EX-2.2
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STOCK PURCHASE AGREEMENT
Dated as of August 28, 1996
By and Among
SPECIALTY PAPERBOARD, INC.,
ARCON COATING ▇▇▇▇▇, INC.,
ARCON HOLDINGS CORP.,
THE STOCKHOLDERS OF
ARCON HOLDINGS CORP.
and
VARIOUS OTHER PARTIES
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TABLE OF CONTENTS
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ARTICLE I
DEFINITIONS........................................................... 4
Section 1.1 Definitions......................................... 4
ARTICLE II
PURCHASE OF STOCK; CANCELLATION OF OPTIONS AND WARRANTS............... 11
Section 2.1 Purchase of Stock; Cancellation of Option
and Warrants..................................... 11
Section 2.2 Price............................................... 12
Section 2.3 Cash on Hand........................................ 14
Section 2.4 Closing............................................. 15
ARTICLE III
REPRESENTATIONS OF THE COMPANIES...................................... 15
Section 3. Representations of the Company...................... 15
Section 3.1 Existence and Good Standing......................... 15
Section 3.2 Capital Stock....................................... 16
Section 3.3 Authorization and Validity of this
Agreement........................................ 17
Section 3.4 Subsidiaries and Investments........................ 18
Section 3.5 Financial Statements; No Material Changes........... 18
Section 3.6 Books and Records................................... 20
Section 3.7 Title to Properties; Encumbrances................... 20
Section 3.8 Real Property....................................... 22
Section 3.9 Intellectual Property............................... 22
Section 3.10 Leases............................................. 22
Section 3.11 Material Contracts................................. 23
Section 3.12 Consents and Approvals; No Violations.............. 25
Section 3.13 Litigation......................................... 26
Section 3.14 Taxes.............................................. 27
Section 3.15 Liabilities........................................ 30
Section 3.16 Insurance.......................................... 30
Section 3.17 Compliance with Laws............................... 31
Section 3.18 Employment Relations............................... 31
Section 3.19 Employee Benefit Plans............................. 32
Section 3.20 Interests in Customers, Suppliers, etc............. 40
(i)
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Section 3.21 Environmental Laws and Regulations................. 41
Section 3.22 Bank Accounts, Powers of Attorney.................. 44
Section 3.23 Compensation of Employees.......................... 44
Section 3.24 Conduct of Business................................ 45
Section 3.25 Customer Relations................................. 45
Section 3.26 Condition of Assets................................ 45
Section 3.27 Broker's or Finder's Fees.......................... 46
ARTICLE IV
REPRESENTATIONS OF THE SELLERS........................................ 46
Section 4. Representations of the Seller....................... 46
Section 4.1 Ownership of Stock.................................. 46
Section 4.2 Authorization and Validity of Agreement............. 47
Section 4.3 Restrictive Documents............................... 48
Section 4.4 Consents............................................ 48
Section 4.5 Broker's or Finder's Fees........................... 49
ARTICLE V
REPRESENTATIONS OF THE PURCHASER...................................... 49
Section 5. Representations of the Purchaser.................... 49
Section 5.1 Existence and Good Standing; Power and
Authority........................................ 49
Section 5.2 Restrictive Documents; No Legal Bar................. 50
Section 5.3 Purchase for Investment............................. 50
Section 5.4 Broker's or Finder's Fees........................... 51
Section 5.5 Litigation; Disputes................................ 51
Section 5.6 Consents............................................ 51
ARTICLE VI
TRANSACTIONS PRIOR TO THE CLOSING DATE................................ 52
Section 6.1 Conduct of Business of the Companies................ 52
Section 6.2 Exclusive Dealing................................... 54
Section 6.3 Review of the Companies............................. 55
Section 6.4 Reasonable Efforts.................................. 55
Section 6.5 Agreement by the Purchaser Regarding No
Other Representations or Warranties by the
Sellers......................................... 56
Section 6.6 Satisfaction of Financing Condition................. 56
ARTICLE VII
CONDITIONS TO THE PURCHASER'S OBLIGATIONS............................. 57
Section 7. Conditions to the Purchaser's Obligations........... 57
(ii)
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Section 7.1 Opinions of Counsel................................. 57
Section 7.2 Good Standing and Other Certificates................ 57
Section 7.3 [Intentionally Omitted]............................. 58
Section 7.4 Truth of Representations and Warranties............. 58
Section 7.5 Performance of Agreements........................... 58
Section 7.6 No Litigation Threatened............................ 59
Section 7.7 Third Party Consents; Governmental
Approvals........................................ 59
Section 7.8 Termination of Security Interests................... 59
Section 7.9 Resignations........................................ 59
Section 7.10 Financing.......................................... 59
Section 7.11 [Intentionally omitted]............................ 60
Section 7.12 FIRPTA............................................. 60
Section 7.13 HSR Act............................................ 60
Section 7.14 Escrow Agreement................................... 60
ARTICLE VIII
CONDITIONS TO THE COMPANIES AND
THE SELLERS' OBLIGATIONS.............................................. 60
Section 8. Conditions to the Seller's Obligations.............. 60
Section 8.1 Opinions of Counsel................................. 60
Section 8.2 Truth of Representations and Warranties............. 61
Section 8.3 Third Party Consents; Governmental
Approvals........................................ 61
Section 8.4 Performance of Agreements........................... 61
Section 8.5 No Litigation Threatened............................ 62
Section 8.6 HSR Act............................................. 62
Section 8.7 Warrants............................................ 62
ARTICLE IX
TAX MATTERS........................................................... 62
Section 9.1 Tax Returns......................................... 62
Section 9.2 Overlap Period, Refunds, Tax Benefits............... 68
Section 9.3 Cooperation; Audits................................. 71
Section 9.4 Controversies....................................... 73
Section 9.5 Transfer Taxes...................................... 75
Section 9.6 Amended Returns..................................... 75
Section 9.7 Non-foreign Person Affidavit........................ 76
Section 9.8 Indemnification..................................... 76
Section 9.9 FSE Tax Indemnity................................... 78
ARTICLE X
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION.......................... 80
(iii)
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Section 10.1 Survival of Representations........................ 80
Section 10.2 Indemnification.................................... 81
Section 10.3 Indemnification Procedure.......................... 85
ARTICLE XI
TERMINATION........................................................... 91
Section 11.1 Termination........................................ 91
Section 11.2 Effect of Termination.............................. 92
ARTICLE XII
MISCELLANEOUS......................................................... 93
Section 12.1 Knowledge.......................................... 93
Section 12.2 Expenses........................................... 93
Section 12.3 Governing Law...................................... 94
Section 12.4 Captions........................................... 94
Section 12.5 Publicity.......................................... 94
Section 12.6 Notices............................................ 95
Section 12.7 Parties in Interest................................ 96
Section 12.8 Counterparts....................................... 96
Section 12.9 Entire Agreement................................... 96
Section 12.10 Amendments........................................ 97
Section 12.11 Severability...................................... 97
Section 12.12 Third Party Beneficiaries......................... 98
Section 12.13 Jurisdiction...................................... 98
Section 12.14 Action by Sellers................................. 98
Section 12.15 Sellers' Representative........................... 99
Section 12.16 Assignment........................................100
Section 12.17 Construction......................................100
Section 12.18 Schedules.........................................100
SCHEDULES
Schedule 3.2 Capital Stock
Schedule 3.5(b) Financial Statements
Schedule 3.7 Title to Properties; Encumbrances.
Schedule 3.8 Real Property.
Schedule 3.9 Intellectual Property
Schedule 3.10 Leases
Schedule 3.11 Material Contracts
Schedule 3.12 Consents and Approvals; No Violations
Schedule 3.13 Litigation
Schedule 3.14 Taxes
(iv)
Schedule 3.15 Liabilities
Schedule 3.16 Insurance
Schedule 3.17 Compliance with Laws
Schedule 3.18 Employment Relations
Schedule 3.19 Employee Benefit Plans
Schedule 3.20 Interests in Customers, Suppliers, etc.
Schedule 3.21 Environmental Laws and Regulations
Schedule 3.22 Bank Accounts, Powers of Attorney
Schedule 3.23 Compensation of Employees
Schedule 3.24 Conduct of Business
Schedule 3.25 Customer Relations
Schedule 4.4 Consents
Schedule 5.6 Third Party Consents
EXHIBITS
Exhibit A Form of Escrow Agreement
ANNEXES
Annex I Stock Ownership
Annex II Percentage Interests
(v)
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (this "Agreement") dated as of August 28, 1996 by
and among SPECIALTY PAPERBOARD, INC., a Delaware corporation (the "Purchaser"),
the stockholders (the "Stockholders") of ARCON HOLDINGS CORP., a Delaware
corporation ("Arcon Holdings") and the sole stockholder of ARCON COATING ▇▇▇▇▇,
INC., a Delaware corporation (the "Company"), the option holders ("the
Optionholders") listed on Annex I attached hereto, Arcon Holdings and the
Company. Each of the Stockholders and the Optionholders shall be referred to
herein individually as a "Seller" and collectively as the "Sellers."
W I T N E S S E T H :
WHEREAS, Arcon Holdings owns all of the issued and outstanding shares of
common stock, $.01 par value, of the Company (collectively the "Company Stock"),
such shares being all of the outstanding shares of the capital stock of the
Company;
WHEREAS, each of the Sellers identified as a Common Stock Seller under
Column A of Annex I attached hereto (the "Common Stock Holders") is the holder
of the number of shares of common stock, $0.01 par value, of Arcon Holdings (the
"Common Stock"), set forth opposite such Seller's name in
Column B of Annex I attached hereto, which shares of Common Stock constitute all
of the issued and outstanding shares of Common Stock of Arcon Holdings;
WHEREAS, each of the Sellers identified as a Series A Holder under Column
A of Annex I attached hereto (the "Series A Stock Holders") is the holder of the
number of shares of Series A Non-Voting Convertible Preferred Stock, $0.01 par
value, of Arcon Holdings (the "Series A Stock") set forth opposite such Seller's
name in Column B of Annex I attached hereto, which shares of Series A Stock
constitute all of the issued and outstanding shares of Series A Stock of Arcon
Holdings;
WHEREAS, each of the Sellers identified as a Series B Holder under Column
A of Annex I attached hereto (the "Series B Stock Holders") is the holder of the
number of shares of Series B (Voting) Convertible Preferred Stock, $0.01 par
value, of Arcon Holdings (the "Series B Stock" and together with the Series A
Stock, the "Preferred Stock" and together with the Common Stock and the Series A
Stock, the "Stock") set forth opposite such Seller's name in Column B of Annex I
attached hereto, which shares of Series B Stock constitute all of the issued and
outstanding shares of Series B Stock of Arcon Holdings;
WHEREAS, each of the Optionholders (collectively with the Common Stock
Holders, the Series A Stock Holders and the
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Series B Stock Holders, the "Common Stock Sellers") is the holder of options
(the "Options") to acquire the number of shares of Common Stock set forth
opposite such Seller's name in Column B of Annex I attached hereto, which
Options constitute all of the issued and outstanding options to purchase Common
Stock or any other capital stock of Arcon Holdings;
WHEREAS, the Bank is the holder of warrants (the "Warrants") to acquire
85,000 shares of Common Stock, which Warrants constitute all of the issued and
outstanding warrants to purchase Common Stock or any other capital stock of
Arcon Holdings;
WHEREAS, the Optionholders desire to cancel the Options in consideration
of payment by the Purchaser to each Optionholder of the Net Option Payment;
WHEREAS, prior to the Closing, Arcon Holdings intends to repurchase the
Warrants from the Bank and cancel the Warrants; and
WHEREAS, it is the intention of the parties hereto that, upon consummation
of the purchase and sale of the Stock, the payment of the Net Option Payment and
the cancellation of the Options and the Warrants pursuant to this Agreement, the
Purchaser shall own all of the outstanding shares (and rights to acquire shares)
of capital stock of Arcon Holdings.
NOW, THEREFORE, IT IS AGREED:
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ARTICLE I
DEFINITIONS
Section 1.1 Definitions. In addition to the terms defined elsewhere in
this Agreement, the following terms shall have the respective meanings
specified therefor below (such meanings to be equally applicable to both the
singular and plural forms of the terms defined).
"Aggregate Closing Payment" shall have the meaning specified in Section
2.2.
"Agreement" shall mean this Agreement, as amended, modified or
supplemented from time to time.
"Arcon Holdings" shall have the meaning specified in the preamble to this
Agreement.
"Audited Statements" shall have the meaning specified in Section 3.5.
"Balance Sheet" shall have the meaning specified in Section 3.5.
"Balance Sheet Date" shall have the meaning specified in Section 3.5.
"Bank" shall mean ▇▇▇▇▇▇ Financial, Inc.
"Business Day" shall mean any day other than a Saturday, a Sunday or a day
on which banks located in New York, New York shall be authorized or required by
law to close.
"Claim" shall have the meaning specified in Section 10.3
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"Closing" shall have the meaning specified in Section 2.4.
"Closing Date" shall have the meaning specified in Section 2.4.
"Code" shall have the meaning specified in Section 3.14.
"Common Stock" shall have the meaning specified in the preamble to this
Agreement.
"Common Stock Holders" shall have the meaning specified in the preamble to
this Agreement.
"Common Stock Sellers" shall have the meaning specified in the preamble to
this Agreement.
"Companies" shall have the meaning specified in Article III.
"Company" shall have the meaning specified in the preamble to this
Agreement.
"Company Property" shall have the meaning specified in Section 3.21.
"Company Stock" shall have the meaning specified in the preamble to this
Agreement.
"Confidentiality Agreement" shall have the meaning specified in Section
6.3.
"Damages" shall have the meaning specified in Section 10.2.
"Deductions" shall have the meaning specified in Section 9.2.
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"Determination" shall have the meaning specified in Section 10.3.
"Dispute Notice" shall have the meaning specified in Section 9.1.
"Employee Benefit Plans" shall have the meaning specified in Section 3.19.
"Encumbrances" shall have the meaning specified in Section 3.7.
"Environmental Claims" shall have the meaning specified in Section 3.21.
"Environmental Law" shall have the meaning specified in Section 3.21.
"ERISA" shall have the meaning specified in Section 3.19.
"Escrow Account" shall have the meaning specified in Section 2.2.
"Escrow Agent" shall have the meaning specified in Section 2.2.
"Escrow Agreement" shall have the meaning specified in Section 7.14.
"Escrow Amount" shall have the meaning specified in Section 2.2(b).
"FSE Tax Indemnity" shall mean the Stock Purchase Agreement among Arcon
Holdings, Arcon Acquisition Corp., FSE Holdings, Inc. and the Company, dated as
of April 14, 1994.
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"FSE Indemnifiable Amounts" shall have the meaning specified in Section
9.9.
"GAAP" shall have the meaning specified in Section 3.5. "Hazardous
Materials" shall have the meaning specified in Section 3.21.
"HSR Act" shall have the meaning specified in Section 6.4.
"Indemnified Party" shall have the meaning specified in Section 10.3.
"Indemnifiable Amounts" shall have the meaning specified in Section
10.3(f).
"Indemnifying Party" shall have the meaning specified in Section 10.3.
"Indemnity Response" shall have the meaning specified in Section 10.3.
"Independent Auditor" shall have the meaning specified in Section 9.1.
"Insurable Amounts" shall have the meaning specified in Section 10.3(f).
"Intellectual Property" shall have the meaning specified in Section 3.9.
"IRS" shall have the meaning set forth in Section 3.19.
"Material Adverse Effect" shall have the meaning specified in Section 3.1.
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"Net Option Payment" shall mean, as to each Optionholder, the portion of
the Aggregate Closing Payment payable to each Optionholder pursuant to Section
2.2(d) plus his respective portion of the Escrow Amount set forth under Column C
of Annex I.
"Option" shall have the meaning specified in the preamble to this
Agreement.
"Optionholders" shall have the meaning specified in the preamble to this
Agreement.
"Outstanding Indebtedness" shall mean the outstanding indebtedness for
borrowed money of Arcon Holdings and the Company at the Closing (including
unpaid interest thereon and penalties, if any, associated with the repayment
thereof).
"Overlap Period" shall have the meaning specified in Section 9.2.
"PBGC" shall have the meaning set forth in Section 3.19.
"Percentage Interest" of any Person shall mean the percentages as set
forth across from such Person's name on Annex II attached hereto.
"Permitted Encumbrances" shall have the meaning specified in Section 3.7.
"Person" shall have the meaning specified in Section 3.11.
"Personal Liability Amount" shall have the meaning specified in Section
10.2.
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"Pre-Closing Period" shall have the meaning specified in Section 3.14.
"Preferred Stock" shall have the meaning specified in the preamble to this
Agreement.
"Purchaser" shall have the meaning specified in the preamble to this
Agreement.
"Real Property" shall have the meaning set forth in Section 3.8.
"Refund Requests" shall have the meaning specified in Section 9.1(a).
"Required Sellers" shall mean such Sellers who hold in the aggregate more
than 50% of the then issued and outstanding Common Stock held by all Sellers as
of immediately prior to the Closing (calculated (i) as if all issued and
outstanding shares of Preferred Stock were converted into shares of Common Stock
and (ii) as if all Options have been fully exercised into shares of Common
Stock).
"Returns" shall have the meaning specified in Section 3.14.
"Seller" and "Sellers" shall have the meanings specified in the preamble
to this Agreement.
"Sellers' Liability Amount" shall have the meaning set forth in Section
10.2.
"Sellers' Representative" shall have the meaning specified in Section 9.1.
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"Series A Stock" shall have the meaning specified in the preamble to this
Agreement.
"Series A Stock Holders" shall have the meaning specified in the preamble
to this Agreement.
"Series B Stock" shall have the meaning specified in the preamble to this
Agreement.
"Series B Stock Holders" shall have the meaning specified in the preamble
to this Agreement.
"Single Employer Plan" shall have the meaning set forth in Section 3.19.
"Stock" shall have the meaning specified in the preamble to this
Agreement.
"Stockholder" shall have the meaning specified in the preamble to this
Agreement.
"Tax Matter" shall have the meaning specified in Section 9.4.
"Taxes" means all taxes, assessments, charges, duties, fees, levies or
other governmental charges, including, without limitation, all Federal, state,
local, foreign and other income, capital, franchise, profits, capital gains,
capital stock, transfer, sales, use, occupation, property, excise, severance,
windfall profits, stamp, license, payroll, withholding and other taxes,
assessments, charges, duties, fees, levies or other governmental charges of any
kind whatsoever (whether payable directly or by withholding and whether or
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not requiring the filing of a Return), all estimated taxes, deficiency
assessments, additions to tax, penalties and interest and shall include any
liability for such amounts as a result either of being a member of a combined,
consolidated, unitary or affiliated group or of a contractual obligation to
indemnify any person or other entity.
"Termination Date" shall have the meaning specified in Section 2.4.
"Unaudited Statements" shall have the meaning specified in Section 3.5.
"Warrants" shall have the meaning specified in the preamble to this
Agreement.
ARTICLE II
PURCHASE OF STOCK; CANCELLATION OF OPTIONS AND WARRANTS
Section 2.1 Purchase of Stock; Cancellation of Option and Warrants.
Subject to the terms and conditions set forth in this Agreement, the Purchaser
agrees to purchase from each of the Sellers on the Closing Date and each of
the Sellers agrees to sell, assign, transfer and deliver to the Purchaser on
the Closing Date, the shares of Stock so owned by such Seller. Subject to the
terms and conditions of this Agreement, each of the Optionholders agrees to
cancel such Optionholder's Options and to deliver to the Purchaser on the
Closing Date, the cancelled Options. Subject to the terms of
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this Agreement, the Company agrees to cancel the Warrants and to deliver to the
Purchaser on the Closing Date the cancelled Warrants. The certificates
representing the Stock shall be duly endorsed in blank, or accompanied by stock
powers duly executed in blank by each of the Sellers, transferring the same to
the Purchaser with all necessary transfer tax and other revenue stamps affixed
and cancelled. Each of the Sellers agrees to cure any deficiencies with respect
to the endorsement of the certificates representing the Stock or with respect to
the stock power accompanying any such certificates.
Section 2.2 Price. In consideration for the sale to the Purchaser by
Sellers of the Stock and the cancellation by the Optionholders of the
Options, the Purchaser shall deliver at the Closing an aggregate cash amount
equal to $32,000,000 (such amount, the "Aggregate Closing Payment") by wire
transfer in immediately available funds as follows:
(a) to the escrow agent (the "Escrow Agent") to be held in an escrow
account (the "Escrow Account") pursuant to the provisions of the Escrow
Agreement as contemplated by Section 10.2 hereof, an amount equal to $2,000,000
(the "Escrow Amount"), representing the sum of that portion of the Aggregate
Closing Payment to be held in the Escrow Account as set forth under Column C of
Annex I attached hereto;
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(b) to the Bank, the amount of Outstanding Indebtedness owed to the Bank
on the Closing Date to an account specified to the Purchaser at least two
Business Days prior to the Closing (it being acknowledged and agreed that it is
the intent of the parties hereto that such amount shall be deemed to have been
paid to the Bank immediately prior to the Closing);
(c) to the Shareholders' Representative an amount equal to $300,000 to an
account specified by the Shareholders' Representative at least two Business Days
prior to the Closing; and each Seller hereby acknowledges and agrees that such
amount, together with any and all earnings in respect thereof (collectively, the
"Sellers Amount"), will be used by the Sellers' Representative in its sole
discretion to pay any and all costs and expenses of the Sellers' under this
Agreement or in connection with the execution, delivery, performance or
consummation of the transactions contemplated hereby, including, without
limitation, to pay all costs and expenses of the Sellers' attorneys and
accountants, to pay Taxes, expenses and other liabilities of the Sellers arising
under Article IX (including, without limitation in connection with the
preparation and filing of Tax Returns and Refund Requests) and Article X, and to
pay the costs and expenses incurred by the Sellers' Representative in connection
with or relating to its acting as Sellers' Representative hereunder
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or under the Escrow Agreement. Each Seller hereby irrevocably and
unconditionally authorizes the Sellers' Representative to utilize in its sole
discretion the Sellers Amount to make any and all of the foregoing payments and
to otherwise utilize the Sellers Amount as provided above. In addition, each
Seller acknowledges that the Sellers' Representative shall not be responsible
for determining the foregoing amounts and that the Sellers Amount may not be
sufficient to pay in full all of the foregoing amounts;
(d) to each of the Optionholders (i) the balance of the Aggregate Closing
Payment multiplied by his Percentage Interest minus (ii) the aggregate exercise
price of the Options held by such Optionholder to the account specified by each
of the Optionholders at least two Business Days prior to Closing; each of the
Sellers hereby acknowledges and consents to the payment of the Net Option
Payment to each of the Optionholders; and
(e) to each of the Sellers (other than the Optionholders) the balance of
the Aggregate Closing Payment multiplied by the Percentage Interest of such
Seller to the account specified by each of the Sellers to the Purchaser at least
two Business Days prior to Closing.
Section 2.3 Cash on Hand. The Purchaser agrees and acknowledges that, any
and all cash on hand of the Companies (or either of them) at or prior to the
Closing shall be
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utilized in the sole discretion of the Companies including, without limitation,
to pay bonuses to employees of the Companies, to prepay Outstanding Indebtedness
and/or to purchase the Warrants.
Section 2.4 Closing. The purchases and sales referred to in Section 2.1
(the "Closing") shall take place at 10:00 A.M. at the offices of White &
Case, New York, New York within 10 Business Days after the later of the
termination or expiration of the applicable waiting period (and any extension
thereof) under the HSR Act or the satisfaction or waiver of all other
conditions precedent set forth in Articles VII and VIII hereof, or at such
other time and date (not later than October 31, 1996 (the "Termination
Date")) as the parties hereto shall designate in writing. Such date is herein
referred to as the "Closing Date."
ARTICLE III
REPRESENTATIONS OF THE COMPANIES
Section 3. Representations of the Company. Each of Arcon Holdings and the
Company (collectively, the "Companies") hereby jointly and severally represents
and warrants as of the date hereof to the Purchaser as follows:
Section 3.1 Existence and Good Standing. Each of the Companies is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware.
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Each of the Companies has the requisite corporate power and authority to own,
lease and operate its properties and to carry on its business as now being
conducted. Each of the Companies is duly qualified or licensed to do business
and is in good standing in each jurisdiction in which the character or location
of the properties owned, leased or operated by it or the nature of the business
conducted by it makes such qualification or license necessary, except where the
failure to be so duly qualified or licensed would not have a material adverse
effect on the business, operations, financial condition or results of operations
of the Companies taken as a whole (a "Material Adverse Effect").
Section 3.2 Capital Stock. Arcon Holdings has an authorized capitalization
consisting of (i) 1,500,000 shares of Common Stock of which 41,175.1 shares are
issued and outstanding, (ii) 100,000 shares of Class B Common Stock, $0.01 par
value per share, none of which are issued and outstanding on the date hereof and
none of which will be issued and outstanding at Closing, (iii) 32,000 shares of
Series A Stock of which 31,944.8 shares are issued and outstanding, and (iv)
6,500 shares of Series B Stock of which 6,225.3 shares are issued and
outstanding. The Company has an authorized capitalization consisting of 1,000
shares of Company Stock, of which 1,000 shares are issued and outstanding and
held of record and beneficially by Arcon Holdings. All outstanding shares
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of capital stock of each of Arcon Holdings and the Company have been duly
authorized and validly issued and are fully paid and nonassessable. Except as
set forth on Schedule 3.2 attached hereto, there are no outstanding
subscriptions, options, warrants, rights, calls, commitments, conversion rights,
rights of exchange, plans or other agreements of any character providing for the
purchase, issuance or sale of any shares of the capital stock of Arcon Holdings
or the Company.
Section 3.3 Authorization and Validity of this Agreement. Each of the
Companies has the requisite corporate power and authority to execute and
deliver this Agreement and to perform its obligations hereunder. The
execution, delivery and performance of this Agreement by each of the
Companies and the performance of their respective obligations hereunder have
been duly authorized and approved by their respective Board of Directors and
no other corporate action on the part of the Companies or action by the
stockholders of the Companies is necessary to authorize the execution,
delivery and performance of this Agreement by the Companies. This Agreement
has been duly executed and delivered by each of the Companies and, assuming
due execution of this Agreement by the Purchaser, is a valid and binding
obligation of each of the Companies enforceable against each of the Companies
in accordance with its terms, except to the extent that its enforceability
may be subject to applicable bankruptcy,
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insolvency, reorganization, moratorium and similar laws affecting the
enforcement of creditors' rights generally and by general equitable principles.
Section 3.4 Subsidiaries and Investments. Neither Arcon Holdings (except
for its ownership of the Company Stock) nor the Company owns any capital
stock or other equity or ownership or proprietary interest in any
corporation, partnership, association, trust, joint venture or other entity.
Section 3.5 Financial Statements; No Material Changes. (a) The Company has
heretofore furnished the Purchaser with ▇▇▇▇▇▇▇- dated audited balance sheets of
Arcon Holdings and the Company and audited balance sheets of the Company as of
October 31, 1994, and October 31, 1995, respectively, together with related
consolidated statements of operation, stockholders' equity and cash flows for
the periods then ended, together with the report of Price Waterhouse LLP
(collectively, the "Audited Statements"). The Audited Statements, including the
footnotes thereto, have been prepared in accordance with generally accepted
accounting principles consistently applied by the Companies throughout the
periods indicated ("GAAP") and fairly present in all material respects the
consolidated financial position of the Companies and the financial position of
the Company, as applicable, at the respective dates thereof, and the
consolidated results of the operations and cash flows of the Companies and the
results of operations
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and cash flows of the Company for the respective periods indicated.
(b) The Company has also heretofore furnished the Purchaser with a
consolidated unaudited balance sheet of the Companies as of June 30, 1996,
together with related consolidated statements of operations for the period then
ended (collectively, the "Unaudited Statements"). The Unaudited Statements have
been prepared in accordance with GAAP (except that the Unaudited Statements do
not contain footnotes and do not reflect normal year-end adjustments) and,
except as disclosed on Schedule 3.5(b), fairly present in all material respects
the consolidated financial position of the Companies at its date thereof and the
results of the operations of the Companies for the period indicated. The
unaudited balance sheet of the Companies dated June 30, 1996, is hereinafter
referred to as the "Balance Sheet" and June 30, 1996, is hereinafter referred to
as the "Balance Sheet Date."
(c) Since October 31, 1995, there has been no (i) material adverse change
in the business, operations, financial condition or results of operations of the
Companies or (ii) material damage, destruction or loss to any asset or property,
tangible or intangible, of the Companies which materially and adversely affects
the ability of the Companies to conduct their respective business.
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Section 3.6 Books and Records. The minute books of Arcon Holdings, as
previously made available to the Purchaser and its representatives, contain
materially accurate records of all meetings of, and corporate actions taken by
(including action taken by written consent), their respective shareholders and
Boards of Directors. At Closing all of the books and records of Arcon Holdings
will be in the possession of Arcon Holdings and the Company.
Section 3.7 Title to Properties; Encumbrances. Except as set forth on
Schedule 3.7 attached hereto and except for such properties and assets which
have been sold or otherwise disposed of in the ordinary course of business,
each of Arcon Holdings and the Company has good title to its material
properties and assets (real and personal, tangible and intangible) owned by
it (and good leasehold title to the material properties and assets leased by
it), including, without limitation, the material properties and assets
reflected in the Balance Sheet, subject to no encumbrance, lien, charge or
other restriction of any kind or character ("Encumbrances"), except for (i)
Encumbrances reflected in the Balance Sheet, (ii) Encumbrances for current
taxes, assessments or governmental charges or levies on property not yet due
and delinquent, (iii) Encumbrances arising by operation of law, (iv) pledges
or deposits made in the ordinary course of business in connection with
workers' compensation, unemployment insur-
-20-
ance and other social security legislation, (v) easements, rights-of-way,
restrictions and other similar Encumbrances previously incurred in the ordinary
course of business which, in respect of properties or assets of the Companies
are not material and which, in the case of such encumbrances on the assets or
properties of the Companies, do not materially detract from the value of any
such properties or assets or materially interfere with any present use of such
properties or assets, (vi) carriers', warehousemen's, mechanics', materialmen's,
repairmen's or other like Encumbrances arising in the ordinary course of
business which are not overdue for a period of more than 90 days or which are
being contested in good faith by appropriate proceedings, (vii) deposits to
secure the performance of bids, contracts (other than for borrowed money),
leases, statutory obligations, surety and appeal bonds, performance bonds and
other obligations of a like nature incurred in the ordinary course of business,
(viii) statutory and contractual Encumbrances on the property of the Companies
in favor of landlords securing leases, and (ix) Encumbrances in existence on the
Closing Date and described on Schedule 3.7 attached hereto (Encumbrances of the
type described in clauses (i) through (ix) above are hereinafter sometimes
referred to as "Permitted Encumbrances").
-21-
Section 3.8 Real Property. Schedule 3.8 attached hereto contains an
accurate and complete list of all real property owned in whole or in part by
Arcon Holdings or the Company (the "Real Property"). With respect to all of
the buildings, structures and appurtenances situated on the Real Property,
each of the Companies has adequate rights of ingress and egress for operation
of the business of the Companies in the ordinary course consistent with past
practice. None of such buildings, structures or appurtenances, nor the
operation or maintenance thereof, violates any restrictive covenant or
encroaches, on any property owned by others, except for such violations,
encumbrances or encroachments which would not have a Material Adverse Effect.
Section 3.9 Intellectual Property. All licenses, patents, trade names,
trademarks and service marks (collectively, the "Intellectual Property") owned
by Arcon Holdings or the Company are set forth on Schedule 3.9 attached hereto.
All such Intellectual Property is, to the Companies' knowledge, in full force
and effect and neither Arcon Holdings nor the Company has received any written,
or to its knowledge, oral notice of any event, inquiry, investigation or
proceeding threatening the validity of any such Intellectual Property, except as
set forth on Schedule 3.9.
Section 3.10 Leases. Schedule 3.10 attached hereto contains a list of all
leases or sub-leases to which Arcon Holdings or
-22-
the Company is a party requiring an annual aggregate payment of at least
$25,000. Except as otherwise set forth in Schedule 3.10 attached hereto, each
lease or sub-lease set forth in Schedule 3.10 is in full force and effect; all
rents and additional rents due to date from Arcon Holdings or the Company on
each such lease or sub-lease have been paid; neither Arcon Holdings nor the
Company has received written notice (nor, to the knowledge of the Companies,
oral notice) that it is in material default under any such lease or sublease;
and, to the knowledge of the Companies, there exists no default by either of the
Companies or any other party under such lease or sub-lease, except for such
defaults which would not have a Material Adverse Effect.
Section 3.11 Material Contracts. Except as set forth on Schedule 3.10 and
Schedule 3.11 attached hereto, neither Arcon Holdings nor the Company is bound
by (a) any agreement, contract or commitment that involves the performance of
services or the delivery of goods and/or materials by it of an amount or value
in excess of $25,000, (b) any agreement, contract or commitment not in the
ordinary course of business, (c) any agreement, indenture or other instrument
which contains restrictions with respect to payment of dividends or any other
distribution in respect of its capital stock, (d) any agreement, contract or
commitment relating to capital expenditures in excess of $25,000, (e) any
agreement,
-23-
indenture or instrument relating to indebtedness, liability for borrowed money
or the deferred purchase price of property (excluding trade payables in the
ordinary course of business), (f) any loan or advance to, or investment in, any
individual, partnership, joint venture, corporation, trust, unincorporated
organization, government or other entity (each a "Person"), any agreement,
contract or commitment relating to the making of any such loan, advance or
investment or any agreement, contract or commitment involving a sharing of
profits, other than loans or advances to employees of Arcon Holdings and the
Company in the ordinary course of business not in excess of $5,000 in any
individual instance (g) any guarantee or other contingent liability in respect
of any indebtedness or obligation of any Person (other than in the ordinary
course of business), (h) any management service, consulting or any other similar
type of contract, (i) any agreement, contract or commitment limiting the ability
of Arcon Holdings or the Company to engage in any line of business or to compete
with any Person, (j) any warranty, guaranty or other similar undertaking with
respect to a contractual performance extended by Arcon Holdings or the Company
other than in the ordinary course of business, or (k) any amendment,
modification or supplement in respect of any of the foregoing. Except as
otherwise set forth on Schedule 3.11, each contract or agreement set forth on
-24-
Schedule 3.11 is, to the knowledge of the Companies, in full force and effect
and there exists no default or event of default by the Companies thereunder,
except for such defaults which would not have a Material Adverse Effect.
Section 3.12 Consents and Approvals; No Violations. Except as set forth in
Schedule 3.12 attached hereto, the execution and delivery of this Agreement by
Arcon Holdings and the Company and the consummation of the transactions
contemplated hereby to be consummated by the Companies (a) will not violate or
contravene any provision of the Certificate of Incorporation or By-laws of Arcon
Holdings or the Company, (b) except as may be required under the HSR Act will
not violate or contravene any statute, rule, regulation, order or decree of any
public body or authority by which Arcon Holdings or the Company is bound or by
which any of its respective properties or assets are bound, (c) except as may be
required under the HSR Act will not require by Arcon Holdings or the Company any
filing with, or permit, consent or approval of, or the giving of any notice to,
any governmental or regulatory body, agency or authority, or any other Person
and (d) will not result in a violation or breach of, conflict with, constitute
(with or without due notice or lapse of time or both) a default (or give rise to
any right of termination, cancellation, payment or acceleration) under, or
result in the creation of any Encumbrance upon any of the properties or assets
of Arcon
-25-
Holdings or the Company under, any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, license, franchise, permit, agreement, lease,
franchise agreement or any other instrument or obligation to which Arcon
Holdings or the Company is a party, or by which it or any of their respective
properties or assets is bound, except, in the case of clauses (c) and (d), for
such filing, permit, consent or approval, the absence of which, and violations,
breaches, defaults, conflicts and Encumbrances which, in the aggregate would not
have a Material Adverse Effect.
Section 3.13 Litigation. Except as set forth on Schedule 3.13 attached
hereto, there is no action, suit, proceeding at law or in equity, arbitration
or administrative or other proceeding by or before (or to the knowledge of
the Companies any investigation by) any governmental or other instrumentality
or agency, pending, or, to the knowledge of the Companies, threatened,
against Arcon Holdings or the Company or any material portion of their
respective properties or rights which, if adversely determined, would
materially and adversely affect the right or ability of Arcon Holdings or the
Company to carry on its business as now conducted, or which would have a
Material Adverse Effect; and neither Arcon Holdings nor the Company knows of
any valid basis for any such action, proceeding or investigation. Neither
Arcon
-26-
Holdings nor the Company is subject to any judgment, order or decree entered in
any lawsuit or proceeding which would have a Material Adverse Effect.
Section 3.14 Taxes. Except as set forth in Schedule 3.14: (a) Tax
Returns. Each of Arcon Holdings and the Company has timely filed or caused to
be timely filed or will timely file or cause to be timely filed with the
appropriate taxing authorities all returns, statements, forms and reports for
Taxes ("Returns") that are required to be filed by, or with respect to,
either of them on or prior to the Closing Date. The Returns have accurately
reflected and will accurately reflect all material liability for Taxes of
Arcon Holdings and the Company for the periods and the type covered thereby.
(b) Payment of Taxes. All material Taxes and Tax liabilities of Arcon
Holdings and the Company for all taxable years or periods that end on or before
the Closing Date and, with respect to any taxable year or period beginning
before and ending after the Closing Date, the portion of such taxable year or
period ending on and including the Closing Date ("Pre-Closing Periods") have
been timely paid or accrued and adequately disclosed on the books and records of
the Companies in accordance with GAAP.
(c) Other Tax Matters. (i) (A) there are no audits or other examinations
of Taxes by the appropriate tax authorities of any nation, state or locality
currently in progress
-27-
(or to the knowledge of Companies scheduled as of the Closing Date to be
conducted), (B) there have been no audits or other examinations relating to
Federal income taxes of Arcon Holdings or the Company which have resulted in an
adjustment in Federal income tax liability, (C) there are no taxable years or
other taxable periods of Arcon Holdings or the Company which will not be subject
to the normally applicable statute of limitations by reason of the existence of
circumstances that would cause any such statute of limitations for applicable
Taxes to be extended, (D) no taxing authority has notified Arcon Holdings or the
Company that it has proposed or assessed any adjustments or assessed any
deficiency relating to any Returns for Tax liability of Arcon Holdings or the
Company and (E) neither Arcon Holdings nor the Company has received any written
notice from any taxing authority relating to any issue which could affect the
Tax liability of Arcon Holdings or the Company, which issue has not been finally
determined and which, if determined adversely to Arcon Holdings or the Company,
could result in a Tax liability.
(ii) Except for the consolidated, unitary or combined Returns filed
by Arcon Holdings that have included the Company, as set forth on Schedule 3.14
hereto, the Companies have not been included in any "consolidated," "unitary" or
"combined" Return provided for under the law of
-28-
the United States, any foreign jurisdiction or any state or locality with
respect to Taxes for any taxable period for which the statute of limitations has
not expired.
(iii) All Taxes which Arcon Holdings or the Company is (or was)
required by law to withhold or collect have been duly withheld or collected, and
have been timely paid over to the proper authorities to the extent due and
payable.
(iv) Neither Arcon Holdings nor the Company is a "United States real
property holding corporation" within the meaning of Section 897(c)(2) of the
Internal Revenue Code of 1986, as amended, and the rules and regulations
promulgated thereunder (the "Code").
(v) There are no tax sharing, allocation, indemnification or similar
agreements or arrangements in effect as between Arcon Holdings or the Company or
any predecessor or affiliate thereof and any other party (including any of the
Sellers and any predecessor or affiliate thereof) under which the Purchaser,
Arcon Holdings or the Company could be liable for any Taxes or other claims of
any party.
(vi) Neither Arcon Holdings nor the Company has applied for, been
granted, or agreed to any accounting method change for which it will be required
to take into account any adjustment under Section 481 of the Code or any similar
pro-
-29-
vision of the Code or the corresponding tax laws of any nation, state or
locality.
(vii) At and after giving effect to Closing there will not be any
indebtedness of Arcon Holdings or the Company that consists of "corporate
acquisition indebtedness" within the meaning of Section 279 of the Code.
(viii) Neither Arcon Holdings nor the Company is a party to any
agreement that would require it to make any payment that would constitute an
"excess parachute payment" for purposes of Sections 280G and 4999 of the Code.
Section 3.15 Liabilities. Neither Arcon Holdings nor the Company has any
outstanding indebtedness or other liabilities, contingent or otherwise, except
(i) as set forth in the Balance Sheet or referred to in the footnotes in the
Audited Statements, (ii) liabilities incurred subsequent to the Balance Sheet
Date in the ordinary course of business, (iii) as set forth in Schedule 3.15 and
(iv) liabilities which would not have a Material Adverse Effect.
Section 3.16 Insurance. Schedule 3.16 contains an accurate listing of all
policies of property, fire and casualty, product liability, workers compensation
and other forms of insurance owned or held by Arcon Holdings or the Company. The
Companies have not received (i) any written notice of cancellation of any policy
described in such Schedule or refusal of coverage thereunder, (ii) any written
notice that
-30-
any issuer of such policy has filed for protection under applicable bankruptcy
laws or is otherwise in the process of liquidating or has been liquidated, or
(iii) any other written notice that such policies are no longer in full force or
effect.
Section 3.17 Compliance with Laws. Except as set forth on Schedule 3.17,
the Companies are in compliance with all applicable laws, regulations, orders,
judgments and decrees, except where the failure to so comply would not have a
Material Adverse Effect.
Section 3.18 Employment Relations. Except as set forth on Schedule 3.18:
(a) The Companies are in compliance with all Federal, state or other applicable
laws, domestic or foreign, respecting employment and employment practices, and
are not engaged in any unfair labor practice, except where the failure to so
comply would not have a Material Adverse Effect;
(b) no unfair labor practice complaint against the Companies is pending
before the National Labor Relations Board;
(c) there is no labor strike, slowdown or stoppage actually pending or to
the Companies' knowledge, threatened against the Companies;
(d) neither Arcon Holdings nor the Company is a party to any collective
bargaining agreement and no collective bar-
-31-
gaining agreement is currently being negotiated by the Companies; and
(e) except for written claims for benefits in the ordinary course, no
claim in respect of the employment of any employee has been asserted or, to the
knowledge of the Companies, threatened, against the Companies.
Section 3.19 Employee Benefit Plans. (a) List of Plans. Set forth in
Schedule 3.19 attached hereto is an accurate and complete list of all
domestic and foreign (i) "employee benefit plans," within the meaning of
Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations thereunder ("ERISA"); (ii) bonus,
stock option, stock purchase, restricted stock, incentive, profit-sharing,
pension, retirement, deferred compensation, medical, life, disability,
accident, accrued leave, vacation, sick pay, sick leave, supplemental
retirement and unemployment benefit plans and/or programs (whether or not
insured); and (iii) employment, consulting, termination, and severance
contracts or agreements; for active, retired or former employees or
directors, whether or not any such plans, programs, arrangements,
commitments, contracts, agreements and/or practices (referred to in (i), (ii)
or (iii)) are in writing or are otherwise exempt from the provisions of
ERISA; that have been established, maintained or contributed to (or with
respect to which an obligation to contribute has been
-32-
undertaken by Arcon Holdings or the Company or with respect to which any
potential liability is borne by Arcon Holdings or the Company (including, for
this purpose and for the purpose of all of the representations in Sections
3.19(c) and (d), any predecessors to Arcon Holdings or the Company and all
employers (whether or not incorporated) that are by reason of common control
treated together with Arcon Holdings or the Company as a single employer (A)
within the meaning of Section 414 of the Code or (B) as a result of Arcon
Holdings or the Company being or having been a general partner of any such
employer in each case while treated as a single employer with Arcon Holdings or
the Company, within the last six years from the date hereof ("Employee Benefit
Plans").
(b) Status of Plans. Each Employee Benefit Plan has at all times been
maintained and operated in compliance with its terms and the requirements of all
applicable laws, including, without limitation, ERISA and the Code except where
failure to so comply will not have a Material Adverse Affect. Except as set
forth on Schedule 3.19 attached hereto, (i) no complete or partial termination
of any Employee Benefit Plan has occurred or is expected to occur and (ii)
neither Arcon Holdings nor the Company has any commitment, intention or
understanding to create, modify or terminate any Employee Benefit Plan. Except
as required by applicable law, no condition or, to the Company's or Arcon
Holding's knowledge,
-33-
circumstance exists, that would prevent the amendment or termination of any
Employee Benefit Plan. No event has occurred and, to the Company's or Arcon
Holding's knowledge, no condition or circumstance has existed, that could result
in a material increase in the benefits under or the expense of maintaining any
Employee Benefit Plan from the level of benefits or expense incurred for the
most recent fiscal year ended thereof other than premium increases in the normal
course.
(c) Liabilities. No Employee Benefit Plan subject to Section 412 of the
Code or Section 302 of ERISA has incurred any accumulated funding deficiency
within the meaning of Section 412 of the Code or Section 302 of ERISA,
respectively, or has applied for or obtained a waiver from the Internal Revenue
Service ("IRS") of any minimum funding requirement under Section 412 of the
Code. Except as set forth in Schedule 3.19, neither Arcon Holdings nor the
Company currently maintains, sponsors or is required to make contributions, nor
within the previous six years maintained, contributed to, or was required to
make contributions, to any "employee pension benefit plan" (within the meaning
of Section 3(2) of ERISA) which is subject to Title IV of ERISA. Neither Arcon
Holdings nor the Company has ever contributed to or had any obligation to
contribute to (or borne any
-34-
liability with respect to) any "multiemployer plan" (as defined in Section
4001(a)(3) of ERISA).
Neither Arcon Holdings nor the Company maintains any Employee
Benefit Plan which is a "group health plan" (as such term is defined in Section
5000(b)(1) of the Code) that has not been administered and operated in all
respects in substantial compliance with the applicable requirements of Section
601 of ERISA and Section 4980B(f) of the Code and neither Arcon Holdings nor the
Company is subject to any material liability, including, without limitation,
additional contributions, fines, penalties or loss of tax deduction as a result
of such administration and operation. Except as set forth on Schedule 3.19,
neither Arcon Holdings nor the Company maintains any Employee Benefit Plan
(whether qualified within the meaning of Section 401(a) of the Code or
nonqualified) providing for retiree health and/or life benefits and having
unfunded liabilities. Neither Arcon Holdings nor the Company maintains any
Employee Benefit Plan which is an "employee welfare benefit plan" (as such term
is defined in Section 3(1) of ERISA) that has provided any "disqualified
benefit" (as such term is defined in Section 4976(b) of the Code) with respect
to which an excise tax could be imposed.
Except as set forth in Schedule 3.19, neither Arcon Holdings nor the
Company has any unfunded liabilities
-35-
pursuant to any Employee Benefit Plan that is not intended to be qualified under
Section 401(a) of the Code.
Neither Arcon Holdings nor the Company has incurred any liability
for any tax or excise tax arising under Section 4971, 4977, 4978, 4978B, 4979,
4980 or 4980B of the Code, and no event has occurred and is continuing and, to
each of their knowledge, no condition or circumstance has existed and is
continuing that could give rise to any such liability.
There are no actions, suits or claims pending, or, to the knowledge
of Arcon Holdings and the Company, threatened, anticipated or expected to be
asserted against any Employee Benefit Plan or the assets of any such plan (other
than routine claims for benefits and appeals of denied routine claims). No civil
or criminal action brought pursuant to the provisions of Title I, Subtitle B,
Part 5 of ERISA is pending, or to the knowledge of Arcon Holdings and the
Company, threatened, anticipated, or expected to be asserted against Arcon
Holdings or the Company or any fiduciary of any Employee Benefit Plan, in any
case with respect to any Employee Benefit Plan. No Employee Benefit Plan or, to
the knowledge of Arcon Holdings and the Company, any fiduciary thereof has been
the direct or indirect subject of an audit, investigation or examination by any
governmental or quasi-governmental agency which audit, investigation or
examination has not been settled.
-36-
(d) Contributions. Full payment has been made of all amounts which Arcon
Holdings or the Company is required, under applicable law or under any Employee
Benefit Plan or any agreement relating to any Employee Benefit Plan to which
Arcon Holdings or the Company is a party, to have paid as contributions thereto
as of the last day of the most recent fiscal year of such Employee Benefit Plan
ended prior to the date hereof which are required to be contributed as of the
date hereof. All such contributions have been fully deducted for income tax
purposes to the extent permitted by applicable law and no such deduction has
been challenged or, to the knowledge of the Company and Arcon Holdings after due
inquiry, disallowed, by any governmental entity, and to the knowledge of Arcon
Holdings and the Company no event has occurred and no condition or circumstance
has existed that could give rise to any such challenge or disallowance. Each of
Arcon Holdings and the Company has made adequate provision for reserves to meet
contributions that have accrued but that have not been made because they are not
yet due under the terms of any Employee Benefit Plan or related agreements.
Except as set forth in Schedule 3.19, benefits under all Employee Benefit Plans
are as represented and have not been increased subsequent to the date as of
which documents have been provided.
-37-
(e) Tax Qualification. Each Employee Benefit Plan intended to be qualified
under Section 401(a) of the Code has been determined to be so qualified by the
Internal Revenue Service. Each trust established in connection with any Employee
Benefit Plan which is intended to be exempt from Federal income taxation under
Section 501(a) of the Code has been determined to be so exempt by the Internal
Revenue Service. Since the date of each most recent determination referred to in
this paragraph (f), no event has occurred and no condition or, to the knowledge
of Arcon Holdings and the Company, circumstance has existed that resulted or is
likely to result in the revocation of any such determination or that could
adversely affect the qualified status of any such Employee Benefit Plan or the
exempt status of any such trust.
(f) Transactions. No "reportable event" (as such term is defined in
Section 4043 of ERISA) for which the 30-day notice requirement has not been
waived by the PBGC has occurred or is expected to occur with respect to any
Employee Benefit Plan. Neither Arcon Holdings nor the Company nor any of their
respective directors, officers, employees or, to the knowledge of Arcon Holdings
and the Company, other persons who participate in the operation of any Employee
Benefit Plan or related trust or funding vehicle, has engaged in any transaction
with respect to any Employee Benefit Plan or breached any applicable fiduciary
responsibilities or obligations
-38-
under Title I of ERISA that would subject any of them to a tax, penalty or
liability for prohibited transactions under ERISA or the Code or would result in
any claim being made under, by or on behalf of any such Employee Benefit Plan by
any party with standing to make such claim.
(g) Triggering Events. The execution of this Agreement and the
consummation of the transactions contemplated hereby, do not constitute a
triggering event under any Employee Benefit Plan or program, whether or not
legally enforceable, which will or may result in any payment (whether of
severance pay or otherwise), acceleration, vesting or increase in benefits to
any employee or former employee or director of Arcon Holdings and/or the
Company. Except as set forth in Schedule 3.19, no Employee Benefit Plan provides
for the payment of severance benefits upon the termination of an employee's
employment.
(h) Documents. Arcon Holdings and/or the Company has delivered or caused
to be delivered to Purchaser and its counsel true and complete copies of the
following documents in connection with each Employee Benefit Plan (where
applicable): (i) all Employee Benefit Plans as in effect on the date hereof,
together with all amendments thereto, including, in the case of any Employee
Benefit Plan not set forth in writing, a written description thereof; (ii) all
current summary plan descriptions, summaries of material modifica-
-39-
tions thereof, and material written employee communications; (iii) all current
trust agreements, declarations of trust and other documents establishing other
funding arrangements (and all amendments thereto and the latest financial
statements thereof); (iv) the most recent Internal Revenue Service determination
letter obtained with respect to each Employee Benefit Plan intended to be
qualified under Section 401(a) of the Code or exempt under Section 501(a) of the
Code; (v) the annual report on Internal Revenue Service Form 5500-series for
each of the last three plan years for each Employee Benefit Plan required to
file such form; (vi) the most recently prepared financial statements; and (vii)
all contracts relating to each Employee Benefit Plan, including, without
limitation, service provider agreements, insurance contracts, annuity contracts,
investment management agreements, subscription agreements, participation
agreements, and recordkeeping agreements.
Section 3.20 Interests in Customers, Suppliers, etc. Except as set forth
on Schedule 3.20 attached hereto, none of the Sellers nor, to the knowledge of
the Companies or any officer or director of Arcon Holdings or the Company,
possesses, directly or indirectly, any ownership interest in, or is a director,
officer or employee of, any Person which is a supplier, customer, lessor,
lessee, licensor, developer or competitor of Arcon Holdings or the Company.
Ownership of
-40-
securities of a company whose securities are registered under the Securities
Exchange Act of 1934 of 5% or less of any class of such securities shall not be
deemed to be a financial interest for purposes of this Section 3.20.
Section 3.21 Environmental Laws and Regulations. Except as set forth on
Schedule 3.21 and except for that which would not have a Material Adverse
Effect:
(a) Hazardous Materials (as hereinafter defined) have not been generated,
used, treated stored, released or disposed by Arcon Holdings or the Company or,
to the knowledge of the Companies, by any other Person on any Company Property,
except in substantial compliance with Environmental Laws.
(b) Each of Arcon Holdings and the Company is in substantial compliance
with Environmental Laws (as hereinafter defined) and the requirements of permits
issued under such Environmental Laws with respect to the Companies' business,
operations and any Company Property.
(c) There are no pending or, to the knowledge of the Companies, threatened
Environmental Claims (as hereinafter defined) against Arcon Holdings, the
Company or any Company Property.
(d) There are no facts, circumstances, conditions or occurrences regarding
the Companies' past or present business or operations or any Company Property or
former Company
-41-
Property that could reasonably be anticipated (i) to form the basis of an
Environmental Claim against Arcon Holdings, the Company or any Company Property
or (ii) to cause such Company Property to be subject to any restrictions on its
ownership, occupancy, use or transferability under any Environmental Law.
(e) For purposes of this Section 3.21 the following definitions shall
apply:
"Company Property" means any real property and improvements owned,
leased, used, operated or occupied by Arcon Holdings or the Company.
"Hazardous Materials" means (a) any petroleum or petroleum products,
radioactive materials, asbestos in any form that is friable, urea formaldehyde
foam insulation, transformers or other equipment that contain dielectric fluid
containing levels of polychlorinated biphenyls, and radon gas; and (b) any
chemicals, materials or substances defined as or included in the definition of
"hazardous substances," "hazardous wastes," "hazardous materials," "extremely
hazardous wastes," "restricted hazardous wastes," "toxic substances," "toxic
pollutants," or words of similar import, under any applicable Environmental Law.
"Environmental Law" means any federal, state or local statute, law,
rule, regulation, ordinance, code, policy or rule of common law in effect and in
each case as amended
-42-
as of the Closing Date, and any judicial or administrative interpretation
thereof as of the Closing Date, including any judicial or administrative
order, consent decree or judgment, relating to the environment, health,
safety or Hazardous Materials, including the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended, 42 U.S.C.
Section 6901 et seq.; the Resource Conservation and Recovery Act, as amended,
42 U.S.C. Section 9601 et seq.; the Federal Water Pollution Control Act, as
amended, 33 U.S.C. Section 1251 et seq.; the Toxic Substances Control Act, 15
U.S.C. Section 2601 et seq.; the Clean Air Act, 42 U.S.C. Section 7401 et
seq.; the Safe Drinking Water Act, 42 U.S.C. Section 300f et seq.; the Oil
Pollution Act of 1990, 33 U.S.C. Section 2701 et seq.; the Occupational
Safety and Health Act of 1970, as amended, 29 U.S.C. Section 651 et seq.; and
their state and local counterparts and equivalents.
"Environmental Claims" means administrative, regulatory or judicial
actions, suits, demands, demand letters, claims, liens, notices of
non-compliance or violation, investigations or proceedings by, from or in favor
of any governmental or regulatory authorities or any other party or entity
alleging liability (a) for enforcement, cleanup, investigatory, removal,
response, remedial or other actions or damages pursuant to any applicable
Environmental Law, and (b) for damages, contribution, indemnification, cost
recovery, com-
-43-
pensation or injunctive relief resulting from Hazardous Materials or arising
from alleged injury or threat of injury to health, safety or the environment.
(e) The Purchaser agrees that the only representations and warranties of
Arcon Holdings and the Company or the Sellers herein as to Environmental Laws,
Environmental Claims and all other environmental-related matters are those
contained in this Section 3.21.
Section 3.22 Bank Accounts, Powers of Attorney. Set forth on Schedule 3.22
attached hereto is an accurate and complete list showing (a) the name and
address of each bank in which Arcon Holdings or the Company has a material
account or safe deposit box, the number of any such account or any such box and
the names of all persons authorized to draw thereon or to have access thereto
and (b) the names of all persons, if any, holding powers of attorney from Arcon
Holdings or the Company.
Section 3.23 Compensation of Employees. The Company has previously
provided the Purchaser with an accurate and complete list for fiscal year 1995
showing the names of all persons employed by the Company who received more
than $50,000 in 1995 cash compensation (including, without limitation, salary,
commission and bonus) and who are employed by the Companies as of the date
hereof. Such list sets forth the present salary or hourly wage (including,
without limitation,
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salary, commission and bonus) and fringe benefits (excluding Employee Benefit
Plans set forth on Schedule 3.19), of each such person.
Section 3.24 Conduct of Business. Except as disclosed on Schedule 3.24
attached hereto and except as expressly contemplated by this Agreement, since
October 31, 1995, neither Arcon Holdings nor the Company has taken any action
which, if taken subsequent to the execution of this Agreement and on or prior
to the Closing Date, would constitute a breach of the Companies' agreements
set forth in clauses (a) through and including (m) of Section 6.1.
Section 3.25 Customer Relations. Except as set forth on Schedule 3.25
attached hereto, neither Arcon Holdings nor the Company has, since June 30,
1996, received written notice (nor, to the knowledge of the Companies, any
oral notice) from any of the top ten customers of Arcon Holdings or the
Company (based on 1995 revenues of the Companies) that any such customer
intends to reduce the volume or dollar amount of purchases from Arcon
Holdings or Company which could have a Material Adverse Effect.
Section 3.26 Condition of Assets. The assets and properties utilized in
and material to the conduct of the Companies' business, whether owned or
leased, are in the aggregate adequate operating condition and repair (normal
wear and tear
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excepted) and are adequate for the purposes for which they are presently being
used.
Section 3.27 Broker's or Finder's Fees. No agent, broker, person or firm
acting on behalf of Arcon Holdings, the Company or the Sellers, is, or will be,
entitled to any commission or broker's or finder's fees from Arcon Holdings or
the Company, or from any Person controlling, controlled by or under common
control with the Company, in connection with any of the transactions
contemplated by this Agreement.
ARTICLE IV
REPRESENTATIONS OF THE SELLERS
Section 4. Representations of the Sellers. Each of the Sellers represents
and warrants as of the date hereof (severally and not jointly and with each
Seller's personal liability expressly limited as set forth in Article X) as
to such Seller to the Purchaser as follows:
Section 4.1 Ownership of Stock. Each of the Sellers is the lawful owner
of the Stock and/or the Options listed under column B on Annex I attached
hereto, free and clear of all liens, encumbrances, restrictions and claims of
every kind. Such Seller has the (partnership in the case of Northwood
Ventures and ▇▇▇▇, ▇▇▇▇ & Co.; and limited liability company in the case of
Northwood Capital Partners LLC) full legal right, power and authority to
enter into this Agreement and
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to sell, assign, transfer and convey such shares of Stock pursuant to this
Agreement, and the delivery to the Purchaser of such shares of Stock pursuant to
the provisions of this Agreement will transfer to the Purchaser good title
thereto, free and clear of all Encumbrances, except for those encumbrances
created by the Purchaser or its affiliates in connection with the acquisition by
the Purchaser of such shares pursuant to this Agreement.
Section 4.2 Authorization and Validity of Agreement. Northwood Ventures
is a limited partnership validly existing and in good standing under the laws
of the State of New York. ▇▇▇▇, Loeb & Co. is a general partnership, validly
existing and in good standing under the laws of the State of New York.
Northwood Capital Partners, LLC is a limited liability company, validly
existing and in good standing under the laws of the State of New York. Such
Seller has the requisite (partnership in the case of Northwood Ventures and
▇▇▇▇, ▇▇▇▇ & Co.; and limited liability company in the case of Northwood
Capital Partners LLC) power and authority to execute and deliver this
Agreement, to perform its respective obligations hereunder and to consummate
the transactions contemplated to be performed by it hereby. This Agreement
has been duly executed and delivered by such Seller and, assuming the due
execution of this Agreement by the Purchaser, is a valid and binding
obligation of such Seller, enforceable against such
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Seller in accordance with its terms, except to the extent that its
enforceability may be subject to applicable bankruptcy, insolvency,
reorganization and similar laws affecting the enforcement of creditors'
rights generally and to general equitable principles. The representations and
warranties of Northwood Ventures, ▇▇▇▇, Loeb & Co. and Northwood Capital
Partners, LLC set forth in this Section 4.2 are made only by Northwood
Ventures, ▇▇▇▇, ▇▇▇▇ & Co. and Northwood Capital Partners LLC, respectively,
as to itself, and not by any other Seller.
Section 4.3 Restrictive Documents. Subject to the termination or
expiration of all applicable waiting periods under the HSR Act, such Seller
is not subject to any mortgage, lien, lease, agreement, instrument, order,
law, rule, regulation, judgment or decree, or any other restriction of any
kind or character which would prevent consummation by such Seller of the
transactions contemplated by this Agreement.
Section 4.4 Consents. Except as may be required under the HSR Act or as
set forth on Schedule 4.4 hereto, no consents, approvals or authorizations
of, or filings with, any governmental authority or any other person or entity
are required in connection with the execution and delivery of this Agreement
by such Seller and the consummation of the transactions contemplated hereby
to be consummated by it.
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Section 4.5 Broker's or Finder's Fees. No agent, broker, person or firm
acting on behalf of such Seller is, or will be, entitled to any commission or
broker's or finder's fees from Arcon Holdings, the Company, or from any Person
controlling, controlled by or under common control with the Company, in
connection with any of the transactions contemplated by this Agreement.
ARTICLE V
REPRESENTATIONS OF THE PURCHASER
Section 5. Representations of the Purchaser. The Purchaser represents and
warrants as of the date hereof to the Companies and each of the Sellers as
follows:
Section 5.1 Existence and Good Standing; Power and Authority. The
Purchaser is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. The Purchaser has the
requisite corporate power and authority to enter into, execute and deliver
this Agreement and perform its obligations hereunder. This Agreement has been
duly authorized and approved by the Purchaser and, assuming the due execution
of this Agreement by each of the Sellers, is a valid and binding obligation
of the Purchaser enforceable against it in accordance with its terms, except
to the extent that its enforceability may be subject to applicable
bankruptcy, insolvency, reorganization, moratorium
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and other similar laws affecting the enforcement of creditors' rights generally
and by general equitable principles.
Section 5.2 Restrictive Documents; No Legal Bar. The Purchaser is not
subject to any mortgage, lien, lease, agreement, instrument, order, law,
rule, regulation, judgment or decree, or any other restriction of any kind or
character which would prevent consummation by it of the transactions
contemplated by this Agreement. Neither the execution and delivery of this
Agreement by the Purchaser, nor the consummation of the transactions
contemplated hereby by the Purchaser, (i) violates any provision of the
certificate of incorporation or by-laws of the Purchaser, (ii) except for the
termination or expiration of all applicable waiting periods under the HSR
Act, constitutes a violation of any applicable law, or (iii) violates or
conflicts with, or results in any breach of any of the terms of any material
contract, commitment, agreement, or lease of any kind to which the Purchaser
is a party or by which the Purchaser or any of its assets are bound
including, without limitation, the financing documents contemplated by the
commitment letter referred to in Section 7.10.
Section 5.3 Purchase for Investment. The Purchaser will acquire the Stock
for its own account for investment and not with a view toward any resale or
distribution of all or any part thereof; provided, however, that the disposition
of the
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Purchaser's property shall at all times remain within the sole control of the
Purchaser.
Section 5.4 Broker's or Finder's Fees. No agent, broker, person or firm
acting on behalf of the Purchaser is, or will be, entitled to any commission
or broker's or finder's fees from the Seller in connection with any of the
transactions contemplated by this Agreement.
Section 5.5 Litigation; Disputes. There is no action, suit, proceeding at
law or in equity, arbitration or administrative or other proceeding by or before
(or, to the knowledge of the Purchaser any investigation by) any governmental or
other instrumentality or agency, pending, or, to the knowledge of the Purchaser,
threatened, against the Purchaser which challenges the validity of this
Agreement, or which if adversely determined, would adversely materially affect
its ability to consummate the transactions contemplated by this Agreement; and
the Purchaser knows of no valid basis for any such action, proceeding or
investigation.
Section 5.6 Consents. Except as may be required under the HSR Act or as
set forth on Schedule 5.6 hereto, no consents, approvals or authorizations
of, or filings with, any governmental authority or any other person or entity
are required in connection with the execution and delivery of this Agreement
by the Purchaser and the consummation of the transactions contemplated hereby
to be consummated by it.
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ARTICLE VI
TRANSACTIONS PRIOR TO THE CLOSING DATE
Section 6.1 Conduct of Business of the Companies. During the period from
the date of this Agreement to the Closing Date, the Companies shall conduct
their operations only according to its ordinary course of business; use their
reasonable efforts to preserve intact its business organizations, keep
available the services of their officers and employees and maintain its
relationships and goodwill with licensors, suppliers, distributors,
customers, landlords, agents and others having business relationships with
it; confer with the Purchaser (as reasonably requested by the Purchaser
during normal business hours without undue interruption) concerning the
business, operations and finances of the Companies. Notwithstanding the
immediately preceding sentence, prior to the Closing Date, except as
permitted in Section 2.3 and otherwise except as may be first approved in
writing by the Purchaser, each of Arcon Holdings and the Company shall, (a)
refrain from amending or modifying its Certificate of Incorporation or
By-Laws from its form on the date of this Agreement, (b) refrain from paying
or increasing any bonuses, salaries, or other compensation to any director,
officer, employee or stockholder or entering into any employment, severance,
or similar agreement with any
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director, officer, or employee other than, in each case, in the ordinary course
of business consistent with past practice or as disclosed to the Purchaser
pursuant to Section 3.23 hereof, (c) except as set forth on Schedule 3.19,
refrain from the adopting or increasing of any profit sharing, bonus, deferred
compensation, savings, insurance, pension, retirement, or other employee benefit
plan for or with any of its employees, (d) refrain from entering into any
material contract or commitment except material contracts and commitments in the
ordinary course of business consistent with past practice, (e) refrain from
increasing its indebtedness for borrowed money, except borrowings in the
ordinary course of business, (f) refrain from cancelling or waiving any claim or
right of substantial value which individually or in the aggregate is material
other than in the ordinary course of business, (g) refrain from declaring or
paying any dividends in respect of its capital stock or redeeming, purchasing or
otherwise acquiring any of its capital stock, (h) refrain from making any
material change in accounting methods or practices, except as required by law or
generally accepted accounting principles, (i) refrain from issuing or selling
any shares of capital stock or any other securities, or issuing any securities
convertible into, or options, warrants or rights to purchase or subscribe to, or
entering into any arrangement or contract with respect to the issue and sale
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of, any shares of its capital stock or any other securities, or making any other
changes in its capital structure, except pursuant to outstanding options or
other rights disclosed on Schedule 3.2 attached hereto, (j) refrain from
selling, leasing or otherwise disposing of any material asset or property other
than the sale of inventory and other assets in the ordinary course of business
consistent with past practices, (k) refrain from entering into any commitment
for the making of a capital expenditure, except in the ordinary course of
business consistent with past practice, (l) refrain from writing off as
uncollectible any notes or accounts receivable, except write-offs in the
ordinary course of business charged to applicable reserves, none of which
individually or in the aggregate is material and (m) refrain from agreeing in
writing to do any of the foregoing.
Section 6.2 Exclusive Dealing. During the period from the date of this
Agreement to the earlier of the termination of this Agreement and the Closing
Date, none of the Sellers, Arcon Holdings or the Company shall take any action
to, directly or indirectly, encourage, initiate or engage in discussions or
negotiations with, or provide any information to, any Person, other than the
Purchaser, concerning any purchase of any capital stock of Arcon Holdings or the
Company or any merger, sale of all or substantially all assets or similar
transaction involving Arcon Holdings or the Company.
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Section 6.3 Review of the Companies. Upon reasonable notice, during normal
business hours and without undue interruption, the Companies shall permit the
Purchaser and its representatives to have, after the date of execution of this
Agreement, full access to the premises and to all the books and records of the
Companies and to cause the officers of the Companies to furnish the Purchaser
with such financial and operating data and other information with respect to the
business and properties of the Company as the Purchaser shall from time to time
reasonably request. The parties hereto acknowledge that the Purchaser, Arcon
Holdings, the Company and the Sellers have entered into a Confidentiality
Agreement dated December 6, 1995 (the "Confidentiality Agreement") and that
information obtained during any such review will be subject to the terms of the
Confidentiality Agreement.
Section 6.4 Reasonable Efforts. Each of Arcon Holdings, the Company, the
Sellers and the Purchaser shall reasonably cooperate and use their respective
reasonable best efforts to cause to be made the filing of Notification and
Report Forms under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as
amended (the "HSR Act") with the Federal Trade Commission and the Antitrust
Division of the Department of Justice) and to obtain, prior to the Closing Date,
all required consents and approvals of parties to contracts with Arcon Holdings
or the Company set forth in Schedule 3.12
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attached hereto and designated by an asterisk and to fulfill the conditions to
the sale contemplated hereby.
Section 6.5 Agreement by the Purchaser Regarding No Other Representations
or Warranties by the Sellers. The Purchaser agrees that except for the
representations and warranties expressly set forth in Articles II and III of
this Agreement, neither Arcon Holdings, the Company nor any of the Sellers nor
any affiliate thereof has made and shall not be construed as having made to the
Purchaser or to any representative or affiliate thereof any representation or
warranty of any kind. Without limiting the generality of the foregoing, the
Purchaser agrees that neither Arcon Holdings, the Company nor any of the Sellers
nor any affiliate thereof makes or has made any representation or warranty to
the Purchaser or to any representative or affiliate thereof with respect to any
projections, estimates or budgets heretofore or hereafter delivered to or made
available to the Purchaser or its counsel, accountants, advisors, lenders,
representatives or affiliates of future revenues, expenses or expenditures,
future results of operations (or any component thereof), future cash flows (or
any component thereof) or future financial condition (or any component thereof)
of the Companies or the future business, operations or affairs of the Companies.
Section 6.6 Satisfaction of Financing Condition. The Purchaser shall use
all reasonable efforts to satisfy the
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condition set forth in Section 7.10 on or prior to the Termination Date.
ARTICLE VII
CONDITIONS TO THE PURCHASER'S OBLIGATIONS
Section 7. Conditions to the Purchaser's Obligations. The obligation of
the Purchaser to purchase the Stock contemplated by this Agreement is
conditioned upon satisfaction, at or prior to the Closing, of the following
conditions:
Section 7.1 Opinions of Counsel. The Companies shall have furnished the
Purchaser with an opinion, dated the Closing Date, of ▇▇▇▇▇▇ & ▇▇▇▇▇▇, in form
and in substance reasonably acceptable to the Purchaser and its counsel.
Section 7.2 Good Standing and Other Certificates. The Purchaser shall have
received (a) copies of the charters, including all amendments thereto, in each
case certified by the Secretary of State or other appropriate official of the
jurisdiction of incorporation of each of Arcon Holdings and the Company, (b) a
certificate from the Secretary of State or other appropriate official of the
jurisdiction of incorporation of each of Arcon Holdings and the Company to the
effect that such company is in good standing and listing all charter documents
of such company on file, (c) a certificate from the Secretary of State or other
appropriate official in each State in which each of Arcon Holdings and the
Company is
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qualified to do business to the effect that such company is in good standing in
such State, (d) a certificate as to the tax status of each of Arcon Holdings and
the Company from the appropriate official in their respective jurisdictions of
incorporation and each state in which such company is qualified to do business
and (e) a copy of the By-Laws of Arcon Holdings and the Company certified by the
Secretary of such company as being true and correct and in effect on the Closing
Date.
Section 7.3 [Intentionally Omitted].
Section 7.4 Truth of Representations and Warranties. The representations
and warranties of the Companies contained in this Agreement and the
representations and warranties of the Sellers contained in this Agreement
shall be true and correct in all material respects (other than those
representations and warranties of the Companies and the Sellers which are
qualified by "materiality," "material adverse effect" or words of equivalent
import, which shall be true and correct) on and as of the Closing Date with
the same effect as though such representations and warranties had been made
on and as of such date, and the Companies and the Seller shall have each
delivered to the Purchaser a certificate, dated the Closing Date, to such
effect.
Section 7.5 Performance of Agreements. All of the agreements of the
Companies and the Sellers to be performed prior to the
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Closing pursuant to the terms of this Agreement shall have been duly performed
in all material respects, and the Companies and the Sellers shall have each
delivered to the Purchaser a certificate, dated the Closing Date, to such
effect.
Section 7.6 No Litigation Threatened. No action or proceedings shall have
been instituted or, to the knowledge of the Companies or the Sellers,
threatened before a court or other government body or by any public authority
to restrain or prohibit any of the transactions contemplated hereby.
Section 7.7 Third Party Consents; Governmental Approvals. All consents,
approvals or waivers, if any, disclosed on Schedules 3.12 or 5.6 attached hereto
and designated by an asterisk or required in connection with the consummation of
the transactions contemplated by this Agreement shall have been received.
Section 7.8 Termination of Security Interests. All security interests,
liens, mortgages, claims or other encumbrances of any kind securing
Outstanding Indebtedness shall be released.
Section 7.9 Resignations. All members of the Board of Directors of the
Companies shall have tendered their resignation from such positions effective
at the Closing.
Section 7.10 Financing. The Purchaser shall have received financing on
substantially the same terms and conditions as set forth in the commitment
letter of Bankers Trust company
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dated August 27, 1996, a copy of which has been delivered to the Seller's
Representative.
Section 7.11 [Intentionally omitted]
Section 7.12 FIRPTA. The Sellers shall have furnished to the Purchaser,
on or prior to the Closing Date, a non-foreign person affidavit required by
Section 1445 of the Code.
Section 7.13 HSR Act. Any waiting period (and any extension thereof)
under the HSR Act applicable to the transactions contemplated by this
Agreement shall have expired or terminated.
Section 7.14 Escrow Agreement. The Sellers, the Purchaser and the Escrow
Agent shall have entered into an escrow agreement substantially in the form of
Exhibit A hereto (the "Escrow Agreement").
ARTICLE VIII
CONDITIONS TO THE COMPANIES AND
THE SELLERS' OBLIGATIONS
Section 8. Conditions to the Seller's Obligations. The obligations of the
Companies and the Sellers to effect the transactions contemplated by this
Agreement on the Closing Date are conditioned upon satisfaction or waiver, at or
prior to the Closing, of the following conditions:
Section 8.1 Opinions of Counsel. The Purchaser shall have furnished the
Sellers with an opinion, dated the Closing
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Date, of White & Case, in form and in substance reasonably acceptable to the
Sellers' Representative and its counsel.
Section 8.2 Truth of Representations and Warranties. The representations
and warranties of the Purchaser contained in this Agreement shall be true and
correct in all material respects (other than those representations and
warranties of the Companies and the Sellers which are qualified by
"materiality," "material adverse effect" or words of equivalent import, which
shall be true and correct) on and as of the Closing Date with the same effect as
though such representations and warranties had been made on and as of such date,
and the Purchaser shall have delivered to the Sellers an officer's certificate,
dated the Closing Date, to such effect.
Section 8.3 Third Party Consents; Governmental Approvals. All consents,
approvals or waivers, if any, disclosed on Schedule 3.12 and Schedule 4.4 and
designated by an asterisk shall have been received.
Section 8.4 Performance of Agreements. All of the agreements of the
Purchaser to be performed prior to the Closing pursuant to the terms of this
Agreement shall have been duly performed in all material respects, and the
Purchaser shall have delivered to the Sellers an officer's certificate, dated
the Closing Date, to such effect.
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Section 8.5 No Litigation Threatened. No action or proceeding shall be
instituted or, to the knowledge of the Purchaser, threatened before a court or
other government body or any public authority to restrain or prohibit any of the
transactions contemplated hereby, and the Purchaser shall have delivered to the
Sellers an officer's certificate, dated the Closing Date, to such effect.
Section 8.6 HSR Act. Any waiting period (and any extension thereof) under
the HSR Act applicable to the transactions contemplated by this Agreement
shall have expired or terminated.
Section 8.7 Warrants. The Bank shall have executed and delivered an
agreement with Arcon Holdings providing for the purchase by Arcon Holdings of
the Warrants from the Bank, in form and substance reasonably acceptable to
Arcon Holdings and such purchase shall have been consummated.
ARTICLE IX
TAX MATTERS
Section 9.1 Tax Returns. (a) The Sellers, acting through an appointed
representative (the "Sellers' Representative"), shall have the exclusive
authority and obligation, subject to compliance by the Purchaser and the
Companies with their obligations under this Article IX, to prepare and timely
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file, or cause to be prepared and timely filed, (i) all Returns of the Company
and Arcon Holdings that are due and (ii) at its sole option and discretion, all
applications or requests for refunds ("Refund Requests") of Taxes paid by or on
behalf of the Company and Arcon Holdings, in each case, with respect to any
taxable year or other taxable period ending on or prior to the Closing Date.
Such authority shall include, but not be limited to, the determination of the
manner in which any items of income, gain, deduction, loss or credit arising out
of the income, properties and operations of the Company and Arcon Holdings shall
be reported or disclosed in such Returns and Refund Requests; provided, however,
that such Returns and Refund Requests shall be prepared by treating items on
such Returns and Refund Requests in a manner consistent with the past practices
with respect to such items, unless otherwise required by law. The Sellers'
Representative shall provide to the Purchaser drafts of all Returns and Refund
Requests of the Company and Arcon Holdings required or permitted to be prepared
and filed by the Sellers' Representative under this Section 9.1(a) at least
thirty (30) days prior to the due date (including extensions) for the filing of
such Returns or Refund Requests. No later than fifteen (15) days after receipt
of such draft, the Purchaser shall give written notice (the "Dispute Notice") of
the existence of any objection the
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Purchaser may have to any items set forth on such draft Returns or Refund
Requests to the Sellers' Representative, which Dispute Notice shall specify in
reasonable detail the nature and basis for such objection (and in the absence of
any such Dispute Notice, the Purchaser shall be deemed to have no objection to
the filing of such Return or Refund Request). The Purchaser and the Sellers'
Representative agree to consult and use their best efforts to resolve in good
faith any such objection within 15 days of receipt by the Sellers'
Representative of the Dispute Notice. If the Sellers' Representative and the
Purchaser are unable to resolve the disputed matters within such 15-day period
all disputed matters raised in the Dispute Notice and not so resolved shall be
submitted to such nationally recognized independent accounting firm as is chosen
by mutual agreement of the Sellers' Representative and the Purchaser acting in
good faith (such firm which accepts the engagement, the ("Independent Auditor"),
for final resolution. Each party shall be permitted to submit to the Independent
Auditor a written statement in support of its position with respect to the
disputed matters raised in the Dispute Notice and not resolved. The Sellers'
Representative and the Purchaser shall use their respective reasonable best
efforts to cause the Independent Auditor to make its determination as soon as
possible, but in no event later than 30 days after receipt of
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the disputed matters. Such determination shall be final and binding upon all
parties hereto. The Independent Auditor's determination shall be limited to
matters of dispute which are raised in the Dispute Notice and not resolved by
the Sellers' Representative and the Purchaser. The Independent Auditor's
resolution of any such dispute shall be reflected in a written report which
shall be delivered to the Sellers' Representative and the Purchaser. All fees
and disbursements of the Independent Auditor and any interest or penalties
attributable to the late filing of a Return that results from the failure of the
parties to resolve such issues prior to the due date of such Return, shall be
borne by the party whose position with respect to such issues is most at
variance from the position with respect to such issues determined by the
Independent Auditor. The Sellers' Representative shall not file any Return or
Refund Request without the prior consent of the Purchaser, which consent shall
not be unreasonably withheld or delayed; provided, however, that no such consent
shall be required if the Purchaser shall not have delivered a Dispute Notice or
if the objections contained in a Dispute Notice shall have been finally
resolved, in each case in accordance with this Article IX. None of Purchaser,
the Company, Arcon Holdings, nor any affiliate of the foregoing shall file any
application or request to extend, or consent to the extension of, the
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time to file any Return of the Company or Arcon Holdings with respect to any
taxable year or other taxable period ending on or prior to the Closing Date,
including any Return of the Company or Arcon Holdings for the short taxable year
ending on the Closing Date, unless requested to do so by the Sellers'
Representative (provided, however, that no such extended period shall extend
beyond the termination of the Escrow Account pursuant to the Escrow Agreement).
(b) Except as provided in Section 9.1(a), the Purchaser shall have the
exclusive authority and obligation to prepare and timely file, or cause to be
prepared and timely filed, all Returns and Refund Requests of the Company and
Arcon Holdings. Such authority shall include, but not be limited to, the
determination of the manner in which any items of income, gain, deduction, loss
or credit arising out of the income, properties and operations of the Company
and Arcon Holdings shall be reported or disclosed on such Returns and Refund
Requests; provided, however, with respect to Returns and Return Requests to be
filed by the Purchaser pursuant to this Section 9.1 for taxable periods
beginning before the Closing Date and ending after the Closing Date, items set
forth on such Returns and Return Requests shall be treated in a manner
consistent with the past practices of the Companies with respect to such items,
unless otherwise required by law. The Purchaser shall provide to the Sellers'
Representative
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drafts of all Returns and Refund Requests of the Company and Arcon Holdings
required or permitted to be filed by the Purchaser pursuant to this Section
9.1(b) with respect to taxable years or other taxable periods beginning before
the Closing Date and ending after the Closing Date at least thirty (30) days
prior to the due date (including extensions) for the filing of such Returns or
Refund Requests. No later than fifteen (15) days after receipt of such draft,
the Sellers' Representative shall give the Purchaser a Dispute Notice with
respect to the existence of any objection (which Dispute Notice shall specify in
reasonable detail the nature and basis of such objection) the Sellers'
Representative may have to any items set forth on such draft Returns or Refund
Requests (and in the absence of any such timely objection, the Sellers'
Representative shall be deemed to have no objection to the filing of such Return
or Refund Request). The Purchaser and the Sellers' Representative agree to
consult and use their best efforts to resolve in good faith any such objection
within such 15-day period. In the event that the Purchaser and the Sellers'
Representative are unable to resolve such objection within such 15-day period,
the dispute resolution and cost allocation procedure set forth in Section 9.1(a)
shall apply. None of the Purchaser, Arcon Holdings, the Company, nor any
affiliate of the foregoing shall file any such Return or Refund Request with
respect to
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taxable years or other taxable periods beginning before the Closing Date and
ending after the Closing Date without the prior consent of the Sellers'
Representative, which consent shall not be unreasonably withheld or delayed;
provided, however, that no such consent shall be required if the Sellers'
Representative shall not have delivered a Dispute Notice or if the objections
contained in a Dispute Notice shall have been finally resolved, in each case
in accordance with this Article IX. None of the Purchaser, Arcon Holdings,
the Company, or any affiliate of the foregoing will make any election under
Treasury Regulation Section1.1502-76(c) to file a separate return for the
entire taxable year ending October 31, 1996.
Section 9.2 Overlap Period, Refunds, Tax Benefits. All Taxes and Tax
liabilities with respect to the income, property or operations of the Company
and Arcon Holdings that relate to a taxable year or other taxable period
beginning before and ending after the Closing Date (an "Overlap Period") shall
be apportioned between the Pre-Closing Period and the portion of such Overlap
Period after the Closing Date (the "Post-Closing Period") as follows: (A) in the
case of Taxes other than income Taxes and sales and use Taxes, on a per diem
basis, and (B) in the case of income Taxes (including income Taxes based on
capital or other alternative bases) and sales and use Taxes, as determined from
the books and records of the
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Company and Arcon Holdings, between the Pre-Closing Period and the Post-Closing
Period as though the taxable year of Arcon Holdings or the Company terminated at
the close of business on the Closing Date, and based on accounting methods,
elections and conventions that do not have the effect of distorting income and
expenses.
To the extent the Company or Arcon Holdings has made a payment of
Taxes on or prior to the Closing Date with respect to Taxes attributable to a
Pre-Closing Period in excess of the liability of the Companies for such Taxes
for such Pre-Closing Period, the Purchaser and the Companies will, if requested
by the Sellers' Representative, use their reasonable best efforts to obtain a
prompt refund of such overpayment. The Purchaser or the Companies shall remit
any refund received pursuant to the preceding sentence (and any refunds under
Section 9.1(a)), net of any Taxes of the Purchaser, the Company or Arcon
Holdings arising from the receipt of such refund, to the Sellers' Representative
for the benefit of the Sellers within 10 days of the receipt of such refund.
Further, to the extent any deductions attributable to unamortized
original issue discount attributable to the Warrants and the exercise or
cancellation of the Options (the "Deductions") are included as deductions in any
Return of the Company or Arcon Holdings for any taxable year or other
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taxable period ending after the Closing Date, the Purchaser, the Company or
Arcon Holdings shall remit to the Sellers' Representative for the benefit of the
Sellers the amount of the actual reduction in the Tax liability of the Company
and/or Arcon Holdings (the "Tax Benefit") attributable to the Deductions (a) for
taxable years or other taxable periods commencing on or after the day following
the Closing Date, and (b) with respect to an Overlap Period, for the portion of
such Overlap Period commencing on the day following the Closing Date (it being
understood and agreed that the parties intend that for purposes of preparing the
Returns provided for in Section 9.1, the Purchaser, the Companies and the
Sellers shall treat the Deductions as being attributable to a Pre-Closing
Period). The Purchaser, the Company or Arcon Holdings shall remit such amount
within 10 days after the filing of a Return in which any such Deduction is
utilized. The Purchaser shall determine and shall certify to the Sellers the
amount of the Tax Benefit and the timing of the utilization of such Tax Benefit
in its reasonable discretion (provided, however, the Purchaser and the Companies
shall not be obligated to disclose any information with respect to the income,
results of operations, or Taxes or Returns of the Companies with respect to any
period after the Closing Date, other than the information with respect to an
Overlap Period provided for in Section 9.1(b) and other than contemplated by
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Section 9.3). If the Tax liability of the Company or Arcon Holdings is adjusted
by the appropriate taxing authority after filing a Return in which the
Deductions are utilized and such adjustment reduces the amount of the Tax
Benefit realized by the Company and/or Arcon Holdings from the Deductions, the
Sellers shall reimburse the Purchaser for the amount of such reduced Tax Benefit
to the extent that the Purchaser or the Companies previously remitted such
reduced Tax Benefit to the Sellers (but not in excess of the amount paid by the
Purchaser and the Companies to the Sellers' Representative pursuant to this
Section 9.2), as reasonably determined by the Purchaser (provided, however, the
Purchaser and the Companies shall not be obligated to disclose any information
with respect to the income, results of operations, or Taxes or Returns of the
Companies with respect to any period after the Closing Date, other than the
information with respect to an Overlap Period provided for in Section 9.1(b) and
other than contemplated by Section 9.3), within 10 days after receipt by
Sellers' Representative from the Purchaser of a certificate setting forth the
amount of such reduced Tax Benefit.
Section 9.3 Cooperation; Audits. In connection with the preparation of
Returns, Refund Requests, audit examinations and any administrative or
judicial proceedings relating to the Tax liabilities imposed on the Company
and Arcon Holdings
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for all Pre-Closing Periods, the Purchaser, the Company and Arcon Holdings on
the one hand, and the Sellers' Representative on the other hand, will cooperate
fully with each other, including, but not limited to, the furnishing or making
available during normal business hours, at no cost to Sellers or Sellers'
Representative (except out-of-pocket costs, excluding salaries and wages of
personnel, provided such cooperation does not interfere with normal operations
of the Company, Arcon Holdings or the Purchaser), of records, personnel (as
reasonably required), books of account, powers of attorney or other materials
with respect to Pre-Closing Periods and the Post-Closing Period necessary or
helpful for the preparation of such Returns or Refund Requests, the conduct of
audit examinations or the defense of claims by Tax authorities as to the
imposition of Taxes. Without limiting the generality of the foregoing, the
Sellers' Representative and its accountants and attorneys shall be entitled to
examine books and records of the Company and Arcon Holdings, with respect to any
Pre-Closing Period and the Post-Closing Period, and shall have reasonable access
to personnel of the Company and Arcon Holdings, including their cooperation in
timely signing Returns and Refund Requests and applying any current liability
accruals to the payment of Taxes shown due thereon, to the extent necessary or
helpful for purposes of
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preparing or filing any Tax Returns or obtaining Tax refunds with respect to all
Pre-Closing Periods.
Section 9.4 Controversies. The Purchaser shall promptly notify the
Sellers' Representative in writing upon receipt by the Purchaser or any
affiliate of the Purchaser (including Arcon Holdings and the Company after
the Closing Date) of written notice of any inquiries, claims, assessments,
audits or similar events with respect to Taxes relating to a taxable period
ending on or prior to the Closing Date for which the Sellers may be liable
under this Agreement (any such inquiry, claim, assessment, audit or similar
event, a "Tax Matter"). The Sellers' Representative, at the sole expense of
the Sellers, shall have the exclusive authority to represent the interests of
the Companies with respect to any Tax Matter before the Internal Revenue
Service, any other taxing authority, any other governmental agency or
authority or any court and shall have the sole right to extend or waive the
statute of limitations with respect to a Tax Matter and to control the
defense, compromise or other resolution of any Tax Matter, including
responding to inquiries, filing Tax returns and settling audits; provided,
however, that the Sellers' Representative shall not enter into any settlement
of or otherwise compromise any Tax Matter that affects or may affect the Tax
liability of the Purchaser, Arcon Holdings, or the Company or any affiliate
of the foregoing for any period
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ending after the Closing Date, including the Post-Closing Period, without the
prior written consent of the Purchaser, which consent shall not be unreasonably
withheld or delayed. The Sellers' Representative shall keep the Purchaser
reasonably informed with respect to the commencement, status and nature of any
Tax Matter. The Sellers' Representative shall, in good faith, allow the
Purchaser to make comments to the Sellers' Representative regarding the conduct
of or positions taken in any such proceeding.
Except as otherwise provided in Section 9.1, this Section 9.4, Section 9.8
and Section 9.9 the Purchaser shall have the sole right to control any audit or
examination by any taxing authority, initiate any claim for refund or amend any
Return, and contest, resolve and defend against any assessment for additional
Taxes, notice of Tax deficiency or other adjustment of Taxes of, or relating to,
the income, assets or operations of the Companies for all taxable periods;
provided, however, that the Purchaser shall not, and shall cause its affiliates
(including the Companies) not to, enter into any settlement of any contest or
otherwise compromise any issue that affects or may affect the Tax liability of
the Sellers, Arcon Holdings or the Company for any Pre-Closing Period, including
the portion of an Overlap Period ending on or prior to the Closing Date, without
the prior written consent of the Sellers' Representative, which
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consent shall not be unreasonably withheld or delayed. The Purchaser shall keep
the Sellers' Representative reasonably informed with respect to the
commencement, status and nature of any Tax matter conducted by Purchaser with
respect to the Overlap Period. The Purchaser shall, in good faith, allow
Sellers' Representative to make comments to the Purchaser regarding the conduct
of or position taken in any such proceeding with respect to the Overlap Period.
Section 9.5 Transfer Taxes. All transfer, sales and use, registration,
stamp and similar Taxes imposed in connection with the sale of the Stock or
any other transaction that occurs pursuant to this Agreement shall be borne
equally by the Sellers, on the one hand, and the Purchaser, on the other hand.
Section 9.6 Amended Returns. None of the Sellers or the Sellers'
Representative, shall file or cause to be filed any amended Return of or
including the Company or Arcon Holdings without the prior written consent of the
Purchaser, which consent shall not be unreasonably withheld or delayed. None of
the Purchaser, the Company, Arcon Holdings, nor any affiliate of the foregoing
shall file or cause to be filed any amended Return relating to or including any
Pre-Closing Period, including the portion of an Overlap Period ending on or
prior to the Closing Date, of the Company or Arcon Holdings without the prior
written consent of the Sellers'
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Representative, which consent shall not be unreasonably withheld or delayed.
Section 9.7 Non-foreign Person Affidavit. Each Seller shall furnish to the
Purchaser on or before the Closing Date a non- foreign person affidavit as
required by Section 1445 of the Code.
Section 9.8 Indemnification. Subject to Section 9.3, Section 9.4 and
Section 9.9, each of the Sellers agrees severally (on the basis of such Seller's
Percentage Interest and with each Seller's personal liability expressly limited
as set forth in Section 10.2(c)) to indemnify, defend and hold harmless the
Purchaser, its affiliates (including Arcon Holdings and the Company) and the
successors to the foregoing (and their respective shareholders, officers,
directors, employees and agents) on an after-tax basis against (i) all Taxes,
losses, claims and expenses resulting from, arising out of, or incurred with
respect to, any claims that may be asserted by any party based upon,
attributable to, or resulting from the failure of any representation or warranty
made pursuant to Section 3.14 (other than Section 3.14(b)) to be true and
correct as of the Closing Date; and (ii) all unpaid Taxes imposed on or asserted
against the properties, income or operations of Arcon Holdings and the Company
at any time after the Closing Date to the extent such Taxes relate to any
Pre-Closing Period. Notwithstanding any of the foregoing,
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(v) any indemnification provided under any clause of the preceding sentence
shall be without duplication of any indemnification provided under the other
clause of the preceding sentence, (w) the indemnification provided under clause
(ii) above shall not apply to any Tax liability paid to the appropriate taxing
authority on or prior to the Closing Date to the extent such amount is not
refunded or otherwise returned to any of the Sellers, the Sellers'
Representative, the Company or Arcon Holdings, (x) the indemnification provided
under the preceding sentence shall not apply to income Tax and sales or use
Taxes to the extent of the current liability accruals attributable to income
Taxes and sales and use Taxes disclosed to the Purchaser and set forth on the
books and records of the Company or Arcon Holdings at the Closing Date
(maintained in accordance with past practices), (y) the indemnification provided
in the preceding sentence for any liability that is related to an income Tax or
sales or use Tax shall be subject to and included in the $4,000,000 limit on the
Sellers' indemnification liabilities (but not the $400,000 "Deductible")
provided for in Section10.2 hereof, and (z) the indemnification provided in the
preceding sentence for any liability that is not related to an income Tax or
sales or use Tax shall be subject to and included within the $400,000
"Deductible" and the $4,000,000 limit on the Sellers'
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indemnification liabilities provided for in Section10.2 hereof. The Purchaser
shall promptly give the Sellers' Representative written notice of all Taxes,
losses, claims and expenses which the Purchaser has reasonably determined may
give rise to a right of indemnification under this Section 9.8, including a
computation of the amount of the required indemnification with sufficient
detail and particularity to enable the Sellers' Representative to reasonably
determine the amount of such required indemnification. The Sellers shall not
be liable for any Tax or payment hereunder to the extent that the Purchaser's
failure timely to notify the Sellers' Representative as required by the
preceding sentences or in Section 9.4 causes or increases a Tax or other
payment to be due or otherwise materially prejudices the ability of the
Sellers to contest such Tax liability.
Section 9.9 FSE Tax Indemnity. The Purchaser and the Companies shall
cooperate reasonably and in good faith, at Sellers' sole expense, with
Sellers and the Sellers' Representative to enforce any and all rights
Purchaser or the Companies may have under the FSE Tax Indemnity in respect of
Taxes and liabilities which are otherwise indemnifiable amounts of the
Sellers under this Article IX (such indemnifiable amounts recoverable under
the FSE Tax Indemnity (the "FSE Indemnifiable Amount")), all without
prejudice to the Sellers' agreements and obligations under this Article IX
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or under the Escrow Agreement. The Purchaser and the Companies shall, subject to
the terms and conditions of this Section 9.9, at Sellers' sole expense, seek to
recover all FSE Indemnifiable Amounts under the FSE Tax Indemnity first, before
proceeding to enforce against the Sellers any of their rights under this Article
IX. Subject to Sellers' obligation to advance, in reasonable increments as
mutually agreed in good faith by the Purchaser and the Sellers' Representatives,
all of the Companies' reasonable costs and expenses (including, without
limitation, reasonable attorney's fees) of such enforcement, the Purchaser and
the Companies shall pursue all available remedies to enforce the FSE Tax
Indemnity, including by recourse to appropriate judicial proceedings); provided,
however that neither the Purchaser nor the Companies shall be obligated to
pursue any such legal proceeding unless the Sellers shall have paid the FSE
Indemnifiable Amounts to the Purchaser in accordance with this Agreement and the
Escrow Agreement whereupon the Sellers shall be subrogated to the rights of the
Companies under the FSE Tax indemnity. Any amounts actually recovered by the
Purchaser and the Companies pursuant to the FSE Tax Indemnity (i) shall be
without duplication of any indemnification provided in Section 9.8 hereof, (ii)
shall be excluded from the $400,000 "Deductible" and the $4,000,000 limitation
on Sellers' indemnification liabilities provided for in Section
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10.2 hereof and (iii) which constitute reimbursement or other payment of costs
and expenses of the Sellers, the Purchaser and the Companies incurred in
connection with pursuing FSE Indemnifiable Amounts which have been paid by or on
behalf of the Sellers shall be promptly paid to the Sellers' Representative upon
receipt by the Purchaser or the Companies. Notwithstanding anything to the
contrary herein, the Purchaser and the Companies agree that the Sellers'
Representative, at Sellers' sole expense, shall have the exclusive authority to
represent the interests of the Companies with respect to any FSE Tax Indemnity
matter and to control the prosecution, compromise and resolution of any such
matter (including with attorneys and other advisors chosen by the Sellers'
Representative) and the Purchaser and each of the Companies shall cooperate
reasonably and in good faith with the Sellers and the Sellers' Representative in
the prosecution of any such FSE Tax Indemnity matter.
ARTICLE X
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
Section 10.1 Survival of Representations. The respective representations
and warranties of the Companies, the Sellers and the Purchaser contained in
this Agreement shall survive the Closing for a period of 18 months except for
the repre-
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sentations and warranties contained in Section 3.14 (other than the
representations and warranties contained in Section 3.14(b) which shall not
survive the Closing), which shall survive for the applicable statute of
limitations period (subject to Section 9.1(a)), and the representations and
warranties of the Sellers in Section 4.1 which shall survive indefinitely.
Section 10.2 Indemnification. (a) Following the Closing, each of the
Sellers, severally and not jointly (based upon their respective Percentage
Interest and with each Sellers's personal liability expressly limited as set
forth in Section 10.2(b) and 10.2(c)) hereby agrees to indemnify and hold the
Purchaser and its officers, directors, affiliates (including, without
limitation, Arcon Holdings and the Company) and agents, and any successors
thereto, harmless from damages, losses, costs or expenses (including, without
limitation, reasonable attorneys' fees and expenses) ("Damages") incurred or
suffered as a result of or arising out of (i) the failure of any
representation or warranty made by the Company in this Agreement (without
regard to any "materiality" or any "material adverse effect" exception
contained in any such representation and warranty other than the
representations and warranties contained in Section 3.5 and Section 3.24 (but
only as to clauses (d), (h) and (l) of Section 6.1 incorporated by reference
into such Section 3.24) and Section
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3.25) to be true and correct as of the Closing Date with the same effect as
though such representation and warranty had been made on and as of the Closing
Date, (other than a breach of Section 3.14 with respect to Taxes which shall be
governed by Section 9.8), or (ii) the breach of any covenant or agreement made
or to be performed by the Sellers pursuant to this Agreement; provided, however,
that the Sellers shall not be liable under clause (i) of this Section unless the
aggregate amount of Damages exceeds $400,000 and then only to the extent of such
excess; provided further, however, that, except as set forth in Section 10.2(b)
below, the Sellers' aggregate liability under this Article X and Article IX
shall not exceed $4,000,000 in the aggregate (the "Sellers Liability Amount").
(b) Following the Closing, each of the Sellers, severally as to itself and
not jointly, hereby agrees to indemnify and hold the Purchaser and its officers,
directors, affiliates (including without limitation, Arcon Holdings and the
Company) and agents, and any successors thereto, harmless from Damages incurred
or suffered as a result of or arising out of the failure of any representation
or warranty made by such Seller in Article IV of this Agreement to be true and
correct as of the Closing Date; provided, however, that aggregate liability of
the Sellers under this Section 10.2(b) shall not exceed the Aggregate Closing
Payment (net of the
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amount of Outstanding Indebtedness paid to the Bank pursuant to Section 2.2(b)
and amounts recovered under Sections 10.2(a) and 9.8 of such Seller) and the
liability of each of the Sellers under this Section 10.2(b) shall not exceed, as
to each Seller, the product of the Aggregate Closing Payment and the Percentage
Interest (net of the amount of Outstanding Indebtedness paid to the Bank
pursuant to Section 2.2(b) and amounts recovered under Sections 10.2(a) and 9.8
of such Seller).
(c) Personal Liability of the Sellers. Except as set forth in Section
10.2(b), the aggregate personal liability (the "Personal Liability Amount")
of each of the Sellers with respect to the subject matter of this Agreement
and the transactions contemplated hereby is, and shall be, limited to an
aggregate amount equal to the product of the Sellers' Liability Amount and
the Percentage Interest of such Seller. No Seller shall have any personal
liability in excess of the applicable Personal Liability Amount for the
performance or observance of the covenants, agreements, representations and
warranties of Sellers, the Sellers' Representative, Arcon Holdings or the
Company contained in this Agreement (including, without limitation, Article
IX hereof and, except as set forth in Section 10.2(b), this Article X or in
any document executed in connection herewith and the Purchaser, on behalf of
itself and its affiliates (including, without limitation,
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each of the Companies), covenants and, absent fraud, agrees not to seek any
Damages or personal money judgment against any or all Sellers, in excess of the
Sellers' Liability Amount with respect to all of the Sellers (except as set
forth in Section 10.2(b)) or the applicable Personal Liability Amount with
respect to any Seller (except as set forth in Section 10.2(b)), for any Damage
sustained by the Purchaser, for any default or breach under this Agreement or
any other document executed in connection herewith or otherwise. To the extent
any term or provision of this Agreement provides for the joint and several
liability of the Sellers, such joint and several liability shall be limited in
the aggregate, in all respects with respect to all of the Sellers, to the
Sellers' Liability Amount (except as set forth in Section 10.2(b)), and in all
respects with respect to any of the Sellers, to the applicable Personal
Liability Amount (except as set forth in Section 10.2(b)).
(d) After the Closing, the Purchaser hereby agrees to indemnify and hold
the Sellers harmless from Damages incurred or suffered as a result of or arising
out of (i) the failure of any representation or warranty made by the Purchaser
in this Agreement to be true and correct as of the Closing Date with the same
effect as though such representation and warranty had been made on and as of the
Closing Date or (ii) the breach of any covenant or agreement made or to be
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performed by the Purchaser or the Companies pursuant to this Agreement after the
Closing; provided, however, that the Purchaser shall not be liable under clause
(i) of this Section unless the aggregate amount of Damages exceeds $400,000 and
then only to the extent of such excess; provided further, however, that the
Purchaser's aggregate liability under this Article X shall not exceed $4,000,000
in the aggregate.
(e) The foregoing indemnification provisions in this Article X and the
indemnification by Sellers provided in Section 9.8 shall be the sole and
exclusive remedy for any breach of the covenants, obligations, representations
or warranties or other agreements set forth in this Agreement or any other
agreement or other document executed in connection herewith; provided, however,
that the provisions of this Section 10.2(e) shall not prevent the Seller or the
Purchaser from seeking the remedies of specific performance or injunctive relief
prior to Closing in connection with a breach of a covenant or agreement of any
party contained herein.
Section 10.3 Indemnification Procedure. (a) Any party seeking
indemnification (the "Indemnified Party") from any other party (the
"Indemnifying Party") with respect to any claim, demand, action, proceeding
or other matter pursuant to this Agreement other than a claim by Purchaser
with respect to Taxes (a "Claim") shall promptly notify the Indemnifying
Party of the existence of the Claim, setting forth in
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reasonable detail the facts and circumstances pertaining thereto, the basis for
the Indemnified Party's right to indemnification, the amount of Damages for
which indemnification is being asserted, if known, and, in the case of third
party claims, such notice shall be accompanied by copies of all relevant
pleadings, demands and other papers, if any, served on the Indemnified Party.
(b) If any third party shall notify any Indemnified Party with respect to
any matter which may give rise to a Claim for indemnification against the
Indemnifying Party under this Agreement, then the Indemnified Party shall
promptly notify each Indemnifying Party thereof; provided, however, that no
delay on the part of the Indemnified Party in notifying any Indemnifying Party
shall relieve the Indemnifying Party from any liability or obligation hereunder
unless (and then solely to the extent) the Indemnifying Party thereby is
materially prejudiced by such failure to give notice. In the event that any
Indemnifying Party notifies the Indemnified Party within 30 days after the
Indemnified Party has given notice of the matter that the Indemnifying Party
would be required to indemnify the Indemnified Party in full against any such
Claim and is assuming the defense thereof:
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(i) the Indemnifying Party will defend the Indemnified Party against
the matter with counsel of its choice reasonably satisfactory to the Indemnified
Party;
(ii) the Indemnified Party may retain separate co-counsel at its
sole cost and expense (except that the Indemnifying Party will be responsible
for the reasonable fees and expenses of the separate co-counsel (a) to the
extent the Indemnified Party concludes reasonably based upon written advice of
counsel that a conflict of interest exists between the Indemnified Party and
Indemnifying Party or (b) the named parties to any such action (including any
impleaded parties) include both such Indemnified Party and the Indemnifying
Party and such Indemnified Party shall have been advised in writing by counsel
that there may be one or more material legal defenses available to the
Indemnified Party which are not available to the Indemnifying Party, or
available to the Indemnifying Party, but the assertion of which would be
materially adverse to the interest of the Indemnified Party);
(iii) the Indemnified Party will not consent to the entry of any
judgment or enter into any settlement with respect to the matter without the
written consent of the Indemnifying Party (not to be withheld or delayed
unreasonably);
(iv) the Indemnifying Party will not consent to the entry of any
judgment or enter into any settlement (other
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than with respect to a judgement or settlement involving exclusively money
damages), without the written consent of the Indemnified Party (not to be
withheld or delayed unreasonably), provided, that, in the case of entry of any
such judgement or settlement (to the extent involving exclusively money
damages), the claimant or plaintiff in the matter shall have provided the
Indemnified Party a written release from all liability with respect thereto; and
(v) subject to Section 10.3(d), within 30 days after the
Determination Date with respect to a third party Claim, the Indemnifying Party
shall pay the Indemnified Party the amount of Damages incurred by the
Indemnified Party. As used herein, the term "Determination Date" shall mean the
date on which the Determination is final, legally binding, and non-appealable.
As used herein, the term "Determination" shall mean (i) the final non-appealable
judgment by a court of competent jurisdiction with respect to any third party
Claim covered by this Article X or (ii) a compromise and settlement agreement
executed and delivered by both Indemnifying Party and Indemnified Party with
respect to any third party Claim covered by this Article X.
(c) If no Indemnifying Party notifies the Indemnified Party within 30 days
after the Indemnified Party has given notice of the matter that the Indemnifying
Party is assuming the defense thereof, then the Indemnified Party may defend
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against, or enter into any settlement with respect to (subject to subsection
(b)(iii) above), the matter in any manner it reasonably may deem appropriate,
without prejudice to any of its rights hereunder.
(d) The Indemnified Party shall be entitled to reimbursement of reasonable
out-of-pocket expenses included in Damages with respect to any Claim (including,
without limitation, the reasonable out-of-pocket cost of defense, preparation
and investigation relating to such Claim) as such expenses are incurred by the
Indemnified Party following receipt by the Indemnifying Party of appropriate
invoices with respect thereto.
(e) In the event that liability hereunder does not involve a third party
claim, the Indemnifying Party shall within 30 days after the date of an
Indemnity Notice respond in writing to the Indemnified Party (the "Indemnity
Response") and set forth with reasonable specificity those items in the
Indemnity Notice to which the Indemnified Party does not agree as well as the
summary basis upon which such disagreement is founded. Within 30 days following
the delivery of the Indemnity Response to the Indemnified Party, representatives
of the Indemnifying Party and Indemnified Party shall meet to attempt to resolve
through good faith negotiations the applicable indemnification claims.
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(f) The amount of any Damages for which indemnification is provided under
this Article X shall be net of the amount of Tax benefits actually realized by
the Indemnified Party in the tax year in which payments in respect of
indemnification are received, and net of any amounts actually recovered by the
Indemnified Party under insurance policies (other than premiums paid and related
costs of collection) with respect to such Damages. The Indemnified Party shall
use all reasonable efforts to recover amounts under its insurance policies, if
any, in respect of Claims for Damages for which indemnification is provided
under this Agreement ("Insurable Amounts"). To the extent Insurable Amounts are
actually recovered by the Purchaser after the Purchaser has recovered from the
Escrow Account or the Sellers amounts in respect of the same Claims for Damages
for which the Purchaser has actually received such Insurable Amounts
("Indemnifiable Amount"), the Purchaser shall promptly pay to the Sellers'
Representative for the benefit of the Sellers out of such Insurable Amounts
actually recovered an amount equal to such Indemnifiable Amount.
(g) Except for Claims that the Purchaser may have pursuant to this Article
X or Article IX and Claims for fraud, the Purchaser, on behalf of itself and its
successors and assigns, hereby waives and releases from and after the Closing
the other parties hereto and their respective
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successors and assigns from any and all claims of any kind or nature (including,
without limitation, claims for contribution, cost recovery or reimbursement)
which the Purchaser may otherwise have under any laws, rules or regulations
(including, without limitation, Environmental Laws) applicable to the Companies,
any of the Sellers or the Company Property.
ARTICLE XI
TERMINATION
Section 11.1 Termination. This Agreement may be terminated in writing at
any time prior to the Closing:
(a) by the mutual written consent of the Purchaser and the Required
Sellers;
(b) by the Purchaser, if there has been a material breach by Arcon
Holdings, the Company or any of the Sellers of any material covenant,
representation or warranty contained in this Agreement which has prevented the
satisfaction of any condition to the obligations of the Purchaser at the Closing
and such breach has not been waived by the Purchaser or, in the case of a
covenant breach, cured by Arcon Holdings, the Company or any of the Sellers
within the earlier of 30 days after written notice thereof from the Purchaser or
the Termination Date;
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(c) by the Required Sellers, if there has been a material breach by the
Purchaser of any material covenant, representation or warranty contained in this
Agreement which has prevented the satisfaction of any condition to the
obligation of the Sellers or the Companies at the Closing and such breach has
not been waived by the Required Sellers or, with respect to a covenant breach,
cured by the Purchaser within the earlier of 30 days after written notice
thereof by the Sellers or the Companies or the Termination Date;
(d) by either the Purchaser or the Required Sellers if (i) the
transactions contemplated hereby have not been consummated by the Termination
Date; provided, however, that neither the Purchaser nor the Sellers shall be
entitled to terminate this Agreement pursuant to this Section 11.1(d) if such
Person's breach of this Agreement has prevented the consummation of the
transactions contemplated hereby.
(e) by either the Purchaser or the Required Sellers if any governmental
authority shall have issued an order, decree, ruling or taken any other action
restraining, enjoining or otherwise prohibiting the transactions contemplated by
this Agreement and such order, decree, ruling or other action shall have become
final and nonappealable.
Section 11.2 Effect of Termination. In the event that this Agreement
shall be terminated pursuant to Section 11.1, all further obligations of the
parties hereto under this Agree-
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ment or otherwise (other than pursuant to Sections 12.2 and 12.5 and the
Confidentiality Agreement, which shall continue in full force and effect in
accordance with their terms) shall terminate without further liability or
obligation of the Sellers or the Companies, on the one hand and the Purchaser on
the other hand; provided, however, that no party shall be released from
liability hereunder if this Agreement is terminated pursuant to Section 11.1(b),
11.1(c) or 11.1(d) and the transactions abandoned by reason of (i) willful
failure of such party to have performed its obligations hereunder or (ii) any
knowing material misrepresentation made by such party of any matter set forth in
Article III, IV or V, as applicable.
ARTICLE XII
MISCELLANEOUS
Section 12.1 Knowledge. Where any representation or warranty made by the
Companies or either of them contained in this Agreement is expressly qualified
by reference to its knowledge, such knowledge shall be deemed to exist if the
matter is within the actual knowledge of any of the Sellers and/or the executive
officers of Arcon Holdings or the Company.
Section 12.2 Expenses. Subject to Section 9.3 the parties hereto shall pay
their own expenses relating to the transac- tions contemplated by this
Agreement, including, without
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limitation, the fees and expenses of their respective counsel and financial
advisers, it being understood that all third party out-of-pocket expenses of the
Companies incurred prior to the Closing in connection with the transactions
contemplated by this Agreement shall be paid by the Sellers prior to the Closing
Date (it being understood and agreed by the parties, without limiting the
generality of the foregoing in this Section 12.2, that all accounting fees and
expenses of the Companies incurred in connection with the Purchaser's financing
of the transaction contemplated by this Agreement, whether or not the Closing
occurs, shall be borne by the Purchaser).
Section 12.3 Governing Law. THE INTERPRETATION AND CONSTRUC- TION OF THIS
AGREEMENT, AND ALL MATTERS RELATING HERETO, SHALL BE GOVERNED BY THE LAWS OF THE
STATE OF NEW YORK APPLICABLE TO AGREEMENTS EXECUTED AND TO BE PERFORMED SOLELY
WITHIN SUCH STATE.
Section 12.4 Captions. The Article and Section captions used herein are
for reference purposes only, and shall not in any way affect the meaning or
interpretation of this Agreement.
Section 12.5 Publicity. Except as otherwise required by law, none of the
parties hereto shall issue, prior to the Closing, any press release or make any
other public statement, in each case relating to, connected with or arising out
of this Agreement or the matters contained herein, without obtaining
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the prior approval of the Companies, on the one hand, and the Purchaser, on the
other hand, to the contents and the manner of presentation and publication
thereof. Except as otherwise required by law, after the Closing the Sellers
shall not issue any press release or make any other public statement, in each
case relating to, connected with or arising out of this Agreement or the matters
contained herein, without obtaining the prior approval of the Purchaser which
shall not be unreasonably withheld or delayed.
Section 12.6 Notices. Any notice or other communication required or
permitted under this Agreement shall be sufficiently given if delivered in
person or sent by telecopy or by registered or certified mail, postage
prepaid, addressed as follows: if to the Purchaser, to Specialty Paperboard,
Inc., ▇▇▇▇▇▇▇ ▇▇▇▇, ▇.▇. ▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ (Facsimile
Number (▇▇▇) ▇▇▇-▇▇▇▇) Attention: Chief Financial Officer, with a copy to its
counsel, White & Case, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
(Facsimile Number (▇▇▇) ▇▇▇-▇▇▇▇), Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.; and if
to the Sellers, to the Sellers' Representative, initially Northwood Ventures,
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ (Facsimile Number (516)
364-0879), Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, with a copy to their counsel, ▇▇▇▇▇▇ &
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ (Facsimile Number (212)
682-0200), Attention: ▇▇▇▇▇▇▇ ▇.
-▇▇-
▇▇▇▇, ▇▇▇. or such other address or number as shall be furnished in writing by
any such party, and such notice or communication shall be deemed to have been
given as of the date so delivered, sent by facsimile or mailed.
Section 12.7 Parties in Interest. This Agreement may not be transferred,
assigned, pledged or hypothecated by any party hereto, other than by operation
of law. This Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective heirs, executors, administrators,
successors and permitted assigns.
Section 12.8 Counterparts. This Agreement may be executed in two or more
counterparts, all of which taken together shall constitute one instrument.
Section 12.9 Entire Agreement. This Agreement (including the Schedules
hereto) and the Confidentiality Agreement, including the other documents
referred to herein and therein which form a part hereof and thereof, contain
the entire understanding of the parties hereto with respect to the subject
matter contained herein and therein. This Agreement supersedes all prior
agreements and understandings between the parties with respect to such
subject matter other than the Confidentiality Agreement which, in accordance
with its terms, shall survive termination hereof but shall terminate and be
of no further force and effect on and after the Closing.
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Section 12.10 Amendments. This Agreement may not be changed orally, but
only by an agreement in writing signed by the Purchaser, the Companies and
each of the Sellers.
Section 12.11 Severability. Should any provision of this Agreement be
held by a court of competent jurisdiction to be enforceable only if modified,
such holding shall not affect the validity of the remainder of this
Agreement, the balance of which shall continue to be binding upon the parties
hereto with any such modification to become a part hereof and treated as
though originally set forth in this Agreement. The parties further agree that
any such court is expressly authorized to modify any such unenforceable
provision of this Agreement in lieu of severing such unenforceable provision
from this Agreement in its entirety, whether by rewriting the offending
provision, deleting any or all of the offending provision, adding additional
language to this Agreement, or by making such other modifications as it deems
warranted to carry out the intent and agreement of the parties as embodied
herein to the maximum extent permitted by law. The parties expressly agree
that this Agreement as so modified by such court shall be binding upon and
enforceable against each of them. In any event, should one or more of the
provisions of this Agreement be held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not
affect any other provisions hereof,
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and if such provision or provisions are not modified as provided above, this
Agreement shall be construed as if such invalid, illegal or unenforceable
provisions had never been set forth herein.
Section 12.12 Third Party Beneficiaries. Each party hereto intends that
this Agreement shall not benefit or create any right or cause of action in or
on behalf of any Person other than the parties hereto.
Section 12.13 Jurisdiction. Any judicial proceeding brought against any
of the parties to this Agreement or any dispute arising out of this Agreement
or any matter related hereto shall be brought in the courts of the State of
New York, or in the United States District Court for the Southern District of
New York, and, by execution and delivery of this Agreement, each of the
parties to this Agreement accepts the exclusive jurisdiction of such courts,
and irrevocably agrees to be bound by any judgment rendered thereby in
connection with this Agreement. The foregoing consent to jurisdiction shall
not be deemed to confer rights on any Person other than the respective
parties to this Agreement.
Section 12.14 Action by Sellers. Except as expressly set forth herein,
whenever this Agreement requires or permits action to be taken by the
Sellers, such action shall be sufficient if taken by the Required Sellers.
Each of the Sellers hereby consents and agrees to all actions or inac-
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tions taken or omitted to be taken by the Required Sellers and agrees to
indemnify and hold harmless the Required Sellers from and against all costs and
expenses (including, without limitation, reasonable attorneys fees and expenses
incurred by the Required Sellers in any claim, action or proceeding between the
Required Sellers and the Sellers (or any of them) or between the Required
Sellers and any third party (including, without limitation, the Purchaser or the
Companies) or otherwise) incurred or suffered as a result of or arising out of
such actions or inactions.
Section 12.15 Sellers' Representative. By the execution and delivery of
this Agreement, each Seller hereby irrevocably constitutes and appoints
Northwood Ventures, a New York limited partnership, as the Sellers'
Representative with the exclusive authority and power to take all actions
required or permitted to be taken by the Sellers' Representative under this
Agreement including, without limitation, under Article IX hereof and the
Escrow Agreement. Each of the Sellers hereby consents and agrees to all
actions or inactions taken or omitted to be taken by the Sellers'
Representative under this Agreement and the Escrow Agreement hereby agrees to
indemnify and hold harmless the Sellers' Representative from and against all
costs and expenses (including, without limitation, reasonable attorneys' fees
and accountants' expenses) incurred by the Sellers' Representative in any
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claim, action or proceeding between the Sellers' Representative and the Sellers
(or any of them) or between the Sellers' Representative and any third party
(including, without limitation, the Purchaser or the Companies) or otherwise
incurred or suffered as a result of or arising out of such actions or inactions.
Upon written notice to the Purchaser, the Sellers may change the identity of the
Sellers' Representative by written consent signed by the Required Sellers.
Section 12.16 Assignment. This Agreement shall not be assignable by any of
the parties hereto except pursuant to a writing executed by all of the parties
hereto.
Section 12.17 Construction. The parties hereto agree that this Agreement
is the product of negotiations between sophisticated parties and individuals,
all of whom were represented by counsel, and each of whom had an opportunity
to participate in, and did participate in, the drafting of each provision
hereof. Accordingly, ambiguities in this Agreement, if any, shall not be
construed strictly or in favor of or against any party hereto but rather
shall be given a fair and reasonable construction without regard to the rule
of contra proferentem.
Section 12.18 Schedules. All Schedules, Exhibit A and Annex I and Annex
II to this Agreement are integral parts of this Agreement. Without limiting the
generality of the foregoing,
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the fact that any disclosure on any of the Schedules is not required to be
disclosed in order to render the applicable representation or warranty to which
it relates true, or that the absence of such disclosure on the Schedule would
not constitute a breach of such representation or warranty, shall not be deemed
or construed to expand the scope of any representation or warranty hereunder or
to establish a standard of disclosure in respect of any representation or
warranty.
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IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed on its behalf by its respective officer thereunto duly
authorized, all as of the day and year first above written.
SPECIALTY PAPERBOARD, ARCON HOLDINGS CORP.
INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇ By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------- -----------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇ Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President Title: Chairman
ARCON COATING ▇▇▇▇▇, INC.
By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President - CEO
NORTHWOOD VENTURES
By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: General Partner
NORTHWOOD CAPITAL PARTNERS LLC
By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chairman and CEO
▇▇▇▇, LOEB & CO.
By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Managing Partner
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇
-------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇
/s/ ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------
▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇. Ablum
-------------------------------
▇▇▇▇▇▇ ▇. Ablum
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇
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ANNEX I
A B C
Sellers'
Shares of Stock/ Escrow
Name Options Owned Payment
---------------------------------- ---------------- --------
Preferred Stock Holders
Series A Holders
Northwood Ventures 21,239.2 --
Northwood Capital Partners LLC 10,610.1 --
▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 95.5 --
Series B Holders
▇▇▇▇, Loeb & Co. 2,387.5 --
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 955.0 --
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ 955.0 --
▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ 382.0 --
▇▇▇▇▇ ▇. ▇▇▇▇▇ 238.8 --
▇▇▇▇▇▇ ▇. Ablum 382.0 --
▇▇▇▇▇ ▇. ▇▇▇▇▇ 955.0 --
Common Stock Sellers
Northwood Ventures 22,893.3 1,030,630
Northwood Capital Partners LLC 11,436.4 514,906
▇▇▇▇, ▇▇▇▇ & Co. 2,573.4 115,856
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 1,029.4 46,342
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ 1,029.4 46,342
▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ 411.8 18,536
▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 102.9 4,644
▇▇▇▇▇ ▇. ▇▇▇▇▇ 257.3 124,102
▇▇▇▇▇▇ ▇. Ablum 411.8 18,536
▇▇▇▇▇ ▇. ▇▇▇▇▇ 1,029.4 46,342
▇▇▇▇▇▇▇ ▇▇▇▇ -- 33,764
Optionholders
▇▇▇▇▇ ▇. ▇▇▇▇▇ 55,556 N/A
▇▇▇▇▇▇▇ ▇▇▇▇ 16,667 N/A
ANNEX II
Percentage
Interest
----------
Northwood Ventures 51.5333
Northwood Capital Partners LLC 25.7455
▇▇▇▇, ▇▇▇▇ & Co. 5.7928
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 2.3171
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ 2.3171
▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ .9268
▇▇▇▇▇ ▇. ▇▇▇▇▇▇ .2322
▇▇▇▇▇ ▇. ▇▇▇▇▇ 6.2051
▇▇▇▇▇▇ ▇. Ablum .9268
▇▇▇▇▇ ▇. ▇▇▇▇▇ 2.3171
▇▇▇▇▇▇▇ ▇▇▇▇ 1.6882
Total 100%
ESCROW AGREEMENT
ESCROW AGREEMENT (this "Escrow Agreement") made this 31st day of
October, 1996 by and among SPECIALTY PAPERBOARD, INC., a Delaware corporation
(the "Purchaser"), each of the Persons listed on Exhibit A hereto (each a
"Seller" and, collectively, the "Sellers"), former owners of all of the
outstanding Stock, Options and Warrants of ARCON HOLDINGS CORP., a Delaware
corporation ("Arcon Holdings"), and The Bank of New York, a New York banking
corporation (the "Escrow Agent").
WHEREAS, the Sellers and the Purchaser have entered into a Stock
Purchase Agreement dated as of August 28, 1996 (the "Agreement");
WHEREAS, the Agreement provides that the Purchasers shall put into
escrow with the Escrow Agent the amount of Two Million Dollars ($2,000,000) (the
"Escrow Amount"), to be used to satisfy claims arising out of and under Article
IX and/or Article X of the Agreement during the period from the date hereof
until a date which is eighteen months after the date hereof; and
WHEREAS, the parties to this Escrow Agreement have agreed upon and
wish to set forth the terms and conditions with respect to the Escrow Amount
held by the Escrow Agent.
NOW THEREFORE, in consideration of the premises and for other good
and valuable consideration the receipt and sufficiency of which are hereby
acknowledged the parties agree as follows:
1. Definitions. Capitalized terms used but not defined herein shall
have the respective meanings set forth in the Agreement. The following terms
shall have the following meanings when used herein:
"Agreed Amount" shall have the meaning specified in Section 7(a)
hereof.
"Arcon Holdings" shall have the meaning specified in the
introductory paragraph hereof.
"Claim Notice" shall have the meaning specified in Section 7(a)
hereof.
"Escrow Account" shall have the meaning specified in Section 3.
"Escrow Agent" shall have the meaning specified in the introductory
paragraph hereof.
"Escrow Agreement" shall have the meaning specified in the
introductory paragraph hereof.
"Escrow Amount" shall have the meaning specified in the third
WHEREAS clause of this Escrow Agreement.
"Escrow Deposit" shall have the meaning specified in Section 4(b)
hereof.
"Expiration Date" shall have the meaning
specified in Section 4(a) hereof.
"Final Judgment" shall have the meaning specified in Section 8
hereof.
"Judgment Amount" shall have the meaning specified in Section 7(b)
hereof.
"Purchaser" shall have the meaning specified in the introductory
paragraph hereof.
"Required Sellers" shall mean such Sellers who hold in the aggregate
more than 50% of the then issued and outstanding Common Stock held by all
Sellers as of the Closing Date (calculated (i) as if all issued and outstanding
shares of Preferred Stock were converted into shares of Common Stock and (ii) as
if all Options have been fully exercised into shares of Common Stock).
"Seller" or "Sellers" shall have the meaning specified in the
introductory paragraph hereof.
"Sellers' Representative" shall mean the representative of the
Sellers appointed pursuant to Section 19 of this Escrow Agreement.
2. Escrow Agent. The Sellers and Purchaser hereby designate and
appoint the Escrow Agent to serve in accordance with the terms, conditions and
provisions of this Escrow Agreement, and the Escrow Agent hereby agrees
-2-
to act as such, upon the terms, conditions and provisions provided in this
Escrow Agreement.
3. Deposit of Escrow Amount. Concurrently with the execution of this
Escrow Agreement, the Purchaser has deposited for the account of the Sellers
with the Escrow Agent the Escrow Amount, to be held in a separate account (the
"Escrow Account") subject to the terms and provisions herein contained.
Subject to the removal of the Escrow Agent or the right of the
Escrow Agent to resign as hereinafter provided, the Escrow Agent shall hold the
funds placed in escrow pursuant to this Escrow Agreement to satisfy certain
contingent indemnity obligations of the Sellers to the Purchaser and funds
representing the payment thereof shall not be disbursed except as herein
provided.
4. Termination of Escrow Agreement; Release of Escrow Amount. (a)
This Escrow Agreement shall terminate and the Purchaser and the Sellers'
Representative shall give joint written notice to the Escrow Agent of such
termination, on the later of (i) April 30, 1998 (the "Expiration Date"), or (ii)
if on such Expiration Date, a written claim shall have been previously delivered
to the Sellers' Representative and the Escrow Agent and not theretofore
determined pursuant to a written agreement between Purchaser and the Sellers'
Representative or pursuant to a Final Judgment, the date when such claim shall
have been finally determined as provided herein and payment thereof, if any,
shall have been made to the Purchaser or the Sellers, as the case may be.
(b) The Escrow Agent shall release the Escrow Amount and all
interest, earnings and proceeds therefrom (collectively, the "Escrow Deposit")
to the Sellers upon termination pursuant to Section 4(a); provided, however,
(i) that if on the Expiration Date, a written claim shall have been
delivered to the Sellers' Representative and the Escrow Agent in an
amount less than the remaining Escrow Amount, the Escrow Agent shall
release to the Sellers all interest, earnings and proceeds from the
Escrow Amount plus the difference between the remaining Escrow
Amount and the asserted claim; and
(ii) that if on the Expiration Date, a written claim shall have been
delivered to the Sellers' Representative and the Escrow Agent in an
amount
-3-
greater than the remaining Escrow Amount, the Escrow Agent shall
release to the Sellers an amount determined in accordance with
Section 4(a)(ii) hereof (except that the Escrow Agent shall release
to the Sellers all interest, earnings and proceeds from the Escrow
Amount on the Expiration Date).
5. Investment of Escrow Amount. The Escrow Agent shall invest and
reinvest the funds in the Escrow Account as directed from time to time in
writing by the Sellers' Representative in any one or more of the following
investments: in United States treasury bills or United States treasury notes, in
any other direct obligation issued by or guaranteed in full as to principal and
interest by the United States of America, or in certificates of deposit issued
by a commercial bank having capital, surplus and undivided profits of not less
than One Hundred Million Dollars ($100,000,000) (including the Escrow Agent) or
in such other interest-bearing security or account as shall be approved in
writing by the Purchaser and the Sellers; provided, however, that any such
obligations shall have maturities of no more than 90 days. The Escrow Agent
shall not be liable or responsible in any manner for any loss or depreciation
resulting from any such investment, or for any costs in connection therewith
other than due to its gross negligence, bad faith or willful misconduct, and all
of said losses and costs shall be borne by the Escrow Account. The Escrow Agent
shall hold all securities in the Escrow Account in the name of one or more of
its nominees. The Escrow Agent shall have the power to sell or liquidate the
investments described in this Section 5 whenever the Escrow Agent shall be
directed in writing to release all or any portion of the Escrow Deposit
hereunder.
6. Investment Income. All income, interest, earnings and gains of
all kinds from amounts held in the Escrow Account shall be a part of the Escrow
Account. All interest, earnings and proceeds accrued or paid upon amounts held
in the Escrow Account shall be disbursed quarterly to the Sellers on the last
day of March, June, September and December of each year. The Escrow Agent shall
prepare for and deliver to each Seller Forms 1099 for the applicable periods
occurring during the term of this Escrow Agreement.
7. Claims by Purchaser under Agreement. If at any time or from time
to time while this Escrow Agreement continues in effect:
-4-
(a) the Purchaser has notified the Sellers' Representative and the
Escrow Agent in writing (a "Claim Notice") that the Purchaser is entitled
to indemnification under Article IX and/or Article X of the Agreement, in
a specified amount on or prior to the Expiration Date, and the Sellers
agree in writing that the Purchaser is entitled to such indemnification in
such amount (the "Agreed Amount"); or
(b) with respect to a claim made on or prior to the Expiration Date,
the Purchaser delivers to the Sellers a copy of a Final Judgment entered
by a court of competent jurisdiction in favor of the Purchaser assessing
Damages in favor of the Purchaser, as certified by an officer of the
Purchaser in a written certificate delivered to the Sellers (the aggregate
of the amount of such Damages approved pursuant to such Final Judgment are
hereinafter referred to as the "Judgment Amount");
and copies of appropriate documentation verifying the Agreed Amount or the
Judgment Amount, as the case may be, shall have been delivered (in the case of
subsection (a) above, pursuant to the joint written instructions of the
Purchaser and the Sellers' Representative) to the Escrow Agent and the Sellers'
Representative, the Escrow Agent shall deliver to the Purchaser the Agreed
Amount or the Judgment Amount within five (5) Business Days after receipt of
such appropriate documentation. If a Final Judgment in respect of a claim made
by the Purchaser prior to the Expiration Date for indemnification under Article
IX and/or Article X of the Agreement is entered in favor of the Sellers, the
Escrow Agent shall deliver the amount of money approved pursuant to such Final
Judgement upon receipt by the Escrow Agent of copies of appropriate
documentation verifying such amount within five (5) Business Days after receipt
of such appropriate documentation. The Purchaser shall deliver each Claim Notice
to the Escrow Agent and the Sellers' Representative. Upon receipt by the Escrow
Agent of each Claim Notice, the Escrow Agent shall send a copy thereof to the
Sellers' Representative within three (3) Business Days of such receipt.
8. Responsibilities of the Escrow Agent. The Escrow Agent shall have
no duties or responsibilities except those expressly set forth herein. The
Escrow Agent shall have no responsibility for the validity of any agreements
referred to in this Escrow Agreement, or for the performance of any such
agreements by any party thereto or for interpretation of any of the provisions
of any of such
-5-
agreements. The liability of the Escrow Agent hereunder shall be limited solely
to bad faith, willful misconduct or gross negligence on its part. The Escrow
Agent shall be protected in acting upon any certificate, notice or other
instrument whatsoever received by the Escrow Agent under this Escrow Agreement,
not only as to its due execution and the validity and effectiveness of its
provisions, but also as to the truth and accuracy of any information therein
contained, which the Escrow Agent in good faith believes to be genuine and to
have been signed or presented by a proper person or persons or their counsel.
If a controversy arises between two or more of the parties hereto,
or between any of the parties hereto and any person not a party hereto, as to
whether or not or to whom the Escrow Agent shall deliver the Escrow Deposit or
any portion thereof or as to any other matter arising out of or relating to this
Escrow Agreement, the Escrow Agent shall not be required to determine same and
need not make any delivery of the Escrow Deposit held in escrow or any portion
thereof but may retain the same until the rights of the parties to the dispute
shall have finally been determined by written agreement of the Purchaser and the
Sellers' Representative or by final judgment of a court of competent
jurisdiction after all appeals have been finally determined or the time for
further appeals has expired without an appeal having been made (for purposes of
this Agreement, a "Final Judgment"). The Escrow Agent shall be entitled to
assume that no such controversy has arisen unless it has received a written
notice that such a controversy has arisen which refers specifically to this
Escrow Agreement and identifies the adverse claimants to the controversy.
Except as provided herein the Escrow Agent shall have no
responsibility as to the validity, collectibility or value of any cash and
securities held by it in escrow pursuant to this Escrow Agreement, and the
Escrow Agent may rely on any notice, instruction, certificate, statement,
request, consent, confirmation, agreement or other instrument which it believes
to be genuine and to have been signed or presented by a proper person or
persons. In the event that the Escrow Agent shall be uncertain as to its duties
or rights hereunder or shall receive instructions from any of the undersigned
with respect to any portion of the Escrow Deposit held by it in escrow pursuant
to this Escrow Agreement which, in the opinion of the Escrow Agent, are in
conflict with any of the provisions of this Escrow Agreement, the Escrow Agent
shall be entitled to refrain from taking any action until it shall be directed
otherwise
-6-
in writing by all of the other parties hereto or by an order of a court of
competent jurisdiction. The Escrow Agent shall be deemed to have no notice of,
or duties with respect to, any agreement or agreements with respect to the
Escrow Deposit (or any portion thereof) held by it in escrow pursuant to this
Escrow Agreement other than this Escrow Agreement or except as otherwise
provided herein. This Escrow Agreement and the Agreement (to the extent referred
to herein) sets forth the entire agreement between the parties hereto and the
Escrow Agent as escrow agent with respect to the Escrow Account and the
distribution of the Escrow Deposit (or any portion thereof) held therein.
Notwithstanding any provision to the contrary contained in any other agreement
(excluding any amendment to this Escrow Agreement) between any of the parties
hereto, the Escrow Agent shall have no interest in the Escrow Deposit (or any
portion thereof) held by it in escrow pursuant to this Escrow Agreement. With
respect to the Escrow Account, in the event that any of the terms and provisions
of any other agreement (excluding any amendment to this Escrow Agreement)
between any of the parties hereto conflict or are inconsistent with any of the
terms and provisions of this Escrow Agreement, the terms and provisions of this
Escrow Agreement shall govern and control in all respects.
9. Amendment and Cancellation. The Escrow Agent shall not be bound
by any cancellation, waiver, modification or amendment of this Escrow Agreement,
including the transfer of any interest hereunder, unless such modification is in
writing and signed by each of the Purchaser and the Sellers' Representative and,
if the duties of the Escrow Agent hereunder are affected, unless the Escrow
Agent also shall have given its written consent thereto.
10. Legal Counsel. The Escrow Agent may consult with, and obtain
advice from, legal counsel in the event of any question as to any of the
provisions hereof or its duties hereunder, and it shall incur no liability and
shall be fully protected in acting in good faith in accordance with the opinion
and instructions of such counsel.
11. Resignation and Removal. The Escrow Agent shall have the right,
in its discretion, to resign as escrow agent hereunder at any time, by giving at
least thirty (30) days' prior written notice of such resignation to the Sellers'
Representative and the Purchaser. The Escrow Agent may be removed at any time by
an instrument or concurrent instruments in writing delivered to the Escrow Agent
and signed by each of the Sellers' Representative and Purchaser. Such
resignation or removal, as the case may
-7-
be, shall take effect upon the appointment of a successor escrow agent in
accordance with the provisions of this Section 11 and the acceptance of such
appointment by the successor escrow agent. Upon such resignation or removal, as
the case may be, each of the Sellers and the Purchaser shall use their best
efforts to appoint another bank with capital, surplus and undivided profits of
not less than One Hundred Million Dollars ($100,000,000) as successor Escrow
Agent. Upon acceptance of such appointment, each of the Sellers and the
Purchaser will enter into an agreement with such successor escrow agent in
substantially the form of this Escrow Agreement. Resignation by or removal of,
as the case may be, the Escrow Agent shall relieve the Escrow Agent of any
responsibility or duty thereafter arising hereunder, but shall not relieve the
Escrow Agent of responsibility to deliver the Escrow Deposit as provided for in
this Section 11. Immediately upon the effectiveness of such resignation or
removal, as the case may be, the Escrow Agent shall deliver to the successor
escrow agent the Escrow Deposit then held in the Escrow Account. In the event of
the resignation of the Escrow Agent, if a substitute for the Escrow Agent
hereunder shall not have been selected as aforesaid within the 30-Business Day
notice period referred to in the first sentence of this Section 11, the Escrow
Agent shall be entitled to petition any court of competent jurisdiction for the
appointment of a substitute for it hereunder or, in the alternative, it may
transfer and deliver the Escrow Deposit then held in the Escrow Account to or
upon the order of such court. The Escrow Agent shall be discharged from all
further duties hereunder upon the effectiveness of such resignation or removal
as set forth above and upon transfer and delivery of the Escrow Deposit in the
Escrow Account to or upon the order of any such court, as the case may be.
12. Fees. The Sellers (severally, and not jointly, in accordance
with such seller's percentage interest as set forth in Exhibit A hereto), on the
one hand, and the Purchaser, on the other hand, agree to share equally the
Escrow Agent's annual fee (such fees to be based upon the anniversary date of
this Escrow Agreement) and all other fees and expenses of the Escrow Agent
pursuant to the fee schedule attached hereto as Exhibit B. Each of the Sellers
hereby agrees that the Sellers' Representative may pay such Seller's percentage
interest of such fees from the Sellers Amount, as provided for in Section 2.2(c)
of the Agreement. This Section 12 shall survive the termination of this
Agreement.
-8-
13. Payments. At any time the Escrow Agent is required to distribute
or pay over any amounts held by or received by it under any of the provisions of
this Escrow Agreement to the Sellers, such distribution and payment shall be
effected by issuance of the Escrow Agent's check in the appropriate amount
payable to such Seller and by mailing of such check to such Seller at the
address of such Seller set forth in Exhibit A hereto, provided that:
A. Any Seller may, by written notice delivered to the Escrow Agent, direct
that payment of amounts required to be distributed to such Seller be effected by
wire transfer in immediately available funds to an account established by such
Seller for such purpose, or by mailing the Escrow Agent's check for such amounts
to any other or changed address specified in such notice, and payments
thereafter (but not theretofore) made by the Escrow Agent to such Seller
hereunder shall thereafter be made in accordance with such notice (until changed
by subsequent notice delivered to the Escrow Agent as herein provided);
B. In the event of any transfer or assignment, by death, divorce or
otherwise by operation of law, or by sale, assignment, contract, security
agreement or otherwise, of any right to receive payment of any part of any
amounts held by the Escrow Agent (notice of which sale, transfer or assignment
shall be given by such Seller to the Escrow Agent) the Escrow Agent shall
nevertheless be entitled to withhold payment of any amounts to such assignee,
transferee or successor in interest until written instructions from such
assignee, transferee or successor in interest are delivered to the Escrow Agent
specifying the mailing address or account of such assignee, transferee or
successor in interest pursuant to the foregoing provisions of this Section; and
C. All payments and distributions of all kinds required to be made to the
Sellers in accordance with the terms hereof shall be made according to each such
Seller's Percentage Interest as set forth in Exhibit A hereto.
14. Notices. All communications and disbursements required
pursuant to this Escrow Agreement shall be addressed to the Escrow Agent, the
Purchaser and the Sellers, respectively, as follows:
-9-
If to the Escrow Agent:
The Bank of New York
Insurance Trust and Escrow Department
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇-▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
If to the Purchaser:
Specialty Paperboard, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
If to the Sellers:
To the respective addresses of the Sellers
shown in Exhibit A to this Escrow Agreement.
with a copy to:
▇▇▇▇▇▇ & ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
If to the Sellers' Representative:
Northwood Ventures
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇ & ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
Any notice or instructions under any of the provisions of this Escrow Agreement
shall be deemed effectively given only if such notice is in writing and is
received by the recipient thereof if notice is personally delivered or sent by
courier or three (3) Business Days after date of mailing, if sent by certified
mail, return receipt requested. Any delivery under this Escrow Agreement shall
be made by
-10-
hand delivery, or by courier with receipt acknowledged, or by certified mail,
return receipt requested, addressed to the respective addresses of the parties
hereto as set forth in this Section 14 or at such other address as any of the
parties hereto may hereafter specify to the others in writing. Notwithstanding
any of the foregoing, no notice or instructions to the Escrow Agent shall be
deemed to have been received by the Escrow Agent prior to actual receipt by the
Escrow Agent, and any computation of a time period which is to begin after
receipt of a notice by the Escrow Agent shall run from the date of such receipt
by the Escrow Agent.
15. Parties in Interest. This Escrow Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective heirs,
executors, administrators, successors and assigns.
16. Headings. The Section headings used herein are for reference
purposes only, and shall not in any way affect the meaning or interpretation of
this Escrow Agreement.
17. Execution by Escrow Agent. The execution of this Escrow
Agreement by the Escrow Agent shall constitute a receipt for the Escrow Amount
and shall evidence its acceptance and agreement to the terms hereof.
18. Indemnification of Escrow Agent. Sellers, on the one hand, and
the Purchaser, on the other hand, hereby jointly and severally agree to
indemnify the Escrow Agent and its officers, directors, employees,
representatives and agents form and hold each of them harmless against any and
all liabilities, obligations (including removal or remedial actions), losses,
damages, penalties, claims, actions, judgments, suits, costs, expenses and
disbursements incurred by any of them as a result of, or arising out of, or in
any way related to, or by reason of any investigation, litigation or other
proceeding (whether or not the Escrow Agent is a party thereto) related to the
entering into and/or performance of this Agreement, including, without
limitation, the reasonable fees and disbursements of counsel incurred in
connection with any such investigation, litigation or other proceeding (but
excluding any such losses, liabilities, claims, damages or expenses incurred by
reason of the bad faith, gross negligence or willful misconduct of the Escrow
Agent). The foregoing indemnities in this Section shall survive termination of
this Escrow Agreement.
-11-
19. Sellers' Representative. The initial Sellers' Representative
shall be Northwood Ventures, a New York limited partnership. Upon written notice
to the Purchaser and the Escrow Agent, the Sellers may change the identity of
the Sellers' Representative by written consent signed by the Required Sellers.
20. Governing Law. This Escrow Agreement shall be construed and
interpreted in accordance with the law of the State of New York. Any judicial
proceeding brought against any of the parties to this Escrow Agreement or any
dispute arising out of this Escrow Agreement or any matter related hereto shall
be brought in the courts of the State of New York, or in the United States
District Court for the Southern District of New York, and, by execution and
delivery of this Escrow Agreement, each of the parties to this Escrow Agreement
accepts the exclusive jurisdiction of such courts, and irrevocably agrees to be
bound by any judgment rendered thereby in connection with this Escrow Agreement.
The foregoing consent to jurisdiction shall not be deemed to confer rights on
any Person other than the respective parties to this Escrow Agreement.
21. Counterparts. This Escrow Agreement may be executed in two or
more counterparts, all of which taken together shall constitute one instrument.
-12-
IN WITNESS WHEREOF, the parties hereunto have duly caused this
Escrow Agreement to be executed as of the day first above written.
SPECIALTY PAPERBOARD, THE BANK OF NEW YORK
INC.
By______________________ By___________________________
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇ Name:
Title: Vice President Title:
and Chief Financial
Officer
ARCON HOLDINGS CORP.
By___________________________
Name:
Title:
ARCON COATING ▇▇▇▇▇, INC.
By___________________________
Name:
Title:
NORTHWOOD VENTURES
By__________________________
Name:
Title:
NORTHWOOD CAPITAL
PARTNERS LLC
By__________________________
Name:
Title:
-▇▇-
▇▇▇▇, ▇▇▇▇ & CO.
By__________________________
Name:
Title:
____________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
____________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
____________________________
▇▇▇▇▇▇▇ ▇▇▇▇
____________________________
▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
____________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
____________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇
____________________________
▇▇▇▇▇▇ ▇. Ablum
____________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇
-14-
EXHIBIT A
ADDRESS PERCENTAGE INTEREST
------- -------------------
Northwood Ventures 51.5333
Suite 205
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
General Partner
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Northwood Capital Partners LLP 25.7455
Suite 205
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
General Partner
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇, Loeb & Co. 5.7928
20th Floor
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 2.3171
Salomon Brothers Inc.
40th Floor
▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
EXHIBIT A
Page ▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ ▇.▇▇▇▇
▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇ ▇.▇▇▇▇
▇▇▇▇▇ Coating ▇▇▇▇▇, Inc.
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ .9268
▇▇▇▇ ▇▇▇▇▇▇▇ Inc.
▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇ .2322
Suite 205
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇ 6.2051
Arcon Coating ▇▇▇▇▇, Inc.
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
EXHIBIT A
Page ▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇ .▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ & Co.
Suite 205
175 North Franklin
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇ ▇.▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
EXHIBIT B
ESCROW AGENT FEE SCHEDULE
Acceptance Fee........................................................$1,500.00
Review Escrow Agreement and supporting documents
Establish Account
Annual Administration Fee.............................................$5,000.00
(pro rated for partial years subject to a minimum of
$2,500.00)
Investment Transaction Fee, (if applicable)..............................$25.00
Wire Transfers and Checks, each (if applicable)..........................$15.00
Preparation of Forms 1099......................................$250.00 per year
Schedule 3.2
Capital Stock
1.* Warrant Certificate dated as of April 14, 1994 issued to the Bank (the
"Warrant Certificate").
2. Take-Along Rights Agreement dated as of April 14, 1994 by and between
Arcane Holdings and the Bank (the "Take-Along Rights Agreement").
3. Certificate of Incorporation of Arcon Holdings, as amended (the "Holdings
Charter").
4. Stock Purchase Agreement dated as of April 14, 1994 by and among Arcon
Holdings, the Company, Arcon Acquisition Corp. and FSE Holdings, Inc. (the
"FSE Purchase Agreement").
5. Stock Purchase Agreement dated as of April 14, 1994 among Arcon Holdings
and certain of the Sellers (the "Stock Purchase Agreement").
6.** Shareholder Agreement by and among Arcon Holdings and certain of the
Sellers dated April 14, 1994 (the "Shareholder Agreement").
7.** Registration Rights Agreement dated April 14, 1994.
8. Stock Option Plan of Arcon Holdings Corp.
9.* Option Certificate dated April 14, 1994 issued to ▇▇▇▇▇ ▇. ▇▇▇▇▇ relating
to the Common Stock.
1O.* Option Certificate dated April 14, 1994 issued to ▇▇▇▇▇▇▇ ▇▇▇▇ relating to
the Common Stock.
11. Prior to the Closing, Arcon Holdings intends to purchase from the Bank the
Warrants.
----------
* To be cancelled and delivered at Closing in exchange for applicable payment
of Purchase Price pursuant to Section 2.2 of this Agreement.
** To be terminated at or prior to Closing.
Schedule 3.5(b)
Financial Statements; No Material Change
1. The Consolidated unaudited balance sheet of the Companies as of June 30,
1996 fairly present in all material respects the consolidated financial
position of the Companies at its date thereof except as indicated below:
(a) the stock options issued under stock option agreements to ▇▇▇▇▇▇▇ ▇▇▇▇
& ▇▇▇▇▇ ▇▇▇▇▇ should be revalued, which will increase compensation
expense and liability for deferred compensation;
(b) the Warrants should be revalued based upon the fair market value of
the Company, which will increase expenses and liabilities for the
Warrants; and
(c) the retained earnings should be reallocated to the carrying value of
preferred stock.
Schedule 3.7
Title to Properties; Encumbrances
1. Encumbrances referred to in Title Insurance Policy No. 36-907-02-64854CK
dated April 18, 1994 with the Bank as named insured, a copy of which is
attached hereto and made a part hereof. [Not attached. Will file upon
request of the Commission.]
2. Easements, rights of way, restrictions and other Encumbrances of record
affecting the leased property located at ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇
▇▇▇▇ ▇▇▇▇▇.
3. Certain properties and assets of each of the Company and Arcon Holdings are
subject to Encumbrances pursuant to that certain Credit Agreement dated as
of April 14, 1994 by and between the Company, the Bank, and the other
parties thereto and the additional security and other credit documentation
(including, but not limited to security agreements, mortgages, guarantees,
promissory notes, pledges and financing statements) executed in connection
therewith (collectively, the "Bank Documents").
4. Jurisdiction: Ohio Secretary of State
File No. AM16675
File Date: September 22, 1995
Secured Party: ▇▇▇▇ Leasing Company
Collateral: Leased telephone system.
5. Jurisdiction: ▇▇▇▇▇ County, Ohio
File No.: 95003719
File Date: September 22, 1995
Secured Party: ▇▇▇▇ Leasing Company
Collateral: Leased telephone system.
Schedule 3.8
Real Property
-------------
1. The real property and improvements thereon located at ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇.
2. Leasehold interest in the real property and improvements thereon located at
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇.
Schedule 3.9
Intellectual Property
---------------------
1. Trademark Registration No. 1,829,385 relating to SUPER ARCOFLEX -Registered
Trademark- for ungummed paper tape for binding pads, binders and books in
Class 16. Registered April 5, 1994.
2. Trademark Registration No. 1,848,580 relating to ARCOFLEX for ungummed
paper tape for binding pads, binders and books in Class 16. Registered
August 9, 1994.
Schedule 3.10
Leases
-------------
1. Amended and Restated Agreement of Lease between the Company, as lessee, and
▇▇▇▇▇▇ ▇▇▇▇▇▇ d/b/a/ A&C Realty, as lessor, dated June 1, 1988 relating to
premises located at ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇.
Schedule 3.11
Material Contracts
1. The Warrant Certificate.
2.* The Take-Along Rights Agreement.
3. The FSE Purchase Agreement.
4. The Stock Purchase Agreement.
5.* The Shareholder Agreement.
6. Arcon Coating ▇▇▇▇▇, Inc. Profit Sharing Plan & Trust Agreement dated
November 1, 1993, as amended.
7. Supply Agreement effective as of August 1, 1995 by and between the Company
and CPM, Inc.
8. Supply Agreement dated as of January 1, 1996 by and between the Company and
CPM, Inc.
9. Supply Agreement dated as of October 14, 1992 by and between the Company
and ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Corporation.
10. Arcon Holdings owns all of the issued and outstanding shares of Company
Stock.
11. Lease Agreement dated December 27, 1994 by and among King ▇'▇▇▇▇▇▇ Cadillac
Sales Inc., the Company and ▇▇▇▇▇ ▇. ▇▇▇▇▇.
12. Lease Agreement dated March 18, 1996 by and between the Company and Crown
Lift Trucks.
13. Arcon Coating ▇▇▇▇▇ Profit Sharing Plan and Trust Agreement dated November
1, 1993, as amended.
14.* Management and Administrative Services Agreement by and among the Company,
Arcon Holdings, Northwood Ventures and Northwood Management Corp. dated as
of April 14, 1994.
15. The Bank Documents.
--------------
* To be terminated at or prior to the Closing.
16. See attached Schedule of open customer orders over $25,000, as of
August 9, 1996.
17. See attached Schedule of open purchase orders over $25,000, as of
August 9, l996.
18. The Internal Revenue Service (the "IRS") is currently conducting an audit
of FSE Holdings, Inc. ("FSE"), the former parent of the Company, regarding
the consolidated federal income tax return filed by FSE for the tax year
relating to the Company's 1990 fiscal year. FSE has advised the Company
that it has waived the applicable statutes of limitations relating to
federal tax returns filed by it for the tax year relating to the Company's
1990 fiscal year and such subsequent tax years as have been requested by
the IRS.
ARCON COATING ▇▇▇▇▇
OPEN ORDER OVER $25,000
August 9, 1996
Customer Amount
-------- ------
ACCO $41,388.98
AMPAD, MA 35,021.39
AMPAD, IL 96,223.29
BUSHNELL 45,233.00
DELUXE CHECK, NJ 29,939.73
DELUXE CHECK, KS 38,447.25
DIVERSIFIED 36,240.00
EXPANDEX 26,127.30
ESSELTE 165,665.62
▇▇▇▇▇▇▇▇ 34,417.00
▇▇▇▇▇, GA 47,332.20
▇▇▇▇▇, OH 39,205.45
▇▇▇▇▇, MN 63,051.40
ARCON COATING ▇▇▇▇▇
OPEN PURCHASE ORDERS OVER $25,000
August 9, 1996
Vendor Amount
------ ------
Du Pont $354,409.67
▇▇▇▇▇-BRIDGE ▇▇▇▇▇ 111,381.40
▇▇▇▇▇▇▇▇-▇▇▇▇▇ 172,339.23
EMTECH 24,765.06
DEL VAL INK 32,424.96
Schedule 3.12
Consents and Approvals; No Violations
1. Supply Agreement effective as of August 1, 1995 by and between the Company
and CPM, Inc.
2. Supply Agreement dated as of January 1, 1996 by and between the Company and
CPM, Inc.
3. Supply Agreement dated as of October 14, 1992 by and between the Company
and ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Corporation.
4. The Holdings Charter provides for certain contingent rights for the holders
of Preferred Stock with respect to the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby.
5. The consummation of the transactions contemplated by this Agreement would
be an event of default under certain of the Bank Documents.
6. Pursuant to the Warrant Certificate, the Bank is entitled to 30 days prior
written notice of the transactions contemplated by this Agreement.
7. Pursuant to the Take-Along Rights Agreement, the Bank is entitled to 45
days prior written notice of the transactions contemplated by this
Agreement.
Schedule 3.13
Litigation
1. The IRS is currently conducting an audit of FSE, the former parent of the
Company, regarding the consolidated federal income tax return filed by FSE
for the tax year relating to the Company's 1990 fiscal year. FSE has
advised the Company that it has waived the applicable statutes of
limitations relating to federal tax returns filed by it for the tax year
relating to the Company's 1990 fiscal year and such subsequent tax years as
have been requested by the IRS.
2. Order on Consent No. Rl-4837-92-0l issued by the New York State Department
of Environmental Conservation, together with letter amendments thereto,
attached to Schedule 3.21.
Schedule 3.14
Taxes
1. The IRS is currently conducting an audit of FSE, the former parent of the
Company, regarding the consolidated federal income tax return filed by FSE
for the tax year relating to the Company's 1990 fiscal year. FSE has
advised the Company that it has waived the applicable statutes of
limitations relating to federal tax returns filed by it for the tax year
relating to the Company's 1990 fiscal year and such subsequent tax years as
have been requested by the IRS.
2. Prior to April 14, 1994 the Company was included in the consolidated,
unitary or combined Returns of FSE.
3. The FSE Purchase Agreement contains provisions relating to the payment of,
liability for and indemnities in respect of certain Taxes.
Schedule 3.15
Liabilities
1. The IRS is currently conducting an audit of FSE, the former parent of the
Company, regarding the consolidated federal income tax return filed by FSE
for the tax year relating to the Company's 1990 fiscal year. FSE has
advised the Company that it has waived the applicable statutes of
limitations relating to federal tax returns filed by it for the tax year
relating to the Company's 1990 fiscal year and such subsequent tax years as
have been requested by the IRS.
2. All matters disclosed in Schedule 3.21 are incorporated herein by
reference.
3. Liabilities incurred subsequent to the Balance Sheet Date with respect to
the payment of bonuses disclosed in items 7, 8 and 9 of Schedule 3.19 and
items 2 and 3 of Schedule 3.23.
Schedule 3.16
Insurance
1. See attached schedule of insurance.
ARCON COATING ▇▇▇▇▇, INC.
INSURANCE SCHEDULE
-------------------------------------------------------------------------------------------------------------
EFFECT. LIMITS
BROKER POLICY DATE PREMIUM COVERAGE OCCUR/AGGR DEDUCTIBLE
=============================================================================================================
OCEANSIDE
-------------------------------------------------------------------------------------------------------------
▇▇▇▇▇ AFFIL. BUSINESS AUTO 6/1/96 $ 7,443 1,000 K .5K/2K
-------------------------------------------------------------------------------------------------------------
▇▇▇▇▇ AFFIL EXCESS 6/1/96 5,500 5,000K 1,000K/2,000K
UMBRELLA
-------------------------------------------------------------------------------------------------------------
▇▇▇▇▇ AFFIL. COMMERCIAL 6/1/96 18,114 4,368K PROP 2,000K
PACKAGE 3,120K B.I. 30K TRANSIT .5K
1,000K EQUAKE 25K
50K .5K
DISHONESTY
-------------------------------------------------------------------------------------------------------------
▇▇▇▇▇ AFFIL. PROPERTY & 6/1/96 13,841 1,600K PROP 1,000K/2,000K 1K
CASUALTY 288K B.I.
-------------------------------------------------------------------------------------------------------------
STATE WORKERS' COMP 1/1/96 54,232
INSURANCE FUND
-------------------------------------------------------------------------------------------------------------
HARTFORD TRAVEL 7/2/93 7,640 1,000K/500K 2,500K
ACCIDENT 3 YR
DK/JK/MH/EM
ES/WD
-------------------------------------------------------------------------------------------------------------
HARTFORD LIFE DK DISABILITY 8/1/93 3,629 4K/MO.
-------------------------------------------------------------------------------------------------------------
FIRST STATE 7/1/96 1,732
REHABILITATION DISABILITY
-------------------------------------------------------------------------------------------------------------
TRAVELERS JK/ES LIFE 12/2/95 1,484
-------------------------------------------------------------------------------------------------------------
COLONIAL LIFE DK LIFE 11/1/95 7,100 2,000K
-------------------------------------------------------------------------------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇ LIFE 9/1/95 1,800 1,000K
-------------------------------------------------------------------------------------------------------------
ANTHEM HEALTH MEDICAL 12/1/95 8,385/MO
AVG.
-------------------------------------------------------------------------------------------------------------
1
-------------------------------------------------------------------------------------------------------------
EFFECT. LIMITS
BROKER POLICY DATE PREMIUM COVERAGE OCCUR/AGGR DEDUCTIBLE
=============================================================================================================
NY LIFE/ MEDICAL 12/1/95 5,149/MO
NYLCARE AVG.
-------------------------------------------------------------------------------------------------------------
ANTHEM HEALTH LIFE 12/1/95 776/MO
-------------------------------------------------------------------------------------------------------------
▇▇▇▇ ▇▇▇▇▇▇ LTD 12/1/95 990/MO
AVG.
-------------------------------------------------------------------------------------------------------------
SPRINGFIELD
-------------------------------------------------------------------------------------------------------------
BUREAU OF WORKERS COMP 12,373
WORKERS COMP
-------------------------------------------------------------------------------------------------------------
▇▇▇▇▇▇▇ & PACKAGE 2/19/96 13,018
▇▇▇▇▇▇
-------------------------------------------------------------------------------------------------------------
EMPLOYERS LIFE/MAJOR 4/1/96 2,910
HEALTH MEDICAL MO
-------------------------------------------------------------------------------------------------------------
MASS MUTUAL ▇. ▇▇▇▇▇▇▇▇ 9/1/95 1,481 1,000/MO
DISABILITY
-------------------------------------------------------------------------------------------------------------
2
Schedule 3.17
Compliance with Laws
1. All matters disclosed on Schedule 3.21 are incorporated herein by
reference.
2. The IRS is currently conducting an audit of FSE, the former parent of the
Company, regarding the consolidated federal income tax return filed by FSE
for the tax year relating to the Company's 1990 fiscal year. FSE has
advised the Company that it has waived the applicable statutes of
limitations relating to federal tax returns filed by it for the tax year
relating to the Company's 1990 fiscal year and such subsequent tax years as
have been requested by the IRS.
Schedule 3.18
Employment Relations
None.
Schedule 3.19
Employee Benefit Plans
l.* Arcon Coating ▇▇▇▇▇, Inc. Retirement Plan and Trust dated August 1,
1984, which Plan was terminated as of May 31, 1991, and which Plan
received a favorable determination letter from the IRS dated June 17,
1992 with respect to such termination. The Pension Benefit Guaranty
Corporation ("PBGC") has not issued a Notice of Noncompliance with
respect to such termination.
2.** Arcon Coating ▇▇▇▇▇, Inc. Profit Sharing Plan & Trust Agreement dated
November 1, 1993, as amended.
3.* International Envelope Company Savings and Investment Plan (from which
Arcon Coating ▇▇▇▇▇, Inc. Profit Sharing Plan & Trust was spun-off
effective November 1, 1993).
4. Stock Option Plan of Arcon Holdings Corp.
5. The ▇▇▇ Matching Plan of the ▇▇▇▇▇▇ Tape Company dated October 1,
1979, as amended, which is a "simplified employee pension" (as defined
in Section 408(k) of the Code).
6. Employment Agreement dated as of April 14, 1994 by and between Arcon
Holdings and ▇▇▇▇▇ ▇. ▇▇▇▇▇.
7. Employment Agreement dated as of April 14, 1994 by and between Arcon
Holdings and ▇▇▇▇▇▇▇ ▇▇▇▇.
8. The following individuals eligible for the indicated bonus for the
fiscal year ending 10/31/96: ▇▇▇▇▇▇ ▇▇▇▇, $18,000; ▇▇▇▇▇▇ ▇▇▇▇▇▇▇,
$5,000; ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, $5,000; ▇▇▇▇ ▇▇▇▇▇▇▇, $10,000; all office
employees, one week's pay.
----------
* Plan documents, Forms 5500,financial statements and the most recent
determination letter have not been provided to Purchaser with respect to this
plan.
** Plan to be amended prior to the Closing to fully vest all participants as of
the Closing Date.
9. Productivity/length of service bonuses will be given to manufacturing
personnel for fiscal year 1996 as follows: ▇▇▇▇ ▇▇▇▇▇, $550; ▇▇▇▇▇▇ ▇▇▇▇,
$420; ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, $150; ▇▇▇▇▇ ▇▇▇▇▇▇, $150; ▇▇▇▇ ▇▇▇▇▇▇, $250; ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, $1,310; ▇▇▇▇▇▇▇ de ▇▇▇▇▇, $1,940; ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, $440;
▇▇▇▇ ▇▇▇▇▇▇▇▇▇, $150; ▇▇▇▇▇▇ ▇▇▇▇▇▇, $1,500; ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, $2,000;
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, $380; ▇▇▇▇▇ ▇▇▇▇▇▇▇, $328; ▇▇▇▇▇ ▇▇▇▇▇▇, $2,000; ▇▇▇▇▇▇
▇▇▇▇▇▇▇, $150; ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, $300; ▇▇▇▇▇ ▇▇▇▇▇▇▇, $447; ▇▇▇▇
▇▇▇▇▇▇▇▇▇, $2,000; ▇▇▇▇▇ ▇▇▇▇▇▇▇, $315; ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, $440; ▇▇▇▇▇ ▇▇▇▇,
$2,000; ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, $1,420; ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, $330, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇,
$875; ▇▇▇▇ ▇▇▇▇▇▇▇, $300; ▇▇▇▇▇ ▇▇▇▇▇▇▇, $385; ▇▇▇▇▇ ▇▇▇▇▇▇, $250; ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, $245, Inmar ▇▇▇▇▇ ▇▇▇▇▇▇, $250; Taiwan Verene, $150; ▇▇▇▇
▇▇▇▇▇▇, $1,000;
10. See attached description of executive bonus program.
11. See attached description of paid time off and vacation policies.
12. Reference is made to the schedule of insurance attached to Schedule 3.16.
MEMORANDUM
----------
TO: Arcon Board of Directors
FROM: ▇▇▇▇▇ ▇▇▇▇▇
DATE: December 15,1995
SUBJECT: 1996 BONUS PROGRAMS/PERSONAL OBJECTIVES
---------------------------------------
Enclosed please find the finalized bonus programs and personal objectives for
our key employees. Individual bonus formulas are shown separately along with
appropriate personal objectives (P.O.). The general bonus parameters which
relate operating income performance and personal objectives, and pertain to all,
are given below.
- General Formula:
Goal Performance = (X) X O.I. Mult. + (Y) X O.I. MULT. X P.O.
X - Y = 100%. Weight (%) of X & Y for each employee is indicated in the
individual bonus programs.
- The operating income multiplier will index as per the following and
will be reviewed annually:
O.I. O.I. O.I. O.I.
% To Plan Mult. % To Plan Mult.
--------- ----- --------- ----
80% 65% 103% 105%
82% 70% 106% 110%
85% 75% 109% 115%
88% 80% 112% 120%
91% 85% 115% 125%
94% 90% 118% 130%
97% 95% 121% 135%
100% 100% 124% 140%
127% 145%
130% 150%
- Over-accruals of profit sharing and management bonuses will not be
considered when calculating the goal performance (i.e., operating income
is calculated assuming bonus and profit sharing monies are the lesser of
plan or actual amount).
- No bonus payout if operating income falls below 80% of plan.
- The operating income multiplier in the Personal Objectives (P.O.) part of
the equation has a maximum of 125%.
- The operating income multiplier in the P.O. part of the equation can not go
below 100%.
Page 1 of 2
ARCON COATING ▇▇▇▇▇, INC.
-------------------------
MEMORANDUM
----------
TO: Board of Directors
FROM: ▇▇▇▇▇ ▇▇▇▇▇
DATE: December 15,1995
SUBJECT: 1996 PERSONAL OBJECTIVES/BONUS PROGRAMS
---------------------------------------
- SALES/MARKETING 25%
- Insure Sales Department activity to generate sales forecast.
- Spearhead a continuing new product development program.
- Continue efforts for European sales by direct Arcon personnel and
actively recruit an agent.
- FINANCIAL 25%
- Initiate profit improvement program by negotiation with vendors,
material substitution and overall cost reductions to save $250,000 in
materials and $50,000 in S.G. & A. Both to be measured against 1996
budget.
- Provide leadership to complete the installation of a fully automated
order entry, production planning, inventory, and billing system by
March 31, 1996.
- OPERATIONS 25%
- Insure coater waste stays below 3.5%.
- Continue effort to source TYVEK -Registered Trademark- gumming vendor.
- Continue development of alternative TYVEK -Registered Trademark-
material.
- OTHER
- Initiate and investigate possible acquisition candidates. 15%
- Explore and prepare a review of alternative markets for Arcon products
and technology. 10%
Page 2 of 2
BONUS PROGRAM
-------------
ASSUMPTIONS:
CONSOLIDATED FINANCIALS
O.I. = 75% P.O. = 25%
Goal performance indexes 2 points for every point above 100% to a maximum
of 150%.
Target Bonus Potential = 35% of Salary X ($175,000) + $61,250
G.P. = (.75) X Oper. Inc. Mult. + (.25) X (O.I. Mult.) X P.O.
bonus = G.P. % X ($61,250)
DK:dv
Page 1 of 2
M E M O R A N D U M
TO: ▇▇▇▇ ▇▇▇▇▇
FROM: ▇▇▇▇ ▇▇▇▇
DATE: December 15, 1995
SUBJECT: ▇▇▇▇▇▇▇ ▇▇▇▇ - 1996 PERSONAL OBJECTIVES/BONUS PROGRAM
SALES - 65%
Increase Office Products sales from $18,182,000 to $19,635,000. 25%
Grow export sales from $800,000 to $1,000,000. 10%
Increase Book Products sales performance from $3,054,000 to
$3,300,000. Reevaluate our sales coverage and wholesaler network
by 2/28/96. 10%
Institute a profitability program for the top 25 accounts in
conjunction with the finance group. This will include current
margins, profit mix, and recommendations to improve margins. 15%
Redefine ▇▇▇▇▇▇ Tape's product offering and sales thrust by 6/30/96. 5%
ADMINISTRATIVE - 25%
Guide the new products development team to develop three new
products in 1996 with at least two by 8/30/96. 15%
Direct the implementation of a quality control system to cover
incoming WIP, finished goods, and outbound shipments by 2/28/96. 10%
NEW MARKETS - 10%
Investigate potential of five new markets as a result of DuPont
referrals. 10%
Page 2 of 2
BONUS PROGRAM
ASSUMPTIONS:
CONSOLIDATED FINANCIALS
O.I. = 75% P.O. = 25%
Goal performance indexes 2 points for every point above 100%
to a maximum of 150%.
Target Bonus Potential = 30% of Salary x ($131,000) = $39,300
G.P. = (.75) x Oper. Inc. Mult. + (.25) x (O.I. Mult.) x P.O.
Bonus = G.P. % X (39,300)
Page 1 of 2
M E M O R A N D U M
TO: ▇▇▇▇▇ ▇▇▇▇▇
FROM: ▇▇▇▇ ▇▇▇▇▇▇▇
DATE: December 15, 1995
SUBJECT: 1996 PERSONAL OBJECTIVES/BONUS PROGRAM
1. a. Meet all of ▇▇▇▇▇▇ Financial's reporting deadlines including monthly
financial statements, borrowing base certificates, compliance
certificates (including coverages), operations reports, and annual
projections.
10%
b. Provide appropriate support for special projects as requested by
Northwood Ventures and/or the President.
5%
2. a. Complete installation and deliver operational order entry system
by March 31, 1996.
20%
b. Bring in-house and consolidate on the Macola system the accounts
receivable and accounts payable of ▇▇▇▇▇▇ Tape by April 1, 1996.
15%
c. Develop computer reports to enable sales and marketing to determine
profitability by customer/by product.
5%
3. Analyze all areas of overhead costs and develop action plans to generate
potential cost savings of $50,000 below 1996 budgeted levels from the
following target areas: telephone, utilities, freight, health care
costs, bad debts, insurance, and repairs and maintenance.
15%
4. Insure Arcon Oceanside's trade receivable twelve-month average DSO do
not exceed 31 days. Insure working capital stays at or below budget
projections.
5%
5. Provide appropriate support for Price Waterhouse year-end audit, tax
preparations, and all other activity as required.
15%
6. Analyze the feasibility of implementing a fully-integrated manufacturing
cost system for Arcon with recommendations by September 1, 1996.
10%
BONUS PROGRAM
ASSUMPTIONS:
CONSOLIDATED FINANCIALS
O.I. = 60% P.O. = 40%
Goal performance Maximum = 125%
Target Bonus Potential = 15% of Salary x ($90,000) = $13,500
G.P. = .60 x (O.I. Mult.) + .40 x (O.I. Mult.) x P.O.
Bonus = G.P. % x ($13,500)
Page 1 of 2
M E M O R A N D U M
TO: ▇▇▇▇ ▇▇▇▇▇
FROM: ▇▇▇▇ ▇▇▇▇
DATE: December 15, 1995
SUBJECT: ▇▇▇ ▇▇▇▇▇ - 1996 PERSONAL OBJECTIVES/BONUS PROGRAM
SALES - 75%
Increase Office Products sales from $9,100,000 to $9,800,000 (see attached
account list). ▇▇▇▇▇ adjusted by $400,000.
25%
Qualify pressure sensitive TYVEK-Registered Trademark- with release liner
at ▇▇▇▇▇ by July 31, 1996.
20%
Implement cost savings and increased margin contribution for Deluxe Check.
Replace 890-1HS with CMP/KC.
Replace ▇▇▇▇▇▇▇/Foliotronics with 800-1HS. Replace Ideal Tape with 211-1PS.
20%
Grow #5 Drill from $50,000 to $75,000 and sell as a replacement for in-house
combining resulting in 10% material savings.
10%
NEW PRODUCTS - 20%
Develop a source for ribbed Super B Text to compete with Holliston.
10%
Introduce hi-stretch Sontara with ▇▇▇▇▇ for spine reinforcing.
10%
ADMINISTRATIVE - 5%
Submit pre-call planning and call reports on a timely basis.
5%
Page 2 of 2
BONUS PROGRAM
ASSUMPTIONS:
ARCON OCEANSIDE FINANCIALS
O.I. = 60% P.O. = 40%
Goal Performance Maximum = 125%.
Target Bonus Potential = $54,000
G.P. = .60 x (O.I. Mult.) + .40 x (O.I. Mult.) x (P.O)
Bonus = G.P. % x ($54,000)
Page 1 of 2
M E M O R A N D U M
TO: ▇▇▇▇ ▇▇▇▇▇
FROM: ▇▇▇▇ ▇▇▇▇
DATE: December 15, 1995
SUBJECT: ▇▇ ▇▇▇▇▇▇▇▇▇▇
1996 PERSONAL OBJECTIVES/BONUS PROGRAM
SALES - 20%
Increase target accounts by 8% (see attached list).
20%
NEW PRODUCTS - 60%
Develop three new viable products for presentation to the new products
committee: one by 3/31/96, one by 8/31/96, and one by 10/31/96.
25%
Develop a product to meet 701 vertical burn test for the indoor decorative
market.
10%
Improve base costs on two line items by 10% (paper or cloth).
15%
Set up and install a complete procedure for all new product trials for the
company by January 30, 1996. This is to include forms for recording data,
samples, binders, and physical location for same.
10%
QUALITY - 10%
Institute formal quality control standards and procedures to monitor same by
February 28, 1996.
10%
ADMINISTRATION - 10%
Submit pre-call planning and call reports on a timely basis.
10%
Page 2 of 2
BONUS PROGRAM
ASSUMPTIONS:
ARCON OCEANSIDE FINANCIALS
O.I. = 60% P.O. = 40%
Goal Performance Maximum = 125%.
Target Bonus Potential = $4,000
G.P. = .60 x (O.I. Mult.) + .40 x (O.I. Mult.) x (P.O.)
Bonus = G.P. % x ($4,000)
ARCON COATING ▇▇▇▇▇
DESCRIPTION OF PAID TIME OFF AND VACATION
PAID HOLIDAYS
After completion of one full month of work, all full-time employees are
entitled to the following paid holidays. In order to be paid for a holiday,
an employee must work the normal work days before and after the holiday in
that pay period.
New Year's Day Labor Day
Washington's Birthday Thanksgiving Day
Good Friday Friday after Thanksgiving
Memorial Day Christmas
July 4th
VACATION
After completing one year of work, all full-time hourly employees are
entitled to one paid week.
After completing two years of work, all full-time hourly employees are
entitled to two paid weeks.
After completing ten years of work, all full-time hourly employees are
entitled to three paid weeks.
SICK/PERSONAL TIME
All full-time hourly employees are eligible for six (6) personal/sick days
per calendar year after completion of a full calendar year of work. This
breaks down to one-half day per month and is accrued at a rate of 4 hours per
month. Any unused sick/personal time remaining at the end of the calendar
year is paid to the employees at their base hourly salary. (The four hours
accrued for the month of December are carried over to the following year to
be used for those employees wishing to observe ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇. Day in
January.)
SALARIED EMPLOYEES
There is no formal written policy with respect to vacation and sick/personal
time for salaried employees.
Schedule 3.20
Interests in Customers, Suppliers, etc.
None.
Schedule 3.21
Environmental Laws and Regulations
1. See attached draft environmental audit prepared by ENSR Consulting and
Engineering, dated as of August 1996, which is incorporated by reference
herein and made a part hereof. The matters disclosed in the final version
of such draft are also disclosed herein by reference.
2. The Company did not comply with certain New York State Department of
Environmental Conservation ("NYSDEC") and Clean Air Act requirements at its
facility located at ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ (the "Oceanside
Facility"), as further described in the following documents (or provisions
thereof, as applicable) which are attached hereto: (i) Section 2.6.1 of the
Phase I Environmental Site Assessment dated March 1994 by ▇▇▇▇▇▇▇▇-▇▇▇▇▇
Consultants; (ii) Sections A. (starting on page 1) and I. (starting on page
5) of the Environmental Audit dated July 11, 1991 by Pro-Flex Consultants,
Ltd. (the "Pro-Flex Audit"); (iii) Mass Balance Analysis dated August 19,
1991; (iv) Sections A. and II. of the Mid-Year Environmental and Safety
Report of the Company dated June 12, 1992 (the "Safety Report") and
Sections I.A., II and III of the Environmental and Safety Compliance
Assessment dated October 11, 1991 (the "Compliance Report"); (v) Notice of
Compliance Determination dated October 21, 1991; (vi) Order on Consent No.
R1-4837-92-0l issued by NYSDEC, together with letter amendments thereto
(collectively, the "Order on Consent") and (vii) Letter dated August 5,
1993 from Ropes & ▇▇▇▇ to NYSDEC regarding final obligations under the
Order on Consent together with the permits obtained by the Company in
compliance therewith.
3. The Company did not comply with certain hazardous materials and waste
regulations at the Oceanside Facility as further described in the following
documents (or provisions thereof, as applicable) which are attached hereto:
(i) Sections B. (starting on page 2) and II. (starting on page 9) of the
Pro-Flex Audit and (ii) Sections B., C . and II. of the Safety Report and
Sections I.B., I.C., II. and III. of the Compliance Report.
4. The Company did not comply with certain OSHA regulations at the Oceanside
Facility as further
described in the following documents (or provisions thereof, as applicable)
which are attached hereto: (i) Sections C. (starting on page 3) and III.
(starting on page 17) of the Pro-Flex Audit and (ii) Sections C., D. and
II. of the Safety Report and I.C., I.D., II. and III. of the Compliance
Report.
5. On March 31,. 1996, Aquatite Tyvek Red Ink was discharged from the
Oceanside Facility as further described in the following documents which
are attached hereto: (i) Request for Clean-up Notification dated March 31,
1996 issued by NYSDEC and (ii) Field Inspection Report dated April 15,
1996.
6. In March 1994, the following conditions were noted at the Company's
facility located at ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇: (i)
non-compliance with the National Pollution Discharge Elimination Notice of
Intent and Stormwater Pollution Prevention Plan filing requirements; (ii)
the potential impact of soil and/or groundwater in the former tank basin of
an 8,400 gallon underground storage tank in which heating oil had been
stored; (iii) inadequate eye protection policy for certain employees, a
written Lock-Out/Tag-Out Program, and Noise Survey; (iv) potentially
damaged asbestos containing material insulation on overhead piping in the
east building at the facility; and (v) potential impact of oil/grease to
surface and subsurface soil along the east property boundary from an
adjacent property. The Memorandum of the Company dated March 28, 1994
responding to the above issues is attached hereto.
DRAFT
Specialty Paperboard
Brattleboro, Vermont
[LOGO] ▇▇▇▇▇ Environmental Due Diligence:
Arcon Coating ▇▇▇▇▇,
Oceanside, NY
and
▇▇▇▇▇▇ Tape Co.,
Springfield, OH
ENSR Consulting and Engineering
August 1996
Document Number ▇▇▇▇-▇▇▇-▇▇▇
Specialty Paperboard
Brattleboro, Vermont
Environmental Due Diligence:
Arcon Coating ▇▇▇▇▇,
Oceanside, NY
and
▇▇▇▇▇▇ Tape Co.,
Springfield, OH
ENSR Consulting and Engineering
August 1996
Document Number ▇▇▇▇-▇▇▇-▇▇▇
ENSR
--------------------------------------------------------------------------------
CONTENTS
1.0 INTRODUCTION ........................................................ 1-1
1.1 Preface ......................................................... 1-1
1.2 Objectives ...................................................... 1-1
1.3 Scope of Work ................................................... 1-1
1.4 Study Limitations ............................................... 1-2
2.0 OCEANSIDE, NEW YORK ................................................. 2-1
2.1 Site Description ................................................ 2.1
2.1.1 Site Location ............................................. 2-1
2.1.2 Site History .............................................. 2-1
2.1.3 Description of Current Site Activities
and Operational History ................................. 2-1
2.2 Prior Investigations ............................................ 2-2
2.3 Data Base Search Results ........................................ 2-2
2.4 Key Findings .................................................... 2-3
3.0 SPRINGFIELD, OHIO ................................................... 3-1
3.1 Site Description ................................................ 3-1
3.1.1 Site Location ............................................. 3-1
3.1.2 Site History .............................................. 3-1
3.1.3 Description of Current Site Activities
and Operational History ................................. 3-1
3.2 Prior Investigations ............................................ 3-2
3.3 Data Base Search Results ........................................ 3-3
3.4 Key Findings .................................................... 3-3
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1.0 INTRODUCTION
1.1 Preface
ENSR Consulting and Engineering (ENSR) was retained by Specialty Paperboard,
Inc. to evaluate the actual or potential environmental liabilities associated
with two specialty paper manufacturing facilities currently owned and/or
operated by Arcon Coating Mill, Inc. ("Arcon"). These facilities are situated in
Oceanside, NY and Springfield, OH, respectively. The latter facility operates
under the name, The ▇▇▇▇▇▇ Tape Co.
1.2 Objectives
The purpose of this investigation was to determine, where possible, whether the
subject facilities and associated properties might contain actual or potential
environmental liabilities and if so, to provide a reasonable worst case cost
estimate of their financial magnitude.
Reasonable worst case costs are those costs relating to an environmental issue
which are the highest that ENSR believes are reasonably possible. That is, the
chance that the costs will be significantly higher appear to be reasonably
small, but not zero. The reasonable worst case estimate is not based on a true
worst case. Of all the damaging contingencies that might occur, this estimate
takes into account only those that are reasonably possible in this case.
We have not attempted to estimate a most likely cost for addressing the
potential problems identified herein because a commercial Phase I report does
not provide a sufficiently detailed factual or engineering analysis, or an
understanding of the specific regulatory context for preparing such an estimate.
As with any due diligence evaluation, there simply is not sufficient information
available upon which to base such assumptions.
1.3 Scope of Work
Consistent with the above described objectives, ENSR's work scope focused on the
following broad areas of inquiry:
o The extent to which a significant hazardous materials or petroleum
contamination problem may be affecting the subject properties and
potentially necessitating a major expenditure to remediate (clean
up).
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ENSR
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o The extent to which facility operations are being conducted in a
manner consistent with key federal and state EH&S regulations,
including those related to air, water, hazardous waste, underground
storage tanks, PCBs, asbestos-containing building materials, and
worker health and safety.
o The extent to which there exist contingent environmental liabilities
associated with wastes generated from the subject facilities and
taken off-site for disposal.
Both facilities were the subject of previously Phase I site assessment reports
prepared by ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Consultants in March 1994. This current ENSR
investigation builds upon this earlier work in addition to reviewing a
substantial volume of documents obtained by White & Case from Arcon. ENSR also
used EDR of Southport, CT to conduct searches of selected federal and state
regulatory data bases. Lastly, ENSR conducted a site visit to the ▇▇▇▇▇▇ Tape
facility on July 30, 1996. ENSR did not visit the Oceanside, NY facility, though
we have incorporated comments from ▇▇▇▇▇ ▇▇▇▇▇ of Specialty Paperboard, who
visited the Oceanside facility on July 28, 1996.
ENSR has attempted to make this a management-style summary report rather than an
exhaustive recitation of information. The report begins with a description of
each of the subject sites and facilities, including site histories and
identification of current activities taking place. The results of prior Phase I
investigations are then discussed. Finally, a summary of outstanding issues of
potential concern is presented, including estimates of the costs required to
correct or remediate each identified issue. This latter section is intended to
provide a relatively succinct identification of potential environmental
liability issues that might be considered material to the proposed transaction.
1.4 Study Limitations
This Report describes the results of ENSR's due diligence investigation to
identify the presence of significant environmental liabilities materially
affecting the subject facilities and/or properties. In the conduct of this due
diligence investigation, ENSR has attempted to independently assess the presence
of such problems within the limits of the established scope of work as described
in our letter proposals dated July 19, 1996.
As with any due diligence evaluation, there is a certain degree of dependence
upon oral information provided by facility or site representatives which is not
readily verifiable through visual inspection or supported by any available
written documentation. ENSR shall not be held responsible for conditions or
consequences arising from relevant facts that were concealed,
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1-2
ENSR
--------------------------------------------------------------------------------
withheld, or not fully disclosed by facility or site representatives at the time
this investigation was performed.
This report and all field data and notes were gathered and/or prepared by ENSR
in accordance with the agreed upon scope of work and generally accepted
engineering and scientific practice in effect at the time of ENSR's
investigation of the subject sites. The statements, conclusions, and opinions
contained in this report are only intended to give approximations of the
environmental conditions at these locations.
This report, including all supporting field data and notes (collectively
referred to hereinafter as "information"), was prepared or collected by ENSR
Consulting and Engineering (ENSR) for the benefit of its' client, Specialty
Paperboard, Inc. ENSR's client may release the information to its lender or
other third parties, who may use and rely upon the information at their
discretion. However, any use of or reliance upon the information by a party
other than specifically named above shall be solely at the risk of such third
party and without legal recourse against ENSR, its parent or its subsidiaries
and affiliates, or their respective employees, officers or directors, regardless
of whether the action in which recovery of damages is sought is based upon
contract, tort (including the sole, concurrent or other negligence and strict
liability of ENSR), statute or otherwise. This information shall not be used or
relied upon by a party that does not agree to be bound by the above statement.
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2.0 OCEANSIDE, NEW YORK
2.1 Site Description
A summary description of Arcon's Oceanside, NY facility is presented below,
including a discussion of the site location, site history, and current uses of
the subject property.
2.1.1 Site Location
Arcon operates a leased 31,000 s.f. facility addressed as ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇. The facility is located on Long Island about
400 feet east of the confluence of Mill River and ▇▇▇▇▇▇ Creek. The site is
bounded by an indoor tennis court facility to the north; a marina and residences
to the east; a boat yard and shipping container repair facility to the south;
and New Street to the west. On the far side of New Street is a scrap metal and
auto junk yard.
2.1.2 Site History
According to the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ March 1994 Phase I report (WCC report), Arcon
was the first and only tenant of its building, which was constructed in 1972.
Uses of the site prior to 1972 are not discussed in the WCC report.
2.1.3 Description of Current Site Activities and Operational History
Arcon is involved in surface coating and printing operations at this single
story facility. The company coats Tyvek and other materials with water-based
inks and adhesives. Solvent-based inks were used until 1992.
Arcon switched to water-based inks in 1993, largely in response to an
administrative consent order (ACO) with the New York State Department of
Environmental Conservation (NYSDEC). With the switch to water-based inks, Arcon
has limited emission sources. The facility holds current air emission
Certificates to Operate; these have been issued by the Nassau County Department
of Health.
The facility is a small quantity generator of hazardous waste. One of their inks
(green) contains above threshold levels of copper and cannot be disposed of into
the sewer system as a result. This material is taken to S&W Waste in South
Kearny, NJ for disposal.
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2-1
ENSR
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The subject facility is served by municipal water and sewer. Arcon discharges to
the sewer small quantities of washwater produced from cleaning inks from
printing equipment; no permit is required. Nassau County Department of Public
Works last conducted a field inspection of the facility on April 15, 1996; no
compliance issues were identified.
Space heating is by natural gas. There is no history of underground storage
tanks on the subject property. Lastly, there is no known asbestos containing
materials present.
2.2 Prior Investigations
The 1994 WCC Phase I report did not identify any current environmental problems
involving the subject facility, though it did note that the company was
operating under a NYSDEC administrative consent order relative to air problems.
In 1991, Arcon voluntarily disclosed its problems and subsequently was issued a
notice of violation by the Nassau County Department of Health for operating air
emission sources without proper permits. The company entered into an ACO with
the state in November 1992. The required permits were received in July 1993
(current air permits are dated January 1, 1996 and expire in January 1997). It
is our understanding that the company has fulfilled all of its obligations
relative to the ACO.
In July 1991, Pro-Flex Consultants conducted an audit of the Arcon facility. The
audit identified numerous issues, including the absence of air emission permits.
Other notable issues included the absence of the required hazardous
communications plan and poor hazardous waste storage practices. Additionally,
Pro-Flex noted that, "The housekeeping at the presses and in the ink mixing area
is terrible." The documentation obtained by White & Case from Arcon indicates
that immediate actions were taken by Arcon management to correct the identified
deficiencies, including housekeeping problems. The 1994 WCC report found no
outstanding compliance issues. Moreover, housekeeping procedures inside the
facility were noted to be good. There are also no floor drains present,
according to WCC.
2.3 Data Base Search Results
The EDR data base search did not identify any outstanding issues or problems
relative to the Arcon facility or any others in the immediate site vicinity.
Arcon was not identified as being a potentially responsible party (PRP) at any
federal Superfund site.
Although not identified in the data base search results, Arcon had a release of
water-based, non-hazardous red ink on March 31, 1996. Apparently, a 5-gallon
bucket containing residual material
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2-2
ENSR
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had been placed in an outdoor compactor where it was crushed; the liquid
eventually leaked to a nearby storm drain that was located about 15 feet away.
The state was notified and a cleanup of the storm drain was undertaken. Arcon
subsequently installed a lock on the compactor door to prevent anyone except
management from using it. Additionally, employees were re-informed about company
policy involving the proper disposal of unusable ink and wash water. There has
been no further action taken by any regulatory agency relative to this incident,
and none is expected.
2.4 Key Findings
The Arcon facility was observed by ▇▇▇▇▇ ▇▇▇▇▇ to be reasonably well maintained,
with limited opportunities for environmental impairment. Only water-based inks
are used and no floor drains or other conduits for contaminant migration are
present within the plant. Housekeeping is considered good, with there being
adequate attention being paid to environmental compliance issues.
The only identifiable issue concerns the fact that the Arcon facility is
situated in a mixed commercial and industrial area, with a boat and ship repair
facility abutting the subject facility to the south, and a scrap metal & auto
junkyard present on the opposite side of New Street to the west. Neither of
these facilities was identified in the data base report as having been involved
in any contamination-related incidences or as having underground storage tanks.
Both are potential sources of contamination, which could migrate and impact the
subject site (though there is no evidence that this has occurred). However, as
noted earlier, the subject facility is leased. Therefore, these off-site threats
are less an issue of potential concern, in our opinion.
Relative to future compliance matters, particularly as they pertain to the Clean
Air Act (CAAA) Amendments, it appears that the subject facility does not use
sufficient quantity of regulated chemicals to be considered a significant
generator of hazardous air pollutants. All inks and adhesives are water-based.
Therefore, CAAA should have little to no financial impact on Arcon.
No liability costs have been assigned to this facility.
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3.0 SPRINGFIELD, OHIO
3.1 Site Description
A summary description of the ▇▇▇▇▇▇ Tape Company's Springfield, OH facility is
presented below, including a discussion of the site location, site history, and
current uses of the subject property.
3.1.1 Site Location
▇▇▇▇▇▇ Tape ("▇▇▇▇▇▇") operates an owned facility (Arcon Coating ▇▇▇▇▇, Inc. is
owner) that involves two connected buildings situated on a 2-acre site. Each
building has about a 10,000 s.f. footprint, and contains a single story with
full basement. The complex is addressed as ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇.
The subject facility is bounded by Sheridan Avenue to the north, beyond which
are residences; a printing company and a moving company to the east; railroad
tracks to the south; and an abandoned former industrial facility to the west.
3.1.2 Site History
The west building was constructed in the 1860's and was originally used for
manufacturing buggy wheels. ▇▇▇▇▇▇ Tape, which was founded in 1891 in
Wilmington, DL, moved to Springfield, OH and began occupying this facility in
1901. The upper floors of the west building were demolished in 1995, leaving
this a single story building with a below ground basement.
The east building was constructed in 1904 and has been occupied by ▇▇▇▇▇▇ Tape
since its construction.
3.1.3 Description of Current Site Activities and Operational History
The company coats paper and cloth with water-based inks and adhesives to produce
stripping and binding tapes for notebooks and pads. Solvent-based inks were used
until the mid-1970's.
The facility is a generator of hazardous waste, though on an infrequent basis.
They last generated hazardous waste in 1992 when ten drums of spent adhesives
were sent to Klor Kleen of Cincinnati, OH for disposal. This was a one-time
situation involving obsolete inks and adhesives. Asbestos from past abatement
activities were sent to the Bigfoot Run Sanitary landfill
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in Morrow, OH. The company sends its non-hazardous solid waste to Waste
Management of Ohio's landfill in Fairborn, OH.
The subject facility is served by municipal sewer and water. ▇▇▇▇▇▇ Tape
discharges all wash waters, compressor blowdown, and boiler blowdown to the
sewer. The City of Springfield does not consider the facility to be a
Significant Industrial User; therefore, no local discharge permit is required.
The city conducted sampling of ▇▇▇▇▇▇ Tape's effluent in 1992 and no problems
were identified. On-site production activities have not changed since that
sampling event.
Space and process heat are provided by two natural gas-fired boilers located in
the basement of the west building. Until 1987, these boilers used heating oil.
An 8,400 gallon underground storage tank (UST) was located in the alley along
the westerly side of the west building; it was removed on January 14, 1987. No
information was available concerning the age of the UST at the time of removal.
No soil or groundwater sampling took place, though the tank removal company
company, ▇▇▇▇▇ Excavating, reported to ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Consultants in 1994 that
there were no visual signs of leakage and no obvious signs of soil
contamination.
The subject facility has the necessary state air permits and/or registrations to
operate its equipment, including the rotogravure press, laminator, and gumming
machine. All permits and registrations are current.
Asbestos abatement programs were performed at the ▇▇▇▇▇▇ Tape facility in June,
1992 and December 1993 at which time asbestos was removed from the boilers and
steam lines. Additional ACM abatement activities took place in the second and
third floors of the west building; both floors were demolished about a year and
a half ago, leaving the west building a single story structure.
3.2 Prior Investigations
The 1994 WCC Phase I report identified a limited number of issues concerning the
▇▇▇▇▇▇ Tape facility; these included the following:
o The facility has not filed the required Notice of Intent relative to
the National Pollution Discharge Elimination Discharge System
(NPDES) stormwater requirements; a stormwater pollution prevention
plan had also not been prepared.
o Potential impact of the former 8,400 gallon UST on site soil and
groundwater, though no information was found by WCC to indicate that
a problem exists.
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o Need for improved OSHA-related practices as they pertain to the use
of eye protection by workers, the development of a written
Lock-Out/Tag-Out program, and conduct of a noise survey.
o The presence of suspect damaged ACM insulation on overhead piping in
the east building.
o Potential impact of oil/grease to surface and subsurface soils along
east property boundary due to the activities taking place on the
abutting which is occupied by a truck maintenance yard operated by
▇▇▇▇▇▇▇ Moving & Storage. At the time of the WCC site inspection,
drums labeled as containing waste oil were observed along the
property boundary.
WCC did not assign any liability costs to any of the above identified issues.
The ▇▇▇▇▇▇ Tape facility was audited by PF Technical Services of Levittown, NY
in September 1993. No issues were identified. The audit report concluded by
stating that, "....the facility is in compliance with current safety and
environmental regulations."
3.3 Data Base Search Results
The EDR data base search did not identify any outstanding issues or problems
relative to the ▇▇▇▇▇▇ Tape facility or any others in the immediate site
vicinity.
▇▇▇▇▇▇ Tape was not identified as being a potentially responsible party (PRP) at
any federal Superfund site.
3.4 Key Findings
ENSR visited the ▇▇▇▇▇▇ Tape facility on July 30, 1996. On the basis of the site
visit and review of facility records, key observations are noted as follows:
o Facility interior and exterior housekeeping needs improvement. The
basement production areas exhibited signs of past spills of
hydraulic oils and adhesives. Exterior areas are overgrown, with
several plastic drums formerly containing water treatment
chemicals having been discarded there. Although there are limited
opportunities for environmental impairment, given the size of the
facility operations and the limited quantities of hazardous
chemicals used, housekeeping improvements are recommended to at
least enhance the appearance of the plant
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and its grounds in the event that there is a future regulatory
inspection. No costs have been allocated to this task, since the
necessary improvements can be made using internal staff resources.
o The ▇▇▇▇▇▇ Tape facility still needs to file a Notice of Intent for
its stormwater permit and to prepare a pollution prevention plan.
This is a mandatory requirement since the facility is classified as
being in SIC 26. The estimated cost to prepare the necessary filings
is $10,000 to $15,000.
o The former presence of an 8,400 gallon heating oil UST represents a
source of possible concern since the facility has no documentation
pertaining to subsurface conditions at the time of the tank's
removal in 1987. While there were no legal requirements in-place at
the time to conduct sampling (nor would there be any ongoing
requirement for a new owner), a $15,000 to $25,000 contingency
should be considered, particularly if there are any plans to sell
the property.
o The ▇▇▇▇▇▇ Tape facility is situated in a mixed residential/
industrial neighborhood. Abutting the subject site to the east is a
trucking firm; to the west is an abandoned former manufacturing
plant (activities not known). The WCC report expressed concerns
about the trucking firm in particular. Because of the overgrown
conditions that exists between ▇▇▇▇▇▇ Tape and the referenced
trucking firm (i.e., area covered by dense vegetation), no specific
indications of improper waste management practices on the abutting
property were observable at the time of the site visit. Neither of
the abutting properties was identified on the data base search as
being involved in any contamination-related incidents. Nonetheless,
this is an older industrial area. Therefore, off-site conditions
should be monitored. No liability costs have been assigned.
o Minor quantities of suspect ACM is present in the piping that is
located in the basement of the east building; the condition of the
material is variable. Verification of the material as asbestos
containing would be required prior to initiating any corrective
abatement work. Total abatement costs are estimated to be on the
order of $5,000 to $10,000.
The previously identified OSHA compliance issues have been rectified.
Relative to future compliance matters, particularly as they pertain to the Clean
Air Act (CAAA) Amendments, it appears that the subject facility does not use
sufficient quantity of regulated chemicals to be considered a significant
generator of hazardous air pollutants. All inks and
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ENSR
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adhesives are water-based. Therefore, CAAA should have little to no financial
impact on ▇▇▇▇▇▇ Tape.
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▇-▇
▇▇▇▇▇▇▇▇ - ▇▇▇▇▇
▇▇▇▇▇ I Environmental Site Assessment
PHASE I ENVIRONMENTAL SITE ASSESSMENT
ARCON COATING ▇▇▇▇▇, INC.
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Prepared for:
NORTHWOOD VENTURES
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
MARCH 1994
PROJECT NO.: 4E04070
Prepared by:
▇▇▇▇▇▇▇▇-▇▇▇▇▇ CONSULTANTS
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
2.6.1 ENVIRONMENTAL COMPLIANCE
This section includes the results of the review of Arcon's environmental
compliance status regarding air and solid/hazardous waste issues. Based on a
review of documents provided to WCC by Arcon and the site inspections conducted
it appears that the facility is in compliance with applicable environmental
regulations. As stated in Sections 2.5.1 and 2.5.2 above, WCC has not completed
the review of the files at the various agencies contacted.
Air
Arcon is currently operating under a NYSDEC administrative consent order (ACO).
This ACO, signed on November 2, 1992, was designed to allow Arcon to operate
while reducing air emissions to meet NYSDEC and Clean Air Act requirements. At
this time, it appears that Arcon is in compliance with the ACO.
To reduce air emissions, specifically volatile organic compounds (VOCs), Arcon
has switched from solvent-based inks to water-based inks. Because of this
switch, Arcon attempted to get approval from Nassau County Department of Public
Works to discharge waste water (generated from cleaning ink from printing
equipment) to the public sewer system. The amount of discharge is approximately
25 gallons per week. Nassau County Department of Public Works has reviewed their
application and approved it with a
2-7
qualifier. Arcon cannot discharge the "green" waste water because of the copper
level. The discharge limit for copper is 2.0 mg/l and Arcon's "green" water
contained copper at 37 mg/l.
Waste Disposal
WCC has reviewed applicable documents regarding Arcon's waste disposal
practices. The documents were obtained from Arcon and our review is based solely
on these documents. Because of the short time frame for completion of the
project, WCC was unable to obtain any written compliance information from
either NYSDEC or Nassau County Department of Health. Based on our review, it
appears that Arcon is in compliance with applicable federal, state, and local
waste regulations.
Pro - Flex Audit
[Logo] PRO-FLEX consultants ltd.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇. ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ (516) 935-7241
ARCON COATING ▇▇▇▇▇
ENVIRONMENTAL AUDIT, JULY 11, 1991
RECOMMENDATIONS:
A. CLEAN AIR REGULATIONS
1. Identify the course of action to come into compliance by evaluating the
following alternatives:
a. Conversion to waterbourne ink technology
Evaluate the ramifications and requirements of using water
technology. Conduct appropriate tests where necessary. Determine equipment
modifications or additions that will enhance the ability of the presses to
use water inks.
b. Installation of add-on control system - incineration or solvent
recovery.
c. Combination of the available methods to achieve compliance:
(1) Press #1 - Incineration or solvent recovery
(2) Press #2 - Use only water inks and adhesives.
2. Develop a schedule to ascertain the time restraints necessary to
achieve compliance.
3. Due to the nature of the potential legal problems and penalties, engage
an attorney who can facilitate the reception of the applications for
permits and negotiate favorable terms.
4. Submit schedules to come into compliance and applications for permits
to the Nassau County Health Department.
Prior to submitting the applications, suggest that a request be made
to the County Health Department for a conference to discuss the
applications and schedule of compliance. This should initiate a dialogue
and negotiation for acceptance of the proposed course of action.
5. Based on the schedule of compliance, prepare specification packages to
submit to vendors of add-on control systems requesting proposals.
1
During the preparation of the specification package, identify
deficiencies in the existing equipment or plant layout which may require
modification to assure adequate air flows, drying and vapor capture. This
would include consideration of the recirculation of the drying systems,
and other alternatives which would optimize the use of the controls but
reduce the capital cost of the system.
B. HAZARDOUS MATERIALS AND WASTE REGULATIONS
1. Hazardous materials storage requires significant upgrading to meet the
requirements of Nassau County's Article III. This upgrading will include
elimination or replacement of the trailer for ink storage, construction of
a new flammable materials storage area, and consolidation of inks, ink
blends, and solvents into this new area.
Article 3 requirements include provisions for secondary containment,
fire suppression, electrical standards, vapor detection, and exhaust.
2. The ink mixing area at Arcon should be consolidated with the new
storage facilities. The consolidation will allow for improved ventilation,
upgraded electrical, and secondary containment.
3. Solvent currently purchased in 55 gallon drums may be more economically
purchased and managed in larger tote type containers (200 - 500 gallon
capacity). Evaluation of ink containers may also determine that major
colors (white and black, for example) should be purchased in larger tote
type containers.
4. Documentation should be obtained from the drum recycler used by Arcon
to assure that he is operating in accordance with State and New York City
regulations.
5. Drums containing ink blends in the mixing area should be properly
labeled.
6. Determine exactly how much hazardous waste from inks and solvent is
generated by collecting the residues, any ink that must be discarded, etc.
This determination should include the water inks.
7. Consideration should be given to the purchase or lease of a cleaning
tub, in which the solvents are reused and the solids removed periodically
for disposal. This will minimize hazardous waste generation.
8. At the time hazardous waste generator determination is
2
established, Arcon would file for an EPA Identification Number. This
number is required in order to have an authorized waste transporter and
disposer remove the hazardous waste from the premises.
9. Recommend that Arcon prepare an Emergency Fire, Explosion and Spill
Control Contingency Plan; prepare and implement a hazardous waste
management program.
10. Instead of buying ▇▇▇▇▇ of rags and disposing of the dirty rags in the
garbage, rag services should be engaged to supply, collect and clean the
right quality wipers.
11. Options for recycling of waste tyvek should be explored, including
pursuing DuPont's program using scavenger recycling firms, internal reuse
as packaging material, off-site use of the material for packaging
(give-away program, for example), or other options.
12. The sewer discharges should be screened on an annual basis to assure
compliance with Nassau and local sewer ordinances. Assurance should be
taken to avoid use of the wash tubs for cleaning of machine parts, inks,
etc.
C. OSHA
1. Plan and initiate a Safety Committee and Safety Program which would
address all safety and environmental concerns on a regular schedule.
2. Recommend that an OSHA Hazard Communication program be authorized that
will bring the firm into compliance with all sections of the law.
3. Recommend that lock out/tag out procedure should be initiated and the
employees equipped and trained to perform in accordance with the
provisions of the regulation.
4. Recommend that a fork lift truck training program be instituted.
5. Recommend that the dryer system should be checked, cleaned and
otherwise upgraded to improve the negative exhausting of all vapors from
the printing stack. Relocation of the floor fan to another location.
6. Recommend, per letter sent to ▇▇▇▇ ▇▇▇▇▇, that air tests should be made
by ▇▇▇▇▇ ▇▇▇▇ PE using Draeger Tubes. This will quantify the vapor levels
in various parts of the presses and plant. Based on the outcome, in-house
testing can be conducted on a designated schedule and recommendations made
for further action if warranted.
3
7. Give the press and ink mixing areas a good cleaning and train personnel
to maintain the presses and ink mixing areas.
4
[Logo] PRO-FLEX consultants ltd.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇. ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ (516) 935-7241
ARCON COATING ▇▇▇▇▇
ENVIRONMENTAL AUDIT, JULY 11, 1991
I. CLEAN AIR REGULATIONS PERTAINING TO ARCON OPERATIONS
A. New York State Air Regulations 6NYCRR
1. Part 201 Permits and Certificates - requires permits to erect and
certificates to operate an air contamination source.
2. Part 231 New Source Review in Nonattainment Area - requires
permits to erect and certificates to operate for air sources in
excess of deminis quantities and in excess of a potential 100 tons
emissions per year. The emission of Volatile Organic Compounds
(VOC's) carry a deminis quantity of 40 tons per year.
A nonattainment area is one which has been designated as
requiring regulatory restraints to reduce contamination levels to
acceptable levels as determined by the EPA and the NYSDEC (or
appropriate state or local enforcement agency). The entire
Metropolitan New York area, including Nassau County, has been
identified as a nonattainment area. Restrictions are more stringent
than in other areas of the state and country.
The methods of coming into compliance with regulatory
standards for emissions generated by Arcon are outlined in Part 228,
Surface Coating, and Part ▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇.
Part 228 Surface Coating Processes - sets standards for
"emission sources associated with the application, conveyance and
drying of coated materials onto a surface. A coating line may
consist of one emission source or of several emission sources
associated with a common surface coating operation.
The regulation sets standards in pounds per gallon of volatile
organic compounds (solvents) based on the nature of the substrate or
coated surface, and variables which exist within the particular
grouping that would impact on the amount of solvents required.
5
Arcon's adhesives coating operation would be assigned to the
category "Paper Coating Lines," which includes plastic films. The
standard allowed is 2.9 pounds of VOC's per gallon of coating
material.
Compliance with Part 228 can be achieved through the use of
high solids inks, waterbourne inks, or add-on control equipment.
Based on our observations and examination of the Material
Safety Data Sheets, the adhesives used by Arcon would qualify for
compliance under the surface coating standards of Part 228.
4. Part ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ - this part covers Gravure and Flexographic
printing processes. Unlike Part 228, the definition of compliance is
established by percentages of volume per gallon of ink as applied,
or percentage of overall destruction of volatile organic compounds.
The regulation does not define the VOC content by weight under any
circumstances. (In some states, there is a pounds of VOC per gallon
provision.)
For both Gravure and Flexography, water ink may be used to
establish compliance. The VOC content may be no more than 25% by
volume of the Ink As Applied.
High solids inks are offered as an alternative, but there are
no such inks in existence for the two processes at the percentages
described - no more than 40% solvents by volume per gallon of ink
applied.
Add-on controls, such as incineration or solvent recovery, are
methods of compliance. Gravure operations must demonstrate an
overall destruction of 65% of VOC's in the process; Flexographic
presses must achieve an overall destruction of 60% of VOC's.
The overall destruction is a result of both the capture and
removal of the vapors by the press drying system, and the
effectiveness of the control equipment in destroying what has been
captured.
Arcon can commit to compliance by means of extending the use
of water ink technology to all applications, or by installing add-on
controls where required to allow for the continued use of solvent
based ink technology.
B. Enforcement of the regulations has been granted by the State of New
York to the Nassau County Department of Health. Its activities with regard
to permitting and compliance schedules are subject to review and approval
by the New York
6
State Department of Environmental Conservation (DEC), Region 1 - located
in Stony Brook.
Legal affairs are handled by the engineers and attorneys for the
DEC. The County Health Department refers all cases in which it cannot
grant a permit outright to the State for review, negotiations, and
settlement.
C. Penalties are levied based on the time period for which operations are
not "permitted" and/or "out of compliance."
There is a formula which is used to calculate a penalty based on the
number of days of non-compliance. However, this is usually used for
dramatic impact and to set the framework within which legal negotiations
will take place.
A more vindictive method of penalizing a non-compliant firm has been
the use of a formula which calculates the economic advantage a firm has
over its competitors in the marketplace by not having spent the funds to
come into compliance. In most cases, this formulas seeks to exact a
penalty which would approximate the cost to the firm of attaining
compliance, i.e. the cost of purchasing an add-on control system and
operating it for the period involved.
It is difficult to say what the penalties will be. The establishment
of an acceptable penalty sum relates to the personalities of the
enforcement personnel, the region of the state, the nature of the process
and prevalence of other firms in the same business, and the perceived
impact of the resolution of the case.
The NYSDEC does not want to set precedents which can be used by
other firms to restrain enforcement of the regulations or penalties levied
against offenders.
OBSERVATIONS:
To the best of our knowledge, Arcon has not filed for any air emissions
permits during its existence.
The operation emits in excess of 100 tons per year of volatile organic
compounds. An initial estimate for the year 1990 indicates the purchase of inks
(solvent portion only) and solvents for dilution and clean-up amounted to
between 250,000 and 260,000 pounds. This would amount to emissions in excess of
125 tons. A more accurate and detailed evaluation will be made when information
is provided by Del Val Inks for the purchases of the years 1988, 1989 and 1990.
The solvent based inks used are not compliant, containing in
7
excess of the allowable percentages of VOC's as they are supplied. The standard
for solvent based inks is a maximum of 40% by volume as applied. The arriving
inks have solvent contents ranging from 38.8% to 78.8% (based on the listing
provided by Del Val as of May 29, 1991).
Additional solvents are blended in with the inks at the presses prior to
use, and during the run, to maintain operating viscosity levels and color
control. The additional solvent normally amounts to an additional 20% by volume.
The water based inks in use should be in compliance with the regulations.
That would be tantamount to having a maximum of 25% solvents by volume in each
gallon of ink as applied. The information from Del Val will corroborate this
position.
Press #1 runs primarily solvent based inks. On some occasions for small
runs, paper is printed on #1 with water based inks.
Press #2 runs water based inks approximately 85% of the time.
Press #2 also coats the substrates with a water based adhesive. The water
based adhesive meets the criteria of the Part 228 standards. The Material Safety
Data Sheet for the Reslyn does not list any VOC's as components of the
formulation. This phase of the operation is in compliance as noted earlier.
RECOMMENDATIONS:
1. Identify the course of action to come into compliance by evaluating the
following alternatives:
a. Conversion to waterbourne ink technology
Evaluate the ramifications and requirements of using water
technology. Conduct appropriate tests where necessary. Determine equipment
modifications or additions that will enhance the ability of the presses to
use water inks.
The evaluation should consider the ability of Arcon to attain
wettability of the inks on Tyvek and Paper, adhesion of the inks to the
substrate, and other visual properties as required by customers, i.e.
exact color hues and gloss.
Submit samples and rationale to customers to ascertain their
acceptance of the quality of the product.
This is, perhaps, the fastest route to compliance. It will require
expenditures of time and money to modify equipment and work crews trained
to use the new technology.
8
b. Installation of add-on control system - incineration or solvent
recovery.
c. Combination of the available methods to achieve compliance:
(1) Press #1 - Incineration or solvent recovery
(2) Press #2 - Use only water inks and adhesives.
2. Develop a schedule to ascertain the time restraints necessary to
achieve compliance.
3. Due to the nature of the potential legal problems and penalties, engage
an attorney who can facilitate the reception of the applications for
permits and negotiate favorable terms.
I would not want Arcon to go directly to the Nassau County engineers
without having Management obtain a full legal orientation as to the
potential liabilities and penalties, and having the benefit of legal
council as to the best strategy to bring the firm to the attention of the
regulatory agency.
4. Submit schedules to come into compliance and applications for permits
to the Nassau County Health Department.
Prior to submitting the applications, I would suggest that a request
be made to the County Health Department for a conference with them and the
NYSDEC to discuss the applications and schedule of compliance. This should
initiate a dialogue and pave the way for acceptance of the proposed course
by the regulatory agencies.
5. Based on the schedule of compliance, prepare specification packages to
submit to vendors of add-on control systems requesting proposals.
During the preparation of the specification package, identify
deficiencies in the existing equipment or plant layout which may require
modification to assure adequate air flows, drying and vapor capture. This
would include consideration of the recirculation of the drying systems,
and other alternatives which would optimize the use of the controls but
reduce the capital cost of the system.
6. Determine, based on the economic and technical analysis of the add-on
control proposals, and evaluation of the water technology tests and
economics, which approach is best suited to provide Arcon with a viable
compliance solution.
9
ARCON COATING ▇▇▇▇▇
ENVIRONMENTAL AUDIT, July 11, 1991
II. HAZARDOUS MATERIALS AND WASTE REGULATIONS AND RELATED SOLID WASTE AND
WASTEWATER REGULATIONS PERTAINING TO ARCON
A. HAZARDOUS WASTES
New York State 6NYCRP., Parts 370, 371 and 372
Anyone who uses hazardous materials and generates waste is
responsible for the proper collection, packaging, labelling, segregation
and disposition of that waste.
The law differentiates between hazardous waste generators by the
amount of waste produced on a monthly basis. The requirements at each
level varies; however, at every level certain restrictions apply.
A copy of the New York State Small Quantity Generators manual is
attached.
OBSERVATIONS AND COMMENTS
At this time, it would appear that Arcon is not a generator of
hazardous wastes and should strive to maintain such status. The practice
of using overruns of inks in other darker color formulations would give
the impression that no waste is generated; this practice should be
continued to keep Arcon out of the hazardous waste program.
However, in observing various drums and kits filled with dirty
solvents and machine parts, i.e. ink fountains and rolls, the question was
raised as to what happened with that dirty solvent and ink solids. We were
advised that the solvent was removed and used in ink mixing; the solids
were placed in the dumpsters.
This would constitute a violation of the hazardous waste
regulations. Any hazardous materials which enters the waste stream cannot
be placed in regular solid waste unless the waste has been delisted in
accordance with existing regulations. From past experience in arguing this
practice with the NYSDEC, liquid inks and solvents will retain solvents
when allowed to stand in a drum and "dry." They cannot be discarded as
solid waste unless tests are made to assure the State to the contrary.
We also saw one drum of "Bad Ink" that was in the Ink Storage
container, and was advised that Del Val would be asked to take it back.
Del Val had taken back ink waste in the past.
9
This is not legal. If the inks are waste, i.e. off-spec due to use and
handling in plant, and not defective product, they should be labelled
accordingly and shipped as hazardous waste.
The waste that might be generated in the adhesives coating
application is primarily a result of wash-up of the coating station at the
end of a day or job. "All" water waste, we were advised, goes into the
empty pallet bins for return to National Starch (the water keeps the bins
moist and easy to clean.) Precautions should be taken to assure that this
waste is not polluted with any hazardous wastes; the trucks used by
National Starch are not licensed to haul hazardous wastes and could be
penalized if the bins were contaminated. Since the water based adhesives
contain no hazardous chemicals the waste would not be subject to the same
DOT transportation regulations as those transporting hazardous wastes.
We were told that there was no water ink waste to speak of, yet
found coloration in the wash tub behind Press #2. It would be wise to see
what is actually being done when jobs using water inks are finished and
the fountains are cleaned; or what is being done with ink residues. These
wastes are in essence hazardous waste due to the use of the alcohols and
esters (ignitable) in the formulation of the inks.
RECOMMENDATIONS AND OTHER COMMENTS
Determine exactly how much dirty solvent residue is generated by
collecting the residues, any ink that must be discarded, etc. I mentioned
this to Gene when I was in the plant. This determination should include
the water inks as well
From a second point of view, the current exposure related to the use
of dirty solvents for cleaning equipment poses an explosive safety
potential. The open drums of cleaning solvent evaporate to create health
and fire hazards.
Consideration should be given to the purchase of a cleaning tub, in
which the solvents are reused and the solids removed periodically for
disposal. The cleaning tanks are closed and built with safeguards for
health and fire. Some firms lease the cleaning tanks in conjunction with
the purchase and recycling of solvents.
Arcon would most likely be considered a Small Quantity Generator,
perhaps even an Exempt Small Quantity Generator, reducing the regulatory
burdens compared with that of a large quantity generator. Small quantity
generators produce between 100 to 1000 kilograms of waste a month. 100
kilograms is equal to half a fifty five gallon drum.
10
At the time this determination is established, Arcon would file for
an EPA Identification Number. This number is required in order to have an
authorized waste transporter and disposer remove the hazardous waste from
the premises.
When the ID filing is made, Arcon will have to designate an
Emergency Coordinator and develop an Emergency Fire, Explosion and Spill
Control Contingency Plan; train all personnel who are involved in the
management and safety aspects of handling hazardous wastes; collect, store
and label the waste in accordance with the law; inspect periodically, and
- on Long Island due to the aquifer level - have a closure plan to clean
up the site in the event the facility shuts down.
The plant seems to have a very active ink management program, using
press returns for mixing fresh inks. The total effect of this effort is
still subject to the amount of special color matches requested by
customers for short runs. With the amount of ink used, it would be
worthwhile investigating a small color computer to house color mixing
formulas with the capability of including press returns in its
computations.
Inks with a shelf life should be rotated to avoid generating a
hazardous waste. Defective inks should be promptly returned to the vendor
for replacement.
B. SOLID WASTE MANAGEMENT
New York State is currently reviewing regulations to reduce the
amount of solid waste generated. With the closing of landfills and the
problem of erecting incineration plants, legislative moves have been
directed to either banning certain types of wastes, i.e. plastics that are
not biodegradable, or to establishing percentages for industry to reduce
waste over a period of years. This can be done by source reduction or
recycling.
Two areas stand out at Arcon.
1. Currently, spent rags containing ink and solvent are thrown in
the compactor. The rags are collected in open drums in the plant.
Safety cans should be used for these rags. The potential fire hazard
that solvent laden rags presents is significant.
The question of whether dirty rags are hazardous wastes has been
discussed by regulatory agencies for years. EPA has deferred making a
decision. Recently, there have been indications that New York State will
classify rags as hazardous
11
wastes if used to clean up specific solvents, heavy metal pigments or
other listed chemicals. These rags cannot be placed into the normal solid
waste disposal containers for shipment to landfills.
Instead of buying ▇▇▇▇▇ of rags, and disposing of the dirty rags in
the garbage, rag services should be researched to supply, collect and
clean the right quality wipers. These services operate much like a diaper
service; cleaning and returning the wipers for your reuse.
2. Options for recycling of waste tyvek should be explored,
including pursuing DuPont's program using scavenger recycling firms,
internal reuse as packaging material, off-site use of the material for
packaging (give-away program, for example), or other options.
The same approach should be taken with paper waste. There are
smaller scavenger companies who will remove paper waste. Although there
may not be a return in terms of being able to sell the paper waste (the
market is terrible at this time), Arcon may be able to reduce the amount
of waste it discards. This could reduce the number of dumpsters that are
carted away by Oceanside or the amount of time the compactor is used and
emptied at a very high cost per load.
C. WASTEWATER
Process water entering the sewer system or septic tanks, and
chemicals leaching into the drinking water layers of the aquifer are
subject to various laws and regulations. Arcon's plant would be governed
by Federal, State and local laws.
Our observations indicated that the sole source of process water
waste would come from the clean-up procedures used with the equipment
using water inks and adhesives. If the inks and adhesives are removed from
the pans before cleaning, the residues should be well within the normal
levels acceptable to sewer treatment systems in the county.
OBSERVATIONS AND RECOMMENDATIONS:
1. Wastewater is generated at Arcon as a result of tray washing
where water-based materials are used. It should be made clear to all
employees that only water-based materials are allowed to be cleaned in the
sink. Solvents and solvent based inks are to be reused in the plant. Signs
can be posted stating such required practices.
12
2. The wastewater should be screened on an annual basis (or when a
change in inks is implemented) to insure compliance with the Nassau County
sewer ordinance. This screening procedure involves grabbing one sample
during a production period when tray washing is being conducted and
submitting this sample for analytical testing. The parameters regulated by
the county and their limits are indicated in the attached table.
D. HAZARDOUS MATERIALS MANAGEMENT
The two regulations which govern the storage and handling of
hazardous materials in Nassau County are:
1. Article XI Nassau County Public Health Ordinance Toxic and
Hazardous Materials, Storage, Handling and Control
2. Article III Nassau County Fire Prevention Ordinance Flammable
and Combustible Liquids
Both cover the manner and amounts in which chemicals can be stored
and used. In either regulation, permits are required and limits are placed
on the amount of any chemical which may be stored in a given facility.
OBSERVATIONS:
Arcon does not have adequate storage facilities or controls for the
types or amounts of chemicals used. There are no permits for the existing
structure.
Inks and solvents are stored in a truck trailer that has been set on
the ground alongside the building with little regard for safety of the
contents or the neighboring plant.
Inks are mixed in an area that is out of compliance with many
regulations of NYSDEC, OSHA and the Nassau Fire Department. It is an open
area which spills into the #1 press workspace.
Solvent and ink drums are not grounded, although a grounding strip
is in place on the two walls that form part of the boundaries of the area.
The floors are covered with inks and solvents, many of which may
have leached into the ground and the surrounding water.
13
The practice of using Tyvek to cover the floor and hide the
condition is unsafe and misleading. Tyvek can be slippery and loose, with
a potential for falls and injuries resulting.
It may be construed that in the absence of process water waste,
there is no concern for pollution of the ground water under the building.
With the location of the plant near the shoreline and the nature of the
chemicals used in the printing process, responsible management policy
indicate a more stringent approach to the way in which the inks and
solvents are in use. Any inspection of pollution in the canals near the
plant that indicate Arcon as the source, can result in liability for
clean-up of the pollutants.
Drums are currently being wiped clean and sent to AS Steel Drum, ▇▇▇
▇. ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ for reclamation.
RECOMMENDATIONS:
1. Hazardous materials storage requires significant upgrading to meet the
requirements of Nassau County's Article III. This upgrading will include
elimination of the trailer for ink storage, construction of a new
flammable materials storage area, and consolidation of inks, ink blends,
and solvents into this new area.
Article 3 requirements include provisions for secondary containment,
fire suppression, electrical standards, vapor detection, and exhaust.
2. The ink mixing area at Arcon should be consolidated with the new
storage facilities. The consolidation will allow for improved ventilation,
upgraded electrical, and secondary containment.
3. Solvent currently purchased in 55 gallon drums may be more economically
purchased and managed in larger tote type containers (200 - 500 gallon
capacity). Evaluation of ink containers may also determine that major
colors (white and black, for example) should be purchased in larger tote
type containers, if available.
4. Documentation should be obtained from the drum recycler used by Arcon
to assure that he is operating in accordance with State and New York City
regulations. This documentation is necessary to protect Arcon in the event
that any of its drums show up in an illegal dumpsite, or are cited as
contributors to pollution from the reclamation plant.
14
5. Drums containing ink blends in the mixing area should be properly
labeled with the contents and for their hazardous characteristics.
6. Several observations were made regarding the storage of materials.
These conditions were observed at the site visit and should be corrected
immediately:
a. Bungs on drums and totes were found open, missing and/or leaking;
b. Grounding of drums of flammable materials was not in use,
although the wiring was available; there have been three major
accidents in the past year and a half in our industry involving fire
and explosion caused by static electricity and solvents in drums.
c. A solvent drum was leaking onto the floor. The pipe fitting was
loose and wrapped with a rag. The drum was not grounded. The leaking
solvent was being collected in a pail under the spout.
d. Safety equipment was not in use when transferring flammable
materials - funnels, pans, etc.
e. Hazardous materials were found outside in an area without
containment.
f. The container housing the inks and solvents outside of the
building had been hit by a truck or two. With any more force or a
spark, the trailer and the plant would have been consumed by a major
fire.
The existing trailer should be fitted with posts for traffic
control during the interim while upgraded material storage
facilities are under design and construction. These posts should
reduce the likelihood of damage to the containers of material in
storage in case they are hit by a vehicle.
Vehicular damage to this trailer could result in spills to the
environment, fire/explosion, or both.
g. Welding gases may require a permit from the local fire
department. These gases are in use in the maintenance shop.
15
h. A propane tank was found outside without a chain; the tank was at
the corner of the building near New Street.
Since you do not use Propane, the tank must belong to someone
else. This tank should be returned to the vendor, as it apparently
is not in use.
i. Periodic inspections should be conducted and documented to insure
that proper hazardous materials storage practices are being
implemented.
7. To provide some assurance as to the condition of the site in the event
that Arcon closes the facility, it is recommended that ground boring
samples be taken in the area of the ink and presses. This will indicate
the potential for pollution of the groundwater under the building, and the
liability of Arcon for clean-up of the site.
E. SPILL CONTROL AND EMERGENCY RESPONSE REQUIREMENTS
1. Written programs must be developed to define Arcon's procedures
to handle emergencies. These situations include fires, spills, first aid,
chemical and physical injuries, and other scenarios. Arrangements with
local response groups (hospitals, fire and police departments, spill
contractor, etc.) must be documented.
2. Emergency and spill control equipment is required in sufficient
quantity to handle the worst case situation. This equipment may include
spill adsorbent, emergency personnel protection equipment, access to
response information, etc.
3. Records are required demonstrating inspection of emergency
equipment such as fire extinguisher maintenance, sprinkler system
inspections, maintenance of appropriate quantities of emergency response
supplies, etc.
16
ARCON COATING ▇▇▇▇▇
ENVIRONMENTAL AUDIT, JULY 11, 1991
III. OSHA AND RELATED SAFETY AND HEALTH REGULATIONS AT ARCON
A. OSHA has enacted a complete set of regulations and standards for
industry under the Code of Federal Regulations Labor 29, Parts 1900 to
1910.
These are enforced by OSHA and the State of New York through the
County Health Department.
Of particular concern during the audit were compliance with the:
1. Hazard Communication Standard
2. Lock-Out/Tag-Out
3. Powered Industrial Trucks
4. In-door Air Pollution
5. General regulations pertaining to the use of machinery
(i.e. guards and electrical grounding) and chemicals (fire).
B. The OSHA Hazard Communication Standard, frequently called the
"Right To Know" laws, require certain basic actions on the part of
Management:
1. Inventory of all chemicals in building.
2. Material Safety Data Sheets for all chemicals; available for
employees to read as part of their jobs.
3. Labelling of all container - from vender or in use in-plant - to
identify content and hazards.
4. Written Safety Program to implement regulations.
5. Training programs (ongoing). This is intended for groups of
employees who have been on the job at such time as any chemistry changes
or with the passage of time. Every new employee should be given an
indoctrination on hiring.
Arcon did undergo a portion of this activity in 1986, when ▇▇▇▇▇
▇▇▇▇▇ of Del Val Ink came in to conduct a training session and left you
with an outline of the program used at
17
Del Val. An MSDS Book was organized at that time. Records are in the
manual for the class held at that time, with some test papers for a few
of the participants.
Since then there has been no Right To Know activity. The MSDS books
have not been updated; the chemical inventory appears to be the one filed
for Del Val in NJ rather than one for Arcon. No training has taken place
since 1986. New employees have not been given orientations in chemical
safety and the tools of the Hazard Communication Standard.
Containers in the plant, in all areas, were without labels. Drums
and kits in the mixing area and at the presses did not have any labels.
Employees in the mixing areas should be fitted with gloves, aprons,
and eye protection while mixing inks.
C. LOCK-OUT/TAG-OUT
This regulation is intended to define written standards to insure
that equipment that has been shutdown for maintenance or set-up is not
started up inadvertently while the mechanic is working in the machine.
It provides for a survey of equipment to identify power sources and
points at which they can be shut off and secured by a lock. The lock is
tagged to identify who is working on the machine and when. Each mechanic
has his own lock which he removes when he is finished.
Tags identify who is working and when work started.
Arcon does not a lock out/tag out program, but does have equipment
on which such precautions should be taken.
D. FORK LIFT TRUCK OPERATIONS
OSHA requires that every operator be trained in the safe operation
of his/her vehicle. This includes a knowledge of safe operating
procedures, characteristics of fork lift truck operation, safety
precautions and equipment.
Arcon's drivers have not been given this training program. The basic
training given by Arcon at time of hiring has been to show how the truck
starts, stops and functions.
Among our observations with regard to the forklifts:
1. Lines painted on the floor should allow for easier recognition
of fork lift routes.
18
2. Fork lifts should have fire extinguishers and back up horns.
E. INDOOR AIR POLLUTION
OSHA has lowered the levels at which many pollutants can exist in
the workplace. The major solvent at Arcon is Isopropyl Acetate, which has
a PEL of 250 ppm. We are awaiting the breakdown of the inks and quantities
to see if there are any other solvents to check.
Of immediate concern are the areas around the two presses and the
ink mixing area.
The machine areas should be checked to find the covers for the ink
fountains. If not found, covers should be made. Lack of fountain covers
increases the transmission of fugitive vapors in the plant.
The press personnel must be made aware of the need to place the
covers on the fountains after the press has been set-up
Furthermore, the practice of leaving kits and drums of inks and
solvents open at the presses must stop. All open containers facilitate
evaporation of the solvents and the contamination of the plant air.
In the ink mixing area, covers should be on all containers whether
in-process or for feeding the mixer. We did see some drums covers with V's
out in the area for the mixing impeller, but none in use.
A major concern is the location of the ventilation fan at the base
of the printing stack of Press #1. It is pulling all the vapors from the
dryer system back down into the area in which the press personnel work.
This results in a heavy concentration of solvent fumes, a condition which
mandates wearing of respiratory masks when working in the area of the
printing stack.
We did not see Press #2 in full operation and will have to wait for
the air testing to determine levels of vapor concentration.
E. MISCELLANEOUS OBSERVATIONS/COMMENTS
1. Guards are not being used on the presses. Some are lying on the floor
behind Press #2.
They should be in place or made where required to cover gears,
belts, other moving parts including printing rollers.
19
2. Waste oils generated from equipment maintenance should be managed
properly. It was not clear at the audit what the fate of this material
was.
3. Fire exits should be kept clear at all times. Several were found to be
blocked with debris.
4. The ink vat at the smaller press can be moved closer to the press using
less hose. Clean-up should be easier.
5. Housekeeping at the presses and in the ink mixing area is terrible.
This would be a major deterrent in considering water ink technology as a
solution for air emissions compliance.
See comments in other section which relate to conditions in the
press and ink areas.
RECOMMENDATIONS:
1. Plan and initiate a Safety Committee and Safety Program which would
address all safety and environmental concerns on a regular schedule.
2. Recommend that an OSHA Hazard Communication program be authorized that
will bring the firm into compliance with all sections of the law.
3. Recommend that lock out/tag out procedure should be initiated and the
employees equipped and trained to perform in accordance with the
provisions of the regulation.
4. Recommend that a fork lift truck training program be instituted.
5.Recommend that the dryer system should be checked, cleaned and
otherwise upgraded to improve the negative exhausting of all vapors from
the printing stack. Relocation of the fan will most likely be recommended.
6. Recommend, per letter sent to ▇▇▇▇ ▇▇▇▇▇, that air tests should be made
by ▇▇▇▇▇ ▇▇▇▇ PE using Draeger Tubes. This will quantify the vapor levels
in various parts of the presses and plant. Based on the outcome, in-house
testing can be conducted on a designated schedule and recommendations made
for further action if warranted.
7. Give the press areas a good cleaning and train personnel to maintain
the presses and ink mixing areas.
20
[Logo] PRO-FLEX consultants ltd.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇. ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ (516) 935-7241
ARCON COATING ▇▇▇▇▇
ESTIMATED BUDGETS TO COME INTO COMPLIANCE
At your request, we are estimating the cost of coming into compliance with
the major areas of concern and the respective regulations.
These are ball park budgets, intended as a means of putting a perspective
on the work to be done. More refined budgets can be determined as a second stage
in the process. The budget dollars are on the high side of the range of time
required.
I. CLEAN AIR
A. Develop program to come into compliance
Detailed evaluation of the presses and coating operation to
determine the merits of the various options, prepare specifications to
submit to vendors of equipment, obtain proposals for equipment, and
evaluate proposals. Prepare schedule to come into compliance. Budget
includes an audit of the presses and drying systems.
Estimated time required ............. 9-12 days
Estimated cost ...................... $12,000.00
B. Permit application submission to NYSDEC
Collection of data and computations for submission of applications,
drawing of site and preparation of permits. Will involve communications,
possibly meetings with County engineers.
Estimated time required ............. 5-6 days
Estimated cost ...................... $ 6,500.00 plus fees
C. Conciliation meetings and negotiations
This is a nebulous budget, intended to stress the potential
consulting and legal fees that may be required to negotiate with the
County and State engineers and legal affairs department.
Estimated time for budget:
Attorneys 5-l0 days; Consultants 5-10 days
Estimated cost ...................... $30,000.00
D. Cost of Equipment to come into compliance:
1. Incineration - cost of system installed:
Both Presses estimate 30,000 CFM $800,000-l,250,000
Press #1 Only estimate 4,000 CFM $250,000
Arcon would have to provide utilities to site, permits, stack
test, etc.
Estimated cost ................ $50,000
Major consideration would be location of the system in the
building or on the grounds.
2. Water Technology
Estimate is very rough, to consider potential need to modify drying
equipment, re-etch anilox rollers and gravure cylinders, possibly
add a corona treating unit. This information will be developed
during the audit of the presses.
Press #1 $50,000.00
Press #2 $50,000.00
Total $100,000.00
System to handle water waste from inks $30,000.00
TOTAL COST TO COME INTO COMPLIANCE WITH CLEAN AIR
HIGH .......................... $1,298,500.00
LOW ........................... $ 178,500.00
This does not include any penalties for non-compliance and lack of
permits, training of personnel and loss of production during the training
period.
II. HAZARDOUS MATERIALS AND WASTE STORAGE AND HANDLING
1. Construction of proper chemical storage and mixing room.
Engineering and permits $10,000.00
Construction $50,000 - 60,000.00
Total estimate ...................... $70,000.00
Based on inquiries for other clients to use pre-fab hazardous
materials storage buildings, the substitution of a replacement for the
outside trailer housing would cost as much, if not more than constructing
a proper Storage and Mixing Room in the building.
2. Wastewater sampling, testing and analysis.
Estimated cost including lab fees ... $ 2,500.00
3. Hazardous Chemical Emergency Contingency Plan (Spill Control) and
necessary Hazardous Waste Program
Develop program and plans; train personnel
Estimated time 3 days
Estimated cost ...................... $ 2,400.00
TOTAL COST OF HAZARDOUS MATERIAL AND WASTE $74,900.00
C. OSHA
1. Safety and Hazard Communication Program
Preparation of written program and training; initiate Safety
Committee program.
Estimated time 4 days
Estimated cost ...................... $ 3,200.00
2. Lock-out/Tag-out Program
Estimated time 1 day
Estimated cost ...................... $ 800.00
3. Fork-Lift Training Program
Estimated time l/2 day
Estimated cost ...................... $ 400.00
4. Indoor air quality tests
Testing with Draiger tubes, letter July 19, 1991
Estimated cost ...................... $ 700.00
TOTAL COST OF OSHA RELATED PROGRAMS $ 5,100.00
plus materials
D. ESTIMATED COST OF COMING INTO COMPLIANCE
1. HIGH ESTIMATE $1,378,500.00 PLUS PENALTIES
2. LOW ESTIMATE $ 258,500.00 PLUS PENALTIES
The cost of compliance estimates are rough budgets, to be used for
guidance in making the decisions necessary to move to the next phase - assigning
priorities and executing the necessary programs.
Mass Balance Analysis
[Logo] PRO-FLEX Consultants ltd.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇. ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ (516) 935-7241
August 19, 1991
▇▇▇▇▇ ▇▇▇▇▇
Arcon Coating ▇▇▇▇▇ Inc.
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Re. Environmental Audit - Mass Balance Analysis, VOC'S
Dear ▇▇▇▇▇:
Based on the information provided by Del Val, letter dated August 14, we have
completed the mass balance analysis of the printing operations.
For the three prior years, Arcon has emitted volatile organic compound
emissions in excess of the 100 tons per year guideline specified in the EPA and
New York State regulations for air pollution permits and controls.
1990 145.19 tons
1989 141.76 tons
1988 143.79 tons (estimated)
The emissions were further allocated to the two presses based on the assumption
that the two presses run a total of 120 hours per week in a 48 week year. It was
further assumed that the #2 press would run two shifts, #1 one shift. This
breakdown would be helpful in sizing an add-on control system.
The third station of the Press #2 is isolated, since it has been used for
adhesive coating and would be addressed under Part 228 of the NYSDEC
regulations. The coating are viewed for compliance in terms of pounds of VOC's
per gallon. Based on the MSDS's the adhesives are water based and contain no
VOC's. This part of the operation is in compliance with the regulations.
At the end of the spreadsheet, I have indicated some concept of incineration
sizing based on air flows and the recirculation of the air in the drying system.
This needs further engineering analysis.
If the Arcon option selected is water based technology, you should talk to the
following ink suppliers who have done considerable work in this area. Please
note that ▇▇▇▇▇ ▇▇▇▇▇ told me that he had water inks for the Tyvek and would
like to have you try his inks.
Environmental Inks & Coatings - ▇▇▇▇ ▇▇▇▇▇▇ - ▇▇▇-▇▇▇-▇▇▇▇
Sun Chemical Corporation - ▇▇▇▇ ▇▇▇▇▇▇ - ▇▇▇-▇▇▇-▇▇▇▇
Polytex Color & Chemical - ▇▇▇▇ ▇▇▇▇▇ - ▇▇▇-▇▇▇-▇▇▇▇
CZ Inks - ▇▇▇▇ ▇▇▇▇▇▇▇ - ▇▇▇-▇▇▇-▇▇▇▇
Water Ink Technologies - ▇▇▇▇ or ▇▇▇ ▇▇▇▇▇ - ▇▇▇-▇▇▇-▇▇▇▇
Arcar Graphics, Inc. - ▇▇▇ ▇▇▇▇▇ - ▇▇▇-▇▇▇-▇▇▇▇
Please let me know when you have completed your review of the audit and are
prepared to sit down to discuss the contents.
Sincerely,
/s/ ▇▇▇▇ ▇▇▇▇▇▇▇
----------------------------
▇▇▇▇ ▇▇▇▇▇▇▇
P.S. You still require MSDS's from Del Val for your inks. As you move ahead, a
better breakdown of the solvents in the inks will be required.
ARCON COATING ▇▇▇▇▇
MASS BALANCE EVALUATIONS AIR EMISSIONS
1990 1989 1988
INK(LBS) VOC'S(LBS) INK(LBS) VOC'S(LBS) INK(LBS) VOC'S(LBS)
INK SYSTEMS:
AQUATITE
White 26,927 1,348 22,400 1,120 23,000 1,150
COLORS 1,523 90 991 50 752 38
VARNISH 200 10 0 0 35 4
SUB-TOTAL 28,650 1,448 23,391 1,170 23,787 1,192
▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ 73,550 39,937 72,049 39,125 63,000 34,209
COLORS 157,644 99,123 143,584 89,656 152,530 96,438
VARNISH 3,660 2,880 4,420 3,478 2,400 1,889
SUB-TOTAL 234,854 141,940 220,053 132,259 217,930 132,536
MULTIPRINT
WHITE 0 0 0 0 0 0
COLORS 2,304 1,044 866 389 644 342
VARNISH 0 0 0 0 0 0
SUB-TOTAL 2,304 1,044 866 389 644 342
FLEXOPRINT
THERMOPRINT
VARNISH 10,503 8,350 11,534 9,141 l6,192 12,939
SUB-TOTAL 10,503 8,350 11,534 9,141 16,192 12,939
SOLVENT BASED INKS
WHITE 73,550 39,937 72,049 39,125 63,000 34,209
COLORS 159,948 100,167 l44,450 90,045 153,174 96,780
VARNISH 14,163 11,230 15,954 12,619 18,592 14,828
TOTAL 247,661 151,334 232,453 141,789 234,766 145,817
WATERBOURNE INKS
WHITE 26,927 1,348 22,400 1,120 23,000 1,150
COLORS 1,523 90 991 50 752 38
VARNISH 200 10 0 0 35 4
TOTAL 28,650 1,448 23,391 1,170 23,787 1,192
SOLVENTS
ISOPROPYL ACETATE 137,600 137,600 140,800 140,800 140,800 140,800
TOTAL VOC EMISSIONS 290,382 283,759 287,809
TONS VOC'S 145.19 141.88 l43.90
PRESS HOURS OPERATED 5760 5760 5760
POUNDS EMITTED PER PRESS HOUR 50.41 49.26 49.97
ARCON COATING ▇▇▇▇▇
COMPUTATION VOC EMISSIONS BY PRESS
HOURS VOC'S EMITTED
OPERATED 1990 1989 1986
PRESS #1 ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇ 0 0 0
SOLVENT BASED 173360 169553 171970
TOTAL 173360 169553 171970
POUNDS VOC/HOUR 90.29 88.31 89.57
POUNDS VOC/RUN HOUR (EST) 180.58 176.62 179.14
PRESS #2 ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇ 1448 1170 1192
SOLVENT 115574 113036 114647
TOTAL 117022 114206 115839
POUNDS VOC/OPERATING HOUR 30.47 29.74 30.17
POUNDS VOC/RUN HOUR (EST) 60.95 59.48 60.33
AIR FLOWS -DRYER SYSTEM
ACFM
PRESS #1 4,000 estimated recirculate to 2,000 approx.
PRESS #2 21,532 printing stacks recirculate to 10,000 approx.
10,766 coating stacks
INCINERATOR CONFIGURATIONS
Press #1 and #2 as is 25,500 CFM
Press #1 and #2 recirced 12,000 CFM
Press #1 recirc (#2 water) 2,000 CFM
ESTIMATED USED FOR SOLVENT PURCHASED IN 1988 - SAME AS 1989.
[Logo] DEL VAL INK AND COLOR
INCORPORATED
---------------------------------
FLEXOGRAPHIC AND ROTOGRAVURE INKS
---------------------------------
▇▇▇▇ ▇▇▇▇▇▇'▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Phone (Area Code 609) 829-7474
Penna. (Area Code 215) 671-1500
August 14, 1991
▇▇. ▇▇▇▇▇ ▇▇▇▇▇, General Manager
Arcon Coating ▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Dear ▇▇▇▇▇:
As requested by ▇▇▇▇ ▇▇▇▇▇▇▇, we are enclosing ink purchase and VOC
emission data for the years 1988, 1989 and 1990 as follows:
YEAR INK PURCHASED, LBS. VOC LBS.
------------------- --------
1988 258,553 147,009
1989 255,844 142,959
1990 276,311
Worksheets for this summary are attached.
Glad to be of help.
Very truly yours,
DE VAL INK & COLOR INC.
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------
FAM:rf ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
Encls. President
cc: ▇▇▇▇ ▇▇▇▇▇▇▇
Pro-Flex Consultants Ltd.
DEL VAL INK & COLOR, INC. 8/13/91
ARCON COATING ▇▇▇▇▇, INC.
-------------------------
Purchases 1990 - Colors
INK NUMBER INK NAME Lbs. % VOC Lbs. VOC
-------- ---------- ---- ----- --------
??-F-1686 Aquatite (LF) White 26,375 5.0 1,320
??-F-1824 Aquatite (LF) White 552 5.0 28
??-Q-1217 ▇▇▇▇▇▇▇▇▇▇▇ (LF) Tyvek White 73,500 54.3 39,190
??-Q-1987 ▇▇▇▇▇▇▇▇▇▇▇ (LF) 3 1/2% Wax White 50 53.0 27
??-F-5673 Aquatite (LF) Green Shade yellow 70 5.0 4
??-Q-4064 ▇▇▇▇▇▇▇▇▇▇▇ (L) Primrose Yellow 8,677 53.8 4,668
??-Q-4065 ▇▇▇▇▇▇▇▇▇▇▇ (L) Chrome Yellow 24,250 57.6 13,968
??-Q-5080 ▇▇▇▇▇▇▇▇▇▇▇ (L) Anti Stat Yellow 355 54.0 191
??-Q-5661 ▇▇▇▇▇▇▇▇▇▇▇ (LF) Green Shade Yellow 2,402 73.6 1,768
??-Q-5663 ▇▇▇▇▇▇▇▇▇▇▇ (LF) Yellow 2 70.0 1
??-Q-5692 ▇▇▇▇▇▇▇▇▇▇▇ (LF) 3 1/2% Wax G.S. Yellow 40 70.0 28
??-F-2964 Aquatite (LF) Orange 37 5.0 2
??-U-921 Multiprint (L) Moly Orange 50 41.0 20
??-U-2137 Multiprint (LF) Flourescent Blaze Orange 1,545 41.8 645
??-Q-1995 ▇▇▇▇▇▇▇▇▇▇▇ (L) Moly Orange Base 29,600 54.4 16,102
??-Q-2959 ▇▇▇▇▇▇▇▇▇▇▇ (LF) Orange 2,402 54.4 1,306
??-Q-2972 ▇▇▇▇▇▇▇▇▇▇▇ (LF) 3 1/2% Wax Orange 120 53.0 64
??-F-9899 Aquatite (LF) Red 38 5.0 2
??-Q-7242 ▇▇▇▇▇▇▇▇▇▇▇ (LF) Watchung Red 2,575 70.7 1,820
??-Q-7243 ▇▇▇▇▇▇▇▇▇▇▇ (LF) Lithol Rubine 2,851 68.8 1,961
??-F-5505 Aquatite (LF) Phthalo Green 38 5.0 2
??-Q-4034 ▇▇▇▇▇▇▇▇▇▇▇ (LF) Cyan Green 2,342 72.8 1,705
??-F-9209 Aquatite (LF) Red Shade Blue 200 5.0 10
??-P-9485 Aquatite (LF) Red Shade Phthalo Blue 795 5.0 40
??-F-9489 Aquatite (LF) Red Shade Phthalo Blue 194 5.0 10
??-?-6938 ▇▇▇▇▇▇▇▇▇▇▇ (LF) Process Red Shade Blue 10,425 71.6 7,463
??-F-6939 ▇▇▇▇▇▇▇▇▇▇▇ (LF) G.S. Phthalo Blue 4,000 71.6 2,064
??-Q-1117 ▇▇▇▇▇▇▇▇▇▇▇ (LF) Purple 266 68.7 182
??-Q-2256 ▇▇▇▇▇▇▇▇▇▇▇ (LF) Spec Black 66,860 68.4 45,732
??-?-2938 ▇▇▇▇▇▇▇▇▇▇▇ (LF) 3 1/2% Wax Black 36 67.0 24
??-U-2396 Multiprint (LF) Non-Scuff Black 268 53.8 144
??-U-2498 Multiprint (LF) Black 419 53.0 222
??-F-2527 Aquatite (LF) Black 241 5.0 12
DEL VAL INK & COLOR, INC. 8/13/91
Page 2
ARCON COATING ▇▇▇▇▇
Purchases 1990 - Colors
-----------------------
INK NUMBER INK NAME Lbs. % VOC Lbs. VOC
-------- ---------- ---- ----- --------
??-F-2784 Aquatite (LF) Black 160 5.0 8
??-Q-1374 ▇▇▇▇▇▇▇▇▇▇▇ (LF) 175-1 Gold 191 44.4 84
??-U-1614 Multiprint (LF) Pantone 873 Gold 9 50.0 5
??-U-305 Multiprint (LF) Silver 13 63.0 8
Purchase 1990 - Varnishes
-------------------------
??-211 ▇▇▇▇▇▇▇▇▇▇▇ (LF) Varnish 3,660 78.7 2,880
??-2664 Thermoprint (LF) Wax Free Lacquer 9,830 80.5 7,913
??-3009 Thermoprint (LF) Wax Compound 673 65.0 437
??-2955 Aquatite (LF) Extender 200 5.0 10
------- ------
276,311
DEL VAL INK & COLOR, INC. 8/13/91
ARCON COATING ▇▇▇▇▇
Purchases 1989
--------------
INK NUMBER INK NAME Lbs. % VOC Lbs. VOC
---------- -------- ---- ----- --------
10-Q-1217 ▇▇▇▇▇▇▇▇▇▇▇ (LF) Tyvek White 72,000 54.3 39,095
10-P-1900 Plexiprint (LF) Hi Hide White 49 60.0 30
10-F-1686 Aquatite (LF) White 22,400 5.0 1,120
20-Q-4064 ▇▇▇▇▇▇▇▇▇▇▇ (L) Primrose Yellow 7,200 53.8 3,873
20-Q-4065 ▇▇▇▇▇▇▇▇▇▇▇ (L) Chrome Yellow 27,200 57.6 15,667
30-Q-1995 ▇▇▇▇▇▇▇▇▇▇▇ (L) Moly Orange Base 29,200 54.4 15,884
30-U-2137 Multiprint (LF) Fluorescent Blaze Orange 620 41.8 260
30-Q-2198 ▇▇▇▇▇▇▇▇▇▇▇ (LF) Orange 40 40.0 16
30-Q-7242 ▇▇▇▇▇▇▇▇▇▇▇ (LF) Watchung Red 2,426 70.7 1,715
40-Q-7243 ▇▇▇▇▇▇▇▇▇▇▇ (LF) Lithol Rubine 2,844 68.8 1,956
50-Q-4034 ▇▇▇▇▇▇▇▇▇▇▇ (LF) Cyan Green 244 72.8 177
50-Q-6938 ▇▇▇▇▇▇▇▇▇▇▇ (LF) Process R.S. Blue 9,932 71.6 7,111
50-Q-6939 ▇▇▇▇▇▇▇▇▇▇▇ (LF) G.S. Phthalo Blue 4,825 71.6 3,454
60-Q-9433 ▇▇▇▇▇▇▇▇▇▇▇ (LF) Fast Dry Blue 37 70.0 25
60-F-9485 Aquatite (LF) R.S. Phthalo Blue 356 5.0 18
??-Q-1117 ▇▇▇▇▇▇▇▇▇▇▇ (LF) Purple 151 68.7 103
??-U-4018 Multiprint (LF) Tan 39 50.0 20
??-Q-2256 ▇▇▇▇▇▇▇▇▇▇▇ (LF) Spec. Black 59,400 68.4 40,630
??-Q-2498 Multiprint (LF) Black 198 53.0 104
??-F-2527 Aquatite (LF) Black 635 5.0 32
??-Q-1374 ▇▇▇▇▇▇▇▇▇▇▇ (LF) 175-1 Gold 45 44.4 20
??-U-1614 Multiprint (LF) Pantone 873 Gold 9 50.0 5
??-Q-395 ▇▇▇▇▇▇▇▇▇▇▇ (LF) Silver 40 63.0 25
??-Q-211 ▇▇▇▇▇▇▇▇▇▇▇ (LF) Vinyl Varnish 4,420 78.7 3,478
??-G-3009 Thermoprint (LF) Wax Compound 919 65.0 597
??-G-2664 Thermoprint (LF) Wax Free Lacquer 10,535 80.5 8,480
??-A-2545 Flexoprint (LF) Straining Varnish 80 80.0 64
------- -------
255,844 142,959
DEL VAL INK & COLOR, INC. 8/13/91
ARCON COATING ▇▇▇▇▇
Purchases 1988
--------------
INK NUMBER INK NAME Lbs. % VOC Lbs. VOC
---------- -------- ---- ----- --------
6-6 Ammonia Water 35 10 4
5-A-2545 Flexoprint (LF) Staining Varnish 3,138 80 2,510
5-G-2664 Thermoprint (LF) Wax Free Top Lacquer 12,550 80.5 10,102
5-G-3009 Thermoprint (LF) Wax Compound 504 65.0 327
5-Q-211 ▇▇▇▇▇▇▇▇▇▇▇ (LF) Vinyl Varnish 2,400 78.7 1,889
10-F-1686 Aquatite (LF) White 16,500 5.0 825
10-F-1824 Aquatite (LF) White 6,500 5.0 325
??-Q-1217 ▇▇▇▇▇▇▇▇▇▇▇ (LF) Tyvek White 63,000 54.3 34,209
??-Q-4064 ▇▇▇▇▇▇▇▇▇▇▇ (L) Primrose Yellow 7,600 53.8 4,089
??-Q-4065 ▇▇▇▇▇▇▇▇▇▇▇ (L) Chrome Yellow 26,450 57.6 15,235
??-Q-5080 ▇▇▇▇▇▇▇▇▇▇▇ (L) Anti Stat Yellow 390 54.0 210
??-Q-1995 ▇▇▇▇▇▇▇▇▇▇▇ (L) Moly Orange Base 31,200 54.4 16,972
??-U-921 Multiprint (L) Moly Orange 150 54.4 01
??-Q-7242 ▇▇▇▇▇▇▇▇▇▇▇ (LF) Watchung Red 2,986 70.7 2,111
??-Q-7243 ▇▇▇▇▇▇▇▇▇▇▇ (LF) Lithol Rubine 3,579 68.8 2,455
??-Q-4034 ▇▇▇▇▇▇▇▇▇▇▇ (LF) Cyan Green 800 72.8 576
??-Q-6938 ▇▇▇▇▇▇▇▇▇▇▇ (LF) Process R.S. Blue 12,000 71.6 8,592
??-Q-6939 ▇▇▇▇▇▇▇▇▇▇▇ (LF) G.S. Cyan Blue 5,125 71.6 3,669
??-P-9209 Aquatite (LF) R.S. Blue 200 5.0 10
??-Q-1117 ▇▇▇▇▇▇▇▇▇▇▇ (LF) Purple 228 68.7 156
??-F-2527 Aquatite (LF) Black 472 5.0 24
??-F-2708 Aquatite (LF) Tyvek White 80 5.0 4
??-U-2498 Multiprint (LF) Black 474 53.0 251
??-U-2256 ▇▇▇▇▇▇▇▇▇▇▇ (LF) Special Black 61,500 68.4 42,066
??-Q-1374 ▇▇▇▇▇▇▇▇▇▇▇ (LF) 175-1 Gold 525 44.4 233
??-U-1614 Multiprint (LF) Pantone 873 Gold 20 50.0 10
??-Q-1919 ▇▇▇▇▇▇▇▇▇▇▇ (LF) Gold 147 50.0 74
------- -------
258,553 147,009
Long Island Water (gallons)
-----------------
1/15/91 - 4/16/91 34,800
10-18-90 - 1-15-91 35,300
7-19-90 - 10-18-90 42,400
4-19-90 - 7-19-90 33,800
1-18-90 - 4-19-90 30,900
10-20-89 - 1-18-90 28,600
TOTAL 205,800
Pride Solvents - Isopropyl Acetate (pounds)
----------------------------------
1991 (thru May) 43,200
1990 104,000
1989 140,800
Harcross - Isopropyl Acetate (pounds)
----------------------------
1991 (thru May) 19,200
1990 33,600
Safety Report
CONFIDENTIAL
MEMORANDUM
D R A F T
TO: ▇▇▇ ▇▇▇▇▇
FROM: ▇▇▇▇▇ ▇▇▇▇▇
DATE: June 12, 1992
RE: Mid Year Environmental & Safety Report
At your request, I have prepared the following Environmental and Safety update.
In an effort to address all the issues, this report will follow the format of
the October 11, 1991 Ropes & ▇▇▇▇ attorney work product. The number and letter
designations identifying the issues are consistent with the page numbers and
paragraph identification in the original report (copy attached).
A. AIR REGULATION
Background Information
Following the initial notification to the DEC on October 16, 1991, we
embarked upon an aggressive water-based ink testing program and an
extensive investigation of the incineration option, either of which would
bring us into compliance. On May 15, 1992, notification was sent to the
DEC selecting the water-based ink option.
Page 2, Para. 2a. - Permits
With the water-based option selected, permits to construct and/or operate
have been submitted to the Bureau of Air Management of Nassau County.
These permits were submitted (June 11, 1992) for all seven emission points
in the Oceanside facility.
Page 3, Para. (ii) - Graphic Arts Process (Printing)
Compliance issues addressed in this section will be satisfied with the
conversion to water-based inks. We are operating within the time line
issued and the dating suggested in the May 15th letter (i.e., 6 to 9
months). Applications to operate will be submitted immediately thereafter.
[Logo] ARCON
COATING ▇▇▇▇▇
MID YEAR ENVIRONMENTAL & SAFETY REPORT
June 12, 1992
Page 2
B. HAZARDOUS WASTE REGULATION ISSUES
To avoid any misunderstanding, let me state unequivocally that the
collection, packaging, labeling, storage, handling regulations and
disposal of hazardous waste at Arcon is not, nor has it ever been an issue
or problem since we do not and have never generated any hazardous wastes.
Page 4a
The ink formulation program of make up, that is, using ink overruns and
wash in darker colors, as opposed to disposing of same, is ongoing.
Our ink rotation program has been improved and formalized. Ink stored
in-house has been reduced by more than 50%.
Page 4 b1
Now that the water-based ink option has been chosen, the necessity of a
cleaning tank will be reviewed. A decision to buy/not buy will be made by
June 30, 1992.
Page 4 b2
We have obtained an EPA hazardous waste generator I.D. number.
Page 4 b3
No water from the water-base program is sent into the sewers. All clean up
water is used in make up and cutting of raw ink.
Page 5 c
Adhesive coating wastes do not (per MSDS) generate any hazardous waste.
The minimum wash water generated continues to be put in the empty pallet
bins per the supplier's request.
Pace 5 d
NO ink of any type, solvent or water, is being poured in the wash tubs.
Signs have been posted and repetitive instructions to all employees
insures "no ink in the sink".
[Logo] ARCON
COATING ▇▇▇▇▇
MID YEAR ENVIRONMENTAL & SAFETY REPORT
June 12, 1992
Page 3
Page 5 e
Ink drums are now sold to a licensed recycler. ▇▇▇▇ ▇▇▇▇▇▇▇ has confirmed
that our method of disposing of the drums is sufficient and within
regulations.
Pace 6 f
All off-specification inks and inks which were to be tested have been
returned to the respective manufacturers.
Page 6 g
We are now on a formal rag recycling program with a licensed firm. All
used rags are stored in a safety container awaiting the once per week pick
up. ▇▇▇▇ ▇▇▇▇▇▇▇ has confirmed this practice is sufficient and within
specifications.
C. HAZARDOUS MATERIALS MANAGEMENT
This section of the attorney work product deals with potential hazardous
material storage. Only those items no totally resolved at the time of the
original writing (October 11, 1991) will be addressed.
Pace 6 a
Drum covers are now in use throughout the plant.
Pace 7 c2
The plant clean up program is complete and a housekeeping tour is
conducted on a regular basis so as to keep the plant in a satisfactory
condition.
Pace 7 c3
Spill containment permits and plans have been filed with Nassau County.
Once these are approved, bids and, ultimately, construction will begin. We
are anticipating a September 1, 1992 completion.
Pace 7 c4
An explosion-proof room, by regulation, is required only if the VOC's in
the ink have a flash point of 200 degrees F or less. All of the water-base
inks we are using and testing have flash points above 200 degress F;
therefore, we do not anticipate the need for nor the building of an
explosion-proof room.
[Logo] ARCON
COATING ▇▇▇▇▇
MID YEAR ENVIRONMENTAL & SAFETY REPORT
June 12, 1992
Page 4
Page 7 d2
A formal safety program, along with regularly scheduled safety tours, is
now in place. Additionally, written contingency plans are now complete.
Page 7c
Addressed in 7 c3 above.
D. MISCELLANEOUS ISSUES
Page 8a
A "Right to Know" program has been developed. All employees, as of this
writing, have been given formalized classroom-type instruction. The MSDS
file is maintained on a regular basis with current MSDS's for all
materials on file.
Page 9b
A written safety plan, which includes safety tours, committee meetings,
etc. has been published.
Page 9f
All ink fountains now have covers.
Page 9h
Air quality tests were conducted on October 24, 1991 by a contracted
professional engineer. The results indicate we are in compliance with
current air regulations.
II. CONTACTING OF GOVERNMENT AGENCIES
As has been reported on a regular basis, appropriate contact has been made
with the DEC. Our progress to date and the May 15, 1992 selection of the
water-based ink option has been communicated. Additionally, permits have
been filed.
Page 11b
To the best of this writer's understanding, all items raised in the
October 11, 1991 attorney work product are either complete or will be
underway within the time line established with the government agencies.
[Logo} ARCON
COATING ▇▇▇▇▇
MID YEAR ENVIRONMENTAL & SAFETY REPORT
June 12, 1992
Page 5
A similar program, far less involved however, is underway at ▇▇▇▇▇▇ Tape. It is
expected that a formal review of the facility, by ▇▇▇▇ ▇▇▇▇▇▇▇ and myself, will
take place sometime in late July or early August. We would expect ▇▇▇▇▇▇, at
that time or soon thereafter, to be in full compliance with all local and
federal regulations.
DK:dv
[Logo] ARCON
COATING ▇▇▇▇▇
Compliance Report
[Letterhead of Ropes & ▇▇▇▇]
October 11, 1991
PRIVILEGED AND CONFIDENTIAL
ATTORNEY WORK PRODUCT
Board of Directors
FSE Holdings, Inc.
Re: Arcon Coating ▇▇▇▇▇, Inc.
Environmental and Safety Compliance Assessment
----------------------------------------------
Gentlemen:
At your request, we have consulted with the management of Arcon Coating
▇▇▇▇▇, Inc. ("Arcon" or the "Company") and ▇▇▇▇ ▇▇▇▇▇▇▇ of Pro-Flex Consultants
Ltd. to compile information regarding Arcon's compliance with environmental and
safety regulations. In conducting this review, we have focused on the New York
air regulations, which appear to present the most significant compliance issues.
As to other matters, we have relied on Pro-Flex's analysis to identify issues
requiring further action or investigation.
I. Compliance Issues
A. Air Regulation
1. Initial Conditions
Arcon utilizes two presses in its surface coating and printing operations.
Press #1 primarily uses solvent-based inks containing volatile organic compounds
(VOCs). On some occasions, for small runs, water-based inks are used to print
paper on this press. Press #2 uses water-based inks approximately 85% of the
time. This press also coats the substrates with a water-based adhesive.
Operations at the facility appear to have emitted in excess of 100 tons per year
of VOCs during the last three years.
The solvent-based inks currently used contain solvents at concentrations
ranging from 38.8% to 78.8%. Additional solvents were added to the inks at the
presses prior to use, and during the run, to maintain operating viscosity levels
and color control.
Ropes and ▇▇▇▇
This solvent normally amounts to an additional 20% to 30% by volume.
It does not appear that Arcon has filed for or received any air emissions
permits.
2. Issue Discussion
a. Permits
Part 2Ol of the New York Air Pollution Control Regulations generally
prohibits operation of an air contamination source without "a valid certificate
to operate issued by the Commissioner." ss.201.2(b). An air contamination source
is defined as "[a]ny apparatus, contrivance or machine capable of causing
emission of any air contaminant to the outdoor atmosphere, including any
appurtenant exhaust system, air cleaning device or emission point...."
ss.200.1(d). An air contaminant is defined as "[a] dust, fume, gas, mist, odor,
smoke, vapor, pollen or any combination thereof," ss.200.1(b) and would include
VOCs emitted from the Arcon facility. A "person who owns or operates an existing
air contamination source" must "apply for a certificate to operate."
ss.201.2(c). Part 201 also provides that "no person shall commence construction
of an air contamination source or proceed with a modification without having a
valid permit to construct issued by the Commissioner." ss.201.1.
Given that Arcon does not appear to have a "certificate to operate," Arcon
should apply for such a permit. Arcon may also need to apply for a "permit to
construct" should it modify its production process to run with water-based inks.
b. Performance standards
In addition to establishing requirements for permits to authorize the
construction and operation of air contamination sources, the NYSDEC regulations
also establish performance standards for different types of air contamination
sources. Those standards, which establish limits on the amount or rate of
emissions from particular types of sources, apply to both Arcon's surface
coating operation (adhesives) and graphic arts process (printing).
(i) Surface Coating Operations (Adhesives)
Part 228, dealing with surface coating operations, applies to an owner or
operator of listed coating lines that are located in a nonattainment area for
ozone and which emit in excess of 100 tons per year of VOCs or are located in
the New York City metropolitan area (which includes Nassau County) ss.228.1(a).
-2-
ROPES & ▇▇▇▇
Part 228 sets standards in pounds per gallon of VOCs. This standard varies
depending on the process.
Arcon's adhesives coating operation run on Press #2 wou1d probably be
considered a "paper coating line." ss. 228.8. Paper coating lines are
described in the regulations as "[p]aper, pressure sensitive tape regardless of
substance (including paper, fabric, or plastic film) and related web coating
processes on plastic film such as but not limited to: typewriter ribbons,
photographic film and magnetic tape. Also metal foil gift wrap and packaging."
ss. 228.8. Part 228 sets a standard of 2.9 pounds of VOCs per gallon of
coating material for paper coating lines. ss.228.8.
Based on ▇▇▇▇ ▇▇▇▇▇▇▇'▇ analysis of the adhesives used by Arcon, these
adhesives appear to be in compliance with the Part 228 standards.
(ii) Graphic Arts Processes (Printing)
Arcon's major compliance issue relates to Part 234's performance
standards, dealing with graphic arts processes.
Part 234 applies to an owner or operator of packaging rotogravure,
publication rotogravure or flexographic printing processes that are located in a
nonattainment area for ozone and which emit in excess of 100 tons of VOCs per
year or are located in the New York City metropolitan area. Arcon's printing
processes on presses #1 and #2 appear to be subject to these requirements.
Part 234 requires that operators of these facilities limit emissions by
one of three control strategies. First, a process will be in compliance if the
volatile fraction of ink, as it is applied to the substrate, contains 25% by
volume or less of VOCs and 75% by volume or more of non-reactive volatiles. The
solvent-based inks currently used by Arcon do not satisfy this requirement.
According to ▇▇▇▇ ▇▇▇▇▇▇▇, for both gravure and flexography, water-based inks
may be used to establish compliance.
Second, a process will be in compliance if the ink, as it is applied to
the substrate, less non-reactive volatiles, contains at least 60% by volume of
non-volatile material. However, according to ▇▇▇▇ ▇▇▇▇▇▇▇, no such high solids
inks exist for the two processes at the percentages described (i.e., no more
than 40% solvents by volume per gallon of ink applied).
Third, add-on controls, such as incineration or solvent recovery, may be
used to comply. The capture system and the air cleaning device must provide for
an overall reduction in VOC emissions of at least 65% for packaging rotogravure
processes, of
-3-
Ropes & ▇▇▇▇
at least 70% for publication rotogravure processes and of at least 60% for
flexographic printing processes. Arcon currently has no such add-on controls.
B. Hazardous Waste Regulation Issues
The collection, packaging, labelling, storage, handling, segregation and
disposal of hazardous wastes is regulated under both New York and federal law.
▇▇▇▇ ▇▇▇▇▇▇▇ identified several areas of concern relative to the possible
generation and handling of hazardous wastes.
a. ▇▇▇▇ ▇▇▇▇▇▇▇ indicates that, in the past, Arcon has avoided
generating hazardous waste in the form of leftover inks by
utilizing ink overruns in other darker color formulations.
- Arcon should continue utilizing ink overruns in other darker
color formulations in order to minimize the generation of
hazardous wastes in the future.
- Arcon will formalize its ink rotation program to minimize
waste in the form of unusable inks. The formal ink rotation
program will be finalized by November 15, 1991.
b. Dirty solvents and machine parts, i.e., ink fountains and rolls,
have been cleaned by soaking them in drums and kits of solvents.
This produces two forms of waste, both of which would likely be
considered hazardous: (i) used solvents and (ii) solids or "bottoms"
at the bottom of the drums or kits. Arcon currently recycles its
solvents and solids by using them in ink mixing.
- Arcon plans to investigate the purchase of a cleaning tank for
all rollers, mixers, parts, etc. A cleaning tank decision will
be made by October 30, 1991. Should a cleaning tank be
purchased, any unrecyclable solids that result from this
process should be disposed of as hazardous waste.
- Arcon should obtain an EPA hazardous waste generator I.D.
Number and dispose of any unrecyclable wastes generated by
this new cleaning process through a licensed hazardous waste
disposal company.
- The water used in the cleaning process should be tested to
determine whether it contains hazardous substances.
-4-
Ropes & ▇▇▇▇
- In the interim, Arcon management informs us that it will
continue to recycle ink solvents and solids back into solvent
solutions and dispose of them through use in black ink
batches.
c. Adhesives coating wastes have primarily resulted from wash-up of
the coating station at the end of a day or job. Water waste has gone
into the empty pallet bins for return to National Starch (the water
keeps the bins moist and easy to clean).
- Assuming that the coating system does not generate any
hazardous waste, this practice may continue. Periodic testing
should be undertaken to confirm that this wastewater is not
subject to regulation under applicable hazardous waste
management laws.
d. Coloration has been observed on the wash tub behind Press #2.
Management has indicated that wastewater has been generated as a
result of tray washing associated with water-based ink processes.
- The coloration in the wash tub indicates that inks may have
been poured into this wash tub in the past. Solvent-based inks
should never be disposed of or be cleaned from equipment in
the wash tubs. Water-based inks may, in some instances,
contain hazardous constituents and should also not be disposed
of in this manner. ▇▇▇▇ ▇▇▇▇▇▇▇ suggested that, so long as the
inks and adhesives were removed from the pans before cleaning,
the residues should be within levels acceptable to sewer
treatment systems in the county. ▇▇▇▇ ▇▇▇▇▇▇▇ should confirm
this with the regulators and confirm that a permit is not
required. The sinks should be monitored and the employees
should be instructed not to dispose of any inks in the wash
tub.
- Arcon management has informed employees that no ink clean-up
whatsoever may be accomplished in common sinks and that all
inks, solvent or water-based, must be recycled. Signs have
been posted at both sinks. Any waste containing hazardous
substances that cannot be recycled back into darker ink
formulations should be disposed as hazardous waste.
e. Drums are wiped clean and then sent back to the ink vendors for
crushing.
-5-
Ropes & Gray
- Arcon informs us that the ink manufacturer is licensed for
this activity. The manufacturer has been asked to supply
documentation.
- ▇▇▇▇ ▇▇▇▇▇▇▇ should confirm with the regulators that Arcon's
method of cleaning these drums is sufficient. The cleaning
process may generate hazardous wastes, such as ink-soaked
rags, which will need to be properly disposed.
f. Off-spec ink has been returned to the manufacturer.
- Off-spec ink should be returned to the manufacturer as soon as
possible. Off-spec ink that cannot be used for any purpose or
that results from in-plant use may be considered a hazardous
waste. ▇▇▇▇ ▇▇▇▇▇▇▇ should confirm with the regulators that
this material does not need to be handled as a hazardous
waste. If the regulators indicate that off-spec ink is a
hazardous waste, it should be disposed of as such.
g. Spent rags containing ink and solvent have been thrown in the
compactor. The rags are collected in open drums in the plant.
- Safety containers for rags ladened with solvent/flammables are
now in place. An outside rag service has been employed that
will provide rags and be responsible for cleaning them. ▇▇▇▇
▇▇▇▇▇▇▇ should confirm with the regulators that this practice
is sufficient.
C. Hazardous Materials Management
The following conditions at the Arcon facility, which have potential
hazardous material storage implications, were observed by ▇▇▇▇ ▇▇▇▇▇▇▇ during
his visit to the plant. Below each item, we have identified measures that
management has indicated have been taken or will be taken in the near future to
address these conditions. We recommend that ▇▇▇▇ ▇▇▇▇▇▇▇ confirm with the
regulators that these practices and measures are consistent with the applicable
regulations.
a. Bungs on drums and totes have been open, missing and/or leaking.
- All drums not actively in use at the coaters are now covered.
A program is being designed to insure covering even when drums
are in use. These covers should be in place by November 7,
1991.
-6-
Ropes & ▇▇▇▇
b. Drums of flammable materials have not been grounded, although the
wiring is available.
- All solvent/flammable drum containers are now grounded.
c. A solvent drum was leaking onto the floor. The pipe fitting was
loose and wrapped with a rag. The drum was not grounded. The leaking
solvent was being collected in a pail under the spout.
- All solvent/flammable drum containers are now grounded.
- A written program regarding initial clean-up activities and
then on-going housekeeping activities will be prepared.
Initial plant clean-up is scheduled to be complete by November
15, 1991.
- Arcon has contacted an environmental consulting firm and is
awaiting their proposal for a spill containment program. A
final decision on spill containment will be made by October
30, 1991.
- Arcon is also obtaining proposals for an explosion-proof ink
room. Arcon, however, is currently testing nonflammable
water-based inks. This would eliminate the need for special
storage measures. A final decision on ink storage will be made
once a decision is made whether or not to proceed with the
water-based inks.
d. Safety equipment has not been used when flammable materials have
been transferred - funnels, pans, etc.
- Emergency equipment has been purchased and put in place. A
test procedure for fire extinguishers has been instituted.
- A safety program, including a safety plan for employees, will
be incorporated as part of written contingency plans for
responses to fire explosion, spills and so forth currently
under development and will be accomplished by December 31,
1991.
e. Inks and solvents have been stored in a truck trailer that has been
set on the ground alongside the building creating a fire hazard.
- Arcon has contacted an environmental consulting firm and is
awaiting their proposal for a spill
-7-
Ropes & ▇▇▇▇
containment program. A final decision on spill containment
will be made by October 30, 1991.
- Arcon is also obtaining proposals for an explosion-proof ink
room. Arcon, however, is currently testing nonflammable
water-based inks, which would eliminate the need for special
storage measures. A final decision on ink storage will be made
once a final decision is made whether or not to proceed with
waterbased inks.
- A guard rail has been installed around the outside trailer
used for storage.
f. Inks have been mixed in an area next to the Press #1 work space.
- Written contingency plans will be developed by December 31,
1991, for responses to fire, explosion, spills and so forth.
g. Inks and solvents have been found on the floors. The concrete floor
was pitted in the drum storage area. Tyvek has been used to cover
the floor.
- A written program regarding initial clean-up activities and
then on-going housekeeping activities will be prepared.
Initial plant clean-up is scheduled to be completed by
November 15, 1991.
- The concrete floor will be repaired and upgraded to enhance
spill control and management in this area.
- Written contingency plans will be developed by December 31,
1991 for responses to fire, explosion, spills and so forth.
D. Miscellaneous Issues
Arcon has taken steps to address several additional conditions at the
plant. These conditions and the actions Arcon informs us they have taken or will
take are described below. ▇▇▇▇ ▇▇▇▇▇▇▇ should confirm with the regulators that
these practices are consistent with the applicable regulations.
a. There has been no "Right To Know" activity since 1986. The MSDS
books have not been updated. A proper chemical inventory does not
appear to have been filed.
-8-
Ropes & ▇▇▇▇
- A "Right to Know" program for employees currently is being
developed and will be in place by December 1, 1991.
b. In discussions with ▇▇▇▇ ▇▇▇▇▇▇▇, several physical safety issues
were observed: no employee training seminars have taken place since
1986; no formal training program for fork lift truck operators is in
place; not all employees mixing inks were wearing the gloves and eye
protection provided by the company; and new employees have not been
given orientations in chemical safety and the requirements of the
Hazard Communication Standard.
- Arcon will develop a written safety plan involving employees
by December 31, 1991.
c. Containers in the plant have not been labeled. Drums and kits in the
mixing area and at the presses have not been labeled.
- All solvent/flammable drum containers are now labeled.
d. Arcon has not had a lock out/tag out program.
- A lock-out tag-out system is now in place.
e. Fork lifts have not been equipped with fire extinguishers or back-up
horns.
- Back-up warning systems and fire extinguishers have been
placed on the forklifts.
f. The ink fountains have not had covers.
- Existing covers are being modified and new covers are being
fabricated. Arcon expects to complete this project by November
14, 1991.
g. Kits and drums of inks and solvents have been left open at the
presses.
- All drums not actively in use at the coaters are now covered
with a program being designed to insure covering even when
drums are in use.
h. The ventilation fan at Press #1 has been located at the base of the
printing stack and appears to have been pulling vapors from the
dryer system into an area in which press personnel work.
-9-
Ropes & ▇▇▇▇
- A new exhaust arrangement is in place. Air quality tests using
Drager Tubes have been scheduled for later this month. These
tests will quantify the vapor levels in various parts of the
presses and the plant.
i. Guards have not been used on the presses.
- All existing guards have been installed. A sheet metal
contractor is fabricating and installing new guards. This
project is expected to be complete by November 7, 1991. Plans
are in place to cyclone fence potential safety hazards that
don't require frequent access.
j. Several fire exits have been blocked with debris.
- All fire exits are now clear and are being maintained in that
fashion.
k. Housekeeping at the presses and ink mixing area has needed
improvement.
- A written program regarding initial clean-up activities and
then on-going housekeeping activities will be prepared.
Initial plant clean-up is scheduled to be complete by November
15, 1991.
l. Welding gases have been used in the maintenance shop.
- Rather than apply for welding gas permits at this time, Arcon
will cease the small amount of welding using gas that it
currently does.
II. Contacting of Government Agencies
We recommend that Arcon contact the Nassau County Board of Health and
request a meeting to discuss compliance issues as soon as possible.
At the meeting with the regulators, Arcon should propose a plan to address
the concerns noted in this report. In the meantime, Arcon should continue to
investigate the feasibility of using water-based inks, obtain quotes on
incinerators and proceed with other actions suggested by ▇▇▇▇ ▇▇▇▇▇▇▇.
If Arcon does not hear promptly from the County, ▇▇▇▇ ▇▇▇▇▇▇▇ should make
a follow-up telephone call to ▇▇▇▇▇ ▇▇▇▇▇, the person responsible for air
quality matters in the County.
-10-
Ropes & ▇▇▇▇
III. Future Actions
A. Compliance with Part 234
Arcon has two possible options for complying with the performance
standards of Part 234:
a. Conversion to water-based inks which do not contain
hydrocarbon solvents at concentrations in excess of 25% of the
ink solution. The water-based inks which Arcon is considering
generally contain about 5% solvent by volume.
b. Add-on controls, such as catalytic incineration or a solvent
recovery system, which will reduce VOC emissions through
capture and destruction of 60% of the total solvents in the
inks.
Arcon management has indicated that it prefers to convert the production
processes to run on water-based inks for several reasons: (1) the use of
water-based inks is more environmentally sound because it reduces overall usage
of hazardous materials at the facility; (2) the use of water-based inks
eliminates the need for compliance with numerous special requirements for
handling and storing solvent-based inks; and (3) it is significantly less
expensive. Arcon will simultaneously investigate add-on controls to be used
should water-based inks prove to be impractical.
B. Operations Manual
We recommend that Arcon prepare an Operations Manual that would compile
written procedures for manufacturing processes, materials handling, storage and
disposal, environmental reporting and recordkeeping, responses to fire,
explosion and spills, housekeeping and safety.
C. Independent Investigaton
We recommend that an investigation be undertaken into the circumstances
that led to the existence of the conditions referred to in this report. The
investigation should be conducted by an outside counsel to be retained and
supervised by the FSE Holdings, Inc. Board of Directors. The party conducting
the investigation should be given full access to records and personnel to
facilitate their investigation, and all personnel should be directed to
cooperate fully with the investigators. The results of the investigation should
be reported to the FSE Holdings, Inc. Board. Based on the investigator's report
and other information as may be deemed appropriate, the FSE Board
-11-
Ropes & ▇▇▇▇
should cause to be taken whatever remedial, disciplinary and/or other actions
may be appropriate under the circumstances.
D. Adoption of Policy Regarding Compliance With Environmental Laws
We recommend that several further steps be taken to improve Arcon's
environmental compliance efforts. First, we recommend that Arcon adopt a
corporate policy stating Arcon's intent to comply with all environmental, health
and safety laws. Second, an Arcon officer should be specifically assigned
responsibility for environmental, health and safety compliance. This officer
should be responsible for preparing the Operations Manual, identifying and
monitoring compliance with all applicable environmental, health and safety laws
and for developing and implementing employee education and training programs.
Very truly yours,
/s/ Ropes & ▇▇▇▇
Ropes & ▇▇▇▇
-12-
Notice of Compliance Determination
[ILLEGIBLE] Inspected 10/21/91 AT 3:00 PM
--------------------------------
LOC FAC EP
DEPARTMENT OF ENVIRONMENTAL CONSERVATION
DIVISION OF AIR RESOURCES
NOTICE OF COMPLIANCE DETERMINATION
WHITE - APPLICANT BUREAU OF
PINK - DATA ENTRY AIR QUALITY MANAGEMENT
YELLOW - REGIONAL NASSAU COUNTY
OFFICE DEPARTMENT OF HEALTH
▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
________________________________________________________________________________
TO FOR
Name Arcon Coating ▇▇▇▇▇, Inc. Source
Description Surface Coating & Printing
Address ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
|x| INSPECTION
City Oceanside, L.I., N.Y. ZIP 11572 |_| COMPLAINT TYPE
|_| OTHER
Contact ▇▇. ▇▇▇▇▇ ▇▇▇▇▇ (▇▇▇) ▇▇▇-▇▇▇▇
________________________________________________________________________________
MULTIPLE EMISSION POINTS
LIST __________, __________, __________, __________, __________, __________,
IF __________, __________, __________, __________, __________, __________,
MORE __________, __________, __________, __________, __________, __________,
THAN __________, __________, __________, __________, __________, __________,
ONE __________, __________, __________, __________, __________, __________,
________________________________________________________________________________
INSPECTION COMMENTS (DESCRIBE VIOLATION, IF ANY)
Inspection of facility revealed that company was emitting VOC's at the
following locations without the required certificates to operate (1)
Flexographic-Rotogravure Press #1; (2) Flexographic-Rotogravure Press #2;
(3) Ink Mixing Area (Hood); (4) Ink Storage shed (outside of main
building)
Collected ink sample on 10/21/91 for Part 234 compliance determination.
________________________________________________________________________________
COMPLIANCE STATUS
_____________________________________________________
|x| NON COMPLIANCE PLEASE TAKE NOTICE THAT based upon |_| IN COMPLIANCE
this inspection, there is reason to believe that you
are in violation of Article 19 of the New York |_| SOURCE SHUT DOWN
Environmental Conservation Law and the regulation
promulgated thereunder 6NYCFIR Part(s) 201,______. |_| SOURCE REMOVED
PLEASE TAKE FURTHER NOTICE THAT the sanctions for |_| OTHER
such violations include a civil penalty of up to Type __________
$10,000 plus $500 per day the violation continues a
criminal fine of up to $10,000 per day of violation,
and/or imprisonment of up to one year per day of
violation.
YOU ARE HEREBY DIRECTED TO TAKE CORRECTIVE ACTION
_____________________________________________________
________________________________________________________________________________
DISPOSITION
|_| AGREEMENT FOR VOLUNTARY COMPLIANCE BY _/_/_ |_| REINSPECTION TO BE
MADE BY _/_/_
|x| OTHER Refer to DEC for enforcement
----------------------------
|_| FURTHER ACTION NOT REQUIRED 91-06-E |_| PRIOR ACTION(S) COMPLETE
________________________________________________________________________________
(print)
INSPECTION PERFORMED BY V.S. ▇▇▇▇▇▇/C.A. Poreta TITLE Public Health Eng II
----------------------- --------------------
DEC REPRESENTATIVE'S SIGNATURE [ILLEGIBLE] DATE 10/21/91
------------ ---------
DEC RESERVES THE RIGHT TO TAKE for further information please contact-
FURTHER ENFORCEMENT ACTION FOR ______________________________________
ANY VIOLATION NOTED IN THIS name
NOCD OR ANY OTHER VIOLATION OF ___________________________ __________
THE ENVIRONMENTAL CONSERVATION title phone no.
LAW
________________________________________________________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ [County Seal] ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, M.D. MPH
County Executive Commissioner
NASSAU COUNTY
DEPARTMENT OF HEALTH
▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇. ▇▇ ▇▇▇▇▇-▇▇▇▇
October 22. 1991
BAQM Ser. Ltr. #194-91
▇▇. ▇▇▇▇▇▇ ▇▇▇▇, P.C.
Regional Air Pollution Engineer
New York State Department of
Environmental Conservation Subject: Case Referral 91-06-E
SUNY - Building 40 Arcon Coating ▇▇▇▇▇, Inc.
▇▇▇▇▇ ▇▇▇▇▇, ▇.▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇.▇., ▇.▇. ▇▇▇▇▇
Dear ▇▇. ▇▇▇▇:
The subject facility was found to be constructed and operating without proper
certification and is in violation of 6NYCRR Part 201.
In accordance with the current Memo of Understanding we are referring this
matter to your office for litigation. Attached please find a copy of the Notice
of Compliance Determination (NOCD) issued on 10/21/91.
Please advise us of any action taken by NYS/DEC.
Very truly yours,
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, P.E.
Bureau of Air Quality Mgmt.
VSI:mf
Att.
cc: Arcon Coating ▇▇▇▇▇, Inc.
Attn: ▇▇. ▇. ▇▇▇▇▇
Order on Consent
STATE OF NEW YORK
DEPARTMENT OF ENVIRONMENTAL CONSERVATION
x
In the Matter of the Violations of
Articles 19 and 72 or the New York State
Environmental Conservation Law ("ECL"),
& Parts 201, 231 and 234 of Title 6 of
the Official Compilation of Codes, Rules
and Regulations of the State of New ORDER ON CONSENT
York, by FILE #R1-4837-92-01
ARCON COATING ▇▇▇▇▇, INC.
(Nassau County) Respondent
x
I. DEPARTMENT FINDINGS
WHEREAS, Article 19 of the New York State Environmental Conservation Law
("ECL") and the rules and regulations promulgated thereunder, provides for the
maintenance and safeguarding of the air resources of this State from pollution;
and
WHEREAS, Article 72 of the ECL and the rules and regulations promulgated
thereunder and Article 19, provide for air quality control regulatory program
fees and costs; and
WHEREAS, the New York State Department of Environmental Conservation
("NYSDEC," "DEC," or the "Department"), is authorized to enforce the rules and
regulations of the State of New York in order to ▇▇▇▇▇ and prevent air pollution
in the State; and
WHEREAS, Respondent operates four (4) emission points described in 6 NYCRR
Part 200, specifically, Respondent operates a manufacturing facility (the
"facility") which utilizes flexographic printing processes as defined in 6 NYCRR
ss.234.2(3). The facility houses two (2) packaging flexographic rotogravure
printing presses for use in the manufacturing of books and stationery items and
is located at ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇▇.
WHEREAS, the Department has documented violations of ECL Article 19 and 6
NYCRR 201.2(a), 201.2(b), and 201.2(c) and ECL 72-0201 and 72-0302, in that
Respondent caused and/or permitted to be caused, the operation of four (4) air
contamination sources, specifically two (2) flexographic rotogravure printing
presses, one (1) ink mixing area and one (1) ink storage shed, without the
required Permits to Construct/Certificates to Operate, and without payment of
the required regulatory fees, documented on October 21, 1991; and
WHEREAS, according to information given by Respondent to the Nassau County
Department of Health, Respondent emits between 100 to 150 tons per year of
volatile organic compounds and, as such, Respondent's facility is a major
facility subject to the requirements of 6 NYCRR Part 231 in an area of
nonattainment for ozone; and
WHEREAS, the Department has documented violations of ECL Article 19 and 6
NYCRR part 231 in that Respondent caused and/or permitted to be caused the
construction and operation of air contamination sources without having been
issued valid permits to construct and without meeting the requirements of part
231, in violation of 6 NYCRR ss.231.3(a); and
WHEREAS, the Department has documented violations of ECL Article 19 and 6
NYCRR part 234 in that Respondent caused and/or permitted to be caused, the use
and emission of surface coating inks with reactive VOC content greater than 25%,
specifically with 99% VOC content, documented on 10/21/91 and continuing
thereafter to the present, in violation of ss.234.3(a); and
WHEREAS, Respondent has submitted applications for Permits to
Construct/Certificates to Operate, on or about June 11, 1992; but review has
been suspended pending the outcome of these enforcement proceedings; and
WHEREAS, it is expected that the Department and/or its delegates will make
their best efforts to issue the certificates within 60 days after Respondent
submits approvable applications, provided that Respondent is in compliance with
all of the terms and conditions of this Order; and
WHEREAS, pursuant to ECL 71-2103, any person who violates any provision of
Article 19 or any regulation promulgated pursuant thereto shall be liable for a
penalty not to exceed Ten Thousand ($l0,000) Dollars for each violation and an
addition sum not to exceed Five Hundred ($500) Dollars for each day during which
said violation continues, and in addition, such person may be enjoined from
continuing such violation; and
WHEREAS, the facts set forth above constitute separate and distinct
violations by Respondent of Article 19 and of the ECL and 6 NYCRR 201, 231 and
234; and
WHEREAS, other than the aforementioned violations, the Department is
currently aware of no other violations of Article 19 by Respondent; and
WHEREAS, pursuant to ECL ss.7l-4l03, any person who violates any of the
provisions of Article 72 or the regulations promulgated pursuant thereto shall
be liable for a civil penalty of up to One Thousand ($1,000) Dollars in addition
to any amount assessed as a penalty pursuant to subdivision five of ECL SS.
72-0201; and
WHEREAS, the facts set forth above constitute separate and distinct
violations by Respondent of Article 72 of the ECL; and
WHEREAS, this Order is in full satisfaction of the Department's
enforcement for the violations specifically alleged herein, as long as
Respondent strictly complies with the terms and conditions of this Order; and
WHEREAS, Respondent has affirmatively waived its right to a public hearing
in this matter in the manner provided by law and having consented to the
issuance and entry of this Order pursuant to ECL Articles 19 and 72 and agrees
to be bound by the terms and conditions contained herein.
II. ORDER
NOW, having considered this matter and being duly advised, it is
ORDERED, that with respect to the aforesaid violations, there is hereby
imposed upon Respondent, a civil penalty in the sum of Twenty Thousand ($20,000)
Dollars, Ten Thousand ($10,000) Dollars of which shall be made payable to the
Department by bank-certified check upon Respondent's execution of this Order,
and the remaining Ten Thousand ($10,000) Dollars to be suspended in the form of
a letter of credit, bond or other acceptable secured undertaking; provided
Respondent strictly complies with the terms and conditions of this Order; and it
is further
ORDERED, that Respondent shall pay environmental regulatory program fees
in the sum of One Hundred ($100) Dollars to the Department which shall be
payable to the Department by separate bank-certified check, upon Respondent's
execution of this Order; and it is further
ORDERED, that all Letters of Credit, Bonds or other secured undertakings,
pursuant to this Order be submitted to the Department upon execution of this
Order, and shall not expire for at least (6) months after the date for full
compliance to which they relate; and it is further
ORDERED, that Respondent shall pay a One Thousand ($l,000) Dollar penalty
for failure to submit approvable applications for Permit(s) to Construct and/or
Certificate(s) to Operate with any and all supporting documents within fifteen
(15) business days after notification by the Department that revisions are
necessary. "Approvable" within the context of this Order shall mean approvable
by the Department with minimal revision. "Minimal revision" shall mean that
Respondent incorporates the revisions required by the Department and resubmits
the application(s) for approval within fifteen (15) business days of receipt of
the Department's comments; and it is further
ORDERED, that failure to adhere to the terms of this Order shall result in
immediate revocation of all Permits and Certificates to Operate systems that are
the subject of this Order at Respondent's facility and refusal to issue future
Permits and Certificates to Operate until the violations which are the subject
of this Order are resolved; and it is further
3
ORDERED, that upon any denial of the Part 201 Permit(s) to Construct
and/or Certificate(s) to Operate, Respondent shall immediately cease operation
of the air contaminant source for which the Permit(s) to Construct and/or
Certificate(s) to Operate has been denied; and, if the matter cannot be resolved
through good-faith discussions with the Department within 30 days of the date of
the denial, Respondent shall perform closure and clean-up in accordance with a
Department-approved plan; and it is further
ORDERED, that on or before December 31, 1992, Respondent shall submit to
the Department and to the Nassau County Department of Health, complete and
approvable applications for certificates to operate the air contamination
sources that are the subject of this Order. Approvable within the context of
this Order shall mean approvable by the Department with minimal revision.
Minimal revision shall mean that Respondent incorporates the revisions required
by the Department and resubmits the applications for approval within fifteen
(15) business days of receipt of the Department's comments.
ORDERED, that the failure of Respondent to be in full compliance with
Parts 201, 231 and 234 by March 1, l993 and/or Respondent's failure to strictly
comply with the terms and conditions of this Order shall subject the Respondent
to further enforcement action for the violations which are the subject of this
order, as well as any and all subsequent violations; and it is further
ORDERED, that Respondents shall strictly adhere to the terms and
conditions in this Order; and it is further
ORDERED, that on or before March 1, l993, Respondent shall be in receipt
of Part 201 Certificates to Operate its air contamination sources and be in full
compliance with part 231 and part 234, or shall cease operation and close down
its air contamination sources that do not have certificates or are otherwise in
noncompliance in accordance with a Department-approved plan; and it is further
ORDERED, that the issuance of certificates to operate the air
contamination sources that are the subject of this Order shall constitute the
final evidence of Respondent's compliance with this Order; and it is further
ORDERED, that Respondent shall not suffer any penalty under any of the
provisions, terms and conditions hereof, or be subject to any proceedings or
actions for any remedy or relief, if it cannot comply with any requirements of
the provisions hereof because of an Act of God, war, riot, strike, or other
catastrophe, provided however, that Respondent shall immediately notify the
Department in writing when it obtains knowledge of any such condition and
request an appropriate extension or modification of the provisions hereof; and
it is further
4
ORDERED, that if Respondent finds that it must rely on the provisions of
the paragraph immediately above, Respondent shall give notice to the Department,
within a reasonable time after the occurrence, of the nature and extent of the
reason, happening, or event which prevented, hindered, or delayed Respondent's
performance; and shall request such additional time as may be required. If the
Department finds that the delay was caused by the reasons set forth in the
paragraph immediately above, the compliance schedule shall be adjusted as
necessary; and it is further
ORDERED, that the terms of this Order shall not be construed to prohibit
the Commissioner or his duly-authorized representative from exercising any
summary abatement powers, granted pursuant to statute or regulations; and it is
further
ORDERED, that the Department reserves the right to require that the
Respondent undertake any additional measures required to protect human health or
the environment and reserves its rights to exercise its authorities under the
law to protect human health and the environment or to otherwise require
compliance with the law, and that nothing contained in this Order shall be
construed as impairing these rights; and it is further
ORDERED, that for the purpose or ensuring compliance with this Order and
in accordance with ECL ss.l9-0305(2)(a), duly-authorized representatives of DEC
shall be permitted access to the Facility in question and to relevant records to
ensure compliance with the terms of this Order; and it is further
ORDERED, that the provisions of this Order shall not bind or prejudice
Respondents nor shall this Order be construed as an admission in any civil
action. Nothing, however, shall prevent the Department from using this Consent
Order and the terms and conditions contained herein, in a proceeding to enforce
the terms of this Order or in a proceeding by the Department to revoke or
suspend a license or registration or certification of Respondents, or in any
other future proceeding brought by or on behalf of the Department; and it is
further
ORDERED, that in those instances in which Respondent desires that any of
the provisions, terms or conditions of this Order be changed, it shall make
written application, setting forth the grounds for the relief sought to the
Commissioner of Environmental Conservation, c/o ▇▇▇▇ ▇. ▇▇▇▇▇, Regional
Attorney, New York State Department of Environmental Conservation, Building 40,
State University of ▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇; and it is
further
ORDERED, that penalty payments herein required shall be sent by certified
mail to the New York State Department of Environmental Conservation, Building
40, S.U.N.Y. Campus, Stony Brook, New York 11790-2356, Attention: ▇▇▇▇ ▇. ▇▇▇▇▇,
Regional Attorney; and it is
5
further
ORDERED, that this Order on Consent is being entered into for the purposes
of settling the instant proceeding only and nothing contained herein shall be
construed as to relieve Respondent from its duties and obligations under any
laws, rules or regulations, that its operation would cause it to be subject to;
and it is further
ORDERED, that no change in this Order shall be made or become effective,
except as specifically set forth by written order of the Commissioner, such
written order being made either upon written application of the Respondent or
upon the Commissioner's own findings; and it is further
ORDERED, that the provisions of this Order shall be deemed to bind
Respondent and its respective officers, directors, agents, servants, successors
and assigns and all persons, firms and corporations acting under or for it
including, but not limited to those who may carry on any or all of the
operations now being conducted by Respondent, whether at the present location or
any other in New York State.
Dated: Stony Brook, New York
December 4, 1992
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Commissioner of Environmental Conservation
By /s/ ▇▇▇ ▇. ▇▇▇▇▇
--------------------------
▇▇▇ ▇. ▇▇▇▇▇, P.E.
Regional Director
Region One
To: Ropes and ▇▇▇▇
▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Esq.
6
CONSENT BY RESPONDENT
Respondent acknowledges the authority and jurisdiction of the
Commissioner of Environmental Conservation of the State of New York to issue the
foregoing Order, waives public hearing or other proceedings in this matter,
accepts the terms and conditions set forth in the Order and consents to the
issuance thereof.
ARCON COATING ▇▇▇▇▇, INC.
By /s/ ▇▇▇▇▇ ▇▇▇▇▇
---------------------------
STATE OF NEW YORK )
s.s.:
COUNTY OF NASSAU )
On the 23 day of November, 1992, before me personally came [illegible]
to me known, who being duly sworn, deposed and said that he resides at
[illegible] that he is the [illegible] of Respondent Corporation and that he
signed his name for and on behalf of said corporation, with full authority so to
do.
[illegible]
----------------------------
NOTARY PUBLIC
6
CONSENT BY RESPONDENT
Respondent acknowledges the authority and jurisdiction of the
Commissioner of Environmental Conservation of the State of New York to issue the
foregoing Order, waives public hearing or other proceedings in this matter,
accepts the terms and conditions set forth in the Order and consents to the
issuance thereof.
ARCON COATING ▇▇▇▇▇, INC.
By /s/ ▇▇▇▇▇ ▇▇▇▇▇
---------------------------
STATE OF NEW YORK )
s.s.:
COUNTY OF NASSAU )
On the 2 day of November, 1992, before me personally came ▇▇▇▇▇ ▇▇▇▇▇
to me known, who being duly sworn, deposed and said that he resides at
______________________ that he is the __________________ of Respondent
Corporation and that he signed his name for and on behalf of said corporation,
with full authority so to do.
[illegible]
---------------------------
NOTARY PUBLIC
7
------
NUMBER
292495
------
[Logo] New York State Department of Environmental Conservation
RECEIPT
Region Number one Date 12-9-92
Location Stony Brook Division Legal
Received of ARCON COATING ▇▇▇▇▇ INC.
In the amount of Ten Thousand $ as Enforcement penalty & $ One Hundred as
Regulatory Program fee $ 10100.00
For an order on consent in case File No. 1-483
[_] Cash Department Representative [illegible]
[X] Check Number 8340, 8341 Title Clerk
[_] Money Order
ORIGINAL
New York State Department of Environmental Conservation
Building 40--SUNY, Stony ▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
TELEPHONE: (▇▇▇) ▇▇▇-▇▇▇▇
FACSIMILE: (▇▇▇) ▇▇▇-▇▇▇▇ [Logo]
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Commissioner
Apr 15 1993
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, Esq.
Ropes & ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Dear ▇▇. ▇▇▇▇▇▇▇▇▇▇:
This is in response to your request for a modification of Order on Consent
No. R1-4837-92-01 on behalf of Arcon Coating ▇▇▇▇▇, ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇.
The modification requested is for an extension of time from March 1, 1993, to
April 15, 1993, to come into compliance and to continue to operate under the
Order.
You have represented, and the Nassau County Department of Health has
confirmed, that it has been processing your application and needed some
additional information that had been submitted to the DEC, and that Certificates
to Operate are expected to be issued within six weeks. Based upon these
circumstances, your request is granted. Accordingly, the date in paragraph
number 5 on page 4 of said Order is hereby changed from "on or before March 1,
1993," to "On or before April 15, 1993." All other terms and conditions of the
Order remain in full force and effect.
Very truly yours,
[illegible]
▇▇▇ ▇. ▇▇▇▇▇
Regional Director
REC/MEC/ls
cc: Arcon Coating ▇▇▇▇▇
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇. ▇▇▇▇▇▇
Nassau County Dept. of Health
New York State Department of Environmental Conservation
Building 40--SUNY, Stony ▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
TELEPHONE: (▇▇▇) ▇▇▇-▇▇▇▇
FACSIMILE: (▇▇▇) ▇▇▇-▇▇▇▇ [Logo]
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Commissioner
May 26 1993
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, Esq.
Ropes & ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Dear ▇▇. ▇▇▇▇▇▇▇▇▇▇:
This is in response to your request for a modification of Order on
Consent No. R1-4837-92-0l on behalf of Arcon Coating ▇▇▇▇▇, ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇. The modification requested is for an extension of time from April 15,
1993, to June 1, 1993, to come into compliance and to continue to operate under
the Order.
You have represented, and the Nassau County Department of Health has
confirmed, that it has been processing your application and that Certificates to
Operate are expected to be issued within several weeks. Based upon these
circumstances, your request is granted. Accordingly, the date in paragraph
number 5 on page 4 of said Order is hereby changed from "on or before April 15,
1993," to "On or before June 1, 1993." All other terms and conditions of the
Order remain in full force and effect.
Very truly yours,
/s/ ▇▇▇ ▇. ▇▇▇▇▇
▇▇▇ ▇. ▇▇▇▇▇, P.E.
Regional Director
REC/MEC/ls
cc.: Arcon Coating ▇▇▇▇▇
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇
V. Nassau County Dept. of Health
[Letterhead of Ropes & ▇▇▇▇]
November 22, 1993
▇▇. ▇▇▇▇▇ ▇▇▇▇▇
Vice President and General Manager
Arcon Coating ▇▇▇▇▇, Inc.
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Dear ▇▇▇▇▇:
I am returning to you for your files the original Letter of Credit held by the
New York State Department of Environmental Conservation. The Regional Director
also granted our last request for an extension of the compliance dates so that
it coincided with the date of final issuance of permits on this matter. This
should completely resolve our dealings with the State. Congratulations. Please
give me a call should you have any questions.
Sincerely yours,
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇/db
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
JEM/:JEMCEDK.FS
cc: Mr. ▇▇▇▇ ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
New York State Department of Environmental Conservation
Building 40--SUNY, Stony ▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
TELEPHONE: (▇▇▇) ▇▇▇-▇▇▇▇
FACSIMILE: (▇▇▇) ▇▇▇-▇▇▇▇ [Logo]
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Commissioner
SEP 29 1993
Ropes and ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
Dear ▇▇. ▇▇▇▇▇▇▇▇▇:
This is in response to your request, on behalf of Arcon Coating ▇▇▇▇▇,
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, for the New York State Department of
Environmental Conservation to return the $l0,000 Letter of Credit which was held
as security for the suspended penalty in connection with Order on Consent No.
R1-4837-92-0l.
Certificates to Operate were issued in July, 1993. In accordance with the
terms contained in Paragraph number 6 on Page 4 of the Consent Order, the Letter
of Credit is being returned. Your pending request for an extension of time to
come into compliance and continue to operate under the Order is granted. The
date in Paragraph number 5 on Page 4 of said Order is hereby changed from "On or
before April 15, 1993," to "On or before July 19, 1993."
All other terms and conditions of the Order remain in full force and effect.
Very truly yours,
/s/ ▇▇▇ ▇. ▇▇▇▇▇
▇▇▇ ▇. ▇▇▇▇▇, P.E.
Regional Director
REC/MEC/cm
cc.: Arcon Coating ▇▇▇▇▇
▇. ▇▇▇▇▇▇, NCDH
NATIONAL WESTMINSTER BANK USA
TRADE SERVICES DEPARTMENT
▇▇ ▇▇▇▇ ▇▇▇▇▇▇ - ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
TEL.(▇▇▇) ▇▇▇-▇▇▇▇
DATE: NOVEMBER 06, 1992
IRREVOCABLE STANDBY LETTER OF CREDIT NO. S100863
BENEFICIARY: APPLICANT:
STATE OF NEW YORK DEPARTMENT ARCON COATING ▇▇▇▇▇ INC.
OF ENVIRONMENTAL CONSERVATION ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇. ▇▇ ▇▇▇▇▇ ▇▇▇▇. ▇▇ ▇.▇. ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
ATTN: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
AMOUNT: USD 10,000.00
EXPIRY DATE: SEPTEMBER 01, ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇: OUR COUNTERS
GENTLEMEN:
WE HEREBY ISSUE OUR IRREVOCABLE STANDBY LETTER OF CREDIT NUMBER S100863 IN YOUR
FAVOR FOR THE ACCOUNT OF ARCON COATING ▇▇▇▇▇ INC., FOR UP TO AN AGGREGATE AMOUNT
OF USD 10,000.00 (U.S. DOLLARS TEN THOUSAND AND 00/100), AVAILABLE BY YOUR DRAFT
DRAWN ON US AT SIGHT, ACCOMPANIED BY THE FOLLOWING:
1) BENEFICIARY'S SIGNED STATEMENT READING: "ARCON COATING ▇▇▇▇▇ INC. IS NOT IN
COMPLIANCE WITH OUR ORDER FILE NO. R.▇▇▇▇▇-▇▇-▇▇."
2) THE ORIGINAL OF THIS LETTER OF CREDIT AND AMENDMENT(S), IF ANY.
PARTIAL DRAWINGS ARE NOT PERMITTED.
DRAFT MUST STATE: "DRAWN UNDER NATIONAL WESTMINSTER BANK USA STANDBY L/C NO.
S100863 DATED NOVEMBER 6, 1992".
WE HEREBY AGREE WITH YOU THAT YOUR DRAFT DRAWN UNDER AND IN COMPLIANCE WITH THE
TERMS OF THIS LETTER OF CREDIT SHALL BE DULY HONORED UPON DUE PRESENTATION TO
US.
THIS CREDIT IS SUBJECT TO THE UNIFORM CUSTOMS AND PRACTICE FOR DOCUMENTARY
CREDITS (1983 REVISION), THE INTERNATIONAL CHAMBER OF COMMERCE, PUBLICATION NO.
400.
[illegible]
---------------------
AUTHORIZED SIGNATURE
-------------
RECEIVED
NOV 10 1992
LEGAL AFFAIRS
-------------
Ropes & ▇▇▇▇ Letter t/w Permits
[Letterhead of Ropes & ▇▇▇▇]
August 5, 1993
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, Esq.
Assistant Regional Attorney
New York State Department of
Environmental Conservation
Building 40--SUNY
Stoneybrook, New York 11170-2356
Re: Acron Coating Mills, Inc. Case No. R1-4837-92-01
Dear Mary:
I am forwarding to you the final permit package received from the County
by Acron Coating Mills. This should satisfy any further obligations of Acron
under the Consent Order. Per our conversation, I would appreciate it if you
would forward to my attention the $10,000 Letter of Credit being held as
additional security for the performance of Arcon's obligations. I would also
appreciate it if you would include a note for my files indicating that these
permits were issued within the final deadlines of the Consent Order.
Thank you again for your assistance in this matter.
Sincerely yours,
/s/ John E. McElhinney
John E. McElhinney
JEM/:JEM85CAR.FS
Enclosure
cc: Mr. David Kruft
Mr. Frederick Shapiro
Mary Carpentiere, Esq. -2- August 5, 1993
bcc: Jan Juran
Colburn T. Cherney, Esg.
NEW YORK STATE
DEPARTMENT OF ENVIRONMENTAL CONSERVATION
PROCESS, EXHAUST OR VENTILATION SYSTEM
APPLICATION FOR PERMIT TO CONSTRUCT OR CERTIFICATE TO OPERATE
[STAMP SHEET 142 ILLEGIBLE]
NEW YORK STATE
DEPARTMENT OF ENVIRONMENTAL CONSERVATION
PROCESS, EXHAUST OR VENTILATION SYSTEM
APPLICATION FOR PERMIT TO CONSTRUCT OR CERTIFICATE TO OPERATE
[STAMP SHEET 143 ILLEGIBLE]
NEW YORK STATE
DEPARTMENT OF ENVIRONMENTAL CONSERVATION
PROCESS, EXHAUST OR VENTILATION SYSTEM
APPLICATION FOR PERMIT TO CONSTRUCT OR CERTIFICATE TO OPERATE
[STAMP SHEET 144 ILLEGIBLE]
NEW YORK STATE
DEPARTMENT OF ENVIRONMENTAL CONSERVATION
PROCESS, EXHAUST OR VENTILATION SYSTEM
APPLICATION FOR PERMIT TO CONSTRUCT OR CERTIFICATE TO OPERATE
[STAMP SHEET 145 ILLEGIBLE]
NEW YORK STATE
DEPARTMENT OF ENVIRONMENTAL CONSERVATION
PROCESS, EXHAUST OR VENTILATION SYSTEM
APPLICATION FOR PERMIT TO CONSTRUCT OR CERTIFICATE TO OPERATE
[STAMP SHEET 146 ILLEGIBLE]
NEW YORK STATE
DEPARTMENT OF ENVIRONMENTAL CONSERVATION
PROCESS, EXHAUST OR VENTILATION SYSTEM
APPLICATION FOR PERMIT TO CONSTRUCT OR CERTIFICATE TO OPERATE
[STAMP SHEET 147 ILLEGIBLE]
NEW YORK STATE
DEPARTMENT OF ENVIRONMENTAL CONSERVATION
PROCESS, EXHAUST OR VENTILATION SYSTEM
APPLICATION FOR PERMIT TO CONSTRUCT OR CERTIFICATE TO OPERATE
[STAMP SHEET 148 ILLEGIBLE]
Request for Clean-up Notification
New York State Department of Environmental Conservation
Building 40--SUNY, Stony Brook, New York 11790-2356
(516) 444-0320
(516) 444-0373 FAX [Logo]
Langdon Marsh
Acting Commissioner
REQUEST FOR CLEANUP NOTIFICATION ----FIELD ISSUE
|X| IMMEDIATE CLEANUP REQUIRED
|_| WITHIN 10 DAY PERIOD (Unless otherwise specified, the 10 day period will
begin with the above date.)
SPILL #9516872 SPILL LOCATION: Arcon Coating Mills
RESPONSIBLE PARTY INFORMATION:
Address: 3067 New Street, Oceanside
Telephone: 516-766-8800
Contact Person(s): Mr. Dave Kruft
FINDINGS: Aquatite Tyvek Red (Ink) Placed in trash compactor. Ink leaked into
storm drain and discharged to East Rockaway canal.
WORK TO BE PERFORMED: Remove all Ink contaminated water from the storm drains
and dispose of in accordance with NYPPW discharge standards via sanitary sewer
system. Remove and properly dispose of remaining Ink from the trash compactor.
This letter serves as notice that you or your company has been directed to
proceed with a cleanup of the above referenced site within the time frame
indicated. You may either hire a contractor or do the work yourself. However,
the contaminated material generated can only be removed from the site with a 364
Permit.
If no response is received by you or a representative from your company within
the time frame noted above, this office will proceed with the cleanup of the
site, and the New York State Department of Law will seek reimbursement along
with an assessment of penalties from you according to Article 12 of the New York
State Navigation Law.
/s/ David R. Kruft 3/31/96 (Signature acknowledges receipt only)
----------------------- -------
Responsible Party/Agent Date
[illegible] 3/31/96 (Original copy to RP Back copy to DEC)
--------------------------- -------
Spill Response Investigator Date
Field Inspection Report
--------------------------------------------------------------------------------
NASSAU COUNTY DEPARTMENT OF PUBLIC WORKS
INDUSTRIAL PRETREATMENT PROGRAM
FIELD INSPECTION REPORT
--------------------------------------------------------------------------------
PERMIT # DATE: 4/15/96
COMPANY NAME : Arcon Coating Mills Inc.
FACILITY ADDRESS : 3067 New Street, Oceanside
COMPANY OFFICIAL : David Kruft, Pres.
INSPECTOR(S): VEROLLA/MILITO
PRIOR INSPECTION: --/--/--
BUSINESS DESCRIPTION: Printing/Coating of papers
NO. OF EMPLOYEES : 38
HOURS PER DAY : 16
DAYS PER WEEK : 5
--------------------------------------------------------------------------------
DESCRIPTION OF PROCESS: MIXING OF INKS; COATING PROCESS
CHEMICALS used: Water-based inks.
Were any CHANGES made in the process since the last inspection? Y[_] N[_]
If yes, describe:
Description of all WASTESTREAMS (source, volume, point of discharge):
No ink washwaters to sewer; used for reuse. Sanitary flow only to sewer.
Has the average INDUSTRIAL daily flow changed? Y[_] N[X]
If YES, how?
Has the total WASTEWATER discharge changed? Y[_] N[X]
If YES, how?
--------------------------------------------------------------------------------
Description of PRETREATMENT: None.
Any CHANGES made in pretreatment since last inspection? Y[_] N[_]
If YES, describe:
Is PRETREATMENT adequate? Y[_] N[_]
None required
Has a COMPLIANCE SCHEDULE been completed? N/A[X] Y[_] N[_] If YES, list tasks
and date:
--------------------------------------------------------------------------------
HAZARDOUS WASTE hauled away during last year:
TYPE AMOUNT (lbs. or gal.)
1 Ink waste sludge (D001) 200 gal.
2
3
HAZARDOUS WASTE haulers:
NAME EPA ID#
1 S&W Waste NYD986984433
2
3
Are any TOXIC ORGANICS used at this facility? Y[_] N[X]
Are any TOXIC ORGANICS used in the process? Y[_] N[X]
If yes, list them: None.
--------------------------------------------------------------------------------
Location of CHEMICAL STORAGE and condition: Palated area in warehouse.
Location of HAZARDOUS WASTE STORAGE and condition: Kept in drum in ink mix area.
Description of SPILL PREVENTION: Absorbent pillows.
Is SPILL PREVENTION and SOLVENTS MANAGEMENT adequate? Y[X] N[_]
Evaluation of HOUSEKEEPING in general: O.k.
--------------------------------------------------------------------------------
SELF-MONITORING
Frequency: None Required? Y[_] N[X]
Analysis performed by:
Are self-monitoring equipment and methods adequate? Y[_] N[_]
If NO, explain:
Describe SAMPLING LOCATION(S):
(Note locatation on flow diagram)
Noted DEFICIENCIES: NONE
Proposed and/or suggested remedial actions: NONE
--------------------------------------------------------------------------------
The above documentation is true, accurate, and has been validated by all County
Officials involved with this facility inspection.
COUNTY INSPECTOR: [illegible] DATE: 4/15/96
------------------- -------------
COMPANY OFFICIAL: /s/ David R. Kruft DATE: 4/15/96
------------------- -------------
TITLE: President
-------------------
CHIEF CHEMIST_________________ DATE:____________________
Company Memorandum dated March 28, 1994
MEMORANDUM
TO: Tom Ablum
FROM: David Kruft
DATE: March 28, 1994
SUBJECT: Woodward Clyde Thomas Tape Environmental Report
Further to the Woodward Clyde report of 3/17/94, please note the following:
. STORM WATER POLLUTION COMPLIANCE
The enclosed letter suggests the Springfield facility is in compliance and
additional reporting is not necessary. However, management will
investigate the necessity of state and federal filing.
. EYE PROTECTION
Thomas Tape management informed all employees that they are required to
wear eye protection (see enclosed company notice).
. LOCK OUT/TAG OUT PROCEDURE
Lock out/tag out procedures have been established and all employees have
been so informed (see enclosed company notice).
. NOISE
All employees operating machines which generate noise are required to wear
heavy duty ear protection. Appropriate testing will be scheduled.
. ACM INSULATION
The asbestos pipe insulation in the east building will be removed by a
firm which is certified by the appropriate authorities.
. ROLLING MOVING AND STORAGE
Thomas Tape management will conduct inspections of the subject site
quarterly and during periods of heavy rain.
Please advise if you feel additional activity is warranted.
DK:dv
cc: J. Juran, Butler Capital
P. Schiff, Northwood Ventures
H. Wilson, Northwood Ventures
Schedule 3.22
Bank Accounts, Powers of Attorney
1. FLEET BANK
40 Main Street
East Rockaway, NY 11518
(a) Arcon Coating Mills, Inc.
Corporate Checking Account
Account No.: 2010 62 2548
Signatures*: David Kruft
Maida Harris
John Gregory
(b) Arcon Coating Mills, Inc.
Payroll Transfer Account
Account No.: 2010 62 2519
Signatures: David Kruft
Maida Harris
John Gregory
2. SOCIETY NATIONAL BANK
1 South Fountain Avenue
Springfield, OH 45501
(a) Arcon Coating Mills, Inc.
d/b/a The Thomas Tape Company
Corporate Checking
Account No.: 007 302 09445
Signatures :* David Kruft
Maida Harris
John Gregory
(b) Arcon Coating Mills, Inc.
d/b/a The Thomas Tape Company
Corporate Checking
Account No.: 73 021 3226
Signatures: Robert Schwar;z
Ellen Schwartz
----------
* Two signatures required on checks over $5,000
Schedule 3.23
Compensation of Employees
1. See attached schedule of compensation.
2 Full bonuses for the fiscal year 1996 will be paid by the Company at or
prior to the Closing in accordance with the executive bonus program
referenced in item 9 of attached to Schedule 3.19.
3. Full bonuses for the fiscal year 1996 will be paid by the Company at or
prior to the Closing in accordance with items 7 and 8 of Schedule 3.19.
ARCON COATING MILLS
COMPENSATION AS OF AUGUST 7, 1996
95 BONUS TOT 96
96 YTD PAID IN 96 YTD 1995 95 BONUS TOT 95
================================================================================
SALARIED
--------------------------------------------------------------------------------
KRUFT 107,692 84,000 191,692 164,558 16,500 181,058
--------------------------------------------------------------------------------
DUNN 80,615 54,900 135,515 124,070 11,000 135,070
--------------------------------------------------------------------------------
KELLY 64,000 0 64,000 98,467 68,000 166,467
--------------------------------------------------------------------------------
SIARKOWICZ 48,428 0 48,428 84,295 5,496 89,791
--------------------------------------------------------------------------------
HARRIS 45,880 0 45,880 69,645 5,500 75,145
--------------------------------------------------------------------------------
HAUG 40,704 0 40,704 69,476 8,500 77,976
--------------------------------------------------------------------------------
MUELLER 39,360 0 39,360 61,295 5,500 66,795
--------------------------------------------------------------------------------
GREGORY 55,835 10,547 65,932 73,874 375 74,249
--------------------------------------------------------------------------------
HOURLY
INCLUDES
OVERTIME
--------------------------------------------------------------------------------
FISHER 32,210 0 32,210 53,227 1,500 54,727
--------------------------------------------------------------------------------
GEORGES 30,757 0 30,757 58,273 1,500 59,773
--------------------------------------------------------------------------------
PARSEKIAN 33,244 0 33,244 51,753 2,500 54,253
================================================================================
Schedule 3.24
Conduct of Business
1. Prior to the Closing, the Company may draw under its line of credit with
the Bank. Any amounts so drawn may be used to fund the purchase by Arcon
Holdings of the Warrants and the payment of the bonuses disclosed in items
8, 9 and 10 of Schedule 3.19.
2. Prior to the Closing, Arcon Holdings intends to purchase from the Bank the
Warrants.
Schedule 3.25
Customer Relations
1. Each of Kruysman, Tab and Berryville have reduced or may in the future
reduce the volume or dollar amount of their respective purchases from the
Company, including due to the purchase by such customers of alternative or
substitute products from other sources.
2. The Purchaser has advised the Company that following the Closing Atapco may
in the future reduce the volume or dollar amount of its purchases from the
Company.
Schedule 4.4
Consents
1. Pursuant to the Warrant Certificate, the Bank is entitled to 30 days prior
written notice of the transactions contemplated by this Agreement.
2. Pursuant to the Take-Along Rights Agreement, the Bank is entitled to 45
days prior written notice of the transactions contemplated by this
Agreement.
3. The Holdings Charter provides for certain contingent rights for the holders
of Preferred Stock with respect to the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby.
Schedule 5.6
Consents
1. The transactions contemplated by this Agreement require the prior consent
of certain of the Purchasers lenders.