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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): MARCH 17, 1998
SPINNAKER INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 1-13961 06-0544125
(State of (Commission File (IRS Employer
incorporation) Number) Identification No.)
600 N. PEARL STREET, SUITE 2160
DALLAS, TEXAS 75201
(Address of principal executive offices)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 214-855-0322
Exhibit Index on page 5
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On November 18, 1997, Spinnaker Industries, Inc., a Delaware corporation
(the "Registrant"), entered into an Asset Purchase Agreement (the "Asset
Purchase Agreement") with S. D. Warren Company ("Seller") to purchase
Seller's pressure sensitive business (the "Pressure Sensitive Business").
Seller is a large pulp and paper producer owned by an indirect wholly owned
subsidiary of SAPPI, Ltd., a public South African conglomerate.
The acquisition by the Registrant of the assets relating to the Pressure
Sensitive Business (the "Acquisition") was consummated effective as of March
17, 1998. Prior to the closing of the Acquisition, the Registrant assigned
its rights and obligations under the Asset Purchase Agreement and related
transaction documents to its newly formed subsidiary, Spinnaker
Coating-Maine, Inc., a Delaware corporation ("Spinnaker Coating-Maine"),
which acquired the assets of the Pressure Sensitive Business. Spinnaker
Coating-Maine will operate the Pressure Sensitive Business as a part of the
Registrant's adhesive-backed label stock operations, which are currently
conducted by Spinnaker Coating, Inc. (f/k/a Brown-Bridge Industries, Inc.), a
Delaware corporation and wholly owned subsidiary of the Registrant
("Spinnaker Coating").
The Pressure Sensitive Business is a major manufacturer and marketer of
pressure sensitive adhesive-backed label stock primarily for the electronic
data processing ("EDP") segment of the label stock market. The Pressure
Sensitive Business generated $62.1 million of net sales in the fiscal year
ended October 1, 1997, which, on a pro forma basis, accounted for 21% of the
Registrant's net sales for the twelve months ended September 30, 1997.
The Acquisition is consistent with the Registrant's long-term strategy
for expanding its presence in the market for adhesive-backed label stock. The
Registrant believes the addition of the Pressure Sensitive Business to
Spinnaker Coating's adhesive-backed label stock business will make the
Registrant the fifth largest producer of label stock and the second largest
provider of EDP label stock. Management of the Registrant believes that the
strategic benefits of the Acquisition will be primarily derived from
cross-selling opportunities, overhead reduction, manufacturing efficiencies
and purchasing savings.
Pursuant to the Asset Purchase Agreement, Spinnaker Coating-Maine
purchased from Seller substantially all of the assets (other than real
property) relating to the Pressure Sensitive Business. In connection with its
purchase of the Pressure Sensitive Business, the parties entered into a Site
Lease, pursuant to which Spinnaker Coating-Maine will lease from Seller a
portion of the Westbrook facility for a term of 99 years at a nominal rent of
$1.00 per year, and a Site Separation and Services Agreement, pursuant to which
Spinnaker Coating-Maine shall obtain utility, supply shipping, storage,
maintenance and administrative services from the Seller. The parties also
entered into a Space Lease, whereby Spinnaker Coating-Maine will temporarily
lease certain industrial space from Seller at its paper mill for the operation
of the Pressure Sensitive Business.
The purchase price paid by the Registrant for the Pressure Sensitive
Business was approximately $51.8 million, plus the assumption of certain
liabilities, subject to a working capital adjustment. The Registrant entered
into the Asset Purchase Agreement following its successful bid for the
Pressure Sensitive Business in an auction process completed in November 1997.
The Registrant valued the assets to be acquired by viewing historical and
estimated future cash flow of the Pressure Sensitive Business. The purchase
price was paid by the issuance of a 10% subordinated convertible note (the
"Note") by the Registrant to Seller, in the original principal amount of $7.0
million, and the remainder with funds available under the Registrant's
asset-backed working capital revolving credit facility with BT Commercial
Corporation (the "Revolving Credit Facility"), which was concurrently amended
to increase the aggregate facility amount to $60 million.
The principal amount outstanding under the Note is prepayable by the
Company at any time without penalty. The Note has a payment-in-kind ("PIK")
feature that allows the Registrant to pay interest accrued during the first
year with an additional subordinated note having substantially similar terms
as the Note, and the Registrant may also issue such a PIK note if at a future
interest payment date a default or event of default exists, or would be
caused by the payment of interest in cash, under the Revolving Credit
Facility. Payments of principal and interest are subject to restrictions
contained in, and in any event are junior and subordinate in right of payment
to, the payment of indebtedness outstanding under the Revolving Credit
Facility and the Registrant's 10 3/4% Senior Secured Notes due 2006. The
Note matures on January 31, 2002, however it is expected to be prepaid
earlier if certain conditions or events occur. Prepayments of principal in an
amount equal to 30% and 70% of the original principal amount are due on March
31, 1999 and on March 31, 2000, respectively, subject to there being
sufficient unused availability and no existing default or event of default
under the Revolving Credit Facility. The Note is convertible for shares of
the Registrant's common stock, no par value ("Common Stock"), on the basis of
40 shares per $1,000 of the outstanding principal amount of the Note (or $25
per share), subject to adjustment as set forth in the Note. Upon conversion
of the Note, the holder thereof will be entitled to certain registration
rights with respect to the shares of Common Stock received upon such
conversion.
The Pressure Sensitive Business' plant, which is highly automated and
efficient, specializes in manufacturing pressure sensitive materials
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with a focus on electronic data processing products for large accounts.
Because of initial post-acquisition costs and interest expense related to the
Acquisition, the Pressure Sensitive Business is not expected to contribute
materially to Registrant's profitability in fiscal 1998.
------------------
This document contains certain forward looking information. Such
information is based on certain assumptions and estimates and, accordingly, may
be subject to risk, uncertainty and inaccuracy.
Item 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
At this time it is impracticable to provide the required consolidated
financial statements for Spinnaker Coating-Maine and the Pressure Sensitive
Business; therefore, the required financial statements will be filed with
the Commission by amendment no later than May 29, 1998.
(b) PRO FORMA FINANCIAL INFORMATION.
At this time it is impracticable to provide the required pro forma
financial information required pursuant to Article 11 of Regulation S-X;
therefore, all required pro forma financial information will be filed with
the Commission by amendment no later than May 29, 1998.
(c) EXHIBITS.
2.1 Asset Purchase Agreement, dated as of November 18, 1997, by and
between the Resgistrant and S.D. Warren Company ("Seller").
2.2 First Amendment to Asset Purchase Agreement, dated March 17, 1998,
by and between Seller and the Registrant.
4.1 Subordinated Note dated March 17, 1998, issued by the Registrant to
Seller in the original principal amount of $7 million bearing
interest at a rate of 10% per annum.
99.1 Site Separation and Services Agreement dated March 17, 1998, by and
between Seller and the Registrant.
99.2 Lease Agreement dated March 17, 1998, between Seller and the
Registrant.
99.3 Fourth Amendment to the Credit Agreement dated as of October 23,
1996, among Central Products Company, Brown-Bridge Industries,
Inc., Entoleter, Inc., the Registrant, as guarantor, each of the
financial institutions party thereto from time to time, BT
Commercial Corporation, as agent, Transamerica Business Credit
Corporation, as collateral agent, and Bankers Trust Company as
issuing bank (the "Credit Agreement"), made as of December 31, 1997.
99.4 Fifth Amendment to the Credit Agreement.
99.5 Sixth Amendment to the Credit Agreement.
99.6 First Supplemental Indenture dated as of March 17, 1998, among the
Registrant, Central Products Company, Entoleter, Inc., Spinnaker
Coating, Inc., Spinnaker Coating-Maine, Inc. and The Chase Manhattan
Bank, as Trustee.
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Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
SPINNAKER INDUSTRIES, INC.
Date: March 30, 1998 By: /s/ Craig J. Jennings
--------------------------------
Craig J. Jennings
Vice President, Finance and Treasurer
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INDEX TO EXHIBITS
2.1 Asset Purchase Agreement dated as of November 18, 1997, by and
between S.D. Warren Company ("Seller") and the Registrant.
2.2 First Amendment to Asset Purchase Agreement dated March 17, 1998,
by and between Seller and the Registrant.
4.1 Subordinated Note dated March 17, 1998, issued by the Registrant to
Seller in the original principal amount of $7 million bearing
interest at a rate of 10% per annum.
99.1 Site Separation and Services Agreement dated March 17, 1998, by and
between Seller and the Registrant.
99.2 Lease Agreement dated March 17, 1998, between Seller and the
Registrant.
99.3 Fourth Amendment to the Credit Agreement dated as of October 23,
1996, among Central Products Company, Brown-Bridge Industries,
Inc., Entoleter, Inc. the Registrant as grantor, each of the
financial institutions party thereto from time to time, BT
Commercial Corporation, as agent, Transamerica Business Credit
Corporation, as collateral agent, and Bankers Trust Company as
issuing bank (the "Credit Agreement"), made as of December 31, 1997.
99.4 Fifth Amendment to the Credit Agreement.
99.5 Sixth Amendment to the Credit Agreement.
99.6 First Supplemental Indenture dated as of March 17, 1998, among the
Registrant, Central Products Company, Entoleter, Inc., Spinnaker
Coating, Inc., Spinnaker Coating-Maine, Inc. and The Chase Manhattan
Bank, as Trustee.
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ASSET PURCHASE AGREEMENT
DATED AS OF NOVEMBER 18, 1997
BY AND BETWEEN
S.D. WARREN COMPANY
AND
SPINNAKER INDUSTRIES, INC.
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ASSET PURCHASE AGREEMENT
TABLE OF CONTENTS
<TABLE>
PAGE
<S> <C>
ARTICLE 1 PURCHASE AND SALE........................................... 1
Section 1.1 Acquired Assets............................................. 1
Section 1.2 Excluded Assets............................................. 4
Section 1.3 Determinations as to Mixed-Use Assets....................... 5
ARTICLE 2 ASSUMPTION OF CERTAIN OBLIGATIONS........................... 5
ARTICLE 3 PURCHASE PRICE.............................................. 6
Section 3.1 Purchase Price.............................................. 6
Section 3.2 Purchase Price Adjustments.................................. 7
ARTICLE 4 CLOSING..................................................... 9
Section 4.1 Time and Place.............................................. 9
Section 4.2 Transactions at Closing..................................... 9
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF SELLER.................... 10
Section 5.1 Incorporation; Authority.................................... 10
Section 5.2 Rights to Sell Acquired Assets; Approvals; Binding Effect... 10
Section 5.3 No Defaults................................................. 10
Section 5.4 Title to Assets............................................. 11
Section 5.5 Financial Statements........................................ 11
Section 5.6 Absence of Certain Changes.................................. 11
Section 5.7 Litigation, Etc. ........................................... 12
Section 5.8 Labor Relations............................................. 13
Section 5.9 Contracts................................................... 13
Section 5.10 Pensions and Benefits....................................... 14
Section 5.11 Equipment; Acquired Assets.................................. 15
Section 5.12 Customers................................................... 15
Section 5.13 Intellectual Property....................................... 15
Section 5.14 Governmental Consent........................................ 16
Section 5.15 Compliance with Laws, Etc. ................................. 16
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Section 5.16 Environmental Matters....................................... 16
Section 5.17 Brokers..................................................... 17
Section 5.18 Taxes....................................................... 17
Section 5.19 Employees................................................... 17
Section 5.20 Real Estate Matters......................................... 18
Section 5.21 Disclosure.................................................. 19
ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF BUYER..................... 19
Section 6.1 Organization and Standing of Buyer.......................... 19
Section 6.2 Corporate Approval; Binding Effect.......................... 19
Section 6.3 Non-Contravention........................................... 19
Section 6.4 Government Consents, Etc. .................................. 20
Section 6.5 Financing................................................... 20
Section 6.6 Brokers..................................................... 21
Section 6.7 Manufacturing Exemption..................................... 21
Section 6.8 Resale Exemption............................................ 21
ARTICLE 7 CERTAIN REGULATORY APPROVALS................................ 21
Section 7.1 Hart-Scott-Rodino Act....................................... 21
Section 7.2 Environmental Permits....................................... 21
ARTICLE 8 CONDUCT OF BUSINESS PENDING CLOSING......................... 22
Section 8.1 Full Access................................................. 22
Section 8.2 Carry on in Regular Course.................................. 23
Section 8.3 No General Increases........................................ 23
Section 8.4 Sale of Capital Assets; Capital Improvements................ 23
Section 8.5 Insurance................................................... 23
Section 8.6 Preservation of Organization................................ 23
Section 8.7 Advice of Change............................................ 23
Section 8.8 No Shopping................................................. 24
Section 8.9 Tax Covenants............................................... 24
Section 8.10 Preparation of Transaction Documents........................ 24
Section 8.11 Designated Inventory........................................ 24
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ARTICLE 9 CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS................. 24
Section 9.1 Representations and Warranties.............................. 24
Section 9.2 Compliance with Agreement................................... 25
Section 9.3 No Litigation............................................... 25
Section 9.4 HSR Clearance............................................... 25
Section 9.5 Environmental Matters....................................... 25
Section 9.6 Site Separation and Services Agreement...................... 25
Section 9.7 Site Lease; Space Lease..................................... 25
Section 9.8 Material Adverse Change..................................... 26
Section 9.9 Financing................................................... 26
ARTICLE 10 CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS................ 26
Section 10.1 Representations and Warranties.............................. 26
Section 10.2 Compliance with Agreement................................... 26
Section 10.3 No Litigation............................................... 26
Section 10.4 HSR Clearance............................................... 26
Section 10.5 Consent of Lenders.......................................... 27
Section 10.6 Environmental Matters....................................... 27
Section 10.7 Site Separation and Services Agreement...................... 27
Section 10.8 Site Lease; Space Lease..................................... 27
ARTICLE 11 EMPLOYEES AND EMPLOYEE BENEFITS............................. 27
Section 11.1 Hiring Employees............................................ 27
Section 11.2 Welfare Benefit Plans....................................... 28
Section 11.3 Investment & Retirement Plans............................... 28
Section 11.4 Benefit Maintenance......................................... 29
Section 11.5 Limitation on Rights........................................ 31
Section 11.6 Workmen's Compensation...................................... 31
</TABLE>
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ARTICLE 12 CERTAIN COVENANTS ............................................. 31
SECTION 12.1 Obligation of Seller With Respect to Accounts
Receivable .............................................. 31
SECTION 12.2 Third Party Consents ..................................... 32
SECTION 12.3 Access to Books and Records .............................. 33
SECTION 12.4 Use of S.D. Warren Name .................................. 33
SECTION 12.5 No Hiring ................................................ 33
SECTION 12.6 Audited Financials ....................................... 34
SECTION 12.7 Noncompetition ........................................... 34
SECTION 12.8 Financing ................................................ 35
ARTICLE 13 INDEMNITY ..................................................... 35
SECTION 13.1 Indemnification by the Seller ............................ 35
SECTION 13.2 Indemnification by the Buyer ............................. 37
SECTION 13.3 Indemnification Procedures ............................... 38
SECTION 13.4 Scope of Indemnity ....................................... 39
SECTION 13.5 Waiver of Statutory Claims ............................... 39
ARTICLE 14 TAX MATTERS ................................................... 39
SECTION 14.1 General .................................................. 39
SECTION 14.2 Cooperation on Tax Matters; Conduct of Proceedings ....... 40
SECTION 14.3 Scope of Article 14 ...................................... 40
ARTICLE 15 TERMINATION ................................................... 41
ARTICLE 16 CONFIDENTIALITY ............................................... 41
SECTION 16.1 Confidentiality Agreement ................................ 41
SECTION 16.2 Confidential Information Relating to the Pressure
Sensitive Business ...................................... 42
ARTICLE 17 DEFINITIONS ................................................... 42
ARTICLE 18 GENERAL ....................................................... 44
SECTION 18.1 Survival of Representations and Warranties ............... 44
SECTION 18.2 Arbitration .............................................. 45
SECTION 18.3 Expenses, Certain Taxes .................................. 45
SECTION 18.4 Assigns .................................................. 45
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SECTION 18.5 Entire Agreement, Etc. ................................... 46
SECTION 18.6 Waiver of Certain Damages ................................ 46
SECTION 18.7 Construction ............................................. 46
SECTION 18.8 Governing Law ............................................ 46
SECTION 18.9 Notices .................................................. 46
SECTION 18.10 Counterparts ............................................. 48
SECTION 18.11 Section Headings ......................................... 48
SECTION 18.12 Public Statements or Releases ............................ 48
SECTION 18.13 Disclosure in Schedules .................................. 48
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LIST OF EXHIBITS AND SCHEDULES
EXHIBITS:
A Target Statement
B Site Separation and Services Agreement
C Site Lease
D Resale Exemption
SCHEDULES:
1.1(a) Equipment
1.1(b) Inventories
1.1(d) Personal Property Leases
1.1(e) Contracts
1.1(g) Purchase Orders
1.1(i) Intellectual Property
1.1(o) Electrical Transformers
2 Liabilities and Obligations of Seller
3.1 Allocation of Purchase Price
5.4 Permitted Encumbrances
5.5 Financials
5.6 Absence of Certain Changes
5.7 Litigation
5.8 Labor Relations
5.9 Contracts
5.10 Employee Benefit Plans
5.11(a) Equipment
5.11(b) Acquired Assets
5.12 Customers List
5.13 Intellectual Property
5.14 Governmental Consents
5.15 Compliance with Laws
5.16 Environmental Matters
5.20 Real Property
11.1 Assumed Employees
13.1(a)(iii) Blanket Environmental Claims
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "AGREEMENT") is dated as of the 18th
day of November, 1997, by and between S.D. Warren Company, a Pennsylvania
corporation (the "SELLER"), and Spinnaker Industries, Inc., a Delaware
corporation (the "BUYER").
The Seller is in the business of manufacturing and selling certain
pressure sensitive paper products, including EDP Impact, EDP Non-Impact and
Roll Label Products (the "PRESSURE SENSITIVE BUSINESS"). The Pressure
Sensitive Business is conducted primarily as part of the Seller's operations at
its Westbrook, Maine facility (the "WESTBROOK FACILITY").
The Seller desires to sell and the Buyer desires to purchase the Pressure
Sensitive Business.
In connection with the negotiation and preparation of this Agreement, the
Seller has prepared, and the Buyer has reviewed, a set of disclosure schedules,
dated the date hereof and delivered separately as one or more volumes (the
"DISCLOSURE SCHEDULE", with any reference in this Agreement to a Schedule being
a reference to the Disclosure Schedule).
In consideration of the mutual agreements and covenants herein contained,
the parties hereto agree as follows:
ARTICLE 1
PURCHASE AND SALE
1.1. ACQUIRED ASSETS. Subject to the terms and conditions set forth in
this Agreement, at the Closing referred to in Article 4 hereof, the Seller
shall sell, assign, transfer and deliver to the Buyer, and the Buyer shall
purchase, acquire and take assignment and delivery of, all of the following
assets of the Seller used in or relating to the Pressure Sensitive Business,
with the exception of the Excluded Assets (as defined in Section 1.2) (all of
which assets are hereinafter referred to collectively as the "ACQUIRED
ASSETS"):
(a) All machinery, equipment, installations, fixtures, furniture,
tools, supplies, materials and other personal property used primarily in
connection with the Pressure Sensitive Business, including without
limitation
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those items described on SCHEDULE 1.1(a) hereto, with such additions
thereto and deletions therefrom as may hereafter arise in the ordinary
course of business prior to the Closing consistent with the Seller's
obligations under Article 8 hereof (the "EQUIPMENT");
(b) All of the Seller's inventories held for use primarily in the
Pressure Sensitive Business, including raw materials, stores and spare
parts, work in process and finished goods, including without limitation
those items described on SCHEDULE 1.1(b) hereto and the Designated
Inventory described in Section 3.2(b), with such additions thereto and
deletions therefrom as may hereafter arise in the ordinary course of
business prior to the Closing consistent with the Seller's obligations
under Article 8 hereof (the "INVENTORIES"), to the extent reflected on the
Closing Statement (as finally adjusted pursuant to Section 3.2) except as
provided in Section 3.2(b);
(c) All of the Seller's prepaid expenses relating primarily to the
Pressure Sensitive Business, to the extent reflected on the Closing
Statement (as finally adjusted pursuant to Section 3.2) (the "PREPAID
EXPENSES");
(d) All of the Seller's rights under all leases of personal property
used primarily in connection with the Pressure Sensitive Business,
including the leases listed on SCHEDULE 1.1(d) and any other leases for
personal property entered into by the Seller and an unaffiliated third
party in connection with the Pressure Sensitive Business prior to the
Closing consistent with the Seller's obligations under Article 8 hereof
(the "PERSONAL PROPERTY LEASES");
(e) All of the Seller's rights under all contracts and agreements,
including without limitation the supply agreements, entered into by the
Seller and an unaffiliated third party primarily in connection with the
Pressure Sensitive Business, including the contracts listed on
SCHEDULE 1.1(e) and any other such contracts entered into by the Seller
primarily in connection with the Pressure Sensitive Business prior to the
Closing consistent with the Seller's obligations under Article 8 hereof
(the "CONTRACTS");
(f) All of the Seller's rights under the 1997-2002 collective
bargaining agreement between the Seller and United Paperworkers
International Union AFL-CIO Local #1069 (the "UNION") solely as it governs
the terms of employment of current hourly employees of the Pressure
Sensitive Business (the "COLLECTIVE BARGAINING AGREEMENT"); provided, that
the Seller's rights under the Collective Bargaining Agreement shall not be
assumed by the Buyer if the Buyer and the Union enter into a mutually
acceptable substitute contract prior to Closing;
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(g) All of the Seller's rights under purchase orders outstanding on
the Closing Date and relating primarily to the Pressure Sensitive
Business, including the purchase orders listed on SCHEDULE 1.1(g) and any
other purchase orders issued or accepted by the Seller primarily in
connection with the Pressure Sensitive Business prior to the Closing
consistent with the Seller's obligations under Article 8 hereof (the
"PURCHASE ORDERS");
(h) All of the Seller's accounts receivable relating primarily to
the Pressure Sensitive Business outstanding on the Closing Date, to the
extent reflected on the Closing Statement (as finally adjusted pursuant to
Section 3.2) (the "ACCOUNTS RECEIVABLE");
(i) All of the Seller's rights with respect to all Intellectual
Property (as defined in Section 5.13) of the Seller used primarily, or
held primarily for use, in connection with the Pressure Sensitive Business
or as the Buyer may reasonably require to conduct the Pressure Sensitive
Business subsequent to the Closing, including the Intellectual Property
listed on SCHEDULE 1.1(i) hereto but excluding the Intellectual Property
to be used by the Seller to provide services pursuant to the Site
Separation and Services Agreement (as defined in Article 9);
(j) to the extent transferable, all of the Seller's rights with
respect to all computer software programs used primarily in the Pressure
Sensitive Business or as the Buyer may reasonably require to conduct the
Pressure Sensitive Business subsequent to the Closing but excluding the
computer software programs to be used by the Seller to provide services
pursuant to the Site Separation and Services Agreement;
(k) to the extent transferable, all of the Seller's rights with
respect to any licenses, permits, concessions, orders, authorizations,
approvals or registrations from, of or with any Governmental Entity (as
defined in Article 17) and relating primarily to the Pressure Sensitive
Business;
(l) subject to Section 12.3, all existing records of the Seller
relating primarily to the Pressure Sensitive Business, including, without
limitation, property records, production records, purchasing and sales
records, personnel and payroll records to the extent transferable under
applicable law, customer lists, credit records, accounting records and
such other records as the Buyer may reasonably require to conduct the
Pressure Sensitive Business subsequent to the Closing;
(m) all claims, choses in action or causes of action that relate to
the Pressure Sensitive Business;
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(n) all warranties or similar rights that relate to the Acquired
Assets; and
(o) all electrical transformers that relate primarily to the
Pressure Sensitive Business and identified on SCHEDULE 1.1(o).
1.2. EXCLUDED ASSETS. Notwithstanding the foregoing, the Seller is not
selling and the Buyer is not purchasing pursuant to this Agreement, and the
term "ACQUIRED ASSETS" shall not include, any of the following assets (the
"EXCLUDED ASSETS"):
(a) any of the Seller's title to, interest in or rights with respect
to any real property other than to the extent set forth in the Site Lease
or the Space Lease (each as hereinafter defined);
(b) any of the Seller's cash, marketable or other securities,
commercial paper and cash equivalents or other investments, on hand or in
bank accounts, and all of the Seller's bank accounts and intercompany
accounts;
(c) any computers not used primarily in the Pressure Sensitive
Business, and any software embodied in any such computers, any
communication or data network systems not used primarily in the Pressure
Sensitive Business, and any other equipment not reasonably required to
conduct the Pressure Sensitive Business (including assets required to
provide the support services to be provided by the Seller pursuant to the
Site Separation and Services Agreement) or used to support the Pressure
Sensitive Business but not located at the Westbrook Facility;
(d) any insurance policies of the Seller, including any and all
rights to make any claims or receive any proceeds thereunder;
(e) all power transmission equipment other than the transformers
referred to in Section 1.1(o) and any trucks not listed on
SCHEDULE 1.1(a);
(f) any other assets of the Seller not reasonably required to
conduct the Pressure Sensitive Business subsequent to the Closing
(including assets required to provide the support services to be provided
by the Seller pursuant to the Site Separation and Services Agreement);
(g) any rights to the tradenames, trademarks or corporate name "S.D.
Warren" and any derivations thereof;
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(h) any rights of the Seller under that certain Stock Purchase
Agreement, dated as of October 7, 1994, among Scott Paper Company, Sappi
Limited and SDW Acquisition Corp.; and
(i) all corporate records of the Seller, all financial and tax
records of the Seller relating in whole or in part to the Pressure
Sensitive Business and all other records and files not reasonably required
to conduct the Pressure Sensitive Business subsequent to the Closing.
1.3. DETERMINATIONS AS TO MIXED-USE ASSETS. The Seller and the Buyer
shall cooperate in good faith to resolve any disputes as to whether any
specific assets (including, without limitation, any contracts and agreements)
of the Seller which relate to both the Pressure Sensitive Business and another
business of the Seller are used primarily in, or relate primarily to, the
Pressure Sensitive Business. With respect to any contracts or licenses
applicable to both the Pressure Sensitive Business and other businesses of the
Seller, the Seller and the Buyer will cooperate to structure contractual
arrangements providing them both with the relevant rights and obligations under
such contract or license. These arrangements may take the form of a
subcontract or sublicense or causing the other party to such contract or
license to agree to split the contract or license into two separate agreements.
ARTICLE 2
ASSUMPTION OF CERTAIN OBLIGATIONS
At the Closing, the Buyer shall assume, and agree to pay, perform, fulfill
and discharge, the obligations and liabilities of the Seller relating to the
Pressure Sensitive Business described on SCHEDULE 2 hereto. Notwithstanding
any provisions contained in this Agreement or the Disclosure Schedule to the
contrary, except as set forth on SCHEDULE 2 the Buyer shall specifically not
assume any other liabilities or obligations of the Seller, including without
limitation the following liabilities or obligations of the Seller:
(i) liabilities for Indebtedness (as defined in Article 17) of the
Seller;
(ii) those liabilities for Taxes (as defined in Article 17) that
remain the responsibility of the Seller pursuant to Article 14;
(iii) those liabilities of the Seller or any of its ERISA
Affiliates (defined as any other person that, together with the
Seller, would be treated as a single employer under Section 414 of
the Internal Revenue Code of 1986, as amended) under any and all of
the ERISA Plans and Non-ERISA Plans (both as defined in
Section 5.10(a) hereof) currently or at any time in the past
maintained or contributed to by Seller or any of its
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ERISA Affiliates, including but not limited to those plans retained
by the Seller pursuant to Sections 11.2(a) and 11.3(a);
(iv) liabilities of the Seller in respect of severance agreements,
arrangements or obligations with or to employees of the Seller who
are offered employment by the Buyer in accordance with Section 11.1
but who decline such offer;
(v) all liabilities incurred in connection with "stay-put"
arrangements implemented in connection with the sale of the Pressure
Sensitive Business, including without limitation "stay-put" bonuses
and special compensation for certain persons employed by the Seller;
(vi) liabilities or regulatory obligations with respect to
environmental matters referred to in Section 13.1(a)(iii), (iv) and
(v);
(vii) liabilities relating to claims for workmen's compensation
for work performed by employees of the Pressure Sensitive Business
prior to the Closing, only to the extent that any such claim has been
filed prior to Closing or within six (6) months from Closing;
(viii) liabilities with respect to any intercompany accounts; and
(ix) liabilities for product warranty claims for products sold by
the Seller prior to Closing, only to the extent such claims are made
prior to the first anniversary of the Closing.
The liabilities to be assumed by the Buyer under this Agreement are hereinafter
sometimes referred to as the "ASSUMED OBLIGATIONS" and the liabilities that are
not assumed by the Buyer under this Agreement are hereinafter sometimes
referred to as the "EXCLUDED LIABILITIES", which Excluded Liabilities the
Seller covenants it shall pay, satisfy and discharge in full when due, and
shall indemnify the Buyer against any Losses (as defined in Article 13) arising
therefrom as provided in Article 13. The assumption of the Assumed Obligations
by the Buyer shall not enlarge any rights of third parties under contracts or
arrangements with the Buyer or the Seller and nothing herein shall prevent any
party from contesting in good faith with any third party any of said
liabilities.
ARTICLE 3
PURCHASE PRICE
3.1. PURCHASE PRICE. At the Closing, the Buyer shall pay Fifty-Two
Million Seven Hundred Seventy Thousand and no/100 Dollars ($52,770,000) to the
Seller, as
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the aggregate purchase price for the Acquired Assets, subject to adjustment
as provided in Section 3.2 hereof (the "PURCHASE PRICE"), by wire transfer of
same day funds. The Purchase Price shall be allocated among the Acquired
Assets in the manner set forth on SCHEDULE 3.1 hereto. The Buyer and Seller
shall report the purchase and sale of the Acquired Assets, including, without
limitation, in all federal, foreign, state, local and other Tax Returns (as
defined in Article 17) prepared and filed by or for either of the Buyer or
the Seller, in accordance with the basis of allocation set forth on SCHEDULE
3.1 hereto. The Buyer and the Seller further agree that they will prepare
and file asset acquisition statements on Form 8594 reflecting such allocation
with their Federal income tax returns for the taxable year that includes the
Closing Date.
3.2. PURCHASE PRICE ADJUSTMENTS.
(a) Included as Exhibit A is a statement showing the net value of
the Accounts Receivable, Prepaid Expenses and Inventories (collectively,
the "CURRENT ASSETS") and all trade payables (excluding intercompany
payables) and accrued liabilities of the Pressure Sensitive Business, but
excluding all payables and expenses of the types set forth in clauses (i)
to (ix) of Article 2 (collectively, the "CURRENT LIABILITIES"). The
Current Assets and Current Liabilities are collectively referred to as the
"NET WORKING CAPITAL". Except as noted on EXHIBIT A, this statement (the
"TARGET STATEMENT") has been derived from the internal unaudited financial
records for the Pressure Sensitive Business and has been prepared on a
basis consistent with management's past practice. This statement also
shows that as of the applicable dates the net value of the Net Working
Capital was $14,608,000.
(b) Within sixty (60) days after the Closing Date, the Seller shall
prepare and deliver to the Buyer an unaudited statement as of the close of
business on the day immediately preceding the Closing Date of the Net
Working Capital (the "CLOSING STATEMENT"). The Closing Statement (i)
shall be prepared on the same basis as the Target Statement, except that
the book value of the Inventories (other than those identified in clause
(ii)) shall be established conclusively for purposes of this Section 3.2
by the Seller taking a physical inventory of the Inventories as of the
close of business on the day immediately preceding the Closing Date and
reducing the final balance by such amount, if any, as would reduce the
value of the Inventories to a value equal to the lower of cost or market,
calculated in accordance with generally accepted accounting principles and
otherwise applying the valuation methodology used in preparing the Target
Statement to the results of this physical inventory and (ii) that portion
of the Inventory, primarily instrument and electrical inventory, that
relates primarily to the Pressure Sensitive Business but was inadvertently
omitted from the Target Statement (the
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"DESIGNATED INVENTORY") will not be included on the Closing Statement.
The Designated Inventory will be designated as provided in Section 8.11.
(c) When the Seller delivers the Closing Statement, the Seller shall
also deliver a certificate of its Chief Financial Officer (i) certifying
that the Closing Statement was prepared in accordance with paragraph (b)
above, and (ii) containing the Seller's calculations, based on the Closing
Statement (the "SELLER'S PROPOSED CALCULATIONS"), of the Net Working
Capital as of the Closing Date.
(d) Within thirty (30) days after receipt of the Closing Statement
and the accompanying certificate, the Buyer shall notify the Seller of its
agreement or disagreement with the Closing Statement and the accuracy of
any of the Seller's Proposed Calculations; PROVIDED, that the Buyer may
only dispute the Closing Statement and the Seller's Proposed Calculations
to the extent that they deviate from the requirements of paragraphs (b)
and (c) above. If the Buyer disputes any such aspect of the Closing
Statement or the amount of any of the Seller's Proposed Calculations, then
the Buyer shall have the right to direct its independent accountants, at
the Buyer's expense, to review and test the Closing Statement. The
Buyer's accountants shall complete their review and test within thirty
(30) days after the date the Buyer disputes the Seller's Proposed
Calculations. If the Buyer and its independent accountants, after such
review and test, still disagree with the Seller's Proposed Calculations,
and the Seller does not accept the Buyer's proposed alternative
calculations (the "BUYER'S PROPOSED CALCULATIONS"), then, within thirty
(30) days after the date of the Seller's rejection of the Buyer's Proposed
Calculations, the Seller and the Buyer shall select a third nationally
recognized independent accounting firm (the "INDEPENDENT ACCOUNTING FIRM")
to resolve the remaining disputed items (the "REMAINING DISPUTED ITEMS")
by conducting its own review and test of the Closing Statement and
thereafter selecting either the Buyer's Proposed Calculation of the
Remaining Disputed Items or the Seller's Proposed Calculation of the
Remaining Disputed Items or an amount in between the two. The Independent
Accounting Firm shall be instructed (i) that the scope of its review shall
be limited solely to the Remaining Disputed Items, (ii) that it shall
accept the Closing Statement and the Seller's Proposed Calculations except
to the extent that they deviate from the requirements of paragraphs (b)
and (c) above, and (iii) that it is to use every reasonable effort to
complete such assignment and deliver copies of such opinion and, if
required, a revised Closing Statement to the Buyer and the Seller within
thirty (30) days following the date such Remaining Disputed Items are
referred to it. The Buyer and the Seller agree that they shall be bound
by the determination of the Remaining Disputed Items by the Independent
Accounting Firm. The fees and expenses of the Independent Accounting Firm
shall be paid jointly by the Buyer and the Seller.
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(e) Upon the determination pursuant to paragraph (d) of this
Section 3.2 of the definitive Closing Statement and the Net Working
Capital as of the Closing Date, the Purchase Price shall be either
(i) increased by the amount, if any, by which the amount of Net Working
Capital is greater than $14,065,000 or (ii) decreased by the amount, if
any, by which the amount of Net Working Capital is less than $14,065,000
(the "ADJUSTMENT"). The Seller and the Buyer acknowledge that the target
number for the Adjustment set forth in the preceding sentence is different
than the net value of the Net Working Capital reflected on the Target
Statement. If the Purchase Price is increased, the Buyer shall pay such
amount to the Seller, and if the Purchase Price is decreased, the Seller
shall pay such amount to the Buyer. Any such payment shall be made in
cash or same day funds within ten (10) days after the determination of the
Adjustment pursuant to paragraph (d).
ARTICLE 4
CLOSING
4.1. TIME AND PLACE. The closing of the transfer and delivery of all
documents and instruments necessary to consummate the transactions contemplated
by this Agreement (the "CLOSING") shall be held at the offices of Bingham Dana
LLP, 150 Federal Street, Boston, Massachusetts, on the third business day
following completion of the regulatory approvals referred to in Sections 7.1
and 7.2, or at such other time or such other place as the Buyer and the Seller
may agree. The date on which the Closing is actually held hereunder is
sometimes referred to herein as the "CLOSING DATE". The Closing will be deemed
to be effective for purposes of this Agreement as of the opening of business on
the Closing Date.
4.2. TRANSACTIONS AT CLOSING. At the Closing:
(a) The Seller shall duly execute and deliver to the Buyer or its
nominee or nominees such deeds, bills of sale, certificates of title and
other instruments of assignment or transfer with respect to the Acquired
Assets as the Buyer may reasonably request and as may be necessary to vest
in the Buyer all of the Seller's title to the Acquired Assets.
(b) The Buyer shall deliver the Purchase Price by wire transfer to
the Seller.
(c) The Buyer shall duly execute and deliver to the Seller such
instruments of assumption with respect to the Assumed Obligations as the
Seller may reasonably request.
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(d) The Buyer and the Seller, as applicable, shall each duly execute
and deliver the Site Separation and Services Agreement, the Site Lease and
the Space Lease (as each such term is defined in Article 9 hereof).
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF SELLER
The Seller represents and warrants to the Buyer as follows:
5.1. INCORPORATION; AUTHORITY. The Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Pennsylvania and has all requisite corporate power and authority to carry on
the Pressure Sensitive Business as now conducted.
5.2. RIGHTS TO SELL ACQUIRED ASSETS; APPROVALS; BINDING EFFECT. The
Seller has all requisite corporate power and authority to enter into this
Agreement and the other agreements contemplated hereby (collectively, the
"TRANSACTION DOCUMENTS") to which the Seller is to be a party, to perform all
of its agreements and obligations hereunder and thereunder in accordance with
their respective terms, and to sell and transfer to the Buyer all of the
Acquired Assets. This Agreement has been duly executed and delivered by the
Seller and constitutes, and when each of the other Transaction Documents to
which the Seller is to be a party has been duly executed and delivered each of
such other Transaction Documents will constitute, the legal, valid and binding
obligation of the Seller, enforceable against the Seller in accordance with
each of their respective terms, except as such validity, binding effect or
enforcement may be limited by bankruptcy, insolvency or similar laws affecting
creditors' rights generally or by equitable principles relating to the
availability of remedies.
5.3. NO DEFAULTS. Except for consents to transfer with respect to any
agreement that is part of the Acquired Assets, and the consents referred to in
Sections 7.1 and 7.2 hereof, the entering into of this Agreement and the other
Transaction Documents to which the Seller is to be a party, the performance and
compliance by the Seller with the terms hereof and thereof, and the
consummation of all the transactions contemplated hereby and thereby, will not
either currently, or after notice or lapse of time or both:
(a) result in a violation of any provision of the charter, by-laws
or other organizational documents of the Seller; or
(b) result in a violation by the Seller of any statute, regulation,
order, law, ordinance or restriction applicable to the Seller, other than
any
<PAGE>
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violation which would not have a Material Adverse Effect (as defined
in Article 17); or
(c) result in a violation by the Seller of any judgment, order or
decree of any court or judicial or quasi-judicial tribunal applicable to
the Seller, other than any violation which would not have a Material
Adverse Effect.
5.4. TITLE TO ASSETS. The Seller owns or has the right to transfer all of
the Acquired Assets, subject to obtaining the consents described on SCHEDULE
5.4. At and as of the Closing, the Seller will convey to the Buyer good and
marketable title to the Acquired Assets, and the Seller will lease the Primary
Real Property (as defined below) to the Buyer, in each instance, free and clear
of all Encumbrances (as defined in Article 17) except for Permitted
Encumbrances (as defined in Article 17) and except as set forth on
SCHEDULE 5.4.
5.5. FINANCIAL STATEMENTS. Attached as SCHEDULE 5.5 hereto are a statement
of net assets of the Pressure Sensitive Business as of August 26, 1997
(except as noted on SCHEDULE 5.5) and summary statements of contribution
after direct expenses for the Pressure Sensitive Business (the "SUMMARY
STATEMENTS") for the fiscal years of the Seller ended September 30, 1996 and
September 30, 1997. The statement of net assets was prepared on the basis
disclosed and using the assumptions described in the footnotes to such
statements. Except as noted in the footnotes, such statement of net assets
fairly presents in all material respects the financial condition of the
Pressure Sensitive Business, insofar as it relates to the categories of
assets and liabilities presented, as of the applicable dates. Except as
noted in the footnotes, the Summary Statements fairly present in all material
respects the results of operations of the Pressure Sensitive Business,
insofar as they relate to the revenues and types of costs presented, for the
periods covered thereby.
5.6. ABSENCE OF CERTAIN CHANGES. Except as set forth on SCHEDULE 5.6,
from September 30, 1997 to the date of this Agreement the Pressure Sensitive
Business has operated only in the ordinary course and there has not been:
(a) any change in the condition (financial or otherwise), results of
operations, assets, liabilities or business of the Pressure Sensitive
Business other than changes arising in the ordinary course of business,
none of which, individually or in the aggregate, has had a Material
Adverse Effect;
(b) any acquisition or disposition by the Seller outside the
ordinary course of business of any asset or property used primarily in, or
material to the operation of, the Pressure Sensitive Business;
<PAGE>
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(c) any damage, destruction or casualty loss to any asset of the
Seller and relating to the Pressure Sensitive Business, whether or not
covered by insurance, which has had a Material Adverse Effect;
(d) any increase in (or commitment to increase) the compensation,
pension or other benefits payable or to become payable to any of the
officers, employees, agents or representatives of the Pressure Sensitive
Business or any bonus payments or arrangements made to or with any of
them, that will constitute an Assumed Obligation, other than (i) increases
amounting to less than $20,000 individually and effected on a basis
consistent with the past practice of the Seller and (ii) any increase
required under the terms of any of the benefit plans or other arrangements
listed on SCHEDULE 5.10 hereto;
(e) any voluntary forgiveness or cancellation of any debt or claim
of the Pressure Sensitive Business in excess of $5,000 or any voluntary
waiver of any right of material value other than compromises of accounts
receivable in the ordinary course of business;
(f) the imposition of any Encumbrance on any of the assets of the
Pressure Sensitive Business except for Permitted Encumbrances and any
Encumbrance that will be discharged prior to Closing;
(g) any disposition of or lapse of any intellectual property right
or termination of any agreement under which the Seller (insofar as it
relates to the Pressure Sensitive Business) has any right or license, the
disposition, lapse or termination of which would have a Material Adverse
Effect;
(h) any lapse, termination or expiration (other than in accordance
with its terms, except as a result of a breach thereof) of any contract or
agreement, including any joint venture agreement, teaming agreement,
distribution agreement, supply agreement, license agreement, personal
property lease or development contract, to which the Seller (insofar as it
relates to the Pressure Sensitive Business) had been a party, the lapse,
termination or expiration of which would have a Material Adverse Effect;
or
(i) any receipt by the Seller of written notice, or to the Seller's
knowledge, any other communication, from any customer of the Pressure
Sensitive Business that such customer intends to terminate or reduce its
purchase of products from the Seller, except for any such terminations or
reductions that individually or in the aggregate would not have a Material
Adverse Effect.
5.7. LITIGATION, ETC. As of the date of this Agreement, no proceeding,
arbitration, action or suit is pending or, to the knowledge of the Seller,
threatened
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against the Seller (insofar as it relates to the Pressure Sensitive
Business), except as set forth on SCHEDULE 5.7 hereto and except for any such
proceeding, arbitration, action, or suit that, singly or in the aggregate,
would not have a Material Adverse Effect. As of the date of this Agreement,
the Seller (insofar as it relates to the Pressure Sensitive Business) has not
received any written notice from any Governmental Entity of any pending or
threatened governmental investigation relating to the Pressure Sensitive
Business which, if concluded with a determination adverse to the Pressure
Sensitive Business, would have a Material Adverse Effect. As of the date of
this Agreement, except as set forth on SCHEDULE 5.7, the Acquired Assets are
not the subject of any continuing court or administrative order, award,
injunction or decree.
5.8. LABOR RELATIONS. Except as set forth on SCHEDULE 5.8, as of the date
of this Agreement there is no charge pending or, to the knowledge of the
Seller, threatened against the Seller alleging, with respect to any employee or
employees of the Pressure Sensitive Business, any violation of any statute or
regulation relating to employment and employment practices, or any violation of
any collective bargaining agreement, any unlawful discrimination in employment
practices or any unfair labor practices before any court, agency, or other
judicial or arbitral body, except for any such violation that would not have a
Material Adverse Effect. As of the date of this Agreement, there is no labor
strike, dispute, slow-down or work stoppage actually pending or, to the
Seller's knowledge, threatened against the Seller (with respect to employees of
the Pressure Sensitive Business). Except as set forth on SCHEDULE 5.8, no
employees of the Pressure Sensitive Business are covered by any collective
bargaining agreement, and no collective bargaining agreement or other labor
union agreement or agreement with organized labor for employees of the Pressure
Sensitive Business is currently being negotiated or pending negotiation.
Except as set forth on SCHEDULE 5.8 hereto, there has been no material
concerted work stoppage with respect to the Pressure Sensitive Business during
the last three years. To the knowledge of the Seller, except as set forth on
SCHEDULE 5.8, no former or current employee of the Pressure Sensitive Business
is a party to or is otherwise bound by any written agreement or arrangement
between such employee and any other entity that would materially adversely
affect (i) the performance of his duties as an employee of the Pressure
Sensitive Business of the Seller or the Buyer or (ii) the ability of the Seller
or the Buyer to conduct the Pressure Sensitive Business.
5.9. CONTRACTS. Except for contracts, commitments, plans, agreements and
licenses listed on SCHEDULE 5.9 or SCHEDULE 5.10, as of the date of this
Agreement the Seller (insofar as it relates primarily to the Pressure Sensitive
Business) is not a party to or otherwise bound by:
(a) except for purchase orders accepted in the ordinary course of
business, any contract or purchase order to sell products or provide
services to
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any customer (i) providing for payments in excess of $25,000 or (ii)
having a term greater than one calendar year;
(b) except for any contract or agreement that will not constitute an
Assumed Obligation, any written contract or agreement with any director,
officer or employee of the Pressure Sensitive Business;
(c) any contract for the lease or sublease as lessee, lessor,
sublessee or sublessor of real or personal property of the Pressure
Sensitive Business, or any license of computer software used primarily in
the Pressure Sensitive Business, requiring payments in excess of $25,000
per year;
(d) except for purchase orders issued in the ordinary course of
business, any contract requiring payments in excess of $25,000 for the
purchase or sale of any personal property used primarily in the Pressure
Sensitive Business;
(e) any contract or agreement containing non-competition covenants
limiting the freedom of the Seller to operate the Pressure Sensitive
Business;
(f) any contract or agreement for guaranty, indemnity or suretyship
of Indebtedness of the Pressure Sensitive Business in excess of $50,000;
or
(g) except for any purchase commitments made in the ordinary course
of business and in amounts less than $25,000 each, any outstanding
purchase commitments or take or pay agreements binding upon the Seller
which relate to the Pressure Sensitive Business.
Neither the Seller nor, to the knowledge of the Seller, any other party to
any contract, agreement, lease or instrument listed on SCHEDULE 5.9
(collectively, the "CONTRACTS") is, as of the date of this Agreement, in
default in complying with any provisions thereof, except for any such default
that would not have a Material Adverse Effect. As of the date of this
Agreement, except where the same would not, individually or in the aggregate,
have a Material Adverse Effect, the Seller has not received any written notice
of the intention of any party to terminate any Contract, whether as a
termination for convenience or for default of the Seller thereunder.
5.10. PENSIONS AND BENEFITS.
(a) Except as set forth on SCHEDULE 5.10 hereto, as of the date of
this Agreement, the Seller does not maintain or have any obligation to
make contributions to, any employee benefit plan (an "ERISA PLAN") within
the
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meaning of Section 3(3) of the United States Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), or any other retirement, profit
sharing, stock option, stock bonus or other benefit program (a
"NON-ERISA PLAN"), in either case, for the benefit of any officers,
employees or consultants of the Pressure Sensitive Business. The Seller
has heretofore delivered or made available to the Buyer copies or summaries
of each such ERISA Plan and Non-ERISA Plan and any associated funding
instruments and, with respect to any such ERISA Plan, the most recently
completed annual report (with any required attachments), the most recent
IRS determination letter, and any other advisory opinions or rulings
applicable to such Plan.
(b) To the Seller's knowledge, the ERISA Plans and Non-ERISA Plans
have been maintained and operated in all material respects in accordance
with all federal, state, provincial and local laws applicable to such
plans, and the terms and conditions of the respective plan documents.
5.11. EQUIPMENT; ACQUIRED ASSETS. The Equipment, taken as a whole, is
in a condition suitable for its present use in the Pressure Sensitive Business.
Except as set forth on SCHEDULE 5.11(a), as of the date of this Agreement the
Seller has received no written notice of any OSHA violation relating to the
Equipment. Except as set forth on Schedule 5.11(b), the Acquired Assets, when
utilized by a labor force substantially similar to that utilized by the Seller
for the Pressure Sensitive Business immediately prior to Closing at the
Westbrook Facility, and together with the services and utilities to be provided
to the Buyer pursuant to the Site Separation Agreement, are adequate to conduct
the Pressure Sensitive Business as currently conducted.
5.12. CUSTOMERS. SCHEDULE 5.12 hereto sets forth a list of each
paying account in 1997 of the Pressure Sensitive Business.
5.13. INTELLECTUAL PROPERTY.
(a) Except as described in SCHEDULE 5.13, (i) the Seller owns or
licenses sufficient rights, title and interest in all material copyright,
trade secret, trademark, or other proprietary rights (collectively,
"INTELLECTUAL PROPERTY") required to conduct the Pressure Sensitive
Business as presently conducted; (ii) as of the date of this Agreement
there are no proceedings, arbitrations, actions or suits pending or to the
Seller's knowledge threatened, and no unresolved written claims
outstanding, which challenge the rights of the Seller in respect thereof
or charge the Seller with infringement of any adversely held Intellectual
Property, except for any proceedings, arbitrations, actions, suits or
claims that singly or in the aggregate would not have a Material Adverse
Effect; and (iii) except for any of the Excluded Assets to be made
available to the Buyer pursuant to the Site Separation and Services
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Agreement, the Seller has the right to use and to transfer to the Buyer,
in all material respects, all customer lists, designs, manufacturing or
other processes, computer software, systems, data compilations, research
results and other information required for the operation of the Pressure
Sensitive Business as presently conducted.
(b) To the Seller's knowledge, as of the date of this Agreement
there exists no infringement by others of any of the Seller's Intellectual
Property rights relating to the Pressure Sensitive Business, except for
any such infringement that would not have a Material Adverse Effect.
(c) To the Seller's knowledge, the Seller is not making unauthorized
use of any confidential information or trade secrets of any Person,
including without limitation any former employer of any past or present
employee of the Seller. Except as set forth in SCHEDULE 5.13, the Seller
(insofar as it relates to the Pressure Sensitive Business) is not
violating any confidentiality agreement with any third party, and to the
Seller's knowledge, none of its employees (with respect to the Seller,
insofar as it relates to the Pressure Sensitive Business) is violating any
such agreement.
5.14. GOVERNMENTAL CONSENT. Except for the approval required with
respect to the HSR Act (as defined in Section 7.1), consents to transfer
required with respect to contracts, if any, with governments or governmental
agencies and for those items set forth on SCHEDULE 5.14, no consent, approval
or authorization of or registration, designation, declaration or filing with
any Governmental Entity, on the part of the Seller, is required in connection
with the consummation of any of the transactions contemplated hereby, except
for any approval, authorization, registration, designation, declaration or
filing that, if not obtained or made, would not have a Material Adverse Effect,
and would not materially adversely affect the ability of the Seller to perform
its obligations under this Agreement.
5.15. COMPLIANCE WITH LAWS, ETC. Except as set forth on
SCHEDULE 5.15 hereto, the Seller (insofar as it relates to the operation of the
Pressure Sensitive Business) is in compliance with all laws, statutes,
governmental regulations and all judicial or administrative tribunal orders,
awards, decrees, warning letters, judgments, writs and injunctions applicable
to it, except for any non-compliance that would not have a Material Adverse
Effect.
5.16. ENVIRONMENTAL MATTERS. (a) Except as set forth on
SCHEDULE 5.16, the Seller (insofar as it relates to the Pressure Sensitive
Business) is in compliance with all applicable Environmental Laws except where
the failure to be in compliance would not have a Material Adverse Effect.
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(b) Except as set forth on SCHEDULE 5.16, the Seller has all
permits, licenses and operating authorities and has installed and/or
incorporated all compliant control technology on all sources, required
under Environmental Laws for the operation of the Pressure Sensitive
Business as presently conducted (the "ENVIRONMENTAL PERMITS") and there
are no violations, investigations or proceedings nor, to the knowledge of
the Seller, are any investigations or proceedings pending or threatened,
with respect to the Environmental Permits, except where the failure to
have such Environmental Permits or where the violation, investigation or
proceeding relating thereto would not have a Material Adverse Effect.
(c) Except as set forth on SCHEDULE 5.16, since December 31, 1996,
no notice, notification, demand, request for information, citation,
summons, complaint or order has been received by the Seller or, to the
knowledge of the Seller, is pending or threatened by any Person against,
the Seller relating to the Pressure Sensitive Business nor has any
material penalty been assessed against the Seller relating to the Pressure
Sensitive Business with respect to any alleged violation of any
Environmental Law or liability thereunder, other than where such notice,
notification, demand, request for information, citation, summons,
complaint or order has been fully resolved, or where resolution thereof
would not have a Material Adverse Effect.
(d) Except as set forth on SCHEDULE 5.16, no Hazardous Substance has
been discharged, generated, treated, manufactured, handled, stored,
transported, emitted, released or is present at any property now or
previously owned, leased or operated by the Seller (insofar as it relates
to the Pressure Sensitive Business) in violation of any Environmental Law,
except for any of the foregoing that would not have a Material Adverse
Effect.
5.17. BROKERS. Except for Donaldson, Lufkin & Jenrette Securities
Corporation, whose fees and expenses will be paid by the Seller, no finder,
broker, agent or other intermediary has worked for or on behalf of the Seller
in connection with the negotiation or consummation of the transactions
contemplated hereby.
5.18. TAXES. All Taxes relating to the Pressure Sensitive Business
which are required to be paid by the Seller on or prior to the Closing Date
have been paid other than any Taxes being contested in accordance with
applicable law. The Seller is in compliance with all Tax laws with respect to
the Pressure Sensitive Business except where the failure to comply would not
have a Material Adverse Effect.
5.19. EMPLOYEES. The persons listed on SCHEDULE 11.1 are employees of
the Pressure Sensitive Business as of the date hereof.
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5.20. REAL ESTATE MATTERS.
(a) All improvements located on the real property subject to the Site
Lease (the "PRIMARY REAL PROPERTY") ("IMPROVEMENTS") were constructed and
installed in compliance in all material respects with then applicable laws,
statutes, ordinances and codes affecting the Primary Real Property at the time
of construction. Except as set forth on SCHEDULE 5.20, there are not, and as
of the Closing there will not be, any material structural or latent defects in
any of the Improvements known to Seller which have not been disclosed to Buyer.
Except as set forth on SCHEDULE 5.20, the heating, electrical, plumbing, and
other building equipment on the Primary Real Property are, and as of the
Closing will be, in working order sufficient in all material respects for the
operation of the Pressure Sensitive Business consistent with current practice.
(b) The Seller has not received any written notice from an insurance
company which has issued a policy or has been requested to issue a policy with
respect to any portion of the Improvements located on the Primary Real Property
or any board of fire underwriters or any other body exercising similar
functions requesting the performance of any repair, alterations or other work
which has not been complied with in all material respects.
(c) Except as described on SCHEDULE 5.7 or SCHEDULE 5.20, as of the date
of this Agreement there is no existing, pending or, to the Seller's knowledge,
threatened litigation or condemnation or sale in lieu thereof, with respect to
any portion of the Primary Real Property relating to or arising out of the
ownership of the Primary Real Property by any federal, state, county or
municipal department, commission, board, bureau or agency or other governmental
instrumentality. As of the date of this Agreement, except as set forth on
SCHEDULE 5.20 there is no proceeding pending for the reduction or increase of
the assessed valuation or taxes or other impositions payable in respect of any
portion of the Primary Real Property. As of the date of this Agreement, the
Seller has not received any written notice of a proposed increase in the
assessed valuation of any portion of the Primary Real Property.
(d) Except for the Buyer, no Person has any right or option to acquire
the Primary Real Property or any portion thereof.
(e) As of the date of this Agreement, the Seller has no knowledge of any
fact or condition existing which is reasonably likely to result in the
termination or reduction in any material respect of the current access from the
Primary Real Property to existing highways and roads.
(f) Between the date hereof and Closing, Seller will not enter into any
lease, nor any service, maintenance or management agreement with respect to all
or
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any portion of the Primary Real Property, except as contemplated by this
Agreement and except for any such contract that will not constitute an Assumed
Obligation.
5.21. DISCLOSURE. To the Seller's knowledge, the representations and
warranties of the Seller contained in this Section 5 do not misstate a material
fact or omit to state a material fact which would make the representations and
warranties contained in this Article 5 untrue in any material respect.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer represents and warrants to the Seller as follows:
6.1. ORGANIZATION AND STANDING OF THE BUYER. The Buyer is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware. The Buyer has all required corporate power and authority to
enter into this Agreement, to perform all of its agreements and obligations
hereunder in accordance with its terms and to purchase the Acquired Assets from
the Seller.
6.2. CORPORATE APPROVAL; BINDING EFFECT. The Buyer has obtained all
necessary authorizations and approvals from its Board of Directors and
shareholders required for the execution and delivery of this Agreement and the
other Transaction Documents to which it is to be a party and the consummation
of the transactions contemplated hereby and thereby, except for the stockholder
authorization referred to in Section 6.2(d). This Agreement has been duly
executed and delivered by the Buyer and constitutes, and when each of the other
Transaction Documents to which the Buyer is to be a party has been duly
executed and delivered such other Transaction Documents will constitute, the
legal, valid and binding obligation of the Buyer enforceable against the Buyer
in accordance with their respective terms, except as such validity, binding
effect or enforcement may be limited by bankruptcy, insolvency or similar laws
affecting creditors' rights generally or by equitable principles relating to
the availability of remedies.
6.3. NON-CONTRAVENTION. The execution, delivery and performance by the
Buyer of this Agreement and the other Transaction Documents to which it is to
be a party will not result in any violation of or be in conflict with its
Certificate of Incorporation or By-Laws, or any agreement, instrument,
judgment, decree, order, statute, rule or governmental regulation applicable to
it, or be in conflict with or constitute a default under any of the foregoing,
except where such violation or conflict would not have a material adverse
effect on the Buyer or a material adverse effect on the ability of the Buyer to
perform its obligations under the Transaction Documents.
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6.4. GOVERNMENT CONSENTS, Etc. Except for the approvals referred to in
Section 5.14, no consent, approval or authorization of or registration,
designation, declaration or filing with any Governmental Entity, Federal or
other, on the part of the Buyer is required in connection with the purchase of
the Acquired Assets pursuant to this Agreement or the consummation of any other
transaction contemplated hereby.
6.5. FINANCING.
(a) The Buyer has delivered to Seller (i) a copy of a letter dated
November 18, 1997 (the "COMMITMENT LETTER") from BT Commercial
Corporation and TransAmerica Business Credit Corporation (the
"Lenders") providing for a $10,000,000 increase in the Buyer's
existing revolving credit facility (the "REVOLVING FACILITY"), (ii) a
"highly confident" letter from BT Alex.Brown Incorporated (the "HIGHLY
CONFIDENT LETTER") relating to the placement by BT Securities
Corporation of $15,000,000 in convertible preferred stock ("New
Preferred Stock") and (iii) a letter dated as of November 18, 1997
from Lynch Manufacturing Corporation to the Buyer (the "LMC LETTER").
The copies of the Commitment Letter, the Highly Confident Letter and
the LMC Letter are complete and correct, have not been amended or
waived and are in full force and effect. The Buyer intends to fund
the Purchase Price with (i) $770,000 in cash on hand, (ii) $37,000,000
in new borrowings under the Revolving Facility, as amended, and
(iii) $15,000,000 in proceeds from the New Preferred Stock.
(b) The Buyer and its Subsidiaries currently have approximately
$300,000 in outstanding borrowings under the Revolving Facility and an
additional approximately $37,000,000 available for borrowing based on
the Buyer's current borrowing base.
(c) The loans under the Revolving Facility are permitted under the
Indenture dated as of October 23, 1996 with respect to the Buyer's
Senior Secured Notes due 2006.
(d) The Buyer hereby represents and warrants to the Seller (i) that
its Board of Directors has approved the financing transactions
contemplated by the Commitment Letter and the Highly Confident Letter
(collectively, the "FUNDING LETTERS") and the LMC Letter, including
the issuance of the New Preferred Stock on the terms contemplated by
the Highly Confident Letter and the LMC Letter, subject to stockholder
approval and (ii) upon receipt of stockholder approval, the Buyer will
use its best efforts to enter into the financing transactions
contemplated by the Funding Letters on terms no less
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favorable to the Buyer than as set forth in the Funding Letters and the
LMC Letter.
6.6. BROKERS. No finder, broker, agent or other intermediary has worked
for or on behalf of the Buyer in connection with the negotiation or
consummation of the transactions contemplated hereby.
6.7. MANUFACTURING EXEMPTION. The Buyer represents that the Equipment
is being purchased for use by the Buyer in the manufacture of pressure
sensitive paper products. To that end, the Buyer represents that the purchase
of the Equipment will qualify for the manufacturer's exemption pursuant to 36
M.R.S.A. sec. 1760 (31) and that the Buyer does not intend to lease or grant
the use of said assets to another entity.
6.8. RESALE EXEMPTION. The Buyer represents that all product
inventories and all raw material inventories to be acquired as part of the
Acquired Assets are being purchased for use in the manufacturing process and
will be consumed or destroyed in the manufacturing process and/or will be
sold to third party purchasers. Accordingly, the Buyer's purchase of
inventory items in the contemplated transaction will qualify for the
manufacturer's exemption pursuant to 36 M.R.S.A. 1760 (31) or for the resale
exemption pursuant to Maine Regulation, Rule No. 301. The Buyer shall
provide the Seller at or prior to the Closing with a qualified resale
certificate in the form of EXHIBIT D hereto.
ARTICLE 7
CERTAIN REGULATORY APPROVALS
7.1. HART-SCOTT-RODINO ACT. As promptly as practicable, and in any
event within ten (10) business days following the execution and delivery of
this Agreement by the parties, the Seller and the Buyer shall each prepare
and file any required notification and report form under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
ACT"), in connection with the transactions contemplated hereby; the Seller
and the Buyer shall request early termination of the waiting period
thereunder; and the Seller and the Buyer shall respond with reasonable
diligence and dispatch to any request for additional information made in
response to such filings.
7.2. ENVIRONMENTAL PERMITS.
(a) As promptly as practicable, and in any event within ten (10)
business days following the execution and delivery of this Agreement, the
Seller and the Buyer will file with the applicable state authority, an
application (the "AIR PERMIT APPLICATION") to transfer from the Seller to
the
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Buyer the portion of the Seller's State of Maine Air Emission License,
A-29-71-C-A/R, dated June 23, 1988, as amended ("Air Emission License"),
applicable to the Pressure Sensitive Business. The Buyer shall use its
best efforts to assist the Seller in the preparation and filing of the Air
Permit Application. The Seller and the Buyer shall respond with
reasonable diligence and dispatch to any request for additional
information made in response to such filing. In the event that the
applicable portion of the Seller's Air Emission License has not been
effectively transferred at the Closing Date, the Seller agrees to allow
the Buyer to operate the Equipment under the Seller's Air Emission License
until such transfer has become effective and the Buyer agrees to indemnify
and hold the Seller harmless with respect to any and all claims,
liabilities, losses, damages, costs and expenses associated with the
Buyer's operation of the Equipment subject to the terms of the Air
Emission License during such period.
(b) The Seller agrees to provide notice, as promptly as practicable,
to the applicable state and federal authorities that it will receive
wastewater from a new source pursuant to its State of Maine Waste
Discharge License No. 2224 and its Federal Permit No. ME0002321.
(c) As promptly as possible, and in any event within ten (10)
business days following the execution and delivery of this Agreement, the
Buyer agrees to file a Notice of Hazardous Waste Activity with the Maine
Department of Environmental Protection ("MDEP").
ARTICLE 8
CONDUCT OF BUSINESS PENDING CLOSING
The Seller covenants and agrees that, from and after the date of this
Agreement and until the Closing, except as otherwise specifically consented
to or approved by the Buyer in writing:
8.1. FULL ACCESS. The Seller shall afford to the Buyer and its
authorized representatives such access during normal business hours to all
properties, books, records, contracts and documents of the Pressure Sensitive
Business, including all material environmental, health and safety audits,
studies, reports, assessments and/or investigations performed by the Seller
in connection with the Pressure Sensitive Business as the Buyer shall
reasonably request in connection with its review of the Pressure Sensitive
Business, and the Seller shall furnish or cause to be furnished to the Buyer
and its authorized representatives all such information with respect to the
Pressure Sensitive Business as the Buyer may reasonably request. In
addition, the Buyer shall be granted reasonable access to contact any
employees of the Pressure Sensitive Business with the Seller's prior consent
(such consent not to be
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unreasonably withheld) and to conduct joint meetings with the ten largest
customers of the Seller in order to facilitate transition of the Pressure
Sensitive Business from the Seller to the Buyer. Any such access, contact or
meetings shall be on reasonable prior notice and shall be carried out in such
a manner as to minimize any disruption of the Pressure Sensitive Business.
8.2. CARRY ON IN REGULAR COURSE. Except as may be otherwise
contemplated by this Agreement or required by any of the documents listed in
any Schedule to this Agreement, the Seller shall carry on the Pressure
Sensitive Business in the ordinary course substantially in the same manner as
heretofore.
8.3. NO GENERAL INCREASES. Except for any increase required under the
terms of any employment agreement or benefit plan referred to in Section 5.10
and any increase in compensation that will not constitute an Assumed
Obligation, the Seller shall not (i) grant any general or uniform increase in
the rates of pay of employees of the Pressure Sensitive Business, except for
increases in salary or wages in the ordinary course of operation of the
Pressure Sensitive Business consistent with past practice, or (ii) grant any
general, uniform or individual increase in the benefits under any bonus or
pension plan or other contract or commitment for the benefit of any employee
of the Pressure Sensitive Business, or to increase the compensation payable
or to become payable to officers, key salaried employees or representatives
of the Pressure Sensitive Business, or (iii) increase any bonus, insurance,
pension or other benefit plan, payment or arrangement made to, for or with
any such officers, key salaried employees or representatives.
8.4. SALE OF CAPITAL ASSETs; CAPITAL IMPROVEMENTS. Except as may be
otherwise contemplated by this Agreement, the Seller shall not sell or
otherwise dispose of any capital assets of the Pressure Sensitive Business.
The Seller shall not commence or commit itself or the Buyer or any part of
the Acquired Assets to any capital project or projects with costs to the
Pressure Sensitive Business or the Buyer exceeding $50,000 in the aggregate
without the Buyer's prior written consent.
8.5. INSURANCE. The Seller shall maintain insurance coverage for the
Pressure Sensitive Business comparable to the insurance coverage currently in
effect.
8.6. PRESERVATION OF ORGANIZATION. Except as may be otherwise
contemplated by this Agreement, the Seller shall use reasonable efforts under
the applicable circumstances to keep the organization and material business
relationships of the Pressure Sensitive Business intact in all material
respects.
8.7. ADVICE OF CHANGE. The Seller shall advise the Buyer in writing,
promptly after becoming aware thereof, of any material adverse change in the
condition (financial or otherwise), operations or assets of the Pressure
Sensitive Business.
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8.8. NO SHOPPING. Prior to any termination of this Agreement pursuant
to Article 15 hereof, the Seller shall not solicit or enter into any
agreement with respect to the sale of any portion of the Pressure Sensitive
Business or of the Acquired Assets outside the ordinary course of business,
or any merger or other business combination of the Seller (solely as it
relates to or may affect the Pressure Sensitive Business), to or with any
Person other than the Buyer.
8.9. TAX COVENANTS.
(a) The Seller shall, at the request of the Buyer, provide to the
Buyer prior to the Closing Date a clearance certificate or similar
document, if any, which is required by any state taxing authority, in
order to relieve the Seller of any responsibility to withhold from the
Purchase Price.
(b) The Seller will pay timely all Taxes, recording and filing fees
attributable to the sale and transfer of the Acquired Assets from the
Seller to the Buyer. The Buyer will provide reasonable cooperation to
minimize the amount of such Taxes.
8.10. PREPARATION OF TRANSACTION DOCUMENTS. Each of the Buyer and
the Seller agrees to proceed expeditiously and in good faith to prepare and
finalize definitive forms of the Site Separation and Services Agreement, the
Site Lease and the Space Lease (each as defined in Article 9).
8.11. DESIGNATED INVENTORY. Prior to the Closing the Seller will
identify and prepare a list of the Designated Inventory. Based on its
identification to date, the Seller estimates that the Designated Inventory
has a book value of approximately $350,000 and the Seller and the Buyer agree
that it will not have a book value in excess of $400,000.
ARTICLE 9
CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS
The obligation of the Buyer to consummate the Closing is subject to the
satisfaction prior to or at the Closing of each of the following conditions
(to the extent noncompliance is not waived in writing by the Buyer):
9.1. REPRESENTATIONS AND WARRANTIES. The representations and warranties
made by the Seller in this Agreement shall have been correct in all material
respects when made and shall be correct in all material respects at and as of
the Closing (in each case without giving duplicative effect to any
materiality qualification contained in such representation or warranty),
except to the extent that such representations and
<PAGE>
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warranties are no longer correct due to the consummation prior to the Closing
of transactions not prohibited hereby.
9.2. COMPLIANCE WITH AGREEMENT. The Seller shall have performed and
complied in all material respects with all of its obligations under this
Agreement to be performed or complied with by it prior to or at the Closing
(in each case without giving duplicative effect to any materiality
qualification contained in such obligation).
9.3. NO LITIGATION. No restraining order or injunction shall prevent
the transactions contemplated by this Agreement and no action, suit or
proceeding shall be pending or threatened before any court or administrative
body in which it will be or is sought to restrain or prohibit or obtain
damages or other relief in connection with this Agreement or the consummation
of the transactions contemplated hereby.
9.4. HSR CLEARANCE. All required filings under the HSR Act shall have
been completed, and all applicable time limitations under the HSR Act shall
have expired or have been earlier terminated without a request for further
information by the relevant federal authorities under the HSR Act, or in the
event of such a request for further information, all applicable time
limitations under the HSR Act shall have expired without the objection of
such federal authorities.
9.5. ENVIRONMENTAL MATTERS. The Seller and Buyer shall have filed an
Air Permit Application as described in Section 7.2, the Buyer shall have
received evidence that the Seller has notified the applicable federal and
state authorities that it will receive wastewater from a new source pursuant
to its State of Maine Waste Discharge License No. 2224 and its Federal Permit
No. ME0002321, such that the Buyer will be permitted to transfer wastewater
to the Seller as contemplated by the Site Separation and Services Agreement,
and the Buyer shall have received from MDEP a hazardous waste identification
number.
9.6. SITE SEPARATION AND SERVICES AGREEMENT. The Seller shall have
entered into a Site Separation and Services Agreement having the terms set
forth in EXHIBIT B hereto and such other terms consistent therewith as are
mutually acceptable to the Buyer and the Seller (the "SITE SEPARATION AND
SERVICES AGREEMENT"), and the Site Separation and Services Agreement shall be
in full force and effect.
9.7. SITE LEASE; SPACE LEASE. The Seller shall have entered into a Site
Lease (the "SITE LEASE") and a Space Lease (the "SPACE LEASE"), each having
the terms set forth in EXHIBITS C-1 and C-2 hereto, respectively, and such
other terms consistent therewith as are mutually acceptable to the Buyer and
the Seller, and each of the Site Lease and the Space Lease shall be in full
force and effect.
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9.8. MATERIAL ADVERSE CHANGE. There shall have been no material adverse
change in the business, operations or financial condition of the Pressure
Sensitive Business, including any such material adverse change that would
result directly from the proposed consummation of the Closing.
9.9. FINANCING. All conditions to funding of loans to the Buyer set
forth in the Commitment Letter, as in effect on the date hereof shall have
been satisfied or waived by the Lenders and the New Preferred Stock shall
have been issued as contemplated by the Highly Confident Letter and the LMC
Letter.
ARTICLE 10
CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS
The obligation of the Seller to consummate the Closing is subject to the
satisfaction at or prior to the Closing of each of the following conditions
(to the extent noncompliance is not waived in writing by the Seller):
10.1. REPRESENTATIONS AND WARRANTIES. The representations and
warranties made by the Buyer in this Agreement shall have been correct in all
material respects when made and shall be correct in all material respects at
and as of the Closing (in each case without giving duplicative effect to any
materiality qualification contained in such representation or warranty).
10.2. COMPLIANCE WITH AGREEMENT. The Buyer shall have performed and
complied in all material respects with all of its obligations under this
Agreement to be performed or complied with by it prior to or at the Closing
(in each case without giving duplicative effect to any materiality
qualification contained in such obligation).
10.3. NO LITIGATION. No restraining order or injunction shall
prevent the transactions contemplated by this Agreement and no action, suit
or proceeding shall be pending or threatened before any court or
administrative body in which it will be or is sought to restrain or prohibit
or obtain damages or other relief in connection with this Agreement or the
consummation of the transactions contemplated hereby.
10.4. HSR CLEARANCE. All required filings under the HSR Act shall
have been completed, and all applicable time limitations under the HSR Act
shall have expired or have been earlier terminated without a request for
further information by the relevant federal authorities under the HSR Act, or
in the event of such a request for further information, all applicable time
limitations under the HSR Act shall have expired without the objection of
such federal authorities.
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10.5. CONSENT OF LENDERS. The Seller shall have obtained all
consents to the transactions contemplated hereby required under its credit
facilities with the group of banks led by Chase Manhattan Bank, N.A.
10.6. ENVIRONMENTAL MATTERS. The Seller and Buyer shall have filed
an Air Permit Application as described in Section 7.2 and the Seller shall
have notified the applicable federal and state authorities that it will
receive wastewater from a new source pursuant to its State of Maine Waste
Discharge License No. 2224 and its Federal Permit No. ME0002321 and the
Buyer shall have received from MDEP a hazardous waste identification number.
10.7. SITE SEPARATION AND SERVICES AGREEMENT. The Buyer shall have
entered into the Site Separation and Services Agreement, and the Site
Separation and Services Agreement shall be in full force and effect.
10.8. SITE LEASE; SPACE LEASE. The Buyer shall have entered into
each of the Site Lease and the Space Lease and the Site Lease and the Space
Lease shall be in full force and effect.
ARTICLE 11
EMPLOYEES AND EMPLOYEE BENEFITS
11.1. HIRING EMPLOYEES.
(a) At the Closing, the Buyer will offer employment to those
employees of the Pressure Sensitive Business listed on SCHEDULE 11.1.
Subject to the balance of this Article 11, all such offers shall be for
the same pay and comparable benefits as those in effect at Closing and
such offers and the benefits to be provided to the Assumed Employees shall
recognize the date of hire and time of service with the Seller for all
purposes. All employees accepting such offers are referred to in this
Agreement as "ASSUMED EMPLOYEES".
(b) The Buyer agrees that, for a period of 60 days after the Closing
Date, it will not cause any of the Assumed Employees hired by it to suffer
"employment loss" for purposes of the Worker Adjustment and Retraining
Notification Act, 29 U.S.C. Section Section 2101-2109, and related
regulations (the "WARN ACT") if such employment loss could create any
liability for the Seller, unless the Buyer delivers notices under the WARN
Act in such a manner and at such a time that the Seller bears no liability
with respect thereto.
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11.2. WELFARE BENEFIT PLANS.
(a) LIABILITIES GENERALLY. Except as expressly provided otherwise
in this Article 11 and except for any accrued expenses or liabilities set
forth on the Closing Statement (as finally adjusted pursuant to Section
3.2), the Seller shall have and retain exclusive liability and
responsibility for providing any and all benefits due and payable to or in
respect of participants and other beneficiaries under any ERISA Plan or
Non-ERISA Plan in accordance with the terms of such plans and applicable
law.
(b) RETIREE COVERAGES FOR SALARIED EMPLOYEES. The Seller agrees it
will take such action as may be necessary to recognize the service of
Assumed Employees who are not members of the Union as of the Closing Date
(the "SALARIED EMPLOYEES") with the Buyer for purposes of determining the
Salaried Employees' eligibility for the continuation of and entitlement to
the benefits of the Seller's medical and life insurance coverage for an
employee and his or her spouse and eligible dependents, and reimbursement
of Medicare premiums of an employee and his or her spouse, subsequent to
retirement or death (the "RETIREE COVERAGES"), as such Retiree Coverages
are now or may be in effect from time to time hereafter. The parties
agree that an Assumed Employee's termination of employment with the Seller
at the Closing Date shall not constitute his or her retirement for
purposes of beginning any Retiree Coverages for which the Assumed Employee
is or may be eligible but instead that any Retiree Coverages for which an
Assumed Employee is or may qualify shall be provided only following his or
her termination of employment from the Buyer.
11.3. INVESTMENT & RETIREMENT PLANS.
(a) RESPONSIBILITY FOR EXISTING PLANS. Subject to the balance of
this section, the Seller will retain all liability and responsibility for
the disposition of interests under the S.D. Warren Hourly Investment Plan
(the "HOURLY INVESTMENT PLAN"), the S. D. Warren Salaried Investment Plan
(the "SALARIED INVESTMENT PLAN" and, together with the Hourly Investment
Plan, the "INVESTMENT PLANS"), the S.D. Warren Company Cumberland Mills
Hourly Employees Retirement Plan (the "HOURLY RETIREMENT PLAN") and the
S.D. Warren Company Retirement Plan for Salaried Continuing Employees (the
"SALARIED RETIREMENT PLAN", and together with the Hourly Retirement Plan,
the "PENSION PLANS") with respect to those employees (or their
beneficiaries) of the Pressure Sensitive Business who, as of the Closing
Date, are participants in any of the Investment Plans or Pension Plans.
No Assumed Employee who is such a participant will be eligible to make any
contributions to the Investment Plans or, except as provided in the
following sentence, accrue benefits under the Pension Plans, and the
Seller will not be obligated to make
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any contribution with respect to any such participant in either Investment
Plan, with respect to compensation earned by such Assumed Employees on or
after the Closing Date. The Seller agrees that it will amend the Pension
Plans as necessary to recognize the service of Assumed Employees with the
Buyer for purposes of vesting and eligibility for subsidized early
retirement and supplemental benefits with respect to their accrued
benefits under such Plans as of the Closing Date. The Seller agrees that
it will cause the entire account balance of each Assumed Employee who is
a participant in an Investment Plan to be fully vested as of the Closing
Date.
(b) ROLLOVER OF INVESTMENT PLAN BALANCES. Seller further agrees
that the entire vested account balance of each Assumed Employee in the
Investment Plans shall be distributed as promptly as practicable following
the Closing Date if the Assumed Employee consents thereto (if such consent
is required), which distribution, if an Assumed Employee so elects, may be
rolled over, directly or otherwise in accordance with applicable law and
regulations, to an individual retirement account or to one or more defined
contribution retirement plans qualified under Section 401(a) of the Code
maintained by Buyer or any of its subsidiaries or affiliates (the "BUYER
DEFINED CONTRIBUTION PLANS"). Buyer agrees it shall take or cause to be
taken all such action as may be necessary to cause the Buyer Defined
Contribution Plans to accept such rollovers, which shall consist solely of
cash or cash and any promissory note or notes representing an outstanding
loan from the Investment Plans to the Assumed Employee. The Seller
represents to the Buyer that (i) each of the Investment Plans has been
determined by the Internal Revenue Service to qualify under Section 401 of
the Code and (ii) that it has determined, after consulting with counsel,
that the distributions completed by this Section 11.3(b) are consistent
with applicable law, including specifically Section 401(k)(10) of the
Code.
11.4. BENEFIT MAINTENANCE.
(a) HOURLY EMPLOYEES. Commencing as of the Closing Date and
continuing as required pursuant to the Collective Bargaining Agreement (or
any agreement adopted in substitution therefor), the Buyer shall provide
and maintain for the benefit of the Assumed Employees who are members of
the Union (the "HOURLY EMPLOYEES") and their eligible spouses and
dependents compensation, employee welfare, employee pension, and other
employee benefits, including but not limited to Retiree Coverages, all in
accordance with the terms of the Collective Bargaining Agreement (or any
agreement adopted in substitution therefor). Any pension plan adopted or
maintained by the Buyer in satisfaction of the foregoing sentence shall be
substantially similar in its terms to the Hourly Retirement Plan as in
effect on the Closing Date and shall recognize service through the Closing
Date to the extent
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recognized under the Hourly Retirement Plan as of the Closing Date for all
purposes, with an offset in the benefit computation for the amount of
benefit payable under the terms of the Hourly Retirement Plan as in effect
on the Closing Date (but taking into consideration any amendment required
to effectuate Seller's commitments with respect to such Plan under this
Article 11).
(b) SALARIED EMPLOYEES. Commencing as of the Closing Date and
continuing through the second anniversary of the Closing Date, the Buyer
shall provide and maintain for the benefit of the Salaried Employees and
their eligible spouses and dependents compensation, employee welfare,
employee pension and other employee benefits (other than Retiree
Coverages) which are substantially comparable in the aggregate to the
compensation paid and benefits provided by the Seller to such Assumed
Employees as of the Closing Date. Any pension plan adopted or maintained
by the Buyer in satisfaction of the foregoing sentence shall be
substantially similar in its terms to the Salaried Retirement Plan as in
effect on the Closing Date and shall recognize service and compensation of
the Assumed Employees through the Closing Date to the extent recognized
under the Salaried Retirement Plan as of the Closing Date for all
purposes, with an offset in the benefit computation for the amount of
benefit payable under the terms of the Salaried Retirement Plan as in
effect on the Closing Date (but taking into consideration any amendment
required to effectuate Seller's commitments with respect to such Plan
under this Article 11). The Seller and the Buyer acknowledge that the
provisions of this Section 11.4(b) do not require the Buyer to provide the
Salaried Employees or their otherwise eligible spouses and dependents with
Retiree Coverages, nor shall the Retiree Coverages provided to Salaried
Employees by the Seller be taken into account in determining whether the
Buyer's other benefits for Salaried Employees are comparable in the
aggregate.
(c) MEDICAL BENEFITS. The medical and dental coverages to be
provided to the Assumed Employees and dependents and beneficiaries thereof
(the "ELIGIBLE INDIVIDUALS") in accordance with Section 11.4(a) and
Section 11.4(b) shall not apply any exclusion for a pre-existing condition
(other than conditions excluded as of the Closing Date as pre-existing
conditions under Seller's medical and dental coverage) and shall take into
account for purposes of any annual co-payment, deductible and limitation
on benefits, the payments made under Seller's comparable benefit plan in
respect of the Eligible Individuals for otherwise eligible medical and
dental services in the current calendar year through the Closing Date. In
the event the Buyer is unable to secure contracts with the specific
providers to the Seller of the medical and dental benefits now enjoyed by
Assumed Employees as employees of Seller, the foregoing requirement shall
be considered satisfied
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so long as Buyer makes reasonable efforts to provide as "seamless" medical
and dental benefits coverage as possible under the then circumstances.
11.5. LIMITATION ON RIGHTS. Except as expressly provided in Section
11.4, nothing contained in this Article 11 shall limit the rights of the
Buyer or the Seller to amend, modify or terminate from time to time or at any
time any of their respective benefit plans or confer on any third party,
including but not limited to any Assumed Employee, any rights as a
third-party beneficiary of the provisions herein.
11.6. WORKMEN'S COMPENSATION. The Seller shall retain as part of
the Excluded Liabilities all responsibility for any workmen's compensation
claims arising out of the Pressure Sensitive Business for work performed by
employees of the Pressure Sensitive Business prior to the Closing for which
claims have been filed prior to the Closing Date or within six (6) months
thereafter. All other workmen's compensation claims shall constitute part of
the Assumed Obligations.
ARTICLE 12
CERTAIN COVENANTS
12.1. OBLIGATIONS OF SELLER WITH RESPECT TO ACCOUNTS RECEIVABLE.
(a) During the period beginning on the Closing Date and ending 45
days thereafter (the "COLLECTION PERIOD"), the Seller will attempt to
collect all Accounts Receivable in accordance with the Seller's current
collection practices and procedures and will pay to the Buyer, on a weekly
basis, all of such collected Accounts Receivable. All payments received
by the Seller from any customers obligated in respect of any Account
Receivable shall be deemed to have been made in respect of, and shall be
applied to, the Accounts Receivable of such customer in accordance with
the order in which such Account Receivable of the Seller was billed to
such customer, except that (i) all payments shall be applied first to
accounts specified by such customer prior to the application to any
amounts not so specified, and (ii) in the absence of such specification,
all payments received shall be applied first to accounts which are not in
dispute prior to application to any accounts which are in dispute.
(b) The Buyer will not accept any returns of defective products or
give any credit for defective products with respect to any products
relating to the Accounts Receivable without the Seller's prior consent,
which consent will not be unreasonably withheld. The Buyer may accept
returns of products or give credits for products relating to the Accounts
Receivable for reasons other than the products being defective. For
purposes of paragraph (c) below, (i) any Accounts Receivable relating to
product returns or credits
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made in compliance with the first sentence of this paragraph (b) shall
be considered unpaid at the end of the Collection Period (as defined
below) and (ii) any Accounts Receivable relating to product returns or
credits made pursuant to the second sentence of this paragraph (b) or
made pursuant to the first sentence of this paragraph (b) but without
the Seller's consent, shall be considered paid in full.
(c) Within 10 days after the end of the Collection Period, the
Seller will deliver to the Buyer a final statement setting forth all
amounts collected by the Seller during the Collection Period with respect
to the Accounts Receivable and listing all Accounts Receivable (or portion
thereof) remaining unpaid, after giving effect to the provisions of
paragraph (b) above (the "UNPAID ACCOUNTS"). At the time of delivery of
such statement the Seller will pay to the Buyer, by wire transfer or
certified or bank check, the balance of the Unpaid Accounts, net of any
reserve for uncollected accounts set forth on the Closing Statement (as
finally adjusted pursuant to Section 3.2). Any amounts collected by the
Seller or the Buyer with respect to any Unpaid Accounts after the
Collection Period will be the property of the Seller.
(d) In the event that the Seller collects more with respect to the
Account Receivables than the total amount set forth for the Account
Receivables (net of any reserve) on the Closing Statement (as finally
adjusted pursuant to Section 3.2), the Seller will be entitled to keep
such excess amount.
12.2. THIRD PARTY CONSENTS.
(a) To the extent that any agreement constituting part of the
Acquired Assets is not capable of being transferred by the Seller to the
Buyer pursuant to this Agreement without the consent, approval or waiver
of a third Person, and such consent is not obtained prior to the Closing,
or if such transfer or attempted transfer would constitute a breach
thereof or a violation of any law, rule or regulation in the absence of
obtaining such an approval, nothing in this Agreement will constitute a
transfer or an attempted transfer thereof. Each of the Buyer and the
Seller shall use reasonable efforts at its own expense to obtain any such
approvals.
(b) In the event that such consents, approvals and waivers referred
to in paragraph (a) are not obtained then the Seller and the Buyer will
each use reasonable efforts, each at its own expense, to (i) provide to
the Buyer the benefits and burdens of any such agreement, (ii) cooperate
in any reasonable and lawful arrangement designed to provide such benefits
and burdens to the Buyer without incurring any obligation to any other
Person other than to
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provide such benefits to the Buyer, including without limitation the
appointment of the Buyer as the agent of the Seller for purposes of such
agreement, and (iii) enforce, at the request of the Buyer for the account
of the Buyer, any rights of the Seller arising from any such agreement.
12.3. ACCESS TO BOOKS AND RECORDS.
(a) The Buyer agrees to cooperate with and to make available to the
Seller such documents, books, records or information relating to the
Pressure Sensitive Business as the Seller may reasonably require after the
Closing.
(b) The Buyer agrees to preserve and protect all books, records,
files and data referred to in paragraph (a) above for a period of six (6)
years after the Closing Date.
(c) The Buyer agrees not to destroy any files or records which are
subject to this Section 12.3 (i) for the period described in clause (b) of
this Section 12.3, and (ii) thereafter, without giving at least thirty
(30) days' notice to the Seller. Upon receipt of such notice, the Seller
may (A) cause to be delivered to it the files or records intended to be
destroyed, at the Seller's expense, or (B) notify the Buyer that the
Seller will pay the cost of storing and maintaining such files or records
(including any necessary costs of moving such files or records to a
location under control of the Seller).
12.4. USE OF S.D. WARREN NAME. The Buyer agrees that on or prior to
the date which is one hundred eighty (180) days after the Closing Date it
will cease using any references to the Seller, or any of its respective
Affiliates, including any such use in connection with the use of existing
supplies of labels, signs, letterhead and other printed materials, except
that the Buyer may use up existing stocks of catalogs and other promotional
materials so long as they are stickered so as to indicate that the Pressure
Sensitive Business is no longer affiliated with the Seller.
12.5. NO HIRING.
(a) After the Closing, for a period of one year, the Seller shall
not solicit or hire any Assumed Employee.
(b) After the Closing, for a period of one year, except pursuant to
Section 11.1 or as described in Section IV 2. of EXHIBIT B hereto or with
respect to Julee Supan or Craig Libby, the Buyer shall not solicit or hire
any individual who was an employee of the Seller at the Westbrook Facility
or the Technology Center as of the date of this Agreement or on the
Closing Date.
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12.6. AUDITED FINANCIALS. (a) The Seller agrees that it will
provide audited financial statements for the Pressure Sensitive Business to
be used by the Buyer in connection with the preparation by the Buyer and its
independent public accountants of its securities law filings. The financial
statements will cover the fiscal year ended September 30, 1997 (the "1997
FINANCIALS"). The Seller agrees to provide the 1997 Financials on or before
December 3, 1997. In the event that the Seller delivers the 1997 Financials
after December 3, 1997, the "drop dead" date will be extended as provided in
Article 15. In addition, in the event that the Buyer will be required to
include in its filings with the Securities and Exchange Commission ("SEC")
audited financial statements for the Pressure Sensitive Business for periods
prior to the year ended September 30, 1997, the Seller will, to the extent
possible, prepare audited financial statements for the two fiscal years ended
September 30, 1996 (the "1995/1996 FINANCIALS" and together with the 1997
Financials, the "AUDITED FINANCIALS"). In the event that the Seller delivers
the 1995/1996 Financials after December 3, 1997 and the 1995/1996 Financials
are required to be included in the Proxy Materials (as defined in Section
12.8) then the "drop dead" date will be extended as provided in Article 15.
(b) The Seller and the Buyer agree to cooperate and use their best
efforts to eliminate or minimize the requirement that the Buyer include all
or part of the 1995/1996 Financials in the Proxy Materials, including
requesting the SEC to waive this requirement.
(c) The Seller agrees that it will provide reasonable cooperation
in connection with the preparation by the Buyer and its independent public
accountants of audited financial statements for the Pressure Sensitive
Business for periods other than as described above.
12.7. NONCOMPETITION. (a) From and after the Closing Date, and for
a period of three years thereafter, Seller shall not, directly or indirectly,
within the United States engage in the business of manufacturing and selling
pressure sensitive products similar to those currently manufactured by the
Seller in connection with the Pressure Sensitive Business (a "COMPETING
ACTIVITY").
(b) The provisions of paragraph (a) above shall not be deemed to
prohibit the Seller from (i) owning less than 10% of the voting securities of
any Person engaged in a Competing Activity, (ii) acquiring any business or
Person engaged in a Competing Activity so long as its primary business is not
a Competing Activity, (iii) acting as a supplier of liner, face sheet and
other components to any Person engaged in a Competing Activity and (iv)
continuing to manufacture and sell its specialty line of products.
(c) The Seller agrees that the agreements set forth in this
Section 12.7 constitute a separate agreement independently supported by good
and
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adequate consideration and shall be severable from the other provisions of,
and shall survive, this Agreement. The existence of any claim or cause of
action of Seller against Buyer, whether predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement by Buyer of the
covenants and agreements of Seller contained in this Section 12.7.
(d) Seller acknowledges and recognizes that the enforcement of the
provisions of this Section 12.7 is necessary to ensure the preservation and
continuity of the business and good will of the Pressure Sensitive Business.
Seller furthers agree that due to the nature of such business, the
restrictions set forth in this Section 12.7 are reasonable as to time and
geographic area.
12.8. FINANCING. The Buyer agrees that it will use its best efforts to
obtain the financing contemplated by the Funding Letters and the LMC Letter,
including (i) proceeding diligently and in good faith to negotiate definitive
documents for the revolving loans contemplated by the Commitment Letter and
the placement of New Preferred Stock contemplated by the Highly Confident
Letter, (ii) proceeding diligently and in good faith to prepare disclosure
documents for the placement of the New Preferred Stock and any required proxy
statement or information statement in connection with the approval of
stockholders required to authorize an amendment to the Buyer's charter to
authorize the New Preferred Stock (collectively, "PROXY MATERIALS"), (iii)
filing the Proxy Materials with the SEC as promptly as practicable, but in no
event later than five days after delivery of that portion of the Audited
Financials required to be included in the Proxy Materials, (iv) conduct any
required stockholder meeting or stockholder consent as promptly as
practicable and (v) permitting the Seller to review and comment on any
disclosure materials relating to the placement of the New Preferred Stock or
the Proxy Materials, which the Seller agrees it will review in an expedited
manner consistent with the diligent pace contemplated by this Section 12.8.
ARTICLE 13
INDEMNITY
13.1. INDEMNIFICATION BY THE SELLER.
(a) The Seller agrees to indemnify and hold the Buyer (and its
directors, officers and employees) harmless from and with respect to any
and all claims, liabilities, losses, damages, costs and expenses
(including without limitation the reasonable fees and disbursements of
counsel), net of insurance proceeds received (collectively, "LOSSES"),
arising out of any of the following:
(i) any breach by the Seller of any representation or
warranty made by the Seller in this Agreement;
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(ii) any breach by the Seller of any covenant, obligation or
undertaking made by the Seller in this Agreement,
including without limitation the Seller's covenant in
Article 2 to satisfy and discharge the Excluded
Liabilities;
(iii) any of the matters set forth on SCHEDULE 13.1(a)(iii);
(iv) except for the matters referred to in clause (iii) above,
any actual liability for the cleanup or removal of any
Hazardous Substances, or for death or injury to person or
property as a result of the generation, transportation,
disposal, release, emission or discharge of any Hazardous
Substances on-site or off-site from or by the Seller or
any operation existing on the Westbrook Facility, past or
present, solely to the extent that such liability arises
out of any matter that occurred or existed on or before
the Closing Date; and
(v) except for the matters referred to in clause (iii) above,
any actual liability and penalties for violations of,
and/or noncompliance with, Environmental Laws, to the
extent that such liability arises out of any matter that
occurred or existed on or before the Closing Date.
(b) No action or claim for Losses (a "CLAIM") pursuant to
paragraph (a)(i) above may be brought or made unless such action or claim
has been specified in reasonable detail in a written notice from the Buyer
to the Seller on or before the first anniversary of the Closing Date,
except that any claim under paragraph (a)(i) arising from a breach of
Seller's representations and warranties in Section 5.4 may be made at any
time in the future, subject to any applicable statute of limitations. No
Claim pursuant to paragraph (a)(iv) above or paragraph (a)(v) above,
including any Claim falling within the scope of paragraph (a)(iv) above or
paragraph (a)(v) above that also falls within the scope of paragraph
(a)(i) above or paragraph (a)(ii) above (with any such Claim falling
within the scope of paragraph (a)(iv) or paragraph (a)(v) above referred
to as a "LIMITED ENVIRONMENTAL CLAIM"), may be brought or made unless such
Limited Environmental Claim has been specified in reasonable detail in a
written notice from the Buyer to the Seller on or before the seventh
anniversary of the Closing Date; provided that notwithstanding the
foregoing, in the event that the Buyer performs any "Phase II"
environmental assessment subsequent to Closing at the Primary Real
Property in accordance with the terms of the Site Lease, a Limited
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Environmental Claim may be brought or made by the Buyer only for a period
of three (3) years from the date of commencement of the "Phase II"
environmental assessment but in any event no later than the seventh
anniversary of the Closing Date. Any claim under paragraph (a)(ii) above
(excluding any claim that also constitutes a Limited Environmental Claim)
or paragraph (a)(iii) above (excluding any Claim that also constitutes a
Limited Environmental Claim) ("BLANKET ENVIRONMENTAL CLAIMS") may be made
at any time in the future, subject to any applicable statute of
limitations.
(c) The Buyer shall not be entitled to indemnification under
paragraph (a)(i) above except to the extent that the cumulative amount of
Losses arising from Claims asserted under paragraph (a)(i) above exceeds
$100,000, and then only to the extent of such excess. In addition, in no
event shall the aggregate liability of the Seller for Losses under
paragraph (a)(i) above exceed fifteen percent (15%) of the Purchase Price
(as finally adjusted pursuant to Section 3.2) and in no event shall the
aggregate liability of the Seller for Losses with respect to Limited
Environmental Claims exceed $20,000,000; provided that notwithstanding the
foregoing, in the event that the Buyer performs any "Phase II" site
assessment subsequent to Closing at the Primary Real Property in
accordance with the terms of the Site Lease, the aggregate liability of
the Seller for Losses with respect to Limited Environmental Claims shall,
exclusive of Claims made in connection with any costs incurred with
respect to remediation required as a result of the "Phase II" site
assessment findings ("PHASE II REMEDIATION COSTS"), thereafter not exceed
$5,000,000; provided that in no event shall the aggregate liability of the
Seller for Losses with respect to Limited Environmental Claims exceed
$20,000,000 (including Phase II Remediation Costs). Any remediation to be
performed in connection with any findings arising from the Phase II site
assessment shall be performed by the Seller as described in the Site
Separation and Services Agreement. Any claims under paragraph (a)(ii)
above or Blanket Environmental Claims shall not be subject to any
deductible amount or ceiling on liability. Limited Environmental Claims
shall not be subject to any deductible amount.
13.2. INDEMNIFICATION BY THE BUYER.
(a) The Buyer agrees to indemnify and hold the Seller (and its
directors, officers and employees) harmless from and with respect to any
and all Losses arising out of any of the following:
(i) any breach by the Buyer of any representation or warranty
made by the Buyer in this Agreement, or
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(ii) any breach by the Buyer of any covenant, obligation or
undertaking made by the Buyer in this Agreement,
including without limitation the Buyer's covenant in
Article 2 to assume, pay, perform and discharge the
Assumed Obligations; and
(iii) the operation of the Pressure Sensitive Business or the
use of the Acquired Assets in the operation thereof after
the Closing Date.
(b) No action or claim for Losses pursuant to paragraph (a)(i) above
may be brought or made unless such action or claim (a "CLAIM") has been
specified in reasonable detail in a written notice from the Seller to the
Buyer on or before the first anniversary of the Closing Date. Any claims
under paragraphs (a)(ii) or (a)(iii) above may be made at any time in the
future, subject to any applicable statute of limitations.
(c) The Seller shall not be entitled to indemnification under
paragraph (a)(i) above for any Claim except to the extent that the
cumulative amount of Losses arising from Claims asserted under
paragraph (a)(i) above exceeds $100,000, and then only to the extent of
such excess. In addition, in no event shall the aggregate liability of
the Buyer for Losses under paragraph (a)(i) above exceed fifteen percent
(15%) of the Purchase Price (as finally adjusted pursuant to Section 3.2).
Any claims under paragraphs (a)(ii) or (a)(iii) above shall not be subject
to any deductible amount or ceiling on liability.
13.3. INDEMNIFICATION PROCEDURES.
(a) In the event that any party hereto (an "INDEMNIFIED PARTY")
desires to make a claim against another party hereto (the "INDEMNIFYING
PARTY", which term shall include all Indemnifying Parties if there be more
than one) in connection with any action, suit, proceeding or demand at any
time instituted against or made upon it for which it may seek
indemnification hereunder (a "THIRD-PARTY CLAIM"), the Indemnified Party
shall promptly notify the Indemnifying Party of such Third-Party Claim and
of its claims of indemnification with respect thereto; PROVIDED, HOWEVER,
that the failure to provide such notice shall not release the Indemnifying
Party from any obligation under this Article 13 except to the extent such
Indemnifying Party is prejudiced by such failure. Upon receipt of such
notice from the Indemnified Party, the Indemnifying Party shall be
entitled to participate in the defense of such Third-Party Claim, and
assume the defense of such Third-Party Claim, and in the case of such an
assumption the Indemnifying Party shall have the authority to negotiate,
compromise and settle such Third-Party
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Claim; PROVIDED, THAT the Indemnifying Party shall not be entitled to
settle any such Third-Party Claim without the consent of the Indemnified
Party unless as part of such settlement the Indemnified Party is released
from all liability with respect to such Third-Party Claim.
(b) The Indemnified Party shall retain the right to employ its own
counsel and to participate in the defense of any Third-Party Claim, the
defense of which has been assumed by an Indemnifying Party pursuant
hereto, but the claimant shall bear and shall be solely responsible for
its own costs and expenses in connection with such participation.
(c) With respect to any indemnification to be provided by the Seller
with respect to Limited Environmental Claims or Blanket Environmental
Claims, such indemnification shall be subject to the relevant procedures
set forth in the Site Separation and Services Agreement, and in the event
of any conflict between this Section 13.3 and the Site Separation and
Services Agreement, the provisions of the Site Separation and Services
Agreement shall control.
13.4. SCOPE OF INDEMNITY. Except as provided in Article 14, each of
the Seller and the Buyer acknowledges that, except for equitable relief,
including specific performance, its sole and inclusive remedy with respect to
any and all claims relating to the subject matter of this Agreement shall be
pursuant to the indemnification provisions of this Article 13.
13.5. Waiver of Statutory Claims. The Buyer hereby waives and releases
the Seller from any and all Losses, known or unknown, it may have under
CERCLA (as defined in Article 17) or any other statutes relating to
environmental matters now or hereafter in effect or any other statute if the
assertion of a right under such statute would circumvent the intended effect
of Section 13.4. The Seller hereby waives and releases the Buyer from any
and all Losses, known or unknown, it may have under CERCLA or any other
statutes relating to environmental matters now or hereafter in effect or any
other statute if the assertion of a right under such statute would circumvent
the intended effect of Section 13.4.
ARTICLE 14
TAX MATTERS
14.1. General.
(a) Except as provided in paragraph (b) below and except for any
accrued expenses for Taxes set forth on the Closing Statement (as finally
adjusted pursuant to Section 3.2), the Seller shall remain responsible for
all
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Taxes (as defined in Article 17) of the Seller payable in connection with
the operation of the Pressure Sensitive Business prior to the Closing.
The Seller shall also remain responsible for the preparation and timely
filing of all related Tax Returns (as defined in Article 17).
(b) With respect to any real property, AD VALOREM or similar Taxes
of the Seller relating to the Pressure Sensitive Business and attributable
to periods before and after the Closing, the Seller shall be responsible
for that portion of such Taxes attributable to the period prior to the
Closing and the Buyer shall be responsible for Taxes attributable to that
period commencing on and after the Closing.
14.2. COOPERATION ON TAX MATTERS; CONDUCT OF PROCEEDINGS.
(a) The Buyer and the Seller shall cooperate fully, as and to the
extent reasonably requested by the other party, in connection with the
preparation and filing of Tax Returns pursuant to this Article 14 and any
audit, litigation or other proceeding with respect to Taxes. Such
cooperation shall include the retention and (upon the other party's
request) the provision of records and information which are reasonably
relevant to such preparation and filing and to any audit, litigation or
other proceeding relating thereto and making employees available on a
mutually convenient basis to provide additional information and
explanation of any material provided hereunder.
(b) The Seller shall be responsible for defending any audit,
litigation or other proceeding with respect to any Taxes of the Seller for
which the Seller is wholly or partially responsible for payment pursuant
to this Article 14 and shall have the authority to negotiate, compromise
and settle any such audit, litigation or other proceeding.
14.3. SCOPE OF ARTICLE 14.
(a) Notwithstanding the provisions of Article 13, the provisions of
this Article 14 (and not Article 13) shall govern the allocation of
responsibility between the Seller and the Buyer for Taxes of the Pressure
Sensitive Business.
(b) Claims under this Article 14 may be made by the Buyer and the
Seller at any time prior to the expiration of the statute of limitations
applicable to the Tax matter to which the Claim relates.
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ARTICLE 15
TERMINATION
This Agreement may be terminated by either the Buyer or the Seller in
writing, without liability to the terminating party on account of such
termination (provided the terminating party is not otherwise in default or in
breach of this Agreement), if the Closing shall not have occurred on or before
January 15, 1998, other than as a consequence of the intentional breach or the
intentional default by the terminating party; PROVIDED THAT (i) in the event
that the Seller does not deliver the Audited Financials as provided in Section
12.6 on or before December 3, 1997, this January 15, 1998 date will be extended
for each day after December 3, 1997 the Seller has failed to deliver that
portion of the Audited Financials required to be included in the Proxy
Materials and (ii) in the event that the SEC elects to review the Proxy
Materials, this January 15, 1998 date will be extended to reflect the period
required to clear all the SEC's comments and mail the Proxy Materials to the
Buyer's stockholders; PROVIDED FURTHER that in no event will this date be
extended pursuant to (i) or (ii) beyond March 31, 1998. This Agreement may be
terminated at any time prior to the Closing by mutual written consent of the
Seller and the Buyer. In the event of the termination and abandonment of this
Agreement by the Seller or the Buyer, as herein provided, written notice
thereof shall be given to the other party and this Agreement shall terminate
without any further action of the parties hereto. If this Agreement is
terminated as provided herein: (i) each party will redeliver all documents,
work papers and other material of the other party or parties relating to the
transactions contemplated hereby including such memoranda, notes, lists,
records or other documents compiled or derived from such material, whether so
obtained before or after the execution hereof, to the party furnishing the
same; (ii) all information received by any party hereto with respect to the
business of the other parties or their affiliated companies shall remain
subject to the terms of the Confidentiality Agreement (as defined in
Article 16); and (iii) no party shall have any liability or further obligation
to any other party to this Agreement except as provided by this Article 15 and
as provided with respect to certain expenses as provided in Section 18.3, and
except that any termination of this Agreement pursuant to the first sentence of
this Article 15 shall not relieve a defaulting or breaching party from any
liability to the other party hereto. In addition, the provisions of Article 18
shall survive any termination of this Agreement.
ARTICLE 16
CONFIDENTIALITY
16.1. CONFIDENTIALITY AGREEMENT. Any and all information disclosed by
the Buyer to the Seller or by the Seller to the Buyer as a result of the
negotiations leading to the execution of this Agreement, or in furtherance
thereof, which information was
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not already known to the Seller or to the Buyer, as the case may be, shall be
subject to the Confidentiality Agreement, dated as of September 8, 1997,
between the Buyer and the Seller (the "CONFIDENTIALITY AGREEMENT"), all of the
provisions of which are incorporated into this Section 16.1 by this reference.
Notwithstanding the foregoing, the Confidentiality Agreement shall terminate
upon the Closing.
16.2. CONFIDENTIAL INFORMATION RELATING TO THE PRESSURE SENSITIVE
BUSINESS. At all times from and after the Closing Date, the Seller shall not
use for its benefit or for the benefit of others any confidential or
proprietary information relating solely to the Pressure Sensitive Business
("PSB INFORMATION"), and shall use reasonable efforts, consistent with the
manner in which it keeps confidential its own sensitive business information,
to keep the PSB Information confidential, other than any of such PSB
Information that is in the public domain prior to the date of this Agreement or
thereafter comes into the public domain (unless any of such information is in
or becomes in the public domain in whole or in part due to action or inaction
of the Seller in violation of this Agreement). The foregoing shall not
prohibit use of such PSB Information as is required by applicable law, or as is
necessary to prepare Tax Returns or other filings with governmental
authorities, or to assert or protect any rights of the Seller under this
Agreement, PROVIDED that the Buyer is given notice and an adequate opportunity
to contest such disclosure or to use any means available to minimize such
disclosure (E.G., the "confidential treatment" provisions of Rule 24b-2
promulgated under the Securities Exchange Act of 1934, as amended).
ARTICLE 17
DEFINITIONS
As used herein the following terms not otherwise defined have the
following respective meanings:
"AFFILIATE" means, with respect to any specified Person, any other Person
that directly, or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, such specified Person. As used
in this definition the term "CONTROL" (including the terms "CONTROLLED BY" and
"UNDER COMMON CONTROL WITH") means, with respect to the relationship between or
among two or more Persons, the possession, directly or indirectly or as trustee
or executor, of the power to direct or cause the direction of the affairs or
management of a Person, whether through the ownership of voting securities, as
trustee or executor, by contract or otherwise, including, without limitation,
the ownership, directly or indirectly, of securities having the power to elect
a majority of the board of directors or similar body governing the affairs of
such Person.
"CERCLA" means the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended.
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"CODE" means the Internal Revenue Code of 1986, as amended, and the rules
and regulations thereunder.
"ENCUMBRANCE" means all liens, security interests, pledges, charges,
mortgages, conditional sales agreements, title retention agreements and other
encumbrances.
"ENVIRONMENTAL LAW" means any applicable Federal, state, local or foreign
law, treaty, judicial decision, regulation, rule, judgment, order, decree,
injunction, policy or guideline, permit, agreement or governmental restriction,
each as in effect on or prior to the Closing Date, relating to the environment,
worker health or safety or to any Hazardous Substance.
"GOVERNMENTAL ENTITY" means any government or any court, arbitral
tribunal, administrative agency or commission or other governmental or other
regulatory authority or agency, Federal, state, local, transnational or
foreign.
"HAZARDOUS SUBSTANCE" means any substance, pollutant, contaminant,
chemical, waste or material, including petroleum, its derivatives, by-products,
and other hydrocarbons, that is listed, identified in, or regulated under any
applicable Federal, state, local or foreign law, treaty, judicial decision,
regulation, rule, policy or guideline, judgment, order, decree, injunction,
permit, agreement or governmental restriction. The term "Hazardous Substance"
shall also include asbestos.
"INCOME TAXES" means any Taxes based upon or related to income, including
any Taxes calculated in whole or in part based upon net revenues.
"INDEBTEDNESS" as applied to any Person, means all indebtedness of such
Person to any other Person for borrowed money, whether current or funded, or
secured or unsecured and all such Indebtedness of any other Person which is
directly or indirectly guaranteed by such Person or which such Person has
agreed (contingently or otherwise) to purchase or otherwise acquire or in
respect of which it has otherwise assured against loss, but not including the
endorsement of checks and similar instruments.
"KNOWLEDGE OF THE SELLER" or "to the Seller's knowledge" means and is
limited to the actual knowledge of the following persons: Anne Ayer, Michael
Caron, John Donahue, Allen Hooper, Bart Johnson, Trevor Larkan, Jennifer
Miller, Raymond Pepin and Lew Mohler.
"MATERIAL ADVERSE EFFECT" means any material adverse effect on the
operations, assets or financial condition of the Pressure Sensitive Business
taken as a whole.
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"NON-INCOME TAXES" means any Taxes other than Income Taxes.
"PERMITTED ENCUMBRANCES" means Encumbrances that (i) are excepted in title
commitments delivered to the Buyer in connection with the consummation of the
transactions contemplated by this Agreement, (ii) arise out of Taxes not in
default and payable without penalty or interest or the validity of which is
being contested in good faith by appropriate proceedings, (iii) represent the
rights of customers, vendors, suppliers and subcontractors in the ordinary
course of business under contracts or under general principles of commercial
law, (iv) that individually and in the aggregate could not reasonably be
expected to interfere with the use of the Acquired Assets in the conduct of
normal business operations of the Pressure Sensitive Business; or (v) in
connection with any agreement or instrument constituting part of the Acquired
Assets, relate to restrictions on transfer embodied in the terms of such
agreement or instrument.
"PERSON" means any corporation, association, partnership, limited
liability company, organization, business, individual, government or political
subdivision thereof or governmental agency.
"TAX" means any federal, state, provincial, local, foreign income and
other income, gross receipts, franchise, estimated, alternative minimum, add-on
minimum, sales, use, transfer, ad valorem, profits, registration, value added,
excise, natural resources, severance, stamp, occupation, premium, windfall
profit, environmental, customs, duties, real property, personal property,
capital stock, intangibles, social security, unemployment, disability, payroll,
license, lease, employee, withholding, or other tax or levy, of any kind
whatsoever, including any interest, penalties, or additions to any of the
foregoing.
"TAX RETURN" means any return, declaration, report, claim for refund,
information return, or other document (including any related or supporting
estimates, elections, schedules, statements, or information) filed or required
to be filed in connection with the determination, assessment, or collection of
any Tax or the administration of any laws, regulations, or administrative
requirements relating to any Tax.
ARTICLE 18
GENERAL
18.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties of the parties hereto contained in this
Agreement shall survive the Closing and shall expire on the first anniversary
of the Closing Date,
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except that the Seller's representations and warranties in Section 5.4 shall
survive indefinitely, subject to any applicable statute of limitations.
18.2. ARBITRATION. All disputes or claims arising under or in any way
relating to this Agreement shall be settled by arbitration in Wilmington,
Delaware before a panel of three arbitrators (with one designated by the Buyer
and one by the Seller, and the third arbitrator designated by the first two)
pursuant to the commercial arbitration rules of the American Arbitration
Association. The arbitrators shall be selected as prescribed above, but if
they do not so agree within 30 days after the date of the notice referred to
above, the selection shall be made pursuant to the rules from the panels of
arbitrators maintained by such Association. Any award rendered by the
arbitrators shall be conclusive and binding upon the parties hereto. However,
no arbitrator shall have the power to award incidental, consequential or
special (including punitive or multiple) damages. This provision for
arbitration shall be specifically enforceable by the parties and the decision
of the arbitrators in accordance herewith shall be final and binding and there
shall be no right of appeal therefrom. Each party shall pay its own expenses
of arbitration and the expenses of the arbitrators shall be equally shared;
PROVIDED, HOWEVER, that if in the opinion of the arbitrators any claim for
indemnification or any defense or objection thereto was unreasonable, the
arbitrators may assess, as part of the award, all or any part of the
arbitration expenses of the other party (including reasonable attorneys' fees)
and of the arbitrators against the party raising such unreasonable claim,
defense or objection.
18.3. EXPENSES; CERTAIN TAXES. Each party shall pay its own expenses
and costs incidental to the preparation of this Agreement and to the
consummation of the transactions contemplated hereby, except that in the event
that the Closing is not consummated as a result of the non-satisfaction of the
condition referred to in Section 9.9, then the Buyer shall reimburse the Seller
for all of its out-of-pocket expenses (including accounting, legal and
investment banking fees and expenses) incurred in connection with the
negotiation and preparation of this Agreement and the proposed consummation of
the transactions contemplated hereby, up to a maximum amount of $500,000. All
transfer and sales taxes payable with respect to the sale of the Acquired
Assets to the Buyer shall be borne by the Seller. Each of the Seller and the
Buyer agree to use reasonable efforts to minimize the amount of such Taxes.
18.4. ASSIGNS. This Agreement may not be assigned in whole or in part
by either party hereto without the prior written consent of the other party,
except that (i) the Seller may assign its rights hereunder to a wholly-owned
direct or indirect subsidiary of the Seller; provided that no such assignment
by the Seller hereunder shall release the Seller of any of its obligations
hereunder or under any of the other Transaction Documents; and (ii) the Buyer
may assign its rights hereunder (a) in connection with obtaining financing with
respect to the transactions contemplated hereby or (b) to a wholly-owned direct
or indirect subsidiary of the Buyer; provided
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that no such assignment by the Buyer thereunder shall relieve the Buyer of any
of its obligations hereunder or under any of the other Transaction Documents.
This Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective heirs, successors and permitted assigns.
18.5. ENTIRE AGREEMENT, ETC. This Agreement (including the Schedules
and Exhibits and the Confidentiality Agreement) contains the entire
understanding of the parties, supersedes all prior agreements and
understandings relating to the subject matter hereof and shall not be amended
except by a written instrument hereafter signed by each of the parties hereto.
EXCEPT AS SET FORTH IN ARTICLE 5, SELLER MAKES NO REPRESENTATIONS OR
WARRANTIES, EXPRESS OR IMPLIED, WITH RESPECT TO THE SALE OF THE ACQUIRED ASSETS
HEREUNDER OR THE PRESSURE SENSITIVE BUSINESS, INCLUDING WITHOUT LIMITATION ANY
REPRESENTATION OR WARRANTY REGARDING MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE.
18.6. WAIVER OF CERTAIN DAMAGES. EACH OF THE SELLER AND THE BUYER TO
THE FULLEST EXTENT PERMITTED BY LAW, IRREVOCABLY WAIVES ANY RIGHTS THAT THEY
MAY HAVE TO INCIDENTAL, CONSEQUENTIAL OR SPECIAL (INCLUDING PUNITIVE OR
MULTIPLE) DAMAGES BASED UPON, OR ARISING OUT OF, THIS AGREEMENT OR ANY COURSE
OF CONDUCT, COURSE OF DEALING, STATEMENTS OR ACTIONS OF ANY OF THEM RELATING
THERETO.
18.7. CONSTRUCTION. The language used in this Agreement will be
deemed to be the language chosen by the parties to express their mutual intent,
and no rule of strict construction will be applied against any party.
18.8. GOVERNING LAW. This Agreement shall be governed by and
construed and enforced in accordance with the internal laws (and not the choice-
of-law rules) of the State of Delaware.
18.9. NOTICES. All notices, requests, payments, instructions or other
documents to be given hereunder shall be in writing or by written
telecommunication, and shall be deemed to have been duly given if delivered
personally or if mailed by certified mail, return receipt requested, postage
prepaid, or sent by written telecommunication, as follows:
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If to the Seller, to:
S.D. Warren Company
225 Franklin Street
Boston, Massachusetts 02110
Attention: General Counsel
Telecopier: 617-368-6580
with a copy sent contemporaneously to:
John R. Utzschneider, Esq.
Bingham Dana LLP
150 Federal Street
Boston, Massachusetts 02110
Telecopier: 617-951-8736
If to the Buyer, to:
Ned N. Fleming, III, President
Spinnaker Industries, Inc.
600 N. Pearl Street, Suite 2160
Dallas, Texas 75201
Telecopier: 214-855-0093
with copies sent contemporaneously to:
Timothy R. Vaughan, Esq.
Crouch & Hallett, LLP
717 North Harwood, Suite 1400
Dallas, Texas 75201
Telecopier: 214-022-4193
Mr. K.C. Caldabaugh
Brown-Bridge Industries, Inc.
518 E. Water street
Troy, Ohio 45373-0370
Telecopier: 937-332-6501
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18.10. COUNTERPARTS. This Agreement may be executed by the parties in
separate counterparts, each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute but one and the
same instrument.
18.11. SECTION HEADINGS. All enumerated subdivisions of this Agreement
are herein referred to as "section" or "subsection." The headings of sections
or subsections are for reference only and shall not limit or control the
meaning thereof.
18.12. PUBLIC STATEMENTS OR RELEASES. The parties hereto each agree that
prior to the Closing no party to this Agreement shall make, issue or release
any public announcement, statement or acknowledgment of the existence of, or
reveal the status of, this Agreement or the transactions provided for herein,
without first obtaining the consent of the other party hereto. Nothing
contained in this Section 18.12 shall prevent any party from making such public
announcements as such party may consider necessary in order to satisfy such
party's legal obligations, provided that such disclosing party shall to the
extent practicable give prior notice to the other party of the contents of, and
requirement for, such disclosure.
18.13. DISCLOSURE IN SCHEDULES. For purposes of this Agreement, with
respect to any matter that is clearly disclosed in any portion of the
Disclosure Schedule in such a way as to make its relevance to the information
called for by another Section of this Agreement readily apparent, such matter
shall be deemed to have been included in the Disclosure Schedule in response to
such other Section, notwithstanding the omission of any appropriate
cross-reference thereto.
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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as an instrument under seal as of the day and year first above written.
S.D. WARREN COMPANY
By: /s/ TREVOR L. LARKAN
--------------------------------------
Name: Trevor L. Larkan
Title: Vice President and
Chief Financial Officer
SPINNAKER INDUSTRIES, INC.
By: /s/ NED N. FLEMING, III
--------------------------------------
Name: Ned N. Fleming, III
Title: President
<PAGE>
FIRST AMENDMENT TO
ASSET PURCHASE AGREEMENT
This FIRST AMENDMENT, dated as of March 17, 1998 (the "AMENDMENT"),
by and between (a) S. D. Warren Company, a Pennsylvania corporation (the
"SELLER"), and (b) Spinnaker Industries, Inc., a Delaware corporation (the
"BUYER").
WHEREAS, the Buyer and the Seller are parties to that certain Asset
Purchase Agreement, dated as of November 18, 1997 (the "ASSET PURCHASE
AGREEMENT"); and
WHEREAS, the parties have agreed to amend the Asset Purchase
Agreement;
NOW, THEREFORE, in consideration of the foregoing, and for other good
and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Buyer and the Seller hereby agree as follows:
SECTION 1. DEFINED TERMS. Capitalized terms which are used herein
without definition and which are defined in the Asset Purchase Agreement
shall have the same meanings herein as in the Asset Purchase Agreement.
SECTION 2. AMENDMENTS TO THE ASSET PURCHASE AGREEMENT.
2.1. AMENDMENT TO PURCHASE PRICE. The first sentence of Section
3.1 is hereby amended and restated in its entirety to read as follows:
"At the Closing, the Buyer shall pay Fifty-One Million
Seven Hundred Seventy Thousand Dollars ($51,770,000) to the
Seller, as the aggregate purchase price for the Acquired Assets,
subject to adjustment as provided in Section 3.2 hereof (the
"PURCHASE PRICE"), by wire transfer of $44,770,000 to the Buyer
in cash and delivery of a promissory note to the Buyer in the
original principal amount of $7,000,000, such promissory note to
be in the form of EXHIBIT E hereto (the "SUBORDINATED NOTE").
2.2 PURCHASE PRICE ADJUSTMENTS. Section 3.2 is hereby amended
and restated in its entirety to read as follows:
"3.2. PURCHASE PRICE ADJUSTMENTS.
(a) Included as EXHIBIT A is a statement showing the net
value of the Accounts Receivable, Prepaid Expenses and
Inventories (collectively, the "CURRENT ASSETS") and all trade
payables (excluding intercompany payables) and accrued
liabilities of the Pressure Sensitive Business, but excluding
all payables and expenses of the types set forth in clauses (i)
to (ix) of Article 2 (collectively, the "CURRENT LIABILITIES").
The Current Assets and Current Liabilities are collectively
referred to as the "NET WORKING CAPITAL". Except as noted on
Exhibit A, this statement (the "TARGET STATEMENT") has been
derived from the internal unaudited financial records for the
Pressure Sensitive Business and has been prepared on a basis
consistent with management's past practice. This statement also
shows that as of the applicable dates the net value of the Net
Working Capital was $14,608,000.
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(b) Within sixty (60) days after the Closing Date, the
Seller shall prepare and deliver to the Buyer an unaudited
statement as of the close of business on the day immediately
preceding the Closing Date of the Net Working Capital (the
"Closing Statement"). The Closing Statement (i) shall be
prepared on the same basis as the Target Statement, except that
the book value of the Inventories (other than those identified
in clause (ii)) shall be established conclusively for purposes
of this Section 3.2 by the Seller taking a physical inventory of
the Inventories as of the close of business on the day
immediately preceding the Closing Date and reducing the final
balance by such amount, if any, as would reduce the value of the
Inventories to a value equal to the lower of cost or market,
calculated in accordance with generally accepted accounting
principles and otherwise applying the valuation methodology used
in preparing the Target Statement to the results of this
physical inventory and (ii) that portion of the Inventory,
primarily instrument and electrical inventory, that relates
primarily to the Pressure Sensitive Business but was
inadvertently omitted from the Target Statement (the "Designated
Inventory") will not be included on the Closing Statement. The
Designated Inventory will be designated as provided in Section
8.11.
(c) When the Seller delivers the Closing Statement, the
Seller shall also deliver a certificate of its Chief Financial
Officer (i) certifying that the Closing Statement was prepared
in accordance with paragraph (b) above, and (ii) containing the
Seller's calculations, based on the Closing Statement (the
"Seller's Proposed Calculations"), of the Net Working Capital as
of the Closing Date.
(d) Within thirty (30) days after receipt of the Closing
Statement and the accompanying certificate, the Buyer shall
notify the Seller of its agreement or disagreement with the
Closing Statement and the accuracy of any of the Seller's
Proposed Calculations; PROVIDED, that the Buyer may only dispute
the Closing Statement and the Seller's Proposed Calculations to
the extent that they deviate from the requirements of
paragraphs (b) and (c) above. If the Buyer disputes any such
aspect of the Closing Statement or the amount of any of the
Seller's Proposed Calculations, then the Buyer shall have the
right to direct its independent accountants, at the Buyer's
expense, to review and test the Closing Statement. The Buyer's
accountants shall complete their review and test within thirty
(30) days after the date the Buyer disputes the Seller's
Proposed Calculations. If the Buyer and its independent
accountants, after such review and test, still disagree with the
Seller's Proposed Calculations, and the Seller does not accept
the Buyer's proposed alternative calculations (the "Buyer's
Proposed Calculations"), then, within thirty (30) days after the
date of the Seller's rejection of the Buyer's Proposed
Calculations, the Seller and the Buyer shall select a third
nationally recognized independent accounting firm (the
"Independent Accounting Firm") to resolve the remaining disputed
items (the "Remaining Disputed Items") by conducting its own
review and test of the Closing Statement and thereafter
selecting either the Buyer's Proposed Calculation of the
Remaining Disputed Items or the Seller's Proposed Calculation of
the Remaining Disputed Items or an amount in between the two.
The Independent Accounting Firm shall be instructed (i) that the
scope of its review shall be limited solely to the Remaining
Disputed Items, (ii) that it shall accept the Closing Statement
and the Seller's Proposed Calculations except to the extent that
they deviate from the requirements of paragraphs (b) and (c)
above, and (iii) that it is to use every reasonable effort to
complete such assignment and deliver copies of such opinion and,
if required, a revised Closing Statement to the Buyer and the
Seller within thirty (30) days following the date such Remaining
Disputed Items are referred to it. The Buyer and the Seller
agree that they shall be bound by the determination of the
Remaining Disputed Items by the Independent Accounting Firm.
The fees and expenses of the Independent Accounting Firm shall
be paid jointly by the Buyer and the Seller.
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(e) Upon the determination pursuant to paragraph (d) of
this Section 3.2 of the definitive Closing Statement and the Net
Working Capital as of the Closing Date, the Purchase Price shall
be either (i) increased by the amount, if any, by which the
amount of Net Working Capital is greater than $13,065,000 or
(ii) decreased by the amount, if any, by which the amount of Net
Working Capital is less than $13,065,000 (the "Adjustment").
The Seller and the Buyer acknowledge that the target number for
the Adjustment set forth in the preceding sentence is different
than the net value of the Net Working Capital reflected on the
Target Statement. If the Purchase Price is increased, the Buyer
shall pay such amount to the Seller, and if the Purchase Price
is decreased, the Seller shall pay such amount to the Buyer.
Any such payment shall be made in cash or same day funds within
ten (10) days after the determination of the Adjustment pursuant
to paragraph (d)."
2.3. TRANSACTIONS AT CLOSING. Section 4.2(b) is hereby amended
and restated in its entirety to read as follows:
"(b) The Buyer shall deliver the Subordinated Note to the
Seller and shall deliver the remainder of the Purchase Price to
the Seller by wire transfer."
2.4. CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS. A new
Section 9.10 is hereby added to the Asset Purchase Agreement, which
Section 9.10 shall read as follows:
"9.10. REGISTRATION RIGHTS/SUBSIDIARY GUARANTIES. The
Buyer shall have entered into a Registration Rights Agreement
with the Seller in the form of Exhibit F hereto (the
"Registration Rights Agreement") and the Buyer shall have caused
each of its Subsidiaries to have entered into a Guaranty in
favor of the Seller in the form of Exhibit G hereto
(collectively, the "Subsidiary Guaranties"), and each of the
Registration Rights Agreement and the Subsidiary Guaranties
shall be in full force and effect."
2.5. EXHIBITS TO ASSET PURCHASE AGREEMENT. Exhibits E
(Subordinated Note), F (Registration Rights Agreement) and G (Subsidiary
Guaranty) to the Asset Purchase Agreement are hereby added as new exhibits
to the Asset Purchase Agreement, each to be in the form attached to this
Amendment.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF BUYER.
3.1. AUTHORITY; APPROVALS; BINDING EFFECT. The Buyer has all
requisite corporate power and authority to enter into this Amendment and
the Registration Rights Agreement and to issue the Subordinated Note and
to perform all of its agreements and obligations hereunder and thereunder
in accordance with their respective terms. Each of the Buyer's
Subsidiaries has all requisite corporate power and authority to enter into
its respective Subsidiary Guaranty and to perform all of its agreements
and obligations thereunder in accordance with its terms. This Amendment
has been duly executed and delivered by the Buyer and constitutes, the
Asset Purchase Agreement as amended by this Amendment constitutes, and
when each of the Registration Rights Agreement, the Subordinated Note and
the Subsidiary Guaranties (collectively, with this Amendment, the
"Additional Transaction Documents") has been
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duly executed and delivered by the Buyer or its Subsidiaries, as applicable,
such Additional Transaction Documents will constitute, the legal, valid and
binding obligation of such Person, enforceable against such Person in
accordance with each of their respective terms, except as such validity,
binding effect or enforcement may be limited by bankruptcy, insolvency or
similar laws affecting creditors' rights generally or by equitable principles
relating to the availability of remedies.
3.2. NO DEFAULTS. The entering into by the Buyer and its
Subsidiaries of the Additional Transaction Documents to which any such
Person is a party, the performance and compliance by the Buyer and each
such Subsidiary with the terms hereof and thereof, and the consummation of
the transactions contemplated hereby and thereby, will not either
currently, or after notice or lapse of time or both:
(a) result in a violation of any provision of the charter, by-
laws or other organization documents of the Buyer or such Subsidiary;
(b) result in a violation by the Buyer or such Subsidiary of
any statute, regulation, order, law, ordinance or restriction
applicable to such Person, other than any violation which would not
have a Material Adverse Effect; or
(c) result in a violation by such Person of any judgment, order
or decree of any court or judicial or quasi-judicial tribunal
applicable to such Person, other than any violation which would not
have a Material Adverse Effect.
3.3. SUBORDINATED NOTE; ISSUANCE OF COMMON STOCK UPON
CONVERSION. The issuance of the Subordinated Note by the Buyer to the
Seller is exempt from registration under the Securities Act of 1933, as
amended (the "ACT"). All shares of common stock of the Buyer issued upon
conversion of the Subordinated Note in accordance with the terms thereof
(the "SHARES") have been duly authorized and reserved for issuance, and
upon issuance will be fully-paid and non-assessable shares of Common Stock
of the Buyer, free of any lien, claim or other encumbrance, and no
stockholder of the Buyer will have any preemptive right of subscription or
purchase in respect thereof. Assuming the accuracy of the Seller's
representations and warranties in Section 4.3 hereof, the Shares will,
when issued, be exempt from registration under the Act and any applicable
state securities laws. The Buyer is eligible to file with the Securities
and Exchange Commission (the "SEC") a Registration Statement on Form S-3
with respect to the Shares.
<PAGE>
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SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE SELLER.
4.1. AUTHORITY; APPROVALS; BINDING EFFECT. The Seller has all
requisite corporate power and authority to enter into this Amendment and
each of the Additional Transaction Documents to which it is a party, and
to perform all of its agreements and obligations hereunder and thereunder
in accordance with their respective terms. This Amendment has been duly
executed and delivered by the Seller and constitutes, the Asset Purchase
Agreement as amended by this Amendment constitutes, and when each of the
other Additional Transaction Documents to which the Seller is a party has
been duly executed and delivered by the Seller each of such Additional
Transaction Documents will constitute, the legal, valid and binding
obligation of the Seller, enforceable against the Seller in accordance
with each of their respective terms, except as such validity, binding
effect or enforcement may be limited by bankruptcy, insolvency or similar
laws affecting creditors' rights generally or by equitable principles
relating to the availability of remedies.
4.2. NO DEFAULTS. The entering into by the Seller of the
Additional Transaction Documents to which the Seller is a party, the
performance and compliance by the Seller with the terms hereof and
thereof, and the consummation of the transactions contemplated hereby and
thereby, will not either currently, or after notice or lapse of time or
both:
(a) result in a violation of any provision of the charter, by-
laws or other organization documents of the Seller;
(b) result in a violation by the Seller of any statute,
regulation, order, law, ordinance or restriction applicable to the
Seller, other than any violation which would not have a Material
Adverse Effect; or
(c) result in a violation by the Seller of any judgment, order
or decree of any court or judicial or quasi-judicial tribunal
applicable to the Seller, other than any violation which would not
have a Material Adverse Effect.
4.3. INVESTMENT REPRESENTATIONS. (a) The Subordinated Note is
not being and the Shares to be acquired by the Seller upon conversion of
the Subordinated Note will not be acquired with a view to the resale or
distribution of any part thereof except pursuant to the Registration
Rights Agreement and the Seller has no present intention of selling,
granting any participation in, or otherwise distributing the same, except
pursuant to the Registration Rights Agreement.
(b) INVESTMENT EXPERIENCE. The Seller understands that the
Subordinated Note and the Shares have not been, and prior to an
appropriate registration statement's becoming effective will not be,
registered under the Act, by reason of a specific exemption from the
registration provisions of the Act which depends upon, among other things,
the bona fide nature of the investment intent and the accuracy of the
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Seller's representations as expressed herein. The Seller acknowledges
that it is able to fend for itself, can bear the economic risk of its
investment and has such knowledge and experience in financial and business
matters that it is capable of evaluating the merits and risks of the
investment in the Subordinated Note and the Shares.
(c) LEGENDS. The Seller understands that the Subordinated Note
and/or the Shares may bear one or all of the following legends:
(i) "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN
EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION
IS NOT REQUIRED."
(ii) Any legend required by the Blue Sky laws of any state to
the extent such laws are applicable to the shares represented by the
certificate so legended.
A certificate shall not bear such legends if in the opinion of counsel
reasonably satisfactory to the Buyer the securities represented thereby
may be publicly sold without registration under the Act and any applicable
state securities laws.
(e) RESTRICTED SECURITIES. The Seller understands that the
Subordinated Note and the Shares are characterized as "restricted
securities" under the federal securities laws inasmuch as they are being
acquired from the Buyer in a transaction not involving a public offering
and that under such laws and applicable regulations such Subordinated Note
and Shares may be resold without registration under the Act only in
certain limited circumstances. The Seller acknowledges that the
Subordinated Note and the Shares must be held indefinitely unless
subsequently registered under the Act or an exemption from such
registration is available.
(f) ACCREDITED INVESTOR. The Seller is an accredited investor
as defined in Rule 501(a) of Regulation D promulgated under the Act.
SECTION 5. CONDITIONS TO EFFECTIVENESS. This Amendment shall become
effective upon the execution of this Amendment by each of the Buyer and
the Seller.
SECTION 6. NO OTHER AMENDMENTS. Except as expressly provided in this
Amendment, all of the terms and conditions of the Asset Purchase Agreement
remain unchanged, and the terms and conditions of the Asset Purchase
Agreement as amended hereby remain in full force and effect. Each of the
Buyer and the Seller agrees that the Additional Transaction Documents
shall, from and after the date hereof, be Transaction Documents for all
purposes of the Asset Purchase Agreement.
<PAGE>
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SECTION 7. EXECUTION IN COUNTERPARTS. This Amendment may be executed
in any number of counterparts and by each party on a separate counterpart,
each of which when so executed and delivered shall be an original, but all
of which together shall constitute one instrument. In proving this
Amendment, it shall not be necessary to produce or account for more than
one such counterpart signed by the party against whom enforcement is
sought.
SECTION 8. MISCELLANEOUS. This Amendment shall be deemed to be a
contract under seal under the laws of the State of Delaware and shall for
all purposes be construed in accordance with and governed by the laws of
the State of Delaware.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Amendment as of
the date first above written.
S.D. WARREN COMPANY
By: /s/ Trevor L. Larkan
--------------------------------
Title: Vice President and Chief
Financial Officer
SPINNAKER INDUSTRIES, INC.
By: /s/ M. R. Matteson
--------------------------------
Title: Vice President, Corporate
Development
<PAGE>
THIS SUBORDINATED NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER AND
MAY NOT BE TRANSFERRED EXCEPT PURSUANT TO A REGISTRATION STATEMENT THEREUNDER
OR AN EXEMPTION THEREFROM.
SUBORDINATED NOTE
March 17, 1998
$7,000,000.00
FOR VALUE RECEIVED, the undersigned Spinnaker Industries, Inc., a
Delaware corporation (the "MAKER"), by this Subordinated Note (this "NOTE"),
HEREBY PROMISES TO PAY to the order of S.D. Warren Company, a Pennsylvania
corporation (the "HOLDER"), in lawful money of the United States of America
and in immediately available funds at an address specified by the Holder,
Seven Million Dollars ($7,000,000.00) (the "ORIGINAL PRINCIPAL AMOUNT") or,
if less, the aggregate unpaid principal amount outstanding under this Note,
and to pay interest as described in Article 2 hereof.
ARTICLE ONE
DEFINED TERMS
Capitalized terms used herein shall have the meanings assigned to such
terms in the Asset Purchase Agreement, dated as of November 18, 1997, as
amended, between the Holder and the Maker (the "ASSET PURCHASE AGREEMENT").
In addition, the following terms have the following meanings for purposes of
this Note:
"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 the purposes of this definition,
"control", when used with respect to any specified Person, means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"BANKRUPTCY LAW" means Title 11, U.S. Code or any similar Federal, state
or foreign law for the relief of debtors.
<PAGE>
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"BOARD OF DIRECTORS" means either the board of directors of the Maker or
any duly authorized committee of that board.
"BOARD RESOLUTION" means a vote duly adopted by the Board of Directors,
a copy of which, certified by the Secretary or an Assistant Secretary of the
Maker to have been duly adopted by the Board of Directors and to be in full
force and effect on the date of such certification, shall have been delivered
to the Holder.
"BORROWERS" means Central Products Company, Spinnaker Coating, Inc.,
Entoleter, Inc. and Spinnaker Coating - Maine, Inc.
"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 balanced sheet in
accordance with GAAP.
"CAPITAL STOCK" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated)
of corporate stock, (iii) in the case of a partnership or limited liability
company, partnership or membership interests (whether general or limited) and
(iv) any other interest or participation that confers on a Person the right
to receive a share of the profits and losses of, or distributions of assets
of, the issuing Person.
"CHANGE OF CONTROL" has the meaning set forth in the Indenture.
"CLOSING PRICE" means, with respect to the Common Stock of the Company,
for any day, the reported last bid price per share on the Nasdaq National
Market or, if the Common Stock is not quoted on the Nasdaq National Market,
on the principal national securities exchange on which the Common Stock is
listed or admitted to trading, or if not quoted on the Nasdaq National Market
or listed or admitted to trading on any national securities exchange, the
average of the closing bid and asked prices per share in the over-the-counter
market as furnished by any New York Stock Exchange member firm selected from
time to time by the Company for that purpose.
"COMMON STOCK" means the Common Stock, no par value per share, of the
Maker authorized at the date of this instrument as originally executed,
having a one-tenth vote per share and such other rights as are set forth in
the Maker's certificate of incorporation, as amended. Subject to the
provisions of Sections 8.11, shares issuable on conversion of this Note shall
include only shares of Common Stock or shares of any class or classes of
common stock resulting from any reclassification or reclassifications
thereof; PROVIDED, HOWEVER, that if at any time there shall be more than one
such resulting class, the shares so issuable on conversion of this Note shall
include shares of all such classes, and the shares of each such class then so
issuable shall be substantially in the proportion which the total number of
shares of such class
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resulting from all such reclassifications bears to the total number of shares
of all such classes resulting from all such reclassifications.
"COMMON STOCK" includes any stock of any class of capital stock which
has no preference in respect of dividends or of amounts payable in the event
of any voluntary or involuntary liquidation, dissolution or winding up of the
issuer thereof and which is not subject to redemption by the issuer thereof.
"CONTINUING DIRECTORS" means, as of any date of determination, any
member of the Board of Directors of the Maker who (i) was a member of the
Board of Directors on the date of this Note or (ii) was nominated for
election or elected to the Board of Directors with, or whose election to the
Board of Directors was approved by, the affirmative vote of a majority of the
Continuing Directors who were members of the Board of Directors at the time
of such nomination or election or (iii) is a representative of one or more of
the Permitted Holders or was nominated by one or more of the Permitted
Holders or any representative of the Permitted Holders on the Board of
Directors.
"COVENANT DEFAULT" means any event or condition (other than a Payment
Default) the occurrence of which entitles one or more Persons to accelerate
maturity of any Senior Indebtedness.
"CUSTODIAN" means any receiver, trustee, assignee, liquidator,
sequestrator or similar official under any Bankruptcy Law.
"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, at the option of the holder thereof), or upon the happening of
any event, other than an event which would constitute a change of control,
matures (excluding any maturity or the result of an optional redemption by
the issuer thereof) or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is redeemable at the option of the holder
thereof, except in each case upon the occurrence of a Change of Control in
whole or in part, on or prior to the date that is 91 days after the date on
which the Note matures; PROVIDED, HOWEVER, that any Capital Stock that would
constitute Disqualified Stock solely because the holders thereof have the
right to require the Maker to repurchase such Capital Stock upon the
occurrence of a Change of Control shall not constitute Disqualified Stock if
the terms of such Capital Stock provide that the Maker may not repurchase or
redeem any such Capital Stock pursuant to such provisions unless and until
this Note is paid in full.
"EXCHANGE ACT" means the Securities Exchange Act of 1934.
"EXISTING CREDIT FACILITY" means that certain Credit Agreement, dated as
of October 23, 1996, among the Maker, certain of its Affiliates, BT
Commercial Corporation, as agent (in such capacity, together with its
successors and assigns,
<PAGE>
-4-
the "AGENT"), Transamerica Business Credit Corporation, as collateral agent,
Bankers Trust Company, as issuing bank, and the lenders named therein,
including any related notes, guarantees, collateral documents, instruments
and agreements executed in connection therewith, as amended, supplemented,
modified, restated, replaced from time to time, and renewals, replacements,
refundings and refinancings thereof.
"GAAP" shall mean generally accepted accounting principles in the United
States, consistently applied, that are in effect at the date hereof.
"HOLDER" means the Person named as the "Holder" in the first paragraph
of this instrument.
"INDEBTEDNESS" shall mean, with respect to any Person, without
duplication:
(a) all liabilities of such Person for borrowed money (including
overdrafts) or for the deferred purchase price of property or services,
excluding any trade payables and other accrued current liabilities
incurred in the ordinary course of business, but including, without
limitation, all obligations, contingent or otherwise, of such Person in
connection with any letters of credit and acceptances issued under letter
of credit facilities, acceptance facilities or other similar facilities;
(b) all obligations of such Person evidenced by bonds, notes,
debentures or other similar instruments;
(c) all indebtedness of such Person created or arising under any
conditional sale or other title retention agreement with respect to
property acquired by such Person (even if the rights and remedies of the
seller or lender under such agreement in the event of default are limited
to repossession or sale of such property), but excluding trade payables
arising in the ordinary course of business;
(d) all Capitalized Lease Obligations of such Person;
(e) all Indebtedness referred to in (but not excluded from) the
preceding clauses of other Persons and all dividends of other Persons, the
payment of which is secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured
by) any lien, security interest or other encumbrance upon or with respect
to property (including, without limitation, accounts and contract rights)
owned by such Person, even though such Person has not assumed or become
liable for the payment of such Indebtedness (the amount of such obligation
being deemed to be the lesser of the value of such property or asset or
the amount of the obligation so secured); and
<PAGE>
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(f) all guarantees by such Person of Indebtedness referred to in
this definition of any other Person.
"INDENTURE" means the Indenture, dated as of October 23, 1996, among the
Maker, certain of its Affiliates, as Guarantors, and The Chase Manhattan Bank,
as Trustee, relating to $115,000,000 aggregate principal amount of 10 3/4%
Senior Secured Notes due 2006, as in effect on the date of this Note.
"INTEREST PAYMENT DATE" means the Stated Maturity of an installment of
interest on this Note.
"INVESTMENTS" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to directors, officers and employees made in the ordinary course of
business), purchases or other acquisitions for consideration of Indebtedness,
Capital Stock or other securities, together with all items that are or would
be classified as investments on a balance sheet prepared in accordance with
GAAP.
"MAKER" means the Person named as the "Maker" in the first paragraph of
this instrument.
"NOTE GUARANTEES" means the Subordinated Guarantees of this Note
delivered by the Subsidiaries of the Maker pursuant to Section 9.10 of the
Asset Purchase Agreement or Section 6.4 of this Note.
"PAYMENT BLOCKAGE PERIOD" has the meaning provided in Section 9.3(b).
"PAYMENT DEFAULT" means any default in the payment of principal of or
interest on, or any other amount with respect to, any Senior Indebtedness,
beyond the applicable grace period (if any) with respect thereto.
"PERMITTED HOLDERS" means and includes (i) Mario Gabelli, Richard J.
Boyle and Ned N. Fleming, III; each Affiliate of any of the foregoing natural
persons (so long as it remains such an Affiliate), each member of the
immediate family of any of the foregoing natural persons and any trust or
similar device created for the benefit of any one or more of the foregoing
and each Person that acquires a direct or indirect beneficial ownership
interest in shares of Capital Stock of the Maker as an executor or
administrator for or by way of inheritance or bequest from one or more of the
natural persons described in this clause (i) following the death of such
Person; and (ii) each group (as such term is used in Section 13(d)(3) of the
Exchange Act) which is controlled by (with the term "controlled by" as used
herein to be determined in a manner consistent with the phrase "controlled
by" as used in the definition of
<PAGE>
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Affiliate contained herein) one or more of the Permitted Holders described in
the preceding clause (i), but only so long as the respective such group is so
controlled.
"PERMITTED INVESTMENTS" means any Investment referred to in clauses
(a), (b), (d), (e), and (f) of the definition of "Permitted Investments" in
the Indenture.
"PERMITTED JUNIOR SECURITIES" means any securities of the Maker or any
successor obligor that are (i) Capital Stock (other than Disqualified Capital
Stock) or (ii) are debt securities or Disqualified Capital Stock issued in
connection with a Proceeding that are subordinated in right of payment to all
Senior Indebtedness that may at the time be outstanding at least to the same
extent as this Note is so subordinated as provided in this Note.
"PERSON" means any individual, corporation, limited liability company,
partnership, joint venture, trust, estate, unincorporated organization or
government or any agency or political subdivision thereof.
"PROCEEDING" has the meaning set forth in Section 9.2(iv).
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement
entered into pursuant to the Asset Purchase Agreement.
"RESTRICTED INVESTMENT" means any Investment other than a Permitted
Investment.
"SECURITIES ACT" means the United States Securities Act of 1933.
"SENIOR INDEBTEDNESS" means all obligations and liabilities of the
Borrowers (including without limitation the principal of, premium, if any,
and interest (including interest accruing after the filing of a petition
initiating any proceeding under any Bankruptcy Law, whether or not allowable)
and all letter of credit obligations) under (i) the Existing Credit Facility,
as amended, modified, renewed, refunded, replaced or refinanced from time to
time (the "CREDIT AGREEMENT OBLIGATIONS"); PROVIDED that the total principal
amount of Indebtedness qualifying as Senior Indebtedness pursuant to this
clause (i) shall not exceed the LESSER of (x) the total amount then permitted
under Section 4.09(b)(i) of the Indenture and (y) the sum of $3 million plus
the total amount that would then be permitted to be borrowed under the
borrowing base provisions of the Existing Credit Facility as in effect on the
date of this Note, but without reference to the limitations imposed by the
maximum principal amount set forth in the definitions "Brown Line of Credit",
"Entoleter Line of Credit", "Central Line of Credit" and "SCM Line of
Credit", and (ii) the Company's Senior Secured Notes due 2006 issued pursuant
to the Indenture dated October 23, 1996, as amended, modified, renewed,
refunded, replaced or refinanced from time to time; PROVIDED that the total
principal amount of Indebtedness qualifying as Senior Indebtedness pursuant
to this clause (ii) shall not exceed
<PAGE>
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$115,000,000 at any time, less the amount of such Senior Indebtedness prepaid
as a consequence of an "Asset Sale" as contemplated by the Indenture.
Notwithstanding the foregoing, "SENIOR INDEBTEDNESS" does not include (i)
Indebtedness evidenced by this Note or (ii) Indebtedness which by its terms
is subordinate or junior in right of payment to any Indebtedness of the Maker
or any of its Subsidiaries.
"SIGNIFICANT SUBSIDIARY" means any Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation
S-X, promulgated pursuant to the Securities Act, as such regulation is in
effect on the date of this Indenture.
"STATED MATURITY" means, with respect to any installment of interest or
principal on this Note or any other Indebtedness, the date on which such
payment of interest or principal was scheduled to be paid in the original
documentation governing such Indebtedness, and shall not include any
contingent obligations to repay, redeem or repurchase any such interest or
principal prior to the date originally scheduled for the payment thereof.
"SUBSIDIARY" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total
voting power of shares of capital stock (or other ownership interests)
entitled (without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by such Person or one or more of the
other Subsidiaries of that Person (or a combination thereof) and (ii) any
partnership (a) the sole general partner or the managing general partner of
which is such Person or a Subsidiary of such Person or (b) the only general
partners of which are such Person or of one or more Subsidiaries of such
Person (or any combination thereof).
"TRADING DAY" means (i) if the Common Stock is quoted on the Nasdaq
National Market or any other system of automated dissemination of quotations
of securities prices, a day on which trades may be effected through such
system; (ii) if the Common Stock is listed or admitted for trading on any
national securities exchange, a day on which such national securities
exchange is open for business; or (iii) if the Common Stock is not listed or
admitted for trading on any national securities exchange or quoted on the
Nasdaq National Market or any other system of automated dissemination of
quotation of securities prices, a day on which the Common Stock is traded
regular way in the over-the-counter market and for which a closing bid a
closing asked price for the Common Stock are available.
"UNRESTRICTED SUBSIDIARY" has the meaning set forth in the Indenture.
"UNUSED AVAILABILITY" has the meaning set forth in the Existing Credit
Facility as in effect on the date hereof.
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"VOTING STOCK" with respect to any Person means all classes of Capital
Stock of such Person then outstanding and normally entitled to vote in
elections of directors of such Person.
In addition to the terms defined above, the following terms are defined
in the Articles or subsections referenced opposite such terms:
AFFILIATE TRANSACTIONS 6.3
ASSET PURCHASE AGREEMENT 1
CONSTITUENT PERSON 8.11
CONVERSION RATE 8.1
CONVERSION SHARES 8.4(4)
CREDIT AGREEMENT 1
DISTRIBUTION DATE 8.4(4)
EVENTS OF DEFAULT 7.1
INDENTURE 1
NON-ELECTING SHARE 8.11
NOTE Preamble
ORIGINAL PRINCIPAL AMOUNT Preamble
PAYMENT BLOCKAGE PERIOD 9.3(b)
PIK NOTE 2
RESTRICTED PAYMENTS 6.1
RIGHTS 8.4(4)
TRIGGER EVENT 8.4(5)
ARTICLE TWO
INTEREST
The principal amount outstanding from time to time under this Note shall
bear interest at a rate of 10% per annum accruing from the date of this Note
payable annually in arrears on March 31, commencing March 31, 1999; provided
that on the March 31, 1999 interest payment date and if at any other relevant
interest payment date a Default or Event of Default (as defined therein)
exists under the Existing Credit Facility or would be caused by such payment,
the Maker may pay accrued interest by delivery of an additional subordinated
promissory note in the principal amount of the accrued interest, which shall
be substantially in the form of this Note (a "PIK NOTE"). All computations
of interest shall be based on a 360-day year and paid for the actual number
of days elapsed. All payments of interest and principal hereunder shall be
made at the principal business address of the Holder referred to in Article
16 below.
<PAGE>
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ARTICLE THREE
PRINCIPAL AMOUNT
3.1. SCHEDULED PAYMENTS. The principal on this Note shall be payable in
full on January 31, 2002. In addition, so long as no Default or Event of
Default (as defined therein) exists under the Existing Credit Facility or
would be caused by such payment, the Maker shall make mandatory prepayments
of 30% of the Original Principal Amount on March 31, 1999 and 70% of the
Original Principal Amount on March 31, 2000 (each a "PRINCIPAL PREPAYMENT
DATE") in each case plus accrued interest, provided that if after making such
a prepayment on such Principal Prepayment Date the Unused Availability would
be less than $15,000,000, the Maker shall be permitted to defer such portion
of such payment that would cause the Unused Availability to be less than
$15,000,000 until such next August 15 or March 31 as the Maker can make such
payment without reducing the Unused Availability below $15,000,000; PROVIDED
FURTHER, that the Maker shall not be obligated to make any such payments on
any such August 15 or March 31 if a Default or Event of Default (as defined
therein) exists under the Existing Credit Facility or would be caused by such
payment.
3.2. MANDATORY PREPAYMENTS. This Note shall become due and payable in
full upon the earlier of (i) the occurrence of a Change of Control and (ii)
thirty (30) days after payment in full in cash of the Existing Credit
Facility. In addition, in the event the Maker or any Restricted Subsidiary
incurs any Indebtedness other than pursuant to Section 6.2(i) and except for
Permitted Indebtedness or the Maker or any Restricted Subsidiary issues any
equity securities or securities convertible into or exercisable for equity
securities for cash or cash equivalents, so long as no Default or Event of
Default (as defined therein) exists under the Existing Credit Facility or
would be caused by such payment, the Maker shall use the aggregate cash
proceeds, net of related transaction costs, to prepay this Note within
fifteen (15) days of the applicable event giving rise to the prepayment
obligations, provided that if after making such a prepayment the Unused
Availability on the date of such prepayment would be less than $15,000,000,
the Maker shall be permitted to defer such portion of such payment that would
cause the Unused Availability to be less than $15,000,000 until such next
August 15 or March 31 as the Maker can make such payment without reducing
Unused Availability below $15,000,000; PROVIDED FURTHER, that the Maker shall
not be obligated to make any such payments on any such August 15 or March 31
if a Default or Event of Default (as defined therein) exists under the
Existing Credit Facility or would be caused by such payment. This Note may
be prepaid without premium or penalty at any time at the option of the Maker.
<PAGE>
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ARTICLE FOUR
OVERDUE AMOUNTS
All overdue principal and, to the extent permitted by applicable law,
overdue interest, shall bear interest at a rate of 12% per annum, payable on
demand.
ARTICLE FIVE
APPLICATION OF PAYMENTS
All payments hereunder shall be applied FIRST to any unpaid accrued
interest, SECOND to payment of all, if any, other amounts except principal
due under or in respect of this Note, and THIRD to repayment of principal.
ARTICLE SIX
CERTAIN COVENANTS
The Maker covenants and agrees that, so long as any amount remains
outstanding under this Note, it shall comply with the covenants set forth in
this Article 6.
6.1. RESTRICTED PAYMENTS. The Maker shall not, and shall not permit any
of its Restricted Subsidiaries to, directly or indirectly: (i) declare or pay
any dividend or make any other payment or distribution on account of the
Maker's or any of its Restricted Subsidiaries' Capital Stock (including,
without limitation, any payment in connection with any merger or
consolidation involving the Maker or any of its Subsidiaries) or to the
direct or indirect holders of the Maker's or any of its Subsidiaries' Capital
Stock in their capacity as such (other than dividends or distributions
payable in Capital Stock (other than Disqualified Stock) of the Maker or to
the Maker or a Subsidiary of the Maker); (ii) purchase, redeem or otherwise
acquire or retire for value (including, without limitation, in connection
with any merger or consolidation involving the Maker) any Capital Stock of
the Maker or any direct or indirect parent of the Maker or any Subsidiary of
the Maker; (iii) make any payment on or with respect to, or purchase, redeem,
defease or otherwise acquire or retire for value any Indebtedness that is
subordinated to the Notes or the Note Guarantees, except a payment of
interest or principal at Stated Maturity; or (iv) make any Restricted
Investment (all such payments and other actions set forth in clauses (i)
through (iv) above being collectively referred to as "RESTRICTED PAYMENTS").
Notwithstanding the foregoing, this Section 6.1 shall not prohibit any
Restricted Payments of the type excluded from clause (i) of the definition of
"Restricted
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Payment" in the Indenture as a result of the parenthetical clauses (x), (y)
and (z) contained in such clause (i).
6.2. INCURRENCE OF INDEBTEDNESS. The Maker shall not, and shall not
permit any of its Restricted 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 any Indebtedness outstanding at the time any
Person becomes a Subsidiary of the Maker), except that (i) the Maker and its
Restricted Subsidiaries may incur Indebtedness that qualifies as Senior
Indebtedness and (ii) the Maker and its Restricted Subsidiaries may incur
additional Indebtedness if the net proceeds are used solely to repay
principal on this Note. In addition, this Section 6.2 shall not prohibit the
incurrence of any Indebtedness permitted under clauses (ii), (v) (but only
with respect to the refinancing of Indebtedness existing on the date hereof),
(vi) or (vii) of Section 4.09(b) of the Indenture, or Capital Lease
Obligations and Indebtedness that is purchase money financing in an aggregate
amount not to exceed at any time $10,000,000 less the principal amount of
this Note then outstanding ("PERMITTED INDEBTEDNESS").
6.3. TRANSACTIONS WITH AFFILIATES. The Maker shall not, and shall not
permit any of its Restricted Subsidiaries to, make any payment to, or 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 or amend any
transaction, contract, agreement, understanding, loan, advance or guarantee
with, or for the benefit of, any Affiliate (each of the foregoing, an
"AFFILIATE TRANSACTION"), unless (i) such Affiliate Transaction is on terms
that are no less favorable to the Maker or the relevant Subsidiary than those
that would have been obtained in a comparable transaction by the Maker or
such Subsidiary with an unrelated Person and (ii) the Maker delivers to the
Holder (a) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of
$500,000, a resolution of the Board of Directors set forth in a certificate
of the President and Chief Financial Officer of the Maker certifying that
such Affiliate Transaction complies with clause (i) above and that such
Affiliate Transaction has been approved by a majority of the disinterested
members of the Board of Directors and (b) with respect to any Affiliate
Transaction or series of related Affiliate Transactions involving aggregate
consideration in excess of $1.0 million, an opinion as to the fairness to the
Holder of such Affiliate Transaction from a financial point of view issued by
an accounting, appraisal or investment banking firm of national standing.
Notwithstanding the foregoing, the following items shall not be deemed to be
Affiliate Transactions: (i) any employment agreement entered into by the
Maker or any of its Subsidiaries in the ordinary course of business and
consistent with the past practice of the Maker or such Subsidiary, (ii)
transactions between or among the Maker and/or its Subsidiaries, and (iii)
payment of reasonable directors fees to Persons who are not otherwise
Affiliates of the Maker, (iv) transactions permitted under clause (iii) of
Section 4.12 of the Indenture and (v) transactions permitted under Section
6.2 above.
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6.4. ADDITIONAL SUBSIDIARY GUARANTEES. If the Maker or any of its
Subsidiaries shall acquire or create another Subsidiary (other than an
Unrestricted Subsidiary) after the date of this Note, then such newly
acquired or created Subsidiary shall become a guarantor of this Note by
executing and delivering to the Holder a Note Guarantee substantially in the
form attached as an Exhibit to the First Amendment to Asset Purchase
Agreement, between Maker and Holder, together with board of directors votes,
officers' certificates and other supporting documentation reasonably
requested by the Holder. The Holder agrees to release any Subsidiary from
its Note Guarantee when such Subsidiary becomes an Unrestricted Subsidiary in
accordance with the Indenture or is released from its obligations as a
guarantor under the Indenture.
ARTICLE SEVEN
EVENTS OF DEFAULT
7.1. EVENTS OF DEFAULT. Each of the following events shall constitute
an Event of Default for purposes of this Note:
(a) default in the payment of principal or interest on this Note;
PROVIDED that in the case of a default in the payment of interest on this
Note, such default shall have continued for a period of thirty (30) days;
(b) breach of, or default in the performance by the Maker or any
Restricted Subsidiary of, any other obligation under this Note or its
obligations under the Registration Rights Agreement, in each case as
amended, restated, modified or supplemented and in effect from time to
time, and continuance of such breach or default for a period of thirty
(30) days after written notice shall have been given to the breaching or
defaulting party by the Holder;
(c) (i) one or more defaults in the payment of principal of or
premium, if any, on Indebtedness of the Maker or any Restricted Subsidiary
aggregating $3 million or more when the same becomes due and payable at
the Stated Maturity thereof, and such default or defaults shall have
continued after any applicable grace period and shall not have been cured
or waived or (ii) Indebtedness of the Maker or any Restricted Subsidiary
aggregating $3 million or more shall have been accelerated or otherwise
declared due and payable, or required to be prepaid or repurchased (other
than by regularly scheduled required prepayment), prior to the Stated
Maturity thereof; PROVIDED, HOWEVER, that for purposes of both clause (i)
and (ii), Indebtedness shall not include Indebtedness owed (x) by the
Company to any Subsidiary, (y) by any Subsidiary to the Company or (z) by
any Subsidiary to any other Subsidiary;
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(d) one or more final judgments or orders shall be rendered against
the Company or any Restricted Subsidiary for the payment of money, either
individually or in an aggregate amount, in excess of $5 million and shall
not be discharged and either (i) an enforcement proceeding shall have been
commenced by any creditor upon such judgment or order or (ii) there shall
have been a period of sixty (60) consecutive days during which a stay of
enforcement of such judgment or order, by reason of a pending appeal or
otherwise, was not in effect;
(e) the Maker or any Significant Subsidiary (other than any
Unrestricted Subsidiary) shall:
(i) commence a voluntary case under any Bankruptcy Law of the
United States Code as from time to time in effect, or authorize, by
appropriate proceedings of its Board of Directors, the commencement
of such a voluntary case;
(ii) have filed against it a petition commencing an involuntary
case under any Bankruptcy Law and such petition shall not have been
dismissed, bonded, discharged, or stayed within sixty (60) days;
(iii) seek relief as a debtor under any applicable law,
other than any Bankruptcy Law, of any jurisdiction relating to the
liquidation or reorganization of debtors or to the modification or
alteration of the rights of creditors, or consent to or acquiesce in
such relief;
(iv) have entered against it an order by a court of competent
jurisdiction (x) finding it to be bankrupt or insolvent, (y) ordering
or approving its liquidation, reorganization or any modification or
alteration of the rights of its creditors, or (z) assuming custody
of, or appointing a receiver or other custodian for, all or a
substantial part of its property; or
(v) make a general assignment for the benefit of its creditors,
or appoint or consent to the appointment of a receiver or other
custodian for all or a substantial part of its property.
7.2. REMEDIES. Upon the occurrence and continuance of any of the Events
of Default under Section 7.1 hereof, in each and every such case, the Holder
may proceed to protect and enforce its rights by suit in equity, action at
law and/or other appropriate proceedings either for specific performance of
any covenant, provision or condition contained or incorporated by reference
in this Note, or in aid of the exercise of any power granted in this Note,
and the Holder (unless there shall have
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occurred an Event of Default under Section 7.1(e) hereof, in which case the
unpaid balance of this Note, shall automatically become due and payable) may
by notice to the Maker, declare an Event of Default, and thereupon the unpaid
principal amount or part thereof of the Note then outstanding, together with
interest accrued and payable under this Note, shall become due and payable
without presentation, presentment, protest or further demand or notice of any
kind, all of which are hereby expressly waived, and the Holder may proceed to
enforce payment of such amount or part thereof in such manner as it may elect.
ARTICLE EIGHT
CONVERSION OF NOTE
8.1. CONVERSION PRIVILEGE AND CONVERSION RATE. Subject to and upon
compliance with the provisions of this Article, at the option of the Holder,
this Note or any portion which is $1,000 or an integral multiple thereof may
be converted into fully paid and nonassessable shares (calculated as to each
conversion to the nearest 1/100th of a share) of Common Stock of the Maker at
the Conversion Rate, determined as hereinafter provided, in effect at the
time of conversion. Such conversion right shall expire when the principal
amount of this Note and all outstanding interest has been paid in full.
The rate at which shares of Common Stock shall be delivered upon
conversion (herein called the "CONVERSION RATE") shall be initially 40
shares of Common Stock for each $1,000 principal amount of this Note. The
Conversion Rate shall be adjusted in certain instances as provided in this
Article Eight.
8.2. EXERCISE OF CONVERSION PRIVILEGE. In order to exercise the
conversion privilege, the Holder of this Note shall surrender this Note, duly
endorsed or assigned to the Maker or in blank, at the office of the Maker
referred to in Article Fifteen, accompanied by a written statement stating
that the Holder elects to convert this Note or, if less than the entire
principal amount thereof is to be converted, the portion thereof to be
converted. Interest payable in respect of any portion of this Note
surrendered for conversion shall be paid up to the date of conversion to the
Holder of this Note, notwithstanding the exercise of the right of conversion.
This Note shall be deemed to have been converted immediately prior to
the close of business on the day of surrender of this Note for conversion in
accordance with the foregoing provisions, and at such time the rights of the
Holder of this Note as a Holder of this Note shall cease with respect to the
portion so converted, and the Person or Persons entitled to receive the
Common Stock issuable upon conversion shall be treated for all purposes as
the record holder or holders of such Common Stock at such time. As promptly
as practicable on or after the conversion date, the Maker shall issue and
deliver to the Holder, a certificate or certificates for the
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number of full shares of Common Stock issuable upon conversion, together with
payment in lieu of any fraction of a share, as provided in Section 8.3.
All shares of Common Stock delivered upon such conversion shall rank
PARI PASSU with other shares of Common Stock of the Maker and shall bear a
Securities Act legend in customary form and shall be subject to the
restrictions on transfer provided in such legend.
In case this Note is converted in part only, upon such conversion the
Maker shall execute and deliver to the Holder hereof, at the expense of the
Maker, a new Subordinated Note, substantially in the form of this Note, in an
aggregate principal amount equal to the unconverted portion of the principal
amount of such Note.
8.3. FRACTIONS OF SHARES. No fractional shares of Common Stock shall be
issued upon conversion of this Note. Instead of any fractional share of
Common Stock which would otherwise be issuable upon conversion of this Note
(or specified portions thereof), the Maker shall calculate and pay a cash
adjustment in respect of such fraction (calculated to the nearest 1/100th of
a share) in an amount equal to the same fraction of the Closing Price at the
close of business on the day immediately preceding the date of conversion;
alternatively, at the option of the Maker the Maker shall round up to the
next higher whole share.
8.4. ADJUSTMENT OF CONVERSION RATE. The Conversion Rate shall be
subject to adjustments from time to time as follows:
(1) In case the Maker shall pay or make a dividend or other
distribution on any class of Capital Stock of the Company payable in shares
of Common Stock, the Conversion Rate in effect at the opening of business on
the day following the date fixed for the determination of shareholders
entitled to receive such dividend or other distribution shall be increased by
dividing such Conversion Rate by a fraction of which the numerator shall be
the number of shares of Common Stock outstanding at the close of business on
the date fixed for such determination and the denominator shall be the sum of
such number of shares and the total number of shares constituting such
dividend or other distribution, such increase to become effective immediately
after the opening of business on the day following the date fixed for such
determination. For the purposes of this paragraph (1), the number of shares
of Common Stock at any time outstanding shall not include shares held in the
treasury of the Company but shall include shares issuable in respect of scrip
certificates issued in lieu of fractions of shares of Common Stock. The
Company will not pay any dividend or make any distribution on shares of
Common Stock held in the treasury of the Company.
(2) Subject to the last sentence of paragraph (5) of this Section, in
case the Company shall after the date hereof, issue rights, options or
warrants to all holders of its Common
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Stock entitling them to subscribe for or purchase shares of Common Stock at a
price per share less than the current market price per share (determined as
provided in paragraph (6) of this Section 8.4) of the Common Stock on the
date fixed for the determination of shareholders entitled to receive such
rights, options or warrants, the Conversion Rate in effect at the opening of
business on the day following the date fixed for such determination shall be
increased by dividing such Conversion Rate by a fraction of which the
numerator shall be the number of shares of Common Stock outstanding at the
close of business on the date fixed for such determination plus the number of
shares of Common Stock which the aggregate of the offering price of the total
number of shares of Common Stock so offered for subscription or purchase
would purchase at such current market price and the denominator shall be the
number of shares of Common Stock outstanding at the close of business on the
date fixed for such determination plus the number of additional shares of
Common Stock so offered for subscription or purchase, such increase to become
effective immediately after the opening of business on the day following the
date fixed for such determination. For the purposes of this paragraph (2),
the number of shares of Common Stock at any time outstanding shall not
include shares held in the treasury of the Company but shall include shares
issuable in respect of scrip certificates issued in lieu of fractions of
shares of Common Stock. The Company will not issue any rights, options or
warrants in respect of shares of Common Stock held in the treasury of the
Company. To the extent that shares of Common Stock are not delivered after
the expiration or termination of such rights, options or warrants, the
Conversion Rate shall be readjusted to the Conversion Rate that would then be
in effect had the adjustment made upon the issuance of such rights, options
or warrants been made on the basis of delivery of only the number of shares
of Common Stock actually delivered.
(3) In case outstanding shares of Common Stock shall be subdivided into
a greater number of shares of Common Stock, the Conversion Rate in effect at
the opening of business on the day following the day upon which such
subdivision becomes effective shall be proportionately increased, and,
conversely, in case outstanding shares of Common Stock shall each be combined
into a smaller number of shares of Common Stock, the Conversion Rate in
effect at the opening of business on the day following the day upon which
such combination becomes effective shall be proportionately reduced, such
increase or reduction, as the case may be, to become effective immediately
after the opening of business on the day following the day upon which such
subdivision or combination becomes effective.
(4) Subject to the last sentence of this paragraph (4) and the last
sentence of paragraph (5) of this Section, in case the Company shall, by
dividend or otherwise, distribute to all holders of its Common Stock
evidences of its indebtedness, shares of any class of Capital Stock, or other
property (including securities, but excluding (i) any rights, options or
warrants referred to in paragraph (2) of this Section, (ii) any dividend or
distribution paid exclusively in cash, (iii) any dividend or distribution
referred to in paragraph (1) of this Section and (iv) any merger or
consolidation to which Section 8.11 applies), the Conversion Rate shall be
increased so that the same
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shall equal the rate determined by dividing the Conversion Rate in effect
immediately prior to the close of business on the date fixed for the
determination of shareholders entitled to receive such distribution by a
fraction of which the numerator shall be the current market price per share
(determined as provided in paragraph (6) of this Section 8.4) of the Common
Stock on the date fixed for such determination less the then fair market
value (as determined by the Board of Directors, whose determination shall be
conclusive and described in a Board Resolution delivered to the Holder) of
the portion of the assets, shares or evidences of indebtedness so distributed
applicable to one share of Common Stock and the denominator shall be such
current market price per share of the Common Stock, such adjustment to become
effective immediately prior to the opening of business on the day following
the date fixed for the determination of shareholders entitled to receive such
distribution. If the Board of Directors determines the fair market value of
any distribution for purposes of this paragraph (4) by reference to the
actual or when issued trading market for any securities comprising such
distribution, it must in doing so consider the prices in such market over the
same period used in computing the current market price per share pursuant to
paragraph (6) of this Section. In lieu of making the foregoing adjustment,
in the event that the Company shall distribute rights or warrants relating to
securities of the Company (other than those referred to in paragraph (2) of
this Section) ("RIGHTS") pro rata to holders of Common Stock, the Company
shall make proper provision so that each Holder of this Note who converts
this Note (or any portion thereof) after the record date for such
distribution and prior to the expiration or redemption of the Rights shall be
entitled to receive upon such conversion, in addition to the shares of Common
Stock issuable upon such conversion (the "CONVERSION SHARES"), a number of
Rights to be determined as follows: (i) if such conversion occurs on or prior
to the date for the distribution to the holders of Rights of separate
certificates evidencing such Rights (the "DISTRIBUTION DATE"), the same
number of Rights to which a holder of a number of shares of Common Stock
equal to the number of Conversion Shares is entitled at the time of such
conversion in accordance with the terms and provisions of and applicable to
the Rights; and (ii) if such conversion occurs after the Distribution Date,
the same number of Rights to which a holder of the number of shares of Common
Stock into which the principal amount of this Note so converted was
convertible immediately prior to the Distribution Date would have been
entitled on the Distribution Date in accordance with the terms and provisions
of and applicable to the Rights. In the event that such dividend or
distribution is not so paid or made, the Conversion Rate shall again be
adjusted to the Conversion Rate that would then be in effect if such dividend
or distribution had not been declared.
(5) The reclassification of Common Stock into securities other than
Common Stock (other than any reclassification upon a consolidation or merger
to which Section 8.11 applies) shall be deemed to involve (a) a distribution
of such securities other than Common Stock to all holders of Common Stock
(and the effective date of such reclassification shall be deemed to be "the
date fixed for the determination of shareholders entitled to receive such
distribution" and "the date
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fixed for such determination" within the meaning of paragraph (4) of this
Section), and (b) a subdivision or combination, as the case may be, of the
number of shares of Common Stock outstanding immediately prior to such
reclassification into the number of shares of Common Stock outstanding
immediately thereafter (and the effective date of such reclassification shall
be deemed to be "the day upon which such subdivision becomes effective" or
"the day upon which such combination becomes effective", as the case may be,
and "the day upon which such subdivision or combination becomes effective"
within the meaning of paragraph (3) of this Section 8.4). Rights or warrants
issued by the Company to all holders of its Common Stock entitling the
holders thereof to subscribe for or purchase shares of Common Stock, which
rights or warrants (i) are deemed to be transferred with such shares of
Common Stock, (ii) are not exercisable and (iii) are also issued in respect
of future issuances of Common Stock, in each case in clauses (i) through
(iii) until the occurrence of a specified event or events ("TRIGGER EVENT"),
shall for purposes of this Section 8.4 not be deemed issued (and no
adjustment to the Conversion Rate shall be required) until the occurrence of
the earliest Trigger Event.
(6) For the purpose of any computation under paragraphs (2) or (4) of
this Section 8.4, the current market price per share of Common Stock on any
date shall be calculated by the Company and be deemed to be the average of
the daily Closing Prices for the five consecutive Trading Days selected by
the Company commencing not more than 10 Trading Days before, and ending not
later than, the earlier of the day in question and the day before the "ex"
date with respect to the issuance or distribution requiring such computation.
For purposes of this paragraph, the term "ex date", when used with respect
to any issuance or distribution, means the first date on which the Common
Stock trades regular way in the applicable securities market or on the
applicable securities exchange without the right to receive such issuance or
distribution.
(7) No adjustment in the Conversion Rate shall be required unless such
adjustment (plus any adjustments not previously made by reason of this
paragraph (7)) would require an increase or decrease of at least one percent
in such rate; PROVIDED, HOWEVER, that any adjustments which by reason of this
paragraph (7) are not required to be made shall be carried forward and taken
into account in any subsequent adjustment. All calculations under this
Article shall be made to the nearest cent or to the nearest one-hundredth of
a share, as the case may be.
(8) The Company may make such increases in the Conversion Rate, for the
remaining term of this Note or any shorter term, in addition to those
required by paragraphs (1), (2), (3) and (4) of this Section 8.4, as it
considers to be advisable in order to avoid or diminish any income tax to any
holders of shares of Common Stock resulting from any dividend or distribution
of stock or issuance of rights or warrants to purchase or subscribe for stock
or from any event treated as such for income tax purposes. The Company shall
have the power to resolve any ambiguity or correct
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any error in the application of this paragraph (8) and its actions in so
doing shall, absent manifest error, be final and conclusive.
8.5. NOTICE OF ADJUSTMENTS OF CONVERSION RATE. Whenever the Conversion
Rate is adjusted as provided in Section 8.4 the Company shall compute the
adjusted Conversion Rate in accordance with Section 8.4 and shall prepare a
certificate signed by the chief financial officer or the treasurer of the
Company setting forth the adjusted Conversion Rate and showing in reasonable
detail the facts upon which such adjustment is based, and such certificate
shall promptly be delivered to the Holder.
8.6. NOTICE OF CERTAIN CORPORATE ACTION. In case:
(a) the Company shall declare a dividend (or any other distribution)
on its Common Stock payable otherwise than exclusively in cash (whether or
not permitted under Article 6); or
(b) the Company shall authorize the granting to the holders of its
Common Stock of rights, options or warrants to subscribe for or purchase
shares of capital stock of any class or of any other rights; or
(c) of any reclassification of the Common Stock (other than a change
in par value) of the Company, or of any consolidation, merger or share
exchange to which the Company is a party and for which approval of any
shareholders of the Company is required, or of the conveyance, sale,
transfer or lease of all or substantially all of the assets the Company;
or
(d) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company;
then the Company shall deliver to the Holder at least 20 days (or 10 days in
any case specified in clause (a) or (b) above) prior to the applicable
record, expiration or effective date hereinafter specified, a notice stating
(x) the date on which a record is to be taken for the purpose of such
dividend, distribution, rights, options or warrants, or, if a record is not
to be taken, the date as of which the holders of Common Stock of record to be
entitled to such dividend, distribution, rights, options or warrants are to
be determined, or (y) the date on which such reclassification consolidation,
merger, conveyance, transfer, sale, lease, dissolution, liquidation or
winding up is expected to become effective, and the date as of which it is
expected that holders of Common Stock of record shall be entitled to exchange
their shares of Common Stock for securities, cash or other property
deliverable upon such reclassification, consolidation, merger, conveyance,
transfer, sale, lease, dissolution, liquidation or winding up. Neither the
failure to give such notice or the notice referred to in the following
paragraph nor any defect therein shall affect the legality or validity of the
proceedings described in clauses (a) through (d) of this Section 8.6.
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8.7. MAKER TO RESERVE COMMON STOCK. The Maker shall at all times
reserve and keep available, free from preemptive rights, out of its
authorized but unissued Common Stock, for the purpose of effecting the
conversion of this Note, the full number of shares of Common Stock then
issuable upon the conversion of this Note.
8.8. TAXES ON CONVERSIONS. Except as provided in the next sentence, the
Maker will pay any and all taxes and duties that may be payable in respect of
the issue or delivery of shares of Common Stock on conversion of this Note
pursuant hereto. The Maker shall not, however, be required to pay any tax or
duty which may be payable in respect of any transfer involved in the issue
and delivery of shares of Common Stock in a name other than that of the
Holder of this Note, and no such issue or delivery shall be made unless and
until the Person requesting such issue has paid to the Maker the amount of
any such tax or duty, or has established to the satisfaction of the Maker
that such tax or duty has been paid.
8.9. COVENANT AS TO COMMON STOCK. The Maker agrees that all shares of
Common Stock which may be delivered upon conversion of this Note, upon such
delivery, will have been duly authorized and validly issued and will be fully
paid and nonassessable (and shall be issued out of the Maker's authorized but
unissued Common Stock) and, except as provided in Section 8.8, the Maker will
pay all taxes, liens and charges with respect to the issue thereof.
8.10. CANCELLATION OF CONVERTED SECURITIES. This Note when delivered
for conversion shall be cancelled with respect to the converted portion.
8.11. PROVISION IN CASE OF CONSOLIDATION, MERGER OR SALE OF ASSETS. In
case of any consolidation of the Maker with any other Person, any merger of
the Maker into another Person or of another Person into the Maker (other than
a merger which does not result in any reclassification, conversion, exchange
or cancellation of outstanding shares of Common Stock of the Maker) or any
conveyance, sale, transfer or lease of all or substantially all of the
properties and assets of the Maker, whether or not this Note becomes due and
payable as provided in Article 3, the Person formed by such consolidation or
resulting from such merger or which acquires such properties and assets, as
the case may be, shall execute and deliver to the Holder a written agreement,
in form and substance reasonably satisfactory to the Holder, providing that
the Holder of this Note shall have the right thereafter, during the period
this Note shall be convertible as specified in Section 8.1, to convert this
Note only into the kind and amount of securities, cash and other property
receivable upon such consolidation, merger, conveyance, sale, transfer or
lease (including any Common Stock retainable) by a holder of the number of
shares of Common Stock of the Maker into which this Note might have been
converted immediately prior to such consolidation, merger, conveyance, sale,
transfer or lease, assuming such holder of Common Stock of the Maker, (i) is
not a Person with which the Maker consolidated, into which the Maker merged
or which merged into the Maker or to which such
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conveyance, sale, transfer or lease was made, as the case may be (a
"CONSTITUENT PERSON"), or an Affiliate of a Constituent Person and (ii)
failed to exercise his rights of election, if any, as to the kind or amount
of securities, cash and other property receivable upon such consolidation,
merger, conveyance, sale, transfer or lease (PROVIDED that if the kind or
amount of securities, cash and other property receivable upon such
consolidation, merger, conveyance, sale, transfer or lease is not the same
for each share of Common Stock of the Maker held immediately prior to such
consolidation, merger, conveyance, sale, transfer or lease by others than a
Constituent Person or an Affiliate thereof and in respect of which such
rights of election shall not have been exercised ("NON-ELECTING SHARE"), then
for the purpose of this Section 8.11 the kind and amount of securities, cash
and other property receivable upon such consolidation, merger, conveyance,
sale, transfer or lease by the holders of each Non-electing Share shall be
deemed to be the kind and amount so receivable per share by a plurality of
the Non-electing Shares). Such agreement shall provide for adjustments
which, for events subsequent to the effective date of such agreement, shall
be as nearly equivalent as may be practicable to the adjustments provided for
in this Article. The above provisions of this Section 8.11 shall similarly
apply to successive consolidations, mergers, conveyances, sales, transfers or
leases. Notice of the execution of such an agreement shall be given by the
Maker to the Holder of this Note promptly upon such execution. In this
paragraph, "securities of the kind receivable" upon such consolidation,
merger, conveyance, transfer, sale or lease by a holder of Common Stock means
securities that, among other things, are registered and transferable under
the Securities Act, and listed and approved for quotation in all securities
markets, in each case to the same extent as such securities so receivable by
a holder of Common Stock.
ARTICLE NINE
SUBORDINATION OF SECURITIES
9.1. NOTES SUBORDINATE TO SENIOR INDEBTEDNESS. The Maker covenants and
agrees, and the Holder, by acceptance of this Note likewise covenants and
agrees, that, to the extent and in the manner hereinafter set forth in this
Article 9, the Indebtedness represented by this Note and the payment of the
principal of and interest on this Note are hereby expressly made subordinate
and junior in right of payment as provided in this Article 9 to the prior
payment in full in cash of all Senior Indebtedness.
This Article 9 shall constitute a continuing offer to all Persons who,
in reliance upon such provisions, become holders of or continue to hold
Senior Indebtedness; and such provisions are made for the benefit of the
holders of Senior Indebtedness; and such holders are made obligees hereunder
and they or each of them may enforce such provisions. This Article 9 shall
be binding on the Holder and its successors, assigns and transferees.
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9.2. PAYMENT OVER OF PROCEEDS UPON DISSOLUTION, ETC. In the event of
(a) any insolvency or bankruptcy case or proceeding, or any receivership,
liquidation, reorganization or other similar case or proceeding, relative to
the Maker or to its creditors, as such, or to its assets, or (b) any
liquidation, dissolution or other winding up of the Maker, whether voluntary
or involuntary and whether or not involving insolvency or bankruptcy, or (c)
any assignment for the benefit of creditors or any other marshaling of assets
or liabilities of the Maker, then and in any such event:
(i) the holders of Senior Indebtedness shall be entitled
to receive payment in full in cash of all amounts due on or in
respect of all Senior Indebtedness, or provision shall be made for
such payment in a manner satisfactory to the Agent and the other
holders of the Senior Indebtedness, before the Holder is entitled to
receive any payment or distribution of any kind or character, whether
in cash, securities or other property (other than in Permitted Junior
Securities) on account of this Note;
(ii) any payment or distribution of assets of the Maker of
any kind or character, whether in cash, other property or securities
(excluding Permitted Junior Securities), by set-off or otherwise, to
which the Holder would be entitled but for the provisions of this
Article 9 shall be paid to the holders of Senior Indebtedness or
their representative or representatives or to the trustee or trustees
under any indenture under which any instruments evidencing any of
such Senior Indebtedness may have been issued, ratably according to
the aggregate amounts remaining unpaid on account of the Senior
Indebtedness held or represented by each, until all Senior
Indebtedness shall have been paid in full in cash; and
(iii) in the event that, notwithstanding the foregoing
provisions of this Section 9.2, the Holder shall have received any
payment or distribution of assets of the Maker of any kind or
character, whether in cash, property or securities, in respect of
this Note before all Senior Indebtedness is paid in full in cash or
payment thereof provided for in a manner satisfactory to the Agent
and the other holders of the Senior Indebtedness, then and in such
event such payment or distribution (excluding Permitted Junior
Securities) shall be paid over or delivered forthwith to the holders
of Senior Indebtedness until all Senior Indebtedness is paid in cash
in full. Any funds so received by the Holder shall, until so paid
over or delivered, be held in trust by the Holder for the benefit of
the holders of the Senior Indebtedness.
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(iv) The Holder shall retain the right to vote and
otherwise act in any proceeding or case described in the first
sentence of Section 9.2 (a "PROCEEDING"), including without
limitation the right to vote to accept or reject any plan of partial
or complete liquidation, reorganization, readjustment, arrangement,
composition or extension (a "PLAN") proposed in any Proceeding,
PROVIDED that the Holder shall not vote with respect to any such Plan
or take any other action in any way so as to contest (A) the validity
of any liens or security interests granted to, or for the benefit of,
the holders of any Senior Indebtedness, (B) the relative rights and
duties of the holders of the Senior Indebtedness established in any
agreements with the holders of Senior Indebtedness with respect to
such liens and security interests or (C) the enforceability of any
agreement among the Maker and the holder of any Senior Indebtedness
or the enforceability of this Article 9.
9.3. SUSPENSION OF PAYMENT WHEN SENIOR INDEBTEDNESS IN DEFAULT.
(a) Upon (1) the occurrence of a Payment Default and (2) receipt by
the Maker from the holders of Senior Indebtedness or their representative
of written notice of such occurrence in accordance with the terms of such
Senior Indebtedness, then no direct or indirect payment or distribution of
any assets of the Maker of any kind or character (excluding Permitted
Junior Securities) shall be made on account of this Note or on account of
the purchase or redemption or other acquisition of this Note unless and
until such Payment Default shall have been cured or waived or shall have
ceased to exist or all Senior Indebtedness shall have been discharged or
paid in full in cash or payment thereof duly provided for in a manner
satisfactory to the Agent and the holders of the Senior Indebtedness,
after which the Maker shall resume making any and all required payments in
respect of this Note, including any missed payments.
(b) Upon (1) the occurrence of a Covenant Default and (2) receipt by
the Maker from the holders of Senior Indebtedness or their representative
of written notice of such occurrence in accordance with the terms of such
Indebtedness, no direct or indirect payment or distribution of any assets
of the Maker of any kind or character (excluding Permitted Junior
Securities) may be made on account of this Note or on account of the
purchase or redemption or other acquisition of this Note for a period (the
"PAYMENT BLOCKAGE PERIOD") commencing on the date of receipt by the Maker
of such notice and ending on (subject to any blockage of payments that may
then be in effect under subsection (a) of this Section 9.3) the earliest
of (x) 179 days after the receipt by the Maker of such written notice
(provided the Senior Indebtedness with respect to which such Covenant
Default shall have occurred shall theretofore have not been accelerated),
(y) the date on which such Covenant Default shall
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have been cured or waived or shall have ceased to exist or such Senior
Indebtedness shall have been discharged or paid in full or payment thereof
provided for or (z) the date on which such Payment Blockage Period shall
have been terminated by written notice to the Maker from the holders of
Senior Indebtedness initiating such Payment Blockage Period or their
representative in accordance with the terms of such Senior Indebtedness,
after which, in the case of clause (x), (y) or (z), the Maker shall resume
making any and all required payments in respect of this Note, including
any missed payments. Notwithstanding any other provision of this Note,
only one Payment Blockage Period may be commenced with respect to this
Note within any 365-day period and no Covenant Default with respect to
Senior Indebtedness which existed or was continuing on the date of the
commencement of any Payment Blockage Period will be, or can be, made the
basis for the commencement of a second Payment Blockage Period, whether or
not within a period of 365 consecutive days, unless such event of default
shall have been cured or waived for a period of not less than 180
consecutive days. In no event shall a Payment Blockage Period extend
beyond 179 days from the date of the receipt of the notice referred to in
clause (2) of this Section 9.3(b). Any number of notices of a Covenant
Default may be given during a Payment Blockage Period; PROVIDED, HOWEVER,
that no such notice shall extend such Payment Blockage Period beyond the
179-day limit.
(c) In the event that, notwithstanding the foregoing, the Holder
shall receive any payment prohibited by the foregoing provisions of this
Section 9.3, then and in such event such payment shall be paid over and
delivered forthwith to the holders of Senior Indebtedness until all Senior
Indebtedness is paid in cash in full, or as a court of competent
jurisdiction shall direct.
9.4. PAYMENT PERMITTED IF NO DEFAULT. Nothing contained in this Article
9 or elsewhere in this Note shall prevent the Maker, except as expressly
provided herein, from making payments at any time of principal of or interest
on this Note.
9.5. SUBROGATION TO RIGHTS OF HOLDERS OF SENIOR INDEBTEDNESS. Subject
to the payment in full in cash of all Senior Indebtedness, the Holder of this
Note shall be subrogated to the rights of the holders of such Senior
Indebtedness to receive payments and distributions of cash, property and
securities applicable to the Senior Indebtedness until the principal of and
interest on this Note shall be paid in full. For purposes of such
subrogation, no payments or distributions to the holders of Senior
Indebtedness of any cash, property or securities to which the Holder would be
entitled except for the provisions of this Article 9, and no payments over
pursuant to the provisions of this Article 9 to the holders of Senior
Indebtedness by the Holder or the Maker shall, as among the Maker, its
creditors other than holders of Senior Indebtedness and the Holder, be deemed
to be a payment or distribution by the Maker to or on account of the Senior
Indebtedness.
<PAGE>
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9.6. PROVISIONS SOLELY TO DEFINE RELATIVE RIGHTS. The provisions of
this Article 9 are intended solely for the purpose of defining the relative
rights of the Holder on the one hand and the holders of Senior Indebtedness
on the other hand. Nothing contained in this Article 9 or elsewhere in this
Note is intended to or shall (a) impair, as among the Maker, its creditors
other than holders of Senior Indebtedness and the Holder, the obligation of
the Maker, which is absolute and unconditional, to pay to the Holder the
principal of and interest on this Note as and when the same shall become due
and payable in accordance with its terms; or (b) affect the relative rights
against the Maker or the Holder of this Note and creditors of the Maker other
than the holders of Senior Indebtedness; or (c) except as expressly provided
herein, prevent the Maker or any Holder from exercising all remedies
otherwise permitted by applicable law upon default under this Note.
9.7. NO WAIVER OF SUBORDINATION PROVISIONS.
(a) No right of any present or future holder of any Senior
Indebtedness to enforce subordination as herein provided shall at any time
in any way be prejudiced or impaired by any act or failure to act on the
part of the Maker or by any act or failure to act, by any such holder, or
by any non-compliance by the Maker with the terms, provisions and
covenants of this Note, regardless of any knowledge thereof any such
holder may have or be otherwise charged with.
(b) Without limiting the generality of Section 9.7(a), the holders
of Senior Indebtedness may, at any time and from time to time, without the
consent of or notice to the Holder, without incurring responsibility to
the Holder and without impairing or releasing the subordination provided
in this Article 9 or the obligations hereunder of the Holder to the
holders of Senior Indebtedness, do any one or more of the following:
(1) effect any amendment, modification or waiver of, or any compromise,
release or other action in respect of the Senior Indebtedness, or change
the manner, place or terms of payment or extend the time of payment of, or
renew or alter, Senior Indebtedness or any instrument evidencing the same
or any agreement under which Senior Indebtedness is outstanding; (2) sell,
exchange, release or otherwise deal with any property pledged, mortgaged
or otherwise securing Senior Indebtedness; (3) release any Person liable
in any manner for the collection or payment of Senior Indebtedness; and
(4) exercise or refrain from exercising any rights against the Maker and
any other Person and any assets securing the Senior Indebtedness; (5) any
lack of validity or enforceability of any Senior Indebtedness; (6) any
other circumstance which might otherwise constitute a defense available
to, or a discharge of, the Maker or a subordinated creditor; and (7) the
absence of any notice to, or knowledge by, the Holder of the existence or
occurrence of any of the matters or events set forth in clauses (1)
through (6) above, PROVIDED, HOWEVER, that in no event
<PAGE>
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shall any such actions limit the right of the Holder of this Note to take
any action pursuant to Article 7 of this Note or to pursue any rights or
remedies hereunder or under applicable laws if the taking of such action
or the pursuit of such rights or remedies does not otherwise violate the
terms of this Article 9.
(c) The Holder, to fullest extent remitted by law, unconditionally
waives (1) all notices which may be required to preserve intact any rights
of any holder of Senior Indebtedness, other than any notices expressly set
forth in this Article 9, and (2) any requirement of diligence on the part
of any holder of Senior Indebtedness.
9.8. RELIANCE ON JUDICIAL ORDER OR CERTIFICATE OF LIQUIDATING AGENT.
Upon any payment or distribution of assets of the Maker referred to in this
Article 9, the Holder shall be entitled to rely upon any order or decree
entered by any court of competent jurisdiction in which such insolvency,
bankruptcy, receivership, liquidation, reorganization, dissolution, winding
up or similar case or proceeding is pending, or a certificate of the
Custodian making such payment or distribution, delivered to the Holder, for
the purpose of ascertaining the Persons entitled to participate in such
payment or distribution, the holders of Senior Indebtedness and other
Indebtedness of the Maker, the amount thereof or payable thereon, the amount
or amounts paid or distributed thereon and all other facts pertinent thereto
or to this Article 9; PROVIDED, HOWEVER, that the foregoing shall apply only
if such court has been fully apprised of the provisions of this Article 9.
9.9. RIGHTS OF HOLDER AS A HOLDER OF SENIOR INDEBTEDNESS. The Holder in
its individual capacity shall be entitled to all the rights set forth in this
Article 9 with respect to any Senior Indebtedness which may at any time be
held by it, to the same extent as any other holder of Senior Indebtedness,
and nothing in this Note shall deprive the Holder of any of its rights as
such holder.
9.10. NO SUSPENSION OF REMEDIES. Nothing contained in this Article 9
shall limit the right of the Holder to take any action pursuant to Article 7
of this Note or to pursue any rights or remedies hereunder or under
applicable law, except as expressly set forth herein.
9.11. CERTAIN CONVERSIONS DEEMED PAYMENT.
For the purpose of this Article only, the issuance and delivery of
Common Stock upon conversion of this Note in accordance with Article 8 shall
not be deemed to constitute a payment or distribution on account of this
Note. Nothing contained in this Article or elsewhere in this Note is intended
to or shall impair, as among the Maker, its creditors other than holders of
Senior Indebtedness and the Holder of this Note, the right, which is absolute
and unconditional, of the Holder of this Note to convert this Note in
accordance with Article 8.
<PAGE>
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9.12. REINSTATEMENT.
To the extent any payment of Senior Indebtedness (whether by or on
behalf of the Maker or any Subsidiary, as proceeds of security or enforcement
of any right of setoff or otherwise) is declared to be fraudulent or
preferential, set aside or required to be paid to any receiver, trustee in
bankruptcy, liquidating trustee, agent or other similar Person under any
bankruptcy, insolvency, receivership, fraudulent conveyance or similar law,
then if such payment is recovered by, or paid over to, such receiver, trustee
in bankruptcy, liquidating trustee, agent or other similar Person, the Senior
Indebtedness or part thereof originally intended to be satisfied shall be
deemed to be reinstated and outstanding as if such payment had not occurred.
To the extent the obligation to repay any Senior Indebtedness is declared to
be fraudulent, invalid, or otherwise set aside under any bankruptcy,
insolvency, receivership, fraudulent conveyance or similar law, then the
obligations so declared fraudulent, invalid or otherwise set aside (and all
other amounts that would come due with respect thereto had such obligation
not been affected) shall be deemed to be reinstated and outstanding as Senior
Indebtedness for all purposes hereof as if such payment of Senior
Indebtedness had not been made.
ARTICLE TEN
LIMITATION ON INTEREST PAYMENTS
No provision of this Note shall require the payment of, or permit
contracting for, charging, receiving or collecting interest in excess of the
rate then permitted by applicable law. Regardless of any provision contained
herein, the Holder shall not be entitled to contract for, charge, take,
reserve, receive or apply, as interest hereunder, any amount in excess of the
highest lawful rate and, in the event the Holder ever contracts for, charges,
takes, reserves, receives or applies as interest any such excess, it shall be
deemed a partial prepayment of principal and treated hereunder as such, and
if the principal debt is paid in full, any remaining excess shall forthwith
be paid to the Maker.
ARTICLE ELEVEN
DATE OF PAYMENTS
If interest on or principal of this Note becomes due payable on a
Saturday, Sunday or public or other banking holiday under the laws of the
State of Delaware, the maturity thereof shall be extended to the next
succeeding business day, and interest shall be payable thereon at the rate
herein specified during such extension.
<PAGE>
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ARTICLE TWELVE
TRANSFER AND EXCHANGE OF NOTES
(a) The Maker shall keep a register (the "NOTE REGISTER") of the
holders of this Note and any Notes issued pursuant to Article 2 or upon
any transfer as provided below or any exchange. When this Note is
presented to the Maker with a request to register its transfer or exchange
for an equal principal amount of Notes of other denominations, the Maker
shall register the transfer or make the exchange; PROVIDED that (i) a Note
presented or surrendered for transfer or exchange shall be duly endorsed
or accompanied by a written instrument of transfer in form satisfactory to
the Maker duly executed by the Holder thereof or its attorney duly
authorized in writing and (ii) the Maker may not transfer portions of this
Note to more than three transferees. No service charge shall be made for
any transfer or exchange.
(b) If a mutilated Note is surrendered to the Maker, or if the
Holder of a Note claims that such Note has been lost, destroyed or
wrongfully taken, the Maker shall issue a replacement Note. If required
by the Maker, the applicable Holder will provide an indemnity bond
sufficient in the judgment of the Maker to protect the Maker from any loss
which it may suffer if a Note is replaced. The Maker shall be entitled to
charge the Holder who has lost a Note for the full expense of replacing
such Note, including any tax or other governmental charge that may be
imposed in relation thereto.
(c) The Holder may not sell, assign or otherwise transfer all or any
portion of its interests, rights or obligations under this Note to any
Person, except in compliance with the terms and conditions specified in
the legends set forth on page 1 of this Note.
ARTICLE THIRTEEN
GOVERNING LAW
This Note shall be governed by and construed in accordance with the laws
of the State of Delaware without giving effect to the conflicts of laws rules
thereof.
ARTICLE FOURTEEN
ENFORCEMENT ACTIONS
If the Holder institutes any action for the enforcement or collection of
this Note, the Maker shall pay on demand all costs and expenses of such action
including reasonable legal fees. Amounts payable by the Maker under this Note
may not be set
<PAGE>
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off against amounts payable by the Holder under the Asset Purchase Agreement,
the Site Separation and Services Agreement, the Site Lease or the Space Lease.
ARTICLE FIFTEEN
WAIVER OF NOTICE, ETC.; AMENDMENTS
The Maker expressly waives any presentment, demand, protest, or other
notice of any kind. This Note may not be amended or waived except pursuant
to a written agreement signed by the Maker and the Holder.
ARTICLE SIXTEEN
NOTICE
Any notice under this Note shall be provided in the manner set forth in
Section 18.9 of the Asset Purchase Agreement.
--------------------
IN WITNESS WHEREOF, SPINNAKER INDUSTRIES, INC. has caused this Note to
be executed in its name by its duly authorized officer as of the date first
written above.
SPINNAKER INDUSTRIES, INC.
By: /s/ Mark R. Matteson
-----------------------------------
Name: Mark R. Matteson
------------------------------
Title: Vice President, Corporate
Development
-----------------------------
<PAGE>
SITE SEPARATION
AND
SERVICES AGREEMENT
This SITE SEPARATION AND SERVICES AGREEMENT (as in effect from time to
time and including all exhibits, annexes and schedules hereto, the "SERVICES
AGREEMENT"), is dated as of March 17, 1998, by and between S. D. WARREN
COMPANY, a Pennsylvania corporation (the "SELLER"), and SPINNAKER INDUSTRIES,
INC., a Delaware corporation (the "BUYER").
RECITALS
WHEREAS, the Buyer and the Seller have entered into an Asset Purchase
Agreement, dated as of November 18, 1997 (as in effect from time to time, the
"ASSET PURCHASE AGREEMENT"), pursuant to which the Buyer agreed to purchase,
and the Seller agreed to sell, certain assets of the Seller comprising its
Pressure Sensitive Business (as defined in the Asset Purchase Agreement); and
WHEREAS, pursuant to the Asset Purchase Agreement, the Seller has agreed
to enter into this Services Agreement in order for the Seller to provide to
the Buyer certain utilities, operating support, supplies and other services
in connection with the Buyer's operation and maintenance of the Pressure
Sensitive Business; and
WHEREAS, the Seller is willing to provide the utilities, services and
supplies hereunder, as more fully described below, all on the terms and
conditions stated herein.
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements set forth below and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Seller and the
Buyer agree as follows:
ARTICLE 1
DEFINED TERMS
As used in this Services Agreement the following defined terms shall
have the following meanings:
<PAGE>
-2-
"Agency Action" means any notice of violation, complaint, order, consent
order, consent agreement or other final action brought by a federal, state,
or local regulatory agency having the requisite authority and jurisdiction to
bring such action.
"Applicable Licenses" means those licenses, permits, plans and
procedures of the Seller and the Buyer for the Westbrook Facility that have
been approved by the cognizant Governmental Authority, and under which the
Buyer will conduct its operations of the Pressure Sensitive Business at the
Demised Premises and, in part, under which the Seller will provide Utilities
and Services to the Buyer. A list of the current Applicable Licenses is set
forth in EXHIBIT A hereto
"Asset Purchase Agreement" has the meaning set forth in the preamble.
"Bankruptcy" means (a) the filing of a voluntary petition seeking
liquidation, reorganization, arrangement or readjustment, in any form, of a
party's debts under Title 11 of the United States Code or any successor
bankruptcy or insolvency laws, (b) the filing of an answer consenting to or
acquiescing in any such petition, (c) the making by a party of any assignment
for the benefit of its creditors or the admission by such party in writing of
its inability to pay its debts as they mature, (d) the filing of an
involuntary petition against a party under Title 11 of the United States Code
or any successor bankruptcy or insolvency laws, an application for the
appointment of a receiver for the assets of such party, or an involuntary
petition seeking liquidation, reorganization, arrangement or readjustment of
such party's debts under any other federal or state bankruptcy or insolvency
laws, provided that the same shall not have been vacated, set aside or stayed
within a 60-day period after the occurrence of such event, or (e) the entry
against a party of a final non-appealable order for relief under any other
bankruptcy, insolvency or similar law now or hereafter in effect.
"Business Services and Transition Agreement" shall have the meaning
specified in Section 3.2(d).
"Buyer" has the meaning set forth in the preamble.
"Buyer Confidential Information" means any confidential or proprietary
information of any type of the Buyer or furnished by the Buyer.
"Buyer Indemnity Matters" has the meaning set forth in Section 8.1.
"Buyer Representative(s)" means one or more employees of the Buyer
designated to act as the Buyer's liaison and point of coordination for the
provision of the various elements of the Utilities and Services. Any Buyer
Representative must be reasonably satisfactory to the Seller.
<PAGE>
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"Confidential Information" means any Buyer Confidential Information or
any Seller Confidential Information.
"Demised Premises" means the property to be leased by the Buyer from the
Seller pursuant to the Real Property Leases, including any additional
property obtained from the Seller under such Real Property Leases, whether
such property is being currently leased or has been purchased by the Buyer
from the Seller (as represented on the Site Plan).
"Easement Agreement" means the Easement Agreement between the Buyer and
the Seller of even date hereof.
"Environmental Law" means any applicable Federal, state, local or
foreign law, treaty, judicial decision, regulation, rule, judgment, order,
decree, injunction, policy or guideline, permit, agreement or governmental
restriction, each as in effect on or prior to the Closing Date, relating to
the environment, worker health or safety or to any Hazardous Substance.
"Governmental Entity" means any government or any court, arbitral
tribunal, administrative agency or commission or other governmental or other
regulatory authority or agency, Federal, state, local, transnational or
foreign.
"Governmental Authority" means any federal, state, municipal, local or
other governmental agency, department, commission, board, bureau, regulatory
authority, instrumentality, judicial or administrative body.
"Hazardous Substances" means any substance, pollutant, contaminant,
chemical, waste or material, including petroleum, its derivatives,
by-products, and other hydrocarbons, that is listed, identified in, or
regulated under any applicable Federal, state, local or foreign law, treaty,
judicial decision, regulation, rule, judgment, order, decree, injunction,
permit, agreement or governmental restriction.
"Indemnified Party" has the meaning set forth in Section 8.3.
"Indemnifying Party" has the meaning set forth in Section 8.3.
"Laws" means any applicable federal, state, local or foreign law,
treaty, judicial decision, regulation, rule, judgment, order, decree,
injunction, permit, or governmental restriction.
"Losses" has the meaning set forth in Section 8.1.
"Real Property Leases" means each of the Site Lease and the Space Lease.
<PAGE>
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"Related Agreements" means the Asset Purchase Agreement, this Services
Agreement, the Business Services and Transition Agreement, the Site Leases,
and any other agreement between the Buyer and the Seller which specifies that
it is a Related Agreement for purposes of this Services Agreement.
"Release" shall mean, with respect to any Hazardous Substance, any
releasing, spilling, leaking, pumping, pouring, emitting, emptying,
discharging, injecting, escaping, disposing or dumping of such Hazardous
Substance.
"Remedial Action" means any and all actions required pursuant to
applicable Environmental Laws to address the release or threatened release of
a Hazardous Substance, including, but not limited to, investigation and
cleanup.
"Seller" has the meaning set forth in the preamble.
"Seller Confidential Information" means any confidential or proprietary
information of any type of the Seller or furnished by the Seller, but
excluding any information constituting part of the Acquired Assets.
"Seller Indemnity Matters" has the meaning set forth in Section 8.2.
"Seller's Premises" means that portion of the Westbrook Facility other
than the Demised Premises.
"Seller Representative(s)" means one or more employees of the Seller
designated to act as the Seller's liaison and point of coordination for the
provision of the various elements of the Utilities and Services. Any Seller
Representative must be reasonably satisfactory to the Buyer.
"Services" means the support services to be provided by the Seller to
the Buyer for the Pressure Sensitive Business at the Westbrook Facility, as
described in Section 3.2.
"Services Agreement" has the meaning set forth in the preamble.
"Services Period" has the meaning set forth in Section 3.2.
"Site Lease" means the Site Lease pursuant to which the Buyer will
lease, and has the option to purchase, certain buildings and other space at
the Westbrook Facility from the Seller.
"Site Plan" means the site plan for the Westbrook Facility as it relates
to the Pressure Sensitive Business as more fully set forth on EXHIBIT B hereto.
<PAGE>
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"Space Lease" means the Space Lease pursuant to which the Buyer will
lease space in certain buildings at the Westbrook Facility from the Seller.
"Uncontrollable Circumstances" has the meaning ascribed thereto in
Article 10.
"Utilities" means the utilities to be provided by the Seller to the
Buyer for the Pressure Sensitive Business at the Westbrook Facility, as
described in Section 3.1.
Except as defined above, or otherwise defined in this Services
Agreement, all terms, the first letters of which are capitalized, shall have
the meanings assigned to them in the Asset Purchase Agreement.
ARTICLE 2
2.1. MEANS BY WHICH UTILITIES AND SERVICES WILL BE PROVIDED. Except as
otherwise provided herein, the Utilities will be provided by the Seller to
the Buyer and the Services will be performed by the Seller for the Buyer
(without limiting the Seller's obligation to provide the exact types of such
utilities and services set forth in this Services Agreement) in a manner that
is reasonably consistent with the manner in which such utilities are provided
and services are performed by the Seller for the Pressure Sensitive Business
prior to Closing. Except as otherwise provided in the Asset Purchase
Agreement, the Seller will, at the Buyer's expense, and to the extent
necessary, be responsible for obtaining all required amendments to the
Seller's Applicable Licenses in order to enable the Seller to provide the
Utilities and Services to the Buyer. Prior to incurring any such expense,
the Seller will notify the Buyer of any required amendments, and at the
Buyer's request will meet to discuss such amendment and the anticipated
expense. Each of the Seller and the Buyer agrees that, except as may be
required by applicable Laws or by a Governmental Authority, it will not,
without the other party's prior written consent, which consent shall not be
unreasonably withheld or delayed, alter any of its Applicable Licenses or the
operation of its business if such alteration would have a material adverse
effect on the other party's operation of its business at the Westbrook
Facility.
2.2. RELATIONSHIP OF THE PARTIES. Nothing in this Services Agreement
will constitute or create a joint venture, partnership or other similar
arrangement between the Buyer and the Seller; and neither the Buyer nor the
Seller shall be authorized to act for the other or to commit the other in any
way to pay money for services or materials of third parties. At all times
the Seller will act under this Services Agreement solely as an independent
contractor and not as an agent or employee of the Buyer.
<PAGE>
-6-
ARTICLE 3
SCOPE OF UTILITIES AND SERVICES TO BE PROVIDED
3.l. PROVISION OF UTILITIES GENERALLY. Subject to Section 3.1(i) below,
during the period from the Closing Date through the twentieth anniversary of
the Closing Date (or such shorter time period as is specifically set forth in
this Article 3 for a particular Utility), or as may otherwise be agreed to by
the parties hereto (the "UTILITIES PERIOD"), the Seller will provide to the
Buyer Utilities as are listed in this Section 3.1, in support of the
operation by the Buyer of the Pressure Sensitive Business at the Westbrook
Facility.
(a) STEAM. The Seller will deliver to the Buyer at Building #110
(as shown on the Site Plan), 300 psig steam at a minimum of 10DEG.F
superheat, consistent with the use and delivery of steam to the Pressure
Sensitive Business of the Seller prior to Closing. The maximum daily usage
of such steam by the Buyer shall not exceed 30,000 pounds per hour. There is
no minimum daily usage by the Buyer required. Steam flow shall be measured
by the two existing flow meters located in Building #110 and by an additional
flow meter which shall be installed by the Seller, at the Buyer's expense, on
the condensate return line. The Buyer agrees to pay to the Seller the cost
of steam delivered to the Buyer hereunder at the rate of $5.50 per MM BTU
through the first anniversary of the Closing Date, increasing at a rate equal
to 1.5% for each year thereafter. Calculations of MM BTU of steam to be
charged to the Buyer will be based on the difference between the MM BTU of
steam used and the MM BTU of condensate returned as measured by the existing
and installed flow meters. In the event that changes in the Buyer's
operations through the fifth anniversary of the date hereof increases maximum
daily usage above 30,000 pounds per hour and increases the cost to the Seller
of providing steam hereunder beyond the annual increases provided for above,
the parties will agree on an appropriate adjustment to these charges. In
addition, after the fifth anniversary hereof, in the event that the cost to
the Seller of providing steam hereunder increases (whether or not related to
changes in the Buyer's operations), these charges will be appropriately
adjusted as agreed by the parties; provided, that the Buyer shall be
responsible for a portion of such increased costs that is proportionate to
the amount of steam provided to the Pressure Sensitive Business relative to
the total amount provided to operations at the Westbrook Facility at the
Closing, except that the Buyer's proportionate responsibility for such costs
shall be increased to reflect any changes in the Pressure Sensitive Business
after the Closing. As part of the Buyer's due diligence investigation with
respect to the Pressure Sensitive Business, the Seller has confirmed to the
Buyer that operation of the Pressure Sensitive Business in accordance with
past practice does not require the supply of steam in excess of an average of
23.1 MM BTU per hour (excluding any additional steam required for the
thermo-electron steamer to be installed). So long as the Buyer is operating
the Pressure Sensitive Business in a manner that is reasonably consistent
with the past
<PAGE>
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practice of the Seller, the Seller agrees that from the date hereof through
the fifth anniversary of the date hereof, it shall not require the Buyer to
pay the cost of steam to the extent that usage thereof in any month exceeds
an average hourly rate of 23.1 MM BTU (excluding any additional steam
required for the thermo-electron steamer to be installed). If any of the flow
meters fails at any time, the Buyer Representative and the Seller
Representative shall promptly meet and agree upon a methodology (for example,
estimating current usage based on actual usage in a prior period) that will
best calculate the amount of the Buyer's steam usage during the period the
flow meters are inoperative.
(b) ELECTRIC POWER. During the period from the Closing Date
through the fifth anniversary of the Closing Date, the Seller shall provide
to the Buyer 1500 KVA, 11,000 volts 3 phase power and 2,300 volts single
phase power from the Seller's power generation plant at the Westbrook
Facility. High voltage power (11,000 volts) will be delivered to two of the
Buyer's transformers, identified as T-41 and T-42 which are located between
Buildings #109 and #110 as shown on the Site Plan. Medium voltage power
(2,300 volts) will be delivered to a 2,300/120 volt 50KW lighting transformer
to be located within the same area. Maximum daily usage by the Buyer of
electric power shall not exceed the limit of the transformers. If the Buyer
requests additional power due to expansion, the Seller agrees to provide such
power, PROVIDED that the Buyer purchases any necessary additional
transformers and subject to the limitations of the Seller's switching
station. So long as the Buyer is operating the Pressure Sensitive Business
in a manner consistent with the past practice of the Seller, the Seller
agrees that from the date hereof through the fifth anniversary of the date
hereof, it shall not require the Buyer to pay the cost of electric power to
the extent that usage thereof in any quarter exceeds 1,080 KWHr. Revenue
class meters will be installed by the Seller, at the Buyer's expense, on the
T-41 and T-42 kv/480 volt transformers and on the lighting transformer and
any other transformers installed from time to time for the Pressure Sensitive
Business. The cost for electric power will be equal to $.0721 per KWHr from
the Closing Date through the first anniversary thereof, thereafter, electric
power costs shall be indexed to the Central Maine Power intermediate general
service primary time of use rate schedule for customers with demand between
400 KW and 1,000 KW, with the winter, on-peak energy charge to be used as the
index (the "CMP RATE SCHEDULE"). If for any reason and at any time the CMP
Rate Schedule ceases to be in effect, the Buyer Representative and the Seller
Representative shall meet to determine a rate schedule satisfactory to both
parties which provides for rates on a basis as similar as possible to such
rate schedule and any historic increases thereto. In the event that changes
in the Buyer's operations through the fifth anniversary of the Closing Date
increases the cost to the Seller of providing power hereunder above the
increases provide for under the CMP Rate Schedule, these charges will be
adjusted appropriately as agreed by the parties.
<PAGE>
-8-
(c) CONDITIONED AIR. During the period from the Closing Date
through the fifth anniversary of the Closing Date, the Seller will provide to
the Buyer from the Seller's system at the Westbrook Facility, conditioned
air, at a minimum of 60 psi, filtered and dry, with a maximum dew point of
38DEG.. Air will be delivered to Building #110 as shown on the Site Plan at a
maximum of up to 200 SCFM. The Buyer agrees to pay the Seller $36,000 per
year for air supplied hereunder.
(d) WATER. The Buyer will obtain its own water from the Portland
Water District commencing on the Closing Date but such water will be provided
through pipes leading to the Demised Premises from the Seller's Premises,
subject to the rights and easements granted to the Buyer by the Seller in the
Easement Agreement. The Seller will, not later than thirty (30) days after
the Closing Date, at the expense of the Buyer, install water meters to
measure the total water flow to the Buyer and water meters to measure the
portion of water flow used by the Buyer solely for sanitary use. Costs of
water use as shown on such water meters will be borne by the Buyer. The
Buyer will arrange for either the Portland Water District to bill the Buyer
directly or the Buyer will reimburse the Seller for the costs of Buyer's
water usage. After the fifth anniversary of the Closing Date, the Seller
may, upon one year's prior written notice, terminate this arrangement.
(e) SEWER (PROCESS). (i) Subject to Section 3.1(i) below, the
Seller will accept the Buyer's process sewer discharge which complies with
the acceptance criteria set forth in subsection (ii) below. There will be no
minimum or maximum volume limitations for such sewage discharge, but any
significant increase in maximum volume will be subject to the Seller's prior
approval (such approval not to be unreasonably withheld or delayed). Any
process sewer discharge will be delivered by the Buyer to the Seller at
locations which exist as of the Closing Date. The Buyer shall be responsible
for all costs and expenses relating to all piping located on that portion of
the Demised Premises subject to the Site Lease (whether or not purchased by
the Buyer). The Buyer agrees to pay the Seller $0.30 per 1,000 gallons of
total water flow less sanitary water flow (as described in paragraph (f)
below) through the first anniversary of the Closing Date, as measured by the
water meters described in Section 3.1(d) above, such amount to escalate by
1.5% per year thereafter. In the event that changes in the Buyer's
operations during the first five (5) years after the Closing Date increase
the cost to the Seller of accepting process sewer discharge, these charges
will be adjusted appropriately as agreed by the parties. In addition, after
the fifth anniversary of the Closing Date, in the event the cost to the
Seller of accepting process sewer discharge increases (whether or not related
to changes in the Buyer's operations), these charges will be adjusted
appropriately as agreed by the parties; provided that the Buyer shall be
responsible for a portion of such increased costs that is proportionate to
the amount of sewage discharged by the Pressure Sensitive Business relative
to the total amount discharged by operations at the Westbrook Facility at the
Closing, except that the Buyer's proportionate
<PAGE>
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responsibility for such costs shall be increased to reflect any changes in
the Pressure Sensitive Business after the Closing.
(ii) Any process sewer discharge to be accepted by the Seller
must be free of organic solvent or other hazardous material, and must comply
with the following terms:
(A) Discharge from the solvent-recovery decanter will contain
dissolved solvent to the limit of its solubility in water.
(B) Discharge shall be managed by the Buyer so as to avoid
solvent odor and/or observable surface sheen at the first collection pond.
(C) The Buyer will, within thirty (30) days after the Closing
Date, prepare and adhere to a plan which has been approved by the Seller
in its reasonable discretion, for storm water management which takes into
account housekeeping and spill control in the drained area.
(D) The Buyer agrees to review with, and obtain prior approval
of Seller for (such approval not to be unreasonably withheld or delayed),
any change in the process which would substantially impact either the
volume or content of the process discharge of the Buyer relating to the
Pressure Sensitive Business or cause the Seller to violate any of its
Applicable Licenses.
(E) The Buyer agrees that all discharge will comply with the
applicable permit conditions of the Seller as in effect from time to time
at the Westbrook Facility of which the Buyer has been notified. The
Seller shall promptly, and in any event within five (5) business days,
notify the Buyer of any pending or actual changes in such applicable
permit conditions.
(F) The Seller will, within 180 days of the Closing Date,
install appropriate systems, at the Buyer's expense, to monitor the
Buyer's process sewer discharge. In connection with the installation of
the monitoring system, the Seller will prepare a baseline characterization
analysis of the process sewage discharge currently being generated by the
Pressure Sensitive Business. The Seller Representative and the Buyer
Representative will from time to time meet to review and revise this
analysis as necessary.
(f) SEWER (SANITARY). (i) Subject to Section 3.1(i) below, the
Seller will accept the Buyer's sanitary sewer discharge which complies with
the acceptance criteria set forth in subsection (ii) below. There will be no
minimum or maximum volume limitations for such sewage discharge, but any
significant increase in maximum volume will be subject to the Seller's prior
approval (such approval not to
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be unreasonably withheld or delayed). Any sanitary sewer discharge will be
delivered by the Buyer to the Seller through existing mill sanitary sewer
collection systems at locations which exist as of the Closing Date. The
Buyer agrees to pay to the Seller for such service, costs equal to the
current municipal rate for industrial sanitary treatment based on the Buyer's
metered water flow used solely for sanitary use, as measured by the water
meters described in Section 3.1(d) above. In the event that changes in the
Buyer's operations in the first five (5) years after the Closing Date
increase the cost to Seller of accepting sanitary sewer discharge, these
charges will be adjusted appropriately as agreed by the parties. In
addition, after the fifth anniversary of the Closing Date, in the event the
cost to the Seller of accepting sanitary sewer discharge increases (whether
or not related to changes in the Buyer's operations), these charges will be
adjusted appropriately as agreed by the parties; provided that the Buyer
shall be responsible for a portion of such increased costs that is
proportionate to the amount of sewage discharged by the Pressure Sensitive
Business relative to the total amount discharged by operations at the
Westbrook Facility at the Closing, except that the Buyer's proportionate
responsibility for such costs shall be increased to reflect any changes in
the Pressure Sensitive Business after the Closing.
(ii) Any sanitary sewer discharge to be accepted by the Seller
must be free of organic solvent or other hazardous material, and must
comply with the following terms:
(A) Such discharge must not contain any process sewer
discharge.
(B) Such discharge must comply with any restrictions imposed
from time to time by the municipal treatment facility.
(C) The Buyer agrees to review with, and obtain prior approval
of Seller for, any change which would substantially impact the volume of
the discharge or cause the Seller to violate any of its Applicable
Licenses. Seller agrees it will not unreasonably withhold or delay such
approval.
(D) The Buyer agrees that all discharge will comply with the
applicable permit conditions of the Seller as in effect from time to time
at the Westbrook Facility of which the Buyer has been notified. The
Seller shall promptly, and in any event within five (5) business days
notify the Buyer of any pending or actual changes in such applicable
permit conditions.
(g) CHANGES IN UTILITY CONSUMPTION. The parties will discuss any
major changes in their respective operations, systems or equipment which
could materially impact the level of Utilities to be provided by the Seller
hereunder,
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including but not limited to additions or deletions of equipment, changes in
time or manner of Utility consumption, or changes in processes or
methodologies that may affect Utility consumption, reasonably in advance of
implementing any such changes. The Buyer will obtain the Seller's prior
approval (such approval not to be unreasonably withheld or delayed) before
making any such changes, with the reasonable costs incurred by the Seller in
connection with providing such approval, including the reasonable costs of
third party consultants or technical experts, and the cost of all such
approved changes to be at the Buyer's expense.
(h) OUTAGES. The parties also will discuss any planned outage
(whether total or partial) involving their respective operations, reasonably
in advance of such planned outage. The Seller will obtain the Buyer's prior
approval (such approval not to be unreasonably withheld or delayed) of the
timing of all such planned outage(s). The Seller agrees that, without the
Buyer's consent (such consent not to be unreasonably withheld or delayed),
any planned outage(s) will not exceed five (5) days in any year. The Buyer
acknowledges that any planned outage(s) will be "cold" outages during which
the Utilities will be available on a very limited basis or not at all. Each
party also will notify the other party immediately upon becoming aware of any
forced or unplanned outage (whether total or partial) of its operations and
related power consumption and will take all reasonable actions to reduce the
scope and/or duration of any such forced or unplanned outage that may have an
adverse impact on the other party's operations.
(i) TERMINATION OF SELLER'S OBLIGATIONS. (i) Notwithstanding
anything to the contrary contained herein, after the fifth anniversary of the
Closing Date, the Seller will have the right, upon one year's prior written
notice to the Buyer, to terminate its obligation to provide any of the
Utilities in Sections 3.1(a) (steam), 3.1(e) (process sewer) or 3.1(f)
(sanitary sewer) above. In the event the Seller terminates its obligation,
it will reimburse the Buyer for the costs of design, engineering, equipment
purchase and installation ("CAPITAL COSTS") of (A) in the case of steam, the
Capital Cost of converting the operations in existence on the date hereof
using steam power to natural gas, or for those processes not converted to
natural gas, the Capital Cost of generating and providing steam on a
stand-alone basis, (B) in the case of process sewer discharge, the Capital
Cost of a system to collect from the process sewer drains, pumping to
pre-treatment, required pre-treatment capability, and transfer to the
Portland Water District municipal facility, and (C) in the case of sanitary
sewer discharge, the Capital Cost necessary to move, collect and discharge
sewage directly into the Portland Water District sewage system. In addition,
the Seller will make adequate land available at the Westbrook Facility for
any required replacement equipment or facilities as more particularly
described in the Site Lease.
(ii) In addition, if Seller has assigned this Agreement in
accordance with Section 14.7 hereof and, prior to five years from the date
hereof, Buyer notifies Seller of the assignee's material failure to perform
its obligations under Section
<PAGE>
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3.1(a), 3.1(e) or 3.1(f) hereof that has not been cured within thirty (30)
days after notice from the Buyer, Seller will reimburse Buyer for all Capital
Costs described in 3.1(i)(i) above which relate to the Utility such assignee
has failed to provide.
(iii) The Capital Cost to be paid by the Seller pursuant to
Section 3.1(i)(i) and (ii) above will be based on the configuration and
operations of the Pressure Sensitive Business existing on the Closing Date
and a replacement plan that approximates the quality and level of service
provided to the Pressure Sensitive Business as in existence on the Closing
Date. To the extent that any changes by the Buyer in the configuration or
operations of the Pressure Sensitive Business have the effect of increasing
the required Capital Cost for replacing any of these Utilities, the Seller
will not be responsible for this additional amount of Capital Costs. In the
event that the Seller elects to terminate any of these Utilities, the Buyer
Representative will develop a proposal and capital budget and submit it to
the Seller Representative for review and approval, which approval will not be
unreasonably withheld or delayed. The Buyer agrees to use commercially
reasonable efforts to minimize any of these required Capital Costs. The
Seller, after review of the Buyer's plans, may elect, upon notice to the
Buyer, to install the required systems and equipment itself. All designs
must comply with appropriate codes and regulations.
3.2. PROVISION OF SERVICES GENERALLY. The relevant Services listed
below will be provided by the Seller to the Buyer, for the periods described
below, or for such time or times as may otherwise be agreed to by the parties
(the "SERVICES PERIOD"), in connection with the Buyer's operation of the
Pressure Sensitive Business at the Westbrook Facility. The Buyer and the
Seller agree that, subject to the terms and conditions of this Services
Agreement, the provision by the Seller of all Services is of a transitional
and interim nature only and for the purpose of enabling the Buyer to start-up
and operate the Pressure Sensitive Business at the Westbrook Facility on and
after the Closing Date. The parties' intent is that the operations of the
Pressure Sensitive Business being transferred to the Buyer will continue
uninterrupted in all material ways and that the Pressure Sensitive Business
will continue as in effect on the Closing Date. From and after the Closing
Date, the Buyer will continue to use all commercially reasonable efforts,
including the provision of all necessary resources, to establish the internal
expertise or other means to perform or procure the Services by no later than
the end of any individual Services Period. The Seller will cooperate
reasonably and provide reasonable assistance to the Buyer in connection with
such efforts.
(a) SOLID WASTE. The Seller agrees to collect and compact the
Buyer's slab waste for a period of six (6) months from the Closing Date. The
Buyer agrees to contract with a third party for all other solid waste
disposal relating to its operations at the Westbrook Facility. In connection
therewith, the Buyer has obtained a hazardous waste identification number and
created a new facility address for the Pressure Sensitive Business.
Notwithstanding anything to the contrary
<PAGE>
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contained herein, except with respect to slab waste as described above, the
Buyer shall be solely responsible for solid and hazardous waste disposal
costs associated with the operation of the Pressure Sensitive Business.
(b) SHIPPING, TRANSPORTATION AND STORAGE. (i) The Seller will use
commercially reasonable efforts to cooperate with the Buyer to maintain the
product flow of the Pressure Sensitive Business consistent with that existing
prior to Closing. The Seller shall, from the Closing Date through the date
one hundred eighty (180) days thereafter, provide the Buyer with shipping
labor which, together with such labor as is provided by the Assumed
Employees, would provide shipping labor on a basis consistent with the past
practice of the Seller relating to the Pressure Sensitive Business. The
Buyer agrees to pay the Seller $30,000 per month for such Services. The
Buyer may terminate such shipping services upon thirty (30) days' prior
written notice to the Seller.
(ii) The Seller shall, from the Closing Date through the date
eighteen (18) months thereafter (the "INITIAL PERIOD") permit the Buyer to
have access to the existing loading dock in Building #77 (the Winder Room
Storage as shown on the Site Plan) for paper supply unloading. Upon written
notice to the Seller given at least thirty (30) days prior to the expiration
of the Initial Period, the Buyer may elect to have access to such loading
dock for paper supply unloading for an additional eighteen (18) month period,
but such access shall occur only between the hours of 3:00 p.m. and 7:00
a.m., local time.
(iii) The Buyer shall obtain off-site storage space for raw
material of the Buyer not manufactured by the Seller at the Westbrook
Facility.
(c) MAINTENANCE SERVICES. (i) As more fully described in the
Asset Purchase Agreement, spare parts relating to the Pressure Sensitive
Business and either identified in the Closing Statement (as defined therein
and as finally adjusted pursuant to Section 3.2 thereof) or constituting part
of the Designated Inventory (as defined in the Asset Purchase Agreement) have
been delivered to the Buyer on the date hereof. The Seller will provide the
Buyer with transitional storage space for spare parts for a period of one
hundred and eighty (180) days from the date hereof.
(ii) The Seller shall provide the Buyer with maintenance labor
and machine shop labor which, together with such labor as is provided by the
Assumed Employees, would provide maintenance labor and machine shop labor on
a basis consistent with the past practice of the Seller relating to the
Pressure Sensitive Business. The Seller shall provide such services to the
Buyer until the Buyer has had a reasonable amount of time to hire and
integrate its own maintenance personnel, but in any event, no longer than the
date one hundred eighty (180) days from the Closing Date. The Buyer shall
use reasonable commercial efforts to hire and integrate such
<PAGE>
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personnel as soon as possible after the date hereof. The Buyer agrees to pay
the Seller $36.00 per hour per person provided by the Seller to perform such
Services.
(iii) The Seller will also coordinate with the Buyer regarding
the transitioning of up to eight (8) of the Seller's maintenance workers to
the Buyer's employ during the one hundred eighty (180) day period described
above. Such maintenance personnel shall be qualified to work in the Pressure
Sensitive Business.
(d) ADMINISTRATIVE SUPPORT. The Seller shall also provide the
information, administrative and related support services more particularly
described in the Information Services Agreement, dated as of the date hereof
(the "BUSINESS SERVICES AND TRANSITION AGREEMENT"), between the Buyer and the
Seller.
3.3 ADMINISTRATION OF SERVICES. The Buyer Representative and the
Seller Representative shall meet from time to time to ensure that the level
of Services to be provided by the Seller hereunder are being provided on a
basis consistent with the past practice of the Seller relating to the
Pressure Sensitive Business. In particular, the Buyer Representative and the
Seller Representative will create a mutually satisfactory ordering procedure
for maintenance and machine shop services to be provided pursuant to Section
3.2(c) above. From and after the Closing Date, if the Buyer's actual scope
or volume demand for any type of Service exceeds the levels to be provided as
described in Section 3.2, the Buyer may request an increase in the scope
and/or volume of such Service. If such request is accepted by the Seller,
which acceptance shall be subject to the Seller's then existing commitments
to third parties and any constraints or restrictions on its personnel or
resources that may, in the Seller's sole judgment, preclude its ability to
provide the additional Service(s) requested, the Seller will provide such
additional Service(s) to the Buyer. In the event that the Seller agrees to
provide such additional Services, the fees payable pursuant to Section
3.2(c), shall be increased appropriately to reflect such increased level of
effort. With respect to any additional maintenance services to be provided
pursuant to Section 3.2(b), the $36.00 per hour charge shall apply to such
additional Services. Notwithstanding the foregoing, nothing herein shall be
construed to impose upon the Seller any obligation to provide any increased
level of Service beyond the maximum scope and volume levels specified in
Section 3.2 hereof.
3.4 SERVICES PROVIDED BY THIRD PARTIES; REQUESTS FOR ADDITIONAL
SERVICES.
(a) At all times, the Buyer shall be free to obtain from any third
party services in substitution for any type of the Services.
(b) In addition, the Buyer may request, from time to time, that
the Seller provide additional services during the Services Period as are
reasonably necessary for the Buyer to operate the Pressure Sensitive Business
to the extent the Seller provides such services as of the Closing Date. The
Seller may accept or reject
<PAGE>
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any such request. Unless the Seller and the Buyer otherwise agree, to the
extent any such additional service is provided by the Seller, it shall
constitute a Service hereunder.
3.5 PRODUCT SUPPLY. In addition to the Utilities and Services provided
above, the Seller shall supply and the Buyer shall purchase liner and face
sheet manufactured by the Seller ("SUPPLIES") on the following terms:
(a) The Seller will supply paper at the prices set forth on the
attached ANNEX A, it being understood that such prices do not include freight
charges, such charges to be paid by Buyer. The Seller will supply certain
paper through the date six (6) months from the Closing Date as set forth on
ANNEX A. Upon prior written notice to the Seller, the Buyer may also elect
to purchase 2.5 mil liner, 3.2 mil liner and EDP facestock for an additional
six (6) months at the prices and in the maximum volumes set forth on ANNEX A.
During this period the maximum volume the Buyer can purchase will be based on
production volume of the #6 machine.
(b) The Buyer may on thirty (30) days prior written notice to the
Seller reduce its paper requirements for the next month, PROVIDED that, for
products manufactured on the #6 paper machine, the Buyer may not reduce
volumes such that the #6 machine would be producing less than 325 tons per
week unless the Buyer is terminating the Seller's obligation to supply paper
from the #6 machine. If the Buyer ceases purchasing both the 2.5 mil liner
and the 3.2 mil liner, the Seller shall no longer be obligated to supply
either liner.
(c) The paper to be provided by the Seller will meet the
specifications set forth on ANNEX B as in effect at November 1, 1997.
(d) After the Closing, whenever the Buyer requires Supplies from
the Seller, it shall submit a purchase order to the Seller, unless the
provision of Supplies is provided for in the schedules referenced in
paragraph (f). The Buyer acknowledges that the Seller may produce the
Supplies from locations other than the Seller's Westbrook Facility, such as
the Seller's facility in Mobile, Alabama, so long as such Supplies are
comparable to the Supplies produced by the Seller at the Westbrook Facility.
Any purchase order for Supplies shall be governed solely by the terms and
conditions of this Services Agreement; and any pre-printed terms and
conditions on the front, back, or attached to or referenced in any such
purchase order shall be null and void. Subject to the applicable maximum
volumes referenced in paragraph (a) above, the Buyer may from time to time
provide shipping schedules for the Supplies to the Seller, which shall set
forth terms for delivery of the Supplies. Deliveries shall be made only in
the quantities and at the times set forth in such schedules. The Buyer shall
have the right to cancel, in whole or in part, the delivery of Supplies in
accordance with any such schedule upon thirty (30) days prior written
<PAGE>
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notice to the Seller. The Buyer will be obligated to purchase Supplies on
the basis set forth in the shipping schedules except to the extent cancelled
in accordance with the preceding sentence. Upon delivery of such notice, the
Buyer shall be under no obligation to the Seller for Supplies completed or
partially completed or related raw material acquired by the Seller, unless
the delivery or fabrication of such Supplies or the acquisition of such raw
materials was specifically authorized by the Buyer under an authorized
shipping schedule that has not been cancelled by the Buyer.
(e) The parties agree that the quantities identified in ANNEX A
are estimates of the Buyer's needs for the Pressure Sensitive Business and
shall in no way obligate the Buyer to acquire or take receipt of the
quantities specified, and that demand for the products identified in ANNEX A
may vary upon the requirements of customers of the Pressure Sensitive
Business. However, the Seller will not be required to sell Supplies in
excess of the amounts set forth in ANNEX A. The Buyer may acquire certain
raw materials or other Supplies from third party manufacturers at any time
during the product supply period identified herein without prior notification
to the Seller, subject to the terms of this Section 3.5.
(f) The Buyer will provide to the Seller planned production
forecasts and volumes no later than the fifth working day of each calendar
month. The monthly planned production forecasts may be used by the Seller to
estimate the demand for the two months following the applicable monthly
forecast; however, the actual needs of the Pressure Sensitive Business will
be conveyed to the Seller on a daily basis, consistent with past practices
and the Buyer's obligation to purchase Supplies in the amounts set forth in
the shipping schedules pursuant to paragraph (d) above. The Buyer and the
Seller shall use commercially reasonable efforts to ensure that an
"out-of-stock" condition does not occur at the Pressure Sensitive Business
with respect to the Supplies. If the Seller has acquired paper products in
anticipation of the Buyer's needs based upon the two month estimated demand
set forth in the most recent monthly forecast, and the quality of such
materials meets applicable product specifications, then the Buyer shall use
commercially reasonable efforts to use such products prior to the termination
of the Seller's services under this Section 3.5. The Buyer shall not in any
event be responsible for Supplies purchased by the Seller in amounts that
exceed the sixty (60) day average demand for said Supplies.
(g) Each of the Seller and the Buyer shall appoint an employee who
shall be responsible for ensuring on-time delivery and no stock shortages of
Supplies to the Buyer. In addition, the following persons shall act as
scheduling representatives for the purchase and sale of Supplies:
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Buyer's Scheduling Representative Seller's Scheduling Representative
--------------------------------- ----------------------------------
Gail Stanley Julie Goyette or Duane Jutting
(207) 856-4112 (207) 856-4137 (207) 856-4121
(h) The Buyer may reject Supplies only if they do not meet the
specifications set forth in ANNEX B. Seller shall be responsible for
processing all rejected Supplies immediately upon receipt of notification
from the Buyer. All Supplies rejected by the Buyer in accordance with this
paragraph (h) shall be removed from the Demised Premises within forty-eight
(48) hours of such notification. Credit for such rejected Supplies shall be
made to the Buyer within fourteen (14) days after receipt of rejected
materials on the Seller's property.
(i) Title to Supplies sold to the Buyer will pass to the Buyer
when said Supplies are placed on the Buyer's manufacturing equipment. The
Buyer will be responsible for entering into the Pressure Sensitive Business'
manufacturing business system the actual scale weight (the "PURCHASE WEIGHT")
of the Supplies, less the average raw material core waste derived from past
practices (the "TARE WEIGHT") as set forth below. The Seller shall invoice
the Buyer weekly based upon the consumption reports provided to the Buyer as
identified in Section 1.4 of the Business Services and Transition Agreement.
For the purposes of this Section, the following actual scale weight
adjustment calculation shall be used to generate the Purchase Weight:
Raw Liner - 2.5 Mil: Actual Scale Weight less the Tare Weight of 100 lbs =
Purchase Weight
Raw Liner - 3.2 Mil: Actual Scale Weight less the Tare Weight of 100 lbs =
Purchase Weight
Raw Face - EDP: Actual Scale Weight less the Tare Weight of 35 lbs = Purchase
Weight
Raw Face - Latex: Actual Scale Weight less the Tare Weight of 35 lbs =
Purchase Weight
3.6 SOLVENT SUPPLY TO THE SELLER. The Buyer shall, from the Closing
Date through the date ten (10) years thereafter, sell to the Seller, and the
Seller shall purchase from the Buyer, solvents that are used to operate the
#2 solvent coater of the Seller at the Westbrook Facility, in such volumes as
are consistent with the past practices of the Seller and so long as the Buyer
is using the same solvents in its business and is using the solvent tank.
The Buyer shall give the Seller six (6) months prior written notice of its
intention to discontinue its use of solvents or the solvent
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tank. So long as the Buyer still uses solvents after ten (10) years, it will
continue to sell these solvents to the Seller on the terms set forth herein.
If at any time the Buyer begins construction requiring the relocation of the
solvent tank or any piping or other equipment related thereto, the Seller
may, at its option, either terminate the Buyer's obligation to provide such
solvents or reimburse the Buyer for all costs related to relocating or
reconstructing such piping or other equipment necessary to enable the Buyer
to continue to provide such solvents to Seller, and the Buyer agrees, in such
event, to relocate or reconstruct such piping or other equipment as
necessary. The Seller agrees to pay the Buyer an amount equal to the actual
direct costs of such solvents to the Buyer, PLUS, an amount equal to five
percent (5%) of such costs. The Seller shall pay the Buyer for solvents at
the times and in accordance with the terms applicable to the Buyer with
respect to its purchases of Utilities, Services and Supplies, as set forth in
Section 4 hereof.
3.7 INGRESS AND EGRESS. The Seller shall, at all times during the
Utilities Period/Services Period have the right of ingress and egress to and
from the Pressure Sensitive Business of the Buyer at the Westbrook Facility
for any purposes connected with the provision of the Utilities or Services or
the exercise of any right under or the performance of any other obligation
required by this Services Agreement.
3.8 USE OF UTILITIES, SERVICES AND SUPPLIES. The Seller shall be
required to provide Utilities, Services and Supplies only to the Buyer; and
the Buyer shall not resell any such utilities, services or supplies to any
Person whatsoever or permit the use of such services by any Person other than
in connection with the operation of the Pressure Sensitive Business in the
ordinary course.
3.9 SELLER'S REMEDIAL OBLIGATIONS. Subject to the provisions and
limitations contained in Sections 13.1(b)-(c) of the Asset Purchase
Agreement, the Buyer may perform, at its expense, a Phase II site assessment
subsequent to Closing at that portion of the Demised Premises subject to the
Site Lease. In the event that such report indicates the presence of
Hazardous Substances at that portion of the Demised Premises subject to the
Site Lease in excess of levels permitted by Environmental Law for which the
Buyer will be making a Claim against the Seller under Section 13 of the Asset
Purchase Agreement, the Buyer shall promptly deliver a copy of such report to
the Seller. Upon receipt of such report, the Seller shall, subject to the
provisions and limitations contained in Sections 13.1(b)-(c) of the Asset
Purchase Agreement, develop a plan for remediation of such Hazardous
Substances (a "REMEDIATION PLAN") and submit such Remediation Plan to the
Buyer within sixty (60) days of the date on which the Seller received the
report of the Phase II findings from the Buyer and shall thereafter
expeditiously proceed to remediate that portion of the Demised Premises
subject to the Site Lease in accordance with the terms of the Remediation
Plan, to the extent required and in compliance with, Environmental Law and
subject to the provisions and limitations contained in Sections 13.1(b)-(c)
of the Asset Purchase Agreement.
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3.10 DISCLAIMER OF WARRANTIES. EXCEPT AS EXPRESSLY SET FORTH IN THIS
SERVICES AGREEMENT, THE UTILITIES, SERVICES AND SUPPLIES, INCLUDING ANY
RELATED OR ASSOCIATED MATERIALS PROVIDED IN CONNECTION THEREWITH, ARE
FURNISHED AS IS, WHERE IS, WITH ALL FAULTS AND WITHOUT WARRANTY OF ANY KIND,
EXPRESS OR IMPLIED, INCLUDING ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR
A PARTICULAR PURPOSE.
ARTICLE 4
PRICING; INVOICING AND BILLING
4.1 UTILITIES, SERVICES AND SUPPLIES. All Utilities, Services and
Supplies provided by the Seller to the Buyer hereunder will be provided at
the applicable rates established and set forth in Article 3 hereof.
4.2 INVOICES AND PAYMENT TERMS FOR UTILITIES, SERVICES AND SUPPLIES.
(a) The Seller will, as soon as reasonably practicable after the
end of any calendar month, provide to the Buyer a written invoice for the
Buyer's account describing in reasonable detail for such month the actual
amount of Utilities, Services and Supplies provided by the Seller to the
Buyer during the month and the total price payable by the Buyer for the
provision of each type of Utility and Service rendered and all Supplies
provided.
(b) The fees and charges set forth in the Seller's invoice
pursuant to subsection (a) of this Section 4.2 will be due and payable to the
Seller upon receipt by the Buyer. Payment terms are net thirty (30) days of
the date of the Seller's invoice.
(c) The Seller shall maintain sufficient backup records and
information, including the actual hours worked by its personnel providing
Services and the price of all direct material purchases for the Buyer's
account to reasonably support its invoices provided to the Buyer under this
Section 4.2. Upon reasonable advance request of the Buyer, the Seller shall
make the relevant backup records and information available to the Buyer
during normal business hours. The Buyer's review rights under this Section
4.2(c) shall not be deemed to be a general right to audit the Seller's books
and records, nor shall such rights extend to any books or records in
connection with the Seller's billing rates or the basis for or the
development of such rates.
4.3 LATE PAYMENT SERVICE CHARGE. The Seller will have the right to
add to any invoice, and the Buyer agrees to pay, a service charge of one and
one-half
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percent (1.5%) per month (not to exceed the lawful applicable rate) on all
undisputed amounts not paid within the specified time. All disputed amounts,
the payment of which is not otherwise resolved between the Buyer
Representative and the Seller Representative will be subject to the Dispute
Resolution provisions of Article 13. Any payment by the Buyer pursuant to
this Section 4.3 shall be without prejudice to the Buyer's rights under
Section 4.2(c) above.
4.4 TAXES. The fees/prices paid or to be paid to the Seller by the
Buyer under this Services Agreement do not include any sales or use taxes now
or hereafter applicable to, measured by, or imposed hereunder or as a result
of the provision by the Seller of the Utilities or Services or the sale of
the Supplies. The Buyer agrees to pay, in addition to any other amount due
and payable to the Seller hereunder, all such taxes, if any, directly to the
applicable taxing authorities or to reimburse the Seller for all such taxes,
if any, which the Seller is required to pay directly to such taxing
authorities. Upon request by the Seller, the Buyer will provide the Seller
with reasonable evidence of the Buyer's direct payment of all such applicable
taxes or the Buyer's exemption from the payment of such taxes.
4.5 CHANGES IN LAWS. If a change in applicable Laws, whether new Laws
or revisions to existing Laws, is promulgated after the Closing Date (a
"CHANGE IN LAWS"), the Seller shall have the right, subject to Article 10,
"Uncontrollable Circumstances", to include the impact of such Change in Laws
in its pricing of Utilities, Services or Supplies, provided hereunder. As
soon as reasonably practicable after the occurrence of any such Change in
Laws, the Seller shall provide the Buyer with notice of the effect of the
Change in Laws hereunder and the need to adjust any of the pricing provisions
of this Services Agreement.
4.6 PARTIES TO COOPERATE ON PAYMENT MATTERS. The parties' respective
Representatives will meet, if reasonably requested to do so by either party
(including to discuss price changes necessitated by Section 4.5 hereof), to
discuss any outstanding issues relating to the pricing of or payment for
Utilities and/or Services and/or Supplies provided hereunder.
ARTICLE 5
ADDITIONAL BUYER OBLIGATIONS AND RESPONSIBILITIES
5.1 SCOPE AND CONDUCT OF THE BUYER OPERATIONS. In addition to its
ownership and operation of the Pressure Sensitive Business, the Buyer will be
responsible for day-to-day operation, maintenance and management of its
activities at the Westbrook Facility.
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5.2 CONDITIONS FOR USE OF THE WESTBROOK FACILITY.
(a) The Buyer will use the Seller's Premises for the conduct of
the Pressure Sensitive Business only in accordance with the Applicable
Licenses and all existing Seller policies, procedures and site requirements
for the Westbrook Facility. Included in this condition is the requirement
that the Buyer not receive, locate, handle, store, stage or process any waste
or materials at the Westbrook Facility if the presence of any such waste or
materials at the Westbrook Site is not authorized under the Applicable
Licenses.
(b) The Buyer will access the Seller's Premises using only those
means of ingress and egress as are designated on EXHIBIT B hereto. The Buyer
shall conduct the activities at the Westbrook Facility so as not to interfere
in any material respect with the Seller's other continuing operations at the
Westbrook Facility. The Seller shall conduct its activities at the Westbrook
Facility so as not to interfere in any material respect with the Buyer's
operations of the Pressure Sensitive Business at the Westbrook Facility.
5.3 SELLER ACCESS. The Buyer will make available on a timely basis to
the Seller all information and materials and other access as reasonably
requested by the Seller to enable it to provide the Utilities and Services.
The Buyer shall give the Seller reasonable access and inspection rights,
during regular operating hours and at such other times as are reasonably
required, at the Westbrook Facility in connection with the Pressure Sensitive
Business for the purposes of providing the Utilities and Services and
ensuring compliance with the requirements of the Applicable Licenses under
which any Utilities and/or Services are provided.
ARTICLE 6
COMPLIANCE WITH LAWS
AND RELATED MATTERS
6.1 COMPLIANCE WITH LAWS.
(a) The Buyer will conduct its activities and operations for which
the Seller will provide Utilities and Services hereunder in compliance, in
all material respects, with all applicable Laws (including all Environmental
Laws) and requirements of Governmental Authorities and in accordance with the
conditions and requirements contained in the Applicable Licenses, including
as described in Section 5.2(a).
(b) The Seller will provide the Utilities and Services hereunder
in compliance, in all material respects, with all applicable Laws (including
Environmental Laws) and requirements of Governmental Authorities and in
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accordance with the conditions and requirements contained in the Seller's
Applicable Licenses, including as described in Section 2.1.
(c) In addition, each party agrees that the recovery of money
damages will not be sufficient to compensate the other party hereunder for
harm suffered in the event the other party violates subsections (a) or (b)
above, as applicable, and the non-violating party shall have the ability to
seek appropriate injunctive relief.
6.2 COMPLIANCE PROCEDURES.
(a) Prior to the Closing, the Buyer Representative(s) and the
Seller Representative(s) with backgrounds in licensing and permitting and
environmental regulatory compliance have met to discuss the requirements in
the Applicable Licenses and all applicable Westbrook Facility policies,
procedures and requirements and their effect on the Buyer's operation of the
Pressure Sensitive Business at the Westbrook Facility. After the Closing
Date such Representatives will meet on an on-going basis, as necessary, to
discuss licensing and permitting and such regulatory matters.
(b) To the extent that either the Seller or the Buyer receives a
"notice of violation" or similar notice from any Governmental Authority
relating to their respective operations at their respective facilities at the
Westbrook Facility that may reasonably be expected to impact or involve the
other party, the recipient will give notice to the other party and at the
request of either the Buyer Representative or the Seller Representative, such
representatives (or their designees) will meet to discuss such matters.
ARTICLE 7
INSURANCE
7.1 CONVENTIONAL COVERAGE. Notwithstanding any provision in either of
the Real Property Leases to the contrary, as to all activities hereunder, the
following insurance shall be obtained and maintained in force so long as the
Seller is providing Utilities or Services hereunder, unless otherwise
specifically provided herein, for the benefit and protection of the Seller
and the Buyer:
(a) COMPREHENSIVE GENERAL LIABILITY. The Seller and the Buyer
each shall carry and maintain, or cause to be carried and maintained, in
effect commercial general liability insurance, including contractual
liability insurance, providing for limits of $3,000,000 per occurrence for
bodily injury, personal injury, products complete operations, fire legal
liability and property damage.
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(b) AUTOMOBILE LIABILITY. The Seller and the Buyer each shall
carry and maintain, or cause to be carried and maintained, in effect
automobile liability insurance covering all owned, non-owned and hired
automobiles with insurance limits of $1,000,000 per accident for bodily
injury and property damage.
(c) UMBRELLA LIABILITY. The Seller and the Buyer each shall carry
and maintain or cause to be carried and maintained in effect umbrella
liability insurance providing for limits of $25,000,000 per occurrence for
bodily injury, personal injury and property damage.
(d) WORKER'S COMPENSATION INSURANCE. The Seller and the Buyer
each shall maintain Worker's Compensation complying with the laws of the
State of Maine, whether or not such coverage is required by law, and
Employers Liability Insurance with limits of $1,000,000 for each accident.
(e) SPECIAL BUSINESS INTERRUPTION INSURANCE. The Buyer shall,
during all applicable Utility Periods, maintain Special Business Interruption
Insurance sufficient to cover the Buyer for any losses it may incur as a
result of the Seller being unable to provide any Utilities hereunder which
would be insurable in a standard "open perils" property policy, which will
provide insurance against losses with limits of $5 million per occurrence.
This policy will be available for Seller's review upon request.
7.2 POLICY TERMS.
(a) Each of the Seller and the Buyer agree to name the other
party, as its interests may appear, as an additional insured under the
policies either the Seller or the Buyer is required to maintain under Section
7.1(a), (b) and (c) above: (i) with respect to activities performed under
this Services Agreement or property which is the subject of this Services
Agreement and (ii) to the extent the acts or omissions of one party causes
the other party to incur an insurable loss. With respect to any such
insurable loss as described in the previous sentence, the applicable policy
shall be primary, without right of contribution from any other insurance
which may be carried by a party.
(b) Each policy referred to in Section 7.1 shall require thirty
(30) days prior written notice to each party of cancellation or non-renewal
of any policy or material modification of any term thereof. Each of the
policies referred to in Section 7.1(a), (b) and (c) above shall provide that
in the event of any loss payment under such policy, the insurer shall waive
rights of subrogation against the insured party or its insurance carrier.
Each of the policies referred to in Section 7.1(a), (b) and (c) above shall
include a cross-liability endorsement providing that inasmuch as the policies
as written cover more than one insured, all terms and conditions (with the
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exception of limits of liability) shall operate in the same manner as if
there were a separate policy covering each insured.
(c) Each policy referred to in Section 7.1 shall be maintained
with financially sound and reputable insurance companies having a rating of
not less than A-7, as determined by A.M. Best.
7.3 CERTIFICATES. Within ten (10) days after the Closing Date, each
party hereto shall provide the other party hereto with written evidence of
the insurance required in Section 7.1 hereof in the form of appropriate
insurance certificates specifying amounts of coverage and expiration dates of
all policies in effect and referencing the terms required by Section 7.1
hereof.
ARTICLE 8
INDEMNIFICATION
8.1. INDEMNITY BY THE BUYER. Subject to the provisions of Sections 8.3
through 8.7, the Buyer agrees to indemnify and hold the Seller and its
Affiliates harmless from and with respect to any and all claims, liabilities,
losses, damages, costs and expenses, including without limitation the
reasonable fees and disbursements of counsel (collectively, the "LOSSES"),
related to or arising directly or indirectly out of any of the following
("BUYER INDEMNITY MATTERS"):
(a) any breach by the Buyer of any covenant, obligation, or
undertaking made by the Buyer in this Services Agreement;
(b) any violation by the Buyer or its agents of any Law (including
any Environmental Laws) or Applicable License at any future time, to the
extent said violation is caused by the Buyer or any of its employees or
agents at any time prior to termination of this Agreement; and
(c) any Release or threatened Release of Hazardous Substances by
the Buyer or its employees or agents at, on, into or from the Westbrook
Facility (including any properties covered by the Site Leases) occurring on
or after the date hereof.
8.2. INDEMNITY BY THE SELLER. Subject to the provisions of Sections
8.3 through 8.7, the Seller agrees to indemnify and hold the Buyer and its
Affiliates harmless from and with respect to any and all Losses related to or
arising directly or indirectly out of any of the following ("SELLER INDEMNITY
MATTERS"):
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(a) any breach by the Seller of any covenant, obligation or
undertaking made by the Seller in this Services Agreement;
(b) any violation by the Seller or its agents of any Law
(including any Environmental Laws) or any Applicable License at any future
time, to the extent said violation is caused by the Seller or any of its
employees or agents at any time prior to termination of this Agreement;
(c) any Release or threatened Release of Hazardous Substances by
the Seller or its employees or agents at, on, into or from the Westbrook
Facility occurring on or after the date hereof; and
(d) Any matter described in Section 13.1(a)(iii) of the Asset
Purchase Agreement (subject to the applicable limitations set forth in
Sections 13.1(b) and (c) thereof).
8.3. CONTROL AND PARTICIPATION.
(a) With respect to matters indemnified pursuant to this Article 8
and relating to an Agency Action, the party obligated to provide
indemnification hereunder (the "INDEMNIFYING PARTY") upon accepting its
responsibility and liability therefor, shall have full control in dealing and
negotiating with the cognizant regulatory authorities in order to settle all
matters giving rise to the Loss; PROVIDED, HOWEVER, that (i) the party
entitled to indemnification hereunder (the "INDEMNIFIED PARTY") shall have
the right to attend, at its own expense, any meetings with the regulatory
authorities and to receive, upon request, copies of all correspondence,
reports, or other documents submitted or received by or on behalf of the
Indemnifying Party, and (ii) the Indemnifying Party shall not, without the
prior written consent of the Indemnified Party (which shall not be
unreasonably withheld), take any measure or step that imposes any
unreasonable burden or encumbrance upon the conduct of the Indemnified
Party's operations.
(b) Where Remedial Action is required pursuant to this Article 8,
the Indemnifying Party shall have the opportunity to perform such Remedial
Action, and the Indemnified Party agrees that it shall grant or exercise
reasonable efforts to cause to be granted to the Indemnifying Party a right
of reasonable access to the affected real property and agrees that it will
exercise reasonable efforts to obtain a similar right of access to any leased
real property from the Indemnified Party's tenants, for the purpose of
undertaking such Remedial Action; PROVIDED, HOWEVER, that such Remedial
Action shall be conducted in a manner so as to assure no material
interference with ongoing operations. In addition, all Remedial Actions
conducted by the Indemnifying Party shall be conducted in compliance with all
applicable Laws (including Environmental Laws) and in a manner so as not to
violate any of the Indemnified Party's licenses and permits.
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(c) With respect to any action, suit, proceeding or demand
instituted against the Indemnified Party by a third party, other than an
Agency Action or Remedial Action (a "THIRD PARTY CLAIM"), upon receipt of
such notice from the Indemnified Party, the Indemnifying Party shall be
entitled to participate in the defense of such Third Party Claim, and if and
only if each of the following conditions is satisfied, the Indemnifying Party
may assume the defense of such Third Party Claim, and in the case of such an
assumption the Indemnifying Party shall have the authority to negotiate,
compromise and settle such Third Party Claim:
(i) the Indemnifying Party confirms in writing that it is
obligated hereunder to indemnify the Indemnified Party with respect to such
Third Party Claim; and
(ii) the Indemnifying Party establishes to the reasonable
satisfaction of the Indemnified Party that the Indemnifying Party has (and
will continue to have) adequate financial resources to satisfy and discharge
such action or claim.
The Indemnified Party shall retain the right to employ its own
counsel and to participate in the defense of any Third Party Claim, the
defense of which has been assumed by the Indemnifying Party pursuant hereto,
but the Indemnified Party shall bear and shall be solely responsible for its
own costs and expenses in connection with such participation.
Notwithstanding the foregoing provisions of this Section 8.3(c):
(i) no Indemnifying Party shall be entitled to settle any Third Party Claim
without the Indemnified Party's prior written consent unless as part of such
settlement the Indemnified Party is released in writing from all liability
with respect to such Third Party Claim and (ii) no Indemnified Party shall be
entitled to settle any Third Party Claim without the Indemnifying Party's
prior written consent unless as part of such settlement the Indemnifying
Party is released in writing from all liability with respect to such Third
Party Claim.
8.4. JOINT RESPONSIBILITY. With respect to the Buyer's indemnification
obligations under Section 8.1 and the Seller's indemnification obligations
under Section 8.2, to the extent that any Losses relate to or arise directly
or indirectly out of any matter, event or occurrence that constitutes a
Seller Indemnity Matter and any matter, event or occurrence that constitutes
a Buyer Indemnity Matter, such that both the Seller and the Buyer could be
entitled to indemnification with respect thereto (for example, a release of a
Hazardous Substance that was caused partially by the actions of a Seller
employee and partially by the actions of an the Buyer employee), the
respective indemnification obligations of the Seller and the Buyer shall be
equitably apportioned between them based on the parties' comparative
responsibilities.
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8.5. INSURANCE PROCEEDS.
(a) No Indemnified Party shall be obligated to pursue or collect
from any insurer prior to making a claim for indemnification pursuant to this
Article 8 and no Indemnifying Party shall be entitled to postpone performance
of any indemnification obligation under this Article 8 while an insurance
claim is pending. However, without limiting any of the provisions of
Sections 8.1 through 8.7, in connection with any matter subject to
indemnification under this Article 8, the Buyer and the Seller shall
cooperate with each other in giving notice of any claim to any insurer
(including an insurer of an Indemnified Party) and shall provide reasonable
assistance in the collection of any such claim; PROVIDED, HOWEVER, that there
is no duty to provide notice, cooperate or assist with respect to an
Indemnified Party's insurance policies where the Indemnified Party determines
in its sole discretion that such notice, cooperation or assistance could
invalidate any portion of the coverage available under such policy or result
in the imposition of retroactive premiums or prospective premium increases.
In addition, if an Indemnified Party makes such a determination after it has
notified its insurer, it shall be entitled to retract such notice.
(b) If an Indemnified Party actually receives insurance proceeds,
the amount for which such Indemnified Party is entitled to indemnification
under this Article 8 shall be reduced by an equal amount. In the event an
Indemnified Party receives insurance proceeds after being paid by the
Indemnifying Party with respect to an indemnifiable matter under this Article
8, the Indemnified Party will remit such proceeds to the Indemnifying Party,
up to the amount previously paid by the Indemnifying Party with respect to
such matter.
8.6. SCOPE OF THIS ARTICLE 8. The Seller and the Buyer each
acknowledge and agree that, except for equitable relief, including specific
performance, its and their sole and exclusive remedy with respect to any and
claims relating to or arising from the provision of Utilities and Services
under this Services Agreement shall be subject to this Article 8 and, with
respect to matters contained in Section 3.9, the parties' remedies shall be
governed by Article 13 of the Asset Purchase Agreement.
8.7. CONSEQUENTIAL AND OTHER DAMAGES WAIVER.
(a) Neither the Seller nor the Buyer shall be liable, whether in
contract, in tort (including negligence and strict liability) or otherwise,
for any special, indirect, incidental or consequential damages whatsoever,
which in any way arise out of, relate to, or are a consequence of, its
performance or nonperformance hereunder, or the provision or the failure to
provide any Utilities, Services or Supplies hereunder, including but not
limited to, loss of profits or revenue or the loss of use thereof, business
interruptions and claims of customers. Notwithstanding the foregoing, the
Buyer may seek to recover such special, indirect, incidental or consequential
damages if (i) the Seller (A) discontinues providing one or more of the
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Utilities at the Westbrook Facility, (B) sells or otherwise transfers all or
a substantial part of its operations at the Westbrook Facility, (C)
discontinues substantially all of its operations at the Westbrook Facility,
or (D) otherwise discontinues performance hereunder; and (ii) as a result of
one or more of the foregoing, the Seller would no longer be capable of
providing one or more of the Utilities to the Buyer; and (iii) the Seller has
not assigned its obligations under this Services Agreement to a third party
that agrees in writing to assume all or any relevant portion of the Seller's
obligations hereunder; PROVIDED that any such recovery by the Buyer shall not
be permitted unless the Seller fails to perform its obligations under Section
3.1(i); PROVIDED further, that the Buyer shall be entitled to recover such
damages only (i) to the extent that they are incurred by the Buyer with
respect to any applicable Utility during the twelve (12) month period
immediately following the Seller's discontinuance of its provision of such
Utility hereunder, and (ii) if the Buyer continues to maintain business
interruption insurance in accordance with the provisions set forth in Section
7.1(e) hereof, and (iii) to the extent that such special, incidental,
indirect, and consequential damages are not fully covered by such insurance.
(b) The provisions of this Section 8.7 shall prevail over any
conflicting or inconsistent provisions set forth in this Services Agreement
or in any purchase order or work authorization for Utilities, Services or
Supplies issued hereunder.
ARTICLE 9
CONFIDENTIALITY AND RELATED MATTERS
9.1 SELLER AND BUYER CONFIDENTIAL INFORMATION.
(a) Each of the Seller and the Buyer agrees that it will use the
Confidential Information of the other party only in connection with the
provision of Utilities, Services and Supplies, and the performance of its
other obligations set forth in this Services Agreement and the other Related
Agreements and it will not disclose such Confidential Information of the
other party to any Person except as expressly permitted by this Section 9.1.
(b) Either the Seller or the Buyer may disclose the Confidential
Information of the other party to its directors, officers, employees and
representatives (including outside legal counsel, accountants and other
professionals) who have a reasonable need to know the contents thereof and
who are subject to a written confidentiality agreement with the disclosing
party obligating them to keep confidential the Confidential Information,
subject to customary exceptions set forth in subsections (c) and (d) below.
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(c) The foregoing restriction will not apply to the disclosure or
use of information which the disclosing party: (i) can show was previously
known to it prior to receipt from the other party; (ii) can show was
developed by employees or agents of the disclosing party independently of and
without reference to any Confidential Information of the other party; (iii)
is now, or hereafter becomes, publicly available through no wrongful act of
the disclosing party; or (iv) is subsequently disclosed to a party by a third
party not owing an obligation of confidentiality to the other party.
(d) Either party hereto may disclose the other party's
Confidential Information to the extent required by applicable Laws or
applicable requirements of Governmental Authorities, including any court of
competent jurisdiction; provided that the disclosing party has made
reasonable efforts to conduct its relevant business activities in a manner
such that the disclosure requirements of such Laws, Governmental Authorities
or requirements of a court of competent jurisdiction do not apply; and
provided further, that the party whose Confidential Information may be
disclosed is given notice and an adequate opportunity to contest such
disclosure or to use any lawful means available to minimize such disclosure
(E.G., the confidential treatment provisions of Rule 24b-2 promulgated under
the Securities Exchange Act of 1934, as amended).
9.2 THIRD PARTY CONFIDENTIAL INFORMATION. The parties agree that
nothing in this Services Agreement shall be deemed to obligate either of them
to disclose Confidential Information of the other party in violation of a
confidentiality obligation owed by the party possessing such information. In
the event that either party discloses Confidential Information to the other
party in violation of a confidentiality obligation owed to a third party by
the disclosing party, the recipient shall, without limiting its other
obligations under this Article 9, upon request, return to the disclosing
party all copies of such Confidential Information in any tangible form.
9.3 LIMITATION ON OBLIGATIONS. The restrictions set forth in Section
9.1 shall apply to the Seller or the Buyer Confidential Information, as
applicable, only to the extent the confidential or proprietary information:
(i) if first disclosed in tangible form, is marked as "Proprietary" or
"Confidential" or (ii) if first disclosed in verbal, visual or other
intangible form, at the time of disclosure was identified or referred to as
proprietary or confidential and is, within sixty (60) days after such
disclosure, embodied or described in a tangible form marked "Proprietary" or
"Confidential," furnished by the disclosing party to the receiving party.
9.4 CONFIDENTIAL TREATMENT OF THIS SERVICES AGREEMENT. The parties
hereto agree to treat the terms of this Services Agreement as Buyer
Confidential Information and Seller Confidential Information.
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ARTICLE 10
UNCONTROLLABLE CIRCUMSTANCES
10.1 NO OBLIGATION TO PERFORM. Except as provided in Section 10.2
below, if either party hereto is rendered wholly or partly unable to perform
its obligations under this Services Agreement because of Uncontrollable
Circumstances (as defined below in Section 10.2), that party shall be excused
from whatever performance is affected by the Uncontrollable Circumstances to
the extent so affected, provided that:
(a) the non-performing party, within ten (10) days after it
becomes aware of the occurrence of the Uncontrollable Circumstances, gives
the other party written notice describing the particulars of the occurrence;
(b) the suspension of performance is of no greater scope and of no
longer duration than is reasonably required by the Uncontrollable
Circumstances and shall not in any event apply to any obligation solely to
pay money;
(c) no obligation of either party which arose before the
occurrence causing the suspension of performance is suspended as a result of
the occurrence; and
(d) the non-performing party uses its best efforts to promptly
remedy its inability to perform.
10.2 DEFINITION. "Uncontrollable Circumstances" shall mean any act or
event that prevents either the Seller or the Buyer from performing its
obligations, or complying with any conditions that it must comply with, under
this Services Agreement; provided such act or event was not caused by and is
beyond the reasonable control of the party relying thereon as justification
for such nonperformance or noncompliance. Such acts or events include,
without limitation but only to the extent not caused by and outside the
reasonable control of the applicable party, acts of God, nuclear emergency,
explosion, fire, epidemic, landslide, lightening, earthquake, flood or
similar cataclysmic occurrence, act of the public enemy, war, blockade,
insurrection, riot, civil disturbance, or restrictions, restraints or
requirements imposed by applicable Laws or restrictions, restraints or
requirements of Governmental Authorities, whether Federal, state or local,
and including changes in such Laws or restrictions, restraints or
requirements of Governmental Authorities. Economic hardship involving a
party shall not constitute Uncontrollable Circumstances.
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ARTICLE 11
TERM; TERMINATION
11.1 TERM. The term of this Services Agreement shall commence on the
Closing Date and shall terminate with respect to: (i) the Seller's provision
of each Utility, at the end of the applicable Utilities Period for each such
Utility; (ii) the Seller's provision of each Service, at the end of the
applicable Services Period for each such Service; and (iii) the Seller's
provision of Supplies, at the end of the applicable periods specified in
Section 3.5 hereof. In addition, this Services Agreement will terminate in its
entirety (including, without limitation, the indemnification provisions
contained in Article 8 hereof as to any matters or events occurring after such
termination) when the Seller or its assignee is no longer obligated to provide
Services, Utilities or Supplies hereunder.
11.2 TERMINATION BY THE SELLER. The Seller shall have the right to
terminate all or any part of this Services Agreement: (i) upon the failure
of the Buyer to pay any undisputed amount payable under this Services
Agreement within fifteen (15) days after receipt of written notice of
non-payment from the Seller, (ii) upon the Bankruptcy of the Buyer or (iii)
in the event the Buyer breaches any covenant or obligation in this Services
Agreement in any material respect and the Seller delivers a notice of default
to the Buyer specifying such material breach and either (x) such breach is
not cured within 30 days after the Buyer's receipt of such notice or (y) if
such breach is of a nature such that a cure within 30 days is not reasonably
possible, the Buyer does not work diligently to cure such breach as promptly
as is commercially reasonable under the circumstances.
11.3 TERMINATION BY THE BUYER. The Buyer shall have the right to
terminate all or any part of this Services Agreement: (i) upon the
Bankruptcy of the Seller or (ii) in the event the Seller breaches any
covenant or obligation in this Services Agreement in any material respect and
the Buyer delivers a notice of default to the Seller specifying such material
breach and either (x) such breach is not cured within 30 days after the
Seller's receipt of such notice or (y) if such breach is of a nature such
that a cure within 30 days is not reasonably possible, the Seller does not
work diligently to cure such breach as promptly as is commercially reasonable
under the circumstances or (iii) upon three (3) months prior written notice
to the Seller.
11.4 SURVIVAL. The provisions of Section 3.7, 3.8, 3.10 and Articles 8
(with respect to Seller Indemnity Matters and Buyer Indemnity Matters covered
therein; provided that such matters or events occurred prior to termination
of this Services Agreement), 9, 12, 13 and 14 shall survive any expiration or
termination of this Services Agreement.
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ARTICLE 12
DISPUTE RESOLUTION
12.1 PROCEDURE. The parties agree that, all disputes arising out of or
related to this Services Agreement shall be resolved as follows:
(a) Initially a meeting shall be held promptly between the
appropriate the Seller Representative and the Buyer Representative having
decision making authority regarding the dispute to attempt in good faith to
negotiate a resolution of the dispute.
(b) If within ten (10) days after such meeting, the parties have
not succeeded in negotiating a resolution of the dispute, they will submit
the dispute to higher levels of their respective managements for resolution.
(c) If within an additional twenty (20) days after the dispute
being submitted to the parties' managements, the parties have not succeeded
in negotiating a resolution of the dispute, the parties shall be free to
pursue any remedy available to such party, whether in an action at law or in
equity.
(d) Nothing contained in this Section 12.1 shall prohibit any
party from seeking specific or equitable relief at any time if the provisions
of this Article 12 would otherwise prejudice or damage the party seeking
relief hereunder.
12.2 JURISDICTION AND CONSENT TO SERVICE OF PROCESS, WAIVER OF JURY
TRIAL. The parties agree that any legal action, suit or proceeding arising
out of or relating to this Services Agreement or the matters contemplated
hereby may be instituted in a federal or state court sitting within
Cumberland County, Maine, which shall be the exclusive venues of said legal
proceedings. Each party waives any objection which such party may now or
hereafter have to the laying of venue of any such action in any such court,
and irrevocably submits to the jurisdiction of any such court in any such
action, suit or proceeding. Any and all service of process and any other
notice in any such action shall be effective against such party when
transmitted in accordance with Section 14.2. Nothing contained herein shall
be deemed to affect the right of any party to serve process in any manner
permitted by applicable law. EACH OF THE SELLER AND THE BUYER WAIVES ALL
RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING (WHETHER BASED UPON
CONTRACT, TORT, OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR
ANY TRANSACTION CONTEMPLATED HEREIN.
<PAGE>
-33-
ARTICLE 13
TRANSFER
Prior to the transfer by the Buyer to a third party of the Pressure
Sensitive Business, or any interest in the Pressure Sensitive Business, the
Buyer shall obtain from the third party transferee written assurances for the
Seller of the limitation of and protection against liability following the
proposed transfer at least equivalent to that afforded to the Seller under
this Services Agreement. Transfer contrary to this Article 13 shall make the
Buyer the indemnitor of the Seller against any liabilities incurred by the
Seller in excess of those that would have been incurred had no such transfer
taken place. This provision shall not preclude assignment of this Services
Agreement in accordance with Section 14.7.
ARTICLE 14
GENERAL
14.1. EXPENSES. Except as expressly set forth in this Services
Agreement, all expenses of the preparation, execution and consummation of
this Services Agreement and of the transactions contemplated hereby,
including, without limitation, attorneys', accountants and outside advisers'
fees and disbursements, shall be borne by the party incurring such expenses.
14.2. NOTICES. All notices, demands and other communications
hereunder shall be in writing or by written telecommunication, and shall be
deemed to have been duly given if delivered personally or if mailed by
certified mail, return receipt requested, postage prepaid or if sent by
overnight courier or sent by written telecommunication, as follows:
If to the Buyer:
Ned N. Fleming, III, President
Spinnaker Industries, Inc.
600 N. Pearl Street, Suite 2160
Dallas, Texas 75201
Telecopier: 214-855-0093
with copies sent contemporaneously to:
Timothy R. Vaughan, Esq.
Crouch & Hallett, LLP
<PAGE>
-34-
717 North Harwood, Suite 1400
Dallas, Texas 75201
Telecopier: 214-922-4193
Mr. K.C. Caldabaugh
Brown-Bridge Industries, Inc.
518 E. Water street
Troy, Ohio 45373-0370
Telecopier: 937-332-6501
If to the Seller to:
S.D. Warren Company
225 Franklin Street
Boston, Massachusetts 02110
Attention: General Counsel
with a copy sent contemporaneously to:
Bingham Dana LLP
150 Federal Street
Boston, Massachusetts 02110
Attention: John R. Utzschneider, Esq.
14.3. ENTIRE AGREEMENT. This Services Agreement (including the
Exhibits hereto) together with the Asset Purchase Agreement and the other
Related Agreements contains the entire understanding of the parties hereto
and thereto, and supersedes all prior agreements and understandings relating
to the subject matter hereof and thereof, and shall not be amended except by
a written instrument hereafter signed by all of the parties hereto or
thereto, as applicable. No waiver of any provision of the Services Agreement
shall be effective unless evidenced by a written instrument signed by the
waiving party. The Seller and the Buyer further acknowledge and agree that,
in entering into this Services Agreement, they have not in any way relied
upon any oral or written agreements, statements, promises, information,
arrangements, understandings, representations or warranties, express or
implied, not specifically set forth in this Services Agreement, the Asset
Purchase Agreement or the other Related Agreements.
<PAGE>
-35-
14.4. GOVERNING LAW, ETC. This Services Agreement shall be governed
by, and construed and enforced in accordance with, the laws of the State of
Maine, all rights and remedies being governed by such laws, without regard to
its conflict of laws rules.
14.5 ORDER OF PRECEDENCE FOR INTERPRETATION. To the greatest extent
possible, all Exhibits hereto shall be construed and interpreted consistently
with the fourteen (14) Articles of this Services Agreement, so that all of
these documents compliment each other. All rights, responsibilities and
remedies established in such documents are cumulative, but statements of
exclusivity with regard to any remedy shall control. Any inconsistency
between any provision of one of such documents and any other, shall be
resolved by giving priority to the document that has the most applicability
and if such document can not be determined by giving priority to this
Services Agreement.
14.6 SECTIONS AND SECTION HEADINGS. The headings of sections and
subsections are for reference only and shall not limit or control the meaning
thereof.
14.7 ASSIGNS. This Services Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective heirs, successors
and permitted assigns. Neither this Services Agreement nor the rights or
obligations of any party hereunder shall be assignable or transferable by
such party without the prior written consent of the other party hereto;
PROVIDED that the Seller may assign its rights and obligations (i) in
connection with the transfer of all or a portion of the Westbrook Facility,
to any person or entity who agrees in writing with the Seller and the Buyer
to assume and perform all of the Seller's obligations under this Services
Agreement, (ii) to an appropriate provider of the relevant Service if such
person agrees in writing with the Seller and the Buyer to assume and perform
all of the Seller's obligations with respect to such Service under this
Services Agreement, or (iii) as collateral security for its lenders, and
PROVIDED FURTHER, the Buyer may assign its rights and obligations hereunder
(i) in connection with the sale of all or substantially all of the Buyer's
assets, to any person or entity who agrees in writing with the Seller and the
Buyer to assume and perform all of the Buyer's obligations under this
Services Agreement and (ii) as collateral security for its lenders.
14.8 NO IMPLIED RIGHTS OR REMEDIES. Except as otherwise expressly
provided herein, nothing herein expressed or implied is intended or shall be
construed to confer upon or to give any person, firm or corporation, except
the Seller and the Buyer, any rights or remedies under or by reason of this
Services Agreement.
14.9 COUNTERPARTS. This Services Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
<PAGE>
-36-
14.10 CONSTRUCTION.
(a) As used in this Services Agreement, the terms "include" and
"including" are not intended to imply an all-inclusive list, and shall be
construed as meaning "including without limitation".
(b) The language used in this Services Agreement will be deemed to
be the language chosen by the parties to express their mutual intent, and no
rule of strict construction will be applied against any party.
14.11 SEVERABILITY. The invalidity or unenforceability of any
particular provision of this Services Agreement or the Asset Purchase
Agreement shall not affect the other provisions hereof or thereof, and this
Services Agreement shall be construed in all respects as if such invalid or
unenforceable provision was omitted.
[signature page to follow]
<PAGE>
-37-
IN WITNESS WHEREOF, and intending to be legally bound hereby, the parties
hereto have caused this agreement to be duly executed and delivered as of the
date and year first above written.
Attest: S.D. WARREN COMPANY
By:
- ------------------------------ ------------------------------
Name:
Title:
Attest: SPINNAKER INDUSTRIES, INC.
/s/ Lance M. Hardenburg By: /s/ Mark R. Matteson
- ------------------------------ ------------------------------
Name: Mark R. Matteson
Title: Vice President,
Corporate Development
<PAGE>
-37-
IN WITNESS WHEREOF, and intending to be legally bound hereby, the
parties hereto have caused this agreement to be duly executed and delivered
as of the date and year first above written.
Attest: S.D. WARREN COMPANY
/s/ Sarah G. Manchester By: /s/ Trevor L. Larkan
- ------------------------------ ------------------------------
Name: Trevor L. Larkan
Title: Vice President and
Chief Financial Officer
Attest: SPINNAKER INDUSTRIES, INC.
By:
- ------------------------------ ------------------------------
Name:
Title:
<PAGE>
EXHIBITS
Exhibit A. Applicable Licenses
Exhibit B. Site Plan
ANNEX
ANNEX A Paper Prices
ANNEX B Paper Specifications
<PAGE>
LEASE AGREEMENT
BETWEEN
S. D. WARREN COMPANY
AS LANDLORD
AND
SPINNAKER COATING - MAINE, INC.
AS TENANT
FOR PREMISES LOCATED AT
WESTBROOK, MAINE
PRESSURE SENSITIVE SITE LEASE
DATED: March 17, 1998
<PAGE>
3/13/98
- --------------------------------------------------------------------------------
LEASE AGREEMENT
THIS LEASE AGREEMENT, made as of the 17th day of March, 1998
(hereinafter, the "Effective Date"), is by and between S. D. WARREN COMPANY,
a Pennsylvania corporation with a place of business in Westbrook, Maine
(hereinafter referred to as "Landlord") and SPINNAKER COATING - MAINE, INC.,
a Delaware corporation with a place of business at Westbrook, Maine
(hereinafter referred to as "Tenant").
FOR AND IN CONSIDERATION of the mutual promises set forth herein, and
for other good and valuable consideration the receipt and sufficiency of
which are hereby acknowledged, Landlord hereby leases to Tenant, and Tenant
hereby rents from Landlord, upon the terms and provisions of this Lease the
following:
(a) That certain parcel of land containing approximately 151,226 square
feet of land area in the City of Westbrook, Maine (the "Land") shown and
labeled as the "Proposed Long Term Lease Lot" on the site plan entitled
"Buildings and Grounds Civil Site Plan Spinnaker Lot," prepared by
Daniel R. Laflin, Sebago Technics, dated February 12, 1998, last revised
March 3, 1998, a reduced photocopy of which is attached hereto as
EXHIBIT A (the "Site Plan"), the Land being more particularly described
on EXHIBIT B attached hereto, and being a portion of the S. D. Warren
facility in Westbrook, Maine as shown on the plan entitled "Building &
Grounds Civil, Mill Buildings Plan, S. D. Warren Co. Drawing # CB-57863,
which S. D. Warren facility is more particularly described in the
Mortgage from S.D. Warren Company to Chemical Bank dated December 20,
1994 and recorded in the Cumberland County Registry of Deeds in Book
11764, Page 144 (the "Westbrook Facility") together with
(b) The buildings and improvements located on the Land (the
"Buildings"), the Buildings including without limitation the Building
known as Building 109, 20 Re-Winder, the Building known as Building 110,
76 Coater Bldg., and the Solvent Storage and the Solvent Unloading
areas, as shown on the Site Plan;
(c) The easements, rights of way, covenants, restrictions and other
terms and provisions of a certain Declaration of Reciprocal Easements,
Restrictions and Covenants, executed this date between Landlord and
Tenant and recorded in said Registry on an even date herewith (the
"Reciprocal Easements"), as the Reciprocal Easements are applicable to
the Tenant, the Land and the Buildings (the "Tenant Easements");
(the Land, the Buildings and the Tenant Easements being collectively referred
to as the "Demised Premises");
<PAGE>
EXCEPTING AND RESERVING to Landlord, its successors and assigns, the
easements, rights of way, covenants, restrictions and other terms and
provisions of the Reciprocal Easements, as the Reciprocal Easements are
applicable to the Landlord and Landlord's Warren Facility as defined therein
(the "Landlord Easements");
SUBJECT TO THE OPERATION AND EFFECT of all governmental laws,
ordinances, rules, regulations, codes, or orders now or hereafter affecting
the Demised Premises and to the Permitted Exceptions to Title as hereinafter
defined.
UPON THE TERMS AND SUBJECT TO THE CONDITIONS which are hereinafter set
forth:
1. TERM OF LEASE.
(a) The term of the Lease (the "Term") shall be for a period of
ninety-nine (99) years, commencing as of the date hereof (the "Commencement
Date").
(b) This Lease shall terminate at the end of the Term without the
necessity of any notice. Tenant shall at its expense, at or prior to the
expiration of the Term or any earlier termination of this Lease, (i) promptly
surrender to Landlord possession of the Demised Premises (including any
fixtures or other improvements) in compliance with all governmental laws,
ordinances, rules, regulations, codes, or orders as then affecting the
Demised Premises.
2. RENT.
(a) As rent for the Demised Premises, Tenant covenants and agrees to
pay to Landlord, the Base Rent as hereinafter provided, and any and all other
sums of money that are required under the terms of this Lease to be paid by
Tenant (which sums, together with the Base Rent are referred to herein as
"Rent"). All payments of Rent shall be payable without setoff or deduction,
in lawful money of the United States of America to Landlord, at Landlord's
notice address as set forth in Section 17 of this Lease, or at such other
place as Landlord may from time to time designate in writing. The Base Rent
has been paid by Tenant upon the execution of this Lease in one installment
in the amount of $99.00 which shall be the total amount of Base Rent for the
Term.
(b) The phrase "Lease Year" shall mean, for the first Lease Year, the
period beginning on the Commencement Date and ending at the end of the last
calendar day of the twelfth (12th) full calendar month following the
Commencement Date; and for Lease Years after the first Lease Year, the twelve
month period beginning with the next day following the expiration of the
preceding Lease Year.
2
<PAGE>
3. REAL ESTATE TAXES, UTILITIES AND OTHER OPERATING COSTS.
(a) Tenant and Landlord acknowledge that they have entered into a
separate agreement entitled "Site Separation and Services Agreement," dated
as of same date as the Effective Date of this Lease (the "Site Agreement"),
which Site Agreement provides for the delivery of certain services in
connection with the operation of the Pressure Sensitive Business on the
Demised Premises for certain periods of time as therein set forth. Except as
otherwise provided in the Site Agreement, Tenant shall arrange to have
furnished to the Demised Premises public water, electrical service, public
sewer, year-round ventilation, and air conditioning and heat during the
seasons when they are required and any and all other services and utilities
required in connection with Tenant's use of the Demised Premises. Except as
otherwise provided in the Site Agreement, the cost of utility services
provided to the Demised Premises shall be paid by Tenant.
(b) Tenant shall pay, as and when due, all of the real estate taxes and
other assessments and charges levied against or in respect of the Demised
Premises, excepting the Tenant Easements, together with all interest and
penalties thereon.Landlord and Tenant each shall have the right to review or
contest such real estate taxes on the Demised Premises by appropriate
proceedings, instituted and conducted at the sole expense of the party
commencing such proceedings, and in case, as a result of such proceedings, or
otherwise, any such taxes or assessments shall be reduced, canceled, set
aside or to any extent discharged, Tenant's final liability hereunder shall
be based on the amount that shall be finally assessed or imposed or be
adjudicated to be due and payable on any such disputed or contested items.
If one of the parties commences such a proceeding, it agrees to so notify the
other party, and the other party agrees to cooperate with the first party,
providing that the first party shall pay all expenses of such proceeding
including the legal fees reasonably incurred by the other. Tenant shall not
be required to pay, discharge or remove any such taxes so long as either
party shall, in good faith, contest the same or the validity thereof, by
appropriate proceedings; provided, however, that if at any time payment of
the whole or any part of any unpaid taxes should become necessary to avoid
the imposition of any penalty or to prevent the filing of a tax lien on the
Demised Premises, or to prevent interference with Landlord's or Tenant's
interest in the Demised Premises, Tenant shall cause the amount of such taxes
to be paid to the taxing authority in sufficient time to prevent filing of
such a tax lien or to prevent such interference. In such event, any interest
which has accrued with respect to such taxes shall be paid by the party
commencing such proceedings.
(c) Tenant shall pay all personal property taxes assessed against it or
in connection with its use of the Demised Premises on its personal property
located at or used in connection with the Leased Premises.
4. REPAIR AND MAINTENANCE.
3
<PAGE>
Tenant shall keep and maintain the Demised Premises in accordance with
the terms of the Reciprocal Easements.
5. ALTERATIONS.
(a) Tenant shall have the right, at its expense, from time to time, to
make such alterations and changes in the Buildings and the Land as it shall
deem expedient or necessary for its purposes, including, without limitation,
the unconditional right to demolish any existing or future buildings and/or
to construct new buildings, provided, however, that such alterations and
changes shall be in conformity with the Reciprocal Easements.
(b) Except in connection with the termination of this Lease as a result
of the exercise of Tenant's Purchase Option as set forth in Section 21 of
this Lease, unless otherwise agreed by the parties, any improvements or
fixtures which may be made or installed by either Landlord or Tenant upon the
Demised Premises and which Tenant may elect to leave on the Demised Premises
at the expiration or termination of this Lease shall be surrendered with the
Demised Premises as a part thereof; provided, however, that Tenant's
equipment, trade fixtures, inventory, furniture and other personal property
may be removed by Tenant from the Demised Premises at any time during the
term of this Lease or prior to the expiration or termination of this Lease,
provided that Tenant is not then in default.
6. USE OF THE DEMISED PREMISES AND THE BUILDING.
(a) Any other provision of this Lease to the contrary notwithstanding,
Tenant shall have the right to use the Demised Premises for the operation of
Tenant's Pressure Sensitive Business, being the business operations at the
Westbrook Facility acquired by Tenant from Landlord as of the Effective Date
of this Lease pursuant to that certain Asset Purchase Agreement between
Landlord and Tenant dated as of November 18, 1997 (the "Pressure Sensitive
Business"), or for any other industrial use, and for no other use or purpose.
(b) Tenant shall be responsible for the proper handling, accumulation,
storage (for less than 180 days), disposal, monitoring, inspection, and
closure (as well as response activities in the event of a release) required
in connection with any hazardous wastes (as defined in Maine Hazardous Waste
Rules, DEP Regs. Ch. 850 ET SEQ. and the Resource Conservation and Recovery
Act), stored (for less than 180 days) or generated by Tenant in connection
with its operations at the Demised Premises or otherwise in connection with
the Pressure Sensitive Business. Landlord shall be responsible for the
proper handling, storage, disposal, monitoring, closure and response
activities required in connection with any such hazardous wastes used, stored
or generated by Landlord in connection with its operations at the Westbrook
Facility. Each party hereby grants to the other party such right of access
to and use of such portions of the Demised Premises and
4
<PAGE>
adjacent property, or other property leased, owned or controlled by such
party (including pipes, conduits, transportation and movement areas,
equipment and conveyancing systems), to the extent necessary for or required
by law for the above purposes.
(c) Tenant shall have the right to place on or in the Demised Premises
such signs as Tenant deems necessary and proper in the conduct of its
business, provided that all such signs shall conform to all laws, ordinances
and regulations.
(d) Except as otherwise provided in the Site Agreement with respect to
the obligations of Landlord thereunder, Tenant, at its own expense, shall
during the Term of this Lease promptly comply with all laws, ordinances and
lawful orders and regulations affecting the Demised Premises and the
cleanliness, safety, accessibility, occupation, emergency response and use of
the same, including, without limitation, any federal, state or local
statutes, laws, regulations, rules and ordinances relating to protection of
health, safety or the environment, and to accessibility by persons with
disabilities; provided, however that Tenant may refrain from complying with
any such law, ordinance, rule or regulation so long as the validity thereof
shall be contested by Tenant in good faith by appropriate proceedings and so
long as Landlord shall not incur any fine, penalty or other liability in
connection therewith.
(e) In addition to and not in limitation of the other provisions of
this Lease, Tenant covenants that it will not introduce on, in or under the
Demised Premises, Tenant's Easements or the Westbrook Facility any Hazardous
Materials, as hereafter described, except such Hazardous Materials as are
used or generated in the ordinary conduct of Tenant's business in compliance
with all applicable Environmental Laws as hereafter described, and that
Tenant will not violate any Environmental Laws in connection with Tenant's
use, maintenance or operation of the Demised Premises, and Tenant shall, and
hereby does defend, save, and hold harmless Landlord, its employees, agents,
officers, trustees, and directors, shareholders, partners, successors and
assigns (the "Indemnified Landlord Parties") from and against, and shall
promptly pay to or reimburse the Indemnified Landlord Parties for, all
claims, demands, actions, losses, penalties, costs, expenses and damages,
including all reasonable attorneys fees and court costs, investigation and
laboratory fees, corrective action, clean-up and removal costs incurred by or
asserted against the Indemnified Landlord Parties by reason of the inaccuracy
or breach of the covenant contained in this subparagraph, or as a result of a
release or presence of Hazardous Materials on or affecting the Demised
Premises as a result of the acts or negligence of Tenant or any party acting
on Tenant's behalf. Upon termination of this Lease, Tenant covenants and
agrees to remove any and all Hazardous Materials in, on, under or to the
Demised Premises, to the extent that said Hazardous Materials were placed or
released in, on or under the Demised Premises by Tenant's operations, acts or
negligence, and to dispose of all such materials as required by all
applicable laws, and to undertake such closure of any hazardous waste
activity or facility of Tenant at the Demised Premises to the extent required
by law, at its sole expense, and for the purpose
5
<PAGE>
of conducting such activities Landlord hereby grants to Tenant the right of
access to the Demised Premises, the Building, and Landlord's adjacent
properties for such period and for such purposes as may be required for
Tenant to complete such activities. Unless otherwise agreed by Landlord and
Tenant, and in addition to any other restoration or surrender obligations set
forth elsewhere in this Lease, Tenant further agrees that upon termination of
this Lease other than in connection with exercise of the Purchase Option, as
hereinafter defined, Tenant shall remove from the Demised Premises any
equipment or other property of Tenant that contains Hazardous Materials
introduced by Tenant. Tenant acknowledges and agrees that the expiration or
sooner termination of this Lease shall not relieve or release Tenant of any
legal liability and responsibility whether by way of damages, penalties, or
remedial actions resulting from unlawful discharges of Hazardous Materials by
Tenant or any party acting on Tenant's behalf.
As used herein, "Hazardous Materials" shall mean any flammable
explosives, ultrahazardous materials, biomedical waste, radioactive
materials, hazardous materials, hazardous or special waste, petroleum or
petroleum products, hazardous matter, hazardous or toxic substances,
hazardous chemicals, or toxic pollutants, pollutants, air contaminant, oil or
waste oil as any of those terms are used or defined in common law, 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 2802, ET SEQ.), the
Resource Conservation and Recovery Act, as amended (42 U.S.C. Sections 6901,
ET SEQ.), the Toxic Substances Control Act, as amended (15 U.S.C Sections
2601, ET SEQ.), the Safe Drinking Water Act, as amended (42 U.S.C. Sections
300(f), ET SEQ.), the Clean Air Act, as amended (42 U.S.C. Sections 7401, ET
SEQ.), the implementing regulations of the Occupational Health and Safety Act
(29 C.F.R. Section 1910.1200(c)), and applicable Maine laws and regulations,
including without limitation, the Uncontrolled Hazardous Substances Sites Law
(38 M.R.S.A. Sections 1361, ET SEQ.), the Hazardous Waste and Hazardous
Matter Control Law and its implementing regulations (38 M.R.S.A. Sections
1317, ET SEQ.; DEP Regs. Chs. 800, 801,850, et seq., and 900), and applicable
ordinances of the City of Westbrook, or any similar applicable federal, state
or local law, or in the regulations adopted and promulgated pursuant thereto,
including all amendments to such laws and regulations and all supplements or
successors thereto (such Acts, statutes, laws and regulations together with
the Acts, statutes, laws and regulations referred to hereinafter in this
subparagraph being sometimes referred to herein as "Environmental Laws"), or
any other pollutants, contaminants, substances or materials that may
constitute a hazard, peril or threat to the health of persons, animals, plant
life or the environment; excepting, however, "Hazardous Materials" shall not
for the purposes hereof include any materials or substances in amounts or
concentrations insufficient to require any remedial action under any
then-applicable Environmental law or order of the federal, state or local
governments. The provisions of this Section shall survive the termination or
expiration of the term of this Lease, unless the Purchase Option is
exercised by Tenant.
(f) Subject to the provisions and limitations contained in Sections
13.1(b) - (c) of the Asset Purchase Agreement between Landlord and Tenant,
dated as of November
6
<PAGE>
18, 1997 (as in effect from time to time, the "Asset Purchase Agreement"),
Tenant may perform, at its expense, a Phase II site assessment subsequent to
the commencement of this Lease on the Demised Premises, excepting the Tenant
Easements. In the event that such report indicates the presence of Hazardous
Materials at the Demised Premises in excess of levels permitted by
Environmental Law for which Tenant will be making a Claim against Landlord
under Section 13 of the Asset Purchase Agreement, Tenant shall promptly
deliver a copy of such report to Landlord. Upon receipt of such report,
Landlord shall, subject to the provisions and limitations contained in
Sections 13.1(b) - (c) of the Asset Purchase Agreement, develop a plan for
remediation of such Hazardous Materials (a "Remediation Plan") and submit
such Remediation Plan to Tenant within sixty (60) days of the date on which
Landlord received the report of the Phase II findings from Tenant, and shall
thereafter proceed expeditiously to remediate the Demised Premises in
accordance with the terms of the Remediation Plan, to the extent required and
in compliance with Environmental Law and subject to the provisions and
limitations contained in Sections 13.1(b)-(c) of the Asset Purchase Agreement.
7. INDEMNITY AND RELEASE.
(a) Subject to the provisions of Sections 7(c) through 7(g), Tenant
covenants and agrees, at its sole cost and expense and in addition to any
other right or remedy of Landlord hereunder, to indemnify and hold Landlord
and its affiliates harmless from and with respect to any and all claims,
liabilities, losses, damages, costs and expenses, including without
limitation the reasonable fees and disbursements of counsel (collectively,
the "Losses"), related to or arising directly or indirectly out of any of the
following ("Tenant Indemnity Matters"):
(i) any breach by Tenant of any covenant, obligation or undertaking
made by Tenant in this Lease;
(ii) any violation by Tenant or its agents of any Law (including any
Environmental Laws) or Applicable License at any future time, to the
extent said violation is caused by Tenant or any of its employees or
agents at any time prior to termination of this Lease; and
(iii) any Release or Threatened Release of Hazardous Materials by
Tenant or its employees or agents at, on, into or from the Westbrook
Facility (including the Demised Premises) occurring on or after the
date hereof.
(b) Subject to the provisions of Sections 7(c) through 7(g), Landlord
covenants and agrees, at its sole cost and expense and in addition to any
other right or remedy of Tenant hereunder, to indemnify and hold Tenant and
its affiliates harmless from and with respect to any and all claims,
liabilities, losses, damages, costs and expenses, including without
limitation the reasonable fees and disbursements of counsel
7
<PAGE>
(collectively, the "Losses"), related to or arising directly or indirectly
out of any of the following ("Landlord Indemnity Matters"):
(i) any breach by Landlord of any covenant, obligation or
undertaking made by Landlord in this Lease;
(ii) any violation by Landlord or its agents of any Law (including
any Environmental Laws) or Applicable License at any future time,
to the extent said violation is caused by Landlord or any of its
employees or agents at any time prior to termination of this Lease;
and
(iii) any Release or Threatened Release of Hazardous Materials by
Landlord or its employees or agents at, on, into or from the
Westbrook Facility occurring on or after the date hereof.
(c) CONTROL AND PARTICIPATION.
(i) With respect to matters indemnified pursuant to this Section
7 and relating to an Agency Action, the party obligated to provide
indemnification hereunder (the "Indemnifying Party") upon accepting its
responsibility and liability therefor, shall have full control in
dealing and negotiating with the cognizant regulatory authorities in
order to settle all matters giving rise to the Loss; provided, however,
that (A) the party entitled to indemnification hereunder (the
"Indemnified Party") shall have the right to attend, at its own expense,
any meetings with the regulatory authorities and to receive, upon
request, copies of all correspondence, reports, or other documents
submitted or received by or on behalf of the Indemnifying Party, and (B)
the Indemnifying Party shall not, without the prior written consent of
the Indemnified Party (which shall not be unreasonably withheld) take
any measure or step that imposes any unreasonable burden or encumbrance
upon the conduct of the Indemnified Party's operations.
(ii) Where Remedial Action is required pursuant to this Section 7,
the Indemnifying Party shall have the opportunity to perform such Remedial
Action, and the Indemnified Party agrees that it shall grant or exercise
reasonable efforts to cause to be granted to the Indemnifying Party a
right of reasonable access to the affected real property and agrees that
it will exercise reasonable efforts to obtain a similar right of access
to any leased real property from the Indemnified Party's tenants, for
the purpose of undertaking such Remedial Action; provided, however, that
such Remedial Action shall be conducted in a manner so as to assure no
material interference with ongoing operations. In addition, all
Remedial Actions conducted by the Indemnifying Party shall be conducted
in compliance with all applicable Laws (including Environmental Laws)
and in a manner so as not to violate any of the Indemnified Party's
licenses and permits.
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(iii) With respect to any action, suit, proceeding or demand
instituted against the Indemnified Party by a third party, other than an
Agency Action or Remedial Action (a "THIRD PARTY CLAIM"), upon receipt
of such notice from the Indemnified Party, the Indemnifying Party shall
be entitled to participate in the defense of such Third Party Claim, and
if and only if each of the following conditions is satisfied, the
Indemnifying Party may assume the defense of such Third Party Claim, and
in the case of such an assumption the Indemnifying Party shall have the
authority to negotiate, compromise and settle such Third Party Claim:
(A) the Indemnifying Party confirms in writing that it is
obligated hereunder to indemnify the Indemnified Party with respect to
such Third Party Claim; and
(B) the Indemnifying Party establishes to the reasonable
satisfaction of the Indemnified Party that the Indemnifying Party has
(and will continue to have) adequate financial resources to satisfy and
discharge such action or claim.
The Indemnified Party shall retain the right to employ its own
counsel and to participate in the defense of any Third Party Claim, the
defense of which has been assumed by the Indemnifying Party pursuant
hereto, but the Indemnified Party shall bear and shall be solely
responsible for its own costs and expenses in connection with such
participation.
Notwithstanding the foregoing provisions of this Section 7(c): (i)
no Indemnifying Party shall be entitled to settle any Third Party Claim
without the Indemnified Party's prior written consent unless as part of
such settlement the Indemnified Party is released in writing from all
liability with respect to such Third Party Claim and (ii) no Indemnified
Party shall be entitled to settle any Third Party Claim without the
Indemnifying Party's prior written consent unless as part of such
settlement the Indemnifying Party is released in writing from all
liability with respect to such Third Party Claim.
(d) JOINT RESPONSIBILITY. With respect to Tenant's indemnification
obligations under Section 7(a) and the Landlord's indemnification obligations
under Section 7(b), to the extent that any Losses relate to or arise directly
or indirectly out of any matter, event or occurrence that constitutes a
Landlord Indemnity Matter and any matter, event or occurrence that
constitutes a Tenant Indemnity Matter, such that both Landlord and Tenant
could be entitled to indemnification with respect thereto (for example, a
release of a Hazardous Material that was caused partially by the actions of a
Landlord employee and partially by the actions of a Tenant employee), the
respective indemnification obligations of Landlord and Tenant shall be
equitably apportioned between them based on the parties' comparative
responsibilities.
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(e) INSURANCE PROCEEDS.
(i) No Indemnified Party shall be obligated to pursue or collect from
any insurer prior to making a claim for indemnification pursuant to this
Section 7 and no Indemnifying Party shall be entitled to postpone
performance of any indemnification obligation under this Section 7 while an
insurance claim is pending. However, without limiting any of the
provisions of Section 7(a) through 7(g), in connection with any matter
subject to indemnification under this Section 7, Tenant and Landlord shall
cooperate with each other in giving notice of any claim to any insurer
(including an insurer of an Indemnified Party) and shall provide reasonable
assistance in the collection of any such claim; provided, however, that
there is no duty to provide notice, cooperate or assist with respect to an
Indemnified Party's insurance policies where the Indemnified Party
determines in its sole discretion that such notice, cooperation or
assistance could invalidate any portion of the coverage available under
such policy or result in the imposition of retroactive premiums or
prospective premium increases. In addition, if an Indemnified Party makes
such a determination after it has notified its insurer, it shall be
entitled to retract such notice.
(ii) If an Indemnified Party actually receives insurance proceeds, the
amount for which such Indemnified Party is entitled to indemnification
under this Section 7 shall be reduced by an equal amount. In the event an
Indemnified Party receives insurance proceeds after being paid by the
Indemnifying Party with respect to an indemnifiable matter under this
Section 7, the Indemnified Party will remit such proceeds to the
Indemnifying Party, up to the amount previously paid by the Indemnifying
Party with respect to such matter.
(f) SCOPE OF THIS SECTION 7. Landlord and Tenant each acknowledge and
agree that, except for equitable relief, including specific performance, its
and their sole and exclusive remedy with respect to any and all claims
relating to or arising out of this Lease shall be subject to this Section 7.
(g) CONSEQUENTIAL AND OTHER DAMAGES WAIVER.
(i) Neither Landlord nor Tenant shall be liable, whether in contract,
in tort (including negligence and strict liability) or otherwise, for any
special, indirect, incidental or consequential damages whatsoever, which in
any way arise out of, relate to, or are a consequence of, its performance
or nonperformance hereunder, including but not limited to, loss of profits
or revenue or the loss of use thereof, business interruptions and claims of
customer.
(ii) The provisions of this Section 7(g) shall prevail over any
inconsistent or conflicting provisions set forth in this Lease.
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8. INSURANCE.
(a) At all times during the Term of this Lease, Tenant shall maintain
(i) commercial general liability insurance (including, without limitation,
premises, independent contractors, contractual liability, products complete
operation, fire legal liability and a broad form of comprehensive general
liability endorsement) with limits of not less than Three Million Dollars
($3,000,000) combined for bodily injury, death and property damage (such
amount of insurance to be increased from time to time as is customary for
insurance of such type to reasonably reflect inflation and other matters);
and (ii) all-risk extended fire and casualty insurance on the Buildings and
the Demised Premises, and on Tenant's personal property and equipment at
replacement cost value. Spinnaker may elect to satisfy the requirements of
this subsection 3.5(a) through the maintenance of a blanket insurance policy
including all of the elements described herein.
(b) At all times during the Term of this Lease, Landlord shall maintain
(i) commercial general liability insurance (including, without limitation,
premises, independent contractors, contractual liability, products complete
operation, fire legal liability and a broad form of comprehensive general
liability endorsement) with limits of not less than Three Million Dollars
($3,000,000) combined for bodily injury, death and property damage (such
amount of insurance to be increased from time to time as is customary for
insurance of such type to reasonably reflect inflation and other matters.
(c) All public liability insurance required by this Lease to be
maintained by Landlord or Tenant shall name the other party as an additional
insured. All casualty insurance required by this Lease to be maintained by
Tenant shall name Landlord as a loss payee, as its interest may appear. Each
party shall provide to the other current certificates of such insurance as it
is required to maintain. Such certificates shall provide that any change
restricting or reducing any such coverage or the cancellation of any policy
under which any such certificate is issued shall not be valid except upon
twenty (20) days notice in writing to Landlord and Tenant of such change or
cancellation. All such policies shall be obtained from responsible insurance
companies qualified to do business in the State of Maine and in good standing
therein. Insofar as and to the extent that the following provisions may be
effective without invalidating or making it impossible to secure insurance
coverage obtainable from responsible insurance companies doing business in
the State of Maine (even though extra premium may result therefrom), Landlord
and Tenant mutually agree, and their insurance policies shall provide, that
with respect to any loss which is covered by insurance then being carried by
them, respectively, or which would be covered by insurance policies required
by this Lease if such policies had no deductible amount, the one carrying or
required to carry such insurance and suffering said loss releases the other
of and from any and all claims with respect to such loss; and they further
mutually agree that their respective insurance companies shall have no right
of subrogation against the other on account thereof, nor
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shall the party suffering the loss have any claim against the other party
with respect to any such loss not covered by its insurance that would have
been covered had insurance policies maintained by the injured party had no
deductible amount. This provision is intended to restrict each party (as
permitted by law) to recoveryagainst insurance carriers to the extent of such
coverage, and waive fully, and for the benefit of each, any rights and/or
claims which might give rise to a right of subrogation in any insurance
carrier.
9. ACCESS TO PREMISES.
Landlord shall have the right to enter the Demised Premises in
accordance with the terms and conditions of the Reciprocal Easements.
10. FIRE OR OTHER CASUALTY. In the event that at any time during the
Term of this Lease the Demised Premises or any portion thereof shall be
damaged or destroyed in whole or in part by fire or other cause, then this
Lease shall remain in effect without abatement, and Tenant, at its sole cost
and expense, shall promptly remove from the Demised Premises any and all
debris to the extent necessary to maintain accessibility by Landlord to
Landlord's Easements, and shall keep the Demised Premises in a safe condition
and in compliance with all applicable laws, but Tenant shall have no
obligation to restore or rebuild any improvements (although Tenant may do so
at its option).
11. EMINENT DOMAIN.
If, after the execution and prior to the expiration of the Term hereof,
all or any portion of the Demised Premises shall be taken under the power of
eminent domain, then this Lease shall remain in effect as to the portion of
the Demised Premises not so taken. The entire award for any taking shall
belong to Tenant, except such amount as may relate to Landlord's Easements,
equipment or other personal property of Landlord located on the Demised
Premises or any portion of the Westbrook Facility other than the Demised
Premises.
12. ASSIGNMENT AND SUBLEASING.
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This Lease shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns. Neither this
Lease nor the rights or obligations of any party hereunder shall be
assignable or transferable by such party without the prior written consent of
the other party hereto; provided that Landlord may assign its rights and
obligations (a) in connection with the transfer of all or a portion of the
Westbrook Facility, to any person or entity who agrees in writing with the
Landlord and the Tenant to assume and perform all of Landlord's obligations
under this Lease, or (b) as collateral security for its lenders, and provided
further, that Tenant may assign its rights and obligations, including its
option rights, hereunder (a) in connection with the sale of all or
substantially all of the Tenant's assets, to any person or entity who agrees
in writing with the Landlord and the Tenant to assume and perform all of the
Tenant's obligations under this Lease, and (b) as collateral security for its
lenders.
13. DEFAULT.
(a) Tenant or Landlord shall be in default in the performance of its
obligations under this Lease if any one or more of the following events
(herein sometimes called "events of default") shall occur:
(1) if such party fails to make due and punctual payment of any
installment of rent when and as the same shall become due and payable, and
such failure shall continue for a period of ten (10) days after written
notice from the other party specifying the items in due; or
(2) if either party fails to perform or comply with any of the
agreements, terms, covenants or conditions in this Lease provided, other
than those referred to in the foregoing subparagraph (1), and such default
shall continue for a period of thirty (30) days after written notice from
the other party specifying the items in default, or in case of a default or
contingency which cannot with due diligence be cured within thirty (30)
days, the defaulting party fails to proceed within said thirty (30) day
period to commence to cure the same and thereafter to prosecute the curing
of such default with due diligence and within a period of time which under
all prevailing circumstances shall be reasonable; or
(3) if either party shall file a voluntary petition in bankruptcy or
shall be adjudicated a bankrupt or insolvent, or shall file any petition or
answer seeking any reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under the present or any future
state or federal bankruptcy or insolvency statute or law, or shall seek or
consent to the appointment of any bankruptcy or insolvency trustee,
receiver or liquidator of such party or of all or any substantial part of
its properties or of such party's interest in the Building; or
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(4) if within sixty (60) days after the commencement of any
proceeding against such party seeking any reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar relief under
the present or any future state or federal bankruptcy act or any other
present or future state or federal bankruptcy or insolvency statute or law,
such proceeding shall not have been dismissed, or, if, within sixty (60)
days after the appointment, without the consent or acquiescence of such
party, of any trustee, receiver or liquidator of such party or of all or
substantially all of its properties or of such party's interest in the
Building, such appointment shall not have been vacated or stayed on appeal
or otherwise, or if within sixty (60) days after the expiration of any such
stay, such appointment shall not have been vacated
Upon the occurrence of any event of default described in Subsection 13(a)(1)
or 13(a)(2), the non-defaulting party shall have the right to institute an
arbitration claim against the defaulting party seeking specific performance
of its obligations under this Lease and seeking damages for such default, in
accordance with the arbitration procedures set forth in Subsection 13(c)
hereinbelow; and shall also have the right to exercise the self-help remedies
set forth in Subsection 13(b) hereinbelow. Landlord shall not have the right
to terminate this Lease or to require that Tenant vacate the Demised Premises
under any circumstances, nor shall Tenant have the right to terminate this
Lease except on the occurrence of a Substantial Event of Default by Landlord
as hereinafter defined. A Substantial Event of Default shall be deemed to
exist if Landlord fails to perform or comply with any covenant, agreement, or
obligation of Landlord under this Lease and such failure causes substantial
danger to the life or health of persons in or around the Building or to the
Building or the property located therein, or otherwise causes the
non-defaulting party to be unable to safely continue its business operation
in the Building in compliance with law and either (i) such failure continues
for more than sixty (60) consecutive days, or (ii) such failure occurs and
is not cured in accordance with Subsection 13(a)(2) hereinabove, more than
three (3) times during the Term of this Lease.
(b) Upon the occurrence of any event of default described in Subsection
13(a)(2) hereinabove, the non-defaulting party may (in addition to any other
remedy provided in this Lease) at any time thereafter (after applicable cure
periods) cure such default for the account of the defaulting party and the
defaulting party shall reimburse the other party for any amount paid and any
expense or contractual liability so incurred, and provided that any amounts
due from Tenant shall be deemed additional rent due and payable with the next
installment of monthly rent and any amount due from Landlord may be deducted
by Tenant from any rent due hereunder; provided however, that either may cure
any such default as aforesaid prior to the expiration of said waiting period
but after notice to the other party, if it is necessary to protect the
Demised Premises or the Building or to prevent injury or damages to persons
or Property.
(c) Any controversy or claim arising out of or relating to this Lease
or the breach thereof shall be settled by binding, private and confidential
arbitration.
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Arbitration may be initiated by either Landlord or Tenant and, unless
otherwise agreed in writing by Landlord and Tenant, shall be administered by
the American Arbitration Association, or its successor, under its Commercial
Arbitration Rules, and judgment on the decision rendered by the arbitrator
may be entered in any court having jurisdiction thereof. If the American
Arbitration Association has ceased to exist or to perform private commercial
arbitration, then the arbitration shall be administered by its designated
successor or by a similar nationally recognized commercial arbitration
organization under its applicable rules for commercial arbitration as
designated by the party initiating the arbitration, and in the event of any
dispute between the parties as to the designation of the entity to administer
the arbitration, either party may apply to the Superior Court of Cumberland
County for the designation of the administrator and the applicable rules for
conduct of the arbitration
(d) EACH OF LANDLORD AND TENANT TO THE FULLEST EXTENT PERMITTED BY LAW,
IRREVOCABLY WAIVES ANY RIGHTS THAT THEY MAY HAVE TO INCIDENTAL, CONSEQUENTIAL
OR SPECIAL (INCLUDING PUNITIVE OR MULTIPLE) DAMAGES BASED UPON, OR ARISING
OUT OF, THIS LEASE OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS OR
ACTIONS OF ANY OF THEM RELATING THERETO.
(e) Landlord agrees, in the event of its bankruptcy, to (i) promptly
file a motion with the Bankruptcy Court seeking to assume the Lease under
Section 365 of the Bankruptcy Code, and (ii) consent to termination of the
automatic stay under Section 362 of the Bankruptcy Code, upon Tenant's
motion, to allow Tenant to avail itself of its rights under the Lease,
including, without limitation, its right to exercise its Purchase Option
and/or Additional Land Option as hereinafter described.
14. COVENANT OF QUIET ENJOYMENT.
Upon the payment of the Base Rent and observing, keeping and performing
all of the terms and provisions of this Lease on its part to be observed,
kept and performed, Tenant may lawfully, peaceably and quietly have, hold,
occupy and enjoy the Demised Premises during the Term without hindrance or
ejection by any persons lawfully claiming under Landlord, subject to the
terms and conditions of this Lease, and Landlord hereby covenants and agrees
to defend Tenant's rights hereunder against the claims of any persons
claiming under or through Landlord, subject to the Permitted Title Exceptions
as hereinafter defined. It is understood and agreed that this covenant and
any and all other covenants of Landlord contained in this Lease shall be
binding upon Landlord and Landlord's successors only with respect to breaches
occurring during Landlord's interest hereunder.
15. ESTOPPEL CERTIFICATE.
At any time, and from time to time, upon the written request of Landlord
or Tenant,
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or any mortgagee, the other party within ten (10) days of the date of such
written request agrees to execute and deliver to the requesting party and/or
such mortgagee, and in a form reasonably satisfactory to the requesting party
and/or such mortgagee, a written statement: (i) ratifying this Lease; (ii)
confirming the commencement and expiration dates of the term of this Lease;
(iii) certifying, to the best of its knowledge, that Tenant is in occupancy
and has accepted possession of the Demised Premises, and that the Lease is in
full force and effect and has not been modified, assigned, supplemented or
amended except by such writings as shall be stated; (iv) certifying, to the
best of its knowledge, that all conditions and agreements under this Lease to
be satisfied or performed by each party have been satisfied and performed
except as shall be stated; (v) certifying, to the best of its knowledge, that
the other party is not in default under this Lease and there are no defenses
or offsets against the enforcement of this Lease by either party, or stating
the defaults and/or defenses claimed; (vi) reciting the amount of advance
Base Rent, if any, paid by Tenant and the date to which such Base Rent has
been paid; (vii) reciting the amount of security deposited with Landlord, if
any; and (viii) any other information which the requesting party or the
mortgagee may reasonably require.
16. MECHANIC'S LIENS.
Tenant shall not permit any mechanic's lien, materialmen's lien, or
other lien to be placed or to remain against the Demised Premises and/or
Tenant's interest therein, to the extent that any such lien encumbers any
interest in the Westbrook Facility other than the Demised Premises and/or
Tenant's interest therein, which lien may arise out of any payment due for or
purported to be due for, any labor, services, materials, supplies, or
equipment alleged to have been furnished to or for Tenant in, upon or about
the Demised Premises at the direction or request of Tenant or with its
consent or approval. If any such lien does arise, Tenant agrees to discharge
such lien promptly, either by payment or by filing of the necessary bond, or
otherwise; provided, however, that during the Term of this Lease, Tenant may
elect to refrain from discharging such lien provided that Tenant shall be
contesting such lien in good faith, and provided further that Tenant promptly
shall discharge such lien if required in connection with any financing by
Landlord, or sale of Landlord's property or otherwise required by any third
party dealing with Landlord. Tenant shall indemnify and hold Landlord
harmless against any liability, loss, damage, cost or expense, including
attorneys fees, as a result of Tenant's failure to promptly discharge any
such lien.
17. NOTICES.
(a) All notices, demands or other communications hereunder shall be in
writing, and shall be deemed to have been duly given if delivered personally
or if mailed by certified United States mail, return receipt requested,
postage prepaid, or if sent by overnight courier or sent by written
telecommunication, as follows:
If to Tenant:
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Spinnaker Industries, Inc.
600 N. Pearl Street, Suite 2160
Dallas, Texas 75201
Attention: President
Telecopier: 214/855-0093
with copies sent contemporaneously to :
Timothy R. Vaughan, Esq.
Crouch & Hallett, LLP
717 North Harwood, Suite 1400
Dallas, Texas 75201
Telecopier: 214/922-4193
Spinnaker Coating - Maine, Inc.
225 Warren Avenue
Westbrook, Maine 04092
Attention: Vice President - Operations
Telecopier: 207/856-4742
Spinnaker Coating, Inc.
518 W. Water Street
Troy, Ohio 45373-0370
Attention: K.C. Caldabaugh
Telecopier: 937/335-2843
If to the Landlord:
S. D. Warren Company
225 Franklin Street
Boston, MA 02110
Attention: General Counsel
Telecopier: 617/368-6580
with copies sent contemporaneously to:
S. D. Warren Company
89 Cumberland Street
P. O. Box 5000
Westbrook, Maine 04098
Attention: Plant Manager
Telecopier: 207/856-1346
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Either party shall have the right to designate in writing served as above a
different address to which any notice or communication should be delivered to
it.
18. HOLDOVER.
If Tenant or any party claiming through or under Tenant shall remain or
continue to be in possession of the Demised Premises or any part thereof
after the termination of this Lease other than pursuant to Tenant's exercise
of the Purchase Option, then, at Landlord's option, Tenant or such party or
both shall be deemed to be illegally retaining possession, or Tenant or such
party or both shall be deemed to be a month to month tenant of the Demised
Premises on all the terms and conditions of this Lease except that the
monthly rent payable hereunder shall be twice the amount of thethen fair
market rental value of the Demised Premises as determined by independent
appraisal. Nothing herein shall be construed to limit Landlord's rights to
obtain possession of the Demised Premises upon termination of this Lease by
unlawful detainer proceedings or otherwise in the event that Landlord does
not exercise its option to treat the continued possession by Tenant or any
party claiming through or under Tenant as a month to month tenancy.
19. ENFORCEABILITY OF LEASE.
This Lease may be modified or altered only by agreement in writing
between Landlord and Tenant. All rights, obligations and liabilities herein
given to, or imposed upon, the respective parties hereto shall extend to and
bind the successors and assigns of the said parties; and if there shall be
more than one party constituting Tenant or Landlord, they shall all be bound
jointly and severally by the terms, covenants and agreements herein. If,
however, approval of Landlord is required by the express terms of this Lease
for any assignee of Tenant, then in that event alone no rights shall inure to
the benefit of such assignee of Tenant unless the assignment to such party
has been approved by Landlord. Any and all prior discussions, undertakings,
agreements and understandings of the parties are superseded by this Lease,
which alone fully and completely express their entire agreement. There are
no promises, agreements, representations, warranties, conditions or
understandings, either oral or written, between the parties hereto, except as
set forth herein.
20. DEFINITION OF LANDLORD.
The term "Landlord" as used in this Lease, so far as covenants or
obligations on the part of Landlord are concerned, shall be limited to mean
and include only the owner or owners at the time in question of the Demised
Premises, or any Portion of the Demised Premises. If the interest of the
Landlord named herein in the Demised Premises, or any Portion of the Demised
Premises, is transferred, whether by sale, foreclosure, or otherwise, the
named Landlord shall be and hereby is entirely freed and relieved of all
covenants and obligations of Landlord hereunder arising after the date of
such transfer with respect to the property transferred, provided that such
transferee shall covenant and
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agree in writing for the benefit of Tenant that such transferee has assumed
and agreed to carry out any and all covenants and obligations of the Landlord
hereunder with respect to such property.
21. TENANT'S OPTION TO PURCHASE.
In consideration of the terms and conditions of this Lease, the Site
Agreement, and Tenant's purchase of the Pressure Sensitive Business from
Landlord, Landlord hereby grants to Tenant the right and option to purchase
the Demised Premises and the Additional Land, as hereinafter defined, at any
time during the term of this Lease for a purchase price of One Dollar ($1.00)
(the "Purchase Option"). Any such purchase of the Demised Premises and the
Additional Land by Tenant shall be in "as is" condition, without any
warranty, representation or covenant of any kind by Landlord other than those
set forth in the Asset Purchase Agreement (which are incorporated herein by
reference); provided, however that Landlord shall convey the Demised Premises
and the Additional Land to Tenant by quitclaim deed with covenant, subject to
the Reciprocal Easements, the exceptions to title set forth on EXHIBIT C
attached hereto and made a part hereof (the "Permitted Exceptions to Title"),
and subject to such other exceptions to title placed against the Demised
Premises by Tenant or as a result of Tenant's use or occupancy of the Demised
Premises, or as may be approved by Tenant. At the time of closing, the
Reciprocal Easements, to be recorded on the date of this Lease, shall become
perpetual in duration, as provided therein, without the need for any further
instrument or agreement. Tenant shall exercise the Purchase Option by notice
to Landlord given in writing at any time during the Term of this Lease, and
the closing on the sale of the Demised Premises and the Additional Land shall
take place on a date agreed by Landlord and Tenant, but not later than 60
days after the date of such notice of exercise, unless such date is extended
by agreement of Landlord and Tenant. Provided Tenant has not exercised the
Additional Land Option, as hereinafter defined, Tenant may elect in its sole
discretion to exercise the Purchase Option with respect to only the Demised
Premises, without the Additional Land. This Lease shall terminate as of the
date of the sale. Landlord shall not grant any mortgage or other encumbrance
or permit any lien against the Demised Premises and/or the Additional Land,
and/or Landlord's interest therein, arising through or under Landlord (but
not arising through or under Tenant) during the Term of this Lease. Any such
mortgage, lien or encumbrance created in violation of this provision shall
automatically be deemed to be subordinate to this Lease, the Purchase Option,
and the Additional Land Option as hereinafter defined. Landlord further
agrees in connection with any such sale of the Demised Premises and
Additional Land to remove any mortgage, lien or other encumbrance on the
Demised Premises or the Additional Land arising through or under Landlord
(but not arising through or under Tenant), but Landlord shall have no
obligation to cure any of the Permitted Exceptions to Title. Landlord agrees
to cooperate in good faith with Tenant should Tenant elect to cure any
Permitted Exception to Title with respect to the Demised Premises or the
Additional Land in connection with the exercise of the Purchase Option
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by Tenant.
22. TENANT'S OPTION FOR ADDITIONS TO DEMISED LAND.
Tenant shall have the right at its option at any time during the term
of this Lease to add to the Demised Premises the additional land containing
approximately 46,480 square feet located adjacent to the Land shown and
labeled on the Site Plan as"Proposed Future Expansion Lease Area", and as
more particularly described on EXHIBIT D attached hereto (the "Additional
Land") in the event that Tenant determines, in its discretion, to use the
Additional Land for any use permitted hereunder, or other activities related
thereto, or if otherwise necessary to bring the Demised Premises and/or
Tenant's use thereof into compliance with applicable laws, ordinances and
regulations (the "Additional Land Option"). Tenant shall exercise the
Additional Land Option by notice to Landlord advising Landlord that Tenant
desires to add the Additional Land to the Demised Premises and describing the
expansion of Tenant's business or other activities or circumstances requiring
the Additional Land. In the event that Tenant elects to exercise the
Additional Land Option, Landlord and Tenant shall enter into an amendment to
this Lease adding the Additional Land as part of the Demised Premises,
subject to the Reciprocal Easements, and providing that the Additional Land
shall be subject to all of the terms and conditions of this Lease as
applicable to the Land, and shall otherwise be deemed to be a part of the
Land for all purposes. No additional Base Rent shall be payable by Tenant
with respect to the Additional Land.
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23. MISCELLANEOUS PROVISIONS.
(a) WAIVER. Failure on the part of either party to complain of any
action or non-action on the part of the other party, no matter how long the
same may continue, shall never be deemed to be a waiver by such party of any
of its rights hereunder. Further, no waiver at any time of any of the
provisions hereof by either party shall be construed as a waiver of any of
the other provisions hereof, and a waiver at any time of any of the
provisions hereof shall not be construed as a waiver at any subsequent time
of the same provisions. The consent or approval of either party to or of any
action by the other party requiring such consent or approval shall not be
deemed to waive or render unnecessary such consent or approval to or of any
subsequent similar acts. No payment by either party, or acceptance by either
party, of a lesser amount than shall be due from under this Lease shall be
treated otherwise than as a payment on account. The acceptance by either of
a check for a lesser amount with an endorsement or statement thereon, or upon
any letter accompanying such check, that such lesser amount is payment in
full, shall be given no effect, and the recipient may accept such check
without prejudice to any other rights or remedies which the recipient may
have against the other party.
(b) INVALIDITY OF PARTICULAR PROVISIONS. If any term or provision of
this Lease, or the application thereof to any person or circumstance shall,
to any extent, be invalid or unenforceable, the remainder of this Lease, or
the application of such term or provision to persons or circumstances other
than those as to which it is held invalid or unenforceable, shall not be
affected thereby, and each term and provision of this Lease shall be valid
and be enforced to the fullest extent permitted by law.
(c) GOVERNING LAW. This Lease shall be governed exclusively by the
provisions hereof and by the laws of the State of Maine.
(d) RECORDING. The parties agree not to record this Lease, but each
party hereto agrees to execute a short form memorandum of this Lease in
recordable form in compliance with the requirements of 33 M.R.S.A. Section
201, as amended, and satisfactory to Landlord and Tenant, which memorandum of
lease may be recorded by either party, and also to record the Reciprocal
Easements executed this date. The memorandum shall set forth in sufficient
detail so as to provide record notice thereof both the Purchase Option and
the Additional Land Option, but in no event shall such memorandum set forth
the rental or other charges payable by Tenant under this Lease. The
memorandum shall expressly state that it is executed pursuant to the
provisions contained in this Lease, and is not intended to vary the terms and
conditions hereof. Upon termination of this lease Landlord and Tenant agree
to record a memorandum stating that this lease has been terminated.
(e) SECTION HEADINGS. The section headings throughout this instrument
are for convenience and reference only, and the words contained therein shall
in no way be held to explain, modify, amplify, or aid in the interpretation,
construction, or meaning of the
21
<PAGE>
provisions of this Lease.
(f) INTERPRETATION. Whenever in this Lease provision is made for the
doing of any act by any party, it is understood and agreed that said act
shall be done by such party at its own cost and expense.
(g) CONTROLLING DOCUMENTS. In the event of any inconsistencies between
the provisions of this Lease and the provisions of the Site Agreement between
the parties of even date herewith, the provisions of the Site Agreement shall
be controlling during the term of the Site Agreement. In the event of any
inconsistencies between the provisions of this Lease and the provisions of
the Asset Purchase Agreement between the parties dated November 18, 1997 (the
"Asset Purchase Agreement") with respect to the terms and provisions of this
Lease, the provisions of this Lease shall be controlling, except for matters
set forth in Article 13 of the Asset Purchase Agreement. This Lease, the
Site Agreement, the Asset Purchase Agreement, the Lease Agreement between the
parties executed as of the date of this Lease governing Tenant's lease of
certain building space from Landlord (the "Space Lease"), and the
Declaration of Reciprocal Easements, Restrictions and Covenants executed this
date by Landlord and Tenant, including all exhibits, schedules and
attachments thereto, contain the entire understanding of the parties with
respect to the subject matter thereof, supersede all prior agreements and
understandings relating to the subject matter thereof and shall not be
amended except by a written instrument hereafter signed by each of the
parties thereto.
(h) CONSTRUCTION. The language used in this Lease will be deemed to be
the language chosen by the parties to express their mutual intent, and no
rule of strict construction will be applied against any party.
(i) CAPITALIZED TERMS. All capitalized terms used herein and not
otherwise defined shall have the meanings assigned to them in the Site
Agreement.
(j) COUNTERPARTS. This Lease may be simultaneously executed in any
number of counterparts, each of which when so executed and delivered shall be
an original; but such counterparts shall constitute but one and the same
instrument.
[the next page is the signature page]
22
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this instrument as of
the date set forth in the introductory paragraph of this Lease.
LANDLORD:
S.D. WARREN COMPANY
By: /s/ Trevor L. Larkan
--------------------------------
Its: Vice President and Chief
Financial Officer
-------------------------------
Printed Name: Trevor L. Larkan
----------------------
TENANT:
SPINNAKER COATING - MAINE, INC.
By: /s/ Mark R. Matteson
--------------------------------
Its: Vice President, Corporate
Development
-------------------------------
Printed Name: Mark R. Matteson
----------------------
23
<PAGE>
EXHIBIT A
TO LEASE AGREEMENT
SITE PLAN OF LANDLORD'S WESTBROOK FACILITY
<PAGE>
EXHIBIT B
TO LEASE AGREEMENT
SURVEYOR'S LEGAL DESCRIPTION OF THE LAND
<PAGE>
EXHIBIT C
TO LEASE AGREEMENT
PERMITTED EXCEPTIONS TO TITLE
1. Water and Sewer Pipeline Easement granted by Scott Paper Company to
Portland Water District, dated February 5, 1976 and recorded in the
Cumberland County Registry of Deeds in Book 3808, Page 30.
2. Rights, easements and conditions granted by Scott Paper Company to
Portland Water District, dated March 23, 1976 and recorded in the Cumberland
County Registry of Deeds in Book 3823, Page 26.
3. Rights and easements granted by Scott Paper Company to Central
Maine Power Company and New England Telephone and Telegraph Company,
consisting of a line of two poles, dated March 29, 1978 and recorded in the
Cumberland County Registry of Deeds in Book 4205, Page 247.
4. Rights of others in and to the use of easements appurtenant to the
Demised Premises and terms and conditions relative to the use thereof.
5. All matters and notes as shown or referred to on a plan entitled
"Buildings and Grounds, Civil Site Plan, Spinnaker Lot" for S. D. Warren
Company by Sebago Technics, Inc., Westbrook Maine, dated February 12, 1998,
last revised March 3, 1998, S.D. Warren Drawing No. CD-62792, referred to in
the foregoing Lease Agreement as the "Site Plan," including but not limited
to title in and to land referenced in Notes 7 & 8, but excepting the last
sentence of Note 5.
6. Terms and conditions of the Declaration of Reciprocal Easement,
Restrictions and Covenants by and between S.D. Warren Company and Spinnaker
Industries, Inc. referred to in the foregoing Lease Agreement as the
"Reciprocal Easements."
7. All matters and notes as shown or referred to on a plan entitled
"Buildings and Grounds, Civil Site Plan Spinnaker Lot/Easements," S. D.
Warren Drawing No. CD-62873, prepared by Daniel R. Laflin, P.E. of Sebago
Technics, dated February 12, 1998, last revised March 3, 1998, referred to in
the aforesaid Reciprocal Easements as the "Easement Plan," excepting the last
sentence of Note 5.
8. All matters and notes as shown or referred to on a plan entitled
<PAGE>
"ALTA/ACSM Land Title Survey (Urban Class) of Spinnaker Lot, Warren Ave.,
Westbrook, Maine," prepared for Spinnaker Industries, Inc. by Daniel R.
Laflin, P.E. of Sebago Technics, dated February 20, 1998, last revised March
2, 1998.
9. Rights and easements granted to Central Maine Power Company and New
England Telephone and Telegraph Company as set forth in an instrument from
S.D. Warren Company, dated July 19, 1996 and recorded in the Cumberland
County Registry of Deeds in Book 12712, Page 289.
10. Such state of facts as would be disclosed by an accurate survey of
the easements appurtenant to the premises.
<PAGE>
EXHIBIT D
TO LEASE AGREEMENT
SURVEYOR'S LEGAL DESCRIPTION OF THE ADDITIONAL LAND
<PAGE>
FOURTH AMENDMENT TO CREDIT AGREEMENT
THIS FOURTH AMENDMENT (this "AMENDMENT"), to the Credit Agreement dated as
of October 23, 1996, among CENTRAL PRODUCTS COMPANY, a Delaware corporation
("CENTRAL"), BROWN-BRIDGE INDUSTRIES, INC., a Delaware corporation ("BROWN"),
ENTOLETER, INC. ("ENTOLETER" and, together with Central and Brown, the
"BORROWERS"), SPINNAKER INDUSTRIES, INC., a Delaware corporation (the
"GUARANTOR" and together with the Borrowers, the "CREDIT PARTIES"), each of the
financial institutions from time to time parties thereto, as lenders (the
"LENDERS"), BT COMMERCIAL CORPORATION, as agent (in such capacity, the "AGENT")
for the Lenders, TRANSAMERICA BUSINESS CREDIT CORPORATION, as collateral agent
(in such capacity, the "COLLATERAL AGENT"), and BANKERS TRUST COMPANY, as
issuing bank (the "ISSUING BANK"), is made as of December 31, 1997 among the
Credit Parties and the undersigned Lenders.
W I T N E S S E T H :
WHEREAS, Credit Parties, the Lenders, the Agent, the Collateral Agent and
the Issuing Bank are parties to the Credit Agreement, dated as of October 23,
1996 (as amended by the First Amendment dated as of December 31, 1996, the
Second Amendment dated as of March 31, 1997, the Third Amendment dated as of
September 30, 1997 and as the same may be further amended, supplemented or
otherwise modified from time to time, the "CREDIT AGREEMENT"; capitalized terms
used herein shall have the meanings assigned to them in the Credit Agreement
unless otherwise defined herein);
WHEREAS, the Credit Parties have requested that the Majority Lenders agree
to amend the Credit Agreement in the manner set forth herein; and
WHEREAS, the undersigned Lenders are agreeable to such amendment, but only
on the terms and subject to the conditions set forth herein;
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the parties hereto hereby agree as follows:
<PAGE>
SECTION 1. AMENDMENT TO CREDIT AGREEMENT. Section 7.2(u) of the Credit
Agreement is, effective as of the date hereof and subject to Section 2
hereof, amended by deleting "1.60:1.00" and substituting therefor "1.35:1.00".
SECTION 2. EFFECTIVENESS. This Amendment shall become effective upon
the Agent's receipt of this Amendment, duly executed by the Credit Parties
and the Majority Lenders.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE CREDIT PARTIES. Each
of the Credit Parties represents and warrants as follows:
(a) The execution, delivery and performance by such Credit Party of this
Amendment (i) are within such Credit Party's corporate powers and authority,
have been duly authorized by all necessary corporate action and do not
contravene (A) such Credit Party's Governing Documents, (B) any Requirement
of Law applicable to it or any of its properties or (C) any franchise,
license, permit, indenture, contract, lease, agreement, instrument or other
commitment to which it is a party or by which it or any of its properties are
bound, (ii) will not result in a Default or an Event of Default and (iii)
will not result in or require the creation or imposition of any Lien upon or
with respect to any property now owned or hereafter acquired by such Credit
Party (other than Liens permitted by the Credit Agreement).
(b) This Amendment constitutes the legal, valid and binding obligations
of such Credit Party enforceable against such Credit Party in accordance with
its terms, except as such enforceability may be limited by bankruptcy,
insolvency or similar laws affecting creditor's rights generally and general
principles of equity.
SECTION 4. REFERENCE TO AND EFFECT ON THE CREDIT DOCUMENTS.
(a) Upon the effectiveness of this Amendment, on and after the date
hereof, each reference in the Credit Agreement to (i) "this Agreement,"
"hereunder," "hereof," "herein" and words of like import, and such words or
words of like import in each reference in the Credit Documents, shall mean
and be a reference to the Credit Agreement as amended hereby.
(b) Except as specifically amended hereby, all of the terms and
provisions of the Credit Agreement shall remain in full force and effect and
are hereby ratified and confirmed.
-2-
<PAGE>
(c) The execution, delivery and effectiveness of this Amendment shall
not, except as expressly provided herein, operate as an amendment to or a
waiver of any right, power or remedy of the Agent or the Lenders under any of
the Credit Documents, or constitute an amendment to or a waiver of any
provision of any of the Credit Documents.
(d) This Amendment shall be deemed to be a Credit Document for all
purposes.
SECTION 5. EXECUTION IN COUNTERPARTS. This Amendment may be executed in
counterparts each of which when so executed and delivered shall be deemed to
be an original and all of which taken together shall constitute one and the
same instrument. Telecopied counterparts of the signature pages hereof shall
be deemed effective as of the Agent's receipt thereof.
SECTION 6. EXPENSES. The Borrowers shall, jointly and severally, pay
for all of the reasonable costs and expenses incurred by the Agent in
connection with the transactions contemplated by this Amendment, including,
without limitation, the reasonable fees and expenses of counsel to Agent.
SECTION 7. GOVERNING LAW. THE VALIDITY, INTERPRETATION AND ENFORCEMENT
OF THIS AMENDMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK
WITHOUT GIVING EFFECT TO THE CONFLICTS OF LAW PRINCIPLES THEREOF (OTHER THAN
SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW).
-3-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized as of the
date first above written.
BORROWERS
CENTRAL PRODUCTS COMPANY
By: /s/ Mark R. Matteson
--------------------------------
Name: Mark R. Matteson
Title: Vice President
BROWN-BRIDGE INDUSTRIES, INC.
By: /s/ Ned N. Fleming, III
--------------------------------
Name: Ned N. Fleming, III
Title: Vice President
ENTOLETER, INC.
By: /s/ Mark R. Matteson
--------------------------------
Name: Mark R. Matteson
Title: Vice President
GUARANTOR
SPINNAKER INDUSTRIES, INC.
By: /s/ Richard J. Boyle
--------------------------------
Name: Richard J. Boyle
Title: Chairman and Chief
Executive Officer
LENDERS
BT COMMERCIAL CORPORATION
By: /s/ Jeff Ogden
--------------------------------
Name: Jeff Ogden
Title: Senior Vice President
TRANSAMERICA BUSINESS CREDIT
CORPORATION
By: /s/ Robert Heinz
--------------------------------
Name: Robert Heinz
Title: Senior Vice President
-4-
<PAGE>
FIFTH AMENDMENT TO CREDIT AGREEMENT
THIS FIFTH AMENDMENT (this "AMENDMENT"), to the Credit Agreement dated
as of October 23, 1996, among CENTRAL PRODUCTS COMPANY, a Delaware
corporation ("CENTRAL"), SPINNAKER COATING, INC., a Delaware corporation
formerly known as Brown-Bridge Industries, Inc. ("COATING"), ENTOLETER, INC.,
a Delaware corporation ("ENTOLETER" and, together with Central and Coating,
the "EXISTING BORROWERS"), SPINNAKER INDUSTRIES, INC., a Delaware corporation
(the "GUARANTOR"), each of the financial institutions from time to time
parties thereto, as lenders (the "LENDERS"), BT COMMERCIAL CORPORATION, as
agent (in such capacity, the "AGENT") for the Lenders, TRANSAMERICA BUSINESS
CREDIT CORPORATION, as collateral agent (in such capacity, the "COLLATERAL
AGENT"), and BANKERS TRUST COMPANY, as issuing bank (the "ISSUING BANK"), is
made as of March 17, 1998 among the Existing Borrowers, Spinnaker
Coating-Maine, Inc., a Delaware corporation ("SCM" and, together with the
Existing Borrowers, the "BORROWERS"), the Guarantor, the Agent, the
Collateral Agent, the Issuing Bank and the Lenders.
W I T N E S S E T H :
WHEREAS, the Existing Borrowers, the Guarantor, the Lenders, the Agent,
the Collateral Agent and the Issuing Bank are parties to the Credit
Agreement, dated as of October 23, 1996 (as amended by the First Amendment
dated as of December 31, 1996, the Second Amendment dated as of March 31,
1997, the Third Amendment dated as of September 30, 1997 and the Fourth
Amendment dated as of December 31, 1997 and as the same may be further
amended, supplemented or otherwise modified from time to time, the "CREDIT
AGREEMENT"; capitalized terms used herein shall have the meanings assigned to
them in the Credit Agreement unless otherwise defined herein);
WHEREAS, Section 7.2(o) of the Credit Agreement prohibits the Existing
Borrowers and the Guarantor from creating or acquiring any direct or indirect
Subsidiary except as expressly provided therein;
WHEREAS, the Existing Borrowers and the Guarantor desire that SCM become
a wholly-owned Subsidiary of Coating and a borrower under the Credit
Agreement;
WHEREAS, SCM intends to acquire from S.D. Warren Company ("SDW") its
Pressure Sensitive Business (the "ACQUIRED BUSINESS") for a purchase price of
approximately $51,770,000 (the "ACQUISITION") pursuant to an Asset Purchase
Agreement dated as of November 18, 1997, as amended by the First Amendment
dated as of March 17, 1998 (the "PURCHASE AGREEMENT") between SDW and the
Guarantor, which purchase price shall consist of $44,770,000 in
<PAGE>
cash and a subordinated note in the principal amount of $7,000,000 made by
the Guarantor in favor of SDW (the "SDW SUBORDINATED NOTE");
WHEREAS, in connection with the Purchase Agreement, SCM is entering into
a subordinated guaranty in favor of SDW (the "SDW SUBORDINATED GUARANTY"),
pursuant to which SCM has agreed to guarantee the obligations of the
Guarantor under the SDW Subordinated Note on the terms set forth in the
Subordinated Guaranty;
WHEREAS, the Existing Borrowers and the Guarantor have requested that
the Lenders agree to amend the Credit Agreement, among other things, to
enable SCM to become a borrower thereunder and a wholly owned Subsidiary of
Coating, increase the Commitment of each Lender and extend the Expiration
Date; and
WHEREAS, the Lenders are agreeable to such amendments, but only on the
terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the parties hereto hereby agree as follows:
SECTION 1. AMENDMENT TO CREDIT AGREEMENT. Effective as of the date
hereof, but subject to the satisfaction of the conditions precedent set forth
in Section 2, the Credit Agreement is hereby amended as follows:
(a) The Preamble to the Credit Agreement is amended by deleting
"('ENTOLETER' and, together with Central and Brown, the 'BORROWERS')" and
substituting the following therefor:
"('ENTOLETER'), Spinnaker Coating-Maine, Inc., a Delaware corporation
with its chief executive office and principal place of business at
225 Warren Avenue, Westbrook, Maine 04092 ("SCM" and, together with
Central, Brown and Entoleter, the 'BORROWERS')."
(b) The definition of "Acquisition Basket" in Section 1.1 of the Credit
Agreement is amended and restated as follows:
"'ACQUISITION BASKET' means the sum of (i) $15,000,000 (the
"Acquisition Base Amount"), (ii) if positive, Excess Cash Flow and
(iii) the Equity Proceeds Amount as of the date of determination;
PROVIDED that reductions for Capital Expenditures and Investments
shall be without duplication and the Acquisition Basket shall not be
reduced by any Investments (x) to the extent paid for
-2-
<PAGE>
with the issuance of capital stock of the Guarantor or (y) made in
connection with the SDW Acquisition."
(c) The definition of "Borrowing Base" in Section 1.1 of the Credit
Agreement is amended by inserting "the SCM Borrowing Base," immediately
after the phrase "the sum of."
(d) The definition of "Credit Documents" in Section 1.1 of the Credit
Agreement is amended by inserting "the SDW Subordinated Note, the SDW
Subordinated Guaranty," immediately after "Intercompany Subordinated Notes,".
(e) Subsection (h) of the definition of "Eligible Accounts Receivable"
in Section 1.1 of the Credit Agreement is amended by (i) deleting "or"
immediately before "(iii)" and substituting therefor "," and (ii) adding at
the end of clause (iii) thereof the following: "or (iv) the Account is
covered by a credit insurance policy in form and substance, and issued by an
insurer, satisfactory to the Agent."
(f) The definition of "Equity Proceeds Amount" in Section 1.1 is amended
by (i) deleting "and" at the end of clause (c) thereof and substituting
therefore ";" and (ii) inserting the following immediately before the period
at the end of such definition:
"and (d) reduced at the time any prepayment of the SDW
Subordinated Note is made in accordance with Section 2.9(d) by
the amount of such prepayment."
(g) The definition of "Letter of Credit Obligations" in Section 1.1 of
the Credit Agreement is amended by inserting "the SCM Letter of Credit
Obligations," immediately after the phrase "the total of."
(h) The definition of "Line of Credit" in Section 1.1 of the Credit
Agreement is amended by deleting "$40,000,000" and substituting therefor
"$60,000,000." Section 1.1 of the Credit Agreement is amended by adding the
following definitions in their appropriate alphabetical order:
"'SCM' is defined in the Preamble to this Credit Agreement."
"'SCM ACCOUNTS BORROWING BASE' means, on any day, an amount up to
85% of the
-3-
<PAGE>
outstanding Eligible Accounts Receivable of SCM on such day."
"'SCM BORROWING BASE' means, on any day, an amount equal to the
sum of (a) the SCM Accounts Borrowing Base on such day and (b) the SCM
Inventory Borrowing Base on such day."
"'SCM INVENTORY BORROWING BASE' means, on any day, an amount up
to 65% of the Eligible Inventory of SCM on such day."
"'SCM LETTER OF CREDIT OBLIGATIONS' means, the sum of the
aggregate undrawn amount of all Letters of Credit outstanding for
SCM's account, plus the aggregate amount of all drawings under Letters
of Credit issued for SCM's account for which the Borrowers have not
reimbursed the Issuing Bank, plus the aggregate amount of all payments
made by the Lenders to the Issuing Bank for participations in Letters
of Credit issued for SCM's account for which the Borrowers have not
reimbursed the Lenders."
"'SCM LINE OF CREDIT' means the aggregate revolving line of
credit extended by the Lenders to SCM for Revolving Loans and Letters
of Credit pursuant to and in accordance with the terms of this Credit
Agreement, in the amount of $15,000,000, as such revolving line of
credit may be reduced from time to time in accordance with this Credit
Agreement."
"'SDW ACQUISITION' means the acquisition by SCM of the Pressure
Sensitive Business of S.D. Warren Company."
"'SDW SUBORDINATED GUARANTY' means the subordinated guaranty
dated as of March 17, 1998 made by the Borrowers in favor of S.D.
Warren Company, as amended, supplemented or otherwise modified from
time to time in accordance with the terms hereof."
"'SDW SUBORDINATED NOTE' means the subordinated note dated
March 17, 1998 made by the Guarantor in favor of S.D. Warren Company,
as amended, supplemented or
-4-
<PAGE>
otherwise modified from time to time in
accordance with the terms hereof."
(j) Section 2.1(a) is amended by (i) deleting the period at the end of
subsection (iii) and substituting therefor "; and" and (ii) inserting the
following new subsection (iv):
"(iv) TO SCM: an aggregate amount equal to the lesser of (x) the
SCM Line of Credit and (y) the SCM Borrowing Base, minus, in each case,
the then outstanding SCM Letter of Credit Obligations and the Pending
Borrowings of SCM provided that no Revolving Loan or Letter of Credit
may be incurred if after giving effect thereto an amount equal to fifty
percent (50%) of the sum of the Revolving Loans extended by the Lenders
to SCM and SCM Letter of Credit Obligations exceeds the SCM Accounts
Borrowing Base."
(k) Section 3.1 is amended by:
(i) deleting "$5,000,000" in subsection (b) and substituting
therefor "$7,000,000";
(ii) relettering subsections (d), (e) and (f) as (e), (f) and (g),
respectively; and
(iii) inserting a new subsection (d) as follows:
"(d) The face amount of such Letter of Credit requested by SCM,
(i) when added to the SCM Letter of Credit Obligations then outstanding,
would cause the SCM Letter of Credit Obligations to exceed $4,000,000 or
(ii) when added to the aggregate amount of Revolving Loans to SCM and
all SCM Letter of Credit Obligations then outstanding would cause the
sum of the Revolving Loans to SCM and the SCM Letter of Credit
Obligations to exceed the lesser of (x) the SCM Line of Credit and (y)
the SCM Borrowing Base then in effect; or."
(l) Section 2.9(d) is amended by adding the following proviso immediately
before the period at the end thereof:
"; PROVIDED, that if (i) a Credit Party receives Net Cash Proceeds
from the issuance of equity securities, (ii) after giving effect
thereto, Unused Availability shall be equal to or greater than
$15,000,000 and (iii) no Event of Default has occurred and is
continuing, then such Credit Party shall not be required to apply such
Net Cash Proceeds to repay the Revolving Loans to the extent that Unused
Availability exceeds $15,000,000 (it being understood that such
-5-
<PAGE>
Credit Party may apply such excess to prepay the SDW Subordinated Note)"
(m) Section 7.2(b) is amended by deleting clause (viii) thereof and
substituting therefor the following:
"(viii) (A) the Senior Notes and (B) the SDW Subordinated Note;"
(n) Section 7.2(f) of the Credit Agreement is amended by deleting clause
(ix) thereof and substituting therefor the following:
"(ix) so long as no Default or Event of Default has occurred and
is continuing or would result therefrom, the SDW Acquisition;
PROVIDED, that the purchase price therefor shall not exceed
$51,770,000 (excluding reasonable costs and expenses incurred in
connection therewith), subject to any purchase price adjustments set
forth in the Asset Purchase Agreement dated as of November 18, 1997
between S.D. Warren Company and the Guarantor, as amended by the First
Amendment dated as of March 17, 1998; and"
(o) Section 7.2(l) is amended by (i) inserting ", the SDW Subordinated
Note, the SDW Subordinated Guaranty" immediately after the phrase "the
Intercompany Subordinated Notes" in each place it appears and (ii) inserting
immediately at the end of such Section a new sentence as follows:
"The Credit Parties will not, nor will they permit any of their
Restricted Subsidiaries, to make any cash payments on account of the SDW
Subordinated Note at any time, except (i) prepayments of the SDW
Subordinated Note to the extent expressly permitted by Section 2.9(d),
(ii) so long as, both before and after giving effect thereto, no Event
of Default has occurred and is continuing and Unused Availability is at
least $15,000,000, prepayments of principal of the SDW Subordinated Note
in accordance with the terms thereof as in effect on March 17, 1998 and
(iii) so long as, both before and after giving effect thereto, no Event
of Default has occurred and is continuing and the Credit Parties would
be in compliance with Section 7.2(u) on a pro forma basis, regularly
scheduled payments of interest on the SDW Subordinated Note in
accordance with the terms thereof as in effect on March 17, 1998."
-6-
<PAGE>
(p) Section 7.2(o) is amended by deleting "create or acquire a
Restricted Subsidiary" and substituting therefor "create SCM and create or
acquire a Restricted Subsidiary."
(q) Section 7.2(t) is amended and restated as follows:
"(t) MINIMUM CONSOLIDATED CURRENT RATIO. The Credit Parties will
not permit the Consolidated Current Ratio, at any time during each
period set forth below, to be less than the ratio set forth below
opposite such period:
<TABLE>
PERIOD RATIO
------ -----
<S> <C>
Closing Date through 1.20:1.00
December 31, 1997
January 1, 1998 through 0.90:1.00
March 31, 1999
April 1, 1999 and thereafter 1.00:1.00"
</TABLE>
(r) Section 7.2(u) is amended and restated as follows:
"(u) MINIMUM CONSOLIDATED INTEREST COVERAGE RATIO. The Credit Parties will
not permit the Consolidated Interest Coverage Ratio, for each fiscal period
set forth below, to be less than the ratio set forth below opposite such
period:
<TABLE>
PERIOD RATIO
------ -----
<S> <C>
April 1, 1997 through 1.25:1.00
March 31, 1998
July 1, 1997 through 1.30:1.00
June 30, 1998
October 1, 1997 through 1.35:1.00
September 30, 1998
January 1, 1998 through 1.40:1.00
December 31, 1998
April 1, 1998 through 1.40:1.00
March 31, 1999
July 1, 1998 through 1.50:1.00
June 30, 1999
October 1, 1998 through 1.60:1.00
September 30, 1999
-7-
<PAGE>
January 1, 1999 through 1.65:1.00
December 31, 1999
April 1, 1999 through 1.65:1.00
March 31, 2000
July 1, 1999 through 1.75:1.00
June 30, 2000
October 1, 1999 through 1.85:1.00
September 30, 2000
January 1, 2000 through 1.90:1.00
December 31, 2000
April 1, 2000 through 1.90:1.00
March 31, 2001
July 1, 2000 through 2.00:1.00
June 30, 2001
October 1, 2000 through 2.10:1.00
September 30, 2001
January 1, 2001 through 2.15:1.00"
December 31, 2001
</TABLE>
(s) Section 7.2(v) is amended and restated as follows:
"(v) CONTINGENT OBLIGATIONS. The Credit Parties shall not, and
shall not permit any of their Restricted Subsidiaries to, directly or
indirectly incur, assume, or suffer to exist any Contingent Obligation,
excluding (i) indemnities given in connection with the sale of Inventory
or other asset dispositions permitted hereunder, (ii) Contingent
Obligations for Indebtedness permitted to be incurred under Section
7.2(b) (excluding Section 7.2(b)(viii)(B)), (iii) the SDW Subordinated
Guaranty and (iv) guaranties, substantially in the form of the SDW
Subordinated Guaranty, made by Restricted Subsidiaries pursuant to
Section 6.4 of the SDW Subordinated Note as in effect on March 17, 1998."
(t) Clause (j) of Section 8.1 is amended by inserting "or in the SDW
Subordinated Note or in the SDW Subordinated Guaranty" immediately after "any
Intercompany Subordinated Note."
-8-
<PAGE>
(u) Section 11.11(a)(i)(F) is amended by inserting "SCM Accounts
Borrowing Base, SCM Inventory Borrowing Base," immediately after the phrase
"the definitions of."
(v) Schedule 1 to the Credit Agreement is amended by (i) deleting
"$20,000,000" from each place it appears and substituting therefor
"$30,000,000" and (ii) deleting "$40,000,000" and substituting therefor
"$60,000,000."
(w) Schedule 6.1(a) to the Credit Agreement is amended and restated in
the form of Annex I hereto.
(x) Schedule 6.1(k) to the Credit Agreement is amended and restated in
the form of Annex II hereto.
(y) Schedule 6.1(l)(i) to the Credit Agreement is amended and restated in
the form of Annex III hereto.
(z) Schedule 6.1(l)(ii) to the Credit Agreement is amended and restated
in the form of Annex IV hereto.
(aa) Schedule 6.1(p) to the Credit Agreement is amended and restated in
the form of Annex V hereto.
(ab) Schedule 6.1(r) to the Credit Agreement is amended and restated in
the form of Annex VI hereto.
(ac) Schedule 6.1(v) to the Credit Agreement is amended and restated in
the form of Annex VII hereto.
(ad) Schedule 6.1(w) to the Credit Agreement is amended and restated in
the form of Annex VIII hereto.
(ae) Schedule 6.1(x) to the Credit Agreement is amended and restated in
the form of Annex IX hereto.
(af) Schedule 7.2(P) to the Credit Agreement is amended and restated in
the form of Annex X hereto.
(ag) Exhibit M to the Credit Agreement is amended and restated in the form
of Annex XI hereto.
(ah) Exhibits B, C, D, E, F and N of the Credit Agreement are each amended
by including therein a reference to Spinnaker Coating-Maine, Inc., as the
context may require, and each reference to "Borrowers" in such Exhibits shall
include Spinnaker Coating-Maine, Inc.
-9-
<PAGE>
SECTION 2. CONDITIONS PRECEDENT This Amendment shall become effective
upon the Agent's receipt of this Amendment, duly executed by each Borrower,
the Guarantor (collectively, the "CREDIT PARTIES"), the Issuing Bank, the
Agent, the Collateral Agent and the Lenders, and upon the Lenders' receipt of
(x) the amounts payable under Section 7 hereof and (y) the amounts set forth
in the Fee Letter dated November 18, 1997, as amended, from the Lenders to
the Existing Borrowers and the Guarantor. Section 1 hereof shall become
effective when, and only when, the Agent shall have additionally received all
of the following on or before March 31, 1998, each of which shall be in form
and substance satisfactory to the Agent and the Collateral Agent
(collectively, the "Agents"):
(a) Certified copies of (i) the resolutions of the Board of Directors of
each Credit Party approving this Amendment, the documents delivered in
connection herewith and the matters contemplated hereby and thereby, (ii) all
documents evidencing other necessary corporate actions and governmental
approvals, if any, with respect to this Amendment, the Purchase Agreement and
the transactions contemplated hereby and thereby, (iii) executed copies of
the SDW Subordinated Note and the SDW Subordinated Guaranty and (iv) executed
copies of the Purchase Agreement (including the amendment thereto) and all
material documents and agreements executed in connection therewith
(including, without limitation, the Site Separation and Services Agreement,
the Declaration of Reciprocal Easements, Restrictions and Covenants, the Site
Lease and the Space Lease).
(b) A certificate of the Secretary or an Assistant Secretary of each
Credit Party certifying the names and true signatures of the officers of such
Credit Party who are authorized to sign this Amendment and the documents
delivered in connection herewith to which such Credit Party is a party.
(c) A certificate of good standing of SCM from the Secretary of State of
Delaware.
(d) A copy of the Governing Documents of SCM, attached to which is a
certificate of the Secretary or an Assistant Secretary of SCM certifying that
such copies are true, complete and accurate and that the same have not been
amended or modified and are in full force and effect.
(e) (i) An opinion of Haynes and Boone, counsel for the Credit Parties,
covering such matters relating to this Amendment as the Agent shall
reasonably request and (ii) an opinion of Verrill & Dana, special Maine
counsel to the Credit Parties, covering such matters relating to this
Amendment as the Agent shall reasonably request.
-10-
<PAGE>
(f) A certificate signed by a duly authorized officer of the Guarantor
certifying that (i) the representations and warranties contained in Section 3
hereof are true and correct on and as of the date of such certificate as
though made on and as of such date, (ii) the representations and warranties
contained in Section 6.1 of the Credit Agreement are true and correct (after
giving effect to SCM as a Borrower thereunder) on and as of the date of such
certificate as though made on and as of such date, except to the extent that
such representations and warranties expressly relate solely to an earlier
date (in which case such representations and warranties shall have been true
and correct on and as of such earlier date) and (iii) no Default or Event of
Default has occurred and is continuing.
(g) Evidence that (i) the transactions contemplated by the Purchase
Agreement have closed on terms and pursuant to documentation satisfactory to
the Agents, and that the purchase price of the Acquired Business does not
exceed $44,770,000 in cash and $7,000,000 in the form of the SDW Subordinated
Note (subject to purchase price adjustments set forth in the Purchase
Agreement), and (ii) the assets constituting the Acquired Business are free
and clear of all Liens except for Liens permitted by the Credit Agreement.
(h) Appropriate Uniform Commercial Code financing statements (naming the
Agent as secured party and SCM and Central as debtors), appropriate UCC-3
amendments reflecting the name change of Brown-Bridge Industries, Inc., and
appropriate UCC-3 termination statements and other releases (including a lien
release letter from Chemical Bank, now known as The Chase Manhattan Bank).
(i) A certificate executed by the chief financial officer of each Credit
Party to the effect that such Credit Party is solvent after giving effect to
the transactions contemplated by this Amendment and the Purchase Agreement.
(j) (i) Audited financial statements (including an income statement,
cash flow statement and balance sheet) of the Acquired Business for the
fiscal year ended September 30, 1997, prepared in accordance with GAAP and
accompanied by an unqualified opinion of Ernst & Young and/or Deloitte &
Touche, which financial statements shall reveal results at least as favorable
as the historical PRO FORMA financial statements of the Acquired Business
previously delivered to the Agents, (ii) a PRO FORMA balance sheet of the
Guarantor and its Subsidiaries as of September 30, 1997, adjusted to give
effect to the closing of the Purchase Agreement and the transactions
contemplated thereby, and (iii) to the extent heretofore delivered to the
Guarantor, all of the financial statements, notes thereto and reports thereon
described in Sections 5.5 and 12.6(a) of the Purchase Agreement.
-11-
<PAGE>
(k) A duly executed PRO FORMA Borrowing Base Certificate as of the date
hereof, after giving effect to the closing of the Purchase Agreement and the
transactions contemplated thereby.
(l) Collateral Access Agreements, duly executed by SDW with respect to
each parcel of property leased by SDW or its Affiliates to a Credit Party.
(m) A Lockbox Agreement, substantially in the form of Exhibit A, duly
executed by SCM and the lockbox bank party thereto.
(n) Revolving Notes substantially in the form of Exhibit B, duly executed
by SCM in favor of each Lender.
(o) The business plan of the Credit Parties, together with a certificate
of an Authorized Officer certifying that such business plan has been prepared
in good faith based upon the assumptions contained therein and all
information currently available to it and that such Authorized Officer is not
aware of any information contained in such business plan which is false or
misleading, which business plan shall reveal results at least as favorable as
the draft projections for the Acquired Business previously delivered to the
Agents.
(p) A certificate of insurance naming the Agent as loss payee and an
additional insured.
(q) Evidence that, after giving effect to the Loans to be made on the
effective date of this Amendment, there will be Unused Availability in an
amount satisfactory to the Agents.
(r) An amendment to the Security Agreement, substantially in the form of
Exhibit C, duly executed by each Credit Party.
(s) A consent to collateral assignment, substantially in the form of
Exhibit D, duly executed by SDW.
(t) An amendment to the Guaranty, substantially in the form of Exhibit E,
duly executed by the Guarantor.
(u) An amendment to the Contribution Agreement, substantially in the form
of Exhibit F, duly executed by each Borrower.
-12-
<PAGE>
(v) A certificate of amendment to the certificate of incorporation of
Brown-Bridge Industries, Inc., certified by the Secretary of State of
Delaware, showing that it changed its name to Spinnaker Coating, Inc.
(w) Such other documents, instruments, opinions, materials and
information as the Agent or the Collateral Agent may reasonably request.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE CREDIT PARTIES. Each
of the Credit Parties represents and warrants as follows:
(a) The execution, delivery and performance by such Credit Party of this
Amendment and the documents delivered in connection herewith to which such
Credit Party is a party (i) are within such Credit Party's corporate powers
and authority, have been duly authorized by all necessary corporate action
and do not contravene (A) such Credit Party's Governing Documents, (B) any
Requirement of Law applicable to it or any of its properties or (C) any
franchise, license, permit, indenture, contract, lease, agreement, instrument
or other commitment to which it is a party or by which it or any of its
properties are bound, (ii) will not result in a Default or an Event of
Default and (iii) will not result in or require the creation or imposition of
any Lien upon or with respect to any property now owned or hereafter acquired
by such Credit Party (other than Liens permitted by the Credit Agreement).
(b) This Amendment and the documents delivered in connection herewith to
which such Credit Party is a party constitute the legal, valid and binding
obligations of such Credit Party enforceable against such Credit Party in
accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency or similar laws affecting creditor's rights generally
and general principles of equity.
(c) There is no pending or, to the best of its knowledge, threatened
litigation, proceeding, inquiry or other action seeking an injunction or
other restraining order, damages or other relief with respect to the
transactions contemplated by this Amendment, the Purchase Agreement or the
transactions contemplated hereby and thereby or any Credit Party's other
business activities.
(d) Since September 30, 1997, there has occurred no material adverse
change in the financial condition, operations, assets or prospects of the
Acquired Business.
-13-
<PAGE>
(e) (i) All consents, filings and approvals required in connection with
execution, delivery and performance by SDW or any Credit Party of the
Purchase Agreement and the documents delivered in connection therewith to
which it is a party have been obtained or made and are in full force and
effect, except such consents, filings and approvals which, if not obtained or
made, could not reasonably be expected to have a Material Adverse Effect or a
material adverse effect on the financial condition, operations, assets or
prospects of the Acquired Business, and (ii) all applicable waiting periods
(including, without limitation, under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976) have expired without any action being taken by any
competent authority.
SECTION 4. ADDITION OF SCM AS BORROWER. By executing this Amendment,
SCM (a) agrees and acknowledges that it shall be obligated as a Borrower
under the Credit Agreement and (b) agrees to be bound by all of the terms and
conditions set forth in the Credit Agreement and the other Credit Documents
applicable to a Borrower, in each case as if SCM were an original signatory
to the Credit Agreement.
SECTION 5. REFERENCE TO AND EFFECT ON THE CREDIT DOCUMENTS.
(a) Upon the effectiveness of this Amendment, on and after the date
hereof, each reference in the Credit Agreement to (i) "this Agreement,"
"hereunder," "hereof," "herein" and words of like import, and such words or
words of like import in each reference in the Credit Documents, shall mean
and be a reference to the Credit Agreement as amended hereby.
(b) Except as specifically amended hereby, all of the terms and
provisions of the Credit Agreement shall remain in full force and effect and
are hereby ratified and confirmed.
(c) The execution, delivery and effectiveness of this Amendment shall
not, except as expressly provided herein, operate as an amendment to or a
waiver of any right, power or remedy of the Agent or the Lenders under any of
the Credit Documents, or constitute an amendment to or a waiver of any
provision of any of the Credit Documents.
(d) This Amendment shall be deemed to be a Credit Document for all
purposes.
SECTION 6. EXECUTION IN COUNTERPARTS; ETC. This Amendment may be
executed in counterparts each of which when so executed and delivered shall
be deemed to be an original and all of which taken together shall constitute
one and the same instrument. This Amendment and each of the other documents
delivered in connection herewith may be executed and delivered by
-14-
<PAGE>
telecopier with the same force and effect as if the same was a fully executed
and delivered original manual counterpart.
SECTION 7. EXPENSES. The Borrowers shall, jointly and severally, pay
for all of the reasonable costs and expenses incurred by the Agent and the
Collateral Agent in connection with the transactions contemplated by this
Amendment, including, without limitation, the reasonable fees and expenses of
counsel to the Agent.
SECTION 8. GOVERNING LAW. THE VALIDITY, INTERPRETATION AND ENFORCEMENT
OF THIS AMENDMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK
WITHOUT GIVING EFFECT TO THE CONFLICTS OF LAW PRINCIPLES THEREOF (OTHER THAN
SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW).
[Remainder of page intentionally left blank]
-15-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized as of the
date first above written.
BORROWERS
CENTRAL PRODUCTS COMPANY
By: /s/ Mark R. Matteson
-------------------------------------
Name: Mark R. Matteson
Title: Vice President
SPINNAKER COATING, INC.,
formerly known as
BROWN-BRIDGE INDUSTRIES, INC.
By: /s/ Mark R. Matteson
-------------------------------------
Name: Mark R. Matteson
Title: Vice President
ENTOLETER, INC.
By: /s/ Mark R. Matteson
-------------------------------------
Name: Mark R. Matteson
Title: Vice President
SPINNAKER COATING-MAINE, INC.
By: /s/ Mark R. Matteson
-------------------------------------
Name: Mark R. Matteson
Title: Vice President
GUARANTOR
SPINNAKER INDUSTRIES, INC.
By: /s/ Mark R. Matteson
-------------------------------------
Name: Mark R. Matteson
Title: Vice President,
Corporate Development
[Signature page to Fifth Amendment]
-16-
<PAGE>
AGENT
BT COMMERCIAL CORPORATION, as Agent
By: /s/ Bruce W. Addison
-------------------------------------
Name: Bruce W. Addison
Title: Vice President
COLLATERAL AGENT
TRANSAMERICA BUSINESS CREDIT
CORPORATION, as Collateral Agent
By: /s/ Robert Heinz
-------------------------------------
Name: Robert Heinz
Title: Senior Vice President
ISSUING BANK
BANKERS TRUST COMPANY, as Issuing Bank
By: /s/ Bruce W. Addison
-------------------------------------
Name: Bruce W. Addison
Title: Vice President
LENDERS
BT COMMERCIAL CORPORATION
By: /s/ Bruce W. Addison
-------------------------------------
Name: Bruce W. Addison
Title: Vice President
TRANSAMERICA BUSINESS CREDIT CORPORATION
By: /s/ Robert Heinz
-------------------------------------
Name: Robert Heinz
Title: Senior Vice President
[Signature page to Fifth Amendment]
-17-
<PAGE>
SIXTH AMENDMENT TO CREDIT AGREEMENT
THIS SIXTH AMENDMENT (this "AMENDMENT"), to the Credit Agreement dated as
of October 23, 1996, among CENTRAL PRODUCTS COMPANY, a Delaware corporation
("CENTRAL"), SPINNAKER COATING, INC., a Delaware corporation formerly known as
Brown-Bridge Industries, Inc. ("COATING"), SPINNAKER COATING-MAINE, INC., a
Delaware corporation ("SCM"), ENTOLETER, INC., a Delaware corporation
("ENTOLETER" and, together with Central, Coating and SCM, the "BORROWERS"),
SPINNAKER INDUSTRIES, INC., a Delaware corporation (the "GUARANTOR"), each of
the financial institutions from time to time parties thereto, as lenders (the
"LENDERS"), BT COMMERCIAL CORPORATION, as agent (in such capacity, the "AGENT")
for the Lenders, TRANSAMERICA BUSINESS CREDIT CORPORATION, as collateral agent
(in such capacity, the "COLLATERAL AGENT"), and BANKERS TRUST COMPANY, as
issuing bank (the "ISSUING BANK"), is made as of March 17, 1998 among the
Borrowers, the Guarantor, the Agent, the Collateral Agent, the Issuing Bank and
the Lenders.
W I T N E S S E T H :
WHEREAS, the Borrowers, the Guarantor, the Lenders, the Agent, the
Collateral Agent and the Issuing Bank are parties to the Credit Agreement, dated
as of October 23, 1996 (as amended by the First Amendment dated as of
December 31, 1996, the Second Amendment dated as of March 31, 1997, the Third
Amendment dated as of September 30, 1997, the Fourth Amendment dated as of
December 31, 1997 and the Fifth Amendment dated as of even date herewith and as
the same may be further amended, supplemented or otherwise modified from time to
time, the "CREDIT AGREEMENT"; capitalized terms used herein shall have the
meanings assigned to them in the Credit Agreement unless otherwise defined
herein);
WHEREAS, the Borrowers and the Guarantor have requested that the Lenders
agree to amend the Credit Agreement to increase the amount of Capital
Expenditures permitted under 7.2(r) thereof; and
WHEREAS, the Lenders are agreeable to such amendments, but only on the
terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the parties hereto hereby agree as follows:
<PAGE>
SECTION 1. AMENDMENT TO CREDIT AGREEMENT. Effective as of December 31,
1997, but subject to the satisfaction of the condition precedent set forth in
Section 2, clause (i) of Section 7.2(r) of the Credit Agreement is amended by
deleting "July 1, 1997 through December 31, 1997 $4,000,000
for each six month period thereafter $5,000,000."
and substituting therefor the following:
<TABLE>
<S> <C>
"July 1, 1997 through December 31, 1997 $5,500,000
January 1, 1998 through June 30, 1998 $6,000,000
July 1, 1998 through December 31, 1998 $6,000,000
For each six month period thereafter $5,000,000."
</TABLE>
SECTION 2. CONDITION PRECEDENT This Amendment shall become effective
upon the Agent's receipt of this Amendment, duly executed by each Borrower,
the Guarantor (collectively, the "CREDIT PARTIES"), the Issuing Bank, the
Agent, the Collateral Agent and the Lenders.
SECTION 3. REFERENCE TO AND EFFECT ON THE CREDIT DOCUMENTS.
(a) Upon the effectiveness of this Amendment, on and after the date
hereof, each reference in the Credit Agreement to (i) "this Agreement,"
"hereunder," "hereof," "herein" and words of like import, and such words or
words of like import in each reference in the Credit Documents, shall mean
and be a reference to the Credit Agreement as amended hereby.
(b) Except as specifically amended hereby, all of the terms and
provisions of the Credit Agreement shall remain in full force and effect and
are hereby ratified and confirmed.
(c) The execution, delivery and effectiveness of this Amendment shall
not, except as expressly provided herein, operate as an amendment to or a
waiver of any right, power or remedy of the Agent or the Lenders under any of
the Credit Documents, or constitute an amendment to or a waiver of any
provision of any of the Credit Documents.
(d) This Amendment shall be deemed to be a Credit Document for all
purposes.
SECTION 4. EXECUTION IN COUNTERPARTS; ETC. This Amendment may be
executed in counterparts each of which when so executed and delivered shall
be deemed to be an original and all of which taken together shall constitute
one and the same instrument. This Amendment and each of the other documents
delivered in connection herewith may be executed and delivered by telecopier
with the same force and effect as if the same was a fully executed and
delivered original manual counterpart.
-2-
<PAGE>
SECTION 5. EXPENSES. The Borrowers shall, jointly and severally, pay
for all of the reasonable costs and expenses incurred by the Agent and the
Collateral Agent in connection with the transaction contemplated by this
Amendment, including, without limitation, the reasonable fees and expenses of
counsel to the Agent.
SECTION 6. GOVERNING LAW. THE VALIDITY, INTERPRETATION AND ENFORCEMENT
OF THIS AMENDMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK
WITHOUT GIVING EFFECT TO THE CONFLICTS OF LAW PRINCIPLES THEREOF (OTHER THAN
SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW).
[Remainder of page intentionally left blank]
-3-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized as of the date
first above written.
BORROWERS
CENTRAL PRODUCTS COMPANY
By: /s/ Mark R. Matteson
------------------------------
Name: Mark R. Matteson
Title: Vice President
SPINNAKER COATING, INC.,
formerly known as
BROWN-BRIDGE INDUSTRIES, INC.
By: /s/ Mark R. Matteson
------------------------------
Name: Mark R. Matteson
Title: Vice President
ENTOLETER, INC.
By: /s/ Mark R. Matteson
------------------------------
Name: Mark R. Matteson
Title: Vice President
SPINNAKER COATING-MAINE, INC.
By: /s/ Mark R. Matteson
------------------------------
Name: Mark R. Matteson
Title: Vice President
GUARANTOR
SPINNAKER INDUSTRIES, INC.
By: /s/ Mark R. Matteson
------------------------------
Name: Mark R. Matteson
Title: Vice President,
Corporate Development
[Signature page to Sixth Amendment]
-4-
<PAGE>
AGENT
BT COMMERCIAL CORPORATION, as Agent
By: /s/ Stephen R. Lapidus
------------------------------
Name: Stephen R. Lapidus
Title: Associate
COLLATERAL AGENT
TRANSAMERICA BUSINESS CREDIT
CORPORATION, as Collateral Agent
By: /s/ Robert Heinz
------------------------------
Name: Robert Heinz
Title: Senior Vice President
ISSUING BANK
BANKERS TRUST COMPANY, as Issuing
Bank
By: /s/ Stephen R. Lapidus
------------------------------
Name: Stephen R. Lapidus
Title: Associate
LENDERS
BT COMMERCIAL CORPORATION
By: /s/ Stephen R. Lapidus
------------------------------
Name: Stephen R. Lapidus
Title: Associate
TRANSAMERICA BUSINESS CREDIT
CORPORATION
By: /s/ Robert Heinz
------------------------------
Name: Robert Heinz
Title: Senior Vice President
[Signature page to Sixth Amendment]
-5-
<PAGE>
FIRST SUPPLEMENTAL INDENTURE
This First Supplemental Indenture (herein so called) is dated as of
March 17, 1998, among Spinnaker Industries, Inc., a Delaware corporation (the
"Company"), Central Products Company, a Delaware corporation, Spinnaker
Coating, Inc., a Delaware corporation, formerly known as Brown-Bridge
Industries, Inc., Entoleter, Inc., a Delaware corporation, Spinnaker
Coating-Maine, Inc., a Delaware corporation ("SCMI"), and The Chase Manhattan
Bank, a banking corporation organized and existing under the laws of the
State of New York, as Trustee. Each defined term used herein shall have the
meaning assigned to it in the Indenture (hereinafter defined), unless the
context hereof otherwise requires or provides.
RECITALS
1 As of October 23, 1996, the Company, the Guarantors and the Trustee
executed an Indenture (the "Indenture") providing for the issuance of
$115,000,000 of the Company's 10 3/4% Senior Secured Notes Due 2006, Series B
(the "Securities").
2 Section 4.17 of the Indenture permits, among other things,
Restricted Subsidiaries to guarantee Indebtedness if the Restricted
Subsidiary becomes a Guarantor by executing a supplemental indenture in which
such Restricted Subsidiary agrees to be bound by the terms of the Indenture
as a Guarantor and executes a Guarantee.
3 SCMI is a Restricted Subsidiary that proposes to guarantee certain
indebtedness of the Company.
4 Section 9.01(a)(iv) of the Indenture permits the Indenture to be
amended or supplemented to add Guarantees with respect to the Securities
without the consent of any Securityholder.
5 The Company, the Guarantors, SCMI, and the Trustee agree as follows
for the benefit of each other and for the equal and ratable benefit of the
Holders of the Securities:
ARTICLE 1
ADDITIONAL GUARANTOR
Section 1.01 GUARANTY. SCMI, by executing this First Supplemental
Indenture, agrees to be bound by the terms of the Indenture as a Guarantor
and agrees to execute a Guarantee.
FIRST SUPPLEMENTAL INDENTURE PAGE 1
<PAGE>
Section 1.02 SCHEDULE I. Schedule I to the Indenture is amended by
adding the following:
REGISTERED OWNER
DESCRIPTION OF SHARES ISSUER (AND PLEDGOR)
--------------------- ------ -----------
1,000 shares of Spinnaker Coating-- Spinnaker
Common Stock Maine, Inc. Coating, Inc.
ARTICLE 2
MISCELLANEOUS
Section 2.01 FURTHER ASSURANCES. The parties will execute and deliver
such further instruments and do such further acts and things as may be
reasonably required to carry out the intent and purpose of this First
Supplemental Indenture.
Section 2.02 TRUST INDENTURE ACT CONTROLS. If any provision of this
First Supplemental Indenture limits, qualifies, or conflicts with another
provision hereof that is required to be included in this First Supplemental
Indenture by the TIA, the required provision shall control.
Section 2.03 COUNTERPART ORIGINALS. This First Supplemental
Indenture may be executed in any number of counterparts, each of which so
executed shall be an original, but all of them together represent the same
agreement.
Section 2.04 HEADINGS. Headings of the Articles and Sections of this
First Supplemental Indenture have been inserted for convenience of reference
only, are not to be considered a part of this First Supplemental Indenture,
and shall in no way modify or restrict any of the terms or provisions hereof.
Section 2.05 GOVERNING LAW. This First Supplemental Indenture shall
be governed by, and construed in accordance with, the laws of the State of
New York but without giving effect to applicable principles of conflicts of
law to the extent that the application of the laws of another jurisdiction
would be required thereby.
Section 2.06 SUCCESSORS. All agreements of the Company, the
Guarantors, and the Trustee in this First Supplemental Indenture shall bind
their successors.
Section 2.07 SEVERABILITY. In case any provision in this First
Supplemental Indenture 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.
FIRST SUPPLEMENTAL INDENTURE PAGE 2
<PAGE>
Section 2.08 INDENTURE REMAINS IN FULL FORCE AND EFFECT. Except to
the extent amended hereby or in connection herewith, all terms, provisions
and conditions of the Indenture, and all documents executed in connection
therewith, shall continue in full force and effect and shall remain
enforceable and binding in accordance with their terms. Except as
specifically modified herein, the Indenture remains unchanged and in full
force and effect.
Section 2.09 NO THIRD PARTY BENEFITS. Nothing in this First
Supplemental Indenture, express or implied, shall give to any Person, other
than the parties hereto and their successors under the Indenture, and the
Holders of the Securities, any benefit or any legal or equitable right,
remedy or claim under the Indenture.
Section 2.10 THE TRUSTEE. The Trustee shall not be responsible in any
manner for or in respect of the validity or sufficiency of this First
Supplemental Indenture, or for or in respect of the recitals contained
herein, all of which recitals are made by the Company solely.
IN WITNESS WHEREOF, the parties hereto have caused this First
Supplemental Indenture to be duly executed as of the date first written above.
SPINNAKER INDUSTRIES, INC.
By: /s/ Mark R. Matteson
-------------------------------
Name: Mark R. Matteson
-----------------------------
Title: Vice President,
Corporate Development
-----------------------------
CENTRAL PRODUCTS COMPANY
By: /s/ Mark R. Matteson
-------------------------------
Name: Mark R. Matteson
-----------------------------
Title: Vice President
-----------------------------
FIRST SUPPLEMENTAL INDENTURE PAGE 3
<PAGE>
SPINNAKER COATING, INC.
By: /s/ Mark R. Matteson
-------------------------------
Name: Mark R. Matteson
-----------------------------
Title: Vice President
-----------------------------
ENTOLETER, INC.
By: /s/ Mark R. Matteson
-------------------------------
Name: Mark R. Matteson
-----------------------------
Title: Vice President
-----------------------------
SPINNAKER COATING-MAINE, INC.
By: /s/ Mark R. Matteson
-------------------------------
Name: Mark R. Matteson
-----------------------------
Title: Vice President
-----------------------------
THE CHASE MANHATTAN BANK, as Trustee
By: /s/ Glenn G. McKeever
-------------------------------
Name: Glenn G. McKeever
-----------------------------
Title: Senior Trust Officer
-----------------------------
FIRST SUPPLEMENTAL INDENTURE PAGE 4
