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EXHIBIT 10.11
INVENTORY PURCHASE AGREEMENT
THIS AGREEMENT is made and entered into this ___ day of June, 1997, by and
between XXXXXXX PAPER COMPANY, a Washington corporation (the "Seller"),
PLAINWELL HOLDING COMPANY, a Delaware corporation (the "Buyer"). All undefined
terms used herein shall have the meaning assigned to such terms in that certain
Stock Purchase Agreement dated as of March 12, 1997, as amended, by and between
the Seller and the Buyer (the "Stock Purchase Agreement").
RECITALS:
A. The Seller owns all of the Purchased Inventory and for the purposes of
this Agreement, the term Purchased Inventory shall include Seller's inventory of
Satin Kote as well as the products identified in the Stock Purchase Agreement.
B. The Seller desires to sell to the Buyer, and the Buyer desires to
purchase from the Seller, the Purchased Inventory.
TERMS:
Therefore, in consideration of the mutual covenants contained in this
Agreement, and other good and valuable consideration, the receipt and adequacy
of which are hereby acknowledged, the parties agree as follows:
ARTICLE I
1.1 Purchase and Sale. Subject to the terms and conditions set forth
in this Agreement, at the closing of the purchase and sale of the Purchased
Inventory contemplated herein (the "Inventory Closing"), which shall occur
immediately prior to the Closing on the Closing Date, the Seller will sell to
the Buyer, and the Buyer will purchase from the Seller, free and clear of all
liens, claims or encumbrances of any nature whatsoever, all of the Purchased
Inventory.
1.2 Purchase Price. The purchase price for the Purchased Inventory
(the "Inventory Purchase Price") shall be an amount equal to the book value
thereof as determined in accordance with generally accepted accounting
principles, consistently applied, pursuant to the FIFO Inventory Valuation
Methodology described on attached Exhibit A (the "Inventory Valuation
Methodology").
1.3 Estimated Inventory Purchase Price. The parties acknowledge and
agree that the exact amount of the Inventory Purchase Price will not be known as
of the Closing Date and the amount paid at the Inventory Closing pursuant to
Section 1.4, below, is an estimate of
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the Inventory Purchase Price. In that regard, immediately prior to the Closing
Date, the Seller will perform a physical count of the Purchased Inventory, a
process in which the Buyer and its representatives shall have the right to
participate, and will deliver to the Buyer an initial inventory statement (the
"Initial Inventory Statement") certified by the Seller's chief financial officer
setting forth an itemization and the determination of the value, pursuant to the
Inventory Valuation Methodology, of the Purchased Inventory (the "Estimated
Inventory Purchase Price") as of the Closing Date.
1.4 Payment of Estimated Inventory Purchase Price. Subject to the
post-closing adjustment described in Section 1.5 hereof, the Buyer will (and the
Seller hereby directs the Buyer to) pay the Estimated Inventory Purchase Price
to the Company at the Inventory Closing, which shall be payable in immediately
available and lawful funds of the United States by wire transfer to Account No.
00000000 in the name of the Seller, Seattle First National Bank, CASC, Xxxxxxx,
Xxxxxxxxxx, 00000, ABA No. 000000000, or such other account as the Seller shall
designate in writing at least five (5) days prior to the Closing Date.
1.5 Post-Closing Adjustment. After the Inventory Closing, the amount of
the Final Inventory Purchase Price (as hereinafter defined) shall be determined
as provided below, and the amount of the payment made by wire transfer at the
Inventory Closing shall be adjusted, if necessary, to reflect any difference
between the value of the Estimated Inventory Purchase Price as shown in the
Initial Inventory Statement and the value of the Final Inventory Purchase Price
as finally determined pursuant to Section 1.5.1, below.
1.5.1 Closing Audit. Promptly after the Inventory Closing but in any
event within ninety (90) days after the Closing Date, the Seller shall
deliver to the Buyer a final inventory statement (the "Final Inventory
Statement") certified by its chief financial officer setting forth an
itemization and the determination of the value, pursuant to the Inventory
Valuation Methodology, of the Purchased Inventory as of the Closing Date
(the "Final Inventory Purchase Price"). The Buyer shall have thirty (30)
days after delivery of the Final Inventory Statement within which to
approve or object in writing to the Final Inventory Statement. During that
30-day period, the Buyer and its accountants may review all the Seller's
records, working papers, and calculations relating to the Final Inventory
Statement and calculation of the Final Inventory Purchase Price and have
such access to the Seller's personnel as may be reasonably necessary to
review in detail the manner in which the Final Inventory Statement was
prepared. If the Buyer objects in writing to the Final Inventory Purchase
Price specified in the Final Inventory Statement, the Seller will take the
objections into account and deliver a revised Final Inventory Statement to
the Buyer within seven (7) days after receipt of the Buyer's objection. In
that event, the Buyer shall have fifteen (15) business days within which
to approve or object in writing to the revised Final Inventory Statement.
If the Buyer and the Seller do not agree on the Final Inventory Purchase
Price after following these procedures, any party may submit the dispute
to Deloitte & Touche, LLP or any other firm of nationally recognized
independent certified public accountants approved by the Buyer and the
Seller and not currently employed by any party hereto, who shall review
the Final
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Inventory Statement and make a determination of the Final Inventory
Purchase Price without any obligation to accept the positions taken by the
Seller or the Buyer, provided that such final determination may not fall
outside the range bounded by the valuations originally asserted, if any,
by the Buyer and the Company. The determination of such firm shall be
based upon definitions and provisions contained herein, shall be in
writing, and shall be final and binding on the parties; such firm's fee
and costs shall be shared equally by the Buyer and the Seller.
1.5.2 Payment Adjustment. If the amount of the Final Inventory
Purchase Price as set forth on the Final Inventory Statement is greater
than the amount of the Estimated Inventory Purchase Price set forth on the
Initial Inventory Statement, the Buyer shall promptly pay the difference
to the Seller in immediately available funds, with interest from the
Closing Date at a floating rate per annum equal to the reference rate of
interest announced from time to time by Bank of America, N.A., of San
Francisco. California. Conversely, if the amount of the Final Inventory
Purchase Price as set forth on the Final Inventory Statement is less than
the Estimated Inventory Purchase Price as set forth on the Initial
Inventory Statement, the Seller shall promptly pay the difference to the
Buyer in immediately available funds with interest from the Closing Date
at a floating rate per annum equal to the reference rate of interest
announced from time to time by Bank of America, N.A., of San Francisco,
California.
ARTICLE II
Sale of Purchased Inventory
The Seller shall use its reasonable best efforts from and after the
Closing Date to assist the Buyer in selling or otherwise disposing of those
items of the Purchased Inventory which are located at any of the Seller's
facilities.
ARTICLE III
Closing Deliveries
The Inventory Closing shall occur simultaneously with the execution of
this Agreement. At the Inventory Closing, the Seller shall deliver to the Buyer
a Quitclaim Xxxx of Sale in the form attached hereto as Exhibit B and such other
instruments of conveyance as the Buyer shall require in a form reasonably
satisfactory to the Buyer and its legal counsel.
ARTICLE IV
Title to Purchased Inventory
The Seller warrants and represents to the Buyer, which warranties and
representations shall survive the execution and closing hereof, that the Seller
has, and shall convey. good, valid,
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and marketable title to the Purchased Inventory, free and clear of all liens,
claims and encumbrances of any nature whatsoever, and, upon transfer to the
Buyer at the Inventory Closing good, valid, and marketable title to the
Purchased Inventory will pass to the Buyer.
ARTICLE V
Miscellaneous
5.1 Notices. All notices, demands, requests and other communications
required or permitted hereunder shall be written and given pursuant to Section
13.4 of the Stock Purchase Agreement.
5.2 Assignment . This Agreement shall not be assigned, in whole or in
part, by any party without the prior written consent of the other parties,
except that the Buyer may assign its rights under this Agreement to: (i) an
Affiliate that is a substantial ongoing entity with as much net worth as the
assignor and that agrees in a writing, reasonably satisfactory to the Seller to
assume the obligations of the Buyer hereunder; or (ii) an institutional lender
as security for an operating line or other financing. Any assignment in
violation of this Section 5.2 shall be null and void, and no assignment shall
relieve the Buyer of its obligations to the Seller or the Seller hereunder.
5.3 Other Miscellaneous Matters. This Agreement, together with applicable
provisions of the Stock Purchase Agreement: (i) contains the entire
understanding of the parties on the subject matter addressed; (ii) supersedes
all prior understandings on those matters; (iii) may only be amended in a
writing signed by duly authorized representatives of the Seller and the Buyer;
(iv) shall be binding upon and inure to the benefit of the successors and
permitted assigns of the parties; and (v) may be executed in counterparts, each
of which shall be deemed a fully binding original of the same instrument.
Nothing in this Agreement, express or implied. is intended to confer any rights
upon any individual (including, without limitation, any employees or former
employees of the Seller or the Buyer) other than the parties hereto and their
successors and permitted assigns.
5.4 Governing Law. This Agreement shall be governed by, construed under,
and enforced in accordance with the laws of the State of Washington without
reference to the conflict-of-laws provisions thereof.
5.5 Severability. In the event that any provision of this Agreement shall
be invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired thereby
so long as the remaining provisions do not fundamentally alter the relations
among the parties hereto.
5.6 Headings. The section headings of this Agreement are for reference
purposes only and are to be given no effect in the construction or
interpretation of this Agreement.
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5.7 Further Cooperation. After the Inventory Closing, the Seller and the
Buyer shall cooperate with each other to give full effect to the consummation of
the purchase and sale of the Purchased Inventory hereunder.
5.8 Termination. In the event that the Closing of the Stock Purchase
Agreement is not consummated for any reason, this Agreement shall be terminated
and shall be of no further force or effect.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day, month and year first above written.
XXXXXXX PAPER COMPANY
By:
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Its
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PLAINWELL HOLDING COMPANY
By:
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Its
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EXHIBIT A
FIFO INVENTORY VALUATION METHODOLOGY
GENERAL
Finished goods and in process inventories are assumed to turn 4 to 5 times per
year and are stated at lower of cost or market.
RAW MATERIAL
FIFO value is established for individual categories of Fiber, Fillers, and
Additives by determining average price per unit based on accumulated invoice
value of the most recent purchases prior to the end of the period.
The FIFO value for Mill Broke is established by calculating the ratio of the per
unit FIFO value to the standard cost value for Southern Hardwood Pulp. This
ratio is applied to the per unit standard cost value for Mill Broke to arrive at
the per unit FIFO value for Mill Broke.
Label inventories are valued at zero cost.
FINISHED GOODS PRODUCT INVENTORIES
Direct Costs - Inventory is first valued at standard direct costs by individual
grade and then consolidated. Significant cost differences between standard cost
and actual latest acquisition costs are calculated in aggregate for Raw
Materials, Direct Labor, Utilities, and Packaging and then added or subtracted
from total standard direct cost. The prior three months actual costs are used
for latest acquisition costs for Direct Labor, Utilities, and Packaging. The
material component of finished goods inventory is costed by determining average
price per unit based on accumulated invoice value of the most recent purchases
prior to the end of the period.
Period Costs - Inventories period costs per unit are determined by taking the
prior three months period expenses less the following:
o Period inventory variation.
o Warehouse and shipping costs related to shipments directly from the mill
to customers.
o Seasonal or unusual costs that may distort the calculated rate.
The remaining amount is divided by practical capacity to arrive at the prior
cost rate per unit of inventory. This rate is extended against total Finished
Goods Inventory volume to calculate total inventoriable period costs for
Finished Goods. Practical capacity for Plainwell is 90,260 tons per
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year (361 operating days per year, 250 packed tons per day). Period costs do not
include depreciation for 1996 valuations.
IN-PROCESS PRODUCT INVENTORIES
Direct Costs - Same as above except that WIP inventory is converted to
equivalent finished goods unit prior to the standard cost calculation. Also,
unincurred costs for converting operations are subtracted from the total
standard cost value and cost differences-between standard and current costs are
not calculated for packaging materials.
Period Costs - Same as above except that period costs related to converting
operations, warehouse, and shipping operations are not included in the prior
three months costs to calculate the period cost rate per unit of inventory.
MACHINE CLOTHING
Inventoried at the actual acquisition cost on a per item basis.
FUEL OIL. SPARES AND OTHER SUPPLIES
Inventory valuation is on a rolling average basis.
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EXHIBIT B
QUITCLAIM XXXX OF SALE
FOR GOOD AND VALUABLE CONSIDERATION, the receipt and sufficiency of which
is hereby acknowledged, XXXXXXX PAPER COMPANY, a Washington corporation (the
"Seller"), hereby conveys, grants, bargains, sells, transfers, assigns and
delivers unto PLAINWELL HOLDING COMPANY, a Delaware corporation ("Buyer"), its
successors and assigns forever all of the Seller's right, title and interest in
and to all of the Purchased Inventory (as defined in that certain Stock Purchase
Agreement ("Stock Purchase Agreement") dated as of even date herewith, by and
between the Seller and Buyer.
TO HAVE AND TO HOLD all of the above-described assets hereby assigned,
transferred and conveyed unto Buyer, its successors and assigns, to its and
their own use forever.
SELLER WARRANTS AND REPRESENTS, WHICH WARRANTY AND REPRESENTATION SHALL
SURVIVE THE EXECUTION HEREOF, THAT SELLER HAS GOOD AND MARKETABLE TITLE TO THE
PURCHASED INVENTORY FREE AND CLEAR OF ALL LIENS, CLAIMS AND ENCUMBRANCES. SELLER
MAKES NO FURTHER WARRANTIES WITH RESPECT TO THE PURCHASED INVENTORY. IT BEING
EXPRESSLY UNDERSTOOD THAT THE PURCHASED INVENTORY IS IN AS IS, WHERE IS"
CONDITION, WHEREVER LOCATED.
IN WITNESS WHEREOF, Seller has executed this instrument as of this 12th
day of June, 1997.
SELLER:
XXXXXXX PAPER COMPANY
By:
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