AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 23, 1996
REGISTRATION NO. 333-_____
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
BRUNSWICK TECHNOLOGIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MAINE 2221
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(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER)
01-0402052
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(I.R.S. EMPLOYER IDENTIFICATION NO.)
43 Bibber Parkway, Brunswick Maine 04011 (207) 729-7792
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(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
MARTIN S. GRIMNES
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
43 BIBBER PARKWAY
BRUNSWICK, MAINE 04011
(207) 729-7792
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(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
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THE COMMISSION IS REQUESTED TO SEND COPIES OF ALL COMMUNICATIONS TO:
MARIANNE GILLERAN, ESQ. VICTOR J. PACI, ESQ.
GADSBY & HANNAH LLP BINGHAM, DANA & GOULD LLP
125 SUMMER STREET 150 FEDERAL STREET
BOSTON, MASSACHUSETTS 02110 BOSTON, MA 02110
(617) 345-7000 (617) 951-8000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As
soon as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
- ------------------------------------------- ------------------- ------------------------ ----------------------- -------------------
TITLE OF EACH CLASS OF AMOUNT TO BE PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED OFFERING PRICE AGGREGATE OFFERING REGISTRATION FEE
PER SHARE (1) PRICE
- ------------------------------------------- ------------------- ------------------------ ----------------------- ===================
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Common Stock, $0.0001 par value 2,587,500(2) $8.00 $20,700,000 $7,138
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(1) Estimated solely for the purpose of calculating the amount of the registration fee pursuant to Rule 457(a)
promulgated under the Securities Act of 1933, as amended.
(2) Includes 337,500 shares subject to the Underwriters' over-allotment option.
</TABLE>
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT WILL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A)
MAY DETERMINE.
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BRUNSWICK TECHNOLOGIES, INC.
CROSS-REFERENCE SHEET SHOWING LOCATION IN PROSPECTUS OF
INFORMATION REQUIRED BY ITEMS OF FORM S-1
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FORM S-1 REGISTRATION STATEMENT ITEM AND HEADING LOCATION IN PROSPECTUS
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Item 1. Forepart of Registration Forepart of Registration
Statement and Outside Front Statement and cover page
Cover Page of Prospectus.....................................of Prospectus
Item 2. Inside Front and Outside Back Cover Inside front and outside back
Pages of Prospectus..........................................cover pages of Prospectus
Item 3. Summary Information, Risk Factors
and Ratio of Earnings to Fixed
Charges......................................................"Prospectus Summary"
Item 4. Use of Proceeds................................................"Use of Proceeds"
Item 5. Determination of Offering Price................................"Underwriting"
Item 6. Dilution......................................................."Dilution"
Item 8. Plan of Distribution...........................................Cover Page and "Underwriting"
Item 9. Description of Securities to be
Registered..................................................."Description of Capital Stock"
Item 10. Interests of Named Experts and Counsel........................."Legal Matters"
Item 11. Information with Respect to the "Prospectus Summary-The Company"
Registrant..................................................."-Summary Financial Information;"
"Capitalization;" "Selected Financial
Information;" "Management's Discussion and
Analysis of Financial Condition and Results of
Operations;" "Business;" "Management;"
"Principal Stockholders;" "Certain
Transactions;" "Changes in Independent
Accountants" and "Experts"
Item 12. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities..................................................Not applicable
</TABLE>
SUBJECT TO COMPLETION, DATED AUGUST 23, 1996
PROSPECTUS
BRUNSWICK TECHNOLOGIES, INC.
2,250,000 SHARES
COMMON STOCK
Brunswick Technologies, Inc. ("BTI" or the "Company") hereby offers
2,250,000 shares of Common Stock, $0.0001 par value (the "Common Stock"). Prior
to the offering described herein (the "Offering"), there has been no public
market for the Common Stock and there can be no assurance that a market will
develop after completion of the Offering, or that if developed, it will be
sustained. The Company has applied to list the Common Stock on the NASDAQ
National Market under the symbol "BTIC." It is currently estimated that the
initial public offering price will be between $6.00 and $8.00 per share. See
"Underwriting" for a discussion of the factors that will be considered in
determining the initial public offering price.
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SEE "RISK FACTORS" BEGINNING ON PAGE 8 FOR CERTAIN INFORMATION WHICH
SHOULD BE CAREFULLY
CONSIDERED BY INVESTORS BEFORE PURCHASING SHARES OF THE
COMMON STOCK OFFERED HEREBY.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
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Price to Underwriting Proceeds to
Public Discounts(1) Company(2)
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<S> <C> <C> <C>
Per Share........................................ $ $ $
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Total(3)......................................... $ $ $
======================================================= ======================== ======================= =======================
(1) Does not include additional cash compensation to Josephthal Lyon & Ross Incorporated (the "Representative") in the
form of a non-accountable expense allowance. In addition, see "Underwriting" for information concerning
indemnification and contribution arrangements with the Underwriters and other compensation payable to the
Representative.
(2) Before deducting expenses payable by the Company estimated to be $500,000, including the non-accountable expense
allowance payable to the Representative.
(3) The Company has granted the Underwriters an option, exercisable within 45 days of the consummation of the Offering,
to purchase up to 337,500 additional shares of Common Stock, on the terms set forth above, solely to cover
over-allotments, if any. If such option is exercised in full, the total Price to Public, Underwriting Discounts, and
Proceeds to Company will be $ , $ , and $ , respectively. See "Underwriting."
</TABLE>
The Common Stock is being offered by the Underwriters, subject to prior
sale, when, as and if delivered to and accepted by the Underwriters, and subject
to approval of certain legal matters by their counsel and to certain other
conditions. The Underwriters reserve the right to withdraw, cancel or modify the
Offering and to reject any order in whole or in part. It is expected that
delivery of the Common Stock offered hereby will be made against payment at the
offices of Josephthal Lyon & Ross Incorporated, New York, New York on or about ,
1996.
JOSEPHTHAL LYON & ROSS INCORPORATED
THE DATE OF THIS PROSPECTUS IS ______________, 1996
PHOTOS AND GRAPHICS
The inside front cover fold-out of the prospectus contains 13
photographs, one illustration, text, and the Company's logo in the upper right
hand corner.
The photography caption reads: "Surrounding our unique manufacturing
process are examples of innovative applications using optimized BTI
reinforcements. Clockwise from above: Assembly of the first 68 foot, two piece
insulated composite boxcar using the SCRIMPsm manufacturing process; boxcar
ready for endurance testing (Spring 1995); underground petroleum tanks
constructed from composite reinforcement fiber (2); a Norwegian made composite
wellhead cover for North Sea oil exploration (2); new hollow Hardshaft(R)
composite marine pilings (2); a 130 feet mega-yacht under construction using BTI
BiTex(R) materials (4); BTI's stitchbonding process at work (center)."
The illustration shows differences between various manufacturing
techniques and the text states: "THE PERFECT LAMINATING PROCESS WOULD COMBINE:";
"EFFICIENT, UNIFORM DISTRIBUTION OF CHOPPED FIBERS WITHOUT BINDER"; "STRAIGHT
FIBER ORIENTATION"; "LABOR-SAVING LAMINATED MULTIPLE LAYERS"; "NOT SPRAYED ON";
"NOT CRIMPED"; "NOT WOVEN THEN SPRAYED"; "BTI COMBINES THESE FEATURES IN A
ONE-STEP PROCESS REDUCING THE TOTAL COST OF YOUR LAMINATES: BINDERLESS MAT TO
MINIMIZE BLISTERING; FLAT, NON-CRIMPED REINFORCING FIBERS; FASTER WET-OUT; LOW
RESIN CONSUMPTION".
There is also text that reads "THE CHOICE IS SIMPLE.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMPANY'S
COMMON STOCK AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET AND
OTHER MARKETS. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements, including the notes thereto, appearing
elsewhere in this Prospectus. Investors should carefully consider the
information set forth under the heading "Risk Factors." Investors should refer
to a Glossary of Technical Terms on page 53 for a description of certain
technical terms used in this Prospectus.
THE COMPANY
Brunswick Technologies, Inc. ("BTI" or the "Company") is a
technologically advanced, leading developer and manufacturer of stitchbonded
engineered composite reinforcement fabrics made from glass, carbon and other
fibers which are used by composite fabricators. The Company's principal strength
lies in its innovative quadraxial single-step stitchbonding operation, through
which it can quickly and cost effectively produce engineered composite
reinforcement fabrics in sizes and shapes beyond the capability of the
competition. Fabrics created from the Company's proprietary manufacturing
operations offer characteristics imperative to facilitate the use of composite
materials in infrastructure, industrial and large scale commercial applications.
As a result of BTI's ability to create and market cost-effective superior
quality fabrics, it recorded revenues of $15.5 million for 1995, a 61% increase
over revenues for 1994. Additionally, revenues for the first six months of 1996
have increased by 33% over revenues for the same period in 1995.
BTI has introduced a process that not only more efficiently creates
composite reinforcement fabrics, but also optimizes the performance
characteristics of such fabrics. In a proprietary single-step production
process, the Company is able to stitchbond fibers in different directions
without diminishing the composite fibers' inherent properties, thus dramatically
improving the structural strength of the composite reinforcement fabric. This
compares favorably, firstly, with traditional composite fabrics which are woven,
and therefore require the use of more resin, and secondly, with the more costly
multi-step processes of other knitting or stitchbonding manufacturing
technologies used by competitors. In addition, the Company's proprietary, high
through-put manufacturing processes have the ability to produce heavyweight
quadraxial fabrics over 100 inches wide in a single-step process which allows
for cost-effective fabrication of composite parts of up to 10 inches thick. The
combination of these features produces fabrics which enable composite
fabricators to manufacture end-products at a competitive cost while maintaining
maximum structural integrity.
Composite products offer substantial benefits over conventional
materials such as steel, concrete and wood. Such benefits include: a higher
strength-to-weight ratio, greater design flexibility while maintaining
structural integrity, chemically inert properties and lower maintenance
requirements. As a result of their superior features, composite reinforcement
fabrics are increasingly demanded by a growing number of industries and
applications, including transportation, infrastructure, recreation,
petro-chemical and construction. Management believes the use of engineered
composite reinforcement fabrics will continue to grow as the market is made more
aware of the positive features of such materials and as the cost of more
advanced composite fibers such as carbon continues to decline.
-3-
BTI is currently participating in several significant joint ventures
and projects. The Company is working with E.I. DuPont de Nemours and Company,
Inc., Hardcore Composites Ltd., The Dow Chemical Company and Johns Hopkins
University in an effort to create heavyweight composites for industrial
applications such as marine pilings, bridges, rail cars and shipping containers.
The Company has also entered into two research agreements with the University of
Maine, the first of which is to develop a composite alternative to plywood, and
the second of which is to develop composites for very thick applications
adaptable to large sub-marine structures. Additionally, BTI is working with
Maritime Senor, a division of ASEA Brown Boveri S.A., to develop offshore
well-head covers and pipeline protection structures. The Company is also
negotiating with Norsk Hydro A.S., one of the largest North Sea oil operators,
towards making greater use of composite structures in the off-shore oil
industry.
The Company has a corporate collaboration with Vetrotex CertainTeed
Corp. ("Vetrotex"), the U.S. fiberglass manufacturing arm of Saint Gobain S.A.,
the largest materials and construction company in Europe. This collaboration
includes a significant equity ownership by Vetrotex in BTI, a supply arrangement
whereby the Company purchases a majority of its fiberglass needs from Vetrotex
and a provision for BTI to have access to certain new products from Vetrotex
which the Company believes to be of significant importance for its own new
product development.
During 1996, the Company moved into a new, state-of-the-art, 50,000
square foot manufacturing facility. The Company was organized as a Maine
corporation in 1984 and began operations in 1985. The Company's executive
offices are located at 43 Bibber Parkway, Brunswick, Maine 04011 and its
telephone number is (207) 729-7792.
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THE OFFERING
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Common Stock Offered by the Company........................... 2,250,000 shares
Shares of Common Stock Outstanding
Before Offering.......................................... 5,447,674
After Offering(1)........................................ 7,697,674
Use of Proceeds............................................... Purchase of capital equipment, repayment of
bank debt, research and development
expenditures, potential acquisitions, potential
purchase of the Company's current manufacturing
facilities and general working capital
purposes. See "Use of Proceeds."
Risk Factors.................................................. The securities offered hereby involve a high
degree of risk and immediate and substantial
dilution. See "Risk Factors" and "Dilution."
Proposed NASDAQ symbol........................................ "BTIC"
- ------------------------
(1) Includes an estimated 260,544 shares to be issued to holders of
outstanding shares of the Company's preferred stock, no par value (the
"Preferred Stock") in payment of accrued dividends, concurrently with the
consummation of the Offering, but does not include (a) a total of
1,006,395 shares of the Common Stock reserved for issuance upon the
exercise of stock options granted under the Company's 1991 Stock Option
Plan and 1994 Stock Option Plan, or (b) a total of 527,786 shares of
Common Stock reserved for issuance pursuant to warrants outstanding as of
the closing of the Offering (157,500 shares of Common Stock to be issued
pursuant to warrants to be issued to the Representative in connection
with a Financial Advisory Agreement discussed herein below, and 370,286
shares of Common Stock to be issued pursuant to warrants held by certain
stockholders and assuming a cashless exercise of such warrants by such
stockholders). The weighted average exercise price of such options and
warrants is $1.11 per share. See "Dividend Policy," "Management-Stock
Option Plans," "Certain Transactions," "Principal Stockholders,"
"Description of Capital Stock," and "Underwriting."
</TABLE>
UNLESS OTHERWISE INDICATED, ALL COMMON STOCK SHARE AND PER SHARE DATA
AND INFORMATION IN THIS PROSPECTUS (I) HAVE BEEN ADJUSTED TO GIVE EFFECT TO A
65:1 STOCK SPLIT TO BE EFFECTED IMMEDIATELY PRIOR TO THE EFFECTIVENESS OF THE
REGISTRATION STATEMENT OF WHICH THIS PROSPECTUS IS A PART, (II) ASSUME THE
CONVERSION, UPON THE CLOSING OF THE OFFERING, OF ALL OUTSTANDING SHARES OF THE
PREFERRED STOCK INTO 4,603,560 SHARES OF COMMON STOCK AND THE ISSUANCE TO SUCH
HOLDERS OF PREFERRED STOCK OF 260,544 SHARES OF COMMON STOCK IN PAYMENT OF AN
ESTIMATED $1,823,810 IN ACCRUED CASH DIVIDENDS AS OF SEPTEMBER 15, 1996 PURSUANT
TO THE TERMS OF SUCH PREFERRED STOCK, (III) ASSUME NO EXERCISE OF OUTSTANDING
OPTIONS TO PURCHASE AN AGGREGATE OF 1,006,395 SHARES OF COMMON STOCK WITH A
WEIGHTED AVERAGE EXERCISE PRICE OF $0.38 PER SHARE, (IV) ASSUME NO EXERCISE OF
OUTSTANDING WARRANTS TO PURCHASE AN AGGREGATE OF 527,786 SHARES OF COMMON STOCK
WITH A WEIGHTED AVERAGE EXERCISE PRICE OF $2.51 PER SHARE,
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(V) ASSUME NO EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION, AND (VI)
ASSUME THE CONSUMMATION OF A RECAPITALIZATION WHEREBY THE COMPANY'S NO PAR
COMMON STOCK IS CONVERTED INTO COMMON STOCK, WHICH RECAPITALIZATION IS TO BE
EFFECTED IMMEDIATELY PRIOR TO THE EFFECTIVENESS OF THE REGISTRATION STATEMENT OF
WHICH THIS PROSPECTUS IS A PART.
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SUMMARY FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30
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1991 1992 1993 1994 1995 1995 1996
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STATEMENTS OF
INCOME DATA:
Net sales........................... $2,625 $4,701 $6,376 $9,596 $15,476 $7,003 $9,297
Cost of goods sold.................. 2,215 3,700 4,997 7,382 11,979 5,412 7,010
Gross profit........................ 410 1,001 1,379 2,214 3,497 1,591 2,287
Income (loss) from operations....... (325) 30 122 340 845 452 575
Income (loss) before income
tax benefit (expense)............. (421) 3 111 314 785 388 560
Income tax benefit (expense)........ - - - - 122 61 (197)
Net income (loss)................... (421) 3 111 314 907 449 363
Primary earnings (loss)
per common share.................. $(0.91) $(0.66) $(0.55) $(0.40) $0.20 $0.10 $0.05
Weighted average number of common
shares outstanding(1)............. 462 488 536 536 1,919 1,795 1,906
JUNE 30, 1996
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ACTUAL AS ADJUSTED(1)
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BALANCE SHEET DATA:
Working capital.................................................. $ 1,492 $14,275
Total assets..................................................... 8,387 20,722
Long-term liabilities............................................ 1,414 50
Total liabilities................................................ 4,325 2,513
Preferred Stock.................................................. 6,339 -
Stockholders' equity (deficit)................................... (2,277) 18,209
(1) Adjusted to give effect to the sale by the Company of 2,250,000 shares of Common Stock at an assumed initial public
offering price of $7.00 per share and the application of the estimated net proceeds therefrom (after deducting discounts,
allowance and offering expenses). See "Use of Proceeds."
</TABLE>
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RISK FACTORS
THE PURCHASE OF SHARES OF COMMON STOCK OFFERED HEREBY INVOLVES A HIGH
DEGREE OF RISK. PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE FOLLOWING
FACTORS, IN ADDITION TO THE OTHER INFORMATION SET FORTH HEREIN, IN EVALUATING
THE COMPANY AND ITS BUSINESS BEFORE PURCHASING SHARES OF THE COMMON STOCK
OFFERED HEREBY.
POSSIBLE FLUCTUATIONS IN OPERATING RESULTS, CYCLICAL NATURE OF
END-PRODUCT MANUFACTURER INDUSTRIES, SEASONALITY AND SUPPLY FACTORS. Many of the
purchasers of end-products produced with the Company's composite reinforcement
fabrics are engaged in cyclical industries, including the marine industry which
accounts for approximately 80% of the Company's net sales, due to the effects of
general economic conditions or other factors. The Company has also experienced a
seasonal effect on its sales to a certain extent with respect to marine industry
and winter sports products. In addition, the Company's sales have varied from
period to period as a result of fluctuations in the general availability of
fiberglass used by the Company in its manufacturing process. When supplies of
fiberglass are short, the Company's distributors and end-product manufacturers
order additional inventory of composite reinforcement fabrics to ensure
availability of product. When the supply of fiberglass later improves, the
Company's sales may decline due to decreasing demand by its distributors and
end-product manufacturers as a result of their build-up of excess inventory
during the period when fabric availability was tight. In the first quarter of
1996, the Company's net sales were increased by its distributors building their
inventory levels to cushion against the supply shortage that was industry wide
throughout 1995. In the second quarter of 1996, the Company's distributors
reduced their inventory in response to the general availability of fiberglass,
thereby contributing to a reduction in the Company's net sales to $4.4 million
from $4.8 million in the first quarter of 1996. A decrease in net sales as
compared to the first quarter of 1996 may occur for the same reasons in the
third quarter. Management estimates that during the second quarter of 1996 its
distributors maintained an approximate three week supply of composite
reinforcement fabrics as opposed to an approximate twelve week supply in the
first quarter of 1996. Management expects this trend to continue into the fourth
quarter of 1996. The impact of the cyclicality and/or seasonality of the
end-product manufacturing industries using the Company's products, fiberglass
supply and related inventory factors or other factors affecting the purchasing
decisions of end-product manufacturers, could adversely affect the Company's net
sales. This may result in fluctuations in the Company's results of operations,
may make it more difficult for the Company to accurately forecast its financial
requirements and may result in fluctuations in the market price for the Common
Stock. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
DEPENDENCE ON FEW FIBERGLASS SUPPLIERS. There are only three
significant suppliers from which the Company may purchase its fiberglass
requirements. Vetrotex, a stockholder of the Company, currently supplies
approximately 80% of the Company's fiberglass requirements, with the remainder
being supplied primarily by a single other vendor. The Company's current supply
agreement with Vetrotex expires August 25, 1996. Although the Company is not
under supply pressures to enter into a new supply agreement due to the current
general availability of fiberglass in the marketplace, the Company and Vetrotex
have each expressed an interest in negotiating an extension of their agreement.
The Company intends to enter into contracts with one or two other suppliers to
ensure a continuing supply of fiberglass, but there can be no
-8-
assurance that the Company will be successful in its efforts to secure such
agreements. One of the two other significant fiberglass suppliers holds a 50%
equity interest in one of the Company's primary competitors. The Company's
ability to operate and to increase its revenues is dependent upon its ability to
obtain an adequate supply of fiberglass and may be limited by competition for
the same source of supply. Suppliers of fiberglass may not be able to supply the
quantity, quality or variety of inventory that the Company requires in a timely
manner or on price terms favorable to the Company. The failure or inability of
any of the major suppliers to produce for any significant period due to labor
problems, furnace meltdown or other equipment problems, or any other reason,
could also have a materially adverse effect on the available supply of
fiberglass required by the Company. The failure to obtain an adequate supply or
a substantial increase in the cost of fiberglass would have a material adverse
effect on the Company. See "Business-Supply" and "-Backlog."
DEPENDENCE ON FOUR PRINCIPAL DISTRIBUTORS. Although the Company
primarily markets its products directly to end-product manufacturers which sell
to consumers, approximately 90% of the Company's sales are made through
distributors. Four of the Company's distributors accounted in the aggregate for
85%, 89% and 78% of the Company's net sales for the Company's fiscal years ended
December 31, 1993, 1994 and 1995, respectively. Each of the four distributors
accounts for more than 10% of the Company's net sales. The Company does not have
written contracts with any of its distributors, which the Company believes is
consistent with industry practice. The Company's distributors also sell products
that are competitive with the products supplied by the Company. The loss of any
of its major distributors would have a material adverse effect on the Company.
See "Business-Marketing and Sales."
DEPENDENCE ON PRODUCT AND PROCESS INNOVATION; MARKET ACCEPTANCE The
Company's ability to continue its revenue growth will be dependent upon its
ability to continue both product and process innovation through research and
development and other means. In order to remain competitive, the Company must
maintain the engineering and technical capability to respond to customer demands
for new and improved versions of its current products at competitive prices. The
Company has invested, and intends to continue to invest, in the development and
refinement of its production processes in order to reduce costs and expand its
capability to produce a broader range of products. Wood, concrete and steel
products may cost less than products using the Company's reinforcement fabrics.
No assurance can be given that the Company will achieve further market
acceptance of its products, that it will be successful in developing new
products or that such products will be accepted by end-product manufacturers due
to quality or cost considerations. See "Business-Product Engineering,
Manufacturing and Development."
COMPETITION. There is no single competitor that produces materials with
the same characteristics as all of the Company's products. However, there are
other products in the marketplace which compete with each of the Company's
products. Wood, concrete and steel products may cost less than products using
the Company's reinforcement fabrics. The Company believes that there are only
three other companies using a knitting or stitchbonding process that have
significant shares of the knitted and stitchbonded composite reinforcement
fabrics market. Although the Company believes that it is one of the largest
suppliers in the United States market for composite reinforcement fabrics, it
believes that each of its significant competitors has greater financial,
marketing and operating resources than the Company. Although the Company relies
on certain proprietary information and believes that there is no
-9-
equipment currently commercially available that is able to duplicate through the
same one-step production process, the fabrics produced by the Company, there is
equipment available to produce fabrics possessing certain of the characteristics
of products required by composite manufacturers. As existing barriers to the
market are not prohibitive, others may enter the marketplace to compete with the
Company and these additional competitors may have resources greater than those
of the Company. Competition in the fiberglass industry is based upon price,
quality and design innovation as well as marketing and distribution strategies.
There can be no assurance that the Company's products will be able to compete
successfully with other products available for the same applications. See
"Business-Competition."
RISKS RELATING TO GROWTH AND EXPANSION; LIMITS ON CAPITAL EXPENSES. If
the Company's revenues and earnings continue to grow rapidly, such growth may
significantly strain the Company's management and its operational and technical
resources. If the Company is successful in rapidly obtaining greater market
penetration with its products, the Company will be required to deliver
increasing volumes of highly complex products to its customers on a timely basis
at a reasonable cost to the Company. No assurance can be given that the
Company's efforts to expand its manufacturing activities will be successful or
that the Company will be able to satisfy increased production demands on a
timely and cost-effective basis. The Company's success will also depend, in
part, upon its ability to provide its customers with engineering, manufacturing,
marketing and other support. Efforts to expand the Company's manufacturing
capacity and support therefor could require significant additional personnel; no
assurance can be given that the Company will be able to attract and retain such
personnel. In addition to the levels of support currently provided, including
the ability to modify its technology and products to meet end-product
manufacturer requirements, the Company will also be required to continue to
improve its operational, management and financial systems and controls. Failure
to manage possible growth could have a material adverse effect on the business
of the Company. In connection with the industrial development financing
underlying the construction of the facility leased by the Company in Brunswick,
Maine, the Company was required, pursuant to Internal Revenue Code requirements,
to agree to limit certain capital expenditures through the period ending
December 12, 1998. The restrictions are applicable to capital expenditures
(whether incurred by the Company, its affiliates or unaffiliated parties) with
respect to the Company's (or the Company's affiliates') facilities or property
located in the Town of Brunswick. As of June 30, 1996 additional capital
expenditures of up to approximately $6.5 million may be incurred through
December 12, 1998 in Brunswick. Management believes that the anticipated capital
expenditures through the relevant period will not exceed that amount, although
if the Company's plans change, the limit could restrict desired activities. The
Company also has the option to lease equipment, in lieu of purchasing such
equipment, as equipment leases are generally not restricted by the limitations.
Further, if the Company were to purchase the Brunswick facility and the bonds
used to finance it were repaid (which repayment would require the consent of the
holders of such bonds), the capital expenditures restriction would be
terminated. See "Use of Proceeds," "Business-Products" and "Product Engineering,
Manufacturing and Development."
BROAD DISCRETION OVER USE OF PROCEEDS; POSSIBLE ACQUISITIONS. The
Company plans to repay its bank debt with a portion of the net proceeds of the
Offering. At July 31, 1996 term and revolving bank debt aggregated approximately
$2.2 million dollars or 15.6% of the estimated net proceeds. An additional $3
million or 21.2% of the net proceeds has been allocated to the
-10-
purchase of capital equipment over the next several years. However, the Company
may also use a portion of the net proceeds for acquisitions to broaden its
product line as well as manufacturing capacity, product market coverage, and
distribution channels. The Company will face risks associated with any
acquisitions it may make, including the implementation of any post-acquisition
strategies and the integration of any acquired businesses with the Company's
business. There can be no assurance that the Company will be successful in these
efforts or that it will not incur unanticipated costs in respect thereto.
Certain of the net proceeds will also be used to fund working capital, as well
as the Company's research and development efforts. The Company may also consider
purchasing its manufacturing facility in Brunswick, Maine, as well as acquiring
an additional operating facility. Management will have broad discretion in
allocating and applying such proceeds and the Company's stockholders may not
have an opportunity to review or vote upon the terms of these unspecified
expenditures or review the financial statements of any businesses which may be
acquired. The Company has no commitments or agreements with respect to any
acquisition, joint venture or licensing of any technology other than those
specifically identified in this Prospectus. No assurance can be given that the
Company can successfully complete any acquisitions or that any such acquisitions
would not materially and adversely affect the Company. See "Use of Proceeds."
RISK OF POTENTIAL PRODUCT LIABILITY CLAIMS. As a manufacturer of
components used in products which include boats, skis and diving boards, the
Company is subject to the potential risks of product liability claims. Although
the Company maintains insurance coverage against such liabilities, any such
claim against the Company might exceed the amount of such insurance coverage or
fall outside the scope of such coverage. A successful product liability claim or
series of claims could have a material adverse effect on the Company's business,
financial condition and results of operations.
SINGLE FACILITY. The Company's manufacturing operations are conducted
at, and substantially all of the Company's inventory is maintained in, a single
facility in Brunswick, Maine. Any significant casualty loss to, or extended
interruption of operations at, this facility would have a material adverse
effect on the Company. Replacement of the Company's customized manufacturing
equipment could take several months and would have a material adverse effect on
the Company. See "Business-Property."
INTELLECTUAL PROPERTY. Although the Company has three registered
trademarks and owns two patents, it relies almost entirely upon unpatented
technology in its production processes. The Company relies in part upon state
and federal trade secrets and unfair competition laws to protect its
intellectual property. There can be no assurances that the Company can
adequately protect its rights in such unpatented proprietary technology or that
others will not independently develop substantially equivalent or better
proprietary information or techniques, or otherwise gain access to the Company's
proprietary technology or that others will disclose such technology. The Company
will continue to seek additional protection for newly developed intellectual
property as deemed appropriate. There can be no assurance as to the breadth or
degree of protection which existing or future trademarks, patents and copyrights
may afford the Company, that any trademark or patent application will result in
issued trademarks or patents, or that the Company's intellectual property will
not be circumvented or invalidated. Foreign intellectual property laws may not
adequately protect the Company's intellectual property. There can be no
assurance that the Company's products do not or will not violate the proprietary
rights of others, that the
-11-
Company's intellectual property would be upheld if challenged, or that the
Company would not be prevented from using its intellectual property, any of
which occurrences could have an adverse effect on the Company. The Company
received a notice from a competitor in 1987 with respect to an alleged
infringement of certain of the competitor's patents. The Company denied the
allegations and has received no further communications from the competitor since
a meeting was held with representatives of the alleging party in 1992. In
addition, the Company may not have the financial resources necessary to enforce
or defend its trademarks, patents and copyrights at the time of any apparent
infringement or of any challenge. See "Business-Intellectual Property."
DEPENDENCE UPON KEY PERSONNEL. The success of the Company will be
largely dependent on the personal efforts of Martin S. Grimnes, William M.
Dubay, Robert R. Fuller and Thomas L. Wallace. The loss of the services of any
of these individuals would have a material adverse effect on the Company's
business and prospects. The Company is the owner and beneficiary of a "key man"
life insurance policy on each of Messrs. Grimnes and Dubay in the amount of $1
million each. See "Management."
CONTROL BY EXISTING STOCKHOLDERS. Upon the consummation of the
Offering, the current stockholders of the Company will beneficially own
approximately 71% of the outstanding shares of Common Stock (assuming no
exercise of outstanding stock options or warrants). Accordingly, these
stockholders, acting together, will be able to elect all of the Company's
directors and, generally, to direct the affairs of the Company. Mr. Grimnes and
four representatives of major stockholders are currently Directors of the
Company, and although the Board of Directors intends to elect Mr. Dubay to
replace one of the representatives of a major stockholder who will be resigning,
and the Board intends to elect two additional directors (both of whom will be
independent), with both actions effective as of the consummation of the
Offering, together these four encumbent directors and Mr. Dubay will constitute
a majority of the Board of Directors following the Offering. In addition, voting
together, they could effectively block any major corporate transactions, such as
a merger or sale of substantially all of the Company's assets, that under Maine
law requires the affirmative vote of holders of a majority of the outstanding
Common Stock of the Company. See "Management," "Principal Stockholders" and
"Description of Capital Stock."
IMMEDIATE AND SUBSTANTIAL DILUTION. Purchasers of shares of Common
Stock in the Offering will experience immediate and substantial dilution in net
tangible book value per share from the initial public offering price. Such
dilution at June 30, 1996, would have been equal to $4.63 per share or 66% of an
assumed initial public offering price of $7.00 per share. See "Dilution."
ABSENCE OF PUBLIC MARKET; ARBITRARY DETERMINATION OF PUBLIC OFFERING
PRICE; POSSIBLE VOLATILITY OF SHARE PRICE. Prior to the Offering, there has been
no public market for the Common Stock. The initial public offering price has
been arbitrarily determined by negotiations between the Company and the
Underwriters. There can be no assurance that an active trading market will
develop and continue after completion of the Offering or that the market price
of the Common Stock will not decline below the public offering price. Stock
prices for many companies fluctuate widely for reasons which can be unrelated to
operating results. These fluctuations, as well as general economic, political
and market conditions, such as a recession or military conflict, may
-12-
also have a material adverse effect on the market price for the Common Stock.
See "Underwriting."
SHARES ELIGIBLE FOR FUTURE SALE. Sales of substantial amounts of Common
Stock in the public market following the completion of the Offering could have
an adverse effect on the market price of the Common Stock. There will be
7,697,674 shares of Common Stock outstanding immediately after the Offering,
including the 2,250,000 shares offered hereby. Upon completion of the Offering,
all of the shares of Common Stock offered hereby will be eligible for public
sale without restriction, except for shares purchased by affiliates (those
controlling or controlled by or under common control with the issuer and
generally deemed to include officers and directors) of the Company. The
5,447,674 shares of Common Stock that will be owned by the Company's current
stockholders following the Offering, including the 4,603,560 shares of Common
Stock to be issued to existing holders of Preferred Stock upon conversion of
their shares of Preferred Stock and an estimated 260,544 shares to be issued to
such holders in payment of accrued dividends concurrently with the completion of
the Offering (the "Dividend Shares") are "restricted securities," as that term
is defined under Rule 144 promulgated under the Securities Act of 1933, as
amended, (the "Securities Act"). As of September 30, 1996, 5,187,130 shares of
Common Stock would be eligible for sale under Rule 144(k). The Dividend Shares
and the aggregate of 527,786 shares issuable under warrants outstanding as of
the closing of the Offering will be eligible to trade under Rule 144 on the
second anniversary of their issuance. The 1,006,395 shares issuable under
outstanding options would be tradable 90 days after the commencement of the
Offering if such options are exercised. All existing holders of the Company's
capital stock have been granted registration rights by the Company pursuant to
which they may as a group on two occasions demand that the Company register the
resale of all or a portion of their Common Stock and may otherwise "piggyback"
upon certain registrations by the Company of its securities. The holders of all
shares of Common Stock outstanding immediately prior to the closing of the
Offering and the holders of all options and warrants to purchase Common Stock
have agreed not to sell or otherwise dispose of any of their shares of Common
Stock for a period of 13 months after the closing of the Offering without the
prior written consent of the Representative. The possibility that substantial
amounts of Common Stock may be sold in the public market after the expiration of
the thirteen month "lock-up" period may adversely affect the prevailing market
price for the Common Stock and could impair the Company's ability to raise
additional capital through the sale of its equity securities. See "Shares
Eligible for Future Sale."
LACK OF DIVIDENDS. To date, the Company has not paid any dividends on
either Common Stock or Preferred Stock. Concurrently with the closing of the
Offering, the Company will issue approximately 260,544 shares of Common Stock to
the holders of its Preferred Stock in payment of accrued cash dividends which
are expected to aggregate approximately $1,823,810 as of September 15, 1996.
Under the terms of its existing bank loan agreements, the Company may not pay
dividends without the consent of the lender. The Company currently intends to
retain future earnings to finance the growth and development of the Company's
business and does not anticipate paying any dividends in the foreseeable future.
See "Dividend Policy."
ANTI-TAKEOVER PROVISIONS; POSSIBLE ISSUANCE OF PREFERRED STOCK. The
Company's Restated Articles of Incorporation permit it to issue undesignated
"blank-check" Preferred Stock. Accordingly, shares of the Company's Preferred
Stock may be issued in the future without further stockholder approval and
-13-
upon such terms and conditions, and having such rights, privileges and
preferences, as the Board of Directors may determine. Such rights, privileges
and preferences could include preferential voting rights, dividend rights in
excess of those provided to holders of Common Stock, and conversion rights,
redemption privileges or liquidation preferences not available to holders of
Common Stock. The rights of the holders of Common Stock will be subject to, and
may be adversely affected by, the rights of holders of any Preferred Stock that
may be issued in the future. The issuance of Preferred Stock, while providing
desirable flexibility in connection with possible acquisitions and other
corporate purposes, could have the effect of making it more difficult for a
third party to acquire, or discouraging a third party from acquiring, a majority
of the outstanding voting stock of the Company. The provision also may limit the
price that certain investors may be willing to pay in the future for shares of
the Common Stock. The Company has no present plans to issue any shares of its
Preferred Stock.
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 2,250,000 shares
of Common Stock offered hereby at an assumed initial public offering price of $7
per share are estimated to be approximately $14.1 million, after deducting
underwriting discounts and estimated additional Offering expenses of
approximately $500,000 payable by the Company, which includes the
Representative's expense allowance. The Company intends to use the net proceeds
of the Offering to expand its manufacturing capacity through the purchase of
additional capital equipment aggregating approximately $3 million, repay in full
its existing term and revolving bank debt aggregating approximately $2.2 million
at July 31, 1996, and otherwise for general corporate purposes, including
research and development and possible acquisitions of complementary businesses
and product lines. The Company's $1.425 million term equipment loan bears
interest, at the Company's option, at the prime rate or the London Interbank
Offered Rate ("LIBOR") plus 2.25%. The Company's revolving line of credit, with
approximately $782,000 outstanding as of July 31, 1996, bears interest, at the
Company's option, at the prime rate or LIBOR plus 1.75%. The Company may
consider purchasing its manufacturing facility in Brunswick, Maine, and/or
acquiring an additional operating facility. The Company has had discussions with
several parties regarding acquisitions but has no agreements or commitments with
respect to any such acquisitions. Pending the uses described above, the proceeds
of the Offering will be invested in short- and medium-term investment-grade,
interest-bearing securities.
DIVIDEND POLICY
To date, the Company has not paid any dividends on either the Common
Stock or the Preferred Stock. Concurrently with the closing of the Offering, all
of the outstanding shares of Preferred Stock will convert to 4,603,560 shares of
Common Stock and the Company will issue 260,544 shares of Common Stock (assuming
payment as of September 15, 1996) to the holders of the Preferred Stock in
payment of accrued cash dividends which will equal in the aggregate $1,823,810
as of September 15, 1996. The Company currently intends to retain future
earnings to finance the growth and development of the Company's business and
does not anticipate paying any dividends in the foreseeable future. The payment
of dividends is within the discretion of the Board of Directors and will depend
upon the Company's earnings, its capital requirements, financial condition and
other relevant factors. Under the terms
-14-
of its existing bank loan agreements, the Company may not pay dividends without
the consent of the lender.
DILUTION
The difference between the public offering price per share of Common
Stock and the pro forma net tangible book value per share of the Company after
the Offering constitutes the dilution per share to investors in the Offering.
Net tangible book value per share is determined by dividing the net tangible
book value of the Company (total tangible assets less total liabilities) by the
number of outstanding shares of Common Stock (adjusted to give effect to (i) a
65:1 stock split; (ii) the conversion of the Preferred Stock outstanding at June
30, 1996 into 4,603,560 shares of Common Stock; and (iii) the issuance of
260,544 shares of Common Stock in payment of accrued Preferred Stock dividends
of $1,823,810 (as of September 15, 1996); all to be effected immediately prior
to or concurrently with the closing of the Offering).
At June 30, 1996, the net tangible book value of the Company was
approximately $4,061,483 or $0.75 per share of Common Stock. After giving effect
to the sale by the Company of the 2,250,000 shares of Common Stock offered
hereby at an assumed initial public offering price of $7.00 per share (less
underwriting discounts and estimated expenses of the Offering), the pro forma
net tangible book value of the Company at June 30, 1996, would have been
approximately $2.37 per share, representing an immediate increase in net
tangible book value of $1.62 per share to existing stockholders and an immediate
dilution of $4.63 per share to investors in the Offering. The following table
illustrates this per share dilution:
Assumed initial public offering price per share............ $7.00
Net tangible book value per share at June 30, 1996....... $0.75
Increase per share attributable to new investors......... $1.62
Pro forma net tangible book value per share after Offering. $2.37
Dilution of pro forma net tangible book value per share
to new investors......................................... $4.63
The following table sets forth, on a pro forma basis at June 30, 1996,
a comparison of the number of shares of Common Stock purchased from the Company,
the total consideration paid, and the average price per share paid by existing
stockholders and to be paid by new investors purchasing Common Stock in the
Offering at an assumed initial public offering price of $7.00 per share:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
---------------- ------------------- PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
------ ------- ------ ------- -----
<S> <C> <C> <C> <C> <C>
Existing stockholders............ 5,447,674 70.8% $6,730,529 29.9% $1.23
New investors.................... 2,250,000 29.2% $15,750,000 70.1% $7.00
--------- ---- ----------- ----
Total............................ 7,697,674 100.0% $22,480,529 100.0%
========= ===== =========== =====
The information set forth in the preceding table assumes no exercise of (i) options to purchase a total of 1,006,395
shares of Common Stock that have been granted under the Company's 1991 Stock Option Plan and 1994 Stock Option Plan; (ii)
warrants outstanding as of the closing of the Offering to purchase an aggregate of 527,786 shares of Common Stock; or (iii)
additional options which may be granted in the future under the Company's 1991 Stock Option Plan
-15-
and 1994 Stock Option Plan to acquire up to 856,700 shares of Common Stock. See "Management-Stock Option Plans," "Description
of Capital Stock," and "Underwriting."
</TABLE>
-16-
CAPITALIZATION
The following table sets forth the capitalization of the Company at
June 30, 1996, and as adjusted to give effect to (i) the sale of the 2,250,000
shares of Common Stock offered by the Company hereby at an assumed initial
public offering price of $7.00 per share; (ii) the conversion of the outstanding
Preferred Stock into 4,603,560 shares of Common Stock concurrently with the
consummation of the Offering; (iii) the issuance of 260,544 shares of Common
Stock in payment of accrued Preferred Stock dividends concurrently with the
consummation of the Offering; and (iv) liquidation of all bank debt and the
increase of the Company's working capital with the remainder of the estimated
net proceeds of the Offering. The information set forth below should be read in
conjunction with the financial statements and notes thereto included elsewhere
in this Prospectus.
<TABLE>
<CAPTION>
JUNE 30,1996
------------
ACTUAL AS ADJUSTED
------ -----------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C>
Note payable to a bank ....................................... $387 $ -
Current installments of long term debt........................ 139 78
Long-term debt and capital lease obligations.................. 1,364 -
Convertible Preferred Stock:.................................. 6,339 -
Stockholders' equity (deficit) (1):...........................
Preferred stock, $10.00 par value; 1,000,000 shares
authorized; no shares outstanding........................ - -
Common Stock; $0.0001 par value; 20,000,000 shares authorized;
583,570 shares outstanding; 7,697,674 shares
outstanding, as adjusted (2)............................. 406 20,893
Accumulated deficit........................................ (2,683) (2,683)
------ ------
Total stockholders' equity (deficit)....................... (2,277) 18,210
------ ------
Total capitalization..................................... $5,952 $18,288
====== =======
(1) The information set forth in the preceding table assumes no exercise of (i) options to
purchase a total of 1,006,395 shares of Common Stock that have been granted under the
Company's 1991 Stock Option Plan and 1994 Stock Option Plan; (ii) warrants outstanding as
of the closing of the Offering to purchase an aggregate of 527,786 shares of Common Stock;
or (iii) additional options which may be granted in the future under the Company's 1991
Stock Option Plan and 1994 Stock Option Plan to acquire up to 856,700 shares of Common
Stock. See "Management-Stock Option Plans," "Description of Capital Stock," and
"Underwriting."
(2) The 7,697,674 shares of Common Stock outstanding as of June 30, 1996 as adjusted include
all of the shares of Preferred Stock then outstanding which will convert automatically,
upon the closing of the Offering, to 4,603,560 shares of Common Stock, and an additional
260,544 shares of Common Stock being issued to holders of Preferred Stock in payment of an
estimated $1,823,810 in accrued cash dividends as of September 15, 1996.
</TABLE>
-17-
SELECTED FINANCIAL INFORMATION
The selected financial data set forth below for each of the Company's
fiscal years ended December 31, 1993 and 1994 and at December 31, 1994 are
derived from the financial statements of the Company audited by KPMG Peat
Marwick LLP, independent public accountants, which are included elsewhere in
this Prospectus. The selected financial data set forth below for the Company's
fiscal year ended December 31, 1995 and at December 31, 1995 are derived from
the financial statements of the Company audited by Coopers & Lybrand L.L.P.,
independent accountants, which are included elsewhere in this Prospectus. The
selected financial data set forth below for the six months ended June 30, 1995
and 1996 and at June 30, 1996 are derived from the unaudited financial
statements of the Company, which appear elsewhere in this Prospectus, and in the
opinion of management, include all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of financial position
and the results of operations. The operating results for the six months ended
June 30, 1996 are not necessarily indicative of the operating results for the
entire year. The selected financial data set forth below should be read in
conjunction with the Financial Statements and Notes thereto and with
Management's Discussion and Analysis of Financial Condition and Results of
Operations appearing elsewhere in this Prospectus.
-18-
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED DECEMBER 31, JUNE 30
----------------------- -------
---------------------------------------------------------------------------------------------------- --------------------
1991 1992 1993 1994 1995 1995 1996
---- ---- ---- ---- ---- ---- ----
(IN THOUSANDS, EXCEPT PER SHARE DATA)
STATEMENTS OF INCOME DATA:
<S> <C> <C> <C> <C> <C> <C> <C>
Net Sales......................... $2,625 $4,701 $6,376 $9,597 $15,476 $7,003 $9,297
Cost of goods sold................ 2,215 3,700 4,997 7,382 11,979 5,412 7,010
Gross profit.................... 410 1,001 1,379 2,214 3,497 1,591 2,287
Other operating expenses.......... 736 971 1,257 1,874 2,492 1,139 1,616
Moving costs...................... - - - - 9 - 243
Facility repair costs............. - - - - 150 - (147)
Operating income................ (326) 30 122 340 846 452 575
Other income (expense), net....... (95) (27) (11) (26) (61) (63) (15)
Income (loss) before income
tax benefit (expense)........... (421) 3 111 314 785 389 560
Income tax benefit (expense)...... - - - - 122 61 (197)
Net income...................... (421) 3 111 314 907 449 363
Primary earnings (loss) per
common share(1)................. $(0.91) $(0.66) $(0.55) $(0.40) $0.20 $0.10 $0.05
Weighted average number of
common shares outstanding(1).... 462 488 536 536 1,919 1,795 1,906
-19-
DECEMBER 31, JUNE 30
------------------------------------------------------------- ------------------
1991 1992 1993 1994 1995 1995 1996
---- ---- ---- ---- ---- ---- ----
(IN THOUSANDS)
BALANCE SHEET DATA:
Working capital (deficit)............ $236 $(252) $548 $631 $905 $975 $1,492
Total assets......................... 2,022 2,494 4,363 5,665 7,867 6,256 8,387
Long-term liabilities................ 272 460 337 1,177 1,069 1,122 1,414
Total liabilities.................... 1,481 1,829 1,895 2,886 4,168 3,024 4,327
Preferred Stock...................... 2,460 2,913 5,010 5,538 6,070 5,802 6,339
Accumulated deficit.................. (2,322) (2,640) (2,666) (3,151) (2,777) (3,045) (2,683)
Stockholders' deficit................ $(1,919) $(2,248) $(2,542) $(2,759) $(2,371) $(2,649) $(2,277)
-20-
- --------------------
(1) See Note 1 of Notes to Financial Statements for an explanation of the method used to determine per share
data.
</TABLE>
-21-
BRUNSWICK TECHNOLOGIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
INTRODUCTION
Brunswick Technologies, Inc. is a leading developer and manufacturer of
engineered composite reinforcement fabrics produced from glass and other fibers.
The Company has experienced revenue growth of 50.1% and 61.3% for 1994 and 1995,
respectively, and 32.8% for the first six months of 1996, as compared to the
same period for 1995. The Company's primary strategic objective is to continue
such growth by targeting new market and product applications for engineered
composite reinforcement fabrics manufactured using BTI's proprietary processes.
These include the transportation, offshore petrochemical, and infrastructure
markets. The Company intends to pursue joint projects with leaders in different
industrial sectors to accelerate the substitution of BTI's composite
reinforcement fabrics for conventional materials. The Company is also
considering using its fabrics to produce certain end-user products itself, in
addition to supplying its fabrics to other manufacturers.
Although the Company utilizes independent distributors for
approximately 90% of its sales, BTI markets its products primarily to the
ultimate end-product manufacturer. In 1996, the Company moved into a new,
state-of-the-art, 50,000 square foot manufacturing facility which is leased from
a corporation affiliated with the Town of Brunswick, Maine. The Company
currently operates six production machines and expects to put a seventh into
operation by the end of 1996.
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated certain
financial data as a percentage of net sales:
<TABLE>
<CAPTION>
Six Months Ended
Fiscal Years Ended December 31 June 30,
------------------------------ ----------------
1993 1994 1995 1995 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net Revenue 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of Goods Sold 78.4 76.9 77.4 77.3 75.4
---- ---- ---- ---- ----
Gross Profit 21.6 23.1 22.6 22.7 24.6
Selling, general and
administrative expenses 17.7 15.6 13.5 13.7 14.2
Research and development
expenses 2.0 3.9 2.6 2.6 3.2
Moving costs 0.0 0.0 0.0 0.0 2.6
Facility repair cost 0.0 0.0 1.0 0.0 (1.6)
--- --- --- --- -----
Operating Income before
items shown below 1.9 3.6 5.5 6.4 6.2
Other income (expense):
Interest expense 0.0 (0.2) (0.8) (0.9) (0.6)
Miscellaneous, net (0.2) (0.1) 0.4 0.0 0.4
---- ----- --- --- ---
(0.2) (0.3) (0.4) (0.9) (0.2)
---- ----- ---- ----- -----
Income before income tax 1.7 3.3 5.1 5.5 6.0
Income tax benefit (expense) 0.0 0.0 0.8 0.9 (2.1)
--- --- --- --- ----
Net income 1.7% 3.3% 5.9% 6.4% 3.9%
==== ==== ==== ==== ====
</TABLE>
-22-
SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO SIX MONTHS ENDED JUNE 30, 1995
Net Sales. Net Sales for the six month period ended June 30, 1996
increased by $2.3 million or 33% to $9.3 million from $7.0 million for the same
period in 1995. The increase in net sales is attributable primarily to a 20%
increase in unit volume to new and existing customers and a more attractive mix
of products enjoying higher unit pricing.
Gross Profit. Gross profit increased to $2.3 million for the six month
period ended June 30, 1996 from $1.6 million for the same period in 1995. Gross
profit margin increased to 24.6% of net sales for the six month period in 1996
from 22.7% for the same period in 1995. The increase in gross profit margin is
attributable primarily to higher selling prices per pound of the Company's
fabrics.
Selling, General and Administrative Expense. Selling, general and
administrative expenses as a percentage of net sales increased to 14.2% for the
six month period ended June 30, 1996 from 13.7% for the same period in 1995.
Research and Development Expenses. Research and development ("R&D")
expenses as a percentage of net sales increased to 3.2% for the six month period
ended June 30, 1996 from 2.6% for the same period in 1995, reflecting expansion
of in-house process and design R&D.
Operating Income. Operating income increased to $575,017 for the six
month period ended June 30, 1996 from $451,791 for the same period in 1995.
Operating income as a percentage of net sales decreased to 6.2% for the period
ended June 30, 1996 from 6.4% for the same period in 1995 primarily due to
one-time moving costs of $243,301 representing 2.6% of net sales. In connection
with the move to the new facility, the Company recorded in 1995 an expense of
$150,000 to cover the expenses estimated to be incurred for the restoration of
the facilities being vacated. The repairs thought to be required when the
expense was recorded did not materialize and therefore the unexpended amount of
$147,545 was recognized as an addition to operating income in June 1996 which
offset, to some extent, the other increases in operating expenses. Excluding
such one-time moving costs, operating income for the period in 1996 would have
been $670,773 or 7.2% of net sales, a 12% gain over the prior period.
Income Taxes. The Company incurred income tax expense for the first
time in the amount of $197,000 for the six month period ending June 30, 1996, as
compared to a tax benefit of $60,360 for the same period in 1995.
Net Income. Net income for the six month period ended June 30, 1996 was
$363,112 or 3.9% of net sales as compared to $448,777 or 6.4% of net sales for
the same period in 1995. The decrease was due to one-time moving costs of
$95,756 and an increase in income tax expenses to $197,000 during the 1996
period. During the same period in 1995, the Company had an income tax benefit of
$60,360. Income before taxes for the period in 1996 was 6.0% of net sales or
7.1% of net sales when adjusted for one-time moving expenses, compared to 5.5%
of net sales for the same period in 1995.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
-23-
Net Sales. Net Sales for 1995 increased by $5.9 million or 61% to $15.5
million from $9.6 million for 1994. The increase in net sales is attributable
primarily to volume increases and favorable product mix gains.
Gross Profit. Gross profit increased to $3.5 million for 1995 from $2.2
million for 1994. Gross profit margin decreased to 22.6% of net sales for 1995
from 23.1% for 1994. The decrease in gross profit margin is attributable
primarily to higher costs paid per pound for raw materials.
Selling, General and Administrative Expense. Selling, general and
administrative expenses as a percentage of net sales decreased to 13.5% for 1995
from 15.6% for 1994 due to economies of scale realized by the Company.
Research and Development Expense. The Company continued to favor
research and development expenditure which increased year to year by 9% while
decreasing as a percentage of net sales from 3.9% for 1994 to 2.6% for 1995.
Operating Income. Operating income increased by 249% to $845,927 for
1995 from $340,219 in 1994. Operating income as a percentage of net sales
increased to 5.5% for 1995 from 3.6% for 1994.
Income Taxes. The Company received an income tax benefit of $121,900 in
1995 as compared to 1994 when no income tax expense or benefit was recorded.
Net Income. Net income for 1995 was $906,505 or 5.9% of net sales as
compared to $314,196 or 3.3% of net sales for 1994. For the year ended 1995, the
Company utilized an income tax benefit of $121,900. Income before taxes for the
year ended 1995 was 5.1% of net sales, compared to 3.3% of net sales in 1994.
YEAR ENDED DECEMBER 31, 1994 COMPARED TO YEAR ENDED DECEMBER 31, 1993
Net Sales. Net Sales for 1994 increased by $3.2 million or 50% to $9.6
million from $6.4 million for 1993. The increase in net sales was attributable
primarily to growing acceptance of new products and by the addition of new
customers.
Gross Profit. Gross profit increased to $2.2 million for 1994 from $1.4
million in 1993. Gross profit margin increased to 23.1% of net sales for 1994
from 21.6% in 1993. The increase in gross profit margin was attributable to
sales volume increases.
Selling, General and Administrative Expense. Selling, general and
administrative expenses as a percentage of net sales decreased to 15.6% for 1994
from 17.7% for 1993.
Research and Development Expense. Research and development expenses as
a percentage of net sales increased to 3.9% for 1994 from 2.0% for 1993, in part
reflecting a reclassification of certain R&D expenses.
Operating Income. Operating income increased to $340,219 for the year
ended 1994 from $122,292 in 1993. Operating income as a percentage of net sales
increased to 3.6% for 1994 from 1.9% for 1993.
Income Taxes. The Company neither incurred an income tax expense nor
received income tax benefits for either of the years 1994 or 1993.
-24-
Net Income. Net income for the year ended 1994 was $314,196 or 3.3% of
net sales as compared to $111,476 or 1.7% of net sales for 1993.
QUARTERLY RESULTS
The following table presents financial information derived from the
Company's unaudited financial statements for each quarter included in the year
ended December 31, 1995 and for the quarters ended March 31, 1996 and June 30,
1996. Such information has been prepared on the same basis as the audited
Financial Statements appearing elsewhere in this Prospectus. Based on unaudited
financial statements for the quarter ended June 30, 1996, revenues for such
quarter of 1996 increased by 16% to $4,452,000 from $3,824,000 for the same
period in 1995. Gross profit increased by 25% to $1,134,000 from $904,000 for
the same period in 1995. Net income in the second quarter in 1996 decreased by
33% to $201,000 from $302,000 for the same period in 1995. The decrease in net
income is primarily attributable to an income tax expense of $109,000 for the
second quarter of 1996, compared to an income tax benefit of $40,000 for the
same period in 1995.
-25-
<TABLE>
<CAPTION>
Quarter Ended
Brunswick Technologies, Inc.
Comparative Quarterly Earnings 1995
----------------------------------------------------------------------------------------
Dollars in Thousands Mar. 31 Jun. 30 Sept. 30 Dec. 31
------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $ 3,179 100.0% $ 3,824 100.0% $ 4,031 100.0% $ 4,442 100.0%
Cost of goods sold 2,492 78.4 2,920 76.4 3,104 77.0 3,463 78.0
--------- ---- --------- ----- --------- ----- --------- -----
Gross profit 687 21.6 904 23.6 927 23.0 979 22.0
Selling, general and
administrative expenses 438 13.7 522 13.6 536 13.3 588 13.2
Research and development
expenses 88 2.8 91 2.4 112 2.8 117 2.6
Moving costs - 0.0 - 0.0 - 0.0 9 0.2
Facility repair costs - 0.0 - 0.0 - 0.0 150 3.4
--------- --- --------- ----- --------- ----- --------- -----
Operating income 161 5.1 291 7.6 279 6.9 115 2.6
--------- --- --------- ----- --------- ----- --------- -----
Other income (expense):
Interest expense (31) -1.0 (28) -0.7 (29) -0.7 (36) -0.8
Miscellaneous, net (2) 0.0 (2) -0.1 (13) -0.3 80 1.8
--------- --- --------- ----- --------- ----- --------- -----
(33) -1.0 (30) -0.8 (42) -1.0 44 1.0
--------- --- --------- ----- --------- ----- --------- -----
Income before income tax 128 4.1 261 6.8 237 5.9 159 3.6
Income tax benefit (expense) 20 0.6 40 1.1 37 0.9 25 0.6
--------- --- --------- ----- --------- ----- --------- -----
Net income $ 148 4.7% $ 301 7.9% $ 274 6.8% $ 184 4.2%
--------- --- --------- ----- --------- ----- --------- -----
</TABLE>
<TABLE>
<CAPTION>
Brunswick Technologies, Inc. Quarter Ended
Comparative Quarterly Earnings 1996
------------------------------------------
Dollars in Thousands Mar. 31 June 30
------- -------
<S> <C> <C> <C> <C>
Net sales $ 4,845 100.0% $ 4,452 100.0%
Cost of goods sold 3,692 76.2 3,318 74.5
--------- ----- --------- -----
Gross profit 1,153 23.8 1,134 25.5
Selling, general and
administrative expenses 635 13.0 682 15.4
Research and development
expenses 143 3.0 157 3.5
Moving costs 144 0.0 99 2.2
Facility repair costs - 3.0 (148) -3.3
--------- ----- --------- -----
Operating income 231 4.8 344 7.7
--------- ----- --------- -----
Other income (expense):
Interest expense (27) -0.5 (30) -0.7
Miscellaneous, net 46 0.9 (4) 0.0
--------- ----- --------- -----
19 0.4 (34) -0.7
--------- ----- --------- -----
Income before income tax 250 5.2 310 7.0
Income tax benefit (expense) (88) -1.8 (109) 2.5
--------- ----- --------- -----
Net income $ 162 3.4% $ 201 4.5%
--------- ----- --------- -----
</TABLE>
-26-
In the first quarter of 1996, the Company's net sales were increased in
connection with its distributors building their inventory levels to cushion
against the continuation of a fiberglass supply shortage that was industry wide
throughout 1995. In the second quarter of 1996, the Company's distributors
reduced their inventory levels in response to the general availability of
fiberglass, thereby contributing to a reduction in the Company's net sales to
$4.4 million from $4.8 million in the first quarter of 1996. A decrease in net
sales as compared to the first quarter of 1996 may occur for the same reasons in
the third quarter. Management estimates that during the second quarter of 1996
its distributors maintained an approximate three week inventory of composite
reinforcement fabrics as opposed to an approximate twelve week supply in the
first quarter of 1996.
The Company's quarterly results of operations may be subject to
fluctuations due to factors including changes in distribution channels' and
end-users' inventories, and general economic conditions. The Company has
traditionally operated with relatively little backlog and generally arranges
delivery promptly upon receipt of orders. Therefore, a majority of the Company's
sales in each quarter have resulted from orders placed in that quarter.
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows from Operating Activities. Cash utilized by operations for
the first six months of 1996 was $692,000, compared to cash generated of
$584,000 for the first six months of 1995 and $1.1 million for 1995. The
decrease in cash flow for the most recent period is primarily attributable to an
increase in inventories of $1.2 million resulting principally from an increase
in the value of finished goods inventory to $1.9 million for the period, up from
$450,000 at December 31, 1995. Finished goods inventory was strategically
increased so as to provide the ability to supply fabrics to its customers while
the move to the new facility was being completed.
Cash Flows from Investing Activities. Cash used for investing purposes
was $324,000 for the first six months of 1996, compared to $273,000 for the
first six months of 1995. Capital expenditures of $328,000 were incurred for the
period in 1996 primarily due to expenditures made for furniture and fixtures in
connection with the move to the new facility, the final payment on the sixth
production machine and leasehold improvements to the new facility.
Cash Flows from Financing Activities. During the six month period ended
June 30, 1996, $900,000 of cash was provided through financing activities.
External funds were provided during this period of $325,000 under the equipment
bank loan and $387,000 under the Company's line of credit. Also, funding of
$226,000 was provided through a book overdraft.
On May 30, 1996, the Company completed an amendment to its loan
arrangements with its bank. The new arrangement increases the amount of credit
available and reduces borrowing costs. The arrangement consists of a line of
credit and a term equipment loan. Both loans are secured by substantially all of
the Company's assets. The amount of credit available under the line of credit is
equal to the sum of 75% of eligible accounts receivable plus 50% of eligible
inventories up to a total of $1.5 million. Borrowings bear interest, at the
Company's option, at the prime rate or the LIBOR rate plus 1.75%.
-27-
The term equipment loan is in an amount of $1.425 million plus 75% of
incremental machine expenditures made through January 31, 1997, up to a total of
$1.8 million. Borrowings carry, at the Company's option, an interest rate of
prime or LIBOR plus 2.25%. The Company is obligated to make interest-only
payments through January 31, 1997, at which time the principal begins
amortization over an 84 month period. The outstanding balance of the term
equipment loan was $1,425,000 at June 30, 1996.
The Company expects to satisfy its cash requirements through internally
generated cash and borrowings, although it plans to maintain its revolving line
of credit facility.
-28-
BUSINESS
INTRODUCTION
BTI is a technologically advanced, leading developer and manufacturer
of stitchbonded engineered composite reinforcement fabrics made from glass,
carbon and other fibers which are used by composite fabricators. The Company's
principal strength lies in its innovative quadraxial single-step stitchbonding
operation, through which it can quickly and cost effectively produce engineered
composite reinforcement fabrics in sizes and shapes beyond the capability of the
competition. Fabrics created from the Company's proprietary manufacturing
operations offer characteristics imperative to facilitate the use of composite
materials in infrastructure, industrial and large scale commercial applications.
BTI has introduced a process that not only more efficiently creates
composite reinforcement fabrics, but also optimizes the performance
characteristics of such fabrics. In a proprietary single-step production
process, the Company is able to stitchbond fibers in different directions
without diminishing the composite fibers' inherent properties, thus dramatically
improving the structural strength of the composite reinforcement fabric. This
compares favorably, firstly, with traditional composite fabrics which are woven,
and therefore require the use of more resin; and secondly, with the more costly
multi-step processes of other knitting or stitchbonding manufacturing
technologies used by competitors. In addition, the Company's proprietary, high
through-put manufacturing processes have the ability to produce heavyweight
quadraxial fabrics over 100 inches wide in a single-step process which allows
cost-effective fabrication of composite parts of up to 10 inches thick. The
combination of these features produces fabrics which enable composite
fabricators to manufacture end-products at a competitive cost while maintaining
maximum structural integrity.
Composite products offer substantial benefits over conventional
materials such as steel, concrete and wood. Such benefits include: a higher
strength-to-weight ratio, greater design flexibility while maintaining
structural integrity, chemically inert properties and lower maintenance
requirements. As a result of their superior features, composite reinforcement
fabrics are increasingly demanded by a growing number of industries and
applications, including transportation, infrastructure, recreation,
petro-chemical and construction. Management believes the use of engineered
composite reinforcement fabrics will continue to grow as the market is made more
aware of the positive features of such materials and as the cost of more
advanced composite fibers such as carbon continues to decline.
The Company's strategy is to increase revenues and net income through
increasing its domestic and international market share in the composite
reinforcement fabric industry as well as making strategic acquisitions for
product and market presence, and engaging in joint projects. The key elements of
this strategy include: (i) targeting additional applications for composite
reinforcement fabrics in the transportation, offshore petro-chemical and
infrastructure sectors; (ii) increasing its international presence; (iii)
continuous innovation of its state-of-the-art manufacturing processes; (iv)
extension of its product offerings further along the value-added chain towards
net shape products and (v) acquiring businesses or engaging in joint projects
with companies which complement the Company's strategy, including the expansion
of its manufacturing capacity and the broadening of its geographic market
presence.
-29-
INDUSTRY BACKGROUND
Since the invention of composite reinforcement fabrics made from
fiberglass in the early 1940's, various attempts have been made to commercialize
the potential of these fabrics as replacements for wood, steel and concrete.
These diverse pioneering projects include the 1953 Corvette and Wonder Bread
delivery trays from the early 1950's. While these efforts were remarkable for
their day, the potential of these materials did not start to be realized until
the mid 1960's when the recreational boat industry converted from wood to
composite reinforcement fabrics. This development spurred the expansion of the
composite fiber industry from occasional to broad usage in a wide variety of
consumer products such as skis, diving boards and protective helmets, and in
industrial applications, including cars, trucks, and industrial tanks and pipes.
Over this period the processes used to create fabrics composed of composite
fibers have dramatically evolved.
Traditionally, reinforcement fibers were woven together to create a
composite reinforcement fabric. The weaving process aligns these fibers along
the zero-to-ninety degree axis, inserting them over and under each other to
create the weave, resulting in the bending of such fibers, or crimping, which in
turn reduces each individual fiber's strength and reinforcement properties. As
the mechanical properties of the composite reinforcement fabric is the key
parameter for the design of the underlying product or application, the integrity
of the fiber's performance defines the amount of such fibers needed to achieve
specific performance specifications. In contrast to weaving, stitchbonding a
composite fabric allows the manufacturer to optimize the fibers' mechanical
properties, thus reducing the volume of fibers required as compared to the
weaving process. The Company's innovative stitchbonding production processes
align the composite reinforcement fibers in a variety of axes. All of this takes
place in a single production step and at high production throughputs, all
without crimping the fiber and thereby avoiding diminishing the fiber's
strength. While certain of the Company's competitors also can offer knitted or
stitchbonded reinforcement fabrics, they generally manufacture their products in
multi-step processes. The competitors' manufacturing processes are more costly
due to the greater number of steps in the process and the lower throughput rate
as compared to the Company's proprietary, high throughput, one-step process.
The first generation of knitted fabrics offered significant strength
advantages compared to woven reinforcements, and thus were able to produce
savings in material usage and weight. These fabrics, however, were priced at a
substantial premium over traditional woven fabrics.
In 1990, the Company introduced a revolutionary new product line,
BiTex(R), the first generation of price-competitive, heavy-weight stitchbonded
reinforcement fabrics. For the first time, knitted or stitchbonded composite
reinforcement fabrics, whose market potential was previously limited by their
high cost, became competitive in numerous composite applications, from
automobile bumpers and one-piece molded commercial aircraft structures to
high-strength consumer products such as boat hulls and skis.
COMPANY STRATEGY
The Company's strategy to continue its current growth includes the
following elements:
-30-
o Continued expansion of its leadership position in the composite
reinforcement fabrics industry, development of new products and
processes to answer the needs of a wide range of industries including
the continuing integration of fabric design elements with the specific
needs of composite fabricators and capitalization upon the Company's
position as the only supplier of composite reinforcement fabrics to
develop and manufacture its own production equipment;
o Pursuit of acquisitions to broaden its product line as well as
manufacturing capacity, product market coverage, and distribution
channels;
o Extension of activities into international markets, in particular
Europe and Latin America, and specific product niche markets;
o Fostering of joint projects with a wide range of manufacturers as well
as universities and state and federal governments to develop new
composite products incorporating composite reinforcement fabrics; and
o Development of component products which will reduce the steps between
fabric formation and end-user products, and the manufacture of
completed components for certain end-user products. See "Product
Engineering, Manufacturing and Development."
PRODUCTS
The Company currently manufactures composite reinforcement fabrics,
also referred to as stitchbonded or non-crimped fabrics, primarily from glass
fibers, and is distributing them under the BiTex(R) and Cofil(R) trade names.
The Company is continuously researching new methods of producing other types of
composite fabrics and the use of new fibers to create them. The Company's
introduction of proprietary stitchbonding production processes in 1990 enabled
composite reinforcement fabrics to compete more successfully with conventional
materials by reducing such fabric's manufacturing costs, which previously were
prohibitively high. The Company's composite reinforcement fabrics permitted a
reduction in the quantity of fibers used and the consequential reduction in the
quantity of resin required, leading to significant reductions in cost for
equivalent mechanical performance. The Company believes that it is currently the
only supplier of composite reinforcement fabrics which develops and manufactures
its own production equipment. The Company's proprietary production processes
allow it to offer composite reinforcement fabrics of varying weights, widths and
fiber orientations, and allow fabric production at unrivaled efficiencies.
Furthermore, these fabrics can be engineered to respond to a customer's specific
requirements. The Company's experience indicates that these proprietary
processes can be successfully applied to other base materials, allowing for
production of reinforcement fabrics from various carbon, aramid and other
fibers. The Company's current output is presently used by end-product
manufacturers to build a wide range of products, including boats, diving boards,
snowboards, swimming pools, truck bodies and corrosion sensitive vessels.
Engineered composite reinforcement fabrics offer significant advantages
over other currently used materials:
o STRENGTH-TO-WEIGHT RATIO. Composite products render a strength-to-weight
ratio much higher than that of steel, wood or concrete. Composite
reinforcement fabrics are uncommonly strong for their weight and density.
-31-
Use of these materials in transportation industries provides for
substantial fuel savings and greater payload capacity. The marine market is
the most mature of the industries currently using composite reinforcement
fabrics. Truck and railcar manufacturers are developing bodies made out of
these materials. Furthermore, due to their inherent strength-to-weight
ratio, construction materials can be built from reinforcement fabrics in
both load and no-load designs and in shapes too complex to be built from
much heavier metals. The Company is working in a joint development project
to develop products for infrastructure applications such as bridges and
reinforced column wrapping for earthquake protection. See "Business-Joint
Projects."
o LONGER LIFE-CYCLE. Products produced from composite reinforcement fabrics
do not rust or rot, are chemically inert, non-conductive and generally
maintenance free, making their life-cycles significantly longer than those
of steel, concrete or wood. These features allow use of composite
reinforcement fabrics in environmentally corrosive situations, such as salt
water immersion or highway construction. Accordingly, these products are
increasingly used in finished products such as marine pilings, telephone
poles, one-piece septic tanks, guardrails, building columns, bridge
columns, and bridges. The housing industry is using these materials in
construction, both residential and commercial.
o GREATER SAFETY. Products produced with composite reinforcement fabrics do
not suffer from the disintegration failures suffered by steel and concrete.
Moreover, composite materials offer significantly greater high-energy
impact absorption, and their one-piece fabrication means that no weak seams
need to be introduced into the part. The Company is working with its
customers to develop products made from composite reinforcement fabrics
which will offer non-varying mechanical strength and stiffness through the
entire life-cycle of the product, and to lower the risk of continuous
deterioration and degradation of strength, which can be caused by metal
fatigue in steel or environmental erosion in concrete. These tougher
products are being developed for use in automotive and highway safety
applications, structural support, and as components of deep-sea oil
drilling platforms.
o DESIGN AND PROCESS FREEDOM AND EFFICIENCY. Composite reinforcement fabrics
can be molded in tremendously flexible ways, allowing the creation of
complex parts. Manufacturers assembling final products using these
materials are able to use one part, formed in a complex shape, instead of
having to use two or more simpler parts formed from metals. This obviously
results in significant cost savings, in both material and labor costs.
Architecturally, designers can create shapes that would not otherwise be
buildable from conventional construction materials. Furthermore, many final
products, through weight savings, can be installed in one piece, such as
septic tanks. Other ongoing projects include the development of on-site
fabrication of parts using new injection molding and bonding techniques.
o ENVIRONMENTAL BENEFITS. Use of the Company's stitchbonded products reduces
the amount of resin required to manufacture the end-product, resulting in
the decreased release of volatile organic compounds by end-product
fabricators. The use of composite reinforcement fabrics in products which
substitute for wood, steel or concrete can diminish the amount of chemicals
released in the environment. For example, marine pilings and telephone
poles constructed of composite materials would not be treated with arsenic
or other toxic substances presently required to provide adequate product
-32-
cycle life to wood products. Due to their high strength-to-weight ratios,
composite reinforcement fabrics offer the transportation industry
substantial fuel savings and permit the transport of greater payloads due
to increased truck capacity. The construction industry is starting to use
these fabrics as a shield from noise, heat, weather, and electro-magnetic
interference. These products can be highly insulating, in addition to their
chemically non-reactive nature, making them ideal for use as pipes, tanks
and ducting, especially in corrosive situations. The paper and
petrochemical industries are starting to use these types of products in
hostile environments.
PRODUCT ENGINEERING, MANUFACTURING AND DEVELOPMENT
The Company believes that its strongest competitive advantage is its
technical and developmental know-how. The principal reasons for its progress in
technical development thus far are the quality of its product design and its
engineering and manufacturing capabilities. These capabilities enable the
Company to design and engineer products that meet or exceed end-product
manufacturers' performance and reliability specifications. The Company believes
that it has created and will continue to create know-how and technology to
manufacture products at lower costs than its competitors by pursuing its
engineering and manufacturing development in-house. The quality of the
technology and know-how of a business or product line is an important factor in
the Company's evaluation of potential acquisition candidates.
The Company's operations utilize current-generation computer systems
for product design and documentation as well as for performance testing. A key
to the Company's ability to reduce manufacturing cost has been the reduction of
direct labor through the introduction of its proprietary single-step, automated
or semi-automated manufacturing processes.
The Company believes that its ability to produce fabric in a single
step at 20 feet/minute is the fastest in the composite reinforcement fabrics
industry. It also believes that it has the unique capacity to produce quadraxial
reinforcements over 100 inch wide in a single step. The Company's proprietary
capabilities allow composite reinforcement fabrics to be produced by
continuously placing reinforcement fibers in layers at different angular
orientations and concurrently stitching them together to achieve certain desired
properties, depending upon the application, such as greater carrying capability
and corresponding strength. The Company's machines are capable of producing
reinforcements in five different directions/orientations and planes or any
combination thereof.
The Company has continued to build on the success of its BiTex(R)
product line, and has introduced the following product and process innovations:
o First commercial binderless mat production process introduced in 1990;
o First single-step quadraxial products introduced in 1992;
o First 100+ inch wide single-step quadraxial fabrics commercialized in 1993;
and
o First 150 inch 0-90(degree) binderless mat product commercialized in 1994.
-33-
The Company invests in product development to meet and anticipate
customer requirements. The Company also undertakes end-product
manufacturer-sponsored or joint sponsored product development contracts.
Accordingly, the Company's development activities are generally product or
program specific.
Certain of the Company's current research and development activities
are directed toward producing new processing equipment which can manufacture in
a single step composite reinforcement fabrics double the weight of those
currently produced by the Company.
Certain other of the Company's research and development activities are
focused upon manufacturing processes and equipment so that the Company might
produce certain end-user products. Such equipment may mold or "net-shape"
composite fabrics into specific shapes or continuous forms such as piping or
tubular structures on-site.
MARKETING AND SALES
The Company's competitive position in the marketplace is dependent upon
its continuing ability to design innovative processes to generate products for
specific composite fabricator applications. The Company's marketing philosophy
is to have a team of employees work directly with prospective and active
composite fabricators. The Company markets its products primarily through its
own marketing and sales force directly to composite fabricators either
individually or at trade shows.
Although 85%, 89% and 78% of the Company's sales were made through four
distributors in 1993, 1994 and 1995 respectively (GLS Corporation, M.A. Hanna
Resin Distribution, Plastic Sales, Inc. and RP Associates), each distributor is
comprised of a subset of multiple regional distributors. In 1993, 1994 and 1995
the Company made 2.0%, 4.3% and 9.8%, respectively of its sales directly to
composite fabricators.
Management believes that the key to the Company's sales and marketing
strategy is the development of long-term relationships with end-product
manufacturers through its team approach of combining product development and
sales. The Company's production and sales managers work with sales staff in all
markets to develop products for particular end-product manufacturers.
SUPPLY
There are only three significant suppliers from which the Company may
purchase its fiberglass requirements: PPG Industries, Inc., Owens-Corning
Fiberglass, Inc. and Vetrotex. The Company has a contract with Vetrotex which
expires in August 1996 pursuant to which Vetrotex must supply and the Company
must purchase 90% of its fiberglass requirements. In the case where Vetrotex may
be unable to satisfy fully the requirements set forth by such contract, the
Company is free to purchase its remaining fiberglass needs from other vendors.
Vetrotex currently supplies approximately 80% of the Company's requirements, and
the Company believes that it is a significant purchaser of fiberglass strands
from Vetrotex. The Company and Vetrotex have mutually expressed an interest in
negotiating an extension of the current supply contract. The Company is also
negotiating with additional vendors to ensure a continued supply of fiberglass
for its production needs. The Company's ability to operate and to grow is
dependent upon its ability to obtain an adequate supply of fiberglass.
-34-
BACKLOG
Backlog as of June 30, 1996, was $1,200,000, or approximately 3 weeks
of sales. Backlog as of June 30, 1995, was approximately $3,000,000, or
approximately two months of sales. In June 1995, over $1,500,000 of the backlog
consisted of orders that were past their shipping date as a result of capacity
and raw material constraints present in the market at the time. This caused
distributors and customers to hedge against future shortages and place
additional orders, which drove the backlog to very high levels. In the second
quarter of 1996, backlog returned to more historic levels.
JOINT PROJECTS
In February 1995, the Company entered into a Collaborative Agreement
with E.I. DuPont de Nemours and Company, Inc. ("DuPont"), Hardcore Composites
Ltd. ("Hardcore"), The Dow Chemical Company and Johns Hopkins University under
the Federal Advanced Technology Program to develop agile heavyweight composites
for large civil bridge infrastructure applications. For its part in the
cooperative project, the Company was awarded $750,000 over three years as part
of a $13.5 million grant from the U.S. Department of Commerce and the National
Institute of Standards and Technology. The project is directed toward the study
of the manufacturing competency of composites produced with Seeman Composite
Resin Infusion Molding Process (SCRIMP) technology (a process of layering dry
fabric and drawing resin through the layered fabric with the use of vacuum
pressure) and their ability to increase the life of large structures such as
bridges, while reducing such structures' cost and weight. The Company believes
that the project will also assist in the development of cost-effective design
and manufacturing technologies for composite materials that can be used to build
other large structures which are strong, lightweight, and resistant to corrosion
and seismic shock. The Company is the sole supplier of composite fabrics for the
project.
The parties have mutually agreed to protect each other's proprietary
information for a period of five years. Any technology jointly developed in the
performance of the Collaborative Agreement ("Program Technology") is to be owned
jointly by the project participants, with the right to use the same on an
unrestricted basis. The Program Technology may also be subject to a
non-exclusive, non-transferable paid-up license to the United States government
which may not publicly disclose any proprietary information relative to the
Program Technology.
The Company is also involved in a collaboration with Hardcore Dupont
Composites LLC ("Hardcore DuPont"), a joint venture between Hardcore and DuPont,
wherein the Company provided the engineered composite fabric for the manufacture
of two railroad cars using the SCRIMP process. These successful prototypes have
permitted the consortium comprised of Hardcore DuPont, Burlington Northern and
Trinity Industries to propose a project for the industrial manufacture of
railroad cars using the Company's composite fabric.
In October 1995, the Company began a joint venture project with the
University of Maine ("UM") to develop a composite plywood alternative utilizing
waste wood fibers from the paper industry. The $170,000 project is funded in
part by the Center for Technology Transfer ("CTT"), a non-profit partnership
among the Maine Science and Technology Foundation, the University of Maine, the
University of Southern Maine, the Maine Technical College System, and certain
companies in Maine operating in the metals and electronics industries. Funding
for CTT is provided by a grant from the U.S. Department
-35-
of Energy under its Experimental Program to Stimulate Competitive Research
(EPSCoR). The project was undertaken as part of a proposal to develop hybrid
(wood and fiberglass) composite structural panels which have commercial
application for the construction industry. The goal is to develop products that
will be cost competitive with traditional wood products. BTI and UM will
individually own the intellectual property rights to any technology developed
separately, and will own jointly any intellectual property rights arising from
technology developed together. Furthermore, UM agreed to license to BTI any and
all of its intellectual property rights arising from the project, on an
exclusive, world-wide, and reasonable basis. CTT will be entitled to the payback
of up to $113,587 from profits generated from commercial products created by the
project.
The Department of Defense has awarded funding through the 1995 Defense
Experimental Program to Stimulate Competitive Research (DEPSCoR) to the
University of Maine relative to a study of the dynamics of thick composite
structures. BTI has agreed to provide industrial composite expertise, laminate
engineering, reinforcement materials, composite fabrication through
subcontracts, and participation through analytical reviews and program
management reviews. This project will provide valuable experience, evaluation,
and modeling development for the use of BTI heavyweight fabrics in the Naval,
off-shore oil, sub-marine and waterfront infrastructure materials markets.
The Company is currently working with ASEA Brown Boveri S.A. ("ABB") in
ABB's development of a full range of composite well head covers and pipe
protection structures for the offshore oil and gas industry constructed from
advanced engineered composite reinforcement fabrics. These lightweight
structures range in size up to 90' by 90' by 90' and would replace
corrosion-prone heavy steel structures.
The Company is also negotiating with Norsk Hydro A.S., one of the
largest North Sea oil operators, towards making greater use of composite
structures in the off-shore oil industry.
COMPETITION
The Company's principal competitors are producers of woven
reinforcement fabrics and other producers of stitched or knitted reinforcement
products. Competition is based on price, product performance and customer
support. The Company's continued success will depend in part on its ability to
continue to develop and introduce cost competitive quality products that meet or
exceed end-product manufacturer requirements.
There is no competitor that manufactures products that are
substantially similar to or competitive with all of the Company's products.
However, there are competitors for each of the Company's products and the
Company believes that there are only three companies that have significant
shares of the stitched or knitted reinforcement markets. These are Advanced
Textiles, Inc., a division of Burlington Industries Inc., Johnston Composite
Industries, a subsidiary of Johnston Industries Inc. and Knytex, a joint venture
between Owens-Corning Fiberglass and Hexcel Corporation. The Company believes
that it has one of the largest shares of the United States market for knitted or
stitchbonded (non-crimped) composite reinforcement fabrics.
EMPLOYEES
-36-
As of August 1, 1996, the Company had 64 full time employees, of whom
48 were employed in engineering and manufacturing, five in sales and marketing
and 11 in administrative and management functions. No employees are represented
by unions.
PROPERTIES
The Company's executive offices and manufacturing/warehouse facility is
located in a facility in Brunswick, Maine, of approximately 50,000 square feet
which was completed in March 1996. The Company leases the property from
Brunswick Development Corporation ("BDC"), a Maine corporation wholly owned by
the town of Brunswick. The Company's lease is for a term of 10 years and
commenced on January 1, 1996, with an option to extend the term for one
additional five-year period. The Company also has an option to purchase the
facility at any time between the conclusion of the fifth year of the current
lease and the end of the lease, at an option price equal to the greater of fair
market value of the facility or the residual debt payable by BDC on the bonds
issued to finance the construction of the facility. The Company may, however,
consider the purchase of the property prior to the option date. The rent for the
facility is $181,500 annually for the first five years of the lease; the lease
provides for periodic scheduled rent increases, with a final annual rent of
$206,000 for the last year of the current lease.
The Company also maintains 10,400 square feet of warehouse space at
another location in Brunswick, Maine, for which it pays rent of $44,495 per
year.
INTELLECTUAL PROPERTY
Although the Company has three registered trademarks and owns two
patents relating to its product, the Company relies almost entirely upon
unpatented technology in its production processes. The Company relies in part
upon state and federal trade secrets and unfair competition laws to protect its
intellectual property. Management's philosophy is to patent only those processes
as to which the process may be determined when analyzing the product produced.
There can be no assurances that the Company can adequately protect its rights in
such unpatented proprietary technology or that others will not independently
develop substantially equivalent or better proprietary information or
techniques, or otherwise gain access to the Company's proprietary technology or
disclose such technology. The Company will seek additional protection for newly
developed intellectual property as deemed appropriate. One patent relates to a
bound and structurally reinforced thermoplastic multi-layer composite fabric
which is moldable. No product has yet been commercialized. Although the other
patent relates to a manufacturing process commercialized by the Company,
management believes that it would be very difficult to assess whether a
competitive product was produced by a process which infringes such process
covered by the patent.
LEGAL PROCEEDINGS
The Company is involved from time to time in litigation incidental to
its business. To the Company's knowledge, the Company is not subject to any
material pending legal proceedings.
-37-
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company are as follows:
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE POSITION SINCE
---- --- -------- -----
<S> <C> <C> <C>
Martin S. Grimnes(1)(2) 48 Chairman, Chief Executive Officer 1984
and Director
David M. Coit (1)(3) 49 Director 1987
Peter N. Walmsley (1)(3) 60 Director 1991
Gregory Peters (1)(2) 50 Director 1995
David E. Sharpe (1)(2) 54 Director 1993
William M. Dubay 45 President and Chief Operating
Officer
Robert R. Fuller 40 Vice President, Sales
John P. O'Sullivan 54 Chief Financial Officer and Treasurer
Thomas L. Wallace 43 Vice President, Manufacturing
- ---------------------
(1) Messrs. Coit, Walmsley, Peters and Sharpe were elected to the Board of Directors as the designees of the
holders of the outstanding Preferred Stock and Mr. Grimes was elected as the designee of the holders of
Common Stock pursuant to the terms of a Shareholders' Agreement among the Company and its stockholders. The
agreement terminates upon the closing of the Offering but each of the aforesaid individuals other than Mr.
Peters will continue to serve as directors. Mr. Peters has agreed to resign effective with the closing of
the Offering and the Board intends to elect Mr. Dubay to the Board of Directors effective with the closing
of the Offering. Additionally, the Board plans to elect two independent directors effective with the closing
of the Offering. See "Certain Transactions" and "Principal Stockholders."
(2) Member of the Compensation Committee effective as of the closing date of the Offering.
(3) Member of the Audit Committee effective as of the closing date of the Offering.
</TABLE>
MARTIN S. GRIMNES is the founder of the Company and since the Company's
inception in 1984, has served as a director and between 1984 and 1987 as
president and treasurer. Mr. Grimnes has been Chairman of the Board since 1987.
Mr. Grimnes has a textile engineering degree from the Technische
-38-
Akademie e. V. in Hohenstein, Germany and a B.S. in Industrial Management from
the University of Vermont. Prior to founding the Company, he was export manager
for W. S. Libbey Co. of Lewiston, Maine, an industrial and decorative textile
manufacturer (1980 - 1984) and General Manager of Sandvika Veveri A/S of Oslo,
Norway, a decorative textile manufacturer (1974-1980).
DAVID M. COIT has been, since 1986, President of North Atlantic Capital
Corporation, a venture capital management company which manages three venture
capital funds, including the North Atlantic Venture Fund, L.P., which is a
stockholder of the Company. Mr. Coit is also a General Partner with Mr. Peters
of North Atlantic Capital Partners, Limited Partnership, which is the General
Partner of the venture fund. Previously, Mr. Coit was President of Maine Capital
Corporation and an Assistant Vice President for commercial lending of First
National Bank of Boston. Mr. Coit attended Yale University and received his
M.B.A. from the Harvard Graduate School of Business Administration.
PETER N. WALMSLEY has been for more than the past five years, one of
two general partners of AMT Associates Ltd., which is the sole general partner
of both AMT Venture Partners, Ltd. and JHAM Limited Partnership, which are
venture capital funds and stockholders of the Company. During the past five
years he has been President and 50% owner of AMT Management, Inc., and also for
the last three years, President and sole owner of Newton Delaware, Inc.,
corporations which manage the two funds. Mr. Walmsley was previously Manager,
Acquisitions & Divestitures in the Corporate Plans Department at E.I. DuPont de
Nemours & Co., Inc., where he was also responsible for the corporate venture
capital activities. Mr. Walmsley received his Ph.D. in chemical engineering at
Manchester University in England.
GREGORY PETERS has been, since 1986, Vice President and Treasurer of
North Atlantic Capital Corporation, a venture capital management company, which
manages three venture capital funds, including the North Atlantic Venture Fund
L.P., which is a stockholder of the Company. Mr. Peters is also a General
Partner with Mr. Coit of North Atlantic Capital Partners, Limited Partnership,
which is the General Partner of the venture fund. Mr. Peters is a general
partner of two other venture capital funds. He also has an operations and sales
background having been a Vice President and General Manager of a computer
peripheral company (1981 - 1982) an Eastern Regional Sales and Operations
Manager for Rossignol Ski Company, Inc. (1978 to 1980) and a Vice President of
International Sales and Marketing for a $20 million consumer electronics company
(1975 - 1977). Mr. Peters is a graduate of Harvard University and holds an
M.B.A. from the Harvard Graduate School of Business Administration.
DAVID E. SHARPE has been employed in management or executive positions
for Vetrotex and its affiliates for more than 22 years, most recently serving
since 1989 as vice president of sales and marketing of Vetrotex. Vetrotex is a
stockholder of the Company and a major supplier of raw materials thereto. Mr.
Sharpe is a member of the Board of the Composites Institute of the Society of
the Plastics Industry, Inc. He holds a B.S. in biology and chemistry from
Otterbein College in Westerville, Ohio and an M.B.A. with distinction, in
finance and economics from New York University.
WILLIAM M. DUBAY has been employed by the Company since May 1989 and
has served as President and Chief Operating Officer since November 1991. Mr.
Dubay received a B.A. in Business Education (cum laude) from Thomas College in
Waterville, Maine, and prior to his employment by the Company was Manager of
-39-
Provider Services for Blue Cross/Blue Shield of Maine (November 1987 through
April 1989) and from June 1981 through August 1987 was employed by Sabre Yachts
in South Casco, Maine, a nationally known manufacturer of premium quality
sailing yachts, where he earned successive promotions to Senior Manager,
Manufacturing.
ROBERT R. FULLER has served as Vice President, Sales, since 1993 and
has been with the Company since 1990. Mr. Fuller received his B.S. in
engineering-naval architecture from the University of Michigan in Ann Arbor.
Prior to his employment with the Company, Mr. Fuller founded and was Chief
Executive officer of Advanced Sail Concepts, a ship design firm located in
Massachusetts and North Carolina. He has also served as a naval architect and
project manager with General Dynamics in Quincy, Massachusetts.
JOHN P. O'SULLIVAN has served as Chief Financial Officer of the Company
since October 1994 and as Treasurer since March 1995. From January 1979 to April
1994, Mr. O'Sullivan was Vice President, Finance and Administration for Bangor
Hydro Electric Co. in Bangor, Maine. Between 1975 to 1978, he served as
Commissioner of Finance and Administration (the Chief Financial Officer) for the
State of Maine. Mr. O'Sullivan is both a Certified Management Accountant and a
Certified Public Accountant, and received his B.A. in economics from the College
of the Holy Cross and his M.B.A. from the Amos Tuck School of Business
Administration at Dartmouth College.
THOMAS L. WALLACE has served as Vice President, Manufacturing since
January 1994. Prior thereto he was Manufacturing Manager for Personal
Electronics in Manchester, N.H. from March 1992 through December 1993, Director
of Quality Assurance for AM Technologies in Manchester, N.H. from August 1991
until March 1992 and Director of Operations for Summa Four, also in Manchester,
N.H. from May 1983 until August 1991. Mr. Wallace received his B.S. in business
management (with honors) from Franklin Pierce College and has completed various
M.B.A. courses at the University of New Hampshire.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board maintains a Compensation Committee and during the year ended
December 31, 1995, Messrs. Grimnes, Peters and Sharpe served on the Committee.
The Board also maintains an Audit Committee and during the year ended December
31, 1995, Messrs. Coit and Walmsley served on the Committee. The Board has no
nominating committee. The Audit Committee reviews the results of operations of
the Company with the officers of the Company who are responsible for accounting
matters and, from time to time, with the Company's independent public
accountants. The Compensation Committee reviews and evaluates the compensation
and benefits of all officers of the Company, reviews general policy matters
relating to compensation and benefits of employees of the Company, and makes
recommendations concerning these matters to the Board of Directors. The
Compensation Committee also administers the Company's Stock Option Plans.
COMPENSATION OF DIRECTORS
Following the closing of the Offering, Directors who are not employees
of the Company or affiliated with or related to a principal stockholder of the
Company will be paid an annual retainer of $2,000, payable quarterly, a fee of
$500 for each Board or committee meeting attended and will be granted an option
to purchase 6,000 shares of Common Stock exercisable at the Offering Price,
which option will vest in three equal tranches over a three year period
-40-
so long as the individual remains a director. All Directors are reimbursed by
the Company for their out-of-pocket expenses incurred in connection with
attendance at Board and committee meetings or otherwise in the performance of
their services as a Director. See "Management-Stock Option Plans."
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning the
compensation for the year ended December 31, 1995 of the Company's Chief
Executive Officer, who was the only executive officer who earned in excess of
$100,000 for such year:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL LONG-TERM
COMPENSATION COMPENSATION
------------ ------------
OTHER SECURITIES
NAME AND ANNUAL UNDERLYING
PRINCIPAL POSITION SALARY($) BONUS($) COMPENSATION($) OPTIONS
- ------------------ --------- -------- --------------- -------
<S> <C> <C> <C> <C>
Martin S. Grimnes,
Chairman and Chief
Executive Officer... 90,000 2,420 26,229(1) 22,750
- --------------------
-41-
(1) Includes $20,770 in payments for accrued but unused vacation time, $3,279 in payments for health
insurance, personal use of a company car valued at $1,375 and $865 for paid sick time.
</TABLE>
The Board of Directors of the Company adopted a formula profit sharing
plan in September of 1995. A bonus pool was calculated as a percentage of annual
net revenue, adjusted by the rate of revenue growth. One-half of this bonus pool
was disbursed to management according to the approved plan, while the other
one-half of the bonus pool was disbursed to all other employees in an amount
directly proportional to their wage level. Messrs. Grimnes, Dubay and Fuller
received $3,719.95, $3,347.96 and $2,789.96, respectively, from the 1995 bonus
pool. The same profit sharing plan is in effect for 1996.
STOCK OPTION PLANS
1991 Stock Option Plan. The Company's 1991 Stock Option Plan (the "1991
Plan") was adopted by the Board of Directors and approved by the stockholders of
the Company on January 24, 1991. A total of 889,395 shares of Common Stock have
been reserved for awards under the 1991 Plan. Pursuant to the 1991 Plan, the
Board of Directors is authorized to grant options, in its discretion, to key
personnel and directors of the Company. The number of shares, term and vesting
schedule for exercise of the options were also determined by the Board of
Directors. All options are exercisable at the fair market value of the shares of
Common Stock at the time of grant. In the event an optionee's employment or
directorship with the Company is terminated, whether voluntarily or
involuntarily, his stock option is terminated immediately, except in the event
of a voluntary retirement, death or disability, in which event the option is
exercisable to the extent vested for a one month period following such
termination. In the event of a merger (where the Company is not the surviving
entity), dissolution or liquidation of the Company or the sale or exchange of
all or substantially all of the Company's assets, each optionee shall be given
twenty days prior notice and may exercise their options to the extent vested,
but the options will otherwise expire.
1994 Stock Option Plan. The Company's 1994 Stock Option Plan (the "1994
Plan") was adopted by the Board of Directors and stockholders of the Company on
May 25, 1994. A total of 1,060,605 shares of Common Stock have been reserved for
awards under the 1994 Plan. Pursuant to the 1994 Plan, the Board of Directors
was authorized to grant options, in its discretion, to key personnel,
consultants and directors of the Company with all options to be granted for a
10-year term. The number of shares and vesting schedule for exercise of the
options are also determined by the Board of Directors. All options are
exercisable at the fair market value of the shares of Common Stock at the time
of grant. In the event an optionee's employment or directorship with the Company
is terminated or he or she ceases to be a member of the Board of Directors of
the Company, whether voluntarily or involuntarily, his or her stock option is
terminated immediately, except in the event of a voluntary retirement, death or
disability, in which event the option is exercisable for a one month period to
the extent vested. In the event of a merger (where the Company is not the
surviving entity), dissolution or liquidation of the Company or the sale or
exchange of all or substantially all of the Company's assets, each optionee
shall be given twenty days prior notice and may exercise their options to the
extent vested, but the options will otherwise expire.
At June 30, 1996 18 employees and two outside consultants held options
to purchase a total of 1,006,395 shares under the 1991 and 1994 Plans. The
-42-
options are exercisable at prices ranging from $0.0154 to $$0.769, and expire at
dates ranging from September 18, 1999 to September 15, 2010. Executive officers
of the Company own the following options under the 1991 and 1994 Plans: Mr.
Grimnes, options for 266,500 shares, Mr. Dubay, options for 249,600 shares, Mr.
Fuller, options for 161,720 shares, Mr. O'Sullivan, options for 39,000 shares,
and Mr. Wallace, options for 78,000 shares.
The following table sets forth grants of stock options to the Company's
chief executive officer during the year ended December 31, 1995.
OPTION GRANTS TABLE
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-----------------
PERCENT
OF TOTAL POTENTIAL REALIZABLE
OPTIONS VALUE AT ASSUMED
NUMBER OF GRANTED TO ANNUAL RATES OF STOCK
SECURITIES EMPLOYEES PRICE APPRECIATION
UNDERLYING IN EXERCISE FOR OPTION TERM
OPTIONS FISCAL PRICE EXPIRATION ----------------------
NAME GRANTED(#) YEAR ($/SH.) DATE 5%($) 10%($)
---- ---------- ---- ------- ---- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Martin S. Grimnes (1) 22,750 14.58% $0.77 Sep. 2010 $875 $1,750
- --------------------
(1) Mr. Grimnes' options were granted by the Board on September 15, 1995 pursuant to the 1994 Stock Option Plan discussed
above. These options vest in five installments of 4,550 shares each over five years, commencing on September 14, 1996 and
ending on September 14, 2000. Unexercised options expire ten years after the date of vesting of each installment.
</TABLE>
-43-
PRINCIPAL STOCKHOLDERS
The following table and notes thereto set forth certain information
regarding beneficial ownership of the Common Stock, as of July 31, 1996, by (i)
each person known to the Company to beneficially own more than 5% of the
outstanding shares of the Common Stock, (ii) each of the Company's directors and
officers, and (iii) all directors and officers of the Company as a group. The
information as to each person has been furnished by such person, and, except as
noted, each person named in the table has sole voting and investment power with
respect to all shares of Common Stock shown as beneficially owned.
<TABLE>
<CAPTION>
PERCENTAGE OF SHARES
BENEFICIALLY OWNED
------------------
SHARES PRIOR TO AFTER
BENEFICIALLY OWNED OFFERING(1) OFFERING(1)
------------------ ----------- -----------
NAME AND ADDRESS OF
BENEFICIAL OWNER
----------------
<S> <C> <C> <C>
North Atlantic Venture 2,757,004 39.49% 29.86%
Fund, L.P.(2)
70 Center Street
Portland, ME 04101
Vetrotex CertainTeed Corp.(3) 1,363,620 19.53% 14.77%
750 E. Swedesford Rd.
Valley Forge, PA 19482
AMT Venture Partners Ltd.(4) 654,023 9.37% 7.08%
10929 Wickshire Way
Rockville, MD 20852
Martin S. Grimnes* 631,800 9.05% 6.84%
43 Bibber Parkway
Brunswick, ME 04011
David M. Coit*(2) - - -
70 Center Street
Portland, ME 04101
Gregory B. Peters*(2) - - -
70 Center Street
Portland, ME 04101
David E. Sharpe*(3) - - -
750 E. Swedesford Rd.
Valley Forge, PA 19482
Peter N. Walmsley*(4) - - -
10929 Wickshire Way
Rockville, MD 20852
William M. Dubay 215,800 3.09% 2.38%
43 Bibber Parkway
Brunswick, ME 04011
-44-
Robert R. Fuller 125,320 1.79% 1.36%
43 Bibber Parkway
Brunswick, ME 04011
Thomas L. Wallace 41,600 + +
43 Bibber Parkway
Brunswick, ME 04011
John P. O'Sullivan 7,800 + +
43 Bibber Parkway
Brunswick, ME 04011
All Directors and Officers 1,022,320 14.64% 11.07%
as a group (9 persons)(2)(3)(4)(5)
- ---------------------
* Member of Board of Directors of the Company.
+ Less than 1%.
(1) The number of shares of Common Stock deemed outstanding prior to the Offering includes: (i) the aggregate
amount of 5,187,130 shares of Common Stock, including Common Stock issued upon the conversion of Preferred
Stock, outstanding as of July 31, 1996, (ii) 1,534,181 shares of Common Stock issuable upon exercise of
the common stock purchase warrants and employee stock options which will be exercisable within 60 days of
July 31, 1996 and (iii) 260,544 shares of Common Stock to be issued to holders of Preferred Stock in
payment of accrued dividends upon conversion of the Preferred Stock to Common Stock effective with the
consummation of the Offering (assuming the closing as of September 15, 1996). The number of shares of
Common Stock deemed outstanding after the Offering includes the 2,250,000 shares of Common Stock being
offered for sale by the Company in the Offering.
(2) Includes 383,500 shares of Common Stock subject to warrants currently exercisable and 119,326 shares in
payment of accrued dividends, subtracting 42,142 shares for cashless exercise of warrants. Messrs. Coit
and Peters are general partners of North Atlantic Capital Partners, Limited Partnership, the sole general
partner of North Atlantic Venture Fund, L.P. ("NAVF") and have voting control of the shares owned by NAVF.
Such shares are not included in the shares owned by directors and officers as a group.
(3) Includes 80,390 shares in payment of accrued dividends. Mr. Sharpe, a director of the Company, is the Vice
President, Sales and Marketing, of Vetrotex. The shares owned by Vetrotex are not included in the shares
owned by directors and officers as a group.
(4) Includes 31,583 shares in payment of accrued dividends. Mr. Walmsley has been for more than the past five
years, one of two general partners of AMT Associates Ltd., which is a general partner of both AMT Venture
Partners, Ltd. ("AMT") and JHAM Limited Partnership, which are venture capital funds and stockholders of
the Company. AMT Associates Ltd. has 100% of the voting powers of the shares owned by AMT. Such shares are
not included in the shares owned by directors and officers as a group.
(5) Includes 625,820 shares of Common Stock subject to options exercisable within 60 days of July 31, 1996.
</TABLE>
-45-
CERTAIN TRANSACTIONS
In August, 1993, the Company and certain stockholders sold 1,040,000
shares of Series D Convertible Preferred Stock, 139,230 shares of Common Stock,
92,300 shares of Series AA Preferred Stock and 11,700 shares of Series BB
Preferred Stock of the Company to Vetrotex for an aggregate cash purchase price
of $2,043,000 or approximately $1.59 per share of Common Stock (on an
as-converted basis). The purchase price was determined by negotiation between
the Company, the selling stockholders, and Vetrotex. Concurrently with the sales
transaction, the Company and Vetrotex entered into a three year Supply Agreement
which expires August 25, 1996, pursuant to which Vetrotex agreed to sell to the
Company and the Company agreed to purchase from Vetrotex not less than 90% of
the Company's requirements of fiberglass products. For calendar years 1993, 1994
and 1995, the Company paid Vetrotex $3,213,169, $4,911,399, and $7,809,567
respectively for fiberglass products purchased pursuant to the Supply Agreement.
See "Business-Supply."
In March 1992 Vetrotex loaned the Company $300,000, on an interest-free
basis, to finance the purchase and modification of one stitchbonding machine.
Vetrotex obtained a purchase money security interest in the machine. The Company
is currently making quarterly payments of $17,500 to Vetrotex. As of July 31,
1996, the remaining debt was $50,000.
The Restated Articles of Incorporation of the Company provide in the
designations of rights and preferences of the Series AA Convertible Preferred
Stock, Series BB Convertible Preferred Stock, Series C Convertible Preferred
Stock and Series D Convertible Preferred Stock that the holders of the Series AA
and BB stock shall have the right, voting as a class, to elect one director of
the Company, the holders of the BB, C and D stock, each voting as a separate
series, are entitled to elect one director each, and the holders of Common Stock
shall have the right to elect one director. Pursuant to these rights, Messrs.
Coit, Peters, Sharpe and Walmsley have been elected to the Board of Directors by
the holders of Preferred Stock. All series of Preferred Stock will automatically
convert to Common Stock upon the consummation of the Offering and the rights of
the Preferred Stockholders to elect directors described above shall terminate.
DESCRIPTION OF CAPITAL STOCK
Upon the closing of the Offering, the Company will be authorized to
issue 20,000,000 shares of Common Stock, $0.0001 par value, and 1,000,000 shares
of preferred stock, $10.00 par value ("New Preferred Stock"). The Company's
authorized Series AA, Series BB, Series C and Series D Preferred Stock will
automatically convert to Common Stock upon closing of the Offering. Upon such
closing, 7,697,674 shares of Common Stock will be outstanding and no shares of
New Preferred Stock.
COMMON STOCK
The following summary description of the Common Stock is qualified in
its entirety by reference to the Company's Amended and Restated Articles of
Incorporation.
The holders of Common Stock are entitled to one vote for each share
held of record on all matters to be voted on by stockholders. There is no
cumulative voting with respect to the election of directors, with the result
that the holders of more than 50% of the shares voted for the election of
-46-
directors can elect all of the directors. The holders of Common Stock are
entitled to receive dividends when, as and if declared by the Board of Directors
out of funds legally available therefor. In the event of liquidation,
dissolution or winding up of the Company, the holders of Common Stock are
entitled to share ratably in all assets remaining available for distribution to
them after payment of all liabilities. Holders of shares of Common Stock, as
such, have no conversion, preemptive or other subscription rights, and there are
no redemption provisions applicable to the Common Stock. All of the outstanding
shares of Common Stock are, and the shares of Common Stock offered hereby, when
issued against the consideration set forth in this Prospectus, will be, fully
paid and nonassessable.
RECAPITALIZATION
Immediately prior to the commencement of the Offering, all outstanding
no par common stock will be converted into $0.0001 par Common Stock. As of the
closing of the Offering, each share of the Company's four series of outstanding
Preferred Stock will convert to 65 shares of Common Stock $0.0001 par value.
Furthermore, each holder of such Preferred Stock is entitled to receive
cumulative dividends upon conversion. Such holders of Preferred Stock will
receive an aggregate of 260,544 shares of Common Stock in payment of an
estimated $1,823,810 in accrued cash dividends as of September 15, 1996.
PREFERRED STOCK
The Board of Directors has the authority to issue the New Preferred
Stock in one or more series and to fix the rights, preferences, privileges and
restrictions thereof, including dividend rights, dividend rates, conversion
rights, voting rights, terms of redemption, redemption prices, liquidation
preferences and the number of shares constituting any series or the designation
of such series, without further vote or action of the stockholders. The rights
of the holders of Common Stock will be subject to, and may be adversely affected
by, the rights of holders of any New Preferred Stock that may be issued in the
future. The Company has no present plans to issue any shares of its New
Preferred Stock.
SHARES ELIGIBLE FOR FUTURE SALE.
Sales of substantial amounts of Common Stock in the public market
following the completion of the Offering could have an adverse effect on the
market price of the Common Stock. There will be 7,697,674 shares of Common Stock
outstanding immediately after the Offering, including the 2,250,000 shares
offered hereby. Upon completion of the Offering, all of the shares of Common
Stock offered hereby will be eligible for public sale without restriction,
except for shares purchased by affiliates (those controlling or controlled by or
under common control with the issuer and generally deemed to include officers
and directors) of the Company. The 5,447,674 shares of Common Stock that will be
owned by the Company's current stockholders following the Offering, including
(i) the 4,603,560 shares of Common Stock to be issued to existing holders of
Preferred Stock upon conversion of their shares of Preferred Stock and (ii) the
260,544 shares of Common Stock (estimated as of September 15, 1996) to be issued
to such holders in payment of accrued dividends concurrently with the completion
of the Offering (the "Dividend Shares"), are "restricted securities," as that
term is defined under rule 144 promulgated under the Securities Act of 1933, as
amended, (the "Securities Act"). Additionally, there will be outstanding as of
the closing of the Offering, options and warrants to purchase an aggregate of
1,534,181
-47-
shares of Common Stock which, when issued in accordance with the terms of such
options and warrants, will be restricted shares under the Securities Act.
Subject to the volume limitations of Rule 144, all of such shares
(other than the Dividend Shares) will be eligible for sale under Rule 144
beginning 90 days after the commencement of the Offering, subject to the
"lock-up" agreement described below. In general, under Rule 144 as currently in
effect, subject to the satisfaction of certain other conditions, a person,
including an affiliate of the Company (or persons whose shares are aggregated
with such affiliate), who has owned restricted shares of Common Stock
beneficially for at least two years is entitled to sell, within any three-month
period, a number of shares that does not exceed the greater of one percent (1%)
of the total number of outstanding shares of the same class or, if the Common
Stock is quoted on NASDAQ, the average weekly trading volume during the four
calendar weeks preceding the sale. A person who has not been an affiliate of the
Company for at least the three months immediately preceding the sale and who has
beneficially owned shares of Common Stock for at least three years is entitled
to sell such shares under Rule 144(k) without regard to any of the limitations
described above. Beginning on the commencement of the Offering, 5,447,674 shares
of Common Stock would be eligible for sale under Rule 144(k).
In addition, 1,006,395 shares of stock underlying options outstanding
as of July 31, 1996, would be salable under Rule 701 promulgated under the
Securities Act if sold in compliance with Rule 144, 90 days after the
commencement of the Offering, subject to general volume limitations imposed on
aggregate amounts sold in reliance on the Rule. The 527,786 shares underlying
the outstanding warrants would be salable under Rule 144 two years after their
respective dates on which such warrants are exercised.
REGISTRATION RIGHTS
The holders of all outstanding shares of Common Stock have been granted
registration rights by the Company pursuant to which they may as a group on two
occasions demand that the Company register the resale of all or a portion of
their Common Stock and may otherwise "piggyback" upon certain registrations by
the Company of its securities. All stockholders have agreed to waive their
registration rights to participate in the Offering and not to exercise their
rights during the 13 months following the closing date of the Offering.
LOCK-UP AGREEMENTS
The holders of all shares of Common Stock, Options and Warrants
outstanding immediately prior to the consummation of the Offering have agreed
not to sell or otherwise dispose of any shares of Common Stock for a period of
thirteen months from the commencement of the Offering without the prior written
consent of the Representative of the Underwriters. The possibility that
substantial amounts of Common Stock may be sold in the public market may
adversely affect the prevailing market price for the Common Stock and could
impair the Company's ability to raise capital through the sale of its equity
securities.
UNDERWRITING
Under the terms and subject to the conditions set forth in an
underwriting agreement (the "Underwriting Agreement") between the Company and
-48-
Josephthal Lyon & Ross Incorporated (the "Representative"), the Company has
agreed to sell to each of the Underwriters named below (the "Underwriters"), and
each of the Underwriters has severally agreed to purchase the respective number
of shares of Common Stock set forth opposite its name below:
NUMBER OF
UNDERWRITER SHARES
- ----------- ------
Josephthal Lyon & Ross Incorporated...............
Total........................................... 2,250,000
In the Underwriting Agreement, the Underwriters have agreed, subject to
the terms and conditions set forth therein, to purchase all the shares of Common
Stock offered hereby if any such shares are purchased. In the event of a default
by an Underwriter, the Underwriting Agreement provides that, in certain
circumstances, such commitments of the non-defaulting Underwriter may be
increased or the Underwriting Agreement may be terminated.
The Underwriters, for whom Josephthal Lyon & Ross Incorporated is
acting as the representative (the "Representative"), have advised the Company
that they propose initially to offer the shares of Common Stock offered hereby
to the public at the public offering price per share set forth on the cover page
of this Prospectus. The Underwriters may allow a concession of not more than
$_______ per share to selected dealers; and the Underwriters may allow, and such
dealers may reallow, a discount not in excess of $_______ per share on sales to
certain other dealers. After the initial public offering, the concession to
selected dealers and the reallowance to other dealers may be changed by the
Underwriters. The shares of Common Stock are offered subject to receipt and
acceptance by the Underwriters and to certain other conditions, including the
right to reject orders in whole or in part.
The Company has agreed to indemnify the Underwriters against certain
civil liabilities, including liabilities under the Securities Act and the
Securities Exchange Act of 1934, as amended, or to contribute to payments the
Underwriters may be required to make in respect thereof.
The Company has granted to the Underwriters an option to purchase up to
337,500 additional shares of Common Stock, solely to cover over-allotments, if
any, exercisable within 45 days after the commencement of the Offering, at the
initial public offering price per share of Common Stock offered hereby, less
underwriting discounts.
The existing holders of all of the shares of the Common Stock have
agreed not to sell or otherwise dispose of their shares of Common Stock during
the thirteen month period following the commencement of the Offering.
The Company has granted the Representative the right to designate for
election one person to the Company's Board of Directors until such time as AMT
Venture Partners Ltd. and North Atlantic Venture Fund, L.P. no longer hold in
excess of 80% of their current shareholdings in the Company. In the event the
Representative elects not to exercise this right, then it may designate one
person to attend Board of Directors' meetings as an observer.
-49-
The Company has agreed to pay the Representative a non-accountable
expense allowance of 0.75% of the gross proceeds of the Offering ($118,250 if
the Over-allotment Option is not exercised and $135,844 if the Over-allotment
Option is exercised in full), none of which has been paid to date. The Company
also has agreed to pay all expenses in connection with registering or qualifying
the shares offered hereby for sale under the laws of the states in which shares
are sold by the Underwriters (including expenses of counsel retained for such
purposes by the Underwriters, not to exceed $15,000). Further, the Company has
agreed to reimburse the Underwriters for certain accountable expenses relating
to the Offering, none of which has been paid to date.
In addition, the Company has entered into a Financial Advisory
Agreement with the Representative pursuant to which the Representative has been
engaged, for a twelve month period ending in June 1997, to render a valuation of
the Company and/or certain of its components and to provide consulting advice as
an investment banker as shall be agreed to from time to time by the Company and
the Representative. The Agreement does not require that the Representative
devote a specific amount of time to the performance of its duties thereunder. As
compensation for the Representative's services under the Financial Advisory
Agreement, the Company has agreed to pay $60,000 for the six month period
commencing as of June 1, 1996, payable in monthly installments of $10,000. To
date the Company has paid the Representative $20,000. Under the Agreement the
Company has also granted the Representative five year warrants to purchase
157,500 shares of Common Stock at an exercise price equal to 120% of the
purchase price for shares of Common Stock in the Offering. In the event that the
Representative originates a financing or a merger, acquisition, joint venture or
other transaction to which the Company is a party, the Representative will be
entitled to receive a finder's fee in consideration for origination of such
transaction.
Prior to the Offering, there has been no market for the Common Stock of
the Company. Accordingly, the initial public offering price has been determined
by negotiations between the Company and the Underwriters. Among the factors
considered in determining the initial public offering price are the Company's
results of operations, the Company's current financial condition, its future
prospects, the state of the markets for its products and services, the
experience of its management, the economics of the industry in general, the
general condition of the equity securities market and the demand for similar
securities of companies considered comparable to the Company.
The foregoing is a summary of the principal terms of the agreements
described above and does not purport to be complete. Reference is made to a copy
of each such agreement which is filed as an exhibit to the Registration
Statement of which this Prospectus forms a part. See "Additional Information."
CHANGES IN ACCOUNTANTS
In July 1995, the Company advised KPMG Peat Marwick LLP ("Peat
Marwick") that it would no longer retain the firm as independent accountants due
to the closing of Peat Marwick's office in Portland, Maine. The reports of Peat
Marwick for the previous years (1994 and 1993) did not contain an adverse
opinion or a disclaimer of opinion, nor was it qualified or modified as to
uncertainty, audit scope or accounting principles. The decision to change
accountants was recommended by the Company's Audit Committee and approved by the
full Board of Directors. During the periods reviewed by Peat Marwick
-50-
there were no disagreements with Peat Marwick on any matter of accounting
principles or practices, financial statement disclosure or auditing scope or
procedure, which disagreement(s) if not resolved to the satisfaction of Peat
Marwick, would have caused it to make reference to the subject matter of the
disagreements in connection with its report. Coopers and Lybrand L.L.P. was
engaged by the Company as its independent accountants in July 1995.
LEGAL MATTERS
The validity of the Common Stock offered by the Company will be passed
upon for the Company by Eaton, Peabody, Bradford & Veague, P.A., Bangor, Maine.
Daniel G. McKay, a member of that firm, is Clerk of the Company. Certain other
legal matters with respect to the Company will be passed upon for the
Underwriters by Gadsby & Hannah, LLP, Boston, Massachusetts, counsel for the
Company. Certain legal matters will be passed upon for the Underwriters by
Bingham, Dana & Gould LLP, Boston, Massachusetts.
EXPERTS
The financial statements for the fiscal year ended December 31, 1995 of
the Company included or incorporated by reference in this Prospectus and
elsewhere in the Registration Statement have been audited by Coopers & Lybrand
L.L.P., independent public accountants, as indicated in its report with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in accounting and auditing. The financial statements for the fiscal
years ended December 31, 1994 and December 31, 1993 of the Company included or
incorporated by reference in this Prospectus and elsewhere in the Registration
Statement have been audited by KPMG Peat Marwick LLP, independent public
accountants, as indicated in its report with respect thereto, and are included
herein in reliance upon the authority of said firm as experts in accounting and
auditing.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-1 (the "Registration
Statement") under the Securities Act with respect to the Common Stock offered by
this Prospectus. This Prospectus does not contain all of the information set
forth in the Registration Statement and the exhibits and schedules thereto,
certain parts of which are omitted in accordance with the rules and regulations
of the Commission. For further information with respect to the Company and the
Common Stock, reference is made to the Registration Statement, including the
exhibits and schedules filed therewith, which may be inspected without charge at
the Commission's Public Reference Room, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the Northwestern Atrium Center, Suite 1400, 500
West Madison Street, Chicago, Illinois 60661-2511, and Northeast Regional
Office, Seven World Trade Center, 13th Floor, New York, New York 10048. Copies
of the Registration Statement may be obtained from the Commission from its
Public Reference Section, 450 Fifth Street, N.W., Washington, D.C. 20549 upon
payment of prescribed fees. The Commission also maintains a Web site at
htpp://www.sec.gov, containing reports, proxy and information statements, and
other information regarding registrants, including the Company, that file
electronically with the Commission. Statements contained in this Prospectus as
to the contents of any contract or other document are not necessarily complete
and, where the contract or other document has been filed as an exhibit to the
Registration Statement, each such
-51-
statement is qualified in all respects by reference to the exhibit filed with
the Commission.
The Company will furnish to its stockholders annual reports containing
audited financial statements accompanied by an opinion thereon of an independent
public accountant, and such other periodic reports as the Company may determine
to be appropriate or as may be required by law.
-52-
GLOSSARY OF TECHNICAL TERMS
Binderless Mat:
A mat composed of short reinforcing fibers stitchbonded together in
random orientations, instead of glued together in the traditional fashion.
Composite Fibers:
Fibers used to reinforce the resin matrix in composite construction.
Knitting:
A bonding technique for fibers in which the fibers are held together by
a series of interlocking stitches that do not pass through the fibers.
Laminate:
Composite material consisting of reinforcing fibers and a resin matrix.
Quadraxial:
Composite reinforcing material with fibers aligned along four axes,
namely 0(degree), 90(degree), +45(degree), and -45(degree).
Resin:
Liquid substance that solidifies due to either a temperature or
chemical change, and which binds reinforcing fibers together to form a laminate.
Stitchbonding:
A bonding technique for fibers in which fibers are connected by
stitches that are sewn through the fibers.
Weaving:
A traditional method of producing composite fabrics in which fibers
pass over and under adjacent fibers as a method of interlocking the fibers.
-53-
BRUNSWICK TECHNOLOGIES, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Coopers & Lybrand L.L.P.................................................. F-2
Report of KPMG Peat Marwick LLP.................................................... F-3
Balance Sheets as of December 31, 1994 and 1995 and Unaudited
Balance Sheet as of June 30, 1996................................................ F-4
Statements of Income for the Years Ended December 31, 1993, 1994 and 1995 and
Unaudited Statements of Income for the Six Month
Periods Ended June 30, 1995 and 1996............................................. F-6
Statements of Stockholders' Deficit for the Years Ended December 31, 1993, 1994
and 1995 and Unaudited Statement of Stockholders'
Deficit for the Six Month Period Ended June 30, 1996............................. F-7
Statements of Cash Flows for the Years Ended December 31, 1993, 1994 and 1995
and Unaudited Statements of Cash Flows for the Six Month
Periods Ended June 30, 1995 and 1996............................................. F-9
Notes to Financial Statements...................................................... F-10
</TABLE>
F-1
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
Brunswick Technologies, Inc.:
We have audited the accompanying balance sheet of Brunswick Technologies, Inc.,
as of December 31, 1995, and the related statements of income, stockholders'
deficit, and cash flows for the year then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits. The financial
statements of Brunswick Technologies, Inc. as of December 31, 1994, and for the
years ended December 31, 1994 and 1993, were audited by other auditors, whose
report dated January 20, 1995, expressed an unqualified opinion on those
statements.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the 1995 financial statements referred to above present fairly,
in all material respects, the financial position of Brunswick Technologies,
Inc., as of December 31, 1995, and the results of its operations and its cash
flows for the year then ended in conformity with generally accepted accounting
principles.
/s/Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
Portland, Maine
January 26, 1996, except for Notes 1 and 11,
as to which the date is August 14, 1996
F-2
Independent Auditor's Report
The Board of Directors
Brunswick Technologies, Inc.:
We have audited the accompanying balance sheet of Brunswick Technologies, Inc.,
as of December 31, 1994, and the related statements of income, stockholders'
equity, and cash flows for the year ended December 31, 1994 and 1993. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Brunswick Technologies, Inc. as
of December 31, 1994 and the results of its operations and its cash flows for
the years ended December 31, 1994 and 1993 in conformity with generally accepted
accounting principles.
/s/ KPMG Peat Marwick LLP
KPMG PEAT MARWICK LLP
Boston, Massachusetts
January 20, 1995
F-3
BRUNSWICK TECHNOLOGIES, INC.
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
------------ --------
1994 1995 1996
------ ------ -----
(UNAUDITED)
<S> <C> <C> <C>
Current assets:
Cash $ 2,806 $ 117,959 $ 952
Accounts receivable, net of
allowance for doubtful
accounts of $12,365 in 1994,
$7,287 in 1995, and $12,945
in 1996 942,446 2,013,699 1,423,336
Inventories 1,325,804 1,429,864 2,629,608
Refundable income taxes - 16,000 -
Deferred income taxes - 306,700 190,100
Other current assets 68,117 119,801 159,239
------- -------- --------
Total current assets 2,339,173 4,004,023 4,403,235
---------- ---------- ----------
Property, plant and equipment:
Furniture and fixtures 125,051 212,861 291,844
Leasehold improvements 255,256 271,595 310,442
Machinery and equipment 3,709,607 4,475,800 4,683,641
Vehicles 52,004 60,678 62,678
------- ------- -------
4,141,918 5,020,934 5,348,605
Less accumulated depreciation
and amortization (885,463) (1,261,881) (1,464,274)
---------- ----------- -----------
Net property, plant and
equipment 3,256,455 3,759,053 3,884,331
---------- ---------- ----------
Other assets, net 68,926 103,470 99,655
------- -------- -------
$ 5,664,554 $ 7,866,546 $ 8,387,221
=========== =========== ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL
PART OF THE FINANCIAL STATEMENTS.
F-4
BRUNSWICK TECHNOLOGIES, INC.
BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' DEFICIT
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
------------ --------
1994 1995 1996
------ ------ -----
(UNAUDITED)
<S> <C> <C> <C>
Current liabilities:
Bank overdraft $ 119,216 $ 216,622 $ 443,019
Note payable to bank 80,000 - 387,000
Current installments of long-
term debt 129,251 179,162 139,426
Current obligations under
capital leases 1,625 2,620 -
Accounts payable-trade 1,209,484 2,324,870 1,742,630
Accrued expenses 168,943 344,030 175,925
Income taxes payable - 32,000 23,474
--- ------- -------
Total current liabilities 1,708,519 3,099,304 2,911,474
---------- ---------- ----------
Long-term debt, excluding current
installments 1,177,044 1,036,471 1,364,264
Deferred income taxes - 32,600 50,000
Commitments
Convertible preferred stock 5,537,717 6,069,530 6,338,757
---------- ---------- ----------
Stockholders' deficit
Preferred stock, $10 par value;
1,000,000 shares authorized,
none outstanding
Common stock, $0.0001 par value; - - -
20,000,000 shares authorized,
583,750 outstanding 54 58 58
Additional paid-in-capital 392,590 410,261 410,461
Treasury stock, 6,500 shares at cost - (5,000) (5,000)
Accumulated deficit (3,151,370) (2,776,678) (2,682,793)
----------- ----------- -----------
Total stockholders' deficit (2,758,726) (2,371,359) (2,277,274)
----------- ----------- -----------
$5,664,554 $7,866,546 $8,387,221
========== ========== ==========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL
PART OF THE FINANCIAL STATEMENTS.
F-5
BRUNSWICK TECHNOLOGIES, INC.
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE YEARS ENDED FOR THE SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
------------ --------
1993 1994 1995 1995 1996
------ ------ ------ ------ -----
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales $6,376,385 $9,596,578 $15,476,424 $7,002,914 $9,296,802
Cost of goods sold 4,996,633 7,382,285 11,978,978 5,411,931 7,009,936
---------- ---------- ----------- ---------- ----------
Gross profit 1,379,752 2,214,293 3,497,446 1,590,983 2,286,866
Selling, general and administrative
expenses 1,132,775 1,500,119 2,084,712 960,301 1,323,852
Research and development expenses 124,685 373,955 408,247 178,891 292,241
Moving costs - - 8,560 - 243,301
Facility repair costs - - 150,000 - (147,545)
--- --- -------- --- ----------
Operating income 122,292 340,219 845,927 451,791 575,017
-------- -------- -------- -------- --------
Other income (expense):
Interest expense - (19,595) (124,122) (59,126) (54,280)
Miscellaneous, net (10,816) (6,428) 62,800 (4,248) 39,375
--------- -------- ------- -------- -------
(10,816) (26,023) (61,322) (63,374) (14,905)
--------- --------- --------- --------- ---------
Income before income tax 111,476 314,196 784,605 388,417 560,112
Income tax benefit (expense) - - 121,900 60,360 (197,000)
--- --- -------- ------- ----------
Net income $ 111,476 $ 314,196 $ 906,505 $ 448,777 $ 363,112
========== ========== =========== ========== ==========
Primary:
Earnings (loss) per common
share $ (0.55) $ (0.40) $ 0.20 $ 0.10 $ 0.05
======== ======== ====== ====== ======
Weighted average common
shares outstanding 535,730 535,730 1,918,835 1,795,609 1,906,152
======== ======== ========== ========== ==========
Fully diluted:
Earnings (loss) per common
share $ - $ - $ 0.13 $ 0.07 $ 0.05
==== ==== ====== ====== ======
Weighted average common
shares outstanding - - 6,782,939 6,659,713 6,770,256
=== === ========== ========== ==========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL
PART OF THE FINANCIAL STATEMENTS.
F-6
BRUNSWICK TECHNOLOGIES, INC.
STATEMENTS OF STOCKHOLDERS' DEFICIT
<TABLE>
<CAPTION>
TOTAL
COMMON STOCK ADDITIONAL STOCK-
--------------------- PAID-IN TREASURY ACCUMULATED HOLDERS'
SHARES AMOUNT CAPITAL STOCK DEFICIT DEFICIT
------ ------ ------- ----- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1992 487,500 $49 391,685 - $(2,647,361) $(2,255,627)
Exercise of common stock options 48,230 5 905 910
Accrual of preferred dividend (332,787) (332,787)
Accretion of preferred stock
redemption value (70,864) (70,864)
Net income 111,476 111,476
------- ------- ------- ------- -------- --------
Balance at December 31, 1993 535,730 54 392,590 - (2,939,536) (2,546,892)
Accrual of preferred dividend (450,120) (450,120)
Accretion of preferred stock
redemption value (75,910) (75,910)
Net income 314,196 314,196
------- ------- ------- ------- -------- --------
Balance at December 31, 1994 535,730 54 392,590 - (3,151,370) (2,758,726)
Exercise of common stock
options 25,675 3 3,572 3,575
Exercise of warrants to purchase
common stock 9,165 1 14,099 14,100
Repurchases of common stock $(5,000) (5,000)
Accrual of preferred dividend (450,120) (450,120)
Accretion of preferred stock
redemption value (81,693) (81,693)
Net income 906,505 906,505
------- ------- ------- ------- -------- --------
Balance at December 31, 1995 570,570 58 410,261 (5,000) (2,776,678) (2,371,359)
Exercise of common stock options 13,000 - 200 200
F-7
Accrual of preferred dividend (225,060) (225,060)
Accretion of preferred stock
redemption value (44,167) (44,167)
Net income 363,112 363,112
------- ------- ------- ------- ----------- -----------
Balance at June 30, 1996
(unaudited) 583,570 $ 58 $410,461 $(5,000) $(2,682,793) $(2,277,274)
======= ==== ======== ======== ============ ============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL
PART OF THE FINANCIAL STATEMENTS.
F-8
BRUNSWICK TECHNOLOGIES, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED FOR THE SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
------------------------------------------ ------------------------
1993 1994 1995 1995 1996
------ ------ ------ ------ -----
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income $ 111,476 $ 314,196 $ 906,505 $ 448,777 $ 363,112
Adjustments to reconcile net income
to net cash (used in) provided by
operating activities:
Depreciation and amortization 141,606 266,574 396,595 196,967 202,393
Deferred taxes - - (274,100) (111,313) 134,000
(Gain) loss on sale of property,
plant and equipment 1,803 - (4,164) - -
Changes in assets and liabilities:
(Increase) decrease in accounts
receivable (264,360) (156,751) (1,071,253) (111,979) 590,363
(Increase) in inventories (180,481) (617,119) (104,060) (221,452) (1,199,744)
(Increase) decrease in refundable
income taxes - - (16,000) - 16,000
(Increase) decrease in other
current assets (44,242) 12,883 (51,684) (13,432) (39,438)
Increase (decrease) in accounts
payable and accrued expenses 405,502 (21,496) 1,290,473 350,204 (750,345)
Increase (decrease) in income
taxes payable - - 32,000 45,752 (8,526)
--- --- ------- ------- --------
Net cash provided by (used in)
operating activities 171,304 (201,713) 1,104,312 583,524 (692,185)
-------- ---------- ---------- -------- ----------
Cash flows from investing activities:
Purchases of property, plant and
equipment (993,969) (1,286,797) (899,271) (252,574) (327,671)
Proceeds from sale of property,
plant and equipment - - 12,126 - -
Increase in other assets (1,959) (48,914) (36,140) (20,535) 3,815
-------- --------- --------- --------- ------
Net cash used in investing
activities (995,928) (1,335,711) (923,285) (273,109) (323,856)
---------- ------------ ---------- ---------- ---------
Cash flows from financing activities:
Bank overdraft - 119,216 97,406 (6,992) 226,397
Net proceeds (repayments) under line
of credit (107,246) 80,000 (80,000) (80,000) 387,000
Proceeds from long-term debt borrowings - 1,100,000 - - 325,000
Repayment of long-term debt (267,287) (268,953) (90,662) (39,420) (36,943)
Net principal repayments under capital
lease obligations (12,753) (3,250) (5,293) (2,149) (2,620)
Proceeds from issuance of common stock
upon exercise of stock options and
warrants 1,310 - 17,675 3,475 200
Issuance of convertible preferred stock 1,760,000 - - - -
Costs related to issuance of convert-
ible preferred stock (69,938) (2,724) - - -
Repurchase of common stock - - (5,000) - -
--- --- -------- --- --
Net cash provided by (used in)
financing activities 1,304,086 1,024,289 (65,874) (125,086) 899,034
---------- ---------- --------- ---------- --------
Net increase (decrease) in cash 479,462 (513,135) 115,153 185,329 (117,007)
Cash at beginning of period 36,479 515,941 2,806 2,806 117,959
------- -------- ------ ------ --------
Cash at end of period $ 515,941 $ 2,806 $ 117,959 $ 188,135 $ 952
========== =========== =========== ========= ==========
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest (including interest
capitalized of $53,523 in 1993,
$36,945 in 1994 and $6,000 in the
six months ended June 30, 1995) $ 67,091 $ 52,552 $ 128,276 $ 59,455 $ 67,191
========== =========== =========== ========= ==========
Income taxes $ - $ - $ 136,200 $ 5,200 $ 91,526
======= ======== =========== ========= ==========
</TABLE>
During 1995, the Company entered into a capital lease obligation amounting to
$6,288 for telephone equipment.
THE ACCOMPANYING NOTES ARE AN INTEGRAL
PART OF THE FINANCIAL STATEMENTS.
F-9
BRUNSWICK TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1994, AND 1995
(INFORMATION WITH RESPECT TO JUNE 30, 1995 AND 1996 IS UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Nature of Business
Brunswick Technologies, Inc. is a developer and manufacturer of
stitchbonded engineered composite reinforcement fabrics made from
glass, carbon and other fibers. Its products are used in a diverse
range of products, including those used in the marine, automotive,
construction, and transportation industries.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could
differ from those estimates.
Inventories
Inventories are stated at the lower of standard cost, which
approximates first-in, first-out cost method, or market.
Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation is
provided on the straight-line method over the estimated useful lives as
follows:
Years
-----
Furniture and fixtures 2-15
Machinery and equipment 7-15
Vehicles 5
Amortization of capitalized leased assets and leasehold improvements is
provided on the straight-line method over the shorter of the lease term
or the useful life. Interest expense incurred on borrowings used to
finance the construction of production machinery is capitalized and
included in the cost basis of the asset.
Expenditures for maintenance, repairs, and minor replacements are
charged to operations while expenditures for major replacements and
betterments are added to the property, plant and equipment accounts.
When fixed assets are retired or otherwise disposed of, the asset cost
and accumulated depreciation and amortization are removed from the
accounts and any resulting gain or loss is reflected in income.
F-10
BRUNSWICK TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1994, AND 1995
(INFORMATION WITH RESPECT TO JUNE 30, 1995 AND 1996 IS UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
Accounting for Stock Options and Stock Warrants
In 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 123 - Accounting for Stock Based
Compensation (SFAS No. 123). This statement requires a fair value based
method of accounting for employee stock options and similar equity
instruments. It also permits a company to continue to measure
compensation expense for such plans as prescribed by Accounting
Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees (APB No. 25). The Company has elected to continue to measure
its cost using APB No. 25 and as required, will disclose the impact of
SFAS No. 123 in the notes to the December 1996 financial statements.
Research and Development
Expenditures for research and development are charged to operations as
incurred.
Organization Costs
Organization costs are comprised of fees incurred in connection with
the organization of the Company. They are stated at cost net of
accumulated amortization, computed on a straight-line basis over five
years.
Patents
Costs associated with securing patents for the Company's products are
capitalized and amortized over the shorter period of 17 years, or the
estimated useful life.
Earnings per Common Share
Primary earnings per common share are computed by dividing net income,
after giving effect of the preferred stock dividends and accretion of
the mandatory conversion value of preferred stock, by the weighted
average number of outstanding common shares during the period, plus
when their effect is dilutive, common stock equivalents consisting of
shares subject to stock options and warrants. Fully diluted earnings
per share additionally assumes the conversion of the outstanding
convertible preferred stock but does not reduce net income by the
preferred dividends accrued or the accretion of the redemption value.
F-11
BRUNSWICK TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1994, AND 1995
(INFORMATION WITH RESPECT TO JUNE 30, 1995 AND 1996 IS UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
Earnings per Common Share, Continued:
The following table presents information necessary to calculate primary
and fully diluted (when not antidilutive), earnings (loss) per share:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED FOR THE SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
-------------------------------------- -----------------------
1993 1994 1995 1995 1996
------ ------ ------ ------ -----
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Primary:
Net income $111,476 $314,196 $ 906,505 $448,777 $ 363,112
Preferred stock dividend (332,787) (450,120) ( 450,120) (225,060) ( 225,060)
Accretion of preferred stock
redemption value ( 70,864) (75,910) ( 81,693) ( 40,847) ( 44,167)
--------- -------- --------- --------- ---------
Net income (loss) applicable
to common stock $(292,175) $(211,834) $ 374,692 $182,870 $ 93,885
========= ========= ========= ======== ========
Primary earnings (loss) per
common share: $ (0.55) $ (0.40) $ 0.20 $ 0.10 $ 0.05
======== ======== ====== ====== ======
Common shares outstanding:
Weighted average shares
outstanding 535,730 535,730 570,570 554,905 583,570
Common share equivalents - - 1,348,265 1,240,704 1,322,582
---- ---- --------- --------- ---------
Adjusted common shares
outstanding 535,730 535,730 1,918,835 1,795,609 1,906,152
======== ======== ========= ========= =========
Fully diluted:
Net income $ - $ - $ 906,505 $ 448,777 $ 363,112
==== ==== ========= ========= =========
Fully diluted earnings:
Per common shares - - $ 0.13 $ 0.07 $ 0.05
=== === ===== ===== =====
Common shares outstanding
Weighted average shares - - 570,570 554,905 583,570
Common share equivalents - - 1,348,265 1,240,704 1,322,582
Conversion of preferred stock - - 4,603,560 4,603,560 4,603,560
Preferred stock dividend - - 260,544 260,544 260,544
--- --- -------- -------- --------
Adjusted shares outstanding - - 6,782,939 6,659,713 6,770,256
=== === ========= ========= =========
</TABLE>
F-12
BRUNSWICK TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1994, AND 1995
(INFORMATION WITH RESPECT TO JUNE 30, 1995 AND 1996 IS UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
Stock Split and Authorized Shares
On August 14, 1996, the Board of Directors approved a 65 to 1 stock
split of the Company's common stock to be effective immediately prior
to the effective date of the registration statement for the Company's
initial public offering. All share and per share amounts have been
retroactively restated to reflect this stock split. In addition, the
Board approved an increase in the authorized shares of common stock to
20,000,000 shares, to be effective immediately prior to the effective
date of the Registration Statement. The Board also authorized the
creation of a new undesignated class of preferred stock consisting of
1,000,000 shares, $10 par value.
Cash and Cash Equivalents
The Company considers all highly liquid debt instruments purchased with
an original maturity of three months or less to be cash equivalents.
Reclassifications
Certain prior year amounts primarily relating to preferred stock have
been reclassified to conform with the presentation used in the June 30,
1996, financial statements. Pursuant to Securities and Exchange
Commission regulations, convertible preferred stock has been
reclassified outside of stockholders' equity and accrued dividends and
an increase in the preferred stock carrying value based on anticipated
redemption value have been recorded. As a result, the accumulated
deficit has increased by $526,030 and $531,813 at December 31, 1994 and
1995, respectively, and $269,227 at June 30, 1996.
Unaudited Financial Statements
The unaudited financial statements as of June 30, 1996, and for the six
months ended June 30, 1995 and 1996, have been prepared on the same
basis as the audited financial statements and in the opinion of the
Company, include all adjustments (consisting only of normal recurring
adjustments) necessary to present fairly the financial statements and
the results of operations for this period.
F-13
BRUNSWICK TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1994, AND 1995
(INFORMATION WITH RESPECT TO JUNE 30, 1995 AND 1996 IS UNAUDITED)
2. INVENTORIES:
Inventories consist of the following components:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1994 1995 1996
------ ------ -----
(UNAUDITED)
<S> <C> <C> <C>
Raw materials $ 515,060 $ 450,447 $ 393,544
Work in process 219,066 324,772 379,001
Finished goods 591,678 654,645 1,857,063
-------- -------- ----------
$ 1,325,804 $ 1,429,864 $ 2,629,608
=========== =========== ===========
</TABLE>
F-14
BRUNSWICK TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1994, AND 1995
(INFORMATION WITH RESPECT TO JUNE 30, 1995 AND 1996 IS UNAUDITED)
3. DEBT:
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
------------ --------
1994 1995 1996
---- ---- ----
(UNAUDITED)
<S> <C> <C> <C>
5.75% note payable to a financial institution,
payable in monthly installments of principal and
interest of $384, through January 1999;
collateralized by a motor vehicle $ 16,824 $ 13,133 $ 11,190
Equipment loan payable to a bank with interest
payable monthly through January 31, 1997 and
principal amortized over 84 months beginning on
March 1, 1997; collateralized by all corporate
assets 1,100,000 1,100,000 1,425,000
Non-interest bearing note payable to a
shareholder/supplier payable in quarterly
installments of $17,500 through April 1997;
collateralized by certain machinery 172,500 102,500 67,500
8.75% note payable with monthly principal and
interest installments of $548. The note was
collateralized by a vehicle and was paid in full
in December 1995, when the vehicle was sold 16,971 - -
------- --- --
1,306,295 1,215,633 1,503,690
Less current installments (129,251) (179,162) (139,426)
--------- --------- ---------
Long-term debt, excluding current installments $1,177,044 $1,036,471 $1,364,264
========== ========== ==========
</TABLE>
The schedule of maturities of long-term debt at December 31, 1995, are as
follows:
1996 $ 179,162
1997 162,480
1998 143,255
1999 153,525
2000 577,211
------------
$ 1,215,633
============
F-15
BRUNSWICK TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1994, AND 1995
(INFORMATION WITH RESPECT TO JUNE 30, 1995 AND 1996 IS UNAUDITED)
3. DEBT, CONTINUED:
On May 30, 1996, the Company renegotiated its existing debt facility
with a bank. The new agreement increases the Company's line of credit
from $1 million to $1.5 million and increases an equipment term loan
from $1.1 million to $1.8 million.
Borrowings under the line of credit are based on 75% of eligible
accounts receivable and 50% of eligible inventory. At the Company's
option, interest is charged at either the Bank's prime rate or the
London Interbank Borrowing Rate (LIBOR), plus 1.75%. There is a
commitment fee of .125% on any unused balance. At June 30, 1996,
borrowings under the line of credit amounted to $387,000. The weighted
average interest rate of borrowings outstanding at June 30, 1996, was
8.125%. The line of credit expires on June 1, 1997.
Under the equipment term loan, the Bank will advance 75% of the
equipment cost to be acquired. At the Company's option, interest is
charged at either the Bank's prime rate or LIBOR, plus 2.25%. Principal
on outstanding balances will be repaid in 84 equal installments
commencing March 1, 1997. At June 30, 1996, $1,425,000 was outstanding
under the equipment term loan and further advances will expire on
January 31, 1997.
The loan agreement contains certain restrictive covenants, including
limitations on capital expenditures, debt to equity ratio, debt service
coverage and minimum net income. The borrowings under this agreement
are collateralized by all corporate assets.
4. LEASES:
Commencing January 1, 1996, the Company began leasing a newly
constructed manufacturing facility. The lease term is for ten years
with an option to renew for an additional five years. The Company has
the option to purchase the facility at fair market value at any time
between the end of the fifth year of the lease and the end of the
lease. In connection with the vacating of its former facility in
December 1995, the Company recorded $150,000 as its estimated cost to
make repairs to the premises as specified in its lease agreement.
However, this estimate was not realized and $147,545 was reversed in
June 1996. In connection with the relocation to its new facility, the
Company has recorded a separate operating expense for the cost of the
move, which includes the rental expense for the old facility for the
six months ended June 30, 1996. The Company also has operating leases
for equipment and a vehicle. Total rental expense under all operating
leases was $147,114, $164,293, and $176,558 for the years ended
December 31, 1993, 1994, and 1995, respectively, and $90,600 and
$179,138 for the six months ended June 30, 1995 and 1996, respectively.
F-16
BRUNSWICK TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1994, AND 1995
(INFORMATION WITH RESPECT TO JUNE 30, 1995 AND 1996 IS UNAUDITED)
4. LEASES, CONTINUED:
The Company has entered into capital lease agreements for various
equipment. The net book value of the equipment capitalized under the
lease, which is included under property, plant and equipment, was
$5,839 at December 31, 1995, and $6,288 at June 30, 1996.
At December 31, 1995, future minimum lease payments under all
non-cancelable leases are as follows:
CAPITAL OPERATING
LEASES LEASES
------ ------
1996 $ 2,950 $ 273,153
1997 - 184,065
1998 - 181,500
1999 - 181,500
2000 - 181,500
Thereafter
------- ----------
Minimum future lease payments 2,950 $1,001,718
------ ==========
Less amounts representing interest 330
Present value of minimum future
lease payments currently payable $ 2,620
=======
F-17
BRUNSWICK TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1994, AND 1995
(INFORMATION WITH RESPECT TO JUNE 30, 1995 AND 1996 IS UNAUDITED)
5. CONVERTIBLE PREFERRED STOCK (SEE ALSO NOTE 11):
The Company's convertible preferred stock, no par value consists of
four series whose activity is shown in the following table:
<TABLE>
<CAPTION>
SERIES AA SERIES BB SERIES C SERIES D
--------- --------- -------- --------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1992 3,657 $216,040 33,167 $1,742,877 18,000 $959,057 - $ -
Issuance of preferred stock,
net of costs 16,000 1,690,062
Accrual of preferred stock
dividend 18,285 165,835 90,000 58,667
Accretion of preferred stock
redemption value 29,845 18,217 6,975 15,827
- ------- - ------- - ------ - -------
Balance at December 31, 1993 3,657 264,170 33,167 1,926,929 18,000 1,056,032 16,000 1,764,556
Stock issuance costs
Accrual of preferred stock
dividend 18,285 165,835 90,000 176,000
Accretion of preferred stock
redemption value 34,465 18,432 7,031 15,982
- ------- - ------- - ------ - -------
Balance at December 31, 1994 3,657 316,920 33,167 2,111,196 18,000 1,153,063 16,000 1,956,538
Accrual of preferred stock
dividend 18,285 165,835 90,000 176,000
Accretion of preferred stock
redemption value 39,818 18,650 7,089 16,136
- ------- - ------- - ------ - -------
Balance at December 31, 1995 3,657 375,023 33,167 2,295,681 18,000 1,250,152 16,000 2,148,674
Accrual of preferred stock
dividend 9,143 82,917 45,000 88,000
Accretion of preferred stock
redemption value 23,011 9,436 3,574 8,146
- ------- - ------ - ------ - ------
Balance at June 30, 1996
(unaudited) 3,657 $407,177 33,167 $2,388,034 18,000 $1,298,726 16,000 $2,244,820
===== ======== ====== ========== ====== ========== ====== ==========
Liquidation preference at
June 30, 1996 $447,983 $2,404,608 $1,305,000 $2,258,667
======== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
TOTAL CONVERTIBLE
PREFERRED SHARES
----------------
SHARES AMOUNT
------ ------
<S> <C> <C>
Balance at December 31, 1992 58,824 $2,917,974
Issuance of preferred stock,
net of costs 16,000 1,690,062
Accrual of preferred stock
dividend 332,787
Accretion of preferred stock
redemption value 70,864
- -------
Balance at December 31, 1993 70,824 5,011,687
Stock issuance costs
Accrual of preferred stock
dividend 450,120
Accretion of preferred stock
redemption value 75,910
- -------
Balance at December 31, 1994 70,824 5,537,717
Accrual of preferred stock
dividend 450,120
Accretion of preferred stock
redemption value 81,693
- -------
Balance at December 31, 1995 70,824 6,069,530
Accrual of preferred stock
dividend 225,060
Accretion of preferred stock
redemption value 44,167
- -------
Balance at June 30, 1996
(unaudited) 70,824 $6,338,757
====== ==========
Liquidation preference at
June 30, 1996 $6,416,258
==========
</TABLE>
F-18
BRUNSWICK TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1994, AND 1995
(INFORMATION WITH RESPECT TO JUNE 30, 1995 AND 1996 IS UNAUDITED)
5. CONVERTIBLE PREFERRED STOCK (SEE ALSO NOTE 11), CONTINUED:
All of the preferred stock series are entitled to cumulative dividends
at the rate of 10% per annum of the original issue price. This
entitlement began on January 1, 1992, for the Series AA, BB, and C and
on September 1, 1993, for the Series D preferred stock. The dividends
are to be paid out of any funds legally available; to date the Company
has not paid any such amounts. Upon redemption or conversion of the
preferred stock, or upon liquidation of the Company, all such dividends
shall become immediately due and payable. Such unpaid dividends
amounted to $1,507,000 and $1,732,000 at December 31, 1995 and June 30,
1996, respectively. In addition, the preferred shares have a
liquidation preference of $100, $50, $50, and $110 per share for the
series AA, BB, C, and D preferred shares, respectively, plus unpaid
cumulative dividends. The shares are convertible into common stock
based on a conversion price on the date that the shares are surrendered
for conversion. At the effective date of the registration statement for
the Company's initial public offering, each share of all series of the
preferred stock was convertible into 65 shares of common stock.
The holders of not less than two-thirds of the total number of shares
of preferred stock outstanding (of all series, collectively) may elect
to require the Company to redeem, such number of shares of each series
of convertible preferred stock outstanding on January 1, 1996, as may
be tendered from time to time on the dates following: 33% on June 1,
1996; 67% on June 1, 1997; and 100% on June 1, 1998. Each redemption
will be allocated pro rata among the holders of all series of the
convertible preferred stock electing to participate in such redemption.
The remdemption price is the greater of: a) fair market value of the
shares to be redeemed, or b) $100, $50, $50, and $110 per share for the
Series AA, BB, C and D, respectively, plus unpaid cumulative dividends.
F-19
BRUNSWICK TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1994, AND 1995
(INFORMATION WITH RESPECT TO JUNE 30, 1995 AND 1996 IS UNAUDITED)
6. CAPITAL STOCK:
The Company has two employee stock option plans, one established in
1991 and the other in 1994. The plans reserve for issuance 1,950,000
shares of common stock. Options granted vest at a rate of 20% per year
beginning one year after the date of grant.
A summary of changes in common stock options during 1994, 1995, and
1996 is:
<TABLE>
<CAPTION>
PRICE
PER
SHARES SHARE
------ -----
<S> <C> <C>
Outstanding grants at December 31, 1993 856,895 $0.02-$0.77
Granted 32,500 $0.77
Exercised -
Canceled -
--
Outstanding grants at December 31, 1994 889,395 $0.02-$0.77
Granted 164,125 $0.77
Exercised (25,675) $0.02-$0.77
Canceled (8,450) $0.02-$0.77
-------
Outstanding grants at December 31, 1995 1,019,395 $0.02-$0.77
Granted -
Exercised (13,000) $0.02
Canceled -
--
Outstanding grants at June 30, 1996 1,006,395 $0.02-$0.77
=========
Shares exercisable at December 31, 1994 607,295 $0.02-$0.77
========
Shares exercisable at December 31, 1995 715,845 $0.02-$0.77
========
Shares exercisable at June 30,1996 727,219 $0.02-$0.77
========
</TABLE>
Through the date of the Company's initial public offering, the plans
have provided for, at the option of the Company, the repurchase of
stock held by employees when they terminate service with the Company.
In 1995, the Company repurchased 6,500 common shares at $0.77 per share
from a former employee. These shares are held by the Company and
recorded as Treasury Stock at their cost of $5,000.
In conjunction with the issuance of convertible preferred stock, the
Company has issued warrants for the purchase its common stock. Each
warrant is exercisable for one share of common stock. In 1995, warrants
were exercised to purchase 9,165 common shares at $1.54 per share. At
December 31, 1995, the Company had 416,000 warrants outstanding at an
exercise price of $0.77 per warrant, which expire through December 31,
1997.
F-20
BRUNSWICK TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1994, AND 1995
(INFORMATION WITH RESPECT TO JUNE 30, 1995 AND 1996 IS UNAUDITED)
7. CONCENTRATION OF CREDIT RISK:
The Company utilizes a national distribution system that sells to
approximately 600-700 end users. Four individual distributors accounted
for approximately 85%, 89% and 78% of the Company's 1993, 1994 and 1995
revenues, respectively, and 80% and 77% for each of the six months
ended June 30, 1995 and 1996, respectively. The same distributors also
represent the aforementioned percentages of the Company's respective
account receivable balances at December 31, 1994 and 1995.
8. INCOME TAXES:
Income tax benefit (expense) consists of the following:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED FOR THE SIX MONTHS ENDED
DECEMBER 31 JUNE 30
--------------------------------------------- --------------------------------
1993 1994 1995 1995 1996
------ ------ ------ ------ -----
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Current:
Federal $ - $ - $(120,200) $ (59,200) $ (59,000)
State - - (32,000) (16,000) (4,000)
------- ------- --------- --------- --------
- - (152,200) (75,200) (63,000)
------- ------- ---------- --------- ---------
Deferred:
Federal - - 214,600 106,060 (98,000)
State - - 59,500 29,500 (36,000)
------- ------- ------- ------- ---------
- - 274,100 135,560 (134,000)
------- ------- -------- -------- ----------
Total tax
benefit
(expense) $ - $ - $ 121,900 $ 60,360 $(197,000)
======= ======= ========= ======== ==========
</TABLE>
The actual income tax benefit differs from the expected tax computed by
applying the U.S. federal corporate tax rate of 34% to income before
income tax as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED FOR THE SIX MONTHS ENDED
DECEMBER 31 JUNE 30,
----------- --------
1993 1994 1995 1995 1996
------ ------ ------ ------ -----
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Computed expected
income tax $(38,000) $(107,000) $(267,000) $(132,000) $(190,000)
State income taxes (6,000) (18,000) (47,000) (23,500) (33,000)
Change in valu-
ation allowance 12,000 138,000 439,100 217,400 -
Benefit of net
operating loss
carryforwards 42,000 - - - -
Other (10,000) (13,000) (3,200) (l,540) 26,000
-------- --------- -------- -------- -------
Total income
tax benefit
(expense) $ - $ - $ 121,900 $ 60,360 $(197,000)
==== ==== ========= ======== ==========
</TABLE>
F-21
BRUNSWICK TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1994, AND 1995
(INFORMATION WITH RESPECT TO JUNE 30, 1995 AND 1996 IS UNAUDITED)
8. INCOME TAXES, CONTINUED:
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities
consist of the following at:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30
1994 1995 1996
----------- ---------- ---------------
(unaudited)
<S> <C> <C> <C>
Deferred tax assets (liabilities):
Reserves $ 22,027 $ 92,900 $25,000
Net operating loss carryforward 665,498 303,000 209,000
Alternative minimum tax credit
carryforward --- 152,200 178,000
Compensation 49,587 26,000 18,000
Other 29,103 56,000 85,100
Depreciation and amortization (327,115) (356,000) (140,100)
--------- --------- ---------
Total deferred taxes 439,100 274,100
Less valuation allowance (439,100) - -
--------- --- --
Net deferred taxes $ - $274,100 $140,100
==== ======== ========
Current deferred tax assets $ - $306,700 $190,100
==== ======== ========
Non-current deferred tax
liabilities $ - $(32,600) $(50,000)
==== ========= =========
</TABLE>
As of December 31, 1995, the Company had net operating loss
carryforwards for federal and state income tax purposes of
approximately $760,000, which expire at various dates through 2006.
Under Internal Revenue Code Section 382, utilization of net operating
loss carryforwards may be limited in the event of changes in the
ownership structure of the Company. Such a change occurred in 1990, and
approximately $522,000 of the net operating loss carryforwards are
limited for utilization at approximately $95,000 per year. In addition,
the Company has alternative minimum tax credit carryforwards of
approximately $152,200 which have no expiration date. At December 31,
1994, the Company had a net deferred tax position which was offset by a
valuation allowance of $439,100 due to uncertainties about the ultimate
realization of net operating loss carryforwards. At December 31, 1995,
the Company was still in a deferred tax asset position and no valuation
allowance was recorded as current year utilization of net operating
loss carryforwards and projected utilization in the future of such
carryforwards removed material uncertainties about the ultimate
realization of the deferred tax assets.
F-22
BRUNSWICK TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1994, AND 1995
(INFORMATION WITH RESPECT TO JUNE 30, 1995 AND 1996 IS UNAUDITED)
9. RELATED PARTIES:
The Company purchases approximately 80% of its raw materials inventory
from a stockholder. For the years ended December 31, 1993, 1994, and
1995, purchases of raw materials were $3,213,169, $4,911,399, and
$7,809,567 respectively. For the six months ended June 30, 1995 and
1996, purchases were $3,937,125 and $5,033,063, respectively. At
December 31, 1994 and 1995, and June 30, 1996, the Company had due this
stockholder, $836,790, $1,529,678, and $1,169,225, respectively,
included in accounts payable. In addition, the Company was obligated
under a non-interest bearing note payable to the stockholder (See Note
3).
10. NATIONAL INSTITUTE OF STANDARDS AND TECHNOLOGY (NIST) GRANT:
The Company is a participant in a consortium to develop a manufacturing
competency to replace wood, steel, and concrete with high performance
composites. The project has been awarded a grant by NIST whereby 50% of
the project's costs will be reimbursed. In 1995, the Company incurred
project eligible costs of $201,936 and applied for reimbursement of
$100,968, for which the Company has recorded miscellaneous income of
$66,742 and reduced cost of goods sold by $34,226.
11. SUBSEQUENT EVENTS AND PRO FORMA INFORMATION:
Per the terms of the convertible preferred stock agreements, the
outstanding shares of preferred stock will automatically convert to
common stock, to be effective immediately prior to the commencement of
the Company's initial public offering. As a result, 70,824 shares of
preferred stock will be converted to 4,603,560 shares of common stock.
In addition, on August 14, 1996, the Board of Directors approved the
issuance of common stock in lieu of cash payment of the cumulative
preferred dividend. This will result in an additional 260,544 shares of
common stock being issued to preferred stockholders. The following pro
forma information has been included to reflect the conversion of the
outstanding preferred stock to common stock and issuance of additional
shares of common stock in lieu of payment of a cumulative cash
dividend.
F-23
BRUNSWICK TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1994, AND 1995
(INFORMATION WITH RESPECT TO JUNE 30, 1995 AND 1996 IS UNAUDITED)
11. SUBSEQUENT EVENTS AND PRO FORMA INFORMATION, CONTINUED:
<TABLE>
<CAPTION>
ACTUAL AT PRO FORMA
JUNE 30, PRO FORMA JUNE 30,
1996 ADJUSTMENTS 1996
--------------- ----------- -------------
<S> <C> <C> <C>
Convertible preferred stock $ 6,338,757 $(6,338,757) $ -
=========== ============ =========
Stockholders' (deficit) equity:
Preferred stock, $10 par value
actual and pro forma; 1,000,000 shares
authorized and none outstanding
actual and pro forma - - -
Common stock, par value $0.0001
actual and pro forma; 20,000,000
shares authorized actual and
pro forma; 583,570 shares
outstanding, actual; 5,447,674
shares outstanding pro forma 58 487 545
Additional paid-in-capital 410,461 6,338,270 6,748,731
Treasury stock, 6,500 shares
at cost (5,000) --- (5,000)
Accumulated deficit (2,682,793) --- (2,682,793)
------------ ---- -----------
$(2,277,274) $6,338,757 $4,061,483
============ ========== ==========
</TABLE>
F-24
No dealer, salesman or other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus, and, if given or made, such information or representations must not
be relied upon as having been authorized by the Company or the Underwriter. This
Prospectus does not constitute an offer to sell or a solicitation of an offer to
buy any security other than the shares of Common Stock offered by this
Prospectus, or an offer to sell or a solicitation of an offer to buy any
security by any person in any jurisdiction in which such offer or solicitation
would be unlawful. Neither the delivery of this Prospectus nor any sale made
hereunder shall, under any circumstances, imply that the information in this
Prospectus is correct as of any time subsequent to the date of this Prospectus.
--------------
TABLE OF CONTENTS
PAGE
----
Prospectus Summary......................................... 3
Risk Factors............................................... 8
Use of Proceeds............................................ 14
Dilution................................................... 15
Capitalization............................................. 17
Selected Financial Information............................. 18
Management's Discussion and
Analysis of Financial Condition
and Results of Operations................................ 22
Business................................................... 29
Management................................................. 38
Principal Stockholders..................................... 44
Certain Transactions....................................... 46
Description of Capital Stock............................... 46
Shares Eligible for Future Sale............................ 47
Underwriting............................................... 49
Changes in Accountants..................................... 50
Legal Matters.............................................. 51
Experts.................................................... 51
Additional Information..................................... 51
Glossary of Technical Terms................................ 53
Index to Financial Statements.............................. F-1
--------------
Until _______, 1996, all dealers effecting transactions in the
registered Securities, whether or not participating in this distribution, may be
required to deliver a Prospectus. This is in addition to the obligation of
dealers to deliver a Prospectus when acting as underwriters and with respect to
their unsold allotments or subscriptions.
2,250,000 SHARES
BRUNSWICK TECHNOLOGIES, INC.
COMMON STOCK
--------------
PROSPECTUS
--------------
JOSEPHTHAL LYON & ROSS INCORPORATED
__________________, 1996
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the various costs and expenses payable
in connection with the sale and distribution of the securities being registered,
other than underwriting discounts. All of the amounts shown are estimates except
the SEC registration fee and the NASD filing fee.
AMOUNT TO
BE PAID BY
REGISTRANT
----------
SEC registration fee.................................... $7,138
Exchange listing fee.................................... $36,744
NASD fee................................................ $2,570
Printing and engraving.................................. $60,000
Legal fees and expenses of the Registrant............... $110,000
Accounting fees and expenses............................ $85,000
Blue sky fees and expenses.............................. $15,000
Transfer agent fees..................................... $4,500
Expense allowance to Representative..................... $118,250
Miscellaneous........................................... $60,798
Total...................................... $500,000
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Subsection (1) of Section 719 of the Maine Business Corporation Act
empowers a corporation to indemnify, or if so provided in the bylaws, shall in
all cases indemnify, any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of the fact
that that person is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, trustee, partner, fiduciary, employee or agent of another
corporation, partnership, joint venture, trust, pension or other employee
benefit plan or other enterprise, against expenses, including attorneys' fees,
judgments, fines and amounts paid in settlement actually and reasonably incurred
by that person in connection with such action, suit or proceeding; provided that
no indemnification may be provided for any person with respect to any matter as
to which that person shall have been finally adjudicated: (a) not to have acted
honestly or in the reasonable belief that that person's action was in or not
opposed to the best interest of the corporation or its shareholders or, in the
case of a person serving as a fiduciary of an employee benefit plan or trust, in
or not opposed to the best interest of the plan or trust, or its participants or
beneficiaries; or (b) with respect to any criminal action or proceeding, to have
had reasonable cause to believe that that person's conduct was unlawful.
Furthermore, subsection (1) of Section 719 provides that the
termination of any action, suit or proceeding by judgment, order or conviction
adverse to that person, or by settlement or plea of nolo contendere or its
equivalent, shall not of itself create a presumption that that person did not
act honestly or in the reasonable belief that that person's action was in or not
opposed to the best interests of the corporation or its shareholders or, in the
case of a
II-1
person serving as a fiduciary of an employee benefit plan or trust, in or not
opposed to the best interests of that plan or trust or its participants or
beneficiaries and, with respect to any criminal action or proceeding, had
reasonable cause to believe that that person's conduct was unlawful.
Subsection (1-A) of Section 719 provides that notwithstanding any
provision of subsection (1), a corporation shall not have the power to indemnify
any person with respect to any claim, issue or matter asserted by or in the
right of the corporation as to which that person is finally adjudicated to be
liable to the corporation unless the court in which the action, suit or
proceeding was brought shall determine that, in view of all the circumstances of
the case, that person is fairly and reasonably entitled to indemnity for such
amounts as the court shall deem reasonable.
Subsection (3) of Section 719 provides that any indemnification under
subsection (1), unless ordered by a court or required by the bylaws, shall be
made by the corporation only as authorized in the specific case upon a
determination that indemnification of the director, officer, employee or agent
is proper in the circumstances and in the best interests of the corporation.
That determination shall be made by the board of directors by a majority vote of
a quorum consisting of directors who were not parties to that action, suit or
proceeding, or if such a quorum is not obtainable, or even if obtainable, if a
quorum of disinterested directors so directs, by independent legal counsel in a
written opinion, or by the shareholders. Such a determination once made may not
be revoked and, upon the making of that determination, the director, officer,
employee or agent may enforce the indemnification against the corporation by a
separate action notwithstanding any attempted or actual subsequent action by the
board of directors.
Finally, subsection (6) of Section 719 provides that a corporation
shall have power to purchase and maintain insurance on behalf of any person who
is or was a director, officer, employee or agent of the corporation, or is or
was serving at the request of the corporation as a director, officer, trustee,
partner, fiduciary, employee or agent of another corporation, partnership, joint
venture, trust, pension or other employee benefit plan or other enterprise
against any liability asserted against that person and incurred by that person
in any such capacity, or arising out of that person's status as such, whether or
not the corporation would have the power to indemnify that person against such
liability under this section.
Section 14 of Article Third of the Second Restated Bylaws of the
Company provides for such indemnification to the fullest extent that the Maine
Business Corporation Act permits, as more fully described in the five paragraphs
immediately preceding above.
The Company has purchased directors and officers liability insurance
covering liabilities incurred by its officers and directors in connection with
the performance of their duties from National Union Fire Insurance Company of
Pittsburgh, PA., in the amount of $3,000,000.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Since August 1993, the Registrant has sold and issued the following
securities:
In August, 1993, the Company and certain stockholders sold 16,000
shares of Series D Convertible Preferred Stock, 139,230 shares of Common Stock,
1,420
II-2
shares of Series AA Preferred Stock and 180 shares of Series BB Preferred Stock
of the Company to Vetrotex for an aggregate cash purchase price of $2,043,000 or
approximately $1.59 per share of Common Stock (on an as-converted basis). Said
shares were sold pursuant to Section 4(2) of the Securities Act and Rule 505 or
506 promulgated thereunder.
On March 15, 1995 John Busch and Jurgen Kok exercised options to
acquire 3,250 and 4,875 shares of the Company's Common Stock, respectively, at
an aggregate exercise price of $50 and $75 respectively. On March 15, 1995 and
April 23, 1996, Herschel Sternlieb exercised options to acquire 3,250 and 13,000
shares of the Company's Common Stock, respectively, at an aggregate exercise
price of $250. On March 30, 1995, Lisa Anderson-Bisson exercised options to
acquire 7,800 shares of the Company's Common Stock at an aggregate exercise
price of $3,300. On August 11, 1995, Peter Rand exercised options to acquire
6,500 shares of the Company's Common Stock at an aggregate exercise price of
$100. The Company purchased said shares from Mr. Rand within 60 days of the
exercise of his options. On December 31, 1995, Dudley Follansbee acquired 9,165
shares of the Company's Common Stock pursuant to warrants at an aggregate price
of $14,100.
ITEM 16. EXHIBITS
(a) Exhibits
EXHIBIT
NUMBER DESCRIPTION
------ -----------
1.1 Form of Underwriting Agreement (to be filed by amendment).
3.1 Amended and Restated Articles of Incorporation of the Registrant
(to be filed by amendment).
3.2 Third Restated Bylaws of the Registrant (to be filed by
amendment).
4.1 Amended and Restated Registration Rights Agreement dated August
25, 1993.
4.2 Form of Warrants (to be filed by amendment).
5.1 Opinion of Eaton, Peabody, Bradford & Veague, P.A. as to legality
of shares (to be filed by amendment).
10.1 Loan Agreement between the Registrant and Fleet Bank of Maine
dated May 30, 1996.
10.2 Security Agreement between the Registrant and Fleet Bank of Maine
dated May 30, 1996.
10.3 Demand Note in favor of Fleet Bank of Maine dated May 30, 1996.
10.4 Supply Agreement between the Registrant and Vetrotex CertainTeed
Corp. dated August 25, 1993 (filed separately under a request for
confidential treatment pursuant to Rule 406).
II-3
10.5 Private Activity Bond Requirements Certificate of Brunswick
Technologies, Inc. dated December 1, 1995.
10.6 Lease Agreement between the Registrant and Brunswick Development
Corporation dated August 1, 1995.
10.7 Collaborative Agreement between the Registrant and E.I. DuPont de
Nemours and Company, Inc., et al.
10.8 Financial Advisory Agreement and Indemnification Agreement between
the Registrant and the Representative.
10.9 Installment Promissory Note between the Registrant and Vetrotex
CertainTeed Corp dated March 31, 1992.
10.10 Security Agreement between the Registrant and Vetrotex CertainTeed
Corp. dated March 31, 1992.
16 Letter of KPMG Peat Marwick LLP re: change in certifying
accountant.
23.1 Consent of Coopers & Lybrand L.L.P.
23.2 Consent of KPMG Peat Marwick LLP.
23.3 Consent of Eaton, Peabody, Bradford & Veague, P.A. (to be included
in Exhibit 5.1.)
24.1 Power of Attorney (included at page II-7).
27 Financial Data Schedule.
(b) Financial Statement Schedules
All schedules are omitted because they are not applicable, not required
under the instructions, or all the information required is set forth in the
financial statements or notes thereto.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes to provide to the
underwriter at the closing specified in the underwriting agreements,
certificates in such denominations and registered in such names as required by
the underwriter to permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
II-4
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of Prospectus filed
as part of this Registration Statement in reliance upon 430A
and contained in a form of prospectus filed by the Registrant
pursuant to Rule 424(b)(1) or (4) or 497(h) under the
Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a
form of Prospectus shall be deemed to be a new Registration
Statement relating to the securities offered herein, and the
offering of such securities at the time shall be deemed to be
the initial bona fide offering thereof.
II-5
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the Town of Brunswick,
State of Maine, on the 22nd day of August, 1996.
BRUNSWICK TECHNOLOGIES, INC.
By: /s/ Martin S. Grimnes
------------------------------------
Martin S. Grimnes
Principal Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Martin S. Grimnes
- ------------------------ Principal Executive Officer August 23, 1996
Martin S. Grimnes and Director
/s/ David M. Coit
- ------------------------ Director August 23, 1996
David M. Coit
/s/ Gregory B. Peters
- ------------------------ Director August 23, 1996
Gregory B. Peters
/s/ David E. Sharpe
- ------------------------ Director August 23, 1996
David E. Sharpe
/s/ Peter N. Walmsley
- ------------------------ Director August 23, 1996
Peter N. Walmsley
/s/ John P. O'Sullivan
- ------------------------ Treasurer and Principal August 23, 1996
John P. O'Sullivan Financial and Accounting Officer
/s/ William M. Dubay
- ------------------------ President and Principal August 23, 1996
William M. Dubay Operating Officer
</TABLE>
II-6
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoint Martin S. Grimnes and John P. O'Sullivan
and each one of them, his attorneys-in-fact, each with the power of
substitution, for him in any and all capacities, to sign any and all amendments
to this Registration Statement (including post-effective amendments), and to
file the same, with exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, hereby ratifying and
confirming all that each of said attorneys-in-fact, or his substitute or
substitutes, may do or cause to be done by virtue hereof.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Martin S. Grimnes
- ------------------------ Principal Executive Officer August 23, 1996
Martin S. Grimnes and Director
/s/ David M. Coit
- ------------------------ Director August 23, 1996
David M. Coit
/s/ Gregory B. Peters
- ------------------------ Director August 23, 1996
Gregory B. Peters
/s/ David E. Sharpe
- ------------------------ Director August 23, 1996
David E. Sharpe
/s/ Peter N. Walmsley
- ------------------------ Director August 23, 1996
Peter N. Walmsley
/s/ John P. O'Sullivan
- ------------------------ Treasurer and Principal August 23, 1996
John P. O'Sullivan Financial and Accounting Officer
/s/ William M. Dubay
- ------------------------ President and Principal August 23, 1996
William M. Dubay Operating Officer
</TABLE>
II-7
EXHIBIT 4.1
EXHIBIT B
AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT
August 25, 1993
To each of the Stockholders and
Purchasers named in Schedule I
attached hereto
Dear Sirs:
This will confirm that in consideration of your agreements in
the past and on the date hereof, as applicable, to purchase an aggregate of
3,657 shares of Series AA Convertible Preferred Stock, no par value, 33,167
shares of Series BB Stock, no par value, 18,000 shares of Series C Convertible
Preferred Stock, no par value and 16,000 shares of Series D Convertible
Preferred Stock, no par value (the "Preferred Shares") (the "Preferred Stock"),
of Brunswick Technologies, Inc., a Maine corporation (the "Company"), pursuant
to various prior stock purchase agreements, conversion agreements and a certain
Stock Purchase Agreement of even date herewith (collectively the "Purchase
Agreement") between the Company and you and as an inducement to you to
consummate the transactions contemplated by the Purchase Agreement, the Company
covenants and agrees with each of you as follows:
1. Certain Definitions. As used in this Agreement, the
following terms shall have the following respective meanings:
"Commission" shall mean the Securities and Exchange
Commission, or any other federal agency at the time administering the
Securities Act.
"Common Stock" shall mean the Common Stock, no par value, of
the Company, as constituted as of the date of this Agreement.
"Conversion Shares" shall mean the shares of Common Stock
issued upon conversion of the Preferred Shares or upon exercise of the
Warrants.
"Exchange Act" shall mean the Securities Exchange Act of
1934, as amended, or any similar federal statute, and the rules and
regulations of the Commission thereunder, all as the same shall be in
effect at the time.
"Qualified Public Offering" shall mean any firm underwritten
public offering of shares of Common Stock of the Company at a price
greater than or equal to Two Hundred Fifty Dollars ($250) per share
(as adjusted) and in which the aggregate net proceeds of the Company
are not less than Five Million Dollars ($5,000,000).
"Registration Expenses" shall mean the expenses so described in
Section 7.
"Restricted Stock" shall mean the Conversion Shares,
excluding Conversion Shares which have been (a) registered under
the Securities Act pursuant to an effective registration statement
filed thereunder and disposed of in accordance with the
registration statement covering them or (b) publicly sold pursuant
to Rule 144 under the Securities Act.
"Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar federal statute, and the rules and
regulations of the Commission thereunder, all as the same shall be
in effect at the time.
"Selling Expenses" shall mean the expenses so described in
Section 8.
"Warrants" shall mean all common stock purchase warrants
issued to shareholders of the Company as set forth on Schedule I
hereto.
2. Restrictive Legend. Each certificate representing
Preferred Shares or Conversion Shares shall, except as otherwise provided in
this Section 2 or in Section 3, be stamped or otherwise imprinted with a legend
substantially in the following form:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 AND MAY NOT BE TRANSFERRED OR OTHERWISE
DISPOSED OF UNLESS IT HAS BEEN REGISTERED UNDER THAT ACT OR
AN EXEMPTION FROM REGISTRATION IS AVAILABLE. "
A certificate shall not bear such legend if in the opinion of counsel
satisfactory to the Company the securities being sold thereby may be publicly
sold without registration under the Securities Act.
3. Notice of Proposed Transfer. Prior to any proposed
transfer of any Preferred Shares or Conversion Shares (other than under the
circumstances described in Sections 4 or 5), the holder thereof shall give
written notice to the Company of its intention to effect such transfer. Each
such notice shall describe the manner of the proposed transfer and, if requested
by the Company, shall be accompanied by an opinion of counsel satisfactory to
the Company to the effect that the proposed transfer may be effected without
registration under the Securities Act, whereupon the holder of such stock shall
be entitled to transfer such stock in accordance with the terms of its notice;
provided, however, that no such opinion of counsel shall be required for a
transfer to one or more partners of the transferor (in the case of a transfer
that is a partnership) or to an affiliated corporation (in the case of a
transferor that is a corporation). Each certificate for Preferred Shares or
Conversion Shares transferred as above provided shall bear the legend set forth
in Section 2, except that such certificate shall not bear such legend if (i)
such transfer is in accordance with the provisions of Rule 144 (or any other
rule permitting public sale without registration under the Securities Act) or
(ii) the opinion of counsel referred to above is to the further effect that the
transferee and any subsequent transferee (other than an affiliate of the
Company) would be entitled to transfer such securities in a public sale without
-2-
registration under the Securities Act. The restrictions provided for in this
Section 3 shall not apply to securities which are not required to bear the
legend prescribed by Section 2 in accordance with the provisions of that
Section.
4. Required Registration. (a) At any time commencing ninety
(90) days after any registration statement covering a Qualified Public Offering
shall have become effective and ending ten (10) years after the date of said
Qualified Public Offering, the holders of Restricted Stock constituting at least
50% of the total shares of the Company's Common Stock issued or issuable upon
the conversion of the Restricted Stock may request the Company to register under
the Securities Act all or any portion of the shares of Restricted Stock held by
such requesting holder or holders for sale in the manner specified in such
notice and the Company will use its best efforts to cause such stock to be
registered, provided, that the shares of Restricted Stock for which registration
has been requested shall constitute at least 20% of the total shares of the
Company's Common Stock issued or issuable upon the conversion of the Restricted
Stock if such holder or holders shall request the registration of less than all
shares of Restricted Stock then held by such holder or holders. For Purposes of
this Section 4 and Sections 5, 13(a) and 13(d), the term "Restricted Stock"
shall be deemed to include the number of shares of Restricted Stock which would
be issuable to a holder of Preferred Shares upon conversion of all shares of
Preferred Stock held by such holder at such time, provided, however, that the
only securities which the Company shall be required to register pursuant hereto
shall be shares of Common Stock, and provided, further, however, that, in any
underwritten public offering contemplated by this Section 4 or Sections 5 and 6,
the holders of Preferred Shares shall be entitled to sell such Preferred Shares
to the underwriters for conversion and sale of the shares of Common Stock issued
upon conversion thereof. Notwithstanding anything to the contrary contained
herein, (i) no request may be made under this Section 4 within one hundred (120)
days after the effective date of a registration statement filed by the Company
covering a firm commitment underwritten public offering in which the holders of
Restricted Stock shall have been entitled to join pursuant to Section 5 and in
which there shall have been effectively registered all shares of Restricted
Stock as to which registration shall have been requested and (ii) the Company
will not be obligated to effect more than two (2) registrations under this
Section 4.
(b) Following receipt of any notice under this Section 4, the
Company shall immediately notify all holders of Restricted Stock from whom
notice has not been received and shall use its best efforts to register under
the Securities Act, for public sale in accordance with the method of disposition
specified in such notice from requesting holders, the number of shares of
Restricted Stock specified in such notice (and in all notices received by the
Company from other holders within thirty (30) days after the giving of such
notice by the Company). If such method of disposition shall be an underwritten
public offering, the holders of a majority of the shares of Restricted Stock to
be sold in such offering may designate the managing underwriter of such
offering, subject to the approval of the Company, which approval shall not be
unreasonably withheld or delayed. The Company shall be obligated to register
Restricted Stock pursuant to this Section 4 on two occasions only, provided,
however, that such obligation shall be deemed satisfied only when a registration
statement covering all shares of Restricted Stock specified in notices received
as aforesaid, for sale in accordance with the method of disposition
-3-
specified by the requesting holders, shall have become effective and, if such
method of disposition is a firm commitment underwritten public offering, all
such shares shall have been sold pursuant thereto.
(c) The Company shall be entitled to include in any
registration statement referred to in this Section 4, for sale in accordance
with the method of disposition specified by the requesting holders, shares of
Common Stock to be sold by the Company for its own account, except as and to
the extent that, in the opinion of the managing underwriter (if such method of
disposition shall be an underwritten public offering), such inclusion would
adversely affect the marketing of the Restricted Stock to be sold. Except for
registration statements on Form S-4, S-8 or any successor thereto, the Company
will not file with the Commission any other registration statement with respect
to its Common Stock, whether for its own account or that of other stockholders,
from the date of receipt of a notice from requesting holders pursuant to this
Section 4 until the completion of the period of distribution of the
registration contemplated thereby.
5. Incidental Registration. If the Company at any time (other
than pursuant to Section 4) proposes to register any of its securities under
the Securities Act for sale to the public, whether for its own account or for
the account of other security holders or both (except with respect to
registration statements on Forms S-4, S-8 or another form not available for
registering the Restricted Stock for sale to the public), each such time it
will give written notice to all holders of outstanding Restricted Stock of its
intention so to do. Upon the written request of any such holder, received by
the Company within thirty (30) days after the giving of any such notice by the
Company, to register any of its Restricted Stock (which request shall state the
intended method of disposition thereof), the Company will use its best efforts
to cause the Restricted Stock as to which registration shall have been so
requested to be included in the securities to be covered by the registration
statement proposed to be filed by the Company, all to the extent requisite to
permit the sale or other disposition by the holder (in accordance with its
written request) of such Restricted Stock so registered. In the event that any
registration pursuant to this Section 5 shall be, in whole or in part, an
underwritten public offering of Common Stock, (i) as a condition to the
exercise of its rights under this Section 5, each holder of Restricted Stock
must agree to participate in the underwriting arrangements described in the
notice, and (ii) the number of shares of Restricted Stock to be included in
such an underwriting may be reduced (pro rata among the requesting holders
based upon the number of shares of Restricted Stock owned by such holders) if
and to the extent that the managing underwriter shall be of the opinion that
such inclusion would adversely affect the marketing of the securities to be
sold by the Company therein, provided, however, that such number of shares of
Restricted Stock shall not be reduced if any shares are to be included in such
underwriting for the account of any person other than the Company or requesting
holders of Restricted Stock, and provided, further, however, that in no event
may less than one-third of the total number of shares of Common Stock to be
included in such underwriting be made available for shares of Restricted Stock.
In order to facilitate the allocation of shares as provided herein, the Company
or the underwriter may round the number of shares allocated to any holder to
the nearest 100 shares. Notwithstanding the foregoing provisions, the Company
may withdraw any registration statement
-4-
referred to in this Section 5 without thereby incurring any liability to the
holders of Restricted Stock.
6. Registration Procedure. If and whenever the Company is
required by the provisions of Sections 4 or 5 to use its best efforts to effect
the registration of any shares of Restricted Stock under the Securities Act, the
Company will, as expeditiously as possible:
(a) prepare and file with the Commission a registration
statement (which, in the case of an underwritten public offering pursuant to
Section 4, shall be on Form S-1 or other form of general applicability
satisfactory to the managing underwriter selected as therein provided) with
respect to such securities and use its best efforts to cause such registration
statement to become and remain effective for the period of the distribution
contemplated thereby (determined as hereinafter provided);
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective for
the period specified in paragraph (a) above and comply with the provisions of
the Securities Act with respect to the disposition of all Restricted Stock
covered by such registration statement in accordance with the sellers' intended
method of disposition set forth in such registration statement for such period;
(c) furnish to each seller of Restricted Stock and to each
underwriter such number of copies of the registration statement and the
prospectus included therein (including each preliminary prospectus) as such
persons reasonably may request in order to facilitate the public sale or other
disposition of the Restricted Stock covered by such registration statement;
(d) use its best efforts to register or qualify the
Restricted Stock covered by such registration statement under the securities or
"blue sky" laws of such jurisdictions within the United States as the sellers of
Restricted Stock or, in the case of an underwritten public offering, the
managing underwriter reasonably shall request, provided, however, that the
Company shall not for any such purpose be required to qualify generally to
transact business as a foreign corporation in any jurisdiction where it is not
so qualified or to consent to general service of process in any such
jurisdiction;
(e) use its best efforts to list the Restricted Stock covered
by such registration statement with any securities exchange on which the Common
Stock of the Company is then listed;
(f) immediately notify each seller of Restricted Stock and
each underwriter under such registration statement, at any time when a
prospectus relating thereto is required to be delivered under the Securities
Act, of the happening of any event of which the Company has knowledge as a
result of which the prospectus contained in such registration statement, as then
in effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the
-5-
circumstances then existing;
(g) if the offering is underwritten and at the request of any
seller of Restricted Stock, use its best efforts to furnish on the date that
Restricted Stock is delivered to the underwriters for sale pursuant to such
registration: (i) an opinion dated such date of counsel representing the Company
for the purposes of such registration, addressed to the underwriters and to such
seller, stating that such registration statement has become effective under the
Securities Act and that (A) to the best knowledge of such counsel, no stop order
suspending the effectiveness thereof has been issued and no proceedings for that
purpose have been instituted or are pending or contemplated under the Securities
Act, (B) the registration statement, the related prospectus and each amendment
or supplement thereof comply as to form in all material respects with the
requirements of the Securities Act (except that such counsel need not express
any opinion as to financial statements contained therein) and (C) to such other
effects as reasonably may be requested by counsel for the underwriters or by
such seller or its counsel and (ii) a letter dated such date from the
independent public accountants retained by the Company, addressed to the
underwriters and to such seller, stating that they are independent public
accountants within the meaning of the Securities Act and that, in the opinion of
such accountants, the financial statements of the Company included in the
registration statement or the prospectus, or any amendment or supplement
thereof, comply as to form in all material respects with the applicable
accounting requirements of the Securities Act, and such letter shall
additionally cover such other financial matters (including information as to the
period ending no more than five business days prior to the date of such letter)
with respect to such registration as such underwriters reasonably may request;
and
(h) make available for inspection by each seller of
Restricted Stock, any underwriter participating in any distribution pursuant to
such registration statement, and any attorney, accountant or other agent
retained by such seller or underwriter, all financial and other records,
pertinent corporate documents and properties of the Company, and cause the
Company's officers, directors and employees to supply all information reasonably
requested by any such seller, underwriter, attorney, accountant or agent in
connection with such registration statement.
For purposes of Sections 6(a) and 6(b) and of Section 4(c),
the period of distribution of Restricted Stock in a firm commitment underwritten
public offering shall be deemed to extend until each underwriter has completed
the distribution of all securities purchased by it, and the period of
distribution of Restricted Stock in any other registration shall be deemed to
extend until the earlier of the sale of all Restricted Stock covered thereby or
one hundred (120) days after the effective date thereof.
In connection with each registration hereunder, the sellers
of Restricted Stock will furnish to the Company in writing such information with
respect to themselves and the proposed distribution by them as reasonably shall
be necessary in order to assure compliance with federal and applicable state
securities laws.
-6-
In connection with each registration pursuant to Sections 4
or 5 covering an underwritten public offering, the Company and each seller agree
to enter into a written agreement with the managing underwriter selected in the
manner herein provided in such form and containing such provisions as are
customary in the securities business for such an arrangement between such
underwriter and companies of the Company's size and investment stature.
7. Expenses. All expenses incurred by the Company in
complying with Sections 4 and 6, including, without limitation, all registration
and filing fees, printing expenses, fees and disbursements of counsel and
independent public accountants for the Company, fees and expenses (including
counsel fees) incurred in connection with complying with state securities or
"blue sky" laws, fees of the National Association of Securities Dealers, Inc.,
transfer taxes, fees of transfer agents and registrars, costs of insurance and
fees and disbursements of one counsel for the sellers of Restricted Stock, but
excluding any Selling Expenses, are called "Registration Expenses". All
underwriting discounts and selling commissions applicable to the sale of
Restricted Stock are called "Selling Expenses".
The Company will pay all Registration Expenses in connection
with each registration statement under Sections 4 or 5. All Selling Expenses in
connection with each registration statement under Sections 4 or 5 shall be borne
by the participating sellers in proportion to the number of shares sold by each,
or by such participating sellers other than the Company (except to the extent
the Company shall be a seller) as they may agree.
8. Indemnification and Contribution. (a) In the event of a
registration of any of the Restricted Stock under the Securities Act pursuant to
Sections 4 or 5, the Company will indemnify and hold harmless each seller of
such Restricted Stock thereunder, each underwriter of such Restricted Stock
thereunder and each other person, if any, who controls such seller or
underwriter within the meaning of the Securities Act, against any losses,
claims, damages or liabilities, joint or several, to which such seller,
underwriter or controlling person may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any registration statement
under which such Restricted Stock was registered under the Securities Act
pursuant to Sections 4 or 5, any preliminary prospectus or final prospectus
contained therein, or any amendment or supplement thereof, or arise out of or
are based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and will reimburse each such seller, each such underwriter and each
such controlling person for any legal or other expenses reasonably incurred by
them in connection with investigating or defending any such loss, claim, damage,
liability or action, provided, however, that the Company will not be liable in
any such case if and to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission so made in conformity with information
furnished by any such seller, any such underwriter or any such controlling
person in writing specifically for use in such registration statement or
prospectus.
-7-
(b)In the event of a registration of any of the Restricted
Stock under the Securities Act pursuant to Sections 4 or 5, each seller of such
Restricted Stock thereunder, severally and not jointly, will indemnify and hold
harmless the Company, each person, if any, who controls the Company within the
meaning of the Securities Act, each officer of the Company who signs the
registration statement, each director of the Company, each underwriter and each
person who controls any underwriter within the meaning of the Securities Act,
against all losses, claims, damages or liabilities, joint or several, to which
the Company or such officer, director, underwriter or controlling person may
become subject under the Securities Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of any material
fact contained in the registration statement under which such Restricted Stock
was registered under the Securities Act pursuant to Sections 4 or 5, any
preliminary prospectus or final prospectus contained therein, or any amendment
or supplement thereof, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will reimburse the
Company and each such officer, director, underwriter and controlling person for
any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action,
provided, however, that such seller will be liable hereunder in any such case if
and only to the extent that any such loss, claim, damage or liability arises out
of or is based upon an untrue statement or alleged untrue statement or omission
or alleged omission made in reliance upon and in conformity with information
pertaining to such seller, as such, furnished in writing to the Company by such
seller specifically for use in such registration statement or prospectus, and
provided, further, however, that the liability of each seller hereunder shall be
limited to the proportion of any such loss, claim, damage, liability or expense
which is equal to the proportion that the public offering price of the shares
sold by such seller under such registration statement bears to the total public
offering price of all securities sold thereunder, but not in any event to exceed
the proceeds received by such seller from the sale of Restricted Stock covered
by such registration statement.
(c) Promptly after receipt by an indemnified party hereunder
of notice of the commencement of any action, such indemnified party shall, if a
claim in respect thereof is to be made against the indemnifying party hereunder,
notify the indemnifying party in writing thereof, but the omission so to notify
the indemnifying party shall not relieve it from any liability which it may have
to such indemnified party other than under this Section 8 and shall only relieve
it from any liability which it may have to such indemnified party under this
Section 8 if and to the extent the indemnifying party is prejudiced by such
omission. In case any such action shall be brought against any indemnified party
and it shall notify the indemnifying party of the commencement thereof, the
indemnifying party shall be entitled to participate in and, to the extent it
shall wish, to assume and undertake the defense thereof with counsel
satisfactory to such indemnified party, and, after notice from the indemnifying
party to such indemnified party of its election so to assume and undertake the
defense thereof, the indemnifying party shall not be liable to such indemnified
party under this Section 8 for any legal expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation and of liaison with counsel so selected, provided,
however, that, if the
-8-
defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that there may be reasonable defenses available to it which are different from
or additional to those available to the indemnifying party or if the interests
of the indemnified party reasonably may be deemed to conflict with the interests
of the indemnifying party, the indemnified party shall have the right to select
a separate counsel and to assert such legal defenses and otherwise to
participate in the defense of such action, with the expenses and fees of such
separate counsel and other expenses related to such participation to be
reimbursed by the indemnifying party as incurred.
(d) In order to provide for just and equitable contribution
to joint liability under the Securities Act in any case in which either (i) any
holder of Restricted Stock exercising rights under this Agreement, or any
controlling person of any such holder, makes a claim for indemnification
pursuant to this Section 8 but it is judicially determined (by the entry of a
final judgment or decree by a court of competent jurisdiction and the expiration
of time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact that
this Section 8 provides for indemnification in such case, or (ii) contribution
under the Securities Act may be required on the part of any such selling holder
or any such controlling person in circumstances for which indemnification is
provided under this Section 8; then, and in each such case, the Company and such
holder will contribute to the aggregate losses, claims, damages or liabilities
to which they may be subject (after contribution from others) in such proportion
so that such holder is responsible for the portion represented by the percentage
that the public offering price of its Restricted Stock offered by the
registration statement bears to the public offering price of all securities
offered by such registration statement, and the Company is responsible for the
remaining portion; provided, however, that, in any such case, (A) no such holder
will be required to contribute any amount in excess of the public offering price
of all such Restricted Stock offered by it pursuant to such registration
statement; and (B) no person or entity guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) will be entitled to
contribution from any person or entity who was not guilty of such fraudulent
misrepresentation.
9. Changes in Common Stock or Preferred Stock. If, and as
often as, there is any change in the Common Stock or the Preferred Stock by way
of a stock split, stock dividend, combination or reclassification, or through a
merger, consolidation, reorganization or recapitalization, or by any other
means, appropriate adjustment shall be made in the provisions hereof so that the
rights and privileges granted hereby shall continue with respect to the Common
Stock or the Preferred Stock as so changed.
1O. Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the Commission which may at any
time permit the sale of the Restricted Stock to the public without registration,
at all times after ninety (90) days after any registration statement covering a
public offering of securities of the Company under the Securities Act shall have
become effective, the Company agrees to:
-9-
(a) make and keep public information available, as those
terms are understood and defined in Rule 144 under the Securities Act;
(b) use its best efforts to file with the Commission in a
timely manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act; and
(c) furnish to each holder of Restricted Stock forthwith upon
request a written statement by the Company as to its compliance with the
reporting requirements of such Rule 144 and of the Securities Act and the
Exchange Act, a copy of the most recent annual or quarterly report of the
Company, and such other reports and documents so filed by the Company as such
holder may reasonably request in availing itself of any rule or regulation of
the Commission allowing such holder to sell any Restricted Stock without
registration.
11. Representations and Warranties of the Company. The
Company represents and warrants as follows:
(a) The execution, delivery and performance of this Agreement
by the Company have been duly authorized by all requisite corporate action and
will not violate any provision of law, any order of any court or other agency of
government, the Charter or By-laws of the Company or any provision of any
indenture, agreement or other instrument to which it or any or its properties or
assets is bound, conflict with, result in a breach of or constitute (with due
notice or lapse of time or both) a default under any such indenture, agreement
or other instrument or result in the creation or imposition of any lien, charge
or encumbrance of any nature whatsoever upon any of the properties or assets of
the Company.
(b) This Agreement has been duly executed and delivered by
the Company and constitutes the legal, valid and binding obligation of the
Company, enforceable in accordance with its terms.
12. Miscellaneous.
(a) All covenants and agreements contained in this Agreement
by or on behalf of any of the parties hereto shall bind and inure to the benefit
of the respective successors and assigns of the parties hereto (including
without limitation transferees of any Preferred Shares or Restricted Stock),
whether so expressed or not, provided, however that registration rights
contained herein for the holders of Preferred Shares or Restricted Stock shall
only inure to the benefit of a transferee of Preferred Shares or Restricted
Stock if (i) there is transferred to such transferee at least 20% of the total
shares of Restricted Stock originally issued pursuant to the Purchase Agreement
to the direct or indirect transferor of such transferee or (ii) such transferee
is a partner, shareholder or affiliate of a party hereto.
-10-
(b) All notices, requests, consents and other communications
hereunder shall be in writing and shall be mailed by certified or registered
mail, return receipt requested, postage prepaid, or telecopied, addressed as
follows:
if to the Company or any other party hereto, at the address of such
party set forth in the Purchase Agreement;
if to any subsequent holder of Preferred Shares or Restricted Stock,
to it at such address as may have been furnished to the Company in writing by
such holder; or
in any case, at such other address or addresses as shall have been
furnished in writing to the Company (in the case of a holder of Preferred Shares
or Restricted Stock) or to the holders of Preferred Shares or Restricted Stock
(in the case of the Company) in accordance with the provisions of this
paragraph.
(c) This Agreement shall be governed by and construed in
accordance with the laws of the State of Maine.
(d) This Agreement may not be amended or modified, and no
provision hereof may be waived, without the written consent of the Company and
the holders of at least twothirds of the outstanding shares of Restricted Stock.
(e) This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(f) If requested in writing by the underwriters for the
initial underwritten public offering of securities of the Company, each holder
of Restricted Stock who is a party to this Agreement shall agree not to sell
publicly any shares of Restricted Stock or any other shares of Common Stock
(other than shares of Restricted Stock or other shares of Common Stock being
registered in such offering), without the consent of such underwriters, for a
period of not more than ninety (90) days following the effective date of the
registration statement relating to such offering; provided, however, that all
persons entitled to registration rights with respect to shares of Common Stock
who are not parties to this Agreement, all other persons selling shares of
Common Stock in such offering and all executive officers and directors of the
Company shall also have agreed not to sell publicly their Common Stock under the
circumstances and pursuant to the terms set forth in this Section 12(f).
(g) Notwithstanding the provisions of Section 6(a), the
Company's obligation to file a registration statement, or cause such
registration statement to become and remain effective, shall be suspended for a
period not to exceed ninety (90) days in any twenty-four (24) month period if
there exists at the time material non-public information relating to the Company
which, in the reasonable opinion of the Company, should not be disclosed.
-11-
(h) The Company shall not grant to any third party any
registration rights more favorable than any of those contained herein, so long
as any of the registration rights under this Agreement remains in effect.
(i) If any provision of this Agreement shall be held to be
illegal, invalid or unenforceable, such illegality, invalidity or
unenforceability shall attach only to such provision and shall not in any manner
affect or render illegal, invalid or unenforceable any other provision of this
Agreement, and this Agreement shall be carried out as if any such illegal,
invalid or unenforceable provision were not contained herein.
(j) This Agreement constitutes the entire agreement among the
parties pertaining to the subject matter hereof and supersedes all prior and
contemporaneous agreements and understandings of the parties in connection
therewith.
Please indicate your acceptance of the foregoing by signing
and returning the enclosed counterpart of this letter, whereupon this Agreement
shall be a binding agreement between the Company and you.
Very truly yours,
BRUNSWICK TECHNOLOGIES, INC.
By:
------------------------------
, its
---------- ----------------
STOCKHOLDERS:
NORTH ATLANTIC VENTURE FUND,
Limited Partnership
By: North Atlantic Capital Partners, Limited
Partnership, General Partner
By:
-------------------------------
---------------,General Partner
MAINE CAPITAL CORPORATION
By:
-------------------------------
, its
---------- -----------------
ADVANCED MATERIAL TECHNOLOGIES
VENTURE PARTNERS, LTD.
By:
------------------------------
, its
---------- ----------------
VETROTEX CERTAINTEED CORPORATION
By:
------------------------------
, its
---------- ----------------
JHAM LIMITED PARTNERSHIP
By:
-------------------------------
---------------,General Partner
-------------------------------
Donald D. Notman, Sr.
-------------------------------
Daniel A. Zilkha
-------------------------------
Thomas N. Tureen
-------------------------------
Bernard Tureen
-------------------------------
Dodge D. Morgan
-------------------------------
Martin S. Grimnes
-------------------------------
Donald W. Perkins
-------------------------------
Dudley B. Follansbee
-13-
<TABLE>
<CAPTION>
SCHEDULE I
Stock Ownership of Brunswick Technologies, Inc.
Stockholder Common Series AA Series BB Series C Series D Warrants Options Total
------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
North Atlantic Venture 0 1,115 24,574 6,800 0 5,900 0 38,389
Fund, Limited Partnership
David Coit
70 Center Street
Portland, Maine 04101
Maine Capital Corporation 0 149 2,690 0 0 0 0 2,839
David Coit
70 Center Street
Portland, Maine 04101
Donald D. Notman, Sr 0 34 73 0 0 0 0 107
41 Church Street
Weston, MA 02193
Daniel Z. ZiLkha 0 0 1,013 100 0 250 0 1,363
Suite 200
121 Middle Street
Portland, Maine 04101
Thomas N. Tureen 0 175 388 0 0 0 0 563
Tribal Assets Management
178 Middle Street
Portland, Maine 04112
Bernard Tureen 0 231 153 0 0 0 0 384
12 Meadowbrook C.C.Est.
Ballwin, MO 63011
Dodge D. Morgan 0 309 3,149 100 0 250 0 3,808
Maine Publishing Corp.
40 Portland Pier #7
Portland, Maine 04101
(SCHEDULE I Continued)
Dudley B. Follansbee 0 0 746 0 0 141 0 887
High Head 55
South Harpswell, ME 04079
Martin S. Grimnes 6,100 0 0 0 0 0 3,750 9,850
P.O. Box 516
One Maine Street
Brunswick, Maine 04011
Donald W. Perkins 0 224 201 0 0 0 0 425
30 Milk Street
P.O. Box 449
Portland, Maine 04112
Advanced Material 0 0 0 9,705 0 0 0 9,705
Technologies Venture
Partners, LTD
Peter N. Walmsley
c/o AMT Management, Inc.
1303 Delaware Ave. #412
Wilmington, DE 19806
JHAM Limited Partnership 0 0 0 1,295 0 0 0 1,295
Peter N. Walmsley
c/o AMT Management, Inc.
1303 Delaware Ave. #412
Wilmington, DE 19806
Vetrotex CertainTeed
Corporation 2,142 1,420 180 0 16,000 0 0 19,742
David Sharpe
750 East Swedesford Road
Valley Forge, PA 19482
Totals 8,242 3,657 33,167 18,000 16,000 6,541 3,750 89,357
</TABLE>
EXHIBIT 10.1
LOAN AGREEMENT
LOAN AGREEMENT ("Agreement") executed as of this 3Oth day of May,
1996, by and between Brunswick Technologies, Inc., a Maine corporation (herein
called the "Borrower" or the "Debtor"), whose principal place of business is
located at and whose mailing address for all notices is 43 Bibber Parkway, P.O.
Box 516, Brunswick, Maine 04011, and Fleet Bank of Maine, a financial
institution qualified to do business in the State of Maine, with a place of
business at Two Portland Square, P.O. Box 1280, Portland, Maine 04104-5006 (the
"Bank" or the "Lender").
SECTION 1. DEFINITIONS: RULES OF CONSTRUCTION
1.1 As used herein, unless otherwise specifically defined, the
following capitalized words and phrases shall have the following meanings:
"Accounts" means all Borrower's accounts as defined in 11 M.R.S.A. ss.
9-106 (or any successor provision), and any and all rights of Borrower to
payment for goods sold or leased or for services rendered, including all
accounts receivable, contract rights, general intangibles, notes, bills,
acceptances, choses in action, chattel paper, instruments, documents and all
other forms of obligations at any time owing to Borrower for whatever reason,
all guaranties, collateral, liens, leases, letters of credit and other rights,
agreements or property securing or relating to payment of any of the foregoing,
together with all customer lists, books and records, ledger and account cards,
computer tapes, computer software, disks, printouts, and other Records
evidencing or relating to the Accounts or any other Collateral, and further
including, without limitation, all right, title and interest in and to any goods
and/or inventory which gave rise to any Account, in each case whether now
existing or hereafter arising or acquired, and all proceeds and products of all
of the foregoing, including proceeds of insurance whether now or hereafter owned
by Borrower.
"Affiliate" means any subsidiary of a Person, or any Person which,
directly or indirectly, controls, is controlled by, or is under common control
with such Person and, without limitation of the foregoing, with respect to the
Borrower, includes any holder of ten percent (10%) of equity of the Borrower
unless the Borrower is a limited partnership, in which event, none of the
limited partners of the Borrower shall be included as affiliates of the Borrower
unless such partner is also a general partner, guarantor or subsidiary of a
guarantor. For purposes of this definition, the word control means possession of
the power to direct or cause the direction of the management and policies of a
Person, by voting securities, by contract or otherwise.
"Banking Day" means any day of the week other than (a) Saturday or
Sunday or (b) any other day on which banks in the City of Portland, Maine are
not required or authorized to conduct the business of banking.
"Base Rate" or the "Prime Lending Rate" means the per annum rate of
interest designated by the Bank or its successors or assigns from time to time
at its main branch in Portland, Maine, or the principal place of business of any
successor or assign, if applicable, for the internal guidance of its lending
personnel as its "Prime Lending Rate," whether or not such rate is otherwise
published. The Prime Lending Rate is simply an indicator rate for all loans
making reference thereto and is not necessarily the lowest or most favorable
interest rate provided by the Bank to any particular group of borrowers. If the
Bank or its successors or assigns shall cease to determine any such Prime
Lending Rate, then the Prime Lending Rate for purposes of this Note shall be the
rate published in the Wall Street Journal for large money center banks or, if
not so published, then the Prime Lending Rate shall be the rate as published in
a generally recognized source determined by the holder of the Note.
"Capital Expenditures" means any payment made directly or indirectly
for the purpose of acquiring, or constructing or improving fixed assets, real
property or equipment which in accordance with generally accepted accounting
principles ("GAAP") will be added as a debit to the fixed asset account of the
Borrower, including, without limitation, amounts paid or payable under any
conditional sale or other title retention agreement or under any lease or other
periodic payment arrangement which is of such a nature that payment obligations
of the lessee or obligor hereunder would be required by GAAP to be capitalized
and shown as liabilities on the balance sheet of such lessee or obliger.
"Capital Lease" means any lease of property (real, personal or mixed)
which, in accordance with GAAP, should be capitalized on the lessee's balance
sheet or for which the amount of the asset and liability hereunder if so
capitalized should be disclosed in a note to such balance sheet.
"Closing Date" means May 30, 1996.
"Collateral" means any and all of the following assets and property of
Borrower, whether real, personal or mixed, tangible or intangible, now existing
or owned or hereafter acquired or arising, wherever located:
(a) any and all of Borrower's Accounts, Inventory and
Equipment and all of Borrower's records and Contract Rights relating to any of
the foregoing (including without limitation any and all rights of Borrower as
lessor or lessee under any real property or equipment leases arising from time
to time), tax refunds, and all debts, obligations and liabilities in whatever
form, owing to Borrower from any person, firm or corporation,
-2-
whether now existing or hereafter arising, now or hereafter received by or
belonging or owing to Borrower, and all guaranties and security therefor, all of
Borrower's rights as an unpaid vendor or lienor, including the rights of
stoppage in transit, replevin and reclamation, and all monies, securities and
other property (and any proceeds thereof), now or hereafter held or received by
or in transit to the Bank from Borrower, whether for safekeeping, pledge,
custody, transmission, collection or otherwise and all credits and balances of
Borrower at any time existing with the Bank; and
"Contract Rights" means any right of Borrower to payment under a
contract not yet earned by performance and not evidenced by an instrument or
chattel paper and other rights under agreements between the Borrower and third
parties, including without limitation any and all rights of the Borrower under
leases, license agreements for the licensing of General Intangibles and
promissory notes.
"Cost of Funds" means the annual or per annum rate of interest
designated by the Bank at its main office in Portland, Maine from time to time
for the internal guidance of its lending personnel as its "Cost of Funds,"
whether or not any such rate is published. An interest rate based on Cost of
Funds is simply an indicator for a fixed rate of interest per annum for all
loans making reference thereto and is not necessarily the lowest or most
favorable rate of interest provided by the Bank to any particular group of
borrowers.
"Cost of Funds Interest Period" shall mean with respect to the per
annum rate of interest paid by the Borrower on an advance made by Bank to
Borrower pursuant to Section 3 hereof a period of eighty-four (84) months (seven
years), provided that in no event shall the Cost of Funds Interest Period extend
beyond January 1, 2004 and the seven year Cost of Funds interest rate option is
available only for the entire Term Loan Period.
"Cost of Funds Loans" means any loan made by Bank to Borrower under
Section 3 hereof from time to time in an amount not less than $100,000 (and
thereafter in increments of $5,000) for which interest is to be computed on the
basis of the Cost of Funds Rate for the applicable Cost of Funds Interest
Period.
"Cost of Funds Portion" means the outstanding amount of the Term Loan
on the commencement of the Term Loan Period available to Borrower for term loans
under Section 3 hereof and which as of the date of the request has met all
conditions for basing the interest on advance on Cost of Funds.
"Cost of Funds Pricing Option" shall mean the option granted to the
Borrower to have interest on the principal amount of the Term Loan made by Bank
to Borrower under Section 3 hereof bear interest computed on the basis of Cost
of Funds.
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"Cost of Funds Rate" for the Term Loan made pursuant to Section 3
hereof means the annual or per annum rate of interest equal to Cost of Funds for
the applicable Cost of Funds Interest Period plus 2.25% fixed on the date of the
commencement of the Term Loan Period.
"Cost of Funds Rate Request" means the notice in writing (or by
telephonic communication confirmed in writing on the same day as the telephonic
request) from the Borrower to the Bank requesting that interest on the Term Loan
be based on a Cost of Funds Rate for the Cost of Funds Interest Period and shall
be received one (1) day in advance on the commencement of the Term Loan Period.
"Eligible Accounts Receivable" or "Qualified Accounts" means an
Account owing to Borrower which met the following specifications at the time it
came into existence and continues to meet the same until it is collected in
full:
(a) The Account is evidenced by an invoice or other
documentation in form reasonably acceptable to Bank, is payable in United States
dollars and is not more than ninety (90) days from the date of the invoice
therefor (or more than ninety (90) days beyond the due date, for any Account
that arises from a sale made on a datings basis).
(b) The Account arose from the performance of services or an
outright sale of goods by Borrower, such goods have been shipped to the account
debtor or delivered to the account debtor on open account and on an absolute
sale basis and not on consignment, on approval or on a sale-or-return basis or
subject to any other repurchase or return agreement, and none of such goods have
been returned, repossessed, rejected, lost or damaged, and Borrower has
possession of, or has delivered to Bank, shipping and delivery receipts
evidencing such shipment.
(c) The Account is subject to and covered by Bank's perfected
security interest and is not subject to any prior assignment, claim, lien, or
security interest, and Borrower will not make any further assignment thereof or
create any further security interest therein, nor permit Borrower's rights
therein to be reached by attachment, levy, garnishment or other judicial
process.
(d) The Account is not subject to set-off, credit, allowance
or adjustment, or to any counterclaim or defense by the account debtor, except
reasonable discounts allowed for prompt payment and other allowances made in
accordance with Borrower's customary business practices, and the account debtor
has not complained as to its liability thereon.
(e) The Account arose in the ordinary course of Borrower's
business and is not owing from an employee, officer, agent, director,
stockholder, supplier, parent, subsidiary,
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affiliate or brother/sister entity of Borrower (other than amounts due from
Vetrotex CertainTeed Corp.) or from the United States of America or any
department, agency or instrumentality thereof.
(f) No notice of bankruptcy or insolvency of the Account
debtor has been received by or is known to Borrower.
(g) The Account is not owed by an account debtor whose
principal place of business is outside the United States Of America, unless (i)
such account debtor has furnished Borrower with an irrevocable letter of credit
which has been issued or confirmed by a financial institution acceptable to
Lender, is in form and substance acceptable to Bank, has been pledged to Bank,
and is payable in United States dollars in an amount not less than the face
value of the Account or (ii) is insured pursuant to a program acceptable to
Bank.
(h) The account debtor is not located in the State of New
Jersey, unless borrower is a New Jersey corporation, has received a certificate
of authority to do business in New Jersey or has filed a Notice of Business
Activities Report with the New Jersey Division of Taxation for the then-current
year.
(i) The Account is not evidenced by chattel paper or an
instrument or promissory note of any kind.
(j) The Account is one against which Bank is legally
permitted to make loans and advances.
(k) Bank in its sole discretion does not deem the Account to
be unacceptable for any reason.
PROVIDED THAT, without limiting Bank's rights under paragraph (1) above: (i) if,
at any time, thirty percent (30%) or more of the aggregate amount of the
Accounts due from any account debtor are unpaid in whole or in part more than
ninety (90) days from the respective dates of invoice, from and after such time
none of the Accounts (then existing or thereafter arising) due from such account
debtor shall be deemed to be Qualified Accounts until such time as all Accounts
from such account debtor are (as a result of actual payments received thereon)
no more than ninety (90) days from the date of invoice; (ii) accounts payable by
Borrower to an account debtor shall be netted against Accounts due from such
account debtor and only the difference (if positive) shall constitute Eligible
Accounts Receivable from such account debtor for purposes of determining the
Borrowing Base (notwithstanding paragraph (d) above); (iii) the characterization
of any Account due from an account debtor as an Eligible Account Receivable
shall not be deemed a determination by Bank as to its actual value or as to the
credit worthiness of the account debtor, nor in any way obligate Bank to accept
any Account subsequently arising from such account debtor to be, or to continue
to deem such Account to be, an Eligible Account
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Receivable; (iv) it is Borrower's responsibility to determine the
creditworthiness of account debtors, and all risks concerning them and
concerning the collection of Accounts are with Borrower; and (v) all Accounts,
whether or not Eligible Accounts Receivable, constitute Collateral.
"Eligible Finished Goods Inventory" means such of Borrower's Inventory
valued at the lower of cost or market as is initially, and at all times, until
sold: new and unused (except, with Bank's prior written approval, used equipment
held for sale or lease), in first-class condition (not seconds or samples),
merchantable and saleable through normal trade channels and ready for sale; kept
at a location on-site which has been identified in writing to Bank as a location
of Inventory or at such other locations as the Bank may approve, which approval
will not be unreasonably withheld; subject to a perfected security interest in
favor of Bank; owned by Borrower free and clear of any lien except in favor of
Bank; not obsolete and reported net of any Obsolescence Reserve; not consigned
to a customer of Borrower; not purchased by Borrower as part of a "bulk"
transfer or sale of assets, unless Borrower and the bulk transferor have
complied with all applicable bulk sales and bulk transfer laws; not scrap,
waste, defective goods, samples, seconds or the like; produced by Borrower in
accordance with the Federal Fair Labor Standards Act of 1938, as amended, and
all rules, regulations and orders promulgated thereunder; not stored with a
bailee, warehouseman or similar party unless Bank has given its prior written
consent thereto and Borrower has caused each such bailee, warehouseman or
similar party to issue and deliver to Bank warehouse receipts in Bank's name for
such Inventory; and not designated by Bank in its sole discretion as
unacceptable for any reason. All Inventory, whether or not Eligible Finished
Goods Inventory, constitutes Collateral but for purposes of advances under
Section 2 hereof, Eligible Finished Goods Inventory shall exclude Eligible Raw
Materials Inventory and Eligible Parts Inventory.
"Eligible Parts Inventory" means the aggregate dollar value of
Borrower's parts for the production of Inventory valued at the lower of cost or
market which constitutes Inventory but does not constitute Eligible Finished
Goods Inventory or Eligible Raw Materials Inventory.
"Eligible Raw Materials Inventory" means the aggregate dollar value of
Borrower's raw materials acquired for the production of Eligible Finished Goods
Inventory valued at cost, exclusive however, of the cost or value of any work in
process, any samples or seconds, any raw materials stored off-site.
"Equipment" means all of Debtor's equipment (as defined in 11 M.R.S.A.
ss. 9-109 or any successor provision), including all machinery, furniture,
fixtures, trade fixtures, computer hardware and software, any parts or
accessions for any of the foregoing, and all documents evidencing Debtor's title
to any of the foregoing, all accessions, accessories and attachments thereto,
-6-
and any guaranties, warranties, indemnities, and other agreements of
manufacturers, vendors and others with respect to the foregoing, all whether now
owned or hereafter acquired and wherever located and any other goods or
equipment, or rights related thereto.
"Fixtures" means and includes any and all (i) fixtures and
improvements of Borrower now owned or hereafter acquired, now or hereafter
erected, constructed, situated or affixed on any real property now or hereafter
owned, leased or occupied by borrower; and (ii) machinery, Equipment, furniture,
furnishings, trade fixtures or inventory of borrower now owned or hereafter
acquired, now or hereafter affixed to any of the aforementioned real property;
in each case together with any and all additions and accessions thereto,
replacements therefor and products thereof.
"General Intangibles" means and refers to any and all of Borrower's
general intangibles, including, without limitation, all tax refunds of every
kind and nature to which Borrower is now or hereafter may become entitled, no
matter however arising, all other refunds, goodwill, trade secrets, computer
programs, technology, customer lists, trade names, business names, copyrights,
know-how, trademarks (and all associated goodwill), patents, all other
intellectual property of every nature and variety, all indemnity agreements,
guaranties, insurance policies, and all other contractual rights of whatever
kind or nature, all licenses, permits and other approvals or rights in which
Borrower has any interest and any and all moneys, securities and other
properties now or hereafter held or received by or in transit to the Bank, and
all credits and balances of Borrower at any time existing and uncertificated
securities.
"Indebtedness" means at any date and without duplication (i) all items
(except items of capital stock or capital paid-in surplus or retained earnings)
which in accordance with GAAP would be included in determining total liabilities
as shown on the liability side of the balance sheet of the Borrower as of the
date on which such indebtedness is to be determined, including the obligations
and liabilities of Borrower for borrowed money and any Capital Lease; (ii) all
indebtedness secured by any mortgage, pledge, lien or conditional sale or other
title retention agreement to which any property or asset held by such Borrower
is subject, whether or not the indebtedness so secured thereby shall have been
assumed; (iii) all indebtedness of others which Borrower has directly or
indirectly guaranteed, endorsed, or sold with recourse or agreed, contingent or
otherwise, to purchase or repurchase or otherwise acquire, or in respect of
which the Borrower has agreed to supply or advance funds (whether by way of
loan, stock purchase, capital, contributions or otherwise) or otherwise to
become directly or indirectly liable; (iv) the unfunded or unreimbursed portion
of all letters of credit issued for the account of any Person; and (v) all other
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indebtedness of a Person on which interest charges are customarily paid or
accrued.
"Inventory" means and includes any and all of Borrower's inventory now
owned or hereafter acquired, goods held by and intended for sale or lease by
Borrower or to be furnished by Borrower under contracts of service and all raw
materials, work in process, finished goods, parts, materials and supplies of
every nature used or useable in connection with the manufacture, packing,
shipping, advertising, selling, leasing or furnishing of such goods, including
all goods used or consumed in Borrower's business and all goods in transit and
returned, reclaimed and rejected goods of whatever kind, and further including,
without limitation, all Eligible Finished Goods Inventory, Eligible Raw
Materials Inventory or Eligible Parts Inventory.
"LIBOR" means the per annum rate of interest determined by the Bank
two (2) Banking Days before the beginning of any LIBOR Interest Period to be the
rate of interest, if any is available, at which the then principal balance of a
Loan is offered to the Bank by prime banks in the London International Interbank
Eurocurrency market for deposit for a period of time comparable to the
applicable LIBOR Interest Period on or about 11:00 a.m. London time.
"LIBOR Interest Period" means for any loan or advance under Sections 2
or 3 hereof any period selected as provided below of thirty (30) days to three
hundred sixty (360) days, in thirty (30) day increments, commencing on any
Banking Day, provided, however, that no LIBOR Interest Period with respect to
any LIBOR Loan made under Section 2 hereof shall extend beyond the Revolving
Credit Termination Date and no LIBOR Interest Period with respect to any LIBOR
Loan made under Section 3 hereof shall extend beyond the Term Loan Period. Each
determination by the Bank of any LIBOR Interest Period shall, in the absence of
manifest error, be conclusive and, at the Borrower's request, the Bank shall
demonstrate the basis for any such determination.
"LIBOR Loans" means any loan made by Bank to Borrower under Sections 2
or 3 hereof from time to time in an amount not less than $100,000 for which
interest is to be computed on the basis of the LIBOR Rate.
"LIBOR Portion" means the portion of any Loan specified in a LIBOR
Rate Request which is not less than $100,000 in the aggregate (and thereafter in
increments of $5,000) and which does not exceed the availability under the
revolving credit facility or the amount of Term Loans, as applicable, and which
as of the date of the request has met all conditions for basing the interest on
advance on LIBOR.
"LIBOR Rate" means for any LIBOR Loan made by Bank to Borrower
pursuant to Section 2 hereof the per annum rate of interest equal to LIBOR for
the LIBOR Interest Period for which
-8-
interest is to be determined based on LIBOR Rate plus one and three-quarters
percent (1.75%) per annum, and for any LIBOR Loan made by Bank to Borrower
pursuant to Section 3 hereof the per annum rate of interest equal to LIBOR for
the LIBOR Interest Period for which interest is to be based on the LIBOR Rate
plus two and one-quarter percent (2.25%) per annum.
"LIBOR Rate Option." The option granted pursuant to Sections 2 and 3
of this Agreement to have interest on all or any portion of the principal amount
of a revolving credit loan OR Term Loan, as applicable, based on LIBOR.
"LIBOR Rate Request" means the notice in writing (or by telephonic
communication confirmed in writing on the same day as the telephonic request)
from the Borrower to the Bank requesting that interest on all or a qualified
portion of a Loan made pursuant to Sections 2 or 3 hereof be based on the LIBOR
Rate, which request shall be received by 11:00 a.m. Portland, Maine time at
least two (2) Banking Days prior to the date of any proposed LIBOR Loan, which
request shall specify the first day of the LIBOR Interest Period, the proposed
length of the LIBOR Interest Period and the dollar amount of the LIBOR Portion
(which shall not be less than $100,000), subject in all cases to the terms and
provisions hereof.
"Lien," as applied to the property of any Person, shall mean any
charge, conditional sale or other title retention agreement, lease, lien,
mortgage, pledge or other security interest or encumbrance of any kind on any
property of such Person, or upon the income, rents, or profits therefrom; any
arrangements, expressed or implied, under which any property of such Person is
transferred, sequestered or otherwise identified for the purpose of subjecting
the same to the payment of Indebtedness or performance of any other obligation
or priority to the payment of unsecured creditors of such Person; any
indebtedness for wages or indebtedness arising for any other reason which, if
unpaid for thirty days after the same shall have become due and payable, under
Section 5 of the United States Bankruptcy Code or any other law (whether or not
the events or conditions, other than the existence of such indebtedness or the
initiation of legal proceedings available generally to unsecured creditors, set
forth in such law have occurred and have been satisfied) could be given any
priority whatsoever over general unsecured creditors of such Person, and/or the
execution and delivery by Borrower or any such Person of, or any agreement to
give any financing statement under the Maine Uniform Commercial Code or its
equivalent or analog in any jurisdiction.
"Loan Documents" means this Agreement, the Notes, the Security
Documents and any and all other instruments, documents and agreements
evidencing, securing, governing or otherwise relating to the Obligations,
whether now existing, executed contemporaneously herewith, or executed at any
time in the future.
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"Loans" or "Loan" shall mean the revolving credit and term loans made
to Borrower pursuant to this Agreement.
"Notes" means the Demand Note issued by Borrower to evidence the Loans
made by Bank pursuant to Section 2 and the Term Note(s) issued by Borrower to
evidence the Loans made by Bank pursuant to Section 3 hereof (each being
sometimes referred to as a "Note"), including any and all renewals, extensions
or rearrangements thereof, modifications thereto and substitutions therefor.
"Obligations," as used herein, means any and all notes, liabilities,
advances, loans, obligations and indebtedness of Borrower to Bank of every kind,
nature and description (whether or not evidenced by any note or other
instrument, and whether or not for the payment of money), direct or indirect,
absolute or contingent, primary or secondary, joint or several, otherwise
secured or unsecured, due or to become due, now existing or hereafter arising,
regardless of how they arise or were acquired, including, without limiting the
generality of the foregoing, the Note, and all amounts owing by Borrower to Bank
by reason of purchases made by Borrower from other concerns and factored or
financed by Bank, any liability of Borrower to Bank as a guarantor or surety of
the indebtedness or liabilities of others, obligations to perform acts and
refrain from taking action as well as obligations to pay money, and all
interest, fees, charges and expenses (including reasonable attorneys' fees) paid
or incurred by Bank at any time in connection with the commitment for,
negotiation, preparation, execution, delivery, perfection, administration and/or
enforcement or amendment of this Agreement or any other of the Loan Documents.
All Obligations of Borrower to the Bank are secured by the Collateral.
"Permitted Encumbrances" means with respect to any asset:
(a) Liens securing the Note and other Liens in favor of the
Bank;
(b) Exceptions affecting title to real property as shown in a
title insurance policy approved by the Bank;
(c) In the case of any mortgaged real property constituting
Collateral hereunder that is not covered by a title policy, minor defects in
title or customary easements, plotted building lines, restrictive covenants,
mineral reservations and similar exceptions affecting title which do not secure
the payment of money;
(d) Inchoate statutory operator's liens securing obligations
for labor, services, materials and supplies which are not delinquent or which
are being contested by Borrower in good faith for which Borrower has obtained a
proper payment and performance bond in the amount of the contested claim;
-10-
(e) Any other mechanic's, materialmen's, warehousemen's,
journeymen's and carrier's liens and other liens arising by operation of law or
statute in the ordinary course of business if the underlying claim is not
delinquent and in any event did not cover a billing period exceeding thirty (30)
days, unless the claim giving rise to such lien is being contested by Borrower
in good faith, in which case borrower shall have obtained a proper payment and
performance bond in the amount of the contested claim;
(f) Liens for taxes or other impositions which are not yet
due or which are delinquent and are being contested by Borrower as permitted by
and in accordance with the terms and conditions set forth in Section 6.4 hereof;
and
(g) Liens securing Indebtedness authorized under Section
7.1(d) to the extent the creditor finances the acquisition of the asset or item
of Collateral and such creditor's lien is limited to that asset or item of
Collateral, provided that such Liens shall not secure obligations exceeding at
any time $25,000 in the aggregate, Plus the lien in favor of Vetrotex
CertainTeed Corp. as described in Schedule 5.8 attached hereto.
"Person" or "Party" shall include individuals, firms, corporations,
associations, partnerships, joint venturers, governmental units and all other
entities of every type and nature.
"Records" means all Borrower's books of account and similar books and
records used or useful in connection with the conduct of Borrower's business of
every kind and nature, including, without limitation, books, records, ledger
cards, all electronically recorded data relating to Borrower or its business and
other property, rights and general intangibles at any time evidencing or
relating to Collateral.
"Restricted Payment" means (a) any dividend or distribution, direct or
indirect, on account of a Person's ownership of capital stock or other
securities of the Borrower; (b) any purchase or acquisition, direct or indirect,
of any interest in the Borrower now or hereafter outstanding or any warrants or
rights to purchase any such interest; and (c) any payments relating to any
Subordinated Debt.
"Revolving Credit Termination Date" as to the Loans made to the
Borrower pursuant to Section 2, means June 1, 1997, unless renewed or extended
by Bank in writing prior to such date in which the Bank specifically refers to
an extension of the Revolving Credit Termination Date. The decision whether to
renew, as well as the terms and conditions of any such renewal, including
without limitation the interest rate, maximum principal amount and maximum
extension term, will be in the sole and absolute discretion of the Bank. The
existence of a Revolving
-11-
Credit Termination Date in this Agreement does not alter, modify, qualify or
limit the demand nature of the obligations of Borrower to Bank under Article 2
hereof.
"Security Documents" means any and all documents, instruments or
agreements securing the Obligations, whether now existing or executed hereafter,
as the same may be amended from time to time, including, without limitation, a
Security Agreement of even date between Borrower and Bank, the assignment of
rentals, and all UCC-1 Financing Statements.
"Senior Debt" of the Borrower means as of the date of any
determination thereof, the aggregate amount of all Indebtedness of Borrower to
any third party, other than Subordinated Debt.
"Subordinated Debt" of the Borrower means indebtedness of the Borrower
identified on Schedule 5.8 attached hereto, if any, other than Indebtedness
secured by Permitted Encumbrances which debt has been consented to in writing by
the Bank and which by its terms (or by the instruments under which it is
outstanding and to which appropriate reference is made evidencing any such
Subordinated Debt) is expressly made subordinate and junior in payment to the
Note and to the other Obligations of the Borrower to the Bank, all upon such
terms and pursuant to such provisions and agreements as the Bank may require,
and which indebtedness has been subordinated to the Loans pursuant to the terms
of a Debt Subordination Agreement in form and substance satisfactory to Bank.
"Tangible Net Worth" or "Net Worth" of the Borrower means, as of the
date of any determination thereof, shareholders equity "including capital stock,
additional paid-in capital and retained earnings) as set forth in the Borrower's
statement of financial position determined in accordance with GAAP (provided
that, regardless of the requirements of GAAP, all classes of Borrower's
outstanding preferred stock shall be treated as shareholders equity), minus the
aggregate book value of the following items (but only to the extent that such
items have been included in any determination of the consolidated total assets
of the Borrower): (i) patents, copyrights, trademarks, tradenames, franchises,
goodwill, experimental expenses, and similar assets that would be classified as
intangible assets on a balance sheet prepared in accordance with GAAP; (ii)
deferred charges and prepaid expenses, other than prepaid taxes; (iii) capital
stock, notes and other securities issued by the Borrower and then held in the
treasury of the Borrower; (iv) any and all amounts due to the Borrower from any
employees or officers of the Borrower or any Affiliate of the Borrower; and (v)
assets located, and notes receivable due from obligers domiciled outside of the
United States of America or Canada.
"Term Loan Period" shall mean the period beginning on February 1, 1997
and continuing through January 1, 2004.
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"Total Debt" of the Borrower means as of the date of any determination
thereof, the aggregate amount of all Indebtedness of Borrower.
"Total Debt Service" shall mean the annual payments of principal,
interest, penalties and premiums, if any, paid or to be paid annually by
Borrower in respect of its Total Debt.
1.2 The singular form of any word used herein, including the terms
defined in Section 1.1 hereof, shall include the plural, and vice versa. The use
herein of a word of any gender shall include both genders.
1.3 Unless otherwise specified, references to Articles, Sections and
other subdivisions of this Agreement are to the designated Articles, Sections
and other subdivisions of this Agreement as originally executed. The words
"hereof," "herein," "hereunder" and words of similar import refer to this
Agreement as a whole.
1.4 The headings or titles of the several Articles and Sections shall
be solely for convenience of reference and shall not affect the meaning,
construction or effect of the provisions hereof.
1.5 All words and terms used in this Agreement and in any supplement
or amendment hereto, other than those specifically defined in this Agreement or
such supplement or amendment, shall be deemed to have the meanings, if any,
accorded to them in the Maine Uniform Commercial Code, 11 M.R.S.A. ss. 101
et. seq., as amended from time to time (herein, the "Code" or the "Maine UCC" )
.
1.6 The parties hereto acknowledge and agree that neither this
Agreement nor any other Loan Document shall be construed more favorably in favor
of one than the other based upon which party drafted the same, it being
acknowledged and agreed that all parties hereto contributed substantially to the
negotiation and preparation of this Agreement and the other Loan Documents.
1.7 All accounting terms not specifically defined shall be construed
in accordance with the United States Generally Accepted Accounting Principles
and consistently applied on the basis used by the concerned entity in prior
years.
SECTION 2. REVOLVING CREDIT LOANS
2.1 Establishment of Revolving Credit Facility. (a) Subject to the
terms and conditions hereof, and in reliance on the representations and
warranties set forth herein, Bank agrees to advance to Borrower from time to
time, an amount equal to the sum of (i) up to seventy-five percent (75%) of the
net amount of Borrower's Eligible Accounts Receivable; and (ii) up to (A) fifty
percent (50%) of the Eligible Finished Goods Inventory valued at
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the lesser of cost or market value, plus (B) up to twenty percent (20%) of the
Eligible Parts Inventory Plus (C) up to fifty percent (50%) of any Eligible Raw
Materials Inventory; Provided, that in no event shall advances pursuant to the
revolving credit facility established under this Section 2 exceed in the
aggregate One Million Five Hundred Thousand Dollars ($1,500,000) (the "Revolving
Credit Commitment Amount"). The Bank reserves the right to modify (upwards or
downwards) the formula for advances under this Section 2 on thirty (30) days
prior written notice to Borrower.
(b) The advances permissible under this revolving credit
facility based on Eligible Accounts Receivable and Eligible Inventory (of every
type) shall be known as Borrower's Borrowing Base. Loans (which shall be in
minimum amounts of $5,000) shall be made at such times as Borrower shall request
by notice given no later than 11:00 a.m. on the day when the Loan is to be made
as to any advance hereunder bearing interest at the Prime Lending Rate, except
for LIBOR Loans, which shall be subject to all requirements of a LIBOR Rate
Request. Such notice, which shall accompany any such Borrowing Base Certificate
shall be in writing or by telephonic communication confirmed immediately
following any such telephone request.
(c) The Borrower hereby authorizes the persons identified in
Schedule 2.1(c) to request advances by telephone (a "Telephonic Advance
Request"). All Telephonic Advance Requests shall be followed by written
confirmation transmitted by telecopier. Bank shall have no obligation to inquire
into the circumstances, use, purpose, disposition or application of funds
advanced pursuant to a Telephonic Advance Request and shall have no liability
relating thereto.
(d) This facility shall expire on the first to occur of the
following: (i) demand by Bank in respect of the Note evidencing Loans under this
Section 2, (ii) the occurrence of a Default or an Event of Default (as
hereinafter defined).
(e) In the absence of demand by Bank, the Borrower may
borrow, repay and reborrow from time to time amounts under this line of credit
through the Revolving Credit Termination Date, provided that in no event shall
the aggregate amount outstanding hereunder exceed the Revolving Credit
Commitment Amount. Any revolving credit advance not previously repaid shall be
due and payable on the Revolving Credit Termination Date.
(f) Borrower shall, on a monthly basis, deliver to Bank a
Borrowing Base Certificate, in such form as the Bank may require from time to
time. The Borrowing Base Certificate will indicate the current amount of
Accounts, Eligible Accounts Receivable, and the current amount of Inventory and
each element of Eligible Inventory (namely, Eligible Finished Goods Inventory,
Eligible Raw Materials Inventory and Eligible Parts Inventory).
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Inventory will be valued according to GAAP and will be listed by nature,
quantity and location.
(g) The proceeds of all revolving credit advances shall be
used for working capital purposes.
2.2 Interest Rate Applicable on Revolving Credit Advances. (a) The rate
of interest due and payable on each advance hereunder shall be a per annum rate
equal to the Bank's Prime Lending Rate per annum unless Borrower elects a fixed
rate pricing for such advance based on LIBOR, in which case the advance in
respect of which a fixed rate pricing option has been chosen shall bear interest
at the applicable LIBOR Rate for the LIBOR Interest Period, so selected by the
Borrower in the request for an advance. If Borrower does not notify Bank of an
alternative interest rate option prior to the end of the applicable fixed rate
interest period, interest on the outstanding principal amount of such advance
shall convert automatically to a Prime Rate based index and accrue at the Prime
Lending Rate until an alternative rate is chosen in accordance with the terms
hereof. Interest shall be adjusted daily and calculated on the basis of a three
hundred sixty (360) day year counting the actual number of days elapsed. The
change in the rate of interest due and payable on a Loan shall be effective on
the date of any change in the Prime Lending Rate as to any advance bearing
interest at the Prime Lending Rate.
(b) Subject to the terms and conditions hereof and so long as
there exists no event of default hereunder or under the Note evidencing Loans
under this Section 2, the Borrower, in its sole discretion upon notice to the
Bank in the form required in any fixed rate request, may elect to have the
principal amount of an advance under this credit facility accrue and bear daily
interest during the LIBOR Interest Period so selected in said notice at a LIBOR
Rate, as applicable. Once selected, the applicable fixed rate shall be the rate
of interest per annum paid by Borrower in respect of any such advance so
designated for the interest period so selected. Upon expiration of any such
interest period, the Borrower may select further fixed rate pricing options for
the next succeeding fixed rate interest period in accordance with the terms
hereof or, in the absence of such an election, the advance shall bear interest
at the Prime Lending Rate.
2.3 Payments of Principal and Interest. Interest payments shall be due
and payable monthly in arrears on the first day of each month commencing on the
first such date next succeeding the date hereof and continuing thereafter on the
first day of each month so long as Loans hereunder remain available or
outstanding. Principal payments shall be repaid on demand and, in the absence of
prior demand, on the Revolving Credit Termination Date.
2.4 Revolving Credit Note. The Loans made by Bank pursuant to this
Section 2 shall be evidenced by the execution and
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delivery of a demand note substantially in the form attached hereto as Exhibit A
(the "Revolving Credit Note"), payable to the order of the Bank, duly executed
on behalf of the Borrower, dated as of the Closing Date and in the principal
amount of One Million Five Hundred Thousand Dollars ($1,500,000). The then
outstanding principal balance of the Revolving Credit Note shall be due and
payable on the Revolving Credit Termination Date or earlier upon demand.
2.5 Payment of Maintenance Fee. any loans or advances hereunder
bearing interest at the LIBOR Rate or Cost of Funds Rate may be prepaid in full
prior to the end of the applicable LIBOR Interest Period or Cost of Funds
interest period only with the consent of the Bank and only upon payment of the
applicable Maintenance Fee, if any. The "Maintenance Fee" shall mean the payment
required in the event of any prepayment of the principal of a Loan bearing
interest at a fixed rate of interest prior to the end of the fixed rate interest
period, which amount shall be calculated as follows: the latest published rate
preceding the date of a prepayment for United States Treasury Notes or Bills
(bills on a discounted basis shall be converted to a bond equivalent) as
published weekly in the Federal Reserve Statistical Release with a maturity date
closest to the maturity date of the term chosen for the applicable fixed rate
interest period being prepaid which shall be subtracted from the "Cost of Funds"
component of the fixed rate in effect at the time of prepayment. If the result
is zero or a negative number, no prepayment premium shall be payable. If the
result is a positive number, then the resulting prepayment shall be multiplied
by the amount of the principal balance being prepaid. The resulting amount will
be divided by 360 and multiplied by the number of days remaining in the
applicable fixed rate interest period as to which a prepayment is made. Said
amount shall be reduced to present value calculated by using the number of days
remaining in the designated term and using the above-referenced United States
Treasury Note or Bill rate and the number of days remaining in the applicable
fixed rate interest period as to which a prepayment is made as of the date of
prepayment. The resulting amount shall be the Maintenance Fee due to the Bank on
any prepayment of a fixed rate loan. Appropriate adjustments shall be made for
partial prepayments.
2.6 Overdue Payments. In the event that the Borrower shall fail to
make any payment of the principal of, or interest on the Revolving Credit Note
when due, whether at a date fixed for the payment of any installment or
prepayment thereof, and such failure continues for more than ten (10) days,
Borrower shall pay to Bank upon demand a late fee of five percent (5%) of the
overdue installment amount. The holder of this Note also shall have the right to
charge interest on the unpaid principal balance hereof at an interest rate equal
to the sum of three percent (3%) per annum plus the rate of interest otherwise
payable as provided herein commencing after the occurrence of a Default or Event
of Default under this Agreement or any of the Loan Documents, but
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only following the expiration of any applicable period of grace without a cure
having been effected. The failure by the holder of the Revolving Credit Note to
collect any such late charge or to apply a default rate of interest on one
occasion shall not be deemed a waiver by the holder of the Note of its right to
collect late charges or to collect such charges in any other instance involving
a late payment hereunder or to apply a default rate of interest thereafter.
2.7 Monthly Statements. After the end of each month, Bank will render
to Borrower a statement of Borrower's account activity, showing all applicable
credits and debits as of the date specified in said statement. Absent manifest
error, each statement shall be considered correct and to have been accepted by
Borrower and shall be conclusively binding upon Borrower in respect of all
charges, debits and credits of whatever nature contained therein under or
pursuant to this Agreement, and the closing balance shown therein, unless
Borrower notifies Bank in writing of any discrepancy or disagreement within
thirty (30) days from the mailing by Bank to Borrower of any such monthly
statement.
2.8 Form and Terms of Payment. All payments by the Borrower of the
principal of or interest on the Revolving Credit Note and of any fee due
hereunder shall be made at the address of the Bank set forth in Section 15.2 and
shall be made in United States dollars in immediately available funds. The
Borrower hereby authorizes the Bank to charge the Borrower's deposit accounts
for the purpose of effecting all such payments. If any payment of principal of
or interest on the Revolving Credit Note shall become due on a day which is not
a Banking Day, such payment may be made on the next succeeding Banking Day and
such extension shall be included in computing interest in connection with such
payment.
2.9 Availability Fee. Borrower shall pay to Bank an availability fee
equal to one-eighth of one percent (.125%) per quarter (computed on the basis of
the actual number of days elapsed over a 360 day year) of the daily unused
portion of the Revolving Credit Commitment Amount, which amount shall be payable
quarterly in arrears on the last day of each March, June, September and December
of each year, commencing on the first of such dates next succeeding the date
hereof, and continuing until demand or the Revolving Credit Termination Date,
whichever is earlier. The availability fee will be pro-rated for any partial
calendar quarter. The Availability Fee provided for in this Section is in
addition to any fees, balances or charges which may be applicable to other
services now or hereafter provided to Borrower by the Bank.
2.10 Inability to Determine LIBOR Rate. In the event that prior to the
commencement of any LIBOR Interest Period relating to any LIBOR Rate Loan, Bank
shall determine in the exercise of its reasonable commercial judgment that
adequate and reasonable
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methods do not exist for ascertaining the LIBOR Rate for such Interest Period,
Bank shall forthwith give notice of such determination (which shall be
conclusive and binding on Borrower) to the Borrower. In such event (a) any
notice from Borrower requesting a LIBOR Rate for a Loan shall be automatically
withdrawn and shall be deemed a request for a Loan bearing interest at the
applicable Prime Lending Rate index, and (b) each LIBOR Loan will automatically,
on the last day of the then current LIBOR Rate Interest Period, convert to an
amount accruing interest at the Prime Lending Rate index per annum, and no
further LIBOR Loans will be permitted until Bank determines in the exercise of
its reasonable commercial judgment that the circumstances giving rise to such
suspension no longer exist, whereupon Bank shall so notify Borrower.
2.11 Demand Obligations. Borrower acknowledges and agrees that the
revolving credit loans made pursuant to this Section 2 are demand obligations,
as defined in the Maine Uniform Commercial Code, which may be called by Bank for
full and immediate payment at any time, in Bank's sole discretion. Borrower
acknowledges and agrees that the demand nature of such obligations is not waived
by Bank or otherwise negated or affected in any way, notwithstanding any
provisions herein, in the Revolving Credit Note evidencing such loans or
elsewhere which may indicate Bank's present willingness to accept various
payments over time, to periodically consider renewal of this facility, and
notwithstanding references in this Agreement, in the Revolving Credit Note or
any other Loan Document to "Defaults" or "Events of Default."
SECTION 3. TERM LOANS
3.1 Term Loans. (a) The Bank agrees that, upon the terms and subject
to the conditions hereinafter set forth, it shall make term loans to the Company
in the principal amount of up to $1,800,000 (the "Term Loan"). The Bank and the
Borrower agree that approximately $1,500,000 of the Term Loan will be advanced
at Closing to refinance existing term indebtedness and for the acquisition of
machinery and equipment. The ability of the Borrower to secure additional
advances under this Term Loan shall expire on January 31, 1997. Requests for an
advance under the Term Loan facility shall be made in writing one day prior to
the date of the proposed advance and shall specify the amount of the advance,
the proposed use of the proceeds and such other information as the Bank may
require. It is contemplated that the proceeds of the additional advances under
this Term Loan facility will be used solely for the acquisition of machinery and
equipment and advances shall be limited to seventy-five percent (75%) of the
demonstrated invoice cost of the item or items of machinery and equipment to be
acquired.
(b) The Term Loan shall be payable until paid in full in
eighty-four (84) consecutive monthly installments of principal, each monthly
payment in an amount sufficient to fully
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amortize the then outstanding principal balance of the Term Loan over the then
remaining balance of the Term Loan Period. Principal payments shall be payable
on the first day of each month commencing on February 1, 1997 and continuing
thereafter on the first day of each month until December 1, 2003, with one final
payment of all remaining principal on January 1, 2004, unless earlier paid or
required to be paid in accordance with the terms of this Agreement. Interest due
in respect of so much of the principal amount of the Term Note evidencing Term
Loans as shall have been advanced to the Borrower shall be payable monthly in
arrears on the first day of each month, commencing on the first such date after
the date hereof and continuing thereafter on the first day of each month until
maturity (whether by acceleration or otherwise).
3.2 Term Note. (a) The Term Loan shall be evidenced by the execution
and delivery by the Company of a term note (the "Term Note") substantially in
the form attached hereto as Exhibit B (the Term Note and the Demand Note,
together with any extensions or rearrangements thereof, modifications or
amendments thereto or substitutions therefor, being sometimes referred to
collectively as the "Notes" and each individually as a "Note"), payable to the
order of the Bank, dated as of the Closing Date, secured by the Collateral and
in the aggregate principal amount of up to $1,800,000.
(b) The Term Note shall bear interest (computed on the basis
of the actual number of days elapsed in a 360 day year) on the unpaid principal
amount thereof at a per annum rate of interest equal to the Prime Lending Rate
plus one-quarter percent (.25%), (a) provided that, subject to the terms and
conditions hereof, and so long as there exists no Event of Default hereunder or
under the Term Note, from the date hereof through January 31, 1997 the Borrower
in its sole discretion upon notice to the Bank in the form required in any fixed
rate request, may elect to have the principal amount of all or any portion of
the Term Loan accrue and bear interest daily during the LIBOR Interest Period
selected pursuant to a LIBOR Rate Request at a per annum rate equal to LIBOR
plus two and one-quarter percent (2.25%) for the LIBOR Interest Period selected
in accordance with the terms hereof; and (b) provided, further, that subject to
the terms and conditions hereof and so long as there exists no Event of Default
hereunder or under the Term Note, on February 1, 1997 Borrower in its sole
discretion upon notice to the Bank in the form required in any fixed rate
request, may elect to have the entire principal amount of the Term Loan accrue
and bear interest at the Cost of Funds Rate (namely, Cost of Funds plus two and
one-quarter percent (2.25%) for the balance of the Term Loan Period or if the
Cost of Funds Rate Option is not selected in accordance with the terms hereof,
the Borrower may elect to have the Term Loan accrue and bear interest daily
during the LIBOR Interest Period selected pursuant to a LIBOR Rate Request at a
per annum rate equal to LIBOR plus two and one-quarter percent (2.25%) for LIBOR
Interest Period selected in accordance with the terms hereof. Once
-19-
selected, the applicable fixed rate shall be the rate of interest per annum
paid by Borrower in respect to any such advance so designated for the interest
period so selected. Upon expiration of any such interest period, the Borrower
may select further fixed rate pricing options for the next succeeding fixed rate
interest period in accordance with the terms hereof or, in the absence of such
selection, the advance shall bear interest at the Prime Lending Rate plus
one-quarter percent (.25%).
(c) Borrower may prepay all (but not less than all) of
principal amount of the Term Loan provided the payment of a maintenance fee in
the event of any prepayment of principal, which amount shall be calculated as
follows: the latest published rates preceding the date of a prepayment for
United States Treasury Notes or Bills (Bills on a discounted basis shall be
converted to a bond equivalent) as published weekly in the Federal Reserve
Statistical Release with a maturity date closest to the maturity date of the
term chosen for the applicable fixed rate interest period being prepaid which
shall be subtracted from the "Cost of Funds" component of the fixed rate in
effect at the time of prepayment. If the result is zero or a negative number, no
prepayment premium shall be payable. If the result is a positive number, then
the resulting prepayment shall be multiplied by the amount of the principal
balance being prepaid. The resulting amount will be divided by 360 and
multiplied by the number of days remaining in the applicable fixed rate interest
period as to which a prepayment is made. Said amount shall be reduced to present
value calculated by using the number of days remaining in the designated term
and using the above-referenced United States Treasury Note or Bill rate and the
number of days remaining in the applicable fixed rate interest period as to
which a prepayment is made as of the date of prepayment. The resulting amount
shall be the Maintenance Fee due to the Bank on any prepayment of a fixed rate
loan. Appropriate adjustments shall be made for partial prepayments.
3.3 Overdue Payments. In the event that the Borrower shall fail to
make any payment of principal of or interest on the Term Note when due, whether
at a date fixed for the payment of any installment or prepayment thereof, and
such failure continues for more than ten (l0) days, Borrower shall pay to Bank
upon demand a late fee of five percent (5%) of the overdue installment amount.
The holder of the Term Note also shall have the right to charge interest on the
unpaid principal balance hereof at an interest rate equal to the sum of three
percent (3%) per annum plus the rate of interest otherwise payable as provided
herein for any period during which the undersigned shall be in Default hereunder
or under any of the Loan Documents. The failure by the holder of the Term Note
to collect any such late charge or to apply a default rate of interest on one
occasion shall not be deemed a waiver by the holder of the Term Note of its
right to collect late charges or to collect such charges in any other instance
involving a late payment hereunder or to apply a default rate of interest
thereafter. Except to the extent that the Borrower has
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elected a LIBOR Rate or a Cost of Funds Rate, each change in the rate of
interest on these Term Notes shall be effective on the date of any change in the
Prime Lending Rate.
3.4 Form and Terms of Payment. All payments by the Borrower of
principal of or interest on the Term Note and of any fee due hereunder shall be
made at the address of the Bank set forth in subsection 15.2 (or at such other
address as the Bank shall have furnished to the Bank in writing) and shall be
made in immediately available funds. The Borrower hereby authorizes the Bank to
charge the Borrower's deposit accounts for the purpose of effecting any such
payments. If any payment of principal of or interest on the Term Note shall
become due on a day which is not a Banking Day, such payment may be made on the
next succeeding Banking Day and such extension shall be included in computing
interest in connection with such payment.
3.5 Commitment Fees. Borrower shall pay Bank a one-time commitment fee
of $1,000 payable at closing.
3.6 Use of Term Loan Proceeds. The proceeds of the Term Loan will be
used solely to refinance existing debt and the balance shall be used to acquire
machinery and equipment based on seventy-five percent (75%) of the demonstrated
invoice cost of the machinery being acquired.
SECTION 4. CONDITIONS OF LENDING
4.1 Initial Loan. The obligation of the Bank to make the initial
Loan(s) hereunder is subject to the following conditions:
(a) On or prior to the date of the first advance, the Bank
shall have received the Note and all other Loan Documents duly completed,
executed and delivered.
(b) The receipt of a favorable opinion of counsel for the
Borrower, dated as of such date and in form and substance satisfactory to the
Bank and its counsel.
(c) A copy of the Borrower's organizational documents.
(d) Borrower shall deliver to the Bank certificates of
insurance with appropriate loss payable and mortgagee endorsements as may be
reasonably required by the Bank.
(e) All other information and documents which the Bank or its
counsel may reasonably have requested in connection with the transactions
contemplated by this Agreement, such information and documents where appropriate
to be certified by the proper officers of Borrower or governmental authorities,
including without limitation those documents identified in the Closing Agenda
attached hereto as Schedule 4.1.
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4.2 Conditions Precedent to All Loans. On the date of each Loan
hereunder and any advance under the revolving credit facility (a) the
representations and warranties of the Borrower contained in Section 5 of this
Agreement shall be true on and as of such dates as if they had been made on such
dates (except to the extent that such representations and warranties expressly
relate to an earlier date or are affected by the consummation of transactions
permitted under this Agreement); (b) the Borrower shall be in compliance with
all material terms and provisions set forth herein on its part to be observed or
performed on or prior to such dates as well as those terms and provisions the
non-compliance with which could have a material adverse effect on the business
or operations of Borrower or the value of the Collateral or the Bank's ability
to recover all Obligations; (c) after giving effect to any Loan hereunder to be
made on such dates, no Event of Default, nor any event which with the giving of
notice or expiration of any applicable grace period or both would constitute
such an Event of Default, shall have occurred and be continuing; (d) since the
date of this Agreement, there shall have been no material adverse change in the
assets or liabilities or in the financial or other condition of the Borrower;
and (e) upon request of the Bank, the Borrower shall deliver to the Bank an
officer's certificate in form satisfactory to the Bank affirming compliance with
the conditions of subsection 4.2 as of such date. Each request for a Loan made
by the Borrower hereunder shall constitute a representation and warranty to the
Bank that all of the conditions specified in this subsection 4.2 have been
satisfied as of the date of each such Loan.
SECTION 5. REPRESENTATIONS AND WARRANTIES
In order to induce the Bank to enter into this Agreement and to make
the Loans provided for hereunder, the Borrower makes the following
representations and warranties, which shall survive the execution and delivery
hereof:
5.1 Organization, Standing, etc. of the Borrower. The Borrower is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Maine and has all requisite corporate power and authority to own
and operate its properties, to carry on its business as now conducted and
proposed to be conducted, to enter into this Agreement, the Security Documents
to which it is a party, the other Loan Documents and all other documents to be
executed by it in connection with the transactions contemplated hereby, to issue
the Notes and to carry out the terms hereof and thereof.
5.2 Subsidiaries. The Borrower has no subsidiaries.
5.3 Qualification. The Borrower is qualified to do business in the
State of Maine and Maine is the only jurisdiction in which Borrower is required
to be so qualified to carry on its business currently conducted. If the
character of the properties
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owned or the nature of the activities conducted make such qualification or
licensing necessary, the Borrower agrees that it will become so qualified at the
option of the Bank.
5.4 Financial Information; Disclosure, etc. The Borrower has furnished
the Bank with the financial statements and other reports listed in Schedule 5.4
attached hereto. Such financial statements have been prepared in accordance with
GAAP applied on a consistent basis and fairly present the financial position and
results of operations of the Borrower as of the dates and for the periods
indicated. Since the end of the most recent fiscal period shown in such
financial statements, there has not been any material adverse change in the
business, operations, properties or financial position of the Borrower not
previously disclosed to the Bank in writing. Neither this Agreement nor any
financial statements, reports or other documents or certificates furnished to
the Bank by the Borrower in connection with the transactions contemplated hereby
contains any untrue statement of a material fact or omits to state any material
fact necessary to make the statements herein or therein contained not
misleading. None of the Loans will render the Borrower unable to pay its debts
as they become due. The Borrower is not contemplating either the filing of a
petition by it under any state or federal bankruptcy or insolvency laws or the
liquidation of all or a major portion of its property; and the Borrower has no
knowledge of any person contemplating the filing of any such petition against
it.
5.5 Licenses: Franchises, etc. The Borrower has obtained all material
authorizations, licenses, permits and franchises of any public or governmental
regulatory body which are necessary for the conduct of the business of the
Borrower as now conducted and proposed to be conducted (such authorizations,
licenses, permits and franchises, together with any extensions or renewals
thereof, being herein sometimes referred to collectively as the "Licenses"). All
of such Licenses are validly issued and in full force and effect and the
Borrower has fulfilled and performed all of its obligations with respect
thereto, and has full power and authority to operate thereunder.
5.6 Material Agreements. Intentionally deleted.
5.7 Tax Returns and Payments. The Borrower has filed all federal,
foreign, state and local tax returns required by law to be filed by it and has
paid all taxes, assessments, impositions, fees and other governmental charges
levied upon any of its properties, assets, income or franchises, other than
those not yet delinquent and those being or about to be contested in accordance
with subsection 6.4 hereof. There are in effect no waivers of applicable
statutes of limitations for federal, state or local taxes for any period. The
charges, accruals and reserves on the books of the Borrower in respect of its
taxes are adequate in the opinion of the Borrower, and the Borrower knows of no
unpaid assessment for additional taxes or of any basis therefor.
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5.8 Indebtedness, Liens and Investments, etc. Schedule 5.8 attached
hereto correctly describes, as of the date hereof, (a) all outstanding
Indebtedness of the Borrower in respect of borrowed money and Capital Leases;
(b) all existing mortgages, liens and security interests in respect of any
property or assets of the Borrower; (c) all outstanding investments, loans and
advances of the Borrower; and (d) all existing guarantees by the Borrower.
5.9 Title to Properties: Liens. The Borrower has good and marketable
title to all of its properties and assets, and none of such properties or assets
is subject to any mortgage, pledge, lien, security interest, charge or
encumbrance or other lien, except the existing mortgages and security interests
referred to in Schedule 5.8 attached hereto. The Borrower enjoys quiet
possession under all leases to which it is a party as lessee, and all of such
leases are valid, subsisting and in full force and effect. None of such leases
contains any provision restricting the incurrence of indebtedness by the lessee
or any unusual or burdensome provision materially adversely affecting the
current and proposed operations of the Borrower.
5.10 Litigation, etc. There is no action, proceeding or investigation
of any sort pending or, to the knowledge of Borrower, threatened (or any basis
therefor known to the Borrower) against or affecting the Borrower or the
Collateral which could prevent or hinder the consummation of the transactions
contemplated hereby or which questions the validity of this Agreement, the Note,
the Security Documents or the other Loan Documents executed in connection
herewith, or any action taken or to be taken pursuant hereto, or which might
result, either in any case or in the aggregate, in any material adverse change
in the business operations, affairs or condition of the Borrower or in any of
its properties, or in any material liability on the part of the Borrower, or in
any material impairment of the right or ability of Borrower to carry on its
operations as currently conducted or proposed to be conducted.
5.11 Authorization: Compliance with Other Instruments. The execution,
delivery and performance of this Agreement, the Note and the Security Documents,
and the other Loan Documents have been duly authorized by all necessary
corporate action on the part of the Borrower, will not result in any violation
of or be in conflict with or constitute a default under any term of the charter
or by-laws of the Borrower, or, to the knowledge of Borrower, of any agreement,
instrument, judgment, decree, order, statute, rule or governmental regulation
applicable to the Borrower or the Collateral, or result in the creation of any
mortgage, lien, charge or encumbrance upon any of the properties or assets of
the Borrower pursuant to any such term (except pursuant to the Security
Documents). The Borrower is not in violation of any term of its organizational
documents or by-laws, or, to the knowledge of Borrower, of any term of any
agreement or
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instrument to which it is a party, or, of any judgment, decree, order, statute,
rule or governmental regulation applicable to it.
5.12 Governmental Consent. Neither the Borrower nor any shareholders
of Borrower is required to obtain any order, consent, approval or authorization
of, or required to make any declaration or filing with, any governmental
authority in connection with the execution or delivery of this Agreement and the
issuance and delivery of the Note pursuant hereto, or in connection with the
execution and delivery of the Security Documents and the granting of the
security interests in the Collateral pursuant thereto other than the filing of
financing statements and mortgages.
5.13 Compliance with Laws. To the knowledge of Borrower, after due
inquiry, Borrower is in compliance with all requirements of law, federal, state
and local and all requirements of all governmental bodies or agencies having
jurisdiction over it, the conduct of its business, the use of its properties and
assets, and all premises occupied by it, and, without limiting the foregoing,
the Borrower has all the required franchises, licenses, permits, certificates
and authorizations needed for the conduct of its business, the use of its
properties and assets, and all premises occupied by it, as now conducted, owned
and used or as proposed to be conducted, owned and used or as proposed to be
conducted, owned and used. Borrower has not received any notice, not heretofore
complied with, from any federal, state or local authority or any insurance or
inspection body that any of its properties, facilities, equipment or business
procedures or practices fails to comply with any applicable law, ordinance,
regulation, building or zoning law or any other requirement of any such
authority or body. No authorization, consent, approval, license, exemption of or
filing or registration with any court or governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, is or will be
necessary to the valid execution and delivery of, or for the performance by the
Borrower of its obligations under this Agreement, the Note or any other
instrument provided for or contemplated by this Agreement.
5.14 Intellectual Property. Intentionally Deleted.
5.15 Regulation U, etc. The Borrower does not own or have any present
intention of acquiring any "margin stock" within the meaning of Regulation U (12
CFR Part 221) of the Board of Governors of the Federal Reserve System (herein
called "margin stock"). None of the proceeds of the Loans will be used, directly
or indirectly, by the Borrower for the purpose of purchasing or carrying, or for
the purpose of reducing or retiring any indebtedness which was originally
incurred to purchase or carry, any margin stock or for any other purpose which
might constitute the transactions contemplated hereby a "purpose credit" within
the meaning of said Regulation U. or cause this Agreement to violate Regulation
U, Regulation T,
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Regulation X, or any other regulation of the Board of Governors of the Federal
Reserve System or the Securities Exchange Act of 1934. If requested by the Bank,
the Borrower will promptly furnish the Bank with a statement in conformity with
the requirements of Federal Reserve Form U-1 referred to in said Regulation U.
5.16 Employee Retirement Income Security Act of 1974. The Borrower has
not incurred (a) an accumulated funding deficiency within the meaning of the
employee retirement income security Act of 1974, or (b) any liability subject to
the Pension Benefit Guaranty Corporation established under such act (or any
successor thereto under such Act) in connection with any employee benefit plan
established or maintained by the Borrower or any Subsidiary; nor (c) has the
Borrower had any tax assessed against it by the Internal Revenue Service for any
alleged violation under Section 4975 of the Internal Revenue Code. To the
Borrower's knowledge, no prohibited transaction or reportable events have
occurred with respect to any employee benefit plan established or maintained by
the Borrower or any Subsidiary, as these terms are defined in ERISA and/or the
Internal Service Code of 1986, as amended. Borrower has no pension,
profit-sharing or other employee benefit plan except as identified in Schedule
5.16.
5.17 Ownership of Borrower. Schedule 5.17 attached hereto correctly
sets forth the number of shares of the Borrower's capital stock of each class
authorized and the number thereof outstanding, the name of each of the
Borrower's shareholders and the number of shares of each class of such capital
stock owned by such shareholders. All of said outstanding shares are validly
issued, fully paid and nonassessable and are owned by such shareholders as
specified in such Schedule, free of any assignment, pledge, lien, security
interest, charge, option or other encumbrance. Except as otherwise set forth in
Schedule 5.17 (relating to the terms of an employee stock option plan for less
than thirty-eight percent (38%) of the Borrower's outstanding capital stock),
the Borrower is not obligated in any manner to issue any additional shares of
its capital stock.
5.18 Environmental Compliance. To the best knowledge of the Borrower,
after inquiry, all of Borrower's properties and the present use thereof are in
compliance with all applicable environmental and land use laws, statutes,
ordinances, regulations, orders and all applicable policies and guidelines. In
particular but without limitation, there is no asbestos, lead paint or other
hazardous, toxic or dangerous substance, material and/or waste in, on or under
any such properties or the buildings thereon in any form or quantity which would
violate applicable law or, if such materials are on or under such premises,
Borrower has complied with all applicable laws requiring the reporting,
licensing or other remedial or responsive actions under any municipal ordinance
or state or federal law or regulation.
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5.19 General. To the best knowledge of the Borrower, neither this
Agreement, nor the financial statements referred to herein, nor any certificates
delivered pursuant to this Agreement, nor any other agreement, documents,
certificate or written statement furnished to the Bank or to the Bank's counsel
by or on behalf of the Borrower in connection with the transactions contemplated
by this Agreement contains any untrue statement of a material fact or omits to
State a material fact necessary in order to make the statements contained herein
or therein not misleading. There is no fact within the special knowledge of any
of the executive officers of the Borrower which has not been disclosed herein or
in writing by them to the bank which materially adversely affects, or in the
future in their opinion may, insofar as they can now foresee, materially
adversely affect the business, properties, assets or condition, financial or
other, of Borrower.
SECTION 6. AFFIRMATIVE COVENANTS
So long as any of the Loans shall remain available to the Borrower,
and until the principal of and interest on the Note and all fees due hereunder
and all Obligations shall have been paid in full, the Borrower agrees that;
6.1 Financial Statements, Collateral Reports, etc. The Borrower will
furnish or cause to be furnished to the Bank:
(a) Within one hundred twenty (120) days after the end of
each fiscal year of the Borrower audited balance sheets of the Borrower as at
the end of such year, and the related statements of income and surplus for such
year, setting forth figures for the previous fiscal year, all in reasonable
detail certified by independent public accountants selected by the Borrower and
satisfactory to the Bank.
(b) Within thirty (30) days of the end of each fiscal year
quarter, (i) a covenant compliance certificate from Borrower's President or
Treasurer certifying as to compliance by Borrower with all covenants of Borrower
hereunder, including demonstration of compliance with all financial covenants in
such detail and form as the Bank may require; and (ii) a certificate by the
Borrower's president or treasurer to the effect that such balance sheets and
income statements presented in the previous quarter fairly present the condition
of the Borrower at the end of such period and the results of its operations
during such period in accordance with accounting procedures that have been
applied on a consistent basis with prior interim financial information prepared
by the Borrower.
(c) As soon as reasonably possible, and in any event within
twenty-five (25) days after the end of each month, a statement signed and
certified by a principal officer of the Borrower (or an employee of the Borrower
acceptable to Bank)setting forth in reasonable detail, (i) a listing and aging
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of accounts receivable, (ii) a listing and aging of all accounts payable; (iii)
unaudited balance sheets and statements of profit and loss, and (iv) a statement
of cash flows for the year to date.
(d) On a semi-annual basis beginning on the Closing Date, a
list of Borrower's customers with their addresses along with identification of
any problem (ninety (90) days from invoice date) accounts.
(e) Promptly upon their becoming available, copies of any
periodic or special reports riled by the Borrower with any federal, state or
local governmental agency or authority, if such reports indicate any material
change in the business, operations, affairs or conditions of the Borrower or if
copies thereof are requested by the Bank, and copies of any material notices and
other material communications from any other federal, state or local
governmental agency or authority which specifically relate to the Borrower.
(f) Forthwith upon any officer of the Borrower obtaining
knowledge of any condition or event which constitutes an Event of Default or
which, after notice or lapse of time or both, would constitute an Event of
Default, a certificate signed by such officer specifying in reasonable detail
the nature and period of existence thereof and what action the Borrower has
taken or proposes to take with respect thereto.
(g) The Borrower will also furnish or cause to be furnished
to the Bank such other information regarding the business, affairs and condition
of the Borrower or its Affiliates as the Bank may from time to time reasonably
request.
6.2 Legal Existence: Licenses; Compliance with Laws, etc. The Borrower
will maintain its corporate existence and business; maintain all properties
which are reasonably necessary for the conduct of such business, now or
hereafter owned, in good repair, working order and condition; take all actions
necessary to maintain and keep in full force and effect its rights, including
the Licenses; and, except as otherwise provided herein, comply with all
applicable statutes, rules, regulations and orders of, and all applicable
restrictions imposed by, all governmental authorities in respect of the conduct
of its business and the ownership of its properties, including without
limitation all zoning, land-use and environmental laws and regulations; provided
that neither the Borrower nor any Subsidiary shall be required by reason of this
subsection to comply therewith at any time while the Borrower or such Subsidiary
shall be contesting its obligations to do so in good faith by appropriate
proceeding or other appropriate actions promptly initiated and diligently
conducted, and if it shall have set aside on its books such reserves, if any,
with respect thereto as are required by GAAP and deemed adequate by the Borrower
and its independent public accountants.
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6.3 Insurance. The Borrower will maintain or cause to be maintained on
all insurable properties now or hereafter owned by the Borrower insurance
against loss or damage by fire or other casualty to the extent customary with
respect to like properties of companies conducting similar businesses and will
also maintain or cause to be maintained public liability and workmen's
compensation insurance insuring the Borrower upon the foregoing terms and, upon
request, will furnish to the Bank satisfactory evidence of the same, Provided,
however, that the Inventory shall be insured to the full value thereof and all
other collateral, including any and all improvements on any real property owned
or leased by the Borrower, shall be insured to at least ninety (90%) percent of
the replacement value thereof. Each insurance policy pertaining to any of the
Collateral shall: (i) name the Bank as an insured pursuant to a so-called
"standard mortgagee clause" and as loss payee; (ii) provide that no action of
the Borrower or any tenant or subtenant shall void such policy as to the Bank;
and (iii) provide that the Bank shall be notified of any proposed cancellation
of such policy at least ten (10) days in advance of such proposed cancellation
and will have sufficient time to correct any deficiencies justifying such
proposed cancellation. All such policies shall be delivered to the Bank upon
request. In the event of a casualty loss, the Bank may release any proceeds of
any insurance for the restoration or replacement of the property or retain the
same and apply such proceeds against the Obligations.
6.4 Payment of Taxes. The Borrower will pay and discharge promptly as
they become due and payable all taxes, assessments and other governmental
charges or levies imposed upon it or its income or upon any of its property or
assets, or upon any part thereof, as well as all lawful claims of any kind
(including claims for labor, materials and supplies) which, if unpaid, might by
law become a lien or a charge upon its property; provided that the Borrower
shall not be required to pay any such tax, assessment, charge, levy or claim if
the amount, applicability or validity thereof shall currently be contested in
good faith by appropriate proceedings or other appropriate actions promptly
initiated and diligently conducted and if the Borrower shall have set aside on
its books such reserves, if any, with respect thereto as are required by GAAP
and deemed appropriate by the Borrower and its independent public accountants.
6.5 Payment of Indebtedness, etc. The Borrower will pay the principal
of and interest on the Note at the times and places and in the manner provided
in the Note and herein, and promptly pay when due all other amounts owing to the
Bank in respect of fees or otherwise. The Borrower will pay promptly when due,
or in conformance with customary trade terms, all other Indebtedness and
obligations incident to the conduct of its business except for non-materia1
obligations contested in good faith by proceedings and/or procedures promptly
initiated and diligently pursued which will not result in the imposition of a
lien on any Collateral.
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6.6 Further Assurances. From time to time hereafter, the Borrower will
execute and deliver, or will cause to be executed and delivered, such additional
instruments, certificates or documents, and will take all such actions, as the
Bank may reasonably request, for the purpose of implementing or effectuating the
provisions of this Agreement, the Security Documents or the Note, or of more
fully perfecting or renewing the Bank's rights with respect to the Collateral
pursuant hereto or thereto. Upon the exercise by the Bank of any power, right,
privilege or remedy pursuant to this Agreement or the Security Documents which
requires any consent, approval, registration, qualification or authorization of
any governmental authority or instrumentality, the Borrower will execute and
deliver, or will cause the execution and delivery of, all applications,
certifications, instruments and other documents and papers that the Bank may be
required to obtain for such governmental consent, approval, registration,
qualification or authorization.
6.7 Depository Account. The Borrower will maintain its depository
accounts with the Bank.
6.8 Inspection. The Borrower will, at all reasonable times make its
books and records available, in its offices, for inspection, examination, and
copying by the Bank and its representatives and will, at all reasonable times,
permit inspection of its properties by the Bank and its representatives.
6.9 Advice of Default, etc. The Borrower will promptly advise Bank of
any notice in respect of any order, claim or proceeding received by the Borrower
as to violations or alleged violations of any statutes, orders, rules or
regulations relating to the foregoing requiring any work, repair or capital
expenditures.
6.10 Reimbursement of Costs and Expenses. Borrower will pay or
reimburse the Bank, on demand, for the following: (a) out-of-pocket costs and
expenses incurred or paid by Bank in connection with: the preparation,
interpretation or amendment of the Loan Documents in connection with the initial
closing, including, without limitation, lien search fees; filing and recording
fees; environmental audit fees; real estate appraisal and site assessment costs;
title search costs, title insurance premiums; and the legal fees, expenses and
disbursements of the Bank's counsel; (b) after closing, the out-of-pocket costs
and expenses incurred by the Bank in connection with amendment or administration
of the Loan Documents, including the legal fees and expenses of the Bank's
counsel, provided such fees, costs and expenses are reasonably related to
necessary amendments to any of the Loan Documents, or to transactions initiated
by the Borrower; (c) after any default by the Borrower: all costs and expenses,
including, but not limited to, all out-of-pocket expenses incurred by Bank for
Bank's attorney and paralegal fees, disbursements, and costs (including, without
limitation, lien search fees, and filing and recording fees), all at such rates
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and with respect to such services as Bank in its sole discretion may elect to
pay (as such rates may vary from time to time during the course of the
performance of such services) including the costs of attorneys who are employees
of Bank, and the costs of appraisers, engineers, investment bankers,
environmental consultants and other experts that may be retained by Bank in
connection with such efforts, related to: (1) the enforcement by Bank of its
rights against Borrower or any guarantor, insurer or surety (if any) or against
any of the collateral; (2) the administration, supervision, protection OR
realization of any collateral for the Obligations; (3) any action or
participation by Bank in connection with any bankruptcy case or proceeding
involving Borrower or any of the Collateral, and (4) the defense, settlement or
satisfaction of any action, claim or demand asserted against Bank with respect
to Bank's rights or liabilities under the Loan Documents not attributable to the
gross negligence or willful misconduct of Bank. At its option, and without
limiting any other rights or remedies, Bank may pay or discharge taxes, liens,
security interests or other encumbrances at any time levied against or placed on
any of the Collateral, and may procure and pay any premiums on any insurance to
be carried by Borrower, or provide for the maintenance and preservation of any
of the Collateral, and add the expense thereof to the Obligations.
6.11 Notice of Relocation. Borrower shall provide Bank with at least
thirty (30) days notice of any proposed relocation to new leased facilities or
as to the renegotiation of its existing lease, and prior to effecting any such
move, or contemporaneously with the renegotiation of any such existing lease,
shall deliver to Bank an assignment of lease (tenant's interest) and landlord's
waiver, consent and estoppel letter in form and substance satisfactory to Bank.
6.13 Continuity in Senior Management. Martin Grimnes and William Dubay
shall remain actively involved as senior operating officers of the Borrower or a
successor satisfactory to the Bank shall be selected and so acting within sixty
(60) days of the departure of either Mr. Grimnes or Mr. Dubay, as applicable.
SECTION 7. NEGATIVE COVENANTS
So long as any of the Loans shall remain available to the Borrower,
and until the principal of and interest on the Note and all fees due hereunder
and all other Obligations shall have been paid in full, the Borrower agrees
that:
7.1 Indebtedness. Intentionally Deleted.
7.2 Mortgages, Liens, etc. The Borrower will not, directly or
indirectly, create, incur, assume or suffer to exist, any mortgage, lien, charge
or encumbrance on, or security interest in, or pledge of, or conditional sale or
other title retention agreement (including any Capital Lease) with respect to,
any
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property or asset now owned or hereafter acquired by the Borrower (including,
without limitation, liens or encumbrances on property or assets of Borrower not
constituting Collateral hereunder, such as, but not limited to, General
Intangibles and Contract Rights), except:
(a) Liens in favor of the Bank;
(b) The existing mortgages and security interests referred to
in Schedule 5.8 attached hereto, but not any renewal, extension or refunding of
any such mortgage or security interest;
(c) Liens for taxes not yet delinquent or being contested in
good faith as provided in subsection 6.4 hereof; and
(d) Permitted Encumbrances.
7.3 Loans, Guarantees and Investments. The Borrower will not make or
permit to remain outstanding any loan or advance to, or guarantee or endorse
(except as a result of endorsing negotiable instruments for deposit or
collection in the ordinary course of business) or otherwise assume or remain
liable with respect to any obligation of, or make or own any investment in, or
acquire (except in the ordinary course of business) the properties or assets of,
any person, except:
(a) Extensions of credit by the Borrower in the ordinary
course of business in accordance with customary trade practices;
(b) The presently outstanding investments, loans and
advances, if any, and the presently existing guarantees, if any, referred to in
Schedule 5.8 attached hereto;
(c) Marketable direct obligations of the United States of
America or any department or agency thereof maturing not more than one year
from-the date of issuance thereof;
(d) Certificates of deposit, repurchase agreements or other
similar types of investments maturing not more than one year from the date of
acquisition thereof and evidencing direct obligations of any bank within the
United States of America having capital surplus and undivided profits in excess
of $10,000,000;
(e) Capital Expenditures to the extent permitted by
subsection 7.4.
7.4 Capital Expenditures. The Borrower will not make any Capital
Expenditures during any fiscal year if after giving effect thereto, the
aggregate amount of all Capital Expenditures made by the Borrower for such
fiscal year would exceed $1,500,000.
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7.5 No Guaranties. Borrower will not assume, guarantee, endorse or
otherwise become directly or contingently liable, or permit any of its
Subsidiaries to assume, guarantee, endorse or otherwise become directly or
contingently liable (including, without limitation, liable by way of agreement,
contingent or otherwise, to purchase, to provide funds for payment, to supply
funds to or otherwise invest in any debtor or otherwise to assure any creditor
against loss) in connection with any Indebtedness of any other Person, except
(i) guaranties by endorsement or similar transactions in the ordinary course of
business, and (II) liability of any Borrower to the Bank, under this Agreement
or otherwise.
7.6 No Mergers, etc. Borrower will not liquidate or dissolve, or merge
or consolidate with any other Person, or sell, assign, lease or otherwise
dispose of (whether in one transaction or in a series of transactions) any item
or items material to its business (whether now owned or hereafter acquired)
included in the assets of Borrower or any of its subsidiaries, or turn over the
management of, or enter into a management contract with respect to, its
properties, assets, rights or licenses, or permit any of its Subsidiaries to do
so. Notwithstanding the foregoing, Borrower may sell inventory at fair market
value in the ordinary course of its business; dispose of obsolete assets no
longer useful for its business in an aggregate amount not to exceed $25,000
annually; and create and renew Permitted Encumbrances.
7.7 No Assignment of Receivables. Borrower will not sell, assign
(other than the assignment to the Bank contained in the Security Documents) or
dispose in any way of any receivables, with or without recourse, except for an
assignment for collection in the ordinary course of business.
7.8 No Chance in Place of Business. Borrower will not move its
principal place of business or chief executive office from the address described
in Section 12 until after receipt of a certificate from the Bank, signed by an
officer thereof, stating that the Bank has, to its satisfaction, obtained all
documentation that it deems necessary or desirable to obtain, maintain, perfect
and confirm the first priority security interests granted by the Security
Documents.
7.9 No Subsidiaries. Borrower will not organize or form, or permit any
of its Subsidiaries to organize or form, any new Subsidiaries, or become a
member of any partnership or joint venture without the prior written consent of
the Bank, which consent will not be unreasonably withheld by the Bank in the
exercise of its reasonable commercial judgment.
7.10 No Chances in Control. The Borrower will not permit any change in
control and, for purposes of this Section 7.10, a change in control shall be
deemed to have occurred whenever shares of the Borrower's outstanding common
stock representing more than forty-nine percent (49%) of the total number of
shares
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entitled to vote at a meeting of the shareholders shall be held by persons other
than those persons identified on Schedule 5.17 attached hereto, as modified from
time to time, without the prior written consent of the Bank.
7.11 Issuance or Sale of Additional Shares, etc. The Borrower will not
directly or indirectly:
(a) Sell, assign, pledge or otherwise encumber or dispose of
any shares of capital stock of any subsidiary (or options to acquire any such
shares).
(b) Redeem, repurchase, retire, convert or otherwise acquire
for value any of its capital stock (or rights or options to purchase such shares
except pursuant to employee stock option plans described in Schedule 5.17
attached hereto) or convert any of its securities, whether now or hereafter
outstanding.
7.12 ERISA. The Borrower will not permit any employee pension benefit
plan, as that term is defined in the Employee Retirement Income Security Act of
1974 ("ERISA"), maintained by it to (a) engage in any "prohibited transaction"
as that term is defined in Section 4975 of the Internal Revenue Code of 1954, as
amended, (b) incur any "accumulated funding deficiency" as that term is defined
in ERISA, whether or not waived, or (c) terminate in any manner which could
result in the imposition of a lien or encumbrance on the assets of the Borrower
or any Subsidiary pursuant to Section 4058 of ERISA.
7.13 The Business of Borrower, etc. The Borrower will not engage in
any business other than the business in which it is currently engaged or
businesses reasonably related thereto, or to enter any transaction outside of
the ordinary course of its business as presently conducted.
7.14 Transactions with Affiliates. The Borrower will not directly or
indirectly, enter into any lease or other transaction with any partner of
Borrower or shareholder, on terms that are less favorable to the Borrower than
those which might be obtained at the time from Persons who are not such a
shareholder, provided, however, the Borrower is not required to seek bids in
order to establish what terms might be obtained from such Persons.
7.15 Observance of Subordination Provisions. The Borrower will not
make, or cause or permit to be made, any payments in respect of any Subordinated
Debt in contravention of the subordination provisions contained in the evidence
of such Subordinated Debt or in contravention of any written agreement
pertaining thereto, nor will the Borrower amend, modify or change in any manner
any of such subordination provisions without the prior written consent of the
Bank.
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7.16 Limitation on Restricted Payments. Debtor shall not declare, make
or pay, directly or indirectly, any dividends or other distributions in respect
of its corporate stock or security, whether in cash or in kind, or make any
other Restricted Payments. Debtor shall not pay any salaries, bonuses, or other
compensation, direct or indirect, to any officer or stockholder of Borrower in
excess of existing compensation levels other than normal and reasonable periodic
increases in base compensation and, so long as no Default or Event of Default
exists, or any event which with notice, the passage of time, or both, would
constitute a Default or Event of Default hereunder, bonuses paid in accordance
with historical practices.
SECTION 8. FINANCIAL COVENANTS
So long as any of the Loans shall remain available to the Borrower,
and until the principal of and interest on the Note and all fees due hereunder
shall have been paid in full, the Borrower agrees that:
8.1 Ratio of Total Debt to Tangible Net Worth. The Borrower will not
permit its ratio of Total Debt to Tangible Net Worth to exceed 1.75 to 1.0
throughout the term hereof. Compliance with this covenant shall be measured
quarterly beginning with the quarter ending June 30, 1996.
8.2 Debt Service Coverage. Borrower will not permit its Debt Service
Coverage to be less than 1.2 to 1.0. For purposes of this Agreement, "Debt
Service Coverage" shall be determined by dividing (a) Borrower's net income
after current taxes but before any deferred income tax expense and after
restoring thereto depreciation expense and interest expense, all determined in
accordance with GAAP ("Net Cash Flow") by (b) its Annual Debt Service. For
purposes of determining compliance with this covenant, "Annual Debt Service"
shall mean the current portion of principal and interest paid or payable by
Borrower for the applicable period in respect of Indebtedness, all determined in
accordance with GAAP. For determining compliance with this covenant, Net Cash
Flow shall be divided by its Annual Debt Service. Compliance with this covenant
will be measured annually.
8.3 Minimum Net Profits. Borrower shall realize minimum after tax
profits (determined in accordance with GAAP) of at least $75,000 for each
quarter. Compliance with this covenant shall be measured quarterly throughout
the term hereof, beginning on the quarter ending June 30, 1996.
SECTION 9. DEFAULTS: REMEDIES
9.1 Events of Default; Acceleration. If any of the following events
(each an "Event of Default") shall occur:
(a) The failure of the Borrower to pay on demand any
principal of or interest on the Notes in accordance with the
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terms hereof, or any fees, charges or other amounts payable to the Bank
hereunder or under any of the other Loan Documents or any other Obligations; or
(b) Any material representation or warranty made by the
Borrower herein or pursuant hereto or in any Loan Document shall prove to have
been false or incorrect in any material respect when made; or
(c) The failure, refusal or neglect of Borrower to properly
observe, perform or comply with its covenants, agreements or obligations set
forth in Sections 6.1, 6.2, 6.4, 6.6 or 6.10 or 6.11 and such failure to perform
shall continue for twenty (20) days following written notice thereof from the
Bank; or
(d) The failure, refusal or neglect of Borrower to properly
observe, perform or comply with any other covenant, agreement or obligation
contained in this Agreement, or any of the other Loan Documents following the
expiration of any applicable grace period; or
(e) The Borrower shall default in any payment due on any
Indebtedness or any Capital Lease and such default shall continue for more than
the period of grace, if any, applicable thereto, or in the performance of or
compliance with any term of any evidence of such Indebtedness or of any
mortgage, indenture or other agreement relating thereto, and any such default
shall continue for more than the period of grace, if any, specified therein; or
(f) The Borrower shall discontinue its business or shall make
an assignment for the benefit of creditors, or shall fail generally to pay its
debts as such debts become due, or shall apply for or consent to the appointment
of or taking possession by a trustee, receiver or liquidator (or other similar
official) of the Borrower or any substantial part of the property of the
Borrower, or shall commence a case or have an order for relief entered against
it under the federal bankruptcy laws, as now or hereafter constituted, or any
other applicable federal or state bankruptcy, insolvency or other similar law,
or if the Borrower shall take any action looking to the dissolution or
liquidation of the Borrower; or
(g) If, within sixty (60) days after the commencement against
the Borrower of a case under the federal bankruptcy laws, as now or hereafter
constituted, or any other applicable federal or state bankruptcy, insolvency or
other similar law, such case shall have been consented to or shall not have been
dismissed or all orders or proceedings thereunder affecting the operations or
the business of the Borrower stayed, or if the stay of any such order or
proceeding shall thereafter be set aside, or if within sixty (60) days after the
entry of a decree appointing a trustee, receiver or liquidator (or other similar
official) of the
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Borrower or any substantial part of the property of the Borrower, such
appointment shall not have been vacated; or
(h) A final judgment which, with other outstanding final
judgments against the Borrower, exceeds an aggregate of $25,000 shall be
rendered against the Borrower and if, within thirty (30) days after entry
thereof, such judgment shall not have been discharged or otherwise provided for
or execution thereof stayed pending appeal, or if, within thirty (30) days after
the expiration of any such stay, such judgment shall not have been discharged;
or
(i) If the Borrower fails to keep in force, suffers the
termination or revocation or terminates, forfeits or suffers an amendment to any
License at any time owned by it which would have a material adverse effect on
the operations of the Borrower and does not reinstate such License within thirty
(30) days; or
(j) The Bank's Liens with respect to the Collateral or any
part thereof shall not constitute a first and prior lien or security interest on
the same (except in the case of Permitted Encumbrances); or
(k) The occurrence of any event or circumstance with respect
to Borrower such that Bank shall believe in good faith that the prospect of
payment of all or any part of the Obligations or the performance by Borrower
under this Agreement or under any other agreement between Bank and Borrower is
materially impaired, and Borrower shall fail, within ten (10) days after notice
of such belief has been given, to persuade Bank that such prospects have not
been impaired, or there shall occur any material adverse change in the business
or financial condition of Borrower; or
(1) The entry of any court order which enjoins, restrains or
in any way prevents Borrower from conducting all or any material part of its
business affairs in the ordinary course of business unless such order is set
aside within thirty (30) days; or
(m) The occurrence of any uninsured or materially
underinsured loss, theft, damage or destruction to any material asset(s) of
Borrower; or
(n) The ceasing or failure of the Loan Documents, at any time
after its execution and delivery and for any reason, (i) to create a valid and
perfected security interest in the Collateral; or (ii) to be in full force and
effect; or any determination or declaration that this Agreement is null and
void; or the commencement or prosecution of any contest challenging the validity
or enforceability hereof by Borrower or any guarantor; or any denial by Borrower
that it has any further liability or obligation hereunder; or
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(O) The occurrence of any of the foregoing Events of Default
with respect to any guarantor, endorser, or surety to Bank with respect to any
of the Obligations, as if such guarantor, endorser or surety were the "Borrower"
described therein and the failure to cure the same within the applicable grace
or cure period, if any; or
(p) The termination, or attempted termination, of any
guaranty by any guarantor of the Obligations without the prior consent of the
bank or the occurrence of any event of default under any agreement between a
guarantor and bank or under any agreement from a guarantor to Bank and the
expiration of any applicable grace period.
then, and in any such event but following the expiration of any applicable grace
or cure period (a cure not having been effected), and at any time thereafter, if
any Event of Default shall then be continuing, the Bank may, by written notice
to the Borrower, (i) declare the principal of and accrued interest in respect of
the Notes to be forthwith due and payable, whereupon the principal of and
accrued interest in respect of the Note shall become forthwith due and payable
without presentment, demand, protest or other notice of any kind, all of which
are hereby expressly waived by the Borrower, and/or (ii) terminate its
commitment, if any, to make any or all of the Loans hereunder, whereupon said
commitment of the Bank hereunder shall forthwith terminate without any other
notice of any kind; and/or such other remedies as are permitted under this
Agreement, the other Loan Documents and applicable law. Notwithstanding the
foregoing or anything to the contrary contained herein or in any Loan Document,
upon the occurrence of an Event of Default described in Section 9.1(f) or
Section 9.1(g), the entire unpaid principal balance of the Notes, and all
accrued, unpaid interest thereon shall automatically be accelerated and
immediately be due and payable in full, without notice (expressly including, but
not limited to, notice of default, intent to accelerate or of acceleration),
presentment, protest, demand or action of any nature whatsoever, each of which
hereby is expressly waived by Borrower.
9.2 Additional Remedies on Default, etc. In case any one or more Events
of Default shall occur and be continuing, in addition to the foregoing and
rights Bank may have as a secured party under the Maine Uniform Commercial Code
and the other Loan Documents, the Bank may proceed to protect, enforce and
exercise its rights by an action at law, suit in equity or other appropriate
proceeding, including without limitation a set off pursuant to Section 10 hereof
against any and all deposits, accounts, certificate of deposit balances, claims
or other sums at anytime credited by or due from the Bank to the Borrower or any
guarantor, surety or endorser of any of the Note or other amounts due to the
Bank and against all other property of the Borrower in the possession of the
Bank or under its control, whether for the specific performance of any agreement
contained
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herein or in any Note or Security Document, or for an injunction against a
violation of any of the terms hereof or exercise any power granted hereby or
thereby or by law, in addition to and not by way of limitation of any right Bank
may have as a secured party or mortgagee under any of the Security Documents. In
case of a default the Borrower will pay to the Bank such further amount as shall
be sufficient to cover the cost and expense of collection, including, without
limitation, reasonable attorneys' fees, expenses and disbursements. No course of
dealing and no delay on the part of the bank in exercising any right shall
operate as a waiver thereof or otherwise prejudice the Bank's rights. No right
conferred hereby or by any Note or Security Document upon the Bank shall be
exclusive of any other right referred to herein or therein or now or hereafter
available at law, in equity, by statute or otherwise.
SECTION 10. RIGHTS OF SET-OFF
(a) In addition to the Bank's Liens, Borrower hereby
expressly grants to Bank the right to set-off against all deposits and other
sums at any time held or credited by or due from Bank to Borrower, in accordance
with the provisions of this Section 10. The rights of Bank under this Section 10
are in addition to other rights and remedies (including, without limitation,
other rights of set-off under law or equity) which Bank and may have under law
or by agreement.
(b) Bank is hereby authorized at any time during the
continuance of any Event of Default, to the fullest extent permitted by law, at
its option, without notice or demand and without liability, to set off and apply
any and all deposits (general or special, time or demand, provisional or final,
excepting, however, any fiduciary or escrow accounts established by Borrower
into which only funds of unrelated third parties are deposited, and provided
that Borrower has informed Bank of the nature of such accounts) at any time
held, and other indebtedness at any time owing, by such Bank to or for the
credit or the account of Borrower against any and all of the Obligations now or
hereafter existing under this Agreement, the Note and the other Loan Documents,
in such order and manner as Bank may determine in its sole discretion,
regardless of whether Bank shall have made any demand under this Agreement or
the Note and although such obligations may be unmatured.
(c) Borrower agrees, to the fullest extent it may effectively
do so under applicable law, that Bank and any holder of a participation in the
Note may exercise rights of set off or counterclaim and other rights with
respect to such participation as fully as if such holder of a participation were
a direct creditor of Borrower in the amount of such participation, provided that
any such set-off by the holder of a participation shall be subject to the
provisions of this Section 10.
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SECTION 11. REMEDIES CUMULATIVE, CONCURRENT AND NON-EXCLUSIVE
Bank shall have all rights, remedies and recourses granted in the Loan
Documents, including, but not limited to, all the Security Documents, and
available at law or equity (including specifically those granted by the UCC in
effect) and same (a) shall be cumulative and concurrent, (b) may be pursued
separately, successively or concurrently against Borrower, or any others
obligated under the Note, or against any one or more of them, at the sole
discretion of Bank, (c) may be exercised as often as the occasion therefor shall
arise, it being agreed by Borrower that the exercise or failure to exercise any
of same shall in no event be construed as a waiver or release thereof or of any
other right, remedy or as a waiver or release thereof or of any other right,
remedy or recourse, and (d) are intended to be, and shall be, non-exclusive.
SECTION 12. DISCLOSURE CONSENT
Borrower hereby consents to the release and disclosure from time to
time by Bank to any institution now or hereafter acquiring a participation
interest in any of the Obligations, to any guarantor now or hereafter existing
as to any of the Obligations and to Bank's parent and affiliated financial
institutions of any of the following items or matters: (i) copies or originals
of any and all "financial records" (as defined at 9-B M.R.S.A Section 161, as
amended) of Borrower now or hereafter in the possession or under the control of
Bank, and (ii) any and all notices, financial and operating reports, balance
sheets, financial statements, consultants' reports, and any and all
documentation and information of or regarding Borrower heretofore or hereafter
provided to or generated by or for the benefit of Bank in connection with this
Agreement or any of the Obligations now or hereafter existing.
SECTION 13. NO CONDITIONS PRECEDENT TO EXERCISE REMEDIES
Borrower and each other Person hereafter obligated for payment or
fulfillment of all or any part of the Obligations shall not, except as otherwise
provided by applicable law, be relieved of such obligation by reason of (a) the
failure of Bank to comply with any request of Borrower, or any other Person so
obligated to foreclose the Banks' Liens or to enforce any provisions of the Loan
Documents, (b) the release, regardless of consideration, of any Person obligated
with respect to the Obligations, or of the Collateral or any part thereof, or
the addition of any other property to the Collateral, and (c) any agreement or
stipulation between any subsequent owner of the Collateral and the Bank
extending, renewing, rearranging or in any other way modifying the terms of the
Loan Documents without first having obtained the consent of, given notice to or
paid any consideration to Borrower, or such other Person, and in such event,
Borrower and all such other Persons shall continue to be liable to make payments
in accordance with the terms of any such
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extension or modification agreement unless expressly released and discharged in
writing by the Bank. Borrower waives any right to require the Bank to proceed
against any other Person, exhaust any Collateral, or pursue any other remedy in
the Bank's power. All dealings between Borrower and the Bank, whether or not
resulting in the creation of the Obligations, shall conclusively be presumed to
have been had or consummated in reliance upon this Agreement. Borrower
authorizes the Bank, without notice or demand and without any reservation of
rights against Borrower and without affecting liability hereunder or on the
obligations, from time to time, to (i) renew, extend for any period, accelerate,
modify, compromise, settle, or release the obligation of any other person that
may be obligated with respect to any or all of the Obligations or Collateral;
(ii) take and hold any other property as collateral, other than the Collateral,
for the payment of any or all of the Obligations, and exchange, enforce, waive,
and release any or all of the Collateral or other property; and (iii) after the
occurrence of an Event of Default but following the expiration of any applicable
grace period and cure of such Default not having been effected, apply the
Collateral or other property and direct the order or manner of sale thereof in
accordance with the terms of this Agreement and the Security Documents.
SECTION 14. WAIVERS
(a) To the full extent permitted by law, Borrower hereby
irrevocably and unconditionally waives and releases (i) all benefit that might
accrue to Borrower by virtue of any present or future law exempting the
Collateral from attachment, levy or sale on execution or providing for any
appraisement, evaluation, stay of execution, exemption from civil process,
redemption or extension of time for payment, (ii) except as specifically
provided for herein, all notices of any Default or Event of Default or of any
trustee's or agent's election to exercise or his or its actual exercise of any
right, remedy or recourse provided for under the Loan Documents, (iii) any right
to a marshalling of assets with respect to the Loan or any of the Collateral or
any Debt of Borrower, or a sale in inverse order of alienation and (iv) except
as specifically provided for herein, any and all right to receive demand,
notice, presentment for payment, protest, notice of intention to accelerate the
Obligations or notice of acceleration of the Obligations.
(b) The Bank shall not be deemed to have waived any of its
rights under or against this Agreement, the Obligations or the Collateral or
otherwise unless such waiver be in writing and signed by an officer of the Bank,
and then only to the extent specifically stated. Bank's failure to require
strict performance of this Agreement or any other of the Loan Documents, or any
delay or omission on the part of the Bank in exercising any right, or any
acceptance by Bank of partial or inadequate payment or performance shall not
waive, affect or diminish such right of Bank or Borrower's duty of compliance
and performance.
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A waiver on any one occasion shall not be construed as a bar to or waiver of the
same or any other right or remedy on the same or any future occasion.
SECTION 15. APPLICATION OF PROCEEDS
All payments on the Loans received by Bank during the existence of an
Event of Default and the proceeds of any sale or disposition of, and all
proceeds generated by the holding, leasing, operation or other use of, the
Collateral, or any part thereof, during the existence of an event of default and
upon the exercise of the Bank's rights and remedies hereunder or under any of
the Loan Documents, shall be applied by Bank, the applicable trustee or the
receiver, if one is appointed, to the extent that funds are so available
therefrom, in the following order of priority:
(a) First, to the payment of the costs and expenses of taking
possession of the Collateral and holding, using, repairing, improving or selling
the same, including without limitation (i) reasonable trustee's and receiver's
fees, court costs, attorneys' and accountants' fees, (ii) costs of advertisement
and (iii) the payment of any and all impositions and amounts secured by any
Liens equal or superior to the Bank's Liens.
(b) Second, to the payment of all amounts and Obligations
(including any fees required under the Loan Documents), other than the unpaid
principal balance of the Note and accrued unpaid interest thereon, due to the
Bank under the Loan Documents, and any advances made by the Bank to effect
performance of any unperformed obligations of Borrower under any of the Loan
Documents, together with any accrued interest thereon if and as provided in the
Loan Documents.
(c) Third, to the payment of any and all accrued and unpaid
interest due on the Loans.
(d) Fourth, to the payment of the unpaid principal balance of
the Loans, in such order and manner as the Bank shall elect.
(e) Fifth, to the extent known by Bank and permitted by law,
to the payment of any indebtedness or obligations secured by Liens against the
Collateral which are subordinate to the Bank's Liens.
(f) Sixth, to Borrower, or such other Person entitled to the
same.
15.1 Continuing Agreement. This is a continuing Agreement and all the
rights, powers and remedies of the Bank hereunder and all agreements and
obligations of Borrower hereunder, shall continue to exist until the Obligations
are paid in full.
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15.2 Notices. All notices, requests and other communications to any
party hereunder shall be in writing (including bank wire, telex, telecopy or
similar writing), except for any telephone notices as specifically provided for
herein, may be personally served or sent by telex, telecopier, mail or the
express mail service of the United States Postal Service, Federal Express or
other equivalent overnight or expedited delivery service, and (a) if given by
personal service, telex (confirmed by telephone) or telecopier (confirmed by
telephone), it shall be deemed to have been given upon receipt; (b) if sent by
telex or telecopier without telephone confirmation, it shall be deemed to have
been given twenty-four (24) hours after being given; (c) if sent by mail, it
shall be deemed to have been given upon the earlier of (i) actual receipt, or
(ii) three (3) Banking Days after deposit in a depository of the United States
Postal Service, first class mail, postage prepaid, or actual receipt; (d) if
sent by Federal Express, the express mail service of the United States Postal
Service or other equivalent overnight or expedited delivery service, it shall be
deemed given upon the earlier of (i) actual receipt or (ii) twenty-four (24)
hours after delivery to such overnight or expedited delivery service, delivery
charges prepaid, and properly addressed to Borrower or the Bank. For purposes
hereof, the address of the parties to this Agreement shall be as follows:
(a) If to Borrower:
Brunswick Technologies, Inc.
43 Bibber Parkway
P.O. Box 516
Brunswick, ME 04011
Attn: William M. Dubay
President
with a copy to:
Daniel G. McKay, Esq.
Eaton, Peabody, Bradford & Veague, PA
Fleet Center, Exchange Street
P.O. Box 1210
Bangor, ME 04402-1210
(b) If to Bank:
Fleet Bank of Maine
P.O. Box 1280
Two Portland Square
Portland, ME 04104-5006
Attn: Claude R. Carbonneau, Vice President
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with a copy to:
Michael E. High, Esq.
Drummond Woodsum & MacMahon
P.O. Box 9781
245 Commercial Street
Portland, ME 04104-5081
Any party may, by proper written notice hereunder to the other parties, change
the address to which notices shall thereafter be sent to it. Notwithstanding
anything to the contrary implied or expressed herein, the notice requirements
herein (including the method, timing or deemed giving of any notice) is not
intended to and shall not be deemed to increase the number of days or to modify
the method of notice or to otherwise supplement or affect the requirements for
any notice required or sent pursuant to applicable law (including, without
limitation, any applicable statutory or law requirement), or otherwise given
hereunder, that is not required under this Agreement or other Loan Documents.
The provisions of this Section 15.2 shall control over any conflicting
contractual notice provisions contained in the Loan Documents.
15.3 Payments. For purposes of determining the amount of the
Obligations, the receipt of any check or any other item of payment by Bank shall
not be effective as a payment on account of the Obligation until such check or
other item of payment is actually paid in cash or finally collected.
15.4 Successors and Assigns. Whenever in this Agreement there is
reference made to any of the parties hereto, such references shall be deemed to
include, wherever applicable, a reference to the successors and assigns of such
party. The provisions of this Agreement shall be binding upon and shall inure to
the benefit of the successors and assigns of Borrower and Bank.
15.5 Governing Law; Severability. This agreement has been delivered by
Borrower to Bank in the State of Maine for Bank's acceptance or rejection and
shall be construed in all respects in accordance with, and governed by, the laws
of the State of Maine, as a sealed instrument. Wherever possible each provision
of this Agreement shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provisions of this Agreement shall be
prohibited by, unenforceable or invalid under applicable law, such provision
shall be ineffective to the extent of such prohibition, unenforceability or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Agreement.
15.6 Entire Agreement; Modification. This Agreement and the other Loan
Documents and the Commitment Letter, and as modified by this Agreement contain
(or expressly incorporate) the entire
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agreement of the parties hereto and thereto with respect to the matters
discussed herein and therein. This Agreement may not be altered or amended
except by an agreement in writing, signed by the parties hereto. Borrower may
take any action herein prohibited or omit to perform any act herein required to
be performed by it, if and only if Borrower shall obtain Bank's prior written
consent to each such action or omission to act.
15.7 Invalidated Payment. Borrower agrees that to the extent that
Borrower makes a payment or payments to Bank, which payment or payments, or any
part thereof, are subsequently invalidated, declared to be fraudulent or
preferential, set aside and/or required to be repaid to Borrower, its estate,
trustee, receiver or any other Person or party under any bankruptcy or
insolvency law, state or federal law, common law or equitable cause, then to the
extent of such payment or repayment, the liability or part thereof which has
been paid, reduced or satisfied by the amount so repaid shall be reinstated and
included within the Obligations.
15.8 Submission to Jurisdiction. Borrower submits to the jurisdiction
of any state or federal court located within the State of Maine in connection
with any suits or proceedings arising from or under this Agreement.
15.9 Amendments; Consent to Deviation. Any provision of this
Agreement, the Note or the other Loan Documents may be amended if, but only if,
such amendment or waiver is in writing and is signed by Borrower and the Bank.
15.10 Survival. All representations, warranties and covenants made by
Borrower herein or in any certificate or other instrument delivered by it or on
its behalf under the Loan Documents shall be considered to have been relied upon
by the Bank and shall survive the delivery to the Bank of such Loan Documents or
the extension of any of the Loan (or any part thereof), regardless of any
investigation made by or on behalf of the Bank.
15.11 Prior Understandings; Not Defenses; Release; No Oral Agreements.
This Agreement supersedes all other prior understandings and agreements, whether
written or not, between the parties hereto relating specifically to the
transactions provided for herein. Borrower confirms that there are no existing
defenses, claims, counterclaims or rights of offset against the Bank in
connection with the negotiation, preparation, execution, performance or any
other matters related to this Agreement or any of the other Loan Documents
executed as of the date hereof and any of the transactions contemplated thereby,
and Borrower hereby expressly releases and discharges Bank, and their officers
and representatives, from any and all such claims, known or unknown. Borrower
further confirms that Bank has not made any agreements with, or commitments or
representations to, Borrower
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(either in writing or orally) other than expressly stated herein or in the other
Loan Documents executed as of the date hereof.
THIS WRITTEN LOAN AGREEMENT, TOGETHER WITH THE OTHER WRITTEN LOAN
DOCUMENTS, REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT
BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENT OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN
THE PARTIES.
15.12 Bank's Right to Perform Borrower's Obligations. (a) If Borrower
fails, refuses, or neglects to make any payment or perform any act required by
the Loan Documents, then at any time thereafter, and without notice to or demand
upon Borrower and without waiving or releasing any other right, remedy or
recourse the Bank may have because of same, the Bank may (but shall not be
obligated to) make such payment or perform such act for the account of and at
the expense of Borrower. In making any payments to protect the security intended
to be created by the Loan Documents, Bank shall not be bound to inquire into the
validity of any apparent or threatened adverse title, Lien, encumbrance or claim
before making an advance for the purpose of preventing or removing the same but
shall be required to act in a commercially reasonable manner.
(b) Borrower shall indemnify the Bank for all losses,
expenses, damages, claims and causes of action, including reasonable attorneys'
fees, incurred or accruing by reason of any acts performed by Bank pursuant to
the provisions of this Section 15.12. All sums paid by the Bank pursuant to this
Section 15.12, and all other sums expended by the Bank to which it shall be
entitled to be indemnified, together with interest thereon at the interest rate
from time to time in effect with respect to the Note, shall constitute additions
to the Obligations, shall be secured by the Liens created by the Loan Documents
and shall be paid by Borrower to the Bank upon demand.
15.13 Counterparts. This Agreement and all amendments hereto, and all
other Loan Documents may be executed in any number of original counterparts,
each of which when so executed and delivered shall be an original, and all of
which, collectively, shall constitute one and the same agreement, it being
understood and agreed that the signature pages may be detached from one or more
counterparts and combined with the signature pages from any other counterpart in
order that one or more fully executed originals may be assembled.
15.14 Indemnification. The Borrower will indemnify the Bank, its
directors, officers and employees and each other Person, if any, who controls
the Bank, and will hold the Bank and such other Persons harmless from and
against any and all claims, damages, losses, liabilities, judgments and expenses
(including without limitation all reasonable fees and expenses of counsel and
all expenses of litigation or preparation therefor) which the
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Bank or such other Persons may incur or which may be asserted against the Bank
or such other Persons in connection with or arising out of any investigation,
litigation or proceeding involving the Borrower or any guarantor of the
Obligations (including compliance with or contesting of any subpoenas or other
process issued against the Bank, or any director, officer or employee of the
Bank, or any Person, if any, who controls the Bank in any proceeding involving
the Borrower or any guarantor of the Obligations), whether or not the Bank is
party hereto, other than claims, damages, losses, liabilities or judgments with
respect to any matter as to which the Bank or such other Person seeking
indemnity shall have been finally adjudicated not to have acted in good faith or
shall have acted with willful misconduct or gross negligence. Promptly upon
receipt by any indemnified party hereunder of notice of the commencement of any
action, such indemnified party shall, if a claim in respect thereof is to be
made against the Borrower hereunder, notify the Borrower in writing of the
commencement thereof.
15.15 Cross Defaults, etc. It is intended, and the Borrower and the
Bank hereby agree that (i) a default under or in respect of any Obligation
issued pursuant hereto or any Security Documents or other security securing such
Obligation shall constitute a default in respect of the other Obligations of
Borrower to Bank and (ii) each Loan of Borrower to Bank pursuant to this Loan
Agreement, and all other amounts due and owing from Borrower to Bank hereunder
or under the other Loan Documents is secured by the Collateral of Borrower and
the Security Documents or any other security therefor. Borrower shall execute
and deliver to the Bank such mortgages, security agreements and other security
documents satisfactory to the Bank to reflect and assure such cross
collateralization.
15.16 Acknowledgement of the Position of the Parties. The Borrower
acknowledges to and agrees with the Bank that the Bank does not directly or
indirectly have any obligation or duty of any kind whatsoever to renew or extend
any indebtedness of Borrower to the Bank, to extend any further loans or credit
to the Borrower, to further amend, modify or supplement this Agreement or any of
power or remedies in any matter whatsoever. Notwithstanding any other provision
of this Agreement or any other contract or instrument between the Borrower and
the Bank, the relationship between the Bank and the Borrower shall be limited to
the relationship of the lender to a borrower or a guarantor or third party
pledger in a commercial loan transaction, as applicable; the Bank is not and
shall not by construed as a partner, joint venturer, alter ego, manager,
controlling persona or other business associate or participant of any kind of
Borrower (or of any other person), and neither the Bank nor the Borrower intends
the Bank to assume any such status; and the Bank is not and shall not be deemed
to be responsible for (or a participant in) any acts, omissions or decisions of
the Borrower.
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15.17 Capital Adeguacy. If after the day hereof, the Bank determines
that (i) the adoption of any applicable law, rule or regulation regarding
requirements for banks or bank holding companies in subsidiaries thereof; (ii)
any change in the interpretation or administration of any such law, rule or
regulation by any governmental authority, central bank a comparable agency
charged with the interpretation or administration thereof; or (iii) compliance
by Bank or its holding company with any request or directive of any governmental
authority, central bank, or comparable agency regarding capital adequacy (or not
having a force of law), has the effect of reducing the return on the Bank's
capital to a level below that which Bank could have achieved (taking into
account the Bank's and its holding company's policies with respect to capital
adequacy and immediately before such adoption, change or compliance and assuming
that bank's capital was fully utilized prior to such adoption, change or
compliance) but for such adoption, change or compliance as a consequence of the
Bank's commitment to make advances pursuant hereto by any amount deemed by the
Bank to be material; then Bank shall promptly, after Bank's determination of
such occurrence, give notice to the Borrower, and the Borrower shall pay to the
Bank as and additional fee from time to time on demand, such amount as Bank
certifies to be the lowest amount that will be required to compensate the Bank
for any such reduction. A certificate from the Bank claiming entitlement to
compensation as provided in this Section 13.16 shall be conclusive in the
absence of manifest error. Said certificate will be delivered to the Borrower
and shall set forth the nature of the occurrence giving rise to any such need
for compensation, the additional amount or amounts to be paid to the Bank, and
the method by which such amounts were determined. In determining any such
amount, the Bank may use any reasonable averaging or attribution method. Any
adjustment will be no greater than that calculated to be proportionate to the
Borrower's loan in relationship to the rest of the Bank's loan portfolio of
similar risk.
15.18 Waiver of Jury Trial. THE BANK AND THE DEBTOR AGREE THAT NEITHER
OF THEM NOR ANY ASSIGNEE OR SUCCESSOR SHALL (A) SEEK A JURY TRIAL IN ANY
LAWSUIT, PROCEEDING, COUNTERCLAIM OR OTHER ACTION RELATING TO THIS AGREEMENT,
THE NOTES, OR ANY RELATED INSTRUMENTS, OR THE DEALINGS OR THE RELATIONSHIP
BETWEEN OR AMONG ANY OF THEM, OR (B) SEEK TO CONSOLIDATE ANY SUCH ACTION WITH
ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED. THE
PROVISIONS OF THIS PARAGRAPH HAVE BEEN FULLY DISCUSSED BY THE BANK AND THE
DEBTOR, AND THESE PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS. NEITHER THE BANK
NOR THE DEBTOR HAS AGREED WITH OR REPRESENTED TO THE OTHER THAT THE PROVISIONS
OF THIS PARAGRAPH WILL NOT BE FULLY ENFORCED IN ALL INSTANCES.
15.19 No Oral Promises. UNDER MAINE LAW, NO PROMISE, CONTRACT OR
AGREEMENT TO LEND MONEY, EXTEND CREDIT, FOREBEAR FROM COLLECTION OF A DEBT OR
MAKE ANY OTHER ACCOMMODATION FOR THE REPAYMENT OF A DEBT FOR MORE THAN $250,000
MAY BE ENFORCED IN
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COURT AGAINST A BANK UNLESS THE PROMISE, CONTRACT OR AGREEMENT IS IN WRITING aND
SIGNED BY THE BANK. ACCORDINGLY, BORROWER CANNOT ENFORCE ANY ORAL PROMISE UNLESS
IT IS CONTAINED IN LOAN DOCUMENTS SIGNED BY THE BANK, NOR CAN ANY CHANGE,
FORBEARANCE, OR OTHER ACCOMMODATION RELATING TO THE OBLIGATIONS, THE NOTE OR ANY
OTHER OF THE LOAN DOCUMENTS BE ENFORCED, UNLESS IT IS IN WRITING AND SIGNED BY
THE BANK. BORROWER ALSO UNDERSTANDS AND AGREES THAT ALL FUTURE PROMISES,
CONTRACTS OR AGREEMENTS OF THE BANK RELATING TO ANY OTHER TRANSACTION BETWEEN IT
AND THE BANK CANNOT BE ENFORCED IN COURT UNLESS THEY ARE IN WRITING AND SIGNED
BY THE BANK. BY EXECUTION OF THIS AGREEMENT AND THE NOTE, BORROWER HEREBY
ACKNOWLEDGES AND AGREES THAT THE REQUIREMENT OF A WRITING DESCRIBED IN THIS
PARAGRAPH SHALL APPLY TO THIS NOTE, THE OBLIGATIONS, THE LOAN DOCUMENTS, ANY
EXTENSION, MODIFICATION, RENEWAL, FORBEARANCE OR OTHER ACCOMMODATION RELATING
HERETO OR THERETO AND TO ANY OTHER CREDIT RELATIONSHIP BETWEEN BORROWER AND THE
BANK (WHETHER NOW EXISTING OR CREATED IN THE FUTURE), WHETHER OR NOT THE AMOUNT
INVOLVED EXCEEDS $250,000.
IN WITNISS WHEREOF, the Borrower and the Bank have caused this
Agreement to be executed on the day and year written first above by duly
authorized officers, intending the same to take effect as a sealed instrument.
WITNESS BRUNSWICK TECHNOLOGIES, INC.
Illegible By: William M. Dubay
- --------------------------- -----------------------------
Its: Pres C.O.O
----------------------------
FLEET BANK OF MAINE
By: Gregory Shaw
Illegible -----------------------------
- ---------------------------
Its: Banking Officer
----------------------------
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EXHIBIT 10.2
SECURITY AGREEMENT
SECURITY AGREEMENT, dated as of the 30th day of May, 1996 by and
between Brunswick Technologies, Inc., a Maine corporation with a place of
business at 43 Bibber Parkway, Brunswick, Maine 04011 (the "Debtor" or the
"borrower"), and Fleet Bank of Maine, a financial institution qualified to do
business in the state of Maine with a place of business at Two Portland Square,
P.O. Box 1280, Portland, Maine 04104-5006 (the "Secured Party" or the "Bank").
W I T N E S S E T H :
Whereas, the Secured Party and the Debtor have entered into certain
loan transactions pursuant to a Loan Agreement of even or near even date (the
"Loan Agreement") between secured party as lender and the Debtor as borrower
pursuant to which the Debtor has agreed to borrow from the Bank and, subject to
the terms and conditions of the Loan Agreement, the Bank agreed to lend to
Debtor a total of up to $3,300,000 (the "Loan" or the "Loans"), which Loans will
be evidenced by a Term Note or Notes in the aggregate original principal amount
of up to $1,800,000 and a Demand Note in the original principal amount of
$1,500,000 (referred to collectively, and each individually, together with any
and all amendments or modifications thereto, substitutions therefor, and
renewals, extensions and rearrangements thereof, the "Note"); and
Whereas, the obligation of the Secured Party to make the Loans is
subject to the condition, among others, that Debtor shall execute and deliver
this Agreement and grant the security interests hereinafter described;
Now, therefore, in consideration of the willingness of the Secured
Party to make the Loans and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, it is hereby agreed as
follows:
1. Grant of Security Interest in Collateral. As security for the
Secured Obligations described in section 2 hereof, Debtor hereby grants to the
Secured Party a present and continuing security interest in and valid lien on
all of the Debtor's property described below (the parties intending the same to
be a description of all of Debtor's assets), together with any and all additions
and accessions thereto, replacements, proceeds (including without limitation
insurance proceeds) and products thereof, and substitutions therefor, wherever
the same may be located from time to time and whether now existing or hereafter
arising or acquired (hereinafter referred to collectively as the "Collateral"):
(a) any and all of Debtor's accounts (as defined in 11 M.R.S.A.
section 9-106, or any successor provision) and, to the extent not included
therein, all rights to payments for goods sold or leased or for services
rendered which is not evidenced by instruments or chattel paper and whether or
not earned by performance, including without limitation all accounts, accounts
receivable, any other obligations or indebtedness owed to the Debtor from
whatever source arising, including without limitation obligations or
indebtedness owed to the Debtor from companies related to Debtor, all rights of
Debtor to receive any payments in money or in kind in connection with any of the
foregoing, and further including without limitation all right, title and
interest in and to any and all goods, and/or inventory which give rise to any of
the foregoing, and any security for any of the foregoing, and any cash or
non-cash proceeds thereof (including, without limitation, insurance proceeds),
whether now existing or hereafter arising;
(b) all of Debtor's inventory (as defined in 11 M.R.S.A. Section
9-109 or any successor provision), whether now owned or hereafter acquired,
including without limitation all goods, merchandise and other personal property
of every type held by and intended for sale, use or lease by Debtor or to be
furnished by Debtor under contracts of service, and all raw materials,
workiin-process, finished goods used in the business of Debtor, and all
materials and other supplies of every nature used or usable in connection with
the packing, shipping, advertising, selling, leasing or furnishing of the
foregoing, wherever located, whether in transit, on consignment, in outlets,
warehouses, terminals or elsewhere;
(c) all of Debtor's equipment (as defined in 11 M.R.S.A. Section
9-109 or any successor provision), including all machinery, furniture, fixtures,
trade fixtures, computer hardware and software, motor vehicles, rolling stock,
any parts or accessions for any of the foregoing, and all documents evidencing
Debtor's title to any of the foregoing, all accessions, accessories and
attachments thereto, and any guaranties, warranties, indemnities, and other
agreements of manufacturers, vendors and others with respect to the foregoing,
all whether now owned or hereafter acquired and wherever located and any other
goods or equipment, or rights related thereto;
(d) all of Debtor's records and contract rights relating to any of
the foregoing (including without limitation any and all rights of Debtor as
lessor or lessee under any real property or equipment leases arising from time
to time), trade secrets, business and corporate records, tax refunds, and all
debts, obligations and liabilities in whatever form, owing to Debtor from any
person, firm or corporation, whether now existing or hereafter arising, now or
hereafter received by or belonging
-2-
or owing to Debtor, and all guaranties and security therefor, all of Debtor's
rights as an unpaid vendor or lienor, including the rights of stoppage in
transit, replevin and reclamation, and all monies, securities and other property
(and any proceeds thereof), now or hereafter held or received by or in transit
to the Secured Party from Debtor, whether for safekeeping, pledge, custody,
transmission, collection or otherwise and all credits and balances of Debtor at
any time existing with the Secured Party; and
(e) all so-called "Collateral" as defined in the Loan Agreement.
2. Obligations Secured by the Collateral. The security interest hereby
granted in the Collateral shall secure the due and punctual payment and
performance of the following liabilities and obligations of Debtor (hereinafter
called the "Secured Obligations" and each individually a "Secured Obligation"):
(a) Payment of the principal of, premium, if any, and interest on
the Note or Notes and the Loans evidenced thereby, or either of them, and any
modifications or amendments thereto, renewals, extensions or rearrangements
thereof or substitutions therefor; and
(b) Performance or payment of any and all other obligations of
Debtor to the Secured Party under the Note, the Loan Agreement, this Agreement
or the other Loan Documents (as defined in the Loan Agreement) executed in
connection therewith or under any agreement or instrument relating thereto, as
the same may be amended from time to time (collectively, the "Loan Documents").
3. Special Representations, Warranties and Covenants of Debtor. Debtor
hereby warrants and covenants to the Secured Party that:
(a) The chief executive office of Debtor and all of Debtor's
additional places of business, if any, and the location of all the Collateral
are listed in Exhibit A attached hereto. Debtor will not change its chief
executive office or any other place of business, or the location of any
Collateral without at least 30 days' prior written notice to the Secured Party
and the Debtor has executed and delivered to Secured Party signed UCC-3 or UCC-1
financing statements relating thereto. The Debtor will from time to time at the
request of Secured Party provide Secured Party with current lists as to all
locations of Collateral.
(b) Debtor shall not sell or otherwise dispose of any of the
Collateral or any interest therein, except for dispositions of inventory in the
ordinary course of its business and sale or disposition of obsolete assets or
assets not used in the operation of Debtor's business, the value of which, in
any fiscal year of Debtor, does not exceed $25,000.
-3-
(c) Debtor will promptly execute and deliver to the Secured Party
such financing statements, certificates and other documents or instruments as
may be necessary to enable the Secured Party to perfect or from time to time
renew the security interest granted hereby.
(d) Debtor shall immediately notify the Secured Party of any
material loss in the value of the Collateral.
(e) The Debtor does business solely under its own name and has not
conducted its business under any tradename or trade style other than the name
identified at the beginning of this Agreement as its corporate name. The Debtor
will not conduct its business hereafter under any other tradename or trade style
and will not change its name or its legal status except upon 30 days prior
written notice to the Bank.
(f) The Debtor is and shall hereafter remain the owner of the
Collateral free from any adverse attachments, liens, security interests or other
encumbrances of any nature whatsoever with the exception of the security
interest granted hereby and such other permitted encumbrances and liens
specified or identified in the Loan Agreement. The Debtor will defend the
Collateral against all claims or demands of all persons and entities (other than
Secured Party) claiming the Collateral or any interest herein, except liens in
favor of third parties identified in Schedule 5.8 of the Loan Agreement.
(g) Debtor shall maintain casualty insurance coverage on the
Collateral in such amounts and of such types as may be reasonably requested by
the Bank and in any event at least in such amounts and of such types as are
ordinarily carried by similar businesses, all as required by the Loan Agreement.
All such insurance policies shall contain a provision whereby they cannot be
canceled except after ten (10) days written notice to the Bank and identify the
Bank as a holder of a lien on the Collateral naming the Bank as loss payee and
mortgagee. Borrower shall immediately notify Bank of any event causing material
loss or depreciation in value of any of the Collateral. Bank may act as the
attorney for the Debtor in obtaining, adjusting, settling and cancelling such
insurance and/or any claims arising thereunder in endorsing any drafts or checks
issued with respect thereto. In the event of any failure of the Debtor to
provide insurance as herein required, the Bank may at its option (but without
any obligation) obtain and/or maintain insurance coverage with respect to the
Collateral, without waiving any event of default by the Debtor and any sums
expended by the Bank in procuring such insurance shall be deemed a secured
obligation which is secured hereunder by the Collateral. The Bank may apply the
proceeds of any insurance against the secured obligations, whether or not the
same have matured, in such order of application as the Bank may determine.
-4-
(h) Except as the Debtor may otherwise advise the Secured Party in
writing, to the best of the knowledge of the Debtor, each account, chattel
paper, document, general intangible, instrument and other contract constituting
or evidencing Collateral is (or, in the case of all future Collateral, will be
when arising or issued) the valid, genuine and legally enforceable obligation of
the account debtor or other obligor named therein or in the Debtor's records
pertaining thereto as being obligated to pay or perform such obligation. Without
the Secured Party's prior written consent, the Debtor will not agree to any
modifications, amendments, subordinations, cancellations or terminations of the
obligations of any such account debtor or other obligors other than the
adjustment of trade accounts in the ordinary course of business. The Debtor will
perform and comply in all material respects with all its obligations under its
contracts and exercise promptly and diligently its rights thereunder.
(i) The Debtor will promptly pay all taxes and other governmental
charges levied or assessed upon and against any Collateral or upon or against
the creation, perfection or continuance of the security interest, as well as all
other claims of any kind (including claims for labor, material and supplies)
against or with respect to the Collateral, except to the extent (a) such taxes,
charges or claims are being contested in good faith by appropriate proceedings,
(b) such proceedings do not involve any material danger of the sale, forfeiture
or loss of any of the Collateral or any interest therein and (c) such taxes,
charges or claims are adequately reserved against on the Debtor's books in
accordance with generally accepted accounting principles.
(j) The Debtor will at all reasonable times permit the Secured
Party or its representatives to examine or inspect any Collateral, any evidence
of Collateral and the Debtor's books and records concerning the Collateral,
wherever located. The Debtor will from time to time when requested by the
Secured Party furnish to the Secured Party a report on its accounts, chattel
paper, general intangibles and instruments, naming the account debtors or other
obligors thereon, the amount due and the aging thereof. The Secured Party or its
designee is authorized to contact account debtors and other persons obligated on
any such Collateral from time to time to verify the existence, amount and/or
terms of such Collateral.
(k) The Debtor will promptly notify the Secured Party of any loss
of or material damage to any material item of Collateral or of any substantial
adverse change, known to Debtor, in any material item of Collateral or the
prospect of payment or performance thereof.
(l) The Debtor will use and keep the Collateral, and will require
that others use and keep the Collateral, only for lawful purposes, without
violation of any federal, state or local
-5-
law, statute or ordinance. all inventory of the Debtor as of the date of this
Agreement that was produced by the Debtor or with respect to which the Debtor
performed any manufacturing or assembly process was produced by the Debtor (or
such manufacturing or assembly process was conducted) in compliance in all
material respects with all requirements of the fair labor Standards Act, and all
inventory produced, manufactured or assembled by the Debtor after the date of
this Agreement will be so produced, manufactured or assembled, as the case may
be.
(m) As additional security for the payment and performance of the
Obligations, the Debtor hereby assigns to the Secured Party any and all monies
(including proceeds of insurance and refunds of unearned premiums) due or to
become due under, and all other rights of the Debtor with respect to, any and
all policies of insurance now or at any time hereafter covering the Collateral
or any evidence thereof or any business records or valuable papers pertaining
thereto. At any time, following an Event of Default, such Default not having
been cured or waived prior to the Secured Party's actions hereunder, the Secured
Party may (but need not), in the Secured Party's name or in Debtor's name,
execute and deliver proofs of claim, receive all such monies, endorse checks and
other instruments representing payment of such monies, and adjust, litigate,
compromise or release any claim against the issuer of any such policy.
Notwithstanding any of the foregoing, so long as no Event of Default exists the
Debtor shall be entitled to all insurance proceeds with respect to equipment or
inventory provided that such proceeds are applied to the cost of replacement
equipment or inventory.
4. Fixtures. It is the intention of the parties hereto that none of the
Collateral shall become fixtures and Debtor will take all reasonable action or
actions as may be necessary to prevent the Collateral from becoming fixtures.
Debtor hereby represents and warrants that any and all manufacturing machinery
equipment and trade fixtures annexed in any way to Debtor's business premises
were not intended to become a permanent part of the realty, can be removed from
the building structure without material damages or modifications to the realty
or such property and were not especially fitted to or usable with the realty to
which they are attached. Without limiting the generality of the foregoing,
Debtor will obtain waivers of lien or disclaimers with respect to any interest
in the Collateral, in form satisfactory to the Secured Party, from each lessor
and owner of real property on which any of the Collateral is or is to be
located.
5. Events of Default. Debtor shall be in default under this Agreement
upon the happening of any of the following events or conditions (herein called
"Events of Default"):
(a) The occurrence of Default or Event of Default under the Note
(or either of them), the Loan Documents (as defined in the Loan Agreement) or
any other agreement between Debtor and the Secured Party, or any other material
agreement or
-6-
instrument issued by or by and between Debtor and any third party, and such
default shall continue beyond the expiration of the applicable period of grace,
if any; or
(b) Any material representation or warranty made by Debtor herein
shall be false or incorrect when made or if Debtor shall breach or fail to
perform or discharge any covenant, agreement or obligation made herein and such
breach or default is not cured within ten (10) days (except for breaches or
defaults arising under Sections 3(a), (b), (d), (g) or (k), as to which no grace
or cure period shall apply); or
(c) The loss, theft, substantial damage, destruction, sale,
encumbrance to or on the Collateral with respect to which adequate insurance is
not reasonably anticipated to be available, or the making of any levy, seizure
or attachment thereof or thereon which is not discharged within thirty (30)
days.
If any Event of Default shall occur pursuant hereto, then, or at
anytime thereafter, Secured party may declare all Secured Obligations to be in
default, whereupon such Secured Obligations shall become due and payable,
without notice, protest, presentment, or demand, all of which are expressly
waived by Debtor, in addition to and not in any respect in limitation of any
other rights or remedies granted to Secured Party hereunder, under the Loan
Documents (including the Security Documents and the Note), in any other
agreement or document executed in connection therewith or under applicable law.
6. The Secured Party's Duties. The powers conferred on the Secured
Party hereunder are solely to protect its interest in the Collateral and shall
not impose any duty upon it to exercise any such powers. The Secured Party shall
be deemed to have exercised reasonable care in the safekeeping of any Collateral
in its possession if such Collateral is accorded treatment substantially equal
to the safekeeping which the Secured Party accords it own property of like kind.
Except for the safekeeping of any Collateral in its possession and the
accounting for monies and for other properties actually received by it
hereunder, the Secured Party shall have no duty, as to any Collateral, as to
ascertaining or taking action with respect to calls, conversions, exchanges,
maturities, tenders or other matters relative to any Collateral, whether or not
the Secured Party has or is deemed to have knowledge of such matters, or as to
the taking of any necessary steps to preserve rights against any persons or any
other rights pertaining to any Collateral. The Secured Party will take action in
the nature of exchanges, conversions, redemptions, tenders and the like
requested in writing by the Debtor with respect to the Collateral in the Secured
Party's possession if the Secured Party in its reasonable judgment determines
that such action will not impair the security interest or the value of the
Collateral, but a failure of the Secured Party to comply any such request shall
not of itself be deemed a failure to exercise reasonable care.
-7-
7. Rights and Remedies of Secured Party. Upon the occurrence of any
Event of Default, such default not having previously been remedied or cured (if
available), the Secured Party shall have the following rights and remedies:
(a) All rights and remedies provided by law, or in equity,
including, without limitation, those provided to a secured party under the Maine
UCC;
(b) All rights and remedies provided in this Agreement; and
(c) All rights and remedies provided in the loan Agreement, or in
the Note or in the Loan Documents (as defined in the Loan Agreement) or in any
other agreement, document or instrument pertaining to the Secured Obligations.
8. Rights of Secured Party To Take Possession. (A) Upon the occurrence
of an Event of Default, the Secured Party shall have the right to take
possession of the Collateral, and in addition thereto, the right to enter upon
any premises on which the Collateral or any part thereof may be situated and
remove the same therefrom. Unless the Collateral is perishable or threatens to
decline speedily in value or is of a type customarily sold on a recognized
market, the Secured Party will give debtor at least five (5) business days'
prior written notice by registered or certified mail at the address of Debtor
set forth above (or at such other address or addresses as Debtor shall specify
in writing to the Secured Party) of the time and place of any public sale
thereof or of the time after which any private sale or any other intended
disposition thereof is to be made. Any such notice shall be deemed to meet any
requirement hereunder or under any applicable law (including the Uniform
Commercial Code) that reasonable notification be given of the time and place of
such sale or other disposition. After deducting all costs and expenses of
collection, storage, custody, sale or other disposition and delivery (including
legal costs and attorneys' and paralegals' fees) and all other charges against
the Collateral, the net proceeds of any such sale or disposition shall be
applied to the payment of the Secured Obligations in such order of priority as
the Secured Party shall determine, and any surplus shall be returned to Debtor
or to whomever may be legally entitled thereto. All costs and expenses,
including without limitation, legal costs and attorneys' fees, incurred by the
Secured Party in enforcing this Agreement shall be chargeable to and secured by
the Collateral.
(b) Upon the occurrence of an Event of default, the Bank
shall have the right to enter and/or remain upon the premises of the Debtor
without any obligation to pay rent to the Debtor or any other place or places
where the Collateral is located and kept in connection with the exercise of its
remedies hereunder.
-8-
9. Rights of Secured Party to Use and Operate Collateral, etc. (a) In
addition to any other rights or remedies of the Secured Party set forth herein
or in any related documents, upon the occurrence of any Event of Default, the
Secured Party shall have the right and power to take possession of all or any
part of the Collateral, and to exclude Debtor and all persons claiming under
Debtor wholly or partly therefrom, and thereafter to hold, store, and/or use,
operate, manage and control the same. Without limiting the generality of the
foregoing, the Secured Party shall have the right to have a receiver appointed
by a court of competent jurisdiction in any action taken by the Secured Party to
enforce its rights and remedies hereunder in order to manage, protect and
preserve the Collateral and continue the operation of the business of Debtor
(including the manufacture, production, processing, storing and/or sale of
Collateral) and to collect all revenues and profits thereof and apply the same
to the payment of all expenses and other charges of such receivership, including
the compensation of the receiver and to the payment of the Secured Obligations
as aforesaid until a sale or other disposition of such Collateral shall be
finally made and consummated. The Secured Party may require the Debtor to and
Debtor hereby agrees that it will, at its expense and upon request from the
Secured Party assemble all Collateral as directed by the Secured Party and make
it available to Secured Party at a place or places to be designated by Secured
Party.
(b) Any sale of Collateral may be in one or more parcels at public
or private sale, at any of the Secured Party's offices or elsewhere, for cash,
on credit, or for future delivery, and upon such other terms as the Secured
Party may reasonably believe are commercially reasonable. The Secured Party
shall not be obligated to make any sale of Collateral regardless of notice of
sale having been given, and the Secured Party may adjourn any public or private
sale from time to time by announcement made at the time and place fixed
therefor, and such sale may, without further notice, be made at the time and
place to which it was so adjourned.
(c) The Secured Party is hereby granted a license or other right
to use, without charge, all of the Debtor's property, including, without
limitation, all of the Debtor's labels, trademarks, copyrights, patents and
advertising matter, or any property of a similar nature, as it pertains to the
Collateral, in completing production of, advertising for sale and selling any
Collateral, and the Debtor's rights under all licenses and all franchise
agreements shall inure to the Secured Party's benefit until the Obligations are
paid in full.
10. Collection of Accounts Receivable Upon Default. Debtor hereby
absolutely and unconditionally assigns to Secured Party all accounts as security
for the Secured Obligations, provided that unti1 notice by Bank, thereafter,
Secured Party, subject to the terms of the Note, authorizes Debtor to collect
any and all amounts owing on all accounts. The Secured Party may, in its
-9-
sole discretion, give notice to any account debtors identified of the rights of
the Secured Party to and the security interest of Secured Party in the accounts,
and following a default which has not been cured within the applicable period of
grace, if any, effect collection of any such accounts, directly from the account
debtor with full power and the sole discretion to settle or compromise disputes
or claims relating to such account. upon the occurrence and during the
continuance of an event of default the Secured Party may notify any account
Debtor or other person obligated on any accounts or other Collateral that the
same have been assigned or transferred to the secured party and that the same
should be performed as requested by, or paid directly to, the Secured Party, as
the case may be. The Debtor shall join in giving notice, if the Secured Party so
requests. The Secured Party may, following a Default which has not been cured
within the applicable period of grace, if any, in the Secured Party's name or in
the Debtor's name, demand, sue for, collect or receive any money or property at
any time payable or receivable on account of, or securing, any such Collateral
or grant any extension to, make any compromise or settlement with or otherwise
agree to waive, modify, amend or change the obligation of any such Account
Debtor or other person. If any payments on any such Collateral are received by
the Debtor after an Event of Default has occurred, such payments shall be held
in trust by the Debtor as the property of the Secured Party and shall not be
commingled with any funds or property of the Debtor and shall be forthwith
remitted to the Secured Party for application on the Obligations.
11. Application of Proceeds. All cash proceeds received by the Secured
Party in respect of any sale of, collection from, or other realization upon all
or any part of the Collateral may, in the discretion of the Secured Party, be
held by the Secured Party as collateral for, or then or at any time thereafter
be applied in whole or in part by the Secured Party against, all or any part of
the Obligations (including, without limitation, any expenses of the Secured
party payable pursuant to Section 12 hereof).
12. Costs and Expenses; Indemnity. The Debtor will pay or reimburse the
Secured Party on demand for all reasonable out-of-pocket expenses (including in
each case all filing and recording fees and taxes and all reasonable fees and
expenses of counsel and of any experts and agents) incurred by the Secured Party
in connection with the creation, perfection, protection, satisfaction,
foreclosure or enforcement of the security interest and the preparation,
administration, continuance, amendment or enforcement of this Agreement, and all
such costs and expenses shall be part of the Secured Obligations secured by the
security interest. The Debtor shall indemnify and hold the Secured Party
harmless from and against any and all claims, losses and liabilities (including
reasonable attorneys' fees) growing out of or resulting from this Agreement and
the security interest hereby created (including enforcement of this Agreement)
or the actions of the Secured Party pursuant hereto, except claims, losses or
liabilities resulting from the gross negligence or willful
-10-
misconduct of the person claiming indemnity as determined by a final judgment of
a court of competent jurisdiction. Any liability of the Debtor to indemnify and
hold the Secured Party or any Bank harmless pursuant to the preceding sentence
shall be part of the Secured Obligations secured by the security interest. The
obligations of the Debtor under this Section shall survive any termination of
this Agreement.
13. Rights Are Cumulative. The Bank shall have, in addition to any
other rights or remedies contained in this Agreement and any other agreement or
related instrument, all of the rights and remedies of secured party under the
Maine Uniform Commercial Code and enforced in the State of Maine as otherwise
provided by law. All of the Secured Party's rights and remedies whether
evidenced hereby or by any other agreement or instrument or whether otherwise
available shall be cumulative and may be exercised in such order or concurrently
as Secured Party may elect.
14. Invalidated Payments. Notwithstanding the provisions of section 16,
this Agreement shall continue to be effective or be reinstated, as the case may
be, if at any time any amount received by the Secured Party in respect of the
Secured Obligations is rescinded or must otherwise be restored or returned by
the Secured Party upon the insolvency, bankruptcy, dissolution, liquidation or
reorganization of the company or upon the appointment of any intervener or
conservator of, or trustee or similar official for, the Company or any
substantial part of its properties, or otherwise, all as though such payments
had not been made.
15. Waivers, etc. Debtor hereby waives presentment, demand, notice,
protest and, except as is otherwise provided herein, all other demands and
notices in connection with this Agreement or the enforcement of the Secured
Party's rights hereunder or in connection with any Secured Obligations or any
Collateral; waives all requirements of law, if any, relating to the marshalling
of assets which would be applicable in connection with the enforcement of
Secured Party's remedies hereunder; waives its right, if any, to require the
Secured Party to proceed against any guarantor of the Secured Obligations prior
to proceeding against any of the Collateral; agrees that the rights of the
Secured Party hereunder shall not be affected by any extensions, renewals,
indulgences, settlements, or compromises respecting any of the Secured
Obligations; consents to and waives notice of the granting of renewals,
extensions of time for payment or other indulgences to Debtor or to any account
debtor in respect of any account receivable, or substitution, release, surrender
or impairment of any Collateral, the addition or release of persons primarily or
secondarily liable on any Secured Obligation or on any account receivable or
other Collateral, the acceptance of partial payments on any Secured Obligation
or on any account receivable or other Collateral and/or the settlement or
compromise thereof. No delay or omission on the part of the
-11-
Secured Party in exercising any right hereunder shall operate as a waiver of
such right or of any other right hereunder. Any waiver of any such right on any
one occasion shall not be construed as a bar to or waiver of any such right on
any such future occasion. No waiver by the Secured Party or by any other holder
of Secured Obligations of any default shall be effective unless in writing, and
any such waiver shall not operate as a waiver of any other default or of the
same default on a future occasion.
16. Termination; Assignments, etc. This Agreement shall (a) create a
continuing security interest in the collateral and shall remain in full force
and effect until payment in full of the Obligations and the expiration of any
obligation of the bank to extend further credit accommodations to the Debtor
under the Loan Agreement, (b) be binding upon the Debtor, it successors and
assigns, and (c) inure to the benefit of, and be enforceable by, the Secured
Party and their respective successors, transferees, and assigns. Without
limiting the generality of the foregoing clause (c), the Secured Party may
assign or otherwise transfer all or any portion of its rights and obligations
under the Loan Agreement and may similarly transfer all or any portion of its
rights under this Security Agreement to such persons. In the event of a sale or
assignment by the Secured Party of all or any of the Secured Obligations, the
Secured Party may assign or transfer its rights and interests under this
agreement in whole or in part to the purchaser or purchasers of such Secured
Obligations, in which case, Secured Party shall so notify Debtor and such
assignee shall accept such assignment and assume the obligations of the Secured
Party hereunder, whereupon such purchaser or purchasers shall become vested with
all of the powers, obligations and rights of the Secured Party hereunder, and
the Secured Party shall thereafter be forever released and fully discharged from
any further liability or responsibility hereunder, with respect to the rights
and interests so assigned.
17. Notices. All notices, requests and other communications to any
party hereunder shall be in writing (including bank wire, telex, telecopy or
similar writing), may be personally served or sent by telex, telecopier, mail or
the express mail service of the United States Postal Service, Federal Express or
other reputable overnight or expedited delivery service which provides evidence
of delivery, and (a) if given by personal service, telex (confirmed by
telephone) or telecopier (confirmed by telephone), it shall be deemed to have
been given upon receipt; (b) if sent by telex or telecopier without telephone
confirmation, it shall be deemed to have been given twenty-four (24) hours after
being given; (c) if sent by mail, it shall be deemed to have been given upon the
earlier of (i) actual receipt, or (ii) three (3) Business Days after deposit in
a depository of the United States Postal Service, first class mail, postage
prepaid, or actual receipt; (d) if sent by Federal Express, the express mail
service of the United States Postal Service or other equivalent overnight or
expedited delivery
-12-
service, it shall be deemed given upon the earlier of (i) actual receipt or (ii)
twenty-four (24) hours after delivery to such overnight or expedited delivery
service, delivery charges prepaid, and properly addressed to Debtor or the Bank.
For purposes hereof, the address of the parties to this Agreement shall be as
follows:
(a) if to Debtor:
Brunswick Technologies, Inc.
43 Bibber Parkway
Brunswick, ME 04011
with a copy to:
Daniel G. McKay, Esq.
Eaton, Peabody, Bradford & Veague, PA
Fleet Center, Exchange Street
P.O. Box 1210
Bangor, ME 04402-1210
(b) if to the Secured Party:
Fleet Bank of Maine
P.O. Box 1280
Portland, ME 04104-5006
Attn: Claude R. Carbonneau
Vice President
with a copy to:
Michael E. High, Esq.
Drummond Woodsum & MacMahon
P.O. Box 9731
245 Commercial Street
Portland, ME 04104-5081
or at such other address as the party to whom such notice is directed may have
designated in writing to the other parties hereto.
18. Consent to Jurisdiction. AT THE OPTION OF THE SECURED PARTY, THIS
AGREEMENT MAY BE ENFORCED IN ANY FEDERAL COURT OR MAINE STATE COURT SITTING IN
CUMBERLAND COUNTY, MAINE; AND THE DEBTOR CONSENTS TO THE JURISDICTION AND VENUE
OF ANY SUCH COURT AND WAIVES ANY ARGUMENT THAT VENUE IN SUCH FORUMS IS NOT
CONVENIENT. IN THE EVENT THE DEBTOR COMMENCES ANY ACTION IN ANOTHER JURISDICTION
OR VENUE UNDER ANY TORT OR CONTRACT THEORY ARISING DIRECTLY OR INDIRECTLY FROM
THE RELATIONSHIP CREATED BY THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS, THE
SECURED PARTY AT ITS OPTION SHALL BE ENTITLED TO HAVE THE CASE TRANSFERRED TO
ONE OF THE JURISDICTIONS AND VENUES ABOVE-DESCRIBED, OR IF SUCH TRANSFER CANNOT
BE ACCOMPLISHED UNDER APPLICABLE LAW, TO HAVE
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SUCH CASE DISMISSED WITHOUT PREJUDICE. Debtor hereby waives personal service of
any and all process upon Debtor, and consents that all such service of process
be made by registered mail, or certified mail, return receipt requested,
directed to Debtor at the address stated at the commencement of this Agreement
(or such other address as Debtor may have given Bank notice of under the terms
of this Agreement), with a copy to Debtor's counsel at the address set forth in
Section 17 hereof and service so made shall be deemed to be completed upon
receipt.
19. Disclosure Consent. Debtor hereby consents to the release and dis-
closure from time to time by Bank to any institution note or hereafter
acquiring a participation interest in any of the Secured Obligations, to any
guarantor now or hereafter existing as to any of the Secured Obligations and to
Bank's parent and affiliated financial institutions of any of the following
items or matters: (i) copies or originals of any and all "financial records" of
Debtor now or hereafter in the possession or finder the control of Bank, and
(ii) any and all notices, financial and operating reports, balance sheets,
financial statements, consultants' reports, and any and all documentation and
information of or regarding Debtor heretofore or hereafter provided to or
generated by or for the benefit of Bank in connection with this Agreement or
any of the Secured Obligations nor or hereafter existing.
20. Governing Law and Construction. THE VALIDITY, CONSTRUCTION AND
ENFORCEABILITY OF THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF
MAINE, WITHOUT GIVING EFFECT TO CONFLICT OF LAWS PRINCIPLES THEREOF, EXCEPT TO
THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER,
OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE MANDATORILY
GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF MAINE. Whenever
possible, each provision of this Agreement and any other statement, instrument
or transaction contemplated hereby or relating hereto shall be interpreted in
such manner as to be effective and valid under such applicable law, but, if any
provision of this Agreement or any other statement, instrument or transaction
contemplated hereby or relating hereto shall be held to be prohibited or invalid
under such applicable law, such provision shall be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Agreement or any other
statement, instrument or transaction contemplated hereby or relating hereto.
21. Waiver of Jury Trial. (a) THE BANK AND THE DEBTOR AGREE THAT
NEITHER OF THEM NOR ANY ASSIGNEE OR SUCCESSOR SHALL (A) SEEK A JURY TRIAL IN ANY
LAWSUIT, PROCEEDING, COUNTERCLAIM OR ANY RELATED INSTRUMENTS, OR THE DEALINGS OR
THE RELATIONSHIP BETWEEN OR AMONG ANY OF THEM, OR (B) SEEK TO CONSOLIDATE ANY
SUCH ACTION WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT
BEEN WAIVED. THE PROVISIONS OF THIS PARAGRAPH HAVE BEEN FULLY DISCUSSED BY THE
BANK AND THE DEBTOR, AND THESE PROVISIONS
-14-
SHALL BE SUBJECT TO NO EXCEPTIONS. NEITHER THE BANK NOR THE DEBTOR HAS AGREED
WITH OR REPRESENTED TO THE OTHER THAT THE PROVISIONS OF THIS PARAGRAPH WILL NOT
BE FULLY ENFORCED IN ALL INSTANCES.
(b) THE DEBTOR HEREBY WAIVES ALL RIGHTS TO A JUDICIAL HEARING
OF ANY KIND PRIOR TO THE EXERCISE BY THE SECURED PARTY OF ITS RIGHTS TO
POSSESSION OF THE COLLATERAL WITHOUT JUDICIAL PROCESS OR OF ITS RIGHTS TO
REPLEVY, ATTACH OR LEVY UPON THE COLLATERAL WITHOUT PRIOR NOTICE OR HEARING. THE
DEBTOR ACKNOWLEDGES THAT IT HAS BEEN ADVISED BY COUNSEL OF ITS CHOICE WITH
RESPECT TO THIS PROVISION AND THIS AGREEMENT.
22. Miscellaneous. This Agreement shall inure to the benefit of and be
binding upon the Secured Party and Debtor and their respective successors and
assigns, and the term "Secured Party" shall be deemed to include any other
holder or holders of any of the Secured Obligations. This Agreement may be
executed in any number of counterparts, each of which shall be an original, but
all of which together shall constitute one instrument. No consent, approval or
waiver shall be binding unless in writing. The consent, approval or waiver by
one or more of the parties constituting a secured party hereunder shall not be
binding upon any other party constituting a secured party unless given by an
authorized agent. The section headings hereunder are for convenience of
reference only and shall not be considered in construing the meaning of the
terms and provisions of this Agreement. All representations and warranties of
Debtor and all terms, provisions, conditions or agreements to be performed by
Debtor contained herein or in any of the other documents delivered pursuant
hereto or in connection herewith shall be true at the time of the execution of
this Agreement and shall survive the execution and delivery hereof. The Debtor
waives notice of acceptance of this Agreement by Secured Party.
IN WITNES, WHEREOF, the undersigned has executed this Agreement as a
sealed instrument as of the date above written.
WITNESS: BRUNSWICK TECHNOLOGIES, INC.
Illegible By: William M. Dubay
------------------- --------------------------
Its: President and C.O.O.
--------------------------
FLEET BANK OF MAINE
By: Gregory Shaw
--------------------------
Its: Banking Officer
------------------- --------------------------
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EXHIBIT A
to
Security Agreement
(CEO, Place of Business and Location of Collateral)
Martin S. Grimnes, CEO
1. 43 Bibber Parkway
Brunswick, ME 04011
2. 1 Maine Street
Brunswick, ME 04011
EXHIBIT 10.3
DEMAND NOTE
$1,500,000 Portland, Maine
May 30, 1996
FOR VALUE RECEIVED, BRUNSWICK TECHNOLOGIES, INC., a Maine corporation
(the "Maker"), promises to pay to Fleet Bank of Maine (the "Bank"), or order, ON
DEMAND, the principal sum of One Million Five Hundred Thousand Dollars
($1,500,000), or so much hereof as may be outstanding at the time this
obligation becomes due and payable (whether upon demand or otherwise).
Maker promises to pay interest (computed on the basis of the actual
number of days elapsed in a 360 day year) on the unpaid principal balance
outstanding from time to time on this Note or any advance hereunder until paid
in full (whether at maturity, by acceleration or otherwise) at a rate of
interest per annum equal to the Prime Lending Rate then in effect, floating
daily, or, at the election of Maker, at a rate of interest per annum equal to
the LIBOR Rate (namely LIBOR plus one and three-quarters percent (1.75%) per
annum) for any LIBOR Interest Period selected by Maker in accordance with the
terms and provisions of the Loan Agreement of even date by and between the Maker
as borrower and the Bank as lender (as the same may be amended from time to
time, the "Loan Agreement"). In no event shall any LIBOR Interest Period so
selected extend beyond the Revolving Credit Termination Date. In the event Maker
has not selected an alternative interest rate option upon expiration of any
applicable fixed rate interest period, the principal amount hereof shall bear
interest at the Prime Lending Rate until an alternative interest rate option
based on the LIBOR Rate is selected by Maker in accordance with the terms hereof
and the Loan Agreement. Interest is due and payable in arrears on the first day
of each month, commencing on the first of such dates next succeeding the date
hereof (namely, June 1, 1996) and continuing thereafter on the first day of each
month until this obligation becomes due and payable (whether upon demand or
otherwise). In any period during which interest is accruing at the Prime Lending
Rate based index, a change in the rate of interest on this Note shall be
effective on the date of any change in the Prime Lending Rate. Capitalized terms
used herein without definition shall have the meanings ascribed to them in the
Loan Agreement.
The "Prime Lending Rate," for purposes of this Note, means the annual
rate of interest designated by the Bank at its main branch in Portland, Maine,
from time to time, for the internal guidance of its lending personnel, as its
"Prime Lending Rate", whether or not such rate is otherwise published. The Prime
Lending Rate is simply an indicator rate for all loans making reference thereto
and is not necessarily the lowest or most favorable rate provided by Bank to any
particular group of borrowers. The Prime Lending Rate floats upward and
downward,
automatically, at the time specified in any announcement relating thereto,
without any special notice to Debtor. If the Bank shall cease designating such a
rate, for any reason, then the term "Prime Lending Rate" shall mean the rate of
interest published in the Wall Street Journal as the Prime Rate or the base rate
on corporate loans for large United States money center banks, as it may vary
from time to time.
"LIBOR" means the per annum rate of interest determined by the Bank
two (2) Banking Days before the beginning of any LIBOR Interest Period to be the
rate of interest, if any is available, at which the then principal balance of a
Loan or advance under the Loan Agreement is offered to the Bank by prime banks
in the London International Interbank Eurocurrency market for deposit for a
period comparable to the applicable LIBOR Interest Period on or about 11:00
a.m. London time. The "LIBOR Rate" means for any LIBOR Loan made by Bank to
Maker the per annum rate of interest equal to LIBOR for the LIBOR Interest
Period for which interest is to be determined based on the LIBOR Rate plus one
and three-quarters percent (1.75%) per annum.
If the Maker shall fail to make any regular monthly payment on this
Note, and such failure continues for more than ten (10) days, the Maker shall
pay to the Bank or other holder of this Note, as the case may be, on demand by
such holder, an additional amount as premium in an amount equal to five percent
(5%) of the overdue installment amount. The holder of this note also shall have
the right to charge interest on the unpaid principal balance hereof at an
interest rate equal to the sum of three percent (3%) per annum plus the rate of
interest otherwise payable as provided herein following a, and during the
continuance of a Default or Event of Default under this Note or any of the Loan
Documents, but only following the expiration of any applicable period of grace
without a cure having been effected. The failure by the holder of this Note to
collect any such late charge, or to charge a default rate of interest on one
occasion shall not be deemed a waiver by the holder of this Note of its right to
collect late charges or to collect such charges in any other instance involving
a late payment hereunder, or to charge a default rate of interest at a later
date or on another occasion.
All payments in respect of this Note shall be payable to the Bank at
its offices at Two Portland Square, Portland, Maine, Attention: Corporate
Banking Department, or such other address as the Bank or other holder hereof
shall notify the Maker in writing in United States Dollars.
This Note is subject to prepayment in whole or in part, without
premium or penalty, except that the parties acknowledge that the Maker is
obligated to pay the availability fee referenced in the Loan Agreement and in
the event the Borrower elects to prepay the principal of any advance which is
subject to a LIBOR Pricing Option prior to the end of the applicable LIBOR
-2-
Rate Interest Period Borrower shall pay to the Bank a Maintenance Fee calculated
in the manner set forth in the Loan Agreement.
This Note evidences a loan or loans under and is issued pursuant to
the Loan Agreement, to which reference is made for a complete description of the
rights, obligations, limitations and restrictions of the Maker and the holder of
this Note. The holder of this Note is entitled to the benefit of the Loan
Agreement and the other Loan Documents, but neither this reference to such Loan
Agreement or any of the related Loan Documents (including any Security
Documents), nor any provisions thereof, shall affect or impair the absolute and
unconditional obligation of the Maker to pay the principal of and interest on
this Note when and as the same shall become due and payable.
Upon written demand by Bank, or, in the absence of prior demand, on
the Revolving Credit Termination Date, this Note shall become immediately due
and payable without presentment, additional demand, protest or notice of any
kind, all of which are hereby waived, which remedies are in addition to and not
in any respect in limitation of any other rights or remedies Bank may have under
the Security Agreement, the other Loan Documents or at law or in equity. The
Maker shall not be obligated to make advances under any of the Loan Documents
that it might otherwise be obligated to make thereunder following a demand or a
Default or Event of Default under the Loan Agreement or any other Loan Document.
The Maker and all other parties liable herefor, whether as maker,
principal, guarantor, endorser or otherwise, acknowledge and agree that they are
jointly and severally liable for all amounts due and owing hereunder, hereby
severally waive presentment, demand, protest, notice of dishonor and all notices
and demands of every kind in connection with the delivery, acceptance,
performance and enforcement of this Note, and waive all recourse to suretyship
and guarantorship defenses generally, including, but not limited to, any
extension of time for payment or performance which may be granted to the Maker
or to any other liable party, any impairment of any collateral for the loans
evidenced by this Note, any release of security, and all other indulgences of
any type which may be granted by the holder hereof to the Maker or any other
party liable herefor. Maker shall pay all reasonable costs and expenses,
including without limitation any attorneys' or paralegals' fees and
disbursements that may be incurred by the Bank or any subsequent holder of this
Note in connection with the enforcement or collection of this Note or any
security for this Note.
This Note is subject to the condition that at no time shall the maker
or any other party liable hereon be obligated or required to pay interest at a
rate which could subject the holder hereof to either civil or criminal
liability, forfeiture or loss of principal, interest, or other sums as a result
of being in excess of the maximum interest rate which obligers are permitted
-3-
by law to contract or agree to pay or which the holder hereof is permitted to
receive. If by the terms of this Note the Maker or any other party liable hereon
is at any time required or obligated to pay interest at a rate in excess of such
maximum rate, the rate of interest under the Note shall be deemed to be
immediately reduced to such maximum rate for so long as such maximum rate shall
be in effect and shall thereafter be payable at the rate herein provided. If
any obligation or a portion of this Note is determined to be invalid or
unenforceable under applicable law, it shall not affect the validity or
enforcement of the remaining obligations or portions hereof.
UNDER MAINE LAW, NO PROMISE, CONTRACT OR AGREEMENT TO LEND MONEY,
EXTEND CREDIT, FOREBEAR FROM COLLECTION OF A DEBT OR MAKE ANY OTHER
ACCOMMODATION FOR THE REPAYMENT OF A DEBT FOR MORE THAN $250,000 MAY BE ENFORCED
IN COURT AGAINST A LENDER UNLESS THE PROMISE, CONTRACT OR AGREEMENT IS IN
WRITING AND SIGNED BY THE LENDER. ACCORDINGLY, MAKER CANNOT ENFORCE ANY ORAL
PROMISE UNLESS IT IS CONTAINED IN LOAN DOCUMENTS SIGNED BY THE BANK, NOR CAN ANY
CHANGE, FORBEARANCE, OR OTHER ACCOMMODATION RELATING TO THE OBLIGATIONS, THE
NOTE OR ANY OTHER OF THE LOAN DOCUMENTS BE ENFORCED, UNLESS IT IS IN WRITING AND
SIGNED BY THE BANK. MAKER ALSO UNDERSTANDS AND AGREES THAT ALL FUTURE PROMISES,
CONTRACTS OR AGREEMENTS OF THE BANK RELATING TO ANY OTHER TRANSACTION BETWEEN IT
AND THE BANK CANNOT BE ENFORCED IN COURT UNLESS THEY ARE IN WRITING AND SIGNED
BY THE BANK. BY EXECUTION OF THIS NOTE, MAKER HEREBY ACKNOWLEDGES AND AGREES
THAT THE REQUIREMENT OF A WRITING DESCRIBED IN THIS PARAGRAPH SHALL APPLY TO
THIS NOTE, THE OBLIGATIONS, THE LOAN DOCUMENTS, ANY EXTENSION, MODIFICATION,
RENEWAL, FORBEARANCE OR OTHER ACCOMMODATION RELATING HERETO OR THERETO AND TO
ANY OTHER CREDIT RELATIONSHIP BETWEEN MAKER AND THE BANK (WHETHER NOW EXISTING
OR CREATED IN THE FUTURE), WHETHER OR NOT THE AMOUNT INVOLVED EXCEEDS $250,000.
THE BANK AND THE MAKER FURTHER AGREE THAT NEITHER OF THEM NOR ANY
ASSIGNEE OR SUCCESSOR SHALL (A) SEEK A JURY TRIAL IN ANY LAWSUIT OR OTHER
PROCEEDING RELATING TO THIS NOTE, THE OTHER LOAN DOCUMENTS OR ANY DEALINGS OR
THE RELATIONSHIP BETWEEN OR AMONG ANY OF THEM, OR (B) SEEK TO CONSOLIDATE ANY
SUCH ACTION WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT
BEEN WAIVED. THE PROVISIONS OF THIS PARAGRAPH HAVE BEEN FULLY DISCUSSED BY THE
BANK AND THE MAKER, AND THESE PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS.
NEITHER THE BANK NOR THE MAKER HAS AGREED WITH OR REPRESENTED TO THE OTHER THAT
THE PROVISIONS OF THIS PARAGRAPH WILL NOT BE FULLY ENFORCED IN ALL INSTANCES.
This Note evidences a loan for business or commercial purposes and not
for personal, family or household uses, and is secured by the Collateral (as
defined in the Loan Agreement) and the related Loan Documents. This Note shall
be construed in all respects in accordance with and governed by the laws of the
State of Maine. Maker submits to the jurisdiction of the courts of the State of
Maine and the United States District Court for the District of Maine, and agrees
that at Bank's option all
-4-
litigation under or relating to this Note shall be conducted in such courts.
IN WITNESS WHEREOF this Note has been executed as a sealed instrument
and delivered on the date above written by a duly authorized representative of
the undersigned.
BRUNSWICK TECHNOLOGIES, INC.
WITNESS:
- ------------------------------ By: William Dubay
---------------------------
Its: President C.O.O.
---------------------------
EXHIBIT 10.5
PRIVATE ACTIVITY BOND REQUIREMENTS CERTIFICATE
The undersigned, being the duly appointed and acting President of
Brunswick Technologies, Inc. of Brunswick, Maine ("the Company"), hereby
certifies, represents and warrants as follows in connection with the issuance
and sale of $1,700,000 aggregate principal amount of the Town of Brunswick,
Maine (the "Issuer") 1995 General Obligation Tax Increment Financing Bonds (BTI
Project) dated December 1, 1995 (the "Bonds").
1. AUTHORITY. The undersigned is the duly appointed and acting
President of the Company and is an officer of the Company charged with the
responsibility for signing the Lease. The Company is a Maine corporation with a
place of business in the Town of Brunswick, County of Cumberland, State of
Maine.
2. LOCATION OF FACILITIES. The Issuer has designated certain property
it owned located in Brunswick, Maine (the "Property") as the Town of Brunswick,
Maine, BTI Tax Increment and State Tax Increment Financing District (the
"District"). The purpose of the District is to assist the Company in financing
the construction of a new manufacturing facility along with other related
improvements located in Brunswick, Maine (the "Facilities"). The Facilities and
the Property are now owned by Brunswick Development Corporation ("BDC"). BDC
will use the proceeds of the Bonds to construct the Facilities and will then
lease the Facilities to the Company. The Facilities will be located within the
State of Maine at all times at which any Bonds remain outstanding. The Company
and BDC have entered into a lease agreement dated August 1, 1995 under which the
Facilities, along with the real property on which it is located (the "Leased
Property") shall be leased to the Company.
3. USE OF PROCEEDS. To the best of my knowledge, the Facilities
comprise and will comprise land or property of a character subject to the
allowance for depreciation under Section 167 of the Internal Revenue Code of
1986, as amended (the "Code"). At least ninety-five percent (95%) of the
proceeds of the Bonds are to be used to finance costs (a) for the acquisition,
construction or reconstruction of land or property of a character subject to the
allowance for depreciation provided in Section 167 of the Code and (b) which are
chargeable to a capital account of the Facilities or would be so chargeable
either with an election by the Company or but for the election by the Company to
deduct the amount of the item.
4. SUBSTANTIAL USERS. The Bonds will not be sold to or held by the
Company or any other person who is a "substantial user" of the Facilities to be
financed with the Bond proceeds. Nor will the Bonds be sold to or held by a
"related person" of the Company or any other substantial user. The undersigned
expects the Company to be the sole substantial user of the Facilities.
A "substantial user" of the Facilities to be financed with the Bond
proceeds is any nonexempt person under the Code who regularly uses a part of
such Facilities in the course of his trade or business. A substantial user may
also be any non-exempt person for whom the Facilities or part thereof was
specifically constructed, reconstructed or acquired or, if the Facilities were
not so constructed, reconstructed or acquired, then a non-exempt person who
derives more than,
five percent (5%) of the total gross revenues from the facility or occupies more
than five percent (5%) of the useable area of the Facilities.
A "related person" includes:
a. Two or more persons if the relationship between them
would result in a disallowance of losses under section 267 or 707
(b) of the code;
b. Two or more persons who are members of the same
"controlled group of corporations" (as that term is defined in
Section 1563(a) of the Code, except that for purposes of this
definition "more than 50 percent" shall be substituted for "at least
80 percent" each place it appears in Section 1563(a));
c. A partnership and each of its partners(and their spouses
and minor children); and
d. An S Corporation and each of its shareholders (and their
spouses and minor children).
5. REMAINING USEFUL LIFE. The remaining average economic life of the
various assets being financed with the proceeds of the Bonds, calculated in the
manner set forth in Schedule C hereto, is 45 years. The weighted average
maturity of the Bonds, 11.397876 years from the date hereof, does not exceed
120% of the average remaining expected economic life of the assets being
financed with the proceeds of the Bonds within the meaning of Section 147(b) of
the Code.
6. LAND ACQUISITION.
Less than twenty-five percent (25%) of the net proceeds of the Bonds
will be used (directly or indirectly) for the acquisition of land (or an
interest therein).
No portion of the net proceeds of the Bonds will be used (directly or
indirectly) for the acquisition of land (or an interest therein) to be used for
farming purposes.
7. FIRST USE OF PROPERTY.
a. To the best of my knowledge, no portion of the Bond
proceeds shall be used for the acquisition of any personal property
(or any interest therein) unless:
(1) the first use of such property is pursuant to such
acquisition, or
(2) the rehabilitation exception described in paragraph
7(b) below is Satisfied.
2
(The inclusion of some used parts in property that otherwise will be put to its
first use pursuant to such acquisition shall not prevent such property from
qualifying as property being put to its first use.)
b. The Company may acquire previously owned or previously
used personal property if it expends an amount on qualified
rehabilitation expenditures (within the meaning of Section 147(d)(3)
of the Code) (i) equal to at least fifteen percent (15%) of the
purchase price of all existing buildings and equipment included with
the buildings, if any, being acquired with proceeds of the Bonds and
(ii) equal to at least 100% of the purchase price of all other
structures, if any, being acquired with the proceeds of the Bonds.
Failure so to do will result in the interest on the Bonds being
taxable. The Company agrees that if it acquires previously owned or
previously used property with Bond proceeds, it will make such
qualified rehabilitation expenditures no later than two (2) years
following the later of (i) the issuance of the Bonds or (ii) the
acquisition of any building or other structure, if any.
8. USE OF BOND PROCEEDS. To the best of my knowledge:
a. Pursuant to Section 147(e) of the Code, no portion of the
Bond proceeds will be used to provide any of the following:
(1) airplane;
(2) skybox or other private luxury box;
(3) health club facility;
(4) facility primarily used for gambling; or
(5) any store the principal business of which is
the sale of alcoholic beverages for
consumption off premises.
b. Pursuant to Section 144(a)(8) of the Code:
(1) no more than twenty-five percent (25%) of the
net proceeds of the Bonds will be used
to provide any of the following:
a. retail food and beverage services;
b. automobile sales or service; or
c. the provision of recreation or
entertainment; and
(2) no portion of the Bonds proceeds will be used
to provide any of the following:
a. any private or commercial golf course;
b. country club;
3
c. massage parlor;
d. tennis club;
e. skating facility (including roller
skating, skateboard, and ice
skating);
f. racquet sports facility (including any
handball or racquetball court);
g. hot tub facility;
h. sun tan facility; or
i. race track.
9. ORIGINAL USE OF EXEMPT FACILITY. Pursuant to Treasury Regulation
ss.1.103-8T(a)(5)(i) with respect to Facilities that are exempt facilities:
(a) Before Bond Issue. If the original use of the
Facilities commences before the issue date of the Bonds, no person
(or related person) (a) who was a substantial user of the Facilities
within the five (5) years preceding the issuance of the Bonds and
(b) who will also be a substantial user of the Facilities within the
five (5) years after the issuance of the Bonds will receive
(directly or indirectly) an amount equal to five percent (5%) or
more of the face amount of the Bonds in payment for his or her
interest in the Facilities unless:
(i) A declaration of official intent for the
facility is adopted under Treasury Regulation
Section 1 . 150-2 within 60 days after the
date on which acquisition, construction or
reconstruction of that Facilitie commenced;
and
(ii) For an acquisition, no person that is a
substantial user or related person after the
acquisition date was also a substantial user
more than 60 days before the date on which
the declaration of official intent was
adopted.
(b) After Bond Issue. If the original use of the Facilities
commences after the issue date of the Bonds, a declaration of
official intent will be adopted by the Issuer pursuant to Treasury
Regulation Section 1.10150-2 within 60 days of the commencement of
construction, reconstruction or acquisition of the Facilities.
10. MANUFACTURING FACILITY. The Facilities constitute a
manufacturing facility, and as such, are used in the manufacturing or production
of tangible personal property (including the processing resulting in a change in
the condition of such property).
Portions of the Facilities that are not directly used in the
manufacturing process but are directly related and ancillary to the
manufacturing facility:
4
a. are located on the same site as the manufacturing
facility; and
b. have not been financed with more than twenty-five percent
(25%) of the net proceeds of the Bonds.
With respect to any office space included within the Facilities:
a. such office space is located on the premises of the
facilities; and
b. not more than a de minimis amount of the functions to be
performed at such office(s) is not directly related to
the day-to-day operations of the Facilities.
All storage areas included within the Facilities are used to store:
a. materials used in the manufacturing process; or
b. articles manufactured at the Facilities.
11. CHANGE IN USE OF FACILITIES. The Company understands and
acknowledges that a change in the use of the Facilities to a use not qualified
for tax-exempt financing will result in both the loss of tax-exemption on Bond
interest and the loss of income tax deductions for interest paid by the person
making the nonqualified use of the Facilities. The Company hereby covenants
and agrees that before any change in use of the Facilities while any Bonds are
outstanding, the Company shall first file with the Issuer an opinion of
counsel satisfactory to the Issuer to the effect that such action would not
cause the interest on the Bonds to be included in gross income for federal tax
purposes.
12. CAPITAL EXPENDITURES LIMIT.
a. The undersigned is familiar with the financial books and
records of the Company and they are maintained under the
undersigned's supervision and control. The undersigned is also
familiar with the books and records of any "related person" to the
Company, as that term is defined in Section 144(a)(3) of the Code and
the Treasury Regulations relating thereto.
b. The undersigned has examined the books and records of the
Company and of all such "related persons," and such other documents
and records as the undersigned has deemed necessary for the periods
beginning December 12, 1992 through the date hereof.
5
c. The undersigned is familiar with the provisions of
Section 144 of the Code including, in particular, the provisions of
Treasury Regulation Section 1. 103-10.
d. The undersigned has reviewed the statement of the issuer
relating to its election to have the provisions of Section 144(a)(4)
of the Code apply to the issuance by it of the Bonds. The statements
contained in said statement of election as they relate to the company
are correct.
e. Where are listed on schedule A hereto all "capital
expenditures" within the meaning of section 144(a)(4) of the code
which were paid or incurred during the period December 12, 1992,
through the date hereof, with respect to any property located wholly
or partially within the corporate boundaries of the Issuer or
outside the Issuer, but contiguous to or integrated with the
Facilities within the Issuer, the principal users of which are or
were the Company, or any "related person" as defined hereinabove.
Capital expenditures financed out of the proceeds of the Bonds are
not "Section 144(a)(4) Capital Expenditures" and are not listed on
Schedule A.
The Company hereby covenants and agrees that from the date hereof
through and including December 12, 1998, the Company shall limit the aggregate
amount of all Section 144(a)(4) Capital Expenditures with respect to property
located wholly or partially within the corporate boundaries of the Issuer or
outside the Issuer, but contiguous to or integrated with the facilities within
the Issuer, to an amount less than the difference of $10.000,000 minus the face
amount of the Bonds minus the amount of capital expenditures listed on Schedule
A attached hereto.
13. $40,000,000 LIMIT. The Company covenants, agrees and certifies
that except for the "Tax Exempt Bonds" (defined below) described in Schedule B
attached hereto, which Tax Exempt Bonds do not exceed $40,000,000, as of the
date hereof, neither the Company nor any, "related person" as defined
hereinabove:
a. owns, occupies or uses any facilities financed with the
proceeds of tax-exempt exempt facility bonds, qualified small issue
bonds, qualified redevelopment bonds, or other industrial development
bonds ("Tax Exempt Bonds") now outstanding located anywhere within
the United States, with the exception of the Company's occupancy of
the Facilities located at Brunswick, Maine; or
b. or has borrowed, received or benefited from Tax Exempt
Bond proceeds, whether by grant, loan, lease or any other arrangement
of any nature whatsoever, located anywhere within the United States
with the exception of the Company's occupancy of the Facilities
located at Brunswick, Maine.
The Company further covenants and agrees that no owner or principal user of the
Facilities or related party shall, from the date hereof through the date that
is three years from the date the
6
Facilities are placed in service, own, occupy or use any property financed with,
or borrow, receive or be benefited by, Tax Exempt Bonds such that the portion of
those Tax Exempt Bonds allocable to such owner, principal user or related party
exceed $40,000,000.
That portion of a Tax Exempt Bond allocable to the Company, an owner, a
principal user or any "related person" is equivalent to that entity's
proportional use of the facility financed with the Tax Exempt Bond proceeds,
calculated as a percentage of the entire facility. For purposes of making that
calculation, the Company's, or owner's, principal user's or related person's
proportional use of a facility shall be the greatest of its proportional use
measured on the basis of:
a. Ownership interest in the facility;
b. Square footage of the facility;
c. Cost of the facility;
d. Income generated by the facility;
e. Fair market rental value of the facility; or
f. Percentage of output purchased.
The Company shall describe in Schedule B its ownership, occupancy or use of
any bond financed facility located within the United States or other benefits
from the issuance of bonds during the periods referenced above.
14. PENDING LITIGATION. There is no action, suit, proceeding, or
investigation at law or in equity before or by any court, public board or body,
pending or threatened, against or affecting the Company or, to the best of its
knowledge, the facilities, wherein an unfavorable decision, ruling, or finding
would materially adversely affect the Company or, to the best of its knowledge,
the Facilities or the validity of the Bonds.
15. OTHER MATERIAL AGREEMENTS. The execution and delivery of this
certificate, and the representations made herein, does not and will not in any
material respect conflict with or constitute on the part of the Company a breach
of or default under any other material agreement or instrument to which the
Company is a party or any existing law, regulation, court order, or consent
decree to which the Company is subject and noncompliance with which would have a
material adverse effect on the operations and financial condition of the Company
taken as a whole.
16. ARBITRAGE CERTIFICATE.
a. Confirmation of Information. The undersigned has reviewed the
Arbitrage and Use of Proceeds Certificates of the Town of Brunswick and
BDC to be delivered in connection with the issuance of the Bonds (the
"Town's Arbitrage Certificate") and hereby confirms as true and
correct, to the best of its knowledge, all information set forth
therein regarding the Company and its use of the Facilities, and
confirms that the Company is not aware of any facts or circumstances
inconsistent with the information set
7
forth therein or that would cause any of the expectations set forth therein to
be unreasonable.
b. Compliance Covenant. The Company will comply with the
provisions and procedures set forth in the Town's and BDC's Arbitrage
Certificates and will do and perform all acts and things necessary or
desirable, including certifying to the Town on a quarterly basis or on
the Town's request, if sooner, that the Company is in compliance with
all provisions of this Private Activity Bond Requirements Certificate,
in order to assure that interest paid on the Bonds shall, for purposes
of federal income taxation, be excluded from the gross income of the
owner's thereof.
17. INDEMNIFICATION. The Company hereby agrees to indemnify, defend and
hold harmless the Town from any and all claims, actions, suits, proceedings or
investigations, and from any and all liability, damages, costs (including
without limitation, attorney's fees) or other amounts, arising from any action
or failure to act on the part of the Company that causes or has the effect of
causing interest on the Bonds to be included in the gross income of the holders
thereof for purposes of federal income taxation.
18. RELIANCE BY BOND COUNSEL. The undersigned recognizes and acknowledges
that Pierce, Atwood, Scribner, Allen, Smith and Lancaster, bond counsel, will
rely upon this certification in rendering their opinion as to the validity and
tax status of the Bonds.
IN WITNESS WHEREOF, the undersigned has executed this Certificate as of the
12th day of December, 1995.
BRUNSWICK TECHNOLOGIES, INC.
By :
---------------------------
William Dubay
Its President
8
SCHEDULE A
SCHEDULE OF CAPITAL EXPENDITURES
(510,000,000 Local Capital Expenditure Limitation)
The following are the dates and amounts of all "Section 144(a)(4) Capital
Expenditures," as defined in Treasury Regulations Section 1.103-10(b)(2)(ii),
paid or incurred by the Company, and any "related persons" in the Town of
Brunswick during the period December 12, 1992, through the date hereof.
Party Making
Expenditure Date Amount
----------- ---- ------
A-1
SCHEDULE B
PARTICIPATION IN BOND-FINANCED FACILITIES
($40,000,000 NATIONAL TAX EXEMPT BOND LIMITATION)
Party Owning, Description of
Occupying Facilities Owned, Percentage Principal Amount
or Using Occupied or Used of Use of Financing
- -------- ---------------- ------ ------------
NONE
----
B-1
SCHEDULE C
EVIDENCE OF ECONOMIC LIFE
-------------------------
LIST OF FINANCED ASSETS COMPRISING
FACILITY, WITH REASONABLY EXPECTED ECONOMIC
LIVES AND WEIGHTED AVERAGE CALCULATION
REASONABLE
COST FINANCED EXPECTED
WITH BOND ECONOMIC WEIGHTED
ITEM * PROCEEDS LIFE** LIFE***
Building $1,700,000 x 45 years $76,5000,000 years
WEIGHTED AVERAGE CALCULATION
$76,500,000
(Total Weighted Life) = years:
(Total Cost) = $1,700,000 = 45 years Average Economic Life
* only include assets financed with bond proceeds.
** The life or the asset must be adjusted as follows: If the asset is
"placed in service" prior to the date of issuance of the Bond, the
life of such asset must be decreased by the period of time it is in
service prior to the date of issuance of the Bond. If the asset will
be "Placed in service" after the date of issuance of the Bond, the
life of the asset man be increased by the period of time measured
from the date of issuance of the Bond to the date the asset is
expected to be "placed in service". Only for purposes herein, the
term "placed in service" means the date an asset is eligible for the
investment tax credit and accelerated cost recovery deductions under
the Internal Revenue Code.
*** Multiply the value of the asset by its life.
Note: For purposes of the calculations, the reasonably expected
economic life of property is determined on the basis of all the facts
and circumstances. The Code permits the use of certain "safe harbor"
guidelines:
C-1
1. For new personal property the economic life may be the midpoint
life determined under the Internal Revenue Service's Class 1ife
Asset Depreciation Range (CLADR). found in Rev. Proc. 87-56, as
amended and modified.
2. For newly constructed real property the economic life may be
determined under the Guidelines. For property which was previously
owned by a third party, determination of the economic life of such
property must be based on an appraisal of economic life by a
reputable appraisal company or by a person with a demonstrated
expertise in this area. Such a report must be attached to this
Exhibit if the Borrower chooses not to rely on the safe harbor
guidelines.
Land is always assigned a life of thirty (30) years.
C-2
PRIVATE ACTIVITY BOND REQUIREMENTS CERTIFICATE
OF
BRUNSWICK TECHNOLOGIES, INC.
Town of Brunswick, Maine
1995 General Obligation
Tax Increment Financing Bonds
(BTI Project)
Dated: December 1, 1995
PRIVATE ACTIVITY BOND REQUIREMENTS CERTIFICATE
The undersigned, being the duly appointed and acting President of Brunswick
Technologies, Inc. of Brunswick, Maine (the "Company"), hereby certifies,
represents and warrants as follows in connection with the issuance and sale of
$1,700,000 aggregate principal amount of the Town of Brunswick, Maine (the
"Issuer") 1995 General Obligation Tax Increment Financing Bonds (BTI Project)
dated December 1, 1995 (the "Bonds").
1. AUTHORITY. The undersigned is the duly appointed and acting President of
the Company and is an officer of the Company charged with the responsibility for
signing the Lease. The Company is a Maine corporation with a place of business
in the Town of Brunswick, County of Cumberland, State of Maine.
2. LOCATION OF FACILITIES. The Issuer has designated certain property it
owned located in Brunswick, Maine (the "Property") as the Town of Brunswick,
Maine, BTI Tax Increment and State Tax Increment Financing District (the
"District"). The Purpose of the District is to assist the Company in financing
the construction of a new manufacturing facility along with other related
improvements located in Brunswick, Maine (the "Facilities"). The Facilities and
the Property are now owned by Brunswick Development Corporation ("BDC"). BDC
will use the proceeds of the Bonds to construct the Facilities and will then
lease the Facilities to the Company. The Facilities will be located within the
State of Maine at all times at which any Bonds remain outstanding. The Company
and BDC have entered into a lease agreement dated August 1, 1995 under which the
Facilities, along with the real property on which it is located (the "Leased
Property") shall be leased to the Company.
3. USE OF PROCEEDS. To the best of my knowledge, the Facilities comprise
and will comprise land or property of a character subject to the allowance for
depreciation under Section 167 of the Internal Revenue Code of 1986, as amended
(the "Code"). At least ninety-five percent (95%) of the proceeds of the Bonds
are to be used to finance costs (a) for the acquisition, construction or
reconstruction of land or property of a character subject to the allowance for
depreciation provided in Section 167 of the Code and (b) which are chargeable to
a capital account of the Facilities or would be so chargeable either with an
election by the Company or but for the election by the Company to deduct the
amount of the item.
4. SUBSTANTIAL USERS. The Bonds will not be sold to or held by the Company
or any other person who is a "substantial user" of the Facilities to be financed
with the Bond proceeds. Nor will the Bonds be sold to or held by a "related
person" of the Company or any other substantial user. The undersigned expects
the Company to be the sole substantial user of the Facilities.
A "substantial user" of the Facilities to be financed with the Bond
proceeds is any non-exempt person under the Code who regularly uses a part of
such Facilities in the course of his trade or business. A substantial user may
also be any non-exempt person for whom the Facilities or part thereof was
specifically constructed, reconstructed or acquired or, if the Facilities were
not so constructed, reconstructed or acquired, then a non-exempt person who
derives more than
five percent (5%) of the total gross revenues from the facility or occupies more
than five percent (5%) of the usable area of the Facilities.
A "related person" includes:
a. Two or more persons if the relationship between them would
result in a disallowance of losses under Section 267 or 707(b) of the
Code;
b. Two or more persons who are members of the same "controlled
group of corporations" (as that term is defined in Section 1563(a) of the
Code, except that for purposes of this definition "more than 50 percent"
shall be substituted for "at least 80 percent" each place it appears in
Section 1563(a));
c. A partnership and each of its partners (and their spouses and
minor children); and
d. An S Corporation and each of its shareholders (and their
spouses and minor children).
5. REMAINING USEFUL LIFE. The remaining average economic life of the
various assets being financed with the proceeds of the Bonds, calculated in the
manner set forth in Schedule C hereto, is 45 years. The weighted average
maturity of the Bonds, 11.397876 years from the date hereof, does not exceed
120% of the average remaining expected economic life of the assets being
financed with the proceeds of the Bonds within the meaning of Section 147(b) of
the Code.
6. LAND ACQUISITION.
Less than twenty-five percent (25%) of the net proceeds of the Bonds will
be used (directly or indirectly) for the acquisition of land (or an interest
therein).
No portion of the net proceeds of the Bonds will be used (directly or
indirectly) for the acquisition of land (or an interest therein) to be used for
farming purposes.
7. FIRST USE OF PROPERTY.
a. To the best of my knowledge, no portion of the Bond proceeds
shall be used for the acquisition of any personal property (or any
interest therein) unless:
(1) the first use of such property is pursuant to such
acquisition, or
(2) the rehabilitation exception described in paragraph 7(b)
below is satisfied.
-2-
(The inclusion of some used parts in property that otherwise will be put to its
first use pursuant to such acquisition shall not prevent such property from
qualifying as property being put to its first use.)
b. The Company may acquire previously owned or previously used
personal property if it expends an amount on qualified rehabilitation
expenditures (within the meaning of Section 147(d)(3) of the Code)(i)
equal to at least fifteen percent (15%) of the purchase price of all
existing buildings and equipment included with the buildings, if any,
being acquired with proceeds of the Bonds and (ii) equal to at least 100%
of the purchase price of all other structures, if any, being acquired
with the proceeds of the Bonds. Failure so to do will result in the
interest on the Bonds being taxable. The Company agrees that if it
acquires previously owned or previously used property with Bond proceeds,
it will make such qualified rehabilitation expenditures no later than two
(2) years following the later of (i) the issuance of the Bonds or (ii)
the acquisition of any building or other structure, if any.
8. USE OF BOND PROCEEDS. To the best of my knowledge:
a. Pursuant to Section 147(e) of the Code, no portion of the Bond
proceeds will be used to provide any of the following:
(1) airplane;
(2) skybox or other private luxury box;
(3) health club facility;
(4) facility primarily used for gambling; or
(5) any store the principal business of which is the
sale of alcoholic beverages for consumption off
premises.
b. Pursuant to Section 144(a)(8) of the Code:
(1) no more than twenty-five percent (25%) of the net
proceeds of the Bonds will be used to provide any
of the following:
a. retail food and beverage services;
b. automobile sales or service; or
c. the provision of recreation or entertain-
ment; and
(2) no portion of the Bonds proceeds will be used to
provide any of the following:
a. any private or commercial golf courses;
b. country clubs;
-3-
c. massage parlor;
d. tennis club;
e. skating facility (including roller
skating, skateboard, and ice skating);
f. racquet sports facility (including any
handball or racquetball court);
g. hot tub facility;
h. sun tan facility; or
i. race track.
9. ORIGINAL USE OF EXEMPT FACILITY. Pursuant to Treasury Regulation Section
1.103-8T(a)(5)(i) with respect to Facilities that are exempt facilities:
(a) Before Bond Issue. If the original use of the Facilities
commences before the issue date of the Bonds, no person (or related
person) (a) who was a substantial user of the Facilities within the five
(5) years preceding the issuance of the Bonds, and (b) who will also be a
substantial user of the Facilities within the five (5) years after the
issuance of the Bonds, will receive (directly or indirectly) an amount
equal to five percent (5%) or more of the face amount of the Bonds in
payment for this or her interest in the Facilities unless:
(i) A declaration of official intent for the facility
is adopted under Treasury Regulation Section
1.150-2 within 60 days after the date on which
acquisition, construction, or reconstruction of
that Facilities commenced; and
(ii)For the acquisition, no person that is a
substantial user or related person after the
acquisition date was also a substantial user more
than 60 days before the date on which the
declaration of official intent was adopted.
(b) After Bond Issue. If the original use of the Facilities
commences after the issue date of the Bonds, a declaration of official
intent will be adopted by the Issuer pursuant to Treasury Regulation
Section 1.150-2 within 60 days of the commencement of construction,
reconstruction or acquisition of the Facilities.
10. MANUFACTURING FACILITY. The Facilities constitute a manufacturing
facility, and as such are used in the manufacturing or production of tangible
personal property (including the processing resulting in a change in the
condition of such property).
Portions of the Facilities that are not directly used in the manufacturing
process, but are directly related and accillary to the manufacturing facility:
-4-
a. are located on the same site as the manufacturing facility; and
b. have not been financed with more than twenty-five percent (25%)
of the net proceeds of the Bonds.
With respect to any office space included within the Facilities:
a. such office space is located on the premises of the Facilities;
and
b. not more than a de minimus amount of the functions to be
performed at such office(s) is not directly related to the
day-to-day operations of the Facilities.
All storage areas included within the Facilities are used to store:
a. materials used in the manufacturing process; or
b. articles manufactured at the Facilities.
11. Change in Use of Facilities. The Company understands and acknowledges
that a change in the use of the Facilities to a use not qualified for tax-exempt
financing will result in both the loss of tax-exemption on Bond interest and the
loss income tax deductions for interest paid by the person making the
nonqualified use of the Facilities. The Company hereby covenants and agrees that
before any change in use of the Facilities while any Bonds are outstanding, the
Company shall first file with the Issuer an opinion of counsel satisfactory to
the Issuer to the effect that such action would not cause the interest on the
Bonds to be included in gross income for federal tax purposes.
12. Capital Expenditures Limit.
a. The undersigned is familiar with the financial books and
records of the Company and they are maintained under the undersigned's
supervison and control. The undersigned is also familiar with the books
and records of any "related person" to the Company, as that term is
defined in Section 144(a)(3) of the Code and the Treasury Regulations
relating thereto.
b. The undersigned has examined the books and records of the
Company and of all such "related persons," and such other documents and
records as the undersigned has deemed necessary for the periods beginning
December 12, 1992 through the date hereof.
-5-
c. The undersigned is familiar with the provisions of Section 144
of the Code including, in particular, the provisions of Treasury
Regulation Section 1.103-10.
d. The undersigned has reviewed the statement of the Issuer
relating to its election to have the provisions of Section 144(a)(4) of
the Code apply to the issuance by it of the Bonds. The statements
contained in said statement of election as they relate to the Company are
correct.
e. There are listed on Schedule A hereto all "capital
expenditures" within the meaning of Section 144(a)(4) of the Code which
were paid or incurred during the period December 12, 1992, through the
date hereof, with respect to any property located wholly or partially
within the corporate boundaries of the Issuer or outside the Issuer, but
contiguous to or integrated with the Facilities within the Issuer, the
principal users of which are or were the Company, or any "related person"
as defined hereinabove. Capital expenditures financed out of the proceeds
of the Bonds are not "Section 144(a)(4) Capital Expenditures" and are not
listed on Schedule A.
The Company hereby covenants and agrees that from the date hereof through
and including December 12, 1998, the Company shall limit the aggregate amount of
all Section 144(a)(4) Capital Expenditures with respect to property located
wholly or partially within the corporate boundaries of the Issuer or outside the
Issuer, but contiguous to or integrated with the Facilities within the Issuer,
to an amount less than the difference of $10,000,000 minus the face amount of
the Bonds minus the amount of capital expenditures listed on Schedule A attached
hereto.
13. $40,000,000 Limit. The Company covenants, agrees and certifies that
except for the "Tax Exempt Bonds" (defined below) described in Schedule B
attached hereto, which Tax Exempt Bonds do not exceed $40,000,000, as of the
date hereof, neither the Company nor any "related person" as defined
hereinabove:
a. owns, occupies or uses any facilities financed with the
proceeds of tax-exempt facility bonds, or other industrial development
bonds ("Tax Exempt Bonds") now outstanding located anywhere within the
United States, with the exception of the Company's occupancy of the
Facilities located at Brunswick, Maine; or
b. or has borrowed, received or benefited from Tax Exempt Bond
proceeds, whether by grant, loan, lease or any other arrangement of any
nature whatsoever, located anywhere within the United Stajtes with the
exception of the Copmpany 's occupancy of the Facilities located at
Brunswick, Maine.
The Company further covenants and agrees that no owner or principal user of the
Facilities or related party shall, from the date hereof through the date that is
three years from the date there
-6-
forth therein or that would cause any of the expectations set forth therein to
be unreasonable.
b. Compliance Covenant. The Company will comply with the
provisions and procedures set forth in the Town's and BDC's Arbitrage
Certificates and will do and perform all acts and things necessary or
desirable, including certifying to the Town on a quarterly basis or on
the Town's request, if sooner, that the Company is in compliance with all
provisions of this Private Activity Bond Requirements Certificate, in
order to assure that interest paid on the Bonds shall, for purposes of
federal income taxation, be excluded from the gross income of the owner's
thereof.
17. Reliance by Bond Counsel. The undersigned recognizes and acknowledges
that Pierce, Atwood, Scribner, Allen, Smith and Lancaster, bond counsel, will
rely upon this certification in rendering their opinion as to the validity and
tax status of the Bonds.
IN WITNESS WHEREOF, the undersigned has executed this Certificate as of the
12th day of December, 1995.
BRUNSWICK TECHNOLOGIES, INC.
By: /S/William Dubay
-------------------------
William Dubay
Its President
-8-
SCHEDULE A
SCHEDULE OF CAPITAL EXPENDITURES
($10,000,000 Local Capital Expenditure Limitation)
The following are the dates and amounts of all "Section 144(a)(4) Capital
Expenditures," as defined in Treasury Regulations Section 1.103-10(b)(2)(ii),
paid or incurred by the Company, and any "related persons" in the Town of
Brunswick during the period December 12, 1192, through the date hereof.
Party Making
Expenditure Date Amount
- ----------- ---- ------
Company 12/12/92-12/31/92 $ 1,822
Company Year 1993 966,909
Company Year 1994 1,249,140
Company 01/01/95-12/07/95 498,219
-------
$2,716,090
A-1
SCHEDULE B
PARTICIPATION IN BOND-FINANCED FACILITIES
Party Owning, Description of
Occupying Facilities Owned, Percentage Principal Amount
or Using Occupied or Used of Use of Financing
-------- ---------------- ------ ------------
NONE
B-1
SCHEDULE C
EVIDENCE OF ECONOMIC LIFE
List of Financed Assets Comprising
Facility with Reasonably Expected Economic
Lives and Weighted Average Calculation
Reasonably
Cost Financed Expected
with Bond Economic Weighted
Item* Proceeds Life** Life***
- ----- -------- ------ -------
Building $1,700,000 x45 years $76,500,000 years
WEIGHTED AVERAGE CALCULATION
$76,500,000
(Total Weighted Life) = years
- -----------------------------
(Total Cost) = $1,700,000 = 45 years Average Economic Life
* Only include assets financed with bond proceeds.
** The life or the asset must be adjusted as follows: If the asset
is "placed in service" prior to the date of issuance of the Bond,
the life of such asset must be decreased by the period of time it
is in service prior to the date of issuance of the Bond. If the
asset will be "Placed in service" after the date of issuance of
the Bond, the life of the asset may be increased by the period of
time measured from the date of issuance of the Bond to the date
the asset is expected to be "placed in service". Only for purposes
herein, the term "placed in service" means the date an asset is
eligible for the investment tax credit and accelerated cost
recovery deductions under the Internal Revenue Code.
*** Multiply the value of the asset by its life.
Note: For purposes of the calculations, the reasonably expected
economic life of property is determined on the basis of all the
facts and circumstances. The Code permits the use of certain "safe
harbor" guidelines:
C-1
1. For new personal property the economic life may be the midpoint
life determined under the Internal Revenue Service's Class Life
Asset Depreciation Range (CLADR), found in Rev. Proc. 87-56, as
amended and modified.
2. For newly constructed real property the economic life may be
determined under the Guidelines. For property which was previously
owned by a third party, determination of the economic life of such
property must be based on an appraisal of economic life by a
reputable appraisal company or by a person with a demonstrated
expertise in this area. Such a report must be attached to this
Exhibit if the Borrower chooses not to rely on the safe harbor
guidelines.
Land is always assigned a life of thirty (30) years.
C-2
Exhibit 10.6
LEASE AGREEMENT
THIS LEASE AGREEMENT (this "Lease") dated as of August l , 1995, is by
and between Brunswick Development Corporation., a Maine corporation, with a
principal office in Brunswick, Maine ("Landlord") and Brunswick Technologies,
Inc., a Maine corporation with a principal office in Brunswick, Maine
("Tenant").
W I T N E S S E T H:
WHEREAS, Landlord owns certain land situated in Brunswick, Maine, more
particularly described below (the "Real Property"); and
WHEREAS, Landlord has agreed to construct improvements and a building
(the "Building") on the Real Property in accordance with mutually agreed upon
plans and specifications (such improvements, the Building, and the Real Property
are collectively referred to as the "Leased Premises") with a fixed price not to
exceed $1,700,000 as more particularly described herein; and
WHEREAS, Landlord wishes to lease to Tenant, and Tenant wishes to lease
from Landlord, the Leased Premises on the terms and conditions set out below.
NOW, THEREF0RE, in consideration of the mutual covenants and agreements
set forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
1. LEASED PREMISES.
a. Landlord hereby leases to Tenant, and Tenant hereby leases from
Landlord, the Real Property described on Exhibit A attached hereto and
incorporated herein, together with a Building and improvements to be erected
thereon in accordance with mutually agreed upon design specifications and
building plans (the "Construction Plans") on the terms and conditions set out
below.
b. Tenant and Landlord shall cooperatively develop Construction
Plans for a 50,000 square foot Building. Tenant shall assist the Landlord in
selecting a general contractor to construct the Building, and assist the
Landlord in negotiating all the terms of a fixed price construction contract to
construct the Building which shall provide for total Project Costs (except land
acquisition) not to exceed $1,700,000 and shall be in the form attached hereto
as Exhibit B. "Project Costs" are those costs identified in Exhibit C attached
hereto and incorporated herein by reference. Any development, construction or
other Project Costs associated with the Building in excess of $1,700,000 shall
be the sole responsibility and obligation of Tenant, unless the Landlord
expressly assumes responsibility for additional costs in a written agreement
signed by an authorized representative of Landlord expressly stating that the
$1,700,000 responsibility of the Landlord should be increased by a specific
dollar amount.
Landlord and Tenant shall appoint a construction manager acceptable to
both parties to oversee the construction of the Building (the "Construction
Manager").
All change orders must be approved in writing by both the Landlord and
the Tenant. No change orders shall be effective without such mutual written
approval. Approval of change orders by the Landlord shall not constitute a
commitment to pay Project Costs in excess of $1,700,000.
Any requisitions shall be reviewed at regularly scheduled meetings of
the general contractor, the Construction Manager and representatives of the
Landlord and the Tenant. Requisitions must be approved by the Landlord and the
Tenant. In the event of any dispute between the Landlord and Tenant regarding
the approval of any requisition which is not resolved following good faith
discussions so as to allow timely payment of the requisition, the dispute shall
be submitted to the Construction Manager for immediate, final, binding and
nonappealable resolution. Payment of any requisition shall not constitute
acceptance of any work not performed by accordance with the construction
contract.
Landlord shall be responsible for obtaining, either directly or through
the general contractor, all approvals, permits and/or licenses necessary for the
construction and operation of the premises, and shall provide copies of the same
to Tenant prior to the Commencement Date. Landlord shall deliver to Tenant on or
before the Commencement Date final lien waivers from all contractors,
subcontractors, or materialmen that provided services or materials in connection
with the construction of the Building, together with a written statement from
the general contractor setting forth the names of all such contractors,
subcontractors, and materialmen. In addition, before executing and delivering
any contracts related to services or materials that are in addition to or are
supplemental to the construction contract, Landlord shall provide copies of the
same to the Tenant for approval. Landlord acknowledges that Tenant's approval
will be dependent, in part, on whether the Landlord's rights and warranties
pursuant to such contracts are assignable to and inure to the benefit of Tenant.
c. Landlord expressly disclaims all warranties relating in any way
to construction of the Building including, without limitation, any warranties as
to workmanship, materials, safety or fitness for a particular purpose. Landlord
shall assign to Tenant any warranties of all architects, engineers and other
professionals, all general contractors, subcontractors, suppliers and other
vendors, and any other party providing services labor, or materials to Landlord
relating to construction of the Building. Landlord shall conditionally assign to
Tenant with the consent of the General Contractor, its rights under the
construction contract, which assignment shall become effective upon failure of
Landlord to pursue any claim or right of action thereunder. Tenant understands
that the Construction Manager shall be responsible for inspection of the
Building and that Landlord will not inspect the Building for compliance with the
Construction Plans or for any other purpose. All risk relating to construction
of the Building as between Landlord and Tenant, except for payment of the
initial $1,700,000 in Project Costs, shall be borne by Tenant, and Tenant shall
accept the Building As Is after Landlord has funded the $1,700,000 in Project
Costs required by this
2
Lease. The construction contract for the Building shall require that the general
contractor maintain builders' risk insurance, general liability insurance and
workers' compensation insurance with coverage satisfactory to the Landlord and
the Tenant and that the General Contractor provide a payment and performance
bond securing the obligations of the General Contractor under the construction
contract. Upon termination or earlier expiration of this Lease, for any reason
whatsoever, all warranties and other rights assigned to Tenant hereunder shall
revert to Landlord without necessity of any further action by Tenant.
d. Tenant shall have access to the Leased Premises to inspect the
Building at any and all times as construction progresses subject to the
following terms and conditions:
(1) Any such entry upon the Leased Premises shall be in
compliance with all insurance regulations of Landlord and of contractors of
Landlord;
(2) Tenant shall not interfere with any work being done by
Landlord or its agents;
(3) Any communication from Tenant with respect to the
construction of the work shall be directed through the Construction Manager;
Tenant shall not communicate with Landlord's contractors with respect to any
such work, except through the Construction Manager;
(4) Any entry by Tenant or its employees, agents, or
contractors shall be at its and their own risk and the provisions of Section 21
hereof with respect to indemnification and release shall apply to any such
entry.
TO HAVE AND TO HOLD the Leased Premises for the term and rental
hereinafter provided and upon the conditions, covenants and agreements
hereinafter set forth, SUBJECT TO THE OPERATION AND EFFECT OF ANY AND ALL
INSTRUMENTS AND MATTERS OF RECORD AND SUBJECT TO EXHIBIT A ATTACHED HERETO.
2. TERM.
a. The initial term of this Lease shall be for ten (10) Lease
Years, commencing on the later of (i) January 1, 1996; or (ii) the date that the
Building has been completed to a stage that a certificate of occupancy is
issuable by the Town of Brunswick, Landlord has obtained all lien waivers from
all contractors and materialmen and Tenant can occupy and utilize the Leased
Premises for its business subject to typical "punch list" items that would not
materially interfere with tenant's operations as determined by the Construction
Manager (the "Initial Term"); provided that the foregoing does not constitute
any warranty or other assurance as to the adequacy of design of the Building for
Tenant's intended or actual utilization. Tenant hereby agrees to execute a
document, satisfactory in form and content to Landlord, on or prior to the
Commencement Date stating the Commencement Date and acknowledging that the
Initial Term has commenced.
3
b. Tenant shall have the option to extend the term of this Lease
for one (1) additional period of five (5) years. If Tenant exercises its option,
the five-year renewal (the "Renewal Term") shall commence immediately upon the
expiration of the Initial Term. In order to exercise the option to extend this
Lease for the Renewal Term, (i) Tenant shall deliver to Landlord written notice
of its election to exercise said option not later than one hundred eighty (180)
days before the expiration of the Initial Term of this Lease; (ii) the Lease
shall be in full force and effect and Tenant shall not be in default of any of
its obligations under this Lease at the time it delivers notice of its election
to exercise said option to extend or at the end of the Initial Term; and (iii)
no portion of the Leased Premises may be sublet or otherwise occupied by another
party at the end of the tenth Lease Year; provided, that this condition (iii)
may be voided and waived by the written consent of Landlord in its sole
discretion. All of the terms and conditions of this Lease, except rent which is
addressed specifically in Section 3 hereof, shall be applicable in the event
Tenant exercises its option for the Renewal Term. Tenant shall have no right or
option to extend this Lease beyond the Renewal Term; provided, however, that
Landlord shall negotiate with Tenant in good faith to extend this Lease beyond
the Renewal Term. The word "Term" as used herein shall mean the Initial Term;
provided, however, that if Tenant extends the Initial Term as provided herein,
the word "Term" shall mean the Initial Term as so extended.
3. RENT.
a. Tenant covenants and agrees to pay to Landlord a net base
rental per square foot of the Building for the Initial Term and the Renewal Term
as follows:
INITIAL TERM
LEASE RENT PER
YEAR SQUARE FOOT ANNUAL BASE RENT MONTHLY INSTALLMENT
- --------------------------------------------------------------------------------
1 $3.63/sq. ft. 181,500(1) 15,125.00(1)
2 $3.63/sq. ft. 181,500 15,125.00
3 $3.63/sq. ft. 181,500 15,125.00
4 $3.63/sq. ft. 181,500 15,125.00
5 $3.63/sq. ft. 181,500 15,125.00
6 $3.73/sq. ft. 186,500 15,541.66
7 $3.83/sq. ft. 191,500 15,958.33
8 $3.93/sq. ft. 196,500 16,375.00
(1)Plus a pro rata portion for any portion of a calendar month between the
Commencement Date and the first full calendar month following the Commencement
Date
4
9 $4.03/sq. ft. 201,500 16,791.66
10 $4.13/sq. ft. 206,500 17,208.33
RENEWAL TERM
LEASE RENT PER
YEAR SQUARE FOOT ANNUAL BASE RENT MONTHLY INSTALLMENT
- --------------------------------------------------------------------------------
11 $4.23/sq. ft. 211,500 17,625.00
12 $4.33/sq. ft. 216,500 18,041.66
13 $4.43/sq. ft. 221,500 18,458.33
14 $4.53/sq. ft. 226,500 18,875.00
15 $4.63/sq. ft. 231,500 19,291.66
For purposes of calculating base rental, the Building shall be conclusively
presumed to contain 50,000 square feet, notwithstanding any deviation in actual
dimensions.
In the event the Project Costs are less than $1,700,00O, the excess
proceeds from the loan by the Town to the Landlord to finance the Cost of the
Building will be applied to debt service on the loan and Tenant's succeeding
months' rent shall be reduced by the amount of the excess until the excess
proceeds have been fully applied.
b. The annual base rent payable hereunder shall be payable in equal
monthly installments in an amount equal to 1/12 of the annual base rent for the
applicable Lease Year. The first monthly installment of base rent shall be due
and payable upon the Commencement Date. Thereafter, the monthly installments of
rent shall be due and payable on the first (1st) day of each month in advance.
In the event Tenant has not paid base rent in full by 4:30 p.m. Eastern Standard
Time on the fifth day of each month, a surcharge shall be automatically imposed
upon Tenant in an amount equal to five percent (5 %) of the base rent not timely
paid, and such surcharge shall thereafter be deemed base rent for all purposes
under this Lease. Any monthly installment of base rent (including any applicable
surcharge), or any portion thereof, not paid on or before the tenth (lOth) day
of each month shall bear interest accruing from the 10th day of that month until
payment at a rate of eighteen percent (18%) per annum. Interest accrued on late
payments shall constitute base rent for all purposes under this Lease. In the
event Landlord's offices are closed on the 1st day of the month, rent shall be
due the first business day thereafter. All payments of base rent shall be paid
in advance, on the date specified above, without notice, setoff or deduction, in
lawful money of the United States of America at the address of Landlord as set
forth in Section 34 of this Lease, or at such other place as Landlord may from
time to time designate in writing. Base rent shall be prorated for any portion
of a calendar month within the Term.
5
c. The term "Lease Year" for the first Lease Year shall mean the
period commencing on the Commencement Date and ending on the day immediately
preceding the first anniversary of such Commencement Date; provided, however,
that if the Commencement Date is the not the first day of a calendar month, the
first Lease Year shall end on the last day of the twelfth full calendar month
following the Commencement Date. For Lease Years after the first Lease Year,
"Lease Year" shall mean the twelve calendar month period beginning with the day
following the expiration of the preceding Lease Year.
d. It is the intention of the parties hereto that the rent payable
hereunder shall be net to Landlord so that this Lease shall yield to Landlord
the net annual rent specified herein during the Term, and that all costs,
expenses and obligations of every kind and nature whatsoever relating to the
Leased Premises shall be paid by Tenant, except (i) debt service on Landlord's
financing for the Leased Premises, and (ii) as otherwise expressly set forth
herein.
e. 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 Leased Premises (including any fixtures
or other improvements) in good order and repair (ordinary wear and tear
excepted) and broom clean, (ii) remove therefrom Tenant's signs, furnishings,
trade fixtures, and equipment which are used in conducting Tenant's business and
are not owned by Landlord, and (iii) repair any damage to the Leased Premises
caused by such removal.
4. UTILITIES.
Utility connections to the Leased Premises shall be provided in the
Building design as a project component. Tenant shall directly pay for all heat,
electricity, water, sewerage, propane and any and all other utilities supplied
to the Building.
5. TAXES AND MAINTENANCE EXPENSES.
a. Tenant agrees to pay before delinquency all real estate taxes
levied against the Building and the land on which the Leased Premises are
located, which land is designated as Tax Lot 59 on Map 17 of the Town of
Brunswick dated April 1, 1994 (the "Tax Lot"). Tenant's liability to pay the
real property taxes shall be prorated on the basis of a 365-day year to account
for any fractional portion of a fiscal tax year included in the Term. Tenant
shall have the right to dispute such taxes and charges in good faith, provided
that Tenant shall notify Landlord of the dispute prior to delinquency and take
all necessary measures to assure that no lien or other interest in, to or upon
the Leased Premises in favor of any government authority shall arise as a result
thereof. If any such liens or interests do arise, the Tenant will take all
necessary measures to remove such liens at least 90 days prior to any forfeiture
of title.
b. Tenant shall pay before delinquency any and all personal property
taxes, assessments, license taxes, sales and use taxes, employment taxes and
other charges levied.
6
assessed or imposed and which become payable during the Term upon Tenant's
operations or upon the equipment, furniture, appliances or trade fixtures and
other personal property of Tenant of any kind installed or located on the Leased
Premises; provided, however, that Tenant shall have the right to dispute such
taxes and charges in good faith, provided that Tenant shall notify Landlord of
such dispute prior to delinquency and take all necessary measures to assure that
no lien or other interest in, to or upon the Leased Premises in favor of any
government authority shall arise as a result thereof. If any such liens or
interests do arise, the Tenant will take all necessary measures to remove such
liens at least 90 days prior to any forfeiture of title.
c. Tenant shall be responsible for the payment of all costs and
expenses incurred from the Commencement Date through the end of the Term that
are associated with or related to the Leased Premises and the use, occupancy,
operation, maintenance and repair thereof. Debt service on funds borrowed to
construct the Building, or any refinancing thereof, shall not be included in
expenses.
d. In the event of any State or local limitation on real or personal
property tax rates or amounts, or in the event any such taxes are hereafter
repealed or eliminated, then Tenant shall pay to Landlord an amount equal to the
real and personal property taxes that would have been paid with respect to the
Leased Premises (and personal property located therein) under existing law as of
the date hereof, had such limits or changes not been adopted or imposed, using
as the rate and valuation for such tax the rate and valuation in effect as of
the date of such change. The Town shall reasonably and in good faith determine
any amount to be paid by Tenant to Landlord pursuant to this Section 5(d),
providing appropriate credit for any amounts received by the municipality from
the State or under authority of the State to compensate the municipality for the
loss of tax revenue as contemplated under this Section 5(d).
6. USE AND SIGNAGE.
a. The Premises shall be used for any lawful purpose consistent with
applicable zoning requirements. Tenant shall use the Leased Premises in a
careful, safe and proper manner and shall not use or permit the Leased Premises
to be used for any purposes prohibited by the laws of the United States or the
State of Maine or the ordinances of the Town of Brunswick. Tenant shall keep the
Leased Premises in a neat and sanitary condition and shall not commit or permit
any nuisance or waste on or in, or about the Leased Premises. Tenant shall
dispose of all debris, trash and waste in compliance with all applicable laws
and regulations.
b. Tenant may affix and maintain any signs that are consistent with
applicable zoning requirements. Any such signs shall be installed and maintained
by Tenant at its sole cost and expense and shall comply with all laws,
ordinances or regulations applicable thereto.
7
c. In addition to and not in limitation of the other provisions of
this Lease, Tenant covenants that it will not introduce or permit to be
introduced or located on the Leased Premises any Hazardous Materials, as
hereafter described, except in accordance with any applicable licenses, permits,
laws, rules and regulations and that Tenant will not violate any Environmental
Laws as hereafter described in connection with Tenant's use, maintenance or
operation of the Leased Premises and Tenant shall, and hereby does totally and
completely 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
attorneys fees and court costs, investigation and laboratory fees, 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. Upon termination of this Lease, Tenant covenants and agrees to
remove any and all Hazardous Materials introduced by it in violation of this
Lease at its sole expense. 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,
remedial actions or otherwise for unlawful discharges of Hazardous Materials. As
used herein, "Hazardous Materials" shall mean any flammable explosives,
radioactive materials, hazardous materials, hazardous waste, petroleum or
petroleum products, hazardous matter, hazardous or toxic substances, or toxic
pollutants, oil or waste oil as any of those terms are used or defined in the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended (42 U S.C. ss.ss. 9601. et seg.), the Hazardous Materials Transportation
Act, as amended (49 U.S.C. ss.ss. 2802, et seg.), the Resource Conservation and
Recovery Act, as amended (42 U.S.C. ss.ss. 6901, et seg.), applicable Maine
statutes or any similar federal, state or local law, or in the regulations
adopted and publications 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 applicable law, order, rule or regulation
of the federal, state or local governments.
7. COMPLIANCE WITH LAWS.
Tenant covenants and agrees that during the Term, it shall promptly
comply with all present and future laws, ordinances, orders, rules, regulations
and requirements of the federal, state and local governments or any of their
departments, bureaus, boards, commissions and officials thereof with respect to
the Leased Premises or the use or occupancy thereof, including without
limitation, at Tenant's cost, to alter, maintain or restore the Leased Premises
in compliance with all laws relating to the condition, use or occupancy of the
Leased Premises, whether said work is structural or nonstructural, foreseen or
8
unforeseen and whether said compliance shall be ordered or directed to or
against Landlord or Tenant, or both.
8. FINACIAL COVENANTS. Tenant covenants and agrees that during the
Term, it shall furnish to Landlord:
a. Promptly after becoming available and in any event within
ninety (90) days after the close of each fiscal year of Tenant, the audited
financial statements of Tenant; and
b. Within forty-five (45) days after the end of each fiscal year
quarter, an eighteen (18) month cash flow projection for Tenant, including a
line item for rental payments on the Leased Premises, certified by Tenant's
Chief Financial Officer as being an accurate projection to the best of his or
her knowledge or ability; and
c. Such other information and materials as may be necessary for
the Landlord to timely comply with any and all federal securities laws or rating
agency requirements relating to primary or secondary market disclosure in
connection with Landlord's financing of the Leased Premises.
9. ALTERATIONS AND IMPROVEMENTS.
a. Tenant acknowledges that Landlord is not responsible for making
any Tenant improvements except as provided in Section 1 hereof. Tenant shall not
make any improvements, alterations, additions, or installments to the Leased
Premises with a cost in excess of $50,000 individually or in the aggregate
during any 360-day period, without the Landlord's prior written approval, which
approval will not be unreasonably withheld. Approval under this Section 9(a)
shall not constitute approval under Section 9(c) unless such approval
specifically so states. In the event Tenant desires to expand the Building
during the Term of this Lease, Landlord shall, in good faith, negotiate a
commercially reasonable arrangement to accommodate the expansion. This provision
does not apply to trade fixtures governed by Section 17 hereof.
b. Tenant hereby releases and agrees to hold Landlord forever
harmless from any and all claims and liabilities of any kind and description
which may arise out of or be connected in any way with improvements,
alterations, additions or installations on or to the Leased Premises made by or
under the direction of Tenant. Tenant shall pay the cost of all such
improvements, alterations, additions, or installations and also the cost of
painting, restoring or repairing the Building occasioned by such improvements,
alterations, additions, or installations.
c. Any improvements, alterations, additions or installations made
by Tenant at Leased Premises shall comply with all insurance requirements and
all laws, ordinances, rules and regulations of all applicable governmental
authorities, shall be constructed in a good and workmanlike manner, and shall
immediately become the property
9
of Landlord and surrendered to Landlord upon the expiration or termination of
this Lease, unless required to be removed as provided in the next sentence. Upon
expiration or other termination of this lease, Tenant shall, upon written demand
by Landlord, at Tenant's sole cost and expense, promptly and with all due
diligence remove any alterations, additions or improvements made by Tenant and
designated by Landlord to be removed and shall repair any damage to the Building
caused by such removal; provided, however, that Tenant shall not be required to
remove any structural improvements to the Leased Premises so long as Landlord
agrees in writing specifically referencing this Section 9(c) in advance of
installation that such structural improvements may remain at the conclusion of
the Term. This provision does not apply to trade fixtures governed by Section
17.
10. MAINTENANCE AND REPAIRS.
a. Tenant shall take good care of the Leased Premises and the
fixtures and improvements therein or thereon and, at its sole cost and expense,
shall make repairs, restorations or replacements as and when needed to preserve
them in good working order, condition and repair. Tenant specifically agrees to
keep in good order, condition, and repair the roof, foundations, heating, air
conditioning, ventilating, and electrical systems and equipment, and other
structural portions of the Building. Except as specifically herein otherwise
provided, Tenant also agrees that from and after the date that possession of the
Leased Premises is delivered to Tenant, and until the end of the Term of this
Lease, Tenant will keep neat and clean and maintain in good order, condition,
and repair all nonstructural portions of the Building including, but not limited
to, the exterior and interior portions of all doors, all plumbing and sewerage
facilities, fixtures, interior walls, floors, ceilings, cleaning and replacement
as necessary of all windows, maintenance and repair of all interior and exterior
signage, maintenance of all landscaping, parking areas, sidewalks and driveways,
including removal of snow and ice, all exterior lighting, security systems, and
any and all other improvements on the Leased Premises. Tenant shall, at Tenant's
expense, repaint and refurbish the Building and any part and portion thereof
from time to time in order to assure that the same are kept in a tenantable and
attractive condition throughout the Term of this Lease.
b. If Tenant fails to make any repairs, restorations or
replacements as required by this Lease, Landlord may, but shall not be obligated
to, make such repairs, restorations or replacements, or perform such
maintenance, at the expense of Tenant and such expense shall be due as
additional rent. Landlord shall provide Tenant with reasonable advance notice
prior to exercising its right to make repairs or replacements hereunder. Tenant
shall comply with all provisions of Section 18 of this Lease in connection with
such repairs, restorations and replacements. Landlord shall exercise such right
so as to cause a minimum of disruption to Tenant's operations, provided that
there shall be no allowance to Tenant for diminution of the rental value and no
liability on the part of Landlord by reason of inconvenience, annoyance or
injury to or interruption of business arising from Landlord, Tenant or any other
party making any such repairs, restorations or replacements, alterations,
additions or improvements in or to any portion of the Leased Premises.
10
11. MECHANIC'S LIENS.
Tenant shall pay or cause to be paid all costs for work done by it or
caused to be done by it on the Leased Premises and Tenant shall keep the Leased
Premises free and clear of all mechanic's liens and other liens on account of
work done for Tenant or persons claiming under it. In the event a lien is placed
upon the Premises, Tenant shall cause the lien to be removed or bonded within 30
days Tenant shall indemnify and hold Landlord harmless against any liability,
loss, damage, costs or expenses, including attorneys' fees, on account of any
claims of any nature for work performed for, or materials or supplies furnished
to, Tenant or persons claiming under it. Landlord may require, at Landlord's
sole option, as a condition to its consent to any such work with a total cost in
excess of $50,000, that Tenant shall provide to Landlord, at Tenant's sole cost
and expense, a lien and completion bond in an amount equal to one and one-half
times the estimated cost of the improvements, additions, or alterations that
Tenant desires to make.
12. QUIET ENJOYMENT.
Landlord covenants and agrees with Tenant that upon Tenant paying the
rent hereunder and observing and performing all the terms, covenants and
conditions of this Lease on Tenant's part to be observed and performed, Tenant
may peaceably and quietly enjoy the Leased Premises subject, nevertheless, to
the terms and conditions of this Lease, including without limitation the
subordination provision of Section 25 hereof.
13. ASSIGNMENT OR SUBLETTING.
a. Tenant shall not, either voluntarily or by operation of law,
transfer, pledge, hypothecate, mortgage or assign this Lease or any interest
herein, or sublet the Leased Premises or any portion thereof, or otherwise allow
or suffer the Leased Premises or any portion thereof to be used by any other
person, without the prior written consent of Landlord in each instance, which
consent will not be unreasonably withheld. In connection with any proposed
assignment or sublease, Landlord reserves the right to consider in connection
with providing such consent, among such other factors as it deems appropriate
the personal property tax revenue to be generated by any such assignee or
subtenant. Any such attempted assignments, subletting or occupancy without
Landlord's prior written consent shall be void and shall confer no rights
whatsoever on any party and shall, at Landlord's option, constitute a default
hereunder. The consent by Landlord to an assignment, subletting, occupancy or
use arrangement shall not relieve Tenant from primary liability hereunder or
from the obligation to obtain the express consent in writing of Landlord to any
further assignment, subletting, occupancy or use arrangement. If Tenant shall
request Landlord's consent to a sublease, assignment or use agreement hereunder,
Tenant shall pay Landlord's expenses, including legal fees, incurred in
connection with the processing and reviewing of documents necessary to evaluate
such request. Tenant's liability shall be reduced by any excess rent actually
received by Landlord pursuant to Section 13(b).
11
b. Any consideration received by Tenant on account of any such
assignment or any rent under a sublease or occupancy exceeding the rent in
effect during the Lease Year in which the sublease or occupancy becomes
effective shall be paid in full by Tenant to Landlord upon receipt of same. In
the event of any default under this Lease, total damages due from Tenant to
Landlord shall be reduced by the cumulative excess rent previously received by
Landlord under this Section 13(b).
c. Tenant shall have the right without the prior written consent of
the Landlord to assign this Lease to any affiliated entity. An affiliated entity
is any entity that controls, is controlled by, or is under common control with
Tenant. Control means voting control through equity interest or other
contractual commitment providing effective control over management of the
Tenant's principal business affairs.
d. The Landlord agrees to consent to collateral assignment, pledge
or other mortgaging of Tenant's leasehold interest upon terms and conditions
reasonably acceptable to the Landlord, which consent will not be unreasonably
withheld.
14. EMINENT DOMAIN.
a. If the entire Building is taken by any public authority under the
power of eminent domain or taken in any manner for any public or quasi-public
use or conveyed in lieu of such taking, or if any portion of the Building is so
taken or conveyed so as to render the Leased Premises untenable or unsuitable
for manufacturing processes of Tenant, then the term of this Lease shall cease
as of the day possession shall be taken by such public authority or the date of
the conveyance and the rent and other sums payable hereunder shall be duly
apportioned as of the date of such taking or conveyance. If any portion of the
Building shall be taken or conveyed as described above, but such taking or
conveyance does not render the Leased Premises untenantable, then this Lease
shall continue in full force and effect. All damages awarded for such taking
under the power of eminent domain or any like proceedings shall belong to and be
the property of Landlord. Tenant hereby waives all claims against Landlord and
the condemning authority for or on account or incident to such taking, except
Tenant may separately claim and recover from the condemning authority, but not
from Landlord, the value of the remaining term of the Lease and the value of any
personal property of Tenant that Tenant was entitled to remove pursuant to the
Lease.
b. If only a portion of the Building is taken by any public
authority under power of eminent domain or taken in any manner for any public or
quasi-public use or conveyed in lieu thereof and this Lease is not terminated
pursuant to Subsection 14(a), this Lease shall continue in full force and effect
and Landlord shall make an equitable adjustment of the rent payable by Tenant
for the tenantable portion of the Leased Premises effective the date of taking
or conveyance.
12
15. INSURANCE.
a. At all times during the Term of this Lease, Tenant shall, at its
own expense, maintain (i) fire and hazard insurance on the Building in an amount
at least equal to the replacement value thereof, (ii) commercial general
liability insurance for claims for personal injury or death and property damage
having such limits as to each as are reasonably required by Landlord from time
to time, but in any event not less than One Million Dollars ($1,000,000) for
bodily injury to or death of any one person during any one occurrence, Three
Million Dollars ($3,000,000) for bodily injury to or death of all persons in any
one occurrence, and Five Hundred Thousand Dollars ($500,000) for property damage
or destruction during any one occurrence; provided that every three (3) years
during the Term, the Landlord may adjust the foregoing coverage limits to a
commercially reasonable level; and (iii) all risk property insurance on all
leasehold improvements and on all personal property and trade fixtures of Tenant
to the extent of at least ninety percent (90%) of their insurable value;
products liability insurance with respect to any items manufactured or assembled
by Tenant. Each such policy (i) shall name as the insureds thereunder, as their
interests may appear, Landlord and Tenant and, at Landlord's request, any
mortgagee of Landlord's interest in the Property (and supply such mortgagee with
a Maine Standard Mortgagee Endorsement, if so requested); and (ii) shall, by its
terms, be considered primary and non-contributory with respect to any other
insurance carried by Landlord or its successors and assigns; and (iii) shall by
its terms be cancelable or altered only on at least thirty (30) days prior
written notice to Landlord (and at Landlord's request any mortgagee of
Landlord): and (iv) shall be issued by an insurer reasonably acceptable to
Landlord. Tenant at Tenant's sole expense, shall comply with all rules, orders,
regulations or requirements of the board of fire underwriters, or any other
similar body, having jurisdiction over the Leased Premises. No adjustment of any
and all claims shall be made without the prior written approval of the Landlord,
which may be withheld in the Landlord's sole discretion.
b. Prior to the Commencement Date, Tenant shall deliver to Landlord
an original or copy of each such policy or, at Landlord's option, a certificate
thereof and at least thirty (30) days before any such policy expires, Tenant
shall deliver to Landlord an original replacement policy therefor (or at
Landlord's option a certificate thereof). Tenant shall require such insurer to
specify in its certificate that it will provide Landlord with at least 30 days
prior written notice of any changes in coverage, coverage limits, cancellation
or nonrenewal of its policy or policies.
16. CASUALTY LOSS.
a. If at any time during the Term, the Leased Premises shall be
damaged or destroyed in whole or in part by fire or other cause, and Tenant
elects not to terminate this Lease, then Tenant shall, at its own cost and
expense, repair and restore the Leased Premises to its condition as of the
Commencement Date, subject to reasonable wear and tear, within a period of time,
which, under all prevailing circumstances, shall be commercially reasonable. In
such event, this Lease shall remain in full force and effect and Tenant shall
not be entitled to any reduction of the rent payable hereunder, proportionate or
otherwise. All proceeds of
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the insurance required under Section 15(a) hereof shall first be applied to
repair and restore the Leased Premises if Tenant elects to repair and restore
the Premisses pursuant to this Section.
b. In no event shall Landlord be required to repair any injury or
damage by fire or other cause, or to make repairs or replacements of, any
leasehold improvements, fixtures or other personal property of Tenant.
c. Tenant shall have the option to terminate the Lease and not
reconstruct the Building in which case Tenant shall surrender to Landlord the
Leased Premises in accordance with the provisions of Section 18 and pay over to
Landlord all proceeds of the insurance required under Section 15(a) hereof.
Tenant shall pay to Landlord such additional amounts as may be required,
together with such insurance proceeds, to produce an amount sufficient, when
invested at the yield on the Bonds as reported on He Form 8038-G filed with the
Internal Revenue Service in connection therewith, giving account to the
investment earnings thereon, to pay the outstanding principal of, premium, if
any, and interest on the loan from the Town to Landlord to finance the
construction of the Building as and when due. In the event insurance proceeds
actually received exceed the amount required to fund the payment of outstanding
principal of, premium, if any, and interest on the Bonds determined in the
manner hereinabove described, then such excess insurance proceeds shall be
divided between Landlord and Tenant on a proportionate basis based upon a
fraction, the numerator of which will be the value of the Landlord's or Tenant's
interest in the Leasehold Premises, as the case may be (with Tenant's interest
to be determined based upon the initial term of this Lease without taking into
consideration its right to renew or extend the term or its option to purchase),
and the denominator of which will be the total value of the Leased Premises. The
value of the Leased Premises, the Landlord's interest in the Leased Premises and
Tenant's leasehold interest shall be determined using the same procedure as is
set forth in Section 19 hereof regarding determination of fair market value of
the Leased Premises. The total value of the Leased Premises shall in no event
exceed the lesser of (a) the sum of the Landlord's value plus Tenant's value or
(b) the insurance proceeds. All rent and other sums payable hereunder shall be
apportioned as of the date of such termination and Landlord and Tenant shall be
free and discharged from all obligations hereunder arising after the date of
such termination; provided any responsibility or liability for events occurring
prior to the termination date shall survive the termination.
17. TRADE FIXTURES.
Tenant may install or cause to be installed in the Leased Premises such
equipment and trade fixtures as are reasonably necessary for the operation of
its business. Such equipment and trade fixtures shall remain personal property
of Tenant. Tenant shall be entitled to remove such trade fixtures installed by
Tenant at any time during the Term or upon the expiration or earlier termination
of this Lease; provided that Tenant is not then in default hereunder. Tenant
covenants and agrees, at its own expense, to immediately repair any damage to
the Leased Premises attributable to the removal of any of Tenant's equipment and
trade fixtures, reasonable wear and tear excepted, and this provision shall
survive the
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expiration or termination of this Lease. As used herein, the term "trade
fixtures" includes, but is not limited to: (1) all materials, inventories, and
supplies; (2) manufacturing equipment of every kind; (3) all handling and
storage equipment not provided or financed by the Landlord; (4) any and all
equipment installed specific to the operations of BTI, such as vents or cranes
or other equipment for specific operations not provided or financed by the
Landlord; (5) lighting installed for specific work centers installed by BTI not
provided or financed by the Landlord; (6) portable office partitions and office
equipment not provided or financed by the Landlord.
18. ACCESS TO LEASED PREMISES.
Landlord and Landlord's agent shall have the right to enter the Leased
Premises upon reasonable advance notice under the circumstances to examine them,
show them to prospective purchasers or mortgagees and to make and perform such
maintenance, repairs and other work that Landlord may be required to perform
under this Lease or as Landlord may deem necessary for the safety, improvement
or preservation of the Leased Premises, provided that no obligation to perform
any such work is hereby implied, without the same constituting an eviction of
Tenant in whole or in part or entitling Tenant to any abatement of rent or
damages for any injury or interference with Tenant's business or loss of quiet
enjoyment. Landlord shall exercise its best efforts to take all such actions in
a manner which causes minimum disruption and cost to Tenant.
19. OPTION TO PURCHASE THE LEASED PREMISED.
Landlord hereby grants to Tenant the option to purchase the Leased
Premises at the time, for the consideration, and upon the terms and conditions
hereinafter set forth:
a. Except as provided below, Tenant may exercise this option to
purchase the Leased Premises at any time following the conclusion of the fifth
year of the Term hereof; provided, that any such election must be evidenced by a
notice in writing addressed to Landlord.
b. The price to be paid by Tenant to Landlord for the Leased
Premises if the option is exercised shall be the greater of:
(1) The fair market value of the Leased Premises (including the
Real Property, Building, and related improvements), at the time Tenant gives
written notice to Landlord that it elects to exercise its option to purchase the
Leased Premises; or
(2) An amount equal to the sum of (i) the fair market value of
the Real Property plus (ii) an amount sufficient, when invested at the yield on
the Bonds as reported on the Form 8038-G filed with the Internal Revenue Service
in connection therewith, giving account to the investment earnings thereon, to
pay the outstanding principal of, premium, if any, and interest on the loan from
the Town to Landlord to finance the construction of the building. The
amortization schedules on the loan from the Town to
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Landlord shall be the same as the Town's general obligation bonds issued to fund
the loan to Landlord.
c. For purposes of this Section 19, fair market value shall be
determined on the following basis and in the following order of priority:
1. By agreement of the parties;
2. By qualified appraiser acceptable to both parties;
3. In the event the parties cannot agree upon a single appraiser
within 30 days following notice of exercise of Tenant's option,
then each party shall select an appraiser within 10 days and
the two appraisers so chosen shall select a third qualified
appraiser and the arithmetic average of the three appraisals
shall be the fair market value.
d. The option price to be paid to Landlord, as hereinabove
provided, shall be a net amount to Landlord, and all expenses in connection with
the transfer of the Leased Premises including, but not limited to, appraisals,
title insurance, recording fees, documentary stamps, conveyance tax, and all
other closing costs, shall be paid by Tenant. Notwithstanding the foregoing,
Landlord shall be responsible for payment of all outstanding liens and
encumbrances against the Leased Premises, excepting any liens or encumbrances
created by Tenant, provided no authority to create such liens or encumbrances is
hereby implied. The option price shall be paid by Tenant in cash to Landlord
concurrently with the conveyance of the Leased Premises by Landlord to Tenant.
The Leased Premises shall be conveyed by Landlord to Tenant free and clear of
liens and encumbrances excepting municipal and zoning ordinances, recorded
easements, and recorded restrictions identified in Exhibit A attached hereto,
all taxes or assessments, general or special, and any other defects, liens, or
encumbrances caused, created, or suffered by Tenant. Tenant shall obtain and pay
for any title evidence which Tenant may feel necessary prior to conveyance.
Landlord will provide Tenant with all title reports, title opinions and title
policies in its possession.
e. The right to exercise the option herein granted is conditioned
upon the faithful performance by Tenant of all covenants, conditions, and
agreements required to be performed by it as Tenant under this Lease, and the
payment by Tenant of all rent and other monetary obligations imposed upon Tenant
by this Lease to the date of the completion of the purchase of the Leased
Premises by Tenant. The Tenant shall have no right to purchase the Leased
Premises and any attempt to exercise this option shall be void, if at the time
such option is exercised, Tenant is in default under this Lease; provided,
however, that Tenant shall have the right to cure any defaults in the manner and
to the extent provided in Section 22 hereof at the time it exercises its option
and such cure shall satisfy the conditions of this section.
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f. The closing shall occur within 90 days of Tenant's exercise of
its option. At closing, Landlord shall deliver a quitclaim deed with covenants
conveying good and marketable title to Tenant.
g. Landlord shall have the right to sell the Leased Premises to a
third party at any time, subject to Tenant's rights and interests under this
Lease, including without limitation the Tenant's rights under this Section l9.
20. END OF TERM.
At the expiration or termination of this Lease, Tenant shall promptly
quit and surrender the Leased Premises to Landlord broom clean and in good order
and condition, ordinary wear excepted, and free from debris, trash and waste.
All trade fixtures, equipment, furniture, furnishings and personal effects not
removed by Tenant within ten (lO) days after expiration or termination of this
Lease shall, at Landlord's option, be deemed to have been conveyed to Landlord
and may be appropriated, sold, stored, destroyed or otherwise disposed of by
Landlord without obligation to account therefor or, at Landlord's option,
Landlord can have such trade fixtures and items removed and the cost of any such
removal and the expense of any repair necessitated by such removal shall be
borne by Tenant.
21. RELEASE AND INDEMNITY.
a. Tenant shall neither hold nor attempt to hold Landlord or
Landlord's employees or agents liable for, and Tenant shall defend, hold
harmless and indemnify Landlord and Landlord's employees or agents from and
against, any and all demands, claims, causes of action, liabilities or
judgments, and any and all expenses and costs (including, without limitation,
attorneys' fees) incurred by Landlord in investigating and resisting the same,
incurred in connection with, or as a result of, or arising from any of the
following:
(l) any acts, omissions or negligence of Tenant, its agents,
employees, contractors, subtenants, invitees or visitors or any violation or
non-performance of any law, ordinance or governmental requirement of any kind,
or from any breach or default in the performance of any provisions of this Lease
by any of such persons, or any activity, work or other thing done, permitted or
suffered by any of such persons; or
(2) any injury or damage to the person, property or business
of Tenant, its agents, employees, contractors, invitees, visitors or any other
person entering upon the Leased Premises, where the injury or damage is caused
by any reason whatsoever, except as specifically hereinafter discussed,
including without limiting the generality of the foregoing, negligence of
Landlord. The sole exception to this indemnity is for injury or damage caused
solely by the fraudulent or criminal acts of the officers and agents of
Landlord.
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b. Neither Landlord, nor its agents, servants, or employees,
shall be liable for, and Tenant hereby releases such parties from, all claims
for loss of life, personal injury or damage to property or business sustained by
Tenant or any person claiming by or through Tenant resulting from any fire,
accident, occurrence or condition in or upon the Leased Premises. Tenant agrees
to use and occupy the Leased Premises at its own risk. Landlord shall have no
responsibility or liability for any such loss or injury or for any loss of or
damage to fixtures or personal property of Tenant.
c. The provisions of this Section 21 shall survive the
termination or expiration of this Lease.
22. DEFAULT.
The occurrence of any one or more of the following shall constitute a
default of Tenant hereunder:
a. Tenant shall fail to pay any installment of base rent within
ten (10) days after the due date specified in Section 3(b) hereof; provided,
however, that no default shall occur unless payment is not received within a
period of 10 days following Tenant's receipt of written notice from the Landlord
of failure to make such payment. Notice shall be given by Landlord to Tenant of
failure to pay only upon the expiration of ten (10) days following the due date.
b. Tenant shall neglect or fail to perform or observe any covenant
herein contained on Tenant's part to be performed or observed, or to pay any
sums other than base rent to any party when due, that is not otherwise specified
as an event of default under this Section, and Tenant shall fail to remedy the
same within thirty (30) days after Landlord shall have given to Tenant written
notice specifying such neglect or failure (forthwith in the case of an emergency
or in the case of a breach of a negative covenant contained herein), or within
such longer period as may be reasonably required to cure such default if it is
of such nature that it can be cured, but not within such thirty-day period,
provided that Tenant promptly commences to remedy such default and proceeds with
reasonable diligence thereafter to cure such default; provided, however, that
such period of completion shall not extend for more than an additional ninety
(90) days).
c. This Lease or the Leased Premises or any part thereof shall be
taken upon execution or by other process of law directed against Tenant, or any
partner of Tenant, or shall be taken upon or subject to any attachment at the
instance of any creditor of or claimant against Tenant, or any partner of
Tenant, and such attachment is not discharged or disposed of within ninety (90)
days after the levy thereof.
d. Tenant shall (i) admit in writing its inability to pay its
debts generally as they become due, (ii) make an assignment of all or a
substantial part of its property for the benefit of creditors, (iii) apply for
or consent to or acquiesce in the appointment of a receiver trustee or
liquidator of Tenant, or any partner of Tenant, or of all or a substantial
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part of its property or of the Leased Premises or of its interest in this Lease
unless such receiver, trustee or liquidator is discharged within ninety (90)
days from the date of his appointment; or (iv) file a voluntary petition in
bankruptcy or a petition or an answer seeking reorganization under any
bankruptcy or insolvency law or an arrangement with creditors, or take advantage
of any insolvency law or file an answer admitting the material allegations of a
petition filed against Tenant, or any partner of Tenant, in any bankruptcy,
reorganization or insolvency proceedings which is not dismissed in ninety (90)
days.
e. The entry of a court order, judgment or decree without the
application, approval or consent of Tenant, appointing a receiver, trustee or
liquidator of Tenant or of all or a substantial part of its property or of the
Leased Premises or of Tenant's interest in this Lease or adjudicating Tenant, or
any partner of Tenant, a bankrupt or insolvent, and such order, judgment or
decree shall not be vacated, set aside or stayed within ninety (90) days from
the date of entry.
23. REMEDIES.
If Tenant shall default under this Lease as set forth in Section 22,
Landlord shall have the following rights and remedies, in addition to all other
remedies at law or equity, and none of the following, whether or not exercised
by Landlord, shall preclude the exercise of any other right or remedy whether
herein set forth or existing at law or equity:
a. Landlord lawfully may, immediately or at any time after such
default, and without demand or notice, enter into and upon said Leased Premises
or any part thereof in the name of the whole, and repossess the same as of its
former estate, and expel Tenant and those claiming through or under it and
remove its or their effects (forcibly if necessary) without being deemed guilty
of any manner of trespass, and without prejudice to any remedies which might
otherwise be used for arrears of rent or preceding breach of covenant, and upon
entry as aforesaid this Lease shall terminate.
b. Landlord shall have the right to terminate this Lease by giving
Tenant notice in writing, and upon the giving of such notice, this Lease and the
Term hereof as well as the right, title and interest of Tenant under this Lease
shall wholly cease and expire in the same manner and with the same force and
effect (except as to Tenant's liability) on the date of the termination of this
Lease without the necessity of re-entry or any other act on Landlord's part.
Upon any termination of this Lease Tenant shall quit and surrender to Landlord
the leased Premises as set forth in Section 20. If this Lease is terminated,
Tenant shall remain liable to Landlord for all rent accrued and unpaid and for
the entire unpaid rental and other sums due hereunder for the remainder of the
Term and Landlord shall also be entitled to recover damages from Tenant, such
damages to include not only damages under this Lease, but also reimbursement for
any liability or obligation that Landlord may elect to assume under any
subleases of the Leased Premises. Landlord agrees to exercise reasonable efforts
to mitigate its damages.
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c. Landlord may, without further demand or notice, re-enter and
take possession of the Leased Premises or any part thereof, without terminating
this Lease and expel Tenant and those claiming through or under Tenant, and
remove any effects of any and all such persons (forcibly, if necessary) without
being deemed guilty of any manner of trespass and without prejudice to any
remedies and Tenant shall remain liable for its obligations under this Lease.
Should Landlord elect to re-enter as provided in this subsection 23(c), or
should Landlord take possession pursuant to legal proceedings or pursuant to any
notice provided for by law, Landlord, may, from time to time, without
terminating this Lease, relet the Leased Premises or any part thereof for such
term or terms and at such rent or rentals and upon such other conditions as
Landlord may deem advisable, with the right to make alterations or repairs to
the Leased Premises. No such re-entry or repossession of the Leased Premises by
Landlord shall be construed as an election of Landlord's part to terminate this
Lease unless a written notice of termination is given to Tenant by Landlord. No
such re-entry or repossession of the Leased Premises shall relieve Tenant of its
liability and obligation under this Lease, all of which shall survive such
re-entry or repossession. Upon the occurrence of such re-entry or repossession,
Landlord shall be entitled to the amount of the monthly rent and any other sums,
which would be payable hereunder if such re-entry or repossession had not
occurred, less the net proceeds, if any, of reletting the Leased Premises after
deducting all of Landlord's expenses in connection with such reletting. Tenant
shall pay such amount to Landlord on the days on which the rent or other sums
due hereunder would have been payable hereunder if possession had not been
retaken. In no event shall Tenant be entitled to receive the excess, if any, of
net rent collected by Landlord as a result of such reletting of the sums payable
by Tenant to Landlord hereunder.
d. If Tenant shall default in making any payment required to be
made by Tenant (other than payments of rent) or shall default in performing any
other obligation of Tenant under this Lease, Landlord may, but shall not be
obligated to, make such payment or, on behalf of Tenant, spend such sum as may
be necessary to perform such obligation. All sums so expended by Landlord,
together with interest thereon at the annual rate of 18 percent, shall be repaid
by Tenant to Landlord on demand. No such payment or expenditure by Landlord
shall be deemed a waiver of Tenant's default nor shall it effect any other
remedy of Landlord by reason of such default.
e. The receipt of rent by Landlord with knowledge of any default
of Tenant shall not be deemed to be a waiver of any provision of this Lease. Any
failure of Landlord to enforce the provisions of this Lease upon the default of
Tenant shall not be construed as creating a custom of deferring payment or as
modifying in any way the terms of this Lease or as a waiver of Landlord's
remedies under this Lease or of Landlord's right to enforce the provisions
hereof for any subsequent default. No payment by Tenant, or receipt by Landlord,
of a lesser amount than the rent due hereunder shall be deemed to be other than
on account of the earliest stipulated rent, nor shall any endorsement or
statement on any check or any letter accompanying any check or payment as rent
be deemed in accord and satisfaction. Landlord may accept such check or payment
without prejudice to Landlord's right to recover the balance of such rent or
pursue any other remedy available to Landlord.
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24. HOLDOVER.
If Tenant or any party claiming through or under Tenant shall remain or
continue to be in possession of the Leased Premises or any part thereof after
the termination of the Lease, without Landlord's consent, Tenant or such party
or both shall be deemed to be a month-to-month tenant of the Leased Premises on
all the terms and conditions of this Lease except that the monthly rent
hereunder shall be two times the amount payable during the month prior to such
termination. This Section shall not be construed as giving Tenant any right to
hold over after the expiration of the Term or to limit Landlord's rights to
obtain possession of the Leased Premises upon termination by any lawful means
available to Landlord if Landlord does not elect to treat the continued
possession by Tenant or any party claiming through or under Tenant as a
month-to-month tenancy.
25. SUBORDINATION.
a. The Tenant agrees at the request of the Landlord to subordinate
this Lease to any mortgage placed upon the Premises, provided that the holder of
such mortgage agrees in substance for itself, its successors and assigns to be
bound by the terms of this Lease and not to disturb the Tenant in the Tenant's
possession of the Premises so long as the Tenant continues to perform the
Tenant's obligations hereunder; and, in the event of acquisition of title by
said holder through foreclosure proceedings or otherwise, to accept the Tenant
as Tenant of the Premises under the terms and conditions of this Lease and to
perform the Landlord's obligations hereunder (but only while owner of the
Premises), and the Tenant agrees to recognize such holder or any other person
acquiring title to the Premises as the Landlord.
b. Subject to the requirements of Section 25(a) promptly at the
request of Landlord or the holder of any mortgage on the Leased Premises or any
landlord under any ground or underlying lease (herein referred to as a
"Mortgagees"), Tenant shall execute, acknowledge and deliver such further
instruments evidencing such subordination as the Landlord or such Mortgagee
shall deem necessary or desirable, and, upon request of such Mortgagee, attorn
to such Mortgagee and recognize such Mortgagee as Landlord under all the terms
and provisions of this Lease except as such Mortgagee shall not be (i) liable
for any act or omission of any prior landlord, or (ii) subject to any offsets or
defenses that Tenant might have against any prior landlord, or (iii) bound by
any rent or other sums payable hereunder that Tenant might have paid for more
than one month in advance to any prior landlord, or (iv) bound by any amendment
or modification of this Lease made without the consent of such Mortgagee.
c. Subject to the requirements of Section 25(a) after receiving
written notice from any Mortgagee, Tenant shall be required to give to such
Mortgagee the same notices as are required to be given to Landlord under the
terms of this Lease, but such notices may be given by Tenant to Landlord and
such Mortgagee concurrently. It is further agreed that such Mortgagee shall have
the right, but not the obligation, within thirty (30) days after
21
receipt of such notice (or within such additional time as is reasonably required
to correct any such default) to correct or remedy, or cause to be corrected or
remedied, each such default before Tenant may take any action under this Lease
by reason of such default and if necessary to cure such default, such Mortgagee
shall have access to the Leased Premises. Notice to such Mortgagee shall be sent
to the address specified in the written notice from such Mortgagee to Tenant, or
to such other address as may be designated in writing from time to time from
such Mortgagee. In any subordination agreements required of Tenant, Landlord
shall exercise its best efforts to obtain a mortgagee's commitment to provide
notices to Tenant contemporaneously with providing such notices to Landlord.
26. NO IMPLIED SURRENDER OR WAIVER.
The acceptance of rent by Landlord or his agent shall not be deemed to
be a waiver (except as to any default arising out of the failure to pay the rent
so accepted by Landlord) of any breach of Tenant of any covenant herein
contained. No provisions of this Lease shall be deemed to have been waived by
Landlord or Tenant unless such waiver is in writing signed by the party to be
charged.
27. NO REPRESENTATIONS BY LANDLORD OR TENANT; ENTIRE AGREEMENT.
Neither Landlord and Landlord's agents, nor Tenant and Tenant's agents,
have made any representations, warranties, agreements or promises with respect
to the Leased Premises, except such as are expressed herein. The entire
agreement of the parties is contained herein, and there are no promises,
agreements, representations, warranties, conditions or understandings, either
oral or written, between them other than as are herein set forth. The Leased
Premises are being leased "as is" and Landlord makes no representation, express
or implied, with respect to habitability, merchantability or fitness for a
particular purpose, except for such as contained in a letter signed by Landlord
and Tenant addressing certain project costs dated , 1995, and attached hereto as
Exhibit D.
28. AMENDMENT OR MODIFICATION.
Except as herein otherwise provided, no amendment, alteration,
modification of or addition to this Lease shall be valid or binding unless
expressed in writing and signed by the party or parties to be bound thereby.
29. 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 Leased
Premises. In the event of any sale or other transfer of the Leased Premises by
Landlord, whether the original Landlord hereunder or any successor Landlord
thereto, Landlord shall be and is hereby entirely freed and relieved of all
liability under any and all of its covenants and obligations contained in or
derived from this Lease arising out of any act, occurrence or omission occurring
after the consummation of
22
such sale or transaction and Tenant shall look solely to the successor Landlord
for the performance of any such covenants or obligations.
30. ESTOPPEL CERTIFICATES.
Tenant agrees, at any time, and from time to time, upon not less than
ten (10) days prior request by Landlord, to execute, acknowledge and deliver to
Landlord a statement in writing certifying that this Lease is unmodified and in
full force and effect (or, if there have been modifications, stating the
modifications, and that the Lease as modified is in full force and effect), and
that there are no defenses or offsets thereto then accrued, or stating those
claimed by Tenant, and the dates to which the rent and other charges have been
paid, it being intended that any such statement delivered pursuant to this
Section may be relied upon by any prospective purchaser of, any prospective
holder of a mortgage upon the fee of the Leased Premises, or any other properly
interest party.
31. LIMITATION OF LANDLORD'S LIABILITY.
Tenant shall neither assert nor seek to enforce any claim (except
injunctive relief where appropriate) for breach of this Lease against any of
Landlord's assets other than Landlord's interest in the Leased Premises and in
the rents, issues and profits thereof, and in any insurance proceeds actually
received by Landlord that are allocable to the Leased Premises, and Tenant
agrees to look solely to such interests and proceeds for the satisfaction of any
liability of Landlord under this Lease. In no event shall Landlord (which term
shall include, without limitation all or the officers, trustees, directors,
partners, partners in partners, beneficiaries, joint venturers, members,
stockholders or other principals or representatives, disclosed or undisclosed,
thereof) ever be personally liable for any such liability or ever be liable for
damages, whether direct, consequential, punitive or otherwise.
32. SEVERABILITY.
If any clause or provision of this Lease is illegal, invalid or
unenforceable under present or future laws effective during the term of this
Lease, then and in the event, it is the intention of the parties hereto that the
remainder of this Lease shall not be affected thereby.
33. CAPTIONS, GENDER, AND NUMBER.
The caption of each Section is added as a matter of convenience only
and shall be considered of no effect in the construction of any provision or
provisions of this Lease. The term "Tenant" herein, or any pronoun used in place
thereof, shall include the masculine, feminine, singular, plural, individuals,
partnerships or corporations where applicable.
34. NOTICE.
Any notice, demand or communication concerning the Lease shall be in
writing and shall be deemed sufficiently given or rendered if delivered
personally or by certified or
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registered U.S. mail, postage prepaid or overnight courier service addressed to
Tenant at the Leased Premises with a copy to Eaton, Peabody, Bradford & Veague,
P.A., 167 Park Row, P.O. Box 9, Brunswick, ME 04011, ATTN: Michael B. Trainor,
Esq. or addressed to Landlord at 28 Federal Street, Brunswick, Maine 04011,
ATTN: President, with a copy to Pierce, Atwood, Scribner, Allen, Smith &
Lancaster, One Monument Square, Portland, Maine 04101, ATTN: Christopher E.
Howard, Esq. Any such notice shall be deemed effective upon the earlier of (i)
actual receipt or (ii) three days after deposit in the U.S. mail or with such
overnight courier service as provided herein. Either party can change its
address for future notices in the manner provided above, such change of address
to be effective only upon receipt.
35. ADDITIONAL RIGHTS. In the event it shall become necessary for
Landlord to bring suit in order to collect the rent or to enforce any other
provision of this Lease on the part of Tenant to be performed, Landlord shall be
entitled to collect reasonable attorneys' fees and costs from Tenant in
connection with the aforesaid enforcement proceedings, except to the extent
prohibited by applicable law.
36. RECORDING. Tenant agrees not to record this Lease, but each party
hereto agrees, on request of the other, to execute a short form memorandum of
this Lease in recordable form in compliance with the requirements of 33 M.R.S.A.
ss.201, as amended, and satisfactory to Landlord and Tenant, which memorandum of
lease may be recorded by either party. In no event shall such memorandum set
forth the rental or other charges payable by Tenant under this Lease and any
such 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.
37. BINDING EFFECT.
The covenants, conditions and agreements contained in this Lease shall
bind and inure to the benefit of Landlord and Tenant and their respective heirs,
distributees, executors, administrators, successors, and, except as otherwise
provided in this Lease, their assigns.
38. GOVERNING LAW.
This Lease shall be governed by and interpreted in accordance with the
laws of the State of Maine.
24
IN WITNESS WHEREOF, the undersigned have executed this Lease as of the
date first set forth above.
WITNESS BRUNSWICK DEVELOPMENT
CORPORATION
- ----------------------------- By:----------------------------------
Print Name:
Its:
BRUNSWICK TECHNOLOGOGIES, INC.
- ----------------------------- By:----------------------------------
Print Name:
Its:
25
EXHIBIT A
A certain lot or parcel of land in the municipality of Brunswick, County of
Cumberland, State of Maine, situated at the terminus of Bibber Parkway in the
Brunswick Industrial Park and being more particularly bounded and described as
follows:
Lot 19 as defined on the plan entitled "Plan of Subdivision of Property,
Brunswick Industrial Park, Phase III, Greenwood Road & Industrial Parkway,
Brunswick, Maine" dated June 28, 1989 and recorded in the Cumberland County
Registry of Deeds in Plan Book 179 Page 58.
Excepting a certain parcel of land on the west side of Bibber Parkway near the
southeast corner of Lot 19 and more particularly bounded and described as
follows:
Commencing at a 1" aluminum post with 3 1/2" cap stamped PLS 2238,
said post is located at the southeast corner of Lot 19 of the
Brunswick Industrial Park as defined on the plan entitled "Plan of
Subdivision of Property, Brunswick Industrial Park, Phase III,
Greenwood Road & Industrial Parkway, Brunswick, Maine" dated June 28,
1989 and recorded in the Cumberland County Registry of Deeds in Plan
Book 179 Page 58;
Thence north ten degrees five minutes twenty seconds west(N
10(degree)05' 20"W) along the West side of Bibber Parkway five and
zero hundredths (5.00) feet to the True Point of Beginning;
Thence south seventy-nine degrees fifty-four minutes forty seconds
west (S 79(degree) 54' 40" W) twenty-five and zero hundredths (25.00)
feet;
Thence north ten degrees five minutes twenty seconds west (N
10(degree) 05' 20" W) thirty-two and zero hundredths (32.00) feet;
Thence north seventy-nine degrees fifty-four minutes forty seconds
east (N 79(degree) 54' 40" E) twenty-five and zero hundredths (25.OO)
feet to the west side of Bibber Parkway;
Thence south ten degrees five minutes twenty seconds east (S
10(degree) 05' 20" E) along the west side of Bibber Parkway
thirty-two and zero hundredths (32.00) feet to the TruePoint of
Beginning
The bearings and distances are based upon a survey plan oriented to
grid north prepared by Wright-Pierce, Topsham, Maine captioned "Site
Survey of Lot 19, Brunswick Industrial Park, For Town of Brunswick
dated June 14, 1995.
EXHIBIT A (continued)
BRUNSWICK DEVELOPMENT CORPORATION
AND BRUNSWICK TECHNOLOGIES, INC. LEASE
Landlord shall as soon as possible following the date of execution of this Lease
conduct a title examination of the Leased Premises. In the event the results of
such title examination disclose that Landlord does not have title to the Real
Property, that Landlord's title is subject to any outstanding liens or
encumbrances, and/or that the Real Property is encumbered by easements or rights
of others which materially adversely affect the Tenant's intended us and
occupation of the Real Property, Tenant shall notify Landlord of the same and
Landlord, with whatever assistance or action may be necessary from the Town,
which the Town hereby agrees to provide, shall, as soon as reasonably possible
after receipt of such notice, 1) acquire good and marketable title to the Real
Property or, if acceptable to Tenant, provide affirmative title insurance
coverage insuring against loss, including loss arising from challenges as to
marketability, in form reasonably acceptable to Tenant, 2) discharge of record
the lien or encumbrances affecting the Real Property or subordinate the same to
this Lease, and 3) remove of record such easement or right of others.
In the event any such defect material impairs Tenant's right to occupy and
utilize the Leased Premises for its intended purposes, Tenant shall be entitled
to immediately terminate this Lease, in which case both parties shall be
relieved of all obligations hereunder upon written notice to Landlord.
Seen and Agreed:
TOWN OF BRUNSWICK
26
EXHIBIT B
THE ASSOCIATED GENERAL CONTRACTORS
[LOGO]
STANDARD FORM OF
DESIGN-BUILD AGREEMENT
AND GENERAL CONDITIONS
BETWEEN OWNER
AND CONTRACTOR
[WHERE THE BASIS OF COMPENSATION IS A LUMP SUM]
This Document has important legal and insurance consequences; consultation with
an attorney and insurance consultants and carriers is encouraged with respect to
its completion or modification.
AGREEMENT
Made this Nineteenth day of July in the year of Nineteen Hundred and Ninety Five
BETWEEN Brunswick Development Corporation the Owner, and Ouellet Associates,
Inc. the Contractor.
For services in connection with the following described Project: (Include
complete Project location and scope)
The construction of a 50,000 sq. ft. building of which 46,000 sq. ft. will be
for manufacturing and warehouse and 4,000 sq. ft. will be for office space. The
manufacturing warehouse facility to be located in Brunswick Industrial Park off
Church Road, Brunswick, Maine.
The Owner and the Contractor agree as set forth below:
Certain provisions of this document have been derived with modifications from
the following documents published by The American Institute of Architects AIA
Document A111 Owner-Contractor Agreement [c] 1975 AIA Document A201 General
Conditions [c] 1976 by the American Institute of Architects Usage made of AIA
language with the permission of AIA does not imply AIA endorsements or approval
of this document. Further reproduction of copyright AIA material without
separate written permission from AIA is prohibited.
INDEX
ARTICLE PAGE
1 The Construction Team and Extent of Agreement.............. 1
2 Contractor's Responsibilities.............................. 1
3 Owner's Responsibilities................................... 3
4 Subcontracts............................................... 4
5 Contract Time Schedule..................................... 4
6 Lump Sum Price............................................. 4
7 Changes in the Project..................................... 4
8 Payments to the Contractor................................. 6
9 Insurance, Indemnity and Waiver of Subrogation............. 7
10 Termination of the Agreement and Owner's Fight
to Perform Contractor's Obligations........................ 9
11 Assignment and Governing Law...............................10
12 Miscellaneous Provisions...................................10
13 Arbitration................................................11
ARTICLE 1
THE CONSTRUCTION TEAM AND EXTENT OF AGREEMENT
1.1 THE CONSTRUCTION TEAM: The Contractor, the Owner, and the Architect/Engineer
called the "Construction Team" shall work from the beginning of design through
construction completion. The services of Douglas Richmand/Sitelines as the
Architect/Engineer will be furnished by the Contractor pursuant to an agreement
between the Contractor and the Architect/Engineer.
1.2 EXTENT Of AGREEMENT: This Agreement represents the entire agreement between
the Owner and the Contractor and supersedes all prior negotiations,
representations or agreements. When the Drawings and Specifications are
complete, they shall be identified by amendment to this Agreement. This
Agreement shall not be superseded by any provisions of the documents for
construction and may be amended only by written instrument signed by both Owner
and Contractor.
1.3 DEFINITIONS; The Project is the total construction to be designed and
constructed of which the Work is a part. The Work comprises the completed
construction required by the Drawings and Specifications. The term day shall
mean calendar day unless otherwise specifically designated.
ARTICLE 2
CONTRACTOR'S RESPONSIBILITIES
2.1 CONTRACTOR'S SERVICES
2.1.1 The Contractor shall be responsible for furnishing the Design and for the
Construction of the Project. The Contractor shall develop a design and
construction phase schedule and the Owner shall be responsible for prompt
decisions and approvals so as to maintain the approved schedule. Any design,
engineering, architectural, or other professional service required to be
performed under this Agreement shall be performed by duly licensed personnel.
2.1.2 The Contractor shall prepare and the Owner approve a design phase schedule
as follows: PHASE 1: Based upon the Owner's Project requirements, schematic
Design Studies will be prepared by the Architect/Engineer. These Schematics are
for the purpose of assisting the Owner in determining the feasibility of the
project. PHASE 2: Upon approval of Schematic Designs and authorization from the
Owner to proceed, the Architect/Engineer shall prepare Design Development
documents to fix the size and character of the Project as to structural,
mechanical and electrical systems, materials and other appropriate essential
items in the Project. These Development Documents are the basis for the design
and construction of the Project. PHASE 3: From approved Design Development
Documents the Architect/Engineer will prepare working Drawings and
Specifications setting forth in detail the requirements for the construction of
the Project, and based upon codes, laws or regulations which have been enacted
at the time of their preparation.
2.1.3 The Contractor, the Architect/Engineer and the Owner will work closely
together to monitor the design in accordance with prior approvals so as to
ensure that the Project can be constructed within the Lump Sum as defined in
Article 6. As these working Drawings and Specifications are being completed, the
Contractor will keep the Owner advised of the effects of any Owner requested
changes on contract time schedule and/or the Lump Sum. Construction of the
Project shall be in accordance with these Drawings and Specifications as
approved by the Owner. The Drawings and Specifications shall remain the property
of the Contractor and are not to be used by the Owner on this or other projects
without the written consent of the contractor.
2.1.4 after the completion of any phase as set forth in Article 2.1.2, if the
Project is no longer feasible from the standpoint of the Owner, the Owner may
terminate this Agreement and pay the Contractor pursuant to Article 10.3.1.
2.1.5 The Contractor will assist the Owner in securing permits necessary for the
construction of the Project.
2.2 RESPONSIBILITIES WITH RESPECT TO CONSTRUCTION
2.2.1 The Contractor will provide all construction supervision, inspection,
labor, materials, tools, construction equipment and subcontracted items
necessary for the execution and completion of the Project.
2.2.2 The Contractor will pay all sales, use, gross receipts and similar taxes
related to the work provided by the contractor which have been legally enacted
at the time of execution of this Agreement and for which the Contractor is
liable.
2.2.3 The Contractor will prepare and submit for the Owner's approval an
estimated progress schedule for the Project. This schedule shall indicate the
dates for the starting and completion of the various stages of the design and
construction. it shall be revised as required by the conditions of the Work and
those conditions and events which are beyond the Contractor's control.
2.2.4 The Contractor shall at all times keep the premises free from the
accumulation of waste materials or rubbish caused by his operations. At the
completion of the Work, he shall remove all of his waste material and rubbish
from and around the Project as well as all his tools, construction equipment,
machinery and surplus materials.
2.2.5 The Contractor will give all notices and comply with all laws and
ordinances legally enacted at the date of execution of the Agreement, which
govern the proper execution of the Work.
2.2.6 The Contractor shall take necessary precautions for the safety of his
employees on the Work, and shall comply with all applicable provisions of
federal, state and municipal safety laws to prevent accidents or Injury to
persons on, about or adjacent to the Project site. He shall erect and properly
maintain, at all times, as required by the conditions and progress of Work,
necessary safeguards for the protection of workmen and the public. It is
understood and agreed, however, that the Contractor shall have no responsibility
for the elimination or abatement of safety hazards created or otherwise
resulting from Work at the job site carried on by other persons or firms
directly employed by the Owner as separate contractors or by the Owner's
tenants, and the Owner agrees to cause any such separate contractors and tenants
to abide by and fully adhere to all applicable provisions of federal, state and
municipal safety laws and regulations and to comply with all reasonable requests
and directions of the Contractor for the elimination or abatement of any such
safety hazards at the job site.
2.2.7 The Contractor shall keep such full and detailed accounts as may be
necessary for proper financial management under this Agreement. The system shall
be satisfactory to the Owner, who shall be afforded access to all the
Contractor's records books, correspondence, instructions, drawings, receipts,
vouchers, memoranda and similar data relating to this Agreement. The Contractor
shall preserve all such records for a period of three years after the final
payment or longer where required by law.
2.3 ROYALTIES AND PATENTS
2.3.1 The Contractor shall pay all royalties and license fees for materials,
methods and systems incorporated in the work. He shall defend all suits or
claims for infringement of any patent rights and shall save the Owner harmless
from loss on account thereof except when a particular design, process or product
is specified by the Owner. In such case the Contractor shall be responsible for
such loss only if he has reason to believe that the design, process or product
so specified is an infringement of a patent, and fails to give such information
promptly to the Owner.
2.4 WARRANTIES AND COMPLETION
2.4.1 The contractor warrants to the owner that all materials and equipment
furnished under this Agreement will be new, unless otherwise specified, and that
all Work will be of good quality, free from improper workmanship and defective
materials and in conformance with the Drawings and Specifications. The
Contractor agrees to correct all Work performed by him under this Agreement
which proves to be defective in material and workmanship within a period of one
year from the Date of Substantial Completion as defined in Paragraph 5.2, or for
such longer periods of time as may be set forth with respect to specific
warranties contained in the Specifications. This warranty is expressly in lieu
of all other rights and remedies at law or in equity.
2.4.2 The Contractor will secure required certificates of inspection, testing or
approval and deliver them to the Owner.
2.4.3 The Contractor will collect all written warranties and equipment manuals
and deliver them to the Owner.
2.4.4 The Contractor, with the assistance of the Owner's maintenance personnel,
will direct the checkout of utilities and operations of systems and equipment
for readiness, and will assist in their initial start-up and testing.
2.5 ADDITIONAL SERVICES
2.5.1 The Contractor will provide following additional services upon the request
of the Owner A written agreement between the Owner and Contractor shall define.
the extent of such additional services and the amount and manner in which the
Contractor will be compensated for such additional services.
2.5.2 Services related to investigation appraisals or evaluations of existing
conditions, facilities or equipment or verification of the accuracy of existing,
drawings or other Owner-furnished information.
2.5.3 Services related to Owner-furnished equipment, furniture and furnishings
which are not a part of this Agreement.
2.5.4 Services for tenant or rental spaces not a part of this Agreement.
2.5.5 Obtaining and training maintenance personnel or negotiating maintenance
service contracts.
ARTICLE 3
OWNER'S RESPONSIBILITIES
3.1 The Owner shall provide full information regarding his requirements for the
Project.
3.2 The Owner shall designate a representative who shall be fully acquainted
with the Project, and has authority to approve changes in the scope of the
Project, render decisions promptly, and furnish information expeditiously and in
time to meet the dates set forth in Subparagraph 2.2.3.
3.3 The Owner shall furnish for the site of the Project all necessary surveys
describing the physical characteristics, soils reports and subsurface
investigations, legal limitations, utility locations, and a legal description.
3.4 The Owner shall secure and pay for all necessary approvals, easements,
assessments and charges required for the construction, use or occupancy of
permanent structures or for permanent changes in existing facilities.
3.5 The Owner shall furnish such legal services as may be necessary for
providing the items set forth in Paragraph 3.4, and such auditing services as he
may require.
3.6 If the Owner becomes aware of any fault or defect in the Project or non-
conformance with the Drawings or Specifications, he shall give prompt written
notice thereof to the Contractor.
3.7 The Owner shall provide the insurance for the Project as provided in
Paragraph 9.4.
3.8 The Owner shall bear the costs of any bonds that may be required.
3.9 The services and information required by the above paragraphs shall be
furnished with reasonable promptness at the Owner's expense and the Contractor
shall be entitled to rely upon the accuracy and the completeness thereof.
3.10 The Owner shall furnish reasonable evidence satisfactory to the Contractor
prior to commencing Work and at such future times as may be required, that
sufficient funds are available and committed for the entire Cost of the Project.
Unless such reasonable evidence is furnished the Contractor is not required to
commence or continue any Work or may if such evidence is not presented within a
reasonable time stop Work upon l5 days notice to the Owner. The failure of the
Contractor to insist upon the providing of this evidence at any one time shall
not be a waiver of the Owner's obligation to make payments pursuant to this
Agreement nor shall it be a waiver of the Contractor's right to request or
insist that such evidence be provided at a later date.
3.11 The Owner shall have no contractual obligation to the Contractor's
Subcontractors and shall communicate with such Subcontractors only through the
Contractor.
ARTICLE 4
SUBCONTRACTS
4.1 All portions of the Work that the Contractor does not perform with his own
forces shall be performed under subcontracts.
4.2 A Subcontractor is a person or entity who has a direct contract with the
Contractor to perform any Work in connection with the Project. The term
Subcontractor does not include any separate contractor employed by the Owner or
the separate contractors' subcontractors.
4.3 No contractual relationship shall exist between the Owner and any
Subcontractor. The Contractor shall be responsible for the management of the
Subcontractors in the performance of their Work.
ARTICLE 5
CONTRACT TIME SCHEDULE
5.1 The Work to be performed under this Agreement shall be commenced on or about
July 19, 1995 and shall be substantially completed on or about JANUARY 20, 1995
5.2 The Date of Substantial Completion of the Project or a designated portion
thereof is the date when construction is sufficiently complete in accordance wit
h the Drawings and Specifications so the Owner can occupy or utilize the Project
or designated portion thereof for the use for which it is intended. Warranties
called for by this Agreement or by the Drawings and Specifications shall
commence on the Date of Substantial Completion of the Project or designated
portion thereof. This date shall be established by a Certificate of Substantial
Completion signed by the Owner and Contractor and shall state their respective
responsibilities for security, maintenance, heat, utilities, damage to the Work
and insurance. This Certificate shall also list the items to be completed or
corrected and fix the time for their completion and correction.
5.3 If the Contractor is delayed at any time in the progress of the Project by
any act or neglect of the Owner or by any separate contractor employed by the
Owner, or by changes ordered in the Project, or by labor disputes, fire, unusual
delay in transportation, adverse weather conditions not reasonably anticipated,
unavoidable casualties, or any causes beyond the Contractor's control, or a
delay authorized by the Owner pending arbitration, then the Date for Substantial
Completion shall be extended by Change Order for the period caused by such
delay.
ARTICLE 6
LUMP SUM PRICE
6.1 The Lump Sum price for the Project is (S 1,577,889.00).
6.2 The Lump Sum is based upon laws, codes, and regulations in existence at the
date of its establishment and upon criteria, Drawings, and Specifications as set
forth in this agreement.
6.3 The Lump Sum will be modified for delays caused by the Owner and for Changes
in the Project, all pursuant to Article 7.
6.4 ALLOWANCES
6.4.1 Allowances included in the Lump Sum are as set forth below:
6.4.2 Whenever the cost is more than or less than the Allowance, the Lump Sum
shall be adjusted by Change Order as provided in Article 7.
ARTICLE 7
CHANGES IN THE PROJECT
7.1 The Owner, without invalidating this Agreement, may order Changes in the
project within the general scope of this agreement consisting of additions,
deletions or other revisions. The Lump Sum, and the contract time schedule shall
be adjusted accordingly. All such Changes in the Project shall be authorized by
Change Order.
7.1.1 A Change Order is a written order to the Contractor signed by the Owner or
his authorized agent and issued after the execution of this Agreement
authorizing a Change in the Project and/or an adjustment in the Lump Sum or the
Contract Time Schedule.
7.1.2 The increase or decrease in the Lump Sum resulting from a Change in the
Project shall be determined in one or more of the following ways:
7.1.2.1 by mutual acceptance of a lump sum properly itemized and supported by
sufficient substantiating data to permit evaluation;
7.1.2.2 by unit prices stated in this Agreement or subsequently agreed upon; or
7.1.2.3 If none of the methods set forth in articles 7.1.2.1 and 7.1.2.2 is
agreed upon, the Contractor shall promptly proceed with the Work required by the
Change in the Project provided the Contractor receives a written order to
proceed signed by the Owner. The increase in the Lump Sum shall then be
determined on the basis of the reasonable costs of such Work and savings of
those performing the Work attributed to the Change in the Project including a
reasonable increase in the Contractor's overhead and profit. The amount of
decrease in the Lump Sum to be allowed by Contractor to the Owner for any
deletion or Change in the Project with results in a net decrease in cost will be
the amount of the actual net decrease only. When both increases and decreases in
cost of the Work are involved in any one Change in the Project the increase in
overhead and profit shall be figured on the basis of the net increase in costs,
if any. Under this article and articles 7.1.2.1 and 7.1.2.2 the Contractor shall
keep and present in such form as the Owner may prescribe an itemized accounting
together with appropriate supporting data of the effect on the Lump Sum. The
increase or decrease in the Lump Sum under this article and articles 7.1.2.1 and
7.l.2.2 shall be authorized by Change Order signed by the Owner or its
authorized agent.
7.1.3 If unit prices are stated in this agreement or subsequently agreed upon,
and if the quantities originally contemplated are so changed in a proposed
Change Order or as a result of several Change Orders that application of the
agreed unit prices to the quantities of Work proposed will cause substantial
inequity to the Owner or the Contractor. The applicable unit prices and the Lump
Sum shall be equitably adjusted.
7.1.4 Should concealed conditions encountered in the performance of the Work
below the surface of the ground or should concealed or unknown conditions in an
existing structure be at variance with the conditions indicated by the Drawings,
Specifications or Owner-furnished information or should unknown physical
conditions below the surface of the ground or should concealed or unknown
conditions in an existing structure of an unusual nature, differing materially
from those ordinarily encountered and generally recognized as inherent in work
of the character provided for in this Agreement be encountered, the Lump Sum and
the Contract Time Schedule shall be equitably adjusted by Change Order upon
claim by either party made within a reasonable time after the first observance
of the conditions.
7.2 CLAIMS FOR ADDITIONAL COST OR TIME
7.2.1 If the Contractor wishes to make a claim for an increase in the Lump Sum
or an extension in the Contract Time Schedule he shall give the Owner written
notice thereof within a reasonable time after the occurrence of the event giving
rise to such claim. This notice shall be given by the Contractor before
proceeding to execute the Work, except in an emergency endangering life or
property in which case the Contractor shall act, at his discretion, to prevent
threatened damage, injury or loss. Claims arising from delay shall be made
within a reasonable time after the delay. Increases based upon design and
estimating costs with respect to possible changes requested by the Owner, shall
be made within a reasonable time after the decision is made not to proceed with
the change. No such claim shall be valid unless so made. If the Owner and the
Contractor cannot agree on the amount of the adjustment in the Lump Sum, and the
Contract Time Schedule, it shall be determined pursuant to the provisions of
Article 13. Any change in the Lump Sum or Contract Time Schedule resulting from
such claim shall be authorized by Change Order.
7.3 MINOR CHANGES IN THE PROJECT
7.3.1 The Owner will have authority to order minor Changes in the Work not
involving an adjustment in the Lump Sum or an extension of the Contract Time
Schedule and not inconsistent with the intent of the Drawings and
Specifications. Such Changes may be effected by written order and shall be
binding on the Owner and the Contractor.
7.4 EMERGENCIES
7.4.1 In any emergency affecting the safety of persons or property, the
Contractor shall act, at his discretion, to prevent threatened damage, injury or
loss. Any Increase in the Lump Sum or extension of time claimed by the
Contractor on account of emergency work shall be determined as provided in this
Article.
ARTICLE 8
PAYMENTS TO THE CONTRACTOR
8.1 Payments shall be made by the Owner to the Contractor according to the
following procedure:
8.1.1 On or before the 4th Thursday of each month after Work has commenced, the
Contractor shall submit to the Owner an Application for Payment in such detail
as may be required by the Owner based on the Work completed and materials stored
on the site and/or at locations approved by the Owner for the period ending on
the 4th Thursday of the month.
8.1.2 Within ten (10) days after his receipt of each monthly Application for
Payment, the Owner shall pay directly to the Contractor the appropriate amounts
for which Application for Payment is made therein. This payment request shall
deduct the aggregate of amounts previously paid by the Owner.
8.1.3 If the Owner should fail to pay the Contractor at the time the payment of
any amount becomes due, then the Contractor may, at any time thereafter, upon
serving written notice that he will stop Work within seven (7) days after
receipt of the notice by the Owner, and after such seven (7) day period, stop
the Project until payment of the amount owing has been received. Written notice
shall be deemed to have been duly served if sent by certified mail to the last
known business address of the Owner.
8.1.4 Payments due but unpaid shall bear interest at the rate of two percentage
points above the prime interest rate prevailing from time to time at the
location of the Project.
8.2 The Contractor warrants and guarantees that title to all Work, materials and
equipment covered by an Application for Payment whether incorporated in the
Project or not, will pass to the Owner upon receipt of such payment by the
Contractor free and clear of all liens, claims, security interests or
encumbrances hereinafter referred to as Liens.
8.3 No Progress Payment nor any partial or entire use or occupancy of the
Project by the Owner shall constitute an acceptance of any Work not in
accordance with the Drawings and Specifications.
8.4 Final payment constituting the unpaid balance of the Project shall be due
and payable when the Project is delivered to the Owner, ready for beneficial
occupancy, or when the Owner occupies the Project, whichever event first occurs,
provided that the Project be then substantially completed and this Agreement
substantially performed. If there should remain minor items to be completed, the
Contractor and the Owner shall list such items and the Contractor shall deliver,
in writing, his guarantee to complete said items within a reasonable time
thereafter The Owner may retain a sum equal to DO percent of the estimated cost
of completing any unfinished items, provided that said unfinished items are
listed separately and the estimated cost of completing any unfinished items is
likewise listed separately. Thereafter, the Owner shall pay to the Contractor,
monthly, the amount retained for incomplete items as each of said items is
completed.
8.5 Before issuance of Final Payment, the Owner may request satisfactory
evidence that all payrolls, materials bills and other indebtedness connected
with the Project have been paid or otherwise satisfied.
8.6 The making of Final Payment shall constitute a waiver of all claims by the
Owner except those rising from: unsettled liens, improper workmanship or
defective materials appearing within one year after the Date of Substantial
Completion, and terms of any special guarantees required by the Drawings and
Specifications.
8.7 The acceptance of Final Payment shall constitute a waiver of all claims by
the Contractor except those previously made in writing and unsettled.
ARTICLE 9
INSURANCE, INDEMNITY AND WAIVER OF SUBROGATION
9.1 INDEMNITY
9.1.1 The Contractor agrees to indemnify and hold the Owner harmless from all
claims for bodily injury and property damage (other than the Work itself and
other property insured under Paragraph 9.4) that may arise from the Contractor's
operations under this Agreement.
9.1.2 The Owner shall cause any other contractor who may have a contract with
the Owner to perform work in the areas where Work will be performed under this
Agreement, to agree to indemnify the Owner and the Contractor and hold them
harmless from all claims for bodily injury and property damage (other than
property insured under Paragraph 9.4) that may arise from that contractor's
operations. Such provisions shall be in a form satisfactory to the Contractor.
9.2 CONTRACTOR'S LIABILITY INSURANCE
9.2.1 The Contractor shall purchase and maintain such insurance as will protect
him from the claims set forth below which may arise out of or result from the
Contractor's operations under this Agreement whether such operations be by
himself or by any Subcontractor or by anyone directly or indirectly employed by
any of them, or by anyone for whose acts any of them may be liable:
9.2.1.1 Claims under workers' compensation, disability benefit and other similar
employee benefit acts which are applicable to the Work to be performed;
9.2.1.2 Claims for damages because of bodily injury, occupational sickness or
disease, or death of his employees under any applicable employer's liability
law;
9.2.1.3 Claims for damages because of bodily injury, or death of any person
other than his employees;
9.2.1.4 Claims for damages insured by usual personal injury liability coverage
which are sustained (1) by any person as a result of an offense directly or
indirectly related to the employment of such person by the Contractor or (2) by
any other person;
9.2.1.5 Claims for damages, other than to the Work itself, because of injury to
or destruction of tangible property, including loss of use therefrom;
9.2.1.6 Claims for damages because of bodily injury or death of any person or
property damage arising out of the ownership, maintenance or use of any motor
vehicle.
9.2.2 The Comprehensive General Liability Insurance shall include
premises-operations (including explosion, collapse and underground coverage)
elevators, independent contractors, completed operations, and blanket
contractual liability on all written contracts, all including broad form
property damage coverage.
9.2.3 The Contractor's Comprehensive General and Automobile Liability Insurance,
as required by Subparagraphs 9.2.1 and 9.2.2 shall be written for not less than
limits of liability as follows:
a. Comprehensive General Liability
1. Bodily Injury $ 2,000,000.00 Each Occurrence
(Completed Operations)
$ 2,000,000.00 Aggregate
2. Property Damage $ 2,000,000.00 Each Occurrence
$ 2,000,000.00 Aggregate
b. Comprehensive Automobile Liability
1. Bodily Injury $ 2,000,000.00 Each Person
$ 2,000,000.00 Each Occurrence
2. Property damage $ 2,000,000.00 Each Occurrence
9.2.4 Comprehensive General Liability Insurance may be arranged under a single
policy for the full limits required or by a combination of underlying policies
with the balance provided by an Excess or Umbrella Liability policy.
9.2.5 The foregoing policies shall contain a provision that coverages afforded
under the policies will not be cancelled or not renewed until at least sixty
(60) days' prior written notice has been given to the Owner. Certificates of
Insurance showing such coverages to be in force shall be filed with the Owner
prior to commencement of the Work.
9.3 OWNER'S LIABILITY INSURANCE
9.3.1 The Owner shall be responsible for purchasing and maintaining his own
liability insurance and, at his option, may purchase and maintain such insurance
as will protect him against claims which may arise from operations under this
Agreement.
9.4 INSURANCE TO PROTECT PROJECT
9.4.1 The Owner shall purchase and maintain property insurance in a form
acceptable to the Contractor upon the entire Project for the full cost of
replacement at the time of any loss. This insurance shall include as named
insureds the Owner, the Contractor, Subcontractors and Subsubcontractors and
shall insure against loss from the perils of Fire, Extended Coverage, and shall
include "All Risk" insurance for physical loss or damage including, without
duplication of coverage, at least theft, vandalism, malicious mischief, transit,
collapse, flood, earthquake, testing, and damage resulting from defective
design, workmanship or material. The Owner will increase limits of coverage, if
necessary, to reflect estimated replacement cost. The Owner will be responsible
for any co-insurance penalties or deductibles. If the Project covers an addition
to or is adjacent to an existing building, the Contractor, Subcontractors and
Subsubcontractors shall be named as additional insureds under the Owner's
Property Insurance covering such building and its contents.
9.4.1.1 If the Owner finds it necessary to occupy or use a portion or portions
of the Project prior to Substantial Completion thereof, such occupany shall not
commence prior to a time mutually agreed to by the Owner and the Contractor and
to which the insurance company or companies providing the property insurance
have consented by endorsement to the policy or policies. This insurance shall
not be cancelled or lapsed on account of such partial occupancy. Consent of the
Contractor and of the insurance company or companies to such occupancy or use
shall not be unreasonably withheld.
9.4.2 The Owner shall purchase and maintain such boiler and machinery insurance
as may be required or necessary. This insurance shall include the interests of
the Owner, the Contractor, Subcontractors and Subsubcontractors in the Work.
9.4.3 (TEXT MISSING)...
of Owner s property due to those perils Insured pursuant to Subparagraph 9.4.l.
Such policy will provide coverage for expenses of expediting materials,
continuing overhead of the Owner and the Contractor, necessary labor expense
including overtime loss of income by the Owner and other determined exposures.
Exposures of the Owner and the Contractor shall be determined by mutual
agreement and separate limits of coverage FIXED FOR each item.
9.4.4 The Owner shall file a copy of all policies with the Contractor before an
exposure to loss may occur. Copies of any subsequent endorsements will be
furnished to the Contractor. The Contractor will be given sixty (60) days notice
of cancellation nonrenewal or any endorsements restricting or reducing coverage.
If the Owner does not intend to purchase such insurance he shall inform the
Contractor in writing prior to the commencement of the work. The Contractor may
then effect insurance which will protect the interests of himself the
subcontractors and their subsubcontractors in the project the cost of which
shall be added to the lump sum by change order. If the Contractor is damaged by
failure of the Owner to purchase or maintain such insurance or to so notify the
Contractor the Owner shall bear all reasonable costs properly attributable
thereto.
9.5 PROPERTY INSURANCE LOSS ADJUSTMENT
9.5.1 Any insured loss shall be adjusted with the Owner and the Contractor and
made payable to the Owner and Contractor as trustees for the insureds as their
interests may appear subject to any applicable mortgagee clause.
9.5.2 Upon the occurrence of an insured loss, monies received will be deposited
in a separate account and the trustees shall make distribution in accordance
with the agreement of the parties in interest, or in the absence of such
agreement in accordance with an arbitration award pursuant to Article 13. If the
trustees are unable to agree between themselves on the settlement of loss, such
dispute shall also be submitted to arbitration pursuant to Article 13.
9.6 WAIVER OF SUBROGATION
9.6.1 The Owner and Contractor waive all rights against each other, the
Architect/Engineer Subcontractors and Subsubcontractors for damages caused by
perils covered by insurance provided under Paragraph 9.4, except such rights as
they may have to the proceeds of such Insurance held by the Owner and Contractor
as trustees. The Contractor shall require similar waivers from all
Subcontractors and Subsubcontractors.
9.6.2 The Owner and Contractor waive all rights against each other and the
Architect/Engineer. Subcontractors and Subsubcontractors for loss or damage to
any equipment used in connection with the Project which loss is covered by any
property insurance. The Contractor shall require similar waivers from all
Subcontractors and Subsubcontractors.
9.6.3 The Owner waives subrogation against the Contractor, Architect/Engineer,
Subcontractors and Subsubcontractors on all property and consequential loss
policies earned by the Owner on adjacent properties and under property and
consequential loss policies purchased for the Project after its completion.
9.6.4 If the policies of insurance referred to in this Paragraph require an
endorsement to provide for continued coverage where there is a waiver of
subrogation the owners of such policies will cause them to be so endorsed.
ARTICLE 10
TERMINATION OF THE AGREEMENT AND OWNER'S
RIGHT TO PERFORM CONTRACTOR'S OBLIGATIONS
TERMINATION BY THE CONTRACTOR
10.1.1 If the Project is stopped for a period of thirty (30) days under an order
of any court or other public authority having jurisdiction, or as a result of an
act of government, such as a declaration of a national emergency making
materials unavailable, through no act or fault of the Contractor or if the
Project should be stopped for a period of thirty (30) days by the Contractor for
the Owner's failure to make payment thereon then the Contractor, may upon seven
days written notice to the Owner, terminate this Agreement and recover from the
Owner payment for all Work executed, the Lump Sum earned to date, and for any
proven loss sustained upon any materials, equipment, tools, construction
equipment and machinery including reasonable profit and damages.
10.2 OWNER'S RIGHT TO PERFORM CONTRACTORS OBLIGATIONS AND TERMINATION BY THE
OWNER FOR CAUSE
10.2.1 If the Contractor fails to perform any of his obligations under this
Agreement, including any obligation he assumes to perform Work with his own
forces, the Owner may, after seven days' written notice, during which period the
Contractor fails to perform such obligation, make good such deficiencies. The
Lump Sum, if any, shall be reduced by the cost to the Owner of making good such
deficiencies.
10.2.2 If the Contractor is adjudged a bankrupt, or if he makes a general
assignment for the benefit of his creditors, or if a receiver is appointed on
account of his insolvency, or if he persistently or repeatedly refuses or fails,
except in cases for which extension of time is provided, to supply enough
properly skilled workmen or proper materials, or if he fails to make proper
payment to Subcontractors or for materials or labor, or persistently disregards
laws, ordinances, rules, regulations or orders of any public authority having
jurisdiction, or otherwise is guilty of a substantial violation of a provision
of this agreement, then the Owner may, without prejudice to any right or remedy
and after giving the Contractor and his surety, if any, seven (7) days' written
notice, during which period the Contractor fails to cure the violation,
terminate the employment of the Contractor and take possession of the site and
of all materials, equipment, tools, construction equipment and machinery thereon
owned by the Contractor and may finish the Work by whatever reasonable method he
may deem expedient. In such case, the Contractor shall not be entitled to
receive any further payment until the Work is finished nor shall he be relieved
from his obligations assumed under Article 6.
10.3 TERMINATION BY OWNER WITHOUT CAUSE
10.3.1 If the Owner terminates the Agreement other than pursuant to 10.2.2, he
shall pay the Contractor the total of: (a.) Costs incurred by the Contractor in
performing the Project, including initial costs and preparatory expenses; (b.)
Costs incurred in settling and paying termination claims under terminated
subcontracts; (c.) Accounting, legal, clerical and other expenses incurred as a
result of the termination; (d.) Storage, transportation, demobilization and
other costs incurred for the preservation, protection or disposition of material
and equipment on the Project; (e.) Any other necessary and reasonable costs
incurred by the Contractor as a result of the Owner's termination of this
Agreement; (f.) Overhead at ten percent (10%) of the total amount of (a.)
through (e.) above; profit at ten percent (10%) of the total amount of (a}
through (f) above, as adjusted pursuant to Articles 6 and 7. In calculating the
amount due the Contractor under this clause, a deduction shall be made for all
payments to the Contractor under this Agreement.
ARTICLE 11
ASSIGNMENT AND GOVERNING LAW
11.1 Neither the Owner nor the Contractor shall assign his interest in this
Agreement without the written consent of the other except as to the assignment
of proceeds.
11.2 This Agreement shall be governed by the law in effect at the location of
this Project.
ARTICLE 12
MISCELLANEOUS PROVISIONS
Addendum number 1, dated May 1, 1995.
Addendum number 2, dated May 2, 1995.
Addendum number 3, dated May 3, 1995.
Specifications As Suited By Ouellet Associates, Inc. Containing Divisions 1 To
16 Dated July 12, 1995.
Plans And Drawings As Submitted By Ouellet Associates, Inc. Dated July 12, 1995.
Letter Of Additional Changes From Ouellet Associates, Inc. Dated June 28, 1995.
Instruction to Bidder, dated April 14, 1995, paragraph 13, change the retainage
amount from (10%) to (5%).
Proposal and BTI outline specifications, dated May 10, 1995.
ARTICLE 13
ARBITRATION
13.1 AGREEMENT TO ARBITRATE: All claims disputes and matters in question arising
out of or relating to this Agreement or the breach thereof, except for claims
which have been waived by the making or Acceptance of Final Payment, and the
claims described In Article 13.7, shall be decided by arbitration in accordance
with the Construction Industry Arbitration Rules Of The American Arbitration
Association then in effect unless the parties mutually agree otherwise. This
agreement to arbitrate shall be specifically enforceable under the prevailing
arbitration law.
13.2 NOTICE OF DEMAND: Notice of the demand for arbitration shall be filed in
writing with The Other Party to this agreement and with The American Arbitration
Association. The Demand For Arbitration Shall Be Made Within A Reasonable Time
After Written notice of the claim dispute or other matter in question has been
given, and in no event shall it be made AFTER THE DATE OF FINAL ACCEPTANCE OF
THE WORK BY THE OWNER OR WHEN INSTITUTION OF LEGAL OR EQUITABLE PROCEEDINGS
BASED ON SUCH CLAIM, DISPUTE OR other matter in question would be barred by the
applicable statute of limitations, whichever shall first OCCUR. The Location Of
the arbitration proceedings shall be the city of the Contractor's headquarters
or the legal office of Amerlinq & Burns, 193 Middle Street, Portland, ME 04112.
13.3 AWARD: The award rendered by the arbitrator(s) shall be final and judgment
may be entered upon it in accordance with applicable law in any court having
jurisdiction.
13.4 WORK CONTINUATION AND PAYMENT: Unless otherwise agreed in writing, the
Contractor shall carry on the Work and maintain the Schedule of Work pending
arbitration, and, if so, the Owner shall continue to make payments in accordance
with this Agreement.
13.5 NO LIMITATION Of RIGHTS OR REMEDIES: Nothing in this Article shall limit
any rights or remedies not expressly waived by the Contractor which the
Contractor may have under lien laws or payment bonds.
l3.6 SAME ARBITRATORS: To the maximum extent permitted by law, all claims which
are related to or dependent upon each other, shall be heard by the same
arbitrator or arbitrators even through the parties are not the same.
13.7 EXCEPTIONS: This agreement to arbitrate shall not apply to any claim of
contribution or indemnity asserted by one party to this Agreement against the
other party and arising out of any action brought in a state or federal court or
in arbitration by a person who is under no obligation to arbitrate the subject
matter of such action with either of the parties hereto. In any dispute arising
over the application of this Article 13.7, the question of arbitration shall be
decided by the appropriate court and not by arbitration.
Attest:____________________________ Owner:_____________________________
Attest:____________________________ Contractor:_____________________________
June 28, 1995
Mr. Donald Gerrish
Town of Brunswick
28 Federal Street
Brunswick, ME 04011
Listed below is the description and cost break down of the proposed changes
requested by Brunswick Development Corporation for the proposed BTI building.
1. The addition of an extra loading dock per alternate # 9. $ 4,800.00
2. The concrete floors are to be sealed with an Ashford Formula
floor sealer. $ 4,850.00
3. The independent testing of the concrete slab during the pour. $ 1,000.00
4. The addition of two stair ways and wall to the second floor
mezzanine area. $ 4,936.00
5. The additional fixtures in the bathrooms and toilets partition
per the revised plan dated 06/06/95. $ 4,750.00
6. The modification of the layout of the office area as per plans
dated 06/06/95. $ 00.00
7. The addition of in rack sprinkler system of the storage area
to including an allowance of $2,400.00 for the Water District
inspection fees. $ 21,000.00
8. The installation of moisttop vapor barrier under the slab. $ 1,000.00
9. The addition of parabolic light fixtures in the office area per
alternate # 8. $ 2,650.00
10. The data communication installation of a data rack and patch
panel per alternate # 5. $ 1,200.00
11. The substitution of the front gable end corrugated panel
from a 7.5" to a 4.5" corrugation approved by Beh Jen. $ 00.00
12. The installation of a single zone air conditioning system
with control dampers as per our original proposal. $ 00.00
13. The additional cost for the increase electrical power loads
generated by machine # 7. $ 5,328.00
14. Cost to change exterior lights to cut off luminaries as
requested by the planning boards. $ 1,075.00
15. Paint exterior sidewalls and endwall. $ 12,300.00
------------
Subtotal of all extra changes..................... $ 64,889.00
Original Base Bid................................. $ 1,513,000.00
TOTAL NET COST OF REVISED BASE BID WITH ALL CHANGES INCLUSIVE... $ 1,577,889.00
Notes:
Because of the contract sighning delay, the fuel expenses for temporary heat
incurred after November 1, 1995, will be paid by the owner.
The anticipated delay for the delivery of the Behlen building due to the delay
in contract signing will be 4 to 6 weeks. Because of this delay the owners shall
guarantee to the contractor that $480,000.00 in US funds will yield at least
$653,000.00 in Canadian dollars.
All items listed above are included in the new revised base bid. This document
will become part of the contract to clarify the scope of work. If you have any
questions, please do not hesitate to call. Thank you.
Sincerely,
Mike Ouellet
BRUNSWICK/BTI FACILITY May 1, 1995
ADDENDUM NO. I
The following items include clarifications, adjustments and additions
to the RFP for this Project and shall be considered by the D/B Teams as if
originally issued with the RFP.
A - Copy of Town of Brunswick Zoning Ordinance distributed to D/B Teams
"Request for Proposal" Release Meeting on April 14, 1995.
B - RFP Proposal must be received a 3:00 P.M. on Wednesday, May 10, 1995.
C - D/B Teams must include an allowance of $15,000 for Project Landscaping.
This allowance is for shrubbery and plantings only: required loam and
seeding is to be carried independently by the D/B Teams.
Note: Each D/B Team must submit with its Proposal a schematic layout of the
landscaping proposal.
D - In the event: the Owner is unable to select a D/B Team Proposal, all D/B
Teams submitting an acceptable Proposal, in accordance with Article 18 of
the Instructions to Bidders, will be awarded a $2,000 design honorarium.
E - No bonding of sub-contractors required by Owner.
F - Each D/B Team is required to submit with its Proposal, a certificate of
"Design Errors and Omissions" Insurance indicating coverage carried.
Note: Design Errors and Omissions Insurance is not a mandatory requirement
by the Owner.
G - Each D/B Team must submit 5 copies of its Proposal.
H - "Construction Documents Required" is attached to this addendum.
I - All fees for all permits required for this Project are the responsibility of
the Contractor (D/B Team).
J - QA/PUR area to be enclosed with permanent full height partitions.
K - Office Layout in BTI Proposed Facility Layout may be adjusted if a more
efficient use of the space can be achieved. BTI would like to add one
additional office.
Note: Several adjustments to the Electrical & Mechanical RFP requirements
been suggested and these items will be included in a subsequent addendum
following the pre-bid conference on May 1, 1995.
BRUNSWICK/BTI FACILITY May 1, 1995
SECTION 7
CONSTRUCTION DOCUMENTS REQUIRED
- - The Proposal Specifications & Drawings must be further developed in
accordance with the RFP, setting forth in detail the requirements for the
construction of the Project.
These Construction Documents must be sufficiently developed to enable the
following:
a) the Owner to fully understand the significant details of the Project
b) to insure that quality level of equipment, materials and
construction are identified and meet with the Owner's approval.
c) to insure sufficient details to permit proper coordination between
the various trades involved in the Project.
- - These Construction Documents must be prepared and/or sealed by practicing
Architects/Engineers with State of Maine Registration.
- - The RFP Protect Schedule indicates that a Letter of Intent will be issued to
the selected D/B Team on May 17, 1995 subject to certain commitments,
including the preparation of the Construction Documents as noted above. These
documents must be submitted by the selected D/B Team by June 16, 1995. It is
most important that these required Construction Documents be submitted on
schedule and approved by the Owner in order to execute a contract on June 23,
1995.
BRUNSWICK/BTI FACILITY MAY 2, 1995
ADDENDUM NO. 2
The following items include clarifications, adjustments and additions
to the RFP for this Project and shall be considered by the D/B Teams as if
originally issued with RFP:
A. The Applicant for the required Planning Board approval will be the Contractor
(D/B Team).
Note: Contractor must have Final application for Site Plan Approval
to the Planning Board on May 22, 1995.
B. Bennett Engineering will be engaged by the Owner to assist in the evaluation
of the D/B proposals submitted.
C. Town of Brunswick requirement that an "open lane" be provided around the
entire facility does not require any improvements to the "open lane" area.
D. Sampling Manhole not required; standard requirements only.
E. 8" concrete pad required under machines 1-6 inclusive, under the sample
machine and the needle loom.
F. No overhead doors required for trash compactors.
G. Layout prepared by BTI and included in the RFP does not address code
requirements; such requirements are the responsibility or the D/B Teams.
H. Alternate No. 2 - Clear Height (Clarification)
Note: Base bid to include clear height of 18 ft. for manufacturing
and storage area. This alternate is to increase the clear
height in the storage area (only) from 18 ft. to 24 ft.
I. Storage area to house a combination of pallet racking and stacks (beam area)
J. Utility room to include a shower (unisex)/ ADA approved.
K. "P" Designation On BTI Layout Indicates pallet storage location.
L. Owner of the Project will be responsible for any permit cost and/or fees
assigned by CMP Co. for providing electrical service to the Project.
M. Contractor's responsibility for providing power to the machinery shall
terminate at the junction boxes @ ceiling height.
1
N. Delete Section 16100-1.01G in its entirety and replace with:
"Submit an alternate price for all electrical work in the manufacturing area
to be enclosed and gasketed (dust tight)."
Note: Add to Proposal form as Alternate No. 10.
O. At the end of Section 16100-2.09.B add the following sentences:
"High pressure sodium fixtures shall be furnished with hinged and gasketed
lens. Exposed surface temperature not to exceed 165 degrees C (325 F)."
P. Submit an alternate price for using two (2) lamp, 96" high - output,
fluorescent fixtures -dust and moisture resistant, pendant mounted 18'-0" AFF
to bottom of fixture. Exposed surface temperature not to exceed 165 degrees
C (329 F). Note: Add to Proposal form as Alternate No. 11.
Q. Delete Section 15600 Part I, 1.04-A in its entirety and replace with the
following:
"All required coverage shall be provided by a dry pipe systems."
R. The Brunswick-Topsham Water District (BTWD) requires a separate service line
for domestic water. The BTWD requires tee be installed at end of existing 6"
lateral stub for domestic service. Install curb stop within the public
right-of-way on domestic line. Fire line and domestic water service lateral
to then extend separately to building from tee.
The BTWD reports their hydrant (#489) at the end of Bibber Parkway in front
of Lot 19 was flow tested on 1 May 1995 with the following results:
Static Pressure: 58 psi
Flow (at Residual 1,087 gpm
Pressure of 48 psi)
S. Receipt of Proposals - will be as per Article C, Section 6 of the RFP.
T. D/B Teams are to carry an allowance of $25,000 for cost of Local Fees as
listed blow:
a) Site Plan Review Process
b) Impact Fee for Traffic
c) Impact Fee for Solid Waste
d) Building Permit
E) Electrical Permit
f) Plumbing Permit
g) Fire Department Inspection
h) Sewer Connective Fee
i) Water District Meter Fee
U. Clarification of Section 3 "BTI New Facility Specifications" - Article 3A1:
change the word "should" to "could" - intent being that a 46,000 SF shell
could be constructed for manufacturing and warehouse with the 4000 SF office
area constructed as a separate "wing" to the shell.
2
<TABLE>
<CAPTION>
Description Of Location And Use Voltage Phases Ckt Bkr
VAC Amps
<S> <C> <C> <C>
A Main Power for Machine #1 240 3 50
B Main Power for Machine #2 240 3 60
C Main Power for Machine #3 240 3 60
D Main Power for Machine #4 240 3 125
E Main Power for Machine #5 480 3 150
F Main Power for Machine #6 480 3 150
Maintenance Shop - Duplex Convenient Outlets every 4' on solid walls 120 1 15
G Maintenance Shop - Welder 240 1 50
Sample Room - Duplex Convenient Outlets suspended tr ceiling on so 120 1 15
cords 9 places equal spacing
H Sample Room - Lathe Slitter 240 3 30
Compressor Room - Duplex Convenient Outlets 3 places for auto purge 120 1 15
units
I Compressor Room - New Screw Air Compressor 480 3 60
Compressor Room - Old Air Compressor 480 3 30
K Compressor Room - Air Dryer 120 1 20
L Main Power for Sample Machine 240 3 60
M Main Power for Needle Loom 240 3 60
N Machine #1 Hoist Power at ceiling height 120 1 l5
O Machine #2 Hoist Power at ceiling height 120 1 15
Q Machine #3 Hoist Power at ceiling height 120 1 15
R Machine #4 Hoist Power at ceiling height 120 1 20
S Machine #5 Hoist Power at ceiling height 120 1 20
T Machine #6 Hoist Power at ceiling height 120 1 20
U Sample machine Hoist at ceiling height 120 1 15
V Compactor Power - Cardboard 480 3 60
W Compactor Power - Trash 480 3 60
X Pallet Lifts - 4 places each 20 Amp 120 1 20
PR Pallet Wrapper 120 1 15
Y Lab -Infrared Heater 240 1 20
Z Lab - Dryer 120/240 1 20
Duplex Convenience outlets in Mfg 1 every 40' 120 1 15
AA Shop - Battery Charger 240 1 15
</TABLE>
[MAP OF FACILITY]
BRUNSWICK/BTI FACILITY MAY 5, 1995
ADDENDUM NO.3
The following items include clarifications, adjustments and additions
to the RFP for this Project and shall be considered by the D/B Teams as if
originally issued with the RFP:
A. BTI New Facility Specifications.
Section 3N - Flat roof referenced in this section shall be defined as a roof
with interior drainage.
B. Attached is a copy of Supplemental General Conditions dated May 5, 1995.
Delete Supplemental General Conditions dated April 13, 1995, as issued with
the RFP, and substitute the attached.
BRUNSWICK/BTI FACILITY
May 5, 1995
SUPPLEMENTAL GENERAL CONDITIONS
(ISSUED WITH ADDENDUM NO. 3 DATED MAY 5, 1995)
Article 1.2
Add the following:
The Contract Documents consist of the following:
a) Request For Proposal
b) Addendum to the RFP
C) Design Build Agreement
D) General Conditions
E) Supplemental General Conditions
F) Approved Working Drawings & Specifications
Article 2.1.1
In the 2nd line following the word "schedule" add,
"satisfactory to the Owner."
Article 2.1.2
Contract award is based upon a Design/Build competition. Design/Build
Proposals submitted shall contain design specifications and drawings as
described in this article as Phase 2 - Design Development Documents and as
further detailed in "Proposal Specifications & Drawings" of the RFP.
Phase 3 - Working Drawings & Specifications shall be, at a minimum
developed as per this article and as further detailed in the RFP.
Add the following:
In the 1st line following the word "schedule" add, "satisfactory to the
Owner."
In the 4th line following the word "documents" add, "satisfactory to
the Owner."
In the 7th line following the word "specifications" add, "satisfactory
to the Owner."
Article 2.1.5
Delete in its entirety and substitute the following:
"The Contractor shall be responsible to secure all necessary permits
for the construction of the Project."
Article 2.2.2
Add the following:
No State of Maine Sales tax costs shall be included in the cost of the
Project. Project is exempt from Maine State Sales Tax.
Article 2.2.3
Add the following:
At the end of the last sentence following "beyond the Contractor's
Control" add
BRUNSWICK/BTI FACILITY May 5, 1995
Article 9.1.1
Delete this Article in its entirety and replace with the
following:
"The Contractor agrees to defend and indemnify and hold the Owner
harmless from all claims (other than the work itself and other property insured
under paragraph 9.4.) that may arise from the work."
Article 9.1.2
Delete this Article in its entirety.
Article 9.2.3
Limit of liability for the Insurance requirements referenced in this
Article shall be as follows:
a) Comprehensive General Liability
1. Bodily Injury $2,000,000 Each Occurance
(Completed Operations)
$2,000,000 Aggregate
2. Property Damage $2,000,000 Each Occurance
$2,000,000 Aggregate
b) Comprehensive Automobile Liability
1. Bodily Injury $2,000,000 Each Person
$2,000,000 Each Occurance
2. Property Damage $2,000,000 Each Occurance
Article 9.4.1
Delete reference re "Owner shall purchase and maintain property
insurance." The insurance requirements of this Article, generally described as
"Builders Risk" shall be purchased and maintained by the Contractor.
Delete the last sentence of this Article.
Article 9.4.2
Delete "The Owner shall purchase" and substitute "Contractor shall
purchase."
Article 9.4.3
Delete "The Owner shall purchase and maintain..." and substitute the
following: "The Contractor shall purchase and maintain..."
Article 9.4.4
Substitute "Owner" for "Contractor" and "Contractor" for "Owner".
Note: Based upon Contractor purchasing and maintaining "Builders Risk"
Insurance.
Article 9.5.2
Delete all reference to "arbitration" and substitute "the court".
4
BRUNSWICK/BTI FACILITY May 5, 1995
Article 9.6
Delete this Article in its entirety.
Article 10.1.1
"Thirty (30) days" referenced in this Article is changed to "thirty
(30) days or more."
In 4th line following the word "payment" add "unless such failure is
the result of Contractor failures or damages caused by the Contractor."
Article 10.2.1
Add the following:
"The Owner reserves the right to seek damages if the Owner finds it
necessary to terminate the Contractor".
Article 1O.2.2
Delete in line 7 the following:
"during which period the Contractor fails to cure the violation."
Add the following to the last sentence:
"and the Owner reserves the right to seek damages."
Article 13
Delete this Article in its entirety.
5
EXHIBIT C
The Landlord and BTI agree that the following shall be considered Project Costs
under the Lease.
1. All costs incurred by the Landlord or the Town of Brunswick in the
preparation and review of the building and site design; the selection of a
design/build team; and the preparation and review of any construction contact
and any related thereto required to complete the Project. Costs include but
are not limited to design honorariums, architectural, engineering, consulting
and legal fees.
2. All costs associated with the construction of the building and related site
or off-site improvements including the extension of any utilities to the
site.
3 All costs incurred by the Landlord or the Town of Brunswick in planning the
Project or in obtaining any permit, license or approval required by any
agency or authority having jurisdiction over the Project. Such costs include
but are not limited to, site evaluation, soils testing, storm water
management analysis and design, traffic analysis, sewer flows and water
requirements.
4. Any impact fees or any other fee levied by an authority or agency with
jurisdiction over the Project and paid by the Town of Brunswick or the
Landlord.
5. Any cost connected with the issuance of bonds by the Town of Brunswick to
capitalize the Landlord and any costs connected with the Landlord's note to
the Town of Brunswick. Such costs include but are not limited to bond counsel
and legal costs, bond rating, preparation of official statements, and
disclosure materials, registration of the bonds, underwriters costs, closing
costs, premium on the bonds, and any other costs incidental to either the
Town or Landlord's financing.
6. Any cost connected with the preparation and review of the Lease between the
Landlord and BTI.
7. Any cost incurred by the Town in establishing the Brunswick Development
Corporation.
8. Any cost incurred by the Town or the Landlord for construction management.
9. Any construction period interest or other carrying or out of pocket costs in
connecton with the construction of the building and related improvements
incurred by the Town or the Landlord in financing the Project.
BRUNSWICK/BTI FACILITY May 5, 1995
Article 4.2
Add the following:
"The Contractor agrees to be responsible for every sub-contractor and
agent and to bind every sub-contractor and agent to the terms of the Contract
Documents."
Article 4.3
Add the following:
"The Owner reserves the right to issue a statutory notice to the
sub-contractors and agents preventing them from placing liens on Owner's
property".
Article 5.l
Delete in the 4th line reference to "Pending Arbitrations".
Article 7.1.2 - 7.1.4 (inclusive)
Delete these articles in their entirety and replace with the following:
"For any work accomplished on a cost plus basis the following rates for
overhead & profit shall be established:
a) 10% of cost of any work performed by General Contractor.
b) 10% of cost of any work performed by each sub-contractor for work
provided by his own forces.
c) 5% to General Contractor for work performed by his sub-contractors
Article 8.1.2
Application for Payment as referenced in this article shall mean
approved Application for Payment.
Article 8.4
Delete in the 2nd line "ready for beneficial occupancy" and replace
with "after achieving substantial completion".
Article 8.5
Lien waivers, on a form satisfactory to the Owner, shall be required
from the General Contractor, major sub-contractors and material suppliers on a
monthly basis.
Article 8.6
Delete this article in its entirety.
Article 9
Add the following:
"All liability and property policies applicable to Articles 9.1 through
and including 9.6.4 shall include the Town of Brunswick as a named insured."
BRUNSWICK/BTI FACILITY May 5, 1995
"such as strikes, lockouts, fires and unavoidable casualties".
Article 2.2.6
Delete the last sentence in its entirely.
Article 2.3.1
In the 2nd sentence delete the balance of the sentence beyond the
word "thereof".
Article 2.4.1
In the 2nd sentence following the word "performed" delete "by him".
Article 3.1
Delete "full information" and replace with "all information known
to Owner".
Article 3.2
In the 2nd line delete "render decisions promptly" and replace with
"render decisions reasonably promptly upon request".
Article 3.3
Owner has furnished site information, including Test Pit Logs taken
at the site, within the RFP. Contractor is responsible for any further site
information the Contractor may require.
Article 3.4
Delete this Article in its entirety.
Article 3.7
Substitute "Contractor" for "Owner".
Article 3.8
Substitute "Contractor" for "Owner".
Article 3.9
Add the following at the end of this sentence, "provided the
Contractor has no knowledge of any fault or defect in the information".
Article 3.10
In the 1st sentence after the word "shall" add "reasonably promptly
upon request".
Exhibit 10.7
COLLABORATIVE AGREEMENT
This Agreement, made and entered into by and among Hardcore Du Pont Composites
LLC ("HDC"), E. I. du Pont de Nemours and Company ("DuPont"), The Dow Chemical
Company ("Dow"), Brunswick Technologies, Inc. ("BTI") and Johns Hopkins
University ("JHU") (all hereinafter referred to individually as "Party" and
collectively as "Parties").
WITNESSETH:
WHEREAS, the Parties each have unique technology and experience in advanced
composites technologies;
WHEREAS, the Parties are interested in application of their respective
technologies in development of agile robust manufacturing competency for large
structures using SCRIMP technology in large civil bridge infrastructure
applications through a comprehensive systems approach;
WHEREAS, the Department of Commerce, National Institute of Standards and
Technology ("NIST"), is interested in providing funding through its Advanced
Technology Program ("ATP") pursuant to authority under 15 U.S.C. 278n to support
the Parties' cooperative arrangement in advanced composites technology described
in the Proposal submitted to NIST ("Program") attached to and made a part of
this Agreement as Attachment "A"; and
WHEREAS, the Parties desire to define and describe the terms and conditions
which will govern the cooperative arrangement to carry out the Program as
funded under the ATP;
NOW, THEREFORE, the Parties agree as follows:
ARTICLE I - PURPOSE
- -------------------
The Parties agree to pursue the Program through a cooperative research and
development approach. The Parties acknowledge that their agreement to pursue the
cooperative arrangement is based on the expectation that NIST will provide
funding through award of a Cooperative Agreement to HDC to support the Program.
In the event NIST does not execute such Cooperative Agreement prior to March 15,
1995 with funding adequate to support the Program as described therein, the
Parties will be under no obligation to continue the cooperative arrangement
described in this Agreement and this Agreement will terminate.
ARTICLE II - SCOPE OF WORK
- --------------------------
The Parties agree to perform the tasks described in the Statement of Work (SOW)
to be attached to and made a part of this Agreement as Attachment "B" upon award
of the Cooperative Agreement and which is based upon the Program.
ARTICLE III - PERIOD OF PERFORMANCE
- -----------------------------------
The period of performance of this Agreement shall begin after execution of this
Agreement by the Parties and award of the Cooperative Agreement to HDC but in no
event later than March 15, 1995 and shall continue for thirty six (36) months
thereafter unless an extension is agreed to in writing by the Parties and NIST
or unless terminated earlier as hereinafter provided. This Agreement may be
terminated prior to the end of the term (i) upon mutual agreement of the Parties
and NIST, or (ii) in the event NIST terminates the Cooperative Agreement and the
Parties do not mutually agree to continue the Program without NST support. In
the event a Party provides to the other parties ninety (90) days prior written
notice of its intent to withdraw from the Program a Party may withdraw from the
Program and the Agreement provided such Party complies with NIST's procedures
for withdrawal, as provided in the Cooperative Agreement. In the event of
termination of this Agreement, the Parties and NIST shall negotiate an equitable
reimbursement for work actually performed and expenses actually incurred or
accrued toward accomplishment of the Statement of Work and budget at the time
of termination. Termination of this Agreement for any reason shall not relieve
any party of any obligations arising under this Agreement prior to its
termination. The provisions of Articles VII, X, XI, XII, and XIII shall survive
termination of this Agreement.
ARTICLE IV- ADMINISTRATIVE REPRESENTATIVES
- ------------------------------------------
All written notices and other written communications hereunder shall be deemed
given when delivered personally, by facsimile or E-mail transmission upon
confirmation of receipt, by overnight courier guaranteeing next-day delivery or
three days after being mailed by registered or certified mail (return receipt
requested) to the appropriate contract administrators of the Parties identified
below.
DuPont HDC
- ------ ---
E.I. du Pont de Nemours & Co., Inc. Hardcore DuPont Composites, LLC
Advanced Material Systems 42 Lukens Drive
1 Innovation Way New Castle, DE 19720
Newark, DE 19711-6107 Attn: Steve Kopf
Attn: Cynthia Carter-Wedgewood
Dow JHU
- --- ---
The Dow Chemical Company Homewood Research
B-2009 Bldg. Administration
Freeport, TX 77541-3257 Ames Hall - Room 105
Attn: Mac Puckett The Johns Hopkins University
34th and Charles Streets
BTI Baltimore, MD 21218
- --- Attn: Joan Warfield, Contracts
Brunswick Technologies, Inc. Negotiator
One Main Street James Wagner, Professor
Brunswick, Maine 04011
Attn: William Dubay
2
Any Party may change its representatives at will by sending 30 days written
notice of the change to the other Parties.
ARTICLE V - MANAGEMENT
- ----------------------
1. Management Structure
Management of the Program shall be accomplished through the management
structures and processes detailed in this Article and the Statement of Work.
a) HDC will be the lead company for the Program to be performed by the Parties
under this Agreement. In this capacity, HDC will appoint a program manager who
will be responsible for (i) Program direction and management control and (ii)
coordinating all technical, programmatic and business communications between the
Parties and NIST.
b) A Program Management Team ("PMT") shall be formed by the Parties. The PMT
shall be composed of individual program managers appointed by each Party as
their representative and such other personnel of the Parties as the program
managers determine necessary and appropriate. Revisions to the tasks in the SOW
or redirection of the effort under this Program must be agreed to by the PMT.
Decisions of the PMT will be by consensus of the Parties. Technical reports and
other deliverables required by NIST in performance of the SOW will be reviewed
by the PMT prior to submission.
c) In administrative matters, the Parties will be represented by the Contract
Administrators identified in Article IV. Each Contract Administrator will
maintain an interface with the other Contract Administrators and will keep the
PMT advised of administrative matters on the Program.
2. Information Sharing. Publicity and Publications
-----------------------------------------------
a) Developments during performance of the Project shall be communicated through
regular technical reviews of the PMT held on a regularly scheduled basis. Such
communications shall be through meetings, teleconferencing and other means of
communications. The PMT shall submit the reports and coordinate the technical
interchanges and reviews. Any reports or disclosures to NIST shall be only to
the extent required by the Cooperative Agreement and shall include only
non-proprietary information or, if not, the owner of the proprietary information
to be reported or disclosed must consent prior to such report or disclosure.
Each Party shall mark its information to be disclosed among the Parties or
reported with appropriate legends in accordance with Article X, Proprietary
Information Protection.
b) Any news release, public announcement, or other publicity concerning this
Agreement or the Program is subject to the written approval of the PMT prior to
release.
3
c) In the event one of the Parties determines to publish or otherwise publicly
disclose material from the Program, the other Parties through the PMT shall be
provided thirty (30) days to review the proposed publication or disclosure to
assure that results of the Program, proprietary information and patent rights
are protected. Within thirty (30) days of receiving a proposed publication or
disclosure for review, a Party shall respond in writing specifically identifying
the Program results, proprietary information or patent rights that need to be
protected. Prior to publication or disclosure the Party intending to submit for
publication or make a disclosure shall take mutually agreed upon steps to
accomplish such protection including filing of patent applications and
modification of the proposed publication or disclosure. In the event the Parties
are unable to mutually agree on the steps for protection of material identified
as requiring protection the matter shall be referred to the PMT which shall
determine the appropriate steps consistent with the purposes of the Program and
the Parties' interest in publication or disclosure of results.
d) The provisions of Article X, Proprietary Information Protection, shall apply
to all proprietary information of a Party disclosed during work on this Program.
In adddition, NIST shall protect the proprietary information of each Party to
which NIST may be exposed during the course of work under the Program under the
Federal Trade Secrets Act.
3. Access to Facilities
--------------------
If activities arising under this Agreement involve access by a Party's employees
to the facilities of another Party, such Party shall: (i) provide advance notice
or request for access and ii) instruct its employee(s) to comply with all
applicable safety and security procedures made known to such employee(s) and
take all necessary precautions to prevent the occurrence of any injury to person
or property.
ARTICLE VI - PROGRAM COST, PAYMENT AND SUBMISSION OF INVOICES
- -------------------------------------------------------------
a) The Parties have estimated their costs to complete the Program based upon the
level of effort required. Each Party's costs include both federal funds payable
by NIST and non-federal funds contributed by the Party. Each Party shall be
responsible for adherence to applicable government laws and regulations referred
to in the Cooperative Agreement covering federal funds and non-federal funds
including allowability of costs. Each Party shall make available for work under
the Program the non-federal funds in accordance with the budget for the Program
and the SOW.
b) HDC shall provide NIST with required quarterly financial reports on work
performed and costs incurred for such work. The Parties other than HDC agree to
provide HDC with all requested data and information in accordance with the
reporting requirements attached to and made a part of this Agreement as Exhibit
"C" to ensure that HDC can submit the required reports to NIST.
4
c) NIST has determined to provide funds for this Program in the amount set forth
in the Cooperative Agreement. NIST will make these funds available to HDC in
accordance with the financial status reports submitted to NIST on a quarterly
basis. HDC shall pay to the other Parties the federal funds allocated to each
Party for performance of the SOW and in accordance with the budget for the SOW
Exhibit "D". The Parties acknowledge and agree that HDC's obligation to pay
itself or the other Parties for work performed using federal funds is subject to
the availability of funds from NIST. The NIST's liability to make payments for
the Program is limited to only those funds obligated under the Cooperative
Agreement. FDC's obligation to make payments to the other Parties is limited to
the General funds paid to HDC by NIST. Continued support by NIST under the
Cooperative Agreement will be subject to the availability of funds appropriated
for such purposes.
d) In the event NIST ceases support of the Program due to unavailability of
funds the Parties shall determine whether to continue the Program under mutually
acceptable terms.
ARTICLE VII - ACCOUNTS, AUDIT AND RECORDS
- -----------------------------------------
The Parties shall maintain adequate records in accordance with Generally
Accepted Accounting Principles or applicable Government OBM Circulars (A110,
A122, and A12) to account for federal funds received under this Agreement and to
account for each Party's non-federal funding contributed to perform the
Statement of Work under the Program. Such records shall be retained for a period
of three years, except that if any litigation, claim or audit is started before
the expiration of the three year period, the records shall be retained until all
litigation, claims or audit findings involving the records have been resolved.
The retention period starts from the date of the payment of the final invoice.
Independent accountants, mutually agreeable to the Party being audited and NIST,
may be used for audits required by NIST. The use of an independent accountant
does not preclude the Inspector General of the Department of Commerce from
conducting its own audit. The Cooperative Agreement requires Government audits
of the Program after the first and third years of the Program. Procedures for
audits and resolution of audit issues shall be as set forth in the Cooperative
Agreement. The costs of such project audits shall be paid by the Party audited
if an independent accountant is used. The Inspector General of the Department of
Commerce, or any of their duly authorized representatives, including independent
accountants shall have access to any pertinent books, documents, papers, and
records of the Parties and of subcontractors to make audits, inspections,
excerpts, transcripts or other examinations required by law. Such audit,
examination or access may be performed during business hours on business days
upon prior written notice and shall be subject to the safety and security
requirements of the audited Party's facilities.
5
ARTICLE VIII - DISCLAIMER
- ---------------------------
Information exchanged or disclosed by the Parties shall not constitute any
representation, warranty, assurance, guarantee or inducement by a Party to the
other Party with respect to the infringement of any patent or proprietary right
owned or controlled by any third party, and nothing hereunder shall be construed
as a warranty or representation of any kind with respect to the content,
accuracy, sufficiency, practicality, performance or adequacy on, the
information. In executing and participating under this agreement no party makes
any express or implied warranty as to any matter whatsoever, and each party
disclaims any express or implied warranty, including warranties relating to the
conditions of research or any invention or product whether tangible or
intangible made or developed under this Agreement or the ownership,
merchantability, or fitness for a particular purpose of the research or any
invention or product. Notwithstanding the provisions contained herein in no
event shall any Party be liable for any incidental, special or consequential
damages arising from any cause whatsoever involving infringement or alleged
infringement of patents or copyrights.
ARTICLE IX - LIMITATION OF LIABILITY; INSURANCE
- -----------------------------------------------
a) The Parties are separate and independent entities, and no Party is the agent
of the other. The Parties hereby each agree that with respect to injury, death
or damage to persons or property involved in implementation of this Agreement,
none of the Parties shall make any claim against another Party hereto with
respect to injury or death of its own or its contractors' or its subcontractors'
personnel or damage to its own or its contractors' or its subcontractors'
property caused by activities arising out of or connected with this Agreement,
whether such injury, death or damage arises through negligence or otherwise,
unless the same can be shown to have been caused by the gross negligence or
willful misconduct of the other Party.
b) Each Party agrees to indemnify and hold NIST harmless for all liabilities,
demands, damages, expenses and losses arising out of: (1) the use of NIST's
research and technical developments by the Party, or any party acting on behalf
of or with authorization of the Party, under this Agreement; or (2) any use,
sale or other disposition of products made by use of NIST's technical
development by the Party, or any party acting on behalf of or with authorization
of the Party, under this Agreement. As a condition of this Indemnification, NIST
must provide reasonable notice to the Party of all claims for which
indemnification is sought, permit the Party to control the defense against those
claims, and provide reasonable cooperation and support in the defense against
those claims.
c) Each Party agrees to indemnify NIST and hold NIST harmless for any loss,
claim, damage or liability of any kind involving that Party's employees in
connection with the performance of this Agreement. As a condition of this
Indemnification, NIST must provide reasonable notice to the Party of
6
all claims for which indemnification is sought, permit the Party to control the
defense against those claims, and provide reasonable cooperation and support in
the defense against those claims.
d) Each Party agrees to obtain and maintain appropriate public liability and
casualty insurance, or adequate levels of self-insurance, to insure against any
liability caused by that Party's obligation under this Agreement and the
Cooperative Agreement.
ARTICLE X - PROPRIETARY INFORMATION PROTECTION
- ----------------------------------------------
a) Definitions
"Proprietary Information" means all business, technical, and financial
information relating to the Program that an originating party considers
proprietary, including all designs, concepts, specifications, requirements,
interfaces, software, components, processes, performance data, cost or pricing
data, or the like.
b) To gain protection as Proprietary Information, an originating Party will
originally disclose the information in written or other permanent form marked
with a clear and conspicuous proprietary legend of the originating Party.
Information stored in electronic form on diskette, tape, or other storage media
constitutes information in permanent form. Such electronic information will be
adequately marked if a proprietary legend displays when the information
originally runs on a computer system and when the information is printed from
its data file. If an originating party originally discloses Proprietary
Information in some other form (e.g., visually or orally), a receiving Party
will protect such information as Proprietary Information to the extent the
originating Party:
i. identifies the information as proprietary at the time of original
disclosure;
ii. summarizes the Proprietary Information in writing;
iii.marks the writing with its clear and conspicuous proprietary legend;
and
iv. delivers the writing to the receiving party within thirty (30) days
following the original disclosure.
c) The receiving Party will hold Proprietary Information it receives in
confidence for a period of five (5) years following the effective date of each
disclosure, and will only disclose such information to its employees who have a
"need-to-know" the information for fulfilling the obligations of this Agreement.
Unless authorized in writing by the originating Party, the receiving Party will
only use Proprietary Information for performance of its SOW under this
Agreement. A receiving Party will not disclose Proprietary Information to any
nonparty during the period, despite any termination of this Agreement, without
first obtaining written authorization from the
7
originating party. HDC may, however, disclose Proprietary Information it
receives to NIST in performance of the SOW under this Agreement, provided that
any such disclosure bears an appropriate restrictive legend. Upon the expiration
of the period set forth in this section, all limitations that these Articles
impose on use and disclosure of Proprietary Information shall cease.
d) A receiving Party will satisfy its obligations to protect Proprietary
Information from unauthorized use or disclosure by exercising reasonable care.
Such care will include protecting Proprietary Information using those practices
the receiving Party normally uses to restrict disclosure and use of its own
information of like importance. A receiving Party will not be liable if it
accidentally discloses Proprietary Information while exercising reasonable care,
provided that, upon discovery of such disclosure, the receiving party attempts
to retrieve the Proprietary Information and seeks to prevent any further
accidental disclosures.
e) This Agreement does not restrict disclosure or use of information otherwise
qualifying as Proprietary Information if any of the following conditions exist.
i. The receiving Party knew the information and held it without
restriction as to further disclosure when received.
ii. The receiving Party developed the information independently by
employees who did not access Proprietary Information received under
this Agreement.
iii. The receiving Party obtained the information without restriction as to
further disclosure from a source other than the originating Party
through no breach of confidence by such source.
iv. The information was in the public domain or was generally known when
received or thereafter entered the public domain or became generally
known through no fault of the receiving party.
v. The originating Party disclosed the information to a nonparty,
including the United States Government, without restriction as to
further disclosure.
vi. The receiving Party could readily ascertain the information by proper
means.
vii. The period of protection has expired.
f) Proprietary Information is and remains the property of the originating Party.
No party grants any other Party any right or license under any patents, patent
applications, copyrights, trade secrets, or the like of the originating Party.
8
g) During the term or after any termination, a receiving Party will, upon
written request, destroy all or any part of received Proprietary Information
that the originating party identifies, including any copies, then in its
possession or control. Alternatively, upon request, the receiving Party will
return all identified Proprietary Information and copies to the originating
Party. Either Party may, however, retain any information in which it has any
right, title, or interest. A receiving Party may also retain any Proprietary
Information necessary to fulfill its obligations to the U.S. Government, but
shall hold such information solely for archival purposes.
ARTICLE XI - INTELLECTUAL PROPERTY
- ----------------------------------
a) Definitions
"Technology" shall mean technical data, information, inventions, discoveries,
improvements, know-how and trade secrets embodied in tangible medium, whether or
not patentable.
"Program Technology" shall mean Technology first made or developed in
performance of the Statement of Work in the Program.
"Background Technology" shall mean Technology of a Party that was made or
developed other than in performance of the Statement of Work in the Program.
b) Intellectual Property
Rights in Program Technology shall be subject to any rights NIST may acquire
under the terms of the Cooperative Agreement for the Program. Under the
Cooperative Agreement, the Government may reserve a nonexclusive,
nontransferable, irrevocable paid-up license to practice or have practiced for
or on behalf of the United States such Technology, but shall not, in the
exercise of such license, publicly disclose proprietary information related to
the license. In the event a Party copyrights Program Technology the Party shall
grant the Government and others acting on its behalf a paid-up, non-exclusive,
irrevocable worldwide license to such copyrighted Technology.
Neither this Agreement nor the disclosure of information under this Agreement or
Program shall be construed to grant any Party any rights, license or immunity,
either directly or by implication, estoppel or otherwise, in or under any
issued, pending or after acquired patents, patent applications, copyrights or
proprietary information of the other Parties except as expressly provided
herein.
Nothing in this Agreement grants any Party the right to receive any disclosure
of any other Party's Background Technology. Any rights or license to Background
Technology shall be negotiated on a case by case basis by the Parties.
9
c) Program Technology and Inventions
i. Subject to c. iii below, each Party retains the entire right, title, and
interest throughout the world to Program Technology, including inventions
resulting in patents, developed or produced during performance of this program
solely by such Party or employees of such Party. Parties jointly retain the
entire right, title and interest throughout the world to Program Technology
jointly developed or produced during performance of this Program by the Parties
or employees of such Parties. With respect to jointly owned program Technology
each Party shall have an undivided interest in the whole to urge same as it sees
fit on an unrestricted basis subject to applicable laws and regulations, the
negotiation of mutually consistent license agreements and to the provisions of
any agreement reached with respect to use of Program Technology pursuant to c.
ii below.
ii. In the event that any Party believes that particular unpatentable Program
Technology should be regarded as jointly developed, it shall provide written
notice of that fact to each other Party. Upon delivery of such notice, all
Parties which believe that they may be entitled to a joint interest in such
technology ("Interested Parties") shall meet in good faith and shall seek to
reach agreement with respect to ownership of such unpatentable Program
Technology. Any disagreement among the Parties as to whether Program Technology
has been or is being jointly developed shall be resolved through the dispute
resolution procedures provided in Article XV. Upon agreement as to whether
Program Technology has been or is being jointly developed, the Parties jointly
owning such unpatentable Program Technology may enter into separate arrangements
covering further use or development of such Program Technology providing any
such arrangements do not interfere with the achievement of the SOW and the
Program.
iii. As required by 15 U.S.C. 278n, with respect to inventions made during
performance of this Program, JHU agrees to transfer ownership of inventions
made by JHU to DuPont. JHU agrees to provide all assistance necessary including
signing all papers required by DuPont to evidence its ownership of inventions.
JHU and DuPont agree to negotiate provisions for compensation payable to JHU
based on commercialization of any patents resulting from inventions ownership of
which is transferred to DuPont.
iv. Each Party agrees that it will disclose each invention to the other, in
writing, to contract administrators. Such disclosure shall occur within two (2)
months of the date that such invention is disclosed to personnel identified as
responsible for administration of patent matters within their own organization.
HDC shall submit required reports of inventions to NIST. The Party having title
to an invention shall file any patent application(s) and such Party will be
solely responsible for the preparation and filing of such patent application(s),
including bearing all costs. Responsibility for filing and prosecution of patent
applications covering joint inventions shall be decided by the joint owners on a
case by case basis.
10
v. Each Party agrees to require, by written agreement, its employees, other than
clerical and nontechnical employees, to disclose promptly in writing to
personnel identified as responsible for the administration of patent matters
each invention in order that such Party can comply with the disclosure
provisions of this article, and to execute all paper necessary to file patent
applications on inventions.
ARTICLE XII - FOREIGN ACCESS TO TECHNOLOGY
- ------------------------------------------
Each Party agrees that in performance of this Agreement it will comply with all
applicable laws and regulations including the export laws of the United States
which relate to data or information, software and hardware under this Agreement.
ARTICLE XIII - RELATIONSHIP OF PARTIES
- --------------------------------------
Nothing contained in this Agreement shall be deemed or construed by the Parties
or by any third person to create the relationship of principal and agent, or of
a partnership or of a joint venture between the Parties nor shall this Agreement
be construed, except as expressly provided, to authorize a Party to act as agent
for or to bind or obligate the other Party. Except as otherwise expressly
provided in this Agreement, the execution and delivery of this Agreement shall
not be deemed to confer any rights upon, nor obligate any Party to any person or
entity other than the Parties hereto.
ARTICLE XIV - SUBCONTRACTS
- --------------------------
It is understood that the subcontracts of any of the research effort required
under Article I above shall be in accordance with the Statement of Work. The
appropriate provisions of this Agreement shall be included in any contract with
a subcontractor entered into in connection with the Program.
ARTICLE XV - DISPUTES
- ---------------------
a) Any dispute or difference among the Parties, during the term of the Program,
in connection with this Agreement shall first be discussed in good faith by the
Parties in order to try to find an amicable solution. If no solution is found,
such dispute shall be brought immediately to the attention of the Program
Management Team. If the PMT is unable to resolve the dispute, the dispute shall
be referred to the respective management of the Parties involved in the dispute
who shall meet within a period of two weeks thereafter accompanied by such
advisers as they may select in order to attempt in good faith to settle the
dispute on mutually acceptable basis that does not endanger the continuity of
the Agreement or the business of a Party.
11
b) In the event that within one month after referral to the management of the
Parties, the Parties involved in the dispute have not found a mutually
acceptable solution to the dispute the dispute shall be submitted to arbitration
by one of the Parties filing a notice of demand for arbitration with the other
Party or Parties involved in the dispute. The arbitration shall be limited to
the claims stated in the demand. The Parties acknowledge that the intent of this
Agreement is to resolve disputes in a cost effective and efficient manner and
that any discovery during an arbitration will be for limited purposes and of
limited extent. The arbitral panel shall consist of one arbitrator named in
writing by each Party within thirty (30) days after notice of arbitration is
served by a Party upon the other, and an arbitrator selected by the arbitrators
selected by the Parties involved in the dispute. In the event a third arbitrator
cannot be chosen by the arbitrators selected by the Parties the third arbitrator
shall be selected in accordance with the rules of the American Arbitration
Association. The arbitration shall be administered by the American Arbitration
Association in accordance with its commercial arbitration rules. The judgment
upon award rendered by the arbitrators may be entered into any court having
jurisdiction thereof. Costs of the arbitration shall be borne by the Party
receiving the adverse decision.
ARTICLE XVI - FILING WITH DEPARTMENT OF JUSTICE AND FEDERAL TRADE COMMISSION
- ----------------------------------------------------------------------------
No later than ninety (90) days of the date hereof, HDC shall file on behalf of
the Parties a notice with the Department of Justice and the Federal Trade
Commission in accordance with the National Cooperative Research and Production
Act of 1993. Each Party shall be provided an opportunity to review and comment
on such a notice before it is filed.
ARTICLE XVII - FORCE MAJEURE
- ---------------------------
No liability shall result from delay in performance or nonperformance, caused by
circumstances beyond the control of the party affected including, but not
limited to, Act of God, fire, flood, war, Government action, accident, labor
trouble or shortage, inability to obtain material, utilities, equipment, or
transportation. In the event of any of the foregoing, the term for performance
shall be equitably and immediately adjusted. Any party claiming the benefit of
this provision shall promptly so notify the other party and giving an estimated
length of duration for the occurrence.
ARTICLE XVIII - NIST COOPERATIVE AGREEMENT
- ------------------------------------------
a) Special Power of Attorney By signing this Agreement, each Party grants to HDC
a special power of attorney for the sole purpose of binding such Party to the
terms and conditions of the NIST Cooperative Agreement substantially in the Form
attached hereto. The attached form of Cooperative Agreement has been provided to
the Parties and prior to acceptance of the Cooperative Agreement, HDC shall
provide the other Parties with the opportunity to review the Cooperative
Agreement. In the event a Party determines there is an unacceptable, significant
and material change in the SOW or
12
Cooperative Agreement from the form of Cooperative Agreement attached then such
Party may revoke the special power of attorney and withdraw from the Program and
Agreement. Such Party shall not be obligated to perform further under the SOW,
and shall not be entitled to any further rights or benefits under the
Cooperative Agreement or this Collaborative Agreement.
b) Precedence
Should there be a conflict between the terms and conditions of this Agreement
and the NIST Cooperative Agreement, the NIST Cooperative Agreement shall take
precedence. The provisions of the Cooperative Agreement are incorporated by
reference in this Agreement as if included in full text and the Parties agree to
comply with these provisions to the extent applicable to such Parties as a
recipient of federal funds from NIST.
ARTICLE XIX - GENERAL
- ---------------------
a) Severability
If any term or provision of this Agreement shall be found to be illegal or
unenforceable, notwithstanding, this Agreement shall remain in full force and
effect and such term or provision shall be deemed stricken.
b) Assignability: Successors
No Party shall assign its rights or delegate its obligations under this
Agreement without the written consent of the other Parties. Such consent shall
not be required in the event of the reorganization, merger or sale or transfer
of the assets of a Party to which this Agreement relates provided the successor
agrees to be bound by the obligations and rights of this Agreement. This
Agreement shall be binding upon and inure to the benefit of the respective
successors and assigns of the Parties.
c) Interpretation
The language in all parts of this Agreement shall be, in all cases, construed
according to its fair meaning and not strictly for or against any Party. The
Parties shall act so as to give full force and effect to this Agreement in
undertakings related to the Program supported by this Agreement.
d) Modification: Amendment
No modification, termination or waiver of any provision hereof shall be binding
upon a Party unless made in writing and executed by an authorized representative
of such. No modification shall be effected by the acknowledgment or acceptance
of invoice or purchase order forms containing different terms and conditions. No
amendment to this Agreement shall be effective unless it shall be in writing and
signed by the Parties hereto.
13
e) Waiver
No waiver by a Party of any breach of the covenants herein contained to be
performed by any other Party shall be construed as a waiver of any succeeding
breach of the same or any other covenants or conditions hereof.
f) Execution in Counterparts
This Agreement may be executed by each of the Parties in separate counterparts;
each counterpart when so executed, shall be deemed an original. When executed by
all the Parties, such counterparts shall, together, constitute and be one and
the same agreement.
g) Entireties
This Agreement together with the Attachments is the complete and exclusive
statement of the agreement between the Parties relating to its subject matter.
14
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of
the date first written above by their duly authorized representatives.
HARDCORE DU PONT E. I. DU PONT DE NEMOURS
COMPOSITES LLC AND COMPANY
BY /s/ Illegible BY /s/ Illegible
----------------------- ---------------------
TITLE Treasurer TITLE VP/GM-Advanced Material Systems
------------------- -------------------------------
DATE 2/20/95 DATE 2/20/95
-------------------- -------------------
BY /s/ Illegible
----------------------
TITLE VP/GM Hardcore DuPont Composties LLC
------------------------------------
DATE 2/20/95
--------------------
THE DOW CHEMICAL COMPANY BRUNSWICK TECHNOLOGIES, INC
BY BY /s/ Illegible
----------------------- -------------------------
TITLE TITLE Pres. & C.O.O.
-------------------- ----------------------
DATE DATE 2/21/95
--------------------- -----------------------
BY
-----------------------
TITLE
--------------------
DATE
---------------------
JOHNS HOPKINS UNIVERSITY
BY
-----------------------
TITLE
--------------------
DATE
---------------------
BY
-----------------------
TITLE
--------------------
DATE
---------------------
This is Amendment Number One to the Collaborative Agreement between Hardcore Du
Pont Compostes LLC ("HDC"), E. I. du Pont de Nemours and Company ("DuPont"),
The Dow Chemical Company ("DOW"), Brunswick Technologies, Inc. ("BTI") and John
Hopkins University ("JHU") (all hereinafter referred to individually as "Party"
and collectively as "Parties") dated 2/23/95.
The Collaborative Agreement is hereby amended to change Article IV -
Administrative Representatives to reflect the new point of contact as:
Frank Abbott
DuPont Advanced Material Systems
Delaware Technology Park
P.O. Box 6107
Newark, DE 19714-6107
302-733-8801 (phone)
302-733-8844 (fax)
The effective date of this change is June 19, 1995.
This amendment incorporates the entire agreement between the parties with
respect to the subject matter hereof. All other provisions not expressly changed
by this amendment remain unchanged.
IN WITNESS WHEREOF, the parties hereto have executed the Amendment Number One to
the Collaborative Agreement as of the effective date indicated above.
HARDCORE DU PONT COMPOSITES LLC
JOHN HOPKINS UNIVERSITY
BY /s/ Illegible BY /s/ Illegible
-------------------------- --------------------------
TITLE Treasurer TITLE Assistant Dean
----------------------- -----------------------
DATE 6/22/95 DATE 7/14/95
----------------------- -----------------------
BY /s/ Illegible BY
-------------------------- --------------------------
TITLE GM TITLE
----------------------- -----------------------
DATE 6/26/95 DATE
----------------------- -----------------------
THE DOW CHEMICAL COMPANY BRUNSWICK TECHNOLOGIES, INC.
BY /s/ Illegible BY /s/ Illegible
-------------------------- --------------------------
TITLE Gov Systems Proj Mgr TITLE Pres
----------------------- -----------------------
DATE 8/16/95 DATE 9/5/95
----------------------- -----------------------
E.I. DU PONT DE NEMOURS AND
COMPANY
BY /s/ Illegible
--------------------------
TITLE VP/GM
-----------------------
DATE 6/22/95
-----------------------
DuPont Advanced Composites
Advanced Material Systems
Delaware Technology Park
P.O. Box 6107
Newark, DE 19711-6107
DuPont Advanced Composites
August 28, 1995
William M. Dubay
Brunswick Technologies, Inc.
One Maine Street
P.O. Box 516
Brunswick, Maine 04011
Subject: Amendment No. 1
Change in Contract Administrators
Reference: Collaborative Agreement dated 2/23/95
ATP Joint Venture - High Performance Composites for Large
Commercial Structures
Dear Mr. Dubay,
Effective June 19, 1995, I became the point of contact for the above
referenced program. The attached Amendment Number 1 modifies Article IV
(Administrative Representatives) to reflect this change; a new collaborative
agreement will not be issued at this time.
Please have Ammendment #1 signed by the appropriate individual(s) and
return both copies to me. Update your records to reflect this change and share
this letter with your Technical representative.
I look forward to working with you on this program. Feel free to
contact me, at 302-733-8801 if you have any questions.
Sincerely,
/s/ F. T. Abbott
-------------------------
F.T. Abbott
Manager, Government & Contract Services
cc: S. Kopf
EXHIBIT 10.8
FINANCIAL ADVISORY AGREEMENT
This Agreement is made and entered into as of this 24th day of June,
1996 between Josephthal Lyon & Ross Incorporated ("Josephthal") and Brunswick
Technologies Inc. (together with its affiliates and subsidiaries, the
"Company").
In consideration of the mutual promises made herein and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. The Company hereby engages Josephthal for the term specified in
Paragraph 2 hereof to render a valuation of the Company and/or certain
of its Components as well as to provide consulting advice to the
Company as an investment banker relating to financial and similar
matters upon the terms and conditions set forth herein.
2. Except as otherwise specified in Paragraph 6 hereof, this Agreement
shall be effective for a period of twelve (12) months, commencing upon
the execution hereof.
3. During the term of this Agreement, Josephthal shall provide the Company
with such regular and customary consulting advice as is reasonably
requested by the Company, provided that Josephthal shall not be
required to undertake duties not reasonably within the scope of the
financial advisory services contemplated by this Agreement. It is
understood and acknowledged by the parties that the value of
Josephthal's advice is not readily quantifiable, and that Josephthal
shall be obligated to render advice upon the request of the Company, in
good faith, but shall not be obligated to spend any specific amount of
time in so doing. Josephthal's duties may include, but will not
necessarily be limited to, providing recommendations concerning the
following matters:
A. Rendering advice with regard to internal operations of the
Company, including:
1. the formation of corporate strategy, goals and their
priorities and implementation;
2. the Company's financial structure and its divisions,
subsidiaries or affiliates; and
3. corporate organization and personnel.
B. Rendering advice with regard to any of the following corporate
finance matters:
1. composition and changes in the capitalization of the Company;
2. changes in the Company's corporate structure;
3. offerings of securities in public transactions;
4. sales of securities in private transactions;
5. alternative uses of corporate assets; and
6. structure and use of debt.
C. Rendering advice with respect to any of the following corporate
finance and corporate development matters as they relate to the
Company's products and technologies and potential transactions
with potential corporate partners:
1. product research and development partnerships or similar
arrangements;
2. technology research and development partnerships or similar
arrangements;
3. creation, structuring and financing special purpose companies
for the purpose of financing, developing and marketing
products derived for the Company's or a corporate partner's
products or technologies;
4. marketing and promotion partnerships or similar arrangements;
5. manufacturing and/or distribution arrangements; and
6. product license, exchange, sale or purchase.
4. Josephthal shall render such other financial services as may from time
to time be agreed upon by Josephthal and the Company.
5. In consideration for the advisory services rendered by Josephthal to
the Company pursuant to this Agreement (and in addition to the expenses
provided for in Paragraph 7 hereof), the Company shall compensate
Josephthal as follows:
(a) For a period of six (6) months, commencing as of June 1, 1996, a
retainer fee of sixty thousand dollars ($60,000), payable in monthly
installments of ten thousand dollars ($10,000) each on the first
business day of each month.
(b) Additionally in connection with the consulting and advisory
services, upon the execution hereof, the Company will grant and issue
to Josephthal five year warrants (the "Warrants") to purchase a number
of shares of common stock of the Company (the "Common Stock) equal to
seven percent (7%) of the number of shares of Common Stock proposed to
be offered in the Company's initial public offering of securities (the
"IPO"), at an exercise price of one hundred twenty percent of the IPO
price per share of Common Stock, provided, however, that the total
number of shares of Common Stock issuable upon exercise of the Warrants
shall not exceed two and half percent (2.5%) of the total issued and
outstanding Common Stock upon the closing of the IPO. The Warrants
shall be issued to Josephthal solely as compensation in connection with
the advisory engagement described herein. The aforementioned warrants
shall contain customary
antidilution provisions and registration rights (demand at the cost of
the holder) and shall otherwise be in form and substance satisfactory
to Josephthal. The transferability of the Warrants will be restricted
when, as and if required by the NASD. In the event that Josephthal does
not underwrite the IPO within 120 days from the execution hereof, any
and all rights represented by the Warrants shall be terminated.
(c) In the event that Josephthal introduces a corporate partner in
connection with the Company's business, products or technologies which
results in the receipt by the Company of Consideration (as defined
below), the Company shall pay to Josephthal, upon the closing of any
such transaction, a cash fee equal to five percent (5%) of the
aggregate Consideration actually received or to be received by the
Company in connection with such transaction. In the event that the
Company requests Josephthal's active participation in the structuring
of a transaction with a corporate partner not introduced by Josephthal
which results in the receipt by the Company of Consideration the
Company shall, upon the closing of any such transaction, compensate
Josephthal as shall be mutually agreed to by the Company and
Josephthal, but in no event in an amount to exceed five percent (5%) of
the aggregate Consideration actually received or to be received by the
Company in connection with such transaction. In the event that the
Company consummates a transaction with Burlington Industries Inc.,
Vetrotex Certainteed, Inc., Flemings Laces, Ltd., Hardcore DuPont
Composites, L.L.C., Norsk Hydro A.S., or Montani, A.S., the Company
shall compensate Josephthal upon the closing thereof as shall be
mutually agreed to, but in no event greater than one and one-half
percent (1.5%) of the aggregate Consideration to be paid or received by
the Company in connection therewith.
(d) In the event that Josephthal acts in a material capacity as
introducer or advisor to the Company in connection with the
consummation by the Company of a merger, acquisition, the sale of some
or all of the capital stock of the Company, a business combination,
financing, or payment of research and development expenses, product
rights or licensing or other strategic arrangement, the Company shall
compensate Josephthal in accordance with the following formula and
customary industry practices:
Aggregate Consideration Finder's Fee
up to $1,000,000 5%
$1,000,001 - $2,000,000 The amount set forth above and 4%
of the next $1 million
$2,000,001 - $3,000,000 The amounts set forth above and 3%
of the next $1 million
$3,000,001 - $4,000,000 The amounts set forth above and 2%
of the next $1 million
greater than $4,000,000 The amounts set forth above and
1% of any amount in excess of
$ 4,000,000.
(e) In the event that Josephthal is requested by the Company to render
a fairness opinion or valuation, the Company shall compensate
Josephthal as shall be mutually agreed to by the Company and Josephthal
at the time of such requested engagement.
For the purposes of this Agreement, "Consideration" shall mean the
total market value on the day of closing of stock, cash, assets and all
other property (real or personal, tangible or intangible) exchanged or
received, directly or indirectly by the Company or any of its security
holders in connection with any transaction, including without
limitation any excess above market amounts paid or received pursuant to
any employment agreement, any excess above market amounts paid or
received pursuant to any consulting agreement, any excess above market
amounts paid or received pursuant to any covenant not to compete, any
excess above market amounts paid or received pursuant to any earn-out
or contingent payment right or similar arrangement, agreement or
understanding, whether oral or written, associated with such
transaction.
Notwithstanding anything contained herein or in the Letter of Intent
(as defined in Section 13(a) below) to the contrary, Josephthal shall
in no event be entitled to two fees (one fee under this Agreement and
one fee under the Letter of Intent) with respect to the same
transaction. In the event of a conflict or inconsistency between the
fees to be paid by the Company pursuant to the Letter of Intent and the
fees to be paid by the Company pursuant to this Agreement, the higher
fee shall apply.
6. All fees to be paid pursuant to this Agreement, with the exception of
advisory engagement fee and warrants specified in Paragraphs 5 (a) and
(b) above, are due and payable to Josephthal in cash at the closing or
closings of any transaction specified in Paragraph 5 hereof, or when
actually received or paid by the Company, if later.
This agreement may be terminated by Josephthal upon thirty (30) days'
prior written notice to the Company, and by the Company subsequent to
October 1,
1996, upon thirty (30) days' prior written notice to Josephthal. In
such event, the Company will pay to Josephthal all fees and expenses
payable hereunder that are payable through the date of termination.
In the event that this Agreement shall not be renewed or if terminated
for any reason notwithstanding any such renewal or termination,
Josephthal shall be entitled to the full amount of any and all fees
that would have been due if this Agreement were then in full effect for
any transaction for which the discussions were initiated during the
term of this Agreement and which is consummated within a period of six
(6) months after non-renewal or termination of this Agreement.
7. In addition to the fees payable hereunder, and regardless whether any
transaction set forth in Paragraph 5 hereof is proposed and
consummated, the Company shall reimburse Josephthal for all reasonable
fees and disbursements of Josephthal's counsel and Josephthal's
reasonable travel and out-of-pocket expenses incurred in connection
with the services performed by Josephthal pursuant to this Agreement,
including all reasonable and agreed upon expenses with appropriate
justification for hotel, food and associated expenses and long-distance
telephone calls, subject in each case to appropriate documentation.
8. The Company acknowledges that all opinions and advice (written or oral)
given by Josephthal to the Company in connection with Josephthal's
engagement are intended solely for the benefit and use of the Company
in considering the transaction to which they relate except as may be
otherwise expressly set forth Therein, and the Company agrees that no
person or entity other than the Company shall be entitled to make use
of or rely upon the advice of Josephthal to be given hereunder, and no
such opinion or advice shall be used for any other purpose or
reproduced, disseminated, quoted or referred to at any time, in any
manner or for any purpose, nor may the Company make any public
references to Josephthal, or use Josephthal's name in any annual
reports or any other reports or releases of the Company without
Josephthal's prior written consent, except, in each case, as may be
required by any applicable law, rule, regulation, order or decree of
any governmental authority.
9. The Company acknowledges that Josephthal and its affiliates are in the
business of providing financial services and consulting advice to
others. Nothing herein contained shall be construed to limit or
restrict Josephthal in conducting such business with respect to others,
or in rendering such advice to others; provided, however, that
Josephthal shall maintain all non-public information concerning the
Company in strict confidence (except as required by any applicable law,
rule, regulation, order or decree of any governmental or self
regulatory authority,
subpoena, deposition, request for information or documents, or similar
request) and shall not engage in any investment banking transaction nor
provide investment banking services that would require it to USE OR
disclose confidential information concerning the Company.
10. The Company recognizes and confirms that, in advising the Company and
in fulfilling its engagement hereunder, Josephthal will use and rely on
data, material and other information furnished to Josephthal by the
Company, and in that regard, the Company acknowledges that Josephthal
may rely upon the data, material and other information supplied by the
Company without independently verifying the accuracy, completeness or
veracity of same.
11. Since Josephthal will be acting on behalf of the Company in connection
with its engagement hereunder, the Company and Josephthal have entered
into a separate indemnification agreement substantially in the form
attached hereto as Schedule A and dated the date hereof, providing for
the indemnification of Josephthal by the Company. Josephthal has
entered into this Agreement in reliance on the indemnities set forth in
such indemnification agreement.
12. Josephthal shall perform its services hereunder as an independent
contractor and not as an employee of the Company or an affiliate
thereof. It is expressly understood and agreed to by the parties hereto
that Josephthal shall have no authority to act for, represent or bind
the Company or any affiliate thereof in any manner, except as may be
agreed to expressly by the Company in writing from time to time.
13. (a) This Agreement and the Exhibit attached hereto constitute the
entire agreement and understanding of the parties hereto with respect
to the advisory services to be rendered by Josephthal, and supersede
any and all previous agreements and understandings, whether oral or
written, between the parties with respect to the matters set forth
herein. The Company and Josephthal acknowledge the execution by them of
that certain Letter of Intent (the "Letter of Intent") covering the
Company's proposed initial public offering of securities.
(b) Any notice or communication permitted or required hereunder shall
be in writing and shall be deemed sufficiently given if hand-delivered
or sent (i) postage prepaid by registered mail, return receipt
requested, or (ii) by facsimile, to the respective parties as set forth
below, or to such other address as either party may notify the other of
in writing:
if to the Company, to: Brunswick Technologies Inc.
43 Bibber Parkway
Brunswick, ME 04011
Attn: Martin S. Grimnes, Chairman
and Chief Executive Officer
with a copy to: Walter D. Wekstein, Esq.
Gadsby & Hannah
125 Summer Street
Boston, MA 02110
If to Josephthal, to: Josephthal Lyon & Ross Incorporated
200 Park Avenue, 24th Fl.
New York, New York 10166
Attn: Scott A. Weisman,
Managing Director
with a copy to: Josephthal Lyon & Ross Incorporated
200 Park Avenue, 24th Fl.
New York, New York 10166
Attn: Michael Loew, Esq.,
General Counsel
(c) This Agreement shall be binding upon and inure to the benefit of
each of the parties hereto and their respective successors, legal
representatives and assigns.
(d) This Agreement may be executed in any number of counterparts, each
of which together shall constitute one and the same original document.
(e) No provision of this Agreement may be amended, modified or waived,
except in a writing signed by all of the parties hereto.
(f) This Agreement shall be construed in accordance with and governed
by the laws of the State of New York, without giving effect to its
conflict of law principles. The parties hereby agree that any dispute
which may arise between them arising out of or in connection with this
Agreement shall be adjudicated before a court located in New York City,
and they hereby submit to the exclusive jurisdiction of the courts of
the State of New York located in New York, New York and of the federal
courts in the Southern District of New York with respect to any action
or legal proceeding commenced by any party, and irrevocably waive any
objection they now or hereafter may have respecting the venue of any
such action or proceeding brought in such a court or respecting the
fact that such court is an inconvenient forum, relating to or arising
out of this Agreement, and consent to the service of process in any
such action or legal proceeding by means of registered or certified
mail, return receipt requested, in care of the address set forth in
Paragraph 13(b) hereof. The parties hereby waive trial by jury in any
action or proceeding involving, directly or indirectly, any matter in
any way arising out of or in connection with this Agreement.
If the foregoing correctly sets forth the understanding between
Josephthal and the Company with respect to the foregoing, please so indicate
your agreement by signing in the place provided below, at which time this letter
shall become a binding contract.
JOSEPHTHAL LYON & ROSS INCORPORATED
By:_________________________________
Scott A. Weisman,
Senior Managing Director -
Director of Investment Banking
Accepted and Agreed:
BRUNSWICK TECHNOLOGIES INC.
By:_________________________________
Name:
Title:
Schedule A
Josephthal Lyon & Ross Incorporated
200 Park Avenue, 24th Fl.
New York, New York 10166
Attn: Mr. Scott Weisman,
Managing Director
Director of Investment Banking
Gentlemen:
In connection with our engagement of Josephthal Lyon & Ross
Incorporated ("Josephthal") as our financial advisor and investment banker, we
hereby agree to indemnify and hold harmless Josephthal and its affiliates, and
the respective directors, officers, shareholders, agents and employees of
Josephthal (collectively the "Indemnified Persons"), from and against any and
all claims, actions, suits, proceedings (including those of shareholders),
damages, liabilities and expenses as incurred by any of them (including the
reasonable fees and expenses of counsel) which are (A) related to or arise out
of (i) any actions taken or omitted to be taken (including any untrue material
statements made or any material statements omitted to be made) by the Company,
or (ii) any actions taken or omitted to be taken by any Indemnified Person in
connection with our engagement of Josephthal, or (B) otherwise related to or
arise out of Josephthal's activities on our behalf under Josephthal's
engagement, and we shall reimburse any Indemnified Person for all expenses
(including the reasonable fees and expenses of counsel) as incurred by such
Indemnified Person in connection with investigating, preparing or defending any
such claim, action, suit or proceeding (collectively a "Claim"), whether or not
in connection with pending or threatened litigation in which any Indemnified
Person is a party. We will not, however, be responsible for any Claim which is
finally judicially determined to have resulted exclusively from the gross
negligence or willful misconduct of any person seeking indemnification
hereunder. We further agree that no Indemnified Person shall have any liability
to us for or in connection with our engagement of Josephthal except for any
Claim incurred by us solely as a direct result of any Indemnified Person's gross
negligence or willful misconduct.
We further agree that we will not, without the prior written consent of
Josephthal, settle, compromise or consent to the entry of any judgment in any
pending or threatened
Claim in respect of which indemnification may be sought hereunder (whether or
not any Indemnified Person is an actual or potential party to such Claim),
unless such settlement, compromise or consent includes an unconditional,
irrevocable release of each Indemnified Person hereunder from any and all
liability arising out of such Claim.
Promptly upon receipt by an Indemnified Person of notice of any
complaint or the assertion or institution of any Claim with respect to which
indemnification is being sought hereunder, such Indemnified Person shall notify
us in writing of such complaint or of such assertion or institution but failure
to so notify us shall not relieve us from any obligation we may have hereunder,
unless and only to the extent such failure results in the forfeiture by us of
substantial rights and defenses, and will not in any event relieve us from any
other obligation or liability we may have to any Indemnified Person otherwise
than under this Agreement. If we so elect or are requested by such Indemnified
Person, we will assure the defense of such Claim, including the employment of
counsel reasonably satisfactory to such Indemnified Person and the payment of
the fees and expenses of such counsel. In the event, however, that such
Indemnified Person reasonably determines that having common counsel would
present such counsel with a conflict of interest because the defendant in, or
target of, any such Claim, includes an Indemnified Person and us, and such
Indemnified Person reasonably concludes that there may be legal defenses
available to it or other Indemnified Persons different from or in addition to
those available to us, then such Indemnified Person may employ its own separate
counsel to represent or defend it in any such Claim and we shall pay the
reasonable fees and expenses of such counsel. Notwithstanding anything herein to
the contrary, if we fail timely or diligently to defend, contest, or otherwise
protect against any Claim, the relevant Indemnified Person shall have the right,
but not the obligation, to defend, contest, compromise, settle, assert
crossclaims, or counterclaims or otherwise protect against the same, and shall
be fully indemnified by us therefor, including without limitation, for the
reasonable fees and expenses of its counsel and all amounts paid as a result of
such Claim or the compromise or settlement thereof. In any Claim in which we
assume the defense, the Indemnified Person shall have the right to participate
in such Claim and to retain its own counsel therefor at its own expense.
We agree that if any indemnity sought by an Indemnified Person
hereunder is held by a court to be unavailable for any reason, then (whether or
not Josephthal is the Indemnified Person), we and Josephthal shall contribute to
the Claim for which such indemnity is held unavailable in such proportion as is
appropriate to reflect the relative benefits to us, on the one hand, and
Josephthal on the other, in connection with Josephthal's engagement referred to
above, subject to the limitation that in no event shall the amount of
Josephthal's contribution to such Claim exceed the amount of fees actually
received by Josephthal from us pursuant to Josephthal's engagement. We hereby
agree that the relative benefits to us, on the one hand, and Josephthal on the
other, with respect to Josephthal's engagement shall be deemed to be in the same
proportion as (a) the total value paid or proposed to be paid or received by us
or our stockholders as the case may be, pursuant to the transaction (whether or
not consummated) for which you are engaged to render services bears to (b) the
fee actually paid to Josephthal in connection with such engagement.
Our indemnity, reimbursement and contribution obligations under this
Agreement shall be in addition to, and shall in no way limit or otherwise
adversely affect any rights that any Indemnified Party may have at law or at
equity.
Should Josephthal or its personnel be required or requested by us to
provide documentary evidence or testimony in connection with any proceeding
arising from or relating to Josephthal's engagement, we agree to pay all
reasonable expenses (including fees incurred for legal counsel) in complying
therewith and $2,500 per day for sworn testimony or preparation therefor,
payable in advance.
We hereby consent to personal jurisdiction and service of process and
venue in any court in which any claim for indemnity is brought by any
Indemnified Person.
It is understood that, in connection with Josephthal's engagement,
Josephthal may be engaged to act in one or more additional capacities and that
the terms of the original engagement or any such additional engagement may be
embodied in one or more separate written agreements. The provisions of this
Agreement shall apply to the original engagement, any such additional engagement
and any modification of the original engagement or such additional engagement
and shall remain in full force and effect following the completion or
termination of Josephthal's engagement(s).
Very truly yours,
BRUNSWICK TECHNOLOGIES INC.
By:_________________________________
Name/Title:
Confirmed and agreed to as of this 24th day of June 1996:
JOSEPHTHAL LYON & ROSS INCORPORATED
By:____________________________________
Scott A. Weisman
Senior Managing Director -
Director of Investment Banking
EXHIBIT 10.9
INSTALLMENT PROMISSORY NOTE
---------------------------
$300,000.00 March 31, 1992
- ----------- --------------
FOR VALUE RECEIVED, the Undersigned (hereinafter the "Debtor") promises
(jointly and severally, if more than one) to pay to the order of VETROTEX
CERTAINTEED CORPORATION (hereinafter "Vetrotex CertainTeed") at its offices in
Valley Forge, Pennsylvania, or at such other place as may be designated by
Vetrotex CertainTeed, the principal sum of THREE HUNDRED THOUSAND DOLLARS
($300,000.00).
Principal (on the unpaid principal balance at the aforesaid rate) shall
be payable in nineteen (19) consecutive installments commencing on October 1,
1992, and continuing on the 1st day of each third month thereafter until the
final installment which is payable on April 1, 1997; said installments to be
payable as shown on Exhibit "A" attached hereto and incorporated herein by
reference.
PREPAYMENT: This Note may be prepaid at any time, in whole or in part, without
premium or penalty; provided, however, that partial prepayments shall be applied
to unpaid principal balance in the inverse order of the installments thereof.
DEFAULTS: The Debtor shall be in default hereunder upon the occurrence of any of
the following events: (a) the nonpayment when due of any amount payable on the
indebtedness evidenced by this Note and said default continues for a period of
thirty (30) days; (b) if the Debtor becomes insolvent or makes an assignment for
the benefit of creditors, or if any petition is filed by or against the Debtor
under any provision of any law or statue alleging that such Debtor is insolvent
or unable to pay debts as they mature; (c) any information heretofore or
hereafter furnished to Vetrotex CertainTeed by the Debtor in connection herewith
should be materially false; (d) the failure of the Debtor to furnish such
financial and other information as Vetrotex CertainTeed may reasonably request;
(e) if the Debtor or the presently existing shareholders of the Debtor shall
enter into an agreement for the sale or transfer of shares representing
ownership in the Debtor or if a transfer of shares or ownership interests shall
take place, other than a transfer of shares between existing shareholders or
family
members of existing shareholders, without the prior written consent of Vetrotex
CertainTeed; (f) the Debtor shall default in the performance of any material
obligation under a certain Security Agreement of even date herewith between the
Debtor and payee hereof and such default continues for a period of thirty (30)
days after written notice thereof.
RIGHTS AND REMEDIES OF VETROTEX CERTAINTEED: Whenever the Debtor shall be in
default hereunder, unless Vetrotex CertainTeed elects otherwise, the entire
unpaid amount of the indebtedness evidenced by this Note shall become
immediately due and payable without notice to, or demand on the Debtor. Vetrotex
CertainTeed shall thereupon have the immediate right to enforce or realize on
any collateral security granted for the indebtedness evidenced by this Note in
any manner or order which Vetrotex CertainTeed deems expedient and without
regard to any equitable principles of marshalling or otherwise. In addition to
any rights granted hereunder or in any documents executed or delivered in
connection herewith, Vetrotex CertainTeed shall have all of the rights and
remedies granted by any applicable law, all of which shall be cumulative in
nature.
WAIVERS BY THE DEBTOR: The Debtor waives presentment for payment, demand and
notice of demand, notice of nonpayment or dishonor, protest and notice of
protest, and any and all other notices in connection with the delivery,
acceptance, performance, default or enforcement of the payment of this Note, and
the Debtor agrees that the liability of such Debtor shall be unconditional,
without regard to the liability of any other party, and shall not be affected in
any manner by any indulgence, extension of time, renewal waiver or modification
granted or consented to by Vetrotex CertainTeed. The Debtor further waives and
releases all errors, defects and imperfections in any proceedings instituted by
Vetrotex CertainTeed in exercising its rights and remedies against such Debtor,
as well as all benefits that might accrue to such Debtor by virtue of any
present or future laws exempting the collateral security for the indebtedness
evidenced by this Note, or any other property, real or personal, including the
proceeds thereof, of the Debtor from attachment, levy or sale under execution or
providing for any stay of execution, exemption from civil process or extension
of time for payment.
WAIVERS BY VETROTEX CERTAINTEED: Vetrotex CertainTeed shall not be deemed, by
any act of omission or commission, to have waived any of its rights or remedies
hereunder, unless such waiver is in writing and signed by Vetrotex CertainTeed,
and then only to the extent specifically set forth in writing. If Vetrotex
CertainTeed shall have waived any right or remedy hereunder, such waiver shall
not be deemed to be a waiver upon a later occurrence of recurrence of the event
originally giving rise to such waiver.
-2-
MISCELLANEOUS: All issues arising hereunder shall be governed by the laws of the
State of Maine, without giving effect to the principles thereof relating to
conflict of laws, if any. This Note shall be binding upon the Debtor and the
respective heirs, personal representatives, successors and assigns of the
Debtor, and shall inure to the benefit of Vetrotex CertainTeed and its
successors and assigns. The Debtor hereunder agrees to pay all cost of
collection, including reasonable attorneys' fees in the event that any action is
taken by Vetrotex CertainTeed to collect pursuant to a default by Debtor.
This Promissory Note is secured by the collateral described in a Security
Agreement executed herewith.
IN WITNESS WHEREOF, the Debtor has executed and sealed this Note as of the
day and year first written above.
Name of Corporation: BRUNSWICK TECHNOLOGIES,INC.
Attest or Witness: BRUNSWICK TECHNOLOGIES, INC.
By: /s/ Elegible By: /s/ William Dubay
-------------------------- ------------------------------
Name: Name: William Dubay
--------------------- -------------------------
Title: Title: President
-------------------- ------------------------
(CORPORATE SEAL)
-3-
EXHIBIT "A" TO
PROMISSORY NOTE FROM BRUNSWICK TECHNOLOGIES, INC.
TO VETROTEX CERTAINTEED CORPORATION
PAYMENT QUARTERLY BALANCE
DUE DATE PRINCIPAL INTEREST PAYMENT AFTER PAYMENT
-------- ---------- -------- --------- -------------
10/01/92 $10,000.00 - $10,000.00 $290,000.00
01/01/93 $10,000.00 - $10,000.00 $280,000.00
04/01/93 $10,000.00 - $10,000.00 $270,000.00
07/01/93 $10,000.00 - $10,000.00 $260,000.00
10/01/93 $17,500.00 - $17,500.00 $242,500.00
01/01/94 $17,500.00 - $17,500.00 $225,000.00
04/01/94 $17,500.00 - $17,500.00 $207,500.00
07/01/94 $17,500.00 - $17,500.00 $190,000.00
10/01/94 $17,500.00 - $17,500.00 $172,500.00
01/01/95 $17,500.00 - $17,500.00 $155,000.00
04/01/95 $17,500.00 - $17,500.00 $137,500.00
07/01/95 $17,500.00 - $17,500.00 $120,000.00
10/01/95 $17,500.00 - $17,500.00 $102,500.00
01/01/96 $17,500.00 - $17,500.00 $85,000.00
04/01/96 $17,500.00 - $17,500.00 $67,500.00
07/01/96 $17,500.00 - $17,500.00 $50,000.00
10/01/96 $17,500.00 - $17,500.00 $32,500.00
01/01/97 $17,500.00 - $17,500.00 $15,000.00
04/01/97 $15,000.00 - $15,000.00 0
Exhibit 10.10
SECURITY AGREEMENT
AGREEMENT made as of the 31st day of March, 1992 by and between
BRUNSWICK TECHNOLOGIES, INC., a Maine corporation with offices at Brunswick,
Maine (hereinafter "Debtor") and VETROTEX CERTAINTEED CORPORATION, a
Pennsylvania corporation with offices at Valley Forge, Pennsylvania (hereinafter
"Secured Party").
Section I. Security Interest.
A. The Debtor hereby grants to the Secured Party a security interest in the
Collateral described in Section II.
B. The security interest hereby granted is to secure the performance of the
obligations of the Debtor to the Secured Party arising under a Promissory Note
of substantially even date herewith in the principal amount of Three Hundred
Thousand Dollars U.S. ($300,000) (the "Note").
Section II. Collateral.
The collateral consists of a binderless mat production system using a
Malirno Model #14016 as more particularly described on Exhibit A hereto.
Section III. Representations and Warranties.
A. Debtor's Obligations Relating to Collateral:
(i) Care and Preservation of Collateral: Debtor shall take such
measures as it deems appropriate to properly care for and preserve the
collateral against all hazards. Debtor will not waste, destroy, or
voluntarily damage the collateral, nor shall Debtor use the collateral
in violation of any law. The Secured Party may pay for the care and
preservation of the collateral. The Debtor shall reimburse the Secured
Party, on demand, for any payment made by the Secured Party, to care
for or preserve the collateral, and all such payments and expenses
shall be secured by this Agreement.
(ii) Inspection of Collateral: Debtor shall allow Secured Party to
inspect the collateral upon reasonable written request from the Secured
Party.
(iii) Taxes and Levies Imposed on Collateral: The Debtor shall pay and
discharge when due all taxes and levies imposed on the collateral. If
the Debtor fails to make adequate discharge of any lien or levy, the
Secured Party may discharge such encumbrance and Debtor shall reimburse
the Secured Party, on demand, for
any payment made to discharge such encumbrance. Debtor shall notify the
Secured Party of any seizure of, levy upon, loss of possession of, or
destruction to the collateral. All payments made and expenses incurred
by the Secured Party shall be secured by this Agreement.
(iv) Location of Collateral: During the term of this Agreement, the
collateral will be located at Debtor's place of business in Brunswick,
Maine, and Debtor shall not move or remove the collateral without the
prior written consent of the Secured Party.
B. Compliance with Note: Debtor shall pay when due all money obligations,
and perform all covenants and obligations pursuant to the terms of the
aforementioned Note.
Section IV. Debtor's Rights.
So long as Debtor is not in default of this Security Agreement the Debtor
shall have the right to possession of the collateral, and the right to use the
collateral in any lawful manner not inconsistent with this Agreement.
Section V. Secured Party's Obligations.
Secured Party will abide by its obligations under this Security Agreement.
Section VI. Secured Party's Rights.
A. In addition to the rights granted under the aforesaid Note and this
Agreement, the Secured Party shall have all rights and remedies granted to a
secured party under the Maine Uniform Commercial Code.
B. Secured Party may waive any of Secured Party's rights hereunder without
such waiver prohibiting later exercise of the same or similar rights.
C. Secured Party's rights and privileges shall inure to the Secured Party's
successors and assigns.
Section VII. Default.
A. Events of Default. Debtor shall be in default under this Agreement upon
the happening of any of the following events:
(i) Default in the payment or performance of any obligation, covenant
or liability contained or referred to herein, or in the aforesaid
Note, provided the same continues for a period of at least thirty
(30) days after written notice of the same is given to Debtor;
-2-
(ii) The dissolution, insolvency, or business failure of the Debtor,
appointment of a receiver, assignment for the benefit of
creditors, the commencement of a voluntary proceeding under
bankruptcy or the commencement of an involuntary proceeding in
bankruptcy if not dismissed within sixty (60) days;
(iii) Any other termination of Debtor's existence; or
(iv) Merger, consolidation, reorganization of the Debtor's business, or
a change in voting control of the Debtor.
B. Secured Party's Remedies.
(i) Upon default, the Secured Party may declare all obligations
secured hereby immediately due and payable. Secured Party may
proceed to enforce Debtor's payment of the obligations, and may
exercise all rights under this Agreement, and under the Maine
Uniform Commercial Code.
(ii) Secured Party shall give Debtor reasonable notice of the time and
place of any public sale of the collateral or of the time after
which any private sale or other intended disposition is to be
made. Debtor is entitled to any surplus remaining from the sale of
the collateral after all obligations have been satisfied. If the
sale of the collateral does not generate sufficient value to pay
for all obligations, Debtor shall be liable to the Secured Party
for all remaining obligations.
(iii) Notices. All notices required hereunder shall be addressed as
follows or otherwise as the Debtor and Secured Party may designate
in writing to each other.
Debtor: Brunswick Technologies, Inc.
One Maine Street
P.O. Box 516
Brunswick, Maine 04011
Secured Party: Vetrotex CertainTeed Corporation
750 E. Swedesford Road
P.O. Box 860
Valley Forge, PA 19482
Section VIII. Rules of Construction.
A. The Secured Party's acceptance of late or partial payment or the
failure of the Secured Party to exercise any rights or remedy available to it is
not a waiver of any obligation
-3-
of the Debtor or right of the Secured Party.
B. This Agreement shall be binding upon the successors and assigns of
the Debtor. The Debtor's obligations hereunder may not be assigned except upon
the written consent of the Secured Party.
C. The parties to this Agreement shall be discharged only by a release
or discharge of the security interest upon the full payment of the obligations
secured by this Agreement.
D. If any provisions of this Agreement are declared invalid or
ineffective, all other provisions shall continue in full force and effect, and
the Debtor shall continue to be liable under this Agreement.
E. This Agreement shall be governed and construed for all purposes in
accordance with the laws in effect in the State of Maine.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed under seal as of the day and year first above written.
WITNESS: DEBTOR
BRUNSWICK TECHNOLOGIES, INC.
By
- ---------------------------- ---------------------------
Its President
---------------------
SECURED PARTY
VETROTEX CERTAINTEED CORPORATION
By
- ---------------------------- ---------------------------
Its Vice President
---------------------
-4-
EXHIBIT A
---------
One BTI Stitchbondinq Machine, 102" wide, consisting of:
--- --- ---------------------- ---- ----- ---------- ---
* One Malimo model 14016/C stitchbonding machine 2400mm working width modified
to a model #2 BTI stitching unit
* One BTI fiber orientatioin unit which includes:
- 2 mat production modules
- One each 0 degree and 90 degree carriage modules
* One continuous take up system
EXHIBIT 16
Securities and Exchange Commission
450 Fifth Street, NW
Washington, DC 20549
Re: Brunswick Technologies, Inc.
Ladies and Gentlemen:
We have read the paragraph entitled "Changes in Accountants" in this
Form S-1 Registration Statement for Brunswick Technologies, Inc. concerning a
change in certifying accountants and agree with the statements made by the
registrant in connection therewith.
Sincerely,
/s/KPMG Peat Marwick LLP
KPMG PEAT MARWICK LLP
Boston, Massachusetts
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-1 of our
report dated January 26, 1996, except for Note 1 and 11, as to which the date is
August 14, 1996, on our audit of the financial statements of Brunswick
Technologies, Inc. as of December 31, 1995 and the year then ended. We also
consent to the reference of our firm under the caption "Experts."
/s/Coopers & Lybrand, L.L.P.
COOPERS & LYBRAND, L.L.P.
Portland, Maine
August 20, 1996
CONSENT OF CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
Brunswick Technologies, Inc.:
We consent to the use of our report included herein and to the reference to
our firm under the heading "Experts" in the prospectus
KPMG Peat Marwick LLP
Boston, Massachusetts
August 22, 1996
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