<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarter Ended Commission File No.
June 30, 1998 0-19188
APPLIED EXTRUSION TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 51-0295865
(State of Incorporation) (I.R.S. Employer
Identification No.)
3 Centennial Drive
Peabody, Massachusetts 01960
(Address of principal executive offices)
(978) 538-1500
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES [ X ] NO [ ].
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date: 11,034,764 shares of Common
Stock, $.01 par value per share, as of August 7, 1998.
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
APPLIED EXTRUSION TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
JUNE SEPTEMBER
30, 1998 30, 1997
----------- ----------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,529 $ 3,054
Accounts receivable, net of allowance for doubtful accounts of $723
on June 30, 1998 and $745 on September 30, 1997 51,866 38,513
Inventory 38,153 34,619
Prepaid expenses and deferred taxes 7,887 7,804
-------- --------
Total current assets 99,435 83,990
Property, plant and equipment, net 274,557 284,430
Intangibles and deferred finance charges, net 4,009 4,691
Long-term note receivable and other assets 2,901 3,382
-------- --------
$380,902 $376,493
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Current liabilities:
Accounts payable $ 23,014 $ 15,807
Accrued interest 4,925 9,430
Accrued expenses and other current liabilities 25,908 21,153
Current portion of long-term debt 4,000
-------- --------
Total current liabilities 53,847 50,390
Long-term debt 181,500 196,500
Deferred taxes and other liabilities 32,520 17,420
Commitments and contingencies
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value; authorized, 1,000 shares,
no shares outstanding
Common Stock, $.01 par value:
Voting -- authorized, 14,805 shares; issued 11,250 at
June 30, 1998 and 10,807 shares at September 30, 1997 112 108
Additional paid-in capital 95,132 92,401
Retained earnings 22,419 22,840
Cumulative translation adjustments (1,695) (154)
-------- --------
115,968 115,195
Treasury stock and other, 327 shares at June 30, 1998
and 325 shares at September 30, 1997 (2,933) (3,012)
-------- --------
Total stockholders' equity 113,035 112,183
-------- --------
$380,902 $376,493
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
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<TABLE>
<CAPTION>
APPLIED EXTRUSION TECHNOLOGIES, INC.
CONSOLIDATED RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1998 AND 1997
(In thousands, except per share amounts)
(Unaudited)
1998 1997
---- ----
<S> <C> <C>
SALES $66,525 $ 70,076
Cost of sales 52,582 54,731
------- --------
GROSS PROFIT 13,943 15,345
OPERATING EXPENSES:
Selling, general and administrative 6,061 6,204
Research and development 2,084 2,122
------- --------
Total operating expenses 8,145 8,326
------- --------
OPERATING PROFIT 5,798 7,019
NON-OPERATING EXPENSES:
Acquisition costs 1,500
Interest expense, net 4,240 4,278
------- --------
Total non-operating expenses 4,240 5,778
------- --------
Income before income taxes 1,558 1,241
Income tax expense 623 496
------- --------
NET INCOME $ 935 $ 745
======= ========
EARNINGS PER COMMON SHARE $ .08 $ .07
======= ========
AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING 11,107 11,241
======= ========
</TABLE>
See notes to condensed consolidated financial statements.
2
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<TABLE>
<CAPTION>
APPLIED EXTRUSION TECHNOLOGIES, INC.
CONSOLIDATED RESULTS OF OPERATIONS
NINE MONTHS ENDED JUNE 30, 1998 AND 1997
(In thousands, except per share amounts)
(Unaudited)
1998 1997
---- ----
<S> <C> <C>
SALES $ 185,380 $198,014
Cost of sales 148,176 153,916
--------- --------
GROSS PROFIT 37,204 44,098
OPERATING EXPENSES:
Selling, general and administrative 17,931 17,572
Research and development 5,583 6,245
--------- --------
Total operating expenses 23,514 23,817
--------- --------
OPERATING PROFIT 13,690 20,281
NON-OPERATING EXPENSES:
Acquisition costs 1,500
Interest expense, net 11,433 12,861
Start-up costs 1,539
--------- --------
Total non-operating expenses 12,972 14,361
--------- --------
Income before income taxes and cumulative
effect of a change in accounting principle 718 5,920
Income tax expense 287 2,368
--------- --------
Income before cumulative effect of a change
in accounting principle 431 3,552
Cumulative effect of a change in accounting
principle, net of related tax benefits of $568 852
--------- --------
NET INCOME (LOSS) $ (421) $ 3,552
========= ========
EARNINGS (LOSS) PER COMMON SHARE:
Continuing operations $ .04 $ .32
Cumulative effect of a change in accounting principle (.08)
--------- --------
Earnings (loss) per common share $ (.04) $ .32
========= ========
AVERAGE COMMON AND COMMON EQUIVALENT SHARES
OUTSTANDING: 10,968 11,176
========= ========
</TABLE>
See notes to condensed consolidated financial statements.
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<TABLE>
<CAPTION>
APPLIED EXTRUSION TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED JUNE 30, 1998 AND 1997
(In thousands)
(Unaudited)
1998 1997
---- ----
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $ (421) $ 3,552
Adjustment to reconcile net income (loss) to net cash
(used in) provided by operating activities:
Provision for doubtful accounts 257 231
Depreciation and amortization 13,450 13,029
Deferred income taxes 930 2,686
Cumulative effect of change in accounting 852
Changes in assets and liabilities which
provided (used) cash:
Prepaid expenses and other current assets 234 1,852
Accounts payable and accrued expenses (5,601) (4,282)
Accounts receivable and inventory (24,858) (9,030)
-------- --------
Net cash (used in) provided by operating activities (15,157) 8,038
INVESTING ACTIVITIES:
Proceeds from sale of assets 26,500
Additions to property, plant and equipment (39,687) (37,657)
-------- --------
Net cash used in investing activities (13,187) (37,657)
FINANCING ACTIVITIES:
Borrowings (repayments) under bank credit facility, net (19,000) 30,000
Proceeds from sale/leaseback transaction 44,625
Proceeds from issuance of stock, net 2,735 2,328
-------- --------
Net cash provided by financing activities 28,360 32,328
Effect of exchange rate changes on cash (1,541) (301)
-------- --------
Increase (decrease) in cash and cash equivalents, net (1,525) 2,408
Cash and cash equivalents, beginning 3,054 3,266
-------- --------
Cash and cash equivalents, ending $ 1,529 $ 5,674
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest, net of capitalized interest of $5,175 and $3,435, respectively $ 15,352 $ 16,110
Income taxes 3,000 2
</TABLE>
See notes to condensed consolidated financial statements.
4
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APPLIED EXTRUSION TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED JUNE 30, 1998 AND 1997
(In thousands, except per share amounts)
(Unaudited)
1. BASIS OF PRESENTATION
The information set forth in these statements is unaudited and may be subject to
normal year-end adjustments. The information reflects all adjustments that, in
the opinion of management, are necessary to present a fair statement of the
results of operations of Applied Extrusion Technologies, Inc. (the "Company" or
"AET") for the periods indicated. Results of operations for the interim period
ended June 30, 1998 are not necessarily indicative of the results of operations
for the full fiscal year.
Certain information in footnote disclosures normally included in financial
statements has been condensed or omitted in accordance with the rules and
regulations of the Securities and Exchange Commission. These statements should
be read in conjunction with the Company's Annual Report for the year ended
September 30, 1997, filed on Form 10-K with the Securities and Exchange
Commission.
2. INVENTORIES
Inventories are valued at the lower of cost or market, using the weighted
average cost method. Inventories on June 30, 1998 and September 30, 1997
consisted of the following:
<TABLE>
<CAPTION>
JUNE SEPTEMBER
1998 1997
---- ---------
<S> <C> <C>
Raw materials $ 7,397 $ 8,259
Finished goods 30,756 26,360
------- -------
Total $38,153 $34,619
======= =======
</TABLE>
3. COMMITMENTS AND FOREIGN EXCHANGE CONTRACTS
In connection with certain capital projects, management had entered into
commitments for future capital expenditures of approximately $378 at June 30,
1998. In connection therewith, the Company had entered into foreign exchange
contracts, the last of which expires in July 1998, to hedge firm equipment
purchase commitments denominated in Pounds Sterling. Gains or losses on the
foreign exchange contracts which result from market risk associated with changes
in the market values of the underlying currency are deferred and reported as
part of the cost of the capitalized asset. At June 30, 1998, the Company had
outstanding foreign exchange contracts with a U.S. dollar equivalent value of
$382. These contracts had no carrying value and a net unrealized loss of $4 as
of June 30, 1998. The Company does not enter into foreign exchange contracts for
trading purposes.
4. BANK CREDIT AGREEMENT AND SENIOR NOTES PAYABLE
In conjunction with the 1994 Acquisition of the OPP films business from
Hercules, Incorporated (the "Acquisition"), the Company entered into a Credit
Agreement with a group of lenders to provide the Company with senior bank
financing. In January 1998, the Company amended and restated this Credit
Agreement and combined the revolving facility and revolving term facility
thereunder into a $70,000 revolving credit facility (the "Credit Facility") with
a final maturity of the earlier of (i) November 1, 2001, if the Company's Senior
Notes are not refinanced prior to such date, or (ii) January 29, 2003. The
Credit Facility is secured by all the
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assets of the Company; includes covenants which limit borrowings based on
certain asset levels, require the Company to maintain a minimum tangible net
worth and specified interest coverage and leverage ratios, and establish maximum
capital expenditure levels; and contains other covenants customary in documents
relating to transactions of this type. In addition to the Credit Facility, in
1994, the Company issued $150,000 in Senior Notes to finance, in part, the
Acquisition. The Senior Notes, which bear interest at 11.5 percent payable
semiannually, do not require periodic principal payments and mature, in full, in
2002.
5. DIVESTITURE
In connection with a previously announced restructuring plan which included
divestiture of certain non-core businesses, the Company sold its plastic
profiles, strong-nets and utility products manufacturing assets during the third
quarter of 1998. These businesses, principally located in Salem, Massachusetts,
generated annual sales in fiscal 1997 of approximately $24,000. The gross
proceeds from the transaction of $26,500, which approximated book value for the
businesses after considering costs of the transaction, were utilized to reduce
outstanding borrowings on the Company's Revolving Credit Facility.
6. CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE
During the third quarter of 1998, the Company elected early adoption of
Accounting Standards Executive Committee Statement of Position 98-5, Reporting
on the costs of Start-up Activities ("SOP 98-5"). With the adoption of SOP 98-5,
the Company changed its method of accounting for start-up costs on major capital
projects to expense these costs as incurred. This change has been applied as if
it were adopted at the beginning of the fiscal year. Prior to this accounting
change, the Company capitalized these costs, primarily those related to the
start-up of its eight and ten-meter OPP films lines, and amortized them over an
eighteen month period. The cumulative effect of this change in accounting
principle was the recognition of $1,539 of non-operating costs related to net
start-up costs incurred during fiscal 1998, and a one-time charge of $852, net
of related income tax benefits of $568, resulting from costs incurred in prior
periods, and is presented in the accompanying consolidated income statements for
the nine months ended June 30, 1998.
7. YEAR 2000
The Company will have to ensure that its information systems are able to
recognize and process date sensitive information properly as the year 2000
approaches. The Company is implementing steps to ensure that affected systems
will function properly, including installing vendor-supplied upgrades, or new
software or modifying existing software. The Company believes that the costs to
complete these steps will not be material to the Company's consolidated
financial position and that the Year 2000 issue will not materially impact the
results of operations. Nevertheless, if these steps are not successfully
completed in a timely manner, the Company's operations and financial performance
could be adversely affected. Also, the Company is contacting key suppliers,
banks, customers and other unaffiliated companies to assess their Year 2000
compliance programs, since the Company could be adversely affected by the
failure of these companies to adequately address this issue.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
COMPARATIVE RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED JUNE 30,
1998 AND JUNE 30, 1997
INTRODUCTION
AET is a leading developer and manufacturer of highly specialized plastic films
used in consumer product labeling, and flexible packaging applications. The
Company also develops and manufactures oriented apertured films, or nets, for
health care, filtration, and other markets.
6
<PAGE> 8
Certain of the end use markets for the Company's oriented polypropylene (OPP)
films are seasonal. For example, demand in the snack food, soft drink and candy
markets is generally higher in the spring and summer. As a result, sales and net
income are generally higher in the spring and summer.
For the purposes of this discussion and analysis, the three month periods ended
June 30, 1998 and 1997 are referred to as the third quarters of 1998 and 1997,
respectively.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the percentages of
the Company's sales represented by certain income and expense items in its
income statement before the cumulative effect of a change in accounting
principle:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
JUNE 30, JUNE 30,
----------------------- -----------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Sales ........................................... 100.0% 100.0% 100.0% 100.0%
Cost of sales ................................... 79.0 78.1 79.9 77.7
Gross profit .................................... 21.0 21.9 20.1 22.3
Selling, general and administrative ............. 9.1 8.9 9.7 8.9
Research and development ........................ 3.1 3.0 3.0 3.2
Operating profit ................................ 8.7 10.0 7.4 10.2
Interest expense ................................ 6.4 6.1 6.2 6.5
Net income ...................................... 1.4 1.1 0.0 1.8
</TABLE>
Sales for the third quarter of 1998 were $66,525 versus $70,076 for the
comparable period of 1997, representing a $3,551 or 5% decrease. The Company's
new ten-meter line exceeded internal production estimates for the quarter and
contributed to a 9% increase in OPP films sales volume compared to the third
quarter of 1997, but was offset by lower revenues due to the divestiture of
certain businesses during the quarter and continued lower average selling prices
in the OPP films industry. Capacity utilization rates throughout the OPP films
industry have declined over the past several quarters due to incremental
capacity which has been brought on-stream. For the nine months ended June 30,
1998, the Company reported sales of $185,380 versus $198,014 for the nine months
ended June 30, 1997. The comparative decrease in sales is due primarily to lower
average selling prices. Foreign sales comprised 10 percent and 9 percent of
total sales for the third quarter of 1998 and 1997, respectively. For the nine
months ended June 30, 1998 and 1997, foreign sales represented 11 percent and 10
percent, respectively, of total sales. Foreign operating profit for the quarter
and nine months ended June 30, 1998 was 12 percent and 14 percent, respectively,
of total operating profit compared with 10 percent and 11 percent for the same
respective periods of 1997.
The Company reported gross profit of $13,943, or 21.0 percent of sales, for the
third quarter of 1998 and $37,204, or 20.1 percent of sales, for the nine months
ended June 30, 1998. Gross profit for the comparable quarter and nine months of
1997 was $15,345, or 21.9 percent of sales, and $44,098, or 22.3 percent of
sales, respectively. Favorable improvements in manufacturing costs during the
third quarter and nine months of 1998 versus the 1997 respective periods were
offset by the impact of lower average selling prices.
Total operating expenses of $8,145 and $23,514 for the three and nine months
ended June 30, 1998 were $181 and $303 lower than the same periods of 1997. Over
the past two fiscal years, through its investments in product development and
initiatives to expand its sales and marketing reach, the Company has positioned
itself to support the growth associated with the capacity expansion projects;
most recently the Company's ten-meter tenter production line introduced last
quarter. Operating expenses are expected to remain at levels comparable to those
for the three and nine months ended June 30, 1998.
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Net interest expense was $4,240 and $11,433 for the quarter and nine months
ended June 30, 1998, respectively, versus $4,278 and $12,861 for the same
periods of 1997. The decreases year over year are due primarily to the impact of
lower outstanding debt balances. As a result of writing off start-up costs
associated with major capital projects, $1,539 of non-operating costs have been
incurred in the first two fiscal quarters of 1998, and $852, net of taxes of
$568, was incurred in previous years and expensed as a cumulative effect of
adopting SOP 98-5.
Income taxes of $623 and $287 for the third quarter and nine months of fiscal
1998, respectively, were lower than 1997, due to lower pre-tax earnings. Income
tax as a percent of before-tax income remained constant for the quarter and nine
months ended June 30, 1998 and 1997.
LIQUIDITY AND CAPITAL RESOURCES
In conjunction with the Acquisition, the Company entered into a Credit Agreement
with a group of lenders to provide the Company with senior bank financing. In
January 1998, the Company amended and restated this Credit Agreement and
combined the revolving facility and revolving term facility thereunder into a
$70,000 revolving credit facility (the "Credit Facility") with a final maturity
of the earlier of (i) November 1, 2001, if the Company's Senior Notes are not
refinanced prior to such date, or (ii) January 29, 2003. The Credit Facility is
secured by all the assets of the Company; includes covenants which limit
borrowings based on certain asset levels, require the Company to maintain a
minimum tangible net worth and specified interest coverage and leverage ratios,
and establish maximum capital expenditure levels; and contains other covenants
customary in documents relating to transactions of this type. The Company
completed a sale and leaseback transaction on January 2, 1998, whereby it sold
certain equipment and other property for net proceeds of $44,625 and leased the
property back pursuant to an operating lease agreement dated December 29, 1997.
The net proceeds of this transaction were used to pay down outstanding
borrowings under the Credit Agreement. During the third quarter of 1998, the
Company sold certain non-core businesses, and the proceeds of $26,500 were
utilized to reduce outstanding borrowings on the Company's Credit Facility. At
June 30, 1998, the Company had $29,708 available under this the Credit Facility.
In addition to the Credit Facility, in 1994, the Company issued $150,000 in
Senior Notes to finance, in part, the Acquisition. The Senior Notes, which bear
interest at 11.5 percent payable semiannually, do not require periodic principal
payments and mature, in full, in 2002.
In July, 1998, the Company announced its intent to acquire the worldwide films
businesses of the Montell N.V. subsidiary of Royal Dutch/Shell Group (the
"Montell Acquisition") for an aggregate purchase price of approximately
$220,000, subject to adjustments. The Company intends to finance the Montell
Acquisition through the issuance of additional debt, which may include
refinancing of the Senior Notes and further amendment of the Credit Facility.
The Company utilized $1,525 of cash and equivalents during the first nine months
of fiscal 1998. Operating activities in 1998 utilized $15,157 in cash, which was
the result of net income before the write-off of start-up costs, depreciation,
amortization and other non-cash expenditures of $15,068, offset in part by a
$30,225 net increase in working capital accounts. The net working capital
increase resulted from primarily from the ramp-up of the new ten-meter OPP films
line, with a combined increase in accounts receivable and inventory of $24,858.
Working capital was also impacted by a $5,601 decrease in accounts payable and
accrued expenses, which included a $4,505 decrease in accrued interest, and a
decrease of $234 in prepaid expenses and other assets. Interest paid during the
nine months of 1998, which included the payment of semi-annual bond interest,
amounted to $20,527. Cash flow from operations and borrowings under the
Company's Credit Agreement, discussed above, were utilized to fund capital
expenditures of $39,687. The Company believes that, excluding the Montell
Acquisition, its available cash and equivalents, cash flow from operations, and
borrowing availability under the Credit Facility will provide adequate funds
over at least the next 24 months to accommodate its working capital needs,
capital expenditures, and debt service obligations.
INFLATION
Management reviews the prices charged for its products on a regular basis. When
market conditions allow, adjustments are made to reflect changes in product
costs due to fluctuations in the cost of materials and labor as well as
inflation. Raw materials make up a significant portion of the Company's costs
and have historically fluctuated. There can be no assurance, however, that
future market conditions will support a direct correlation between raw material
cost fluctuations and finished product films pricing.
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Except for the historical information contained herein, the matters discussed in
this report are forward-looking statements that involve risks and uncertainties
which could cause actual results to differ materially from those in the
forward-looking statements, including those risks related to the timely
development and acceptance of new products, fluctuations in raw materials and
other production costs, the loss of one or more significant customers, the
impact of competitive products and pricing, the timely completion of capital
projects, the success of the Company's efforts to access capital markets on
satisfactory terms, and to acquire, integrate, and operate new businesses and
expand into new markets, as well as other risks detailed in Exhibit 99 of the
Company's Annual Report on Form 10-K for the fiscal year ended September 30,
1997 and from time to time in the Company's other reports filed with the
Securities and Exchange Commission.
PART II - OTHER INFORMATION
ITEM 5. OTHER INFORMATION.
Under recent changes to the Federal proxy rules, if a stockholder wishes to
present a proposal at the Company's 1999 Annual Meeting that will not be
included in the Company's proxy statement and fails to notify the Company by
November 15, 1998, or in the case of nominations for election to the Board of
Directors of the Company by no earlier than August 31, 1998 and no later than
September 30, 1998, then the proxies that management solicits for the 1999
Annual Meeting will include discretionary authority to vote on the stockholder's
proposal in the event it is properly brought before the meeting.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
A. EXHIBITS.
3.1(g) Amended and Restated Certificate of Incorporation.
3.2* Amendment dated February 26, 1992 to Amended and Restated
Certificate of Incorporation.
3.3* Amended and Restated By-Laws.
4.1(d) Indenture dated as of April 7,1995 between the Registrant and
United States Trust Company of New York, Trustee.
4.2(d) Form of 11 1/2 percent Senior Note due 2002 (included in Exhibit
4.2).
4.3(a) Specimen Common Stock Certificate.
4.4(k) Rights Agreement dated as of March 2, 1998 between the Company and
BankBoston, N.A., as Rights Agent.
10.1(d) Credit Agreement dated as of April 7, 1994 by and between the
Registrant and The Chase Manhattan Bank (National Association), as
agent.
10.1.1(g) Amendments dated December 30, 1994, July 10, 1995 and June 28, 1996
to the Credit Agreement dated as of April 7, 1994 by and between
the Registrant and The Chase Manhattan Bank (National Association),
as agent.
10.1.2(h) Amendment dated as of March 31, 1997 to the Credit Agreement dated
as of April 7, 1994 by and between the Registrant and The Chase
Manhattan Bank (National Association),as agent.
10.1.3(h) Waiver dated as of August 7, 1997 to the Credit Agreement dated as
of April 7, 1994 by and between the Registrant and The Chase
Manhattan Bank (National Association),as agent.
10.1.4(i) Credit Agreement dated as of April 7, 1994 and Amended and Restated
as of January 29, 1998 by and between the Registrant and The Chase
Manhattan Bank as Administrative Agent and LaSalle Business Credit,
Inc. as Co-Agent.
10.2(b) 1986 Stock Option Plan, as amended.
10.3(c) 1991 Stock Option Plan, as amended.
10.4(e) 1991 Stock Option Plan for Directors, as amended.
10.5(d) 1994 Stock Option Plan, as amended.
10.6(g) Employment Agreement dated as of June 1, 1996 between the Registrant
and Mark S. Abrahams.
10.7(g) Employment Agreement dated as of February 1, 1996 between the
Registrant and David N. Terhune, as amended.
10.8* Letter Agreement dated May 18, 1998 between the Registrant and David
N. Terhune.
10.9(h) Agreement dated as of August 22, 1997 between the Registrant and
Anthony J. Allott.
10.10* Letter Agreement dated May 18, 1998 between the Registrant and
Anthony J. Allott.
10.11(g) Employment Agreement dated as of April 26, 1994 between the
Registrant and Amin J. Khoury, as amended.
10.12* Letter Agreement dated May 18, 1998 between the Registrant and Amin
J. Khoury.
10.13(g) Employment Agreement dated as of April 26, 1994 between the
Registrant and Thomas E. Williams, as amended.
10.14* Letter Agreement dated May 18, 1998 between the Registrant and
Thomas E. Williams.
10.15(f) Executive Deferred Compensation Plan dated as of September 1, 1994.
10.16(j) Equipment Lease Agreement dated as of December 29, 1997 between
Registrant and LaSalle National Leasing Corporation.
10.17* Asset Purchase and Sale Agreement dated as of April 6, 1998 between
the Registrant and ProNet Corporation.
27* Financial Data Schedule.
99(h) Cautionary Statement for Purposes of the "Safe Harbor" Provisions of
the Private Securities Litigation Reform Act of 1995.
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- -----------------
* Filed herewith.
(a) Contained in Exhibits to Registrant's Registration Statement on Form
S-1, as amended (No. 33-40145), filed with the Commission on April
24, 1991.
(b) Contained in Exhibits to the Registrant's Registration Statement on
Form S-8 (No. 33-44449), filed with the Commission on December 18,
1991.
(c) Contained in Exhibits to the Registrant's Registration Statement on
Form S-8 (No. 33-48841), filed with the Commission on June 25,
1992.
(d) Contained in Exhibits to the Registrant's Registration Statement on
Form S-4 (No. 33-78006), filed with the Commission on April 21,
1994.
(e) Contained in Exhibits to the Registrant's Form 10-K for the fiscal
year ended September 30, 1992.
(f) Contained in Exhibits to the Registrant's Form 10-K for the fiscal
year ended September 30, 1994.
(g) Contained in Exhibits to the Registrant's Form 10-K for the fiscal
year ended September 30, 1996.
(h) Contained in Exhibits to the Registrant's Form 10-K for the fiscal
year ended September 30, 1997.
(i) Contained in Exhibits to the Registrant's Form 10-Q for the fiscal
quarter ended December 31, 1997.
(j) Contained in Exhibits to the Registrant's Form 8-K dated January 2,
1998.
(k) Contained in Exhibits to the Registrant's Form 8-K dated March 2,
1998.
B. REPORTS ON FORM 8-K.
None.
The above reference exhibits are, as indicated, either filed herewith or have
heretofore been filed with the Commission under the Securities Act and the
Exchange Act and are referred to and incorporated herein by reference to such
filings. Registrant agrees to furnish supplementally a copy of any schedule to
this Exhibit which has been omitted from this filing.
11
<PAGE> 13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
APPLIED EXTRUSION TECHNOLOGIES, INC.
(Registrant)
By: /s/ Anthony J. Allott
----------------------------------
Vice President and
Chief Financial Officer
August 14, 1998
12
<PAGE> 1
Exhibit 3.2
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 02/26/1992
B20575163 - 2094403
CERTIFICATE OF AMENDMENT
OF THE
RESTATED CERTIFICATE OF INCORPORATION
OF APPLIED EXTRUSION TECHNOLOGIES, INC.
Applied Extrusion Technologies, Inc., a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware
(the "Corporation").
DOES HEREBY CERTIFY:
FIRST: That pursuant to a unanimous written consent of the Directors of
the Corporation dated December 18, 1991, the Board of Directors of the
Corporation has duly adopted the following resolution setting forth a proposed
amendment to the Restated Certificate of Incorporation of the Corporation,
declaring the advisability thereof and calling for submission of the proposed
amendment to the stockholders of the Corporation for their approval and
adoption:
RESOLVED: That the Restated Certificate of Incorporation of this Corporation
(the "Certificate") be amended by adding an Article 11 (the "Amendment") to
said Certificate to read in its entirety as follows:
"11. DIRECTORS.
A. CLASSIFICATION OF DIRECTORS. Except as otherwise
provided in this Certificate of Incorporation or the By-laws of
this Corporation relating to the rights of the holders of any
class or series of Preferred Stock, voting separately by class or
series, to elect additional directors under specified
circumstances, the number of directors of this Corporation shall
be as fixed from time to time by or pursuant to the By-laws of
this Corporation. The directors, other than those who may be
elected by the holders of any class or series of Preferred Stock
voting separately by class or series, shall be classified, with
respect to the time for which they severally hold office, into
three classes, Class I, Class II and Class III, which shall be as
nearly equal in number as possible, and shall be adjusted from
time to time in the manner specified in the By-laws of this
Corporation to maintain such proportionality. Each initial
director in Class I shall hold office for a term expiring at the
1993 annual meeting of stockholders, each initial director in
Class II shall hold office initially for a term expiring at
<PAGE> 2
the 1994 annual meeting of stockholders, and each initial director in Class III
shall hold office for a term expiring at the 1995 annual meeting of
stockholders. Notwithstanding the foregoing provisions of this Section 1, each
director shall serve until his or her successor is duly elected and qualified or
until his or her earlier death, resignation or removal. At each annual meeting
of stockholders following the 1992 annual meeting, the successors to the class
of directors whose term expires at that meeting shall be elected to hold office
for a term expiring at the annual meeting of stockholders held in the third year
following the year of their election and until their successors have been duly
elected and qualified or until their earlier death, resignation or removal.
B. REMOVAL OF DIRECTORS. Except as otherwise provided pursuant to the
provisions of this Certificate of Incorporation or the By-laws of this
Corporation relating to the rights of the holders of any class or series of
Preferred Stock, voting separately by class or series, to elect directors under
specified circumstances, any director or directors may be removed from office at
any time, but only for cause and only by the affirmative vote, at any regular
meeting or special meeting of the stockholders, of not less than two-thirds of
the total number of votes of the then outstanding shares of capital stock of
this Corporation entitled to vote generally in the election of directors, voting
together as a single class, but only if notice of such proposal was contained in
the notice of such meeting. Any vacancy in the Board of Directors resulting from
any such removal may be filled by vote of a majority of the directors then in
office, although less than a quorum, and any directors so chosen shall hold
office until the next election of the class for which such directors shall have
been chosen and until their successor shall be elected and qualified or until
their earlier death, resignation or removal.
C. AMENDMENT OF THIS SECTION. Notwithstanding any other provisions of this
Certificate of Incorporation or the By-laws of this Corporation (and
notwithstanding the fact that a lesser percentage may be specified by law, this
Certificate of Incorporation or the By-laws of this Corporation), the
affirmative vote, at any
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<PAGE> 3
regular meeting or special meeting of the stockholders, of not
less than two-thirds of the total number of votes of the then
outstanding shares of capital stock of the Corporation
entitled to vote generally in the election of directors,
voting together as a single class, shall be required to amend
or repeal, or to adopt any provision inconsistent with the
purpose or intent of, this Section 11. Notice of any such
proposed alteration or amendment shall be contained in the
notice of the meeting at which it is to be considered.
D. CHANGE OF AUTHORIZED NUMBER OF DIRECTORS. In
the event of any increase or decrease in the authorized number
of directors, the newly created or eliminated directorships
resulting from such increases or decrease shall be appointed
by the Board of Directors among the three classes of directors
so as to maintain such classes as nearly equal as possible. No
decrease in the number of directors constituting the Board of
Directors shall shorten the term of any incumbent director.
E. DIRECTORS ELECTED BY HOLDERS OF PREFERRED
STOCK. Notwithstanding the foregoing, whenever the holders of
any one or more classes or series of Preferred Stock issued by
this Corporation shall have the right, voting separately by
class or series, to elect directors at an annual or special
meeting of stockholders, the election, term of office, filling
of vacancies and other features of such directorships shall be
governed by the terms of this Certificate of Incorporation
applicable thereto, and such directors so elected shall not be
divided into classes pursuant to this Section 11 unless
expressly provided by such terms.";
that the directors deem such Amendment to be advisable; that such
Amendment be submitted to this Corporation's stockholders for their
consideration and approval at the 1992 Annual Meeting of Stockholders
of this Corporation; and that upon approval by the stockholders, such
Amendment be filed with the Delaware Secretary of State.
SECOND: That the annual meeting of stockholders of the Corporation was
duly called and subsequently held on February 11, 1992, upon notice in
accordance with Section 222 of the General Corporation Law of the State of
Delaware, at which meeting the
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<PAGE> 4
necessary number of shares as required by statute were voted in favor of the
amendment.
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, Applied Extrusion Technologies, Inc. has caused
this certificate to be signed by Amin J. Khoury, its chairman, and Ronald Remy,
its Assistant Secretary, this 25th day of February, 1992.
APPLIED EXTRUSION TECHNOLOGIES, INC.
By /s/ Amin J. Khoury
---------------------------------
Amin J. Khoury, Chairman
Attest:
By /s/ Ronald Remy
----------------------
Ronald Remy
Assistant Secretary
<PAGE> 5
COMMONWEALTH OF MASSACHUSETTS )
) ss.
COUNTY OF SUFFOLK )
On this 25th day of February, 1992, personally appeared before me Amin J.
Khoury and Ronald Remy, to me personally known, being by me duly sworn, did say
that they are the Chairman and Assistant Secretary, respectively, of Applied
Extrusion Technologies, Inc., and that this certificate was signed and sealed on
behalf of said Corporation pursuant to resolutions duly adopted by unanimous
written consent of its Board of Directors and approved at the annual meeting of
its stockholders, and they acknowledged the foregoing to be the free act and
deed of said Corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 25th day of
February, 1992.
illegible
---------------------------------
Notary Public
My Commission Expires: 11/25/99
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<PAGE> 1
EXHIBIT 3.3
BY-LAWS
OF
APPLIED EXTRUSION TECHNOLOGIES, INC.
(as amended through May 8, 1996)
Section 1. LAW, CERTIFICATE OF INCORPORATION
AND BY-LAWS
1.1. These by-laws are subject to the certificate of incorporation of
the corporation. In these by-laws, references to law, the certificate of
incorporation and by-laws mean the law, the provisions of the certificate of
incorporation and the by-laws as from time to time in effect.
Section 2. STOCKHOLDERS
2.1. ANNUAL MEETING. The annual meeting of stockholders shall be held
at 10:00 a.m. on the first Tuesday of February in each year, unless that day be
a legal holiday at the place where the meeting is to be held, in which case the
meeting shall be held at the same hour on the next succeeding day not a legal
holiday, or at such other date and time as shall be designated from time to time
by the board of directors and stated in the notice of the meeting, at which they
shall elect a board of directors and transact such other business as may be
required by law or these by-laws or as may properly come before the meeting.
2.2. SPECIAL MEETINGS. A special meeting of the stockholders may be
called at any time only by the chairman of the board, if any, the president or a
majority of the board of directors. Any such call shall state the place, date,
hour, and purposes of the meeting.
2.3. PLACE OF MEETING. All meetings of the stockholders for the
election of directors or for any other purpose shall be held at such place
within or without the State of Delaware as may be determined from time to time
by the chairman of the board, if any, the president or the board of directors.
Any adjourned session of any meeting of the stockholders shall be held at the
place designated in the vote of adjournment.
2.4. NOTICE OF MEETINGS. Except as otherwise provided by law, a written
notice of each meeting of stockholders stating the place, day and hour thereof
and, in the case of a special meeting, the purposes for which the meeting is
called, shall be given not less then ten nor more than sixty days before the
meeting, to each stockholder entitled to vote thereat, and to each stockholder
who, by law, by the certificate of incorporation or by these by-laws, is
entitled to notice, by leaving such notice with him or at his residence or usual
place of business, or by depositing it in the United States mail, postage
prepaid, and addressed to such
<PAGE> 2
stockholder at his address as it appears in the records of the corporation. Such
notice shall be given by the secretary, or by an officer or person designated by
the board of directors, or in the case of a special meeting by the officer
calling the meeting. As to any adjourned session of any meeting of stockholders,
notice of the adjourned meeting need not be given if the time and place thereof
are announced at the meeting at which the adjournment was taken except that if
the adjournment is for more than thirty days or if after the adjournment a new
record date is set for the adjourned session, notice of any such adjourned
session of the meeting shall be given in the manner heretofore described. No
notice of any meeting of stockholders or any adjourned session thereof need be
given to a stockholder if a written waiver of notice, executed before or after
the meeting or such adjourned session by such stockholder, is filed with the
records of the meeting or if the stockholder attends such meeting without
objecting at the beginning of the meeting to the transaction of any business
because the meeting is not lawfully called or convened. Neither the business to
be transacted at, nor the purpose of, any meeting of the stockholders or any
adjourned session thereof need be specified in any written waiver of notice.
2.5. QUORUM OF STOCKHOLDERS. At any meeting of the stockholders a
quorum as to any matter shall consist of a majority of the votes entitled to be
cast on the matter, except where a larger quorum is required by law, by the
certificate of incorporation or by these by-laws. Any meeting may be adjourned
from time to time by a majority of the votes properly cast upon the question,
whether or not a quorum is present. If a quorum is present at an original
meeting, a quorum need not be present at an adjourned session of that meeting.
Shares of its own stock belonging to the corporation or to another corporation,
if a majority of the shares entitled to vote in the election of directors of
such other corporation is held, directly or indirectly, by the corporation,
shall neither be entitled to vote nor be counted for quorum purposes; provided,
however, that the foregoing shall not limit the right of any corporation to vote
stock, including but not limited to its own stock, held by it in a fiduciary
capacity.
2.6. ACTION BY VOTE. When a quorum is present at any meeting, a
plurality of the votes properly cast for election to any office shall elect to
such office and a majority of the votes properly cast upon any question other
than an election to an office shall decide the question, except when a larger
vote is required by law, by the certificate of incorporation or by these
by-laws. No ballot shall be required for any election unless requested by a
stockholder present or represented at the meeting and entitled to vote in the
election.
2.7. ACTION WITHOUT MEETINGS. Unless otherwise provided in the
certificate of incorporation, any action required or permitted to be taken by
stockholders for or in connection with any corporate action may be taken without
a meeting, without prior notice and without a vote, if a consent or consents in
writing, setting forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
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<PAGE> 3
entitled to vote thereon were present and voted and shall be delivered to the
corporation by delivery to its registered office in Delaware by hand or
certified or registered mail, return receipt requested, to its principal place
of business or to an officer or agent of the corporation having custody of the
book in which proceedings of meetings of stockholders are recorded. Each such
written consent shall bear the date of signature of each stockholder who signs
the consent. No written consent shall be effective to take the corporate action
referred to therein unless written consents signed by a number of stockholders
sufficient to take such action are delivered to the corporation in the manner
specified in this paragraph within sixty days of the earliest dated consent so
delivered.
If action is taken by consent of stockholders and in accordance with
the foregoing, there shall be filed with the records of the meetings of
stockholders the writing or writings comprising such consent.
If action is taken by less than unanimous consent of stockholders,
prompt notice of the taking of such action without a meeting shall be given to
those who have not consented in writing and a certificate signed and attested to
by the secretary that such notice was given shall be filed with the records of
the meetings of stockholders.
In the event that the action which is consented to is such as would
have required the filing of a certificate under any provision of the General
Corporation Law of the State of Delaware, if such action had been voted upon by
the stockholders at a meeting thereof, the certificate filed under such
provision shall state, in lieu of any statement required by such provision
concerning a vote of stockholders, that written consent has been given under
Section 228 of said General Corporation Law and that written notice has been
given as provided in such Section 228.
2.8. PROXY REPRESENTATION. Every stockholder may authorize another
person or persons to act for him by proxy in all matters in which a stockholder
is entitled to participate, whether by waiving notice of any meeting, objecting
to or voting or participating at a meeting, or expressing consent or dissent
without a meeting. Every proxy must be signed by the stockholder or by his
attorney-in-fact. No proxy shall be voted or acted upon after three years from
its date unless such proxy provides for a longer period. A duly executed proxy
shall be irrevocable if it states that it is irrevocable and, if, and only as
long as, it is coupled with an interest sufficient in law to support an
irrevocable power. A proxy may be made irrevocable regardless of whether the
interest with which it is coupled is an interest in the stock itself or an
interest in the corporation generally. The authorization of a proxy may but need
not be limited to specified action, provided, however, that if a proxy limits
its authorization to a meeting or meetings of stockholders, unless otherwise
specifically provided such proxy shall entitle the holder thereof to vote at any
adjourned session but shall not be valid after the final adjournment thereof.
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<PAGE> 4
2.9. INSPECTORS. The directors or the person presiding at the meeting
may, but need not, appoint one or more inspectors of election and any substitute
inspectors to act at the meeting or any adjournment thereof. Each inspector,
before entering upon the discharge of his duties, shall take and sign an oath
faithfully to execute the duties of inspector at such meeting with strict
impartiality and according to the best of his ability. The inspectors, if any,
shall determine the number of shares of stock outstanding and the voting power
of each, the shares of stock represented at the meeting, the existence of a
quorum, the validity and effect of proxies, and shall receive votes, ballots or
consents, hear and determine all challenges and questions arising in connection
with the right to vote, count and tabulate all votes, ballots or consents,
determine the result, and do such acts as are proper to conduct the election or
vote with fairness to all stockholders. On request of the person presiding at
the meeting, the inspectors shall make a report in writing of any challenge,
question or matter determined by them and execute a certificate of any fact
found by them.
2.10. LIST OF STOCKHOLDERS. The secretary shall prepare and make, at
least ten days before every meeting of stockholders, a complete list of the
stockholders entitled to vote at such meeting, arranged in alphabetical order
and showing the address of each stockholder and the number of shares registered
in his name. The stock ledger shall be the only evidence as to who are
stockholders entitled to examine such list or to vote in person or by proxy at
such meeting.
Section 3. BOARD OF DIRECTORS
3.1. NUMBER. The number of directors which shall constitute the whole
board shall be determined from time to time by vote of two-thirds of the
directors then in office, provided that the number which shall constitute the
whole board may not be less than one. The stockholders at the annual meeting
shall elect the number of directors as determined in accordance with the
foregoing sentence. The number of directors may be increased at any time or from
time to time by the directors by vote of a two-thirds majority of the directors
then in office. The number of directors may be decreased to any number permitted
by the foregoing at any time by the directors by vote of a two-thirds majority
of the directors then in office, but only to eliminate vacancies existing by
reason of the death, resignation or removal of one or more directors. Directors
need not be stockholders.
3.2. CLASSIFICATION, ELECTION AND TENURE. The directors, other than
those who may be elected by the holders of any class or series of preference
stock voting separately by class or series, shall be classified, with respect to
the duration of the term for which they severally hold office, into three
classes, designated Class I, Class II and Class III, which shall be as nearly
equal in number as possible and as provided by resolution of the board of
directors in connection with such election.
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<PAGE> 5
Each director shall serve until his or her successor is duly elected
and qualified or until the earlier of his or her death, resignation, removal or
disqualification. At each annual meeting of stockholders, the stockholders shall
elect the successors to the class of directors whose term expires at that
meeting to hold office for a term expiring at the annual meeting of stockholders
held in the third year following the year of their election and until their
successors have been duly elected and qualified or until their earlier death,
resignation, removal or disqualification.
The board of directors shall increase or decrease the number of
directors in one or more classes as may be appropriate whenever it increases or
decreases the number of directors pursuant to Section 3.1, in order to ensure
that the three classes shall be as nearly equal in number as possible.
3.3. NOTIFICATION OF NOMINATIONS. Subject to the rights of the holders
of shares of any class or series of any preference stock, nominations for the
election of directors may be made by the board of directors or by any
stockholder entitled to vote for the election of directors. Any stockholder
entitled to vote for the election of directors at a meeting may nominate persons
for election as directors by giving timely notice thereof in proper written form
to the secretary accompanied by a petition signed by at least 100 record holders
of capital stock of the corporation which shows the class, series (if any) and
number of shares held by each person and which holders represent in the
aggregate at least 1% of the outstanding shares entitled to vote in the election
of directors. To be timely, notice shall be delivered to or mailed and received
at the principal executive offices of the corporation not less than 90 days nor
more than 120 days prior to the meeting; provided, however, that in the event
that less than 100 days' notice or prior public disclosure of the date of the
meeting is given or made to the stockholders, to be timely, notice by the
stockholder must be received at the principal executive offices not later than
the close of business on the tenth day following the day on which such notice of
the date of the meeting was mailed or such public disclosure was made. To be in
proper written form, a stockholder's notice shall be set forth in writing (i) as
to each person whom the stockholder proposes to nominate for election or
re-election as a director, all information relating to such person that is
required to be disclosed in solicitations of proxies for election of directors,
or is otherwise required, in each case pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended, including, without limitation, such
person's written consent to being named in the applicable proxy statement as a
nominee and to serving as a director if elected and (ii) as to the stockholder
giving the notice (x) the name and address, as they appear on the corporation's
books, of such stockholder and (y) the class, series (if any) and number of
shares of the corporation which are beneficially owned by such stockholder. At
the request of the board of directors, any person nominated by the board of
directors for election as a director shall furnish to the secretary the
information required to be set forth in a stockholder's notice of nomination
which pertains to the nominee. In the event that a stockholder seeks to nominate
one or more directors, the secretary shall appoint one or
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<PAGE> 6
more inspectors to determine whether a stockholder has complied with this
Section 3.3. If the inspectors shall determine that a stockholder has not
complied with this Section 3.3, the inspectors shall direct the chairman of the
meeting to declare to the meeting that a nomination was not made in accordance
with the procedures prescribed by these by-laws, and the chairman shall so
declare to the meeting and the defective nomination shall be disregarded.
3.4. POWERS. The business and affairs of the corporation shall be
managed by or under the direction of the board of directors who shall have and
may exercise all the powers of the corporation and do all such lawful acts and
things as are not by law, the certificate of incorporation or these by-laws
directed or required to be exercised or done by the stockholders.
3.5. VACANCIES. Vacancies and any newly created directorships resulting
from any increase in the number of directors may be filled by vote of the
stockholders at a meeting called for the purpose, or by a majority of the
directors then in office, although less than a quorum, or by a sole remaining
director. When one or more directors shall resign from the board, effective at a
future date, a majority of the directors then in office, including those who
have resigned, shall have power to fill such vacancy or vacancies, the vote or
action by writing thereon to take effect when such resignation or resignations
shall become effective. The directors shall have and may exercise all their
powers notwithstanding the existence of one or more vacancies in their number,
subject to any requirements of law or of the certificate of incorporation or of
these by-laws as to the number of directors required for a quorum or for any
vote or other actions.
3.6. COMMITTEES. The board of directors may, by vote of a majority of
the whole board, (a) designate, change the membership of or terminate the
existence of any committee or committees, each committee to consist of one or
more of the directors; (b) designate one or more directors as alternate members
of any such committee who may replace any absent or disqualified member at any
meeting of the committee; and (c) determine the extent to which each such
committee shall have and may exercise the powers of the board of directors in
the management of the business and affairs of the corporation, including the
power to authorize the seal of the corporation to be affixed to all papers which
require it and the power and authority to declare dividends or to authorize the
issuance of stock; excepting, however, such powers which by law, by the
certificate of incorporation or by these by-laws they are prohibited from so
delegating. In the absence or disqualification of any member of such committee
and his alternate, if any, the member or members thereof present at any meeting
and not disqualified from voting, whether or not constituting a quorum, may
unanimously appoint another member of the board of directors to act at the
meeting in the place of any such absent or disqualified member. Except as the
board of directors may otherwise determine, any committee may make rules for the
conduct of its business, but unless otherwise provided by the board or such
rules, its business shall be conducted as nearly as may be in the same manner as
is provided by these
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<PAGE> 7
by-laws for the conduct of business by the board of directors. Each committee
shall keep regular minutes of its meetings and report the same to the board of
directors upon request.
3.7. REGULAR MEETINGS. Regular meetings of the board of directors may
be held without call or notice at such places within or without the State of
Delaware and at such times as the board may from time to time determine,
provided that notice of the first regular meeting following any such
determination shall be given to absent directors. A regular meeting of the
directors may be held without call or notice immediately after and at the same
place as the annual meeting of stockholders.
3.8. SPECIAL MEETINGS. Special meetings of the board of directors may
be held at any time and at any place within or without the State of Delaware
designated in the notice of the meeting, when called by the chairman of the
board, if any, the president, or by one-third or more in number of the
directors, reasonable notice thereof being given to each director by the
secretary or by the chairman of the board, if any, the president or any one of
the directors calling the meeting.
3.9. NOTICE. It shall be reasonable and sufficient notice to a director
to send notice by mail at least forty-eight hours or by telegram at least
twenty-four hours before the meeting addressed to him at his usual or last known
business or residence address or to give notice to him in person or by telephone
at least twenty-four hours before the meeting. Notice of a meeting need not be
given to any director if a written waiver of notice, executed by him before or
after the meeting, is filed with the records of the meeting, or to any director
who attends the meeting without protesting prior thereto or at its commencement
the lack of notice to him. Neither notice of a meeting nor a waiver of a notice
need specify the purposes of the meeting.
3.10. QUORUM. Except as may be otherwise provided by law, by the
certificate of incorporation or by these by-laws, at any meeting of the
directors a majority of the directors then in office shall constitute a quorum;
a quorum shall not in any case be less than one-third of the total number of
directors constituting the whole board. Any meeting may be adjourned from time
to time by a majority of the votes cast upon the question, whether or not a
quorum is present, and the meeting may be held as adjourned without further
notice.
3.11. ACTION BY VOTE. Except as may be otherwise provided by law, by
the certificate of incorporation or by these by-laws, when a quorum is present
at any meeting the vote of a majority of the directors present shall be the act
of the board of directors.
3.12. ACTION WITHOUT A MEETING. Any action required or permitted to be
taken at any meeting of the board of directors or a committee thereof may be
taken without a meeting if all the members of the board or of such committee, as
the case may be, consent thereto in writing, and such writing or writings are
filed with the records of the meetings of the board or of such
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committee. Such consent shall be treated for all purposes as the act of the
board or of such committee, as the case may be.
3.13. PARTICIPATION IN MEETINGS BY CONFERENCE TELEPHONE. Members of the
board of directors, or any committee designated by such board, may participate
in a meeting of such board or committee by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other or by any other means permitted by law. Such
participation shall constitute presence in person at such meeting.
3.14. COMPENSATION. In the discretion of the board of directors, each
director may be paid such fees for his services as director and be reimbursed
for his reasonable expenses incurred in the performance of his duties as
director as the board of directors from time to time may determine. Nothing
contained in this section shall be construed to preclude any director from
serving the corporation in any other capacity and receiving reasonable
compensation therefor.
3.15. INTERESTED DIRECTORS AND OFFICERS.
(a) No contract or transaction between the corporation and one or more
of its directors or officers, or between the corporation and any other
corporation, partnership, association, or other organization in which one or
more of the corporation's directors or officers are directors or officers, or
have a financial interest, shall be void or voidable solely for this reason, or
solely because the director or officer is present at or participates in the
meeting of the board or committee thereof which authorizes the contract or
transaction, or solely because his or their votes are counted for such purpose,
if:
(1) The material facts as to his relationship or interest and
as to the contract or transaction are disclosed or are known to the board of
directors or the committee, and the board or committee in good faith authorizes
the contract or transaction by the affirmative votes of a majority of the
disinterested directors, even though the disinterested directors be less than a
quorum; or
(2) The material facts as to his relationship or interest and
as to the contract or transaction are disclosed or are known to the stockholders
entitled to vote thereon, and the contract or transaction is specifically
approved in good faith by vote of the stockholders; or
(3) The contract or transaction is fair as to the corporation
as of the time it is authorized, approved or ratified, by the board of
directors, a committee thereof, or the stockholders.
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(b) Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the board of directors or of a committee
which authorizes the contract or transaction.
3.16. AMENDMENT OF THIS SECTION. Notwithstanding any other provisions
of these by-laws, the affirmative vote of a majority of stock outstanding and
entitled to vote or the affirmative vote of not less than two-thirds of the
directors then in office is required to amend or repeal or to adopt any
provision inconsistent with the purpose or intent of this Section 3.
Section 4. OFFICERS AND AGENTS
4.1. ENUMERATION; QUALIFICATION. The officers of the corporation shall
be a president, a treasurer, a secretary and such other officers, if any, as the
board of directors from time to time may in its discretion elect or appoint
including without limitation a chairman of the board, one or more vice
presidents and a controller. The corporation may also have such agents, if any,
as the board of directors from time to time may in its discretion choose. Any
officer may be but none need be a director or stockholder. Any two or more
offices may be held by the same person. Any officer may be required by the board
of directors to secure the faithful performance of his duties to the corporation
by giving bond in such amount and with sureties or otherwise as the board of
directors may determine.
4.2. POWERS. Subject to law, to the certificate of incorporation and to
the other provisions of these by-laws, each officer shall have, in addition to
the duties and powers herein set forth, such duties and powers as are commonly
incident to his office and such additional duties and powers as the board of
directors may from time to time designate.
4.3. ELECTION. The officers may be elected by the board of directors at
their first meeting following the annual meeting of the stockholders or at any
other time. At any time or from time to time the directors may delegate to any
officer their power to elect or appoint any other officer or any agents.
4.4. TENURE. Each officer shall hold office until the first meeting of
the board of directors following the next annual meeting of the stockholders and
until his respective successor is chosen and qualified unless a shorter period
shall have been specified by the terms of his election or appointment, or in
each case until he sooner dies, resigns, is removed or becomes disqualified.
Each agent shall retain his authority at the pleasure of the directors, or the
officer by whom he was appointed or by the officer who then holds agent
appointive power.
4.5. CHAIRMAN OF THE BOARD OF DIRECTORS, PRESIDENT AND VICE PRESIDENT.
The chairman of the board, if any, shall have such duties and powers as shall be
designated from
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time to time by the board of directors. Unless the board of directors otherwise
specifies, the chairman of the board, or if there is none the chief executive
officer, shall preside, or designate the person who shall preside, at all
meetings of the stockholders and of the board of directors.
Unless the board of directors otherwise specifies, the president shall
be the chief executive officer and shall have direct charge of all business
operations of the corporation and, subject to the control of the directors,
shall have general charge and supervision of the business of the corporation.
Any vice presidents shall have such duties and powers as shall be set
forth in these by-laws or as shall be designated from time to time by the board
of directors or by the president.
4.6. TREASURER AND ASSISTANT TREASURERS. Unless the board of directors
otherwise specifies, the treasurer shall be the chief financial officer of the
corporation and shall be in charge of its funds and valuable papers, and shall
have such other duties and powers as may be designated from time to time by the
board of directors or by the president. If no controller is elected, the
treasurer shall, unless the board of directors otherwise specifies, also have
the duties and powers of the controller.
Any assistant treasurers shall have such duties and powers as shall be
designated from time to time by the board of directors, the president or the
treasurer.
4.7. CONTROLLER AND ASSISTANT CONTROLLERS. If a controller is elected,
he shall, unless the board of directors otherwise specifies, be the chief
accounting officer of the corporation and be in charge of its books of account
and accounting records, and of its accounting procedures. He shall have such
other duties and powers as may be designated from time to time by the board of
directors, the president or the treasurer.
Any assistant controller shall have such duties and powers as shall be
designated from time to time by the board of directors, the president, the
treasurer or the controller.
4.8. SECRETARY AND ASSISTANT SECRETARIES. The secretary shall record
all proceedings of the stockholders, of the board of directors and of committees
of the board of directors in a book or series of books to be kept therefor and
shall file therein all actions by written consent of stockholders or directors.
In the absence of the secretary from any meeting, an assistant secretary, or if
there be none or he is absent, a temporary secretary chosen at the meeting,
shall record the proceedings thereof. Unless a transfer agent has been appointed
the secretary shall keep or cause to be kept the stock and transfer records of
the corporation, which shall contain the names and record addresses of all
stockholders and the number of shares registered
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in the name of each stockholder. He shall have such other duties and powers as
may from time to time be designated by the board of directors or the president.
Any assistant secretaries shall have such duties and powers as shall be
designated from time to time by the board of directors, the president or the
secretary.
Section 5. RESIGNATIONS AND REMOVALS
5.1. Any director or officer may resign at any time by delivering his
or her resignation in writing to the chairman of the board, if any, the
president, or the secretary or to a meeting of the board of directors. Such
resignation shall be effective upon receipt unless specified to be effective at
some other time, and without in either case the necessity of its being accepted
unless the resignation shall so state. Except as otherwise provided in the
certificate of incorporation or these by-laws relating to the rights of the
holders of any class or series of preference stock, voting separately by class
or series, to elect directors under specified circumstances, any director or
directors may be removed from office at any time, but only for cause and only by
the affirmative vote, at any regular meeting or special meeting of the
stockholders, of not less than two-thirds of the total number of votes of the
then outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors, voting together as a single class, but
only if notice of such proposal was contained in the notice of such meeting. Any
vacancy in the board of directors resulting from any such removal may be filled
by vote of a majority of the directors then in office, although less than a
quorum, and any director or directors so chosen shall hold office until the next
election of the class for which such directors shall have been chosen and until
their successors shall be elected and qualified or until their earlier death,
resignation or removal. The board of directors may at any time remove any
officer either with or without cause. The board of directors may at any time
terminate or modify the authority of any agent. No director or officer resigning
and (except where a right to receive compensation shall be expressly provided in
a duly authorized written agreement with the Corporation) no director or officer
removed shall have any right to any compensation as such director or officer for
any period following his resignation or removal, or any right to damages on
account of such removal, whether his or her compensation be by the month or by
the year or otherwise; unless, in the case of a resignation, the directors, or,
in the case of removal, the body acting on the removal, shall in their or its
discretion provide for compensation.
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Section 6. VACANCIES
6.1. If the office of the president or the treasurer or the secretary
becomes vacant, the directors may elect a successor by vote of a majority of the
directors then in office. If the office of any other officer becomes vacant, any
person or body empowered to elect or appoint that officer may choose a
successor. Each such successor shall hold office for the unexpired term, and in
the case of the president, the treasurer and the secretary until his successor
is chosen and qualified or in each case until he sooner dies, resigns, is
removed or becomes disqualified. Any vacancy of a directorship shall be filled
as specified in Section 3.5 of these by-laws.
Section 7. CAPITAL STOCK
7.1. STOCK CERTIFICATES. Each stockholder shall be entitled to a
certificate stating the number and the class and the designation of the series,
if any, of the shares held by him, in such form as shall, in conformity to law,
the certificate of incorporation and the by-laws, be prescribed from time to
time by the board of directors. Such certificate shall be signed by the chairman
or vice chairman of the board, if any, or the president or a vice president and
by the treasurer or an assistant treasurer or by the secretary or an assistant
secretary. Any of or all the signatures on the certificate may be a facsimile.
In case an officer, transfer agent, or registrar who has signed or whose
facsimile signature has been placed on such certificate shall have ceased to be
such officer, transfer agent, or registrar before such certificate is issued, it
may be issued by the corporation with the same effect as if he were such
officer, transfer agent, or registrar at the time of its issue.
7.2. LOSS OF CERTIFICATES. In the case of the alleged theft, loss,
destruction or mutilation of a certificate of stock, a duplicate certificate may
be issued in place thereof, upon such terms, including receipt of a bond
sufficient to indemnify the corporation against any claim on account thereof, as
the board of directors may prescribe.
Section 8. TRANSFER OF SHARES OF STOCK
8.1. TRANSFER ON BOOKS. Subject to the restrictions, if any, stated or
noted on the stock certificate, shares of stock may be transferred on the books
of the corporation by the surrender to the corporation or its transfer agent of
the certificate therefor properly endorsed or accompanied by a written
assignment and power of attorney properly executed, with necessary transfer
stamps affixed, and with such proof of the authenticity of signature as the
board of directors or the transfer agent of the corporation may reasonably
require. Except as may be otherwise required by law, by the certificate of
incorporation or by these by-laws, the
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corporation shall be entitled to treat the record holder of stock as shown on
its books as the owner of such stock for all purposes, including the payment of
dividends and the right to receive notice and to vote or to give any consent
with respect thereto and to be held liable for such calls and assessments, if
any, as may lawfully be made thereon, regardless of any transfer, pledge or
other disposition of such stock until the shares have been properly transferred
on the books of the corporation.
It shall be the duty of each stockholder to notify the corporation of
his post office address.
8.2. RECORD DATE AND CLOSING TRANSFER BOOKS. In order that the
corporation may determine the stockholders entitled to notice of or to vote at
any meeting of stockholders or any adjournment thereof, the board of directors
may fix a record date, which record date shall not precede the date upon which
the resolution fixing the record date is adopted by the board of directors, and
which record date shall not be more than sixty nor less than ten days before the
date of such meeting. If no such record date is fixed by the board of directors,
the record date for determining the stockholders entitled to notice of or to
vote at a meeting of stockholders shall be at the close of business on the day
next preceding the day on which notice is given, or, if notice is waived, at the
close of business on the day next preceding the day on which the meeting is
held. A determination of stockholders of record entitled to notice of or to vote
at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the board of directors may fix a new record date for the
adjourned meeting.
In order that the corporation may determine the stockholders entitled
to consent to corporate action in writing without a meeting, the board of
directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the board of
directors, and which date shall not be more than ten days after the date upon
which the resolution fixing the record date is adopted by the board of
directors. If no such record date has been fixed by the board of directors, the
record date for determining stockholders entitled to consent to corporate action
in writing without a meeting, when no prior action by the board of directors is
required by the General Corporation Law of the State of Delaware, shall be the
first date on which a signed written consent setting forth the action taken or
proposed to be taken is delivered to the corporation by delivery to its
registered office in Delaware by hand or certified or registered mail, return
receipt requested, to its principal place of business or to an officer or agent
of the corporation having custody of the book in which proceedings of meetings
of stockholders are recorded. If no record date has been fixed by the board of
directors and prior action by the board of directors is required by the General
Corporation Law of the State of Delaware, the record date for determining
stockholders entitled to consent to corporate action in writing without a
meeting shall be at the close of business on the day on which the board of
directors adopts the resolution taking such prior action.
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In order that the corporation may determine the stockholders entitled
to receive payment of any dividend or other distribution or allotment of any
rights or to exercise any rights in respect of any change, conversion or
exchange of stock, or for the purpose of any other lawful action, the board of
directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted, and which record
date shall be not more than sixty days prior to such payment, exercise or other
action. If no such record date is fixed, the record date for determining
stockholders for any such purpose shall be at the close of business on the day
on which the board of directors adopts the resolution relating thereto.
Section 9. CORPORATE SEAL
9.1. Subject to alteration by the directors, the seal of the
corporation shall consist of a flat-faced circular die with the word "Delaware"
and the name of the corporation cut or engraved thereon, together with such
other words, dates or images as may be approved from time to time by the
directors.
Section 10. EXECUTION OF PAPERS
10.1. Except as the board of directors may generally or in particular
cases authorize the execution thereof in some other manner, all deeds, leases,
transfers, contracts, bonds, notes, checks, drafts or other obligations made,
accepted or endorsed by the corporation shall be signed by the chairman of the
board, if any, the president, a vice president or the treasurer.
Section 11. FISCAL YEAR
11.1. The fiscal year of the corporation shall end on the 30th day of
September of each year.
Section 12. AMENDMENTS
12.1. Except as otherwise provided herein, these by-laws may be
adopted, amended or repealed by vote of a majority of the directors then in
office, or except as provided in the corporation's restated certificate of
incorporation, as amended, by vote of a majority of the stock outstanding and
entitled to vote. Any by-law, whether adopted, amended or repealed by the
stockholders or directors, may be amended or reinstated by the stockholders or
the directors.
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EXHIBIT 10.8
May 18, 1998
David N. Terhune
Executive Vice President and
Chief Operating Officer
Applied Extrusion Technologies, Inc.
3 Centennial Drive
Peabody, Massachusetts 01960
Dear David:
On behalf of Applied Extrusion Technologies, Inc. (the "Company"), this
letter confirms our mutual understanding that, under the terms of the Employment
Agreement dated February 1, 1996 between you and the Company (as from time to
time in effect, the "Agreement"): (i) Section 5(d) of the Agreement has been
amended to delete any and all references to your finding other employment,
including without limitation any requirement that you look for, and any
consequence of your finding, other employment, and (ii) if your employment is
terminated by the Company prior to the end of the "Employment Term" (as such
term is used in the Agreement, the "Employment Term") for any reason or for no
reason (including without limitation any such termination for a reason specified
in Section 5(a) or 5(b) of the Agreement, but excluding any such termination
pursuant to Section 5(c) of the Agreement), (a) you (or, upon your death, such
person as you shall have designated in a notice filed with the Company, or, if
no such person shall have been designated, your estate) will continue to be
entitled to the compensation and (unless you shall have died) benefits (or the
equivalent thereof in all material respects if continuation of participation in
benefit plans is not able to be continued under applicable law or benefit plan
terms) specified in the Agreement for the remainder of the Employment Term as if
such termination had not occurred (and the bonus payable to you (or, upon your
death, to such other person or your estate) pursuant to Section 4(b) of the
Agreement during such remainder of the Employment Term shall be an annual amount
(pro rated, for periods less than a year) equal to the average annual amount of
bonus paid to you over the five years immediately preceding such termination),
(b) unless such termination was for a reason specified in Section 5(a), 5(b) or
5(c) of the Agreement, beginning with the day after the last day of the
Employment Term, you will be entitled to continued payment of compensation and
provision of benefits (or the equivalent thereof in all material respects if
continuation of participation in benefit plans is not able to be continued under
applicable law or benefit plan terms) in accordance with Section 5(d) of the
Agreement until the earlier of (1) eighteen (18) months from the last day of the
Employment Term or (2)
<PAGE> 2
the date which is thirty-six (36) months after such termination of employment,
and (c) if such termination was for a reason specified in Section 5(a) or 5(b)
of the Agreement, you will, in addition, be entitled to the payments and
benefits specified in such Section on the terms and conditions set forth
therein. Notwithstanding the foregoing, if, following termination of your
employment with the Company, you shall be entitled to receive from a subsequent
employer one or more benefits comparable to those provided by the Company, the
Company shall no longer be required to provide you with such comparable
benefits.
In addition, this letter confirms the agreement between you and the
Company, as approved by resolution of the Stock Option and Compensation
Committee of the Board of Directors dated May 17, 1998, providing that, in
consideration of your continued services on behalf of the Company, in the event
of a change of control of the Company (as "change of control" is defined in
Exhibit A to the Company's 1991 Stock Option Plan for Directors, a copy of which
is attached), (i) the date which is the earliest date on which the Employment
Term may end under the Agreement will automatically be extended to the date
which is three years from the date of such change of control, (ii) all
outstanding stock options held by you will automatically vest (to the extent not
already vested) and (iii) all references in the Agreement to the termination of
your employment for "cause", and the consequences thereof, will be automatically
deleted, and any subsequent termination of your employment by the Company shall
be deemed to have been without "cause" (unless such termination is for a reason
specified in Section 5(a) or 5(b) of the Agreement).
Sincerely yours,
APPLIED EXTRUSION TECHNOLOGIES, INC.
By /s/ Thomas E. Williams
-------------------------------------
Thomas E. Williams,
President and Chief Executive Officer
Agreed and accepted as of May 18, 1998
/s/ David N. Terhune
- --------------------
David N. Terhune
<PAGE> 1
EXHIBIT 10.10
May 18, 1998
Anthony J. Allott
Vice President, Treasurer and
Chief Operating Officer
Applied Extrusion Technologies, Inc.
3 Centennial Drive
Peabody, MA 01960
Dear Tony:
On behalf of Applied Extrusion Technologies, Inc. (the "Company"), this
letter confirms the agreement between you and the Company, as approved by
resolution of the Stock Option and Compensation Committee of the Board of
Directors dated May 17, 1998, providing that in consideration of your continued
services on behalf of the Company, in the event of a change of control of the
Company (as "change of control" is defined in Exhibit A to the Company's 1991
Stock Option Plan for Directors, a copy of which is attached), all outstanding
options held by you will vest (to the extent not already vested) immediately
upon such change of control.
Sincerely yours,
APPLIED EXTRUSION TECHNOLOGIES, INC.
By: /s/ Thomas E. Williams
-------------------------------------
Thomas E. Williams,
President and Chief Executive Officer
Agreed and accepted this 19th day of May, 1998
/s/ Anthony J. Allott
- ------------------------------
Anthony J. Allott
cc: Gerald M. Haines, II, General Counsel
<PAGE> 1
EXHIBIT 10.12
May 18, 1998
Amin J. Khoury
Chairman
BE Aerospace, Inc.
1400 Corporate Center Way
Wellington, FL 33414
Dear Amin:
On behalf of Applied Extrusion Technologies, Inc. (the "Company"), this
letter confirms our mutual understanding that, under the terms of the Employment
Agreement dated April 26, 1994 between you and the Company (as from time to time
in effect, the "Agreement"): (i) your employment may not be terminated prior to
the end of the "Term" (as such term is used in the Agreement, the "Term"),
except by virtue of your disability or death (in which event the provisions of
Section 5(a) or 5(b) (as applicable) of the Agreement shall govern), (ii) during
the Term you will be entitled to all of the compensation and benefits specified
in the Agreement, (iii) Section 5(c) of the Agreement has been amended to delete
any and all references to your finding other employment, including without
limitation any requirement that you look for, and any consequence of your
finding, other employment, (iv) the date "April 25, 1999" has been replaced,
each place it occurs in the Agreement, with the phrase "the last day of the
Term", and the date "April 26, 1999" has been replaced, each place it occurs in
the Agreement, with the phrase "the day immediately following the last day of
the Term", and (v) if your employment is terminated by the Company prior to the
end of the Term notwithstanding the provisions of the Agreement (unless such
termination is in accordance with Section 5(a) or 5(b) thereof, in which event
the provisions of such Section shall govern), (a) you will continue to be
entitled to the compensation and benefits (or the equivalent thereof in all
material respects if continuation of participation in benefit plans is not able
to be continued under applicable law or benefit plan terms) specified in the
Agreement for the remainder of the Term as if such termination of employment had
not occurred, (b) the "Expiration Date" (as such term is used in the Agreement,
the "Expiration Date") shall be deemed to be the date immediately following the
last day of the Term as if such termination of employment had not occurred and
(c) on and after the Expiration Date, you will be entitled to continued payment
of compensation and provision of benefits (or the equivalent thereof in all
material respects if continuation of participation in benefit plans is not able
to be continued under applicable law or benefit plan terms) in accordance with
Section 5(c) of the Agreement until twenty-four (24) months from the Expiration
Date.
<PAGE> 2
In addition, this letter confirms the agreement between you and the
Company, as approved by resolution of the Stock Option and Compensation
Committee of the Board of Directors dated May 17, 1998, providing that, in
consideration of your continued services on behalf of the Company, in the event
of a change of control of the Company (as "change of control" is defined in
Exhibit A to the Company's 1991 Stock Option Plan for Directors, a copy of which
is attached), (i) the date which is the earliest date on which the Term may end
under the Agreement will automatically be extended to the date which is five
years from the date of such change of control and (ii) all outstanding stock
options held by you will automatically vest (to the extent not already vested).
Sincerely yours,
APPLIED EXTRUSION TECHNOLOGIES, INC.
By: /s/ Thomas E. Williams
-------------------------------------
Thomas E. Williams,
President and Chief Executive Officer
Agreed and accepted as of May 18, 1998
/s/ Amin J. Khoury
- ----------------------------------
Amin J. Khoury
<PAGE> 1
EXHIBIT 10.14
May 18, 1998
Thomas E. Williams
President and Chief Executive Officer
Applied Extrusion Technologies, Inc.
3 Centennial Drive
Peabody, Massachusetts 01960
Dear Tom:
On behalf of Applied Extrusion Technologies, Inc. (the "Company"), this
letter confirms our mutual understanding that, under the terms of the Employment
Agreement dated April 26, 1994 between you and the Company (as from time to time
in effect, the "Agreement"): (i) your employment may not be terminated by the
Company prior to the end of the "Employment Period" (as such term is used in the
Agreement, the "Employment Period"), except for a reason specified in Section
4(b), 4(c) or 4(d) of the Agreement, (ii) Sections 4(c), 4(e) and 4(f) of the
Agreement have been amended to delete any and all references to your finding
other employment, including without limitation any requirement that you look
for, and any consequence of your finding, other employment, (iii) the date
"April 25, 1999" has been replaced, each place it occurs in the Agreement, with
the phrase "the last day of the Employment Period", and the date "April 26,
1999" has been replaced, each place it occurs in the Agreement, with the phrase
"the day immediately following the last day of the Employment Period", and (iv)
if your employment is terminated by the Company prior to the end of the
Employment Period for any reason or for no reason (including without limitation
any such termination for a reason specified in Section 4(b) or 4(c) of the
Agreement, but excluding any such termination pursuant to Section 4(d) of the
Agreement), or if your employment is terminated by you prior to the end of the
Employment Period in accordance with Section 4(f) of the Agreement, (a) you (or,
upon your death, such person as you shall have designated in notice filed with
the Company, or, if no such person shall have been designated, your estate) will
continue to be entitled to the compensation and (unless you shall have died)
benefits (or the equivalent thereof in all material respects if continuation of
participation in benefit plans is not able to be continued under applicable law
or benefit plan terms) specified in the Agreement for the remainder of the
Employment Period as if such termination had not occurred (and the bonus payable
to you (or, upon your death, to such other person or your estate) pursuant to
Section 3(b) of the Agreement during such remainder of the Employment Period
shall be an annual amount (pro rated, for periods less than a year) equal to the
average annual amount of bonus paid to you over the five years immediately
preceding such termination), (b) the "Termination Date" (as such term is used in
the Agreement, the "Termination Date") shall be deemed to be the date
immediately following the last day of the
<PAGE> 2
Employment Period as if such termination of employment had not occurred, (c)
unless such termination was for a reason specified in Section 4(b), 4(c) or 4(d)
of the Agreement, on and after the Termination Date, you will be entitled to
continued payment of compensation and provision of benefits (or the equivalent
thereof in all material respects if continuation of participation in benefit
plans is not able to be continued under applicable law or benefit plan terms) in
accordance with Section 4(e) or 4(f) (as applicable) of the Agreement until the
earlier of (1) twenty-four (24) months from the Termination Date or (2) the date
which is sixty (60) months after the date of such termination of employment, and
(d) if such termination was for a reason specified in Section 4(b) or 4(c) of
the Agreement, you will, in addition, be entitled to the payments and benefits
specified in such Section on the terms and conditions set forth therein.
Notwithstanding the foregoing, if, following termination of your employment with
the Company, you shall be entitled to receive from a subsequent employer one or
more benefits comparable to those provided by the Company, the Company shall no
longer be required to provide you with such comparable benefits.
In addition, this letter confirms the agreement between you and the
Company, as approved by resolution of the Stock Option and Compensation
Committee of the Board of Directors dated May 17, 1998, providing that, in
consideration of your continued services on behalf of the Company, in the event
of a change of control of the Company (as "change of control" is defined in
Exhibit A to the Company's 1991 Stock Option Plan for Directors, a copy of which
is attached), (i) the date which is the earliest date on which the Employment
Period may end under the Agreement will automatically be extended to the date
which is five years from the date of such change of control, (ii) all
outstanding stock options held by you will automatically vest (to the extent not
already vested) and (iii) all references in the Agreement to the termination of
your employment for "cause", and the consequences thereof, will be automatically
deleted, and any subsequent termination of your employment by the Company shall
be deemed to have been without "cause" (unless such termination is for a reason
specified in Section 4(b) or 4(c) of the Agreement).
Sincerely yours,
APPLIED EXTRUSION TECHNOLOGIES, INC.
By /s/ Amin J. Khoury
------------------------
Amin J. Khoury, Chairman
Agreed and accepted as of May 18, 1998
/s/ Thomas E. Williams
- ----------------------
Thomas E. Williams
<PAGE> 1
EXHIBIT 10.17
ASSET PURCHASE AND SALE AGREEMENT
THIS ASSET PURCHASE AND SALE AGREEMENT (the "Agreement") is made as of
the 3d day of April, 1998 by and between APPLIED EXTRUSION TECHNOLOGIES, INC., a
Delaware corporation ("Seller"), and PRONET CORPORATION, a South Carolina
corporation ("Buyer") (Buyer and Seller each being referred to as a "Party" and
collectively as the "Parties").
WHEREAS, Seller is currently engaged, through its operations in Salem,
Massachusetts, in the business of owning and operating certain assets used
primarily in the manufacture and sale of various specialized extruded plastic
netting and extruded plastic profile products and related activities; and
through certain of its operations in Middletown, Delaware (the "Middletown
Facility"), in the business of owning and operating certain assets used
primarily in the manufacture and sale of extruded plastic profile products used
primarily in the utility industry (the "Utility Assets"), each on a
going-concern basis (collectively, the "Business"); and
WHEREAS, Buyer desires to buy and Seller wishes to sell all of the
assets of Seller primarily used in or relating to the Business, except for those
assets specifically excluded by this Agreement, on the terms and conditions set
forth herein; and
WHEREAS, Seller wishes to assign and the Buyer wishes to assume certain
liabilities, agreements and rights of Seller on the terms and conditions set
forth herein; and
WHEREAS, Buyer and Seller agree that it is in their mutual best
interests to effect an orderly transfer of the Business and all of the rights
arising in connection therewith from Seller to Buyer; and
WHEREAS, a majority of the outstanding capital stock of Buyer is owned
by The Founders Fund of South Carolina, LP ("Founders Fund"), of which Vaxa
Capital Management, LLC is the general partner and which is located in
Greenville, South Carolina; and
WHEREAS, to induce Seller to enter into this Agreement with Buyer,
Founders Fund has agreed to execute and deliver to Seller a guarantee of all of
Buyer's obligations hereunder, such guarantee to remain in full force and effect
unless and until the Closing Date (as hereinafter defined) shall occur,
whereupon it shall terminate and be of no further force or effect;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements set forth herein, and each intending to be legally
bound hereby, the Parties agree as follows:
ARTICLE 1. PURCHASE AND SALE
Section 1.01. Assets. In reliance on the representations, warranties,
covenants and agreements herein, and subject to the terms and conditions hereof,
at the Closing (as defined below),
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Seller shall sell, convey, transfer and assign to Buyer, and Buyer shall
purchase from Seller, free and clear of all liens, security interests and
encumbrances (except as otherwise provided herein), all of Seller's right, title
and interest in and to the assets of Seller used primarily in connection with
the Business as at the Closing, as set forth below and subject to the exclusions
contained in Section 1.02 hereof (the assets being so conveyed being referred to
herein as the "Purchased Assets"):
(a) Real Estate. Seller's fee simple estate in that parcel of
real property located at 96 Swampscott Road in Salem, Massachusetts,
that is shown as Lot 699 on Land Court Plan No. 11802-42 (the "Salem
Facility"), including all buildings, improvements and structures
located thereon and all rights of way, easements and other
appurtenances thereto as more fully described on Schedule 1.01(a)
attached hereto;
(b) Fixed Assets. All tangible assets used primarily for the
operation of the Business and located at the Salem Facility or the
Middletown Facility or included in the Aero Safe Assets (as hereinafter
defined), including without limitation, manufacturing machinery and
equipment, production lines, tools, dies, fixtures, engineering and
office equipment, substations, and furniture, including but not limited
to the Material Fixed Assets (as hereinafter defined) listed on
Schedule 1.01(b) attached hereto (collectively, the "Fixed Assets");
Seller shall be responsible for, and shall bear the cost of, removing,
crating and delivering the Utility Assets to Buyer's shipper F.O.B. the
Seller's loading dock at the Middletown Facility; Buyer shall be
responsible for, and shall bear the cost of, transporting the Utility
Assets from the Middletown Facility to such other location as Buyer
shall desire, such delivery to Buyer's shipper by Seller to occur on
such date as Buyer may specify by not less than seven business days'
prior written notice given to Seller on or after the Closing Date; such
removal, crating and delivery by Seller of the Utility Assets shall be
completed by Seller in a first-class workman-like manner and without
material damage of any kind to the Utility Assets; Buyer hereby agrees
and covenants to indemnify, defend and hold Seller harmless for all
costs (including without limitation, attorneys' fees) associated with
its relocation of the Utility Assets, other than such removal, crating
and delivery by Seller of the Utility Assets, unless and then not to
the extent such costs arise from Seller's negligence or wilful
misconduct;
(c) Inventories. All inventories of the Business as of the
Closing Date, including without limitation raw materials,
work-in-process, finished goods, processing materials, purchased parts,
machine parts, maintenance parts, tools, testing equipment and
supplies, all to the extent used primarily in the Business (the
"Inventory"); the removal and shipping of any Inventory located at the
Middletown Facility shall be effected in the same manner and on the
same basis as the removal and shipping of the Utility Assets;
(d) Data and Records. All financial, accounting and operating
data and records relating primarily to the Business, including without
limitation all books, records, notes, sales and sales promotional data,
advertising materials, credit information, cost and pricing
information, customer list, supplier list, business plans, projections,
reference catalogs,
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payroll and personnel records and other similar property, rights and
information (collectively the "Books and Records"); the removal and
shipping of any Books and Records located at the Middletown Facility
shall be effected in the same manner and on the same basis as the
removal and shipping of the Utility Assets;
(e) Intellectual Property. All commercial and technical trade
secrets, engineering, production and other designs, drawings,
specifications, formulae, technology, computer and electronic data
processing programs and software, inventions, processes, know-how,
confidential information and other proprietary property, rights and
interests used primarily in the Business, including without limitation
those patents, trademarks and/or service marks set forth on Schedule
1.01(e) attached hereto, (collectively "Intellectual Property");
(f) Contracts and Rights. All leases, license agreements,
contracts, agreements, sale orders, purchase orders, open bids and
other commitments, warranties and warranty claims and awards relating
primarily to the Business including the Material Contracts (as defined
herein) as set forth on Schedule 1.01(f) attached hereto;
(collectively, the "Contracts and Rights");
(g) Licenses and Permits. All licenses, permits,
authorizations, approvals and similar items relating primarily to the
Business (collectively, the "Licenses"); and
(h) Accounts Receivable; Prepaid Expenses. All accounts
receivable and prepaid expenses relating primarily to the Business.
Section 1.02. Exclusions. The Purchased Assets shall not include:
(a) The trademark "Plastinet" and all derivatives thereof (all
previously-used derivatives thereof being listed on Schedule 1.02(a)
attached hereto); provided, however, that Buyer shall be entitled to
use such trademark and derivatives with respect to the "Rockshield"
product line to the extent currently used by Seller with respect to
such product line and on products currently included in such product
line, and a license to this effect shall be included in the Trademark
and Service Mark Assignment (as hereinafter defined).
(b) The cash and cash equivalents related to the Business;
(c) Corporate records;
(d) Tax returns, workpapers and other documents related
thereto;
(e) All rights, claims and awards (including without
limitation rights, claims and awards under insurance agreements) which
relate to any liability or obligation of Seller which is not an Assumed
Liability or an asset which is not a Purchased Asset; and
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(f) All other assets, properties, contracts or contract
rights, whether tangible or intangible, except as specifically
identified herein as Purchased Assets.
ARTICLE 2. PURCHASE PRICE AND PAYMENT; ASSUMED LIABILITIES
Section 2.01. Purchase Price. Subject to Section 2.06 hereof, the
purchase price ("Purchase Price") for the Purchased Assets shall be $26,500,000
in cash, which shall be paid by Buyer to Seller on the Closing Date in
immediately available funds by federal wire transfer to an account designated by
Seller.
Section 2.02. Assumption of Certain Liabilities. In reliance on the
representations, warranties, covenants and agreements herein, and subject to the
terms and conditions hereof, at and after the Closing, and in addition to the
payment of the Purchase Price, Buyer will assume and satisfy, pay or perform
when due in accordance with the terms thereof and without recourse to Seller,
the following obligations and liabilities (collectively, the "Assumed
Liabilities"):
(a) All obligations and liabilities relating to the Contracts
and Rights;
(b) All accounts payable and accrued expenses of the Business;
(c) All obligations and liabilities assumed by Buyer pursuant
to Section 7.02 hereof; and
(d) All obligations and liabilities arising in connection with
the conduct of the Business after the Closing.
Section 2.03.[Deleted.]
Section 2.04. No Other Liabilities Assumed. Seller shall not assign to
Buyer, and Buyer will not assume from Seller, any liabilities or obligations of
Seller of any kind except for the Assumed Liabilities and except as may be
otherwise specifically set forth in this Agreement or in another document
executed by the Parties. Without limiting the generality of the foregoing
sentence, Buyer shall assume neither any product liability or warranty claims
relating to products sold by Seller in the conduct of the Business prior to the
Closing Date nor any of Seller's obligations under the $6,500,000 principal
amount of City of Salem, Massachusetts Flexible Mode Industrial Development
Revenue Bonds (Applied Extrusion Technologies, Inc. Issue) dated as of December
6, 1990.
Section 2.05. Allocation of Purchase Price. Schedule 2.05 attached
hereto sets forth the preliminary agreement of the Parties with respect to the
allocation of the Purchase Price for tax purposes. The Parties will negotiate in
good faith to reach final agreement with respect to such allocation at or prior
to the Closing.
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Section 2.06. Post-Closing Adjustment.
(a) Promptly after the Closing Date, and in any event within
60 days of the Closing Date, Seller will deliver a balance sheet of the
Business as conveyed to and assumed by Buyer hereunder as of the
Closing Date (the "Closing Date Balance Sheet"), which shall be audited
by Seller's auditors. All fees, costs and expenses of Seller's auditors
incurred in connection with such audit, and all fees, costs and
expenses of Buyer's auditors (subject to an aggregate maximum of
$10,000, with any excess to be paid solely by Buyer) incurred in
connection with the valuation of Inventory as shown on the Closing Date
Balance Sheet, will be paid 50% by Buyer and 50% by Seller.
(b) The Closing Date Balance Sheet will be prepared in
accordance with generally accepted accounting principles applied on a
basis consistent with their application in Seller's September 30, 1997
audited consolidated financial statements and Seller's accounting
practices and procedures followed in the preparation of such financial
statements ("GAAP"), and based on a physical count of the Inventory as
of the Closing Date; provided, however, that, for purposes of preparing
the Closing Date Balance Sheet, there shall be excluded from Inventory
all Inventory which was acquired or produced primarily to supply
products to Samsonite (it being understood that all reserves relating
to such Inventory so excluded shall also be excluded from the Closing
Date Balance Sheet).
(c) In addition, Seller will determine the amount of Net
Assets (as hereinafter defined), and shall deliver a computation
thereof with the Closing Date Balance Sheet to Buyer. "Net Assets"
shall mean the excess of the book value (as shown on the Closing Date
Balance Sheet) of the Purchased Assets over the book value (as shown on
the Closing Date Balance Sheet) of the accounts payable and accrued
expenses assumed by Buyer pursuant hereto.
(d) Buyer's representatives may be present for the physical
count of the Inventory referred to in Section 2.06(b) hereof and may
review all pricing extensions and work papers of Seller and of Seller's
accountants prepared in connection with the determination of Net Assets
and the Closing Date Balance Sheet. If Buyer disputes Seller's
determination of Net Assets or the Closing Date Balance Sheet, Buyer
shall so notify Seller in writing not more than 20 days after the date
on which Buyer receives Seller's determination of Net Assets and the
Closing Date Balance Sheet, and in such notice Buyer shall state any
points of disagreement. Failure of Buyer to deliver such a notice
within such 20-day period shall mean conclusively that Seller's
determination of Net Assets and Closing Date Balance Sheet has been
accepted by Buyer.
(e) Upon receipt by Seller of a notice referred to in Section
2.06(d) hereof, Seller shall promptly consult with Buyer with respect
to any points of disagreement in an effort to resolve the dispute and
reach agreement in writing as to the Net Assets and Closing Date
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Balance Sheet. If such dispute is not resolved by Buyer and Seller
within 10 days after Seller receives such notice, it will be resolved
by submission within 5 business days to Price Waterhouse (the
"Independent Accountants") with instructions to the Independent
Accountants to resolve such dispute within 30 days after receipt of
relevant information.
(f) For purposes of such arbitration, Buyer and Seller shall
each submit to the Independent Accountants a proposed determination of
Net Assets and a proposed Closing Balance Sheet. The Independent
Accountants shall determine Net Assets and the Closing Balance Sheet in
accordance with GAAP and the proviso to Section 2.06(b) hereof, and
shall otherwise conduct the arbitration under such procedures as to
which the parties may agree or, failing such agreement, under the
Commercial Rules of Arbitration of the American Arbitration
Association. The fees and expenses of the Independent Accountants shall
be allocated between Buyer and Seller by the Independent Accountants in
proportion based on the extent that either Party does not prevail on
items in dispute with respect to the determination of Net Assets. The
decision of the Independent Accountants shall be final, conclusive and
binding with respect to the determination of Net Assets and the
allocation of fees and expenses, and the decision of the Independent
Accountants shall be enforceable as an arbitration award by a court of
competent jurisdiction.
(g) Within two business days of the determination of Net
Assets in accordance with Section 2.06(d), (e) or (f) above (as
applicable):
(i) If Net Assets exceed $24,283,000, Buyer shall pay to
Seller such excess, and
(ii) If $24,283,000 exceeds Net Assets, Seller will pay to
Buyer such excess. Such payment shall be made within two business days
of such determination of Net Assets by wire transfer of immediately
available funds to an account designated by the transferee.
Section 2.07. Aero-Safe. Buyer is aware that Aero-Safe, Inc., a
Canadian corporation ("Aero Safe"), performs certain die cutting for both the
Business and other parts of Seller's business and that the Purchased Assets
include certain assets of Seller used by Aero Safe (the "Aero Safe Assets").
Buyer agrees to provide Seller access, through Aero-Safe, to the Aero-Safe
Assets to the extent reasonably necessary or desirable in connection with the
conduct of the Seller's business after the Closing. Buyer and Seller will share
equitably, based upon Buyer's and Seller's annual usage of the Aero-Safe Assets,
in the costs of maintaining and using the Aero-Safe Assets, all pursuant to an
agreement reasonably satisfactory to both Parties and to Aero-Safe (the
"Aero-Safe Sharing Agreement").
Section 2.08. Sharing of Taxes. Buyer and Seller shall share equally
any tax or other levy payable in connection with the conveyance of the Salem
Facility to Buyer.
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ARTICLE 3. CLOSING
Section 3.01. Closing. Subject to the prior or contemporaneous
satisfaction (or waiver in accordance with the terms hereof) of the conditions
set forth in Articles 8 and 9 hereof, the Closing ("Closing") for the sale and
purchase of the Purchased Assets shall occur at the offices of Ropes & Gray, One
International Place, Boston, Massachusetts, at 11:00 a.m. on April 24, 1998, or
on such other date as Buyer and Seller may mutually agree in writing (the
"Closing Date").
Section 3.02. Deliveries by Seller. At the Closing, Seller shall
deliver to Buyer:
(a) a Bill of Sale and Assumption Agreement in the form of
Exhibit 3.02(a) (the "Bill of Sale and Assumption Agreement");
(b) an assignment of service marks and/or trademarks in the
form of Exhibit 3.02(b) (the "Trademark and Service Mark Assignment"),
and any other reasonable assignments and other instruments of transfer
for the Purchased Assets sufficient to convey to Buyer all right, title
and interest in and to the Purchased Assets, including, where
necessary, consents to assignment or transfer by interested third
parties;
(c) a special warranty deed transferring to Buyer title to the
Salem Facility, in form and substance reasonably satisfactory to both
Buyer and Seller (the "Deed");
(d) certified copies of resolutions duly adopted by the Board
of Directors of Seller approving and authorizing the transactions
contemplated in this Agreement, the execution hereof and the
performance of all acts required herein accompanied by an appropriate
certificate of incumbency;
(e) a certificate of good standing of Seller from the
Secretary of State of the State of Delaware;
(f) the UCC-3 Release(s) listed on Schedule 3.02(e) attached
hereto; and
(g) the Aero-Safe Sharing Agreement, duly executed by Seller
and Aero Safe;
and, except for Buyer's obligations to relocate the Utility Assets, Inventory
and Books and Records from the Middletown Facility, Seller shall have taken all
steps reasonably necessary to put Buyer in possession and control of the
Purchased Assets (other than the Aero Safe Assets).
Section 3.03. Deliveries by Buyer. At the Closing, Buyer shall deliver
to Seller:
(a) the Cash Purchase Price by wire transfer as specified in
Section 2.01 hereof;
(b) the Bill of Sale and Assumption Agreement;
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(c) certified copies of resolutions duly adopted by the Board
of Directors of Buyer approving and authorizing the transactions
contemplated in this Agreement, the execution hereof and the
performance of all acts required herein accompanied by an appropriate
certificate of incumbency;
(d) a certificate of good standing of Buyer from the Secretary
of State of the State of South Carolina; and
(e) the Aero-Safe Sharing Agreement, duly executed by Buyer
and Aero Safe.
Section 3.04. Simultaneous Closing. All actions taken at the Closing
shall be deemed to be performed simultaneously. The Parties shall deliver such
additional documents and take such additional actions as may be reasonably
necessary to complete the transactions contemplated hereby.
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Buyer that each of the
statements contained in this Article 4 (including any Schedules hereto) is true
and correct as of the date hereof and will be true and correct at and as of the
Closing Date (except as to the effects of transactions not prohibited hereby).
Section 4.01. Organization, Power and Standing. Seller is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware, with all requisite corporate power and authority to own its
properties and engage in the Business as it is now conducted, and is duly
qualified to do business in The Commonwealth of Massachusetts.
Section 4.02. Power and Authority Relative to Sale of Purchased Assets.
Seller has full corporate power and authority and has taken all required action
necessary to permit it to execute and deliver and to carry out the terms of this
Agreement and all other documents or instruments required or contemplated hereby
and none of such actions will (a) materially violate any material law, rule,
statute or ordinance applicable to Seller (except that Seller makes no
representation with respect to the applicability of any federal or state
antitrust laws), violate any provisions of Seller's Certificate of Incorporation
or Bylaws, as amended, or (b) result in any material breach of any material
agreement, instrument, order or judgment to which Seller is a party or by which
any of its assets may be bound.
Section 4.03. Valid and Binding Obligation. This Agreement constitutes,
and each other instrument or agreement to be executed and delivered by Seller in
accordance herewith will constitute, the valid and legally binding obligation of
Seller enforceable against Seller in accordance with their respective terms,
subject to applicable bankruptcy, insolvency, moratorium, reorganization and
other general laws affecting the rights and remedies of creditors and general
principles of equity, whether considered in a proceeding in equity or at law.
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Section 4.04. Assets. The Seller has valid and marketable title to the
Purchased Assets free and clear of any lien, charge, security interest, option,
restriction or other encumbrance ("Liens") except for Liens listed on Schedule
4.04 attached hereto (the "Permitted Encumbrances"), and Buyer will receive
valid and marketable title to the Purchased Assets, free and clear of any Lien
(other than Liens securing the Assumed Liabilities and other than Permitted
Encumbrances specified by an asterisk in said Schedule 4.04). Schedule 1.01(b)
hereto sets forth all fixed assets of the Business, the individual absence of
which would have a material adverse effect on the conduct of Business as
currently conducted by Seller (the "Material Fixed Assets"). The Purchased
Assets include all the assets used by Seller primarily in connection with the
Business and materially necessary or useful to conduct the Business in the
present locations of the Business as of the date hereof consistent with the past
conduct of the Business. There is no asset not used by Seller primarily in
connection with the conduct of the Business that is materially necessary or
useful for the conduct the Business as of the date hereof consistent with the
past conduct of the Business.
Section 4.05. Financial Statements; Books and Records. The internal
financial statements prepared in the ordinary course of the Business for the
Seller's operations in Salem, Massachusetts and the operations respecting the
Utility Assets for the fiscal year and quarter ended September 30, 1997, and for
the fiscal quarter ended December 31, 1997, are complete and accurate in all
material respects and fairly present the financial condition of said operations
at the dates indicated and the results of said operations for the periods
indicated and were prepared in accordance with GAAP (except as otherwise stated
therein). The historical Books and Records of Seller are complete and accurate
in all material respects and properly reflect all transactions of Seller
relating to the Business. Notwithstanding anything contained herein, Seller
makes no representation or warranty with respect to any forward looking
statements or financial projections of any kind relating to the Business.
Section 4.06. No Material Adverse Change. Except as described on
Schedule 4.06 hereto, since December 28, 1997, there has not been any Material
Adverse Change (as hereinafter defined). For the purposes of this Section 4.06:
(a) a "Material Adverse Change" shall mean any of the following: (i) any loss,
destruction or damage which causes the permanent or extended (for more than five
consecutive business days) shutdown of any Material Fixed Asset; (ii) any
material default under, or any termination of, or written notice of any pending
termination of, or (to the Knowledge (as hereinafter defined) of Seller) any
threat by a party thereto which poses a material risk of any termination of, any
Material Contract (as hereinafter defined); (iii) the loss or more than 20%
decline in the year-over-year purchases of, or (to the Knowledge of Seller) any
threat by any customer which poses a material risk of the loss or more than 20%
decline in the year-over-year purchases of, any customer of the Business, in
each case whose purchases constituted two percent (2%) or more of the gross
sales of the Business in Seller's most recently completed fiscal year, or
written notice from any such customer of its intent to terminate its
relationship with the Business or reduce such customer's year-over-year
purchases by more than 20% as compared to such fiscal year; and (iv) the
inability of Seller to obtain in the open marketplace, for a period of five
consecutive business days or more, any raw material necessary for the conduct of
the Business; and (b) "Knowledge" of the Company shall mean the actual,
conscious knowledge of Messrs. Allott, Abrahams or Sutherby and, in the case of
Mr. Allott, after having made reasonable inquiry of Messrs. Montagno and Mills
and Ms. Bethel.
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Section 4.07. Pending or Threatened Litigation. To the best of Seller's
knowledge, there is no pending or threatened litigation relating to the Business
or the Purchased Assets which would materially either affect the ability of
Seller to consummate the transactions contemplated herein or impair or affect
title to or the value of the Purchased Assets. Schedule 4.07 hereto sets forth a
complete list of all litigation currently pending or threatened respecting the
Business, including without limitation all litigation relating to any charge of
any unfair labor practice or of employment discrimination against Seller, any
union representation question that involves any of Seller's employees in the
Business or any claim (including without limitation any claim relating to unfair
employment practices, past due wages or benefits or injuries arising out of
employment) filed by or on behalf of any present or former employee of Seller in
the conduct of the Business.
Section 4.08. Brokers. Seller has engaged New England Business
Exchange, Inc. ("NEBEX") to act as its broker in connection with the
transactions contemplated herein, and any amounts payable to NEBEX pursuant to
that certain Services Agreement between Seller and NEBEX shall be the sole and
exclusive obligation of Seller. Seller has not dealt with any other broker,
finder or similar agent with respect to the transactions contemplated by this
Agreement.
Section 4.09. List of Agreements, Etc. Schedule 1.01(f) attached hereto
lists certain Contracts and Rights, the individual absence of which would have a
material adverse effect on the Business (the "Material Contracts"). The
Contracts and Rights are all the contracts to which the Seller is a party which
are in force as of the date hereof and which relate primarily to the Business.
Except as provided in Schedule 1.01(f), no consent of any party to any of the
Contracts and Rights or any other person is required as a condition to
transferring to Buyer the rights of Seller under any Contract and Rights. True
and complete copies of all Material Contracts have been delivered to Buyer.
Seller is not a party to any agreement, and does not have any right or claim, in
each case not primarily related to the Business, the absence of which would have
a material adverse effect on the Business.
Section 4.10. Intellectual Property. The Intellectual Property is all
the material intellectual property used by Seller primarily in connection with
the conduct of Business and includes all intellectual property necessary to
conduct the Business as of the date hereof in accordance with the Seller's past
practice. None of the Intellectual Property is subject to any license. As of the
date hereof, there are no proceedings currently pending which claim that
Seller's use of the Intellectual Property infringes on or violates any third
party's intellectual property, and Seller has not received any written notice
that any such proceedings are threatened alleging such violation or
infringement.
Section 4.11. Fixed Assets. All material Fixed Assets shall, at
Closing, be in all material respects in good condition and operational and
useable in the Business as presently conducted by Seller; provided, however,
that the Utility Assets have to be moved from the Middletown Facility as
contemplated by Section 1.01(b) hereof.
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Section 4.12. Bulk Sales Act. The transactions contemplated by this
Agreement are not subject to any bulk sales or similar law.
Section 4.13. Taxes. Seller has filed all property or similar tax
returns that are required to be filed and has paid, or made provisions for the
payment of, all taxes, interest and penalties that have or may become due
pursuant to said returns or to assessments for such taxes received. All such
returns are complete and accurate. All monies withheld or required to be
withheld by Seller from payments to its employees for income taxes, social
security and unemployment insurance taxes or other similar charges or
assessments have been collected or withheld and paid to the appropriate
governmental agencies, other than as set forth on Schedule 4.13 hereto. Schedule
4.13 describes all property taxes applicable to any of the Purchased Assets
(including the identity of the taxing authority, the date the tax is due, the
period covered by the tax due on such date, the date of last payment and the
amount of tax paid on such date).
Section 4.14. Employee Benefits. Schedule 4.14 hereto describes all
employee benefit plans or arrangements for any employee of Seller in the
Business to or by which Seller is a party or may be bound or that Seller
sponsors, copies of which have been delivered to Buyer prior to the execution of
this Agreement. As used herein, "employee benefit plans" shall mean and include
any retirement, profit sharing, money purchase pension, defined benefit, bonus,
thrift savings, stock purchase, deferred compensation, health or medical
insurance, dental insurance, incentive, group insurance, death benefit, fringe
benefit, disability, split-dollar, severance, medical reimbursement or similar
type of plan, whether or not qualified or required to be qualified under the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"). Except as
disclosed on Schedule 4.14, no unfunded liability, including unfunded past
service liability, exists under any such plan and, to the extent that any plan
maintained by the Seller or benefitting any employee of the Seller in the
Business is subject to the provisions of ERISA, or any United States, foreign,
state or local statute, law, ordinance, rule or regulation relating to employee
benefit plans, each of the Seller and such plan is in material compliance with
all applicable provisions thereof.
Section 4.15. Certain Labor Matters. Except as listed on Schedule 4.15
hereto, none of Seller's employees in the Business is currently represented by
any unit or group as his or her representative for collective bargaining or
other labor purposes. Seller is not currently, nor since January 1, 1995 has
Seller been, involved in any labor discussion with any unit or group seeking to
become the bargaining unit for any of its employees.
Section 4.16. Employees. Schedule 4.16 hereto contains a complete and
accurate list as of a date not more than five business days prior to the date
hereof of all employees of Seller in the Business, whether full or part-time,
temporary or otherwise, setting forth for each such employee (a) his or her job
position and (b) his or her hourly or annual compensation. Except as described
on Schedule 4.16, there is no oral or written contract for employment (other
than an employment-at-will arrangement terminable at any time without penalty or
payment) or employee handbook or manual respecting any employee of Seller in the
Business. Except as specified on Schedule 4.16, none of the employees of the
business has any job related disease or disability incurred while an employee
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of the Seller. Since the date of the listing set forth in Schedule 4.16, the
Seller has not hired or terminated the employment of any person in the Business
and has not modified the compensation of any employee of the Seller in the
Business, except for hirings at usual compensation rates and terminations of
employment in each case in the ordinary course of business.
Section 4.17. Other Names; Principal or Chief Executive Offices. Except
as listed on Schedule 4.17 hereto, neither Seller nor any of its divisions has
during the last five years been known by or used (directly or through any
predecessor, affiliate, partnership or joint venture) any other corporate or
fictitious name. Schedule 4.17 lists all the principal and chief executive
offices of the Seller and/or the Business during the last five years.
Section 4.18. Environmental. Seller is in material compliance with all
material local, state and federal environmental statutes, laws, ordinances,
rules, regulations and permits, including but not limited to the Federal Water
Pollution Control Act, 33 U.S.C. 1251 et seq., the Solid Waste Disposal Act, 42
U.S.C. 6901 et seq., the Comprehensive Environmental Response, Compensation, and
Liability Act, 42 U.S.C. 9601 et seq., ("CERCLA"), and the Toxic Substances
Control Act, 15 U.S.C. 2601 et seq.. Except as disclosed on Schedule 4.18
hereto: no "hazardous substance" (as such term is defined in CERCLA), petroleum
hydrocarbon, polychlorindated biphenyl, asbestos or radioactive material
(collectively hereinafter referred to as "Hazardous Substances") has been used,
placed, spilled, stored, treated, disposed or of permitted to remain at, on, in
or under the Salem Facility (including without limitation any improvement,
building or structure located thereon); no Hazardous Substance has been
transported to or from any of such property; and no underground storage tank has
been operated on, in or under any of such property. No asbestos or
asbestos-containing material has been installed, used, incorporated into or
disposed of on, in or under the Salem Facility (including without limitation any
of the improvements, buildings or structures located thereon). The Seller has
provided the Buyer with copies of all written complaints, citations, orders,
reports, written data, notices or other communications sent or received by it
with respect to any local, state or federal environmental law, ordinance, rule
or regulation as any of them related to the Business.
Section 4.19. Inventories. Except as set forth on Schedule 4.19 hereto
or as may be reserved against in the Closing Date Balance Sheet, the Inventory
at Closing will consist in all material respects of materials and supplies of a
quality and quantity usable or salable in the ordinary course of the Business as
conducted by Seller; provided, however, that no representation or warranty is
made herein with respect to Inventory excluded from the Closing Date Balance
Sheet in accordance with the proviso to Section 2.06(b) hereof. Except as
provided in Schedule 4.19, none of the Inventory at the Closing will be subject
to any consignment or similar arrangement.
Section 4.20. Insurance. Schedule 4.20 contains a complete and accurate
list and description of all liability insurance policies currently in effect,
including whether such policies are "occurrence" or "claims made", of all
workers' compensation arrangements and of all hazard and property insurance
policies of Seller currently in effect which relate in any way to the Business.
Complete copies of each such insurance policy or arrangement and its attachments
have been delivered to
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Buyer. Such insurance policies or arrangements are valid, outstanding and
enforceable and all premiums with respect thereto which have become due have
been paid.
Section 4.21. No Orders. Neither the Seller, with respect to the
Business, nor any of the Purchased Assets is subject to any order of any court
or other adjudicatory body.
Section 4.22. Compliance With Laws. Seller has complied in all material
respects with all requirements of applicable material laws in or with respect to
the conduct of the Business. The Salem Facility, and its current use, conform in
all material respects to all zoning and similar ordinances.
Section 4.23. No Related Party Transaction. Except as set forth in
Schedule 4.23 hereto, the Business, in the ordinary course, makes no purchases
from, makes no sales to, receives no payments from and makes no payments to the
portions of Seller not included in the Business or any affiliate of Seller.
Section 4.24. No Notification. Neither Seller nor Buyer is required by
any law to provide advance notification of the transactions contemplated by this
Agreement to any person who is employed in the Business.
Section 4.25. No Transfer Tax. No sales, use, transfer or similar tax
or governmental charge will apply to the transfer pursuant to this Agreement of
any of the Purchased Assets, other than taxes payable in connection with the
conveyance of the Salem Facility to Buyer.
Section 4.26. Accounts Receivable. All accounts receivable included on
the Closing Date Balance Sheet, net of any reserves with respect thereto, will
be paid in full by the account debtors thereof on or prior to the date which is
nine months after the Closing Date.
ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller that each of the
statements contained in this Article 5 is true and correct as of the date hereof
and will be true at and as of the Closing Date.
Section 5.01. Organization, Power and Standing. Buyer is a corporation
duly organized, validly existing and in good standing under the laws of the
State of South Carolina, with all requisite power and authority (corporate or
otherwise) to own its properties and to carry on its business as such business
is now conducted and presently proposed to be conducted. As of the Closing Date,
Buyer shall be duly qualified to do business as a foreign corporation in The
Commonwealth of Massachusetts.
Section 5.02. Power and Authority Relative to Transaction. Buyer has
full corporate power and authority and has taken all required action necessary
to permit it to execute and deliver and to
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carry out the terms of this Agreement and all other documents or instruments
required or contemplated hereby and none of such actions will (a) materially
violate any law, rule, statute or ordinance applicable to Buyer (except that
Buyer makes no representation with respect to the applicability of any federal
or state antitrust law), violate any provisions of Buyer's Certificate or
Articles of Incorporation or Bylaws, as amended, or (b) result in any breach of
any material agreement, instrument, order or judgment to which Buyer is a party
or by which its assets may be bound.
Section 5.03. Valid and Binding Obligation. This Agreement constitutes,
and each other instrument or agreement to be executed and delivered by Buyer in
accordance herewith (including without limitation the Assumption of Liabilities)
will constitute, the valid and legally binding obligation of Buyer, enforceable
against it in accordance with their respective terms, subject to applicable
bankruptcy, insolvency, moratorium, reorganization and other general laws
affecting the rights and remedies of creditors and general principles of equity,
whether considered in a proceeding in equity or at law.
Section 5.04. Brokers. Buyer has not dealt with any broker, finder or
similar agent engaged by Buyer with respect to the transactions contemplated by
this Agreement.
Section 5.05. Pro-Forma Capitalization; Solvency. Attached hereto as
Schedule 5.05 is the pro forma capitalization of the Buyer immediately after
giving effect to the Closing. After giving effect to the consummation of the
transactions contemplated hereby and the financing thereof, Buyer is and will be
solvent (within the meaning of Section 548 of Title 11 of the United States Code
and any similar state statute which may be applicable), has and will have assets
having a fair value in excess of the amount required to pay its probable
liabilities on its existing debts as they become absolute and matured, and has
and will have access to adequate capital for the conduct of its business and the
ability to pay its debts from time to time incurred in connection therewith as
such debts mature.
Section 5.06. Hart-Scott Filing. No filings are required under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"Hart-Scott Act"), because Buyer has less than $10,000,000 in assets and
revenues, determined in accordance with the Hart-Scott Act and rules,
regulations and interpretations thereunder, including without limitation such
assets and revenues of Founders Fund.
ARTICLE 6. COVENANTS OF SELLER
Section 6.01. Access to Information. Subject to Section 7.07 hereof,
pending Closing, Seller shall permit Buyer, its financing sources and their
respective counsel, accountants and other representatives access to such of the
books, accounts, contracts, commitments, records, documents and personnel of or
concerning the Business, and shall furnish Buyer during such period all such
information concerning the Business, as Buyer, its financing sources and their
respective counsel,
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accountants and other representatives may reasonably request, all at times and
in a manner so as not to interfere with the conduct of the Business in any
material respect. Seller shall make available to Buyer, its financing sources
and their respective counsel, accountants and other representatives, Seller's
employees, accountants, and other advisors for consultation, and shall permit
access to other third parties reasonably requested for confirmation of any
information obtained, all at times and in a manner so as not to interfere with
the conduct of the Business in any material respect.
Section 6.02. Conduct of Business. Between the date of this Agreement
and the Closing, unless Buyer shall otherwise consent, Seller shall:
(a) conduct the Business only in the ordinary course,
including retaining any requisite permits, licenses, and
authorizations, and use reasonable efforts to preserve the existing
contracts and goodwill of those having business relations with the
Business;
(b) maintain the books, accounts and records of the Business
in their usual, regular and ordinary manner and post all entries
therein promptly in compliance with accepted practice and all
applicable laws;
(c) maintain sufficient inventory to conduct the Business in
the ordinary course, including without limitation sufficient inventory
of finished goods to fill orders (in the ordinary course of business,
and consistent with past practices and quantities) from customers of
goods manufactured utilizing the Utility Assets during the two months
following the Closing Date;
(d) not dispose of any Material Asset other than inventory in
the ordinary course of business;
(e) not enter into any material agreement respecting the
Business except in the ordinary course of business;
(f) without limiting the generality of Section 6.02(e) above,
not enter into any contract with any supplier of "Super Corflo" smooth
wall flexible pipe, without the prior consent of Buyer which shall not
be unreasonably withheld;
(g) make no material change in the compensation of any
employee of the Business; and
(h) refrain from entering into any agreement or commitment for
capital expenditures in excess of $100,000.00 in the aggregate.
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Section 6.03. Filings, Consents and Approvals. Seller shall, as
promptly as practicable, make or cause to be made all governmental filings
required to be made by it, and will comply with all applicable governmental
waiting periods or notification or other procedures required to be complied with
by it in connection with the transactions contemplated by this Agreement.
Section 6.04. Non-Competition. Seller agrees that, in consideration of
the purchase by Buyer hereunder, neither Seller nor any of its subsidiaries
shall, on or prior to the date which is three years after the Closing Date,
directly or indirectly, run, own, manage, operate or control any business,
venture or activity which sells, to persons or entities which are customers of
the Business on, or have been customers of the Business during the two years
immediately preceding, the Closing Date, products which are materially
equivalent to those products sold by the Business as conducted by Seller at the
Closing Date; provided, however, that Seller shall not be considered to be in
default of this Section 6.04 solely by virtue of holding for portfolio purposes
as a passive investor not more than five percent (5%) (on a fully-diluted basis)
of the issued and outstanding equity securities of a corporation, so long as
such equity securities are listed or quoted on a stock exchange or an
over-the-counter market within the United States; and provided, further, that
Seller shall not be considered to be in default of this Section 6.04 if, after
the Closing Date, (i) Seller or a subsidiary thereof purchases an entity (by
purchase of stock, assets, merger or otherwise), and such entity continues to
sell products sold by it on the date of such acquisition or within the two years
immediately preceding such acquisition to customers of such entity on the date
of such acquisition or within the two years immediately preceding such
acquisition, or (ii) Seller or a subsidiary thereof is acquired by an entity (by
purchase of stock, assets, merger or otherwise), and such entity continues to
sell products sold by it on the date of such acquisition or within the two years
immediately preceding such acquisition to customers of such entity on the date
of such acquisition or within the two years immediately preceding such
acquisition.
Section 6.05. Non-Solicitation. For a period of three years from the
Closing Date, Seller will not, without the prior written consent of Buyer,
either directly or through some other person or entity, seek to contract with,
hire or solicit the employment of any of Buyer's salaried management personnel
who were previously employed by Seller, or otherwise solicit termination of
their employment.
Section 6.06. Exclusivity. In consideration of the time and resources
that Buyer will devote to the transactions contemplated hereby, Seller agrees
that, until April 24, 1998 (so long as good faith negotiations are continuing
between the parties), Seller will not, and Seller will cause its affiliates,
directors, officers, employees, representatives and agents (including without
limitation NEBEX) not to, directly or indirectly, solicit or initiate or enter
into discussions or transactions with, or encourage, or provide any information
to, any corporation, partnership or other entity or group (other than Buyer and
its designees) concerning any sale of stock by the stockholders of, or any
merger, recapitalization, spin-off or sale of securities or substantial assets
of, or any similar transaction or alternative to the transactions contemplated
hereby involving, the Business. Seller represents that neither it nor any of its
affiliated entities is party to or bound by any agreement with respect to any
such transaction other than as contemplated by this Agreement.
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Section 6.07. Certain Transitional Matters Relating to the Utility
Assets.
(a) In connection with the installation by Buyer of the
Utility Assets in the Salem Facility, Seller shall from time to time
make available to Buyer such employees from the Middletown Facility as
Buyer may reasonably request in order to provide to Buyer the technical
experience and know-how Buyer may reasonably require in order to be
able to begin production using the Utility Assets in the Salem Facility
in substantially the same manner as the Utility Assets were used by
Seller in the Middletown Facility; provided, however, that (i) Seller
shall not be required to provide more than an aggregate of 20 man-days
of assistance under this Section 6.07(a), (ii) Seller shall not be
required to provide any assistance under this Section 6.07(a) more than
two months after the Closing Date (the "Transition Termination Date"),
(iii) Buyer shall reimburse Seller for all direct and indirect costs of
the employees so provided by Seller (including without limitation
salaries, benefits and travel expenses) promptly upon demand therefore
by Seller, and (iv) Seller shall not be required to provide any such
employees if doing so would disrupt, in any material manner, Seller's
conduct of its own business. Seller shall have no liability whatsoever
to Buyer for any of the acts of, or advice rendered by, such employees
to Buyer.
(b) Until the Transition Termination Date, Seller will
cooperate with Buyer's reasonable requests to coordinate the orderly
transition to the Salem Facility of the customer/sales service and
invoicing functions relating to the Business which have been conducted
by Seller in the Middletown Facility, and Seller will make available
shipments of Inventory retained in the Middletown Facility and referred
to in Section 6.02(c) hereof; provided, however, that (i) Buyer shall
reimburse Seller for all of Seller's out-of-pocket costs incurred in
providing such assistance to Buyer, (ii) Seller shall not be required
to provide any such assistance if doing so would disrupt, in any
material manner, Seller's conduct of its own business and (iii) Seller
shall have no liability whatsoever to Buyer by reason of rendering such
assistance, except for Seller's gross negligence or wilful misconduct.
On the Transition Termination Date, or such earlier date as Buyer may
specify by notice to Seller, any Inventory remaining at the Middletown
Facility shall be removed and shipped to the Salem Facility in the same
manner and on the same basis as the removal and shipping of the Utility
Assets.
ARTICLE 7. COVENANTS OF BUYER
Section 7.01. Assumed Liabilities. Buyer shall pay, perform in full and
discharge in accordance with the terms thereof all of the Assumed Liabilities.
Section 7.02. Employment Matters. In connection with the transition of
the Business from Seller to Buyer:
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(a) It is acknowledged by the Buyer that the employees listed
on Schedule 7.02(a) attached hereto (the "Retained Employees") shall
continue to be employed by the Seller after the Closing Date. Buyer
shall offer employment to all employees listed on Schedule 4.16 hereto
and marked with an asterisk (the "Transferred Employees").
(b) Buyer will make bona fide offers of employment to
Transferred Employees in good faith and will not discriminate in
violation of any applicable employment or other laws; provided,
however, that such offers to the persons named in Section 9.09 hereof
may be made subject to the execution and delivery by such persons of
the employment and/or non-competition and non-disclosure agreements
referred to therein. Pursuant to such offers, Buyer agrees to use its
best efforts (which efforts shall not, however, be deemed to require
Buyer to offer higher compensation) to hire all Transferred Employees
on or before the Closing Date and on terms consistent with all
provisions of this Section 7.02
(c) Buyer agrees that each offer of employment made to
Transferred Employee shall include (i) base salary compensation at
least equal to the current base salary compensation paid to said
Transferred Employee by Seller as of January 31, 1998, (ii) medical
benefits which in the aggregate are substantially equivalent to those
offered by Seller to its employees generally as of the date hereof
(provided, however, that such coverage can be obtained by Buyer at
substantially the same cost as to Seller), and (iii) the right to
participate in a retirement benefit plan qualified under the provisions
of Section 401(k) of the Internal Revenue Code of 1986, as amended,
that Buyer intends to establish shortly after the Closing, and such
Transferred Employees will be credited by Buyer for all prior years of
service with the Seller for purposes of eligibility and vesting, under
such Plan. Buyer's Section 401(k) plan shall accept, subject to
applicable law, roll-over contributions of distributions from Seller's
savings plan for employees who accept Buyer's offers of employment and
commence employment with Buyer.
(d) Seller shall be responsible for, and shall indemnify and
hold Buyer harmless from, any severance benefits that may become
payable to any Transferred Employee who declines Buyer's good faith
offer of employment made in accordance with this Section 7.02.
(e) Notwithstanding any other provision of this Section 7.02,
Buyer shall have the right to terminate the employment, and adjust the
compensation, of any Employee hired by Buyer at will at any time for
any or no reason.
Section 7.03. Filings, Consents and Approvals. Buyer shall, as promptly
as practicable, make or cause to be made all governmental filings required to be
made by it, and will comply with all applicable governmental waiting periods or
notification or other procedures required to be complied with by Buyer in
connection with the transactions contemplated by this Agreement.
Section 7.04. Non-Competition. Buyer agrees that, in consideration of
the sale by Seller hereunder, neither it, nor Founders Fund, nor any subsidiary
of Buyer or Founders Fund shall, on
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or prior to the date which is three years after the Closing Date, directly or
indirectly, run, own, manage, operate or control any business, venture or
activity which sells, to persons or entities which are customers of Seller on,
or have been customers of the Business during the two years immediately
preceding, the Closing Date, products which are produced by the same process and
to the same general specifications as those products which have been produced,
and which are or have been during the year immediately preceding the Closing
Date provided to such customers, and are identified on Schedule 7.04 attached
hereto (the "Restricted Products"); provided, however, that Buyer and Founders
Fund shall not be considered to be in default of this Section 7.04 solely by
virtue of holding for portfolio purposes as a passive investor not more than
five percent (5%) (on a fully diluted basis) of the issued and outstanding
equity securities of a corporation, so long as such equity securities are listed
or quoted on a stock exchange or an over-the-counter market within the United
States; and provided, further, that Buyer and Founders Fund shall not be
considered to be in default of this Section 7.04 if, after the Closing Date, (i)
Buyer or Founders Fund or a subsidiary thereof purchases an entity (by purchase
of stock, assets, merger or otherwise), and such entity continues to sell
Restricted Products sold by it on the date of such acquisition or within the two
years immediately preceding such acquisition to customers of such entity on the
date of such acquisition or within the two years immediately preceding such
acquisition, or (ii) Buyer or a subsidiary thereof is acquired by an entity (by
purchase of stock, assets, merger or otherwise), and such entity continues to
sell Restricted Products sold by it on the date of such acquisition or within
the two years immediately preceding such acquisition to customers of such entity
on the date of such acquisition or within the two years immediately preceding
such acquisition.
Section 7.05. Non-Solicitation. Except to the extent required by
Section 7.02, for a period of three years from the Closing Date, Buyer will not,
without the prior written consent of Seller either directly or through some
other person or entity, seek to contract with, hire or solicit the employment of
any of Seller's employees (including without limitation, the Retained Employees)
or otherwise solicit termination of their employment; provided, however, that
the foregoing shall not prohibit Buyer from entertaining and accepting requests
for employment by such employees or their agents if such requests are not the
result of direct or indirect efforts by Buyer to solicit their termination and
employment, and such hiring does not violate any valid non-compete or other
agreement with Seller.
Section 7.06. Post-Closing Records Availability. From the Closing Date
through the third anniversary of the Closing Date (the "Maintenance Period"),
Buyer shall maintain and preserve the data, books and records of the Business
referred to in Section 1.01(d), and shall upon reasonable notice and at
reasonable times in the presence of an officer or other authorized
representative of Buyer, permit Seller to inspect and copy said data, books and
records to the extent that they relate to periods prior to the Closing Date.
Following the Maintenance Period, Buyer may dispose of or destroy such data,
books and records in accordance with its normal policies and procedures.
Section 7.07. Confidentiality. Buyer will not, and will not permit any
of its counsel, accountants or other representatives, to, without the prior
written consent of Seller, disclose any confidential information relating to the
Business furnished to Buyer or such counsel, accountants
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or other representatives by or on behalf of Seller or use any such information
for any purpose otherwise than in evaluating the Business in connection with the
transactions contemplated hereby. In the event of any termination of this
Agreement, each of Buyer and such counsel, accountants and other representatives
will return all copies of any written materials in their possession furnished by
or on behalf of Seller or which summarize or otherwise reflect any confidential
information relating to the Business furnished by or on behalf of Seller. Buyer
will advise its investors and its prospective lenders, of the confidential
nature of any confidential information relating to the Business furnished by
Seller to Buyer and then furnished by Buyer to such investors and prospective
lenders and shall request such investors and prospective lenders to keep such
confidential information in confidence and not disclose or use such confidential
information for any purpose otherwise than in evaluating the Business in
connection with their investment or proposed loans, and in the event of
termination of this Agreement further request such investors and prospective
lenders to return all copies of any written materials in their possession
furnished by or on behalf of Buyer or which summarize or otherwise reflect any
confidential information relating to the Business furnished by or on behalf of
Buyer; provided, however, that such information may be furnished to Buyer's
investors and its prospective lenders only with Seller's prior written consent,
which shall not be unreasonably withheld; and provided, further, that Seller may
grant or withhold such consent in the exercise of its sole and absolute
discretion with respect to information regarding the identity of the customers
of the Business or other competitively-sensitive information. Pending closing of
the transaction, neither of the Parties will, without the consent of the other
Party, make any announcement about such transaction to the public, to the
Business' customers or employees, or to any other person or entity; provided,
however, that Seller may disclose this transaction and the terms thereof to the
extent it reasonably determines that it is required to do so under applicable
securities laws or its agreements with the National Association of Securities
Dealers, Inc. The provisions of this Section 7.07 shall supersede the provisions
of the letter agreement relating to confidentiality dated November 12, 1997
between Seller and Founders Fund.
Section 7.08. Application of Payments to Accounts Receivable. From and
after the Closing Date, Buyer shall apply each payment received from an account
debtor to the payment of the account receivable owed by such account debtor
which arose earliest in time and which is still outstanding and unpaid, and, if
any such payment is received from an account debtor while there is an Unpaid
Receivable (as hereinafter defined) with respect to such account debtor, Buyer
shall turn such payment over to the collection agency referred to in Section
10.01(d) hereof for such application; provided, however, that application to an
account receivable shall not be required to be made under this Section 7.08 if
and to the extent that there exists, at the time such application would
otherwise be made, a good faith dispute with respect to the amount thereof which
is due and owing which has been raised by the account debtor with respect
thereto.
Section 7.09. Minimum Equity Contribution; Financing.
(a) Buyer covenants that, in connection with its
capitalization, it will receive a minimum of $6,500,000 of equity
capital from Founders Fund; provided, however, that, at the Closing,
such equity capital may actually be received from sources other than
Founders
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Fund so long as such other sources are not included in the commitment
letters referred to Section 7.09(b) hereof.
(b) Buyer represents and warrants that it has received and
accepted from Gleacher Natwest Inc. and National Westminster Bank Plc
and from Fleet Capital Corporation commitments for debt financing, in
addition to that equity capital to be contributed pursuant to Section
7.09(a) hereof, in an aggregate amount sufficient for Buyer to
consummate the transactions contemplated hereby to be consummated by
Buyer. Buyer has accepted such commitments and has furnished to Seller
correct and complete copies of the fully-executed commitment letters
relating thereto.
ARTICLE 8. CONDITIONS TO OBLIGATIONS OF SELLER
The obligation of Seller to consummate the transactions contemplated
hereby is subject to the satisfaction at or prior to the Closing Date of the
following conditions, any or all of which may be waived in whole or in part by
Seller:
Section 8.01. Representations and Warranties True and Correct. The
representations and warranties of Buyer set forth herein or in any certificate
or document delivered in connection herewith shall have been true and correct in
all material respects when made and shall be repeated and shall be true and
correct in all material respects at and as of the Closing Date.
Section 8.02. Good Standing; Resolutions. Seller shall have received
appropriate evidence as to the continued existence and good standing on the
Closing Date of the Buyer in its jurisdiction of organization and copies of the
resolution or resolutions of the Board of Directors of Buyer with respect to the
authorization and approval of the consummation of the transactions contemplated
hereby certified by the Corporate Secretary of Buyer as of the Closing Date.
Section 8.03. Compliance with Agreement. Buyer shall have performed and
complied with all covenants and conditions required by this Agreement to be
performed and complied with by Buyer prior to or at the Closing Date.
Section 8.04. Proceedings and Instruments. All proceedings with respect
to the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby, including any and all certificates or other
documents delivered in connection therewith, shall have been, in form and
substance, reasonably satisfactory to Seller's counsel.
Section 8.05. [Deleted.]
Section 8.06. Payment of Purchase Price and Assumption of Liabilities.
Seller shall have received from Buyer: (a) the Purchase Price; and (b) the Bill
of Sale and Assumption Agreement.
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Section 8.07. Closing Certificates. Buyer shall provide to Seller such
closing certificates with respect to representations and warranties and
compliance with covenants, and such incumbency certificates, as shall be
reasonably satisfactory to Seller.
Section 8.08. Opinion of Counsel. Buyer shall provide to Seller an
opinion of Buyer's counsel reasonably satisfactory to Seller.
Section 8.09. Final Agreement on Allocation of Purchase Price. Buyer
and Seller shall have reached final agreement on the Allocation of Purchase
Price set forth in preliminary form on Schedule 2.05 hereto.
Section 8.10. Aero-Safe Agreement. Seller shall have received a copy of
the Aero-Safe Sharing Agreement duly authorized, executed and delivered by Buyer
and Aero Safe.
ARTICLE 9. CONDITIONS TO OBLIGATIONS OF BUYER
The obligation of Buyer to consummate the transactions contemplated
hereby is subject to the satisfaction at or prior to the Closing Date of the
following conditions, any or all of which may be waived in whole or in part by
Buyer:
Section 9.01. Representations and Warranties True and Correct. The
representations and warranties of Seller set forth herein and in any certificate
or document delivered pursuant to the provisions hereof shall have been true and
correct in all material respects when made and shall be repeated and shall be
true and correct in all material respects at and as of the time of the Closing.
Section 9.02. Good Standing; Resolutions. Buyer shall have received
appropriate evidence as to the continued existence and good standing on the
Closing Date of the Seller in its jurisdiction of organization and qualification
in the Commonwealth of Massachusetts and copies of the resolution or resolutions
of the Board of Directors of Seller with respect to the authorization and
approval of the consummation of the transactions contemplated hereby certified
by Seller's Corporate Secretary, as of the Closing Date.
Section 9.03. Compliance with Agreement. Seller shall have performed
and complied with all covenants and conditions required by this Agreement to be
performed and complied with by it at or prior to the Closing Date.
Section 9.04. Required Consents; Discharge of Liens. (a) All consents
of third parties which are required pursuant to the terms hereof shall have been
obtained; (b) the Seller shall have discharged (or made other arrangements
reasonably satisfactory to Buyer with respect to) all Liens on each of the
Purchased Assets (except for Liens securing the Assumed Liabilities and
Permitted Encumbrances marked with an asterisk on Schedule 4.04 hereto); and (c)
to the extent required, the other party to each Material Contract shall have
consented, to Buyer's satisfaction, to Buyer's
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assumption of such Material Contract or entered into an agreement satisfactory
to Buyer in substitution of such Material Contract.
Section 9.05. Bills of Sale; Deed; Assignments. Buyer shall have
received from Seller: (a) the Bill of Sale and Assumption Agreement; (b) the
Deed; (c) the Trademark and Service Mark Assignment; and (d) such other
assignments as shall be reasonably necessary to vest in Buyer title to the
Purchased Assets.
Section 9.06. Proceedings and Instruments. All proceedings with respect
to the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby, including any and all certificates or other
documents delivered in connection therewith, shall have been, in form and
substance, reasonably satisfactory to Buyer's counsel.
Section 9.07. [Deleted.]
Section 9.08. [Deleted.]
Section 9.09. Employment and Non-Competition Agreements. The following
persons shall have executed employment, non-competition and non-disclosure
agreements in substantially the form of Exhibit 9.09(a) attached hereto: Robert
J. Montagno, Nancy A. Bethel and Robert Mills; and the following persons shall
have executed non-competition and non-disclosure agreements in substantially the
form of Exhibit 9.09(b) attached hereto: Victor Borges, Charles Lavigne, Kathryn
Ywuc, Michael J. Konan, Cliff O'Neill, Joseph DeLuca and John Kibbey, provided
that the condition contained in this Section 9.09 shall be deemed to have been
satisfied if only one of Victor Borges, Charles Lavigne, Kathryn Ywuc, Michael
J. Konan, Cliff O'Neill, Joseph DeLuca or John Kibbey shall have failed to
execute such a non-competition and non-disclosure agreement.
Section 9.10. Closing Certificates. Seller shall provide to Buyer such
closing certificates with respect to representations and warranties and
compliance with covenants, and such incumbency certificates, as shall be
reasonably satisfactory to Buyer.
Section 9.11 Opinion of Counsel. Seller shall provide to Buyer an
opinion of Seller's counsel reasonably satisfactory to Buyer.
Section 9.12. Financing. Buyer shall have obtained the financings
contemplated by the commitment letters referred to in Section 7.09 hereof (or
such portions of such financings as may be required for Buyer to have sufficient
funds to consummate the transactions contemplated hereby if not all of the
proceeds of such financings are so required) on substantially the terms set
forth in such letters and subject to the negotiation and execution of
documentation relating to such financings which is reasonably satisfactory to
Buyer.
Section 9.13. Due Diligence. The results of such additional due
diligence, including without limitation with respect to environmental matters
and customer investigations and interviews, as
- 23 -
<PAGE> 24
Buyer undertakes with respect to the Business and the Purchased Assets shall be
satisfactory to Buyer; provided, however, that this condition shall be deemed
deleted from this Agreement on April 15, 1998 unless, on or prior to such date,
Buyer has given written notice to Seller that this condition has not been
satisfied and, in the event Buyer gives Seller such notice, Seller or Buyer may
terminate this Agreement.
Section 9.14. Final Agreement on Allocation of Purchase Price. Buyer
and Seller shall have reached final agreement on the Allocation of Purchase
Price set forth in preliminary form on Schedule 2.5.
Section 9.15. Aero-Safe Agreement. Buyer shall have received a copy of
the Aero-Safe Sharing Agreement duly authorized, executed and delivered by
Seller and Aero Safe.
ARTICLE 10. SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
Section 10.01. Survival; Certain Limitations.
(a) The Parties hereto agree that the covenants, agreements,
guarantees, representations and warranties contained in this Agreement
shall survive the Closing until all obligations of the parties
hereunder and under the other closing documents have been satisfied in
full, except that no claim by Buyer against Seller based upon a breach
of any representation or warranty contained in Article 4 of this
Agreement (other than Sections 4.01, 4.02 (other than clause (b)
thereof), 4.03, 4.04, 4.08, 4.13 and 4.18) may be made unless Buyer
gives notice thereof to the Seller no later than 18 months following
the Closing Date, and no claim by Seller against Buyer based upon a
breach of any representation or warranty contained in Article 5 of this
Agreement (other than Sections 5.01, 5.02 (other than clause (b)
thereof), 5.03 and 5.04) may be made unless Seller gives notice thereof
to Buyer no later than 18 months following the Closing Date. No claim
by Buyer against Seller based upon a breach of any representation or
warranty contained in Section 4.13 hereof may be made unless the Buyer
give notice thereof to Seller no later than the expiration of the
applicable statute of limitations relating to the tax in question. No
claim by Buyer against Seller based upon a breach of any representation
or warranty contained in Section 4.18 hereof may be made unless the
Buyer give notice thereof to Seller no later than six years following
the Closing Date.
(b) Notwithstanding any other provision of this Agreement, (i)
Seller shall have no liability to Buyer for breaches of representations
and warranties contained in Article 4 of this Agreement or in any
certificate or other document making such representations and
warranties (except with respect to Section 4.26 hereof) except to the
extent that the aggregate amount of such liabilities exceeds
$100,000.00 and (ii) the aggregate liability of the Seller for breaches
of representations and warranties contained in Article 4 of this
Agreement (other than Sections 4.01, 4.02 (other than clause (b)
thereof), 4.03, 4.04 or 4.08) or in any
- 24 -
<PAGE> 25
certificate or other document making such representations and
warranties shall not exceed $6,500,000.00.
(c) Notwithstanding any other provision of this Agreement, (i)
Buyer shall have no liability to Seller for breaches of representations
and warranties contained in Article 5 of this Agreement or in any
certificate or other document making such representations and
warranties except to the extent that the aggregate amount of such
liabilities exceeds $50,000.00 and (ii) the aggregate liability of the
Buyer for breaches of representations and warranties contained in
Article 5 of this Agreement (other than Sections 5.01, 5.02 (except
clause (b) thereof), 5.03 or 5.04) or in any certificate or other
document making such representations and warranties shall not exceed
$6,500,000.00.
(d) If Buyer shall make any claim against Seller with respect
to a breach of the representation and warranty contained in Section
4.26 hereof (or in any certificate or other document making such
representation and warranty), then Buyer shall (i) take all action to
vest ownership of all of the accounts receivable with respect to which
such claim is made (the "Unpaid Receivables") in the Seller, and (ii)
assign the collection of the Unpaid Receivables to a collection agency
reasonably satisfactory to both Buyer and Seller with instructions to
collect such Unpaid Receivables in a commercially reasonable manner.
Section 10.02. Indemnification of Buyer by Seller. Seller agrees to
indemnify, defend and hold Buyer harmless from and against any and all losses,
claims, damages and liabilities (including interest, penalties and reasonable
attorneys' fees) that Buyer or its affiliates may suffer, sustain, incur or
become subject to arising out of or relating or due to (i) the breach of any
representation, warranty, covenant, undertaking or other agreement of Seller
contained in this Agreement or any other document delivered by Seller in
connection herewith, including without limitation any failure to pay or perform
any Assumed Liability; (ii) employment discrimination, wrongful termination,
severance benefits, workers compensation or other employee or employment matters
or claims by or with respect to employees or former employees of Seller for
claims arising out of or relating to such person's employment by Seller and
occurring prior to the Closing Date; (iii) the Contracts and Rights, to the
extent that such losses, claims, damages and liabilities arise out of or relate
to any act, omission, default, transaction, event or circumstance occurring
before the Closing; and (iv) claims or liability in connection with products of
the Business sold by Seller prior to the Closing.
Section 10.03. Indemnification of Seller by Buyer. Buyer agrees to
indemnify, defend and hold Seller harmless from and against any and all losses,
claims, damages and liabilities (including interest, penalties and reasonable
attorneys' fees) that Seller or its affiliates may suffer, sustain, incur or
become subject to arising out of or relating or due to (i) the breach of any
representation, warranty, covenant, undertaking or other agreement of Buyer
contained in this Agreement or any other document delivered by Buyer in
connection herewith; (ii) employment discrimination, wrongful termination,
severance benefits, workers compensation or other employee or employment matters
or claims by or with respect to former employees of Seller for claims arising
out of or relating to such person's employment by Buyer; (iii) the Contracts and
Rights, to the extent that
- 25 -
<PAGE> 26
such losses, claims, damages and liabilities arise out of or relate to any act,
omission, default, transaction, event or circumstance occurring after the
Closing; or (iv) claims or liability in connection with products of the Business
sold by Buyer after the Closing.
Section 10.04. Procedure for Indemnification.
(a) Any Party making a claim for indemnification hereunder
shall notify the indemnifying Party of the claim in writing, describing
the claim, the amount thereof, and the basis therefor. Such notice
shall be a condition precedent to any liability of the indemnifying
Party hereunder. The Party from whom indemnification is sought shall
respond to each such claim within 30 days of receipt of such notice.
Failure to so respond within such time period shall constitute an
admission of liability for the claim or claims to which the notice
related. No action shall be taken pursuant to the provisions of this
Agreement or otherwise by the Party seeking indemnification until the
expiration of the 30-day response period (unless reasonably necessary
to protect the rights of the Party seeking indemnification). If such
demand is based on a claim by a third party, the indemnifying Party
shall have the right to assume the entire control of the defense
thereof, including at its own expense, employment of counsel reasonably
satisfactory to the indemnified Party, and, in connection therewith,
the Party claiming indemnification shall cooperate fully to make
available to the indemnifying Party all pertinent information under its
control; provided, however, that such assumption shall not constitute,
or be deemed to be any evidence of, the indemnifying Party's admission
of liability to the indemnified Party with respect to such matter. No
settlement may be made by any indemnifying Party without the consent of
the indemnified Party, unless such settlement only requires the payment
of money damages and such amounts are paid in full by the indemnifying
Party. The indemnified Party may, at its own expense, participate in
any proceeding relating to any such claims as to which the indemnifying
Party has assumed control pursuant to this Agreement.
(b) The indemnified Party agrees to cooperate fully with the
indemnifying Party and its counsel in the defense against any asserted
liability for which indemnification is claimed. Subject to the
immediately preceding paragraph, any compromise of any asserted
liability by the indemnifying Party shall require the prior written
consent of the indemnified Party. If, however, the indemnified Party
refuses its consent to a bona fide offer of settlement which the
indemnifying Party wishes to accept and that involves no payment by or
limitation on the indemnified Party, the indemnified Party may continue
to pursue such matter, free of any participation by the indemnifying
Party, at the sole expense of the indemnified Party. In such event, any
obligation of the indemnifying Party to the indemnified Party shall be
equal to the lesser of (i) the amount of the offer of settlement which
the indemnified Party refused to accept plus the costs and expenses of
the indemnified Party prior to the date the indemnifying Party notifies
the indemnified Party of the offer of settlement, or (ii) the actual
out-of-pocket amount the indemnified Party is obligated to pay as a
result of such Party's continuing to pursue such matter. An
indemnifying Party shall be
- 26 -
<PAGE> 27
entitled to recover from the indemnified Party any additional expenses
incurred by such indemnifying Party as a result of the decision of the
indemnified Party to pursue such matter.
(c) The gross amount which an indemnifying Party is liable to,
for, or on behalf of the indemnified Party pursuant to this Section
(the "Indemnifiable Loss") shall not be reduced by any insurance
proceeds actually recovered by or on behalf of such indemnified Party
related to the Indemnifiable Loss or by any tax benefit to the
indemnified Party arising from the Indemnifiable Loss; provided,
however, that, if an indemnified Party shall have received or shall
have had paid on its behalf an indemnity payment in respect of an
Indemnifiable Loss and shall subsequently actually receive directly or
indirectly insurance proceeds or tax reductions in respect of such
Indemnifiable Loss, then such indemnified Party shall pay to such
indemnifying Party the amount of such insurance proceeds (subject to a
reasonable reduction representing a good-faith estimate of any increase
in insurance premiums caused by the payment of such insurance proceeds)
and tax reductions or, if less, the amount of such indemnity payment.
For purposes of this Section, tax reductions arising from an
Indemnifiable Loss shall be determined after taking into account the
tax increase, if any, arising from the receipt of insurance proceeds or
indemnification payments by or on behalf of the indemnified Party.
Section 10.05. Exclusivity. The indemnification provisions of this
Article 10 shall be the exclusive remedy of the Parties with respect to claims
under this Agreement or the certificates or other documents delivered in
connection herewith.
ARTICLE 11. MISCELLANEOUS
Section 11.01. Notices. All notices to a Party hereto shall be in
writing and delivered in person or mailed by certified mail, return receipt
requested, or sent by facsimile, or sent by Federal Express delivery, with
receipt showing acceptance signature, to such Party at its address set forth
below (or such other address as it may from time to time designate in writing to
the other parties hereto):
(a) If to Seller:
Applied Extrusion Technologies, Inc.
3 Centennial Drive
Peabody, Massachusetts 01960
Attention: Anthony J. Allott
Daniel J. Sutherby
Fax: 978-538-1507
- 27 -
<PAGE> 28
With a copy to:
Applied Extrusion Technologies, Inc.
3 Centennial Drive
Peabody, Massachusetts 01960
Attention: Gerald M. Haines II, Esquire
Fax: (978) 538-1507
and with additional copy to:
Ropes & Gray
One International Place
Boston, Massachusetts 02110-2624
Attention: Winthrop G. Minot, Esquire
Fax: (617) 951-7050
(b) If to Buyer:
c/o The Founders Fund of South Carolina, LP
Overlook Executive Park, Suite 1-D
Greenville, South Carolina 29607
Attention: M. Dexter Hagy
Fax: (864) 240-7408
With a copy to:
Wyche, Burgess, Freeman & Parham, P.A.
44 East Camperdown Way
Greenville, South Carolina 29601
Attention: William W. Kehl, Esquire
Fax: (864) 235-8900
Notice shall be deemed given upon receipt, on the next business day in the case
of Federal Express delivery, on the third business day after mailing in the case
of mailing and upon receipt in the case of fax transmission
Section 11.02. Reasonable Assurances. Each Party agrees that it will
execute and deliver, or cause to be executed and delivered, on or after the date
of this Agreement, all such other instruments and will take all reasonable
actions as the other Party may reasonably request from time to time in order to
effectuate the provisions and purposes of this Agreement.
Section 11.03. No Waiver. Each of the parties hereto shall have the
right at all times to enforce the provisions of this Agreement in strict
accordance with its terms and to pursue remedies
- 28 -
<PAGE> 29
for breach by any legal and equitable means, including by an action for specific
performance, notwithstanding any conduct or custom on its part in refraining
from doing so at any time or times. No failure to exercise and no delay in
exercising, on the part of Buyer or Seller, any right, power or remedy hereunder
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right, power or remedy hereunder preclude any other or further exercise
thereof or the exercise of any other right, power or remedy. The rights provided
are cumulative and not exclusive of any rights provided by law.
Section 11.04. Amendments and Waivers. This Agreement may be modified
or amended only by a writing signed by Buyer and Seller. No waiver of any term
or provision hereof shall be effective unless in writing signed by the Party
waiving such term or provision.
Section 11.05. Construction. This Agreement shall be governed by and
construed in accordance with the domestic substantive laws of the Commonwealth
of Massachusetts without regard to principles of conflicts of laws which would
cause the application of the domestic substantive laws of any other
jurisdiction. The non-exclusive forum for any dispute arising under this
Agreement shall be the state or federal courts sitting in Boston, Massachusetts.
The descriptive headings of the several Articles and Sections hereof are for
convenience only and shall not control or affect the meaning or construction of
any of the provisions hereof.
Section 11.06. Binding Effect and Benefits; Assignment. This Agreement
shall be binding upon and shall inure to the benefit of the parties and their
respective heirs, successors and assigns, except that this Agreement may not be
assigned by Buyer without the express written consent of Seller.
Section 11.07. Prior Agreements. This writing embodies the entire
agreement and understanding between the parties with respect to the transaction
contemplated herein and supersedes all prior discussions, understandings and
agreements concerning such matters.
Section 11.08. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall constitute an original and all of which
taken together shall constitute one and the same instrument, and any of the
parties hereto may execute this Agreement by signing any such counterpart.
Section 11.09. Incorporation of Schedules. The Exhibits and Schedules
attached hereto are incorporated into this Agreement and shall be deemed a part
hereof as if set forth herein in full. References herein to "this Agreement" and
the words "herein," "hereof" and words of similar import refer to this Agreement
(including its Exhibits and Schedules as an entirety). In the event of any
conflict between the provisions of this Agreement and any such Schedule, the
provisions of this Agreement shall control.
- 29 -
<PAGE> 30
Section 11.10. No Third Party Rights. This Agreement is not intended
and shall not be construed to create any rights in any persons other than Seller
and Buyer and no person shall assert any rights as third party beneficiary
hereunder.
Section 11.11. Expenses. Each of the Parties hereto shall bear the
expenses incurred by it relating to the transactions contemplated by this
Agreement, including without limitation fees and expenses of counsel, subject to
such other arrangements as may be expressly set forth in the other documents
executed or to be executed in connection with this Agreement.
Section 11.12. Termination. This Agreement may be terminated at any
time before Closing:
(i) by the mutual written consent of the parties hereto; or
(ii) by Seller if the Closing shall not have taken place on or
before the date that is 45 days after the date hereof; or
(iii) automatically if the Closing shall not have taken place on or
before the date that is 75 days after the date hereof, unless
extended by written agreement of the parties hereto; or
(iv) by Seller if any of the representations, warranties or
covenants made by Buyer under this Agreement is not true or is
breached in any material respect, or by Buyer if any of the
representations, warranties or covenants made by Seller under
this Agreement is not true or is breached in any material
respect and, in either case, such untruth or breach remains
uncured for more than five business days following written
notice of the untruth or breach; or
(v) by Seller or Buyer pursuant to Section 9.12 or 9.13 hereof.
Upon termination of this Agreement under this Section 11.12, the Parties shall
be released from all obligations arising under this Agreement except for
obligations arising under Section 7.07 and Article 10 hereof and except as to
liability (A) for willful misrepresentation or nondisclosure in connection with
any representation or warranty made herein, (B) for any breach of the
representations or covenants contained in Section 7.09 hereof or (C) for willful
breach of any other covenant or agreement herein contained.
Section 11.13. Assignments of Certain Instruments. Notwithstanding any
other provision of this Agreement, to the extent that the assignment by Seller
of any Contract or Right to be assigned hereunder shall require the consent or
approval of another party thereto, this Agreement and the Bill of Sale shall not
constitute an assignment or an attempted assignment thereof if such assignment
or attempted assignment would constitute a breach thereof. Seller shall use its
reasonable commercial efforts to obtain the written consent or approval to the
assignment to Buyer of each such instrument with respect to which such consent
is required for such assignment. If such consent or approval has
- 30 -
<PAGE> 31
not been obtained on or prior to the Closing Date, each Party agrees to
cooperate with the other Party in any reasonable arrangement necessary or
desirable to provide to Buyer the benefits of the instrument (subject to the
assumption by Buyer of Seller's obligations thereunder).
Section 11.14. Disclaimer of Other Representations and Warranties.
EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED IN THIS AGREEMENT, THE PURCHASED
ASSETS WILL BE SOLD BY SELLER TO BUYER ON AN "AS IS, WHERE IS" BASIS AND WITHOUT
ANY EXPRESS OR IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE. WITHOUT LIMITING THE GENERALITY OF THE IMMEDIATELY PRECEDING SENTENCE,
EXCEPT AS MAY BE SPECIFICALLY SET FORTH HEREIN, SELLER MAKES NO REPRESENTATION
OR WARRANTY AS TO THE COMPLETENESS OR ACCURACY OF ANY INFORMATION PREPARED FOR
OR PRESENTED TO BUYER IN CONNECTION WITH THE SALE AND PURCHASE OF THE BUSINESS
OR ANY DISCUSSIONS OR NEGOTIATIONS RELATING THERETO.
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Agreement as a sealed instrument as of the date first above written.
PRONET CORPORATION
By: /s/ M. Dexter Hagy
---------------------------------------
Print Name: M. DEXTER HAGY
Title: President
APPLIED EXTRUSION TECHNOLOGIES, INC.
By: /s/ Anthony J. Allott
---------------------------------------
ANTHONY J. ALLOTT
Vice President and Chief Financial Officer
FOR GOOD AND VALUABLE CONSIDERATION, the receipt and sufficiency of
which are hereby acknowledged, the undersigned Founders Fund of South Carolina,
LP ("Founders Fund") hereby guarantees to Applied Extrusion Technologies, Inc.
("Seller") the punctual payment and performance of all of the obligations of
ProNet Corporation ("Buyer") under the foregoing Asset Purchase and Sale
Agreement, this guarantee being a guarantee of payment and not of collectibility
and being in no way conditional or contingent; and, in the event any of Buyer's
obligations under such Agreement are not paid and performed in full in
accordance with such Agreement, Founders Fund will, without demand, protest or
other notice of any kind whatsoever, from Seller or otherwise,
- 31 -
<PAGE> 32
immediately pay and perform the same in full; provided, however, that this
guarantee shall terminate and shall be of no further force or effect if and when
the Closing (as defined in such Agreement) shall occur.
IN WITNESS WHEREOF, Founders Fund has duly executed and delivered this
joinder as a sealed instrument as of the date of such Agreement.
FOUNDERS FUND OF SOUTH CAROLINA, LP
By Vaxa Capital Management, LLC,
its general partner
By /s/ M. Dexter Hagy
---------------------------------------
Print Name: M. Dexter Hagy
Title: Principal
- 32 -
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