Document:

Exhibit 10.25

 

WAIVER AND AMENDMENT NO. 2

 

This WAIVER AND AMENDMENT NO. 2,  dated as of June 24, 2011 (this “Waiver No. 2”), to the Mezzanine Credit and Guaranty Agreement, dated as of September 30, 2010 (as amended by Waiver No. 1 (as defined below), further amended, supplemented, restated or otherwise modified from time to time, the “Credit Agreement”), by and among ISOLA USA CORP.,  a Delaware corporation (“Borrower”), ISOLA GROUP,  a Luxembourg limited liability company (“Lux 1”), HATTRICK LUX NO. 2 S.Á.R.L.,  a Luxembourg limited liability company (“Lux 2”), HATTRICK LUX NO. 4 S.Á.R.L.,  a Luxembourg limited liability company, HATTRICK HOLDINGS U.S.  INC.,  a Delaware corporation, the other  Guarantors party thereto, and the Lenders party thereto from time to time. Capitalized terms used herein not otherwise defined herein shall have the meanings ascribed thereto in the Credit Agreement.

 

RECITALS:

 

WHEREAS, pursuant to that certain Waiver and Amendment No. 1, dated as of May 19, 2011 (“Waiver No. 1”), to the Credit Agreement, the Requisite Lenders waived certain provisions of the Credit Agreement and amended certain schedules thereto;

 

WHEREAS, Borrower has requested that the Requisite Lenders agree to further waive certain provisions of the Credit Agreement and amend certain schedules thereto; and

 

WHEREAS, the Requisite Lenders have agreed to waive certain provisions of the Credit Agreement and amend certain schedules thereto, in the manner, and on the terms and conditions, provided for herein.

 

NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, the parties hereto agree as follows:

 

SECTION I.        WAIVER

 

(a) Subject to clause (b) below and the conditions precedent set forth in Section III, the Requisite Lenders hereby (i) extend, from June 30, 2011 (as previously extended by Waiver No. 1) to September 30, 2011, the periods under Section 5.1(c) of the Credit Agreement for delivery by Lux 1 of the required annual financial statements for Fiscal Year 2010 (the “Annual Financials”),  (ii) acknowledge and accept that the Annual Financials, when delivered, will be accompanied by a qualified report of Lux 1’s independent certified public accountants noting a material deficiency in Lux 1’s internal controls related to Lux 1’s anticipated functional currency change, as described in Part B of the Disclosure Schedule attached as Exhibit A to Waiver No. 1 (the “Material Deficiency”), (iii) acknowledge and accept that, until such time as the Annual Financials are delivered by Lux 1, the monthly reports and quarterly financial statements required to be delivered by Lux 1 under Sections 5.1 (a) and 5.1(b) of the Credit Agreement (the “Monthly and Quarterly Information”)  will  be prepared consistently with Lux 1’s historical accounting practices and subject to changes resulting from audit and normal year end adjustments, provided that all Monthly and Quarterly Information

 

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delivered for any period after the delivery of the Annual Financials shall be prepared in accordance with the requirements of the Credit Agreement and (iv) waive any Default or Event of Default (X) that may have arisen under Section 5.1(c) of the Credit Agreement prior to the Waiver Closing Date as a result of the failure of Lux 1 and Borrower to deliver to each Lender the Annual Financials on or before May 1, 2011, (Y) that would otherwise arise under Section 5.1(c) of the Credit Agreement prior to the Waiver Closing Date as a result of the Annual Financials being accompanied by a qualified report of Lux l’s independent certified accountants due to the Material Deficiency and (Z) that would otherwise arise under Sections 5.1(a) and 5.1(b) of the Credit Agreement prior to the delivery of the Annual Financials as a result of Lux l’s Monthly and Quarterly Information being prepared consistently with Lux l’s historical accounting practices and subject to changes resulting from audit and normal year end adjustments.

 

(b)         Notwithstanding the foregoing, but subject to clause (c) below, the failure of either Lux 1 or Borrower to deliver the Annual Financials to each Lender before October 1, 2011 shall result in an immediate Event of Default.

 

(c)         The parties acknowledge that Lux 1 or a holding company intends to file a registration statement with the Securities and Exchange Commission (the  “SEC”) for an initial public offering and as a part of the initial public offering process, the Annual Financials will be subject to review by the SEC which could lead to changes to the Annual Financials (the “Revised Financials”), Lux 1 will provide to each Lender copies of any Revised Financials within ten days of the finalization and acceptance of such Revised Financials by the SEC, The Revised Financials will be deemed timely if delivered to each Lender within the ten day period described above.

 

SECTION II.       AMENDMENTS

 

(a)         Section 1.01 of the Credit Agreement is hereby amended by adding the following new definition in the appropriate alphabetical order:

 

“CPEC” means Convertible Preferred Equity Certificates issued by any Lux Party.

 

“Waiver No. 2” means that certain Waiver and Amendment No. 2, dated as of June 24, 2011 (“Waiver No. 1”), to this Agreement, among the Borrower, the Guarantors and the Lenders party thereto.

 

(b)         Section 6 of the Credit Agreement is hereby amended by adding the following new Section 6.19:

 

6.19 Issuance and Amendments and Waivers of CPECs. After the Waiver Closing Date (as defined in Waiver No. 2), no Credit Party shall nor shall it permit any of its Subsidiaries to (i) issue any now Convertible Preferred Equity Certificates (or any similar Securities) (x) that could reasonably be expected to be materially adverse to the interest of the

 

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Lenders or (y) unless prior to or contemporaneously with such issuance such Credit Party and the holder of such Convertible Preferred Equity Certificates (or similar Securities) has entered into a subordination agreement in form and substance satisfactory to the Requisite Lenders and (ii) agree to any material amendment, restatement, supplement or other modification to, or waiver of, any of its CPECs in any manner that could reasonably be expected to be materially adverse to the interest of the Lenders without in each case obtaining the prior written consent of the Requisite Lenders for such amendment, restatement, supplement or other modification or waiver.

 

(e)         Schedule 6.1 of the Credit Agreement is hereby amended and restated in it entirety as set forth on Exhibit A attached hereto.

 

SECTION III.                    CONDITIONS PRECEDENT TO EFFECTIVENESS

 

The effectiveness of the waivers set forth in Section I and the amendments set forth in Section II hereto is subject to the satisfaction, or waiver, of the following conditions on or before the date hereof (the “Waiver Closing Date”) whereupon this Waiver No. 2 shall be effective as of the Waiver Closing Date:

 

(a)         Borrowers, the other Credit Parties and Requisite Lenders shall have indicated their consent by the execution and delivery of the signature pages hereof.

 

(b)         Borrower, the other Credit Parties and Requisite Lenders shall have entered into a Waiver and Amendment No. 2, dated as of the date hereof.

 

(c)         Isola Group S.a.r.l. and Lux 2 shall have entered into subordination agreements in respect of their respective CPECs.

 

(d)         Lenders shall have received such other documents and information regarding Credit Parties and the Credit Agreement as Lenders may reasonably request.

 

(e)         Borrower shall have paid the Lenders for all reasonable out-of-pocket expenses incurred by them on or prior to the date hereof in connection with the negotiation and preparation of this Waiver No. 2, including the reasonable fees, charges and disbursements of counsel for the Lenders.

 

SECTION IV.                      REPRESENTATIONS AND WARRANTIES

 

(a)         Corporate Power and Authority.  Each Credit Party has all requisite corporate power and authority to enter into this Waiver No. 2 and to carry out the transactions contemplated hereby.

 

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(b)     Authorization of Agreements. The execution and delivery of this Waiver No. 2 have been duly authorized by all necessary corporate or partnership (as applicable) action on the part of each Credit Party.

 

(c)      Governmental Consents. No action, consent or approval of, registration or filing with or any other action by any Governmental Authority is required in connection with the execution and delivery by each Credit Party of this Waiver No. 2.

 

(d)     Binding Obligation. This Waiver No. 2 has been duly executed and delivered by each Credit Party and each constitutes a legal, valid and binding obligation of each Credit Party enforceable against each Credit Party in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, moratorium, reorganization or other similar laws affecting creditors’ rights generally and except as enforceability may be limited by general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).

 

(e)      Incorporation of Representations and Warranties From Credit Agreement. The representations and warranties contained in the Credit Agreement are and will be true, correct and complete in all material respects, after giving effect to the waivers and amendments contained in Waiver No. 1 and herein, on and as of the Waiver Closing Date to the same extent as though made on and as of that date, except to the extent such representations and warranties specifically relate to an earlier date, in which case they were true, correct and complete in all material respects on and as of such earlier date.

 

(f)      No Default. After giving effect to this Waiver No. 2, no event will have occurred and be continuing that constitutes an Event of Default or a Default.

 

SECTION V.       ACKNOWLEDGEMENT AND CONSENT

 

(a)     Each Guarantor hereby consents to the terms of this Waiver No. 2 and further hereby confirms and agrees that, notwithstanding the effectiveness of this Waiver No. 2, the obligations of such Guarantor under each of the Credit Documents to which such Guarantor is a party shall not be impaired and each of the Credit Documents to which such Guarantor is a party are, and shall continue to be, in full force and effect and are hereby confirmed and ratified in all respects.

 

(b)     Each Guarantor hereby acknowledges and agrees that (i) notwithstanding the conditions to effectiveness set forth in this Waiver No. 2, such Guarantor is not required by the terms of the Credit Agreement or any other Credit Document to consent to the waiver and amendment to the Credit Agreement effected pursuant to this Waiver No. 2 and (ii) nothing in the Credit Agreement, this Waiver No. 2 or any other Credit Document shall be deemed to require the consent of such Guarantor to any future amendments to the Credit Agreement.

 

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SECTION VI.   MISCELLANEOUS

 

(a)     Binding Effect. This Waiver No. 2 shall be binding upon the parties hereto and their respective successors and assigns and shall inure to the benefit of the parties hereto and the successors and assigns of Lenders. No Credit Party’s rights or obligations hereunder or any interest therein may be assigned or delegated by any Credit Party without the prior written consent of all Lenders.

 

(b)     Severability. In case any provision in or obligation hereunder shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby.

 

(c)      Effect on Credit Documents. Except as specifically waived or amended by this Waiver No. 2, the Credit Agreement and the other Credit Documents shall remain in full force and effect and are hereby ratified and confirmed. The parties hereto acknowledge and agree that this Waiver shall be deemed to be a Credit Document. On and after the Waiver Closing Date, each reference in the Credit Agreement to “this Agreement”, “hereunder”, “hereof”, “herein” or words of like import referring to the Credit Agreement, and each reference in the other Credit Documents to the “Credit Agreement”, “thereunder”, “thereof”, “therein” or words of like import referring to the Credit Agreement shall mean and be a reference to the Amended Credit Agreement,

 

(d)     Expenses. Without limitation to the obligations of the Borrower under Section 10.2 of the Credit Agreement, Borrower agrees to promptly reimburse Lenders for their reasonable and documented out-of-pocket expenses incurred in connection with this Waiver No. 2.

 

(e)      Limitation. The execution, delivery and performance of this Waiver No. 2 shall not, except as expressly provided herein, constitute a waiver of any provision of, or operate as a waiver of any right, power or remedy of any Agent or Lender under, the Credit Agreement or any of the other Credit Documents and this Waiver No. 2 shall be limited precisely as written.

 

(f)      Headings. Section headings herein are included herein for convenience of reference only and shall not constitute a part hereof for any other purpose or be given any substantive effect.

 

(g)     APPLICABLE LAW. THIS WAIVER NO. 2, THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND ANY CLAIM, CONTROVERSY OR DISPUTE ARISING UNDER OR RELATED TO THIS WAIVER NO. 2 SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES THEREOF.

 

(h) Counterparts. This Waiver No. 2 may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed an original, but all

 

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such counterparts together shall constitute but one and the same instrument. As set forth herein, this Waiver No. 2 shall become effective upon the execution of a counterpart hereof by each of the parties hereto.

 

[SIGNATURE PAGES FOLLOW]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Waiver No. 2 to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first written above.

 

	
 
    	
ISOLA USA CORP.,  as Borrower
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Raymond P. Sharpe
    
	
 
    	
 
    	
Name:
    	
Raymond   P. Sharpe
    
	
 
    	
 
    	
Title:
    	
President &   CEO
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
ISOLA GROUP
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Raymond P. Sharpe
    
	
 
    	
 
    	
Name:
    	
Raymond   P. Sharpe 
    
	
 
    	
 
    	
Title:   
    	
Manager
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
HATTRICK LUX NO. 2 S.À.R.L.
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Raymond P. Sharpe
    
	
 
    	
 
    	
Name:
    	
Raymond   P. Sharpe
    
	
 
    	
 
    	
Title:
    	
Sole   Manager
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
HATTRICK LUX NO. 4 S.Á.R.L.
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Raymond P. Sharpe
    
	
 
    	
 
    	
Name:
    	
Raymond   P. Sharpe 
    
	
 
    	
 
    	
Title:
    	
Sole   Manager
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
HATTRICK HOLDINGS U.S. INC.
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Raymond P. Sharpe
    
	
 
    	
 
    	
Name:
    	
Raymond   P. Sharpe
    
	
 
    	
 
    	
Title:
    	
President &   CEO
    

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Waiver No. 2 to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first written above.

 

	
 
    	
OCM   PF LAMINATES, L.P.
    
	
 
    	
 
    
	
 
    	
General   Partner:
    
	
 
    	
 
    
	
 
    	
OAKTREE   FUND GP, LLC
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
Oaktree   Fund GP I, L.P.
    
	
 
    	
Its:
    	
Managing   Member
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Jordon L. Kruse
    
	
 
    	
 
    	
Name:
    	
Jordon   L. Kruse
    
	
 
    	
 
    	
Title:
    	
Managing Director
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Cass Traub
    
	
 
    	
 
    	
Name:
    	
Cass   Traub
    
	
 
    	
 
    	
Title:
    	
Vice   President
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
Limited   Partners:
    
	
 
    	
 
    
	
 
    	
OAKTREE   PRINCIPAL FUND V, L.P.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
Oaktree   Principal Fund V GP, L.P.
    
	
 
    	
Its:
    	
General   Partner
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
Oaktree   Principal Fund V GP Ltd.
    
	
 
    	
Its:
    	
General   Partner
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
Oaktree   Capital Management, L.P.
    
	
 
    	
Its:
    	
Director
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    	
/s/   Jordon L. Kruse
    
	
 
    	
 
    	
 
    	
Name:
    	
Jordon   L. Kruse
    
	
 
    	
 
    	
 
    	
Title:
    	
Managing   Director
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    	
/s/   Cass Traub
    
	
 
    	
 
    	
 
    	
Name:
    	
Cass   Traub
    
	
 
    	
 
    	
 
    	
Title:
    	
Vice   President
    
						

 

 

	
 
    	
OAKTREE   PRINCIPAL FUND V (PARALLEL), L.P.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
Oaktree   Principal Fund V GP, L.P.
    
	
 
    	
Its:
    	
General   Partner
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
Oaktree   Principal Fund V GP Ltd.
    
	
 
    	
Its:
    	
General   Partner
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
Oaktree   Capital Management, L.P.
    
	
 
    	
Its:
    	
Director
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Jordon L. Kruse
    
	
 
    	
 
    	
Name:
    	
Jordon   L. Kruse
    
	
 
    	
 
    	
Title:
    	
Managing   Director
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Cass Traub
    
	
 
    	
 
    	
Name:
    	
Cass   Traub
    
	
 
    	
 
    	
Title:
    	
Vice   President
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
OAKTREE   FF INVESTMENT FUND, L.P.- CLASS A
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
Oaktree   FF Investment Fund GP, L.P.
    
	
 
    	
Its:
    	
General   Partner
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
Oaktree   FF Investment Fund GP Ltd.
    
	
 
    	
Its:
    	
General   Partner
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
Oaktree   Capital  Management,   L.P.
    
	
 
    	
Its:
    	
Director
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Jordon L. Kruse
    
	
 
    	
 
    	
Name:
    	
Jordon   L. Kruse
    
	
 
    	
 
    	
Title:
    	
Managing   Director
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Cass Traub
    
	
 
    	
 
    	
Name:
    	
Cass   Traub
    
	
 
    	
 
    	
Title:
    	
Vice   President
    
					

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Waiver No. 2 to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first written above.

 

	
 
    	
SPECIAL VALUE OPPORTUNITIES FUND, LLC
    
	
 
    	
 
    
	
 
    	
SPECIAL VALUE EXPANSION FUND, LLC
    
	
 
    	
 
    
	
 
    	
TENNENBAUM OPPORTUNITIES 
    
	
 
    	
PARTNERS V, LP
    
	
 
    	
 
    
	
 
    	
On   behalf of each of the above listed entities:
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
Tennenbaum   Capital Partners, LLC 
    
	
 
    	
Its:
    	
Investment   Manager
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Philip Tseng
    
	
 
    	
Name:
    	
Philip   Tseng
    
	
 
    	
Title:
    	
Partner
    

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Waiver No. 2 to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first written above.

 

 

	
 
    	
TPG   HATTRICK IV, LLC
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Ronald Cami
    
	
 
    	
 
    	
Name:   Ronald Cami
    
	
 
    	
 
    	
Title:   Vice President
    

 

 

EXHIBIT A

 

Schedule 6.1

Certain Indebtedness

 

1.         ISOLA USA Corp, has a continuous customs bond, dated as of May 7, 2008, in the amount of $60,000.00 securing customs duties, taxes or other charges.

 

2.         An irrevocable standby letter of credit in an approximate amount of $50,000.00 in favor of LibertyMutual Insurance Company (for the account of ISOLA USA Corp.).

 

3.         An irrevocable standby letter of credit in an approximate amount of $21,000.00 in favor of American Casualty Company of Reading Pennsylvania and/or CNA (for the account of ISOLA USA Corp.).

 

4.         An irrevocable standby letter of credit in an approximate amount of $408,000.00 in favor of Travelers Indemnity Company (for the account of ISOLA USA Corp.).

 

5.   Statutory warranty obligations in the ordinary course of business.

 

6.         Indebtedness of lsola Laminate Systems (Suzhou) Co. Ltd. as evidenced by certain promissory notes in favor of various third party lenders in the aggregate principal amount of approximately $14.6 million as of June 30, 2010.

 

7.         Indebtedness of lsola Asia Pacific (Dalian) Co. Ltd. as evidenced by that certain Entrustment Loan in the aggregate principal amount of approximately $5.3 million as of June 30, 2010.

 

8.         Capital Leases of lsola Fabrics S.R.L. in the aggregate principal amount of approximately $13.3 million as of June 30, 2010.

 

9.         Capital Leases of lsola GmbH in the aggregate principal amount of approximately $2.4 million as of June 30, 2010.

 

10.  Line of Credit between lsola Fabrics S.R.L. and Unicredit in an approximate amount of €1,400,000.

 

11.  Loan Agreement, dated June 1, 2004, by and between Hattrick Lux No. 2 S.à.r.l., as Lender, and Hattrick Lux No. 3 S.à.r.l., as Borrower, in an original principal amount equal to €50,000 (EUR).

 

12. The following Convertible Preferred Equity Certificates are currently outstanding:

 

·              420,455 Class A CPECs, each with a par value €1, issued by lsola Group S.a.r.l. to TPG Hattrick Partners LP;

 

·              95,776,449 Class B CPECs, each with a par value €1, issued by lsola Group S.a.r.l. to TPG Hattrick Partners LP;

 

 

·              43,500,666 Class C CPECs, each with a par value €1, issued by Isola Group S.a.r.l. to TPG Hattrick Partners LP;

 

·              654,655 Class A CPECs, each with a par value €1, issued by Hattrick Lux. No. 2 S.a.r.l. to Isola Group S.a.r.l.;

 

·              95,776,449 Class B CPECs, each with a par value €1, issued by Hattrick Lux. No. 2 S.a.r.l. to Isola Group S.a.r.l.;

 

·              43,500,666 Class C CPECs, each with a par value €1, issued by Hattrick Lux. No.2 S.a.r.l. to Isola Group S.a.r.l.;

 

·              13,690,721 Class A CPECs, each with a par value €1, issued by Hattrick Lux. No. 3 S.a.r.l. to Hattrick Lux. No. 2 S.a.r.l.;

 

·              70,796,512 Class A CPECs, each with a par value € 1, issued by Hattrick Lux. No. 4 S.a.r.l. to Hattrick Lux. No. 2 S.a.r.l.; and

 

·              43,500,666 Class C CPECs, each with a par value €1, issued by Hattrick Lux. No. 4 S.a.r.l. to Hattrick Lux. No. 2 S.a.r.l.Certain confidential information contained in this exhibit was omitted by means of redacting a portion of the text and replacing it with [***]. This exhibit (containing the non-public information) has been filed separately with the Secretary of the Securities and Exchange Commission without redaction pursuant to a Confidential Treatment Request under Rule 406 of the Securities Act of 1933, as amended.

 

CONFIDENTIAL TREATMENT

REQUESTED PURSUANT TO RULE 406

 

Exhibit 10.26

 

DISTRIBUTOR AGREEMENT

 

This Agreement made as of the First day of June 2004 between Isola USA Corp. (“Company”), a Delaware corporation having its principal place of business at 7400 W. Detroit Street, Chandler, Arizona 85226, and Insulectro (“Distributor”), a California corporation having its principal place of business at 20362 Windrow Drive, Lake Forest, California 92630.

 

WITNESSETH

 

1.     APPOINTMENT.

 

Company hereby appoints Distributor as an exclusive distributor of the products identified in Exhibit A hereto (“Products”) in the Served Geographic Areas identified in Schedule A (“SGA”).

 

2.     ROLES.

 

(a)           Distributor recognizes that its primary goal, as an exclusive distributor of Company Products, is to complement Company’s direct sales efforts by providing capable sales coverage, satisfactory inventory, and service capabilities in each state listed on Schedule A to achieve targeted goals established in the marketing plan for each such state.

 

(b)           Set forth in Schedule B is a list of customers (“House Accounts”) within the SGA to which Company is making direct sales.  Company reserves the right, in its sole discretion, to provide direct sales coverage, including through a sales representative, in any state within the SGA, including to any customer to whom Distributor is then selling Products.  In the event Company provides such direct sales coverage to any customer to whom Distributor is then selling Products, Company will so advise Distributor by giving not less than sixty (60) days’ prior written notice designating such customer as a House Account.  Following the effective date of such designation, if such customer is currently being serviced with Products by Distributor, Company will compensate Distributor for its lost sales to such designated customer in accordance with the same schedule of commissions as set out in Schedule D.  Such compensation will be reduced by one-half (1/2) thirty (30) days after notification and discontinued sixty (60) days after notification.  If a House Account acquires a customer in any state in the SGA, Company reserves the right to name the acquired customer as a House Account.  If Company designates a customer as a House Account, Company shall use reasonable efforts to help Distributor sell all nonstandard (i.e., customer-specific) Distributor inventory related to such customer.

 

(c)           Company may make telemarketing and internet-based sales contacts in the SGA, including with customers that are not currently serviced by Distributor.  Distributor shall use best efforts to follow up on such contacts to generate future business.  If Distributor does not use such best efforts, then Company may sell direct to such customers, including through a sales representative.

 

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3.     RESPONSIBILITIES.

 

(a)           Sales Promotion.  Distributor shall use commercially reasonably efforts to promote and develop the distribution and sale of, and solicit orders for, all of the Products throughout the SGA.  Distributor and Company will jointly establish annual sales goals for Distributor in each state in the SGA and Distributor will put forth its best efforts to meet those sales goals.  These efforts shall include but shall not be limited to maintaining a competent, adequately staffed sales force making regular sales calls on all existing and potential customers in the SGA.

 

(i)            Marketing Plans.  Distributor and Company will develop an annual marketing plan (“Marketing Plan”) for each state in the SGA.  The Marketing Plan will include information on sales available, share position and competitive situations, to establish a sales goal (by product line) along with enabling plans, such as inventory necessary to support the level of business and target account identification.  The Marketing Plan will also identify customer needs by product segment (multilayer, rigid, high performance) and Distributor and Company resources and commitments required to serve these needs.

 

(ii)           [***]

 

(iii)          Company and Distributor shall review the Marketing Plan [***] periodically (quarterly at a minimum) (“Plan Review”).

 

(b)           Capacity Commitment.

 

(i)            Company will allocate capacity for Distributor up to Distributor’s average weekly purchase volume for the last three (3) months or based upon Distributor’s monthly forecast volume, whichever is less.  Increases over capacity allocation will be jointly agreed upon with Company’s ability to supply as the key determining factor.  Company Manager will work with Distributor purchasing department to develop an “ability to substitute” program, provided that such substitutions utilize available raw materials and manufactured components.

 

(ii)           Company will develop programs to provide quick turns for targeted customers, with such programs to be defined in separate side letters

 

(c)           [***] Distributor shall describe Products being ordered in a specific manner.  Company will not be liable to 

 

[***] Confidential information on this page has been omitted and filed separately with the Securities and Exchange Commission pursuant to a Confidential Treatment Request.

 

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Distributor for refusing to accept an order in whole or in part

 

(d)           Advertising and Logo Use.  Distributor shall from time to time participate in [***] joint advertising efforts, as reasonably determined by Company and Distributor.  Distributor shall obtain consent from Company for any advertising efforts that it undertakes on its own, which consent may be withheld in Company’s sole judgment.  Distributor may use the Company logo and trademark on and in connection with the promotion and sale of Products, provided, however, that Distributor shall first provide Company with samples thereof as requested for Company consent, which consent may be withheld in Company’s sole judgment.

 

(e)           Assistance and Advice.  Distributor will render technical assistance and advice as requested by customers concerning the maintenance, handling, application and use of the Products.  Distributor will use its best efforts to assist and provide technical service to customers, to train its personnel to provide technical service, and to bring in Company resources when required.

 

(f)            Reports.  [***] On or before the fifteenth (15th) day of each month, Distributor shall provide Company with a good faith forecast of the types and quantities of Products Distributor expects to order from Company during the following month.

 

(g)           [***]

 

(h)           Property Rights.  Distributor will recognize the exclusive ownership and right of Company, and will take all necessary steps to maintain such exclusive ownership and right, in and to all trademarks and trade names used by Company in connection with Products and in and to all patents from time to time existing in the name of Company relating to or covering Products.  Distributor will assign to Company any inventions, improvements, trade secrets, or developments conceived by it, solely or jointly, relating to or covering Products.  Upon request, Distributor will execute all documents and do all things necessary or helpful to allow Company the rights set out in this paragraph.

 

[***] Confidential information on this page has been omitted and filed separately with the Securities and Exchange Commission pursuant to a Confidential Treatment Request.

 

3

 

(i)            Compliance with Laws.  Distributor will comply with all laws, rules and regulations issued by any governmental entity having jurisdiction over it.

 

(j)            [***]

 

(k)           Claims.  Distributor shall inform Company in writing if Prepreg Products are found to have functional defects which are parameter related, within [***] days after receipt by Distributor of any such shipment.  Distributor shall so notify Company of any other defect within [***] days after Distributor receipt of Product.  Failure to notify Company or use of Products shall be conclusive that Company has satisfactorily performed.  [***] Company shall respond to Distributor within five (5) working days of its receipt of any such written notification of Product defects.  If, after an additional thirty (30) days after samples are received, Company has not resolved the issue with written notification, Distributor can debit Company the purchase price of the material.

 

(l)            Returns.  Distributor shall return all Products to Company point of manufacture within thirty (30) days after the date upon which Company has issued a written authorization of return relating to such Product.  If Distributor shall return Product after the thirty (30) day period, the parties hereby agree that the claim dollar amount shall be reduced by ten (10) percent.  In the event Company shall decide to discontinue any Product, Company shall so advise Distributor by giving not less than one hundred twenty (120) days’ prior written notice.  Company and Distributor will mutually agree with respect to the terms and conditions applicable to Distributor’s return of discontinued Products to Company, provided Distributor has not held Products to be returned in its inventory more than one hundred twenty (120) days from the date of receipt.

 

(m)          [***]

 

[***] Confidential information on this page has been omitted and filed separately with the Securities and Exchange Commission pursuant to a Confidential Treatment Request.

 

4

 

4.             PURCHASE PRICES.

 

(a)           Company shall advise Distributor of applicable prices (and discounts, if any) for Products to be sold hereunder.  Company shall have the unilateral right to change its prices at any time and shall give Distributor not less than forty (40) days’ prior written notice of such changes.  Taxes and other government charges, if any, on the sale of Products hereunder will be added to the purchase price.

 

(b)           Distributor shall pay such prices net [***] days from the date of Company’s invoices.  Therefore all payments due from Distributor to Company shall be received in full (debit will not be allowed without Company approval) by Company no later than [***].  If in Company’s judgment Distributor’s credit shall become impaired at any time, Company shall forthwith have the right to decline to make deliveries hereunder except for cash until such time as said credit has been reestablished to Company’s satisfaction,

 

(c)           Company will ship to Distributor the Product F.O.B. point of manufacture and shall prepay and allow freight to the Distributor locations listed on Schedule E as amended from time to time.  Company will ship to Distributor freight collect for orders that are expedited at Distributor’s request, including without limitation, FAST orders.

 

5.             SPECIAL PRICE AUTHORIZATION.

 

Distributor may ask for, and Company may grant, special price authorization using the process contained in Schedule F.

 

6.             TERMS AND CONDITIONS OF SALES.

 

This Agreement and all sales shall be governed by Company’s terms and conditions which are made a part hereof as Schedule G.  References therein to “Seller” shall mean Company, and 

 

[***] Confidential information on this page has been omitted and filed separately with the Securities and Exchange Commission pursuant to a Confidential Treatment Request.

 

5

 

references to “Buyer” shall mean Distributor.  In the event of any conflict between the terms and conditions of Schedule G and those herein, the latter shall control.

 

7.             TERMINATION.

 

(a)           This Agreement shall commence on the date hereof and shall continue until ten (10) years from the date first written above.  Notwithstanding the foregoing, if either party is in material breach of the terms of this Agreement, the other party may, upon giving not less than ninety (90) days’ prior written notice, terminate this Agreement; provided that the party in material breach may avoid termination by curing such breach within the ninety (90) day period.

 

(b)           The following terms shall apply upon termination of this Agreement:

 

(i)            Debts, Claims or Causes of Action.  Termination shall not affect any debt, claim or cause of action occurring to either party against the other before the termination.

 

(ii)           Return of Technical Data.  Within fifteen (15) days of termination, written technical and business materials furnished Distributor by Company shall be returned.

 

(iii)          Trademark, Service Marks and Business Names.  Distributor will cease all use of Company trademarks, service marks or business names and Distributor will not adopt or use any names that could be considered to be confusingly similar to names used by Company.

 

(iv)          Survival.  Section 3(h) shall survive termination of this Agreement.

 

(c)                                  (i)            At any regularly scheduled Plan Review, it may become apparent that one or both of the parties’ obligations, or the results sought, under a Marketing Plan, are not being met or obtained.  In such a case, the parties shall mutually agree upon a corrective action plan (“CAP”) at such Plan Review.  The CAP shall include, with respect to the affected territory and product lines, Distributor’s obligations with respect to quantity of sales people, competency of sales people, senior management commitment, inventory commitment and service capability, and Company’s obligations with respect to price support, product support, competitive pricing, technical service support and commercial support.  All of these elements shall be in a CAP regardless of the reason for its preparation.

 

(ii)           No sooner than one hundred twenty (120) days after preparation of a CAP, a special review shall be held to determine whether the issue that gave rise to the CAP has been resolved or best efforts have been made.  If not and Company has met its obligations under the CAP, Company may remove the affected state from the SGA.  In such event, Distributor’s obligations under Section 3(g) not to carry competitive products during the term of this Agreement, and under Section 3(a) to use best efforts in the remaining states of the SGA, shall remain in full force and effect.

 

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8.             OPEN TERRITORY EVALUATIONS.

 

On occasion either new territories may arise (i.e., states not currently covered by the SGA or Mexico) or existing territories may become available (i.e., by means of resignation, termination, or a failed CAP).  In such situations, the following evaluation procedure will be used:

 

(a)           All interested potential distributors, including any which served the territories in the past, will be invited to present a proposal to Company management personnel.

 

(b)           Each interested party’s proposal will be evaluated on criteria that Company, in its sole discretion, deems necessary to achieve the desired results in the territories.

 

(c)           Evaluation criteria will be shared with all interested parties prior to review of their proposals.

 

9.             INSURANCE.

 

Distributor shall provide Company with certificates of insurance evidencing that Distributor has purchased comprehensive, general liability insurance, with coverages of not less than $1,000,000 per occurrence for bodily injury or combined single limit if applicable.

 

10.          MISCELLANEOUS.

 

(a)           The relationship established between Company and Distributor is solely that of seller and buyer.  Distributor is an independent dealer and may not commit Company to any obligation.

 

(b)           This Agreement may not be assigned by Distributor without the prior written consent of Company, and any purported assignment without such consent shall be void.  Distributor will not delegate its obligations to any other Distributor or sales representative.  For purposes of this Agreement “assignment” shall include a transfer of a majority of the ownership interest of Distributor.

 

(c)           Notices to either party shall be in writing and will be deemed made when deposited in the United States mail, first class, postage paid, to the addresses set forth below or when received by facsimile or telex or when delivered by hand.  Either party may change its address by giving notice to the other party.

 

	
 
    	
If to Company:
    	
 
    	
If to Distributor:
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
Isola USA Corp.
    	
 
    	
Insulectro
    	
 
    
	
 
    	
7400 W. Detroit Street
    	
 
    	
20362   Windrow Drive
    	
 
    
	
 
    	
Chandler, AZ 85226
    	
 
    	
Lake   Forest, CA 92630
    	
 
    
	
 
    	
Attn: Vice President,
    	
 
    	
Attn:   President
    	
 
    
	
 
    	
Sales and Marketing
    	
 
    	
 
    	
 
    

 

(d)           This Agreement shall be construed under the laws of the State of Arizona, without regard to principles of conflicts of law.  If any provision of this Agreement shall be held

 

7

 

to be invalid, illegal or unenforceable for any reason, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.  In the case of any such invalidity, illegality or unenforceability, the parties agree to use their best efforts to achieve the purpose of such provision by a new legally valid and enforceable stipulation.

 

(e)           The parties will exchange information under this Agreement which is proprietary to the respective parties and which is considered to be confidential (“Confidential Information”).  Such exchange of information will be governed by the following terms and conditions:

 

(i)                                     Each party shall use the same degree of care as it uses with its proprietary information of a like nature to hold Confidential Information in strict confidence and shall not disclose the same to others without the prior written consent of the disclosing party during the term of this Agreement and for a period of five (5) years from the date this Agreement is terminated.  Each party may disclose Confidential Information to its officers and employees who have a need to know and who have undertaken like obligations of confidentiality.

 

(ii)           Confidential Information shall not include any information which:

 

(a)                                  was in the public domain prior to disclosure, or thereafter comes into the public domain without any breach of any confidentiality obligation; or

 

(b)                                 was known by the receiving party prior to disclosure, as shown by written records; or

 

(c)                                  was disclosed to the receiving party by a third party not in violation of any obligations of confidentiality from or through the disclosing party; or

 

(d)                                 is independently developed by the receiving party.

 

Any combination of known information shall be within any of the foregoing exclusions only if the combination as such is within such exclusion.

 

(f)            Neither party shall disclose the terms of this Agreement without the prior written consent of the other, provided, that Company may disclose the identity of Distributor to the Midwest Distributor and the Midatlantic Distributor; provided  further, that either party may notify others of the fact that this Agreement is in effect.

 

(g)           This Agreement, including the schedules hereto, is the entire agreement and supersedes all prior agreements between the parties concerning the subject matter hereof.  All prior agreements between Company and Distributor, including without limitation the

 

8

 

Distributor Agreement, dated as of May 29, 2003, between the parties, are hereby canceled effective as of the date of this Agreement.

 

(h)           Any change in this Agreement shall not be binding unless approved in writing by persons authorized by the parties.

 

(i)            The failure to perform a term or condition, or the waiver of a breach thereof, shall not prevent a subsequent enforcement of such term or condition nor be deemed to be waiver of any subsequent breach.

 

(j)            The section headings of this Agreement are for convenience of reference only and shall not in any way modify, interpret or construe the intent of the parties.

 

(k)           Any disputes arising in connection with this Agreement shall be finally settled by binding arbitration by a panel of three arbitrators in Phoenix, Arizona, in accordance with the rules of arbitration of the American Arbitration Association.  Judgment upon the award rendered may be entered in any court having jurisdiction, or application may be made to such court for a judicial acceptance of the award and an order of enforcement, as the case may be.  Notwithstanding the foregoing, either party may bring an action in court for an injunction or preliminary relief to preserve the status quo until any arbitration proceeding is concluded.

 

(l)            Notwithstanding anything to the contrary in this Agreement, the arbitration provisions set forth herein, and any arbitration conducted thereunder, shall be governed exclusively by the Federal Arbitration Act, Title 9, United States Code, to the exclusion of any state or municipal law.

 

(m)          [***]

 

WITNESS the due execution hereof as of the day and year first above stated.

 

	
ISOLA   USA CORP.
    	
 
    	
INSULECTRO
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
/s/   Marshall R. Anderson
    	
 
    	
By:
    	
/s/   Donald M. Redfern
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Name:
    	
Marshall   R. Anderson
    	
 
    	
Name:
    	
Donald   M. Redfern
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Title:
    	
VP,   Secretary, Treasurer
    	
 
    	
Title:
    	
Chief   Executive Officer
    

 

[***] Confidential information on this page has been omitted and filed separately with the Securities and Exchange Commission pursuant to a Confidential Treatment Request.

 

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SCHEDULE A

 

[***]

 

[***] Confidential information on this page has been omitted and filed separately with the Securities and Exchange Commission pursuant to a Confidential Treatment Request.

 

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[***]

 

[***] Confidential information on this page has been omitted and filed separately with the Securities and Exchange Commission pursuant to a Confidential Treatment Request.

 

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SCHEDULE B

 

[***]

 

[***] Confidential information on this page has been omitted and filed separately with the Securities and Exchange Commission pursuant to a Confidential Treatment Request.

 

12

 

SCHEDULE C

 

[***]

 

[***] Confidential information on this page has been omitted and filed separately with the Securities and Exchange Commission pursuant to a Confidential Treatment Request.

 

13

 

SCHEDULE D

 

[***]

 

[***] Confidential information on this page has been omitted and filed separately with the Securities and Exchange Commission pursuant to a Confidential Treatment Request.

 

14

 

[***]

 

[***] Confidential information on this page has been omitted and filed separately with the Securities and Exchange Commission pursuant to a Confidential Treatment Request.

 

15

 

SCHEDULE E

 

[***]

 

[***] Confidential information on this page has been omitted and filed separately with the Securities and Exchange Commission pursuant to a Confidential Treatment Request.

 

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SCHEDULE F

 

[***]

 

[***] Confidential information on this page has been omitted and filed separately with the Securities and Exchange Commission pursuant to a Confidential Treatment Request.

 

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SCHEDULE G

 

[***]

 

[***] Confidential information on this page has been omitted and filed separately with the Securities and Exchange Commission pursuant to a Confidential Treatment Request.

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