<PAGE>
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 Quarterly Period Ended: March 28, 1999 Commission File Number: 33-93494
CROWN PAPER CO.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Virginia 54-1752385
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
300 Lakeside Drive, Oakland, CA 94612-3592
---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(510) 874-3400
----------------------------------------------------
(Registrant's telephone number, including area code)
Not Applicable
-----------------------------------------------------
(Former name, former address, and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 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_________
---------
Number of shares of no par value common stock outstanding as of the close of
business on
May 5, 1999:
One (1) share, which is owned by Crown Vantage Inc.
<PAGE>
INDEX
CROWN PAPER CO.
PART I: Financial Information
Item 1. Financial Statements
. Condensed Consolidated Balance Sheets - March 28, 1999 and
December 27, 1998.
. Condensed Consolidated Statements of Operations - First
quarter ended March 28, 1999 and March 29, 1998.
. Condensed Consolidated Statements of Cash Flows - Three
months ended March 28, 1999 and March 29, 1998.
. Notes to Condensed Consolidated Financial Statements.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
PART II: Other Information
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
2
<PAGE>
PART I -- FINANCIAL INFORMATION
- ------
ITEM 1 -- FINANCIAL STATEMENTS
- ------
CROWN PAPER CO.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands of dollars)
<TABLE>
<CAPTION>
ASSETS March 28, 1999 December 27, 1998
-------------- -----------------
(Unaudited)
-----------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 11,230 $ 9,806
Accounts receivable, net 41,442 41,022
Inventories 72,775 102,397
Prepaid expenses and other current assets 2,947 3,481
Assets held for sale 45,000
Deferred income taxes 12,142 15,067
------------- ------------
Total current assets 185,536 171,773
Property, plant and equipment, net 378,664 434,075
Other assets 41,452 43,839
Unamortized debt issue costs 11,250 11,808
Due from Parent 10,930 10,698
Intangibles, net 27,586 27,852
------------- ------------
Total Assets $ 655,418 $ 700,045
============= ============
LIABILITIES AND DEFICIT
Current Liabilities:
Accounts payable $ 42,397 $ 40,916
Accrued liabilities 54,123 75,268
Current portion of long-term debt 1,000 1,000
------------- ------------
Total current liabilities 97,520 117,184
Long-term debt 483,006 459,249
Accrued postretirement benefits other than pensions 85,084 100,736
Other long-term liabilities 30,546 33,596
Deferred income taxes 13,806 16,406
------------- ------------
Total Liabilities 709,962 727,171
------------- ------------
Shareholder's Equity (Deficit):
Preferred Stock, no par value;
Authorized - 500,000 shares;
Issued and outstanding - None
Common Stock, no par value;
Authorized - 5,000 shares;
1 Share issued and outstanding at
March 28, 1999 and December 27, 1998 138,601 137,751
Other comprehensive Income (Loss):
Minimum Pension Liability <2,231> <2,231>
Cumulative foreign currency translation adjustment 297 1,562
Retained deficit <191,211> <164,208>
------------- ------------
<54,544> <27,126>
------------- ------------
Total Liabilities and Deficit $ 655,418 $ 700,045
============= ============
</TABLE>
See notes to condensed consolidated financial statements
3
<PAGE>
CROWN PAPER CO.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the First Quarter (13 weeks)
Ended March 28, 1999 and March 29, 1998
(in thousands of dollars)
<TABLE>
<CAPTION>
First Quarter
-----------------------
1999 1998
--------- ----------
(Unaudited)
<S> <C> <C>
Net sales $201,165 $ 221,806
Cost of goods sold 193,043 212,808
--------- -----------
Gross margin 8,122 8,998
Selling and administrative expenses <15,424> <14,786>
Property tax accrual reversal 8,957
Adjustment of assets held for sale to net realizable value <16,175>
--------- -----------
Operating Loss <14,520> <5,788>
Interest expense <12,426> <12,163>
Other income, net 375 47
--------- -----------
Loss before income taxes <26,571> <17,904>
Provision (benefit) for income taxes 432 <6,266>
--------- -----------
NET LOSS $<27,003> $ <11,638>
========= ===========
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE>
CROWN PAPER CO.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months (13 weeks)
Ended March 28, 1999 and March 29, 1998
(in thousands of dollars)
<TABLE>
<CAPTION>
Three Months
-----------------------------
1999 1998
----------- ------------
(Unaudited)
<S> <C> <C>
Cash Provided by (Used for) Operating Activities:
Net loss $<27,003> $<11,638>
Items not affecting cash:
Depreciation and cost of timber harvested 16,236 21,202
Amortization of goodwill and other intangibles 281 281
Other, net 1,416 1,603
Property tax accrual reversal <8,957>
Adjustment of assets held for sale to net realizable value 16,175
Changes in current assets and liabilities:
Accounts receivable <420> <4,863>
Inventories 703 311
Other current assets 440 1,291
Accounts payable 1,481 <11,972>
Other current liabilities <12,596> <9,718>
Other, net <3,535> <8,515>
----------- ------------
Cash Used for Operating Activities <15,779> <22,018>
----------- ------------
Cash Provided by (Used for) Investing Activities:
Expenditures for property, plant and equipment <7,341> <8,208>
Other, net 794 <70>
----------- ------------
Cash Used for Investing Activities <6,547> <8,278>
----------- ------------
Cash Provided by (Used for) Financing Activities:
Proceeds from draw down of Revolving Credit 60,000 42,000
Repayments of Revolving Credit <36,000> <15,000>
Repayments of Term Loans and other long-term debt <250> <250>
----------- ------------
Cash Provided by Financing Activities 23,750 26,750
----------- ------------
Increase (decrease) in cash and cash equivalents 1,424 <3,546>
Cash and cash equivalents at beginning of year 9,806 11,415
----------- ------------
Cash and cash equivalents at end of period $ 11,230 $ 7,869
=========== ============
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE>
CROWN PAPER CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 -- ORGANIZATION AND BASIS OF PRESENTATION
- ------
The accompanying unaudited condensed consolidated financial statements
include the consolidated operations, assets and liabilities of Crown Paper Co.,
and Crown Paper Co.'s consolidated subsidiaries (The "Company"). The Company is
a wholly owned subsidiary of Crown Vantage Inc. ("Crown Vantage" or the
"Parent").
The accompanying condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for annual
financial statements. The condensed consolidated balance sheet as of December
27, 1998 was derived from audited financial statements, but does not include all
disclosures required by generally accepted accounting principles for annual
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three months ended March 28, 1999 are
not necessarily indicative of the results that may be expected for the year
ended December 26, 1999. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Company's Form 10-K
for the year ended December 27, 1998.
NOTE 2 -- INCOME TAX
- ------
The income tax benefit for the three months ended March 29, 1998 was
provided based on the Company's estimated annual tax rate of 35.0%. The tax
provision for March 28, 1999 is for certain non-income based state taxes and
foreign taxes. The Company recorded a $9.7 million valuation allowance
against the deferred tax assets reducing the tax benefit of the 1999 net
operating loss to $0.
6
<PAGE>
NOTE 3 -- LONG TERM DEBT
- ------
Consolidated long-term debt consists of the following:
<TABLE>
<CAPTION>
March 28 December 27
1999 1998
----------- ------------
(in thousands of dollars)
<S> <C> <C>
Credit Facility:
Revolving credit, due 2002 $ 99,000 $ 75,000
Term Loan B, due 2003 95,925 96,175
----------- ------------
194,925 171,175
11% Senior Subordinated Notes, due 2005 250,000 250,000
Industrial Revenue Bonds, payable to 2026 39,081 39,074
----------- ------------
484,006 460,249
Less current portion 1,000 1,000
----------- ------------
$483,006 $459,249
=========== ============
</TABLE>
Maturities of long-term debt, excluding the revolving credit, for the next
five fiscal year-ends are: 1999 - $1.0 million; 2000 - $1.3 million; 2001 - $.8
million; 2002 - $47.0 million and 2003 - $46.1 million.
NOTE 4 -- INVENTORIES
- ------
<TABLE>
<CAPTION>
March 28, 1999 December 27, 1998
-------------- -----------------
(in thousands of dollars)
<S> <C> <C>
Raw materials $ 20,187 $ 24,716
Work in process 5,102 6,757
Finished goods 34,537 46,469
Stores and supplies 21,717 34,142
-------------- -----------------
81,543 112,084
Reduction to state inventories at last-in, first-out cost <8,768> <9,687>
-------------- -----------------
$ 72,775 $ $102,397
============== =================
</TABLE>
7
<PAGE>
NOTE 5 -- LITIGATION AND ENVIRONMENTAL MATTERS
- ------
The Company is a party to various legal proceedings generally incidental to
its business and is subject to a variety of environmental protection statutes
and regulations. As is the case with other companies in similar industries, the
Company faces exposure from actual or potential claims and legal proceedings
involving environmental matters. Although the ultimate disposition of legal
proceedings cannot be predicted with certainty, it is the present opinion of the
Company's management that the outcome of any claim which is pending or
threatened, either individually or on a combined basis, will not have a
materially adverse effect on the consolidated financial position of the Company
but could materially affect consolidated results of operations in a given year.
The Company has accrued $12.2 million at March 28, 1999 and December 27,
1998 primarily for estimated landfill site restoration, post-closure and
monitoring costs. The $12.2 million liability includes $2.7 million and $2.4
million at March 28, 1999 and December 27, 1998, respectively, which represents
estimated liabilities at Berlin-Gorham that are included in the net assets held
for sale (see Note 9). In addition, the Company has been identified as a
potentially responsible party ("PRP"), along with others, under the
Comprehensive Environmental Response, Compensation and Liability Act or similar
federal and state laws regarding the past disposal of wastes at 19 sites in the
United States. The Company has previously settled its remediation obligations
at 12 of those sites. At 6 other sites, the Company is one of many potentially
responsible parties and its alleged contribution to the site and remediation
obligation is not considered significant. At one other site, remedial
investigation is underway and a loss estimate for the potential remediation
effort costs is not yet possible. However, the Company's accrual for the
remediation investigation effort was $.4 million at March 28, 1999 and December
27, 1998. The liabilities can change substantially due to such factors as the
solvency of other potentially responsible parties, the Company's share of
responsibility, additional information on the nature or extent of contamination,
methods and associated costs of remediation required, and other actions by
governmental agencies or private parties. While it is not feasible to predict
the outcome of all environmental liabilities, based on its most recent review,
management estimates the Company's share of the costs of investigation and
remediation of the known sites will not have a material adverse effect upon the
consolidated financial condition of the Company.
Due to uncertainties associated with remediation activities, regulations,
technologies, and the allocation of costs among various other parties, actual
costs to be incurred at identified sites may vary from estimates. Therefore,
management is unable to determine if the ultimate disposition of all known
environmental liabilities will have a material adverse effect on the Company's
consolidated results of operations in a given year. As with most manufacturing
and many other entities, there can be no assurance that the Company will not be
named as a PRP or incur liabilities through other means at additional sites in
the future or that the costs associated with such additional sites would not be
material.
The Environmental Protection Agency signed final rules affecting pulp and
paper industry discharges of wastewater and gaseous emissions ("Cluster Rules")
which became effective on April 15, 1998. These Cluster Rules require changes
in the pulping, bleaching and/or wastewater treatment processes presently used
in some U.S. pulp and paper mills, including some of the Company's mills. Based
on management's understanding of the rules, the Company estimates that
approximately $40 million of capital expenditures (including approximately $12.9
million at Berlin-Gorham) may be required to comply with the rules with
compliance dates beginning in 1999 and extending over the next two to five
years. The Company's 1999 environmental capital spending includes $1.3 million
and the Company has spent since inception to date $4.9 million for compliance
with the Cluster Rules. There are risks and uncertainties associated with the
Company's estimate that could cause total capital expenditures and timing of
such expenditures to be materially different from current estimates, including
changes in technology, interpretation of the rules by government agencies that
is substantially different from the Company's interpretation, or other items.
8
<PAGE>
NOTE 6 -- ASSET IMPAIRMENT ANALYSIS
- ------
The Company assesses the recoverability of its investments in long-lived
assets to be held and used in operations whenever events or circumstances
indicate that their carrying amounts may be impaired. Such assessment requires
that the future cash flows expected to result from use of the assets are
estimated and an impairment loss recognized when future cash flows are less than
the carrying value of such assets. Estimating future cash flows requires the
Company to estimate useful lives of its long-lived assets, future production
volumes and costs, future sales volumes, demand for the Company's product mix
and prices that reflect the use of its long-lived assets and market conditions.
Although the Company believes it has a reasonable basis for its estimates, it is
reasonably possible that the Company's estimate of future cash flows could
change from current estimates which could result in recognizing, in future
periods, impairment losses on its long-lived assets.
NOTE 7 -- COMPREHENSIVE INCOME
- ------
Comprehensive income for the Company consists of net income, foreign currency
translation adjustments and minimum pension liability adjustments. During the
first quarter of 1999 and 1998, the Company's total comprehensive loss was $28.3
million and $11.1 million, respectively.
NOTE 8 -- SETTLEMENT OF BERLIN PROPERTY TAX CASE
- ------
On February 1, 1999, the Company finalized an agreement with the City of
Berlin, N.H., concerning assessed values and taxability of factory machinery.
Over the next three years the agreement significantly reduces the assessed value
from recent valuations of the Company's Berlin pulp mill. The Company reversed a
property tax accrual, which was accrued at the higher assessed values, of
approximately $9 million in the first quarter of 1999, which relates to amounts
over accrued for previous tax years.
NOTE 9 -- BERLIN-GORHAM SALE
- ------
In March 1999, the Company reached an agreement with American Tissue Company
("ATC") for the sale of the Berlin-Gorham pulp and paper mills ("Berlin-
Gorham"). Management expects to consummate the sale during the second quarter of
1999. In connection with the Company 's decision to sell Berlin-Gorham, a charge
for $16.2 million was taken in the first quarter of 1999 to write down Berlin-
Gorham's net assets to their estimated net realizable value. The write down
consisted of the following elements:
<TABLE>
(amounts in millions)
<S> <C>
Fixed asset write-down $16.5
Transaction costs 2.5
Loss on curtailment of pension plans 3.4
Gain on curtailment/settlement of other benefit plans <6.2>
-----
Total Charge $16.2
=====
</TABLE>
Berlin-Gorham had an operating loss for the first quarter of 1999 of $9.7
million and an operating loss for the first quarter of 1998 of $8.0 million.
The operating loss in the first quarter of 1999 included the reversal of a
property tax accrual of $9.0 million and the $16.2 million charge detailed
above. The next asset held for sale of $45 million consists of the estimated
net realizable value of the assets to be sold to ATC and estimated liabilities
being assumed by ATC.
9
<PAGE>
NOTE 10 -- SEGMENT INFORMATION
- -------
The Company is organized around two segments based primarily on
similarities in products, the manufacturing process and customers.
<TABLE>
<CAPTION>
First Quarter
- ------------------------------------------------------------------------------------------------
(amounts in millions) 1999 1998
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Operating income (loss):
Printing & Publishing Papers $<10.5> $ <6.0>
Specialty Papers <4.0> .2
- ------------------------------------------------------------------------------------------------
Total $<14.5> $ <5.8>
- ------------------------------------------------------------------------------------------------
EBITDA:
Printing & Publishing Papers $ 8.1 $ 10.4
Specialty Papers 1.3 5.3
- ------------------------------------------------------------------------------------------------
Total $ 9.4 $ 15.7
- ------------------------------------------------------------------------------------------------
Net sales:
Printing & Publishing Papers $119.3 $131.7
Specialty Papers 81.9 90.1
- ------------------------------------------------------------------------------------------------
Total $201.2 $221.8
- ------------------------------------------------------------------------------------------------
</TABLE>
First quarter 1999 operating results for Printing and Publishing Papers
include a $16.2 million charge for the adjustment of Berlin-Gorham to its net
realizable value (Note 9) and a $9.0 million property tax accrual reversal (Note
8). EBITDA represents income (loss) before income taxes, interest expense and
depreciation and amortization. First quarter 1999 EBITDA for Printing and
Publishing Papers excludes the effect of the $16.2 million charge and $9 million
property tax accrual reversal. Total assets for Printing and Publishing Papers
decreased by approximately $34 million during the first quarter of 1999 compared
to December 27, 1998. The decrease in total assets of Printing and Publishing
Papers is primarily due to the $16.2 million charge discussed above,
depreciation expense exceeding capital spending and the reclassification of
certain liabilities to net assets held for sale. Specialty Papers' total assets
increased by approximately $7 million during the first quarter of 1999 primarily
due to changes in working capital.
10
<PAGE>
ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
- ------
FINANCIAL CONDITION
Crown Paper Co. and subsidiaries (the "Company" or "Crown Paper") is a
major producer and marketer of value-added paper products for a diverse array of
end-uses. The Company is a wholly owned subsidiary of Crown Vantage Inc. (the
"Parent" or "Crown Vantage"). The Company operates in two segments: printing and
publishing papers and specialty papers. Printing and publishing papers are
primarily for applications such as special interest magazines, catalogs, books,
custom business forms, corporate communications and promotions (e.g. annual
reports and stationery) and other graphics applications. Specialty papers are
principally for food and retail packaging applications and conversion into such
items as coffee filters, labels, cups and plates.
The Company operates 10 facilities using 31 paper machines, and its paper
production is approximately 75% integrated with the Company's pulp operations.
The Company's two largest facilities are integrated operations located in St.
Francisville, La., and Berlin and Gorham, N.H. St. Francisville produces coated
groundwood papers for magazines and catalogs and uncoated specialty converting
papers. Berlin-Gorham primarily produces uncoated printing and publishing papers
as well as market pulp. During the first quarter of 1999, the Company announced
the intended sale of its Berlin-Gorham pulp and paper mills ("Berlin-Gorham") to
American Tissue Holdings Inc. ("ATC") for $45 million. As a result of this
announced sale, which is expected to be completed during the second quarter of
1999, the Company recorded estimated charge for $16.2 million to adjust the
Berlin-Gorham net assets to their estimated net realizable value. Net proceeds
from the sale of Berlin-Gorham will be used to fund certain related liabilities
and pay down debt. The Company also produces uncoated printing and publishing
papers at its non-integrated facilities in Adams, Mass.; Ypsilanti, Mich., and
Dalmore and Guardbridge, Scotland. The Company's specialty papers are produced
primarily at non-integrated specialty packaging papers facilities in Port Huron
and Parchment, Mich., and Milford, N.J., and on the two uncoated specialty
converting papers machines at St. Francisville. In addition to its primary
paper-making operations, the Company operates a cast-coating facility in
Richmond, Va., that produces coated paper and board for graphics and packaging
uses.
RESULTS OF OPERATIONS
- ---------------------
The Company's net sales for each business segment are as follows:
<TABLE>
<CAPTION>
Net Sales and Tonnage by Segment
for the Three Months Ended
March 28, 1999 March 29, 1998
------------------------ -------------------
Tons Sales Tons Sales
---------- ------------ -------- ----------
(thousands) (thousands)
<S> <C> <C> <C> <C>
Printing and Publishing Papers
Coated groundwood 70,886 $ 50,459 71,293 $ 58,439
Uncoated 64,647 54,009 63,413 60,149
Other 30,230 14,754 23,868 13,134
Specialty Papers 82,416 81,943 82,740 90,084
---------- ------------ -------- ----------
248,179 $201,165 241,314 $221,806
========== ============ ======== ==========
</TABLE>
NET SALES
The Company's net sales declined 9.3% for the three months ended March 28,
1999 compared to the same period in 1998. The decrease is due to a decline in
average price per ton of 11.8% from the first quarter of 1999 compared to the
first quarter of 1998. The decline in average price per ton was partially offset
by a 2.8% increase in tons sold.
11
<PAGE>
Net sales of coated groundwood paper (which is used principally in the
production of magazines and catalogs) for the three-month period ended March 28,
1999 were $50.5 million, a decrease of 13.7% compared to the same period in
1998. Sales volume was virtually the same for the first three months of 1999
compared to the same period in 1998, while average net sales price per ton
decreased 13.2% from the first quarter of 1998 to the first quarter of 1999.
Net sales of uncoated printing and publishing papers in the first quarter of
1999 decreased 10.2% to $54.0 million from the first quarter of 1998. The
decrease from first quarter 1999 to first quarter 1998 is primarily due to an
average sales price per ton decrease of 11.9% that was partially offset by a
1.9% increase in tons sold.
Other products reported within printing and publishing papers included the
Company's toweling, pulp and cast-coating operations. Net sales of other
products increased $1.6 million primarily due to an increase in tons sold of
toweling and pulp. This was partially offset by a decrease in average net sales
price per ton of approximately 11.4% primarily due to declines in toweling and
pulp pricing during the periods compared.
Specialty papers' net sales totaled $81.9 million during the first three
months of 1999, an $8.1 million decline from the same period in 1998. The 9.0.%
decrease in net sales is primarily the result of an 8.7% decrease in average net
sales price per ton during the three months ended March 28, 1999 compared to the
three months ended March 29, 1998.
Operating Income (Loss) for each business segment is as follows:
<TABLE>
<CAPTION>
Operating Income (Loss) by Segment
for the Quarter Ended
----------------------------------
March 28, 1999 March 29, 1998
--------------- ---------------
(Thousands)
<S> <C> <C>
Printing and Publishing Papers $<10,488> $<5,974>
Specialty Papers <4,032> 186
--------------- ---------------
$<14,520> $<5,788>
=============== ===============
</TABLE>
OPERATING INCOME
The Company had an operating loss of $14.5 million for the three
months ended March 28, 1999 compared to a $5.8 million loss for the same period
in 1998. The decline in operating profit is primarily due to a charge of $16.2
million that adjusts Berlin-Gorham's net book value to its estimated net
realizable value. This charge was partially offset by a $9 million reversal of a
property tax accrual that resulted from the settlement of an ongoing dispute
with the City of Berlin. Also impacting operating results was an adverse price
variance of $27.0 million in the first quarter of 1999 compared to the first
quarter of 1998, discussed above, that was partially offset by favorable cost
and volume variances of $26.0 million.
Operating results for printing and publishing papers decreased to a
$10.5 million loss during the first three months of 1999 compared to an
operating loss of $6.0 million for the same period in 1998. The decline in
operating results is primarily due to the Berlin-Gorham charge of $16.2 million
that was partially offset by the $9 million property tax accrual reversal.
Operating results during the first quarter of 1999 benefited from a favorable
cost variance of $18.2 million and the increase in tons sold discussed above.
These were partially offset by an unfavorable price variance of $18.5 million
that was discussed above. The reduced costs were primarily due to lower
depreciation expense as a result of the 1998 asset impairment charge, reduced
compensation due to the 1998 workforce reduction, lower wood and pulp costs and
improved operating efficiencies.
12
<PAGE>
Specialty papers operating results decreased $4.2 million to an
operating loss of $4.0 million for the first three months of 1999 compared to an
operating profit of $.2 million for the first three months of 1998. The
decrease in operating income is primarily attributable to an 8.7% decrease in
average net sales price per ton discussed above. The decline in prices was
partially offset by favorable cost improvements primarily from lower pulp costs,
improved mill efficiencies and other cost saving initiatives.
Selling and administrative expenses increased $.6 million for the
first quarter of 1999 compared to the same period in 1998. The increase is
primarily due to an increase in Year 2000 compliance expenditures of $.8 million
during the first quarter of 1999 over the first quarter of 1998.
INTEREST EXPENSE
- ----------------
Interest expense for the three-month period of 1999 and 1998 was $12.4
million and $12.2 million, respectively.
LIQUIDITY AND SOURCES OF CAPITAL
- --------------------------------
In connection with a spin-off in August of 1995, the Company obtained
$250 million in financing through a public offering of Senior Subordinated Notes
and $253 million initial borrowings under a $350 million credit facility
(collectively, the "Financing"). The net proceeds from the Financing were paid
to James River Corporation of Virginia, now known as Fort James Corporation
("Fort James"), together with $100 million Senior Pay-in-Kind Notes issued by
the Parent as a return of James River's capital investment (The "Spin-Off").
Under the credit facility, the revolving credit available is in the
aggregate amount of $150 million with a $75 million sublimit for letters of
credit (of which $38.8 million has been used at March 28, 1999) and can be used
for general corporate purposes, working capital needs and permitted investments.
At March 28, 1999, $99 million of the revolving credit was outstanding and $12.2
million of the aggregate line was available if needed.
Cash flows used by operating activities were $15.8 million for the
three months ended March 28, 1999 compared to $22.0 million for the three months
ended March 29, 1998. The improvement in operating cash flows is mainly
attributable to fluctuations in working capital that were partially offset by
lower gross margins in 1999 (after adjusting for depreciation). Earnings
before interest, taxes, depreciation and amortization (EBITDA), the Berlin-
Gorham charge and property tax accrual reversal were $9.4 million for the
first three months of 1999 as compared to $15.7 million for the comparable
period in 1998.
The Company's business is capital intensive. Pulp and paper mills
generally consist of an extensive network of buildings, machinery, and
equipment, which require continual upgrades, replacement, modernization and
improvement. The Company's capital expenditures for the three months ended
March 28, 1999 were $7.3 million compared to $8.2 million in the same period in
1998. 1999 and 1998 expenditures primarily represented capital maintenance
projects that are substantially focused on projects with the quickest returns
on investment. The Company's capital spending plan for 1999 is approximately
$40 million, which includes approximately $6 million for Berlin-Gorham. These
capital expenditures are primarily for capital maintenance projects and are
expected to be financed by cash flows from operations and available financing
sources.
SETTLEMENT OF BERLIN PROPERTY TAX CASE
- --------------------------------------
On February 1, 1999, the Company finalized an agreement with the City of
Berlin, N.H., concerning assessed values and taxability of factory machinery.
Over the next three years the agreement significantly reduces the assessed value
from recent valuations of the Company's Berlin pulp mill. The Company reversed a
property tax accrual, which was accrued at the higher assessed values, of
approximately $9 million in the first quarter of 1999, which relates to amounts
over accrued for previous tax years.
13
<PAGE>
BERLIN-GORHAM SALE
- -------------------
In connection with the Company's decision to sell Berlin-Gorham, a charge
for $16.2 million was recorded in the first quarter of 1999 to write down
Berlin-Gorham's net assets to their estimated net realizable value. The write
down consisted of the following elements:
<TABLE>
<S> <C>
(amounts in millions)
Fixed asset write-down $16.5
Transaction costs 2.5
Loss on curtailment of pension plans 3.4
Gain on curtailment/settlement of other benefit plans <6.2>
-----
Total Charge $16.2
=====
</TABLE>
Berlin-Gorham had an operating loss for the first quarter of 1999 of $9.7
million and an operating loss for the first quarter of 1998 of $8.0 million. The
operating loss in the first quarter of 1999 included the reversal of a property
tax accrual of $9.0 million and the $16.2 million charge detailed above. The net
asset held for sale of $45 million consists of the estimated net realizable
value of the assets to be sold to ATC and estimated liabilities being assumed by
ATC. While the Company believes that the sale will be completed in the second
quarter of 1999, there are several contingencies and uncertainties that normally
exist with transactions of this type. These contingencies and uncertainties
include, but are not limited to, ATC successfully raising the capital to
complete the transaction and the Company obtaining the necessary consents from
its credit facility lenders.
YEAR 2000
- ---------
The Year 2000 issue concerns the potential inability of computer
applications, information technology systems, and certain software-based
"embedded" control systems to properly recognize and process date-sensitive
information as the Year 2000 approaches and beyond. The Company could suffer
material adverse impacts on its operations and financial results if the
applications and systems used by the Company, or by third parties with whom the
Company does business, do not accurately or adequately process or manage dates
or other information as a result of the Year 2000 issue.
The Company has completed a review of its financial accounting system for
purposes of evaluating the Year 2000 issue. The Company's software provider has
indicated that it will certify this financial accounting system as Year 2000-
compliant upon completion of the next scheduled upgrade. This upgrade, including
independent testing performed by the Company, will be completed in the second
quarter of 1999. There can be no assurance that all Year 2000 issues in this
software will be adequately resolved by this or other future software releases.
The Company also uses a variety of other software applications, business
information systems, accounting subsystems, process control systems and related
software, communication devices, and networking and other operating systems.
The Company has completed its inventory of all such systems and is currently in
the process of testing, upgrading, replacing, or otherwise modifying these
systems to adequately address the Year 2000 issue. The Company believes it will
be able to timely modify or replace its affected systems to prevent any material
detrimental effects on operations and financial results. The Company anticipates
this effort will continue, with appropriate testing, remediation and/or
replacement taking place during the first half of 1999. The Company has
completed approximately 90% of this effort through the first quarter of 1999.
Possible risks of this process include but are not limited to the ability of the
Company's personnel and outside vendors to adequately and timely identify and
resolve all critical Year 2000 issues, and the Company's ability to secure
additional Year 2000 expertise during this time of high demand if an
unanticipated material problem requires skills the Company or its third party
vendors currently do not possess. The Company can give no assurance that all
critical Year 2000 issues will be resolved in a timely manner or that
potentially unresolved issues would not have a material adverse impact on the
results of operations.
14
<PAGE>
The Company has certain key relationships with customers, vendors and
outside service providers. Failure by the Company's key customers, vendors and
outside service providers to adequately address the Year 2000 issue could have a
material adverse impact on the Company's operations and financial results. The
Company is currently assessing the Year 2000 readiness of these key customers,
vendors and outside service providers and, at this time, cannot determine what
the impact of their readiness will be on the Company. This assessment includes
but is not limited to soliciting responses from each of these parties concerning
their Year 2000 readiness and review of public documents filed by many of these
parties. Management expects to complete the assessment of these key customers,
vendors and outside service providers during the first half of 1999. The
Company is primarily relying upon the voluntary disclosures from third parties
for this review of their Year 2000 readiness.
The Company anticipates that its affected systems will be remediated or
replaced to address the Year 2000 issue in a timely manner and is currently
focusing its resources in those areas. The Company is also developing
contingency plans regarding the Year 2000 issue for its internal systems. Many
of the identified risks from key customers, vendors and outside service
providers are both general and speculative in nature, such as possible power or
telecommunication failures, breakdowns in transportation systems, inability to
process financial transactions, and similar events affecting general business
services. As the Company completes its assessment of Year 2000 readiness of key
customers, vendors and outside service providers, management intends to develop
contingency plans to mitigate material known detrimental effects that may be
caused by their Year 2000 noncompliance. However, it is unlikely that any
contingency plan would mitigate the adverse impact to the financial condition or
operations of the Company of any catastrophic event due to the Year 2000 issue
that leads to a prolonged disruption of essential services.
Management believes that total Year 2000 costs will range between $3.0
million and $3.5 million. The costs associated with this effort are in
addition to the Company's regular information technology budget. As of March
28, 1999 the Company has incurred costs related to the Year 2000 issue of
approximately $2.5 million. In addition to the costs mentioned above, the
Company's capital spending for planned upgrading of certain information systems
to enhance the capabilities of those systems was accelerated in part due to the
Year 2000 issue. The total estimated increase in accelerated capital spending
for these systems is anticipated to be under $3 million. The Company's current
estimates of the amount of time and costs necessary to remediate and test its
computer systems are based on the facts and circumstances existing at this time.
The estimates were made using assumptions of future events including the
continued availability of certain resources, Year 2000 readiness plans,
implementation success by key third party vendors, and other factors. New
developments may occur that could increase the Company's estimates of the amount
of time and costs necessary to modify and test its various information and non-
information systems. These potential developments include but are not limited
to the availability and increased cost of personnel trained in this area of
expertise, the ability to locate and correct all relevant computer codes and
equipment, and any unanticipated Year 2000 problems from key customers, vendors,
and outside service providers.
WORK FORCE REDUCTION
- --------------------
During the second and third quarters of 1998 the Company accrued $3.0
million relating to an announced 5% work force reduction. The accrual is for
anticipated expenses resulting from the work force reduction, primarily for
severance and benefit payments to the approximately 230 affected employees. Both
hourly and salaried employees from manufacturing, maintenance, and office staff
were affected. As of March 28, 1999 approximately $2.4 million had been paid,
and the remainder will be paid during the second half of 1999.
15
<PAGE>
DEBT COVENANTS
- --------------
In connection with the credit facility as amended, Crown Paper Co. is
required to comply with certain financial covenants that include maintaining
minimum quarterly cash flow to debt and interest coverage ratios as well as
minimum tangible net worth. During the first quarter of 1999, Crown Paper Co.
amended certain financial covenants for the fiscal year ended December 26, 1999,
which had been established at the Spin-Off in 1995. The Company remains in
compliance with the credit facility. The Company has amended the debt covenants
for each of the last three years as extended weakness in paper markets prevented
the Company from achieving the original financial covenants that were
established at the peak of the paper market cycle when the Company was spun-off.
Without significant improvements in paper markets in 1999 and 2000, the Company
anticipates that it will need to revise its 2000 financial covenants when they
revert to the levels established at the peak of the paper market in 1995.
CONTINUED NASDAQ NATIONAL MARKET LISTING
- ----------------------------------------
The Parents's common stock price has fallen below the $5 minimum
maintenance standard for continued listing on the Nasdaq National Market. The
Parent shared its management initiatives with Nasdaq on February 5, 1999, at
which time an extension was requested. Subsequently the Parent received an
extension stipulating that the stock will continue to trade on the Nasdaq
National Market so long as a closing bid price of at least $5 per share is
achieved by June 18, 1999, and thereafter the stock maintains a closing bid
price of at least $5 per share for a minimum of 10 consecutive trading days. If
the shares are de-listed, the Parent anticipates that the shares may be traded
on the Nasdaq Over-the-Counter Bulletin Board. The stock price, stock trading
liquidity, analyst coverage, and the Parent's ability to raise capital might be
adversely affected if the stock is de-listed from the Nasdaq National Market or
fails to trade actively or at all on the Bulletin Board, both of which are not
within the control of the Parent.
FORWARD LOOKING STATEMENTS
- --------------------------
Certain statements within Management's Discussion and Analysis and
elsewhere are forward-looking within the meaning of the Private Securities
Litigation Reform Act of 1995. These statements are subject to various risks
and uncertainties that could cause the actual results to be materially different
from the Company's current expectations. These forward-looking statements can
be identified by use of language such as plans, expects, estimates, anticipates,
believes, possible and other similar words or phrases. In addition to the
factors discussed above, there are other factors that could cause the actual
results to differ materially. These other factors include, but are not limited
to, business conditions and the general economy, both global and domestic;
prices for the Company's products; the duration and depth of the Asian economic
crisis; failure to complete the sale of Berlin-Gorham; competitive factors;
maintaining good labor relations; The potential de-listing of the Parent's Stock
form the Nasdaq National Market; the Company's ability to successfully
implement its Year 2000 plans; the Company's ability to comply with debt
covenants, and maintaining good customer relations.
16
<PAGE>
PART II -- OTHER INFORMATION
- -------
ITEM 6 -- EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Ex. 10.1 Amendment No. 7 to the Credit Agreement
Ex. 10.2 Asset Purchase Agreement of Berlin-Gorham pulp and paper mills
from Crown Vantage and Crown Paper Co. to American Tissue
Holdings Inc.
Ex. 27 Financial Data Schedule (Electronic Filing Only)
(b) Reports on Form 8-K --
Current Report on Form 8-K dated March 25, 1999 reporting the announced
sale of the Berlin-Gorham, N.H. pulp and paper mills.
17
<PAGE>
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.
Crown Paper Co.
(Registrant)
/s/ R. Neil Stuart /s/ Michael J. Hunter
- ------------------------- ----------------------------
R. Neil Stuart Michael J. Hunter
Executive Vice President, Senior Vice President,
Chief Financial Officer Chief Accounting Officer
(Duly Authorized Officer) (Duly Authorized Chief Accounting
Officer)
May 11, 1999
18
<PAGE>
AMENDMENT NO. 7 TO CREDIT AGREEMENT
AMENDMENT dated as of February 26, 1999 among CROWN PAPER CO. (the
"Borrower"), CROWN VANTAGE INC. ("Holdings"), the BANKS listed on the signature
pages hereof (the "Banks") and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as
Administrative Agent (the "Administrative Agent").
W I T N E S S E T H :
WHEREAS, the parties hereto have heretofore entered into a Credit Agreement
dated as of August 15, 1995 (as heretofore amended, the "Agreement"); and
WHEREAS, the parties hereto desire to amend the Agreement as more fully set
forth below;
NOW, THEREFORE, the parties hereto agree as follows:
Section 1. Defined Terms. Unless otherwise specifically defined herein,
each term used herein which is defined in the Agreement shall have the meaning
assigned to such term in the Agreement. Each reference to "hereof", "hereunder",
"herein" and "hereby" and each other similar reference and each reference to
"this Agreement" and each other similar reference contained in the Agreement
shall from and after the date hereof refer to the Agreement as amended hereby.
Section 2. Cash Flow Ratio. Section 5.12 of the Agreement is amended to
read in its entirety as follows:
SECTION 5.12. Cash Flow Ratio. As of the last day of each fiscal
---------------
quarter of the Borrower set forth below, the Cash Flow Ratio at such day will
not be less than the ratio set forth below opposite such fiscal quarter:
Fiscal Quarter Ratio
-------------- -----
Fourth quarter of 1998 fiscal year 0.145:1
First quarter of 1999 fiscal year 0.13:1
Second quarter of 1999 fiscal year 0.12:1
<PAGE>
Third quarter of 1999 fiscal year 0.10:1
Fourth quarter of 1999 fiscal year 0.11:1
Thereafter 0.20:1
Section 3. Interest Coverage Ratio. Section 5.13 of the Agreement is
amended to read in its entirety as follows:
SECTION 5.13. Interest Coverage Ratio. As of the last day of each
-----------------------
fiscal quarter of the Borrower set forth below, the Interest Coverage Ratio at
such day will not be less than the ratio set forth below opposite such fiscal
quarter:
Fiscal Quarter Ratio
-------------- -----
Fourth quarter of 1998 fiscal year 1.50:1
First quarter of 1999 fiscal year 1.42:1
Second quarter of 1999 fiscal year 1.30:1
Third quarter of 1999 fiscal year 1.09:1
Fourth quarter of 1999 fiscal year 1.17:1
Thereafter 2.50:1
Section 4. Net Worth. Section 5.14 of the Agreement is amended to read in
its entirety as follows:
SECTION 5.14. Minimum Consolidated Tangible Net Worth. Consolidated
---------------------------------------
Tangible Net Worth will at no time during any fiscal period set forth below be
less than the amount set forth in the table below opposite such period; provided
that calculations of Consolidated Tangible Net Worth shall exclude the effect of
(i) the aggregate amount of the pretax write-offs with respect to the stream of
lease payments on a co-generation facility at St. Francisville, up to
$17,000,000 in the aggregate, (ii) the aggregate amount of the pretax December
non-recurring charges with respect to environmental compliance and workers
compensation costs, up to $5,000,000 in the aggregate and (iii) the aggregate
amount of the potential pre-tax non-cash asset write-downs, up to $195,000,000
in the aggregate, in each case as described by the Borrower to the Banks prior
to the date of effectiveness of Amendment No. 6 to this Agreement dated as of
2
<PAGE>
December 11, 1998 among the Borrower, Holdings, the Banks and the Administrative
Agent:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Period Amount
- --------------------------------------------------------------------------------
<S> <C>
From 6/30/98 to but excluding $ 50,000,000
the last day of the first
quarter of 1999 fiscal year
- --------------------------------------------------------------------------------
Last day of the first quarter $ 75,000,000
of 1999 fiscal year to but
excluding the last day of the
second quarter of 1999 fiscal year
- --------------------------------------------------------------------------------
Last day of the second quarter $ 60,000,000
of 1999 fiscal year to but
excluding the last day of the
third quarter of 1999 fiscal year
- --------------------------------------------------------------------------------
Last day of the third quarter $ 55,000,000
of 1999 fiscal year to but
excluding the last day of the
fourth quarter of 1999 fiscal year
- --------------------------------------------------------------------------------
Last day of the fourth quarter $ 47,500,000
of 1999 fiscal year to but
excluding the last day of the
first quarter of 2000 fiscal year
- --------------------------------------------------------------------------------
Last day of the first quarter $100,000,000
of 2000 fiscal year and thereafter
- --------------------------------------------------------------------------------
</TABLE>
Section 5. Increase In Pricing. The Pricing Schedule attached as Appendix
IV to the Agreement is amended to read in its entirety as set forth in the
Pricing Schedule attached hereto.
3
<PAGE>
Section 6. Addition of a Representation Regarding Year 2000 Compliance. A
new Section 4.20 is added to the Agreement immediately after Section 4.19
thereof, to read in its entirety as follows:
SECTION 4.20. Year 2000 Compliance. The Borrower has (i) initiated a
--------------------
review and assessment of all areas within the business and operations of the
Borrower and each of its Subsidiaries that could reasonably be expected to be
materially adversely affected by the "Year 2000 Problem" (that is, the risk that
computer applications used by it or any of its Subsidiaries may be unable to
recognize and perform properly date-sensitive functions involving certain dates
prior to and any date after December 31, 1999), (ii) developed a plan and
timeline for addressing the Year 2000 Problem on a timely basis and (iii) to
date, implemented such plan substantially in accordance with such timetable.
The Borrower reasonably believes that it will be able to deliver product and
process billing and collections in a timely manner prior to, during and after
January 1, 2000, notwithstanding any potential impact on the Borrower's
operations, equipment, hardware or software from the Year 2000 Problem.
Section 7. Governing Law. This Amendment shall be governed by and
construed in accordance with the laws of the State of New York.
Section 8. Counterparts; Effectiveness. This Amendment may be signed in
any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Amendment shall become effective as of the date hereof when the
Administrative Agent shall have received (x) duly executed counterparts hereof
signed by the Borrower and the Required Banks (or, in the case of any party as
to which an executed counterpart shall not have been received, the
Administrative Agent shall have received telegraphic, telex or other written
confirmation from such party of execution of a counterpart hereof by such party)
and (y) for the account of each Bank that has delivered an executed counterpart
hereof (or telegraphic, telex or other written confirmation of execution of a
counterpart hereof) to the Administrative Agent on or prior to February ___,
1999, an amendment fee in such amount as shall have been previously agreed upon
between the Borrower and the Banks.
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of the date first above written.
CROWN PAPER CO.
By /s/ Christopher M. McLain
---------------------------------
Title: Senior Vice President
CROWN VANTAGE INC.
By /s/ Christopher M. McLain
---------------------------------
Title: Senior Vice President
5
<PAGE>
MORGAN GUARANTY TRUST COMPANY OF NEW YORK
By /s/ Stephen J. Hannan
---------------------------------
Title: Vice President
THE BANK OF NEW YORK
By ---------------------------------
Title:
CERES FINANCE LTD.
By /s/ John H. Cullinane
---------------------------------
Title: Director
THE CHASE MANHATTAN BANK
By /s/ Lenard Weiner
---------------------------------
Title: Managing Director
6
<PAGE>
BANK AUSTRIA CREDITANSTALT
CORPORATE FINANCE, INC.
By /s/ James F. McCann
---------------------------------
Title: Vice President
By /s/ Patrick J. Rounds
---------------------------------
Title: Vice President
CHRISTIANIA BANK og KREDITKASSE
By /s/ Carl Petter Svendsen
---------------------------------
Title: Senior Vice President
By /s/ Peter M. Dodge
---------------------------------
Title: Senior Vice President
DRESDNER BANK AG, NEW YORK AND GRAND CAYMAN BRANCHES
By /s/ Beverly G. Cason
---------------------------------
Title: Vice President
By /s/ Christopher E. Sarisky
---------------------------------
Title: Assistant Vice President
7
<PAGE>
FIRST SOURCE FINANCIAL LLP, by FIRST SOURCE
FINANCIAL, INC., its Agent/Manager
By /s/ John P. Thacker
---------------------------------
Title: Senior Vice President
KZH III LLC
By /s/ Virginia Conway
---------------------------------
Title: Authorized Agent
KZH HIGHLAND-2 LLC
By /s/ Virginia Conway
---------------------------------
Title: Authorized Agent
THE LONG-TERM CREDIT BANK OF JAPAN, LTD., LOS
ANGELES AGENCY
By /s/ Koh Takemoto
---------------------------------
Title: General Manager
8
<PAGE>
MARINE MIDLAND BANK
By /s/ Susan L. LeFevre
---------------------------------
Title: Authorized Signatory
MERRILL LYNCH PRIME RATE PORTFOLIO
By: Merrill Lynch Asset Management, LP, as
Investment Advisor
By /s/ Andrew C. Liggio
---------------------------------
Title: Authorized Signatory
MERRILL LYNCH SENIOR FLOATING RATE FUND, INC.
By /s/ Andrew C. Liggio
---------------------------------
Title: Authorized Signatory
NATEXIS BANQUE BFCE
By /s/ Jordan Sadler
---------------------------------
Title: Associate
By /s/ William C. Maier
---------------------------------
Title: Senior Vice President
9
<PAGE>
NATIONSBANK, N.A.
By /s/ Christopher R. Gernhard
---------------------------------
Title: Vice President
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
By /s/ Richard A. Strait
---------------------------------
Title: Its Authorized Representative
PNC BANK, NATIONAL ASSOCIATION
By /s/ Philip K. Liebscher
---------------------------------
Title: Vice President
MORGAN STANLEY DEAN WITTER
PRIME INCOME TRUST
By /s/ Peter Gewirtz
---------------------------------
Title: Authorized Signatory
10
<PAGE>
PAMCO CAYMAN LTD.
By: Highland Capital Management LP, as Collateral
Manager
By /s/ Mark K. Okada CFA
---------------------------------
Title: Executive Vice President
Highland Capital Management L.P.
KEYPORT LIFE INSURANCE COMPANY
By: Stein Roe & Farnham Incorporated,
as Agent for Keyport Life Insurance
Company
By /s/ Brian W. Good
---------------------------------
Title: Vice President & Portfolio
Manager
SOUTHERN PACIFIC BANK
By /s/ Sean R. Walker
---------------------------------
Title: Vice President
STRATA FUNDING LTD.
By /s/ John H. Cullinane
---------------------------------
Title: Director
11
<PAGE>
VAN KAMPEN SENIOR INCOME TRUST
By /s/ Jeffrey W. Maillet
---------------------------------
Title: Senior Vice President &
Director
VAN KAMPEN PRIME RATE INCOME TRUST
By /s/ Jeffrey W. Maillet
---------------------------------
Title: Senior Vice President &
Director
ML CBO IV (CAYMAN) LTD.
By: Highland Capital Management LP, as Collateral
Manager
By /s/ Mark K. Okada CFA
---------------------------------
Title: Executive Vice President
Highland Capital Management L.P.
PILGRIM PRIME RATE TRUST
By: Pilgrim Investment Inc.,
as its Investment Manager
By /s/ Michel Prince, CFA
---------------------------------
Title: Vice President
12
<PAGE>
OASIS COLLATERALIZED HIGH
INCOME PORTFOLIOS - 1, LPD.
By /s/ Andrew Ian Wignall
---------------------------------
Title: Dirctor
MORGAN GUARANTY TRUST COMPANY, as Administrative
Agent and Collateral Agent
By /s/ Stephen J. Hannan
---------------------------------
Title: Vice President
13
<PAGE>
ASSET PURCHASE AGREEMENT
BY AND AMONG
CROWN PAPER CO., CROWN VANTAGE NEW HAMPSHIRE ELECTRIC, INC.
AND BERLIN MILLS RAILWAY, INC., AS SELLER
AND
AMERICAN TISSUE HOLDINGS INC. AND
PULP & PAPER OF AMERICA LLC, AS BUYER
DATED AS OF MARCH 24, 1999
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<S> <C>
ARTICLE I
DEFINITIONS
1.1 Definitions................................................ 1
ARTICLE II
PURCHASE AND SALE OF ASSETS
2.1 Purchase and Sale of Assets................................ 5
2.2 Excluded Assets............................................ 7
2.3 Assumed Liabilities........................................ 8
2.4 Purchase Price............................................. 10
ARTICLE III
RELATED AGREEMENTS
3.1 Related Agreements......................................... 10
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
4.1 Organization, Qualification................................ 11
4.2 Authority Relative to this Agreement....................... 12
4.3 Consents and Approvals..................................... 12
4.4 Non-Contravention.......................................... 13
4.5 Environmental Matters...................................... 13
4.6 Licenses and Permits....................................... 14
4.7 Compliance with Laws....................................... 14
4.8 Financial Statements....................................... 15
4.9 Litigation................................................. 15
4.10 Absence of Changes......................................... 16
4.11 Title to Purchased Assets.................................. 18
4.12 Real Property.............................................. 18
4.13 Leases..................................................... 20
4.14 Inventory.................................................. 20
4.15 Intellectual Property and Software......................... 20
4.16 Material Contracts......................................... 23
4.17 Maintenance of the Equipment............................... 23
4.18 Sufficiency of Purchased Assets............................ 24
4.19 Labor Matters.............................................. 24
4.20 Employee Benefit Plans..................................... 24
4.21 Taxes...................................................... 25
</TABLE>
<PAGE>
<TABLE>
<S> <C>
4.22 Insurance.................................................. 25
4.23 Undisclosed Liabilities.................................... 26
4.24 Powers of Attorney......................................... 26
4.25 Product Warranty........................................... 26
4.26 Product Liability.......................................... 26
4.27 Finders.................................................... 26
4.28 Related Party Transactions................................. 26
4.29 Year 2000 Compliance....................................... 27
4.30 Books and Records.......................................... 27
4.31 Shares of ARCO............................................. 27
4.32 Disclosure................................................. 27
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
5.1 Organization, Qualification................................ 28
5.2 Authority Relative to this Agreement....................... 28
5.3 Consents and Approvals..................................... 29
5.4 Non-Contravention.......................................... 29
5.5 Litigation................................................. 29
5.6 Finders.................................................... 30
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 Conduct of Business of the Facility........................ 30
6.2 Notification............................................... 30
6.3 Forbearances by Seller..................................... 31
6.4 Insurance, Landfill, Financial Security.................... 32
6.5 Negotiations with Others................................... 32
6.6 Investigation of Businesses and Properties................. 32
6.7 Confidentiality............................................ 32
6.8 Taxes and Recording Fees................................... 33
6.9 Proration of Lease Payments, Utility Charges and Other
Payments................................................ .. 33
6.10 Allocation of Purchase Price............................... 33
6.11 Collection of Accounts Receivable.......................... 33
6.12 Bulk Sales Laws............................................ 34
6.13 Materials Received After Closing........................... 34
6.14 Retention of Books and Records............................. 34
6.15 HSR Filings................................................ 34
6.16 Expenses................................................... 34
6.17 Public Announcements....................................... 34
6.18 Subsequent Events.......................................... 35
6.19 Efforts to Consummate...................................... 35
6.20 Further Assurances......................................... 36
6.21 Inventory Adjustment....................................... 36
</TABLE>
-ii-
<PAGE>
<TABLE>
<S> <C>
6.22 Real Property Information.................................. 37
6.23 Certain Incomplete Deliveries.............................. 38
6.24 Pulp Mill Shutdown......................................... 38
ARTICLE VII
COVENANTS
7.1 Transition................................................. 39
7.2 Covenant Not To Compete.................................... 39
7.3 Permit Application......................................... 40
7.4 Tax Clearance.............................................. 40
ARTICLE VIII
EMPLOYEES AND EMPLOYEE MATTERS
8.1 Transferred Employees...................................... 41
8.2 Employee Benefit Plans..................................... 41
8.3 Worker's Compensation...................................... 42
8.4 Severance and Vacation Pay................................. 42
8.5 Other Liabilities Relating to Employees.................... 43
8.6 Administration............................................. 43
ARTICLE IX
CONDITIONS TO OBLIGATIONS OF BUYER
9.1 Representations and Warranties............................. 43
9.2 Performance of this Agreement.............................. 44
9.3 Corporate Authorization.................................... 44
9.4 Consents and Approvals..................................... 44
9.5 Injunction, Litigation..................................... 44
9.6 Legislation................................................ 44
9.7 Title Insurance, Estoppel Certificates..................... 44
9.8 Receipt of Licenses and Permits and Environmental Permits.. 45
9.9 Related Agreements, Documents and Instruments.............. 45
9.10 No Change.................................................. 45
9.11 Payment of Transfer Taxes.................................. 45
9.12 Bulk Sales Compliance...................................... 45
9.13 Results of Environmental Audit............................. 45
9.14 Opinion of Counsel for Seller.............................. 46
9.15 No Material Adverse Change................................. 46
9.16 HSR Act.................................................... 46
9.17 Termination of Liens....................................... 46
9.18 Closing of Sale of Senior Notes............................ 46
9.19 Cluster Compliance......................................... 47
ARTICLE X
</TABLE>
-iii-
<PAGE>
<TABLE>
<S> <C>
CONDITIONS TO OBLIGATIONS OF SELLER
10.1 Representations and Warranties.............................. 47
10.2 Performance of this Agreement............................... 47
10.3 Limited Liability Company Authorization..................... 47
10.4 Consents and Approvals...................................... 47
10.5 Injunction, Litigation...................................... 47
10.6 Legislation................................................. 48
10.7 Opinion of Counsel for Buyer................................ 48
10.8 HSR Act..................................................... 48
ARTICLE XI
CLOSING
11.1 Time and Place of Closing................................... 48
11.2 Deliveries by Seller........................................ 48
11.3 Deliveries by Buyer......................................... 49
11.4 Deliveries by Seller and Buyer.............................. 50
ARTICLE XII
INDEMNIFICATION
12.1 Indemnification by Seller................................... 50
12.2 Indemnification by Buyer.................................... 52
12.3 Third Party Claims.......................................... 53
12.4 Limitations on Indemnification.............................. 54
12.5 Survival, Investigation..................................... 54
12.6 Exclusive Remedy............................................ 54
ARTICLE XIII
TERMINATION, AMENDMENT AND WAIVER
13.1 Termination................................................. 55
13.2 Effect of Termination....................................... 55
13.3 Amendment................................................... 56
13.4 Extension, Waiver........................................... 56
13.5 Termination of ATH's Obligations............................ 56
ARTICLE XIV
GENERAL PROVISIONS
14.1 Option to Purchase Shares of Electric....................... 56
14.2 Notices..................................................... 56
14.3 Interpretation.............................................. 57
14.4 Counterparts................................................ 57
14.5 Waiver...................................................... 57
</TABLE>
-iv-
<PAGE>
<TABLE>
<S> <C>
14.6 Modification................................................ 58
14.7 Severability................................................ 58
14.8 Stricken Words or Phrases................................... 58
14.9 Number and Gender........................................... 58
14.10 Miscellaneous............................................... 58
14.11 Specific Performance........................................ 58
14.12 Governing Law............................................... 58
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List of Schedules:
1.1 Persons With "Knowledge"
2.1(i) Real Property
2.1(ii) Equipment
2.1(iv) Environmental Permits
2.1(v) Licenses and Permits
2.1(vi) Intellectual Property
2.1(vii) Utility Agreements
2.1(ix) Prepaid Expenses and Deferred Charges
2.1(x) Assets of Electric and Railway
2.1(xii) Facility Software
2.1(xiii) Shared Software
2.2(iii) Non Assignable Environmental Permits and Licenses and Permits
2.2(vi) Excluded Assets
2.3(a)(i) Industrial Revenue Bonds
4.1(b) Real Property and Assets of Electric
4.1(c) Real Property and Assets of Railway
4.3 Seller Consents and Approvals
4.3 Consents and Approvals of Electric
4.3 Consents and Approvals of Railway
4.5 Environmental Permits
4.6 Licenses and Permits
4.7 Compliance with Laws
4.8 Financial Statements
4.9 Litigation
4.10 Absence of Changes
4.11 Title to Purchased Assets
4.12(c) Real Property Compliance with Laws
4.12(d) Defects Affecting Real Property
4.12(h) Leases, Subleases, Licenses, Covenants, Easements, Concessions
or Other Agreements Affecting Real Property
4.12(i) Underground Storage Tanks
4.13 Leases
4.14 Inventory
4.15(c) Title to Intellectual Property
4.15(e) Shared Software Programs
4.16 Material Contracts
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4.18 Sufficiency of Purchased Assets
4.19 (a) Collective Bargaining Agreements, Employment Contracts and
Consulting Agreements to be Assumed by Buyer
4.19(b) Notices Regarding Labor Matters
4.19(d) Employee Claims
4.20 Employee Benefit Plans
4.21(b) Return Audits
4.22 Insurance
4.25 Seller's Standard Terms and Conditions of Sale
4.28 Related Party Transactions
4.29 Exceptions to Year 2000 Compliance
5.3 Buyer Consents and Approvals
5.5 Litigation Threatened against Buyer
6.6 Scope of Phase II Environmental Audit
7.2(iii) Employees That Seller Will Not Employ
7.2(a) Manufacturing of Target Grades at Berlin-Gorham and other Crown
Mills
8.2 Employee Benefit Plans to be established by Buyer
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ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (the "Agreement"), dated as of March 24,
1999, is made by and among CROWN PAPER CO., a Virginia corporation ("Crown"),
CROWN VANTAGE NEW HAMPSHIRE ELECTRIC, INC., a New Hampshire corporation and a
wholly-owned subsidiary of Crown ("Electric"), BERLIN MILLS RAILWAY, INC., a New
Hampshire corporation and a wholly-owned subsidiary of Crown ("Railway," and
together with Crown and Electric, collectively, "Seller"), and AMERICAN TISSUE
HOLDINGS INC., a Delaware corporation ("ATH") and PULP & PAPER OF AMERICA LLC, a
New York limited liability company ("PPA" and together with ATH, "Buyer").
RECITALS
Seller desires to sell to Buyer substantially all of the assets of its
integrated pulp and paper mills located in Berlin and Gorham, New Hampshire and
related hydroelectric generating facilities and landfill (collectively, the
"Facility"), and Buyer desires to purchase from Seller such assets, with the
exception of certain excluded assets, upon the terms and conditions and for the
consideration hereinafter set forth, which consideration consists of cash and
the assumption of certain liabilities.
NOW, THEREFORE, in consideration of the foregoing and the representations,
warranties and agreements herein contained, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1 DEFINITIONS. The following terms, as used herein, have the following
meanings:
"Arbitrator" has the meaning set forth in Section 6.21(a).
"ARCO" has the meaning set forth in Section 2.1(x).
"Assumed Liabilities" has the meaning set forth in Section 2.3.
"ATC" has the meaning set forth in Section 6.7.
"ATH" has the meaning set forth in the introductory paragraph of this Agreement.
"Basket" has the meaning set forth in Section 12.1(i).
"Brokerage Agreement" has the meaning set forth in Section 3.1(i).
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"Business" has the meaning set forth in Section 2.1(iii).
"Buyer Indemnified Parties" has the meaning set forth in Section 12.1.
"Buyer" has the meaning set forth in the introductory paragraph of this
Agreement.
"Closing" has the meaning set forth in Section 11.1.
"Closing Date" has the meaning set forth in Section 11.1.
"Closing Inventory Statement" has the meaning set forth in Section 6.21(a)(i).
"Cluster Rule" has the meaning set forth in Section 9.19.
"Compete" has the meaning set forth in Section 7.2.
"Crown" has the meaning set forth in the introductory paragraph of this
Agreement.
"Electric" has the meaning set forth in the introductory paragraph of this
Agreement.
"Employee" has the meaning set forth in Section 8.1.
"Encumbrances" has the meaning set forth in Section 4.11.
"Environmental Laws" has the meaning set forth in Section 4.7.
"Environmental Liabilities" has the meaning set forth in Section 2.3(a)(iii).
"Environmental Permits" has the meaning set forth in Section 2.1(iii).
"Equipment" has the meaning set forth in Section 2.1(ii).
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended.
"Excluded Assets" has the meaning set forth in Section 2.2.
"Expert" has the meaning set forth in Section 9.13(a).
"Facility" has the meaning set forth in the Recitals.
"Facility Software" has the meaning set forth in Section 2.1(xii).
"Final Closing Inventory Statement" has the meaning set forth in Section
6.21(a)(ii).
"Financial Statements" has the meaning set forth in Section 4.8.
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"Governmental Authority" has the meaning set forth in Section 4.5.
"Handling Hazardous Substances" has the meaning set forth in Section 4.5.
"Hazardous Emissions" has the meaning set forth in Section 4.5.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended.
"Indemnified Party" has the meaning set forth in Section 12.3.
"Indemnifying Party" has the meaning set forth in Section 12.3.
"Intellectual Property" has the meaning set forth in Section 2.1(vi).
"Inventory" has the meaning set forth in Section 2.1(iii).
"Law" has the meaning set forth in Section 2.3(a).
"Leases" has the meaning set forth in Section 4.13.
"Legal Action" has the meaning set forth in Section 12.3.
"Liabilities" has the meaning set forth in Section 2.3(a).
"Licenses and Permits" has the meaning set forth in Section 2.1(v).
"Material Contracts" has the meaning set forth in Section 4.16.
"Minimum" has the meaning set forth in Section 12.1(i).
"Ordinary Course of Business" has the meaning set forth in Section 2.1(ix).
"Pension Plans" has the meaning set forth in Section 4.20.
"Permitted Exceptions" has the meaning set forth in Section 6.19.
"Publishing Grades" has the meaning set forth in the Strategic Alliance
Agreement.
"Purchase Price" has the meaning set forth in Section 2.4.
"Purchased Assets" has the meaning set forth in Section 2.1.
"Purchased Hardware and Software" has the meaning set forth in Section 4.29.
"Railway" has the meaning set forth in the introductory paragraph of this
Agreement.
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"Real Property" has the meaning set forth in Section 2.1(i).
"Related Agreements" has the meaning set forth in Section 3.1.
"Related Party" has the meaning set forth in Section 4.28.
"Returns" has the meaning set forth in Section 4.21(b).
"Schedule," together with the numeric designation thereof (e.g., "Schedule
4.3"), means the specifically enumerated Schedule. Except to the extent
otherwise expressly provided herein, each Schedule has been separately delivered
and agreed to as of the date of this Agreement.
"Seller Documents" has the meaning set forth in Section 4.2(a).
"Seller Indemnified Parties" has the meaning set forth in Section 12.2.
"Shared Software" has the meaning set forth in Section 2.1(xiii).
"SEC" means the Securities and Exchange Commission.
"Strategic Alliance Agreement" has the meaning set forth in Section 3.1(i).
"Survival Date" has the meaning set forth in Section 12.5.
"Sustaining Grades" has the meaning set forth in the Brokerage Agreement.
"Taxes" has the meaning set forth in Section 4.21(b).
"Target Grades" has the meaning set forth in the Brokerage Agreement.
"Target Value" has the meaning set forth in Section 6.21.
"To the knowledge of Buyer" means the actual present knowledge of those officers
and employees of Buyer, after due inquiry, listed in Schedule 1.1.
"To the knowledge of Seller" means the actual present knowledge of those
officers and employees of Seller, after due inquiry, listed in Schedule 1.1.
"Transferred Employees" has the meaning set forth in Section 8.1.
"Utility Agreements" has the meaning set forth in Section 2.1(vii).
"WARN Act" means the Worker Adjustment and Retraining Notification Act, as
amended.
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"Welfare Plans" has the meaning set forth in Section 4.20.
"Work" has the meaning set forth in Section 6.24.
"Y2K Remediation Project" has the meaning set forth in Section 4.29.
ARTICLE II
PURCHASE AND SALE OF ASSETS
2.1 PURCHASE AND SALE OF ASSETS. At the Closing, Seller will sell,
assign, transfer, grant, convey and deliver to Buyer and/or one or more of its
designees, and Buyer and/or one or more of its designees shall purchase, acquire
and take delivery, or cause one or more of its designees to purchase, acquire
and take delivery, from Seller, for the consideration hereinafter set forth in
Sections 2.3(a) and 2.4, of the following listed assets, properties and rights
of Seller (the "Purchased Assets"):
(i) the real property listed in Schedule 2.1(i) which, together
with the structures, fixtures and other improvements thereon and the
appurtenances thereto and all rights and privileges pertaining thereto, is
hereinafter referred to as the "Real Property";
(ii) the machinery, equipment (including, without limitation,
electronic data processing equipment and peripheral equipment), hydro
electric facilities and transmission system, furniture, vehicles, tools,
supplies, hardware, spare parts and other tangible personal property (other
than the tangible personal property described in other clauses of this
Section 2.1) listed in Schedule 2.1(ii), (hereinafter referred to
collectively as the "Equipment");
(iii) all raw materials, work-in-process, pulp and finished
goods inventories, stores and supplies, wherever located, which are owned
by Seller and are used in the business of the Facility (the "Business")
(which inventories, stores and supplies are hereinafter referred to
collectively as the "Inventory");
(iv) the Environmental Permits and applications held by Seller
which are assignable and relate exclusively to the Purchased Assets and/or
the Business listed in Schedule 2.1(iv), and used herein, "Environmental
Permits" means federal, state and local governmental licenses, permits, and
other authorizations and approvals, whether foreign or domestic, which
relate to the environment or to public health and safety or worker health
and safety as they may be affected by the environment;
(v) the Licenses and Permits and applications held by Seller
which are assignable and relate exclusively to the Purchased Assets and/or
the Business listed in Schedule 2.1(v); as used herein, "Licenses and
Permits" means federal, state
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and local governmental licenses, permits, approvals and authorizations,
whether foreign or domestic, other than "Environmental Permits";
(vi) the Intellectual Property owned or licensed by Seller or
which Seller has the right to use, which is used in or relates to the
Business listed in Schedule 2.1(vi); as used herein, "Intellectual
Property" means (A) all rights and interests of Seller in trade names,
trademarks, and service marks (including trademark and service mark
registrations and applications for registration) related to the Business
(but excluding those relating to Sustaining Grades, Target Grades and
Publishing Grades), and (B) the following other intellectual property
rights and interests used in or related to the Business: patents, patent
rights, copyrights, whether domestic or foreign (as well as applications,
registrations, licenses, franchises and certificates for any of the
foregoing), inventions, trade secrets, proprietary information, goodwill,
know-how, shop rights, technology, drawings, blueprints, specifications,
proprietary processes and all other industrial and intellectual property
rights that are used in or relate to the Business, provided that Seller
shall retain a perpetual, royalty-free, non-exclusive license to use all of
the Intellectual Property rights and interests described in this Section
2.1(vi)(B).
(vii) all rights and interests of Seller in, to and under all
Material Contracts and Leases and all rights and interests of Seller in, to
and under all other contracts and commitments which relate exclusively to
the Purchased Assets or the Business, including, but not limited to,
cutting and timber rights and contracts; and all rights to contracts and
agreements for the provision of gas, water, steam, electricity,
telecommunications services and other utilities (if any) supplied to the
Real Property listed in Schedule 2.1(vii) ("Utility Agreements");
(viii) all books and records (or true and complete copies
thereof) pertaining to the Business, the Purchased Assets and operations of
the Facility, wherever located, including, without limitation, computerized
records, databases and any associated software and documentation as to
assets, liabilities, revenues, expenditures of, and financial transactions,
as to taxes, shipping, supplier lists, Environmental Protection Agency
manifests, etc. used or maintained in the Facility or in connection with
the Business, or otherwise pertaining to the Purchased Assets or the
Business, including, without limitation, operations logs, equipment repair
and maintenance logs, environmental data, books and records relating to or
containing production data, manufacturing and quality control information,
sales or marketing information, customer invoices, customer lists, vendor
and supplier lists and information, and personnel records of those
employees of the Facility who will become Transferred Employees;
(ix) except as otherwise expressly set forth herein, all
general intangibles and other intangible personal property of whatever kind
or character relating to the Business, whether evidenced in writing or not,
including, but not limited to, those categories of prepaid expenses and
deferred charges created in the ordinary course of business consistent with
past custom and practice (including with
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respect to quantity and frequency) ("Ordinary Course of Business"),
databases, proprietary assays, claims, refunds and causes of action
(whether fixed or contingent) of the business listed in Schedule 2.1(ix);
(x) all of the shares of the capital stock of Androscoggin
Reservoir Company ("ARCO") owned by Seller beneficially and/or of record;
(xi) all technical materials and guidelines relating to the
Business, and all brochures, sales literature, promotional material and
other marketing and selling materials relating to pulp and toweling;
(xii) to the extent assignable, transferable or licensable, all
rights and interests of Seller in and to the computer software programs and
databases (and documentation related thereto) that are used exclusively at
the Facility but are not used by Seller in its operations in locations
other than the Facility, as listed in Schedule 2.1(xii) (the "Facility
Software");
(xiii) non-exclusive rights and licenses to use the computer
software programs and databases (and documentation related thereto) that
are used at the Facility and are also used by Seller in its operations in
locations other than the Facility as listed in Schedule 2.1(xiii) (the
"Shared Software"), to the extent that such rights can be granted or
licensed;
(xiv) all causes of action, software and equipment warranties
and legal claims relating to the Purchased Assets; and
(xv) except as otherwise expressly provided in this Agreement,
all other assets and rights of every kind and nature, real or personal,
tangible or intangible, other than the Excluded Assets under Section 2.2
hereof, that are owned or claimed by Seller and that are necessary to, or
used by Seller primarily in connection with the Purchased Assets or the
Business, whether or not such Purchased Assets are reflected on the
Financial Statements, or acquired thereafter by Seller.
2.2 EXCLUDED ASSETS. The following assets relating to the Facility (the
"Excluded Assets") are not included in the Purchased Assets:
(i) all cash and cash equivalents, including cash on hand, in
bank accounts and in the escrow account relating to the Industrial Revenue
Bonds, certificates of deposit, commercial paper and securities (other than
shares of the capital stock of ARCO to be delivered to Buyer or its
designees pursuant to Section 2.1) belonging to Seller, except petty cash
funds located at the offices of the Facility on the date of the Closing;
(ii) all accounts receivable and notes receivable related to the
Business on the date of the Closing;
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(iii) all Environmental Permits and Licenses and Permits held by
Seller which by operation of law are not assignable which are listed in
Schedule 2.2(iii);
(iv) all prepaid expenses and deferred charges relating to the
Facility and belonging to Seller, other than those listed in Schedule
2.1(ix);
(v) all refunds or rebates paid or payable by vendors or
suppliers relating to purchases for the Facility otherwise properly
allocable to periods prior to the Closing; and
(vi) all other assets listed in Schedule 2.2(vi).
2.3 ASSUMED LIABILITIES. (a) Except to the extent set forth in paragraph
(b) below, at the Closing, PPA will assume the following specifically listed
actions, suits, proceedings, hearings, investigations, charges, complaints,
claims, demands, assessments, injunctions, judgments, orders, decrees, rulings,
damages, dues, penalties, fines, costs, debts, liabilities, obligations, taxes,
liens, losses, expenses and fees, including reasonable attorneys' fees, whether
accrued or fixed, absolute or contingent, material or immaterial, or determined
or determinable ("Liabilities"), arising under any federal, state, local or
foreign, statute, law, ordinance, regulation or rule of law (collectively, the
"Law") or otherwise, of Seller which relate to the Purchased Assets and/or the
Business and are not paid or discharged at or before the Closing, and PPA shall
not assume, incur, guarantee or otherwise be obligated with respect to any
Liabilities whatsoever of Seller other than as so stated:
(i) all obligations of Seller relating to the Purchased Assets
or the Business arising from the Material Contracts, Leases and other
contracts and commitments described in Section 2.1(vii), to the extent such
obligations, by their stated terms, are to be performed in the Ordinary
Course of Business subsequent to the Closing, other than Liabilities
arising from breaches thereof or Liabilities accruing thereunder on or
prior to the Closing;
(ii) certain Liabilities of Seller relating to employees and
employee benefits to the extent set forth in Article VIII; and
(iii) except as set forth in Section 9.13, all liabilities and
obligations arising from Hazardous Emissions and Handling Hazardous
Substances at the Facility (whether based in contract, tort, implied or
express warranty, criminal or civil statute or otherwise), under any law,
regulation, policy or guideline, including but not limited to, obligations
to clean up, remedy or otherwise to restore to a former condition, by
itself or jointly with others, any contaminated surface water, ground
water, soil or any natural resources associated therewith, regardless of
whether such liabilities or obligations arose before or after the Closing
(such liabilities and obligations referred to herein as "Environmental
Liabilities").
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The Liabilities hereinabove listed, and to be assumed by PPA, are hereinafter
referred to collectively as the "Assumed Liabilities."
(b) Notwithstanding the provisions of paragraph (a) above, Seller is
retaining, and Buyer is not assuming, and shall not be deemed to have assumed,
any Liabilities of Seller of any kind or nature whatsoever, except those
expressly provided for in Section 2.3(a) above. Without limiting the generality
of the foregoing, except as otherwise set forth in this Agreement and subject to
Section 2.3(a) above, Buyer is not assuming any Liabilities and shall not have
any obligation for or with respect to:
(i) any Liabilities for federal, state and local taxes or
assessments, and related penalties and interest, incurred or suffered by
Seller or its affiliates in the conduct of, or relating to, the Business
prior to the Closing or incurred by Seller with respect to any of the
transactions contemplated hereby including, without limitation, all income,
payroll, value added, sales, use, ad valorem, transfer, franchise,
-- -------
withholding, property excise taxes, timber tax, worker's compensation tax,
governmental fees or other like assessments or charges of any kind;
(ii) any Liabilities, whether civil or criminal in nature,
arising out of any actual or alleged violation by Seller which occurred, or
which are alleged to have occurred, prior to the Closing, or by any
previous owner of any of the Purchased Assets, of any federal, state or
local law, rule, regulation, judicial or administrative order, judgment or
decree, or governmental permit, license, approval or authorization, with
the exception of Environmental Liabilities;
(iii) any Liabilities of Seller or its affiliates arising from a
breach by Seller or its affiliates prior to the Closing of any contract or
agreement, including, without limitation, Material Contracts and Leases;
(iv) any Liabilities arising under any contract or agreement,
including, without limitation, Material Contracts and Leases, if the rights
of Seller or its affiliates are, for any reason, not transferred to, or the
benefits thereunder are not otherwise made available to, Buyer at the
Closing;
(v) except to the extent expressly otherwise provided in
Article VIII hereof, any Liability in respect of (A) any worker's
compensation or long-term disability for former or present employees of
Seller or its affiliates, whether or not such employees are Transferred
Employees, if the claim arose prior to Closing; (B) any obligation of
Seller or its affiliates to indemnify any person, including, without
limitation, by reason of the fact that such person is or was an officer,
director or employee or agent of Seller or its affiliates; (C) any pension
costs for former or present employees of Seller or its affiliates, whether
or not such employees are Transferred Employees, relating to the period of
employment prior to the Closing, (D) any post-retirement medical benefits
due to former or present employees of Seller, or (E) any severance or
separation pay or allowances for former or present employees of Seller or
its affiliates who are not Transferred Employees.
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(vi) any Liabilities of Seller or its affiliates under
unsatisfied purchase obligations other than the Assumed Liabilities;
(vii) any obligation of Seller or its affiliates under any
employment or consulting agreements or arrangements;
(viii) any Liabilities of Seller or any of its affiliates for any
refunds, rebates, discounts or other such sums, whether falling due before
or after the Closing;
(ix) any Liabilities of Seller or any of its affiliates,
including, without limitation, inter-company interest payable and accounts
payable;
(x) any Liabilities of Seller or its affiliates for legal,
accounting and other professional services rendered to Seller or its
affiliates;
(xi) any Liabilities of Seller or its affiliates arising out of
any action, suit, investigation or proceeding to the extent based upon an
event occurring or a claim arising (i) prior to the Closing or (ii) after
the Closing in the case of claims in respect of products or services sold
or provided by Seller prior to the Closing and attributable to acts
performed or omitted by Seller or its affiliates prior to the Closing;
(xii) any other Liabilities of Seller or its affiliates relating
to the Purchased Assets and/or the Business that are incurred prior to the
Closing, including, without limitation, any accounts payable or other
current Liabilities of Seller or its affiliates and any other liabilities
of Seller or its affiliates incurred in connection with its efforts to
consummate the transactions contemplated hereby; and
(xiii) any Liabilities of Seller arising out of indebtedness for
borrowed money, including, without limitation, loans and credit lines of
Seller.
2.4 PURCHASE PRICE. The purchase price for the Purchased Assets (the
"Purchase Price"), shall be Forty-Five Million Dollars ($45,000,000), payable in
cash at the Closing by electronic funds transferred to a deposit account with
the financial institution specified by Seller in writing to Buyer no less than
twenty-four (24) hours prior to the Closing. The Purchase Price shall be
subject to the adjustment as set forth in Section 6.21.
ARTICLE III
RELATED AGREEMENTS
3.1 RELATED AGREEMENTS. In connection with the sale and purchase of the
Purchased Assets, the agreements listed in Sections 3.1(i) and 3.1(ii) below
between Crown and PPA will be executed simultaneous with this Agreement and will
become effective as
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of the Closing Date, and Crown and PPA will use reasonable best efforts to enter
into the agreements listed in Section 3.1(iii) below on the Closing Date:
(i) A paper brokerage agreement regarding "Target Grades" and
"Sustaining Grades" of papers produced at the Facility (the "Brokerage
Agreement") and a strategic alliance agreement regarding "Publishing
Grades" of paper produced at the Facility (the "Strategic Alliance
Agreement").
(ii) A pulp purchase agreement regarding pulp produced at the
Facility; and
(iii) Transitional services agreements, pursuant to which each of
Seller and Buyer (and its designees) will provide the other(s) with certain
transitional services relating to the operation and management of the
Business and the corporate operations of Seller following the Closing, such
services to be provided at cost, without profit.
The foregoing agreements are hereinafter referred to collectively as the
"Related Agreements."
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer the following:
4.1 ORGANIZATION, QUALIFICATION. (a) Crown is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Virginia and has all requisite corporate power and authority to own all of its
properties and assets, including, without limitation, the Purchased Assets and
to carry on the Business as it is presently being conducted. Seller is duly
qualified and in good standing to do business in New Hampshire and in each other
jurisdiction in which the conduct of the ownership or leasing of its assets or
the Business makes such qualification necessary, except in those jurisdictions
where the failure to be duly qualified and in good standing would not have a
material adverse effect on the Purchased Assets or the Business.
(b) Electric is a corporation duly organized, validly existing and in
good standing under the laws of the State of New Hampshire and a wholly-owned
subsidiary of Crown, and has all requisite corporate power and authority to own,
and does own, all of its properties and assets, including, without limitation,
the assets listed in Schedule 4.1(b), and to carry on its business as it is
presently being conducted. Electric is duly qualified and in good standing to
do business in each other jurisdiction in which the ownership or leasing of its
assets or the conduct of its business makes such qualification necessary, except
in those jurisdictions where the failure to be duly qualified and in good
standing would not have a material adverse effect on the Purchased Assets or its
business.
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(c) Railway is a corporation duly organized, validly existing and in
good standing under the laws of the State of New Hampshire and a wholly-owned
subsidiary of Crown, has all requisite corporate power and authority to own, and
does own, all of its properties and assets, including, without limitation, the
assets listed in Schedule 4.1(c), and to carry on its business as it is
presently being conducted. Railway is duly qualified and in good standing to do
business in each other jurisdiction in which the ownership or leasing of its
assets or the conduct of its business makes such qualification necessary, except
in those jurisdictions where the failure to be duly qualified and in good
standing would not have a material adverse effect on the Purchased Assets or its
business.
4.2 AUTHORITY RELATIVE TO THIS AGREEMENT. (a) Seller has all requisite
corporate power and authority under its respective articles of incorporation and
by-laws, each as amended to date, and applicable laws to execute and deliver
this Agreement, the Related Agreements and each other agreement, instrument or
document to be executed and delivered by it hereunder to which it is a party
(collectively, the "Seller Documents") and to consummate the transactions
contemplated hereby and thereby and to perform its obligations hereunder and
thereunder. The execution, delivery and performance by each Seller of the
Seller Documents, and the consummation by it of the transactions contemplated
hereby and thereby, have been duly authorized by the Board of Directors of each
Seller and no other corporate proceedings on the part of each Seller are
necessary with respect thereto. Assuming that Buyer has duly authorized the
execution and delivery of the Seller Documents, this Agreement constitutes, and
each of the other Seller Documents, when executed and delivered by Seller, will
constitute, valid and binding obligations of Seller, enforceable in accordance
with their respective terms, except as the same may be limited by (i) any
applicable bankruptcy, insolvency, reorganization, moratorium or similar law
affecting creditors' rights generally or (ii) general principles of equity,
whether considered in a proceeding in equity or law. Other than with respect to
Electric, Railway and ARCO, Crown does not own of record or beneficially, or
have any right or obligation to acquire, directly or indirectly, (i) any shares
of capital stock, or securities convertible into, or exercisable or exchangeable
for, shares of capital stock, of any other corporation, any equity participating
interests in any joint venture, partnership or other non-corporate business
enterprise, relating in either case to the Purchased Assets or the Business.
(b) Neither Electric nor Railway owns of record or beneficially, or
has any right or obligation to acquire, directly or indirectly, (i) any shares
of capital stock, or securities convertible into, or exercisable or exchangeable
for, shares of capital stock, of any other corporation, or (ii) any equity or
participating interests in any joint venture, partnership or other non-corporate
business enterprise, relating in either case to the Purchased Assets or the
Business.
4.3 CONSENTS AND APPROVALS. Except as set forth in Schedule 4.3, there is
no requirement applicable to Seller to make any notification, registration,
qualification or filing with any Governmental Authority or any other third party
as a condition to the lawful consummation by Seller of the transactions
contemplated by the Seller Documents. No order, writ, injunction or decree has
been issued, or is threatened to be issued, by any Governmental Authority
governing or pertaining to the Purchased Assets, or the conduct of
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the Business, which would adversely affect the consummation of the transactions
contemplated by the Seller Documents or the value of the Business or the
Purchased Assets. Except as set forth in Schedule 4.3, there is no requirement
that any party to any Material Contract, Lease, Licenses and Permits, agreement
for the use of Intellectual Property, or loan agreement, to which Seller is a
party or by which it or the Purchased Assets are subject or bound, consent to
the execution by Seller of any of the Seller Documents or the consummation of
the transactions contemplated by the Seller Documents.
4.4 NON-CONTRAVENTION. Assuming that the consents and approvals set forth
in Schedule 4.3 are obtained, the execution and delivery by each Seller of this
Agreement does not, and the execution and delivery by each Seller of the other
Seller Documents at the Closing and consummation of the transactions
contemplated hereby and thereby will not, (i) violate or result in a breach of
any provision of the respective articles of incorporation or bylaws of each
Seller, each as amended to date, (ii) result in a breach of, or constitute (with
due notice or lapse of time, or both) a default (or give rise to any right of
termination, cancellation or acceleration or otherwise be in conflict with or
result in a loss of contractual benefits) under the terms, conditions or
provisions of any note, bond, mortgage, indenture, license, agreement, lease or
other instrument or obligation to which any Seller is a party or by which any
Seller or any of the Purchased Assets may be bound, (iii) violate any order,
writ, injunction, decree, statute, rule, regulation, ordinance, code or other
legal requirement applicable to each Seller, any of the Purchased Assets, or the
Business (excluding from the foregoing clauses (ii) and (iii) such defaults and
violations which would not have a material adverse effect on the Purchased
Assets or the Business), (iv) result in any Encumbrance upon any of the
Purchased Assets or the Facility, or (v) interfere with or otherwise adversely
affect the ability of Buyer and/or any of its designees acquiring the Purchased
Assets to carry on the Business after the Closing Date on substantially the same
basis as it is now conducted by Seller.
4.5 ENVIRONMENTAL MATTERS. Except as set forth in Schedule 4.5, Seller
has obtained all material Environmental Permits required for the lawful
operation of the Purchased Assets and conduct of the Business as it is presently
being conducted, including, without limitation, those relating to (i) emissions,
discharges or threatened discharges of pollutants, contaminants, hazardous or
toxic substances or petroleum or any other waste, substance, material, chemical
or constituent subject to regulation under any Environmental Law ("Hazardous
Materials") into the air, surface water, ground water or the ocean, or on or
into the land ("Hazardous Emissions") and (ii) the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Materials ("Handling Hazardous Substances"). Schedule 2.1(iv)
contains a complete and correct list of all such material Environmental Permits
and applications, all of which are in full force and effect and all of which are
assignable without conditions, unless otherwise indicated therein. To the
knowledge of Seller, and except as identified in Schedule 4.5, Seller is in
substantial compliance with all of the terms and conditions set forth in such
Environmental Permits and are also in substantial compliance with all of the
terms and conditions contained in or required of Seller by any law, regulation,
policy, guideline, order, judgment or decree of any agency, instrumentality,
department, commission, court, tribunal or board of any government, whether
foreign or domestic, national, federal, state, provincial or local (each,
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a "Governmental Authority"), applicable to or having jurisdiction over the
Facility, the Purchased Assets, or the Business which relate to the environment,
including, without limitation, ambient air, surface water, groundwater, land and
subsurface strata, and natural resources such as wetlands flora and fauna, or to
public health and safety or worker health and safety as they may be affected by
the environment including, without limitation, the Resource Conservation and
Recovery Act of 1976, as amended, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 (CERCLA) (42 USCA 9601, et. seq.), as
amended, the Superfund Amendments and Reauthorization Act of 1986 (SARA) (Act of
October 17, 1986, Pub. L. No. 99-499 (100 Stat. 1613)), the Federal Clean Water
Act, the Federal Clean Air Act, the Toxic Substances Control Act, the Pulp and
Paper Cluster Rule (63 FR 18504-18751) (hereinafter referred to, collectively,
as "Environmental Laws"). To the knowledge of Seller (but with respect to
Section 9.13 without regard to Seller's knowledge), and except as identified in
Schedule 4.5, there exist no facts, events or conditions which (x) interfere
with, prevent, or, with the passage of time, could interfere with or prevent
continued substantial compliance by Seller with any of its Environmental Permits
or any of the aforementioned laws, regulations, policies, guidelines, orders,
judgments or decrees, (y) may give rise to any liability on the part of Seller
(whether based in contract, tort, implied or express warranty, criminal or civil
statute or otherwise) under any law, regulation, policy or guideline relating to
the Hazardous Emissions or Handling Hazardous Substances or (z) obligate any of
Seller or, with the passage of time, could cause it to be obligated to clean up,
remedy or otherwise restore to a former condition, by itself or jointly with
others, any contaminated surface water, ground water, soil or any natural
resources associated therewith. Seller has delivered to Buyer true and correct
copies of all environmental site assessments commissioned or performed by or on
behalf of Seller relating to the Purchased Assets or the Business, as listed in
Schedule 4.5.
4.6 LICENSES AND PERMITS. Except as set forth in Schedule 4.6, Seller has
obtained all material Licenses and Permits required for the lawful operation of
the Purchased Assets and conduct of the Business as it is presently being
conducted. Schedule 2.1(v) contains a complete and correct list of all such
material Licenses and Permits and applications, all of which are in full force
and effect and, to the knowledge of Seller, are unimpaired by any act or
omission of Seller, its officers, directors, employees or agents, and all of
which are assignable without conditions unless otherwise indicated on Schedule
4.6. No complaint or notice of a violation of any such License or Permit has
been received by Seller or, to the knowledge of Seller, recorded or published,
and no proceeding is pending or, to the knowledge of Seller, threatened, to
revoke, cancel, rescind, modify, or refuse to renew or limit any of the Licenses
and Permits. Seller has no reason to believe that the Licenses or Permits in
effect on the date hereof will not be renewed.
4.7 COMPLIANCE WITH LAWS. Except as set forth in Schedule 4.7 or
identified in Schedule 4.5, and in addition to the representations and
warranties contained in Section 45 relating to Environmental Permits, those
contained in Section 46 relating to Licenses and Permits and those contained in
Section 4.12 relating to Real Property, Crown has, and on or after August 25,
1995 Electric and Railway have, operated the Purchased Assets and the Business
in substantial compliance with all applicable laws, rules, regulations, codes,
plans,
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policies, guidelines, injunctions, orders, rulings, judgments or decrees of any
Governmental Authority, applicable to the Purchased Assets or the Business,
including, without limitation, (i) the Occupational Safety and Health Act of
1970, as amended, (ii) Environmental Laws, and (iii) those related to antitrust
and trade matters, civil rights, zoning and building codes, public health and
safety, worker health and safety and labor and nondiscrimination, the failure to
comply with which could reasonably be expected to materially and adversely
affect the earnings, assets, financial condition or operations of the Business
or the Purchased Assets. Seller is not subject to any governmental or private
litigation or proceedings involving a demand for damages or other liability
under Environmental Laws and, to the knowledge of Seller, none are threatened or
anticipated. Furthermore, except as is disclosed in Schedule 4.5 or Schedule
4.7, Seller has not received any citation, notice of fine, penalty or
unsatisfied abatement obligation, notice or orders or other written or oral
communication alleging any presently unresolved non-compliance with any of the
aforementioned laws, regulations, policies, guidelines, orders, judgments or
decrees or which may require cleanup or other remedial work, and no action,
suit, proceeding, hearing, investigation, charge, complaint, demand, or notice
has been filed or commenced against Seller alleging any failure so to comply
and, to the knowledge of Seller, none are threatened or anticipated. Crown has,
and on or after August 25, 1995, Electric and Railway have, timely filed all
material reports required to be filed by them under applicable Environmental
Laws. To the knowledge of Seller, Crown has not, and on or after August 25,
1995, neither Electric nor Railway has, stored or used any pollutants,
contaminants or hazardous or toxic wastes, substances or materials in violation
of any aspect of any Environmental Law under which the Facility is subject.
Crown has not, and on or after August 25, 1995, neither Electric nor Railway
has, buried, dumped, disposed, spilled or released any Hazardous Materials on,
beneath or about the Facility in violation of Environmental Laws that have not
yet been resolved with the applicable Governmental Authority and, except as
disclosed in Schedule 4.5, no releases of Hazardous Materials have occurred at,
on, under or from the Real Property in a manner which would reasonably be
expected to require response or other corrective action under any applicable
Environmental Law.
4.8 FINANCIAL STATEMENTS. Seller has previously furnished Buyer with true
and complete copies of the following unaudited financial statements for the
Business (collectively the "Financial Statements"): a balance sheet as of
December 27, 1998 and statements of income and cash flow for the fiscal year
ended on such date. The Financial Statements present fairly the financial
position of the Business as of such date and the results of operations and cash
flows for such period and have been prepared in accordance with accounting
principles utilized by Seller for its internal operating and management purposes
applied on a consistent basis.
4.9 LITIGATION. Except as set forth in Schedule 4.9, there are no
material actions, suits, claims, investigations or proceedings (legal,
administrative or arbitrative) pending or, to the knowledge of Seller,
threatened against Seller, or relating to the Purchased Assets or the Business,
whether at law or in equity and whether civil or criminal in nature, before any
Governmental Authority or arbitral panel, nor are there any judgments, decrees
or orders of any such Governmental Authority or arbitral panel outstanding
against Seller which have,
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or, if adversely determined, could reasonably be expected to have a material
adverse effect on the Purchased Assets or the earnings, assets, financial
condition or operations of the Business, or which seek to prevent, restrict or
delay consummation of the transactions contemplated hereby or fulfillment of any
of the conditions of any of the Seller Documents nor does Seller know of any
reasonable grounds for any such claim, action, suit, proceeding or
investigation.
4.10 ABSENCE OF CHANGES. Except as set forth in Schedule 4.10, since
December 27, 1998, there has not been any material adverse change in the
financial condition, operations or results of operations of the Business or the
Purchased Assets, including, without limitation:
(i) there has not been any change, or development involving a
prospective change, including, without limitation, any damage, destruction
or loss (whether or not covered by insurance), but excluding economic,
political, or other conditions affecting the paper and pulp industry
generally, which affects or, to the knowledge of Seller, can reasonably be
expected to affect, materially and adversely, the Purchased Assets or the
earnings, assets, financial condition or operations of the Business;
(ii) any obligation or liability not in the Ordinary Course of
Business involving more than Two Hundred Thousand Dollars ($200,000)
(whether matured, absolute, accrued, contingent, or otherwise) incurred by
Seller with respect to the Business or the Purchased Assets and neither
Seller nor any third party has imposed any Encumbrance upon the Purchased
Assets;
(iii) there has not been any increase in the compensation of the
employees of the Business, including, without limitation, any increase
pursuant to any bonus, pension, profit sharing or other plan or commitment,
(other than normal increases consistent with past practices and those
required by law or collective bargaining agreements);
(iv) there has not been any amendment to any employment
agreement, consulting agreement, or collective bargaining agreement to
which any employee of the Business is a party, and Seller has not entered
into any such agreement;
(v) Seller has not entered into any sale, transfer, lease,
mortgage, license or assignment of, or granted or imposed or permitted any
Encumbrance upon, any of the assets of the Business, including, without
limitation, the Purchased Assets, other than in the Ordinary Course of
Business;
(vi) Seller has not entered into any agreements, contracts,
leases, or licenses (or series of related agreements, contracts, leases and
licenses), other than in the Ordinary Course of Business, with respect to
the Business or with respect to the Purchased Assets which, individually or
in the aggregate, would be material to the Business or which agreements,
contracts, leases or licenses entered into the Ordinary
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Course of Business could be reasonably expected if performed in accordance
with their terms, to have a material adverse effect on the earnings,
assets, financial condition or operations of the Business;
(vii) no party (including Seller) has accelerated, terminated,
modified, or cancelled, or threatened to accelerate, terminate, modify or
cancel, any agreement, contract, lease, or license (or series of related
agreements, contracts, leases and licenses) to which Seller is a party or
by which it is bound which in the aggregate would have a material affect on
the Purchased Assets or the Business;
(viii) Seller has not made any capital investment in, any loan
to, or any acquisition of the securities or assets of, any other person (or
series of related capital investments, loans, and acquisitions) outside the
Ordinary Course of Business with respect to the Purchased Assets or the
Business;
(ix) Seller has not issued any note, bond, or other debt
security or created, incurred, assumed, or guaranteed any indebtedness for
borrowed money or capitalized lease obligation either involving more than
Five Hundred Thousand Dollars ($500,000) singly or One Million Dollars
($1,000,000) in the aggregate with respect to the Purchased Assets or the
Facility;
(x) Seller has not delayed or postponed the payment of
accounts payable and other liabilities outside the Ordinary Course of
Business with respect to the Purchased Assets or the Business;
(xi) Seller has not cancelled, compromised, waived, or
released any right or claim (or series of related rights and claims) either
involving more than Two Hundred and Fifty Thousand Dollars ($250,000) or
outside the Ordinary Course of Business with respect to the Business or the
Purchased Assets;
(xii) Seller has not granted any license or sublicense of or
transferred any rights under or with respect to any Intellectual Property
with respect to the Purchased Assets or the Business;
(xiii) Seller has not experienced any damage, destruction, or
loss (whether or not covered by insurance) to the property relating to the
Business or to the Purchased Assets, in excess of Fifty Thousand Dollars
($50,000) per occurrence and One Hundred and Fifty Thousand Dollars
($150,000) in the aggregate;
(xiv) there has not been any other material occurrence, event,
incident, action, failure to act, or transaction outside the Ordinary
Course of Business involving the Business or the Purchased Assets;
(xv) there has not been any material deterioration of
relations between the Facility and its suppliers, customers, or labor
unions; and
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(xvi) Seller has not entered into any agreement or commitment to
take any action described in this Section 4.10.
Since December 27, 1998, the Business has been conducted only in the Ordinary
Course of Business and in a manner consistent with past practices.
4.11 TITLE TO PURCHASED ASSETS. Seller is the sole lawful owner of, and
has good and valid record and marketable title collectively to, the Purchased
Assets, such as, with respect to the Real Property, would be insurable on a
standard ALTA form policy of title insurance at standard premium rates, and
immediately prior to Closing, Seller will have the full right to sell, convey,
transfer, assign and deliver all of its right, title and interest in the
Purchased Assets owned by it or in which it has an interest and will have such
power without any restrictions of any kind whatsoever. Except for easements,
restrictions and other encumbrances described in Schedule 4.11 or Schedule
4.12(h) and the Assumed Liabilities, all of the Purchased Assets are entirely
free and clear of any security interests, liens, claims, charges, options,
mortgages, debts, leases (and subleases), conditional sales agreements, title
retention agreements, easements, rights-of-way, licenses, covenants, tenancies,
encumbrances of any kind, defects as to title or restrictions on the use and
enjoyment thereof or against the transfer or assignment thereof (collectively,
"Encumbrances"), and there are no filings in any registry of deeds in any
jurisdiction or under the Uniform Commercial Code or similar statute in any
jurisdiction showing Seller as mortgagor or debtor which create or perfect or
which purport to create or perfect any Encumbrance in or on any of the Purchased
Assets. Except as set forth in Schedule 4.11 or Schedule 4.12(h), all leases of
personal property of Seller to be assigned to the Buyer (or its designees)
hereunder are valid and binding in accordance with their respective terms, and
there is not, under any of such leases, any existing default or any condition,
event or act, which with notice or lapse of time, or both, would constitute a
material default or an event of default. Copies of all title insurance policies
and other evidence of title obtained by Seller with respect to the Real Property
have been, or will, in accordance with Section 6.22, be, delivered to Buyer by
Seller. Seller will deliver to Buyer, in accordance with Section 6.22, all
surveys of land and plans, including, without limitation, site plans and "as-
built" plans with respect to the Real Property which are available to Seller
after due inquiry.
4.12 REAL PROPERTY.
(a) Schedule 2.1(i) includes a complete and accurate legal description
of the Real Property. The Real Property comprises all real properties owned or
leased by Seller which are used by Seller in, or are otherwise necessary for,
the conduct of the Business.
(b) There are no pending or, to Seller's knowledge, contemplated
condemnation or eminent domain proceedings that might reasonably be expected to
affect the Real Property. There are no planned or commenced public improvements
which, to the knowledge of Seller, may result in special assessments or
otherwise affect the Real Property and to the knowledge of Seller there is no
proposed increase in taxes, real estate or otherwise, relating to the Real
Property except as set forth in the Settlement Agreement
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with the City of Berlin, which is referenced in Schedule 4.9 and has been
delivered to Buyer.
(c) Except as set forth in Schedule 412(c), the Real Property complies
in all material respects with all regulations, codes, ordinances, and statutes
and other legal requirements of all applicable Governmental Authorities,
including, without limitation, all zoning, building, health, Environmental Laws,
sanitary, and occupational safety and health regulations, laws, and ordinances.
(d) Except as set forth in Schedule 412(d), there are no material
structural defects affecting the Real Property (including, without limitation,
the hydroelectric facilities and landfill), all mechanical systems, including,
without limitation, sewer, septic, water, steam, electrical, plumbing, heating,
air conditioning and environmental improvement systems, are adequate in quantity
and quality for normal operations, and the roofs of the buildings located on the
Real Property are free from material defects. Except as set forth in Schedule
412(d), Seller has not received any unresolved complaint or notice of violation
from the Federal Occupational Safety and Health Administration, the Federal
Environmental Protection Agency, the New Hampshire Department of Environmental
Services, or any other Governmental Authority relating to the Real Property.
(e) The Real Property has direct and unobstructed access to adequate
electric, gas, water, sewer, steam, and telephone lines, all of which are
adequate for the uses to which such property is currently used by Seller, all of
which services are adequate in accordance with all applicable laws, ordinances,
rules and regulations and are sufficient for the operation and conduct of the
business of the Facility.
(f) The Real Property has full and free vehicular access to and from
adjacent public highways and roads and Seller has no knowledge of any fact or
condition which would result in the termination of such access.
(g) Except as set forth in Schedule 411, to the knowledge of Seller,
there are no encroachments on or nuisances affecting adjacent owners' lands by
any portion of any of the improvements located on the Real Property and/or any
of the business conducted at the Facility and there are no encroachments by any
of the improvements located on adjacent owners' lands on any portion of the Real
Property giving rise to any rights or interests of any other person which would
in any way impair the use of the Real Property for Buyer's intended use thereof.
(h) Except as set forth in Schedule 412(h), there are no leases,
subleases, licenses, covenants, options, easements, concessions, or other
agreements, written or oral, recorded or unrecorded, granting to any party or
parties the right of use or occupancy of any portion of the Real Property.
(i) Except as set forth in Schedule 412(i), to the knowledge of
Seller, none of the Real Property contains any underground storage tanks.
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(j) Except as set forth in Schedule 4.11, none of the Real Property
(whether owned or leased) used in the active conduct of the Business, or any
real property which is the subject of any timber rights or similar agreements,
is subject to any land use change tax under NHRSA 79-A.
4.13 LEASES. For Seller's fiscal year ended December 27, 1998, the
aggregate amount of annual rental expense under leases, oral or written, for
real and personal property ("Leases"), was not greater than $1,200,000.
Schedule 4.13 sets forth a complete and accurate list of the Leases. Except as
set forth on Schedule 4.13, Seller has not entered into any material lease of
real or personal property, oral or written, with respect to the Business since
December 27, 1998. Except as set forth in Schedule 413, neither Seller nor any
other party thereto has breached any such Lease and, no event has occurred
which, with the giving of notice or the passage of time, or both, will cause a
default under, or permit the termination, modification or acceleration of any
such Lease by any party thereto. Complete and accurate copies of all of the
Leases have been delivered to Buyer.
4.14 INVENTORY. The Inventory, in the aggregate, (i) is fit for the
purpose for which it was procured and manufactured and is usable or saleable in
the Ordinary Course of Business, (ii) is sufficient but not excessive in kind or
amount for the conduct of the Business as it is presently being conducted, and
(iii) is carried on the books of Seller at an amount which reflects valuations
not in excess of the lower of cost or market determined in accordance with
generally accepted accounting principles applied on a consistent basis.
Schedule 414 sets forth a list of locations of Inventory not located on the Real
Property or on real estate subject to a Lease.
4.15 INTELLECTUAL PROPERTY AND SOFTWARE. (a) Seller owns or has valid
rights to use pursuant to license, agreement or permission each item of
Intellectual Property necessary or desirable for the conduct of the Business as
presently conducted, as listed in Schedule 2.1(vi) without conflict with the
right of others. Each item of Intellectual Property set forth in Schedule
2.1(vi) will be owned or available for use by Buyer on identical terms
immediately subsequent to the Closing Date. Seller has taken all necessary and
desirable action to maintain and protect each item of Intellectual Property that
it owns or uses.
(b) Seller has not interfered with, infringed upon, misappropriated,
or otherwise come into conflict with any Intellectual Property rights of third
parties with respect to the Business and none of the directors and officers (and
employees with responsibility for Intellectual Property matters) of Seller has
ever received any charge, complaint, claim, demand, or notice alleging any such
interference, infringement, misappropriation, or violation (including any claim
that Seller must license or refrain from using any Intellectual Property rights
of any third party) that remains unresolved. No third party has interfered
with, infringed upon, misappropriated, or otherwise come into conflict with any
Intellectual Property rights of the Business in any manner that remains
unresolved.
(c) Schedule 2.1(vi) identifies each trademark, copyright and patent
registration which is held by Seller with respect to any of the Intellectual
Property,
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identifies each pending patent application or application for registration which
Seller has made with respect to any of the Intellectual Property, and identifies
each license, agreement, or other permission which Seller has granted to any
third party with respect to any of the Intellectual Property (together with any
exceptions). Seller has delivered to the Buyer correct and complete copies of
all such registrations, applications, licenses, agreements, and permissions (as
amended to date) and has made available to the Buyer correct and complete copies
of all other written documentation evidencing ownership and prosecution (if
applicable) of each such item. Schedule 2.1(vi) also identifies each trade name
or unregistered trademark or service mark used by Seller in the conduct of the
Business, except those used in connection with the Publishing Grades. With
respect to each item of Intellectual Property:
(i) Seller possesses all right, title, and interest in and to
the item, free and clear of any Encumbrance, license, or other
restriction, except as set forth in Schedule 4.15(c);
(ii) the item is not subject to any outstanding injunction,
judgment, order, decree, ruling, or charge;
(iii) no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand is pending or is threatened which
challenges the legality, validity, enforceability, use, or ownership
of the item; and
(iv) Seller has never agreed to indemnify any person for or
against any interference, infringement, misappropriation, violation or
other conflict with respect to the item.
(d) Schedule 2.1(vi) identifies each item of Intellectual Property
that any third party owns and that Seller uses in the conduct of the Business
pursuant to license, sublicense, agreement, or permission. Seller has delivered
to the Buyer correct and complete copies of all such licenses, sublicense,
agreements and permissions (as amended to date). With respect to each such item
of Intellectual Property:
(i) the license, sublicense, agreement, or permission covering
the item is legal, valid, binding, enforceable, and in full force and
effect;
(ii) the license, sublicense, agreement, or permission will
continue to be legal, valid, binding, enforceable, and in full force
and effect on identical terms following the consummation of the
transactions contemplated hereby;
(iii) no party to the license, sublicense, agreement, or
permission is in breach or default, and no event has occurred which
with notice or lapse of time or both, would constitute a breach or
default or an event of default, or permit termination, modification,
or acceleration thereunder;
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(iv) no party to the license, sublicense, agreement, or
permission has repudiated any provision thereof;
(v) with respect to each sublicense, the representations and
warranties set forth in subsections (i) through (iv) above are true
and correct with respect to the underlying license;
(vi) the underlying item of Intellectual Property is not
subject to any outstanding injunction, judgment, order, decree,
ruling, or charge;
(vii) no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand is pending or is threatened which
challenges the legality, validity, or enforceability of the underlying
item of Intellectual Property; and
(viii) Seller has not granted any sublicense or similar right
with respect to the license, sublicense, agreement or permission.
(e) (i) Schedule 2.1(xii) identifies all of the Facility Software and
Schedule 2.1(xiii) identifies all of the Shared Software (other than off-the-
shelf, non-customized programs and databases that are generally commercially
available), and except as set forth in Schedule 4.15(e), Seller owns outright or
holds valid licenses to all copies of the Facility Software and the Shared
Software. To the knowledge of Seller, none of the Facility Software or Shared
Software, and no use by Seller thereof infringes upon or violates any patent,
copyright, trade secret or other proprietary right of any other person, and no
claim with respect to any such infringement or violation is threatened. Seller
has taken all steps reasonably necessary to protect its right, title and
interest in and to the Facility Software and the Shared Software owned by it,
including, without limitation, the use of written agreements containing
appropriate confidentiality provisions with all third parties having access to
the source code relating thereto.
(ii) Except for off-the-shelf, non-customized programs and databases that
are generally commercially available, Seller possesses or has access to
documentation, including, without limitation, source codes for all Facility
Software and Shared Software owned or used by it sufficient to continue to
operate the Business. Upon consummation of the transactions contemplated by this
Agreement, the Buyer will own all the Facility Software and will have a valid
non-exclusive transferable perpetual and fully-paid up right and license to use
all of the Shared Software owned by Seller immediately prior to the Closing,
free and clear of all claims, liens, encumbrances, obligations and liabilities
and, with respect to all agreements for the lease or license of Facility
Software or Shared Software which require consents or other actions as a result
of the consummation of the transactions contemplated by this Agreement in order
for the Buyer to use and operate the same after the Closing Date, Seller will
have obtained such consents or taken such other actions so required. Seller has
fully paid up all licenses with respect to every third party software program
utilized by each in the conduct of the Business.
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(f) The conduct of the Business following the Closing will not
interfere with, infringe upon, misappropriate, or otherwise come into conflict
with, any Intellectual Property or Facility Software or Shared Software rights
of third parties as a result of the continued operation of its business as
presently conducted.
4.16 MATERIAL CONTRACTS. Schedule 4.16 sets forth a complete and correct
list of each contract, agreement or commitment, other than Leases, of Seller:
(i) upon which any substantial part of the Business is dependent or
which, if breached, could reasonably be expected to affect, materially and
adversely, the Purchased Assets or the earnings, assets, financial
condition or operations of the Business;
(ii) which provides for aggregate future payments by the Business of
more than One Hundred Thousand Dollars ($100,000), except for purchase
orders or sales orders arising in the Ordinary Course of Business, in which
case they are listed only if any party thereto is obligated to make future
payments pursuant thereto aggregating more than Two Hundred Thousand
Dollars ($200,000);
(iii) which relates to the Purchased Assets and extends more than one
year from the date hereof and is not cancelable by either party on 30 days'
notice;
(iv) which provides for the sale, lease or transfer of any interest
in, after the date hereof and other than in the Ordinary Course of
Business, of any of the Purchased Assets; or
(v) which contains covenants pursuant to which any person has agreed
not to compete with any business conducted by or at the Facility or not
disclose to others information concerning the Purchased Assets or the
Business.
Each of the foregoing is referred to in this Agreement as a "Material Contract."
Except as set forth in Schedule 4.16, all of the Material Contracts are in full
force and effect, no Material Contract has been breached and, to the knowledge
of Seller, no event has occurred which, with or without the giving of notice or
the passage of time or both, would constitute a default by any party thereto.
Complete and correct copies of all the Material Contracts have been delivered to
Buyer.
4.17 MAINTENANCE OF THE EQUIPMENT. The Equipment comprises all of the
equipment owned by Seller at the Facility and used or necessary for the conduct
of the Business as currently conducted. The Equipment is adequate in quantity
and quality to operate and conduct the Business in the ordinary course and in
substantial compliance with all applicable laws, rules and regulations. Without
limiting the foregoing, the Equipment has been maintained and operated in
substantial compliance with the rules and regulations of the Federal
Occupational Safety and Health Administration, the Federal Environmental
Protection Agency and all other federal, state, county, or local agencies or
departments having jurisdiction thereover.
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4.18 SUFFICIENCY OF PURCHASED ASSETS. With the exception of the Excluded
Assets and other exceptions set forth in Schedule 4.18, the Purchased Assets
include all properties and rights of Seller used in the operation of the
Purchased Assets and the conduct of the Business as it is presently being
conducted.
4.19 LABOR MATTERS. (a) Schedule 4.19(a) sets forth a complete and correct
list of each labor or collective bargaining agreement, employment contract and
independent contractor agreements to be assumed by Buyer covering Employees and
independent contractors of the Business.
(b) Except as set forth in Schedule 4.19(b), Seller has not received
notice of any allegation of unfair labor practices, or of the institution or, to
the knowledge of Seller, threatened institution of any grievance or arbitration
proceedings or of any material violation of agreements, statutes and
governmental regulations relating to employment practices at the Facility that
remain unresolved or that have resulted in a grievance arbitration decision or a
written settlement agreement during the period of five years preceding the
execution of this Agreement. Except as set forth in Schedule 4.19(b), with
respect to the Business, Seller has substantially complied with all applicable
laws and regulations relating to the employment of labor, including, but not
limited to, those related to wages, hours, discrimination, ERISA, and the
payment of Social Security or similar taxes or unemployment or withholding
taxes, and Seller is not liable for any material penalties for failure to comply
with any of the foregoing. Except as set forth in Schedule 4.19(b), Seller has
not committed any unresolved violation of the federal Fair Labor Standards Act
or any other law dealing with such matters at the Facility.
(c) Since January 1, 1998, neither Crown nor Electric has experienced
at the Facility any strike, labor dispute, work stoppage, slow-down or lockout,
or any other event adversely affecting employee relations and there are no such
actions pending or threatened.
(d) Except as set forth in Schedule 4.19(b) or (d), there are no
unresolved, existing, or to Seller's knowledge, potential, claims by any one or
more of Seller's employees or former employees under any applicable occupational
health or safety, equal employment opportunity, or discrimination statutes or
laws relating to employment at the Facility and there have been no claims that
have resulted in a grievance arbitration decision or a written settlement
agreement with respect to the foregoing during the period of five years
preceding the execution of this Agreement.
4.20 EMPLOYEE BENEFIT PLANS. Schedule 420 lists all of the employee benefit
plans and programs, including, without limitation, all retirement, savings and
other pension plans ("Pension Plans"), all health, severance, insurance,
disability and other employee welfare plans ("Welfare Plans") and all stock
option, incentive, vacation and other similar plans that are maintained by
Seller with respect to employees of the Facility or to which Seller has
contributed or is now contributing on behalf of the employees of the Facility,
true and complete copies of which have been delivered to Buyer. Seller has not
ever maintained or made any contribution to, and is not a party to, any multi-
employer plan as defined in Section 3(37) of ERISA regarding the Facility.
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4.21 TAXES. (a) Except as listed in Schedule 4.9, all real property and
personal property taxes, penalties and interest and related charges currently
due with respect to the Purchased Assets and the conduct of the Business have
been paid by Seller, Electric and Railway. All water and sewage and other
municipal charges and assessments, and any interest and/or penalties thereon,
which are currently due with respect to the Facility or any of the Equipment
(whether or not constituting a lien upon any of the Real Property or other
Purchased Assets) have been paid. Except for the real estate transfer tax, the
sale of the Purchased Assets by Seller, Electric and Railway and purchase of the
Purchased Assets by Buyer, pursuant to this Agreement or any of the Related
Agreements will not result in the imposition of any personal property sales tax
or other similar tax upon the transfer of any of the Purchased Assets, by any
federal, state or local taxing authority.
(b) Except as set forth in Schedule 4.9, to the knowledge of Seller,
with respect to the Business and the Purchased Assets: (i) Seller has timely
filed, or caused to be timely filed, all returns, declarations, reports,
estimates, information returns and statements ("Returns") required to be filed
with or supplied to any taxing authority in connection with all taxes, charges,
fees, levies, duties, tariffs, or other assessments, including, without
limitation, income, gross receipts, excise, real and personal property, sales,
transfer, timber, interest and dividends, business profits, use, change in use,
ad valorem, gains, workers compensation, license, payroll and franchise taxes,
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imposed by any Governmental Authority, any interest, penalties or additions to
tax attributable to any of the foregoing (collectively, "Taxes"), required to be
filed by Seller, all of which Returns were substantially correct as filed and
correctly reflect the facts regarding the income, business, assets, operations,
activities and status of Seller, as well as any Taxes required to be paid or
collected by Seller and the Returns comply in all respects with all applicable
legal requirements; (ii) except as set forth in Schedule 4.21(b), Seller's
Returns have not been audited by any Governmental Authority, nor is any such
audit scheduled or pending; (iii) there are no outstanding, waivers or
extensions of time relating to the filing of any Return; (iv) any deficiency
assessments, penalties and interest with respect to Seller's Returns have been
paid by Seller; (v) there are no outstanding waivers or comparable consents to
the application of the statute of limitations with respect to any Taxes or
Returns; and (vi) except as set forth in Schedule 4.21(b), there are no tax
sharing or similar agreements with respect to any Taxes paid or payable by
Seller.
(c) With regard to the Facility and the Purchased Assets, except as
set forth in Schedule 4.9, Seller has timely paid and through the Closing Date
will have timely paid, all Taxes due and payable on or before such date.
4.22 INSURANCE. Schedule 4.22 sets forth the insurance coverage (and
deductibles relating thereto) currently maintained by Seller relating to the
Purchased Assets and the Business. All premiums with respect thereto have been
paid, and Seller has not received any unresolved notice of cancellation or
threatened cancellation of insurance covering any of the Purchased Assets or the
Business. All such policies are in full force and effect and provide insurance,
including, without limitation, liability insurance, in such amounts and against
such risks and liability claims as is customary for companies engaged in similar
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businesses to that of Seller, to protect the employees, properties, assets of
the Purchased Assets and the Business.
4.23 UNDISCLOSED LIABILITIES. Except as disclosed in this Agreement and
except for the Assumed Liabilities, at the Closing there will be no Liabilities
of Seller which could create an Encumbrance on, or result in a lien on, the
Purchased Assets or the Business (whether absolute, accrued, contingent or
otherwise, and whether due or to become due).
4.24 POWERS OF ATTORNEY. There are no outstanding powers of attorney
executed with respect to the Business or the Purchased Assets.
4.25 PRODUCT WARRANTY. Each product manufactured, sold, or delivered by
Seller in the conduct of the Business has been manufactured, sold or delivered
in substantial conformity with all applicable contractual commitments and all
express and implied warranties, and Seller has no Liability (and there is no
basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against the Purchased Assets
or the Facility giving rise to any Liability) for replacement thereof or other
damages in connection therewith, except for product defects in the Ordinary
Course of Business. No product manufactured, sold, or delivered by Seller in the
conduct of the Business is subject to any guaranty, warranty, or other indemnity
beyond the applicable standard terms and conditions of sale. Schedule 425
includes copies of the standard terms and conditions of sale for products
manufactured, sold or delivered by Seller at the Facility (containing applicable
guaranty, warranty, and indemnity provisions).
4.26 PRODUCT LIABILITY. To the knowledge of Seller, the Business has no
substantial Liability (and there is no basis for any present or future action,
suit, proceeding, hearing, investigation, charge, complaint, claim, or demand
against Seller giving rise to any Liability) arising out of any injury to
individuals or property as a result of the ownership, possession, or use of any
product manufactured, sold, or delivered by Seller relating to the Facility or
the Purchased Assets.
4.27 FINDERS. No broker, finder or investment banker is entitled to any fee
or commission from Seller for services rendered on behalf of Seller in
connection with the transactions contemplated by this Agreement, and Seller
shall be solely responsible for, and shall indemnify Buyer from and against, any
Liability with respect to any and all commissions, fees, and other charges
arising out of any claimed retention by Seller of a broker or finder in
connection with the transactions contemplated hereby except to the extent said
party was engaged by or dealt with Buyer.
4.28 RELATED PARTY TRANSACTIONS. Except as set forth in Schedule 428, as to
the Business and the Purchased Assets, there are no existing arrangements or
proposed transactions between or among Seller, its parent or any of its
subsidiaries and (i) any officer or director of Seller, its parent or any of its
subsidiaries or any member of the immediate family of any of the foregoing
persons (such officers, directors and family members being hereinafter
individually referred to as a "Related Party"), (ii) any business (corporate or
otherwise) which a Related Party owns, directly or indirectly, or in which a
Related Party
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has an ownership interest, or (iii) between any Related Party and any business
(corporate or otherwise) with which Seller or its subsidiaries regularly does
business.
4.29 YEAR 2000 COMPLIANCE. Seller has put in place and is presently
implementing a project of remediation (the "Y2K Remediation Project") of its
computer hardware as listed in Schedule 2.1(ii), the Facility Software and the
Shared Software (collectively, "Purchased Hardware and Software") in order to
ascertain whether the same is free from the "millennium bug" and, in that
regard, will record, store, process and present calendar dates falling on or
after January, 1, 2000, in the same manner, and with the same functionality, as
calendar dates are recorded, stored, processed and presented on or before
December 31, 1999, with the objective that no functionality will be lost with
respect to the introduction of records containing dates falling on or after
January 1, 2000, and, if any of such Purchased Hardware and Software is so
affected, to remediate the same, with the objective that the Purchased Hardware
and Software will on and after January 1, 2000, be interoperable with other
software used by Buyer which may deliver records to the Purchased Hardware and
Software, receive records from the Purchased Hardware and Software, or interact
with the Purchased Hardware and Software in the course of processing data as set
forth in Schedule 4.29. Seller will diligently continue the Y2K Remediation
Project according to its current plans from the date of execution of this
Agreement through the Closing, and will cooperate with Buyer so that Buyer can
continue to carry out the Y2K Remediation Project after the Closing. Seller
currently estimates that the total cost to complete the Y2K Remediation Project
as presently planned will not exceed $1.25 million.
4.30 BOOKS AND RECORDS. The books and records of Seller are complete and
correct in all material respects, have been maintained in accordance with good
business practices, and accurately reflect the basis for the financial
condition, operating results and cash flows set forth in the Financial
Statements, as described in Section 4.8.
4.31 SHARES OF ARCO. Seller is the sole record and beneficial owner of two
thousand five hundred (2,500) shares of the capital stock of ARCO representing
approximately 25% of the total issued and outstanding shares of the capital
stock of ARCO, free and clear of any restrictions on transfer, Taxes, security
interests, Encumbrances, options, warrants, purchase rights, contracts,
commitments, equities, claims, and demands. Seller is not a party to any option,
warrant, purchase right, or other contract or commitment that could require
Seller to sell, transfer, or otherwise dispose of any capital stock of ARCO
(other than this Agreement). Seller is not a party to any voting trust, proxy,
or other agreement or understanding with respect to the voting of any capital
stock of ARCO. Buyer shall have the right, under that certain Androscoggin River
Headwater Benefits Agreement dated June 1, 1983, to select a member of the
Engineering Committee of ARCO.
4.32 DISCLOSURE. None of the information furnished by Seller to Buyer in
connection with the representations and warranties contained in this Article IV
or the transactions contemplated by this Agreement or the Related Agreements
contains any untrue statement of a fact or omits to state any fact necessary in
order to make the statements and
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information contained therein not misleading which would have a material adverse
effect on the Purchased Assets or the Business.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller the following:
5.1 ORGANIZATION, QUALIFICATION. (a) ATH is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has the requisite power and authority to own all of its properties and
assets and to carry on its business as it is presently being conducted.
(b) PPA is a limited liability company duly organized, validly
existing and in good standing under the laws of the State of New York and has
the requisite power and authority to own all of its properties and assets and to
carry on its business as it is presently being conducted.
5.2 AUTHORITY RELATIVE TO THIS AGREEMENT. (a) ATH has all requisite
corporate power and authority under its Certificate of Incorporation and by-
laws, each as amended to date, and applicable laws to execute and deliver this
Agreement and to perform its obligations hereunder. The execution and delivery
by ATH of this Agreement, and the performance by it of its obligations hereunder
have been duly authorized by the Board of Directors of ATH and no other
corporate proceedings on the part of ATH are necessary with respect thereto.
Assuming that Seller has duly authorized the execution and delivery of the
Seller Documents, this Agreement constitutes the valid and binding obligations
of ATH, enforceable in accordance with its terms, except as enforceability may
be limited by (i) any applicable bankruptcy, insolvency, reorganization,
moratorium or similar law affecting creditor's rights generally or (ii) general
principles of equity, whether considered in a proceeding in equity or law.
(b) PPA has all requisite power and authority under its Articles of
Organization and Operating Agreement and applicable laws to execute and deliver
this Agreement and the Related Agreements and to consummate the transactions
contemplated hereby and thereby and to perform its obligations hereunder and
thereunder. The execution and delivery by PPA of this Agreement and the Related
Agreements, and the consummation by it of the transactions contemplated hereby
and thereby, have been duly authorized by the Managers of PPA and no other
limited liability company proceedings on the part of PPA are necessary with
respect thereto. Assuming that Seller has duly authorized the execution and
delivery of the Seller Documents, this Agreement constitutes, and the Related
Agreements, when executed and delivered by PPA will constitute, valid and
binding obligations of PPA, enforceable in accordance with their terms, except
as the same may be limited by (i) any applicable bankruptcy, insolvency,
reorganization, moratorium or similar
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law affecting creditor's rights generally or (ii) general principles of equity,
whether considered in a proceeding in equity or law.
5.3 CONSENTS AND APPROVALS. Except as set forth in Schedule 5.3, there is
no requirement applicable to Buyer to make any registration, qualification or
filing with any Governmental Authority or any third party as a condition to the
lawful consummation of the transactions contemplated by this Agreement by Buyer.
No order, writ, injunction or decree has been issued, or is threatened to be
issued, by any Governmental Authority which would adversely affect the
consummation of the transactions contemplated by this Agreement. Except as set
forth in Schedule 5.3, there is no requirement that any party to an agreement to
which Buyer is a party or by which it is bound consent to the consummation of
the transactions contemplated by this Agreement.
5.4 NON-CONTRAVENTION. (a) Assuming that the consents and approvals set
forth in Schedule 5.3 are obtained, the execution and delivery by Buyer of this
Agreement does not, and the consummation of the transactions contemplated hereby
and thereby will not, (i) violate or result in a breach of any provision of the
Certificate of Incorporation or by-laws of ATH, or (ii) result in a breach of,
or constitute (with due notice or lapse of time, or both) a default (or give
rise to any right of termination, cancellation or acceleration or otherwise be
in conflict with or result in a loss of contractual benefits) under the terms,
conditions or provisions of any note, bond, mortgage, indenture, license,
agreement, lease or other instrument or obligation to which Buyer is a party or
by which ATH, or the business conducted by ATH, may be bound, excluding from the
foregoing clauses (i) and (ii), such defaults and violations as would not have a
material adverse effect on the business or properties of ATH.
(b) Assuming that the consents and approvals set forth in Schedule 5.3
are obtained, the execution and delivery by PPA of this Agreement and the
Related Agreements does not, and the consummation of the transactions
contemplated hereby and thereby will not, (i) violate or result in a breach of
any provision of the Articles of Organization or Operating Agreement of PPA, or
(ii) result in a breach of, or constitute (with due notice or lapse of time, or
both) a default (or give rise to any right of termination, cancellation or
acceleration or otherwise be in conflict with or result in a loss of contractual
benefits) under the terms, conditions or provisions of any note, bond, mortgage,
indenture, license, agreement, lease or other instrument or obligation to which
PPA is a party or by which PPA, or the business conducted by PPA, may be bound,
excluding from the foregoing clauses (i) and (ii) such defaults and violations
which would not have a material adverse effect on the business or properties of
PPA.
5.5 LITIGATION. Except as set forth in Schedule 55, there are no material
actions, suits, claims, investigations or proceedings (legal, administrative or
arbitrative) pending or, to the knowledge of Buyer, threatened against Buyer,
whether at law or in equity and whether civil or criminal in nature, before any
Governmental Authority, nor are there any judgments, decrees or orders of any
such Governmental Authority outstanding against Buyer which seek to prevent,
restrict or delay consummation of the transactions contemplated hereby or
fulfillment of any of the conditions of this Agreement or the
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Related Agreements, nor does Buyer know of any reasonable grounds for any such
claim, action, suit, proceeding or investigation.
5.6 FINDERS. No broker, finder or investment banker is entitled to any fee
or commission from Buyer for services rendered on behalf of Buyer in connection
with the transactions contemplated by this Agreement, and Buyer shall be solely
responsible for, and shall indemnify Seller from and against any liability in
respect of any and all commissions, fees, and other charges arising out of any
claimed retention by Buyer of a broker or finder in connection with the
transactions contemplated hereby except to the extent said party was engaged by
or dealt with Seller.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 CONDUCT OF BUSINESS OF THE FACILITY. From the date hereof and until
the Closing, Seller will (i) conduct the Business only in the usual and ordinary
course; (ii) maintain in their present condition, except for reasonable wear and
tear, all of the Purchased Assets; (iii) use its best efforts to preserve its
relationships with licensors, suppliers, dealers, customers, Employees, labor
unions, and others having business relationships with the Facility, provided
that Seller shall continue to implement planned reductions in staffing at the
Facility previously disclosed to Buyer so long as such reductions have no
material adverse effect, individually, or in the aggregate, on the Business;
(iv) use its best efforts to assign all Licenses and Permits and obtain all
necessary consents, waivers and approvals; and (v) not change the character of
the Business in any material manner. Seller's management will meet, upon
request, with Buyer on a regular and frequent basis to discuss the general
status of the ongoing operations of the Facility and any material problems
relating to the conduct of its business.
6.2 NOTIFICATION. Seller shall notify Buyer in writing promptly after
receipt by Seller of any notice of (i) the institution of, or any threat to
institute, any litigation, suit or proceedings before any Governmental Authority
which could have a material effect on the Purchased Assets, the consummation of
the transactions contemplated by the Seller Documents or the Business; (ii) the
entry or imposition of any judgment or lien against any of the Purchased Assets;
(iii) any notice of, or threat of, taking of all or any part of the Real
Property under powers of condemnation or eminent domain; (iv) any notice of
increase or proposed increase in real property tax rates, or tax assessments,
relating to any portion of the Purchased Assets; (v) any notice from any
Governmental Authority or professional environmental engineering firm retained
by Seller of non-compliance with any law (including, without limitation, the
Environmental Laws) relating to the Purchased Assets or the Business; (vi) any
notice from any insurance company or underwriting agency relating to non-
compliance with insurance requirements or standards in respect of any of the
Purchased Assets or the Business; (vii) any notice of breach or default
hereunder or under any mortgage, agreement, or governmental or judicial decree
or order or applicable law, rule or regulation, by which the Business is bound
or affected and which would have an
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effect upon the value or use of the Purchased Assets, or the consummation of the
transactions contemplated by this Agreement; and (viii) any fact, condition or
event which is, or with the lapse of time or giving of notice, or both, would
become a material breach or default or event of default hereunder or which would
render any representation or warranty of Seller hereunder incomplete or
inaccurate and Seller shall take all reasonable action as is necessary to
forthwith remedy such condition, cure such breach or default or event of default
and/or to render any representation, warranty or covenant complete and accurate.
No notification under this Section 6.2 shall be deemed to cure any breach or
default or event of default or render any representation or warranty incomplete
or inaccurate.
6.3 FORBEARANCES BY SELLER. Except as contemplated by this Agreement, with
regard to the Purchased Assets and the Business, Seller will not, from the date
hereof until the Closing, without the written consent of Buyer, such consent not
to be unreasonably withheld:
(i) incur any material Liability (fixed or contingent), except
normal trade or business obligations incurred in the Ordinary Course of
Business and consistent with past practice and except in connection with
this Agreement and the Related Agreements;
(ii) mortgage, pledge or subject to any Encumbrance, any of the
Purchased Assets;
(iii) sell, transfer, lease or otherwise dispose of any of the
Purchased Assets, except for a fair consideration in the Ordinary Course of
Business and consistent with past practice;
(iv) waive or release any rights of material value or
surrender, or cause to be revoked or otherwise terminate any Licenses and
Permits or other approval, authorization or consent from any court,
administrative agency or other Governmental Authority relating to the
Business;
(v) transfer or grant any licenses, patents, inventions,
trademarks, trade names, service marks, copyrights or know-how;
(vi) make or grant any wage, salary or benefit increase or
bonus payment or enter into or amend the terms of any employment contract,
or consulting agreement, or enter into any incentive compensation, profit
sharing, savings deferred compensation, retirement pension or other benefit
plan or arrangement or grant any severance benefits; or pay or agree to pay
any pension or retirement allowance not required by an existing plan or
agreement;
(vii) make any commitments for capital expenditures (including
capital leases) related to the Business, other than in the Ordinary Course
of Business and in the aggregate amount not exceeding Fifty Thousand
Dollars ($50,000) ;
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(viii) enter into any contract (other than purchases under open
purchase orders made in the Ordinary Course of Business) which will
require, in the aggregate, an expenditure of more than Two Hundred and
Fifty Thousand Dollars ($250,000) by the Facility;
(ix) alter in any way the manner in which it has regularly and
customarily maintained the books of account and records of the Facility; or
(x) enter into any contract, transaction or agreement to do
any of the things described in clauses (i) through (ix) above.
6.4 INSURANCE, LANDFILL, FINANCIAL SECURITY. Seller agrees to use its best
efforts to (i) assist Buyer in placing appropriate insurance coverage for
ownership of the Purchased Assets and operation of the Business and (ii) reduce
the financial security required by the New Hampshire Department of Environmental
Services for operation and closure of the landfill facility included in the
Purchased Assets.
6.5 NEGOTIATIONS WITH OTHERS. Seller will not (and Seller will not cause
or permit any of its directors, officers, employees, agents, or representatives
to) (i) solicit, initiate, or encourage the submission of any proposal or offer
from any person relating to the acquisition of the Purchased Assets or (ii)
participate in any discussions or negotiations regarding, furnish any
information with respect to, assist or participate in, or facilitate in any
other manner any effort or attempt by any person to do or seek, initiate or
encourage any of the foregoing. Seller will notify the Buyer immediately if any
person makes any proposal, offer, inquiry or contact with respect to the
foregoing.
6.6 INVESTIGATION OF BUSINESSES AND PROPERTIES. From and after the date
hereof until the Closing, Seller will afford Buyer and its attorneys,
accountants, financial advisors and other representatives access at all
reasonable times to its officers, employees, properties, contracts, books,
records and documents of Seller relating to the Purchased Assets and the
Business, and a full opportunity to make such investigation as Buyer shall
desire to make with respect to the Purchased Assets and the Business, including,
without limitation, discussion of any such matters with Seller's officers and
other employees, agents, representatives, creditors and vendors. Notwithstanding
the foregoing, Buyer shall have the opportunity to make an analysis of materials
and conduct certain environmental auditing procedures, the scope of which is set
forth in Schedule 6.6. In addition, Seller will furnish Buyer with such
financial, operating and additional data as Buyer may reasonably request
concerning the operations, properties and personnel of the Business.
6.7 CONFIDENTIALITY. Seller and Buyer agree to be bound by the terms of
the Confidentiality and Non-Disclosure Agreement by and between Seller and
American Tissue Corporation ("ATC") dated August 1, 1998, except to the extent
that any information otherwise deemed to be confidential is required to be
disclosed to investors in connection with the Company's proposed offering of
senior notes referred to in Section 9.18. The Confidentiality and Non-Disclosure
Agreement shall survive (i) the execution of this Agreement notwithstanding any
merger clause contained herein and (ii) the Closing.
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6.8 TAXES AND RECORDING FEES. (i) All property taxes included in Taxes and
special assessments payable in respect of any of the Real Property, Equipment,
and Inventory transferred in connection with the transactions contemplated
hereby shall be prorated between the parties on the basis of actual days elapsed
between the commencement of the current fiscal tax year and, up to and including
the Closing Date, based on a 365-day year.
(ii) The New Hampshire real estate transfer taxes incurred in connection
with this Agreement and the transactions contemplated hereby will be borne
equally by Buyer and Seller at the time of Closing. Buyer and Seller will file
all necessary tax returns and other documents required to be filed with respect
to all such taxes and filing fees. Buyer will cooperate with Seller to the
extent necessary to enable it to make such filings and join in the execution and
delivery of the New Hampshire Department of Revenue Administration Declaration
of Consideration and Real Estate Questionnaire. Each party will bear its
respective filing and recording fees.
6.9 PRORATION OF LEASE PAYMENTS, UTILITY CHARGES AND OTHER PAYMENTS. All
rent accrued on any of the Leases and any utility or similar charge of the
Facility relating to the period prior to the Closing Date will be the liability
of Seller. Any installment of rent due on any of the Leases and any utility or
similar charge payable with respect to the period in which the Closing occurs
shall be prorated between the parties hereto on the basis of the actual number
of days applicable to pre-Closing and post-Closing occupancy or use.
6.10 ALLOCATION OF PURCHASE PRICE. The parties shall use reasonable efforts
to agree to the allocation of the Purchase Price among the various assets that
constitute the Purchased Assets, and upon such agreement, the parties shall
execute IRS form 8594 in connection therewith. Each of the parties shall respect
such agreed upon allocation for all tax purposes and shall file all returns and
other documents with all taxing authorities on a basis consistent therewith.
6.11 COLLECTION OF ACCOUNTS RECEIVABLE. Following the Closing, Buyer will
afford Seller reasonable access during normal business hours to such of the
records transferred to it as shall be necessary to allow Seller to collect any
accounts receivable arising prior to the Closing. If a debtor on any such
account receivable who is also a debtor to Buyer for debts incurred at or after
the Closing shall make any remittance on amounts due in respect of the business
of the Facility, whether the debt was incurred prior to or subsequent to the
Closing, such remittance shall be deemed to be on account of the earliest
invoice unless the debtor specifically designates to the contrary, in which case
the payment shall be applied in accordance with such designation; provided,
however, that PPA and its employees and agents shall not personally solicit
account debtors to designate payments in a manner that is to the financial
disadvantage of Seller. After the Closing, and in accordance with the foregoing
sentence, Seller will promptly transfer and deliver (properly endorsed, if
necessary) to PPA any checks or other payments (including the cash equivalents
of credits due from vendors, suppliers or shippers) which it receives on account
of goods sold or shipped by PPA and Buyer shall promptly transfer and deliver
(properly endorsed, if necessary) to Seller any checks or other payments
(including the cash
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equivalents of credits due from vendors, suppliers or shippers) which it
receives on account of goods sold or shipped by Seller.
6.12 BULK SALES LAWS. Notwithstanding the provisions of Article XII, Seller
will indemnify and hold harmless Buyer from any and all claims made by creditors
of Seller relating to provisions of the "bulk sales laws" of any state or other
jurisdiction which may be applicable to the transactions contemplated hereby and
from all costs (including reasonable attorneys' fees) incurred in the defense of
any claims made under such laws.
6.13 MATERIALS RECEIVED AFTER CLOSING. Following the Closing, Buyer may
open all mail, telegrams and other communications and packages it receives which
are addressed to Seller and deal with the contents thereof in its discretion to
the extent that the contents thereof relate to the Purchased Assets, the
Business or the Assumed Liabilities. Buyer agrees to deliver to Seller and to
treat confidentially all other such material it receives which are addressed to
Seller and does not relate to the Purchased Assets, the Assumed Liabilities or
the Business.
6.14 RETENTION OF BOOKS AND RECORDS. For a period of seven years after the
Closing, the parties shall retain their books or records relating to the
Purchased Assets and the Assumed Liabilities. After such seven-year period, any
party shall provide not less than forty-five (45) nor more than ninety (90)
days' prior written notice to the other parties of any proposed destruction or
disposition of any such books and records. If the recipient of such notice
desires to obtain any of the documents to be destroyed or disposed of, it may do
so by notifying the sender of such notice, in writing, at any time prior to the
scheduled date for such destruction or disposal. The notice must specify the
documents which the requesting party wishes to obtain. The parties shall then
promptly arrange for the delivery of such documents. All out-of-pocket costs
associated with the delivery of the requested documents shall be paid by the
requesting party.
6.15 HSR FILINGS. Seller and Buyer will each file, or cause to be filed
within fifteen (15) days of the date hereof, with the United States Federal
Trade Commission and the Antitrust Division of the United States Department of
Justice, pursuant to the HSR Act, all requisite documents and notifications in
connection with the transactions contemplated by this Agreement.
6.16 EXPENSES. Except as otherwise provided in this Agreement, all costs
and expenses incurred in connection with this Agreement and the transactions
contemplated hereby, including, without limitation, attorneys', accountants' and
outside advisers' fees and disbursements, will be paid by the party incurring
such costs and expenses. Buyer shall pay the HSR filing fee.
6.17 PUBLIC ANNOUNCEMENTS. The parties will consult with one another before
issuing any press releases or otherwise making any public statements with
respect to this Agreement and the Related Agreements and the transactions
contemplated hereby and thereby and will not issue any such press release or
make any such public statement
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without the written consent of the other party unless such action is required by
law or by the SEC.
6.18 SUBSEQUENT EVENTS. If any event shall occur prior to the Closing
which, had it occurred prior to the execution of this Agreement, should have
been disclosed by a party to this Agreement in a representation and warranty or
otherwise, then, upon the happening of such event, such party shall promptly
disclose the happening of such event to the other parties hereto. No
notification under this Section 6.18 shall be deemed to cure any breach, default
or event of default or render any warranty, covenant or representation true or
otherwise relieve a party from any obligation hereunder.
6.19 EFFORTS TO CONSUMMATE. Subject to the terms and conditions herein
provided, each of the parties hereto agrees to use its reasonable best efforts
to take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable to consummate, as promptly as practicable,
the transactions contemplated hereby, including, but not limited to, filing all
such reports, notifications and other filings pursuant to federal, state, local
or governmental regulation and obtaining all necessary consents, waivers,
authorizations, orders, approvals, Licenses and Permits, licenses and/or waivers
of third parties, whether private or governmental, required of it to enable it
to comply with the conditions precedent to consummating the transactions
contemplated by this Agreement and the Related Agreements. Seller agrees to
cooperate fully, and to cause its officers and employees to cooperate fully,
with Buyer and its officers, auditors, legal counsel, investment bankers and
their legal counsel in connection with the financing of the transactions
contemplated hereby including without limitation, an audit to be conducted by
Ernst & Young LLP of the financial statements of the Business for Seller's prior
fiscal years and the preparation of proforma financial statements of the
Business giving effect to the transactions contemplated by this Agreement,
including providing Buyer's officers, auditors, legal counsel, investment
bankers and their legal counsel with such documents and information relating to
such financial statement as they may reasonably request and authorizing Seller's
officers and auditors to fully discuss with Buyer's officers, auditors, legal
counsel, investment bankers and their legal counsel such documents and
information. Each party agrees to cooperate fully with each of the other parties
in assisting them to comply with the provisions of this Section 619 and Seller
agrees to take such steps as may be necessary to remove any liens, mortgages,
charges, pledges, security interests or other Encumbrances (other than Permitted
Exceptions) which affect the Purchased Assets. The term "Permitted Exceptions"
as used in this Agreement means (a) statutory liens for current taxes or
assessments not yet due or delinquent; (b) mechanics', carriers', workers',
repairers' and other similar liens arising or incurred in the Ordinary Course of
Business relating to obligations as to which there is no default on the part of
Seller, provided that the same shall be fully discharged of record before the
Closing; (c) exceptions shown on the surveys furnished by Seller to Buyer or
obtained by Buyer and set forth on Schedule 4.11 or 4.12(h) and agreed to by
Buyer as provided in Section 6.22, and (d) such other liens, imperfections in
title, charges, easements, restrictions and encumbrances which either (i) are
set forth on Schedule 4.11 or 4.12(h) and have been agreed to by Buyer as
provided in Section 6.22 or (ii) do not in the aggregate impair the value of the
Purchased Assets by more than Fifty Thousand Dollars ($50,000). Notwithstanding
the foregoing, no party
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hereto shall be required to initiate any litigation, make any payment or incur
any economic burden (other than as to Buyer with respect to the provision of a
letter of credit regarding the landfill) and except for a payment otherwise then
required to be made by it, to obtain any consent, waiver, authorization, order
or approval. If, despite its efforts, any party is unable to obtain any consent,
waiver, authorization, order or approval, and such failure to obtain such
consent, waiver, authorization, order or approval would have a material adverse
effect on the Purchased Assets or the Business, the other party may terminate
this Agreement and shall have no liability therefor, except as is provided in
Section 13.2.
6.20 FURTHER ASSURANCES. Seller and Buyer will use reasonable best efforts
to implement the provisions of this Agreement and the Related Agreements, and
for such purpose, at the request of any party (or Buyer's designees) will, at or
after the Closing, without further consideration, promptly execute and deliver
such additional documents as the requesting party may reasonably deem necessary
or desirable in order to consummate more effectively the transactions
contemplated hereby and thereby to vest in Buyer title to the Purchased Assets
free and clear of any liens, changes, pledges, security interests or other
Encumbrances.
6.21 INVENTORY ADJUSTMENT. The book value of the Inventory included in the
Purchased Assets at the Closing Date shall be $31.4 million (the "Target
Value"). The Purchase Price will be adjusted to the benefit of Buyer or Seller,
dollar for dollar, to the extent that the value of the Inventory as of the
Closing, as reported in the Final Closing Inventory Statement (as defined
below), is more or less than the Target Value (the "Inventory Adjustment").
(a) Closing Inventory Statement.
(i) Seller shall deliver to Buyer a statement setting forth
the value of the Inventory as of the Closing (the "Closing Inventory
Statement"), which Closing Inventory Statement Seller shall use its best efforts
to deliver within five (5) business days after the Closing Date, but shall
deliver no later than ten (10) business days after the Closing Date. The Closing
Inventory Statement shall be prepared in accordance with generally accepted
accounting principles consistent with the current accounting practices of the
Business. Representatives of Buyer shall be entitled to observe and review the
preparation of the Closing Inventory Statement to whatever extent Buyer may
elect.
(ii) The Closing Inventory Statement shall be reviewed by
Buyer, and Buyer may, during the fifteen (15) business day period following the
receipt by Buyer of the Closing Inventory Statement, propose such adjustments
(if any) as shall in its judgment be required to cause the Closing Inventory
Statement to properly reflect the value of the Inventory as of the Closing in
the manner provided in this Section 6.21. In the event that Buyer and Seller are
unable to agree upon any such proposed adjustments within ten (10) business days
after they have been proposed by Buyer as aforesaid then, in such event, the
adjustments in dispute shall be submitted to the accounting firm of KPMG Peat
Marwick (the "Arbitrator") for its consideration and resolution; the fees of the
Arbitrator, the decision of which shall be final and binding upon Buyer and
Seller, shall be paid one-half by each
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of said parties. The Closing Inventory Statement shall become final and binding
upon the parties, (A) if Buyer does not propose any adjustments thereto in
accordance with the terms hereof, on the earlier of the date of written
acceptance thereof by Buyer or fifteen (15) business days after the delivery
thereof to Buyer, or (B) if Buyer proposes adjustments thereto in accordance
with the terms hereof, on the earlier of the date of written acceptance thereof
(as so adjusted) by Buyer and Seller or the date of the receipt by Buyer and
Seller of the decision of the Arbitrator as to any adjustments submitted to it
for resolution. The Closing Inventory Statement, in the form in which it becomes
final and binding upon Buyer and Seller as aforesaid, is hereinafter referred to
as the "Final Closing Inventory Statement". The Final Closing Inventory
Statement shall be delivered by Seller to Buyer within five (5) business days
after it becomes binding upon Buyer and Seller as aforesaid.
(b) Adjustment of the Purchase Price.
(i) If the value of the Inventory as set forth on the Final
Closing Inventory Statement is greater than the Target Value, Buyer shall pay to
Seller, within five (5) business days following the delivery by Seller to Buyer
of the Final Closing Inventory Statement, cash in immediately available funds in
an amount equal to such difference.
(ii) If the value of the Inventory as set forth on the Final
Closing Inventory Statement is less than the Target Value, Seller shall pay to
Buyer, within five (5) business days following the delivery by Seller to Buyer
of the Final Closing Inventory Statement, cash in immediately available funds in
an amount equal to such difference.
6.22 REAL PROPERTY INFORMATION. Notwithstanding anything to the contrary in
Section 4.11 or 4.12(h), Schedules 2.1(i), 4.11 and 4.12(h) (including
satisfaction of Seller's obligation to deliver complete and accurate copies of
policies, plans, title and other documents pursuant thereto) shall be completed
by Seller no later than two (2) weeks following the execution of this Agreement.
Subject to Section 6.19, (i) the Real Property to be listed on Schedule 2.1(i)
shall be sufficient in all material respects, from and after the Closing, for
the operation of the Purchased Assets, the conduct of the Business and Buyer's
intended future operation of the Facility (as previously disclosed to Seller),
and (ii) any Encumbrances listed on Schedule 4.11 or 4.12(h) shall not
materially adversely affect the Purchased Assets, the conduct of the Business
and Buyer's intended future operation of the Facility. Buyer shall have one (1)
week from the time of its receipt of the completed Schedule 2.1(i), 4.11 and
4.12(h) to determine whether the Schedules satisfy the requirements of
subsections (i) and (ii) above and to notify Seller of its determination,
provided that if Seller requires additional time to complete such Schedules or
Buyer requires additional time to complete its review of such Schedules, upon
the giving of written notice to such effect to the other party within the
original time period for its completion or review of such Schedules, such party
will extend such requesting party's completion or review time by one week.
Thereafter, if despite its efforts to remedy any objections Buyer may have based
on clause (i) and/or (ii) of this Section 6.22, Seller is not able to effect
such remedy to Buyer's reasonable satisfaction, Buyer may terminate this
Agreement without liability as permitted by Section 6.19. Buyer's decision to
not terminate shall evidence Buyer's acceptance of the materials listed above
only for purposes of
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proceeding with the transactions contemplated by this Agreement and shall not be
deemed an acceptance of the representations and warranties as true, complete and
correct.
6.23 CERTAIN INCOMPLETE DELIVERIES. Notwithstanding anything to the
contrary in Sections 4.7, 4.13, 4.16 and 4.19, complete and correct copies of
each agreement and/or lease listed on Schedules 4.7, 4.13, 4.16, 4.19(b) and
4.19(d) shall be delivered by Seller to Buyer no later than two (2) weeks
following the date of execution of this Agreement. Seller's failure to deliver
such agreements and leases within such time period shall constitute a breach of
this Agreement. Following delivery of such agreements and leases to Buyer, Buyer
will have a period of one (1) week to review the same and determine whether any
of such agreements or leases that were either not complete as delivered or not
delivered prior to the execution hereof, taken as a whole or any provision
thereof, would materially adversely affect the good and marketable title,
subject to no liens except as otherwise provided herein, to the Purchased
Assets, the conduct of ongoing operation of the Business or Buyer's intended
future operation of the Facility (as previously disclosed to Seller) and if
Buyer so determines, BUYER MAY TERMINATE THIS AGREEMENT WITHOUT LIABILITY AS
PERMITTED BY SECTION 6.19.
6.24 PULP MILL SHUTDOWN COSTS. In connection with the annual shut-down of
the pulp mill at the Facility, currently scheduled to commence in the week of
May 17, 1999, Seller will perform, or cause to be performed, certain inspection,
cleaning, maintenance, repair and improvement work which can only be
accomplished during such shut-down (the "Work") and which involves the direct
expenditure of funds by Crown for labor, materials and equipment, which Crown
currently estimates will aggregate Three Million Two Hundred Thousand Dollars
($3,200,000), but which could be more or less than such amount. During the shut-
down period, PPA shall be entitled to have a representative present at the
Facility to verify the Work being performed at the pulp mill. Following the
completion of the mill shut-down, Crown will prepare and submit to PPA a
detailed accounting of all direct costs incurred by Crown in connection with the
performance of the Work, together with copies of all invoices, statements and
certifications sufficient to support the items of expenditure set forth in such
accounting, which accounting shall be certified by Crown's chief accounting
officer to be accurate and complete and to have been prepared from Crown's books
and records maintained in the ordinary course of business. If the Closing
hereunder has occurred prior to completion of the accounting, PPA shall provide
all reasonable assistance, including access to PPA employees and records, to
allow Seller to promptly complete such accounting. Following its receipt of the
accounting, PPA will have a period of 30 days to review such accounting and the
supporting documents and to request and obtain additional information with
respect to the accounting and to discuss with Crown's management personnel
responsible for the shut-down such additional information as to the Work as PPA
may reasonably request. Following the expiration of such 30 day review period,
if PPA is reasonably satisfied with the accounting, PPA will cause to be
remitted to Crown an amount equal to fifty percent (50%) of the total
expenditures for the Work, as specified in such accounting.
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ARTICLE VII
COVENANTS
7.1 TRANSITION. Neither Seller nor Buyer will take any action that is
designed or intended to have the effect of discouraging any lessor, licensor,
customer, supplier, or other business associate of the pulp, toweling and
Sustaining Grades businesses conducted at the Facility from maintaining the same
business relationships with the Buyer and such business after the Closing as it
maintained with Seller and such business prior to the Closing. Seller will refer
all customer inquiries relating to the pulp and toweling business to Buyer from
and after the Closing.
7.2 COVENANT NOT TO COMPETE. (a) Seller will not:
(i) compete (as defined below) with Buyer, during (A) the three
(3) year period commencing on the Closing Date, with respect to any grades of
toweling or tissue; (B) the three (3) year period commencing on the Closing
Date, with respect to Target Grades of paper produced by Crown at the Facility
during the two (2) year period prior to March 9, 1999, and not produced during
such two (2) year period at any other paper mills then operated by Crown or any
of its subsidiaries or affiliates (as indicated on Schedule 7.2(a) hereto, which
Schedule lists all Target Grades produced by Crown at the Facility and at
Crown's other paper mills during such period). The immediately preceding
sentence shall not apply to Publishing Grades. "Compete" means to own, manage,
operate or engage in a business involving the manufacture, converting,
marketing, improvement, development, production, sale or otherwise, of any
grades of the types and grades of paper specified in clauses (A) and (B) above,
throughout the world, directly or indirectly, either as a proprietor, partner,
manager, operator, agent, consultant, broker, stockholder licensor, licensee,
joint venturer, or in any other capacity or means whatsoever; provided, however,
that Seller shall not be deemed to "compete" with respect to the purchase by
Seller of all of the capital stock or all or substantially all of the assets of
an entity that manufactures (X) toweling (provided that toweling does not
constitute more than twenty-five percent (25%) of the total manufacturing
output, on a tonnage basis, of such entity), or (Y) Target Grades of paper
(provided that the combined output of Target Grades, on a tonnage basis, of
Seller and the acquired entity, does not exceed the aggregate output of Seller
and the acquired entity prior to such purchase).
(ii) interfere with, disrupt or attempt to disrupt the
relationship, contractual or otherwise, between the Buyer and the toweling
business of the Business, and any toweling customer, prospect, supplier or
prospective supplier of Buyer or the toweling business of the Business, or with
regard to toweling, solicit or provide services to, as the case may be, any
toweling accounts, clients, customers or prospects of Buyer or the toweling
business of the Business (or any toweling accounts, clients or customers which
were contacted or solicited by any of them prior to the Closing Date); provided,
however, that Seller shall not be deemed to have done any of the foregoing with
respect to the purchase by Seller of all of the stock or substantially all of
the assets of an entity that
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manufactures toweling provided that toweling does not constitute greater than
twenty-five percent (25%) of the total manufacturing output, on a tonnage basis,
of such entity.
(iii) (x) from the date of execution of this Agreement until the
Closing Date, solicit or transfer any Employee, and (y) during the two (2) year
period commencing on the Closing Date, not solicit for employment any Employee,
or hire or employ any of the persons listed in Schedule 7.2, which shall be
updated by Buyer at the Closing. Buyer shall not without Seller's prior consent,
which shall not be unreasonably withheld, during the periods described in (x)
and (y) above, solicit, hire or employ any person employed by Seller or its
affiliates in its sales and marketing group.
(b) The parties agree that the restrictions contained in this Section
7.2 are a reasonable and necessary protection of the immediate interest of the
Buyer and any violation of these restrictions would cause substantial injury to
the Buyer. It is the desire and intent of the parties that the provisions of
Section 72(a) shall be enforced to the fullest extent permissible under the laws
and public policies applied in each jurisdiction in which enforcement is sought.
Accordingly, if any portion or portions of Section 72(a) shall be adjudicated to
be invalid or unenforceable, Section 72(a) shall be deemed amended to delete
therefrom the portion or portions thus adjudicated to be invalid or
unenforceable, such deletion to apply only with respect to the operation of such
portions of such Sections in the particular jurisdiction in which such
adjudication is made. If there is a breach or threatened breach of any of the
provisions of Section 72(a) of this Agreement, Buyer shall be entitled to an
injunction restraining such breach. Nothing herein shall be construed as
prohibiting Buyer from pursuing any other remedies for such breach or threatened
breach.
(c) If, subsequent to the date of this Agreement Seller or its parent
consolidates with, or merges into, another entity, in which Seller or its parent
is not the surviving or continuing entity, or all or a substantial part of the
assets of Seller or its parent are acquired by another entity, the provisions of
Section 7.2(a) and (b) shall survive such transaction and shall be binding and
enforceable against the successor entity, provided that the successor entity
shall not be deemed to have violated such provisions if the successor entity's
combined output, on a tonnage basis, of toweling and for Target Grades does not
exceed the aggregate output of Seller and the other entity prior to the
consolidation, merger or asset acquisition.
7.3 PERMIT APPLICATION. Seller will use its best efforts to assist Buyer
in obtaining any of the Licenses and Permits listed in Schedule 2.1(v) and
Environmental Permits listed in Schedule 2.1(iv) which are not transferable or
assignable to Buyer.
7.4 TAX CLEARANCE. Seller will use its best efforts to deliver to Buyer a
written commitment or other assurances reasonably acceptable to Buyer by the New
Hampshire Department of Revenue Administration that Seller is in good standing
therewith and that Seller has timely filed all Returns required to be filed
therewith or supplied thereto.
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ARTICLE VIII
EMPLOYEES AND EMPLOYEE MATTERS
8.1 TRANSFERRED EMPLOYEES. (i) Seller has delivered to PPA a list of all
of the employees of Crown and Electric who are employed at the Facility (each,
an "Employee" and collectively, the "Employees") as of the most recent date for
which such information is available. PPA shall have the right, upon reasonable
advance notice and in a manner which is not disruptive to the Business,
following the execution of this Agreement, to interview and negotiate with
Employees in order to determine which Employees will be offered employment by
PPA. Immediately prior to Closing, Seller shall terminate the employment of each
of its respective Employees. Ten (10) business days prior to Closing, Seller
shall advise PPA in writing of the number of Employees which constitute at least
ninety percent (90%) of those Employees entitled to protection under the WARN
Act and PPA shall offer employment with Buyer, effective no later than the day
following the Closing Date, to such number of Employees. The process for PPA to
offer re-employment to Employees who are subject to a collective bargaining
agreement after the Closing shall be in accordance with the terms and conditions
of the applicable collective bargaining agreements. Such Employees who are
offered employment by PPA and elect to become employees of PPA are hereinafter
referred to as "Transferred Employees" and shall be deemed to have become
employees of PPA as of the time the Closing becomes effective.
(ii) PPA represents to Seller that it does not intend to implement a "plant
closing" or a "mass layoff" as those terms are defined in the Worker Adjustment
and Retraining Notification Act ("WARN Act") at or in respect of the Facility
within ninety (90) days of the Closing Date. PPA shall be responsible for and
shall indemnify and hold harmless Seller from any and all claims or liability
under the WARN Act arising from (a) a breach of Buyer's agreement with respect
to hiring contained in Section 8.1(i) or (b) a "plant closing" or "mass layoff"
in violation of the WARN Act occurring after the Closing Date.
8.2 EMPLOYEE BENEFIT PLANS. (i) PPA will establish employee benefit plans
and programs substantially equivalent to the plans and programs listed in
Schedule 8.2 that are presently offered by Seller at the Facility and will
permit each salaried Employee and each hourly Employee of the Business who
becomes a Transferred Employee and who is not covered by one of the collective
bargaining agreements listed in Schedule 4.19(a) to participate in such newly
established employee benefit plans and programs. The Transferred Employees'
accrual of benefits under plans and programs covering employees of Buyer shall
be based solely on their service with PPA after the Closing. For purposes of
calculating and/or satisfying annual deductibles, co-payments, out-of-pocket
maximums and the like under PPA's newly established benefit plans for the year
in which the Closing occurs, Transferred Employees shall receive full credit and
benefit for all otherwise qualifying amounts paid thereby during the calendar
year in which the Closing occurs.
(ii) No assets or Liabilities with respect to Transferred Employees
shall be transferred, as a result of this Agreement, from any of Seller's
employee benefit plans applicable to the Employees of the Business to any plan
maintained or established by Buyer, and Seller shall retain all obligations to
fund or otherwise provide benefits accrued
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by Transferred Employees under its benefit plans prior to the Closing, except as
otherwise expressly provided herein. Benefits under the plans retained by Seller
shall be payable to the Transferred Employees pursuant to the terms of such
plans and shall constitute the only benefits to which the Transferred Employees
are entitled with respect to their service with Seller prior to the Closing,
except as otherwise expressly provided herein, provided nothing in this sentence
shall be deemed an assumption of Liabilities by the Buyer as to Transferred
Employees.
(iii) PPA will assume Seller's obligations under the collective
bargaining agreements listed in Schedule 4.19(a) with respect to Transferred
Employees covered by one or more of such agreements to the extent that the
collective bargaining agreements relate to services rendered for Buyer by
Transferred Employees after the Closing. For purposes of applying the terms and
conditions of such collective bargaining agreements, the employment of each
Transferred Employee shall be deemed to be continuous, and without interruption
resulting from the termination by Seller and rehiring by PPA contemplated under
this Agreement, provided nothing in this sentence shall be deemed an assumption
of pre-Closing Liabilities by PPA as to Transferred Employees. PPA will
establish such benefit plans and arrangements as may be mutually agreed upon by
PPA and the collective bargaining representatives of the Transferred Employees.
8.3 WORKER'S COMPENSATION. PPA will assume the responsibility for all
worker's compensation claims made by Transferred Employees arising from events
occurring after the Closing and Seller shall indemnify PPA for any claims made
against Buyer for events occurring prior to the Closing. Seller will retain the
responsibility (including claims administration) for all worker's compensation
claims made by its employees or former employees (whether or not Transferred
Employees) that arise from events that occur before the Closing or events
otherwise occurring while the Employees are employed by Seller and PPA shall
indemnify Seller for claims made against Seller for events occurring after the
Closing.
8.4 SEVERANCE AND VACATION PAY.
(a) Seller will pay severance pay as required under Seller's existing
severance pay programs to all eligible Employees who are not Transferred
Employees and shall indemnify Buyer for severance or other claims made against
Buyer by Employees who are not Transferred Employees. PPA shall reimburse Seller
for severance pay paid by Seller to any Employee who is hired by PPA within
sixty (60) days after the Closing; provided, however, that PPA shall not
reimburse Seller for severance pay paid by Seller to any employee who is hired
by PPA as a less than full time "consultant" and whose earnings are reported to
the Internal Revenue Service by PPA on IRS Form 1099.
(b) With respect to Transferred Employees, PPA will be a successor of
Seller solely with respect to, and will credit each such Transferred Employee,
with any and all accrued vacation time that must be used during such Transferred
Employee's current year of employment by Seller prior to the Closing and that
has not been previously used by such Transferred Employee. The term "current
year of employment" in the foregoing
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sentence shall mean (i) the current calendar year for hourly Transferred
Employees and (ii) the twelve (12) month period commencing with the most recent
anniversary of the date of hire for salaried Transferred Employees. In addition,
with respect to any Transferred Employee who previously was employed at the
Facility by Crown-Zellerbach, if such Transferred Employee shall make a claim
for vacation pay in respect of any period during which he or she was employed by
Crown-Zellerbach, Seller will defend, indemnify and hold PPA harmless from and
against any such losses, liabilities, damages and expenses (including reasonable
attorneys' fees) suffered or incurred by Buyer by reason of such claim without
regard for the limitations set forth in Section 12.4. Within seventy-two (72)
hours after the Closing, Seller will pay to Employees (who are not Transferred
Employees) all unpaid vacation pay accrued prior to the Closing and shall
indemnify Buyer for any claims made by such employees for unpaid vacation pay
(or any other employee benefit(s) accrued as of the Closing) without regard for
the limitations set forth in Section 12.4. Thereafter, Seller will have no
liability for vacation pay for Transferred Employees except as set forth in this
Article VIII.
8.5 OTHER LIABILITIES RELATING TO EMPLOYEES. Except to the extent
otherwise specifically provided in this Article VIII, PPA shall not assume any
obligations or Liabilities with respect to (i) any pension plan, welfare plan,
retiree medical expenses, or other employee benefit plan or program relating to
any present, former or retired employee of Seller, (ii) any severance or
separation obligation which may result from the consummation of the transactions
contemplated by this Agreement and Seller shall indemnify PPA for any claims by
Employees for such payments; or (iii) any other liabilities or obligations
arising from the employment of Employees through the consummation of the Closing
(whether or not Transferred Employees).
8.6 ADMINISTRATION. PPA and Seller will each make its appropriate
employees available to the other at such reasonable times as may be necessary
for the proper administration by the other of any and all matters relating to
employee benefits, employee grievances and worker's compensation claims
affecting the Employees and former employees of Seller (whether or not
Transferred Employees). If, as a result of the transactions contemplated by this
Agreement, reports are required to be filed with respect to any of Seller's
benefit plans, Seller will file such reports.
ARTICLE IX
CONDITIONS TO OBLIGATIONS OF BUYER
The obligations of Buyer to consummate the transactions contemplated by
this Agreement shall be subject, to the extent not waived by Buyer in writing,
to the satisfaction at or prior to the Closing of each of the following
conditions and, to the extent that satisfaction of any such condition requires
any action on the part of Seller, Seller hereby agrees to take such action:
9.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of
Seller contained in Article IV of this Agreement together with the Schedules
thereto, and any other documents executed by or on behalf of Seller from and
after the date hereof,
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including, but not limited to, the Related Agreements through the Closing
pursuant to this Agreement, shall be true and complete in all material respects
as of the date of this Agreement and as of the Closing, as if made on and as of
such date, and Seller shall deliver to Buyer at the Closing a certificate to
that effect signed by its authorized officer.
9.2 PERFORMANCE OF THIS AGREEMENT. Seller shall have complied in all
material respects with all of its obligations under this Agreement that are to
be performed or complied with by it and prior to the Closing and shall deliver
to Buyer at the Closing a certificate to that effect signed by its Chairman or
President.
9.3 CORPORATE AUTHORIZATION. All corporate action required to be taken by
Seller in connection with the transactions contemplated by this Agreement shall
have been taken, all documents incident thereto shall be reasonably satisfactory
in substance and form to Buyer and Buyer shall have received such originals or
copies of such documents as it may reasonably request.
9.4 CONSENTS AND APPROVALS. All consents, authorizations, orders,
approvals or waivers of Governmental Authorities and of individuals or business
entities (including, without limitation, those listed in Schedule 4.3) which
Seller is required to obtain in order to be able to assign or otherwise transfer
the Purchased Assets to Buyer and to permit Buyer and its designees to operate
the Business shall have been obtained and all waiting periods specified by law
with respect thereto shall have expired or terminated.
9.5 INJUNCTION, LITIGATION. No order, injunction, decree or judgment of
any court or Governmental Authority having jurisdiction shall be in effect which
restrains or prohibits the consummation of the transactions contemplated by this
Agreement or the Related Agreements, or which would limit or affect the ability
of Buyer to own or control the Purchased Assets or to operate the business of
the Facility, and there shall not have been threatened, nor shall there be
pending, any action or proceeding by or before any such court or Governmental
Authority seeking to prohibit, delay or otherwise prevent or challenging the
validity of the transactions contemplated by this Agreement or the Related
Agreements, or which could in Buyer's judgment have an adverse effect on the
Purchased Assets or the business of the Facility.
9.6 LEGISLATION. No statute, rule, regulation, ordinance or other legal
requirement shall have been proposed or enacted which prohibits or might
prohibit, restrict, delay or otherwise prevent the consummation of the
transactions contemplated by this Agreement or the Related Agreements.
9.7 TITLE INSURANCE, ESTOPPEL CERTIFICATES. Buyer and/or its designees
shall have received commitments for an ALTA form title insurance policy in all
respects reasonably satisfactory to Buyer and Buyer's lender insuring Buyer, its
designees and its lender's mortgage in fee simple and without standard or
special exceptions, other than the Permitted Exceptions, or other assurances
reasonably satisfactory to it, that Seller has good and marketable title to the
Real Property and that Buyer will acquire good and marketable titles to the Real
Property free and clear of all liens, charges, pledges and other
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Encumbrances, other than Permitted Exceptions. In addition, Seller shall have
obtained executed estoppel certificates reasonably satisfactory in form and
substance to Buyer and its designees and such other information with respect to
the Leases as Buyer may reasonably request.
9.8 RECEIPT OF LICENSES AND PERMITS AND ENVIRONMENTAL PERMITS. The
issuance or assignment to Buyer and/or its designees of all Licenses and Permits
and Environmental Permits.
9.9 RELATED AGREEMENTS, DOCUMENTS AND INSTRUMENTS. Seller shall have duly
executed and delivered the Related Agreements. Seller shall have delivered all
Schedules and other disclosures required to be delivered pursuant to the
provisions of this Agreement. Seller shall have executed and delivered such
deeds, bills of sale, and other instruments of assignment and transfer in proper
form to effect the transfer and assignment of the Purchased Assets in accordance
with the provisions of this Agreement and such other documents, certificates or
instruments to be delivered hereunder, all in the form required hereby,
including, without limitation, such customary title affidavits and certificates
as may be required to enable Buyer to procure title insurance in accordance with
Section 9.7 above.
9.10 NO CHANGE. From the date of this Agreement to the Closing Date, there
shall not have been any damage, destruction or loss (whether or not covered by
insurance) affecting the Purchased Assets in an aggregate amount in excess of
One Hundred and Fifty Thousand Dollars ($150,000); provided, however, that in
the event of any fire or other casualty resulting in damage, destruction, or
loss not repaired or restored and affecting the Purchased Assets between the
date hereof and the Closing Date, Buyer shall have the election in its sole
discretion (i) not to close hereunder by reason of non-satisfaction of the
condition precedent specified in this Section 910, or (ii) to close hereunder on
the basis of accepting such Assets as is, together with the right to receive all
of Seller's insurance proceeds allocable to such damage, destruction or loss of
Assets.
9.11 PAYMENT OF TRANSFER TAXES. Seller shall have paid or provided for
payment of its portion of all transfer taxes payable upon the transfer of the
Real Property and Equipment hereunder.
9.12 BULK SALES COMPLIANCE. Seller shall have complied with the provisions
of the bulk sales laws of applicable states.
9.13 RESULTS OF ENVIRONMENTAL AUDIT.
(a) The Environmental Audit and Phase II Assessment (the "Study") to
be conducted for Buyer, the scope of which is set forth in Schedule 6.6, shall
have revealed no violations of the representations and warranties set forth in
Article IV which, individually or in the aggregate, in the reasonable judgment
of Tighe & Bond (or other environmental expert selected by Buyer)(the "Expert")
would be expected to cost in excess of One Million Dollars ($1,000,000) to
address, or if any such violation(s) of such representations and warranties is
found, Seller shall in its sole discretion have agreed in writing to perform or
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pay for all action required to address such violation(s) in a manner reasonably
satisfactory to the Buyer; provided, however, that Seller's cost in such
performance, if any, shall be only that amount in excess of One Million Dollars
($1,000,000) with Buyer being solely responsible for the first One Million
Dollars ($1,000,000) of such amount. For purposes of this Section 9.13, no
specific condition, non-compliance with Environmental Law or release of any
Hazardous Material identified in the Study shall be considered to be a violation
of the representations and warranties set forth in Article IV unless, in the
reasonable judgment of the Expert, such violation would cost in excess of One
Hundred Thousand Dollars ($100,000) to address; provided, however, that the cost
to address items 2(d) and 2(g) on Schedule 4.5 shall be deemed to be only the
cost in excess of the estimated cost specified for such items as set forth in
such Schedule 4.5.
(b) Seller shall provide access to the Real Property and otherwise
cooperate with Buyer in its performance of the Study.
9.14 OPINION OF COUNSEL FOR SELLER. Buyer shall have received an opinion
from Sulloway & Hollis, P.L.L.C., counsel for Seller, addressed to Buyer and
dated the Closing Date, in form and substance reasonably acceptable to Buyer.
9.15 NO MATERIAL ADVERSE CHANGE. There shall not have occurred since the
date of the execution of this Agreement, any material adverse change (i) in the
financial condition, results of operations, cash flows or prospects of the
Business or (ii) in the capacity of Seller to conduct the Business in a manner
consistent with past practice, and Seller shall have so certified to Buyer in
writing.
9.16 HSR ACT. Buyer, Seller and any other person (as defined in the HSR Act
and the rules and regulations thereunder) which is required in connection with
the transactions contemplated hereby to file a Notification and Report Form for
Certain Mergers and Acquisitions with the United States Department of Justice
and the United States Federal Trade Commission pursuant to Title II of the HSR
Act shall have made such filing, and the applicable waiting period with respect
to each such filing (including any extension thereof by reason of a request for
additional information) shall have expired or been terminated.
9.17 TERMINATION OF LIENS. All mortgages, security interests and other
liens on the Purchased Assets shall have been fully and unconditionally
satisfied, discharged, released or terminated at or prior to the Closing and
Buyer and its designees shall have received true and complete copies of all such
mortgage satisfactions, certified copies of filed UCC-3 termination statements
or releases and other evidence satisfactory to Buyer and its designees of
satisfaction, discharge, release or termination.
9.18 CLOSING OF SALE OF SENIOR NOTES. Prior to or concurrently with the
Closing, ATH shall have received the net proceeds from the issue and sale of
senior notes in the aggregate principal amount of at least One Hundred and
Seventy-Five Million Dollars ($175,000,000.00) at an interest rate acceptable to
Buyer.
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9.19 CLUSTER COMPLIANCE. Buyer shall have received a satisfactory letter
from a qualified professional environmental engineering firm (the "Cluster
Engineer") regarding the Seller's plans for compliance with the Pulp and Paper
Cluster Rule, 63 Fed. Reg. 18504-18751 promulgated by the United States
Environmental Protection Agency ("Cluster Rule").
ARTICLE X
CONDITIONS TO OBLIGATIONS OF SELLER
The obligations of Seller to consummate the transactions contemplated by
this Agreement shall be subject, to the extent not waived by Seller in writing,
to the satisfaction at or prior to Closing of each of the following conditions
and, to the extent that satisfaction of any such condition requires any action
on the part of Buyer, Buyer hereby agrees to take such action:
10.1 REPRESENTATIONS AND WARRANTIES. Except for changes contemplated by
this Agreement, the representations and warranties of Buyer contained in Article
V of this Agreement shall be true and complete in all material respects as of
the date of this Agreement and as of the Closing as if made on and as of such
date, and Buyer shall have delivered to Seller a certificate to that effect
signed by its Manager.
10.2 PERFORMANCE OF THIS AGREEMENT. Buyer shall have complied in all
material respects with all of its obligations under this Agreement and Buyer
shall have delivered to Seller a certificate to that effect signed by its
Manager.
10.3 LIMITED LIABILITY COMPANY AUTHORIZATION. All limited liability company
action required to be taken by PPA in connection with the transactions
contemplated by this Agreement and the Related Agreements shall have been taken,
all documents incident thereto shall be reasonably satisfactory in substance and
form to Seller, and Seller shall have received all such originals or copies of
such documents as it may reasonably request.
10.4 CONSENTS AND APPROVALS. All consents, including, but not limited to,
those listed in Schedule 4.3, and all authorizations, orders or approvals of
Governmental Authorities and of individuals or business entities, including, but
not limited to, the return to Seller of Seller's letter of credit supporting the
landfill permit, which the parties are required to obtain in order to consummate
the transactions contemplated by this Agreement and the Related Agreements shall
have been obtained and all waiting periods specified by law with respect thereto
shall have passed.
10.5 INJUNCTION, LITIGATION. No order of any court or Governmental
Authority shall be in effect which restrains or prohibits the consummation of
the transactions contemplated by this Agreement and the Related Agreements and
there shall not have been threatened, nor shall there be pending, any action or
proceeding by or before any such court or Governmental Authority seeking to
prohibit or delay or challenging the validity of the transactions contemplated
by this Agreement or the Related Agreements.
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10.6 LEGISLATION. No statute, rule or regulation shall have been proposed
or enacted which does, or might, prohibit, restrict or delay the consummation of
the transactions contemplated by this Agreement or the Related Agreements.
10.7 OPINION OF COUNSEL FOR BUYER. Seller shall have received an opinion
from Mandel & Resnik P.C., counsel for Buyer, addressed to Seller and dated as
of the Closing Date, in form and substance reasonably acceptable to Seller.
10.8 HSR ACT. Buyer, Seller and any other person (as defined in the HSR Act
and the rules and regulations thereunder) which is required in connection with
the transactions contemplated hereby to file a Notification and Report Form for
Certain Mergers and Acquisitions with the United States Department of Justice
and the United States Federal Trade Commission pursuant to Title II of the HSR
Act shall have made such filing, and the applicable waiting period with respect
to each such filing (including any extension thereof by reason of a request for
additional information) shall have expired or been terminated.
ARTICLE XI
CLOSING
11.1 TIME AND PLACE OF CLOSING. The closing (the "Closing") shall take
place at a location mutually agreed upon in writing by Buyer, Buyer's lender,
and Seller at 10:00 a.m. local time on the later of (i) May 27, 1999, (ii) the
next business day after which the last of the closing conditions is fulfilled or
waived, or (iii) such other date as may be mutually agreed upon by the parties
in writing (the "Closing Date"). If the Closing takes place, the Closing and all
of the transactions contemplated by this Agreement and the Related Agreements
shall be deemed to have occurred simultaneously and become effective as of 6:00
a.m. on the Closing Date.
11.2 DELIVERIES BY SELLER. At the Closing, Seller shall deliver to Buyer
and/or its designees the following:
(i) quitclaim deeds with covenants concerning Seller's acts
duly executed and in recordable form conveying to Buyer and/or its
designees good and marketable title to the Real Property, free and clear of
Encumbrances other than Permitted Exceptions;
(ii) properly endorsed title certificates transferring the
motor vehicles which are a part of the Purchased Assets to Buyer or its
designees;
(iii) a bill of sale and assignment conveying to Buyer good and
marketable title to the Equipment and Inventory, free and clear of
Encumbrances other than Permitted Exceptions in form reasonably acceptable
to Buyer;
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(iv) the certificates required by Sections 91 and 92;
(v) evidence that the corporate action described in Section 93
has been taken;
(vi) copies of the consents required by Section 94;
(vii) the estoppel certificates required by Section 97;
(viii) certificates from the appropriate Governmental Authorities
of (a) Crown's good standing in the State of Virginia and its qualification
to do business in the State of New Hampshire, and (b) Electric's and
Railway's good standing in the State of New Hampshire, and (c) ARCO's good
standing in the State of Maine and qualification to do business in the
State of New Hampshire, as of the most recent date obtainable;
(ix) the opinion of counsel for Seller required by Section 914;
(x) title insurance policies relating to the Real Property in
accordance with Section 9.7 above, which shall be obtained by Seller at the
expense of Buyer, such expense to be reimbursed at the Closing;
(xi) an instrument of assignment of all Licenses and Permits
and Environmental Permits in the form and substance reasonably acceptable
to Buyer;
(xii) instruments of assignment of all Intellectual Property,
free and clear of Encumbrances, in the form and substance reasonably
acceptable to Buyer.
(xiii) stock certificate(s), or duly executed affidavits of lost
stock certificates (and surety bond, if required by ARCO), representing
2,500 shares of the capital stock of ARCO, together with stock powers duly
executed in blank, with the signatures thereon duly guaranteed by a
commercial bank; and
(xiv) such additional documents as Buyer may reasonably request.
11.3 DELIVERIES BY BUYER. At the Closing, Buyer shall deliver to Seller the
following:
(i) cash in the amount of the Purchase Price in immediately
available funds as set forth in Section 2.4;
(ii) an instrument of assumption of the Assumed Liabilities
executed by PPA in the form and substance reasonably acceptable to Buyer;
(iii) the certificates required by Sections 101 and 102;
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(iv) evidence that the corporate action on the part of ATH and
the limited liability company action on the part of PPA described in
Section 103 has been taken;
(v) copies of the consents required by Section 10.4.
(vi) a certificate of the Secretary of State of the State of
Delaware as to the good standing of ATH;
(vii) a certificate of the Secretary of State of the State of
New York as to the good standing of PPA in the State of New York and a
certificate of the Secretary of State of the State of New Hampshire as to
its qualifications to do business in the State of New Hampshire (and other
applicable jurisdictions) as of the most recent date obtainable;
(viii) the opinion of Buyer's counsel required by Section 107;
and
(ix) such additional documents as Seller may reasonably
request.
11.4 DELIVERIES BY SELLER AND BUYER. At the Closing, Crown and PPA shall
each execute and deliver to the other duly executed copies of the Related
Agreements.
ARTICLE XII
INDEMNIFICATION
12.1 INDEMNIFICATION BY SELLER. Subject to the limitations contained in
this Article XII, Seller will indemnify, defend and hold Buyer and its
directors, officers, employees, heirs, assigns and representatives
(collectively, "Buyer Indemnified Parties") harmless from any and all
Liabilities asserted against, resulting to or incurred, suffered or paid,
directly or indirectly, by Buyer Indemnified Parties, arising out of or relating
to:
(i) any misrepresentation contained in, omission from or breach
of, any covenant, representation or warranty made by Seller in any of the
Seller Documents; provided, however, that indemnification for any
violation(s) of the representations and warranties set forth in Sections
4.5 and 4.7 relating to Environmental Laws shall be made only if (a) the
cost for any one violation shall be in excess of $100,000 (the "Minimum"),
and (b) the aggregate of all such violations shall exceed the sum of One
Million Dollars ($1,000,000) (the "Basket"), and, in such event, indemnity
shall be made only for the actual cost of such violations in excess of the
Basket; provided further that the Basket shall include any violations that
may be found pursuant to the Study as set forth in Sections 9.13(a), and
the foregoing Minimum and the Basket shall apply to any matter constituting
a violation of Sections 4.5 and 4.7 regardless of which subsection of this
Section 12.1 is asserted to give rise to Seller's duty to indemnify;
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(ii) the breach of any agreement or undertaking of Seller
contained in any of the Seller Documents;
(iii) any Liability or obligation of Seller (whether absolute,
accrued, contingent or otherwise and whether a contractual or other type of
Liability, obligation or claim) not specifically assumed by Buyer pursuant
to this Agreement;
(iv) except for the Assumed Liabilities, any claims of
creditors of Seller or any other third parties against the Purchased Assets
or Buyer's title to the Purchased Assets (including any Liability of Seller
that becomes a Liability of the Buyer under any bulk transfer law of any
jurisdiction, under any common law doctrine of de facto merger or successor
liability, or otherwise by operation of law);
(v) except to the extent Buyer is responsible for the
following Liabilities under this Agreement, any claims by or on behalf of
current or former employees of Crown or Electric arising out of employment
by Crown or Electric prior to the consummation of the Closing: (a) for
wages, compensation, or benefits of any type under any Employee Benefit
Plan; (b) on account of any alleged or actual contractual or other
commitment of Crown or Electric to such employees; (c) on account of any
work related injuries or illnesses occurring or contracted on or prior to
the consummation of the Closing, including, without limitation any refusal
to rehire claim related thereto; (d) on account of any strike, work
stoppage, slowdown, unfair labor practice allegation or finding, grievance
proceedings, discrimination or hiring claims, or other controversies
involving issues of employment, benefits, hiring practices, or any other
aspect of the employer-employee relationship or any similar event or
condition relating to personnel or employment relations matters; and/or (e)
under any workers' compensation, worker health or safety, equal employment
opportunity, or discrimination statutes or laws of any type or description;
(vi) except to the extent Buyer is responsible hereunder to pay
a portion of New Hampshire real estate transfer tax, as set forth in
Section 6.8(ii), any claims for sales and use taxes or any other Taxes made
against Buyer or Buyer's title to the Purchased Assets on account of the
consummation of the transaction contemplated by this Agreement or the
Related Agreements or on account of the Business or operations conducted at
the Facility, including, without limitation, the New Hampshire real estate
transfer tax;
(vii) except for the Assumed Liabilities, any operations or
activities of Seller in connection with ownership or use of the Purchased
Assets by Seller and/or the Business prior to the Closing by Seller;
(viii) except for the Assumed Liabilities, any action, suit or
proceeding commenced before or after the Closing based on an event
occurring or a claim arising on or prior to the consummation of the Closing
relating to Seller, the Purchased Assets or the Business;
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(ix) except to the extent Buyer is responsible for the same
under this Agreement, any claim, Liability, Taxes, tax lien, or Encumbrance
arising from or with respect to property taxes owing on or relating to the
Purchased Assets for periods prior to the Closing; and
(x) any and all actions, suits, proceedings, demands, claims,
assessments, judgments, fines, penalties, costs, damages, losses, charges,
and expenses (including reasonable attorneys' fees, court costs and
disbursements) that Buyer may suffer, sustain, incur, or become subject to
arising out of, based upon, resulting from, or incident to the foregoing.
12.2 INDEMNIFICATION BY BUYER. Subject to the limitations contained in
this Article XII, PPA will indemnify and hold Seller and its directors,
officers, employees, heirs, assigns and representatives (collectively, "Seller
Indemnified Parties") harmless from any and all Liabilities asserted against,
resulting to or incurred, suffered or paid, directly or indirectly, by Seller
Indemnified Parties, arising out of or relating to:
(i) any misrepresentation contained in, omission from or
breach of any covenant, representation or warranty made by Buyer in this
Agreement or the Related Agreements;
(ii) the breach of any agreement or undertaking of Buyer
contained this Agreement or the Related Agreements;
(iii) the failure of PPA to perform any obligation specifically
assumed by it pursuant to the terms of this Agreement;
(iv) any claims by or on behalf of Transferred Employees
arising out of employment by PPA after the consummation of the Closing: (a)
for wages, compensation, or benefits of any type under any employee benefit
plan; (b) on account of any alleged or actual contractual or other
commitment of PPA to such Transferred Employees; (c) on account of any work
related injuries or illnesses occurring or contracted after the
consummation of the Closing, including, without limitation any refusal to
rehire claim related thereto; (d) on account of any strike, work stoppage,
slowdown, unfair labor practice allegation or finding, grievance
proceedings, discrimination or hiring claims, or other controversies
involving issues of employment, benefits, hiring practices, or any other
aspect of the employer-employee relationship or any similar event or
condition relating to personnel or employment relations matters; (e) under
any Workers' Compensation, worker health or safety, equal employment
opportunity, or discrimination statutes or laws of any type or description;
and/or (f) retiree medical benefits for Transferred Employees who retire
from the employment of PPA, which benefits are claimed to have vested or
accrued as a result of such Employees' employment by Seller or its
predecessors;
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(v) any operations or activities of PPA in connection with
ownership or use of the Purchased Assets and/or the Business after the
Closing; and
(vi) any and all actions, suits, proceedings, demands, claims,
assessments, judgments, fines, penalties, costs, damages, losses, charges,
and expenses (including reasonable attorneys' fees, court costs and
disbursements) that Seller may suffer, sustain, incur, or become subject to
arising out of, based upon, resulting from, or incident to the foregoing.
12.3 THIRD PARTY CLAIMS. The obligations and liabilities of a party
from which indemnification is sought (an "Indemnifying Party") to a party
seeking indemnification (an "Indemnified Party") under this Article XII with
respect to any claim, action, suit, proceeding or demand at any time instituted
against or made upon an Indemnified Party for which such Indemnified Party may
seek indemnification hereunder (a "Legal Action") resulting from the assertion
of liability by those not parties to this Agreement (including governmental
claims for penalties, fines and assessments) shall be subject to the following
conditions:
(i) the Indemnified Party shall give prompt written notice to
the Indemnifying Party of the nature of the Legal Action and the amount
thereof to the extent known; provided, however, that the failure to give
such notice shall not affect the rights of the Indemnified Party hereunder
unless such failure materially and adversely affects the Indemnifying
Party;
(ii) if any Legal Action is brought by a third party against an
Indemnified Party, the Legal Action shall be defended by the Indemnifying
Party by counsel of its own choice subject to the consent of the
Indemnified Party, such consent not to be unreasonably withheld. So long as
the Indemnifying Party notifies the Indemnified Party in writing within
fifteen (15) days after the Indemnified Party has given notice of the Legal
Action, the Indemnifying Party will indemnify the Indemnified Party from
and against the entirety of any Liabilities the Indemnified Party may
suffer resulting from, arising out of, relating to, in the nature of, or
caused by the Legal Action, and such defense shall include all appeals or
reviews which counsel for the Indemnifying Party shall deem appropriate.
Until the Indemnifying Party shall have assumed the defense of any such
Legal Action, or if the Indemnified Party shall have reasonably concluded
that there are likely to be defenses available to the Indemnified Party
that are different from or in addition to those available to the
Indemnifying Party (in which case the Indemnifying Party shall not be
entitled to assume the defense of such Legal Action and the defense may be
handled by the Indemnified Party), all legal or other expenses reasonably
incurred by the Indemnified Party shall be borne by the Indemnifying Party;
(iii) in any Legal Action initiated by a third party and
defended by the Indemnifying Party (w) the Indemnified Party shall have the
right to be represented by co-advisory counsel and accountants, at its own
expense, (x) the Indemnifying Party shall keep the Indemnified Party fully
informed as to the status of such Legal
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Action at all stages thereof, whether or not the Indemnified Party is
represented by its own counsel, (y) the Indemnifying Party shall make
available to the Indemnified Party, and its attorneys, accountants and
other representatives, all books and records of the Indemnifying Party
relating to such Legal Action and (z) the parties shall render to each
other such assistance as may be reasonably required in order to ensure the
proper and adequate defense of such Legal Action; and
(iv) in any Legal Action initiated by a third party and
defended by the Indemnifying Party, the Indemnifying Party shall not make
any settlement of any claim without the written consent of the Indemnified
Party, which consent shall not be unreasonably withheld. Without limiting
the generality of the foregoing, it shall not be deemed unreasonable to
withhold consent to a settlement involving injunctive or other equitable
relief against the Indemnified Party or its assets, employees or business.
12.4 LIMITATIONS ON INDEMNIFICATION. Notwithstanding the foregoing
provisions of this Article XII, Seller shall not be liable under Section 12.1
(except with respect to obligations under Sections 12.1(vi) and (ix), and
6.21(b)) and Buyer shall not be liable under Section 12.2 (except with respect
to obligations under Section 6.21(b)) unless and until, and only to the extent
that, the aggregate amount of liability under either of such Sections exceeds
One Hundred and Seventy Five Thousand Dollars ($175,000) and thereafter the
Indemnified Party shall be entitled to indemnification thereunder in an
aggregate amount not to exceed Thirty Million Dollars ($30,000,000); provided,
however, that with respect to Seller's indemnification obligations pursuant to
Sections 12.1(vi) and (ix), and 6.21(b), and Buyer's indemnification obligations
pursuant to Section 6.21(b), (i) there shall be no minimum and no maximum amount
for which either Seller or Buyer shall be liable to indemnify the other, and
(ii) any amount paid by Seller to Buyer under Sections 12.1(vi), (ix) and
6.21(b) shall not be included in, and shall be separate and apart from, the
Thirty Million Dollar ($30,000,000) limitation on indemnification.
12.5 SURVIVAL, INVESTIGATION. The representations and warranties of the
parties contained in this Agreement shall survive any investigation by any party
and shall not terminate until the third anniversary of the Closing Date (the
"Survival Date") at which time they shall lapse. Notwithstanding the provisions
of the preceding sentence, (i) any representation or warranty in respect of
which indemnification may be sought under Sections 12.1(i) or 12.2(i) shall
survive the Survival Date if written notice, given in good faith, of the
specific breach thereof is given to the Indemnifying Party prior to the Survival
Date, whether or not liability has actually been incurred and (ii) any claim for
which indemnification can be sought under Sections 12.1(vi) and (ix) shall
survive indefinitely, notwithstanding any applicable statute of limitations.
12.6 EXCLUSIVE REMEDY. Except as provided in Section 7.2(b) and Section
14.11, and except for a breach of Section 6.5 hereof, the sole and exclusive
remedy for any breach of this Agreement (other than a breach of Section 6.5),
including without limitation, any misrepresentation, breach of covenant or
warranty, and for any claim, loss, damages, or Liabilities relating to, arising
out of or otherwise in connection with such breach, shall be
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<PAGE>
the right of indemnification as and to the extent set forth in this Article XII,
and in all events subject to all of the limitations herein, Buyer and Seller
waive any and all other remedies available to it at law or in equity (except as
provided in Section 7.2(b) and Section 14.11). Without intending to suggest any
exception to the exclusivity of the foregoing indemnification remedy (other than
in respect of Section 6.3), and subject to Section 7.2(b) and Section 14.11, in
the event that Buyer or Seller shall seek to recover any loss, damage, or
Liability from the other party under any theory of recovery other than the
indemnification as provided in this Article XII, the parties hereby agree that
the limitations and protections afforded to an Indemnifying Party by the
provisions of Sections 12.4, 12.5, and 12.6 shall be equally applicable to any
claim sought to be recovered under such theory. The foregoing sentence shall not
be applicable to any claim for breach of any provision of Article VII. This
Section 12.6 shall survive any termination of this Agreement.
ARTICLE XIII
TERMINATION, AMENDMENT AND WAIVER
13.1 TERMINATION. This Agreement may be terminated at any time prior to the
Closing:
(i) by mutual consent of the Boards of Directors, Executive
Committees or Managers of Seller and Buyer.
(ii) by Seller if there has been a breach by Buyer of a
representation, warranty or agreement contained herein or if any condition
contained in this Agreement or the Related Agreements which must be met by
Buyer becomes impossible to fulfill within a reasonably short period of
time;
(iii) by Buyer if there has been a breach by Seller of any
representation or warranty or agreement contained herein or if any
condition contained in this Agreement or the Related Agreements which must
be met by Seller or any of the conditions contained in Article IX have not
been met or, becomes impossible to fulfill within a reasonably short period
of time, or if Buyer is unable to obtain such consents, authorization
orders or approvals as may be necessary to permit it to conduct the
business of the Facility; and
(iv) by Seller or Buyer if the Closing has not occurred by
11:59 p.m. New Hampshire time, July 29, 1999.
13.2 EFFECT OF TERMINATION. If this Agreement is terminated as provided in
Section 131, it shall become wholly void and of no further force and effect and
there shall be no further liability or obligation on the part of any party
hereto except to pay such expenses as are required of it, but such termination
shall not constitute a waiver by any party of any claim it may have for damages
caused by reason of a material breach of a representation or warranty made by
another party hereto.
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<PAGE>
13.3 AMENDMENT. This Agreement, the Related Agreements and the Schedules
hereto may be amended at any time prior to Closing provided that any such
amendment is approved in writing by each of the parties hereto. All
representations and warranties which are true and correct as modified and
approved in writing by the party to whom the representation and warranty is made
shall be deemed true and correct for the purposes of Sections 91 and 101.
13.4 EXTENSION, WAIVER. At any time prior to the Closing any party to this
Agreement which is entitled to the benefits thereof may (i) extend the time for
the performance of any of the obligations of another party hereto, (ii) waive a
breach of a representation or warranty of another party hereto, or (iii) waive
compliance of another party hereto with the Agreement or conditions contained
herein. Any such extension or waiver shall be valid if set forth in a written
instrument signed by the party giving the extension or waiver.
13.5 TERMINATION OF ATH'S OBLIGATIONS. Upon the closing of the transactions
contemplated by this Agreement and/or the documents contemplated hereto, ATH
shall be relieved and released of any and all obligations, understandings and
liabilities of any nature whatsoever relating to or in connection with such
transactions.
ARTICLE XIV
GENERAL PROVISIONS
14.1 OPTION TO PURCHASE SHARES OF ELECTRIC. Notwithstanding anything herein
to the contrary, Buyer may elect, in its sole and absolute discretion, upon
notice to Seller not less than ten (10) days prior to the Closing, to purchase
all of the outstanding shares of capital stock of Electric rather than
purchasing the assets of Electric constituting Purchased Assets, in which case
(i) Buyer shall assume solely the Assumed Liabilities with respect to Crown and
Railway specified in Section 2.3, and (ii) Seller will make such representations
as are necessary and appropriate to reflect the change from a sale of assets to
a sale of shares.
14.2 NOTICES. All notices required to be given hereunder shall be in
writing and shall be deemed to have been given if (i) delivered personally, (ii)
delivered via one-day overnight courier, (iii) transmitted by telefax, or (iv)
mailed by registered or certified mail (return receipt requested and postage
prepaid) to the following listed persons at the addresses and telefax numbers
specified below, or to such other persons, addresses or telefax numbers as a
party entitled to notice shall give, in the manner hereinabove described, to the
others entitled to notice:
(a) If to Seller to:
Crown Paper Co.
300 Lakeside Drive
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<PAGE>
Oakland, CA 94612-3592
Attention: General Counsel
Telefax No.: (510) 874-3595
with a copy to:
Sulloway & Hollis, P.L.L.C.
9 Capitol Street, P.O. Box 1256
Concord, NH 03302-1256
Attention: John M. Sullivan, Esq.
Telefax No.: (603) 226-2404
(b) If to Buyer:
Pulp & Paper of America LLC
135 Engineers Road
Hauppauge, NY 11788
Attention: Mr. Mehdi Gabayzadeh
Telefax No.: (516) 435-8980
with a copy to:
Mandel & Resnik P.C.
220 East 42nd Street
New York, NY 10017
Attention: Nicholas J. Kaiser, Esq.
Telefax No.: (212) 573-0067
If given personally or transmitted by telefax, a notice shall be deemed to have
been given when it is received. If given by one-day overnight courier, notice
shall be deemed to have been given on the next business day following delivery
to the courier. If given by mail, it shall be deemed to have been given on the
third business day following the day on which it was posted. Notices and other
communications given by attorneys for Seller and Buyer shall be deemed given by,
respectively, Seller and Buyer.
14.3 INTERPRETATION. The headings contained in this Agreement are for
reference purposes only and shall not affect the meaning or interpretation of
this Agreement.
14.4 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
14.5 WAIVER. No waiver of any of the provisions hereof shall be effective
unless in writing and signed by the party to be charged with such waiver. No
waiver shall be deemed a continuing waiver or waiver in respect of any
subsequent breach or default, whether of similar or different nature, unless so
expressly stated in writing.
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<PAGE>
14.6 MODIFICATION. This Agreement may not be orally cancelled, changed,
modified or amended, and no cancellation, change, modification or amendment
shall be effective or binding, unless in writing and signed by all of the
parties to this Agreement.
14.7 SEVERABILITY. If any provision of this Agreement is found to be void
or unenforceable by a court of competent jurisdiction, the remaining provisions
of this Agreement shall nevertheless be binding upon the parties with the same
effect as though the void or unenforceable part had been severed and deleted.
14.8 STRICKEN WORDS OR PHRASES. If any words or phrases in this Agreement
shall have been stricken out or otherwise eliminated, whether or not any other
words or phrases have been added, this Agreement shall be construed as if the
words or phrases so stricken out or otherwise eliminated had never appeared in
this Agreement.
14.9 NUMBER AND GENDER. All terms and words used in this Agreement,
regardless of the number or gender in which they are used, shall be deemed to
include any other number and any other gender as the context may require.
14.10 MISCELLANEOUS. This Agreement and all Schedules hereto and the other
Seller Documents and the instrument of Assumption to be delivered at the Closing
by Buyer (i) constitute the entire agreement of the parties as to the subject
matter hereof and supersede all other prior agreements and understandings, both
written and oral, between the parties with respect to the subject matter hereof;
(ii) are not intended to and shall not confer upon any other person or business
entity, other than the parties hereto, any rights or remedies with respect to
the subject matter hereof; (iii) shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and assigns; and (iv)
shall not be assigned by operation of law or otherwise without the prior written
consent of the parties hereto.
14.11 SPECIFIC PERFORMANCE. Seller acknowledges that the acquisition of
the Purchased Assets is a vital, necessary and unique part of the Buyer's
strategic plan, and that any breach of this Agreement by Seller could not be
adequately compensated by monetary damages. Accordingly, if Seller breaches its
obligations under this Agreement, the Buyer shall be entitled, in addition to
any other remedies that it may have, to enforcement of this Agreement by a
decree of specific performance requiring Seller to fulfill its obligations under
this Agreement.
14.12 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York. Buyer and Seller
hereby expressly consent to the jurisdiction of the Supreme Court of the State
of New York with respect to any action or proceeding between Buyer and Seller
with respect to this Agreement or any rights or obligation of such party
pursuant to this Agreement and each of Buyer and Seller agrees that the venue
shall lie in Suffolk County, New York. Each party to this Agreement waives trial
by jury in any such action or proceeding and consents to the service of process
in any such action or proceeding in the manner provided for notices and other
communications in Section 14.2.
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<PAGE>
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be
executed and their corporate seals to be hereto affixed and attested by their
duly authorized officers.
Crown Paper Co.
By /s/ Robert A. Olah
---------------------------------
Robert A. Olah
President
Berlin Mills Railway, Inc.
By /s/ Robert A. Olah
---------------------------------
Robert A. Olah
President
Crown Vantage New Hampshire Electric, Inc.
By /s/ Robert A. Olah
---------------------------------
Robert A. Olah
President
American Tissue Holdings Inc.
By /s/ Mehdi Gabayzadeh
---------------------------------
Mehdi Gabayzadeh
President
Pulp & Paper of America LLC
By /s/ Mehdi Gabayzadeh
---------------------------------
Mehdi Gabayzadeh
Manager
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<PAGE>
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<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-26-1999
<PERIOD-START> DEC-28-1998
<PERIOD-END> MAR-28-1999
<CASH> 11,230
<SECURITIES> 0
<RECEIVABLES> 40,942
<ALLOWANCES> 500
<INVENTORY> 72,775
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<PP&E> 857,081
<DEPRECIATION> 478,417
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<CURRENT-LIABILITIES> 97,520
<BONDS> 483,006
0
0
<COMMON> 138,601
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<TOTAL-LIABILITY-AND-EQUITY> 655,418
<SALES> 201,165
<TOTAL-REVENUES> 201,165
<CGS> 193,043
<TOTAL-COSTS> 193,043
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<INCOME-PRETAX> (26,571)
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