<PAGE>
As filed with the Securities and Exchange Commission on July 13, 1998
Registration No. 333-53603
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
GRAHAM PACKAGING COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 3085 23-2786688
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
------------------------
GPC CAPITAL CORP. I
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 3085 23-2952403
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
------------------------
GRAHAM PACKAGING HOLDINGS COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
PENNSYLVANIA 3085 23-2553000
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
------------------------
GPC CAPITAL CORP. II
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 3085 23-2952404
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
------------------------
<TABLE>
<S> <C>
PHILIP R. YATES
JOHN E. HAMILTON
1110 EAST PRINCESS STREET 1110 EAST PRINCESS STREET
YORK, PENNSYLVANIA 17403 YORK, PENNSYLVANIA 17403
(717) 849-8500 (717) 849-8500
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANTS' PRINCIPAL EXECUTIVE OFFICES) INCLUDING AREA CODE, OF AGENT FOR SERVICE)
</TABLE>
------------------------
With a copy to:
WILSON S. NEELY, ESQ.
SIMPSON THACHER & BARTLETT
425 LEXINGTON AVENUE
NEW YORK, NEW YORK 10017
(212) 455-2000
------------------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box: / /
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering: / /
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: / /
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
Information contained herein is subject to completion or amendment.
A registration statement relating to these securities has been filed
with the Securities and Exchange Commission. These securities may
not be sold nor may offers to buy be accepted prior to the time the
registration statement becomes effective. This prospectus
shall not constitute an offer to sell
or the solicitation of an offer to buy
nor shall there be any sale of these securities in any State in which
such offer, solicitation or sale would be unlawful prior to registration
or qualification under the securities laws of any such
State.
SUBJECT TO COMPLETION DATED JULY 10, 1998
PRELIMINARY PROSPECTUS
GRAHAM PACKAGING COMPANY
AND
GPC CAPITAL CORP. I
OFFER TO EXCHANGE UP TO $150,000,000 OF THEIR
8 3/4% SENIOR SUBORDINATED NOTES DUE 2008, SERIES B, AND $75,000,000 OF THEIR
FLOATING INTEREST RATE SUBORDINATED TERM SECURITIES DUE 2008 (FIRSTS(SERVICE
MARK)*), SERIES B
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
FOR ANY AND ALL OF THEIR OUTSTANDING
8 3/4% SENIOR SUBORDINATED NOTES DUE 2008, SERIES A, AND ANY AND ALL OF THEIR
OUTSTANDING FLOATING INTEREST RATE SUBORDINATED TERM SECURITIES DUE 2008
(FIRSTS(SERVICE MARK)*), SERIES A
GRAHAM PACKAGING HOLDINGS COMPANY
AND
GPC CAPITAL CORP. II
OFFER TO EXCHANGE UP TO $169,000,000 OF THEIR
10 3/4% SENIOR DISCOUNT NOTES DUE 2009, SERIES B,
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
FOR ANY AND ALL OF THEIR OUTSTANDING
10 3/4% SENIOR DISCOUNT NOTES DUE 2009, SERIES A
THE EXCHANGE OFFERS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON ________
__, 1998, UNLESS EXTENDED.
Graham Packaging Company (the 'Operating Company') and GPC Capital Corp. I
('CapCo I' and, together with the Operating Company, the 'Company Issuers'),
hereby offer, upon the terms and subject to the conditions set forth in this
Prospectus and the related Letters of Transmittal (which together constitute the
'Senior Subordinated Exchange Offers'), (i) to exchange an aggregate of up to
$150,000,000 principal amount of 8 3/4% Senior Subordinated Notes Due 2008,
Series B (the 'Fixed Rate Senior Subordinated Exchange Notes'), of the Company
Issuers for an equal principal amount of the issued and outstanding 8 3/4%
Senior Subordinated Notes Due 2008, Series A (the 'Fixed Rate Senior
Subordinated Old Notes' and, together with the Fixed Rate Senior Subordinated
Exchange Notes, the 'Fixed Rate Senior Subordinated Notes'), of the Company
Issuers from the Holders thereof and (ii) to exchange an aggregate of up to
$75,000,000 principal amount of Floating Interest Rate Subordinated Term
Securities Due 2008, Series B (the 'Floating Rate Senior Subordinated Exchange
Notes' and, together with the Fixed Rate Senior Subordinated Exchange Notes, the
'Senior Subordinated Exchange Notes'), of the Company Issuers for an equal
principal amount of the issued and outstanding Floating Interest Rate
Subordinated Term Securities Due 2008, Series A (the 'Floating Rate Senior
Subordinated Old Notes' and, together with the Fixed Rate Senior Subordinated
Old Notes, the 'Senior Subordinated Old Notes'), of the Company Issuers from the
Holders thereof. The Floating Rate Senior Subordinated Exchange Notes and the
Floating Rate Senior Subordinated Old Notes are herein sometimes collectively
called the 'Floating Rate Senior Subordinated Notes,' and the Fixed Rate Senior
Subordinated Notes and the Floating Rate Senior Subordinated Notes are herein
sometimes collectively called the 'Senior Subordinated Notes.'
Graham Packaging Holdings Company ('Holdings') and GPC Capital Corp. II
('CapCo II' and, together with Holdings, the 'Holdings Issuers', which together
with the Company Issuers are herein sometimes collectively called the
'Issuers'), hereby offer, upon the terms and subject to the conditions set forth
in this Prospectus and the related Letter of Transmittal (which together
constitute the 'Senior Discount Exchange Offer'), to exchange an aggregate of up
to $169,000,000 principal amount at maturity of 10 3/4% Senior Discount Notes
Due 2009, Series B (the 'Senior Discount Exchange Notes'), of the Holdings
Issuers for an equal principal amount of the issued and outstanding 10 3/4%
Senior Discount Notes Due 2009, Series A (the 'Senior Discount Old Notes' and,
together with the Senior Discount Exchange Notes, the 'Senior Discount Notes'),
of the Holdings Issuers from the Holders thereof. (Continued on next page.)
SEE 'RISK FACTORS,' BEGINNING ON PAGE 23, FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BY INVESTORS IN CONNECTION WITH THE EXCHANGE
OFFERS AND AN INVESTMENT IN THE SENIOR SUBORDINATED EXCHANGE NOTES OR THE SENIOR
DISCOUNT EXCHANGE NOTES.
------------------
THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is __________, 1998.
* FIRSTS is a service mark of BT Alex. Brown Incorporated.
<PAGE>
(Continued from cover page)
The Company Issuers and the Holdings Issuers are herein sometimes
collectively called the 'Issuers'; the Senior Subordinated Exchange Offer
relating to the Fixed Rate Senior Subordinated Notes is herein sometimes called
the 'Fixed Rate Senior Subordinated Exchange Offer'; the Senior Subordinated
Exchange Offer relating to the Floating Rate Senior Subordinated Notes is herein
sometimes called the 'Floating Rate Senior Subordinated Exchange Offer'; the
Senior Subordinated Exchange Offers and the Senior Discount Exchange Offer are
herein sometimes collectively called the 'Exchange Offers'; the Senior
Subordinated Exchange Notes and the Senior Discount Exchange Notes are herein
sometimes collectively called the 'Exchange Notes'; the Senior Subordinated Old
Notes and the Senior Discount Old Notes are herein sometimes collectively called
the 'Old Notes'; and the Senior Subordinated Notes and the Senior Discount Notes
are herein sometimes collectively called the 'Notes'.
As of the date of this Prospectus, $150,000,000 aggregate principal amount
of the Fixed Rate Senior Subordinated Old Notes and $75,000,000 aggregate
principal amount of the Floating Rate Senior Subordinated Old Notes is
outstanding. The terms of the Fixed Rate Senior Subordinated Exchange Notes and
the Floating Rate Senior Subordinated Exchange Notes are identical in all
material respects to the terms of the Fixed Rate Senior Subordinated Old Notes
and the Floating Rate Senior Subordinated Old Notes, respectively, except that
the Senior Subordinated Exchange Notes have been registered under the Securities
Act of 1933, as amended (the 'Securities Act'), and therefore will not bear
legends restricting their transfer and will not contain certain provisions
providing for an increase in the interest rate on the Senior Subordinated Old
Notes under certain circumstances described in the Senior Subordinated
Registration Rights Agreement (as hereinafter defined), which provisions will
terminate as to all of the Senior Subordinated Notes upon the consummation of
the Senior Subordinated Exchange Offers. While the Operating Company and CapCo I
are jointly and severally liable for the obligations under the Senior
Subordinated Notes, CapCo I, a wholly owned subsidiary of the Operating Company,
has only nominal assets, does not conduct any operations and was formed solely
to act as a co-issuer of the Senior Subordinated Notes.
As of the date of this Prospectus, $169,000,000 aggregate principal amount
at maturity of the Senior Discount Old Notes is outstanding. The Senior Discount
Old Notes were issued at a substantial discount from their principal amount so
as to generate gross proceeds to the Holdings Issuers of $100,612,460. See
'Certain U.S. Federal Income Tax Considerations.' The terms of the Senior
Discount Exchange Notes are identical in all material respects to the terms of
the Senior Discount Old Notes, except that the Senior Discount Exchange Notes
have been registered under the Securities Act and therefore will not bear
legends restricting their transfer and will not contain certain provisions
providing for an increase in the interest rate on the Senior Discount Old Notes
under certain circumstances described in the Senior Discount Registration Rights
Agreement (as hereinafter defined), which provisions will terminate as to all of
the Senior Discount Notes upon the consummation of the Senior Discount Exchange
Offer. While Holdings and CapCo II are jointly and severally liable for the
obligations under the Senior Discount Notes, CapCo II, a wholly owned subsidiary
of Holdings, has only nominal assets, does not conduct any operations and was
formed solely to act as a co-issuer of the Senior Discount Notes.
Each of the Indentures (as hereinafter defined) under which the Notes have
been or will be issued provides that all obligations under the Indentures, the
Notes, the Holdings Guarantee and the Old Holdings Guarantee (as each is
hereinafter defined) (and all notes and guarantees issued in exchange therefor)
shall be expressly non-recourse to the partners of Holdings in their capacities
as such, and that, by purchasing the Notes, each holder of Notes waives any
liability of any partner of Holdings under the Indentures, the Notes, the
Holdings Guarantee and the Old Holdings Guarantee (and all notes and guarantees
issued in exchange therefor). See 'Risk Factors,' 'The Recapitalization,' 'The
Issuers' and 'Security Ownership' in this Prospectus.
Interest on the Senior Subordinated Exchange Notes will accrue from the
last Interest Payment Date on which interest was paid on the Senior Subordinated
Old Notes so surrendered or, if no interest has been paid on such Notes, from
February 2, 1998, and will be payable semiannually in arrears on January 15 and
July 15 of each year, commencing on the first such date to occur after the
effective date of the applicable Senior Subordinated Exchange Offer, at the rate
of 8 3/4% per annum in the case of the Fixed Rate Senior Subordinated Exchange
Notes and at a rate per annum equal to LIBOR (as defined) plus 3 5/8% in the
case of the Floating Rate
ii
<PAGE>
Senior Subordinated Exchange Notes. Interest on the Floating Rate Senior
Subordinated Exchange Notes will be reset semiannually. The Senior Subordinated
Exchange Notes will mature on January 15, 2008.
The Senior Subordinated Exchange Notes will be general unsecured
obligations of the Company Issuers and will be subordinated in right of payment
to all existing and future Senior Indebtedness (as defined) of the Company
Issuers. As of March 29, 1998, after giving effect to the Recapitalization, the
Offerings and the initial borrowings under the New Credit Facility (as defined),
the Company Issuers had $414.7 million of Senior Indebtedness outstanding. In
addition, the Senior Subordinated Exchange Notes will be effectively
subordinated to all indebtedness and other liabilities (including trade
payables) of the Operating Company's subsidiaries. As of March 29, 1998, after
giving effect to the Recapitalization, the Offerings and the initial borrowings
under the New Credit Facility, such subsidiaries had total liabilities of $38.4
million, including indebtedness of $5.1 million. The Senior Subordinated
Exchange Notes will rank pari passu with any future senior subordinated
indebtedness of the Company Issuers and will rank senior to all other
subordinated indebtedness of the Company Issuers. The Senior Subordinated
Exchange Notes will be unconditionally guaranteed by Holdings (the 'Holdings
Guarantee') on a senior subordinated basis, and Holdings hereby offers to issue
the Holdings Guarantee with respect to all Senior Subordinated Exchange Notes
issued in the Senior Subordinated Exchange Offers in exchange for Holdings'
outstanding guarantees (the 'Old Holdings Guarantee') of the Senior Subordinated
Old Notes. The Old Holdings Guarantee is, and the Holdings Guarantee will be,
full and unconditional. Because the Holdings Guarantee will be subordinated in
right of payment to all senior indebtedness of Holdings and effectively
subordinated to all indebtedness and other liabilities (including trade
payables) of Holdings' subsidiaries, investors should not rely on the Holdings
Guarantee in evaluating an investment in the Senior Subordinated Exchange Notes.
See 'Use of Proceeds,' 'Unaudited Pro Forma Financial Information' and
'Description of the New Credit Facility.'
The Fixed Rate Senior Subordinated Exchange Notes will be redeemable, in
whole or in part, at the option of the Company Issuers, on or after January 15,
2003 at the redemption prices set forth herein, plus accrued and unpaid interest
to the date of redemption. The Floating Rate Senior Subordinated Exchange Notes
will be redeemable, in whole or in part, at the option of the Company Issuers,
at any time, at the redemption prices set forth herein plus accrued and unpaid
interest to the date of redemption. The Fixed Rate Senior Subordinated Exchange
Notes are not redeemable by the Company Issuers prior to January 15, 2003,
except that, at any time on or prior to January 15, 2001, the Company Issuers,
at their option, may redeem, with the net cash proceeds of one or more Equity
Offerings (as defined), Fixed Rate Senior Subordinated Notes up to an aggregate
principal amount equal to 40% of the aggregate principal amount of the Fixed
Rate Senior Subordinated Old Notes originally issued, at a redemption price
equal to 108.750% of the principal amount thereof, plus accrued and unpaid
interest to the date of redemption; provided that Fixed Rate Senior Subordinated
Notes in an aggregate principal amount equal to at least 60% of the aggregate
principal amount of the Fixed Rate Senior Subordinated Old Notes originally
issued remains outstanding immediately following such redemption.
Upon a Change of Control (as defined), each holder of Senior Subordinated
Exchange Notes will have the right to require the Company Issuers to repurchase
such holder's Senior Subordinated Exchange Notes at a price equal to 101% of the
principal amount thereof, plus accrued and unpaid interest to the repurchase
date. In addition, in the event of certain Asset Sales (as defined), the Company
Issuers will be obligated to offer to repurchase the Senior Subordinated
Exchange Notes at a price equal to 100% of the principal amount thereof, plus
accrued and unpaid interest to the repurchase date. See 'Description of the
Senior Subordinated Exchange Notes.'
Cash interest on the Senior Discount Exchange Notes will not accrue until
January 15, 2003. Thereafter, interest on the Senior Discount Exchange Notes
will accrue from January 15, 2003 at the rate of 10 3/4% per annum on the
principal amount at maturity of the Senior Discount Exchange Notes, and will be
payable semiannually in arrears on January 15 and July 15 of each year,
commencing July 15, 2003. The Senior Discount Exchange Notes will mature on
January 15, 2009.
The Senior Discount Exchange Notes will be redeemable, in whole or in part,
at the option of the Holdings Issuers on or after January 15, 2003 at the
redemption prices set forth herein, plus accrued and unpaid interest to the date
of redemption. The Senior Discount Exchange Notes are not redeemable by the
Holdings Issuers prior to January 15, 2003, except that, at any time on or prior
to January 15, 2001, the Holdings Issuers, at their option,
iii
<PAGE>
may redeem, with the net cash proceeds of one or more Equity Offerings, Senior
Discount Notes up to an aggregate principal amount at maturity equal to 40% of
the aggregate principal amount at maturity of the Senior Discount Old Notes
originally issued, at a redemption price equal to 110.750% of the Accreted Value
(as defined) thereof; provided that Senior Discount Notes in an aggregate
principal amount equal to at least 60% of the aggregate principal amount at
maturity of the Senior Discount Old Notes originally issued remains outstanding
immediately following such redemption. See 'Description of the Senior Discount
Exchange Notes-- Redemption.'
Upon a Change of Control (as defined), each holder of Senior Discount
Exchange Notes will have the right to require the Holdings Issuers to repurchase
such holder's Senior Discount Exchange Notes at a price equal to 101% of the
Accreted Value thereof, plus accrued and unpaid interest, if any, to the
repurchase date. In addition, in the event of certain Asset Sales (as defined),
the Holdings Issuers will be obligated to offer to repurchase the Senior
Discount Exchange Notes, at a price equal to 100% of the Accreted Value thereof,
plus accrued and unpaid interest, if any, to the repurchase date. See
'Description of the Senior Discount Exchange Notes.'
The Senior Discount Exchange Notes will be general unsecured obligations of
the Holdings Issuers and will rank pari passu in right of payment with all
existing and future senior indebtedness of the Holdings Issuers and senior in
right of payment to all subordinated obligations of the Holdings Issuers. Since
Holdings is a holding company and conducts its business through subsidiaries,
the Senior Discount Exchange Notes will be effectively subordinated to all
indebtedness and other liabilities (including trade payables) of Holdings'
subsidiaries. Investors in the Senior Discount Exchange Notes will have no claim
against Holdings' principal subsidiary, the Operating Company, or any of its
subsidiaries. As of March 29, 1998, after giving effect to the Recapitalization,
the Offerings and the initial borrowings under the New Credit Facility, such
subsidiaries had total liabilities of $757.8 million, including indebtedness of
$641.5 million. See 'Use of Proceeds,' 'Unaudited Pro Forma Financial
Information' and 'Description of the New Credit Facility.'
The Old Notes were issued and sold on February 2, 1998 in transactions (the
'Offerings') not registered under the Securities Act in reliance upon an
exemption from the registration requirements thereof. In general, the Old Notes
may not be offered or sold unless registered under the Securities Act, except
pursuant to an exemption from, or in a transaction not subject to, the
Securities Act. The Senior Subordinated Exchange Notes and the Senior Discount
Exchange Notes are being offered hereby in order to satisfy certain obligations
of the Holdings Issuers contained in the Senior Subordinated Registration Rights
Agreement and the Senior Discount Registration Rights Agreement, respectively.
Based on interpretations by the Staff of the Securities and Exchange Commission
(the 'Commission') set forth in no-action letters issued to third parties, the
Issuers believe that the Exchange Notes issued pursuant to the respective
Exchange Offers in exchange for the respective series of Old Notes may be
offered for resale, resold or otherwise transferred by any holder thereof (other
than any such holder that is an 'affiliate' of the Issuers of such Exchange
Notes within the meaning of Rule 405 promulgated under the Securities Act)
without compliance with the registration and prospectus delivery provisions of
the Securities Act, provided that such Exchange Notes are acquired in the
ordinary course of such holder's business, such holder has no arrangement with
any person to participate in the distribution of such Exchange Notes and neither
such holder nor any such other person is engaging in or intends to engage in a
distribution of such Exchange Notes. However, the Issuers have not sought, and
do not intend to seek, their own no-action letter, and there can be no assurance
that the Staff of the Commission would make a similar determination with respect
to the Exchange Offers. Notwithstanding the foregoing, each broker-dealer that
receives Exchange Notes for its own account pursuant to an Exchange Offer must
acknowledge that it will deliver a prospectus in connection with any resale of
such Exchange Notes. The Letters of Transmittal state that by so acknowledging
and by delivering a prospectus, a broker-dealer will not be deemed to admit that
it is an 'underwriter' within the meaning of the Securities Act. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with any resale of Exchange Notes received in
exchange for such Old Notes where such Old Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities (other than Old Notes acquired directly from the Issuers thereof). A
broker-dealer may not participate in any of the Exchange Offers with respect to
Old Notes acquired other than as a result of market-making activities or other
trading activities. The respective Issuers have agreed that, for a period of 90
days after the date of this Prospectus, they will make this Prospectus available
to any broker-dealer for use in connection with any such resale. See 'Plan of
Distribution.'
iv
<PAGE>
The Old Notes are designated for trading in the Private Offerings, Resales
and Trading through Automated Linkages ('PORTAL') market. There is no
established trading market for the Senior Subordinated Exchange Notes or the
Senior Discount Exchange Notes. The respective Issuers currently do not intend
to list any of the Exchange Notes on any securities exchange or to seek approval
for quotation of the Exchange Notes through any automated quotation system.
Accordingly, there can be no assurance as to the development or liquidity of any
market for any of the Exchange Notes.
The respective Exchange Offers are not conditioned upon any minimum
aggregate principal amount of any series of Old Notes being tendered for
exchange. The date of acceptance and exchange of each series of Old Notes (each
an 'Exchange Date') will be the fourth business day following the applicable
Expiration Date (as hereinafter defined). Old Notes tendered pursuant to an
Exchange Offer may be withdrawn at any time prior to the applicable Expiration
Date. The Senior Subordinated Exchange Offers will expire at 5:00 p.m., New York
City Time, on , 1998 (the date of expiration of each Senior
Subordinated Exchange Offer, as extended, being herein called a 'Senior
Subordinated Expiration Date'), and the Senior Discount Exchange Offer will
expire at 5:00 p.m., New York City Time, on , 1998 (as extended,
the 'Senior Discount Expiration Date' and, together with the Senior Subordinated
Expiration Dates, the 'Expiration Dates'). The Issuers do not currently intend
to extend any of the Expiration Dates.
The respective Issuers will not receive any proceeds from any of the
Exchange Offers. The Company Issuers and the Holdings Issuers will pay all of
the expenses incident to the Senior Subordinated Exchange Offers and the Senior
Discount Exchange Offer, respectively. The Issuers used all of the proceeds from
the Offerings to (i) redeem certain partnership interests in Holdings pursuant
to the recapitalization transaction described herein (the 'Recapitalization');
(ii) repay substantially all of the existing debt of Holdings and its
subsidiaries; (iii) pay certain bonuses and other cash payments to certain
members of Management; and (iv) pay related transaction fees and expenses. Since
the consummation of the Recapitalization, the Issuers have been controlled by
Blackstone Capital Partners III Merchant Banking Fund L.P. and its affiliates
(collectively, 'Blackstone'). See 'The Recapitalization.'
v
<PAGE>
AVAILABLE INFORMATION
The Issuers have filed with the Commission a Registration Statement on Form
S-4 (together with all amendments, exhibits, schedules and supplements thereto,
the 'Registration Statement') under the Securities Act with respect to the
Exchange Notes being offered hereby. This Prospectus, which forms a part of the
Registration Statement, does not contain all of the information set forth in the
Registration Statement. For further information with respect to the Issuers and
the Exchange Notes, reference is made to the Registration Statement. Statements
contained in this Prospectus as to the contents of any contract or other
document are not necessarily complete, and, where such contract or other
document is an exhibit to the Registration Statement, each such statement is
qualified in all respects by the provisions in such exhibit, to which reference
is hereby made. The Issuers are not currently subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the 'Exchange
Act'). Upon completion of the Exchange Offers, the Holdings Issuers will be
subject to the information requirements of the Exchange Act and, in accordance
therewith, will file periodic reports and other information with the Commission.
The Registration Statement, such reports and other information can be inspected
and copied at the Public Reference Section of the Commission located at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington D.C. 20549 and at
regional public reference facilities maintained by the Commission located at
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661
and Seven World Trade Center, Suite 1300, New York, New York 10048. Copies of
such material, including copies of all or any portion of the Registration
Statement, can be obtained from the Public Reference Section of the Commission
at prescribed rates. Such material may also be accessed electronically by means
of the Commission's home page on the Internet (http://www.sec.gov). In addition,
pursuant to the Indentures covering the Notes, the Issuers have agreed that the
Holdings Issuers shall file with the Commission and provide to the Holders of
the Notes the annual reports and the information, documents and other reports
otherwise required pursuant to Section 13 of the Exchange Act. Such requirements
may be satisfied through the filing and provision of such documents and reports
which would otherwise be required pursuant to Section 13 in respect of the
Holdings Issuers.
UNTIL , 1998 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
FORWARD-LOOKING STATEMENTS
ALL STATEMENTS OTHER THAN STATEMENTS OF HISTORICAL FACTS INCLUDED IN THIS
PROSPECTUS, INCLUDING, WITHOUT LIMITATION, STATEMENTS REGARDING THE ISSUERS'
FUTURE FINANCIAL POSITION, BUSINESS STRATEGY, BUDGETS, PROJECTED COSTS AND PLANS
AND OBJECTIVES OF MANAGEMENT FOR FUTURE OPERATIONS, ARE FORWARD-LOOKING
STATEMENTS. IN ADDITION, FORWARD-LOOKING STATEMENTS GENERALLY CAN BE IDENTIFIED
BY THE USE OF FORWARD-LOOKING TERMINOLOGY SUCH AS 'MAY', 'WILL', 'EXPECT',
'INTEND', 'ESTIMATE', 'ANTICIPATE', 'BELIEVE', OR 'CONTINUE' OR THE NEGATIVE
THEREOF OR VARIATIONS THEREON OR SIMILAR TERMINOLOGY. ALTHOUGH THE ISSUERS
BELIEVE THAT THE EXPECTATIONS REFLECTED IN SUCH FORWARD-LOOKING STATEMENTS ARE
REASONABLE, THEY CAN GIVE NO ASSURANCE THAT SUCH EXPECTATIONS WILL PROVE TO HAVE
BEEN CORRECT. IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY FROM THE ISSUERS' EXPECTATIONS ('CAUTIONARY STATEMENTS') ARE
DISCLOSED UNDER 'RISK FACTORS' AND ELSEWHERE IN THIS PROSPECTUS, INCLUDING,
WITHOUT LIMITATION, IN CONJUNCTION WITH THE FORWARD-LOOKING STATEMENTS INCLUDED
IN THIS PROSPECTUS. ALL SUBSEQUENT WRITTEN AND ORAL FORWARD-LOOKING STATEMENTS
ATTRIBUTABLE TO THE ISSUERS, OR PERSONS ACTING ON ANY OF THEIR BEHALF, ARE
EXPRESSLY QUALIFIED IN THEIR ENTIRETY BY THE CAUTIONARY STATEMENTS. SECTION
27A(b)(2)(D) OF THE SECURITIES ACT AND SECTION 21E(b)(2)(D) OF THE EXCHANGE ACT
PROVIDE THAT THE 'SAFE HARBOR' PROVISIONS FOR FORWARD-LOOKING STATEMENTS
PROVIDED IN THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 DO NOT APPLY TO
INITIAL PUBLIC OFFERINGS.
<PAGE>
PROSPECTUS SUMMARY
The following summary information is qualified in its entirety by, and
should be read in conjunction with, the more detailed information and financial
statements appearing elsewhere in this Prospectus. Unless the context otherwise
requires, all references in this Prospectus to the 'Company,' with respect to
periods prior to the Recapitalization, refer to the business historically
conducted by Graham Packaging Holdings Company ('Holdings') (which served as the
operating entity for the business prior to the Recapitalization) and one of its
predecessors (Graham Container Corporation), together with Holdings'
subsidiaries and certain affiliates, and, with respect to periods subsequent to
the Recapitalization, refer to Holdings and its subsidiaries. Since the
Recapitalization, the Operating Company has been a wholly owned subsidiary of
Holdings. See the chart entitled 'Summary of Ownership Structure since the
Recapitalization' on page 10 of this Prospectus. All references to the
Recapitalization herein shall mean the collective reference to the
recapitalization of Holdings and related transactions as described under 'The
Recapitalization,' including the initial borrowings under the New Credit
Facility, the Offerings and the related uses of proceeds. References to
'Continuing Graham Partners' herein refer to Graham Packaging Corporation
('Graham GP Corp.'), Graham Family Growth Partnership or affiliates thereof or
other entities controlled by Donald C. Graham and his family, and references to
'Graham Partners' refer to the Continuing Graham Partners, Graham Engineering
Corporation ('Graham Engineering') and the other partners of Holdings
(consisting of Donald C. Graham and certain entities controlled by Mr. Graham
and his family). All references to 'Management' herein shall mean the management
of the Company at the time in question, unless the context indicates otherwise.
In addition, unless otherwise indicated, all sources for all industry data and
statistics contained herein are estimates contained in or derived from internal
or industry sources believed by the Company to be reliable.
THE COMPANY
Graham Packaging Company is a worldwide leader in the design and
manufacture of customized blow-molded rigid plastic bottles for many of the
world's largest branded consumer products companies for whom customized
packaging design is a critical component in their efforts to differentiate their
products to the consumer. The Company's products are made primarily from high
density polyethylene ('HDPE') and polyethylene terephthalate ('PET') resins for
customers in the (i) automotive, (ii) food and beverage and (iii) household
cleaning and personal care products businesses. With leading positions in each
of its businesses, the Company has been a major beneficiary of the trend of
conversion from glass, paper and metal containers to plastic packaging and has
grown its net sales over the past 15 years at a 24% compounded annual growth
rate ('CAGR'). In contrast to the carbonated soft drink bottle business, the
businesses in which the Company operates are characterized by more specialized
technology, a greater degree of customized packaging, shorter production runs,
higher growth rates and more attractive profit margins.
In order to position itself to further capitalize on the conversion trend,
the Company has made substantial capital expenditures since 1992, particularly
in the fast growing hot-fill PET area for shelf-stable (i.e., unrefrigerated)
beverages. In addition, the Company has distinguished itself as the leader in
locating its manufacturing plants on-site at its customers' packaging facilities
and has over one-third of its 41 facilities at on-site locations. The many
benefits of on-site plants, in addition to the Company's track record of
innovative design, superior customer service and low cost manufacturing
processes, help account for the fact that the Company has not lost a major
customer in the last three years. For the year ended December 31, 1997,
approximately 77% of the Company's net sales were generated by its top 20
customers, approximately 60% of which were under long-term contracts (i.e., with
terms of between one and ten years) and the remainder of which were customers
with whom the Company has been doing business for over 10 years on average. For
the year ended December 31, 1997, the Company generated net sales and EBITDA (as
defined) of $521.7 million and $89.8 million, respectively, and for the three
months ended March 29, 1998, the Company generated net sales and EBITDA of
$134.4 million and $25.3 million, respectively.
As a result of the Recapitalization, the Company has a high degree of
leverage, which could impair the Company's ability to obtain additional
financing and/or reduce funds available for working capital, capital
expenditures, acquisitions, general corporate or other purposes. The Company's
substantial leverage could place it at a competitive disadvantage and hinder its
ability to adjust rapidly to changing market conditions and could
2
<PAGE>
make the Company more vulnerable in the event of a downturn in the general
economic conditions or in its business. The Company could also be adversely
impacted by increased interest rates on its variable interest rate borrowings.
For the three months ended March 29, 1998, the earnings of the Operating Company
and Holdings would have been inadequate to cover fixed charges by approximately
$0.8 million and $3.9 million, respectively.
Automotive. The Company is the preeminent supplier of one quart HDPE motor
oil containers in the United States, producing over 1.5 billion units in 1997,
which Management believes represents 73% of the one quart motor oil containers
produced domestically. The Company is a supplier of such containers to many of
the top domestic producers of motor oil, including Amoco Corporation ('Amoco'),
Ashland Inc. ('Ashland,' producer of Valvoline motor oil), Castrol, Inc.
('Castrol'), Chevron Corporation ('Chevron'), Pennzoil Products Company
('Pennzoil'), Shell Oil Company ('Shell Oil'), Sun Company, Inc. ('Sun Company')
and Texaco, Inc. ('Texaco'), and is the sole supplier of one quart motor oil
containers to five of these producers. Unit volume in the domestic one quart
motor oil business has been declining at approximately 2% per year and, as a
result, the Company has experienced competitive price pressure in this business
throughout 1995, 1996 and 1997. The Company has reduced prices on contracts that
have come up for renewal to maintain its competitive position and has been able
to partially offset these price reductions by improving manufacturing
efficiencies, light-weighting of bottles, improving line speeds, reducing
material spoilage and by improving labor efficiency and inventory. The domestic
one quart motor oil business is forecasted to decline between 1-2% measured by
unit volume per year for the next five years. The Company also manufactures
containers for other automotive products, such as antifreeze and automatic
transmission fluid. Capitalizing on its leading position in the U.S., the
Company is expanding its operations in Latin America. In Brazil, where
Management believes that the Company is among the largest independent suppliers
of plastic packaging for motor oil, the Company currently operates four plants
and recently signed an agreement to operate one additional plant. In addition to
benefitting from the conversion to plastic packaging for motor oil in Latin
America, Management believes that the Company will benefit from the general
growth in the automotive business in this region as the number of motor vehicles
per person increases. In 1994, the ratio of passenger cars to people was 1 to
13.2 in Brazil, while in the U.S. the ratio was 1 to 1.8. For the year ended
December 31, 1997 and the three months ended March 29, 1998, the Company
generated approximately 37.6% and 33.5%, respectively, of its net sales from the
automotive container business.
Food & Beverage. In the food and beverage business, the Company produces
both HDPE and PET containers for customers for whom customized packaging design
is a critical component of their efforts to differentiate their products to the
consumer. From 1992 through December 31, 1997, the Company grew its food and
beverage business at a CAGR of 67%. This substantial growth has been driven by
the rapid conversion of metal, glass and paper containers to plastic bottles, as
the superior functionality, safety and improving economics of plastic became
more apparent. The Company is a leader in the production of HDPE containers for
non-carbonated, chilled juice and juice drinks and certain liquid foods that
utilize HDPE resins. From 1992 through December 31, 1997, the Company invested
over $99 million in capital expenditures to build a strategic nationwide plant
network and to develop the specialized bottle manufacturing processes necessary
to produce the PET bottles required for the hot-fill packaging of shelf-stable
juices and juice drinks. The hot-fill process, in which bottles are filled at
between 180 degrees-190 degrees Fahrenheit to kill bacteria, permits the
shipment and display of juices and juice drinks in a shelf-stable state. The
manufacturing process for hot-fill PET packaging is significantly more demanding
than that used for cold-fill carbonated soft drink containers, and typically
involves shorter production runs, greater shape complexity and close production
integration with customers. Industry sources forecast that the hot-fill PET
juice and juice drink container business, upon which the Company focuses, will
enjoy a CAGR of over 40% between 1996 and 2000. The Company's largest customers
in the food and beverage business include Groupe Danone ('Danone'), Hershey
Foods Corporation ('Hershey's'), The Minute Maid Company ('Minute Maid'), Nestle
Food Company ('Nestle's'), Ocean Spray Cranberries, Inc. ('Ocean Spray'), Seneca
Foods Corporation ('Seneca'), Tree Top, Inc. ('Tree Top'), Tropicana Products,
Inc. ('Tropicana') and Welch Foods, Inc. ('Welch's'). For the year ended
December 31, 1997 and the three months ended March 29, 1998, the Company
generated approximately 28.9% and 34.2%, respectively, of its net sales from the
food and beverage business.
Household Cleaning & Personal Care. The Company is a leading supplier of
HDPE custom bottles to the North American household cleaning and personal care
('HC/PC') products business which includes products such as shampoo, liquid
laundry detergent, tub and tile cleaner and dishwashing liquid. By focusing on
its
3
<PAGE>
customized product design capability, the Company provides its HC/PC customers
with a key component in their efforts to differentiate products on store
shelves. The Company's largest customers in this sector include The Clorox
Company ('Clorox'), Colgate-Palmolive Company ('Colgate-Palmolive'), The Dial
Corp. ('Dial'), Johnson & Johnson ('J&J'), L'Oreal S.A. ('L'Oreal'), The Procter
& Gamble Company ('Procter & Gamble') and Unilever NV ('Unilever'). The Company
is pursuing significant growth opportunities both domestically and
internationally associated with the continued conversion to HDPE packaging of
both household cleaners and personal care products. The Company continues to
benefit as liquid laundry detergents, which are packaged in plastic containers,
capture an increased share from powdered detergents, which are predominantly
packaged in cardboard. For the year ended December 31, 1997 and the three months
ended March 29, 1998, the Company generated approximately 33.5% and 32.3%,
respectively, of its net sales from the HC/PC business.
COMPANY STRENGTHS
Management believes the Company has the following key competitive
strengths:
Strong Relationships and Long-Term Contracts with Diversified Blue Chip
Customer Base. The Company has enjoyed long-standing relationships averaging 16
years with its top twenty customers, who generated 77% of the Company's net
sales in 1997. These customers include many of the world's leading branded
consumer product companies and motor oil companies. Management attributes these
close relationships to the Company's creative design and engineering
capabilities, high level of customer service, high quality products, efficient
manufacturing, reliable delivery, speed to market and experienced and stable
management team and workforce. The Company supplies several of these customers
with 100% of their plastic packaging needs nationally, regionally or for a
specific brand, including Valvoline motor oil, Tropicana orange juice, Cascade
dishwashing gel and Purex laundry detergent. As another example of customer
loyalty, substantially all contracts which have come up for renewal in the last
three fiscal years have been extended.
Premier Custom Package Designer. The Company has centered its growth
strategy upon customers that require custom, as opposed to stock, plastic
containers as a critical component of their marketing efforts. The production of
custom containers involves a high degree of design, engineering and
manufacturing complexity in terms of bottle shapes, production tolerance and
performance requirements. The Company's ability to design and manufacture highly
customized packaging has enabled it to secure long-term contractual commitments
and to continue to enjoy a history of stable and steadily increasing orders from
its top customers at attractive profit margins. Management intends to apply this
core custom manufacturing capability in growth businesses, such as hot-fill PET
packaging, that require the same degree of customization and manufacturing
expertise as the Company's existing HDPE packaging business.
On-Site Facilities. More than one-third of the Company's 41 plants are
located on-site at its customers' plants, which is substantially greater than
any of its competitors. On-site plants enable the Company to work more closely
with its customers, facilitating just-in-time inventory management, generating
significant savings opportunities through process re-engineering, eliminating
costly shipping and handling charges, reducing working capital needs and
fostering the development of long-term customer relationships. The benefits of
on-site manufacturing result in increased profitability for both the Company and
its customers, and partially accounts for the fact that the Company has never
lost an on-site relationship.
Leading Positions. The Company is the preeminent domestic supplier of
motor oil containers, with what Management believes to be an approximate 73%
share of the domestic one quart motor oil container business. The Company has
become a leading manufacturer of hot-fill PET containers for juice and juice
drinks in North America after only approximately five years in the business and
is also a leading supplier in North America of custom HDPE containers for juice
and juice drinks and HDPE custom plastic bottles in the HC/PC business.
Strong Industry Fundamentals and Growth Prospects. Management believes
that the businesses in which the Company operates exhibit strong fundamental
characteristics and growth prospects including (i) the domestic and
international trend in the conversion to plastic packaging from other materials
(including the conversion of the hot-fill domestic juice and juice drinks
business which is only 14% converted to plastic), (ii) the non-cyclical nature
of end-use products for which the Company designs and manufactures packaging
(including motor oil, juices, laundry detergents and shampoos, among others),
(iii) long-term relationships which yield efficiencies in situations where
customers integrate their operations with packaging suppliers, particularly in
on-site situations and (iv) attractive margins inherent in the complex design
and engineering capabilities that are required in these businesses.
4
<PAGE>
Significant Investment in Manufacturing Systems. Management believes that
the Company's investment in its manufacturing systems throughout its 28 U.S.
plants and 13 international plants provides it with a competitive advantage.
From 1992 through December 31, 1997, the Company invested approximately $64
million to maintain its asset base, approximately $200 million to improve the
efficiency of its existing operations and expand capacity and approximately $53
million to acquire several businesses in its effort to diversify globally. From
1992 through December 31, 1997, the Company made capital expenditures of over
$99 million relating to the hot-fill PET business. Management anticipates
achieving higher EBITDA margins in the next few years in the hot-fill PET
business through the leveraging of this investment, as fixed manufacturing and
selling, general and administrative ('SG&A') costs are absorbed by higher sales.
As a result of the Company's on-site strategy and long-term contractual
relationships, capital expenditures are typically associated directly with
specific contracts with customers, which allows Management to more effectively
allocate its investment capital.
Favorable Supplier Relationships. HDPE and PET resins are the principal
raw materials used to manufacture the Company's products. Because the Company is
among the largest purchasers of bottle-grade HDPE resins for blow molding in the
world, it is able to secure advantageous supply arrangements. In addition, the
Company has limited exposure to fluctuations in the price of these raw materials
because it can pass through price adjustments to its customers due to
contractual provisions and standard industry practice. While the Company
historically has been able to pass through changes in the cost of resins to its
customers, the Company may not be able to do so in the future and significant
increases in the price of resins could adversely affect the Company's operating
margins and growth plans. See 'Business--Raw Materials.'
Experienced Management Team. The Company is led by an experienced team of
senior managers with a track record of achieving profitable growth, maintaining
the Company's blue chip customer base, introducing differentiated product
designs and entering new businesses. The Company's top 20 managers average over
15 years of work experience in the packaging industry and 13 years at the
Company. Since the Recapitalization, the Company's senior managers have owned an
equity investment in Investor LP (the entity through which Blackstone holds its
interest in Holdings), that approximates a 2.6% indirect equity interest in
Holdings, and will be awarded options, subject to certain performance based and
other vesting provisions, representing an additional equity interest in
Holdings. In addition, the Continuing Graham Partners retained a 1% general
partnership interest and a 14% limited partnership interest in Holdings, which
interests were valued at $36.7 million at the consummation of the
Recapitalization. See 'The Recapitalization,' 'Management--Management Option
Plan' and 'Security Ownership'.
BUSINESS STRATEGY
The Company's objective is to capitalize on its position as a leading
custom blow molded plastic container supplier. The Company seeks to achieve this
objective by pursuing the following strategies:
Capitalize on Conversion to Plastic Containers. The Company intends to
grow both domestically and internationally by continuing to capitalize on the
industry trend toward the conversion from glass, metal and paper to plastic
containers, which Management believes is being driven by consumer demand, price
competitiveness and superior functionality. As one of the leading domestic
suppliers of hot-fill PET containers, the Company is poised to take advantage of
the rapid conversion from glass to plastic in the juice and juice drink
business, 86% of which has not yet been converted. In addition to opportunities
in the domestic hot-fill PET arena, Management believes that additional
conversions to HDPE packaging will occur in areas such as frozen juice
concentrate (currently packaged entirely in metal and cardboard containers), 64
ounce juices (a large portion of which is currently packaged in cardboard
containers) and motor oil (particularly in Latin America).
Maintain and Expand Position with Key Customers. The Company plans to
maintain and expand its position with global branded consumer products companies
that require highly customized features to differentiate their products on store
shelves. Central to this strategy are the continued (i) delivery of superior
customer service, (ii) location of facilities on-site, (iii) innovation in
packaging design, (iv) operation through long-term contracts and (v) provision
of low cost manufacturing processes. The termination of relationships with the
Company's key customers could have a material adverse effect upon the Company's
business, financial position or results of operations.
Pursue Acquisitions and Strategic Joint Ventures. Management believes that
there are major synergistic acquisition and joint venture opportunities across
the Company's businesses, including additional opportunities in France and
Brazil, plus the establishment of operations in Germany, the United Kingdom,
Turkey, Russia and
5
<PAGE>
Argentina. The Company intends to pursue them on an opportunistic basis (i) to
complement its existing businesses through product line expansion, (ii) to
strengthen its competitive position as a domestic leader and (iii) to facilitate
the penetration of new and developing business areas and geographic territories.
Furthermore, Management believes that it can improve the profitability of
acquired entities through economies of scale, by leveraging the Company's
existing strengths and by expanding the acquired entities' access to
international markets through the Company's existing international presence.
Capture Global Growth Opportunities with Improved Profitability. Since
1992, the Company has expanded globally both through acquisitions and by
accompanying its existing customers into new territories. Following the
Company's entrance into Western Europe, as well as its subsequent expansion into
Brazil, Canada and Poland, the Company's international operations have grown
substantially to 21.2% of net sales for the year end December 31, 1997 and to
21.7% of net sales for the three months ended March 29, 1998. Management
believes that the global trend in the conversion to plastic packaging will
continue, particularly in the developing world as consumer economies expand and
industrialization continues. The Company is subject to the risks associated with
operating in foreign countries, including fluctuations in currency exchange
rates, imposition of limitations on conversion of foreign currencies into
dollars or remittance of dividends or other payments by foreign subsidiaries,
imposition or increase of withholding and other tax remittances and other
payments by foreign subsidiaries, labor relations problems, hyperinflation in
certain foreign countries, the imposition or increase of investment and other
restrictions by foreign governments or the imposition of environmental or
employment laws. Currently, profitability levels from international operations
are lower than in the U.S., and Management intends to improve these margins,
particularly in France.
RECENT DEVELOPMENTS
In June 1998, the Company finalized the settlement of the
JCI-Schmalbach-Lubeca litigation. The amounts paid in settlement, as well as
estimated litigation expenses and professional fees did not differ materially
from the amounts accrued in Special Charges and Unusual Items in respect thereof
for the year ended December 31, 1997 and in the March 29, 1998 unaudited
condensed consolidated financial statements. See 'Business--JCI Litigation' and
Notes 13 and 17 to the Combined Financial Statements as of December 31, 1997 and
1996 and for each of the three years in the period ended December 31, 1997 and
Note 9 to the Condensed Financial Statements.
The Company plans to acquire the plastic bottle manufacturing business of a
company operating in Europe and two plastic bottle manufacturing businesses in
South America, for a total of approximately $70 million, and has signed
non-binding letters of intent with respect to these acquisitions. Significant
terms of the final purchase agreements have been agreed to in principle,
although the Company has not executed a definitive purchase agreement with
respect to any of these acquisitions and continues to perform due diligence
with respect to these businesses.
THE RECAPITALIZATION
The recapitalization (the 'Recapitalization') of Holdings was consummated
on February 2, 1998 pursuant to an Agreement and Plan of Recapitalization,
Redemption and Purchase, dated as of December 18, 1997 (the 'Recapitalization
Agreement'), by and among (i) Holdings, (ii) the Graham Partners, and (iii)
BMP/Graham Holdings Corporation, a Delaware corporation formed by Blackstone
('Investor LP'), and BCP/Graham Holdings L.L.C., a Delaware limited liability
company and a wholly owned subsidiary of Investor LP ('Investor GP' and,
together with Investor LP, the 'Equity Investors').
On February 2, 1998, as part of the Recapitalization, Graham Packaging
Company (the 'Operating Company') and GPC Capital Corp. I ('CapCo I' and,
together with the Operating Company, the 'Company Issuers') consummated an
offering (the 'Senior Subordinated Offering') pursuant to Rule 144A under the
Securities Act of their Senior Subordinated Notes Due 2008, consisting of
$150,000,000 aggregate principal amount of their 8 3/4% Senior Subordinated
Notes Due 2008, Series A (the 'Fixed Rate Senior Subordinated Old Notes') and
$75,000,000 aggregate principal amount of their Floating Interest Rate
Subordinated Term Securities Due 2008, Series A (the 'Floating Rate Senior
Subordinated Old Notes' and, together with the Fixed Rate Senior Subordinated
Old Notes, the 'Senior Subordinated Old Notes'). Pursuant to the Senior
6
<PAGE>
Subordinated Exchange Offers, the Company Issuers are offering to exchange
$150,000,000 aggregate principal amount of their 8 3/4% Senior Subordinated
Notes Due 2008, Series B (the 'Fixed Rate Senior Subordinated Exchange Notes'),
and $75,000,000 aggregate principal amount of their Floating Interest Rate
Subordinated Term Securities Due 2008, Series B (the 'Floating Rate Senior
Subordinated Exchange Notes' and, together with the Fixed Rate Senior
Subordinated Old Notes, the 'Senior Subordinated Exchange Notes'), for equal
principal amounts of Fixed Rate Senior Subordinated Old Notes and Floating Rate
Senior Subordinated Old Notes, respectively.
On February 2, 1998, as part of the Recapitalization, Holdings and GPC
Capital Corp. II ('CapCo II' and, together with the Operating Company, the
'Holdings Issuers', which when referred to with the Company Issuers will
collectively be referred to as the 'Issuers') consummated an offering (the
'Senior Discount Offering' and, together with the Senior Subordinated Offering,
the 'Offerings') pursuant to Rule 144A under the Securities Act of $169,000,000
aggregate principal amount at maturity of their 10 3/4% Senior Discount Notes
Due 2009, Series A (the 'Senior Discount Old Notes' and, together with the
Senior Subordinated Old Notes, the 'Old Notes'). Pursuant to the Senior Discount
Exchange Offer, the Holdings Issuers are offering to exchange $169,000,000
aggregate principal amount at maturity of their 10 3/4% Senior Discount Notes
Due 2009, Series B (the 'Senior Discount Exchange Notes'), for an equal
principal amount at maturity of Senior Discount Old Notes.
The other principal components of the Recapitalization included the
following transactions:
o The contribution by Holdings of substantially all of its assets and
liabilities to the Operating Company;
o The contribution by certain Graham Partners to the Operating Company of
their ownership interests in certain partially owned subsidiaries and
certain real estate used but not owned by Holdings and its subsidiaries
(the 'Graham Contribution');
o The initial borrowing by the Operating Company of $403.5 million (the
'Bank Borrowings') in connection with the New Credit Facility by and
among the Operating Company, Holdings and a syndicate of lenders, as
described under 'Description of the New Credit Facility';
o The repayment by the Operating Company of substantially all of the
existing indebtedness and accrued interest of Holdings and its
subsidiaries (approximately $264.9 million);
o The distribution by the Operating Company to Holdings of all of the
remaining net proceeds of the Bank Borrowings and the Senior Subordinated
Offering (other than amounts necessary to pay certain fees and expenses
and payments to Management) which, in aggregate, were approximately
$313.7 million;
o The repayment by the Graham Partners of $21.2 million owed to Holdings
under certain promissory notes;
o The redemption by Holdings of certain partnership interests in Holdings
held by the Graham Partners for $429.6 million;
o The purchase by the Equity Investors of certain partnership interests in
Holdings held by the Graham Partners for $208.3 million; and
o The payment of certain bonuses and other cash payments and the granting
of certain equity awards to senior and middle level management.
Upon the consummation of the Recapitalization, Investor LP owned an 81%
limited partnership interest in Holdings, Investor GP owned a 4% general
partnership interest in Holdings, and the Continuing Graham Partners retained a
1% general partnership interest and a 14% limited partnership interest in
Holdings. Upon the consummation of the Recapitalization, Holdings owned a 99%
limited partnership interest in the Operating Company, and GPC Opco GP LLC
('Opco GP'), a wholly owned subsidiary of Holdings, owned a 1% general
partnership interest in the Operating Company. See 'The Recapitalization' and
'The Issuers.' Following the consummation of the Recapitalization, certain
members of Management owned an aggregate of approximately 3% of the outstanding
common stock of Investor LP, which constitutes approximately a 2.6% interest in
Holdings. In addition, an affiliate of BT Alex. Brown Incorporated and Bankers
Trust International PLC (which acted as initial purchasers of the Old Notes in
the Offerings) acquired approximately a 4.8% equity interest in Investor LP. See
'Security Ownership.'
7
<PAGE>
SUMMARY OF SOURCES AND USES OF FUNDS
The following table sets forth a summary of the sources and uses of the
funds associated with the Recapitalization.
<TABLE>
<CAPTION>
AMOUNT
-------------
(IN MILLIONS)
<S> <C>
SOURCES OF FUNDS:
Bank Borrowings...................................................................................... $ 403.5
Senior Subordinated Notes(1)......................................................................... 225.0
Senior Discount Notes................................................................................ 100.6
Equity investments and retained equity(2)............................................................ 245.0
Repayment of promissory notes........................................................................ 21.2
Available cash....................................................................................... 1.7
-------------
Total.............................................................................................. $ 997.0
-------------
USES OF FUNDS:
Repayment of existing indebtedness(3)................................................................ $ 264.9
Redemption by Holdings of existing partnership interests............................................. 429.6
Purchase by Equity Investors of existing partnership interests....................................... 208.3
Partnership interests retained by Continuing Graham Partners......................................... 36.7
Payments to Management............................................................................... 15.4
Transaction costs and expenses....................................................................... 42.1
-------------
Total.............................................................................................. $ 997.0
-------------
-------------
</TABLE>
- ------------------
(1) Included $150.0 million of Fixed Rate Senior Subordinated Old Notes and
$75.0 million of Floating Rate Senior Subordinated Old Notes.
(2) Included a $208.3 million equity investment made by Blackstone and
Management in the Equity Investors and a $36.7 million retained partnership
interest of the Continuing Graham Partners. In addition, an affiliate of BT
Alex. Brown Incorporated and Bankers Trust International PLC, two of the
Initial Purchasers, acquired approximately a 4.8% equity interest in
Investor LP. See 'Security Ownership.'
(3) Included $264.5 million of existing indebtedness and $0.4 million of accrued
interest.
8
<PAGE>
SUMMARY OF CASH FLOWS ASSOCIATED WITH THE RECAPITALIZATION
The following table sets forth a summary of the cash flows associated with
the Recapitalization.
-------------- -------------------
| Equity | $208.3 million \ | Graham Partners(2)|
| Investors(1)| ----------------------------------------- | |
-------------- Purchase of existing / / _ -------------------
partnership interests / /|
/ /
$ 21.2 million / /
Repayment of / /
promissory notes / / $429.6 million
/ / Redemption of existing
/ / partnership interests
/ /
/ /
Transaction costs |/_ /
and expenses ------------
$5.9 million | Holdings |
------------
/ /
- ------------------------------- ------------------------------------
\ /|\ \
| $100.6 million Senior Discount Notes
|
|
Distribution | $313.7 million
|
Repayment of |
existing indebtedness |
$264.9 million | $403.5 million Bank Borrowings
/ | /
- -------------------------- --------------------------------
\ \
Payment to Management --------------------- $225.0 million Senior
$15.4 million | Operating Company | Subordinated Notes
/ --------------------- /
- -------------------------- --------------------------------
\ \
Fees and expenses $1.7 million Available Cash
$36.2 million
/ /
- -------------------------- --------------------------------
\ \
- ------------------
1 The Equity Investors are Investor LP and Investor GP.
2 The Graham Partners are: Donald C. Graham, Graham Recycling Corporation,
Graham Capital Corporation, Graham Engineering Corporation, Graham Packaging
Corporation and Graham Family Growth Partnership.
9
<PAGE>
SUMMARY OF OWNERSHIP STRUCTURE SINCE THE RECAPITALIZATION
The following chart sets forth a summary of the ownership structure of
Holdings, the Operating Company and certain other parties following the
consummation of the Recapitalization:
<TABLE>
<S> <C>
- - ------------------------- ------------------------- -----------------------------
| Blackstone(1) | | Management | | Continuing Graham |
- - ------------------------- ------------------------- | Partners |
| 97% | 3% -----------------------------
------------------------ | | |
| | 100% | |
-------------------------------- | |
| BMP/Graham Holdings | | |
| Corporation ("Investor LP") | | |
-------------------------------- | |
| 81% LP | ------------------------- |
100% | | | |
--------------------------- | -------------------------------- |
| BCP/Graham Holdings | | | Graham Packaging Corporation | |
| L.L.C. ("Investor GP") | | | ("Graham GP Corp.") | |
--------------------------- | -------------------------------- |
4% GP | | | 1% GP |
| | | ----------------------- |
| | | | 14% LP
-----------------------------------------------------------------------
| Graham Packaging Holdings |
| Company ("Holdings") |
-----------------------------------------------------------------------
| | |
----------- | ---------------------
| 100% | 100% |
| 99% LP | |
---------------------------- | -------------------------------
| GPC Capital Corp. II | | | GPC Opco GP, L.L.C. |
| ("CapCo II") | | | ("Opco GP") |
---------------------------- | -------------------------------
| | 1% GP
| ----------------------
| |
---------------------------------------
| |
| Graham Packaging Company |
| (the "Operating Company") |
| |
---------------------------------------
| |
------------------- -----------------------
| 100% |
------------------------ ------------------------------
| GPC Capital Corp. I | | Other |
| ("CapCo I") | | Subsidiaries |
------------------------ ------------------------------
</TABLE>
- ------------------
(1) An affiliate of BT Alex. Brown Incorporated and Bankers Trust International
PLC acquired approximately a 4.8% equity interest in the voting securities
of Investor LP. See 'Security Ownership.'
10
<PAGE>
THE SENIOR SUBORDINATED EXCHANGE OFFERS
<TABLE>
<S> <C>
The Senior Subordinated Exchange
Offers............................. The Company Issuers are offering to exchange pursuant to the Senior
Subordinated Exchange Offers (i) up to $150,000,000 aggregate principal
amount of their Fixed Rate Senior Subordinated Exchange Notes for a like
aggregate principal amount of their Fixed Rate Senior Subordinated Old
Notes, and (ii) up to $75,000,000 aggregate principal amount of their
Floating Rate Senior Subordinated Exchange Notes for a like aggregate
principal amount of their Floating Rate Senior Subordinated Old Notes. The
terms of the Fixed Rate Senior Subordinated Exchange Notes and the
Floating Rate Senior Subordinated Exchange Notes are identical in all
material respects (including principal amount, interest rate and maturity)
to the terms of the Fixed Rate Senior Subordinated Old Notes and the
Floating Rate Senior Subordinated Old Notes, respectively, for which they
may be exchanged pursuant to the Senior Subordinated Exchange Offers,
except that the Senior Subordinated Exchange Notes are freely
transferrable by Holders thereof (other than as provided herein), and are
not subject to any covenant regarding registration under the Securities
Act. The Senior Subordinated Exchange Notes will be unconditionally
guaranteed by Holdings (the 'Holdings Guarantee') on a senior subordinated
basis, and Holdings hereby offers to issue the Holdings Guarantee with
respect to all Senior Subordinated Exchange Notes issued in the Senior
Subordinated Exchange Offers in exchange for Holdings' outstanding
guarantees (the ' Old Holdings Guarantee') of the Senior Subordinated Old
Notes. See 'The Senior Subordinated Exchange Offers.'
No Minimum Condition................. The Senior Subordinated Exchange Offers are not conditioned upon any
minimum aggregate principal amount of Senior Subordinated Old Notes being
tendered for exchange.
Senior Subordinated Expiration Dates;
Withdrawal of Tenders.............. The Fixed Rate Senior Subordinated Exchange Offer will expire at 5:00
p.m., New York City time, on , 1998 (the 'Fixed Rate
Senior Subordinated Expiration Date'), and the Floating Rate Senior
Subordinated Exchange Offer will expire at 5:00 p.m., New York City time,
on , 1998 (the 'Floating Rate Senior Subordinated
Expiration Date' and, together with the Fixed Rate Senior Subordinated
Expiration Date, the 'Senior Subordinated Expiration Dates'), unless the
applicable Senior Subordinated Exchange Offer is extended, in which case
the term 'Fixed Rate Senior Subordinated Expiration Date' or 'Floating
Rate Senior Subordinated Expiration Date' means the latest date and time
to which the Fixed Rate Senior Subordinated Exchange Offer or the Floating
Rate Senior Subordinated Exchange Offer, as the case may be, is extended.
The Company Issuers do not currently intend to extend either of the Senior
Subordinated Expiration Dates. Tenders may be withdrawn at any time prior
to 5:00 p.m., New York City time, on the applicable Senior Subordinated
Expiration Date. See 'The Senior Subordinated Exchange Offers-- Withdrawal
Rights.'
Senior Subordinated Exchange Date.... The date of acceptance for exchange of the Senior Subordinated Old
</TABLE>
11
<PAGE>
<TABLE>
<S> <C>
Notes will be the fourth business day following the applicable Senior
Subordinated Expiration Date.
Conditions to the Senior Subordinated
Exchange
Offers............................. Each of the Senior Subordinated Exchange Offers is subject to certain
customary conditions, which may be waived by the Company Issuers. The
Company Issuers currently expect that each of the conditions will be
satisfied and that no waivers will be necessary. See 'The Senior
Subordinated Exchange Offers--Certain Conditions to the Senior
Subordinated Exchange Offers.' The Company Issuers reserve the right to
terminate or amend either Senior Subordinated Exchange Offer at any time
prior to the applicable Senior Subordinated Expiration Date upon the
occurrence of any such condition.
Procedures for Tendering Senior
Subordinated Old Notes............. Each Holder wishing to accept the applicable Senior Subordinated Exchange
Offer must complete, sign and date the applicable Letter of Transmittal,
or a facsimile thereof, in accordance with the instructions contained
herein and therein, and mail or otherwise deliver such Letter of
Transmittal, or such facsimile, together with the applicable Senior
Subordinated Old Notes and any other required documentation to the Senior
Subordinated Exchange Agent at the address set forth therein. See 'The
Senior Subordinated Exchange Offers--Procedures for Tendering Senior
Subordinated Old Notes' and 'Plan of Distribution.'
Use of Proceeds...................... There will be no proceeds to the Company Issuers from the exchange of
Senior Subordinated Notes pursuant to the Senior Subordinated Exchange
Offers.
Federal Income Tax
Considerations..................... The exchange of Notes pursuant to the Senior Subordinated Exchange Offers
will not be a taxable event for federal income tax purposes. See 'Certain
U.S. Federal Income Tax Considerations.'
Special Procedures for Beneficial
Owners............................. Any beneficial owner whose Senior Subordinated Old Notes are registered in
the name of a broker, dealer, commercial bank, trust company or other
nominee and who wishes to tender should contact such registered holder
promptly and instruct such registered holder to tender on such beneficial
owner's behalf. If such beneficial owner wishes to tender on such
beneficial owner's own behalf, such beneficial owner must, prior to
completing and executing the applicable Letter of Transmittal and
delivering the Senior Subordinated Old Notes, either make appropriate
arrangements to register ownership of the Senior Subordinated Old Notes in
such beneficial owner's name or obtain a properly completed bond power
from the registered holder. The transfer of registered ownership may take
considerable time. See 'The Senior Subordinated Exchange
Offers--Procedures for Tendering Senior Subordinated Old Notes.'
Guaranteed Delivery Procedures....... Holders of Senior Subordinated Old Notes who wish to tender their Senior
Subordinated Old Notes and whose Senior Subordinated Old Notes are not
immediately available or who cannot deliver their Senior Subordinated Old
Notes, the applicable Letter of Transmittal or any other documents
required by such Letter of Transmittal to the Senior Subordinated Exchange
Agent prior to the applicable Expiration Date
</TABLE>
12
<PAGE>
<TABLE>
<S> <C>
must tender their Senior Subordinated Old Notes according to the
guaranteed delivery procedures set forth in 'The Senior Subordinated
Exchange Offers--Procedures for Tendering Senior Subordinated Old Notes.'
Acceptance of Senior Subordinated Old
Notes and Delivery of Senior
Subordinated Exchange Notes........ The Company Issuers will accept for exchange any and all Senior
Subordinated Old Notes which are properly tendered in the Senior
Subordinated Exchange Offers prior to 5:00 p.m., New York City time, on
the applicable Senior Subordinated Expiration Date. The Senior
Subordinated Exchange Notes issued pursuant to the Senior Subordinated
Exchange Offers will be delivered promptly following the applicable Senior
Subordinated Expiration Date. See 'The Senior Subordinated Exchange
Offers--Acceptance of Senior Subordinated Old Notes for Exchange; Delivery
of Senior Subordinated Exchange Notes.'
Effect on Holders of Senior
Subordinated Old Notes............. As a result of the making of, and upon acceptance for exchange of all
validly tendered Senior Subordinated Old Notes pursuant to the terms of
the Senior Subordinated Exchange Offers, the Company Issuers will have
fulfilled a covenant contained in the Registration Rights Agreement (the
'Senior Subordinated Registration Rights Agreement') dated as of February
2, 1998 among the Company Issuers, Holdings, as guarantor, and BT Alex.
Brown Incorporated, Bankers Trust International PLC, Lazard Freres & Co.
L.L.C. and Salomon Brothers Inc (the 'Initial Purchasers'), and,
accordingly, there will be no increase in the interest rate on the Senior
Subordinated Old Notes pursuant to the terms of the Senior Subordinated
Registration Rights Agreement, and the holders of the Senior Subordinated
Old Notes will have no further registration or other rights under the
Senior Subordinated Registration Rights Agreement. Holders of the Senior
Subordinated Old Notes who do not tender their Senior Subordinated Old
Notes in the Senior Subordinated Exchange Offers will continue to hold
such Senior Subordinated Old Notes and will be entitled to all the rights
and limitations applicable thereto under the Indenture dated as of
February 2, 1998 (the 'Senior Subordinated Indenture') between the Company
Issuers and United States Trust Company of New York, as Trustee, relating
to the Senior Subordinated Old Notes and the Senior Subordinated Exchange
Notes, except for any such rights under the Senior Subordinated
Registration Rights Agreement that by their terms terminate or cease to
have further effectiveness as a result of the making of, and the
acceptance for exchange of all validly tendered Senior Subordinated Old
Notes pursuant to, the Senior Subordinated Exchange Offers.
Consequence of Failure to Exchange... Holders of Senior Subordinated Old Notes who do not exchange their Senior
Subordinated Old Notes for Senior Subordinated Exchange Notes pursuant to
the Senior Subordinated Exchange Offers will continue to be subject to the
restrictions on transfer of such Senior Subordinated Old Notes provided
for in the Senior Subordinated Old Notes and in the Senior Subordinated
Indenture and as set forth in the legend on the Senior Subordinated Old
Notes. In general, the Senior Subordinated Old Notes may not be offered or
sold, unless registered under the Securities
</TABLE>
13
<PAGE>
<TABLE>
<S> <C>
Act, except pursuant to an exemption from, or in a transaction not subject
to, the Securities Act and applicable state securities laws. The Company
Issuers do not currently anticipate that they will register the Senior
Subordinated Old Notes under the Securities Act. To the extent that Senior
Subordinated Old Notes are tendered and accepted in the Senior
Subordinated Exchange Offers, the trading market for untendered Senior
Subordinated Old Notes could be adversely affected.
Senior Subordinated Exchange Agent... United States Trust Company of New York is serving as exchange agent (the
'Senior Subordinated Exchange Agent') in connection with the Senior
Subordinated Exchange Offers. See 'The Senior Subordinated Exchange
Offers-Senior Subordinated Exchange Agent.'
</TABLE>
TERMS OF THE SENIOR SUBORDINATED EXCHANGE NOTES
<TABLE>
<S> <C>
Securities Offered................... $150,000,000 aggregate principal amount of 8 3/4% Senior Subordinated
Notes Due 2008, Series B (referred to herein as the 'Fixed Rate Senior
Subordinated Exchange Notes').
$75,000,000 aggregate principal amount of Floating Interest Rate
Subordinated Term Securities Due 2008, Series B (referred to herein as the
'Floating Rate Senior Subordinated Exchange Notes').
Issuers.............................. Graham Packaging Company and GPC Capital Corp. I.
Maturity Date........................ January 15, 2008.
Interest Payment Dates............... Interest on the Senior Subordinated Exchange Notes will accrue from the
last Interest Payment Date to which interest was paid on the related
series of Senior Subordinated Old Notes, or if no interest has been paid
on the Senior Subordinated Old Notes, from February 2, 1998. Interest will
be payable semi-annually in arrears on January 15 and July 15 of each
year, commencing on the first such date to occur after the applicable
Senior Subordinated Exchange Date. The Fixed Rate Senior Subordinated
Exchange Notes will bear interest at the rate of 8 3/4% per annum. The
Floating Rate Senior Subordinated Exchange Notes will bear interest at a
rate per annum equal to LIBOR plus 3 5/8%. Interest on the Floating Rate
Senior Subordinated Exchange Notes will be reset semi-annually.
Ranking.............................. The Senior Subordinated Exchange Notes will be general unsecured
obligations of the Company Issuers and will be subordinated in right of
payment to all existing and future Senior Indebtedness of the Company
Issuers. As of March 29, 1998, after giving effect to the
Recapitalization, the Company Issuers and the Operating Company's
subsidiaries had $414.7 million of Senior Indebtedness outstanding. In
addition, the Senior Subordinated Exchange Notes will be effectively
subordinated to all indebtedness and other liabilities (including trade
payables) of the Operating Company's subsidiaries. As of March 29, 1998,
after giving effect to the Recapitalization, such subsidiaries had total
liabilities of $38.4 million, including indebtedness of $5.1 million. In
addition, at March 29, 1998, the Operating Company had additional
borrowing availability of approximately $242.0 million under the New
Credit Facility subject to certain customary drawing conditions relating
to the Revolving Credit Facility (as defined) and certain other
conditions, including required equity contributions relating to the Growth
Capital
</TABLE>
14
<PAGE>
<TABLE>
<S> <C>
Revolving Facility (as defined). See 'Use of Proceeds,' 'Unaudited Pro
Forma Financial Information' and 'Description of the New Credit Facility.'
The Senior Subordinated Exchange Notes will rank pari passu with any
future senior subordinated indebtedness of the Company Issuers and will
rank senior to all other subordinated indebtedness of the Company Issuers.
See 'Use of Proceeds,' 'Unaudited Pro Forma Financial Information' and
'Description of the New Credit Facility.'
Optional Redemption.................. The Fixed Rate Senior Subordinated Exchange Notes will be redeemable, in
whole or in part, at the option of the Company Issuers on or after January
15, 2003 at the redemption prices set forth herein, plus accrued and
unpaid interest to the date of redemption. The Fixed Rate Senior
Subordinated Exchange Notes are not redeemable by the Company Issuers
prior to January 15, 2003, except that, at any time on or prior to January
15, 2001, the Company Issuers, at their option, may redeem, with the net
cash proceeds of one or more Equity Offerings, Fixed Rate Senior
Subordinated Notes up to an aggregate principal amount equal to 40% of the
aggregate principal amount of the Fixed Rate Senior Subordinated Old Notes
originally issued, at a redemption price equal to 108.750% of the
principal amount thereof, plus accrued and unpaid interest to the date of
redemption; provided that Fixed Rate Senior Subordinated Notes in an
aggregate principal amount equal to at least 60% of the aggregate
principal amount of the Fixed Rate Senior Subordinated Old Notes
originally issued remains outstanding immediately following such
redemption. The Floating Rate Senior Subordinated Exchange Notes will be
redeemable, in whole or in part, at the option of the Company Issuers, at
any time, at the redemption prices set forth herein, plus accrued and
unpaid interest, if any, to the date of redemption. See 'Description of
the Senior Subordinated Exchange Notes--Redemption.'
Change of Control.................... Upon a Change of Control, each holder of Senior Subordinated Exchange
Notes will have the right to require the Company Issuers to repurchase
such holder's Senior Subordinated Exchange Notes at a price equal to 101%
of the principal amount thereof, plus accrued and unpaid interest to the
repurchase date. See 'Description of the Senior Subordinated Exchange
Notes--Change of Control.'
Guarantees........................... The Senior Subordinated Exchange Notes will be fully and unconditionally
guaranteed by Holdings on a senior subordinated basis. The Holdings
Guarantee will be subordinated in right of payment to all senior
indebtedness of Holdings ($102.3 million at March 29, 1998) and
effectively subordinated to all indebtedness and other liabilities
(including but not limited to trade payables) of Holdings' subsidiaries
($757.8 million at March 29, 1998). Investors should not rely on the
Holdings Guarantee in evaluating an investment in the Senior Subordinated
Exchange Notes. See 'Risk Factors--Subordination of Senior Subordinated
Exchange Notes' and 'Holdings Guarantee.'
Certain Covenants.................... The Senior Subordinated Indenture contains certain covenants with respect
to the Operating Company and its subsidiaries that restrict, among other
things, (a) the incurrence of additional indebtedness, (b) the payment of
dividends and other restricted payments, (c) the creation of certain
liens, (d) the use of proceeds from sales of assets and subsidiary stock,
and (e) transactions with affiliates. The Senior Subordinated Indenture
also restricts the ability of the Company Issuers to consolidate
</TABLE>
15
<PAGE>
<TABLE>
<S> <C>
or merge with or into, or to transfer all or substantially all of their
assets to, another person. In addition, under certain circumstances, the
Company Issuers will be required to offer to purchase the Senior
Subordinated Exchange Notes, in whole or in part, with the proceeds of
certain Asset Sales, at a purchase price equal to 100% of the principal
amount thereof, plus accrued and unpaid interest to the repurchase date.
These restrictions and requirements are subject to a number of important
qualifications and exceptions. See 'Description of the Senior Subordinated
Exchange Notes--Certain Covenants.'
Absence of Market.................... The Senior Subordinated Exchange Notes are new securities for which there
is currently no established market. Accordingly, there can be no assurance
as to the development or liquidity of any market for the Senior
Subordinated Exchange Notes. The Company Issuers do not intend to list the
Senior Subordinated Exchange Notes on any securities exchange or to seek
approval for quotation of the Senior Subordinated Exchange Notes on any
automated quotation system.
No Recourse to Holdings Partners; No
Personal Liability of Directors,
Officers, Employees and
Stockholders....................... The Senior Subordinated Indenture under which the Senior Subordinated
Notes have been or will be issued provides that all obligations under the
Senior Subordinated Indenture, the Senior Subordinated Notes, the Holdings
Guarantee and the Old Holdings Guarantee (and all notes and guarantees
issued in exchange therefor) shall be expressly non-recourse to the
partners of Holdings in their capacities as such, and that, by purchasing
the Senior Subordinated Notes, each holder of Senior Subordinated Notes
waives any liability of any partner of Holdings under the Senior
Subordinated Indenture, the Senior Subordinated Notes, the Holdings
Guarantee and the Old Holdings Guarantee (and all notes and guarantees
issued in exchange therefor). No director, officer, employee, incorporator
or stockholder of the Company Issuers (or any Guarantor (as defined) under
any Guarantee (as defined) that has been or may be issued with respect to
the Senior Subordinated Notes) shall have any liability for any
obligations of the Company Issuers (or any such Guarantor) under the
Senior Subordinated Notes or the Indenture (or any such Guarantee) or any
claim based on, in respect of, or by reason of such obligation, or their
creation. Such waiver may not be effective to waive liabilities under the
federal securities laws and it is the view of the Commission that such a
waiver is against public policy.
</TABLE>
For additional information regarding the Senior Subordinated Exchange
Notes, see 'Description of the Senior Subordinated Exchange Notes.'
16
<PAGE>
THE SENIOR DISCOUNT EXCHANGE OFFER
<TABLE>
<S> <C>
The Senior Discount Exchange Offer........ The Holdings Issuers are offering to exchange pursuant to the Senior
Discount Exchange Offer up to $169,000,000 aggregate principal amount
of their Senior Discount Exchange Notes for a like aggregate
principal amount of their Senior Discount Old Notes. The terms of the
Senior Discount Exchange Notes are identical in all material respects
(including principal amount, interest rate and maturity) to the terms
of the Senior Discount Old Notes for which they may be exchanged
pursuant to the Senior Discount Exchange Offer, except that the
Senior Discount Exchange Notes are freely transferrable by Holders
thereof (other than as provided herein), and are not subject to any
covenant regarding registration under the Securities Act. See 'The
Senior Discount Exchange Offer.'
No Minimum Condition...................... The Senior Discount Exchange Offer is not conditioned upon any
minimum aggregate principal amount of Senior Discount Old Notes being
tendered for exchange.
Senior Discount Expiration Date;
Withdrawal of Tenders................... The Senior Discount Exchange Offer will expire at 5:00 p.m., New York
City time, on , 1998, unless the Senior Discount
Exchange Offer is extended, in which case the term 'Senior Discount
Expiration Date' means the latest date and time to which the Senior
Discount Exchange Offer is extended. The Holdings Issuers do not
currently intend to extend the Senior Discount Expiration Date.
Tenders may be withdrawn at any time prior to 5:00 p.m., New York
City time, on the Senior Discount Expiration Date. See 'The Senior
Discount Exchange Offer-- Withdrawal Rights.'
Exchange Date............................. The date of acceptance for exchange of the Senior Discount Old Notes
will be the fourth business day following the Senior Discount
Expiration Date.
Conditions to the Senior Discount Exchange
Offer................................... The Senior Discount Exchange Offer is subject to certain customary
conditions, which may be waived by the Holdings Issuers. The Holdings
Issuers currently expect that each of the conditions will be
satisfied and that no waivers will be necessary. See 'The Senior
Discount Exchange Offer--Certain Conditions to the Senior Discount
Exchange Offer.' The Holdings Issuers reserve the right to terminate
or amend the Senior Discount Exchange Offer at any time prior to the
Senior Discount Expiration Date upon the occurrence of any such
condition.
Procedures for Tendering Senior Discount
Old Notes............................... Each Holder wishing to accept the Senior Discount Exchange Offer must
complete, sign and date the Letter of Transmittal, or a facsimile
thereof, in accordance with the instructions contained herein and
therein, and mail or otherwise deliver such Letter of Transmittal, or
such facsimile, together with the Senior Discount Old Notes and any
other required documentation to the Senior Discount Exchange Agent at
the address set forth therein. See 'The Senior Discount Exchange
Offer--Procedures for Tendering Senior Discount Old Notes' and 'Plan
of Distribution.'
</TABLE>
17
<PAGE>
<TABLE>
<S> <C>
Use of Proceeds........................... There will be no proceeds to the Holdings Issuers from the exchange
of Notes pursuant to the Senior Discount Exchange Offer.
Federal Income Tax Consequences........... The exchange of Notes pursuant to the Senior Discount Exchange Offer
will not be a taxable event for federal income tax purposes. See
'Certain U.S. Federal Income Tax Consequences.'
Special Procedures for Beneficial
Owners.................................. Any beneficial owner whose Senior Discount Old Notes are registered
in the name of a broker, dealer, commercial bank, trust company or
other nominee and who wishes to tender should contact such registered
holder promptly and instruct such registered holder to tender on such
beneficial owner's behalf. If such beneficial owner wishes to tender
on such beneficial owner's own behalf, such beneficial owner must,
prior to completing and executing the Letter of Transmittal and
delivering the Senior Discount Old Notes, either make appropriate
arrangements to register ownership of the Senior Discount Old Notes
in such beneficial owner's name or obtain a properly completed bond
power from the registered holder. The transfer of registered
ownership may take considerable time. See 'The Senior Discount
Exchange Offer--Procedures for Tendering Senior Discount Old Notes.'
Guaranteed Delivery Procedures............ Holders of Senior Discount Old Notes who wish to tender their Senior
Discount Old Notes and whose Senior Discount Old Notes are not
immediately available or who cannot deliver their Senior Discount Old
Notes, the Letter of Transmittal or any other documents required by
the Letter of Transmittal to the Senior Discount Exchange Agent prior
to the Expiration Date must tender their Senior Discount Old Notes
according to the guaranteed delivery procedures set forth in 'The
Senior Discount Exchange Offer--Procedures for Tendering Senior
Discount Old Notes.'
Acceptance of Senior Discount Old Notes
and Delivery of Senior Discount Exchange
Notes................................... The Holdings Issuers will accept for exchange any and all Senior
Discount Old Notes which are properly tendered in the Senior Discount
Exchange Offer prior to 5:00 p.m., New York City time, on the Senior
Discount Expiration Date. The Senior Discount Exchange Notes issued
pursuant to the Senior Discount Exchange Offer will be delivered
promptly following the Senior Discount Expiration Date. See 'The
Senior Discount Exchange Offer-- Acceptance of Senior Discount Old
Notes for Exchange; Delivery of Senior Discount Exchange Notes.'
Effect on Holders of Senior Discount Old
Notes................................... As a result of the making of, and upon acceptance for exchange of all
validly tendered Senior Discount Old Notes pursuant to the terms of
this Senior Discount Exchange Offer, the Holdings Issuers will have
fulfilled a covenant contained in the Registration Rights Agreement
(the 'Senior Discount Registration Rights Agreement') dated as of
February 2, 1998 among the Holdings Issuers and the Initial
Purchasers, and, accordingly, there will be no increase in the
interest rate on the Senior Discount Old Notes pursuant to the terms
of the Registration Rights Agreement, and the holders of the Senior
Discount Old Notes will have no further registration or other rights
</TABLE>
18
<PAGE>
<TABLE>
<S> <C>
under the Senior Discount Registration Rights Agreement. Holders of
the Senior Discount Old Notes who do not tender their Senior Discount
Old Notes in the Senior Discount Exchange Offer will continue to hold
such Senior Discount Old Notes and will be entitled to all the rights
and limitations applicable thereto under the Indenture dated as of
February 2, 1998 (the 'Senior Discount Indenture') between the
Holdings Issuers and The Bank of New York, as Trustee, relating to
the Senior Discount Old Notes and the Senior Discount Exchange Notes,
except for any such rights under the Senior Discount Registration
Rights Agreement that by their terms terminate or cease to have
further effectiveness as a result of the making of, and the
acceptance for exchange of all validly tendered Senior Discount Old
Notes pursuant to, the Senior Discount Exchange Offer.
Consequence of Failure to Exchange........ Holders of Senior Discount Old Notes who do not exchange their Senior
Discount Old Notes for Senior Discount Exchange Notes pursuant to the
Senior Discount Exchange Offer will continue to be subject to the
restrictions on transfer of such Senior Discount Old Notes provided
for in the Senior Discount Old Notes and in the Senior Discount
Indenture and as set forth in the legend on the Senior Discount Old
Notes. In general, the Senior Discount Old Notes may not be offered
or sold, unless registered under the Securities Act, except pursuant
to an exemption from, or in a transaction not subject to, the
Securities Act and applicable state securities laws. The Holdings
Issuers do not currently anticipate that they will register the
Senior Discount Old Notes under the Securities Act. To the extent
that Senior Discount Old Notes are tendered and accepted in the
Senior Discount Exchange Offer, the trading market for untendered
Senior Discount Old Notes could be adversely affected.
Senior Discount Exchange Agent............ The Bank of New York is serving as exchange agent (the 'Senior
Discount Exchange Agent') in connection with the Senior Discount
Exchange Offer. See 'The Senior Discount Exchange Offer-- Senior
Discount Exchange Agent.'
</TABLE>
TERMS OF THE SENIOR DISCOUNT EXCHANGE NOTES
<TABLE>
<S> <C>
Securities Offered........................ $169,000,000 aggregate principal amount at maturity of 10 3/4% Senior
Discount Notes Due 2009, Series B, having an approximate Accreted
Value at May 26, 1998 equal to 61.6% of the principal amount at
maturity thereof.
Issuers................................... Graham Packaging Holdings Company and GPC Capital Corp. II.
Maturity Date............................. January 15, 2009.
Interest Payment Dates.................... Cash interest on the Senior Discount Exchange Notes will not accrue
until January 15, 2003. Thereafter, interest on the Senior Discount
Exchange Notes will accrue from January 15, 2003 and will be payable
semi-annually in arrears on January 15 and July 15 of each year,
commencing July 15, 2003.
Ranking................................... The Senior Discount Exchange Notes will be general unsecured
obligations of the Holdings Issuers and will rank pari passu in right
</TABLE>
19
<PAGE>
<TABLE>
<S> <C>
of payment with all existing and future senior indebtedness of the
Holdings Issuers and senior in right of payment to all subordinated
obligations of the Holdings Issuers. Since Holdings is a holding
company and conducts its business through subsidiaries, the Senior
Discount Exchange Notes will be effectively subordinated to all
indebtedness and other liabilities (including trade payables) of
Holdings' subsidiaries. As of March 29, 1998, after giving effect to
the Recapitalization, such subsidiaries had total liabilities of
$757.8 million, including indebtedness of $641.5 million. See 'Use of
Proceeds,' 'Unaudited Pro Forma Financial Information' and
'Description of the New Credit Facility.'
Optional Redemption....................... The Senior Discount Exchange Notes will be redeemable, in whole or in
part, at the option of the Holdings Issuers on or after January 15,
2003 at the redemption prices set forth herein, plus accrued and
unpaid interest to the date of redemption. The Senior Discount
Exchange Notes are not redeemable by the Holdings Issuers prior to
January 15, 2003, except that, at any time on or prior to January 15,
2001, the Holdings Issuers, at their option, may redeem, with the net
cash proceeds of one or more Equity Offerings, Senior Discount Notes
up to an aggregate principal amount at maturity equal to 40% of the
aggregate principal amount at maturity of the Senior Discount Old
Notes originally issued, at a redemption price equal to 110.750% of
the Accreted Value (as defined) thereof; provided that Senior
Discount Notes in an aggregate principal amount equal to at least 60%
of the aggregate principal amount at maturity of the Senior Discount
Old Notes originally issued remains outstanding immediately following
such redemption. See 'Description of the Senior Discount Exchange
Notes-- Redemption.'
Change of Control......................... Upon a Change of Control, each holder of Senior Discount Exchange
Notes will have the right to require the Holdings Issuers to
repurchase such holder's Senior Discount Exchange Notes at a price
equal to 101% of the Accreted Value thereof, plus accrued and unpaid
interest, if any, to the repurchase date. See 'Description of the
Exchange Notes--Change of Control.'
Guarantees................................ None.
Certain Covenants......................... The Senior Discount Indenture contains certain covenants with respect
to Holdings and its subsidiaries that restrict, among other things,
(a) the incurrence of additional indebtedness, (b) the payment of
dividends and other restricted payments, (c) the creation of certain
liens, (d) the use of proceeds from sales of assets and subsidiary
stock, and (e) transactions with affiliates. The Senior Discount
Indenture also restricts the ability of the Holdings Issuers to
consolidate or merge with or into, or to transfer all or
substantially all of their assets to, another person. In addition,
under certain circumstances, the Holdings Issuers will be required to
offer to purchase the Senior Discount Exchange Notes, in whole or in
part, with the proceeds of certain Asset Sales, at a price equal to
100% of the Accreted Value thereof, plus accrued and unpaid interest,
if any, to the repurchase date. These restrictions and requirements
are subject to a number of important qualifications and
</TABLE>
20
<PAGE>
<TABLE>
<S> <C>
exceptions. See 'Description of the Senior Discount Exchange
Notes--Certain Covenants.'
Absence of Market......................... The Senior Discount Exchange Notes are new securities for which there
is currently no established market. Accordingly, there can be no
assurance as to the development or liquidity of any market for the
Senior Discount Exchange Notes. The Holdings Issuers do not intend to
list the Senior Discount Exchange Notes on any securities exchange or
to seek approval for quotation of the Senior Discount Exchange Notes
on any automated quotation system.
No Personal Liability of Directors,
Officers, Employees and Stockholders.... The Senior Discount Indenture under which the Senior Discount Notes
have been or will be issued provides that all obligations under the
Senior Discount Indenture and the Senior Discount Notes (and all
notes issued in exchange therefor) shall be expressly non-recourse to
the partners of Holdings in their capacities as such, and that, by
purchasing the Senior Discount Notes, each holder of Senior Discount
Notes waives any liability of any partner of Holdings under the
Senior Discount Indenture and the Senior Discount Notes (and all
notes issued in exchange therefor). No director, officer, employee,
incorporator or stockholder of the Holdings Issuers (or any Guarantor
(as defined) under any Guarantee (as defined) that may be issued with
respect to the Senior Discount Notes) shall have any liability for
any obligations of the Holdings Issuers (or any such Guarantor) under
the Senior Discount Exchange Notes or the Senior Discount Indenture
(or any such Guarantee) or any claim based on, in respect of, or by
reason of such obligation, or their creation. Such waiver may not be
effective to waive liabilities under the federal securities laws and
it is the view of the Commission that such a waiver is against public
policy.
</TABLE>
For additional information regarding the Senior Discount Exchange Notes,
see 'Description of the Senior Discount Exchange Notes.'
USE OF PROCEEDS
The gross proceeds of the Offerings were used to (i) redeem certain
partnership interests in Holdings pursuant to the Recapitalization; (ii) repay
substantially all of the existing debt of Holdings and its subsidiaries; (iii)
pay certain bonuses and other cash payments to certain members of Management;
and (iv) pay related transaction fees and expenses. See 'The Recapitalization'
and 'Use of Proceeds.'
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<PAGE>
RISK FACTORS
See 'Risk Factors' for a discussion of certain factors that should be
considered in evaluating an investment in the Notes.
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA
The following table sets forth summary historical combined financial data
for the Graham Packaging Group (as described below) for and at the end of each
of the years in the three-year period ended December 31, 1997, and summary pro
forma financial data for Holdings and the Operating Company for the three month
period ended March 29, 1998. The summary historical combined financial data for
each of the three years in the period ended December 31, 1997 are derived from
the Graham Packaging Group's combined financial statements as of and for each of
the three years in the period ended December 31, 1997. The combined financial
statements as of December 31, 1995, 1996 and 1997 and for each of the three
years in the period ended December 31, 1997 have been audited by Ernst & Young
LLP, independent auditors. The combined financial statements of Graham Packaging
Group have been prepared to include Holdings and its subsidiaries and the
ownership interests and real estate constituting the Graham Contribution for all
periods that the operations were under common control. The pro forma financial
information reflects the Recapitalization in the manner described under
'Unaudited Pro Forma Financial Information.' The pro forma financial information
is not necessarily indicative of either future results of operations or the
results that might have occurred if the foregoing transactions had been
consummated on the indicated dates.
The following table should be read in conjunction with 'Unaudited Pro Forma
Financial Information,' 'Management's Discussion and Analysis of Financial
Condition and Results of Operations', the Combined Financial Statements of
Graham Packaging Group, including the related notes thereto, and the Condensed
Financial Statements, including the related notes thereto, included elsewhere in
this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, MARCH 29, 1998(2,12)
---------------------------- ---------------------
1995(1) 1996 1997(2) PRO FORMA
------- ------ ------- ---------------------
OPERATING
HOLDINGS COMPANY
-------- ---------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales(3)...................................................... $ 466.8 $459.7 $ 521.7 $134.4 $ 134.4
Gross margin(3)................................................... 66.8 77.2 84.4 24.6 24.6
Selling, general and administrative expenses...................... 35.5 35.5 34.9 8.5 8.5
Special charges and unusual items(4).............................. 5.9 7.0 24.4 1.6 1.6
Operating income.................................................. 25.4 34.7 25.1 14.5 14.5
Interest expense, net............................................. 16.2 14.5 13.4 18.1 15.0
Other expense (income), net....................................... (11.0) (1.0) 0.7 0.2 0.2
Income tax (benefit) expense(5)................................... (0.3) -- 0.6 -- --
Minority interest................................................. -- -- 0.2 -- --
Extraordinary loss(6)............................................. 1.8 -- -- -- --
------- ------ ------- -------- ---------
Net income (loss)................................................. 18.7 21.2 10.2 (3.8) (0.7)
------- ------ ------- -------- ---------
------- ------ ------- -------- ---------
OTHER DATA:
Cash flows provided by (used in):
Operating activities............................................ $ 60.5 $ 68.0 $ 66.9 $ 1.3 $ 1.3
Investing activities............................................ (68.4) (32.8) (72.3) (16.6) (16.6)
Financing activities............................................ 9.2 (34.6) 9.5 30.8 30.8
EBITDA(7)......................................................... 77.1 90.6 89.8 25.3 25.3
Capital expenditures.............................................. 68.6 31.3 53.2 13.5 13.5
Investments(8).................................................... 3.2 1.2 19.0 3.0 3.0
Depreciation and amortization(9).................................. 45.7 48.2 41.0 9.2 9.2
Ratio of earnings to fixed charges(10)............................ 2.0x 2.2x 1.6x -- --
Pro forma ratio of EBITDA to cash interest expense, net........... 1.79x 1.79x
BALANCE SHEET DATA:
Working capital(11)............................................... $ 18.0 $ 17.0 $ 2.4 $ 6.9 $ 6.9
Total assets...................................................... 360.7 338.8 385.5 423.8 423.8
Total debt........................................................ 257.4 240.5 268.5 743.8 641.5
Partners'/owners' equity (deficit)................................ 15.3 16.8 0.3 (436.3) (339.0)
</TABLE>
(Footnotes on next page)
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<PAGE>
(Footnotes from previous page)
- ------------------
(1) In September 1993, Graham Packaging Group acquired an interest in Commercial
Packaging UK Ltd. (the 'UK Operations') for $0.6 million. In July 1995,
Graham Packaging Group acquired an additional interest in its UK Operations
for $1.1 million and subsequently sold those interests for $5.6 million,
recognizing a gain of $4.4 million in 1995. In addition, Graham Packaging
Group entered into an agreement with the purchaser of its UK Operations and
recorded $6.4 million of non-recurring technical support services income.
Both the gain and the technical support services income are included in
other expense (income), net.
(2) In April 1997, Graham Packaging Group acquired 80% of certain assets and
assumed 80% of certain liabilities of Rheem-Graham Embalagens Ltda. in
Brazil for $20.3 million (excluding direct costs of the acquisition). The
remaining 20% was purchased in February 1998. These transactions were
accounted for under the purchase method of accounting. Results of
operations are included in the historical amounts since the dates of
acquisitions.
(3) Net sales increase or decrease based on fluctuations in resin prices as
industry practice and the Company's agreements with its customers permit
price changes to be passed through to customers by means of corresponding
changes in product pricing. Therefore, the Company's dollar gross profit is
substantially unaffected by changes in resin prices.
(4) Represents certain legal, restructuring and systems conversion costs. See
'Management's Discussion and Analysis of Financial Condition and Results of
Operations' and the Combined Financial Statements of Graham Packaging
Group, including the related notes thereto, for further discussion.
(5) As a limited partnership, Holdings is not subject to U.S. federal income
taxes or most state income taxes. Instead, such taxes are assessed to
Holdings' partners based on the income of Holdings. Holdings makes tax
distributions to its partners to reimburse them for such tax liabilities.
The Company's foreign operations are subject to tax in their local
jurisdictions. Most of these entities have historically had net operating
losses and recognized minimal tax expense.
(6) Represents the write-off of unamortized deferred financing fees in
connection with the early extinguishment of debt. The write-off of deferred
financing fees associated with the retirement of outstanding indebtedness
on February 2, 1998 totalling $0.7 million has been excluded from the pro
forma results of operations for the three months ended March 29, 1998.
(7) EBITDA is not intended to represent cash flow from operations as defined by
generally accepted accounting principles and should not be used as an
alternative to net income as an indicator of operating performance or to
cash flow as a measure of liquidity. 'EBITDA' is defined as earnings before
minority interest, extraordinary items, interest expense, interest income,
income taxes, depreciation and amortization expense, fees paid pursuant to
the Monitoring Agreement (as defined), non-cash equity income in earnings
of joint ventures, other non-cash charges, Recapitalization expenses and
special charges and unusual items. Also in 1995, EBITDA excludes the $4.4
million gain on the sale of the UK Operations and the related $6.4 million
technical support services income as described in note (1) above. EBITDA is
included in this Prospectus to provide additional information with respect
to the ability of Holdings and the Operating Company to satisfy their debt
service, capital expenditures and working capital requirements and because
certain covenants in Holdings' and the Operating Company's borrowing
arrangements are tied to similar measures. While EBITDA is frequently used
as a measure of operations and the ability to meet debt service
requirements, it is not necessarily comparable to other similarly titled
captions of other companies due to the potential inconsistencies in the
method of calculation.
(8) Investments includes the acquisitions made by Graham Packaging Group in the
UK and Brazil described in notes (1) and (2) above. In addition, in 1995,
the Company paid $1.9 million for a 50% interest in the Masko-Graham Joint
Venture (the 'Masko-Graham Joint Venture') in Poland and committed to make
loans to the Masko-Graham Joint Venture of up to $1.9 million. In 1996, the
Company loaned $1.0 million to the Masko-Graham Joint Venture. The
Masko-Graham Joint Venture is accounted for under the equity method of
accounting, and its earnings are included in other expense (income), net.
Amounts shown under this caption represent cash paid, net of cash acquired
in acquisitions.
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<PAGE>
(9) Depreciation and amortization excludes amortization of deferred financing
fees, which is included in interest expense, net.
(10) For purposes of determining the ratio of earnings to fixed charges,
earnings are defined as earnings before income taxes, minority interest and
extraordinary items, plus fixed charges. Fixed charges include interest
expense on all indebtedness, amortization of deferred financing fees, and
one-third of rental expense on operating leases representing that portion
of rental expense deemed to be attributable to interest. Earnings were
insufficient to cover fixed charges on a pro forma basis for the three
months ended March 29, 1998 by $3.9 million for Holdings and $0.8 million
for the Operating Company.
(11) Working capital is defined as current assets (less cash and cash
equivalents) minus current liabilities (less current maturities of
long-term debt).
(12) In February 1998, the Recapitalization occurred.
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<PAGE>
RISK FACTORS
Holders of Old Notes should consider carefully, in addition to the other
information contained in this Prospectus, the following factors before deciding
to tender Old Notes in the Exchange Offers. The risk factors set forth below are
generally applicable to the Old Notes as well as the Exchange Notes.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Old Notes who do not exchange their Old Notes for Exchange Notes
pursuant to the applicable Exchange Offer will continue to be subject to the
restrictions on transfer of such Old Notes as set forth in the legend thereon.
In general, Old Notes may not be offered or sold unless registered under the
Securities Act, except pursuant to an exemption from, or in a transaction not
subject to, the registration requirements of the Securities Act and applicable
state securities laws. The respective Issuers do not currently intend to
register the Old Notes under the Securities Act. Based on interpretations by the
staff of the Commission, the Issuers believe that Exchange Notes issued pursuant
to the applicable Exchange Offer in exchange for Old Notes may be offered for
resale, resold or otherwise transferred by Holders thereof (other than any such
Holder which is an 'affiliate' of the Issuers thereof within the meaning of Rule
405 under the Securities Act) without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that such Old
Notes were acquired in the ordinary course of such Holders' business and such
Holders have no arrangement with any person to participate in the distribution
of such Exchange Notes. Each broker-dealer that receives Exchange Notes for its
own account in exchange for Old Notes, where such Old Notes were acquired by
such broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Notes. See 'Plan of Distribution.' To the
extent that Old Notes are tendered and accepted in the applicable Exchange
Offer, the trading market for untendered and tendered but unaccepted Old Notes
will be adversely affected.
SUBSTANTIAL LEVERAGE
Upon the consummation of the Recapitalization, the Operating Company and
Holdings became highly leveraged. As of March 29, 1998, after giving effect to
the Recapitalization, as described in the Unaudited Pro Forma Financial
Information, (i) the Operating Company and its consolidated subsidiaries had an
aggregate of $641.5 million of outstanding indebtedness and a partners' deficit
of $339.0 million, and the Operating Company's earnings would have been
inadequate to cover fixed charges by approximately $0.8 million for the three
months ended March 29, 1998; and (ii) Holdings and its consolidated subsidiaries
had an aggregate of $743.8 million of outstanding indebtedness and a partners'
deficit of $436.3 million, and Holdings' earnings would have been inadequate to
cover fixed charges by approximately $3.9 million for the three months ended
March 29, 1998. The New Credit Facility includes a $155.0 million Revolving
Credit Facility (of which $13.0 million had been drawn down at March 29, 1998),
and a $100.0 million Growth Capital Revolving Facility. The Indentures (as
defined) permit the Issuers to incur additional indebtedness, subject to certain
limitations. The annual debt service requirements for the Company are as
follows: 1998--$4,771,000; 1999--$3,334,000; 2000--$13,333,000;
2001--$18,337,000; and 2002--$23,469,000. The Company can incur $45 million in
additional indebtedness beyond the amount of the New Credit Facility. The
Company does not anticipate that this additional indebtedness would be expressly
subordinated to other indebtedness. Accordingly, if incurred at the Operating
Company level, such additional indebtedness would be senior to the Operating
Company's Senior Subordinated Notes, and the Senior Discount Notes of Holdings
would be structurally subordinated to such additional indebtedness. See
'Unaudited Pro Forma Combined Financial Information,' 'Capitalization,'
'Description of the Senior Subordinated Exchange Notes,' 'Description of the
Senior Discount Notes' and the Combined Financial Statements of Graham Packaging
Group, including the related notes thereto.
The Issuers' high degree of leverage could have important consequences to
the holders of the Notes, including, but not limited to, the following: (i) the
Issuers' ability to obtain additional financing for working capital, capital
expenditures, acquisitions, general corporate purposes or other purposes may be
impaired in the future; (ii) a substantial portion of the Issuers' cash flow
from operations must be dedicated to the payment of principal and interest on
their indebtedness, thereby reducing the funds available to the Issuers for
other purposes, including capital expenditures necessary for maintenance of the
Company's facilities and for the growth of its businesses; (iii) certain of the
Issuers' borrowings are and will continue to be at variable rates of interest,
which exposes the Issuers to the risk of increased interest rates; (iv) the
indebtedness outstanding under the New Credit Facility is secured and matures
prior to the maturity of the Notes; (v) the Issuers may be substantially more
leveraged than certain of their competitors, which may place the Issuers at a
competitive disadvantage; and (vi) the Issuers' substantial degree of leverage,
as well as the covenants contained in the Indentures and the New
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<PAGE>
Credit Facility, may hinder their ability to adjust rapidly to changing market
conditions and could make them more vulnerable in the event of a downturn in
general economic conditions or in their business. See 'Description of the New
Credit Facility,' 'Description of the Senior Subordinated Exchange Notes' and
'Description of the Senior Discount Exchange Notes.'
ABILITY TO SERVICE DEBT
The Issuers' ability to make scheduled payments or to refinance their
obligations with respect to their indebtedness will depend on their financial
and operating performance, which, in turn, is subject to prevailing economic
conditions and to certain financial, business and other factors beyond their
control. If the Issuers' cash flow and capital resources are insufficient to
fund their respective debt service obligations, they may be forced to reduce or
delay planned expansion and capital expenditures, sell assets, obtain additional
equity capital or restructure their debt. There can be no assurance that the
Issuers' operating results, cash flow and capital resources will be sufficient
for payment of their indebtedness. In the absence of such operating results and
resources, the Issuers could face substantial liquidity problems and might be
required to dispose of material assets or operations to meet their respective
debt service and other obligations, and there can be no assurance as to the
timing of such sales or the proceeds which the Issuers could realize therefrom.
In addition, because the Operating Company's obligations under the New Credit
Facility will bear interest at floating rates, an increase in interest rates
could adversely affect, among other things, the Operating Company's ability to
meet its debt service obligations. The Operating Company will be required to
make scheduled principal payments on the Term Loans under the New Credit
Facility commencing in 1998, as follows: 1998--$3,200,000; 1999--$3,200,000;
2000-- $13,200,000; 2001--$18,200,000; 2002--$23,200,000; 2003--$25,700,000;
2004--$91,200,000; 2005-- $63,137,500; 2006--$120,612,500; and
2007--$33,350,000. The Term Loan Facilities under the New Credit Facility shall
be prepaid, subject to certain conditions and exceptions, with (i) 100% of the
net proceeds of any incurrence of indebtedness, subject to certain exceptions,
by Holdings or its subsidiaries, (ii) 75% of the net proceeds of issuances of
equity, subject to certain exceptions, after the Closing by Holdings or any of
its subsidiaries, (iii) 100% of the net proceeds of certain asset dispositions,
(iv) 50% of the annual excess cash flow (as such term is defined in the New
Credit Facility) of Holdings and its subsidiaries on a consolidated basis and
(v) 100% of the net proceeds from any condemnation and insurance recovery
events, subject to certain reinvestment rights. Outstanding balances under the
Revolving Credit Facility and Growth Capital Revolving Credit Facility are
payable in 2004. See 'Description of the New Credit Facility,' 'Unaudited Pro
Forma Financial Information,' 'Capitalization,' 'Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and Capital
Resources' and the Combined Financial Statements of Graham Packaging Group,
including the related notes thereto.
Additionally, if the Issuers were to sustain a decline in their operating
results or available cash, they could experience difficulty in complying with
the covenants contained in the New Credit Facility, the Indentures or any other
agreements governing future indebtedness. The failure to comply with such
covenants could result in an event of default under these agreements, thereby
permitting acceleration of such indebtedness as well as indebtedness under other
instruments that contain cross-acceleration and cross-default provisions.
HOLDING COMPANY STRUCTURE; STRUCTURAL SUBORDINATION OF SENIOR DISCOUNT EXCHANGE
NOTES
Holdings is a holding company which has no significant assets other than
its direct and indirect partnership interests in the Operating Company. CapCo
II, a wholly owned subsidiary of Holdings, was formed for the purpose of serving
as a co-issuer of the Senior Discount Notes and has no operations or assets from
which it will be able to repay the Senior Discount Notes. Accordingly, the
Holdings Issuers must rely entirely upon distributions from the Operating
Company to generate the funds necessary to meet their obligations, including the
payment of Accreted Value or principal and interest on the Senior Discount
Notes. The Senior Subordinated Indenture and the New Credit Facility contain
significant restrictions on the ability of the Operating Company to distribute
funds to Holdings. There can be no assurance that the Senior Subordinated
Indenture, the New Credit Facility or any agreement governing indebtedness that
refinances such indebtedness or other indebtedness of the Operating Company will
permit the Operating Company to distribute funds to Holdings in amounts
sufficient to pay the Accreted Value or principal or interest on the Senior
Discount Notes when the same become due (whether at maturity, upon acceleration
or otherwise).
The only significant assets of Holdings are the partnership interests in
the Operating Company owned by it. All such interests are pledged by Holdings as
collateral under the New Credit Facility. Therefore, if Holdings were unable to
pay the Accreted Value or principal or interest on the Senior Discount Notes,
the ability of the holders of the Senior Discount Notes to proceed against the
partnership interests of the Operating Company to
26
<PAGE>
satisfy such amounts would be subject to the prior satisfaction in full of all
amounts owing under the New Credit Facility. Any action to proceed against such
partnership interests by or on behalf of the holders of Senior Discount Notes
would constitute an event of default under the New Credit Facility entitling the
lenders thereunder to declare all amounts owing thereunder to be immediately due
and payable, which event would in turn constitute an event of default under the
Senior Subordinated Indenture, entitling the holders of the Senior Subordinated
Notes to declare the principal and accrued interest on the Senior Subordinated
Notes to be immediately due and payable. In addition, as secured creditors, the
lenders under the New Credit Facility would control the disposition and sale of
the Operating Company partnership interests after an event of default under the
New Credit Facility and would not be legally required to take into account the
interests of unsecured creditors of Holdings, such as the holders of the Senior
Discount Notes, with respect to any such disposition or sale. There can be no
assurance that the assets of Holdings after the satisfaction of claims of its
secured creditors would be sufficient to satisfy any amounts owing with respect
to the Senior Discount Notes.
The Senior Discount Notes will be effectively subordinated to all existing
and future claims of creditors of Holdings' subsidiaries, including the lenders
under the New Credit Facility, the holders of the Senior Subordinated Notes and
trade creditors. At March 29, 1998, after giving effect to the Recapitalization,
such subsidiaries had approximately $757.8 million of total liabilities,
including approximately $641.5 million of indebtedness. As described above, the
rights of the Holdings Issuers and their creditors, including the holders of the
Senior Discount Notes, to realize upon the assets of Holdings or any of its
subsidiaries upon any such subsidiary's liquidation (and the consequent rights
of the holders of the Senior Discount Notes to participate in the realization of
those assets) will be subject to the prior claims of the lenders under the New
Credit Facility and the creditors of Holdings' subsidiaries including in the
case of the Operating Company, the lenders under the New Credit Facility and the
holders of the Senior Subordinated Notes. In such event, there may not be
sufficient assets remaining to pay amounts due on any or all of the Senior
Discount Notes then outstanding. Under the New Credit Facility, the Operating
Company is subject to restrictions on the payment of dividends or other
distributions to Holdings; provided that, subject to certain limitations, the
Operating Company may pay dividends or other distributions to Holdings (i) in
respect of overhead, tax liabilities, legal, accounting and other professional
fees and expenses, (ii) to fund purchases and redemptions of equity interests of
Holdings or Investor LP held by then present or former officers or employees of
Holdings, the Operating Company or their Subsidiaries (as defined) or by any
employee stock ownership plan upon such person's death, disability, retirement
or termination of employment or other circumstances with certain annual dollar
limitations and (iii) to finance, starting on July 15, 2003, the payment of cash
interest payments on the Senior Discount Notes.
The Senior Subordinated Notes and all amounts owing under the New Credit
Facility will mature prior to the maturity of the Senior Discount Notes. The
Senior Discount Indenture requires that any agreements governing indebtedness
that refinances the Senior Subordinated Notes or the New Credit Facility not
contain restrictions on the ability of the Operating Company to make
distributions to Holdings that are more restrictive than those contained in the
Senior Subordinated Indenture or the New Credit Facility, respectively. There
can be no assurance that if the Operating Company is required to refinance the
Senior Subordinated Notes or any amounts under the New Credit Facility, it will
be able to do so upon acceptable terms, if at all.
SUBORDINATION OF SENIOR SUBORDINATED NOTES AND HOLDINGS GUARANTEE
The Senior Subordinated Notes are unsecured obligations of the Company
Issuers that are subordinated in right of payment to all Senior Indebtedness of
the Company Issuers, including all indebtedness under the New Credit Facility.
As of March 29, 1998, after giving effect to the Recapitalization, the Company
Issuers had $414.7 million of Senior Indebtedness outstanding. In addition, the
Senior Subordinated Notes are effectively subordinated to all indebtedness and
other liabilities (including trade payables) of the Operating Company's
subsidiaries. As of March 29, 1998, after giving effect to the Recapitalization,
such subsidiaries had total liabilities of $38.4 million, including indebtedness
of $5.1 million. In addition, at March 29, 1998, the Operating Company had
additional borrowing availability of approximately $242.0 million under the New
Credit Facility. The Indentures and the New Credit Facility will permit the
Operating Company to incur additional Senior Indebtedness, provided that certain
conditions are met, and the Operating Company expects from time to time to incur
additional Senior Indebtedness. In the event of the insolvency, liquidation,
reorganization, dissolution or other winding up of the Company Issuers or upon a
default in payment with respect to, or the acceleration of, or if a judicial
proceeding is pending with respect to any default under, any Senior
Indebtedness, the lenders under the New Credit Facility and any other creditors
who are holders of Senior Indebtedness must be paid in full before a holder of
the Senior Subordinated Notes may be paid. Accordingly, there may be
insufficient assets remaining after such payments to pay principal or interest
on the Senior Subordinated Notes. In addition, under
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<PAGE>
certain circumstances, no payments may be made with respect to the principal of
or interest on the Senior Subordinated Notes if a default exists with respect to
certain Senior Indebtedness. See 'Description of the Senior Subordinated
Notes--Subordination.' CapCo I, a wholly owned subsidiary of the Operating
Company, was formed solely for the purpose of serving as a co-issuer of the
Senior Subordinated Notes and has no operations or assets from which it will be
able to repay the Senior Subordinated Notes. Accordingly, the Company Issuers
must rely entirely upon the cash flow and assets of the Operating Company to
generate the funds necessary to meet their obligations, including the payment of
principal and interest on the Senior Subordinated Notes.
The Senior Subordinated Old Notes are, and the Senior Subordinated Exchange
Notes will be, fully and unconditionally guaranteed by Holdings on a senior
subordinated basis. The Old Holdings Guarantee is, and the Holdings Guarantee
will be, subordinated to all senior indebtedness of Holdings ($102.3 million at
March 29, 1998) and effectively subordinated to all indebtedness and other
liabilities (including but not limited to trade payables) of Holdings'
subsidiaries ($757.8 million at March 29, 1998). Because the Holdings Guarantee
will be subordinated in right of payment to all senior indebtedness of Holdings
and effectively subordinated to all indebtedness and other liabilities
(including trade payables) of Holdings' subsidiaries (including the Operating
Company), investors should not rely on the Holdings Guarantee in evaluating an
investment in the Senior Subordinated Exchange Notes.
RESTRICTIVE DEBT COVENANTS
The New Credit Facility and the Indentures contain a number of significant
covenants that, among other things, restrict the ability of the Issuers to
dispose of assets, repay other indebtedness, incur additional indebtedness, pay
dividends, prepay subordinated indebtedness (including, in the case of the New
Credit Facility, the Notes), incur liens, make capital expenditures and make
certain investments or acquisitions, engage in mergers or consolidations, engage
in certain transactions with affiliates and otherwise restrict the activities of
the Issuers. In addition, under the New Credit Facility, the Operating Company
is required to satisfy specified financial ratios and tests. The ability of the
Operating Company to comply with such provisions may be affected by events
beyond the Operating Company's control, and there can be no assurance that the
Operating Company will meet those tests. To the extent that the Operating
Company does not achieve the pro forma estimates with respect to its operations,
it may not be in compliance with certain of the covenants included in the New
Credit Facility. See 'Unaudited Pro Forma Financial Information.' The breach of
any of these covenants could result in a default under the New Credit Facility.
See 'Description of the New Credit Facility.' In the event of any such default,
depending upon the actions taken by the lenders, the Issuers could be prohibited
from making any payments of principal or interest on the Notes. See 'Description
of the Senior Subordinated Exchange Notes-- Subordination' and '--Holding
Company Structure; Structural Subordination of Senior Discount Exchange Notes.'
In addition, the lenders could elect to declare all amounts borrowed under the
New Credit Facility, together with accrued interest, to be due and payable and
could proceed against the collateral securing such indebtedness. If the Senior
Indebtedness were to be accelerated, there can be no assurance that the assets
of the Operating Company would be sufficient to repay in full that indebtedness
and the other indebtedness of the Operating Company. See 'Description of the New
Credit Facility,' 'Description of the Senior Subordinated Exchange Notes' and
'Description of the Senior Discount Exchange Notes.'
COMPETITION
The manufacture and sale of plastic containers are highly competitive, and
several of the Company's competitors are larger and have substantially greater
financial resources than the Company. In particular, price competition can be an
important factor and may affect the Company's results of operations. In
addition, the Company could face increased competition in its hot-fill PET
business if manufacturers of cold-fill containers were able to refit their
machines to produce hot-fill PET bottles. To date, such refitting efforts have
proved to be expensive and substantially less efficient than the Company's
equipment for producing hot-fill PET containers. No assurance can be given,
however, that new technologies will not be created to allow such refitting at
lower costs and greater efficiencies than exist today. See
'Business--Competition.'
DECLINE IN DOMESTIC MOTOR OIL BUSINESS
The domestic one quart motor oil business is forecasted to decline between
1-2% measured by unit volume per year for the next five years due to several
factors, including, but not limited to, the decreased need of motor oil changes
in new automobiles and the growth in retail automotive fast lubrication and
fluid maintenance service centers (such as Jiffy Lube Service Centers). The
Company has encountered pricing pressures on several existing contracts that
have come up for renewal. For the twelve months ended December 31, 1997, the
Company
28
<PAGE>
generated net sales of $177.5 million in the domestic automotive business, which
represented 34.0% of the Company's revenues for that period. Although the
Company has been able over time to partially offset these margin declines
through international expansion (e.g., in Brazil) and by reducing its cost
structure and making more efficient the manufacturing process associated with
its domestic automotive business, no assurance can be given that the Company
will be able to continue to do so in the future. Further declines in domestic
demand for and prices of plastic packaging for motor oil could have a material
adverse effect on the Company's results of operations, financial condition and
cash flow. See 'Business--Automotive' and 'Business--Industry
Overview--Automotive.'
RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS
The Company has significant operations outside the United States in the
form of wholly owned subsidiaries, cooperative joint ventures and other
arrangements. The Company has 13 plants located in countries outside the United
States, including Canada (4), Brazil (4), France (2), Italy (2) and Poland (1),
with two plants pending. For the twelve months ended December 31, 1997, net
sales of the Company's products outside the United States totalled approximately
$110.7 million, representing approximately 21.2% of the Company's net sales for
such period. As a result, the Company is subject to risks associated with
operating in foreign countries, including fluctuations in currency exchange
rates, imposition of limitations on conversion of foreign currencies into
dollars or remittance of dividends and other payments by foreign subsidiaries,
imposition or increase of withholding and other taxes on remittances and other
payments by foreign subsidiaries, labor relations problems, hyperinflation in
certain foreign countries and imposition or increase of investment and other
restrictions by foreign governments or the imposition of environmental or
employment laws. In addition, the Company's operations in France have undergone
extensive restructuring over the past three years and have been less profitable
than its other businesses. To date, the above factors have not had a material
impact on the Company's operations in Europe, North America and South America,
but no assurance can be given that such risks will not have a material adverse
effect on the Company in the future. See 'Management's Discussion and Analysis
of Financial Condition and Results of Operations,' 'Business--Facilities' and
'Business--Foreign Operations.'
EXPOSURE TO FLUCTUATIONS IN RESIN PRICES AND DEPENDENCE ON RESIN SUPPLIES
The Company uses large quantities of HDPE and PET resins in manufacturing
its products. While the Company historically has been able to pass through
changes in the cost of resins to its customers due to contractual provisions and
standard industry practice, the Company may not be able to do so in the future
and significant increases in the price of resin could adversely affect the
Company's operating margins and growth plans. Furthermore, a significant
increase in resin prices could slow the pace of conversions from paper, glass
and metal containers to plastic containers to the extent that such costs are
passed on to the consumer. See 'Management's Discussion and Analysis of
Financial Condition and Results of Operations' and 'Business-- Raw Materials.'
DEPENDENCE ON SIGNIFICANT CUSTOMER
The Company's largest customer (Unilever) accounted for approximately 13.8%
of the Company's net sales for the twelve months ended December 31, 1997. The
termination by such customer of its relationship with the Company could have a
material adverse effect upon the Company's business, financial position or
results of operations. The Company's existing customers' purchase orders and
contracts typically vary from one to ten years. Prices under these arrangements
are tied to market standards and therefore vary with market conditions. The
contracts generally are requirements contracts which do not obligate the
customer to purchase any given amount of product from the Company. Accordingly,
notwithstanding the existence of certain supply contracts, the Company faces the
risk that customers will not purchase the amounts expected by the Company
pursuant to such supply contracts. See 'Business--Customers.'
DEPENDENCE ON KEY PERSONNEL
The success of the Company depends to a large extent on a number of key
employees, and the loss of the services provided by them could have a material
adverse effect on the Company. In particular, the loss of the services provided
by G. Robinson Beeson, Scott G. Booth, Alex H. Everhart, John E. Hamilton,
Geoffrey R. Lu, Roger M. Prevot and Philip R. Yates, among others, could have a
material adverse effect on the Company. The Company does not maintain 'key'
person insurance on any of its employees.
29
<PAGE>
RELATIONSHIP WITH GRAHAM AFFILIATES
The relationship of the Company with Graham Engineering and Graham Capital
Corporation ('Graham Capital'), or their successors or assigns, is material to
the business of the Company. To date, certain affiliates of the Graham Partners
have provided important equipment, technology and services to Holdings and its
subsidiaries. Upon the Recapitalization, Holdings entered into the Equipment
Sales Agreement (as defined) with Graham Engineering, pursuant to which Graham
Engineering will provide the Company with the Graham Wheel and related technical
support, and the Consulting Agreement (as defined) with Graham Capital, pursuant
to which Graham Capital will provide the Company with certain consulting
services. If any such agreements were terminated prior to their scheduled terms
or if the relevant Graham affiliate fails to comply with any such agreement, the
business, financial condition and results of operations of the Company could be
materially and adversely affected. See 'Certain Relationships and Related Party
Transactions--Certain Business Relationships.'
ENVIRONMENTAL MATTERS
The Company and its operations, both in the U.S. and abroad, are subject to
national, state, provincial and/or local laws and regulations that impose
limitations and prohibitions on the discharge and emission of, and establish
standards for the use, disposal, and management of, certain materials and waste,
and impose liability for the costs of investigating and cleaning up, and certain
damages resulting from, present and past spills, disposals, or other releases of
hazardous substances or materials (collectively, 'Environmental Laws').
Environmental Laws can be complex and may change often, capital and operating
expenses to comply can be significant, and violations may result in substantial
fines and penalties. In addition, Environmental Laws such as the Comprehensive
Environmental Response, Compensation and Liability Act ('CERCLA,' also known as
'Superfund'), in the United States, impose liability on several grounds for the
investigation and cleanup of contaminated soil, groundwater and buildings, and
for damages to natural resources, at a wide range of properties: for example,
contamination at properties formerly owned or operated by the Company as well as
at properties the Company currently owns or operates, and properties to which
hazardous substances were sent by the Company, may result in liability for the
Company under Environmental Laws. As a manufacturer, the Company has an inherent
risk of liability under Environmental Laws both with respect to ongoing
operations and with respect to contamination that may have occurred in the past
on its properties or as a result of its operations. There can be no assurance
that the costs of complying with Environmental Laws, any claims concerning
noncompliance, or liability with respect to contamination will not in the future
adversely affect the Company in a manner that could be material.
In addition, a number of governmental authorities both in the U.S. and
abroad have considered or are expected to consider legislation aimed at reducing
the amount of plastic wastes disposed of. Such programs have included, for
example, mandating certain rates of recycling and/or the use of recycled
materials, imposing deposits or taxes on plastic packaging material, and/or
requiring retailers or manufacturers to take back packaging used for their
products. Such legislation, as well as voluntary initiatives similarly aimed at
reducing the level of plastic wastes, could reduce the demand for certain
plastic packaging, result in greater costs for plastic packaging manufacturers,
or otherwise impact the Company's business. Some consumer products companies
(including certain customers of the Company) have responded to these
governmental initiatives and to perceived environmental concerns of consumers
by, for example, using bottles made in whole or in part of recycled plastic.
There can be no assurance that such legislation and initiatives will not in the
future adversely affect the Company in a manner that could be material. See
'Business--Environmental Matters.'
FRAUDULENT CONVEYANCE
In connection with the Recapitalization, the Operating Company made a
distribution to Holdings of $313.7 million of the net proceeds of the Senior
Subordinated Offering and the Bank Borrowings, and Holdings redeemed certain
partnership interests held by the Graham Partners for $429.6 million (without
giving effect to payment by the Graham Partners of $21.2 million owed to
Holdings under certain promissory notes). See 'Use of Proceeds.'
If a court in a lawsuit brought by an unpaid creditor of one of the Issuers
or a representative of such creditor, such as a trustee in bankruptcy, or one of
the Issuers as a debtor-in-possession, were to find under relevant federal and
state fraudulent conveyance statutes that such Issuer had (a) actual intent to
defraud or (b) did not receive fair consideration or reasonably equivalent value
for the distribution from the Operating Company to Holdings or for incurring the
debt, including the Notes, in connection with the financing of the
Recapitalization, and that, at the time of such incurrence, such Issuer (i) was
insolvent, (ii) was rendered insolvent by reason of such incurrence,
30
<PAGE>
(iii) was engaged in a business or transaction for which the assets remaining
with such Issuer constituted unreasonably small capital or (iv) intended to
incur, or believed that it would incur, debts beyond its ability to pay such
debts as they matured, such court could void such Issuer's obligations under the
Notes, subordinate the Notes to other indebtedness of such Issuer or take other
action detrimental to the holders of the Notes.
The measure of insolvency for these purposes varies depending upon the law
of the jurisdiction being applied. Generally, however, a company would be
considered insolvent for these purposes if the sum of the company's debts
(including contingent debts) were greater than the fair saleable value of all
the company's property, or if the present fair saleable value of the company's
assets were less than the amount that would be required to pay its probable
liability on its existing debts as they become absolute and matured. Moreover,
regardless of solvency or the adequacy of consideration, a court could void an
Issuer's obligations under the Notes, subordinate the Notes to other
indebtedness of such Issuer or take other action detrimental to the holders of
the Notes if such court determined that the incurrence of debt, including the
Notes, was made with the actual intent to hinder, delay or defraud creditors.
The Issuers believe that the indebtedness represented by the Notes was
incurred for proper purposes and in good faith without any intent to hinder,
delay or defraud creditors, that the Issuers received reasonably equivalent
value or fair consideration for incurring such indebtedness, that the Issuers
were prior to the issuance of the Notes and, after giving effect to the issuance
of the Notes and the use of proceeds in connection with the Recapitalization,
continued to be, solvent under the applicable standards (notwithstanding the
negative net worth and insufficiency of earnings to cover fixed charges for
accounting purposes that will result from the Recapitalization) and that the
Issuers have and will have sufficient capital for carrying on their businesses
and are and will be able to pay their debts as they mature. There can be no
assurance, however, as to what standard a court would apply in order to evaluate
the parties' intent or to determine whether the Issuers were insolvent at the
time, or rendered insolvent upon consummation, of the Recapitalization or the
sale of the Notes or that, regardless of the method of valuation, a court would
not determine that an Issuer was insolvent at the time, or rendered insolvent
upon consummation, of the Recapitalization.
In rendering their opinions in connection with the Offerings, counsel for
the Issuers and counsel for the Initial Purchasers did not express any opinion
as to the applicability of federal or state fraudulent conveyance laws.
CONTROL BY BLACKSTONE
Since the consummation of the Recapitalization, Blackstone has indirectly
controlled approximately 80% of the general partnership interests in Holdings.
Pursuant to the Holdings Partnership Agreement (as defined), holders of a
majority of the general partnership interests generally have the sole power,
subject to certain exceptions, to take actions on behalf of Holdings, including
the appointment of management and the entering into of mergers, sales of
substantially all assets and other extraordinary transactions. There can be no
assurance that the interests of Blackstone will not conflict with the interests
of holders of the Notes. See 'The Recapitalization' and 'The Partnership
Agreements--Holdings Partnership Agreement.'
LIMITATION ON CHANGE IN CONTROL
The Indentures require the Company Issuers and the Holdings Issuers, in the
event of a Change of Control (as defined under 'Description of the Senior
Subordinated Notes' and 'Description of the Senior Discount Notes'), to offer to
repurchase the Senior Subordinated Notes or the Senior Discount Notes,
respectively, at a purchase price equal to 101% of the principal amount thereof
or the Accreted Value thereof, respectively, plus, in each case, accrued and
unpaid interest, if any, to the repurchase date. See 'Description of the Senior
Subordinated Exchange Notes--Change of Control' and 'Description of the Senior
Discount Exchange Notes-- Change of Control.'
The Change of Control purchase features of the Notes may in certain
circumstances discourage or make more difficult a sale or takeover of Holdings.
In addition, the New Credit Facility will, and other indebtedness may, contain
prohibitions of certain events which would constitute a Change of Control.
Furthermore, the exercise by the holders of the Notes, or if issued, the
Exchange Notes, of their right to require the Issuers to repurchase the Old
Notes or the Exchange Notes may cause a default under the New Credit Facility or
such other indebtedness, even if the Change of Control does not. Finally, there
can be no assurance that the Issuers will have the financial resources necessary
to purchase the Notes upon a Change of Control. See 'Description of the Senior
Subordinated Notes' and 'Description of the Senior Discount Notes.'
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<PAGE>
LACK OF PUBLIC MARKET FOR THE NOTES; RESTRICTIONS ON TRANSFERABILITY
The Exchange Notes are being offered to the holders of the Old Notes. The
Old Notes were offered and sold in February 1998 to a small number of
institutional investors in reliance upon an exemption from registration under
the Securities Act and applicable state securities laws. Therefore, although the
Old Notes are eligible for trading in the PORTAL market of the National
Association of Securities Dealers, Inc., the Old Notes may be transferred or
resold only in a transaction registered under or exempt from the Securities Act
and applicable state securities laws.
The Exchange Notes generally will be permitted to be resold or otherwise
transferred by each holder without the requirement of further registration. Each
series of Exchange Notes, however, constitutes a new issue of securities with no
established trading market. The Exchange Offers will not be conditioned upon any
minimum or maximum aggregate principal amount of Notes being tendered for
exchange. The Issuers do not intend to apply for a listing of any series of the
Exchange Notes on a securities exchange or an automated quotation system, and
there can be no assurance as to the liquidity of markets that may develop for
the Exchange Notes, the ability of the holders of the Exchange Notes to sell
their Exchange Notes or the price at which such holders would be able to sell
their Exchange Notes. If markets for the Exchange Notes were to exist, the
Exchange Notes could trade at prices that may be lower than the initial market
values thereof depending on many factors. The liquidity of, and trading market
for, the Exchange Notes may be adversely affected by movements of interest
rates, the performance of the Company and general declines in the market for
similar securities. Such a decline may adversely affect such liquidity and
trading market independent of the financial performance of, and prospects for,
the Company. The Initial Purchasers are not obligated to make a market in any of
the Notes, and any market making with respect to the Notes may be discontinued
at any time without notice. In addition, such market making activity may be
limited during the pendency of the Exchange Offers or the effectiveness of a
shelf registration statement in lieu thereof. See 'Transfer Restrictions' and
'Plan of Distribution.'
In the case of non-exchanging holders of Old Notes, no assurance can be
given as to the liquidity of any trading market for the Old Notes following the
Exchange Offers.
RISKS ASSOCIATED WITH POSSIBLE FUTURE ACQUISITIONS
The Company's future growth may be a function, in part, of acquisitions of
other consumer goods packaging businesses. To finance such acquisitions, the
Operating Company or Holdings would likely incur additional indebtedness, as
permitted under the New Credit Facility and the Indentures. To the extent that
it grows through acquisition, the Company will face the operational and
financial risks commonly encountered with such a strategy. The Company would
face certain operational risks, including but not limited to failing to
assimilate the operations and personnel of the acquired businesses, disrupting
the Company's ongoing business, dissipating the Company's limited management
resources and impairing relationships with employees and customers of the
acquired business as a result of changes in ownership and management. Customer
satisfaction or performance problems at a single acquired firm could have a
materially adverse impact on the reputation of the Company as a whole. Depending
on the size of the acquisition, it can take up to two to three years to
completely integrate an acquired business into the acquiring company's
operations and systems and realize the full benefit of the integration.
Moreover, during the early part of this integration period, the operating
results of the acquiring business may decrease from results attained prior to
the acquisition. The Company would also face certain financial risks associated
with the incurring of additional indebtedness to make the acquisition, such as
reducing its liquidity, access to capital markets and financial stability.
JCI LITIGATION
Holdings was sued in May 1995 for alleged patent infringement, trade secret
misappropriation and other related state law claims by Hoover Universal, Inc., a
subsidiary of Johnson Controls, Inc. ('JCI'), in the U.S. District Court for the
Central District of California, Case No. CV-95-3331 RAP (BQRx). JCI alleged that
the Company was misappropriating or threatened to misappropriate trade secrets
allegedly owned by JCI relating to the manufacture of hot-fill PET plastic
containers through the hiring of JCI employees, and alleged that the Company
infringed two patents owned by JCI by manufacturing hot-fill PET plastic
containers for several of its largest customers using a certain 'pinch grip'
structural design. In December 1995, JCI filed a second lawsuit alleging
infringement of two additional patents, which relate to a ring and base
structure for hot-fill PET plastic containers. The two suits have been
consolidated for all purposes. The Company has answered the complaints, denying
infringement and misappropriation in all respects and asserting various
defenses, including invalidity and unenforceability of the patents at issue
based upon inequitable conduct on the part of JCI in prosecuting the relevant
patent applications before the U.S. Patent Office and anticompetitive patent
misuse by JCI. The
32
<PAGE>
Company has also asserted counterclaims against JCI alleging violations of
federal antitrust law, based upon certain agreements regarding market division
allegedly entered into by JCI with another competitor and other alleged conduct
engaged in by JCI allegedly intended to raise prices and limit competition. In
March 1997, JCI's plastic container business was acquired by Schmalbach-Lubeca
Plastic Containers USA Inc. ('Schmalbach-Lubeca'). Schmalbach-Lubeca and certain
affiliates were joined as successors to JCI and as counter-claim defendants.
On March 10, 1998, the U.S. District Court in California entered summary
judgment in favor of JCI and against the Company regarding infringement of two
patents, but did not resolve certain issues related to the patents including
certain of the Company's defenses. On March 6, 1998, the Company also filed suit
against Schmalbach-Lubeca in Federal Court in Delaware for infringement of the
Company's patent concerning pinch grip bottle design. On April 24, 1998, the
parties to the litigation reached an understanding on the terms of a settlement
of all claims in all of the litigation with JCI and Schmalbach-Lubeca, subject
to agreement upon and execution of a formal settlement agreement. In June 1998,
the Company finalized the settlement of the JCI-Schmalbach-Lubeca litigation.
The amounts paid in settlement, as well as estimated litigation expenses and
professional fees did not differ materially from the amounts accrued in Special
Charges and Unusual Items in respect thereof for the year ended December 31,
1997 and in the March 29, 1998 unaudited condensed consolidated financial
statements. The cash paid in settlement was funded by draw-downs under the New
Credit Facility. See 'Business--Legal Proceedings' and Notes 13 and 17 to the
Combined Financial Statements as of December 31, 1997 and 1996 and for each of
the three years in the period ended December 31, 1997 and Note 9 to the
Condensed Financial Statements.
HEDGING TRANSACTIONS
The Company engages in the following ongoing hedging transactions, as
disclosed in Note 1 to the Combined Financial Statements of Graham Packing
Group: (i) the two interest rate swap agreements entered into subsequent to
December 31, 1997 as further described in Note 6 to the Combined Financial
Statements of Graham Packaging Group; and (ii) French Franc forward exchange
contracts which have been entered into subsequent to December 31, 1997 to
hedge the exchange rate exposure on transactions denominated in that currency.
The transactions in French franc contracts related to the purchase by
U.S.-based entities of equipment manufactured by an unrelated French company.
ORIGINAL ISSUE DISCOUNT CONSEQUENCES
The Senior Discount Notes will be deemed to be issued at a substantial
discount from their principal amount. Consequently, the purchasers of Senior
Discount Notes generally will be required to include amounts in gross income for
federal income tax purposes in advance of receipt of the cash payments to which
the income is attributable. Holders of Senior Discount Notes are urged to
consult their tax advisors for a more detailed discussion of the federal income
tax consequences of the purchase, ownership and disposition of the Senior
Discount Notes.
FORWARD-LOOKING STATEMENTS
This Prospectus contains certain forward-looking statements concerning the
Company's operations, economic performance and financial condition, including,
in particular, the likelihood of the Company's success in developing and
expanding its business, including, but not limited to, the Company's hot-fill
PET plastic container business. These statements are based upon a number of
assumptions and estimates which are inherently subject to significant
uncertainties and contingencies, many of which are beyond the control of the
Company, and reflect future business decisions which are subject to change. Some
of these assumptions inevitably will not materialize, and unanticipated events
will occur which will affect the Company's results.
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<PAGE>
THE RECAPITALIZATION
The terms and conditions of the Recapitalization are set forth in the
Recapitalization Agreement by and among Holdings, the Graham Partners and the
Equity Investors. The summary set forth below of the terms of the
Recapitalization Agreement is qualified in its entirety by reference to all the
provisions of the Recapitalization Agreement, a copy of which has been filed as
an exhibit to the Registration Statement of which this Prospectus forms a part.
THE OFFERINGS
On February 2, 1998, as part of the Recapitalization, the Company Issuers
consummated an offering pursuant to Rule 144A under the Securities Act of their
Senior Subordinated Notes Due 2008, consisting of $150,000,000 aggregate
principal amount of their Fixed Rate Senior Subordinated Old Notes and
$75,000,000 aggregate principal amount of their Floating Rate Senior
Subordinated Old Notes. Pursuant to the Senior Subordinated Exchange Offers, the
Company Issuers are offering to exchange up to $150,000,000 aggregate principal
amount of their Fixed Rate Senior Subordinated Exchange Notes and $75,000,000
aggregate principal amount of their Floating Rate Senior Subordinated Exchange
Notes for equal principal amounts of Fixed Rate Senior Subordinated Old Notes
and Floating Rate Senior Subordinated Old Notes, respectively.
On February 2, 1998, as part of the Recapitalization, the Holdings Issuers
consummated an offering pursuant to Rule 144A under the Securities Act of
$169,000,000 aggregate principal amount at maturity of Senior Discount Old
Notes. Pursuant to the Senior Discount Exchange Offer, the Holdings Issuers are
offering to exchange up to $169,000,000 aggregate principal amount at maturity
of their Senior Discount Exchange Notes for an equal principal amount of Senior
Discount Old Notes.
RECAPITALIZATION AGREEMENT
Upon the consummation of the Recapitalization, Investor LP acquired an 81%
limited partnership interest in Holdings, Investor GP acquired a 4% general
partnership interest in Holdings, and the Continuing Graham Partners retained a
1% general partnership interest and a 14% limited partnership interest in
Holdings. Also upon consummation of the Recapitalization, Holdings owned a 99%
limited partnership interest in the Operating Company, and Opco GP, a wholly
owned subsidiary of Holdings, acquired a 1% general partnership interest in the
Operating Company.
As provided in the Recapitalization Agreement, immediately prior to the
consummation of the Recapitalization (the 'Closing'), (i) Holdings contributed
to the Operating Company substantially all of its assets and liabilities (other
than its partnership interests in the Operating Company, the capital stock of
CapCo II and the membership interests in Opco GP) and (ii) the Graham
Contribution was made.
Upon the Closing, (i) substantially all outstanding indebtedness of
Holdings and its subsidiaries was repaid, (ii) certain limited and general
partnership interests in Holdings held by the Graham Partners were redeemed by
Holdings for $429.6 million (the 'Redemption Consideration'), (iii) certain
limited and general partnership interests in Holdings held by the Graham
Partners were purchased by the Equity Investors for $208.3 million (the
'Purchase Consideration') and (iv) the Graham Partners repaid all amounts
outstanding under certain promissory notes held by Holdings. In addition,
contemporaneously with the Recapitalization, the Operating Company paid certain
bonuses and other cash payments, and certain equity awards were granted, to
senior and middle level management ('Management Awards'). See 'Use of Proceeds'
and 'Management--Management Awards.'
Pursuant to the Recapitalization Agreement, the Graham Partners have agreed
that neither they nor their affiliates will, subject to certain exceptions, for
a period of five years from and after the Closing, engage in the manufacture,
assembly, design, distribution or marketing for sale of rigid plastic containers
for the packaging of consumer products less than ten liters in volume.
The Recapitalization Agreement contains various representations,
warranties, covenants and conditions. The representations and warranties
generally did not survive the Closing. The Graham Partners have agreed to
indemnify Holdings in respect of any claims by Management with respect to the
adequacy of the Management
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<PAGE>
Awards and, subject to a limit of $12.5 million on payments by the Graham
Partners, 50% of certain specified environmental costs in excess of $5.0
million.
Pursuant to the Recapitalization Agreement, upon the Closing, Holdings
entered into the Equipment Sales Agreement, the Consulting Agreement and
Partners Registration Rights Agreement (each as defined) described under
'Certain Relationships and Related Party Transactions.'
SUMMARY OF OWNERSHIP STRUCTURE AFTER THE RECAPITALIZATION
The following chart sets forth a summary of the ownership structure of
Holdings, the Operating Company and certain other parties following the
consummation of the Recapitalization:
<TABLE>
<S> <C>
- - ------------------------- ------------------------- -----------------------------
| Blackstone(1) | | Management | | Continuing Graham |
- - ------------------------- ------------------------- | Partners |
| 97% | 3% -----------------------------
------------------------ | | |
| | 100% | |
-------------------------------- | |
| BMP/Graham Holdings | | |
| Corporation ("Investor LP") | | |
-------------------------------- | |
| 81% LP | ------------------------- |
100% | | | |
--------------------------- | -------------------------------- |
| BCP/Graham Holdings | | | Graham Packaging Corporation | |
| L.L.C. ("Investor GP") | | | ("Graham GP Corp.") | |
--------------------------- | -------------------------------- |
4% GP | | | 1% GP |
| | | ----------------------- |
| | | | 14% LP
-----------------------------------------------------------------------
| Graham Packaging Holdings |
| Company ("Holdings") |
-----------------------------------------------------------------------
| | |
----------- | ---------------------
| 100% | 100% |
| 99% LP | |
---------------------------- | -------------------------------
| GPC Capital Corp. II | | | GPC Opco GP, L.L.C. |
| ("CapCo II") | | | ("Opco GP") |
---------------------------- | -------------------------------
| | 1% GP
| ----------------------
| |
---------------------------------------
| |
| Graham Packaging Company |
| (the "Operating Company") |
| |
---------------------------------------
| |
------------------- -----------------------
| 100% |
------------------------ ------------------------------
| GPC Capital Corp. I | | Other |
| ("CapCo I") | | Subsidiaries |
------------------------ ------------------------------
</TABLE>
- ------------------
(1) An affiliate of BT Alex. Brown Incorporated and Bankers Trust International
PLC acquired approximately a 4.8% equity interest in the voting securities
of Investor LP. See 'Security Ownership.'
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<PAGE>
THE ISSUERS
Holdings, together with its subsidiaries, is a worldwide leader in the
design, manufacture and sale of customized HDPE and PET blow molded rigid
plastic bottles, as described under 'Business.' Holdings was formed under the
name 'Sonoco Graham Company' on April 3, 1989 as a Pennsylvania limited
partnership and changed its name to 'Graham Packaging Company' on March 28,
1991. The Operating Company was formed under the name 'Graham Packaging Holdings
I, L.P.' on September 21, 1994 as a Delaware limited partnership. The
predecessor to Holdings controlled by the Continuing Graham Partners was formed
in the mid-1970's as a regional domestic custom plastic bottle supplier, using
the proprietary Graham Rotational Wheel.
Upon the Recapitalization, substantially all of the assets and liabilities
of Holdings were contributed to the Operating Company, and since the
Recapitalization, the primary business activity of Holdings has consisted of its
direct and indirect ownership of 100% of the partnership interests in the
Operating Company. Upon the Recapitalization, the Operating Company and Holdings
changed their names to 'Graham Packaging Company' and 'Graham Packaging Holdings
Company,' respectively.
CapCo I, a wholly owned subsidiary of the Operating Company, and CapCo II,
a wholly owned subsidiary of Holdings, were incorporated in Delaware in January
1998 solely for the purpose of acting as co-obligors of the Senior Subordinated
Notes and the Senior Discount Notes, respectively. CapCo I and CapCo II have
only nominal assets, do not conduct any operations and did not receive any
proceeds of the Offerings. Accordingly, investors in the Notes should look only
to the cash flow and assets of the Operating Company or the cash flow and assets
of Holdings for payment of the Notes. See 'The Recapitalization' and 'Security
Ownership.'
The principal executive offices of the Issuers are located at 1110 East
Princess Street, York, Pennsylvania 17403, Telephone: (717) 849-8500.
USE OF PROCEEDS
There will be no proceeds to the Issuers from the exchange of Notes
pursuant to the Exchange Offers. Upon the consummation of the Recapitalization,
the proceeds from the Offerings of $325.6 million were used, together with the
initial borrowings under the New Credit Facility (the 'Bank Borrowings'), as
follows: (i) approximately $264.9 million was used to repay substantially all of
the existing indebtedness, plus accrued interest, of Holdings and its
subsidiaries, (ii) approximately $408.4 million was used by Holdings to redeem
existing partnership interests in Holdings (net of repayment by the Graham
Partners of $21.2 million owed to Holdings under certain promissory notes),
(iii) approximately $15.4 million was used to make certain cash payments to
Management pursuant to the Recapitalization Agreement and (iv) approximately
$42.1 million was used to fund costs and expenses associated with the
Recapitalization. In addition, the equity investment of approximately $208.3
million by Blackstone and Management in the Equity Investors was used to
purchase existing partnership interests in Holdings.
The existing indebtedness that was repaid at the Closing included (i)
indebtedness outstanding under Holdings' existing $125.0 million term loan
facility ('Existing Term Facility') and (ii) indebtedness outstanding under
Holdings' existing $225.0 million revolving credit facility ('Existing Revolving
Facility,' and together with the Existing Term Facility, the 'Existing Credit
Facility'), all of which indebtedness was assumed by the Operating Company prior
to the Recapitalization and repaid by the Operating Company upon the Closing. If
they had not been repaid at the Closing, the term loan under the Existing Term
Facility would have matured in annual installments beginning March 1998 through
March 2000, and the Existing Revolving Facility would have matured in April
2000. The average interest rate on the Existing Credit Facility was
approximately 5.9% per annum. See 'The Recapitalization ' and 'Capitalization.'
36
<PAGE>
The following table sets forth a summary of the sources and uses of funds
associated with the Recapitalization.
<TABLE>
<CAPTION>
AMOUNT
-------------
(IN MILLIONS)
<S> <C>
SOURCES OF FUNDS:
Bank Borrowings...................................................................................... $ 403.5
Senior Subordinated Notes(1)......................................................................... 225.0
Senior Discount Notes................................................................................ 100.6
Equity investments and retained equity(2)............................................................ 245.0
Repayment of promissory notes........................................................................ 21.2
Available cash....................................................................................... 1.7
-------------
Total.............................................................................................. $ 997.0
-------------
USES OF FUNDS:
Repayment of existing indebtedness(3)................................................................ $ 264.9
Redemption by Holdings of existing partnership interests............................................. 429.6
Purchase by Equity Investors of existing partnership interests....................................... 208.3
Partnership interests retained by Continuing Graham Partners......................................... 36.7
Payments to Management............................................................................... 15.4
Transaction costs and expenses....................................................................... 42.1
-------------
Total.............................................................................................. $ 997.0
-------------
-------------
</TABLE>
- ------------------
(1) Included $150.0 million of Fixed Rate Senior Subordinated Old Notes and
$75.0 million of Floating Rate Senior Subordinated Old Notes.
(2) Included a $208.3 million equity investment made by Blackstone and
Management in the Equity Investors and a $36.7 million retained partnership
interest of the Continuing Graham Partners. In addition, an affiliate of BT
Alex. Brown Incorporated and Bankers Trust International PLC, two of the
Initial Purchasers, acquired approximately a 4.8% equity interest in
Investor LP. See 'Security Ownership' and 'Private Placement.'
(3) Included $264.5 million of existing indebtedness and $0.4 million of
accrued interest.
37
<PAGE>
CAPITALIZATION
The following table sets forth the cash and cash equivalents and the
consolidated capitalization of Holdings and the Operating Company as of March
29, 1998. This table should be read in conjunction with 'The Recapitalization,'
'Management's Discussion and Analysis of Financial Condition and Results of
Operations' and the consolidated financial statements of Holdings and the
related notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
MARCH 29, 1998
---------------------
OPERATING
HOLDINGS COMPANY
-------- ---------
(IN MILLIONS)
<S> <C> <C>
Cash and cash equivalents.................................................................. $ 4.2 $ 4.2
-------- ---------
-------- ---------
Total debt (including current maturities):
New Credit Facility:
Revolving Credit Facilities(1)........................................................ $ 13.0 $ 13.0
Tranche A term loans.................................................................. 75.0 75.0
Tranche B term loans.................................................................. 175.0 175.0
Tranche C term loans.................................................................. 145.0 145.0
Senior Subordinated Notes(2)............................................................... 225.0 225.0
Senior Discount Notes...................................................................... 102.3 --
Other debt................................................................................. 8.5 8.5
-------- ---------
Total debt............................................................................ 743.8 641.5
Partners' equity (deficit)................................................................. (436.3) (339.0 )
-------- ---------
Total capitalization.................................................................. $ 307.5 $ 302.5
-------- ---------
-------- ---------
</TABLE>
- ------------------
(1) At March 29, 1998, the Operating Company had the ability, subject to
customary borrowing conditions, to borrow up to $142.0 million under the
Revolving Credit Facility and up to $100.0 million under the Growth Capital
Revolving Facility. Amounts drawn under the Growth Capital Revolving
Facility require matching equity investments from the principal equity
holders of Holdings. See 'Description of the New Credit Facility.'
(2) Includes $150.0 million of Fixed Rate Senior Subordinated Notes and $75.0
million of Floating Rate Senior Subordinated Notes.
38
<PAGE>
GRAHAM PACKAGING COMPANY
GRAHAM PACKAGING HOLDINGS COMPANY
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The accompanying unaudited pro forma financial information of Holdings and
the Operating Company has been prepared by applying pro forma adjustments to the
historical combined financial statements of Graham Packaging Group ('GP Group')
(as described below) and, in the case of the three months ended March 29, 1998,
the consolidated financial statements of Holdings. The combined financial
statements of GP Group have been prepared to include Holdings and its
subsidiaries and the ownership interests and real estate constituting the Graham
Contribution (which contribution was made to the Operating Company prior to the
Closing) for all periods that the operations were under common control, and
therefore the Graham Contribution is not included in the pro forma adjustments.
See 'The Recapitalization.' The pro forma adjustments give effect to the
following aspects of the Recapitalization (the 'Transactions'):
o The contribution by Holdings of substantially all of its assets and
liabilities to the Operating Company (the 'Holdings Contribution')
o The Bank Borrowings and the Offerings
o The repayment of substantially all of the existing indebtedness of
Holdings and its subsidiaries
o The redemption of certain general and limited partnership interests in
Holdings
o The repayment of promissory notes owed to Holdings by certain Graham
Partners
o The payments to Management
o The payment of fees and expenses related to the Transactions
The accompanying unaudited pro forma statements of operations also give
effect to the acquisition of certain assets and the assumption of certain
liabilities of Rheem-Graham Embalagens Ltda. in Brazil (the 'Brazil
Acquisition').
The unaudited pro forma statements of operations for the year ended
December 31, 1997 and the three months ended March 29, 1998 give effect to the
Transactions and the Brazil Acquisition as if they had occurred on January 1,
1997. The adjustments, which are based upon available information and upon
certain assumptions that Management believes are reasonable, are described in
the accompanying notes. The pro forma financial data do not purport to represent
what the results of operations of Holdings or the Operating Company would
actually have been had the Transactions and the Brazil Acquisition in fact
occurred on the assumed dates or to project the results of operations of
Holdings or the Operating Company for any future period or date.
A pro forma balance sheet as of March 29, 1998 is not presented since the
Transactions occurred on February 2, 1998. Accordingly, the March 29, 1998
historical consolidated balance sheet of Holdings includes the events described
in the first paragraph above.
The Recapitalization has been accounted for as a recapitalization of
Holdings and as a transaction between entities under common control for the
Holdings Contribution, which will have no impact on the historical basis of the
assets and liabilities of Holdings or the Operating Company. The Brazil
Acquisition has been accounted for using the purchase method of accounting. The
total purchase cost was allocated to the assets acquired and liabilities assumed
based on their respective fair values.
This unaudited pro forma financial information should be read in
conjunction with 'The Recapitalization,' 'Use of Proceeds,' 'Management's
Discussion and Analysis of Financial Condition and Results of Operations,' the
Combined Financial Statements of the Graham Packaging Group (including the
accompanying notes thereto) and the unaudited consolidated financial statements
of Holdings (including the accompanying notes thereto) and other financial
information included elsewhere in this Prospectus.
39
<PAGE>
GRAHAM PACKAGING COMPANY
GRAHAM PACKAGING HOLDINGS COMPANY
UNAUDITED PRO FORMA STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN MILLIONS)
<TABLE>
<CAPTION>
PRO FORMA
----------------------
BRAZIL OPERATING
GP GROUP ACQUISITION ADJUSTMENTS(A) HOLDINGS COMPANY(A)
-------- ----------- -------------- -------- ----------
<S> <C> <C> <C> <C> <C>
Net sales........................................ $521.7 $ 7.5 $ -- $529.2 $529.2
Cost of goods sold............................... 437.3 5.3 0.3(b) 442.9 442.9
-------- ----------- ------- -------- ----------
Gross margin..................................... 84.4 2.2 (0.3) 86.3 86.3
Selling, general and administrative expense...... 34.9 0.6 2.0(c) 37.5 37.5
Special charges and unusual items................ 24.4 -- -- 24.4 24.4
-------- ----------- ------- -------- ----------
Operating income (loss).......................... 25.1 1.6 (2.3) 24.4 24.4
Interest expense, net............................ 13.4 0.1 57.6(d) 71.1 59.6
Other (income) expense net....................... 0.7 -- -- 0.7 0.7
Minority interest................................ 0.2 -- (0.2)(e) -- --
-------- ----------- ------- -------- ----------
Income (loss) before income taxes and
extraordinary items............................ 10.8 1.5 (59.7) (47.4) (35.9)
Income tax expense (benefit)..................... 0.6 0.2 -- 0.8 0.8
-------- ----------- ------- -------- ----------
Income (loss) before extraordinary items......... $ 10.2 $ 1.3 $(59.7)(f) $(48.2) $(36.7)
-------- ----------- ------- -------- ----------
-------- ----------- ------- -------- ----------
OTHER DATA:
Cash flows provided by (used in):
Operating activities........................... $ 66.9 $ 1.8 $(45.0) $ 23.7 $ 23.7
Investing activities........................... (72.3) (0.2) -- (72.5) (72.5)
Financing activities........................... 9.5 (1.5) -- 8.0 8.0
EBITDA(g)........................................ 89.8 2.1 (1.0) 90.9 90.9
Capital expenditures............................. 53.2 0.2 -- 53.4 53.4
Depreciation and amortization.................... 41.0 0.5 0.3 41.8 41.8
Cash interest expense, net....................... 13.1 0.1 43.0 56.2 56.2
Pro forma ratios of earnings to fixed
charges(h)..................................... -- --
</TABLE>
See accompanying notes.
40
<PAGE>
GRAHAM PACKAGING COMPANY
GRAHAM PACKAGING HOLDINGS COMPANY
UNAUDITED PRO FORMA STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 29, 1998
(IN MILLIONS)
<TABLE>
<CAPTION>
HOLDINGS ADJUSTMENTS(A)
-------- --------------
<S> <C> <C>
Net sales......................................... $134.4 $ --
Cost of goods sold................................ 109.8 --
-------- -------
Gross margin...................................... 24.6 --
Selling, general and administrative expense....... 8.4 0.1(c)
Special charges and unusual items................. 14.9 (13.3)(f)
-------- -------
Operating income (loss)........................... 1.3 13.2
Interest expense, net............................. 11.9 6.2(d)
Other (income) expense net........................ 0.2 --
Recapitalization expenses......................... 11.5 (11.5)(f)
Minority interest................................. -- --
-------- -------
Income (loss) before taxes and extraordinary
items........................................... (22.3) 18.5
Income tax expense................................ --
-------- -------
Income (loss) before extraordinary item........... $(22.3) $ 18.5
-------- -------
-------- -------
OTHER DATA:
Cash flows provided by (used in):
Operating activities............................ $(17.1) $ 18.4
Investing activities............................ (16.6) --
Financing activities............................ 30.8 --
EBITDA(g)......................................... 25.3 --
Capital expenditures.............................. 13.5 --
Depreciation and amortization..................... 9.2 --
Cash interest expense, net........................ 9.2 4.9
Pro forma ratios of earnings to fixed
charges(h)......................................
<CAPTION>
PRO FORMA
---------------------
OPERATING
HOLDINGS COMPANY(A)
-------- ----------
<S> <C> <C>
Net sales.........................................$ 134.4 $134.4
Cost of goods sold................................ 109.8 109.8
-------- ----------
Gross margin...................................... 24.6 24.6
Selling, general and administrative expense....... 8.5 8.5
Special charges and unusual items................. 1.6 1.6
-------- ----------
Operating income (loss)........................... 14.5 14.5
Interest expense, net............................. 18.1 15.0
Other (income) expense net........................ 0.2 0.2
Recapitalization expenses......................... -- --
Minority interest................................. -- --
-------- ----------
Income (loss) before taxes and extraordinary
items........................................... (3.8 ) (0.7)
Income tax expense................................ -- --
-------- ----------
Income (loss) before extraordinary item...........$ (3.8 ) $ (0.7)
-------- ----------
-------- ----------
OTHER DATA:
Cash flows provided by (used in):
Operating activities............................$ 1.3 $ 1.3
Investing activities............................ (16.6 ) (16.6)
Financing activities............................ 30.8 30.8
EBITDA(g)......................................... 25.3 25.3
Capital expenditures.............................. 13.5 13.5
Depreciation and amortization..................... 9.2 9.2
Cash interest expense, net........................ 14.1 14.1
Pro forma ratios of earnings to fixed
charges(h)...................................... -- --
</TABLE>
See accompanying notes.
41
<PAGE>
GRAHAM PACKAGING COMPANY
GRAHAM PACKAGING HOLDINGS COMPANY
NOTES TO UNAUDITED PRO FORMA STATEMENTS OF OPERATIONS
(a) The pro forma statements of operations of the Operating Company include all
of the same adjustments made for Holdings noted below except interest
expense and deferred financing fee amortization expense related to the
Senior Discount Notes described in the table under note (d).
(b) Represents incremental depreciation based on the fair values of property and
equipment acquired in the Brazil Acquisition, using an estimated useful life
of 15 years.
(c) Represents a $1.0 million annual fee expected to be paid to Graham Family
Growth Partnership under the Holdings Partnership Agreement and a $1.0
million annual monitoring fee expected to be paid to an affiliate of
Blackstone. See 'The Partnership Agreements' and 'Certain Relationships and
Related Party Transactions.'
The unaudited pro forma statements of operations do not include any
reduction of selling, general and administrative expenses as a result of the
elimination of certain historical management fees charged by other Graham
companies to Holdings (which totaled $2.8 million for the year ended
December 31, 1997 and $0.1 million for the three months ended March 29,
1998), or any incremental expense as a result of fees expected to be
incurred by Holdings under the Consulting Agreement or the Equipment Sales
Agreement. See 'Certain Relationships and Related Party Transactions.'
(d) Represents the net adjustment to interest expense as a result of the Bank
Borrowings and the Offerings, calculated as follows:
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31, 1997 MARCH 29, 1998
--------------------- ---------------------
OPERATING OPERATING
HOLDINGS COMPANY HOLDINGS COMPANY
-------- --------- -------- ---------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Fixed Rate Senior Subordinated Notes(1)..................... $ 13.1 $ 13.1 $ 3.3 $ 3.3
Floating Rate Senior Subordinated Notes(2).................. 6.9 6.9 1.7 1.7
Senior Credit Facilities:
Revolving Credit Facility(3).............................. 0.7 0.7 0.2 0.2
Tranche A term loans(4)................................... 5.9 5.9 1.5 1.5
Tranche B term loans(5)................................... 14.7 14.7 3.7 3.7
Tranche C term loans(6)................................... 12.5 12.5 3.1 3.1
Commitment fees(7)........................................ 1.2 1.2 0.3 0.3
Other(8).................................................... 1.2 1.2 0.3 0.3
-------- --------- -------- ---------
Cash interest expense....................................... 56.2 56.2 14.1 14.1
Senior Discount Notes(9).................................... 11.1 -- 3.0 --
Amortization of deferred financing costs(10)................ 3.8 3.4 1.0 0.9
-------- --------- -------- ---------
Pro forma interest expense.................................. 71.1 59.6 18.1 15.0
Less historical net interest expense(11).................... (13.5) (13.5) (11.9) (11.9)
-------- --------- -------- ---------
Net adjustment.............................................. $ 57.6 $ 46.1 $ 6.2 $ 3.1
-------- --------- -------- ---------
-------- --------- -------- ---------
</TABLE>
- ------------------
(1) Represents interest on the $150.0 million Fixed Rate Senior Subordinated
Notes using an interest rate of 8.75%.
(2) Represents interest on the $75.0 million Floating Rate Senior Subordinated
Notes using an interest rate of 9.25%.
(Footnotes continued on next page)
42
<PAGE>
GRAHAM PACKAGING COMPANY
GRAHAM PACKAGING HOLDINGS COMPANY--(CONTINUED)
NOTES TO UNAUDITED PRO FORMA STATEMENTS OF OPERATIONS
(Footnotes continued from previous page)
(3) Represents interest on the Revolving Credit Facility and the Growth Capital
Revolving Facility using an interest rate of 7.88%, based on the $8.5
million drawdown at the Closing.
(4) Represents interest on the $75.0 million Tranche A term loans using an
assumed interest rate of 7.88%.
(5) Represents interest on the $175.0 million Tranche B term loans using an
assumed interest rate of 8.38%.
(6) Represents interest on the $145.0 million Tranche C term loans using an
assumed interest rate of 8.63%.
(7) Represents a 0.5% commitment fee on the unused portions of the Revolving
Credit Facility.
(8) Represents historical interest on $8.5 million of indebtedness and capital
lease obligations which were not repaid.
(9) Represents the accretion to Accreted Value on the Senior Discount Notes
using an interest rate of 10.75% applied to the $100.6 million gross
proceeds compounded semi-annually.
(10) Represents amortization of deferred financing costs of $31.0 million (of
which $26.0 million was recorded by the Operating Company) over the term of
related debt (six years for the Revolving Credit Facilities and Tranche A
term loans, eight years for Tranche B term loans, nine years for Tranche C
term loans, 10 years for the Senior Subordinated Notes and 11 years for the
Senior Discount Notes).
(11) Represents the elimination of historical net interest expense.
A 0.125% increase or decrease in the assumed interest rate would change the
pro forma interest expense on floating rate debt as follows:
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, 1997 MARCH 29, 1998
----------------- ------------------
(IN MILLIONS)
<S> <C> <C>
Floating Rate Senior Subordinated Notes........................ $ 0.1 $0.0
New Credit Facility............................................ 0.5 0.1
----- -----
Total........................................................ $ 0.6 $0.1
----- -----
----- -----
</TABLE>
(e) Represents the elimination of 20% minority interest in the earnings of the
Company's subsidiary in Brazil, as the Company purchased such minority
interest on February 1998.
(f) The pro forma statements of operations for the year ended December 31, 1997
do not include any adjustments for the following non-recurring charges,
which Holdings and the Operating Company incurred at Closing. Such amounts
are recorded in the historical consolidated Statements of Operations for the
three months ended March 29, 1998 and are deducted as an adjustment in
determining pro forma income (loss) for the period:
<TABLE>
<CAPTION>
HOLDINGS OPERATING COMPANY
-------- -----------------
(IN MILLIONS)
<S> <C> <C>
Payments to Management(1)................................................ $ 11.9 $11.9
License intangible(2).................................................... 1.4 1.4
-------- ------
Special charges and unusual items(3)..................................... 13.3 13.3
Recapitalization expenses(3)............................................. 11.5 10.5
-------- ------
Total.................................................................. $ 24.8 $23.8
-------- ------
-------- ------
</TABLE>
- ------------------
(1) Represents $12.4 million in bonuses and other cash payments paid to
Management, net of $0.5 million accrued as of Closing. Holdings and the
Operating Company also expect to pay $4.6 million of stay bonuses
(Footnotes continued on next page)
43
<PAGE>
GRAHAM PACKAGING COMPANY
GRAHAM PACKAGING HOLDINGS COMPANY--(CONTINUED)
NOTES TO UNAUDITED PRO FORMA STATEMENTS OF OPERATIONS
(Footnotes continued from previous page)
to certain employees over one to three years and to take a total non-cash
charge of $6.1 million relating to Management's equity purchase, which is
expected to be expensed over the three-year vesting period. See
'Management--Management Awards.'
(2) Represents the non-cash write-off of certain intangibles associated with a
license agreement with a Graham affiliate that terminated at Closing and was
replaced by the Equipment Sales Agreement. See 'Certain Relationships and
Related Party Transactions.'
(3) Represents fees and expenses associated with the Recapitalization and
associated financings.
(g) EBITDA is not intended to represent cash flow from operations as defined by
generally accepted accounting principles and should not be used as an
alternative to net income as an indicator of operating performance or to
cash flow as a measure of liquidity. 'EBITDA' is defined as earnings before
minority interest, extraordinary items, interest expense, interest income,
income taxes, depreciation and amortization expense, fees paid pursuant to
the Monitoring Agreement, non-cash equity income in earnings of joint
venture, other non-cash charges, Recapitalization expenses and special
charges and unusual items. See 'Management's Discussion and Analysis of
Financial Condition and Results of Operations' and Combined Financial
Statements of Graham Packaging Group (including the accompanying notes
thereto).
Pro forma EBITDA is calculated as follows:
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31, 1997 MARCH 29, 1998
--------------------- ---------------------
OPERATING OPERATING
HOLDINGS COMPANY HOLDINGS COMPANY
-------- --------- -------- ---------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Income (loss) before extraordinary item..................... $(48.2) $ (36.7) $ (3.8) $ (0.7)
Interest expense, net....................................... 71.1 59.6 18.1 15.0
Income tax expense (benefit)................................ 0.8 0.8 -- --
Depreciation and amortization............................... 41.8 41.8 9.2 9.2
Fees paid pursuant to the Monitoring Agreement.............. 1.0 1.0 0.3 0.3
Equity income in earnings of joint venture.................. (0.2) (0.2) (0.1) (0.1)
Non-cash compensation....................................... 0.2 0.2 -- --
Special charges and unusual items........................... 24.4 24.4 1.6 1.6
-------- --------- -------- ---------
Pro forma EBITDA............................................ $ 90.9 $ 90.9 $ 25.3 $ 25.3
-------- --------- -------- ---------
-------- --------- -------- ---------
</TABLE>
EBITDA is included in this Prospectus to provide additional information with
respect to the ability of Holdings and the Operating Company to satisfy
their debt service, capital expenditure and working capital requirements and
because certain covenants in Holdings' and the Operating Company's borrowing
arrangements are tied to similar measures. While EBITDA is frequently used
as a measure of operations and the ability to meet debt service
requirements, it is not necessarily comparable to other similarly titled
captions of other companies due to the potential inconsistencies in the
method of calculation.
(h) For purposes of determining the pro forma ratio of earnings to fixed
charges, earnings are defined as earnings before income taxes, minority
interest and extraordinary items, plus fixed charges. Fixed charges include
interest expense on all indebtedness, amortization of deferred debt issuance
costs, and one-third of rental expense on operating leases representing that
portion of rental expense deemed to be attributable to interest. Earnings
were insufficient to cover fixed charges on a pro forma basis for Holdings
and the Operating Company, respectively, by $48.0 million and $36.5 million
for the year ended December 31, 1997 and by $3.9 million and $0.8 million
for the three months ended March 29, 1998.
44
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA
The following table sets forth certain selected historical combined
financial data for the Graham Packaging Group for and at the end of each of the
years in the five-year period ended December 31, 1997 and as of and for the
three-month period ended March 30, 1997 and certain selected historical
consolidated financial data for Holdings as of and for the three-month period
ended March 29, 1998. The selected historical combined financial data for each
of the five years in the period ended December 31, 1997 are derived from the
Graham Packaging Group's combined financial statements. The combined financial
statements as of December 31, 1995, 1996 and 1997 and for each of the four years
in the period ended December 31, 1997 have been audited by Ernst & Young LLP,
independent auditors. The combined financial statements of Graham Packaging
Group have been prepared to include Holdings and its subsidiaries and the
ownership interests and real estate constituting the Graham Contribution (as
defined) for all periods that the operations were under common control. The
selected historical combined financial data as of December 31, 1993 and 1994,
for the year ended December 31, 1993 and as of and for the three months ended
March 30, 1997 were derived from the unaudited combined financial statements of
Graham Packaging Group which, in the opinion of Management, include all
adjustments (consisting only of usual recurring adjustments) necessary for a
fair presentation of such data. The results for the three months ended March 29,
1998 are not necessarily indicative of the results for the full year 1998. The
selected historical consolidated financial data as of and for the three months
ended March 29, 1998 were derived from the unaudited consolidated financial
statements of Holdings which, in the opinion of Management, include all
adjustments (consisting only of usual recurring adjustments) necessary for a
fair presentation of such data.
The following table should be read in conjunction with 'Management's
Discussion and Analysis of Financial Condition and Results of Operations', the
combined financial statements of Graham Packaging Group, including the related
notes thereto, and the consolidated financial statements of Holdings, including
the related notes thereto, included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, ----------------------
------------------------------------------------------- MARCH 30, MARCH 29,
1993(2) 1994(14)(15) 1995(3) 1996 1997(4) 1997 1998(1)(4)
------- ------------ ------- ------ ------- --------- ---------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales(5)............................ $338.7 $396.0 $466.8 $459.7 $521.7 $ 116.5 $ 134.4
Gross margin(5)......................... 58.8 69.5 66.8 77.2 84.4 17.8 24.6
Selling, general and administrative
expenses.............................. 23.3 29.7 35.5 35.5 34.9 8.3 8.4
Special charges and unusual items(6).... 8.7 -- 5.9 7.0 24.4 1.5 14.9
Operating income........................ 26.8 39.8 25.4 34.7 25.1 8.0 1.3
Interest expense, net................... 21.1 12.5 16.2 14.5 13.4 3.3 11.9
Other expense (income), net............. -- (0.2) (11.0 ) (1.0) 0.7 0.3 0.2
Recapitalization expenses............... -- -- -- -- -- -- 11.5
Income tax expense (benefit)(7)......... 0.1 (0.3) (0.3 ) -- 0.6 -- --
Minority interest....................... -- -- -- -- 0.2 -- --
Extraordinary loss(8)................... 15.1 -- 1.8 -- -- -- 0.7
------- ------------ ------- ------ ------- --------- ---------
Net income (loss)....................... $ (9.5 ) $ 27.8 $ 18.7 $ 21.2 $ 10.2 $ 4.4 $ (23.0)
------- ------------ ------- ------ ------- --------- ---------
------- ------------ ------- ------ ------- --------- ---------
OTHER DATA:
Cash flows provided by (used in):
Operating activities.................. $ 49.3 $ 74.6 $ 60.5 $ 68.0 $ 66.9 $ 6.8 $ (17.1)
Investing activities.................. (63.2 ) (53.0) (68.4 ) (32.8) (72.3 ) (8.5) (16.6)
Financing activities.................. 9.4 (26.2) 9.2 (34.6) 9.5 0.9 30.8
EBITDA(9)............................... 77.4 81.3 77.1 90.6 89.8 19.1 25.3
Capital expenditures.................... 31.5 53.8 68.6 31.3 53.2 8.5 13.5
Investments(10)......................... 28.0 -- 3.2 1.2 19.0 -- 3.0
Depreciation and amortization(11)....... 41.9 41.3 45.7 48.2 41.0 9.9 9.2
Ratio of earnings to fixed
charges(12)........................... 1.2 x 2.7x 2.0 x 2.2x 1.6 x 2.1x --
BALANCE SHEET DATA:
Working capital(13)..................... $ 21.3 $ 16.6 $ 18.0 $ 17.0 $ 2.4 $ 22.9 $ 6.9
Total assets............................ 306.5 332.5 360.7 338.8 385.5 337.7 423.8
Total debt.............................. 252.0 233.3 257.4 240.5 268.5 237.7 743.8
Partners'/owners' equity (deficit)...... (8.3 ) 15.6 15.3 16.8 0.3 20.4 (436.3)
</TABLE>
(Footnotes continued on next page)
45
<PAGE>
(Footnotes continued from previous page)
- ------------------
(1) In February 1998 the Recapitalization occurred.
(2) During 1993, the following acquisitions were completed: (i) In April 1993,
Graham Packaging Group acquired all of the outstanding stock of PLAX, Inc.,
a Canadian corporation, for $2.1 million. (ii) In June 1993, Graham
Packaging Group acquired all of the outstanding stock of Seprosy, S.A., a
French company for $27.3 million. (iii) In October 1993, Graham Packaging
Group acquired an interest in Commercial Packaging UK Ltd. (the 'UK
Operations') for $0.6 million. The above transactions were accounted for
under the purchase method of accounting. Results of operations are included
since the acquisition date.
(3) In July 1995, Graham Packaging Group acquired an additional interest in its
UK Operations and subsequently sold its interests for $5.6 million,
recognizing a gain of $4.4 million. In addition, Graham Packaging Group
entered into an agreement with the purchaser of its UK Operations and
recorded $6.4 million of non-recurring technical support services income.
Both the gain and the technical support services income are included in
other expense (income), net.
(4) In April 1997, Graham Packaging Group acquired 80% of certain assets and
assumed 80% of certain liabilities of Rheem-Graham Embalagens Ltda. for
$20.3 million (excluding direct costs of the acquisition). The remaining
20% was purchased in February 1998. These transactions were accounted for
under the purchase method of accounting. Results of operations are included
since the dates of acquisitions.
(5) Net sales increase or decrease based on fluctuations in resin prices as
industry practice and the Company's agreements with its customers permit
price changes to be passed through to customers by means of corresponding
changes in product pricing. Therefore, the Company's dollar gross profit is
substantially unaffected by changes in resin prices.
(6) Represent certain legal, restructuring and systems conversion costs and,
with respect to the three months ended March 29, 1998, Recapitalization
compensation costs. See 'Management's Discussion and Analysis of Financial
Condition and Results of Operations' and the Combined Financial Statements
of Graham Packaging Group, including the related notes thereto, and the
consolidated financial statements of Holdings, including the related notes
thereto for further discussion.
(7) As a limited partnership, Holdings is not subject to U.S. federal income
taxes or most state income taxes. Instead, such taxes are assessed to
Holdings' partners based on the income of Holdings. Holdings makes tax
distributions to its partners to reimburse them for such tax liabilities.
The Company's foreign operations are subject to tax in their local
jurisdictions. Most of these entities have historically had net operating
losses and recognized minimal tax expense.
(8) Represents costs incurred (including the write-off of unamortized deferred
financing fees) in connection with the early extinguishment of debt.
(9) EBITDA is not intended to represent cash flow from operations as defined by
generally accepted accounting principles and should not be used as an
alternative to net income as an indicator of operating performance or to
cash flow as a measure of liquidity. 'EBITDA' is defined as earnings before
minority interest, extraordinary items, interest expense, interest income,
income taxes, depreciation and amortization expense, fees paid pursuant to
the Monitoring Agreement, non-cash equity income in earnings of joint
ventures, other non-cash charges, Recapitalization expenses and special
charges and unusual items. Also in 1995, EBITDA excludes the $4.4 million
gain on the sale of the UK operations and the related $6.4 million
technical support services income as described in note (3) above. EBITDA is
included in this Prospectus to provide additional information with respect
to the ability of Holdings and the Operating Company to satisfy their debt
service, capital expenditure and working capital requirements and because
certain covenants in Holdings' and the Operating Company's borrowing
arrangements are tied to similar measures. While EBITDA is frequently used
as a measure of operations and the ability to meet debt service
requirements, it is not necessarily comparable to other similarly titled
captions of other companies due to the potential inconsistencies in the
method of calculation.
(Footnotes continued on next page)
46
<PAGE>
(Footnotes continued from previous page)
- ------------------
(10) Investments include the acquisitions made by Graham Packaging Group in
Italy, Canada, France, the UK and Brazil described in notes (1) to (4)
above. In addition, in 1995, the Company paid $1.9 million for a 50%
interest in the Masko-Graham Joint Venture in Poland and committed to make
loans to the Joint Venture of up to $1.9 million. In 1996, the Company
loaned $1.0 million to the Joint Venture. The Joint Venture is accounted
for under the equity method of accounting, and its earnings are included in
other expense (income), net. Amounts shown under this caption represent
cash paid, net of cash acquired in the acquisitions.
(11) Depreciation and amortization excludes amortization of deferred financing
fees, which is included in interest expense, net.
(12) For purposes of determining the ratio of earnings to fixed charges,
earnings are defined as earnings before income taxes, minority interest and
extraordinary items, plus fixed charges. Fixed charges include interest
expense on all indebtedness, amortization of deferred financing fees, and
one-third of rental expense on operating leases representing that portion
of rental expense deemed to be attributable to interest. Earnings were
insufficient to cover fixed charges by $22.4 million for the three months
ended March 29, 1998.
(13) Working capital is defined as current assets (less cash and cash
equivalents) minus current liabilities (less current maturities of
long-term debt).
(14) In 1994, the Company adopted the Last In First Out (LIFO) method of
accounting for certain inventories which had the effect of reducing net
income by $1.7 million.
(15) Balance sheet data at December 31, 1994 were derived from unaudited
financial statements.
47
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of the results of operations of the
Company includes a discussion of periods before the consummation of the
Recapitalization. The discussion and analysis of such periods does not reflect
the significant impact that the Recapitalization has had on the Company. See
'Risk Factors,' 'Unaudited Pro Forma Combined Financial Information' and the
section below under '--Liquidity and Capital Resources' for further discussion
relating to the impact that the Recapitalization has had and may have on the
Company. The following discussion should be read in conjunction with 'Selected
Historical Financial Data,' the Combined Financial Statements of Graham
Packaging Group, including the related notes thereto, and the consolidated
financial statements of Holdings, including the related notes thereto, appearing
elsewhere in this Prospectus and 'Unaudited Pro Forma Financial Information'.
References to 'Management' should be understood in this section to refer to the
Company's management in the time periods in question.
OVERVIEW
The Company is a worldwide leader in the design, manufacture and sale of
customized blow-molded rigid plastic bottles for the automotive, food and
beverage and HC/PC products business. Management believes that critical success
factors to the Company's business are its ability to (i) serve the complex
packaging demands of its customers which include some of the world's largest
branded consumer products companies, (ii) forecast trends in the packaging
industry across product lines and geographic territories (including those
specific to the rapid conversion of packaging products from glass, metal and
paper to plastic), and (iii) make the correct investments in plant and
technology necessary to satisfy the two forces mentioned above.
In 1992, the Company established a business plan that continues in a
modified form today. Management believed that the Company needed to profitably
grow and diversify within the custom rigid plastic sector of the packaging
industry and, to accomplish this goal, believed that it could rely on two of the
Company's core strengths, its technological capability in the innovation, design
and manufacture of customized plastic packaging and its strong relationships
with a group of customers who were the leading consumer branded products
companies in the world. Management implemented a strategy of (i) making
substantial investments in research and development, technology and machinery to
capture high margin sales growth from the rapid conversion to plastic packaging
and to meet its customers growing and complex packaging demands, (ii) expanding
in selected arenas in North America, such as in the food and beverage business,
and overseas, such as in the automotive and HC/PC product businesses, and (iii)
increasing efficiencies in its manufacturing processes, labor utilization and
procurement of raw materials.
In 1992, the Company's net sales to its automotive, food and beverage and
HC/PC product businesses were split 67.9%, 4.2% and 27.9%, respectively, and
were generated predominantly in the U.S. In 1997, this allocation between the
Company's three businesses had changed to 37.6%, 28.9% and 33.5%, respectively,
with 21.2% of the Company's net sales coming from operations outside the U.S.
The primary factors that drove this diversification were increased sales of
plastic packaging to the food and beverage businesses in North America and the
growth of the Company's food and beverage business which has grown at a CAGR of
67%.
The Company's North American one quart motor oil container business is in a
mature industry. Unit volume in the one quart motor oil business has been
declining at approximately 2% per year and, as a result, the Company has
experienced competitive price pressures in this business throughout 1995, 1996
and 1997. The Company has reduced prices on contracts that have come up for
renewal to maintain its competitive position and has been able to partially
offset these price reductions by improving manufacturing efficiencies,
light-weighting of bottles, improving line speeds, reducing material spoilage
and by improving labor efficiency and inventory. Management believes that the
decline in the domestic one quart motor oil business will continue for the next
several years but believes that there are significant volume opportunities for
its automotive product business in foreign countries, particularly those in
Latin America. On April 30, 1997, the Company acquired 80% of certain assets and
80% of certain liabilities of Rheem-Graham Embalagens Ltda., a leading supplier
of bottles to the motor oil industry in Brazil, and on February 17, 1998
purchased the residual 20% ownership interest. The Company has signed agreements
to operate two additional plants in Brazil, one of which is now in production.
48
<PAGE>
Management believes that the area with the greatest opportunity for growth
continues to be in producing bottles for the North American food and beverage
business because of the continued conversion to plastic packaging, and, in
particular, the demand for hot-fill PET containers for juices, juice drinks,
sport drinks and teas. From 1992 to 1997 the Company has invested over $99
million in capital expenditures to expand its technology, machinery and plant
structure to prepare for what Management estimated would be the growth in this
area. For the year ended December 31, 1997 sales of hot-fill PET containers had
grown to $92.2 million from negligible levels in 1993. In this business, the
Company continues to benefit from more experienced plant staff, improved line
speeds, higher absorption of SG&A and fixed overhead costs and improved resin
pricing and material usage.
Following its strategy to expand in selected international areas, the
Company currently operates, either on its own or through joint ventures, in
Argentina, Brazil, Canada, France, Italy and Poland. The Company began its
international expansion in 1992, with the acquisition of Pozzoli, s.r.l. on May
30, 1992 in Italy and the acquisition of Seprosy S.A. ('Seprosy', a wholly owned
subsidiary of Danone S.A., formerly Groupe BSN, on June 1, 1993 and renamed
Graham Packaging France, S.A., ('Graham Packaging France')). The Company
considered the Seprosy acquisition to be a strategic investment to serve its
expanding customer base and to establish the Company in the global packaging
business. Management was aware, however, that Seprosy was incurring excessive
overhead and SG&A costs and operated in a highly competitive environment.
Consequently, Management created a plan to restructure Graham Packaging France
operations in two phases and in compliance with French law and regulations.
These plans resulted in restructuring charges of $2.6 million, $3.3 million and
$0.8 million in 1993, 1995 and 1996, respectively. In 1997, Graham Packaging
France was still not profitable and as a result the Company implemented a
program designed to improve manufacturing and workforce efficiencies for a total
cost of approximately $2.0 million. Management is continuing to focus on its
operations in France, which remains a competitive arena and suffers from a
lagging economy, and is seeking to improve the profitability of that business
unit.
In the year ended December 31, 1997, approximately 77% of the Company's net
sales were generated by the top twenty customers, approximately 60% of which are
under long-term contracts (i.e., with terms of between one and ten years) and
the remainder of which were generated by customers with whom the Company has
been doing business for over 10 years on average. Prices under these
arrangements are typically tied to market standards and, therefore, vary with
market conditions. In general the contracts are requirements contracts that do
not obligate the customer to purchase any given amount of product from the
Company.
Based on industry data, the following table summarizes average market price
per pound of PET and HDPE resins:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, THREE MONTHS ENDED
----------------------- --------------------------------
1995 1996 1997 MARCH 30, 1997 MARCH 29, 1998
----- ----- ----- -------------- --------------
<S> <C> <C> <C> <C> <C>
PET................................................... $0.77 $0.63 $0.50 $ 0.43 $ 0.52
HDPE.................................................. 0.45 0.41 0.46 0.46 0.42
</TABLE>
In general, the Company's dollar gross profit is substantially unaffected
by fluctuations in the prices of HDPE and PET resins, the primary raw materials
for the Company's products, because industry practice and the Company's
agreements with its customers permit price changes to be passed through to
customers by means of corresponding changes in product pricing. Consequently,
Management believes that an analysis of the cost of goods sold, as well as
certain other expense items, should not be performed as a percentage of net
sales.
49
<PAGE>
RESULTS OF OPERATIONS
The following tables set forth the major components of the Company's net
sales and such net sales expressed as a percentage of total revenues:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, -------------------------------
---------------------------------------------------------------- MARCH 29,
1995 1996 1997 MARCH 30, 1997 1998
-------------------- -------------------- -------------------- -------------------- ---------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Automotive.................. $ 202.4 43.4% $ 180.9 39.4% $ 196.4 37.6% $ 43.9 37.7% $ 45.0
Food & Beverage............. 96.2 20.6 116.4 25.3 150.6 28.9 31.0 26.6 46.0
HC/PC....................... 168.2 36.0 162.4 35.3 174.7 33.5 41.6 35.7 43.4
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Total Net Sales............. $ 466.8 100.0% $ 459.7 100.0% $ 521.7 100.0% $ 116.5 100.0% $ 134.4
--------- --------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- --------- ---------
<CAPTION>
<S> <C>
Automotive.................. 33.5%
Food & Beverage............. 34.2
HC/PC....................... 32.3
---------
Total Net Sales............. 100.0%
---------
---------
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, -------------------------------
---------------------------------------------------------------- MARCH 29,
NET SALES 1995 1996 1997 MARCH 30, 1997 1998
-------------------- -------------------- -------------------- -------------------- ---------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
North America............... $ 380.9 81.6% $ 381.9 83.1% $ 440.0 84.3% $ 99.5 85.4% $ 112.3
Europe...................... 85.9 18.4 77.8 16.9 67.4 12.9 17.0 14.6 17.2
Latin America............... -- -- -- -- 14.3 2.8 -- -- 4.9
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Total Net Sales............. $ 466.8 100.0% $ 459.7 100.0% $ 521.7 100.0% $ 116.5 100.0% $ 134.4
--------- --------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- --------- ---------
<CAPTION>
NET SALES
<S> <C>
North America............... 83.6%
Europe...................... 12.8
Latin America............... 3.6
---------
Total Net Sales............. 100.0%
---------
---------
</TABLE>
THREE MONTHS ENDED MARCH 29, 1998 COMPARED TO THREE MONTHS ENDED MARCH 30, 1997
Net Sales. Net sales for the three months ended March 29, 1998 increased
$17.9 million to $134.4 million from $116.5 million for the three months ended
March 30, 1997. The increase in net sales was primarily due to a 14.1% increase
in unit volume and a 16.4% increase in resin pounds sold. Net sales also
increased as a result of changes in product mix, partially offset by a net
decrease in average resin prices. The most significant geographic increase in
net sales was in North America, where sales in three months ended March 29, 1998
were $12.8 million or 12.9% greater than in the three months ended March 30,
1997. The North American sales increase included higher unit volume of 9% and
higher pounds sold of 15%. North American sales in the U.S. food and beverage
business contributed $13.6 million to the increase, while sales in the
automotive business were $2.3 million lower. Additionally, sales for the three
months ended March 29, 1998 included a $4.9 million contribution as a result of
the Company's investment in its Latin American subsidiary. Sales for the three
months ended March 29, 1998 in Europe were up $0.2 million or 1.2% from the
three months ended March 30, 1997. Overall, European sales reflected a 23.7%
increase in units and a 2.2% increase in pounds sold.
Gross Profit. Gross profit for the three months ended March 29, 1998
increased $6.8 million to $24.6 million from $17.8 million for the three months
ended March 30, 1997. The increase in gross profit resulted primarily from the
higher sales volume as compared to the prior year period. Gross profit in North
America was up $6.6 million or 37.7%, including increases in all product
businesses, while European gross profit was down $0.4 million. In addition,
gross profit for the three months ended March 29, 1998 included $0.6 million
from the Company's Latin American subsidiary.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses for the three months ended March 29, 1998 increased $0.1
million to $8.4 million from $8.3 million for the three months ended March 30,
1997. As a percent of sales, selling, general and administrative expense
declined to 6.3% in 1998 from 7.1% in 1997. The decline is primarily due to
lower costs in Europe of $0.5 million as a result of the elimination of
duplicative costs incurred prior to the Recapitalization and to the favorable
impact of foreign currency translation due to the weakening French Franc and
Italian Lire. Additionally, selling, general and administrative expenses were
$0.2 million lower in North America as a result of the Company's continued
effort to control these costs. Offsetting the decreases in 1998 selling, general
and administrative expenses is the inclusion of $0.8 million from the Company's
Latin America subsidiary.
Special Charges and Unusual Items. Special charges and unusual items
increased $13.4 million to $14.9 million for the three months ended March 29,
1998 from $1.5 million for the three months ended March 30, 1997. Special
charges and unusual items in the three months ended March 29, 1998 included
costs related to year 2000 system conversion expenditures of $0.4 million (see
'--Information Systems Initiative' for a further
50
<PAGE>
discussion), Recapitalization compensation costs and the write-off of
unamortized licensing fees of $1.4 million. The special charges and unusual
items in the three months ended March 30, 1997 reflect non-recurring legal fees
related to the JCI Schmalbach-Lubeca litigation.
Recapitalization Expenses. Recapitalization expenses for the three months
ended March 29, 1998 included transaction fees of $11.1 million and costs
associated with the termination of interest rate collar and swap agreements of
$0.4 million.
Interest Expense Net. Interest expense, net increased $8.6 million to $11.9
million for the three months ended March 29, 1998 from $3.3 million for the
three months ended March 30, 1997. The increase was primarily related to the
increase in debt resulting from the Recapitalization and higher average interest
rates associated with the new debt.
Other (Income) Expense. Other (income) expense decreased $0.1 million to
$0.2 million for the three months ended March 29, 1998 from $0.3 million for the
three months ended March 30, 1997. The lower expense was due primarily to a
lower foreign currency exchange loss in the three months ended March 29, 1998 as
compared to the comparable 1997 period.
Extraordinary Loss. The extraordinary loss for the three months ended March
29, 1998 reflected the write-off of unamortized debt issuance fees associated
with the early extinguishment of debt resulting from the Recapitalization.
Net Income. Primarily as a result of factors discussed above, net loss for
the three months ended March 29, 1998 was $23.0 million compared to net income
of $4.4 million for the three months ended March 30, 1997.
EBITDA. Primarily as a result of factors discussed above, EBITDA for the
three months ended March 29, 1998 increased by 32.5% to $25.3 million from $19.1
million for the three months ended March 30, 1997.
1997 COMPARED TO 1996
Net Sales. Net Sales in 1997 increased $62.0 million to $521.7 million from
$459.7 million in 1996. The increase in net sales was primarily due to the
effects of a 6.5% increase in unit volume and an 11.7% increase in resin pounds
sold. Net sales also increased as a result of the effect of net resin price
increases and changes in product mix. The most significant geographic increase
in net sales was in North America, where sales in 1997 were $58.1 million or
15.2% higher than in 1996. The North American sales increase includes higher
unit volume of 9% and higher pounds sold of 15%. North American sales in the
food and beverage business contributed $32.9 million of the increase while the
HC/PC business contributed $18.2 million. Additionally, 1997 sales included a
$14.3 million contribution as a result of the Company's investment in its Latin
American subsidiary. Sales in Europe in 1997 declined $10.4 million or 13.4%
from 1996, primarily due to $9.1 million in foreign currency translation due to
the weakening of the French Franc and Italian Lire. Overall, European sales
reflected a decline of 1.7% in unit volume and 6.9% in pounds sold, primarily in
the HC/PC product line.
Gross Profit. Gross profit in 1997 increased $7.2 million to $84.4 million
from $77.2 million in 1996. The increase in gross profit resulted from the
higher sales volume in 1997 as compared to the prior year and from the favorable
impact of lower depreciation. Gross profit in North America was up $10.6 million
or 15.0%, while European gross profit was down $5.7 million due primarily to
lower sales volumes. In addition, 1997 gross profit included $2.3 million from
the Company's Latin American subsidiary.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses in 1997 decreased $0.6 million to $34.9 million from
$35.5 million in 1996. Selling, general and administrative expenses, as a
percentage of sales, declined to 6.7% in 1997 from 7.7% in 1996. The decrease
was due to the favorable impact of foreign currency translation due to the
weakening French Franc and Italian Lire in Europe, where selling, general and
administrative expenses were $1.8 million lower in 1997 than in 1996, partially
offset by $1.0 million from the Company's Latin American subsidiary and higher
North American expenses of $0.2 million.
Special Charges and Unusual Items. Special charges and unusual items
increased $17.4 million to $24.4 million in 1997 compared to $7.0 million in
1996. Special charges and unusual items included non-recurring legal fees in
both years, and in 1997, amounts expected to be paid in settlement of the JCI
Schmalbach-
51
<PAGE>
Lubeca litigation, aggregating $22.6 million in 1997 and $6.3 million in 1996.
Special charges and unusual items also included $0.7 million of restructuring
charges relating to the European operations in each year, while 1997 special
charges and unusual items also included $0.5 million related to restructuring of
North American operations and $0.5 million related to year 2000 system
conversion expenditures. See '--Information Systems Initiative' for a further
discussion.
Interest Expense, Net. Interest expense, net decreased 7.6% to $13.4
million in 1997 from $14.5 million in 1996. The decrease was primarily the
result of a lower average interest rate in 1997, partially offset by higher
borrowings during the same period.
Other (Income) Expense, Net. Other (income) expense changed $1.7 million in
1997 to $0.7 million of net expense from $1.0 million of net income in 1996.
Other (income) expense included foreign currency exchange losses of $1.0 million
in 1997 compared to foreign exchange gains of $0.7 million in 1996. In addition,
other (income) expense included equity in income of Masko Graham, the Company's
joint venture in Poland.
Net Income. Primarily as a result of factors discussed above, net income in
1997 decreased $11.0 million to $10.2 million from $21.2 million in 1996.
EBITDA. Primarily as a result of factors discussed above, EBITDA in 1997
decreased 0.9% to $89.8 million from $90.6 million in 1996.
1996 COMPARED TO 1995
Net Sales. Net sales in 1996 decreased $7.1 million to $459.7 million from
$466.8 million in 1995. The decrease in net sales included a 0.3% decrease in
unit volume coupled with the effect of bottle mix and resin price changes. On a
geographic basis, the lower sales were primarily due to a decrease in revenues
in the European unit of $8.1 million or 9.4% partially offset by higher sales in
North America of $1.0 million. The lower European sales in 1996 reflect the 1995
disposition of the Company's subsidiary in England and lower sales in France and
Italy. The slightly higher North American sales were due to a combined 6% gain
in volume, attributable mainly to the food and beverage business unit and a
shift in product mix which was offset by lower pricing, itself primarily due to
lower resin prices.
Gross Profit. Gross profit in 1996 increased $10.4 million to $77.2 million
from $66.8 million in 1995. This increase was primarily the result of a change
in product mix to more profitable products, primarily in North America where the
raw material component of the cost of products sold, as a percentage of sales,
decreased to 39.1% from 43.5%, and an exceptionally strong fourth quarter
performance which included a $1.6 million favorable adjustment to the estimated
statutory retirement indemnity accrual in France. Gross profit in the fourth
quarter of 1996 represented more than 25% of total 1996 gross profit, only a
portion of which is explained by the above mentioned adjustment. This
improvement was partially offset by a decrease in 1996 gross profit in Europe,
primarily due to lower volumes in Italy and the sale of the Company's subsidiary
in England in 1995.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses in 1996 of $35.5 million remained constant with those in
1995, which included $0.4 million related to the Company's subsidiary in
England. The generally flat selling, general and administrative expenses
reflected the Company's efforts to control these costs.
Interest Expense, Net. Interest expense, net decreased $1.7 million to
$14.5 million in 1996 from $16.2 million in 1995. This decrease was primarily
the result of lower borrowings coupled with a lower average rate of interest on
outstanding borrowings.
Special Charges and Unusual Items. Special charges and unusual items
increased $1.1 million to $7.0 million in 1996 from $5.9 million in 1995.
Special charges and unusual items in 1996 included $6.3 million in unusual legal
fees and $0.7 million of restructuring charges relating to the European
operations while 1995 special charges and unusual items included $2.6 million in
unusual legal fees and $3.3 million restructuring charges relating to the
European operations.
Other (Income) Expense, Net. Other (income) expense, net decreased to
$(1.0) million in 1996 from $(11.0) million in 1995. This decrease is due
primarily to the 1995 gain of $4.4 million recorded on the disposition of the
Company's subsidiary in England, 1995 one-time technical support services income
of $6.4 million which was
52
<PAGE>
offset by greater 1996 foreign exchange gains and equity in income of
Masko-Graham, the Company's joint venture in Poland.
Net Income. Primarily as a result of factors discussed above, net income in
1996 increased 13.4% to $21.2 million from $18.7 million in 1995.
EBITDA. Primarily as a result of factors discussed above, EBITDA in 1996
increased by 17.5% to $90.6 million from $77.1 million in 1995.
EFFECT OF CHANGES IN EXCHANGE RATES
In general, the Company's results of operations are affected by changes in
foreign exchange rates. Subject to market conditions, the Company prices its
products in its foreign operations in local currencies. As a result, a decline
in the value of the U.S. dollar relative to these other currencies can have a
favorable effect on the profitability of the Company, and an increase in the
value of the dollar relative to these other currencies can have a negative
effect on the profitability of the Company. Exchange rate fluctuations did not
have a material effect on the financial results of the Company in 1995, 1996,
1997 or the three months ended March 29, 1998, although exchange rates in France
and Italy changed 15% and 14% respectively from December 31, 1996 to December
31, 1997.
INFORMATION SYSTEMS INITIATIVE
The Company has completed an evaluation and assessment to ensure that its
information systems and related hardware will be year 2000 compliant. As a part
of this process, the Company engaged outside consultants in 1997 to assist with
the evaluation and assessment of its information systems requirements and the
selection and implementation of Enterprise Resource Planning Software. As a
result of this evaluation and assessment, the Company has decided to replace all
of its core application systems, including its financial accounting system,
manufacturing operation system and payroll and human resources system.
During 1997, the Company expensed $0.5 million associated with its
information systems evaluation and assessment and expects to incur during 1998
through the year 2000, approximately $8.0 million to purchase, test and install
new software as well as incur internal staff costs, consulting fees and other
expenses.
The Company expects to have its remediation efforts completed by the end of
1999, and does not expect any material impact on its results of operations,
liquidity or financial position due to incomplete or untimely resolution of the
year 2000 issue. The ability of third parties with whom the Company transacts
business to adequately address their year 2000 issues is outside of the
Company's control. There can be no assurance that the failure of such third
parties to adequately address their year 2000 issues would not have a material
adverse effect on the Company.
DERIVATIVES
The Company enters into interest rate collar and swap agreements to hedge
the exposure to increasing rates with respect to its Credit Agreement. The
differential to be paid or received as a result of these collar and swap
agreements is accrued as interest rates change and recognized as an adjustment
to interest expense related to the Credit Agreement, which was not material in
1995, 1996 and 1997.
LIQUIDITY AND CAPITAL RESOURCES
In 1995, 1996 and 1997, the Company generated $195.4 million of cash from
operations, $52.7 million from increased indebtedness and $3.4 million of net
proceeds from the sale of the UK Operations. This $251.5 million was primarily
used to fund $153.1 million of capital expenditures, $23.4 million of
investments, make distributions of $66.8 million to the Company's partners and
for $8.2 million of other net uses. In the three months ended March 29, 1998,
the Company funded, through its various borrowing arrangements, $17.1 million of
operating activities and $16.6 million of investing activities, including $13.5
million of capital expenditures and $3.0 million of investments.
On February 2, 1998, the Company refinanced the majority of its existing
credit facilities in connection with the Recapitalization, requiring the
repayment of $264.9 million of existing indebtedness, and entered into the
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New Credit Facility. The New Credit Facility consisted of three term loans
totaling $395 million and two revolving loan facilities totaling $255 million,
of which $8.5 million was initially borrowed. The Recapitalization also included
the issuance of $225 million of Senior Subordinated Old Notes and $100.6 million
gross proceeds of Senior Old Discount Notes ($169 million aggregate principal
amount at maturity). Additionally, the Recapitalization included net
distributions to owners of $409.3 million and debt issuance costs of $30.9
million. See 'Description of the New Credit Facility.'
At March 29, 1998, the Company's outstanding indebtedness was $743.8
million. The Company's debt service obligations could have important
consequences to holders of the Notes. See 'Risk Factors--Substantial Leverage',
'Risk Factors--Ability to Service Debt' and 'Risk Factors--Holding Company
Structure; Structural Subordination of Senior Discount Exchange Notes.'
During 1998, the Company expects to incur capital expenditures of at least
$90 million, of which approximately $17.0 million will be related to maintaining
its plant and operations and $6.5 million will be related to a new MIS system in
North America. However, total capital expenditures for 1998 may be significantly
higher depending on the timing of growth related opportunities. In this
connection, the proposed total purchase price for the three acquisitions
described under 'Prospectus Summary--Recent Developments' would be approximately
$70 million, which is not included in the $90 million estimate referred to
above. The Company's principal sources of cash to fund capital requirements will
be net cash provided by operating activities and borrowings under the New Credit
Facility. Significant increases in the Company's planned capital expenditures or
acquisition activity would require an amendment to its New Credit Facility to
provide additional financing, and the Company is currently discussing such an
amendment with its lenders.
Under the New Credit Facility, the Operating Company is subject to
restrictions on the payment of dividends or other distributions to Holdings;
provided that, subject to certain limitations, the Operating Company may pay
dividends or other distributions to Holdings (i) in respect of overhead, tax
liabilities, legal, accounting and other professional fees and expenses, (ii) to
fund purchases and redemptions of equity interests of Holdings or Investor LP
held by then present or former officers or employees of Holdings, the Operating
Company or their Subsidiaries (as defined) or by any employee stock ownership
plan upon such person's death, disability, retirement or termination of
employment or other circumstances with certain annual dollar limitations and
(iii) to finance, starting on July 15, 2003, the payment of cash interest
payments on the Senior Discount Notes.
In June 1998, the Company finalized the settlement of the
JCI-Schmalbach-Lubeca litigation. The amounts paid in settlement, as well as
estimated litigation expenses and professional fees did not differ materially
from the amounts accrued in Special Charges and Unusual Items in respect thereof
for the year ended December 31, 1997 and in the March 29, 1998 unaudited
condensed consolidated financial statements. The cash paid in settlement was
funded by drawdowns under the New Credit Facility. See Notes 13 and 17 to the
Combined Financial Statements as of December 31, 1997 and 1996 and for each of
the three years in the period ended December 31, 1997 and Note 9 to the
Condensed Financial Statements.
The Company does not pay U.S. federal income taxes under the provisions of
the Internal Revenue Code, as the applicable income or loss is included in the
tax returns of the partners. The Company makes tax distributions to its partners
to reimburse them for such tax obligations. The Company's foreign operations are
subject to tax in their local jurisdictions. Most of these entities have
historically incurred net operating losses.
NEW ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, Disclosures about Segments of an
Enterprise and Related Information ('Statement 131'). Statement 131 establishes
standards for the way that public business enterprises report selected
information about operating segments in annual financial statements and requires
that those enterprises report selected information about operating segments in
interim financial reports. It also establishes standards for related disclosures
about products and services, geographic areas and major customers. Statement 131
is effective for financial statements for fiscal years beginning after December
15, 1997, and therefore, the Company will adopt the new requirements in 1998,
which will require retroactive disclosure. Management has not completed its
review of Statement 131 and has not determined the impact adoption will have on
the Company's financial statement disclosures.
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In March 1998, the AICPA issued SOP 98-1, Accounting For the Costs of
Computer Software Developed For or Obtained For Internal-Use. The SOP is
effective for the Company on January 1, 1999. The SOP will require the
capitalization of certain costs incurred after the date of adoption in
connection with developing or obtaining software for internal use. The Company
currently capitalizes certain external costs and expenses all other costs as
incurred. The Company has not yet assessed what the impact of the SOP will be on
the Company's future earnings or financial position.
In February 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 132, Employers' Disclosures about Pensions
and Other Post-Retirement Benefits. This standard revises employers' disclosures
about pensions and other post-retirement plans, but does not change the
measurement or recognition of those plans. This standard will be effective for
the Company's financial statements for the year ended December 31, 1998.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, Accounting for Derivative Instruments
and Hedging Activities. This Statement establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts (collectively referred to as derivatives) and for
hedging activities. It requires that an entity recognize all derivatives as
either assets or liabilities in the statement of financial position and measure
those instruments at fair value. This Standard is effective for the Company's
financial statements for all quarters in the year beginning January 1, 2000.
Management has not completed its review of Statement No. 133 and has not
determined the impact adoption will have on the Company's financial statements.
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BUSINESS
GENERAL
Graham Packaging Company is a worldwide leader in the design and
manufacture of customized blow-molded rigid plastic bottles for many of the
world's largest branded consumer products companies for whom customized
packaging design is a critical component in their efforts to differentiate their
products to the consumer. The Company's products are made primarily from HDPE
and PET resins for customers in the (i) automotive, (ii) food and beverage and
(iii) household cleaning and personal care products businesses. With leading
positions in each of its businesses, the Company has been a major beneficiary of
the trend of conversion from glass, paper and metal containers to plastic
packaging and has grown its net sales over the past 15 years at a 24% CAGR. In
contrast to the carbonated soft drink bottle business, the businesses in which
the Company operates are characterized by more specialized technology, a greater
degree of customized packaging, shorter production runs, higher growth rates and
more attractive profit margins.
In order to position itself to further capitalize on the conversion trend,
the Company has made substantial capital expenditures since 1992, particularly
in the fast growing hot-fill PET area for shelf-stable (i.e., unrefrigerated)
beverages. In addition, the Company has distinguished itself as the leader in
locating its manufacturing plants on-site at its customers' packaging facilities
and has over one-third of its 41 facilities at on-site locations. The many
benefits of on-site plants, in addition to the Company's track record of
innovative design, superior customer service and low cost manufacturing
processes, help account for the fact that the Company has not lost a major
customer in the last three years. For the year ended December 31, 1997,
approximately 77% of the Company's net sales were generated by its top 20
customers, approximately 60% of which were under long-term contracts (i.e., with
terms of between one and ten years) and the remainder of which were customers
with whom the Company has been doing business for over 10 years on average. For
the year ended December 31, 1997, the Company generated net sales and EBITDA of
$521.7 million and $89.8 million, respectively, and for the three months ended
March 29, 1998, the Company generated net sales and EBITDA of $134.4 million and
$25.3 million, respectively.
Automotive. The Company is the preeminent supplier of one quart HDPE motor
oil containers in the United States, producing over 1.5 billion units in 1997,
which Management believes represents 73% of the one quart motor oil containers
produced domestically. The Company is a supplier of such containers to many of
the top domestic producers of motor oil, including Amoco, Ashland, Castrol,
Chevron, Pennzoil, Shell Oil, Sun Company and Texaco, and is the sole supplier
of one quart motor oil containers to five of these producers. The Company also
manufactures containers for other automotive products, such as antifreeze and
automatic transmission fluid. Capitalizing on its leading position in the U.S.,
the Company is expanding its operations in Latin America. In Brazil, where
Management believes that the Company is among the largest independent suppliers
of plastic packaging for motor oil, the Company currently operates four plants
and recently signed an agreement to operate one additional plant. In addition to
benefitting from the conversion to plastic packaging for motor oil in Latin
America, Management believes that the Company will benefit from the general
growth in the automotive business in this region as the number of motor vehicles
per person increases. In 1994, the ratio of passenger cars to people was 1 to
13.2 in Brazil, while in the U.S. the ratio was 1 to 1.8. For the year ended
December 31, 1997 and the three months ended March 29, 1998, the Company
generated approximately 37.6% and 33.5%, respectively, of its net sales from the
automotive container business.
Food & Beverage. In the food and beverage business, the Company produces
both HDPE and PET containers for customers for whom customized packaging design
is a critical component of their efforts to differentiate their products to the
consumer. From 1992 through December 31, 1997, the Company grew its food and
beverage business at a CAGR of 67%. This substantial growth has been driven by
the rapid conversion of metal, glass and paper containers to plastic bottles, as
the superior functionality, safety and improving economics of plastic became
more apparent. The Company is a leader in the production of HDPE containers for
non-carbonated chilled juice and juice drinks and certain liquid foods that
utilize HDPE resins. From 1992 through December 31, 1997, the Company invested
over $99 million in capital expenditures to build a strategic nationwide plant
network and to develop the specialized bottle manufacturing processes necessary
to produce the PET bottles required for the hot-fill packaging of shelf-stable
juices and juice drinks. The hot-fill process, in which bottles are filled at
between 180 degrees -190 degrees Fahrenheit to kill bacteria, permits the
shipment and
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display of juices and juice drinks in a shelf-stable state. The manufacturing
process for hot-fill PET packaging is significantly more demanding than that
used for cold-fill carbonated soft drink containers, and typically involves
shorter production runs, greater shape complexity and close production
integration with customers. Industry sources forecast that the hot-fill PET
juice and juice drink container business, upon which the Company focuses, will
enjoy a CAGR of over 40% between 1996 and 2000. The Company's largest customers
in the food and beverage business include Danone, Hershey's, Minute Maid,
Nestle's, Ocean Spray, Seneca, Tree Top, Tropicana and Welch's. For the year
ended December 31, 1997 and the three months ended March 29, 1998, the Company
generated approximately 28.9% and 34.2%, respectively, of its net sales from the
food and beverage business.
Household Cleaning & Personal Care. The Company is a leading supplier of
HDPE custom bottles to the North American HC/PC products business which includes
products such as shampoo, liquid laundry detergent, tub and tile cleaner and
dishwashing liquid. By focusing on its customized product design capability, the
Company provides its HC/PC customers with a key component in their efforts to
differentiate products on store shelves. The Company's largest customers in this
sector include Clorox, Colgate-Palmolive, Dial, J&J, L'Oreal, Procter & Gamble
and Unilever. The Company is pursuing significant growth opportunities both
domestically and internationally associated with the continued conversion to
HDPE packaging of both household cleaners and personal care products. The
Company continues to benefit as liquid laundry detergents, which are packaged in
plastic containers, capture an increased share from powdered detergents, which
are predominantly packaged in cardboard. For the year ended December 31, 1997
and the three months ended March 29, 1998, the Company generated approximately
33.5% and 32.3%, respectively, of its net sales from the HC/PC business.
COMPANY STRENGTHS
Management believes that the Company has the following key competitive
strengths:
Strong Relationships and Long-term Contracts with Diversified Blue Chip
Customer Base. The Company has enjoyed long-standing relationships averaging 16
years with its top twenty customers, which generated 77% of the Company's net
sales in 1997. These customers include many of the world's leading branded
consumer product companies and motor oil companies. Management attributes these
close relationships to the Company's creative design and engineering
capabilities, high level of customer service, high quality products, efficient
manufacturing, reliable delivery, speed to market and experienced and stable
management team and workforce. The Company supplies several of these customers
with 100% of their plastic packaging needs nationally, regionally or for a
specific brand, including Valvoline motor oil, Tropicana orange juice, Cascade
dishwashing gel and Purex laundry detergent. As another example of customer
loyalty, substantially all contracts which have come up for renewal in the last
three fiscal years have been extended.
Premier Custom Package Designer. The Company has centered its growth
strategy upon customers that require custom, as opposed to stock, plastic
containers as a critical component of their marketing efforts. The production of
custom containers involves a high degree of design, engineering and
manufacturing complexity in terms of bottle shapes, production tolerance and
performance requirements. The Company's ability to design and manufacture highly
customized packaging has enabled it to secure long-term contractual commitments
and to continue to enjoy a history of stable and steadily increasing orders from
its top customers at attractive profit margins. Management intends to apply this
core custom manufacturing capability in growth businesses, such as hot-fill PET
packaging, that require the same degree of customization and manufacturing
expertise as the Company's existing HDPE packaging business.
On-Site Facilities. More than one-third of the Company's 41 plants are
located on-site at its customers' plants, which is substantially greater than
any of its competitors. On-site plants enable the Company to work more closely
with its customers, facilitating just-in-time inventory management, generating
significant savings opportunities through process re-engineering, eliminating
costly shipping and handling charges, reducing working capital needs, and
fostering the development of long-term customer relationships. The benefits of
on-site manufacturing result in increased profitability for both the Company and
its customers, and partially account for the fact that the Company has never
lost an on-site relationship.
Leading Positions. The Company is the preeminent domestic supplier of motor
oil containers, with what Management believes to be an approximate 73% share of
the domestic one quart motor oil container business. The Company has become a
leading manufacturer of hot-fill PET containers for juice and juice drinks in
North
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America after only approximately five years in the business and is also a
leading supplier in North America of custom HDPE containers for juice and juice
drinks and HDPE custom plastic bottles in the HC/PC business.
Strong Industry Fundamentals and Growth Prospects. Management believes that
the businesses in which the Company operates exhibit strong fundamental
characteristics and growth prospects, including the following:
o Plastic Conversion Trend. Industry analysts project the domestic
hot-fill PET container business for juice, juice drinks, teas and
isotonics will grow at a CAGR of approximately 30% over the next several
years, driven by the continuing trend of converting glass, metal and
paper packaging to plastic containers, and that the hot-fill PET
container business for juice and juice drinks, where the Company's
beverage business is primarily focused, will grow at a CAGR of over 40%
for the next several years. To date, 78% of the domestic juice, juice
drinks, teas and isotonics business has yet to convert to plastics,
while in juice and juice drinks, 86% of the business has yet to convert.
Unlike the carbonated soft drink ('CSD') business, which is currently
characterized by standardized packaging, long production runs,
overcapacity and lower profit margins, the HDPE and hot-fill PET
container businesses require a high degree of customization, shorter
production runs, are expanding rapidly and enjoy higher profit margins.
Conversions to plastics in Latin America and Eastern Europe are
continuing as plastic penetration in these countries is considerably
less advanced than it is in the United States, where the conversion of
motor oil cans to plastic containers is nearly complete. Due to its
leading position in the HDPE and hot-fill PET packaging businesses,
Management believes it is well positioned to capture the continued
conversions to plastics in its business.
o Non-Cyclical End Use Products. Management believes that demand for the
products packaged in containers produced by the Company (such as motor
oil, juices, laundry detergents and shampoos, among others) is
non-cyclical because, in general, these products are known to be staple
and not luxury items. Accordingly, downturns in the general economy are
not expected to impact the consumption of such products significantly.
o Stable Customer Relationships. Management believes that the custom
plastic packaging industry is characterized by long-term relationships
between packaging manufacturers and their customers due to (i) the need
for joint package design between manufacturer and customer, (ii) the
integrated nature of package manufacturing and customers' filling
processes and (iii) the fact that the blow molds used by packaging
manufacturers are created specifically for and are typically funded by
the customer and, in many cases, can only be utilized on the machine for
which they were designed. Because of the expense and lead time
associated with the above, Management believes that many plastic
packaging customers have an incentive to retain their primary packaging
provider.
o Attractive Margin Products. The custom plastic packaging business has
been characterized by attractive profit margins, in comparison to the
business for stock containers, as a result of the design and engineering
complexity of bottle shapes (e.g., handles, view stripes, pouring
features and customized labeling) and the performance and material
requirements (e.g., hot-fill capability, recycled material usage,
multiple layering and flavor and oxygen barriers) for such products.
Management believes that the plastic packaging industry will continue to
offer attractive margins.
Significant Investment in Manufacturing Systems. Management believes that
the Company's investment in its manufacturing systems throughout its 28 U.S.
plants and 13 international plants provides it with a competitive advantage.
Between 1992 and 1997, the Company invested approximately $64 million to
maintain its asset base, approximately $200 million to improve the efficiency of
its existing operations and expand capacity and approximately $53 million to
acquire several businesses in its effort to diversify globally. From 1992
through December 31, 1997, the Company made capital expenditures of over $99
million relating to the hot-fill PET business. Management anticipates achieving
higher EBITDA margins in the next few years in the hot-fill PET business through
the leveraging of this investment, as fixed manufacturing and SG&A costs are
absorbed by higher sales. As a result of the Company's on-site strategy and
long-term contractual relationships, capital expenditures are typically
associated directly with specific contracts with customers, which allows
Management to more effectively allocate its investment capital.
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Favorable Supplier Relationships. HDPE and PET resins are the principal raw
materials used to manufacture the Company's products. Because the Company is
among the largest purchasers of bottle-grade HDPE resins for blow molding in the
world, it is able to secure advantageous supply arrangements. In addition, the
Company has limited its exposure to fluctuations in the price of these raw
materials because it can pass through price adjustments to its customers due to
contractual provisions and standard industry practice. See '--Raw Materials'
herein.
Experienced Management Team. The Company is led by an experienced team of
senior managers with a track record of achieving profitable growth, maintaining
the Company's blue chip customer base, introducing differentiated product
designs and entering new businesses. The Company's top 20 managers average over
15 years of work experience in the packaging industry and 13 years at the
Company. Following the Recapitalization, the Company's senior managers own an
equity investment in Investor LP (the entity through which Blackstone holds its
interest in Holdings), that approximates a 2.6% indirect equity interest in
Holdings, and will be awarded options, subject to certain performance based and
other vesting provisions, representing an additional equity interest in
Holdings. In addition, the Continuing Graham Partners retained a 1% general
partnership interest and 14% limited partnership interest in Holdings, which
were valued at $36.7 million at the consummation of the Recapitalization. See
'The Recapitalization,' 'Management,' 'Security Ownership' and
'Management--Management Option Plan.'
BUSINESS STRATEGY
The Company's objective is to capitalize on its position as a leading
custom blow molded plastic container supplier. The Company seeks to achieve this
objective by pursuing the following strategies:
Capitalize on Conversion to Plastic Containers. The Company intends to grow
both domestically and internationally by continuing to capitalize on the
industry trend toward the conversion from glass, metal and paper to plastic
containers, which Management believes is being driven by consumer demand, price
competitiveness and superior functionality. As one of the leading domestic
suppliers of hot-fill PET containers, the Company is poised to take advantage of
the rapid conversion from glass to plastic in the juice and juice drink
business, 86% of which has not yet been converted. In addition to opportunities
in the domestic hot-fill PET arena, Management believes that additional
conversions to HDPE packaging will occur in areas such as frozen juice
concentrate (currently packaged entirely in metal and cardboard containers), 64
ounce juices (a large portion of which is currently packaged in cardboard
containers) and motor oil (particularly in Latin America).
Maintain and Expand Position with Key Customers. The Company plans to
maintain and expand its position with global branded consumer products companies
that require highly customized features to differentiate their products on store
shelves. Central to this strategy are the continued (i) delivery of superior
customer service, (ii) location of facilities on-site, (iii) innovation in
packaging design, (iv) operation through long-term contracts and (v) provision
of low cost manufacturing processes.
Pursue Acquisitions and Strategic Joint Ventures. Management believes that
there are major synergistic acquisition and joint venture opportunities across
the Company's businesses, and, on an opportunistic basis, intends to pursue them
(i) to complement its existing businesses through product line expansion, (ii)
to strengthen its competitive position as a domestic leader and (iii) to
facilitate the penetration of new and developing business areas and geographic
territories. Furthermore, Management believes that it can improve the
profitability of acquired entities through economies of scale, by leveraging the
Company's existing strengths and by expanding the acquired entities' access to
international markets through the Company's existing international presence.
Capture Global Growth Opportunities with Improved Profitability. Since
1992, the Company has expanded globally both through acquisitions and by
accompanying its existing customers into new territories. Following the
Company's entrance into Western Europe, as well as its subsequent expansion into
Brazil, Canada and Poland, the Company's international operations have grown
substantially to 21.2% of net sales for the year ended December 31, 1997 and
21.7% for the three months ended March 29, 1998. Management believes that the
global trend in the conversion to plastic packaging will continue, particularly
in the developing world as consumer economies expand and industrialization
continues. Currently, profitability levels from international operations are
lower than in the U.S., and Management intends to improve these margins,
particularly in France.
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INDUSTRY OVERVIEW
Based on industry estimates for 1997, the estimated $72 billion domestic
packaging industry is comprised of paper (corrugated and folding) (38%),
flexible packaging (23%), metal cans (17%), plastic bottles (10%), glass
containers (6%) and closures (6%). Within the global rigid packaging business,
the Company competes exclusively in selected niches as described below.
Automotive. Management estimates that the domestic business for motor oil
that is packaged in one quart containers approximates two billion quarts per
year. The domestic business is converted to plastic and entirely customized,
which represents a dramatic shift from the early 1980's when the domestic
business consisted exclusively of non-custom composite cans. Management expects
1-2% unit volume declines per year in the U.S. motor oil container sector over
the next five years as new automobiles require less frequent motor oil changes
and retail automotive fast lubrication and fluid maintenance service centers
(such as Jiffy-Lube service centers) continue to grow in popularity. Management
believes that the increase in the use of plastic packaging for motor oil
internationally is attributable to the continued conversion from composite and
metal cans to customized plastic containers and the increase in the purchase of
motor vehicles as these countries continue to industrialize. In 1994, the ratio
of automobiles to individuals was approximately 1 to 13.2 in Brazil, whereas
that same ratio in the U.S. was approximately 1 to 1.8. In addition, the
international business is more fragmented with a limited number of sizable
competitors and many small, local suppliers.
Food & Beverage. The domestic food and beverage packaging business is
estimated to be 200 billion units per year and largely consists of plastic,
glass, metal and rigid paper containers. The Company focuses primarily on
subsets of the juice and juice drink non-carbonated beverage container industry,
which consist of (i) shelf-stable juices and juice drinks, (ii) chilled juices,
(iii) frozen juice concentrate, (iv) teas and (v) isotonics. Based on 1996
industry data, the aggregate size of these subsets is estimated to be
approximately 20.0 billion units per year with approximately 16% plastic
penetration. This business is comparatively fragmented and service-oriented with
multiple food and beverage companies that require value-added services and
customized packaging from their container manufacturers.
Hot-fill PET packaging for non-carbonated juices and juice drinks
approximates 1.0 billion units and is expected to grow at a CAGR of over 40%
from 1996 to 2000 due primarily to the conversion to plastics. The conversion
trend in the food and beverage sector is driven by price, functionality and
greater consumer satisfaction with plastic bottles due to several factors,
including their lighter weight, lower susceptibility to breakage (in comparison
to glass containers), custom designed spouts and built-in handles, lower
manufacturing costs (except for some single-serve applications) and superior
presentation on store shelves (which many branded consumer products companies
believe afford greater product differentiation). Penetration of PET hot-fill
containers in the non-carbonated juice and juice drink business is forecasted to
continue to grow from its current level of 14% today to approximately 44% by the
year 2000, driven largely by consumer demand for the superior functionality and
safety of plastic, a declining cost differential between plastic and glass
containers and improved manufacturing technology which enables the
cost-efficient manufacture of hot-fill PET bottles in single-serve sizes.
Household Cleaning & Personal Care. The domestic HC/PC business
approximates 5.0 billion units per year, approximately 38% of which represents
personal care products and 62% represents household products. In the United
States, the HC/PC packaging business is forecasted to grow moderately. In
selected segments, such as laundry detergents, where conversion to plastic
containers is at an earlier stage, higher growth rates have been achieved
historically. As a percentage of the total laundry detergent business, liquid
laundry detergents, which utilize plastic packaging, have grown from
approximately 38% of the business in 1992 to 52% of the business in 1996,
representing a CAGR of 5.6%. In the developing world, the packaging of HC/PC
products is expected to grow due to the expansion of consumer economies, the
entrance of global branded consumer products companies (and their new product
introductions) and the continued conversion to plastic from paper or glass.
PRODUCTS
The Company currently designs, manufactures and sells customized HDPE and
PET blow-molded rigid plastic bottles, thermo-formed rigid plastic containers
and injection molded caps and spouts, primarily for the automotive, food and
beverage and HC/PC products businesses. The Company's custom packaging involves
a
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high degree of design and engineering to accommodate complex bottle shapes
(e.g., handles, view stripes, pouring features and customized labeling) and
performance and material requirements (e.g., hot-fill capability, recycled
material usage and multiple layering).
HDPE containers, which are non-transparent, are utilized to package
products such as motor oil, laundry detergents, dishwashing liquids, personal
care products, certain food products, chilled juices and juice drinks. The
Company's HDPE containers are designed with custom features, such as specially
designed shapes, handles and pouring spouts which differentiate customers'
products to consumers and which may consist of a single layer of plastic or
multiple layers for specialized uses. Customers request multi-layer containers
for a variety of reasons, including the increased differentiation of the
packaging (such as oxygen barrier layering properties), the desire to include
recycled materials in the product's packaging and the reduction of cost by
limiting the use of colorants to a single exterior layer. The Company operates
one of the largest HDPE recycling plants in North America and more than 60% of
its HDPE packaging products contain recycled HDPE bottles.
PET containers, which are transparent, are utilized for products where
glass-like clarity is valued and that require shelf stability, such as
carbonated soft drinks, juice, juice drinks, isotonics and teas. CSD producers
are the largest users of PET containers, and the cold-fill manufacturing process
used for this application is characterized by long production runs and
standardized technology due to a low degree of product differentiation through
package design. By contrast, the hot-fill manufacturing process used for the
Company's products is characterized by shorter production runs, high
customization to facilitate greater packaging differentiation and the ability to
withstand the high temperatures under which the containers are filled.
The Company's net sales for the year ended December 31, 1992, for the year
ended December 31, 1997 and for the three months ended March 29, 1998 in each of
its three largest businesses are set forth below.
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, 1992 DECEMBER 31, 1997 MARCH 29, 1998
------------------------------ ------------------------------ ------------------------------
PERCENTAGE OF PERCENTAGE OF PERCENTAGE OF
BUSINESS NET SALES NET SALES NET SALES NET SALES NET SALES
- ----------------------------- ------------- ------------- ------------- ------------- -------------
NET SALES (IN MILLIONS) (IN MILLIONS)
-------------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Automotive................... $ 185.9 67.9% $ 196.4 37.6% $ 45.0 33.5%
Food & Beverage.............. 11.6 4.2 150.6 28.9 46.0 34.2
Household Cleaning & Personal
Care....................... 76.3 27.9 174.7 33.5 43.4 32.3
------------- ------ ------------- ------ ------------- ------
Total...................... $ 273.8 100.0% $ 521.7 100.0% $ 134.4 100.0%
------------- ------ ------------- ------ ------------- ------
------------- ------ ------------- ------ ------------- ------
</TABLE>
CUSTOMERS
Substantially all of the Company's sales are made to major branded consumer
products companies and oil companies located across the United States and in
foreign countries. The Company's customers demand a high degree of packaging
design and engineering to accommodate complex bottle shapes, performance
requirements, materials, speed to market and reliable delivery. As a result,
many customers opt for long-term contracts, many of which have terms of one to
ten years. Fourteen of the Company's top 20 customers are under long-term
contracts. The Company's contracts typically contain provisions allowing for
price adjustments based on the market price of resins and colorants, energy and
labor costs, among others, and contain, in certain cases, the Company's right of
first refusal to meet a competing third party bid to supply the customer.
In many cases, the Company is the sole supplier of all of its customer's
custom plastic bottle requirements nationally, regionally or for a specific
brand. For the year ended December 31, 1997 and the three months ended March 29,
1998, the Company had only one customer (Unilever) that accounted for over 10%
of the Company's total net sales (13.8% for each period). For the year ended
December 31, 1997 and the three months ended
61
<PAGE>
March 29, 1998, the Company's twenty largest customers, who accounted for
approximately 77% and 78% of net sales for these periods, respectively, were, in
alphabetical order:
<TABLE>
<CAPTION>
CUSTOMER(1) BUSINESS COMPANY CUSTOMER SINCE(1)
- --------------------------------- --------------------------------- ---------------------------------
<S> <C> <C>
Ashland(2) Automotive Early 1970's
Castrol Automotive Late 1960's
Chevron Automotive Early 1970's
Clement Pappas Food & Beverage Mid 1990's
Colgate-Palmolive HC/PC Mid 1980's
Danone Food & Beverage Before 1980
Dial HC/PC Early 1990's
Hershey's Food & Beverage Mid 1980's
Ocean Spray Food & Beverage Early 1990's
Pennzoil Automotive Early 1970's
Petrobras Distribuidora S.A. Automotive Early 1990's
Procter & Gamble HC/PC Early 1980's
Quaker State Automotive Early 1970's
Shell Oil Automotive Early 1970's
Sun Company Automotive Early 1960's
Texaco Automotive Early 1970's
Tree Top Food & Beverage Early 1990's
Tropicana Food & Beverage Mid 1980's
Unilever HC/PC, Food & Beverage Early 1970's
Welch's Food & Beverage Early 1990's
</TABLE>
- ------------------
(1) These companies include their predecessors, if applicable, and the dates may
reflect customer relationships initiated by predecessors to the Company or
entities acquired by the Company.
(2) Ashland is the producer of Valvoline motor oil.
FOREIGN OPERATIONS
The Company has significant operations outside the United States in the
form of wholly owned subsidiaries, cooperative joint ventures and other
arrangements. The Company has 13 plants located in countries outside of the
United States, including Canada (4), Brazil (4), France (2), Italy (2) and
Poland (1). The Company also plans to open a plant in Hungary and an additional
plant in Brazil. For the year ended December 31, 1997 and the three months ended
March 29, 1998, the Company's operations outside of the United States
represented approximately 21.2% and 21.7%, respectively, of the Company's net
sales.
Brazil and Argentina. In Brazil, the Company operates three on-site
plants for motor oil packaging, including for Petrobras Distribuidora S.A.,
the national oil company of Brazil. The Company also operates an off-site
plant for its motor oil and agricultural and chemical businesses and has
entered into an agreement to operate one more plant. On April 30, 1997, the
Company acquired 80% of certain assets and assumed 80% of certain
liabilities of Rheem-Graham Embalagens Ltda. in Brazil. Graham Packaging do
Brasil Industriais e Commerciais S.A. ('Graham Packaging do Brazil') is the
current name of the Company's subsidiary in Brazil. In February 1998, the
Company acquired the residual 20% ownership interest in Graham Packaging do
Brazil. In Argentina, the Company formed a subsidiary, Lido-Plast Graham,
to enter into a joint venture and manufacturing agreement with Lido Plast
S.A. and Lido Plast San Luis S.A. (collectively, 'Lido Plast').
Western Europe. The Company operates four off-site plants in France
and Italy for the production of liquid food HDPE containers, HC/PC,
automotive and agricultural chemical products. Under its long-term contract
with Danone, the Company manufactures a substantial portion of the plastic
containers for drinkable yogurt in France. See 'Management's Discussion and
Analysis of Financial Condition and Results of Operations.'
Poland. Through Masko-Graham, a 50% owned joint venture in Poland, the
Company manufactures HDPE bottles for HC/PC and the liquid food products.
62
<PAGE>
COMPETITION
The Company faces substantial competition across its product lines from a
number of well-established businesses operating both regionally and
internationally. The Company's primary competitors include Owens-Brockway (a
wholly owned subsidiary of Owens-Illinois, Inc.), Ball Corporation, Crown Cork &
Seal Company, Inc., Plastic Containers, Inc. (a wholly owned subsidiary of
Continental Can, Inc., which agreed on or about January 15, 1998 to be sold to
Suiza Foods Corporation), Plastipak, Inc., Silgan Holdings Inc. (successor to
Silgan Corporation), Schmalbach-Lubeca Plastic Containers USA Inc., American
National Can, Inc. and Alpla Werke Alwin Lehner Gmbh. Several of these
competitors are larger and have greater financial and other resources than the
Company. Management believes that the Company's long-term success is largely
dependent on its ability to provide superior levels of service, its speed to
market and its ability to develop product innovations and improve its production
technology and expertise through its applied research and development
capability. Other important competitive factors include rapid delivery of
products, production quality and price.
MARKETING AND DISTRIBUTION
The Company's sales are made through its own direct sales force; agents or
brokers are not utilized to conduct sales activities with customers or potential
customers. Sales activities are conducted from the Company's corporate
headquarters in York, Pennsylvania and from field sales offices located in
Houston, Texas, Cincinnati, Ohio, Bristol, Pennsylvania, Burlington, Ontario,
Montreal, Quebec, Paris, France, Buenos Aires, Argentina, Rio de Janeiro and Sao
Paulo, Brazil, Milan, Italy and Sulejowek, Poland. The Company's products are
typically delivered by truck, on a daily basis, in order to meet its customers'
just-in-time delivery requirements, except in the case of on-site operations. In
many cases, the Company's on-site operations are integrated with their
customers' manufacturing operations so that deliveries are made, as needed, by
direct conveyance to the customers' fill lines.
RESEARCH AND DEVELOPMENT
Research and development constitutes an important part of the Company's
competitive advantage both in the design, development and enhancement of new
customized products and in the creation of manufacturing technologies to improve
production efficiency. The Company is actively involved with its customers in
the design and introduction of new packaging features, including the design of
special wheel molds. In general, wheel molds are only able to run on the
machines for which they are built, thus encouraging customers to retain the
Company as their primary packaging provider. Management believes that the
Company's development and research abilities, coupled with the support of Graham
Engineering in the design of blow molding wheels and recycling systems, has
positioned the Company as the packaging design and development leader in the
industry. Pursuant to the Equipment Sales Agreement, Graham Engineering will
continue to provide engineering, consulting and other services and sell to the
Company certain proprietary blow molding wheels. Over the past several years,
the Company has received 28 patents and has filed for 42 additional patents.
During the year ended December 31, 1997, the Company designed over 200 new
custom containers and molds. See 'The Recapitalization,' 'Certain Relationships
and Related Party Transactions--Certain Business Relationships-- Equipment Sales
Agreement' and '--Intellectual Property' herein.
MANUFACTURING
A critical component of the Company's strategy is to locate its
manufacturing plants on-site, at its largest customers' manufacturing
operations, to provide the highest possible servicing levels, to reduce
expensive shipping and handling charges and to heighten production and
distribution efficiencies. The Company is the industry leader in on-site
manufacturing arrangements, with over a third of its 41 facilities on-site at
customers' facilities, substantially more than its competitors. See
'--Facilities' herein. Within its 41 plants, the Company runs over 300
production lines. As necessary, the Company dedicates particular production
lines within a plant to better service its customers. The Company's plants
generally operate 24 hours a day, five days a week, although not every
production line is run constantly. When customer demand requires, the Company
runs its plants seven days a week.
63
<PAGE>
In the blow molding process used for HDPE applications, resin pellets are
blended with colorants or other necessary additives and fed into the extrusion
machine, which uses heat and pressure to form the resin into a round hollow tube
of molten plastic called a parison. Bottle molds mounted radially on a wheel
capture the parisons as they leave the extruder. Once inside the mold, air
pressure is used to blow the parison into the bottle shape of the mold. In the
1970's, the Company developed and introduced the Graham Wheel. The Graham Wheel
is a single parison, electro-mechanical rotary blow molding technology designed
for its speed, reliability and ability to use virgin resins, high barrier resins
and recycled resins simultaneously without difficulty. The Company has achieved
very low production costs, particularly in plants housing Graham Wheels. While
certain of the Company's competitors also use wheel technology in their
production lines, the Company has developed a number of proprietary improvements
which Management believes permit the Company's wheels to operate at higher
speeds and with greater efficiency in the manufacture of containers with one or
more special features, such as multiple layers and in-mold labeling.
In the stretch blow molding process used for hot-fill PET applications,
resin pellets are fed into a Husky injection molding machine that uses heat and
pressure to mold a test tube shaped parison or 'preform.' The preform is then
fed into the Sidel blow molder where it is re-heated to allow it to be formed
through a stretch blow molding process into a final container. During this
re-heat and blow process, special steps are taken to induce the temperature
resistance needed to withstand high temperatures on customer filling lines.
Management believes that the Husky injection molders and Sidel blow molders used
by the Company are widely recognized as the leading technologies for high speed
production of hot-fill PET containers and have replaced less competitive
technologies used initially in the manufacture of hot-fill PET containers.
Management believes that equipment for the production of cold-fill containers
can be refitted to accommodate the production of hot-fill containers. However,
such refitting has only been accomplished at a substantial cost and has proven
to be substantially less efficient than the Company's equipment for producing
hot-fill PET containers.
The Company maintains a program of quality control with respect to
suppliers, line performance and packaging integrity for its containers. The
Company's production lines are equipped with automatic inspection machines that
electronically inspect containers for dimensional conformity, flaws and various
other performance requirements. Additionally, product samples are inspected and
tested by Company employees on the production line for proper dimensions and
performance and are also inspected and audited after packaging. Containers that
do not meet quality standards are crushed and recycled as raw materials. The
Company monitors and updates its inspection programs to keep pace with modern
technologies and customer demands. Laboratories are maintained at each
manufacturing facility to test characteristics of the products and compliance
with quality standards.
The Company has highly modernized equipment in all plants, consisting
primarily of the proprietary rotational wheel systems sold to the Company by
Graham Engineering and shuttle systems, both of which are used for HDPE blow
molding systems, and Husky/Sidel heat-set stretch blow molding systems for
custom hot-fill juice bottles. The Company is also pursuing research and
development initiatives in barrier and aseptic technologies to strengthen its
position in the food and beverage business. In the past, the Company has
achieved substantial cost savings in its manufacturing process by productivity
and process enhancements, including increasing line speeds, utilizing recycled
products, reducing scrap and optimizing plastic volume requirements for each
product's specifications. Management estimates that the Company's operating
efficiencies are among the highest in the industry.
Management believes that capital investment to maintain and upgrade
property, plant and equipment is important to remain competitive. Total capital
expenditures for 1995, 1996 and 1997 were approximately $68.6 million, $31.3
million and $53.2 million, respectively. Management estimates that the annual
capital expenditure required to maintain the Company's current facilities will
be approximately $20 million per year, and additional capital expenditures
beyond this amount will be required to expand capacity.
RAW MATERIALS
HDPE and PET resins constitute the primary raw materials used to
manufacture the Company's products. These materials are available from a number
of suppliers, and the Company is not dependent upon any single supplier for any
of these materials. Based on the Company's experience, Management believes that
adequate quantities of these materials will be available to supply all of its
customers' needs, but there can be no assurance
64
<PAGE>
that they will continue to be available in adequate supply in the future. In
general, the Company's dollar gross profit is substantially unaffected by
fluctuations in resin prices because industry practice and the Company's
contractual arrangements with its customers permit changes in resin prices to be
passed through to customers by means of corresponding changes in product
pricing. In addition, the Company manages its inventory of HDPE and PET to
minimize its exposure to fluctuations in the price of these resins.
Through its wholly owned subsidiary, Graham Recycling Company ('Graham
Recycling'), the Company operates one of the largest HDPE bottle recycling
plants in North America, and more than 60% of its HDPE packaging products
contain recycled HDPE bottles. Management believes that the Company can extend
its recycling technology to take advantage of further opportunities in the HDPE
and PET businesses. The recycling plant is located at the Company's headquarters
in York, Pennsylvania.
FACILITIES
The Company currently owns or leases 41 plants located in the United
States, Canada, Brazil, France, Italy and Poland, not including the two Lido
Plast-Graham joint venture facilities which are wholly owned and operated by its
joint venture partner. At March 29, 1998, sixteen of the Company's packaging
plants were located on-site at customer plants. In addition, the Company
operates one plant in Poland pursuant to a joint venture arrangement where the
Company owns a 50% interest. The Company is currently planning to bring two new
plants into production in 1998. The Company's corporate headquarters are in
multiple facilities located in York, Pennsylvania, totalling approximately
45,000 square feet. The Company believes that its plants, which are of varying
ages and types of construction, are in good condition, are suitable for the
Company's operations and generally provide sufficient capacity to meet the
Company's requirements for the foreseeable future.
The following table sets forth the location of the Company's plants and
administrative facilities, whether on-site or off-site, whether leased or owned,
and their approximate current square footage.
<TABLE>
<CAPTION>
ON SITE SIZE
LOCATION OR OFF SITE LEASED/OWNED (SQ. FT.)
- ---------------------------------------------------------------------- ----------- --------------- ---------
<S> <C> <C> <C>
U.S. Packaging Facilities
1. York, Pennsylvania*............................................... Off Site Owned 395,554
York, Pennsylvania(a)............................................. N/A Leased 45,000
2. Maryland Heights, Missouri........................................ Off Site Owned 308,961
3. Emigsville, Pennsylvania.......................................... Off Site Leased 148,300
4. Levittown, Pennsylvania........................................... Off Site Leased 148,000
5. Rancho Cucamonga, California...................................... Off Site Leased 143,063
6. Santa Ana, California............................................. Off Site Owned 127,680
7. Muskogee, Oklahoma................................................ Off Site Leased 125,000
8. Woodridge, Illinois............................................... Off Site Leased 124,137
9. Atlanta, Georgia.................................................. Off Site Leased 112,400
10. Cincinnati, Ohio.................................................. Off Site Leased 103,119
11. Berkeley, Missouri*............................................... Off Site Owned 75,000
12. Selah, Washington................................................. On Site Owned 70,000
13. Cambridge, Ohio................................................... On Site Leased 57,000
14. Shreveport, Louisiana............................................. On Site Leased 56,400
15. Whiting, Indiana.................................................. On Site Leased 56,000
16. Richmond, California.............................................. Off Site Leased 54,985
17. Houston, Texas.................................................... Off Site Owned 52,500
18. New Kensington, Pennsylvania...................................... On Site Leased 48,000
19. Bradford, Pennsylvania............................................ Off Site Leased 44,000
20. Port Allen, Louisiana............................................. On Site Leased 44,000
21. N. Charleston, South Carolina..................................... On Site Leased 40,000
22. Jefferson, Louisiana.............................................. On Site Leased 37,000
</TABLE>
65
<PAGE>
<TABLE>
<CAPTION>
ON SITE SIZE
LOCATION OR OFF SITE LEASED/OWNED (SQ. FT.)
- ---------------------------------------------------------------------- ----------- --------------- ---------
<S> <C> <C> <C>
23. Vicksburg, Mississippi............................................ On Site Leased 31,200
24. Bordentown, New Jersey............................................ On Site Leased 30,000
25. Tulsa, Oklahoma................................................... On Site Leased 28,500
26. Wapato, Washington................................................ Off Site Leased 20,300
27. Bradenton, Florida................................................ On Site Leased 12,191
Canadian Packaging Facilities
28. Burlington, Ontario, Canada*...................................... Off Site Owned 145,200
Burlington, Ontario, Canada(a)*................................... N/A Owned 4,800
29. Mississauga, Ontario, Canada*..................................... Off Site Owned 78,416
30. Anjou, Quebec, Canada*............................................ Off Site Owned 44,875
31. Toronto, Ontario, Canada.......................................... On Site N/A 5,000
European Packaging Facilities
32. Assevent, France.................................................. Off Site Owned 186,470
33. Campochiaro, Italy................................................ Off Site Owned 93,200
34. Blyes, France..................................................... Off Site Owned 89,000
35. Sulejowek, Poland(b).............................................. Off Site Owned 82,700
36. Sovico (Milan), Italy............................................. Off Site Leased 74,500
Latin American Packaging Facilities
37. Sao Paulo, Brazil................................................. Off Site Leased 23,440
38. Rio de Janeiro, Brazil............................................ On Site Owned/Leased(c ) 20,000
Rio de Janeiro, Brazil(a)......................................... N/A Leased 1,650
39. Santos, Brazil.................................................... On Site Leased 5,400
40. Rio de Janeiro, Brazil............................................ On Site N/A 10,000
Graham Recycling
41. York, Pennsylvania*............................................... Off Site Owned 44,416
Graham Affiliated Packaging Facilities (Lido Plast-Graham--Joint
Venture)(d)
42. Buenos Aires, Argentina........................................... Off Site N/A N/A
43. San Luis, Argentina............................................... Off Site N/A N/A
</TABLE>
- ------------------
(a) This indicates an administrative facility.
(b) This facility is owned by the Masko-Graham Joint Venture, in which the
Company holds a 50% interest.
(c) The building is owned; land is leased.
(d) The Lido Plast-Graham facilities are owned and operated by the Company's
joint venture partner, Lido Plast, in which the Company does not own any
interest. See '--Foreign Operations.'
* Contributed to the Operating Company as part of the Graham Contribution.
With respect to the Berkeley, Missouri facility (Location 11 in the table
above), a manufacturing plant, warehouse and parcel of land, the latter two
of which are not listed in the table above, were contributed to the
Operating Company as part of the Graham Contribution.
EMPLOYEES
At March 29, 1998, the Company had approximately 2,937 employees, 1,826 of
which were located in the United States. Approximately 75% of the Company's
employees are hourly wage employees, 39% of whom are members of various labor
unions and are covered by collective bargaining agreements that expire between
May 1998 and April 2001. During the past three years, the Company's subsidiary
in France, Graham Packaging
66
<PAGE>
France, has experienced on several occasions labor stoppages, none of which
exceeded one day in duration. Management believes that it enjoys good relations
with the Company's employees.
ENVIRONMENTAL MATTERS
The Company and its operations, both in the U.S. and abroad, are subject to
national, state, provincial and/or local laws and regulations that impose
limitations and prohibitions on the discharge and emission of, and establish
standards for the use, disposal, and management of, certain materials and waste,
and impose liability for the costs of investigating and cleaning up, and certain
damages resulting from, present and past spills, disposals, or other releases of
hazardous substances or materials (collectively, 'Environmental Laws').
Environmental Laws can be complex and may change often, capital and operating
expenses to comply can be significant, and violations may result in substantial
fines and penalties. In addition, Environmental Laws such as the Comprehensive
Environmental Response, Compensation and Liability Act ('CERCLA,' also known as
'Superfund'), in the United States, impose liability on several grounds for the
investigation and cleanup of contaminated soil, groundwater, and buildings, and
for damages to natural resources, at a wide range of properties: for example,
contamination at properties formerly owned or operated by the Company as well as
at properties the Company currently owns or operates, and properties to which
hazardous substances were sent by the Company, may result in liability for the
Company under Environmental Laws. The Company is not aware of any material
noncompliance with the Environmental Laws currently applicable to it and is not
the subject of any material claim for liability with respect to contamination at
any location. For its operations to comply with Environmental Laws, the Company
has incurred and will continue to incur costs, which were not material in fiscal
1997 and are not expected to be material in the future. See 'Risk
Factors--Environmental Matters.'
A number of governmental authorities both in the U.S. and abroad have
considered or are expected to consider legislation aimed at reducing the amount
of plastic wastes disposed of. Such programs have included, for example,
mandating certain rates of recycling and/or the use of recycled materials,
imposing deposits or taxes on plastic packaging material, and/or requiring
retailers or manufacturers to take back packaging used for their products. Such
legislation, as well as voluntary initiatives similarly aimed at reducing the
level of plastic wastes, could reduce the demand for certain plastic packaging,
result in greater costs for plastic packaging manufacturers, or otherwise impact
the Company's business. Some consumer products companies (including certain
customers of the Company) have responded to these governmental initiatives and
to perceived environmental concerns of consumers by, for example, using bottles
made in whole or in part of recycled plastic. The Company operates one of the
largest HDPE recycling plants in North America and more than 60% of its HDPE
packaging products contain recycled HDPE bottles. To date these initiatives and
developments have not materially and adversely affected the Company. See 'Risk
Factors--Environmental Matters.'
INTELLECTUAL PROPERTY
The Company owns approximately 16 unexpired U.S. patents and three
trademarks. Approximately 15 patent applications are currently pending at the
United States Patent and Trademark Office. In addition, twelve foreign patents
have been issued and 27 are pending. While a presumption of validity exists with
respect to issued U.S. patents, the Company cannot assure that any of its
patents will not be challenged, invalidated, circumvented or rendered
unenforceable. Furthermore, the Company cannot assure the issuance of any
pending patent application, or that if patents are issued, such patents will
provide meaningful protection against competitors or against competitive
technologies. While the Company holds the various patents and trademarks
summarized above, it believes that its business is not dependent upon any one of
such patents or trademarks. The Company also relies on unpatented proprietary
know-how and continuing technological innovation and other trade secrets to
develop and maintain its competitive position. There can be no assurance,
however, that others will not obtain knowledge of such proprietary know-how
through independent development or other access by legal means. In addition to
its own patents and proprietary know-how, the Company is a party to certain
licensing arrangements and other agreements authorizing the Company to use
certain other proprietary processes, know-how and related technology and/or to
operate within the scope of certain patents owned by other entities. The Company
also has licensed or sub-licensed certain intellectual property rights to third
parties.
67
<PAGE>
LEGAL PROCEEDINGS
The Company is party to various litigation matters arising in the ordinary
course of business. The ultimate legal and financial liability of the Company
with respect to such litigation cannot be estimated with certainty, but
Management believes, based on its examination of such matters, experience to
date and discussions with counsel, that such ultimate liability will not be
material to the business, financial condition or results of operations of the
Company.
Holdings was sued in May 1995 for alleged patent infringement, trade secret
misappropriation and other related state law claims by Hoover Universal, Inc., a
subsidiary of Johnson Controls, Inc. ('JCI'), in the U.S. District Court for the
Central District of California, Case No. CV-95-3331 RAP (BQRx). JCI alleged that
the Company was misappropriating or threatened to misappropriate trade secrets
allegedly owned by JCI relating to the manufacture of hot-fill PET plastic
containers through the hiring of JCI employees, and alleged that the Company
infringed two patents owned by JCI by manufacturing hot-fill PET plastic
containers for several of its largest customers using a certain 'pinch grip'
structural design. In December 1995, JCI filed a second lawsuit alleging
infringement of two additional patents, which relate to a ring and base
structure for hot-fill PET plastic containers. The two suits have been
consolidated for all purposes. The Company has answered the complaints, denying
infringement and misappropriation in all respects and asserting various
defenses, including invalidity and unenforceability of the patents at issue
based upon inequitable conduct on the part of JCI in prosecuting the relevant
patent applications before the U.S. Patent Office and anticompetitive patent
misuse by JCI. The Company has also asserted counterclaims against JCI alleging
violations of federal antitrust law, based upon certain agreements regarding
market division allegedly entered into by JCI with another competitor and other
alleged conduct engaged in by JCI allegedly intended to raise prices and limit
competition. In March 1997, JCI's plastic container business was acquired by
Schmalbach-Lubeca Plastic Containers USA Inc. ('Schmalbach-Lubeca').
Schmalbach-Lubeca and certain affiliates were joined as successors to JCI and as
counter-claim defendants.
On March 10, 1998, the U.S. District Court in California entered summary
judgment in favor of JCI and against the Company regarding infringement of two
patents, but did not resolve certain issues related to the patents including
certain of the Company's defenses. On March 6, 1998, the Company also filed suit
against Schmalbach-Lubeca in Federal Court in Delaware for infringement of the
Company's patent concerning pinch grip bottle design. On April 24, 1998, the
parties to the litigation reached an understanding on the terms of a settlement
of all claims in all of the litigation with JCI and Schmalbach-Lubeca, subject
to agreement upon and execution of a formal settlement agreement. In June 1998,
the Company finalized the settlement of the JCI-Schmalbach-Lubeca litigation.
The amounts paid in settlement, as well as estimated litigation expenses and
professional fees did not differ materially from the amounts accrued in Special
Charges and Unusual Items in respect thereof for the year ended December 31,
1997 and in the March 29, 1998 unaudited condensed consolidated financial
statements. The cash paid in settlement was funded by drawdowns under the New
Credit Facility. See Notes 13 and 17 to the Combined Financial Statements as of
December 31, 1997 and 1996 and for each of the three years in the period ended
December 31, 1997 and Note 9 to the Condensed Financial Statements.
68
<PAGE>
MANAGEMENT
ADVISORY COMMITTEE MEMBERS AND EXECUTIVE OFFICERS
The members of the Advisory Committee of Holdings and the executive
officers of the Operating Company since the Recapitalization and their
respective ages and positions are set forth in the table below. For a
description of the Advisory Committee, see 'The Partnership Agreements--Holdings
Partnership Agreement.'
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----- --- ---------
<S> <C> <C>
Donald C. Graham................................ 65 Chairman of the Advisory Committee of Holdings
William H. Kerlin, Jr. ......................... 47 Vice Chairman of the Advisory Committee of
Holdings
Philip R. Yates................................. 50 President and Chief Executive Officer of the
Operating Company
G. Robinson Beeson.............................. 49 Senior Vice President and General Manager,
Automotive of the Operating Company
Scott G. Booth.................................. 41 Senior Vice President and General Manager,
Household Cleaning and Personal Care of the
Operating Company
Roger M. Prevot................................. 39 Senior Vice President and General Manager, Food
and Beverage of the Operating Company
Geoffrey R. Lu.................................. 43 Vice President and General Manager, Latin
America of the Operating Company
Alex H. Everhart................................ 37 Senior Vice President and General Manager,
Europe of the Operating Company
John E. Hamilton................................ 39 Senior Vice President, Finance and
Administration of the Operating Company
Chinh E. Chu.................................... 31 Member of the Advisory Committee of Holdings
Howard A. Lipson................................ 34 Member of the Advisory Committee of Holdings
Simon P. Lonergan............................... 29 Member of the Advisory Committee of Holdings
</TABLE>
Donald C. Graham has served as Chairman of the Advisory Committee of
Holdings since the Recapitalization. From June 1993 to the Recapitalization, Mr.
Graham served as Chairman of the Board of Directors of the Company. Prior to
June 1993, Mr. Graham served as President of the Company.
William H. Kerlin, Jr. has served as Vice Chairman of the Advisory
Committee of Holdings since the Recapitalization. From October 1996 to the
Recapitalization, Mr. Kerlin served as Vice Chairman of the Board of Directors
and Chief Executive Officer of the Company. From 1994 to 1996, Mr. Kerlin served
as Vice President of the Company and Vice Chairman of the Company. Prior to
1994, Mr. Kerlin served as Secretary of the Company.
Philip R. Yates has served as President and Chief Executive Officer of the
Operating Company since the Recapitalization. Since the Recapitalization, Mr.
Yates has also served as President and Chief Executive Officer of Opco GP and of
various subsidiaries of the Operating Company or their general partner, as
President, Treasurer and Assistant Secretary of CapCo I and CapCo II, and as a
member of the Boards of Directors of CapCo I and CapCo II. From April 1995 to
the Recapitalization, Mr. Yates served as President and Chief Operating Officer
of the Company. From 1994 to 1995, Mr. Yates served as President of the Company.
Prior to 1994, Mr. Yates served in various management positions with the
Company.
G. Robinson Beeson has served as Senior Vice President or Vice President
and General Manager, Automotive of the Operating Company since the
Recapitalization. From July 1990 to the Recapitalization, Mr. Beeson served as
Vice President and General Manager, U.S. Automotive of the Company.
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<PAGE>
Scott G. Booth has served as Senior Vice President or Vice President and
General Manager, Household Cleaning and Personal Care of the Operating Company
since the Recapitalization. From July 1990 to the Recapitalization, Mr. Booth
served as Vice President and General Manager, U.S. Household Cleaning and
Personal Care of the Company.
Roger M. Prevot has served as Senior Vice President or Vice President and
General Manager, Food and Beverage of the Operating Company since the
Recapitalization. From July 1990 to the Recapitalization, Mr. Prevot served as
Vice President and General Manager, U.S. Food and Beverage of the Company. From
June 1991 to October 1994, Mr. Prevot also served as President and General
Manager of Graham Recycling.
Geoffrey R. Lu has served as Vice President and General Manager, Latin
America of the Operating Company since the Recapitalization. From May 1997 to
the Recapitalization, Mr. Lu served as Vice President and General Manager, Latin
America of the Company. From 1994 to 1997, Mr. Lu served as Director and General
Manager, Latin America of the Company. Prior to 1994, Mr. Lu served as Director,
Global Business Development of the Company.
Alex H. Everhart has served as Senior Vice President or Vice President and
General Manager, Europe of the Operating Company since the Recapitalization.
From November 1994 to the Recapitalization, Mr. Everhart served as Vice
President and General Manager, Canada of the Company. Prior to 1994, Mr.
Everhart served as Vice President, MIS of the Company.
John E. Hamilton has served as Senior Vice President, Finance and
Administration or Vice President, Finance and Administration of the Operating
Company since the Recapitalization. Since the Recapitalization, Mr. Hamilton has
also served as Vice President Finance and Administration, Treasurer and
Secretary of Opco GP and of various subsidiaries of the Operating Company or
their general partner, as Vice President, Secretary and Assistant Treasurer of
CapCo I and CapCo II, and as a member of the Boards of Directors of CapCo I and
CapCo II. From November 1992 to the Recapitalization, Mr. Hamilton served as
Vice President, Finance and Administration, North America of the Company. Prior
to 1992, Mr. Hamilton served in various management positions with the Company.
Chinh E. Chu is a Managing Director of The Blackstone Group L.P. which he
joined in 1990. Since the Recapitalization, Mr. Chu has served as Vice
President, Secretary and Assistant Treasurer of Investor LP and Investor GP, as
a Vice President of CapCo I and CapCo II and as a member of the Boards of
Directors of Investor LP, CapCo I and CapCo II. Prior to joining Blackstone, Mr.
Chu was a member of the Mergers and Acquisitions Group of Salomon Brothers Inc
from 1988 to 1990. He currently serves on the Boards of Directors of Prime
Succession Inc., Roses, Inc. and Haynes International, Inc.
Howard A. Lipson is Senior Managing Director of The Blackstone Group L.P.
which he joined in 1988. Since the Recapitalization, Mr. Lipson has served as
President, Treasurer and Assistant Secretary of Investor LP and Investor GP and
as a member of the Board of Directors of Investor LP. Prior to joining
Blackstone, Mr. Lipson was a member of the Mergers and Acquisitions Group of
Salomon Brothers Inc. He currently serves on the Boards of Directors of Allied
Waste Industries, Inc., Volume Services, Inc., AMF Group Inc., Ritvik Holdings
Inc., Prime Succession Inc. and Roses, Inc.
Simon P. Lonergan is an Associate of The Blackstone Group L.P. which he
joined in 1996. Since the Recapitalization, Mr. Lonergan has served as Vice
President, Assistant Secretary and Assistant Treasurer of Investor LP and
Investor GP, as a Vice President of CapCo I and CapCo II and as a member of the
Boards of Directors of Investor LP, CapCo I and CapCo II. Prior to joining
Blackstone, Mr. Lonergan was an Associate at Bain Capital, Inc. and a Consultant
at Bain and Co. He currently serves on the Board of Directors of CommNet
Cellular, Inc. and the Advisory Committee of InterMedia Partners VI.
The Boards of Directors of CapCo I and CapCo II are comprised of Philip R.
Yates, John E. Hamilton, Chinh E. Chu and Simon P. Lonergan. The Board of
Directors of Investor LP is comprised of Howard A. Lipson, Chinh E. Chu and
Simon P. Lonergan.
Except as described above, there are no arrangements or understandings
between any director or executive officer and any other person pursuant to which
such person was elected or appointed as a director or executive officer.
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EXECUTIVE COMPENSATION
The following table sets forth all cash compensation paid to the Chief
Executive Officer and four other most highly compensated executive officers of
the Company (the 'Named Executive Officers') for the year ended December 31,
1997, and their respective titles at December 31, 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------------- AWARDS
OTHER ANNUAL --------------- ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) COMPENSATION(2) EAUS(#)(3) COMPENSATION
- ---------------------------------------- ---- -------- -------- --------------- --------------- ------------
<S> <C> <C> <C> <C> <C> <C>
William H. Kerlin, Jr.(4)
Chief Executive Officer............... 1997 $140,000 $ 70,000 $ 2,750 -- --
Philip R. Yates
President and Chief Operating
Officer, North America................ 1997 250,000 120,000 6,991 -- --
Jean F. Rubie(5)
President and Chief Operating
Officer, Europe....................... 1997 250,000 120,000 -- -- $330,000
Roger M. Prevot
Vice President and General
Manager, Food & Beverage.............. 1997 164,275 72,000 4,181 150 --
John E. Hamilton
Vice President, Finance and
Administration........................ 1997 133,300 60,000 9,514 100 --
</TABLE>
- ------------------
(1) Represents bonus accrued in 1996 and paid in 1997 under Company's annual
discretionary bonus plan.
(2) Represents contributions to the Company's 401(k) plan and amounts
attributable to both group term life insurance and personal use of company
automobiles.
(3) Represents the number (#) of equity appreciation units awarded under
Holdings' former equity appreciation plan (which was cancelled upon the
Closing). See '--EAU Grants in Last Fiscal Year' and '--Management Awards.'
(4) Mr. Kerlin, who is compensated solely by Graham Capital, provides services
to companies other than Holdings. Amounts set forth for Mr. Kerlin represent
the portion of Mr. Kerlin's compensation allocable to Holdings based on the
amount of services provided to Holdings.
(5) Mr. Rubie's compensation was paid solely by Graham Capital and another
affiliate of the Graham Partners. The amount set forth under 'All Other
Compensation' for Mr. Rubie was a special bonus related to acquisition
activity in Europe. Since the Recapitalization, Mr. Rubie has not been
employed by the Company.
EQUITY APPRECIATION UNITS
Set forth below is certain information with respect to the equity
appreciation units ('EAUs') granted in 1997 under Holdings former equity
appreciation plan (which was cancelled upon the Closing). Under this plan,
10,000 units represented the right to cash payments equal to 1% of the equity
appreciation of Holdings from the date of grant. See '--Management Awards.'
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<PAGE>
EAU GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
- ---------------------------------------------------------------------------------------------------- ANNUAL RATES OF
PERCENT OF APPRECIATION OVER
TOTAL EAU'S FIVE YEARS
GRANTED TO EXERCISE OF --------------------
EAU'S EMPLOYEES IN BASE PRICE EXPIRATION 5% 10%
NAME GRANTED(#) FISCAL YEAR ($/EAU) DATE ($) ($)
- ------------------------------- ---------- ------------ ----------- ---------- ------- --------------------
<S> <C> <C> <C> <C> <C> <C>
William H. Kerlin, Jr.......... -- -- -- -- -- --
Philip R. Yates................ -- -- -- -- -- --
Jean F. Rubie.................. -- -- -- -- -- --
Roger M. Prevot................ 150 11.2% $431.04 None $17,863 $ 39,473
John E. Hamilton............... 100 7.5% 431.04 None 11,909 26,315
</TABLE>
MANAGEMENT AWARDS
Pursuant to the Recapitalization Agreement, immediately prior to the
Closing, Holdings made cash payments to approximately 20 senior level managers
equal to approximately $7.0 million, which represented the aggregate value
payable under Holdings' former equity appreciation plan (which was cancelled
upon the Closing) and additional cash bonuses.
Pursuant to the Recapitalization Agreement, immediately after the Closing,
Holdings granted to approximately 100 middle level managers stay bonuses
aggregating approximately $4.6 million, which are payable over a period of up to
three years.
Pursuant to the Recapitalization Agreement, immediately after the Closing,
Holdings made additional cash payments to approximately 15 senior level managers
equal to approximately $5.0 million, which represented additional cash bonuses
and the taxes payable by such managers in respect of the awards described in
this paragraph. In addition, (a) Holdings made additional cash payments to such
managers equal to approximately $3.1 million, which was used by the recipients
to purchase shares of restricted common stock of Investor LP and (b) each such
recipient was granted the same number of additional restricted shares as the
shares purchased pursuant to clause (a). Such restricted shares vest over a
period of three years, and one-third of any forfeited shares will increase the
Graham Partners' ownership interests in Holdings.
As a result of such equity awards, Management owns an aggregate of
approximately 3.0% of the outstanding common stock of Investor LP, which
constitutes approximately a 2.6% interest in Holdings.
SEVERANCE AGREEMENTS
In connection with the Recapitalization, the Company entered into severance
agreements with Messrs. Yates, Prevot and Hamilton. Such severance agreements
provided that in the event a Termination Event (as defined therein) occurs, the
executive shall receive: (i) a severance allowance equal to one year of salary
(two years for Mr. Yates) payable in equal monthly installments over a one year
period (two years for Mr. Yates); (ii) continued group health and life insurance
coverage for one year (the executive's contribution for which would be the same
contribution as similarly situated executives and would be deducted from the
severance allowance payments); and (iii) a lump sum amount payable when the
Company pays its executives bonuses, equal to the executive's target bonus,
pro-rated to reflect the portion of the relevant year occurring prior to the
executive's termination of employment.
SUPPLEMENTAL INCOME PLAN
Mr. Yates is the sole participant in the Graham Engineering Corporation
Amended Supplemental Income Plan (the 'SIP'). Upon the Closing, the Operating
Company assumed Graham Engineering's obligations under the SIP. The SIP provides
that upon attaining age 65, Mr. Yates shall receive a fifteen year annuity
providing annual payments equal to 25% of his Final Salary (as defined therein).
The SIP also provides that the annuity payments shall be increased annually by a
4% cost of living adjustment. The SIP permits Mr. Yates to retire at or after
attaining age 55 without any reduction in the benefit (although such benefit
would not begin until Mr. Yates
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<PAGE>
attained age 65). In the event that Mr. Yates were to retire prior to attaining
age 55 (the benefit would still commence at age 65), then the annuity payments
would be reduced. In the event that Mr. Yates' employment is terminated by the
Company, without 'just cause' (as defined in the SIP), then upon attaining age
65, he would receive the entire annuity. The SIP provides for similar benefits
in the event of a termination of employment on account of death or disability.
MANAGEMENT OPTION PLAN
Pursuant to the Recapitalization Agreement, the Company has adopted the
Graham Packaging Holdings Company Management Option Plan (the 'Option Plan').
The Option Plan provides for the grant to management employees of Holdings
and its subsidiaries of options ('Options') to purchase limited partnership
interests in Holdings equal to 0.01% of Holdings (prior to any dilution
resulting from any interests granted pursuant to the Option Plan) (each 0.01%
interest being referred to as a 'Unit'). The aggregate number of Units with
respect to which Options may be granted under the Option Plan shall not exceed
500 Units, representing a total of up to 5% of the equity of Holdings. No grants
have yet been made under the Option Plan.
The exercise price per Unit has yet to be determined. The number and type
of Units covered by outstanding Options and exercise prices may be adjusted to
reflect certain events such as recapitalizations, mergers or reorganizations of
or by Holdings. The Option Plan is intended to advance the best interests of the
Company by allowing such employees to acquire an ownership interest in the
Company, thereby motivating them to contribute to the success of the Company and
to remain in the employ of the Company.
A committee (the 'Committee') shall be appointed to administer the Option
Plan, including, without limitation, the determination of the employees to whom
grants will be made, the number of Units subject to each grant, and the various
terms of such grants. The Committee may provide that an Option cannot be
exercised after the merger or consolidation of Holdings into another company or
corporation, the exchange of all or substantially all of the assets of Holdings
for the securities of another corporation, the acquisition by a corporation of
80% or more of Holdings' partnership interest or the liquidation or dissolution
of Holdings, and if the Committee so provides, it will also provide either by
the terms of such Option or by a resolution adopted prior to the occurrence of
such merger, consolidation, exchange, acquisition, liquidation or dissolution,
that, for ten business days prior to such event, such Option shall be
exercisable as to all Units subject thereto, notwithstanding anything to the
contrary in any provisions of such Option and that, upon the occurrence of such
event, such Option shall terminate and be of no further force or effect. The
Committee may also provide that even if the Option shall remain exercisable
after any such event, from and after such event, any such Option shall be
exercisable only for the kind and amount of securities and other property
(including cash), or the cash equivalent thereof, receivable as a result of such
event by the holder of a number of partnership interests for which such Option
could have been exercised immediately prior to such event. No suspension,
termination or amendment of or to the Option Plan shall materially and adversely
affect the rights of any participant with respect to Options issued hereunder
prior to the date of such suspension, termination or amendment without the
consent of such holder.
PENSION PLANS
In the year ended December 31, 1997 and the three months ended March 29,
1998, the Company participated in a noncontributory, defined benefit pension
plan sponsored by Graham Engineering for salaried and hourly employees other
than employees covered by collectively-bargained plans. The Company also
sponsored other noncontributory defined benefit plans under collective
bargaining agreements. These plans covered substantially all of the Company's
U.S. employees. The defined benefit plan for salaried employees provides
retirement benefits based on the final five years average compensation and years
of service, while plans covering hourly employees provide benefits based on
years of service. See Note 10 to the Combined Financial Statements of Graham
Packaging Group for each of the three years in the period ended December 31,
1997.
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<PAGE>
The following table shows estimated annual benefits upon retirement under
the defined benefit plan for salaried employees, based on the final five years
average compensation and years of service, as specified therein:
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
---------------------------------------------------
REMUNERATION 15 20 25 30 35
- ----------------------------------------------------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
125,000.................................................... $27,198 $36,265 $45,331 $54,397 $55,959
150,000.................................................... 33,198 44,265 55,331 66,397 68,272
175,000.................................................... 39,198 52,265 66,331 78,387 80,584
200,000.................................................... 45,198 60,265 75,331 90,397 92,897
225,000.................................................... 51,198 68,265 85,331 102,397 105,209
250,000.................................................... 57,198 76,265 95,331 114,397 117,522
300,000.................................................... 69,198 92,265 115,331 138,397 142,147
400,000.................................................... 93,198 124,265 155,331 186,397 191,397
450,000.................................................... 105,198 140,265 176,331 210,397 216,022
500,000.................................................... 117,198 156,265 195,331 234,397 240,647
</TABLE>
Note: The amounts shown are based on 1998 covered compensation of $31,129 for an
individual born in 1933. In addition, these figures do not reflect the
salary limit of $160,000 and benefit limit under the plan's normal form of
$130,000 in 1998.
The compensation covered by the defined benefit plan for salaried employees
is an amount equal to 'Total Wages' (as defined). This amount includes the
annual Salary and Bonus amounts shown in the Summary Compensation Table above
for the four Named Executive Officers who participated in the plan. Mr. Rubie
did not participate in the plan. The estimated credited years of service for the
year ended December 31, 1997 for each of the four Named Executive Officers
participating in the plan was as follows: William H. Kerlin, Jr., 20 years;
Philip R. Yates, 26 years; Roger M. Prevot, 10 years; and John E. Hamilton, 14
years. Benefits under the plan are computed on the basis of straight-life
annuity amounts. Amounts set forth in the Pension Table are not subject to
deduction for Social Security or other offset amounts.
The Recapitalization Agreement provides that assets of the Graham
Engineering defined benefit plan related to employees not covered by collective
bargaining agreements will be transferred to a new non-contributory defined
benefit plan sponsored by the Company for such employees. Such transfer is
expected to be completed in 1998.
401(K) PLAN
During 1997 and the three months ended March 29, 1998, the Company also
participated in a defined contribution plan under Internal Revenue Code Section
401(k) sponsored by Graham Engineering, which covered all U.S. employees of the
Company except those represented by a collective bargaining unit. The Company's
contributions were determined as a specified percentage of employee
contributions, subject to certain maximum limitations. The Company's costs for
this plan for 1995, 1996, and 1997 were $668,000, $722,000 and $742,000,
respectively. See Note 10 to the Combined Financial Statements of Graham
Packaging Group for each of the three years in the period ended December 31,
1997.
Pursuant to the Recapitalization Agreement, assets of this plan related to
Company employees were transferred to a new plan sponsored by the Company
following the Closing of the Recapitalization.
COMPENSATION OF DIRECTORS AND CERTAIN PARTNERS
The members of the Boards of Directors of CapCo I and CapCo II and Investor
LP are not compensated for their services except that each is reimbursed for his
reasonable expenses in performing his duties as such.
Under the Holdings Partnership Agreement, the Advisory Committee is
comprised of five individuals, three of whom shall be appointed from time to
time by Investor GP and, for so long as the Continuing Graham Partners and their
affiliates do not sell more than two-thirds of their partnership interests owned
at the Closing, two of
74
<PAGE>
whom shall be appointed from time to time by the other general partners. The
Advisory Committee serves solely in an advisory role and does not have any power
to act for or bind Holdings. The Holdings Partnership Agreement provides that,
so long as the Continuing Graham Partners and their affiliates do not sell more
than two-thirds of their partnership interests owned at the Closing, Holdings
will pay to Graham Family Growth Partnership an annual fee of $1.0 million. The
Monitoring Agreement provides that Holdings will pay to Blackstone an annual
Monitoring Fee of $1.0 million. Under the Holdings Partnership Agreement, the
general partners of Holdings are entitled to reimbursement for their expenses in
performing their obligations thereunder. See 'The Partnership Agreements' and
'Certain Relationships and Related Party Transactions.'
SECURITY OWNERSHIP
The following table sets forth the ownership of the Issuers upon the
consummation of the Recapitalization. For a more detailed discussion of certain
ownership interests, see 'The Recapitalization,' 'The Partnership Agreements'
and 'Certain Relationships and Related Party Transactions.' Unless otherwise
noted, the address of each of the entities named below is the Operating
Company's principal executive office.
<TABLE>
<CAPTION>
NAME AND ADDRESS PERCENTAGE
ISSUER OF BENEFICIAL OWNER TYPE OF INTEREST INTEREST
- ----------------------------------------------- -------------------------------- -------------------- ----------
<S> <C> <C> <C>
Graham Packaging Company....................... Holdings Limited Partnership 99%
Opco GP(1) General Partnership 1%
GPC Capital Corp. I............................ Operating Company Common Stock 100%
Graham Packaging Holdings Company.............. Investor LP(2) Limited Partnership 81%
Investor GP(2) General Partnership 4%
Graham Family entities(3) Limited Partnership 14%
Graham Packaging Corporation(3) General Partnership 1%
GPC Capital Corp. II........................... Holdings Common Stock 100%
</TABLE>
- ------------------
(1) Opco GP is a wholly owned subsidiary of Holdings.
(2) Investor GP is a wholly owned subsidiary of Investor LP. Upon the
consummation of the Recapitalization, Blackstone became the beneficial owner
of 100.0% of the common stock of Investor LP, and, following the
consummation of the Recapitalization, Blackstone transferred to Management
approximately 3.0% of such common stock. See 'Management--Management
Awards.' The address of each of the Equity Investors is c/o The Blackstone
Group L.P., 345 Park Avenue, New York, New York 10154. In addition, an
affiliate of BT Alex. Brown Incorporated and Bankers Trust International
PLC, two of the Initial Purchasers of the Old Notes, acquired approximately
a 4.8% equity interest in Investor LP. After giving effect to that
transaction, Blackstone's beneficial ownership of the common stock of
Investor LP declined by a corresponding 4.8%.
(3) Each of these entities is wholly owned, directly or indirectly, by the
Graham family. The address of each of these entities is c/o Graham Capital
Company, 1420 Sixth Avenue, York, Pennsylvania 17403.
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<PAGE>
THE PARTNERSHIP AGREEMENTS
The summaries of the Partnership Agreements set forth below set forth the
material terms of the respective Partnership Agreements. However, such summaries
are not complete and are qualified in their entirety by reference to all
provisions of the Partnership Agreements. Copies of the Partnership Agreements
are exhibits to the Registration Statement of which this Prospectus is a part.
THE OPERATING COMPANY PARTNERSHIP AGREEMENT
The Operating Company was formed under the name 'Graham Packaging Holdings
I, L.P.' on September 21, 1994 as a limited partnership in accordance with the
provisions of the Delaware Revised Uniform Limited Partnership Act. Upon the
Closing of the Recapitalization, the name of the Operating Company was changed
to 'Graham Packaging Company.' The Operating Company will continue until its
dissolution and winding up in accordance with the terms of the Operating Company
Partnership Agreement (as defined).
Prior to the Recapitalization, Graham Recycling Corporation ('Recycling')
was the sole general partner of the Operating Company and Holdings was the sole
limited partner of the Operating Company. As provided in the Recapitalization
Agreement, immediately prior to the Closing, Recycling contributed to Opco GP
its general partnership interest in the Operating Company, and the partnership
agreement of the Operating Company was amended and restated to reflect such
substitution of sole general partner and certain other amendments (the
'Operating Company Partnership Agreement'). Following the Closing, Holdings has
remained the sole limited partner of the Operating Company.
The purpose of the Operating Company is the sale and manufacturing of rigid
plastic containers and any business necessary or incidental thereto.
Management. The Operating Company Partnership Agreement provides that the
general partner shall be entitled in its sole discretion and without the
approval of the other partners to perform or cause to be performed all
management and operational functions relating to the Operating Company and shall
have the sole power to bind the Operating Company. The limited partner shall not
participate in the management or control of the business.
Exculpation and Indemnification. The Operating Company Partnership
Agreement provides that neither the general partner nor any of its affiliates,
nor any of its partners, shareholders, officers, directors, employees or agents,
shall be liable to the Operating Company or any partner for any breach of the
duty of loyalty or any act or omission not in good faith or which involves
intentional misconduct or a knowing violation of law or the Operating Company
Partnership Agreement. The Operating Company shall indemnify the general partner
and its affiliates, and its partners, shareholders, officers, directors,
employees and agents, from and against any claim or liability of any nature
arising out of the assets or business of the Operating Company.
Affiliate Transactions. The Operating Company may enter into transactions
with any partner or any of its affiliates which is not prohibited by applicable
law; provided that, any material transaction with any partner or any of its
affiliates shall be on terms reasonably determined by the General Partner to be
comparable to the terms which can be obtained from third parties.
Transfers of Partnership Interests. The Operating Company Partnership
Agreement provides that the limited partner shall not transfer its limited
partnership interests.
Dissolution. The Operating Company Partnership Agreement provides that the
Operating Company shall be dissolved upon the earliest of (i) December 31, 2044,
(ii) the sale, exchange or other disposition of all or substantially all of the
Operating Company's assets, (iii) the withdrawal, resignation, filing of a
certificate of dissolution or revocation of the charter or bankruptcy of a
general partner, or the occurrence of any other event which causes a general
partner to cease to be a general partner unless there shall be another general
partner, (iv) the withdrawal, resignation, filing of a certificate of
dissolution or revocation of the charter or bankruptcy of a limited partner, or
the occurrence of any other event which causes a limited partner to cease to be
a limited partner unless there shall be another limited partner, (v) the
acquisition by a single person of all of the partnership interests in the
Operating Company, (vi) the issuance of a decree of dissolution by a court of
competent jurisdiction, or (vii) otherwise as required by applicable law.
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<PAGE>
THE HOLDINGS PARTNERSHIP AGREEMENT
Holdings was formed under the name 'Sonoco Graham Company' on April 3, 1989
as a limited partnership in accordance with the provisions of the Pennsylvania
Uniform Limited Partnership Act, and on March 28, 1991, Holdings changed its
name to 'Graham Packaging Company.' Upon the Closing of the Recapitalization,
the name of Holdings was changed to 'Graham Packaging Holdings Company.'
Holdings will continue until its dissolution and winding up in accordance with
the terms of the Holdings Partnership Agreement (as defined).
As contemplated by the Recapitalization Agreement, upon the Closing, Graham
Capital and its successors or assigns, Graham Family Growth Partnership, Graham
GP Corp., Investor LP and Investor GP entered into a Fifth Amended and Restated
Agreement of Limited Partnership (the 'Holdings Partnership Agreement'). The
general partners of the Partnership are Investor GP and Graham GP Corp. The
limited partners of the Partnership are Graham Family Growth Partnership, Graham
Capital and Investor LP.
The purpose of Holdings is the sale and manufacturing of rigid plastic
containers and any business necessary or incidental thereto.
Management; Advisory Committee. The Holdings Partnership Agreement
provides that the general partner elected by the general partner(s) holding a
majority of the general partnership interests in Holdings (the 'Managing General
Partner') shall be entitled in its sole discretion and without the approval of
the other partners to perform or cause to be performed all management and
operational functions relating to Holdings and shall have the sole power to bind
Holdings, except for certain actions in which the Managing General Partner shall
need the approval of the other general partners. The limited partners shall not
participate in the management or control of the business.
The partnership and the general partners shall be advised by a committee
(the 'Advisory Committee') comprised of five individuals, three of whom shall be
appointed from time to time by Investor GP and, for so long as the Continuing
Graham Partners and their affiliates do not sell more than two-thirds of their
partnership interests owned at the Closing, two of whom shall be appointed from
time to time by the other general partners. Such committee shall serve solely in
an advisory role and shall not have any power to act for or bind Holdings.
Annual Fee. The Holdings Partnership Agreement provides that, so long as
the Continuing Graham Partners and their affiliates do not sell more than
two-thirds of their partnership interests owned at the Closing, Holdings will
pay to Graham Family Growth Partnership an annual fee of $1.0 million.
Exculpation and Indemnification. The Holdings Partnership Agreement
provides that no general partner nor any of its affiliates, nor any of its
respective partners, shareholders, officers, directors, employees or agents,
shall be liable to Holdings or any of the limited partners for any act or
omission, except resulting from its own willful misconduct or bad faith, any
breach of its duty of loyalty or willful breach of its obligations as a
fiduciary, or any breach of certain terms of the Holdings Partnership Agreement.
Holdings shall indemnify the general partners and their affiliates, and their
respective partners, shareholders, officers, directors, employees and agents,
from and against any claim or liability of any nature arising out of the assets
or business of Holdings.
Affiliate Transactions. Holdings may not enter into any transaction with
any partner or any of its affiliates unless the terms thereof are believed by
the general partners to be in the best interests of Holdings and are
intrinsically fair to Holdings and equally fair to each of the partners;
provided that, Holdings may perform and comply with the Recapitalization
Agreement, the Equipment Sales Agreement, the Consulting Agreement and the
Monitoring Agreement (as defined).
Transfers of Partnership Interests. The Holdings Partnership Agreement
provides that, subject to certain exceptions including, without limitation, in
connection with an IPO Reorganization (as defined) and the transfer rights
described below, general partners shall not withdraw from Holdings, resign as a
general partner, nor transfer their general partnership interests without the
consent of all general partners, and limited partners shall not transfer their
limited partnership interests.
If any Continuing Graham Partner wishes to sell or otherwise transfer its
partnership interests pursuant to a bona fide offer from a third party, Holdings
and the Equity Investors must be given a prior opportunity to purchase such
interests at the same purchase price set forth in such offer. If Holdings and
the Equity Investors do
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<PAGE>
not elect to make such purchase, then such Continuing Graham Partner may sell or
transfer such partnership interests to such third party upon the terms set forth
in such offer. If the Equity Investors wish to sell or otherwise transfer their
partnership interests pursuant to a bona fide offer from a third party, the
Continuing Graham Partners shall have a right to include in such sale or
transfer a proportionate percentage of their partnership interests. If the
Equity Investors (so long as they hold 51% or more of the partnership interests)
wish to sell or otherwise transfer their partnership interests pursuant to a
bona fide offer from a third party, the Equity Investors shall have the right to
compel the Continuing Graham Partners to include in such sale or transfer a
proportionate percentage of their partnership interests.
Dissolution. The Holdings Partnership Agreement provides that Holdings
shall be dissolved upon the earliest of (i) the sale, exchange or other
disposition of all or substantially all of Holdings' assets (including pursuant
to an IPO Reorganization), (ii) the withdrawal, resignation, filing of a
certificate of dissolution or revocation of the charter or bankruptcy of a
general partner, or the occurrence of any other event which causes a general
partner to cease to be a general partner unless (a) the remaining general
partner elects to continue the business or (b) if there is no remaining general
partner, a majority-in-interest of the limited partners elect to continue the
partnership, or (iii) such date as the partners shall unanimously elect.
IPO Reorganization. 'IPO Reorganization' means the transfer of all or
substantially all of Holdings' assets and liabilities to CapCo II in
contemplation of an initial public offering of the shares of common stock of
CapCo II. The Holdings Partnership Agreement provides that, without the approval
of each general partner, the IPO Reorganization may not be effected through any
entity other than CapCo II.
Tax Distributions. The Partnership Agreement requires certain tax
distributions to be made.
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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
The summaries of agreements set forth below do not purport to be complete
and are qualified in their entirety by reference to all the provisions of such
agreements. Copies of the Recapitalization Agreement, the Consulting Agreement,
the Equipment Sales Agreement and the Partners Registration Rights Agreement are
exhibits to the Registration Statement of which this Prospectus is a part.
TRANSACTIONS WITH GRAHAM PARTNERS AND OTHERS
Prior to the Closing of the Recapitalization, Donald C. Graham, as lessor,
and Holdings, as lessee, were parties to four lease agreements relating to two
properties in Berkeley, Missouri and two properties in York, Pennsylvania. For
the year ended December 31, 1997, the Company paid Donald C. Graham $2.0 million
in the aggregate pursuant to such lease agreements. Upon the consummation of the
Recapitalization, the real property subject to each such lease agreement was
contributed to the Operating Company as part of the Graham Contribution. See
'The Recapitalization.'
Prior to the Closing, York Transportation and Leasing, Inc. (an affiliate
of the Graham Partners), as lessor, and Graham Packaging Canada, Ltd., as
lessee, were parties to three lease agreements relating to properties located in
Missassuaga, Ontario, Burlington, Ontario and Anjou, Quebec. For the year ended
December 31, 1997, the Company paid York Transportation and Leasing $0.6 million
in the aggregate pursuant to such lease agreements. Upon the Closing, the real
property subject to each such lease agreement was contributed to the Operating
Company as part of the Graham Contribution. See 'The Recapitalization.'
Prior to the Closing, Graham GP Corp., Graham Capital and Graham Europe
Limited (affiliates of the Graham Partners) were parties to management
agreements, pursuant to which Donald C. Graham, William H. Kerlin, Jr. and
others provided management services and served as executive officers of the
Company. The Company paid $1.7 million for the year ended December 31, 1997 for
such services.
Prior to the Closing, Holdings, Graham Capital, Graham GP Corp. and York
Transportation and Leasing were all parties to an Airplane Lease
Agreement/Aircraft Sharing Agreement. The Company paid $0.3 million for the year
ended December 31, 1997 pursuant to such agreement.
For the year ended December 31, 1997, the Company also paid Viking Graham
Corporation (an affiliate of the Graham Partners) $0.6 million for certain
consulting services.
All of the agreements described above were terminated upon the Closing.
Donald C. Graham and Jean Rubie are each one-third owners of Techne
Technipack Engineering Italia S.p.A. ('Techne'). Techne supplies shuttle
blow-molders to many of the Company's non-U.S. facilities. The Company paid
Techne approximately $3.5 million for such equipment for the year ended December
31, 1997. Prior to the Recapitalization, Mr. Rubie served as General Manager,
Europe, of the Company.
Graham Engineering has supplied both services and equipment to the Company.
The Company paid Graham Engineering approximately $11.3 million for such
services and equipment for the year ended December 31, 1997.
The Company has provided certain services to Graham Engineering. Graham
Engineering paid the Company approximately $1.0 million for such services for
the year ended December 31, 1997. In addition, in the fourth quarter of 1997,
the Company sold certain bottle manufacturing equipment to Graham Engineering
for approximately $3.4 million, and Graham Engineering sold such equipment to
Banco SRL S.A., a Brazilian commercial bank ('Banco SRL'), transmitting the
manufacturer's warranty on such equipment in a transaction financed by the
Company. The equipment is currently operated by the Company at a customer's
facility in Rio de Janeiro, Brazil, such equipment having been leased by the
customer from Banco SRL.
An affiliate of BT Alex. Brown Incorporated and Bankers Trust International
PLC, two of the Initial Purchasers of the Old Notes, acquired approximately a
4.8% equity interest in Investor LP. See 'Security Ownership.' Bankers Trust
Company, an affiliate of BT Alex. Brown Incorporated and Bankers Trust
International PLC, acted as administrative agent and provided a portion of the
financing under the New Credit Facility entered into in connection with the
Recapitalization, for which it received customary commitment and other fees and
compensation. See 'Description of the New Credit Facility.' Pursuant to the
Purchase Agreement
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dated January 23, 1998, the Initial Purchasers, BT Alex. Brown Incorporated,
Bankers Trust International PLC, Lazard Freres & Co. LLC and Salomon Brothers
Inc, purchased the Senior Subordinated Old Notes at a price of 97.0% of the
principal amount (for a discount of 3% from the initial offering price of 100%),
and the Senior Discount Old Notes at a price of 57.173% of the principal amount
(for a discount of 2.381% from the initial offering price of 59.534%). Pursuant
to the Purchase Agreement, the Issuers also reimbursed the Initial Purchasers
for certain expenses.
THE PARTNERSHIP AGREEMENTS
For a description of the Operating Company Partnership Agreement and the
Holdings Partnership Agreement, including certain fees payable by Holdings
thereunder, see 'The Partnership Agreements.'
PARTNERS REGISTRATION RIGHTS AGREEMENT
Pursuant to the Recapitalization Agreement, upon the Closing, Holdings,
CapCo II, the Continuing Graham Partners, the Equity Investors and Blackstone
entered into a registration rights agreement (the 'Partners Registration Rights
Agreement'). Under the Partners Registration Rights Agreement, CapCo II will
grant, with respect to the shares of its common stock to be distributed pursuant
to an IPO Reorganization, (i) to the Continuing Graham Partners and their
affiliates (and their permitted transferees of partnership interests in
Holdings) two 'demand' registrations after an initial public offering of the
shares of common stock of CapCo II has been consummated and customary
'piggyback' registration rights (except with respect to such initial public
offering, unless Blackstone and its affiliates are selling their shares in such
offering) and (ii) to the Equity Investors, Blackstone and their affiliates an
unlimited number of 'demand' registrations and customary 'piggyback'
registration rights. The Partners Registration Rights Agreement also provides
that CapCo II will pay certain expenses of the Continuing Graham Partners, the
Equity Investors, Blackstone and their respective affiliates relating to such
registrations and indemnify them against certain liabilities which may arise
under the Securities Act. See 'The Partnership Agreements--Holdings Partnership
Agreement.'
CERTAIN BUSINESS RELATIONSHIPS
Equipment Sales Agreement. Pursuant to the Recapitalization Agreement,
upon the Closing, Holdings and Graham Engineering entered into the Equipment
Sales, Service and Licensing Agreement ('Equipment Sales Agreement'), which
provides that, with certain exceptions, (i) Graham Engineering will sell to
Holdings and its affiliates certain of Graham Engineering's larger-sized
proprietary extrusion blow molding wheel systems ('Graham Wheel Systems'), at a
price to be determined on the basis of a percentage mark-up of material, labor
and overhead costs that is as favorable to Holdings as the percentage mark-up
historically offered by Graham Engineering to Holdings and is as favorable as
the mark-up on comparable equipment offered to other parties, (ii) each party
will provide consulting services to the other party at hourly rates ranging from
$60 to $200 (adjusted annually for inflation) and (iii) Graham Engineering will
grant to Holdings a nontransferable, nonexclusive, perpetual, royalty-free right
and license to use certain technology. Subject to certain exceptions set forth
in the Equipment Sales Agreement, Holdings and its affiliates will have the
exclusive right to purchase, lease or otherwise acquire the applicable Graham
Wheel Systems in North America and South America, the countries comprising the
European Economic Community as of the Closing and any other country in or to
which Holdings has produced or shipped extrusion blow molded plastic bottles
representing sales in excess of $1.0 million in the most recent calendar year.
The Equipment Sales Agreement terminates on December 31, 2007, unless mutually
extended by the parties. After December 31, 1998, either party may terminate the
other party's right to receive consulting services.
Consulting Agreement. Pursuant to the Recapitalization Agreement, upon the
Closing, Holdings and Graham Capital entered into a Consulting Agreement (the
'Consulting Agreement'), pursuant to which Graham Capital will provide Holdings
with general business, operational and financial consulting services at mutually
agreed retainer or hourly rates (ranging from $200 to $750 per hour). The
Consulting Agreement terminates on the second anniversary of the Closing, unless
mutually extended by the parties.
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PROMISSORY NOTES OF GRAHAM PARTNERS
From 1994 through the Closing, there was outstanding $20.2 million
principal amount of promissory notes owed by the Graham Partners to Holdings,
which had been contributed by the Graham Partners as capital in Holdings. Such
promissory notes (including accrued interest) were repaid in full in connection
with the Recapitalization. For the year ended December 31, 1997, accrued
interest income on the promissory notes was approximately $1.0 million.
PAYMENT OF CERTAIN FEES AND EXPENSES
In connection with the Recapitalization, Blackstone received a fee of
approximately $9.3 million, and the Operating Company has reimbursed or will
reimburse Blackstone for all out-of-pocket expenses incurred in connection with
the Recapitalization. In addition, pursuant to a monitoring agreement (the
'Monitoring Agreement') entered into among Blackstone, Holdings and the
Operating Company, Blackstone will receive a monitoring fee equal to $1.0
million per annum, and will be reimbursed for certain out-of-pocket expenses. In
the future, an affiliate or affiliates of Blackstone may receive customary fees
for advisory and other services rendered to Holdings and its subsidiaries. If
such services are rendered in the future, the fees will be negotiated from time
to time on an arm's length basis and will be based on the services performed and
the prevailing fees then charged by third parties for comparable services.
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DESCRIPTION OF THE NEW CREDIT FACILITY
The summary of the New Credit Facility set forth below does not purport to
be complete and is qualified in its entirety by reference to all the provisions
of the definitive Credit Agreement governing the New Credit Facility. A copy of
such Credit Agreement is an exhibit to the Registration Statement of which this
Prospectus is a part.
GENERAL
As part of the Recapitalization, the Operating Company entered into a
credit facility (the 'New Credit Facility') with Bankers Trust Company ('BT'),
as administrative agent, and the several lenders parties thereto. The New Credit
Facility consists of term loan facilities (the 'Term Loan Facilities') in an
aggregate principal amount of $395.0 million, a revolving credit facility (the
'Revolving Credit Facility') in an aggregate principal amount of up to $155.0
million and a revolving credit facility in an aggregate principal amount of up
to $100.0 million (the 'Growth Capital Revolving Facility,' and, together with
the Term Loan Facilities and the Revolving Facility, the 'Facilities'). The
following is a summary description of the principal terms of the New Credit
Facility and is subject to, and qualified in its entirety by reference to, the
definitive agreement, which is filed as an exhibit to the Registration Statement
and incorporated herein by reference.
All obligations of the Operating Company under the New Credit Facility are
unconditionally and irrevocably guaranteed jointly and severally by Holdings and
each of Holdings' present and future domestic subsidiaries (other than the
Operating Company) ('Loan Guarantors'). Indebtedness under the New Credit
Facility is secured by a first priority perfected security interest in (i) all
of the capital stock, partnership interests and promissory notes owned by the
Operating Company and the Loan Guarantors of their domestic subsidiaries and up
to 65% of the equity interests of material foreign subsidiaries and (ii)
substantially all other tangible and intangible assets (including receivables,
contract rights, securities, patents, trademarks, other intellectual property,
inventory, equipment and certain fee owned real estate) owned by the Operating
Company and each Loan Guarantor.
TERM LOAN FACILITIES
The Term Loan Facilities consist of three tranches of term loans in an
aggregate principal amount of $395.0 million. The Tranche A term loans are in an
aggregate principal amount of $75.0 million, the Tranche B term loans are in an
aggregate principal amount of $175.0 million, and the Tranche C term loans are
in an aggregate principal amount of $145.0 million. The loans under the Term
Loan Facilities (the 'Term Loans') were made in a single drawing at the Closing
of the Recapitalization. The Tranche A term loans will mature on the sixth
anniversary of the Closing, the Tranche B term loans will mature on the eighth
anniversary of the Closing, and the Tranche C term loans will mature on the
ninth anniversary of the Closing. Installments of the Tranche A term loans will
be due in equal quarterly amounts totalling $10.0 million in year 3, $15.0
million in year 4, $20.0 million in year 5, and $30.0 million in year 6.
Installments of the Tranche B term loans will be due in aggregate principal
amounts per annum equal to 1% of the initial aggregate principal amount of
Tranche B term loans for the first six years after the Closing and the remaining
amount of Tranche B term loans will be due in eight quarterly amortization
payments in the seventh and eighth years after the Closing. Installments of the
Tranche C term loans will be due in aggregate principal amounts per annum equal
to 1% of the initial aggregate principal amount of Tranche C term loans for the
first eight years after the Closing and the remaining amount of Tranche C term
loans will be due in four quarterly amortization payments in the ninth year
after the Closing.
REVOLVING CREDIT FACILITY
The Revolving Credit Facility consists of a revolving credit facility in an
aggregate principal amount of $155.0 million. The Operating Company is entitled
to draw amounts under the Revolving Credit Facility for general corporate
purposes. The Revolving Credit Facility includes sub-limits for letters of
credit and swingline loans ('Swingline Loans'). The Revolving Credit Facility
will mature on the sixth anniversary of the Closing.
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GROWTH CAPITAL REVOLVING CREDIT FACILITY
The Growth Capital Revolving Facility consists of a revolving credit
facility in an aggregate principal amount of $100.0 million. The Operating
Company is entitled to draw amounts under the Growth Capital Revolving Facility
for capital expenditure requirements and to finance acquisitions and
investments, provided that loans under the Growth Capital Revolving Facility may
only be incurred to the extent that such loans are matched with equity
contributions from the principal equity holders of Investor LP (which equity
contributions shall, in turn, ultimately be contributed to the Operating
Company), on a dollar-for-dollar basis. The Growth Capital Revolving Facility
will mature on the sixth anniversary of the Closing.
AVAILABILITY
The full amount of the Term Loan Facilities was drawn in a single drawing
at the Closing, and $8.5 million was drawn under the Revolving Credit Facility
at the Closing. The loans under the Revolving Credit Facility and the Growth
Capital Revolving Facility (the 'Revolving Loans' and 'Growth Capital Loans,'
respectively, and, together with the Term Loans, the 'Loans') are subject to
various conditions precedent typical of bank facilities of this type and may be
borrowed, repaid and reborrowed after the Closing. Utilization under the Growth
Capital Revolving Facility will be matched by equity contributions, as described
above.
INTEREST RATES
The Operating Company may elect that all or a portion of the Loans, other
than the Swingline Loans, bear interest at the eurodollar rate (the 'Eurodollar
Rate') plus the applicable interest margin, or the base rate (the 'Base Rate')
plus the applicable interest margin. The Base Rate is defined as the higher of
(i) the overnight federal funds rate, plus 1/2% and (ii) the prime lending rate
of BT. The Eurodollar Rate is defined as the rate at which eurodollar deposits
for one, two, three or six months or (if and when available to all of the
relevant lenders) nine or twelve months are offered to BT in the London
interbank eurodollar market. The applicable interest margin for Tranche A term
loans, Revolving Loans and Growth Capital Loans is 1.25% for Base Rate loans and
2.25% for Eurodollar Rate loans. The applicable interest margin for Tranche B
term loans is 1.75% for Base Rate loans and 2.75% for Eurodollar Rate loans. The
applicable interest margin for Tranche C term loans is 2.00% for Base Rate loans
and 3.00% for Eurodollar Rate loans. The interest margins for the Loans are
subject to reduction, as long as no default or event of default exists under the
New Credit Facility based on the leverage ratio. Interest accrues quarterly on
Base Rate Loans.
MANDATORY AND OPTIONAL REPAYMENT
The Term Loan Facilities shall be prepaid, subject to certain conditions
and exceptions, with (i) 100% of the net proceeds of any incurrence of
indebtedness, subject to certain exceptions, by Holdings or its subsidiaries,
(ii) 75% of the net proceeds of issuances of equity, subject to certain
exceptions, after the Closing by Holdings or any of its subsidiaries, (iii) 100%
of the net proceeds of certain asset dispositions, (iv) 50% of the annual excess
cash flow (as such term is defined in the New Credit Facility) of Holdings and
its subsidiaries on a consolidated basis and (v) 100% of the net proceeds from
any condemnation and insurance recovery events, subject to certain reinvestment
rights. The foregoing mandatory prepayments will first be applied pro rata to
reduce outstanding Tranche A, Tranche B and Tranche C term loans (and to
installments of each Tranche on a pro rata basis or, in the case of prepayments
based on excess cash flow, in direct order of maturity), provided, however, that
at the Operating Company's election, (i) up to $30 million in the aggregate of
mandatory prepayments (to the extent based on annual excess cash flow) and
voluntary prepayments will be applied first to prepay outstanding Tranche A term
loans and, to the extent in excess thereof, as otherwise provided herein for
mandatory prepayments and (ii) at any time that Tranche A term loans are
outstanding, the holders of Tranche B term loans and Tranche C term loans may
decline to accept voluntary or mandatory prepayment of Tranche B term loans or
Tranche C term loans, as the case may be, and such amounts shall be applied to
the Tranche A term loans. Prepayments in excess of the amount of outstanding
term loans will be applied (i) first, to reduce the commitments under the Growth
Capital Revolving Facility (and, in the case of any reduction of commitments
pursuant to this clause (i), a like principal amount of Growth Capital Revolving
loans, to the extent then outstanding, shall also be required to be prepaid at
such time) and (ii) second, to reduce the commitments under the Revolving Credit
Facility. The New Credit Facility provides that the Operating Company may
voluntarily
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prepay loans in whole or in part without penalty, subject to minimum
prepayments. Prepayments of Eurodollar Rate Loans shall be subject to
reimbursement of the lenders' breakage and redeployment costs. Optional
prepayments of the Term Loans will be applied pro rata to reduce outstanding
Tranche A, Tranche B and Tranche C term loans (and to installments of each
Tranche in the direct order).
COVENANTS
The New Credit Facility contains certain covenants and other requirements
of Holdings and its subsidiaries. The affirmative covenants provide for, among
other things, mandatory reporting by Holdings of financial and other information
to the administrative agent and notice by Holdings to the agent upon the
occurrence of certain events. The affirmative covenants also include standard
covenants requiring Holdings and its subsidiaries to operate its business in an
orderly manner and consistent with past practice and requiring maintenance of
interest rate protection.
The New Credit Facility also contains certain negative covenants and
restrictions on actions by Holdings and its subsidiaries, including, without
limitation, restrictions on indebtedness, liens, guarantee obligations, mergers,
asset dispositions, investments, loans, advances, acquisitions, dividends and
other restricted junior payments, transactions with affiliates, changes in
business conducted and prepayments and amendments of subordinated indebtedness.
The New Credit Facility also requires Holdings and its subsidiaries to meet
certain financial covenants.
EVENTS OF DEFAULT
The New Credit Facility specifies certain customary events of default
including, without limitation, non-payment of principal, non-payment of interest
or fees (with a customary grace period), violation of covenants, inaccuracy of
representations and warranties in any material respect, cross-default to certain
other indebtedness, bankruptcy and insolvency events, material judgments,
violations of the Employee Retirement Income Security Act of 1974, as amended,
change of control transactions, failure to maintain security interests,
invalidity or asserted invalidity of credit documents, including guarantees and
failure of the New Credit Facility and guarantees thereof to be senior in right
of payment.
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THE SENIOR SUBORDINATED EXCHANGE OFFERS
GENERAL
The Company Issuers hereby offer, upon the terms and subject to the
conditions set forth in this Prospectus and in the applicable Letters of
Transmittal (which together constitute the Senior Subordinated Exchange Offers),
(i) to exchange an aggregate of up to $150,000,000 principal amount of their
Fixed Rate Senior Subordinated Exchange Notes for an equal principal amount of
their issued and outstanding Fixed Rate Senior Subordinated Old Notes, and (ii)
to exchange an aggregate of up to $75,000,000 principal amount of their Floating
Rate Senior Subordinated Exchange Notes for an equal principal amount of their
issued and outstanding Floating Rate Senior Subordinated Old Notes, in each case
properly tendered on or prior to the applicable Senior Subordinated Expiration
Date and not withdrawn as permitted pursuant to the procedures described below.
This Prospectus and the Letter of Transmittal related to the Fixed Rate Senior
Subordinated Notes together constitute the Fixed Rate Senior Subordinated
Exchange Offer, and this Prospectus and the Letter of Transmittal related to the
Floating Rate Senior Subordinated Notes together constitute the Floating Rate
Senior Subordinated Exchange Offer. The Senior Subordinated Exchange Notes will
be unconditionally guaranteed by Holdings (the 'Holdings Guarantee') on a senior
subordinated basis. Upon the terms and subject to the conditions set forth in
this Prospectus and in the applicable Letter of Transmittal, Holdings hereby
offers to issue the Holdings Guarantee with respect to all Senior Subordinated
Exchange Notes issued in the Senior Subordinated Exchange Offers in exchange for
Holdings' outstanding guarantees (the 'Old Holdings Guarantee') of the Senior
Subordinated Old Notes. Throughout this Prospectus, references to the Senior
Subordinated Exchange Offers include the offer of Holdings to exchange the
Holdings Guarantee for the Old Holdings Guarantee, whether so expressed or not.
Throughout this Prospectus, references to the 'Letter of Transmittal' refer to
the form of Letter of Transmittal that is applicable to the Fixed Rate Senior
Subordinated Notes, the Floating Rate Senior Subordinated Notes or the Senior
Discount Notes, as the context requires, whether so expressed or not. The Senior
Subordinated Exchange Offers are being made with respect to all of the Senior
Subordinated Old Notes.
As of the date of this Prospectus, $150,000,000 aggregate principal amount
of Fixed Rate Senior Subordinated Old Notes is outstanding and $75,000,000
aggregate principal amount of Floating Rate Senior Subordinated Old Notes is
outstanding. This Prospectus and the applicable Letters of Transmittal are first
being sent on or about , 1998, to all holders of Senior
Subordinated Old Notes known to the Company Issuers. The Company Issuers'
obligation to accept Senior Subordinated Old Notes for exchange pursuant to the
Senior Subordinated Exchange Offers is subject to certain conditions set forth
under 'Certain Conditions to the Senior Subordinated Exchange Offers' below. The
Company Issuers currently expect that each of the conditions will be satisfied
and that no waivers will be necessary.
PURPOSE OF THE SENIOR SUBORDINATED EXCHANGE OFFERS
The Senior Subordinated Old Notes were issued on February 2, 1998 in
transactions exempt from the registration requirements of the Securities Act.
Accordingly, the Senior Subordinated Old Notes may not be reoffered, resold, or
otherwise transferred unless so registered or unless an applicable exemption
from the registration and prospectus delivery requirements of the Securities Act
is available.
In connection with the issuance and sale of the Senior Subordinated Old
Notes, the Company Issuers and Holdings, as guarantor, entered into the Senior
Subordinated Registration Rights Agreement, which requires the Company Issuers
and Holdings to file with the Commission a registration statement relating to
the Senior Subordinated Exchange Offers not later than 120 days after the date
of issuance of the Senior Subordinated Old Notes and to use their best efforts
to cause the registration statement relating to the Senior Subordinated Exchange
Offers to become effective under the Securities Act not later than 180 days
after the date of issuance of the Senior Subordinated Old Notes. In addition,
the Senior Subordinated Registration Rights Agreement provides for certain
remedies if the Senior Subordinated Exchange Offers are not consummated or a
shelf registration statement with respect to Senior Subordinated Old Notes is
not made effective within the time periods specified therein. See 'Senior
Subordinated Exchange Offers; Senior Subordinated Registration Rights.' A copy
of the Senior Subordinated Registration Rights Agreement has been filed as an
exhibit to the Registration Statement.
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The Senior Subordinated Exchange Offers are being made by the Company
Issuers to satisfy their obligations with respect to the Senior Subordinated
Registration Rights Agreement. The term 'holder,' with respect to the Senior
Subordinated Exchange Offers, means any person in whose name Senior Subordinated
Old Notes are registered on the books of the Company Issuers or any other person
who has obtained a properly completed bond power from the registered holder, or
any person whose Senior Subordinated Old Notes are held of record by The
Depository Trust Company or its nominee. Other than pursuant to the Senior
Subordinated Registration Rights Agreement, the Company Issuers and Holdings are
not required to file any registration statement to register any outstanding
Senior Subordinated Old Notes. Holders of Senior Subordinated Old Notes who do
not tender their Senior Subordinated Old Notes or whose Senior Subordinated Old
Notes are tendered but not accepted would have to rely on exceptions to the
registration requirements under the securities laws, including the Securities
Act, if they wish to sell their Senior Subordinated Old Notes.
The Company Issuers are making the Senior Subordinated Exchange Offers in
reliance on the position of the Staff of the Commission as set forth in certain
interpretive letters addressed to third parties in other transactions. However,
the Company Issuers have not sought their own interpretive letter and there can
be no assurance that the Staff would make a similar determination with respect
to the Senior Subordinated Exchange Offers as it has in such interpretive
letters to third parties. Based on these interpretations by the Staff, the
Company Issuers believe that the Senior Subordinated Exchange Notes issued
pursuant to the Senior Subordinated Exchange Offers in exchange for Senior
Subordinated Old Notes may be offered for resale, resold and otherwise
transferred by a Holder (other than any Holder who is a broker-dealer or an
'affiliate' of the Company Issuers or Holdings within the meaning of Rule 405 of
the Securities Act) without further compliance with the registration and
prospectus delivery requirements of the Securities Act, provided that such
Senior Subordinated Exchange Notes are acquired in the ordinary course of such
Holder's business and that such Holder is not participating, and has no
arrangement or understanding with any person to participate, in a distribution
(within the meaning of the Securities Act) of such Senior Subordinated Exchange
Notes. See '--Resale of Senior Subordinated Exchange Notes.' Each broker-dealer
that receives Senior Subordinated Exchange Notes for its own account in exchange
for Senior Subordinated Old Notes, where such Senior Subordinated Old Notes were
acquired by such broker-dealer as a result of market-making activities or other
trading activities, must acknowledge that it will deliver a prospectus in
connection with any resale of such Senior Subordinated Exchange Notes. See 'Plan
of Distribution.'
TERMS OF THE EXCHANGE
The Company Issuers hereby offer, subject to the conditions set forth
herein and in the applicable Letters of Transmittal accompanying this
Prospectus, (i) to exchange $1,000 principal amount of Fixed Rate Senior
Subordinated Exchange Notes for each $1,000 principal amount of their issued and
outstanding Fixed Rate Senior Subordinated Old Notes, and (ii) to exchange
$1,000 principal amount of Floating Rate Senior Subordinated Exchange Notes for
each $1,000 principal amount of their issued and outstanding Floating Rate
Senior Subordinated Old Notes, in each case properly tendered on or prior to the
applicable Senior Subordinated Expiration Date and not withdrawn as permitted
pursuant to the procedures described below. The terms of the Fixed Rate Senior
Subordinated Exchange Notes and the Floating Rate Senior Subordinated Exchange
Notes are identical in all material respects to the terms of the Fixed Rate
Senior Subordinated Old Notes and the Floating Rate Senior Subordinated Old
Notes, respectively, for which they may be exchanged pursuant to the applicable
Senior Subordinated Exchange Offer, except that the Senior Subordinated Exchange
Notes will generally be freely transferable by holders thereof and will not be
subject to any covenant regarding registration. The Fixed Rate Senior
Subordinated Exchange Notes and the Floating Rate Senior Subordinated Exchange
Notes will evidence the same indebtedness as the Fixed Rate Senior Subordinated
Old Notes and the Floating Rate Senior Subordinated Old Notes, respectively, and
will be entitled to the benefits of the Senior Subordinated Indenture. See
'Description of Senior Subordinated Exchange Notes.'
The Senior Subordinated Exchange Offers are not conditioned upon any
minimum aggregate principal amount of Senior Subordinated Old Notes being
tendered for exchange.
The Company Issuers have not requested, and do not intend to request, an
interpretation by the Staff of the Commission with respect to whether the Senior
Subordinated Exchange Notes issued pursuant to the Senior Subordinated Exchange
Offers in exchange for the Senior Subordinated Old Notes may be offered for
sale, resold
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or otherwise transferred by any holder without compliance with the registration
and prospectus delivery provisions of the Securities Act. Instead, based on an
interpretation by the Staff of the Commission set forth in a series of no-action
letters issued to third parties, the Company Issuers believe that Senior
Subordinated Exchange Notes issued pursuant to the Senior Subordinated Exchange
Offers in exchange for Senior Subordinated Old Notes may be offered for sale,
resold and otherwise transferred by any holder of such Senior Subordinated
Exchange Notes (other than any such holder that is a broker-dealer or is an
'affiliate' of the Company Issuers or Holdings within the meaning of Rule 405
under the Securities Act) without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that such Senior
Subordinated Exchange Notes are acquired in the ordinary course of such holder's
business and such holder has no arrangement or understanding with any person to
participate in the distribution of such Senior Subordinated Exchange Notes and
neither such holder nor any other such person is engaging in or intends to
engage in a distribution of such Senior Subordinated Exchange Notes. Since the
Commission has not considered the Senior Subordinated Exchange Offers in the
context of a no-action letter, there can be no assurance that the Staff of the
Commission would make a similar determination with respect to the Senior
Subordinated Exchange Offers. Any holder who is an affiliate of the Company
Issuers or who tenders in the Senior Subordinated Exchange Offers for the
purpose of participating in a distribution of the Senior Subordinated Exchange
Notes cannot rely on such interpretation by the Staff of the Commission and must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale transaction. Each holder, other
than a broker-dealer, must acknowledge that it is not engaged in, and does not
intend to engage in, a distribution of Senior Subordinated Exchange Notes. Each
broker-dealer that receives Senior Subordinated Exchange Notes for its own
account in exchange for Senior Subordinated Old Notes, where such Senior
Subordinated Old Notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities, must acknowledge that it
will deliver a prospectus in connection with any resale of such Senior
Subordinated Exchange Notes. A broker-dealer may not participate in the Senior
Subordinated Exchange Offers with respect to Senior Subordinated Old Notes
acquired other than as a result of market-making activities or other trading
activities. See 'Plan of Distribution.'
Interest on the Senior Subordinated Exchange Notes will accrue from the
last Interest Payment Date on which interest was paid on the Senior Subordinated
Old Notes so surrendered or, if no interest has been paid on such Notes, from
February 2, 1998.
Tendering holders of the Senior Subordinated Old Notes will not be required
to pay brokerage commissions or fees or, subject to the instructions in the
Letter of Transmittal, transfer taxes with respect to the exchange of the Senior
Subordinated Old Notes pursuant to the Senior Subordinated Exchange Offers.
EXPIRATION DATES; EXTENSION; TERMINATION; AMENDMENT
The Fixed Rate Senior Subordinated Exchange Offer will expire at 5:00 p.m.,
New York City time, on , 1998 (the 'Fixed Rate Senior
Subordinated Expiration Date'), and the Floating Rate Senior Subordinated
Exchange Offer will expire at 5:00 p.m., New York City time, on
, 1998 (the 'Floating Rate Senior Subordinated Expiration Date'
and, together with the Fixed Rate Senior Subordinated Expiration Date, the
'Senior Subordinated Expiration Dates'), unless the applicable Senior
Subordinated Exchange Offer is extended, in which case the term 'Fixed Rate
Senior Subordinated Expiration Date' or 'Floating Rate Senior Subordinated
Expiration Date' means the latest date and time to which the Fixed Rate Senior
Subordinated Exchange Offer or the Floating Rate Senior Subordinated Exchange
Offer, as the case may be, is extended. The Fixed Rate Senior Subordinated
Expiration Date and the Floating Rate Senior Subordinated Expiration Date will
each be at least 20 business days after the commencement of the related Senior
Subordinated Exchange Offer in accordance with Rule 14e-1(a) under the Exchange
Act. The Company Issuers expressly reserve the right, at any time or from time
to time, to extend the period of time during which either the Fixed Rate Senior
Subordinated Exchange Offer or the Floating Rate Senior Subordinated Exchange
Offer is open, and thereby delay acceptance for exchange of any Fixed Rate
Senior Subordinated Old Notes or Floating Rate Senior Subordinated Old Notes, as
the case may be, by giving oral or written notice to the Senior Subordinated
Exchange Agent and by timely public announcement no later than 9:00 a.m. New
York City time, on the next business day after the applicable Senior
Subordinated Expiration Date previously in effect. During any such extension,
all Senior Subordinated Old Notes previously tendered will remain subject to the
applicable Senior Subordinated Exchange Offer unless properly withdrawn. The
Company Issuers do not anticipate extending either Senior Subordinated
Expiration Date.
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The Company Issuers expressly reserve the right to (i) terminate or amend
either Senior Subordinated Exchange Offer and not to accept for exchange any
Senior Subordinated Old Notes not theretofore accepted for exchange upon the
occurrence of any of the events specified below under 'Certain Conditions to the
Senior Subordinated Exchange Offers' which have not been waived by the Company
Issuers and (ii) amend the terms of the Senior Subordinated Exchange Offers in
any manner which, in their good faith judgment, is advantageous to the holders
of the Senior Subordinated Old Notes, whether before or after any tender of
Senior Subordinated Old Notes. If any such termination or amendment occurs, the
Company Issuers will notify the Senior Subordinated Exchange Agent and will
either issue a press release or give oral or written notice to the holders of
the Senior Subordinated Old Notes as promptly as practicable.
For purposes of the Senior Subordinated Exchange Offers, a 'business day'
means any day other than Saturday, Sunday or a date on which banking
institutions are required or authorized by New York State law to be closed, and
consists of the time period from 12:01 a.m. through 12:00 midnight, New York
City time. Unless the Company Issuers terminate the applicable Senior
Subordinated Exchange Offer prior to 5:00 p.m., New York City time, on the
related Senior Subordinated Expiration Date, the Company Issuers will exchange
the applicable Senior Subordinated Exchange Notes for Senior Subordinated Old
Notes on such Senior Subordinated Exchange Date.
PROCEDURES FOR TENDERING SENIOR SUBORDINATED OLD NOTES
The tender to the Company Issuers of Senior Subordinated Old Notes by a
holder thereof as set forth below and the acceptance thereof by the Company
Issuers will constitute a binding agreement between the tendering holder and the
Company Issuers upon the terms and subject to the conditions set forth in this
Prospectus and in the applicable Letter of Transmittal.
A holder of Senior Subordinated Old Notes may tender the same by (i)
properly completing and signing the applicable Letter of Transmittal or a
facsimile thereof (all references in this Prospectus to a Letter of Transmittal
shall be deemed to include a facsimile thereof) and delivering the same,
together with the certificate or certificates representing the Senior
Subordinated Old Notes being tendered and any required signature guarantees and
any other documents required by such Letter of Transmittal, to the Senior
Subordinated Exchange Agent at its address set forth below on or prior to the
applicable Senior Subordinated Expiration Date (or complying with the procedure
for book-entry transfer described below) or (ii) complying with the guaranteed
delivery procedures described below.
THE METHOD OF DELIVERY OF SENIOR SUBORDINATED OLD NOTES, LETTERS OF
TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE
HOLDERS. IF SUCH DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL
PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED, BE USED. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO INSURE TIMELY DELIVERY. NO SENIOR
SUBORDINATED OLD NOTES OR LETTERS OF TRANSMITTAL SHOULD BE SENT TO THE COMPANY
ISSUERS.
If tendered Senior Subordinated Old Notes are registered in the name of the
signer of the Letter of Transmittal and the Senior Subordinated Exchange Notes
to be issued in exchange therefor are to be issued (and any untendered Senior
Subordinated Old Notes are to be reissued) in the name of the registered holder
(which term, for the purposes described herein, shall include any participant in
The Depository Trust Company (also referred to as a 'book-entry transfer
facility') whose name appears on a security listing as the owner of Senior
Subordinated Old Notes), the signature of such signer need not be guaranteed. In
any other case, the tendered Senior Subordinated Old Notes must be endorsed or
accompanied by written instruments of transfer in form satisfactory to the
Company Issuers and duly executed by the registered holder, and the signature on
the endorsement or instrument of transfer must be guaranteed by a bank, broker,
dealer, credit union, savings association, clearing agency or other institution
(each an 'Eligible Institution') that is a member of a recognized signature
guarantee medallion program within the meaning of Rule 17Ad-15 under the
Exchange Act. In addition, if the Senior Subordinated Exchange Notes and/or
Senior Subordinated Old Notes not exchanged are to be delivered to an address
other than that of the registered holder appearing on the applicable note
register for such Senior Subordinated Old Notes, the signature on the Letter of
Transmittal must be guaranteed by an Eligible Institution.
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The Senior Subordinated Exchange Agent will make a request within two
business days after the date of receipt of this Prospectus to establish accounts
with respect to the Senior Subordinated Old Notes at the book-entry transfer
facility for the purpose of facilitating the Senior Subordinated Exchange
Offers, and subject to the establishment thereof, any financial institution that
is a participant in the book-entry transfer facility's system may make
book-entry delivery of Senior Subordinated Old Notes by causing such book-entry
transfer facility to transfer such Senior Subordinated Old Notes into the Senior
Subordinated Exchange Agent's account with respect to the Senior Subordinated
Old Notes in accordance with the book-entry transfer facility's procedures for
such transfer. Although delivery of Senior Subordinated Old Notes may be
effected through book-entry transfer into the Senior Subordinated Exchange
Agent's account at the book-entry transfer facility, an appropriate Letter of
Transmittal with any required signature guarantee and all other required
documents must in each case be transmitted to and received or confirmed by the
Senior Subordinated Exchange Agent at its address set forth below on or prior to
the applicable Senior Subordinated Expiration Date, or, if the guaranteed
delivery procedures described below are complied with, within the time period
provided under such procedures.
If a holder desires to accept either Senior Subordinated Exchange Offer and
time will not permit the applicable Letter of Transmittal or Senior Subordinated
Old Notes to reach the Senior Subordinated Exchange Agent before the applicable
Senior Subordinated Expiration Date or the procedure for book-entry transfer
cannot be completed on a timely basis, a tender may be effected if the Senior
Subordinated Exchange Agent has received at its address set forth below on or
prior to the applicable Senior Subordinated Expiration Date, a letter, telegram
or facsimile transmission (receipt confirmed by telephone and an original
delivered by guaranteed overnight courier) from an Eligible Institution setting
forth the name and address of the tendering holder, the names in which the
Senior Subordinated Old Notes are registered and, if possible, the certificate
numbers of the Senior Subordinated Old Notes to be tendered, and stating that
the tender is being made thereby and guaranteeing that within three business
days after the applicable Senior Subordinated Expiration Date, the Senior
Subordinated Old Notes in proper form for transfer (or a confirmation of
book-entry transfer of such Senior Subordinated Old Notes into the Senior
Subordinated Exchange Agent's account at the book-entry transfer facility), will
be delivered by such Eligible Institution together with a properly completed and
duly executed Letter of Transmittal (and any other required documents). Unless
Senior Subordinated Old Notes being tendered by the above-described method are
deposited with the Senior Subordinated Exchange Agent within the time period set
forth above (accompanied or preceded by a properly completed Letter of
Transmittal and any other required documents), the Company Issuers may, at their
option, reject the tender. Copies of the forms of notice of guaranteed delivery
('Notice of Guaranteed Delivery') relating to the Fixed Rate Senior Subordinated
Notes and the Floating Rate Senior Subordinated Notes, respectively, which may
be used by Eligible Institutions for the purposes described in this paragraph
are available from the Senior Subordinated Exchange Agent.
A tender will be deemed to have been received as of the date when (i) the
tendering holder's properly completed and duly signed Letter of Transmittal
accompanied by the Senior Subordinated Old Notes (or a confirmation of
book-entry transfer of such Senior Subordinated Old Notes into the Senior
Subordinated Exchange Agent's account at the book-entry transfer facility) is
received by the Senior Subordinated Exchange Agent, or (ii) the applicable
Notice of Guaranteed Delivery or letter, telegram or facsimile transmission to
similar effect (as provided above) from an Eligible Institution is received by
the Senior Subordinated Exchange Agent. Issuances of Senior Subordinated
Exchange Notes in exchange for Senior Subordinated Old Notes tendered pursuant
to a Notice of Guaranteed Delivery or letter, telegram or facsimile transmission
to similar effect (as provided above) by an Eligible Institution will be made
only against deposit of the applicable Letter of Transmittal (and any other
required documents) and the tendered Senior Subordinated Old Notes.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of Senior Subordinated Old Notes tendered for exchange
will be determined by the Company Issuers in their sole discretion, which
determination shall be final and binding. The Company Issuers reserve the
absolute right to reject any and all tenders of any particular Senior
Subordinated Old Notes not properly tendered or not to accept any particular
Senior Subordinated Old Notes which acceptance might, in the judgment of the
Company Issuers or their counsel, be unlawful. The Company Issuers also reserve
the absolute right to waive any defects or irregularities or conditions of the
Senior Subordinated Exchange Offers as to any particular Senior Subordinated Old
Notes either before or after the applicable Senior Subordinated Expiration Date
(including the right to waive the ineligibility of any holder who seeks to
tender Senior Subordinated Old Notes in the Senior Subordinated
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Exchange Offers). The interpretation of the terms and conditions of the Senior
Subordinated Exchange Offers (including the applicable Letter of Transmittal and
the instructions thereto) by the Company Issuers shall be final and binding on
all parties. Unless waived, any defects or irregularities in connection with
tenders of Senior Subordinated Old Notes for exchange must be cured within such
reasonable period of time as the Company Issuers shall determine. Neither the
Company Issuers, the Senior Subordinated Exchange Agent nor any other person
shall be under any duty to give notification of any defect or irregularity with
respect to any tender of Senior Subordinated Old Notes for exchange, nor shall
any of them incur any liability for failure to give such notification.
If a Letter of Transmittal is signed by a person or persons other than the
registered holder or holders of Senior Subordinated Old Notes, such Senior
Subordinated Old Notes must be endorsed or accompanied by appropriate powers of
attorney, in either case signed exactly as the name or names of the registered
holder or holders appear on the Senior Subordinated Old Notes.
If a Letter of Transmittal or any Senior Subordinated Old Notes or powers
of attorney are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a fiduciary or
representative capacity, such persons should so indicate when signing, and,
unless waived by the Company Issuers, proper evidence satisfactory to the
Company Issuers of their authority to so act must be submitted.
By tendering, each holder will represent to the Company Issuers that, among
other things, the Senior Subordinated Exchange Notes acquired pursuant to the
Senior Subordinated Exchange Offers are being acquired in the ordinary course of
business of the person receiving such Senior Subordinated Exchange Notes,
whether or not such person is the holder, that neither the holder nor any such
other person has an arrangement or understanding with any person to participate
in the distribution of such Senior Subordinated Exchange Notes and that neither
the holder nor any such other person is an 'affiliate,' as defined under Rule
405 of the Securities Act, of the Company Issuers or Holdings, or if it is an
affiliate it will comply with the registration and prospectus requirements of
the Securities Act to the extent applicable.
Each broker-dealer that receives Senior Subordinated Exchange Notes for its
own account in exchange for Senior Subordinated Old Notes where such Senior
Subordinated Old Notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities must acknowledge that it
will deliver a prospectus in connection with any resale of such Senior
Subordinated Exchange Notes. See 'Plan of Distribution.'
TERMS AND CONDITIONS OF THE LETTER OF TRANSMITTAL
Each Letter of Transmittal contains, among other things, the following
terms and conditions, which are part of the related Senior Subordinated Exchange
Offer.
The party tendering Notes for exchange (the 'Transferor') exchanges,
assigns and transfers the Senior Subordinated Old Notes to the Company Issuers
and irrevocably constitutes and appoints the Senior Subordinated Exchange Agent
as the Transferor's agent and attorney-in-fact to cause the Senior Subordinated
Old Notes to be assigned, transferred and exchanged. The Transferor represents
and warrants that it has full power and authority to tender, exchange, assign
and transfer the Senior Subordinated Old Notes and to acquire Senior
Subordinated Exchange Notes issuable upon the exchange of such tendered Notes,
and that, when the same are accepted for exchange, the Company Issuers will
acquire good and unencumbered title to the tendered Senior Subordinated Old
Notes, free and clear of all liens, restrictions, charges and encumbrances and
not subject to any adverse claim. The Transferor also warrants that it will,
upon request, execute and deliver any additional documents deemed by the Senior
Subordinated Exchange Agent or the Company Issuers to be necessary or desirable
to complete the exchange, assignment and transfer of tendered Senior
Subordinated Old Notes or transfer ownership of such Senior Subordinated Old
Notes on the account books maintained by a book-entry transfer facility. The
Transferor further agrees that acceptance of any tendered Senior Subordinated
Old Notes by the Company Issuers and the issuance of Senior Subordinated
Exchange Notes in exchange therefor shall constitute performance in full by the
Company Issuers of certain of their obligations under the Senior Subordinated
Registration Rights Agreement. All authority conferred by the Transferor will
survive the death or incapacity of the Transferor and every obligation of the
Transferor shall be binding upon the heirs, legal representatives, successors,
assigns, executors and administrators of such Transferor.
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The Transferor certifies that it is not an 'affiliate' of the Company
Issuers or Holdings within the meaning of Rule 405 under the Securities Act and
that it is acquiring the Senior Subordinated Exchange Notes offered hereby in
the ordinary course of such Transferor's business and that such Transferor has
no arrangement with any person to participate in the distribution of such Senior
Subordinated Exchange Notes. Each holder, other than a broker-dealer, must
acknowledge that it is not engaged in, and does not intend to engage in, a
distribution of Senior Subordinated Exchange Notes. Each Transferor which is a
broker-dealer receiving Senior Subordinated Exchange Notes for its own account
must acknowledge that it will deliver a prospectus in connection with any resale
of such Senior Subordinated Exchange Notes. By so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an 'underwriter' within the meaning of the Securities Act. This Prospectus, as
it may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of Senior Subordinated Exchange Notes
received in exchange for Senior Subordinated Old Notes where such Senior
Subordinated Old Notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities. The Company Issuers will,
for a period of 90 days after the applicable Senior Subordinated Expiration
Date, make copies of this Prospectus available to any broker-dealer for use in
connection with any such resale.
WITHDRAWAL RIGHTS
Tenders of Senior Subordinated Old Notes may be withdrawn at any time prior
to the applicable Senior Subordinated Expiration Date.
For a withdrawal to be effective, a written notice of withdrawal sent by
telegram, facsimile transmission (receipt confirmed by telephone) or letter must
be received by the Senior Subordinated Exchange Agent at the address set forth
herein prior to the applicable Senior Subordinated Expiration Date. Any such
notice of withdrawal must (i) specify the name of the person having tendered the
Senior Subordinated Old Notes to be withdrawn (the 'Depositor'), (ii) identify
the Senior Subordinated Old Notes to be withdrawn (including the certificate
number or numbers and principal amount of such Senior Subordinated Old Notes),
(iii) specify the principal amount of Senior Subordinated Old Notes to be
withdrawn, (iv) include a statement that such holder is withdrawing his election
to have such Senior Subordinated Old Notes exchanged, (v) be signed by the
holder in the same manner as the original signature on the Letter of Transmittal
by which such Senior Subordinated Old Notes were tendered or as otherwise
described above (including any required signature guarantees) or be accompanied
by documents of transfer sufficient to have the Senior Subordinated Trustee
under the Senior Subordinated Indenture register the transfer of such Senior
Subordinated Old Notes into the name of the person withdrawing the tender and
(vi) specify the name in which any such Senior Subordinated Old Notes are to be
registered, if different from that of the Depositor. The Senior Subordinated
Exchange Agent will return the properly withdrawn Senior Subordinated Old Notes
promptly following receipt of notice of withdrawal.
If Senior Subordinated Old Notes have been tendered pursuant to the
procedure for book-entry transfer, any notice of withdrawal must specify the
name and number of the account at the book-entry transfer facility to be
credited with the withdrawn Senior Subordinated Old Notes or otherwise comply
with the book-entry transfer facility procedure. All questions as to the
validity of notices of withdrawals, including time of receipt, will be
determined by the Company Issuers and such determination will be final and
binding on all parties.
Any Senior Subordinated Old Notes so withdrawn will be deemed not to have
been validly tendered for exchange for purposes of the applicable Senior
Subordinated Exchange Offer. Any Senior Subordinated Old Notes which have been
tendered for exchange but which are not exchanged for any reason will be
returned to the holder thereof without cost to such holder (or, in the case of
Senior Subordinated Old Notes tendered by book-entry transfer into the Senior
Subordinated Exchange Agent's account at the book-entry transfer facility
pursuant to the book-entry transfer procedures described above, such Senior
Subordinated Old Notes will be credited to an account with such book-entry
transfer facility specified by the holder) as soon as practicable after
withdrawal, rejection of tender or termination of the applicable Senior
Subordinated Exchange Offer. Properly withdrawn Senior Subordinated Old Notes
may be retendered by following one of the procedures described under
'--Procedures for Tendering Senior Subordinated Old Notes' above at any time on
or prior to the applicable Senior Subordinated Expiration Date.
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ACCEPTANCE OF SENIOR SUBORDINATED OLD NOTES FOR EXCHANGE; DELIVERY OF SENIOR
SUBORDINATED EXCHANGE NOTES
Upon satisfaction or waiver of all of the conditions to the Senior
Subordinated Exchange Offers, the Company Issuers will accept, promptly on the
Senior Subordinated Exchange Date, all Senior Subordinated Old Notes properly
tendered and will issue the Senior Subordinated Exchange Notes promptly after
such acceptance. See '--Certain Conditions to the Senior Subordinated Exchange
Offers' below. For purposes of the Senior Subordinated Exchange Offers, the
Company Issuers shall be deemed to have accepted properly tendered Senior
Subordinated Old Notes for exchange when, as and if the Company Issuers have
given oral or written notice thereof to the Senior Subordinated Exchange Agent.
For each Senior Subordinated Old Note accepted for exchange, the holder of
such Senior Subordinated Old Note will receive a Senior Subordinated Exchange
Note having a principal amount equal to that of the surrendered Senior
Subordinated Old Note.
In all cases, issuance of Senior Subordinated Exchange Notes for Senior
Subordinated Old Notes that are accepted for exchange pursuant to either of the
Senior Subordinated Exchange Offers will be made only after timely receipt by
the Senior Subordinated Exchange Agent of certificates for such Senior
Subordinated Old Notes or a timely book-entry confirmation of such Senior
Subordinated Old Notes into the Senior Subordinated Exchange Agent's account at
the book-entry transfer facility, a properly completed and duly executed Letter
of Transmittal and all other required documents. If any tendered Senior
Subordinated Old Notes are not accepted for any reason set forth in the terms
and conditions of the applicable Senior Subordinated Exchange Offer or if Senior
Subordinated Old Notes are submitted for a greater principal amount than the
holder desires to exchange, such unaccepted or non-exchanged Senior Subordinated
Old Notes will be returned without expense to the tendering holder thereof (or,
in the case of Senior Subordinated Old Notes tendered by book-entry transfer
into the Senior Subordinated Exchange Agent's account at the book-entry transfer
facility pursuant to the book-entry transfer procedures described above, such
non-exchanged Senior Subordinated Old Notes will be credited to an account
maintained with such book-entry transfer facility specified by the holder) as
promptly as practicable after the expiration of the applicable Senior
Subordinated Exchange Offer.
CERTAIN CONDITIONS TO THE SENIOR SUBORDINATED EXCHANGE OFFERS
Notwithstanding any other provision of the Senior Subordinated Exchange
Offers, or any extension of the Senior Subordinated Exchange Offers, the Company
Issuers shall not be required to accept for exchange, or to issue Senior
Subordinated Exchange Notes in exchange for, any Senior Subordinated Old Notes
and may terminate or amend either Senior Subordinated Exchange Offer (by oral or
written notice to the Senior Subordinated Exchange Agent or by a timely press
release) if at any time before the acceptance of such Senior Subordinated Old
Notes for exchange or the exchange of the Senior Subordinated Exchange Notes for
such Senior Subordinated Old Notes, any of the following conditions exist:
(a) any action or proceeding is instituted or threatened in any court
or by or before any governmental agency or regulatory authority or any
injunction, order or decree is issued with respect to such Senior
Subordinated Exchange Offer which, in the sole judgment of the Company
Issuers, might materially impair the ability of the Company Issuers to
proceed with the Senior Subordinated Exchange Offer or have a material
adverse effect on the contemplated benefits of such Senior Subordinated
Exchange Offer to the Company Issuers; or
(b) any change (or any development involving a prospective change)
shall have occurred or be threatened in the business, properties, assets,
liabilities, financial condition, operations, results of operations or
prospects of the Company Issuers that, in the sole judgment of the Company
Issuers, is or may be adverse to the Company Issuers, or the Company
Issuers shall have become aware of facts that have or may have adverse
significance with respect to the value of the Senior Subordinated Old Notes
or the Senior Subordinated Exchange Notes or that may, in the sole judgment
of the Company Issuers, materially impair the contemplated benefits of such
Senior Subordinated Exchange Offer to the Company Issuers; or
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(c) any law, rule or regulation or applicable interpretations of the
Staff of the Commission is issued or promulgated which, in the good faith
determination of the Company Issuers, does not permit the Company Issuers
to effect such Senior Subordinated Exchange Offer; or
(d) any governmental approval has not been obtained, which approval
the Company Issuers, in their
sole discretion, deem necessary for the consummation of such Senior
Subordinated Exchange Offer; or
(e) there shall have been proposed, adopted or enacted any law,
statute, rule or regulation (or an amendment to any existing law, statute,
rule or regulation) which, in the sole judgment of the Company Issuers,
might materially impair the ability of the Company Issuers to proceed with
such Senior Subordinated Exchange Offer or have a material adverse effect
on the contemplated benefits of such Senior Subordinated Exchange Offer to
the Company Issuers; or
(f) there shall occur a change in the current interpretation by the
Staff of the Commission which permits the Senior Subordinated Exchange
Notes issued pursuant to such Senior Subordinated Exchange Offer in
exchange for Senior Subordinated Old Notes to be offered for resale, resold
and otherwise transferred by holders thereof (other than any such holder
that is an 'affiliate' of the Company Issuers or Holdings within the
meaning of Rule 405 under the Securities Act) without compliance with the
registration and prospectus delivery provisions of the Securities Act
provided that such Senior Subordinated Exchange Notes are acquired in the
ordinary course of such holders' business and such holders have no
arrangement with any person to participate in the distribution of such
Senior Subordinated Exchange Notes; or
(g) there shall have occurred (i) any general suspension of,
shortening of hours for, or limitation on prices for, trading in securities
on any national securities exchange or in the over-the-counter market
(whether or not mandatory), (ii) any limitation by any governmental agency
or authority which may adversely affect the ability of the Company Issuers
to complete the transactions contemplated by such Senior Subordinated
Exchange Offer, (iii) a declaration of a banking moratorium or any
suspension of payments in respect of banks by Federal or state authorities
in the United States (whether or not mandatory), (iv) a commencement of a
war, armed hostilities or other international or national crisis directly
or indirectly involving the United States, (v) any limitation (whether or
not mandatory) by any governmental authority on, or other event having a
reasonable likelihood of affecting, the extension of credit by banks or
other lending institutions in the United States, or (vi) in the case of any
of the foregoing existing at the time of the commencement of the Senior
Subordinated Exchange Offers, a material acceleration or worsening thereof.
The Company Issuers expressly reserve the right to terminate either Senior
Subordinated Exchange Offer and not accept for exchange any of the related
Senior Subordinated Old Notes upon the occurrence of any of the foregoing
conditions (which represent all of the material conditions to the acceptance by
the Company Issuers of such Senior Subordinated Old Notes which are properly
tendered). In addition, the Company Issuers may amend either Senior Subordinated
Exchange Offer at any time prior to the applicable Senior Subordinated
Expiration Date if any of the conditions set forth above occurs. Moreover,
regardless of whether any of such conditions has occurred, the Company Issuers
may amend either Senior Subordinated Exchange Offer in any manner which, in
their good faith judgment, is advantageous to holders of the related Senior
Subordinated Old Notes.
The foregoing conditions are for the sole benefit of the Company Issuers
and may be asserted by the Company Issuers regardless of the circumstances
giving rise to any such condition or may be waived by the Company Issuers in
whole or in part at any time and from time to time in their sole discretion. The
failure by the Company Issuers at any time to exercise any of the foregoing
rights shall not be deemed a waiver of any such right and each such right shall
be deemed an ongoing right which may be asserted at any time and from time to
time. If the Company Issuers waive or amend the foregoing conditions, they will,
if required by law, extend the applicable Subordinated Exchange Offer for a
minimum of five business days from the date that the Company Issuers first give
notice, by public announcement or otherwise, of such waiver or amendment, if
such Senior Subordinated Exchange Offer would otherwise expire within such five
business-day period. Any determination by the Company Issuers concerning the
events described above will be final and binding upon all parties.
In addition, the Company Issuers will not accept for exchange any Senior
Subordinated Old Notes tendered, and no Senior Subordinated Exchange Notes will
be issued in exchange for any such Senior Subordinated Old Notes, if at such
time any stop order shall be threatened or in effect with respect to the
Registration Statement of
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which this Prospectus constitutes a part or the qualification of the Senior
Subordinated Indenture under the Trust Indenture Act of 1939, as amended. In any
such event, the Company Issuers are required to use every reasonable effort to
obtain the withdrawal of any stop order at the earliest possible time.
The Senior Subordinated Exchange Offers are not conditioned upon any
minimum principal amount of Senior Subordinated Old Notes being tendered for
exchange.
SENIOR SUBORDINATED EXCHANGE AGENT
United States Trust Company of New York has been appointed as the Senior
Subordinated Exchange Agent for the Senior Subordinated Exchange Offers. All
executed Letters of Transmittal related to either Senior Subordinated Exchange
Offer should be directed to the Senior Subordinated Exchange Agent at one of the
addresses set forth below:
<TABLE>
<S> <C>
By Overnight Courier: By Registered or Certified Mail:
United States Trust Company of New York United States Trust Company of New York
770 Broadway P.O. Box 844
13th Floor Attn: Corporate Trust Services
New York, New York 10003 Cooper Station
Attn: Corporate Trust Services New York, New York 10276-0844
By Hand: By Facsimile (Eligible Institutions Only):
United States Trust Company of New York (212) 420-6152
111 Broadway Confirm by Telephone
Lower Level (800) 548-6565
Attn: Corporate Trust Services
New York, New York 10006
</TABLE>
Questions and requests for assistance, requests for additional copies of
this Prospectus or of either Letter of Transmittal related to the Senior
Subordinated Notes and requests for Notices of Guaranteed Delivery related to
the Senior Subordinated Notes should be directed to the Senior Subordinated
Exchange Agent at the address and telephone number set forth in the applicable
Letter of Transmittal.
DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ON THE APPLICABLE LETTER OF
TRANSMITTAL, OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN
THE ONE SET FORTH ON SUCH LETTER OF TRANSMITTAL, WILL NOT CONSTITUTE A VALID
DELIVERY.
SOLICITATION OF TENDERS; FEES AND EXPENSES
The Company Issuers have not retained any dealer-manager in connection with
the Senior Subordinated Exchange Offers and will not make any payments to
brokers, dealers or others soliciting acceptances of the Senior Subordinated
Exchange Offers. The Company Issuers, however, will pay the Senior Subordinated
Exchange Agent reasonable and customary fees for its services and will reimburse
it for its reasonable out-of-pocket expenses in connection therewith. The
Company Issuers will also pay brokerage houses and other custodians, nominees
and fiduciaries the reasonable out-of-pocket expenses incurred by them in
forwarding copies of this and other related documents to the beneficial owners
of the Senior Subordinated Old Notes and in handling or forwarding tenders for
their customers.
The estimated cash expenses to be incurred in connection with the Senior
Subordinated Exchange Offers will be paid by the Company Issuers and are
estimated in the aggregate to be approximately $ , including fees
and expenses of the Senior Subordinated Exchange Agent or the Senior
Subordinated Trustee, registration fees, and accounting, legal, printing and
related fees and expenses.
No person has been authorized to give any information or to make any
representations in connection with the Senior Subordinated Exchange Offers other
than those contained in this Prospectus. If given or made, such information or
representations should not be relied upon as having been authorized by the
Company Issuers. Neither the delivery of this Prospectus nor any exchange made
hereunder shall, under any circumstances, create
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any implication that there has been no change in the affairs of the Company
Issuers since the respective dates as of which information is given herein. The
Senior Subordinated Exchange Offers are not being made to (nor will tenders be
accepted from or on behalf of) holders of Senior Subordinated Old Notes in any
jurisdiction in which the making of the applicable Senior Subordinated Exchange
Offer or the acceptance thereof would not be in compliance with the laws of such
jurisdiction. However, the Company Issuers may, at their discretion, take such
action as they may deem necessary to make the Senior Subordinated Exchange
Offers in any such jurisdiction and extend the Senior Subordinated Exchange
Offers to holders of Senior Subordinated Old Notes in such jurisdiction. In any
jurisdiction in which the securities or 'blue sky' laws require the Senior
Subordinated Exchange Offers to be made by a licensed broker or dealer, the
Senior Subordinated Exchange Offers are being made on behalf of the Company
Issuers by one or more registered brokers or dealers which are licensed under
the laws of such jurisdiction.
TRANSFER TAXES
The Company Issuers will pay all transfer taxes, if any, applicable to the
exchange of Senior Subordinated Old Notes pursuant to the applicable Senior
Subordinated Exchange Offer. If, however, certificates representing Senior
Subordinated Exchange Notes or Senior Subordinated Old Notes for principal
amounts not tendered or accepted for exchange are to be delivered to, or are to
be issued in the name of, any person other than the registered holder of the
Senior Subordinated Old Notes tendered, or if tendered Senior Subordinated Old
Notes are registered in the name of any person other than the person signing the
applicable Letter of Transmittal, or if a transfer tax is imposed for any reason
other than the exchange of Senior Subordinated Old Notes pursuant to the
applicable Senior Subordinated Exchange Offer, then the amount of any such
transfer taxes (whether imposed on the registered holder or any other persons)
will be payable by the tendering holder. If satisfactory evidence of payment of
such taxes or exemption therefrom is not submitted with the applicable Letter of
Transmittal, the amount of such transfer taxes will be billed directly to such
tendering holder.
ACCOUNTING TREATMENT
The Senior Subordinated Exchange Notes will be recorded at the carrying
value of the Senior Subordinated Old Notes as reflected in the Company Issuers'
accounting records on the date of the exchange. Accordingly, no gain or loss for
accounting purposes will be recognized by the Company Issuers upon the exchange
of Senior Subordinated Exchange Notes for Senior Subordinated Old Notes.
Expenses incurred in connection with the issuance of the Senior Subordinated
Exchange Notes will be amortized over the term of the Senior Subordinated
Exchange Notes.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Senior Subordinated Old Notes who do not exchange their Senior
Subordinated Old Notes for Senior Subordinated Exchange Notes pursuant to the
Senior Subordinated Exchange Offers will continue to be subject to the
restrictions on transfer of such Senior Subordinated Old Notes as set forth in
the legend thereon. Senior Subordinated Old Notes not exchanged pursuant to the
Senior Subordinated Exchange Offers will continue to remain outstanding in
accordance with their terms. In general, the Senior Subordinated Old Notes may
not be offered or sold unless registered under the Securities Act, except
pursuant to an exemption from, or in a transaction not subject to, the
Securities Act and applicable state securities laws. The Company Issuers do not
currently anticipate that they will register the Senior Subordinated Old Notes
under the Securities Act.
Participation in the Senior Subordinated Exchange Offers is voluntary, and
holders of Senior Subordinated Old Notes should carefully consider whether to
participate. Holders of Senior Subordinated Old Notes are urged to consult their
financial and tax advisors in making their own decision on what action to take.
As a result of the making of, and upon acceptance for exchange of all
validly tendered Senior Subordinated Old Notes pursuant to the terms of, the
Senior Subordinated Exchange Offers, the Company Issuers will have fulfilled a
covenant contained in the Senior Subordinated Registration Rights Agreement.
Holders of Senior Subordinated Old Notes who do not tender their Senior
Subordinated Old Notes in the applicable Senior Subordinated Exchange Offer will
continue to hold such Senior Subordinated Old Notes and will be entitled to all
the rights and limitations applicable thereto under the Senior Subordinated
Indenture, except for any such rights
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under the Senior Subordinated Registration Rights Agreement that by their terms
terminate or cease to have further effectiveness as a result of the making of
the Senior Subordinated Exchange Offers. All untendered Senior Subordinated Old
Notes will continue to be subject to the restrictions on transfer set forth in
the Senior Subordinated Indenture. To the extent that Senior Subordinated Old
Notes are tendered and accepted in the Senior Subordinated Exchange Offers, the
trading market for untendered Senior Subordinated Old Notes could be adversely
affected.
The Company Issuers may in the future seek to acquire, subject to the terms
of the Senior Subordinated Indenture, untendered Senior Subordinated Old Notes
in open-market or privately-negotiated transactions, through subsequent exchange
offers or otherwise. The Company Issuers have no present plan to acquire any
Senior Subordinated Old Notes which are not tendered in the Senior Subordinated
Exchange Offers.
RESALE OF SENIOR SUBORDINATED EXCHANGE NOTES
The Company Issuers are making the Senior Subordinated Exchange Offers in
reliance on the position of the Staff of the Commission as set forth in certain
interpretive letters addressed to third parties in other transactions. However,
the Company Issuers have not sought their own interpretive letter and there can
be no assurance that the Staff would make a similar determination with respect
to the Senior Subordinated Exchange Offers as it has in such interpretive
letters to third parties. Based on these interpretations by the Staff, the
Company Issuers believe that the Senior Subordinated Exchange Notes issued
pursuant to the Senior Subordinated Exchange Offers in exchange for Senior
Subordinated Old Notes may be offered for resale, resold and otherwise
transferred by a Holder (other than any Holder who is a broker-dealer or an
'affiliate' of the Company Issuers or Holdings within the meaning of Rule 405 of
the Securities Act) without further compliance with the registration and
prospectus delivery requirements of the Securities Act, provided that such
Senior Subordinated Exchange Notes are acquired in the ordinary course of such
Holder's business and that such Holder is not participating, and has no
arrangement or understanding with any person to participate, in a distribution
(within the meaning of the Securities Act) of such Senior Subordinated Exchange
Notes. However, any holder who is an 'affiliate' of the Company Issuers or
Holdings who has an arrangement or understanding with respect to the
distribution of the Senior Subordinated Exchange Notes to be acquired pursuant
to the Senior Subordinated Exchange Offers, or any broker-dealer who purchased
Senior Subordinated Old Notes from the Company Issuers to resell pursuant to
Rule 144A or any other available exemption under the Securities Act (i) could
not rely on the applicable interpretations of the Staff and (ii) must comply
with the registration and prospectus delivery requirements of the Securities
Act. A broker-dealer who holds Senior Subordinated Old Notes that were acquired
for its own account as a result of market-making or other trading activities may
be deemed to be an 'underwriter' within the meaning of the Securities Act and
must, therefore, deliver a prospectus meeting the requirements of the Securities
Act in connection with any resale of Senior Subordinated Exchange Notes. Each
such broker-dealer that receives Senior Subordinated Exchange Notes for its own
account in exchange for Senior Subordinated Old Notes, where such Senior
Subordinated Old Notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities, must acknowledge in the
applicable Letter of Transmittal that it will deliver a prospectus in connection
with any resale of such Senior Subordinated Exchange Notes. See 'Plan of
Distribution.'
In addition, to comply with the securities laws of certain jurisdictions,
if applicable, the Senior Subordinated Exchange Notes may not be offered or sold
unless they have been registered or qualified for sale in such jurisdiction or
an exemption from registration or qualification is available and is complied
with. The Company Issuers have agreed, pursuant to the Senior Subordinated
Registration Rights Agreement and subject to certain specified limitations
therein, to register or qualify the Senior Subordinated Exchange Notes for offer
or sale under the securities or blue sky laws of such jurisdictions as any
holder of the Senior Subordinated Exchange Notes reasonably requests. Such
registration or qualification may require the imposition of restrictions or
conditions (including suitability requirements for offerees or purchasers) in
connection with the offer or sale of any Senior Subordinated Exchange Notes.
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THE SENIOR DISCOUNT EXCHANGE OFFER
GENERAL
The Holdings Issuers hereby offer, upon the terms and subject to the
conditions set forth in this Prospectus and in the applicable Letter of
Transmittal (which together constitute the Senior Discount Exchange Offer), to
exchange up to $169,000,000 aggregate principal amount at maturity of their
Senior Discount Exchange Notes for a like aggregate principal amount at maturity
of their Senior Discount Old Notes properly tendered on or prior to the Senior
Discount Expiration Date and not withdrawn as permitted pursuant to the
procedures described below. Throughout this Prospectus, references to the
'Letter of Transmittal' refer to the form of Letter of Transmittal that is
applicable to the Senior Discount Notes, the Fixed Rate Senior Subordinated
Notes or the Floating Rate Senior Subordinated Notes, as the context requires,
whether so expressed or not. The Senior Discount Exchange Offer is being made
with respect to all of the Senior Discount Old Notes.
As of the date of this Prospectus, $169,000,000 aggregate principal amount
at maturity of Senior Discount Old Notes is outstanding. This Prospectus and the
applicable Letter of Transmittal are first being sent on or about
, 1998, to all holders of Senior Discount Old Notes known to the
Holdings Issuers. The Holdings Issuers' obligation to accept Senior Discount Old
Notes for exchange pursuant to the Senior Discount Exchange Offer is subject to
certain conditions set forth under 'Certain Conditions to the Senior Discount
Exchange Offer' below. The Holdings Issuers currently expect that each of the
conditions will be satisfied and that no waivers will be necessary.
PURPOSE OF THE SENIOR DISCOUNT EXCHANGE OFFER
The Senior Discount Old Notes were issued on February 2, 1998 in a
transaction exempt from the registration requirements of the Securities Act.
Accordingly, the Senior Discount Old Notes may not be reoffered, resold, or
otherwise transferred unless so registered or unless an applicable exemption
from the registration and prospectus delivery requirements of the Securities Act
is available.
In connection with the issuance and sale of the Senior Discount Old Notes,
the Holdings Issuers entered into the Senior Discount Registration Rights
Agreement, which requires the Holdings Issuers to file with the Commission a
registration statement relating to the Senior Discount Exchange Offer not later
than 120 days after the date of issuance of the Senior Discount Old Notes, and
to use its best efforts to cause the registration statement relating to the
Senior Discount Exchange Offer to become effective under the Securities Act not
later than 180 days after the date of issuance of the Senior Discount Old Notes.
In addition, the Senior Discount Registration Rights Agreement provides for
certain remedies if the Senior Discount Exchange Offer is not consummated or a
shelf registration statement with respect to Senior Discount Old Notes is not
made effective within the time periods specified therein. See 'Senior Discount
Exchange Offer; Senior Discount Registration Rights.' A copy of the Senior
Discount Registration Rights Agreement has been filed as an exhibit to the
Registration Statement.
The Senior Discount Exchange Offer is being made by the Holdings Issuers to
satisfy their obligations with respect to the Senior Discount Registration
Rights Agreement. The term 'holder,' with respect to the Senior Discount
Exchange Offer, means any person in whose name Senior Discount Old Notes are
registered on the books of the Holdings Issuers or any other person who has
obtained a properly completed bond power from the registered holder, or any
person whose Senior Discount Old Notes are held of record by The Depository
Trust Company or its nominee. Other than pursuant to the Senior Discount
Registration Rights Agreement, the Holdings Issuers are not required to file any
registration statement to register any outstanding Senior Discount Old Notes.
Holders of Senior Discount Old Notes who do not tender their Senior Discount Old
Notes or whose Senior Discount Old Notes are tendered but not accepted would
have to rely on exceptions to the registration requirements under the securities
laws, including the Securities Act, if they wish to sell their Senior Discount
Old Notes.
The Holdings Issuers are making the Senior Discount Exchange Offer in
reliance on the position of the Staff of the Commission as set forth in certain
interpretive letters addressed to third parties in other transactions. However,
the Holdings Issuers have not sought their own interpretive letter and there can
be no assurance that the Staff would make a similar determination with respect
to the Senior Discount Exchange Offer as it has in such
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interpretive letters to third parties. Based on these interpretations by the
Staff, the Holdings Issuers believe that the Senior Discount Exchange Notes
issued pursuant to the Senior Discount Exchange Offer in exchange for Senior
Discount Old Notes may be offered for resale, resold and otherwise transferred
by a Holder (other than any Holder who is a broker-dealer or an 'affiliate' of
the Holdings Issuers within the meaning of Rule 405 of the Securities Act)
without further compliance with the registration and prospectus delivery
requirements of the Securities Act, provided that such Senior Discount Exchange
Notes are acquired in the ordinary course of such Holder's business and that
such Holder is not participating, and has no arrangement or understanding with
any person to participate, in a distribution (within the meaning of the
Securities Act) of such Senior Discount Exchange Notes. See '--Resale of Senior
Discount Exchange Notes.' Each broker-dealer that receives Senior Discount
Exchange Notes for its own account in exchange for Senior Discount Old Notes,
where such Senior Discount Old Notes were acquired by such broker-dealer as a
result of market-making activities or other trading activities, must acknowledge
that it will deliver a prospectus in connection with any resale of such Senior
Discount Exchange Notes. See 'Plan of Distribution.'
TERMS OF THE EXCHANGE
The Holdings Issuers hereby offer to exchange, subject to the conditions
set forth herein and in the applicable Letter of Transmittal accompanying this
Prospectus, $1,000 in principal amount at maturity of Senior Discount Exchange
Notes for each $1,000 principal amount at maturity of the Senior Discount Old
Notes, properly tendered on or prior to the Senior Discount Expiration Date and
not withdrawn as permitted pursuant to the procedures described below. The terms
of the Senior Discount Exchange Notes are identical in all material respects to
the terms of the Senior Discount Old Notes for which they may be exchanged
pursuant to the Senior Discount Exchange Offer, except that the Senior Discount
Exchange Notes will generally be freely transferable by holders thereof and will
not be subject to any covenant regarding registration. The Senior Discount
Exchange Notes will evidence the same indebtedness as the Senior Discount Old
Notes and will be entitled to the benefits of the Senior Discount Indenture. See
'Description of Senior Discount Exchange Notes.'
The Senior Discount Exchange Offer is not conditioned upon any minimum
aggregate principal amount of Senior Discount Old Notes being tendered for
exchange.
The Holdings Issuers have not requested, and do not intend to request, an
interpretation by the Staff of the Commission with respect to whether the Senior
Discount Exchange Notes issued pursuant to the Senior Discount Exchange Offer in
exchange for the Senior Discount Old Notes may be offered for sale, resold or
otherwise transferred by any holder without compliance with the registration and
prospectus delivery provisions of the Securities Act. Instead, based on an
interpretation by the Staff of the Commission set forth in a series of no-action
letters issued to third parties, the Holdings Issuers believe that Senior
Discount Exchange Notes issued pursuant to the Senior Discount Exchange Offer in
exchange for Senior Discount Old Notes may be offered for sale, resold and
otherwise transferred by any holder of such Senior Discount Exchange Notes
(other than any such holder that is a broker-dealer or is an 'affiliate' of the
Holdings Issuers within the meaning of Rule 405 under the Securities Act)
without compliance with the registration and prospectus delivery provisions of
the Securities Act, provided that such Senior Discount Exchange Notes are
acquired in the ordinary course of such holder's business and such holder has no
arrangement or understanding with any person to participate in the distribution
of such Senior Discount Exchange Notes and neither such holder nor any other
such person is engaging in or intends to engage in a distribution of such Senior
Discount Exchange Notes. Since the Commission has not considered the Senior
Discount Exchange Offer in the context of a no-action letter, there can be no
assurance that the Staff of the Commission would make a similar determination
with respect to the Senior Discount Exchange Offer. Any holder who is an
affiliate of the Holdings Issuers or who tenders in the Senior Discount Exchange
Offer for the purpose of participating in a distribution of the Senior Discount
Exchange Notes cannot rely on such interpretation by the Staff of the Commission
and must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with any resale transaction. Each holder, other
than a broker-dealer, must acknowledge that it is not engaged in, and does not
intend to engage in, a distribution of Senior Discount Exchange Notes. Each
broker-dealer that receives Senior Discount Exchange Notes for its own account
in exchange for Senior Discount Old Notes, where such Senior Discount Old Notes
were acquired by such broker-dealer as a result of market-making activities or
other trading activities, must acknowledge that it will deliver a prospectus in
connection with any resale of such Senior Discount Exchange Notes. A
broker-dealer may
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not participate in the Senior Discount Exchange Offer with respect to Senior
Discount Old Notes acquired other than as a result of market-making activities
or other trading activities. See 'Plan of Distribution.'
Cash interest on the Senior Discount Exchange Notes will not accrue until
January 15, 2003. Thereafter, interest on the Senior Discount Exchange Notes
will accrue from January 15, 2003 at the rate of 10 3/4% per annum on the
principal amount at maturity of the Senior Discount Exchange Notes, and will be
payable semiannually in arrears on January 15 and July 15 of each year,
commencing July 15, 2003.
Tendering holders of the Senior Discount Old Notes will not be required to
pay brokerage commissions or fees or, subject to the instructions in the
applicable Letter of Transmittal, transfer taxes with respect to the exchange of
the Senior Discount Old Notes pursuant to the Senior Discount Exchange Offer.
SENIOR DISCOUNT EXPIRATION DATE; EXTENSION; TERMINATION; AMENDMENT
The Senior Discount Exchange Offer will expire at 5:00 p.m., New York City
time, on , 1998, unless the Holdings Issuers, in their sole
discretion, have extended the period of time for which the Senior Discount
Exchange Offer is open (such date, as it may be extended, is referred to herein
as the 'Senior Discount Expiration Date' and, together with the Senior
Subordinated Expiration Dates, the 'Expiration Dates.') . The Senior Discount
Expiration Date will be at least 20 business days after the commencement of the
Senior Discount Exchange Offer in accordance with Rule 14e-1(a) under the
Exchange Act. The Holdings Issuers expressly reserve the right, at any time or
from time to time, to extend the period of time during which the Senior Discount
Exchange Offer is open, and thereby delay acceptance for exchange of any Senior
Discount Old Notes, by giving oral or written notice to the Senior Discount
Exchange Agent and by timely public announcement no later than 9:00 a.m. New
York City time, on the next business day after the previously scheduled Senior
Discount Expiration Date. During any such extension, all Senior Discount Old
Notes previously tendered will remain subject to the Senior Discount Exchange
Offer unless properly withdrawn. The Holdings Issuers do not anticipate
extending the Senior Discount Expiration Date.
The Holdings Issuers expressly reserve the right to (i) terminate or amend
the Senior Discount Exchange Offer and not to accept for exchange any Senior
Discount Old Notes not theretofore accepted for exchange upon the occurrence of
any of the events specified below under 'Certain Conditions to the Senior
Discount Exchange Offer' which have not been waived by the Holdings Issuers and
(ii) amend the terms of the Senior Discount Exchange Offer in any manner which,
in their good faith judgment, is advantageous to the holders of the Senior
Discount Old Notes, whether before or after any tender of the Senior Discount
Old Notes. If any such termination or amendment occurs, the Holdings Issuers
will notify the Senior Discount Exchange Agent and will either issue a press
release or give oral or written notice to the holders of the Senior Discount Old
Notes as promptly as practicable.
For purposes of the Senior Discount Exchange Offer, a 'business day' means
any day other than Saturday, Sunday or a date on which banking institutions are
required or authorized by New York State law to be closed, and consists of the
time period from 12:01 a.m. through 12:00 midnight, New York City time. Unless
the Holdings Issuers terminate the Senior Discount Exchange Offer prior to 5:00
p.m., New York City time, on the Senior Discount Expiration Date, the Holdings
Issuers will exchange the Senior Discount Exchange Notes for the Senior Discount
Old Notes on the Senior Discount Exchange Date.
PROCEDURES FOR TENDERING SENIOR DISCOUNT OLD NOTES
The tender to the Holdings Issuers of Senior Discount Old Notes by a holder
thereof as set forth below and the acceptance thereof by the Holdings Issuers
will constitute a binding agreement between the tendering holder and the
Holdings Issuers upon the terms and subject to the conditions set forth in this
Prospectus and in the applicable Letter of Transmittal.
A holder of Senior Discount Old Notes may tender the same by (i) properly
completing and signing the applicable Letter of Transmittal or a facsimile
thereof (all references in this Prospectus to the Letter of Transmittal shall be
deemed to include a facsimile thereof) and delivering the same, together with
the certificate or certificates representing the Senior Discount Old Notes being
tendered and any required signature guarantees and any other documents required
by the applicable Letter of Transmittal, to the Senior Discount Exchange
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Agent at its address set forth below on or prior to the Senior Discount
Expiration Date (or complying with the procedure for book-entry transfer
described below) or (ii) complying with the guaranteed delivery procedures
described below.
THE METHOD OF DELIVERY OF SENIOR DISCOUNT OLD NOTES, LETTERS OF TRANSMITTAL
AND ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDERS. IF
SUCH DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL PROPERLY
INSURED, WITH RETURN RECEIPT REQUESTED, BE USED. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO INSURE TIMELY DELIVERY. NO SENIOR DISCOUNT OLD NOTES OR
LETTERS OF TRANSMITTAL SHOULD BE SENT TO THE HOLDINGS ISSUERS.
If tendered Senior Discount Old Notes are registered in the name of the
signer of the Letter of Transmittal and the Senior Discount Exchange Notes to be
issued in exchange therefor are to be issued (and any untendered Senior Discount
Old Notes are to be reissued) in the name of the registered holder (which term,
for the purposes described herein, shall include any participant in The
Depository Trust Company (also referred to as a 'book-entry transfer facility')
whose name appears on a security listing as the owner of Senior Discount Old
Notes), the signature of such signer need not be guaranteed. In any other case,
the tendered Senior Discount Old Notes must be endorsed or accompanied by
written instruments of transfer in form satisfactory to the Holdings Issuers and
duly executed by the registered holder, and the signature on the endorsement or
instrument of transfer must be guaranteed by a bank, broker, dealer, credit
union, savings association, clearing agency or other institution (each an
'Eligible Institution') that is a member of a recognized signature guarantee
medallion program within the meaning of Rule 17Ad-15 under the Exchange Act. In
addition, if the Senior Discount Exchange Notes and/or Senior Discount Old Notes
not exchanged are to be delivered to an address other than that of the
registered holder appearing on the note register for the Senior Discount Old
Notes, the signature on the Letter of Transmittal must be guaranteed by an
Eligible Institution.
The Senior Discount Exchange Agent will make a request within two business
days after the date of receipt of this Prospectus to establish accounts with
respect to the Senior Discount Old Notes at the book-entry transfer facility for
the purpose of facilitating the Senior Discount Exchange Offer, and subject to
the establishment thereof, any financial institution that is a participant in
the book-entry transfer facility's system may make book-entry delivery of Senior
Discount Old Notes by causing such book-entry transfer facility to transfer such
Senior Discount Old Notes into the Senior Discount Exchange Agent's account with
respect to the Senior Discount Old Notes in accordance with the book-entry
transfer facility's procedures for such transfer. Although delivery of Senior
Discount Old Notes may be effected through book-entry transfer into the Senior
Discount Exchange Agent's account at the book-entry transfer facility, an
appropriate Letter of Transmittal with any required signature guarantee and all
other required documents must in each case be transmitted to and received or
confirmed by the Senior Discount Exchange Agent at its address set forth below
on or prior to the Senior Discount Expiration Date, or, if the guaranteed
delivery procedures described below are complied with, within the time period
provided under such procedures.
If a holder desires to accept the Senior Discount Exchange Offer and time
will not permit a Letter of Transmittal or Senior Discount Old Notes to reach
the Senior Discount Exchange Agent before the Senior Discount Expiration Date or
the procedure for book-entry transfer cannot be completed on a timely basis, a
tender may be effected if the Senior Discount Exchange Agent has received at its
address set forth below on or prior to the Senior Discount Expiration Date, a
letter, telegram or facsimile transmission (receipt confirmed by telephone and
an original delivered by guaranteed overnight courier) from an Eligible
Institution setting forth the name and address of the tendering holder, the
names in which the Senior Discount Old Notes are registered and, if possible,
the certificate numbers of the Senior Discount Old Notes to be tendered, and
stating that the tender is being made thereby and guaranteeing that within three
business days after the Senior Discount Expiration Date, the Senior Discount Old
Notes in proper form for transfer (or a confirmation of book-entry transfer of
such Senior Discount Old Notes into the Senior Discount Exchange Agent's account
at the book-entry transfer facility), will be delivered by such Eligible
Institution together with a properly completed and duly executed Letter of
Transmittal (and any other required documents). Unless Senior Discount Old Notes
being tendered by the above-described method are deposited with the Senior
Discount Exchange Agent within the time period set forth above (accompanied or
preceded by a properly completed Letter of Transmittal and any other required
documents), the Holdings Issuers may, at their option, reject the tender. Copies
of the notice of guaranteed delivery ('Notice of
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Guaranteed Delivery') which may be used by Eligible Institutions for the
purposes described in this paragraph are available from the Senior Discount
Exchange Agent.
A tender will be deemed to have been received as of the date when (i) the
tendering holder's properly completed and duly signed Letter of Transmittal
accompanied by the Senior Discount Old Notes (or a confirmation of book-entry
transfer of such Senior Discount Old Notes into the Senior Discount Exchange
Agent's account at the book-entry transfer facility) is received by the Senior
Discount Exchange Agent, or (ii) a Notice of Guaranteed Delivery or letter,
telegram or facsimile transmission to similar effect (as provided above) from an
Eligible Institution is received by the Senior Discount Exchange Agent.
Issuances of Senior Discount Exchange Notes in exchange for Senior Discount Old
Notes tendered pursuant to a Notice of Guaranteed Delivery or letter, telegram
or facsimile transmission to similar effect (as provided above) by an Eligible
Institution will be made only against deposit of the applicable Letter of
Transmittal (and any other required documents) and the tendered Senior Discount
Old Notes.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of Senior Discount Old Notes tendered for exchange will
be determined by the Holdings Issuers in their sole discretion, which
determination shall be final and binding. The Holdings Issuers reserve the
absolute right to reject any and all tenders of any particular Senior Discount
Old Notes not properly tendered or not to accept any particular Senior Discount
Old Notes which acceptance might, in the judgment of the Holdings Issuers or
their counsel, be unlawful. The Holdings Issuers also reserve the absolute right
to waive any defects or irregularities or conditions of the Senior Discount
Exchange Offer as to any particular Senior Discount Old Notes either before or
after the Senior Discount Expiration Date (including the right to waive the
ineligibility of any holder who seeks to tender Senior Discount Old Notes in the
Senior Discount Exchange Offer). The interpretation of the terms and conditions
of the Senior Discount Exchange Offer (including the applicable Letter of
Transmittal and the instructions thereto) by the Holdings Issuers shall be final
and binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Senior Discount Old Notes for exchange must be cured
within such reasonable period of time as the Holdings Issuers shall determine.
Neither the Holdings Issuers, the Senior Discount Exchange Agent nor any other
person shall be under any duty to give notification of any defect or
irregularity with respect to any tender of Senior Discount Old Notes for
exchange, nor shall any of them incur any liability for failure to give such
notification.
If the Letter of Transmittal is signed by a person or persons other than
the registered holder or holders of Senior Discount Old Notes, such Senior
Discount Old Notes must be endorsed or accompanied by appropriate powers of
attorney, in either case signed exactly as the name or names of the registered
holder or holders appear on the Senior Discount Old Notes.
If the Letter of Transmittal or any Senior Discount Old Notes or powers of
attorney are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a fiduciary or
representative capacity, such persons should so indicate when signing, and,
unless waived by the Holdings Issuers, proper evidence satisfactory to the
Holdings Issuers of their authority to so act must be submitted.
By tendering, each holder will represent to the Holdings Issuers that,
among other things, the Senior Discount Exchange Notes acquired pursuant to the
Senior Discount Exchange Offer are being acquired in the ordinary course of
business of the person receiving such Senior Discount Exchange Notes, whether or
not such person is the holder, that neither the holder nor any such other person
has an arrangement or understanding with any person to participate in the
distribution of such Senior Discount Exchange Notes and that neither the holder
nor any such other person is an 'affiliate,' as defined under Rule 405 of the
Securities Act, of the Holdings Issuers, or if it is an affiliate it will comply
with the registration and prospectus requirements of the Securities Act to the
extent applicable.
Each broker-dealer that receives Senior Discount Exchange Notes for its own
account in exchange for Senior Discount Old Notes where such Senior Discount Old
Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities must acknowledge that it will deliver a
prospectus in connection with any resale of such Senior Discount Exchange Notes.
See 'Plan of Distribution.'
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TERMS AND CONDITIONS OF THE LETTER OF TRANSMITTAL
The Letter of Transmittal contains, among other things, the following terms
and conditions, which are part of the Senior Discount Exchange Offer.
The party tendering Notes for exchange (the 'Transferor') exchanges,
assigns and transfers the Senior Discount Old Notes to the Holdings Issuers and
irrevocably constitutes and appoints the Senior Discount Exchange Agent as the
Transferor's agent and attorney-in-fact to cause the Senior Discount Old Notes
to be assigned, transferred and exchanged. The Transferor represents and
warrants that it has full power and authority to tender, exchange, assign and
transfer the Senior Discount Old Notes and to acquire Senior Discount Exchange
Notes issuable upon the exchange of such tendered Notes, and that, when the same
are accepted for exchange, the Holdings Issuers will acquire good and
unencumbered title to the tendered Senior Discount Old Notes, free and clear of
all liens, restrictions, charges and encumbrances and not subject to any adverse
claim. The Transferor also warrants that it will, upon request, execute and
deliver any additional documents deemed by the Senior Discount Exchange Agent or
the Holdings Issuers to be necessary or desirable to complete the exchange,
assignment and transfer of tendered Senior Discount Old Notes or transfer
ownership of such Senior Discount Old Notes on the account books maintained by a
book-entry transfer facility. The Transferor further agrees that acceptance of
any tendered Senior Discount Old Notes by the Holdings Issuers and the issuance
of Senior Discount Exchange Notes in exchange therefor shall constitute
performance in full by the Holdings Issuers of certain of their obligations
under the Senior Discount Registration Rights Agreement. All authority conferred
by the Transferor will survive the death or incapacity of the Transferor and
every obligation of the Transferor shall be binding upon the heirs, legal
representatives, successors, assigns, executors and administrators of such
Transferor.
The Transferor certifies that it is not an 'affiliate' of the Holdings
Issuers within the meaning of Rule 405 under the Securities Act and that it is
acquiring the Senior Discount Exchange Notes offered hereby in the ordinary
course of such Transferor's business and that such Transferor has no arrangement
with any person to participate in the distribution of such Senior Discount
Exchange Notes. Each holder, other than a broker-dealer, must acknowledge that
it is not engaged in, and does not intend to engage in, a distribution of Senior
Discount Exchange Notes. Each Transferor which is a broker-dealer receiving
Senior Discount Exchange Notes for its own account must acknowledge that it will
deliver a prospectus in connection with any resale of such Senior Discount
Exchange Notes. By so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an 'underwriter' within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of Senior Discount Exchange Notes received in exchange for Senior
Discount Old Notes where such Senior Discount Old Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities. The Holdings Issuers will, for a period of 90 days after the Senior
Discount Expiration Date, make copies of this Prospectus available to any
broker-dealer for use in connection with any such resale.
WITHDRAWAL RIGHTS
Tenders of Senior Discount Old Notes may be withdrawn at any time prior to
the Senior Discount Expiration Date.
For a withdrawal to be effective, a written notice of withdrawal sent by
telegram, facsimile transmission (receipt confirmed by telephone) or letter must
be received by the Senior Discount Exchange Agent at the address set forth
herein prior to the Senior Discount Expiration Date. Any such notice of
withdrawal must (i) specify the name of the person having tendered the Senior
Discount Old Notes to be withdrawn (the 'Depositor'), (ii) identify the Senior
Discount Old Notes to be withdrawn (including the certificate number or numbers
and principal amount of such Senior Discount Old Notes), (iii) specify the
principal amount of Senior Discount Old Notes to be withdrawn, (iv) include a
statement that such holder is withdrawing his election to have such Senior
Discount Old Notes exchanged, (v) be signed by the holder in the same manner as
the original signature on the Letter of Transmittal by which such Senior
Discount Old Notes were tendered or as otherwise described above (including any
required signature guarantees) or be accompanied by documents of transfer
sufficient to have the Trustee under the Senior Discount Indenture register the
transfer of such Senior Discount Old Notes into the name of the person
withdrawing the tender and (vi) specify the name in which any such Senior
Discount Old
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Notes are to be registered, if different from that of the Depositor. The Senior
Discount Exchange Agent will return the properly withdrawn Senior Discount Old
Notes promptly following receipt of notice of withdrawal.
If Senior Discount Old Notes have been tendered pursuant to the procedure
for book-entry transfer, any notice of withdrawal must specify the name and
number of the account at the book-entry transfer facility to be credited with
the withdrawn Senior Discount Old Notes or otherwise comply with the book-entry
transfer facility procedure. All questions as to the validity of notices of
withdrawals, including time of receipt, will be determined by the Holdings
Issuers and such determination will be final and binding on all parties.
Any Senior Discount Old Notes so withdrawn will be deemed not to have been
validly tendered for exchange for purposes of the Senior Discount Exchange
Offer. Any Senior Discount Old Notes which have been tendered for exchange but
which are not exchanged for any reason will be returned to the holder thereof
without cost to such holder (or, in the case of Senior Discount Old Notes
tendered by book-entry transfer into the Senior Discount Exchange Agent's
account at the book-entry transfer facility pursuant to the book-entry transfer
procedures described above, such Senior Discount Old Notes will be credited to
an account with such book-entry transfer facility specified by the holder) as
soon as practicable after withdrawal, rejection of tender or termination of the
Senior Discount Exchange Offer. Properly withdrawn Senior Discount Old Notes may
be retendered by following one of the procedures described under '--Procedures
for Tendering Senior Discount Old Notes' above at any time on or prior to the
Senior Discount Expiration Date.
ACCEPTANCE OF SENIOR DISCOUNT OLD NOTES FOR EXCHANGE; DELIVERY OF SENIOR
DISCOUNT EXCHANGE NOTES
Upon satisfaction or waiver of all of the conditions to the Senior Discount
Exchange Offer, the Holdings Issuers will accept, promptly on the Senior
Discount Exchange Date, all Senior Discount Old Notes properly tendered and will
issue the Senior Discount Exchange Notes promptly after such acceptance. See
'--Certain Conditions to the Senior Discount Exchange Offer' below. For purposes
of the Senior Discount Exchange Offer, the Holdings Issuers shall be deemed to
have accepted properly tendered Senior Discount Old Notes for exchange when, as
and if the Holdings Issuers have given oral or written notice thereof to the
Senior Discount Exchange Agent.
For each Senior Discount Old Note accepted for exchange, the holder of such
Senior Discount Old Note will receive a Senior Discount Exchange Note having a
principal amount equal to that of the surrendered Senior Discount Old Note.
In all cases, issuance of Senior Discount Exchange Notes for Senior
Discount Old Notes that are accepted for exchange pursuant to the Senior
Discount Exchange Offer will be made only after timely receipt by the Senior
Discount Exchange Agent of certificates for such Senior Discount Old Notes or a
timely book-entry confirmation of such Senior Discount Old Notes into the Senior
Discount Exchange Agent's account at the book-entry transfer facility, a
properly completed and duly executed Letter of Transmittal and all other
required documents. If any tendered Senior Discount Old Notes are not accepted
for any reason set forth in the terms and conditions of the Senior Discount
Exchange Offer or if Senior Discount Old Notes are submitted for a greater
principal amount than the holder desires to exchange, such unaccepted or
non-exchanged Senior Discount Old Notes will be returned without expense to the
tendering holder thereof (or, in the case of Senior Discount Old Notes tendered
by book-entry transfer into the Senior Discount Exchange Agent's account at the
book-entry transfer facility pursuant to the book-entry transfer procedures
described above, such non-exchanged Senior Discount Old Notes will be credited
to an account maintained with such book-entry transfer facility specified by the
holder) as promptly as practicable after the expiration of the Senior Discount
Exchange Offer.
CERTAIN CONDITIONS TO THE SENIOR DISCOUNT EXCHANGE OFFER
Notwithstanding any other provision of the Senior Discount Exchange Offer,
or any extension of the Senior Discount Exchange Offer, the Holdings Issuers
shall not be required to accept for exchange, or to issue Senior Discount
Exchange Notes in exchange for, any Senior Discount Old Notes and may terminate
or amend the Senior Discount Exchange Offer (by oral or written notice to the
Senior Discount Exchange Agent or by a timely press release) if at any time
before the acceptance of such Senior Discount Old Notes for exchange or the
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exchange of the Senior Discount Exchange Notes for such Senior Discount Old
Notes, any of the following conditions exist:
(a) any action or proceeding is instituted or threatened in any court
or by or before any governmental agency or regulatory authority or any
injunction, order or decree is issued with respect to the Senior Discount
Exchange Offer which, in the sole judgment of the Holdings Issuers, might
materially impair the ability of the Holdings Issuers to proceed with the
Senior Discount Exchange Offer or have a material adverse effect on the
contemplated benefits of the Senior Discount Exchange Offer to the Holdings
Issuers; or
(b) any change (or any development involving a prospective change)
shall have occurred or be threatened in the business, properties, assets,
liabilities, financial condition, operations, results of operations or
prospects of the Holdings Issuers that, in the sole judgment of the
Holdings Issuers, is or may be adverse to the Holdings Issuers, or the
Holdings Issuers shall have become aware of facts that have or may have
adverse significance with respect to the value of the Senior Discount Old
Notes or the Senior Discount Exchange Notes or that may, in the sole
judgment of the Holdings Issuers, materially impair the contemplated
benefits of the Senior Discount Exchange Offer to the Holdings Issuers; or
(c) any law, rule or regulation or applicable interpretations of the
Staff of the Commission is issued or promulgated which, in the good faith
determination of the Holdings Issuers, does not permit the Holdings Issuers
to effect the Senior Discount Exchange Offer; or
(d) any governmental approval has not been obtained, which approval
the Holdings Issuers, in their sole discretion, deem necessary for the
consummation of the Senior Discount Exchange Offer; or
(e) there shall have been proposed, adopted or enacted any law,
statute, rule or regulation (or an amendment to any existing law, statute,
rule or regulation) which, in the sole judgment of the Holdings Issuers,
might materially impair the ability of the Holdings Issuers to proceed with
the Senior Discount Exchange Offer or have a material adverse effect on the
contemplated benefits of the Senior Discount Exchange Offer to the Holdings
Issuers; or
(f) there shall occur a change in the current interpretation by the
Staff of the Commission which permits the Senior Discount Exchange Notes
issued pursuant to the Senior Discount Exchange Offer in exchange for
Senior Discount Old Notes to be offered for resale, resold and otherwise
transferred by holders thereof (other than any such holder that is an
'affiliate' of the Holdings Issuers within the meaning of Rule 405 under
the Securities Act) without compliance with the registration and prospectus
delivery provisions of the Securities Act provided that such Senior
Discount Exchange Notes are acquired in the ordinary course of such
holders' business and such holders have no arrangement with any person to
participate in the distribution of such Senior Discount Exchange Notes; or
(g) there shall have occurred (i) any general suspension of,
shortening of hours for, or limitation on prices for, trading in securities
on any national securities exchange or in the over-the-counter market
(whether or not mandatory), (ii) any limitation by any governmental agency
or authority which may adversely affect the ability of the Holdings Issuers
to complete the transactions contemplated by the Senior Discount Exchange
Offer, (iii) a declaration of a banking moratorium or any suspension of
payments in respect of banks by Federal or state authorities in the United
States (whether or not mandatory), (iv) a commencement of a war, armed
hostilities or other international or national crisis directly or
indirectly involving the United States, (v) any limitation (whether or not
mandatory) by any governmental authority on, or other event having a
reasonable likelihood of affecting, the extension of credit by banks or
other lending institutions in the United States, or (vi) in the case of any
of the foregoing existing at the time of the commencement of the Senior
Discount Exchange Offer, a material acceleration or worsening thereof.
The Holdings Issuers expressly reserve the right to terminate the Senior
Discount Exchange Offer and not accept for exchange any Senior Discount Old
Notes upon the occurrence of any of the foregoing conditions (which represent
all of the material conditions to the acceptance by the Holdings Issuers of
properly tendered Senior Discount Old Notes). In addition, the Holdings Issuers
may amend the Senior Discount Exchange Offer at any time prior to the Senior
Discount Expiration Date if any of the conditions set forth above occurs.
Moreover, regardless of whether any of such conditions has occurred, the
Holdings Issuers may amend the Senior Discount
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Exchange Offer in any manner which, in their good faith judgment, is
advantageous to holders of the Senior Discount Old Notes.
The foregoing conditions are for the sole benefit of the Holdings Issuers
and may be asserted by the Holdings Issuers regardless of the circumstances
giving rise to any such condition or may be waived by the Holdings Issuers in
whole or in part at any time and from time to time in their sole discretion. The
failure by the Holdings Issuers at any time to exercise any of the foregoing
rights shall not be deemed a waiver of any such right and each such right shall
be deemed an ongoing right which may be asserted at any time and from time to
time. If the Holdings Issuers waive or amend the foregoing conditions, they
will, if required by law, extend the Senior Discount Exchange Offer for a
minimum of five business days from the date that the Holdings Issuers first give
notice, by public announcement or otherwise, of such waiver or amendment, if the
Senior Discount Exchange Offer would otherwise expire within such five
business-day period. Any determination by the Holdings Issuers concerning the
events described above will be final and binding upon all parties.
In addition, the Holdings Issuers will not accept for exchange any Senior
Discount Old Notes tendered, and no Senior Discount Exchange Notes will be
issued in exchange for any such Senior Discount Old Notes, if at such time any
stop order shall be threatened or in effect with respect to the Registration
Statement of which this Prospectus constitutes a part or the qualification of
the Senior Discount Indenture under the Trust Indenture Act of 1939, as amended.
In any such event, the Holdings Issuers are required to use every reasonable
effort to obtain the withdrawal of any stop order at the earliest possible time.
The Senior Discount Exchange Offer is not conditioned upon any minimum
principal amount of Senior Discount Old Notes being tendered for exchange.
SENIOR DISCOUNT EXCHANGE AGENT
The Bank of New York has been appointed as the Senior Discount Exchange
Agent for the Senior Discount Exchange Offer. All executed Letters of
Transmittal should be directed to the Senior Discount Exchange Agent at one of
the addresses set forth below:
<TABLE>
<S> <C>
By Hand or Overnight Delivery: By Registered or Certified Mail:
The Bank of New York The Bank of New York
101 Barclay Street 101 Barclay Street, 7E
Corporate Trust Services Window New York, New York 10286
Ground Level Attn: Enrique Lopez, Reorganization Section
New York, New York 10286
Attn: Enrique Lopez, Reorganization Section
By Facsimile (Eligible Institutions Only):
(212) 815-6339
Attn: Enrique Lopez, Reorganization Section
Telephone: (212) 816-2742
</TABLE>
Questions and requests for assistance, requests for additional copies of
this Prospectus or of the Letter of Transmittal and requests for Notices of
Guaranteed Delivery should be directed to the Senior Discount Exchange Agent at
the address and telephone number set forth in the Letter of Transmittal.
DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ON THE LETTER OF TRANSMITTAL, OR
TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN THE ONE SET FORTH
ON THE LETTER OF TRANSMITTAL, WILL NOT CONSTITUTE A VALID DELIVERY.
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SOLICITATION OF TENDERS; FEES AND EXPENSES
The Holdings Issuers have not retained any dealer-manager in connection
with the Senior Discount Exchange Offer and will not make any payments to
brokers, dealers or others soliciting acceptances of the Senior Discount
Exchange Offer. The Holdings Issuers, however, will pay the Senior Discount
Exchange Agent reasonable and customary fees for its services and will reimburse
it for its reasonable out-of-pocket expenses in connection therewith. The
Holdings Issuers will also pay brokerage houses and other custodians, nominees
and fiduciaries the reasonable out-of-pocket expenses incurred by them in
forwarding copies of this and other related documents to the beneficial owners
of the Senior Discount Old Notes and in handling or forwarding tenders for their
customers.
The estimated cash expenses to be incurred in connection with the Senior
Discount Exchange Offer will be paid by the Holdings Issuers and are estimated
in the aggregate to be approximately $ , including fees and
expenses of the Senior Discount Exchange Agent and the Senior Discount Trustee,
registration fees, and accounting, legal, printing and related fees and
expenses.
No person has been authorized to give any information or to make any
representations in connection with the Senior Discount Exchange Offer other than
those contained in this Prospectus. If given or made, such information or
representations should not be relied upon as having been authorized by the
Holdings Issuers. Neither the delivery of this Prospectus nor any exchange made
hereunder shall, under any circumstances, create any implication that there has
been no change in the affairs of the Holdings Issuers since the respective dates
as of which information is given herein. The Senior Discount Exchange Offer is
not being made to (nor will tenders be accepted from or on behalf of) holders of
Senior Discount Old Notes in any jurisdiction in which the making of the Senior
Discount Exchange Offer or the acceptance thereof would not be in compliance
with the laws of such jurisdiction. However, the Holdings Issuers may, at their
discretion, take such action as they may deem necessary to make the Senior
Discount Exchange Offer in any such jurisdiction and extend the Senior Discount
Exchange Offer to holders of Senior Discount Old Notes in such jurisdiction. In
any jurisdiction in which the securities or 'blue sky' laws require the Senior
Discount Exchange Offer to be made by a licensed broker or dealer, the Senior
Discount Exchange Offer is being made on behalf of the Holdings Issuers by one
or more registered brokers or dealers which are licensed under the laws of such
jurisdiction.
TRANSFER TAXES
The Holdings Issuers will pay all transfer taxes, if any, applicable to the
exchange of Senior Discount Old Notes pursuant to the Senior Discount Exchange
Offer. If, however, certificates representing Senior Discount Exchange Notes or
Senior Discount Old Notes for principal amounts not tendered or accepted for
exchange are to be delivered to, or are to be issued in the name of, any person
other than the registered holder of the Senior Discount Old Notes tendered, or
if tendered Senior Discount Old Notes are registered in the name of any person
other than the person signing the Letter of Transmittal, or if a transfer tax is
imposed for any reason other than the exchange of Senior Discount Old Notes
pursuant to the Senior Discount Exchange Offer, then the amount of any such
transfer taxes (whether imposed on the registered holder or any other persons)
will be payable by the tendering holder. If satisfactory evidence of payment of
such taxes or exemption therefrom is not submitted with the applicable Letter of
Transmittal, the amount of such transfer taxes will be billed directly to such
tendering holder.
ACCOUNTING TREATMENT
The Senior Discount Exchange Notes will be recorded at the carrying value
of the Senior Discount Old Notes as reflected in the Holdings Issuers'
accounting records on the date of the exchange. Accordingly, no gain or loss for
accounting purposes will be recognized by the Holdings Issuers upon the exchange
of Senior Discount Exchange Notes for Senior Discount Old Notes. Expenses
incurred in connection with the issuance of the Senior Discount Exchange Notes
will be amortized over the term of the Senior Discount Exchange Notes.
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CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Senior Discount Old Notes who do not exchange their Senior
Discount Old Notes for Senior Discount Exchange Notes pursuant to the Senior
Discount Exchange Offer will continue to be subject to the restrictions on
transfer of such Senior Discount Old Notes as set forth in the legend thereon.
Senior Discount Old Notes not exchanged pursuant to the Senior Discount Exchange
Offer will continue to remain outstanding in accordance with their terms. In
general, the Senior Discount Old Notes may not be offered or sold unless
registered under the Securities Act, except pursuant to an exemption from, or in
a transaction not subject to, the Securities Act and applicable state securities
laws. The Holdings Issuers do not currently anticipate that they will register
the Senior Discount Old Notes under the Securities Act.
Participation in the Senior Discount Exchange Offer is voluntary, and
holders of Senior Discount Old Notes should carefully consider whether to
participate. Holders of Senior Discount Old Notes are urged to consult their
financial and tax advisors in making their own decision on what action to take.
As a result of the making of, and upon acceptance for exchange of all
validly tendered Senior Discount Old Notes pursuant to the terms of, the Senior
Discount Exchange Offer, the Holdings Issuers will have fulfilled a covenant
contained in the Senior Discount Registration Rights Agreement. Holders of
Senior Discount Old Notes who do not tender their Senior Discount Old Notes in
the Senior Discount Exchange Offer will continue to hold such Senior Discount
Old Notes and will be entitled to all the rights and limitations applicable
thereto under the Senior Discount Indenture, except for any such rights under
the Senior Discount Registration Rights Agreement that by their terms terminate
or cease to have further effectiveness as a result of the making of this Senior
Discount Exchange Offer. All untendered Senior Discount Old Notes will continue
to be subject to the restrictions on transfer set forth in the Senior Discount
Indenture. To the extent that Senior Discount Old Notes are tendered and
accepted in the Senior Discount Exchange Offer, the trading market for
untendered Senior Discount Old Notes could be adversely affected.
The Holdings Issuers may in the future seek to acquire, subject to the
terms of the Senior Discount Indenture, untendered Senior Discount Old Notes in
open-market or privately-negotiated transactions, through subsequent exchange
offers or otherwise. The Holdings Issuers have no present plan to acquire any
Senior Discount Old Notes which are not tendered in the Senior Discount Exchange
Offer.
RESALE OF SENIOR DISCOUNT EXCHANGE NOTES
The Holdings Issuers are making the Senior Discount Exchange Offer in
reliance on the position of the Staff of the Commission as set forth in certain
interpretive letters addressed to third parties in other transactions. However,
the Holdings Issuers have not sought their own interpretive letter and there can
be no assurance that the Staff would make a similar determination with respect
to the Senior Discount Exchange Offer as it has in such interpretive letters to
third parties. Based on these interpretations by the Staff, the Holdings Issuers
believe that the Senior Discount Exchange Notes issued pursuant to the Senior
Discount Exchange Offer in exchange for Senior Discount Old Notes may be offered
for resale, resold and otherwise transferred by a Holder (other than any Holder
who is a broker-dealer or an 'affiliate' of the Holdings Issuers within the
meaning of Rule 405 of the Securities Act) without further compliance with the
registration and prospectus delivery requirements of the Securities Act,
provided that such Senior Discount Exchange Notes are acquired in the ordinary
course of such Holder's business and that such Holder is not participating, and
has no arrangement or understanding with any person to participate, in a
distribution (within the meaning of the Securities Act) of such Senior Discount
Exchange Notes. However, any holder who is an 'affiliate' of the Holdings
Issuers or who has an arrangement or understanding with respect to the
distribution of the Senior Discount Exchange Notes to be acquired pursuant to
the Senior Discount Exchange Offer, or any broker-dealer who purchased Senior
Discount Old Notes from the Holdings Issuers to resell pursuant to Rule 144A or
any other available exemption under the Securities Act (i) could not rely on the
applicable interpretations of the Staff and (ii) must comply with the
registration and prospectus delivery requirements of the Securities Act. A
broker-dealer who holds Senior Discount Old Notes that were acquired for its own
account as a result of market-making or other trading activities may be deemed
to be an 'underwriter' within the meaning of the Securities Act and must,
therefore, deliver a prospectus meeting the requirements of the Securities Act
in connection with any resale of Senior Discount Exchange Notes. Each such
broker-dealer that receives Senior Discount Exchange Notes for its own account
in exchange for Senior
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Discount Old Notes, where such Senior Discount Old Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge in the applicable Letter of Transmittal that it
will deliver a prospectus in connection with any resale of such Senior Discount
Exchange Notes. See 'Plan of Distribution.'
In addition, to comply with the securities laws of certain jurisdictions,
if applicable, the Senior Discount Exchange Notes may not be offered or sold
unless they have been registered or qualified for sale in such jurisdiction or
an exemption from registration or qualification is available and is complied
with. The Holdings Issuers have agreed, pursuant to the Senior Discount
Registration Rights Agreement and subject to certain specified limitations
therein, to register or qualify the Senior Discount Exchange Notes for offer or
sale under the securities or blue sky laws of such jurisdictions as any holder
of the Senior Discount Exchange Notes reasonably requests. Such registration or
qualification may require the imposition of restrictions or conditions
(including suitability requirements for offerees or purchasers) in connection
with the offer or sale of any Senior Discount Exchange Notes.
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DESCRIPTION OF THE SENIOR SUBORDINATED EXCHANGE NOTES
The Senior Subordinated Old Notes were issued and the Senior Subordinated
Exchange Notes offered hereby will be issued under an Indenture dated as of
February 2, 1998 (the 'Senior Subordinated Indenture') by and between the
Company Issuers, Holdings, as guarantor, and United States Trust Company of New
York, as trustee (the 'Senior Subordinated Trustee'). The Fixed Rate Senior
Subordinated Exchange Notes and the Floating Rate Senior Subordinated Exchange
Notes will be treated as a single class of securities and will be issued under
the Senior Subordinated Indenture. Any Senior Subordinated Old Notes that remain
outstanding after the completion of the Senior Subordinated Exchange Offers,
together with the Senior Subordinated Exchange Notes issued in connection with
the Senior Subordinated Exchange Offers, will also be treated as a single class
of securities under the Senior Subordinated Indenture. All references to the
'Senior Subordinated Notes' in the following summary and elsewhere herein shall
mean the collective reference to the Fixed Rate Senior Subordinated Exchange
Notes, the Floating Rate Senior Subordinated Exchange Notes, the Fixed Rate
Senior Subordinated Old Notes and the Floating Rate Senior Subordinated Old
Notes. The following summary of certain provisions of the Senior Subordinated
Indenture does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, the Trust Indenture Act of 1939, as amended (the
'TIA'), and to all of the provisions of the Senior Subordinated Indenture,
including the definitions of certain terms therein and those terms made a part
of the Senior Subordinated Indenture by reference to the TIA as in effect on the
date of the Senior Subordinated Indenture. The definitions of certain
capitalized terms used in the following summary that relate solely to the
Floating Rate Senior Subordinated Notes are set forth below under '--Floating
Rate Senior Subordinated Notes,' and the definitions of certain other
capitalized terms used in the following summary that relate to all Senior
Subordinated Notes are set forth below under '--Certain Definitions.' For
purposes of this section, references to the 'Company' mean the Operating
Company, and the terms 'Company' and 'Company Issuers' do not include their
respective Subsidiaries. The Senior Subordinated Indenture is an exhibit to the
Registration Statement of which this Prospectus is a part.
GENERAL
On February 2, 1998 (the 'Issue Date'), the Company Issuers issued
$150,000,000 aggregate principal amount of Fixed Rate Senior Subordinated Old
Notes, and $75,000,000 aggregate principal amount of Floating Rate Senior
Subordinated Old Notes under the Senior Subordinated Indenture. The terms of the
Fixed Rate Senior Subordinated Exchange Notes and the Floating Rate Senior
Subordinated Exchange Notes are identical in all material respects to the terms
of the Fixed Rate Senior Subordinated Old Notes and the Floating Rate Senior
Subordinated Old Notes, respectively, for which they may be exchanged, except
for certain transfer restrictions and registration and other rights relating to
the exchange of the Senior Subordinated Old Notes for Senior Subordinated
Exchange Notes. The Senior Subordinated Trustee will authenticate and deliver
Fixed Rate Senior Subordinated Exchange Notes and Floating Rate Senior
Subordinated Exchange Notes for original issue only in exchange for a like
principal amount of Fixed Rate Senior Subordinated Old Notes and Floating Rate
Senior Subordinated Old Notes, respectively. The Fixed Rate Senior Subordinated
Exchange Notes and the Floating Rate Senior Subordinated Exchange Notes will be
treated as a single class of securities under the Senior Subordinated Indenture.
Any Senior Subordinated Old Notes that remain outstanding after the completion
of the Senior Subordinated Exchange Offers, together with the Senior
Subordinated Exchange Notes issued in connection with the Senior Subordinated
Exchange Offers, will also be treated as a single class of securities under the
Senior Subordinated Indenture. Accordingly, all references herein to specified
percentages in aggregate principal amount of the outstanding Senior Subordinated
Exchange Notes shall be deemed to mean, at any time after the Senior
Subordinated Exchange Offers are consummated, such percentage in aggregate
principal amount of the Senior Subordinated Old Notes and Senior Subordinated
Exchange Notes then outstanding.
The Senior Subordinated Exchange Notes will be unsecured obligations of the
Company Issuers, ranking subordinate in right of payment to all Senior
Indebtedness of the Company Issuers.
The Senior Subordinated Exchange Notes will be issued in fully registered
form only, without coupons, in denominations of $1,000 and integral multiples
thereof. Initially, the Senior Subordinated Trustee will act as Paying Agent and
Registrar for the Senior Subordinated Exchange Notes. The Senior Subordinated
Exchange Notes may be presented for registration of transfer and exchange at the
offices of the Registrar, which initially will be the Senior Subordinated
Trustee's corporate trust office. The Company Issuers may change any Paying
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Agent and Registrar without notice to holders of the Senior Subordinated
Exchange Notes (the 'Holders'). The Company Issuers will pay principal (and
premium, if any) on the Senior Subordinated Exchange Notes at the Senior
Subordinated Trustee's corporate office in New York, New York. At the Company
Issuers' option, interest may be paid at the Senior Subordinated Trustee's
corporate trust office or by check mailed to the registered addresses of
Holders.
PRINCIPAL, MATURITY AND INTEREST
The Senior Subordinated Notes are limited to $325,000,000 aggregate
principal amount at any time outstanding. Pursuant to the Senior Subordinated
Exchange Offers, an aggregate of up to $225,000,000 aggregate principal amount
of Senior Subordinated Exchange Notes may be issued, consisting of $150,000,000
principal amount of Fixed Rate Senior Subordinated Exchange Notes and
$75,000,000 principal amount of Floating Rate Senior Subordinated Exchange
Notes. Such Senior Subordinated Exchange Notes may be issued solely in exchange
for the $150,000,000 aggregate principal amount of Fixed Rate Senior
Subordinated Old Notes and $75,000,000 aggregate principal amount of Floating
Rate Senior Subordinated Old Notes which were issued on February 2, 1998.
The Senior Subordinated Exchange Notes will mature on January 15, 2008.
Interest on the Senior Subordinated Exchange Notes will be payable semiannually
in cash on each January 15 and July 15, commencing on the first such date to
occur after the effective date of the applicable Senior Subordinated Exchange
Offer. Interest will be payable to the persons who are registered Holders at the
close of business on the January 1 or July 1 immediately preceding the
applicable interest payment date. Interest on each Senior Subordinated Exchange
Note will accrue (A) from the later of (i) the last interest payment date on
which interest was paid on the Senior Subordinated Old Note surrendered in
exchange therefor or (ii) if the Senior Subordinated Old Note is surrendered for
exchange on a date in a period which includes the record date for an interest
payment date to occur on or after the date of such exchange and as to which
interest will be paid, the date of such interest payment date or (B) if no
interest has been paid on such Senior Subordinated Old Note, from the Issue
Date.
The Senior Subordinated Exchange Notes will not be entitled to the benefit
of any mandatory sinking fund.
FIXED RATE SENIOR SUBORDINATED EXCHANGE NOTES
Interest on the Fixed Rate Senior Subordinated Exchange Notes will accrue
at the rate of 8 3/4% per annum.
FLOATING RATE SENIOR SUBORDINATED EXCHANGE NOTES
The Floating Rate Senior Subordinated Exchange Notes will bear interest at
a rate per annum, reset semi-annually, equal to LIBOR (as defined) plus 3 5/8%,
as determined by the Calculation Agent (the 'Calculation Agent'), which shall
initially be the Senior Subordinated Trustee.
'LIBOR,' with respect to an Interest Period, will be the rate (expressed
as a percentage per annum) for deposits in United States dollars for a six-month
period beginning on the second London Banking Day (as defined) after the
Determination Date (as defined) that appears on Telerate Page 3750 (as defined)
as of 11:00 a.m., London time, on the Determination Date. If Telerate Page 3750
does not include such a rate or is unavailable on a Determination Date, LIBOR
for the Interest Period shall be the arithmetic mean of the rates (expressed as
a percentage per annum) for deposits in a Representative Amount (as defined) in
United States dollars for a six-month period beginning on the second London
Banking Day after the Determination Date that appears on Reuters Screen LIBO
Page (as defined) as of 11:00 a.m., London time, on the Determination Date. If
Reuters Screen LIBO Page does not include two or more rates or is unavailable on
a Determination Date, the Calculation Agent will request the principal London
office of each of four major banks in the London interbank market, as selected
by the Calculation Agent, to provide such bank's offered quotation (expressed as
a percentage per annum), as of approximately 11:00 a.m., London time, on such
Determination Date, to prime banks in the London interbank market for deposits
in a Representative Amount in United States dollars for a six-month period
beginning on the second London Banking Day after the Determination Date. If at
least two such offered quotations are so provided, LIBOR for the Interest Period
will be the arithmetic mean of such quotations. If fewer than two such
quotations are so provided, the Calculation Agent will request each of three
major banks in New York City, as selected by the Calculation Agent, to provide
such bank's rate (expressed as a percentage per
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annum), as of approximately 11:00 a.m., New York City time, on such
Determination Date, for loans in a Representative Amount in United States
dollars to leading European banks for a six-month period beginning on the second
London Banking Day after the Determination Date. If at least two such rates are
so provided, LIBOR for the Interest Period will be the arithmetic mean of such
rates. If fewer than two such rates are so provided, then LIBOR for the Interest
Period will be LIBOR in effect with respect to the immediately preceding
Interest Period.
'Interest Period' means the period commencing on and including an interest
payment date and ending on and including the day immediately preceding the next
succeeding interest payment date, with the exception that the first Interest
Period shall commence on and include February 2, 1998 and end on and include
July 14, 1998.
'Determination Date,' with respect to an Interest Period, will be the
second London Banking Day preceding the first day of the Interest Period.
'London Banking Day' is any day in which dealings in United States dollars
are transacted or, with respect to any future date, are expected to be
transacted in the London interbank market.
'Representative Amount' means a principal amount of not less than U.S.
$1,000,000 for a single transaction in the relevant market at the relevant time.
'Telerate Page 3750' means the display designated as 'Page 3750' on the
Dow Jones Telerate Service (or such other page as may replace Page 3750 on that
service).
'Reuters Screen LIBO Page' means the display designated as page 'LIBO' on
The Reuters Monitor Money Rates Service (or such other page as may replace the
LIBO page on that service).
Subject to the provisions relating to the date from which interest will
accrue on the Senior Subordinated Exchange Notes as described under
'--Principal, Maturity and Interest' above, the amount of interest for each day
that the Floating Rate Senior Subordinated Exchange Notes are outstanding (the
'Daily Interest Amount') will be calculated by dividing the interest rate in
effect for such day by 360 and multiplying the result by the principal amount of
the Floating Rate Senior Subordinated Exchange Notes. Subject to such provisions
described under '--Principal, Maturity and Interest' above, the amount of
interest to be paid on the Floating Rate Senior Subordinated Exchange Notes for
each Interest Period will be calculated by adding the Daily Interest Amounts for
each day in the Interest Period.
All percentages resulting from any of the above calculations will be
rounded, if necessary, to the nearest one hundred-thousandth of a percentage
point, with five one-millionths of a percentage point being rounded upwards
(e.g., 9.876545% (or .09876545) being rounded to 9.87655% (or .0987655)) and all
dollar amounts used in or resulting from such calculations will be rounded to
the nearest cent (with one-half cent being rounded upwards).
The interest rate on the Floating Rate Senior Subordinated Exchange Notes
will in no event be higher than the maximum rate permitted by New York law as
the same may be modified by United States law of general application. Under
current New York law, the maximum rate of interest is 25% per annum on a simple
interest basis. This limit may not apply to Floating Rate Senior Subordinated
Exchange Notes in which $2,500,000 or more has been invested.
The Calculation Agent will, upon the request of the holder of any Floating
Rate Senior Subordinated Exchange Note, provide the interest rate then in effect
with respect to the Floating Rate Senior Subordinated Exchange Notes. All
calculations made by the Calculation Agent in the absence of manifest error will
be conclusive for all purposes and binding on the Company Issuers, Holdings, as
guarantor, and the Holders of the Floating Rate Senior Subordinated Exchange
Notes.
REDEMPTION
Optional Redemption. The Fixed Rate Senior Subordinated Exchange Notes
will be redeemable, at the Company Issuers' option, in whole at any time or in
part from time to time, on and after January 15, 2003, upon not less than 30 nor
more than 60 days' notice, at the following redemption prices (expressed as
percentages of
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the principal amount thereof) if redeemed during the twelve-month period
commencing on January 15 of the year set forth below, plus, in each case,
accrued and unpaid interest thereon to the date of redemption:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- -------------------------------------------------------------- ----------
<S> <C>
2003.......................................................... 104.375%
2004.......................................................... 102.917%
2005.......................................................... 101.458%
2006 and thereafter........................................... 100.000%
</TABLE>
The Floating Rate Senior Subordinated Exchange Notes will be redeemable, at
the Company Issuers' option, in whole or in part from time to time, upon not
less than 30 nor more than 60 days' notice, at the following redemption prices
(expressed as percentages of the principal amount thereof) if redeemed during
the twelve-month period commencing on January 15 of the year set forth below,
plus, in each case, accrued and unpaid interest thereon, to the date of
redemption:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- -------------------------------------------------------------- ----------
<S> <C>
1998.......................................................... 105.000%
1999.......................................................... 104.000%
2000.......................................................... 103.000%
2001.......................................................... 102.000%
2002.......................................................... 101.000%
2003 and thereafter........................................... 100.000%
</TABLE>
Optional Redemption of Fixed Rate Senior Subordinated Exchange Notes upon
Equity Offerings. At any time, or from time to time, on or prior to January 15,
2001, the Company Issuers may, at their option, use the net cash proceeds of one
or more Equity Offerings by the Company (or by Holdings to the extent such
proceeds are contributed to the Company) to redeem Fixed Rate Senior
Subordinated Notes up to an aggregate principal amount equal to 40% of the
aggregate principal amount of the Fixed Rate Senior Subordinated Old Notes
originally issued, at a redemption price equal to 108.750% of the principal
amount thereof, plus accrued and unpaid interest to the date of redemption;
provided that Fixed Rate Senior Subordinated Notes in an aggregate principal
amount equal to at least 60% of the aggregate principal amount of the Fixed Rate
Senior Subordinated Old Notes originally issued remains outstanding immediately
following such redemption. In order to effect the foregoing redemption with the
proceeds of any Equity Offering, the Company Issuers shall make such redemption
not more than 120 days after the consummation of any such Equity Offering.
SELECTION AND NOTICE OF REDEMPTION
If less than all of the Senior Subordinated Exchange Notes are to be
redeemed at any time or if more Senior Subordinated Exchange Notes are tendered
pursuant to an Asset Sale Offer or a Change of Control Offer than the Company
Issuers are required to purchase, then the selection of such Senior Subordinated
Exchange Notes for redemption or purchase, as the case may be, will be made by
the Senior Subordinated Trustee in compliance with the requirements of the
principal national securities exchange, if any, on which such Senior
Subordinated Exchange Notes are listed, or, if such Senior Subordinated Exchange
Notes are not so listed, on a pro rata basis, by lot or by such other method as
the Senior Subordinated Trustee shall deem fair and appropriate (and in such
manner as complies with applicable legal requirements); provided that no Senior
Subordinated Exchange Notes of $1,000 or less shall be purchased or redeemed in
part.
Notices of purchase or redemption shall be mailed by first class mail,
postage prepaid, at least 30 but not more than 60 days before the purchase or
redemption date to each Holder of Senior Subordinated Exchange Notes to be
purchased or redeemed at such Holder's registered address. If any Senior
Subordinated Exchange Note is to be purchased or redeemed in part only, any
notice of purchase or redemption that relates to such Senior Subordinated
Exchange Note shall state the portion of the principal amount thereof that has
been or is to be purchased or redeemed.
A new Senior Subordinated Exchange Note in principal amount equal to the
unpurchased or unredeemed portion of any Senior Subordinated Exchange Note
purchased or redeemed in part will be issued in the name of the Holder thereof
upon cancellation of the original Senior Subordinated Exchange Note. On and
after the purchase or redemption date unless the Company Issuers default in
payment of the purchase or redemption price,
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interest shall cease to accrue on Senior Subordinated Exchange Notes or portions
thereof purchased or called for redemption.
SUBORDINATION
The payment of all Obligations on the Senior Subordinated Notes is
subordinated in right of payment to the prior payment in full in cash or Cash
Equivalents of all Obligations on Senior Indebtedness. Upon any payment or
distribution of assets of either of the Company Issuers of any kind or
character, whether in cash, property or securities, to creditors upon any
liquidation, dissolution, winding up, reorganization, assignment for the benefit
of creditors or marshaling of assets of either of the Company Issuers or in a
bankruptcy, reorganization, insolvency, receivership or other similar proceeding
relating to either of the Company Issuers or their respective property, whether
voluntary or involuntary, all Obligations due or to become due upon all Senior
Indebtedness shall first be paid in full in cash or Cash Equivalents, or such
payment duly provided for to the satisfaction of the holders of Senior
Indebtedness, before any payment or distribution of any kind or character is
made on account of any Obligations on the Senior Subordinated Notes, or for the
acquisition of any of the Senior Subordinated Notes for cash or property or
otherwise (except that holders of the Senior Subordinated Notes may receive
Permitted Junior Securities and payments from a trust described under 'Legal
Defeasance and Covenant Defeasance' below so long as, on the date or dates the
respective amounts were paid into the trust, such payments were made with
respect to the Senior Subordinated Notes without violating the subordination
provisions described herein). If any default occurs and is continuing in the
payment when due, whether at maturity, upon any redemption, by acceleration or
otherwise, of any principal of, interest on, unpaid drawings for letters of
credit issued in respect of, or regularly accruing fees with respect to, any
Senior Indebtedness, no payment of any kind or character shall be made by or on
behalf of either of the Company Issuers or any other Person on either of their
behalf with respect to any Obligations on the Senior Subordinated Notes or to
acquire any of the Senior Subordinated Notes for cash or property or otherwise
(except that holders of the Senior Subordinated Notes may receive payments from
a trust described under '--Legal Defeasance and Covenant Defeasance' below so
long as, on the date or dates the respective amounts were paid into the trust,
such payments were made with respect to the Senior Subordinated Notes without
violating the subordination provisions described herein).
In addition, if any other event of default occurs and is continuing with
respect to any Designated Senior Indebtedness, as such event of default is
defined in the instrument creating or evidencing such Designated Senior
Indebtedness, permitting the holders of such Designated Senior Indebtedness then
outstanding to accelerate the maturity thereof and if the Representative for the
respective issue of Designated Senior Indebtedness gives written notice of the
event of default to the Senior Subordinated Trustee (a 'Default Notice'), then,
unless and until all events of default have been cured or waived or have ceased
to exist or the Senior Subordinated Trustee receives notice from the
Representative for the respective issue of Designated Senior Indebtedness
terminating the Blockage Period (as defined), during the 180 days after the
delivery of such Default Notice (the 'Blockage Period'), neither of the Company
Issuers nor any other Person on either of their behalf shall (x) make any
payment of any kind or character with respect to any Obligations on the Senior
Subordinated Notes or (y) acquire any of the Senior Subordinated Notes for cash
or property or otherwise (except that holders of the Senior Subordinated Notes
may receive payments from a trust described under '--Legal Defeasance and
Covenant Defeasance' below so long as, on the date or dates the respective
amounts were paid into the trust, such payments were made with respect to the
Senior Subordinated Notes without violating the subordination provisions
described herein). Notwithstanding anything herein to the contrary, in no event
will a Blockage Period extend beyond 180 days from the date the Default Notice
is delivered and only one such Blockage Period may be commenced within any 360
consecutive days. No event of default which existed or was continuing on the
date of the commencement of any Blockage Period with respect to the Designated
Senior Indebtedness shall be, or be made, the basis for commencement of a second
Blockage Period by the Representative of such Designated Senior Indebtedness
whether or not within a period of 360 consecutive days, unless such event of
default shall have been cured or waived for a period of not less than 90
consecutive days (it being acknowledged that any subsequent action, or any
breach of any financial covenants for a period commencing after the date of
commencement of such Blockage Period that, in either case, would give rise to an
event of default pursuant to any provisions under which an event of default
previously existed or was continuing shall constitute a new event of default for
this purpose).
By reason of such subordination, in the event of the insolvency of either
of the Company Issuers, creditors of the Company Issuers who are not holders of
Senior Indebtedness, including the Holders of the Senior Subordinated Notes, may
recover less, ratably, than holders of Senior Indebtedness.
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COMPANY ISSUERS' STRUCTURE
The Company is a wholly owned operating subsidiary of Holdings, and CapCo I
is a subsidiary corporation of the Company with no material operations of its
own and only limited assets.
NO RECOURSE TO HOLDINGS PARTNERS; NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS,
EMPLOYEES AND STOCKHOLDERS
The Senior Subordinated Indenture under which the Senior Subordinated Notes
have been or will be issued provides that all obligations under the Senior
Subordinated Indenture, the Senior Subordinated Notes, the Holdings Guarantee
and the Old Holdings Guarantee (and all notes and guarantees issued in exchange
therefor) shall be expressly non-recourse to the partners of Holdings in their
capacities as such, and that, by purchasing the Senior Subordinated Notes, each
holder of Senior Subordinated Notes waives any liability of any partner of
Holdings under the Senior Subordinated Indenture, the Senior Subordinated Notes,
the Holdings Guarantee and the Old Holdings Guarantee (and all notes and
guarantees issued in exchange therefor). No director, officer, employee,
incorporator or stockholder of the Company Issuers or any Guarantor shall have
any liability for any obligations of the Company Issuers or the Guarantors under
the Senior Subordinated Exchange Notes, the Guarantees or the Senior
Subordinated Indenture or any claim based on, in respect of, or by reason of
such obligation, or their creation. Such waiver may not be effective to waive
liabilities under the federal securities laws and it is the view of the
Commission that such a waiver is against public policy.
HOLDINGS GUARANTEE
The obligations of the Company Issuers under the Senior Subordinated
Exchange Notes and the Senior Subordinated Indenture will be fully and
unconditionally guaranteed (the 'Holdings Guarantee') on a senior subordinated
basis by Holdings. The Holdings Guarantee will be subordinated in right of
payment to all Senior Indebtedness of Holdings to the same extent that the
Senior Subordinated Notes are subordinated to Senior Indebtedness of the Company
Issuers. Since Holdings is a holding company with no significant operations, the
Holdings Guarantee provides little, if any, additional credit support for the
Senior Subordinated Exchange Notes, and investors should not rely on the
Holdings Guarantee in evaluating an investment in the Senior Subordinated
Exchange Notes.
CHANGE OF CONTROL
The Senior Subordinated Indenture provides that upon the occurrence of a
Change of Control, each Holder will have the right to require that the Company
Issuers purchase all or a portion of such Holder's Senior Subordinated Exchange
Notes pursuant to the offer described below (the 'Change of Control Offer'), at
a purchase price equal to 101% of the principal amount thereof plus accrued
interest to the date of purchase.
The Senior Subordinated Indenture provides that, prior to the mailing of
the notice referred to below, but in any event within 30 days following any
Change of Control, the Company Issuers covenant to (i) repay in full and
terminate all commitments under Indebtedness under the New Credit Facility and
all other Senior Indebtedness the terms of which require repayment upon a Change
of Control or offer to repay in full and terminate all commitments under all
Indebtedness under the New Credit Facility and all other such Senior
Indebtedness and to repay the Indebtedness owed to each lender which has
accepted such offer or (ii) obtain the requisite consents under the New Credit
Facility and all other Senior Indebtedness to permit the repurchase of the
Senior Subordinated Exchange Notes as provided below. The Company Issuers shall
first comply with the covenant in the immediately preceding sentence before they
shall be required to repurchase Senior Subordinated Notes pursuant to the
provisions described below. The Company Issuers' failure to comply with the
covenant described in the second preceding sentence or the immediately
succeeding paragraph shall constitute an Event of Default described in clause
(iii) (and not in clause (ii)) under 'Events of Default' below.
Within 30 days following the date upon which the Change of Control
occurred, the Company Issuers must send, by first class mail, a notice to each
Holder, with a copy to the Senior Subordinated Trustee, which notice shall
govern the terms of the Change of Control Offer. Such notice shall state, among
other things, the purchase date, which must be no earlier than 30 days nor later
than 60 days from the date such notice is mailed, other than as may be required
by law (the 'Change of Control Payment Date'). Holders electing to have a Senior
Subordinated Note purchased pursuant to a Change of Control Offer will be
required to surrender the Senior
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Subordinated Note, with the form entitled 'Option of Holder to Elect Purchase'
on the reverse of the Senior Subordinated Note completed, to the paying agent
('Paying Agent') at the address specified in the notice prior to the close of
business on the third Business Day prior to the Change of Control Payment Date.
If a Change of Control Offer is made, there can be no assurance that the
Company Issuers will have available funds sufficient to pay the Change of
Control purchase price for all the Senior Subordinated Exchange Notes that might
be delivered by Holders seeking to accept the Change of Control Offer. In the
event that the Company Issuers are required to purchase outstanding Senior
Subordinated Exchange Notes pursuant to a Change of Control Offer, the Company
Issuers expect that they would seek third party financing to the extent they do
not have available funds to meet their purchase obligations. However, there can
be no assurance that the Company Issuers would be able to obtain such financing.
Neither the Board of Directors of either Company Issuer nor the Senior
Subordinated Trustee may waive the covenant relating to a Holder's right to
repurchase upon a Change of Control. Restrictions in the Senior Subordinated
Indenture described herein on the ability of the Company Issuers to incur
additional Indebtedness, to grant Liens on their property, to make Restricted
Payments and to make Asset Sales may also make more difficult or discourage a
takeover of Holdings or the Company Issuers, whether favored or opposed by the
management of Holdings or the Company Issuers. Consummation of any such
transaction in certain circumstances may require redemption or repurchase of the
Senior Subordinated Exchange Notes, and there can be no assurance that the
Company Issuers or the acquiring party will have sufficient financial resources
to effect such redemption or repurchase. Such restrictions and the restrictions
on transactions with Affiliates may, in certain circumstances, make more
difficult or discourage any leveraged buyout of Holdings, either of the Company
Issuers or any of their respective Subsidiaries by the management of Holdings or
the respective Company Issuers. While such restrictions cover a wide variety of
arrangements which have traditionally been used to effect highly leveraged
transactions, the Senior Subordinated Indenture may not afford the Holders of
Senior Subordinated Exchange Notes protection in all circumstances from the
adverse aspects of a highly leveraged transaction, reorganization,
restructuring, merger or similar transaction.
The Company Issuers will comply with the requirements of Rule 14e-1 under
the Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Senior Subordinated Exchange Notes pursuant to a Change of Control
Offer. To the extent that the provisions of any securities laws or regulations
conflict with the 'Change of Control' provisions of the Senior Subordinated
Indenture, the Company Issuers shall comply with the applicable securities laws
and regulations and shall not be deemed to have breached their obligations under
the 'Change of Control' provisions of the Senior Subordinated Indenture by
virtue thereof.
CERTAIN COVENANTS
The Senior Subordinated Indenture contains, among others, the following
covenants:
Limitations on Incurrence of Indebtedness and Issuance of Disqualified
Stock. (i) The Company will not, and will not cause or permit any of its
Restricted Subsidiaries to, directly or indirectly, create, incur, issue,
assume, guarantee or otherwise become directly or indirectly liable,
contingently or otherwise, with respect to (collectively, 'incur' and
collectively, an 'incurrence') any Indebtedness (including Acquired
Indebtedness), (ii) the Company and any Guarantor will not issue any shares of
Disqualified Stock and (iii) the Company will not permit any of its Restricted
Subsidiaries that are not Guarantors (other than CapCo I) to issue any shares of
preferred stock; provided, however, that the Company and any Guarantor may incur
Indebtedness (including Acquired Indebtedness) or issue shares of Disqualified
Stock if the Fixed Charge Coverage Ratio for the Company's and the Restricted
Subsidiaries' most recently ended four full fiscal quarters for which internal
financial statements are available immediately preceding the date on which such
additional Indebtedness is incurred or such Disqualified Stock is issued would
have been at least 1.75 to 1.00 (determined on a pro forma basis (including a
pro forma application of the net proceeds therefrom), as if the additional
Indebtedness had been incurred, or the Disqualified Stock had been issued, as
the case may be, and the application of proceeds therefrom had occurred at the
beginning of such four-quarter period).
The foregoing limitations do not apply to: (a) the incurrence by the
Company or its Restricted Subsidiaries of Indebtedness under the New Credit
Facility and the issuance and creation of letters of credit and banker's
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acceptances thereunder (with letters of credit and banker's acceptances being
deemed to have a principal amount equal to the face amount thereof) up to an
aggregate principal amount of $650.0 million outstanding at any one time; (b)
the incurrence by the Company Issuers of Indebtedness represented by the Senior
Subordinated Notes in an aggregate principal amount not to exceed $225,000,000;
(c) Indebtedness existing on the Issue Date (other than Indebtedness described
in clauses (a) and (b)); (d) Indebtedness (including Capitalized Lease
Obligations) incurred by the Company or any of its Restricted Subsidiaries, to
finance the purchase, lease or improvement of property (real or personal) or
equipment (whether through the direct purchase of assets or the Capital Stock of
any Person owning such assets) in an aggregate principal amount which, when
aggregated with the principal amount of all other Indebtedness then outstanding
and incurred pursuant to this clause (d) and including all Refinancing
Indebtedness incurred to refund, refinance or replace any other Indebtedness
incurred pursuant to this clause (d), does not exceed 15% of Total Assets at the
time of the respective incurrence; (e) Indebtedness incurred by the Company or
any of its Restricted Subsidiaries constituting reimbursement obligations with
respect to letters of credit issued in the ordinary course of business,
including without limitation, letters of credit in respect of workers'
compensation claims or self-insurance, or other Indebtedness with respect to
reimbursement type obligations regarding workers' compensation claims; (f)
Indebtedness arising from agreements of the Company or a Restricted Subsidiary
providing for indemnification, adjustment of purchase price or similar
obligations, in each case, incurred or assumed in connection with the
disposition of any business, assets or a Subsidiary, other than guarantees of
Indebtedness incurred by any Person acquiring all or any portion of such
business, assets or a Subsidiary for the purpose of financing such acquisition;
(g) Indebtedness of the Company to a Restricted Subsidiary; provided that any
such Indebtedness shall be subordinated in right of payment to the Senior
Subordinated Notes; provided further that any subsequent issuance or transfer of
any Capital Stock or any other event which results in any such Restricted
Subsidiary ceasing to be a Restricted Subsidiary or any other subsequent
transfer of any such Indebtedness (except to the Company or another Restricted
Subsidiary) shall be deemed, in each case to be an incurrence of such
Indebtedness; (h) shares of preferred stock of a Restricted Subsidiary issued to
the Company or another Restricted Subsidiary; provided that any subsequent
issuance or transfer of any Capital Stock or any other event which results in
any such Restricted Subsidiary ceasing to be a Restricted Subsidiary or any
other subsequent transfer of any such shares of preferred stock (except to the
Company or another Restricted Subsidiary) shall be deemed, in each case to be an
issuance of such shares of preferred stock; (i) Indebtedness of a Restricted
Subsidiary to the Company or another Restricted Subsidiary; provided that if a
Guarantor incurs such indebtedness from a Restricted Subsidiary that is not a
Guarantor, such Indebtedness shall be subordinated in right of payment to the
Guarantee of such Guarantor; and provided, further, that any subsequent transfer
of any such Indebtedness (except to the Company or another Restricted
Subsidiary) shall be deemed, in each case to be an incurrence of such
Indebtedness; (j) Hedging Obligations that are incurred in the ordinary course
of business (1) for the purpose of fixing or hedging interest rate risk with
respect to any Indebtedness that is permitted by the terms of the Senior
Subordinated Indenture to be outstanding; (2) for the purpose of fixing or
hedging currency exchange rate risk with respect to any currency exchanges; or
(3) for the purpose of fixing or hedging commodity price risk with respect to
any commodity purchases; (k) obligations in respect of performance and surety
bonds and completion guarantees provided by the Company or any Restricted
Subsidiary in the ordinary course of business; (l) Indebtedness of any Guarantor
in respect of such Guarantor's Guarantee; (m) Indebtedness or Disqualified Stock
of the Company and any of its Restricted Subsidiaries not otherwise permitted
hereunder in an aggregate principal amount or liquidation preference, which when
aggregated with the principal amount and liquidation preference of all other
Indebtedness and Disqualified Stock then outstanding and incurred pursuant to
this clause (m), does not exceed $50.0 million at any one time outstanding; (n)
(i) any guarantee by the Company or by any Restricted Subsidiary that is a
Guarantor of Indebtedness or other obligations of the Company or any of the
Company's Restricted Subsidiaries so long as the incurrence of such Indebtedness
incurred by such Restricted Subsidiary or the Company, as the case may be, is
permitted under the terms of the Senior Subordinated Indenture and (ii) any
Excluded Guarantee of a Restricted Subsidiary; (o) the incurrence by the Company
or any of its Restricted Subsidiaries of Indebtedness which serves to refund,
refinance or restructure any Indebtedness incurred as permitted under the first
paragraph of this covenant, this clause (o) and clauses (b) and (c) above and
(q) below, or any Indebtedness issued to so refund, refinance or restructure
such Indebtedness including additional Indebtedness incurred to pay premiums and
fees in connection therewith (the 'Refinancing Indebtedness') prior to its
respective maturity; provided, however, that such Refinancing Indebtedness (i)
has a Weighted Average Life to Maturity at the time such Refinancing
Indebtedness is incurred which is not less than the remaining
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Weighted Average Life to Maturity of the Indebtedness being refunded or
refinanced, (ii) to the extent such Refinancing Indebtedness refinances
Indebtedness subordinated or pari passu to the Senior Subordinated Notes, such
Refinancing Indebtedness is subordinated or pari passu to the Senior
Subordinated Notes at least to the same extent as the Indebtedness being
refinanced or refunded and (iii) shall not include (x) Indebtedness of a
Restricted Subsidiary that is not a Guarantor that refinances Indebtedness of
the Company or (y) Indebtedness of the Company or a Restricted Subsidiary that
refinances Indebtedness of an Unrestricted Subsidiary; and provided further that
subclauses (i) and (ii) of this clause (o) will not apply to any refunding or
refinancing of any Senior Indebtedness; (p) other Indebtedness in an amount not
greater than twice the amount of Permanent Qualified Equity Contributions after
the Issue Date at any one time outstanding; and (q) Indebtedness or Disqualified
Stock of Persons that are acquired by the Company or any of its Restricted
Subsidiaries or merged into a Restricted Subsidiary in accordance with the terms
of the Senior Subordinated Indenture; provided that such Indebtedness or
Disqualified Stock is not incurred in contemplation of such acquisition or
merger; and provided further that after giving effect to such acquisition,
either (i) the Company would be permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the
first sentence of this covenant or (ii) the Fixed Charge Coverage Ratio is
greater than immediately prior to such acquisition.
For purposes of determining compliance with this covenant, in the event
that an item of Indebtedness meets the criteria of more than one of the
categories of permitted Indebtedness described in clauses (a) through (q) above
or is entitled to be incurred pursuant to the first paragraph of this covenant,
the Company shall, in its sole discretion, classify such item of Indebtedness in
any manner that complies with this covenant and such item of Indebtedness will
be treated as having been incurred pursuant to only one of such clauses or
pursuant to the first paragraph hereof. Accrual of interest, the accretion of
accreted value and the payment of interest in the form of additional
Indebtedness will not be deemed to be an incurrence of Indebtedness for purposes
of this covenant.
Limitation on Restricted Payments. The Company will not, and will not cause
or permit any of its Restricted Subsidiaries to, directly or indirectly: (i)
declare or pay any dividend or make any distribution on account of the Company's
or any of its Restricted Subsidiaries' Equity Interests (other than (A)
dividends or distributions by the Company payable in Equity Interests (other
than Disqualified Stock) of the Company or (B) dividends or distributions by a
Restricted Subsidiary so long as, in the case of any dividend or distribution
payable on or in respect of any class or series of securities issued by a
Restricted Subsidiary other than a Wholly Owned Restricted Subsidiary, the
Company or a Restricted Subsidiary receives at least its pro rata share of such
dividend or distribution in accordance with its Equity Interests in such class
or series of securities); (ii) purchase or otherwise acquire or retire for value
any Equity Interests of the Company; (iii) make any principal payment on, or
redeem, repurchase, defease or otherwise acquire or retire for value in each
case, prior to any scheduled repayment, or maturity, any Subordinated
Indebtedness (other than (A) the payment, redemption, repurchase, defeasance,
acquisition or retirement of Subordinated Indebtedness in anticipation of
satisfying a sinking fund obligation, principal installment or final maturity,
in any case due within one year of the date of such payment, redemption,
repurchase, defeasance, acquisition or retirement and (B) Indebtedness permitted
under clauses (g) and (i) of the covenant described under 'Limitations on
Incurrence of Indebtedness and Issuance of Disqualified Stock'); or (iv) make
any Restricted Investment (all such payments and other actions set forth in
clauses (i) through (iv) above being collectively referred to as 'Restricted
Payments'), unless, at the time of such Restricted Payment: (a) no Default or
Event of Default shall have occurred and be continuing or would occur as a
consequence thereof; (b) immediately after giving effect to such transaction on
a pro forma basis, the Company could incur $1.00 of additional Indebtedness
under the provisions of the first paragraph of 'Limitations on Incurrence of
Indebtedness and Issuance of Disqualified Stock'; and (c) such Restricted
Payment, together with the aggregate amount of all other Restricted Payments
made by the Company and its Restricted Subsidiaries after the Issue Date
(including Restricted Payments permitted by clauses (i), (ii) (with respect to
the repurchase, retirement or other acquisition of Retired Capital Stock
pursuant to clause (a) thereof and the payment of dividends on Retired Capital
Stock pursuant to clause (b) thereof), (v), (vi), (ix) and (x) of the next
succeeding paragraph, but excluding all other Restricted Payments permitted by
the next succeeding paragraph), is less than the sum of (i) 50% of the
cumulative Consolidated Net Income of the Company for the period (taken as one
accounting period) from the first day after the Issue Date to the date of such
Restricted Payment (or, in the case such Consolidated Net Income for such period
is a deficit, minus 100% of such deficit), plus (ii) 100% of the aggregate net
proceeds, including cash and the fair market value of property other than cash
(as determined in good faith by the Company), received by the Company since the
Issue Date from the issue or
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sale of Equity Interests of the Company (including Refunding Capital Stock (as
defined) but excluding Disqualified Stock), including such Equity Interests
issued upon conversion of Indebtedness or upon exercise of warrants or options,
plus (iii) 100% of the aggregate amount of contributions to the capital of the
Company since the Issue Date (other than Excluded Contributions), plus (iv) 100%
of the aggregate amount received in cash and the fair market value of property
other than cash (as determined in good faith by the Company) received from (A)
the sale or other disposition (other than to the Company or a Restricted
Subsidiary) of Restricted Investments made by the Company and its Restricted
Subsidiaries or (B) the sale (other than to the Company or a Restricted
Subsidiary) of the Capital Stock of an Unrestricted Subsidiary, plus (v) in case
any Unrestricted Subsidiary has been redesignated a Restricted Subsidiary or has
been merged, consolidated or amalgamated with or into, transfers or conveys
assets to, or is liquidated into, the Company or a Restricted Subsidiary, the
fair market value (as determined in good faith by the Company) of such
Investment in such Unrestricted Subsidiary at the time of such redesignation,
combination or transfer (or of the assets transferred or conveyed, as
applicable), after deducting any Indebtedness associated with the Unrestricted
Subsidiary so designated or combined or with the assets so transferred or
conveyed.
The foregoing provisions will not prohibit: (i) the payment of any dividend
or distribution within 60 days after the date of declaration thereof, if at the
date of declaration such payment would have complied with the provisions of the
Senior Subordinated Indenture; (ii) (a) the repurchase, retirement or other
acquisition of any Equity Interests (the 'Retired Capital Stock') or
Subordinated Indebtedness of the Company in exchange for, or out of the proceeds
of the substantially concurrent sale (other than to a Restricted Subsidiary) of,
Equity Interests of the Company (other than any Disqualified Stock) or
contributions to the common equity capital of the Company (the 'Refunding
Capital Stock'), and (b) the declaration and payment of dividends on the Retired
Capital Stock out of the proceeds of the substantially concurrent sale (other
than to a Restricted Subsidiary) of Refunding Capital Stock; (iii) the
redemption, repurchase or other acquisition or retirement of Subordinated
Indebtedness of the Company made by exchange for, or out of the proceeds of the
substantially concurrent sale of, new Indebtedness of the Company so long as (A)
the principal amount of such new Indebtedness does not exceed the principal
amount of and accrued and unpaid interest on the Subordinated Indebtedness being
so redeemed, repurchased, acquired or retired for value (plus the amount of any
premium required to be paid under the terms of the instrument governing the
Subordinated Indebtedness being so redeemed, repurchased, acquired or retired),
(B) such Indebtedness is subordinated to the Senior Subordinated Notes at least
to the same extent as such Subordinated Indebtedness so purchased, exchanged,
redeemed, repurchased, acquired or retired for value, (C) such Indebtedness has
a final scheduled maturity date equal to or later than the final scheduled
maturity date of the Subordinated Indebtedness being so redeemed, repurchased,
acquired or retired and (D) such Indebtedness has a Weighted Average Life to
Maturity equal to or greater than the remaining Weighted Average Life to
Maturity of the Subordinated Indebtedness being so redeemed, repurchased,
acquired or retired; (iv) the repurchase, retirement or other acquisition for
value (or a dividend or distribution to fund any such repurchase, retirement or
other acquisition) of Equity Interests of the Company, Holdings or Investor LP
held by any future, present or former employee, director or consultant of the
Company or any Subsidiary pursuant to any management equity plan or stock option
plan or any other management or employee benefit plan or agreement; provided,
however, that the aggregate amounts paid under this clause (iv) does not exceed
in any calendar year $5.0 million (with unused amounts in any calendar year
being carried over to succeeding calendar years subject to a maximum (without
giving effect to the following proviso) of $10.0 million in any calendar year);
provided further, that such amount in any calendar year may be increased by an
amount not to exceed (i) the cash proceeds from the sale of Equity Interests of
the Company (or of Holdings or Investor LP which are contributed to the Company)
to members of management, directors or consultants of the Company and its
Subsidiaries that occurs after the Issue Date (provided that such proceeds have
not been included with respect to determining whether a previous Restricted
Payment was permitted pursuant to the first paragraph of this covenant) plus
(ii) the cash proceeds of key man life insurance policies received by the
Company and its Restricted Subsidiaries after the Issue Date; (v) the
declaration and payment of dividends or distributions to holders of any class or
series of Disqualified Stock of the Company or any of its Restricted
Subsidiaries issued or incurred in accordance with the covenant entitled
'Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock';
(vi) the declaration and payment of dividends or distributions to holders of any
class or series of Designated Preferred Stock; provided, however, that for the
most recently ended four full fiscal quarters for which internal financial
statements are available preceding the date of declaration of any such dividend
or distribution, after giving effect
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to such dividend or distribution as a Fixed Charge on a pro forma basis, the
Company and its Restricted Subsidiaries would have had a Fixed Charge Coverage
Ratio of at least 1.75 to 1.00; (vii) Investments in Unrestricted Subsidiaries
having an aggregate fair market value, taken together with all other Investments
made pursuant to this clause (vii) that are at that time outstanding, not to
exceed $15.0 million at the time of such Investment (with the fair market value
of each Investment being measured at the time made and without giving effect to
subsequent changes in value); (viii) repurchases of (or a dividend or
distribution to fund the repurchases of) Equity Interests of the Company,
Holdings or Investor LP deemed to occur upon exercise of stock options if such
Equity Interests represent a portion of the exercise price of such options; (ix)
the payment of dividends on the Company's Common Stock (or the payment to
Holdings to fund the payment by Holdings of dividends on Holding's Common Stock)
following the first public offering of Common Stock of the Company or Holdings,
as the case may be, after the Issue Date, of up to 6% per annum of the net
proceeds received by the Company or contributed to the Company by Holdings, as
the case may be, in such public offering; (x) the repurchase, retirement or
other acquisition for value after the first anniversary of the Issue Date (or
dividend or distribution to fund the repurchase, retirement or other acquisition
of) of Equity Interests of Holdings, the Company or Investor LP in existence on
the Issue Date and which are not held by Blackstone or any of their Affiliates
or the Management Group on the Issue Date (including any Equity Interests issued
in respect of such Equity Interests as a result of a stock split,
recapitalization, merger, combination, consolidation or otherwise, but excluding
any management equity plan or stock option plan or similar agreement), provided
that (A) the aggregate amounts paid under this clause (x) shall not exceed (I)
$15.0 million on or prior to the second anniversary of the Issue Date or (II)
$30.0 million at any time after the second anniversary of the Issue Date and (B)
after giving effect thereto, the Company would be permitted to incur at least
$1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio
test set forth in the first sentence of the covenant described under
'Limitations on Incurrence of Indebtedness and Issuance of Disqualified Stock';
(xi) Investments that are made with Excluded Contributions; (xii) other
Restricted Payments in an aggregate amount not to exceed $15.0 million; (xiii)
the payment of any dividend or distribution on Equity Interests of the Company
to the extent necessary to permit direct or indirect beneficial owners of such
Equity Interests to receive tax distributions in an amount equal to the taxable
income of the Company allocated to a partner multiplied by the highest combined
federal and state income tax rate (including, to the extent applicable,
alternative minimum tax) solely as a result of the Company (and any intermediate
entity through which such holder owns such Equity Interests) being a partnership
or similar pass-through entity for federal income tax purposes ('Permitted Tax
Distributions'); (xiv) the payment of dividends or distributions to Holdings to
fund cash interest payments on the Senior Discount Notes commencing July 15,
2003 in accordance with the terms of the Senior Discount Notes; (xv) Restricted
Payments made on the Issue Date contemplated by the Recapitalization Agreement;
and (xvi) any dividend or distribution to Holdings in respect of overhead
expenses, legal, accounting, Commission reporting and other professional fees
and expenses of Holdings that are directly attributable to the operations of the
Company and its Restricted Subsidiaries; provided, however,that at the time of,
and after giving effect to, any Restricted Payment permitted under clauses
(vii), (ix), (x), (xii) and (xiv) (other than with respect to Defaults and
Events of Default set forth in clause (iii) or (vi) under 'Events of Default'),
no Default or Event of Default shall have occurred and be continuing or would
occur as a consequence thereof; and provided further that for purposes of
determining the aggregate amount expended for Restricted Payments in accordance
with clause (c) of the immediately preceding paragraph, only the amounts
expended under clauses (i), (ii) (with respect to the repurchase, retirement or
other acquisition of Retired Capital Stock pursuant to clause (a) thereof and
the payment of dividends on Retired Capital Stock pursuant to clause (b)
thereof), (v), (vi), (ix) and (x) shall be included.
As of the Issue Date, all of the Company's Subsidiaries were Restricted
Subsidiaries. The Company will not permit any Unrestricted Subsidiary to become
a Restricted Subsidiary except pursuant to the second to last sentence of the
definition of 'Unrestricted Subsidiary.' For purposes of designating any
Restricted Subsidiary as an Unrestricted Subsidiary, all outstanding Investments
by the Company and its Restricted Subsidiaries (except to the extent repaid) in
the Subsidiary so designated will be deemed to be Restricted Payments in an
amount determined as set forth in the last sentence of the definition of
'Investments.' Such designation is only permitted if a Restricted Payment in
such amount would be permitted at such time (whether pursuant to the first
paragraph of this covenant or under clause (vii), (xi) or (xii)) and if such
Subsidiary otherwise meets the definition of an Unrestricted Subsidiary.
Unrestricted Subsidiaries will not be subject to any of the restrictive
covenants set forth in the Senior Subordinated Indenture.
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Limitation on Asset Sales. The Company will not, and will not cause or
permit any of its Restricted Subsidiaries to, cause, make or suffer to exist an
Asset Sale, unless (x) the Company or its Restricted Subsidiary, as the case may
be, receives consideration at the time of such Asset Sale at least equal to the
fair market value (as determined in good faith by the Company) of the assets
sold or otherwise disposed of and (y) at least 75% of the consideration therefor
received by the Company or such Restricted Subsidiary, as the case may be, is in
the form of cash or Cash Equivalents; provided that the amount of (a) any
liabilities (as shown on the Company's or such Restricted Subsidiary's most
recent balance sheet or in the notes thereto) of the Company or any Restricted
Subsidiary (other than liabilities that are by their terms subordinated to the
Senior Subordinated Notes) that are assumed by the transferee of any such assets
without recourse to the Company or any of the Restricted Subsidiaries, (b) any
notes or other obligations received by the Company or such Restricted Subsidiary
from such transferee that are converted by the Company or such Restricted
Subsidiary into cash (to the extent of the cash received) within 180 days
following the closing of such Asset Sale, (c) any Designated Noncash
Consideration received by the Company or any of its Restricted Subsidiaries in
such Asset Sale having an aggregate fair market value, taken together with all
other Designated Noncash Consideration received pursuant to this clause (c) that
is at that time outstanding, not to exceed 15% of Total Assets at the time of
the receipt of such Designated Noncash Consideration (with the fair market value
of each item of Designated Noncash Consideration being measured at the time
received and without giving effect to subsequent changes in value) and (d) any
assets received in exchange for assets related to a Similar Business of
comparable market value in the good faith determination of, the Board of
Directors of the Company, shall be deemed to be cash for purposes of this
provision.
Within 365 days after the Company's or any Restricted Subsidiary's receipt
of the Net Proceeds of any Asset Sale, the Company or such Restricted Subsidiary
may apply the Net Proceeds from such Asset Sale, at its option, (i) to
permanently reduce Obligations under the New Credit Facility (and to
correspondingly reduce commitments with respect thereto) or other Senior
Indebtedness or Pari Passu Indebtedness (provided that if the Company shall so
reduce Obligations under Pari Passu Indebtedness, it will equally and ratably
reduce Obligations under the Senior Subordinated Notes if the Senior
Subordinated Notes are then redeemable or, if the Senior Subordinated Notes may
not be then redeemed, the Company shall make an offer (in accordance with the
procedures set forth below for an Asset Sale Offer) to all Holders to purchase
at 100% of the principal amount thereof the amount of Senior Subordinated Notes
that would otherwise be redeemed) or Indebtedness of a Restricted Subsidiary,
(ii) to an investment in any one or more businesses, capital expenditures or
acquisitions of other assets in each case, used or useful in a Similar Business
and/or (iii) to make an investment in properties or assets that replace the
properties and assets that are the subject of such Asset Sale. Pending the final
application of any such Net Proceeds, the Company or such Restricted Subsidiary
may temporarily reduce Indebtedness under a revolving credit facility, if any,
or otherwise invest such Net Proceeds in Cash Equivalents or Investment Grade
Securities. The Senior Subordinated Indenture provides that any Net Proceeds
from the Asset Sale that are not invested as provided and within the time period
set forth in the first sentence of this paragraph (it being understood that any
portion of such Net Proceeds used to make an offer to purchase Senior
Subordinated Notes, as described in clause (i) above, shall be deemed to have
been invested whether or not such offer is accepted) will be deemed to
constitute 'Excess Proceeds.' When the aggregate amount of Excess Proceeds
exceeds $15.0 million, the Company Issuers shall make an offer to all Holders of
Senior Subordinated Notes (an 'Asset Sale Offer') to purchase the maximum
principal amount of Senior Subordinated Notes, that is an integral multiple of
$1,000, that may be purchased out of the Excess Proceeds at an offer price in
cash in an amount equal to 100% of the principal amount thereof, plus accrued
and unpaid interest, if any, to the date fixed for the closing of such offer, in
accordance with the procedures set forth in the Senior Subordinated Indenture.
The Company Issuers will commence an Asset Sale Offer with respect to Excess
Proceeds within ten Business Days after the date that Excess Proceeds exceeds
$15.0 million by mailing the notice required pursuant to the terms of the Senior
Subordinated Indenture, with a copy to the Senior Subordinated Trustee. To the
extent that the aggregate amount of Senior Subordinated Notes tendered pursuant
to an Asset Sale Offer is less than the Excess Proceeds, the Company may use any
remaining Excess Proceeds for general corporate or partnership purposes. If the
aggregate principal amount of Senior Subordinated Notes surrendered by Holders
thereof exceeds the amount of Excess Proceeds, the Senior Subordinated Trustee
shall select the Senior Subordinated Notes to be purchased in the manner
described under the caption 'Selection and Notice of Redemption' above. Upon
completion of any such Asset Sale Offer, the amount of Excess Proceeds shall be
reset at zero.
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The Company Issuers will comply with the requirements of Rule 14e-1 under
the Exchange Act and any other securities laws and regulations thereunder to the
extent such laws or regulations are applicable in connection with the repurchase
of the Senior Subordinated Notes pursuant to an Asset Sale Offer. To the extent
that the provisions of any securities laws or regulations conflict with the
provisions of the Senior Subordinated Indenture, the Company Issuers will comply
with the applicable securities laws and regulations and shall not be deemed to
have breached its obligations described in the Senior Subordinated Indenture by
virtue thereof.
Limitation on Dividend and Other Payment Restrictions Affecting
Subsidiaries. The Company will not, and will not cause or permit any of its
Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or
suffer to exist or become effective any consensual encumbrance or consensual
restriction on the ability of any Restricted Subsidiary to: (a)(i) pay dividends
or make any other distributions to the Company or any of its Restricted
Subsidiaries (1) on their Capital Stock or (2) with respect to any other
interest or participation in, or measured by, its profits, or (ii) pay any
Indebtedness owed to the Company or any of its Restricted Subsidiaries; (b) make
loans or advances to the Company or any of its Restricted Subsidiaries; or (c)
sell, lease or transfer any of its properties or assets to the Company or any of
its Restricted Subsidiaries; except (in each case) for such encumbrances or
restrictions existing under or by reason of: (1) contractual encumbrances or
restrictions in effect on the Issue Date, including pursuant to the New Credit
Facility and its related documentation and the Senior Discount Indenture; (2)
the Senior Subordinated Indenture and the Senior Subordinated Notes; (3)
purchase money obligations for property acquired in the ordinary course of
business that impose restrictions of the nature discussed in clause (c) above on
the property so acquired; (4) applicable law or any applicable rule, regulation
or order; (5) any agreement or other instrument of a Person acquired by the
Company or any Restricted Subsidiary in existence at the time of such
acquisition (but not created in contemplation thereof), which encumbrance or
restriction is not applicable to any Person, or the properties or assets of any
Person, other than the Person, or the property or assets of the Person, so
acquired; (6) contracts for the sale of assets, including, without limitation,
customary restrictions with respect to a Subsidiary pursuant to an agreement
that has been entered into for the sale or disposition of all or substantially
all of the Capital Stock or assets of such Subsidiary; (7) secured Indebtedness
otherwise permitted to be incurred pursuant to the covenants described under
'Limitations on Incurrence of Indebtedness and Issuance of Disqualified Stock'
and 'Limitation on Liens' that limit the right of the debtor to dispose of the
assets securing such Indebtedness; (8) restrictions on cash or other deposits or
net worth imposed by customers under contracts entered into in the ordinary
course of business; (9) other Indebtedness of Foreign Subsidiaries permitted to
be incurred subsequent to the Issue Date pursuant to the provisions of the
covenant described under 'Limitations on Incurrence of Indebtedness and Issuance
of Disqualified Stock'; (10) customary provisions in joint venture agreements
and other similar agreements entered into in the ordinary course of business;
(11) customary provisions contained in leases and other agreements entered into
in the ordinary course of business; (12) any encumbrances or restrictions of the
type referred to in clauses (a), (b) and (c) above imposed by any amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacements or refinancings of the contracts, instruments or obligations
referred to in clauses (1) through (11) above, provided that such amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacements or refinancings are, in the good faith judgment of the Board of
Directors (or the general partners with regard to a partnership) of such Company
Issuer engaged in such transaction, no more restrictive with respect to such
dividend and other payment restrictions than those contained in the dividend or
other payment restrictions prior to such amendment, modification, restatement,
renewal, increase, supplement, refunding, replacement or refinancing; (13) any
encumbrances or restrictions that are no more restrictive than those contained
in the New Credit Facility as in effect on the Issue Date; or (14) which will
not in the aggregate cause the Company Issuers not to have the funds necessary
to pay the principal of, premium, if any, or interest on, the Senior
Subordinated Notes.
Limitation on Liens. The Company will not, and will not cause or permit any
of its Restricted Subsidiaries to, directly or indirectly create, incur, assume
or suffer to exist any Lien (other than a Permitted Lien) that secures any Pari
Passu Indebtedness or Subordinated Indebtedness on any asset or property of the
Company or such Restricted Subsidiary, or any income or profits therefrom, or
assign or convey any right to receive income therefrom, unless the Senior
Subordinated Notes are equally and ratably secured with the obligations so
secured or until such time as such obligations are no longer secured by a Lien.
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The Senior Subordinated Indenture provides that no Guarantor will directly
or indirectly create, incur, assume or suffer to exist any Lien (other than a
Permitted Lien) that secures any Pari Passu Indebtedness or Subordinated
Indebtedness of such Guarantor on any asset or property of such Guarantor or any
income or profits therefrom, or assign or convey any right to receive income
therefrom, unless the Guarantee of such Guarantor is equally and ratably secured
with the obligations so secured or until such time as such obligations are no
longer secured by a Lien.
Limitation on Other Senior Subordinated Indebtedness. The Company will not,
and will not permit any Restricted Subsidiary that is a Guarantor to, directly
or indirectly, incur any Indebtedness (including Acquired Indebtedness) that is
subordinate in right of payment to any Indebtedness of the Company or any
Indebtedness of any Restricted Subsidiary that is a Guarantor, as the case may
be, unless such Indebtedness is either (a) pari passu in right of payment with
the Senior Subordinated Notes or such Guarantor's Guarantee, as the case may be
or (b) subordinate in right of payment to the Senior Subordinated Notes, or such
Guarantor's Guarantee, as the case may be, in the same manner and at least to
the same extent as the Senior Subordinated Notes are subordinate to Senior
Indebtedness or such Guarantor's Guarantee is subordinate to such Guarantor's
Senior Indebtedness, as the case may be.
Merger, Consolidation and Sale of Assets. The Company may not consolidate
or merge with or into or wind up into (whether or not the Company is the
surviving entity), or sell, assign, transfer, lease, convey or otherwise dispose
of all or substantially all of its properties or assets in one or more related
transactions, to any Person unless (i) the Company is the surviving entity or
the Person formed by or surviving any such consolidation or merger (if other
than the Company) or to which such sale, assignment, transfer, lease, conveyance
or other disposition will have been made is a corporation, partnership or
limited liability company organized or existing under the laws of the United
States, any state thereof, the District of Columbia, or any territory thereof
(the Company or such Person, as the case may be, being herein called the
'Successor Company'); (ii) the Successor Company (if other than the Company or
CapCo I) expressly assumes all the obligations of the Company under the Senior
Subordinated Indenture and the Senior Subordinated Notes pursuant to a
supplemental indenture or other documents or instruments in form reasonably
satisfactory to the Senior Subordinated Trustee; (iii) immediately after such
transaction no Default or Event of Default shall have occurred and be
continuing; (iv) immediately after giving pro forma effect to such transaction,
as if such transaction had occurred at the beginning of the applicable
four-quarter period, either (A) the Successor Company (if other than CapCo I)
would be permitted to incur at least $1.00 of additional Indebtedness pursuant
to the Fixed Charge Coverage Ratio test set forth in the first sentence of the
covenant described under 'Limitations on Incurrence of Indebtedness and Issuance
of Disqualified Stock' or (B) the Fixed Charge Coverage Ratio for the Successor
Company (if other than CapCo I) and its Restricted Subsidiaries would be greater
than such ratio for the Company and its Restricted Subsidiaries immediately
prior to such transaction; and (v) the Company shall have delivered to the
Senior Subordinated Trustee an Officers' Certificate and an opinion of counsel,
each stating that such consolidation, merger or transfer and such supplemental
indenture (if any) comply with the Senior Subordinated Indenture. The Successor
Company will succeed to, and be substituted for, the Company under the Senior
Subordinated Indenture and the Senior Subordinated Notes. Notwithstanding the
foregoing clauses (iii) and (iv), (a) any Restricted Subsidiary may consolidate
with, merge into or transfer all or part of its properties and assets to the
Company or to another Restricted Subsidiary and (b) the Company may merge with
or transfer all of its properties and assets to an Affiliate incorporated or
formed solely for the purpose of either reincorporating or reforming the Company
in another State of the United States or changing the legal structure of the
Company to a corporation so long as the amount of Indebtedness of the Company
and its Restricted Subsidiaries is not increased thereby (it being understood
that after the transfer of such property and assets for the purpose of changing
its legal structure to a corporation, the Company may dissolve).
Each Guarantor, if any, shall not, and the Company will not permit a
Guarantor to, consolidate or merge with or into or wind up into (whether or not
such Guarantor is the surviving corporation), or sell, assign, transfer, lease,
convey or otherwise dispose of all or substantially all of its properties or
assets in one or more related transactions to, any Person unless (i) such
Guarantor is the surviving corporation or the Person formed by or surviving any
such consolidation or merger (if other than such Guarantor) or to which such
sale, assignment, transfer, lease, conveyance or other disposition will have
been made is a corporation, partnership or limited liability company organized
or existing under the laws of the United States, any state thereof, the District
of
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Columbia, or any territory thereof (such Guarantor or such Person, as the case
may be, being herein called the 'Successor Guarantor'); (ii) the Successor
Guarantor (if other than such Guarantor) expressly assumes all the obligations
of such Guarantor under the Senior Subordinated Indenture and such Guarantor's
Guarantee pursuant to a supplemental indenture or other documents or instruments
in form reasonably satisfactory to the Senior Subordinated Trustee; (iii)
immediately after such transaction no Default or Event of Default shall have
occurred and be continuing; and (iv) the Guarantor shall have delivered or
caused to be delivered to the Senior Subordinated Trustee an Officers'
Certificate and an opinion of counsel, each stating that such consolidation,
merger or transfer and such supplemental indenture (if any) comply with the
Senior Subordinated Indenture. The Successor Guarantor will succeed to, and be
substituted for, such Guarantor under the Senior Subordinated Indenture and such
Guarantor's Guarantee.
Limitations on Transactions with Affiliates. (a) The Company will not, and
will not cause or permit any of its Restricted Subsidiaries to, make any payment
to, or sell, lease, transfer or otherwise dispose of any of its properties or
assets to, or purchase any property or assets from, or enter into or make or
amend any transaction, contract, agreement, understanding, loan, advance or
guarantee with, or for the benefit of, any Affiliate (each of the foregoing, an
'Affiliate Transaction') involving aggregate consideration in excess of $5.0
million, unless (a) such Affiliate Transaction is on terms that are not
materially less favorable to the Company or the relevant Restricted Subsidiary
than those that would have been obtained in a comparable transaction by the
Company or such Restricted Subsidiary with an unrelated Person and (b) with
respect to any Affiliate Transaction or series of related Affiliate Transactions
involving aggregate consideration in excess of $10.0 million, the Company
delivers to the Senior Subordinated Trustee a resolution adopted by the majority
of the Board of Directors of the Company, approving such Affiliate Transaction
and set forth in an Officers' Certificate certifying that such Affiliate
Transaction complies with clause (a) above.
The foregoing provisions do not apply to the following: (i) transactions
between or among the Company and/or any of its Restricted Subsidiaries; (ii)
Restricted Payments permitted by the provisions of the Senior Subordinated
Indenture described above under the covenant 'Limitation on Restricted
Payments'; (iii) the payment of annual management, consulting, monitoring and
advisory fees and related expenses to Blackstone, Graham Packaging Corporation
and their respective Affiliates; (iv) the payment of reasonable and customary
fees paid to, and indemnity provided on behalf of, officers, directors,
employees or consultants of the Company or any Restricted Subsidiary; (v)
payments by the Company or any of its Restricted Subsidiaries to Blackstone and
its Affiliates made for any financial advisory, financing, underwriting or
placement services or in respect of other investment banking activities,
including, without limitation, in connection with acquisitions or divestitures
which payments are approved by, the majority of the Board of Directors of the
Company, in good faith; (vi) transactions in which the Company or any of its
Restricted Subsidiaries, as the case may be, delivers to the Senior Subordinated
Trustee a letter from an Independent Financial Advisor stating that such
transaction is fair to the Company or such Restricted Subsidiary from a
financial point of view or meets the requirements of clause (a) of the preceding
paragraph; (vii) payments or loans to employees or consultants which are
approved by a majority of the Board of Directors of the Company in good faith;
(viii) any agreement as in effect as of the Issue Date or any amendment thereto
(so long as any such amendment is not disadvantageous to the holders of the
Senior Subordinated Notes in any material respect) or any transaction
contemplated thereby; (ix) the existence of, or the performance by the Company
or any Restricted Subsidiary of its obligations under the terms of, the
Recapitalization Agreement, or any agreement contemplated thereunder (including
any registration rights agreement or purchase agreement related thereto) to
which it is a party as of the Issue Date and any similar agreements which it may
enter into thereafter; provided, however, that the existence of, or the
performance by the Company or any Restricted Subsidiary of obligations under any
future amendment to any such existing agreement or under any similar agreement
entered into after the Issue Date shall only be permitted by this clause (ix) to
the extent that the terms of any such amendment or new agreement are not
otherwise disadvantageous to the Holders of the Senior Subordinated Notes in any
material respect; (x) the payment of all fees, expenses, bonuses and awards
related to the transactions contemplated by the Recapitalization Agreement,
including fees to Blackstone; and (xi) transactions with customers, clients,
suppliers, or purchasers or sellers of goods or services, in each case in the
ordinary course of business and otherwise in compliance with the terms of the
Senior Subordinated Indenture which are fair to the Company and its Restricted
Subsidiaries, in the reasonable determination of the majority of the Board of
Directors of the Company, or are on terms at least as favorable as might
reasonably have been obtained at such time from an unaffiliated party.
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Limitations on Guarantees of Indebtedness by Restricted Subsidiaries. (a)
The Company will not permit any Restricted Subsidiary to guarantee the payment
of any Indebtedness of the Company or any Indebtedness of any other Restricted
Subsidiary unless such Restricted Subsidiary simultaneously executes and
delivers a supplemental indenture to the Senior Subordinated Indenture providing
for a guarantee of payment of the Senior Subordinated Notes by such Restricted
Subsidiary, except that (A) if the Senior Subordinated Notes are subordinated in
right of payment to such Indebtedness, the Guarantee under the supplemental
indenture shall be subordinated to such Restricted Subsidiary's guarantee with
respect to such Indebtedness substantially to the same extent as the Senior
Subordinated Notes are subordinated to such Indebtedness under the Senior
Subordinated Indenture and (B) if such Indebtedness is by its express terms
subordinated in right of payment to the Senior Subordinated Notes, any such
guarantee of such Restricted Subsidiary with respect to such Indebtedness shall
be subordinated in right of payment to such Restricted Subsidiary's Guarantee
with respect to the Senior Subordinated Notes substantially to the same extent
as such Indebtedness is subordinated to the Senior Subordinated Notes; provided
that this paragraph (a) shall not be applicable to any guarantee by any
Restricted Subsidiary (x) that (A) existed at the time such Person became a
Restricted Subsidiary of the Company and (B) was not incurred in connection
with, or in contemplation of, such Person becoming a Restricted Subsidiary of
the Company or (y) that guarantees the payment of Obligations of the Company or
any Restricted Subsidiary under the New Credit Facility or any other bank
facility which is designated as Senior Indebtedness and any refunding,
refinancing or replacement thereof, in whole or in part, provided that such
refunding, refinancing or replacement thereof constitutes Senior Indebtedness
and is not incurred pursuant to a registered offering of securities under the
Securities Act or a private placement of securities (including under Rule 144A)
pursuant to an exemption from the registration requirements of the Securities
Act (other than securities issued pursuant to any bank or similar credit
facility (including the New Credit Facility), which private placement provides
for registration rights under the Securities Act (any guarantee excluded by
operations of this clause (y) being an 'Excluded Guarantee').
(b) Notwithstanding the foregoing and the other provisions of the Senior
Subordinated Indenture, any Guarantee by a Restricted Subsidiary of the Senior
Subordinated Notes shall provide by its terms that it shall be automatically and
unconditionally released and discharged upon (i) any sale, exchange or transfer,
to any Person not an Affiliate of the Company, of all of the Company's Capital
Stock in, or all or substantially all of the assets of, such Restricted
Subsidiary (which sale, exchange or transfer is not prohibited by the Senior
Subordinated Indenture) or (ii) the release or discharge of the guarantee which
resulted in the creation of such Guarantee, except a discharge or release by or
as a result of payment under such guarantee.
Reports to Holders. The Company Issuers will deliver to the Senior
Subordinated Trustee within 15 days after the filing of the same with the
Commission, copies of the quarterly and annual reports and of the information,
documents and other reports, if any, which the Company Issuers are required to
file with the Commission pursuant to Section 13 or 15(d) of the Exchange Act.
The Senior Subordinated Indenture further provides that, notwithstanding
that the Company Issuers may not be subject to the reporting requirements of
Section 13 or 15(d) of the Exchange Act or otherwise report on an annual and
quarterly basis on forms provided for such annual and quarterly reporting
pursuant to rules and regulations promulgated by the Securities and Exchange
Commission (the 'Commission'), the Senior Subordinated Indenture will require
the Company Issuers to file with the Commission (and provide the Senior
Subordinated Trustee and Holders with copies thereof, without cost to each
Holder, within 15 days after it files them with the Commission), (a) within 90
days after the end of each fiscal year, annual reports on Form 10-K (or any
successor or comparable form) containing the information required to be
contained therein (or required in such successor or comparable form); (b) within
45 days after the end of each of the first three fiscal quarters of each fiscal
year, reports on Form 10-Q (or any successor or comparable form); (c) promptly
from time to time after the occurrence of an event required to be therein
reported, such other reports on Form 8-K (or any successor or comparable form);
and (d) any other information, documents and other reports which the Company
Issuers would be required to file with the Commission if they were subject to
Section 13 or 15(d) of the Exchange Act; provided, however, that the Company
Issuers shall not be so obligated to file such reports with the Commission if
the Commission does not permit such filing, in which event the Company Issuers
will make available such information to prospective purchasers of Senior
Subordinated Notes, in addition to providing such information to the Senior
Subordinated Trustee and the Holders, in each case within 15 days after the time
the Company Issuers
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would be required to file such information with the Commission, if they were
subject to Sections 13 or 15(d) of the Exchange Act. The above reporting
requirements with respect to the Company Issuers may be satisfied through the
filing and provision of such reports, information and documents by the Holdings
Issuers in lieu of the Company Issuers. Notwithstanding the foregoing, such
requirements shall be deemed satisfied (x) prior to April 30, 1998, if the
Holdings Issuers deliver to the Senior Subordinated Trustee and the holders of
the Senior Subordinated Notes on or prior to such date copies of the audited
financial statements of the Holdings Issuers and (y) prior to May 31, 1998, by
filing with the Commission and delivering to the Senior Subordinated Trustee and
the holders of the Senior Subordinated Notes on or prior to such date a
registration statement under the Securities Act that contains the information
that would be required in a Form 10-K for the Holdings Issuers for the year
ended December 31, 1997 and a Form 10-Q for the Holdings Issuers for the quarter
ended March 31, 1998. The Company Issuers will also comply with the other
provisions of TIA Section 314(a).
EVENTS OF DEFAULT
The following events are defined in the Senior Subordinated Indenture as 'Events
of Default':
(i) the failure to pay interest on any Senior Subordinated Notes when
the same becomes due and payable and the default continues for a period of
30 days (whether or not such payment shall be prohibited by the
subordination provisions of the Senior Subordinated Indenture);
(ii) the failure to pay the principal on any Senior Subordinated
Notes, when such principal becomes due and payable, at maturity, upon
redemption or otherwise (including the failure to make a payment to
purchase Senior Subordinated Notes tendered pursuant to a Change of Control
Offer or an Asset Sale Offer which has actually been made) (whether or not
such payment shall be prohibited by the subordination provisions of the
Senior Subordinated Indenture);
(iii) a default in the observance or performance of any other covenant
or agreement contained in the Senior Subordinated Indenture which default
continues for a period of 60 days after the Company receives written notice
specifying the default (and demanding that such default be remedied) from
the Senior Subordinated Trustee or the Holders of at least 25% of the
outstanding principal amount of the Senior Subordinated Notes (except in
the case of a default with respect to the 'Merger, Consolidation and Sale
of Assets' covenant, which will constitute an Event of Default with such
notice requirement but without such passage of time requirement);
(iv) the failure to pay at final maturity (giving effect to any
applicable grace periods and any extensions thereof) the principal amount
of any Indebtedness of the Company or any Significant Restricted
Subsidiary, or the acceleration of the final stated maturity of any such
Indebtedness if the aggregate principal amount of such Indebtedness,
together with the principal amount of any other such Indebtedness in
default for failure to pay principal at final maturity or which has been
accelerated, aggregates $20.0 million or more at any time;
(v) one or more judgments in an aggregate amount in excess of $20.0
million shall have been rendered against the Company or any Significant
Restricted Subsidiary and such judgments remain undischarged, unpaid or
unstayed for a period of 60 days after such judgment or judgments become
final and non-appealable, and in the event such judgment is covered by
insurance, an enforcement proceeding has been commenced by any creditor
upon such judgment or decree which is not promptly stayed;
(vi) any Guarantee by a Significant Restricted Subsidiary shall become
null or void or unenforceable (other than in accordance with the terms of
the Senior Subordinated Indenture) or any such Guarantor shall deny its
obligations under its Guarantee; or
(vii) certain events of bankruptcy affecting the Company or any of its
Significant Restricted Subsidiaries.
If an Event of Default (other than an Event of Default specified in clause
(vii) with respect to the Company) shall occur and be continuing, the Senior
Subordinated Trustee or the Holders of at least 25% in principal amount of
outstanding Senior Subordinated Notes may declare the principal of and
accrued interest on all the Senior Subordinated Notes to be due and payable
by notice in writing to the Company and the Senior
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Subordinated Trustee specifying the respective Event of Default and that it
is a 'notice of acceleration' (the 'Acceleration Notice'), and the same (i)
shall become immediately due and payable or (ii) if there are any amounts
outstanding under the New Credit Facility, shall become immediately due and
payable upon the first to occur of an acceleration under the New Credit
Facility or 5 Business Days after receipt by the Company and the
Representative under the New Credit Facility of such Acceleration Notice,
but only if such Event of Default is then continuing. If an Event of Default
specified in clause (vii) with respect to the Company occurs, then the
principal of and any accrued interest on the Senior Subordinated Notes shall
ipso facto become immediately due and payable without any further action by
the Senior Subordinated Trustee or the Holders.
The Senior Subordinated Indenture provides that, at any time after a
declaration of acceleration with respect to the Senior Subordinated Notes as
described in the preceding paragraph, the Holders of a majority in principal
amount of the Senior Subordinated Notes may rescind and cancel such declaration
and its consequences (i) if the rescission would not conflict with any judgment
or decree, (ii) if all existing Events of Default have been cured or waived
except nonpayment of principal or interest that has become due solely because of
the acceleration, (iii) to the extent the payment of such interest is lawful,
interest on overdue installments of interest and overdue principal, which has
become due otherwise than by such declaration of acceleration, has been paid and
(iv) if the Company has paid the Senior Subordinated Trustee its reasonable
compensation and reimbursed the Senior Subordinated Trustee for its expenses,
disbursements and advances. No such rescission shall affect any subsequent
Default or impair any right consequent thereto.
The Holders of a majority in principal amount of the Senior Subordinated
Notes may waive any existing Default or Event of Default under the Senior
Subordinated Indenture, and its consequences, except a default in the payment of
the principal of or interest on any Senior Subordinated Notes.
Holders of the Senior Subordinated Notes may not enforce the Senior
Subordinated Indenture or the Senior Subordinated Notes except as provided in
the Senior Subordinated Indenture and under the TIA. Subject to the provisions
of the Senior Subordinated Indenture relating to the duties of the Senior
Subordinated Trustee, the Senior Subordinated Trustee is under no obligation to
exercise any of its rights or powers under the Senior Subordinated Indenture at
the request, order or direction of any of the Holders, unless such Holders have
offered to the Senior Subordinated Trustee reasonable indemnity. Subject to all
provisions of the Senior Subordinated Indenture and applicable law, the Holders
of a majority in aggregate principal amount of the then outstanding Senior
Subordinated Notes have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Senior Subordinated
Trustee or exercising any trust or power conferred on the Senior Subordinated
Trustee.
Under the Senior Subordinated Indenture, the Company is required to provide
an Officers' Certificate to the Senior Subordinated Trustee promptly upon it
obtaining knowledge of any Default or Event of Default (provided that such
certification shall be provided at least annually whether or not the Company
knows of any Default or Event of Default) that has occurred and, if applicable,
describe such Default or Event of Default and the status thereof.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company Issuers may, at their option and at any time, elect to have
their obligations discharged with respect to the outstanding Senior Subordinated
Notes ('Legal Defeasance'). Such Legal Defeasance means that the Company Issuers
shall be deemed to have paid and discharged the entire indebtedness represented
by the outstanding Senior Subordinated Notes, except for (i) the rights of
Holders to receive payments in respect of the principal of, premium, if any, and
interest on the Senior Subordinated Notes when such payments are due, (ii) the
Company Issuers' obligations with respect to the Senior Subordinated Notes
concerning issuing temporary Senior Subordinated Notes, registration of Senior
Subordinated Notes, mutilated, destroyed, lost or stolen Senior Subordinated
Notes and the maintenance of an office or agency for payments, (iii) the rights,
powers, trust, duties and immunities of the Senior Subordinated Trustee and the
Company Issuers' obligations in connection therewith and (iv) the Legal
Defeasance provisions of the Senior Subordinated Indenture. In addition, the
Company Issuers may, at their option and at any time, elect to have the
obligations of the Company Issuers released with respect to certain covenants
that are described in the Senior Subordinated Indenture ('Covenant Defeasance')
and
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thereafter any omission to comply with such obligations shall not constitute a
Default or Event of Default with respect to the Senior Subordinated Notes. In
the event Covenant Defeasance occurs, certain events (not including non-payment,
bankruptcy, receivership, reorganization and insolvency events) described under
'Events of Default' will no longer constitute an Event of Default with respect
to the Senior Subordinated Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i)
the Company must irrevocably deposit with the Senior Subordinated Trustee, in
trust, for the benefit of the Holders cash in U.S. dollars, non-callable U.S.
government obligations, or a combination thereof, in such amounts as will be
sufficient, in the opinion of a nationally recognized firm of independent public
accountants, to pay the principal of, premium, if any, and interest on the
Senior Subordinated Notes on the stated date for payment thereof or on the
applicable redemption date, as the case may be; (ii) in the case of Legal
Defeasance, the Company shall have delivered to the Senior Subordinated Trustee
an opinion of counsel in the United States reasonably acceptable to the Senior
Subordinated Trustee confirming that (A) the Company Issuers have received from,
or there has been published by, the Internal Revenue Service a ruling or (B)
since the date of the Senior Subordinated Indenture, there has been a change in
the applicable federal income tax law, in either case to the effect that, and
based thereon such opinion of counsel shall confirm that, the Holders will not
recognize income, gain or loss for federal income tax purposes as a result of
such Legal Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the case if
such Legal Defeasance had not occurred; (iii) in the case of Covenant
Defeasance, the Company shall have delivered to the Senior Subordinated Trustee
an opinion of counsel in the United States reasonably acceptable to the Trustee
confirming that the Holders will not recognize income, gain or loss for federal
income tax purposes as a result of such Covenant Defeasance and will be subject
to federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such Covenant Defeasance had not occurred;
(iv) no Default or Event of Default shall have occurred and be continuing on the
date of such deposit or insofar as Events of Default from bankruptcy or
insolvency events are concerned, at any time in the period ending on the 123rd
day after the date of deposit; (v) such Legal Defeasance or Covenant Defeasance
shall not result in a breach or violation of, or constitute a default under the
Senior Subordinated Indenture (and shall not conflict with the subordination
provisions contained herein at the time the respective payments are made into
the respective defeasance trust) or any other material agreement or instrument
to which the Company or any of its Subsidiaries is a party or by which the
Company or any of its Subsidiaries are bound; (vi) the Company shall have
delivered to the Senior Subordinated Trustee an Officers' Certificate stating
that the deposit was not made by the Company with the intent of preferring the
Holders over any other creditors of the Company or with the intent of defeating,
hindering, delaying or defrauding any other creditors of the Company or others;
(vii) the Company shall have delivered to the Senior Subordinated Trustee an
Officers' Certificate and an opinion of counsel, each stating that all
conditions precedent provided for or relating to the Legal Defeasance or the
Covenant Defeasance have been complied with; (viii) the Company shall have
delivered to the Senior Subordinated Trustee an opinion of counsel (which may be
subject to customary assumptions and exclusions) to the effect that after the
123rd day following the deposit, the trust funds will not be subject to the
effect of any applicable bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally; and (ix) certain other customary
conditions precedent are satisfied.
SATISFACTION AND DISCHARGE
The Senior Subordinated Indenture will be discharged and will cease to be
of further effect (except as to surviving rights or registration of transfer or
exchange of the Senior Subordinated Notes, as expressly provided for in the
Senior Subordinated Indenture) as to all outstanding Senior Subordinated Notes
when (i) either (a) all the Senior Subordinated Notes theretofore authenticated
and delivered (except lost, stolen or destroyed Senior Subordinated Notes which
have been replaced or paid and Senior Subordinated Notes for whose payment money
has theretofore been deposited in trust or segregated and held in trust by the
Company Issuers and thereafter repaid to the Company Issuers or discharged from
such trust) have been delivered to the Senior Subordinated Trustee for
cancellation or (b) all Senior Subordinated Notes not theretofore delivered to
the Senior Subordinated Trustee for cancellation have become due and payable and
the Company has irrevocably deposited or caused to be deposited with the Trustee
funds in an amount sufficient to pay and discharge the entire Indebtedness on
the Senior Subordinated Notes not theretofore delivered to the Senior
Subordinated Trustee for cancellation, for principal of, premium, if any, and
interest on the Senior Subordinated Notes to the date of deposit together with
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irrevocable instructions from the Company directing the Senior Subordinated
Trustee to apply such funds to the payment thereof at maturity or redemption, as
the case may be; (ii) the Company has paid all other sums payable under the
Senior Subordinated Indenture by the Company; and (iii) the Company has
delivered to the Senior Subordinated Trustee an Officers' Certificate and an
opinion of counsel stating that all conditions precedent under the Senior
Subordinated Indenture relating to the satisfaction and discharge of the Senior
Subordinated Indenture have been complied with.
MODIFICATION OF THE SENIOR SUBORDINATED INDENTURE
From time to time, the Company Issuers and the Senior Subordinated Trustee,
without the consent of the Holders, may amend the Senior Subordinated Indenture
for certain specified purposes, including curing ambiguities, defects or
inconsistencies, so long as such change does not, in the opinion of the Senior
Subordinated Trustee, adversely affect the rights of any of the Holders in any
material respect. In formulating its opinion on such matters, the Senior
Subordinated Trustee will be entitled to rely on such evidence as it deems
appropriate, including, without limitation, solely on an opinion of counsel.
Other modifications and amendments of the Senior Subordinated Indenture may be
made with the consent of the Holders of a majority in principal amount of the
then outstanding Senior Subordinated Notes issued under the Senior Subordinated
Indenture, except that, without the consent of each Holder affected thereby, no
amendment may: (i) reduce the amount of Senior Subordinated Notes whose Holders
must consent to an amendment; (ii) reduce the rate of or change or have the
effect of changing the time for payment of interest, including defaulted
interest, on any Senior Subordinated Notes; (iii) reduce the principal of or
change or have the effect of changing the fixed maturity of any Senior
Subordinated Notes, or change the date on which any Senior Subordinated Notes
may be subject to redemption or repurchase, or reduce the redemption or
repurchase price therefor; (iv) make any Senior Subordinated Notes payable in
money other than that stated in the Senior Subordinated Notes; (v) make any
change in provisions of the Senior Subordinated Indenture protecting the right
of each Holder to receive payment of principal of and interest on such Senior
Subordinated Note on or after the due date thereof or to bring suit to enforce
such payment, or permitting Holders of a majority in principal amount of Senior
Subordinated Notes to waive Defaults or Events of Default; (vi) amend, change or
modify in any material respect the obligation of the Company Issuers to make and
consummate a Change of Control Offer in the event of a Change of Control or make
and consummate an Asset Sale Offer with respect to any Asset Sale that has been
consummated or modify any of the provisions or definitions with respect thereto;
or (vii) modify or change any provision of the Senior Subordinated Indenture or
the related definitions affecting the subordination or ranking of the Senior
Subordinated Notes in a manner which adversely affects the Holders.
GOVERNING LAW
The Senior Subordinated Indenture provides that it and the Senior
Subordinated Notes will be governed by, and construed in accordance with, the
laws of the State of New York but without giving effect to applicable principles
of conflicts of law to the extent that the application of the law of another
jurisdiction would be required thereby.
THE SENIOR SUBORDINATED TRUSTEE
The Senior Subordinated Indenture provides that, except during the
continuance of an Event of Default, the Senior Subordinated Trustee will perform
only such duties as are specifically set forth in the Senior Subordinated
Indenture. During the existence of an Event of Default, the Senior Subordinated
Trustee will exercise such rights and powers vested in it by the Senior
Subordinated Indenture, and use the same degree of care and skill in its
exercise as a prudent man would exercise or use under the circumstances in the
conduct of his own affairs.
The Senior Subordinated Indenture and the provisions of the TIA contain
certain limitations on the rights of the Senior Subordinated Trustee, should it
become a creditor of either of the Company Issuers, to obtain payments of claims
in certain cases or to realize on certain property received in respect of any
such claim as security or otherwise. Subject to the TIA, the Senior Subordinated
Trustee will be permitted to engage in other transactions; provided that if the
Senior Subordinated Trustee acquires any conflicting interest as described in
the TIA, it must eliminate such conflict or resign.
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CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
Senior Subordinated Indenture. Reference is made to the Senior Subordinated
Indenture for the full definition of all such terms, as well as any other terms
used herein for which no definition is provided.
'Acquired Indebtedness' means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Restricted Subsidiary of such specified Person,
including, without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Restricted Subsidiary of such specified Person and (ii) Indebtedness secured by
a Lien encumbering any asset acquired by such specified Person.
'Affiliate' of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, 'control'
(including, with correlative meanings, the terms 'controlling,' 'controlled by'
and 'under common control with'), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise.
'Asset Sale' means (i) the sale, conveyance, transfer or other disposition
(whether in a single transaction or a series of related transactions) of
property or assets (including by way of a sale and leaseback) of the Company or
any Restricted Subsidiary thereof (each referred to in this definition as a
'disposition') or (ii) the issuance or sale of Equity Interests of any
Restricted Subsidiary (whether in a single transaction or a series of related
transactions), in each case, other than: (a) a disposition of Cash Equivalents
or Investment Grade Securities or obsolete or worn out equipment in the ordinary
course of business; (b) the disposition of all or substantially all of the
assets of the Company in a manner permitted pursuant to the provisions described
above under 'Certain Covenants--Merger, Consolidation and Sale of Assets' or any
disposition that constitutes a Change of Control pursuant to the Senior
Subordinated Indenture; (c) any Restricted Payment that is permitted to be made,
and is made, under the covenant described above under 'Limitation on Restricted
Payments;' (d) any disposition of assets with an aggregate fair market value of
less than $2.0 million; (e) any disposition of property or assets by a
Restricted Subsidiary to the Company or by the Company or a Restricted
Subsidiary to a Restricted Subsidiary; (f) any exchange of like property
pursuant to Section 1031 of the Internal Revenue Code of 1986, as amended, for
use in a Similar Business; (g) any financing transaction with respect to
property built or acquired by the Company or any of its Restricted Subsidiaries
after the Issue Date including, without limitation, sale-leasebacks and asset
securitizations; (h) foreclosures on assets; and (i) any sale of Equity
Interests in, or Indebtedness or other securities of, an Unrestricted
Subsidiary.
'Blackstone' means Blackstone Capital Partners III Merchant Banking Fund
L.P. and its Affiliates.
'Board of Directors' means, as to any Person, the board of directors of
such Person (or, if such Person is a partnership, the board of directors or
other governing body of the general partner of such Person) or any duly
authorized committee thereof.
'Board Resolution' means, with respect to any Person, a copy of a
resolution certified by the Secretary or an Assistant Secretary of such Person
(or, if such Person is a partnership, its general partner) to have been duly
adopted by the Board of Directors of such Person and to be in full force and
effect on the date of such certification, and delivered to the Trustee.
'Business Day' means a day that is not a Saturday, a Sunday or a day on
which banking institutions in New York, New York are not required to be open.
'Capitalized Lease Obligation' means, at the time any determination thereof
is to be made, the amount of the liability in respect of a capital lease that
would at such time be required to be capitalized and reflected as a liability on
a balance sheet in accordance with GAAP.
'Capital Stock' means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership or limited liability
company, partnership or membership interests
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(whether general or limited) and (iv) any other interest or participation that
confers on a Person the right to receive a share of the profits and losses of,
or distributions of assets of, the issuing Person.
'Cash Equivalents' means (i) U.S. dollars (and foreign currency exchanged
into U.S. dollars within 180 days), (ii) securities issued or directly and fully
guaranteed or insured by the U.S. Government or any agency or instrumentality
thereof, (iii) certificates of deposit, time deposits and eurodollar time
deposits with maturities of one year or less from the date of acquisition,
bankers' acceptances with maturities not exceeding one year and overnight bank
deposits, in each case with any commercial bank having capital and surplus in
excess of $500.0 million, (iv) repurchase obligations for underlying securities
of the types described in clauses (ii) and (iii) entered into with any financial
institution meeting the qualifications specified in clause (iii) above, (v)
commercial paper rated A-1 or the equivalent thereof by Moody's or S&P and in
each case maturing within one year after the date of acquisition, (vi)
investment funds investing 95% of their assets in securities of the types
described in clauses (i)-(v) above, (vii) readily marketable direct obligations
issued by any state of the United States of America or any political subdivision
thereof having one of the two highest rating categories obtainable from either
Moody's or S&P and (viii) Indebtedness or preferred stock issued by Persons with
a rating of 'A' or higher from S&P or 'A2' or higher from Moody's.
'Change of Control' means the occurrence of any of the following: (i) the
sale, lease or transfer, in one or a series of related transactions, of all or
substantially all of the assets of the Company and its Restricted Subsidiaries,
taken as a whole, to a Person other than the Permitted Holders and their Related
Parties; or (ii) the Company becomes aware (by way of a report or any other
filing pursuant to Section 13(d) of the Exchange Act, proxy, vote, written
notice or otherwise) of the acquisition by any Person or group (within the
meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act, or any
successor provision), including any group acting for the purpose of acquiring,
holding or disposing of securities (within the meaning of Rule 13d-5(b)(1) under
the Exchange Act), other than the Permitted Holders and their Related Parties,
in a single transaction or in a related series of transactions, by way of
merger, consolidation or other business combination or purchase, of beneficial
ownership (within the meaning of Rule 13d-3 under the Exchange Act, or any
successor provision) of 50% or more of the total voting power of the Voting
Stock of the Company.
'Common Stock' of any Person means any and all shares, interests or other
participations in, and other equivalents (however designated and whether voting
or non-voting) of such Person's common equity, whether outstanding on the Issue
Date or issued after the Issue Date, and includes, without limitation, all
series and classes of such common equity.
'Consolidated Depreciation and Amortization Expense' means with respect to
any Person for any period, the total amount of depreciation and amortization
expense of such Person and its Restricted Subsidiaries for such period on a
consolidated basis and otherwise determined in accordance with GAAP.
'Consolidated EBITDA' means, with respect to any Person for any period, the
Consolidated Net Income of such Person for such period plus (a) provision for
taxes based on income or profits of such Person, or Permitted Tax Distributions
made by such Person, for such period deducted in computing Consolidated Net
Income, plus (b) Consolidated Interest Expense of such Person for such period to
the extent the same was deducted in calculating such Consolidated Net Income,
plus (c) Consolidated Depreciation and Amortization Expense of such Person for
such period to the extent such depreciation and amortization expense was
deducted in computing Consolidated Net Income, plus (d) any fees, expenses or
charges related to any Equity Offering, Permitted Investment, acquisition or
recapitalization or Indebtedness permitted to be incurred by the Senior
Subordinated Indenture (whether or not successful) and fees, expenses or charges
related to the transactions contemplated by the Recapitalization Agreement
(including fees to Blackstone), plus (e) the amount of any non-recurring charges
(including any one-time costs incurred in connection with acquisitions after the
Issue Date) deducted in such period in computing Consolidated Net Income, plus
(f) without duplication, any other non-cash charges reducing Consolidated Net
Income for such period (excluding any such charge which requires an accrual of a
cash reserve for anticipated cash charges for any future period), plus (g) the
amount of any minority interest expense deducted in calculating Consolidated Net
Income, plus (h) special charges and unusual items during any period ending on
or prior to the second anniversary of the Issue Date not to exceed $15.0 million
in the aggregate, plus (i) the amount of management, consulting monitoring and
advisory fees paid to Blackstone and its Affiliates during such period not to
exceed $1.0 million during any four quarter period, less, without duplication
(j) non-cash items
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increasing Consolidated Net Income of such Person for such period (excluding any
items which represent the reversal of any accrual of, or cash reserve for,
anticipated cash charges in any prior period).
'Consolidated Interest Expense' means, with respect to any Person for any
period, the sum, without duplication, of: (a) consolidated interest expense of
such Person and its Restricted Subsidiaries for such period, to the extent such
expense was deducted in computing Consolidated Net Income (including
amortization of original issue discount, the interest component of Capitalized
Lease Obligations and net payments and receipts (if any) pursuant to Hedging
Obligations to the extent included in Consolidated Interest Expense and
excluding amortization of deferred financing fees), (b) consolidated capitalized
interest of such Person and its Restricted Subsidiaries for such period, whether
paid or accrued and (c) on and after January 15, 2004, the interest expense of
Holdings with respect to the Senior Discount Notes.
'Consolidated Net Income' means, with respect to any Person for any period,
the aggregate of the Net Income, of such Person and its Restricted Subsidiaries
for such period, on a consolidated basis; provided, however, that (i) any net
after-tax extraordinary gains or losses (less all fees and expenses relating
thereto) shall be excluded, (ii) any increase in the cost of sales or other
incremental expenses resulting from purchase accounting in relation to any
acquisition, net of taxes, shall be excluded, (iii) the Net Income for such
period shall not include the cumulative effect of a change in accounting
principles during such period, (iv) any net after-tax income (loss) from
discontinued operations and any net after-tax gains or losses on disposal of
discontinued operations shall be excluded, (v) any net after-tax gains or losses
(less all fees and expenses relating thereto) attributable to asset dispositions
other than in the ordinary course of business (as determined in good faith by
the Company) shall be excluded, (vi) the Net Income for such period of any
Person that is not a Subsidiary, or is an Unrestricted Subsidiary, or that is
accounted for by the equity method of accounting, shall be included only to the
extent of the amount of dividends or distributions or other payments paid in
cash (or to the extent converted into cash) to the referent Person or a
Restricted Subsidiary thereof in respect of such period, (vii) the Net Income of
any Person acquired in a pooling of interests transaction shall not be included
for any period prior to the date of such acquisition, (viii) the Net Income for
such period of any Restricted Subsidiary shall be excluded to the extent that
the declaration or payment of dividends or similar distributions by such
Restricted Subsidiary of its Net Income is not at the date of determination
permitted without any prior governmental approval (which has not been obtained)
or, directly or indirectly, by the operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule, or governmental
regulation applicable to that Restricted Subsidiary or its stockholders, unless
such restriction with respect to the payment of dividends or in similar
distributions has been legally waived and (ix) the Net Income for such period of
the Company and its Restricted Subsidiaries shall be decreased by the amount of
Permitted Tax Distributions during such period.
'Contingent Obligations' means, with respect to any Person, any obligation
of such Person guaranteeing any leases, dividends or other obligations that do
not constitute Indebtedness ('primary obligations') of any other Person (the
'primary obligor') in any manner, whether directly or indirectly, including,
without limitation, any obligation of such Person, whether or not contingent,
(i) to purchase any such primary obligation or any property constituting direct
or indirect security therefor, (ii) to advance or supply funds (A) for the
purchase or payment of any such primary obligation or (B) to maintain working
capital or equity capital of the primary obligor or otherwise to maintain the
net worth or solvency of the primary obligor, or (iii) to purchase property,
securities or services primarily for the purpose of assuring the owner of any
such primary obligation of the ability of the primary obligor to make payment of
such primary obligation against loss in respect thereof.
'Default' means any event that is, or with the passage of time or the
giving of notice or both would be, an Event of Default.
'Designated Noncash Consideration' means the fair market value of noncash
consideration received by the Company or any of its Restricted Subsidiaries in
connection with an Asset Sale that is so designated as Designated Noncash
Consideration pursuant to an Officers' Certificate, setting forth the basis of
such valuation, less the amount of cash or Cash Equivalents received in
connection with a subsequent sale of such Designated Noncash Consideration.
'Designated Preferred Stock' means preferred stock of the Company (other
than Disqualified Stock) that is issued for cash (other than to a Restricted
Subsidiary) and is so designated as Designated Preferred Stock, pursuant to an
Officers' Certificate, on the issuance date thereof, the cash proceeds of which
are excluded from the calculation set forth in clause (c) of the covenant
described under 'Limitation on Restricted Payments.'
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'Designated Senior Indebtedness' means (i) Indebtedness under or in respect
of the New Credit Facility (except that any Indebtedness which represents a
partial refinancing of Indebtedness theretofore outstanding pursuant to the New
Credit Facility, rather than a complete refinancing thereof, shall only
constitute Designated Senior Indebtedness if such partial refinancing meets the
requirements of succeeding clause (ii)) and (ii) any other Indebtedness
constituting Senior Indebtedness which, at the time of determination, has an
aggregate principal amount or accreted value of at least $25.0 million and is
specifically designated in the instrument evidencing such Senior Indebtedness as
'Designated Senior Indebtedness' by the Company Issuers.
'Disqualified Stock' means, with respect to any Person, any Capital Stock
of such Person which, by its terms (or by the terms of any security into which
it is convertible or for which it is putable or exchangeable), or upon the
happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or redeemable at the option of the holder
thereof, in whole or in part, in each case prior to the maturity date of the
Senior Subordinated Notes; provided, however, that if such Capital Stock is
issued to any employee or to any plan for the benefit of employees of the
Company or any of its Subsidiaries or by any such plan to such employees, such
Capital Stock shall not constitute Disqualified Stock solely because it may be
required to be repurchased by the Company or such Subsidiary in order to satisfy
applicable statutory or regulatory obligations or as a result of such employee's
death or disability.
'Equity Interests' means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
'Equity Offering' means any public or private sale of common stock or
preferred stock of the Company or Holdings (other than Disqualified Stock),
other than (i) public offerings with respect to the Common Stock registered on
Form S-8 and (ii) any such public or private sale the proceeds of which have
been designated by the Company as an Excluded Contribution or Permanent
Qualified Equity Contributions.
'Exchange Act' means the Securities Exchange Act of 1934, as amended, and
the rules and regulations of the Commission promulgated thereunder.
'Excluded Contributions' means the net cash proceeds received by the
Company after the Issue Date from (a) contributions to its common equity capital
and (b) the sale (other than to a Subsidiary or to any management equity plan or
stock option plan or any other management or employee benefit plan or agreement
of the Company or any of its Subsidiaries) of Capital Stock (other than
Disqualified Stock) of the Company, in each case designated as Excluded
Contributions pursuant to an Officers' Certificate, the cash proceeds of which
are excluded from the calculation set forth in paragraph (c) of the 'Limitation
on Restricted Payments' covenant.
'fair market value' means, with respect to any asset or property, the price
which could be negotiated in an arm's-length, free market transaction, for cash,
between a willing seller and a willing and able buyer, neither of whom is under
undue pressure or compulsion to complete the transaction.
'Fixed Charge Coverage Ratio' means, with respect to any Person for any
period, the ratio of Consolidated EBITDA of such Person for such period to the
Fixed Charges of such Person for such period. In the event that the Company or
any of its Restricted Subsidiaries incurs, assumes, guarantees or redeems any
Indebtedness (other than in the case of revolving credit borrowings, in which
case interest expense shall be computed based upon the average daily balance of
such Indebtedness during the applicable period) or issues or redeems preferred
stock subsequent to the commencement of the period for which the Fixed Charge
Coverage Ratio is being calculated but prior to the event for which the
calculation of the Fixed Charge Coverage Ratio is made (the 'Calculation Date'),
then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect
to such incurrence, assumption, guarantee or redemption of Indebtedness, or such
issuance or redemption of preferred stock, as if the same had occurred at the
beginning of the applicable four-quarter period. With respect to any Calculation
Date that occurs on or after January 15, 2003 and prior to January 15, 2004, the
Fixed Charge Coverage Ratio shall be calculated giving pro forma effect to the
interest expense of Holdings with respect to the Holdings Senior Discount Notes
as if such interest expense was Consolidated Interest Expense of the Company.
For purposes of making the computation referred to above, Investments,
acquisitions, dispositions, mergers, consolidations and discontinued operations
(as determined in accordance with GAAP) that have been made by the Company or
any of its Restricted Subsidiaries during the four-quarter reference period or
subsequent to such reference period and on or prior to or simultaneously with
the Calculation Date shall be calculated on a pro forma basis assuming that all
such Investments, acquisitions, dispositions, discontinued operations, mergers
and consolidations (and the reduction of any associated fixed charge obligations
and the change in Consolidated EBITDA resulting therefrom) had occurred on the
first day of the four-quarter reference period. If since the beginning of such
period any Person (that subsequently became a Restricted Subsidiary or was
merged with or into the Company or any Restricted Subsidiary since the beginning
of such period) shall have made any
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Investment, acquisition, disposition, discontinued operation, merger or
consolidation that would have required adjustment pursuant to this definition,
then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect
thereto for such period as if such Investment, acquisition, disposition,
discontinued operation, merger or consolidation had occurred at the beginning of
the applicable four-quarter period. For purposes of this definition, whenever
pro forma effect is to be given to a transaction, the pro forma calculations
shall be made as determined in good faith by a responsible financial or
accounting officer of the Company. If any Indebtedness bears a floating rate of
interest and is being given pro forma effect, the interest on such Indebtedness
shall be calculated as if the rate in effect on the Calculation Date had been
the applicable rate for the entire period (taking into account any Hedging
Obligations applicable to such Indebtedness). Interest on a Capitalized Lease
Obligation shall be deemed to accrue at an interest rate reasonably determined
by a responsible financial or accounting officer of the Company to be the rate
of interest implicit in such Capitalized Lease Obligation in accordance with
GAAP. For purposes of making the computation referred to above, interest on any
Indebtedness under a revolving credit facility computed on a pro forma basis
shall be computed based upon the average daily balance of such Indebtedness
during the applicable period. Interest on Indebtedness that may optionally be
determined at an interest rate based upon a factor of a prime or similar rate, a
eurocurrency interbank offered rate, or other rate, shall be deemed to have been
based upon the rate actually chosen, or, if none, then based upon such optional
rate chosen as the Company may designate. Any such pro forma calculation may
include adjustments in the reasonable determination of the Company as set forth
in an Officers' Certificate, to (i) reflect operating expense reductions
reasonably expected to result from any acquisition or merger or (ii) eliminate
the effect of any extraordinary accounting event with respect to any acquired
Person on Consolidated Net Income.
'Fixed Charges' means, with respect to any Person for any period, the sum
of (a) Consolidated Interest Expense of such Person for such period and (b) the
product of (x) all cash dividend payments (excluding items eliminated in
consolidation) on any series of Disqualified Stock of such Person or its
Restricted Subsidiaries and (y) (A) if such Person is not a taxable entity for
U.S. federal income tax purposes, one, or (B) if such Person is an entity
taxable for U.S. federal income tax purposes, a fraction, the numerator of which
is one and the denominator of which is one minus the then current effective
consolidated federal, state and local tax rate of such Person, expressed as a
decimal.
'Foreign Subsidiary' means a Restricted Subsidiary not organized or
existing under the laws of the United States, any State thereof, the District of
Columbia, or any territory thereof.
'GAAP' means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the Issue Date. For the purposes of the
Senior Subordinated Indenture, the term 'consolidated' with respect to any
Person shall mean such Person consolidated with its Restricted Subsidiaries, and
shall not include any Unrestricted Subsidiary.
'Government Securities' means securities that are (a) direct obligations of
the United States of America for the timely payment of which its full faith and
credit is pledged or (b) obligations of a Person controlled or supervised by and
acting as an agency or instrumentality of the United States of America the
timely payment of which is unconditionally guaranteed as a full faith and credit
obligation by the United States of America, which, in either case, are not
callable or redeemable at the option of the issuer thereof, and shall also
include a depository receipt issued by a bank (as defined in Section 3(a)(2) of
the Securities Act), as custodian with respect to any such Government Securities
or a specific payment of principal of or interest on any such Government
Securities held by such custodian for the account of the holder of such
depository receipt; provided that (except as required by law) such custodian is
not authorized to make any deduction from the amount payable to the holder of
such depository receipt from any amount received by the custodian in respect of
the Government Securities or the specific payment of principal of or interest on
the Government Securities evidenced by such depository receipt.
'guarantee' means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness or other obligations.
'Guarantee' means any guarantee of the obligations of the Company Issuers
under the Senior Subordinated Indenture and the Senior Subordinated Notes by any
Restricted Subsidiary in accordance with the provisions of the Senior
Subordinated Indenture. When used as a verb, 'Guarantee' shall have a
corresponding meaning.
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'Guarantor' means any Restricted Subsidiary that incurs a Guarantee;
provided that upon the release and discharge of such Restricted Subsidiary from
its Guarantee in accordance with the Senior Subordinated Indenture, such
Restricted Subsidiary shall cease to be a Guarantor.
'Hedging Obligations' means, with respect to any Person, the obligations of
such Person under (i) currency exchange or interest rate swap agreements,
currency exchange or interest rate cap agreements and currency exchange or
interest rate collar agreements and (ii) other agreements or arrangements
designed to protect such Person against fluctuations in currency exchange or
interest rates or commodity prices.
'Indebtedness' means, with respect to any Person, (a) any indebtedness of
such Person, whether or not contingent (i) in respect of borrowed money, (ii)
evidenced by bonds, notes, debentures or similar instruments or letters of
credit or bankers' acceptances (or, without double counting, reimbursement
agreements in respect thereof), (iii) representing the balance deferred and
unpaid of the purchase price of any property (including Capitalized Lease
Obligations), except any such balance that constitutes a trade payable or
similar obligation to a trade creditor, in each case accrued in the ordinary
course of business or (iv) representing any Hedging Obligations, if and to the
extent of any of the foregoing Indebtedness (other than letters of credit and
Hedging Obligations) that would appear as a liability upon a balance sheet
(excluding the footnotes thereto) of such Person prepared in accordance with
GAAP, (b) to the extent not otherwise included, any obligation by such Person to
be liable for, or to pay, as obligor, guarantor or otherwise, on the
Indebtedness of another Person (other than by endorsement of negotiable
instruments for collection in the ordinary course of business) and (c) to the
extent not otherwise included, Indebtedness of another Person secured by a Lien
on any asset owned by such Person (whether or not such Indebtedness is assumed
by such Person); provided, however, that Contingent Obligations incurred in the
ordinary course of business shall be deemed not to constitute Indebtedness.
'Independent Financial Advisor' means an accounting, appraisal, investment
banking firm or consultant to Persons engaged in Similar Businesses of
nationally recognized standing that is, in the good faith determination of the
Company, qualified to perform the task for which it has been engaged.
'Investment Grade Securities' means (i) securities issued or directly and
fully guaranteed or insured by the United States government or any agency or
instrumentality thereof (other than Cash Equivalents), (ii) debt securities or
debt instruments with a rating of BBB- or higher by S&P or Baa3 or higher by
Moody's or the equivalent of such rating by such rating organization, or, if no
rating of S&P or Moody's then exists, the equivalent of such rating by any other
nationally recognized securities rating agency, but excluding any debt
securities or instruments constituting loans or advances between and among the
respective Company Issuers and their respective Subsidiaries, and (iii)
investments in any fund that invests exclusively in investments of the type
described in clauses (i) and (ii) which fund may also hold immaterial amounts of
cash pending investment and/or distribution.
'Investments' means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the form of loans (including
guarantees), advances or capital contributions (excluding accounts receivable,
trade credit, advances to customers, commission, travel and similar advances to
officers and employees made in the ordinary course of business), purchases or
other acquisitions for consideration of Indebtedness, Equity Interests or other
securities issued by any other Person and investments that are required by GAAP
to be classified on the balance sheet (excluding the footnotes thereto) of such
Person in the same manner as the other investments included in this definition
to the extent such transactions involve the transfer of cash or other property.
For purposes of the definition of 'Unrestricted Subsidiary' and the covenant
described under 'Certain Covenants--Limitation on Restricted Payments,' (i)
'Investments' shall include the portion (proportionate to the Company's equity
interest in such Subsidiary) of the fair market value of the net assets of a
Subsidiary of the Company at the time that such Subsidiary is designated an
Unrestricted Subsidiary; provided, however, that upon a redesignation of such
Subsidiary as a Restricted Subsidiary, the Company shall be deemed to continue
to have a permanent 'Investment' in an Unrestricted Subsidiary equal to an
amount (if positive) equal to (x) the Company's 'Investment' in such Subsidiary
at the time of such redesignation less (y) the portion (proportionate to the
Company's equity interest in such Subsidiary) of the fair market value of the
net assets of such Subsidiary at the time of such redesignation; and (ii) any
property transferred to or from an Unrestricted Subsidiary shall be valued at
its fair market value at the time of such transfer, in each case as determined
in good faith by the Company.
'Issue Date' means the closing date for the sale and original issuance of
the Senior Subordinated Notes under the Senior Subordinated Indenture.
'Lien' means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under
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applicable law (including any conditional sale or other title retention
agreement, any lease in the nature thereof, any option or other agreement to
sell or give a security interest in and any filing of or agreement to give any
financing statement under the Uniform Commercial Code (or equivalent statutes)
of any jurisdiction); provided that in no event shall an operating lease be
deemed to constitute a Lien.
'Management Group' means the group consisting of the executive officers of
the Company.
'Moody's' means Moody's Investors Service, Inc.
'Net Income' means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends.
'Net Proceeds' means the aggregate cash proceeds received by the Company or
any of its Restricted Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of any
Designated Noncash Consideration received in any Asset Sale), net of the direct
costs relating to such Asset Sale and the sale or disposition of such Designated
Noncash Consideration (including, without limitation, legal, accounting and
investment banking fees, and brokerage and sales commissions), and any
relocation expenses incurred as a result thereof, taxes paid or payable as a
result thereof (after taking into account any available tax credits or
deductions and any tax sharing arrangements related thereto), amounts required
to be applied to the repayment of principal, premium (if any) and interest on
Indebtedness required (other than required by clause (i) of the second paragraph
of 'Certain Covenants--Limitation on Asset Sales') to be paid as a result of
such transaction and any deduction of appropriate amounts to be provided by the
Company as a reserve in accordance with GAAP against any liabilities associated
with the asset disposed of in such transaction and retained by the Company after
such sale or other disposition thereof, including, without limitation, pension
and other post-employment benefit liabilities and liabilities related to
environmental matters or against any indemnification obligations associated with
such transaction.
'New Credit Facility' means that certain credit facility among Bankers
Trust Company, the Company and certain of its Subsidiaries and affiliates and
the lenders from time to time party thereto, together with any related
documents, instruments and agreements executed in connection therewith
(including, without limitation, any guaranty agreements and security documents),
in each case as such credit facility and related documents, instruments and
agreements may be amended (including any amendment and restatement thereof),
supplemented or otherwise modified from time to time, including any agreement
extending the maturity of, refinancing, replacing or otherwise restructuring
(including increasing the amount of available borrowings thereunder or adding
additional obligors or guarantors thereunder) all or any portion of the
Indebtedness under such credit facility or any successor or replacement credit
facility and whether by the same or any other agent, lender or group of lenders.
'Obligations' means all obligations for principal, interest, penalties,
fees, indemnifications, reimbursements (including, without limitation,
reimbursement obligations with respect to letters of credit and banker's
acceptances), damages and other liabilities payable under the documentation
governing any Indebtedness; provided that Obligations with respect to the Senior
Subordinated Notes shall not include fees or indemnifications in favor of the
Senior Subordinated Trustee and other third parties other than the holders of
the Senior Subordinated Notes.
'Officer' of any Person means the Chairman of the Board, the President, any
Executive Vice President, Senior Vice President or Vice President, the Treasurer
or the Secretary of such Person.
'Officers' Certificate' of any Person means a certificate signed on behalf
of such Person by two Officers of such Person, one of whom must be the principal
executive officer, the principal financial officer, the treasurer or the
principal accounting officer of such Person that meets the requirements set
forth in the Senior Subordinated Indenture.
'Pari Passu Indebtedness' means with respect to the Senior Subordinated
Notes or a Guarantee, Indebtedness which ranks pari passu in right of payment to
the Senior Subordinated Notes or such Guarantee, as the case may be.
'Permanent Qualified Equity Contributions' means net cash proceeds to the
Company in the form of contributions to the common equity capital of the Company
or from the sale (other than to a Subsidiary of the Company or to any management
equity plan or stock option plan or any other management or employee benefit
plan of the Company or any of its Subsidiaries) of Capital Stock (other than
Disqualified Stock) of the Company, in each case designated as Permanent
Qualified Equity Contributions pursuant to an Officers' Certificate, the cash
proceeds of which are excluded from the calculation set forth in paragraph (c)
of the 'Limitation on Restricted Payments' covenant.
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'Permitted Holders' means Blackstone and any of its Affiliates.
'Permitted Investments' means (a) any Investment in the Company or any
Restricted Subsidiary; (b) any Investment in cash and Cash Equivalents or
Investment Grade Securities; (c) any Investment by the Company or any Restricted
Subsidiary in a Person that is a Similar Business if as a result of such
Investment (i) such Person becomes a Restricted Subsidiary or (ii) such Person,
in one transaction or a series of related transactions, is merged, consolidated
or amalgamated with or into, or transfers or conveys substantially all of its
assets to, or is liquidated into, the Company or a Restricted Subsidiary; (d)
any Investment in securities or other assets not constituting cash or Cash
Equivalents and received in connection with an Asset Sale made pursuant to the
provisions of 'Certain Covenants--Limitation on Asset Sales' or any other
disposition of assets not constituting an Asset Sale; (e) any Investment
existing on the Issue Date; (f) advances to employees not in excess of $10.0
million outstanding at any one time, in the aggregate; (g) any Investment
acquired by the Company or any of its Restricted Subsidiaries (i) in exchange
for any other Investment or accounts receivable held by the Company or any such
Restricted Subsidiary in connection with or as a result of a bankruptcy,
workout, reorganization or recapitalization of the issuer of such other
Investment or accounts receivable or (ii) as a result of a foreclosure by the
Company or any of its Restricted Subsidiaries with respect to any secured
Investment or other transfer of title with respect to any secured Investment in
default; (h) Hedging Obligations permitted under clause (j) of the 'Limitation
of Incurrence of Indebtedness and Issuance of Disqualified Stock' covenant; (i)
loans and advances to officers, directors and employees for business-related
travel expenses, moving expenses and other similar expenses, in each case
incurred in the ordinary course of business; (j) any Investment in a Similar
Business (other than an Investment in an Unrestricted Subsidiary) having an
aggregate fair market value, taken together with all other Investments made
pursuant to this clause (j) that are at that time outstanding, not to exceed 10%
of Total Assets at the time of such Investment (with the fair market value of
each Investment being measured at the time made and without giving effect to
subsequent changes in value); (k) Investments the payment for which consists of
Equity Interests of the Company (other than Disqualified Stock); provided,
however, that such Equity Interests will not increase the amount available for
Restricted Payments under clause (c) of the 'Limitation on Restricted Payments'
covenant; (l) additional Investments having an aggregate fair market value,
taken together with all other Investments made pursuant to this clause (l) that
are at that time outstanding, not to exceed $10.0 million (with the fair market
value of each Investment being measured at the time made and without giving
effect to subsequent changes in value); (m) any transaction to the extent it
constitutes an Investment that is permitted by and made in accordance with the
provisions of clauses (iii) and (xi) of the second paragraph of the covenant
described under 'Certain Covenants--Transactions with Affiliates'; (n) any
Investment by Restricted Subsidiaries in other Restricted Subsidiaries; (o)
Investments consisting of the licensing or contribution of intellectual property
pursuant to joint marketing arrangements with other Persons; and (p) Investments
consisting of purchases and acquisitions of inventory, supplies, materials and
equipment or licenses or leases of intellectual property, in any case, in the
ordinary course of business.
'Permitted Junior Securities' shall mean debt or equity securities of a
Company Issuer or any successor corporation issued pursuant to a plan of
reorganization or readjustment of a Company Issuer that are subordinated to the
payment of all then outstanding Senior Indebtedness at least to the same extent
that the Senior Subordinated Notes are subordinated to the payment of all Senior
Indebtedness on the Issue Date, so long as (i) the effect of the use of this
defined term in the subordination provisions described under the caption
'Subordination' is not to cause the Senior Subordinated Notes to be treated as
part of (a) the same class of claims as the Senior Indebtedness or (b) any class
of claims pari passu with, or senior to, the Senior Indebtedness for any payment
or distribution in any case or proceeding or similar event relating to the
liquidation, insolvency, bankruptcy, dissolution, winding up or reorganization
of a Company Issuer and (ii) to the extent that any Senior Indebtedness
outstanding on the date of consummation of any such plan or reorganization or
readjustment are not paid in full in cash on such date, either (a) the holders
of any such Senior Indebtedness not so paid in full in cash have consented to
the terms of such plan or reorganization or readjustment of (b) such holders
receive securities which constitute Senior Indebtedness and which have been
determined by the relevant court to constitute satisfaction in full in money or
money's worth of any Senior Indebtedness not paid in full in cash.
'Permitted Liens' means the following types of Liens:
(i) judgment Liens not giving rise to an Event of Default so long as
such Lien is adequately bonded and any appropriate legal proceedings which
may have been duly initiated for the review of such judgment shall not have
been finally terminated or the period within which such proceedings may be
initiated shall not have expired;
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(ii) any interest or title of a lessor under any Capitalized Lease
Obligation; provided that such Liens do not extend to any property or
assets which is not leased property subject to such Capitalized Lease
Obligation;
(iii) purchase money Liens to finance property or assets of the
Company or any Restricted Subsidiary acquired in the ordinary course of
business; provided, however, that (A) the related purchase money
Indebtedness shall not exceed the cost of such property or assets and shall
not be secured by any property or assets of the Company or any Restricted
Subsidiary other than the property and assets so acquired and (B) the Lien
securing such Indebtedness shall be created within 180 days of such
acquisition;
(iv) Liens upon specific items of inventory or other goods and
proceeds of any Person securing such Person's obligations in respect of
bankers' acceptances issued or created for the account of such Person to
facilitate the purchase, shipment or storage of such inventory or other
goods;
(v) Liens securing reimbursement obligations with respect to
commercial letters of credit which encumber documents and other property
relating to such letters of credit and products and proceeds thereof;
(vi) Liens securing Indebtedness under Hedging Obligations;
(vii) Liens securing Acquired Indebtedness incurred in accordance with
the 'Limitations on Incurrence of Indebtedness and Issuance of Disqualified
Stock' covenant; provided that (A) such Liens secured such Acquired
Indebtedness at the time of and prior to the incurrence of such Acquired
Indebtedness by the Company or a Restricted Subsidiary thereof and were not
granted in connection with, or in anticipation of, the incurrence of such
Acquired Indebtedness by the Company or a Restricted Subsidiary thereof and
(B) such Liens do not extend to or cover any property or assets of the
Company or any of the Restricted Subsidiaries other than the property or
assets that secured the Acquired Indebtedness prior to the time such
Indebtedness became Acquired Indebtedness of the Company or such Restricted
Subsidiary and are no more favorable to the lienholders than those securing
the Acquired Indebtedness prior to the incurrence of such Acquired
Indebtedness by the Company or such Restricted Subsidiary;
(viii) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, suppliers, materialmen, repairmen and other Liens
imposed by law incurred in the ordinary course of business for sums not yet
delinquent or being contested in good faith, if such reserve or other
appropriate provision, if any, as shall be required by GAAP shall have been
made in respect thereof;
(ix) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance
and other types of Social Security, including any Lien securing letters of
credit issued in the ordinary course of business, consistent with past
practice in connection therewith, or to secure the performance of tenders,
statutory obligations, surety and appeal bonds, bids, leases, government
contracts, performance and return-of-money bonds and other similar
obligations (exclusive of obligations for the payment of borrowed money);
and
(x) Liens encumbering deposits made to secure obligations arising from
statutory, regulatory, contractual or warranty requirements, including
rights of offset and set off.
'Person' means an individual, partnership, corporation, unincorporated
organization, trust or joint venture, or a governmental agency or political
subdivision thereof.
'Recapitalization Agreement' means the Agreement and Plan of
Recapitalization, Redemption and Purchase, dated as of December 18, 1997 by and
among the Company, BMP/Graham Holdings Corporation and the other parties
thereto.
'Related Parties' means any Person controlled by a Permitted Holder,
including any partnership of which a Permitted Holder or its Affiliates is the
general partner.
'Representative' means the indenture trustee or other trustee, agent or
representative in respect of any Designated Senior Indebtedness; provided that
if, and for so long as, any Designated Senior Indebtedness lacks such a
representative, then the Representative for such Designated Senior Indebtedness
shall at all times constitute the holders of a majority in outstanding principal
amount of such Designated Senior Indebtedness in respect of any Designated
Senior Indebtedness.
'Restricted Investment' means an Investment other than a Permitted
Investment.
'Restricted Subsidiary' means, at any time, any direct or indirect
Subsidiary of the Company that is not then an Unrestricted Subsidiary; provided,
however, that upon the occurrence of an Unrestricted Subsidiary
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ceasing to be an Unrestricted Subsidiary, such Subsidiary shall be included in
the definition of 'Restricted Subsidiary.'
'S&P' means Standard and Poor's Ratings Group.
'Securities Act' means the Securities Act of 1933, as amended, and the
rules and regulations of the Commission promulgated thereunder.
'Senior Indebtedness' means the principal of, premium, if any, and interest
(including any interest accruing subsequent to the filing of a petition of
bankruptcy at the rate provided for in the documentation with respect thereto,
whether or not such interest is an allowed claim under applicable law) on any
Indebtedness of Holdings, the Company Issuers or such Guarantor, whether
outstanding on the Issue Date or thereafter created, incurred or assumed,
unless, in the case of any particular Indebtedness, the instrument creating or
evidencing the same or pursuant to which the same is outstanding expressly
provides that such Indebtedness shall not be senior in right of payment to the
Holdings Guarantee, the Senior Subordinated Notes or the Guarantee of such
Guarantor. Without limiting the generality of the foregoing, 'Senior
Indebtedness' shall also include the principal of, premium, if any, interest
(including any interest accruing subsequent to the filing of a petition of
bankruptcy at the rate provided for in the documentation with respect thereto,
to the extent such interest is an allowed claim under applicable law) on, and
all other amounts owing in respect of, (x) all monetary obligations (including
guarantees thereof) of every nature of Holdings, the Company Issuers or a
Guarantor under the New Credit Facility, including, without limitation,
obligations to pay principal and interest, reimbursement obligations under
letters of credit, fees, expenses, indemnities and Hedging Obligations related
thereto, in each case whether outstanding on the Issue Date or thereafter
incurred and (y) all monetary obligations (including guarantees thereof) of
every nature of the Company Issuers, Holdings and any Guarantor with respect to
Hedging Obligations, in each case whether outstanding on the Issue Date or
thereafter incurred. Notwithstanding the foregoing, 'Senior Indebtedness' shall
not include (i) any Indebtedness of Holdings, the Company or a Guarantor to a
Subsidiary thereof, (ii) Indebtedness to, or guaranteed on behalf of, any
director, officer or employee of Holdings, the Company or a Guarantor or any
Subsidiary thereof (including, without limitation, amounts owed for
compensation), (iii) Indebtedness to trade creditors and other amounts incurred
in connection with obtaining goods, materials or services (other than amounts
incurred under the New Credit Facility), (iv) Indebtedness represented by
Disqualified Stock, (v) any liability for federal, state, local or other taxes
owed or owing, (vi) that portion of any Indebtedness incurred in violation of
the Senior Subordinated Indenture provisions set forth under 'Limitations on
Incurrence of Indebtedness and Issuance of Disqualified Stock' (but, as to any
such obligation, no such violation shall be deemed to exist for purposes of this
clause (vi) if the holder(s) of such obligation or their representative shall
have received an Officers' Certificate of the Company to the effect that the
incurrence of such Indebtedness does not (or, in the case of revolving credit
Indebtedness, that the incurrence of the entire committed amount thereof at the
date on which the initial borrowing thereunder is made would not) violate such
provisions of the Senior Subordinated Indenture), (vii) Indebtedness which, when
incurred and without respect to any election under Section 1111(b) of Title 11,
United States Code, is without recourse to Holdings, the Company or a Guarantor,
as the case may be and (viii) any Indebtedness which is, by its express terms,
subordinated in right of payment to any other Indebtedness of Holdings, the
Company or a Guarantor, as the case may be.
'Significant Restricted Subsidiary' means any Restricted Subsidiary that
would be a 'significant subsidiary' of the Company as defined in Article 1, Rule
1-02 of Regulation S-X, promulgated pursuant to the Securities Act, as such
Regulation is in effect on the date hereof.
'Similar Business' means a business, the majority of whose revenues are
derived from the manufacture, marketing or sale of containers or any business or
activity that is reasonably similar thereto or a reasonable extension,
development or expansion thereof or ancillary thereto.
'Subordinated Indebtedness' means with respect to the Senior Subordinated
Notes or a Guarantee, any Indebtedness of the Company or a Guarantor, as the
case may be, which is by its terms subordinated in right of payment to the
Senior Subordinated Notes or the Guarantee of such Guarantor, as the case may
be.
'Subsidiary' means, with respect to any Person, (i) any corporation,
association, or other business entity (other than a partnership) of which more
than 50% of the total voting power of shares of Capital Stock entitled (without
regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time of determination owned or
controlled, directly or indirectly, by such Person or one or more of the other
Subsidiaries of that Person or a combination thereof and (ii) any partnership,
joint venture, limited liability company or similar entity of which (x) more
than 50% of the capital accounts, distribution rights, total equity and voting
interests or general or limited partnership interests, as applicable, are owned
or controlled,
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directly or indirectly, by such Person or one or more of the other Subsidiaries
of that Person or a combination thereof whether in the form of membership,
general, special or limited partnership or otherwise and (y) such Person or any
Wholly Owned Restricted Subsidiary of such Person is a controlling general
partner or otherwise controls such entity.
'Total Assets' means the total consolidated assets of the Company and its
Restricted Subsidiaries, as shown on the most recent balance sheet of the
Company.
'Unrestricted Subsidiary' means (i) any Subsidiary of the Company which at
the time of determination is an Unrestricted Subsidiary (as designated by the
Board of Directors of the Company, as provided below) and (ii) any Subsidiary of
an Unrestricted Subsidiary. The Board of Directors of the Company may designate
any Subsidiary of the Company (including any existing Subsidiary and any newly
acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary unless
such Subsidiary or any of its Subsidiaries owns any Equity Interests of, or
owns, or holds any Lien on, any property of, the Company or any Subsidiary
thereof (other than any Subsidiary of the Subsidiary to be so designated),
provided that each Subsidiary to be so designated and its Subsidiaries have not
at the time of designation, and do not thereafter, create, incur, issue, assume,
guarantee or otherwise become directly or indirectly liable with respect to any
Indebtedness pursuant to which the lender has recourse to any of the assets of
the Company or any of its Restricted Subsidiaries. The Board of Directors of the
Company may designate any Unrestricted Subsidiary to be a Restricted Subsidiary;
provided that, immediately after giving effect to such designation, (i) the
Company could incur at least $1.00 of additional Indebtedness pursuant to the
Fixed Charge Coverage Ratio test described under 'Certain Covenants--Limitations
on Incurrence of Indebtedness and Issuance of Disqualified Stock' or (ii) the
Fixed Charge Coverage Ratio for the Company and its Restricted Subsidiaries
would be greater than such ratio for the Company and its Restricted Subsidiaries
immediately prior to such designation, in each case on a pro forma basis taking
into account such designation. Any such designation by the Board of Directors of
the Company shall be notified by the Company to the Senior Subordinated Trustee
by promptly filing with the Senior Subordinated Trustee a copy of the board
resolution giving effect to such designation and an Officers' Certificate
certifying that such designation complied with the foregoing provisions.
'Voting Stock' of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
'Weighted Average Life to Maturity' means, when applied to any Indebtedness
or Disqualified Stock, as the case may be, at any date, the quotient obtained by
dividing (i) the sum of the products of the number of years from the date of
determination to the date of each successive scheduled principal payment of such
Indebtedness or redemption or similar payment with respect to such Disqualified
Stock multiplied by the amount of such payment, by (ii) the sum of all such
payments.
'Wholly Owned Restricted Subsidiary' is any Wholly Owned Subsidiary that is
a Restricted Subsidiary.
'Wholly Owned Subsidiary' of any Person means a Subsidiary of such Person
100% of the outstanding Capital Stock or other ownership interests of which
(other than directors' qualifying shares) shall at the time be owned by such
Person or by one or more Wholly Owned Subsidiaries of such Person or by such
Person and one or more Wholly Owned Subsidiaries of such Person.
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DESCRIPTION OF THE SENIOR DISCOUNT EXCHANGE NOTES
The Senior Discount Old Notes were issued and the Senior Discount Exchange
Notes offered hereby will be issued under an indenture dated as of February 2,
1998 (the 'Senior Discount Indenture' and, together with the Senior Subordinated
Indenture, the 'Indentures') by and between the Holdings Issuers and The Bank of
New York, as trustee (the 'Senior Discount Trustee'). Any Senior Discount Old
Notes that remain outstanding after the completion of the Senior Discount
Exchange Offer, together with the Senior Discount Exchange Notes issued in
connection with the Senior Discount Exchange Offer, will be treated as a single
class of securities under the Senior Discount Indenture. The following summary
of certain provisions of the Senior Discount Indenture does not purport to be
complete and is subject to, and is qualified in its entirety by reference to,
the Trust Indenture Act of 1939, as amended (the 'TIA'), and to all of the
provisions of the Senior Discount Indenture, including the definitions of
certain terms therein and those terms made a part of the Senior Discount
Indenture by reference to the TIA as in effect on the date of the Senior
Discount Indenture. The definitions of certain capitalized terms used in the
following summary are set forth below under '--Certain Definitions.' For
purposes of this section, references to 'Holdings' and the 'Holdings Issuers' do
not include their respective Subsidiaries. The Senior Discount Indenture is an
exhibit to the Registration Statement of which this Prospectus is a part.
GENERAL
On February 2, 1998, the Holdings Issuers issued $169,000,000 aggregate
principal amount at maturity of Senior Discount Old Notes under the Indenture.
The terms of the Senior Discount Exchange Notes are identical in all material
respects to the Senior Discount Old Notes, except for certain transfer
restrictions and registration and other rights relating to the exchange of the
Senior Discount Old Notes for Senior Discount Exchange Notes. The Trustee will
authenticate and deliver Senior Discount Exchange Notes for original issue only
in exchange for a like principal amount of Senior Discount Old Notes. Any Senior
Discount Old Notes that remain outstanding after the completion of the Senior
Discount Exchange Offer, together with the Senior Discount Exchange Notes issued
in connection with the Senior Discount Exchange Offer, will be treated as a
single class of securities under the Senior Discount Indenture. Accordingly, all
references herein to specified percentages in aggregate principal amount of the
outstanding Senior Discount Exchange Notes shall be deemed to mean, at any time
after the Senior Discount Exchange Offer is consummated, such percentage in
aggregate principal amount of the Senior Discount Old Notes and Senior Discount
Exchange Notes then outstanding.
The Senior Discount Exchange Notes will be unsecured obligations of the
Holdings Issuers, ranking pari passu in right of payment to all unsubordinated
obligations of the Holdings Issuers.
The Senior Discount Exchange Notes will be issued in fully registered form
only, without coupons, in denominations of $1,000 principal amount at maturity
and integral multiples thereof. Initially, the Senior Discount Trustee will act
as Paying Agent and Registrar for the Senior Discount Exchange Notes. The Senior
Discount Exchange Notes may be presented for registration of transfer and
exchange at the offices of the Registrar, which initially will be the Senior
Discount Trustee's principal corporate trust office. The Holdings Issuers may
change any Paying Agent and Registrar without notice to holders of the Senior
Discount Exchange Notes (the 'Holders'). The Holdings Issuers will pay principal
(and premium, if any) on the Senior Discount Exchange Notes at the Senior
Discount Trustee's principal corporate office in New York, New York. At the
Holdings Issuers' option, interest may be paid at the Senior Discount Trustee's
principal corporate trust office or by check mailed to the registered addresses
of Holders.
PRINCIPAL, MATURITY AND INTEREST
The Senior Discount Notes are limited in aggregate principal amount at
maturity to $169,000,000 at any time outstanding. Pursuant to the Senior
Discount Exchange Offer, an aggregate of up to $169,000,000 aggregate principal
amount at maturity of Senior Subordinated Exchange Notes may be issued. Such
Senior Discount Exchange Notes may be issued solely in exchange for the
$169,000,000 aggregate principal amount at maturity of Senior Discount Old Notes
which were issued on February 2, 1998.
The Senior Discount Exchange Notes will mature on January 15, 2009. Cash
interest on the Senior Discount Exchange Notes will not accrue prior to January
15, 2003. Thereafter, interest on the Senior Discount Exchange Notes will accrue
from January 15, 2003 at the rate of 10 3/4% per annum and will be payable
semiannually in
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cash on each January 15 and July 15, commencing on July 15, 2003, to the persons
who are registered Holders at the close of business on the January 1 and July 1
immediately preceding the applicable interest payment date.
The Senior Discount Exchange Notes will not be entitled to the benefit of
any mandatory sinking fund.
REDEMPTION
Optional Redemption. The Senior Discount Exchange Notes will be
redeemable, at the Holdings Issuers' option, in whole at any time or in part
from time to time, on and after January 15, 2003, upon not less than 30 nor more
than 60 days' notice, at the following redemption prices (expressed as
percentages of the principal amount at maturity thereof) if redeemed during the
twelve-month period commencing on January 15 of the year set forth below, plus,
in each case, accrued and unpaid interest thereon, if any, to the date of
redemption:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- -------------------------------------------------------------- ----------
<S> <C>
2003.......................................................... 105.375%
2004.......................................................... 103.583
2005.......................................................... 101.792
2006 and thereafter........................................... 100.000
</TABLE>
Optional Redemption upon Equity Offerings. At any time, or from time to
time, on or prior to January 15, 2001, the Holdings Issuers may, at their
option, use the net cash proceeds of one or more Equity Offerings by Holdings to
redeem Senior Discount Notes up to an aggregate principal amount at maturity
equal to 40% of the aggregate principal amount at maturity of the Senior
Discount Old Notes originally issued, at a redemption price equal to 110.750% of
the Accreted Value thereof; provided that Senior Discount Notes in an aggregate
principal amount equal to at least 60% of the aggregate principal amount at
maturity of the Senior Discount Old Notes originally issued remains outstanding
immediately following such redemption. In order to effect the foregoing
redemption with the proceeds of any Equity Offering, the Holdings Issuers shall
make such redemption not more than 120 days after the consummation of any such
Equity Offering.
SELECTION AND NOTICE OF REDEMPTION
If less than all of the Senior Discount Exchange Notes are to be redeemed
at any time or if more Senior Discount Exchange Notes are tendered pursuant to
an Asset Sale Offer or a Change of Control Offer than the Holdings Issuers are
required to purchase, then the selection of such Senior Discount Exchange Notes
for redemption or purchase, as the case may be, will be made by the Senior
Discount Trustee in compliance with the requirements of the principal national
securities exchange, if any, on which such Senior Discount Exchange Notes are
listed, or, if such Senior Discount Notes are not so listed, on a pro rata
basis, by lot or by such other method as the Senior Discount Trustee shall deem
fair and appropriate (and in such manner as complies with applicable legal
requirements); provided that no Senior Discount Notes of $1,000 principal amount
at maturity or less shall be purchased or redeemed in part.
Notices of purchase or redemption shall be mailed by first class mail,
postage prepaid, at least 30 but not more than 60 days before the purchase or
redemption date to each Holder of Senior Discount Notes to be purchased or
redeemed at such Holder's registered address. If any Senior Discount Exchange
Note is to be purchased or redeemed in part only, any notice of purchase or
redemption that relates to such Senior Exchange Discount Note shall state the
portion of the principal amount thereof that has been or is to be purchased or
redeemed.
A new Senior Exchange Discount Note in principal amount at maturity equal
to the unpurchased or unredeemed portion of any Senior Discount Note purchased
or redeemed in part will be issued in the name of the Holder thereof upon
cancellation of the original Senior Discount Exchange Note. On and after the
purchase or redemption date unless the Holdings Issuers default in payment of
the purchase or redemption price, Accreted Value shall cease to accrete or
interest shall cease to accrue on Senior Discount Exchange Notes or portions
thereof purchased or called for redemption.
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HOLDINGS ISSUERS' STRUCTURE
Holdings is a holding company with no material operations of its own.
Accordingly, Holdings is dependent upon the distribution of the earnings of its
Subsidiaries, whether in the form of dividends, advances or payments on account
of intercompany obligations, to service its debt obligations. In addition, the
claims of the Holders of Senior Discount Exchange Notes are subject to the prior
payment of all liabilities (whether or not for borrowed money) and to any
preferred stock interest of such Subsidiaries. There can be no assurance that,
after providing for all prior claims, there would be sufficient assets available
from its Subsidiaries to satisfy the claims of the Holders of Senior Discount
Exchange Notes. CapCo II is a subsidiary corporation of Holdings with no
material operations of its own.
NO RECOURSE TO HOLDINGS PARTNERS; NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS,
EMPLOYEES AND STOCKHOLDERS
The Senior Discount Indenture under which the Senior Discount Notes have
been or will be issued provides that all obligations under the Senior Discount
Indenture and the Senior Discount Notes (and all notes issued in exchange
therefor) shall be expressly non-recourse to the partners of Holdings in their
capacities as such, and that, by purchasing the Senior Discount Notes, each
holder of Senior Discount Notes waives any liability of any partner of Holdings
under the Senior Discount Indenture and the Senior Discount Notes (and all notes
issued in exchange therefor). No director, officer, employee, incorporator or
stockholder of the Holdings Issuers or any Guarantor shall have any liability
for any obligations of the Holdings Issuers or the Guarantors under the Senior
Discount Exchange Notes, the Guarantees or the Senior Discount Indenture or any
claim based on, in respect of, or by reason of such obligation, or their
creation. Such waiver may not be effective to waive liabilities under the
federal securities laws and it is the view of the Commission that such a waiver
is against public policy.
CHANGE OF CONTROL
The Senior Discount Indenture provides that upon the occurrence of a Change
of Control, each Holder will have the right to require that the Holdings Issuers
purchase all or a portion of such Holder's Senior Discount Exchange Notes
pursuant to the offer described below (the 'Change of Control Offer'), at a
purchase price equal to 101% of the Accreted Value thereof, plus accrued
interest, if any, to, the date of purchase.
The Senior Discount Indenture provides that, prior to the mailing of the
notice referred to below, but in any event within 30 days following any Change
of Control, the Holdings Issuers covenant to (i) repay in full and terminate all
commitments under Indebtedness under the New Credit Facility and all other
Indebtedness of Holdings' Restricted Subsidiaries the terms of which require
repayment upon a Change of Control or offer to repay in full and terminate all
commitments under all Indebtedness under the New Credit Facility and all other
such Indebtedness of Holdings' Restricted Subsidiaries and to repay the
Indebtedness owed to each lender which has accepted such offer or (ii) obtain
the requisite consents under the New Credit Facility and all other Indebtedness
of Holdings' Restricted Subsidiaries to permit the repurchase of the Senior
Discount Exchange Notes as provided below. The Holdings Issuers shall first
comply with the covenant in the immediately preceding sentence before they shall
be required to repurchase Senior Discount Notes pursuant to the provisions
described below. The Holdings Issuers' failure to comply with the covenant
described in the second preceding sentence or the immediately succeeding
paragraph shall constitute an Event of Default described in clause (iii) (and
not in clause (ii)) under 'Events of Default' below.
Within 30 days following the date upon which the Change of Control
occurred, the Holdings Issuers must send, by first class mail, a notice to each
Holder, with a copy to the Senior Discount Trustee, which notice shall govern
the terms of the Change of Control Offer. Such notice shall state, among other
things, the purchase date, which must be no earlier than 30 days nor later than
60 days from the date such notice is mailed, other than as may be required by
law (the 'Change of Control Payment Date'). Holders electing to have a Senior
Discount Note purchased pursuant to a Change of Control Offer will be required
to surrender the Senior Discount Note, with the form entitled 'Option of Holder
to Elect Purchase' on the reverse of the Note completed, to the paying agent
('Paying Agent') at the address specified in the notice prior to the close of
business on the third Business Day prior to the Change of Control Payment Date.
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If a Change of Control Offer is made, there can be no assurance that the
Holdings Issuers will have available funds sufficient to pay the Change of
Control purchase price for all the Senior Discount Exchange Notes that might be
delivered by Holders seeking to accept the Change of Control Offer. In the event
that the Holdings Issuers are required to purchase outstanding Senior Discount
Exchange Notes pursuant to a Change of Control Offer, the Holdings Issuers
expect that they would seek third party financing to the extent they do not have
available funds to meet their purchase obligations. However, there can be no
assurance that the Holdings Issuers would be able to obtain such financing.
Neither the Board of Directors of either Holdings Issuer nor the Senior
Discount Trustee may waive the covenant relating to a Holder's right to
repurchase upon a Change of Control. Restrictions in the Senior Discount
Indenture described herein on the ability of the Holdings Issuers to incur
additional Indebtedness, to grant Liens on their property, to make Restricted
Payments and to make Asset Sales may also make more difficult or discourage a
takeover of Holdings, whether favored or opposed by the management of Holdings.
Consummation of any such transaction in certain circumstances may require
redemption or repurchase of the Senior Discount Exchange Notes, and there can be
no assurance that the Holdings Issuers or the acquiring party will have
sufficient financial resources to effect such redemption or repurchase. Such
restrictions and the restrictions on transactions with Affiliates may, in
certain circumstances, make more difficult or discourage any leveraged buyout of
Holdings or any of its Subsidiaries by the management of Holdings. While such
restrictions cover a wide variety of arrangements which have traditionally been
used to effect highly leveraged transactions, the Senior Discount Indenture may
not afford the Holders of Senior Discount Exchange Notes protection in all
circumstances from the adverse aspects of a highly leveraged transaction,
reorganization, restructuring, merger or similar transaction.
The Holdings Issuers will comply with the requirements of Rule 14e-1 under
the Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Senior Discount Exchange Notes pursuant to a Change of Control
Offer. To the extent that the provisions of any securities laws or regulations
conflict with the 'Change of Control' provisions of the Senior Discount
Indenture, the Holdings Issuers shall comply with the applicable securities laws
and regulations and shall not be deemed to have breached their obligations under
the 'Change of Control' provisions of the Senior Discount Indenture by virtue
thereof.
CERTAIN COVENANTS
The Senior Discount Indenture contains, among others, the following
covenants:
Limitations on Incurrence of Indebtedness and Issuance of Disqualified
Stock. Holdings will not, and will not cause or permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee
or otherwise become directly or indirectly liable, contingently or otherwise,
with respect to (collectively, 'incur' and collectively, an 'incurrence') any
Indebtedness (including Acquired Indebtedness) or issue any shares of
Disqualified Stock; provided, however, that Holdings and any Restricted
Subsidiary may incur Indebtedness (including Acquired Indebtedness) or issue
shares of Disqualified Stock if the Fixed Charge Coverage Ratio for Holdings'
and the Restricted Subsidiaries' most recently ended four full fiscal quarters
for which internal financial statements are available immediately preceding the
date on which such additional Indebtedness is incurred or such Disqualified
Stock is issued would have been at least 1.75 to 1.00 (determined on a pro forma
basis (including a pro forma application of the net proceeds therefrom), as if
the additional Indebtedness had been incurred, or the Disqualified Stock had
been issued, as the case may be, and the application of proceeds therefrom had
occurred at the beginning of such four-quarter period).
The foregoing limitations do not apply to: (a) the incurrence by Holdings
or its Restricted Subsidiaries of Indebtedness under the New Credit Facility and
the issuance and creation of letters of credit and banker's acceptances
thereunder (with letters of credit and banker's acceptances being deemed to have
a principal amount equal to the face amount thereof) up to an aggregate
principal amount of $650.0 million outstanding at any one time; (b) the
incurrence by the Holdings Issuers of Indebtedness represented by the Senior
Discount Notes; (c) Indebtedness of Holdings and its Restricted Subsidiaries
existing on the Issue Date (other than Indebtedness described in clauses (a) and
(b)) including the Senior Subordinated Notes and Holdings' guarantee thereof
(and any future guarantees thereof); (d) Indebtedness (including Capitalized
Lease Obligations) incurred by Holdings
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or any of its Restricted Subsidiaries, to finance the purchase, lease or
improvement of property (real or personal) or equipment (whether through the
direct purchase of assets or the Capital Stock of any Person owning such assets)
in an aggregate principal amount which, when aggregated with the principal
amount of all other Indebtedness then outstanding and incurred pursuant to this
clause (d) and including all Refinancing Indebtedness (as defined below)
incurred to refund, refinance or replace any other Indebtedness incurred
pursuant to this clause (d), does not exceed 15% of Total Assets at the time of
the respective incurrence; (e) Indebtedness incurred by Holdings or any of its
Restricted Subsidiaries constituting reimbursement obligations with respect to
letters of credit issued in the ordinary course of business, including without
limitation, letters of credit in respect of workers' compensation claims or
self-insurance, or other Indebtedness with respect to reimbursement type
obligations regarding workers' compensation claims; (f) Indebtedness arising
from agreements of Holdings or a Restricted Subsidiary providing for
indemnification, adjustment of purchase price or similar obligations, in each
case, incurred or assumed in connection with the disposition of any business,
assets or a Subsidiary, other than guarantees of Indebtedness incurred by any
Person acquiring all or any portion of such business, assets or a Subsidiary for
the purpose of financing such acquisition; (g) Indebtedness of Holdings to a
Restricted Subsidiary; provided that any such Indebtedness shall be subordinated
in right of payment to the Senior Discount Notes; provided further that any
subsequent issuance or transfer of any Capital Stock or any other event which
results in any such Restricted Subsidiary ceasing to be a Restricted Subsidiary
or any other subsequent transfer of any such Indebtedness (except to Holdings or
another Restricted Subsidiary) shall be deemed, in each case to be an incurrence
of such Indebtedness; (h) shares of preferred stock of a Restricted Subsidiary
issued to Holdings or another Restricted Subsidiary; provided that any
subsequent issuance or transfer of any Capital Stock or any other event which
results in any such Restricted Subsidiary ceasing to be a Restricted Subsidiary
or any other subsequent transfer of any such shares of preferred stock (except
to Holdings or another Restricted Subsidiary) shall be deemed, in each case to
be an issuance of such shares of preferred stock; (i) Indebtedness of a
Restricted Subsidiary to Holdings or another Restricted Subsidiary; provided
that any subsequent transfer of any such Indebtedness (except to Holdings or
another Restricted Subsidiary) shall be deemed, in each case to be an incurrence
of such Indebtedness; (j) Hedging Obligations that are incurred in the ordinary
course of business (1) for the purpose of fixing or hedging interest rate risk
with respect to any Indebtedness that is permitted by the terms of the Senior
Discount Indenture to be outstanding; (2) for the purpose of fixing or hedging
currency exchange rate risk with respect to any currency exchanges; or (3) for
the purpose of fixing or hedging commodity price risk with respect to any
commodity purchases; (k) obligations in respect of performance and surety bonds
and completion guarantees provided by Holdings or any Restricted Subsidiary in
the ordinary course of business; (l) Indebtedness of any Guarantor in respect of
such Guarantor's Guarantee; (m) Indebtedness or Disqualified Stock of Holdings
and any of its Restricted Subsidiaries not otherwise permitted hereunder in an
aggregate principal amount or liquidation preference, which when aggregated with
the principal amount and liquidation preference of all other Indebtedness and
Disqualified Stock then outstanding and incurred pursuant to this clause (m),
does not exceed $75.0 million at any one time outstanding; (n) (i) any guarantee
by Holdings or any of its Restricted Subsidiaries of Indebtedness or other
obligations of any of Holdings' Restricted Subsidiaries and any guarantee by a
Restricted Subsidiary that is a Guarantor of Indebtedness of Holdings so long as
the incurrence of such Indebtedness incurred by such Restricted Subsidiary or
Holdings, as the case may be, is permitted under the terms of the Senior
Discount Indenture and (ii) any Excluded Guarantee of a Restricted Subsidiary;
(o) the incurrence by Holdings or any of its Restricted Subsidiaries of
Indebtedness which serves to refund, refinance or restructure any Indebtedness
incurred as permitted under the first paragraph of this covenant, this clause
(o) and clauses (b) and (c) above and (q) below, or any Indebtedness issued to
so refund, refinance or restructure such Indebtedness including additional
Indebtedness incurred to pay premiums and fees in connection therewith (the
'Refinancing Indebtedness') prior to its respective maturity; provided, however,
that such Refinancing Indebtedness (i) has a Weighted Average Life to Maturity
at the time such Refinancing Indebtedness is incurred which is not less than the
remaining Weighted Average Life to Maturity of the Indebtedness being refunded
or refinanced, (ii) to the extent such Refinancing Indebtedness refinances
Indebtedness subordinated or pari passu to the Senior Discount Notes, such
Refinancing Indebtedness is subordinated or pari passu to the Senior Discount
Notes at least to the same extent as the Indebtedness being refinanced or
refunded and (iii) shall not include (x) Indebtedness of a Restricted Subsidiary
that is not a Guarantor that refinances Indebtedness of Holdings or (y)
Indebtedness of Holdings or a Restricted Subsidiary that refinances Indebtedness
of an Unrestricted Subsidiary; and provided further that subclauses (i) and (ii)
of this clause (o) will not apply to any refunding or refinancing of any
Indebtedness of a Restricted Subsidiary; (p) other Indebtedness in an amount not
greater than
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twice the amount of Permanent Qualified Equity Contributions after the Issue
Date at any one time outstanding; and (q) Indebtedness or Disqualified Stock of
Persons that are acquired by Holdings or any of its Restricted Subsidiaries or
merged into a Restricted Subsidiary in accordance with the terms of the Senior
Discount Indenture; provided that such Indebtedness or Disqualified Stock is not
incurred in contemplation of such acquisition or merger; and provided further
that after giving effect to such acquisition, either (i) Holdings would be
permitted to incur at least $1.00 of additional Indebtedness pursuant to the
Fixed Charge Coverage Ratio test set forth in the first sentence of this
covenant or (ii) the Fixed Charge Coverage Ratio is greater than immediately
prior to such acquisition.
For purposes of determining compliance with this covenant, in the event
that an item of Indebtedness meets the criteria of more than one of the
categories of permitted Indebtedness described in clauses (a) through (q) above
or is entitled to be incurred pursuant to the first paragraph of this covenant,
Holdings shall, in its sole discretion, classify such item of Indebtedness in
any manner that complies with this covenant and such item of Indebtedness will
be treated as having been incurred pursuant to only one of such clauses or
pursuant to the first paragraph hereof. Accrual of interest, the accretion of
accreted value and the payment of interest in the form of additional
Indebtedness will not be deemed to be an incurrence of Indebtedness for purposes
of this covenant.
Limitation on Restricted Payments. Holdings will not, and will not cause
or permit any of its Restricted Subsidiaries to, directly or indirectly: (i)
declare or pay any dividend or make any distribution on account of Holdings' or
any of its Restricted Subsidiaries' Equity Interests (other than (A) dividends
or distributions by Holdings payable in Equity Interests (other than
Disqualified Stock) of Holdings or (B) dividends or distributions by a
Restricted Subsidiary so long as, in the case of any dividend or distribution
payable on or in respect of any class or series of securities issued by a
Restricted Subsidiary other than a Wholly Owned Restricted Subsidiary, Holdings
or a Restricted Subsidiary receives at least its pro rata share of such dividend
or distribution in accordance with its Equity Interests in such class or series
of securities); (ii) purchase or otherwise acquire or retire for value any
Equity Interests of Holdings; (iii) make any principal payment on, or redeem,
repurchase, defease or otherwise acquire or retire for value in each case, prior
to any scheduled repayment, or maturity, any Subordinated Indebtedness (other
than (A) the payment, redemption, repurchase, defeasance, acquisition or
retirement of Subordinated Indebtedness in anticipation of satisfying a sinking
fund obligation, principal installment or final maturity, in any case due within
one year of the date of such payment, redemption, repurchase, defeasance,
acquisition or retirement and (B) Indebtedness permitted under clauses (g) and
(i) of the covenant described under 'Limitations on Incurrence of Indebtedness
and Issuance of Disqualified Stock'); or (iv) make any Restricted Investment
(all such payments and other actions set forth in clauses (i) through (iv) above
being collectively referred to as 'Restricted Payments'), unless, at the time of
such Restricted Payment: (a) no Default or Event of Default shall have occurred
and be continuing or would occur as a consequence thereof; (b) immediately after
giving effect to such transaction on a pro forma basis, Holdings could incur
$1.00 of additional Indebtedness under the provisions of the first paragraph of
'Limitations on Incurrence of Indebtedness and Issuance of Disqualified Stock';
and (c) such Restricted Payment, together with the aggregate amount of all other
Restricted Payments made by Holdings and its Restricted Subsidiaries after the
Issue Date (including Restricted Payments permitted by clauses (i), (ii) (with
respect to the repurchase, retirement or other acquisition of Retired Capital
Stock pursuant to clause (a) thereof and the payment of dividends on Retired
Capital Stock pursuant to clause (b) thereof), (v), (vi), (ix) and (x) of the
next succeeding paragraph, but excluding all other Restricted Payments permitted
by the next succeeding paragraph), is less than the sum of (i) 50% of the
cumulative Consolidated Net Income of Holdings for the period (taken as one
accounting period) from the first day after the Issue Date to the date of such
Restricted Payment (or, in the case such Consolidated Net Income for such period
is a deficit, minus 100% of such deficit), plus (ii) 100% of the aggregate net
proceeds, including cash and the fair market value of property other than cash
(as determined in good faith by the Holdings Issuers), received by Holdings
since the Issue Date from the issue or sale of Equity Interests of Holdings
(including Refunding Capital Stock (as defined) but excluding Disqualified
Stock), including such Equity Interests issued upon conversion of Indebtedness
or upon exercise of warrants or options, plus (iii) 100% of the aggregate amount
of contributions to the capital of Holdings since the Issue Date (other than
Excluded Contributions), plus (iv) 100% of the aggregate amount received in cash
and the fair market value of property other than cash (as determined in good
faith by Holdings) received from (A) the sale or other disposition (other than
to Holdings or a Restricted Subsidiary) of Restricted Investments made by
Holdings and its Restricted Subsidiaries or (B) the sale (other than to Holdings
or a Restricted Subsidiary) of the Capital Stock of an
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Unrestricted Subsidiary, plus (v) in case any Unrestricted Subsidiary has been
redesignated a Restricted Subsidiary or has been merged, consolidated or
amalgamated with or into, transfers or conveys assets to, or is liquidated into,
Holdings or a Restricted Subsidiary, the fair market value (as determined in
good faith by Holdings) of such Investment in such Unrestricted Subsidiary at
the time of such redesignation, combination or transfer (or of the assets
transferred or conveyed, as applicable), after deducting any Indebtedness
associated with the Unrestricted Subsidiary so designated or combined or with
the assets so transferred or conveyed.
The foregoing provisions will not prohibit: (i) the payment of any dividend
or distribution within 60 days after the date of declaration thereof, if at the
date of declaration such payment would have complied with the provisions of the
Senior Discount Indenture; (ii) (a) the repurchase, retirement or other
acquisition of any Equity Interests (the 'Retired Capital Stock') or
Subordinated Indebtedness of Holdings in exchange for, or out of the proceeds of
the substantially concurrent sale (other than to a Restricted Subsidiary) of,
Equity Interests of Holdings (other than any Disqualified Stock) or
contributions to the common equity capital of Holdings (the 'Refunding Capital
Stock'), and (b) the declaration and payment of dividends on the Retired Capital
Stock out of the proceeds of the substantially concurrent sale (other than to a
Restricted Subsidiary) of Refunding Capital Stock; (iii) the redemption,
repurchase or other acquisition or retirement of Subordinated Indebtedness of
Holdings made by exchange for, or out of the proceeds of the substantially
concurrent sale of, new Indebtedness of Holdings so long as (A) the principal
amount of such new Indebtedness does not exceed the principal amount of and
accrued and unpaid interest on the Subordinated Indebtedness being so redeemed,
repurchased, acquired or retired for value (plus the amount of any premium
required to be paid under the terms of the instrument governing the Subordinated
Indebtedness being so redeemed, repurchased, acquired or retired), (B) such
Indebtedness is subordinated to the Senior Discount Notes at least to the same
extent as such Subordinated Indebtedness so purchased, exchanged, redeemed,
repurchased, acquired or retired for value, (C) such Indebtedness has a final
scheduled maturity date equal to or later than the final scheduled maturity date
of the Subordinated Indebtedness being so redeemed, repurchased, acquired or
retired and (D) such Indebtedness has a Weighted Average Life to Maturity equal
to or greater than the remaining Weighted Average Life to Maturity of the
Subordinated Indebtedness being so redeemed, repurchased, acquired or retired;
(iv) the repurchase, retirement or other acquisition for value (or a dividend or
distribution to fund any such repurchase, retirement or other acquisition) of
Equity Interests of Holdings or Investor LP held by any future, present or
former employee, director or consultant of Holdings or any Subsidiary of
Holdings pursuant to any management equity plan or stock option plan or any
other management or employee benefit plan or agreement; provided, however, that
the aggregate amounts paid under this clause (iv) does not exceed in any
calendar year $5.0 million (with unused amounts in any calendar year being
carried over to succeeding calendar years subject to a maximum (without giving
effect to the following proviso) of $10.0 million in any calendar year);
provided further, that such amount in any calendar year may be increased by an
amount not to exceed (i) the cash proceeds from the sale of Equity Interests of
Holdings (or of Investor LP which are contributed to Holdings) to members of
management, directors or consultants of Holdings and its Subsidiaries that
occurs after the Issue Date (provided that such proceeds have not been included
with respect to determining whether a previous Restricted Payment was permitted
pursuant to the first paragraph of this covenant) plus (ii) the cash proceeds of
key man life insurance policies received by Holdings and its Restricted
Subsidiaries after the Issue Date; (v) the declaration and payment of dividends
or distributions to holders of any class or series of Disqualified Stock of
Holdings or any of its Restricted Subsidiaries issued or incurred in accordance
with the covenant entitled 'Limitation on Incurrence of Indebtedness and
Issuance of Disqualified Stock'; (vi) the declaration and payment of dividends
to holders of any class or series of Designated Preferred Stock; provided,
however, that for the most recently ended four full fiscal quarters for which
internal financial statements are available preceding the date of declaration of
any such dividend or distribution, after giving effect to such dividend or
distribution as a Fixed Charge on a pro forma basis, Holdings and its Restricted
Subsidiaries would have had a Fixed Charge Coverage Ratio of at least 1.75 to
1.00; (vii) Investments in Unrestricted Subsidiaries having an aggregate fair
market value, taken together with all other Investments made pursuant to this
clause (vii) that are at that time outstanding, not to exceed $15.0 million at
the time of such Investment (with the fair market value of each Investment being
measured at the time made and without giving effect to subsequent changes in
value); (viii) repurchases of (or a dividend or distribution to fund repurchases
of) Equity Interests of Holdings or Investor LP deemed to occur upon exercise of
stock options if such Equity Interests represent a portion of the exercise price
of such options; (ix) the payment of dividends on Holding's Common Stock
following the first public offering of Common Stock of Holdings after the Issue
Date
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of up to 6% per annum of the net proceeds received by Holdings in such public
offering; (x) the repurchase, retirement or other acquisition for value after
the first anniversary of the Issue Date (or a dividend or distribution to fund
the repurchase, retirement or other acquisition of) of Equity Interests of
Holdings or Investor LP in existence on the Issue Date and which are not held by
Blackstone or any of their Affiliates or the Management Group on the Issue Date
(including any Equity Interests issued in respect of such Equity Interests as a
result of a stock split, recapitalization, merger, combination, consolidation or
otherwise, but excluding any management equity plan or stock option plan or
similar agreement), provided that (A) the aggregate amounts paid under this
clause (x) shall not exceed (I) $15.0 million on or prior to the second
anniversary of the Issue Date or (II) $30.0 million at any time after the second
anniversary of the Issue Date and (B) after giving effect thereto, Holdings
would be permitted to incur at least $1.00 of additional Indebtedness pursuant
to the Fixed Charge Coverage Ratio test set forth in the first sentence of the
covenant described under 'Limitations on Incurrence of Indebtedness and Issuance
of Disqualified Stock'; (xi) Investments that are made with Excluded
Contributions; (xii) other Restricted Payments in an aggregate amount not to
exceed $15.0 million; (xiii) the payment of any dividend or distribution on
Equity Interests of Holdings to the extent necessary to permit direct or
indirect beneficial owners of such Equity Interests to receive tax distributions
in an amount equal to the taxable income of Holdings allocated to a partner
multiplied by the highest combined federal and state income tax rate (including,
to the extent applicable, alternative minimum tax) solely as a result of
Holdings (and any intermediate entity through which such holder owns such Equity
Interests) being a partnership or similar pass-through entity for federal income
tax purposes ('Permitted Tax Distributions'); and (xiv) Restricted Payments made
on the Issue Date contemplated by the Recapitalization Agreement; provided,
however, that at the time of, and after giving effect to, any Restricted Payment
permitted under clauses (vii), (ix), (x) and (xii), no Default or Event of
Default shall have occurred and be continuing or would occur as a consequence
thereof; and provided further that for purposes of determining the aggregate
amount expended for Restricted Payments in accordance with clause (c) of the
immediately preceding paragraph, only the amounts expended under clauses (i),
(ii) (with respect to the repurchase, retirement or other acquisition of Retired
Capital Stock pursuant to clause (a) thereof and the payment of dividends on
Retired Capital Stock pursuant to clause (b) thereof), (v), (vi), (ix) and (x),
shall be included.
As of the Issue Date, all of Holdings' Subsidiaries were Restricted
Subsidiaries. Holdings will not permit any Unrestricted Subsidiary to become a
Restricted Subsidiary except pursuant to the second to last sentence of the
definition of 'Unrestricted Subsidiary.' For purposes of designating any
Restricted Subsidiary as an Unrestricted Subsidiary, all outstanding Investments
by Holdings and its Restricted Subsidiaries (except to the extent repaid) in the
Subsidiary so designated will be deemed to be Restricted Payments in an amount
determined as set forth in the last sentence of the definition of 'Investments.'
Such designation is only permitted if a Restricted Payment in such amount would
be permitted at such time (whether pursuant to the first paragraph of this
covenant or under clause (vii), (xi) or (xii)) and if such Subsidiary otherwise
meets the definition of an Unrestricted Subsidiary. Unrestricted Subsidiaries
will not be subject to any of the restrictive covenants set forth in the Senior
Discount Indenture.
Limitation on Asset Sales. Holdings will not, and will not cause or permit
any of its Restricted Subsidiaries to, cause, make or suffer to exist an Asset
Sale, unless (x) Holdings or its Restricted Subsidiary, as the case may be,
receives consideration at the time of such Asset Sale at least equal to the fair
market value (as determined in good faith by Holdings) of the assets sold or
otherwise disposed of and (y) at least 75% of the consideration therefor
received by Holdings or such Restricted Subsidiary, as the case may be, is in
the form of cash or Cash Equivalents; provided that the amount of (a) any
liabilities (as shown on Holdings' or such Restricted Subsidiary's most recent
balance sheet or in the notes thereto) of Holdings or any Restricted Subsidiary
(other than liabilities that are by their terms subordinated to the Senior
Discount Notes) that are assumed by the transferee of any such assets without
recourse to Holdings or any of the Restricted Subsidiaries, (b) any notes or
other obligations received by Holdings or such Restricted Subsidiary from such
transferee that are converted by Holdings or such Restricted Subsidiary into
cash (to the extent of the cash received) within 180 days following the closing
of such Asset Sale, (c) any Designated Noncash Consideration received by
Holdings or any of its Restricted Subsidiaries in such Asset Sale having an
aggregate fair market value, taken together with all other Designated Noncash
Consideration received pursuant to this clause (c) that is at that time
outstanding, not to exceed 15% of Total Assets at the time of the receipt of
such Designated Noncash Consideration (with the fair market value of each item
of Designated Noncash Consideration being measured at the time received and
without
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giving effect to subsequent changes in value) and (d) any assets received in
exchange for assets related to a Similar Business of comparable market value in
the good faith determination of, the Board of Directors of Holdings, shall be
deemed to be cash for purposes of this provision.
Within 365 days after Holdings' or any Restricted Subsidiary's receipt of
the Net Proceeds of any Asset Sale, Holdings or such Restricted Subsidiary may
apply the Net Proceeds from such Asset Sale, at its option, (i) to permanently
reduce Obligations under the New Credit Facility (and to correspondingly reduce
commitments with respect thereto) or other Indebtedness of a Restricted
Subsidiary or Pari Passu Indebtedness (provided that if Holdings shall so reduce
Obligations under Pari Passu Indebtedness, it will equally and ratably reduce
Obligations under the Senior Discount Notes if the Senior Discount Notes are
then redeemable or, if the Senior Discount Notes may not be then redeemed,
Holdings shall make an offer (in accordance with the procedures set forth below
for an Asset Sale Offer) to all Holders to purchase at 100% of the Accreted
Value thereof the amount of Senior Discount Notes that would otherwise be
redeemed), (ii) to an investment in any one or more businesses, capital
expenditures or acquisitions of other assets in each case, used or useful in a
Similar Business and/or (iii) to make an investment in properties or assets that
replace the properties and assets that are the subject of such Asset Sale.
Pending the final application of any such Net Proceeds, Holdings or such
Restricted Subsidiary may temporarily reduce Indebtedness under a revolving
credit facility, if any, or otherwise invest such Net Proceeds in Cash
Equivalents or Investment Grade Securities. The Senior Discount Indenture
provides that any Net Proceeds from the Asset Sale that are not invested as
provided and within the time period set forth in the first sentence of this
paragraph (it being understood that any portion of such Net Proceeds used to
make an offer to purchase Senior Discount Notes, as described in clause (i)
above, shall be deemed to have been invested whether or not such offer is
accepted) will be deemed to constitute 'Excess Proceeds.' When the aggregate
amount of Excess Proceeds exceeds $15.0 million, the Holdings Issuers shall make
an offer to all Holders of Senior Discount Notes (an 'Asset Sale Offer') to
purchase the maximum principal amount at maturity of Senior Discount Notes, that
is an integral multiple of $1,000, that may be purchased out of the Excess
Proceeds at an offer price in cash in an amount equal to 100% of the Accreted
Value thereof, plus accrued and unpaid interest, if any, to, the date fixed for
the closing of such offer, in accordance with the procedures set forth in the
Senior Discount Indenture. The Holdings Issuers will commence an Asset Sale
Offer with respect to Excess Proceeds within ten Business Days after the date
that Excess Proceeds exceeds $15.0 million by mailing the notice required
pursuant to the terms of the Senior Discount Indenture, with a copy to the
Trustee. To the extent that the aggregate Accreted Value of Senior Discount
Notes tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds,
Holdings may use any remaining Excess Proceeds for general corporate or
partnership purposes. If the Accreted Value of Senior Discount Notes surrendered
by Holders thereof exceeds the amount of Excess Proceeds, the Senior Discount
Trustee shall select the Senior Discount Notes to be purchased in the manner
described under the caption 'Selection and Notice of Redemption' above. Upon
completion of any such Asset Sale Offer, the amount of Excess Proceeds shall be
reset at zero.
The Holdings Issuers will comply with the requirements of Rule 14e-1 under
the Exchange Act and any other securities laws and regulations thereunder to the
extent such laws or regulations are applicable in connection with the repurchase
of the Senior Discount Notes pursuant to an Asset Sale Offer. To the extent that
the provisions of any securities laws or regulations conflict with the
provisions of the Senior Discount Indenture, the Holdings Issuers will comply
with the applicable securities laws and regulations and shall not be deemed to
have breached its obligations described in the Senior Discount Indenture by
virtue thereof.
Limitation on Dividend and Other Payment Restrictions Affecting
Subsidiaries. Holdings will not, and will not cause or permit any of its
Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or
suffer to exist or become effective any consensual encumbrance or consensual
restriction on the ability of any Restricted Subsidiary to: (a)(i) pay dividends
or make any other distributions to Holdings or any of its Restricted
Subsidiaries (1) on their Capital Stock or (2) with respect to any other
interest or participation in, or measured by, its profits, or (ii) pay any
Indebtedness owed to Holdings or any of its Restricted Subsidiaries; (b) make
loans or advances to Holdings or any of its Restricted Subsidiaries; or (c)
sell, lease or transfer any of its properties or assets to Holdings or any of
its Restricted Subsidiaries; except (in each case) for such encumbrances or
restrictions existing under or by reason of: (1) contractual encumbrances or
restrictions in effect on the Issue Date, including pursuant to the New Credit
Facility and its related documentation and the Senior Subordinated Indenture;
(2) the Senior Discount Indenture and the Senior Discount Notes; (3) purchase
money obligations for
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property acquired in the ordinary course of business that impose restrictions of
the nature discussed in clause (c) above on the property so acquired; (4)
applicable law or any applicable rule, regulation or order; (5) any agreement or
other instrument of a Person acquired by Holdings or any Restricted Subsidiary
in existence at the time of such acquisition (but not created in contemplation
thereof), which encumbrance or restriction is not applicable to any Person, or
the properties or assets of any Person, other than the Person, or the property
or assets of the Person, so acquired; (6) contracts for the sale of assets,
including, without limitation, customary restrictions with respect to a
Subsidiary pursuant to an agreement that has been entered into for the sale or
disposition of all or substantially all of the Capital Stock or assets of such
Subsidiary; (7) secured Indebtedness otherwise permitted to be incurred pursuant
to the covenants described under 'Limitations on Incurrence of Indebtedness and
Issuance of Disqualified Stock' and 'Limitation on Liens' that limit the right
of the debtor to dispose of the assets securing such Indebtedness; (8)
restrictions on cash or other deposits or net worth imposed by customers under
contracts entered into in the ordinary course of business; (9) other
Indebtedness of Foreign Subsidiaries permitted to be incurred subsequent to the
Issue Date pursuant to the provisions of the covenant described under
'Limitations on Incurrence of Indebtedness and Issuance of Disqualified Stock';
(10) customary provisions in joint venture agreements and other similar
agreements entered into in the ordinary course of business; (11) customary
provisions contained in leases and other agreements entered into in the ordinary
course of business; (12) any encumbrances or restrictions of the type referred
to in clauses (a), (b) and (c) above imposed by any amendments, modifications,
restatements, renewals, increases, supplements, refundings, replacements or
refinancings of the contracts, instruments or obligations referred to in clauses
(1) through (11) above, provided that such amendments, modifications,
restatements, renewals, increases, supplements, refundings, replacements or
refinancings are, in the good faith judgment of the Board of Directors of
Holdings, no more restrictive with respect to such dividend and other payment
restrictions than those contained in the dividend or other payment restrictions
prior to such amendment, modification, restatement, renewal, increase,
supplement, refunding, replacement or refinancing; (13) any encumbrances or
restrictions that are no more restrictive than those contained in the New Credit
Facility as in effect on the Issue Date or (14) which will not in the aggregate
cause Holdings not to have the funds necessary to pay the principal of, premium,
if any, or interest on, the Senior Discount Notes.
Limitation on Liens. Holdings will not directly or indirectly create,
incur, assume or suffer to exist any Lien (other than a Permitted Lien) that
secures any Indebtedness of Holdings on any asset or property of Holdings, or
any income or profits therefrom, or assign or convey any right to receive income
therefrom, unless the Senior Discount Notes are equally and ratably secured with
the obligations so secured or until such time as such obligations are no longer
secured by a Lien.
The Senior Subordinated Indenture provides that no Guarantor will directly
or indirectly create, incur, assume or suffer to exist any Lien (other than a
Permitted Lien) that secures any guarantee of Indebtedness of Holdings by such
Guarantor on any asset or property of such Guarantor or any income or profits
therefrom, or assign or convey any right to receive income therefrom, unless the
Guarantee of such Guarantor is equally and ratably secured with the obligations
so secured or until such time as such guarantee is no longer secured by a Lien.
Merger, Consolidation and Sale of Assets. Holdings may not consolidate or
merge with or into or wind up into (whether or not Holdings is the surviving
entity), or sell, assign, transfer, lease, convey or otherwise dispose of all or
substantially all of its properties or assets in one or more related
transactions, to any Person unless (i) Holdings is the surviving entity or the
Person formed by or surviving any such consolidation or merger (if other than
Holdings) or to which such sale, assignment, transfer, lease, conveyance or
other disposition will have been made is a corporation, partnership or limited
liability company organized or existing under the laws of the United States, any
state thereof, the District of Columbia, or any territory thereof (Holdings or
such Person, as the case may be, being herein called the 'Successor Company');
(ii) the Successor Company (if other than Holdings or CapCo II) expressly
assumes all the obligations of Holdings under the Senior Discount Indenture and
the Senior Discount Notes pursuant to a supplemental indenture or other
documents or instruments in form reasonably satisfactory to the Senior Discount
Trustee; (iii) immediately after such transaction no Default or Event of Default
shall have occurred and be continuing; (iv) immediately after giving pro forma
effect to such transaction, as if such transaction had occurred at the beginning
of the applicable four-quarter period, either (A) the Successor Company (if
other than CapCo II) would be permitted to incur at least $1.00 of additional
Indebtedness pursuant
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to the Fixed Charge Coverage Ratio test set forth in the first sentence of the
covenant described under 'Limitations on Incurrence of Indebtedness and Issuance
of Disqualified Stock' or (B) the Fixed Charge Coverage Ratio for the Successor
Company (if other than CapCo II) and its Restricted Subsidiaries would be
greater than such ratio for Holdings and its Restricted Subsidiaries immediately
prior to such transaction; and (v) Holdings shall have delivered to the Senior
Discount Trustee an Officers' Certificate and an opinion of counsel, each
stating that such consolidation, merger or transfer and such supplemental
indenture (if any) comply with the Senior Discount Indenture. The Successor
Company will succeed to, and be substituted for, Holdings under the Senior
Discount Indenture and the Senior Discount Notes. Notwithstanding the foregoing
clauses (iii) and (iv), (a) any Restricted Subsidiary may consolidate with,
merge into or transfer all or part of its properties and assets to Holdings or
to another Restricted Subsidiary and (b) Holdings may merge with or transfer all
of its properties and assets to an Affiliate incorporated or formed solely for
the purpose of either reincorporating or reforming Holdings in another State of
the United States or changing the legal structure of Holdings to a corporation
so long as the amount of Indebtedness of Holdings and its Restricted
Subsidiaries is not increased thereby (it being understood that after the
transfer of such property and assets for the purpose of changing legal structure
to a corporation, Holdings may dissolve).
Each Guarantor, if any, shall not, and Holdings will not permit a Guarantor
to, consolidate or merge with or into or wind up into (whether or not such
Guarantor is the surviving corporation), or sell, assign, transfer, lease,
convey or otherwise dispose of all or substantially all of its properties or
assets in one or more related transactions to, any Person unless (i) such
Guarantor is the surviving corporation or the Person formed by or surviving any
such consolidation or merger (if other than such Guarantor) or to which such
sale, assignment, transfer, lease, conveyance or other disposition will have
been made is a corporation, partnership or limited liability company organized
or existing under the laws of the United States, any state thereof, the District
of Columbia, or any territory thereof (such Guarantor or such Person, as the
case may be, being herein called the 'Successor Guarantor'); (ii) the Successor
Guarantor (if other than such Guarantor) expressly assumes all the obligations
of such Guarantor under the Senior Discount Indenture and such Guarantor's
Guarantee pursuant to a supplemental indenture or other documents or instruments
in form reasonably satisfactory to the Senior Discount Trustee; (iii)
immediately after such transaction no Default or Event of Default shall have
occurred and be continuing; and (iv) the Guarantor shall have delivered or
caused to be delivered to the Senior Discount Trustee an Officers' Certificate
and an opinion of counsel, each stating that such consolidation, merger or
transfer and such supplemental indenture (if any) comply with the Senior
Discount Indenture. The Successor Guarantor will succeed to, and be substituted
for, such Guarantor under the Senior Discount Indenture and such Guarantor's
Guarantee.
Limitations on Transactions with Affiliates. (a) Holdings will not, and
will not cause or permit any of its Restricted Subsidiaries to, make any payment
to, or sell, lease, transfer or otherwise dispose of any of its properties or
assets to, or purchase any property or assets from, or enter into or make or
amend any transaction, contract, agreement, understanding, loan, advance or
guarantee with, or for the benefit of, any Affiliate (each of the foregoing, an
'Affiliate Transaction') involving aggregate consideration in excess of $5.0
million, unless (a) such Affiliate Transaction is on terms that are not
materially less favorable to Holdings or the relevant Restricted Subsidiary than
those that would have been obtained in a comparable transaction by Holdings or
such Restricted Subsidiary with an unrelated Person and (b) with respect to any
Affiliate Transaction or series of related Affiliate Transactions involving
aggregate consideration in excess of $10.0 million, Holdings delivers to the
Senior Discount Trustee a resolution adopted by the majority of the Board of
Directors of Holdings, approving such Affiliate Transaction and set forth in an
Officers' Certificate certifying that such Affiliate Transaction complies with
clause (a) above.
The foregoing provisions do not apply to the following: (i) transactions
between or among Holdings and/or any of its Restricted Subsidiaries; (ii)
Restricted Payments permitted by the provisions of the Senior Discount Indenture
described above under the covenant 'Limitation on Restricted Payments'; (iii)
the payment of annual management, consulting, monitoring and advisory fees and
related expenses to Blackstone, Graham Packaging Corporation and their
respective Affiliates; (iv) the payment of reasonable and customary fees paid
to, and indemnity provided on behalf of, officers, directors, employees or
consultants of Holdings or any Restricted Subsidiary; (v) payments by Holdings
or any of its Restricted Subsidiaries to Blackstone and its Affiliates made for
any financial advisory, financing, underwriting or placement services or in
respect of other investment
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banking activities, including, without limitation, in connection with
acquisitions or divestitures which payments are approved by, the majority of the
Board of Directors of Holdings, in good faith; (vi) transactions in which
Holdings or any of its Restricted Subsidiaries, as the case may be, delivers to
the Senior Discount Trustee a letter from an Independent Financial Advisor
stating that such transaction is fair to Holdings or such Restricted Subsidiary
from a financial point of view or meets the requirements of clause (a) of the
preceding paragraph; (vii) payments or loans to employees or consultants which
are approved by a majority of the Board of Directors of Holdings, in good faith;
(viii) any agreement as in effect as of the Issue Date or any amendment thereto
(so long as any such amendment is not disadvantageous to the holders of the
Senior Discount Notes in any material respect) or any transaction contemplated
thereby; (ix) the existence of, or the performance by Holdings or any Restricted
Subsidiary of its obligations under the terms of, the Recapitalization
Agreement, or agreement contemplated thereunder (including any registration
rights agreement or purchase agreement related thereto) to which it is a party
as of the Issue Date and any similar agreements which it may enter into
thereafter; provided, however, that the existence of, or the performance by
Holdings or any Restricted Subsidiary of obligations under any future amendment
to any such existing agreement or under any similar agreement entered into after
the Issue Date shall only be permitted by this clause (ix) to the extent that
the terms of any such amendment or new agreement are not otherwise
disadvantageous to the Holders of the Senior Discount Notes in any material
respect; (x) the payment of all fees, expenses, bonuses and awards related to
the transactions contemplated by the Recapitalization Agreement, including fees
to Blackstone; and (xi) transactions with customers, clients, suppliers, or
purchasers or sellers of goods or services, in each case in the ordinary course
of business and otherwise in compliance with the terms of the Senior Discount
Indenture which are fair to Holdings and its Restricted Subsidiaries, in the
reasonable determination of the majority of the Board of Directors of Holdings,
or are on terms at least as favorable as might reasonably have been obtained at
such time from an unaffiliated party.
Limitations on Guarantees of Indebtedness by Restricted Subsidiaries. (a)
Holdings will not permit any Restricted Subsidiary to guarantee the payment of
any Indebtedness of Holdings unless such Restricted Subsidiary simultaneously
executes and delivers a supplemental indenture to the Senior Discount Indenture
providing for a guarantee of payment of the Senior Discount Notes by such
Restricted Subsidiary, except that if such Indebtedness is by its express terms
subordinated in right of payment to the Senior Discount Notes, any such
guarantee of such Restricted Subsidiary with respect to such Indebtedness shall
be subordinated in right of payment to such Restricted Subsidiary's Guarantee
with respect to the Senior Discount Notes substantially to the same extent as
such Indebtedness is subordinated to the Senior Discount Notes; provided that
this paragraph (a) shall not be applicable to any guarantee by any Restricted
Subsidiary (x) that (A) existed at the time such Person became a Restricted
Subsidiary of Holdings and (B) was not incurred in connection with, or in
contemplation of, such Person becoming a Restricted Subsidiary of Holdings or
(y) that guarantees the payment of Obligations of Holdings under the New Credit
Facility or any other bank facility which is Pari Passu Indebtedness of Holdings
and any refunding, refinancing or replacement thereof, in whole or in part,
provided that such refunding, refinancing or replacement thereof constitutes
Pari Passu Indebtedness of Holdings and is not incurred pursuant to a registered
offering of securities under the Securities Act or a private placement of
securities (including under Rule 144A) pursuant to an exemption from the
registration requirements of the Securities Act (other than Securities issued
pursuant to a bank or similar credit facility (including the New Credit
Facility)), which private placement provides for registration rights under the
Securities Act (any guarantee excluded by operations of this clause (y) being an
'Excluded Guarantee').
(b) Notwithstanding the foregoing and the other provisions of the Senior
Discount Indenture, any Guarantee by a Restricted Subsidiary of the Senior
Discount Notes shall provide by its terms that it shall be automatically and
unconditionally released and discharged upon (i) any sale, exchange or transfer
to any person not an Affiliate of Holdings, of all of Holdings' Capital Stock
in, or all or substantially all of the assets of, such Restricted Subsidiary
(which sale, exchange or transfer is not prohibited by the Senior Discount
Indenture) or (ii) the release or discharge of the guarantee which resulted in
the creation of such Guarantee, except a discharge or release by or a result of
payment under such Guarantee.
Reports to Holders. The Holdings Issuers will deliver to the Senior
Discount Trustee within 15 days after the filing of the same with the
Commission, copies of the quarterly and annual reports and of the information,
documents and other reports, if any, which the Holdings Issuers are required to
file with the Commission pursuant to Section 13 or 15(d) of the Exchange Act.
The Senior Discount Indenture further provides that,
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notwithstanding that the Holdings Issuers may not be subject to the reporting
requirements of Section 13 or 15(d) of the Exchange Act or otherwise report on
an annual and quarterly basis on forms provided for such annual and quarterly
reporting pursuant to rules and regulations promulgated by the Securities and
Exchange Commission (the 'Commission'), the Senior Discount Indenture will
require the Holdings Issuers to file with the Commission (and provide the Senior
Discount Trustee and Holders with copies thereof, without cost to each Holder,
within 15 days after it files them with the Commission), (a) within 90 days
after the end of each fiscal year, annual reports on Form 10-K (or any successor
or comparable form) containing the information required to be contained therein
(or required in such successor or comparable form); (b) within 45 days after the
end of each of the first three fiscal quarters of each fiscal year, reports on
Form 10-Q (or any successor or comparable form); (c) promptly from time to time
after the occurrence of an event required to be therein reported, such other
reports on Form 8-K (or any successor or comparable form); and (d) any other
information, documents and other reports which the Holdings Issuers would be
required to file with the Commission if they were subject to Section 13 or 15(d)
of the Exchange Act; provided, however, that the Holdings Issuers shall not be
so obligated to file such reports with the Commission if the Commission does not
permit such filing, in which event the Holdings Issuers will make available such
information to prospective purchasers of Senior Discount Notes, in addition to
providing such information to the Senior Discount Trustee and the Holders, in
each case within 15 days after the time the Holdings Issuers would be required
to file such information with the Commission, if they were subject to Sections
13 or 15(d) of the Exchange Act. Notwithstanding the foregoing, such
requirements shall be deemed satisfied (x) prior to April 30, 1998, if the
Holdings Issuers deliver to the Senior Discount Trustee and the holders of the
Senior Discount Notes on or prior to such date copies of the audited financial
statements of the Holdings Issuers and (y) prior to May 31, 1998, by filing with
the Commission and delivering to the Senior Discount Trustee and the holders of
the Senior Discount Notes on or prior to such date a registration statement
under the Securities Act that contains the information that would be required in
a Form 10-K for the Holdings Issuers for the year ended December 31, 1997 and a
Form 10-Q for the Holdings Issuers for the quarter ended March 31, 1998. The
Holdings Issuers will also comply with the other provisions of TIA Section
314(a).
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EVENTS OF DEFAULT
The following events are defined in the Senior Discount Indenture as
'Events of Default':
(i) the failure to pay interest on any Senior Discount Notes when the
same becomes due and payable and the default continues for a period of 30
days;
(ii) the failure to pay the Accreted Value of or the principal on any
Senior Discount Notes, when the same becomes due and payable, at maturity,
upon redemption or otherwise (including the failure to make a payment to
purchase Senior Discount Notes tendered pursuant to a Change of Control
Offer or an Asset Sale Offer which has actually been made);
(iii) a default in the observance or performance of any other covenant
or agreement contained in the Senior Discount Indenture which default
continues for a period of 60 days after Holdings receives written notice
specifying the default (and demanding that such default be remedied) from
the Senior Discount Trustee or the Holders of at least 25% of the
outstanding principal amount of the Senior Discount Notes (except in the
case of a default with respect to the 'Merger, Consolidation and Sale of
Assets' covenant, which will constitute an Event of Default with such
notice requirement but without such passage of time requirement);
(iv) the failure to pay at final maturity (giving effect to any
applicable grace periods and any extensions thereof) the principal amount
of any Indebtedness of Holdings or any Significant Restricted Subsidiary,
or the acceleration of the final stated maturity of any such Indebtedness
if the aggregate principal amount of such Indebtedness, together with the
principal amount of any other such Indebtedness in default for failure to
pay principal at final maturity or which has been accelerated, aggregates
$20.0 million or more at any time;
(v) one or more judgments in an aggregate amount in excess of $20.0
million shall have been rendered against Holdings or any Significant
Restricted Subsidiary and such judgments remain undischarged, unpaid or
unstayed for a period of 60 days after such judgment or judgments become
final and non-appealable, and in the event such judgment is covered by
insurance, an enforcement proceeding has been commenced by any creditor
upon such judgment or decree which is not promptly stayed;
(vi) any Guarantee by a Significant Restricted Subsidiary shall become
null or void or unenforceable (other than in accordance with the terms of
the Senior Discount Indenture) or any such Guarantor shall deny its
obligations under its Guarantee; or
(vii) certain events of bankruptcy affecting Holdings or any of its
Significant Restricted Subsidiaries.
If an Event of Default (other than an Event of Default specified in clause (vii)
with respect to Holdings) shall occur and be continuing, the Senior Discount
Trustee or the Holders of at least 25% in principal amount of outstanding Senior
Discount Notes may declare the Accreted Value of and accrued interest, if any,
on all the Senior Discount Notes to be due and payable by notice in writing to
Holdings and the Senior Discount Trustee specifying the respective Event of
Default and that it is a 'notice of acceleration' (the 'Acceleration Notice'),
and the same (i) shall become immediately due and payable or (ii) if there are
any amounts outstanding under the New Credit Facility, shall become immediately
due and payable upon the first to occur of an acceleration under the New Credit
Facility or 5 Business Days after receipt by Holdings and the Agent under the
New Credit Facility of such Acceleration Notice, but only if such Event of
Default is then continuing. If an Event of Default specified in clause (vii)
with respect to Holdings occurs, then the Accreted Value of and any accrued
interest on the Senior Discount Notes shall ipso facto become immediately due
and payable without any further action, by the Senior Discount Trustee or the
Holders.
The Senior Discount Indenture provides that, at any time after a
declaration of acceleration with respect to the Senior Discount Notes as
described in the preceding paragraph, the Holders of a majority in principal
amount at maturity of the Senior Discount Notes may rescind and cancel such
declaration and its consequences (i) if the rescission would not conflict with
any judgment or decree, (ii) if all existing Events of Default have been cured
or waived except nonpayment of Accreted Value or interest that has become due
solely because of the acceleration, (iii) to the extent the payment of such
interest is lawful, interest on overdue installments of interest
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and overdue principal, which has become due otherwise than by such declaration
of acceleration, has been paid and (iv) if Holdings has paid the Senior Discount
Trustee its reasonable compensation and reimbursed the Senior Discount Trustee
for its expenses, disbursements and advances. No such rescission shall affect
any subsequent Default or impair any right consequent thereto.
The Holders of a majority in principal amount at maturity of the Senior
Discount Notes may waive any existing Default or Event of Default under the
Senior Discount Indenture, and its consequences, except a default in the payment
of the Accreted Value of or interest on any Senior Discount Notes.
Holders of the Senior Discount Notes may not enforce the Senior Discount
Indenture or the Senior Discount Notes except as provided in the Senior Discount
Indenture and under the TIA. Subject to the provisions of the Senior Discount
Indenture relating to the duties of the Senior Discount Trustee, the Senior
Discount Trustee is under no obligation to exercise any of its rights or powers
under the Senior Discount Indenture at the request, order or direction of any of
the Holders, unless such Holders have offered to the Senior Discount Trustee
reasonable indemnity. Subject to all provisions of the Senior Discount Indenture
and applicable law, the Holders of a majority in aggregate principal amount at
maturity of the then outstanding Senior Discount Notes have the right to direct
the time, method and place of conducting any proceeding for any remedy available
to the Senior Discount Trustee or exercising any trust or power conferred on the
Senior Discount Trustee.
Under the Senior Discount Indenture, Holdings is required to provide an
Officers' Certificate to the Senior Discount Trustee promptly upon Holdings
obtaining knowledge of any Default or Event of Default (provided that such
certification shall be provided at least annually whether or not Holdings knows
of any Default or Event of Default) that has occurred and, if applicable,
describe such Default or Event of Default and the status thereof.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Holdings Issuers may, at their option and at any time, elect to have
their obligations discharged with respect to the outstanding Senior Discount
Notes ('Legal Defeasance'). Such Legal Defeasance means that the Holdings
Issuers shall be deemed to have paid and discharged the entire indebtedness
represented by the outstanding Senior Discount Notes, except for (i) the rights
of Holders to receive payments in respect of the principal of, premium, if any,
and interest on the Senior Discount Notes when such payments are due, (ii) the
Holdings Issuers' obligations with respect to the Senior Discount Notes
concerning issuing temporary Senior Discount Notes, registration of Senior
Discount Notes, mutilated, destroyed, lost or stolen Senior Discount Notes and
the maintenance of an office or agency for payments, (iii) the rights, powers,
trust, duties and immunities of the Senior Discount Trustee and the Holdings
Issuers' obligations in connection therewith and (iv) the Legal Defeasance
provisions of the Senior Discount Indenture. In addition, the Holdings Issuers
may, at their option and at any time, elect to have the obligations of the
Holdings Issuers released with respect to certain covenants that are described
in the Senior Discount Indenture ('Covenant Defeasance') and thereafter any
omission to comply with such obligations shall not constitute a Default or Event
of Default with respect to the Senior Discount Notes. In the event Covenant
Defeasance occurs, certain events (not including non-payment, bankruptcy,
receivership, reorganization and insolvency events) described under 'Events of
Default' will no longer constitute an Event of Default with respect to the
Senior Discount Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i)
Holdings must irrevocably deposit with the Senior Discount Trustee, in trust,
for the benefit of the Holders cash in U.S. dollars, non-callable U.S.
government obligations, or a combination thereof, in such amounts as will be
sufficient, in the opinion of a nationally recognized firm of independent public
accountants, to pay the principal of, premium, if any, and interest on the
Senior Discount Notes on the stated date for payment thereof or on the
applicable redemption date, as the case may be; (ii) in the case of Legal
Defeasance, Holdings shall have delivered to the Senior Discount Trustee an
opinion of counsel in the United States reasonably acceptable to the Senior
Discount Trustee confirming that (A) the Holdings Issuers have received from, or
there has been published by, the Internal Revenue Service a ruling or (B) since
the date of the Senior Discount Indenture, there has been a change in the
applicable federal income tax law, in either case to the effect that, and based
thereon such opinion of counsel shall confirm that, the Holders will not
recognize income, gain or loss for federal income tax purposes as a result of
such Legal Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the case if
such Legal Defeasance had not occurred; (iii) in the case of
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Covenant Defeasance, Holdings shall have delivered to the Senior Discount
Trustee an opinion of counsel in the United States reasonably acceptable to the
Trustee confirming that the Holders will not recognize income, gain or loss for
federal income tax purposes as a result of such Covenant Defeasance and will be
subject to federal income tax on the same amounts, in the same manner and at the
same times as would have been the case if such Covenant Defeasance had not
occurred; (iv) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit or insofar as Events of Default from
bankruptcy or insolvency events are concerned, at any time in the period ending
on the 91st day after the date of deposit; (v) such Legal Defeasance or Covenant
Defeasance shall not result in a breach or violation of, or constitute a default
under the Senior Discount Indenture or any other material agreement or
instrument to which Holdings or any of its Subsidiaries is a party or by which
Holdings or any of its Subsidiaries are bound; (vi) Holdings shall have
delivered to the Senior Discount Trustee an Officers' Certificate stating that
the deposit was not made by Holdings with the intent of preferring the Holders
over any other creditors of Holdings or with the intent of defeating, hindering,
delaying or defrauding any other creditors of Holdings or others; (vii) Holdings
shall have delivered to the Senior Discount Trustee an Officers' Certificate and
an opinion of counsel, each stating that all conditions precedent provided for
or relating to the Legal Defeasance or the Covenant Defeasance have been
complied with; (viii) Holdings shall have delivered to the Senior Discount
Trustee an opinion of counsel to the effect that after the 91st day following
the deposit, the trust funds will not be subject to the effect of any applicable
bankruptcy, insolvency, reorganization or similar laws affecting creditors'
rights generally; and (ix) certain other customary conditions precedent are
satisfied.
SATISFACTION AND DISCHARGE
The Senior Discount Indenture will be discharged and will cease to be of
further effect (except as to surviving rights or registration of transfer or
exchange of the Senior Discount Notes, as expressly provided for in the Senior
Discount Indenture) as to all outstanding Senior Discount Notes when (i) either
(a) all the Senior Discount Notes theretofore authenticated and delivered
(except lost, stolen or destroyed Notes which have been replaced or paid and
Senior Discount Notes for whose payment money has theretofore been deposited in
trust or segregated and held in trust by the Holdings Issuers and thereafter
repaid to the Holdings Issuers or discharged from such trust) have been
delivered to the Senior Discount Trustee for cancellation or (b) all Senior
Discount Notes not theretofore delivered to the Senior Discount Trustee for
cancellation have become due and payable and Holdings has irrevocably deposited
or caused to be deposited with the Trustee funds in an amount sufficient to pay
and discharge the entire Indebtedness on the Senior Discount Notes not
theretofore delivered to the Senior Discount Trustee for cancellation, for
principal of, premium, if any, and interest on the Senior Discount Notes to the
date of deposit together with irrevocable instructions from Holdings directing
the Senior Discount Trustee to apply such funds to the payment thereof at
maturity or redemption, as the case may be; (ii) Holdings has paid all other
sums payable under the Senior Discount Indenture by Holdings; and (iii) Holdings
has delivered to the Senior Discount Trustee an Officers' Certificate and an
opinion of counsel stating that all conditions precedent under the Senior
Discount Indenture relating to the satisfaction and discharge of the Senior
Discount Indenture have been complied with.
MODIFICATION OF THE SENIOR DISCOUNT INDENTURE
From time to time, the Holdings Issuers and the Senior Discount Trustee,
without the consent of the Holders, may amend the Senior Discount Indenture for
certain specified purposes, including curing ambiguities, defects or
inconsistencies, so long as such change does not, in the opinion of the Senior
Discount Trustee, adversely affect the rights of any of the Holders in any
material respect. In formulating its opinion on such matters, the Senior
Discount Trustee will be entitled to rely on such evidence as it deems
appropriate, including, without limitation, solely on an opinion of counsel.
Other modifications and amendments of the Senior Discount Indenture may be made
with the consent of the Holders of a majority in principal amount at maturity of
the then outstanding Senior Discount Notes issued under the Senior Discount
Indenture, except that, without the consent of each Holder affected thereby, no
amendment may: (i) reduce the amount of Senior Discount Notes whose Holders must
consent to an amendment; (ii) reduce the rate of or change or have the effect of
changing the time for payment of interest, including defaulted interest, on any
Senior Discount Notes, or change or have the effect of changing the definition
of Accreted Value; (iii) reduce the principal of or change or have the effect of
changing the fixed maturity of any Senior Discount Notes, or change the date on
which any Senior Discount
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Notes may be subject to redemption or repurchase, or reduce the redemption or
repurchase price therefor; (iv) make any Senior Discount Notes payable in money
other than that stated in the Senior Discount Notes; (v) make any change in
provisions of the Senior Discount Indenture protecting the right of each Holder
to receive payment of principal or Accreted Value of and interest on such Senior
Discount Note on or after the due date thereof or to bring suit to enforce such
payment, or permitting Holders of a majority in principal amount at maturity of
Senior Discount Notes to waive Defaults or Events of Default; (vi) amend, change
or modify in any material respect the obligation of the Holdings Issuers to make
and consummate a Change of Control Offer in the event of a Change of Control or
make and consummate an Asset Sale Offer with respect to any Asset Sale that has
been consummated or modify any of the provisions or definitions with respect
thereto; or (vii) modify or change any provision of the Senior Discount
Indenture or the related definitions affecting the ranking of the Senior
Discount Notes in a manner which adversely affects the Holders.
GOVERNING LAW
The Senior Discount Indenture provides that it and the Senior Discount
Notes will be governed by, and construed in accordance with, the laws of the
State of New York but without giving effect to applicable principles of
conflicts of law to the extent that the application of the law of another
jurisdiction would be required thereby.
THE SENIOR DISCOUNT TRUSTEE
The Senior Discount Indenture provides that, except during the continuance
of an Event of Default, the Senior Discount Trustee will perform only such
duties as are specifically set forth in the Senior Discount Indenture. During
the existence of an Event of Default, the Senior Discount Trustee will exercise
such rights and powers vested in it by the Senior Discount Indenture, and use
the same degree of care and skill in its exercise as a prudent man would
exercise or use under the circumstances in the conduct of his own affairs.
The Senior Discount Indenture and the provisions of the TIA contain certain
limitations on the rights of the Senior Discount Trustee, should it become a
creditor of either of the Holdings Issuers, to obtain payments of claims in
certain cases or to realize on certain property received in respect of any such
claim as security or otherwise. Subject to the TIA, the Senior Discount Trustee
will be permitted to engage in other transactions; provided that if the Trustee
acquires any conflicting interest as described in the TIA, it must eliminate
such conflict or resign.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
Senior Discount Indenture. Reference is made to the Senior Discount Indenture
for the full definition of all such terms, as well as any other terms used
herein for which no definition is provided.
'Accreted Value' means as of any date prior to January 15, 2003, an amount
per $1,000 principal amount at maturity of the Senior Discount Notes that is
equal to the sum of (a) the initial offering price of each Senior Discount Note
and (b) the portion of the excess of the principal amount at maturity of each
Senior Discount Note over such initial offering price which shall have been
amortized through such date, such amount to be so amortized on a daily basis and
compounded semi-annually on each January 15, and July 15 at the rate of 10 3/4%
per annum from the Issue Date through the date of determination computed on the
basis of a 360-day year of twelve 30-day months.
'Acquired Indebtedness' means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Restricted Subsidiary of such specified Person,
including, without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Restricted Subsidiary of such specified Person and (ii) Indebtedness secured by
a Lien encumbering any asset acquired by such specified Person.
'Affiliate' of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, 'control'
(including, with correlative meanings, the terms 'controlling,' 'controlled by'
and 'under common control with'), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power
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to direct or cause the direction of the management or policies of such Person,
whether through the ownership of voting securities, by agreement or otherwise.
'Asset Sale' means (i) the sale, conveyance, transfer or other disposition
(whether in a single transaction or a series of related transactions) of
property or assets (including by way of a sale and leaseback) of Holdings or any
Restricted Subsidiary thereof (each referred to in this definition as a
'disposition') or (ii) the issuance or sale of Equity Interests of any
Restricted Subsidiary (whether in a single transaction or a series of related
transactions), in each case, other than: (a) a disposition of Cash Equivalents
or Investment Grade Securities or obsolete or worn out equipment in the ordinary
course of business; (b) the disposition of all or substantially all of the
assets of Holdings in a manner permitted pursuant to the provisions described
above under 'Certain Covenants--Merger, Consolidation and Sale of Assets' or any
disposition that constitutes a Change of Control pursuant to the Senior Discount
Indenture; (c) any Restricted Payment that is permitted to be made, and is made,
under the covenant described above under 'Limitation on Restricted Payments;'
(d) any disposition of assets with an aggregate fair market value of less than
$2.0 million; (e) any disposition of property or assets by a Restricted
Subsidiary to Holdings or by Holdings or a Restricted Subsidiary to a Restricted
Subsidiary; (f) any exchange of like property pursuant to Section 1031 of the
Internal Revenue Code of 1986, as amended, for use in a Similar Business; (g)
any financing transaction with respect to property built or acquired by Holdings
or any of its Restricted Subsidiaries after the Issue Date including, without
limitation, sale-leasebacks and asset securitizations; (h) foreclosures on
assets; and (i) any sale of Equity Interests in, or Indebtedness or other
securities of, an Unrestricted Subsidiary.
'Blackstone' means Blackstone Capital Partners III Merchant Banking Fund
L.P. and its Affiliates.
'Board of Directors' means, as to any Person, the board of directors of
such Person (or, if such Person is a partnership, the board of directors or
other governing body of the general partner of such Person) or any duly
authorized committee thereof.
'Board Resolution' means, with respect to any Person, a copy of a
resolution certified by the Secretary or an Assistant Secretary of such Person
(or, if such Person is a partnership, its general partner) to have been duly
adopted by the Board of Directors of such Person and to be in full force and
effect on the date of such certification, and delivered to the Trustee.
'Business Day' means a day that is not a Saturday, a Sunday or a day on
which banking institutions in New York, New York are not required to be open.
'Capitalized Lease Obligation' means, at the time any determination thereof
is to be made, the amount of the liability in respect of a capital lease that
would at such time be required to be capitalized and reflected as a liability on
a balance sheet in accordance with GAAP.
'Capital Stock' means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership or limited liability
company, partnership or membership interests (whether general or limited) and
(iv) any other interest or participation that confers on a Person the right to
receive a share of the profits and losses of, or distributions of assets of, the
issuing Person.
'Cash Equivalents' means (i) U.S. dollars (and foreign currency exchanged
into U.S. dollars within 180 days), (ii) securities issued or directly and fully
guaranteed or insured by the U.S. Government or any agency or instrumentality
thereof, (iii) certificates of deposit, time deposits and eurodollar time
deposits with maturities of one year or less from the date of acquisition,
bankers' acceptances with maturities not exceeding one year and overnight bank
deposits, in each case with any commercial bank having capital and surplus in
excess of $500.0 million, (iv) repurchase obligations for underlying securities
of the types described in clauses (ii) and (iii) entered into with any financial
institution meeting the qualifications specified in clause (iii) above, (v)
commercial paper rated A-1 or the equivalent thereof by Moody's or S&P and in
each case maturing within one year after the date of acquisition, (vi)
investment funds investing 95% of their assets in securities of the types
described in clauses (i)-(v) above, (vii) readily marketable direct obligations
issued by any state of the United States of America or any political subdivision
thereof having one of the two highest rating categories obtainable from either
Moody's or S&P and (viii) Indebtedness or preferred stock issued by Persons with
a rating of 'A' or higher from S&P or 'A2' or higher from Moody's.
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'Change of Control' means the occurrence of any of the following: (i) the
sale, lease or transfer, in one or a series of related transactions, of all or
substantially all of the assets of Holdings and its Restricted Subsidiaries,
taken as a whole, to a Person other than the Permitted Holders and their Related
Parties; or (ii) Holdings becomes aware (by way of a report or any other filing
pursuant to Section 13(d) of the Exchange Act, proxy, vote, written notice or
otherwise) of the acquisition by any Person or group (within the meaning of
Section 13(d)(3) or Section 14(d)(2) of the Exchange Act, or any successor
provision), including any group acting for the purpose of acquiring, holding or
disposing of securities (within the meaning of Rule 13d-5(b)(1) under the
Exchange Act), other than the Permitted Holders and their Related Parties, in a
single transaction or in a related series of transactions, by way of merger,
consolidation or other business combination or purchase, of beneficial ownership
(within the meaning of Rule 13d-3 under the Exchange Act, or any successor
provision) of 50% or more of the total voting power of the Voting Stock of
Holdings.
'Common Stock' of any Person means any and all shares, interests or other
participations in, and other equivalents (however designated and whether voting
or non-voting) of such Person's common equity, whether outstanding on the Issue
Date or issued after the Issue Date, and includes, without limitation, all
series and classes of such common equity.
'Consolidated Depreciation and Amortization Expense' means with respect to
any Person for any period, the total amount of depreciation and amortization
expense of such Person and its Restricted Subsidiaries for such period on a
consolidated basis and otherwise determined in accordance with GAAP.
'Consolidated EBITDA' means, with respect to any Person for any period, the
Consolidated Net Income of such Person for such period plus (a) provision for
taxes based on income or profits of such Person, or Permitted Tax Distributions
made by such Person, for such period deducted in computing Consolidated Net
Income, plus (b) Consolidated Interest Expense of such Person for such period to
the extent the same was deducted in calculating such Consolidated Net Income,
plus (c) Consolidated Depreciation and Amortization Expense of such Person for
such period to the extent such depreciation and amortization expense was
deducted in computing Consolidated Net Income, plus (d) any fees, expenses or
charges related to any Equity Offering, Permitted Investment, acquisition or
recapitalization or Indebtedness permitted to be incurred by the Senior Discount
Indenture (whether or not successful) and fees, expenses or charges related to
the transactions contemplated by the Recapitalization Agreement (including fees
to Blackstone), plus (e) the amount of any non-recurring charges (including any
one-time costs incurred in connection with acquisitions after the Issue Date)
deducted in such period in computing Consolidated Net Income, plus (f) without
duplication, any other non-cash charges reducing Consolidated Net Income for
such period (excluding any such charge which requires an accrual of a cash
reserve for anticipated cash charges for any future period), plus (g) the amount
of any minority interest expense deducted in calculating Consolidated Net
Income, plus (h) special charges and unusual items during any period ending on
or prior to the second anniversary of the Issue Date not to exceed $15.0 million
in the aggregate, plus (i) the amount of management, consulting monitoring and
advisory fees paid to Blackstone and its Affiliates during such period not to
exceed $1.0 million during any four quarter period, less, without duplication
(j) non-cash items increasing Consolidated Net Income of such Person for such
period (excluding any items which represent the reversal of any accrual of, or
cash reserve for, anticipated cash charges in any prior period).
'Consolidated Interest Expense' means, with respect to any Person for any
period, the sum, without duplication, of: (a) consolidated interest expense of
such Person and its Restricted Subsidiaries for such period, to the extent such
expense was deducted in computing Consolidated Net Income (including
amortization of original issue discount, the interest component of Capitalized
Lease Obligations and net payments and receipts (if any) pursuant to Hedging
Obligations to the extent included in Consolidated Interest Expense and
excluding amortization of deferred financing fees and (b) consolidated
capitalized interest of such Person and its Restricted Subsidiaries for such
period, whether paid or accrued ; provided, however, that Consolidated Interest
Expense of Holdings shall not include the interest with respect to the Senior
Discount Notes until January 15, 2003.
'Consolidated Net Income' means, with respect to any Person for any period,
the aggregate of the Net Income, of such Person and its Restricted Subsidiaries
for such period, on a consolidated basis; provided, however, that (i) any net
after-tax extraordinary gains or losses (less all fees and expenses relating
thereto) shall be excluded, (ii) any increase in the cost of sales or other
incremental expenses resulting from purchase
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accounting in relation to any acquisition, net of taxes, shall be excluded,
(iii) the Net Income for such period shall not include the cumulative effect of
a change in accounting principles during such period, (iv) any net after-tax
income (loss) from discontinued operations and any net after-tax gains or losses
on disposal of discontinued operations shall be excluded, (v) any net after-tax
gains or losses (less all fees and expenses relating thereto) attributable to
asset dispositions other than in the ordinary course of business (as determined
in good faith by Holdings) shall be excluded, (vi) the Net Income for such
period of any Person that is not a Subsidiary, or is an Unrestricted Subsidiary,
or that is accounted for by the equity method of accounting, shall be included
only to the extent of the amount of dividends or distributions or other payments
paid in cash (or to the extent converted into cash) to the referent Person or a
Restricted Subsidiary thereof in respect of such period, (vii) the Net Income of
any Person acquired in a pooling of interests transaction shall not be included
for any period prior to the date of such acquisition, (viii) the Net Income for
such period of any Restricted Subsidiary shall be excluded to the extent that
the declaration or payment of dividends or similar distributions by such
Restricted Subsidiary of its Net Income is not at the date of determination
permitted without any prior governmental approval (which has not been obtained)
or, directly or indirectly, by the operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule, or governmental
regulation applicable to that Restricted Subsidiary or its stockholders, unless
such restriction with respect to the payment of dividends or in similar
distributions has been legally waived; provided that such Net Income shall not
be so excluded in calculating Consolidated Net Income (a) as a component of
Consolidated EBITDA for purposes of calculating the Fixed Charge Coverage Ratio
in determining whether (I) a Restricted Subsidiary can incur additional
Indebtedness or issue Disqualified Stock or (II) Holdings can incur $1.00 of
Indebtedness for purposes of (A) clause (b) of the first paragraph or clauses
(vi) and (x) of the second paragraph of the covenant 'Limitation on Restricted
Payments', (B) clause (iv) of the covenant 'Merger, Consolidation and Sale of
Assets' or (C) the definition of 'Unrestricted Subsidiary' or (b) for purposes
of clause (c) of the first paragraph of the covenant 'Limitation on Restricted
Payments' in determining whether a Restricted Investment can be made (including
the designation of a Subsidiary as an Unrestricted Subsidiary) and (ix) the Net
Income for such period of Holdings and its Restricted Subsidiaries shall be
decreased by the amount of Permitted Tax Distributions during such period.
'Contingent Obligations' means, with respect to any Person, any obligation
of such Person guaranteeing any leases, dividends or other obligations that do
not constitute Indebtedness ('primary obligations') of any other Person (the
'primary obligor') in any manner, whether directly or indirectly, including,
without limitation, any obligation of such Person, whether or not contingent,
(i) to purchase any such primary obligation or any property constituting direct
or indirect security therefor, (ii) to advance or supply funds (A) for the
purchase or payment of any such primary obligation or (B) to maintain working
capital or equity capital of the primary obligor or otherwise to maintain the
net worth or solvency of the primary obligor, or (iii) to purchase property,
securities or services primarily for the purpose of assuring the owner of any
such primary obligation of the ability of the primary obligor to make payment of
such primary obligation against loss in respect thereof.
'Default' means any event that is, or with the passage of time or the
giving of notice or both would be, an Event of Default.
'Designated Noncash Consideration' means the fair market value of noncash
consideration received by Holdings or any of its Restricted Subsidiaries in
connection with an Asset Sale that is so designated as Designated Noncash
Consideration pursuant to an Officers' Certificate, setting forth the basis of
such valuation, less the amount of cash or Cash Equivalents received in
connection with a subsequent sale of such Designated Noncash Consideration.
'Designated Preferred Stock' means preferred stock of Holdings or a
Restricted Subsidiary (other than Disqualified Stock) that is issued for cash
(other than to a Restricted Subsidiary) and is so designated as Designated
Preferred Stock, pursuant to an Officers' Certificate, on the issuance date
thereof, the cash proceeds of which are excluded from the calculation set forth
in clause (c) of the covenant described under 'Limitation on Restricted
Payments.'
'Disqualified Stock' means, with respect to any Person, any Capital Stock
of such Person which, by its terms (or by the terms of any security into which
it is convertible or for which it is putable or exchangeable), or upon the
happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or redeemable at the option of the holder
thereof, in whole or in part, in each case prior to the maturity
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date of the Senior Discount Notes; provided, however, that if such Capital Stock
is issued to any employee or to any plan for the benefit of employees of
Holdings or any of its Subsidiaries or by any such plan to such employees, such
Capital Stock shall not constitute Disqualified Stock solely because it may be
required to be repurchased by Holdings or such Subsidiary in order to satisfy
applicable statutory or regulatory obligations or as a result of such employee's
death or disability.
'Equity Interests' means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
'Equity Offering' means any public or private sale of common stock or
preferred stock of Holdings (other than Disqualified Stock), other than (i)
public offerings with respect to the Common Stock registered on Form S-8 and
(ii) any such public or private sale the proceeds of which have been designated
by Holdings as an Excluded Contribution or Permanent Qualified Equity
Contributions.
'Exchange Act' means the Securities Exchange Act of 1934, as amended, and
the rules and regulations of the Commission promulgated thereunder.
'Excluded Contributions' means the net cash proceeds received by Holdings
after the Issue Date from (a) contributions to its common equity capital and (b)
the sale (other than to a Subsidiary or to any management equity plan or stock
option plan or any other management or employee benefit plan or agreement of
Holdings or any of its Subsidiaries) of Capital Stock (other than Disqualified
Stock) of Holdings, in each case designated as Excluded Contributions pursuant
to an Officers' Certificate, the cash proceeds of which are excluded from the
calculation set forth in paragraph (c) of the 'Limitation on Restricted
Payments' covenant.
'fair market value' means, with respect to any asset or property, the price
which could be negotiated in an arm's-length, free market transaction, for cash,
between a willing seller and a willing and able buyer, neither of whom is under
undue pressure or compulsion to complete the transaction.
'Fixed Charge Coverage Ratio' means, with respect to any Person for any
period, the ratio of Consolidated EBITDA of such Person for such period to the
Fixed Charges of such Person for such period. In the event that Holdings or any
of its Restricted Subsidiaries incurs, assumes, guarantees or redeems any
Indebtedness (other than in the case of revolving credit borrowings, in which
case interest expense shall be computed based upon the average daily balance of
such Indebtedness during the applicable period) or issues or redeems preferred
stock subsequent to the commencement of the period for which the Fixed Charge
Coverage Ratio is being calculated but prior to the event for which the
calculation of the Fixed Charge Coverage Ratio is made (the 'Calculation Date'),
then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect
to such incurrence, assumption, guarantee or redemption of Indebtedness, or such
issuance or redemption of preferred stock, as if the same had occurred at the
beginning of the applicable four-quarter period. With respect to any Calculation
Date that occurs on or after January 15, 2003 and prior to January 15, 2004, the
Fixed Charge Coverage Ratio shall be calculated giving pro forma effect to the
interest expense of Holdings with respect to the Senior Discount Notes. For
purposes of making the computation referred to above, Investments, acquisitions,
dispositions, mergers, consolidations and discontinued operations (as determined
in accordance with GAAP) that have been made by Holdings or any of its
Restricted Subsidiaries during the four-quarter reference period or subsequent
to such reference period and on or prior to or simultaneously with the
Calculation Date shall be calculated on a pro forma basis assuming that all such
Investments, acquisitions, dispositions, discontinued operations, mergers and
consolidations (and the reduction of any associated fixed charge obligations and
the change in Consolidated EBITDA resulting therefrom) had occurred on the first
day of the four-quarter reference period. If since the beginning of such period
any Person (that subsequently became a Restricted Subsidiary or was merged with
or into Holdings or any Restricted Subsidiary since the beginning of such
period) shall have made any Investment, acquisition, disposition, discontinued
operation, merger or consolidation that would have required adjustment pursuant
to this definition, then the Fixed Charge Coverage Ratio shall be calculated
giving pro forma effect thereto for such period as if such Investment,
acquisition, disposition, discontinued operation, merger or consolidation had
occurred at the beginning of the applicable four-quarter period. For purposes of
this definition, whenever pro forma effect is to be given to a transaction, the
pro forma calculations shall be made as determined in good faith by a
responsible financial or accounting officer of Holdings. If any Indebtedness
bears a floating rate of interest and is being given pro forma effect, the
interest on such Indebtedness shall be calculated
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as if the rate in effect on the Calculation Date had been the applicable rate
for the entire period (taking into account any Hedging Obligations applicable to
such Indebtedness). Interest on a Capitalized Lease Obligation shall be deemed
to accrue at an interest rate reasonably determined by a responsible financial
or accounting officer of Holdings to be the rate of interest implicit in such
Capitalized Lease Obligation in accordance with GAAP. For purposes of making the
computation referred to above, interest on any Indebtedness under a revolving
credit facility computed on a pro forma basis shall be computed based upon the
average daily balance of such Indebtedness during the applicable period.
Interest on Indebtedness that may optionally be determined at an interest rate
based upon a factor of a prime or similar rate, a eurocurrency interbank offered
rate, or other rate, shall be deemed to have been based upon the rate actually
chosen, or, if none, then based upon such optional rate chosen as Holdings may
designate. Any such pro forma calculation may include adjustments in the
reasonable determination of Holdings as set forth in an Officers' Certificate,
to (i) reflect operating expense reductions reasonably expected to result from
any acquisition or merger or (ii) eliminate the effect of any extraordinary
accounting event with respect to any acquired Person on Consolidated Net Income.
'Fixed Charges' means, with respect to any Person for any period, the sum
of (a) Consolidated Interest Expense of such Person for such period and (b) the
product of (x) all cash dividend payments (excluding items eliminated in
consolidation) on any series of Disqualified Stock of such Person or its
Restricted Subsidiaries and (y) (A) if such Person is not a taxable entity for
U.S. federal income tax purposes, one, or (B) if such Person is an entity
taxable for U.S. federal income tax purposes, a fraction, the numerator of which
is one and the denominator of which is one minus the then current effective
consolidated federal, state and local tax rate of such Person, expressed as a
decimal.
'Foreign Subsidiary' means a Restricted Subsidiary not organized or
existing under the laws of the United States, any State thereof, the District of
Columbia, or any territory thereof.
'GAAP' means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the Issue Date. For the purposes of the
Senior Discount Indenture, the term 'consolidated' with respect to any Person
shall mean such Person consolidated with its Restricted Subsidiaries, and shall
not include any Unrestricted Subsidiary.
'Government Securities' means securities that are (a) direct obligations of
the United States of America for the timely payment of which its full faith and
credit is pledged or (b) obligations of a Person controlled or supervised by and
acting as an agency or instrumentality of the United States of America the
timely payment of which is unconditionally guaranteed as a full faith and credit
obligation by the United States of America, which, in either case, are not
callable or redeemable at the option of the issuer thereof, and shall also
include a depository receipt issued by a bank (as defined in Section 3(a)(2) of
the Securities Act), as custodian with respect to any such Government Securities
or a specific payment of principal of or interest on any such Government
Securities held by such custodian for the account of the holder of such
depository receipt; provided that (except as required by law) such custodian is
not authorized to make any deduction from the amount payable to the holder of
such depository receipt from any amount received by the custodian in respect of
the Government Securities or the specific payment of principal of or interest on
the Government Securities evidenced by such depository receipt.
'guarantee' means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness or other obligations.
'Guarantee' means any guarantee of the obligations of the Holdings Issuers
under the Senior Discount Indenture and the Senior Discount Notes by any
Restricted Subsidiary in accordance with the provisions of the Senior Discount
Indenture. When used as a verb, 'Guarantee' shall have a corresponding meaning.
'Guarantor' means any Restricted Subsidiary that incurs a Guarantee;
provided that upon the release and discharge of such Restricted Subsidiary from
its Guarantee in accordance with the Senior Discount Indenture, such Restricted
Subsidiary shall cease to be a Guarantor.
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'Hedging Obligations' means, with respect to any Person, the obligations of
such Person under (i) currency exchange or interest rate swap agreements,
currency exchange or interest rate cap agreements and currency exchange or
interest rate collar agreements and (ii) other agreements or arrangements
designed to protect such Person against fluctuations in currency exchange or
interest rates or commodity prices.
'Indebtedness' means, with respect to any Person, (a) any indebtedness of
such Person, whether or not contingent (i) in respect of borrowed money, (ii)
evidenced by bonds, notes, debentures or similar instruments or letters of
credit or bankers' acceptances (or, without double counting, reimbursement
agreements in respect thereof), (iii) representing the balance deferred and
unpaid of the purchase price of any property (including Capitalized Lease
Obligations), except any such balance that constitutes a trade payable or
similar obligation to a trade creditor, in each case accrued in the ordinary
course of business or (iv) representing any Hedging Obligations, if and to the
extent of any of the foregoing Indebtedness (other than letters of credit and
Hedging Obligations) that would appear as a liability upon a balance sheet
(excluding the footnotes thereto) of such Person prepared in accordance with
GAAP, (b) to the extent not otherwise included, any obligation by such Person to
be liable for, or to pay, as obligor, guarantor or otherwise, on the
Indebtedness of another Person (other than by endorsement of negotiable
instruments for collection in the ordinary course of business) and (c) to the
extent not otherwise included, Indebtedness of another Person secured by a Lien
on any asset owned by such Person (whether or not such Indebtedness is assumed
by such Person); provided, however, that Contingent Obligations incurred in the
ordinary course of business shall be deemed not to constitute Indebtedness.
'Independent Financial Advisor' means an accounting, appraisal, investment
banking firm or consultant to Persons engaged in Similar Businesses of
nationally recognized standing that is, in the good faith determination of
Holdings, qualified to perform the task for which it has been engaged.
'Investment Grade Securities' means (i) securities issued or directly and
fully guaranteed or insured by the United States government or any agency or
instrumentality thereof (other than Cash Equivalents), (ii) debt securities or
debt instruments with a rating of BBB- or higher by S&P or Baa3 or higher by
Moody's or the equivalent of such rating by such rating organization, or, if no
rating of S&P or Moody's then exists, the equivalent of such rating by any other
nationally recognized securities rating agency, but excluding any debt
securities or instruments constituting loans or advances between and among the
respective Company Issuers and their respective Subsidiaries, and (iii)
investments in any fund that invests exclusively in investments of the type
described in clauses (i) and (ii) which fund may also hold immaterial amounts of
cash pending investment and/or distribution.
'Investments' means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the form of loans (including
guarantees), advances or capital contributions (excluding accounts receivable,
trade credit, advances to customers, commission, travel and similar advances to
officers and employees made in the ordinary course of business), purchases or
other acquisitions for consideration of Indebtedness, Equity Interests or other
securities issued by any other Person and investments that are required by GAAP
to be classified on the balance sheet (excluding the footnotes thereto) of such
Person in the same manner as the other investments included in this definition
to the extent such transactions involve the transfer of cash or other property.
For purposes of the definition of 'Unrestricted Subsidiary' and the covenant
described under 'Certain Covenants--Limitation on Restricted Payments,' (i)
'Investments' shall include the portion (proportionate to Holdings' equity
interest in such Subsidiary) of the fair market value of the net assets of a
Subsidiary of Holdings at the time that such Subsidiary is designated an
Unrestricted Subsidiary; provided, however, that upon a redesignation of such
Subsidiary as a Restricted Subsidiary, Holdings shall be deemed to continue to
have a permanent 'Investment' in an Unrestricted Subsidiary equal to an amount
(if positive) equal to (x) Holdings' 'Investment' in such Subsidiary at the time
of such redesignation less (y) the portion (proportionate to Holdings' equity
interest in such Subsidiary) of the fair market value of the net assets of such
Subsidiary at the time of such redesignation; and (ii) any property transferred
to or from an Unrestricted Subsidiary shall be valued at its fair market value
at the time of such transfer, in each case as determined in good faith by
Holdings.
'Issue Date' means the closing date for the sale and original issuance of
the Senior Discount Notes under the Senior Discount Indenture.
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'Lien' means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction);
provided that in no event shall an operating lease be deemed to constitute a
Lien.
'Management Group' means the group consisting of the executive officers of
Holdings.
'Moody's' means Moody's Investors Service, Inc.
'Net Income' means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends.
'Net Proceeds' means the aggregate cash proceeds received by Holdings or
any of its Restricted Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of any
Designated Noncash Consideration received in any Asset Sale), net of the direct
costs relating to such Asset Sale and the sale or disposition of such Designated
Noncash Consideration (including, without limitation, legal, accounting and
investment banking fees, and brokerage and sales commissions), and any
relocation expenses incurred as a result thereof, taxes paid or payable as a
result thereof (after taking into account any available tax credits or
deductions and any tax sharing arrangements related thereto), amounts required
to be applied to the repayment of principal, premium (if any) and interest on
Indebtedness required (other than required by clause (i) of the second paragraph
of 'Certain Covenants--Limitation on Asset Sales') to be paid as a result of
such transaction and any deduction of appropriate amounts to be provided by
Holdings as a reserve in accordance with GAAP against any liabilities associated
with the asset disposed of in such transaction and retained by Holdings after
such sale or other disposition thereof, including, without limitation, pension
and other post-employment benefit liabilities and liabilities related to
environmental matters or against any indemnification obligations associated with
such transaction.
'New Credit Facility' means that certain credit facility among Bankers
Trust Company, the Company and certain of its Subsidiaries and affiliates and
the lenders from time to time party thereto, together with any related
documents, instruments and agreements executed in connection therewith
(including, without limitation, any guaranty agreements and security documents),
in each case as such credit facility and related documents, instruments and
agreements may be amended (including any amendment and restatement thereof),
supplemented or otherwise modified from time to time, including any agreement
extending the maturity of, refinancing, replacing or otherwise restructuring
(including increasing the amount of available borrowings thereunder or adding
additional obligors or guarantors thereunder) all or any portion of the
Indebtedness under such credit facility or any successor or replacement credit
facility and whether by the same or any other agent, lender or group of lenders.
'Obligations' means all obligations for principal, interest, penalties,
fees, indemnifications other than fees and indemnifications in favor of the
Senior Discount Trustee and other third parties), reimbursements (including,
without limitation, reimbursement obligations with respect to letters of credit
and banker's acceptances), damages and other liabilities payable under the
documentation governing any Indebtedness.
'Officer' of any Person means the Chairman of the Board, the President, any
Executive Vice President, Senior Vice President or Vice President, the Treasurer
or the Secretary of such Person.
'Officers' Certificate' of any Person means a certificate signed on behalf
of such Person by two Officers of such Person, one of whom must be the principal
executive officer, the principal financial officer, the treasurer or the
principal accounting officer of such Person that meets the requirements set
forth in the Senior Discount Indenture.
'Pari Passu Indebtedness' means, with respect to the Senior Discount Notes
or a Guarantee, Indebtedness which ranks pari passu in right of payment to the
Senior Discount Notes or such Guarantee, as the case may be.
'Permanent Qualified Equity Contributions' means net cash proceeds to the
Company in the form of contributions to the common equity capital of the Company
or from the sale (other than to a Subsidiary of the
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Company or to any management equity plan or stock option plan or any other
management or employee benefit plan of the Company or any of its Subsidiaries)
of Capital Stock (other than Disqualified Stock) of the Company, in each case
designated as Permanent Qualified Equity Contributions pursuant to an Officers'
Certificate, the cash proceeds of which are excluded from the calculation set
forth in paragraph (c) of the 'Limitation on Restricted Payments' covenant.
'Permitted Holders' means Blackstone and any of its Affiliates.
'Permitted Investments' means (a) any Investment in Holdings or any
Restricted Subsidiary; (b) any Investment in cash and Cash Equivalents or
Investment Grade Securities; (c) any Investment by Holdings or any Restricted
Subsidiary in a Person that is a Similar Business if as a result of such
Investment (i) such Person becomes a Restricted Subsidiary or (ii) such Person,
in one transaction or a series of related transactions, is merged, consolidated
or amalgamated with or into, or transfers or conveys substantially all of its
assets to, or is liquidated into, Holdings or a Restricted Subsidiary; (d) any
Investment in securities or other assets not constituting cash or Cash
Equivalents and received in connection with an Asset Sale made pursuant to the
provisions of 'Certain Covenants--Limitation on Asset Sales' or any other
disposition of assets not constituting an Asset Sale; (e) any Investment
existing on the Issue Date; (f) advances to employees not in excess of $10.0
million outstanding at any one time, in the aggregate; (g) any Investment
acquired by Holdings or any of its Restricted Subsidiaries (i) in exchange for
any other Investment or accounts receivable held by Holdings or any such
Restricted Subsidiary in connection with or as a result of a bankruptcy,
workout, reorganization or recapitalization of the issuer of such other
Investment or accounts receivable or (ii) as a result of a foreclosure by
Holdings or any of its Restricted Subsidiaries with respect to any secured
Investment or other transfer of title with respect to any secured Investment in
default; (h) Hedging Obligations permitted under clause (j) of the 'Limitation
of Incurrence of Indebtedness and Issuance of Disqualified Stock' covenant; (i)
loans and advances to officers, directors and employees for business-related
travel expenses, moving expenses and other similar expenses, in each case
incurred in the ordinary course of business; (j) any Investment in a Similar
Business (other than an Investment in an Unrestricted Subsidiary) having an
aggregate fair market value, taken together with all other Investments made
pursuant to this clause (j) that are at that time outstanding, not to exceed 10%
of Total Assets at the time of such Investment (with the fair market value of
each Investment being measured at the time made and without giving effect to
subsequent changes in value); (k) Investments the payment for which consists of
Equity Interests of Holdings (other than Disqualified Stock); provided, however,
that such Equity Interests will not increase the amount available for Restricted
Payments under clause (c) of the 'Limitation on Restricted Payments' covenant;
(l) additional Investments having an aggregate fair market value, taken together
with all other Investments made pursuant to this clause (l) that are at that
time outstanding, not to exceed $10.0 million at the time of such Investment
(with the fair market value of each Investment being measured at the time made
and without giving effect to subsequent changes in value); (m) any transaction
to the extent it constitutes an Investment that is permitted by and made in
accordance with the provisions of clauses (iii) and (xi) of the second paragraph
of the covenant described under 'Certain Covenants--Transactions with
Affiliates'; (n) any Investment by Restricted Subsidiaries in other Restricted
Subsidiaries; (o) Investments consisting of the licensing or contribution of
intellectual property pursuant to joint marketing arrangements with other
Persons; and (p) Investments consisting of purchases and acquisitions of
inventory, supplies, materials and equipment or licenses or leases of
intellectual property, in any case, in the ordinary course of business.
'Permitted Liens' means the following types of Liens:
(i) judgment Liens not giving rise to an Event of Default so long as
such Lien is adequately bonded and any appropriate legal proceedings which
may have been duly initiated for the review of such judgment shall not have
been finally terminated or the period within which such proceedings may be
initiated shall not have expired;
(ii) any interest or title of a lessor under any Capitalized Lease
Obligation; provided that such Liens do not extend to any property or
assets which is not leased property subject to such Capitalized Lease
Obligation;
(iii) purchase money Liens to finance property or assets of Holdings
or any Restricted Subsidiary acquired in the ordinary course of business;
provided, however, that (A) the related purchase money
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Indebtedness shall not exceed the cost of such property or assets and shall
not be secured by any property or assets of Holdings or any Restricted
Subsidiary other than the property and assets so acquired and (B) the Lien
securing such Indebtedness shall be created within 180 days of such
acquisition;
(iv) Liens upon specific items of inventory or other goods and
proceeds of any Person securing such Person's obligations in respect of
bankers' acceptances issued or created for the account of such Person to
facilitate the purchase, shipment or storage of such inventory or other
goods;
(v) Liens securing reimbursement obligations with respect to
commercial letters of credit which encumber documents and other property
relating to such letters of credit and products and proceeds thereof;
(vi) Liens securing Indebtedness under Hedging Obligations;
(vii) Liens securing Acquired Indebtedness incurred in accordance with
the 'Limitations on Incurrence of Indebtedness and Issuance of Disqualified
Stock' covenant; provided that (A) such Liens secured such Acquired
Indebtedness at the time of and prior to the incurrence of such Acquired
Indebtedness by Holdings or a Restricted Subsidiary thereof and were not
granted in connection with, or in anticipation of, the incurrence of such
Acquired Indebtedness by Holdings or a Restricted Subsidiary thereof and
(B) such Liens do not extend to or cover any property or assets of Holdings
or any of the Restricted Subsidiaries other than the property or assets
that secured the Acquired Indebtedness prior to the time such Indebtedness
became Acquired Indebtedness of Holdings or such Restricted Subsidiary and
are no more favorable to the lienholders than those securing the Acquired
Indebtedness prior to the incurrence of such Acquired Indebtedness by
Holdings or such Restricted Subsidiary;
(viii) Liens securing obligations under the New Credit Facility;
(ix) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, suppliers, materialmen, repairmen and other Liens imposed by law
incurred in the ordinary course of business for sums not yet delinquent or
being contested in good faith, if such reserve or other appropriate
provision, if any, as shall be required by GAAP shall have been made in
respect thereof;
(x) Liens incurred or deposits made in the ordinary course of business
in connection with workers' compensation, unemployment insurance and other
types of social security, including any Lien securing letters of credit
issued in the ordinary course of business, consistent with past practice in
connection therewith, or to secure the performance of tenders, statutory
obligations, surety and appeal bonds, bids, leases, government contracts,
performance and return-of-money bonds and other similar obligations
(exclusive of obligations for the payment of borrowed money); and
(xi) Liens encumbering deposits made to secure obligations arising
from statutory, regulatory, contractual or warranty requirements, including
rights of offset and set off.
'Person' means an individual, partnership, corporation, unincorporated
organization, trust or joint venture, or a governmental agency or political
subdivision thereof.
'Recapitalization Agreement' means the Agreement and Plan of
Recapitalization, Redemption and Purchase, dated as of December 18, 1997 by and
among the Company, BMP/Graham Holdings Corporation and the other parties
thereto.
'Related Parties' means any Person controlled by a Permitted Holder,
including any partnership of which a Permitted Holder or its Affiliates is the
general partner.
'Restricted Investment' means an Investment other than a Permitted
Investment.
'Restricted Subsidiary' means, at any time, any direct or indirect
Subsidiary of Holdings that is not then an Unrestricted Subsidiary; provided,
however, that upon the occurrence of an Unrestricted Subsidiary ceasing to be an
Unrestricted Subsidiary, such Subsidiary shall be included in the definition of
'Restricted Subsidiary.'
'S&P' means Standard and Poor's Ratings Group.
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'Securities Act' means the Securities Act of 1933, as amended, and the
rules and regulations of the Commission promulgated thereunder.
'Significant Restricted Subsidiary' means any Restricted Subsidiary that
would be a 'significant subsidiary' of Holdings as defined in Article 1, Rule
1-02 of Regulation S-X, promulgated pursuant to the Securities Act, as such
Regulation is in effect on the date hereof.
'Similar Business' means a business, the majority of whose revenues are
derived from the manufacture, marketing or sale of containers or any business or
activity that is reasonably similar thereto or a reasonable extension,
development or expansion thereof or ancillary thereto.
'Subordinated Indebtedness' means with respect to the Senior Discount Notes
or a Guarantee, any Indebtedness of Holdings or a Guarantor, as the case may be,
which is by its terms subordinated in right of payment to the Senior Discount
Notes or the Guarantee of such Guarantor, as the case may be.
'Subsidiary' means, with respect to any Person, (i) any corporation,
association, or other business entity (other than a partnership) of which more
than 50% of the total voting power of shares of Capital Stock entitled (without
regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time of determination owned or
controlled, directly or indirectly, by such Person or one or more of the other
Subsidiaries of that Person or a combination thereof and (ii) any partnership,
joint venture, limited liability company or similar entity of which (x) more
than 50% of the capital accounts, distribution rights, total equity and voting
interests or general or limited partnership interests, as applicable, are owned
or controlled, directly or indirectly, by such Person or one or more of the
other Subsidiaries of that Person or a combination thereof whether in the form
of membership, general, special or limited partnership or otherwise and (y) such
Person or any Wholly Owned Restricted Subsidiary of such Person is a controlling
general partner or otherwise controls such entity.
'Total Assets' means the total consolidated assets of Holdings and its
Restricted Subsidiaries, as shown on the most recent balance sheet of Holdings.
'Unrestricted Subsidiary' means (i) any Subsidiary of Holdings which at the
time of determination is an Unrestricted Subsidiary (as designated by the Board
of Directors of Holdings, as provided below) and (ii) any Subsidiary of an
Unrestricted Subsidiary. The Board of Directors of Holdings may designate any
Subsidiary of Holdings (including any existing Subsidiary and any newly acquired
or newly formed Subsidiary) to be an Unrestricted Subsidiary unless such
Subsidiary or any of its Subsidiaries owns any Equity Interests of, or owns, or
holds any Lien on, any property of, Holdings or any Subsidiary thereof (other
than any Subsidiary of the Subsidiary to be so designated), provided that each
Subsidiary to be so designated and its Subsidiaries have not at the time of
designation, and do not thereafter, create, incur, issue, assume, guarantee or
otherwise become directly or indirectly liable with respect to any Indebtedness
pursuant to which the lender has recourse to any of the assets of Holdings or
any of its Restricted Subsidiaries. The Board of Directors of Holdings may
designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided
that, immediately after giving effect to such designation, (i) Holdings could
incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge
Coverage Ratio test described under 'Certain Covenants--Limitations on
Incurrence of Indebtedness and Issuance of Disqualified Stock' or (ii) the Fixed
Charge Coverage Ratio for Holdings and its Restricted Subsidiaries would be
greater than such ratio for Holdings and its Restricted Subsidiaries immediately
prior to such designation, in each case on a pro forma basis taking into account
such designation. Any such designation by the Board of Directors of Holdings
shall be notified by Holdings to the Senior Discount Trustee by promptly filing
with the Senior Discount Trustee a copy of the Board Resolution giving effect to
such designation and an Officers' Certificate certifying that such designation
complied with the foregoing provisions.
'Voting Stock' of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
'Weighted Average Life to Maturity' means, when applied to any Indebtedness
or Disqualified Stock, as the case may be, at any date, the quotient obtained by
dividing (i) the sum of the products of the number of years from the date of
determination to the date of each successive scheduled principal payment of such
Indebtedness
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or redemption or similar payment with respect to such Disqualified Stock
multiplied by the amount of such payment, by (ii) the sum of all such payments.
'Wholly Owned Restricted Subsidiary' is any Wholly Owned Subsidiary that is
a Restricted Subsidiary.
'Wholly Owned Subsidiary' of any Person means a Subsidiary of such Person
100% of the outstanding Capital Stock or other ownership interests of which
(other than directors' qualifying shares) shall at the time be owned by such
Person or by one or more Wholly Owned Subsidiaries of such Person or by such
Person and one or more Wholly Owned Subsidiaries of such Person.
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SENIOR SUBORDINATED EXCHANGE OFFERS;
SENIOR SUBORDINATED REGISTRATION RIGHTS
The summary set forth below of certain provisions of the Senior
Subordinated Registration Rights Agreement does not purport to be complete and
is qualified in its entirety by reference to all the provisions of the Senior
Subordinated Registration Rights Agreement. The Senior Subordinated Registration
Rights Agreement is an exhibit to the Registration Statement of which this
Prospectus is a part.
On February 2, 1998, the Company Issuers, Holdings, as guarantor, and the
Initial Purchasers entered into a registration rights agreement (the 'Senior
Subordinated Registration Rights Agreement'). In the Senior Subordinated
Registration Rights Agreement, the Company Issuers and Holdings agree, for the
benefit of holders of the Senior Subordinated Old Notes, that they will, at
their expense, use their reasonable best efforts to (i) within 120 days after
the Issue Date, file a registration statement on an appropriate registration
form (the 'Senior Subordinated Registration Statement') with the Commission with
respect to registered offers (the 'Senior Subordinated Exchange Offers') to
exchange the Fixed Rate Senior Subordinated Old Notes and the Floating Rate
Senior Subordinated Old Notes for the Fixed Rate Senior Subordinated Exchange
Notes and the Floating Rate Senior Subordinated Exchange Notes, respectively,
which will have terms (including a guarantee of Holdings) substantially
identical to the terms of the Fixed Rate Senior Subordinated Old Notes and the
Floating Rate Senior Subordinated Old Notes, respectively (except that the
Senior Subordinated Exchange Notes will not contain terms with respect to the
transfer restrictions) and (ii) cause the Senior Subordinated Registration
Statement to be declared effective under the Securities Act within 180 days
after the Issue Date. Upon the Senior Subordinated Registration Statement being
declared effective, the Company Issuers and Holdings will offer to all holders
of Fixed Rate Senior Subordinated Old Notes and Floating Rate Senior
Subordinated Old Notes an opportunity to exchange their securities for a like
principal amount of Fixed Rate Senior Subordinated Exchange Notes or Floating
Rate Senior Subordinated Exchange Notes, as the case may be. The Company Issuers
and Holdings will keep the Senior Subordinated Exchange Offers open for
acceptance for not less than 20 business days (or longer if required by
applicable law) after the date on which notice of the Senior Subordinated
Exchange Offers is mailed to the holders. For each Fixed Rate Senior
Subordinated Old Note or Floating Rate Senior Subordinated Old Note surrendered
for exchange pursuant to the Senior Subordinated Exchange Offers, the holder of
such Fixed Rate Senior Subordinated Old Note or Floating Rate Senior
Subordinated Old Note will receive a Fixed Rate Senior Subordinated Exchange
Note or Floating Rate Senior Subordinated Exchange Note, as the case may be,
having a principal amount equal to that of the surrendered Senior Subordinated
Old Note. Interest on each Senior Subordinated Exchange Note will accrue (A)
from the later of (i) the last interest payment date on which interest was paid
on the Senior Subordinated Old Note surrendered in exchange therefor or (ii) if
the Senior Subordinated Old Note is surrendered for exchange on a date in a
period which includes the record date for an interest payment date to occur on
or after the date of such exchange and as to which interest will be paid, the
date of such interest payment date or (B) if no interest has been paid on such
Senior Subordinated Old Note, from the Issue Date.
Under existing interpretations of the Commission contained in several
no-action letters to third parties, the Senior Subordinated Exchange Notes will
be freely transferable by holders thereof (other than affiliates of the Company
Issuers or Holdings) after the Senior Subordinated Exchange Offers without
further registration under the Securities Act; provided, however, that each
holder that wishes to exchange its Senior Subordinated Old Notes for Senior
Subordinated Exchange Notes will be required to represent (i) that any Senior
Subordinated Exchange Notes to be received by it will be acquired in the
ordinary course of its business, (ii) that at the time of the commencement of
the Senior Subordinated Exchange Offers, it has no arrangement or understanding
with any person to participate in the distribution (within the meaning of
Securities Act) of the Senior Subordinated Exchange Notes in violation of the
Securities Act, (iii) that it is not an 'affiliate' (as defined in Rule 405
promulgated under the Securities Act) of the Company Issuers or Holdings, (iv)
if such holder is not a broker-dealer, that it is not engaged in, and does not
intend to engage in, the distribution of Senior Subordinated Exchange Notes and
(v) if such holder is a broker-dealer (a 'Participating Broker-Dealer') that
will receive Senior Subordinated Exchange Notes for its own account in exchange
for Senior Subordinated Old Notes that were acquired as a result of
market-making or other trading activities, that it will deliver a prospectus in
connection with any resale of such Senior Subordinated Exchange Notes. The
Commission has taken the position that Participating Broker-Dealers may fulfill
their prospectus delivery requirements with respect to the Senior
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Subordinated Exchange Notes (other than a resale of an unsold allotment from the
original sale of the Senior Subordinated Old Notes) with the prospectus
contained in the Senior Subordinated Registration Statement. The Company Issuers
and Holdings will agree to make available, during the period required by the
Securities Act, a prospectus meeting the requirements of the Securities Act for
use by Participating Broker-Dealers and other persons, if any, with similar
prospectus delivery requirements for use in connection with any resale of Senior
Subordinated Exchange Notes.
If, (i) because of any change in law or in currently prevailing
interpretations of the Staff of the Commission, the Company Issuers and Holdings
are not permitted to effect the Senior Subordinated Exchange Offers, (ii) the
Senior Subordinated Exchange Offers are not consummated within 210 days of the
Issue Date or (iii) in the case of any holder that participates in the Senior
Subordinated Exchange Offers, such holder does not receive Senior Subordinated
Exchange Notes on the date of the exchange that may be sold without restriction
under state and federal securities laws (other than due solely to the status of
such holder as an affiliate of the Company Issuers or Holdings within the
meaning of the Securities Act), then in each case, the Company Issuers and
Holdings will (x) promptly deliver to the holders and the applicable Trustee
written notice thereof and (y) at their sole expense, (a) as promptly as
practicable, file a shelf registration statement covering resales of the Senior
Subordinated Old Notes (the 'Senior Subordinated Shelf Registration Statement'),
(b) use their reasonable best efforts to cause the Senior Subordinated Shelf
Registration Statement to be declared effective under the Securities Act and (c)
use their reasonable best efforts to keep effective the Senior Subordinated
Shelf Registration Statement until the earlier of two years after the Issue Date
or such time as all of the applicable Senior Subordinated Old Notes have been
sold thereunder. The Company Issuers and Holdings will, in the event that a
Senior Subordinated Shelf Registration Statement is filed, provide to each
holder copies of the prospectus that is a part of the Senior Subordinated Shelf
Registration Statement, notify each such holder when the Senior Subordinated
Shelf Registration Statement for the Senior Subordinated Old Notes has become
effective and take certain other actions as are required to permit unrestricted
resales of the Senior Subordinated Old Notes. A holder that sells Senior
Subordinated Old Notes pursuant to the Senior Subordinated Shelf Registration
Statement will be required to be named as a selling securityholder in the
related prospectus and to deliver a prospectus to purchasers, will be subject to
certain of the civil liability provisions under the Securities Act in connection
with such sales and will be bound by the provisions of the Senior Subordinated
Registration Rights Agreement that are applicable to such Holder (including
certain indemnification rights and obligations).
If the Company Issuers and Holdings fail to comply with the above
provisions or if the Senior Subordinated Registration Statement or the Senior
Subordinated Shelf Registration Statement fails to become effective, then, as
liquidated damages, additional interest (the 'Additional Interest') shall become
payable in respect of the Senior Subordinated Old Notes as follows:
(i) if (A) the Senior Subordinated Registration Statement is not filed
with the Commission within 120 days following the Issue Date or (B)
notwithstanding that the Company Issuers and Holdings have consummated or
will consummate the Senior Subordinated Exchange Offers, the Company
Issuers and Holdings are required to file a Senior Subordinated Shelf
Registration Statement and such Senior Subordinated Shelf Registration
Statement is not filed on or prior to the 60th day following the date on
which the obligation to file such Senior Subordinated Shelf Registration
Statement arises, then commencing on the day after either such required
filing date, Additional Interest shall accrue on the principal amount of
the Senior Subordinated Old Notes at a rate of .25% per annum for the first
90 days immediately following each such filing date, such Additional
Interest rate increasing by an additional .25% per annum at the beginning
of each subsequent 90-day period; or
(ii) if (A) the Senior Subordinated Registration Statement is not
declared effective by the Commission within 180 days following the Issue
Date or (B) notwithstanding that the Company Issuers and Holdings have
consummated or will consummate the Senior Subordinated Exchange Offers, the
Company Issuers and Holdings are required to file a Senior Subordinated
Shelf Registration Statement and such Senior Subordinated Shelf
Registration Statement is not declared effective by the Commission on or
prior to the 120th day following the date on which the obligation to file
such Senior Subordinated Shelf Registration Statement arises, then,
commencing on the day after either such required effective date, Additional
Interest shall accrue on the principal amount of the Senior Subordinated
Old Notes at a rate of .25% per annum for
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the first 90 days immediately following such date, such Additional Interest
rate increasing by an additional .25% per annum at the beginning of each
subsequent 90-day period; or
(iii) if (A) the Company Issuers and Holdings have not exchanged
Senior Subordinated Exchange Notes for all Senior Subordinated Old Notes
validly tendered in accordance with the terms of the Senior Subordinated
Exchange Offers on or prior to the later of the 45th day after the date on
which the Senior Subordinated Registration Statement was declared effective
or the 210th day after the Issue Date or (B) if applicable, the Senior
Subordinated Shelf Registration Statement has been declared effective and
such Senior Subordinated Shelf Registration Statement ceases to be
effective at any time prior to the second anniversary of the Issue Date
(other than as a result of a Suspension Period (as defined) and other than
after such time as all Senior Subordinated Old Notes have been disposed of
thereunder), then Additional Interest shall accrue on the principal amount
of the Senior Subordinated Old Notes at a rate of .25% per annum for the
first 90 days commencing on (x) the 46th or 211th, as the case may be, day
after such effective date, in the case of (A) above, or (y) the day such
Senior Subordinated Shelf Registration Statement ceases to be effective in
the case of (B) above (or in the event of a Suspension Period, on the
earlier of the last day of such Suspension Period or the 60th day after
notice of such Suspension Period), such Additional Interest rate increasing
by an additional .25% per annum at the beginning of each subsequent 90-day
period; provided, however, that the Additional Interest rate on the Senior
Subordinated Old Notes may not exceed in the aggregate 1.0% per annum;
provided, further, however, that (1) upon the filing of the Senior
Subordinated Registration Statement or a Senior Subordinated Shelf
Registration Statement (in the case of clause (i) above), (2) upon the
effectiveness of the Senior Subordinated Registration Statement or a Senior
Subordinated Shelf Registration Statement (in the case of clause (ii)
above), or (3) upon the exchange of Senior Subordinated Exchange Notes for
all Senior Subordinated Old Notes tendered (in the case of clause (iii) (A)
above), or upon the effectiveness of the Senior Subordinated Shelf
Registration Statement which had ceased to remain effective (other than as
a result of a Suspension Period) (in the case of clause (iii) (B) above),
Additional Interest on the Senior Subordinated Old Notes as a result of
such clause (or the relevant subclause thereof), as the case may be, shall
cease to accrue. Any amounts of Additional Interest due pursuant to clause
(i), (ii) or (iii) above will be payable in cash on the same original
interest payment dates as provided in the terms of the Senior Subordinated
Old Notes.
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SENIOR DISCOUNT EXCHANGE OFFER;
SENIOR DISCOUNT REGISTRATION RIGHTS
The summary set forth below of certain provisions of the Senior Discount
Registration Rights Agreement does not purport to be complete and is qualified
in its entirety by reference to all the provisions of the Senior Discount
Registration Rights Agreement. The Senior Discount Registration Rights Agreement
is an exhibit to the Registration Statement of which this Prospectus is a part.
On February 2, 1998, the Holdings Issuers and the Initial Purchasers
entered into a registration rights agreement (the 'Senior Discount Registration
Rights Agreement' and, together with the Senior Subordinated Registration Rights
Agreement, the 'Registration Rights Agreements'). In the Senior Discount
Registration Rights Agreement, the Holdings Issuers agree, for the benefit of
holders of the Senior Discount Old Notes, that they will, at their expense, use
their reasonable best efforts to (i) within 120 days after the Issue Date, file
a registration statement on an appropriate registration form (the 'Senior
Discount Registration Statement') with the Commission with respect to a
registered offer (the 'Senior Discount Exchange Offer') to exchange the Senior
Discount Old Notes for Senior Discount Exchange Notes, which will have terms
substantially identical to the terms of the Senior Discount Old Notes (except
that the Senior Discount Exchange Notes will not contain terms with respect to
the transfer restrictions) and (ii) cause the Senior Discount Registration
Statement to be declared effective under the Securities Act within 180 days
after the Issue Date. Upon the Senior Discount Registration Statement being
declared effective, the Holdings Issuers will offer to all holders of the Senior
Discount Old Notes an opportunity to exchange their securities for a like
principal amount at maturity of the Senior Discount Exchange Notes. The Holdings
Issuers will keep the Senior Discount Exchange Offer open for acceptance for not
less than 20 business days (or longer if required by applicable law) after the
date notice of the Senior Discount Exchange Offer is mailed to the holders. For
each Senior Discount Old Note surrendered for exchange pursuant to the Senior
Discount Exchange Offer, the Holder of such Senior Discount Old Note will
receive a Senior Discount Exchange Note having an Accreted Value and a principal
amount at maturity equal to that of the surrendered Senior Discount Old Note.
Under existing interpretations of the Commission contained in several
no-action letters to third parties, the Senior Discount Exchange Notes will be
freely transferable by holders thereof (other than affiliates of the Holdings
Issuers) after the Senior Discount Exchange Offer without further registration
under the Securities Act; provided, however, that each Holder that wishes to
exchange its Senior Discount Old Notes for Senior Discount Exchange Notes will
be required to represent (i) that any Senior Discount Exchange Notes to be
received by it will be acquired in the ordinary course of its business, (ii)
that at the time of the commencement of the Senior Discount Exchange Offer it
has no arrangement or understanding with any person to participate in the
distribution (within the meaning of the Securities Act) of the Senior Discount
Exchange Notes in violation of the Securities Act, (iii) that it is not an
'affiliate' (as defined in Rule 405 promulgated under the Securities Act) of the
Holdings Issuers, (iv) if such holder is not a broker-dealer, that it is not
engaged in, and does not intend to engage in, the distribution of Senior
Discount Exchange Notes and (v) if such holder is a Participating Broker-Dealer
that will receive Senior Discount Exchange Notes for its own account in exchange
for Senior Discount Old Notes that were acquired as a result of market-making or
other trading activities, that it will deliver a prospectus in connection with
any resale of such Senior Discount Exchange Notes. The Commission has taken the
position that Participating Broker-Dealers may fulfill their prospectus delivery
requirements with respect to the Senior Discount Exchange Notes (other than a
resale of an unsold allotment from the original sale of the Senior Discount Old
Notes) with the prospectus contained in the Senior Discount Registration
Statement. The Holdings Issuers agree to make available, during the period
required by the Securities Act, a prospectus meeting the requirements of the
Securities Act for use by Participating Broker-Dealers and other persons, if
any, with similar prospectus delivery requirements for use in connection with
any resale of Senior Discount Exchange Notes.
If, (i) because of any change in law or in currently prevailing
interpretations of the Staff of the Commission, the Holdings Issuers are not
permitted to effect a Senior Discount Exchange Offer, (ii) the Senior Discount
Exchange Offer is not consummated within 210 days of the Issue Date, or (iii) in
the case of any holder that participates in the Senior Discount Exchange Offer,
such holder does not receive Senior Discount Exchange Notes on the date of the
exchange that may be sold without restriction under state and federal securities
laws (other than due solely to the status of such holder as an affiliate of the
Holdings Issuers within the meaning of the
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Securities Act), then in each case, the Holdings Issuers will (x) promptly
deliver to the holders and the Trustee written notice thereof and (y) at their
sole expense, (a) as promptly as practicable, file a shelf registration
statement covering resales of the Senior Discount Old Notes (the 'Senior
Discount Shelf Registration Statement'), (b) use their reasonable best efforts
to cause the Senior Discount Shelf Registration Statement to be declared
effective under the Securities Act and (c) use their reasonable best efforts to
keep effective the Senior Discount Shelf Registration Statement until the
earlier of two years after the Issue Date or such time as all of the applicable
Senior Discount Old Notes have been sold thereunder. The Holdings Issuers will,
in the event that a Senior Discount Shelf Registration Statement is filed,
provide to each holder copies of the prospectus that it is a part of the Senior
Discount Shelf Registration Statement, notify each such holder when the Senior
Discount Shelf Registration Statement for the Senior Discount Old Notes has
become effective and take certain other actions as are required to permit
unrestricted resales of the Senior Discount Old Notes. A holder that sells
Senior Discount Old Notes pursuant to the Senior Discount Shelf Registration
Statement will be required to be named as a selling securityholder in the
related prospectus and to deliver a prospectus to purchasers, will be subject to
certain of the civil liability provisions under the Securities Act in connection
with such sales and will be bound by the provisions of the Senior Discount
Registration Rights Agreement that are applicable to such holder (including
certain indemnification rights and obligations).
If the Holdings Issuers fail to comply with the above provisions or if the
Senior Discount Registration Statement or the Senior Discount Shelf Registration
Statement fails to become effective, then, as liquidated damages, Additional
Interest shall become payable in cash in respect of the Senior Discount Old
Notes, whether or not cash interest is otherwise payable with respect to the
Senior Discount Old Notes, as follows:
(i) if (A) the Senior Discount Registration Statement is not filed
with the Commission within 120 days following the Issue Date or (B)
notwithstanding that the Holdings Issuers have consummated or will
consummate a Senior Discount Exchange Offer, the Holdings Issuers are
required to file a Senior Discount Shelf Registration Statement and such
Senior Discount Shelf Registration Statement is not filed on or prior to
the 60th day following the date on which the obligation to file such Senior
Discount Shelf Registration Statement arises, then commencing on the day
after either such required filing date, Additional Interest shall accrue on
the average Accreted Value of the Senior Discount Old Notes at a rate of
.25% per annum for the first 90 days immediately following each such filing
date, such Additional Interest rate increasing by an additional .25% per
annum at the beginning of each subsequent 90-day period; or
(ii) if (A) the Senior Discount Registration Statement is not declared
effective by the Commission within 180 days following the Issue Date or (B)
notwithstanding that the Holdings Issuers have consummated or will
consummate a Senior Discount Exchange Offer, the Holdings Issuers are
required to file a Senior Discount Shelf Registration Statement and such
Senior Discount Shelf Registration Statement is not declared effective by
the Commission on or prior to the 120th day following the date on which the
obligation to file such Senior Discount Shelf Registration Statement
arises, then, commencing on the day after either such required effective
date, Additional Interest shall accrue on the average Accreted Value of the
Senior Discount Old Notes at a rate of .25% per annum for the first 90 days
immediately following such date, such Additional Interest rate increasing
by an additional .25% per annum at the beginning of each subsequent 90-day
period; or
(iii) if (A) the Holdings Issuers have not exchanged Senior Discount
Exchange Notes for all Senior Discount Old Notes validly tendered in
accordance with the terms of the Senior Discount Exchange Offer on or prior
to the later of the 45th day after the date on which the Senior Discount
Registration Statement was declared effective or the 210th day after the
Issue Date or (B) if applicable, the Senior Discount Shelf Registration
Statement has been declared effective and such Senior Discount Shelf
Registration Statement ceases to be effective at any time prior to the
second anniversary of the Issue Date (other than as a result of a
Suspension Period (as defined) and other than after such time as all Senior
Discount Old Notes have been disposed of thereunder), then Additional
Interest shall accrue on the average Accreted Value of the Senior Discount
Old Notes at a rate of .25% per annum for the first 90 days commencing on
(x) the 46th or the 211th, as the case may be, day after such effective
date, in the case of (A) above, or (y) the day such Senior Discount Shelf
Registration Statement ceases to be effective in the case of (B) above (or
in the event of a Suspension Period, on the earlier of the last day of such
Suspension Period or the 60th day after notice of such Suspension Period),
such Additional Interest rate increasing by an additional .25% per annum at
the
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beginning of each subsequent 90-day period; provided, however, that the
Additional Interest rate on the Senior Discount Old Notes may not exceed in
the aggregate 1.0% per annum; provided, further, however, that (1) upon the
filing of the Senior Discount Registration Statement or a Senior Discount
Shelf Registration Statement (in the case of clause (i) above), (2) upon
the effectiveness of the Senior Discount Registration Statement or a Senior
Discount Shelf Registration Statement (in the case of clause (ii) above),
or (3) upon the exchange of Senior Discount Exchange Notes for all Senior
Discount Old Notes tendered (in the case of clause (iii) (A) above), or
upon the effectiveness of the Senior Discount Shelf Registration Statement
which had ceased to remain effective (other than as a result of a
Suspension Period) (in the case of clause (iii) (B) above), Additional
Interest on the Senior Discount Old Notes as a result of such clause (or
the relevant subclause thereof), as the case may be, shall cease to accrue.
Any amounts of Additional Interest due pursuant to clause (i), (ii) or
(iii) above will be payable in cash on January 15 and July 15 of each year
during which such Additional Interest is payable, commencing with the first such
date to occur after the obligation to pay Additional Interest arises.
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BOOK ENTRY; DELIVERY AND FORM
The certificates representing the Senior Subordinated Exchange Notes and
the Senior Discount Exchange Notes will be issued in fully registered form. The
Fixed Rate Senior Subordinated Exchange Notes, the Floating Rate Senior
Subordinated Exchange Notes and the Senior Discount Exchange Notes will each
initially be represented by a single, permanent global Exchange Note, in
definitive, fully registered form without interest coupons (each a 'Global
Exchange Note') and will be deposited with the applicable Trustee as custodian
for The Depository Trust Company, New York, New York ('DTC') and registered in
the name of a nominee of DTC.
DTC has advised the Issuers as follows:
DTC is a limited purpose trust company organized under the laws of the
State of New York, a 'banking organization' within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a 'clearing corporation'
within the meaning of the Uniform Commercial Code and a 'Clearing Agency'
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
was created to hold securities for its participants (the 'Participants') and
facilitate the clearance and settlement of securities transactions between
Participants through electronic book-entry changes in accounts of its
Participants, thereby eliminating the need for physical movement of
certificates. Participants include securities brokers and dealers, banks, trust
companies and clearing corporations and certain other organizations. Indirect
access to the DTC system is available to others such as banks, brokers, dealers
and trust companies that clear through or maintain a custodial relationship with
a Participant, either directly or indirectly ('indirect participants').
So long as DTC, or its nominee, is the registered owner or holder of the
Fixed Rate Senior Subordinated Exchange Notes, the Floating Rate Senior
Subordinated Exchange Notes and the Senior Discount Exchange Notes, DTC or such
nominee, as the case may be, will be considered the sole owner or holder of the
Fixed Rate Senior Subordinated Exchange Notes, the Floating Rate Senior
Subordinated Exchange Notes and the Senior Discount Exchange Notes represented
by such Global Exchange Notes for all purposes under the respective Indentures.
No beneficial owner of an interest in any Global Exchange Note will be able to
transfer that interest except in accordance with DTC's procedures, in addition
to those provided for under the applicable Indenture.
Payments of the principal of, premium if any, and interest on, the
respective Global Exchange Notes will be made to DTC or its nominee, as the case
may be, as the registered owner thereof. None of the Company Issuers, the
Holdings Issuers, Holdings as guarantor, the Senior Subordinated Trustee, the
Senior Discount Trustee or any paying agent will have any responsibility or
liability for any aspect of the records, relating to or payments made on account
of beneficial ownership in any of the Global Exchange Notes or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interest.
The respective Issuers expect that DTC or its nominee, upon receipt of any
payment of principal, premium, if any, and interest (including liquidated
damages) on any Global Exchange Note, will credit Participants' accounts with
payments in amounts proportionate to their respective beneficial interests in
the principal amount of such Global Exchange Note as shown on the records of DTC
or its nominee. The Issuers also expect that payments by participants to owners
of beneficial interests in any Global Exchange Note held through such
Participants will be governed by standing instructions and customary practice,
as is now the case with securities held for the accounts of customers registered
in the names of nominees for such customers. Such payments will be the
responsibility of such Participants.
Transfers between Participants in DTC will be effected in the ordinary way
through DTC's same-day funds system in accordance with DTC rules and will be
settled in same-day funds. If a holder requires physical delivery of a
Certificated Security for any reason, including to sell Exchange Notes to
persons in states which require physical delivery of the Exchange Notes, or to
pledge such securities, such holder must transfer its interest in the applicable
Global Exchange Note, in accordance with the normal procedures of DTC and with
the procedures set forth in the applicable Indenture.
DTC has advised the respective Issuers that it will take any action
permitted to be taken by a holder of Exchange Notes (including the presentation
of Exchange Notes for exchange as described below) only at the direction of one
or more Participants to whose account the DTC interests in the applicable Global
Exchange Note are credited and only in respect of such portion of the aggregate
principal amount of Exchange Notes as to which
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such Participant or Participants has or have given such direction. However, if
there is an Event of Default under the applicable Indenture, DTC will exchange
the related Global Exchange Note for Certificated Securities, which it will
distribute to its Participants.
Upon the issuance of each Global Exchange Note, DTC or its custodian will
credit, on its internal system, the respective principal amount of the
individual beneficial interests represented by such Global Exchange Note to the
accounts of persons who have accounts with such depositary. Ownership of
beneficial interests in each Global Exchange Note will be limited to
Participants or persons who hold interests through Participants. Ownership of
beneficial interests in each Global Exchange Note will be shown on, and the
transfer of that ownership will be effected only through, records maintained by
DTC or its nominee (with respect to interests of Participants) and the records
of Participants (with respect to interests of persons other than Participants).
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the Global Exchange Notes among Participants, it is
under no obligation to perform such procedures, and such procedures may be
discontinued at any time. Neither the Company Issuers, Holdings, as guarantor,
the Holdings Issuers, the Senior Subordinated Trustee nor the Senior Discount
Trustee will have any responsibility for the performance by DTC or its
Participants or indirect participants of their respective obligations under the
rules and procedures governing their operations.
If DTC is at any time unwilling or unable to continue as a depositary for
any Global Exchange Note and a successor depositary is not appointed by the
related Issuers within 90 days, Certificated Securities will be issued in
exchange for such Global Exchange Note.
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PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own account
pursuant to any of the Exchange Offers must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of Exchange Notes received in
exchange for Old Notes where such Old Notes were acquired as a result of
market-making activities or other trading activities. A broker-dealer may not
participate in any Exchange Offer with respect to Old Notes acquired other than
as a result of market-making activities or other trading activities. To the
extent any such broker-dealer participates in any Exchange Offer and so notifies
the applicable Issuers, or causes such Issuers to be so notified in writing, the
Issuers have agreed that for a period of 90 days after the date of this
Prospectus, they will make this Prospectus, as amended or supplemented,
available to such broker-dealer for use in connection with any such resale, and
will promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the applicable Letter of Transmittal. In addition, until , 1998
(90 days after the date of this Prospectus), all dealers effecting transactions
in the Exchange Notes may be required to deliver a prospectus.
The Issuers will not receive any proceeds from any sale of Exchange Notes
by broker-dealers. Exchange Notes received by broker-dealers for their own
account pursuant to any of the Exchange Offers may be sold from time to time in
one or more transactions in the over-the-counter market, in negotiated
transactions, through the writing of options on the Exchange Notes or a
combination of such methods of resale, at prevailing market prices at the time
of resale, at prices related to such prevailing market prices or at negotiated
prices. Any such resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such broker-dealer or the purchasers of any such Exchange
Notes. Any broker-dealer that resells Exchange Notes that were received by it
for its own account pursuant to any of the Exchange Offers and any broker or
dealer that participates in a distribution of such Exchange Notes may be deemed
to be an 'underwriter' within the meaning of the Securities Act, and any profit
on any such resale of Exchange Notes and any commissions or concessions received
by any such persons may be deemed to be underwriting compensation under the
Securities Act. Each Letter of Transmittal states that, by acknowledging that it
will deliver and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an 'underwriter' within the meaning of the Securities Act.
The Issuers have agreed to pay all expenses incident to each of the
Exchange Offers (other than commissions and concessions of any broker-dealers),
subject to certain prescribed limitations, and will indemnify the holders of the
Old Notes against certain liabilities, including certain liabilities that may
arise under the Securities Act.
By its acceptance of any Exchange Offer, any broker-dealer that receives
Exchange Notes pursuant to such Exchange Offer hereby agrees to notify the
applicable Issuers prior to using this Prospectus in connection with the sale or
transfer of Exchange Notes, and acknowledges and agrees that, upon receipt of
notice from the applicable Issuers of the happening of any event which makes any
statement in this Prospectus untrue in any material respect or which requires
the making of any changes in this Prospectus in order to make the statements
herein not misleading or which may impose upon the Issuers disclosure
obligations that may have a material adverse effect on the Issuers (which notice
the Issuers agree to deliver promptly to such broker-dealer), such broker-dealer
will suspend use of this Prospectus until the Issuers have notified such
broker-dealer that delivery of this Prospectus may resume and have furnished
copies of any amendment or supplement to this Prospectus to such broker-dealer.
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CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
The exchange of Senior Subordinated Old Notes or Senior Discount Old Notes
for Senior Subordinated Exchange Notes or Senior Discount Exchange Notes, as the
case may be, in the applicable Exchange Offer should not constitute a taxable
event to the holders. Consequently, no gain or loss will be recognized by a
holder upon receipt of an Exchange Note, the holding period of the Exchange Note
will include the holding period of the Old Note for which it is exchanged and
the basis of the Exchange Note will be the same as the basis of the Old Note for
which it is exchanged immediately before the exchange.
In any event, persons considering the exchange of Old Notes for Exchange
Notes should consult their own tax advisors concerning the United States federal
income tax consequences in light of their particular situations as well as any
consequences arising under the laws of any other taxing jurisdiction.
CHANGE IN INDEPENDENT ACCOUNTANTS
Holdings, which is composed of the legal entities and operations that prior
to the Recapitalization, which occurred on February 2, 1998, were known as the
Graham Packaging Group (the 'Group'), has engaged Deloitte & Touche LLP as its
independent auditors for the year ending December 31, 1998 to replace the firm
of Ernst & Young LLP, who were dismissed as auditors of Holdings effective April
30, 1998. The action was formalized by a resolution adopted by Investor GP, as
general partner of Holdings, on July 10, 1998, but effective as of April 30,
1998.
The reports of Ernst & Young LLP on the combined financial statements of
the Group for the years ended December 31, 1997 and 1996 and for each of the
three years in the period ended December 31, 1997 did not contain an adverse
opinion or a disclaimer of opinion and were not qualified or modified as to
uncertainty, audit scope, or accounting principles.
In connection with the audits of the Group's combined financial statements
for each of the two years in the period ended December 31, 1997, and in the
subsequent interim period, there were no disagreements with Ernst & Young LLP on
any matters of accounting principles or practices, financial statement
disclosure, or auditing scope and procedures which, if not resolved to the
satisfaction of Ernst & Young LLP would have caused Ernst & Young LLP to make
reference to the matter in their report.
LEGAL MATTERS
Certain legal matters relating to the Exchange Offers will be passed upon
for the Issuers by Simpson Thacher & Bartlett, New York, New York, and certain
legal matters relating to Pennsylvania law will be passed upon for the Issuers
by Morgan, Lewis & Bockius LLP, Philadelphia, Pennsylvania.
EXPERTS
The combined financial statements and schedule of Graham Packaging Group at
December 31, 1997 and 1996, and for each of the three years in the period ended
December 31, 1997 appearing in this Prospectus and Registration Statement have
been audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon appearing elsewhere herein, and are included in reliance upon
such report given upon the authority of such firm as experts in accounting and
auditing.
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INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Auditors............................................................................. F-2
Audited Combined Financial Statements
Combined Balance Sheets at December 31, 1996 and 1997...................................................... F-3
Combined Statements of Income for the years ended December 31, 1995, 1996 and 1997......................... F-4
Combined Statements of Owners' Equity for the years ended December 31, 1995, 1996 and 1997................. F-5
Combined Statements of Cash Flows for the years ended December 31, 1995, 1996 and 1997..................... F-6
Notes to Combined Financial Statements..................................................................... F-7
Unaudited Condensed Financial Statements
Condensed Balance Sheets at December 31, 1997 and March 29, 1998........................................... F-21
Condensed Statements of Operations for the three months ended March 30, 1997 and
March 29, 1998........................................................................................... F-22
Condensed Statements of Partners' Capital/Owners' Equity (Deficit) for the year ended December 31, 1997 and
the three months ended March 29, 1998.................................................................... F-23
Condensed Statements of Cash Flows for the three months ended
March 30, 1997 and March 29, 1998........................................................................ F-24
Notes to Condensed Financial Statements.................................................................... F-25
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Owners
Graham Packaging Group
We have audited the accompanying combined balance sheets of the entities and
operations listed in Note 1, collectively referred to as the Graham Packaging
Group, as of December 31, 1996 and 1997, and the related combined statements of
income, owners' equity, and cash flows for each of the three years in the period
ended December 31, 1997. Our audit also included the financial statement
schedule listed in the Index at Item 21(b). These financial statements and
schedule are the responsibility of the Group's management. Our responsibility is
to express an opinion on these financial statements and schedule based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the combined financial position of the entities and
operations listed in Note 1, at December 31, 1996 and 1997, and the combined
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1997, in conformity with generally accepted
accounting principles. Also, in our opinion, the related financial statement
schedule, when considered in relation to the basic financial statements taken as
a whole, presents fairly in all material respects the information set forth
therein.
/s/ ERNST & YOUNG LLP
Harrisburg, Pennsylvania
March 23, 1998,
except for the matters
discussed in the last paragraph
of Notes 13 and 17, as to which
the date is April 24, 1998
F-2
<PAGE>
GRAHAM PACKAGING GROUP
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1996 1997
-------- --------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................................................... $ 3,431 $ 7,218
Accounts receivable..................................................................... 59,903 69,295
Inventories............................................................................. 28,918 32,236
Prepaid expenses and other current assets............................................... 6,442 9,198
-------- --------
Total current assets...................................................................... 98,694 117,947
Property, plant, and equipment:
Machinery and equipment................................................................. 439,770 478,534
Land, buildings, and leasehold improvements............................................. 70,100 68,146
Construction in progress................................................................ 24,642 41,230
-------- --------
534,512 587,910
Less accumulated depreciation and amortization.......................................... 303,156 327,614
-------- --------
231,356 260,296
Other assets.............................................................................. 8,763 7,248
-------- --------
Total assets.............................................................................. $338,813 $385,491
-------- --------
-------- --------
LIABILITIES AND OWNERS' EQUITY
Current liabilities:
Accounts payable........................................................................ $ 47,814 $ 56,547
Accrued expenses........................................................................ 30,462 51,814
Current portion of long-term debt....................................................... 5,150 4,771
-------- --------
Total current liabilities................................................................. 83,426 113,132
Long-term debt............................................................................ 235,366 263,694
Other non-current liabilities............................................................. 3,216 3,345
Minority interest......................................................................... -- 4,983
Owners' equity:
Owners' capital......................................................................... 38,715 20,383
Notes receivable for ownership interests................................................ (20,240) (20,240)
Other comprehensive income.............................................................. (1,670) 194
-------- --------
Total owners' equity...................................................................... 16,805 337
-------- --------
Total liabilities and owners' equity...................................................... $338,813 $385,491
-------- --------
-------- --------
</TABLE>
See accompanying notes.
F-3
<PAGE>
GRAHAM PACKAGING GROUP
COMBINED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1995 1996 1997
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Net sales.................................................................... $466,766 $459,740 $521,707
Cost of goods sold........................................................... 399,946 382,547 437,301
-------- -------- --------
66,820 77,193 84,406
Selling, general, and administrative expenses................................ 35,540 35,472 34,882
Special charges and unusual items............................................ 5,904 7,037 24,361
-------- -------- --------
Operating income............................................................. 25,376 34,684 25,163
Interest expense............................................................. 18,178 15,686 14,940
Interest income.............................................................. (1,999) (1,233) (1,510)
Other (income) expense....................................................... (11,048) (977) 755
Minority interest............................................................ -- -- 165
-------- -------- --------
Income before income taxes and extraordinary item............................ 20,245 21,208 10,813
Income tax provision (benefit)............................................... (288) (24) 600
-------- -------- --------
Income before extraordinary item............................................. 20,533 21,232 10,213
Extraordinary loss from early extinguishment of debt......................... 1,859 -- --
-------- -------- --------
Net income................................................................... $ 18,674 $ 21,232 $ 10,213
-------- -------- --------
-------- -------- --------
</TABLE>
See accompanying notes.
F-4
<PAGE>
GRAHAM PACKAGING GROUP
COMBINED STATEMENTS OF OWNERS' EQUITY
<TABLE>
<CAPTION>
NOTES
RECEIVABLE FOR OTHER
OWNERS' OWNERSHIP COMPREHENSIVE
CAPITAL INTERESTS INCOME TOTAL
-------- -------------- ------------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Balance at January 1, 1995................................. $ 37,512 $(20,240) $(1,715) $ 15,557
--------
Net income for the year.................................. 18,674 -- -- 18,674
Cumulative translation adjustment........................ -- -- (611) (611)
--------
Comprehensive income..................................... 18,063
--------
Cash distributions to owners............................. (18,364) -- -- (18,364)
-------- -------------- ------------- --------
Balance at December 31, 1995............................... 37,822 (20,240) (2,326) 15,256
--------
Net income for the year.................................. 21,232 -- -- 21,232
Cumulative translation adjustment........................ -- -- 656 656
--------
Comprehensive income..................................... 21,888
--------
Cash distributions to owners............................. (20,339) -- -- (20,339)
-------- -------------- ------------- --------
Balance at December 31, 1996............................... 38,715 (20,240) (1,670) 16,805
--------
Net income for the year.................................. 10,213 -- -- 10,213
Cumulative translation adjustment........................ -- -- 1,864 1,864
--------
Comprehensive income..................................... 12,077
--------
Cash distributions to owners............................. (28,737) -- -- (28,737)
Other.................................................... 192 -- -- 192
-------- -------------- ------------- --------
Balance at December 31, 1997............................... $ 20,383 $(20,240) $ 194 $ 337
-------- -------------- ------------- --------
-------- -------------- ------------- --------
</TABLE>
See accompanying notes.
F-5
<PAGE>
GRAHAM PACKAGING GROUP
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------
1995 1996 1997
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Operating activities:
Net income............................................................... $ 18,674 $ 21,232 $ 10,213
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization....................................... 45,696 48,218 41,039
Amortization of debt issuance fees.................................. 379 216 320
Extraordinary loss.................................................. 1,859 -- --
Gain on disposition of business..................................... (4,415) -- --
Minority interest................................................... -- -- 165
Equity income in earnings of joint venture.......................... (125) (257) (200)
Foreign currency transaction (gain) loss............................ 364 (1,045) 1,124
Other non-current assets and liabilities............................ (364) (1,499) 565
Changes in operating assets and liabilities, net of acquisition
of business:
Accounts receivable................................................. (5,203) (996) (10,918)
Inventories......................................................... (1,790) 1,773 (3,605)
Prepaid expenses and other current assets........................... 329 3,751 (3,935)
Accounts payable and accrued expenses............................... 5,072 (3,375) 32,137
--------- --------- ---------
Net cash provided by operating activities.................................. 60,476 68,018 66,905
Investing activities:
Net purchases of property, plant, and equipment.......................... (68,639) (31,252) (53,173)
Proceeds from disposition of subsidiary, net of cash sold................ 3,440 -- --
Acquisition of Brazilian business........................................ -- -- (19,016)
Joint ventures and other investments..................................... (3,185) (1,239) --
Other.................................................................... -- (271) (88)
--------- --------- ---------
Net cash used in investing activities...................................... (68,384) (32,762) (72,277)
Financing activities:
Proceeds from issuance of long-term debt................................. 399,699 117,528 174,049
Payment of long-term debt................................................ (370,833) (131,321) (136,430)
Cash distributions to owners............................................. (18,364) (20,339) (28,073)
Debt issuance fees....................................................... (1,285) (541) --
Other.................................................................... -- 51 --
--------- --------- ---------
Net cash (used in) provided by financing activities........................ 9,217 (34,622) 9,546
Effect of exchange rate changes............................................ (118) 352 (387)
--------- --------- ---------
Increase in cash and cash equivalents...................................... 1,191 986 3,787
Cash and cash equivalents at beginning of year............................. 1,254 2,445 3,431
--------- --------- ---------
Cash and cash equivalents at end of year................................... $ 2,445 $ 3,431 $ 7,218
--------- --------- ---------
--------- --------- ---------
</TABLE>
See accompanying notes.
F-6
<PAGE>
GRAHAM PACKAGING GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Combination
The combined financial statements include the operations of Graham
Packaging Holdings Company, a Pennsylvania limited partnership formerly known as
Graham Packaging Company ('Holdings'); Graham Packaging Italy, an Italian SRL;
Graham Packaging France Partners, G.P.; Graham Packaging Poland, L.P.; Graham
Packaging do Brasil Industriais e Comerciais S.A.; Graham Packaging Canada,
Ltd., a Canadian limited liability company; Graham Packaging Company, a Delaware
limited partnership formerly known as Graham Packaging Holdings I, L.P. (the
'Operating Company'); Graham Recycling Company, L.P.; subsidiaries thereof; and
land and buildings that were used in the operations, owned by the control group
of owners and contributed to the Group (see Note 19 to the Combined Financial
Statements). Prior to February 2, 1998, these operations were under common
control by virtue of ownership by the Donald C. Graham family. The combined
financial statements include the accounts and results of operations of the Group
for all periods that the operations were under common control. All amounts are
those reported in the historical financial statements of the individual
operations. All significant intercompany accounts and transactions have been
eliminated in the combined financial statements. These entities and assets are
collectively referred to as Graham Packaging Group (the 'Group'). With respect
to the periods subsequent to the Recapitalization on February 2, 1998,
references to the 'Group' refer to Holdings and its subsidiaries.
Description of Business
The Group sells plastic packaging products to large, multinational
companies in the automotive, food and beverage, and household cleaning and
personal care industries. The Group has manufacturing facilities in the United
States, Canada, France, Italy, Poland and Brazil.
Investment in Joint Venture
The Group accounts for its investment in a joint venture in Poland under
the equity method of accounting.
Revenue Recognition
Sales are recognized as products are shipped and upon passage of title to
the customer and as services are rendered.
Cash and Cash Equivalents
The Group considers cash and investments with a maturity of three months or
less when purchased to be cash and cash equivalents.
Inventories
Inventories are stated at the lower of cost or market with cost determined
by the last-in, first-out (LIFO) and first-in, first-out (FIFO) methods.
Property, Plant and Equipment
Property, plant, and equipment are stated on the basis of cost.
Depreciation and amortization are computed by the straight-line method over the
estimated useful lives of the various assets ranging from 3 to 31.5 years. Lease
amortization is included in depreciation expense.
F-7
<PAGE>
GRAHAM PACKAGING GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
Other Assets
Other assets include debt issuance fees, goodwill and license fees for
which amortization is computed by the straight-line method over the term of the
related debt for debt issuance fees and otherwise for periods ranging
principally from five to ten years.
Derivatives
The Group enters into interest rate collar and swap agreements to hedge the
exposure to increasing rates with respect to its Credit Agreement. The
differential to be paid or received as a result of these collar and swap
agreements is accrued as interest rates change and recognized as an adjustment
to interest expense related to the Credit Agreement.
The Group also enters into forward exchange contracts, when appropriate, to
hedge the exchange rate exposure on transactions that are denominated in a
foreign currency. The Group enters into foreign currency borrowings to hedge the
net income exposure from translating certain intercompany accounts and the
foreign currency net asset exposure of foreign operations.
Foreign Currency Translation
The Group uses the local currency as the functional currency for all
foreign operations. All assets and liabilities of foreign operations are
translated into U.S. dollars at year-end exchange rates. Income statement items
are translated at average exchange rates prevailing during the year. The
resulting translation adjustments are recorded as a separate component of
owners' equity.
Comprehensive Income
As of January 1, 1998, the Group adopted Statement of Financial Accounting
Standards No. 130 ('Statement 130'), Reporting Comprehensive Income. Statement
130 establishes new rules for the reporting and display of comprehensive income
and its components; however, the adoption of this Statement had no impact on the
Group's net income or owners' equity. Statement 130 requires foreign currency
translation adjustments, which prior to adoption were reported separately in
owners' equity, to be included in other comprehensive income and added with net
income to determine total comprehensive income which is displayed in the
Combined Statements of Owners' Equity. Prior year financial statements have been
reclassified to conform to the requirements of Statement 130.
Income Taxes
The Group does not pay U.S. federal income taxes under the provisions of
the Internal Revenue Code, as the applicable income or loss is included in the
tax returns of the owners. For the Group's foreign operations subject to tax in
their local jurisdictions, deferred tax assets and liabilities are recognized
for the future tax consequences attributable to temporary differences between
the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases and are measured using enacted tax rates expected to
apply to taxable income in the years in which the temporary differences are
expected to reverse.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
F-8
<PAGE>
GRAHAM PACKAGING GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
Reclassifications
Certain reclassifications have been made to the 1995 and 1996 financial
statements to conform to the 1997 presentation.
New Accounting Pronouncements Not Yet Adopted
In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 131, Disclosures about Segments of an Enterprise and Related Information
('Statement 131'). Statement 131 establishes standards for the way that public
business enterprises report selected information about operating segments in
annual financial statements and requires that those enterprises report selected
information about operating segments in interim financial reports. It also
establishes standards for related disclosures about products and services,
geographic areas and major customers. Statement 131 is effective for financial
statements for fiscal years beginning after December 15, 1997, and therefore,
the Group will adopt the new requirements in 1998, which will require
retroactive disclosure. Management has not completed its review of Statement 131
and has not determined the impact adoption will have on the Group's financial
statements.
In March 1998, the AICPA issued SOP 98-1, Accounting For the Costs of
Computer Software Developed For or Obtained For Internal-Use. The SOP is
effective for the Group on January 1, 1999. The SOP will require the
capitalization of certain costs incurred after the date of adoption in
connection with developing or obtaining software for internal-use. The Group
currently capitalizes certain external costs and expenses all other costs as
incurred. The Group has not yet assessed what the impact of the SOP will be on
the Group's future earnings or financial position.
2. PURCHASE OF RHEEM-GRAHAM EMBALAGENS, LTDA.
On April 30, 1997, Graham Packaging do Brasil Industriais e Comerciais
S.A., then a wholly owned subsidiary, with no operations, of Holdings and owners
of Holdings, acquired 80% of the operating assets of Rheem-Graham Embalagens
Ltda., which manufactures and sells plastic packaging products, from Rheem
Empreendimentos Industrialis e Comerciais. Rheem Empreendimentos Industrialis e
Comerciais contributed the remaining 20% of the operating assets of Rheem-Graham
Embalagens Ltda. in exchange for a 20% minority interest in Graham Packaging do
Brasil Industriais e Comerciais S.A. The purchase price related to the 80% of
the operating assets of Rheem-Graham Embalagens Ltda. was approximately $21.1
million, which was funded through borrowings under the Group's bank facilities.
The acquisition was recorded under the purchase method of accounting and
accordingly, the results of operations of the business acquired by Graham
Packaging do Brasil Industriais e Comerciais S.A. are included in the combined
financial statements of the Group beginning on April 30, 1997, less a minority
interest amount equal to 20% of Graham Packaging do Brasil Industriais e
Comerciais S.A. owned by the unaffiliated entity. The purchase price has been
allocated to assets acquired and liabilities assumed based upon fair values on
the date of acquisition. The fair value of assets and liabilities acquired and
contributed to Graham Packaging do Brasil Industriais e Comerciais S.A. is
summarized as follows (in thousands):
<TABLE>
<S> <C>
Net working capital............................................ $ 2,451
Property, plant and equipment.................................. 23,679
-------
$26,130
-------
-------
</TABLE>
F-9
<PAGE>
GRAHAM PACKAGING GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997
2. PURCHASE OF RHEEM-GRAHAM EMBALAGENS, LTDA.--(CONTINUED)
The following table sets forth unaudited pro forma combined results of
operations assuming that the acquisition had taken place on January 1, 1996.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1996 1997
---------- ------------
(IN THOUSANDS)
<S> <C> <C>
Net sales......................................................... $482,840 $529,207
Net income........................................................ 22,368 10,647
</TABLE>
These unaudited pro forma results have been prepared for comparative
purposes only and include certain adjustments, such as additional depreciation
expense as a result of a step-up in the basis of fixed assets, increased
interest expense on acquisition debt, and a 20% minority interest reduction in
earnings of Graham Packaging do Brasil Industriais e Comerciais S.A. relating to
the interest in the company owned by an unaffiliated entity. They do not purport
to be indicative of the results of operations which actually would have resulted
had the combination been in effect on January 1, 1996, or of future results of
operations of the combined entities.
In February 1998, the Group acquired the remaining 20% minority interest in
Graham Packaging do Brasil Industriais e Comerciais S.A. from Rheem
Empreendimentos Industrialis e Comerciais for $2,995,000.
3. ACCOUNTS RECEIVABLE
Accounts receivable are presented net of an allowance for doubtful accounts
of $1,202,000 and $1,635,000 at December 31, 1996 and 1997 respectively.
Management performs ongoing credit evaluations of its customers and generally
does not require collateral.
The Group's sales to two customers, each of which exceeded 10% of total
sales in 1995 and one of which exceeded 10% of total sales in 1996 and 1997,
totaled 23%, 22% and 22% for the years ended December 31, 1995, 1996 and 1997,
respectively. On an annual basis, approximately 80%, 13% and 7% of the sales to
these two customers were made in the United States, Europe and Canada,
respectively.
4. INVENTORIES
Inventories consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1996 1997
------- -------
(IN THOUSANDS)
<S> <C> <C>
Finished goods.......................................................... $15,770 $18,759
Raw materials and parts................................................. 14,818 15,447
------- -------
30,588 34,206
Less LIFO allowance..................................................... 1,670 1,970
------- -------
$28,918 $32,236
------- -------
------- -------
</TABLE>
The December 31, 1996 and 1997 inventories valued using the LIFO method
totaled $19,570,000 and $22,446,000, respectively.
F-10
<PAGE>
GRAHAM PACKAGING GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997
5. ACCRUED EXPENSES
Accrued expenses consisted of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
---------------------
1996 1997
------- -------
(IN THOUSANDS)
<S> <C> <C>
Accrued employee compensation and benefits.......................... $14,037 $16,305
Special charges and unusual items................................... 1,667 18,472
Other............................................................... 14,758 17,037
------- -------
$30,462 $51,814
------- -------
------- -------
</TABLE>
6. DEBT ARRANGEMENTS
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
---------------------
1996 1997
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Credit agreement:
Term loan......................................................... $125,000 $125,000
Revolving loan.................................................... 101,662 132,179
Revolving credit facilities....................................... 8,080 6,653
Other............................................................. 5,774 4,633
-------- --------
240,516 268,465
Less amounts classified as current.................................. 5,150 4,771
-------- --------
$235,366 $263,694
-------- --------
-------- --------
</TABLE>
In 1995, the Group refinanced its existing credit agreement and executed a
new $350 million Credit Agreement with a consortium of banks. The Credit
Agreement consisted of a term loan of $125 million and a revolving loan
providing availability of $225 million. The term loan was payable in annual
installments beginning March 31, 1998 through March 31, 2000. The revolving loan
was scheduled to expire on April 18, 2000. The refinancing resulted in an
extraordinary charge to income of $1,859,000 in 1995. This extraordinary charge
consisted of the write-off of unamortized debt issuance fees.
The Group's effective rate on the outstanding borrowings under the term
loan and revolving loan was 5.78% and 6.03% at December 31, 1996 and 1997,
respectively.
At December 31, 1997, the Group had two U.S. Dollar interest rate swap
agreements outstanding which effectively fixed the Eurocurrency Rate on the term
loan, through the duration of such loan. The average rate of the two U.S. Dollar
interest rate swap agreements at December 31, 1997, was 5.55%. At December 31,
1997, the U.S. Dollar Eurocurrency Rate was 6.0%.
At December 31, 1997, the Group had a French Franc interest rate swap
agreement which effectively fixed the Eurocurrency Rate at 4.59% on a notional
amount of French Franc denominated borrowings equivalent to $37,500,000 through
April, 2000. The Group had also entered into a French Franc interest rate collar
agreement that set a minimum and maximum Eurocurrency Rate at 3.5% and 6.52%,
respectively, on a notional amount of French Franc denominated borrowings
equivalent to $16,700,000. At December 31, 1997, the French Franc Eurocurrency
Rate was 3.61%.
The Group had several variable-rate revolving credit facilities denominated
in U.S. Dollars, French Francs and Italian Lire, with aggregate available
borrowings equivalent to $16,200,000. The Group's average effective
F-11
<PAGE>
GRAHAM PACKAGING GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997
6. DEBT ARRANGEMENTS--(CONTINUED)
rate on borrowings of $8,080,000 on these credit facilities was 6.25% at
December 31, 1996. The Group's average effective rate on borrowings of
$6,653,000 on these credit facilities was 6.70% at December 31, 1997.
Interest paid during 1995, 1996 and 1997, net of amounts capitalized of
$869,000, $572,000 and $615,000, respectively, totaled $18,115,000, $15,868,000
and $14,900,000, respectively.
On February 2, 1998, as discussed in Note 19 to the Combined Financial
Statements, the Group refinanced the majority of its existing credit facilities
in connection with the Recapitalization and entered into a new Credit Agreement
(the 'New Credit Agreement') with a consortium of banks. The New Credit
Agreement consists of three term loans to the Operating Company totaling $395
million and two revolving loan facilities to the Operating Company totaling $255
million. The obligations of the Operating Company under the New Credit Agreement
are guaranteed by Holdings and certain other subsidiaries of Holdings. The term
loans are payable in quarterly installments beginning June 30, 1998 through
January 31, 2007, and require payments of $3,200,000 in 1998, $3,200,000 in
1999, $13,200,000 in 2000, $18,200,000 in 2001 and $23,200,000 in 2002. The
revolving loan facilities expire on January 31, 2004. Interest is payable at (a)
the 'Alternate Base Rate' (the higher of the Prime Rate or the Federal Funds
Rate plus 0.50%) plus a margin ranging from 0% to 2.00%; or (b) the
'Eurocurrency Rate' (the applicable interest rate offered to banks in the London
interbank eurocurrency market) plus a margin ranging from 0.625% to 3.00%. A
commitment fee ranging from 0.20% to 0.50% is due on the unused portion of the
revolving loan commitment. In addition, the New Credit Agreement contains
certain affirmative and negative covenants as to the operations and financial
condition of the Group. The Group's effective Eurocurrency rate on initial
outstanding borrowings of $403,530,000 under the New Credit Agreement was 8.36%.
The refinancing resulted in the write-off of unamortized debt issuance fees and
costs associated with the termination of the interest rate collar and swap
agreements, which resulted in a corresponding charge to earnings of $1.1 million
in 1998.
The Recapitalization also included the issuance of $225 million in Senior
Subordinated Notes of the Operating Company and $100.6 million gross proceeds in
Senior Discount Notes ($169 million aggregate principal amount at maturity) of
Holdings. The Senior Subordinated Notes are unconditionally guaranteed on a
senior subordinated basis by Holdings and mature on January 15, 2008, with
interest payable on $150 million at 8.75% and with interest payable on $75
million at LIBOR plus 3.625% (9.25% at February 2, 1998). The Senior Discount
Notes mature on January 15, 2009, with interest payable at 10.75%. Cash interest
on the Senior Discount Notes does not accrue until January 15, 2003.
Based upon the repayment terms under the New Credit Agreement, maturities
of long-term debt for the succeeding five years are as follows:
1998--$4,771,000; 1999--$3,334,000; 2000--$13,333,000; 2001-- $18,337,000;
2002--$23,469,000.
The Operating Company has entered into two U.S. Dollar interest rate swap
agreements that will, beginning April 9, 1998, effectively fix the Eurocurrency
Rate on $300 million of the term loans, on $200 million through April 9, 2002 at
5.8075% and on $100 million through April 9, 2003 at 5.77%.
F-12
<PAGE>
GRAHAM PACKAGING GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997
7. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair values
of each class of financial instruments:
Cash and Cash Equivalents, Accounts Receivable and Accounts Payable
The fair values of these financial instruments approximate their carrying
amounts.
Long-Term Debt
The fair values of the variable-rate, long-term debt instruments
approximate their carrying amounts. The fair value of other long-term debt was
estimated using discounted cash flow analyses based on current incremental
borrowing rates for similar types of borrowing arrangements. The fair value of
other long-term debt, including the current portion, approximates the carrying
amounts at December 31, 1996 and 1997.
Interest Rate Collar and Swap Agreements
The fair value of the Group's interest rate collar and swap agreements was
approximately $680,000, and $354,000 as of December 31, 1996 and 1997,
respectively.
8. LEASE COMMITMENTS
The Group was a party to various leases involving real property and
equipment during 1995, 1996 and 1997. Total rent expense for operating leases
amounted to $8,991,000 in 1995; $8,432,000 in 1996 and $9,599,000 in 1997.
Minimum future lease obligations on long-term noncancelable operating leases in
effect at December 31, 1997, are as follows: 1998--$5,259,000; 1999--$4,159,000;
2000--$2,911,000; 2001--$2,236,000; 2002-- $1,516,000; and
thereafter--$2,213,000.
9. TRANSACTIONS WITH AFFILIATES
Transactions with entities affiliated through common ownership included the
following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1995 1996 1997
------ ------ -------
(IN THOUSANDS)
<S> <C> <C> <C>
Equipment purchases from affiliates....................................... $6,536 $5,223 $11,104
Management services provided by affiliates including management, legal,
tax, accounting, insurance, treasury, and employee benefits
administration services................................................. 2,411 2,623 2,820
Management services provided and sales to affiliates including engineering
services and raw materials.............................................. 758 742 945
Interest income on notes receivable from owners........................... 1,026 1,026 1,026
</TABLE>
Account balances with affiliates include the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1996 1997
------- -------
(IN THOUSANDS)
<S> <C> <C>
Accounts receivable................................................. $ 471 $ 361
Prepaid expenses and other current assets........................... 1,395 917
Accounts payable.................................................... 3,642 3,470
</TABLE>
F-13
<PAGE>
GRAHAM PACKAGING GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997
9. TRANSACTIONS WITH AFFILIATES--(CONTINUED)
Certain land and buildings included in the accompanying combined financial
statements were leased by the Group from the control group of owners under
operating leases until the assets were contributed to the Group. The lease
payments totaling approximately $2.8 million in 1995 and 1996 and $2.6 million
in 1997 are classified as distributions to owners in the accompanying combined
financial statements. The depreciation and operating expenses related to the
land and buildings are included in the operations of the Group. Certain of the
real property leased from the control group was contributed to the Group as part
of the Recapitalization and the related leases were terminated.
10. PENSION PLANS
The Group participates in a noncontributory, defined benefit plan and a
defined contribution plan sponsored by an affiliate. In addition, the Group
sponsors other noncontributory defined benefit plans. These plans cover
substantially all of the Group's U.S. employees.
The defined benefit plan covering salaried employees provides retirement
benefits based on the final five years average compensation, while plans
covering hourly employees provide benefits based on years of service. The
Group's policy is to fund the normal cost plus amounts required to amortize
actuarial gains and losses and prior service costs over a period of ten years.
Plan assets consist of a diversified portfolio including U.S. Government
securities, certificates of deposit issued by commercial banks, and domestic
common stocks and bonds.
The following table sets forth the Group's funded status for its defined
benefit pension plans:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1996 1997
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Actuarial present value of:
Vested benefit obligation....................................... $ (8,167) $(10,164)
Nonvested benefits.............................................. (464) (757)
-------- --------
Accumulated benefit obligation.................................... (8,631) (10,921)
Effect of projected future salary increases....................... (3,267) (4,097)
-------- --------
Projected benefit obligation...................................... (11,898) (15,018)
Plan assets at market value....................................... 9,489 12,092
-------- --------
Projected benefit obligation in excess of plan assets............. (2,409) (2,926)
Unrecognized net gain from past experience different from that
assumed and effects of changes in assumptions................... (1,416) (440)
Unrecognized prior service cost................................... 471 446
Unrecognized net transition obligation............................ 508 436
-------- --------
Accrued pension expense........................................... $ (2,846) $ (2,484)
-------- --------
-------- --------
</TABLE>
F-14
<PAGE>
GRAHAM PACKAGING GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997
10. PENSION PLANS--(CONTINUED)
The Group's net pension cost for its defined benefit pension plans includes
the following components:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1995 1996 1997
------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost............................................................... $1,324 $1,349 $1,317
Interest cost.............................................................. 692 793 947
Actual return on plan assets............................................... (879) (320) (850)
Net amortization and deferral.............................................. 459 (238) 135
------ ------ ------
Net periodic pension costs................................................. $1,596 $1,584 $1,549
------ ------ ------
</TABLE>
Significant actuarial assumptions used to develop the projected benefit
obligations were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------
1996 1997
---- ----
<S> <C> <C>
Assumed discount rate.......................................................... 8.0 % 7.5 %
Assumed rate of compensation increase (salaried plan).......................... 5.0 % 5.0 %
</TABLE>
Additionally, an expected rate of return on plan assets of 8.0% was used in
the determination of net pension cost in 1995, 1996, and 1997.
The Group participates in a defined contribution plan under Internal
Revenue Code Section 401(k) sponsored by an affiliate, which covers all U.S.
employees except those represented by a collective bargaining unit. The Group's
contributions are determined as a specified percentage of employee
contributions, subject to certain maximum limitations. The Group's cost for this
plan for 1995, 1996, and 1997 was $668,000, $722,000 and $742,000, respectively.
11. OWNERS' EQUITY
Owners' equity included the partners' capital and shareholders' equity of
the various entities and operations included in the combined financial
statements, as described in Note 1. Effective January 1, 1994, pursuant to an
ownership structure reorganization of Holdings and several affiliated entities,
Holdings obtained 60% of the outstanding voting interests of members of the
Group operating in France, Italy, and the United Kingdom. The remaining 40% of
the outstanding voting interests was obtained directly by owners of Holdings.
Also, Holdings obtained 99% of the voting interest in Graham Recycling Company
L.P. During 1995, the members operating in France and Italy issued 100% of their
nonvoting preferred interests to Holdings.
At December 31, 1997, Holdings owned 100% of the outstanding stock of
Graham Packaging Canada, Ltd., a Canadian limited liability company, 15.8% of
the outstanding stock of Graham Packaging do Brasil Industriais e Comerciais
S.A. and a 99% limited partnership interest in the Operating Company. The
remaining 1% interest in Graham Recycling Company, L.P. and the Operating
Company were owned directly by owners of Holdings. In addition, 64.2% of Graham
Packaging do Brasil Industriais e Comerciais S.A. was owned directly by owners
of Holdings and the remaining 20% was owned by an unrelated entity.
During 1995, Holdings and the affiliated owners of the Group member in the
United Kingdom sold their ownership interests to an unaffiliated company.
Holdings recognized a gain of $4.4 million based on the portion of the total
proceeds received for its ownership interests and the Group received $6.4
million for technical support services provided to the buyer. These amounts are
included in other income. The operating results of the United Kingdom operations
are included in the accompanying combined financial statements from January 1,
1995 through the date of disposition in 1995 and are not material.
F-15
<PAGE>
GRAHAM PACKAGING GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997
11. OWNERS' EQUITY--(CONTINUED)
At December 31, 1997, Holdings held notes receivable from limited partners
of $20,240,000, bearing interest at 5.07% for partnership interests in it. The
notes were classified as a reduction of owners' equity in the combined balance
sheets.
12. EQUITY APPRECIATION PLAN
Holdings administers an equity appreciation incentive unit plan for certain
management level employees, which provides for the award of 'phantom units'
representing hypothetical investments in units of Holdings at no cost to the
employees. Under the terms of the plan, 1,000,000 equity appreciation units are
available of which 7,400 units were issued and outstanding as of December 31,
1997. These units change in value based on (i) earnings before interest, taxes,
depreciation and amortization and (ii) average net invested capital, as defined
in the Plan, with the corresponding charge being recognized as compensation
expense in the year of change. The liability of $468,000 at December 31, 1997 is
recorded in accrued expenses.
13. SPECIAL CHARGES AND UNUSUAL ITEMS
The special charges and unusual items were as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1995 1996 1997
------ ------ -------
(IN THOUSANDS)
<S> <C> <C> <C>
Restructuring of facilities............................................... $3,262 $ 754 $ 1,222
Systems conversion........................................................ -- -- 515
Litigation................................................................ 2,642 6,283 22,624
------ ------ -------
$5,904 $7,037 $24,361
------ ------ -------
------ ------ -------
</TABLE>
The restructuring charges relate to the decision reached in 1995 to close
the Lagnieu, France plant. The Group incurred a charge of $3,262,000 to
terminate approximately 100 people at Lagnieu and to write off assets that had
no continuing use to the Group. In addition, in 1996, the Group incurred
$754,000 to move assets from its plant in Lagnieu, France to Blyes, France, and
in 1997, the Group incurred an additional $746,000 related to the restructuring
of the facilities in France. Also in 1997, the Group incurred $476,000 in
restructuring costs at its corporate offices. Approximately $630,000 of the
restructuring charges incurred remain accrued for actions that will be
substantially complete in 1998.
The systems conversion expenses relate to outside consulting costs incurred
by Holdings in 1997 as it commenced a project to evaluate and assess its
information systems and related hardware to ensure that they will be year 2000
compliant. As part of this process, the Group has engaged outside consultants to
assist with the evaluation and assessment of its information systems
requirements and the selection and implementation of enterprise resource
planning software.
The litigation costs are primarily costs incurred and accrued by the Group
for legal fees in connection with the claims against the Group for alleged
patent infringements and the counterclaims brought by the Group alleging
violations of federal antitrust law by the plaintiffs and, for the year ended
December 31, 1997, amounts expected to be paid in settlement of all claims in
the JCI Schmalbach-Lubeca matter. See Note 17 to the Combined Financial
Statements.
F-16
<PAGE>
GRAHAM PACKAGING GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997
14. OTHER (INCOME) EXPENSE
Other (income) expense consisted of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1995 1996 1997
-------- ----- -----
(IN THOUSANDS)
<S> <C> <C> <C>
Foreign exchange (gain) loss............................................... $ (25) $(720) $ 955
Equity income in earnings of joint ventures................................ (125) (257) (200)
Gain on sale of subsidiary*................................................ (4,415) -- --
Technical support services*................................................ (6,411) -- --
Other...................................................................... (72) -- --
-------- ----- -----
$(11,048) $(977) $ 755
-------- ----- -----
-------- ----- -----
</TABLE>
- ------------------
* Relates to sale of United Kingdom operations described in Note 11 to the
Combined Financial Statements.
15. INCOME TAXES
Certain legal entities in the Group do not pay income taxes because their
income is taxed to the owners. For those entities, the reported amount of their
assets net of the reported amount of their liabilities exceeds the related tax
bases of their assets net of liabilities by $32.3 million and $14.8 million at
December 31, 1996 and 1997, respectively.
Income of certain legal entities related principally to the foreign
operations of the Group is taxable to the legal entities. The following table
sets forth the deferred tax assets and liabilities that result from temporary
differences between the reported amounts and the tax bases of the assets and
liabilities of such entities:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1996 1997
------- -------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards.......................................................... $10,708 $13,613
Accrued retirement indemnities............................................................ 676 799
Inventories............................................................................... 450 253
Other items............................................................................... 323 273
------- -------
Gross deferred tax assets................................................................... 12,157 14,938
Valuation allowance......................................................................... (2,984) (7,034)
------- -------
Net deferred tax assets..................................................................... 9,173 7,904
Deferred tax liabilities:
Fixed Assets, principally due to differences in depreciation and assigned values.......... 9,092 8,359
Other items............................................................................... 129 328
------- -------
Gross deferred tax liabilities.............................................................. 9,221 8,687
------- -------
Net deferred tax liabilities................................................................ $ 48 $ 783
------- -------
------- -------
</TABLE>
At December 31, 1997, the Group's various taxable entities had net
operating loss carryforwards for purposes of reducing future taxable income by
approximately $32,998,000, for which no benefit has been recognized. Of this
amount, $12,414,000 related to carryforwards that will expire, if unused, at
various dates ranging from 1998 to 2002 and the remaining carryforwards have no
expiration date.
F-17
<PAGE>
GRAHAM PACKAGING GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997
16. COMMITMENTS
In connection with plant expansion and improvement programs, the Group had
commitments for capital expenditures of approximately $14,917,000 at December
31, 1997.
17. CONTINGENCIES
The Group is party to various litigation matters arising in the ordinary
course of business. The ultimate legal and financial liability of the Group with
respect to litigation cannot be estimated with certainty, but Management
believes, based on its examination of such matters, experience to date and
discussions with counsel, that such ultimate liability will not be material to
the business, financial condition or results of operations of the Group.
Holdings was sued in May, 1995, for alleged patent infringement, trade
secret misappropriation and other related state law claims by Hoover Universal,
Inc., a subsidiary of Johnson Controls, Inc. ('JCI'), in the U.S. District Court
for the Central District of California (the 'JCI Litigation'). JCI alleged that
Holdings was misappropriating or threatened to misappropriate trade secrets
allegedly owned by JCI relating to the manufacture of hot-fill PET plastic
containers through the hiring of JCI employees and alleged that Holdings
infringed two patents owned by JCI by manufacturing hot-fill PET plastic
containers for several of its largest customers using a certain 'pinch grip'
structural design. In December, 1995, JCI filed a second lawsuit alleging
infringement of two additional patents, which relate to a ring and base
structure for hot-fill PET plastic containers. The two suits have been
consolidated for all purposes. Holdings has answered the complaints, denying
infringement and misappropriation in all respects and asserting various
defenses, including invalidity and unenforceability of the patents at issue
based upon inequitable conduct on the part of JCI in prosecuting the relevant
patent applications before the U.S. Patent Office and anticompetitive patent
misuse by JCI. Holdings has also asserted counterclaims against JCI alleging
violations of federal antitrust law, based upon certain agreements regarding
market division allegedly entered into by JCI with another competitor and other
alleged conduct engaged in by JCI allegedly intended to raise prices and limit
competition in the market for hot-fill PET plastic containers. In March, 1997,
JCI's plastic container business was acquired by Schmalbach-Lubeca Plastic
Containers USA Inc. ('Schmalbach-Lubeca'). Schmalbach-Lubeca and certain
affiliates were joined as successors to JCI and as counter-claim defendants.
On March 10, 1998, the U.S. District Court in California entered summary
judgment in favor of JCI and against the Group regarding infringement of two
patents, but did not resolve certain issues related to the patents including
certain of the Group's defenses. On March 6, 1998, the Group also filed suit
against Schmalbach-Lubeca in Federal Court in Delaware for infringement of the
Group's patent concerning pinch grip bottle design. On April 24, 1998, the
parties to the litigation reached an understanding on the terms of a settlement
of all claims in all of the litigation with JCI and Schmalbach-Lubeca, subject
to agreement upon and execution of a formal settlement agreement. Management
believes that the amounts that will ultimately be paid in settlement, as well as
estimated litigation expenses and professional fees, will not differ materially
from the amounts accrued in Special Charges and Unusual Items in respect thereof
for the year ended December 31, 1997. See Note 13 to the Combined Financial
Statements.
F-18
<PAGE>
GRAHAM PACKAGING GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997
18. GEOGRAPHICAL REGION INFORMATION
Information by geographic area is as follows:
<TABLE>
<CAPTION>
UNITED LATIN
STATES CANADA EUROPE AMERICA ELIMINATIONS TOTAL
-------- ------- -------- ------- ------------ --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Year ended December 31, 1995
Net sales................................. $355,790 $25,113 $ 85,863 $ -- $ -- $466,766
Net income (loss)......................... 28,119 1,248 (10,693) -- -- 18,674
Identifiable assets....................... 314,146 14,332 93,155 -- (60,980) 360,653
Year ended December 31, 1996
Net sales................................. $357,386 $24,530 $ 77,824 $ -- $ -- $459,740
Net income (loss)......................... 27,019 1,140 (6,927) -- -- 21,232
Identifiable assets....................... 319,403 18,910 88,106 -- (87,606) 338,813
Year ended December 31, 1997
Net sales................................. $411,031 $28,946 $ 67,408 $14,322 $ -- $521,707
Net income (loss)......................... 19,564 651 (10,794) 792 -- 10,213
Identifiable assets....................... 341,191 22,827 82,241 29,738 (90,506) 385,491
</TABLE>
19. SUBSEQUENT EVENTS
Pursuant to an Agreement and Plan of Recapitalization, Redemption and
Purchase, dated as of December 18, 1997 (the 'Recapitalization Agreement'), (i)
Holdings, (ii) the owners of the Group (the 'Graham Partners') and (iii)
BMP/Graham Holdings Corporation, a Delaware corporation formed by Blackstone
Capital Partners III Merchant Banking Fund L.P. ('Investor LP'), and BCP/Graham
Holdings L.L.C., a Delaware limited liability company and a wholly owned
subsidiary of Investor LP ('Investor GP' and together with Investor LP, the
'Equity Investors') agreed to a recapitalization of Holdings (the
'Recapitalization'). Closing under the Recapitalization Agreement occurred on
February 2, 1998.
The principal components and consequences of the Recapitalization included
the following:
o A change in the name of Holdings to Graham Packaging Holdings
Company;
o The contribution by Holdings of substantially all of its assets and
liabilities to the Operating Company, which was renamed 'Graham
Packaging Company';
o The contribution by certain Graham Partners to the Group of their
ownership interests in certain partially-owned subsidiaries of
Holdings and certain real estate used but not owned by Holdings and
its subsidiaries;
o The initial borrowing by the Operating Company of $403.5 million
(the 'Bank Borrowings') in connection with the New Credit Agreement
entered into by and among the Operating Company, Holdings and a
syndicate of lenders;
o The issuance of $225 million Senior Subordinated Notes by the
Operating Company and $100.6 million gross proceeds ($169 million
aggregate principal amount at maturity) Senior Discount Notes by
Holdings. A wholly owned subsidiary of each of the Operating Company
and Holdings serves as co-issuer with its parent for its respective
issue of Notes;
o The repayment by the Operating Company of substantially all of the
existing indebtedness and accrued interest of Holdings and its
subsidiaries;
F-19
<PAGE>
GRAHAM PACKAGING GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997
19. SUBSEQUENT EVENTS--(CONTINUED)
o The distribution by the Operating Company to Holdings of all of the
remaining net proceeds of the Bank Borrowings and the Senior
Subordinated Notes (other than amounts necessary to pay certain fees
and expenses and payments to Management);
o The redemption by Holdings of certain partnership interests in
Holdings held by the Graham Partners for $429.6 million;
o The purchase by the Equity Investors of certain partnership
interests in Holdings held by the Graham Partners for $208.3
million.
o The repayment by the Graham Partners of amounts owed to Holdings
under the $20.2 million promissory notes;
o The recognition of additional compensation expense under the Equity
Appreciation Plan;
o The payment of certain bonuses and other cash payments and the
granting of certain equity awards to senior and middle level
management; and
o The execution of various other agreements among the parties.
As a result of the consummation of the Recapitalization, Investor LP owns
an 81% limited partnership interest in Holdings, and Investor GP owns a 4%
general partnership interest in Holdings. Certain Graham Partners or affiliates
thereof or other entities controlled by Donald C. Graham and his family, have
retained a 1% general partnership interest and a 14% limited partnership
interest in Holdings. Additionally, Holdings owns a 99% limited partnership
interest in the Operating Company, and GPC Opco GP L.L.C., a wholly owned
subsidiary of Holdings, owns a 1% general partnership interest in the Operating
Company.
Also, the Graham Partners have agreed that neither they nor their
affiliates will, subject to certain exceptions, for a period of five years from
and after the Closing of the Recapitalization, engage in the manufacture,
assembly, design, distribution or marketing for sale of rigid plastic containers
for the packaging of consumer products less than ten liters in volume.
Pursuant to the Recapitalization Agreement, Holdings entered into an
Equipment Sales, Service and Licensing Agreement and a Consulting Agreement with
certain entities controlled by Donald C. Graham and members of his family and a
Partners Registration Rights Agreement with partners of Holdings and certain
other entities.
As a result of the Recapitalization, the Group incurred charges of
approximately $31 million related to the issuance of debt which will be
recognized as interest expense over 6 to 11 years based upon the terms of the
related debt instruments. In addition, charges of approximately $34 million were
incurred, including cash payments of $30 million and non-cash charges of $4
million, which relate to transaction fees, expenses, compensation and
unamortized licensing fees which will be expensed immediately; and to deferred
compensation expense and stay bonuses which will be recognized by the Group over
a period up to three years.
The issuers of the Senior Subordinated Notes and the Senior Discount Notes
(the 'Notes') have agreed to file registration statements relating to exchange
offers pursuant to which other series of notes of the respective issuers covered
by such registration statements and containing substantially the same terms as
the Notes, would be offered in exchange for the Notes.
F-20
<PAGE>
GRAHAM PACKAGING HOLDINGS COMPANY
CONDENSED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 29,
1997 1998
------------ ---------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................................................... $ 7,218 $ 4,197
Accounts receivable................................................................. 69,295 80,712
Inventories......................................................................... 32,236 30,182
Prepaid expenses and other current assets........................................... 9,198 8,429
------------ ---------
Total current assets.................................................................. 117,947 123,520
Property, plant, and equipment, net................................................... 260,296 261,932
Other assets.......................................................................... 7,248 38,311
------------ ---------
Total assets.......................................................................... $385,491 $ 423,763
------------ ---------
------------ ---------
LIABILITIES AND PARTNERS' CAPITAL/OWNERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable and accrued expenses............................................... $108,361 $ 112,393
Current portion of long-term debt................................................... 4,771 3,344
------------ ---------
Total current liabilities............................................................. 113,132 115,737
Long-term debt........................................................................ 263,694 740,448
Other non-current liabilities......................................................... 3,345 3,867
Minority interest..................................................................... 4,983 --
Commitments and contingencies......................................................... -- --
Partners' capital/Owners' equity (deficit):
Partners'/Owners' capital (deficit)................................................... 20,383 (435,784)
Notes receivable for ownership interests.............................................. (20,240) --
Other comprehensive income............................................................ 194 (505)
------------ ---------
Total Partners' capital/Owners' equity (deficit)...................................... 337 (436,289)
------------ ---------
Total liabilities and Partners' capital/Owners' equity (deficit)...................... $385,491 $ 423,763
------------ ---------
------------ ---------
</TABLE>
See accompanying notes.
F-21
<PAGE>
GRAHAM PACKAGING HOLDINGS COMPANY
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------------------
MARCH 30, 1997 MARCH 29, 1998
-------------- --------------
(IN THOUSANDS)
<S> <C> <C>
Net sales........................................................................ $116,460 $134,418
Cost of goods sold............................................................... 98,655 109,841
-------------- --------------
17,805 24,577
Selling, general, and administrative expenses.................................... 8,318 8,422
Special charges and unusual items................................................ 1,532 14,898
-------------- --------------
Operating income................................................................. 7,955 1,257
Recapitalization expenses........................................................ -- 11,496
Interest expense, net............................................................ 3,260 11,939
Other expense.................................................................... 329 161
-------------- --------------
Income (loss) before income taxes and extraordinary item......................... 4,366 (22,339)
Income tax provision............................................................. -- 8
-------------- --------------
Income (loss) before extraordinary item.......................................... 4,366 (22,347)
Extraordinary loss from early extinguishment of debt............................. -- 675
-------------- --------------
Net income (loss)................................................................ $ 4,366 $(23,022)
-------------- --------------
-------------- --------------
</TABLE>
See accompanying notes.
F-22
<PAGE>
GRAHAM PACKAGING HOLDINGS COMPANY
CONDENSED STATEMENTS OF PARTNERS' CAPITAL/OWNERS' EQUITY (DEFICIT)
(UNAUDITED)
<TABLE>
<CAPTION>
NOTES
PARTNERS'/ RECEIVABLE
OWNERS' FOR OTHER
CAPITAL OWNERSHIP COMPREHENSIVE
(DEFICIT) INTERESTS INCOME TOTAL
---------- --------- ------------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Balance at January 1, 1997................................. $ 38,715 $(20,240 ) $(1,670) $ 16,805
---------
Net income for the year.................................. 10,213 -- -- 10,213
Cumulative translation adjustment........................ -- -- 1,864 1,864
---------
Comprehensive income..................................... 12,077
---------
Cash distributions to owners............................. (28,737) -- -- (28,737)
Other.................................................... 192 -- -- 192
---------- --------- ------------- ---------
Balance at December 31, 1997............................... 20,383 (20,240 ) 194 337
---------
Net loss for the period.................................. (23,022) -- -- (23,022)
Cumulative translation adjustment........................ -- -- (699) (699)
---------
Comprehensive income..................................... (23,721)
---------
Cash distributions to owners............................. (624) -- -- (624)
Recapitalization......................................... (432,521) 20,240 -- (412,281)
---------- --------- ------------- ---------
Balance at March 29, 1998.................................. $ (435,784) $ -- $ (505) $(436,289)
---------- --------- ------------- ---------
---------- --------- ------------- ---------
</TABLE>
See accompanying notes.
F-23
<PAGE>
GRAHAM PACKAGING HOLDINGS COMPANY
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------------------
MARCH 30, 1997 MARCH 29, 1998
-------------- --------------
(IN THOUSANDS)
<S> <C> <C>
Operating activities:
Net income (loss).............................................................. $ 4,366 $ (23,022)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization............................................... 9,878 9,243
Amortization of debt issuance fees.......................................... 78 661
Extraordinary loss.......................................................... -- 675
Write-off of license fees................................................... -- 1,436
Equity income in earnings of joint venture.................................. (41) (75)
Foreign currency transaction loss........................................... 87 10
Changes in operating assets and liabilities, net of
acquisition of business:
Accounts receivable....................................................... (3,068) (11,560)
Inventories............................................................... (2,188) 1,992
Prepaid expenses and other current assets................................. 732 889
Accounts payable and accrued expenses..................................... (3,023) 1,991
Changes in non-operating assets and liabilities............................. -- 622
-------------- --------------
Net cash provided by (used in) operating activities.............................. 6,821 (17,138)
Investing activities:
Net purchases of property, plant, and equipment................................ (8,532) (13,505)
Acquisition of Brazilian business.............................................. -- (2,995)
Other.......................................................................... (9) (66)
-------------- --------------
Net cash used in investing activities............................................ (8,541) (16,566)
Financing activities:
Net proceeds from issuance of long-term debt................................... 3,928 735,987
Recapitalization debt repayments............................................... -- (264,410)
Recapitalization owner note payments........................................... -- 20,240
Recapitalization cash distributions to owners.................................. -- (429,566)
Other cash distributions to owners............................................. (2,983) (624)
Debt issuance fees............................................................. -- (30,876)
-------------- --------------
Net cash provided by financing activities........................................ 945 30,751
Effect of exchange rate changes.................................................. 763 (68)
-------------- --------------
Decrease in cash and cash equivalents............................................ (12) (3,021)
Cash and cash equivalents at beginning of period................................. 3,431 7,218
-------------- --------------
Cash and cash equivalents at end of period....................................... $ 3,419 $ 4,197
-------------- --------------
-------------- --------------
</TABLE>
See accompanying notes.
F-24
<PAGE>
GRAHAM PACKAGING HOLDINGS COMPANY
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 29, 1998
1. BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements of Graham
Packaging Holdings Company have been prepared in accordance with generally
accepted accounting principles for interim financial statement information and
with the instructions to Form 10-Q and Article 10 of Regulation S-X and
therefore do not include all of the information and footnotes required by
generally accepted accounting principles for complete annual financial
statements. In the opinion of management, all adjustments (consisting only of
usual recurring adjustments) considered necessary for a fair presentation are
reflected in the condensed financial statements. The condensed combined balance
sheet as of December 31, 1997, is derived from audited financial statements. The
condensed combined financial statements and notes thereto should be read in
conjunction with the combined financial statements and notes thereto for the
year ended December 31, 1997. The results of operations for the three months
ended March 29, 1998, are not necessarily indicative of the results to be
expected for the full year ending December 31, 1998.
The financial statements include the operations of Graham Packaging
Holdings Company, a Pennsylvania limited partnership formerly known as Graham
Packaging Company ('Holdings'); Graham Packaging Company, a Delaware limited
partnership formerly known as Graham Packaging Holdings I, L.P. (the 'Operating
Company'); Graham Packaging Italy, an Italian SRL; Graham Packaging France
Partners, G.P.; Graham Packaging Poland, L.P.; Graham Packaging do Brasil
Industriais e Commerciais S.A.; Graham Packaging Canada, Ltd. a Canadian limited
liability company; Graham Recycling Company, L.P.; subsidiaries thereof; and
land and buildings that were used in the operations, owned by the control group
of owners and contributed to the Group. Prior to February 2, 1998, these
operations were under common control by virtue of ownership by the Donald C.
Graham family. These entities and assets are collectively referred to as Graham
Packaging Group (the 'Group'). With respect to the periods subsequent to the
Recapitalization on February 2, 1998, the condensed financial statements and
references to the 'Group' relate to Holdings and its subsidiaries on a
consolidated basis and for the period prior to the Recapitalization to the
'Group' on a combined basis. The combined financial statements include the
accounts and results of operations of the Group for all periods that the
operations were under common control. All amounts in the combined financial
statements are those reported in the historical financial statements of the
individual operations. All significant intercompany accounts and transactions
have been eliminated in the combined and consolidated financial statements.
Since the Recapitalization, Holdings has had no assets, liabilities or
operations other than its direct and indirect investments in the Operating
Company, its ownership of GPC Capital Corp. II and the Senior Discount
Notes and related unamortized issuance costs. GPC Capital Corp. II has no
substantial assets, does not conduct any operations and was formed solely to act
as a co-issuer of the Senior Discount Notes. Holdings has fully and
unconditionally guaranteed the Operating Company's Senior Subordinated Notes on
a senior subordinated basis.
2. RECAPITALIZATION
Pursuant to an Agreement and Plan of Recapitalization, Redemption and
Purchase, dated as of December 18, 1997 (the 'Recapitalization Agreement'), (i)
Holdings, (ii) the owners of the Group (the 'Graham Partners') and (iii)
BMP/Graham Holdings Corporation, a Delaware corporation formed by Blackstone
Capital Partners III Merchant Banking Fund L.P. ('Investor LP'), and BCP/Graham
Holdings L.L.C., a Delaware limited liability company and a wholly owned
subsidiary of Investor LP ('Investor GP' and together with Investor LP, the
'Equity Investors') agreed to a recapitalization of Holdings (the
'Recapitalization'). Closing under the Recapitalization Agreement occurred on
February 2, 1998.
The principal components and consequences of the Recapitalization included
the following:
o A change in the name of Holdings to Graham Packaging Holdings
Company;
F-25
<PAGE>
GRAHAM PACKAGING HOLDINGS COMPANY
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
MARCH 29, 1998
2. RECAPITALIZATION--(CONTINUED)
o The contribution by Holdings of substantially all of its assets and
liabilities to the Operating Company, which was renamed 'Graham
Packaging Company';
o The contribution by certain Graham Partners to the Group of their
ownership interests in certain partially-owned subsidiaries of
Holdings and certain real estate used but not owned by Holdings and
its subsidiaries;
o The initial borrowing by the Operating Company of $403.5 million
(the 'Bank Borrowings') in connection with the New Credit Agreement
entered into by and among the Operating Company, Holdings and a
syndicate of lenders;
o The issuance of $225 million Senior Subordinated Notes by the
Operating Company and $100.6 million gross proceeds ($169 million
aggregate principal amount at maturity) Senior Discount Notes by
Holdings. A wholly owned subsidiary of each of the Operating Company
and Holdings serves as co-issuer with its parent for its respective
issue of Notes;
o The repayment by the Operating Company of substantially all of the
existing indebtedness and accrued interest of Holdings and its
subsidiaries;
o The distribution by the Operating Company to Holdings of all of the
remaining net proceeds of the Bank Borrowings and the Senior
Subordinated Notes (other than amounts necessary to pay certain fees
and expenses and payments to Management);
o The redemption by Holdings of certain partnership interests in
Holdings held by the Graham Partners for $429.6 million;
o The purchase by the Equity Investors of certain partnership
interests in Holdings held by the Graham Partners for $208.3
million;
o The repayment by the Graham Partners of amounts owed to Holdings
under the $20.2 million promissory notes;
o The recognition of additional compensation expense under the Equity
Appreciation Plan;
o The payment of certain bonuses and other cash payments and the
granting of certain equity awards to senior and middle level
management; and
o The execution of various other agreements among the parties.
As a result of the consummation of the Recapitalization, Investor LP owns
an 81% limited partnership interest in Holdings, and Investor GP owns a 4%
general partnership interest in Holdings. Certain Graham Partners or affiliates
thereof or other entities controlled by Donald C. Graham and his family, have
retained a 1% general partnership interest and a 14% limited partnership
interest in Holdings. Additionally, Holdings owns a 99% limited partnership
interest in the Operating Company, and GPC Opco GP L.L.C., a wholly owned
subsidiary of Holdings, owns a 1% general partnership interest in the Operating
Company.
As a result of the Recapitalization, the Group incurred charges of
approximately $31 million related to the issuance of debt which will be
recognized as interest expense over 6 to 11 years based upon the terms of the
related debt instruments. In addition, Recapitalization expenses of
approximately $24.8 million which related to transaction fees, expenses,
compensation, unamortized licensing fees and costs associated with the
termination of the interest rate collar and swap agreements were incurred.
Recapitalization expenses in the condensed statement of operations for the three
months ended March 29, 1998 include transaction fees of $11.1 million and
termination costs associated with the interest rate collar and swap agreements
of $0.4 million. The Recapitalization also resulted in the write-off of
unamortized debt issuance fees which is reflected as an extraordinary loss in
the consolidated financial statements. The Group will also incur compensation
expense of $10.7 million related to stay bonuses and the granting of certain
ownership interests to management which will be recognized over a period up to
three years. See Note 8.
F-26
<PAGE>
GRAHAM PACKAGING HOLDINGS COMPANY
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
MARCH 29, 1998
3. DEBT ARRANGEMENTS
On February 2, 1998, the Group refinanced the majority of its existing
credit facilities in connection with the Recapitalization and entered into a new
Credit Agreement (the 'New Credit Agreement') with a consortium of banks. The
New Credit Agreement consists of three term loans to the Operating Company
totaling $395 million and two revolving loan facilities to the Operating Company
totaling $255 million. The obligations of the Operating Company under the New
Credit Agreement are guaranteed by Holdings and certain other subsidiaries of
Holdings. The term loans are payable in quarterly installments beginning June
30, 1998 through January 31, 2007, and require payments of $3,200,000 in 1998,
$3,200,000 in 1999, $13,200,000 in 2000, $18,200,000 in 2001 and $23,200,000 in
2002. The revolving loan facilities expire on January 31, 2004. Interest is
payable at (a) the 'Alternate Base Rate' (the higher of the Prime Rate or the
Federal Funds Rate plus 0.50%) plus a margin ranging from 0% to 2.00%; or (b)
the 'Eurocurrency Rate' (the applicable interest rate offered to banks in the
London interbank eurocurrency market) plus a margin ranging from 0.625% to
3.00%. A commitment fee ranging from 0.20% to 0.50% is due on the unused portion
of the revolving loan commitment. In addition, the New Credit Agreement contains
certain affirmative and negative covenants as to the operations and financial
condition of the Group, as well as certain restrictions on the payment of
dividends and other distributions to Holdings.
The Recapitalization also included the issuance of $225 million in Senior
Subordinated Notes of the Operating Company and $100.6 million gross proceeds in
Senior Discount Notes ($169 million aggregate principal amount at maturity) of
Holdings. The Senior Subordinated Notes are unconditionally guaranteed on a
senior subordinated basis by Holdings and mature on January 15, 2008, with
interest payable on $150 million at 8.75% and with interest payable on $75
million at LIBOR plus 3.625% (9.25% at February 2, 1998). The Senior Discount
Notes mature on January 15, 2009, with interest payable at 10.75%. Cash interest
on the Senior Discount Notes does not accrue until January 15, 2003.
The Operating Company has entered into two U.S. Dollar interest rate swap
agreements that will, beginning April 9, 1998, effectively fix the Eurocurrency
Rate on $300 million of the term loans, on $200 million through April 9, 2002,
at 5.8075% and on $100 million through April 9, 2003 at 5.77%.
4. RELATED PARTY TRANSACTIONS
Pursuant to the Recapitalization Agreement, the Graham Partners have agreed
that neither they nor their affiliates will, subject to certain exceptions, for
a period of five years from and after the Closing of the Recapitalization,
engage in the manufacture, assembly, design, distribution or marketing for sale
of rigid plastic containers for the packaging of consumer products less than ten
liters in volume.
Also pursuant to the Recapitalization Agreement, Holdings entered into an
Equipment Sales, Service and Licensing Agreement and a Consulting Agreement with
certain entities controlled by Donald C. Graham and members of his family and a
Partners Registration Rights Agreement with partners of Holdings and certain
other entities. Additionally, Holdings has entered into a Monitoring Agreement
with Blackstone Management Partners III for advisory and consulting services.
5. INVENTORIES
Inventories consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31, 1997 MARCH 29, 1998
----------------- --------------
(IN THOUSANDS)
<S> <C> <C>
Finished goods............................................ $18,759 $ 18,924
Raw materials and parts................................... 15,447 13,228
----------------- --------------
34,206 32,152
Less LIFO allowances...................................... 1,970 1,970
----------------- --------------
$32,236 $ 30,182
----------------- --------------
----------------- --------------
</TABLE>
F-27
<PAGE>
GRAHAM PACKAGING HOLDINGS COMPANY
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
MARCH 29, 1998
6. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses included the following:
<TABLE>
<CAPTION>
DECEMBER 31, 1997 MARCH 29, 1998
----------------- --------------
<S> <C> <C>
Accounts payable.......................................... $ 56,547 $ 48,822
Accrued employee compensation and benefits................ 16,305 12,445
Special charges and unusual items......................... 18,472 17,359
Other..................................................... 17,037 33,767
----------------- --------------
$ 108,361 $112,393
----------------- --------------
----------------- --------------
</TABLE>
7. INCOME TAXES
The Group does not pay U.S. federal income taxes under the provisions of
the Internal Revenue Code, as the applicable income or loss is included in the
tax returns of the owners. For the Group's foreign operations subject to tax in
their local jurisdictions, deferred tax assets and liabilities are recognized
for the future tax consequences attributable to temporary differences between
the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases and are measured using enacted tax rates expected to
apply to taxable income in the years in which the temporary differences are
expected to reverse. During 1998 and 1997, the Group's various taxable entities
incurred additional net operating loss carryforwards for which no benefit has
been recognized.
8. SPECIAL CHARGES AND UNUSUAL ITEMS
The special charges and unusual items recorded in the three months ended
March 30, 1997 and March 29, 1998 were as follows:
<TABLE>
<CAPTION>
1997 1998
----------------- --------------
(IN THOUSANDS)
<S> <C> <C>
Systems conversion........................................ $ -- $ 366
Recapitalization expenses................................. -- 14,532
Litigation................................................ 1,532 --
------- --------------
$ 1,532 $ 14,898
------- --------------
------- --------------
</TABLE>
The systems conversion expenses relate to outside consulting costs incurred
by Holdings in 1998 as it commenced a project to evaluate and assess its
information systems and related hardware to ensure that they will be year 2000
compliant. As part of this process, the Group has engaged outside consultants to
assist with the evaluation and assessment of its information systems
requirements and the selection and implementation of enterprise resource
planning software.
Recapitalization expenses included in special charges and unusual items
relate to compensation of $13.1 million and the write-off of unamortized
licensing fees of $1.4 million. Additionally recapitalization expenses relate to
stay bonuses and the granting of certain ownership interests to Management
pursuant to the terms of the Recapitalization (see Note 2), which are being
recognized over a period of up to three years.
The litigation costs are primarily costs incurred and accrued by the Group
for legal fees in connection with the claims against the Group for alleged
patent infringements and the counterclaims brought by the Group alleging
violations of federal antitrust law by the plaintiffs. See Note 9.
9. CONTINGENCIES
The Group is party to various litigation matters arising in the ordinary
course of business. The ultimate legal and financial liability of the Group with
respect to litigation cannot be estimated with certainty, but Management
believes, based on its examination of such matters, experience to date and
discussions with counsel, that such liability will not be material to the
business, financial condition, results of operations or cash flows of the Group.
F-28
<PAGE>
GRAHAM PACKAGING HOLDINGS COMPANY
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
MARCH 29, 1998
9. CONTINGENCIES--(CONTINUED)
Holdings was sued in May, 1995, for alleged patent infringement, trade
secret misappropriation and other related state law claims by Hoover Universal,
Inc., a subsidiary of Johnson Controls, Inc. ('JCI'), in the U.S. District Court
for the Central District of California (the 'JCI Litigation'). JCI alleged that
Holdings was misappropriating or threatened to misappropriate trade secrets
allegedly owned by JCI relating to the manufacture of hot-fill PET plastic
containers through the hiring of JCI employees and alleged that Holdings
infringed two patents owned by JCI by manufacturing hot-fill PET plastic
containers for several of its largest customers using a certain 'pinch grip'
structural design. In December, 1995, JCI filed a second lawsuit alleging
infringement of two additional patents, which relate to a ring and base
structure for hot-fill PET plastic containers. The two suits have been
consolidated for all purposes. Holdings has answered the complaints, denying
infringement and misappropriation in all respects and asserting various
defenses, including invalidity and unenforceability of the patents at issue
based upon inequitable conduct on the part of JCI in prosecuting the relevant
patent applications before the U.S. Patent Office and anticompetitive patent
misuse by JCI. Holdings has also asserted counterclaims against JCI alleging
violations of federal antitrust law, based upon certain agreements regarding
market division allegedly entered into by JCI with another competitor and other
alleged conduct engaged in by JCI allegedly intended to raise prices and limit
competition in the market for hot-fill PET plastic containers. In March, 1997,
JCI's plastic container business was acquired by Schmalbach-Lubeca Plastic
Containers USA Inc. ('Schmalbach-Lubeca'). Schmalbach-Lubeca and certain
affiliates were joined as successors to JCI and as counter-claim defendants.
On March 10, 1998, the U.S. District Court in California entered summary
judgment in favor of JCI and against the Group regarding infringement of two
patents, but did not resolve certain issues related to the patents including
certain of the Group's defenses. On March 6, 1998, the Group also filed suit
against Schmalbach-Lubeca in Federal Court in Delaware for infringement of the
Group's patent concerning pinch grip bottle design. On April 24, 1998, the
parties to the litigation reached an understanding on the terms of a settlement
of all claims in all of the litigation with JCI and Schmalbach-Lubeca, subject
to agreement upon and execution of a formal settlement agreement. In June 1998,
the Company finalized the settlement of the JCI-Schmalbach-Lubeca litigation.
The amounts paid in settlement, as well as estimated litigation expenses and
professional fees did not differ materially from the amounts accrued in Special
Charges and Unusual Items in respect thereof for the year ended December 31,
1997 and in the March 29, 1998 unaudited condensed consolidated financial
statements.
10. CONDENSED OPERATING COMPANY DATA
Condensed financial data for the Operating Company as of March 29, 1998, in
thousands of dollars, was as follows:
<TABLE>
<S> <C>
Current assets.................................................................... $123,520
Noncurrent assets................................................................. 295,292
Total assets...................................................................... 418,812
Current liabilities............................................................... 115,737
Noncurrent liabilities............................................................ 642,043
Partners' capital (deficit)....................................................... (338,968)
</TABLE>
Condensed financial data for the Operating Company for the three months
ended March 29, 1998, in thousands of dollars, was as follows:
<TABLE>
<S> <C>
Sales............................................................................. $134,418
Gross profit...................................................................... 24,577
Loss from continuing operations................................................... (19,614)
Net loss.......................................................................... (20,289)
</TABLE>
Condensed financial data of the Operating Company is not presented for
periods prior to February 2, 1998.
F-29
<PAGE>
GRAHAM PACKAGING HOLDINGS COMPANY
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
MARCH 29, 1998
11. COMPREHENSIVE INCOME
Effective January 1, 1998, the Group adopted the provisions of Statement of
Financial Accounting Standards No. 130, Reporting Comprehensive Income.
Comprehensive income for the three months ended March 30, 1997 and March 29,
1998, in thousands of dollars, was as follows:
<TABLE>
<CAPTION>
1997 1998
------ ---------
<S> <C> <C>
Net income (loss)....................................................... $4,366 $ (23,022)
Foreign currency translation adjustments................................ 2,221 (699)
------ ---------
Comprehensive income (loss)............................................. $6,587 $ (23,721)
------ ---------
------ ---------
</TABLE>
12. NEW ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED
In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 131, Disclosures about Segments of an Enterprise and Related Information
('Statement 131'). Statement 131 establishes standards for the way that public
business enterprises report selected information about operating segments in
annual financial statements and requires that those enterprises report selected
information about operating segments in interim financial reports. It also
establishes standards for related disclosures about products and services,
geographic areas and major customers. Statement 131 is effective for financial
statements for fiscal years beginning after December 15, 1997, and therefore,
the Group will adopt the new requirements in 1998, which will require
retroactive disclosure. Management has not completed its review of Statement 131
and has not determined the impact adoption will have on the Group's financial
statement disclosures.
In March 1998, the AICPA issued SOP 98-1, Accounting For the Costs of
Computer Software Developed For or Obtained For Internal-Use. The SOP is
effective for the Group on January 1, 1999. The SOP will require the
capitalization of certain costs incurred after the date of adoption in
connection with developing or obtaining software for internal-use. The Group
currently capitalizes certain external costs and expenses all other costs as
incurred. The Group has not yet assessed what the impact of the SOP will be on
the Group's future earnings or financial position.
In February 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 132 Employers' Disclosures about Pensions
and Other Post Retirement Benefits. This standard revises employers' disclosures
about pensions and other post-retirement plans, but does not change the
measurement or recognition of those plans. This standard will be effective for
the Group's financial statements for the year ended December 31, 1998.
F-30
<PAGE>
- ------------------------------------------------------
- ------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE OFFER
CONTAINED HEREIN, OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY SECURITY OTHER THAN THOSE TO WHICH IT
RELATES, NOR DOES IT CONSTITUTE AN OFFER TO SELL, OR THE SOLICITATION OF AN
OFFER TO BUY, TO ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE ISSUERS SINCE THE DATE
HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information............................ 1
Forward-Looking Statements....................... 1
Prospectus Summary............................... 2
Risk Factors..................................... 23
The Recapitalization............................. 32
Use of Proceeds.................................. 34
Capitalization................................... 36
Unaudited Pro Forma Financial Information........ 37
Selected Historical Financial Data............... 43
Management's Discussion and Analysis of Financial
Condition and Results of Operations............ 46
Business......................................... 53
Management....................................... 66
Security Ownership............................... 72
The Partnership Agreements....................... 73
Certain Relationships and Related Party
Transactions................................... 76
Description of the New Credit Facility........... 79
The Senior Subordinated Exchange Offers.......... 82
The Senior Discount Exchange Offer............... 94
Description of the Senior Subordinated Exchange
Notes.......................................... 106
Description of the Senior Discount Exchange
Notes.......................................... 137
Senior Subordinated Exchange Offers; Senior
Subordinated Registration Rights............... 165
Senior Discount Exchange Offer; Senior Discount
Registration Rights............................ 168
Book Entry; Delivery and Form.................... 171
Plan of Distribution............................. 173
Certain U.S. Federal Income Tax Considerations... 174
Change in Accountants............................ 174
Legal Matters.................................... 174
Experts.......................................... 174
Index to Financial Statements.................... F-1
</TABLE>
GRAHAM PACKAGING COMPANY
AND
GPC CAPITAL CORP. I
OFFER TO EXCHANGE UP TO $150,000,000 OF THEIR 8 3/4% SENIOR SUBORDINATED NOTES
DUE 2008, SERIES B, AND $75,000,000 OF THEIR FLOATING INTEREST RATE SUBORDINATED
TERM SECURITIES DUE 2008, SERIES B (FIRSTSSM*), WHICH HAVE BEEN REGISTERED UNDER
THE SECURITIES ACT, FOR ANY AND ALL OF THEIR OUTSTANDING 8 3/4% SENIOR
SUBORDINATED NOTES DUE 2008, SERIES A, AND ANY AND ALL OF THEIR OUTSTANDING
FLOATING INTEREST RATE SUBORDINATED TERM SECURITIES DUE 2008, SERIES A
(FIRSTSSM*)
GRAHAM PACKAGING
HOLDINGS COMPANY
AND
GPC CAPITAL CORP. II
OFFER TO EXCHANGE UP TO $169,000,000 OF THEIR 10 3/4% SENIOR DISCOUNT NOTES DUE
2009, SERIES B, WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT, FOR ANY AND
ALL OF THEIR OUTSTANDING 10 3/4% SENIOR DISCOUNT NOTES DUE 2009, SERIES A
---------------------------
PROSPECTUS
---------------------------
, 1998
* FIRSTS IS A SERVICE MARK OF BT ALEX. BROWN INCORPORATED.
------------------------------------------------------
------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Subject to any terms, conditions or restrictions set forth in the Limited
Partnership Agreement of the Operating Company, Section 17-108 of the Delaware
Revised Uniform Limited Partnership Act empowers a Delaware limited partnership
to indemnify and hold harmless any partner or other person from and against all
claims and demands whatsoever. The Partnership Agreement of the Operating
Company provides that the Operating Company will, defend and hold harmless, to
the fullest extent not prohibited by law, its general partner and each of its
affiliates and their respective partners, shareholders, officers, directors,
employees and agents, from and against any claim, loss or liability of any
nature whatsoever (including attorneys' fees) arising out of or in connection
with the assets or business of the Operating Company, unless the act or failure
to act giving rise to the claim for indemnification is determined by a court to
have constituted intentional misconduct or a knowing violation of law by such
person or (in the case of the general partner only) a breach by the general
partner of any of the material terms and provisions of the Partnership Agreement
of the Operating Company. The foregoing obligation of the Operating Company will
be satisfied only out of the assets of the Operating Company and under no
circumstances will any recourse be available against the general partner or any
other partner or the assets of any partner. The Partnership Agreement of the
Operating Company further provides that the Operating Company will indemnify
each partner from and against any damage, liability, loss, cost or deficiency
(including, but not limited to, reasonable attorneys' fees) which each such
partner pays or becomes obligated to pay on account of the imposition upon or
assessment against such partner of any obligation or liability of the Operating
Company. The foregoing obligation of the Operating Company will be satisfied
only out of the assets of the Operating Company and under no circumstances will
any recourse be available against the general partner or any other partner or
the assets of any partner with respect thereto.
Subject to any terms, conditions or restrictions set forth in the Limited
Partnership Agreement of Holdings, Section 8510 of the Pennsylvania Revised
Uniform Limited Partnership Act empowers a Pennsylvania limited partnership to
indemnify and hold harmless any partner or other person from and against all
claims and demands whatsoever. Indemnification shall not be made in any case
where the act or failure to act giving rise to the claim for indemnification is
determined by a court to have constituted willful misconduct or recklessness.
The Partnership Agreement of Holdings provides that no general partner nor any
of its affiliates nor any of its respective partners, shareholders, officers,
directors, employees or agents will be liable, in damages or otherwise, to
Holdings or to any of the limited partners for any act or omission on its or his
part, except for (i) any act or omission resulting from its own willful
misconduct or bad faith, (ii) any breach by the general partner of its duty of
loyalty and obligations under applicable law as a fiduciary to Holdings or (iii)
any breach by the general partner of any of the terms and provisions of the
Partnership Agreement of Holdings. Holdings will indemnify, defend and hold
harmless, to the fullest extent permitted by law, the general partners and each
of their affiliates and their respective partners, shareholders, officers,
directors, employees and agents, from and against any claim or liability of any
nature whatsoever arising out of or in connection with the assets or business of
Holdings, except where attributable to the willful misconduct or bad faith of
such individual or entity or where relating to a breach by the general partner
of its obligations as a fiduciary of Holdings or to a breach by the general
partner of any of the terms and provisions of the Partnership Agreement of
Holdings. Notwithstanding the foregoing and anything in the Partnership
Agreement of Holdings to the contrary, no general partner will be liable to
Holdings or its partners for monetary damages for breach of its fiduciary duties
or its duties set forth in Partnership Agreement of Holdings, in each case other
than a willful and flagrant breach thereof, or a breach of its duty of loyalty.
Expenses incurred by a partner or other person in defending any action or
proceeding against which indemnification may be made pursuant to the foregoing
shall be paid by the Operating Company in advance of the final disposition of
such action or proceeding upon receipt of an undertaking by or on behalf of such
person to repay such amount if it shall ultimately be determined that it is not
entitled to be indemnified by the Operating Company. In addition, the
Partnership Agreement of Holdings provides that Holdings will indemnify, to the
fullest extent not prohibited by law, each member of the advisory committee
against losses, claims, damages or liabilities arising from any act or omission
performed or omitted by him or her as a member of the advisory committee.
II-1
<PAGE>
Under Section 145 of the Delaware General Corporation Law (the 'Delaware
Law'), a corporation may indemnify its directors, officers, employees and agents
and its former directors, officers, employees and agents and those who serve, at
the corporation's request, in such capacity with another enterprise, against
expenses (including attorney's fees), as well as judgments, fines and
settlements in nonderivative lawsuits, actually and reasonably incurred in
connection with the defense of any action, suit or proceeding in which they or
any of them were or are made parties or are threatened to be made parties by
reason of their serving or having served in such capacity. The Delaware General
Corporation Law provides, however, that such person must have acted in good
faith and in a manner such person reasonably believed to be in (or not opposed
to) the best interests of the corporation and, in the right of the corporation,
where such person has been adjudged liable to the corporation, unless, and only
to the extent that a court determines that such person fairly and reasonably is
entitled to indemnity for costs the court deems proper in light of liability
adjudication. Indemnity is mandatory to the extent a claim, issue or matter has
been successfully defended.
The Certificate of Incorporation and By-Laws of CapCo I and CapCo II
provide for mandatory indemnification of directors and officers on generally the
same terms as permitted by the Delaware General Corporation Law.
Reference is made to the forms of Purchase Agreement, Senior Subordinated
Registration Rights Agreement and Senior Discount Registration Rights Agreement,
filed as Exhibits 2.2, 4.6 and 4.10, respectively, to this Registration
Statement, which provide for the indemnification of certain officers, directors
and other representatives of each of the Registrants or their partners signing
this Registration Statement and certain controlling persons of each of the
Registrants against certain liabilities (including those arising under the
Securities Act), in certain instances by the Initial Purchasers.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits:
See the Exhibit Index included immediately preceding the exhibits to
this Registration Statement.
(b) Financial Statement Schedules:
Schedule II--Valuation and Qualifying Accounts.
All other schedules have been omitted because they are not applicable or
not required or the required information is included in the financial statements
or notes thereto.
ITEM 22. UNDERTAKINGS.
The undersigned Registrants hereby undertake:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereto), which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
II-2
<PAGE>
The undersigned Registrants hereby undertake as follows: that prior to any
public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed to be underwriters, in addition to the information
called for by the other Items of the applicable form.
The Registrants undertake that every prospectus: (i) that is filed pursuant
to the immediately preceding undertaking or (ii) that purports to meet the
requirements of section 10(a)(3) of the Act and is used in connection with an
offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrants pursuant to the foregoing provisions, or otherwise, the Registrants
have been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrants of expenses incurred
or paid by a director, officer or controlling person of a Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The undersigned Registrants hereby undertake to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
The undersigned Registrants hereby undertake to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS AMENDMENT TO THE REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN YORK, PENNSYLVANIA, ON
JULY 10, 1998.
GRAHAM PACKAGING COMPANY
BY GPC OPCO GP LLC, ITS GENERAL PARTNER
By: /s/ JOHN E. HAMILTON
--------------------------------------
Name: John E. Hamilton
Title: Vice President, Finance and Administration
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
TO THE REGISTRATION STATEMENT HAS BEEN SIGNED ON THE 10TH DAY OF JULY, 1998 BY
THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED, WITH RESPECT TO GPC OPCO GP
LLC, AS GENERAL PARTNER OF GRAHAM PACKAGING COMPANY, OR BMP/GRAHAM HOLDINGS
CORPORATION, AS SOLE MEMBER OF BCP/GRAHAM HOLDINGS L.L.C., WHICH IS A GENERAL
PARTNER OF GRAHAM PACKAGING HOLDINGS COMPANY, THE SOLE MEMBER OF GPC OPCO GP
LLC:
<TABLE>
<CAPTION>
SIGNATURE TITLE
----------- ---------
<C> <S>
* PHILIP R. YATES President and Chief Executive Officer (Principal Executive
- ------------------------------------------ Officer) of GPC Opco GP LLC
/s/ JOHN E. HAMILTON Vice President, Finance and Administration, Secretary and
- ------------------------------------------ Treasurer (Principal Financial Officer and Principal Accounting
John E. Hamilton Officer) of GPC Opco GP LLC
* HOWARD A. LIPSON Director of BMP/Graham Holdings Corporation
- ------------------------------------------
* CHINH E. CHU Director of BMP/Graham Holdings Corporation
- ------------------------------------------
* SIMON P. LONERGAN Director of BMP/Graham Holdings Corporation
- ------------------------------------------
*By: JOHN E. HAMILTON
John E. Hamilton
Attorney-in-Fact
</TABLE>
II-4
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS AMENDMENT TO THE REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN YORK, PENNSYLVANIA, ON
JULY 10, 1998.
GPC CAPITAL CORP. I
By: /s/ JOHN E. HAMILTON
-------------------------
Name: John E. Hamilton
Title: Vice President
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
TO THE REGISTRATION STATEMENT HAS BEEN SIGNED ON THE 10TH DAY OF JULY, 1998 BY
THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED, WITH RESPECT TO GPC CAPITAL
CORP. I:
<TABLE>
<CAPTION>
SIGNATURE TITLE
------------- ---------
<C> <S>
*PHILIP R. YATES President, Treasurer and Assistant Secretary and
- ------------------------------------------------------ Director (Principal Executive Officer)
/s/ JOHN E. HAMILTON Vice President, Secretary and Assistant Treasurer and
- ------------------------------------------------------ Director (Principal Financial Officer and Principal
John E. Hamilton Accounting Officer)
*CHINH E. CHU Director
- ------------------------------------------------------
*SIMON P. LONERGAN Director
- ------------------------------------------------------
By: /s/ JOHN E. HAMILTON
John E. Hamilton
Attorney-in-Fact
</TABLE>
II-5
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS AMENDMENT TO THE REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN YORK, PENNSYLVANIA, ON
JULY 10, 1998.
GRAHAM PACKAGING HOLDINGS COMPANY
By BCP/Graham Holdings L.L.C., its General Partner
By: /s/ JOHN E. HAMILTON
--------------------------------------------
Name: John E. Hamilton
Title: Vice President, Finance and Administration
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
TO THE REGISTRATION STATEMENT HAS BEEN SIGNED ON THE 10TH DAY OF JULY, 1998 BY
THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED, WITH RESPECT TO BCP/GRAHAM
HOLDINGS L.L.C., AS GENERAL PARTNER OF GRAHAM PACKAGING HOLDINGS COMPANY, OR
BMP/GRAHAM HOLDINGS CORPORATION AS SOLE MEMBER OF BCP/GRAHAM HOLDINGS L.L.C., AS
INDICATED BELOW:
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ------------------------------------------------------ ------------------------------------------------------
<C> <S>
*HOWARD A. LIPSON President, Treasurer and Assistant Secretary
- ------------------------------------------------------ (Principal Executive Officer) of BCP/Graham Holdings
L.L.C.
/s/ JOHN E. HAMILTON Vice President, Finance and Administration, Assistant
- ------------------------------------------------------ Secretary and Assistant Treasurer (Principal Financial
John E. Hamilton Officer and Principal Accounting Officer) of
BCP/Graham Holdings L.L.C.
*HOWARD A. LIPSON Director of BMP/Graham Holdings Corporation
- ------------------------------------------------------
*CHINH E. CHU Director of BMP/Graham Holdings Corporation
- ------------------------------------------------------
*SIMON P. LONERGAN Director of BMP/Graham Holdings Corporation
- ------------------------------------------------------
* By /s/ JOHN E. HAMILTON
John E. Hamilton
Attorney-in-Fact
</TABLE>
II-6
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS AMENDMENT TO THE REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN YORK, PENNSYLVANIA, ON
JULY 10, 1998.
GPC CAPITAL CORP. II
By: /s/ JOHN E. HAMILTON
----------------------
Name: John E. Hamilton
Title: Vice President
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
TO THE REGISTRATION STATEMENT HAS BEEN SIGNED ON THE 10TH DAY OF JULY, 1998 BY
THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED, WITH RESPECT TO GPC CAPITAL
CORP. II:
<TABLE>
<CAPTION>
SIGNATURE TITLE
------------ -----------
<C> <S>
*PHILIP R. YATES President, Treasurer and Assistant Secretary and
- ------------------------------------------------------ Director (Principal Executive Officer)
/s/ JOHN E. HAMILTON Vice President, Secretary and Assistant Treasurer and
- ------------------------------------------------------ Director (Principal Financial Officer and Principal
John E. Hamilton Accounting Officer)
*CHINH E. CHU Director
- ------------------------------------------------------
*SIMON P. LONERGAN Director
- ------------------------------------------------------
By: /s/ JOHN E. HAMILTON
John E. Hamilton
Attorney-in-Fact
</TABLE>
II-7
<PAGE>
EXHIBIT INDEX
(a) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ---------- ----------------------
<S> <C> <C>
2.1 -- Agreement and Plan of Recapitalization, Redemption and Purchase dated as of December 18, 1997, as
amended as of January 29, 1998, by and among Graham Packaging Holdings Company, BCP/Graham
Holdings LLC, BMP/Graham Holdings Corporation and the other parties named therein.
2.2* -- Purchase Agreement dated January 23, 1998 among Graham Packaging Holdings Company, Graham
Packaging Company, GPC Capital Corp. I, GPC Capital Corp. II, BT Alex. Brown Incorporated, Bankers
Trust International PLC, Lazard Freres & Co. LLC and Salomon Brothers Inc.
3.1 -- Certificate of Limited Partnership of Graham Packaging Company.
3.2* -- Amended and Restated Agreement of Limited Partnership of Graham Packaging Company dated as of
February 2, 1998.
3.3* -- Certificate of Incorporation of GPC Capital Corp. I.
3.4* -- By-Laws of GPC Capital Corp. I.
3.5 -- Certificate of Limited Partnership of Graham Packaging Holdings Company.
3.6* -- Fifth Amended and Restated Agreement of Limited Partnership of Graham Packaging Holdings Company
dated as of February 2, 1998.
3.7* -- Certificate of Incorporation of GPC Capital Corp. II.
3.8* -- By-Laws of GPC Capital Corp. II.
4.1* -- Indenture dated as of February 2, 1998 among Graham Packaging Company and GPC Capital Corp. I and
Graham Packaging Holdings Company, as guarantor, and United States Trust Company of New York, as
Trustee, relating to the Senior Subordinated Notes Due 2008 of Graham Packaging Company and GPC
Capital Corp. I, unconditionally guaranteed by Graham Packaging Holdings Company.
4.2* -- Form of 8 3/4% Senior Subordinated Note Due 2008, Series A (included in Exhibit 4.1).
4.3* -- Form of 8 3/4% Senior Subordinated Note Due 2008, Series B (included in Exhibit 4.1).
4.4* -- Form of Floating Interest Rate Term Security Due 2008, Series A (included in Exhibit 4.1).
4.5* -- Form of Floating Interest Rate Term Security Due 2008, Series B (included in Exhibit 4.1).
4.6* -- Registration Rights Agreement dated as of February 2, 1998 among Graham Packaging Company and GPC
Capital Corp. I and Graham Packaging Holdings Company, as guarantor, and BT Alex. Brown
Incorporated, Bankers Trust International PLC, Lazard Freres & Co. LLC and Salomon Brothers Inc,
relating to the Senior Subordinated Notes Due 2008 of Graham Packaging Company and GPC Capital
Corp. I, unconditionally guaranteed by Graham Packaging Holdings Company.
4.7* -- Indenture dated as of February 2, 1998 among Graham Packaging Holdings Company and GPC Capital
Corp. II and The Bank of New York, as Trustee, relating to the Senior Discount Notes Due 2009 of
Graham Packaging Holdings Company and GPC Capital Corp. II.
4.8* -- Form of 10 3/4% Senior Discount Note Due 2009, Series A (included in Exhibit 4.7).
4.9* -- Form of 10 3/4% Senior Discount Note Due 2009, Series B (included in Exhibit 4.7).
4.10* -- Registration Rights Agreement dated as of February 2, 1998 among Graham Packaging Holdings
Company, GPC Capital Corp. II, BT Alex. Brown Incorporated, Bankers Trust International PLC,
Lazard Freres & Co. LLC and Salomon Brothers Inc. relating to the Senior Discount Notes Due 2009
of Graham Packaging Holdings Company and GPC Capital Corp. II.
5.1** -- Opinion of Simpson Thacher & Bartlett relating to the Senior Subordinated Notes.
5.2** -- Opinion of Morgan, Lewis & Bockius LLP relating to the Senior Subordinated Notes.
5.3** -- Opinion of Simpson Thacher & Bartlett relating to the Senior Discount Notes.
5.4** -- Opinion of Morgan, Lewis & Bockius LLP relating to the Senior Discount Notes.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ---------- -----------------------
<S> <C> <C>
10.1 -- Credit Agreement dated as of February 2, 1998 among Graham Packaging Holdings Company, Graham
Packaging Company, GPC Capital Corp. I, the lending institutions identified in the Credit
Agreement and the agents identified in the Credit Agreement.
10.2 -- Consulting Agreement dated as of February 2, 1998 between Graham Packaging Holdings Company and
Graham Capital Corporation.
10.3 -- Equipment Sales, Service and License Agreement dated February 2, 1998 between Graham Engineering
Corporation and Graham Packaging Holdings Company.
10.4 -- Forms of Retention Incentive Agreement.
10.5 -- Forms of Severance Agreement.
10.6 -- Registration Rights Agreement by and among Graham Packaging Company, GPC Capital Corp. II, Graham
Capital Corporation, Graham Family Growth Partnership, BCP/Graham Holdings LLC, BMP/Graham
Holdings Corporation and the other parties named therein.
10.7 -- Monitoring Agreement dated as of February 2, 1998 among Graham Packaging Holdings Company, Graham
Packaging Company and Blackstone.
10.8 -- Management Stockholders Agreement.
10.9 -- Form of Equity Incentive Agreement.
10.10 -- Stockholders' Agreement dated as of February 2, 1998 among Blackstone Capital Partners III
Merchant Banking Fund L.P., Blackstone Offshore Capital Partners III L.P., Blackstone Family
Investment Partners III, L.P., BMP/Graham Holdings Corporation, Graham Packaging Holdings Company,
GPC Capital Corp. II and BT Investment Partners, Inc.
10.11 -- Graham Engineering Corporation Amended Supplemental Income Plan.
12* -- Computation of Ratios of Earnings to Fixed Charges.
16.1* -- Letter of Ernst & Young LLP re: change in independent accountants.
21.1 -- Subsidiaries of Graham Packaging Company.
21.2 -- Subsidiaries of Graham Packaging Holdings Company.
23.1** -- Consents of Simpson Thacher & Bartlett (included in its opinions filed as Exhibits 5.1 and 5.3
hereto).
23.2** -- Consents of Morgan, Lewis & Bockius LLP (included in its opinions filed as Exhibits 5.2 and 5.4
hereto).
23.3* -- Consent of Ernst & Young LLP, Independent Auditors.
24* -- Powers of Attorney--Pages II-4 through II-7 of the Registration Statement.
25.1* -- Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of United
States Trust Company of New York, as Trustee.
25.2* -- Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of The Bank
of New York, as Trustee.
27* -- Financial Data Schedule.
99.1* -- Form of Fixed Rate Senior Subordinated Letter of Transmittal.
99.2* -- Form of Fixed Rate Senior Subordinated Notice of Guaranteed Delivery.
99.3* -- Form of Floating Rate Senior Subordinated Letter of Transmittal.
99.4* -- Form of Floating Rate Senior Subordinated Notice of Guaranteed Delivery.
99.5* -- Form of Senior Discount Letter of Transmittal.
99.6* -- Form of Senior Discount Notice of Guaranteed Delivery.
</TABLE>
- ------------------
* Previously filed.
** To be filed by amendment.
<PAGE>
(b) Financial Statement Schedules:
*SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS.
All other schedules have been omitted because they are not applicable or
not required or the required information is included in the financial statements
or notes thereto.
- ------------------
* Previously filed.
<PAGE>
EXHIBIT 2.1
AGREEMENT AND PLAN OF RECAPITALIZATION,
REDEMPTION AND PURCHASE
Dated as of December 18, 1997,
as amended as of January 29, 1998,
by and among
GRAHAM PACKAGING COMPANY,
GRAHAM PACKAGING CORPORATION,
GRAHAM FAMILY GROWTH PARTNERSHIP,
GRAHAM ENGINEERING CORPORATION,
GRAHAM CAPITAL CORPORATION,
GRAHAM RECYCLING CORPORATION,
DONALD C. GRAHAM,
and
BCP/GRAHAM HOLDINGS L.L.C.
and
BMP/GRAHAM HOLDINGS CORPORATION
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 1. RECAPITALIZATION, REDEMPTION AND PURCHASE
TRANSACTIONS........................................................ 2
1.1 Recapitalization, Redemption and Purchase Transactions.............. 2
1.2 Adjustments......................................................... 5
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE GRAHAM
PARTNERS............................................................ 7
2.1 Organization and Good Standing...................................... 7
2.2 Power and Authorization............................................. 7
2.3 No Conflict......................................................... 8
2.4 Title............................................................... 8
2.5 Litigation.......................................................... 9
2.6 DCG Control......................................................... 9
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE PARTNERSHIP................... 9
3.1 Organization........................................................ 9
3.2 Power and Authorization............................................. 9
3.3 No Conflict......................................................... 10
3.4 Subsidiaries........................................................ 10
3.5 Compliance with Laws................................................ 11
3.6 Litigation.......................................................... 11
3.7 Financial Statements................................................ 11
3.8 Inventory........................................................... 12
3.9 Real Property....................................................... 12
3.10 List of Properties, Contracts, etc.................................. 13
3.11 Contracts........................................................... 15
3.12 Insurance........................................................... 15
3.13 Tangible Personal Assets............................................ 15
3.14 Intellectual Property............................................... 15
3.15 Customers and Suppliers............................................. 16
3.16 Taxes............................................................... 16
3.17 Labor Matters....................................................... 16
3.18 Employee Benefits................................................... 17
3.19 Affiliate Agreements................................................ 19
3.20 Environmental Matters............................................... 19
3.21 Absence of Certain Changes and Events............................... 21
3.22 Brokers............................................................. 21
3.23 No Other Warranties................................................. 22
3.24 Partnership's Knowledge............................................. 22
SECTION 4. REPRESENTATIONS AND WARRANTIES OF INVESTORS......................... 22
4.1 Organization and Good Standing...................................... 22
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
4.2 Power and Authorization............................................. 22
4.3 No Conflicts........................................................ 23
4.4 Brokers............................................................. 23
4.5 Financing........................................................... 23
4.6 Investigation and Evaluation........................................ 24
SECTION 5. ADDITIONAL AGREEMENTS AND COVENANTS................................. 25
5.1 Organization of Certain Entities; Contribution of Assets to Opco.... 25
5.2 Conduct of Business Pending Closing................................. 25
5.3 Access to Information; Confidentiality.............................. 27
5.4 Public Announcements; Certain Communications........................ 28
5.5 Notification of Certain Matters..................................... 29
5.6 Further Assurances; Best Efforts; Assistance in Financing........... 31
5.7 Consents............................................................ 31
5.8 Costs and Expenses.................................................. 31
5.9 Release of Graham Partners.......................................... 32
5.10 Indemnification of DCG.............................................. 32
5.11 Credit Facilities................................................... 32
5.12 Covenant Not-to-Compete by the Graham Partners...................... 33
5.13 Payoff of Certain Notes............................................. 34
5.14 Partnership Agreement; Certificate of Limited Partnership........... 35
5.15 Consulting Agreement................................................ 35
5.16 Equipment Sales, Services and License Agreement..................... 35
5.17 Conversion of Brazilian Subsidiary.................................. 35
5.18 Contributions by Family Growth, GP Corp and Recycling............... 35
5.19 Contributions by DCG................................................ 35
5.20 New Equity Plan..................................................... 36
5.21 Pension and Welfare Plans........................................... 36
5.22 Tax Matters......................................................... 38
5.23 No Solicitation..................................................... 39
5.24 Litigation.......................................................... 39
5.25 BTNY Warrants....................................................... 40
5.26 Estoppel Certificates............................................... 40
5.27 Transfers of Graham Partner Interests............................... 40
SECTION 6. CONDITIONS TO INVESTORS' OBLIGATIONS................................ 41
6.1 Representations and Warranties and Covenants........................ 41
6.2 Approvals........................................................... 41
6.3 Legal Matters....................................................... 42
6.4 Opinion of Counsel.................................................. 42
6.5 No Material Adverse Effect.......................................... 42
6.6 Solvency Opinion.................................................... 42
6.7 Registration Rights Agreement....................................... 42
6.8 MAC/Market Out...................................................... 42
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 7. CONDITIONS TO THE PARTNERSHIP'S AND THE GRAHAM
PARTNERS' OBLIGATIONS............................................... 42
7.1 Representations and Warranties and Covenants........................ 43
7.2 Solvency Opinion.................................................... 43
7.3 Approvals........................................................... 43
7.4 Legal Matters....................................................... 43
7.5 Opinion of Counsel.................................................. 43
7.6 Credit Facilities................................................... 43
7.7 Registration Rights Agreement....................................... 43
SECTION 8. CLOSING............................................................. 43
8.1 Time and Place of Closing........................................... 43
SECTION 9. TERMINATION......................................................... 44
9.1 Termination......................................................... 44
9.2 Effect of Termination............................................... 45
SECTION 10. INDEMNIFICATION..................................................... 46
10.1 Indemnification..................................................... 46
10.2 Claims; Defense..................................................... 47
SECTION 11. MISCELLANEOUS....................................................... 48
11.1 Survival of Representations and Warranties.......................... 48
11.2 Notices............................................................. 49
11.3 Assignment; Binding Effect; Benefits................................ 50
11.4 Amendment, Modification and Waiver.................................. 50
11.5 Governing Law; Consent to Jurisdiction; No Jury Trial............... 50
11.6 Enforcement Expenses................................................ 51
11.7 Specific Performance................................................ 51
11.8 Headings, Gender and "Person"....................................... 51
11.9 Counterparts........................................................ 51
11.10 Entire Agreement.................................................... 51
11.11 Third Parties....................................................... 51
</TABLE>
iii
<PAGE>
SCHEDULES AND EXHIBITS
<TABLE>
<CAPTION>
<S> <C>
Schedule 1.1(d) Percentage and Agreed Value of Partnership Interests
Schedule 1.1(e) Allocation of Fair Market Value
Schedule 1.2 Actual Net Income
Schedule 5.2 Conduct of Business
Schedule 5.11 Financial Debt
Schedule 5.18 Contribution of Interests by Family Growth, GP Corp and Recycling
Schedule 5.19 DCG Real Estate to be Contributed to the Partnership
Disclosure Schedules of the Graham Partners and the Partnership
Exhibit 5.14 Form of Fifth Amended and Restated Agreement of Limited Partnership
Exhibit 5.15 Form of Consulting Agreement
Exhibit 5.16 Form of Equipment Sales, Services and License Agreement
Exhibit 6.7 Form of Registration Rights Agreement
</TABLE>
iv
<PAGE>
AGREEMENT AND PLAN OF RECAPITALIZATION,
REDEMPTION AND PURCHASE
THIS AGREEMENT AND PLAN OF RECAPITALIZATION, REDEMPTION AND PURCHASE is
dated as of December 18, 1997 by and among Graham Packaging Company, a
Pennsylvania limited partnership (the "Partnership"), Graham Packaging
Corporation, a Pennsylvania corporation ("GP Corp"), Graham Family Growth
Partnership, a Pennsylvania limited partnership ("Family Growth"), Graham
Engineering Corporation, a Pennsylvania corporation ("Engineering"), Graham
Capital Corporation, a Pennsylvania corporation ("Capital"), Graham Recycling
Corporation, a Pennsylvania corporation ("Recycling"), Donald C. Graham ("DCG"),
BCP/Graham Holdings L.L.C., a Delaware limited liability company ("Investor
GP"), and BMP/Graham Holdings Corporation, a Delaware corporation and an
affiliate of Investor GP ("Investor LP"). Investor GP and Investor LP are also
hereinafter each referred to as an "Investor" and collectively as "Investors."
BACKGROUND
1. The Partnership and its Subsidiaries (as herein defined) are engaged in
the business of the sale and manufacturing of extrusion blow molded rigid
plastic bottles primarily for the food and beverage, household and automotive
business segments (the "Business").
2. At the date hereof, the sole general partner of the Partnership is GP
Corp, and the limited partners of the Partnership are Family Growth,
Engineering, Capital, Recycling and DCG. GP Corp, Family Growth, Engineering,
Capital, Recycling and DCG are also hereinafter each referred to as a "Graham
Partner" and collectively as the "Graham Partners."
3. Upon the terms and subject to the conditions of this Agreement, prior to
the consummation of the transactions contemplated in paragraph 4 below, the
Partnership will contribute to Graham Packaging Holdings I, L.P., a Pennsylvania
limited partnership ("Opco"), substantially all of its assets and liabilities
with the exception of its ownership interests in Opco GP (as herein defined) and
IPO Corp (as herein defined) (the "Opco Contribution") and will organize a
Delaware limited liability company ("Opco GP") to serve as sole general partner
of Opco. The Partnership will be the sole member of Opco GP and the sole limited
partner of Opco. The Partnership will also organize a Delaware "C" corporation
("IPO Corp."), of which the Partnership will hold all of the issued capital
stock. Opco will organize a Delaware limited liability company ("Sub GP"), of
which Opco will be the sole member, and will also organize a Delaware "C"
corporation ("Capital Corp."), of which Opco will hold all of the issued capital
stock. Recycling will transfer to Opco GP a 1% general partner interest in Opco
and Family Growth, GP Corp and Recycling will transfer to Sub GP a 1% ownership
interest in certain entities identified in Schedule 5.18 hereto that are
currently under common control with the Partnership ("Common Control Entities"),
and Family Growth will contribute to Opco all of its then remaining ownership
interests in the Common Control Entities. DCG will make an additional capital
contribution to Opco by contributing to Opco, or causing the contribution to
Opco of, the real estate identified in Schedule 5.19 hereto. All amounts due and
payable to the Partnership under the Promissory Notes (as herein defined) in the
aggregate principal amount of $20,240,000 (plus accrued interest thereon) will
be paid in full. The contributions of interests in
<PAGE>
the Common Control Entities, the contribution by DCG of real estate and the
payment of the Promissory Notes, as described above, are herein referred to
collectively as the "Graham Contributions."
4. Upon the terms and subject to the conditions of this Agreement, the
Partnership, the Graham Partners and the Investors will enter into a redemption
and recapitalization transaction pursuant to which, among other things, newly
arranged financings of the Partnership and Opco will be utilized in part to
redeem a portion of the general and limited partner interests in the Partnership
held by the Graham Partners and to repay certain existing indebtedness for
borrowed money of the Partnership and the Subsidiaries as set forth in Schedule
5.11 (the "Repayment"). Investor GP will then purchase from the Graham Partners
a general partner interest in the Partnership and a limited partner interest in
the Partnership which will thereupon be converted into a general partner
interest in the Partnership, and Investor LP will purchase from the Graham
Partners certain of their remaining limited partner interests.
NOW, THEREFORE, in consideration of the premises and the representations,
warranties, covenants and agreements hereinafter contained, and for other
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto, intending to be legally bound, agree as follows:
SECTION 1. RECAPITALIZATION, REDEMPTION AND PURCHASE
TRANSACTIONS
1.1 Recapitalization, Redemption and Purchase Transactions. Subject to the
terms and conditions hereof and on the basis of and in reliance upon the
covenants, agreements and representations and warranties set forth herein, at
the Closing (as herein defined) the Partnership, the Graham Partners and the
Investors shall enter into the following transactions in the order indicated:
(a) the Partnership and Opco (and, to the extent requested by the
Investors, IPO Corp. and Capital Corp.) shall consummate borrowings and/or
note offerings (the "Borrowings") on such terms as shall be specified by
the Investors in an amount sufficient to effect the Repayment and the
redemption described in Section 1.1(b) below (the "Redemption") and to pay
certain costs and expenses associated with the transactions contemplated
hereby, provided the Borrowings shall be without recourse to the Graham
Partners and the Investors. Opco shall distribute to the Partnership such
portion of the net proceeds of such Borrowings as shall be necessary to
enable the Partnership to effect such Repayment and Redemption.
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(b) Partial Redemption of Graham Partners' Interests. Subject to post-
Closing adjustment as provided in Section 1.2 below, the Partnership shall
redeem from the Graham Partners, and the Graham Partners shall transfer to
the Partnership, all or a portion, as the case may be, of the Graham
Partners' general and limited partner interests in the Partnership, as set
forth on Schedule 1.1(c) hereto, in exchange for aggregate cash
consideration equal to the amount determined by the following calculation
(such amount being referred to herein as the "Graham Redemption Value"):
(i) $674,565,840.99 (the agreed equity value ("Agreed Equity
Value") of all of the general and limited partner interests in the
Partnership held by the Graham Partners before the Closing, after
giving effect to the Graham Contributions described above, and after
considering the Closing Payments (as defined in Part I of Schedule
3.18) and long-term cash stay bonuses and/or equity incentives that
shall be paid by or on behalf of the Partnership to senior and middle
level management in connection with the recapitalization as outlined
in Part I of Schedule 3.18 hereto, as well as the equity options to be
granted to management as outlined in Section 5.20); plus
(ii) amounts, if any, payable by the Partnership to the Graham
Partners pursuant to Section 5.24(b)(i) hereto; less
(iii) $208.25 million (the amount paid by Investor LP and
Investor GP for the Partnership interests being acquired by them
pursuant to subparagraph (c) below); less
(iv) $36.75 million (the agreed value of that portion of the
Graham Partners' general partner and limited partner interests in the
Partnership to be retained following (a) the redemption pursuant to
this Section 1.1(b) and (b) the purchase of the general and limited
partner interests in the Partnership described in (iii) above).
The Partnership shall also pay to the Graham Partners, as additional
consideration for the redemption of their Partnership interests, interest on the
Graham Redemption Value (together with the amount described in clause (iii)
above) accruing, beginning February 2, 1998 and ending on the day immediately
preceding the Closing Date, at the rate of 9.5% per annum through February 21,
1998, 10.5% per annum from February 22, 1998 through March 14, 1998 and 11% per
annum from March 15, 1998 (the "Closing Interest"). The Partnership shall
utilize the proceeds of the Credit Facilities (as herein defined) to pay the
Graham Redemption Value and, if applicable, the Closing Interest. The Graham
Redemption Value and the Closing Interest, if applicable, shall be allocated
among the Graham Partners in accordance with instructions to be provided by the
Graham Partners at least two business days prior to Closing. On the Closing
Date, the Graham Redemption Value and, if applicable, the Closing Interest shall
be paid by the Partnership by wire transfer of immediately available funds
pursuant to instructions previously given by the Graham Partners to the
Partnership for that purpose.
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(c) Purchase of Partner Interests by Investors. Immediately following
the partial redemption pursuant to Section 1.1(b), Investor GP shall
purchase from GP Corp a general partner interest of the Partnership and
shall purchase from the other Graham Partners a limited partner interest of
the Partnership, whereupon such limited partner interest shall be converted
into a general partner interest of the Partnership (such purchased general
partner interest and converted limited partner interest are collectively
referred to herein as the "Investor General Partner Interest") of the
Partnership, and Investor LP shall purchase from the Graham Partners
additional limited partner interests of the Partnership (the "Investor
Limited Partner Interest"). The aggregate purchase price for the Investor
General Partner Interest and the Investor Limited Partner Interest shall be
$208.25 million, allocated among the Graham Partners in accordance with
instruction to be provided by the Graham Partners at least two business
days prior to Closing (subject to subparagraphs (d) and (f) below). On the
Closing Date, the aforesaid payments by the Investors to purchase general
and limited partner interests (collectively, the "Investor Purchase
Payments") shall be paid to the Graham Partners by wire transfer of
immediately available funds pursuant to instructions previously given by
the Graham Partners to Investors for that purpose.
(d) Post-Closing Ownership. Upon consummation of the transactions
contemplated by this Section 1.1, the amount and value of the general and
limited partner interests in the Partnership held by Investors and the
Graham Partners shall be as set forth on Schedule 1.1(d) hereto.
(e) Allocation of Fair Market Value and Tax Treatment. The parties
hereto acknowledge that for tax purposes the fair market value of the
Business as of the Closing shall equal the amount set forth on Schedule
1.1(e) hereto, and shall be allocated among the assets of the Partnership
in accordance with Schedule 1.1(e) hereto. The parties shall mutually agree
upon an allocation among specific assets within the groups of assets
described in Schedule 1.1(e). The parties hereto agree to file all tax
returns (including amended returns and claims for refund) and information
reports in a manner consistent with such allocation. This shall constitute
an agreement among the parties hereto pursuant to Section 755 of the
Internal Revenue Code of 1986, as amended, and the Treasury Regulations
promulgated thereunder. The parties shall treat the Redemption as a
tax-free distribution to the Graham Partners. Upon sale, the Graham
Partners shall recognize taxable gain equal to the sum of the proceeds
payable by Investor GP and Investor LP, respectively, plus 85% of the
liabilities of the Partnership less their basis in the Partnership. As the
Partnership shall make a Section 754 election, the step-up in basis
pursuant to Section 743 resulting from the sale shall inure solely to the
benefit of Investor LP and Investor GP.
(f) Allocation of Redemption and Purchase Amounts Among Graham
Partners. Prior to the Closing Date, the Graham Partners may agree among
themselves as to their respective limited partner interests in the
Partnership that are to be redeemed by the Partnership, purchased by
Investor GP and Investor LP or retained by each such Graham Partner,
provided, however, that for each Graham Partner the ratio of the sales
proceeds for such Partner pursuant to Section 1.1(c) to the redemption
proceeds for such Partner pursuant to Section 1.1(b) shall be the same.
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1.2 Adjustments.
(a) Closing Statement. (i) Not later than 30 days after the Closing Date,
the Graham Partners shall prepare and deliver, or cause to be prepared and
delivered, to the Investors, in accordance with United States generally accepted
accounting principles ("GAAP") applied on a basis consistent with the
preparation of the Audited Financial Statements described in Section 3.7 hereof
and otherwise subject to Schedule 1.2, a statement of Actual Net Income (as
herein defined) for the period from November 3, 1997 to, but excluding, the
Closing Date. Such statement prepared and determined as provided in this Section
1.2(a)(i) is referred to herein as the "Closing Statement." The Partnership and
Investors shall cooperate fully with the preparation of the Closing Statement
and use best efforts to cause their respective affiliates to so cooperate. For
the purposes of this Agreement, "Actual Net Income" shall mean the net income of
the Partnership on a pro forma basis (after giving effect to the contributions
by DCG, Family Growth, GP Corp and Recycling to the Partnership or any of its
Subsidiaries pursuant to Sections 5.19 and 5.18 prepared under a pooling of
interests method of accounting) using accounting policies in accordance with
GAAP consistent with those used in preparation of the Audited Financial
Statements, and applied consistently throughout the period, after giving effect
to the matters set forth on Part I of Schedule 1.2 and after giving no effect to
the matters set forth on Part II of Schedule 1.2, but excluding to the extent
otherwise included in such Actual Net Income (i) income or charges outside the
ordinary course of business, (ii) any Settlement Cost (as defined in Section
5.24(c)), (iii) items of income and expense recorded during the period from
November 3, 1997 up to but excluding the Closing Date and where such items are
related to events, occurrences or circumstances existing for the periods prior
to November 3, 1997, and (iv) items of income and expense related to the
recapitalization, redemption and purchase transactions contemplated by this
Agreement.
(ii) The Investors shall have 30 days to review the Closing Statement after
receipt thereof. Unless the Investors deliver written notice to Graham Partners
on or prior to the 30th day after their receipt of the Closing Statement of
their objection to the Closing Statement and specifying in reasonable detail all
disputed items and the reason therefor, the Investors shall be deemed to have
accepted and agreed to the Closing Statement. If the Investors so notify Graham
Partners of their objection to the Closing Statement, Graham Partners and the
Investors shall, within 30 days of such notice (the "Resolution Period"),
attempt to resolve their differences and any resolution by them as to any
disputed amounts shall be final, binding and conclusive.
(iii) If, at the conclusion of the Resolution Period, any amounts remain in
dispute, then all such amounts remaining in dispute shall be submitted to one of
the "big six" accounting firms which shall be mutually agreeable to the Graham
Partners and the Investors (the "Neutral Auditor"). All fees and expenses
relating to the work to be performed by the Neutral Auditor shall be borne 50%
by the Investors and 50% by the Graham Partners. The Neutral Auditor shall
determine, on the basis stipulated in this Agreement and based solely on
presentations by or on behalf of the Investors and Graham Partners, and not by
independent review, only those issues still in dispute. The respective
presentations by or on behalf of the Investors and the Graham Partners shall be
submitted to the Neutral Auditor within 15 days of the appointment of the
Neutral Auditor. The Neutral Auditor's determination shall be made
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within 15 days of the final submission as provided above. The determination of
the Neutral Auditor shall be set forth in a written statement delivered to the
Investors and the Graham Partners and shall be final, binding and conclusive.
The term "Final Statement" shall mean the definitive Closing Statement deemed to
be accepted and agreed by the Investors or agreed to by the Graham Partners and
the Investors in accordance with Section 1.2(a)(ii) or the definitive Closing
Statement resulting from the determinations made by the Neutral Auditor in
accordance with this Section 1.2(a)(iii) (in addition to those items theretofore
agreed to by the Investors and the Graham Partners).
(b) Post-Closing Adjustment. If the Actual Net Income for the period from
November 3, 1997 to, but excluding, the Closing Date as set forth in the Final
Statement as provided herein is less than $0, then the Graham Partners, jointly
and severally, shall pay to the Partnership an amount equal to such deficiency.
Any payment pursuant to this Section shall be made within five business days
following receipt by the parties of the Final Statement. Payments made pursuant
to this Section 1.2(b) shall be made by wire transfer of immediately available
funds to an account or accounts designated by the Partnership.
(c) Post-Closing Graham Tax Adjustment. The Graham Partners shall be
entitled to distributions to cover the Graham Partners' federal and state income
tax liabilities calculated as the product of the taxable income of the
Partnership allocated to the Graham Partners (for the tax years ending December
31, 1997 and for the 1998 tax year ending on the Closing Date) times the highest
combined marginal individual federal and state income tax rate applicable to
Partnership taxable income (the "Tax Distributions"). Within five business days
following receipt by the parties of the Final Statement:
(i) the Partnership shall distribute to the Graham Partners the
excess, if any, of Tax Distributions (as calculated above) over any prior
distributions made to the Graham Partners with respect to taxes (for the
tax years ending December 31, 1997 and for the 1998 tax year ending on the
Closing Date); and
(ii) the Graham Partners shall contribute to the Partnership the
excess, if any, of prior distributions made to the Graham Partners with
respect to taxes (for the tax years ending December 31, 1997 and for the
1998 tax year ending on the Closing Date) over the Tax Distributions (as
calculated above).
For purposes of the calculation of Tax Distributions, taxable income for the
1998 tax year ending on the Closing Date shall not be reduced by the Closing
Payments to management that are to be made immediately prior to Closing in
connection with the transactions contemplated herein, as set forth in Part I of
Schedule 3.18.
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SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE GRAHAM
PARTNERS
Certain information relating to the representations and warranties of the
Graham Partners and the Partnership contained in this Section 2 and Section 3 of
this Agreement is set forth in disclosure schedules hereto (the "Disclosure
Schedules") prepared by the Partnership and delivered to the Investors pursuant
to this Agreement as of the date hereof. The disclosures in the Disclosure
Schedules shall relate only to the representations and warranties to which they
expressly refer and shall be deemed to be representations and warranties as if
made hereunder. All capitalized terms used in the Disclosure Schedules have the
definitions specified in this Agreement. Disclosure of a matter or a document in
the Disclosure Schedules shall not be deemed to be an acknowledgement that such
matter is material, would have a Material Adverse Effect (as herein defined), or
is outside the ordinary course of business of the Partnership or the
Subsidiaries. The Graham Partners and the Partnership may supplement the
Disclosure Schedules from time to time subject to and in accordance with Section
5.5(b) of this Agreement, and from and after any such supplement the term
"Disclosure Schedules" as used in this Agreement shall mean the Disclosure
Schedules as so supplemented. For purposes of this Agreement, the term "Material
Adverse Effect" shall mean any event, condition or contingency that has had or
is reasonably likely to have a material adverse effect on the business,
properties, assets, liabilities, profits or condition (financial or otherwise)
of the Partnership and the Subsidiaries (as defined herein) taken as a whole
(after giving effect to the contributions under Sections 5.18 and 5.19).
Each of the Graham Partners, jointly and severally, hereby represents and
warrants to the Investors as follows:
2.1 Organization and Good Standing. Each of the Graham Partners that is an
entity is validly existing and in good standing under the laws of its
jurisdiction of organization and has all necessary power and authority to carry
on its business as presently conducted.
2.2 Power and Authorization. Each of the Graham Partners has full legal
right, power and authority to enter into and perform its obligations under this
Agreement and all other agreements and documents (the "Partner Transaction
Documents") required to be delivered by it prior to or at the Closing. The
execution, delivery and performance by each of the Graham Partners of this
Agreement and the Partner Transaction Documents have been duly authorized by all
necessary action on the part of each of the Graham Partners. This Agreement has
been duly and validly executed and delivered by the Graham Partners and
constitutes the legal, valid and binding obligation of the Graham Partners,
enforceable against each of them in accordance with its terms, subject to the
effects of bankruptcy, insolvency, moratorium, fraudulent conveyance,
reorganization or other similar laws affecting creditors' rights generally and
except that enforceability of the obligations of the Graham Partners under this
Agreement is subject to the application of equitable principles and the
availability of equitable remedies in any proceeding, whether at law or in
equity. When executed and delivered as contemplated herein, each of the Partner
Transaction Documents to which a Graham Partner is a party shall constitute the
legal, valid and binding obligation of each of the Graham Partners, as
applicable, enforceable against them in accordance with its terms, subject to
the effects of bankruptcy, insolvency, moratorium,
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fraudulent conveyance, reorganization or other similar laws affecting creditors'
rights generally and except that enforceability of the obligations of the Graham
Partners under the Partner Transaction Documents is subject to the application
of equitable principles and the availability of equitable remedies in any
proceeding, whether at law or in equity.
2.3 No Conflict. The execution, delivery and performance of this Agreement
and the Partner Transaction Documents by each of the Graham Partners do not and
will not violate or result in the breach of any material term, condition or
provision of, or require the consent of any other person which has not been
obtained under: (a) any material law, ordinance or governmental rule or
regulation to which such Graham Partner is subject, (b) any judgment, order,
writ, injunction, decree or award of any court, arbitrator or governmental or
regulatory official, body or authority which is applicable to such Graham
Partner, (c) the certificate of incorporation, the certificate of limited
partnership or other organizational documents of such Graham Partner, if
applicable, or (d) any material contract, agreement or commitment to which such
Graham Partner is a party or by which any material asset of such Graham Partner
is bound.
2.4 Title.
(a) Each of the Graham Partners owns the partner interests in the
Partnership and the Subsidiaries ascribed to it in Schedule 2.4 pursuant to
Sections 3.1 and 3.4(b) hereof, beneficially and of record, free and clear of
any restriction, mortgage, deed of trust, pledge, lien, security interest or
other encumbrance (collectively, "Encumbrances"), except for the restrictions on
the transferability of the limited partner interests in the Partnership pursuant
to the Fourth Amended and Restated Agreement of Limited Partnership of the
Partnership dated February 28, 1994.
(b) DCG (or an entity controlled by DCG) has insurable title in fee simple
(insurable at reasonable rates) to the DCG Real Estate free and clear of any
restriction, mortgage, deed of trust, pledge, lien, security interest or other
charge, claim or encumbrance, except for (i) liens for current taxes,
assessments and governmental charges and levies not yet due and payable; and
(ii) such easements and restrictions, if any, as do not materially detract from
the value or marketability of the property subject thereto and do not materially
interfere with the current use of such property. To the knowledge of DCG, no
building or structure included in the DCG Real Estate, or any appurtenance
thereto or equipment therein, or the operation or maintenance thereof, violates
any restrictive covenant, or encroaches on any property owned by others, and DCG
has not received any notice of any claim or charge that the DCG Real Estate is
or within the last two (2) years has been in violation of or in default under
any such restrictive covenant. No condemnation proceeding is pending or, to the
knowledge of DCG, threatened, with respect to any of the DCG Real Estate. Except
as set forth in this Agreement, there are no lease agreements, purchase
agreements, rights of first refusal, options or other agreements or commitments
in effect conveying to any person or entity any rights with respect to the DCG
Real Estate.
2.5 Litigation. There are no judicial, administrative or other governmental
actions, proceedings or investigations pending or, to the knowledge of each of
the Graham Partners, threatened against the Graham Partners that question any of
the transactions contemplated by, or
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the validity of, this Agreement or any of the other agreements or instruments
contemplated hereby or which, if adversely determined, would have an adverse
effect upon the ability of the Graham Partners to enter into or perform their
respective obligations under this Agreement or any of the other agreements or
instruments contemplated hereby. The Graham Partners have not received any
request from any governmental agency or instrumentality for information with
respect to the transactions contemplated hereby, except pursuant to the HSR Act.
2.6 DCG Control. All ownership interests in all of the Graham Partners are
held directly or indirectly by DCG or trusts established for the primary benefit
of his children, and each of the Graham Partners is under the unilateral control
of DCG.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE PARTNERSHIP
The Partnership hereby represents and warrants to the Investors, except as
set forth in the Disclosure Schedules, as follows:
3.1 Organization. The Partnership is validly existing and in good standing
under the laws of the Commonwealth of Pennsylvania and has all necessary power
and authority to carry on its business as presently conducted and to own and
lease the assets which it owns and leases. All of the outstanding beneficial
interests of the Partnership are owned of record by the Graham Partners as set
forth in Schedule 1.1(c) hereto.
3.2 Power and Authorization. The Partnership and Opco have full legal
right, power and authority to enter into and perform their obligations under
this Agreement and the Borrowings, as applicable (the transactions contemplated
hereby and in connection with the Borrowings, the "Transactions") and all other
agreements and documents (the "Graham Transaction Documents") required to be
delivered by it in connection with the Transactions prior to or at the Closing.
The execution, delivery and performance by the Partnership of this Agreement and
the Graham Transaction Documents have been duly authorized by all necessary
Partnership action. This Agreement has been duly and validly executed and
delivered by the Partnership and constitutes the legal, valid and binding
obligation of the Partnership, enforceable against it in accordance with its
terms, subject to the effects of bankruptcy, insolvency, moratorium, fraudulent
conveyance, reorganization or other similar laws affecting creditors' rights
generally and except that enforceability of the obligations of the Partnership
under this Agreement is subject to the application of equitable principles and
the availability of equitable remedies in any proceeding, whether at law or in
equity. When executed and delivered as contemplated herein, each of the Graham
Transaction Documents to which the Partnership is a party thereto shall
constitute the legal, valid and binding obligation of the Partnership
enforceable against it in accordance with its terms, subject to the effects of
bankruptcy, insolvency, moratorium, fraudulent conveyance, reorganization or
other similar laws affecting creditors' rights generally and except that
enforceability of the obligations of the Partnership under the Graham
Transaction Documents is subject to the application of equitable principles and
the availability of equitable remedies in any proceeding, whether at law or in
equity.
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3.3 No Conflict.
(a) Except as caused or required by the Opco Contribution, the execution,
delivery and performance of this Agreement and the Graham Transaction Documents
by the Partnership and the Graham Partners do not and will not violate or result
in the breach of any material term, condition or provision of, result in the
acceleration (whether after the giving of notice or lapse of time or both) of
any material obligation under, permit the termination of, or require the consent
of any other person which has not been obtained under, or result in the creation
of any material Encumbrance upon the assets of the Partnership or its
Subsidiaries under: (i) any material law, ordinance or governmental rule or
regulation to which the Partnership or any Subsidiary is subject; (ii) any
judgment, order, writ, injunction, decree or award of any court, arbitrator or
governmental or regulatory official, body or authority which is applicable to
the Partnership or any Subsidiary; (iii) the certificate of limited partnership
or other organizational documents of the Partnership or any Subsidiary; or (iv)
any material contract, agreement or commitment to which the Partnership or any
Subsidiary is a party or by which any material asset of the Partnership or any
Subsidiary is bound.
(b) No consents or approvals of, or registrations, notifications, filings
and/or declarations with, any court, government or governmental agency or
instrumentality are required to be given or made by the Graham Partners, the
Partnership or any Subsidiary in connection with the execution, delivery and
performance of this Agreement and the other agreements and instruments
contemplated herein, other than in accordance with the requirements of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act") and such as
have been obtained or made.
3.4 Subsidiaries.
(a) Schedule 3.4(a) separately identifies each subsidiary of the
Partnership (the "Subsidiaries") and the jurisdiction of organization and the
type of legal entity thereof. Each Subsidiary is validly existing and in good
standing under the laws of its jurisdiction of organization and has all
necessary power and authority to carry on its business as presently conducted,
and to own or lease the assets which it owns or leases. Each Subsidiary is duly
qualified to do business and is in good standing under the laws of each
jurisdiction identified in Schedule 3.4(a).
(b) The authorized, issued and outstanding capital stock and other
beneficial interests of each Subsidiary and the record and beneficial ownership
thereof are set forth in Schedule 3.4(b). Except as required under applicable
law with respect to foreign Subsidiaries, as set forth on Schedule 3.4(b), no
person has any preemptive or other rights with respect to any such capital stock
or beneficial interests and there are no offers, options, warrants, rights,
agreements or commitments of any kind (contingent or otherwise) relating to the
issuance, voting, conversion, registration, sale or transfer of any such capital
stock or beneficial interests. All of the issued and outstanding shares of
capital stock or other beneficial interests of each Subsidiary have been duly
authorized by such Subsidiary and are validly issued and outstanding, fully paid
and non-assessable.
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3.5 Compliance with Laws. The Partnership and the Subsidiaries are, and
within all applicable statutes of limitations periods have been, in compliance
in all material respects with all laws, ordinances or governmental or regulatory
rules or regulations (including, without limitation, environmental laws),
whether federal, foreign, state, provincial or local, (collectively, "Laws").
The Partnership and the Subsidiaries own, hold, possess or lawfully use in the
operation of the Business all material franchises, licenses, permits, easements,
rights, registrations and other authorizations which are necessary for them to
conduct the Business (collectively, "Authorizations"). Neither the Partnership
nor any Subsidiary is in default, nor has it received any notice of any claim of
default, with respect to any such Authorization.
3.6 Litigation. There are no material claims, actions, suits, proceedings
(arbitration or otherwise) or, to the knowledge of the Partnership,
investigations involving or affecting the Partnership or the Subsidiaries before
or by any court, government, governmental agency or instrumentality, or before
an arbitrator other than as set forth in Schedule 3.6. Other than with respect
to the litigation set forth in Part I of Schedule 3.6, the matters set forth in
Schedule 3.6, individually or in the aggregate, are not reasonably likely to
have a Material Adverse Effect. To the Partnership's knowledge, (i) no such
claim, action, suit, proceeding or investigation is presently threatened or
contemplated, and (ii) there are no facts which could reasonably serve as a
basis for any such claim, action, suit, proceeding or investigation. Neither the
Partnership nor any Graham Partner is a party to or, to their knowledge,
materially and adversely affected by, any writ, order, injunction or decree of
any court, government, governmental agency or instrumentality.
3.7 Financial Statements.
(a) Schedule 3.7(a) includes: (i) the consolidated balance sheets of the
Partnership and the Subsidiaries as at December 31, 1996 (the "1996 Balance
Sheet") and as at December 31, 1994 and 1995, and the related consolidated
statements of income and cash flows for each of the fiscal years then ended,
together with the reports thereon of Ernst & Young LLP, independent public
accountants, and all applicable notes thereto (collectively, the "Audited
Financial Statements"); and (ii) an unaudited consolidated balance sheet of the
Partnership and the Subsidiaries as of November 2, 1997 (the "Interim Balance
Sheet") and the related unaudited historic consolidated statements of income and
cash flow for the ten months then ended (collectively, the "Interim Financial
Statements"). (The Audited Financial Statements and the Interim Financial
Statements are collectively referred to as the "Financial Statements"). The
Financial Statements present fairly the financial position, results of
operations and cash flows of the Partnership for the periods and dates covered
thereby and, except as disclosed in the Financial Statements, have been prepared
in accordance with GAAP consistently applied, subject, in the case of the
Interim Financial Statements, to (y) recurring year-end adjustments normal in
nature and amount and the absence of notes, and (z) management's best estimates
of accruals and adjustments applied on a basis consistent with management's past
preparation of interim financial statements. The 1996 Balance Sheet and the
Interim Balance Sheet fairly reflect reserves, accruals or other appropriate
provisions at least equal to reasonably anticipated liabilities, losses and
expenses of the Partnership and the Subsidiaries as of the respective dates
thereof required to be accrued by GAAP, including, without limitation, those
with respect to warranty claims, bad debts, unsaleable inventories, product
returns, distributions related to
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partners' income tax liabilities, salaries, vacation pay and other accrued
compensation, sales allowances and resin pricing adjustments.
(b) The 1996 Balance Sheet (or the notes thereto) and the Interim Balance
Sheet fairly reflect all material liabilities of the Partnership and the
consolidated Subsidiaries, whether absolute, accrued or contingent, as of the
respective dates thereof of the type required to be reflected or disclosed in a
balance sheet prepared in accordance with GAAP. Except as identified in the
notes to the 1996 Balance Sheet or in Schedule 3.7(b), neither the Partnership
nor the Subsidiaries have any liabilities or obligations (whether accrued,
absolute, fixed or contingent) of a nature required to be disclosed by GAAP,
either in a balance sheet or the notes thereto, that are not reflected on the
Interim Balance Sheet, except for liabilities (within the meaning of GAAP) which
have been incurred since the date thereof in the ordinary course of business
consistent in nature and amount with past practice.
(c) The Interim Balance Sheet accurately reflects the cash, cash
equivalents and short-term investments, indebtedness for borrowed money
(including capitalized lease obligations) and accrued interest of the
Partnership and its Subsidiaries as of November 2, 1997, prepared in accordance
with GAAP applied on a basis consistent with the preparation of the Audited
Financial Statements. For purposes of this Agreement, "Net Borrowing Amount"
shall mean indebtedness for borrowed money (including capitalized lease
obligations), plus accrued interest, less cash, cash equivalents and short-term
investments, in each case of the Partnership and its Subsidiaries as of November
2, 1997, determined in accordance with GAAP applied on a basis consistent with
the preparation of the Audited Financial Statements.
3.8 Inventory. The inventory of the Partnership and the Subsidiaries,
except for obsolete items and items of below standard quality, all of which have
been written off or written down to their net realizable value on the books and
records of the Partnership, is usable and saleable in all material respects in
the ordinary course of business.
3.9 Real Property.
(a) Schedule 3.9 lists each interest in real property owned or leased by
the Partnership and the Subsidiaries and used in the Business (including the DCG
Real Estate (as herein defined)), including the location thereof (collectively,
the "Premises"). Except as reflected in the Interim Balance Sheet, the
Partnership and the Subsidiaries have insurable title in fee simple (insurable
at reasonable rates) to the Premises owned by them, free and clear of any
restriction, mortgage, deed of trust, pledge, lien, security interest or other
charge, claim, lien or encumbrance except for: (i) liens for current taxes,
assessments and governmental charges and levies not yet due and payable; and
(ii) such easements and restrictions, if any, as do not materially detract from
the value or marketability of the property subject thereto and do not materially
interfere with the current use of such property. To the knowledge of the
Partnership, no building or structure included in the Premises, or any
appurtenance thereto or equipment therein, or the operation or maintenance
thereof, violates any restrictive covenant, or encroaches on any property owned
by others, and the Partnership has not received any notice of any claim or
charge that the Partnership or a Subsidiary is or within the last two (2) years
has been in violation of or in default under any such restrictive covenant,
other instruments of record, agreements
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affecting real property or Law. No condemnation proceeding is pending or, to the
knowledge of the Partnership, threatened, with respect to any of the Premises.
There are no lease agreements, purchase agreements, rights of first refusal,
options or other agreements or commitments of the Partnership in effect
conveying to any person or entity any rights of the Partnership with respect to
the Premises.
(b) Schedule 3.9 further contains a complete and correct list of all
material documents related to the Partnership's leased property, including any
and all amendments and modifications. A true, correct and complete set of said
documents has been made available to the Investors. Each lease identified in
Schedule 3.9 grants the lessee under the lease the exclusive right to use and
occupy the premises and rights demised thereunder free and clear of any
restriction, mortgage, deed of trust, pledge, lien, security interest or
encumbrance except for: (i) liens for current taxes, assessments and
governmental charges and levies not yet due and payable, and (ii) such easements
and restrictions, if any, as do not materially detract from the value or
marketability of the property subject thereto and do not materially interfere
with the current use for such property. Each of the leases at the Premises vests
good and valid interests in the Partnership or its Subsidiaries and each is in
full force and effect and no notice of default has been received thereunder for
which the default has not been cured.
(c) The Premises constitute all the fee, leasehold and other interests in
real property held by the Partnership and the Subsidiaries, and constitute all
of the fee, leasehold and other interests in real property necessary for the
conduct of, or otherwise material to , the Business as it is currently
conducted.
3.10 List of Properties, Contracts, etc. Schedule 3.10 lists or adequately
describes the following:
(a) Each vehicle, item of machinery, equipment and other tangible asset
(other than real property) relating to the Business and owned, leased, used or
held by the Partnership or any Subsidiary which is capitalized or, if not
currently capitalized, was capitalized and written off the books, as of the date
indicated in Schedule 3.10(a) and had an original cost in excess of $100,000, on
the Partnership's consolidated financial statements;
(b) Each Authorization;
(c) Each (i) registered fictitious business name, registered trademark,
registered service mark and any applications for the foregoing, (ii) patent,
patent right and patent application, and (iii) registered copyright in published
and material unpublished works, computer programs and software (the items
referred to in clauses (i)-(iii) above, together with
all other intellectual property rights, are collectively referred to herein as
"Intellectual Property"), and (iv) license and permit issued or granted by any
person relating to any of the foregoing; in each case owned, leased, used or
held by, granted to or licensed by the Partnership or any Subsidiary and related
to the Business as either licensor or licensee, together with all other
interests therein granted by the Partnership or any Subsidiary to any other
person;
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(d) Except as otherwise described in this Agreement, each outstanding loan
or advance (which shall not be deemed to include advances in the ordinary course
of business related to expenses to be reimbursed by Affiliates) made (excluding
advances to employees for ordinary and necessary business expenses made in the
ordinary course of business) by the Partnership or any Subsidiary to any
director, officer, employee or shareholder of the Partnership or any Subsidiary;
(e) Except as otherwise described in this Agreement and the agreements to
be executed and delivered at or prior to Closing pursuant hereto, each contract,
agreement or commitment which restricts or purports to restrict any business
activities or freedom of the Partnership or any Subsidiary to engage in the
manufacture, assembly, design, distribution or marketing for sale of rigid
plastic containers for the packaging of consumer products less than ten liters
in volume;
(f) Each material contract, agreement or commitment to which the
Partnership or any Subsidiary is a party or is otherwise bound providing for
payments (contingent or otherwise) to or by any person or entity based on sales,
purchases or profits, other than payments for goods and purchase orders, and
each other agreement, contract or commitment to which the Partnership or any
Subsidiary is a party or by which it or any of its assets are otherwise bound
(i) which involves aggregate payments or receipts in excess of $1,000,000 per
annum and (ii) which is not terminable by the Partnership or such Subsidiary
without payment of penalty or premium on less than sixty (60) days' notice;
(g) Each material policy and binder of insurance (including, without
limitation, property, casualty, liability, life, health, accident, workers'
compensation and disability insurance and bonding arrangements), owned by or
maintained for the benefit of, or respecting which any premiums are paid
directly or indirectly by, the Partnership or any Subsidiary;
(h) Each note, debt instrument, other evidence of indebtedness, letter of
credit and guaranty issued by or for the benefit of the Partnership or any
Subsidiary which involves an outstanding commitment of at least $1,000,000;
(i) Each open purchase order relating to purchases by the Partnership or
any Subsidiary of more than $1,000,000; and
(j) All material commitments or understandings pursuant to which the
Partnership or any Subsidiary has any obligation to any customer to buy back
non-defective products (whether or not products of the Partnership or any
Subsidiary) owned or held by such customer which are not included in the Interim
Balance Sheet.
3.11 Contracts. Except for the transactions contemplated by this Agreement,
no condition exists or event has occurred which (whether with or without notice
or lapse of time or both, or the happening or occurrence of any other event)
would constitute a default by the Partnership or any Subsidiary or, to the
Partnership's knowledge, any other party thereto under, or result in a right in
termination of, any contract or agreement identified in Schedule 3.10.
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3.12 Insurance. With respect to all insurance policies identified in
Schedule 3.10(g), all premiums due thereon have been paid and the Partnership
and the Subsidiaries have complied in all material respects with the provisions
of such policies and have not received any notice from any of its insurance
brokers or carriers that such broker or carrier will not be willing or able to
renew their existing coverage. All material properties of the Partnership and
the Subsidiaries are covered by insurance in customary scope and amount of
coverage.
3.13 Tangible Personal Assets. On November 2, 1997, the Partnership and the
Subsidiaries had and, except with respect to tangible personal assets disposed
of or acquired in the ordinary course of business and consistent with past
practice since such date, the Partnership and the Subsidiaries now have, good
and valid title to, or holds by valid and existing lease or license, all the
tangible personal assets reflected as assets of the Partnership and the
Subsidiaries on the Interim Balance Sheet or which would have been reflected on
the Interim Balance Sheet if acquired prior to such date, free and clear of all
Encumbrances of any nature except for: (i) Encumbrances which secure
indebtedness or obligations which are properly reflected on the Interim Balance
Sheet; (ii) liens for Taxes not yet payable or being contested in good faith;
(iii) liens arising as a matter of law in the ordinary course of business,
provided that the obligations secured by such liens are not delinquent or are
being contested in good faith; and (iv) such disposal of assets or imperfections
of title and Encumbrances which, individually or in the aggregate, would not
have a Material Adverse Effect. Giving effect to the contributions of assets
anticipated under Section 5.18 and 5.19, the Partnership and the Subsidiaries
own, or have valid leasehold interests in, all material tangible assets
necessary to conduct the Business as conducted on the date of this Agreement.
3.14 Intellectual Property. The Partnership and/or the Subsidiaries are the
owners or have the perpetual right to use without consideration, all material
Intellectual Property, free and clear of any lien, security interest,
restriction, encumbrance, adverse court order or judgment or, to the
Partnership's knowledge, other adverse claim. Except as disclosed in Schedule
3.10, neither the Partnership nor the Subsidiaries have granted or licensed to
any person, other than their Affiliates, any rights with respect to any of their
Intellectual Property. No claim is pending, or, to the Partnership's knowledge,
threatened, alleging that any of the products manufactured or sold by the
Partnership or the Subsidiaries nor any processes or Intellectual Property owned
or used by the Partnership or the Subsidiaries infringe or are alleged to
infringe any trademark, copyright, patent or other proprietary right of any
person, and, to the Partnership's knowledge, no other person is infringing the
material Intellectual Property. The Partnership and its Subsidiaries have taken
reasonable efforts to protect, maintain and safeguard their material
Intellectual Property and the confidentiality thereof, including without
limitation any Intellectual Property for which improper or unauthorized
disclosure would impair its value or validity.
3.15 Customers and Suppliers. No customer that accounted for more than of
2% of the consolidated sales of the Partnership and the Subsidiaries since
December 31, 1996 has terminated or materially reduced or has given notice that
it intends to terminate or materially reduce the amount of business (measured in
terms of resin throughput) done with the Partnership and the Subsidiaries. No
supplier or vendor that accounted for more than 2% of the consolidated purchases
of the Partnership and the Subsidiaries since December 31, 1996 has terminated
or materially reduced or has given notice that it intends to terminate or
materially reduce the
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amount of business done with the Partnership and the Subsidiaries (other than
with respect to reductions in equipment sales to the Partnership or
Subsidiaries).
3.16 Taxes. All federal, state, local and foreign tax returns and tax, duty
and value added statements and reports (or extensions relating thereto) required
to be filed by the Partnership and the Subsidiaries, including, without
limitation, those relating to or affecting the Business, have been filed on a
timely basis, when initially due or when due upon grant of an extension, with
the appropriate governmental agencies in all jurisdictions in which such returns
and reports are required to be filed and all such returns, statements, and
reports were true and correct in all material respects when filed. All federal,
state, local and foreign income, duties, profits, franchise, sales, use,
payroll, premium, occupancy, property, severance, excise, withholding, value
added and other taxes (including interest and penalties) (collectively, "Taxes")
due from the Partnership and the Subsidiaries, including, without limitation,
those relating to the Business, have been fully and timely paid when initially
due or when due upon grant of an extension, except to the extent not yet due and
payable. There are no levies, liens, or other encumbrances existing, threatened
or pending with respect to any Partnership or Subsidiary asset relating to any
Taxes except for any liens for taxes not yet due and payable. Schedule 3.16
lists all federal, state, local and foreign income and franchise tax returns of,
or covering, the Partnership and the Subsidiaries which have been examined or
which are currently under examination by the Internal Revenue Service or by
other appropriate taxing authorities within the last three years, and, except as
and to the extent provided for on the 1996 Balance Sheet, all deficiencies
asserted or assessments made as a result of such examinations have been fully
paid, and there are no other unpaid deficiencies asserted or assessments made by
any taxing authority against the Partnership or any Subsidiary or otherwise
affecting any of its assets.
3.17 Labor Matters. The Partnership and the Subsidiaries are not parties to
any collective bargaining agreement or other contract or agreement with any
labor organization or other representative of any of the Partnership's or the
Subsidiaries' employees, nor is any such contract or agreement presently being
negotiated. There is no labor strike, slowdown, work stoppage, or lockout in
effect affecting the Partnership and the Subsidiaries and the Partnership and
the Subsidiaries have not experienced any such labor controversy since January
1, 1995. No material action, suit, complaint, charge, arbitration, inquiry
proceeding or investigation by or before any court, governmental agency,
administrative agency or commission brought by or on behalf of any employee,
prospective employee, former employee, retiree, labor organization or other
representative of the Partnership's or the Subsidiaries' employees is pending
or, to the knowledge of the Partnership, threatened against the Partnership or
the Subsidiaries. Since January 1, 1995, the Partnership and the Subsidiaries
have not closed any plant or facility, nor has the Partnership and the
Subsidiaries planned or announced any such action or program for the future. The
Partnership and the Subsidiaries are in compliance with its obligations pursuant
to the Worker Adjustment and Retraining Notification Act of 1988, and all other
notification and bargaining obligations arising under any collective bargaining
agreement, statute or otherwise.
3.18 Employee Benefits.
(a) Schedule 3.18 identifies each employee pension benefit plan ("Pension
Plan"), as defined in section 3(2) of the Employee Retirement Income Security
Act of 1974, as
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amended ("ERISA"), employee welfare benefit plan ("Welfare Plan"), as defined in
section 3(1) of ERISA, qualified deferred compensation plan, stock purchase,
stock option, severance, employment, change-in-control, fringe benefit,
collective bargaining and all other material employee benefit plans, agreements,
programs, policies or arrangements, whether or not subject to ERISA, whether
formal or informal, oral or written, maintained by or on behalf of the
Partnership or an ERISA Affiliate (as hereinafter defined) and under which any
employee or former employee of the Partnership or its Subsidiaries has any
present or future right to benefits or under which the Partnership or its
Subsidiaries have any present or future liabilities (collectively, "Employee
Benefit Plans").
(b) Neither the Partnership nor any ERISA Affiliate has incurred any
material liability under any provision of ERISA or other applicable Law relating
to any Employee Benefit Plan. Each Employee Benefit Plan has been administered
in material compliance with its terms and is in material compliance with the
applicable provisions of ERISA (including, but not limited to, the funding and
prohibited transactions provisions thereof), the Internal Revenue Code of 1986,
as amended (the "Code"), and other applicable Laws.
(c) There are no inquiries or proceedings regarding a material amount of
assets pending or threatened by the Internal Revenue Service, the U.S.
Department of Labor, the Pension Benefit Guaranty Corporation, or by any
participant or beneficiary, with respect to any Employee Benefit Plan.
(d) Neither the Partnership nor any entity under common control with the
Partnership within the meaning of Section 414(b), 414(c), 414(m), or 414(o) of
the Code, or section 4001(b) of ERISA (an "ERISA Affiliate") has, since
September 2, 1974, contributed or been required to contribute to any
multiemployer plan, as defined in section 3(37) of ERISA ("Multiemployer Plan").
(e) With respect to each Employee Benefit Plan, the Partnership has
delivered to the Investors a current, accurate and complete copy (or, to the
extent no such copy exists, an accurate description) thereof and, to the extent
applicable: (i) any related trust agreement or other funding instrument; (ii)
the most recent determination letter, if applicable; (iii) any summary plan
description or other written communications (or a description of any oral
communications) by the Partnership or its ERISA Affiliates to their employees
concerning the extent of the benefits provided under any Employee Benefit Plan;
and (iv) for the three most recent years, to the extent applicable (A) the Form
5500 and attached schedules, (B) actuarial valuation reports and (C) attorney's
response to an auditor's request for information.
(f) Each Employee Benefit Plan which is intended to be qualified within the
meaning of Code section 401(a) is so qualified and has received a favorable
determination letter as to its qualification, and nothing has occurred, whether
by action or failure to act, that could reasonably be expected to cause the loss
of such qualification. No event has occurred and no condition exists that would
subject the Partnership or its ERISA Affiliates, either directly or by reason of
their affiliation, to any tax, fine, lien, penalty or other liability imposed by
ERISA, the Code or other applicable laws, rules and regulations. For each
Employee Benefit Plan with respect to which a Form 5500 has been filed, no
material change has occurred with respect to the
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matters covered by the most recent Form since the date thereof. No "reportable
event" (as such term is defined in ERISA section 4043) for which notice has not
been waived by the regulations under such section "prohibited transaction" (as
such term is defined in ERISA section 406 and Code section 4975) or "accumulated
funding deficiency" (as such term is defined in ERISA section 302 and Code
section 412 (whether or not waived)) has occurred that would be reasonably
likely to subject the Partnership or its ERISA Affiliates, either directly or by
reason of their affiliation, to any tax, fine, lien, penalty or other liability
imposed by ERISA, the Code or other applicable laws, rules and regulations. No
Employee Benefit Plan provides retiree welfare benefits and neither the
Partnership nor its ERISA Affiliates have any obligations to provide any retiree
welfare benefits.
(g) With respect to each of the Employee Benefit Plans that is subject to
Title IV of ERISA, as of the Closing Date, the assets of each such Employee
Benefit Plan are at least equal in value to the present value of the accrued
benefits (vested and unvested) of the participants in such Employee Benefit Plan
on an accrued and projected benefit obligation basis, based on the actuarial
methods and assumptions indicated in the most recent actuarial valuation
reports.
(h) With respect to any Employee Benefit Plan, (i) no actions, suits or
claims (other than routine claims for benefits in the ordinary course) are
pending or threatened, (ii) no facts or circumstances exist that could give rise
to any such actions, suits or claims, and (iii) no written or oral communication
has been received from the PBGC in respect of any Employee Benefit Plan subject
to Title IV of ERISA concerning the funded status of any such plan or any
transfer of assets and liabilities from any such plan in connection with the
transactions contemplated herein.
(i) No Employee Benefit Plan exists that could result in the payment to any
present or former employee of the Partnership or its ERISA Affiliates of any
money or other property or accelerate or provide any other rights or benefits to
any present or former employee of the Partnership or its ERISA Affiliates as a
result of the transaction contemplated by this Agreement, whether or not such
payment would constitute a parachute payment within the meaning of Code section
280G.
3.19 Affiliate Agreements. Except for this Agreement and the agreements
contemplated hereby, there are no material contracts, agreements or commitments
between the Partnership or any Subsidiary, on the one hand, and any Graham
Partner or any other of their Affiliates, on the other hand.
3.20 Environmental Matters.
(a) Except as set forth in Schedule 3.20:
(i) To the knowledge of the Partnership and the Subsidiaries,
there are no conditions at, on, beneath or originating from the
Premises or any other location which would, or would reasonably be
expected to, under any Environmental Law (as defined below), (A) give
rise to liability of the Partnership or any Subsidiary or any entity
for which the Partnership or any
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Subsidiary is or may be liable, or the imposition of a statutory lien
at any of the Premises, or (B) require of the Partnership or any
Subsidiary or any entity for which the Partnership or any Subsidiary
is or may be liable, any "Response," "Removal" or "Remedial Action"
(as those terms are defined below) or any other action, including
without limitation reporting, monitoring, cleanup or contribution;
(ii) To the knowledge of the Partnership, no Hazardous Substances
are present at or have been used, handled, generated, processed,
treated, stored, transported to or from, or released, discharged or
disposed of by the Partnership or any Subsidiary or any third party
at, on, or beneath, the Premises in material violation of, or in a
manner that could reasonably be expected to result in material
liability under, any Environmental Law;
(iii) To the knowledge of the Partnership, during the ownership,
use or lease of any real property which was, but is no longer, owned,
used or leased to or by the Partnership or any Subsidiary or formerly
owned subsidiaries (the "Former Real Property") no Hazardous
Substances were present at or used, handled, generated, processed,
treated, stored, transported to or from, or released, discharged or
disposed of by the Partnership, any Subsidiary or any third party at,
on, or beneath, the Former Real Property in material violation of any
Environmental Law applicable at the time of such ownership, use or
lease or that could reasonably be expected to result in material
liability under any Environmental Law;
(iv) To the knowledge of the Partnership, there are no
aboveground or underground storage tanks or transformers containing or
contaminated with PCBs on, at or beneath the Premises in violation of
any Environmental Law; and during ownership, use or lease of the
Former Real Property by the Partnership or any Subsidiary, there were
no aboveground or underground storage tanks, or transformers
containing or contaminated with PCBs on, at or beneath the Former Real
Property in violation of any Environmental Law applicable at the time
of such ownership use, or lease;
(v) Neither the Partnership nor any Subsidiary has received
written notice of:
(A) any claim, demand, investigation, enforcement, Response,
Removal, Remedial Action, statutory lien or other governmental or
regulatory action instituted or threatened against the
Partnership, a Subsidiary, any entity for any matter with respect
to which the Partnership or any Subsidiary is or may be liable,
the Premises or any Former Real Property pursuant to any of the
Environmental Laws;
(B) any claim, demand, investigation, suit or action, made
or threatened by any person against the Partnership, a
Subsidiary, any entity for any matter with respect to which the
Partnership or any Subsidiary is or may be liable, the Premises
or any Former Real Property relating to (1) any form of damage,
loss or injury resulting from, or claimed to result from, any
Hazardous Substance or (2) any alleged violation of the
Environmental Laws by the Partnership or a Subsidiary; or
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(C) any communication to or from any governmental or
regulatory agency arising out of or in connection with Hazardous
Substances at, on, beneath, or originating from the Premises or
any Former Real Property or any other location, including without
limitation, any notice of violation, citation, complaint, order,
directive, request for information or response thereto, notice
letter, demand letter or compliance schedule for which the
Partnership or any Subsidiary or any entity for which the
Partnership or any Subsidiary is or may be liable.
(b) True and complete copies of all Environmental Reports in the
possession of the Partnership or any Subsidiaries have been provided to the
Investors.
(c) As used in this Agreement:
(i) the term "Environmental Laws" means the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 and the
Resource Conservation and Recovery Act of 1976, each as amended,
together with all other laws (including rules, regulations, codes,
plans, injunctions, judgments, orders, decrees, rulings and charges
thereunder) of federal, state, local, and foreign governments (and all
other agencies thereof) concerning pollution or protection of the
environment.
(ii) The terms "Response," "Removal" and "Remedial Action" shall
have the meanings ascribed to them in Sections 101(23)-101(25) of the
Comprehensive Environmental Response, Compensation and Liability Act,
as amended ("CERCLA").
(iii) The term "Hazardous Substances" or "Hazardous Substance" shall mean
any substance regulated under any of the Environmental Laws including, without
limitation, any substance which is: (A) petroleum, asbestos or
asbestos-containing material or polychlorinated biphenyls; (B) defined,
designated or listed as a "pollutant" or "Hazardous Substance" pursuant to
Sections 307 and 311 of the Clean Water Act, 33 U.S.C. ss.ss. 1317 and 1321 or
Section 101(14) of CERCLA, 42 U.S.C. ss. 9601; (C) listed in the United States
Department of Transportation Hazardous Material Tables, 49 C.F.R. ss. 172.101;
or (D) defined, designated or listed as a "Hazardous Waste" under Section
1004(5) of the Resource and Conservation and Recovery Act, 42 U.S.C. 6903(5) or
any similar definitions, designations or listings of hazardous substances under
the laws of any other governmental authority, including without limitation any
foreign government.
(iv) The term "Environmental Reports" shall mean any report, study,
assessment, audit, or other similar document that addresses any issue of actual
or potential noncompliance with, or actual or potential liability under or cost
arising out of, any Environmental Law that may in any way affect the Partnership
or any Subsidiary.
3.21 Absence of Certain Changes and Events. Since the date of the 1996
Balance Sheet, the Partnership and the Subsidiaries have conducted the Business
only in the usual and ordinary course consistent with past practice and there
has not been any:
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(i) declaration or payment of any distribution or payment in
respect of the beneficial interests of the Partnership or any
Subsidiary, other than any such paid entirely in cash with
respect to partners' income tax liabilities;
(ii) material adverse change in the Business or any event,
condition or contingency that would constitute a Material Adverse
Effect;
(iii) settlement or compromise of any material litigation;
(iv) undertaking or consummation of any transaction with or
payment of any fees or amounts to the Graham Partners or any of
their Affiliates or to Viking Graham other than (A) payments in
amounts consistent with past practice to Engineering, Capital or
Viking Graham for services rendered in the ordinary course of
business and (B) distributions for partners' income tax
liabilities permitted under subparagraph (f) of Section 5.2;
(v) tax election or change in a tax election or the filing
for any change in any material respect of any method of
accounting with the Internal Revenue Service; or
(vi) to the Partnership's knowledge, change in any
accounting policy, except as required by GAAP.
3.22 Brokers. Except for Goldman, Sachs & Co. (the fees and expenses of
which shall be borne by the Graham Partners), no person acting on behalf of the
Partnership or its Affiliates or under the authority of any of the foregoing is
or will be entitled to any brokers' or finders' fee or any other commission or
similar fee from the Partnership or the Graham Partners in connection with any
of the transactions contemplated by this Agreement.
3.23 No Other Warranties. In connection with the transactions contemplated
hereby, except as expressly set forth in this Section 3, THE PARTNERSHIP MAKES
NO REPRESENTATIONS OR WARRANTIES WHATSOEVER, WHETHER EXPRESS OR IMPLIED OR
STATUTORY, OF ANY NATURE WHATEVER WITH RESPECT TO THE PARTNERSHIP, THE
SUBSIDIARIES OR THE BUSINESS.
3.24 Partnership's Knowledge. For purposes of this Section 3, "to the
Partnership's knowledge" or words of similar import shall be conclusively deemed
to be only that knowledge actually possessed by those persons identified in
Schedule 3.24 hereto. The Partnership shall not be deemed to have actual or
constructive knowledge of any fact, circumstance or occurrence known to any
person other than as set forth in the preceding sentence.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF INVESTORS
Each Investor hereby represents and warrants to the Partnership and the
Graham Partners as follows:
4.1 Organization and Good Standing. Investor GP is a limited liability
company and Investor LP is a corporation, in each case duly organized, validly
existing and in good standing
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under the laws of its jurisdiction of organization, and has all necessary power
and authority to carry on its business as presently conducted, to own and lease
the assets which it owns and leases and to perform all its obligations under
each agreement and instrument by which it is bound.
4.2 Power and Authorization. Each Investor has full legal right, power and
authority to enter into and perform its obligations under this Agreement and
under the other agreements and documents (the "Investor Transaction Documents")
required to be delivered by it prior to or at the Closing. The execution,
delivery and performance by each Investor of this Agreement and the Investor
Transaction Documents have been duly authorized by all necessary corporate
action. This Agreement has been duly and validly executed and delivered by each
Investor and constitutes its legal, valid and binding obligation, enforceable
against it in accordance with its terms, subject to the effects of bankruptcy,
insolvency, moratorium, fraudulent conveyance, reorganization or other similar
laws affecting creditors' rights generally and except that enforceability of the
obligations of Investor under this Agreement is subject to the application of
equitable principles or the availability of equitable remedies in any
proceeding, whether at law or in equity. When executed and delivered as
contemplated herein, each of the Investor Transaction Documents shall constitute
the legal, valid and binding obligation of each Investor, enforceable against it
in accordance with its terms, subject to the effects of bankruptcy, insolvency,
moratorium, fraudulent conveyance, reorganization or other similar laws
affecting creditors' rights generally and except that enforceability of the
obligations of Investor under the Investor Transaction Documents is subject to
the application of equitable principles or the availability of equitable
remedies in any proceeding, whether at law or in equity.
4.3 No Conflicts.
(a) The execution, delivery and performance of this Agreement and the
Investor Transaction Documents do not and will not (with or without the passage
of time or the giving of notice):
(i) violate or conflict with either Investor's certificate or articles
of incorporation, bylaws or other organizational document, or any law
binding upon each Investor; or
(ii) violate or conflict with, result in a breach of, or constitute a
default or otherwise cause any loss of benefit under any agreement,
contract, commitment or other obligation to which each Investor is a party.
(b) No consents or approvals of, or registrations, notifications, filings
and/or declarations with, any court, government or governmental agency or
instrumentality, creditor, lessor or other person are required to be given or
made by Investor in connection with the execution, delivery and performance of
this Agreement and the other agreements and instruments contemplated herein,
other than the requirements of the HSR Act and such as have been obtained or
made.
(c) There are no judicial, administrative or other governmental actions,
proceedings or investigations pending or, to the knowledge of each Investor,
threatened against
<PAGE>
the Investors, that question any of the transactions contemplated by, or the
validity of, this Agreement or any of the other agreements or instruments
contemplated hereby or which, if adversely determined, would have an adverse
effect upon the ability of Investor to enter into or perform its obligations
under this Agreement or any of the other agreements or instruments contemplated
hereby. Neither Investor has received any request from any governmental agency
or instrumentality for information with respect to the transactions contemplated
hereby, except pursuant to the HSR Act.
4.4 Brokers. Other than Salomon Smith Barney, no person acting on behalf of
Investors or any of their Affiliates or under the authority of any of the
foregoing is or will be entitled to any brokers' or finders' fee or any other
commission or similar fee, directly or indirectly, in connection with any of the
transactions contemplated by this Agreement.
4.5 Financing. Investors have delivered to the Partnership a bank
commitment letter and a bridge financing commitment letter, in each case
attached hereto, (the "Commitment/Bridge Financing Letters") from Bankers Trust
Company (in the case of the commitment letter) and its affiliate Bankers Trust
New York Corporation (in the case of the bridge financing letter) (the
"Lenders") to provide pursuant to the terms detailed in the Commitment/Bridge
Financing Letters (i) long-term loans to Opco at Closing (the "Term Loan"), (ii)
bridge loans to Opco at Closing (the "Opco Bridge Loans") and (iii) a bridge
loan to the Partnership at Closing (the "Partnership Bridge Loan"), all of which
(together with the equity contributions described in the last sentence of this
paragraph) will enable the Partnership to consummate the transactions set forth
in Section 1.1 hereof and to repay certain of Opco's and the Subsidiaries'
financial debt pursuant to Section 5.11(c) hereof, and (iv) immediately
available revolving credit facilities to Opco (the "Revolvers"). All of the
above-described credit facilities shall be nonrecourse to the Graham Partners
and the Investors. As of the date hereof, Investors have no reason to believe
that all conditions precedent to the obligations of the Partnership, Opco and
co-signing Subsidiaries and the Lenders contained therein or in the
Commitment/Bridge Financing Letters will not be satisfied. Blackstone Capital
Partners III Merchant Banking Fund L.P. (the "Fund") has received all approvals
and authorizations necessary to (i) contribute to the Investors the equity to be
utilized by the Investors to purchase from the Graham Partners interests in the
Partnership, subject to the satisfaction of the other terms and conditions set
forth in Section 6.1 here of (ii) provide additional commitments, if needed,
pursuant to the terms of the Partnership Bridge Loan and (iii) to guarantee the
obligations of the Investors pursuant to Section 9.2 hereof.
4.6 Investigation and Evaluation.
(a) Each Investor acknowledges that (i) the Investor and its directors,
officers, attorneys, accountants and advisors have been given the opportunity to
examine to the full extent deemed necessary by Investor all books, records and
other information with respect to the Partnership, the Subsidiaries and the
Business, including without limitation the Financial Statements, (ii) the
Investor has taken full responsibility for determining the scope of its
investigations of the Partnership, the Subsidiaries and the Business, and for
the manner in which such investigations have been conducted, and has examined
the Partnership, the Subsidiaries and the Business to the Investor's full
satisfaction, (iii) the Investor is fully capable of evaluating the
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adequacy and accuracy of the information and material obtained by the Investor
in the course of such investigations, and (iv) except as otherwise provided in
Section 3 hereof, THE PARTNERSHIP AND THE GRAHAM PARTNERS ARE NOT MAKING ANY
REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED OR STATUTORY, OF ANY NATURE
WHATEVER WITH RESPECT TO THE PARTNERSHIP, THE SUBSIDIARIES OR THE BUSINESS.
(b) Each Investor acknowledges that (i) the Investor has taken full
responsibility for evaluating the adequacy, completeness and accuracy of various
forecasts, projections, opinions and similar material heretofore furnished by
the Partnership, its affiliates or their representatives to the Investor in
connection with the Investor's investigations of the Partnership, the
Subsidiaries, and their businesses, assets and liabilities; (ii) there are
uncertainties inherent in attempting to make projections and forecasts and
render opinions, and the Investor is familiar with such uncertainties; and (iii)
neither the Partnership nor any affiliate of the Partnership makes any
representations or warranties concerning any such forecasts or projections.
(c) Each Investor acknowledges that it has been advised by the Partnership
that the Investor General Partner Interest and the Investor Limited Partner
Interest (together, the "Partnership Interests") have not been registered under
the Securities Act of 1933, as amended (the "Act"), that the Partnership
Interests will be issued on the basis of the statutory exemption provided by
Section 4(2) of the Act and/or Regulation D promulgated thereunder ("Regulation
D") relating to transactions by an issuer not involving a public offering, and
that the Partnership's reliance thereon is based in part upon the
representations made by the Investors in this Agreement. Each Investor
acknowledges that it has been informed by the Partnership of, or is otherwise
familiar with, the nature of the limitations imposed by the Act and the rules
and regulations thereunder on the transfer of securities. In particular, each
Investor agrees to be bound by the terms and conditions set forth in this
Agreement and the Amended and Restated Partnership Agreement (as defined herein)
and further agrees that no sale, assignment or transfer of the Partnership
Interests shall be valid or effective, and the Partnership shall not be required
to give any effect to any such sale, assignment or transfer, unless (i) the
sale, assignment or transfer of the Partnership Interests is registered under
the Act, it being understood that the Partnership has no obligation or intention
to so register the Partnership Interests, (ii) the Partnership Interests are
sold, assigned or transferred in accordance with the requirements and
limitations of Rule 144 under the Act, it being understood that Rule 144 is not
available at the present time for the resale of the Partnership Interests and
that there can be no assurance that Rule 144 will be available any time in the
future, or (iii) such sale, assignment, or transfer is otherwise exempt from
registration under the Act.
(d) Each Investor is an Accredited Investor, as that term is defined in
Regulation D. The Partnership Interests will be acquired by it for its own
account, not as a nominee or agent, for investment and without a view to resale
or other distribution within the meaning of the Act, and the rules and
regulations thereunder, and such Investor will not distribute or transfer any
part of the Partnership Interests in violation of the Act.
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SECTION 5. ADDITIONAL AGREEMENTS AND COVENANTS
5.1 Organization of Certain Entities; Contribution of Assets to Opco.
(a) The Partnership shall organize or cause the organization of Opco GP,
IPO Corp., Sub GP and Capital Corp.
(b) The Partnership shall contribute, immediately prior to the Closing, all
of its assets and liabilities to Opco, except that the Partnership shall not
contribute to Opco its ownership interest in Opco GP and IPO Corp or such other
assets as shall be specified by the Investors.
5.2 Conduct of Business Pending Closing. Except as expressly provided in
this Agreement (including, specifically, the Opco Contribution) or in Schedule
5.2 or as consented to in writing by Investors (and provided that nothing in
this Section 5.2 shall prohibit or limit the Partnership in any respect from
entering into or adopting the compensatory or other employee incentive
agreements that are described in Part I of Schedule 3.18 hereto, and satisfying
its obligations thereunder), between the date hereof and the Closing, the
Partnership shall, and shall cause each Subsidiary to:
(a) maintain its existence, pay and discharge its debts, liabilities
and obligations as they become due, and operate its business solely in the
ordinary course consistent with past practice and the provisions of this
Agreement and in compliance in all material respects with all applicable
laws and agreements to which it is bound;
(b) maintain its facilities and assets in the same state of repair,
order and condition as they were on the date hereof, reasonable wear and
tear excepted;
(c) maintain its books and records in accordance with past practice and use
all reasonable efforts to maintain in full force and effect all material
insurance policies and binders;
(d) use all reasonable efforts to preserve intact its present business
organization and maintain its relations and goodwill with its suppliers,
customers, employees and others having a business relationship with it;
(e) not issue, repurchase or redeem or commit to issue, repurchase or
redeem any partnership interests or shares of capital stock of the Partnership
or any Subsidiary, any options or other rights to acquire such partnership
interests or capital stock or any securities convertible into or exchangeable
for such partnership interests or capital stock;
(f) not, in the case of the Partnership or Opco, declare or pay any
dividend on, or make any other distribution with respect to, outstanding
partnership interests or capital stock of the Partnership and the Subsidiaries
other than with respect to distributions for partners' income tax liabilities
for the period prior to the Closing Date (excluding any deductions with respect
to the payment of the Closing Payments set forth in Part I of Schedule 3.18);
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(g) not amend its charter or other organizational documents;
(h) not assume, guarantee, or otherwise become responsible for the
obligations of, or make any loans or advances to, any other individual, firm or
corporation, other than between the Partnership and the Subsidiaries;
(i) not waive or release any rights of material value, or cancel,
compromise, release or assign any material indebtedness owed to it or any
material claims held by it;
(j) not settle or compromise any material litigation;
(k) not enter into, nor amend, any collective bargaining agreements;
(l) not (i) increase the compensation or fringe benefits of any present or
former director, officer or employee of the Partnership or its Subsidiaries
(except for increases in salary or wages in the ordinary course of business
consistent with past practice), (ii) loan or advance any money or other property
to any present or former director, officer or employee of the Partnership or its
Subsidiaries, (iii) grant any severance or termination pay to any present or
former director, officer or employee of the Partnership or its Subsidiaries, or
(iv) establish, adopt, enter into, amend or terminate any Employee Benefit Plan
or any plan, agreement, program, policy, trust, fund or other arrangement that
would be an Employee Benefit Plan if it were in existence as of the date of this
Agreement;
(m) not undertake or consummate any transaction with or pay any fees or
other amounts to the Graham Partners or any of their Affiliates or to Viking
Graham other than (i) payments in amounts consistent with past practice to
Graham Engineering, Graham Capital and Viking Graham for services rendered in
the ordinary course of business and (ii) distributions for partners' income tax
liabilities permitted under subparagraph (f) above;
(n) not make, nor change, any tax elections prior to Closing or file for
any change in any material respect any method of accounting with the Internal
Revenue Service;
(o) not, to the Partnership's knowledge, change any accounting policy,
except as required by GAAP;
(p) not merge with or into any other corporation or entity or, except in
the ordinary course of business consistent with past practice, sell, assign,
transfer, pledge or encumber any part of its assets;
(q) not enter into, nor amend in any material respect, any contract,
commitment, agreement or arrangement which requires payments by the Partnership
or any of its Subsidiaries in excess of $5 million in any 12-month period, to
the extent such contract, commitment, agreement or arrangement is not terminable
within 60 days without payment of premium or penalty or is not in the ordinary
course of business; provided that the foregoing shall not restrict the
Partnership from entering into or amending contracts with respect to the
purchase
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of resin and other materials or the sale of products, in each case in the
ordinary course of business consistent with past practice; or
(r) agree to do any of the foregoing.
5.3 Access to Information; Confidentiality. Prior to the Closing, the
Partnership shall, during ordinary business hours, give Investors and their
authorized representatives, agents, advisors and financing sources reasonable
access to all of its personnel, auditors, books, records, plants, offices and
other facilities and properties, permit Investors to make such inspections
thereof as Investors may reasonably request, and cause its officers and advisors
to furnish Investors and financing sources with such financial, operating and
other information regarding the Partnership's and each Subsidiary's business,
agreements, commitments, liabilities, personnel and properties as Investors may
reasonably request. Investors' access to the foregoing information must be
coordinated through the senior management of the Partnership. Investors agree
that when they exercise their rights under this Section 5.3, they will not
unduly disrupt the business and operations of the Partnership and the
Subsidiaries. Investors acknowledge that certain of the information which may be
made available to them is proprietary and includes confidential information.
Until the Closing, Investors shall hold such information in confidence in
accordance with that certain agreement dated August 12, 1997 between Blackstone
Management Partners III LLC and the Partnership with respect, inter alia, to the
confidentiality of certain information (the "Confidentiality Agreement"). The
Confidentiality Agreement is hereby incorporated herein by this reference and
made a part hereof.
5.4 Public Announcements; Certain Communications.
(a) From and after the date hereof and after the Closing, except as and to
the extent required by law based on the advice of their respective counsel, as
the case may be, without the prior written consent of the other parties (which
shall not be unreasonably withheld), no party hereto shall, and each will direct
its representatives, advisors and financing sources not to, directly or
indirectly, make any public comment, statement or communication with respect to,
or otherwise disclose or permit the disclosure of any of the material terms,
conditions or other aspects of, the transactions (other than the Borrowings)
contemplated hereby other than to limited partners of the Fund and its
Affiliates and the banks or other lenders in the Borrowings (including to all of
their respective advisers); provided that nothing in this Agreement shall
prohibit the disclosure of any information which has been previously publicly
disclosed in accordance with this Section 5.4(a) (through a press release or
other broad public dissemination) by any party hereto or any of its Affiliates.
In the event any party determines that it is required by law, regulation or
legal or judicial process to make any such public comment, statement or
communication, such party shall advise the other parties of that fact as soon as
reasonably practicable so that, to the extent feasible and desired by the other
parties, such public comment, statement or other communication can be made
jointly by the parties. Notwithstanding anything in this Section 5.4(a) to the
contrary, Investors will be permitted to undertake customary marketing
activities associated with the Borrowings and the offering by the Partnership
and Opco of public and/or private debt securities to provide financings for the
Redemption and Repayment or to replace all or a portion of the Credit Facilities
(as herein defined). It is understood that this Agreement will become publicly
available in connection with the anticipated registration of
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securities of the Partnership and Opco, and it is agreed that any filing in
connection with such registration shall not be made prior to 90 days after the
Closing (or if such day is not a business day, the next preceding business day).
(b) Notwithstanding anything in this Section 5.4 to the contrary, except as
otherwise provided in Section 5.3 hereof or pursuant to the Partnership's prior
written consent, at no time prior to the Closing shall any Investor directly or
indirectly contact or engage in any discussion or other communication with (i)
any employee, consultant, customer or supplier of the Partnership, any Graham
Partner or any of their Affiliates or (ii) any other person or entity which
Investor knows or believes to be in an actual or prospective business
relationship with the Partnership or any Graham Partner, in either case for the
purpose of discussing any matter related to the Partnership, any Graham Partner
or the Business.
5.5 Notification of Certain Matters.
(a) Certain Events. The Partnership shall give prompt notice to Investors,
and Investors shall give prompt notice to the Partnership, of (i) any material
failure of the Partnership, any Graham Partner or any Investor, as the case may
be, or any partner, officer, director, employee or agent thereof, to comply with
or satisfy any covenant, condition or agreement to be complied with or satisfied
by it hereunder, (ii) any notice or other communication from any governmental or
regulatory agency or authority in connection with the transactions contemplated
by this Agreement, and (iii) any actions, suits, claims, investigations or
proceedings pending or, to the best of its knowledge, threatened against,
relating to or involving or otherwise affecting the Partnership or any Investor,
as the case may be, or any of the transactions contemplated by this Agreement.
(b) Update of Disclosure Schedules. (i) In the event the Partnership or any
Graham Partner discovers any matter which would cause any of the representations
and warranties made herein by the Partnership or any Graham Partner to become
inaccurate or untrue in any material respect as of the date of this Agreement
assuming solely for this purpose that the Partnership and the Graham Partners
had knowledge thereof as of the date of this Agreement (a "Discovery"), or if
any developments should occur between the date of this Agreement and the Closing
Date which, had they occurred before the date of this Agreement, would have
caused any representation or warranty made by the Partnership or any Graham
Partner herein to be inaccurate or untrue in any material respect as of the date
of this Agreement or which would (but for the provisions of subparagraph (ii)
below) cause any such representation or warranty to be inaccurate or untrue in
any material respect as of the Closing Date (in each such case, a
"Development"), then the Partnership and such Graham Partner shall, subject to
subparagraph (ii) below with respect to Discoveries, supplement the Disclosure
Schedules in reasonable detail and specificity to disclose such Discovery or
Development upon notice to the Investors in accordance with Section 11.2 of this
Agreement.
(ii) With respect to a supplement to the Disclosure Schedules relating to a
Discovery, if requested by Investors in writing within ten business days of
notice of the proposed supplement, the Partnership and/or the Graham Partners
and Investors shall meet and discuss any such proposed supplement. If Investors
accept such proposed supplement or the
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Investors do not make a request to meet with the Partnership and/or the Graham
Partners within ten business days of Investors' receipt of their notice of such
a proposed supplement to the Disclosure Schedules, then the Discovery described
in such notice shall be deemed to be incorporated into and to become a part of
the Disclosure Schedules as of the date of this Agreement. If the Investors
reject such proposed supplement or request a meeting and do not thereafter
accept such proposed supplement, then such Discovery shall not be deemed to be
incorporated into or to become part of the Disclosure Schedules. No approval is
required of the Investors for any supplement to the Disclosure Schedules for a
Development, and the Development described in the notice thereof in accordance
with subparagraph (i) above shall be deemed to be incorporated into and to
become a part of the Disclosure Schedules as of the date of this Agreement.
(iii) With respect to any Discovery or Development of which the Investors
become aware, the Investors shall notify the Partnership and the Graham Partners
within two business days of receiving the supplement in respect of such
Discovery or Development if the Investors believe that such Discovery or
Development (together with all other Developments and all Discoveries not
accepted for inclusion in the Disclosure Schedules) (A) constitutes a Material
Adverse Effect or (B) might constitute a Material Adverse Effect and the
Investors desire additional information to determine if such Discovery or
Development (together with all other Developments and all Discoveries not
accepted for inclusion in the Disclosure Schedules) constitute(s) a Material
Adverse Effect, in which latter case the Graham Partners and the Partnership
shall reasonably comply with any reasonable requests (within two business days
thereof to the extent such information is reasonably available) of the Investors
for information germane to their assessment as to whether a Material Adverse
Effect has occurred. In the case of a notice described in clause (B) above, the
Investors shall notify the Graham Partners and the Partnership in writing by no
later than the fifth (5th) business day following the notice described in clause
(B) above as to whether or not the Investors believe that a Material Adverse
Effect has occurred. In the case of a notice delivered pursuant to clause (A) or
(B) above, the Graham Partners and the Investors shall discuss the relevant
Discovery or Discoveries or Development(s). In the event the Investors have
notified the Graham Partners and the Partnership that they believe that a
Material Adverse Effect has occurred, the parties shall discuss in good faith
whether the parties shall proceed with the transactions contemplated by this
Agreement on the terms of this Agreement or other terms mutually agreeable to
the parties hereto. In a case described in the immediate preceding sentence, if
the parties do not agree to proceed with the transactions contemplated by this
Agreement on the terms contained in this Agreement or other mutually agreeable
terms within five business days after receipt by the Graham Partners of the
Investors' notice pursuant to clause (A) or (B) above, then either party may, on
written notice to the other party, terminate this Agreement pursuant to Section
9.1(c) or (d) hereof, as applicable, unless, prior to such written notice of
termination, the Investors give written notice to the Graham Partners and the
Partnership that they have withdrawn their determination that a Material Adverse
Effect has occurred. The failure by the Investors to provide notice to the
Partnership and the Graham Partners of their determination that a Discovery or
Discoveries or a Development or Developments constitute or might constitute a
Material Adverse Effect within the required two business day period with respect
to clause (A) or (B) above as applicable, or the absence of a determination by
the Investors that a Discovery or Discoveries or a Development or Developments
under consideration under clause (B) above
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constitutes a Material Adverse Effect within the required five business day
period, or the subsequent withdrawal of a determination that a Material Adverse
Effect has occurred, shall be deemed a waiver of the Investors' right to
terminate this Agreement by reason of any and all Discoveries or Developments
which are the subject of a determination pursuant to clause (A) above or were
under consideration pursuant to clause (B) above pursuant to this Section
5.5(b)(iii), as applicable, provided, no subsequent Discovery or Development
occurs. Upon becoming aware of subsequent Discoveries or Developments, such
waiver shall no longer be in effect, and the provisions of this subparagraph
(iii) (including the provisions relating to the possible waiver of such
subsequent and prior Discovery or Developments) shall apply de novo.
5.6 Further Assurances; Best Efforts; Assistance in Financing.
(a) Each party hereto shall use best efforts to comply with all
requirements imposed hereby on such party and to cause the transactions
contemplated hereby to be consummated as contemplated hereby and shall, from
time to time and without further consideration, either before or after the
Closing, execute such further instruments and take such other actions as any
other party hereto shall reasonably request in order to fulfill its obligations
under this Agreement and to effectuate the purposes of this Agreement. Each
party shall promptly notify the other parties of any event or circumstance known
to such party that could prevent or delay the consummation of the transactions
contemplated hereby or which would indicate a breach or non-compliance with any
of the terms, conditions or agreements of any of the parties to this Agreement.
No party shall take any action to cause any such covenant, agreement,
transaction or condition not to occur, be satisfied or be performed, as the case
may be.
(b) The Partnership and the Subsidiaries will provide reasonable assistance
to the Investors in their efforts to obtain the financing necessary to
consummate the transactions contemplated hereby including facilitating customary
due diligence and arranging for senior officers of the Partnership and the
Subsidiaries, as selected by the Investors, to meet with prospective lenders and
investors in customary "road show" presentations or otherwise. The Partnership
and the Subsidiaries will also cause its accountants and attorneys to provide
reasonable assistance in such financing, including providing audited financial
statements (restated to reflect the transactions described in Sections 5.18 and
5.19 hereof) suitable for inclusion in a registration statement on Form S-l,
customary "comfort letters" and legal opinions. Prior to the Closing, if
requested by the Investors, the Graham Partners shall cause IPO Corp and Capital
Corp to enter into with one or more underwriters purchase agreements with
respect to any note offerings comprising part of the Borrowings that are
anticipated to close on the Closing Date, in such forms as may be reasonably
requested by the Investors, provided there is not liability to the Partnership
or Opco thereunder if the Closing does not occur. The Graham Partners shall
provide such information as is reasonably required in connection with such
registration statement.
5.7 Consents. Prior to the Closing, the Partnership and Investors shall,
and the Partnership shall cause each Subsidiary to, use all reasonable efforts
to obtain (and cooperate with the other parties hereto in obtaining) all
consents, permits, Authorizations, approvals of, and
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exemptions by, any regulatory authority or third party necessary for the
consummation of the transactions contemplated by this Agreement.
5.8 Costs and Expenses. Except as otherwise provided in this Section 5.8
and Section 9.2 hereof, the Partnership, the Graham Partners and Investors shall
each pay their own respective Fees and Expenses (as herein defined) incurred in
connection with the transactions contemplated by this Agreement; provided that
the fees and expenses of Goldman Sachs and all legal and all other fees and
expenses incurred by the Partnership shall be borne by the Graham Partners
("Graham Fees"). If any Graham Fees are or have been paid by the Partnership,
the Partnership shall send to the Graham Partners and the Investors an itemized
list thereof and the Graham Partners shall reimburse the Partnership for the
amounts set forth on such list within five business days of the receipt of such
list. Notwithstanding the foregoing, if the transactions contemplated by this
Agreement are consummated, the Partnership shall pay or reimburse the following
Fees and Expenses at or immediately after the Closing: (a) transaction-related
fees and expenses (expected to approximate $9.0 million in the aggregate)
incurred by the Investors in connection with the transactions contemplated by
this Agreement; (b) all financing fees and expenses at market rates consistent
with the Commitment/Bridge Financing Letters related to the Credit Facilities
(as herein defined); and (c) a fee of $9.3 million payable to Blackstone
Management Partners III L.L.C. All real estate and other transfer taxes in
connection with the contribution of the DCG Real Estate shall be paid by the
Graham Partners.
5.9 Release of Graham Partners. Effective as of the Closing, the
Partnership hereby releases the Graham Partners and their respective partners,
shareholders, directors, officers, employees, agents and affiliates who served
in such capacity prior to Closing, of and from any and all causes of actions,
claims and demands whatsoever that the Partnership ever had, or now has, or that
it or its successors and assigns hereafter shall or may have against such
persons in such capacities, for, or by reason of, any cause or matter, the basis
for which existed at or prior to the date hereof, except as expressly provided
in this Agreement or the Partnership Agreement; provided, that the capital in
the Partnership of the Continuing Graham Partners shall remain at risk to the
same extent as the capital in the Partnership of the Investors.
5.10 Indemnification of DCG. From and after the Closing, the Partnership
shall indemnify, defend and hold harmless DCG and his Affiliates, agents and
representatives against any and all losses, costs, expenses, claims, damages or
liabilities (collectively, "Damages"), that DCG and his Affiliates, agents and
representatives has suffered, incurred or became subject to, and to reimburse
DCG and his Affiliates, agents and representatives for any legal, audit or other
expenses incurred by them in connection with investigating any claims and
defending any actions, insofar as any such Damages arise out of any matter
related to the DCG Real Estate (as herein defined), including without limitation
any matter related to Environmental Laws, provided, however, that the
Partnership shall not be obligated to indemnify, defend and hold harmless DCG
and his agents and representatives under this Section 5.10 for any matter that
constitutes a material breach of any representation or warranty of the
Partnership or any Graham Partner made or given under this Agreement.
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5.11 Credit Facilities.
(a) Upon the Partnership's request from time to time, Investors shall
report to the Partnership concerning the status of the Borrowings and shall
provide the Partnership with such information, draft documents and other
materials related thereto as the Partnership shall reasonably request from time
to time.
(b) In regard to the bank lending syndicates for the senior and junior debt
securities expected to be issued as part of the Borrowings (the "Credit
Facilities"), the Investors shall use reasonable efforts to obtain the selection
of the Partnership's current agent bank, NationsBank, N.A., as documentation
agent; provided, however, that the selection of such documentation agent shall
be the joint decision of the Investors and Bankers Trust Company. In addition,
Investors acknowledge that it is the strong preference of the Partnership and
the Graham Partners that (i) those other banks that are members of the
Partnership's lending syndicate under the Partnership's $350,000,000 credit
facility be invited to participate as co-agents in the Credit Facility, and (ii)
NationsBank be selected as co-manager with respect to the senior subordinated
and junior subordinated debt securities that are expected to be issued in lieu
of all or a portion of the Opco Bridge Loan and the Partnership Bridge Loan;
provided, however, that the Investors have the unilateral right to select such
co-agents or co-managers and have no obligation whatsoever to select such banks
and Nationsbank as co-agents or co-managers in the Credit Facility or any other
portion of the financing.
(c) Contemporaneously with the Closing, the Partnership shall consummate
the transactions contemplated by the Credit Facilities, and the Partnership
shall repay in full the financial debt of the Partnership and the Subsidiaries
as reflected on Schedule 5.11 hereto that is outstanding on the Closing Date.
5.12 Covenant Not-to-Compete by the Graham Partners.
(a) Except as otherwise provided in Section 5.12(b) below, for a period of
five years from and after the Closing Date, neither the Graham Partners nor any
of their Affiliates (as herein defined) shall, directly or indirectly, (i)
engage in the manufacture, assembly, design, distribution or marketing for sale
of rigid plastic containers for the packaging of consumer products less than ten
liters in volume ("GPC Containers"); (ii) be or become a stockholder, partner,
owner, officer, director or employee of, or a consultant to, any person or
entity engaging in any such activities; (iii) solicit the employment of any
person who is a key employee of the Partnership or any of the Subsidiaries as of
the date hereof; or (iv) hire or employ any person who is a key employee of the
Partnership or any of the Subsidiaries as of the date hereof, except (A) any
such person who, subsequent to the date hereof, is terminated by, or resigns for
good reason from, the Partnership or any of the Subsidiaries, or (B) those
employees set forth on Schedule 5.12(a) (who currently have substantial
responsibilities providing services to Engineering in connection with
Engineering's agreement with Tetra Pak International S.A. and its Affiliates
dated December 12, 1997). Such Schedule 5.12(a) shall be provided on or before
the Closing subject to the approval of the Investors, which shall not be
unreasonably withheld.
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(b) Notwithstanding anything herein to the contrary, nothing herein shall
prohibit the Graham Partners or any of their Affiliates from (i) the design,
manufacture, assembly, distribution, sale or service of any equipment used in
connection with the manufacture or assembly of GPC Containers, including without
limitation providing services in connection therewith, (ii) owning partnership
interests in the Partnership, (iii) owning, as passive investors, in the
aggregate not more than five percent (5%) of the outstanding shares of capital
stock or other beneficial ownership interests of any entity (other than a
successor in interest to the Partnership) engaged in the manufacture, assembly,
design, distribution or marketing for sale of GPC Containers, (iv) owning, as
passive investors, any interest in any private equity investment partnership or
similar investment vehicle, (v) the provision of certain services by Engineering
to Tetra Pak International S.A. and its Affiliates pursuant to agreements dated
December 12, 1997 or (vi) the provision of services (whether as a director,
employee, consultant, partner, advisor or otherwise) to a division or portion of
an entity conducting its business operations in the business described in
Section 5.12(a)(i) above, if such entity is diversified and such Graham Partner
or Affiliate thereof does not render services, directly or indirectly, to the
division or portion of the entity which is conducting its business operations in
the business described in Section 5.12(a)(i) above.
(c) For the purposes of this Agreement, "Affiliate" of any person or entity
means any other person or entity that, directly or indirectly, through one or
more intermediaries, controls or is controlled by or is under common control
with such person or entity. A person shall be deemed to be controlled by another
person if such other person possesses, directly or indirectly, power to direct
or cause the direction of management and policies of such person whether by
ownership of equity or other securities, by contract or otherwise, provided that
any person or entity of which any other person or entity owns beneficially or of
record, either directly or through one or more intermediaries, more than
twenty-five percent (25%) of the ownership interests, shall be conclusively
presumed to be an "Affiliate", provided that Techne Technipack Engineering
Italia SPA shall not be an Affiliate of the Partnership or the Graham Partners
or any Affiliate of the Graham Partners."
(d) Each party expressly acknowledges that damages alone would be an
inadequate remedy for any breach or violation of any of the provisions of this
Section 5.12, and that the non-breaching party, in addition to all other
remedies under this Agreement, shall be entitled as a matter of right to
injunctive relief, including specific performance, with respect to any such
breach or violation, in any court of competent jurisdiction.
(e) The invalidity or unenforceability of any provision or provisions of
this Section 5.12 shall not affect the validity or enforceability of any other
provision of this Section 5.12, which shall remain in full force and effect, and
in the event that any provision of this Section 5.12 shall be determined to be
invalid or unenforceable for any reason, such provision shall be construed by
limiting it so as to be valid and enforceable to the fullest extent compatible
with and possible under applicable law.
5.13 Payoff of Certain Notes. The Graham Partners, jointly and severally,
shall cause all amounts due and payable to the Partnership under those certain
promissory notes (the "Promissory Notes") dated February 28, 1994 of GP Corp
(the "GP Corp Note") and The Steven
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Conway Graham Growth Trust, The Kristin Ruth Graham Growth Trust, The Kenneth
Alexander Graham Growth Trust, The Richard Arnesen Graham Growth Trust and The
Erik Lambert Graham Growth Trust (collectively, the "Trust Notes") in the
aggregate principal amount of $20,240,000 (and accrued interest thereon) to be
repaid in full at the Closing. Such repayment of the GP Corp Note and the Trust
Notes shall be satisfied in full out of the cash consideration to be paid by the
Partnership to GP Corp and Family Growth, respectively, in connection with the
redemption of their limited partner interests in the Partnership pursuant to
Section 1.1(b) hereof.
5.14 Partnership Agreement; Certificate of Limited Partnership. The Graham
Partners that will hold general and limited partner interests in the Partnership
after the Closing (the "Continuing Graham Partners") and the Investors shall at
the Closing execute and deliver the Fifth Amended and Restated Agreement of
Limited Partnership of the Partnership, in substantially the form attached
hereto as Exhibit 5.14 (the "Amended and Restated Partnership Agreement"), and
the Partnership shall file with the Secretary of State of the Commonwealth of
Pennsylvania an Amended and Restated Certificate of Limited Partnership of the
Partnership.
5.15 Consulting Agreement. Capital and the Partnership shall enter into a
consulting agreement, in substantially the form attached hereto as Exhibit 5.15
(the "Consulting Agreement").
5.16 Equipment Sales, Services and License Agreement. Engineering and the
Partnership shall enter into an Equipment Sales, Services and License Agreement,
in substantially the form attached hereto as Exhibit 5.16 (the "Equipment Sales,
Services and License Agreement").
5.17 Conversion of Brazilian Subsidiary. Immediately following the Closing,
but in no event later than 60 days, the Partnership shall convert Graham
Packaging Do Brasil Industria E Comercio, an indirect subsidiary of the
Partnership (the "Brazilian Subsidiary"), into an entity that will not be
characterized as a corporation for United States income tax purposes. Any
subpart F income relating to such Subsidiary shall be specially allocated to the
Graham Partners.
5.18 Contributions by Family Growth, GP Corp and Recycling. Prior to the
Closing, Family Growth, GP Corp and Recycling shall each contribute to the
Partnership all of its ownership interests in the entities identified on
Schedule 5.18 hereto by transferring to Sub GP a 1% ownership interest in such
entities, other than Recycling's 1% general partner interest in Opco which shall
be transferred to Opco GP, and transferring all of its remaining interests
therein to Opco. The parties hereto acknowledge that Family Growth's, GP Corp's
and Recycling's ownership interests in such entities have the respective values
as set forth on Schedule 5.18 hereto.
5.19 Contributions by DCG.
(a) Prior to Closing, DCG shall contribute, or shall cause to be
contributed, to Opco insurable title, at reasonable rates, to the real estate
identified on Schedule 5.19 hereto (the "DCG Real Estate") free and clear of any
restriction, mortgage, deed of trust, pledge, lien, security interest or other
charge, claim or encumbrance, except for (i) liens for current taxes,
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assessments and governmental charges and levies not yet due and payable,
interest or other additional charge and (ii) such easements and restrictions, if
any, as do not materially detract from the value or marketability of the
property subject thereto and do not materially interfere with the current use of
such property. The parties hereto acknowledge that the value of the DCG Real
Estate shall be as set forth on Schedule 5.19 hereto.
(b) Real property owned in fee, or its equivalent, shall be transferred by
conveyancing documents reasonably satisfactory to the parties to vest title in
the ultimate transferee intended. The leased properties shall be transferred by
assignment and assumption agreements in form and substance reasonably acceptable
to the parties. The parties shall also execute such reasonable and customary
documents as are further required to effect such transfers and transfers of
appurtenant rights and interests.
(c) All rent payable by the Partnership in respect of the DCG Real Estate
shall terminate effective November 30, 1997.
5.20 New Equity Plan. At or promptly after the Closing, there will be
established an employee stock option plan involving 5% of the total equity of
the Partnership on a fully diluted basis as of the Closing Date (without regard
to any warrants which may be issued in connection with the financing or
refinancing of the Borrowings) with an exercise price per unit equal to the
purchase price per unit being paid by the Investors for equity in connection
with the recapitalization of the Partnership as herein provided. Grants of
options under such plan shall be in addition to the awards contemplated by Part
I of Schedule 3.18 hereto, and neither of such awards shall reduce other
customary compensation for employees.
5.21 Pension and Welfare Plans.
(a) Pension Plan. The Graham Partners shall take such action as is
necessary to transfer assets in cash or marketable securities from the Graham
Companies Pension Plan (the "Pension Plan") to a plan of the Partnership
designated by the Investors ("Designated Pension Plan"). The amount of assets
transferred shall equal the present value of all "benefits on a termination
basis" (as defined in Treas. Reg. ss. 1.414(l)-1(b)(5)), accrued to the Closing
Date for those current, former and retired employees of the Partnership with
benefits held under the Pension Plan as of the Closing Date (including benefits
of those individuals who become employees of the Partnership as of the Closing
Date), whether such benefits are vested or not. Such present value shall be
calculated on the basis of Pension Benefit Guaranty Corporation ("PBGC")
assumptions in effect as of the Closing Date for defined benefit plans
terminated as of the Closing Date.
The Graham Partners shall provide the Investors with a detailed listing of all
of the Members of the Pension Plan who are or who become employees of the
Partnership as of the Closing Date or who are former or retired employees of the
Partnership with benefits held under the Pension Plan. No assets shall be
transferred to the Designated Pension Plan prior to the receipt of a Partnership
Certification reasonably acceptable to the Graham Partners, that the Designated
Pension Plan will be a qualified plan under Section 401(a) of the Code or a
favorable determination letter regarding a Designated Pension Plan from the IRS.
The Graham Partners
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shall certify in a form reasonably acceptable to the Investors that the Pension
Plan is, as of the date of the asset transfer, qualified under Section 401(a) of
the Code. The Partnership shall apply for a determination from the Internal
Revenue Service that the Designated Pension Plan is such a qualified plan as
soon as practicable and shall take such action, including any retroactive
action, as is or may be necessary to obtain a favorable determination from the
Internal Revenue Service.
The Partnership and the Graham Partners shall prepare and cause to be filed
with the Internal Revenue Service a Form 5310-A for the Pension Plan and for the
Designated Pension Plan, together with supporting actuarial certificates, to
notify the Internal Revenue Service about the transfer of assets. The Graham
Partners shall cause the transfer of assets to the Designated Pension Plan as
soon as practicable after the close of the month in which occurs the later of
(i) the date the opinion of counsel referred to above is obtained, or (ii) the
30th day after the date the Forms 5310-A have been filed. Such payment will
include interest from the Closing Date to the date of transfer (calculated at
the interest rate used by the PBGC to value immediate annuities for defined
benefit plans terminating as of the Closing Date). The Partnership shall
indemnify and hold harmless the Graham Partners and the Pension Plan from and
against any damage, expense, loss, or deficiency (including without limitation
reasonable attorneys' fees and other reasonable costs and expenses paid or
payable to any third party incident to any suit, action, or proceeding) arising
out of or resulting from any claim for benefits payable to any Member with
respect to whom assets have been transferred from the Pension Plan to the
Designated Pension Plan in accordance with this Section. The Graham Partners
shall indemnify and hold harmless the Partnership and the Designated Pension
Plan from and against any damage, expense, loss, or deficiency (including
without limitation reasonable attorneys' fees and other reasonable costs and
expenses paid or payable to any third party incident to any suit, action, or
proceeding) arising out of or resulting from any claim for benefits payable to
any Member with respect to whom assets have not been transferred from the
Pension Plan to the Designated Pension Plan in accordance with this Section.
(b) 401(k) Plan. The Graham Partners shall take such action as is necessary
to transfer assets in cash or marketable securities from the Graham Companies
Retirement Savings Plan (the "401(k) Plan") to a plan designated by the
Investors ("Designated 401(k) Plan"). The amount of assets transferred shall
equal the sum of the account balances as of the Closing Date for those current,
former and retired employees of the Partnership with accounts held under the
401(k) Plan as of the Closing Date (including accounts of those individuals who
become employees of the Partnership as of the Closing Date), whether such
accounts are vested or not. Any outstanding balances of plan loans to such
employees shall be transferred with the underlying accounts.
The Graham Partners shall provide the Investors with a detailed listing of all
of the Members of the 401(k) Plan who are or who become employees of the
Partnership as of the Closing Date or who are former or retired employees of the
Partnership with accounts held under the 401(k) Plan. No assets shall be
transferred to the Designated 401(k) Plan prior to the receipt of a Partnership
Certification, reasonably acceptable to the Graham Partners, that the Designated
401(k) Plan will be a qualified plan under Section 401(a) of the Code or a
favorable determination letter regarding a Designated 401(k) Plan from the IRS.
The Graham Partners shall certify in a form reasonably acceptable to the
Investors that the 401(k) Plan is, as of the date of the asset transfer,
qualified
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under Section 401(a) of the Code or a favorable determination letter regarding a
Designated 401(k) Plan from the IRS. The Graham Partners shall certify in a form
acceptable to the Partnership that the 401(k) Plan is, as of the date of the
asset transfer, qualified under Section 401(a) of the Code. The Partnership
shall apply for a determination from the Internal Revenue Service that the
Designated 401(k) Plan is such a qualified plan as soon as practicable and shall
take such action, including any retroactive action, as is or may be necessary to
obtain a favorable determination from the Internal Revenue Service.
The Graham Partners shall cause the transfer of assets to the Designated 401(k)
Plan as soon as practicable after the close of the month in which occurs the
date the opinion of counsel referred to above is obtained. Such payment will
include earnings from the Closing Date to the date of transfer credited to the
accounts to be transferred. The Partnership shall indemnify and hold harmless
the Graham Partners and the 401(k) Plan from and against any damage, expense,
loss, or deficiency (including without limitation reasonable attorneys' fees and
other reasonable costs and expenses paid or payable to any third party incident
to any suit, action, or proceeding) arising out of or resulting from any claim
for benefits payable to any Member with respect to whom assets have been
transferred from the 401(k) Plan to the Designated 401(k) Plan in accordance
with this Section. The Graham Partners shall indemnify and hold harmless the
Partnership and the Designated 401(k) Plan from and against any damage, expense,
loss, or deficiency (including without limitation reasonable attorneys' fees and
other reasonable costs and expenses paid or payable to any third party incident
to any suit, action, or proceeding) arising out of or resulting from any claim
for benefits payable to any Member with respect to whom assets have not been
transferred from the 401(k) Plan to the Designated 401(k) Plan in accordance
with this Section.
5.22 Tax Matters.
(a) Certain Operating Conventions and Procedures. For U.S. federal income
tax purposes and (except as otherwise provided under applicable law, if any)
state, local and foreign income tax purposes, the taxable year of the
Partnership shall end as of the close of business on the Closing Date.
(b) Proceedings.
(1) The Partnership shall have responsibility and authority to represent
the interest of the Partnership in any Tax proceeding relating to the
Partnership and to employ counsel of its choice at its expense; provided,
however, that the Graham Partners shall be permitted to participate (at its own
expense) in any such proceedings and all hearings related thereto.
(2) The Graham Partners shall execute and deliver to the Partnership any
power of attorney requested by the Partnership in connection with any Proceeding
described in this Section 5.22(b); provided, however, that such power of
attorney is necessary or appropriate to permit the Partnership to conduct such
proceeding.
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(c) Elections. The Partnership shall, in its federal income tax return for
the period ending on the Closing Date, make the tax election under Section 754
of the Code, as well as any comparable state and local elections, the Graham
Partners shall join in such Section 754 election, and the increase in basis of
the assets owned by the Partnership shall be allocated among the assets in
accordance with Schedule 1.1(d).
5.23 No Solicitation. The Partnership and the Graham Partners agree that
prior to the earlier of the termination of this Agreement or February 15, 1998,
they will not, and will cause their respective officers, directors, employees
and agents not to, initiate, solicit or encourage, directly or indirectly, any
inquiries or the making of any proposal with respect to, or engage in any
negotiations with, any Person relating to, or provide to any Person confidential
information in connection with, any acquisition, recapitalization, business
combination or purchase of all or a material portion of the equity or assets of
the Partnership or the Subsidiaries other than in the ordinary course of
business with regard to assets of the Partnership or the Subsidiaries. The
Partnership and the Graham Partners shall promptly provide to the Investors
copies of any written proposals that are received in respect of such
acquisition, recapitalization, business combination or purchase.
5.24 Litigation.
(a) The Graham Partners and the Investors agree that with respect to
the litigation described on Part I of Schedule 3.6 hereto (the
"Litigation"), the Partnership shall have the exclusive right to conduct
the defense of or to settle or compromise the Litigation in its sole
discretion, except that any settlement or compromise of the Litigation
prior to the Closing Date shall require the prior consent of the Investors.
(b) In the event of the settlement, compromise, Final Adjudication (as
defined herein) or other resolution of the Litigation (the "Litigation
Termination"), the Partnership shall have the following obligations:
(i) If the Litigation Termination occurs prior to the Closing
Date, the Graham Redemption Value and the aggregate purchase price
under Section 1.1(b) shall be increased by an aggregate amount (the
"Graham Share") equal to one-half of the sum of (A) the amount, if
any, by which the Specified Amount (as set forth in Part I of Schedule
3.6) exceeds the Settlement Cost (as defined herein) and (B) any
amounts paid or payable by or on behalf of the plaintiff in the
Litigation (the "Plaintiff") as a result of the settlement,
compromise, Final Adjudication or other resolution of any counterclaim
by the Partnership against the Plaintiff or its affiliates, successors
or assigns, adjusted to reflect the present value (based upon a
discount rate of 9.5% per annum, calculated from the date of the
Litigation Termination to the date or dates upon which funds are to be
transferred) of any amount that the Plaintiff agrees to pay or cause
to be paid to the Partnership (provided that with respect to any
royalties receivable by the Partnership, the Graham Partners and the
Investors agree to estimate in good faith the present value of such
royalty payments calculated under a methodology consistent with
Section 5.24(c)); and
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(ii) If the Litigation Termination occurs on or after the Closing Date, the
Partnership shall pay to the Graham Partners (in the same proportions as the
payments under Section 1.1(a)), within five business days thereof (or, in the
case of any amount paid by or on behalf of the Plaintiff, within five business
days of the transfer of funds in such amount to the Partnership), the Graham
Share.
(c) For purposes hereof, "Settlement Cost" shall mean, with respect to the
Litigation, all Damages (as defined in Section 10.1 hereof) paid or payable by
or on behalf of the Partnership after the date hereof, including without
limitation any Present Value Royalties (as defined, it being agreed that the
Present Value Royalties shall equal $0 with respect to any royalty-free
cross-licensing arrangement). For purposes hereof, "Present Value Royalties"
shall mean, as of the date of the Litigation Termination, the present value
(based upon a discount rate of 9.5% per annum) of all royalties payable by the
Partnership in connection with future sales of allegedly infringing products, it
being agreed that if such royalty payments are to be based on the Partnership's
revenues from sales or number of units sold of allegedly infringing products,
the amount of such revenues or the number of units sold during each remaining
year of the relevant patent(s) or otherwise applicable royalty period shall be
deemed to equal the actual revenues generated from the Partnership's sales, or
the actual number of units sold (whichever may be applicable), of allegedly
infringing products during the 12-month period ending on the last day of the
second month preceding the date of the Litigation Termination. For purposes
hereof, "Final Adjudication" shall mean an order, judgement, ruling or decree
finally terminating the Litigation issued and entered by any court from time to
time having jurisdiction over the Litigation that has not been reversed, stayed,
modified or amended and as to which the time to appeal or petition for
reargument, rehearing or certiorari has expired, and as to which no appeal,
reargument, petition for certiorari or rehearing is pending or as to which any
right to appeal, reargue, petition for certiorari or seek rehearing has been
waived in writing or, if an appeal, reargument, petition for certiorari or
rehearing thereof has been denied, the time to take any further appeal or to
seek certiorari or further argument or rehearing has expired.
5.25 BTNY Warrants. The parties hereto agree that, in the event that
Investor LP is required pursuant to the terms of the Bridge Commitment Letter to
issue to Bankers Trust New York Corporation (or any of its successors, assignees
or designees) warrants to purchase for nominal consideration common equity of
Investor LP in an aggregate amount representing a percentage (not to exceed
12.5%) of the outstanding common equity of the Partnership (the "Dilution Pool")
(calculated on a fully diluted basis as of the Closing Date), the Continuing
Graham Partners shall issue to the Investors an option to purchase, for nominal
consideration, limited partner interests in the Partnership in an aggregate
amount representing 15% of the Dilution Pool. The issuance of such warrant shall
be considered for tax purposes to be part of the original purchase transaction.
5.26 Estoppel Certificates. If the lessor under any of the leases for the
leased properties is required under the applicable lease to deliver an estoppel
certificate, the Partnership will request that such estoppels be delivered to
the Investors prior to Closing.
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5.27 Transfers of Graham Partner Interests. Prior to the Closing, the
Graham Partners shall not transfer any of their Partnership interests (except
that the limited partner interests of the Graham Partners may be transferred
among the Graham Partners).
SECTION 6. CONDITIONS TO INVESTORS' OBLIGATIONS
The obligation of Investors to consummate the transactions
contemplated by this Agreement is subject to the fulfillment by or at the
Closing of each of the following conditions, any or all of which may be waived
by Investors in their sole discretion:
6.1 Representations and Warranties and Covenants.
(a) The representations and warranties of the Partnership and the Graham
Partners herein contained shall have been true and correct in all material
respects at the date of execution of this Agreement and as of the Closing Date
as though made on and as of the Closing Date, except in the case of
representations and warranties which are expressly made as of a specified date,
which shall be true and correct as of such date (in each case after giving
effect to any supplement to the Disclosure Schedules with respect to
Developments, or with respect to Discoveries accepted or deemed to have been
accepted by Investors, in each case pursuant to Section 5.5(b) hereof as if all
such supplements were included in the Disclosure Schedules delivered by the
Graham Partners and the Partnership on the date hereof), with such exceptions
(i) with respect to Discoveries (A) as would not, in the aggregate, result in
Damages in excess of $15 million or (B) as to which the Graham Partners shall
have entered into an agreement, effective at Closing, to indemnify, consistent
with the indemnification provisions of Sections 10.1(a) and 10.2(b), the
Partnership for Damages arising out of, based upon or otherwise in respect there
of (ii) with respect to Discoveries and Developments that are Identified
Environmental Matters as to which the Graham Partners are not obligated to
indemnify the Partnership or have agreed to indemnify the Partnership pursuant
to Section 10.1(c), and (iii) relating to matters that re not Identified
Environmental matters by solely reason of the $100,000 threshold described in
Section 10.1(a); provided that for purposes of the foregoing, "Damages"
attributable to matters under clauses (i), (ii) and (iii) shall be disregarded
to the extent of the amount taken into account in calculating Actual Net Income)
and provided further, such exceptions, considered together with matters
described in supplements to the Disclosure Schedules after the date hereof, do
not, in light of any indemnification of the Partnerships agreed to by the Graham
Partners, in the aggregate represent a Material Adverse Effect.
(b) The Partnership and the Graham Partners shall have performed or
complied in all material respects with all agreements, undertakings and
covenants required by this Agreement to be performed or complied with by the
Partnership and the Graham Partners at or prior to the Closing Date.
(c) The Partnership and the Graham Partners shall have delivered to
Investors a certificate dated the Closing Date and signed by the President or a
Senior or Executive Vice President of GP Corp, as general partner of the
Partnership, and by the Graham Partners to the effect set forth in this Section
6.1.
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6.2 Approvals. The waiting period under the HSR Act shall have expired or
been terminated without any request by any governmental agency or authority for
any additional information concerning such transactions. The consent or approval
of all persons described in Schedule 3.3 hereof shall have been obtained.
6.3 Legal Matters. The Closing shall not violate any order or decree of any
court or governmental body of competent jurisdiction.
6.4 Opinion of Counsel. Investors shall have received an opinion, in form
and substance reasonably satisfactory to Investors, of Drinker Biddle & Reath
LLP, counsel for the Partnership, dated as of the Closing Date.
6.5 No Material Adverse Effect. There shall not have occurred and be
continuing a Material Adverse Effect (without taking into account any matters as
to which there is in effect a waiver of the Investors' right to claim a Material
Adverse Effect pursuant to Section 5.5(b)).
6.6 Solvency Opinion. An opinion, in form and substance reasonably
satisfactory to the Investors, from Houlihan, Lokey, Howard and Zukin, dated as
of the Closing Date, relating to the solvency of the Partnership after giving
effect to the transactions contemplated hereby, shall have been delivered.
6.7 Registration Rights Agreement. The Partnership shall have executed a
Registration Rights Agreement, in substantially the form attached hereto as
Exhibit 6.7, and proffered same to the Investors.
6.8 MAC/Market Out. Financing for the transactions contemplated by this
Agreement shall not be unavailable due to (a) there being in existence events,
conditions and/or contingencies that have had or are reasonably likely to have a
material adverse effect on the business, operations, properties, assets,
liabilities, profits or condition (financial or otherwise) of the Partnership
and its Subsidiaries taken as a whole or (b) there having occurred a material
disruption of or material adverse change in financial, banking or capital market
conditions that, in the applicable financing source's reasonable judgment, has
materially impaired, or would be reasonably likely to materially impair, the
financing (or syndication thereof) of the transactions contemplated by this
Agreement (collectively, a "MAC/Market Out").
SECTION 7. CONDITIONS TO THE PARTNERSHIP'S AND THE GRAHAM
PARTNERS' OBLIGATIONS
The obligation of the Partnership and the Graham Partners to consummate the
transactions contemplated by this Agreement is subject to the fulfillment by or
at the Closing of each of the following conditions, any or all of which may be
waived by the Partnership and the Graham Partners in their sole discretion:
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7.1 Representations and Warranties and Covenants.
(a) The representations and warranties of each Investor herein contained
shall have been true and correct in all material respects at the date of
execution of this Agreement and as of the Closing Date as though made on and as
of the Closing Date, except in the case of representations and warranties which
are expressly made as of a specified date, which shall be true and correct as of
such date.
(b) Each Investor shall have performed or complied in all material respects
with all agreements, undertakings and covenants required by this Agreement to be
performed or complied with by Investor at or prior to the Closing Date.
(c) Each Investor shall have delivered to the Partnership a certificate
dated the Closing Date and signed by the President or Vice President of Investor
to the effect set forth in this Section 7.1.
7.2 Solvency Opinion. The Partnership and the Graham Partners shall have
received an opinion in form and substance reasonably satisfactory to each of
them from Houlihan, Lokey, Howard and Zukin, dated as of the Closing Date,
relating to the solvency of the Partnership after giving effect to the
transactions contemplated hereby.
7.3 Approvals. The waiting period under the HSR Act shall have expired or
been terminated without any request by any governmental agency or authority for
additional information concerning such transactions.
7.4 Legal Matters. The Closing shall not violate any order or decree of any
court or governmental body of competent jurisdiction.
7.5 Opinion of Counsel. The Partnership shall have received an opinion,
reasonably satisfactory in form and substance to the Partnership, of Simpson
Thacher & Bartlett, counsel for Investors, dated as of the Closing Date.
7.6 Credit Facilities. There shall be in effect definitive documentation
providing for the financing referred to in the Commitment/Bridge Financing
Letters or such other financings on market terms to the Partnership and the
Subsidiaries.
7.7 Registration Rights Agreement. The Partnership shall have executed a
Registration Rights Agreement, in substantially the form attached hereto as
Exhibit 6.7, and proffered same to the Continuing Graham Partners.
SECTION 8. CLOSING
8.1 Time and Place of Closing. Unless this Agreement shall have been
terminated and the transactions herein contemplated shall have been abandoned
pursuant to Section 9 and subject to the satisfaction or waiver of the
conditions set forth in Sections 6 and 7 hereof, the closing of the transactions
contemplated by this Agreement (the "Closing") will take place at
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10:00 a.m. local time on the later of (i) the second business day after the
satisfaction or, if permissible, waiver of the conditions set forth in Sections
6 and 7 hereof, or (ii) the date on which the financing sources are prepared to
fund the Borrowings in accordance with this Agreement (or as soon as practicable
thereafter), at the offices of Simpson Thacher & Bartlett New York, New York
unless another date, time or place is agreed to in writing by the parties hereto
(the "Closing Date").
SECTION 9. TERMINATION
9.1 Termination. This Agreement may be terminated and the transactions
contemplated herein may be abandoned at any time prior to the Closing:
(a) by mutual consent of Investors, the Partnership and the Graham
Partners;
(b) by Investors, on the one hand, or by the Partnership and the Graham
Partners, on the other hand, if the Closing has not occurred by March 31, 1998
(the "Outside Date") (unless such Outside Date is extended in writing by the
parties hereto); provided that the parties seeking to terminate shall not be in
willful breach of their respective obligations under this Agreement unless the
non-terminating parties are also in willful breach of their respective
obligations;
(c) by Investors, (i) if the representations and warranties of the
Partnership and the Graham Partners in this Agreement shall not be true and
correct in all material respects as of the date of this Agreement, with such
exceptions as are described in Section 6.1 hereof, or (ii) if there shall have
been a failure of the Partnership or the Graham Partners to perform or comply in
all material respects with their covenants and agreements hereunder, provided
that, with respect to (i) and (ii), the Investors have notified the Partnership
and the Graham Partners as soon as practicable of the breach or failure and that
there is no reasonable prospect that the breach or failure will be cured by the
Partnership or the Graham Partners on or before the Outside Date, or (iii)
pursuant to Section 5.5(b)(iii) hereof provided that a Material Adverse Effect
(without taking into account matters as to which there is in effect a waiver
pursuant to Section 5.5(b) of the Investors' right to claim a Material Adverse
Effect) has occurred or (iv) the financing for the transactions contemplated by
this Agreement shall not have been provided due to there having occurred a
MAC/Market Out; provided that the parties seeking to terminate shall not be in
willful breach of their obligations under this Agreement;
(d) by the Partnership and the Graham Partners, if (i) the representations
and warranties of any of the Investors in this Agreement shall not be true and
correct in all material respects as of the date of this Agreement, or (ii) there
shall have been a failure of the Investors to perform or comply in all material
respects with their covenants and agreements hereunder, provided that, with
respect to (i) and (ii), the Partnership and the Graham Partners have notified
the Investors as soon as practicable of the breach or failure, and that there is
no reasonable prospect that the breach or failure will be cured by the Investors
on or before the Outside Date, or (iii) pursuant to Section 5.5(b)(iii) hereof;
provided that the parties seeking to terminate shall not be in willful breach of
their obligations under this Agreement; or
43
<PAGE>
(e) by the Partnership and the Graham Partners, on the one hand, or the
Investors, on the other hand, not earlier than five business days but not later
than ten business days, after the Partnership's and the Graham Partners' receipt
of an Environmental Notice (as herein defined) if such Environmental Notice sets
forth Identified Environmental Matters (as herein defined) and indicates that
such matters will reasonably be likely to result in Damages in excess of $35
million in the aggregate; provided, however, that the Investors shall not have
the right to terminate this Agreement pursuant to this subsection (e) if the
Graham Partners shall have entered into an agreement, effective at Closing, to
cure all such Damages in excess of $35 million by indemnifying the Partnership
with respect thereto, consistent with the indemnification provisions of Sections
10.1(a) and 10.2(b), and/or obtaining at the Graham Partners' expense,
environmental impairment liability insurance for the benefit of the Partnership
as an insured party or named beneficiary on terms reasonably acceptable to the
Investors or otherwise protecting the Partnership against such Damages through
commercially reasonable means acceptable to the Investors.
9.2 Effect of Termination.
(a) Subject to Section 11.7 (other than with respect to a termination
pursuant to Section 5.5(b)(iii)), a party terminating this Agreement pursuant to
Section 9.1 shall give written notice thereof to each other party hereto,
whereupon this Agreement shall terminate. Nothing contained in this Section 9
shall relieve any party from liability for any breach of this Agreement. Section
9.2(b) shall be the sole remedy for the Graham Partners and the Partnership for
any breach of this Agreement by Investors on the basis of which termination
occurs pursuant to Section 9.2(b).
(b) If this Agreement is terminated (i) by either party pursuant to Section
9.1(b) hereof and at the time of such termination the conditions set forth in
Section 6.1 have been satisfied and the Investors have failed (A) (1) to provide
to the Partnership the funding sufficient to accomplish the Repayment and the
Redemption in accordance with this Agreement, or (2) to effect the Investor
Purchase Payments in accordance with this Agreement, or (B) to comply with their
covenants in Section 5.14, or (ii) by the Partnership and the Graham Partners
pursuant to Section 9.1(d)(iii) hereof, provided that at the time of such
termination no Material Adverse Effect which is the subject of a notice
delivered by the Investors to the Graham Partners and the Partnership and not
withdrawn pursuant to Section 5.5(b)(iii) has occurred, then the Investors shall
pay to the Partnership promptly, but in any event within two days after demand
therefor, liquidated damages in the amount of $70,000,000 in the aggregate. Upon
such payment, the Investors and their officers, directors, stockholders, agents
and affiliates (including the partners, officers, employees and agents thereof)
shall be relieved of any further liability hereunder.
SECTION 10. INDEMNIFICATION
10.1 Indemnification.
(a) The Graham Partners shall, jointly and severally, indemnify and hold
the Partnership harmless against and in respect of any and all losses, costs,
expenses, claims,
44
<PAGE>
damages, obligations and liabilities, including interest, penalties and
reasonable attorneys' fees and disbursements ("Damages"), which the Partnership
may suffer, incur or become subject to from and after the Closing arising out
of, based upon or otherwise in respect of (i) any inaccuracy of any
representation of any Graham Partner made in Section 2.4(a) hereof, (ii) taxes
from the conversion of the Brazilian subsidiary for periods ending on or before
the date of the conversion provided for in Section 5.17 herein, including, but
not limited to, Taxes attributable to "subpart F income" or gain on the
conversion, (iii) any claims by management with respect to the adequacy of the
compensatory and other employee incentive arrangements that are described in
Part I of Schedule 3.18 hereto (except to the extent that such claim is
attributable to the failure of the Partnership and/or Investor LP and its
Affiliates to perform or cause to be performed any of the obligations under Part
I of Schedule 3.18 (other than clause (i) thereunder)), and (iv) subject to the
limitations set forth in Section 10.1(c) hereof, any claims arising out of an
Identified Environmental Matter (as herein defined). The term "Identified
Environmental Matter" shall mean each matter that is reasonably likely to result
in Damages of at least $100,000 to the Partnership and the Subsidiaries
resulting from a violation of any Environmental Law whether or not such matter
is disclosed or not disclosed on any Disclosure Schedules or constitutes a
Discovery, provided that such matter is disclosed by the Investors in an
Environmental Notice (as herein defined) delivered to the Partnership and the
Graham Partners by January 12, 1998. The term "Environmental Notice" shall mean
any written notice that identifies each Identified Environmental Matter in
reasonable detail, including the Premises or Former Real Property affected, the
Environmental Law at issue, the nature and scope of the environmental condition,
the general nature of action believed to be required to remediate or correct the
condition so as to bring the matter into compliance with Environmental Laws and
a reasonable estimate of such Damages reasonably likely to result from such
matter (supported by reports of qualified environmental engineers or
consultants).
(b) Except as otherwise provided in this Agreement the Partnership shall
indemnify and hold harmless the Graham Partners and each of their affiliates and
their respective directors, officers, employees, agents, stockholders and
partners (each, a "Graham Indemnified Party" and collectively, the "Graham
Indemnified Parties") harmless against and in respect of any and all Damages
which any Graham Indemnified Party may suffer, incur or become subject to from
and after the Closing arising out of, any third party claims in respect of the
assets or the operation of the Business on or before the Closing Date (including
without limitation the Litigation and the Opco Contribution), except where
attributable to the willful misconduct or bad faith of such Graham Indemnified
Party or where relating to a breach by the Graham Indemnified Party of its
obligations as a fiduciary of the Partnership or to a breach by the Graham
Indemnified Party of any of the terms and provisions of the Partnership
Agreement. This Section 10.1(b) is not intended to apply to Damages suffered by,
or loss of value with respect to the capital accounts of, the Partnership
suffered or a ratable basis by all Partners of the Partnership after the
Closing.
(c) Notwithstanding anything to the contrary contained in Section
10.1(a)(iii), except as otherwise provided in this Section 10.1(c), the Graham
Partners shall have no obligation to indemnify the Partnership for any Damages
arising out of, based upon or otherwise in respect of any Identified
Environmental Matter unless and until the aggregate of all such Damages actually
incurred and paid by the Partnership exceeds $5,000,000 (the "Environmental
45
<PAGE>
Basket"), in which event the sole obligation of the Graham Partners shall be to
indemnify the Partnership, on a dollar for dollar basis, for 50% of each dollar
of the next $25 million of such Damages in the aggregate actually incurred and
paid by the Partnership in excess of the Environmental Basket. Notwithstanding
anything herein to the contrary, the indemnification obligations of the Graham
Partners set forth in this Section 10.1(c) shall terminate and become null and
void in all respects on the third anniversary of the Closing Date.
10.2 Claims; Defense.
(a) Each party shall promptly notify the other in writing of the assertion
of any claim for indemnification hereunder, specifying the basis of such claim.
In the event of a claim for indemnification by a Graham Indemnified Party, the
Partnership shall thereupon give the Graham Partners reasonable access to the
books, records and assets of the Partnership which evidence or support such
claim or the act, omission or occurrence giving rise to such claim and the
right, upon prior notice during normal business hours, to interview any
appropriate personnel of the Partnership related thereto.
(b) If there occurs an event which a party asserts is an indemnifiable
event pursuant to Section 10.1, the party or parties seeking indemnification
shall notify the other party or parties obligated to provide indemnification
(the "Indemnifying Party") promptly. If such event involves (i) any claim or
(ii) the commencement of any action or proceeding by a third person, the party
seeking indemnification will give such Indemnifying Party prompt written notice
of such claim or the commencement of such action or proceeding; provided,
however, that the failure to provide prompt notice as provided herein will
relieve the Indemnifying Party of its obligations hereunder only to the extent
that such failure prejudices the Indemnifying Party hereunder. In case any such
action shall be brought against any party in respect of which that person is
seeking indemnification and it shall notify the Indemnifying Party of the
commencement thereof, the Indemnifying Party shall be entitled to participate
therein or, following the delivery by the Indemnifying Party to the party or
parties seeking indemnification of the Indemnifying Party's acknowledgement in
writing that the relevant Damage is an indemnified liability hereunder and that
the Indemnifying Party, in its good faith judgement, will be able to pay any
award of money damages against the indemnified party in connection with such
action, to assume the defense thereof, with counsel reasonably satisfactory to
such party or parties seeking indemnification and, after notice form the
Indemnifying Party to such party or parties seeking indemnification of such
election so to assume the defense thereof, the Indemnifying Party shall not be
liable to the party or parties seeking indemnification hereunder for any legal
expenses of other counsel or any other expenses subsequently incurred by such
party or parties in connection with the defense thereof. The Indemnifying Party
and the party seeking indemnification agree to cooperate fully with each other
and their respective counsel in connection with the defense, negotiation or
settlement of any such action or asserted liability. The party or parties
seeking indemnification shall have the right to participate at their own expense
in the defense of such action or asserted liability. If the Indemnifying Party
assumes the defense of an action (a) no settlement or compromise thereof may be
effected (i) by the indemnifying Party without the written consent of the
indemnified party (which consent shall not be unreasonably withheld or delayed)
unless (x) there is no finding or admission of any violation of law or any
violation of the rights of any person by any indemnified party and no adverse
effect
46
<PAGE>
on any other claims that may be made against any indemnified party and (y) all
relief provided is paid or satisfied in full by the Indemnified Party or (ii) by
the indemnified party without the written consent of the Indemnifying Party
(which consent shall not be unreasonably withheld or delayed) and (b) the
indemnified party may subsequently assume the defense of such action if a court
of competent jurisdiction determines that the Indemnifying Party is not
vigorously defending such action.
SECTION 11. MISCELLANEOUS
11.1 Survival of Representations and Warranties.
(a) Anything in this Agreement to the contrary notwithstanding, none of the
representations, warranties, covenants and agreements made by each party in this
Agreement or in any attachment, exhibit, certificate, document or list delivered
by any such party pursuant hereto or in connection with the transactions
contemplated hereby shall survive (a) a termination of this Agreement pursuant
to Section 9.1 hereof, except for the obligations of the parties set forth under
Sections 5.3, 5.4, 5.8, 9.2, 11.5 and 11.6 hereof or (b) the Closing, except for
the representations and warranties of the Graham Partners set forth under
Section 2.4(a) hereof and the obligations of the parties set forth under
Sections 5.3, 5.4, 5.6, 5.8, 5.9, 5.10, 5.12, 5.17, 5.20, 5.21, 5.22, 5.24,
5.25, 10, 11.1, 11.2, 11.3, 11.4, 11.5, 11.6 and 11.7 hereof.
(b) Not later than 30 days after the Closing Date, the Graham Partners
shall prepare and deliver, or cause to be prepared and delivered, to the
Partnership a reconciliation of the Net Borrowing Amount as of November 2, 1997,
prepared in accordance with GAAP applied on a basis consistent with the Audited
Financial Statements (the "Reconciliation") together with such supporting
documentation as the Partnership shall reasonably request. The Partnership and
the Investors shall cooperate fully with the preparation of the Reconciliation
and use best efforts to cause their respective affiliates to so cooperate. To
the extent that the Net Borrowing Amount set forth on the Reconciliation exceeds
the Net Borrowing Amount based upon the Interim Balance Sheet, the Graham
Partners shall pay such excess amount to the Partnership; to the extent that the
Net Borrowing Amount set forth on the Reconciliation is less than the Net
Borrowing Amount based upon the Interim Balance Sheet, the Partnership shall pay
the Graham Partners such deficiency. Notwithstanding the foregoing, differences
of less than $500,000 in the aggregate in either direction shall be ignored for
the purposes of such calculation. Any amounts in dispute with respect to the
Reconciliation under this Section 11.1(b) shall be resolved in accordance with
the procedures set forth in Section 1.2(a)(ii) and (iii).
11.2 Notices. All notices, consents or other communications required or
permitted to be given under this Agreement shall be in writing and shall be
deemed to have been duly given when delivered personally, delivery charges
prepaid, or three business days after being sent by registered or certified mail
(return receipt requested), postage prepaid, or one business day after being
sent by a nationally recognized express courier service, postage or delivery
charges prepaid, to the parties at their respective addresses stated below.
Notices may also be given by prepaid telegram or facsimile and shall be
effective on the date transmitted if confirmed within 24 hours thereafter by a
signed original sent in the manner provided in the preceding sentence.
47
<PAGE>
Any party may change its address for notice and the address to which copies must
be sent by giving notice of the new address to the other parties in accordance
with this Section 11.2, except that any such change of address notice shall not
be effective unless and until received.
If to Investors, care of:
BCP Graham Holdings LLC
c/o Blackstone Capital Partners III Merchant Banking Fund L.P.
345 Park Avenue
New York, New York 10154
Attention: Howard A. Lipson
Facsimile: (212) 754-8703
With a required copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017-3954
Attention: Wilson S. Neely
Facsimile: (212) 455-2502
If to the Partnership or the Graham Partners to:
Graham Capital Corporation
1420 Sixth Avenue
York, PA 17403
Attention: William H. Kerlin, Jr.
Facsimile: (717) 848-5951
With a required copy to:
Drinker Biddle & Reath LLP
Philadelphia National Bank Building
1345 Chestnut Street
Philadelphia, PA 19107-3496
Attention: Robert Mead Jones, Jr.
Facsimile: (215) 988-2757
11.3 Assignment; Binding Effect; Benefits. No party hereto shall assign
this Agreement or any rights hereunder, or delegate any obligations hereunder,
without the prior written consent of the other parties hereto. This Agreement
shall inure to the benefit of the parties hereto, and shall be binding upon the
parties hereto and their respective permitted successors and assigns. Nothing in
this Agreement, express or implied, is intended to confer on any person other
than the parties hereto, or their respective permitted successors and assigns,
any rights, remedies, obligations or liabilities under or by reason of this
Agreement.
48
<PAGE>
11.4 Amendment, Modification and Waiver. The parties may amend or modify
this Agreement in any respect, and Investors, on the one hand, and the
Partnership or the Graham Partners on the other hand, may: (a) extend the time
for the performance of any of the obligations of the other, (b) waive any
inaccuracies in representations and warranties by the other, (c) waive
compliance by the other with any of the obligations contained in this Agreement,
or (d) waive the fulfillment of any condition precedent to the performance under
this Agreement of the waiving party. Any such amendment, or modification,
extension or waiver shall be in writing. The waiver by a party of any breach of
any provision of this Agreement shall not constitute or operate as a waiver of
any other breach of such provision or of any other provision hereof, nor shall
any failure to enforce any provision hereof operate as a waiver of such
provision or of any other provision hereof.
11.5 Governing Law; Consent to Jurisdiction; No Jury Trial. This Agreement
is made pursuant to, and shall be construed and enforced in accordance with, the
laws of the Commonwealth of Pennsylvania (and United States federal law, to the
extent applicable), irrespective of the principal place of business, residence
or domicile of the parties hereto, and without giving effect to otherwise
applicable principles of conflicts of law. Any legal action, suit or proceeding
arising out of or relating to this Agreement may be instituted in any federal
court in the Eastern District of Pennsylvania, or in any state court in which
venue would otherwise be proper located in the Eastern District of Pennsylvania,
and each party waives any objection which such party may now or hereafter have
to the laying of the venue of any such action, suit or proceeding, and
irrevocably submits to the jurisdiction of any such court. Any and all service
of process and any other notice in any such action, suit or proceeding shall be
effective against any party if given as provided herein. Nothing herein
contained shall be deemed to affect the right of any party to serve process in
any other manner permitted by law or to commence legal proceedings or otherwise
proceed against any other party in any jurisdiction other than Pennsylvania. The
parties hereby waive trial by jury in any action, suit, proceeding or
counterclaim brought by either of them against the other in any matters arising
out of or in any way connected with this Agreement.
11.6 Enforcement Expenses. In the event of any litigation, arbitration, or
other legal proceeding to enforce, interpret or recover damages for breach of
this Agreement, the prevailing party shall be entitled to recover reasonable
attorneys' fees and costs incurred in the proceeding in addition to any other
relief to which the prevailing party is entitled.
11.7 Specific Performance. The parties hereto agree that if any of the
provisions of this Agreement were not performed by the Graham Partners in
accordance with their specific terms or were otherwise breached by the Graham
Partners, irreparable damage would occur, no adequate remedy at law would exist
and damages would be difficult to determine, and that the Investors shall be
entitled to specific performance of the terms hereof, which, if elected and
awarded, shall constitute the Investors' sole and exclusive remedy under this
Agreement, at law, in equity or otherwise; provided, however, that nothing
herein shall affect the right of any of the parties hereto to seek recovery
against any other party hereto, at law, in equity or otherwise, with respect to
any covenants, agreements or obligations to be performed by such party or
parties after the Closing Date.
49
<PAGE>
11.8 Headings, Gender and "Person". All section headings contained in this
Agreement are for convenience of reference only, do not form a part of this
Agreement and shall not affect in any way the meaning or interpretation of this
Agreement. Words used herein, regardless of the number and gender specifically
used, shall be deemed and construed to include any other number, singular or
plural, and any other gender, masculine, feminine, or neuter, as the context
requires. Any reference to a "person" herein shall include an individual, firm,
corporation, partnership, trust, governmental authority or body, association,
unincorporated organization or any other entity.
11.9 Counterparts. This Agreement may be executed in any number of
counterparts and any party hereto may execute any such counterpart, each of
which when executed and delivered shall be deemed to be an original and all of
which counterparts taken together shall constitute but one and the same
instrument. This Agreement shall become binding when one or more counterparts
taken together shall have been executed and delivered by the parties. It shall
not be necessary in making proof of this Agreement or any counterpart hereof to
produce or account for any of the other counterparts.
11.10 Entire Agreement. This Agreement and the Confidentiality Agreement,
together with the agreements, exhibits, schedules and certificates referred to
herein or delivered pursuant hereto, constitute the entire agreement between the
parties hereto with respect to the transactions contemplated herein and
supersede all prior agreements and understandings, oral or written, between the
parties hereto or otherwise with respect to the subject matter hereof.
11.11 Third Parties. Nothing herein expressed or implied is intended or
shall be construed to confer upon or give to any person or corporation, other
than the parties hereto and their permitted successors or assigns, any rights or
remedies under or by reason of this Agreement.
50
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has duly executed this
Agreement, under seal, all as of the date first above written.
GRAHAM PACKAGING COMPANY
By: Graham Packaging Corporation,
its general partner
By: /s/ Steven C. Graham
--------------------
Title: Senior Vice President
---------------------
GRAHAM PACKAGING CORPORATION
By:/s/ Steven C. Graham
--------------------
Title: Senior Vice President
---------------------
GRAHAM FAMILY GROWTH PARTNERSHIP
By: Graham Packaging Corporation,
its general partner
By:/s/ Steven C. Graham
-------------------
Title: Senior Vice President
---------------------
GRAHAM ENGINEERING CORPORATION
By:/s/ William H. Kerlin
-----------------
Title: President
---------
GRAHAM CAPITAL CORPORATION
By:/s/ William H. Kerlin
------------------
Title: President
---------
51
<PAGE>
GRAHAM RECYCLING CORPORATION
By:/s/ Steven F. Wood
--------------
Title:Senior Vive President
--------------------
/s/ Donald C. Graham
----------------
DONALD C. GRAHAM
BCP/GRAHAM HOLDINGS L.L.C.
By: BMP/GRAHAM HOLDINGS
CORPORATION, member
By: /s/ Howard A. Lipson
----------------
Title: Member
------
BMP/GRAHAM HOLDINGS CORPORATION
By:/s/ Howard A. Lipson
----------------
Title: Member
------
* * *
Guarantee of Blackstone Capital Partners III Merchant Banking Fund L.P.
The undersigned, an affiliate of the Investors, intending to be legally
bound hereby and in consideration of the execution and delivery of this
Agreement by the Graham Partners, hereby unconditionally guarantees the
performance by the Investors of all of their liabilities and obligations under
Section 9.2(b) of this Agreement.
Blackstone Capital Partners III
Merchant Banking Fund L.P.
By: Blackstone Management Associates III L.L.C,
General Partner
52
<PAGE>
By: /s/ Howard A. Lipson
----------------
Howard A. Lipson
Member
<PAGE>
<TABLE>
<CAPTION>
Schedule 1.1(d)
Percentage and Agreed Value of Partnership Interests
=====================================================================================================================
Partnership Partnership
Interests as of Interests Agreed Value of Partnership
Partner 12/18/97 After Closing Interests After Closing
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
GP Corp 1.0%(GP) 1.0%(GP) $2,450,000
- ---------------------------------------------------------------------------------------------------------------------
Family Growth 32.0%(LP) 5%(LP) $12,250,000
- ---------------------------------------------------------------------------------------------------------------------
Engineering 23.1%(LP) -- --
- ---------------------------------------------------------------------------------------------------------------------
Capital 38.5%(LP) 9%(LP) $22,050,000
- ---------------------------------------------------------------------------------------------------------------------
Recycling 4.0%(LP) -- --
- ---------------------------------------------------------------------------------------------------------------------
DCG 1.4%(LP) -- --
- ---------------------------------------------------------------------------------------------------------------------
Investor GP -- 4.0%(GP) $9,800,000
- ---------------------------------------------------------------------------------------------------------------------
Investor LP -- 81.0%(LP) $198,450,000
- ---------------------------------------------------------------------------------------------------------------------
Total 100% 100% $245,000,000
=====================================================================================================================
</TABLE>
<PAGE>
Schedule 1.1(e)
Allocation of Fair Market Value
For the purposes set forth in Section 1.1(e) of the Recapitalization
Agreement, the aggregate fair market value of the Partnership's assets as of the
Closing Date shall be considered to equal the sum of (A) the quotient of (i) the
aggregate proceeds received by the Graham Partners under Section 1.1(b), as
ultimately adjusted, divided by (ii) the aggregate percentage interest of the
Investors in the Partnership as of the end of the Closing Date, plus (B) the
aggregate Liabilities of the Partnership, under Federal income tax accounting
principles, as of the end of the Closing Date. Such fair market value shall be
allocated among such assets as follows:
Tangible Depreciable Property $110,000,000
Real Property $ 30,000,000
Controlled Foreign Ownership Interests $ 80,000,000
Other Assets GAAP Book Value
Goodwill Residual Value
<PAGE>
Schedule 1.2
Actual Net Income
Part I. The calculation of Actual Net Income of the Partnership and the
Subsidiaries pursuant to Section 1.2(a) shall give effect to the following:
1. Actual Net Income shall be increased for the full amount of any loss
realized with respect to the sale of the facility located in Lagnieu,
France up to a maximum equivalency of U.S. $1,000,000, to the extent
otherwise deducted in determining Actual Net Income.
2. There shall not be any adjustment for write-downs or write-offs of the
November 2, 1997 fixed, intangible or other long-lived asset balances.
3. For purposes of the Actual Net Income calculation, the contribution of
the DCG Real Estate and the resulting pooling of interests accounting
treatment will be deemed to have occurred effective November 30, 1997.
Part II. The calculation of Actual Net Income of the Partnership and the
Subsidiaries pursuant to Section 1.2(a) shall give no effect to the following:
1. All Fees and Expenses to be paid by the Partnership pursuant to
Section 5.8.
2. All LIFO adjustments.
3. The payment of the Graham Redemption Value.
4. All debt incurred under the Credit Facilities to fund the Graham
Redemption Value.
5. All payments to be made by the Partnership at or immediately prior to
the Closing (or an accrual made therefor) pursuant to the compensatory
and other employee incentive agreements described in Part I of
Schedule 3.18 or Section 5.20, including any payment thereunder that
replaces payment obligations of the Partnership under the
Partnership's existing management incentive plans.
6. Any accrual or expense related to the Existing Management Incentive
Plan that may be required due to the execution of this Agreement or
any other event connected with this Agreement.
7. Any transaction-related accounting adjustment made in connection with
or as a result of the recapitalization, redemption and purchase
transactions contemplated by this Agreement.
8. There shall be no effect given to the provisions of Section 1.1(e)
hereof.
9. No effect shall be given to accrued interest on the Promissory Notes
from November 3, 1997 up to January 31, 1998.
<PAGE>
Schedule 3.18
Part I
The Agreed Equity Value of the Graham Partners' interests in the
Partnership as set forth in Section 1.1(b) gives effect to the following $25.0
million of incentive payments and contractual arrangements to be provided by or
on behalf of the Partnership to management:
(i) Closing Payments ($7.0 million). Immediately prior to the Closing,
there will be paid to approximately 12 senior managers and approximately 10
upper middle level members of management of the Partnership, selected by
Capital, cash in an amount aggregating approximately $7.0 million, representing
the aggregate value payable under the Partnership's existing equity appreciation
plan for such Managers plus an additional cash bonus (the "Closing Payments").
(ii) Stay Bonuses for Middle Level Managers ($4.8 million). Pursuant to
arrangements to be entered into between the Partnership and approximately 100
middle level managers (who will be employees of the Partnership immediately
following the Closing) prior to the Closing, effective the day after the
Closing, there will be awarded on the day after the Closing by the Partnership
to such managers stay bonuses aggregating approximately $4.8 million. The
individuals and the amounts of such bonuses have been identified in a separate
schedule dated the date hereof which has been agreed upon by the Investors and
the Partnership. The terms and conditions of such stay bonuses will be as
provided in the form of Retention Incentive Agreement previously agreed upon by
the Investors and the Partnership.
(iii) Additional Long-Term Incentives for Senior Managers and Upper Middle
Level Managers ($13.2 million). Pursuant to arrangements to be entered into
between the Partnership and approximately 15 senior level managers and upper
middle level managers (the "Participants") the day after the Closing, there will
be awarded by or on behalf of the Partnership on the day after the Closing to
the Participants cash stay bonuses with a discounted pre-tax value of $5.11
million (based upon an undiscounted value of $5.94 million) (which cash stay
bonuses shall consist of (a) amounts payable by the Partnership to the relevant
taxing authority, on behalf of such Participants, in respect of withholding
obligations relating to (i) such payments, (ii) the Cash Payments (as defined
below) and (iii) the value of the Directed Shares (as defined below) issued to
such Participants (collectively, "Withholding Obligations"), and (b) cash
distributions) and restricted common equity (based on the purchase price being
paid by Investor LP for common equity of the Partnership at the Closing) with a
discounted value of $6.25 million (based upon an undiscounted value of $7.26
million) ("Restricted Equity"). Such awards shall be made to the persons and in
the amounts identified in a separate schedule dated the date hereof which has
been agreed upon by the Partnership and the Investors (the "Participants
Incentive Schedule"), with the restricted common equity vesting over three
years. The terms and conditions of such awards will be as provided in the form
of Equity Incentive Agreement previously agreed upon by the Investors and the
Partnership.
In order to satisfy the obligations of the Partnership with respect to the
Restricted Equity described above, the Investors shall cause the following
transactions to occur the day after the Closing: (a) Investor LP shall issue (or
shall cause an affiliate of Investor LP to transfer) to the Participants shares
of Investor LP having an aggregate value (based on the purchase price being paid
by Investor LP for common equity of the Partnership at the Closing) of $3.125
million (the "Directed Shares"), allocated among the Participants as set forth
in the Participant's Incentive Schedule; (b) the Partnership shall pay to the
Participants cash payments consisting in the aggregate of $3.125 million (the
"Cash Payments"), allocated among the Participants as set forth in the
Participants Incentive Schedule (subject to the concurrent purchase by the
Participants of the Purchased Shares (as defined below) in accordance with the
following subparagraph (c)); and (c) the Participants shall purchase
<PAGE>
from Blackstone Management Partners III L.P. additional shares of Investor LP
having a value (based on the purchase price being paid by Investor LP for common
equity of the Partnership at the Closing) of $3.125 million (the "Purchased
Shares" and, together with the Directed Shares, the "Blocker Shares"). One-third
of any Blocker Shares which are forfeited under the terms of the Equity
Incentive Agreements (or, at Investor LP's election, limited partnership
interests in the Partnership equal to the product of (A) the number of such
forfeited Blocker Shares divided by the aggregate number of all of the then
outstanding Blocker Shares (without giving effect to such forfeiture),
multiplied by (B) 33- 1/3%, multiplied by (C) Investor LP's percentage ownership
interest in the Partnership on the date of forfeiture of the forfeited Blocker
Shares) shall be promptly transferred over to the Graham Partners (in the same
proportions as their share of the Graham Redemption Value and shall constitute
an adjustment to their redemption amounts and sale proceeds under Sections
1.1(a) and (b) of this Agreement).
- ----------
Note: There shall be paid customary annual bonuses to employees of the
Partnership in respect of the year ending December 31, 1997 at the normal time
(approximately March 15, 1998) and otherwise in accordance with past practice,
in an amount equal to less than $3.5 million, which amounts have been reflected
in the projected SG&A for the Partnership for the year ending December 31, 1997
and will be fully accrued on the balance sheet of the Partnership as of December
31, 1997.
<PAGE>
Schedule 5.11
Debt Instruments to be Repaid at Closing
Credit Agreement between Graham Packaging Company and certain other Borrowers
and NationsBank, NA and certain Lenders.
Debt amount as of November 2, 1997: $253,050,000
------------
Promissory Note between Graham Packaging Company and York Bank & Trust Company.
Debt amount as of November 2, 1997: $51,000
-------
Pennsylvania RIDA Loan between Graham Recycling Company and the Commonwealth of
Pennsylvania.
Debt amount as of November 2, 1997: $562,000
--------
Credit Facility between Graham Packaging France, S.A. and Societe Generale, Lyon
Branch.
Debt amount as of November 2, 1997: $769,000
--------
Credit Facility between Graham Packaging Italy, Srl and Societe Generale, Milan
Branch.
Debt amount as of November 2, 1997: $5,015,000
----------
Credit Facility between Graham Packaging Italy, Srl and SIP, Srl and Credito
Italiano.
Debt amount as of November 2, 1997: $172,000
--------
Mortgage between Graham Packaging Italy, Srl and Medio Credito.
Debt amount as of November 2, 1997: $86,000
-------
Certain capital leases in France and Italy.
Balance as of November 2, 1997: $1,751,000
----------
Accrued interest on amounts disclosed above.
<PAGE>
Schedule 5.18
<TABLE>
<CAPTION>
Ownership Interests to be Contributed by Family Growth, GP Corp
and Recycling to the Partnership
===========================================================================================================
Graham Partners' Ownership Interest (and agreed value)
in each of the Following Entities
- -----------------------------------------------------------------------------------------------------------
Graham Packaging Graham Packaging LIDO Plast- Graham Packaging Graham Packaging
France Partners Italy Graham Latin America Poland
Partner (Ownership/Value) (Ownership/Value) (Ownership/Value) (Ownership/Value) (Ownership/Value)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Family 40%/$40,000 40%/$1,120,000 80%/$2,400 80%/$80,000 --
Growth
- ------------------------------------------------------------------------------------------------------------
-- -- -- -- 1%/$37,800
Recycling
- ------------------------------------------------------------------------------------------------------------
-- -- -- --
GP Corp
============================================================================================================
Graham
Brazil
Graham Packaging Participacoes Graham Recycling
Holdings I (Ownership/ Company
Partner (Ownership/Value) Value) (Ownership/Value)
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Family -- 1%/$22,200 --
Growth
- ---------------------------------------------------------------------------
1%/$23,600 -- 1%/$62,300
Recycling
- ---------------------------------------------------------------------------
-- -- --
GP Corp
===========================================================================
</TABLE>
<PAGE>
Schedule 5.19
DCG Real Estate to be Contributed to the Partnership
1. LOCATION: 500 Windsor Street
York, Pennsylvania
DESCRIPTION: 395,554 Sq. Ft. Plant/Warehouse and Office Space
RECORD OWNER: Donald C. Graham
AGREED VALUE: $2,621,208
2. LOCATION: 505 Windsor Street
York, Pennsylvania
DESCRIPTION: 44,416 Sq. Ft. Plant/Warehouse and Office Space
RECORD OWNER: Donald C. Graham
AGREED VALUE: $792,139
3. LOCATION: 8921 Latty Road
Berkely, Missouri
DESCRIPTION: Approximately 7.16 acres/vacant land
RECORD OWNER: York Transportation & Leasing, Inc.
AGREED VALUE: $192,000
4. LOCATION: 8942 Latty Road
Berkeley, Missouri
DESCRIPTION: 80,100 Sq. Ft. Plant/Warehouse and Office Space
RECORD OWNER: Donald C. Graham
AGREED VALUE: $1,363,300
5. LOCATION: 8966 Latty Road
Berkeley, Missouri
DESCRIPTION: 75,000 Sq. Ft. Plant/Warehouse Space
RECORD OWNER: Donald C. Graham
AGREED VALUE: $1,300,762
6. LOCATION: 4041 North Service Road
Burlington, Ontario, Canada
DESCRIPTION: 150,000 Sq. Ft. Plant/Warehouse and Office Space
RECORD OWNER: York Transportation & Leasing, Inc.
AGREED VALUE: $1,850,165
7. LOCATION: 3174 Mavis Road
Mississauga, Ontario, Canada
DESCRIPTION: 78,416 Sq. Ft. Plant/Warehouse Space
RECORD OWNER: York Transportation & Leasing, Inc.
AGREED VALUE: $751,593
8. LOCATION: 10551 Ray Lawson Boulevard
Anjou, Quebec, Canada
DESCRIPTION: 44,875 Sq. Ft. Plant/Warehouse Space
RECORD OWNER: York Transportation & Leasing, Inc.
AGREED VALUE: $686,007
<PAGE>
Exhibit 3.1
State of Delaware
Office of the Secretary of State
------------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
RESTORATION OF "GRAHAM PACKAGING HOLDINGS I, L.P.," FILED IN THIS OFFICE ON THE
EIGHTEENTH DAY OF NOVEMBER, A.B. 1996, AT 9 O'CLOCK A.M.
-----------------------------------
Edward J. Freel, Secretary of State
AUTHENTICATION:
DATE:
<PAGE>
STATE OF DELAWARE
CERTIFICATE TO RESTORE TO GOOD STANDING
A DELAWARE LIMITED PARTNERSHIP
PURSUANT TO TITLE 6, SEC. 17-1109
1. Name of Limited Partnership GRAHAM PACKAGING HOLDINGS I,
L.P. __________________________________________________
2. Date of original filing with Delaware Secretary of State 9-21-94.
______________________________________________
I, Graham Packaging Corporation, General Partner of Liquidation Trustee of the
above named limited partnership to hereby certify that this limited partnership
is paying all annual taxes, penalties and interest due to the State of Delaware.
I do hereby request this limited partnership be restored to Good Standing.
Graham Packaging Corporation
/s/ John E. Hamilton
-----------------------------------
Name: John E. Hamilton
Title: Treasurer of General Partner
<PAGE>
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF LIMITED PARTNERSHIP
OF
GRAHAM PACKAGING HOLDINGS I, L.P.
Graham Packaging Holdings I, L.P., a limited partnership organized
under the Delaware Revised Uniform Limited Partnership act (the "Act"), for the
purpose of amending its Certificate of Limited Partnership pursuant to Section
17-202 of the Act, hereby certifies that the Certificate of Limited Partnership
is amended and restated in its entirety to read as follows:
1. The name of the limited partnership is Graham Packaging Company,
L.P.
2. The name and address of the registered office and registered agent
is:
The Corporation Trust Company
Corporation Trust Center
1209 Orange Street
Wilmington, Delaware 19801
3. The name and business address of the General Partner is:
GPC Opco GP LLC
110 East Princess Street
York, Pennsylvania 17403
IN WITNESS WHEREOF, this Certificate of Amendment has been duly
executed by the undersigned as of the 2nd day of February, 1998.
GRAHAM PACKAGING HOLDINGS I, L.P.
By: Graham Recycling Corporation, By: GPC Opco GP LLC,
its withdrawing general partner its new general partner:
By: Graham Packaging Holdings
Company, its sole member
By: /s/ William H. Kerlian By: Graham Packaging Corporation
---------------------- its general partner
By /s/ William H. Kerlian
----------------------
William H. Kerlian
CEO Graham Packaging
<PAGE>
Exhibit 3.5
<TABLE>
<CAPTION>
COMMONWEALTH OF PENNSYLVANIA
FEE DEPARTMENT OF STATE
LIMITED PARTNERSHIP CERTIFICATE $75.00 CORPORATION BUREAU
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. THE NAME OF THE LIMITED PARTNERSHIP IS:
Sonoco Graham Company
- ------------------------------------------------------------------------------------------------------------------------------------
2. STREET ADDRESS OF THE PRINCIPAL PLACE OF BUSINESS:
1420 Sixth Avenue
- ------------------------------------------------------------------------------------------------------------------------------------
CITY STATE ZIP CODE
York Pennsylvania 17403
- ------------------------------------------------------------------------------------------------------------------------------------
3. THE CHARACTER OF ITS SURVIVORS IS: 4. THE TERM FOR WHICH THE
Manufacture of plastic containers PARTNERSHIP IS TO ________:
December 31, 2019
- ------------------------------------------------------------------------------------------------------------------------------------
5. ________ PLACE OF RESIDENCE OF SUCH GENERAL PARTNER IS:
NAME ADDRESS INCLUDE STREET NUMBER:
- ------------------------------------------------------------------------------------------------------------------------------------
6. __________________________________________________
ADDRESS INCLUDING
NAME STREET NUMBER:
CAPITAL CONTRIBUTION
Graham Engineering 1420 Sixth Avenue
Corporation York, Pennsylvania 17403 $50.00
- ------------------------------------------------------------------------------------------------------------------------------------
7. __________________________________________________
NAME SHARE ON AMOUNT
Graham Engineering Corporation 1.02
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- FOR OFFICE USE ONLY -
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
8. FILED CODE ________ SEQUENTIAL NO. MICROFILM NUMBER
1231 8929-488
--------------------------------------------------------------------------------------------
REFERRED BY ________ AMOUNT CORPORATION NUMBER
1071490
$75
-----------------
DATE APPROVED
--------------------------------------------------------------------------------------------
DATE REJECTED CERTIFY TO: INPUT BY LOG IN LOG IN
(REFILE)
REV
-----------------
Treasury of the Commonwealth INVALID BY DATE L&I VERIFIED BY LOG OUT LOT OUT
Department of State (REFILE)
Commonwealth of Pennsylvania OTHER
________ company, Philadelphia
</TABLE>
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE 1
THE LIMITED PARTNERSHIP............................................ 2
1.1 Formation.......................................................... 2
1.2 Certificate of Limited Partnership................................. 2
1.3 Name............................................................... 2
1.4 Character of Business.............................................. 2
1.5 Principal Offices.................................................. 2
1.6 Fiscal Year........................................................ 3
1.7 Accounting Matters................................................. 3
ARTICLE 2
DEFINITIONS........................................................ 3
2.1 Act................................................................ 3
2.2 Affiliate.......................................................... 3
2.3 Agreement.......................................................... 3
2.4 Agreement Date..................................................... 3
2.5 Auditor............................................................ 3
2.6 Available Cash..................................................... 4
2.7 Bankruptcy......................................................... 4
2.8 Capital Account.................................................... 4
2.9 Capital Contribution............................................... 4
2.10 Certificate........................................................ 4
2.11 Code............................................................... 5
2.12 Container.......................................................... 5
2.13 Depreciation....................................................... 5
2.14 Engineering........................................................ 5
2.15 Event of Withdrawal................................................ 5
2.16 General Partner.................................................... 5
2.17 Generally Accepted Accounting Principles........................... 5
2.18 Gross Asset Value.................................................. 5
2.19 Limited Partner.................................................... 6
2.20 Opening Balance Sheet.............................................. 6
2.21 Organization Agreement............................................. 6
2.22 Partner............................................................ 6
2.23 Partnership........................................................ 6
2.24 Partnership Interest............................................... 6
2.25 Partnership Year................................................... 6
2.26 Percentage Interest................................................ 6
2.27 Person............................................................. 6
2.28 Profits and Losses................................................. 6
i
<PAGE>
2.29 Sonoco............................................................. 7
2.30 Transfer........................................................... 7
2.31 General Provisions................................................. 7
ARTICLE 3
CAPITAL CONTRIBUTIONS; CAPITAL ACCOUNTS............................ 8
3.1 Initial Capital Contribution....................................... 8
3.2 Additional Capital Contributions................................... 8
3.3 Opening Balance Sheet.............................................. 8
3.4 Capital Accounts................................................... 8
3.5 Negative Capital Accounts.......................................... 9
3.6 Compliance with Treasury Regulations............................... 9
3.7 Succession to Capital Accounts..................................... 9
3.8 Certain Adjustments................................................ 9
3.9 No Withdrawal of Capital Contributions............................. 9
ARTICLE 4
COSTS AND EXPENSES................................................. 10
4.1 Organizational and Other Costs..................................... 10
4.2 Operating Costs.................................................... 10
ARTICLE 5
DISTRIBUTIONS, PARTNERSHIP ALLOCATIONS; TAX MATTERS................ 10
5.1 Distributions Prior to Dissolution................................. 10
5.2 Partnership Allocations............................................ 11
5.3 Tax Allocations; Code Section 704(c)............................... 14
5.4 Accounting Method.................................................. 14
ARTICLE 6
MANAGEMENT......................................................... 14
6.1 Rights and Duties of the Partners.................................. 14
6.2 Fiduciary Duty of General Partner.................................. 14
6.3 Powers of General Partner.......................................... 15
6.4 Other Activities................................................... 16
6.5 Transactions with Affiliates....................................... 16
6.6 Confidentiality of Certain Information............................. 17
6.7 Exculpation........................................................ 17
ii
<PAGE>
ARTICLE 7
COMPENSATION....................................................... 18
ARTICLE 8
ACCOUNTS........................................................... 18
8.1 Books and Records.................................................. 18
8.2 Reports, Returns and Audits........................................ 18
ARTICLE 9
TRANSFERS.......................................................... 19
9.1 Transfer of General Partner's Interest............................. 19
9.2 Transfer of a Limited Partner's Interest........................... 20
9.3 Partnership's Right of First Refusal............................... 20
9.4 Limited Partner's Right of Second Refusal.......................... 21
9.5 Deviation from Bona Fide Offers.................................... 21
9.6 Partnership's Call Option.......................................... 21
9.7 Closing............................................................ 22
9.8 Involuntary Transfers.............................................. 23
9.9 Allocation of Distributions Subsequent to Assignment............... 23
9.10 Death, Incompetence, Bankruptcy, Liquidation or Withdrawal of a
Limited Partner.................................................... 24
9.11 Satisfactory Written Assignment Required........................... 24
9.12 Transferee's Rights................................................ 24
9.13 Transferees Admitted as Partners................................... 24
ARTICLE 10
DISSOLUTION........................................................ 25
10.1 Events of Dissolution.............................................. 25
10.2 Final Accounting................................................... 25
10.3 Liquidation........................................................ 25
10.4 Cancellation of Certificate........................................ 26
ARTICLE 11
AMENDMENTS TO AGREEMENT............................................ 26
ARTICLE 12
NOTICES............................................................ 26
12.1 Method of Notice................................................... 26
12.2 Computation of Time................................................ 26
iii
<PAGE>
ARTICLE 13
INVESTMENT REPRESENTATIONS......................................... 26
13.1 Investment Purpose................................................. 26
13.2 Investment Restriction............................................. 27
ARTICLE 14
GENERAL PROVISIONS................................................. 27
14.1 Entire Agreement................................................... 27
14.2 Amendment Waiver................................................... 27
14.3 Governing Law...................................................... 27
14.4 Binding Effect..................................................... 27
14.5 Separability....................................................... 27
14.6 Headings........................................................... 28
14.7 No Third-Party Rights.............................................. 28
14.8 Waiver of Partition................................................ 28
14.9 Nature of Interests................................................ 28
14.10 Power of Attorney.................................................. 28
iv
<PAGE>
AMENDED AND RESTATED
CERTIFICATE OF LIMITED PARTNERSHIP
OF
SONOCO GRAHAM COMPANY
THIS AMENDED AND RESTATED CERTIFICATE OF LIMITED PARTNERSHIP
("Certificate") of Sonoco Graham Company, a Pennsylvania limited partnership
(the "Partnership"), is made this third day of April, 1989, by and among Sonoco
Graham Corporation, a Pennsylvania corporation, as general partner (the "General
Partner"), Graham Engineering Corporation, a Pennsylvania corporation (the
"Initial Limited Partner"), and Graham Container Corporation, a Pennsylvania
corporation, and Sonoco Products Company, a South Carolina corporation (the
"Additional Limited Partners," and, collectively with the Initial Limited
Partner, hereinafter the "Limited Partners"). Hereinafter, the General Partner
and the Limited Partners are collectively referred to as "Partners."
W I T N E S S E T H :
---------------------
WHEREAS, on March 24, 1989, a Certificate of Limited
Partnership was filed in the Department of State of the Commonwealth of
Pennsylvania whereby the Partnership was formed by the General Partner and the
Initial Limited Partner under the Pennsylvania Uniform Limited Partnership Act;
and
WHEREAS, the Partners now desire to amend and restate the
terms and provisions of the Certificate of Limited Partnership of the
Partnership, all in accordance with the Amended and Restated Agreement of
Limited Partnership of the Partnership dated April 3, 1989 (the "Restated
Agreement"), a copy of which is attached hereto as Exhibit A; and
WHEREAS, the Partners also wish to admit the Additional
Limited Partners to the Partnership as additional Limited Partners.
NOW, THEREFORE, pursuant to the Pennsylvania Uniform Limited
Partnership Act, the undersigned hereby certify as follows:
ARTICLE ONE
Name
The name of the Partnership is Sonoco Graham Company.
<PAGE>
2
ARTICLE TWO
Character of Business
The character of the Partnership's business and the purposes
of the Partnership shall be as set forth in Section 1.4 of the Restated
Agreement.
ARTICLE THREE
Location of Principal Place of Business
The Partnership shall have its principal offices at 1420 Sixth
Avenue, York, Pennsylvania 17403-1104, or at such other location as may be
selected from time to time by the General Partner.
ARTICLE FOUR
Names and Places of Residence of Partners
The names and places of residence of the Partners are as
follows:
General Partner:
Sonoco Graham Corporation
1420 Sixth Avenue
York, PA 17403-1104
Limited Partners:
Sonoco Products Company
One North Second Street
Hartsville, SC 29550
Graham Engineering Corporation
1420 Sixth Avenue
York, PA 17403-1104
Graham Container Corporation
1420 Sixth Avenue
York, PA 17403-1104
ARTICLE FIVE
Term
The term of the Partnership shall be as set forth in Section
10.1 of the Restated Agreement.
<PAGE>
3
ARTICLE SIX
Capital Contributions by Limited Partners
The amount of cash and the agreed value of other property
contributed to the capital of the Partnership by each Limited Partner is set
forth opposite such Limited Partner's name on Schedule "A" to the Restated
Agreement.
ARTICLE SEVEN
Additional Capital Contributions by Limited Partners
The amount of additional contributions to the capital of the
Partnership agreed to be made by each Limited Partner, and the times at which
such contributions shall be made, if any, are set forth in Section 3.2 to the
Restated Agreement.
ARTICLE EIGHT
Return of Contributions
There has been no agreement as to when the contributions of
each Limited Partner is to be returned except as provided for in Sections 5.1
and 10.3 of the Restated Agreement.
ARTICLE NINE
Share of Profits
The share of profits and other compensation by way of income
which each Limited Partner shall receive by reason of its contribution to the
Partnership is set forth in Article 5 and Section 10.3 of the Restated
Agreement.
ARTICLE TEN
Substitution of Assignee in Place of Limited Partner
The right of a Limited Partner to transfer his interest and to
substitute an assignee as contributor in his place, and the terms and conditions
of such substitution, are set forth in Article 9 of the Restated Agreement.
ARTICLE ELEVEN
Right of Partners to Admit Additional Limited Partners
The Partners may not admit additional limited partners.
<PAGE>
4
ARTICLE TWELVE
Priority
The Limited Partners shall have such rights to priority as to
contributions to the Partnership or as to compensation by way of income as is
provided in Article 5 of the Restated Agreement.
ARTICLE THIRTEEN
Continuation of Partnership Business on Removal,
Withdrawal, Death, Dissolution, Adjudication
or Incompetence or Bankruptcy of a General Partner
The withdrawal, resignation, dissolution, revocation of the
charter or bankruptcy of the General Partner or the occurrence of any other
event which causes the General Partner to cease to be a general partner of the
Partnership shall cause an immediate dissolution of the Partnership.
ARTICLE FOURTEEN
Right of a Limited Partner or the
Special Limited Partner to Demand and
Receive Property Other than Cash
No Limited Partner shall have any right to demand and receive
property other than cash in return for his contribution to the Partnership
except in accordance with Section 10.3 of the Restated Agreement.
ARTICLE FIFTEEN
Power of Attorney
The power of attorney given by each Limited Partner to the
General Partner, pursuant to which the General Partner may execute this
Certificate as attorney-in-fact for each of the Limited Partners, is set forth
in Section 14.10 of the Restated Agreement.
<PAGE>
5
IN WITNESS WHEREOF, the undersigned have executed this Amended
and Restated Certificate of Limited Partnership on the date first above written.
GENERAL PARTNER:
[SEAL] SONOCO GRAHAM CORPORATION
By:
-----------------------------------------------
William H. Kerlin, Jr.,
Vice President
LIMITED PARTNERS:
[SEAL] SONOCO PRODUCTS COMPANY
By:
-----------------------------------------------
Harris E. De Loach, Jr.,
Vice President-Administration
[SEAL] GRAHAM ENGINEERING CORPORATION
By:
-----------------------------------------------
William H. Kerlin, Jr.,
Executive Vice President
[SEAL] GRAHAM CONTAINER CORPORATION
By:
-----------------------------------------------
William H. Kerlin, Jr.,
Executive Vice President
<PAGE>
Exhibit A
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF SONOCO GRAHAM COMPANY
DATED AS OF APRIL 3, 1989
<PAGE>
TABLE OF CONTENTS
Page No.
--------
ARTICLE 1
THE LIMITED PARTNERSHIP............................................ 2
1.1 Formation.......................................................... 2
1.2 Certificate of Limited Partnership................................. 2
1.3 Name............................................................... 2
1.4 Character of Business.............................................. 2
1.5 Principal Offices.................................................. 2
1.6 Fiscal Year........................................................ 3
1.7 Accounting Matters................................................. 3
ARTICLE 2
DEFINITIONS........................................................ 3
2.1 Act................................................................ 3
2.2 Affiliate.......................................................... 3
2.3 Agreement.......................................................... 3
2.4 Agreement Date..................................................... 3
2.5 Auditor............................................................ 3
2.6 Available Cash..................................................... 4
2.7 Bankruptcy......................................................... 4
2.8 Capital Account.................................................... 4
2.9 Capital Contribution............................................... 4
2.10 Certificate........................................................ 4
2.11 Code............................................................... 5
2.12 Container.......................................................... 5
2.13 Depreciation....................................................... 5
2.14 Engineering........................................................ 5
2.15 Event of Withdrawal................................................ 5
2.16 General Partner.................................................... 5
2.17 Generally Accepted Accounting Principles........................... 5
2.18 Gross Asset Value.................................................. 5
2.19 Limited Partner.................................................... 6
2.20 Opening Balance Sheet.............................................. 6
2.21 Organization Agreement............................................. 6
2.22 Partner............................................................ 6
2.23 Partnership........................................................ 6
2.24 Partnership Interest............................................... 6
2.25 Partnership Year................................................... 6
2.26 Percentage Interest................................................ 6
2.27 Person............................................................. 6
2.28 Profits and Losses................................................. 6
2.29 Sonoco............................................................. 7
2.30 Transfer........................................................... 7
i
<PAGE>
Page No.
--------
2.31 General Provisions................................................. 7
ARTICLE 3
CAPITAL CONTRIBUTIONS; CAPITAL ACCOUNTS............................ 8
3.1 Initial Capital Contribution....................................... 8
3.2 Additional Capital Contributions................................... 8
3.3 Opening Balance Sheet.............................................. 8
3.4 Capital Accounts................................................... 8
3.5 Negative Capital Accounts.......................................... 9
3.6 Compliance with Treasury Regulations............................... 9
3.7 Succession to Capital Accounts..................................... 9
3.8 Certain Adjustments................................................ 9
3.9 No Withdrawal of Capital Contributions............................. 9
ARTICLE 4
COSTS AND EXPENSES................................................. 10
4.1 Organizational and Other Costs..................................... 10
4.2 Operating Costs.................................................... 10
ARTICLE 5
DISTRIBUTIONS, PARTNERSHIP ALLOCATIONS;
TAX MATTERS........................................................ 10
5.1 Distributions Prior to Dissolution................................. 10
5.2 Partnership Allocations............................................ 11
5.3. Tax Allocations; Code Section 704(c)............................... 14
5.4 Accounting Method.................................................. 14
ARTICLE 6
MANAGEMENT......................................................... 14
6.1 Rights and Duties of the Partners.................................. 14
6.2 Fiduciary Duty of General Partner.................................. 14
6.3 Powers of General Partner.......................................... 15
6.4 Other Activities................................................... 16
6.5 Transactions with Affiliates....................................... 16
6.6 Confidentiality of Certain Information............................. 17
6.7 Exculpation........................................................ 17
ARTICLE 7
COMPENSATION....................................................... 18
ii
<PAGE>
Page No.
--------
ARTICLE 8
ACCOUNTS............................................................ 18
8.1 Books and Records................................................... 18
8.2 Reports, Returns and Audits......................................... 18
ARTICLE 9
TRANSFERS........................................................... 19
9.1 Transfer of General Partner's Interest.............................. 19
9.2 Transfer of a Limited Partner's Interest............................ 20
9.3 Partnership's Right of First Refusal................................ 20
9.4 Limited Partner's Right of Second Refusal........................... 21
9.5 Deviation from Bona Fide Offers..................................... 21
9.6 Partnership's Call Option........................................... 21
9.7 Closing............................................................. 22
9.8 Involuntary Transfers............................................... 23
9.9 Allocation of Distributions Subsequent to Assignment................ 23
9.10 Death, Incompetence, Bankruptcy, Liquidation or
Withdrawal of a Limited Partner................................... 24
9.11 Satisfactory Written Assignment Required............................ 24
9.12 Transferee's Rights................................................. 24
9.13 Transferees Admitted as Partners.................................... 24
ARTICLE 10
DISSOLUTION......................................................... 25
10.1 Events of Dissolution............................................... 25
10.2 Final Accounting.................................................... 25
10.3 Liquidation......................................................... 25
10.4 Cancellation of Certificate......................................... 26
ARTICLE 11
AMENDMENTS TO AGREEMENT............................................. 26
ARTICLE 12
NOTICES............................................................. 26
12.1 Method of Notice.................................................... 26
12.2 Computation of Time................................................. 26
ARTICLE 13
INVESTMENT REPRESENTATIONS.......................................... 26
13.1 Investment Purpose.................................................. 26
13.2 Investment Restriction.............................................. 27
iii
<PAGE>
Page No.
--------
ARTICLE 14
GENERAL PROVISIONS.................................................. 27
14.1 Entire Agreement.................................................... 27
14.2 Amendment Waiver.................................................... 27
14.3 Governing Law....................................................... 27
14.4 Binding Effect...................................................... 27
14.5 Separability........................................................ 27
14.6 Headings............................................................ 28
14.7 No Third-Party Rights............................................... 28
14.8 Waiver of Partition................................................. 28
14.9 Nature of Interests................................................. 28
14.10 Power of Attorney................................................... 28
iv
<PAGE>
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
SONOCO GRAHAM COMPANY
THIS AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP is
entered into as of the 3rd day of April, 1989, by and among Sonoco Graham
Corporation, a Pennsylvania corporation with its offices at 1420 Sixth Avenue,
York, Pennsylvania 17403-1104, as general partner (the "General Partner"), and
Sonoco Products Company, a South Carolina corporation with its offices at One
North Second Street, Hartsville, South Carolina ("Sonoco"), Graham Container
Corporation, a Pennsylvania corporation with its offices at 1420 Sixth Avenue,
York, Pennsylvania 17403-1104 ("Container"), and Graham Engineering Corporation,
a Pennsylvania corporation with its offices at 1420 Sixth Avenue, York,
Pennsylvania 17403-1104 ("Engineering"), as limited partners (hereinafter
collectively referred to as the "Limited Partners"). The General Partner and the
Limited Partners are hereinafter sometimes referred to collectively as the
"Partners" and individually as a "Partner."
W I T N E S S E T H :
---------------------
WHEREAS, the General Partner and Engineering heretofore
have formed a limited partnership in accordance with the provisions of the
Pennsylvania Uniform Limited Partnership Act (59 Pa. Cons. Stat. ch. 5), under
the name Sonoco Graham Company pursuant to a Certificate of Limited Partnership
dated March 22, 1989 and an Agreement of Limited Partnership filed March 24,
1989; and
WHEREAS, the parties hereto desire to amend and restate in its
entirety the Agreement of Limited Partnership of the partnership as hereinafter
set forth;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, the parties hereto hereby agree that the Agreement
of Limited Partnership of the Partnership is hereby amended and restated in its
entirety by this Amended and Restated Agreement of Limited Partnership and, as
so amended and restated hereby, shall read in its entirety as follows:
<PAGE>
ARTICLE 1
THE LIMITED PARTNERSHIP
1.1 Formation.
(a) The parties hereto, in consideration of the mutual
covenants herein contained, are hereby becoming partners in a limited
partnership (hereinafter referred to as the "Partnership") formed under and
pursuant to the provisions of the Act to engage in the business hereinafter
described for the period and upon the terms and conditions hereinafter set
forth.
(b) The General Partner and the Limited Partners have been
admitted to the Partnership as a general partner and limited partners,
respectively, and have contributed to the capital of the Partnership their
initial Capital Contributions, as set forth in Section 3.1 below.
1.2 Certificate of Limited Partnership. The General Partner
has executed and caused to be filed a Certificate of Limited Partnership of the
Partnership (hereinafter referred to as the "Certificate") in the office of the
Secretary of State of the Commonwealth of Pennsylvania on March 24, 1989, shall
cause to be filed an amendment to the Certificate reflecting this Agreement
promptly after the execution hereof, and hereafter shall execute such further
documents (including any further amendments to the Certificate) and take such
further action as shall be appropriate to comply with all requirements of law
for the formation and operation of a limited partnership in the Commonwealth of
Pennsylvania and all other counties and states where the Partnership may elect
to do business.
1.3 Name. The name of the Partnership is Sonoco Graham
Company. The General Partner may change the name of the Partnership or cause the
business of the Partnership to be conducted under any other name.
1.4 Character of Business. The business of the Partnership
shall be the manufacturing and marketing of plastic containers to purchasers in
the United States and such other activities and business as are incidental to
the foregoing. For such purposes, the Partnership shall have and exercise all
the powers now or hereafter conferred by the laws of the Commonwealth of
Pennsylvania on limited partnerships formed under the laws of that Commonwealth,
and to do any and all things as fully as natural persons might or could do as
are not prohibited by law, in furtherance of the aforesaid business of the
Partnership. The business of the Partnership shall be conducted in accordance
with, and any action required or permitted to be taken by the General Partner or
any Limited Partner shall be taken in compliance with, all applicable laws,
rules and regulations.
1.5 Principal Offices. The location of the principal
offices of the Partnership shall be at 1420 Sixth Avenue, York,
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Pennsylvania 17403-1104, or at such other location as may be selected from time
to time by the General Partner. The Partnership may maintain such other offices
at such other places as the General Partner deems advisable.
1.6 Fiscal Year. The fiscal year of the Partnership shall be
the calendar year (the "Partnership Year").
1.7 Accounting Matters. Unless otherwise specified herein, all
accounting determinations hereunder shall be made, all accounting terms used
herein shall be interpreted, and all financial statements required to be
delivered hereunder shall be prepared, in accordance with Generally Accepted
Accounting Principles, except, in the case of such financial statements, for
departures from Generally Accepted Accounting Principles that may from time to
time be approved in writing by the Partners and the Auditor who is at the time
reporting on such financial statements.
ARTICLE 2
DEFINITIONS
The following defined terms used in this Agreement shall have
the respective meanings specified below.
2.1 Act. "Act" shall mean the Pennsylvania Revised Uniform
Limited Partnership Act (15 Pa. Cons. Stat. ch. 85), as amended from time to
time and any successor to such Act, except that prior to the effective date of
such Revised Uniform Limited Partnership Act, "Act" shall mean the Pennsylvania
Uniform Limited Partnership Act (59 Pa. Cons. Stat. ch. 5).
2.2 Affiliate. "Affiliate" shall mean (i) any Person directly
or indirectly controlling, controlled by or under common control with another
Person, (ii) a Person owning or controlling ten percent (10%) or more of the
outstanding voting securities of such other Person, (iii) any officer, director
or general partner of such other Person, and (iv) if such other Person is an
officer, director or general partner, any other entity for which such Person
acts in any capacity.
2.3 Agreement. This "Agreement" shall refer to this Amended
and Restated Agreement of Limited Partnership, including Schedule A hereto, as
the same may be amended from time to time.
2.4 Agreement Date. "Agreement Date" shall mean the date of
this Agreement.
2.5 Auditor. "Auditor" shall mean Ernst & Whinney or any
successor firm of independent auditors selected by the General Partner.
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2.6 Available Cash. "Available Cash" shall mean at any point
in time all cash and cash equivalents on hand of the Partnership from any source
(including, without limitation, any proceeds from borrowings) less cash
reasonably reserved or reasonably anticipated to be required for debts and
expenses, interest and scheduled principal payments on any indebtedness, capital
expenditures, taxes or the activities of the Partnership (including payments to
Partners under any agreement other than this Agreement).
2.7 Bankruptcy. The "Bankruptcy" of a Partner shall mean (i)
the filling by a Partner of a voluntary petition seeking liquidation,
reorganization, arrangement or readjustment, in any form, of its debts under
Title 11 of the United States Code or any other federal or state insolvency law,
or a Partner's filing an answer consenting to or acquiescing in any such
petition, (ii) the making by a Partner of any assignment for the benefit of its
creditors or (iii) the expiration of sixty days after the filing of an
involuntary petition under Title 11 of the United States Code, an application
for the appointment of a receiver for the assets of a Partner, or an involuntary
petition seeking liquidation, reorganization, arrangement or readjustment of its
debts under any other federal or state insolvency law, provided that the same
shall not have been vacated, set aside or stayed within such sixty-day period.
2.8 Capital Account. The "Capital Account" of a Partner shall
be (a) credited with (i) the amount of cash or, in the case of non-cash asset
contributions, the gross fair market value of such capital contributions as
agreed upon by the Partners at the time such contribution is made less
liabilities assumed by the Partnership in connecting with such contributions (or
to which any such contributed assets are subject) and (ii) such Partner's
allocable share of Profits of the Partnership and (b) debited with (i) the
amount of any cash and the fair market value of any property distributed to it
pursuant to Section 5.1 other than clause (iii) of Subsection 5.1(a), (ii) the
amount of any payments by the Partnership to such Partner under any agreement
other than this Agreement that are ultimately determined for Federal income tax
purposes not to constitute (A) payments to a partner other than in its capacity
as a partner under Section 707(a) of the code or (B) guaranteed payments under
Section 707(c) of the Code and (iii) such Partner's allocable share of Losses of
the Partnership. For purposes of this Section 2.8, the note of the Partnership
referred to in Subsection 5.1(b) shall not be treated as "property" distributed
to Container, and payments of principal under such note shall be treated as cash
distributed to Container.
2.9 Capital Contribution. The "Capital Contribution" of a
Partner shall be the amount which such Partner contributes to the capital of the
Partnership as provided in Article 3.
2.10 Certificate. "Certificate" shall have the meaning
ascribed to such term in Section 1.2.
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2.11 Code. "Code" shall mean the Internal Revenue Code of
1986, as amended and in effect from time to time, or the corresponding
provisions of any successor statute.
2.12 Container. "Container" shall have the meaning ascribed to
such term in the first paragraph of this Agreement.
2.13 Depreciation. "Depreciation" shall mean, for each fiscal
year or other period, an amount equal to the depreciation, amortization or other
cost recovery deduction allowable with respect to an asset for such year or
other period, except that if the Gross Asset Value of an asset differs from its
adjusted basis for federal income tax purposes at the beginning of such year or
other period, Depreciation shall be an amount which bears the same ratio to such
beginning Gross Asset Value as the federal income tax depreciation, amortization
or other cost recovery deduction for such year or other period bears to such
beginning adjusted tax basis.
2.14 Engineering. "Engineering" shall have the meaning
ascribed to such term in the first paragraph of this Agreement.
2.15 Event of Withdrawal. "Event of Withdrawal" shall have the
meaning ascribed to such term in Subsection 10.1(b).
2.16 General Partner. "General Partner" shall have the meaning
ascribed to such term in the first paragraph of this Agreement.
2.17 Generally Accepted Accounting Principles. "Generally
Accepted Accounting Principles" shall refer to generally accepted accounting
principles as in effect from time to time in the United States of America.
2.18 Gross Asset Value. "Gross Asset Value" shall mean, with
respect to any asset, the asset's adjusted basis for federal income tax purposes
except as follows:
(1) The initial Gross Asset Value of any asset
contributed by a Partner to the Partnership shall be the gross fair market value
of such asset at the time of such contribution, as agreed to by the Partners;
(2) The Gross Asset Values of all Partnership
assets shall be adjusted to equal their respective gross fair market values, as
agreed to by the Partners, as of the following times: (a) the acquisition of an
additional interest in the Partnership by any new or existing Partner in
exchange for more than a de minimis capital contribution; (b) the distribution
by the Partnership to a Partner of more than a de minimis amount of Partnership
property other than money, unless all Partners receive simultaneous
distributions of undivided interests in the distributed property in proportion
to their respective Percentage Interests; (c) the liquidation of the Partnership
within the meaning of Treas. Reg. ss.1.704-1(b)(2)(ii)(g); and (d) the
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termination of the Partnership for federal income tax purposes pursuant to
Section 708(b)(1)(B) of the Code; and
(3) The Gross Asset Value of any Partnership
asset distributed to any Partner shall be the gross fair market value of such
asset on the date of distribution.
If the Gross Asset Value of an asset has been determined or adjusted pursuant to
Subsections 2.18(1) or (2) hereof, such Gross Asset Value shall thereafter be
adjusted by the Depreciation taken into account with respect to such asset for
purposes of computing Profits and Losses.
2.19 Limited Partner. "Limited Partner" shall have the
meaning ascribed to such term in the first paragraph of this
Agreement.
2.20 Opening Balance Sheet. "Opening Balance Sheet" shall
have the meaning ascribed to such term in Section 3.3.
2.21 Organization Agreement. "Organization Agreement" shall
mean that certain Organization Agreement, dated as of March 31, 1989, by and
among Sonoco, Engineering, Container, the General Partner and the Partnership,
as the same may be amended and in effect from time to time.
2.22 Partner. "Partner" shall have the meaning ascribed to
such term in the first paragraph of this Agreement.
2.23 Partnership. "Partnership" shall have the meaning
ascribed to such term in Subsection 1.1(a).
2.24 Partnership Interest. "Partnership Interest" shall refer,
with respect to a given Partner as of a given date, to such Partner's general
partner interest in the Partnership (if any) and such Partner's limited partner
interest in the Partnership (if any), in each case as of such date.
2.25 Partnership Year. "Partnership Year" shall have the
meaning ascribed to such term in Section 1.6.
2.26 Percentage Interest. The "Percentage Interest" of
a Partner shall be the percentage set forth next to its respective name on
Schedule A hereto.
2.27 Person. "Person" shall include an individual, a
partnership, a corporation, a trust, an unincorporated organization, a
government or any department or agency thereof, and any other entity.
2.28 Profits and Losses. "Profits" and "Losses" shall mean,
for each fiscal year or other period, an amount equal to the Partnership's
taxable income or loss for such year or period, determined in accordance with
Section 703(a) of the Code (for this purpose, all items of income, gain, loss or
deduction
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required to be stated separately pursuant to Section 703(a)(1) of the Code shall
be included in taxable income or loss), with the following adjustments:
(i) Any income of the Partnership that is exempt from federal
income tax and not otherwise taken into account in computing Profits or Losses
pursuant to this Section 2.28 shall be added to such taxable income or loss;
(ii) Any expenditures of the Partnership described in Section
705(a)(2)(B) of the Code or treated as Code Section 705(a)(2)(B) expenditures
pursuant to Treas Reg. ss.1.704- 1(b)(2)(iv)(i), and not otherwise taken into
account in computing Profits or Losses pursuant to this Section 2.28, shall be
subtracted from such taxable income or loss;
(iii) In the event the Gross Asset Value of any Partnership
asset is adjusted pursuant to Subsection 2.18(2) or (3) hereof, the amount of
such adjustment shall be taken into account as gain or loss from the disposition
of such asset for purposes of computing Profits or Losses;
(iv) Gain or loss resulting from any disposition of
Partnership property with respect to which gain or loss is recognized for
federal income tax purposes shall be computed by reference to the Gross Asset
Value of the property disposed of, notwithstanding that the adjusted tax basis
of such property differs from its Gross Asset Value; and
(v) In lieu of the depreciation, amortization and other cost
recovery deductions taken into account in computing such taxable income or loss,
there shall be taken into account Depreciation for such fiscal year or other
period.
2.29 Sonoco. "Sonoco" shall have the meaning ascribed
to such term in the first paragraph of this Agreement.
2.30 Transfer. "Transfer" shall mean any assignment, mortgage,
hypothecation, transfer, pledge, creation of a security interest in or lien
upon, encumbrance, gift or other disposition.
2.31 General Provisions. As used in this Agreement, except as
the context otherwise requires, each term stated in either the singular or the
plural shall include the singular and the plural, and pronouns stated in the
masculine, feminine or neuter gender shall include the masculine, feminine and
the neuter. The words "herein", "hereof", and "hereunder" and other words of a
similar import refer to this Agreement as a whole, including Schedule A hereto,
and not to any particular Article, Section, Subsection, Clause or Subdivision
contained in this Agreement. Capitalized terms used in this Agreement which are
not otherwise defined herein shall have the respective meanings ascribed to such
term in the Organization Agreement.
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ARTICLE 3
CAPITAL CONTRIBUTIONS; CAPITAL ACCOUNTS
3.1 Initial Capital Contribution.
(a) The General Partner shall, as its initial
Capital Contribution to the capital of the Partnership, pay or cause to be paid
into the Partnership the sum of $500,000.
(b) Sonoco shall, as its initial Capital
Contribution to the Capital of the Partnership, convey, transfer and assign into
the name of the Partnership, or cause to be signed so conveyed, transferred and
assigned, all its right, title and interest in and to the Sonoco Assets, subject
to the Sonoco Liabilities, as such terms are defined in the Organization
Agreement.
(c) Container shall, as its initial Capital
Contribution to the capital of the Partnership, convey, transfer and assign into
the name of the Partnership, or cause to be so conveyed, transferred and
assigned, all its right, title and interest in and to the Container Assets,
subject to the Container Liabilities, as such terms are defined in the
Organization Agreement.
(d) Engineering shall, as its initial Capital
Contribution to the capital of the Partnership, convey, transfer and assign into
the name of the Partnership, or cause to be so conveyed, transferred and
assigned, all its right, title and interest in and to the Engineering Assets,
subject to the Engineering Liabilities, as such terms are defined in the
Organization Agreement.
3.2 Additional Capital Contributions. Except to the extent set
forth in Section 11.2 of the Organization Agreement (relating to indemnification
payments, none of which shall result in a change in a Partner's Percentage
Interest), no additional contributions shall be required to be made by the
Partners. Unless otherwise agreed, any additional contributions shall be made
pro rata by the Partners in accordance with their Percentage Interests.
3.3 Opening Balance Sheet. Promptly after the Agreement Date,
the Partnership shall prepare a balance sheet (the "Opening Balance Sheet") of
the Partnership, as of the Agreement Date (after giving effect to initial
Capital Contributions of the Partners) in accordance with Generally Accepted
Accounting Principles.
3.4 Capital Accounts. A Capital Account shall be established
and maintained for each Partner on the books of the Partnership. Each Partner's
interest in the capital of the Partnership shall be represented by its Capital
Account. The initial Capital Account of each Partner, which reflects such
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Partner's Capital Contribution pursuant to Section 3.1, is set forth opposite
its respective name on Schedule A.
3.5 Negative Capital Accounts. At no time during the term of
the Partnership or upon dissolution and liquidation thereof shall a Limited
Partner with a negative balance in its Capital Account have any obligation to
the Partnership or the other Partners to restore such negative balance.
3.6 Compliance with Treasury Regulations. The foregoing
provisions and the other provisions of this Agreement relating to the
maintenance of capital accounts are intended to comply with Section 704(b) of
the code and Treas Reg. ss.1.704-1(b) (or any corresponding provision of
succeeding law) and shall be interpreted and applied in a manner consistent with
such Regulation. In the event the General Partner shall determine that it is
prudent to modify the manner in which the Capital Accounts, or any debits or
credits thereto, are computed in order to comply with such Regulation, the
Partnership may make such modifications. The Partnership also shall make any
appropriate modifications in the event unanticipated events might otherwise
cause this Agreement not to comply with Section 704(b) of the Code and Treas.
Reg. ss.1.704-1(b) (or any corresponding provision of succeeding law.
3.7 Succession to Capital Accounts. In the event any interest
in the Partnership is transferred in accordance with the terms of this Agreement
and the Organization Agreement, the transferee shall succeed to the Capital
Account of the transferor to the extent it relates to the transferred interest.
For purposes of the preceding sentence, the portion of the Capital Account to
which the transferee succeeds shall be that percentage of the transferor's total
Capital Account as the Percentage Interest being transferred bears to the total
Percentage Interest of the transferor.
3.8 Certain Adjustments. In the event the Gross Asset Values
of the assets of the Partnership are adjusted pursuant to the provisions of this
Agreement, the Capital Accounts of all Partners shall be adjusted simultaneously
to reflect the aggregate net adjustment as if the Partnership recognized gain or
loss equal to the amount of such aggregate net adjustment.
3.9 No Withdrawal of Capital Contributions. No Partner shall
withdraw any Capital Contributions without the unanimous written approval of the
other Partners No Partner shall receive any interest with respect to its Capital
Contributions.
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ARTICLE 4
COSTS AND EXPENSES
4.1 Organizational and Other Costs. The Partnership shall pay
or cause to be paid all costs and expenses incurred in connection with the
formation and organization of the Partnership, except to the extent that such
costs are required to be borne by the parties to the Organization Agreement as
set forth therein. Such costs and expenses to be borne by the Partnership shall
include, without limitation, all related accounting, consulting, filing and
registration costs.
4.2 Operating Costs. The Partnership shall (i) pay or cause to
be paid all costs and expenses of the Partnership incurred in pursuing and
conducting, or otherwise related to, the business of the Partnership, (ii) pay
or cause to be paid all employment-related costs and expenses incurred by the
General Partner in pursuing and conducting the business of the Partnership, and
(iii) reimburse the General Partner for any out-of-pocket costs and expenses
incurred by it in connection therewith (including, without limitation, in the
performance of its duties as tax matters partner) to the extent permitted by
Section 6.5.
ARTICLE 5
DISTRIBUTIONS, PARTNERSHIP ALLOCATIONS;
TAX MATTERS
5.1 Distributions Prior to Dissolution.
(a) Promptly after the execution of this Agreement,
the Partnership shall borrow funds to enable it to make the following
distributions and payments:
(i) $100 million shall be distributed to
Sonoco immediately after the borrowing of such funds by
the Partnership;
(ii) On January 1, 1990, $100 million shall
be distributed to Container; and
(iii) On each of (A) the date of the
distribution to Sonoco under Clause (i), (B) July 1, 1989 and
(C) October 1, 1989, interest on $100 million for the period
beginning on such date and ending with the end of the calendar
quarter including or immediately following such date, computed
at the prime rate in effect on such date as announced by the
Morgan Guaranty Bank (New York City), shall be paid to
Container.
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To the extent, if any, that the Partnership is unable to borrow funds sufficient
to make the full amount of the foregoing distributions, the amounts
distributable to each Partner under Clauses (i), (ii) and (iii) shall be reduced
proportionately. Each amount payable to Container under Clause (iii) is intended
to be treated for Federal income tax purposes as a "guaranteed payment" for the
use of capital under Section 707(c) of the Code.
(b) The Partnership shall make arrangements with
its lending bank for such bank, contemporaneously with the distribution to
Sonoco under Clause (i) of Subsection 5.1(a), to issue an unconditional letter
of credit for the benefit of Container as security for fulfillment of the
Partnership's obligation to make the distribution and payments to Container
described in Clauses (ii) and (iii) of Subsection 5.1(a).
(c) Except as provided in Subsection 5.1(a) and
Section 10.3, distributions shall be made to the Partners in proportion to their
respective Percentage Interests.
(d) Available Cash shall be distributed to the
Partners at the following times and in the following amounts:
(i) On or before ninety days after the end
of each Partnership Year, Available Cash shall be distributed
to the Partners in proportion to their respective Percentage
Interests in an aggregate cumulative amount at least equal to
the sum of (1) the income tax liability for the Partner with
the largest percentage income tax liability (of itself or its
shareholders) from cumulative Partnership taxable income
allocated to such Partner under Subsection 5.2(b) hereof, and
(2) for the other Partners, a proportional cash amount
adjusted only for respective Percentage Interests; and
(ii) Any remaining Available Cash shall be
distributed to the Partners in proportion to their respective
Percentage Interests at such times and in such amounts as the
General Partner shall determine.
5.2 Partnership Allocations.
(a) If any payments to a Partner by the Partnership under an
agreement other than this Agreement are determined for Federal income tax
purposes not to constitute (1) payments to a partner other than in its capacity
as a partner under Section 707(a) of the Code or (2) guaranteed payments under
Section 707(c) of the Code, gross income of the Partnership shall first be
allocated to each such Partner in proportion to and up to the excess of (x) the
aggregate cumulative amount of such payments by the Partnership to such Partner
over (y) the aggregate cumulative amount of gross income previously allocated to
such Partner pursuant to this Subsection 5.2(a). Such allocated gross income
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shall consist of pro rata portions of each item of income and gain recognized by
the Partnership in the taxable year.
(b) Except as otherwise provided in Subsection 5.2(a) or (c)
or elsewhere in this Agreement, for purposes of this Agreement, and for federal,
state and local income tax purposes, all items of Profits, Losses, income, gain,
loss, deduction or credit shall be determined with respect to each taxable year
of the Partnership as of the end thereof, and allocated to the Partners in
accordance with their Percentage Interests. Each Partner's Percentage Interest
shall constitute its interest in partnership profits for purposes of determining
such Partner's share of nonrecourse liabilities of the Partnership under Temp.
Treas. Reg. ss.1.752-1T(e)(3)(ii)(C).
(c) Notwithstanding Subsections 5.2(a) and (b):
(i) Minimum Gain and Hypothetical Capital Accounts. For
purposes of complying with Treasury Regulations relating to tax allocation, the
Partnership's "minimum gain," "minimum gain attributable to partner nonrecourse
debt" and the Partners' hypothetically adjusted Capital Accounts ("Hypothetical
Capital Accounts") must be determined from time to time. The amount of minimum
gain or minimum gain attributable to partner nonrecourse debt is determined in
accordance with Temp. Treas. Reg. ss.1.704-1T(b)(4)(iv)(c) or
1.704-1T(b)(4)(iv)(h)(6), as the case may be, by computing, with respect to each
nonrecourse liability of the Partnership, the amount of gain (of whatever
character), if any, that would be realized by the Partnership if it disposed of
(in a taxable transaction) the Partnership property subject to such liability in
full satisfaction thereof, and by then aggregating the amounts so computed. A
Partner's Hypothetical Capital Account shall equal its true Capital Account,
increased by any amount that such Partner is treated as being obligated to
restore under Treas. Reg. ss.1.704- 1T(b)(2)(ii)(c) (including the Partner's
share of minimum gain, computed as provided in Temp. Treas. Reg.
ss.1.704-1T(b)(4)(iv)(f), and of minimum gain attributable to partner
nonrecourse debt, computed as provided in Temp. Treas. Reg. ss.1.704-
1T(b)(4)(iv)(h)(5)), and decreased by the items described in Treas. Reg.
ss.1.704-1(b)(2)(ii)(d), clauses (4), (5) and (6). For purposes of determining
each Partner's share of minimum gain or minimum gain attributable to partner
nonrecourse debt, any distributions pursuant to Section 5.1(a) shall be treated
as allocable to the nonrecourse liabilities, if any, that are incurred by the
Partnership in connection with such distributions.
(ii) Qualified Income Offset. A Partner who
unexpectedly receives an adjustment, allocation, or distribution described in
Treas. Reg. ss.1.704-1(b)(2)(ii)(d), clauses (4), (5) and (6), that creates a
deficit in his Hypothetical Capital account shall be allocated items of income
and gain (consisting of a pro rata portion of each item of Partnership income,
including gross income, and gain for such year) in an amount and
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manner sufficient to eliminate such deficit as quickly as possible.
(iii) Minimum Gain Chargeback. If there is a net
decrease in the Partnership's minimum gain or minimum gain attributable to
partner nonrecourse debt during a Partnership taxable year, any Partner with a
share of such minimum gain at the beginning of such year shall be allocated,
before any other allocation is made of Partnership items for such taxable year,
items of income and gain for such year (and, if necessary, subsequent years) in
proportion to, and to the extent of, an amount equal to the greater of (A) the
portion of such Partner's share of the net decrease in such minimum gain that is
allocable to the disposition of Partnership property or (B) the deficit balance
in such Partners's Hypothetical Capital Account as of the end of such year (but
before any allocations of income or loss for such year) in accordance with Temp.
Treas. Reg. ss.ss.1.704- 1T(b)(4)(iv)(e) and 1.704-1T(b)(4)(iv)(h)(4) (the
"Minimum Gain Chargeback"). The Minimum Gain Chargeback allocated in any taxable
year shall consist first of gains recognized from the disposition of items of
Partnership property subject to one or more nonrecourse liabilities of the
Partnership to the extent of the decrease in Minimum Gain attributable to the
disposition of such items of property, with the remainder of the Minimum Gain
Chargeback, if any, made up of a pro rata portion of the Partnership's other
items of income and gain for that year.
(iv) Special Limitation on Losses Allocated to a
Limited Partner. No loss or deduction shall be allocated to a Limited Partner to
the extent that such allocation would reduce such Partner's Hypothetical Capital
Account below zero, and such loss or deduction shall instead be allocated to the
other Partners in proportion to the positive balances of their respective
Hypothetical Capital Accounts.
(v) Restoration. If any items of income, gain,
loss or deduction shall be specially allocated pursuant to paragraph (ii), (iii)
or (iv) of this Subsection 5.2(c), then as quickly as possible thereafter (but
not in such a manner as to create or increase a deficit in any Partner's
Hypothetical Capital Account) items of income, gain, loss or deduction shall be
specially allocated to other Partners so as to return all Capital Accounts to
such balances as they would have had if no such special allocations had been
made pursuant to Paragraph (ii), (iii) or (iv) of this Subsection 5.2(c).
(vi) Rule of Construction. This Section 5.2 is
intended to satisfy the alternate test for economic effect set forth in Treas.
Reg. ss.1.704-1T(b)(2)(ii)(d) and the rules for allocations of nonrecourse
deductions set forth in Temp. Treas. Reg. ss.1.704-1T(b)(4)(iv)(d) and
allocations of partner nonrecourse deductions set forth in Temp. Treas.
Reg. ss.1.704-1T(b)(4)(iv)(h) and should be so construed.
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5.3 Tax Allocations; Code Section 704(c).
(a) In accordance with Section 704(c) of the Code and the
Treasury Regulations thereunder, income, gain, loss, and deduction with respect
to any property contributed to the capital of the Partnership shall, solely for
tax purposes, be allocated among the Partners so as to take account of any
variation between the adjusted basis of such property to the Partnership for
federal income tax purposes and its initial Gross Asset Value.
(b) In the event the Gross Asset Value of any asset of the
Partnership shall be adjusted pursuant to the provisions of this Agreement,
subsequent allocations of income, gain, loss and deduction with respect to such
asset shall take account of any variation between the adjusted basis of such
asset for federal income tax purposes and its Gross Asset Value in the same
manner as under Section 704(c) of the Code and the Treasury Regulations
thereunder.
(c) Any elections or other decisions relating to such Section
704(c) allocations shall be made by the Partners in any manner that reasonably
reflects the purpose and intention of this Agreement. Section 704(c) allocations
pursuant to this Section 5.3 are solely for purposes of federal, state, and
local taxes and shall not affect, or in any way be taken into account in
computing, any partner's Capital Account or share of profits, Losses, other
items, or distributions pursuant to any provision of this Agreement.
5.4 Accounting Method. The books of the Partnership
(for both tax and financial reporting purposes) shall be kept on
an accrual basis.
ARTICLE 6
MANAGEMENT
6.1 Rights and Duties of the Partners.
(a) The Limited Partners as limited partners in the
Partnership shall not participate in the control of the business of the
Partnership and shall have no power to act for or bind the Partnership.
(b) Pursuant to Pennsylvania law, each Limited Partner shall
not be liable for losses or debts of the Partnership beyond the aggregate amount
such Partner is required to contribute to the Partnership pursuant to this
Agreement plus his share of the undistributed net profits of the Partnership,
except that a Partner may be liable under Pennsylvania law to repay certain
distributions received by it.
6.2 Fiduciary Duty of General Partner. The General
Partner shall have fiduciary responsibility for the safekeeping
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and use of all funds and assets (including records) of the partnership, whether
or not in his immediate possession or control, and the General Partner shall not
employ, or permit another to employ, such funds or assets in any manner except
for the exclusive benefit of the Partnership.
6.3 Powers of General Partner.
(a) Subject to the terms and conditions of this Agreement, the
General partner shall have full and complete charge of all affairs of the
Partnership, and the management and control of the Partnership's business shall
rest exclusively with the General Partner. Except as otherwise provided in the
Act or by this Agreement, the General Partner shall possess all of the rights
and powers of a partner in a partnership without limited partners under
Pennsylvania law. The General Partner shall be required to devote to the conduct
of the business of the Partnership such time and attention as is necessary to
accomplish the purposes, and to conduct properly the business, of the
Partnership.
(b) Subject to the limitations set forth in this Agreement,
the General Partner shall perform or cause to be performed all management and
operational functions relating to the business of the Partnership. Without
limiting the generality of the foregoing, the General Partner is authorized on
behalf of the Partnership, in its sole discretion and without the approval of
the Limited Partners, to:
(i) expand the capital and revenues of the
Partnership in furtherance of the Partnership's business as
described in Section 1.4 and pay, in accordance with the
provisions of this Agreement, all expenses, debts and
obligations of the Partnership to the extent that funds of the
Partnership are available therefor;
(ii) make investments in United States government
securities, securities of governmental agencies, commercial
paper, money market funds, bankers' acceptances, certificates
of deposit, and any other debt instruments or other
securities, pending disbursement of the Partnership funds in
furtherance of the Partnership's business as described in
Section 1.4 or to provide a source from which to meet
contingencies;
(iii) enter into and terminate agreements and
contracts with third parties in furtherance of the
Partnership's business as described in Section 1.4, institute,
defend and settle litigation arising therefrom, and give
receipts, releases and discharges with respect to all of the
foregoing;
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(iv) maintain, at the expense of the Partnership,
adequate records and accounts of all operations and
expenditures and furnish any Partner with the reports referred
to in Section 8.2;
(v) purchase, at the expense of the Partnership,
liability, casualty, fire and other insurance and bonds to
protect the Partnership's properties, business, partners and
employees and to protect the General Partner and its
employees;
(vi) employ, at the expense of the Partnership,
consultants, accountants, attorneys and others and terminate
such employment; provided, however, that if any Affiliate of
any Partner is so employed, such employment shall be in
accordance with Section 6.5;
(vii) execute and deliver any and all agreements,
documents and other instruments necessary or incidental to the
conduct of the business of the Partnership; and
(viii) incur indebtedness, borrow funds and/or issue
guarantees, in each case for the conduct of the Partnership's
business as described in Section 1.4.
By executing this Agreement, each Limited Partner shall be deemed to have
consented to any exercise by the General Partner of any of the foregoing powers.
6.4 Other Activities. Any Partner (other than the General
Partner in such capacity) (the "Interested Party") may engage in or possess an
interest in other business ventures of any nature or description, independently
or with others, whether presently existing or hereafter created, and neither the
Partnership nor any Partner (including the General Partner) other than the
Interested Party shall have any rights in or to such independent ventures or the
income or profits derived therefrom.
6.5 Transactions with Affiliates.
(a) Nothing in this Agreement shall preclude transactions
between the Partnership and any Partner (including the General Partner) or an
Affiliate or Affiliates of any Partner acting in and for its own account,
provided that any services performed or products provided by the Partner or any
such Affiliates are services an/or products that the General Partner reasonably
believes, at the time of requesting such services and/or products, to be in the
best interests of the Partnership, and further provided that the rate of
compensation to be paid for any such services and/or products shall be
comparable to the amount paid for similar services and/or products under similar
circumstances to or by independent third parties in arm's length transactions.
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(b) All bills with respect to services provided to the
Partnership by a Partner or any affiliate of a Partner shall be separately
submitted and shall be supported by logs or other written data.
(c) Nothing contained herein shall preclude the Partnership
from entering into, and complying with, the Master Purchase and License
Agreement with Engineering and the Promotion and Marketing Agreement with
Sonoco, both of which agreements are dated April 3, 1989.
6.6 Confidentiality of Certain Information.
(a) At all times during and after the term of the Partnership,
Sonoco, on behalf of itself and its affiliates, agrees to (i) keep private and
confidential, and not disclose to other Persons without the prior written
consent of Engineering, all technical information, expertise, knowledge, trade
secrets, know-how, process technology and other proprietary information, now
owned or hereafter developed or acquired by Engineering, and made available to
Sonoco or to the Partnership by Engineering pursuant to this Agreement, the
Joint Venture Agreement, dated March 28, 1984, between Boise Cascade Corporation
("Boise") and Engineering, the First Amendment to Joint Venture Agreement, dated
June 28, 1985, between Boise and Engineering, the Assignment and Assumption
Agreement, dated March 31, 1987, between Boise and Sonoco, the Organization
Agreement or the Master Purchase and License Agreement, dated April 3, 1989
between the Partnership and Engineering, contemplated thereunder (the
"Proprietary Information"), and (ii) make no use for its own behalf or that of
any person, directly or indirectly, of any Proprietary Information, except as a
Limited Partner and shareholder of the General Partner in accordance with the
terms of this Agreement.
(b) At all times during and after the term of the Partnership,
to the extent that Sonoco develops and contributes (or has developed and
contributed) Proprietary Information relating to the production of Similar
Products, Container and Engineering shall keep such Proprietary Information
private and confidential, and shall not disclose such Proprietary Information to
other Persons without the prior written consent of Sonoco.
6.7 Exculpation. Neither the General Partner nor any Affiliate
of the General Partner nor any of their respective partners, shareholders,
officers, directors, employees, or agents shall be liable, in damages or
otherwise, to the Partnership or to any of the Limited Partners for any act or
omission on its or his part, except for (i) any act or omission resulting from
its or his own wilful misconduct or bad faith, (ii) any breach by the General
Partner of its obligations as a fiduciary of the Partnership or (iii) any breach
by the General Partner of any of the terms and provisions of this Agreement. The
Partnership shall indemnify, defend and hold harmless, to the fullest extent
permitted by law, the General partner and each of its Affiliates
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and their respective partners, shareholders, officers, directors, employees and
agents, from and against any claim or liability of any nature whatsoever arising
out of or in connection with the assets or business of the Partnership, except
where attributable to the willful misconduct or bad faith of such individual or
entity or where relating to a breach by the General Partner of its obligations
as a fiduciary of the Partnership or to a breach by the General Partner of any
of the terms and provisions of this Agreement.
ARTICLE 7
COMPENSATION
The General Partner shall be entitled to reimbursement of all
of its expenses attributable to the performance of its obligations hereunder, as
provided in Article 4 hereof, to the extent permitted by Section 6.5. Subject to
the Act, no amount so paid to the General Partner shall be deemed to be a
distribution of Partnership assets for purposes of this Agreement. Except for
reimbursement of its expenses and its right to distributions as provided in this
Agreement, the General Partner shall not receive any compensation for its
services as such.
ARTICLE 8
ACCOUNTS
8.1 Books and Records. The General Partner shall maintain
complete and accurate books of account of the Partnership's affairs at the
Partnership's principal office, including a list of the names and addresses of
all Partners. Each Partner shall have the right to inspect the Partnership's
books and records (including the list of the names and addresses of Partners).
Each of the Partners shall have the right to audit independently the books and
records of the Partnership, any such audit being at the sole cost and expense of
the Partner conducting such audit.
8.2 Reports, Returns and Audits.
(a) The books of account shall be closed promptly after the
end of each Partnership Year. The books and records of the Partnership shall be
audited as of the end of each Partnership Year by the Auditor. Within ninety
days after the end of such Partnership Year, the General Partner shall make a
written report to each person who was a Partner at any time during such
Partnership Year which shall include financial statements comprised of at least
the following: a balance sheet as of the close of the preceding Partnership Year
and a statement of earnings or losses, changes in financial position and changes
in Partners' Capital Accounts for the Partnership Year then
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ended, which financial statements shall be certified by the Auditor as in
accordance with Generally Accepted Accounting Principles.
(b) Prior to May 15 of each year, each Partner shall be
provided with an information letter (containing such Partner's Form K-1 or
comparable information) with respect to its distributive share of income, gains,
deductions, losses and credits for income tax reporting purposes for the
previous Partnership Year, together with any other information concerning the
Partnership necessary for the preparation of a Partner's income tax return(s),
and the Partnership shall provide each Partner with an estimate of the
information to be set forth in such information letter by no later than April 15
of each year. With the sole exception of mathematical errors in computation, the
financial statements and the information contained in such information letter
shall be deemed conclusive and binding upon such Partner unless written
objection shall be lodged with the General Partner within ninety days after the
giving of such information letter to such Partner.
(c) The General Partner shall also furnish the Partners with
quarterly financial statements of the Partnership and such other periodic
reports concerning the Partnership's business and activities as the General
partner considers necessary to advise all Partners properly about their
investment in the Partnership.
(d) The General Partner shall prepare or cause to be prepared
all federal, state and local returns of the Partnership (the "Returns") for each
year or other period for which such Returns are required to be filed. To the
extent permitted by law, for purposes of preparing the Returns, the Partnership
shall use the Partnership Year. The General Partner may make any elections under
the Code and/or applicable state or local tax laws, and the General Partner
shall be absolved from all liability for any and all consequences to any
previously admitted or subsequently admitted Partners resulting from its making
or failing to make any such election. Notwithstanding the forgoing, the General
Partner shall make the election provided for in Section 754 of the Code, if
requested to do so by any Partner.
(e) The General Partner shall be the "tax matters partner," as
such term is defined in Section 6231(a)(7) of the Code.
ARTICLE 9
TRANSFERS
9.1 Transfer of General Partner's Interest.
(a) The General Partner shall not withdraw from the
Partnership or resign as General Partner nor shall it Transfer
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its general partner interest in the Partnership, in each case without the
written approval of the Limited Partners.
(b) The General Partner shall be liable to the Partnership for
any withdrawal or resignation in violation of Subsection 9.1(a) above.
9.2 Transfer of a Limited Partner's Interest.
(a) Except as otherwise provided in this Article 9, no Limited
Partner may Transfer its Partnership Interest or any portion thereof to any
Person without the written approval of the other Partners.
(b) The Limited Partners agree, upon request of the General
Partner, to execute such certificates or other documents and perform such acts
as the General Partner reasonably deems appropriate to preserve the status of
the Partnership as a limited partnership, after the completion of any Transfer
of an interest in the Partnership, under the laws of the Commonwealth of
Pennsylvania.
(c) A Limited Partner's Partnership Interest may be
transferred by such Limited Partner to any Affiliate or such Limited Partner
provided that (i) notice of the transfer is given to the Partnership and all
other Partners by the Limited Partner making the transfer, and (ii) the
Affiliate to whom such interest is to be transferred satisfies the condition set
forth in Subsection 9.4(b).
9.3 Partnership's Right of First Refusal. If either Sonoco, on
the one hand, or Engineering and Container on the other hand (for purposes of
this Section 9.3 and Section 9.4, Engineering and Container shall be treated as
a single Limited Partner) (the "Selling Partner") wishes to sell any Partnership
Interest (the "Offered Interest") pursuant to a bona fide written offer from a
third party to purchase the Offered Interest (a "Bona Fide Offer"), it shall
first give written notice (the "Notice of Sale") to the Partnership, and the
Partnership shall in turn forward a copy of such notice to the other Limited
Partner (the "Non-Selling Partner"), of its intention to do so. A Notice of Sale
shall name the proposed transferee and specify the amount of the Offered
Interest, the price and the terms of payment and shall have attached thereto a
copy of the Bona Fide Offer. The Partnership shall have the right to purchase
all but not less than all of the Offered Interest at the price and on the terms
of the Bona Fide Offer and shall exercise such rights by giving written notice
to the Selling Partner within 60 days after the Partnership shall have received
the Notice of Sale. If the Offered Interest constitutes less than all of the
Partnership Interests of the Selling Partner, nothing herein shall be construed
to give any party the right to purchase any Partnership Interest (or portion
thereof) that is not included in the Offered Interest.
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9.4 Limited Partner's Right of Second Refusal.
(a) If the Partnership does not elect to purchase the Offered
Interest within the time period specified in Section 9.3, the Partnership shall
so notify the Non-Selling Partner. The Non-Selling Partner shall have the right
to purchase all, but not less than all, of the Offered Interest at the price and
on the terms of the Bona Fide Offer and shall exercise such right as follows:
(i) Within 10 days after the Partnership notifies the
Non-Selling Partners of its election not to purchase the
Offered Interest, the Non-Selling Partners shall give the
Selling Partner written notice of such Non-Selling Partner's
election to purchase the Offered Interest.
(ii) If the Non-Selling Partner does not elect to
purchase the Offered Interest within the time period
specified, the Selling Partner may, within 30 days of the
expiration of the period specified in Clause (i) above, sell
the Offered Interest to the Person named and in accordance
with the terms set forth in the Bona Fide Offer; provided that
the condition set forth in paragraph (b) below shall have been
satisfied.
(b) As a condition precedent to the effectiveness of any
transfer of a Partnership Interest pursuant to this Agreement to any person or
entity not a party to this Agreement, such transferee shall agree in writing to
become a party to this Agreement with all of the rights and obligations relating
thereto. A copy of such agreement shall be executed by the transferee and
delivered to the Secretary of the General Partner.
9.5 Deviation from Bona Fide Offers. The parties hereby
acknowledge and agree that in cases where nonfungible property such as real
estate constitutes part of the price under the Bona Fide Offer and such offer
depends on the unique situation of the proposed transferee, or otherwise cannot
be precisely duplicated by anyone other than the proposes transferee, purchases
by any Non-Selling Partner or the Partnership pursuant to Section 9.3 or 9.4
shall be made for a consideration upon terms which constitute the reasonable
economic equivalent of the price and terms of the Bona Fide Offer as determined
by the Board of Directors of the General Partner. For these purposes, the
promissory note of any Non-Selling Partner of the Partnership shall be
considered the reasonable economic equivalent of the promissory note of the
proposed transferee, notwithstanding any differences in financial condition.
9.6 Partnership's Call Option.
(a) At any time within one year after there shall be a Change
in Control (as hereinafter defined) of a Limited Partner, the Partnership shall
have the right and option to purchase the
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Partnership Interest owned by the Limited Partner of which such Change in
Control occurred (the "Affected Partner") and such Affected Partner shall be
required to sell such Partnership Interests for the price and upon the terms set
forth in this Section 9.6. The option granted hereunder may be exercised by
written notice from the Partnership to the Affected Partner given at any time
prior to the expiration of said option. A "Change in Control" with respect to
either Engineering or Container (or an Affiliate thereof who may become a
Limited Partner hereunder after the date hereof) means the sale or transfer by
Donald C. Graham, directly or indirectly, of the beneficial ownership of capital
stock representing fifty percent (50%) or more of the outstanding voting rights
of such Limited Partner to a transferee or transferees other than an Affiliate
of Engineering or Container, the spouse or a lineal descendant (whether natural
or adopted) of Donald C. Graham, his estate or a trust created for the benefit
of Donald C. Graham or his spouse or lineal descendants. A "Change in Control"
of any other Limited Partner means the sale or transfer, directly or indirectly,
to a person (as "person" is defined in Section 13(d) of the Securities Exchange
Act of 1934), in a transaction or series of related transactions, of the
beneficial ownership of capital stock representing thirty percent (30%) or more
of the outstanding voting rights of such Limited Partner.
(b) The purchase price for any Partnership Interest which the
Partnership purchases upon exercise of its option pursuant to Section 9.6(a)
shall be the fair market value of such Partnership Interest on a going concern
basis as determined by a reputable investment banking firm. Such firm shall be
selected by the Partnership within 30 days after the exercise of the option
hereunder and shall be reasonably acceptable to each of the Partners. The
determination by such investment banking firm of the fair market value of the
Partnership Interests shall be made as of the date of the exercise of the option
to purchase such Partnership Interests and such determination shall be final and
binding on all parties to this Agreement. The Partners and the Partnership shall
use their respective best efforts to cause the determination of fair market
value to be completed within 60 days after the appointment of the investment
banking firm.
(c) The Partnership shall have the right, at any time prior to
the exercise of its option hereunder, to assign its option and all of its other
rights under this Section 9.6 to any Limited Partner other than the Affected
Partner pro rata in proportion to each such Limited Partner's Partnership
Interest and, upon notice of such assignment by the Partnership, the Affected
Partner shall be obligated to sell its Partnership Interest to such assignee
upon exercise of the option assigned pursuant thereto.
9.7 Closing. The closing of the purchase and sale of a
Partnership Interest pursuant to Section 9.3, 9.4 or 9.6 shall take place at the
principal office of the Partnership (or such other location as may be mutually
agreed upon by the Partnership
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and the Partners), within 30 days after notice of the exercise by the
Partnership or the Non-Selling Partner of its right to purchase the Offered
Interest pursuant to Section 9.3 or 9.4, as the case may be, or, in the case of
a purchase under Section 9.6, within 30 days after the final determination of
the fair market value of the Partnership Interest. At closing the seller shall
deliver to the purchaser of the Partnership Interest an assignment of such
interest, free and clear of any lien, claim, charge, pledge, security interest
or encumbrance whatsoever, and the purchaser shall deliver to the seller
consideration therefor at the price and on the terms of the Bona Fide Offer (or
the reasonable economic equivalent thereof pursuant to Section 9.5 above) or at
the price fixed by the investment banking firm pursuant to Section 9.6, as the
case may be. The seller shall warrant to the purchaser that the interest being
transferred is free and clear of any lien, claim, charge, pledge, security
interest or encumbrance whatsoever.
9.8 Involuntary Transfers. In the event that the Partnership
Interest owned by any Limited Partner shall be subject to sale or other transfer
by reason of (i) bankruptcy or insolvency proceedings, whether voluntary or
involuntary, (ii) attachment or garnishment; or (iii) distraint, levy, execution
or other involuntary transfer, then such Limited Partner shall give the
Partnership and the other Partners written notice thereof promptly upon the
occurrence of such event, stating the terms of such proposed transfer, the
identity of the proposed transferee, the price or consideration, if readily
determinable, for which the Partnership Interest is proposed to be transferred,
and the number of the Partnership Interest to be transferred. After receipt of
such notice, or, failing such receipt, after the Partnership or any of other
Partners otherwise obtains actual knowledge of such proposed transfer, the
Partnership and the other Limited Partners (unless applicable law would
otherwise prohibit) shall have the same rights of first and second refusal as
are set forth in Sections 9.3 and 9.5 above, respectively; provided, however,
that if the nature of the event is such that no readily determinable
consideration is to be paid for the transfer of the Partnership Interest the
price to be paid shall be the book value thereof, as determined by the
Partnership in accordance with Generally Accepted Accounting Principles,
consistently applied.
9.9 Allocation of Distributions Subsequent to Assignment. All
Profits and Losses of the Partnership attributable to any Partnership Interest
acquired by reason of any Transfer of such Partnership Interest and any
distributions made with respect thereto shall be allocated (i) in respect of the
portion of the Partnership Year ending on the effective date of the Transfer, to
the transferor and (ii) in respect of subsequent periods, to the transferee. The
effective date of any Transfer permitted under this Agreement, subject to the
provisions of Section 9.12 below, shall be the close of business on the day the
Partnership is notified of the Transfer.
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9.10 Death, Incompetence, Bankruptcy, Liquidation or
Withdrawal of a Limited Partner. The death, incompetence, Bankruptcy,
liquidation or withdrawal of a Limited Partner shall not cause (in and of
itself) a dissolution of the Partnership, but the rights of such a Limited
Partner to share in the Profits and Losses of the Partnership, to receive
distributions as to assign its Interest pursuant to this Article 9, on the
happening of such an event, shall devolve on its beneficiary or other successor,
executor, administrator, guardian or other legal representative for the purpose
of settling its estate or administering its property, and the Partnership shall
continue as a limited partnership. Such successor or personal representative,
however, shall become a substituted limited partner only upon compliance with
the requirements of Section 9.13 hereof with respect to a transferee of a
Partnership Interest. The estate of a Bankrupt Limited Partner shall be liable
for all the obligations of the Limited Partner.
9.11 Satisfactory Written Assignment Required. Anything herein
to the contrary notwithstanding, both the Partnership and the General Partner
shall be entitled to treat the transferor of a Partnership Interest as the
absolute owner thereof in all respects, and shall incur no liability for
distributions of cash or other property made in good faith to it, until such
time as a written assignment or other evidence of the consummation of a Transfer
that conforms to the requirements of this Article 9 and is reasonably
satisfactory to the General Partner has been received by and recorded on the
books of the Partnership, at which time the Transfer shall become effective for
purposes of this Agreement.
9.12 Transferee's Rights. Any purported Transfer of a
Partnership Interest which is not in compliance with this Agreement is hereby
declared to be null and void and of no force and effect whatsoever. A permitted
transferee of any Partnership Interest pursuant to Section 9.1, 9.2, 9.3, 9.4,
9.8 or 9.10 hereof shall be entitled to receive distributions of cash or other
property from the Partnership and to receive allocations of the income, gains,
credits, deductions, profits and losses of the Partnership attributable to such
Partnership Interest after the effective date of the Transfer but shall not
become a Partner unless and until admitted pursuant to Section 9.13 hereof.
9.13 Transferees Admitted as Partners. The assignee or
transferee of any Partnership Interest shall be admitted as a Partner only upon
the satisfaction of the following conditions:
(a) A duly executed and acknowledged written instrument of
Transfer approved by the General Partner and either a copy of this Agreement
duly executed by the transferee or an instrument of assumption in form and
substance satisfactory to the General Partner setting forth the transferee's
agreement to be bound by the provisions of this Agreement have been delivered to
the Partnership.
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(b) The transferee has paid any fees and reimbursed the
Partnership for any expenses paid by the Partnership in connection with the
Transfer and admission.
The effective date of an admission of a Partner and the withdrawal of the
transferring Partner, if any, shall be the first day which is the last business
day of a calendar month to occur following the satisfaction of the foregoing
conditions.
ARTICLE 10
DISSOLUTION
10.1 Events of Dissolution. The Partnership shall continue
until December 31, 2019, or such later date as the Partners may unanimously
agree, unless sooner dissolved upon the earliest to occur of the following
events, which shall cause an immediate dissolution of the Partnership:
(a) the sale, exchange or other disposition of all or
substantially all of the Partnership's assets;
(b) the withdrawal, resignation, filing of a certificate of
dissolution or revocation of the charter or Bankruptcy of the General Partner or
the occurrence of any other event which causes the General Partner to cease to
be a general partner of the Partnership under the Act (each an "Event of
Withdrawal"); or
(c) such earlier date as the Partners shall unanimously elect.
10.2 Final Accounting. Upon the dissolution of the Partnership
as provided in Section 10.1 hereof, a proper accounting shall be made by the
Partnership's Auditor from the date of the last previous accounting to the date
of dissolution.
10.3 Liquidation. Upon the dissolution of the Partnership as
provided in Section 10.1 hereof, the General Partner or, if there is no General
Partner, a person approved by a majority in interest of the remaining Partners,
shall act as liquidator to wind up the Partnership. The liquidator shall have
full power and authority to sell, assign and encumber any or all of the
Partnership's assets and to wind up and liquidate the affairs of the Partnership
in an orderly and business-like manner. All proceeds from liquidation shall be
distributed in the following orders of priority: (a) to the payment and
discharge of the debts and liabilities of the Partnership (other than
liabilities for distributions to Partners) and expenses of liquidation, (b) to
the setting up of such reserves as the liquidator may reasonably deem necessary
for any contingent liability of the Partnership (other than liabilities for
distributions to Partners), and (c) the balance to the Partners in accordance
with their positive Capital Accounts after
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adjustment to reflect all Profit and Loss for the Partnership Year in which such
liquidation occurs.
10.4 Cancellation of Certificate. Upon the completion of the
distribution of Partnership assets as provided in Section 10.3 hereof, the
Partnership shall be terminated and the person acting as liquidator shall cause
the cancellation of the Certificate (as amended) and shall take such other
actions as may be necessary or appropriate to terminate the Partnership.
ARTICLE 11
AMENDMENTS TO AGREEMENT
Without the written approval of each of the Partners, no
amendment shall be made to this Agreement. The General Partner shall give
written notice to all partners promptly after any amendment has become
effective.
ARTICLE 12
NOTICES
12.1 Method of Notice. Any notices or other communications
required or permitted hereunder shall be in writing and shall be deemed to have
been duly given when delivered personally or transmitted by telex or telecopier,
receipt acknowledged, or in the case of documented overnight delivery service or
registered or certified mail, return receipt requested, postage prepaid, on the
date shown on the receipt therefor, addressed to the Partners at their
respective addresses as set forth in Schedule A annexed hereto (except that any
Partner may from time to time give notice changing its address for that
purpose).
12.2 Computation of Time. In computing any period of time
under this Agreement, the day of the act, event or default from which the
designated period of time begins to run shall not be included. The last day of
the period so computed shall be included, unless it is a Saturday, Sunday or
legal holiday, in which event the period shall run until the end of the next day
which is not a Saturday, Sunday or legal holiday.
ARTICLE 13
INVESTMENT REPRESENTATIONS
13.1 Investment Purpose. Each Limited Partner represents and
warrants to the Partnership and to each other Partner that it has acquired its
limited partner interest in the Partnership for its own account, for investment
only and not with
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a view to the distribution thereof, except to the extent provided in or
contemplated by this Agreement.
13.2 Investment Restriction. Each Partner recognizes that (a)
the limited partner interests in the Partnership have not been registered under
the Securities Act of 1933, as amended (the "Securities Act"), in reliance upon
an exemption from such registration, and agrees that it will not sell, offer for
sale, transfer, pledge or hypothecate its limited partner interest in the
Partnership (i) in the absence of an effective registration statement covering
such limited partner interest under the Securities Act, unless such sale, offer
of sale, transfer, pledge or hypothecation is exempt from registration for any
proposed sale, and (ii) except in compliance with all applicable provisions of
this Agreement, and (b) the restrictions on transfer imposed by this Agreement
may severely affect the liquidity of an investment in limited partner interests
in the Partnership.
ARTICLE 14
GENERAL PROVISIONS
14.1 Entire Agreement. This Agreement constitutes the entire
agreement among the parties hereto with respect to the subject matter hereof,
and supersedes any prior agreement or understanding among the parties hereto
with respect to the subject matter hereof.
14.2 Amendment Waiver. Except as provided otherwise herein,
this Agreement may not be amended nor may any rights hereunder be waived except
by an instrument in writing signed by the party sought to be charged with such
amendment or waiver.
14.3 Governing Law. This Agreement shall be construed in
accordance with and governed by the Act and the other laws of the Commonwealth
of Pennsylvania, without giving effect to the provisions, policies or principles
thereof relating to choice or conflict of laws.
14.4 Binding Effect. Except as provided otherwise herein, this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective legal representatives, heirs, successors and
assigns.
14.5 Separability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining portions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction.
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14.6 Headings. The section and other headings contained in
this Agreement are for reference purposes only and shall not affect the meaning
or interpretation of this Agreement.
14.7 No Third-Party Rights. Nothing in this Agreement shall be
deemed to create any right in any person not a party hereto (other than the
permitted successors and assigns of a party hereto) and this Agreement shall not
be construed in any respect to be a contract in whole or in part for the benefit
of any third party (except as aforesaid).
14.8 Waiver of Partition. Each Partner, by requesting and
being granted admission to the Partnership, is deemed to waive until termination
of the Partnership any and all rights that it may have to maintain an action for
partition of the Partnership's assets.
14.9 Nature of Interests. All Partnership property, whether
real or personal, tangible or intangible, shall be deemed to be owned by the
Partnership as an entity, and none of the Partners shall have any direct
ownership of such property.
14.10 Power of Attorney. Each of the Partners does hereby
constitute and appoint the General Partners as its true and lawful
representative and attorney-in-fact, in its name, place and stead to make,
execute, sign and file any amendment to the Certificate which may be required
because of this Agreement or the making of any amendments or supplements thereto
as provided in Article 11, and to make, execute, sign and file all such other
instruments, documents and certificates which, in the opinion of the General
Partner, may from time to time be required by the laws of the United States of
America, the Commonwealth of Pennsylvania or any other jurisdiction in which the
Partnership shall determine to do business, or any political subdivision or
agency thereof or which the General Partner may deem necessary or appropriate to
effectuate, implement and continue the valid and subsisting existence and
business of the Partnership.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the day and year first above written.
GENERAL PARTNER:
SONOCO GRAHAM CORPORATION
By: /s/ William H. Kerlian, Jr.
----------------------------
Title: Vice President
28
<PAGE>
LIMITED PARTNERS:
SONOCO PRODUCTS CORPORATION
By:
--------------------------------------------
Title: Vice President - Administration
GRAHAM CONTAINER CORPORATION
By: /s/ William H. Kerlian, Jr.
--------------------------------------------
Title: Executive Vice President
GRAHAM ENGINEERING CORPORATION
By: /s/ William H. Kerlian, Jr.
--------------------------------------------
Title: Executive Vice President
29
<PAGE>
Schedule A
Percentage Initial
Name and Address Interest Capital Account
- ---------------- -------- ---------------
General Partner
- ---------------
Sonoco Graham Corporation
1420 Sixth Avenue
York, Pennsylvania 17403-1104 1.0% $ 500,000
Attention: Chairman
Limited Partners
- ----------------
Sonoco Products Company
One North Second Street
Hartsville, South Carolina 39.6% $125,400,000
Attention: Chairman
Graham Container Corporation
1420 Sixth Avenue
York, Pennsylvania 17403-1104 58.4% $142,100,000
Attention: Chairman
Graham Engineering Corporation
1420 Sixth Avenue
York, Pennsylvania 17403-1104 1.0% $ 700,000
Attention: Chairman
<PAGE>
AMENDMENT NO. 1 TO AMENDED AND RESTATED
CERTIFICATE OF LIMITED PARTNERSHIP
OF
SONOCO GRAHAM COMPANY
THIS AMENDMENT NO. 1 TO THE AMENDED AND RESTATED CERTIFICATE
OF LIMITED PARTNERSHIP OF SONOCO GRAHAM COMPANY is entered into on the 31st day
of August, 1989, effective as of the 3rd day of April, 1989, by and among Sonoco
Graham Corporation, a Pennsylvania corporation with its offices at 1420 Sixth
Avenue, York, Pennsylvania 17403-1104, as general partner, and Sonoco Products
Company, a South Carolina corporation with its offices at One North Second
Street, Hartsville, South Carolina 29550, Graham Container Corporation, a
Pennsylvania corporation with its offices at 1420 Sixth Avenue, York,
Pennsylvania 17403-1104, and Graham Engineering Corporation, a Pennsylvania
corporation with its offices at 1420 Sixth Avenue, York, Pennsylvania
17403-1104, as limited partners.
W I T N E S S E T H:
--------------------
WHEREAS, the parties hereto heretofore have entered into an
Amended and Restated Certificate of Limited Partnership of Sonoco Graham
Company, dated as of April 3, 1989 (the "Certificate"); and
WHEREAS, the parties hereto desire to amend the Certificate to
reflect the agreed-upon valuations of contributed assets and interests in
partnership profits and capital, as such amounts have now been determined.
NOW THEREFORE, in consideration of the mutual covenants and
agreements contained in the Agreement and herein, the parties hereto agree that
the Certificate shall be and is hereby amended as follows:
(a) Schedule A to Exhibit A to the Certificate is hereby
amended and restated in its entirety as attached hereto.
<PAGE>
2
IN WITNESS WHEREOF, the parties hereto have executed this
agreement on the day and year first above written.
GENERAL PARTNER:
----------------
SONOCO GRAHAM CORPORATION
By:/s/ William H. Kerlin, Jr.
---------------------------------------
William H. Kerlin, Jr., Secretary
LIMITED PARTNERS:
-----------------
Sonoco Products Company
Graham Container Corporation
Graham Engineering Corporation
BY: SONOCO GRAHAM CORPORATION,
as attorney-in-fact for the above-
named limited partners
By:/s/ William H. Kerlin, Jr.
---------------------------------------
William H. Kerlin, Jr., Secretary
<PAGE>
AFFIDAVIT
---------
I, William H. Kerlin, Jr., Secretary of Sonoco Graham
Corporation (the "General Partner"), being duly sworn, hereby represent that
Sonoco Products Company, Graham Container Corporation, Graham Engineering
Corporation (collectively the "Limited Partners") and the General Partners have
executed an Amended and Restated Certificate of Limited Partnership of Sonoco
Graham Company dated April 3, 1989, which was filed with the Pennsylvania
Corporation Bureau on April 4, 1989, pursuant to Section 14.10 of which the
Limited Partners constituted and appointed the General Partner as their true and
lawful representative and attorney-in-fact, in their name, place and stead, and
granted the General Partner the power to execute, sign and file any amendment to
the Certificate of Limited Partnership.
/s/ William H. Kerlin, Jr.
-----------------------------------------
William H. Kerlin, Jr.
Secretary
Subscribed and Sworn to
before me in the City of
York, Pennsylvania this
29th day of September, 1989.
/s/ Candace J. Lawford
- ----------------------------
Notary Public
<PAGE>
Schedule A
Percentage Initial
Name and Address Interest Capital
- ---------------- -------- -------
Account
-------
General Partner
- ---------------
Sonoco Graham Corporation
1420 Sixth Avenue
York, Pennsylvania 17403-1104 1.0% $ 500,000
Attention: Chairman
Limited Partners
- ----------------
Sonoco Products Company
One North Second Street
Hartsville, South Carolina 29550 39.6% $108,911,952
Attention: Chairman
Graham Container Corporation
1420 Sixth Avenue
York, Pennsylvania 17403-1104 55.4% $112,467,975
Attention: Chairman
Graham Engineering Corporation
1420 Sixth Avenue
York, Pennsylvania 17403-1104 4.0% $ 900,000
Attention: Chairman
<PAGE>
AMENDMENT NO. 1 TO AMENDED AND RESTATED
CERTIFICATE OF LIMITED PARTNERSHIP
OF
SONOCO GRAHAM COMPANY
THIS AMENDMENT NO. 1 TO AMENDED AND RESTATED CERTIFICATE OF
LIMITED PARTNERSHIP of Sonoco Graham Company, a Pennsylvania limited partnership
(the "Partnership"), is made this 22nd day of May, 1990, by and among Sonoco
Graham Corporation, a Pennsylvania corporation, as general partner (the "General
Partner"), Graham Engineering Corporation, a Pennsylvania corporation, Graham
Capital Corporation (f/k/a Graham Container Corporation), a Pennsylvania
corporation, and Sonoco Products Company, a South Carolina corporation, as
limited partners (the "Limited Partners"). Hereinafter, the General Partner and
the Limited Partners are collectively referred to as "Partners."
W I T N E S S E T H:
--------------------
WHEREAS, on March 24, 1989, a Certificate of Limited
Partnership was filed in the Department of State of the Commonwealth of
Pennsylvania whereby the Partnership was formed under the Pennsylvania Uniform
Limited Partnership Act;
WHEREAS, on April 4, 1989, an Amended and Restated Certificate
of Limited Partnership of the Partnership (the "Certificate") was filed in the
Department of State of the Commonwealth of Pennsylvania;
WHEREAS, the name of Graham Container Corporation has
been changed to Graham Capital Corporation; and
WHEREAS, the Partners now desire to amend the terms and
provisions of the Certificate to reflect such change of name and the terms of
Amendments Nos. 1, 2 and 3 (the "Amendments") to the Amended and Restated
Agreement of Limited Partnership of the Partnership (the "Restated Agreement"),
entered into on August 23, 1989, effective as of April 3, 1989, on January 31,
1990 and on February 21, 1990, effective as of April 3, 1989, respectively, and
copies of which are attached hereto as Exhibits A, B and C.
NOW, THEREFORE, pursuant to the Pennsylvania Uniform Limited
Partnership Act, the undersigned hereby certify as follows:
1. Article Four of the Certificate shall be, and hereby is,
amended by changing the reference therein from Graham Container Corporation to
Graham Capital Corporation (f/k/a Graham Container Corporation).
2. Article Six of the Certificate shall be, and hereby is,
amended to read as follows:
<PAGE>
2
ARTICLE SIX
Capital Contributions by Limited Partners
-----------------------------------------
The amount of cash and the agreed value of other property
contributed to the capital of the Partnership by each Limited Partner is set
forth opposite such Limited Partner's name on Schedule "A" to the Restated
Agreement as amended by the Amendments.
3. Article Nine of the Certificate shall be, and hereby is,
amended to read as follows:
ARTICLE NINE
Share of Profits
----------------
The share of profits and other compensation by way of income
which each Limited Partner shall receive by reason of its contribution to the
Partnership is set forth in Article 5 and Section 10.3 of the Restated Agreement
as amended by the Amendments.
4. Article Twelve of the Certificate shall be, and hereby is,
amended to read as follows:
ARTICLE TWELVE
Priority
--------
The Limited Partners shall have such rights to priority as to
contributions to the Partnership or as to compensation by way of income as is
provided in Article 5 of the Restated Agreement as amended by the Amendments.
<PAGE>
3
IN WITNESS WHEREOF, the undersigned have executed this
Amendment No. 1 to Amended and Restated Certificate of Limited
Partnership on the date first above written.
GENERAL PARTNER:
----------------
[SEAL] SONOCO GRAHAM CORPORATION
By: /s/ William H. Kerlin, Jr.
---------------------------------
William H. Kerlin, Jr.,
Secretary
LIMITED PARTNERS:
[SEAL] SONOCO PRODUCTS COMPANY
By: SONOCO GRAHAM CORPORATION
pursuant to power of
attorney as reflected in
Article Fifteen of the
Certificate
By: /s/ William H. Kerlin, Jr.
----------------------------------
William H. Kerlin, Jr.,
Secretary
[SEAL] GRAHAM ENGINEERING CORPORATION
By: /s/ William H. Kerlin, Jr.,
----------------------------------
William H. Kerlin, Jr.,
Executive Vice President
[SEAL] GRAHAM CAPITAL CORPORATION
By: /s/ William H. Kerlin, Jr.,
----------------------------------
William H. Kerlin, Jr.,
Executive Vice President
<PAGE>
AMENDMENT NO. 1 TO AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
SONOCO GRAHAM COMPANY
THIS AMENDMENT NO. 1 TO THE AMENDED AND RESTATED AGREEMENT OF
LIMITED PARTNERSHIP OF SONOCO GRAHAM COMPANY is entered into on the 23rd day of
August, 1989, effective as of the 3rd day of April, 1989, by and among Sonoco
Graham Corporation, a Pennsylvania corporation with its offices at 1420 Sixth
Avenue, York, Pennsylvania 17403-1104, as general partner, and Sonoco Products
Company, a South Carolina corporation with its offices at One North Second
Street, Hartsville, South Carolina 29550, Graham Container Corporation, a
Pennsylvania corporation with its offices at 1420 Sixth Avenue, York,
Pennsylvania 17403-1104, and Graham Engineering Corporation, a Pennsylvania
corporation with its offices at 1420 Sixth Avenue, York, Pennsylvania
17403-1104, as limited partners.
W I T N E S S E T H:
--------------------
WHEREAS, the parties hereto heretofore have entered into an
Amended and Restated Agreement of Limited Partnership of Sonoco Graham Company,
dated as of April 3, 1989 (the "Agreement"); and
WHEREAS, the parties hereto desire to amend the Agreement to
reflect the agreed-upon valuations of contributed assets and interests in
partnership profits and capital, as such amounts have now been determined, as
hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained in the Agreement and herein, the parties hereto agree that
the Agreement shall be and is hereby amended as follows:
1. Section 2.3 and 2.31 of the Agreement are hereby amended
by replacing the words "Schedule A" with the words "the Schedule."
2. Section 3.4 of the Agreement is amended by adding the
following sentence at the end thereof:
"The fair market value of the assets contributed by
the Partners pursuant to Section 3.1 at the time of
such contribution, as agreed to by the Partners, are
as set forth on Schedule B."
3. Schedule A of the Agreement is amended to read as annexed
hereto.
<PAGE>
2
4. A new Schedule B, as amended hereto, is added to the
Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the day and year first above written.
GENERAL PARTNER:
---------------
SONOCO GRAHAM CORPORATION
By:
---------------------------------
Title Vice President
LIMITED PARTNERS:
-----------------
SONOCO PRODUCTS CORPORATION
By:
---------------------------------
Title: Vice President
Administration
GRAHAM CONTAINER CORPORATION
By: /s/ William H. Kerlin, Jr.
--------------------------------
Title: Executive Vice President
GRAHAM ENGINEERING CORPORATION
By: /s/ William H. Kerlin, Jr.,
--------------------------------
Title: Executive Vice President
<PAGE>
Schedule A
Percentage Initial
Name and Address Interest Capital Account
- ---------------- -------- ---------------
General Partner
- ---------------
Sonoco Graham Corporation
1420 Sixth Avenue
York, Pennsylvania 17403-1104 1.04% $ 500,000
Attention: Chairman
Limited Partners
- ----------------
Sonoco Products Company
One North Second Street
Hartsville, South Carolina 29550 39.6% $108,911,952
Attention: Chairman
Graham Container Corporation
1420 Sixth Avenue
York, Pennsylvania 17403-1104 55.4% $112,467,975
Attention: Chairman
Graham Engineering Corporation
1420 Sixth Avenue
York, Pennsylvania 17403-1104 4.0% $ 900,000
Attention: Chairman
<PAGE>
SCHEDULE B
It is agreed that the fair market value of each asset as of
April 3, 1989 is its book value immediately prior to its contribution to the
Partnership, except that, as of such date, the fair market value of goodwill and
going concern value contributed by Container is $77,240,000, and the fair market
value of the exclusive license contributed by Engineering referred to in clause
(i) of Section 1.23 of the Organization Agreement is $890,000.
<PAGE>
AMENDMENT NO. 2 TO AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
SONOCO GRAHAM COMPANY
THIS AMENDMENT NO. 2 TO THE AMENDED AND RESTATED AGREEMENT OF
LIMITED PARTNERSHIP OF SONOCO GRAHAM COMPANY is entered into on the 31st day of
January, 1990, by and among Sonoco Graham Corporation, a Pennsylvania
corporation with its offices at 1420 Sixth Avenue, York, Pennsylvania
17403-1104, as general partner, and Sonoco Products Company, a South Carolina
corporation with its offices at One North Second Street, Hartsville, South
Carolina 29550, Graham Container Corporation, a Pennsylvania corporation with
its offices at 1420 Sixth Avenue, York, Pennsylvania 17403-1104, and Graham
Engineering Corporation, a Pennsylvania corporation with its offices at 1420
Sixth Avenue, York, Pennsylvania 17403-1104, as limited partners.
W I T N E S S E T H:
--------------------
WHEREAS, the parties hereto heretofore have entered into an
Amended and Restated Agreement of Limited Partnership of Sonoco Graham Company,
dated as of April 3, 1989, as amended August 23, 1989 (the "Agreement"); and
WHEREAS, the parties hereto desire to amend the Agreement to
change the dates prior to which the Partnership must provide certain information
to each of its partners;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained in the Agreement and herein, the parties hereto agree that
the Agreement shall be and is hereby amended as follows:
1. Section 8.2(b) of the Agreement is hereby amended by
replacing the references to "May 15" and "April 15" in the first sentence
thereof with "July 15" and "March 15," respectively
<PAGE>
2
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the day and year first above written.
GENERAL PARTNER:
----------------
SONOCO GRAHAM CORPORATION
By:
---------------------------------
Title Vice President
LIMITED PARTNERS:
-----------------
SONOCO PRODUCTS CORPORATION
By:
---------------------------------
Title: Vice President
Administration
GRAHAM CONTAINER CORPORATION
By: /s/ William H. Kerlin, Jr.
--------------------------------
Title: Executive Vice President
GRAHAM ENGINEERING CORPORATION
By: /s/ William H. Kerlin, Jr.,
--------------------------------
Title: Executive Vice President
<PAGE>
AMENDMENT NO. 3 TO AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
SONOCO GRAHAM COMPANY
THIS AMENDMENT NO. 3 TO THE AMENDED AND RESTATED AGREEMENT OF
LIMITED PARTNERSHIP OF SONOCO GRAHAM COMPANY is entered into on the 21st day of
February, 1990, effective as of the 3rd day of April, 1989, by and among Sonoco
Graham Corporation, a Pennsylvania corporation with its offices at 1420 Sixth
Avenue, York, Pennsylvania 17403-1104, as general partner, and Sonoco Products
Company, a South Carolina corporation with its offices at One North Second
Street, Hartsville, South Carolina 29550, Graham Container Corporation, a
Pennsylvania corporation with its offices at 1420 Sixth Avenue, York,
Pennsylvania 17403-1104, and Graham Engineering Corporation, a Pennsylvania
corporation with its offices at 1420 Sixth Avenue, York, Pennsylvania
17403-1104, as limited partners.
W I T N E S S E T H:
--------------------
WHEREAS, the parties hereto heretofore have entered into an
Amended and Restated Agreement of Limited Partnership of Sonoco Graham Company,
dated as of April 3, 1989, as amended August 23, 1989 and January 31, 1990 (the
"Agreement"); and
WHEREAS, the parties hereto desire to amend the Agreement to
reflect the agreed-upon valuations of contributed assets and interests in
partnership capital, as such amounts have now been further determined, as
hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained in the Agreement and herein, the parties hereto agree that
the Agreement shall be and is hereby amended as follows:
1. Schedule A and B of the Agreement are amended to read as
annexed hereto.
<PAGE>
2
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the day and year first above written.
GENERAL PARTNER:
----------------
SONOCO GRAHAM CORPORATION
By:
---------------------------------
Title Vice President
LIMITED PARTNERS:
-----------------
SONOCO PRODUCTS CORPORATION
By:
---------------------------------
Title: Vice President
Administration
GRAHAM CONTAINER CORPORATION
By: /s/ William H. Kerlin, Jr.
--------------------------------
Title: Executive Vice President
GRAHAM ENGINEERING CORPORATION
By: /s/ William H. Kerlin, Jr.,
--------------------------------
Title: Executive Vice President
<PAGE>
Schedule A
Percentage Initial
Name and Address Interest Capital Account
- ---------------- -------- ---------------
General Partner
- ---------------
Sonoco Graham Corporation
1420 Sixth Avenue
York, Pennsylvania 17403-1104 1.0% $ 500,000
Attention: Chairman
Limited Partners
- ----------------
Sonoco Products Company
One North Second Street
Hartsville, South Carolina 39.6% $108,750,740
Attention: Chairman
Graham Container Corporation
1420 Sixth Avenue
York, Pennsylvania 17403-1104 55.4% $112,242,196
Attention: Chairman
Graham Engineering Corporation
1420 Sixth Avenue
York, Pennsylvania 17403-1104 4.0% $ 900,000
Attention: Chairman
<PAGE>
Schedule B
It is agreed that the fair market value of each asset as of
April 3, 1989 is its book value immediately prior to its contribution to the
Partnership; except that, as of such date, the fair market value of goodwill and
going concern value contributed by Container is $77,013,845, and the fair market
value of the exclusive license contributed by Engineering referred to in clause
(i) of Section 1.23 of the Organization Agreement is $890,000.
<PAGE>
AMENDMENT NO. 2 TO AMENDED AND RESTATED
CERTIFICATE OF LIMITED PARTNERSHIP
OF
SONOCO GRAHAM COMPANY
THIS AMENDMENT NO. 2 TO AMENDED AND RESTATED CERTIFICATE OF
LIMITED PARTNERSHIP of Sonoco Graham Company, a Pennsylvania limited partnership
(the "Partnership"), is made this 22nd day of May, 1990, by Sonoco Graham
Corporation, a Pennsylvania corporation, as general partner (the "General
Partner").
W I T N E S S E T H:
--------------------
WHEREAS, on March 24, 1989, a Certificate of Limited
Partnership was filed in the Department of State of the Commonwealth of
Pennsylvania whereby the Partnership was formed under the Pennsylvania Uniform
Limited Partnership Act;
WHEREAS, on April 4, 1989, an Amended and Restated Certificate
of Limited Partnership of the Partnership was filed in the Department of State;
WHEREAS, an Amendment No. 1 to the Amended and Restated
Certificate of Limited Partnership of the Partnership was executed on May 22,
1990, and, immediately prior to the filing of the within Amendment No. 2, is to
be filed in the Department of State; and
WHEREAS, the Amended and Restated Agreement of Limited
Partnership of the Partnership, as amended, provides that the Partnership shall
be governed by the Pennsylvania Revised Uniform Limited Partnership Act during
all periods after the effective date of such Act, and, accordingly, the General
Partner now desires to amend and restate the terms and provisions of the
Certificate of Limited Partnership of the Partnership in accordance with the
provisions of such Act;
NOW, THEREFORE, pursuant to the Pennsylvania Revised Uniform
Limited Partnership Act, the undersigned hereby certifies as follows:
ARTICLE ONE
Name
----
The name of the Partnership is Sonoco Graham Company.
ARTICLE TWO
Location of Registered Office
-----------------------------
The Partnership has its registered office at 1110 East
Princess Street, York, Pennsylvania 17403.
<PAGE>
2
ARTICLE THREE
Name and Business Address of General Partner
--------------------------------------------
The name and business address of the sole general partner of
the Partnership is:
Sonoco Graham Corporation
1110 East Princess Street
York, PA 17403
IN WITNESS WHEREOF, the undersigned has executed this
Amendment No. 2 to Amended and Restated Certificate of the Limited Partnership
on the date first above written.
[SEAL] SONOCO GRAHAM CORPORATION
By: /s/ William H. Kerlin, Jr.,
-------------------------------
William H. Kerlin, Jr.,
Secretary
<PAGE>
CONSENT TO USE OF SIMILAR NAME
Pursuant to 19 Pa. Code ss. 17.3 (relating to use of a
confusingly similar name) the undersigned association, desiring to consent to
the use by another association of a name which is confusingly similar to its
name, hereby certifies that:
1. The name of the association executing this Consent to Use of Similar Name is:
Graham Packaging Corporation
----------------------------------------------------------------------------
2. The (a) address of this association's current registered office in this
Commonwealth or (b) commercial registered office provider and the county of
venue is (the Department is hereby authorized to correct the following
address to conform to the records of the Department):
(a) 1420 Sixth Avenue York PA 17405-1104 York
----------------------------------------------------------------------------
Number and Street City State Zip County
(b)
----------------------------------------------------------------------------
Name of Commercial Registered Office Provider County
For an association represented by a commercial registered office provider,
the county in (b) shall be deemed the county in which the association is
located for venue and official publication purposes.
3. The date of its incorporation or other organization is: March 9, 1989
-------------------
4. The statute under which it was incorporated or otherwise organized is
PA BCL, Act of May 5, 1933, as amended
----------------------------------------------------------------------------
5. The association is entitled to the benefit of this Consent to Use of Similar
Name is :
--
Graham Packaging Company
----------------------------------------------------------------------------
6. A check in this box __ indicates that the association executing this
Consent to Use of Similar Name is the parent or prime affiliate of a group
of associations using the same name with geographic or other designations,
and that such association is authorized to and does hereby act on behalf of
all such affiliated associations, including the following (see 19 Pa. Code
ss. 17.3(c) (6)):
-----------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
IN TESTIMONY WHEREOF, the undersigned association has caused this consent to be
signed by a duly authorized officer thereof this 28th day of March 1991.
Graham Packaging Corporation
-----------------------------------
(Name of Association)
By: /s/ William H. Kerlin, Jr.
-------------------------------
(Signature)
William H. Kerlin, Jr.
Title: Secretary
-----------------------------
<PAGE>
Microfilm Number 91171194 Filed with the Department of State on Mar 28, 1991
---------
Entity Number 1071490 /s/ Christopher Al Lewis
------- -----------------------------------
Secretary of the Commonwealth
CERTIFICATE OF AMENDMENT LIMITED PARTNERSHIP
In compliance with the requirements of 15 Pa. C.S. ss. 8512 (relating
to certificate of amendment), the undersigned limited partnership, desiring to
amend its Certificate of Limited Partnership, hereby certifies that:
1. The name of the limited partnership is: Sonoco Graham Company
----------------------------------
--------------------------------------------------------------------------
2. The date of filing of the original Certificate of Limited Partnership is:
March 24, 1989
---------------------------
3. (Check, and if appropriate complete, one of the following):
x The amendment adopted by the limited partnership, set forth in full,
--- is as follows:
A. Article One is amended to read:
"The name of the limited partnership is: Graham Packaging Company."
B. The name of the general partner referenced in Article Four and on the
signature line is amended to read "Graham Packaging Corporation."
--- The amendment adopted by the limited partnership is set forth in full
in Exhibit A, attached hereto and made a part hereof.
4. (Check, and if appropriate complete, one of the following):
x The amendment shall be effective upon filing this Certificate of
--- Amendment in the Department of State.
--- The amendment shall be effective on: ______________________________
5. (Check if the amendment restates the Certificate of Limited Partnership):
--- The restated Certificate of Limited Partnership supersedes the
original Certificate of Limited Partnership and all amendments
thereto.
IN TESTIMONY WHEREOF, the undersigned limited partnership has caused this
certificate to be executed this 28th day of March, 1991.
SONOCO GRAHAM COMPANY
-----------------------------------------
(Name of Partnership)
By: GRAHAM PACKAGING CORPORATION, its G.P.
By: /s/ William H. Kerlin, Jr.
------------------------------------
William H. Kerlin, Jr.
Title: Secretary of GENERAL PARTNER
----------------------------------
<PAGE>
RESTATED
CERTIFICATE OF LIMITED PARTNERSHIP
OF
GRAHAM PACKAGING COMPANY
1. The name of the Partnership is Graham Packaging Company.
2. The current registered office of the Partnership in the
Commonwealth of Pennsylvania is at 1420 Sixth Avenue, York, York County,
Pennsylvania 17405-1104.
3. The name and business address of each general partner of
the Partnership is as follows:
Graham Packaging Corporation
1420 Sixth Avenue
York, PA 17405-1104
<PAGE>
COMMONWEALTH OF PENNSYLVANIA
DEPARTMENT OF STATE
JANUARY 12, 1998
TO ALL WHOM THESE PRESENTS SHALL COME, GREETING:
GRAHAM PACKAGING COMPANY
1. Yvette Kane, Secretary of the Commonwealth of Pennsylvania
do hereby certify that the foregoing and annexed is a true and correct photocopy
of Certificate of Limited Partnership and all Amendments which appear of record
in this department
[SEAL] IN TESTIMONY WHEREOF, I have hereunto set my
hand and caused the Seal of the Secretary's
Office to be affixed, the day and year above
written.
--------------------------------
Secretary of the Commonwealth
<PAGE>
Entity Number
--------------------- ----------------------------------
Secretary of the Commonwealth
CERTIFICATE OF AMENDMENT-LIMITED PARTNERSHIP
In compliance with the requirements of 15 Pa. C.S. 1/28512 (relating
to certificate of amendment), the undersigned limited partnership, desiring to
amend its Certificate of Limited Partnership, hereby certifies that:
1. The name of the limited partnership is: Graham Packaging Company
------------------------------------
----------------------------------------------------------------------------
2. The date of filing of the original Certificate of Limited Partnership is:
March 24, 1989
-------------------------
3. (Check, and if appropriate complete, one of the following):
--- The amendment adopted by the limited partnership, set forth in full,
is as follows:
x The amendment adopted by the limited partnership is set forth
--- in full in Exhibit A attached hereto and made a part hereof.
4. (Check, and if appropriate complete, one of the following):
x The amendment shall be effective upon filing this Certificate
--- of Amendment in the Department of State.
--- The amendment shall be effective on: ___________ at ______________
Date Hour
5. (Check if the amendment restates the Certificate of Limited Partnership):
x The restated Certificate of Limited Partnership supersedes the
--- original Certificate of Limited Partnership and all amendments
thereto.
IN TESTIMONY WHEREOF, the undersigned limited partnership has caused
this Certificate of Amendment to be executed this 2nd day of February, 1998.
GRAHAM PACKAGING COMPANY
By: Graham Packaging Corporation, By: BCP/Graham Holdings LLC,
General Partner General Partner
By: BMP/Graham Holdings
Corporation, member
By: /s/ William H. Kerlin, Jr. By: /s/ Simon Lonergan
------------------------------ ---------------------------
<PAGE>
Exhibit A
AMENDED AND RESTATED
CERTIFICATE OF LIMITED PARTNERSHIP
OF
GRAHAM PACKAGING HOLDINGS COMPANY
1. The name of the Partnership is Graham Packaging Holdings Company.
2. The current registered office of the Partnership in the Commonwealth of
Pennsylvania is at 1110 East Princess Street, York, York County, Pennsylvania
17403.
3. The name and business address of each general partner of the Partnership is
as follows:
BCP/Graham Holdings LLC
c/o Blackstone Capital Partners III Merchant Banking Fund L.P.
345 Park Avenue
New York, New York 10154
Graham Packaging Corporation
1420 Sixth Avenue
York, Pennsylvania 17405-1104
<PAGE>
ANNEX A
PENNSYLVANIA DEPARTMENT OF STATE
CORPORATION BUREAU
ROOM 308 NORTH OFFICE BUILDING
P.O. BOX 8722
HARRISBURG, PA 17105-8722
GRAHAM PACKAGING HOLDINGS COMPANY
THE CORPORATION BUREAU IS HAPPY TO SEND YOU YOUR FILED DOCUMENT.
PLEASE NOTE THE FILE DATE AND THE SIGNATURE OF THE SECRETARY OF THE
COMMONWEALTH. THE CORPORATION BUREAU IS HERE TO SERVE YOU AND WANTS TO THANK
YOU FOR DOING BUSINESS IN PENNSYLVANIA. IF YOU HAVE ANY QUESTIONS PERTAINING
TO THE CORPORATION BUREAU, CALL (717) 787-1057.
ENTITY NUMBER: 1071490
MICROFILM NUMBER: 09806
1574-1575
CSC NETWORKS
COUNTER
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Entity Number 1071590 ----------------------------------
------------- Secretary of the Commonwealth
CERTIFICATE OF AMENDMENT-LIMITED PARTNERSHIP
In compliance with the requirements of 15 Pa.C.S. 1/2 8512 (relating
to certificate of amendment), the undersigned limited partnership, desiring to
amend its Certificate of Limited Partnership, hereby certifies that:
1. The name of the limited partnership is: Graham Packaging Company
------------------------------------
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2. The date of filing of the original Certificate of Limited Partnership is:
March 24, 1989
------------------------
3. (Check, and if appropriate complete, one of the following):
--- The amendment adopted by the limited partnership, set forth in full,
is as follows:
x The amendment adopted by the limited partnership is set forth
--- in full in Exhibit A attached hereto and made a part hereof.
4. (Check, and if appropriate complete, one of the following):
x The amendment shall be effective upon filing this Certificate
--- of Amendment in the Department of State.
--- The amendment shall be effective on: ___________ at _______________
Date Hour
5. (Check if the amendment restates the Certificate of Limited Partnership):
x The restated Certificate of Limited Partnership supersedes the
--- original Certificate of Limited Partnership and all amendments
thereto.
IN TESTIMONY WHEREOF, the undersigned limited partnership has caused
this Certificate of Amendment to be executed this 2nd day of February, 1998.
GRAHAM PACKAGING COMPANY
By: Graham Packaging Corporation, By: BCP/Graham Holdings LLC,
General Partner General Partner
By: BMP/Graham Holdings Corporation,
member
By: /s/ William H. Kerlin, Jr. By: /s/ Simon Lonergan
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Exhibit 3.1
State of Delaware
Office of the Secretary of State
-----------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
LIMITED PARTNERSHIP OF "GRAHAM PACKAGING HOLDINGS I, L.P.", FILED IN THIS
OFFICE ON THE TWENTY-FIRST DAY OF SEPTEMBER, A.D. 1994, AT 1:30 O'CLOCK P.M.
[SEAL] /s/ Edward J. Freel
------------------------------------
Edward J. Freel, Secretary of State
AUTHENTICATION: 8871374
DATE: 01-16-98
<PAGE>
CERTIFICATE OF LIMITED PARTNERSHIP
OF
GRAHAM PACKAGING HOLDINGS I, L.P.
This Certificate of Limited Partnership (the "Certificate") of Graham
Packaging Holdings I, L.P., a Delaware limited partnership is being filed
pursuant to Section 17-201 of the Delaware Revised Uniform Limited Partnership
Act:
1. The name of the partnership is Graham Packaging Holdings I, L.P.
2. The name and address of the registered office and registered agent
is:
The Corporation Trust Company
Corporation Trust Center
1209 Orange Street
Wilmington, Delaware 19801.
3. The name and business address of the General Partner is:
Graham Recycling Corporation
1420 6th Avenue
York, Pennsylvania 17405-1104
IN WITNESS WHEREOF, the undersigned has executed this Certificate the
____ day of September, 1994.
Graham Recycling Corporation
By:
----------------------------
William H. Kerlian
Vice President
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CREDIT AGREEMENT
Dated as of February 2, 1998,
Among
GRAHAM PACKAGING HOLDINGS COMPANY,
GRAHAM PACKAGING COMPANY,
GPC CAPITAL CORP. I,
THE LENDERS NAMED HEREIN,
BANKERS TRUST COMPANY,
as Administrative Agent,
Syndication Agent, and
Collateral Agent,
NATIONSBANK, N.A.,
as Documentation Agent,
and
BANKERS TRUST COMPANY,
as Fronting Bank
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<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS ............................ 3
SECTION 1.01.Defined Terms ....................................... 3
SECTION 1.02.Terms Generally ..................................... 36
ARTICLE II
THE CREDITS ............................. 37
SECTION 2.01.Commitments ......................................... 37
SECTION 2.02.Loans ............................................... 37
SECTION 2.03.Borrowing Procedure ................................. 39
SECTION 2.04.Evidence of Debt; Repaymentof Loans ................. 39
SECTION 2.05.Fees ................................................ 40
SECTION 2.06.Interest on Loans ................................... 41
SECTION 2.07.Default Interest .................................... 42
SECTION 2.08.Alternate Rate of Interest .......................... 42
SECTION 2.09.Termination and Reduction of Commitments ............ 42
SECTION 2.10.Conversion and Continuation of Term Borrowings ...... 43
SECTION 2.11.Repayment of Term Borrowings ........................ 45
SECTION 2.12.Prepayment .......................................... 48
SECTION 2.13.Reserve Requirements; Change in Circumstances ....... 50
SECTION 2.14.Change in Legality .................................. 52
SECTION 2.15.Indemnity ........................................... 53
SECTION 2.16.Pro Rata Treatment .................................. 53
SECTION 2.17.Sharing of Setoffs .................................. 53
SECTION 2.18.Payments ............................................ 54
SECTION 2.19.Taxes ............................................... 55
SECTION 2.20.Letters of Credit ................................... 58
SECTION 2.21. Replacement of Lenders ............................ 63
ARTICLE III
REPRESENTATIONS AND WARRANTIES ................... 69
SECTION 3.01.Organization; Powers ................................ 69
SECTION 3.02.Authorization ....................................... 70
SECTION 3.03.Enforceability ...................................... 70
(i)
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<TABLE>
<CAPTION>
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SECTION 3.04.Governmental Approvals ..................................... 64
SECTION 3.05.Financial Statements ....................................... 64
SECTION 3.06.No Material Adverse Change or Material Adverse Effect ...... 65
SECTION 3.07.Title to Properties; Possession Under Leases ............... 65
SECTION 3.08.Co-Borrower; Subsidiaries .................................. 66
SECTION 3.09.Litigation; Compliance with Laws ........................... 66
SECTION 3.10.Agreements ................................................. 66
SECTION 3.11.Federal Reserve Regulations ................................ 67
SECTION 3.12.Investment Company Act; Public Utility Holding Company Act . 67
SECTION 3.13.Use of Proceeds ............................................ 67
SECTION 3.14.Tax Returns ................................................ 67
SECTION 3.15.No Material Misstatements .................................. 68
SECTION 3.16.Employee Benefit Plans ..................................... 68
SECTION 3.17.Environmental Matters ...................................... 69
SECTION 3.18.Capitalization of Holdings and the Borrower ................ 70
SECTION 3.19.Security Documents ......................................... 70
SECTION 3.20.Location of Real Property and Leased Premises .............. 71
SECTION 3.22.Labor Matters .............................................. 72
SECTION 3.23.Insurance .................................................. 72
SECTION 3.24.Representations and Warranties in Recapitalization Agreement 72
ARTICLE IV
CONDITIONS OF LENDING ............................... 79
SECTION 4.01.All Credit Events .......................................... 72
SECTION 4.02.FirstCredit Event .......................................... 73
ARTICLE V
AFFIRMATIVE COVENANTS ............................... 85
SECTION 5.01.Existence; Businesses and Properties ....................... 78
SECTION 5.02.Insurance .................................................. 78
SECTION 5.03.Taxes ...................................................... 80
SECTION 5.04.Financial Statements, Reports, etc ......................... 80
SECTION 5.05.Litigation and Other Notices ............................... 82
SECTION 5.06.Employee Benefits .......................................... 82
SECTION 5.07.Maintaining Records; Access to Properties and Inspections .. 83
SECTION 5.08.Use of Proceeds ............................................ 83
SECTION 5.09.Compliance with Environmental Laws ......................... 83
SECTION 5.10.Preparation of Environmental Reports ....................... 83
SECTION 5.11.Further Assurances; Additional Mortgages ................... 84
</TABLE>
(ii)
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<TABLE>
<CAPTION>
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SECTION 5.12.Fiscal Year; Accounting ..................................... 86
SECTION 5.13.Dividends ................................................... 86
SECTION 5.14.Interest Rate Protection Agreements ......................... 86
SECTION 5.15.Surveys ..................................................... 86
ARTICLE VII
NEGATIVE COVENANTS ................................. 95
SECTION 6.01.Indebtedness ................................................ 86
SECTION 6.02.Liens ....................................................... 89
SECTION 6.03.Sale and Lease-Back Transactions ............................ 92
SECTION 6.04.Investments, Loans and Advances ............................. 92
SECTION 6.05.Mergers, Consolidations, Sales of Assets and Acquisitions ... 95
SECTION 6.06.Dividends and Distributions ................................. 96
SECTION 6.07.Transactions with Affiliates ................................ 98
SECTION 6.08.Business of Holdings, the Borrower and their Subsidiaries ... 99
SECTION 6.09.Limitation on Modifications of Indebtedness; Modifications of
Certificate of Incorporation, By-Laws and Certain Other
Agreements; etc ............................................. 100
SECTION 6.10.Capital Expenditures ........................................ 100
SECTION 6.11.Interest Coverage Ratio ..................................... 101
SECTION 6.12.Net Leverage Ratio .......................................... 102
ARTICLE VII .......................................................................
EVENTS OF DEFAULT .................................. 114
SECTION 7.01.Events of Default ........................................... 102
SECTION 7.02.Borrowers Right to Cure ..................................... 105
ARTICLE VIII ......................................................................
THE AGENTS ..................................... 118
SECTION 8.01.Appointment ................................................. 106
SECTION 8.02.Nature of Duties ............................................ 107
SECTION 8.03.Resignation by the Agents ................................... 107
SECTION 8.04.Each Agent in its Individual Capacity ....................... 107
SECTION 8.05.Indemnification ............................................. 108
SECTION 8.06.Lack of Reliance on Agents .................................. 108
ARTICLE IX
MISCELLANEOUS .................................... 121
</TABLE>
<PAGE>
SECTION 9.01.Notices ............................................ 108
SECTION 9.02.Survival of Agreement .............................. 109
SECTION 9.03.Binding Effect ..................................... 109
SECTION 9.04.Successors and Assigns ............................. 109
SECTION 9.05.Expenses; Indemnity ................................ 112
SECTION 9.06.Right of Setoff .................................... 114
SECTION 9.07.Applicable Law ..................................... 114
SECTION 9.08.Waivers; Amendment ................................. 114
SECTION 9.08.Interest Rate Limitation ........................... 116
SECTION 9.09.Entire Agreement ................................... 116
SECTION 9.10.WAIVER OF JURY TRIAL ............................... 117
SECTION 9.11.Severability ....................................... 117
SECTION 9.12.Counterparts ....................................... 117
SECTION 9.13.Headings ........................................... 117
SECTION 9.14.Jurisdiction; Consent to Service of Process ........ 117
SECTION 9.15.Confidentiality .................................... 118
SECTION 9.16.Release of Liens and Guarantees .................... 118
SECTION 9.18.Limitations on Recourse ............................ 119
SECTION 9.17.Co-Borrowers Obligations ........................... 119
Exhibits and Schedules]
Exhibit A Form of Assignment and Acceptance
Exhibit B Form of Borrowing Request
Exhibit C Form of Letter of Credit Request
Exhibit D Form of Intellectual Property Security Agreement
Exhibit E Form of Mortgage
Exhibit F Form of Parent Guarantee Agreement
Exhibit G Form of Pledge Agreement
Exhibit H Form of Security Agreement
Exhibit I Form of Subsidiary Guarantee Agreement
Exhibit J-1 Form of Opinion of Simpson Thacher & Bartlett
Exhibit J-2 Form of Opinion of Morgan, Lewis & Bockius
Schedule A Pricing Adjustments
Schedule B Lender Addresses
Schedule 2.01 Commitments
Schedule 3.05 Contingent Liabilities
Schedule 3.07(c) Intellectual Property
Schedule 3.07(e) Mortgaged Property Rights
(iv)
<PAGE>
Schedule 3.08 Subsidiaries
Schedule 3.09 Litigation
Schedule 3.14 Taxes
Schedule 3.17 Environmental Matters
Schedule 3.18 Capitalization
Schedule 3.19 Filing Offices
Schedule 3.20 Real Property and Leased Premises
Schedule 3.22 Labor Matters
Schedule 3.23 Insurance
Schedule 6.01 Indebtedness
Schedule 6.02 Liens
Schedule 6.04 Investments
Schedule 6.07 Transactions with Affiliates
(v)
<PAGE>
CREDIT AGREEMENT dated as of February 2, 1998, among GRAHAM PACKAGING
HOLDINGS COMPANY, a Pennsylvania limited partnership ("Holdings"), GRAHAM
PACKAGING COMPANY, a Delaware limited partnership (the "Borrower"), GPC CAPITAL
CORP. I, a Delaware corporation (the "Co-Borrower"), the Lenders party hereto
from time to time, NATIONSBANK, N.A., as documentation agent (in such capacity,
the "Documentation Agent"), BANKERS TRUST COMPANY, as administrative agent (in
such capacity, the "Administrative Agent"), as syndication agent (in such
capacity, the "Syndication Agent") and as collateral agent (in such capacity,
the "Collateral Agent") for the Lenders, and BANKERS TRUST COMPANY, as fronting
bank (in such capacity, the "Fronting Bank").
Pursuant to or in connection with the transactions contemplated by the
Recapitalization Agreement (such term and each other capitalized term used but
not defined herein having the meaning given to it in Article I), (a) the Fund
has formed BMP/Graham Holdings Corporation, a Delaware corporation ("Investor
LP") which is wholly owned by the Fund and one or more other persons or entities
(collectively with the Fund, the "Investors") which consist principally of
affiliates of the Fund and members of management of Holdings and the Borrower,
(b) Investor LP, directly and through its wholly-owned subsidiary, BCP/Graham
Holdings L.L.C., a Delaware limited liability company ("Investor GP"), will
acquire limited and general partnership interests in Holdings, in a
recapitalization transaction (the "Recapitalization"), (c) in conjunction with
the Recapitalization, (i) certain assets relating to the business of Holdings
(but held outside of Holdings) will be contributed to it and (ii) Holdings will
contribute to the Borrower substantially all of its assets and liabilities
(other than cash, to the extent such cash is to be paid out in the Transaction,
and its ownership interests in CapCo II and Opco GP, but including the interests
held by Holdings in other subsidiaries, and other than certain other assets
satisfactory to the Agents), such that Holdings will become a holding company
with the Borrower as its operating subsidiary (the "Reorganization"), (d)
Holdings has organized GPC Capital Corp. II, a wholly-owned subsidiary of
Holdings ("CapCo II") which is a co-obligor on the Holdings Discount Notes, and
the Borrower has organized the Co-Borrower, a wholly-owned subsidiary of the
Borrower, which is a co-obligor on the Senior Subordinated Notes, (e) in
conjunction with the Recapitalization, the series of financing and related
transactions described below will be consummated (such transactions, together
with the Recapitalization, the Reorganization, the organization of CapCo II and
the Co-Borrower and the other transactions described in the Recapitalization
Agreement and in these recitals are collectively referred to as the
"Transaction"). After giving effect to the Transaction, Investor LP will own,
directly or indirectly in the aggregate approximately 85% of the issued and
outstanding partnership interests in Holdings and certain of the existing
Holdings Partners (collectively, the "Continuing Partners") will own, directly
or indirectly, the remaining partnership interests in Holdings. The aggregate
amount (for purposes of this sentence, including as a use any amount
attributable to equity retained in Holdings) needed to effect the
Recapitalization and the Refinancing and to pay fees and expenses in connection
with the Transaction, shall not
<PAGE>
exceed $985,000,000 and the Recapitalization shall be effected substantially in
accordance with the Recapitalization Agreement.
In connection with the Recapitalization and the Refinancing, (a) the
capitalization of Holdings, consisting of partnership interests to be purchased
from existing partners of Holdings (the "Purchase") by Investor LP and Investor
GP utilizing cash obtained by them through cash contributions to Investor LP and
the retained partnership interests of the Continuing Partners (valued on the
same per unit basis as the purchases made by Investor LP and Investor GP), will
equal at least $245,000,000 (which purchases will occur immediately after the
Redemption described below), (b) Holdings and CapCo II will issue the Holdings
Discount Notes for gross proceeds of $100,000,000, (c) the Borrower and the
Co-Borrower will issue the Senior Subordinated Notes for gross proceeds of
$225,000,000, (d) Holdings (from distributions received from the Borrower) and
the Borrower will repay certain existing Indebtedness of Holdings and its
subsidiaries (the "Refinancing"), (e) the partnership interests (or portions
thereof) in Holdings (which are not to be purchased or retained as described in
clause (a) of this paragraph) will be redeemed (the "Redemption") by Holdings
(from proceeds of the Holdings Discount Notes and, to the extent additional
amounts are needed, from distributions received from the Borrower from the
proceeds of the Loans and the Senior Subordinated Notes) in a manner consistent
with the Recapitalization Agreement, (f) certain existing partners of Holdings
will repay to Holdings approximately $21,000,000 owed under certain promissory
notes, (g) certain bonuses and other cash payments will be made, and certain
equity awards will be granted, to management of Holdings and its Subsidiaries
and (h) costs and expenses incurred in connection with the Transaction will be
paid by Holdings and the Borrower.
The Borrower has requested the Lenders to extend credit, subject to the
terms and conditions herein, in the form of (a) Tranche A Term Loans on the
Closing Date, in an aggregate principal amount not in excess of $75,000,000, (b)
Tranche B Term Loans on the Closing Date, in an aggregate principal amount not
in excess of $175,000,000, (c) Tranche C Term Loans on the Closing Date, in an
aggregate principal amount not in excess of $145,000,000, (d) Revolving Loans
and Swingline Loans at any time and from time to time prior to the Revolving
Credit Maturity Date, in an aggregate principal amount at any time outstanding
not in excess of the difference between (i) $155,000,000 and (ii) the Revolving
L/C Exposure at such time, (e) Letters of Credit, at any time and from time to
time prior to the Revolving Credit Maturity Date, in an aggregate stated amount
at any time outstanding not in excess of $50,000,000 and (f) Growth Capital
Revolving Loans at any time and from time to time prior to the Growth Capital
Maturity Date, in an aggregate principal amount at any time outstanding not in
excess of $100,000,000.
The proceeds of the Tranche A Term Loans, the Tranche B Term Loans and the
Tranche C Term Loans will be used on the Closing Date, together with (a) up to
$15,000,000 of the proceeds of Revolving Loans, (b) the cash obtained by
Investor LP and Investor GP as described in clause (a) of the second preceding
paragraph and (c) the proceeds of the issuance of the Holdings Discount Notes
and Senior Subordinated Notes,
-2-
<PAGE>
solely (i) to effect the Purchase and Redemption, (ii) to effect the Refinancing
and (iii) to pay related fees, expenses and other transaction costs. The
proceeds of Revolving Loans (except as described above) will be used for general
corporate purposes. The Letters of Credit and Swingline Loans will be used for
general corporate purposes. The proceeds of the Growth Capital Revolving Loans
shall be utilized by the Borrower and its Subsidiaries to make Capital
Expenditures, acquisitions and investments, in each case as herein provided.
The Lenders are willing to extend such credit to the Borrower and the
Fronting Bank is willing to issue Letters of Credit for the account of the
Borrower, in each case on the terms and subject to the conditions set forth
herein. Accordingly, the parties hereto agree as follows:
ARTICLE I.
DEFINITIONS
SECTION 1.01. Defined Terms. As used in this Agreement, the following terms
shall have the meanings specified below:
"ABR Borrowing" shall mean a Borrowing comprised of ABR Loans.
"ABR Growth Capital Revolving Loan" shall mean any Growth Capital Revolving
Loan bearing interest at a rate determined by reference to the Alternate Base
Rate in accordance with the provisions of Article II.
"ABR Loan" shall mean any ABR Term Loan, ABR Revolving Loan, ABR Growth
Capital Revolving Loan or Swingline Loan.
"ABR Margin" shall mean for Tranche A Term Loans, Tranche B Term Loans,
Tranche C Term Loans, Revolving Loans, Growth Capital Revolving Loans and
Swingline Loans, the rate per annum set forth under the relevant column heading
opposite such Loans as set forth on Schedule A hereto.
"ABR Revolving Loan" shall mean any Revolving Loan bearing interest at a
rate determined by reference to the Alternate Base Rate in accordance with the
provisions of Article II.
"ABR Term Borrowing" shall mean a Borrowing comprised of ABR Term Loans.
"ABR Term Loan" shall mean any Term Loan bearing interest at a rate
determined by reference to the Alternate Base Rate in accordance with the
provisions of Article II.
-3-
<PAGE>
"Additional Mortgage" shall have the meaning provided in Section 5.11(b).
"Additional Mortgaged Property" shall have the meaning provided in Section
5.11(b).
"Adjusted LIBO Rate" shall mean, with respect to any Eurodollar Borrowing
for any Interest Period, an interest rate per annum (rounded upwards, if
necessary, to the next 1/16 of 1%) equal to the product of (a) the LIBO Rate in
effect for such Interest Period and (b) Statutory Reserves, if any.
"Administrative Agent" shall have the meaning given such term in the
introductory paragraph of this Agreement.
"Administrative Agent Fees" shall have the meaning given such term in
Section 2.05(c).
"Affiliate" shall mean, when used with respect to a specified person,
another person that directly, or indirectly through one or more intermediaries,
Controls or is Controlled by or is under common Control with the person
specified.
"Agents" shall mean each of the Administrative Agent, Syndication Agent,
Collateral Agent and Documentation Agent.
"Aggregate Revolving Credit Exposure" shall mean the aggregate amount of
the Lenders' Revolving Credit Exposures.
"Alternate Base Rate" shall mean, for any day, a rate per annum equal to
the greater of (a) the Prime Rate in effect on such day and (b) the Federal
Funds Effective Rate in effect on such day plus 1/2 of 1%. If for any reason the
Administrative Agent shall have determined (which determination shall be
conclusive absent manifest error) that it is unable to ascertain the Federal
Funds Effective Rate, including the failure of the Federal Reserve Bank of New
York to publish rates or the inability of the Administrative Agent to obtain
quotations in accordance with the terms thereof, the Alternate Base Rate shall
be determined without regard to clause (b) of the preceding sentence until the
circumstances giving rise to such inability no longer exist. Any change in the
Alternate Base Rate due to a change in the Prime Rate or the Federal Funds
Effective Rate shall be effective on the effective date of such change in the
Prime Rate or the Federal Funds Effective Rate, respectively.
"Applicable Percentage" of any Revolving Credit Lender at any time shall
mean the percentage of the Total Revolving Credit Commitment represented by such
Lender's Revolving Credit Commitment. In the event the Revolving Credit
Commitments shall have expired or been terminated, the Applicable Percentages
shall be determined on the basis of the Revolving Credit Commitments most
recently in effect, but giving effect to any assignments pursuant to Section
9.04.
-4-
<PAGE>
"Assignment and Acceptance" shall mean an assignment and acceptance entered
into by a Lender and an assignee, and accepted by the Administrative Agent and
the Borrower, in the form of Exhibit A or such other form as shall be approved
by the Administrative Agent.
"Available Growth Capital Commitment" for any Lender shall mean, at any
time, the Growth Capital Commitment of such Lender as then in effect less such
Lender's Growth Capital Percentage of the amount of the Blocked Commitment, if
any, at such time.
"Available Investment Basket Amount" shall mean, on any date of
determination, an amount equal to (i) the Cumulative Retained Excess Cash Flow
Amount on such date (after giving effect to all prior and contemporaneous
reductions thereto), plus (ii) the Cumulative Retained Net Proceeds Amount on
such date, plus (iii) the amount of funds theretofore received after the Closing
Date which, if not spent as described in the parenthetical below in this clause
(iii), would have constituted Net Proceeds under clause (a) of the definition
thereof (but which will not constitute such Net Proceeds pursuant to the first
proviso to said clause (a) as a result of the use of such funds to make payments
in connection with investments pursuant to Sections 6.04(k) and (l)), minus (iv)
any amounts used to make investments pursuant to clause (x) of the proviso to
Section 6.01(j), clause (x) of the proviso to Section 6.04(k) and/or clause (x)
of the proviso to Section 6.04(n) after the Closing Date and on or prior to such
date, and minus (v) any amounts used to make Permitted Business Acquisitions
after the Closing Date and on or prior to such date pursuant to clause (z) of
the proviso to the definition of Permitted Business Acquisition Amount.
"Blocked Commitment" shall mean an amount which initially shall be
$100,000,000 and which shall be reduced on each date after the Closing Date on
which Designated Capital Contributions are made by the amount of Designated
Capital Contributions made on such date.
"Board" shall mean the Board of Governors of the Federal Reserve System of
the United States.
"Borrower" shall have the meaning given such term in the introductory
paragraph of this Agreement.
"Borrower Partners" means, at any time, each person which is a partner of
the Borrower from time to time pursuant to and in accordance with the terms of
the partnership agreement in respect of the Borrower.
"Borrowing" shall mean a group of Loans of a single Type under a single
Tranche of Loans and made on a single date and, in the case of Eurodollar Loans,
as to which a single Interest Period is in effect.
-5-
<PAGE>
"Borrowing Request" shall mean a request by the Borrower in accordance with
the terms of Section 2.03 and substantially in the form of Exhibit B.
"Business Day" shall mean any day other than a Saturday, Sunday or day on
which banks in New York City are authorized or required by law to close;
provided, however, that when used in connection with a Eurodollar Loan, the term
"Business Day" shall also exclude any day on which banks are not open for
dealings in Dollar deposits in the London interbank market.
"Capital Expenditures" shall mean, for any person in respect of any period,
the aggregate of all expenditures incurred by such person during such period
that, in accordance with GAAP, are or should be included in "additions to
property, plant or equipment" or similar items reflected in the statement of
cash flows of such person (which shall in any event exclude investments made
pursuant to Section 6.04 (exclusive of clause (r) thereof)); provided, however,
that Capital Expenditures for the Borrower and its Subsidiaries shall not
include (a) expenditures to the extent they are made with the proceeds of the
issuance of Equity Interests (other than Designated Capital Contributions) of
Holdings after the Closing Date or with funds that would have constituted Net
Proceeds under clause (a) of the definition of the term "Net Proceeds" (but
which will not constitute Net Proceeds as a result of the first two provisos to
said clause (a)), (b) expenditures of proceeds of insurance settlements,
condemnation awards and other settlements in respect of lost, destroyed, damaged
or condemned assets, equipment or other property to the extent such expenditures
are made to replace or repair such lost, destroyed, damaged or condemned assets,
equipment or other property or otherwise to acquire assets or properties useful
in the business of the Borrower and the Subsidiaries within 12 months of receipt
of such proceeds, (c) interest capitalized during such period, (d) expenditures
that are accounted for as capital expenditures of such person and that actually
are paid for by a third party (excluding Holdings or any Subsidiary thereof) and
for which neither Holdings nor any Subsidiary thereof has provided or is
required to provide or incur, directly or indirectly, any consideration or
obligation to such third party or any other person (whether before, during or
after such period) or (e) the book value of any asset owned by such person prior
to or during such period to the extent that such book value is included as a
capital expenditure during such period as a result of such person reusing or
beginning to reuse such asset during such period without a corresponding
expenditure actually having been made in such period, provided that any
expenditure necessary in order to permit such asset to be reused shall be
included as a Capital Expenditure during the period that such expenditure
actually is made and such book value shall have been included in Capital
Expenditures when such asset was originally acquired.
"Capital Lease Obligations" of any person shall mean the obligations of
such person to pay rent or other amounts under any lease of (or other
arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such person under GAAP
and, for purposes hereof, the amount of such obligations at any time shall be
the capitalized amount thereof at such time determined in accordance with GAAP.
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"Cash Interest Expense" shall mean, with respect to the Borrower and its
Subsidiaries on a consolidated basis for any period, Interest Expense for such
period (but in any event excluding interest expense of Holdings and CapCo II
with respect to the Holdings Discount Notes), less the sum of (a) pay-in-kind
Interest Expense, (b) to the extent included in Interest Expense, the
amortization of any financing fees paid by, or on behalf of, the Borrower or any
of its Subsidiaries, including such fees paid in connection with the Transaction
(including any such fees paid by Holdings from the proceeds of distributions
from the Borrower), (c) the amortization of debt discounts, if any, or fees in
respect of Interest Rate Protection Agreements and (d) gross interest income of
the Borrower and its Subsidiaries for such period.
"CERCLA" shall have the meaning given such term in the definition of the
term "Environmental Law".
"Change in Control" shall be deemed to have occurred if, subsequent to the
Closing Date (i) prior to the IPO Reorganization (a) Holdings should fail to own
directly, beneficially and of record (except that 1% may be owned indirectly
through Opco GP), free and clear of any and all Liens (other than Liens in favor
of the Collateral Agent pursuant to the Pledge Agreement), 100% of the issued
and outstanding Equity Interests of the Borrower; (b) Holdings should fail to
own directly, beneficially and of record, free and clear of any and all Liens
(other than liens in favor of the Collateral Agent pursuant to the Pledge
Agreement), 100% of the issued and outstanding Equity Interests of Opco GP; (c)
the Designated Persons shall cease to be able to elect or designate the managing
general partner of Holdings; (d) the Designated Persons or any combination of
Designated Persons shall cease to own beneficially, directly or indirectly,
aggregate Equity Interests representing at least 51% of the ordinary voting
power represented by the issued and outstanding Equity Interests of the managing
general partner of Holdings; or (e) the Designated Persons or any combination of
Designated Persons shall cease to own beneficially, directly or indirectly, the
aggregate Equity Interests representing at least 51% of the aggregate common
economic interests represented by the issued and outstanding Equity Interests of
Holdings; (ii) from and after the IPO Reorganization (a) Holdings shall fail to
own directly, beneficially and of record (except that 1% may be owned indirectly
through Opco GP so long as Opco GP is a direct Wholly Owned Subsidiary of
Holdings), free and clear of any and all liens (other than Liens in favor of the
Collateral Agent pursuant to Pledge Agreement) 100% of the issued and
outstanding Equity Interests in the Borrower; or (b) any person or group (within
the meaning of Rule 13d-5 of the Securities Exchange Act of 1934 as in effect on
the date hereof), other than management of Holdings or the Borrower, shall own
beneficially, directly or indirectly,
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<PAGE>
in the aggregate Equity Interests representing a greater percentage of the
aggregate ordinary voting power represented by the issued and outstanding Equity
Interests of Holdings than the aggregate ordinary voting power at such time
represented by the issued and outstanding Equity Interests of Holdings owned
beneficially, directly or indirectly, by the Fund and Fund Affiliates
(excluding, for this purpose, from the definition of Fund Affiliates management
of Holdings and the Borrower), (iii) at any time both (x) management of Holdings
or the Borrower shall own beneficially, directly or indirectly, in the aggregate
Equity Interests representing a greater percentage of the aggregate ordinary
voting power represented by the issued and outstanding Equity Interests of
Holdings than the aggregate ordinary voting power at such time represented by
the issued and outstanding Equity Interests of Holdings owned beneficially,
directly or indirectly, by the Fund and Fund Affiliates (excluding, for this
purpose, from the definition of Fund Affiliates management of Holdings and the
Borrower), and (y) the Fund and Fund Affiliates shall fail to own beneficially,
directly or indirectly, in the aggregate Equity Interests representing at least
one-half the percentage of the aggregate ordinary voting power represented by
the issued and outstanding Equity Interests of Holdings owned by the Fund and
Fund Affiliates (excluding, for this purpose, from the definition of Fund
Affiliates management of Holdings and the Borrower) on the Closing Date; or (iv)
a "Change in Control" shall occur under the Senior Subordinated Note Indenture
or the Holdings Discount Note Indenture.
"Charges" shall have the meaning provided in Section 9.09.
"Closing Date" shall mean a single date (which shall in no event be later
than March 31, 1998) on which the initial Borrowing or issuance of a Letter of
Credit occurs hereunder.
"Co-Borrower" shall have the meaning given such term in the introductory
paragraph of this Agreement.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time.
"Collateral" shall mean all the "Collateral" as defined in any Security
Document and shall also include the Mortgaged Properties.
"Collateral Agent" shall have the meaning given such term in the
introductory paragraph of this Agreement.
"Commercial Letter of Credit" shall mean a commercial documentary Letter of
Credit under which the Fronting Bank agrees to make payments in Dollars for the
account of the Borrower, on behalf of the Borrower or a Subsidiary of the
Borrower, in respect of obligations of the Borrower or such Subsidiary in
connection with the purchase of goods or services.
"Commitment Fee" shall have the meaning given such term in Section 2.05(a).
"Commitments" shall mean, with respect to any Lender, such Lender's
Revolving Credit Commitment, Growth Capital Commitment, Term Commitments and
Swingline Loan Commitment and, with respect to any Fronting Bank, its Revolving
L/C Commitment.
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"Consolidated Net Income" means, with respect to any person for any period,
the aggregate of the Net Income of such person and its Subsidiaries for such
period, on a consolidated basis; provided, however, that (i) any net after-tax
extraordinary gains or losses (less all fees and expenses relating thereto)
shall be excluded, (ii) any increase in the cost of sales or other incremental
expenses resulting from purchase accounting in relation to any acquisition, net
of taxes, shall be excluded, (iii) Consolidated Net Income for such period shall
not include the cumulative effect of a change in accounting principles during
such period, (iv) any net after-tax income (loss) from discontinued operations
and any net after-tax gains or losses on disposal of discontinued operations
shall be excluded, (v) any net after-tax gains or losses (less all fees and
expenses relating thereto) attributable to asset dispositions other than in the
ordinary course of business (as determined in good faith by Holdings or the
Borrower) shall be excluded, (vi) the Net Income for such period of any person
that is not a Subsidiary, or that is accounted for by the equity method of
accounting, shall be included only to the extent of the amount of dividends or
distributions or other payments paid in cash (or to the extent converted into
cash) to the referent person or a Subsidiary thereof in respect of such period,
(vii) the Net Income of any person acquired in a pooling of interests
transaction shall not be included for any period prior to the date of such
acquisition, (viii) the Net Income for such period of any Subsidiary shall be
excluded to the extent that the declaration or payment of dividends or similar
distributions by such Subsidiary of its Net Income is not at the date of
determination permitted without any prior governmental approval (which has not
been obtained) or, directly or indirectly, by the operation of the terms of its
charter or any agreement, instrument, judgment, decree, order, statute, rule, or
governmental regulation applicable to that Subsidiary or its stockholders,
unless such restriction with respect to the payment of dividends or in similar
distributions has been legally waived and (ix) Consolidated Net Income for such
period shall be decreased by the amount of all payments made during such period
pursuant to Sections 6.06(c) and (e).
"Continuing Partners" shall have the meaning given such term in the
preamble to this Agreement.
"Control" shall mean the possession, directly or indirectly, of the power
to direct or cause the direction of the management or policies of a person,
whether through the ownership of voting securities, by contract or otherwise,
and "Controlling" and "Controlled" shall have meanings correlative thereto.
"Credit Event" shall have the meaning given such term in Article IV.
"Cumulative Retained Excess Cash Flow Amount" shall mean, at any date, an
amount, not less than zero, determined on cumulative basis equal to (x) the
amount of Excess Cash Flow for all Excess Cash Flow Periods ending after the
Closing Date which is not (and, in the case of any Excess Cash Flow Period where
the respective required date of prepayment has not yet occurred pursuant to
Section 2.12(d), will not on such date of required prepayment be) required to be
applied in accordance with Section 2.12(d) minus (y)
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<PAGE>
the aggregate amount of Capital Expenditures made on or prior to such date
pursuant to Section 6.10(c)(ii).
"Cumulative Retained Net Proceeds Amount" shall mean (x) the aggregate
amount of proceeds received after the Closing Date which would have constituted
Net Proceeds pursuant to clause (a) of the definition thereof except for the
operation of the second proviso to said clause (a), plus (y) at any time after
the first date upon which the ABR Margin and the LIBOR Margin are determined by
reference to Level 6, 7 or 8 as set forth on Schedule A, that amount which, as
of the date of determination of the Cumulative Retained Net Proceeds Amount,
equals the amount which would have constituted Net Proceeds received after the
Closing Date, but which did not constitute Net Proceeds, because of (and to the
extent of) the operation of the last sentence of the definition of Net Proceeds
contained herein, minus (z) the aggregate amount of Capital Expenditures made on
or prior to such date pursuant to Section 6.10(a)(iii).
"Cure Amount" shall have the meaning provided in Section 7.02.
"Cure Right" shall have the meaning provided in Section 7.02.
"Current Assets" shall mean, with respect to the Borrower and its
Subsidiaries on a consolidated basis at any date of determination, all assets
(other than cash and Permitted Investments or other cash equivalents) that
would, in accordance with GAAP, be classified on a consolidated balance sheet of
the Borrower and its Subsidiaries as current assets at such date of
determination.
"Current Liabilities" shall mean, with respect to the Borrower and its
Subsidiaries on a consolidated basis at any date of determination, all
liabilities that would, in accordance with GAAP, be classified on a consolidated
balance sheet of the Borrower, and its Subsidiaries as current liabilities at
such date of determination, other than (a) the current portion of long-term
debt, (b) accruals of Interest Expense (excluding Interest Expense that is due
and unpaid), (c) Revolving Loans, Growth Capital Revolving Loans or Swingline
Loans classified as current, (d) loans of Foreign Subsidiaries of the Borrower
classified as current, (e) accruals, if any, of transaction costs resulting from
the Transaction, (f) accruals of any costs or expenses related to severance or
termination of employees prior to the date hereof and (g) accruals for add-backs
to EBITDA included in clauses (e)-(j) of the definition thereof.
"Debt Service" shall mean, with respect to the Borrower and its
Subsidiaries on a consolidated basis for any period, Cash Interest Expense for
such period plus scheduled principal amortization of Total Debt for such period
(whether or not such payments are made).
"Default" shall mean any event or condition that upon notice, lapse of time
or both would constitute an Event of Default.
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"Defaulting Lender" shall mean any Lender with respect to which a Lender
Default is in effect.
"Designated Capital Contributions" shall mean common equity contributions
made by the Designated Investor LP Investors to the Investor LP (which equity
contributions are, in turn, contributed by Investor LP to the equity of
Holdings, which, in turn, contributes such amounts to the Borrower) the proceeds
of which are used by the Borrower, together with an equal amount of Growth
Capital Revolving Loans, to make Capital Expenditures pursuant to Section
6.10(c)(i) and/or acquisitions and investments pursuant to Sections 6.04(j),
(k), (l) and (n). In no event shall any amounts contributed pursuant to the
exercise of Cure Rights pursuant to Section 7.02 be deemed to constitute (in
whole or in part) Designated Capital Contributions.
"Designated Investor LP Investors" shall mean the Fund, Fund Affiliates,
management of Holdings and the Borrower on the Closing Date, any other entity
holding direct or indirect Equity Interests in Holdings on the Closing Date and
any other person approved by the Agents.
"Designated Persons" shall mean, collectively, (w) the Fund, (x) Fund
Affiliates, (y) members of management of Holdings or the Borrower holding voting
interests of Holdings or Investor LP or options to acquire such interests on the
Closing Date and (z) holders of Equity Interests for whom Holdings, Investor LP,
the Fund or Fund Affiliates (which are not themselves operating companies) have
the power to vote.
"Dollars" or "$" shall mean lawful money of the United States of America.
"Documentation Agent" shall have the meaning given such term in the
introductory paragraph of this Agreement.
"EBITDA" shall mean, with respect to the Borrower and its Subsidiaries on a
consolidated basis for any period, the Consolidated Net Income of the Borrower
and its Subsidiaries for such period plus (in each case without duplication and
to the extent the respective amounts described in items (a) through (i) below
reduced such Consolidated Net Income for the respective period for which EBITDA
is being determined) (a) provision for taxes based on income or profits of the
Borrower and its Subsidiaries and Permitted Tax Amount Distributions made by the
Borrower for such period, plus (b) Interest Expense of the Borrower and its
Subsidiaries for such period, plus (c) depreciation and amortization expense of
the Borrower and its Subsidiaries for such period, plus (d) any fees, expenses
or charges related to any equity offering, investments permitted hereunder,
acquisition or recapitalization or Indebtedness permitted to be incurred
hereunder (whether or not successful) and fees, expenses or charges related to
the transactions contemplated by the Recapitalization Agreement (including fees
to the Fund and Fund Affiliates), plus (e) the amount of any non-recurring
charges (including any one-time costs incurred in connection with acquisitions
after the Closing Date), plus (f) any other non-cash charges (excluding any
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such charge which requires an accrual of a cash reserve for anticipated cash
charges for any future period), plus (g) the amount of any minority interest
expense, plus (h) special charges and unusual items during any period ending on
or prior to the second anniversary of the Closing Date not to exceed $15.0
million in the aggregate, plus (i) the amount of management, consulting
monitoring and advisory fees paid to the Fund and its Affiliates during such
period not to exceed $1.0 million during any four quarter period less, without
duplication, (j) non-cash items increasing Consolidated Net Income of the
Borrower and its Subsidiaries for such period (excluding any items which
represent the reversal of any accrual of, or cash reserve for, anticipated cash
charges in any prior period).
"Eligible Transferee" shall mean and include a commercial bank, financial
institution, fund that invests in loans or extensions of credit of the types
made pursuant to this Agreement or any other "accredited investor" (as defined
in regulation D of the Securities Act of 1933, as amended).
"Employee Equity Sales" shall have the meaning given such term in the
definition of the term Net Proceeds.
"environment" shall mean ambient air, surface water and groundwater
(including potable water, navigable water and wetlands), the land surface or
subsurface strata, the workplace or as otherwise defined in any Environmental
Law.
"Environmental Claim" shall mean any written accusation, allegation, notice
of violation, claim, demand, order, directive, cost recovery action or other
cause of action by, or on behalf of, any Governmental Authority or any person
for damages, injunctive or equitable relief, personal injury (including
sickness, disease or death), Remedial Action costs, tangible or intangible
property damage, natural resource damages, nuisance, pollution, any adverse
effect on the environment caused by any Hazardous Material, or for fines,
penalties or restrictions, resulting from or based upon: (a) the threat, the
existence, or the continuation of the existence of a Release (including sudden
or non-sudden, accidental or non-accidental Releases); (b) exposure to any
Hazardous Material; (c) the presence, use, handling, transportation, storage,
treatment or disposal of any Hazardous Material; or (d) the violation or alleged
violation of any Environmental Law or Environmental Permit.
"Environmental Law" shall mean any and all applicable current and future
treaties, laws, rules, regulations, codes, ordinances, orders, decrees,
judgments, injunctions, notices or binding agreements issued, promulgated or
entered into by any Governmental Authority, relating in any way to the
environment, preservation or reclamation of natural resources, the treatment,
storage, disposal, Release or threatened Release of any Hazardous Material or to
human health or safety, including the Hazardous Materials Transportation Act, 49
U.S.C. ss. 1801 et seq., the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended, 42 U.S.C. ss. 9601 et seq. ("CERCLA"),
the Solid Waste Disposal Act, as amended, 42 U.S.C. ss. 6901 et seq., the
Federal Water Pollution Control Act, as amended, 33 U.S.C. ss. 1251 et seq., the
Clean Air Act of 1970, as
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amended, 42 U.S.C. ss. 7401 et seq., the Toxic Substances Control Act of 1976,
15 U.S.C. ss. 2601 et seq., the Emergency Planning and Community Right-to-Know
Act of 1986, 42 U.S.C. ss. 11001 et seq., the National Environmental Policy Act
of 1975, 42 U.S.C. ss. 4321 et seq., the Safe Drinking Water Act of 1974, as
amended, 42 U.S.C. ss. 300(f) et seq., and any similar or implementing state,
local or foreign law, and all amendments or regulations promulgated under any of
the foregoing.
"Environmental Permit" shall mean any permit, approval, authorization,
certificate, license, variance, filing or permission required by or from any
Governmental Authority pursuant to any Environmental Law.
"Equity Interests" of any person shall mean any and all shares, interests,
rights to purchase, warrants, options, participation or other equivalents of or
interests in (however designated) equity of such person, including any preferred
stock, any limited or general partnership interest and any limited liability
company membership interest, but excluding any debt securities convertible into
such equity.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
the same may be amended from time to time.
"ERISA Affiliate" shall mean any trade or business (whether or not
incorporated) that, together with the Borrower, is treated as a single employer
under Section 414(b) or (c) of the Code, or, solely for purposes of Section 302
of ERISA and Section 412 of the Code, is treated as a single employer under
Section 414 of the Code.
"Eurodollar Borrowing" shall mean a Borrowing comprised of Eurodollar
Loans.
"Eurodollar Growth Capital Revolving Loan" shall mean any Growth Capital
Revolving Loan bearing interest at a rate determined by reference to the
Adjusted LIBO rate in accordance with the provisions of Article II.
"Eurodollar Loan" shall mean any Eurodollar Term Loan, Eurodollar Revolving
Loan or Eurodollar Growth Capital Revolving Loan.
"Eurodollar Revolving Loan" shall mean any Revolving Loan bearing interest
at a rate determined by reference to the Adjusted LIBO Rate in accordance with
the provisions of Article II.
"Eurodollar Term Borrowing" shall mean a Borrowing comprised of Eurodollar
Term Loans.
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<PAGE>
"Eurodollar Term Loan" shall mean any Term Loan bearing interest at a rate
determined by reference to the Adjusted LIBO Rate in accordance with the
provisions of Article II.
"Event of Default" shall have the meaning given such term in Article VII.
"Excess Amount" shall have the meaning provided in Section 2.12(f).
"Excess Cash Flow" shall mean, with respect to the Borrower and its
Subsidiaries on a consolidated basis for any Excess Cash Flow Period, EBITDA of
the Borrower and its Subsidiaries on a consolidated basis for such Excess Cash
Flow Period, minus, without duplication, (a) Debt Service for such Excess Cash
Flow Period, (b) any voluntary prepayments of Term Loans during the period
beginning on April 1 of such Excess Cash Flow Period and ending on March 31 of
the immediately succeeding Excess Cash Flow Period and any permanent voluntary
reductions to the Revolving Credit Commitments and/or the Growth Capital
Commitments, in each case to the extent that an equal amount of the Revolving
Loans or Growth Capital Revolving Loans, as the case may be, simultaneously is
repaid, in each case so long as such amounts are not already reflected in Debt
Service, (c) (i) Capital Expenditures by the Borrower and its Subsidiaries on a
consolidated basis during such Excess Cash Flow Period (excluding Capital
Expenditures made in such Excess Cash Flow Period where a certificate in the
form contemplated by the following clause (d) was previously delivered) that are
paid in cash and (ii) the aggregate consideration paid in cash during such
Excess Cash Flow Period, in respect of Permitted Business Acquisitions and other
investments permitted hereunder (less any amounts received in respect thereof as
a return of capital), (d) Capital Expenditures that the Borrower or any
Subsidiary of the Borrower shall, during such Excess Cash Flow Period, become
obligated to make but that are not made during such Excess Cash Flow Period,
provided that the Borrower shall deliver a certificate to the Administrative
Agent not later than 90 days after the end of such Excess Cash Flow Period of
the Borrower, signed by a Responsible Officer of the Borrower and certifying
that such Capital Expenditures and the delivery of the related equipment will be
made in the following Excess Cash Flow Period, (e) taxes paid in cash by the
Borrower and its Subsidiaries on a consolidated basis during such Excess Cash
Flow Period or which are paid during the respective Excess Cash Flow Period or
will be paid within six months after the close of such Excess Cash Flow Period
(provided that any amount so deducted which will be paid after the close of such
Excess Cash Flow Period shall not be deducted again in a subsequent Excess Cash
Flow Period) and for which reserves have been established, including income tax
expense and withholding tax expense incurred in connection with cross-border
transactions involving its Foreign Subsidiaries, (f) without duplication of the
preceding clause (e), Permitted Tax Amount Distributions which are paid during
the respective Excess Cash Flow Period or will be paid within six months after
the close of such Excess Cash Flow Period (provided that any amount so deducted
which will be paid after the close of such Excess Cash Flow Period shall not be
deducted again in a subsequent Excess Cash Flow Period), (g) an amount equal to
any increase in Working Capital of the Borrower and its Subsidiaries for such
Excess Cash Flow
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Period, (h) to the extent not deducted in determining EBITDA, monitoring and
management fees paid to the Fund and/or any of its Affiliates or the Fund
Affiliates and annual fees paid to Graham Family Growth Partnership and its
Affiliates during such Excess Cash Flow Period, (i) cash expenditures made in
respect of Interest Rate Protection Agreements and Other Hedging Agreements
during such Excess Cash Flow Period, to the extent not reflected in the
computation of EBITDA or Interest Expense, (j) permitted dividends or
distributions (excluding Permitted Tax Amount Distributions, which are covered
in clause (f) above) or repurchases of its Equity Interests paid in cash by
Holdings or the Borrower during such Excess Cash Flow Period and permitted
dividends paid by any Subsidiary of the Borrower to any person other than the
Borrower or any of the Borrower's other Subsidiaries during such Excess Cash
Flow Period, in each case in accordance with Section 6.06, (k) amounts paid in
cash during such Excess Cash Flow Period on account of items that were accounted
for as noncash reductions of Consolidated Net Income of the Borrower and its
Subsidiaries in the current or a prior period, (l) special charges or any
extraordinary or nonrecurring loss paid in cash during such Excess Cash Flow
Period, (m) to the extent not deducted in the computation of Net Proceeds in
respect of any asset disposition or condemnation giving rise thereto, mandatory
prepayments of Indebtedness (other than Indebtedness created hereunder or under
any other Loan Document) and (n) to the extent included in determining EBITDA,
all items that did not result from a cash payment to the Borrower and its
Subsidiaries on a consolidated basis during such Excess Cash Flow Period plus,
without duplication, (i) an amount equal to any decrease in Working Capital for
such Excess Cash Flow Period, (ii) all proceeds received during such Excess Cash
Flow Period of Capital Lease Obligations, purchase money Indebtedness, Sale and
Lease-Back Transactions pursuant to Section 6.03 and any other Indebtedness, in
each case to the extent used to finance any Capital Expenditure (other than
Indebtedness under this Agreement to the extent there is no corresponding
deduction to Excess Cash Flow above in respect of the use of such Borrowings),
(iii) all amounts referred to in (c) above to the extent funded with the
proceeds of the issuance of Equity Interests of, or capital contributions to,
Holdings after the Closing Date (to the extent not previously used to prepay
Indebtedness (other than Revolving Loans, Growth Capital Revolving Loans or
Swingline Loans), make any investment or capital expenditure or otherwise for
any purpose resulting in a deduction to Excess Cash Flow in any prior Excess
Cash Flow Period) or any amount that would have constituted Net Proceeds under
clause (a) of the definition of the term "Net Proceeds" if not so spent, in each
case to the extent there is a corresponding deduction to Excess Cash Flow above,
(iv) to the extent any permitted Capital Expenditures and the corresponding
delivery of equipment referred to in (d) above do not occur in the Excess Cash
Flow Period of the Borrower specified in the certificate of the Borrower
provided pursuant to (d) above, such amounts of Capital Expenditures that were
not so made in the Excess Cash Flow Period of the Borrower specified in such
certificates, (v) cash payments received in respect of Interest Rate Protection
Agreements during such Excess Cash Flow Period to the extent not (A) included in
the computation of EBITDA or (B) reducing Cash Interest Expense, (vi) any
extraordinary or nonrecurring gain realized in cash during such Excess Cash Flow
Period (except to the extent such gain is subject to Section 2.12(c)), (vii) to
the extent deducted in the computation of EBITDA, interest income and (viii) to
the extent subtracted in
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determining EBITDA, all items that did not result from a cash payment by the
Borrower and its Subsidiaries on a consolidated basis during such Excess Cash
Flow Period.
"Excess Cash Flow Period" shall mean (i) the period taken as one accounting
period from the Closing Date and ending on December 31, 1998 and (ii) each
fiscal year of the Borrower ended thereafter.
"Federal Funds Effective Rate" shall mean, for any day, the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers, as published on the
next succeeding Business Day by the Federal Reserve Bank of New York, or, if
such rate is not so published for any day which is a Business Day, the average
of the quotations for the day of such transactions received by the
Administrative Agent from three Federal funds brokers of recognized standing
selected by it.
"Fees" shall mean the Commitment Fees, the L/C Participation Fees, the
Fronting Bank Fees and the Administrative Agent Fees.
"Financial Officer" of any person shall mean the chief financial officer,
principal accounting officer, Treasurer, Assistant Treasurer or Controller of
such person.
"Financial Performance Covenants" means the covenants of Holdings and the
Borrower set forth in Sections 6.11 and 6.12.
"Flow-through Entity" shall have the meaning given such term in the
definition of Permitted Tax Amount Distributions.
"Foreign Subsidiary" shall mean, for any person, each Subsidiary of such
person that is incorporated or organized under the laws of any jurisdiction
other than the United States of America, any state thereof, the United States
Virgin Islands or Puerto Rico.
"Fronting Bank" shall have the meaning given such term in the introductory
paragraph of this Agreement.
"Fronting Bank Fees" shall have the meaning given to such term in Section
2.05(b).
"Fund" shall mean Blackstone Capital Partners III Merchant Banking Fund
L.P., a Delaware limited partnership, and Blackstone Offshore Capital Partners
III L.P., a Delaware limited partnership.
"Fund Affiliates" shall mean each Affiliate of the Fund that is not an
operating company or Controlled by an operating company and each general partner
of the Fund or any Fund Affiliate who is a partner or employee of The Blackstone
Group L.P.
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"GAAP" shall mean generally accepted accounting principles in effect from
time to time in the United States, applied on a consistent basis (provided that,
at their option, Holdings and its Subsidiaries may capitalize repair and
maintenance expenses in connection with their capital assets, so long as such
capitalization is done on a consistent basis for all periods ended after the
Closing Date, except for such period as is reasonably necessary to implement the
change described above in this parenthetical).
"Governmental Authority" shall mean any federal, state, local or foreign
court or governmental agency, authority, instrumentality or regulatory body or,
in the case of references to "Governmental Authority" in Article II and Sections
9.04 and 9.16, the National Association of Insurance Commissioners.
"Growth Capital Borrowing" shall mean a Borrowing comprised of Growth
Capital Revolving Loans.
"Growth Capital Commitment" shall mean, with respect to each Lender, the
commitment of such Lender to make Growth Capital Revolving Loans hereunder as
set forth in Section 2.01(c) or in the Assignment and Acceptance pursuant to
which such Lender assumed its Growth Capital Commitment, as applicable, as the
same may be reduced from time to time pursuant to Section 2.09 and pursuant to
assignments by such Lender pursuant to Section 9.04.
"Growth Capital Exposure" shall mean, with respect to any Lender at any
time, the aggregate principal amount at such time of all outstanding Growth
Capital Revolving Loans of such Lender.
"Growth Capital Lender" shall mean a Lender with a Growth Capital
Commitment.
"Growth Capital Maturity Date" shall mean January 31, 2004.
"Growth Capital Percentage" of any Growth Capital Lender at any time shall
mean the percentage of the Total Growth Capital Commitment represented by such
Lender's Growth Capital Commitment.
"Growth Capital Revolving Loans" shall mean the revolving loans made by the
Lenders to the Borrower pursuant to Section 2.01(c). Each Growth Capital
Revolving Loan shall be a Eurodollar Growth Capital Revolving Loan or an ABR
Growth Capital Revolving Loan.
"Guarantee" of or by any person shall mean (a) any obligation, contingent
or otherwise, of such person guaranteeing or having the economic effect of
guaranteeing any Indebtedness of any other person (the "primary obligor") in any
manner, whether directly or indirectly, and including any obligation of such
person, direct or indirect, (i) to purchase or
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pay (or advance or supply funds for the purchase or payment of) such
Indebtedness (whether arising by virtue of partnership arrangements, by
agreement to keep well, to purchase assets, goods, securities or services, to
take-or-pay or otherwise) or to purchase (or to advance or supply funds for the
purchase of) any security for the payment of such Indebtedness, (ii) to purchase
or lease property, securities or services for the purpose of assuring the owner
of such Indebtedness of the payment of such Indebtedness, (iii) to maintain
working capital, equity capital or any other financial statement condition or
liquidity of the primary obligor so as to enable the primary obligor to pay such
Indebtedness or (iv) entered into for the purpose of assuring in any other
manner the holders of such Indebtedness of the payment thereof or to protect
such holders against loss in respect thereof (in whole or in part), or (b) any
Lien on any assets of such person securing any Indebtedness of any other person,
whether or not such Indebtedness is assumed by such person; provided, however,
that the term "Guarantee" shall not include endorsements for collection or
deposit, in either case in the ordinary course of business, or customary and
reasonable indemnity obligations in effect on the Closing Date or entered into
in connection with any acquisition or disposition of assets permitted under this
Agreement.
"Guarantee Agreements" shall mean the Parent Guarantee Agreement and the
Subsidiary Guarantee Agreement.
"Guarantors" shall mean Holdings and the Subsidiary Guarantors.
"Hazardous Materials" shall mean any material meeting the definition of a
"hazardous substance" in CERCLA 42 U.S.C. ss. 9601(14) and all explosive or
radioactive substances or wastes; hazardous or toxic substances or wastes;
pollutants; solid, liquid or gaseous wastes, including petroleum, petroleum
distillates or fractions or residues, asbestos or asbestos containing materials,
polychlorinated biphenyls ("PCBs") or materials or equipment containing PCBs in
excess of 50 parts per million (ppm), radon gas, infectious or medical wastes,
and all other substances or wastes of any nature regulated pursuant to any
Environmental Law, or that reasonably could form the basis of an Environmental
Claim.
"Holdings" shall have the meaning given such term in the introductory
paragraph of this agreement; provided that upon consummation of the IPO
Reorganization, "Holdings" shall be deemed to mean CapCo II.
"Holdings Discount Note Documents" shall mean the Holdings Discount Notes
and the Holdings Discount Note Indenture.
"Holdings Discount Note Indenture" shall mean the Indenture dated as of
February 2, 1998, among Holdings, CapCo II and the trustee named therein from
time to time, as in effect on the Closing Date and as thereafter amended from
time to time in accordance with the terms thereof and of this Agreement.
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"Holdings Discount Notes" shall mean Holdings' 10-3/4% Senior Discount
Notes due 2009 issued pursuant to the Holdings Discount Note Indenture and any
notes issued by Holdings and CapCo II in exchange for, and as contemplated by,
the Holdings Discount Notes with substantially identical terms as the Holdings
Discount Notes.
"Holdings Partner" means, at any time, each person which is a partner of
Holdings from time to time pursuant to and in accordance with the terms of the
partnership agreement in respect of Holdings.
"Indebtedness" of any person shall mean, without duplication, (a) all
obligations of such person for borrowed money, (b) all obligations of such
person evidenced by bonds, debentures, notes or similar instruments, (c) all
obligations of such person under conditional sale or other title retention
agreements relating to property or assets purchased by such person, (d) all
obligations of such person issued or assumed as the deferred purchase price of
property or services (other than current trade liabilities incurred in the
ordinary course of business), (e) all Indebtedness of others secured by (or for
which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any Lien on property owned or acquired by such
person, whether or not the obligations secured thereby have been assumed, (f)
all Guarantees by such person of Indebtedness of others, (g) all Capital Lease
Obligations of such person, (h) all payments that such person would have to make
in the event of an early termination, on the date Indebtedness of such person is
being determined, in respect of outstanding interest rate protection agreements,
foreign currency exchange agreements or other interest or exchange rate hedging
arrangements and (i) all obligations of such person as an account party in
respect of letters of credit and bankers' acceptances.
"Indemnitee" shall have the meaning provided in Section 9.05(b).
"Information Memorandum" shall have the meaning given such term in Section
3.15(a).
"Initial Date" shall have the meaning provided in Section 2.19(a).
"Installment Date" shall have the meaning given such term in Section
2.11(a).
"Intellectual Property Security Agreement" shall mean the Intellectual
Property Security Agreement, substantially in the form of Exhibit D, between the
Borrower and certain of its Subsidiaries and the Collateral Agent for the
benefit of the Secured Parties.
"Interest Coverage Ratio" shall have the meaning given such term in Section
6.11.
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"Interest Expense" shall mean, with respect to the Borrower and its
Subsidiaries on a consolidated basis for any period, the sum of (a) gross
interest expense of the Borrower and its Subsidiaries for such period on a
consolidated basis, including (i) the amortization of debt discounts, (ii) the
amortization of all fees (including fees with respect to interest rate
protection agreements) payable in connection with the incurrence of Indebtedness
to the extent included in interest expense and (iii) the portion of any payments
or accruals with respect to Capital Lease Obligations allocable to interest
expense and (b) capitalized interest of the Borrower and its Subsidiaries on a
consolidated basis. For purposes of the foregoing, gross interest expense shall
be determined after giving effect to any net payments made or received by the
Borrower and its Subsidiaries with respect to Interest Rate Protection
Agreements.
"Interest Payment Date" shall mean, (a) with respect to any Eurodollar
Loan, the last day of the Interest Period applicable to the Borrowing of which
such Loan is a part and, in the case of a Eurodollar Borrowing with an Interest
Period of more than three months' duration, each day that would have been an
Interest Payment Date had successive Interest Periods of three months' duration
been applicable to such Borrowing, and, in addition, the date of any refinancing
or conversion of such Borrowing with or to a Borrowing of a different Type and
(b) with respect to any ABR Loan, the last day of each calendar quarter.
"Interest Period" shall mean as to any Eurodollar Borrowing, the period
commencing on the date of such Borrowing or on the last day of the immediately
preceding Interest Period applicable to such Borrowing, as the case may be, and
ending on the numerically corresponding day (or, if there is no numerically
corresponding day, on the last day) in the calendar month that is 1, 2, 3 or 6
months thereafter (or 9 or 12 months, if at the time of the relevant Borrowing,
all Lenders make interest periods of such length available), as the Borrower may
elect, and the date any Eurodollar Borrowing is converted to an ABR Borrowing in
accordance with Section 2.10 or repaid or prepaid in accordance with Section
2.11 or 2.12; provided, however, that if any Interest Period would end on a day
other than a Business Day, such Interest Period shall be extended to the next
succeeding Business Day unless such next succeeding Business Day would fall in
the next calendar month, in which case such Interest Period shall end on the
next preceding Business Day. Interest shall accrue from and including the first
day of an Interest Period to but excluding the last day of such Interest Period.
"Interest Rate Protection Agreement" shall mean any interest rate hedging
agreement or arrangement entered into by the Borrower or a Subsidiary of the
Borrower and designed to protect against fluctuations in interest rates.
"Investor GP" shall have the meaning given such term in the preamble of
this Agreement.
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"Investor LP" shall have the meaning given such term in the preamble of
this Agreement.
"Investors" shall have the meaning given such term in the preamble to this
Agreement.
"IPO Reorganization" shall mean the transfer of all or substantially all of
Holdings' assets (including, without limitation, all Equity Interests in the
Borrower and Opco GP) and liabilities to CapCo II and the dissolution,
liquidation or winding up of Holdings in connection with or in contemplation of
an initial public offering of the shares of common stock of CapCo II.
"Joint Venture" shall mean any person in which the Borrower and its
Subsidiaries own, directly or indirectly, more than 5% but 50% or less of the
Equity Interests.
"L/C Disbursement" shall mean a payment or disbursement made by a Fronting
Bank pursuant to a Letter of Credit.
"L/C Participation Fee" shall have the meaning given such term in Section
2.05(b).
"Lender" shall mean each financial institution listed on Schedule 2.01, as
well as any person which becomes a "Lender" hereunder pursuant to Section
9.04(b).
"Lender Default" shall mean (i) the refusal (which has not been retracted)
of a Lender to make available its portion of any Borrowing, to fund Refunded
Swingline Loans or to fund its portion of any unreimbursed payment under Section
2.20(a)(iv) or (ii) a Lender having notified in writing the Borrower and/or the
Administrative Agent that it does not intend to comply with its obligations
under Section 2.01(b) or (c) or Section 2.20.
"Letter of Credit" shall mean the Commercial Letters of Credit and the
Standby Letters of Credit.
"Letter of Credit Request" shall have the meaning given such term in
Section 2.20(a)(i).
"LIBO Rate" shall mean, with respect to any Eurodollar Borrowing for any
Interest Period, the rate at which dollar deposits approximately equal in
principal amount to the Administrative Agent's portion of such Eurodollar
Borrowing and for a maturity comparable to such Interest Period are offered to
the principal London office of the Administrative Agent in immediately available
funds in the London interbank market at approximately 11:00 a.m., New York time,
two Business Days prior to the commencement of such Interest Period.
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"LIBOR Margin" shall mean for Tranche A Term Loans, Tranche B Term Loans,
Tranche C Term Loans, Revolving Loans and Growth Capital Revolving Loans, the
rate per annum set forth under the relevant column heading opposite such Loans
as set forth on Schedule A hereto.
"Lien" shall mean, with respect to any asset, (a) any mortgage, deed of
trust, lien, pledge, encumbrance, charge or security interest in or on such
asset, (b) the interest of a vendor or a lessor under any conditional sale
agreement, capital lease or title retention agreement relating to such asset and
(c) in the case of securities, any purchase option, call or similar right of a
third party with respect to such securities.
"Loan Documents" shall mean this Agreement, the Letters of Credit, the
Guarantee Agreements and the Security Documents.
"Loan Parties" shall mean the Borrower and the Guarantors.
"Loans" shall mean the Term Loans, the Revolving Loans, the Growth Capital
Revolving Loans and the Swingline Loans.
"Margin Adjustment Date" shall have the meaning given such term in the
definition of Tested Parties contained herein.
"Margin Stock" shall have the meaning given such term in Regulation U.
"Majority Lenders" of any Tranche shall mean those Lenders which would
constitute the Required Lenders under, and as defined in, this Agreement if all
outstanding Obligations of the other Tranches under this Agreement were repaid
in full and all Commitments with respect thereto were terminated.
"Material Adverse Effect" shall mean the existence of events, conditions
and/or contingencies that have had or are reasonably likely to have (a) a
materially adverse effect on the assets, business, operations, properties,
liabilities, profits or condition (financial or otherwise) of Holdings and its
Subsidiaries taken as a whole or the Borrower and its Subsidiaries taken as a
whole, (b) a material impairment of the ability of Holdings, the Borrower or any
of their Subsidiaries to perform any of its material obligations under any Loan
Document to which it is or will be a party or to consummate the Transaction or
(c) an impairment of the validity or enforceability of, or a material impairment
of the material rights, remedies or benefits available to the Lenders, the
Fronting Bank, the Administrative Agent or the Collateral Agent under any Loan
Document.
"Maximum Rate" shall have the meaning provided in Section 9.09.
"Mortgaged Properties" shall mean the owned real properties of the Loan
Parties specified on Schedule 3.20 that are expressly designated "Mortgaged
Properties".
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"Mortgages" shall mean the mortgages, deeds of trust, assignments of leases
and rents and other security documents delivered pursuant to clause (i) of
Section 4.02(h) or pursuant to Section 5.11, each substantially in the form of
Exhibit E.
"Multiemployer Plan" shall mean a multiemployer plan as defined in Section
4001(a)(3) of ERISA to which the Borrower or any ERISA Affiliate (other than one
considered an ERISA Affiliate only pursuant to subsection (m) or (o) of Code
Section 414) is making or accruing an obligation to make contributions, or has
within any of the preceding five plan years made or accrued an obligation to
make contributions.
"Net Income" means, with respect to any person, the net income (loss) of
such person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends.
"Net Leverage Ratio" shall mean, on any date, the ratio of (a) Total Net
Debt as of such date to (b) EBITDA for the period of four consecutive fiscal
quarters of the Borrower most recently ended as of such date, all determined on
a consolidated basis in accordance with GAAP, provided that for purposes of this
definition, EBITDA for the four quarter period ending on (i) September 30, 1998,
shall be deemed to be EBITDA for the two fiscal quarter period ending on
September 30, 1998, multiplied by 2 and (ii) December 31, 1998, shall be deemed
to be EBITDA for the three fiscal quarter period ending on December 31, 1998
multiplied by 4/3. As more fully provided in the definition of Total Net Debt,
it is acknowledged and agreed that, in the circumstances described in the
proviso to the definition of Total Net Debt and in the definition of Tested
Parties contained herein, the numerator of the Net Leverage Ratio shall, at
certain times and for purposes of making calculations pursuant to Schedule A
(but not for purposes of Section 6.12), be determined by reference to Holdings
and its Subsidiaries, rather than the Borrower and its Subsidiaries (although
the denominator of the Net Leverage Ratio shall be the same for purposes of
Schedule A and Section 6.12).
"Net Proceeds" shall mean (a) 100% of the cash proceeds actually received
by Holdings, the Borrower or any of their domestic Wholly Owned Subsidiaries
(including any cash payments received by way of deferred payment of principal
pursuant to a note or installment receivable or purchase price adjustment
receivable or otherwise and including casualty insurance settlements and
condemnation awards, but only as and when received) from any loss, damage,
destruction or condemnation of, or any sale, transfer or other disposition
(including any sale and leaseback of assets and any mortgage or lease of real
property) to any person of any asset or assets of Holdings, the Borrower or any
of their Subsidiaries (other than those pursuant to Sections 6.05(a), (b), (d),
(e), (j), (k), and (l)), net of (i) attorneys' fees, accountants' fees,
investment banking fees, survey costs, title insurance premiums, and related
search and recording charges, transfer taxes, deed or mortgage recording taxes,
required debt payments and required payments of other obligations relating to
the applicable asset (other than pursuant hereto or pursuant to the Holdings
Discount Notes or Senior Subordinated Notes), other customary expenses and
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brokerage, consultant and other customary fees actually incurred in connection
therewith, (ii) taxes paid or payable as a result thereof, and (iii) Permitted
Tax Amount Distributions to the extent attributable thereto, provided that if no
Event of Default exists and the Borrower shall deliver a certificate of a
Responsible Officer to the Administrative Agent promptly following receipt of
any such proceeds setting forth the Borrower's intention to use any portion of
such proceeds to purchase assets useful in the business of the Borrower and its
Subsidiaries, or make investments pursuant to Sections 6.04(k) and (l), in each
case within 12 months of such receipt, such portion of such proceeds shall not
constitute Net Proceeds except to the extent not so used within such 12-month
period, and provided further, that (x) no proceeds realized in a single
transaction or series of related transactions shall constitute Net Proceeds
unless such proceeds shall exceed $300,000 and (y) no proceeds shall constitute
Net Proceeds in any fiscal year until the aggregate amount of all such proceeds
in such fiscal year shall exceed $5,000,000 or the aggregate of all such
proceeds received after the Closing Date shall exceed $10,000,000, (b) 100% of
the cash proceeds from the incurrence, issuance or sale by Holdings, the
Borrower or any of their Subsidiaries of any Indebtedness (other than
Indebtedness permitted pursuant to Section 6.01 as in effect on the Closing
Date), net of all taxes and fees (including investment banking fees),
commissions, costs and other expenses, in each case incurred in connection with
such issuance or sale and (c) 75% of the cash proceeds from the issuance or the
sale by Holdings or any of its Subsidiaries of any equity security of, or Equity
Interests in, Holdings or such Subsidiary (other than (i) sales of Equity
Interests of Holdings or Investor LP to directors, officers or employees of
Holdings or Investor LP, the Borrower or any of their Subsidiaries in connection
with permitted employee compensation and incentive arrangements ("Employee
Equity Sales"), (ii) the proceeds of Designated Capital Contributions, (iii) to
the extent that the Net Leverage Ratio does not exceed 3.5:1.0 after giving
effect to the application described in this clause (iii) and no Default or Event
of Default exists, proceeds of equity issuances which are used to make voluntary
redemptions of outstanding Senior Subordinated Notes under the "equity clawback"
provisions with respect thereto, (iv) sales of Equity Interests of Holdings or
Investor LP to the extent the net proceeds of such sales are used to fund
permitted Capital Expenditures or investments within six months after the
receipt of such net proceeds and (v) proceeds of Permitted Cure Securities) net
of all taxes and fees (including investment banking fees), commissions, costs
and other expenses, in each case, incurred in connection with such issuance or
sale. For purposes of calculating the amount of Net Proceeds, fees, commissions
and other costs and expenses payable to Holdings or the Borrower or any
Affiliate of either of them shall be disregarded, except for financial advisory
fees customary in type and amount paid to Affiliates of The Blackstone Group
L.P. Notwithstanding anything in the contrary contained in this definition, if,
at the time of any prepayment required by Section 2.12 hereof, the ABR Margin
and the LIBOR Margin are determined by reference to Level 6, 7 or 8 as set forth
on Schedule A, the percentages set forth in clauses (a), (b) and (c) above shall
be deemed to be 75%, 100%, and 50%, respectively.
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"90% Subsidiary" means any person which is a Wholly Owned Subsidiary of the
Borrower or at least 90% of the Equity Interests of which are owned by the
Borrower and/or one or more Wholly Owned Subsidiaries of the Borrower.
"Notes" shall mean any promissory note of the Borrower issued pursuant to
this Agreement.
"Obligations" shall mean all amounts owing to any of the Agents or any
Lender pursuant to the terms of this Agreement or any other Loan Document.
"Offering Memorandum" shall mean the Offering Memorandum, dated January 23,
1998, in respect of the Holdings Discount Notes and Senior Subordinated Notes.
"Opco GP" shall mean GPC Opco GP, LLC, a Wholly Owned Subsidiary of
Holdings.
"Other Hedging Agreement" shall mean any foreign exchange contracts,
currency swap agreements, commodity agreements or other similar agreements or
arrangements designed to protect against the fluctuations in currency or
commodity values.
"Other Taxes" shall have the meaning provided in Section 2.19(b).
"Parent Guarantee Agreement" shall mean the Parent Guarantee Agreement,
substantially in the form of Exhibit F, made by Holdings in favor of the
Collateral Agent for the benefit of the Secured Parties.
"PBGC" shall mean the Pension Benefit Guaranty Corporation referred to and
defined in ERISA.
"Permitted Business Acquisition" shall mean any acquisition of all or
substantially all the assets of, or shares or other equity interests in, a
person or division or line of business of a person (or any subsequent investment
made in a previously acquired Permitted Business Acquisition) if immediately
after giving effect thereto: (a) no Default or Event of Default shall have
occurred and be continuing or would result therefrom, (b) all transactions
related thereto shall be consummated in accordance with applicable laws, (c) at
least 90% of the Equity Interests of any acquired or newly formed corporation,
partnership, association or other business entity are owned directly by the
Borrower or a domestic Wholly Owned Subsidiary of the Borrower which is a
Guarantor (unless there is a material tax or legal or other economic
disadvantage in not having a Foreign Subsidiary of the Borrower hold such Equity
Interests, in which case such Equity Interests may be held directly by a Foreign
Subsidiary of the Borrower) and all actions required to be taken, if any, with
respect to such acquired or newly formed Subsidiary under Section 5.11 shall
have been taken and (d)(i) Holdings, the Borrower and their Subsidiaries shall
be in compliance,
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on a pro forma basis after giving effect to such acquisition or formation, with
the covenants contained in Sections 6.11 and 6.12 recomputed as at the last day
of the most recently ended fiscal quarter of Holdings, the Borrower and their
Subsidiaries as if such acquisition had occurred on the first day of each
relevant period for testing such compliance, and the Borrower shall have
delivered to the Administrative Agent an officers' certificate to such effect,
together with all relevant financial information for such Subsidiary or assets,
and (ii) any acquired or newly formed Subsidiary shall not be liable for any
Indebtedness (except for Indebtedness permitted by Section 6.01) and (e) the
aggregate amount of consideration paid in connection with any individual
Permitted Business Acquisition shall not exceed the Permitted Business
Acquisition Amount. Pro forma calculations made pursuant to clause (d)(i) of the
immediately preceding sentence shall be determined in good faith by a
Responsible Officer of the Borrower and may include adjustments, in the
reasonable determination of the Borrower as set forth in an officers'
certificate, to (i) reflect operating expense reductions reasonably expected to
result from any acquisition or merger or (ii) eliminate the effect of any
extraordinary accounting event with respect to any acquired person or assets on
Consolidated Net Income.
"Permitted Business Acquisition Amount" shall mean, for each Permitted
Business Acquisition, $25,000,000, provided that the Permitted Business
Acquisition Amount shall be increased with respect to a given Permitted Business
Acquisition (x) to the extent, and only to the extent, that the Borrower makes
an election to increase the Permitted Business Acquisition Amount for the
respective Permitted Business Acquisition, which increase shall only occur to
the extent that the Borrower so elects (x) to apply amounts that would otherwise
be available to make Capital Expenditures at such time pursuant to, and in
accordance with the provisions of, Section 6.10(a) and (b), (y) to make payments
owing in connection with the respective Permitted Business Acquisition with the
proceeds of Growth Capital Revolving Loans (so long as the amount of proceeds of
Growth Capital Revolving Loans so applied does not exceed the amount of proceeds
of Designated Capital Contributions used at such time pursuant to this clause
(y)) and Designated Capital Contributions and/or (z) to the extent the Borrower
elects to apply amounts otherwise available pursuant to, and in an amount not to
exceed, the Available Investment Basket Amount at such time.
"Permitted Cure Security" means an equity security of Holdings having no
mandatory redemption, repurchase or similar requirements prior to June 1, 2007
and upon which all dividends or distributions, at the election of Holdings, may
be payable in additional shares of such equity security.
"Permitted Investments" shall mean: (a) direct obligations of the United
States of America or any agency thereof or obligations guaranteed by the United
States of America or any agency thereof; (b) time deposit accounts, certificates
of deposit and money market deposits maturing within 180 days of the date of
acquisition thereof issued by a bank or trust company which is organized under
the laws of the United States of America, any state thereof or any foreign
country recognized by the United States of America having capital,
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surplus and undivided profits aggregating in excess of $250,000,000 (or the
foreign currency equivalent thereof) and whose long-term debt, or whose parent
holding company's long-term debt, is rated A (or such similar equivalent rating
or higher by at least one nationally recognized statistical rating organization
(as defined in Rule 436 under the Securities Act of 1933, as amended)); (c)
repurchase obligations with a term of not more than 30 days for underlying
securities of the types described in clause (a) above entered into with a bank
meeting the qualifications described in clause (b) above; (d) commercial paper,
maturing not more than 180 days after the date of acquisition, issued by a
corporation (other than an Affiliate of the Borrower) organized and in existence
under the laws of the United States of America or any foreign country recognized
by the United States of America with a rating at the time as of which any
investment therein is made of P-1 (or higher) according to Moody's Investors
Service, Inc., or A-1 (or higher) according to Standard & Poor's Ratings Group;
(e) securities with maturities of six months or less from the date of
acquisition issued or fully guaranteed by any state, commonwealth or territory
of the United States of America, or by any political subdivision or taxing
authority thereof, and rated at least A by Standard & Poor's Ratings Group or A
by Moody's Investors Service, Inc.; (f) in the case of any Subsidiary organized
in a jurisdiction outside the United States: (i) direct obligations of the
sovereign nation (or any agency thereof) in which such Subsidiary is organized
and is conducting business or in obligations fully and unconditionally
guaranteed by such sovereign nation (or any agency thereof), (ii) investments of
the type and maturity described in clauses (a) through (e) above of foreign
obligors, which investments or obligors (or the parents of such obligors) have
ratings described in such clauses or equivalent ratings from comparable foreign
rating agencies or (iii) investments of the type and maturity described in
clauses (a) through (e) above of foreign obligors (or the parents of such
obligors), which investments or obligors (or the parents of such obligors) are
not rated as provided in such clauses or in clause (ii) above but which are, in
the reasonable judgment of the Borrower, comparable in investment quality to
such investments and obligors (or the parents of such obligors); (g) shares of
mutual funds whose investment guidelines restrict 95% of such funds' investments
to those satisfying the provisions of clauses (a) through (e) above; and (h)
time deposit accounts, certificates of deposit and money market deposits in an
aggregate face amount not in excess of 1/2 of 1% of total assets of Holdings and
its Subsidiaries, on a consolidated basis, as of the end of Holdings' most
recently completed fiscal year.
"Permitted Tax Amount Distributions" shall mean for each tax year that the
Borrower or Holdings, as the case may be, qualifies as a partnership or as a
branch or agency of another person (a "Flow-through Entity") under the Code
(including the applicable provisions Treasury Regulations promulgated
thereunder) or any similar provision of state or local law, distributions of tax
amounts in respect of U.S. federal income tax and of income tax imposed by the
state or local jurisdictions in which the Flow-through Entity so qualifies as a
partnership or as a branch or agency of another person; provided, however, that
(A) a knowledgeable and duly authorized officer of the Flow-through Entity
certifies annually that the Flow-through Entity qualifies as a partnership or as
a branch or agency of another person for federal income tax purposes and under
similar laws of the states in respect of which such tax amount distributions are
being made and (B) at the time of such tax amount
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distributions, the most recent audited financial statements of the Flow-through
Entity provide that the Flow-through Entity was treated as a partnership or as a
branch or agency of another person for federal income tax purposes for the
period of such financial statements. Between the first and fifteenth day of each
month in which an estimated tax payment for a Borrower Partner is due, the
Flow-through Entity may distribute cash to each Borrower Partner in an amount
equal to the product of (A) the highest combined marginal individual or
corporate (as applicable) federal, state and local income tax rates ((i)
including, to the extent applicable, if any, alternative minimum tax and (ii)
taking into account any federal tax benefit for a deduction for state and local
taxes) applicable to the taxable income of the Flow-through Entity allocated to
a Borrower Partner and in effect at the time of the distribution, times (B) the
remainder, if any, of (1) the product of 25, 50, 75 or 100 percent for the first
(1st), second (2nd), third (3rd) or fourth (4th) required estimated tax
installment payments for the fiscal year, respectively, times (a) the cumulative
(as annualized) taxable income to be allocated to such Borrower Partner for such
fiscal year less (b) the cumulative taxable loss that has been allocated to such
Borrower Partner to the extent such loss has not previously reduced taxable
income pursuant to this provision in any prior taxable year, as determined in
good faith by the Flow-through Entity's executive committee at or around the
date of payment, minus (2) the sum of the cumulative distributions to such
Borrower Partner made with respect to such fiscal year under the applicable
provisions of the partnership agreement of the Borrower. Notwithstanding the
foregoing provisions, the Permitted Tax Amount Distributions permitted to be
distributed by Holdings shall be adjusted to reflect the Reimbursed Amount
calculated under Section 5.1(b)(ii) of Holdings' partnership agreement as in
effect on the date hereof. If any Borrower Partner of a Flow-through Entity is
an S corporation or a partnership or a similar pass-through entity, reference to
Borrower Partner shall include shareholder or partner, as the case may be, of
the Borrower Partner and reference to the Borrower shall include such
S-corporation or partnership or similar pass-through entity.
"person" shall mean any natural person, corporation, business trust, joint
venture, association, company, partnership, limited liability company or
government, individual or family trusts, or any agency or political subdivision
thereof.
"Plan" shall mean any employee pension benefit plan (other than a
Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section
412 of the Code and in respect of which the Borrower or any ERISA Affiliate is
(or, if such plan were terminated, would under Section 4069 of ERISA be deemed
to be) an "employer" as defined in Section 3(5) of ERISA.
"Pledge Agreement" shall mean, collectively, the Pledge Agreement,
substantially in the form of Exhibit G, among Holdings, the Borrower, each
Subsidiary Guarantor and the Collateral Agent for the benefit of the Secured
Parties and each other document delivered on the Closing Date (or thereafter
pursuant to Section 5.11) pursuant to which Holdings, the Borrower or any of
their domestic Subsidiaries pledged Equity Interests of any of their Foreign
Subsidiaries to secure the Obligations.
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"Pledged Notes" shall have the meaning provided in the Pledge Agreement.
"Pledged Partnership Interests" shall have the meaning provided in the
Pledge Agreement.
"Pledged Stock" shall have the meaning provided in the Pledge Agreement.
"primary obligor" shall have the meaning given such term in the definition
of Guarantee.
"Prime Rate" shall mean the rate of interest per annum publicly announced
from time to time by the Administrative Agent as its prime rate in effect at its
principal office in New York City; each change in the Prime Rate shall be
effective on the date such change is publicly announced as being effective.
"Properties" shall have the meaning given such term in Section 3.17(a).
"Purchase" shall have the meaning given such term in the preamble to this
Agreement.
"Recapitalization" shall have the meaning given such term in the preamble
to this Agreement.
"Recapitalization Agreement" shall mean the Agreement and Plan of
Recapitalization, Redemption and Purchase, dated as of December 18, 1997, by and
among (i) Holdings, (ii) the existing limited and general partners of Holdings,
(iii) Investor LP and (iv) Investor GP.
"Redemption" shall have the meaning given such term in the preamble to this
Agreement.
"Refinancing" shall have the meaning given such term in the preamble of
this Agreement.
"Refunded Swingline Loans" shall have the meaning provided in Section
2.01(d)(iii).
"Register" shall have the meaning given such term in Section 9.04(c).
"Regulation D" shall mean Regulation D of the Board as from time to time in
effect and all official rulings and interpretations thereunder or thereof.
"Regulation G" shall mean Regulation G of the Board as from time to time in
effect and all official rulings and interpretations thereunder or thereof.
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"Regulation U" shall mean Regulation U of the Board as from time to time in
effect and all official rulings and interpretations thereunder or thereof.
"Regulation X" shall mean Regulation X of the Board as from time to time in
effect and all official rulings and interpretations thereunder or thereof.
"Release" shall have the meaning given such term in CERCLA, 42 U.S.C. ss.
9601(22).
"Remaining Present Value" shall mean, as of any date with respect to any
lease, the present value as of such date of the scheduled future lease payments
with respect to such lease, determined with a discount rate equal to a market
rate of interest for such lease reasonably determined at the time such lease was
entered into.
"Remedial Action" shall mean (a) "remedial action" as such term is defined
in CERCLA, 42 U.S.C. Section 9601(24), and (b) all other actions, including
studies and investigations, required by any Governmental Authority or
voluntarily undertaken to (i) clean up, remove, treat, abate or in any other way
respond to any Hazardous Material in the environment or (ii) prevent the Release
or threatened Release, or minimize the further Release, of any Hazardous
Material.
"Reorganization" shall have the meaning given such term in the preamble to
this Agreement.
"Reportable Event" shall mean any reportable event as defined in Section
4043 of ERISA or the regulations issued thereunder with respect to a Plan (other
than a Plan maintained by an ERISA Affiliate that is considered an ERISA
Affiliate only pursuant to subsection (m) or (o) of Code Section 414).
"Required Lenders" shall mean, at any time, Lenders having Loans (other
than Swingline Loans), Revolving L/C Exposures, Swingline Exposures and unused
Commitments (excluding commitments to issue Letters of Credit or make Swingline
Loans) representing more than 50% of the sum of all Loans (other than Swingline
Loans) outstanding, Revolving L/C Exposures, Swingline Exposures and unused
Commitments (excluding commitments to issue Letters of Credit or make Swingline
Loans) at such time. The Loans, Revolving L/C Exposures, Swingline Exposures and
unused Commitments of any Defaulting Lender shall be disregarded in determining
Required Lenders at any time.
"Responsible Officer" of any person shall mean any executive officer or
Financial Officer of such person and any other officer or similar official
thereof responsible for the administration of the obligations of such
corporation in respect of this Agreement.
"Revolving Credit Borrowing" shall mean a Borrowing comprised of Revolving
Loans.
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"Revolving Credit Commitment" shall mean, with respect to each Lender, the
commitment of such Lender to make Revolving Loans hereunder as set forth in
Section 2.01(b) or in the Assignment and Acceptance pursuant to which such
Lender assumed its Revolving Credit Commitment, as applicable, as the same may
be reduced from time to time pursuant to Section 2.09 and pursuant to
assignments by such Lender pursuant to Section 9.04.
"Revolving Credit Exposure" shall mean, with respect to any Lender at any
time, the aggregate principal amount at such time of all outstanding Revolving
Loans of such Lender plus the amount at such time of such Lender's Revolving L/C
Exposure plus the amount at such time of such Lender's Swingline Exposure.
"Revolving Credit Lender" shall mean a Lender with a Revolving Credit
Commitment.
"Revolving Credit Maturity Date" shall mean January 31, 2004.
"Revolving L/C Commitment" shall mean, with respect to the Fronting Bank,
the commitment of the Fronting Bank to issue Letters of Credit pursuant to
Section 2.20(a).
"Revolving L/C Exposure" shall mean at any time the sum of (a) the
aggregate undrawn amount of all outstanding Letters of Credit at such time plus
(b) the aggregate principal amount of all L/C Disbursements that have not yet
been reimbursed at such time. The Revolving L/C Exposure of any Revolving Credit
Lender at any time shall mean its Applicable Percentage of the aggregate
Revolving L/C Exposure at such time.
"Revolving Loans" shall mean the revolving loans made by the Lenders to the
Borrower pursuant to Section 2.01(b). Each Revolving Loan shall be a Eurodollar
Revolving Loan or an ABR Revolving Loan.
"Sale and Lease-Back Transaction" shall have the meaning given such term in
Section 6.03.
"SEC" shall mean the Securities and Exchange Commission or any successor
thereto.
"Secured Parties" shall have the meaning given such term in the Security
Agreement.
"Security Agreement" shall mean the Security Agreement, substantially in
the form of Exhibit H, among Holdings, the Borrower, each Subsidiary Guarantor
and the Collateral Agent for the benefit of the Secured Parties.
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"Security Documents" shall mean the Mortgages, the Security Agreement, the
Intellectual Property Security Agreement, the Pledge Agreement and each of the
security agreements, mortgages and other instruments and documents executed and
delivered pursuant to any of the foregoing or pursuant to Section 5.11.
"Senior Subordinated Note Documents" shall mean the Senior Subordinated
Notes and the Senior Subordinated Note Indenture.
"Senior Subordinated Note Indenture" shall mean the Indenture dated as of
February 2, 1998 among the Borrower, the Co-Borrower and the trustee named
therein from time to time, as in effect on the Closing Date and as thereafter
amended from time to time in accordance with the requirements thereof and of
this Agreement.
"Senior Subordinated Notes" shall mean the Borrower's 8 3/4% Senior
Subordinated Notes due 2008 and its Floating Interest Rate Subordinated Term
Securities due 2008 issued pursuant to the Senior Subordinated Note Indenture
and any notes issued by the Borrower in exchange for, and as contemplated by,
the Senior Subordinated Notes with substantially identical terms as the Senior
Subordinated Notes.
"Standby Letter of Credit" shall mean an irrevocable standby letter of
credit under which the Fronting Bank agrees to make payments in Dollars for the
account of the Borrower, on behalf of the Borrower or any of its Subsidiaries.
"Statutory Reserves" shall mean a fraction (expressed as a decimal), the
numerator of which is the number one and the denominator of which is the number
one minus the aggregate of the maximum reserve percentages (including any
marginal, special, emergency or supplemental reserves) expressed as a decimal
established by the Board and any other banking authority, domestic or foreign,
to which the Administrative Agent is subject with respect to Eurocurrency
Liabilities (as defined in Regulation D of the Board) or other categories of
liabilities or deposits by reference to which the LIBO Rate is determined. Such
reserve percentages shall include those imposed pursuant to such Regulation D.
Eurodollar Loans shall be deemed to constitute Eurocurrency Liabilities and to
be subject to such reserve requirements without benefit of or credit for
proration, exemptions or offsets that may be available from time to time to any
Lender under such Regulation D. Statutory Reserves shall be adjusted
automatically on and as of the effective date of any change in any reserve
percentage.
"Subsidiary" shall mean, with respect to any person (herein referred to as
the "parent"), any corporation, partnership, association or other business
entity (a) of which securities or other ownership interests representing more
than 50% of the equity or more than 50% of the ordinary voting power or more
than 50% of the general partnership interests are, at the time any determination
is being made, directly or indirectly, owned, Controlled or held, or (b) that
is, at the time any determination is made, otherwise Controlled, by the parent
or one or more subsidiaries of the parent or by the parent and one
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or more subsidiaries of the parent. Unless the context otherwise indicates, all
references herein to a "Subsidiary" are references to a subsidiary of Holdings.
"Subsidiary Guarantee Agreement" shall mean the Subsidiary Guarantee
Agreement, substantially in the form of Exhibit I, to be entered into by the
Subsidiary Guarantors pursuant to and in accordance with the terms of Section
5.11 in favor of the Collateral Agent for the benefit of the Secured Parties.
"Subsidiary Guarantor" shall mean each domestic Subsidiary of Holdings
designated as a "Subsidiary Guarantor" on Schedule 3.08 hereto or which executes
the Subsidiary Guarantee Agreement pursuant to and in accordance with the terms
of Section 5.11.
"Supermajority Lenders" of any Tranche shall mean those Lenders which would
constitute the Required Lenders under, and as defined in, this Agreement if (x)
all outstanding Obligations of the other Tranches under this Agreement were
repaid in full and all Commitments with respect thereto were terminated and (y)
the percentage "50%" contained therein were changed to "66-2/3%".
"Swingline Exposure" shall mean at any time the aggregate principal amount
of all outstanding Swingline Loans at such time. The Swingline Exposure of any
Revolving Credit Lender at any time shall mean its Applicable Percentage of the
aggregate Swingline Exposure at such time.
"Swingline Lender" shall mean Bankers Trust Company in its capacity as
Swingline Lender hereunder.
"Swingline Loan Commitment" shall mean the commitment of the Swingline
Lender to make Swingline Loans as set forth in Section 2.01(d).
"Swingline Loans" shall mean the swingline loans made by the Swingline
Lender to the Borrower pursuant to Section 2.01(d).
"Syndication Agent" shall have the meaning given such term in the
introductory paragraph of this Agreement.
"Syndication Date" shall mean that date upon which the Administrative Agent
determines in its sole discretion (and notifies the Borrower) that the primary
syndication (and resultant addition of institutions as Banks pursuant to Section
9.04) has been completed.
"Taxes" shall have the meaning provided in Section 2.19(a).
"Term Borrowing" shall mean a Borrowing comprised of Term Loans.
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"Term Commitments" shall mean the Tranche A Term Loan Commitments, the
Tranche B Term Loan Commitments and the Tranche C Term Loan Commitments.
"Term Loans" shall mean the term loans made by the Lenders to the Borrower
pursuant to Section 2.01(a). Each Term Loan shall be a Eurodollar Term Loan or
an ABR Term Loan.
"Tested Parties" shall mean (x) prior to July 15, 2003, the Borrower and
its Subsidiaries and (y) thereafter, the Borrower and its Subsidiaries or, if on
any date of change to (or a reset of) the "LIBOR Margin", the "ABR Margin"
and/or Commitment Fee percentages pursuant to Schedule A (each such date a
"Margin Adjustment Date"), within the six calendar month period ended on such
Margin Adjustment Date, the Borrower has made any distributions to Holdings to
fund (or which were used to fund) the payment of cash interest on the Holdings
Discount Notes, then the Tested Parties, from such Margin Adjustment Date until
the next such Margin Adjustment Date (at which time the Tested Parties shall
once again be determined in accordance with the provisions of this clause (y)),
shall instead be Holdings and its Subsidiaries.
"Total Debt" shall mean, with respect to any person and its Subsidiaries on
a consolidated basis at any time (without duplication), all Indebtedness
consisting of Capital Lease Obligations, Indebtedness for borrowed money and
Indebtedness in respect of the deferred purchase price of property or services
of such person and its Subsidiaries on a consolidated basis at such time.
"Total Growth Capital Commitment" shall mean, at any time, the aggregate
amount of Growth Capital Commitments, as in effect at such time.
"Total Net Debt" at any date shall mean Total Debt of the Borrower and its
Subsidiaries determined on a consolidated basis on such date minus the aggregate
amount of cash and cash equivalents in excess of $5,000,000 set forth on the
consolidated balance sheet of the Borrower and its Subsidiaries prepared as of
such date; provided that for all purposes of making calculations pursuant to
Schedule A (but not for purposes of Section 6.12), each reference above in this
definition to "Borrower and its Subsidiaries" shall be deemed changed to instead
be a reference to the "Tested Parties".
"Total Revolving Credit Commitment" shall mean, at any time, the aggregate
amount of the Revolving Credit Commitments, as in effect at such time.
"Tranche" shall mean the respective facility and commitments utilized in
making Loans hereunder, with there being six separate Tranches, i.e., Tranche A
Term Loans, Tranche B Term Loans, Tranche C Term Loans, Revolving Loans, Growth
Capital Revolving Loans and Swingline Loans.
"Tranche A Maturity Date" shall mean January 31, 2004.
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"Tranche A Term Borrowing" shall mean a Borrowing comprised of Tranche A
Term Loans.
"Tranche A Term Loan Commitment" shall mean with respect to each Lender,
the commitment of such Lender to make Tranche A Term Loans hereunder as set
forth in Section 2.01(a)(i), as the same may be reduced from time to time
pursuant to Section 2.09.
"Tranche A Term Loan Installment Date" shall have the meaning provided in
Section 2.11(a).
"Tranche A Term Loans" shall mean the term loans made by the Lenders to the
Borrower pursuant to Section 2.01(a)(i).
"Tranche B Maturity Date" shall mean January 31, 2006.
"Tranche B Term Borrowing" shall mean a Borrowing comprised of Tranche B
Term Loans.
"Tranche B Term Loan Commitment" shall mean with respect to each Lender,
the commitment of such Lender to make Tranche B Term Loans hereunder as set
forth in Section 2.01(a)(ii), as the same may be reduced from time to time
pursuant to Section 2.09.
"Tranche B Term Loan Installment Date" shall have the meaning provided in
Section 2.11(a).
"Tranche B Term Loans" shall mean the term loans made by the Lenders to the
Borrower pursuant to Section 2.01(a)(ii).
"Tranche C Term Loan Installment Date" shall have the meaning provided in
Section 2.11(a).
"Tranche C Maturity Date" shall mean January 31, 2007.
"Tranche C Term Borrowing" shall mean a Borrowing comprised of Tranche C
Term Loans.
"Tranche C Term Loan Commitment" shall mean with respect to each Lender,
the commitment of such Lender to make Tranche C Term Loans hereunder as set
forth in Section 2.01(a)(iii), as the same may be reduced from time to time
pursuant to Section 2.09.
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"Tranche C Term Loans" shall mean the term loans made by the Lenders to the
Borrower pursuant to Section 2.01(a)(iii).
"Transaction" shall have the meaning given such term in the preamble to
this Agreement.
"Type", when used in respect of any Loan or Borrowing, shall refer to the
Rate by reference to which interest on such Loan or on the Loans comprising such
Borrowing is determined. For purposes hereof, the term "Rate" shall include the
Adjusted LIBO Rate and the Alternate Base Rate.
"Wholly Owned Subsidiary" of any person means a Subsidiary of such person,
at least 99% of the Equity Interests of which (other than directors' qualifying
shares) are owned by such person or another Wholly Owned Subsidiary. Unless the
context otherwise indicates, all references herein to a "Wholly Owned
Subsidiary" are references to a Wholly Owned Subsidiary of Holdings.
"Withdrawal Liability" shall mean liability to a Multiemployer Plan as a
result of a complete or partial withdrawal from such Multiemployer Plan, as such
terms are defined in Part I of Subtitle E of Title IV of ERISA.
"Working Capital" shall mean, with respect to the Borrower and its
Subsidiaries on a consolidated basis at any date of determination, Current
Assets at such date of determination minus Current Liabilities at such date of
determination.
SECTION 1.02. Terms Generally. The definitions in Section 1.01 shall apply
equally to both the singular and plural forms of the terms defined. Whenever the
context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words "include", "includes" and "including" shall
be deemed to be followed by the phrase "without limitation". All references
herein to Articles, Sections, Exhibits and Schedules shall be deemed references
to Articles and Sections of, and Exhibits and Schedules to, this Agreement
unless the context shall otherwise require. Except as otherwise expressly
provided herein, (a) any reference in this Agreement to any Loan Document shall
mean such document as amended, restated, supplemented or otherwise modified from
time to time and (b) all terms of an accounting or financial nature shall be
construed in accordance with GAAP, as in effect from time to time; provided,
however, that for purposes of determining compliance with the covenants
contained in Section 2.12(d) and Article VI all accounting terms herein shall be
interpreted and all accounting determinations hereunder (in each case, unless
otherwise provided for or defined herein) shall be made in accordance with GAAP
as in effect on the date of this Agreement and applied on a basis consistent
with the application used in the financial statements referred to in Section
3.05 (other than, at the option of Holdings and the Borrower, with respect to
capitalization of repair and maintenance expenses in accordance with the
parenthetical appearing in the definition of GAAP contained herein); and
provided further, that if the Borrower notifies the
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Administrative Agent that the Borrower wishes to amend any covenant in Section
2.12(d) or Article VI or any related definition to eliminate the effect of any
change in GAAP occurring after the date of this Agreement on the operation of
such covenant (or if the Administrative Agent notifies the Borrower that the
Required Lenders wish to amend Section 2.12(d) or Article VI or any related
definition for such purpose), then (i) the Borrower and the Administrative Agent
shall negotiate in good faith to agree upon an appropriate amendment to such
covenant and (ii) the Borrower's compliance with such covenant shall be
determined on the basis of GAAP in effect immediately before the relevant change
in GAAP became effective until such covenant is amended in a manner satisfactory
to the Borrower and the Required Lenders. For the purposes of determining
compliance under Sections 6.01, 6.02, 6.04, 6.05 and 6.10 with respect to any
amount in a currency other than Dollars, such amount shall be deemed to equal
the Dollar equivalent thereof at the time such amount was incurred or expended,
as the case may be.
ARTICLE II.
THE CREDITS
SECTION 2.01. Commitments. (a) Subject to the terms and conditions and
relying upon the representations and warranties of Holdings and the Borrower
herein set forth, each Lender agrees, severally and not jointly:
(i) to make a Tranche A Term Loan to the Borrower on the Closing Date,
in a principal amount not to exceed the Tranche A Term Loan Commitment set
forth opposite its name on Schedule 2.01, as the same may be reduced from
time to time pursuant to Section 2.09;
(ii) to make a Tranche B Term Loan to the Borrower on the Closing Date
in a principal amount not to exceed the Tranche B Term Loan Commitment set
forth opposite its name on Schedule 2.01, as the same may be reduced from
time to time pursuant to Section 2.09; and
(iii) to make a Tranche C Term Loan to the Borrower on the Closing
Date in a principal amount not to exceed the Tranche C Term Loan Commitment
set forth opposite its name on Schedule 2.01, as the same may be reduced
from time to time pursuant to Section 2.09.
(b) Subject to the terms and conditions and relying upon the
representations and warranties of Holdings and the Borrower herein set forth,
each Lender agrees, severally and not jointly, to make Revolving Loans to the
Borrower, at any time and from time to time on or after the date hereof, and
until the earlier of the Revolving Credit Maturity Date and the termination of
the Revolving Credit Commitment of such Lender in accordance with the terms
hereof, in an aggregate principal amount at any time outstanding that will not
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result in such Lender's Revolving Credit Exposure at such time exceeding the
Revolving Credit Commitment set forth opposite its name on Schedule 2.01, as the
same may be reduced from time to time pursuant to Section 2.09, provided that
the aggregate principal amount of Revolving Loans made to the Borrower on the
Closing Date shall not exceed $15,000,000.
(c) Subject to the terms and conditions and relying upon the
representations and warranties of Holdings and the Borrower herein set forth,
each Lender agrees, severally and not jointly, to make Growth Capital Revolving
Loans to the Borrower, at any time and from time to time after the date hereof,
and until the earlier of the Growth Capital Maturity Date and the termination of
the Growth Capital Commitment of such Lender in accordance with the terms
hereof, in an aggregate principal amount at any time outstanding that will not
result in the aggregate principal amount of Growth Capital Revolving Loans made
by such Lender and outstanding at such time exceeding the Available Growth
Capital Commitment of such Lender at such time.
(d) (i) The Swingline Lender hereby agrees, subject to the terms and
conditions and relying upon the representations and warranties of Holdings and
the Borrower herein set forth, and subject to the limitations set forth below
with respect to the maximum amount of Swingline Loans permitted to be
outstanding from time to time, to make a portion of the Revolving Credit
Commitments available to the Borrower from time to time during the period from
the Closing Date through and excluding the earlier of the Revolving Credit
Maturity Date and the termination of the Revolving Credit Commitments in an
aggregate principal amount not to exceed the Swingline Loan Commitment, by
making Swingline Loans to the Borrower. Swingline Loans may be made
notwithstanding the fact that such Swingline Loans, when aggregated with the
Swingline Lender's outstanding Revolving Loans, Revolving L/C Exposure and
outstanding Swingline Loans, may exceed the Swingline Lender's Revolving Credit
Commitment. The original amount of the Swingline Loan Commitment is $20,000,000.
The Swingline Loan Commitment shall expire on the date the Revolving Credit
Commitments are terminated and all Swingline Loans and all other amounts owed
hereunder with respect to Swingline Loans shall be paid in full no later than
that date. The Borrower shall give the Swingline Lender telephonic, written or
telecopy notice (in the case of telephonic notice, such notice shall be promptly
confirmed in writing or by telecopy) not later than 12:00 (noon), New York City
time, on the day of a proposed borrowing. Such notice shall be delivered on a
Business Day, shall be irrevocable and shall refer to this Agreement and shall
specify the requested date (which shall be a Business Day) and amount of such
Swingline Loan. The Swingline Lender shall give the Administrative Agent, which
shall in turn give to each Lender, prompt written or telecopy advice of any
notice received from the Borrower pursuant to this paragraph.
(ii) In no event shall (A) the aggregate principal amount of Swingline
Loans outstanding at any time exceed the aggregate Swingline Loan Commitment in
effect at such time, (B) the Aggregate Revolving Credit Exposure at any time
exceed the Total Revolving Credit Commitment at such time or (C) the aggregate
Swingline Loan Commitment exceed
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at any time the aggregate Revolving Credit Commitments in effect at such time.
Swingline Loans may only be made as ABR Loans.
(iii) With respect to any Swingline Loans that have not been voluntarily
prepaid by the Borrower, the Swingline Lender (by request to the Administrative
Agent) or Administrative Agent at any time may, in its sole discretion, on one
Business Day's notice, require each Revolving Credit Lender, including the
Swingline Lender, and each such Lender hereby agrees, subject to the provisions
of this Section 2.01(d), to make a Revolving Loan (which shall be funded as an
ABR Loan) in an amount equal to such Lender's Applicable Percentage of the
amount of the Swingline Loans ("Refunded Swingline Loans") outstanding on the
date notice is given which the Swingline Lender requests the Lenders to prepay.
(iv) In the case of Revolving Loans made by Lenders other than the
Swingline Lender under the immediately preceding paragraph (iii), each such
Lender shall make the amount of its Revolving Loan available to the
Administrative Agent, in same day funds, at the office of the Administrative
Agent located at 130 Liberty Street, New York, New York, not later than 1:00
p.m., New York City time, on the Business Day next succeeding the date such
notice is given. The proceeds of such Revolving Loans shall be immediately
delivered to the Swingline Lender (and not to the Borrower) and applied to repay
the Refunded Swingline Loans. On the day such Revolving Loans are made, the
Swingline Lender's Applicable Percentage of the Refunded Swingline Loans shall
be deemed to be paid with the proceeds of a Revolving Loan made by the Swingline
Lender and such portion of the Swingline Loans deemed to be so paid shall no
longer be outstanding as Swingline Loans and shall be outstanding as Revolving
Loans of Lenders. The Borrower authorizes the Administrative Agent and the
Swingline Lender to charge the Borrower's account with the Administrative Agent
(up to the amount available in such account) in order to pay immediately to the
Swingline Lender the amount of such Refunded Swingline Loans to the extent
amounts received from Lenders, including amounts deemed to be received from the
Swingline Lender, are not sufficient to repay in full such Refunded Swingline
Loans. If any portion of any such amount paid (or deemed to be paid) to the
Swingline Lender should be recovered by or on behalf of the Borrower from the
Swingline Lender in bankruptcy, by assignment for the benefit of creditors or
otherwise, the loss of the amount so recovered shall be ratably shared among all
Lenders in the manner contemplated by Section 2.17. Subject to the compliance by
the Swingline Lender with the provisions of subparagraph (vii) below, each
Lender's obligation to make the Revolving Loans referred to in this paragraph
shall be absolute and unconditional and shall not be affected by any
circumstance, including (A) any setoff, counterclaim, recoupment, defense or
other right that such Lender may have against the Swingline Lender, the Borrower
or any other person for any reason whatsoever; (B) the occurrence or continuance
of an Event of Default or a Default; (C) any adverse change in the condition
(financial or otherwise) of Holdings or any of its Subsidiaries; (D) any breach
of this Agreement by Holdings, the Borrower or any other Lender; or (E) any
other circumstance, happening or event whatsoever, whether or not similar to any
of the foregoing. Nothing in this Section 2.01(d) shall be deemed to relieve any
Lender from
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its obligation to fulfill its Commitments hereunder or to prejudice any rights
that the Borrower may have against any Lender as a result of any default by such
Lender hereunder.
(v) A copy of each notice given by the Swingline Lender or the
Administrative Agent pursuant to this Section 2.01(d) shall be promptly
delivered by the Swingline Lender to the Administrative Agent and the Borrower.
Upon the making of a Revolving Loan by a Lender pursuant to this Section
2.01(d), the amount so funded shall no longer be owed in respect of Swingline
Loans.
(vi) To the extent any Swingline Loans are outstanding on any date when one
of the events described in Section 7.01(h) or (i) shall have occurred, each
Revolving Credit Lender will, on such date, purchase an undivided participating
interest in the Refunded Swingline Loans (determined as if the notice specified
in clause (d)(iii) of this Section 2.01 had in fact been given with respect to
all then outstanding Swingline Loans) in an amount equal to its Applicable
Percentage of such Refunded Swingline Loans. Each such Lender will immediately
transfer to the Swingline Lender in immediately available funds, the amount of
its participation. Upon one Business Day's notice from the Swingline Lender,
each Revolving Credit Lender shall deliver to the Swingline Lender an amount
equal to its respective participation in same day funds at the office of the
Swingline Lender in New York, New York. In order to evidence such participation
each Revolving Credit Lender agrees to enter into a participation agreement at
the request of the Swingline Lender in form and substance reasonably
satisfactory to all parties. In the event any Revolving Credit Lender fails to
make available to the Swingline Lender the amount of such Revolving Credit
Lender's participation as provided in this Section 2.01(d), the Swingline Lender
shall be entitled to recover such amount on demand from such Revolving Credit
Lender together with interest at the customary rate set by the Swingline Lender
for correction of errors among banks in New York City for one Business Day and
thereafter at the Alternate Base Rate plus the ABR Margin then in effect as set
forth on Schedule A.
(vii) Notwithstanding anything herein to the contrary, the Swingline Lender
shall not make any Swingline Loans at any time the Swingline Lender is aware
that the conditions to the making of such Swingline Loan set forth in Section
4.01 have not been satisfied unless such conditions shall have been waived in
accordance with this Agreement.
(e) Within the limits set forth in paragraphs (b), (c) and (d) above, (x)
the Borrower may borrow, pay or prepay (including pursuant to a refinancing
permitted by Section 2.02(f)) and reborrow Revolving Loans and Swingline Loans
on or after the Closing Date and prior to the Revolving Credit Maturity Date and
(y) the Borrower may borrow, pay or prepay (including pursuant to a refinancing
permitted by Section 2.02(f)) and reborrow Growth Capital Revolving Loans after
the Closing Date and prior to the Growth Capital Maturity Date, in each case
subject to the terms, conditions and limitations set forth herein. Amounts paid
or prepaid in respect of Term Loans may not be reborrowed.
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SECTION 2.02. Loans. (a) Each Loan shall be made as part of a Borrowing
consisting of Loans made by the Lenders ratably in accordance with their
applicable Commitments; provided, however, that the failure of any Lender to
make any Loan shall not relieve any other Lender of its obligation to lend
hereunder (it being understood, however, that no Lender shall be responsible for
the failure of any other Lender to make any Loan required to be made by such
other Lender). The Loans comprising any Borrowing shall be in an aggregate
principal amount which is (i) an integral multiple of $1,000,000 (or, in the
case of Swingline Loans, $500,000) and not less than $2,000,000 (or, in the case
of Swingline Loans, $500,000) or (ii) equal to the remaining available balance
of the applicable Commitments, provided that Revolving Loans used to pay
Refunded Swingline Loans may be in the amount of such Refunded Swingline Loans.
(b) Subject to Sections 2.08 and 2.14, each Borrowing shall be comprised
entirely of ABR Loans or (except in the case of Swingline Loans or as set forth
in the second proviso to this sentence) Eurodollar Loans as the Borrower may
request pursuant to Section 2.03. Each Lender may at its option make any
Eurodollar Loan by causing any domestic or foreign branch or Affiliate of such
Lender to make such Loan, provided that any exercise of such option shall not
affect the obligation of the Borrower to repay such Loan in accordance with the
terms of this Agreement and such Lender shall not be entitled to any amounts
payable under Section 2.13 or Section 2.19 in respect of increased costs arising
as a result of such exercise, provided further that prior to the earlier of (x)
the 35th day after the Closing Date and (y) the Syndication Date, the following
restrictions shall apply: (x) no Loans may be incurred as Eurodollar Loans prior
to the fifth day after the Closing Date and (II) no more than one borrowing
under each Tranche of Revolving Loans and Growth Capital Revolving Loans may be
incurred as Eurodollar Loans, each of which borrowings of Eurodollar Loans shall
be incurred on the fifth day after the Closing Date and have a one month
Interest Period. Borrowings of more than one Type may be outstanding at the same
time; provided, however, that the Borrower shall not be entitled to request any
Borrowing that, if made, would result in more than 20 Eurodollar Borrowings
outstanding hereunder at any time. For purposes of the foregoing, Borrowings
having different Interest Periods, regardless of whether they commence on the
same date, shall be considered separate Borrowings.
(c) Subject to paragraph (f) below, each Lender shall make each Loan to be
made by it hereunder on the proposed date thereof by wire transfer to such
account as the Administrative Agent may designate in federal funds not later
than 11:00 a.m., New York City time, and the Administrative Agent shall by 12:00
(noon), New York City time, (a) in the case of any Loan made to reimburse any
L/C Disbursement or to refund any Swingline Loan, apply the amounts so received
to effect such reimbursement or refund as contemplated by Section 2.20 or
Section 2.01(d) and (b) in the case of each Loan the proceeds of which are to be
received by the Borrower, credit the amounts so received to an account
designated by the Borrower in the applicable Borrowing Request; provided,
however, that if a Borrowing shall not occur on such date because any condition
precedent herein specified shall not
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have been met, the Administrative Agent shall return the amounts so received to
the respective Lenders.
(d) Unless the Administrative Agent shall have received notice from a
Lender prior to the date of any Borrowing that such Lender will not make
available to the Administrative Agent such Lender's portion of such Borrowing,
the Administrative Agent may assume that such Lender has made such portion
available to the Administrative Agent on the date of such Borrowing in
accordance with paragraph (c) above and may, in reliance upon such assumption,
make available to the Borrower on such date a corresponding amount. If the
Administrative Agent shall have so made funds available then, to the extent that
such Lender shall not have made such portion available to the Administrative
Agent, such Lender and the Borrower severally agree to repay to the
Administrative Agent forthwith on demand such corresponding amount together with
interest thereon, for each day from the date such amount is made available to
the Borrower until the date such amount is repaid to the Administrative Agent,
at (i) in the case of the Borrower, the interest rate applicable at the time to
the Loans comprising such Borrowing and (ii) in the case of such Lender, a rate
determined by the Administrative Agent to represent its cost of overnight or
short-term funds (which determination shall be conclusive absent manifest
error). If such Lender shall repay to the Administrative Agent such
corresponding amount, such amount shall constitute such Lender's Loan as part of
such Borrowing for purposes of this Agreement.
(e) Notwithstanding any other provision of this Agreement, the Borrower
shall not be entitled to request any Borrowing if the Interest Period requested
with respect thereto would end after the Tranche A Maturity Date, Tranche B
Maturity Date, Tranche C Maturity Date, Revolving Credit Maturity Date or Growth
Capital Maturity Date, as applicable.
(f) The Borrower may refinance all or any part of a Revolving Credit
Borrowing or a Growth Capital Borrowing with another Revolving Credit Borrowing
or Growth Capital Borrowing, respectively. Any Revolving Credit Borrowing (or
part thereof) or Growth Capital Borrowing (or part thereof) so refinanced shall
be deemed to be repaid or prepaid in accordance with the applicable provisions
of this Agreement with the proceeds of the new Revolving Credit Borrowing or new
Growth Capital Borrowing, as the case may be, and the proceeds of such new
Borrowing, to the extent they do not exceed the principal amount of the
Borrowing being refinanced, shall not be paid by the Lenders to the
Administrative Agent or by the Administrative Agent to the Borrower pursuant to
paragraph (c) above.
SECTION 2.03. Borrowing Procedure. In order to request a Borrowing, the
Borrower shall hand deliver or telecopy to the Administrative Agent a duly
completed Borrowing Request substantially in the form of Exhibit B (a) in the
case of a Eurodollar Borrowing, not later than 12:00 (noon),
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New York City time, three Business Days before a proposed Borrowing, and (b) in
the case of an ABR Borrowing, not later than 12:00 noon, New York City time, one
Business Day before a proposed Borrowing; provided, however, that Borrowing
Requests with respect to Borrowings to be made on the Closing Date may, at the
discretion of the Administrative Agent, be delivered later than the times
specified above. Each Borrowing Request shall be irrevocable, shall be signed by
or on behalf of the Borrower and shall specify the following information: (i)
whether the Borrowing then being requested is to be a Term Borrowing, a
Revolving Credit Borrowing or a Growth Capital Borrowing (and in the case of a
Term Borrowing the Commitments pursuant to which the Loans comprising such
Borrowing are to be made), and whether such Borrowing is to be a Eurodollar
Borrowing or an ABR Borrowing; (ii) the date of such Borrowing (which shall be a
Business Day), (iii) in the case of a Borrowing the proceeds of which are to be
received by the Borrower, the number and location of the account to which funds
are to be disbursed (which shall be an account that complies with the
requirements of Section 2.02(c)); (iv) the amount of such Borrowing; and (v) if
such Borrowing is to be a Eurodollar Borrowing, the Interest Period with respect
thereto; provided, however, that, notwithstanding any contrary specification in
any Borrowing Request, each requested Borrowing shall comply with the
requirements set forth in Section 2.02. If no election as to the Type of
Borrowing is specified in any such notice, then the requested Borrowing shall be
an ABR Borrowing. If no Interest Period with respect to any Eurodollar Borrowing
is specified in any such notice, then the Borrower shall be deemed to have
selected an Interest Period of one month's duration. The Administrative Agent
shall promptly (and in any event on the same day that the Administrative Agent
receives such notice, if received by 1:00 p.m., New York City time, on such day)
advise the applicable Lenders of any notice given pursuant to this Section 2.03
and of each Lender's portion of the requested Borrowing.
If the Borrower shall not have delivered a Borrowing Request in accordance
with this Section 2.03 prior to the end of the Interest Period then in effect
for any Revolving Credit Borrowing or any Growth Capital Borrowing, as the case
may be, requesting that such Borrowing be refinanced, then the Borrower shall
(unless the Borrower has notified the Administrative Agent, not less than three
Business Days prior to the end of such Interest Period, that such Borrowing is
to be repaid at the end of such Interest Period) be deemed to have delivered a
Borrowing Request requesting that such Borrowing be refinanced with a new
Borrowing of equivalent amount, and such new Borrowing shall be an ABR
Borrowing.
SECTION 2.04. Evidence of Debt; Repayment of Loans. (a)" \* MERGEFORMAT (a)
The outstanding principal balance of each Loan shall be payable (i) in the case
of a Term Loan, as provided in Section 2.11, (ii) in the case of a Revolving
Loan or a Swingline Loan, on the Revolving Credit Maturity Date and (iii) in the
case of a Growth Capital Revolving Loan, on the Growth Capital Maturity Date.
Each Loan shall bear interest from the date of the first Borrowing hereunder on
the outstanding principal balance thereof as set forth in Section 2.06.
(b) Each Lender shall maintain in accordance with its usual practice an
account or accounts evidencing the indebtedness to such Lender resulting from
each Loan
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made by such Lender from time to time, including the amounts of principal and
interest payable and paid to such Lender from time to time under this Agreement.
(c) The Administrative Agent shall maintain accounts in which it will
record (i) the amount of each Loan made hereunder, the Type of each Loan made
and the Interest Period applicable thereto, (ii) the amount of any principal or
interest due and payable or to become due and payable from the Borrower to each
Lender hereunder and (iii) the amount of any sum received by the Administrative
Agent hereunder from the Borrower and each Lender's share thereof.
(d) The entries made in the accounts maintained pursuant to paragraph (b)
and (c) of this Section 2.04 shall be prima facie evidence of the existence and
amounts of the obligations therein recorded; provided, however, that the failure
of any Lender or the Administrative Agent to maintain such accounts or any error
therein shall not in any manner affect the obligations of the Borrower to repay
the Loans in accordance with their terms.
(e) Notwithstanding any other provision of this Agreement, upon the request
of any Lender, the Borrower will duly execute and deliver to such lender a
promissory note or notes evidencing the Loans made to such Lender hereunder and
the interests represented by such Note or Notes shall at all times (including
after any assignment of all or part of such interests pursuant to Section 9.04)
be represented by one or more Notes payable to the payee named therein or its
registered assigns.
SECTION 2.05. Fees. (a) The Borrower agrees to pay to each Lender (other
than any Defaulting Lender), through the Administrative Agent, on the last day
of March, June, September and December in each year, and on the date on which
the Commitments of all the Lenders shall be terminated as provided herein, a
commitment fee (a "Commitment Fee") on the average daily unused amount of the
Commitments of such Lender during the preceding quarter (or other period ending
with the date on which the last of the Commitments of such Lender shall be
terminated) at either (i) a rate equal to 0.50% per annum or (ii) for any such
period commencing on or after the date of the Borrower's delivery to the
Administrative Agent of the Borrower's consolidated financial statements for the
second full fiscal quarter of the Borrower commencing after the Closing Date, at
the rate per annum effective for each day in such period as set forth on
Schedule A. All Commitment Fees shall be computed on the basis of the actual
number of days elapsed in a year of 360 days. For the purpose of calculating any
Lender's Commitment Fee, the outstanding Swingline Loans during the period for
which such Lender's Commitment Fee is calculated shall be deemed to be zero. The
Commitment Fee due to each Lender shall commence to accrue on the Closing Date
and shall cease to accrue on the date on which the last of the Commitments of
such Lender shall be terminated as provided herein.
(b) The Borrower from time to time agrees to pay (i) to each Revolving
Credit Lender (other than any Defaulting Lender), through the Administrative
Agent, on the last day of March, June, September and December of each year and
on the date on which
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the Revolving Credit Commitments of all the Lenders shall be terminated as
provided herein, a fee (an "L/C Participation Fee") on such Lender's Applicable
Percentage of the average daily aggregate Revolving L/C Exposure (excluding the
portion thereof attributable to unreimbursed L/C Disbursements), during the
preceding quarter (or shorter period commencing with the date hereof or ending
with the Revolving Credit Maturity Date or the date on which the Revolving
Credit Commitments shall be terminated) at the rate per annum equal to the LIBOR
Margin effective for each day in such period for Revolving Loans as set forth on
Schedule A and (ii) to the Fronting Bank, for its own account, (x) on the last
day of March, June, September and December of each year and on the date on which
the Revolving Credit Commitments of all the Lenders shall be terminated as
provided herein, a facing fee in respect of each Letter of Credit issued for its
account hereunder for the period from and including the date of issuance of such
Letter of Credit to and including the termination of such Letter of Credit,
computed at a rate equal to 1/4 of 1% per annum of the daily average stated
amount of such Letter of Credit; provided that in no event shall the annual
amount of such facing fee with respect to any Letter of Credit be less than
$500, plus, (y) in connection with the issuance, amendment or transfer of any
such Letter of Credit or any L/C Disbursement thereunder, the Fronting Bank's
customary documentary and processing charges (collectively, the "Fronting Bank
Fees"). All L/C Participation Fees and Fronting Bank Fees that are payable on a
per annum basis shall be computed on the basis of the actual number of days
elapsed in a year of 360 days.
(c) The Borrower agrees to pay to the Administrative Agent, for its own
account, the fees set forth in the Fee Letter dated as of December 18, 1997, at
the times specified therein (the "Administrative Agent Fees").
(d) All Fees shall be paid on the dates due, in immediately available
funds, to the Administrative Agent for distribution, if and as appropriate,
among the Lenders, except that the Fronting Bank Fees shall be paid directly to
the Fronting Bank. Once paid, none of the Fees shall be refundable under any
circumstances.
SECTION 2.06. Interest on Loans. (a) Subject to the provisions of paragraph
(c) below and Section 2.07, the Loans comprising each ABR Borrowing shall bear
interest (computed on the basis of the actual number of days elapsed over a year
of 365 or 366 days, as the case may be, when determined by reference to the
Prime Rate and over a year of 360 days at all other times) at a rate per annum
equal to the Alternate Base Rate plus, in the case of (i) Tranche A Term Loans,
Revolving Loans, Swingline Loans or Growth Capital Revolving Loans, 1.25%, (ii)
Tranche B Term Loans, 1.75% or (iii) Tranche C Term Loans, 2.00%.
(b) Subject to the provisions of paragraph (c) below and Section 2.07, the
Loans comprising each Eurodollar Borrowing shall bear interest (computed on the
basis of the actual number of days elapsed over a year of 360 days) at a rate
per annum equal to the Adjusted LIBO Rate for the Interest Period in effect for
such Borrowing plus, in the case of
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(i) Tranche A Term Loans, Revolving Loans or Growth Capital Revolving Loans,
2.25%, (ii) Tranche B Term Loans, 2.75% or (iii) Tranche C Term Loans, 3.00%.
(c) Subject to the provisions of Section 2.07, Tranche A Term Loans,
Tranche B Term Loans, Tranche C Term Loans, Revolving Loans, Swingline Loans and
Growth Capital Revolving Loans comprising any ABR Borrowing or Eurodollar
Borrowing shall bear interest (computed as set forth in paragraph (a) or (b)
above, as applicable) for any date on or after the date of the Borrower's
delivery to the Administrative Agent of the Borrower's consolidated financial
statements for the second full fiscal quarter of the Borrower commencing after
the Closing Date, at a rate per annum equal to the Alternate Base Rate or the
Adjusted LIBO Rate, as applicable, plus the ABR Margin or the LIBOR Margin, as
applicable, effective for such date as set forth on Schedule A.
(d) Interest on each Loan shall be payable on the Interest Payment Dates
applicable to such Loan except as otherwise provided in this Agreement. The
applicable Alternate Base Rate or Adjusted LIBO Rate for each Interest Period or
day within an Interest Period, as the case may be, shall be determined by the
Administrative Agent, and such determination shall be conclusive absent manifest
error. The Administrative Agent shall give the Borrower prompt notice of each
such determination.
SECTION 2.07. Default Interest. If the Borrower shall default in the
payment of the principal of or interest on any Loan or any other amount becoming
due hereunder, by acceleration or otherwise, the Borrower shall on demand from
time to time pay interest, to the extent permitted by law, on such defaulted
amount for the period beginning on the date of such default up to (but not
including) the date of actual payment (after as well as before judgment) at a
rate per annum (computed on the basis of the actual number of days elapsed over
a year of 360 days) equal to the greater of (i) 2% per annum in excess of the
rate otherwise applicable to ABR Loans of the respective Tranche of Loans from
time to time and (y) the rate which is 2% in excess of the rate then borne by
such Loans.
SECTION 2.08. Alternate Rate of Interest. In the event, and on each
occasion, that on the day two Business Days prior to the commencement of any
Interest Period for a Eurodollar Borrowing the Administrative Agent shall have
determined that dollar deposits in the principal amounts of the Loans comprising
such Borrowing are not generally available in the London interbank market, or
that the rates at which such dollar deposits are being offered will not
adequately and fairly reflect the cost to any Lender of making or maintaining
its Eurodollar Loan during such Interest Period, or that reasonable means do not
exist for ascertaining the Adjusted LIBO Rate, the Administrative Agent shall,
as soon as practicable thereafter, give written or telecopy notice of such
determination to the Borrower and the Lenders. In the event of any such
determination, until the Administrative Agent shall have advised the Borrower
and the Lenders that the circumstances giving rise to such notice no longer
exist, any request by the Borrower for a Eurodollar Borrowing pursuant to
Section 2.03 or 2.10 shall be deemed to be a request for an ABR Borrowing. Each
determination by the Administrative Agent hereunder shall be conclusive absent
manifest error.
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SECTION 2.09. Termination and Reduction of Commitments. (a) (i) The Tranche
A Term Loan Commitments, Tranche B Term Loan Commitments and Tranche C Term Loan
Commitments shall be automatically and permanently terminated at 5:00 p.m., New
York City time, on the Closing Date. The Total Revolving Credit Commitment shall
be automatically and permanently terminated at 5:00 p.m., New York City time, on
the Revolving Credit Maturity Date. The Total Growth Capital Commitment shall be
automatically and permanently terminated at 5:00 p.m., New York City time, on
the Growth Capital Maturity Date.
(ii) The Commitments (and the Term Commitments, Revolving Credit
Commitments, Growth Capital Commitments, Swingline Loan Commitment and Revolving
L/C Commitment of each Lender) shall terminate in their entirety on March 31,
1998 unless the Closing Date shall have occurred on or prior to such date.
(b) Upon at least three Business Days' prior irrevocable written or
telecopy notice to the Administrative Agent, the Borrower may at any time in
whole permanently terminate, or from time to time in part permanently reduce,
any of the Term Commitments, the Revolving Credit Commitments or Growth Capital
Commitments; provided, however, that (i) each partial reduction of any
Commitments shall be in an integral multiple of $1,000,000 and in a minimum
amount of $2,000,000 (or, if less, the remaining amount of the applicable
Commitments), (ii) the Total Revolving Credit Commitment shall not be reduced to
an amount that is less than the Revolving Credit Exposure at the time and (iii)
the Total Growth Capital Commitment shall not be reduced to an amount that is
less than the Growth Capital Exposure at the time.
(c) In addition to any other mandatory commitment reductions pursuant to
this Section 2.09, on each date after the Closing Date upon which a mandatory
prepayment of Term Loans pursuant to Section 2.12(c) and/or (d) is required (and
exceeds in amount the aggregate principal amount of Term Loans then outstanding)
or would be required if Term Loans were then outstanding, the amount required to
be applied pursuant to said Section (determined as if an unlimited amount of
Term Loans were actually outstanding) in excess of the aggregate principal
amount of Term Loans then outstanding shall be applied (x) first, to permanently
reduce the Total Growth Capital Commitment as then in effect and (y) second, to
the extent in excess of the amount applied pursuant to preceding clause (x), to
permanently reduce the Total Revolving Credit Commitment.
(d) Each reduction in the Commitments hereunder shall be made ratably among
the Lenders in accordance with their respective applicable Commitments. The
Borrower shall pay to the Administrative Agent for the account of the Lenders,
on the date of each termination or reduction, the Commitment Fees and, to the
extent applicable, L/C Participation Fees on the amount of the Commitments so
terminated or reduced accrued to but excluding the date of such termination or
reduction.
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SECTION 2.10. Conversion and Continuation of Term Borrowings. The Borrower
shall have the right at any time upon prior irrevocable notice to the
Administrative Agent (a) not later than 12:00 (noon), New York City time, one
Business Day prior to conversion, to convert any Eurodollar Term Borrowing into
an ABR Term Borrowing, (b) not later than 10:00 a.m., New York City time, three
Business Days prior to conversion or continuation, to convert any ABR Term
Borrowing into a Eurodollar Term Borrowing or to continue any Eurodollar Term
Borrowing as a Eurodollar Term Borrowing for an additional Interest Period, and
(c) not later than 10:00 a.m., New York City time, three Business Days prior to
conversion, to convert the Interest Period with respect to any Eurodollar Term
Borrowing to another permissible Interest Period, subject in each case to the
following:
(i) each conversion or continuation shall be made pro rata among the
relevant Lenders in accordance with the respective principal amounts of the
Loans comprising the converted or continued Term Borrowing;
(ii) if less than all the outstanding principal amount of any Term
Borrowing shall be converted or continued, then each resulting Term
Borrowing shall satisfy the limitations specified in Sections 2.02(a) and
(b) regarding the principal amount and maximum number of Borrowings of the
relevant Type;
(iii) each conversion shall be effected by each Lender by recording
for the account of such Lender the new Term Loan of such Lender resulting
from such conversion and reducing the Term Loan (or portion thereof) of
such Lender being converted by an equivalent principal amount; accrued
interest on a Term Loan (or portion thereof) being converted shall be paid
by the Borrower at the time of conversion;
(iv) if any Eurodollar Term Borrowing is converted at a time other
than the end of the Interest Period applicable thereto, the Borrower shall
pay, upon demand, any amounts due to the Lenders pursuant to Section 2.15;
(v) any portion of a Term Borrowing maturing or required to be repaid
in less than one month may not be converted into or continued as a
Eurodollar Term Borrowing;
(vi) any portion of a Eurodollar Term Borrowing which cannot be
converted into or continued as a Eurodollar Term Borrowing by reason of the
immediately preceding clause shall be automatically converted at the end of
the Interest Period in effect for such Borrowing into an ABR Term
Borrowing;
(vii) no Interest Period may be selected for any Eurodollar Term
Borrowing that would end later than an Installment Date occurring on or
after the first day of such Interest Period if, after giving effect to such
selection, the aggregate outstanding amount of (A) the Eurodollar Term
Borrowings made pursuant
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to the same Commitments with Interest Periods ending on or prior to such
Installment Date and (B) the ABR Term Borrowings made pursuant to the same
Commitments would not be at least equal to the principal amount of Term
Borrowings made pursuant to the same Commitments to be paid on such
Installment Date; and
(viii) prior to the earlier of (i) the 35th day after the Closing Date
and (ii) the Syndication Date, conversions of ABR Loans into Eurodollar
Loans may only be made if the conversion is effective on the fifth day
after the Closing Date and otherwise in accordance with Section 2.02(b).
Each notice pursuant to this Section 2.10 shall be irrevocable and shall
refer to this Agreement and specify (i) the identity and amount of the Term
Borrowing that the Borrower requests be converted or continued, (ii) whether
such Term Borrowing is to be converted to or continued as a Eurodollar Borrowing
or an ABR Borrowing, (iii) if such notice requests a conversion, the date of
such conversion (which shall be a Business Day) and (iv) if such Term Borrowing
is to be converted to or continued as a Eurodollar Borrowing, the Interest
Period with respect thereto. If no Interest Period is specified in any such
notice with respect to any conversion to or continuation as a Eurodollar
Borrowing, the Borrower shall be deemed to have selected an Interest Period of
one month's duration. The Administrative Agent shall advise the other Lenders of
any notice given pursuant to this Section 2.10 and of each Lender's portion of
any converted or continued Term Borrowing. If the Borrower shall not have given
notice in accordance with this Section 2.10 to continue any Term Borrowing into
a subsequent Interest Period (and shall not otherwise have given notice in
accordance with this Section 2.10 to convert such Term Borrowing), such Term
Borrowing shall, at the end of the Interest Period applicable thereto (unless
repaid pursuant to the terms hereof), automatically be converted into an ABR
Borrowing.
SECTION 2.11. Repayment of Term Borrowings. (a) (i) The Tranche A Term
Borrowings shall be payable as to principal in the amounts and on the dates set
forth below (each such date being called a "Tranche A Term Loan Installment
Date"):
Tranche A
Term Loan
Date Amount
- ---- ------
March 31, 2000 $2,500,000
June 30, 2000 $2,500,000
September 30, 2000 $2,500,000
December 31, 2000 $2,500,000
March 31, 2001 $3,750,000
June 30, 2001 $3,750,000
September 30, 2001 $3,750,000
December 31, 2001 $3,750,000
March 31, 2002 $5,000,000
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June 30, 2002 $5,000,000
September 30, 2002 $5,000,000
December 31, 2002 $5,000,000
March 31, 2003 $7,500,000
June 30, 2003 $7,500,000
September 30, 2003 $7,500,000
January 31, 2004 $7,500,000
(ii) The Tranche B Term Borrowings shall be payable as to principal in the
amounts and on the dates set forth below (each such date being called a "Tranche
B Term Loan Installment Date"):
Tranche B
Term Loan
Date Amount
June 30, 1998 $583,333
September 30, 1998 $583,333
December 31, 1998 $583,334
March 31, 1999 $437,500
June 30, 1999 $437,500
September 30, 1999 $437,500
December 31, 1999 $437,500
March 31, 2000 $437,500
June 30, 2000 $437,500
September 30, 2000 $437,500
December 31, 2000 $437,500
March 31, 2001 $437,500
June 30, 2001 $437,500
September 30, 2001 $437,500
December 31, 2001 $437,500
March 31, 2002 $437,500
June 30, 2002 $437,500
September 30, 2002 $437,500
December 31, 2002 $437,500
March 31, 2003 $437,500
June 30, 2003 $437,500
September 30, 2003 $437,500
December 31, 2003 $437,500
March 31, 2004 $20,562,500
June 30, 2004 $20,562,500
September 30, 2004 $20,562,500
December 31, 2004 $20,562,500
March 31, 2005 $20,562,500
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June 30, 2005 $20,562,500
September 30, 2005 $20,562,500
January 31, 2006 $20,562,500
(iii) The Tranche C Term Borrowings shall be payable as to principal in the
amounts and on the dates set forth below (each such date being called a "Tranche
C Term Loan Installment Date" and, together with the Tranche A Term Loan
Installment Dates and the Tranche B Term Loan Installment Dates, the
"Installment Dates"):
Tranche C
Date Term Loan
Amount
June 30, 1998 $483,333
September 30, 1998 $483,333
December 31, 1998 $483,334
March 31, 1999 $362,500
June 30, 1999 $362,500
September 30, 1999 $362,500
December 31, 1999 $362,500
March 31, 2000 $362,500
June 30, 2000 $362,500
September 30, 2000 $362,500
December 31, 2000 $362,500
March 31, 2001 $362,500
June 30, 2001 $362,500
September 30, 2001 $362,500
December 31, 2001 $362,500
March 31, 2002 $362,500
June 30, 2002 $362,500
September 30, 2002 $362,500
December 31, 2002 $362,500
March 31, 2003 $362,500
June 30, 2003 $362,500
September 30, 2003 $362,500
December 31, 2003 $362,500
March 31, 2004 $362,500
June 30, 2004 $362,500
September 30, 2004 $362,500
December 31, 2004 $362,500
March 31, 2005 $362,500
June 30, 2005 $362,500
September 30, 2005 $362,500
December 31, 2005 $362,500
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March 31, 2006 $33,350,000
June 30, 2006 $33,350,000
September 30, 2006 $33,350,000
January 31, 2007 $33,350,000
(b) Except as set forth in paragraphs (c) and (d) below,
(i) all Net Proceeds and Excess Cash Flow to be applied at any time to
prepay Term Borrowings pursuant to Sections 2.12(c) and (d), respectively, shall
be applied to the Tranche A Term Borrowings, Tranche B Term Borrowings and
Tranche C Term Borrowings ratably in accordance with the respective principal
amounts outstanding thereof; and
(ii) each prepayment of principal of the Term Borrowings pursuant to
Section 2.12(a) shall be applied to the Tranche A Term Borrowings, the Tranche B
Term Borrowings and the Tranche C Term Borrowings ratably in accordance with the
respective outstanding principal amounts thereof.
Such prepayments made pursuant to Section 2.12(a) and prepayments made
pursuant to Section 2.12(d) shall reduce scheduled payments required under
paragraph (a) above, of the respective Tranches of Term Loans required to be
repaid, after the date of such prepayment in the scheduled order of maturity and
such prepayments made pursuant to Section 2.12(c) shall reduce scheduled
payments required under paragraph (a) above, of the respective Tranches of Term
Loans required to be repaid, after the date of such prepayment on a pro rata
basis. To the extent not previously paid, all Tranche A Term Borrowings shall be
due and payable on the Tranche A Maturity Date, all Tranche B Term Borrowings
shall be due and payable on the Tranche B Maturity Date, and all Tranche C Term
Borrowings shall be due and payable on the Tranche C Maturity Date. Each payment
of Borrowings pursuant to this Section 2.11 shall be accompanied by accrued
interest on the principal amount paid to but excluding the date of payment.
(c) Notwithstanding the provisions of paragraph (b) above, at the election
of the Borrower, the first $30,000,000 in aggregate of (i) mandatory prepayments
that would otherwise be made pursuant to Section 2.12(d) or (ii) optional
prepayments that would otherwise be made pursuant to Section 2.12(a), in either
case shall be applied, until the Tranche A Term Borrowings shall have been paid
in full, first to prepay Tranche A Term Borrowings, and shall reduce scheduled
payments in respect of such Borrowings under Section 2.11(a) after the date of
any such prepayment in the scheduled order of maturity.
(d) Any Lender holding Tranche B Term Loans or Tranche C Term Loans may, to
the extent Tranche A Term Borrowings are outstanding, elect on not less than one
Business Day's prior written notice to the Administrative Agent with respect to
(i) any optional prepayment made pursuant to Section 2.12(a), if the Borrower
shall have consented to the availability of such election pursuant to this
Section 2.11(d), or (ii) any mandatory
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prepayment made pursuant to Section 2.12(c) or (d), not to have such prepayment
applied to such Lender's Tranche B Term Loans or Tranche C Term Loans, as the
case may be, until all Tranche A Term Borrowings shall have been paid in full,
in which case the amount not so applied shall be applied to prepay Tranche A
Term Borrowings, and shall reduce scheduled payments under Section 2.11(a) after
the date of any prepayment on the same basis as is provided for the respective
types of payments pursuant to Section 2.11(b).
SECTION 2.12. Prepayment. (a) The Borrower shall have the right at any time
and from time to time to prepay any Borrowing, in whole or in part, upon at
least three Business Days' (or, in the case of a prepayment of ABR Loans, one
Business Day's) prior written or telecopy notice (or telephone notice promptly
confirmed by written or telecopy notice) to the Administrative Agent, before
11:00 a.m., New York City time; provided, however, that (i) each partial
prepayment (other than of a Swingline Loan) shall be in an amount that is an
integral multiple of $1,000,000 and not less than $5,000,000 (or, if less, the
aggregate outstanding amount under the applicable Tranche) and (ii) each
prepayment of Term Borrowings shall be applied as set forth in paragraphs (b),
(c) and (d) of Section 2.11.
(b) (i) In the event of any termination of the Revolving Credit
Commitments, the Borrower shall on the date of such termination repay or prepay
all its outstanding Swingline Loans and Revolving Credit Borrowings, reduce the
Revolving L/C Exposure to zero and cause all Letters of Credit to be canceled
and returned to the Fronting Bank. In the event of any partial reduction of the
Revolving Credit Commitments, then (i) at or prior to the effective date of such
reduction, the Administrative Agent shall notify the Borrower, the Swingline
Lender and the Revolving Credit Lenders of the Aggregate Revolving Credit
Exposure and (ii) if the Aggregate Revolving Credit Exposure would exceed the
Total Revolving Credit Commitment after giving effect to such reduction, then
the Borrower shall, on the date of such reduction, repay or prepay Swingline
Loans and Revolving Credit Borrowings, or reduce the Revolving L/C Exposure, in
an aggregate amount sufficient to eliminate such excess. Notwithstanding the
foregoing, on the date of any termination or reduction of the Revolving Credit
Commitments pursuant to Section 2.09, the Borrower shall pay or prepay so much
of, first, the Swingline Loans and, second, the Revolving Credit Borrowings as
shall be necessary in order that the Aggregate Revolving Credit Exposure will
not exceed the Total Revolving Credit Commitment after giving effect to such
termination or reduction.
(ii) In the event of any termination of the Growth Capital Commitments, the
Borrower shall, on the date of such termination, repay or prepay all its
outstanding Growth Capital Borrowings. In the event of any partial reduction of
the Growth Capital Commitments then, if the Growth Capital Exposure would exceed
the Total Growth Capital Commitment after giving effect to such reduction, then
the Borrower shall on the date of such reduction, repay or prepay Growth Capital
Revolving Loans in an aggregate amounts sufficient to eliminate such excess.
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(c) The Borrower shall apply all Net Proceeds promptly upon receipt thereof
by Holdings, the Borrower or any of their Subsidiaries to prepay Term Borrowings
in accordance with paragraphs (b) and (d) of Section 2.11.
(d) Not later than 90 days after the end of each Excess Cash Flow Period,
the Borrower shall calculate Excess Cash Flow for such Excess Cash Flow Period
and shall apply 50% of such Excess Cash Flow to prepay Term Borrowings in
accordance with paragraphs (b) and (d) of Section 2.11, provided that if, at the
time of such prepayment, the ABR Margin and the LIBOR Margin are determined by
reference to Level 6, 7 or 8 as set forth on Schedule A, the Borrower shall be
required to apply only 25% of such Excess Cash Flow to prepay such Borrowings.
Not later than the date on which the Borrower is required to deliver financial
statements with respect to the end of each Excess Cash Flow Period under Section
5.04(a), the Borrower will deliver to the Administrative Agent a certificate
signed by a Financial Officer of the Borrower setting forth the amount, if any,
of Excess Cash Flow for such fiscal year and the calculation thereof in
reasonable detail.
(e) Each notice of prepayment or reduction pursuant to this Section 2.12
shall specify the prepayment date and the principal amount of each Borrowing (or
portion thereof) to be prepaid, shall be irrevocable and shall commit the
Borrower to prepay such Borrowing by the amount stated therein on the date
stated therein. All prepayments under this Section 2.12 shall be subject to
Section 2.15 but otherwise without premium or penalty. All prepayments under
this Section 2.12 shall be accompanied by accrued interest on the principal
amount being prepaid to but excluding the date of payment.
(f) In the event the amount of any prepayment required to be made above
shall exceed the aggregate principal amount of the ABR Loans outstanding under
the Tranches required to be prepaid (the amount of any such excess being called
the "Excess Amount"), the Borrower shall have the right, in lieu of making such
prepayment in full, to prepay all the outstanding applicable ABR Loans and to
deposit an amount equal to the Excess Amount with the Collateral Agent in a cash
collateral account maintained (pursuant to documentation reasonably satisfactory
to the Administrative Agent) by and in the sole dominion and control of the
Collateral Agent. Any amounts so deposited shall be held by the Collateral Agent
as collateral for the Obligations and applied to the prepayment of the
applicable Eurodollar Loans at the end of the current Interest Periods
applicable thereto. On any Business Day on which (i) collected amounts remain on
deposit in or to the credit of such cash collateral account after giving effect
to the payments made on such day pursuant to this Section 2.12(f) and (ii) the
Borrower shall have delivered to the Collateral Agent a written request or a
telephonic request (which shall be promptly confirmed in writing) that such
remaining collected amounts be invested in the Permitted Investments specified
in such request, the Collateral Agent shall use its reasonable efforts to invest
such remaining collected amounts in such Permitted Investments; provided,
however, that the Collateral Agent shall have continuous dominion and full
control over any such investments (and over any interest that accrues thereon)
to the same extent that it has dominion and control over such cash collateral
account and no Permitted Investment shall mature after the end of the Interest
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Period for which it is to be applied. The Borrower shall not have the right to
withdraw any amount from such cash collateral account until the applicable
Eurodollar Loans and accrued interest thereon are paid in full or if a Default
or Event of Default then exists or would result.
SECTION 2.13. Reserve Requirements; Change in Circumstances. (a)
Notwithstanding any other provision herein, if after the date of this Agreement
any change in applicable law or regulation or in the interpretation or
administration thereof by any Governmental Authority charged with the
interpretation or administration thereof (whether or not having the force of
law) shall change the basis of taxation of payments to any Lender or the
Fronting Bank in respect of any Letter of Credit or of the principal of or
interest on any Eurodollar Loan made by such Lender or any Fees or other amounts
payable hereunder (other than changes in respect of (i) taxes imposed on the
overall net income of such Lender or the Fronting Bank by the jurisdiction in
which such Lender or the Fronting Bank has its principal office or by any
political subdivision or taxing authority therein and (ii) any Taxes described
in Section 2.19), or shall impose, modify or deem applicable any reserve,
special deposit or similar requirement against assets or deposits with or for
the account of or credit extended by or, in the case of the Letters of Credit,
participated in by such Lender (except any such reserve requirement which is
reflected in the Adjusted LIBO Rate) or the Fronting Bank or shall impose on
such Lender or the Fronting Bank or the interbank Eurodollar market any other
condition affecting this Agreement, any Letter of Credit (or any participation
with respect thereto), the Revolving L/C Exposure or any Eurodollar Loans of
such Lender or the Fronting Bank, and the result of any of the foregoing shall
be to increase the cost to such Lender or the Fronting Bank of making or
maintaining its Revolving L/C Exposure or any Eurodollar Loan (or, in the case
of the Fronting Bank, of making any payment under any Letter of Credit) or to
reduce the amount of any sum received or receivable by such Lender or the
Fronting Bank hereunder (whether of principal, interest or otherwise) by an
amount deemed by such Lender or the Fronting Bank to be material, then from time
to time the Borrower will pay to such Lender or the Fronting Bank upon demand
such additional amount or amounts as will compensate such Lender or the Fronting
Bank for such additional costs incurred or reduction suffered.
(b) If any Lender or the Fronting Bank shall have determined that the
adoption after the date hereof of any law, rule, regulation or guideline
regarding capital adequacy, or any change after the date hereof in any of the
foregoing or in the interpretation or administration of any of the foregoing by
any Governmental Authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by any Lender (or any
lending office of such Lender) or the Fronting Bank or any Lender's or the
Fronting Bank's holding company with any request or directive regarding capital
adequacy (whether or not having the force of law) made or issued after the date
hereof by any such authority, central bank or comparable agency, has or would
have the effect of reducing the rate of return on such Lender's or the Fronting
Bank's capital or on the capital of such Lender's or the Fronting Bank's holding
company, if any, as a consequence of this Agreement or its obligations pursuant
hereto to a level below that which such Lender or the
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Fronting Bank or such Lender's or the Fronting Bank's holding company would have
achieved but for such adoption, change or compliance (taking into consideration
such Lender's or the Fronting Bank's policies and the policies of such Lender's
or the Fronting Bank's holding company with respect to capital adequacy) by an
amount deemed by such Lender or the Fronting Bank to be material, then from time
to time the Borrower shall pay to such Lender or the Fronting Bank upon demand
such additional amount or amounts as will compensate such Lender or the Fronting
Bank or such Lender's or the Fronting Bank's holding company for any such
reduction suffered.
(c) A certificate of each Lender or the Fronting Bank setting forth such
amount or amounts as shall be necessary to compensate such Lender or the
Fronting Bank or its holding company as specified in paragraph (a) or (b) above,
as the case may be, shall be delivered to the Borrower through the
Administrative Agent and shall be conclusive absent manifest error. The Borrower
shall pay each Lender or the Fronting Bank the amount shown as due on any such
certificate delivered by it within 10 days after its receipt of the same.
(d) In the event any Lender or the Fronting Bank delivers a notice pursuant
to paragraph (e) below, the Borrower may require, at the Borrower's expense and
subject to Section 2.15, such Lender or the Fronting Bank to assign, at par plus
accrued interest and fees, without recourse (in accordance with Section 9.04)
all its interests, rights and obligations hereunder (including, in the case of a
Lender, all of its Commitments and the Loans at the time owing to it and
participations in Letters of Credit held by it and its obligations to acquire
such participations) to a financial institution specified by the Borrower,
provided that (i) such assignment shall not conflict with or violate any law,
rule or regulation or order of any court or other Governmental Authority, (ii)
the Borrower shall have received the written consent of the Administrative Agent
(which consent shall not be unreasonably withheld) and the Fronting Bank to such
assignment, (iii) the Borrower shall have paid to the assigning Lender or the
Fronting Bank all moneys accrued and owing hereunder to it (including pursuant
to this Section 2.13) and (iv) in the case of a required assignment by the
Fronting Bank, all outstanding Letters of Credit issued by the Fronting Bank
shall be canceled and returned to the Fronting Bank.
(e) Promptly after any Lender or the Fronting Bank has determined, in its
sole judgment, that it will make a request for increased compensation pursuant
to this Section 2.13, such Lender or the Fronting Bank will notify the Borrower
thereof. Failure on the part of any Lender or the Fronting Bank so to notify the
Borrower or to demand compensation for any increased costs or reduction in
amounts received or receivable or reduction in return on capital with respect to
any period shall not constitute a waiver of such Lender's or the Fronting Bank's
right to demand compensation with respect to such period or any other period,
provided that the Borrower shall not be under any obligation to compensate any
Lender or the Fronting Bank under paragraph (b) above with respect to increased
costs or reductions with respect to any period prior to the date that is six
months prior to such request if such Lender or the Fronting Bank knew or could
reasonably have been expected
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to be aware of the circumstances giving rise to such increased costs or
reductions and of the fact that such circumstances would in fact result in a
claim for increased compensation by reason of such increased costs or reductions
and provided further, that the foregoing limitation shall not apply to any
increased costs or reductions arising out of the retroactive application of any
law, regulation, rule, guideline or directive as aforesaid within such six month
period. The protection of this Section 2.13 shall be available to each Lender
and the Fronting Bank regardless of any possible contention as to the invalidity
or inapplicability of the law, rule, regulation, guideline or other change or
condition which shall have occurred or been imposed.
SECTION 2.14. Change in Legality. (a) Notwithstanding any other provision
herein, if the adoption of or any change in any law or regulation or in the
interpretation thereof by any Governmental Authority charged with the
administration or interpretation thereof shall make it unlawful for any Lender
to make or maintain any Eurodollar Loan or to give effect to its obligations as
contemplated hereby with respect to any Eurodollar Loan, then, by written notice
to the Borrower and to the Administrative Agent, such Lender may:
(i) declare that Eurodollar Loans will not thereafter be made by such
Lender hereunder, whereupon any request by the Borrower for a Eurodollar
Borrowing shall, as to such Lender only, be deemed a request for an ABR
Loan unless such declaration shall be subsequently withdrawn; and
(ii) require that all outstanding Eurodollar Loans made by it be
converted to ABR Loans, in which event all such Eurodollar Loans shall be
automatically converted to ABR Loans as of the effective date of such
notice as provided in paragraph (b) below.
In the event any Lender shall exercise its rights under subparagraphs (i) and
(ii) above, all payments and prepayments of principal that would otherwise have
been applied to repay the Eurodollar Loans that would have been made by such
Lender or the converted Eurodollar Loans of such Lender shall instead be applied
to repay the ABR Loans made by such Lender in lieu of, or resulting from the
conversion of, such Eurodollar Loans.
(b) For purposes of this Section 2.14, a notice to the Borrower by any
Lender shall be effective as to each Eurodollar Loan, if lawful, on the last day
of the Interest Period currently applicable to such Eurodollar Loan; in all
other cases such notice shall be effective on the date of receipt by the
Borrower.
SECTION 2.15. Indemnity. The Borrower shall indemnify each Lender against
any loss or expense (other than taxes) that such Lender may sustain or incur as
a consequence of (a) any failure by the Borrower to fulfill on the date of any
Borrowing or proposed Borrowing hereunder the applicable conditions set forth in
Article IV, (b) any failure by the Borrower to borrow or to refinance, convert
or continue any Loan hereunder after irrevocable notice of such Borrowing,
refinancing, conversion or continuation has been
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given pursuant to Section 2.03 or 2.10, (c) any payment, prepayment or
conversion of a Eurodollar Loan required by any other provision of this
Agreement or otherwise made or deemed made on a date other than the last day of
the Interest Period applicable thereto, (d) any default in payment or prepayment
of the principal amount of any Loan or any part thereof or interest accrued
thereon, as and when due and payable (at the due date thereof, whether by
scheduled maturity, acceleration, irrevocable notice of prepayment or otherwise)
or (e) the occurrence of any Event of Default, including, in each such case, any
loss or reasonable expense sustained or incurred or to be sustained or incurred
in liquidating or employing deposits from third parties acquired to effect or
maintain such Loan or any part thereof as a Eurodollar Loan. Such loss or
reasonable expense shall exclude loss of margin hereunder but shall include an
amount equal to the excess, if any, as reasonably determined by such Lender, of
(i) its cost of obtaining the funds for the Loan being paid, prepaid, converted
or not borrowed, converted or continued (assumed to be the Adjusted LIBO Rate
applicable thereto) for the period from the date of such payment, prepayment,
conversion or failure to borrow, convert or continue to the last day of the
Interest Period for such Loan (or, in the case of a failure to borrow, convert
or continue, the Interest Period for such Loan which would have commenced on the
date of such failure) over (ii) the amount of interest (as reasonably determined
by such Lender) that would be realized by such Lender in reemploying the funds
so paid, prepaid, converted or not borrowed, converted or continued for such
period or Interest Period, as the case may be. A certificate of any Lender
setting forth any amount or amounts that such Lender is entitled to receive
pursuant to this Section 2.15 (and the reasons therefor) shall be delivered to
the Borrower through the Administrative Agent and shall be conclusive absent
manifest error.
SECTION 2.16. Pro Rata Treatment. Except as required under Section 2.14 and
subject to Section 2.11, each Borrowing, each payment or prepayment of principal
of any Borrowing, each payment of interest on the Loans, each reimbursement of
L/C Disbursements, each payment of the Commitment Fees or L/C Participation
Fees, each reduction of the Term Commitments, the Revolving Credit Commitments
or the Growth Capital Commitments and each refinancing of any Borrowing with,
conversion of any Borrowing to or continuation of any Borrowing as a Borrowing
of any Type shall be allocated (except in the case of Swingline Loans) pro rata
among the Lenders in accordance with their respective applicable Commitments
(or, if such Commitments shall have expired or been terminated, in accordance
with the respective principal amounts of their applicable outstanding Loans or
participations in L/C Disbursements, as applicable). Each Lender agrees that in
computing such Lender's portion of any Borrowing or L/C Disbursement, the
Administrative Agent may, in its discretion, round each Lender's percentage of
such Borrowing or L/C Disbursement, computed in accordance with Section 2.01, to
the next higher or lower whole dollar amount.
SECTION 2.17. Sharing of Setoffs. Each Lender agrees that if it shall,
through the exercise of a right of banker's lien, setoff or counterclaim against
the Borrower or pursuant to a secured claim under Section 506 of Title 11 of the
United States Code or other security or interest arising from, or in lieu of,
such secured claim, received by such
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Lender under any applicable bankruptcy, insolvency or other similar law or
otherwise, or by any other means, obtain payment (voluntary or involuntary) in
respect of any Loan or L/C Disbursement as a result of which the unpaid
principal portion of its Loans or L/C Disbursements made pursuant to any
Commitment (or, after acceleration of the Loans pursuant to Article VII,
applicable to any Loan or L/C Disbursement) shall be proportionately less than
the unpaid principal portion of the Loans or L/C Disbursements of any other
Lender made pursuant to such Commitments (or, after acceleration of the Loans
pursuant to Article VII, applicable to any Loan or L/C Disbursement), it shall
be deemed simultaneously to have purchased from such other Lender at face value,
and shall promptly pay to such other Lender the purchase price for, an interest
in the Loans or L/C Disbursements of such other Lender, so that the aggregate
unpaid principal amount of the Loans or L/C Disbursements and interests in Loans
or L/C Disbursements held by each such Lender shall be in the same proportion to
the aggregate unpaid principal amount of all Loans or L/C Disbursements then
outstanding under such Commitments as the principal amount of its Loans or L/C
Disbursements under such Commitments prior to such exercise of banker's lien,
setoff or counterclaim or other event was to the principal amount of all such
Loans or L/C Disbursements outstanding prior to such exercise of banker's lien,
setoff or counterclaim or other event; provided, however, that, if any such
purchase or purchases or adjustments shall be made pursuant to this Section 2.17
and the payment giving rise thereto shall thereafter be recovered, such purchase
or purchases or adjustments shall be rescinded to the extent of such recovery
and the purchase price or prices or adjustment restored without interest. The
Borrower expressly consents to the foregoing arrangements and agrees that any
Lender holding an interest in a Loan or L/C Disbursement deemed to have been so
purchased may exercise any and all rights of banker's lien, setoff or
counterclaim with respect to any and all moneys owing by the Borrower to such
Lender by reason thereof as fully as if such Lender had made a Loan directly to,
or L/C Disbursement directly for the benefit of, the Borrower in the amount of
such interest.
SECTION 2.18. Payments. (a) The Borrower shall make each payment without
setoff or counterclaim (including principal of or interest on any Borrowing or
L/C Disbursement or any Fees or other amounts) required to be made by it
hereunder and under any other Loan Document not later than 12:00 noon, New York
City time, on the date when due in Dollars to the Administrative Agent at its
offices at 130 Liberty Street, New York, New York, Attention: Deal
Administrator, in immediately available funds. The Administrative Agent shall
distribute such payments to the Lenders and the Fronting Bank promptly upon
receipt in like funds as received.
(b) Whenever any payment (including principal of or interest on any
Borrowing or L/C Disbursement or any Fees or other amounts) hereunder or under
any other Loan Document shall become due, or otherwise would occur, on a day
that is not a Business Day, such payment may be made on the next succeeding
Business Day (except in the case of payment of principal of a Eurodollar
Borrowing if the effect of such extension would be to extend such payment into
the next succeeding month, in which event such
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payment shall be due on the immediately preceding Business Day), and such
extension of time shall in such case be included in the computation of interest
or Fees, if applicable.
SECTION 2.19. Taxes. (a) Any and all payments by the Borrower to the
Administrative Agent, the Fronting Bank or the Lenders hereunder or under the
other Loan Documents shall be made, in accordance with Section 2.18, free and
clear of and without deduction for any and all present or future taxes, levies,
imposts, deductions, charges or withholdings, and all liabilities with respect
thereto, excluding (i) in the case of each Lender, the Fronting Bank and the
Administrative Agent, taxes that would not be imposed but for a connection
between such Lender, the Fronting Bank or the Administrative Agent (as the case
may be) and the jurisdiction imposing such tax, other than a connection arising
solely by virtue of the activities of such Lender, the Fronting Bank or the
Administrative Agent (as the case may be) pursuant to or in respect of this
Agreement or under any other Loan Document, including entering into, lending
money or extending credit pursuant to, receiving payments under, or enforcing,
this Agreement or any other Loan Document, and (ii) in the case of each Lender,
the Fronting Bank and the Administrative Agent, any United States withholding
taxes payable with respect to any payments made hereunder or under the other
Loan Documents under laws (including any statute, treaty, ruling, determination
or regulation) in effect on the Initial Date (as hereinafter defined) applicable
to such Lender, the Fronting Bank or the Administrative Agent, as the case may
be, but not excluding any United States withholding taxes payable solely as a
result of any change in such laws occurring after the Initial Date (all such
non-excluded taxes, levies, imposts, deductions, charges, withholdings and
liabilities being hereinafter referred to as "Taxes"). For purposes of this
Section 2.19, the term "Initial Date" shall mean (i) in the case of the
Administrative Agent, the Fronting Bank or any Lender, the date on which such
person became a party to this Agreement and (ii) in the case of any assignment,
including any assignment by a Lender or the Fronting Bank to a new lending
office, the date of such assignment. If any Taxes shall be required by law to be
deducted from or in respect of any sum payable hereunder or under any other Loan
Document to any Lender, the Fronting Bank or the Administrative Agent, (i) the
sum payable by the Borrower shall be increased as may be necessary so that after
making all required deductions (including deductions applicable to additional
sums payable under this Section 2.19) such Lender, the Fronting Bank or the
Administrative Agent, as the case may be, receives an amount equal to the sum it
would have received had no such deductions been made, (ii) the Borrower shall
make such deductions and (iii) the Borrower shall pay the full amount deducted
to the relevant taxation authority or other authority in accordance with
applicable law. The Borrower shall not, however, be required to pay any amounts
pursuant to clause (i) of the preceding sentence to any Lender, the Fronting
Bank or the Administrative Agent not organized under the laws of the United
States of America or a state thereof if such Lender, the Fronting Bank or the
Administrative Agent fails to comply with the requirements of paragraph (f) or
(g), as the case may be, and paragraph (h) of this Section 2.19.
(b) In addition, the Borrower agrees to pay any present or future stamp or
documentary taxes or any other excise or property taxes, charges or similar
levies which
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arise from the execution, delivery or registration of, or otherwise with respect
to, this Agreement or any other Loan Document (hereinafter referred to as "Other
Taxes").
(c) The Borrower will indemnify each Lender, the Fronting Bank and the
Administrative Agent for the full amount of Taxes and Other Taxes (including any
Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this
Section 2.19) paid by such Lender, the Fronting Bank or the Administrative
Agent, as the case may be, and any liability (including penalties, interest and
expenses including reasonable attorney's fees and expenses) arising therefrom or
with respect thereto whether or not such Taxes or Other Taxes were correctly or
legally asserted. A certificate as to the amount of such payment or liability
prepared by a Lender (or transferee), the Fronting Bank or the Administrative
Agent, absent manifest error, shall be final, conclusive and binding for all
purposes, provided that if the Borrower reasonably believes that such Taxes were
not correctly or legally asserted, such Lender, the Fronting Bank or the
Administrative Agent, as the case may be shall use reasonable efforts to
cooperate with the Borrower to obtain a refund of such Taxes or Other Taxes.
Such indemnification shall be made within 10 days after the date any Lender, the
Fronting Bank or the Administrative Agent, as the case may be, makes written
demand therefor. If a Lender, the Fronting Bank or the Administrative Agent
shall become aware that it is entitled to receive a refund in respect of Taxes
or Other Taxes, it shall promptly notify the Borrower of the availability of
such refund and shall, within 30 days after receipt of a request by the
Borrower, pursue or timely claim such refund at the Borrower's expense. If any
Lender, the Fronting Bank or the Administrative Agent receives a refund in
respect of any Taxes or Other Taxes for which such Lender, the Fronting Bank or
the Administrative Agent has received payment from the Borrower hereunder, it
shall promptly repay such refund (plus any interest received) to the Borrower
(but only to the extent of indemnity payments made, or additional amounts paid,
by the Borrower under this Section 2.19 with respect to the Taxes or Other Taxes
giving rise to such refund), provided that the Borrower, upon the request of
such Lender, the Fronting Bank or the Administrative Agent, agrees to return
such refund (plus any penalties, interest or other charges required to be paid)
to such Lender, the Fronting Bank or the Administrative Agent in the event such
Lender, such Fronting Bank or the Administrative Agent is required to repay such
refund to the relevant taxing authority.
(d) Within 30 days after the date of any payment of Taxes or Other Taxes
withheld by the Borrower in respect of any payment to any Lender, the Fronting
Bank or the Administrative Agent, the Borrower will furnish to the
Administrative Agent, at its address referred to in Section 9.01, the original
or a certified copy of a receipt evidencing payment thereof.
(e) Without prejudice to the survival of any other agreement contained
herein, the agreements and obligations contained in this Section 2.19 shall
survive the payment in full of principal and interest hereunder, the expiration
of the Letters of Credit and the termination of the Commitments.
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(f) In the case of any Borrowing by, or L/C Disbursement for the benefit
of, the Borrower, this paragraph (f) shall apply. Each Lender, the Fronting Bank
and the Administrative Agent that is not organized under the laws of the United
States of America or a state thereof agrees that at least 10 days prior to the
first Interest Payment Date following the Initial Date in respect of the
Fronting Bank or such Lender, it will deliver to the Borrower and the
Administrative Agent (if appropriate) two duly completed copies of either (i)
United States Internal Revenue Service Form 1001 or 4224 or successor applicable
form, as the case may be, certifying in each case that the Fronting Bank, such
Lender or the Administrative Agent, as the case may be, is entitled to receive
payments under this Agreement and the other Loan Documents payable to it without
deduction or withholding of any United States federal income taxes and backup
withholding taxes or is entitled to receive such payments at a reduced rate
pursuant to a treaty provision or (ii) in the case of a Lender that is not a
"bank" within the meaning of Section 881(c)(3) of the Code, (A) deliver to the
Borrower and the Administrative Agent (I) a statement under penalties of perjury
that such Lender (w) is not a "bank" under Section 881(c)(3)(A) of the Code, is
not subject to regulatory or other legal requirements as a bank in any
jurisdiction, and has not been treated as a bank for purposes of any tax,
securities law or other filing or submission made to any Governmental Authority,
any application made to a rating agency or qualification for any exemption from
tax, securities law or other legal requirements, (x) is not a 10-percent
shareholder within the meaning of Section 881(c)(3)(B) of the Code, (y) is not a
controlled foreign corporation receiving interest from a related person within
the meaning of Section 881(c)(3)(c) of the Code and (z) is not a "conduit
entity" within the meaning of U.S. Treasury Regulations Section 1.881-3 and (II)
an Internal Revenue Service Form W-8; (B) deliver to the Borrower and the
Administrative Agent a further copy of said Form W-8, or any successor
applicable form or other manner of certification on or before the date that any
such Form W-8 expires or becomes obsolete or after the occurrence of any event
requiring a change in the most recent form previously delivered by such Lender;
and (C) obtain such extensions of time for filing and complete such forms or
certifications as may be reasonably requested by the Borrower or the
Administrative Agent; unless in any such case an event (including any change in
treaty, law or regulation) has occurred prior to the date on which any such
delivery would otherwise be required which renders any such forms inapplicable
or which would prevent such Lender from duly completing and delivering any such
form with respect to it and such Lender so advises the Borrower and the
Administrative Agent. Such Lender shall certify (i) in the case of a Form 1001
or 4224, that it is entitled to receive payments under this Agreement without
deduction or withholding of any United States Federal income taxes or is
entitled to receive such payments at a reduced rate pursuant to a treaty
provision and (ii) in the case of a Form W-8 or W-9, that it is entitled to an
exemption from United States backup withholding tax. Each Person that shall
become a participant pursuant to Section 9.04 shall, upon the effectiveness of
the related transfer, be required to provide all the forms and statements
required pursuant to this paragraph (f) to the Lender from which the related
participation shall have been purchased. Unless the Borrower and the
Administrative Agent have received forms, certificates and other documents
required by this Section 2.19(f) indicating that payments hereunder or under
this Agreement, any other Loan Document or the Letters of Credit to or for the
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Fronting Bank or Lender not incorporated or organized under the laws of the
United States or a state thereof are not subject to United States withholding
tax or are subject to such tax at a rate reduced by an applicable tax treaty,
the Borrower or the Administrative Agent shall withhold such taxes from such
payments at the applicable statutory rate.
(g) The Fronting Bank and any Lender claiming any additional amounts
payable pursuant to this Section 2.19 shall use reasonable efforts (consistent
with legal and regulatory restrictions) to file any certificate or document
requested in writing by the Borrower or to change the jurisdiction of its
applicable lending office, if the making of such a filing or change would avoid
the need for or reduce the amount of any such additional amounts which would be
payable or may thereafter accrue and would not, in the sole determination of the
Fronting Bank or such Lender, be otherwise disadvantageous to the Fronting Bank
or such Lender.
(h) Nothing contained in this Section 2.19 shall require any Lender or the
Fronting Bank or the Administrative Agent to make available any of its tax
returns (or any other information that it deems to be confidential or
proprietary).
SECTION 2.20. Letters of Credit. (a) Letters of Credit. (i) General. The
Borrower may request the issuance of a Standby Letter of Credit or a Commercial
Letter of Credit by delivering notice in the form of Exhibit C hereto (each a
"Letter of Credit Request"), appropriately completed, for the account of the
Borrower at any time and from time to time while the Revolving Credit
Commitments remain in effect. This Section 2.20(a) shall not be construed to
impose an obligation upon the Fronting Bank to issue any Letter of Credit that
is inconsistent with the terms and conditions of this Agreement or that would
result in there existing Letters of Credit in an aggregate stated amount at any
time in excess of $50,000,000.
(ii) Notice of Issuance, Amendment; Certain Conditions. In order to request
the issuance of a Letter of Credit (or to request that the Fronting Bank amend
an existing Letter of Credit), the Borrower shall hand deliver or telecopy to
the Fronting Bank and the Administrative Agent (reasonably in advance of the
requested date of issuance or amendment) a notice requesting the issuance of
such Letter of Credit in Dollars and on a sight basis, or identifying any Letter
of Credit to be amended, and specifying the date of issuance or amendment, the
date on which such Letter of Credit is to expire (which shall comply with
paragraph (iii) below), the amount of such Letter of Credit to be issued or
amended, the name and address of the account party (which shall be the Borrower)
and the beneficiary thereof and such other information as shall be necessary to
prepare such Letter of Credit or grant such issuance or amendment. Each Letter
of Credit shall be issued or amended subject to the terms and conditions and
relying on the representations and warranties of Holdings and the Borrower set
forth herein, and in any case only if, and upon issuance or amendment of each
Letter of Credit the Borrower shall be deemed to represent and warrant that,
after giving effect to such issuance or amendment the Aggregate Revolving
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Credit Exposure shall not exceed the Total Revolving Credit Commitment in effect
at such time.
(iii) Expiration Date. Each Standby Letter of Credit shall expire at the
close of business on the earlier of the date one year after the date of the
issuance of such Standby Letter of Credit (although any such Standby Letter of
Credit may be automatically extendable for successive periods of up to one year,
but not beyond the tenth Business Day prior to the Revolving Credit Maturity
Date) and the date that is ten Business Days prior to the Revolving Credit
Maturity Date and each Commercial Letter of Credit shall expire at the close of
business on the earlier of the date 180 days after the date of issuance of such
Commercial Letter of Credit and the date that is ten Business Days prior to the
Revolving Credit Maturity Date, unless such Standby Letter of Credit expires by
its terms on an earlier date, provided that a Standby Letter of Credit shall not
be issued (nor shall a Standby Letter of Credit be amended, renewed or extended)
that would result in the Aggregate Revolving Credit Exposure exceeding the Total
Revolving Credit Commitment in effect at such time. Compliance with the
foregoing proviso shall be determined based upon the assumption that (A) each
Standby Letter of Credit remains outstanding and undrawn in accordance with its
terms until its expiration date (taking into account any rights of renewal or
extension that do not require written notice by or consent of any Fronting Bank,
in its sole discretion, in order to effect such renewal or extension) and (B)
the Revolving Credit Commitments will not be reduced pursuant to Section 2.09.
(iv) Participations. By the issuance of a Letter of Credit and without any
further action on the part of the Fronting Bank or the Revolving Credit Lenders,
the Fronting Bank will grant to each Revolving Credit Lender, and each such
Lender will acquire from the Fronting Bank, a participation in such Letter of
Credit equal to such Revolving Credit Lender's Applicable Percentage of the
aggregate amount available to be drawn under such Letter of Credit, effective
upon the issuance of such Letter of Credit. In consideration and in furtherance
of the foregoing, each Revolving Credit Lender hereby absolutely and
unconditionally agrees to pay to the Administrative Agent, for the account of
the Fronting Bank, such Revolving Credit Lender's Applicable Percentage of each
L/C Disbursement made by the Fronting Bank under such Letter of Credit and not
reimbursed by the Borrower (or, if applicable, another party pursuant to its
obligations under any other Loan Document) on or before the next Business Day as
provided in paragraph (v) below. Each Revolving Credit Lender acknowledges and
agrees that its obligation to acquire participations pursuant to this paragraph
in respect of Letters of Credit is absolute and unconditional and shall not be
affected by any circumstance whatsoever, including the occurrence and
continuance of a Default or an Event of Default, and that each such payment
shall be made without any offset, abatement, withholding or reduction
whatsoever, provided that nothing in this Agreement shall be construed to excuse
the Fronting Bank from liability to the Revolving Credit Lenders caused by the
gross negligence or wilful misconduct of the Fronting Bank.
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(v) Reimbursement. If the Fronting Bank shall make any L/C Disbursement in
respect of a Letter of Credit, the Borrower shall pay to the Administrative
Agent, on or before the Business Day immediately following the date of such L/C
Disbursement, an amount equal to such L/C Disbursement. If the Borrower shall
fail to pay any amount required to be paid under this paragraph on or before
such Business Day (or to cause payment thereof when due pursuant to a Revolving
Credit Borrowing), then (A) such unpaid amount shall bear interest, for each day
from and including such Business Day to but excluding the date of payment, at a
rate per annum equal to the interest rate applicable to overdue ABR Loans that
are Revolving Credit Loans pursuant to Section 2.07 (provided that the 2.00%
margin referred to therein shall not be applicable until the first Business Day
after the Borrower receives notice from the Administrative Agent that such L/C
Disbursement has been or will be made), (B) the Administrative Agent shall
notify the Fronting Bank and the Revolving Credit Lenders thereof, (C) each
Revolving Credit Lender shall comply with its obligation under paragraph (iv)
above by wire transfer of immediately available funds, in the same manner as
provided in Section 2.02(c) with respect to Loans made by such Revolving Credit
Lender (and Section 2.02(d) shall apply, mutatis mutandis, to the payment
obligations of the Revolving Credit Lenders) and (D) the Administrative Agent
shall promptly pay to the Fronting Bank amounts so received by it from the
Revolving Credit Lenders. The Administrative Agent shall promptly pay to the
Fronting Bank on a pro rata basis with respect to outstanding L/C Disbursements
any amounts received by it from the Borrower (or, if applicable, another party
pursuant to its obligations under any other Loan Document) pursuant to this
paragraph prior to the time that any Revolving Credit Lender makes any payment
pursuant to paragraph (iv) above; any such amounts received by the
Administrative Agent thereafter shall be promptly remitted by the Administrative
Agent to the Revolving Credit Lenders that shall have made such payments and to
the Fronting Bank, as their interests may appear.
(vi) In the case of Commercial Letters of Credit, in the event that the
Fronting Bank is other than the Administrative Agent, such Fronting Bank will
send a facsimile transmission to the Administrative Agent promptly on the first
Business Day of each week, stating its daily aggregate daily maximum amount
available for drawing under Commercial Letters of Credit for the previous week.
The Administrative Agent shall deliver to each Revolving Credit Lender, upon
each calendar month, a report setting forth for such period the daily aggregate
daily maximum amount available for drawing under the Commercial Letters of
Credit issued by all of the Fronting Banks during such period. The
Administrative Agent shall deliver to each Lender, upon each calendar month end
and upon each L/C Participation Fee payment, a report setting forth for such
period the daily aggregate stated amount available to be drawn under the
Commercial Letters of Credits issued by the Fronting Bank during such period.
(b) Obligations Absolute. The Borrower's obligations to reimburse L/C
Disbursements as provided in paragraph (a) above shall be absolute,
unconditional and irrevocable, and shall be performed strictly in accordance
with the terms of this Agreement, under any and all circumstances whatsoever,
and irrespective of:
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(i) any lack of validity or enforceability of any Letter of Credit or
any Loan Document, or any term or provision therein;
(ii) any amendment or waiver of or any consent to departure from all
or any of the provisions of any Letter of Credit or any Loan Document;
(iii) the existence of any claim, setoff, defense or other right that
the Borrower, any other party guaranteeing, or otherwise obligated with,
the Borrower or any Subsidiary or other Affiliate thereof or any other
person may at any time have against the beneficiary under any Letter of
Credit, the Fronting Bank, any Agent or any Lender (other than the defense
of payment in accordance with the terms of this Agreement or a defense
based on the gross negligence or wilful misconduct of the Fronting Bank) or
any other person, whether in connection with this Agreement, any other Loan
Document or any other related or unrelated agreement or transaction;
(iv) any draft or other document presented under a Letter of Credit
proving to be forged, fraudulent, invalid or insufficient in any respect or
any statement therein being untrue or inaccurate in any respect, provided
that payment by the applicable Fronting Bank shall not have constituted
gross negligence or wilful misconduct of the Fronting Bank;
(v) payment by the Fronting Bank under a Letter of Credit against
presentation of a draft or other document that does not comply with the
terms of such Letter of Credit, provided that payment by the Fronting Bank
shall not have constituted gross negligence or wilful misconduct of such
Fronting Bank; and
(vi) any other act or omission to act or delay of any kind of the
Fronting Bank, the Lenders, any Agent or any other person or any other
event or circumstance whatsoever, whether or not similar to any of the
foregoing, that might, but for the provisions of this Section 2.20(b),
constitute a legal or equitable discharge of the Borrower's obligations
hereunder, provided that such act or omission shall not have constituted
gross negligence or wilful misconduct of such Fronting Bank.
(c) Disbursement Procedures. The Fronting Bank shall, promptly following
its receipt thereof, examine all documents purporting to represent a demand for
payment under a Letter of Credit. The Fronting Bank shall as promptly as
possible give telephonic notification, confirmed by telecopy, to the
Administrative Agent and the Borrower of such demand for payment and whether the
Fronting Bank has made or will make an L/C Disbursement thereunder, provided
that any failure to give or delay in giving such notice shall not relieve the
Borrower of its obligation to reimburse the Fronting Bank and the Lenders with
respect to any such L/C Disbursement. The Administrative Agent shall promptly
give each Revolving Credit Lender notice thereof.
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(d) Interim Interest. If the Fronting Bank shall make any L/C Disbursement
in respect of a Letter of Credit, then, unless the Borrower shall reimburse such
L/C Disbursement in full on such date, the unpaid amount thereof shall bear
interest for the account of the Fronting Bank, for each day from and including
the date of such L/C Disbursement, to but excluding the earlier of the date of
payment or the date on which interest shall commence to accrue thereon as
provided in subparagraph (a)(v) above, at the rate per annum that would apply to
such amount if such amount were an ABR Loan.
(e) Liability of the Fronting Bank. Without limiting the generality of
paragraph (b) above, it is expressly understood and agreed that the absolute and
unconditional obligation of the Borrower to reimburse L/C Disbursements will not
be excused by the gross negligence or wilful misconduct of the Fronting Bank,
except as otherwise expressly provided in said paragraph (b). However, nothing
in this Agreement shall be construed to excuse the Fronting Bank from liability
to the Borrower to the extent of any direct damages (as opposed to consequential
damages, claims in respect of which are hereby waived by the Borrower to the
extent permitted by applicable law) suffered by the Borrower that are caused by
the Fronting Bank's gross negligence or wilful misconduct in determining whether
drafts and other documents presented under a Letter of Credit comply with the
terms thereof. It is understood that the Fronting Bank may accept documents that
appear on their face to be in order, without responsibility for further
investigation in making any payment under any Letter of Credit and, except as
otherwise expressly provided in said paragraph (b), (i) the Fronting Bank's
exclusive reliance on the documents presented to it under such Letter of Credit
as to any and all matters set forth therein, including reliance on the amount of
any draft presented under such Letter of Credit, whether or not the amount due
to the beneficiary thereunder equals the amount of such draft and whether or not
any document presented pursuant to such Letter of Credit proves to be
insufficient in any respect, if such document on its face appears to be in
order, and whether or not any other statement or any other document presented
pursuant to such Letter of Credit proves to be forged or invalid or any
statement therein proves to be inaccurate or untrue in any respect whatsoever
and (ii) any noncompliance in any immaterial respect of the documents presented
under such Letter of Credit with the terms thereof shall, in each case, be
deemed not to constitute wilful misconduct or gross negligence of such Fronting
Bank.
(f) Resignation or Removal of a Fronting Bank. The Fronting Bank may resign
at any time by giving 30 days' prior written notice to the Administrative Agent,
the Lenders and the Borrower, and may be removed at any time by the Borrower by
notice to the Fronting Bank, the Administrative Agent and the Lenders, subject
in each case to the appointment by the Borrower of a replacement Fronting Bank
reasonably satisfactory to the Administrative Agent, provided that (i) Bankers
Trust Company shall not resign as the Fronting Bank hereunder for any reason
other than compliance with applicable legal and regulatory requirements and (ii)
no Fronting Bank may resign as to any Letter of Credit previously issued by it.
Subject to the next succeeding sentences of this paragraph (f), upon the
acceptance of any appointment as the Fronting Bank hereunder by a successor
Fronting Bank, such successor shall succeed to and become vested with all the
interests, rights and
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obligations of the retiring Fronting Bank and the retiring Fronting Bank shall
be discharged from its obligations to issue additional Letters of Credit
hereunder to the extent of the commitment of the successor Fronting Bank to
provide Letters of Credit. At the time such removal or resignation shall become
effective, the Borrower shall pay all accrued and unpaid fees of such Fronting
Bank pursuant to Section 2.05(b)(ii). The acceptance of any appointment as
Fronting Bank hereunder by a successor Fronting Bank shall be evidenced by an
agreement entered into by such successor, in a form satisfactory to the Borrower
and the Administrative Agent, and, from and after the effective date of such
agreement, (i) such successor Fronting Bank shall have all the rights and
obligations of its predecessor Fronting Bank under this Agreement and the other
Loan Documents and (ii) references herein and in the other Loan Documents to the
term "Fronting Bank" shall be deemed to refer to such successor or to such
predecessor Fronting Bank, or to such successor and all predecessor and current
Fronting Banks, as the context shall require. After the resignation or removal
of a Fronting Bank hereunder, such retiring Fronting Bank shall remain a party
hereto and shall continue to have all the rights and obligations of a Fronting
Bank under this Agreement and the other Loan Documents with respect to Letters
of Credit issued by it prior to such resignation or removal, but shall not be
required to issue additional Letters of Credit.
(g) Cash Collateralization. If any Event of Default shall occur and be
continuing, the Borrower shall, on the Business Day the Borrower receives notice
from the Administrative Agent or Revolving Credit Lenders with combined
Revolving Credit Commitments representing a majority of the aggregate Revolving
Credit Commitments (or, if the maturity of the Loans has been accelerated,
Revolving Credit Lenders holding participations in outstanding Letters of Credit
representing a majority of the aggregate undrawn amount of all outstanding
Letters of Credit) thereof and of the amount to be deposited, deposit in an
account with the Collateral Agent, for the benefit of the Revolving Credit
Lenders an aggregate amount in cash equal to the Revolving L/C Exposure as of
such date. Such deposit shall be held by the Collateral Agent as collateral for
the payment and performance of the Obligations. The Collateral Agent shall have
exclusive dominion and control, including the exclusive right of withdrawal,
over such account. Other than any interest earned on the investment of such
deposits in Permitted Investments, which investments shall be made at the option
and sole discretion of the Collateral Agent (provided that the Collateral Agent
shall use reasonable efforts to make such investments), such deposits shall not
bear interest. Interest or profits, if any, on such investments shall accumulate
in such account. Moneys in such account shall (a) automatically be applied by
the Administrative Agent to reimburse the Fronting Bank for L/C Disbursements
that have not been reimbursed, (b) be held for the satisfaction of the
reimbursement obligations of the Borrower for the Revolving L/C Exposure and (c)
if the maturity of the Loans has been accelerated (but subject to the consent of
Revolving Credit Lenders holding participations in outstanding Letters of Credit
representing greater than 50% of the aggregate undrawn amount of all outstanding
Letters of Credit), be applied to satisfy the Obligations. If the Borrower is
required to provide an amount of cash collateral hereunder as a result of the
occurrence of an Event of Default, such amount (to the extent not applied as
aforesaid) shall be returned to
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the Borrower within three Business Days after all Events of Default have been
cured or waived.
(h) Additional Fronting Banks. From time to time, the Borrower may by
notice to the Administrative Agent designate additional Fronting Banks
reasonably satisfactory to the Administrative Agent. Such additional Fronting
Banks shall execute a counterpart of this Agreement upon approval of the
Administrative Agent (which shall not be unreasonably withheld) and shall
thereafter be Fronting Banks hereunder for all purposes and shall have the
Revolving L/C Commitment noted under their signature and, if applicable, the
Revolving L/C Commitment of any other Fronting Bank shall be reduced by the
amount or amounts specified to the Administrative Agent and each affected
Fronting Bank and delivered concurrently with any notice of designation of an
additional Fronting Bank.
SECTION 2.21. Replacement of Lenders. If any Lender is subject to an order,
judgment or decree of any Governmental Authority that purports to enjoin or
restrain such Lender from making Loans hereunder, then the Borrower may, at its
sole expense and effort and subject to Section 2.15, upon notice to such Lender
and the Administrative Agent, require such Lender to assign and delegate, at par
plus accrued interest and fees, without recourse (in accordance with and subject
to the restrictions contained in Section 9.04), all its interests, rights and
obligations under this Agreement (including all of its Commitments and the Loans
at the time owing to it and participations in Letters of Credit held by it and
its obligations to acquire such participations) to a financial institution
specified by the Borrower (which may be another Lender, if a Lender accepts such
assignment), provided that (i) the Borrower shall have received the prior
written consent of the Administrative Agent (and, if a Revolving Commitment is
being assigned, the Fronting Bank and Swingline Lender), which consent shall not
unreasonably be withheld or delayed, (ii) such assignment shall not conflict
with or violate any law, rule or regulation or order of any court or other
Governmental Authority and (iii) the Borrower shall have paid to the assigning
Lender all moneys accrued and owing hereunder to it (including pursuant to this
Section 2.21).
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
Each of Holdings and the Borrower represents and warrants to each of the
Lenders that:
SECTION 3.01. Organization; Powers. Each of Holdings, the Borrower and each
of their Subsidiaries (a) is a partnership, limited liability company or
corporation duly organized, validly existing and in good standing (or, if
applicable in a foreign jurisdiction, enjoys the equivalent status under the
laws of any jurisdiction of organization outside the United States) under the
laws of the jurisdiction of its organization, (b) has all requisite power and
authority to own its property and assets and to carry on its business as
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now conducted, (c) is qualified to do business in every jurisdiction where such
qualification is required, except where the failure so to qualify could not
reasonably be expected to result in a Material Adverse Effect, and (d) has the
power and authority to execute, deliver and perform its obligations under each
of the Loan Documents and each other agreement or instrument contemplated
thereby to which it is or will be a party and, in the case of the Borrower, to
borrow and otherwise obtain credit hereunder.
SECTION 3.02. Authorization. The execution, delivery and performance by
Holdings, the Borrower and each of their Subsidiaries of each of the Loan
Documents to which it is a party, and the borrowings hereunder and the
transactions forming a part of the Recapitalization (a) have been duly
authorized by all corporate, stockholder, limited liability company or
partnership action required to be obtained by Holdings, the Borrower and such
Subsidiaries and (b) will not (i) violate (A) any provision of law, statute,
rule or regulation, or of the certificate or articles of incorporation or other
constitutive documents or By-laws of Holdings, the Borrower or any such
Subsidiary, (B) any applicable order of any court or any rule, regulation or
order of any Governmental Authority or (C) any provision of any indenture,
certificate of designation for preferred stock, agreement or other instrument to
which Holdings, the Borrower or any such Subsidiary is a party or by which any
of them or any of their property is or may be bound, (ii) be in conflict with,
result in a breach of or constitute (alone or with notice or lapse of time or
both) a default under any such indenture, certificate of designation for
preferred stock, agreement or other instrument, where any such conflict,
violation, breach or default referred to in clause (i) or (ii) of this Section
3.02, individually or in the aggregate could reasonably be expected to have a
Material Adverse Effect, or (iii) result in the creation or imposition of any
Lien upon or with respect to any property or assets now owned or hereafter
acquired by Holdings, the Borrower or any such Subsidiary, other than the Liens
created by the Loan Documents.
SECTION 3.03. Enforceability. This Agreement has been duly executed and
delivered by Holdings and the Borrower and constitutes, and each other Loan
Document when executed and delivered by each Loan Party that is party thereto
will constitute, a legal, valid and binding obligation of such Loan Party
enforceable against each such Loan 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).
SECTION 3.04. Governmental Approvals. No action, consent or approval of,
registration or filing with or any other action by any Governmental Authority is
or will be required in connection with the Transaction, except for (a) the
filing of Uniform Commercial Code financing statements and filings with the
United States Patent and Trademark Office and the United States Copyright Office
and comparable offices in foreign jurisdictions and equivalent filings in
foreign jurisdictions, (b) recordation of the Mortgages, (c) such as have been
made or obtained and are in full force and effect, (d) filings (which have been
completed or will be completed on the Closing Date) of amended and restated
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certificates of limited partnership for Holdings and the Borrower and (e) such
actions, consents and approvals the failure to obtain or make which could not
reasonably be expected to result in a Material Adverse Effect.
SECTION 3.05. Financial Statements. Holdings has heretofore furnished to
the Lenders its combined balance sheets and combined statements of income, cash
flows and owners' equity (i) as of and for the fiscal years ended December 31,
1995 and December 31, 1996, audited by and accompanied by the opinion of Ernst &
Young LLP, independent public accountants, and (ii) as of and for the portion of
the fiscal year ended September 30, 1997 (in the case of clause (ii), without
footnotes and without a statement of owners' equity), in each case as set forth
in the Offering Memorandum. Such financial statements present fairly, in all
material respects, the financial position and results of operations of Holdings
and its consolidated Subsidiaries (including the Borrower) as of such dates and
for such periods. None of Holdings, its consolidated Subsidiaries and the
Borrower has or shall have as of the Closing Date any material Guarantee,
contingent liability or liability for taxes, or any long-term lease or unusual
forward or long-term commitment, including any interest rate or foreign currency
hedging transaction, which is not reflected in the foregoing statements or the
notes thereto, other than pursuant to the Loan Documents and except as
specifically disclosed in Schedule 3.05 to this Agreement. Such financial
statements were prepared in accordance with GAAP.
SECTION 3.06. No Material Adverse Change or Material Adverse Effect. Since
December 31, 1996 (but after giving effect to the consummation of the
Transaction) there has been no material adverse change (or occurrence which is
reasonably likely to result in a material adverse change) in the assets,
business, operations, properties, liabilities, profits or condition (financial
or otherwise) of Holdings and its Subsidiaries taken as a whole or of the
Borrower and its Subsidiaries taken as a whole. Furthermore, since December 31,
1996 (but after giving effect to the Transaction) no Material Adverse Effect has
occurred.
SECTION 3.07. Title to Properties; Possession Under Leases. (a) Each of
Holdings, the Borrower and each of their Subsidiaries has good and marketable
title to, or valid leasehold interests in, or easements or other limited
property interests in, all its material properties and assets (including all
Mortgaged Properties), except for minor defects in title that do not interfere
with its ability to conduct its business as currently conducted or to utilize
such properties and assets for their intended purposes and except where the
failure to have such title in the aggregate could not reasonably be expected to
have a Material Adverse Effect. All such material properties and assets are free
and clear of Liens, other than Liens expressly permitted by Section 6.02.
(b) Each of Holdings, the Borrower and each of their Subsidiaries has
complied with all obligations under all material leases to which it is a party,
except where the failure to comply would not have a Material Adverse Effect, and
all such leases are in full force and effect, except leases in respect of which
the failure to be in full force and effect
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could not reasonably be expected to have a Material Adverse Effect. Each of
Holdings, the Borrower and each of their Subsidiaries enjoys peaceful and
undisturbed possession under all such material leases, other than leases which,
individually or in the aggregate, are not material to Holdings and its
Subsidiaries taken as a whole or the Borrower and its Subsidiaries taken as a
whole, and in respect of which the failure to enjoy peaceful and undisturbed
possession could not reasonably be expected to, individually or in the
aggregate, result in a Material Adverse Effect.
(c) Each of Holdings, the Borrower and each of their Subsidiaries owns or
possesses, or could obtain ownership or possession of, on terms not materially
adverse to it, all patents, trademarks, service marks, trade names, copyrights,
licenses and rights with respect thereto necessary for the present conduct of
its business, without any known conflict with the rights of others, and free
from any burdensome restrictions, except where such conflicts and restrictions
could not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect and except as set forth on Schedule 3.07(c).
(d) As of the Closing Date, none of Holdings, the Borrower and their
Subsidiaries has received any notice of, or has any knowledge of, any pending or
contemplated condemnation proceeding affecting any of the Mortgaged Properties
or any sale or disposition thereof in lieu of condemnation that remains
unresolved as of the Closing Date.
(e) None of Holdings, the Borrower and their Subsidiaries is obligated on
the Closing Date under any right of first refusal, option or other contractual
right to sell, assign or otherwise dispose of any Mortgaged Property or any
interest therein, except as permitted under Sections 6.02 or 6.05 or as set
forth on Schedule 3.07(e).
SECTION 3.08. Co-Borrower; Subsidiaries. (a) As of the Closing Date, and
after giving effect to the Recapitalization, Holdings will have no Subsidiaries
other than (x) CapCo II, (y) Opco GP and (z) the Borrower and its Subsidiaries.
(b) Schedule 3.08 sets forth as of the Closing Date the name and
jurisdiction of incorporation of each Subsidiary of Holdings and, as to each
such Subsidiary, the percentage of each class of Equity Interests owned by
Holdings or by any such Subsidiary.
(c) As of the Closing Date, there are no outstanding subscriptions,
options, warrants, calls, rights or other agreements or commitments (other than
stock options granted to employees or directors and directors' qualifying
shares) of any nature relating to any Equity Interests of Holdings or any of its
Subsidiaries, except under the Loan Documents.
SECTION 3.09. Litigation; Compliance with Laws. (a) Except as set forth in
Schedule 3.09, there are not any material actions, suits or proceedings at law
or in equity or by or before any Governmental Authority now pending or, to the
knowledge of Holdings
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or the Borrower, threatened against or affecting Holdings, the Borrower or any
of their Subsidiaries or any business, property or rights of any such person (i)
which involve any Loan Document or the Transaction or (ii) as to which there is
a reasonable possibility of an adverse determination and which, if adversely
determined, could, individually or in the aggregate, reasonably be expected to
result in a Material Adverse Effect or materially adversely affect the
Transaction.
(b) None of Holdings, the Borrower, their Subsidiaries and their respective
material properties or assets is in violation of (nor will the continued
operation of their material properties and assets as currently conducted
violate) any law, rule or regulation (including any zoning, building,
Environmental Law, ordinance, code or approval or any building permit) or any
restriction of record or agreement affecting any Mortgaged Property, or is in
default with respect to any judgment, writ, injunction or decree of any
Governmental Authority, where such violation or default could reasonably be
expected to result in a Material Adverse Effect.
SECTION 3.10. Agreements. None of Holdings, the Borrower and their
Subsidiaries is in default in any manner under any provision of any indenture or
other agreement or instrument evidencing Indebtedness, or any other material
agreement or instrument to which it is a party or by which it or any of its
properties or assets are or may be bound, in either case where such default
could reasonably be expected to result in a Material Adverse Effect. Immediately
after giving effect to the Transaction, no Default or Event of Default shall
have occurred and be continuing.
SECTION 3.11. Federal Reserve Regulations. (a) None of Holdings, the
Borrower and their Subsidiaries is engaged principally, or as one of its
important activities, in the business of extending credit for the purpose of
purchasing or carrying Margin Stock.
(b) No part of the proceeds of any Loan will be used, whether directly or
indirectly, and whether immediately, incidentally or ultimately, (i) to purchase
or carry Margin Stock or to extend credit to others for the purpose of
purchasing or carrying Margin Stock or to refund indebtedness originally
incurred for such purpose, or (ii) for any purpose which entails a violation of,
or which is inconsistent with, the provisions of the Regulations of the Board,
including Regulation G, U or X.
SECTION 3.12. Investment Company Act; Public Utility Holding Company Act.
None of Holdings, the Borrower and their Subsidiaries is (a) an "investment
company" as defined in, or subject to regulation under, the Investment Company
Act of 1940, as amended, or (b) a "holding company" as defined in, or subject to
regulation under, the Public Utility Holding Company Act of 1935, as amended.
SECTION 3.13. Use of Proceeds. The Borrower will use the proceeds of the
Loans and will request the issuance of Letters of Credit only for the purposes
specified in the preamble to this Agreement; provided that Growth Capital
Revolving Loans initially
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incurred to finance Capital Expenditures, acquisitions and investments as
provided in the preamble to this Agreement may, to the extent the principal
amount thereof is subsequently repaid, be reborrowed (subject to the terms and
conditions of this Agreement) by the Borrower for its and its Subsidiaries'
general corporate purposes. The Co-Borrower shall not use the proceeds of the
Loans or Letters of Credit.
SECTION 3.14. Tax Returns. Each of Holdings, the Borrower and each of their
Subsidiaries has timely filed or caused to be timely filed all federal, and all
material state and local, tax returns required to have been filed by it and has
paid or caused to be paid all taxes shown thereon to be due and payable by it
and all assessments in excess of $2,000,000 in the aggregate received by it,
except taxes or assessments that are being contested in good faith by
appropriate proceedings in accordance with Section 5.03 and for which the
Borrower has set aside on its books adequate reserves and taxes, assessments,
charges, levies or claims in respect of property taxes for property that
Holdings, the Borrower or any of their Subsidiaries has determined to abandon
where the sole recourse for such tax, assessment, charge, levy or claim is to
such property. Each of Holdings, the Borrower and each of their Subsidiaries has
paid in full or made adequate provision (in accordance with GAAP) for the
payment of all taxes due with respect to all periods ending on or before the
Closing Date, which taxes, if not paid or adequately provided for, could
reasonably be expected to have a Material Adverse Effect. Except as set forth on
Schedule 3.14, as of the Closing Date, with respect to each of Holdings, the
Borrower and each of their Subsidiaries, (a) no material claims are being
asserted in writing with respect to any taxes, (b) no presently effective
waivers or extensions of statutes of limitation with respect to taxes have been
given or requested, (c) no tax returns are being examined by, and no written
notification of intention to examine has been received from, the Internal
Revenue Service or, with respect to any material potential tax liability, any
other taxing authority and (d) no currently pending issues have been raised in
writing by the Internal Revenue Service or, with respect to any material
potential tax liability, any other taxing authority. For purposes hereof,
"taxes" shall mean any present or future tax, levy, impost, duty, charge,
assessment or fee of any nature (including interest, penalties and additions
thereto) that is imposed by any Governmental Authority.
SECTION 3.15. No Material Misstatements. (a) The written information,
reports, financial statements, exhibits and schedules furnished by or on behalf
of Holdings, the Borrower or any of their Subsidiaries to the Administrative
Agent or any Lender in connection with the negotiation of any Loan Document or
included therein or delivered pursuant thereto (including the Confidential
Information Memorandum dated January 1998 relating to the Borrower (the
"Information Memorandum") but excluding the financial projections referred to in
Section 3.16(b)), when taken as a whole, did not contain, and as they may be
amended, supplemented or modified from time to time, will not contain, as of the
Closing Date any material misstatement of fact and did not omit, and as they may
be amended, supplemented or modified from time to time, will not omit, to state
as of the Closing Date any material fact necessary to make the statements
therein, in the light of the circumstances under which they were, are or will be
made, not materially misleading in
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their presentation of the Transaction or of Holdings, the Borrower and their
Subsidiaries taken as a whole.
(b) All financial projections concerning Holdings, the Borrower and their
Subsidiaries that are or have been made available to the Administrative Agent or
any Lender by Holdings, the Borrower or any such Subsidiary have been or will be
prepared in good faith based upon assumptions believed by Holdings and the
Borrower to be reasonable on the Closing Date.
SECTION 3.16. Employee Benefit Plans. Each of Holdings, the Borrower and
the ERISA Affiliates is in compliance with the applicable provisions of ERISA
and the provisions of the Code relating to ERISA and the regulations and
published interpretations thereunder and any similar applicable non-U.S. law
except for such noncompliance which could not reasonably be expected to result
in a Material Adverse Effect. No Reportable Event has occurred as to which
Holdings, the Borrower or any ERISA Affiliate was required to file a report with
the PBGC, other than reports for which the 30 day notice requirement is waived,
reports that have been filed and reports the failure of which to file could not
reasonably be expected to result in a Material Adverse Effect. As of the Closing
Date, the present value of all benefit liabilities under each Plan of Holdings,
the Borrower and the ERISA Affiliates (on a termination basis and based on those
assumptions used to fund such Plan) did not, as of the last annual valuation
date applicable thereto for which a valuation is available, exceed by more than
$15,000,000 the value of the assets of such Plan, and the present value of all
benefit liabilities of all underfunded Plans (based on those assumptions used to
fund each such Plan) did not, as of the last annual valuation dates applicable
thereto for which valuations are available, exceed by more than $15,000,000 the
value of the assets of all such underfunded Plans. None of Holdings, the
Borrower and the ERISA Affiliates has incurred or could reasonably be expected
to incur any Withdrawal Liability that could reasonably be expected to result in
a Material Adverse Effect. None of Holdings, the Borrower and the ERISA
Affiliates have received any written notification that any Multiemployer Plan is
in reorganization or has been terminated within the meaning of Title IV of
ERISA, and no Multiemployer Plan is reasonably expected to be in reorganization
or to be terminated, where such reorganization or termination has resulted or
could reasonably be expected to result, through increases in the contributions
required to be made to such Plan or otherwise, in a Material Adverse Effect.
SECTION 3.17. Environmental Matters. Except as set forth in Schedule 3.17:
(a) There has not been a Release or threatened Release of Hazardous
Materials at, on, under or around the properties currently or formerly
owned, operated or leased by Holdings, the Borrower or any of their
Subsidiaries (the "Properties") in amounts or concentrations which (i)
constitute or constituted a violation of Environmental Laws, except as
could not reasonably be expected to have a Material Adverse Effect; (ii)
would reasonably be expected to give rise to an
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Environmental Claim that, in any such case or in the aggregate, is
reasonably likely to result in a Material Adverse Effect; or (iii) could
reasonably be expected to impair materially the fair saleable value of any
material Property;
(b) The Properties and all operations of Holdings, the Borrower and
their Subsidiaries are in compliance, and in all prior periods have been in
compliance, with all Environmental Laws, and all necessary Environmental
Permits have been obtained and are in effect, except to the extent that
such non-compliance or failure to obtain any necessary permits, in the
aggregate, are not reasonably likely to result in a Material Adverse
Effect;
(c) None of Holdings, the Borrower or any of their Subsidiaries has
received any Environmental Claim in connection with the Properties or the
operations of the Borrower or its Subsidiaries or with regard to any person
whose liabilities for environmental matters Holdings, the Borrower or any
of their Subsidiaries has retained or assumed, in whole or in part,
contractually, by operation of law or otherwise, which, in either such case
or in the aggregate, is reasonably likely to result in a Material Adverse
Effect;
(d) Hazardous Materials have not been transported from the Properties,
nor have Hazardous Materials been generated, treated, stored or disposed of
at, on, under or around any of the Properties in a manner that could
reasonably give rise to liability under any Environmental Law, nor have any
of Holdings, the Borrower or any of their Subsidiaries retained or assumed
any liability, contractually, by operation of law or otherwise, with
respect to the generation, treatment, storage or disposal of Hazardous
Materials, which, in each case, individually or in the aggregate, is
reasonably likely to result in a Material Adverse Effect;
(e) No Lien in favor of any Governmental Authority for (i) any
liability under any Environmental Law or (ii) damages arising from or costs
incurred by such Governmental Authority in response to a Release or
threatened Release of Hazardous Materials into the environment has been
recorded with respect to the Properties except for Liens permitted by
Section 6.02.
SECTION 3.18. Capitalization of Holdings and the Borrower. The Equity
Interests issued and outstanding for each of Holdings and the Borrower is set
forth on Schedule 3.18 as of the Closing Date (after giving effect to the
Recapitalization). All outstanding partnership interests of the Borrower, on and
after the Closing Date, will be owned beneficially and of record by Holdings
(except that 1% thereof may be owned by Opco GP) and, on and after the Closing
Date, will be free and clear of all Liens and encumbrances whatsoever other than
the Liens created by the Loan Documents.
SECTION 3.19. Security Documents. (a) The Pledge Agreement is effective to
create in favor of the Collateral Agent, for the ratable benefit of the Secured
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Parties, a legal, valid and enforceable security interest in the Collateral (as
defined in the Pledge Agreement) and, when the Pledged Stock is delivered to the
Collateral Agent (or, as applicable in the case of Equity Interests of Foreign
Subsidiaries, the requisite filings or registrations are made), the Pledge
Agreement will constitute a fully perfected first priority Lien on, and security
interest in, all right, title and interest of the pledgors thereunder in such
Pledged Stock, in each case prior and superior in right to any other person.
(b) The Security Agreement is effective to create in favor of the
Collateral Agent, for the ratable benefit of the Secured Parties, a legal, valid
and enforceable security interest in the Collateral (as defined in the Security
Agreement) and, when financing statements in appropriate form are filed in the
offices specified on the schedules to the Security Agreement, the Security
Agreement will constitute a fully perfected Lien on, and security interest in,
all right, title and interest of the grantors thereunder in such Collateral and,
to the extent contemplated therein and subject to ss. 9-306 of the Uniform
Commercial Code, the proceeds thereof, in each case prior and superior in right
to any other person, other than with respect to Liens expressly permitted by
Section 6.02.
(c) The Mortgages are effective to create in favor of the Collateral Agent,
for the ratable benefit of the Secured Parties, a legal, valid and enforceable
Lien on all of the Loan Parties' right, title and interest in and to the
Mortgaged Properties thereunder and, to the extent contemplated therein and
subject to ss. 9-306 of the Uniform Commercial Code, the proceeds thereof, and
when the Mortgages are filed in the offices specified on the schedules thereto
and when financing statements in appropriate form are filed in the offices
specified on the schedules thereto, each Mortgage will constitute an enforceable
mortgage Lien on, and fully perfected security interest in, all right, title and
interest of the Loan Parties in the Mortgaged Property subject thereto and, to
the extent contemplated therein and subject to ss. 9-306 of the Uniform
Commercial Code, the proceeds thereof, in each case prior and superior in right
to any other person, other than with respect to the rights of persons pursuant
to Liens expressly permitted by Section 6.02.
(d) The Intellectual Property Security Agreement is effective to create in
favor of the Collateral Agent, for the ratable benefit of the Secured Parties, a
legal, valid and enforceable security interest in the Collateral (as defined in
the Intellectual Property Security Agreement), and when financing statements in
appropriate form are filed in the offices specified on Schedule 3.19 and the
Intellectual Property Security Agreement is filed in the United States Patent
and Trademark Office and the United States Copyright Office, the Intellectual
Property Security Agreement will constitute a fully perfected Lien on, and
security interest in, all right, title and interest of the Loan Parties in such
Collateral and, to the extent contemplated therein and subject to ss.9-306 of
the Uniform Commercial Code, the proceeds thereof, in each case prior and
superior in right to any other person (it being understood that subsequent
recordings in the United States Patent and Trademark Office and the United
States Copyright Office may be necessary to perfect a Lien on registered
trademarks, trademark applications and copyrights acquired by the Loan Parties
after the date
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hereof), other than with respect to the rights of persons pursuant to Liens
expressly permitted by Section 6.02.
SECTION 3.20. Location of Real Property and Leased Premises. (a) Schedule
3.20 lists completely and correctly as of the Closing Date all real property
owned by Holdings and its Subsidiaries and the addresses thereof, other than
individual properties that have an original cost of less than $200,000. As of
the Closing Date, Holdings and its Subsidiaries own in fee all the real property
set forth as being owned by them on Schedule 3.20.
(b) Schedule 3.20 lists completely and correctly as of the Closing Date all
real property leased by Holdings and its Subsidiaries and the addresses thereof.
As of the Closing Date, the Borrower and the Subsidiaries have valid leases in
all the real property set forth as being leased by them on Schedule 3.20.
SECTION 3.21. Solvency. (a) Immediately after the consummation of the
Recapitalization and the other transactions to occur on the Closing Date and
immediately following the making of each Loan made, and the issuance of each
Letter of Credit issued, on the Closing Date and after giving effect to the
application of the proceeds thereof, (i) the fair value of the assets of each of
Holdings (individually), Holdings and its Subsidiaries on a consolidated basis,
the Borrower (individually) and the Borrower and its Subsidiaries on a
consolidated basis, at a fair valuation, will exceed the debts and liabilities,
direct, subordinated, contingent or otherwise, of each of Holdings
(individually), Holdings and its Subsidiaries on a consolidated basis, the
Borrower (individually) and the Borrower and its Subsidiaries on a consolidated
basis; (ii) the present fair saleable value of the property of each of Holdings
(individually), Holdings and its Subsidiaries on a consolidated basis, the
Borrower (individually) and the Borrower and its Subsidiaries on a consolidated
basis will be greater than the amount that will be required to pay the probable
liability of each of Holdings (individually), Holdings and its Subsidiaries on a
consolidated basis, the Borrower (individually) and the Borrower and its
Subsidiaries on a consolidated basis on their debts and other liabilities,
direct, subordinated, contingent or otherwise, as such debts and other
liabilities become absolute and matured; (iii) each of Holdings (individually),
Holdings and its Subsidiaries on a consolidated basis, the Borrower
(individually) and the Borrower and its Subsidiaries on a consolidated basis
will be able to pay their debts and liabilities, direct, subordinated,
contingent or otherwise, as such debts and liabilities become absolute and
matured; and (iv) each of Holdings (individually), Holdings and its Subsidiaries
on a consolidated basis, the Borrower (individually) and the Borrower and its
Subsidiaries on a consolidated basis will not have unreasonably small capital
with which to conduct the businesses in which they are engaged as such
businesses are now conducted and are proposed to be conducted following the
Closing Date.
(b) Each of Holdings and the Borrower does not intend to, and does not
believe that it or any of its respective Subsidiaries will, incur debts beyond
its ability to pay such debts as they mature, taking into account the timing and
amounts of cash to be received
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by it or any such Subsidiary and the timing and amounts of cash to be payable on
or in respect of its Indebtedness or the Indebtedness of any such Subsidiary.
SECTION 3.22. Labor Matters. Except as set forth in Schedule 3.22, there
are no strikes pending or threatened against Holdings, the Borrower or any of
their Subsidiaries that, individually or in the aggregate, could reasonably be
expected to result in a Material Adverse Effect. The hours worked and payments
made to employees of Holdings, the Borrower and their Subsidiaries have not been
in violation in any material respect of the Fair Labor Standards Act or any
other applicable law dealing with such matters. All material payments due from
Holdings, the Borrower or any of their Subsidiaries or for which any claim may
be made against Holdings, the Borrower or any of their Subsidiaries, on account
of wages and employee health and welfare insurance and other benefits have been
paid or accrued as a liability on the books of Holdings, the Borrower or such
Subsidiary to the extent required by GAAP. The consummation of the Transaction
will not give rise to a right of termination or right of renegotiation on the
part of any union under any collective bargaining agreement to which Holdings,
the Borrower or any of their Subsidiaries (or any predecessor) is a party or by
which Holdings, the Borrower or any of their Subsidiaries (or any predecessor)
is bound, other than collective bargaining agreements which, individually or in
the aggregate, are not material to Holdings and its Subsidiaries taken as a
whole.
SECTION 3.23. Insurance. Schedule 3.23 sets forth a true, complete and
correct description of all material insurance maintained by or on behalf of
Holdings, the Borrower or their domestic Subsidiaries as of the Closing Date. As
of such date, such insurance is in full force and effect.
SECTION 3.24. Representations and Warranties in Recapitalization Agreement.
All representations and warranties of each Loan Party set forth in the
Recapitalization Agreement were true and correct in all material respects as of
the time such representations and warranties were made and shall be true and
correct in all material respects as of the Closing Date as if such
representations and warranties were made on and as of such date, unless stated
to relate to a specific earlier date, in which case such representations and
warranties shall be true and correct in all material respects as of such earlier
date.
ARTICLE IV.
CONDITIONS OF LENDING
The obligations of (a) the Lenders (including, without limitation, the
Swingline Lender) to make Loans and (b) the Fronting Bank to issue Letters of
Credit hereunder (each, a "Credit Event") are subject to the satisfaction of the
following conditions:
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SECTION 4.01. All Credit Events. On the date of each Borrowing and on the
date of each issuance or renewal of a Letter of Credit (other than a Borrowing
in which Revolving Loans are refinanced with new Revolving Loans as contemplated
by Section 2.02(f) without any increase in the aggregate principal amount of
Revolving Loans outstanding and any extension or renewal of any Letter of Credit
without any increase in the stated amount of such Letter of Credit):
(a) The Administrative Agent shall have received, in the case of a
Borrowing, a notice of such Borrowing as required by Section 2.03 (or such
notice shall have been deemed given in accordance with the last paragraph
of Section 2.03) or, in the case of the issuance of a Letter of Credit, the
Fronting Bank and the Administrative Agent shall have received a notice
requesting the issuance of such Letter of Credit as required by Section
2.20(a).
(b) The representations and warranties set forth in Article III hereof
shall be true and correct in all material respects on and as of the date of
such Borrowing or issuance of such Letter of Credit, as the case may be,
with the same effect as though made on and as of such date, except to the
extent such representations and warranties expressly relate to an earlier
date (in which case such representations and warranties shall be true and
correct in all material respects as of such earlier date).
(c) At the time of and immediately after such Borrowing or issuance of
such Letter of Credit, as the case may be, no Event of Default or Default
shall have occurred and be continuing.
Each Borrowing and each issuance of a Letter of Credit (except those specified
in the parenthetical contained in the introductory paragraph of this Section
4.01) shall be deemed to constitute a representation and warranty by the
Borrower on the date of such Borrowing or issuance, as the case may be, as to
the matters specified in paragraphs (b) and (c) of this Section 4.01. The
conditions set forth in this Section 4.01 shall not be required to be satisfied
on the Closing Date.
SECTION 4.02. First Credit Event. On the Closing Date:
(a) The Administrative Agent shall have received, on behalf of itself,
the Documentation Agent, the Lenders and the Fronting Bank, a favorable
written opinion of (i) Simpson Thacher & Bartlett, special counsel for
Holdings and the Borrower, substantially to the effect set forth in Exhibit
J-1, (ii) Morgan, Lewis & Bockius, special Pennsylvania counsel for
Holdings and the Borrower, substantially to the effect set forth in Exhibit
J-2, and (iii) local counsel satisfactory to the Agents, in each case (A)
dated the Closing Date, (B) addressed to the Fronting Bank, the
Administrative Agent, the Documentation Agent and the Lenders, and (C)
covering such other matters relating to the Loan Documents and the
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Recapitalization as the Agents shall reasonably request, and each of
Holdings and the Borrower hereby instructs its counsel to deliver such
opinions.
(b) All legal matters incident to this Agreement, the borrowings and
extensions of credit hereunder and the other Loan Documents shall be
reasonably satisfactory to the Agents, to the Lenders and to the Fronting
Bank.
(c) The Administrative Agent shall have received in the case of each
Loan Party each of the items referred to in clauses (A), (B) and (C) below:
(A) a copy of the certificate or articles of incorporation, partnership
agreement or limited liability agreement, including all amendments thereto,
of each Loan Party, (x) in the case of a corporation, certified as of a
recent date by the Secretary of State of the state of its organization, and
a certificate as to the good standing of each such Loan Party as of a
recent date from such Secretary of State or (y) in the case of a
partnership of or limited liability company, certified by the Secretary or
Assistant Secretary of each such Loan Party; (B) a certificate of the
Secretary or Assistant Secretary of each Loan Party dated the Closing Date
and certifying (w) that attached thereto is a true and complete copy of the
by-laws (or partnership agreement, limited liability company agreement or
other equivalent governing documents) of such Loan Party as in effect on
the Closing Date and at all times since a date prior to the date of the
resolutions described in clause (x) below, (x) that attached thereto is a
true and complete copy of resolutions duly adopted by the Board of
Directors (or equivalent governing body) of such Loan Party (or, its
managing general partner or managing member) authorizing the execution,
delivery and performance of the Loan Documents to which such person is a
party and, in the case of the Borrower, the borrowings hereunder, and that
such resolutions have not been modified, rescinded or amended and are in
full force and effect, (y) that the certificate or articles of
incorporation, partnership agreement or limited liability agreement of such
Loan Party have not been amended since the date of the last amendment
thereto disclosed pursuant to clause (A) above, and (z) as to the
incumbency and specimen signature of each officer executing any Loan
Document or any other document delivered in connection herewith on behalf
of such Loan Party; (C) a certificate of another officer as to the
incumbency and specimen signature of the Secretary or Assistant Secretary
executing the certificate pursuant to (B) above; and (b) such other
documents as the Agents, the Lenders and the Fronting Bank may reasonably
request.
(d) The Administrative Agent shall have received a certificate of the
Borrower, dated the Closing Date and signed by the Borrower, confirming
compliance with the conditions precedent set forth in paragraphs (b) and
(c) of Section 4.01 and (except to the extent that any such condition is
required to be satisfactory or determined by the Lenders and/or the Agents)
paragraphs (k), (o), (p) and (q) of this Section 4.02.
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(e) Each of the Guarantee Agreements shall have been duly executed by
the parties thereto and delivered to the Collateral Agent and shall be in
full force and effect.
(f) (i) The Pledge Agreement shall have been duly executed by the
parties thereto and delivered to the Collateral Agent and shall be in full
force and effect, and all Pledged Stock, Pledged Notes and Pledged
Partnership Interests (to the extent certificated) (as such terms are
defined in the Pledge Agreement), shall have been delivered to the
Collateral Agent, (x) endorsed in blank in the case of Pledged Notes, (y)
together with executed and undated stock powers in the case of Pledged
Stock and (z) together with other instruments of transfer satisfactory to
the Collateral Agent in the case of Pledged Partnership Interests; and (ii)
the Security Agreement and the Intellectual Property Security Agreement
shall have been duly executed by the Loan Parties party thereto and shall
have been delivered to the Collateral Agent and shall be in full force and
effect on such date and each document (including each Uniform Commercial
Code financing statement) required by law or reasonably requested by the
Administrative Agent to be filed, registered or recorded in order to create
in favor of the Collateral Agent for the benefit of the Secured Parties a
valid, legal and perfected first-priority security interest in and lien on
the Collateral described in such agreement (subject to any Lien expressly
permitted by Section 6.02) shall have been delivered to the Collateral
Agent.
(g) The Collateral Agent shall have received (i) the results of a
search of the Uniform Commercial Code filings made with respect to the Loan
Parties in the states in which the chief executive office of each such
person is located and the other jurisdictions in which Uniform Commercial
Code filings are to be made pursuant to the preceding paragraph, together
with copies of the financing statements disclosed by such search and (ii)
the results of equivalent searches made in each other jurisdiction
requested by the Administrative Agent, in each case accompanied by evidence
satisfactory to the Agents that the Liens indicated in any such financing
statement (or similar document) or otherwise disclosed in such searches
would be permitted under Section 6.02 or have been released.
(h)(i) Each of the Mortgages, substantially in the form of Exhibit E,
relating to each of the Mortgaged Properties shall have been duly executed
by the parties thereto and delivered to the Collateral Agent and shall be
in full force and effect, (ii) each of such Mortgaged Properties shall not
be subject to any Lien other than those expressly permitted under Section
6.02, (iii) a lender's title insurance policy, paid for by the Borrower, in
form and substance acceptable to the Agents, insuring such Mortgage as a
first lien on such Mortgaged Property (subject to any Lien expressly
permitted by Section 6.02 or otherwise agreed to by the Agents) shall have
been received by the Administrative Agent and (iv) the Collateral Agent
shall have received such other documents, including a policy or policies of
title insurance issued by a nationally recognized title insurance company,
together with such
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endorsements, coinsurance and reinsurance as may be requested by the
Administrative Agent, insuring the Mortgages as valid first Liens on the
Mortgaged Properties, free of Liens other than those expressly permitted
under Section 6.02 or otherwise agreed to by the Agents, together with such
surveys, abstracts, appraisals and legal opinions required to be furnished
pursuant to the terms of the Mortgages or this Agreement or as reasonably
requested in writing by the Agents or the Lenders.
(i) The Administrative Agent shall have received copies of, or an
insurance broker's or agent's certificate as to coverage under, the
insurance policies required by Section 5.02 and the applicable provisions
of the Security Documents, each of which policies shall be endorsed or
otherwise amended to include a "standard" or "New York" lender's loss
payable endorsement and to name the Collateral Agent as additional insured,
in form and substance satisfactory to the Agents.
(j) The Administrative Agent shall have received environmental
assessment reports, in form, scope and substance reasonably satisfactory to
the Lenders, from Environmental Resources Management, Dames & Moore and
Langan Engineering and Environmental Services as to certain environmental
hazards, liabilities or Remedial Action to which Holdings, the Borrower or
any of their respective Subsidiaries may be subject.
(k) The Recapitalization and the other portions of the Transaction
shall have been consummated in all material respects simultaneously with
the incurrence of the initial Loans hereunder in accordance with applicable
law, the Recapitalization Agreement and all related documentation, in each
case in the form previously approved by the Administrative Agent, and
otherwise on terms reasonably satisfactory to the Agents. The conditions
set forth in Section 6.1(a) of the Recapitalization Agreement shall be
satisfied without giving effect to any waivers thereof or to any proposed
supplements to the Disclosure Schedules thereto in any manner adverse to
the Lenders or the Agents with respect to Discoveries (as defined in the
Recapitalization Agreement) not approved by the Administrative Agent (to
the extent of its approval rights with respect thereto as described in
clause (v) below). Furthermore, (x) all other conditions to the obligations
of Holdings and its Affiliates set forth in the Recapitalization Agreement
shall have been satisfied in all material respects without giving effect to
any waivers or amendments adverse to Holdings and its Subsidiaries or the
Lenders not approved by the Administrative Agent and (y) no event or
circumstance shall then exist which would permit (without giving effect to
any waivers or amendments to Section 9.1 of the Recapitalization Agreement
not previously approved by the Administrative Agent) the Investors to
terminate the Recapitalization Agreement pursuant to Section 9.1(c) or (e)
thereof.
(l) Holdings shall have equity capitalization of at least $245,000,000
(of which approximately 15% shall be in the form of retained equity of
Holdings
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theretofore held by existing partners of Holdings (valued at the price per
unit in the Purchase, it being understood that the valuation described in
this paragraph is not in accordance with GAAP) and the remainder of which
shall constitute partnership interests purchased by Investor LP and
Investor GP from existing partners). All terms and conditions (and the
documentation) in connection with the equity shall be consistent with the
Recapitalization Agreement and otherwise on terms reasonably satisfactory
to the Agents.
(m) The Borrower shall have received gross cash proceeds of
$225,000,000 from the issuance of the Senior Subordinated Notes. The terms
and conditions of the Senior Subordinated Notes shall be as described in
the Offering Memorandum.
(n) Holdings shall have received gross cash proceeds of $100,000,000
from the issuance of the Holdings Discount Notes. The terms and conditions
of the Holdings Discount Notes shall be as described in the Offering
Memorandum.
(o) The cash proceeds received from the incurrence of the Senior
Subordinated Notes and the incurrence of the Holdings Discount Notes, when
added to the aggregate principal amount of Term Loans and Revolving Loans
incurred on the Closing Date, shall be sufficient to effect the Transaction
and to pay all fees and expenses in connection therewith.
(p) After giving effect to the consummation of the Transaction,
Holdings and its Subsidiaries shall have no outstanding Indebtedness or
preferred equity, except as permitted by Sections 6.01 and 6.04.
(q) All necessary material governmental and material third party
approvals and/or consents in connection with the Transaction, the
transactions contemplated by the Loan Documents and otherwise referred to
herein shall have been obtained and remain in effect, and all applicable
waiting periods shall have expired without any action being taken by any
competent authority which restrains, prevents, or imposes materially
adverse conditions upon, the consummation of the Transaction or the
transactions contemplated by the Loan Documents or otherwise referred to
herein.
(r) The corporate and capital structure of Holdings and its
Subsidiaries, in each case as the same will exist after giving effect to
the consummation of the Transaction, shall be consistent with the
Recapitalization Agreement and the pro forma financial statements
referenced in clause (u) below. All agreements relating to the Equity
Interests in Holdings and its Subsidiaries shall be consistent with the
Recapitalization Agreement and, to the extent the terms thereof are not
expressly provided therein, same shall be reasonably satisfactory to the
Agents.
(s) All costs, fees, expenses (including, without limitation,
reasonable legal fees and expenses) and other compensation contemplated
hereby, payable to the
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Lenders and the Agents or payable in respect of the Transaction, shall have
been paid to the extent due and invoiced.
(t) The Lenders shall have received a solvency opinion from Houlihan
Lokey Howard & Zukin, in form and substance reasonably satisfactory to the
Agents, setting forth the conclusions that, after giving effect to the
Transaction and the incurrence of all the financings contemplated herein,
each of Holdings, individually, Holdings and its Subsidiaries, taken as a
whole, the Borrower, individually, and the Borrower and its Subsidiaries,
taken as a whole, are not insolvent and will not be rendered insolvent by
the indebtedness incurred in connection therewith, and will not be left
with unreasonably small capital with which to engage in their businesses
and will not have incurred debts beyond their ability to pay such debts as
they mature.
(u) The Administrative Agent shall have received (i) historical
financial statements for Holdings and its Subsidiaries for each monthly and
quarterly period ended after September 30, 1997 and prior to the Closing
Date, in each case to the extent such financial statements are reasonably
available to Holdings, (ii) a pro forma opening balance sheet of Holdings
and its Subsidiaries after giving effect to the Transaction and (iii)
projections for Holdings and its Subsidiaries after giving effect to the
Transaction, all of which financial statements or projections shall be
consistent in all material respects with the financial information
previously provided to the Administrative Agent by Investor LP or Holdings
(in each case, other than to reflect certain contributions of assets
anticipated under the Recapitalization Agreement).
(v) The Administrative Agent shall have received all schedules and
exhibits to, and reports and notices delivered pursuant to, the
Recapitalization Agreement (including, without limitation, the Disclosure
Schedules and any environmental reports and Environmental Notices delivered
pursuant to the Recapitalization Agreement) not previously received by the
Administrative Agent, and the Agents shall have the same approval and other
rights with respect to such schedules, exhibits, reports and notices, and
the matters disclosed therein, including proposed supplements thereto, as
the Investors have with respect thereto.
ARTICLE V.
AFFIRMATIVE COVENANTS
Each of Holdings and the Borrower covenants and agrees with each Lender
that so long as this Agreement shall remain in effect and until the Commitments
have been terminated and the principal of and interest on each Loan, all Fees
and all other expenses or amounts payable under any Loan Document shall have
been paid in full and all Letters of
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Credit have been canceled or have expired and all amounts drawn thereunder have
been reimbursed in full, unless the Required Lenders shall otherwise consent in
writing, each of Holdings and the Borrower will, and will cause each of their
Subsidiaries to:
SECTION 5.01. Existence; Businesses and Properties. (a) Do or cause to be
done all things necessary to preserve, renew and keep in full force and effect
its legal existence, except as otherwise expressly permitted under Section 6.05,
and except for the liquidation or dissolution of Subsidiaries of the Borrower if
the assets of such entities to the extent they exceed estimated liabilities are
acquired by the Borrower or a Wholly Owned Subsidiary of the Borrower in such
liquidation or dissolution, provided that Subsidiaries of the Borrower that are
Guarantors may not be liquidated into Subsidiaries of the Borrower that are not
Guarantors and domestic Subsidiaries of the Borrower may not be liquidated into
Foreign Subsidiaries of the Borrower.
(b) Do or cause to be done all things necessary to obtain, preserve, renew,
extend and keep in full force and effect the rights, licenses, permits,
franchises, authorizations, patents, copyrights, trademarks and trade names
material to the conduct of its business; comply in all material respects with
all applicable laws, rules, regulations (including any zoning, building,
Environmental Law, ordinance, code or approval or any building permits or any
restrictions of record or agreements affecting the Mortgaged Properties) and
orders of any Governmental Authority, whether now in effect or hereafter
enacted; and at all times maintain and preserve all property material to the
conduct of such business and keep such property in good repair, working order
and condition and from time to time make, or cause to be made, all needful and
proper repairs, renewals, additions, improvements and replacements thereto
necessary in order that the business carried on in connection therewith, if any,
may be properly conducted at all times (in each case except as expressly
permitted by this Agreement).
SECTION 5.02. Insurance. (a) Keep its insurable properties insured at all
times by financially sound and reputable insurers in such amounts as shall be
customary for similar businesses and maintain such other reasonable insurance
(including, to the extent consistent with past practices, self-insurance), of
such types, to such extent and against such risks, as is customary with
companies in the same or similar businesses, and maintain such other insurance
as may be required by law or any other Loan Document.
(b) Cause all such property and casualty insurance policies with respect to
the Mortgaged Properties to be endorsed or otherwise amended to include a
"standard" or "New York" lender's loss payable endorsement, in form and
substance reasonably satisfactory to the Administrative Agent and the Collateral
Agent, which endorsement shall provide that, from and after the Closing Date, if
the insurance carrier shall have received written notice from the Administrative
Agent or the Collateral Agent of the occurrence of an Event of Default, the
insurance carrier shall pay all proceeds otherwise payable to the Borrower or
the Loan Parties under such policies directly to the Collateral Agent; cause all
such policies to provide that neither the Borrower, the Administrative Agent,
the Collateral Agent nor any
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other party shall be a coinsurer thereunder and to contain a "Replacement Cost
Endorsement", without any deduction for depreciation, and such other provisions
as the Administrative Agent or the Collateral Agent may reasonably (in light of
a Default or a material development in respect of the insured Mortgaged
Property) require from time to time to protect their interests; deliver original
or certified copies of all such policies or a certificate of an insurance broker
to the Collateral Agent; cause each such policy to provide that it shall not be
canceled, modified or not renewed upon not less than 30 days' prior written
notice thereof by the insurer to the Administrative Agent and the Collateral
Agent; deliver to the Administrative Agent and the Collateral Agent, prior to
the cancellation, modification or nonrenewal of any such policy of insurance, a
copy of a renewal or replacement policy (or other evidence of renewal of a
policy previously delivered to the Administrative Agent and the Collateral
Agent), or insurance certificate with respect thereto, together with evidence
satisfactory to the Administrative Agent and the Collateral Agent of payment of
the premium therefor.
(c) If at any time the area in which the Premises (as defined in the
Mortgages) are located is designated a "flood hazard area" in any Flood
Insurance Rate Map published by the Federal Emergency Management Agency (or any
successor agency), obtain flood insurance in such reasonable total amount as the
Administrative Agent, the Collateral Agent or the Required Lenders may from time
to time reasonably require, and otherwise comply with the National Flood
Insurance Program as set forth in the Flood Disaster Protection Act of 1973, as
it may be amended from time to time.
(d) With respect to each Mortgaged Property, carry and maintain
comprehensive general liability insurance including the "broad form CGL
endorsement" and coverage on an occurrence basis against claims made for
personal injury (including bodily injury, death and property damage) and
umbrella liability insurance against any and all claims, in no event for a
combined single limit of less than $1,000,000, naming the Collateral Agent as an
additional insured, on forms reasonably satisfactory to the Collateral Agent.
(e) Notify the Administrative Agent and the Collateral Agent promptly
whenever any separate insurance concurrent in form or contributing in the event
of loss with that required to be maintained under this Section 5.02 is taken out
by Holdings, the Borrower or any of their Subsidiaries; and promptly deliver to
the Administrative Agent and the Collateral Agent a duplicate original copy of
such policy or policies, or insurance certificate with respect thereto.
(f) In connection with the covenants set forth in this Section 5.02, it is
understood and agreed that:
(i) none of the Agents, the Lenders, the Fronting Bank and their
respective agents or employees shall be liable for any loss or damage
insured by the insurance policies required to be maintained under this
Section 5.02, it being understood that (A) the Borrower and the other Loan
Parties shall look solely to
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their insurance companies or any other parties other than the aforesaid
parties for the recovery of such loss or damage and (B) such insurance
companies shall have no rights of subrogation against the Agents, the
Lenders, the Fronting Bank or their agents or employees. If, however, the
insurance policies do not provide waiver of subrogation rights against such
parties, as required above, then each of Holdings and the Borrower hereby
agree, to the extent permitted by law, to waive, and to cause each of their
Subsidiaries to waive, its right of recovery, if any, against the Agents,
the Lenders, the Fronting Bank and their agents and employees; and
(ii) the designation of any form, type or amount of insurance coverage
by the Administrative Agent, the Collateral Agent or the Required Lenders
under this Section 5.02 shall in no event be deemed a representation,
warranty or advice by the Administrative Agent, the Collateral Agent or the
Lenders that such insurance is adequate for the purposes of the business of
Holdings, the Borrower and their Subsidiaries or the protection of their
properties.
SECTION 5.03. Taxes. Pay and discharge promptly when due all taxes,
assessments and governmental charges or levies imposed upon it or upon its
income or profits or in respect of its property, before the same shall become
delinquent or in default, as well as all lawful claims for labor, materials and
supplies or otherwise which, if unpaid, might give rise to a Lien upon such
properties or any part thereof; provided, however, that such payment and
discharge shall not be required with respect to any such tax, assessment,
charge, levy or claim so long as (a) the validity or amount thereof shall be
contested in good faith by appropriate proceedings and Holdings, the Borrower or
the affected Subsidiary, as applicable, shall have set aside on its books
reserves in accordance with GAAP with respect thereto, (b) such tax, assessment,
charge, levy or claim is in respect of property taxes for property that
Holdings, the Borrower or one of their Subsidiaries has determined to abandon
and the sole recourse for such tax, assessment, charge, levy or claim is to such
property or (c) the amount of such taxes, assessments, charges, levies and
claims and interest and penalties thereon does not exceed $2,000,000 in the
aggregate.
SECTION 5.04. Financial Statements, Reports, etc. Furnish to the Agents and
each Lender:
(a) within 90 days after the end of each fiscal year (or, in the case
of the fiscal year ended December 31, 1997, within 120 days after the end
thereof), a consolidated balance sheet and related statements of
operations, cash flows and owners' equity showing the financial position of
each of Holdings and its Subsidiaries and the Borrower and its Subsidiaries
as of the close of such fiscal year and the consolidated results of their
operations during such year (or, in the case of the fiscal year ended
December 31, 1997, such statements of Holdings combined on the same basis
as set forth in the Offering Memorandum), all audited by independent public
accountants of recognized national standing reasonably acceptable to the
Administrative Agent and accompanied by an opinion of such accountants
(which
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shall not be qualified in any material respect) to the effect that such
consolidated financial statements fairly present, in all material respects,
the financial position and results of operations of each of Holdings and
its Subsidiaries and the Borrower and its Subsidiaries on a consolidated
basis in accordance with GAAP, it being understood that the delivery by
Holdings of its Form 10-K as filed with the SEC shall satisfy its
requirements (but not those of the Borrower and its Subsidiaries) under
this Section 5.04(a);
(b) within 45 days (or 60 days in the case of the fiscal quarter ended
in March, 1998) after the end of each of the first three fiscal quarters of
each fiscal year, a consolidated balance sheet and related statements of
operations and cash flows showing the financial position of each of
Holdings and its Subsidiaries and the Borrower and its Subsidiaries as of
the close of such fiscal quarter and the consolidated results of their
operations during such fiscal quarter and the then-elapsed portion of the
fiscal year, all certified by a Financial Officer of Holdings or the
Borrower, as the case may be, on behalf of Holdings or the Borrower,
respectively, as fairly presenting, in all material respects, the financial
position and results of operations of Holdings and its Subsidiaries or the
Borrower and its Subsidiaries, as the case may be, in each case on a
consolidated basis in accordance with GAAP (except for the absence of
footnotes), subject to normal year-end audit adjustments, it being
understood that the delivery by Holdings of its Form 10-Q as filed with the
SEC shall satisfy its requirements (but not those of the Borrower and its
Subsidiaries) under this Section 5.04(b);
(c) concurrently with any delivery of financial statements under (a)
or (b) above, a certificate of the accounting firm or Financial Officer on
behalf of the Borrower opining on or certifying such statements (which
certificate, when furnished by an accounting firm, may be limited to
accounting matters and disclaim responsibility for legal interpretations)
(i) certifying that no Event of Default or Default has occurred or, if such
an Event of Default or Default has occurred, specifying the nature and
extent thereof and any corrective action taken or proposed to be taken with
respect thereto and (ii) setting forth computations in reasonable detail
satisfactory to the Administrative Agent demonstrating compliance with the
covenants contained in Sections 6.10, 6.11 and 6.12 (it being understood
that the information required by this clause (ii) may be provided in a
certificate of a Financial Officer on behalf of the Borrower instead of
from such accounting firm);
(d) promptly after the same become publicly available, copies of all
periodic and other publicly available reports, proxy statements and, to the
extent requested by the Administrative Agent, other materials filed by
Holdings, the Borrower or any of their Subsidiaries with the SEC, or
distributed to its shareholders generally, as the case may be;
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(e) if, as a result of any change in accounting principles and
policies from those as in effect on the date of this Agreement (other than
in respect of the capitalization of repairs and maintenance expenses as
provided in the definition of GAAP), the consolidated financial statements
of Holdings or the Borrower (and their respective Subsidiaries) delivered
pursuant to paragraph (a) or (b) above will differ in any material respect
from the consolidated financial statements that would have been delivered
pursuant to such clauses had no such change in accounting principles and
policies been made, then, together with the first delivery of financial
statements pursuant to paragraph (a) and (b) above following such change, a
schedule prepared by a Financial Officer on behalf of Holdings or the
Borrower, as the case may be, reconciling such changes to what the
financial statements would have been without such changes;
(f) within 30 days after the beginning of each fiscal year, a budget
in form satisfactory to the Agents prepared by Holdings for each of the
four fiscal quarters of such fiscal year prepared in reasonable detail, of
Holdings and its Subsidiaries, accompanied by the statement of a Financial
Officer of Holdings to the effect that, to the best of his knowledge, the
budget is a reasonable estimate for the period covered thereby;
(g) promptly following the creation or acquisition of any Subsidiary,
a certificate from a Responsible Officer, identifying such new Subsidiary
and the ownership interest of the Borrower and the Subsidiaries therein;
(h) simultaneously with the delivery of any financial statements
pursuant to paragraph (a) or (b) above, a balance sheet and related
statements of operations, cash flows and stockholder's equity for each
unconsolidated Subsidiary for the applicable period;
(i) promptly, a copy of all reports submitted in connection with any
material interim or special audit made by independent accountants of the
books of Holdings, the Borrower or any of their Subsidiaries; and
(j) promptly, from time to time, such other information regarding the
operations, business affairs and financial condition of Holdings, the
Borrower or any of their Subsidiaries, or compliance with the terms of any
Loan Document, or such consolidating financial statements, as in each case
the Agents or any Lender, acting through the Administrative Agent, may
reasonably request.
SECTION 5.05. Litigation and Other Notices. Furnish to the Administrative
Agent written notice of the following promptly after any Responsible Officer of
the Borrower obtains actual knowledge thereof:
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(a) any Event of Default or Default, specifying the nature and extent
thereof and the corrective action (if any) proposed to be taken with
respect thereto;
(b) the filing or commencement of, or any written threat or notice of
intention of any person to file or commence, any action, suit or
proceeding, whether at law or in equity or by or before any Governmental
Authority, against Holdings, the Borrower or any of their Subsidiaries in
respect of which there is a reasonable possibility of an adverse
determination and which, if adversely determined, could reasonably be
expected to result in a Material Adverse Effect; and
(c) any other development specific to Holdings, the Borrower or any of
their Subsidiaries that is not a matter of general public knowledge and
that has resulted in, or could reasonably be expected to result in, a
Material Adverse Effect.
SECTION 5.06. Employee Benefits. (a) Comply in all material respects with
the applicable provisions of ERISA and the provisions of the Code relating to
ERISA and any applicable similar non-U.S. law, except for such noncompliances
which could not reasonably be expected to result in a Material Adverse Effect,
and (b) furnish to the Administrative Agent (i) as soon as possible after, and
in any event within 30 days after any Responsible Officer of Holdings, the
Borrower or any ERISA Affiliate knows or has reason to know that, any Reportable
Event has occurred, a statement of a Financial Officer setting forth details as
to such Reportable Event and the action proposed to be taken with respect
thereto, together with a copy of the notice, if any, of such Reportable Event
given to the PBGC, (ii) promptly after any Responsible Officer learns of receipt
thereof, a copy of any notice that the Borrower or any ERISA Affiliate may
receive from the PBGC relating to the intention of the PBGC to terminate any
Plan or Plans (other than a Plan maintained by an ERISA Affiliate that is
considered an ERISA Affiliate only pursuant to subsection (m) or (o) of Code
Section 414) or to appoint a trustee to administer any such Plan, (iii) within
30 days after the due date for filing with the PBGC pursuant to Section 412(n)
of the Code a notice of failure to make a required installment or other payment
with respect to a Plan, a statement of a Financial Officer setting forth details
as to such failure and the action proposed to be taken with respect thereto,
together with a copy of any such notice given to the PBGC and (iv) promptly
after any Responsible Officer learns thereof and in any event within 30 days
after receipt thereof by Holdings, the Borrower or any ERISA Affiliate from the
sponsor of a Multiemployer Plan, a copy of each notice received by Holdings, the
Borrower or any ERISA Affiliate concerning (A) the imposition of Withdrawal
Liability or (B) a determination that a Multiemployer Plan is, or is expected to
be, terminated or in reorganization, in each case within the meaning of Title IV
of ERISA, provided that in the case of each of clauses (i) through (iv) above,
notice to the Administrative Agent shall only be required if such event or
condition, together with all other events or conditions referred to in clauses
(i) through (iv) above, could reasonably be expected to result in liability of
Holdings, the Borrower or any of their Subsidiaries in an aggregate amount
exceeding $15,000,000.
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SECTION 5.07. Maintaining Records; Access to Properties and Inspections.
Maintain all financial records in accordance with GAAP and permit any persons
designated by the Agents or any Lender to visit and inspect the financial
records and the properties of Holdings, the Borrower or any of their
Subsidiaries at reasonable times, upon reasonable prior notice to Holdings or
the Borrower, and as often as reasonably requested and to make extracts from and
copies of such financial records, and permit any persons designated by the
Agents or any Lender upon reasonable prior notice to Holdings or the Borrower to
discuss the affairs, finances and condition of Holdings, the Borrower or any of
their Subsidiaries with the officers thereof and independent accountants
therefor (subject to reasonable requirements of confidentiality, including
requirements imposed by law or by contract).
SECTION 5.08. Use of Proceeds. Use the proceeds of the Loans and request
the issuance of Letters of Credit only for the purposes set forth in the
preamble to this Agreement.
SECTION 5.09. Compliance with Environmental Laws. Comply, and make
reasonable efforts to cause all lessees and other persons occupying its
Properties to comply, with all Environmental Laws and Environmental Permits
applicable to its operations and Properties; obtain and renew all material
Environmental Permits necessary for its operations and Properties; and conduct
any Remedial Action in accordance with Environmental Laws, except, in each case
with respect to this Section 5.09, to the extent the failure to do so,
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect.
SECTION 5.10. Preparation of Environmental Reports. If a default caused by
reason of a breach of Section 3.17 or 5.09 shall have occurred and be
continuing, at the request of the Required Lenders through the Administrative
Agent, provide to the Lenders within 90 days after such request, at the expense
of the Borrower, an environmental site assessment report for the Properties
which are the subject of such default prepared by an environmental consulting
firm acceptable to the Administrative Agent, indicating the presence or absence
of Hazardous Materials and the estimated cost of any Remedial Action required
under any applicable Environmental Law in connection with such Properties.
SECTION 5.11. Further Assurances; Additional Mortgages. (a) Execute any and
all further documents, financing statements, agreements and instruments, and
take all further action (including filing Uniform Commercial Code and other
financing statements, mortgages and deeds of trust) that may be required under
applicable law, or which the Collateral Agent may reasonably request, in order
to effectuate the transactions contemplated by the Loan Documents and in order
to grant, preserve, protect and perfect the validity and first priority (subject
to Liens permitted by Section 6.02) of the security interests created or
intended to be created by the Security Documents. In addition, from time to
time, Holdings, the Borrower and their Subsidiaries will, at their cost and
expense, on or promptly (but in any event within 10 Business Days) following the
date of acquisition by Holdings or any Subsidiary of Holdings of any new
Subsidiary (subject to the receipt of
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any required consents from Governmental Authorities) promptly secure the
Obligations by causing the following to occur: (i) promptly upon creating or
acquiring any additional Subsidiary, the Equity Interests of such Subsidiary
(excluding that portion of the voting stock of any Foreign Subsidiary which
would be in excess of 65% of the total outstanding voting stock of such Foreign
Subsidiary) will be pledged pursuant to the Pledge Agreement or the Security
Agreement, and (ii) such Subsidiary will (unless such Subsidiary is a Foreign
Subsidiary or less than 90% of the Equity Interests of such Subsidiary is owned
by Holdings and its Subsidiaries) (A) become a party to the Security Agreement,
the Intellectual Property Security Agreement and the Pledge Agreement (if such
Subsidiary owns Equity Interests of any other Person) as contemplated under each
such agreement, (B) enter into the Subsidiary Guarantee Agreement (or become a
party thereto if the Subsidiary Guarantee Agreement shall be in effect at such
time) and (C) if such Subsidiary owns any real property located in the United
States having a value at the time of acquisition of such Subsidiary in excess of
$2,500,000, take the actions specified in paragraph (b) below. All such security
interests and Liens will be created under the Security Documents and other
instruments and documents in form and substance reasonably satisfactory to the
Collateral Agent, and Holdings, the Borrower and their Subsidiaries shall
deliver or cause to be delivered to the Administrative Agent all such
instruments and documents (including legal opinions and lien searches) as the
Required Lenders shall reasonably request to evidence compliance with this
Section 5.11. Holdings and the Borrower agree to provide, and to cause each of
their Subsidiaries to provide, such evidence as the Collateral Agent shall
reasonably request as to the perfection and priority status of each such
security interest and Lien. Notwithstanding anything to the contrary contained
above, Holdings and its Subsidiaries will not be required to (i) cause any
Subsidiary acquired after the Closing Date to pledge any property pursuant to
this Section or to execute any Loan Document pursuant to this Section if, and to
the extent that, and for so long as, doing so would violate a contractual
obligation applicable to the respective Subsidiary which existed at the time of
the acquisition thereof and which was not created (or modified) in anticipation
of the acquisition of such Subsidiary or (ii) take any actions pursuant to this
Section 5.11 with respect to assets acquired after the Closing Date, to the
extent that, and for so long as, taking such actions would violate a contractual
obligation applicable to the assets so acquired which existed at the time of the
acquisition thereof and which was not created (or modified) in anticipation of
the acquisition of such assets.
(b) Holdings and the Borrower will, and will cause each of their domestic
Subsidiaries at least 90% of the Equity Interests in which are owned by Holdings
and its Subsidiaries to, grant to the Collateral Agent security interests and
mortgages (each an "Additional Mortgage") in such real property of Holdings,
Borrower or any such of their domestic Subsidiaries as are not covered by the
original Mortgages, to the extent acquired after the Closing Date and having a
value at the time of acquisition in excess of $2,500,000 (each such real
property, an "Additional Mortgaged Property"). All such Additional Mortgages
shall be granted pursuant to documentation substantially in the form of the
Mortgages delivered to the Collateral Agent on the Closing Date or in such other
form as is reasonably satisfactory to the Collateral Agent and shall constitute
valid and enforceable
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perfected Liens superior to and prior to the rights of all third persons (except
Liens under Section 6.02) and subject to no other Liens except as are permitted
by Section 6.02 at the time of perfection thereof. The Additional Mortgages or
instruments related thereto shall be duly recorded or filed in such manner and
in such places as is required by law to establish, perfect, preserve and protect
the Liens in favor of the Collateral Agent required to be granted pursuant to
the Additional Mortgages and all taxes, fees and other charges payable in
connection therewith shall be paid in full.
(c) At the time of the IPO Reorganization, (i) Holdings and its
Subsidiaries will execute any further documents, financing statements,
agreements and instruments, and take all further actions that may be required
under applicable law, which the Collateral Agent may reasonably request, in
order to preserve, protect and maintain the security interests created or
intended to be created by the Security Documents and (ii) CapCo II will execute
any further documents and agreements and take all further actions that may be
required under applicable law, which the Administrative Agent or the Required
Lenders reasonably request so that CapCo II assumes all obligations of Graham
Packaging Holdings Company under the Loan Documents. It is understood that if
Graham Packaging Holdings Company remains in existence after the IPO
Reorganization, it will remain a Guarantor hereunder and will execute any
further documents and agreements and take all further actions that may be
required under applicable law, or which the Collateral Agent reasonably
requests, in order to preserve, protect and maintain the security interests
created or intended to be created by the Security Documents.
(d) Within 60 days after the Closing Date, the Borrower shall deliver to
the Collateral Agent a Pledge Acknowledgment (as defined in the Pledge
Agreement) duly executed by each of its Subsidiaries which is a Pledged
Partnership or Pledged LLC (each as defined in the Pledge Agreement), in each
case to the extent same were not delivered on or prior to the Closing Date.
(e) Without limiting the foregoing, within 60 days after any request by the
Administrative Agent, the Collateral Agent or the Required Lenders, the Borrower
will execute any and all further documents, make any requisite filings or
registrations, and take any further actions, in each case as reasonably
requested, in order to grant, preserve, protect and perfect security interests
in any Collateral (as defined in the Pledge Agreement) pledged pursuant to the
Pledge Agreement under applicable local law (including, with respect to Foreign
Subsidiaries of Holdings, any actions so requested under the law of the
jurisdiction of incorporation or organization of the respective such
Subsidiary).
SECTION 5.12. Fiscal Year; Accounting. In the case of each of Holdings, the
Borrower and each of their Subsidiaries, cause its respective fiscal year to end
on December 31.
SECTION 5.13. Dividends. In the case of the Borrower, permit its
Subsidiaries to pay dividends and cause such dividends to be paid to the extent
required to
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pay the monetary Obligations, subject to restrictions permitted by Section
6.09(c) and to prohibitions imposed by applicable requirements of law.
SECTION 5.14. Interest Rate Protection Agreements. In the case of the
Borrower, as promptly as practicable and in any event within 60 days after the
Closing Date, enter into, and thereafter maintain in effect for a period of at
least three years following the Closing Date, one or more Interest Rate
Protection Agreements with any of the Lenders or other financial institutions
reasonably satisfactory to the Administrative Agent, the effect of which shall
be to limit at all times the interest payable in connection with Indebtedness
having an aggregate outstanding principal amount not less than an amount equal
to 33% of the aggregate principal amount of Term Borrowings to a maximum rate
and on terms and conditions reasonably acceptable, taking into account current
market conditions, to the Administrative Agent, and deliver evidence of the
execution and delivery thereof to the Administrative Agent.
SECTION 5.15. Surveys. Within 30 days after the Closing Date, furnish the
Collateral Agent with an as built survey of each Mortgaged Property, in form and
substance reasonably satisfactory to the Collateral Agent.
ARTICLE VI.
NEGATIVE COVENANTS
Each of Holdings and the Borrower covenants and agrees with each Lender
that, so long as this Agreement shall remain in effect and until the Commitments
have been terminated and the principal of and interest on each Loan, all Fees
and all other expenses or amounts payable under any Loan Document have been paid
in full and all Letters of Credit have been canceled or have expired and all
amounts drawn thereunder have been reimbursed in full, unless the Required
Lenders shall otherwise consent in writing, neither Holdings nor the Borrower
will, and neither will cause or permit any of their Subsidiaries to:
SECTION 6.01. Indebtedness. Incur, create, assume or permit to exist any
Indebtedness, except:
(a) Indebtedness existing on the date hereof and set forth in Schedule
6.01, but not any extensions, renewals or replacements of such Indebtedness
except (i) renewals and extensions expressly provided for in the agreements
evidencing any such Indebtedness as the same are in effect on the date of
this Agreement and (ii) refinancings and extensions of any such
Indebtedness if the average life to maturity thereof is greater than or
equal to that of the Indebtedness being refinanced or extended, provided
that such extending, renewal or replacement Indebtedness shall not be (A)
Indebtedness of an obligor that was not an obligor with respect to the
Indebtedness being extended, renewed or refinanced or (B) in a principal
amount
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which exceeds the Indebtedness being renewed, extended or refinanced (plus
unpaid accrued interest and premium thereon);
(b) Indebtedness created hereunder and under the other Loan Documents;
(c) in the case of the Guarantors, the Guarantees under the Guarantee
Agreements;
(d) Indebtedness of the Borrower and its Subsidiaries pursuant to
Interest Rate Protection Agreements entered into in order to fix the
effective rate of interest on the Loans and other Indebtedness, provided
that such transactions shall be entered into to hedge actual interest rate
exposures and not for the purpose of speculation;
(e) Indebtedness owed to (including obligations in respect of letters
of credit for the benefit of) any person providing worker's compensation,
health, disability or other employee benefits or property, casualty or
liability insurance to the Borrower or any Subsidiary of the Borrower,
pursuant to reimbursement or indemnification obligations to such person;
(f) (i) Indebtedness of the Borrower or any Subsidiary of the Borrower
that is a Guarantor to any Subsidiary of the Borrower or to the Borrower,
(ii) Indebtedness of the Borrower or any Subsidiary of the Borrower that is
not a Guarantor to any Subsidiary of the Borrower that is not a Guarantor;
and (iii) Indebtedness of any Subsidiary to the Borrower or any Subsidiary
of the Borrower arising from an investment made pursuant to Section 6.04;
(g) intercompany Indebtedness resulting from investments made pursuant
to Sections 6.04(a), (h), (j), (k), (l) and/or (n);
(h) Indebtedness of the Borrower or its Subsidiaries in respect of
performance bonds, bid bonds, appeal bonds, surety bonds and similar
obligations and trade-related letters of credit, in each case provided in
the ordinary course of business, including those incurred to secure health,
safety and environmental obligations in the ordinary course of business and
any extension, renewal or refinancing thereof to the extent that the amount
of refinancing Indebtedness is not greater than the amount of Indebtedness
being refinanced;
(i) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument drawn against
insufficient funds in the ordinary course of business, provided that such
Indebtedness is extinguished within two Business Days of its incurrence;
(j) Indebtedness of a Subsidiary of the Borrower acquired after the
date hereof and Indebtedness of a corporation merged or consolidated with
or into the
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Borrower or a Subsidiary of the Borrower after the date hereof and
Indebtedness assumed in connection with the acquisition of assets, which
Indebtedness in each case exists at the time of such acquisition, merger,
consolidation or conversion into a Subsidiary of the Borrower and is not
created in contemplation of such event and where such acquisition, merger
or consolidation is permitted by this Agreement, provided that the
aggregate principal amount of Indebtedness under this paragraph (j) shall
not at any time outstanding exceed $15,000,000 for the Borrower and all of
its Subsidiaries;
(k) Capital Lease Obligations, mortgage financings and purchase money
Indebtedness incurred by the Borrower or any Subsidiary of the Borrower
prior to or within 270 days after the acquisition or improvement of the
respective asset permitted under this Agreement in order to finance such
acquisition or improvement, and extensions, renewals and refinancings
thereof, in an aggregate principal amount outstanding at any time not in
excess of $10,000,000, provided that any such refinancing Indebtedness
shall not be (i) Indebtedness of an obligor that was not an obligor with
respect to the Indebtedness being extended, renewed or refinanced, (ii) in
a principal amount which exceeds the Indebtedness being renewed, extended
or refinanced or (iii) additionally secured;
(l) Capital Lease Obligations incurred by the Borrower or any
Subsidiary of the Borrower in respect of any Sale and Lease-Back
Transaction that is permitted under Section 6.03;
(m) Indebtedness of the Borrower or any Subsidiary of the Borrower
supported by a Letter of Credit, in a principal amount not in excess of the
stated amount of such Letter of Credit;
(n) other Indebtedness of the Borrower and its domestic Subsidiaries,
provided that at no time shall the aggregate principal amount of all
Indebtedness outstanding pursuant to this clause (n) exceed $15,000,000;
(o) other Indebtedness of Foreign Subsidiaries of the Borrower in an
aggregate principal amount at any time outstanding not in excess of
$20,000,000;
(p) Indebtedness of (x) Holdings and CapCo II pursuant to the Holdings
Discount Notes in an aggregate face (or principal) amount not to exceed
$169,000,000 (it being understood that the Holdings Discount Notes shall
have been originally issued with an aggregate discount of approximately
$68,400,000 and the accretion of the aggregate principal amount to
$169,000,000 shall not occur until January 2003) less the aggregate amount
of all
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repayments of principal of the Holdings Discount Notes effected after the
Closing Date and (y) the Borrower and the Co-Borrower pursuant to the
Senior Subordinated Notes in an aggregate principal amount not to exceed
$225,000,000 less the aggregate amount of all repayments of the Senior
Subordinated Notes effective after the Closing Date (which Indebtedness
described in this clause (y) may be guaranteed by Holdings on a senior
subordinated basis in accordance with the Senior Subordinated Notes
Indenture, provided that in no event shall any other Subsidiary of Holdings
or the Borrower guarantee any of the Indebtedness described in this
paragraph (p) without the specific consent of the Required Lenders);
(q) Indebtedness arising from agreements of the Borrower or a
Subsidiary of the Borrower providing for indemnification, adjustment of
purchase price or similar obligations, in each case, incurred or assumed in
connection with the disposition of any business, assets or a Subsidiary,
other than guarantees of Indebtedness incurred by any Person acquiring all
or any portion of such business, assets or a Subsidiary for the purpose of
financing such acquisition;
(r) obligations in respect of performance and surety bonds and
completion guarantees provided by the Borrower and its Subsidiaries in the
ordinary course of business;
(s) Indebtedness incurred by Borrower or any of its Subsidiaries
constituting reimbursement obligations with respect to letters of credit
issued in the ordinary course of business, including without limitation,
letters of credit in respect of workers' compensation claims or self
insurance and other similar statutory requirements, or other Indebtedness
with respect to reimbursement type obligations regarding workers'
compensation claims, so long as the aggregate principal amount of
Indebtedness pursuant to this clause (s) shall not exceed $10,000,000 at
any time outstanding;
(t) Indebtedness evidenced by Other Hedging Agreements entered into
pursuant to Section 6.04(q);
(u) Indebtedness constituting unsecured guarantees or letters of
credit supporting the Indebtedness permitted to be outstanding pursuant to
Section 6.01(o);
(v) Indebtedness of any Foreign Subsidiary that is a Subsidiary of the
Borrower, to the Borrower or any domestic Subsidiary of the Borrower, in an
aggregate principal amount outstanding at any time not in excess of
$30,000,000; provided that if the Administrative Agent or Required Lenders
so request, any such Indebtedness shall be evidenced by a promissory note
which shall be in form and substance satisfactory to the Administrative
Agent and which shall be pledged pursuant to the Pledge Agreement (so long
as such pledge would not result in adverse tax consequences to Holdings,
the Borrower or the applicable Subsidiary); and
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(w) all premium (if any), interest (including post-petition interest),
fees, expenses, indemnities, charges and additional or contingent interest
on obligations described in clauses (a) through (v) above.
SECTION 6.02. Liens. Create, incur, assume or permit to exist any Lien on
any property or assets (including stock or other securities of any person,
including any Subsidiary of Holdings or the Borrower) at the time owned by it or
on any income or revenues or rights in respect of any thereof, or sell or
transfer any account receivable or any right in respect thereof, except:
(a) Liens on property or assets of the Borrower and its Subsidiaries
existing on the date hereof and set forth in Schedule 6.02, provided that
such Liens shall secure only those obligations which they secure on the
date hereof (and extensions, renewals and refinancings of such obligations
permitted by Section 6.01(a)) and shall not subsequently apply to any other
property or assets of Holdings, the Borrower or any of their Subsidiaries
(other than pursuant to existing after acquired property clauses);
(b) any Lien created under the Loan Documents or permitted in respect
of any Mortgaged Property by the terms of the applicable Mortgage;
(c) any Lien existing on any property or asset of the Borrower or any
Subsidiary of the Borrower prior to the acquisition thereof by the Borrower
or any Subsidiary of the Borrower, provided that (i) such Lien is not
created in contemplation of or in connection with such acquisition and (ii)
such Lien does not apply to any other property or asset of the Borrower or
any Subsidiary of the Borrower;
(d) any Lien on any property or asset of the Borrower or a Subsidiary
of the Borrower securing Indebtedness permitted by Section 6.01(j),
provided that such Lien does not apply to any other property or assets of
Holdings, the Borrower or any of their Subsidiaries not securing such
Indebtedness at the date of the acquisition of such property or asset
(other than after acquired property subjected to a Lien securing
Indebtedness and other obligations incurred prior to such date and
permitted hereunder which contains a requirement for the pledging of after
acquired property, it being agreed that such after acquired property shall
not include property of Holdings, the Borrower and their Subsidiaries,
other than any such acquired Subsidiary of the Borrower, that would have
been included but for such acquisition);
(e) Liens for taxes, assessments or other governmental charges or
levies not yet delinquent, or which are for less than $2,000,000 in the
aggregate, or which are being contested in compliance with Section 5.03 or
for property taxes on property that Holdings, the Borrower or one of their
Subsidiaries has determined to abandon
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if the sole recourse for such tax, assessment, charge, levy or claim is to
such property;
(f) carriers', warehousemen's, mechanics', materialmen's, repairmen's
or other like Liens arising in the ordinary course of business and securing
obligations that are not due and payable or that are being contested in
good faith by appropriate proceedings and in respect of which, if
applicable, Holdings, the Borrower or the relevant Subsidiary shall have
set aside on its books reserves in accordance with GAAP;
(g) pledges and deposits made in the ordinary course of business in
compliance with the Federal Employers Liability Act or any other workmen's
compensation, unemployment insurance and other social security laws or
regulations and deposits securing liability to insurance carriers under
insurance or self-insurance arrangements in respect of such obligations;
(h) deposits to secure the performance of bids, trade contracts (other
than for Indebtedness), leases (other than Capital Lease Obligations),
statutory obligations, surety and appeal bonds (the deposits for which
shall not exceed $20,000,000 at any time outstanding), performance bonds
and other obligations of a like nature incurred in the ordinary course of
business, including those incurred to secure health, safety and
environmental obligations in the ordinary course of business;
(i) zoning restrictions, easements, trackage rights, leases (other
than Capital Lease Obligations), licenses, special assessments,
rights-of-way, restrictions on use of real property and other similar
encumbrances incurred in the ordinary course of business which, in the
aggregate, are not substantial in amount and do not materially detract from
the value of the property subject thereto or interfere with the ordinary
conduct of the business of Holdings, the Borrower or any of their
Subsidiaries;
(j) purchase money security interests in equipment or other property
or improvements thereto hereafter acquired (or, in the case of
improvements, constructed) by the Borrower or any Subsidiary of the
Borrower (including the interests of vendors and lessors under conditional
sale and title retention agreements), provided that (i) such security
interests secure Indebtedness permitted by Section 6.01(k), (ii) such
security interests are incurred, and the Indebtedness secured thereby is
created, within 270 days after such acquisition (or construction), (iii)
the Indebtedness secured thereby does not exceed 100% of the cost of such
equipment or other property or improvements at the time of such acquisition
(or construction), including transaction costs incurred by the Borrower or
any Subsidiary of the Borrower in connection with such acquisition (or
construction), (iv) such expenditures are permitted by this Agreement and
(v) such security interests do not apply to any other property or assets of
the Borrower or any Subsidiary of the
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Borrower (other than to accessions to such equipment or other property or
improvements and provided that individual financings of equipment provided
by a single lender may be cross-collateralized to other financings of
equipment provided solely by such lender);
(k) Liens arising out of capitalized or operating lease transactions
permitted under Section 6.03, so long as such Liens attach only to the
property sold and being leased in such transaction and any accessions
thereto or proceeds thereof and related property;
(l) Liens on the assets of a Foreign Subsidiary of the Borrower which
secure such Foreign Subsidiary's obligations under Indebtedness incurred
pursuant to Section 6.01(o);
(m) Liens securing judgments for the payment of money in an aggregate
amount not in excess of $10,000,000 (except to the extent covered by
insurance and the Administrative Agent shall be reasonably satisfied with
the credit of such insurer), unless such judgments shall remain
undischarged for a period of more than 30 consecutive days during which
execution shall not be effectively stayed;
(n) any leases or subleases in the ordinary course of business to
other persons of properties or assets owned or leased by the Borrower or a
Subsidiary of the Borrower;
(o) any Lien arising by operation of law pursuant to Section 107(1) of
the Comprehensive Environmental Response, Compensation and Liability Act,
42 U.S.C. ss. 9607(1), or pursuant to analogous state law, for costs or
damages which are not yet due (by virtue of a written demand for payment by
a Governmental Authority) or which demand is being contested in compliance
with the standard set forth in Section 5.03(a), or on property that the
Borrower or a Subsidiary of the Borrower has determined to abandon if the
sole recourse for such costs or damages is to such property, provided that
the liability of the Borrower and its Subsidiaries with respect to the
matter giving rise to all such Liens shall not, in the reasonable estimate
of the Borrower (in light of all attendant circumstances, including the
likelihood of contribution by third parties), exceed $10,000,000;
(p) Liens that are contractual rights of setoff (i) relating to the
establishment of depository relations with banks not given in connection
with the issuance of Indebtedness or (ii) pertaining to pooled deposit
and/or sweep accounts of the Borrower and/or any Subsidiary of the Borrower
to permit satisfaction of overdraft or similar obligations incurred in the
ordinary course of business of the Borrower and the Subsidiaries of the
Borrower;
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(q) Liens securing obligations in respect of trade-related letters of
credit permitted under Section 6.01 and covering the goods (or the
documents of title in respect of such goods) financed by such letters of
credit and the proceeds and products thereof;
(r) other Liens with respect to property or assets not constituting
collateral for the Obligations with an aggregate fair market value (valued
at the time of creation thereof) of not more than $15,000,000 at any time;
(s) Liens disclosed by the title insurance policies delivered pursuant
to Sections 4.02 and 5.11;
(t) construction liens arising in the ordinary course of business,
including liens for work performed for which payment has not been made,
securing obligations that are not due and payable or are being contested in
good faith by appropriate proceedings and in respect of which, if
applicable, Holdings, the Borrower or the relevant Subsidiary thereof shall
have set aside on its books reserves in accordance with GAAP;
(u) the replacement, extension or renewal of any Lien permitted by
clause (c), (d), (j) or (s) above; provided that such replacement,
extension or renewal Lien shall not cover any property other than the
property that was subject to such Lien prior to such replacement, extension
or renewal; and provided further, that the Indebtedness and other
obligations secured by such replacement, extension or renewal Lien are
permitted by this Agreement;
(v) Liens upon specific items of inventory or other goods and proceeds
of the Borrower or any Subsidiary of the Borrower securing such Person's
obligations in respect of bankers' acceptances issued or created for the
account of such Person to facilitate the purchase, shipment or storage of
such inventory or other goods; and
(w) Liens securing reimbursement obligations with respect to trade
letters of credit which encumber documents and the goods purchased under
such letters of credit and products and proceeds thereof.
SECTION 6.03. Sale and Lease-Back Transactions. Enter into any arrangement,
directly or indirectly, with any person whereby it shall sell or transfer any
property, real or personal, used or useful in its business, whether now owned or
hereafter acquired, and thereafter rent or lease such property or other property
which it intends to use for substantially the same purpose or purposes as the
property being sold or transferred (a "Sale and Lease-Back Transaction"),
provided that Sale and Lease-Back Transactions shall be permitted so long as at
no time will the aggregate Remaining Present Value of all leases entered into
pursuant to such Sale and Lease-Back Transactions exceed $10,000,000.
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SECTION 6.04. Investments, Loans and Advances. Purchase, hold or acquire
any capital stock, evidences of indebtedness or other securities of, make or
permit to exist any loans or advances to, or make or permit to exist any
investment or any other interest in, any other person, except:
(a) investments (i) existing on the date hereof in the Equity
Interests of the Subsidiaries of Holdings; (ii) by Holdings in the Equity
Interests of the Borrower, CapCo II and Opco GP; (iii) by the Borrower or
any Subsidiary of the Borrower in any 90% Subsidiary of the Borrower that
is a Guarantor (so long as such Guarantor shall remain a 90% Subsidiary of
the Borrower after giving effect to such investment); (iv) by any 90%
Subsidiary of the Borrower in any Wholly Owned Subsidiary of the Borrower
that is a Guarantor; or (v) by any Subsidiary of the Borrower that is not a
Guarantor in any 90% Subsidiary of the Borrower that is not a Guarantor (so
long as such Subsidiary shall remain a 90% Subsidiary of the Borrower after
giving effect to such investment);
(b) Permitted Investments and investments that were Permitted
Investments when made;
(c) investments arising out of the receipt by the Borrower or any
Subsidiary of the Borrower of noncash consideration for the sale of assets
permitted under Section 6.05, provided that such consideration (if the
stated amount or value thereof is in excess of $2,000,000) is pledged upon
receipt pursuant to the Pledge Agreement to the extent required hereby and
thereby;
(d) intercompany loans permitted to be incurred as Indebtedness under
Sections 6.01(a), (f), (n), (o) and (v);
(e)(i) loans and advances to employees of Holdings, the Borrower or
their Subsidiaries not to exceed $3,000,000 in the aggregate at any time
outstanding (calculated without regard to write-downs or write-offs
thereof) and (ii) advances of payroll payments and expenses to employees in
the ordinary course of business;
(f) (i) accounts receivable arising and trade credit granted in the
ordinary course of business and any securities received in satisfaction or
partial satisfaction thereof from financially troubled account debtors to
the extent reasonably necessary in order to prevent or limit loss and (ii)
prepayments and other credits to suppliers made in the ordinary course of
business;
(g) Interest Rate Protection Agreements permitted pursuant to Section
6.01(d);
(h) investments existing on the Closing Date and set forth on Schedule
6.04;
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(i) investments resulting from pledges and deposits referred to in
Section 6.02(g) or (h);
(j) other investments by the Borrower and its Subsidiaries in an
aggregate amount (valued at the time of the making thereof, and without
giving effect to any write-downs or write-offs thereof) not to exceed
$20,000,000 (plus any returns of capital actually received by the
respective investor in respect of investments theretofore made by it
pursuant to this clause (j)); provided that at any time additional
investments may be made pursuant to this clause (j) at the election of the
Borrower, which additional investments pursuant to this proviso shall only
be permitted to the extent that the Borrower so elects (x) to apply an
amount not to exceed the Available Investment Basket Amount at such time to
the making of the respective investment pursuant to this clause (j) and/or
(y) to make additional investments pursuant to this clause (j) with the
proceeds of Growth Capital Revolving Loans (so long as the amount of
proceeds of Growth Capital Revolving Loans so applied at any time does not
exceed the amount of proceeds of Designated Capital Contributions used at
such time pursuant to this clause (j)) and Designated Capital
Contributions;
(k) investments by the Borrower and its Subsidiaries in Foreign
Subsidiaries of the Borrower in an aggregate amount (valued at the time of
the making thereof, and without giving effect to any write-downs or
write-offs thereof) not to exceed $20,000,000 (plus any returns of capital
actually received by the respective investor in respect of investments
theretofore made by it pursuant to this clause (k)); provided that at any
time additional investments may be made pursuant to this clause (k) at the
election of the Borrower, which additional investments pursuant to this
proviso shall only be permitted to the extent that the Borrower so elects
(x) to apply an amount not to exceed the Available Investment Basket Amount
at such time to the making of the respective investment pursuant to this
clause (k) and/or (y) to make additional investments pursuant to this
clause (k) with the proceeds of Growth Capital Revolving Loans (so long as
the amount of proceeds of Growth Capital Revolving Loans so applied at any
time does not exceed the amount of proceeds of Designated Capital
Contributions used at such time pursuant to this clause (k)) and Designated
Capital Contributions;
(l) investments constituting Permitted Business Acquisitions;
(m) Holdings shall be permitted to contribute the proceeds of
Designated Capital Contributions to the Borrower;
(n) investments by the Borrower and its Subsidiaries in Joint
Ventures, so long as the aggregate amount so invested pursuant to this
clause (n) (valued at the time of the making thereof, and without giving
effect to any write-downs or write-offs thereof) does not exceed
$10,000,000 (plus any returns of capital actually
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received by the respective investor in respect of investments theretofore
made by it pursuant to this clause (n)); provided that at any time
additional investments may be made pursuant to this clause (n) at the
election of the Borrower, which additional investments pursuant to this
proviso shall only be permitted to the extent that the Borrower so elects
(x) to apply an amount not to exceed the Available Investment Basket Amount
at such time to the making of the respective investment pursuant to this
clause (n) and/or (y) to make additional investments pursuant to this
clause (n) with the proceeds of Growth Capital Revolving Loans (so long as
the amount of proceeds of Growth Capital Revolving Loans so applied at any
time does not exceed the amount of proceeds of Designated Capital
Contributions used at such time pursuant to this clause (n)) and Designated
Capital Contributions;
(o) investments consisting of the purchase of the remaining minority
interest in Graham Packaging do Brasil Industria e Comercio S.A.;
(p) the IPO Reorganization;
(q) the Borrower and its Subsidiaries may enter into and perform its
obligations under Other Hedging Agreements entered into in the ordinary
course of business and so long as any such Other Hedging Agreement is not
speculative in nature;
(r) investments expressly permitted by Section 6.05; and
(s) additional investments may be made from time to time to the extent
made with proceeds of Equity Interests (excluding proceeds of Designated
Capital Contributions and proceeds received as a result of the exercise of
Cure Rights pursuant to Section 7.02) of Holdings, which proceeds or
investments in turn are contributed to the Borrower.
SECTION 6.05. Mergers, Consolidations, Sales of Assets and Acquisitions.
Merge into or consolidate with any other person, or permit any other person to
merge into or consolidate with it, or sell, transfer, lease or otherwise dispose
of (in one transaction or in a series of transactions) all or any part of its
assets (whether now owned or hereafter acquired), or any Equity Interests of any
Subsidiary, or purchase, lease or otherwise acquire (in one transaction or a
series of transactions) all or any substantial part of the assets of any other
person, except that this Section shall not prohibit:
(a) the purchase and sale of inventory in the ordinary course of
business by the Borrower or any Subsidiary of the Borrower or the
acquisition of any other asset (excluding assets constituting investments
of the type subject to Section 6.04) in the ordinary course of business;
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(b) if at the time thereof and immediately after giving effect thereto
no Event of Default or Default shall have occurred and be continuing (i)
the merger of any Subsidiary of the Borrower into the Borrower in a
transaction in which the Borrower is the surviving corporation and (ii) the
merger or consolidation of any Subsidiary of the Borrower into or with any
other 90% Subsidiary of the Borrower in a transaction in which the
surviving entity is a 90% Subsidiary of the Borrower (which shall be a
domestic Subsidiary if the non-surviving person shall be a domestic
Subsidiary) and, (A) in the case of each of clauses (i) and (ii), no person
other than the Borrower or a 90% Subsidiary of the Borrower receives any
consideration and (B) in the case of clause (ii), if any non-surviving
person was a Guarantor the surviving person must be a Guarantor;
(c) Sale and Lease-Back Transactions permitted by Section 6.03;
(d) investments permitted by Section 6.04;
(e) subject to Section 6.07, sales, leases or transfers (i) from the
Borrower or any Subsidiary of the Borrower to the Borrower or to a domestic
90% Subsidiary of the Borrower, (ii) from any Foreign Subsidiary of the
Borrower to any Wholly Owned Subsidiary of the Borrower or the Borrower,
(iii) from any Foreign Subsidiary that is a non-Wholly Owned Subsidiary of
the Borrower to any other Foreign Subsidiary that is a non-Wholly Owned
Subsidiary of the Borrower or (iv) from any Foreign Subsidiary that is a
Wholly Owned Subsidiary of the Borrower to any Foreign Subsidiary that is a
non-Wholly Owned Subsidiary of the Borrower, provided that the fair market
value of all property sold, leased or transferred pursuant to this clause
(iv) shall not exceed $15,000,000 in the aggregate;
(f) sales, leases or other dispositions of equipment or other property
of the Borrower or its Subsidiaries determined by the general partner or
senior management of the Borrower to be no longer useful or necessary in
the operation of the business of the Borrower or its Subsidiaries, provided
that the Net Proceeds thereof shall be applied in accordance with Section
2.12(c);
(g) sales, leases or other dispositions of inventory of the Borrower
and its Subsidiaries not made in the ordinary course of business determined
by the general partner or senior management of the Borrower to be no longer
useful or necessary in the operation of the business of the Borrower and
its Subsidiaries, provided that the Net Proceeds thereof shall be applied
in accordance with Section 2.12(c);
(h) the sale of any Equity Interests of any Subsidiary of the Borrower
in which less than 90% of the Equity Interests is owned by the Borrower and
its Subsidiaries;
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(i) sales, leases or other dispositions of property having a net book
value not in excess of $12,500,000 in any fiscal year, provided that the
Net Proceeds thereof are applied in accordance with Section 2.12(c) or are
used within one year of the date of receipt thereof to purchase assets
useful in the business of the Borrower and its Subsidiaries, provided
further, that no sale may be made of the Equity Interests of any Subsidiary
except in connection with the sale of all its outstanding Equity Interests
that are held by the Borrower and any other Subsidiary and provided
further, that to the extent that the net book value of such property sold,
leased or disposed in any fiscal year is less than $12,500,000, the amount
of such difference, but in no case more than $5,000,000, may be carried
forward and used for sales, leases, or dispositions of property in the
immediately succeeding fiscal year (after the full amount such sales,
leases and other dispositions of property otherwise permitted to be made
under this paragraph (i) in such fiscal year, without regard to the
provisions of this proviso, have been made) (it being understood that
amounts once carried forward into such succeeding fiscal year shall lapse
and terminate at the end of such fiscal year);
(j) the Transaction;
(k) the sale of defaulted receivables in the ordinary course of
business and not as part of an accounts receivables financing transaction;
and
(l) the IPO Reorganization.
Notwithstanding anything to the contrary contained above, Holdings must at all
times own, directly or indirectly, 100% of the Equity Interests of the Borrower
and Opco GP (except to the extent Opco GP is liquidated or consolidated with
Holdings in connection with or in contemplation of the IPO Reorganization).
SECTION 6.06. Dividends and Distributions. Declare or pay, directly or
indirectly, any dividend or make any other distribution (by reduction of capital
or otherwise), whether in cash, property, securities or a combination thereof,
with respect to any of its Equity Interests (other than dividends and
distributions on the common stock of Holdings payable solely by the issuance of
additional shares of common stock of Holdings) or directly or indirectly redeem,
purchase, retire or otherwise acquire for value (or permit any Subsidiary to
purchase or acquire) any shares of any class of its Equity Interests or set
aside any amount for any such purpose; provided, however, that:
(a) any Subsidiary of the Borrower may declare and pay dividends to,
repurchase its Equity Interests from or make other distributions to the
Borrower or to any Wholly Owned Subsidiary of the Borrower (or, in the case
of non-Wholly Owned Subsidiaries, to the Borrower or any Subsidiary of the
Borrower and to each other owner of Equity Interests of such Subsidiary on
a pro rata basis (or more
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favorable basis from the perspective of the Borrower or such Subsidiary)
based on their relative ownership interests);
(b) Holdings and the Borrower may effect the Transaction, the IPO
Reorganization and transactions related thereto;
(c) the Borrower may declare and pay dividends or make other
distributions to Holdings in respect of overhead, tax liabilities (other
than income tax liabilities for which the Borrower is permitted (or would
be permitted subject to satisfaction of sub-clauses (x) and (y) of clause
(e) of this Section 6.06) to make distributions pursuant to clause (e) of
this Section 6.06) of Holdings, legal, accounting and other professional
fees and expenses and other fees and expenses in connection with the
maintenance of its existence and its ownership of the Borrower, CapCo II
and Opco GP and in order to permit Holdings to make payments permitted by
Sections 6.07(b) and (c);
(d) Holdings and the Borrower may purchase or redeem (and the Borrower
may declare and pay dividends or make other distributions to Holdings the
proceeds of which are to be used by Holdings to so purchase or redeem),
directly or indirectly, Equity Interests of Holdings or Investor LP
(including related stock appreciation rights or similar securities) held by
then present or former officers or employees of Holdings, the Borrower or
any of their Subsidiaries or by any Plan upon such person's death,
disability, retirement or termination of employment or under the terms of
any such Plan or any other agreement under which such shares of stock or
related rights were issued, provided that the aggregate amount of such
purchases or redemptions under this paragraph (d) shall not exceed in any
calendar year $4,000,000 (plus the amount of net proceeds received by
Holdings or the Borrower, including such amounts received from Investor LP,
during such calendar year from Employee Equity Sales and the amount of net
proceeds of any key-man life insurance received during such calendar year)
which, if not used in any year may be carried forward to any subsequent
calendar year; provided, however, that the aggregate amount of such
purchases or redemptions that may be made pursuant to this paragraph (d)
shall not exceed $12,000,000 (plus the amount of net proceeds received by
Holdings or the Borrower, including such amounts received from Investor LP,
after the date of this Agreement from Employee Equity Sales);
(e) for so long as the Borrower or Holdings is a partnership or
substantially similar pass-through entity for federal income tax purposes,
cash distributions may be made by the Borrower to Borrower Partners or by
Holdings to Holdings Partners, as the case may be, from time to time in
amounts not to exceed the Permitted Tax Amount Distributions of Borrower or
Holdings, as the case may be, so long as (x) the payments are made at the
times permitted by the second sentence of the definition of Permitted Tax
Amount Distributions contained herein
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and (y) no Event of Default exists at the time any distribution is made
pursuant to this Section 6.06(e) or would exist after giving effect
thereto;
(f) so long as the Loans have not been accelerated pursuant to Article
VII, no Default under Section 7.01(b), (c), (h) or (i) then exists and no
Event of Default then exists or would result therefrom, commencing on July
15, 2003, the Borrower may pay cash dividends to Holdings at the times and
in the amounts necessary to enable Holdings to make the cash interest
payments due on the Holdings Discount Notes so long as Holdings immediately
thereafter uses such cash dividends to make such cash interest payments;
and
(g) non-cash repurchases of Equity Interests deemed to occur upon
exercise of stock options if such Equity Interests represent a portion of
the exercise price of such options.
SECTION 6.07. Transactions with Affiliates. (a) Sell or transfer any
property or assets to, or purchase or acquire any property or assets from, or
otherwise engage in any other transaction with, any of its Affiliates or any
known direct or indirect holder of 10% or more of any class of capital stock of
Holdings, unless such transaction forms a part of the Recapitalization or is (i)
otherwise permitted under this Agreement and (ii) upon terms no less favorable
to Holdings, the Borrower or such Subsidiary, as the case may be, than it would
obtain in a comparable arm's-length transaction with a person which was not an
Affiliate, provided that the foregoing restriction shall not apply to (A) the
payment to the Fund or any of its Affiliates or the Fund Affiliates of the
monitoring and management fees referred to in paragraph (c) below or fees
payable on the Closing Date or (B) the indemnification of directors of Holdings,
the Borrower and their Subsidiaries in accordance with customary practice.
(b) The foregoing paragraph (a) shall not prohibit, to the extent otherwise
permitted under this Agreement, (i) any issuance of securities, or other
payments, awards or grants in cash, securities or otherwise pursuant to, or the
funding of, employment arrangements, stock options and stock ownership plans
approved by the Advisory Committee or board of directors of Holdings, (ii) loans
or advances to employees of Holdings, the Borrower or any of their Subsidiaries
in accordance with Section 6.04(e), (iii) transactions among the Borrower and
Wholly Owned Subsidiaries and transactions among Wholly Owned Subsidiaries
otherwise permitted by this Agreement, (iv) the payment of fees and indemnities
to directors, officers and employees of Holdings and its Subsidiaries in the
ordinary course of business, (v) transactions pursuant to permitted agreements
in existence on the Closing Date and set forth on Schedule 6.07, (vi) any
employment agreements entered into by any of the Borrower or any of its
Subsidiaries in the ordinary course of business, (vii) dividends and repurchases
permitted under Section 6.06, (viii) any purchase by the Investors or the
Continuing Partners of Equity Interests of Holdings or Investor LP or any
purchase by Holdings of Equity Interests of the Borrower or any contribution by
Holdings to the equity capital of the Borrower, provided that any Equity
Interests of the
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Borrower purchased by Holdings shall be pledged to the Collateral Agent on
behalf of the Lenders pursuant to the Pledge Agreement, (ix) payments by
Holdings, the Borrower or any of their Subsidiaries to the Fund and Fund
Affiliates made for any financial advisory, financing, underwriting or placement
services or in respect of other investment banking activities, including,
without limitation, in connection with acquisitions or divestitures which
payments are approved by the majority of the Advisory Committee or board of
directors of Holdings, in good faith, (x) transactions in which the Borrower
delivers to the Administrative Agent a letter from an independent financial
advisor acceptable to the Administrative Agent stating that such transaction is
fair to the Borrower or applicable Subsidiary from a financial point of view,
(xi) any agreement as in effect as of the Closing Date or any amendment thereto
(so long as any such amendment is not disadvantageous to the Lenders in any
material respect) or any transaction contemplated thereby, (xii) the existence
of, or the performance by Holdings, the Borrower or any of their Subsidiaries of
its obligations under the terms of, the Recapitalization Agreement, or any
agreement contemplated thereunder (including any registration rights agreement
or purchase agreement related thereto) to which it is a party as of the Closing
Date and any similar agreements which it may enter into thereafter; provided,
however, that the existence of, or the performance by Holdings, the Borrower or
any Subsidiary of obligations under any future amendment to any such existing
agreement or under any similar agreement entered into after the Closing Date
shall only be permitted by this clause (xii) to the extent that the terms of any
such amendment or new agreement are not otherwise disadvantageous to the Lenders
in any material respect and (xiii) the payment of all fees, expenses, bonuses
and awards related to the transactions contemplated by the Recapitalization
Agreement, including fees to the Fund and Fund Affiliates;
(c) Make any payment of or on account of monitoring or management or
similar fees payable to the Fund or the Fund Affiliates in an aggregate amount
in any fiscal year in excess of $1,000,000 (plus reasonable expenses in
connection therewith).
SECTION 6.08. Business of Holdings, the Borrower and their Subsidiaries.
Engage at any time in any business or business activity other than (a) in the
case of the Borrower and its Subsidiaries other than the Co-Borrower, any
business or business activity conducted by it on the date hereof and any
business or business activities incidental or related thereto or the
manufacture, marketing or sale of containers or any business or activity that is
reasonably similar thereto or a reasonable extension, development or expansion
thereof or ancillary thereto, including the consummation of the Transaction, (b)
in the case of Holdings, (i) the ownership of the Equity Interests in the
Borrower, CapCo II and Opco GP, together with activities directly related
thereto, (ii) performance of its obligations under and in connection with the
Loan Documents and under the Holdings Discount Notes Documents, the Senior
Subordinated Notes Documents, the Recapitalization Agreement, the Stockholders
Agreement executed in connection with the Recapitalization Agreement and other
agreements contemplated thereby, (iii) actions incidental to the consummation of
the Recapitalization, (iv) actions required by law to maintain its existence and
(v) the IPO Reorganization, (c) in the case of Opco GP, (i) the ownership of the
general
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partnership interest in the Borrower, together with activities directly related
thereto, (ii) performance of its obligations under and in connection with the
Loan Documents and under the Recapitalization Agreement, the Stockholders
Agreement executed in connection with the Recapitalization Agreement and other
agreements contemplated thereby, (iii) actions incidental to the consummation of
the Recapitalization and (iv) actions required by law to maintain its existence
and (d) in the case of CapCo II and the Co-Borrower, (i) performance of their
obligations under and in connection with the Loan Documents, the Holdings
Discount Notes, the Senior Subordinated Notes and other agreements contemplated
thereby, (ii) actions incidental to the consummation of the Recapitalization,
(iii) actions required by law to maintain their status as a corporation and (iv)
the IPO Reorganization.
SECTION 6.09. Limitation on Modifications of Indebtedness; Modifications of
Certificate of Incorporation, By-Laws and Certain Other Agreements; etc. (a)
Amend or modify in any manner materially adverse to the Lenders, or grant any
waiver or release under or terminate in any manner (if such action shall be
adverse to the Lenders), the certificate of incorporation or By-laws or
partnership agreement or limited liability agreement in any material respect of
Holdings, the Borrower or any of their Subsidiaries or the Recapitalization
Agreement.
(b) (i) Make (or give any notice in respect thereof) any voluntary or
optional payment or prepayment on or redemption or acquisition for value of
(including, without limitation, by way of depositing with the trustee with
respect thereto money or securities before due for the purpose of paying when
due), or any prepayment or redemption as a result of any asset sale, change of
control or similar event of, any Holdings Discount Notes or Senior Subordinated
Notes (other than redemptions of Senior Subordinated Notes under the "equity
clawback" provisions, to the extent provided in sub-clause (iii) of the
parenthetical contained in clause (c) of the definition of Net Proceeds) or (ii)
amend or modify, or permit the amendment of modification of, any provision of
any Holdings Discount Notes or Senior Subordinated Notes or any agreement
(including, without limitation, any Holdings Discount Notes Document or Senior
Subordinated Notes Document) relating thereto, other than amendments or
modifications which do not in any way adversely affect, in any material respect,
the interest of the Lenders and which do not affect the subordination provisions
thereof.
(c) Permit any Subsidiary of Holdings to enter into any agreement or
instrument which by its terms restricts the payment of dividends or
distributions or the making of cash advances by such Subsidiary to the Borrower
or any Subsidiary that is a direct or indirect parent of such Subsidiary other
than those arising under any Loan Document other than those which would not
reasonably be expected to have a Material Adverse Effect.
SECTION 6.10. Capital Expenditures. Permit Holdings or its Subsidiaries to
make any Capital Expenditure, except that:
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(a) (x) During the period (taken as one accounting period) from the Closing
Date through and including December 31, 1998, the Borrower and its Subsidiaries
may make Capital Expenditures in an aggregate amount not to exceed $90,000,000
and (y) during any fiscal year thereafter the Borrower and its Subsidiaries may
make Capital Expenditures so long as the aggregate amount thereof does not
exceed the amount set forth opposite such fiscal year below (provided that the
amounts for such fiscal years set forth in clauses (x) and (y) hereof shall be
reduced by any amounts used to make Permitted Business Acquisitions pursuant to
clause (x) of the proviso to the definition of Permitted Business Acquisition
Amount):
Year Amount
---- ------
1999 $100,000,000
2000 $ 80,000,000
2001 $ 70,000,000
2002 and each fiscal year $ 60,000,000
thereafter
(b) Notwithstanding anything to the contrary contained in clause (a) above,
to the extent that the aggregate amount of Capital Expenditures made by the
Borrower and its Subsidiaries in any fiscal year of the Borrower pursuant to
Section 6.10(a) is less than the amount set forth for such fiscal year, the
amount of such difference may be carried forward and used to make Capital
Expenditures in succeeding fiscal years, provided that in any fiscal year, the
amount permitted to be applied to make Capital Expenditures pursuant to this
clause (b) shall in no event exceed an amount equal to 50% of the amount set
forth in Section 6.10(a) for such fiscal year.
(c) In addition to the Capital Expenditures permitted pursuant to
proceeding clauses (a) and (b), the Borrower and its Subsidiaries may make
additional Capital Expenditures as follows: (i) Capital Expenditures made with
the proceeds from (x) Borrowings of Growth Capital Revolving Loans (so long as
the proceeds of Growth Capital Revolving Loans to be so applied at any time do
not exceed the amount of the proceeds of Designated Capital Contributions to be
used at such time pursuant to following clause (y)) and (y) the proceeds of
Designated Capital Contributions, (ii) Capital Expenditures may be made at any
time in an amount not to exceed the Cumulative Retained Excess Cash Flow Amount
at such time and (iii) Capital Expenditures may be made at any time in an amount
not to exceed the Cumulative Retained Net Proceeds Amount at such time.
SECTION 6.11. Interest Coverage Ratio. Permit the ratio (the "Interest
Coverage Ratio") on the last day of any fiscal quarter occurring in any period
set forth
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below, for the four quarter period ended as of such day of (a) EBITDA of the
Borrower and its Subsidiaries to (b) Cash Interest Expense to be less than the
ratio set forth below for such period, provided that for purposes of this
Section 6.11 Cash Interest Expense and EBITDA for the four quarter period ending
on (i) September 30, 1998, shall be deemed to be Cash Interest Expense or
EBITDA, as the case may be, for the two fiscal quarter period ending on
September 30, 1998, multiplied by two and (ii) December 31, 1998, shall be
deemed to be Cash Interest Expense or EBITDA, as the case may be, for the three
fiscal quarter period ending on December 31, 1998, multiplied by 4/3:
<TABLE>
<CAPTION>
Period: Ratio:
------- ------
<S> <C>
July 1, 1998 to and including September 30, 1998 1.5:1.0
October 1, 1998 to and including September 30, 1999 1.6:1.0
October 1, 1999 to and including September 30, 2000 1.7:1.0
October 1, 2000 to and including September 30, 2001 1.8:1.0
October 1, 2001 to and including September 30, 2002 1.9:1.0
October 1, 2002 to and including September 30, 2003 2.0:1.0
October 1, 2003 to and including September 30, 2004 2.2:1.0
October 1, 2004 and thereafter 2.5:1.0
</TABLE>
SECTION 6.12. Net Leverage Ratio. Permit the Net Leverage Ratio on the last
day of any fiscal quarter occurring in any period set forth below, to be in
excess of the ratio set forth below for such period:
<TABLE>
<CAPTION>
Period: Ratio:
------- ------
<S> <C>
July 1, 1998 to and including September 30, 1998 7.4:1.0
October 1, 1998 to and including September 30, 1999 7.2:1.0
October 1, 1999 to and including September 30, 2000 6.7:1.0
October 1, 2000 to and including September 30, 2001 5.9:1.0
October 1, 2001 to and including September 30, 2002 5.5:1.0
October 1, 2002 to and including September 30, 2003 4.9:1.0
October 1, 2003 to and including September 30, 2004 4.5:1.0
October 1, 2004 and thereafter 3.8:1.0
</TABLE>
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ARTICLE VII.
EVENTS OF DEFAULT
SECTION 7.01. Events of Default. In case of the happening of any of the
following events ("Events of Default"):
(a) any representation or warranty made or deemed made by Holdings,
the Borrower or any Loan Party in any Loan Document, or any representation,
warranty, statement or information contained in any report, certificate,
financial statement or other instrument furnished in connection with or
pursuant to any Loan Document, shall prove to have been false or misleading
in any material respect when so made, deemed made or furnished by Holdings,
the Borrower or any other Loan Party;
(b) default shall be made in the payment of any principal of any Loan
or the reimbursement with respect to any L/C Disbursement when and as the
same shall become due and payable, whether at the due date thereof or at a
date fixed for prepayment thereof or by acceleration thereof or otherwise;
(c) default shall be made in the payment of any interest on any Loan
or on any L/C Disbursement or in the payment of any Fee or any other amount
(other than an amount referred to in (b) above) due under any Loan
Document, when and as the same shall become due and payable, and such
default shall continue unremedied for a period of five Business Days;
(d) default shall be made in the due observance or performance by
Holdings or any of its Subsidiaries of any covenant, condition or agreement
contained in Section 5.01(a) (with respect to the Borrower), 5.05(a), 5.08
or 5.12 or in Article VI;
(e) default shall be made in the due observance or performance by
Holdings, the Borrower or any of their Subsidiaries of any covenant,
condition or agreement contained in any Loan Document (other than those
specified in (b), (c) or (d) above) and such default shall continue
unremedied for a period of 30 days after notice thereof from the
Administrative Agent or the Required Lenders to the Borrower;
(f) Holdings or the Borrower shall fail to observe or perform any
term, covenant, condition or agreement contained in any agreement or
instrument evidencing or governing any Indebtedness (other than any
Indebtedness under any Loan Document) having an aggregate principal or
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notional amount in excess of $10,000,000 if the effect of any such failure
is to cause, or to permit the holder or holders of such Indebtedness or a
trustee on its or their behalf to cause, such Indebtedness to become due
prior to its stated maturity, or Holdings or the Borrower shall fail to pay
any principal in respect of any such Indebtedness at the stated maturity
thereof;
(g) there shall have occurred a Change in Control;
(h) an involuntary proceeding shall be commenced or an involuntary
petition shall be filed in a court of competent jurisdiction seeking (i)
relief in respect of Holdings, the Borrower or any of their Subsidiaries,
or of a substantial part of the property or assets of Holdings, the
Borrower or any of their Subsidiaries, under Title 11 of the United States
Code, as now constituted or hereafter amended, or any other federal, state
or foreign bankruptcy, insolvency, receivership or similar law, (ii) the
appointment of a receiver, trustee, custodian, sequestrator, conservator or
similar official for Holdings, the Borrower or any of their Subsidiaries or
for a substantial part of the property or assets of Holdings, the Borrower
or any of their Subsidiaries or (iii) other than with respect to Holdings
pursuant to the IPO Reorganization, the winding-up or liquidation of
Holdings, the Borrower or any of their Subsidiaries; and such proceeding or
petition shall continue undismissed for 60 days or an order or decree
approving or ordering any of the foregoing shall be entered;
(i) Holdings, the Borrower or any of their Subsidiaries shall (i)
voluntarily commence any proceeding or file any petition seeking relief
under Title 11 of the United States Code, as now constituted or hereafter
amended, or any other federal, state or foreign bankruptcy, insolvency,
receivership or similar law, (ii) consent to the institution of, or fail to
contest in a timely and appropriate manner, any proceeding or the filing of
any petition described in paragraph (i) above, (iii) apply for or consent
to the appointment of a receiver, trustee, custodian, sequestrator,
conservator or similar official for Holdings, the Borrower or any of their
Subsidiaries or for a substantial part of the property or assets of
Holdings, the Borrower or any of their Subsidiaries, (iv) file an answer
admitting the material allegations of a petition filed against it in any
such proceeding, (v) make a general assignment for the benefit of
creditors, (vi) become unable, admit in writing its inability or fail
generally to pay its debts as they become due or (vii) take any action for
the purpose of effecting any of the foregoing;
(j) one or more judgments for the payment of money in an aggregate
amount in excess of $10,000,000 (except to the extent covered by insurance
where the Administrative Agent is reasonably satisfied with the credit of
such insurer) shall be rendered against Holdings, the Borrower, any
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of their Subsidiaries or any combination thereof and the same shall remain
undischarged for a period of 30 consecutive days during which execution
shall not be effectively stayed, or any action shall be legally taken by a
judgment creditor to levy upon assets or properties of Holdings, the
Borrower or any of their Subsidiaries to enforce any such judgment;
(k) (i) a Reportable Event or Reportable Events, or a failure to make
a required installment or other payment (within the meaning of Section
412(n)(1) of the Code), shall have occurred with respect to any Plan or
Plans, (ii) a trustee shall be appointed by a United States district court
to administer any Plan or Plans, (iii) the PBGC shall institute proceedings
(including giving notice of intent thereof) to terminate any Plan or Plans,
(iv) the Borrower or any ERISA Affiliate shall have been notified by the
sponsor of a Multiemployer Plan that it has incurred Withdrawal Liability
to such Multiemployer Plan and the Borrower or such ERISA Affiliate does
not have reasonable grounds for contesting such Withdrawal Liability or is
not contesting such Withdrawal Liability in a timely and appropriate
manner, (v) the Borrower or any ERISA Affiliate shall have been notified by
the sponsor of a Multiemployer Plan that such Multiemployer Plan is in
reorganization or is being terminated, within the meaning of Title IV of
ERISA, (vi) the Borrower or any ERISA Affiliate shall engage in any
"prohibited transaction" (as defined in Section 406 of ERISA or Section
4975 of the Code) involving any Plan, (vii) any other similar event or
condition shall occur or exist with respect to a Plan; and in each case in
clauses (i) through (vii) above, such event or condition, together with all
other such events or conditions, if any, could reasonably be expected to
have a Material Adverse Effect; or
(l) (i) any Loan Document shall for any reason be asserted by
Holdings, the Borrower or any of their Subsidiaries not to be a legal,
valid and binding obligation of any party thereto, (ii) any security
interest purported to be created by any Security Document and to extend to
assets that are not immaterial to Holdings, the Borrower and their
subsidiaries on a consolidated basis shall cease to be, or shall be
asserted by the Borrower or any other Loan Party not to be, a valid and
perfected security interest (having the priority required by this Agreement
or the relevant Security Document) in the securities, assets or properties
covered thereby, except to the extent that any such loss of perfection or
priority results from the failure of the Collateral Agent to maintain
possession of certificates actually delivered to it representing securities
pledged under the Pledge Agreement or to file UCC continuation statements
and except to the extent that such loss is covered by a lender's title
insurance policy and the Administrative Agent shall be reasonably satisfied
with the credit of such insurer or (iii) the Obligations of Holdings or the
Borrower, the guarantee by Holdings thereof
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pursuant to the Parent Guarantee Agreement, if applicable, or the guarantee
by the Subsidiary Guarantors thereof pursuant to the Subsidiary Guarantee
Agreement shall cease to constitute senior indebtedness under the
subordination provisions of the Senior Subordinated Notes or such
subordination provisions shall be invalidated or otherwise cease to be
legal, valid and binding obligations of the parties thereto, enforceable in
accordance with their terms;
then, and in every such event (other than an event with respect to the Borrower
described in paragraph (h) or (i) above), and at any time thereafter during the
continuance of such event, the Administrative Agent, at the request of the
Required Lenders, shall, by notice to the Borrower, take any or all of the
following actions, at the same or different times: (i) terminate forthwith the
Commitments, (ii) declare the Loans then outstanding to be forthwith due and
payable in whole or in part, whereupon the principal of the Loans so declared to
be due and payable, together with accrued interest thereon and any unpaid
accrued Fees and all other liabilities of the Borrower accrued hereunder and
under any other Loan Document, shall become forthwith due and payable, without
presentment, demand, protest or any other notice of any kind, all of which are
hereby expressly waived by the Borrower, anything contained herein or in any
other Loan Document to the contrary notwithstanding and (iii) demand cash
collateral pursuant to Section 2.20(g); and in any event with respect to the
Borrower described in paragraph (h) or (i) above, the Commitments shall
automatically terminate, the principal of the Loans then outstanding, together
with accrued interest thereon and any unpaid accrued Fees and all other
liabilities of the Borrower accrued hereunder and under any other Loan Document,
shall automatically become due and payable and the Administrative Agent shall be
deemed to have made a demand for cash collateral to the full extent permitted
under Section 2.20(g), without presentment, demand, protest or any other notice
of any kind, all of which are hereby expressly waived by the Borrower, anything
contained herein or in any other Loan Document to the contrary notwithstanding.
SECTION 7.02. Borrower's Right to Cure. (a) Financial Performance
Covenants. Notwithstanding anything to the contrary contained in Section 7.01,
in the event that Holdings and the Borrower fail to comply with the requirements
of any Financial Performance Covenant, until the expiration of the 10th day
subsequent to the date the certificate calculating such Financial Performance
Covenant is required to be delivered pursuant to Section 5.04(c), Holdings shall
have the right to issue Permitted Cure Securities for cash or otherwise receive
cash contributions to the capital of Holdings, and, in each case, to contribute
any such cash to the capital of Borrower (collectively, the "Cure Right"), and
upon the receipt by Borrower of such cash (the "Cure Amount") pursuant to the
exercise by Holdings of such Cure Right such Financial Performance Covenant
shall be recalculated giving effect to the following pro forma adjustments:
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(i) EBITDA shall be increased, solely for the purpose of measuring the
Financial Performance Covenants and not for any other purpose under this
Agreement, by an amount equal to the Cure Amount; and
(ii) If, after giving effect to the foregoing recalculations, Holdings
and Borrower shall then be in compliance with the requirements of all
Financial Performance Covenants, Holdings and Borrower shall be deemed to
have satisfied the requirements of the Financial Performance Covenants as
of the relevant date of determination with the same effect as though there
had been no failure to comply therewith at such date, and the applicable
breach or default of the Financial Performance Covenants which had occurred
shall be deemed cured for all purposes of the Agreement.
(b) Limitation on Exercise of Cure Right. Notwithstanding anything herein
to the contrary, (a) in no event shall Holdings be entitled to exercise the Cure
Right in more than three consecutive fiscal quarters, (b) in any ten fiscal
quarter period, there must be a period of at least four consecutive fiscal
quarters during which Holdings has not exercised its Cure Right and (c) each
Cure Amount shall not exceed the amount required to cure the applicable failure
to comply with a Financial Performance Covenant.
ARTICLE VIII.
THE AGENTS
SECTION 8.01. Appointment. (a) In order to expedite the transactions
contemplated by this Agreement, Bankers Trust Company is hereby appointed to act
as Administrative Agent, Syndication Agent, Collateral Agent and the Fronting
Bank and NationsBank, N.A. is hereby appointed to act as Documentation Agent.
Each of the Lenders and each assignee of any such Lender hereby irrevocably
authorizes the Agents to take such actions on behalf of such Lender or assignee
or the Fronting Bank and to exercise such powers as are specifically delegated
to the Agents by the terms and provisions hereof and of the other Loan
Documents, together with such actions and powers as are reasonably incidental
thereto. The Administrative Agent is hereby expressly authorized by the Lenders
and the Fronting Bank, without hereby limiting any implied authority, (a) to
receive on behalf of the Lenders and the Fronting Bank all payments of principal
of and interest on the Loans, all payments in respect of L/C Disbursements and
all other amounts due to the Lenders and the Fronting Bank hereunder, and
promptly to distribute to each Lender or the Fronting Bank its proper share of
each payment so received; (b) to give notice on behalf of each of the Lenders to
the Borrower of any Event of Default specified in this Agreement of which the
Administrative Agent has actual knowledge acquired in connection with its agency
hereunder; and (c) to
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distribute to each Lender copies of all notices, financial statements and other
materials delivered by the Borrower pursuant to this Agreement as received by
the Administrative Agent. Without limiting the generality of the foregoing, the
Agents are hereby expressly authorized to execute any and all documents
(including releases) with respect to the Collateral and the rights of the
Secured Parties with respect thereto, as contemplated by and in accordance with
the provisions of this Agreement and the Security Documents. In the event that
any party other than the Lenders and the Agents shall participate in all or any
portion of the Collateral pursuant to the Security Documents, all rights and
remedies in respect of such Collateral shall be controlled by the Collateral
Agent.
(b) Neither the Agents nor any of their respective directors, officers,
employees or agents shall be liable as such for any action taken or omitted by
any of them except for its or his own gross negligence or wilful misconduct, or
be responsible for any statement, warranty or representation herein or the
contents of any document delivered in connection herewith, or be required to
ascertain or to make any inquiry concerning the performance or observance by the
Borrower or any other Loan Party of any of the terms, conditions, covenants or
agreements contained in any Loan Document. The Agents shall not be responsible
to the Lenders for the due execution, genuineness, validity, enforceability or
effectiveness of this Agreement or any other Loan Documents or other instruments
or agreements. The Agents shall in all cases be fully protected in acting, or
refraining from acting, in accordance with written instructions signed by the
Required Lenders and, except as otherwise specifically provided herein, such
instructions and any action or inaction pursuant thereto shall be binding on all
the Lenders. Each Agent shall, in the absence of knowledge to the contrary, be
entitled to rely on any instrument or document believed by it in good faith to
be genuine and correct and to have been signed or sent by the proper person or
persons. Neither the Agents nor any of their respective directors, officers,
employees or agents shall have any responsibility to the Borrower or any other
Loan Party on account of the failure of or delay in performance or breach by any
Lender or the Fronting Bank of any of its obligations hereunder or to any Lender
or the Fronting Bank on account of the failure of or delay in performance or
breach by any other Lender or the Fronting Bank or the Borrower or any other
Loan Party of any of their respective obligations hereunder or under any other
Loan Document or in connection herewith or therewith. Each of the Agents may
execute any and all duties hereunder by or through agents or employees and shall
be entitled to rely upon the advice of legal counsel selected by it with respect
to all matters arising hereunder and shall not be liable for any action taken or
suffered in good faith by it in accordance with the advice of such counsel.
SECTION 8.02. Nature of Duties. The Lenders hereby acknowledge that neither
Agent shall be under any duty to take any discretionary action permitted to be
taken by it pursuant to the provisions of this Agreement unless it shall be
requested in writing to do so by the Required Lenders. The
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Lenders further acknowledge and agree that so long as an Agent shall make any
determination to be made by it hereunder or under any other Loan Document in
good faith, such Agent shall have no liability in respect of such determination
to any person. Notwithstanding any provision to the contrary elsewhere in this
Agreement, the Administrative Agent shall not have any duties or
responsibilities, except those expressly set forth herein, or any fiduciary
relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into the Loan
Documents or otherwise exist against the Administrative Agent. Each Lender
recognizes and agrees that neither the Syndication Agent nor the Documentation
Agent shall have any duties or responsibilities under this Agreement or any
other Loan Document, or any fiduciary relationship with any Lender, and shall
have no functions, responsibilities, duties, obligations or liabilities for
acting as the Syndication Agent or the Documentation Agent hereunder.
SECTION 8.03. Resignation by the Agents. Subject to the appointment and
acceptance of a successor Agent as provided below, any Agent may resign at any
time by notifying the Lenders and the Borrower. Upon any such resignation, the
Required Lenders shall have the right to appoint a successor with the consent of
the Borrower (not to be unreasonably withheld or delayed). If no successor shall
have been so appointed by the Required Lenders and approved by the Borrower and
shall have accepted such appointment within 30 days after the retiring Agent
gives notice of its resignation, then the retiring Agent may, on behalf of the
Lenders with the consent of the Borrower (not to be unreasonably withheld or
delayed), appoint a successor Agent which shall be a bank with an office in New
York, New York, having a combined capital and surplus of at least $500,000,000
or an Affiliate of any such bank. Upon the acceptance of any appointment as
Agent hereunder by a successor bank, such successor shall succeed to and become
vested with all the rights, powers, privileges and duties of the retiring Agent
and the retiring Agent shall be discharged from its duties and obligations
hereunder. After the Agent's resignation hereunder, the provisions of this
Article and Section 9.05 shall continue in effect for its benefit in respect of
any actions taken or omitted to be taken by it while it was acting as Agent. It
is hereby understood that in the event that the Syndication Agent or
Documentation Agent resigns, no successor to the Syndication Agent or
Documentation Agent, as the case may be, shall be required.
SECTION 8.04. Each Agent in its Individual Capacity. With respect to the
Loans made by it hereunder, each Agent in its individual capacity and not as
Agent shall have the same rights and powers as any other Lender and may exercise
the same as though it were not an Agent, and the Agents and their Affiliates may
accept deposits from, lend money to and generally engage in any kind of business
with the Borrower or any of its Subsidiaries or other Affiliates thereof as if
it were not an Agent.
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SECTION 8.05. Indemnification. Each Lender agrees (a) to reimburse the
Agents, on demand, in the amount of its pro rata share (based on its Commitments
hereunder (or if such Commitments shall have expired or been terminated, in
accordance with the respective principal amounts of its applicable outstanding
Loans or participations in L/C Disbursements, as applicable)) of any reasonable
expenses incurred for the benefit of the Lenders by the Agents, including
counsel fees and compensation of agents and employees paid for services rendered
on behalf of the Lenders, which shall not have been reimbursed by the Borrower
and (b) to indemnify and hold harmless each Agent and any of its directors,
officers, employees or agents, on demand, in the amount of such pro rata share,
from and against any and all liabilities, taxes, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever which may be imposed on, incurred by or asserted
against it in its capacity as Agent or any of them in any way relating to or
arising out of this Agreement or any other Loan Document or any action taken or
omitted by it or any of them under this Agreement or any other Loan Document, to
the extent the same shall not have been reimbursed by the Borrower, provided
that no Lender shall be liable to an Agent for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting from the gross negligence or wilful
misconduct of such Agent or any of its directors, officers, employees or agents.
SECTION 8.06. Lack of Reliance on Agents. Each Lender acknowledges that it
has, independently and without reliance upon the Agents or any other Lender and
based on such documents and information as it has deemed appropriate, made its
own credit analysis and decision to enter into this Agreement. Each Lender also
acknowledges that it will, independently and without reliance upon the Agents or
any other Lender and based on such documents and information as it shall from
time to time deem appropriate, continue to make its own decisions in taking or
not taking action under or based upon this Agreement or any other Loan Document,
any related agreement or any document furnished hereunder or thereunder.
ARTICLE IX.
MISCELLANEOUS
SECTION 9.01. Notices. Notices and other communications provided for herein
shall be in writing and shall be delivered by hand or overnight courier service,
mailed by certified or registered mail or sent by telecopy, as follows:
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(a) if to the Borrower, to it at 1110 East Princess Street, York,
Pennsylvania, 17403, Attention of the Chief Financial Officer (Telecopy No.
(717) 849-8541), and if to Holdings, to it in care of the Borrower, in each
case with a copy to The Blackstone Group, 345 Park Avenue, New York, New
York 10154, Attention of Mr. Simon Lonergan (Telecopy No. (212) 754-8710);
(b) if to the Administrative Agent, to Bankers Trust Company, 130
Liberty Street, New York, New York 10006, Attention of Mary Kay Coyle
(Telecopy No. (212) 250-7218);
(c) if to the Fronting Bank (if other than the Administrative Agent),
to it at its address (or telecopy number) set forth separately in writing;
and
(d) if to a Lender, to it at its address (or telecopy number) set
forth on Schedule B.
All notices and other communications given to any party hereto in accordance
with the provisions of this Agreement shall be deemed to have been given on the
date of receipt if delivered by hand or overnight courier service or sent by
telecopy or on the date five Business Days after dispatch by certified or
registered mail if mailed, in each case delivered, sent or mailed (properly
addressed) to such party as provided in this Section 9.01 or in accordance with
the latest unrevoked direction from such party given in accordance with this
Section 9.01.
SECTION 9.02. Survival of Agreement. All covenants, agreements,
representations and warranties made by the Borrower and the Guarantors herein,
in the other Loan Documents and in the certificates or other instruments
prepared or delivered in connection with or pursuant to this Agreement or any
other Loan Document shall be considered to have been relied upon by the Lenders
and the Fronting Bank and shall survive the making by the Lenders of the Loans,
the execution and delivery to the Lenders of the Loan Documents and the issuance
of the Letters of Credit, regardless of any investigation made by the Lenders or
on their behalf, and shall continue in full force and effect as long as the
principal of or any accrued interest on any Loan or L/C Disbursement or any Fee
or any other amount payable under this Agreement or any other Loan Document is
outstanding and unpaid or any Letter of Credit is outstanding and so long as the
Commitments have not been terminated. Without prejudice to the survival of any
other agreements contained herein, indemnification and reimbursement obligations
contained herein (including pursuant to Sections 2.13, 2.15, 2.19 and 9.05)
shall survive the payment in full of the principal and interest hereunder, the
expiration of the Letters of Credit and the termination of the Commitments or
this Agreement.
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SECTION 9.03. Binding Effect. This Agreement shall become effective when it
shall have been executed by Holdings, the Borrower, the Co-Borrower, and the
Agents and when the Administrative Agent shall have received copies hereof
which, when taken together, bear the signatures of each of the other parties
hereto, and thereafter shall be binding upon and inure to the benefit of
Holdings, the Borrower, the Co-Borrower, the Fronting Bank, the Agents and each
Lender and their respective permitted successors and assigns.
SECTION 9.04. Successors and Assigns. (a) This Agreement shall be binding
upon and inure to the benefit of and be enforceable by the respective successors
and assigns of the parties hereto; provided, however, no Loan Party may assign
or transfer any of its rights, obligations or interest hereunder or under any
other Loan Document without the prior written consent of all of the Lenders
(except in a merger or consolidation transaction permitted by Section 6.05) and,
provided further, that, although any Lender may transfer, assign or grant
participations in its rights hereunder in accordance with the terms hereof, such
Lender shall remain a "Lender" for all purposes hereunder (and may not transfer
or assign all or any portion of its Commitments hereunder except as provided in
Section 9.04(b)) and the transferee, assignee or participant, as the case may
be, shall not constitute a "Lender" hereunder and, provided further, that no
Lender shall transfer or grant any participation under which the participant
shall have rights to approve any amendment to or waiver of this Agreement or any
other Loan Document except to the extent such amendment or waiver would (i)
extend the final scheduled maturity of any Loan, Note or Letter of Credit
(unless such Letter of Credit is not extended beyond the Revolving Credit
Maturity Date) in which such participant is participating, or reduce the rate or
extend the time of payment of interest or Fees thereon (except (x) in connection
with a waiver of applicability of any post-default increase in interest rates
and (y) that any amendment or modification to the financial definitions in this
Agreement shall not constitute a reduction in the rate of interest for purposes
of this clause (i)) or reduce the principal amount thereof, or increase the
amount of the participant's participation over the amount thereof then in effect
(it being understood that a waiver of any Default or Event of Default or of a
mandatory reduction in the total Commitments shall not constitute a change in
the terms of such participation, and that an increase in any Commitment or Loan
shall be permitted without the consent of any participant if the participant's
participation is not increased as a result thereof), (ii) consent to the
assignment or transfer by the Borrower of any of its rights and obligations
under this Agreement or (iii) release all or substantially all of the Collateral
under all of the Security Documents (except as expressly provided in the Loan
Documents) supporting the Loans hereunder in which such participant is
participating. In the case of any such participation, the participant shall not
have any rights under this Agreement or any of the other Loan Documents (the
participant's rights against such Lender in respect of such participation to be
those set forth in the agreement executed by such Lender in favor of the
participant relating thereto)
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and all amounts payable by the Borrower hereunder shall be determined as if such
Lender had not sold such participation.
(b) Notwithstanding the foregoing, any Lender (or any Lender together with
one or more other Lenders) may (x) assign all or a portion of its Revolving
Credit Commitment (and related outstanding Obligations hereunder), Growth
Capital Commitment (and related outstanding Obligations hereunder) and/or its
outstanding Term Loans to its (i) parent company and/or any affiliate of such
Lender which is at least 50% owned by such Lender or its parent company or (ii)
in the case of any Lender that is a fund that invests in loans, any other fund
that invests in loans and is managed and/or advised by the same investment
advisor of such Lender or by an Affiliate of such investment advisor or (iii) to
one or more Lenders or (y) assign all, or if less than all, (I) a portion equal
to at least $5,000,000 in the aggregate for the assigning Lender or assigning
Lenders or (II) a portion equal to all of such assigning Lender's Commitments or
outstanding Loans under a particular Tranche, of such Revolving Credit
Commitments, Growth Capital Commitments and outstanding principal amount of Term
Loans hereunder to one or more Eligible Transferees, each of which assignees
shall become a party to this Agreement as a Lender by execution of an Assignment
and Acceptance, provided that, (i) at such time Schedule 2.01 shall be deemed
modified to reflect the Commitments (and/or outstanding Term Loans, as the case
may be) of such new Lender and of the existing Lenders, (ii) the consent of the
Administrative Agent and the Borrower shall be required in connection with any
such assignment pursuant to clause (y) above (which consents (x) shall not be
unreasonably withheld or delayed and (y) in the case of the Borrower, shall not
be required if a Default or Event of Default under Section 7.01(h) or (i) exists
at such time), (iv) the consent of the Swingline Lender and each Fronting Bank
shall be required in connection with any assignment of all or any portion of the
Revolving Credit Commitments of any Lender and (v) the Administrative Agent
shall receive at the time of each such assignment, from the assigning or
assignee Lender, the payment of a non-refundable assignment fee of $3,500. To
the extent of any assignment pursuant to this Section 9.04(b), the assigning
Lender shall be relieved of its obligations hereunder with respect to its
assigned Commitments (it being understood that the indemnification provisions
under this Agreement (including, without limitation, Sections 2.13, 2.15, 2.19
and 9.05) shall survive as to such assigning Lender). At the time of each
assignment pursuant to this Section 9.04(b) to a person which is not already a
Lender hereunder and which is not a United States person (as such term is
defined in Section 7701(a)(30) of the Code) for federal income tax purposes, the
respective assignee Lender shall provide to the Borrower and the Administrative
Agent the appropriate Internal Revenue Service Forms described in Section
2.19(f).
(c) The Administrative Agent, acting for this purpose as an agent of the
Borrower, shall maintain at its address referred to in subsection 9.01 a copy of
each Assignment and Acceptance delivered to it and a register (the "Register")
for
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the recordation of the names and addresses of the Lenders and the Commitments
of, and principal amount of the Loans and L/C Disbursements owing to, each
Lender from time to time. The Administrative Agent shall also record the
Revolving L/C Exposure of each Lender in the Register. The entries in the
Register shall be conclusive, in the absence of manifest error, and the
Borrower, the Administrative Agent, the Fronting Bank and the Lenders shall
treat each person whose name is recorded in the Register as the owner of
Commitments and the Loans and Revolving L/C Exposures recorded therein for all
purposes of this Agreement. The Register shall be available for inspection by
the Borrower, the Fronting Bank, any Lender and their representatives (including
counsel and accountants), at any reasonable time and from time to time upon
reasonable prior notice.
(d) Any Lender or participant may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this Section
9.04, disclose to the assignee or participant or proposed assignee or
participant any information relating to the Borrower or any Guarantor furnished
to such Lender by or on behalf of the Borrower or any Guarantor, provided that,
prior to any such disclosure, each such assignee or participant or proposed
assignee or participant shall agree to be bound by Section 9.16.
(e) Any Lender may at any time assign all or any portion of its rights
under this Agreement to a Federal Reserve Bank and, with the consent of the
Administrative Agent, any Lender which is a fund that invests in loans may
pledge all or any portion of its Loans or Notes to its trustee in support of its
obligations to the trustee on customary terms, provided that no such assignment
shall release a Lender from any of its obligations hereunder.
(f) In the event that Standard & Poor's Ratings Group or Moody's Investors
Service, Inc. shall, after the date that any Lender becomes a Lender, downgrade
the long- term certificate deposit ratings or long-term senior unsecured debt
ratings of such Lender (or the parent company thereof), and the resulting
ratings shall be BBB+ or Baa1 or lower, then the Fronting Bank shall have the
right, but not the obligation, at its own expense, upon notice to such Lender
and the Administrative Agent, to replace (or to request the Borrower, at the
sole expense of the Fronting Bank, to use its reasonable efforts to replace)
such Lender with respect to such Lender's Revolving Credit Commitment with an
assignee (in accordance with and subject to the restrictions contained in
paragraph (b) above), and such Lender hereby agrees to transfer and assign
without recourse (in accordance with and subject to the restrictions contained
in paragraph (b) above) all its interests, rights and obligations in respect of
its Revolving Credit Commitment to such assignee; provided, however, that (i) no
such assignment shall conflict with any law, rule and regulation or order of any
Governmental Authority and (ii) such assignee shall pay to such Lender in
immediately available funds on the date of such assignment the principal of and
interest accrued to the date of payment on the Loans
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and L/C Disbursements of such Lender hereunder and all other amounts accrued for
such Lender's account or owed to it hereunder.
(g) Except as provided in Section 2.13(d), the Fronting Bank shall not
assign or delegate any of its interests, rights or obligations as a Fronting
Bank under this Agreement without the prior written consent of the Borrower, the
Administrative Agent and the Required Lenders.
SECTION 9.05. Expenses; Indemnity. (a) The Borrower agrees to pay all
reasonable out-of-pocket expenses incurred by the Agents in connection with the
preparation of this Agreement and the other Loan Documents, or by the Agents in
connection with the syndication of the Commitments or the administration of this
Agreement (including expenses incurred in connection with due diligence and
initial and ongoing Collateral examination to the extent incurred with the
reasonable prior approval of the Borrower) or in connection with any amendments,
modifications or waivers of the provisions hereof or thereof (whether or not the
transactions hereby contemplated shall be consummated) or incurred by the Agents
or any Lender in connection with the enforcement or protection of their rights
in connection with this Agreement and the other Loan Documents or in connection
with the Loans made or the Letters of Credit issued hereunder, including the
reasonable fees, charges and disbursements of White & Case, counsel for the
Administrative Agent and the Collateral Agent, and, in connection with any such
enforcement or protection, the reasonable fees, charges and disbursements of any
other counsel (including the reasonable allocated costs of internal counsel if a
Lender elects to use internal counsel in lieu of outside counsel) for the
Agents, the Fronting Bank or any Lender (but no more than one such counsel for
any Lender).
(b) The Borrower agrees to indemnify the Agents, the Fronting Bank, each
Lender and each of their respective directors, trustees, officers, employees and
agents (each such person being called an "Indemnitee") against, and to hold each
Indemnitee harmless from, any and all losses, claims, damages, liabilities and
related expenses, including reasonable counsel fees, charges and disbursements,
incurred by or asserted against any Indemnitee arising out of, in any way
connected with, or as a result of (i) the execution or delivery of this
Agreement or any other Loan Document or any agreement or instrument contemplated
hereby or thereby, the performance by the parties hereto and thereto of their
respective obligations thereunder or the consummation of the Recapitalization
and the other transactions contemplated hereby and thereby, (ii) the use of the
proceeds of the Loans or the use of any Letter of Credit or (iii) any claim,
litigation, investigation or proceeding relating to any of the foregoing,
whether or not any Indemnitee is a party thereto, provided that such indemnity
shall not, as to any Indemnitee, be available to the extent that such losses,
claims, damages, liabilities or related expenses result from the gross
negligence or wilful misconduct of such Indemnitee (treating, for this purpose
only, any Agent, the Fronting Bank or any Lender and its
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directors, trustees, officers and employees as a single Indemnitee). Subject to
and without limiting the generality of the foregoing sentence, the Borrower
agrees to indemnify each Indemnitee against, and hold each Indemnitee harmless
from, any and all losses, claims, damages, liabilities and related expenses,
including reasonable counsel or consultant fees, charges and disbursements,
incurred by or asserted against any Indemnitee arising out of, in any way
connected with, or as a result of (A) any Environmental Claim related in any way
to Holdings, the Borrower or any of their Subsidiaries, or (B) any actual or
alleged presence, Release or threatened Release of Hazardous Materials on any
Property or any property owned, leased or operated by any predecessor of
Holdings, the Borrower or any of their Subsidiaries, provided that such
indemnity shall not, as to any Indemnitee, be available to the extent that such
losses, claims, damages, liabilities or related expenses are determined by a
court of competent jurisdiction by final and nonappealable judgment to have
resulted from the gross negligence or wilful misconduct of such Indemnitee or
any of its directors, trustees, officers or employees. The provisions of this
Section 9.05 shall remain operative and in full force and effect regardless of
the expiration of the term of this Agreement, the consummation of the
transactions contemplated hereby, the repayment of any of the Obligations, the
invalidity or unenforceability of any term or provision of this Agreement or any
other Loan Document, or any investigation made by or on behalf of any Agent, the
Fronting Bank or any Lender. All amounts due under this Section 9.05 shall be
payable on written demand therefor.
(c) Unless an Event of Default shall have occurred and be continuing, the
Borrower shall be entitled to assume the defense of any action for which
indemnification is sought hereunder with counsel of its choice at its expense
(in which case the Borrower shall not thereafter be responsible for the fees and
expenses of any separate counsel retained by an Indemnitee except as set forth
below); provided, however, that such counsel shall be reasonably satisfactory to
each such Indemnitee. Notwithstanding the Borrower's election to assume the
defense of such action, each Indemnitee shall have the right to employ separate
counsel and to participate in the defense of such action, and the Borrower shall
bear the reasonable fees, costs and expenses of such separate counsel, if (i)
the use of counsel chosen by the Borrower to represent such Indemnitee would
present such counsel with a conflict of interest; (ii) the actual or potential
defendants in, or targets of, any such action include both the Borrower and such
Indemnitee and such Indemnitee shall have reasonably concluded that there may be
legal defenses available to it that are different from or additional to those
available to the Borrower (in which case the Borrower shall not have the right
to assume the defense or such action on behalf of such Indemnitee); (iii) the
Borrower shall not have employed counsel reasonably satisfactory to such
Indemnitee to represent it within a reasonable time after notice of the
institution of such action; or (iv) the Borrower shall authorize such Indemnitee
to employ separate counsel at the Borrower's expense. The Borrower will not be
liable under this Agreement for any amount paid by an Indemnitee to settle any
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claims or actions if the settlement is entered into without the Borrower's
consent, which consent may not be withheld or delayed unless such settlement is
unreasonable in light of such claims or actions against, and defenses available
to, such Indemnitee.
(d) Notwithstanding anything to the contrary in this Section 9.05, this
Section 9.05 shall not apply to taxes, it being understood that the Borrower's
only obligations with respect to taxes shall arise under Sections 2.13 and 2.19.
SECTION 9.06. Right of Setoff. (a) If an Event of Default shall have
occurred and be continuing, each Lender and the Fronting Bank is hereby
authorized at any time and from time to time, to the fullest extent permitted by
law, to set off and apply any and all deposits (general or special, time or
demand, provisional or final) at any time held and other indebtedness at any
time owing by such Lender or the Fronting Bank to or for the credit or the
account of Holdings or the Borrower against any of and all the obligations of
Holdings or the Borrower now or hereafter existing under this Agreement or any
other Loan Document held by such Lender or the Fronting Bank, irrespective of
whether or not such Lender or the Fronting Bank shall have made any demand under
this Agreement or such other Loan Document and although such obligations may be
unmatured. The rights of each Lender and the Fronting Bank under this Section
9.06 are in addition to other rights and remedies (including other rights of
setoff) which such Lender or the Fronting Bank may have.
(b) NOTWITHSTANDING THE FOREGOING SUBSECTION (a), AT ANY TIME THAT THE
LOANS OR ANY OTHER OBLIGATION SHALL BE SECURED BY REAL PROPERTY LOCATED IN
CALIFORNIA, NO LENDER OR THE FRONTING BANK SHALL EXERCISE A RIGHT OF SETOFF,
LENDER'S LIEN OR COUNTERCLAIM OR TAKE ANY COURT OR ADMINISTRATIVE ACTION OR
INSTITUTE ANY PROCEEDING TO ENFORCE ANY PROVISION OF THIS AGREEMENT OR ANY NOTE
UNLESS IT IS TAKEN WITH THE CONSENT OF THE REQUIRED LENDERS, IF SUCH SETOFF OR
ACTION OR PROCEEDING WOULD OR MIGHT (PURSUANT TO CALIFORNIA CODE OF CIVIL
PROCEDURE SECTIONS 580a, 580b, 580d AND 726 OF THE CALIFORNIA CODE OF CIVIL
PROCEDURE OR SECTION 2924 OF THE CALIFORNIA CIVIL CODE, IF APPLICABLE, OR
OTHERWISE) AFFECT OR IMPAIR THE VALIDITY, PRIORITY, OR ENFORCEABILITY OF THE
LIENS GRANTED TO THE COLLATERAL AGENT PURSUANT TO THE SECURITY DOCUMENTS OR THE
ENFORCEABILITY OF THE NOTES AND OTHER OBLIGATIONS HEREUNDER, AND ANY ATTEMPTED
EXERCISE BY ANY LENDER OR THE FRONTING BANK OF ANY SUCH RIGHT WITHOUT OBTAINING
SUCH CONSENT OF THE REQUIRED LENDERS SHALL BE NULL AND VOID. THIS SUBSECTION (b)
SHALL BE SOLELY
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FOR THE BENEFIT OF EACH OF THE LENDERS AND THE FRONTING BANK HEREUNDER.
SECTION 9.07. Applicable Law. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS
(OTHER THAN LETTERS OF CREDIT AND AS EXPRESSLY SET FORTH IN OTHER LOAN
DOCUMENTS) SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE
STATE OF NEW YORK. EACH LETTER OF CREDIT SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED IN ACCORDANCE WITH, THE LAWS OR RULES DESIGNATED IN SUCH LETTER OF
CREDIT, OR IF NO SUCH LAWS OR RULES ARE DESIGNATED, THE UNIFORM CUSTOMS AND
PRACTICE FOR DOCUMENTARY CREDITS (1993 REVISION), INTERNATIONAL CHAMBER OF
COMMERCE, PUBLICATION NO. 500 (THE "UNIFORM CUSTOMS") AND, AS TO MATTERS NOT
GOVERNED BY THE UNIFORM CUSTOMS, THE LAWS OF THE STATE OF NEW YORK.
SECTION 9.08. Waivers; Amendment. (a) No failure or delay of the Agents,
the Fronting Bank or any Lender in exercising any right or power hereunder or
under any Loan Document shall operate as a waiver thereof, nor shall any single
or partial exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such a right or power, preclude any other or
further exercise thereof or the exercise of any other right or power. The rights
and remedies of the Agents, the Fronting Bank and the Lenders hereunder and
under the other Loan Documents are cumulative and are not exclusive of any
rights or remedies that they would otherwise have. No waiver of any provision of
this Agreement or any other Loan Document or consent to any departure by
Holdings, the Borrower or any Guarantor therefrom shall in any event be
effective unless the same shall be permitted by paragraph (b) below, and then
such waiver or consent shall be effective only in the specific instance and for
the purpose for which given. No notice or demand on Holdings, the Borrower or
any Guarantor in any case shall entitle the Borrower to any other or further
notice or demand in similar or other circumstances.
(b) Neither this Agreement nor any other Loan Document nor any provision
hereof or thereof may be changed, waived, discharged or terminated unless such
change, waiver, discharge or termination is in writing signed by the respective
Loan Parties party thereto and the Required Lenders, provided that no such
change, waiver, discharge or termination shall, without the consent of each
Lender (with Obligations being directly affected in the case of following clause
(i)), (i) extend the final scheduled maturity of any Loan or Note or extend the
stated maturity of any Letter of Credit beyond the Revolving Loan Maturity Date,
or reduce the rate or extend the time of payment of interest or Fees thereon
(except (x) in connection with the waiver of applicability of any post-default
increase in interest rates and (y) that any amendment or modification to the
financial definitions in this
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Agreement shall not constitute a reduction in the rate of interest for purposes
of this clause (i)), or reduce the principal amount thereof (except to the
extent repaid in cash), (ii) release all or substantially all of the Collateral
(except as expressly provided in the Loan Documents) under all the Security
Documents, (iii) amend, modify or waive any provision of this Section 9.08, (iv)
reduce the percentage specified in the definition of Required Lenders (it being
understood that, with the consent of the Required Lenders, additional extensions
of credit pursuant to this Agreement may be included in the determination of the
Required Lenders on substantially the same basis as the extensions of Term
Loans, the Revolving Loan Commitments and the Growth Capital Commitments are
included on the Closing Date) or (v) consent to the assignment or transfer by
the Borrower of any of its rights and obligations under this Agreement; provided
further, that no such change, waiver, discharge or termination shall (u)
increase the Commitments of any Lender over the amount thereof then in effect
without the consent of such Lender (it being understood that waivers or
modifications of conditions precedent, covenants, Defaults or Events of Default
or of a mandatory reduction in the aggregate Commitments shall not constitute an
increase of the Commitment of any Lender, and that an increase in the available
portion of any Commitment of any Lender shall not constitute an increase in the
Commitment of such Lender), (v) without the consent of the Swingline Lender or,
in the case of Letters of Credit, the respective Fronting Bank, amend, modify or
waive any provision of Section 2.01(d) or 2.20, respectively, or alter its
rights or obligations with respect to Letters of Credit or Swingline Loans, (w)
without the consent of each Agent affected thereby, amend, modify or waive any
provision of Article VIII as same applies to such Agent or any other provision
as same relates to the rights or obligations of such Agent, (x) without the
consent of the Collateral Agent, amend, modify or waive any provision relating
to the rights or obligations of the Collateral Agent, (y) without the consent of
the Majority Lenders of each Tranche which is being allocated a lesser
prepayment, repayment or commitment reduction as a result of the actions
described below (or without the consent of the Majority Lenders of each Tranche
in the case of an amendment to the definition of Majority Lenders), amend the
definition of Majority Lenders (it being understood that, with the consent of
the Required Lenders, additional extensions of credit pursuant to this Agreement
may be included in the determination of the Majority Lenders on substantially
the same basis as the extensions of Term Loans, the Revolving Loan Commitments
and the Growth Capital Commitments are included on the Closing Date) or alter
the required application of any prepayments or repayments (or commitment
reductions), as between the various Tranches, pursuant to Section 2.11 or 2.12
(excluding Section 2.11(a)) (although (x) the Required Lenders may waive, in
whole or in part, any such prepayment, repayment or commitment reduction, so
long as the application, as amongst the various Tranches, of any such
prepayment, repayment or commitment reduction which is still required to be made
is not altered and (y) if additional Tranches of Term Loans are extended after
the Closing Date with the consent of the Required Lenders as required above,
such Tranches may be included on a pro rata
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basis (as is originally done with the Tranche A Term Loans, Tranche B Term Loans
and Tranche C Term Loans) in the various prepayments or repayments required
pursuant to Sections 2.11 and 2.12 (excluding Section 2.11(a)) and any section
providing scheduled installments for any new Tranche of Term Loans) or (z)
without the consent of the Supermajority Lenders of the respective Tranche,
reduce the amount of, or extend any Installment Date or the installment
otherwise due on such date applicable to such Tranche or, without the consent of
the Supermajority Lenders of each Tranche, amend the definition of Supermajority
Lenders (it being understood that, with the consent of the Required Lenders,
additional extensions of credit pursuant to this Agreement may be included in
the determination of the Supermajority Lenders on substantially the same basis
as the extensions of Term Loans, the Revolving Loan Commitments and the Growth
Capital Commitments are included on the Closing Date); and provided further that
amendments may be made to the Loan Documents to effect technical or
administrative changes required as a result of the IPO Reorganization with the
consent of the Agents.
SECTION 9.09. Interest Rate Limitation. Notwithstanding anything herein to
the contrary, if at any time the applicable interest rate, together with all
fees and charges that are treated as interest under applicable law
(collectively, the "Charges"), as provided for herein or in any other document
executed in connection herewith, or otherwise contracted for, charged, received,
taken or reserved by any Lender or the Fronting Bank, shall exceed the maximum
lawful rate (the "Maximum Rate") that may be contracted for, charged, taken,
received or reserved by such Lender in accordance with applicable law, the rate
of interest payable hereunder, together with all Charges payable to such Lender
or the Fronting Bank, shall be limited to the Maximum Rate, provided that such
excess amount shall be paid to such Lender or the Fronting Bank on subsequent
payment dates to the extent not exceeding the legal limitation.
SECTION 9.10. Entire Agreement. This Agreement, the other Loan Documents
and the agreements regarding certain Fees referred to herein constitute the
entire contract between the parties relative to the subject matter hereof. Any
previous agreement among or representations from the parties with respect to the
subject matter hereof is superseded by this Agreement and the other Loan
Documents. Nothing in this Agreement or in the other Loan Documents, expressed
or implied, is intended to confer upon any party other than the parties hereto
and thereto any rights, remedies, obligations or liabilities under or by reason
of this Agreement or the other Loan Documents.
SECTION 9.11. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER
OR IN CONNECTION WITH THIS
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AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS. EACH PARTY HERETO (A) CERTIFIES
THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT
AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND
THE OTHER LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL
WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.11.
SECTION 9.12. Severability. In the event any one or more of the provisions
contained in this Agreement or in any other Loan Document should be held
invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein and therein shall
not in any way be affected or impaired thereby. The parties shall endeavor in
good-faith negotiations to replace the invalid, illegal or unenforceable
provisions with valid provisions the economic effect of which comes as close as
possible to that of the invalid, illegal or unenforceable provisions.
SECTION 9.13. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original but all of which when
taken together shall constitute but one contract, and shall become effective as
provided in Section 9.03.
SECTION 9.14. Headings. Article and Section headings and the Table of
Contents used herein are for convenience of reference only, are not part of this
Agreement and are not to affect the construction of, or to be taken into
consideration in interpreting, this Agreement.
SECTION 9.15. Jurisdiction; Consent to Service of Process. (a) Each of
Holdings and the Borrower hereby irrevocably and unconditionally submits, for
itself and its property, to the nonexclusive jurisdiction of any New York State
court or federal court of the United States of America sitting in New York City,
and any appellate court from any thereof, in any action or proceeding arising
out of or relating to this Agreement or the other Loan Documents, or for
recognition or enforcement of any judgment, and each of the parties hereto
hereby irrevocably and unconditionally agrees that all claims in respect of any
such action or proceeding may be heard and determined in such New York State or,
to the extent permitted by law, in such federal court. Each of the parties
hereto agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law. Nothing in this Agreement shall affect any
right that any Lender or the Fronting Bank may otherwise have to bring any
action or proceeding relating to this
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Agreement or the other Loan Documents against Holdings, the Borrower or any
Guarantor or their properties in the courts of any jurisdiction.
(b) Each of Holdings and the Borrower hereby irrevocably and
unconditionally waives, to the fullest extent it may legally and effectively do
so, any objection which it may now or hereafter have to the laying of venue of
any suit, action or proceeding arising out of or relating to this Agreement or
the other Loan Documents in any New York State or federal court. Each of the
parties hereto hereby irrevocably waives, to the fullest extent permitted by
law, the defense of an inconvenient forum to the maintenance of such action or
proceeding in any such court.
(c) Each party to this Agreement irrevocably consents to service of process
in the manner provided for notices in Section 9.01. Nothing in this Agreement
will affect the right of any party to this Agreement to serve process in any
other manner permitted by law.
SECTION 9.16. Confidentiality. Each of the Lenders, the Fronting Bank and
each of the Agents agrees that it shall maintain in confidence any information
relating to Holdings, the Borrower and the other Loan Parties furnished to it by
or on behalf of Holdings, the Borrower or the other Loan Parties (other than
information that (a) has become generally available to the public other than as
a result of a disclosure by such party, (b) has been independently developed by
such Lender, the Fronting Bank or such Agent without violating this Section 9.16
or (c) was available to such Lender, the Fronting Bank or such Agent from a
third party having, to such person's knowledge, no obligations of
confidentiality to Holdings, the Borrower or any other Loan Party) and shall not
reveal the same other than (i) to its directors, trustees, officers, employees
and advisors with a need to know or to any person that approves or administers
the Loans on behalf of such Lender (so long as each such person shall have been
instructed to keep the same confidential in accordance with this Section 9.16)
and (ii) as contemplated by Section 9.04(d), except: (A) to the extent necessary
to comply with law or any legal process or the requirements of any Governmental
Authority or of any securities exchange on which securities of the disclosing
party or any Affiliate of the disclosing party are listed or traded, (B) as part
of normal reporting or review procedures to Governmental Authorities, (C) to its
parent companies, Affiliates or auditors (so long as each such person shall have
been instructed to keep the same confidential in accordance with this Section
9.16), (D) in order to enforce its rights under any Loan Document in a legal
proceeding and (E) to any direct or indirect contractual counterparty in swap
agreements or such contractual counterparty's professional advisor (so long as
such contractual counterparty or professional advisor to such contractual
counterparty agrees to be bound by the provisions of this Section. Furthermore,
prior to the 90th day after the Closing Date, no Lender, Agent or Fronting Bank
shall, without the prior consent of the Borrower, make any
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public announcement (except to the extent required by law) concerning the
Transaction or the financing therefor.
SECTION 9.17. Release of Liens and Guarantees. In the event that Holdings,
the Borrower or any of their Subsidiaries conveys, sells, leases, assigns,
transfers or otherwise disposes of all or any portion of any of the Equity
Interests, assets or property of Holdings, the Borrower or any of their
Subsidiaries to a Person that is not (and is not required to become) a Loan
Party in a transaction not prohibited by Section 6.05, the Administrative Agent
and the Collateral Agent shall promptly (and the Lenders hereby authorize the
Administrative Agent and the Collateral Agent to) take such action and execute
any such documents as may be reasonably requested by the Borrower and at the
Borrower's expense to release any Liens created by any Loan Document in respect
of such Equity Interests, assets or property (provided that in no event shall
the Equity Interests of the Borrower be released under this Section 9.17),
including the release and satisfaction of record of any mortgage or deed of
trust granted in connection herewith, and, in the case of a disposition of all
or substantially all the Equity Interests of any Subsidiary Guarantor, terminate
such Subsidiary Guarantor's obligations under the Subsidiary Guarantee
Agreement. In addition, the Administrative Agent and the Collateral Agent agree
to take such actions as are reasonably requested by the Borrower and at the
Borrower's expense to terminate the Liens and security interests created by the
Loan Documents when all the Obligations are paid in full and all Letters of
Credit and Commitments are terminated. Any representation, warranty or covenant
contained in any Loan Document relating to any such Equity Interests, assets,
property or Subsidiary of Holdings (other than the Borrower) shall no longer be
deemed to be made once such Equity Interests, assets or property is so conveyed,
sold, leased, assigned, transferred or disposed of.
SECTION 9.18. Limitations on Recourse. Notwithstanding anything contained
herein to the contrary, each Lender and each Agent agree that (a) in an action
to collect any amounts due under, or otherwise in respect of, this Agreement,
any Note or any other Loan Document, no future, current or former Holdings
Partner (except, if any such Holdings Partner is a Loan Party, for such Loan
Party's obligations under the Loan Documents) in its capacity as such will be
personally liable for any amounts due or any other liability under this
Agreement, any Note or any other Loan Document, and no deficiency or personal
judgment will be sought against any such Holdings Partner in its capacity as
such for payment of the Indebtedness evidenced by this Agreement, any Note or
any other Loan Document and (b) no property or assets of any such future,
current or former Holdings Partner (except, if any such Holdings Partner is a
Loan Party, for such Loan Party's obligations under the Loan Documents) in its
capacity as such shall be sold, levied upon or otherwise used to satisfy any
judgment rendered in connection with any action brought with respect to this
Agreement or any Note; provided, however, that nothing contained in this Section
9.18 shall (i) impair the validity of
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the Indebtedness evidenced by this Agreement or the Notes, (ii) prevent the
taking of any action permitted by law against the Borrower or any other Loan
Party or the assets of the Borrower or any other Loan Party or the proceeds of
such assets or (iii) in any way affect or impair the right of any Agent or any
Lender to take any action permitted by law to realize upon any Mortgaged
Property, the Collateral or any other security which may secure any Loan Party's
obligations.
SECTION 9.19. Co-Borrower's Obligations. The Co-Borrower is a party hereto
for purposes of providing co-extensive obligors for the Obligations (on a joint
and several basis), although the parties acknowledge that the Co-Borrower shall
not have any substantial assets or other property. All references in this
Agreement and the other Loan Documents to the "Borrower" shall be deemed to
include a reference to the Co-Borrower, mutatis mutandis, whether or not actual
reference is made thereto; provided, that, without limiting the generality of
the foregoing, any obligations by any of the parties hereto to the Borrower
shall be deemed fulfilled with respect to the Co-Borrower when fulfilled with
respect to the Borrower.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
GRAHAM PACKAGING HOLDINGS
COMPANY
By: BCP/Graham Holdings L.L.C., its
general partner
By: /s/ [ILLEGIBLE]
---------------------------------
Name:
Title:
GRAHAM PACKAGING COMPANY
By:GPC Opco LLC, its general partner
By: /s/ [ILLEGIBLE]
---------------------------------
Name:
Title:
GPC CAPITAL CORP. I
By: /s/ [ILLEGIBLE]
---------------------------------
Name:
Title:
<PAGE>
Graham Packaging Company
Credit Agreement
BANKERS TRUST COMPANY,
Individually, as Administrative Agent,
as Syndication Agent and as Fronting
Bank
By: /s/ [ILLEGIBLE]
---------------------------------
Name:
Title:
<PAGE>
Graham Packaging Company
Credit Agreement
NATIONSBANK, N.A.
By: /s/ Philip Durand
---------------------
Name: Philip Durand
Title: Vice President
<PAGE>
Graham Packaging Company
Credit Agreement
THE CHASE MANHATTAN BANK
By: /s/ ROBERT T. SACKS
------------------------------
Name: ROBERT T. SACKS
Title: MANAGING DIRECTOR
<PAGE>
Graham Packaging Company
Credit Agreement
VAN KAMPEN AMERICAN CAPITAL PRIME
RATE INCOME TRUST
By: /s/ JEFFREY W. MAILLET
------------------------------
Name: JEFFREY W. MAILLET
Title: Senior Vice President & Director
<PAGE>
SOCIETE GENERALE
By: /s/ Gordon Saint-Denis
------------------------------
Name: Gordon Saint-Denis
Title: Vice President
<PAGE>
Graham Packaging Company
Credit Agreement
KZH HOLDING CORPORATION III
By:/s/ Virgina R. Conway
------------------------------
Name: Virgina R. Conway
Title: Authorized Agent
<PAGE>
THE LONG-TERM CREDIT BANK OF JAPAN,
LIMITED, New York Branch
By: /s/ Shuichi Tajima
---------------------------------
Name: Shuichi Tajima
Title: Deputy General Manager
<PAGE>
Graham Packaging Company
Credit Agreement
OAK HILL SECURITIES FUND, L.P.
By: Oak Hill Securities by Gen Par, L.P.
its General Partner
By: Oak Hill Securities M.G.P., Inc.,
its General Partner
By: /s/ SCOTT D. KRASE
---------------------------------
Name: SCOTT D. KRASE
Title: Vice President
<PAGE>
Graham Packaging Company
Credit Agreement
ABN AMRO BANK, NV
By: /s/ Roy D. Hasbrook
---------------------------------
Name: Roy D. Hasbrook
Title: Group Vice President
By: /s/ [ILLEGIBLE]
---------------------------------
Name:
Title: Vice President and Director
<PAGE>
Graham Packaging Company
Credit Agreement
DELANO COMPANY
By: PACIFIC INVESTMENT MANAGEMENT
COMPANY, as its Investment Advisor
By: /s/ [ILLEGIBLE]
---------------------------------
Name:
Title:
<PAGE>
THE TRAVELERS INSURANCE COMPANY
By: /s/ [ILLEGIBLE]
---------------------------------
Name:
Title: INVESTMENT OFFICER
<PAGE>
MASSACHUSETTS MUTUAL LIFE
INSURANCE COMPANY
By:/s/ ANDREW C. DICKEY
----------------------------------
Name: ANDREW C. DICKEY
Title: MANAGING DIRECTOR
MASSMUTUAL CORPORATE
VALUE PARTNERS LIMITED
By: MASSACHUSETTS MUTUAL LIFE
INSURANCE COMPANY,
as Investment Manager
By:/s/ ANDREW C. DICKEY
----------------------------------
Name: ANDREW C. DICKEY
Title: MANAGING DIRECTOR
MASSMUTUAL/DARBY CBO LLC
By: MASSMUTUAL/DARBY CBO IM INC.,
as Investment Manager
By:/s/ ANDREW C. DICKEY
----------------------------------
Name:
Title:
<PAGE>
Graham Packaging Company
Credit Agreement
NATEXIS BANQUE BFCE
By: /s/ FRANK H. MADDEN, JR.
---------------------------------
Name: FRANK H. MADDEN, JR.
Title: VICE PRESIDENT
By: /s/ G. KEVIN DOOLEY
---------------------------------
Name: G. KEVIN DOOLEY
Title: Vice President
<PAGE>
Graham Packaging Company
Credit Agreement
METROPOLITAN LIFE INSURANCE COMPANY
By: /s/ James R. Dingler
---------------------------------
Name: James R. Dingler
Title: Director
<PAGE>
Graham Packaging Company
Credit Agreement
CREDIT AGRICOLE INDOSUEZ
By: /s/ FRANCOISE BERTHELOT
----------------------------------
Name: FRANCOISE BERTHELOT
Title: VICE PRESIDENT
By:/s/PATRICA FRANKEL
----------------------------------
Name: Patrica Frankel
Title: First Vice President
<PAGE>
Graham Packaging Company
Credit Agreement
NATIONAL CITY BANK
By:/s/ JOSEPH D. ROBISON
---------------------------------
Name: JOSEPH D. ROBISON
Title: VICE PRESIDENT
<PAGE>
Graham Packaging Company
Credit Agreement
THE FUJI BANK, LTD.
By: /s/ Teiji Teramoto
---------------------------------
Name: TEIJI TERAMOTO
Title: Vice President & Manager
<PAGE>
BANK OF TOKYO-MITSUBISHI TRUST COMPANY
By:/s/ Nicholas J. Campbell, Jr.
---------------------------------
Name: Nicholas J. Campbell, Jr.
Title: Vice President
<PAGE>
BANK OF TOKYO-MITSUBISHI TRUST COMPANY
By:/s/ Nicholas J. Campbell, Jr.
---------------------------------
Name: Nicholas J. Campbell, Jr.
Title: Vice President
<PAGE>
Graham Packaging Company
Credit Agreement
ARCHIMEDES FUNDING, L.L.C.
By: ING Capital Advisors, Inc.,
as Collateral Manager
By:/s/ Michael D. Hatley
---------------------------------
Name: MICHAEL D. HATLEY
Title: VICE PRESIDENT & PORTFOLIO MANAGER
<PAGE>
Graham Packaging Company
Credit Agreement
ARCHIMEDES FUNDING, L.L.C.
By: ING Capital Advisors, Inc.,
as Collateral Manager
By:/s/ Michael D. Hatley
---------------------------------
Name: MICHAEL D. HATLEY
Title: VICE PRESIDENT & PORTFOLIO MANAGER
<PAGE>
Graham Packaging Company
Credit Agreement
DEEPROCK & COMPANY
By: Eaton Vance Management,
as investment advisor
By: /s/ Scott H. Page
-------------------------------
Name: Scott H. Page
Title: Vice President
<PAGE>
Graham Packaging Company
Credit Agreement
CREDIT LYONNAIS, NEW YORK BRANCH
By: /s/ [ILLEGIBLE]
---------------------------------
Name:
Title:
<PAGE>
Graham Packaging Company
Credit Agreement
THE MITSUBISHI TRUST AND
BANKING CORPORATION
By: /s/ Beatrice E. Kossodo
-------------------------------
Name: Beatrice E. Kossodo
Title: Senior Vice President
<PAGE>
Graham Packaging Company
Credit Agreement
OCTAGON CREDIT INVESTORS LOAN PORTFOLIO
(a unit of the Chase Manhattan Bank)
By: /s/ Joyce C. Delucca
-------------------------------
Name: JOYCE C. DELUCCA
Title: MANAGING DIRECTOR
<PAGE>
Graham Packaging Company
Credit Agreement
PRESIDENTIAL LIFE INSURANCE COMPANY
By:/s/ Stanley Rubin
-------------------------------
Name: Stanley Rubin
Title: Senior Vice President
<PAGE>
THE BANK OF NOVA SCOTIA
By:/s/ J.W. CAMPBELL
-------------------------------
Name: J.W. Campbell
Title: Authorized Signatory
<PAGE>
GOLDMAN SACHS CREDIT PARTNERS L.P.
By: /s/ [ILLEGIBLE]
---------------------------------
Name:
Title:
<PAGE>
IMPERIAL BANK, a California banking
corporation
By:/s/Ray Vadalma
-----------------------------------
Name: RAY VADALMA
Title: SENIOR VICE PRESIDENT
<PAGE>
CORESTATES BANK, N.A.
By: /s/ John J. Massaro
-----------------------------------
Name: John J. Massaro
Title: Vice President
<PAGE>
Graham Packaging Company
Credit Agreement
CREDIT SUISSE FIRST BOSTON-NY
By: /s/ KATHLEEN D. O'BRIEN
---------------------------------
Name: KATHLEEN D. O'BRIEN
Title: DIRECTOR
By: /s/ Matthew M. Tuck
---------------------------------
Name: MATTHEW M. TUCK
Title: ASSOCIATE
<PAGE>
Graham Packaging Company
Credit Agreement
PRIME INCOME TRUST
By: /s/ [ILLEGIBLE]
---------------------------------
Name:
Title:
<PAGE>
Schedule A
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
ABR
LIBOR Margin
Margin for for
Revolving Revolving
Loans, Loans,
Growth Growth
Capital LIBOR LIBOR Capital ABR ABR
Revolving Margin Margin Revolving Margin Margin
Loans and for for Loans and for for
Tranche A Tranche B Tranche C Tranche A Tranche B Tranche C
Term Term Term Term Term Term Commitment
Level Net Leverage Ratio Loans Loans Loans Loans Loans Loans Fee
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 Greater than 5.5 2.25% 2.75% 3.00% 1.25% 1.75% 2.00 % 0.50%
to 1.00
- --------------------------------------------------------------------------------------------------------------------------------
2 Greater than 5.0 2.00% 2.50% 2.75% 1.00% 1.50% 1.75% 0.50%
to 1.00 but less
than or equal to
5.5 to 1.00
- --------------------------------------------------------------------------------------------------------------------------------
3 Greater than 4.5 1.75% 2.25% 2.50% 0.75% 1.25% 1.50% 0.375%
to 1.00 but less
than or equal to
5.0 to 1.00
- --------------------------------------------------------------------------------------------------------------------------------
4 Greater than 4.0 1.50% 2.00% 2.25% 0.50% 1.00% 1.25% 0.375%
to 1.00 but less
than or equal to
4.5 to 1.00
- --------------------------------------------------------------------------------------------------------------------------------
5 Greater than 3.5 1.25% 1.75% 2.00% 0.25% 0.75% 1.00% 0.25%
to 1.00 but less
than or equal to
4.0 to 1.00
- --------------------------------------------------------------------------------------------------------------------------------
6 Greater than 3.0 1.00% 1.50% 1.75% 0.0% 0.50% 0.75 % 0.25%
to 1.00 but less
than or equal to
3.5 to 1.00
- --------------------------------------------------------------------------------------------------------------------------------
7 Greater than 2.5 0.75% 1.50% 1.75% 0.0% 0.50% 0.75 % 0.25%
to 1.00 but less
than or equal to
3.0 to 1.00
- --------------------------------------------------------------------------------------------------------------------------------
8 Less than or 0.625% 1.50% 1.75% 0.0% 0.50% 0.75 % 0.20%
equal to 2.5 to
1.00
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The "LIBOR Margin", the "ABR Margin" and the Commitment Fee for any date shall
be determined by reference to the Net Leverage Ratio as of the last day of the
fiscal quarter most recently ended as of such date and any change shall become
effective upon the delivery to the Administrative Agent of the financial
statements to be delivered pursuant to Section 5.04 for the most recently ended
fiscal quarter together with a certificate of a Responsible Officer of the
Borrower (a) setting forth in reasonable detail the calculation of the Net
Leverage Ratio for the end of such fiscal quarter and (b) stating that the
signer has reviewed the terms of this Agreement and the other Loan Documents and
has made, or caused to be made under his or her
<PAGE>
SCHEDULE A
Page 2
supervision, a review in reasonable detail of the transactions and condition of
Holdings, the Borrower and their Subsidiaries during the accounting period, and
that the signer does not have knowledge of the existence as at the date of such
officers' certificate of any Event of Default or Default. It is understood that
the foregoing certificate of a Responsible Officer shall be permitted to be
delivered prior to, but in no event later than, the time of the actual delivery
of the financial statements required to be delivered pursuant to Section 5.04.
Notwithstanding the foregoing, at any time during which (i) the Borrower has
failed to deliver the certificate required under Section 5.04(c) with respect to
a fiscal quarter following the date the delivery thereof is due or (ii) a
Default or Event of Default is in existence, the Net Leverage Ratio shall be
deemed, solely for the purposes of this Schedule A, to be greater than 5.5 to
1.00, until such time as the Borrower shall deliver such certificate.
<PAGE>
SCHEDULE B
LENDER ADDRESSES
BANKERS TRUST COMPANY
130 Liberty Street
New York, New York 10006
Mary Kay Coyle
Telephone: (212) 250-9094
Telecopy: (212) 250-7218
ABN AMRO BANK, NV
One PPG Place
Suite 2950
Pittsburgh, PA 15222-5401
Lou McLinden
Tel: (415) 566-2290
Fax: (415) 566-2266
with a copy to:
135 South LaSalle
Suite 2805
Chicago, IL 60603
Ken Keck/Judy Chiang
Tel: (312) 904-1136
Fax: (312) 904-8840
<PAGE>
SCHEDULE B
Page 2
SANKETY HIGH YIELD ASSET PARTNERS, L.P. (BAIN CAPITAL)
2 Copley Place
Boston, MA 02116
Diane Exter
Tel: (617) 572-2372
Fax: (617) 572-3274
THE BANK OF NOVA SCOTIA
One Liberty Plaza
165 Broadway
New York, NY 10006
Philip N. Adsetts
Tel: (212) 225-5010
Fax: (212) 225-5090
Terry Fryett
Tel: (212) 225-5035
Fax: (212) 225-5090
BANK OF TOKYO-MITSUBISHI, LTD.
1251 Avenue of the Americas
New York, NY 10020
Victor Bulzacchelli
Tel: (212) 782-4325
Fax: (212) 782-4981
THE CHASE MANHATTAN BANK
270 Park Avenue
New York, NY 10017
Robert Sacks
Tel: (212) 270-4118
Fax: (212) 270-7939
<PAGE>
SCHEDULE B
Page 3
CORESTATES BANK
601 Penn Street
8th Floor
Reading, PA 19601
John Massaro
Tel: (610) 655-2892
Fax: (610) 655-1514
CREDIT AGRICOLE INDOSUEZ
520 Madison Avenue
New York, NY 10022
Michael Fought
Tel: (212) 418-2254
Fax: (212) 418-2228
with a copy to:
Indosuez Capital
1211 Avenue of the Americas
New York, NY 10036
Francoise Berthelot
Tel: (212) 278-2213
Fax: (212) 278-2254
CREDIT LYONNAIS, NEW YORK BRANCH
1301 Avenue of the Americas
New York, NY 10019
Attila Koc
Tel: (212) 261-7358
Fax: (212) 459-3176
CREDIT SUISSE FIRST BOSTON-NY
11 Madison Avenue
<PAGE>
SCHEDULE B
Page 4
21st Floor
New York, NY 10010
Sean Bernard
Tel: (212) 325-9933
Fax: (212) 325-9136
DEEPROCK & COMPANY (EATON VANCE)
24 Federal Street
6th Floor
Boston, MA 02110
Bonnie Ramage
Tel: (617) 482-8260 ext. 825
Fax: (617) 695-9594
THE FUJI BANK, LTD.
Two World Trade Center
New York, NY 10048
Jay Shanker
Tel: (212) 898-2400
Fax: 321-9408/7
GENERAL REINSURANCE CORP.
Financial Center
695 East Main Street
Stamford, CT 06904-2350
Ernest Frohboese
Tel: (203) 328-6505
Fax: (203) 328-6504
GOLDMAN SACHS CREDIT PARTNERS L.P.
85 Broad Street
6th Floor
New York, NY 10004
<PAGE>
SCHEDULE B
Page 5
John Makrinos
Tel: (212) 902-5977
Fax: (212) 357-4597
<PAGE>
SCHEDULE B
Page 6
HARVARD MANAGEMENT COMPANY, INC.
600 Atlantic Avenue
Boston, MA 02210-2203
Bill Heffron
Tel: (617) 523-4400 x333
Fax: (617) 523-5308
THE IMPERIAL BANK
9920 South La Cienega Blvd.
Inglewood, CA 90301
Ray Vadalma
Tel: (310) 417-5710
Fax: (310) 338-2611
ING CAPITAL ADVISORS
333 South Grand Avenue
Suite 4250
Los Angeles, CA 90071
Michael Hatley
Tel: (213) 346-3972
Fax: (213) 346-3995
KZH-CRESCENT 2 CORPORATION / KZH HOLDINGS CORPORATION III
c/o The Chase Manhattan Bank
450 West 33rd Street
15th Floor
New York, NY 10001
Virginia Conway
Tel: (212) 946-7575
Fax: (212) 946-7776
with a copy to:
<PAGE>
SCHEDULE B
Page 7
Gibson, Dunn & Crutcher, LLP
200 Park Avenue
New York, NY 10166
Lee Ann Duffy
Tel: (212) 351-3809
Fax: (212) 351-4035
THE LONG TERM CREDIT BANK OF JAPAN, LIMITED
165 Broadway
49th Floor
New York, NY 10006
Greg Hong/Akira Iwamoto
Tel: (212) 335-4534
Fax: (212) 608-2371
<PAGE>
SCHEDULE B
Page 8
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
1295 State Street
Springfield, MA 01111-0001
John Wheeler
Tel: (413) 744-6228
Fax: (413) 744-6127
Steve Katz
Tel: (413) 744-6125
Fax: (413) 744-6210
METROPOLITAN LIFE INSURANCE COMPANY
334 Madison Street
Convent Station, NJ 07961-0633
James Dingler
Tel: (201) 254-3206
Fax: (201) 254-3050
THE MITSUBISHI TRUST AND BANKING CORPORATION
520 Madison Avenue
26th Floor
New York, NY 10022
Bea Kossodo
Tel: (212) 891-8363
Fax: (212) 644-6825
NATEXIS BANQUE BFCE
645 Fifth Avenue
20th Floor
New York, NY 10022
Frank Madden
Tel: (212) 872-5180
Fax: (212) 872-5045
<PAGE>
SCHEDULE B
Page 9
NATIONAL CITY BANK
1900 East Ninth Street
Cleveland, OH 44114
Joe Robison
Tel: (216) 575-9254
Fax: (216) 575-9396
NATIONSBANK, N.A.
100 North Tryon Street
8th Floor
Charlotte, NC 28255
Phil Durand
Tel: (704) 386-4955
Fax: (704) 388-0960
OAKHILL SECURITIES FUND
65 East 55th Street
32nd Floor
New York, NY 10022
Scott Krase
Tel: (212) 326-1551
Fax: (212) 593-3596
OCTAGON CREDIT INVESTORS LOAN PORTFOLIO
380 Madison Avenue
12th Floor
New York, NY 10017
Joyce Delucca
Tel: (212) 622-3104
Fax: (212) 622-3797
<PAGE>
SCHEDULE B
Page 10
DELANO COMPANY (PIMCO)
840 Newport Center Drive
Newport Beach, CA 92658-6430
Raymond Kennedy
Tel: (714) 717-7213
Fax: (714) 640-3419
PRESIDENTIAL LIFE INSURANCE COMPANY
69 Lydecker Street
Nyack, NY 10901
Stan Rubin
Tel: (914) 358-2300
Fax: (914) 358-2818
PRIME INCOME TRUST
Two World Trade Center
72nd Floor
New York, NY 10048
Rafael Scolari
Tel: (212) 392-5686
Fax: (212) 392-5345
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
1 Gateway Center
11th Floor
7-45 Raymond Blvd. West
Newark, NJ 07012
Pam Hickory
Tel: (973) 802-2265
Fax: (973) 802-3200
<PAGE>
SCHEDULE B
Page 11
SOCIETE GENERALE
1221 Avenue of the Americas
New York, NY 10020
Gordon Saint-Denis
Tel: (212) 278-7141
Fax: (212) 278-7430
SUMMIT BANK
750 Walnut Avenue
Cranford, NJ 07016
Wayne Trotman
Tel: (908) 709-5339
Fax: (908) 709-6433
KZH SOLEIL CORPORATION (SUNAMERICA)
One SunAmerica Center
Century City, CA 90067-6022
Sabour Moini
Tel: (310) 772-6256
Fax: (310) 772-6078
CONTINENTAL ASSURANCE COMPANY
TCW Asset Management Company
200 Park Avenue,
Suite 2200
25th Floor
New York, NY 10166-0228
Mark Gold/Justin Driscoll
Tel: (212) 297-4138
Fax: (212) 297-4159
<PAGE>
SCHEDULE B
Page 12
THE TRAVELERS INSURANCE COMPANY
One Tower Square
Hartford, CT 06183-2030
John Petchler
Tel: (860) 277-5346
Fax: (860) 954-5243
VAN KAMPEN AMERICAN CAPITAL PRIME RATE INCOME TRUST
One Parkview Plaza
Oakbrook Terrace, IL 60181
Jeffrey Maillet
Tel: (630) 684-6438
Fax: (630) 684-6740
<PAGE>
SCHEDULE 2.01
COMMITMENTS
<TABLE>
<CAPTION>
Tranche A Term Tranche B Term Tranche C Term Swing Line
Loan Loan Loan Revolving Credit Growth Capital Loan
Commitments Commitments Commitments Commitments Commitments Commitments
-------------- --------------- -------------- --------------- --------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Bankers Trust Company $ 5,681,818.19 $ 59,826,563.50 57,773,437.50 $ 11,742,424.24 $ 7,575,757.59 $20,000,000.00
NationsBank, N.A. 5,000,000.00 2,187,500.00 1,812,500.00 10,333,333.32 6,666,666.67
Goldman Sachs Credit 4,545,454.55 2,187,500.00 1,812,500.00 9,393,939.38 6,060,606.06
Partners L.P.
The Bank of Nova Scotia 4,318,181.82 8,924,242.42 5,757,575.76
The Chase Manhattan Bank 4,318,181.82 8,924,242.42 5,757,575.76
Credit Lyonnais, New York 4,318,181.82 8,924,242.42 5,757,575.76
Branch
Credit Suisse First Boston-NY 4,318,181.82 8,924,242.42 5,757,575.76
Societe Generale 4,318,181.82 8,924,242.42 5,757,575.76
ABN AMRO Bank, NV 3,181,818.18 6,575,757.58 4,242,424.24
Bank Of Tokyo-Mitsubishi, 3,181,818.18 6,575,757.58 4,242,424.24
Ltd.
Corestates Bank 3,181,818.18 6,575,757.58 4,242,424.24
Credit Agricole Indosuez 3,181,818.18 5,468,750.00 4,531,250.00 6,575,757.58 4,242,424.24
The Fuji Bank, Ltd. 3,181,818.18 6,575,757.58 4,242,424.24
The Imperial Bank 3,181,818.18 6,575,757.58 4,242,424.24
The Long-Term Credit Bank of 3,181,818.18 6,575,757.58 4,242,424.24
Japan, Limited
The Mitsubishi Trust and 3,181,818.18 6,575,757.58 4,242,424.24
Banking Corporation
Natexis Banque BFCE 3,181,818.18 2,460,937.50 2,039,062.50 6,575,757.58 4,242,424.24
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Tranche A Term Tranche B Term Tranche C Term Swing Line
Loan Loan Loan Revolving Credit Growth Capital Loan
Commitments Commitments Commitments Commitments Commitments Commitments
-------------- --------------- -------------- --------------- --------------- --------------
<S> <C> <C> <C> <C> <C> <C>
National City Bank 3,181,818.18 6,575,757.58 4,242,424.24
The Prudential Insurance 3,181,818.18 6,575,757.58 4,242,424.24
Company of America
Summit Bank 3,181,818.18 6,575,757.58 4,242,424.24
Sankaty High Yield Asset 5,468,750.00 4,531,250.00
Partners, L.P.
Prime Income Trust 5,468,750.00 4,531,250.00
Deeprock & Company 5,468,750.00 4,531,250.00
General Reinsurance Corp. 5,468,750.00 4,531,250.00
Harvard Management Company, 5,468,750.00 4,531,250.00
Inc.
Northern Life Insurance 5,468,750.00 4,531,250.00
Company, By: ING Capital
Advisors Inc., as Investment
Advisor
Massmutua l/Darby CBO LLC 5,468,750.00 4,531,250.00
Metropolitan Life Insurance 5,468,750.00 4,531,250.00
Company
Oakhill Securities Fund 5,468,750.00 4,531,250.00
Octagon Credit Investors 5,468,750.00 4,531,250.00
Loan Portfolio
Presidential Life Insurance 5,468,750.00 4,531,250.00
Company
KZH Soleil Corporation 5,468,750.00 4,531,250.00
(SunAmerica)
The Travelers Insurance 5,468,750.00 4,531,250.00
Company
Van Kampen American Capital 5,468,750.00 4,531,250.00
Prime Rate Income Trust
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Tranche A Term Tranche B Term Tranche C Term Swing Line
Loan Loan Loan Revolving Credit Growth Capital Loan
Commitments Commitments Commitments Commitments Commitments Commitments
-------------- --------------- -------------- --------------- --------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Delano Company 2,734,375.00 2,265,625.00
KZH Holding Corporation III 2,734,375.00 2,265,625.00
Continental Assurance 1,640,625.00 1,359,375.00
Company
KZH-Crescent 2 Corporation 3,828,125.00 3,171,875.00
TOTAL: $75,000,000.00 $175,000,000.00 $145,000,000.00 $155,000,000.00 $100,000,000.00 $20,000,000.00
</TABLE>
<PAGE>
Schedule 3.05
to Credit Agreement
Contingent Liabilities
1. Foreign Currency Forwards
<TABLE>
<CAPTION>
Trade Settlement Origin Origin Destination Destination Exchange
Date Date Company Currency Currency Amount Bank Rate Amount Due
- ----------- --------------- ----------- ----------- -------------- -------------- -------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
11/15/97 02/15/98 GPC US$ FRF 724,304.00 FNBM 5.75000 $ 125,965.91
12/05/97 02/13/98 GPC US$ FRF 7,543,742.00 ABN-AMARO 5.93770 $1,270,482.17
01/06/98 04/15/98 GPC US$ FRF 1,378,007.00 ABN-AMARO 6.06030 $ 227,382.64
------------ -------------
9,646,053.00 $1,632,830.72
</TABLE>
** Note: The above currency forwards were implemented to hedge against FRF/US$
currency volatility with regard to the purchase of equipment from a French
supplier.
2. See attached Schedule 3.07(b) to the Recapitalization Agreement.
<PAGE>
SCHEDULE 3.07 -- FINANCIAL STATEMENTS
(b) Statutory Minimum Capitalization Requirements.
Due to the minimum capital requirements in both France and Italy, Graham
Packaging France, S.A, Graham Packaging Italy, Srl and SIP Srl may be
required to recapitalize a portion of their respective statutory equity in
order to meet such requirements for future periods.
Revolver Utilization For Qperations.
Since the date of the 1996 Balance Sheet and the Interim Balance Sheet, the
Partnership's and the Subsidiaries' capital expenditures, non-financial
working capital increases, permitted tax distributions in connection with
the taxable income of the Partnership, and other Partnership's expenditures
in the ordinary course of business have been funded out of available cash
or by utilizing the Partnership's and the Subsidiaries' revolving credit
facilities.
<PAGE>
Schedule 3.07(c)
to Credit Agreement
Intellectual Property
1. Lever Brothers sued Graham Packaging Company for infringement of U.S.
Patent No. 5,108,009. Graham Packaging Company was last in contact with
Lever on April 7, 1997, at which time Graham Packaging Company verbally
proposed to (i) redesign to a non-infringing spout/bottle finish design in
exchange for a release; (ii) convert all applicable molds for other
customers within one year; and (iii) pay a $200,000 nonexclusive license
fee for past infringement, if Lever will require other infringing companies
to pay similar fees and incur similar conversion costs. Lever has not
responded to this proposal.
2. Graham Packaging Company was sued in May 1995 for alleged patent
infringement, trade secret misappropriation and other related state law
claims by Hoover Universal, Inc., a subsidiary of Johnson Controls, Inc.
("JCI"), in the U.S. District Court for the Central District of California,
Case No. CV-95-3331 RAP (BQRx) (the "JCI Litigation"). JCI alleged that
Graham Packaging Company was misappropriating or threatened to
misappropriate trade secrets allegedly owned by JCI relating to the
manufacture of hot-fill PET plastic containers through the hiring of JCI
employees, and alleged that Graham Packaging Company infringed two patents
owned by JCI by manufacturing hot-fill PET plastic containers for several
of its largest customers using,a certain "pinch grip" structural design. In
December 1995, JCI filed a second lawsuit alleging infringement of two
additional patents, which relate to a ring and base structure for hot-fill
PET plastic containers. The two suits have been consolidated for all
purposes. Graham Packaging Company has answered the complaints, denying
infringement and misappropriation in all respects and asserting various
defenses, including invalidity and unenforceability of the patents at issue
based upon inequitable conduct on the part of JCI in prosecuting the
relevant patent applications before the U.S. Patent Office and
anticompetitive patent misuse by JCI. Graham Packaging Company has also
asserted counterclaims against JCI alleging violations of federal antitrust
law, based upon certain agreements regarding market division allegedly
entered into by JCI with another competitor and other alleged conduct
engaged in by JCI allegedly intended to raise prices and limit competition.
In March 1997, JCI's plastic container business was acquired by
Schmalbach-Lubeca Plastic Containers USA Inc. ("Schmalbach-Lubeca"). An
order joining Schmalbach-Lubeca and certain affiliates, as successors to
JCI and as counter-claim defendants is expected to be entered shortly.
Although Management believes that it is not infringing the asserted patents
and that there are good grounds for holding the patents at issue invalid
and/or enforceable, there can be no assurance that the JCI Litigation will
result in an outcome favorable to Graham Packaging Company. A finding of
infringement could lead to an award of damages against Graham Packaging
Company and/or the entry of an injunction prohibiting Graham Packaging
Company and its subsidiaries from further use of the
<PAGE>
subject structural designs or requiring it to pay a royalty for further
use. There can be no assurance that any such unfavorable outcome would not
have a material adverse effect on the business, financial condition or
results of operations of Graham Packaging Company.
<PAGE>
Schedule 3.07(e)
to Credit Agreement
Mortgaged Property Rights
None.
<PAGE>
Schedule 3.08
to Credit Agreement
Subsidiaries (Post-Recapitalization)
<TABLE>
<CAPTION>
=================================================================================================================
Percentage of Each Class of Equity
Jurisdiction of Interests Owned by Holdings or Any
Subsidiary of Holdings Formation Subsidiary
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Graham Packaging Company DE 100%
- -----------------------------------------------------------------------------------------------------------------
GPC Capital Corp. I DE 100%
- -----------------------------------------------------------------------------------------------------------------
GPC Capital Corp. II DE 100%
- -----------------------------------------------------------------------------------------------------------------
GPC Opco GP, LLC DE 100%
- -----------------------------------------------------------------------------------------------------------------
GPC Sub GP, LLC DE 100%
- -----------------------------------------------------------------------------------------------------------------
Graham Brasil Participacoes Ltda. Brazil 100%
- -----------------------------------------------------------------------------------------------------------------
Graham Packaging Canada, Ltd. Canada 100%
- -----------------------------------------------------------------------------------------------------------------
Graham Packaging do Brasil Industria e Comercio Brazil 80%
S.A.
- -----------------------------------------------------------------------------------------------------------------
Graham Packaging France Holding, S.A. France 100%
- -----------------------------------------------------------------------------------------------------------------
Graham Packaging France Partners PA 100%
- -----------------------------------------------------------------------------------------------------------------
Graham Packaging France, S.A. France 100%
- -----------------------------------------------------------------------------------------------------------------
Graham Packaging Italy, S.r.L. Italy 100%
- -----------------------------------------------------------------------------------------------------------------
Graham Packaging Latin America, LLC DE 100%
- -----------------------------------------------------------------------------------------------------------------
Graham Packaging Poland, L.P. PA 100%
- -----------------------------------------------------------------------------------------------------------------
Graham Recycling Company, L.P. PA 100%
- -----------------------------------------------------------------------------------------------------------------
Lido Plast-Graham SRL Argentina 100%
- -----------------------------------------------------------------------------------------------------------------
Societa Imballaggi, Plastici ("SIP"), S.r.l. Italy 100%
=================================================================================================================
</TABLE>
<PAGE>
Schedule 3.09
to Credit Agreement
Litigation
None
<PAGE>
Schedule 3.14
to Credit Agreement
Taxes
<TABLE>
<CAPTION>
=====================================================================================================================
Entity Jurisdiction Audit Period Audit Performed
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Graham Packaging Company Caddo Shreveport (local) January 1, 1994 to October 1997
31, 1996
- ---------------------------------------------------------------------------------------------------------------------
Graham Packaging Company Georgia To be determined To be determined
- ---------------------------------------------------------------------------------------------------------------------
Graham Packaging Canada, Ontario - Tax Audit To be determined To be determined
Ltd.
- ---------------------------------------------------------------------------------------------------------------------
SIP, Srl Corporate - VAT Audit 1992-1993 May 1996
=====================================================================================================================
</TABLE>
<PAGE>
Schedule 3.17
to Credit Agreement
Environmental Matters
The matters identified in the Environmental Notice (as defined in, and
delivered in connection with, the Recapitalization Agreement), could give rise
to investigation or remediation costs, claims against the Borrower and/or a
Subsidiary, or the diminution of the value or marketability of the property
identified in the Environmental Notice. The Borrower does not believe that any
matter identified in the Environmental Notice is likely to result in a Material
Adverse Effect.
<PAGE>
Schedule 3.18
to Credit Agreement
Capitalization
(1) The Equity Interests issued and outstanding for Holdings consist of a 4%
General Partnership interest owned by BCP/Graham Holdings LLC, an 81%
Limited Partnership interest owned by BMP/Graham Holdings Corporation, a 1%
General Partnership interest owned by Graham Packaging Corporation and a
14% General Partnership interest owned by the Graham Family.
(2) The Equity Interests issued and outstanding for the Borrower consist of a
99% Limited Partnership interest owned by Graham Packaging Holdings Company
and a 1% General Partnership interest owned by GPC Opco GP LLC.
<PAGE>
Schedule 3.19
to Credit Agreement
Filing Offices
<TABLE>
<CAPTION>
=====================================================================================================================
DEBTOR NAME STATE JURISDICTION
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Graham Packaging Company California Secretary of State
Graham Packaging Holdings Company
Graham Recycling Company
- ---------------------------------------------------------------------------------------------------------------------
Graham Packaging Company California County Clerk, Contra Costa County
Graham Packaging Holdings Company
Graham Recycling Company
- ---------------------------------------------------------------------------------------------------------------------
Graham Packaging Company California County Clerk, Orange County
Graham Packaging Holdings Company
Graham Recycling Company
- ---------------------------------------------------------------------------------------------------------------------
Graham Packaging Company Florida Department of State
Graham Packaging Holdings Company
Graham Recycling Company
- ---------------------------------------------------------------------------------------------------------------------
Graham Packaging Company Florida County Clerk, Manatee County
Graham Packaging Holdings Company
Graham Recycling Company
- ---------------------------------------------------------------------------------------------------------------------
Graham Packaging Company Florida County Clerk, Lee County
Graham Packaging Holdings Company
Graham Recycling Company
- ---------------------------------------------------------------------------------------------------------------------
Graham Packaging Company Florida County Clerk, Orange County
Graham Packaging Holdings Company
Graham Recycling Company
- ---------------------------------------------------------------------------------------------------------------------
Graham Packaging Company Georgia County Clerk, Fulton County
Graham Packaging Holdings Company
Graham Recycling Company
- ---------------------------------------------------------------------------------------------------------------------
Graham Packaging Company Illinois Secretary of State
Graham Packaging Holdings Company
Graham Recycling Company
- ---------------------------------------------------------------------------------------------------------------------
Graham Packaging Company Illinois County Clerk, Du Page County
Graham Packaging Holdings Company
Graham Recycling Company
- ---------------------------------------------------------------------------------------------------------------------
Graham Packaging Company Indiana Secretary of State
Graham Packaging Holdings Company
Graham Recycling Company
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
=====================================================================================================================
DEBTOR NAME STATE JURISDICTION
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Graham Packaging Company Indiana County Clerk, Lake County
Graham Packaging Holdings Company
Graham Recycling Company
- ---------------------------------------------------------------------------------------------------------------------
Graham Packaging Company Louisiana Parish Clerk, Jefferson Parish
Graham Packaging Holdings Company
Graham Recycling Company
- ---------------------------------------------------------------------------------------------------------------------
Graham Packaging Company Louisiana Parish Clerk, West Baton Rouge Parish
Graham Packaging Holdings Company
Graham Recycling Company
- ---------------------------------------------------------------------------------------------------------------------
Graham Packaging Company Louisiana Parish Clerk, Caddo Parish
Graham Packaging Holdings Company
Graham Recycling Company
- ---------------------------------------------------------------------------------------------------------------------
Graham Packaging Company Missouri Secretary of State
Graham Packaging Holdings Company
Graham Recycling Company
- ---------------------------------------------------------------------------------------------------------------------
Graham Packaging Company Missouri County Clerk, St. Louis County
Graham Packaging Holdings Company
Graham Recycling Company
- ---------------------------------------------------------------------------------------------------------------------
Graham Packaging Company Mississippi Secretary of State
Graham Packaging Holdings Company
Graham Recycling Company
- ---------------------------------------------------------------------------------------------------------------------
Graham Packaging Company Mississippi County Clerk, Warren County
Graham Packaging Holdings Company
Graham Recycling Company
- ---------------------------------------------------------------------------------------------------------------------
Graham Packaging Company New Jersey Secretary of State
Graham Packaging Holdings Company
Graham Recycling Company
- ---------------------------------------------------------------------------------------------------------------------
Graham Packaging Company New Jersey County Clerk, Burlington County
Graham Packaging Holdings Company
Graham Recycling Company
- ---------------------------------------------------------------------------------------------------------------------
Graham Packaging Company Ohio Secretary of State
Graham Packaging Holdings Company
Graham Recycling Company
- ---------------------------------------------------------------------------------------------------------------------
Graham Packaging Company Ohio County Clerk, Guernsey County
Graham Packaging Holdings Company
Graham Recycling Company
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
=====================================================================================================================
DEBTOR NAME STATE JURISDICTION
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Graham Packaging Company Ohio County Clerk, Hamilton County
Graham Packaging Holdings Company
Graham Recycling Company
- ---------------------------------------------------------------------------------------------------------------------
Graham Packaging Company Oklahoma County Clerk, Muskogee County
Graham Packaging Holdings Company
Graham Recycling Company
- ---------------------------------------------------------------------------------------------------------------------
Graham Packaging Company Pennsylvania Secretary of State
Graham Packaging Holdings Company
Graham Recycling Company
- ---------------------------------------------------------------------------------------------------------------------
Graham Packaging Company Pennsylvania County Clerk, Bucks County
Graham Packaging Holdings Company
Graham Recycling Company
- ---------------------------------------------------------------------------------------------------------------------
Graham Packaging Company Pennsylvania County Clerk, Clearfield County
Graham Packaging Holdings Company
Graham Recycling Company
- ---------------------------------------------------------------------------------------------------------------------
Graham Packaging Company Pennsylvania County Clerk, Westmoreland County
Graham Packaging Holdings Company
Graham Recycling Company
- ---------------------------------------------------------------------------------------------------------------------
Graham Packaging Company Pennsylvania County Clerk, York County
Graham Packaging Holdings Company
Graham Recycling Company
- ---------------------------------------------------------------------------------------------------------------------
Graham Packaging Company South Carolina Secretary of State
Graham Packaging Holdings Company
Graham Recycling Company
- ---------------------------------------------------------------------------------------------------------------------
Graham Packaging Company South Carolina County Clerk, Charleston County
Graham Packaging Holdings Company
Graham Recycling Company
- ---------------------------------------------------------------------------------------------------------------------
Graham Packaging Company Texas Secretary of State
Graham Packaging Holdings Company
Graham Recycling Company
- ---------------------------------------------------------------------------------------------------------------------
Graham Packaging Company Texas County Clerk, Harris County
Graham Packaging Holdings Company
Graham Recycling Company
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
=====================================================================================================================
DEBTOR NAME STATE JURISDICTION
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Graham Packaging Company Washington Secretary of State
Graham Packaging Holdings Company
Graham Recycling Company
- ---------------------------------------------------------------------------------------------------------------------
Graham Packaging Company Washington County Clerk, Yakima County
Graham Packaging Holdings Company
Graham Recycling Company
- ---------------------------------------------------------------------------------------------------------------------
Graham Packaging Poland, L.P. Pennsylvania Secretary of State
Graham Packaging France Partners
Graham Packaging Latin America, LLC
GPC Capital Corp. II
GPC Opco GP, LLC
GPC Capial Corp. I
GPC Sub GP LLC
- ---------------------------------------------------------------------------------------------------------------------
Graham Packaging Poland, L.P. Pennsylvania County Clerk, York County
Graham Packaging France Partners
Graham Packaging Latin America, LLC
GPC Capital Corp. II
GPC Opco GP, LLC
GPC Capital Corp. I
GPC Sub GP, LLC
=====================================================================================================================
</TABLE>
<PAGE>
Schedule 3.20
to Credit Agreement
Real Property and Leased Premises
<TABLE>
<CAPTION>
PRIMARY LEASED/
LOCATION ADDRESS USE(1) OWNED
-------- ------- ------- -------
<S> <C> <C> <C>
U.S.
- ----
Atlanta, GA 3495 Bankhead Highway, P LEASED
Suites 100 and 114
Berkeley, MO 8942 Latty Road W OWNED(2)(7)
Berkeley, MO 8966 Latty Road P OWNED(2)(7)
Berkeley, MO 9060 Latty Road W LEASED
Berkeley, MO 8921 Latty Road L OWNED(2)(7)
Bordentown, NJ 201 Elizabeth Street P LEASED
Bradenton, FL 1001 13th Avenue East P LEASED
Bradford, PA 105 Bolivar Drive P LEASED
Cambridge, OH 8800 Guernsey Ind Blvd. P LEASED
Cape Coral, FL 3813 NE l0th Pl. #4&5 L OWNED
Charleston, SC 4960 Virginia Avenue P LEASED
Cincinnati, OH 290 Circle Freeway Drive P LEASED
Emigsville, PA 420 Elmig Road P LEASED
Houston, TX 3833 W. 11th Street P OWNED(7)
Houston, TX 4000 W. 1Ith Street W LEASED
Jefferson, LA 309 Jefferson Highway P LEASED
Jefferson, LA 309 Jefferson Highway W LEASED
Levittown, PA 6300 S. Bristol Pike P LEASED
Maitland, FL 101 Southall Lane, Suite 400 O LEASED
Maryland Heights, MO 13300 Interstate Drive P OWNED(7)
Muskogee, OK 102 Kaad Street P LEASED(5)
Kew Kensington, PA 130 Logans Ferry Road P LEASED
Port Allen, LA 1981 S. Westport Drive P LEASED
Rancho Cucamonga, CA 9041 Pittsburgh Ave. P LEASED
Rancho Cucamonga, CA 9281 Pittsburgh Ave. W LEASED
Richmond, CA 2600 Goodrick Avenue P LEASED
Richmond, CA 601 Parr Boulevard W LEASED
Santa Ana, CA 3300 West Segerstrom Street P LEASED(7)
Selah, WA 510 E. Naches Ave. P OWNED(7)
Shreveport, LA 3460 Hollywood Ave. P LEASED
Tulsa, OK 1505-B West 17th Street P LEASED
Vicksburg, MS 653 Haining Road P LEASED
Wapato, WA 31 Industrial Park Road P LEASED
Whiting, IN 1701 121st Street P LEASED
Woodridge, IL 2400 Internationale Pkwy P LEASED
York, PA 1803 Mt. Rose Ave. O LEASED
York, PA 500 Windsor Street P OWNED(2)(7)
York, PA 505 Windsor Street P OWNED(2)(7)
York, PA 250 Grim Lane W LEASED
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PRIMARY LEASED/
LOCATION ADDRESS USE(1) OWNED
-------- ------- ------ -----
<S> <C> <C> <C>
York, PA (Admin.) 1110 E. Princess St. O LEASED
Canada
Anjou, Quebec, Canada 10551 Ray Lawson Boulevard P OWNED(2)
Burlington, Ontario, Canada 4041 North Service Road P OWNED(2)
Mississauga, Ontario, 3174 Mavis Road P OWNED(2)
Canada
Toronto, Ontario, Canada 99 Vanderhof Avenue P N/A
Europe
- ------
Assevent, France Rue Maurice Willot P OWNED
Biyes, France Parc Industriel, Plaine de l'Adin P OWNED(5)
Rueil, France (Admin) 4 Rue Monnier O LEASED
Compochiaro, Italy Zona Industriale 86010 P OWNED(6)
Sovico (Milan), Italy Viale Monza 24 P LEASED
Sulejowek, Poland(3) 32 Zelezna str. P OWNED(4)
Latin America
- -------------
Barra Da Tijuca, Brazil Av. Das Americas, 2901 0 LEASED
Caxias, Brazil Av. Fabor, s/n Campos Eliseos P LEASED
Sao Paulo, Brazil Rue Chafic Maluf, 130 P LEASED
Santos, Brazil Rue Augusto Scaraboto, 245/a P N/A
</TABLE>
(1) P = Production Facility, W = Warehouse, O = Office, L = Land
(2) Contributed to Loan Parties in connection with Recapitalization.
(3) Facility owned by Masko-Graham Joint Venture, of which Graham holds a 50%
interest.
(4) Building is owned; land is leased.
(5) Under capital lease.
(6) Unclear title to approximately 2,000 sq. ft. of land; except to settle by
September 1998.
(7) Mortgaged Property
<PAGE>
Schedule 3.22
to Credit Agreement
Labor Matters
None.
<PAGE>
Schedule 3.23
to Credit Agreement
Insurance
(as of 12/31/97 -
expired policies have been renewed but new policy numbers are not yet available)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
INSURANCE TYPE INSURANCE CARRIER POLICY TERM POLICY NUMBER
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Health Insurance
US Aetna US Healthcare 1/1/97-12/31/97
US Keyston Central HMO 1/1/97-12/31/97
US South Central Preferred 1/1/97-12/31/97
US Healthguard HMO 1/1/97-12/31/97
US Gulf South HMO 1/1/97-12/31/97
US Kaiser HMO 1/1/97-12/31/97
US US Healthcare HMO 1/1/97-12/31/97
US Greater Atlantic HMO 1/1/97-12/31/97
US Group Health HMO 1/1/97-12/31/97
US Continental Insurance Co. 1/1/97-12/31/97
- -----------------------------------------------------------------------------------------------------------------------
Kidnap/Ransom/Extortion
Global Chubb 7/1/97-7/1/97 8133-97-38
- -----------------------------------------------------------------------------------------------------------------------
Long Term Disability
US Reliance 2/1/97-2/1/97 LSC 64856
- -----------------------------------------------------------------------------------------------------------------------
Marine Floater
Global Chubb 7/1/97-7/1/97 6550103
- -----------------------------------------------------------------------------------------------------------------------
National Flood
Selah National Food 10/22/97-10/22/98
New Kensington National Food 10/22/97-10/22/98
Vicksburg National Food 8/13/97-8/13/98
Tulsa National Food 5/10/97-5/10/98
Richmond National Food 5/10/97-5/10/98
Santa Ana National Food 11/13/97-11/13/98
Charleston National Food 11/6/97-11/6/98
Bradford National Food 7/4/97-7/4/98
- -----------------------------------------------------------------------------------------------------------------------
Ocean Marine Floater
Global Hartford 9/1/97-9/1/98 44CTPFT0375
- -----------------------------------------------------------------------------------------------------------------------
Property
Global IRI 9/1/95-9/1/98 31363680
France Allianz 9/1/97-9/1/98
Italy (property) Allianz 9/1/97-9/1/98
Italy (business interruption) Allianz 9/1/97-9/1/99
Brazil Allianz 9/1/97-9/1/99 416001534
Poland (property) Amplicico 9/1/97-9/1/98 666003396
Poland (business interruption) Amplicico 9/1/95-9/1/98 666003397
- -----------------------------------------------------------------------------------------------------------------------
Short Term Disability
US UNUM 9/1/97-9/1/98 519195001
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
INSURANCE TYPE INSURANCE CARRIER POLICY TERM POLICY NUMBER
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Travel Accident
Global Chubb 4/1/96-4/1/99 6408-40-80
- -----------------------------------------------------------------------------------------------------------------------
Workers Compensation
Stop Gap CNA 7/1/95-7/1/98 GL 502522479
US CNA 7/1/95-7/1/98 WC 602522473
Italy (statutory) Intercontinental 1/1/97-12/31/97 15157181
Italy (statutory) Winterthur 1/1/97-12/31/97 667
- -----------------------------------------------------------------------------------------------------------------------
Auto
US CNA 7/1/95-7/1/98 BUA 6 02522487
Texas CNA 7/1/97-7/1/98 BUA 4 02522488
Canada CNA 7/1/97-7/1/98 CAE 2522489
France La Lilloise 1/1/97-12/31/97 8066923
France La Lilloise 1/1/97-12/31/97 8166799
Italy Abeille 1/1/97-12/31/97 4605976
Italy Abeille 1/1/97-12/31/97 4605982
Italy Intercontinentale 1/1/97-12/31/97 15157181
Brazil General Accident 8/1/97-8/1/98 108205
- -----------------------------------------------------------------------------------------------------------------------
Crime
Global Chubb 7/1/97-7/1/98 8133-97-38
- -----------------------------------------------------------------------------------------------------------------------
Directors & Officers
Europe AIG 7/1/97-7/1/98 7900660
- -----------------------------------------------------------------------------------------------------------------------
Excess Earthquake
California plants Westchester Fire 9/1/97-9/1/98 IMS447385
California plants Agricultural 9/1/97-9/1/98 CPP1803791
California plants Pacific 9/1/97-9/1/98 ZG0003623
California plants Royal Surplus 9/1/97-9/1/98 KHD309418
California plants Western Re 9/1/97-9/1/98 UIM464474
California plants North Shore 9/1/97-9/1/98 NSM97301
California plants USF & G 9/1/97-9/1/98 CPR14932771700
- -----------------------------------------------------------------------------------------------------------------------
Excess Liability
Primary Chubb 7/1/96-7/1/99 (99) 7971-51-90 RMG
Secondary Fireman's Fund 7/1/97-7/1/98 XXK-000-9559-1475
Third Hartford Fire Insurance 7/1/97-7/1/98 44 XS SL3565
- -----------------------------------------------------------------------------------------------------------------------
Fiduciary
Global Chubb 7/1/97-7/1/98 8133-97-38
- -----------------------------------------------------------------------------------------------------------------------
General Liability
US C N A 7/1/97-7/1/98 GL 5 02522482
Canada C N A 7/1/97-7/1/98 GL 302522483
Italy Lloyd Andriatico 2/12/90- 46787392
Poland Warta 12/31/2000
Poland, including DIC/DIL Chubb 7/1/97-7/1/98 00300/UOC/59/97
France Chubb 1/1/97-7/1/98 3530-64-89
Italy Chubb 1/1/97-7/1/98
Brazil Chubb 1/1/97-7/1/98 2-7315217
1/1/97-7/1/98 6099163
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
INSURANCE TYPE INSURANCE CARRIER POLICY TERM POLICY NUMBER
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Group Life Insurance/AD&D
US UNUM 8/1/97-8/1/99 517096 001
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Schedule 6.01
to Credit Agreement
Indebtedness
See attached.
<PAGE>
Schedule 6.01
to Credit Agreement
INDEBTEDNESS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
OUTSTANDING DATE OF
AGREEMENT PARTIES COMMITMENT BALANCE AGREEMENT
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Promissory Note Graham Packaging Company and N/A 1,100,000 USD April 3, 1989
Sonoco Products Company
- --------------------------------------------------------------------------------------------------------------------
Equipment Capital Lease Graham Packaging Canada, N/A 400,000 CND January 15, 1996
Agreement Ltd. and Quaker State, Inc.
- --------------------------------------------------------------------------------------------------------------------
Real Property Capital Graham Packaging France, N/A 3,745,000 FRF April 1, 1992
Lease Agreement S.A. and Sicomi Rhone-Alpes
- --------------------------------------------------------------------------------------------------------------------
Equipment Capital Lease Societa Imballaggi Plastici, N/A 512,000,000 ITL December 30, 1992
Agreement Srl and BN Comercio e
Finanza Spa
- --------------------------------------------------------------------------------------------------------------------
Mortgage Loan Capital Societa Imballaggi Plastici, N/A 79,000,000 ITL October 18, 1988
Lease Agreement SrL and Medio Credito
Lombardo
- --------------------------------------------------------------------------------------------------------------------
Real Property Capital Graham Packaging Company and N/A 990,000 USD July 1, 1996
Lease Agreement the Trustees of Muskogee
County Industrial Authority
- --------------------------------------------------------------------------------------------------------------------
Local Line of Credit Graham Packaging France, 8,000,000 FRF -- FRF
S.A. and Lyonnaise de Banque
(pledging/ discounting of
local trade receivables)
- --------------------------------------------------------------------------------------------------------------------
Local Line of Credit Graham Packaging France, 10,000,000 FRF 2,428,000 FRF
S.A. and Banque Paribas
(pledging/ discounting of
local trade receivables)
- --------------------------------------------------------------------------------------------------------------------
Local Line of Credit Graham Packaging Italy, SrL, 3,000,000,000 ITL 81,000,000 ITL
Societa Imballaggi Plastici,
SrL and Banco de Napoli
(pledging/ discounting of
local trade receivables)
- --------------------------------------------------------------------------------------------------------------------
Local Line of Credit Graham Packaging Italy, SrL, 1,400,000,000 ITL 194,000,000 ITL
and Commerciale Italiano
(pledging/ discounting of
local trade receivables)
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Schedule 6.01
to Credit Agreement
INDEBTEDNESS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
OUTSTANDING DATE OF
AGREEMENT PARTIES COMMITMENT BALANCE AGREEMENT
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Local Line of Credit Societa Imballaggi Plastici, 100,000,000 ITL 38,000,000 ITL
SrL and Commerciale Italiano
(pledging/ discounting of
local trade receivables)
- --------------------------------------------------------------------------------------------------------------------
Local Line of Credit Graham Packaging Company and 2,000,000 USD 166,000 USD September 30,
Promissory Note York Bank & Trust (overdraft 1997
facility)
- --------------------------------------------------------------------------------------------------------------------
Letter of Credit Graham Packaging Company and Reduces $2,000,000 138,000 USD
Amoco Oil Company York Bank LOC
- --------------------------------------------------------------------------------------------------------------------
Letter of Credit Graham Packaging Company and Reduces $2,000,000 1,000 USD
West Baton Rouge Parish York Bank LOC
- --------------------------------------------------------------------------------------------------------------------
Letter of Credit Graham Packaging Company and N/A 1,700,000 USD
Continental Insurance
Company (to be issued for
casualty insurance, post
closing)
- --------------------------------------------------------------------------------------------------------------------
Guarantee Graham Packaging Company and 5,000,000 USD 1,053,000 USD September 1, 1996
Societe Generale
- --------------------------------------------------------------------------------------------------------------------
Intercompany Note Graham Packaging Company and 40,000,000 USD 29,333,000 USD
Graham Packaging France,
S.A. (pro froma working
capital line)
- --------------------------------------------------------------------------------------------------------------------
Intercompany Note Graham Packaging Company and 12,000,000 USD 5,409,000 USD
Graham Packaging Italy, SrL
(pro froma working capital
line)
- --------------------------------------------------------------------------------------------------------------------
Intercompany Note Graham Packaging Company 10,000,000 USD 6,578,000 USD
Note Receivable from Graham
Packaging Canada, Ltd. (pro
froma working capital line)
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Schedule 6.01
to Credit Agreement
INDEBTEDNESS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
OUTSTANDING DATE OF
AGREEMENT PARTIES COMMITMENT BALANCE AGREEMENT
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Intercompany Note Graham Packaging Company N/A 1,058,000 USD
Note Receivable from Graham
Packaging Poland
- --------------------------------------------------------------------------------------------------------------------
Intercompany Note Graham Packaging Company N/A 3,139,000 USD
Note Receivable from Graham
Packaging Italy, SrL
(including accrued interest
of $1,333,000)
- --------------------------------------------------------------------------------------------------------------------
Tax Grant Agreement Graham Packaging Italy, SrL, 1,800,000,000 ITL N/A
Societa Imballaggi Plastici,
SrL and Banco de Napoli
(post closing)
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
See attached Schedule 3.05 for foreign currency forward contracts.
<PAGE>
Schedule 6.02
to Credit Agreement
Liens
Each of the Capital Leases identified on Schedule 6.01.
<PAGE>
SCHEDULE 6.04
to Credit Agreement
Investments
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
INTEREST DATE OF AGREEMENT
AGREEMENT AMOUNT PARTIES RATE
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Masko-Graham Sp. Graham Packaging Poland, LP, January 12, 1995
Z.O.O.-Joint Venture Marcin Klopocinski and Stephan
Agreement Kolakowski
- ------------------------------------------------------------------------------------------------------------------------------
Loan Agreement Principal - Graham Packaging Poland, LP (as 6.00% January 1, 1998
61,710.00 PLZ lender) and Masko-Graham Sp
Z.O.O.(as borrower)
- ------------------------------------------------------------------------------------------------------------------------------
Loan Agreement Principal - Grahalm Packaging Poland, LP (as 6.00% January 1, 1998
28,125.97 US$ lender) and Masko-Graham Sp
Z.O.O. (as borrower)
- ------------------------------------------------------------------------------------------------------------------------------
Loan Agreement Principal - Graham Packaging Poland, LP (as York Bank & January 1, 1998
225,926.44 US$ lender) and Masko-Graham Sp Z.O.O Trust Prime
(as borrower) Rate
- ------------------------------------------------------------------------------------------------------------------------------
Loan Agreement Principal - Graham Packaging Poland, LP (as York Bank & January 1, 1998
786,335.09 US$ lender) and Masko-Graham Sp Trust Prime
Z.O.O. (as borrower) Rate plus 2%
- ------------------------------------------------------------------------------------------------------------------------------
Loan Agreement Approximately R$6.3 Graham Packaging Company (as 13.00% November 26,
million (Maximum $7.0 lender) and SRL Overseas 1997
million) (Brazilian Corporation (Bahamas) Ltd.
Real based principal
amount)
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
SCHEDULE 6.07
to Credit Agreement
Transactions with Affiliates
1. Fifth Amended and Restated Agreement of Limited Partnership, dated as of
February 2, 1998, among Investor GP and Graham GP Corp. as general partners
and Graham Family Growth Partnership, Graham Capital and Investor LP as
limited partners.
2. Equipment Sales, Service and Licensing Agreement, dated as of February 2,
1998, entered into between Holdings and Graham Engineering pursuant to the
Recapitalization Agreement.
3. The Consulting Agreement, dated as of February 2, 1998, entered into
between Holdings and Graham Capital pursuant to the Recapitalization
Agreement.
<PAGE>
EXHIBIT A
(FORM OF)
ASSIGNMENT AND ACCEPTANCE
Reference is made to the Credit Agreement dated as of January __, 1998 (the
"Credit Agreement"), among GRAHAM PACKAGING HOLDINGS COMPANY, a Pennsylvania
limited partnership, GRAHAM PACKAGING COMPANY, a [__________] limited
partnership (the "BORROWER"), certain financial institutions party thereto (the
"Lenders"), NATIONSBANC MONTGOMERY SECURITIES L.L.C., as documentation agent,
BANKERS TRUST COMPANY, as administrative agent (in such capacity, the
"Administrative Agent") and as collateral agent (in such capacity, the
"Collateral Agent") for the Lenders, and BANKERS TRUST COMPANY, as fronting
bank. Capitalized terms used herein but not defined herein shall have the
meanings assigned to such terms in the Credit Agreement. ______________________
(the "Assignor") _________________________ and (the "Assignee") hereby agree as
follows:
1. The Assignor hereby sells and assigns, without recourse, to the
Assignee, and the Assignee hereby purchases and assumes, without recourse, from
the Assignor, effective as of the Effective Date set forth below, the interests
set forth below (the "Assigned Interest") in the Assignor's rights and
obligations under the Credit Agreement, including, without limitation, the
percentages and amounts set forth below (a) the Commitments of the Assignor on
the Effective Date, (b) the Loans owing to the Assignor that are outstanding on
the Effective Date and (c) participations in Letters of Credit acquired from the
Fronting Bank that are outstanding on the Effective Date. Each of the Assignor
and the Assignee hereby makes and agrees to be bound by all the representations,
warranties and agreements set forth in Section 9.04(c) of the Credit Agreement,
a copy of which has been received by each such party. From and after the
Effective Date (a) the Assignee shall be a party to and be bound by the
provisions of the Credit Agreement and, to the extent of the interests assigned
by this Assignment and Acceptance, have the rights and obligations of a Lender
thereunder and under the Loan Documents and (b) the Assignor shall, to the
extent of the interests assigned by this Assignment and Acceptance, relinquish
its rights and be released from its obligations under the Credit Agreement (and
in the event that this Assignment and Acceptance covers all or the remaining
portion of the Assignor's rights and obligations under the Credit Agreement, the
Assignor shall cease to be a party thereto but shall continue to be entitled to
the benefits of Sections 2.13, 2.15, 2.19 and 9.05 thereof, as well as to any
Fees accrued for its account and not yet paid).
2. This Assignment and Acceptance is being delivered to the Administrative
Agent together with (a) if the Assignee is organized under the laws of a
jurisdiction outside the United States, the forms specified in Section 2.19(f)
or (g) of the Credit Agreement, duly completed and executed by such Assignee and
(b) if the Assignee is not already a Lender under the Credit Agreement, an
Administrative Questionnaire in the form of Exhibit A to the Credit Agreement.
3. This Assignment and Acceptance shall be governed by, and construed in
accordance with, the laws of the State of New York.
<PAGE>
2
Date of Assignment:
Legal Name of Assignor:
Legal Name of Assignee:
Assignee's Address for Notices:
Effective Date of Assignment:
<TABLE>
<CAPTION>
Percentage Assigned of the
Commitment of, or Loans
outstanding under, the respective
facility (set forth, to at least eight
decimals, as a percentage of
Aggregate Amount of the aggregate Commitments of, or
Commitments/Loans for Principal Amount aggregate Loans outstanding under, the
all Lenders Assigned respective facility)
--------------------- ---------------- --------------------------------------
<S> <C> <C> <C>
Outstanding
Principal Amount
of Term Loans:
Tranche A: %
Tranche B: %
Tranche C: %
[Term Loan
Commitments:
Tranche A: %
Tranche B: %
Tranche C: %](1)
Outstanding Principal
Amount of
Revolving Loans:
</TABLE>
- ----------
(1) Delete, as appropriate, in the case of Assignment and Acceptances
executed after the termination of the relevant Term Loan Commitments.
<PAGE>
3
<TABLE>
<S> <C> <C> <C>
Revolving Credit
Commitments: %
Outstanding Principal
Amount of Growth
Capital Revolving Loans %
Growth Capital
Commitments: %
L/C Disbursements: %
Letters of Credit: %
Letter of Credit Commitments: %
</TABLE>
<PAGE>
4
The terms set forth above are hereby agreed to:
________________________________________________, As Assignee
By:_____________________________________________
Name:___________________________________________
Title:__________________________________________
By:_____________________________________________
________________________________________________, As Assignor
By:_____________________________________________
Name:___________________________________________
Title:__________________________________________
By:_____________________________________________
[Consented to by:
GRAHAM PACKAGING COMPANY
By:_________________________________________________________
Name:_______________________________________________________
Title:______________________________________________________
BANKERS TRUST COMPANY, as Administrative Agent
By:_________________________________________________________
Name:_______________________________________________________
Title:__________________________________________________](2)
- ----------
(2) The consent of the Administrative Agent and the Borrower is required
for assignments made as (and to the extent) provided in Section 9.04(b)(i)(A).
<PAGE>
EXHIBIT B
[FORM OF]
BORROWING REQUEST
Bankers Trust Company
130 Liberty Street
New York, NY 10006
Attention of [______________]
Telecopy No. (212) [___________________]
[Date]
Ladies and Gentlemen:
The undersigned, GRAHAM PACKAGING COMPANY (the "Borrower"), refers to the
Credit Agreement dated as of February 2, 1998 (as it may hereafter be amended,
modified, extended or restated from time to time, the "Credit Agreement"), among
GRAHAM PACKAGING HOLDINGS COMPANY, the Borrower, GPC CAPITAL CORP. I, a Delaware
corporation (the "Co-Borrower"), the financial institutions named therein as
Lenders or as the Fronting Bank, NATIONSBANK, N.A., as Documentation Agent, and
BANKERS TRUST COMPANY, as Administrative Agent, Syndication Agent and Collateral
Agent. Capitalized terms used herein and not otherwise defined herein shall have
the meanings assigned to such terms in the Credit Agreement. The Borrower hereby
gives you notice pursuant to Section 2.03 of the Credit Agreement that it
requests a Borrowing under the Credit Agreement, and in that connection sets
forth below the terms on which such Borrowing is requested to be made:
(A) Type of Borrowing(1) ______________________________________________________
(B) Interest rate basis(2) ____________________________________________________
(C) Date of Borrowing
(which must be a Business Day) ____________________________________________
(D) Funds are requested to be disbursed to the Borrower at:
Bank Name: ________________________________________________________________
Bank Address: _____________________________________________________________
Account Number: ___________________________________________________________
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(1) Term Borrowing, Revolving Credit Borrowing or Growth Capital Borrowing (and
in the case of a Term Borrowing, specify the Commitments pursuant to which the
Loans comprising such Borrowing are to be made).
(2) Eurodollar Borrowing or ABR Borrowing.
<PAGE>
2
(E) Principal Amount of Borrowing(3) __________________________________________
(F) Interest Period and
the last day thereof(4) ___________________________________________________
GRAHAM PACKAGING COMPANY
By: GPC Opco GP LLC,
its managing general partner
By: ________________________________________
Name:
Title:
Copy to:
Bankers Trust Company, as Administrative Agent
for the Lenders referred to above,
130 Liberty Street
New York, NY 10006
Attention of [ ]
- --------
(3) In Dollars not less than $5,000,000 (and in an integral multiple of
$1,000,000) or equal to the remaining available balance of the applicable
Commitments or such other amounts as may be permitted by the Credit Agreement to
refund Swingline Loans.
(4) Which shall be subject to the definition of the term "Interest Period" and
end not later than the Revolving Credit Maturity Date, Growth Capital Maturity
Date, Tranche A Maturity Date, Tranche B Maturity Date or Tranche C Maturity
Date, as applicable.
<PAGE>
EXHIBIT C
[FORM OF]
LETTER OF CREDIT REQUEST
No. (1) Dated (2)
Bankers Trust Company, as Administrative Agent under the Credit Agreement (as
amended, modified or supplemented from time to time, the "Credit
Agreement"), dated as of February 2, 1998, among Graham Packaging Holdings
Company, Graham Packaging Company, GPC Capital Corp. I, the Lenders from
time to time party thereto, NationsBank, N.A., as Documentation Agent, and
Bankers Trust Company, as Administrative Agent, Syndication Agent,
Collateral Agent and Fronting Bank,
130 Liberty Street
New York, New York 10006
Attention: ________________
[Name and Address of applicable Fronting Bank
Attention: ______________________]
Dear Sirs:
We hereby request that [name of proposed Fronting Bank], in its individual
capacity, issue a [Standby] [Commercial] Letter of Credit for the account of the
undersigned on (3) (the "Date of Issuance") in the aggregate stated amount of
(4). The requested Letter of Credit shall be denominated in Dollars.
For purposes of this Letter of Credit Request, unless otherwise defined
herein, all
- --------
(1) Letter of Credit Request Number.
(2) Date of Letter of Credit Request.
(3) Date of Issuance which shall be at least five Business Days after the date
of this Letter of Credit Request (or such shorter period as is acceptable
to the respective Issuing Bank).
(4) Aggregate initial stated amount of Letter of Credit.
<PAGE>
capitalized terms used herein which are defined in the Credit Agreement shall
have the respective meaning provided therein.
The beneficiary of the requested Letter of Credit will be (5), and such
Letter of Credit will be in support of (6) and will have a stated expiration
date of (7).
We hereby certify that:
(1) the representations and warranties contained in the Loan Documents
will be true and correct in all material respects on the Date of Issuance,
both before and after giving effect to the issuance of the Letter of Credit
requested hereby (it being understood and agreed that any representation or
warranty which by its terms is made as of a specified date shall be
required to be true and correct in all material respects only as of such
specified date); and
(2) no Default or Event of Default has occurred and is continuing nor,
after giving effect to the issuance of the Letter of Credit requested
hereby, would such a Default or an Event of Default occur.
Copies of all relevant documentation with respect to the supported
transaction are attached hereto.
GRAHAM PACKAGING COMPANY
By GPC Opco GP LLC,
its managing general partner
By ___________________________
Title:
- --------
(5) Insert name and address of beneficiary.
(6) Insert description of the obligation to which it relates in the case of
Standby Letters of Credit and a description of the commercial transaction
which is being supported in the case of Commercial Letters of Credit.
(7) Insert last date upon which drafts may be presented which may not be later
than (i) in the case of Commercial Letters of Credit, the earlier of (x)
the date which occurs 180 days after the Date of Issuance or (y) the date
which is 30 days prior to the Revolving Credit Maturity Date or (ii) in the
case of Standby Letters of Credit, the earlier of (x) the date which occurs
12 months after the Date of Issuance, or, if any such Standby Letter of
Credit is automatically extendable for successive periods of up to 12
months, a date not beyond the tenth Business Day prior to the Revolving
Credit Maturity Date or (y) the tenth Business Day prior to the Revolving
Credit Maturity Date.
<PAGE>
EXHIBIT E
This document is intended to
be recorded in ____________
County, __________.
MORTGAGE, SECURITY AGREEMENT,
ASSIGNMENT OF LEASES, RENTS AND PROFITS,
FINANCING STATEMENT AND FIXTURE FILING
made by
GRAHAM PACKAGING COMPANY, L.P.
as Mortgagor,
to
BANKERS TRUST COMPANY
as Collateral Agent,
as Mortgagee
THIS MORTGAGE SECURES FUTURE ADVANCES
- --------------------------------------------------------------------------------
NOTICE: THIS INSTRUMENT SECURES, INTER ALIA, OBLIGATIONS
WHICH MAY PROVIDE FOR A VARIABLE RATE OF INTEREST.
- --------------------------------------------------------------------------------
THIS INSTRUMENT WAS DRAFTED BY AND AFTER RECORDING SHOULD
BE RETURNED TO:
WHITE & CASE LLP
1155 Avenue of the Americas
New York, New York 10036
ATTENTION: Jeffrey J. Temple, Esq.
<PAGE>
MORTGAGE
THIS MORTGAGE dated as of January __, 1998 (this
"Mortgage"), by [GRAHAM PACKAGING COMPANY, L.P.], a _________
limited partnership, having an office at 1110 East Princess
Street, York, Pennsylvania, 17403 (the "Mortgagor"), to BANKERS
TRUST COMPANY, a New York banking corporation, having an office
at 130 Liberty Street, New York, New York 10006, as collateral
agent (in such capacity, the "Collateral Agent") for the benefit
of the Secured Parties (as defined below) (the "Mortgagee");
WITNESSETH THAT:
A. Reference is made to the Credit Agreement dated as of January __, 1998
(as amended, supplemented or otherwise modified from time to time, the "Credit
Agreement"), among the Mortgagor, Graham Packaging Holdings Company, L.P., a
Pennsylvania limited partnership, the lenders named therein (the "Lenders"),
Bankers Trust Company, as administrative agent (in such capacity, the
"Administrative Agent") and as Collateral Agent, NationsBank, N.A., as
documentation agent (in such capacity, the "Documentation Agent"), and Bankers
Trust Company, as fronting bank (in such capacity, the "Fronting Bank"). As used
herein, the term "Secured Parties" shall mean (i) the Lenders, (ii) the
Administrative Agent, (iii) the Collateral Agent, (iv) the Fronting Bank, (v)
each counterparty to an Interest Rate Protection Agreement entered into with the
Borrower if such counterparty was a Lender (or an Affiliate of a Lender) at the
time the Interest Rate Protection Agreement was entered into, (vi) the
beneficiaries of each indemnification obligation undertaken by the Borrower
under any Loan Document and (vii) the successors and permitted assigns of each
of the foregoing. Each capitalized term used herein but not defined herein shall
have the meaning assigned to such term in the Credit Agreement. Pursuant to the
Credit Agreement, (i) the Lenders have lent or agreed to lend to [the Mortgagor]
(a) on a term basis, Term Loans in an aggregate principal amount not in excess
of $395,000,000, and (b) on a revolving basis, Revolving Loans, at any time and
from time to time prior to the Revolving Credit Maturity Date, in an aggregate
principal amount at any time outstanding not in excess of $_____________ and
(ii) the Fronting Bank has issued and has agreed to issue Letters of Credit in
an aggregate face amount at any time outstanding not in excess of
$______________ in each case on the terms and subject to the conditions of the
Credit Agreement.
<PAGE>
B. In order to induce the Lenders to make Loans and the Fronting Bank to
issue Letters of Credit, the Subsidiary Guarantors and [Mortgagor] have agreed
to guarantee pursuant to the Subsidiary Guarantee Agreement and the Parent
Guarantee Agreement, respectively, the due and punctual payment and performance
of the Obligations (as defined in paragraph C below).
C. The obligations of the Lenders to make Loans and of the Fronting Bank to
issue Letters of Credit under the Credit Agreement are conditioned upon, among
other things, the execution and delivery by the Mortgagor of this Mortgage in
the form hereof, to secure (a) the due and punctual payment by the Mortgagor of
(i) the principal of and premium, if any, and interest (including interest
accruing during the pendency of any bankruptcy, insolvency, receivership or
other similar proceeding, regardless of whether allowed or allowable in such
proceeding) on the Loans when and as due, whether at maturity, by acceleration,
upon one or more dates set for prepayment or otherwise, (ii) each payment
required to be made by the Mortgagor under the Credit Agreement in respect of
any Letter of Credit, when and as due, including payments in respect of
reimbursement of disbursements, interest thereon and obligations to provide cash
collateral and (iii) all other monetary obligations, including fees, costs,
expenses and indemnities, whether primary, secondary, direct, contingent, fixed
or otherwise (including monetary obligations incurred during the pendency of any
bankruptcy, insolvency, receivership or other similar proceeding, regardless of
whether allowed or allowable in such proceeding), of the Mortgagor to the
Secured Parties under the Credit Agreement, this Mortgage and the other Loan
Documents to which the Mortgagor is or is to be a party, (b) the due and
punctual performance of all covenants, agreements, obligations and liabilities
of the Mortgagor under or pursuant to the Credit Agreement, this Mortgage and
the other Loan Documents, (c) the due and punctual payment and performance of
all the covenants, agreements, obligations and liabilities of each Loan Party
under or pursuant to this Mortgage and the other Loan Documents and (d) the due
and punctual payment and performance of all obligations of the Mortgagor under
each Interest Rate Protection Agreement entered into with any counterparty that
was a Lender (or an Affiliate of a Lender) at the time such Interest Rate
Protection Agreement was entered into (all the monetary and other obligations
referred to in this paragraph C being referred to collectively, as the
"Obligations").
D. Pursuant to the requirements of the Credit Agreement, the Mortgagor is
entering into this Mortgage to create a security interest in the Mortgaged
Property (as defined herein) to secure the performance and payment by the
Mortgagor of the Obligations. The Credit Agreement also requires the granting by
the Mortgagor of mortgages (the "Other Mortgages") that create security
interests in
-2-
<PAGE>
certain Mortgaged Properties other than the Mortgaged Property to secure the
performance of the Obligations.
Granting Clauses
NOW THEREFORE, IN CONSIDERATION OF the foregoing and in order to secure (A)
the due and punctual payment and performance of the Obligations, (B) the due and
punctual payment by the Mortgagor of all taxes and insurance premiums relating
to the Mortgaged Property and (C) all disbursements made by Mortgagee for the
payment of taxes, common area charges or insurance premiums, all fees, expenses
or advances in connection with or relating to the Mortgaged Property, and
interest on such disbursements and other amounts not timely paid in accordance
with the terms of the Credit Agreement, this Mortgage and the other Loan
Documents, Mortgagor hereby grants, conveys, warrants, mortgages, assigns and
pledges to the Mortgagee (for the ratable benefit of the Secured Parties), all
the following described property (the "Mortgaged Property") whether now owned or
held or hereafter acquired:
(1) all Mortgagor's right, title and interest in all the fee estate in
the land more particularly described on Exhibit A hereto (the "Land"),
together with all rights appurtenant thereto, including the easements over
certain other adjoining land granted by any easement agreements, covenant
or restrictive agreements and all air rights, mineral rights, water rights,
oil and gas rights and development rights, if any, relating thereto, and
also together with all of the other easements, rights, privileges,
interests, hereditaments and appurtenances thereunto belonging or in anyway
appertaining and all of the estate, right, title, interest, claim or demand
whatsoever of Mortgagor therein and in the streets and ways adjacent
thereto, either in law or in equity, in possession or expectancy, now or
hereafter acquired (the "Premises");
(2) all Mortgagor's right, title and interest in all buildings,
improvements, structures, paving, parking areas, walkways and landscaping
now or hereafter erected or located upon the Land, and all fixtures of
every kind and type affixed to the Premises or attached to or forming part
of any structures, buildings or improvements and replacements thereof now
or hereafter erected or located upon the Land (the "Improvements");
(3) all machinery, devices, fixtures, apparatus, interior
improvements, appurtenances and equipment of every kind and nature
whatsoever (other than rolling stock and motor vehicles) owned by the
Mortgagor and now or hereafter attached
-3-
<PAGE>
to or placed in or upon the Premises or the improvements, or any part
thereof, and used or procured for use in connection with the operation of
the Premises or used in connection with the conduct of any business thereon
(collectively, the "Equipment");
(4) all Mortgagor's right, title and interest in and to all real
estate tax refunds and all proceeds of the conversion, voluntary or
involuntary, of any of the Mortgaged Property into cash or liquidated
claims ("Proceeds"), including Proceeds of insurance maintained by the
Mortgagor and condemnation awards, any awards that may become due by reason
of the taking by eminent domain or any transfer in lieu thereof of the
whole or any part of the Premises or Improvements or any rights appurtenant
thereto, and any awards for change of grade of streets, together with any
and all moneys now or hereafter on deposit for the payment of real estate
taxes, assessments or common area charges levied against the Mortgaged
Property, unearned premiums on policies of fire and other insurance
maintained by the Mortgagor covering any interest in the Mortgaged Property
or required by the Credit Agreement; and
(5) all Mortgagor's right, title and interest in and to all of the
rents, income, receipts, revenues, issues, benefits and profits of the
Premises, all extensions, improvements, betterments, renewals, substitutes
and replacements of and all additions and appurtenances to, the Land, the
Premises, the Equipment and the Improvements, hereinafter acquired by or
released to the Mortgagor or constructed, assembled or placed by the
Mortgagor on the Land, the Premises or the Improvements, and all
conversions of the security constituted thereby, immediately upon such
acquisition, release, construction, assembling, placement or conversion, as
the case may be, and in each such case, without any further mortgage, deed
of trust, conveyance, assignment or other act by the Mortgagor, all of
which shall become subject to the lien of this Mortgage as fully and
completely, and with the same effect, as though now owned by the Mortgagor
and specifically described herein.
TO HAVE AND TO HOLD the Mortgaged Property unto the Mortgagee, its
successors and assigns, for the ratable benefit of the Secured Parties, forever,
subject only to the Permitted Encumbrances (as hereinafter defined) and to
satisfaction and cancellation as provided in Section 3.04.
-4-
<PAGE>
ARTICLE I
Representations, Warranties and Covenants of Mortgagor
Mortgagor agrees, covenants, represents and/or warrants as follows:
SECTION 1.01. Title. (a) Mortgagor has good and marketable title to an
indefeasible fee estate in the Land and Improvements subject to no lien, charge
or encumbrance, and this Mortgage is and will remain a valid and enforceable
first and prior lien on the Premises and Improvements subject only to, in each
case, Liens permitted by Section 6.02 of the Credit Agreement and the exceptions
and encumbrances referred to in Schedule B to the title insurance policy being
issued to insure the lien of this Mortgage (collectively, the "Permitted
Encumbrances"). The Permitted Encumbrances do not materially interfere with the
current use, enjoyment or operation of the Mortgaged Property.
(b) The Mortgaged Property is served by water, gas, electric, septic, storm
and sanitary sewage facilities, and such utilities serving the Premises and the
Improvements are located in and in the future will be located fully within the
Premises. There is vehicular access to the Premises and the Improvements which
is provided by, either a public right-of-way abutting and contiguous with the
Land or valid recorded unsubordinated easements.
(c) Mortgagor has not received any notice of, nor has any knowledge of any
pending or contemplated condemnation proceeding affecting the Mortgaged Property
or any sale or disposition thereof in lieu of condemnation. Mortgagor is not
obligated under any right of first refusal, option or other contractual right to
sell, assign or otherwise dispose of any Mortgaged Property or any interest
therein.
(d) All easement agreements, covenants or restrictive agreements,
supplemental agreements and any other instruments hereinabove referred to and
mortgaged hereby (collectively, the "Agreements") are and will remain valid,
subsisting and in full force and effect, unless the failure to remain valid,
subsisting and in full force and effect, individually or in the aggregate, could
not reasonably be expected to have a material adverse effect on the Mortgaged
Property, and Mortgagor is not in default thereunder and has fully performed the
material terms thereof required to be performed through the date hereof, and has
no knowledge of any default thereunder or failure to fully perform the terms
thereof by any other party, nor of the occurrence of any event that after notice
or the passage of time or both will constitute a default thereunder.
-5-
<PAGE>
(e) Mortgagor has good and lawful right and full power and authority to
mortgage the Mortgaged Property and will forever warrant and defend its title to
the Mortgaged Property, the rights of Mortgagee therein under this Mortgage and
the validity and priority of the lien of this Mortgage thereon against the
claims of all persons and parties except those having rights under Permitted
Encumbrances to the extent of those rights.
(f) This Mortgage, when duly recorded in the appropriate public records,
will create a valid, perfected and enforceable lien upon and security interest
in all the Mortgaged Property and there will be no defenses or offsets to this
Mortgage that will be asserted by Mortgagor or its Affiliates (or any third
party defense or offset now known to Mortgagor or its Affiliates) or to any of
the Obligations secured hereby for so long as any portion of the Obligations is
outstanding.
SECTION 1.02. Credit Agreement; Certain Amounts. (a) This Mortgage is given
pursuant to the Credit Agreement, relevant portions of which are attached hereto
as Appendix A. Each and every term and provision of the Credit Agreement
(excluding the governing law provisions thereof), whether or not such provisions
are attached hereto, and including the rights, remedies, obligations, covenants,
conditions, agreements, indemnities, representations and warranties of the
parties thereto shall be considered as if a part of this Mortgage.
(b) To the extent the representations and covenants contained in this
Mortgage are more stringent or expansive than comparable representations and
covenants contained in the Credit Agreement, the representations and covenants
contained herein shall be construed to supplement the representations and
covenants in the Credit Agreement without creating a conflict or inconsistency
therewith, and Mortgagor shall be bound to the more stringent or expansive
representations and covenants hereunder.
(c) If any remedy or right of Mortgagee pursuant hereto is acted upon by
Mortgagee or if any actions or proceedings (including any bankruptcy, insolvency
or reorganization proceedings) are commenced in which Mortgagee is made a party
and is obliged to defend or uphold or enforce this Mortgage or the rights of
Mortgagee hereunder, or if a condemnation proceeding is instituted affecting the
Mortgaged Property, Mortgagor will pay all reasonable sums, including reasonable
attorneys' fees and disbursements, incurred by Mortgagee related to the exercise
of any remedy or right of Mortgagee pursuant hereto or for the reasonable
expense of any such action or proceeding together with all statutory or other
costs, disbursements and allowances, interest thereon from the date of demand
for payment thereof at the rate specified in clause (b) of Section 2.07 of the
Credit Agreement (the "Default Interest
-6-
<PAGE>
Rate"), and such sums and the interest thereon shall, to the extent permissible
by law, be a lien on the Mortgaged Property prior to any right, title to,
interest in or claim upon the Mortgaged Property attaching or accruing
subsequent to the recording of this Mortgage and shall be secured by this
Mortgage to the extent permitted by law. Any payment of amounts due under this
Mortgage not made on or before the due date for such payments shall accrue
interest daily without notice from the due date until paid at the Default
Interest Rate, and such interest at the Default Interest Rate shall be
immediately due upon demand by Mortgagee.
SECTION 1.03. Payment of Taxes, Liens and Charges. (a) Except as may be
permitted by Section 5.03 of the Credit Agreement, Mortgagor will pay and
discharge from time to time prior to the time when the same shall become
delinquent, and before any interest or penalty accrues thereon or attaches
thereto, all taxes of every kind and nature, all general and special
assessments, levies, permits, inspection and license fees, all water and sewer
rents, all vault charges, and all other public charges, and all service charges,
common area charges, private maintenance charges, utility charges and all other
private charges, whether of a like or different nature, imposed upon or assessed
against the Mortgaged Property or any part thereof or arising in respect of the
occupancy, use or possession thereof.
(b) In the event of the passage of any state, Federal, municipal or other
governmental law, order, rule or regulation subsequent to the date hereof (i)
deducting from the value of real property for the purpose of taxation any lien
or encumbrance thereon or in any manner changing or modifying the laws now in
force governing the taxation of this Mortgage or debts secured by mortgages or
deeds of trust (other than laws governing income, franchise and similar taxes
generally) or the manner of collecting taxes thereon and (ii) imposing a tax to
be paid by Mortgagee, either directly or indirectly, on this Mortgage or any of
the Loan Documents or to require an amount of taxes to be withheld or deducted
therefrom, Mortgagor will promptly notify Mortgagee of such event. In such event
Mortgagor shall (i) agree to enter into such further instruments as may be
reasonably necessary or desirable to obligate Mortgagor to make any applicable
additional payments and (ii) Mortgagor shall make such additional payments.
(c) At any time that an Event of Default shall occur hereunder and be
continuing, or if required by any law applicable to Mortgagor or to Mortgagee,
Mortgagee shall have the right to direct Mortgagor to make an initial deposit on
account of real estate taxes and assessments, insurance premiums and common area
charges, levied against or payable in respect of the Mortgaged Property in
advance and thereafter semi-annually, each such deposit to be equal to one-half
of any such annual charges estimated in
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a reasonable manner by Mortgagee in order to accumulate with Mortgagee
sufficient funds to pay such taxes, assessments, insurance premiums and charges.
SECTION 1.04. Payment of Closing Costs. Mortgagor shall pay all costs in
connection with, relating to or arising out of the preparation, execution and
recording of this Mortgage, including title company premiums and charges,
inspection costs, survey costs, recording fees and taxes, reasonable attorneys',
engineers', appraisers' and consultants' fees and disbursements and all other
similar reasonable expenses of every kind.
SECTION 1.05. Alterations and Waste; Plans. (a) Except as may be permitted
by the Credit Agreement, no Improvements will be materially altered or
demolished or removed in whole or in part by Mortgagor. Mortgagor will not erect
any additions to the existing Improvements or other structures on the Premises
which will materially interfere with the operation conducted thereon on the date
hereof, without the written consent of Mortgagee. Mortgagor will not commit any
waste on the Mortgaged Property or make any alteration to, or change in the use
of, the Mortgaged Property that will diminish the utility thereof for the
operation of the business except as may be permitted under the Credit Agreement
or materially increase any ordinary fire or other hazard arising out of
construction or operation, but in no event shall any such alteration or change
be contrary to the terms of any insurance policy required to be kept pursuant to
Section 1.06. Mortgagor will maintain and operate the Improvements in good
repair, working order and condition, reasonable wear and tear excepted.
(b) To the extent the same exist on the date hereof or are obtained in
connection with future permitted alterations, Mortgagor shall maintain a
complete set of final plans, specifications, blueprints and drawings for the
Mortgaged Property either at the Mortgaged Property or in a particular office at
the headquarters of Mortgagor to which Mortgagee shall have access upon
reasonable advance notice and at reasonable times.
SECTION 1.06. Insurance. Mortgagor will keep or cause to be kept the
Improvements insured against such risks, and in the manner, required by Section
5.02 of the Credit Agreement.
SECTION 1.07. To Comply with Laws.
(a) The Mortgagor, at its own expense, will promptly cure all material
violations of law affecting the Mortgaged Property and the use and operation
thereof and will comply with, or cause to be complied with, in all material
respects all present and future legal requirements, all to the extent required
by the Credit Agreement.
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(b) The Mortgagor will use and permit the use of the Mortgaged Property
only in accordance with any applicable licenses and permits issued by
governmental authorities, all to the extent required by the Credit Agreement.
(c) The Mortgagor will procure, pay for and maintain all material permits,
licenses and other authorizations required to be procured and/or maintained by
the owners and/or operators of the Mortgaged Property for any use of the
Mortgaged Property, or any part thereof, then being made and for the lawful and
proper operation and maintenance thereof, all to the extent required by the
Credit Agreement.
SECTION 1.08. Restrictions on Transfers and Encumbrances. Except as
permitted by the Credit Agreement, Mortgagor shall not directly or indirectly
sell, convey, alienate, assign, lease, sublease, license, mortgage, pledge,
encumber or otherwise transfer, create, consent to or suffer the creation of any
lien, charges or any form of encumbrance upon any interest in or any part of the
Mortgaged Property, or be divested of its title to the Mortgaged Property or any
interest therein in any manner or way, whether voluntarily or involuntarily
(other than resulting from a condemnation), or engage in any common,
cooperative, joint, time-sharing or other congregate ownership of all or part
thereof; provided, however, that Mortgagor may in the ordinary course of
business within reasonable commercial standards, enter into easement or covenant
agreements that relate to and/or benefit the operation of the Mortgaged Property
and that do not materially or adversely affect the use and operation of the same
(except for customary utility easements that service the Mortgaged Property,
which are permitted).
SECTION 1.09. Filing and Recording. Mortgagor will cause this Mortgage, any
other security instrument creating a security interest in or evidencing the lien
hereof upon the Mortgaged Property and each instrument of further assurance to
be filed, registered or recorded in such manner and in such places as may be
required by any present or future law in order to publish notice of and fully to
protect the lien hereof upon, and the security interest of Mortgagee in, the
Mortgaged Property. Mortgagor will pay all filing, registration or recording
fees, and all reasonable expenses incidental to the execution and acknowledgment
of this Mortgage, any mortgage supplemental hereto, and any instrument of
further assurance and all Federal, state, county and municipal recording,
documentary or intangible taxes and other taxes, duties, imposts, assessments
and charges arising out of or in connection with the execution, delivery and
recording of this Mortgage, any mortgage supplemental hereto, or any instrument
of further assurance.
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SECTION 1.10. Further Assurances. Upon demand by Mortgagee, Mortgagor will,
at the cost of Mortgagor and without expense to Mortgagee, do, execute,
acknowledge and deliver all such further acts, deeds, conveyances, mortgages,
assignments, notices of assignment, transfers and assurances as Mortgagee shall
from time to time reasonably require for the better assuring, conveying,
assigning, transferring and confirming unto Mortgagee the property and rights
hereby conveyed or assigned or intended now or hereafter so to be, or which
Mortgagor may be or may hereafter become bound to convey or assign to Mortgagee,
or for carrying out the intention or facilitating the performance of the terms
of this Mortgage, or for filing, registering or recording this Mortgage.
SECTION 1.11. Additions to Mortgaged Property. All right, title and
interest of Mortgagor in and to all extensions, improvements, betterments,
renewals, substitutes and replacements of, and all additions and appurtenances
to, the Mortgaged Property hereafter acquired by or released to Mortgagor or
constructed, assembled or placed by Mortgagor upon the Premises or the
Improvements, and all conversions of the security constituted thereby,
immediately upon such acquisition, release, construction, assembling, placement
or conversion, as the case may be, and in each such case without any further
mortgage, conveyance, assignment or other act by Mortgagor, shall become subject
to the lien and security interest of this Mortgage as fully and completely and
with the same effect as though now owned by Mortgagor and specifically described
in the grant of the Mortgaged Property above, but at any and all times Mortgagor
will execute and deliver to Mortgagee any and all such further assurances,
mortgages, conveyances or assignments thereof as Mortgagee may reasonably
require for the purpose of expressly and specifically subjecting the same to the
lien and security interest of this Mortgage.
SECTION 1.12. No Claims Against Mortgagee. Nothing contained in this
Mortgage shall constitute any consent or request by Mortgagee, express or
implied, for the performance of any labor or services or the furnishing of any
materials or other property in respect of the Mortgaged Property or any part
thereof, nor as giving Mortgagor any right, power or authority to contract for
or permit the performance of any labor or services or the furnishing of any
materials or other property in such fashion as would permit the making of any
claim against Mortgagee in respect thereof.
ARTICLE II
Leases; Assignment As Further Security, Etc.
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SECTION 2.01. Assignment of Leases, Rents, Issues and Profits. As further
security for the payment and performance of the Obligations secured hereby, the
Mortgagor hereby presently, irrevocably, absolutely and unconditionally
transfers, assigns and sets over unto the Mortgagee all leases, if any, now or
hereafter entered into by Mortgagor with respect to all or any part of the
Mortgaged Property, and all renewals, extensions, subleases or assignments
thereof, and all other occupancy agreements (written or oral), by concession,
license or otherwise (individually, a "Lease" and collectively, the "Leases"),
together with all of Mortgagor's right, title and interest in and to all of the
following (collectively, the "Rents"): the rents, income, receipts, revenues,
issues and profits arising therefrom, such assignment of Rents to be absolute
and not only collateral, subject to the license to collect, use and enjoy such
Rents granted pursuant to Section 2.02(a) hereof. This assignment shall
automatically terminate upon the release of the lien of this Mortgage.
SECTION 2.02. Entry Upon Default.
(a) So long as no Event of Default shall have occurred and be continuing,
the Mortgagor shall have the license to collect (but not more than one month in
advance (except for any security deposit)) all of the Rents and other payments,
if any, from the Leases and from the Mortgaged Property generally and to use and
enjoy the same in the manner provided herein.
(b) If an Event of Default shall have occurred and be continuing, after the
expiration of the applicable cure period, if any, in addition to its rights and
remedies set forth in Article IV, the Mortgagee may (if permitted by applicable
law) as attorney-in-fact of the Mortgagor, make, enforce, or modify any of the
Leases; obtain tenants for and evict tenants from the Mortgaged Property;
demand, fix and modify the Rents from the Mortgaged Property; institute all
legal proceedings (including summary proceedings) for collection of all Rents;
obtain possession of the Mortgaged Property or any part thereof, or enforce any
other rights theretofore exercisable by the Mortgagor; do any and all other acts
which the Mortgagee deems proper to protect the security hereof; and, with or
without taking possession of the Mortgaged Property, in the Mortgagor's own
name, sue for or otherwise collect and receive all Rents, including those past
due and unpaid, and apply the same, less the reasonable costs and expenses of
operation and collection, including reasonable attorneys' fees, to the
Obligations secured hereby, whether then matured or not, until the same shall
have been paid in full; provided, however, that any balance remaining after the
indebtedness secured hereby shall have been paid in full shall be turned over to
the Mortgagor or such other person as may lawfully be entitled thereto. Neither
the entry upon and taking possession of the Mortgaged Property, nor the
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collection and application of the Rents or other charges thereof as aforesaid,
nor any other action taken by the Mortgagee in connection therewith, shall cure
or waive any default hereunder or waive or modify any notice thereof or notice
of acceleration of the Obligations theretofore given by the Mortgagee.
(c) If an Event of Default shall have occurred and be continuing, notice in
writing by the Mortgagee to the tenants under the Leases advising them that the
Mortgagor has defaulted hereunder and requesting that all future Rents under the
Leases be made to the Mortgagee (or its agent) shall be construed as conclusive
authority to such tenants that such payments are to be made to the Mortgagee (or
its agent). Such tenants shall be fully protected in making such payments to the
Mortgagee (or its agent); and the Mortgagor hereby irrevocably constitutes and
appoints the Mortgagee the attorney-in-fact and agent of the Mortgagor, coupled
with an interest, for the purpose of endorsing the consent of the Mortgagor on
any such notice and for taking any actions provided in subsection 2.02(b).
(d) Upon the delivery of a written notice from the Mortgagee to the
Mortgagor revoking the license granted in Section 2.02(a) hereof and invoking
the Mortgagee's right to function as lessor under all of the Leases and to
collect all of the Rents thereunder, constructive possession of the Mortgaged
Property shall be vested in the Mortgagee, and the assignment of the Leases and
the Rents contained in Section 2.01 hereof shall be activated and perfected.
Notwithstanding the foregoing, such assignment shall also be activated and
perfected upon the Mortgagee's exercising, if an Event of Default shall have
occurred and be continuing, any of the following remedies pursuant to this
Mortgage:
(i) taking actual possession of the Mortgaged Property;
(ii) moving or applying for the appointment of a receiver;
(iii) filing or commencing an action to foreclose this Mortgage; or
(iv) collecting the Rents directly from the tenants under the Leases.
SECTION 2.03. No Mortgagee-In-Possession. It is understood and agreed that
neither the foregoing assignment of Leases and rents, income, receipts, issues
and profits to the Mortgagee nor the Mortgagee's exercise of any of its rights
and remedies under this Article II shall be deemed to make the Mortgagee a
"mortgagee-in-possession" or otherwise responsible or liable in any manner
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with respect to the Mortgaged Property or the use, occupancy, enjoyment or
operation of any portion thereof, unless and until the Mortgagee, in person or
by agent, assumes actual possession thereof, nor shall appointment of a receiver
for the Mortgaged Property by any court at the request of the Mortgagee or by
agreement with the Mortgagor or the entering into possession of the Mortgaged
Property or any part thereof by such receiver be deemed to make the Mortgagee a
"mortgagee-in-possession" or otherwise responsible or liable in any manner with
respect to the Mortgaged Property or the use, occupancy, enjoyment or operation
of any portion thereof.
SECTION 2.04. The Mortgagor's Covenants Regarding Leases.
(a) The Mortgagor will use commercially reasonable efforts to enforce the
terms, covenants and conditions to be performed by all tenants and other parties
to any Lease or other agreement pertaining to the Mortgaged Property and will
not, without the prior written consent of the Mortgagee, receive or collect rent
from any tenant for a period of more than one month in advance.
(b) If requested by the Mortgagee, at any reasonable time, and from time to
time (but not more often than once each calendar year), on written notice from
the Mortgagee, the Mortgagor shall deliver within 30 days to the Mortgagee a
schedule of all Leases then in effect, which schedule shall include the
following: (a) the name of the tenant; (b) a description of the leased space in
form reasonably satisfactory to the Mortgagee, including but not limited to the
approximate number of square feet so leased and the type of activity performed
under such lease; (c) the rental rate, including escalations, if any; (d) the
term of the Lease; and (e) such other information as the Mortgagee may
reasonably request. If requested by the Mortgagee (but not more than once each
year), the Mortgagor shall also deliver photocopies of all Leases accompanied by
the certificate of the Mortgagor that such copies are true, complete and
accurate to the best of its knowledge.
(c) In the event of enforcement by the Mortgagee of the remedies provided
for by law or by this Mortgage, each tenant shall, at the option of the
Mortgagee, attorn to any Person succeeding to the interest of the Mortgagor as a
result of such enforcement and shall recognize such successor in interest as
landlord (or sub-landlord, as the case may be) under such Lease without change
in the terms or other provision thereof (or with respect to Leases in effect as
of the date hereof the Mortgagor shall use its best efforts to cause the tenants
thereunder to so attorn and recognize such successor); provided, however, that
such successor shall not be bound by any payment of rent or additional rent for
more than one month in advance (other than any security deposit received by the
Mortgagor, possession of which was actually
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transferred to such successor) or any amendment or modification of any such
Lease made without the Mortgagee's consent or that of such successor in
interest. Each such tenant shall, upon request of such successor in interest,
execute and deliver instrument(s) confirming such attornment.
(d) The Mortgagee, at its option, is authorized to foreclose or cause the
foreclosure of this Mortgage in accordance with the provisions of Article IV
hereof, such foreclosure to be subject to the rights of any tenants, and the
failure to make any such tenants parties defendant in any such foreclosure
proceedings and to foreclose their rights will not be, nor be asserted by the
Mortgagor to be, a defense to any proceedings instituted by the Mortgagee to
collect the sums secured hereby or to collect any deficiency remaining unpaid
after the foreclosure sale of the Mortgaged Property.
ARTICLE III
Security Agreement Under the Uniform Commercial Code
SECTION 3.01. Security Agreement. It is the intent of the parties hereto
that this Mortgage shall constitute a Security Agreement within the meaning of
the Uniform Commercial Code of the State (the "Code") and the Mortgagor hereby
transfers, assigns, delivers and grants unto the Mortgagee a security interest
in, to and with respect to (a) the leases and rents assigned by the Mortgagor to
the Mortgagee hereunder; (b) so much of the Equipment as is considered or as
shall be determined to be personal property or "fixtures" (as defined in the
Code), together with all replacements thereof, substitutions therefor or
additions thereto; (c) all casualty insurance policies required to be maintained
by Mortgagor hereunder, together with all general intangibles, contract rights
and accounts arising therefrom; (d) all proceeds in any condemnation or recovery
event, together with all general intangibles, contract rights and accounts
arising therefrom; (e) all cash and non-cash proceeds of the above-mentioned
items; and (f) all right, title and interest in and to so much of the remainder
of the Mortgaged Property as is considered or shall be determined to be personal
property other than records, documents and other items owned by customers of the
Mortgagor and stored on the Mortgaged Property (said property described in
clauses (a) through (f) above being sometimes hereinafter referred to as the
"Collateral"), and the Mortgagor further agrees that a security interest shall
attach thereto for the benefit of the Mortgagee to secure the Obligations. Such
security interest shall extend to all collateral of the kind which is the
subject of this Article III which the Mortgagor may acquire at any time during
the continuation of this Mortgage. Upon
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the occurrence of and during the continuance of an Event of Default, after the
expiration of the applicable cure period, if any, the Mortgagee may elect to
treat the fixtures constituting a part of the Mortgaged Property as either real
property collateral or Collateral and then proceed to exercise such rights as
apply to such type of collateral. The Mortgagor hereby authorizes the Mortgagee
to file financing and continuation statements with respect to the Collateral
without the signature of the Mortgagor, if same is lawful, otherwise the
Mortgagor agrees to execute such financing and continuation statements as the
Mortgagee may reasonably request. If there shall exist and be continuing an
Event of Default under this Mortgage, the Mortgagee, pursuant to the appropriate
provisions of the Code and to the extent permitted by applicable law, shall have
all remedies available to it under the Code and shall have the option of
proceeding as to both real and personal property in accordance with its rights
and remedies in respect of the real property, in which event the default
provisions of the Code shall not apply. Upon the occurrence and during the
continuance of any Event of Default, the Mortgagee will have all rights and
remedies granted by applicable law, and particularly by the Code, including,
without limitation, the right to take possession of all personal property
constituting a part of the Mortgaged Property, and for this purpose the
Mortgagee may enter upon any premises which any or all of such personal property
is situated and take possession of and operate such personal property (or any
portion thereof) or remove it therefrom. The Mortgagee may require the Mortgagor
to assemble such personal property and make it available to the Mortgagee at a
place to be designated by the Mortgagee which is reasonably convenient to all
parties. Unless such personal property is perishable or threatens to materially
decline speedily in value, the Mortgagee will give the Mortgagor reasonable
notice of the time and place of any public sale or of the time after which any
private sale or other disposition of such Collateral is to be made. This
requirement of sending reasonable notice will be met, and the Mortgagor and the
Mortgagee acknowledge that such notice will be commercially reasonable within
the meaning of the Code, if the notice is given to the Mortgagor as herein
provided at least ten (10) days before the time of the sale or disposition. The
reasonable expenses of retaking, holding, preparing for sale, selling and the
like incurred by the Mortgagee shall be assessed against the Mortgagor and shall
include, but not be limited to the reasonable legal expenses incurred by the
Mortgagee. The Mortgagor agrees that it will not remove or permit to be removed
from the Mortgaged Property any of the Collateral except as permitted by the
Security Agreement. All replacements, renewals, substitutions and additions to
the Collateral shall be and become immediately subject to the security interest
of this Mortgage and the provisions of this Article III. The Mortgagor warrants
and represents that the Collateral now is free and clear of all liens and
encumbrances or security interests, other than
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Permitted Encumbrances, and that all replacements of the Collateral,
substitutions therefor or additions thereto, unless the Mortgagee otherwise
consents, will be, free and clear of liens, encumbrances or security interests
of others created after the date hereof, except for Liens permitted under the
Credit Agreement.
SECTION 3.02. Assignment of Non-Code Collateral. To the extent that any of
the Collateral is not subject to the Code, the Mortgagor hereby collaterally
assigns to the Mortgagee all of the Mortgagor's right, title, and interest in
and to the Collateral to secure the Obligations secured hereby, together with
the right of set-off with regard to such Collateral (or any part thereof).
Release of the lien of this Mortgage shall automatically terminate this
assignment.
SECTION 3.03. Conflict with the Security Agreement. Notwithstanding
anything to the contrary contained herein, if any provision of this Mortgage
relating to the Collateral conflicts with the provisions of the Security
Agreement, the terms of the Security Agreement shall control.
ARTICLE IV
Defaults and Remedies
SECTION 4.01. Events of Default. Any Event of Default under the Credit
Agreement (as such term is defined therein) shall constitute an Event of Default
under this Mortgage.
SECTION 4.02. Demand for Payment. If an Event of Default shall occur and be
continuing, then, upon written demand of Mortgagee, Mortgagor will pay to
Mortgagee all amounts due hereunder and such further amount as shall be
sufficient to cover the costs and expenses of collection, including attorneys'
fees, disbursements and expenses incurred by Mortgagee and Mortgagee shall be
entitled and empowered to institute an action or proceedings at law or in equity
for the collection of the sums so due and unpaid, to prosecute any such action
or proceedings to judgment or final decree, to enforce any such judgment or
final decree against Mortgagor and to collect, in any manner provided by law,
all moneys adjudged or decreed to be payable.
SECTION 4.03. Rights To Take Possession, Operate and Apply Revenues. (a) If
an Event of Default shall occur and be continuing, Mortgagor shall, upon demand
of Mortgagee, forthwith surrender to Mortgagee actual possession of the
Mortgaged Property and, if and to the extent not prohibited by applicable law,
Mortgagee itself, or by such officers or agents as it may appoint, may then
enter and take possession of all the Mortgaged Property
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without the appointment of a receiver or an application therefor, exclude
Mortgagor and its agents and employees wholly therefrom, and have access to the
books, papers and accounts of Mortgagor.
(b) If Mortgagor shall for any reason fail to surrender or deliver the
Mortgaged Property or any part thereof after such demand by Mortgagee, Mortgagee
may to the extent not prohibited by applicable law, obtain a judgment or decree
conferring upon Mortgagee the right to immediate possession or requiring
Mortgagor to deliver immediate possession of the Mortgaged Property to
Mortgagee, to the entry of which judgment or decree Mortgagor hereby
specifically consents. Mortgagor will pay to Mortgagee, upon demand, all
reasonable expenses of obtaining such judgment or decree, including reasonable
compensation to Mortgagee's attorneys and agents with interest thereon at the
Default Interest Rate; and all such expenses and compensation shall, until paid,
be secured by this Mortgage.
(c) Upon every such entry or taking of possession, Mortgagee may, to the
extent not prohibited by applicable law, hold, store, use, operate, manage and
control the Mortgaged Property, conduct the business thereof and, from time to
time, (i) make all necessary and proper maintenance, repairs, renewals,
replacements, additions, betterments and improvements thereto and thereon, (ii)
purchase or otherwise acquire additional fixtures, personalty and other
property, (iii) insure or keep the Mortgaged Property insured, (iv) manage and
operate the Mortgaged Property and exercise all the rights and powers of
Mortgagor to the same extent as Mortgagor could in its own name or otherwise
with respect to the same, or (v) enter into any and all agreements with respect
to the exercise by others of any of the powers herein granted Mortgagee, all as
may from time to time be directed or determined by Mortgagee to be in its best
interest and Mortgagor hereby appoints Mortgagee as its true and lawful
attorney-in-fact and agent, for Mortgagor and in its name, place and stead, in
any and all capacities, to perform any of the foregoing acts. Mortgagee may
collect and receive all the rents, issues, profits and revenues from the
Mortgaged Property, including those past due as well as those accruing
thereafter, and, after deducting (i) all expenses of taking, holding, managing
and operating the Mortgaged Property (including compensation for the services of
all persons employed for such purposes), (ii) the costs of all such maintenance,
repairs, renewals, replacements, additions, betterments, improvements, purchases
and acquisitions, (iii) the costs of insurance, (iv) such taxes, assessments and
other similar charges as Mortgagee may at its option pay, (v) other proper
charges upon the Mortgaged Property or any part thereof and (vi) the
compensation, expenses and disbursements of the attorneys and agents of
Mortgagee, Mortgagee shall apply the remainder of the moneys and proceeds so
received first to the payment of the Mortgagee for the satisfaction
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of the Obligations, and second, if there is any surplus, to Mortgagor, subject
to the entitlement of others thereto under applicable law.
(d) Whenever, before any sale of the Mortgaged Property under Section 4.06,
all Obligations that are then due shall have been paid and all Events of Default
fully cured, Mortgagee will surrender possession of the Mortgaged Property back
to Mortgagor, its successors or assigns. The same right of taking possession
shall, however, arise again if any subsequent Event of Default shall occur and
be continuing.
SECTION 4.04. Right To Cure Mortgagor's Failure to Perform. Should
Mortgagor fail in the payment, performance or observance of any term, covenant
or condition required by this Mortgage or the Credit Agreement (with respect to
the Mortgaged Property), Mortgagee may pay, perform or observe the same, and all
payments made or costs or expenses incurred by Mortgagee in connection therewith
shall be secured hereby and shall be, without demand, immediately repaid by
Mortgagor to Mortgagee with interest thereon at the Default Interest Rate.
Mortgagee shall be the judge using reasonable discretion of the necessity for
any such actions and of the amounts to be paid. Mortgagee is hereby empowered to
enter and to authorize others to enter upon the Premises or the Improvements or
any part thereof for the purpose of performing or observing any such defaulted
term, covenant or condition without having any obligation to so perform or
observe and without thereby becoming liable to Mortgagor, to any person in
possession holding under Mortgagor or to any other person.
SECTION 4.05. Right to a Receiver. If an Event of Default shall occur and
be continuing, Mortgagee, upon application to a court of competent jurisdiction,
shall be entitled as a matter of right to the appointment of a receiver to take
possession of and to operate the Mortgaged Property and to collect and apply the
Rents. The receiver shall have all of the rights and powers permitted under the
laws of the state wherein the Mortgaged Property is located. Mortgagor shall pay
to Mortgagee upon demand all reasonable expenses, including receiver's fees,
reasonable attorneys' fees and disbursements, costs and agent's compensation
incurred pursuant to the provisions of this Section 4.05; and all such expenses
shall be secured by this Mortgage and shall be, without demand, immediately
repaid by Mortgagor to Mortgagee with interest thereon at the Default Interest
rate. Any court-appointed receiver of all or any part of the Mortgaged Property,
to the extent permitted by applicable law, shall be an agent of the court
appointing such receiver and not an agent of the Mortgagee, and no acts of such
receiver shall be deemed to be acts of the Mortgagee.
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SECTION 4.06. Foreclosure and Sale. (a) If an Event of Default shall occur
and be continuing, Mortgagee may elect to sell the Mortgaged Property or any
part of the Mortgaged Property by exercise of the power of foreclosure or of
sale granted to Mortgagee by applicable law or this Mortgage. In such case,
Mortgagee may commence a civil action to foreclose this Mortgage, or it may
proceed and sell the Mortgaged Property to satisfy any Obligation. Mortgagee or
an officer appointed by a judgment of foreclosure to sell the Mortgaged
Property, may sell all or such parts of the Mortgaged Property as may be chosen
by Mortgagee at the time and place of sale fixed by it in a notice of sale,
either as a whole or in separate lots, parcels or items as Mortgagee shall deem
expedient, and in such order as it may determine, at public auction to the
highest bidder. Mortgagee or an officer appointed by a judgment of foreclosure
to sell the Mortgaged Property may postpone any foreclosure or other sale of all
or any portion of the Mortgaged Property by public announcement at such time and
place of sale, and from time to time thereafter may postpone such sale by public
announcement or subsequently noticed sale. Without further notice, Mortgagee or
an officer appointed to sell the Mortgaged Property may make such sale at the
time fixed by the last postponement, or may, in its discretion, give a new
notice of sale. Any person, including Mortgagor or Mortgagee or any designee or
affiliate thereof, may purchase at such sale.
(b) The Mortgaged Property may be sold subject to unpaid taxes and
Permitted Encumbrances, and, after deducting all costs, fees and expenses of
Mortgagee (including costs of evidence of title in connection with the sale),
Mortgagee or an officer that makes any sale shall apply the proceeds of sale in
the manner set forth in Section 2.08.
(c) Any foreclosure or other sale of less than the whole of the Mortgaged
Property or any defective or irregular sale made hereunder shall not exhaust the
power of foreclosure or of sale provided for herein; and subsequent sales may be
made hereunder until the Obligations have been satisfied, or the entirety of the
Mortgaged Property has been sold.
(d) If an Event of Default shall occur and be continuing, Mortgagee may
instead of, or in addition to, exercising the rights described in Section
2.06(a) above and either with or without entry or taking possession as herein
permitted, proceed by a suit or suits in law or in equity or by any other
appropriate proceeding or remedy (i) to specifically enforce payment of some or
all of the Obligations, or the performance of any term, covenant, condition or
agreement of this Mortgage or any other Loan Document or any other right, or
(ii) to pursue any other remedy available to Mortgagee, all as Mortgagee shall
determine most effectual for such purposes.
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SECTION 4.07. Other Remedies. In connection with a sale of the Mortgaged
Property and the application of the proceeds of sale as provided in Section
2.08, Mortgagee shall be entitled to enforce payment of and to receive up to the
principal amount of the Obligations, plus all other charges, payments and costs
due under this Mortgage, and to recover a deficiency judgment for any portion of
the aggregate principal amount of the Obligations remaining unpaid, with
interest.
SECTION 4.08. Application of Sale Proceeds and Rents. After any foreclosure
sale of all or any of the Mortgaged Property, Mortgagee shall receive the
proceeds of sale, no purchaser shall be required to see to the application of
the proceeds and Mortgagee shall apply the proceeds of the sale together with
any Rents that may have been collected and any other sums that then may be held
by Mortgagee under this Mortgage as follows:
FIRST, to the payment of the costs and expenses of such sale,
including compensation to Mortgagee's attorneys and agents, and of any
judicial proceedings wherein the same may be made, and of all expenses,
liabilities and advances made or incurred by Mortgagee under this Mortgage,
together with interest at the Default Interest Rate on all advances made by
Mortgagee, including all taxes or assessments (except any taxes,
assessments or other charges subject to which the Mortgaged Property shall
have been sold) and the cost of removing any Permitted Encumbrance (except
any Permitted Encumbrance subject to which the Mortgaged Property was
sold);
SECOND, to the Mortgagee for the distribution to the Secured Parties
for the satisfaction of the Obligations owed to the Secured Parties; and
THIRD, to the Mortgagor, its successors or assigns, or as a court of
competent jurisdiction may otherwise direct.
The Mortgagee shall have absolute discretion as to the time of application of
any such proceeds, moneys or balances in accordance with this Mortgage. Upon any
sale of the Mortgaged Property by the Mortgagee (including pursuant to a power
of sale granted by statute or under a judicial proceeding), the receipt of the
Mortgagee or of the officer making the sale shall be a sufficient discharge to
the purchaser or purchasers of the Mortgaged Property so sold and such purchaser
or purchasers shall not be obligated to see to the application of any part of
the purchase money paid over to the Mortgagee or such officer or be answerable
in any way for the misapplication thereof.
SECTION 4.09. Mortgagor as Tenant Holding Over. If Mortgagor remains in
possession of any of the Mortgaged Property after any
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foreclosure sale by Mortgagee, at Mortgagee's election Mortgagor shall be deemed
a tenant holding over and shall forthwith surrender possession to the purchaser
or purchasers at such sale or be summarily dispossessed or evicted according to
provisions of law applicable to tenants holding over.
SECTION 4.10. Waiver of Appraisement, Valuation, Stay, Extension and
Redemption Laws. Mortgagor waives, to the extent not prohibited by law, (i) the
benefit of all laws now existing or that hereafter may be enacted providing for
any appraisement of any portion of the Mortgaged Property, (ii) the benefit of
all laws now existing or that may be hereafter enacted in any way extending the
time for the enforcement or the collection of amounts due under any of the
Obligations or creating or extending a period of redemption from any sale made
in collecting said debt or any other amounts due Mortgagee, (iii) any right to
at any time insist upon, plead, claim or take the benefit or advantage of any
law now or hereafter in force providing for any appraisement, homestead
exemption, valuation, stay, statute of limitations, extension or redemption, or
sale of the Mortgaged Property as separate tracts, units or estates or as a
single parcel in the event of foreclosure or notice of deficiency, and (iv) all
rights of redemption, valuation, appraisement, stay of execution, notice of
election to mature or declare due the whole of or each of the Obligations and
marshalling in the event of foreclosure of this Mortgage.
SECTION 4.11. Discontinuance of Proceedings. In case Mortgagee shall
proceed to enforce any right, power or remedy under this Mortgage by
foreclosure, entry or otherwise, and such proceedings shall be discontinued or
abandoned for any reason, or shall be determined adversely to Mortgagee, then
and in every such case Mortgagor and Mortgagee shall be restored to their former
positions and rights hereunder, and all rights, powers and remedies of Mortgagee
shall continue as if no such proceeding had been taken.
SECTION 4.12. Suits To Protect the Mortgaged Property. Mortgagee shall have
power (a) to institute and maintain suits and proceedings to prevent any
impairment of the Mortgaged Property by any acts that may be unlawful or in
violation of this Mortgage, (b) to preserve or protect its interest in the
Mortgaged Property and (c) to restrain the enforcement of or compliance with any
legislation or other governmental enactment, rule or order that may be
unconstitutional or otherwise invalid if the enforcement of or compliance with
such enactment, rule or order would impair the security or be prejudicial to the
interest of Mortgagee hereunder.
SECTION 4.13. Filing Proofs of Claim. In case of any receivership,
insolvency, bankruptcy, reorganization, arrangement, adjustment, composition or
other proceedings affecting Mortgagor,
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Mortgagee shall, to the extent permitted by law, be entitled to file such proofs
of claim and other documents as may be necessary or advisable in order to have
the claims of Mortgagee allowed in such proceedings for the Obligations secured
by this Mortgage at the date of the institution of such proceedings and for any
interest accrued, late charges and additional interest or other amounts due or
that may become due and payable hereunder after such date.
SECTION 4.14. Possession by Mortgagee. Notwithstanding the appointment of
any receiver, liquidator or trustee of Mortgagor, any of its property or the
Mortgaged Property, Mortgagee shall be entitled, to the extent not prohibited by
law, to remain in possession and control of all parts of the Mortgaged Property
now or hereafter granted under this Mortgage to Mortgagee in accordance with the
terms hereof and applicable law.
SECTION 4.15. Waiver. (a) No delay or failure by Mortgagee to exercise any
right, power or remedy accruing upon any breach or Event of Default shall
exhaust or impair any such right, power or remedy or be construed to be a waiver
of any such breach or Event of Default or acquiescence therein; and every right,
power and remedy given by this Mortgage to Mortgagee may be exercised from time
to time and as often as may be deemed expedient by Mortgagee. No consent or
waiver by Mortgagee to or of any breach or default by Mortgagor in the
performance of the Obligations shall be deemed or construed to be a consent or
waiver to or of any other breach or Event of Default in the performance of the
same or any other Obligations by Mortgagor hereunder. No failure on the part of
Mortgagee to complain of any act or failure to act or to declare an Event of
Default, irrespective of how long such failure continues, shall constitute a
waiver by Mortgagee of its rights hereunder or impair any rights, powers or
remedies consequent on any future Event of Default by Mortgagor.
(b) Even if Mortgagee (i) grants some forbearance or an extension of time
for the payment of any sums secured hereby, (ii) takes other or additional
security for the payment of any sums secured hereby, (iii) waives or does not
exercise some right granted herein or under the Loan Documents, (iv) releases a
part of the Mortgaged Property from this Mortgage, (v) agrees to change some of
the terms, covenants, conditions or agreements of any of the Loan Documents,
(vi) consents to the filing of a map, plat or replat affecting the Premises,
(vii) consents to the granting of an easement or other right affecting the
Premises or (viii) makes or consents to an agreement subordinating Mortgagee's
lien on the Mortgaged Property hereunder; no such act or omission shall preclude
Mortgagee from exercising any other right, power or privilege herein granted or
intended to be granted in the event of any breach or Event of Default then made
or of any subsequent default;
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nor, except as otherwise expressly provided in an instrument executed by
Mortgagee, shall this Mortgage be altered thereby. In the event of the sale or
transfer by operation of law or otherwise of all or part of the Mortgaged
Property, Mortgagee is hereby authorized and empowered to deal with any vendee
or transferee with reference to the Mortgaged Property secured hereby, or with
reference to any of the terms, covenants, conditions or agreements hereof, as
fully and to the same extent as it might deal with the original parties hereto
and without in any way releasing or discharging any liabilities, obligations or
undertakings.
SECTION 4.16. Indemnification by Mortgagor. (i) The Mortgagor shall pay to
Mortgagee upon demand all reasonable costs, charges and expenses (including,
without limitation, reasonable attorneys' fees) incurred or paid at any time by
the Mortgagee because of the failure of the Mortgagor to perform, comply with or
abide by any of the stipulations, agreements, conditions, or covenants contained
herein or in the Obligations secured hereby, together with interest thereon at
the Default Interest Rate; and (ii) if any action or proceeding be commenced in
which the Mortgagee, any Secured Parties or any of their respective successors,
assigns, employees, agents and servants (each, an "Indemnitee", collectively,
the "Indemnitees") is made a party, or in which it becomes necessary to defend
or uphold the lien of this Mortgage, or the construction, operation or occupancy
of the Improvements by the Mortgagor or anyone else, the Mortgagor shall
indemnify, defend and hold such Indemnitees harmless from all liability by
reason of said litigation, including reasonable attorneys' fees and expenses
incurred by such Indemnitees in any such litigation, whether or not any such
litigation is prosecuted to judgment and all reasonable sums paid by the
Mortgagee for the expense of any litigation to prosecute or defend the title,
rights and lien created by this Mortgage (including, without limitation,
reasonable attorneys' fees) shall be paid by the Mortgagor to the Mortgagee on
demand, together with interest thereon at the Default Interest Rate from the
date each such payment is made, and all such sums and the interest thereon shall
be a lien on the Mortgaged Property, prior to any right, title or interest in or
claim upon the Mortgaged Property attaching or accruing subsequent to the lien
of this Mortgage, and shall be deemed to be secured by this Mortgage. In any
action or proceeding to foreclose this Mortgage, or to recover or collect the
Obligations, the provisions of law respecting the recovery of costs,
disbursements and allowances, if inconsistent with the foregoing, shall prevail
unaffected by this covenant; provided, however, that the Mortgagor shall not be
responsible for any such liability resulting from the Indemnitees' gross
negligence or willful misconduct.
SECTION 4.17. Remedies Cumulative. No right, power or remedy conferred upon
or reserved to Mortgagee by this Mortgage is
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intended to be exclusive of any other right, power or remedy, and each and every
such right, power and remedy shall be cumulative and concurrent and in addition
to any other right, power and remedy given hereunder or now or hereafter
existing at law or in equity or by statute.
SECTION 4.18. No Merger. It is the intention of the parties hereto that if
the Mortgagee shall at any time hereafter acquire title to all or any portion of
the Mortgaged Property, then, and until the indebtedness secured hereby has been
paid in full, the interest of the Mortgagee hereunder and the lien of this
Mortgage shall not merge or become merged in or with the estate and interest of
the Mortgagee as the holder and owner of title to all or any portion of the
Mortgaged Property and that, until such payment, the estate of the Mortgagee in
the Mortgaged Property and the lien of this Mortgage and the interest of the
Mortgagee hereunder shall continue in full force and effect to the same extent
as if the Mortgagee had not acquired title to all or any portion of the
Mortgaged Property.
ARTICLE V
Miscellaneous
SECTION 5.01. Partial Invalidity. In the event any one or more of the
provisions contained in this Mortgage shall for any reason be held to be
invalid, illegal or unenforceable in any respect, such validity, illegality or
unenforceability shall, at the option of Mortgagee, not affect any other
provision of this Mortgage, and this Mortgage shall be construed as if such
invalid, illegal or unenforceable provision had never been contained herein or
therein.
SECTION 5.02. Notices. All notices and communications hereunder shall
(except as otherwise expressly permitted herein) be in writing and given as
provided in Section 9.01 of the Credit Agreement.
SECTION 5.03. Successors and Assigns. All of the grants, covenants, terms,
provisions and conditions herein shall run with the Premises and the
Improvements and shall apply to, bind and inure to, the benefit of the permitted
successors and assigns of Mortgagor and the successors and assigns of Mortgagee.
SECTION 5.04. Satisfaction and Cancellation. (a) The conveyance to
Mortgagee of the Mortgaged Property as security, created and consummated by this
Mortgage shall be null and void when all the Obligations have been indefeasibly
paid in full, the Lenders have no further commitment to lend, the Revolving L/C
Exposure has been reduced to zero and the Fronting Bank has no
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further commitment to issue Letters of Credit under the Credit Agreement.
(b) Upon a sale or financing by the Mortgagor of all or any portion of the
Mortgaged Property that is permitted under the Credit Agreement and the
application of the Net Proceeds of such sale or financing in accordance with the
Credit agreement, the lien of this Mortgage shall be released from the
applicable portion of the Mortgaged Property. The Mortgagor shall give the
Mortgagee reasonable written notice of any sale or financing of the Mortgaged
Property prior to the closing of such sale or financing.
(c) In connection with any termination or release pursuant to paragraph
(a), the Mortgage shall be marked "satisfied" by the Mortgagee, and this
Mortgage shall be canceled of record at the request and at the expense of the
Mortgagor. Mortgagee shall execute any documents reasonably requested by
Mortgagor to accomplish the foregoing or to accomplish any release contemplated
by paragraph (a) and Mortgagor will pay all costs and expenses, including
reasonable attorneys' fees, disbursements and other charges, incurred by
Mortgagee in connection with the preparation and execution of such documents.
SECTION 5.05. Additional Sums Payable by the Mortgagor. All sums which, by
the terms of this Mortgage, are payable by the Mortgagor to the Mortgagee shall,
together with the interest thereon provided for herein, be secured by this
Mortgage and added to and deemed part of the Obligations secured hereby whether
or not the provision which obligates the Mortgagor to make any such payment to
the Mortgagee specifically so states.
SECTION 5.06. Subrogation. It is understood and agreed that any proceeds of
the Obligations, to the extent that the same are utilized to pay or renew or
extend any indebtedness of the Mortgagor, or any other indebtedness, or take up
or release any outstanding liens against the Mortgaged Property, or any portion
thereof, have been advanced by the Mortgagee at the Mortgagor's request. The
Mortgagee shall be subrogated to any and all rights and liens owned or claimed
by any owner or mortgagee of said outstanding rights and liens, however remote,
regardless of whether said rights and liens are acquired by assignment or are
released by the Mortgagee thereof upon payment.
SECTION 5.07. Usury. Notwithstanding anything contained in this Mortgage to
the contrary, the Mortgagee shall never be deemed to have contracted for or be
entitled to receive, collect or apply as interest on the Obligations secured
hereby, any amount in excess of the amount permitted and calculated at the
highest lawful rate, and, in the event the Mortgagee ever receives, collects or
applies as interest any amount in excess of the amount permitted and
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calculated at the highest lawful rate, such amount which would be excessive
interest shall be applied to the reduction of the unpaid principal balance of
the Obligations secured hereby, and, if the principal balance of the Obligations
secured hereby is paid in full, any remaining excess shall forthwith be promptly
paid to the Mortgagor, together with all interest earned thereon. In determining
whether or not the interest paid or payable under any specific contingency
exceeds the amount of interest permitted and calculated at the highest lawful
rate, the Mortgagor and the Mortgagee shall, to the maximum extent permitted
under applicable law, (i) characterize any non-principal payment (other than
payments which are expressly designated as interest payments hereunder) as an
expense, fee, or premium, rather than as interest, (ii) exclude voluntary
prepayments and the effect thereof, and (iii) spread the total amount of
interest throughout the entire contemplated term of the indebtedness secured
hereby.
SECTION 5.08. Counterparts. This Mortgage may be simultaneously executed in
a number of identical counterparts, each of which, for all purposes, shall be
deemed an original.
SECTION 5.09. Entire Agreement. This Mortgage along with the Loan Documents
embodies the entire agreement and understanding between the parties relating to
the subject matter hereof.
SECTION 5.10. Fixture Filing. This Mortgage shall also constitute a
"fixture filing" for purposes of the Code. Portions of the Collateral are or may
become fixtures.
SECTION 5.11. Financing Statement. The Mortgagee shall have the right at
any time to file this Mortgage as a financing statement, but the failure to do
so shall not impair the validity and enforceability of this Mortgage in any
respect whatsoever. A photographic or other reproduction of this Mortgage, or
any financing statement relating to this Mortgage, shall be sufficient as a
financing statement.
SECTION 5.12. Additional Collateral. (a) The Mortgagor acknowledges and
agrees that the obligations are secured by the Mortgaged Property and various
other collateral including, without limitation, at the time of execution of this
Mortgage, certain personal property of the Mortgagor and other parties described
in the Loan Documents. The Mortgagor specifically acknowledges and agrees that
the Mortgaged Property, in and of itself, if foreclosed or realized upon would
not be sufficient to satisfy the outstanding amount of the Obligations.
Accordingly, the Mortgagor acknowledges that it is in the Mortgagor's
contemplation that the other collateral pledged to secure the Obligations may be
pursued by the Mortgagee in separate proceedings in the various states and
counties where such collateral may be located and additionally that
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the Mortgagor and other parties liable for payment of the Obligations will
remain liable for any deficiency judgements in addition to any amounts the
Mortgagee may realize on sales of other property or any other collateral given
as security for the Obligations. Specifically, and without limitation of the
foregoing, it is agreed that it is the intent of the parties hereto that to the
extent permitted by law in the event of a foreclosure of this Mortgage, that the
Indebtedness evidencing the Obligations shall not be deemed merged into any
judgment of foreclosure, but shall rather remain outstanding.
(b) The Mortgagee may resort to any other security held by the Mortgagee
for the payment of the Obligations in such order and manner as the Mortgagee may
elect.
(c) Notwithstanding anything contained herein to the contrary, the
Mortgagee shall be under no duty to the Mortgagor or others, including, without
limitation, the holder of any junior, senior or subordinate mortgage on the
Property or any part thereof or on any other security held by the Mortgagee, to
exercise or exhaust all or any of the rights, powers and remedies available to
the Mortgagee.
SECTION 5.13. Recordation. Mortgagee accepts this Mortgage when this
Mortgage, duly executed and acknowledged, is made of public record as provided
by law.
SECTION 5.14. Conflict with the Credit Agreement. Notwithstanding anything
to the contrary contained herein, if any provision of this Mortgage conflicts
with the provisions of the Credit Agreement, the terms of the Credit Agreement
shall control.
SECTION 5.15. Definitions. As used in this Mortgage, the singular shall
include the plural as the context requires and the following words and phrases
shall have the following meanings: (a) "including" shall mean "including but not
limited to"; (b) "provisions" shall mean "provisions, terms, covenants and/or
conditions"; (c) "lien" shall mean "lien, charge, encumbrance, security
interest, mortgage or deed of trust"; (d) "obligation" shall mean "obligation,
duty, covenant and/or condition"; and (e) "any of the Mortgaged Property" shall
mean "the Mortgaged Property or any part thereof or interest therein". Any act
that Mortgagee is permitted to perform hereunder may be performed at any time
and from time to time by Mortgagee or any person or entity designated by
Mortgagee. Any act that is prohibited to Mortgagor hereunder is also prohibited
to all lessees of any of the Mortgaged Property. Each appointment of Mortgagee
as attorney-in-fact for Mortgagor under the Mortgage is irrevocable, with power
of substitution and coupled with an interest. Subject to the applicable
provisions hereof, Mortgagee has the right to refuse to
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grant its consent, approval or acceptance or to indicate its satisfaction, in
its sole discretion, whenever such consent, approval, acceptance or satisfaction
is required hereunder.
SECTION 5.16. Multisite Real Estate Transaction. Mortgagor acknowledges
that this Mortgage is one of a number of Other Mortgages and Security Documents
that secure the Obligations. Mortgagor agrees that the lien of this Mortgage
shall be absolute and unconditional and shall not in any manner be affected or
impaired by any acts or omissions whatsoever of Mortgagee and without limiting
the generality of the foregoing, the lien hereof shall not be impaired by any
acceptance by the Mortgagee of any security for or guarantees of any of the
Obligations hereby secured, or by any failure, neglect or omission on the part
of Mortgagee to realize upon or protect any Obligation or indebtedness hereby
secured or any collateral security therefor including the Other Mortgages and
other Security Documents. The lien hereof shall not in any manner be impaired or
affected by any release (except as to the property released), sale, pledge,
surrender, compromise, settlement, renewal, extension, indulgence, alteration,
changing, modification or disposition of any of the Obligations secured or of
any of the collateral security therefor, including the Other Mortgages and other
Security Documents or of any guarantee thereof, and Mortgagee may at its
discretion foreclose, exercise any power of sale, or exercise any other remedy
available to it under any or all of the Other Mortgages and other Security
Documents without first exercising or enforcing any of its rights and remedies
hereunder. Such exercise of Mortgagee's rights and remedies under any or all of
the Other Mortgages and other Security Documents shall not in any manner impair
the indebtedness hereby secured or the lien of this Mortgage and any exercise of
the rights or remedies of Mortgagee hereunder shall not impair the lien of any
of the Other Mortgages and other Security Documents or any of Mortgagee's rights
and remedies thereunder. Mortgagor specifically consents and agrees that
Mortgagee may exercise its rights and remedies hereunder and under the Other
Mortgages and other Security Documents separately or concurrently and in any
order that it may deem appropriate and waives any rights of subrogation.
ARTICLE VI
Particular Provisions
This Mortgage is subject to the following provisions relating to the
particular laws of the state wherein the Premises are located:
SECTION 6.01. Applicable Law; Certain Particular Provisions. This Mortgage
shall be governed by and construed in accordance with the internal law of the
State of New York; provided, however, that
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the provisions of this Mortgage relating to the creation, perfection and
enforcement of the lien and security interest created by this Mortgage in
respect of the Mortgaged Property and the exercise of each remedy provided
hereby, including the power of foreclosure or power of sale procedures set forth
in this Mortgage, shall be governed by and construed in accordance with the
internal law of the state where the Mortgaged Property is located, and Mortgagor
and Mortgagee agrees to submit to jurisdiction and the laying of venue for any
suit on this Mortgage in such state.
IN WITNESS WHEREOF, this Mortgage has been duly executed and delivered to
Mortgagee by Mortgagor on the date of the acknowledgment attached hereto.
WITNESSES: Mortgagor
[GRAHAM PACKAGING COMPANY,
L.P.],
a _______ limited partnership
Printed: ____________
By: ____________________________
Name: ______________________
Printed: ____________ Title: _____________________
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<PAGE>
ACKNOWLEDGMENT
STATE OF )
) ss.
COUNTY OF )
The foregoing instrument was acknowledged before me on ______________,
199_, by __________________________________, on behalf of [Graham Packaging
Company, L.P.], a ________ limited partnership.
(SEAL)
Notary Public,
County,
My commission expires:
<PAGE>
Appendix A
to Mortgage
Credit Agreement
See attachment.
<PAGE>
EXHIBIT F
PARENT GUARANTEE AGREEMENT
PARENT GUARANTEE AGREEMENT, dated as of February 2, 1998, made by GRAHAM
PACKAGING HOLDINGS COMPANY, a Pennsylvania limited partnership (the
"Guarantor"), in favor of BANKERS TRUST COMPANY, as collateral agent (in such
capacity, the "Collateral Agent") for the benefit of the Secured Parties (as
such term is defined below). Reference is made to the Credit Agreement, dated as
of February 2, 1998 (the "Credit Agreement"), among the Guarantor, Graham
Packaging Company, a Delaware limited partnership (the "Borrower"), GPC Capital
Corp. I, a Delaware corporation (the "Co-Borrower"), the Lenders (such term and
each other capitalized term used but not defined having the meaning given to it
in Section 1.01 of the Credit Agreement) from time to time party thereto,
NationsBank, N.A., as Documentation Agent, and Bankers Trust Company, as
Administrative Agent, Syndication Agent, Collateral Agent and Fronting Bank (as
used herein, the term "Credit Agreement" means the Credit Agreement described
above in this sentence as the same may be amended, modified, replaced, restated
or supplemented from time to time, and including any agreement extending the
maturity of, or restructuring the Indebtedness under such agreement or any
successor agreement) (the Lenders, the Documentation Agent, the Administrative
Agent, Syndication Agent, the Collateral Agent and the Fronting Bank are herein
called the "Bank Creditors").
W I T N E S S E T H:
WHEREAS, pursuant to the Credit Agreement, the Lenders have severally
agreed to make Loans and the Fronting Bank has agreed to issue Letters of
Credit, upon the terms and subject to the conditions set forth therein;
WHEREAS, the Borrower may at any time and from time to time enter into one
or more Interest Rate Protection Agreements with one or more Lenders or any
affiliate thereof (each such Lender or affiliate, even if the respective Lender
subsequently ceases to be a lender under the Credit Agreement for any reason,
together with such Lender's or affiliate's successors and assigns, if any,
collectively, the "Other Creditors," and together with the Bank Creditors, the
"Secured Parties");
WHEREAS, it is a condition precedent to the obligation of the Lenders to
make the Loans and the obligation of the Fronting Bank to issue Letters of
Credit that the Guarantor shall have executed and delivered this Guarantee to
the Collateral Agent for the ratable benefit of the Secured Parties; and
WHEREAS, the Guarantor is the direct and indirect holder of all of the
issued and outstanding Equity Interests of the Borrower, and it is to the
advantage of the Guarantor that the Lenders make the Loans and the Fronting Bank
issue the Letters of Credit.
NOW, THEREFORE, in consideration of the premises and to induce the
<PAGE>
Secured Parties to enter into the Credit Agreement and to induce the Lenders to
make their respective Loans and the Fronting Bank to issue its Letters of
Credit, the Guarantor hereby agrees with the Collateral Agent, for the ratable
benefit of the Secured Parties, as follows:
1. Defined Terms. (a) Unless otherwise defined herein, terms defined in the
Credit Agreement and used herein shall have the meanings given in the Credit
Agreement.
(b) "Guarantee": this Parent Guarantee Agreement, as the same may be
amended, supplemented or otherwise modified from time to time.
(c) "Obligations": shall mean (a) the unpaid principal of and premium, if
any, and interest on the Notes and all other obligations and liabilities of the
Borrower (including interest accruing at the then applicable rate provided in
the Credit Agreement after the maturity of the Loans and interest accruing at
the then applicable rate provided in the Credit Agreement after the filing of
any petition in bankruptcy, or the commencement of any insolvency,
reorganization or like proceeding, relating to the Borrower, whether or not a
claim for post-filing or post petition interest is allowed in such proceeding)
to the Bank Creditors, whether direct or indirect, absolute or contingent, due
or to become due, or now existing or hereafter incurred (including monetary
obligations incurred during the pendency of any bankruptcy, insolvency,
receivership or other similar proceeding, regardless of whether allowed or
allowable in such proceeding), which may arise under, out of or in connection
with, the Credit Agreement, this Guarantee or any other Loan Document and any
obligation of the Borrower to a Lender under any other document made, delivered
or given in connection with any of the foregoing, in each case whether on
account of principal, interest, reimbursement obligations, fees, indemnities,
costs, expenses or otherwise, including all fees and disbursements of counsel to
the Collateral Agent or to the Secured Parties that are required to be paid by
the Borrower or a Loan Party pursuant to the terms of the Credit Agreement, this
Agreement or any other Loan Document with a Lender (collectively, the "Credit
Document Obligations") and (b) all obligations and liabilities of the Borrower
to the Other Creditors now existing or hereafter incurred under, arising out of
or in connection with any Interest Rate Protection Agreement (all such
obligations and liabilities under this clause (b) being herein collectively
called the "Other Obligations").
(d) The words "hereof," "herein" and "hereunder" and words of similar
import when used in this Guarantee shall refer to this Guarantee as a whole and
not to any particular provision of this Guarantee, and section and paragraph
references are to this Guarantee unless otherwise specified. The words
"include", "includes" and including shall be deemed to be followed by the
phrase, "without limitation".
(e) The meanings given to terms defined herein shall be equally applicable
to both the singular and plural forms of such terms.
2. Guarantee. (a) The Guarantor hereby unconditionally and irrevocably
guarantees, as a primary obligor and not merely as surety, to the Collateral
Agent, for the ratable benefit of the Secured Parties and their respective
successors, indorsees, transferees and assigns, the due, punctual and complete
payment and performance by the Borrower and the other Loan Parties when and as
due, whether at the stated maturity, by acceleration, upon one or more dates set
for prepayment or otherwise, of the Obligations.
(b) The Guarantor further agrees to pay any and all reasonable expenses
(including all reasonable fees and disbursements of counsel) which may be paid
or incurred by
<PAGE>
any Secured Party in enforcing, or obtaining advice of counsel in respect of,
any rights with respect to, or collecting, any or all of the Obligations
guaranteed by the Guarantor and/or enforcing any rights with respect to, or
collecting against, the Guarantor under this Guarantee. This Guarantee shall
remain in full force and effect until all Interest Rate Protection Agreements
are terminated, the Obligations are paid in full, no Letters of Credit are
outstanding and the Commitments are terminated, notwithstanding that from time
to time prior thereto while the Commitments are in effect any Loan Party may be
free from any Obligations.
(c) The Guarantor agrees that whenever, at any time, or from time to time,
it shall make any payment to the Collateral Agent for the benefit of any Secured
Party on account of its liability hereunder, it will notify the Collateral Agent
in writing that such payment is made under this Guarantee for such purpose,
provided that the failure of the Guarantor to provide such notice shall not
preclude the application of such payment to the complete or partial satisfaction
of the Guarantor's obligations hereunder following the Guarantor's notice to the
Collateral Agent of such payment.
3. No Subrogation. Notwithstanding any payment or payments made by the
Guarantor hereunder or any setoff or application of funds of the Guarantor by
any Secured Party, the Guarantor shall not be entitled to be subrogated to any
of the rights of any Secured Party against any Loan Party or any collateral
security or guarantee or right of offset held by any Secured Party for the
payment of the Obligations, nor shall the Guarantor seek or be entitled to seek
any contribution or reimbursement from any Loan Party in respect of payments
made by the Guarantor hereunder, until all amounts owing to the Secured Parties
by any Loan Party on account of the Obligations are paid in full, no Letters of
Credit are outstanding, the Commitments are terminated and all Interest Rate
Protection Agreements are terminated. If any amount shall be paid to the
Guarantor on account of such subrogation rights at any time when all of the
Obligations shall not have been paid in full, Letters of Credit are outstanding,
the Commitments shall not have been terminated or any Interest Rate Protection
Agreements shall not have been terminated, such amount shall be held by the
Guarantor in trust for the Secured Parties, segregated from other funds of the
Guarantor, and shall forthwith upon receipt by the Guarantor, be turned over to
the Collateral Agent in the exact form received by the Guarantor (duly endorsed
by the Guarantor to the Collateral Agent, if required), to be applied against
the Obligations, whether matured or unmatured, at such time and in such order as
the Collateral Agent may determine.
4. Amendments, etc. with respect to the Obligations; Waiver of Rights. (a)
The Guarantor shall remain obligated hereunder notwithstanding that, without any
reservation of rights against the Guarantor, and without notice to or further
assent by the Guarantor, any demand for payment of any of the Obligations made
by any Secured Party may be rescinded by such Secured Party, and any of the
Obligations continued, and the Obligations, or the liability of any other party
upon or for any part thereof, or any collateral security or guarantee therefor
or right of offset with respect thereto, may, from time to time, in whole or in
part, be renewed, extended, amended, modified, accelerated, compromised, waived,
surrendered or released by any Secured Party, and the Credit Agreement, any
other Loan Document, any Interest Rate Protection Agreement and any other
documents executed and delivered in connection therewith may be amended,
modified, supplemented or terminated, in whole or in part, as the Collateral
Agent (or the Required Lenders, as the case may be) or the relevant Secured
Party (in the case of any such Interest Rate Protection Agreement) may deem
advisable from time to time, and any collateral security, guarantee or right of
offset at any time held by any Secured Party for the payment of the Obligations
may
<PAGE>
be sold, exchanged, waived, surrendered or released. No Secured Party shall have
any obligation to protect, secure, perfect or insure any Lien at any time held
by it as security for the Obligations or for this Guarantee or any property
subject thereto. When making any demand hereunder against the Guarantor, any
Secured Party may, but shall be under no obligation to, make a similar demand on
any Loan Party or any other guarantor, and any failure by any Secured Party to
make any such demand or to collect any payments from any Loan Party or any such
other guarantor or any release of any Loan Party or such other guarantor shall
not relieve the Guarantor of its obligations or liabilities hereunder, and shall
not impair or affect the rights and remedies, express or implied, or as a matter
of law, of any Secured Party against the Guarantor.
(b) The Guarantor hereby acknowledges and affirms that it understands that
to the extent the Obligations are secured by real property located in the State
of California, the Guarantor shall be liable for the full amount of the
liability hereunder notwithstanding foreclosure on such real property by trustee
sale or any other reason impairing the Guarantor's or any secured creditors'
right to proceed against the Borrower or any other guarantor of the Obligations.
(c) The Guarantor hereby waives, to the fullest extent permitted by
applicable law, all rights and benefits under Sections 580a, 580b, 580d and 726
of the California Code of Civil Procedure. The Guarantor hereby further waives
to the fullest extent permitted by applicable law, without limiting the
generality of the foregoing or any other provision hereof, all rights and
benefits which might otherwise be available to the Guarantor under Sections
2809, 2810, 2815, 2819, 2821, 2839, 2845, 2848, 2849, 2850, 2899 and 3433 of the
California Civil Code.
(d) The Guarantor waives its rights of subrogation and reimbursement and
any other rights and defense available to the Guarantor by reason of Sections
2787 to 2855, inclusive, of the California Civil Code, including, without
limitation, (1) any defenses the Guarantor may have to this Guarantee by reason
of an election of remedies by the Secured Parties and (2) any rights or defenses
the Guarantor may have by reason of protection afforded to the Borrower pursuant
to the antideficiency or other laws of California limiting or discharging the
Borrower's indebtedness, including, without limitation, Section 580a, 580b, 580d
and 726 of the California Code of Civil Procedure. In furtherance of such
provisions, the Guarantor hereby waives all rights and defenses arising out of
an election of remedies of the Secured Parties, even though that election of
remedies, such as a nonjudicial foreclosure destroys the Guarantor's rights of
subrogation and reimbursement against the Borrower by the operation of Section
580d of the California Code of Civil Procedure or otherwise.
The Guarantor warrants and agrees that each of the waivers set forth above
is made with full knowledge of its significance and consequences and that if any
of such waivers are determined to be contrary to any applicable law or public
policy, such waivers shall be effective only to the maximum extent permitted by
law.
5. Guarantee Absolute and Unconditional. The Guarantor waives any and all
notice of the creation, renewal, extension or accrual of any of the Obligations
and notice of or proof of reliance by any Secured Party upon this Guarantee or
acceptance of this Guarantee; the Obligations, and any of them, shall
conclusively be deemed to have been created, contracted or incurred, or renewed,
extended, amended or waived, in reliance upon this Guarantee; and all dealings
between any Loan Party or the Guarantor, on the one hand, and any of the Secured
Parties, on the other, shall likewise be conclusively presumed to have
<PAGE>
been had or consummated in reliance upon this Guarantee. The Guarantor waives
diligence, presentment, protest, demand for payment and notice of default or
nonpayment to or upon any Loan Party or the Guarantor with respect to the
Obligations. This Guarantee shall be construed as a continuing, absolute and
unconditional guarantee of payment, and not of collection, and without regard to
(a) the validity, regularity or enforceability of the Credit Agreement, any
other Loan Document, any Interest Rate Protection Agreement, any of the
Obligations or any other collateral security therefor or guarantee or right of
offset with respect thereto at any time or from time to time held by any Secured
Party, (b) any defense, set-off or counterclaim (other than a defense of payment
or performance) which may at any time be available to or be asserted by any Loan
Party against any Secured Party, or (c) any other circumstance whatsoever (with
or without notice to or knowledge of any Secured Party, any Loan Party or the
Guarantor) which may or might in any manner or to any extent vary the risk of
the Guarantor or otherwise constitutes, or might be construed to constitute, an
equitable or legal discharge of any Loan Party for the Obligations, or of the
Guarantor under this Guarantee, in bankruptcy or in any other instance. When
pursuing its rights and remedies hereunder against the Guarantor, any Secured
Party may, but shall be under no obligation to, pursue such rights and remedies
as it may have against any Loan Party or any other person or against any
collateral security or guarantee for the Obligations or any right of offset with
respect thereto, and any failure by any Secured Party to pursue such other
rights or remedies or to collect any payments from any Loan Party or any such
other person or to realize upon any such collateral security or guarantee or to
exercise any such right of offset, or any release of any Loan Party or any such
other person or of any such collateral security, guarantee or right of offset,
shall not relieve the Guarantor of any liability hereunder, and shall not impair
or affect the rights and remedies, whether express, implied or available as a
matter of law, of any Secured Party against the Guarantor. This Guarantee shall
remain in full force and effect and be binding in accordance with and to the
extent of its terms upon the Guarantor and its successors and assigns, and shall
inure to the benefit of the Secured Parties, and their respective permitted
successors, indorsees, transferees and assigns, until all the Obligations and
the obligations of the Guarantor under this Guarantee shall have been satisfied
by payment in full, no Letters of Credit shall be outstanding, the Commitments
shall have been terminated and all Interest Rate Protection Agreements shall
have been terminated, notwithstanding that from time to time while the
Commitments are in effect during the term of the Credit Agreement any Loan Party
may be free from any Obligations.
6. Reinstatement. This Guarantee shall continue to be effective, or be
reinstated, as the case may be, if at any time payment, or any part thereof, of
any of the Obligations is rescinded or must otherwise be restored or returned by
any Secured Party for any reason whatsoever, including, without limitation, upon
the insolvency, bankruptcy, dissolution, liquidation or reorganization of any
Loan Party or upon or as a result of the appointment of a receiver, intervenor
or conservator of, or trustee or similar officer for, any Loan Party or any
substantial part of its property, or otherwise, all as though such payments had
not been made.
7. Payments. The Guarantor hereby agrees that the Obligations will be paid
to the Collateral Agent without setoff or counterclaim in Dollars, on the same
basis as payments are made by the Borrower under Sections 2.18 and 2.19 of the
Credit Agreement, at the office of the Collateral Agent located at 130 Liberty
Street, New York, New York 10006.
8. Representations and Warranties. The Guarantor represents and warrants to
and with the Secured Parties that all representations and warranties in the Loan
<PAGE>
Documents that relate to the Guarantor are true and correct in all material
respects.
9. Covenants. The Guarantor hereby covenants and agrees with the Secured
Parties that, from and after the date of this Guarantee until the Obligations
are paid in full, no Letters of Credit are outstanding, the Commitments are
terminated and all Interest Rate Protection Agreements are terminated, unless
the Required Lenders shall otherwise consent in writing, it will, and will cause
each of the Subsidiaries to, comply with each covenant set forth in Articles V
and VI of the Credit Agreement.
10. Authority of Collateral Agent. The Guarantor acknowledges that the
rights and responsibilities of the Collateral Agent under this Guarantee with
respect to any action taken by the Collateral Agent or the exercise or
non-exercise by the Collateral Agent of any option, right, request, judgment or
other right or remedy provided for herein or resulting or arising out of this
Guarantee shall, as between the Collateral Agent and the other Secured Parties,
be governed by the Credit Agreement and by such other agreements with respect
thereto as may exist from time to time among them, but, as between the
Collateral Agent and the Guarantor, the Collateral Agent shall be conclusively
presumed to be acting as agent for the other Secured Parties with full and valid
authority so to act or refrain from acting.
11. Notices. All notices, requests and demands to or upon any Secured Party
or the Guarantor under this Guarantee shall be given in accordance with Section
9.01 of the Credit Agreement and addressed as follows:
<PAGE>
(a) if to the Guarantor, at its address set forth opposite its
signature below;
(b) if to the Collateral Agent:
Bankers Trust Company
130 Liberty Street
New York, New York 10006
Telephone: (212) 250-9094
Telecopier: (212) 250-7218
Attention: Mary Kay Coyle
(c) if to any Bank Creditor (other than the Collateral Agent), at such
address as such Bank Creditor shall have specified in the Credit Agreement;
(d) if to any Other Creditor, at such address as such Other Creditor
shall have specified in writing to each Grantor and the Collateral Agent;
or
(e) at such other address as shall have been furnished in writing by
any Person described above to the party required to give notice hereunder..
12. Severability. Any provision of this Guarantee or any other Loan
Document which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction. The parties shall
endeavor in good-faith negotiations to replace the prohibited or unenforceable
provisions with valid provisions, the economic effect of which comes as close as
possible to that of the prohibited or unenforceable provisions.
13. Right of Setoff. If an Event of Default shall have occurred and be
continuing under the Credit Agreement, each Secured Party is hereby authorized
at any time and from time to time, to the fullest extent permitted by law, to
set off and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and other indebtedness at any time owing
by such Secured Party to or for the credit or the account of the Guarantor
against any of and all the obligations of the Guarantor now or hereafter
existing under this Guarantee irrespective of whether or not such Secured Party
shall have made any demand under this Guarantee and although such obligations
may be unmatured. The rights of each Secured Party under this Section 13 are in
addition to other rights and remedies (including other rights of setoff) that
such Secured Party may have.
14. Integration. This Guarantee represents the agreement of the Guarantor
with respect to the subject matter hereof and there are no promises or
representations by the Guarantor or any Secured Party relative to the subject
matter hereof not reflected herein or in the other Loan Documents.
15. Amendments in Writing; No Waiver; Cumulative Remedies. (a) None of the
terms or provisions of this Guarantee may be waived, amended, supplemented or
otherwise modified except by a written instrument executed by the Guarantor and
the Collateral Agent (with the consent of either (x) the Required Lenders or, to
the extent required by Section 9.08 of the Credit Agreement, all of the Lenders,
at all times prior to the
<PAGE>
time on which all Credit Document Obligations have been paid in full or (y) the
holders of at least a majority of the outstanding Other Obligations at all times
after the time on which all Credit Document Obligations have been paid in full);
provided, that any change, waiver, modification or variance affecting the rights
and benefits of a single Class of Secured Parties (and not all Secured Parties
in a like or similar manner) shall also require the written consent of the
Requisite Creditors of such Class of Secured Parties. For the purpose of this
Agreement, the term "Class" shall mean each class of Secured Parties, i.e.,
whether (x) the Bank Creditors as holders of the Credit Document Obligations or
(y) the Other Creditors as the holders of the Other Obligations. For the purpose
of this Agreement, the term "Requisite Creditors" of any Class shall mean each
of (x) with respect to the Credit Document Obligations, the Required Lenders and
(y) with respect to the Other Obligations, the holders of at least a majority of
all obligations outstanding from time to time under the Interest Rate Protection
Agreements.
(b) No Secured Party shall by any act (except by a written instrument
pursuant to Section 15(a) hereof), or delay be deemed to have waived any right
or remedy hereunder or to have acquiesced in any Default or Event of Default or
in any breach of any of the terms and conditions hereof. No failure to exercise,
nor any delay in exercising, on the part of any Secured Party, any right, power
or privilege hereunder shall operate as a waiver thereof. No single or partial
exercise of any right, power or privilege hereunder or any course of dealing
between the Collateral Agent and the Guarantor shall preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
A waiver by any Secured Party of any right or remedy hereunder on any one
occasion shall not be construed as a bar to any right or remedy which such
Secured Party would otherwise have on any future occasion.
(c) The rights and remedies herein provided are cumulative, may be
exercised singly or concurrently and are not exclusive of any other rights or
remedies provided by law.
16. Section Headings. The section headings used in this Guarantee are for
convenience of reference only and are not to affect the construction hereof or
be taken into consideration in the interpretation hereof.
17. Successors and Assigns; Release. (a) This Guarantee shall be binding
upon the successors and assigns of the Guarantor and shall inure to the benefit
of the Guarantor and each Secured Party and their permitted successors and
assigns except that the Guarantor shall not have the right to assign its rights
hereunder or any interest herein (and any such attempted assignment shall be
void) except as expressly contemplated by this Guarantee or by the other Loan
Documents.
(b) In the event that (x) Graham Packaging Holdings Company is liquidated,
dissolved or wound-up pursuant to an IPO Reorganization as contemplated by
Sections 5.11(c) and 6.05 of the Credit Agreement and (y) GPC Capital Corp. II
has assumed all Obligations of Graham Packaging Holding Company pursuant to
documentation reasonably satisfactory to the Collateral Agent, Graham Packaging
Holdings Company shall be released from this Guarantee and this Guarantee shall,
as to Graham Packaging Holdings Company, terminate, and have no further force or
effect.
18. GOVERNING LAW. THIS GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF
<PAGE>
THE STATE OF NEW YORK.
19. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN
RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN
CONNECTION WITH THIS GUARANTEE OR ANY OF THE OTHER LOAN DOCUMENTS. EACH PARTY
HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER
PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT,
IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B)
ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER
INTO THIS GUARANTEE AND THE OTHER LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 19.
20. Jurisdiction; Consent to Service of Process. (a) The Guarantor hereby
irrevocably and unconditionally submits, for itself and its property, to the
nonexclusive jurisdiction of any New York State court or Federal court of the
United States of America sitting in New York City, and any appellate court from
any thereof, in any action or proceeding arising out of or relating to this
Guarantee or the other Loan Documents, or for recognition or enforcement of any
judgment, and each of the parties hereto hereby irrevocably and unconditionally
agrees that all claims in respect of any such action or proceeding may be heard
and determined in such New York State or, to the extent permitted by law, in
such Federal court. Each of the parties hereto agrees that a final judgment in
any such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
Nothing in this Guarantee shall affect any right that any Loan Party or any
Secured Party may otherwise have to bring any action or proceeding relating to
this Guarantee or the other Loan Documents against the Guarantor or any Secured
Party or its properties in the courts of any jurisdiction.
(b) The Guarantor and each Secured Party hereby irrevocably and
unconditionally waives, to the fullest extent it may legally and effectively do
so, any objection that it may now or hereafter have to the laying of venue of
any suit, action or proceeding arising out of or relating to this Guarantee or
the other Loan Documents in any New York State or Federal court. Each of the
parties hereto hereby irrevocably waives, to the fullest extent permitted by
law, the defense of an inconvenient forum to the maintenance of such action or
proceeding in any such court.
21. Counterparts. This Guarantee may be executed in counterparts, each of
which shall constitute an original, but all of which, when taken together, shall
constitute but one instrument.
22. Limitations on Recourse. Notwithstanding anything contained herein to
the contrary, the Guarantor and the Collateral Agent agree that (a) in an action
to collect any amounts due under, or otherwise in respect of, this Guarantee,
any Note or any other Loan Document, no current or former Holdings Partner
(except to the extent any such Holdings Partner is a Loan Party) in its capacity
as such will be personally liable for any amounts due or any other liability
under this Guarantee, any Note or any other Loan Document, and no deficiency or
personal judgment will be sought against any such Holdings Partner in its
capacity as such for payment of the Indebtedness evidenced by the Credit
<PAGE>
Agreement, any Note or any other Loan Document and (b) no property or assets of
any such current or former Holdings Partner (except to the extent any such
Holdings Partner is a Loan Party) in its capacity as such shall be sold, levied
upon or otherwise used to satisfy any judgment rendered in connection with any
action brought with respect to this Guarantee, any other Loan Document or any
Note; provided, however, that nothing contained in this Section 22 shall (i)
impair the validity of the Indebtedness evidenced by the Credit Agreement or the
Notes, (ii) prevent the taking of any action permitted by law against Grantor or
any other Loan Party or the assets of the Guarantor or any other Loan Party or
the proceeds of such assets or (iii) in any way affect or impair the right of
any Agent or any Lender to take any action permitted by law to realize upon any
Mortgaged Property, the Collateral or any other security which may secure any
Loan Party's obligations.
* * *
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this Guarantee to be duly
executed and delivered by its duly authorized officer as of the day and year
first above written.
Address:
1110 East Princess Street GRAHAM PACKAGING HOLDINGS COMPANY
York, Pennsylvania 17403
Telephone: (717) 849-8500
Telecopy: (717) 849-8541
Attention: Chief Financial Officer By: BCP/Graham Holdings L.L.C.
its general partner
By: /s/ John E. Hamilton
---------------------------------
Title: Vice President
BANKERS TRUST COMPANY, as
Collateral Agent
By: /s/ Mary Kay Coyle
---------------------------------
Title: Managing Director
<PAGE>
EXHIBIT G
PLEDGE AGREEMENT
PLEDGE AGREEMENT dated as of February 2, 1998, made by each of the
undersigned (each a "Pledgor" and, together with any other entity that becomes a
party hereto pursuant to Section 5(d) hereof, the "Pledgors") in favor of
BANKERS TRUST COMPANY, as collateral agent (in such capacity, the "Collateral
Agent") for the benefit of the Secured Parties (as such term is defined below).
Reference is made to the Credit Agreement, dated as of February 2, 1998 (the
"Credit Agreement"), among GRAHAM PACKAGING HOLDINGS COMPANY, a Pennsylvania
limited partnership ("Holdings"), GRAHAM PACKAGING COMPANY, a Delaware limited
partnership (the "Borrower"), GPC Capital Corp. I, a Delaware corporation (the
"Co-Borrower"), the Lenders (such term and each other capitalized term used but
not defined having the meaning given it in Section 1.01 of the Credit Agreement)
from time to time party thereto, NATIONSBANK, N.A., as Documentation Agent, and
BANKERS TRUST COMPANY, as Administrative Agent, Syndication Agent, Collateral
Agent and Fronting Bank (as used herein, the term "Credit Agreement" means the
Credit Agreement described above in this sentence, as the same may be amended,
modified, extended, restated or supplemented from time to time, and including
any agreement extending the maturity of, or restructuring the Indebtedness under
such agreement or any successor agreements) (the Lenders, the Documentation
Agent, the Administrative Agent, the Syndication Agent, the Collateral Agent and
the Fronting Bank are herein called the "Bank Creditors").
W I T N E S S E T H :
WHEREAS, pursuant to the Credit Agreement, the Lenders have severally
agreed to make Loans and the Fronting Bank has agreed to issue Letters of
Credit, upon the terms and subject to the conditions set forth therein;
WHEREAS, the Borrower may at any time and from time to time enter into one
or more Interest Rate Protection Agreements with one or more Lenders or any
affiliate thereof (each such Lender or affiliate, even if the respective Lender
subsequently ceases to be a lender under the Credit Agreement for any reason,
together with such Lender's or affiliate's successors and assigns, if any,
collectively, the "Other Creditors," and together with the Bank Creditors, the
"Secured Parties");
WHEREAS, it is a condition precedent to the obligations of the Lenders to
make the Loans and the Fronting Bank to issue the Letters of Credit that the
Pledgors (other than the Borrower) guarantee payment and performance of the
Borrower's obligations under the Credit Agreement and the other Loan Documents;
WHEREAS, in satisfaction of such condition, each Pledgor has entered into
(x) in the case of Holdings, the Parent Guarantee Agreement and (y) in the case
of each other
<PAGE>
2
Pledgor (other than the Borrower), the Subsidiary Guarantee Agreement, in each
case for the benefit of the Secured Parties; and
WHEREAS, it is a further condition precedent to the obligations of the
Lenders to make the Loans and the Fronting Bank to issue the Letters of Credit
that the Pledgors shall have executed and delivered this Pledge Agreement to the
Collateral Agent for the ratable benefit of the Secured Parties, to secure
payment and performance of the Pledgors' respective obligations under the Credit
Agreement, the Parent Guarantee Agreement, the Subsidiary Guarantee Agreement
and the other Loan Documents to which they are parties.
NOW, THEREFORE, in consideration of the premises and to induce the Secured
Parties to enter into the Credit Agreement and to induce the Lenders to make
their respective Loans and the Fronting Bank to issue its Letters of Credit,
each of the Pledgors hereby agrees with the Collateral Agent, for the ratable
benefit of the Secured Parties, as follows:
1. Defined Terms. (a) Unless otherwise defined herein, terms defined in the
Credit Agreement and used herein shall have the meanings given in the Credit
Agreement.
(b) The following terms shall have the following meanings:
"Agreement" means this Pledge Agreement, as the same may be amended,
supplemented or otherwise modified from time to time.
"Bank Creditors" shall have the meaning provided in the preamble to
this Agreement.
"Code" means the Uniform Commercial Code from time to time in effect
in the State of New York.
"Collateral" means (v) the Pledged Stock, (w) the Pledged Notes, (x)
the Pledged Partnership Interests, (y) the Pledged Membership Interests and
(z) all Proceeds thereof.
"Collateral Account" means any account established to hold money
Proceeds, maintained under the sole dominion and control of and on terms
and conditions reasonably satisfactory to the Collateral Agent, subject to
withdrawal by the Collateral Agent for the account of the Secured Parties
and the Pledgors, as provided in Section 8(a) and Section 15.
"Credit Document Obligations" shall have the meaning provided in the
preamble to this Agreement.
<PAGE>
3
"Foreign Subsidiary" means any Subsidiary incorporated or otherwise
organized outside the United States of America.
"Indemnitee" means the Secured Parties and their respective officers,
directors, trustees, affiliates and controlling persons.
"Issuers" means the collective reference to the companies identified
on Schedule I attached hereto as the issuers of the Pledged Stock on the
Closing Date and any other issuer of Pledged Stock acquired thereafter;
each, individually, an "Issuer."
"Obligations" shall mean (a) the unpaid principal of and premium, if
any, and interest on the Notes and all other obligations and liabilities of
each Pledgor (including interest accruing at the then applicable rate
provided in the Credit Agreement after the maturity of the Loans and
interest accruing at the then applicable rate provided in the Credit
Agreement after the filing of any petition in bankruptcy, or the
commencement of any insolvency, reorganization or like proceeding, relating
to such Pledgor, whether or not a claim for post-filing or post petition
interest is allowed in such proceeding), whether direct or indirect,
absolute or contingent, due or to become due, or now existing or hereafter
incurred (including monetary obligations incurred during the pendency of
any bankruptcy, insolvency, receivership or other similar proceeding,
regardless of whether allowed or allowable in such proceeding), which may
arise under, out of or in connection with, the Credit Agreement, this
Agreement or any other Loan Document and any obligation of such Pledgor to
a Lender under any other document made, delivered or given in connection
with any of the foregoing, in each case whether on account of principal,
interest, reimbursement obligations, fees, indemnities, costs, expenses or
otherwise, including all fees and disbursements of counsel to the
Collateral Agent or to the Secured Parties that are required to be paid by
a Pledgor pursuant to the terms of the Credit Agreement, this Agreement or
any other Loan Document with a Lender (collectively, the "Credit Document
Obligations") and (b) all obligations and liabilities of each Pledgor to
the Other Creditors now existing or hereafter incurred under, arising out
of or in connection with any Interest Rate Protection Agreement including,
in the case of Pledgors other than the Borrower, all obligations of such
Pledgor under any Guaranty to which such Grantor is a party in respect of
Interest Rate Protection Agreements (all such obligations and liabilities
under this clause (b) being herein collectively called the "Other
Obligations").
"Other Creditors" shall have the meaning provided in the recitals to
this Agreement.
"Other Obligations" shall have the meaning provided in the definition
of "Obligations" contained herein.
<PAGE>
4
"Partnership Assets" shall mean all assets, whether tangible or
intangible and whether real, personal or mixed (including, without
limitation, all partnership capital and interests in other partnerships),
at any time owned by any Pledged Partnership or represented by any Pledged
Partnership.
"Pledged Membership Interest" means the entire membership interest at
any time owned by any Pledgor in any limited liability company (each such
limited liability company, a "Pledged LLC").
"Pledged LLC" shall have the meaning provided in the definition of
"Pledged Membership Interest" contained herein.
"Pledged Notes" means all promissory notes from time to time issued
to, or held by, any Pledgor; provided that "Pledged Notes" shall not
include (x) any promissory note to the extent that such note is owed to a
Pledgor by a Foreign Subsidiary of Holdings if the pledge of such note
hereunder would have material adverse tax consequences, (y) any promissory
note evidencing Indebtedness to any Pledgor from the Borrower or any of its
Subsidiaries so long as the aggregate principal amount of such Indebtedness
owed by such person to such Pledgor is not in excess of $10,000,000 and (z)
any promissory note evidencing non-cash consideration received by any
Pledgor pursuant to Section 6.04(c) of the Credit Agreement so long as the
aggregate principal amount of such promissory note or notes is not in
excess of $2,000,000
"Pledged Partnership" has the meaning provided in the definition of
"Pledged Partnership Interest" contained herein.
"Pledged Partnership Interest" means the entire partnership interests
(whether general and/or limited partnership interests) at any time owned by
each Pledgor in any partnership (general or limited) or similar entity
(each a "Pledged Partnership").
"Pledged Stock" means (x) with respect to persons incorporated under
the laws of the United States or any State or territory thereof (each a
"Domestic Corporation"), all of the shares of capital stock, at any time
owned by any Pledgor, in any such Domestic Corporation, together with all
stock certificates, options or rights of any nature whatsoever that may be
issued or granted by any such Domestic Corporation to such Pledgor while
this Agreement is in effect and (y) in the case of persons that are not
Domestic Corporations (each a "Foreign Corporation"), all of the shares of
capital stock, at any time owned by any Pledgor, in such Foreign
Corporations, together with all stock certificates, options or rights of
any nature whatsoever that may be issued or granted by any such Foreign
Corporation to such Pledgor while this Agreement is in effect, provided
that no Pledgor shall be required to pledge hereunder, and nothing herein
shall be deemed to constitute a pledge
<PAGE>
5
hereunder of, more than 65% of the total combined voting power of all
classes of capital stock of any such Foreign Corporation entitled to vote
(although 100% of all classes of non-voting stock of each Foreign
Corporation shall be required to be pledged).
"Proceeds" means all "proceeds" (as such term is defined in Section
9-306(1) of the Uniform Commercial Code in effect in the State of New York
on the date hereof) of the Pledged Stock, Pledged Notes, Pledged
Partnership Interests and Pledged Membership Interests and, in any event,
shall include all dividends or other income from the Pledged, Stock Pledged
Notes, Pledged Partnership Interests and Pledged Membership Interests,
collections thereon or distributions with respect thereto.
"Secured Creditors" has the meaning assigned that term in the
definition of "Obligations" contained herein.
"Securities Act" means the Securities Act of 1933, as amended.
"U.S. Subsidiary" means any Subsidiary of Holdings that is
incorporated or otherwise organized in the United States of America.
(c) The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement, and section references are to
this Agreement unless otherwise specified. The words "include", "includes" and
"including" shall be deemed to be followed by the phrase "without limitation".
(d) The meanings given to terms defined herein shall be equally applicable
to both the singular and plural forms of such terms.
2. Pledge; Grant of Security Interest. (a) Each Pledgor hereby (i) pledges
and delivers to the Collateral Agent, for the ratable benefit of the Secured
Parties, all certificates or instruments representing or evidencing the Pledged
Stock and Pledged Notes owned by such Pledgor, (ii) grants to the Collateral
Agent, for the ratable benefit of the Secured Parties, a first priority security
interest in all the Collateral owned by such Pledgor from time to time, as
collateral security for the prompt and complete payment and performance when due
(whether at the stated maturity, by acceleration, upon one or more dates of
prepayment or otherwise) of the Obligations and (iii) transfers and assigns to
the Collateral Agent such Pledgor's Pledged Partnership Interests and Pledged
Membership Interests, as the case may be, (and delivers any certificates or
instruments evidencing such Pledged Partnership Interests and Pledged Membership
Interests, as the case may be, duly endorsed in blank) and all of such Pledgor's
right, title and interest in each Pledged Partnership and each Pledged LLC in
each case including, without limitation:
<PAGE>
6
(i) all of its capital therein and its interest in all profits,
losses, Partnership Assets (as defined below) and other distributions to
which such Pledgor shall at any time be entitled in respect of any such
Collateral;
(ii) all other payments due or to become due to such Pledgor in
respect of any such Collateral, whether under any partnership agreement,
limited liability company agreement or otherwise, whether as contractual
obligations, damages, insurance proceeds or otherwise;
(iii) all of its claims, rights, powers, privileges, authority,
options, security interest, liens and remedies, if any, under any
partnership or other agreement or at law or otherwise in respect of any
such Collateral;
(iv) all present and future claims, if any, of such Pledgor against
any Pledged Partnership and any Pledged LLC for moneys loaned or advanced,
for services rendered or otherwise;
(v) all of such Pledgor's rights under any partnership agreement,
limited liability company agreement or at law to exercise and enforce every
right, power, remedy, authority, option and privilege of such Pledgor
relating to any Partnership Interest, including any power, if any, to
terminate, cancel or modify any general or limited partnership agreement or
limited liability company agreement, to execute any instruments and to take
any and all other action on behalf of and in the name of such Pledgor in
respect of such Pledged Partnership Interest or any Pledged Membership
Interest and any Pledged Partnership or Pledged LLC, to make
determinations, to exercise any election (including, but not limited to,
election of remedies) or option or to give or receive any notice, consent,
amendment, waiver or approval, together with full power and authority to
demand, receive, enforce, collect, or receipt for any of the foregoing or
for any Partnership Asset, to enforce or execute any checks, or other
instruments or orders, to file any claims and to take any action in
connection with any of the foregoing;
(vi) all other property hereafter delivered in substitution for or in
addition to any of the foregoing, all certificates and instruments
representing or evidencing such other property and all cash, securities,
interest, dividends, rights and other property at any time and from time to
time received, receivable or otherwise distributed in respect of or in
exchange for any or all thereof; and
(vii) to the extent not otherwise included, all proceeds of any or all
of the foregoing.
(b) Notwithstanding anything to the contrary contained in subsection 2(a)
hereof, if any Pledged Stock, Pledged Notes, Pledged Partnership Interests or
Pledged Membership Interests (whether now owned or hereafter acquired) are
uncertificated securities,
<PAGE>
7
the relevant Pledgor shall promptly notify the Collateral Agent thereof (it
being understood that all uncertificated securities as of the Closing Date are
indicated on the Schedules hereto), and shall promptly take all actions required
to perfect the security interest of the Collateral Agent under applicable law
(including, in any event, under Section 9-115 of the Code, if applicable). Each
Pledgor further agrees to take such actions as the Collateral Agent deems
reasonably necessary or desirable to effect the foregoing and to permit the
Collateral Agent to exercise any of its rights and remedies hereunder.
3. Stock Powers; Endorsements. Concurrently with the delivery to the
Collateral Agent of (x) each certificate representing one or more shares of
Pledged Stock to the Collateral Agent, the applicable Pledgor shall deliver an
undated stock power covering such certificate, duly executed in blank by such
Pledgor with, if the Collateral Agent so requests, signature guaranteed and (y)
each instrument evidencing the Pledged Notes, the respective Pledgor shall duly
endorse the respective instrument in blank.
4. Representations and Warranties. Each Pledgor represents and warrants, as
to itself and the Pledged Stock and Collateral pledged by it hereunder, that:
(a) Each Issuer, as of the Closing Date, and the respective Pledgor's
percentage ownership therein, is listed on Schedule I hereto.
(b) All the shares of the Pledged Stock have been duly and validly
issued and are fully paid and nonassessable.
(c) The Pledged Notes held by such Pledgor, as of the Closing Date,
consist of the promissory notes described in Schedule II where such Pledgor
is listed as the payee.
(d) On the date hereof, (x) the Pledged Partnership Interests and the
Pledged Membership Interests, as the case may be, held by such Pledgor
constitutes that percentage of the entire interest of the respective
Pledged Partnership or Pledged LLC, as the case may be as is set forth on
Schedule III hereto for such Pledgor and (y) such Pledgor owns no other
partnership interests or membership interests.
(e) Subject to Section 22(b), each Pledgor is the sole legal, record
and beneficial owner of the Pledged Stock, the Pledged Notes, the Pledged
Partnership Interests and the Pledged Membership Interests, free of any and
all Liens or options in favor of, or claims of, any other person, except
security interests permitted by Section 6.02 of the Credit Agreement.
(f) This Agreement is effective to create in favor of the Collateral
Agent, for the ratable benefit of the Secured Parties, a legal, valid and
enforceable security interest in the Collateral and, when the Pledged Stock
or Pledged Notes are delivered to the Collateral Agent, this Agreement will
constitute a fully perfected first priority
<PAGE>
8
Lien on, and security interest in, all right, title and interest of the
Pledgors thereunder in such Pledged Stock or Pledged Notes, in each case
prior and superior in rights to any other person; provided that
notwithstanding the foregoing, the representation and warranty set forth in
this clause (f) shall be deemed modified to the extent necessary to effect
all actions required to be taken pursuant to (and within the time periods
required by) Section 5.11(d) of the Credit Agreement in order to perfect
security interests under foreign jurisdictions.
(g) each Pledged Partnership Interest and each Pledged Membership
Interest has been validly acquired and is fully paid for (to the extent
applicable) and is duly and validly pledged hereunder;
(h) a notice in the form set forth in Annex IV attached hereto and by
this reference made a part hereof (such notice the "Pledge Notice"),
appropriately completed, notifying each Pledged Partnership or Pledged LLC,
as the case may be of the existence of this Agreement and a certified copy
of this Agreement have been delivered by each Pledgor to the relevant
Pledged Partnership or Pledged LLC, as the case may be, and each such
Pledgor has received and delivered to the Collateral Agent an
acknowledgment in the form set forth in Annex V attached hereto (such
acknowledgement, the "Pledge Acknowledgement"), duly executed by the
relevant Pledged Partnership or Pledged LLC, as the case may be, in each
case within the time period required by Section 30 of this Agreement; and
(i) the chief executive office of such Pledgor is set forth on Annex
VI hereto or such other office as such Pledgor may establish in accordance
with the terms of the Security Agreement.
5. Covenants. Each Pledgor, as to itself and the Collateral pledged by it
hereunder, covenants and agrees with the Secured Parties that, from and after
the date of this Agreement until this Agreement is terminated and the security
interest created hereby is released, subject to Section 22(b):
(a) If such Pledgor shall become entitled to receive or shall receive
(x) any stock certificate (including any certificate representing a stock
dividend or a distribution in connection with any reclassification,
increase or reduction of capital or any certificate issued in connection
with any reorganization), option or rights, whether in addition to, in
substitution of, as a conversion of, or in exchange for any shares of the
Pledged Stock or otherwise in respect thereof, (y) any additional
promissory notes or instruments therefor or any additional instruments in
respect of, or constituting, Pledged Notes or (z) any additional
certificates in respect of Pledged Partnership Interests or Pledged
Membership Interests, such Pledgor shall accept the same as the agent of
the Secured Parties, hold the same in trust for the Secured Parties and
deliver the same forthwith to the Collateral Agent in the exact form
received, duly indorsed by such Pledgor to the Collateral Agent, if
required, and, in the case of stock
<PAGE>
9
certificates, together with an undated stock power covering such
certificate duly executed in blank by such Pledgor, and, in the case of
Pledged Partnership Interests and Pledged Membership Interests together
with instruments of transfer satisfactory to the Collateral Agent, and
with, if the Collateral Agent so requests, signature guaranteed, to be held
by the Collateral Agent, subject to the terms hereof, as additional
collateral security for the Obligations; provided that if compliance with
this paragraph (a) would result in more than 65% of the total combined
voting power of all classes of capital stock of any Foreign Subsidiary
entitled to vote being included in the Pledged Stock, the applicable
Pledgor shall pledge only such portion of such capital stock as shall
result in 65% of the total combined voting power of the capital stock of
such Foreign Subsidiary being included in the Pledged Stock (or such lesser
portion as is owned by the relevant Pledgor). Without prejudice to the
terms and conditions of the Credit Agreement, any sums paid upon or in
respect of the Pledged Stock, Pledged Notes, Pledged Partnership Interests
or Pledged Membership Interests upon the liquidation or dissolution (other
than any liquidation or dissolution permitted by Section 5.01(a) of the
Credit Agreement) of any Issuer shall be subject to Section 2.12(c) of the
Credit Agreement, or upon and during the continuance of an Event of Default
shall upon the written request of the Collateral Agent be paid over to the
Collateral Agent to be held and applied by it hereunder as provided in
Section 8(a) and Section 15, and in case any distribution of capital shall
be made on or in respect of the Pledged Stock, Pledged Notes, Pledged
Partnership Interests or Pledged Membership Interest or any property shall
be distributed upon or with respect to the Pledged Stock, Pledged Notes,
Pledged Partnership Interests or Pledged Membership Interests pursuant to
the recapitalization or reclassification of capital of any Issuer or
pursuant to the reorganization thereof, the property so distributed shall
be subject to Section 2.12(c) of the Credit Agreement or, upon and during
the continuance of an Event of Default upon the written request of the
Collateral Agent, be delivered to the Collateral Agent to be held and
applied by it hereunder as provided in Section 8(a) and Section 15. If any
sums of money or property so paid or distributed in respect of the Pledged
Stock, Pledged Notes, Pledged Partnership Interests or Pledged Membership
Interests shall be received by such Pledgor, such Pledgor shall apply such
amount in accordance with Section 2.12(c) of the Credit Agreement, or upon
and during the continuance of an Event of Default, shall, upon the written
request of the Collateral Agent, until such money or property is paid or
delivered to the Collateral Agent, hold such money or property in trust for
the Secured Parties, segregated from other funds of such Pledgor, for
application in accordance with Section 8(a) and Section 15.
(b) Without the prior written consent of the Collateral Agent, such
Pledgor will not (i) vote to enable, or take any other action to permit,
any Issuer to issue any stock or other equity securities of any nature or
to issue any other securities convertible into or granting the right to
purchase or exchange for any stock or other equity securities of any nature
of any Issuer, except to the extent the same are permitted to be issued
under the Credit Agreement, (ii) sell, assign, transfer,
<PAGE>
10
exchange, or otherwise dispose of, or grant any option with respect to, the
Collateral owned by it, except as not prohibited under the terms of the
Credit Agreement, (iii) create, incur or permit to exist any Lien or option
in favor of, or any claim of any person with respect to, any of such
Collateral, or any interest therein, except as not prohibited under the
terms of the Credit Agreement and for the security interest created by this
Agreement or (iv) enter into any agreement or undertaking restricting the
right or ability of such Pledgor or the Collateral Agent to sell, assign or
transfer any of such Collateral, except as not prohibited under the terms
of the Credit Agreement.
(c) Such Pledgor shall maintain the security interest created by it
under this Agreement as a first, perfected security interest and shall
defend such security interest against claims and demands of all persons
whomsoever. At any time and from time to time, upon the written request of
the Collateral Agent, and at the sole expense of such Pledgor, such Pledgor
shall promptly and duly execute and deliver such further instruments and
documents and take such further actions as the Collateral Agent may
reasonably request for purposes of obtaining or preserving the full
benefits of this Agreement and of the rights and powers herein granted. If
any amount payable under or in connection with any of the Collateral owned
by such Pledgor shall be or become evidenced by any promissory note, other
instrument or chattel paper, such note, instrument or chattel paper shall,
if so requested by the Collateral Agent, be immediately delivered to the
Collateral Agent duly endorsed in a manner reasonably satisfactory to the
Collateral Agent, to be held as Collateral pursuant to this Agreement,
provided that the use of the Proceeds of such Collateral shall nonetheless
be governed by Sections 6 and 7.
(d) If such Pledgor shall at any time own or acquire any Pledged
Stock, Pledged Notes, Pledged Partnership Interests or Pledged Membership
Interests, in each case which have not already been pledged hereunder and
reflected on Schedules I through III, as appropriate, hereto, such Pledgor
shall immediately pledge same hereunder and take the actions specified in
Section 2 hereof which would have been taken had such Collateral been held
by the respective Pledgor (and pledged hereunder) on the date of this
Agreement. In connection with the actions required to be taken as provided
above in this clause (d), on each date upon which additional Collateral is
pledged pursuant to this Agreement as provided in this clause (d), the
respective Pledgor shall deliver a supplement to this Pledge Agreement,
substantially in the form of Exhibit A-1 to this Agreement (each, a "Pledge
Agreement Supplement") adding such shares of Pledged Stock to Schedule I
hereto, Pledged Notes to Schedule II hereto and/or Pledged Partnership
Interests and/or Pledged Membership Interests to Schedule III hereto, as
the case may be. The execution and delivery of any such instrument shall
not require the consent of any Pledgor hereunder.
<PAGE>
11
(e) From time to time upon the written request of the Collateral Agent
or the Required Lenders, the Pledgors shall provide updated Schedules I, II
and III hereunder.
6. Cash Dividends; Voting Rights; Proceeds. (a) Unless an Event of Default
shall have occurred and be continuing and the Collateral Agent shall have given
notice to the Pledgors of the Collateral Agent's intent to exercise its
corresponding rights pursuant to Section 7 below, the Pledgors shall be
permitted (x) to receive, retain and use (1) all cash dividends paid in
accordance with the terms and conditions of the Credit Agreement in respect of
the Pledged Stock, (2) all cash payments received in respect of the Pledged
Notes and (3) all cash distributions and other payments in respect of the
Pledged Partnership Interests and Pledged Membership Interests and (y) to
exercise (1) all voting and corporate rights with respect to the Pledged Stock
and (2) voting, consent, administration, management, amendment and other rights
and remedies under any partnership agreement, limited liability company
agreement or otherwise with respect to the Pledged Partnership Interests or
Pledged Membership Interests, as the case may be, of such Pledgor, provided,
however, that no vote shall be cast or corporate right exercised or other action
taken (regardless of whether an Event of Default has occurred and is continuing)
which would materially and adversely affect the rights of the Collateral Agent
or the Secured Parties or their ability to exercise the same or result in any
violation of any provision of the Credit Agreement, this Agreement or any other
Loan Document.
(b) Unless an Event of Default shall have occurred and be continuing and
the Collateral Agent shall have given notice to the Pledgors of the Collateral
Agent's intent to exercise its corresponding rights pursuant to Section 7 below,
the Pledgors shall be permitted to receive, retain and use all other Proceeds
(in addition to cash dividends as provided under Section 6(a) above) from the
Collateral.
7. Rights of the Secured Parties and the Collateral Agent. If an Event of
Default shall occur and be continuing and the Collateral Agent shall give notice
of its intent to exercise such rights to the Pledgors, (i) the Collateral Agent
shall have the right to receive any and all Proceeds paid in respect of the
Collateral and any and all Proceeds of Proceeds and make application thereof to
the Obligations in the manner provided in Section 8(a) and Section 15 and (ii)
all shares of the Pledged Stock and, if applicable, Pledged Notes, Pledged
Partnership Interests and Pledged Membership Interests shall be registered in
the name of the Collateral Agent or its nominee, and the Collateral Agent or its
nominee may thereafter exercise (1) all voting, corporate and other rights
pertaining to such shares of the Pledged Stock and to such Pledged Notes,
Pledged Partnership Interests and Pledged Membership Interests at any meeting of
shareholders of any Issuer or otherwise and (2) any and all rights of
conversion, exchange, subscription and any other rights, privileges or options
pertaining to such shares of the Pledged Stock and to such Pledged Notes,
Pledged Partnership Interests and Pledged Membership Interests as if it were the
absolute owner thereof (including the right to exchange at its discretion any
and all the Pledged Stock, Pledged Partnership Interests, Pledged Membership
Interests and, if applicable, Pledged Notes upon the merger,
<PAGE>
12
consolidation, reorganization, recapitalization or other fundamental change in
the corporate structure of any Issuer, or upon the exercise by a Pledgor or the
Collateral Agent of any right, privilege or option pertaining to such shares of
the Pledged Stock, to such Pledged Partnership Interests, to such Pledged
Membership Interests and to such Pledged Notes and in connection therewith, the
right to deposit and deliver any and all the Pledged Stock, Pledged Partnership
Interests, Pledged Membership Interests and, if applicable, Pledged Notes with
any committee, depositary, transfer agent, registrar or other designated agency
upon such terms and conditions as the Collateral Agent may reasonably
determine), all without liability except to account for property actually
received by it, but the Collateral Agent shall have no duty to any Pledgor to
exercise any such right, privilege or option and shall not be responsible for
any failure to do so or delay in so doing. All Proceeds that are received by any
Pledgor contrary to the provisions of this Section 7 shall be received in trust
for the benefit of the Collateral Agent, shall be segregated from other property
or funds of such Pledgor and shall be forthwith delivered to the Collateral
Agent in the same form as so received (with any necessary endorsement). Any and
all money and other property paid over to or received by the Collateral Agent
pursuant to the provisions of this Section 7 shall be retained by the Collateral
Agent in a Collateral Account to be established by the Collateral Agent upon
receipt of such money or other property and shall be applied in accordance with
the provisions of Section 8(a) and Section 15. After all Events of Default under
the Credit Agreement have been cured or waived, the Collateral Agent shall,
within five Business Days after all such Events of Default have been cured or
waived, repay to each Pledgor all cash dividends, interest or principal that
such Pledgor would otherwise be permitted to retain pursuant to the terms of
Section 6 above, but only to the extent such Proceeds remain in such Collateral
Account.
8. Remedies. (a) If an Event of Default shall have occurred and be
continuing the Collateral Agent shall apply all or any part of the Proceeds held
in any Collateral Account in accordance with Section 15.
(b) If an Event of Default shall have occurred and be continuing, the
Collateral Agent, on behalf of the Secured Parties, may exercise, in addition to
all other rights and remedies granted in this Agreement and in any other
instrument or agreement securing, evidencing or relating to the Obligations, all
rights and remedies of a secured party under the Code. Without limiting the
generality of the foregoing, the Collateral Agent, without demand of performance
or other demand, presentment, protest, advertisement or notice of any kind
(except any notice, required by law referred to below) to or upon the Pledgors
or any other person (all and each of which demands, defenses, advertisements and
notices are hereby waived), may in such circumstances forthwith collect,
receive, appropriate and realize upon the Collateral, or any part thereof,
and/or may forthwith sell, assign, give option or options to purchase or
otherwise dispose of and deliver the Collateral or any part thereof (or contract
to do any of the foregoing), in one or more parcels at public or private sale or
sales, in the over-the-counter market, at any exchange, broker's board or office
of the Collateral Agent or any Secured Party or elsewhere upon such terms and
conditions as it may reasonably deem advisable and at such prices as it may
reasonably deem best, for cash or on
<PAGE>
13
credit or for future delivery without assumption of any risk. The Collateral
Agent or any Secured Party shall have the right upon any such public sale or
sales, and, to the extent permitted by law, upon any such private sale or sales,
to purchase the whole or any part of the Collateral so sold, free of (to the
extent permitted by law) any right or equity of redemption in a Pledgor which
right or equity is, to the extent permitted by law, hereby waived or released.
The Collateral Agent shall apply any Proceeds from time to time held by it and
the net proceeds of any such collection, recovery, receipt, appropriation,
realization or sale, after deducting all reasonable costs and expenses incurred
in respect thereof or incidental to the care or safekeeping of any of the
Collateral or reasonably relating to the Collateral or the any or the rights of
the Collateral Agent and the Secured Parties hereunder, including reasonable
attorney's fees and disbursements of counsel to the Collateral Agent, to the
payment in whole or in part of the Obligations, in the order set forth in
Section 15. If any notice of a proposed sale or other disposition of Collateral
shall be required by law, such notice shall be in writing and deemed reasonable
and proper if given at least 10 days before such sale or other disposition. The
Pledgors shall remain liable for any deficiency if the proceeds of any sale or
other disposition of Collateral are insufficient to pay the Obligations and the
reasonable fees and disbursements of any attorneys employed by the Collateral
Agent or any Secured Party to collect such deficiency.
9. Registration Rights; Private Sales. (a) If the Collateral Agent shall
determine to exercise its right to sell any or all of the Pledged Stock pursuant
to Section 8 hereof, and if in the opinion of the Collateral Agent it is
necessary or advisable to have the Pledged Stock, or that portion thereof to be
sold, registered under the provisions of the Securities Act, the Pledgor who
owns such Pledged Stock will cause the Issuer thereof to (i) execute and
deliver, and cause the directors and officers of such Issuer to execute and
deliver, all such instruments and documents, and do or cause to be done all such
other acts as may be, in the reasonable opinion of the Collateral Agent,
necessary or advisable to register the Pledged Stock, or that portion thereof to
be sold, under the provisions of the Securities Act, (ii) use its best efforts
to cause the registration statement relating thereto to become effective and to
remain effective for a period expiring on the earlier of (A) one year from the
date of the first public offering of the Pledged Stock and (B) such time that
all of the Pledged Stock, or that portion thereof to be sold, is sold and (iii)
to make all amendments thereto and/or to the related prospectus which, in the
reasonable opinion of the Collateral Agent, are necessary or advisable, all in
conformity with the requirements of the Securities Act and the rules and
regulations of the Securities and Exchange Commission applicable thereto. The
Pledgor who owns such Pledged Stock agrees to cause such Issuer to comply with
the provisions of the securities or "Blue Sky" laws of any and all jurisdictions
which the Collateral Agent shall reasonably designate and to make available to
its security holders, as soon as practicable, an earnings statement (which need
not be audited) which will satisfy the provisions of Section 11(a) of the
Securities Act. Each Pledgor jointly and severally agrees to (x) indemnify,
defend and hold harmless the Collateral Agent and the other Indemnitees from and
against all losses, liabilities, expenses, costs (including the reasonable fees
and expenses of legal counsel to the Collateral Agent) and claims (including the
costs of investigation) that they may incur insofar as any such loss, liability,
expense, cost or claim arises out of or is
<PAGE>
14
based upon any alleged untrue statement of a material fact contained in any
prospectus, offering circular or similar document (or any amendment or
supplement thereto), or arises out of or is based upon any alleged omission to
state a material fact required to be stated therein or necessary to make the
statements in any writing thereof not misleading, except insofar as the same may
have been caused by any untrue statement or omission based upon information
furnished in writing to any Pledgor or the issuer of such Pledged Stock by the
Collateral Agent or any other Secured Party expressly for use therein, and (y)
enter into an indemnification agreement with any underwriter of or placement
agent for any Pledged Stock, on its standard form, to substantially the same
effect. The Pledgors will jointly and severally bear all costs and expenses of
carrying out their obligations under this Section 9.
(b) The Pledgors recognize that the Collateral Agent may be unable to
effect a public sale of any or all the Pledged Stock, Pledge Notes, Pledged
Partnership Interests or Pledged Membership Interests, by reason of certain
prohibitions contained in the Securities Act and applicable state securities
laws or otherwise, and may be compelled to resort to one or more private sales
thereof to a restricted group of purchasers which will be obliged to agree,
among other things, to acquire such securities for their own account for
investment and not with a view to the distribution or resale thereof. Each
Pledgor acknowledges and agrees that any such private sale may result in prices
and other terms less favorable than if such sale were a public sale and,
notwithstanding such circumstances, agrees that any such private sale shall be
deemed to have been made in a commercially reasonable manner. The Collateral
Agent shall be under no obligation to delay a sale of any of the Collateral for
the period of time necessary to permit the Issuer thereof to register such
securities for public sale under the Securities Act, or under applicable state
securities laws, even if such Issuer would agree do so.
(c) Each Pledgor further agrees to use its best efforts to do or cause to
be done all such other acts as may be reasonably necessary to make such sale or
sales of all or any portion of the Collateral owned by it pursuant to this
Section valid and binding and in compliance with any and all other applicable
requirements of the laws of any jurisdiction. Each Pledgor further agrees that a
breach of any of the covenants contained in this Section will cause irreparable
injury to the Collateral Agent and the Secured Parties, that the Collateral
Agent and the Secured Parties have no adequate remedy at law in respect of such
breach and, as a consequence, that each and every covenant contained in the
Section shall be specifically enforceable against such Pledgor, and such Pledgor
hereby waives and agrees not to assert any defenses against an action for
specific performance of such covenants.
10. Irrevocable Authorization and Instruction to Issuer. Each Pledgor
hereby authorizes and instructs each Issuer, each Pledged Partnership, each
Pledged LLC and each issuer of a Pledged Note (each a "Subject Entity") to
comply with any instruction received by it from the Collateral Agent in writing
that (a) states that an Event of Default has occurred and (b) is otherwise in
accordance with the terms of this Agreement, without any other or further
instructions from such Pledgor, and agrees that each such Subject Entity shall
be fully protected in so complying.
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15
11. Collateral Agent's Appointment as Attorney-in-Fact. (a) Each Pledgor
hereby irrevocably constitutes, and appoints the Collateral Agent and any
officer or agent of the Collateral Agent, with full irrevocable power of
substitution, as its true and lawful attorney-in-fact with full irrevocable
power and authority in the place and stead of such Pledgor and in the name of
such Pledgor or in the Collateral Agent's own name, from time to time in the
Collateral Agent's discretion upon and during the continuance of an Event of
Default, for the purpose of carrying out the terms of this Agreement, to take
any and all appropriate action and to execute any and all documents and
instruments which may be necessary or desirable to accomplish the purposes of
this Agreement, including without limitation, any financing statements,
endorsements, assignments or other instruments of transfer.
(b) Each Pledgor hereby ratifies all that said attorneys shall lawfully do
or cause to be done pursuant to the power of attorney granted in Section 11(a).
All powers, authorizations and agencies contained in this Agreement are coupled
with an interest and are irrevocable until this Agreement is terminated and the
security interests created hereby are released.
12. Duty of Collateral Agent. The Collateral Agent's sole duty with respect
to the custody, safekeeping and physical preservation of the Collateral in its
possession, under Section 9-207 of the Code or otherwise, shall be to deal with
it in the same manner as the Collateral Agent deals with similar securities and
property for its own account, provided that investments shall be made at the
option and sole discretion of the Collateral Agent, and provided further that
the Collateral Agent shall use reasonable efforts to make such investments.
Neither the Collateral Agent, any Secured Party nor any of their respective
directors, officers, employees or agents shall be liable for failure to demand,
collect or realize upon any of the Collateral or for any delay in doing so or
shall be under any obligation to sell or otherwise dispose of any Collateral
upon the request of the Pledgors or any other person or to take any other action
whatsoever with regard to the Collateral or any part thereof.
13. Execution of Financing Statements. Pursuant to Section 9-402 of the
Code, each Pledgor authorizes the Collateral Agent to file financing statements
with respect to the Collateral owned by it without the signature of such Pledgor
in such form and in such filing offices as the Collateral Agent reasonably
determines appropriate to perfect the security interests of the Collateral Agent
under this Agreement. A carbon, photographic or other reproduction of this
Agreement shall be sufficient as a financing statement for filing in any
jurisdiction.
14. Authority of Collateral Agent. Each Pledgor acknowledges that the
rights and responsibilities of the Collateral Agent under this Agreement with
respect to any action taken by the Collateral Agent or the exercise or
non-exercise by the Collateral Agent of any option, voting right, request,
judgment or other right or remedy provided for herein or resulting or arising
out this Agreement shall, as between the Collateral Agent and the Secured
Parties, be governed by the Credit Agreement and by such other agreements with
respect
<PAGE>
16
thereto as may exist from time to time among them, but, as between the
Collateral Agent and such Pledgor, the Collateral Agent shall be conclusively
presumed to be acting as agent for the Secured Parties with full and valid
authority so to act or refrain from acting.
15. Application of Proceeds. (a) The proceeds of any sale of Collateral
pursuant to Section 8(b), as well as any Collateral consisting of cash under
Section 8(a), shall be applied by the Collateral Agent as follows:
(i) First, to the payment of the reasonable costs and expenses of the
Collateral Agent as set forth in Section 8(b) hereof and in the Credit
Agreement;
(ii) Second, to the extent proceeds remain after the application
pursuant to the preceding clause (i), an amount equal to the outstanding
Primary Obligations shall be paid to the Secured Parties as provided in
Section 15(e) hereof, with each Secured Party receiving an amount equal to
its outstanding Primary Obligations or, if the proceeds are insufficient to
pay in full all such Primary Obligations, its Pro Rata Share (as defined
below) of the amount remaining to be distributed;
(iii) Third, to the extent proceeds remain after the application
pursuant to the preceding clauses (i) and (ii), an amount equal to the
outstanding Secondary Obligations shall be paid to the Secured Parties as
provided in Section 15(e) hereof, with each Secured Party receiving an
amount equal to its outstanding Secondary Obligations or, if the proceeds
are insufficient to pay in full all such Secondary Obligations, its Pro
Rata Share of the amount remaining to be distributed; and
(iv) Fourth, to the extent proceeds remain after the application
pursuant to the preceding clauses (i), (ii) and (iii) and following the
termination of this Agreement pursuant to Section 22 hereof, to the
relevant Pledgor or, to the extent directed by such Pledgor or a court of
competent jurisdiction, to whomever may be lawfully entitled to receive
such surplus.
(b) For purposes of this Agreement, (x) "Pro Rata Share" shall mean, when
calculating a Secured Party's portion of any distribution or amount, that amount
(expressed as a percentage) equal to a fraction the numerator of which is the
then unpaid amount of such Secured Party's Primary Obligations or Secondary
Obligations, as the case may be, and the denominator of which is the then
outstanding amount of all Primary Obligations or Secondary Obligations, as the
case may be, (y) "Primary Obligations" shall mean (i) in the case of the Credit
Document Obligations, all principal of, and interest on, all Loans, all
reimbursements of L/C Disbursements theretofore made (together with all interest
accrued thereon), and the aggregate stated amounts of all Letters of Credit
issued under the Credit Agreement, and all Fees and (ii) in the case of the
Other Obligations, all amounts due under the Interest Rate Protection Agreements
(other than indemnities, fees (including, without limitation, attorneys' fees)
and similar obligations and liabilities) and (z) "Secondary Obligations" shall
mean all Obligations other than Primary Obligations.
<PAGE>
17
(c) When payments to Secured Parties are based upon their respective Pro
Rata Shares, the amounts received by such Secured Parties hereunder shall be
applied (for purposes of making determinations under this Section 15 only) (i)
first, to their Primary Obligations (with the amount to be applied by any
Secured Party to its Primary Obligations to be applied (x) first, to interest
and (y) second, to any other Primary Obligations) and (ii) second, to their
Secondary Obligations. If any payment to any Secured Party of its Pro Rata Share
of any distribution would result in overpayment to such Secured Party, such
excess amount shall instead be distributed in respect of the unpaid Primary
Obligations or Secondary Obligations, as the case may be, of the other Secured
Parties, with each Secured Parties whose Primary Obligations or Secondary
Obligations, as the case may be, have not been paid in full to receive an amount
equal to such excess amount multiplied by a fraction the numerator of which is
the unpaid Primary Obligations or Secondary Obligations, as the case may be, of
such Secured Parties and the denominator of which is the unpaid Primary
Obligations or Secondary Obligations, as the case may be, of all Secured Parties
entitled to such distribution.
(d) Each of the Secured Parties agrees and acknowledges that if the Bank
Creditors are to receive a distribution on account of undrawn amounts with
respect to Letters of Credit issued under the Credit Agreement (which shall only
occur after all outstanding Loans and reimbursement of L/C Disbursements with
respect to such Letters of Credit have been paid in full), such amounts shall be
paid to the Administrative Agent under the Credit Agreement and held by it, for
the equal and ratable benefit of the Bank Creditors, as cash security for the
repayment of Obligations owing to the Bank Creditors as such. If any amounts are
held as cash security pursuant to the immediately preceding sentence, then upon
the termination of all outstanding Letters of Credit, and after the application
of all such cash security to the repayment of all Obligations owing to the Bank
Creditors after giving effect to the termination of all such Letters of Credit,
if there remains any excess cash, such excess cash shall be returned by the
Administrative Agent to the Collateral Agent for distribution in accordance with
Section 15(a) hereof.
(e) Except as set forth in Section 15(c) hereof, all payments required to
be made to the Bank Creditors hereunder shall be made to the Administrative
Agent under the Credit Agreement for the account of the Bank Creditors and all
payments required to be made to the Other Creditors hereunder shall be made
directly to the respective Other Creditor.
(f) For purposes of applying payments received in accordance with this
Section 15, the Collateral Agent shall be entitled to rely upon (i) the
Administrative Agent under the Credit Agreement and (ii) the Other Creditors for
a determination (which the Administrative Agent, each Other Creditor and the
Secured Parties agree (or shall agree) to provide upon request of the Collateral
Agent) of the outstanding Obligations owed to the Bank Creditors or the Other
Creditors, as the case may be. Unless it has actual knowledge (including by way
of written notice from a Bank Creditor or an Other Creditor) to the contrary,
the Administrative Agent under the Credit Agreement, in furnishing information
pursuant to the preceding sentence, and the Collateral Agent, in acting
hereunder, shall be entitled to
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18
assume that (x) no Secondary Obligations are owing to any Bank Creditor or Other
Creditor and (y) no Interest Rate Protection Agreement, or Other Obligations in
respect thereof, are in existence.
(g) It is understood that the Pledgors shall remain jointly and severally
liable to the extent of any deficiency between the amount of the proceeds of the
Collateral and the aggregate amount of the sums referred to in clause (a) of
this Section 15 with respect to the relevant Grantor.
(h) The Collateral Agent shall have absolute discretion as to the time of
application of any such proceeds, moneys or balances in accordance with this
Agreement. Upon any sale of the Collateral by the Collateral Agent (including
pursuant to a power of sale granted by statute or under a judicial proceeding),
the receipt of the Collateral Agent or of the officer making the sale shall be a
sufficient discharge to the purchaser or purchasers of the Collateral so sold
and such purchaser or purchasers shall not be obligated to see to the
application of any part of the purchase money paid over to the Collateral Agent
or such officer or be answerable in any way for the misapplication thereof.
16. Pledgee Not Bound. (a) Nothing herein shall be construed to make the
Collateral Agent or any other Secured Party liable as a general partner or
limited partner of any Pledged Partnership or a member of any Pledged LLC and
the Collateral Agent or any other Secured Party by virtue of this Agreement or
otherwise (except as referred to in the following sentence) shall not have any
of the duties, obligations or liabilities of a general partner or limited
partner of any Pledged Partnership or a member of any Pledged LLC. The parties
hereto expressly agree that, unless the Collateral Agent shall become the
absolute owner of a Pledged Partnership Interest or Pledged Membership Interest
pursuant hereto, this Agreement shall not be construed as creating a partnership
or joint venture or membership agreement among the Collateral Agent, any other
Secured Party and/or any Pledgor.
(b) Except as provided in the last sentence of paragraph (a) of this
Section, the Collateral Agent, by accepting this Agreement, did not intend to
become a general partner or limited partner of any Pledged Partnership or a
member of any Pledged LLC or otherwise be deemed to be a co-venturer with
respect to any Pledgor, any Pledged Partnership or any Pledged LLC either before
or after an Event of Default shall have occurred. The Collateral Agent shall
have only those powers set forth herein and shall assume none of the duties,
obligations or liabilities of a general partner or limited partner of any
Pledged Partnership or of a member of any Pledged LLC or of any Pledgor.
(c) The Collateral Agent shall not be obligated to perform or discharge any
obligation of any Pledgor as a result of the collateral assignment hereby
effected.
(d) The acceptance by the Collateral Agent of this Agreement, with all the
rights, powers, privileges and authority so created, shall not at any time or in
any event obligate the Collateral Agent to appear in or defend any action or
proceeding relating to the
<PAGE>
19
Collateral to which it is not a party, or to take any action hereunder or
thereunder, or to expend any money or incur any expenses or perform or discharge
any obligation, duty or liability under the Collateral.
17. Security Interest Absolute. All rights of the Collateral Agent
hereunder, the security interests granted hereunder and all obligations of the
Pledgors hereunder shall be absolute and unconditional.
18. Survival of Agreement. All covenants, agreements, representations and
warranties made by any Pledgor herein and in the certificates or other
instruments prepared or delivered in connection with or pursuant to this
Agreement or any other Loan Document shall be considered to have been relied
upon by the Secured Parties and shall survive the making by the Lenders of the
Loans, the execution and delivery to the Lenders of the Loan Documents or any
Interest Rate Protection Agreement and the issuance by the Fronting Bank of the
Letters of Credit, regardless of any investigation made by the Secured Parties,
or on their behalf, and shall continue in full force and effect as long as the
principal of or any accrued interest on any Loan or L/C Disbursement, or any Fee
or any other amount payable under or in respect of this Agreement, any other
Loan Document or any Interest Rate Protection Agreement is outstanding and
unpaid and so long as the Commitments have not been terminated.
19. Collateral Agent's Liabilities and Expenses; Indemnification. (a)
Notwithstanding anything to the contrary provided herein, the Collateral Agent
assumes no liabilities with respect to any claims regarding each Pledgor's
ownership (or purported ownership) of, or rights or obligations (or purported
rights or obligations) arising from, the Collateral or any use (or actual or
alleged misuse) whether arising out of any past, current or future event,
circumstance, act or omission or otherwise, or any claim, suit, loss, damage,
expense or liability of any kind or nature arising out of or in connection with
the Collateral. All of such liabilities shall, as between the Collateral Agent
and the Pledgors, be borne exclusively by the Pledgors.
(b) Each Pledgor hereby jointly and severally agrees to pay all expenses of
the Collateral Agent and to indemnify the Collateral Agent with respect to any
and all losses, claims, damages, liabilities and related expenses in respect of
this Agreement or the Collateral in each case to the extent the Borrower is
required to do so pursuant to Section 9.05 of the Credit Agreement.
(c) Any amounts payable as provided hereunder shall be additional
Obligations secured hereby and by the other Security Documents. Without
prejudice to the survival of any other agreements contained herein, all
indemnification and reimbursement obligations contained herein shall survive the
payment in full of the principal and interest under the Credit Agreement, the
expiration of the Letters of Credit and the termination of the Commitments or
this Agreement.
<PAGE>
20
20. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN
RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN
CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS. EACH PARTY
HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER
PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT,
IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B)
ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER
INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 20.
21. Jurisdiction; Consent to Service of Process. (a) Each Pledgor hereby
irrevocably and unconditionally submits, for itself and its property, to the
nonexclusive jurisdiction of any New York State court or Federal court of the
United States of America sitting in New York City, and any appellate court from
any thereof, in any action or proceeding arising out of or relating to this
Agreement or the other Loan Documents, or for recognition or enforcement of any
judgment, and each of the parties hereto hereby irrevocably and unconditionally
agrees that all claims in respect of any such action or proceeding may be heard
and determined in such New York State or, to the extent permitted by law, in
such Federal court. Each of the parties hereto agrees that a final judgment in
any such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
Nothing in this Agreement shall affect any right that any Loan Party or any
Secured Party may otherwise have to bring any action or proceeding relating to
this Agreement or the other Loan Documents against any Pledgor or any Secured
Party or its properties in the courts of any jurisdiction.
(b) Each Pledgor and each Secured Party hereby irrevocably and
unconditionally waives, to the fullest extent it may legally and effectively do
so, any objection that it may now or hereafter have to the laying of venue of
any suit, action or proceeding arising out of or relating to this Agreement or
the other Loan Documents in any New York State or Federal court. Each of the
parties hereto hereby irrevocably waives, to the fullest extent permitted by
law, the defense of an inconvenient forum to the maintenance of such action or
proceeding in any such court.
(c) Each party to this Agreement irrevocably consents to service of process
in the manner provided for notices in Section 23 hereof. Nothing in this
Agreement will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.
22. Termination and Release. (a) This Agreement and the security interest
created hereunder shall terminate when all the Obligations have been fully and
indefeasibly
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21
paid and when the Secured Parties have no further Commitments, no Letters of
Credit are outstanding and all Interest Rate Protection Agreements have been
terminated.
(b) Upon any sale by any Pledgor of any Collateral in connection with a
sale permitted by Section 6.05 of the Credit Agreement (excluding sales to
Holdings, the Borrower or any of their respective Subsidiaries) or otherwise
released at the direction of the Required Lenders (or all of the Lenders if
required by Section 9.08 of the Credit Agreement) and the proceeds of such sale
or sales or from such release are applied in accordance with Section 2.11(b) of
the Credit Agreement, or, after the Credit Document Obligations have been paid
in full, released in accordance with Section 25 hereof, to the extent required
to be so applied, the security interest created hereunder in such Collateral
shall be automatically released.
(c) In connection with any termination or release pursuant to paragraphs
(a) and (b), (i) the Collateral Agent shall execute and deliver to each Pledgor
with respect to the Collateral owned by such Pledgor, or to such person or
persons as such Pledgor shall reasonably designate, against receipt, such
Collateral sold, transferred or otherwise disposed together with appropriate
instructions of reassignment and release, (ii) any representation, warranty or
covenant contained herein relating to the Collateral shall no longer be deemed
to be made with respect to such sold, transferred or otherwise disposed
Collateral and (iii) all schedules hereto shall be amended (as appropriate) to
reflect the respective release. Any such reassignment shall be without recourse
or to any warranty by the Collateral Agent and at the expense of such Pledgor.
(d) At any time that a Pledgor desires that the Collateral Agent assign,
transfer and deliver Collateral (and releases therefor) as provided in Section
22(a) or (b) hereof, it shall deliver to the Collateral Agent a certificate
signed by an executive officer of such Pledgor stating that the release of the
respective Collateral is permitted pursuant to such Section 22(a) or (b).
(e) In the event that all of the Equity Interests of one or more Pledgors
is sold or otherwise disposed of (except to Holdings, the Borrower or any of
their respective Subsidiaries) or liquidated in compliance with the requirements
of Section 6.05 of the Credit Agreement (or any such sale or other disposition
or liquidation has been approved in writing by the Required Lenders or, after
all Credit Document Obligations have been paid in full, approved in accordance
with Section 25 hereof) and the proceeds of such sale, disposition or
liquidation are applied in accordance with the provisions of the Credit
Agreement, to the extent applicable, such Pledgor shall be released from this
Agreement and this Agreement shall, as to each such Pledgor or Pledgors,
terminate, and have no further force or effect (it being understood and agreed
that the sale of all the Equity Interests held by Holdings, the Borrower, and
their Subsidiaries in one or more persons that own, directly or indirectly, all
of the Equity Interests of any Pledgor shall be deemed to be a sale of such
Pledgor for the purposes of this clause (e)).
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22
23. Notices. All notices, requests and demands to or upon the Secured
Parties or the Pledgors under this Agreement shall be given or made in
accordance with Section 9.01 of the Credit Agreement and addressed as follows:
(a) if to any Pledgor, at its address set forth opposite its signature
below;
(b) if to the Collateral Agent:
Bankers Trust Company
130 Liberty Street
New York, New York 10006
Telephone: (212) 250-9094
Telecopier: (212) 250-7218
Attention: Mary Kay Coyle
(c) if to any Bank Creditor (other than the Collateral Agent), at such
address as such Bank Creditor shall have specified in the Credit Agreement;
(d) if to any Other Creditor, at such address as such Other Creditor
shall have specified in writing to each Grantor and the Collateral Agent;
or
(e) at such other address as shall have been furnished in writing by
any Person described above to the party required to give notice hereunder.
24. Severability. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition of enforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. The parties shall endeavor in good-faith negotiations to
replace the invalid, illegal or unenforceable provisions with valid provisions,
the economic effect of which comes as close as possible to that of the invalid,
illegal or unenforceable provisions.
25. Amendments in Writing; No Waiver; Cumulative Remedies. (a) None of the
terms or provisions of this Agreement may be waived, amended, supplemented or
otherwise modified except by a written instrument executed by each Pledgor and
the Collateral Agent (with the consent of either (x) the Required Lenders or, to
the extent required by Section 9.08 of the Credit Agreement, all of the Lenders,
at all times prior to the time on which all Credit Document Obligations have
been paid in full or (y) the holders of at least a majority of the outstanding
Other Obligations at all times after the time on which all Credit Document
Obligations have been paid in full); provided, that any change, waiver,
modification or variance affecting the rights and benefits of a single Class of
Secured Creditors (and not all Secured Creditors in a like or similar manner)
shall also require the written consent of the Requisite Creditors of such Class
of Secured Creditors, i.e., whether
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23
(x) the Agents and the Lenders as holders of the Credit Agreement Obligations or
(y) the Other Creditors as the holders of the Other Obligations. For the purpose
of this Agreement, the term "Requisite Creditors" of any Class shall mean each
of (x) with respect to the Credit Agreement Obligations, the Required Lenders
and (y) with respect to the Other Obligations, the holders of at least a
majority of all obligations outstanding from time to time under the Interest
Rate Protection Agreements. Notwithstanding the foregoing, additional parties
may become Pledgors hereunder as provided by Section 31, and in connection
therewith, supplements to this Agreement shall be executed and delivered by such
parties as required by the terms hereof.
(b) Neither the Collateral Agent nor any Secured Party shall by any act
(except by a written instrument pursuant in Section 25(a) hereof) or delay be
deemed to have waived any right or remedy hereunder or to have acquiesced in any
Default or Event of Default or in any breach of any of the terms and conditions
hereof. No failure to exercise, nor any delay in exercising, on the part of any
Secured Party, any right, power or privilege hereunder shall operate as a waiver
thereof. No single or partial exercise of any right, power or privilege
hereunder shall preclude any other or further exercise of any other right, power
or privilege. A waiver by any Secured Party of any right or remedy hereunder on
any one occasion shall not be construed as a bar to any right or remedy which
such Secured Party would otherwise have on any future occasion.
(c) The rights and remedies herein provided are cumulative, may be
exercised singly or concurrently and are not exclusive of any other rights or
remedies provided by law.
26. Section Headings. The section headings used in this Agreement are for
convenience of reference only and are not to affect the construction hereof or
be taken into consideration in the interpretation hereof.
27. Successors and Assigns. This Agreement shall be binding upon the
successors and assigns of the Pledgors and shall inure to the benefit of the
Pledgors, the Collateral Agent and the Secured Parties and their successors and
assigns, provided that this Agreement may not be assigned by the Pledgors
without the prior written consent of the Collateral Agent and the Secured
Parties.
28. Counterparts. This Agreement may be executed in two or more original
counterparts, each of which shall constitute an original but all of which when
taken together shall constitute but one contract.
29. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
30. NOTICES AND ACKNOWLEDGEMENTS WITH RESPECT TO PLEDGED PARTNERSHIP AND
MEMBERSHIP INTERESTS. Notwithstanding anything to
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24
the contrary contained herein or in the Credit Agreement, each Pledgor hereby
covenants and agrees that with respect to any Pledged Partnership Interest or
Pledged Membership Interest, in each case pledged by it hereunder, such Pledgor
will use its reasonable best efforts to deliver to the respective Pledged
Partnerships or Pledged LLCs, as the case may be (with copies to the Collateral
Agent) a Pledge Notice (appropriately completed) and such Pledgor will use its
reasonable best efforts to deliver to the Collateral Agent a Pledge
Acknowledgement signed by the respective Pledged Partnerships or Pledged LLCs,
as the case may be, in each case within forty-five days following the date of
any pledge of any Pledged Partnership Interests or Pledged Membership Interests
hereunder.
31. Additional Pledgors. Pursuant to Section 5.11 of the Credit Agreement,
certain Subsidiaries of Holdings may after the date hereof be required to enter
into this Agreement as a Pledgor. Upon execution and delivery, after the date
hereof, by the Collateral Agent and such Subsidiary of an instrument in the form
of Exhibit A-2, such Subsidiary shall become a Pledgor hereunder with the same
force and effect as if originally named as a Pledgor hereunder. Each Subsidiary
which is required to become a party to this Agreement shall so execute and
deliver a copy of Exhibit A-2 to the Collateral Agent and, at such time, shall
execute a Pledge Agreement Supplement in the form of Exhibit A-1 to this
Agreement with respect to all Collateral of such Pledgor required to be pledged
hereunder, which Supplement shall be completed in accordance with Exhibit A-1
and the covenants which will then be applicable to the new Pledgor pursuant to
Section 5(d) hereof. The execution and delivery of any such instrument shall not
require the consent of any other Pledgor hereunder.
32. Continuing Pledgors. The rights and obligations of each Pledgor (other
than the respective released Pledgor in the case of following clause (y))
hereunder shall remain in full force and effect notwithstanding (x) the addition
of any new Pledgor as a party to this Agreement as contemplated by preceding
Section 31 or otherwise and/or (y) the release of any Pledgor under this
Agreement as contemplated by Section 22 or otherwise.
33. Limitations on Recourse. Notwithstanding anything contained herein to
the contrary, each Pledgor and the Collateral Agent agree that (a) in an action
to collect any amounts due under, or otherwise in respect of, this Agreement,
any Note or any other Loan Document, no current or former Holdings Partner
(except to the extent any such Holdings Partner is a Loan Party) in its capacity
as such will be personally liable for any amounts due or any other liability
under this Agreement, any Note or any other Loan Document, and no deficiency or
personal judgment will be sought against any such Holdings Partner in its
capacity as such for payment of the Indebtedness evidenced by the Credit
Agreement, any Note or any other Loan Document and (b) no property or assets of
any such current or former Holdings Partner (except to the extent any such
Holdings Partner is a Loan Party) in its capacity as such shall be sold, levied
upon or otherwise used to satisfy any judgment rendered in connection with any
action brought with respect to this Agreement, any other Loan Document or any
Note; provided, however, that nothing contained in this Section 33 shall (i)
impair the validity of the Indebtedness evidenced by the Credit Agreement or the
Notes, (ii)
<PAGE>
25
prevent the taking of any action permitted by law against any Pledgor or any
other Loan Party or the assets of any Pledgor or any other Loan Party or the
proceeds of such assets or (iii) in any way affect or impair the right of any
Agent or any Lender to take any action permitted by law to realize upon any
Mortgaged Property, the Collateral or any other security which may secure any
Loan Party's obligations.
* * *
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be duly
executed and delivered as of the date first above written.
Addresses:
1110 East Princess Street GRAHAM PACKAGING HOLDINGS
York, Pennsylvania 17403 COMPANY, as a Pledgor
Telephone: (717) 849-8500
Telecopy: (717) 849-8541 By: BCP/Graham Holdings L.L.C.
Attention: Chief Financial Officer its general partner
By /s/ John E. Hamilton
--------------------------------
Title: Vice President
1110 East Princess Street GRAHAM PACKAGING COMPANY,
York, Pennsylvania 17403 as a Pledgor
Telephone: (717) 849-8500
Telecopy: (717) 849-8541 By: GPC Opco GP LLC
Attention: Chief Financial Officer its general partner
By /s/ John E. Hamilton
--------------------------------
Title: Vice President
1110 East Princess Street GPC CAPITAL CORP. II
York, Pennsylvania 17403
Telephone: (717) 849-8500
Telecopy: (717) 849-8541
Attention: Chief Financial Officer
By /s/ John E. Hamilton
--------------------------------
Title: Vice President
<PAGE>
1110 East Princess Street GPC OPCO GP LLC
York, Pennsylvania 17403
Telephone: (717) 849-8500
Telecopy: (717) 849-8541
Attention: Chief Financial Officer
By /s/ John E. Hamilton
--------------------------------
Title: Vice President
1110 East Princess Street GPC CAPITAL CORP. I
York, Pennsylvania 17403
Telephone: (717) 849-8500
Telecopy: (717) 849-8541
Attention: Chief Financial Officer
By /s/ John E. Hamilton
--------------------------------
Title: Vice President
1110 East Princess Street GRAHAM PACKAGING POLAND, L.P.
York, Pennsylvania 17403
Telephone: (717) 849-8500
Telecopy: (717) 849-8541 By: GPC Sub GP LLC, its general
Attention: Chief Financial Officer partner
By /s/ John E. Hamilton
--------------------------------
Title: Vice President
1110 East Princess Stret GRAHAM RECYCLING COMPANY,
York, Pennsylvania 17403
Telphone: (717) 849-8500
Telecopy: (717) 849-8541 By: GPC Sub GP LLC, its general
Attention: Chief Financial Officer partner
By /s/ John E. Hamilton
--------------------------------
Title: Vice President
<PAGE>
1110 East Princess Street GRAHAM PACKAGING FRANCE PARTNERS
York, Pennsylvania 17403
Telphone: (717) 849-8500
Telecopy: (717) 849-8541 By: GPC Sub GP LLC, general
Attention: Chief Financial Officer partner
By /s/ John E. Hamilton
--------------------------------
Title: Vice President
1110 East Princess Street GRAHAM PACKAGING LATIN AMERICA, LLC
York, Pennsylvania 17403
Telphone: (717) 849-8500
Telecopy: (717) 849-8541
Attention: Chief Financial Officer
By /s/ John E. Hamilton
--------------------------------
Title: Vice President
1110 East Princess Street GPC SUB GP LLC
York, Pennsylvania 17403
Telphone: (717) 849-8500
Telecopy: (717) 849-8541
Attention: Chief Financial Officer
By /s/ John E. Hamilton
--------------------------------
Title: Vice President
BANKERS TRUST COMPANY, as Collateral
Agent
By /s/ Mary Kay Coyle
--------------------------------
Title: Managing Director
<PAGE>
SCHEDULE I
TO PLEDGE AGREEMENT
<TABLE>
<CAPTION>
PLEDGED STOCK
===============================================================================================================
Ownership
Pledgor Issuer Pledged Stock Interest
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Graham Packaging GPC Capital Corp. II 100% (Certificated) 100%
Holdings Company
- ---------------------------------------------------------------------------------------------------------------
Graham Packaging GPC Capital Corp. I 100% (Certificated) 100%
Company
- ---------------------------------------------------------------------------------------------------------------
Graham Packaging Graham 65% 99%
Latin America, LLC Brasil (Uncertificated)
Particacoes
- ---------------------------------------------------------------------------------------------------------------
Graham Packaging Masko 50% 50%
Poland Graham (Uncertificated)
- ---------------------------------------------------------------------------------------------------------------
Graham Packaging Graham Packaging 65% 100%
France Partners France Holdings S.A. (Uncertificated)
- ---------------------------------------------------------------------------------------------------------------
Graham Packaging Graham Packaging 65% (Certificated) 100%
Company Canada Limited (222,796 Shares)
===============================================================================================================
</TABLE>
<PAGE>
SCHEDULE II
TO PLEDGE AGREEMENT
PLEDGED NOTES
1. Intercompany Note between Graham Packaging Company and Graham Packaging
France, S.A. in the amount of $40,000,000.
2. Intercompany Note between Graham Packaging Company and Graham Packaging
Italy, S.r.L. in the amount of $12,000,000.
3. Intercompany Note between Graham Packaging Company and Graham Packaging
Canada, Ltd. in the amount of $10,000,000.
<PAGE>
SCHEDULE III
TO PLEDGE AGREEMENT
PLEDGED PARTNERSHIP INTERESTS AND PLEDGED MEMBERSHIP INTERESTS
================================================================================
Type of
Partnership
Pledged Entity Pledgor % Owned Interest
- --------------------------------------------------------------------------------
GPC Opco GP LLC Graham Packaging 100% LLC
Holdings Company (Uncertified)
- --------------------------------------------------------------------------------
Graham Packaging Graham Packaging 99% LP
Company Holdings Company (Uncertified)
- --------------------------------------------------------------------------------
Graham Packaging GPC Opco GP LLC 1% LP
Company (Uncertified)
- --------------------------------------------------------------------------------
GPC Sub GP LLC Graham Packaging 100% LLC
Company (Uncertified)
- --------------------------------------------------------------------------------
Graham Packaging Graham Packaging 99% GP
France Partners Company (Uncertified)
- --------------------------------------------------------------------------------
Graham Packaging GPC Sub GP LLC 1% GP
France Partners (Uncertified)
- --------------------------------------------------------------------------------
Graham Packaging Graham Packaging 99% S.r.L.
Italy Company (Uncertified)
- --------------------------------------------------------------------------------
Graham Packaging GPC Sub GP LLC 1% S.r.L.
Italy (Uncertified)
- --------------------------------------------------------------------------------
LIDO Plast-Graham Graham Packaging 99% S.r.L.
Company (Uncertified)
- --------------------------------------------------------------------------------
LIDO Plast-Graham GPC Sub GP LLC 1% S.r.L.
(Uncertified)
- --------------------------------------------------------------------------------
Graham Packaging Graham Packaging 99% LP
Poland, L.P. Company (Uncertified)
- --------------------------------------------------------------------------------
Graham Packaging GPC Sub GP LLC 1% LP
Poland, L.P. (Uncertified)
- --------------------------------------------------------------------------------
Graham Recycling Graham Packaging 99% LP
Company, L.P. Company (Uncertified)
- --------------------------------------------------------------------------------
Graham Recycling GPC Sub GP LLC 1% LP
Company, L.P. (Uncertified)
================================================================================
<PAGE>
2
================================================================================
Type of
Partnership
Pledged Entity Pledgor % Owned Interest
- --------------------------------------------------------------------------------
Graham Packaging Graham Packaging 99% LLC
Latin America, LLC Holdings Company (Uncertified)
- --------------------------------------------------------------------------------
Graham Packaging GPC Sub GP LLC 1% LLC
Latin America, LLC (Uncertified)
================================================================================
<PAGE>
SCHEDULE IV
FORM OF PLEDGE NOTICE
[Letterhead of Pledgor]
[Date]
TO: [Name of Pledged Partnership]
Notice is hereby given that, pursuant to a Pledge Agreement (a true and
correct copy of which is attached hereto), dated as of February 2, 1998 (as
amended, modified or supplemented from time to time in accordance with the terms
thereof, the "Pledge Agreement"), among [NAME OF PLEDGOR] (the "Pledgor"), the
other pledgors from time to time party thereto and Bankers Trust Company (the
"Pledgee"), as Collateral Agent on behalf of the Secured Parties described
therein, the Pledgor has pledged and assigned to the Collateral Agent for the
benefit of the Secured Parties and granted to the Collateral Agent for the
benefit of the Secured Parties, a continuing security interest in, all right,
title and interest of the Pledgor, whether now existing or hereafter arising or
acquired, as a [[limited] [general] partner] [member] in [NAME OF PLEDGED
PARTNERSHIP OR PLEDGED LLC] (the ["Partnership"]["LLC"]), and in, to and under
the [TITLE OF APPLICABLE AGREEMENT] (the "[Partnership][LLC] Agreement"),
including, without limitation:
(i) the Pledgor's interest in all of the capital of the
[Partnership][LLC] and the Pledgor's interest in all profits, losses[,
Partnership Assets (as defined in the Pledge Agreement)] and other
distributions to which the Pledgor shall at any time be entitled in respect
of such partnership interest;
(ii) all other payments due or to become due to the Pledgor in respect
of such [partnership][membership] interest, whether under the
[Partnership][LLC] Agreement or otherwise, whether as contractual
obligations, damages, insurance proceeds or otherwise;
(iii) all of the Pledgor's claims, rights, powers, privileges,
authority, options, security interest, liens and remedies, if any, under
the [Partnership][LLC] Agreement or at law or otherwise in respect of such
[partnership][membership] interest;
(iv) all present and future claims, if any, of the Pledgor against the
[Partnership][LLC] for moneys loaned or advanced, for services rendered or
otherwise;
(v) all of the Pledgor's rights under the [Partnership][LLC] Agreement
or at law to exercise and enforce every right, power, remedy, authority,
option and privilege of the Pledgor relating to the [partnership]
[membership] interest, including any power to terminate, cancel or modify
the [Partnership][LLC] Agreement, to execute any instruments and to take
any and all other action on behalf of and in the name of the Pledgor in
<PAGE>
SCHEDULE IV
Page 2
respect of the [partnership][membership] Interest and the
[Partnership][LLC], to make determinations, to exercise any election
(including, but not limited, election of remedies) or option or to give or
receive any notice, consent, amendment, waiver or approval, together with
full power and authority to demand, receive, enforce, collect or receipt
for any of the foregoing [or for any Partnership Asset], to enforce or
execute any checks, or other instruments or orders, to file any claims and
to take any action in connection with any of the foregoing;
(vi) all other property hereafter delivered to the Pledgor in
substitution for or in addition to any of the foregoing, all certificates
and instruments representing or evidencing such other property and all
cash, securities, interest, dividends, rights and other property at any
time and from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all thereof; and
(vii) to the extent not otherwise included, all proceeds of any or all
of the foregoing.
Pursuant to the Pledge Agreement, the [Partnership][LLC] is hereby
authorized and directed to register the Pledgor's pledge to the Pledgee on
behalf of the Secured Creditors of the interest of the Pledgor on the
[Partnership's][LLC's] books.
The Pledgor hereby requests the [Partnership][LLC] to indicate the
[Partnership's][LLC] acceptance of this Notice and consent to and confirmation
of its terms and provisions by signing a copy hereof where indicated on the
attached page and returning the same to the Collateral Agent on behalf of the
Secured Parties.
[NAME OF PLEDGOR]
By_____________________________
Title:
<PAGE>
SCHEDULE V
FORM OF PLEDGE ACKNOWLEDGMENT
[NAME OF PLEDGED PARTNERSHIP/PLEDGED LLC] (the ["Partnership"/"LLC"])
hereby acknowledges receipt of a copy of the assignment by [NAME OF PLEDGOR]
("Pledgor") of its interest under the [TITLE OF APPLICABLE AGREEMENT] (the
"[Partnership][LLC] Agreement") pursuant to the terms of the Pledge Agreement,
dated as of February 2, 1998 (as amended, modified or supplemented from time to
time in accordance with the terms thereof, the "Pledge Agreement"), among the
Pledgor, the other pledgors from time to time party thereto and Bankers Trust
Company, as Collateral Agent on behalf of the Secured Parties described therein.
The undersigned hereby further confirms the registration of the Pledgor's pledge
of its interest to the Pledgee on behalf of the Secured Parties on the
[Partnership's][LLC's] books.
Dated: ______________ __, ____
[NAME OF PLEDGED PARTNERSHIP/PLEDGED LLC]
By:____________________________
Title:
<PAGE>
SCHEDULE VI
TO PLEDGE AGREEMENT
OFFICE LOCATIONS
================================================================================
Entity Office Location/County
- --------------------------------------------------------------------------------
Graham Packaging Holdings Company 1110 East Princess Street
York, Pennsylvania 17405
York County, Pennsylvania
- --------------------------------------------------------------------------------
Graham Packaging Company 1110 East Princess Street
York, Pennsylvania 17405
York County, Pennsylvania
- --------------------------------------------------------------------------------
GPC Capital Corp. II 1110 East Princess Street
York, Pennsylvania 17405
York County, Pennsylvania
- --------------------------------------------------------------------------------
GPC Opco GP. LLC 1110 East Princess Street
York, Pennsylvania 17405
York County, Pennsylvania
- --------------------------------------------------------------------------------
GPC Capital Corp. I 1110 East Princess Street
York, Pennsylvania 17405
York County, Pennsylvania
- --------------------------------------------------------------------------------
Graham Packaging Poland, L.P. 1110 East Princess Street
York, Pennsylvania 17405
York County, Pennsylvania
- --------------------------------------------------------------------------------
Graham Recycling Company 1110 East Princess Street
York, Pennsylvania 17405
York County, Pennsylvania
- --------------------------------------------------------------------------------
Graham Packaging France Partners 1110 East Princess Street
York, Pennsylvania 17405
York County, Pennsylvania
- --------------------------------------------------------------------------------
Graham Packaging Latin America, LLC 1110 East Princess Street
York, Pennsylvania 17405
York County, Pennsylvania
- --------------------------------------------------------------------------------
GPC Sub GP LLC 1110 East Princess Street
York, Pennsylvania 17405
York County, Pennsylvania
================================================================================
<PAGE>
EXHIBIT A-1 TO
PLEDGE AGREEMENT
[FORM OF]
PLEDGE AGREEMENT SUPPLEMENT
PLEDGE AGREEMENT SUPPLEMENT, dated as of [_________] (this
"Supplement"), made by _________, a [_________] corporation (the
"Pledgor"), in favor of BANKERS TRUST COMPANY, as collateral agent (in
such capacity, the "Collateral Agent") for the Secured Parties (such
term and each other capitalized term used but not defined having the
meaning given in the Pledge Agreement, and if not defined therein,
having the meaning given in the Credit Agreement referred to below)
from time to time parties to the Credit Agreement, dated as of
February 2, 1998 (as the same may be amended, supplemented or
otherwise modified from time to time, the "Credit Agreement"), among
Graham Packaging Holdings Company, a Pennsylvania limited partnership
("Holdings"), Graham Packaging Company, a Delaware limited partnership
(the "Borrower"), GPC Capital Corp. I (the "Co-Borrower"), the Lenders
from time to time party thereto, NationsBank, N.A., as Documentation
Agent, and Bankers Trust Company, as Administrative Agent, Syndication
Agent, Collateral Agent, and Fronting Bank.
1. Reference is hereby made to that certain Pledge Agreement, dated as of
February 2, 1998 (as amended, supplemented or otherwise modified as of the date
hereof, the "Pledge Agreement"), made by the Pledgors party thereto in favor of
the Collateral Agent.
2. The Pledgor hereby confirms and reaffirms the security interest in the
Collateral granted to the Collateral Agent for the benefit of the Secured
Parties under the Pledge Agreement, and, as additional collateral security for
the prompt and complete payment when due (whether at stated maturity, by
acceleration or otherwise) of the Obligations and in order to induce the Secured
Parties to make Loans and extend Letters of Credit under the Credit Agreement
and the other Loan Documents, the Pledgor hereby delivers to the Collateral
Agent, for the benefit of the Secured Parties, [(i) all of the issued and
outstanding shares of Capital Stock listed in Schedule I hereto, together with
all stock certificates, options, or rights of any nature whatsoever which may be
issued or granted in respect of such stock while the Pledge Agreement, as
supplemented hereby, is in force (the "Additional Pledged Stock"; as used in the
Pledge Agreement as supplemented by this Supplement, "Pledged Stock" shall be
deemed to include the Additional Pledged Stock)] [(ii) all promissory notes
listed on Schedule II hereto (the "Additional Pledged Notes"; as used in the
Pledge Agreement as supplemented by this Supplement, "Pledged Notes" shall be
<PAGE>
deemed to include the Additional Pledged Notes)][(iii) all partnership interests
and membership interests listed on Schedule III hereto, (the "Additional Pledged
Partnership Interests" and "Additional Pledged Membership Interests", as
appropriate; as used in the Pledge Agreement as supplemented by this Supplement,
"Pledged Partnership Interests" shall be deemed to include the Additional
Pledged Partnership Interests and "Pledged Membership Interests" shall be deemed
to include the Additional Pledged Membership Interests)] and hereby grants to
the Collateral Agent, for the benefit of the Secured Parties, a first security
interest in the Additional Pledged Stock, Additional Pledged Notes, Additional
Pledged Partnership Interests and/or Additional Pledged Membership Interests, as
the case may be, and all Proceeds thereof.
3. The Pledgor hereby represents and warrants that the representations and
warranties contained in Section 4 of the Pledge Agreement are true and correct
on the date of this Supplement [with references therein to the "Pledged Stock"
to include the Additional Pledged Stock, [with references to the "Pledged Notes"
to include the Additional Pledged Notes,] [with references to the "Pledged
Partnership Interests" to include the Additional Pledged Partnership Interests,]
[with references to the "Pledged Membership Interests" to include the Additional
Pledged Membership Interests,] and with references to the "Pledge Agreement" to
mean the Pledge Agreement as supplemented by this Supplement.
4. This Supplement is supplemental to the Pledge Agreement, forms a part
thereof and is subject to the terms thereof and the Pledge Agreement is hereby
supplemented as provided herein. Without limiting the foregoing, Schedule I to
the Pledge Agreement shall hereby be deemed to include each item listed on
Schedule I to this Supplement, Schedule II to the Pledge Agreement shall hereby
be deemed to include each item listed on Schedule II to this Supplement and
Schedule III to the Pledge Agreement shall hereby be deemed to include each item
listed on Schedule III to this supplement.
<PAGE>
3
IN WITNESS WHEREOF, the Pledgor and the Collateral Agent have caused this
Supplement to be duly executed and delivered on the date first set forth above.
[PLEDGOR]
By____________________________________
Name:
Title:
BANKERS TRUST COMPANY, as Collateral Agent
By____________________________________
Name:
Title:
<PAGE>
SCHEDULE I
TO PLEDGE AGREEMENT SUPPLEMENT
================================================================================
PLEDGED STOCK
- --------------------------------------------------------------------------------
Ownership
Pledgor Issuer Pledged Stock Interest
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
<PAGE>
SCHEDULE II
TO PLEDGE AGREEMENT SUPPLEMENT
================================================================================
PLEDGED NOTES
- --------------------------------------------------------------------------------
Obligor Principal Amount (if Maturity Date (if
any) any)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
<PAGE>
SCHEDULE III
TO PLEDGE AGREEMENT SUPPLEMENT
================================================================================
PLEDGED PARTNERSHIP INTERESTS
AND PLEDGED MEMBERSHIP INTERESTS
- --------------------------------------------------------------------------------
Pledged Entities Percentage Owned Type of Partnership
Interest (if
applicable)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
<PAGE>
EXHIBIT A-2 TO THE
PLEDGE AGREEMENT
SUPPLEMENT NO. __ dated as of [____________], to the Pledge
Agreement dated as of February 2, 1998 (the "Pledge Agreement"), among
the Pledgors party thereto (immediately before giving effect to this
Supplement) and BANKERS TRUST COMPANY as collateral agent (the
"Collateral Agent") for the Secured Parties (such term and each other
capitalized term used but not defined having the meaning given it in
the Pledge Agreement, and if not defined therein, having the meaning
given it in Section 1.01 of the Credit Agreement referred to below).
A. Reference is made to the Credit Agreement dated as of February 2, 1998
(as amended or modified from time to time, the "Credit Agreement"), among Graham
Packaging Holdings Company ("Holdings"), Graham Packaging Company (the
"Borrower"), GPC Capital Corp. I (the "Co-Borrower"), the Lenders party thereto,
NationsBank, N.A., as Documentation Agent, and Bankers Trust Company, as
Administrative Agent, Syndication Agent, Collateral Agent, and Fronting Bank.
B. The Pledgors have entered into the Pledge Agreement in order to induce
the Lenders to make Loans and induce the Fronting Bank to issue Letters of
Credit pursuant to, and upon the terms and subject to the conditions specified
in, the Credit Agreement. Pursuant to Section 5.11 of the Credit Agreement,
certain Subsidiaries of Holdings are, after the date of the Pledge Agreement,
required to enter into the Pledge Agreement as a Pledgor. Section 31 of the
Pledge Agreement provides that such additional Subsidiaries may become Pledgors
under the Pledge Agreement by execution and delivery of an instrument in the
form of this Supplement. The undersigned (the "New Pledgor") is a Subsidiary of
Holdings and is executing this Supplement in accordance with the requirements of
the Credit Agreement to become a Pledgor under the Pledge Agreement in order to
induce the Lenders to make additional Loans and the Fronting Bank to issue
additional Letters of Credit and as consideration for Loans previously made and
Letters of Credit previously issued.
Accordingly, the Collateral Agent and the New Pledgor agree as follows:
SECTION 1. The New Pledgor by its signature below becomes a Pledgor under
the Pledge Agreement with the same force and effect as if originally named
therein as a Pledgor and the New Pledgor hereby agrees to all the terms and
provisions of the Pledge Agreement applicable to it as a Pledgor thereunder.
Each reference to a "Pledgor" in the Pledge Agreement shall be deemed to include
the New Pledgor. The Pledge Agreement is hereby incorporated herein by
reference.
<PAGE>
2
SECTION 2. The New Pledgor represents and warrants to the Secured Parties
that this Supplement has been duly authorized, executed and delivered by it and
constitutes its legal, valid and binding obligation, enforceable against it in
accordance with its terms, subject to the effects of applicable bankruptcy,
insolvency or similar laws affecting creditors' rights generally and equitable
principles of general applicability.
SECTION 3. This Supplement may be executed in two or more counterparts,
each of which shall constitute an original, but all of which, when taken
together, shall constitute but one instrument. This Supplement shall become
effective when the Collateral Agent shall have received counterparts of this
Supplement that, when taken together, bear the signatures of the New Pledgor and
the Collateral Agent.
SECTION 4. Except as expressly supplemented hereby, the Pledge Agreement
shall remain in full force and effect.
SECTION 5. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 6. In case any one or more of the provisions contained in this
Supplement should be held invalid, illegal or unenforceable in any respect,
neither party hereto shall be required to comply with such provision for so long
as such provision is held to be invalid, illegal or unenforceable, but the
validity, legality and enforceability of the remaining provisions contained
herein and in the Pledge Agreement shall not in any way be affected or impaired.
The parties hereto shall endeavor in good-faith negotiations to replace the
invalid, illegal or unenforceable provisions with valid provisions the economic
effect of which comes as close as possible to that of the invalid, illegal or
unenforceable provisions.
SECTION 7. All communications and notices hereunder shall be in writing and
given as provided in the Credit Agreement. All communications and notices
hereunder to the New Pledgor shall be given to it at the address set forth under
its signature, with a copy to the Borrower.
<PAGE>
3
IN WITNESS WHEREOF, the New Pledgor and the Collateral Agent have duly
executed this Supplement to the Pledge Agreement as of the day and year first
above written.
[NAME OF NEW PLEDGOR]
By________________________________
Name:
Title:
Address:
BANKERS TRUST COMPANY, as
Collateral Agent
By________________________________
Name:
Title:
<PAGE>
EXHIBIT I
SUBSIDIARY GUARANTEE AGREEMENT
SUBSIDIARY GUARANTEE AGREEMENT, dated as of February 2, 1998, made by each
of the signatories hereto (the "Guarantors"), in favor of BANKERS TRUST COMPANY,
as collateral agent (in such capacity, the "Collateral Agent") for the benefit
of the Secured Parties (as such term is defined below). Reference is made to the
Credit Agreement, dated as of February 2, 1998 (the "Credit Agreement"), among
Graham Packaging Holdings Company, a Pennsylvania limited partnership
("Holdings"), Graham Packaging Company, a Delaware limited partnership (the
"Borrower"), GPC Capital Corp. I, a Delaware corporation (the "Co-Borrower"),
the Lenders (such term and each other capitalized term used but not defined
having the meaning given to it in Section 1.01 of the Credit Agreement) from
time to time party thereto, NationsBank, N.A., as Documentation Agent, and
Bankers Trust Company, as Administrative Agent, Syndication Agent, Collateral
Agent and Fronting Bank (as used herein, the term "Credit Agreement" means the
Credit Agreement described above in this sentence as the same may be amended,
modified, extended, restated or supplemented from time to time, and including
any agreement extending the maturity of, or restructuring the Indebtedness under
such agreement or any successor agreement) (the Lenders, the Documentation
Agent, the Administrative Agent, Syndication Agent, the Collateral Agent and the
Fronting Bank are herein called the "Bank Creditors").
W I T N E S S E T H:
WHEREAS, pursuant to the Credit Agreement, the Lenders have severally
agreed to make Loans and the Fronting Bank has agreed to issue Letters of
Credit, upon the terms and subject to the conditions set forth therein;
WHEREAS, the Borrower may at any time and from time to time enter into one
or more Interest Rate Protection Agreements with one or more Lenders or any
affiliate thereof (each such Lender or affiliate, even if the respective Lender
subsequently ceases to be a lender under the Credit Agreement for any reason,
together with such Lender's or affiliate's successors and assigns, if any,
collectively, the "Other Creditors," and together with the Bank Creditors, the
"Secured Parties"); and
WHEREAS, it is a condition precedent to the obligation of the Lenders to
make the Loans and the obligation of the Fronting Bank to issue Letters of
Credit that each Guarantor shall have executed and delivered this Guarantee to
the Collateral Agent for the ratable benefit of the Secured Parties;
NOW, THEREFORE, in consideration of the premises and to induce the Secured
Parties to enter into the Credit Agreement and to induce the Lenders to make
their respective Loans and the Fronting Bank to issue its Letters of Credit,
each Guarantor hereby agrees with the Collateral Agent, for the ratable benefit
of the Secured Parties, as follows:
<PAGE>
1. Defined Terms. (a) Unless otherwise defined herein, terms defined in the
Credit Agreement and used herein shall have the meanings given in the Credit
Agreement.
(b) "Guarantee": this Subsidiary Guarantee Agreement, as the same may be
amended, supplemented or otherwise modified from time to time.
(c) "Obligations" shall mean (a) the unpaid principal of and premium, if
any, and interest on the Notes and all other obligations and liabilities of the
Borrower (including interest accruing at the then applicable rate provided in
the Credit Agreement after the maturity of the Loans and interest accruing at
the then applicable rate provided in the Credit Agreement after the filing of
any petition in bankruptcy, or the commencement of any insolvency,
reorganization or like proceeding, relating to the Borrower, whether or not a
claim for post-filing or post petition interest is allowed in such proceeding)
to the Bank Creditors, whether direct or indirect, absolute or contingent, due
or to become due, or now existing or hereafter incurred (including monetary
obligations incurred during the pendency of any bankruptcy, insolvency,
receivership or other similar proceeding, regardless of whether allowed or
allowable in such proceeding), which may arise under, out of or in connection
with, the Credit Agreement, this Guarantee or any other Loan Document and any
obligation of the Borrower to a Lender under any other document made, delivered
or given in connection with any of the foregoing, in each case whether on
account of principal, interest, reimbursement obligations, fees, indemnities,
costs, expenses or otherwise, including all fees and disbursements of counsel to
the Collateral Agent or to the Secured Parties that are required to be paid by
the Borrower or a Loan Party pursuant to the terms of the Credit Agreement, this
Agreement or any other Loan Document with a Lender (collectively, the "Credit
Document Obligations") and (b) all obligations and liabilities of the Borrower
to the Other Creditors now existing or hereafter incurred under, arising out of
or in connection with any Interest Rate Protection Agreement (all such
obligations and liabilities under this clause (b) being herein collectively
called the "Other Obligations").
(d) The words "hereof," "herein" and "hereunder" and words of similar
import when used in this Guarantee shall refer to this Guarantee as a whole and
not to any particular provision of this Guarantee, and section and paragraph
references are to this Guarantee unless otherwise specified. The words
"include", "includes" and including shall be deemed to be followed by the
phrase, "without limitation".
(e) The meanings given to terms defined herein shall be equally applicable
to both the singular and plural forms of such terms.
2. Guarantee. (a) Each Guarantor hereby, jointly and severally,
unconditionally and irrevocably guarantees, as a primary obligor and not merely
as surety, to the Collateral Agent, for the ratable benefit of the Secured
Parties and their respective successors, indorsees, transferees and assigns, the
due, punctual and complete payment and performance by the Borrower and the other
Loan Parties when and as due, whether at the stated maturity, by acceleration,
upon one or more dates set for prepayment or otherwise, of the Obligations.
(b) Each Guarantor further agrees to pay any and all reasonable expenses
(including all reasonable fees and disbursements of counsel) which may be paid
or incurred by
<PAGE>
any Secured Party in enforcing, or obtaining advice of counsel in respect of,
any rights with respect to, or collecting, any or all of the Obligations
guaranteed by such Guarantor and/or enforcing any rights with respect to, or
collecting against, such Guarantor under this Guarantee. This Guarantee shall
remain in full force and effect until all Interest Rate Protection Agreements
are terminated, the Obligations are paid in full, no Letters of Credit are
outstanding and the Commitments are terminated, notwithstanding that from time
to time prior thereto while the Commitments are in effect any Loan Party may be
free from any Obligations.
(c) Each Guarantor agrees that whenever, at any time, or from time to time,
it shall make any payment to the Collateral Agent for the benefit of any Secured
Party on account of its liability hereunder, it will notify the Collateral Agent
in writing that such payment is made under this Guarantee for such purpose,
provided that the failure of such Guarantor to provide such notice shall not
preclude the application of such payment to the complete or partial satisfaction
of such Guarantor's obligations hereunder following such Guarantor's notice to
the Collateral Agent of such payment.
3. No Subrogation. Notwithstanding any payment or payments made by any
Guarantor hereunder or any setoff or application of funds of any Guarantor by
any Secured Party, no Guarantor shall be entitled to be subrogated to any of the
rights of any Secured Party against any Loan Party or any collateral security or
guarantee or right of offset held by any Secured Party for the payment of the
Obligations, nor shall any Guarantor seek or be entitled to seek any
contribution or reimbursement from any Loan Party in respect of payments made by
such Guarantor hereunder, until all amounts owing to the Secured Parties by any
Loan Party on account of the Obligations are paid in full, no Letters of Credit
are outstanding, the Commitments are terminated and all Interest Rate Protection
Agreements are terminated. If any amount shall be paid to any Guarantor on
account of such subrogation rights at any time when all of the Obligations shall
not have been paid in full, Letters of Credit are outstanding, the Commitments
shall not have been terminated or any Interest Rate Protection Agreements shall
not have been terminated, such amount shall be held by such Guarantor in trust
for the Secured Parties, segregated from other funds of such Guarantor, and
shall forthwith upon receipt by such Guarantor, be turned over to the Collateral
Agent in the exact form received by such Guarantor (duly endorsed by such
Guarantor to the Collateral Agent, if required), to be applied against the
Obligations, whether matured or unmatured, at such time and in such order as the
Collateral Agent may determine.
4. Amendments, etc. with respect to the Obligations; Waiver of Rights. (a)
Each Guarantor shall remain obligated hereunder notwithstanding that, without
any reservation of rights against any Guarantor, and without notice to or
further assent by any Guarantor, any demand for payment of any of the
Obligations made by any Secured Party may be rescinded by such Secured Party,
and any of the Obligations continued, and the Obligations, or the liability of
any other party upon or for any part thereof, or any collateral security or
guarantee therefor or right of offset with respect thereto, may, from time to
time, in whole or in part, be renewed, extended, amended, modified, accelerated,
compromised, waived, surrendered or released by any Secured Party, and the
Credit Agreement, any other Loan Document, any Interest Rate Protection
Agreement and any other documents executed and delivered in connection therewith
may be amended, modified, supplemented or terminated, in whole or in part, as
the Collateral Agent (or the Required Lenders, as the case
<PAGE>
may be) or the relevant Secured Party (in the case of any such Interest Rate
Protection Agreement) may deem advisable from time to time, and any collateral
security, guarantee or right of offset at any time held by any Secured Party for
the payment of the Obligations may be sold, exchanged, waived, surrendered or
released. No Secured Party shall have any obligation to protect, secure, perfect
or insure any Lien at any time held by it as security for the Obligations or for
this Guarantee or any property subject thereto. When making any demand hereunder
against any particular Guarantor, any Secured Party may, but shall be under no
obligation to, make a similar demand on any Loan Party or any other guarantor,
and any failure by any Secured Party to make any such demand or to collect any
payments from any Loan Party or any such other guarantor or any release of any
Loan Party or such other guarantor shall not relieve such Guarantor of its
obligations or liabilities hereunder, and shall not impair or affect the rights
and remedies, express or implied, or as a matter of law, of any Secured Party
against any Guarantor.
(b) Each Guarantor hereby acknowledges and affirms that it understands that
to the extent the Obligations are secured by real property located in the State
of California, such Guarantor shall be liable for the full amount of the
liability hereunder notwithstanding foreclosure on such real property by trustee
sale or any other reason impairing such Guarantor's or any secured creditors'
right to proceed against the Borrower or any other guarantor of the Obligations.
(c) Each Guarantor hereby waives, to the fullest extent permitted by
applicable law, all rights and benefits under Sections 580a, 580b, 580d and 726
of the California Code of Civil Procedure. Each Guarantor hereby further waives
to the fullest extent permitted by applicable law, without limiting the
generality of the foregoing or any other provision hereof, all rights and
benefits which might otherwise be available to such Guarantor under Sections
2809, 2810, 2815, 2819, 2821, 2839, 2845, 2848, 2849, 2850, 2899 and 3433 of the
California Civil Code.
(d) Each Guarantor waives its rights of subrogation and reimbursement and
any other rights and defenses available to such Guarantor by reason of Sections
2787 to 2855, inclusive, of the California Civil Code, including, without
limitation, (1) any defenses such Guarantor may have to this Guarantee by reason
of an election of remedies by the Secured Parties and (2) any rights or defenses
such Guarantor may have by reason of protection afforded to the Borrower
pursuant to the antideficiency or other laws of California limiting or
discharging the Borrower's indebtedness, including, without limitation, Section
580a, 580b, 580d and 726 of the California Code of Civil Procedure. In
furtherance of such provisions, each Guarantor hereby waives all rights and
defenses arising out of an election of remedies of the Secured Parties, even
though that election of remedies, such as a nonjudicial foreclosure destroys
such Guarantor's rights of subrogation and reimbursement against the Borrower by
the operation of Section 580d of the California Code of Civil Procedure or
otherwise.
Each Guarantor warrants and agrees that each of the waivers set forth above
is made with full knowledge of its significance and consequences and that if any
of such waivers are determined to be contrary to any applicable law or public
policy, such waivers shall be effective only to the maximum extent permitted by
law.
<PAGE>
5. Guarantee Absolute and Unconditional. Each Guarantor waives any and all
notice of the creation, renewal, extension or accrual of any of the Obligations
and notice of or proof of reliance by any Secured Party upon this Guarantee or
acceptance of this Guarantee; the Obligations, and any of them, shall
conclusively be deemed to have been created, contracted or incurred, or renewed,
extended, amended or waived, in reliance upon this Guarantee; and all dealings
between any Loan Party or any Guarantor, on the one hand, and any of the Secured
Parties, on the other, shall likewise be conclusively presumed to have been had
or consummated in reliance upon this Guarantee. Each Guarantor waives diligence,
presentment, protest, demand for payment and notice of default or nonpayment to
or upon any Loan Party or any Guarantor with respect to the Obligations. This
Guarantee shall be construed as a continuing, absolute and unconditional
guarantee of payment, and not of collection, and without regard to (a) the
validity, regularity or enforceability of the Credit Agreement, any other Loan
Document, any Interest Rate Protection Agreement, any of the Obligations or any
other collateral security therefor or guarantee or right of offset with respect
thereto at any time or from time to time held by any Secured Party, (b) any
defense, set-off or counterclaim (other than a defense of payment or
performance) which may at any time be available to or be asserted by any Loan
Party against any Secured Party, or (c) any other circumstance whatsoever (with
or without notice to or knowledge of any Secured Party, any Loan Party or such
Guarantor) which may or might in any manner or to any extent vary the risk of
any Guarantor or otherwise constitutes, or might be construed to constitute, an
equitable or legal discharge of any Loan Party for the Obligations, or of any
Guarantor under this Guarantee, in bankruptcy or in any other instance. When
pursuing its rights and remedies hereunder against any Guarantor, any Secured
Party may, but shall be under no obligation to, pursue such rights and remedies
as it may have against any Loan Party or any other person or against any
collateral security or guarantee for the Obligations or any right of offset with
respect thereto, and any failure by any Secured Party to pursue such other
rights or remedies or to collect any payments from any Loan Party or any such
other person or to realize upon any such collateral security or guarantee or to
exercise any such right of offset, or any release of any Loan Party or any such
other person or of any such collateral security, guarantee or right of offset,
shall not relieve such Guarantor of any liability hereunder, and shall not
impair or affect the rights and remedies, whether express, implied or available
as a matter of law, of any Secured Party against such Guarantor. This Guarantee
shall remain in full force and effect and be binding in accordance with and to
the extent of its terms upon each Guarantor and its successors and assigns, and
shall inure to the benefit of the Secured Parties, and their respective
permitted successors, indorsees, transferees and assigns, until all the
Obligations and the obligations of each Guarantor under this Guarantee shall
have been satisfied by payment in full, no Letters of Credit shall be
outstanding, the Commitments shall have been terminated and all Interest Rate
Protection Agreements shall have been terminated, notwithstanding that from time
to time while the Commitments are in effect during the term of the Credit
Agreement any Loan Party may be free from any Obligations.
6. Reinstatement. This Guarantee shall continue to be effective, or be
reinstated, as the case may be, if at any time payment, or any part thereof, of
any of the Obligations is rescinded or must otherwise be restored or returned by
any Secured Party for any reason whatsoever, including, without limitation, upon
the insolvency, bankruptcy, dissolution, liquidation or reorganization of any
Loan Party or upon or as a result of the appointment of a receiver, intervenor
or conservator of, or trustee or similar officer for, any
<PAGE>
Loan Party or any substantial part of its property, or otherwise, all as though
such payments had not been made.
7. Payments. Each Guarantor hereby agrees that the Obligations will be paid
to the Collateral Agent without setoff or counterclaim in Dollars, on the same
basis as payments are made by the Borrower under Sections 2.18 and 2.19 of the
Credit Agreement, at the office of the Collateral Agent located at 130 Liberty
Street, New York, New York 10006.
8. Representations and Warranties. Each Guarantor hereby represents and
warrants to and with the Secured Parties that all representations and warranties
in the Loan Documents that relate to such Guarantor and its Subsidiaries are
true and correct in all material respects and all such representations and
warranties are incorporated herein by reference as if set forth herein in their
entirety.
9. Covenants. Each Guarantor hereby covenants and agrees with the Secured
Parties that, from and after the date of this Guarantee until the Obligations
are paid in full, no Letters of Credit are outstanding, the Commitments are
terminated and all Interest Rate Protection Agreements are terminated, unless
the Required Lenders shall otherwise consent in writing, it will take, or
refrain from taking, as the case may be, all actions that are necessary to be
taken or not taken so that no violation of any provision, covenant or agreement
contained in Articles V or VI of the Credit Agreement, and so that no Default or
Event of Default, is caused by the actions of such Guarantor or any of its
Subsidiaries.
10. Authority of Collateral Agent. Each Guarantor acknowledges that the
rights and responsibilities of the Collateral Agent under this Guarantee with
respect to any action taken by the Collateral Agent or the exercise or
non-exercise by the Collateral Agent of any option, right, request, judgment or
other right or remedy provided for herein or resulting or arising out of this
Guarantee shall, as between the Collateral Agent and each other Secured Parties,
be governed by the Credit Agreement and by such other agreements with respect
thereto as may exist from time to time among them, but, as between the
Collateral Agent and each Guarantor, the Collateral Agent shall be conclusively
presumed to be acting as agent for the other Secured Parties with full and valid
authority so to act or refrain from acting.
11. Notices. All notices, requests and demands to or upon any Secured Party
or any Guarantor under this Guarantee shall be given in accordance with Section
9.01 of the Credit Agreement and addressed as follows:
(a) if to any Guarantor, at its address set forth opposite its
signature below;
(b) if to the Collateral Agent:
Bankers Trust Company
130 Liberty Street
New York, New York 10006
Telephone: (212) 250-9094
Telecopier: (212) 250-7218
Attention: Mary Kay Coyle
<PAGE>
(c) if to any Bank Creditor (other than the Collateral Agent), at such
address as such Bank Creditor shall have specified in the Credit Agreement;
(d) if to any Other Creditor, at such address as such Other Creditor
shall have specified in writing to each Grantor and the Collateral Agent;
or
(e) at such other address as shall have been furnished in writing by
any Person described above to the party required to give notice hereunder.
12. Severability. Any provision of this Guarantee or any other Loan
Document which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction. The parties shall
endeavor in good-faith negotiations to replace the prohibited or unenforceable
provisions with valid provisions, the economic effect of which comes as close as
possible to that of the prohibited or unenforceable provisions.
13. Right of Setoff. If an Event of Default shall have occurred and be
continuing under the Credit Agreement, each Secured Party is hereby authorized
at any time and from time to time, to the fullest extent permitted by law, to
set off and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and other indebtedness at any time owing
by such Secured Party to or for the credit or the account of each Guarantor
against any of and all the obligations of such Guarantor now or hereafter
existing under this Guarantee irrespective of whether or not such Secured Party
shall have made any demand under this Guarantee and although such obligations
may be unmatured. The rights of each Secured Party under this Section 13 are in
addition to other rights and remedies (including other rights of setoff) that
such Secured Party may have.
14. Integration. This Guarantee represents the agreement of each Guarantor
with respect to the subject matter hereof and there are no promises or
representations by any Guarantor or any Secured Party relative to the subject
matter hereof not reflected herein or in the other Loan Documents.
15. Amendments in Writing; No Waiver; Cumulative Remedies. (a) Except as
provided in Sections 22 and 25, none of the terms or provisions of this
Guarantee may be waived, amended, supplemented or otherwise modified except by a
written instrument executed by each Guarantor and the Collateral Agent (with the
consent of either (x) the Required Lenders or, to the extent required by Section
9.08 of the Credit Agreement, all of the Lenders, at all times prior to the time
on which all Credit Document Obligations have been paid in full or (y) the
holders of at least a majority of the outstanding Other Obligations at all times
after the time on which all Credit Document Obligations have been paid in full);
provided, that any change, waiver, modification or variance affecting the rights
and benefits of a single Class of Secured Parties (and not all Secured Parties
in a like or similar manner) shall also require the written consent of the
Requisite Creditors of such Class of Secured Parties. For the purpose of this
Agreement, the term "Class" shall mean each class of Secured Parties, i.e.,
whether (x) the Bank Creditors as holders of the Credit Document Obligations or
(y) the Other Creditors as the holders of the Other Obligations. For
<PAGE>
the purpose of this Agreement, the term "Requisite Creditors" of any Class shall
mean each of (x) with respect to the Credit Document Obligations, the Required
Lenders and (y) with respect to the Other Obligations, the holders of at least a
majority of all obligations outstanding from time to time under the Interest
Rate Protection Agreements. Notwithstanding the foregoing, additional parties
may become Guarantors hereunder as provided by Section 22, and in connection
therewith, supplements to this Guarantee shall be executed and delivered by such
parties as required by the terms hereof.
(b) No Secured Party shall by any act (except by a written instrument
pursuant to Section 15(a) hereof), or delay be deemed to have waived any right
or remedy hereunder or to have acquiesced in any Default or Event of Default or
in any breach of any of the terms and conditions hereof. No failure to exercise,
nor any delay in exercising, on the part of any Secured Party, any right, power
or privilege hereunder shall operate as a waiver thereof. No single or partial
exercise of any right, power or privilege hereunder or any course of dealing
between the Collateral Agent and any Guarantor shall preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
A waiver by any Secured Party of any right or remedy hereunder on any one
occasion shall not be construed as a bar to any right or remedy which such
Secured Party would otherwise have on any future occasion.
(c) The rights and remedies herein provided are cumulative, may be
exercised singly or concurrently and are not exclusive of any other rights or
remedies provided by law.
16. Section Headings. The section headings used in this Guarantee are for
convenience of reference only and are not to affect the construction hereof or
be taken into consideration in the interpretation hereof.
17. Successors and Assigns. This Guarantee shall be binding upon the
successors and assigns of each Guarantor and shall inure to the benefit of each
Guarantor and each Secured Party and their permitted successors and assigns
except that each Guarantor shall not have the right to assign its rights
hereunder or any interest herein (and any such attempted assignment shall be
void) except as expressly contemplated by this Guarantee or by the other Loan
Documents.
18. GOVERNING LAW. THIS GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
19. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN
RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN
CONNECTION WITH THIS GUARANTEE OR ANY OF THE OTHER LOAN DOCUMENTS. EACH PARTY
HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER
PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT,
IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B)
<PAGE>
ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER
INTO THIS GUARANTEE AND THE OTHER LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 19.
20. Jurisdiction; Consent to Service of Process. (a) Each Guarantor hereby
irrevocably and unconditionally submits, for itself and its property, to the
nonexclusive jurisdiction of any New York State court or Federal court of the
United States of America sitting in New York City, and any appellate court from
any thereof, in any action or proceeding arising out of or relating to this
Guarantee or the other Loan Documents, or for recognition or enforcement of any
judgment, and each of the parties hereto hereby irrevocably and unconditionally
agrees that all claims in respect of any such action or proceeding may be heard
and determined in such New York State or, to the extent permitted by law, in
such Federal court. Each of the parties hereto agrees that a final judgment in
any such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
Nothing in this Guarantee shall affect any right that any Loan Party or any
Secured Party may otherwise have to bring any action or proceeding relating to
this Guarantee or the other Loan Documents against any Guarantor or any Secured
Party or its properties in the courts of any jurisdiction.
(b) Each Guarantor and each Secured Party hereby irrevocably and
unconditionally waives, to the fullest extent it may legally and effectively do
so, any objection that it may now or hereafter have to the laying of venue of
any suit, action or proceeding arising out of or relating to this Guarantee or
the other Loan Documents in any New York State or Federal court. Each of the
parties hereto hereby irrevocably waives, to the fullest extent permitted by
law, the defense of an inconvenient forum to the maintenance of such action or
proceeding in any such court.
21. Counterparts. This Guarantee may be executed in counterparts, each of
which shall constitute an original, but all of which, when taken together, shall
constitute but one instrument.
22. Additional Guarantors. Pursuant to Section 5.11 of the Credit
Agreement, certain Subsidiaries of Holdings may after the date hereof be
required to enter into this Guarantee as a Guarantor. Upon execution and
delivery, after the date hereof, by the Collateral Agent and such Subsidiary of
an instrument in the form of Annex I, such Subsidiary shall become a Guarantor
hereunder with the same force and effect as if originally named as a Guarantor
hereunder. The execution and delivery of any such instrument shall not require
the consent of any other Guarantor hereunder.
23. Contribution. At any time a payment in respect of the Obligations is
made under this Guarantee, the right of contribution of each Guarantor hereunder
against each other such Guarantor shall be determined as provided in the
immediately following sentence, with the right of contribution of each Guarantor
to be revised and restated as of each date on which a payment (a "Relevant
Payment") is made on the Obligations under this Guarantee. At any time that a
Relevant Payment is made by a Guarantor that results in the aggregate payments
made by such Guarantor hereunder in respect of the Obligations to and including
the date of the Relevant Payment exceeding such Guarantor's Contribution
Percentage (as
<PAGE>
defined below) of the aggregate payments made by all Guarantors hereunder in
respect of the Obligations to and including the date of the Relevant Payment
(such excess, the "Aggregate Excess Amount"), each such Guarantor shall have a
right of contribution against each other Guarantor who has made payments
hereunder in respect of the Obligations to and including the date of the
Relevant Payment in an aggregate amount less than such other Guarantor's
Contribution Percentage of the aggregate payments made to and including the date
of the Relevant Payment by all Guarantors hereunder in respect of the
Obligations (the aggregate amount of such deficit, the "Aggregate Deficit
Amount") in an amount equal to (x) a fraction the numerator of which is the
Aggregate Excess Amount of such Guarantor and the denominator of which is the
Aggregate Excess Amount of all Guarantors multiplied by (y) the Aggregate
Deficit Amount of such other Guarantor. A Guarantor's right of contribution
pursuant to the preceding sentences shall arise at the time of each computation,
subject to adjustment to the time of any subsequent computation; provided, that
no Guarantor may take any action to enforce such right until the Obligations
have been paid in full and the Commitments have been terminated, it being
expressly recognized and agreed by all parties hereto that any Guarantor's right
of contribution arising pursuant to this Guarantee against any other Guarantor
shall be expressly junior and subordinate to such other Guarantor's obligations
and liabilities in respect of the Obligations and any other obligations owing
under this Guarantee. As used in this Section 23: (i) each Guarantor's
"Contribution Percentage" shall mean the percentage obtained by dividing (x) the
Adjusted Net Worth (as defined below) of such Guarantor by (y) the aggregate
Adjusted Net Worth of all Guarantors; (ii) the "Adjusted Net Worth" of each
Guarantor shall mean the greater of (x) the Net Worth (as defined below) of such
Guarantor and (y) zero; and (iii) the "Net Worth" of each Guarantor shall mean
the amount by which the fair salable value of such Guarantor's assets on the
date of any Relevant Payment exceeds its existing debts and other liabilities
(including contingent liabilities, but without giving effect to any Obligations
arising under this Guarantee) on such date. All parties hereto recognize and
agree that, except for any right of contribution arising pursuant to this
Section 23, each Guarantor who makes any payment in respect of the Obligations
shall have no right of contribution or subrogation against any other Guarantor
in respect of such payment. Each of the Guarantors recognizes and acknowledges
that the rights to contribution arising hereunder shall constitute an asset in
favor of the party entitled to such contribution. In this connection, each
Guarantor has the right to waive its contribution right against any Guarantor to
the extent that after giving effect to such waiver such Guarantor would remain
solvent, in the determination of the Required Lenders.
24. No Fraudulent Conveyance. Each Guarantor hereby confirms that it is its
intention that this Guarantee not constitute a fraudulent transfer or conveyance
for purposes of any bankruptcy, insolvency or similar law, the Uniform
Fraudulent Conveyance Act or any similar Federal, state of foreign law. To
effectuate the foregoing intention, each Guarantor hereby irrevocably agrees
that the Obligations shall be limited to the maximum amount as will, after
giving effect to such maximum amount and all other (contingent or otherwise)
liabilities of such Guarantor that are relevant under such laws, result in the
Obligations of such Guarantor in respect of such maximum amount not constituting
a fraudulent transfer or conveyance.
25. Release. In the event that all of the Equity Interests of one or more
Guarantors are sold or otherwise disposed of (except to Holdings, the Borrower
or any of their respective Subsidiaries) or liquidated in compliance with the
requirements of Section
<PAGE>
6.05 of the Credit Agreement (or any such sale or other disposition or
liquidation has been approved in writing by the Required Lenders or, after all
Credit Document Obligations have been paid in full, approved in accordance with
Section 15 hereof) and the proceeds of such sale, disposition or liquidation are
applied in accordance with the provisions of the Credit Agreement, to the extent
applicable, such Guarantor shall be released from this Guarantee and this
Guarantee shall, as to each such Guarantor or Guarantors, terminate and have no
further force or effect (it being understood and agreed that the sale of all the
Equity Interests held by Holdings, the Borrower and their Subsidiaries in one or
more persons that own, directly or indirectly, all of the Equity Interests of
any Guarantor shall be deemed to be a sale of such Guarantor for the purposes of
this Section 25).
26. Continuing Guarantors. The rights and obligations of each Guarantor
(other than the respective released Guarantor in the case of following clause
(y)) hereunder shall remain in full force and effect notwithstanding (x) the
addition of any new Guarantor as a party to this Agreement as contemplated by
preceding Section 22 or otherwise and/or (y) the release of any Guarantor under
this Agreement as contemplated by Section 25 or otherwise.
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this Guarantee to be duly
executed and delivered by its duly authorized officer as of the day and year
first above written.
Addresses:
110 East Princess Street GPC CAPITAL CORP. II
York, Pennsylvania 17403
Telephone: (717) 849-8500
Telecopier: (717) 849-8541
Attention: Chief Financial By /s/ John E. Hamilton
Officer -----------------------------
Title: Vice President
1110 East Princess Street GPC OPCO GP LLC
York, Pennsylvania 17403
Telephone: (717) 849-8500
Telecopy: (717) 849-8541
Attention: Chief Financial By /s/ John E. Hamilton
Officer -----------------------------
Title: Vice President
1110 East Princess Street GPC CAPITAL CORP. I
York, Pennsylvania 17403
Telephone: (717) 849-8500
Telecopy: (717) 849-8541
Attention: Chief Financial By /s/ John E. Hamilton
Officer -----------------------------
Title: Vice President
1110 East Princess Street GRAHAM PACKAGING POLAND, L.P.
York, Pennsylvania 17403
Telephone: (717) 849-8500
Telecopy: (717) 849-8541 By: GPC Sub GP LLC, its general
Attention: Chief Financial partner
Officer
By /s/ John E. Hamilton
-----------------------------
Title: Vice President
<PAGE>
1110 East Princess Stret GRAHAM RECYCLING COMPANY,
York, Pennsylvania 17403
Telphone: (717) 849-8500
Telecopy: (717) 849-8541 By: GPC Sub GP LLC, its general
Attention: Chief Financial partner
Officer
By /s/ John E. Hamilton
-----------------------------
Title: Vice President
1110 East Princess Street GRAHAM PACKAGING FRANCE PARTNERS
York, Pennsylvania 17403
Telphone: (717) 849-8500
Telecopy: (717) 849-8541 By: GPC Sub GP LLC, general
Attention: Chief Financial partner
Officer
By /s/ John E. Hamilton
-----------------------------
Title: Vice President
1110 East Princess Street GRAHAM PACKAGING LATIN AMERICA, LLC
York, Pennsylvania 17403
Telphone: (717) 849-8500
Telecopy: (717) 849-8541
Attention: Chief Financial
Officer
By /s/ John E. Hamilton
-----------------------------
Title: Vice President
1110 East Princess Street GPC SUB GP LLC
York, Pennsylvania 17403
Telphone: (717) 849-8500
Telecopy: (717) 849-8541
Attention: Chief Financial
Officer
By /s/ John E. Hamilton
-----------------------------
Title: Vice President
BANKERS TRUST COMPANY, as Collateral Agent
By: /s/ Mary Kay Coyle
------------------------------
Title: Managing Director
<PAGE>
ANNEX 1 TO
SUBSIDIARY GUARANTEE AGREEMENT
SUPPLEMENT NO. _____ dated as of [_______________], to the
Subsidiary Guarantee Agreement dated as of February 2, 1998 (the
"Guarantee"), between the Guarantors party thereto (immediately before
giving effect to this Supplement) and BANKERS TRUST COMPANY, as
Collateral Agent (each capitalized term used but not defined having
the meaning given it in the Guarantee) for the benefit of the Secured
Parties.
A. Reference is made to the Credit Agreement dated as of February 2, 1998
(as amended or modified from time to time, the "Credit Agreement"), among Graham
Packaging Holdings Company, Graham Packaging Company (the "Borrower"), GPC
Capital Corp. I (the "Co-Borrower"), the Lenders from time to time party
thereto, NationsBank, N.A., as Documentation Agent, and Bankers Trust Company,
as Administrative Agent, Syndication Agent, Collateral Agent, and Fronting Bank.
B. The Guarantors have entered into the Guarantee in order to induce the
Lenders to make Loans and induce the Fronting Bank to issue Letters of Credit
pursuant to, and upon the terms and subject to the conditions specified in, the
Credit Agreement. Pursuant to Section 5.11 of the Credit Agreement, certain
Subsidiaries of Holdings are, after the date of the Guarantee, required to enter
into the Guarantee as a Guarantor. Section 22 of the Guarantee provides that
such additional Subsidiaries may become Guarantors under the Guarantee by
execution and delivery of an instrument in the form of this Supplement. The
undersigned (the "New Guarantor"), is a Subsidiary of Holdings and is executing
this Supplement in accordance with the requirements of the Credit Agreement to
become a Guarantor under the Guarantee in order to induce the Lenders to make
additional Loans and the Fronting Bank to issue additional Letters of Credit and
as consideration for Loans previously made and Letters of Credit previously
issued.
Accordingly, the Collateral Agent and the New Guarantor agree as follows:
SECTION 1. In accordance with Section 22 of the Guarantee, the New
Guarantor by its signature below becomes a Guarantor under the Guarantee with
the same force and effect as if originally named therein as a Guarantor and the
New Guarantor hereby agrees to all the terms and provisions of the Guarantee
applicable to it as a Guarantor thereunder. Each reference to a "Guarantor" in
the Guarantee shall be deemed to include the New Guarantor. The Guarantee is
hereby incorporated herein by reference.
SECTION 2. The New Guarantor represents and warrants to the Secured Parties
that this Supplement has been duly authorized, executed and delivered by it and
con-
<PAGE>
ANNEX 1
Page 2
stitutes its legal, valid and binding obligation, enforceable against it in
accordance with its terms, subject to the effects of applicable bankruptcy,
insolvency or similar laws effecting creditors' rights generally and equitable
principles of general applicability.
SECTION 3. This Supplement may be executed in two or more counterparts,
each of which shall constitute an original, but all of which, when taken
together, shall constitute but one instrument. This Supplement shall become
effective when the Collateral Agent shall have received counterparts of this
Supplement that, when taken together, bear the signatures of the New Guarantor
and the Collateral Agent.
SECTION 4. Except as expressly supplemented hereby, the Guarantee shall
remain in full force and effect.
SECTION 5. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 6. In case any one or more of the provisions contained in this
Supplement should be held invalid, illegal or unenforceable in any respect,
neither party hereto shall be required to comply with such provision for so long
as such provision is held to be invalid, illegal or unenforceable, but the
validity, legality and enforceability of the remaining provisions contained
herein and in the Guarantee shall not in any way be affected or impaired. The
parties hereto shall endeavor in good-faith negotiations to replace the invalid,
illegal or unenforceable provisions with valid provisions the economic effect of
which comes as close as possible to that of the invalid, illegal or
unenforceable provisions.
SECTION 7. All communications and notices hereunder shall be in writing and
given as provided in the Credit Agreement. All communications and notices
hereunder to the New Guarantor shall be given to it at the address set forth
under its signature, with a copy to the Borrower.
<PAGE>
ANNEX 1
Page 3
IN WITNESS WHEREOF, the New Guarantor and the Collateral Agent have duly
executed this Supplement to the Guarantee as of the day and year first above
written.
Address:
[NAME OF NEW GUARANTOR], as
Guarantor
By ______________________________________
Name:
Title:
Address: _____________________________
________________________________
BANKERS TRUST COMPANY, as
Collateral Agent,
By ______________________________________
Name:
Title:
<PAGE>
EXHIBIT J-1
[LETTERHEAD OF SIMPSON THACHER & BARTLETT]
February 2, 1998
Bankers Trust Company, as
Administrative Agent, Syndication
Agent, Collateral Agent and Fronting Bank, and
NationsBank, N.A.,
as Documentation Agent, in each case
under the Credit Agreement, as hereinafter
defined (collectively, the "Agents")
and
The Lenders listed on Schedule I hereto
which are parties to the Credit Agreement
on the date hereof
Re: Credit Agreement dated as of February 2, 1998 (the "Credit
Agreement") among Graham Packaging Holdings Company, a
Pennsylvania limited partnership ("Holdings"), Graham Packaging
Company, a Delaware limited partnership (the "Company"), GPC
Capital Corp. I, a Delaware corporation ("Capco I"), the
lending institutions identified in the Credit Agreement (the
"Lenders") and the Agents
Ladies and Gentlemen:
We have acted as counsel to Holdings, the Company and the
subsidiaries of Holdings named on Schedule II attached hereto (each, a
"Subsidiary Guarantor" and, collectively, the "Subsidiary Guarantors")
(Holdings, the Company, and the Subsidiary Guarantors being referred to herein
collectively as the "Credit Parties") in connection with the preparation,
execution and delivery of the following documents:
(a) the Credit Agreement;
(b) the Notes delivered to the Lenders on the date hereof;
<PAGE>
Simpson Thacher & Bartlett
Bankers Trust Company -2- February 2, 1998
(c) the Parent Guarantee Agreement;
(d) the Subsidiary Guarantee Agreement;
(e) the Security Agreement;
(f) the Pledge Agreement;
(g) the Mortgages; and
(h) the Intellectual Property Security Agreement.
The documents described in the foregoing clauses (a) through (h) are
collectively referred to herein as the "Credit Documents"; the documents
described in the foregoing clauses (e) through (h) are collectively referred
to herein as the "Security Documents." Unless otherwise indicated, capitalized
terms used but not defined herein shall have the respective meanings set forth
in the Credit Agreement. This opinion is furnished to you pursuant to Section
4.02(a)(i) of the Credit Agreement.
In connection with this opinion, we have examined:
(A) the Credit Agreement, signed by each Credit Party thereto, by
the Agents and the Lenders listed on Schedule I hereto;
(B) each other Credit Document, signed by each Credit Party a party
thereto; and
(C) forms of the Notes to be delivered after the date hereof.
We also have examined the originals, or duplicates or certified or conformed
copies, of such records, agreements, instruments and other documents and have
made such other investigations as we have deemed relevant and necessary in
connection with the opinions expressed herein. As to questions of fact
material to this opinion, we have relied upon certificates of public officials
and of officers and representatives of the Credit Parties. In addition, we
have examined, and have relied as to matters of fact upon, the representations
made in the Credit Documents.
In rendering the opinions set forth below, we have assumed the
genuineness of all signatures, the legal capacity of natural persons, the
authenticity of all documents submitted to us as originals, the conformity to
original documents of all documents submitted to us as duplicates or certified
or conformed copies, and the authenticity of the originals of such latter
documents.
<PAGE>
Simpson Thacher & Bartlett
Bankers Trust Company -3- February 2, 1998
In addition, we have assumed that (1) the Credit Parties have rights
in the Collateral existing on the date hereof and will have rights in property
which becomes Collateral after the date hereof and (2) to the extent our
opinion in paragraph 14 relates to securities purportedly represented by a
certificate and issued by an issuer not organized under the laws of one of
States of the United States, such securities are "certificated securities"
within the meaning of ss. 8-102(4) of the Uniform Commercial Code as in effect
in the State of New York (the "New York UCC").
In rendering the opinion set forth in paragraph 9 below with respect
to the Notes, we have assumed that at the time of any execution and delivery
of Notes after the date hereof, the Board of Directors of the Company (or any
committee thereof acting pursuant to authority properly delegated to such
committee by the Board of Directors) has not taken any action to rescind or
otherwise reduce its prior authorization of the issuance of such Notes.
Based upon and subject to the foregoing, and subject to the
qualifications and limitations set forth herein, we are of the opinion that:
1. The Company (a) is validly existing and in good standing as a
limited partnership under the laws of the State of Delaware, (b) has the
partnership power and authority to execute and deliver each of the Credit
Documents to which it is a party and to borrow, to perform its obligations
thereunder and to grant the security interests to be granted by it pursuant to
the Security Documents and (c) has duly authorized, executed and delivered
each Credit Document to which it is a party.
2. Each of GPC Capital Corp. I, a Delaware corporation, and GPC
Capital Corp. II, a Delaware corporation (collectively, the "Corporate
Del-Credit Parties") (a) is validly existing and in good standing as a
corporation under the laws of the State of Delaware, (b) has the corporate
power and authority to execute and deliver each of the Credit Documents to
which it is a party and to borrow, to perform its obligations thereunder and
to grant the security interests to be granted by it pursuant to the Security
Documents and (c) has duly authorized, executed and delivered each Credit
Document to which it is a party.
3. Each of GPC Opco GP LLC, a Delaware limited liability company, GPC
Sub GP LLC, a Delaware limited liability company, and Graham Packaging Latin
America, LLC, a Delaware limited liability company (collectively, the "LLC
Del-Credit Parties"; and together with the Company and the Corporate
Del-Credit Parties, the "Del-Credit Parties") (a) is validly existing and in
good standing as a limited liability company under the laws of the State of
Delaware, (b) has the power and authority as a limited liability company to
execute and deliver each of the Credit Documents to which it is a party (and,
in the case of GPC Sub GP LLC, to execute and deliver each of the Credit
Documents to
<PAGE>
Simpson Thacher & Bartlett
Bankers Trust Company -4- February 2, 1998
which any of Graham Packaging France Partners, Graham Packaging Poland, L.P.
and Graham Recycling Company (collectively, the "Pennsylvania Subsidiaries")
is a party on behalf of each of them as general partner), to perform its
obligations thereunder and to grant the security interests to be granted by it
pursuant to the Security Documents and (c) has duly authorized, executed and
delivered each Credit Document to which it is a party (and, in the case of GPC
Sub GP LLC, has executed and delivered each Credit Document to which any of
the Pennsylvania Subsidiaries is a party on behalf of each of them as general
partner). BMP/Graham Holdings Corporation, a Delaware corporation, has the
power and authority to execute and deliver each of the Credit Documents to
which Graham Packaging Holdings Company, a Pennsylvania limited partnership
("Holdings"), is a party. BCP/Graham Holdings L.L.C., a Delaware limited
partnership, has duly executed and delivered each Credit Document to which
Holdings is a party.
4. (a) The execution and delivery by the Company of the Credit
Documents to which it is a party, its borrowings in accordance with the terms
of the Credit Documents, performance of its payment obligations thereunder and
granting of the security interests to be granted by it pursuant to the
Security Documents (a) will not result in any violation of (1) the Limited
Partnership Agreement of the Company, and (2) assuming that proceeds of
borrowings will be used in accordance with the terms of the Credit Agreement,
any Federal or New York statute or the Delaware Uniform Limited Partnership
Act or any rule or regulation issued pursuant to any New York or Federal
statute or the Delaware Uniform Limited Partnership Act or any order known to
us issued by any court or governmental agency or body, and (b) the execution
and delivery by the Company of the Credit Documents to which it is a party,
its borrowings in accordance with the terms of the Credit Documents,
performance of its payment obligations thereunder and granting of the security
interests to be granted by it pursuant to the Security Documents will not
breach or result in a default under or result in the creation of any lien upon
or security interest in the Company's properties pursuant to the terms of any
agreement or instrument identified on Schedule III.
5. (a) The execution and delivery by each of the Corporate Del-Credit
Parties of the Credit Documents to which it is a party, its borrowings in
accordance with the terms of the Credit Documents, performance of its payment
obligations thereunder and granting of the security interests to be granted by
it pursuant to the Security Documents (a) will not result in any violation of
(1) the Certificate of Incorporation or By-Laws of such Corporate Del-Credit
Party, and (2) assuming that proceeds of borrowings will be used in accordance
with the terms of the Credit Agreement, any Federal or New York statute or the
Delaware General Corporation Law or any rule or regulation issued pursuant to
any New York or Federal statute or the Delaware General Corporation Law or any
order known to us issued by any court or governmental agency or body, and (b)
the execution and delivery by any Corporate Del-Credit Party of the Credit
Documents to which it is a party, its borrowings in accordance with the terms
of the Credit Documents, performance
<PAGE>
Simpson Thacher & Bartlett
Bankers Trust Company -5- February 2, 1998
of its payment obligations thereunder and granting of the security interests
to be granted by it pursuant to the Security Documents will not breach or
result in a default under or result in the creation of any lien upon or
security interest in any Corporate Del-Credit Party's properties pursuant to
the terms of any agreement or instrument identified on Schedule III.
6. (a) The execution and delivery by any LLC Del-Credit Party of the
Credit Documents to which it is a party and granting of the security interests
to be granted by it pursuant to the Security Documents (a) will not result in
any violation of (1) the Limited Liability Company Agreement of such LLC
Del-Credit Party, and (2) assuming that proceeds of borrowings will be used in
accordance with the terms of the Credit Agreement, any Federal or New York
statute or the Delaware Limited Liability Company Act or any rule or
regulation issued pursuant to any New York or Federal statute or the Delaware
Limited Liability Company Act or any order known to us issued by any court or
governmental agency or body, and (b) the execution and delivery by any LLC
Del-Credit Party of the Credit Documents to which it is a party and granting
of the security interests to be granted by it pursuant to the Security
Documents will not breach or result in a default under or result in the
creation of any lien upon or security interest in any LLC Del-Credit Party's
properties pursuant to the terms of any agreement or instrument identified on
Schedule III.
7. The execution and delivery by any Credit Party (other than the
Del-Credit Parties) of the Credit Documents to which it is a party and
granting of the security interests to be granted by it pursuant to the
Security Documents will not breach or result in a default under or result in
the creation of any lien upon or security interest in any such Credit Parties'
properties pursuant to the terms of any agreement or instrument identified on
Schedule III.
8. No consent, approval, authorization, order, filing, registration or
qualification of or with any Federal or New York governmental agency or body
or any Delaware governmental agency or body acting pursuant to the Delaware
General Corporation Law, the Delaware Uniform Limited Partnership Act or the
Delaware Limited Liability Company Act (as applicable) is required (a) for the
execution and delivery by any Del-Credit Party of the Credit Documents to
which it is a party, the borrowings by any Del-Credit Party in accordance with
the terms of the Credit Documents or the performance by any of the Del-Credit
Parties of their respective payment obligations under the Credit Documents or
the granting of any security interests under the Security Documents, except as
set forth in Section 3.04 of the Credit Agreement or (b) in connection with
the legality, validity, binding effect or enforceability against any Credit
Party of any Credit Document as of the date hereof.
<PAGE>
Simpson Thacher & Bartlett
Bankers Trust Company -6- February 2, 1998
9. Assuming that each of the Credit Documents is a valid and legally
binding obligation of each of the Lenders parties thereto (except that the
assumption described above shall not apply if the Credit Documents are not
valid and legally binding upon the Lenders because of a lack of validity or
binding effect as to one or more Credit Parties) and assuming that (a) each of
the Credit Parties other than the Del-Credit Parties is validly existing and
in good standing under the laws of Pennsylvania and has duly authorized,
executed and delivered the Credit Documents to which it is a party and (b)
execution, delivery and performance by each Credit Party other than the
Del-Credit Parties of the Credit Documents to which it is a party does not
violate the laws of Pennsylvania, each Credit Document (other than the
Mortgages as to which we express no opinion) constitutes and each Note
delivered to a Lender after the date hereof, assuming the due execution and
delivery by the Credit Party which is the maker of such Note, will constitute
the valid and legally binding obligation of each Credit Party which is a party
thereto, enforceable against such Credit Party in accordance with its terms.
10. No Credit Party is an "investment company" within the meaning of
and subject to regulation under the Investment Company Act of 1940, as
amended, or a "holding company," or a "subsidiary company" of a "holding
company," within the meaning of the Public Utility Holding Company Act of
1935, as amended.
11. Assuming that each Credit Party entitled to borrow money under the
Credit Agreement will comply with the provisions of the Credit Agreement
relating to the use of proceeds, the execution and delivery of the Notes by
the Company and each other Credit Party entitled to borrow money under the
Credit Agreement and the making of the Loans under the Credit Agreement will
not violate Regulation G, T, U or X of the Board of Governors of the Federal
Reserve System.
12. The Security Agreement creates in favor of the Collateral Agent
for the benefit of the Lenders a security interest in the collateral described
therein in which a security interest may be created under Article 9 of the New
York UCC (the "Security Agreement Article 9 Collateral").
13. The Pledge Agreement creates in favor of the Collateral Agent for
the benefit of the Lenders a security interest under the New York UCC in the
investment property identified on Schedules I, II and III to the Pledge
Agreement (the "Pledged Securities").
14. The Collateral Agent will have a perfected security interest in
the Pledged Securities specified on Schedule IV (collectively, the
"Certificated Pledged Securities") for the benefit of the Lenders under the
New York UCC upon delivery to the Collateral Agent for the benefit of the
Lenders in the State of New York of the certificates representing the
Certificated Pledged Securities in registered form, indorsed in blank by an
effective indorsement or accompanied by undated stock powers with respect
thereto
<PAGE>
Simpson Thacher & Bartlett
Bankers Trust Company -7- February 2, 1998
duly indorsed in blank by an effective indorsement. Assuming the
Collateral Agent and each of the Lenders does not have notice of any adverse
claim to the Certificated Pledged Securities, the Collateral Agent will
acquire the security interest in the Certificated Pledged Securities for the
benefit of the Lenders free of any adverse claim.
15. To our knowledge, there are no actions, suits or proceedings
pending or threatened against the Credit Parties with respect to the
Transaction or any of the Credit Documents.
Our opinions in paragraphs 9, 12, 13 and 14 above are subject to (i)
the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting creditors' rights
generally, (ii) general equitable principles (whether considered in a
proceeding in equity or at law) and (iii) an implied covenant of good faith
and fair dealing. Our opinion in paragraph 9 above also is subject to the
qualification that certain provisions of the Security Documents in whole or in
part, may not be enforceable, although the inclusion of such provisions does
not render the Security Documents invalid, and the Security Documents and the
laws of the State of New York contain adequate remedial provisions for the
practical realization of the rights and benefits afforded thereby.
Our opinions in paragraph 12 is limited to Article 9 of the New York
UCC, and our opinion in paragraphs 13 and 14 are limited to Articles 8 and 9
of the New York UCC, and therefore those opinion paragraphs do not address (i)
collateral of a type not subject to Article 9 or 8, as the case may be, of the
New York UCC, and (ii) under New York UCC ss. 9-103 what law governs
perfection of the security interests granted in the collateral covered by this
opinion letter.
We express no opinion with respect to:
(A) perfection of any security interest in any Security Agreement
Article 9 Collateral;
(B) the effect of ss. 9-306(2) of the New York UCC with respect to any
proceeds of Collateral that are not identifiable;
(C) the effect of Section 552 of the Bankruptcy Code (11 U.S.C. 552)
(relating to property acquired by a pledgor after the commencement of a case
under the United States Bankruptcy Code with respect to such pledgor) and
Section 506(c) of the Bankruptcy Code (11 U.S.C. 506(c) (relating to certain
costs and expenses of a trustee in preserving or disposing of collateral);
<PAGE>
Simpson Thacher & Bartlett
Bankers Trust Company -8- February 2, 1998
(D) the effect of any provision of the Credit Documents which is
intended to establish any standard other than a standard set forth in the New
York UCC as the measure of the performance by any party thereto of such
party's obligations of good faith, diligence, reasonableness or care or of the
fulfillment of the duties imposed on any secured party with respect to the
maintenance, disposition or redemption of collateral, accounting for surplus
proceeds of collateral or accepting collateral in discharge of liabilities;
(E) the effect of any provision of the Credit Documents which is
intended to permit modification thereof only by means of an agreement signed
in writing by the parties thereto;
(F) the effect of any provision of the Credit Documents insofar as it
provides that any Person purchasing a participation from a Lender or other
Person may exercise set-off or similar rights with respect to such
participation or that any Lender or other Person may exercise set-off or
similar rights other than in accordance with applicable law;
(G) the effect of any provision of the Credit Documents imposing
penalties or forfeitures;
(H) the enforceability of any provision of any of the Credit Documents
to the extent that such provision constitutes a waiver of illegality as a
defense to performance of contract obligations;
(I) the effect of any provision of the Credit Documents relating to
indemnification or exculpation in connection with violations of any securities
laws or relating to indemnification, contribution or exculpation in connection
with willful, reckless or criminal acts or gross negligence of the indemnified
or exculpated Person or the Person receiving contribution;
(J) any provision of the Credit Documents which relates to forum
selection other than the courts of the State of New York (including, without
limitation, any waiver of any objection to venue in any court or of any
objection that a court is an inconvenient forum);
(K) any provision of the Credit Documents requiring payment of
attorneys' fees, except to the extent a court determines such fees to be
reasonable;
(L) any provision of the Credit Documents which purports to require
that any collateral or property be held in trust or imposes fiduciary duties
on any party thereto;
<PAGE>
Simpson Thacher & Bartlett
Bankers Trust Company -9- February 2, 1998
(M) any provision of any Security Document that provides that a Credit
Party's liability thereunder shall not be affected by actions or failures to
act on the part of the beneficiaries of any such Security Document or by
amendments or waivers of provisions of documents governing the guaranteed or
secured obligations; and
(N) with respect to the validity, binding effect or enforceability of
any provision of any Credit Document which purports to authorize the Secured
Parties to sign or file financing statements or other documents without the
signature of the applicable Credit Party (except to the extent a secured party
may execute and file financing statements without the signature of the debtor
under Section 9-402(2) of the New York UCC).
In connection with the provisions of the Credit Documents whereby
Credit Parties submit to the jurisdiction of the United States District Court
for the Southern District of New York, we note the limitations of 28 U.S.C.
ss.ss. 1331 and 1332 on Federal court jurisdiction, and we also note that such
submissions cannot supersede such court's discretion in determining whether to
transfer an action from one Federal court to another under 28 U.S.C. ss.
1404(a).
With respect to matters of Pennsylvania law, we understand that you
are relying on the opinion of Morgan, Lewis & Bockius of even date herewith.
We are members of the Bar of the State of New York, and we do not
express any opinion herein concerning any law other than the law of the State
of New York, the Federal law of the United States, the Delaware General
Corporation Law, the Delaware Uniform Limited Partnership Act and the Delaware
Limited Liability Company Act.
This opinion letter is rendered to you in connection with the above
described transactions. This opinion letter may not be relied upon by you for
any other purpose, or relied upon by, or furnished to, any other person, firm
or corporation without our prior written consent.
Very truly yours,
/s/ SIMPSON THACHER & BARTLETT
SIMPSON THACHER & BARTLETT
<PAGE>
SCHEDULE I
THE LENDERS
ABN AMRO Bank, NV
Alliance Capital Management L.P.
Archimedes Funding, L.L.C.
Ares Leveraged Investment Fund LP
Bank of Tokyo-Mitsubishi Trust Company
CoreStates Bank, N.A.
Credit Agricole Indosuez
Credit Lyonnais, New York Branch
Credit Suisse First Boston-NY
Deeprock & Company
Delano Company
Goldman Sachs Credit Partners L.P.
Imperial Bank
KZH Holding Corporation III
Massachusetts Mutual Life Insurance Company
Massmutual Corporate Value Partners Limited
Massmutual/Darby CBO LLC
Metropolitan Life Insurance Company
Natexis Banque BFCE
National City Bank
<PAGE>
Bankers Trust Company Schedule I-2 February 2, 1998
NationsBank, N.A.
Northern Life Insurance Company
Oak Hill Securities Fund, L.P.
Octagon Credit Investors Loan Portfolio
Presidential Life Insurance Company
Senior Debt Portfolio
Societe Generale
The Travelers Insurance Company
The Fuji Bank, Ltd.
The Chase Manhattan Bank
The Mitsubishi Trust and Banking Corporation
The Bank of Nova Scotia
The Long Term Credit Bank of Japan, Limited, New York Branch
Van Kampen American Capital Prime Rate Income Trust
<PAGE>
SCHEDULE II
SUBSIDIARY GUARANTORS
(1) GPC Capital Corp. II, a Delaware corporation
(2) GPC Opco GP, LLC, a Delaware limited liability company
(3) GPC Capital Corp. I, a Delaware corporation
(4) Graham Packaging Poland, L.P., a Pennsylvania limited partnership
(5) Graham Recycling Company, a Pennsylvania limited partnership
(6) Graham Packaging France Partners, a Pennsylvania general partnership
(7) Graham Packaging Latin America, LLC, a Delaware limited liability company
(8) GPC Sub GP LLC, a Delaware limited liability company
<PAGE>
SCHEDULE III
AGREEMENTS AND INSTRUMENTS
1. Agreement and Plan of Recapitalization, Redemption and Purchase dated as
of December 18, 1997.
2. Fifth Amended and Restated Agreement of Limited Partnership of Graham
Packaging Holdings Company ("Holdings") dated as of February 2, 1998.
3. Consulting Agreement by and between Holdings and Graham Capital
Corporation dated February 2, 1998.
4. Equipment Sales, Services and License Agreement between Graham
Engineering Corporation and Holdings dated February 2, 1998.
5. Purchase Agreement, dated as of January 23, 1998, regarding the 8 3/4%
Senior Subordinated Notes Due 2008, the Floating Interest Rate
Subordinated Term Securities Due 2008 and the 10 3/4% Senior Discount
Notes Due 2009.
6. Indenture, dated as of February 2, 1998, regarding the 8 3/4% Senior
Subordinated Notes Due 2008 (Series A) and the 8 3/4% Senior Subordinated
Notes Due 2008 (Series B) and the Floating Interest Rate Subordinated
Term Securities Due 2008 (Series A) and the Floating Interest Rate
Subordinated Term Securities Due 2008 (Series B).
7. Indenture, dated as of February 2, 1998, regarding the 10 3/4% Senior
Discount Notes Due 2009 (Series A) and the 10 3/4% Senior Discount Notes
Due 2009 (Series B).
8. Registration Rights Agreement, dated as of February 2, 1998, regarding
the 8 3/4% Senior Subordinated Notes Due 2008 (Series A) and the Floating
Interest Rate Subordinated Term Securities Due 2008 (Series A).
9. Registration Rights Agreement, dated as of February 2, 1998, regarding
the 10 3/4% Senior Discount Notes Due 2009 (Series A) .
10. License Agreement, dated as of January 23, 1997, by and between Edward J.
Towns, Monroe Closure Systems, Inc. and Graham Packaging Company ("Graham
Packaging").
11. Agreement between Amoco Oil Company and Graham Packaging dated July 1,
1992.
<PAGE>
Bankers Trust Company Schedule III-2 February 2, 1998
12. Agreement between Graham and Arizona Beverages dated March 11, 1997.
13. Agreement between Graham Packaging and Castrol North America Automotive,
Inc. dated June 1, 1993.
14. Agreement between Graham Packaging and Castrol, Inc. dated January 1,
1992.
15. Alliance Agreement between Chevron U.S.A. Products Company and Graham
Packaging dated December 1, 1995.
16. Blanket Purchase Order between Citgo Petroleum Corporation and Graham
Packaging effective March 1, 1996.
17. Agreement between Clement Pappas & Co., Inc. and Graham Packaging dated
April 1, 1996.
18. Bottle Supply Agreement between The Clorox Company and Graham Packaging
dated December 7, 1992.
19. Agreement between Graham Container Corporation and Colgate-Palmolive
Company dated February 1, 1988.
20. Supply and Cooperation Agreement between Danone S.A. and Graham Packaging
France ending December 31, 2002.
21. Purchase Order between The Dial Corp. and Graham Packaging dated January
8, 1996.
22. Agreement between Hershey Foods Corporation and Graham Container
Corporation dated November 19, 1986 and Consent to Assignment and
Delegation dated April 3, 1989 from Graham Container Corporation to
Sonoco Graham Company.
23. Agreement between Hershey Foods Corporation and Graham Packaging dated
January 1, 1991.
24. Agreement between Hi-Country Foods Corporation and Graham Packaging dated
April 1, 1996.
25. Agreement by L&A Juice Co. Inc. and Graham Packaging dated November 5,
1996.
<PAGE>
Bankers Trust Company Schedule III-3 February 2, 1998
26. Agreement between Lever Brothers Company and Graham Container Corporation
dated February 1989.
27. Purchase Agreement between The Minute Maid Company, a Division of the
Coca-Cola Company, and Graham Packaging dated December 1, 1996.
28. Contract for the Industrialization of Canisters between Mobil Oil Do
Brasil Ltda. and Rheem Graham Embalagens Ltda. dated February 28, 1994.
29. Agreement between Ocean Spray Cranberries, Inc. and Graham Packaging
dated July 22, 1994 and the First Amendment to the Agreement dated May 3,
1995.
30. Plastic Container Purchase Agreement between Pennzoil Products Company
and Sonoco Graham Company dated January 1, 1990.
31. Memorandum of Understanding dated May 28, 1996 between Petro Canada
Lubricants and Graham Packaging Canada Limited ("Graham Canada").
32. Agreement between Petrobras Distribuidora S.A. and Rheem-Graham
Embalagens Ltda. dated September 27, 1991 and the First Amendment dated
February 9, 1995.
33. Bottle Supply Agreement between Procter & Gamble and Graham Container
Corporation dated November 20, 1991.
34. Agreement between Procter & Gamble and Graham Canada beginning May 1,
1995.
35. Agreement between Quaker State, Inc. and Graham Canada dated January 15,
1996.
36. Blanket Purchase Order from Shell Oil Company to Graham Packaging dated
August 2, 1992.
37. Agreement dated as of March 28, 1991 by and between Graham Packaging and
Sonoco Products Company.
38. Agreement between Sun Company, Inc. and Graham Packaging dated January 1,
1992.
39. Agreement between Texaco Lubricants Company of North America, a division
of Texaco Refining and Marketing Inc. and Graham Packaging dated January
1, 1997.
<PAGE>
Bankers Trust Company Schedule III-4 February 2, 1998
40. Agreement between Tree Top, Inc. and Graham Packaging dated December 8,
1994.
41. Agreement between Tropicana Products, Inc. and Graham Packaging dated
June 30, 1995.
42. Agreement between Welch Foods, Inc. and Graham Packaging dated January
23, 1997.
43. Purchase Agreement between Beaumont Juice, Inc. and Graham Packaging
dated June 1, 1995.
44. Purchase Agreement between the Standard Oil Company and Boise Graham
dated December 12, 1986.
45. Contract between Dowelanco Industrial Ltda and Rheem Graham Embalagens
Ltda dated November 9, 1994.
46. Container Agreement between Dryden Oil Company and Graham Packaging dated
January 1, 1993.
47. Bottle Purchase Agreement between Mrs. Clark's Foods, Inc. and Graham
Packaging dated April 1, 1989.
48. Letter of Intent between Sweetripe Drinks Ltd. and Graham Canada dated
November 2, 1995.
49. Purchase Order between Boise Cascade and Cato Oil & Grease Company dated
January 6, 1987.
50. Purchase Agreement between Colorado Petroleum and Sonoco Graham dated
July 13, 1988.
51. Purchase Agreement between Delta Petroleum and Sonoco Graham dated
September 9, 1987.
52. Purchase Agreement between Fina Oil & Chemical and Sonoco Graham dated
June 1, 1989.
53. Purchase Agreement between Industrial Lubricants Co. and Sonoco Graham
dated January 1, 1990.
<PAGE>
Bankers Trust Company Schedule III-5 February 2, 1998
54. Purchase Agreement between J.D. Streett & Co. and Sonoco Graham dated
June 30, 1988.
55. Assignment and Assumption Agreement between Sonoco Graham Company (JV)
and Sonoco Graham Company (LP) dated April 1989.
56. Purchase Agreement between Troco Oil Company and Sonoco Graham dated
September 29, 1987.
57. Purchase Agreement between Witco Corporation and Sonoco Graham dated May
1, 1989.
<PAGE>
SCHEDULE IV
CERTAIN PLEDGED SECURITIES
(1) Pledged by Holdings of stock certificate No. 1 issued by GPC Capital
Corp. II representing 100 shares.
(2) Pledge by the Company of stock certificate No. 1 issued by GPC Capital
Corp. I representing 100 shares.
(3) Pledge by the Company of a stock certificate issued by Graham Packaging
Canada Limited representing 65% of the issued and outstanding shares of
Graham Packaging Canada Limited.
<PAGE>
EXHIBIT B
[FORM OF]
BORROWING REQUEST
Bankers Trust Company
130 Liberty Street
New York, NY 10006
Attention of [ ]
Telecopy No. (212) [ ]
[Date]
Ladies and Gentlemen:
The undersigned, GRAHAM PACKAGING COMPANY (the "Borrower"),
refers to the Credit Agreement dated as of February 2, 1998 (as it may
hereafter be amended, modified, extended or restated from time to time, the
"Credit Agreement"), among GRAHAM PACKAGING HOLDINGS COMPANY, the Borrower,
GPC CAPITAL CORP. I, a Delaware corporation (the "CoBorrower"), the financial
institutions named therein as Lenders or as the Fronting Bank, NATIONSBANK,
N.A., as Documentation Agent, and BANKERS TRUST COMPANY, as Administrative
Agent, Syndication Agent and Collateral Agent. Capitalized terms used herein
and not otherwise defined herein shall have the meanings assigned to such
terms in the Credit Agreement. The Borrower hereby gives you notice pursuant
to Section 2.03 of the Credit Agreement that it requests a Borrowing under the
Credit Agreement, and in that connection sets forth below the terms on which
such Borrowing is requested to be made:
(A) Type of Borrowing(1) ___________________________________________________
(B) Interest rate basis(2) ___________________________________________________
(C) Date of Borrowing
(which must be a Business Day) __________________________________________
(D) Funds are requested to be
disbursed to the Borrower at:
Bank Name: _______________________________________________________________
Bank Address: ____________________________________________________________
Account Number: __________________________________________________________
- ---------
(1) Term Borrowing, Revolving Credit Borrowing or Growth Capital Borrowing
(and in the case of a Term Borrowing, specify the Commitments pursuant to
which the Loans comprising such Borrowing are to be made).
(2) Eurodollar Borrowing or ABR Borrowing.
<PAGE>
2
(E) Principal Amount of Borrowing(3) _________________________________________
(F) Interest Period and
the last day thereof(4) __________________________________________________
GRAHAM PACKAGING COMPANY
By: GPC Opco GP LLC,
its managing general partner
By: ________________________________________
Name:
Title:
Copy to:
Bankers Trust Company, as Administrative Agent
for the Lenders referred to above,
130 Liberty Street
New York, NY 10006
Attention of [ ]
- ---------
(3) In Dollars not less than $5,000,000 (and in an integral multiple of
$1,000,000) or equal to the remaining available balance of the applicable
Commitments or such other amounts as may be permitted the Credit
Agreement to refund Swingline Loans.
(4) Which shall be subject to the definition of the term "Interest Period"
and end not later than the Revolving Credit Maturity Date, Growth Capital
Maturity Date, Tranche A Maturity Date, Tranche B Maturity Date or
Tranche C Maturity Date, as applicable.
<PAGE>
EXHIBIT J-2
[Letterhead of Morgan, Lewis & Bockius LLP]
February 2, 1998
Bankers Trust Company, as
Administrative Agent, Syndication Agent,
Collateral Agent and Fronting Bank,
Nationsbank, N.A.,
as Documentation Agent, and
Each of the Lenders listed on Schedule B
to the Credit Agreement that are parties to
the Credit Agreement on the date hereof
c/o Bankers Trust Company
130 Liberty Street
New York, NY 10006
Re: Credit Agreement dated as of February 2, 1998 (the "Credit Agreement"),
among Graham Packaging Holdings Company, Graham Packaging Company, GPC
Capital Corp. I and the agents and lending institutions referred to above
Ladies and Gentlemen:
We have acted as special Pennsylvania counsel for Graham Packaging Holdings
Company, a Pennsylvania limited partnership ("Holdings"), and certain
Subsidiaries of Holdings listed on Schedule I hereto (Holdings and such
Subsidiaries being referred to collectively as the "Credit Parties"), in
connection with the execution and delivery of the following documents:
(a) the Credit Agreement;
(b) the Notes delivered to the Lenders on the date hereof;
(c) the Parent Guarantee Agreement;
(d) the Subsidiary Guarantee Agreement;
(e) the Security Agreement;
(f) the Intellectual Property Security Agreement; and
(g) the Pledge Agreement.
The documents described in clauses (a) through (g) above are collectively
referred to as the "Credit Documents."
This opinion is being furnished in accordance with Section 4.02(a) of the
Credit Agreement. Capitalized terms not otherwise defined herein shall have
the corresponding meanings given them in the Credit Agreement.
We have examined the execution forms of the Credit Documents, along with
copies of signature pages thereof received by facsimile, the execution forms
of the financing statements to be filed in the Commonwealth of Pennsylvania
pursuant to the Security Agreement and the Intellectual Property Security
Agreement (collectively, the "Financing Statements"), and such certificates of
public officials, partnership documents and other certificates and
instruments, and have made such investigations of law, as we have deemed
necessary in connection with the opinions hereinafter set forth. In all
examinations made by us in connection with this opinion, we have assumed the
genuineness of all signatures and the conformity to the executed originals of
all documents submitted to us as conformed or photostatic copies. We have also
assumed that each of the partnership agreements and certificates of limited
partnership of the Pennsylvania Credit Parties (as defined below) have been
duly authorized, executed
<PAGE>
February 2, 1998
Page 2
and delivered by the parties thereto pursuant to adequate corporate, company
or partnership power, that each general partner of a Pennsylvania Credit Party
that executed any of the documents referred to herein on behalf of such
Pennsylvania Credit Party duly executed and delivered such documents pursuant
to adequate corporate or company power and that each natural person who
executed any of such documents had sufficient legal capacity to do so.
Based upon the foregoing, and subject to the qualifications herein set forth,
we are of the opinion as of the date hereof that:
1. Holdings (a) is a limited partnership validly existing under the
laws of the Commonwealth of Pennsylvania, (b) has the partnership power and
authority to transact its business as described in the Offering Memorandum and
(c) has the partnership power and authority to execute and deliver each of the
Credit Documents to which it is a party and to borrow, to perform its
obligations thereunder and to grant the security interests to be granted by it
pursuant to the Security Documents.
2. Graham Packaging France Partners (a) is a general partnership
validly existing under the laws of the Commonwealth of Pennsylvania ("Graham
France GP"), (b) has the partnership power and authority to transact its
business as described in the Offering Memorandum and (c) has the partnership
power and authority to execute and deliver each of the Credit Documents to
which it is a party and to perform its obligations thereunder and to grant the
security interests granted by it pursuant to the Security Documents.
3. Each of Graham Packaging Poland, L.P. ("Graham Poland LP") and
Graham Recycling Company, L.P. ("Recycling LP") (a) is a limited partnership
validly existing under the laws of the Commonwealth of Pennsylvania (Holdings,
Graham France GP, Graham Poland LP, and Recycling LP, individually, a
Pennsylvania Credit Party and, collectively, the "Pennsylvania Credit
Parties"), (b) has the partnership power and authority to transact its
business as described in the Offering Memorandum and (c) has the partnership
power and authority to execute and deliver each of the Credit Documents to
which it is a party and to perform its obligations thereunder and to grant the
security interests granted by it pursuant to the Security Documents.
4. The execution, delivery and performance of each of the Credit
Documents has been duly authorized by each of the Pennsylvania Credit Parties
as is a party thereto.
5. The execution, delivery and performance of each of the Credit
Documents by each of the Pennsylvania Credit Parties as is a party thereto
will not violate (a) its partnership agreement or, in the case of each
Pennsylvania Credit Party which is a limited partnership, its certificate of
limited partnership or (b) any Pennsylvania statute, law, rule or regulation.
6. Except for the filing of the Financial Statements, no consent,
approval, authorization, order, filing, registration or qualification with any
Pennsylvania government agency or body is required for the execution, delivery
or performance by any Pennsylvania Credit Party of the Credit Documents to
which it is a party.
7. Insofar as the matter of perfection is governed by Pennsylvania
law, upon the Filing of the Financing Statements in the offices listed in
Schedule II hereto, the Collateral Agent will have a perfected security in the
Grantors' interest in the Collateral (as defined in the Security Agreement) to
the extent that the Collateral consists of "inventory" and "equipment" located
in the Commonwealth of Pennsylvania, "accounts" and "general intangibles"
(including interests in partnerships) (as such terms are defined in the
Uniform Commercial Code as effect in Pennsylvania, the "UCC"). (For purposes
of the opinions expressed in Paragraphs 7 and 8 the term "Grantors" refers to
the Credit Parties which are party to the Security Agreement or the
Intellectual Property Security Agreement, as the case may be.)
<PAGE>
February 2, 1998
Page 3
8. (a) The Intellectual Property Security Agreement is effective to
create in favor of the Collateral Agent a valid security interest in the
Grantors' interest in that portion of the Collateral (as defined in the
Intellectual Property Security Agreement) consisting of (i) issued U.S.
patents or U.S. patent applications identified in such Security Agreement
("Patents"), (ii) U.S. federally registered trademarks and service marks and
applications therefor identified in such Security Agreement ("Trademarks"),
and (iii) U.S. copyright registrations identified in such Security Agreement
("Copyrights") (all such Collateral described in clauses (i) through (iii) is
referred to as the "IP Collateral").
(b) With respect to that part of the IP Collateral which consists of
Patents, upon the filing of the Financing Statements in the offices
listed in Schedule II hereto and the timely recordation of the
Intellectual Property Security Agreement at the United States Patent and
Trademark Office, a security interest in the Patents will be perfected,
assuming that one of the Grantors is the record title holder in the
Patents at the time of such filing and recordation and the Patents have
been properly maintained.
(c) With respect to that part of the IP Collateral which consists of
Trademarks, upon the filing of the Financing Statements in the offices
listed in Schedule II hereto and the timely recordation of the
Intellectual Property Security Agreement at the United States Patent and
Trademark Office, a security interest in the Trademarks will be
perfected, assuming that one of the Grantors is the record title holder
in the Trademarks at the time of such filing and recordation and the
Trademarks have been properly maintained.
(d) With respect to that part of the IP Collateral which consists of
Copyrights, upon the filing of the Financing Statements in the offices
listed in Schedule II hereto and the timely filing of the Intellectual
Property Security Agreement or an appropriate summary document of the
Intellectual Property Security Agreement at the United States Copyright
Office, a security interest in the Copyrights will be perfected,
assuming that one of the Grantors is the record holder in the Copyrights
at the time of such filing and recordation.
The foregoing opinions are subject to the following assumptions and
qualifications:
(a) Except with respect to Paragraph 8, the foregoing opinions are
limited to the law of the Commonwealth of Pennsylvania, and we do not
express any opinion on any other law. The opinions expressed in
Paragraph 8 are limited to the laws of the State of New York, the
Commonwealth of Pennsylvania, and, to the extent applicable to such
matters, federal law.
(b) In connection with the opinions expressed in Paragraphs 5 and 6,
we assume that the businesses in which the Pennsylvania Credit Parties
are engaged are limited to the businesses described in the Offering
Memorandum.
(c) In connection with the opinions expressed in Paragraphs 7 and 8,
we have assumed that (i) the execution, delivery and performance of the
Security Agreement and the Intellectual Property Security Agreement by
each of the Credit Parties as is a party thereto (other than the
Pennsylvania Credit Parties) have been duly authorized by all necessary
corporate or company action, as the case may be, (ii) the Security
Agreement is a legal, valid and binding obligation of each of the Credit
Parties as is a party thereto and is effective under New York law to
create a security interest in the Collateral (as defined in the Security
Agreement), (iii) the Intellectual Property Security Agreement is a
legal, valid and binding obligation of each of the Credit Parties as is
a party thereto, (iv) each Credit Party has its chief executive office
at the respective location in the Commonwealth of Pennsylvania set forth
in Schedule III hereto, and (v) each of the respective Credit Parties
has rights in the Collateral in which it is granting a security
interest.
(d) Our opinions set forth in Paragraphs 5, 7 and 8 are subject to
the effects of bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws affecting creditors'
rights generally and general principles of equity.
<PAGE>
February 2, 1998
Page 4
(e) In connection with the opinion expressed in Paragraph 7, we call
to your attention that under Section 8103 of the UCC, an interest in a
partnership is not a "security" unless it is dealt in or traded on
securities exchanges or in securities markets, its terms expressly
provide that it is a security governed by Article 8 of the UCC, or it is
an investment company security. We assume that none of such exceptions
applies to any Collateral consisting of partnership interests. Although
the Code does not expressly so state, we believe that partnership
interests that do not constitute securities are properly characterized
as "general intangibles." Under Section 9103 of the UCC, the law
(including the conflict of laws rules) of the jurisdiction in which the
debtor is located governs the perfection and the effect of perfection or
non-perfection of a security interest in general intangibles.
(f) In connection with the opinions expressed in Paragraphs 7 and 8
we also call to your attention that (i) under the UCC the effectiveness
of the Financing Statements will lapse five years after filing unless
continuation statements are properly filed prior to the end of such five
year period, and (ii) the perfection of a security interest in proceeds
is limited by Section 9306 of the UCC.
(g) The opinion expressed in Paragraph 7 is limited to the types of
personal property as to which the filing of financing statements in
Pennsylvania is the proper method of perfection. We express no opinion
with respect to the perfection of any security interest in (i) property
which is subject to any certificate of title statute or any federal
system for the registration of liens or security interests (except as
otherwise set forth in Paragraph 8), (ii) any accounts with respect to
which a state or federal governmental unit is the account debtor, (iii)
equipment which may constitute "mobile goods," or (iv) any property
which may constitute "fixtures."
The opinions expressed herein are for the sole benefit of you and your
participants and assigns and may only be relied on by you and them in
connection with the transactions described herein.
Very truly yours,
<PAGE>
[Morgan, Lewis
& Bockius LLP]
SCHEDULE I
The Subsidiary Credit Parties
Graham Packaging Poland, L.P., a Pennsylvania limited partnership
Graham Recycling Company, L.P. a Pennsylvania limited partnership
Graham Packaging France Partners, a Pennsylvania general partnership
Graham Packaging Company, a Delaware limited partnership
GPC Capital Corp. II, a Delaware corporation
GPC Opco GP LLC, a Delaware limited liability company
GPC Capital Corp. I, a Delaware corporation
Graham Packaging Latin America LLC, a Delaware limited liability company
GPC Sub GP LLC, a Delaware limited liability company
<PAGE>
[Morgan, Lewis
& Bockius LLP]
SCHEDULE II
Pennsylvania UCC Filing Offices
Secretary of the Commonwealth
Prothonotary of York County
<PAGE>
[Morgan, Lewis
& Bockius LLP]
SCHEDULE III
Location of Chief Executive Offices
Grantor Address County
------- ------- ------
All 1110 East Princess Street York
York, PA 17403
<PAGE>
SCHEDULE B
PATENT PATENT NO. ISSUE DATE
------ ---------- ----------
<PAGE>
EXHIBIT 21.1
Subsidiaries
Jurisdiction and Type of
Name: Graham Packaging Company Formation
- ------------------------------- ---------
GPC Capital Corp. I Delaware corporation
GPC Sub GP LLC Delaware limited liability company
Graham Packaging Canada Limited Canadian Ltda.
Graham Packaging France Partners Pennsylvania general partnership
Graham Packaging France Holdings S.A. French S.A.
Graham Packaging France, S.A. French S.A.
Graham Packaging Italy, S.r.L Italian S.r.L.
S.I.P. Srl Italian S.r.L.
LIDO Plast-Graham Argentine S.r.L.
Graham Packaging Poland, L.P. Pennsylvania limited partnership
Masko Graham Polish Ltda.
Graham Recycling Company Pennsylvania limited partnership
Graham Packaging Latin America, LLC Delaware limited liability company
Graham Brasil Participacoes Brazilian Ltda.
Graham Packaging do Brasil Brazilian S.A.
Note: Certain foreign subsidiaries' statutory shares are not included in the
Table above. SCHEDULE 2
<PAGE>
EXHIBIT 21.2
Subsidiaries
Jurisdiction and Type of
Name: Graham Packaging Holdings Company Formation
- ---------------------------------------- ---------
Graham Packaging Company
GPC Capital Corp. I Delaware corporation
GPC Capital Corp. II
GPC Opco GP LLC
GPC Sub GP LLC Delaware limited liability company
Graham Packaging Canada Limited Canadian Ltda.
Graham Packaging France Partners Pennsylvania general partnership
Graham Packaging France Holdings S.A. French S.A.
Graham Packaging France, S.A. French S.A.
Graham Packaging Italy, S.r.L Italian S.r.L.
S.I.P. Srl Italian S.r.L.
LIDO Plast-Graham Argentine S.r.L.
Graham Packaging Poland, L.P. Pennsylvania limited partnership
Masko Graham Polish Ltda.
Graham Recycling Company Pennsylvania limited partnership
Graham Packaging Latin America, LLC Delaware limited liability company
Graham Brasil Participacoes Brazilian Ltda.
Graham Packaging do Brasil Brazilian S.A.
Note: Certain foreign subsidiaries' statutory shares are not included in the
Table above.
<PAGE>
EXHIBIT 10.2
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT is dated February 2, 1998 by and between Graham
Packaging Holdings Company, a Pennsylvania limited partnership (formerly known
as Graham Packaging Company, the "Partnership"), and Graham Capital Corporation,
a Pennsylvania corporation ("Capital").
BACKGROUND
1. The Partnership is engaged in the business of the sale and manufacturing
of extrusion blow molded rigid plastic containers primarily for the food and
beverage, household and automotive business segments (the "Business").
2. Capital has agreed to provide the Partnership with general business,
operational and financial consulting services concerning the Business, all on
the terms and conditions hereinafter set forth.
3. On December 18, 1997, the partners of the Partnership and certain other
entities entered into an Agreement and Plan of Recapitalization, Redemption and
Purchase (the "Recapitalization Agreement") pursuant to which, among other
things, the capitalization of the Partnership will be restructured.
4. The execution and delivery of this Agreement is a condition to the
consummation of the transactions contemplated by the Recapitalization Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements contained in this Agreement, the parties hereto, intending to be
legally bound, agree as follows:
SECTION 1. SERVICES
1.1 Nature of Services. Subject to the terms and conditions hereinafter set
forth, during the term of this Agreement, Capital shall provide such general
business, administrative, operational and financial consulting services
concerning the Business as the Partnership shall reasonably request from time to
time.
1.2 Rendering of Services. All consulting services required to be provided
hereunder shall be rendered on behalf of Capital by employees, consultants and
representatives of Capital as are employed or retained from time to time
(including, without limitation, Steven Graham, Steven Wood, Kenneth Graham and
William Kerlin) as may be mutually acceptable to the Partnership and Capital
(each an "Operating Consultant," and together the "Operating Consultants");
provided, however, that in the event Mr. Kerlin serves on the Partnership's
Advisory Committee, Capital shall not be obligated to provide the consulting
services of Mr. Kerlin hereunder unless and until he reaches his maximum time
commitment to the Advisory Committee pursuant to the Fifth Amended and Restated
Agreement of Limited
<PAGE>
Partnership of the Partnership dated the date hereof, and any services provided
by Mr. Kerlin to the Partnership after such time shall be presumed to be
services provided under this Agreement. Capital shall cause the Operating
Consultants to provide requested consulting services to the Partnership within a
reasonable amount of time following Capital's receipt of notice from the
Partnership specifying the type of consulting services requested, the location
where such consulting services need to be performed and the estimated time
commitment for such consulting services.
1.3 Time Commitment. During the term of this Agreement, the extent to which
Capital shall (or shall not) be obligated hereunder to provide the consulting
services of any individual Operating Consultant shall be mutually agreed upon by
the Partnership and Capital.
SECTION 2. COMPENSATION
2.1 Fee for Operating Consultants' Services. In consideration of the
consulting services rendered by the Operating Consultants under this Agreement,
the Partnership shall pay to Capital a mutually agreed upon consulting fee on a
retainer basis or at hourly rates to be agreed upon by the parties before such
services are provided (but ranging from $200 per hour to $750 per hour depending
upon the Operating Consultant that is performing the services) for each hour
actually spent by the Operating Consultants performing such services, including
time spent in travel in connection therewith, payable within 10 days of the date
of an invoice therefor from Capital.
2.2 CPI Adjustments. On the first anniversary of this Agreement (the
"Adjustment Date"), the agreed upon fees pursuant to Section 2.1 hereof shall be
increased to an amount not less than the product of such agreed upon fees
multiplied by a fraction, the numerator of which shall be the CPI (as
hereinafter defined) for the month immediately preceding the Adjustment Date,
and the denominator of which shall be the CPI for the month of December, 1997.
For purposes of this Section 2.2, the term "CPI" shall mean the Consumer Price
Index -- All Urban Consumers -- All Items, as published by the Bureau of Labor
Statistics of the United States Department of Labor, or any revised or successor
index hereafter published by the Bureau of Labor Statistics or other agency of
the United States Government succeeding to its functions.
2.3 Expenses. The Partnership shall promptly reimburse Capital for all
actual out-of-pocket expenses reasonably incurred by or on behalf of Capital in
connection with the performance of the consulting services contemplated hereby.
Such reimbursement shall be made in accordance with the Partnership's
reimbursement policies as in effect from time to time and upon receipt of
itemized vouchers therefor and such other supporting information as the
Partnership may reasonably require.
SECTION 3. TERM AND TERMINATION
3.1 Term. This Agreement shall commence on the date hereof and shall
continue for a period of two (2) years, unless earlier terminated as hereinafter
provided. The term of this Agreement may be extended by mutual written agreement
of the parties.
3.2 Termination. This Agreement may be terminated at any time prior to the
expiration hereof as follows:
(a) by mutual consent of Capital and the Partnership; and
(b) by either party, if the other party materially breaches any
covenant or other term of this Agreement; provided, that the party seeking
to terminate this Agreement has given the party who committed the breach
thirty (30) days' notice in writing, particularly specifying the breach,
and the
<PAGE>
notified party has not cured such breach prior to the expiration of such
notice period to the reasonable satisfaction of the other party.
3.3 Payment of Accrued Amounts. If this Agreement is terminated pursuant to
Section 3.2, the Partnership shall not thereafter be obligated to make any
further payment under this Agreement other than amounts payable hereunder as of
the date of termination. All such payments shall be due and payable immediately
upon termination.
SECTION 4. INDEMNIFICATION
The Partnership shall indemnify and hold Capital (including its officers,
directors, shareholders, consultants, representatives, and employees (including
the Operating Consultants)) harmless against and in respect of any and all
losses, costs, expenses, claims, damages, obligations and liabilities, including
interest, penalties and reasonable attorney's fees and disbursements, which
Capital or any such person may suffer, incur or become subject to arising out
of, based upon or otherwise in respect of the performance by Capital of the
consulting services required to be provided by Capital hereunder or the exercise
by Capital of its rights under this Agreement, except to the extent Capital is
found by a court of competent jurisdiction in a final non-appealable order to
have been guilty of gross negligence or wilful misconduct.
SECTION 5. MISCELLANEOUS
5.1 No Agency Relationship. It is understood and agreed that in providing
consulting services hereunder, Capital is acting as an independent contractor,
and neither Capital nor any Operating Consultant will have any authority to act
as agent for the Partnership in any matter or in any respect.
5.2 Notices. All notices of any kind required or permitted under this
Agreement shall be in writing and shall be sufficiently given if hand-delivered
to the recipient, or sent to the recipient by documented overnight delivery
service or registered or certified mail, postage prepaid, return receipt
requested or by facsimile (confirmed by U.S. mail), confirmation received,
addressed as set forth below or to such other person and/or at such other
address as may be furnished in writing by any party hereto to the other. Any
such notice shall be deemed to have been given as of the date received, in the
case of personal delivery, or on the date shown on the receipt or confirmation
therefor, in all other cases.
If to Capital, to:
Graham Capital Corporation
c/o The Graham Companies
1420 Sixth Avenue
York, Pennsylvania 17405
Attention: William H. Kerlin, Jr.
Facsimile: 717-846-6931
With a copy to:
Drinker Biddle & Reath LLP
Philadelphia National Bank Building
1345 Chestnut Street
Philadelphia, PA 19107-3496
Attention: Robert M. Jones, Jr.
Facsimile: 215-988-2757
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If to the Partnership, to:
BCP/Graham Holdings LLC
c/o Blackstone Capital Partners III Merchant Banking Fund LP
345 Park Avenue
New York, NY 10154
Attention: Howard A. Lipson
Facsimile: (212) 754-8703
With a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017-3954
Attention: Wilson S. Neely
Facsimile: (212) 455-2502
5.3 Assignment. This Agreement may not be assigned by either party hereto
without the prior written consent of the other. Subject to the foregoing
sentence, this Agreement and the rights and obligations set forth herein shall
inure to the benefit of, and be binding upon, the parties hereto and each of
their respective permitted successors and assigns.
5.4 Entire Agreement and Modification. This Agreement constitutes the
entire agreement between the parties hereto with respect to the matters
contemplated herein and supersedes all prior agreements and understandings with
respect thereto. Any amendment, modification, or waiver of this Agreement shall
not be effective unless in writing and signed by the party to be bound or their
respective successors in interest.
5.5 Waiver. Unless expressly provided, the waiver by a party of any breach
of any provision of this Agreement shall not constitute or operate as a waiver
of any other breach of such provision or of any other provision hereof, nor
shall any failure to enforce any provision hereof operate as a waiver of such
provision or of any other provision hereof.
5.6 Governing Law. This Agreement is made pursuant to, and shall be
construed and enforced in accordance with, the internal laws of the Commonwealth
of Pennsylvania, without giving effect to otherwise applicable principles of
conflicts of law.
5.7 Severability. The invalidity or unenforceability of any particular
provision or part of any provision of this Agreement shall not affect
the other provisions or parts thereof.
5.9 Headings. All section headings contained in this Agreement are for
convenience of reference only, do not form a part of this Agreement and
shall not affect in any way the meaning or interpretation of this Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused their duly authorized
representatives to execute this Agreement on the date first written.
GRAHAM PACKAGING HOLDINGS COMPANY
By: Graham Packaging Corporation,
its general partner
By:/s/ William H. Kerlin, Jr.
-------------------------
Name: William H. Kerlin, Jr.
Title: Chief Executive Officer
GRAHAM CAPITAL CORPORATION
By:/s/ William H. Kerlin, Jr.
--------------------------
Name: William H. Kerlin, Jr.
Title: President
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EXHIBIT 10.3
EQUIPMENT SALES, SERVICES AND LICENSE AGREEMENT
between
GRAHAM ENGINEERING CORPORATION
and
GRAHAM PACKAGING HOLDINGS COMPANY
<PAGE>
EQUIPMENT SALES, SERVICES AND LICENSE AGREEMENT
THIS EQUIPMENT SALES, SERVICES AND LICENSE AGREEMENT is dated
this 2nd day of February, 1998 (this "Agreement") between Graham Engineering
Corporation, a Pennsylvania corporation ("GEC"), and Graham Packaging Holdings
Company, a Pennsylvania limited partnership (formerly known as Graham Packaging
Company, "GPC"). GPC and GEC are sometimes referred to herein individually as a
"Party" and collectively as the "Parties."
WHEREAS, GEC manufactures blow molding equipment for the
production of plastic products and related in-mold labeling equipment,
extruders, conveyors, trimmers, tooling and other equipment and possesses
certain secret and substantial information and technology that is useful in the
manufacture and operation of blow molding equipment;
WHEREAS, GPC is an international rigid plastic container
manufacturing company that is active in the food and beverage, household and
automotive businesses and possesses certain secret and substantial information,
technology and know-how pertaining to the design and manufacture of plastic
containers; and
WHEREAS, GPC and GEC desire to enter into this Agreement to
provide for (i) the sale by GEC of GEC Wheel Systems (as hereinafter defined)
to GPC and its Affiliates; (ii) the provision of certain consulting services by
GEC and GPC, to each other; and (iii) certain other matters, all as hereinafter
provided.
NOW, THEREFORE, in consideration of the premises and mutual
promises herein made, and in consideration of the covenants and agreements
herein contained, and intending to be legally bound hereby, the Parties agree
as follows:
ARTICLE I. Definitions
1. Certain Definitions. The following terms, when used
in this Agreement, have the following meanings:
"Affiliate" of any person or entity means any other person or
entity that directly or indirectly, through one or more intermediaries,
controls or is controlled by or is under common control with such person or
entity. A person shall be deemed to be controlled by another person if such
other person possesses, directly or indirectly, power to direct or cause the
direction of the management and policies of such person whether by ownership of
equity or other securities by contract or otherwise provided that any person or
entity of which any other person or entity owns beneficially or of record,
either directly or through one or more intermediaries, more than twenty-five
percent (25%) of the ownership interests, shall be conclusively presumed to be
an
<PAGE>
"Affiliate"; provided that Techne Technipack Engineering Italia SPA shall not
be an Affiliate of Engineering or any of its Affiliates.
"Dairy" means a plant for which a central activity is to
produce and/or package milk, cream, evaporated milk, flavored milks or milk
shakes.
"Dairy Containers" means extrusion blow molded containers for
liquid food products to be filled in Dairies. For the purposes of
clarification, such containers may include bottles for juices, nectars, still
drinks, and water, if filled at a Dairy.
"High Output Extrusion Blow Molding Equipment" means
extrusion blow molding machinery with greater than twelve cavities, including
GEC Wheel Systems. High Output Extrusion Blow Molding Equipment shall also
include rebuilds, retrofits and other similar enhancements of such machinery.
"GEC Wheel Systems" means the GEC "Super 12" line or larger
lines of rotary extrusion blow molding machinery for producing plastic
containers and related components, which operate with more than twelve
stations, and related auxiliary equipment developed or produced by GEC, all as
constituted on the date hereof, as the same may be modified hereafter from time
to time for efficiency improvements, except to the extent such modifications
are, or become, subject to non-use or non- disclosure agreements with third
parties, it being understood that it is GEC's intent, though not its
obligation, to seek to preserve for itself to the extent practicable in its
discretion, the right to include in GEC Wheel Systems for sale to GPC,
efficiency improvements thereto.
"Off-Site Dairy Focused Facility" means a Facility, which is
not a Dairy, but where the substantial portion of the operations are dedicated
to the production of extrusion blow molded milk bottles that are to be filled
in a Dairy.
"Proprietary Technology" means proprietary technical
information and technology that GEC now possesses or hereafter acquires during
the term of this Agreement which is embodied in GEC Wheel Systems and other
equipment proprietary to GEC sold by GEC to GPC and its Affiliates heretofore
or from time to time under this Agreement and other proprietary technical
information and technology identified by GEC to GPC as proprietary that GEC
provides from time to time or already has provided to GPC or any of its
Affiliates.
"Recapitalization Agreement" means the Agreement and Plan of
Recapitalization, Redemption and Purchase dated December 18, 1997 among GPC,
GEC, Graham Packaging Corporation, Graham Family Growth Partnership, Graham
Capital Corporation, Graham Recycling Corporation, Donald C. Graham, BCP/Graham
Holdings LLC and BMP/Graham Holdings Corporation.
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<PAGE>
"Territory" means the countries and territories located in
North America and South America and the countries comprising the European
Economic Community as of the date of this Agreement ("EEC"), and any other
country in or to which GPC or its Affiliates, as of or after the date hereof,
has produced or shipped in the then most recent calendar year extrusion blow
molded plastic bottles representing sales in excess of $1,000,000 at
then-prevailing market prices.
ARTICLE II. Equipment Purchases and Sales
2.1. Equipment Purchases by GPC.
(a) During the term of this Agreement and subject to
the requirements set forth in Section 2.1(b) below, and notwithstanding
anything to the contrary in Paragraph 5(a) of the Terms and Conditions of Sales
attached hereto, GPC and its Affiliates shall have the exclusive right to
purchase, lease or otherwise acquire GEC Wheel Systems in the Territory from
GEC (other than GEC Wheel Systems acquired directly as a result of the
acquisition of a controlling interest (through merger or otherwise) in GEC or
the acquisition of substantially all of the assets or extrusion blow molding
assets of GEC (provided that in any such case, GEC shall ensure that the
successor or purchaser assumes GEC's obligations under this Agreement)), except
for the purposes of manufacturing (i) Dairy Containers or (ii) containers for
yogurt drinks or lactic acid drinks, for which GPC and its Affiliates shall
have a nonexclusive right to purchase such equipment, subject to Section 5.2(b)
hereto. Subject to the foregoing, GEC shall not sell GEC Wheel Systems outside
of the Territory to a purchaser (other than a purchaser to which a sale could
be made in the Territory pursuant to the next paragraph) if, at the time of
such sale (i) such sale would be inconsistent with GPC's exclusive rights if it
were made in the Territory and (ii) GEC knows that such purchaser intends to
relocate the GEC Wheel System to the Territory. GPC shall have the nonexclusive
right to purchase GEC Wheel Systems outside the Territory. Except as provided
in this Section 2.1, nothing in this Agreement shall limit GPC's right to sell
products produced by the GEC Wheel Systems in any geographical area.
Notwithstanding anything in this Section 2.1 to the contrary,
GEC shall not be prohibited from selling any GEC Wheel Systems to GEC customers
that (i) have purchased equipment from GEC or its Affiliates prior to the date
hereof or (ii) after the date hereof purchase equipment from GEC or its
Affiliates outside the Territory on the date of such purchase; provided that
the GEC Wheel Systems permitted to be sold to a customer pursuant to this
sentence shall be no larger in size than (A) with respect to clause (i) above,
the largest GEC Wheel System heretofore sold to such GEC customer (or any
affiliate thereof), or (B) with respect to clause (ii) above, the largest GEC
Wheel System sold to such customer (or any affiliate thereof) prior to the date
on which the geographical area in which the customer is located
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becomes part of the Territory. Other than as indicated in this Section 2.1,
nothing in this Agreement shall be construed as imposing any obligation or
restriction whatsoever on sales of equipment by GEC and its Affiliates.
(b) While GPC and its Affiliates shall be free to
purchase extrusion blow molding equipment, including High Output Extrusion Blow
Molding Equipment, from any supplier, in order to maintain the exclusivity
rights set forth in Section 2.1(a) above, GPC and its Affiliates must purchase
from or through GEC all of GPC's and its Affiliates' collective requirements
for High Output Extrusion Blow Molding Equipment; provided that equivalent
equipment is able to be supplied by GEC and that it is on an overall basis
competitive with commercially available substitutes taking into account
relevant factors such as price, performance, quality and delivery. The
foregoing shall not preclude GPC from rebuilding and retrofitting High Output
Extrusion Blow Molding Equipment owned by GPC or its Affiliates as of the date
of this agreement or purchased by GPC or its Affiliates after the date hereof
from GEC. If GPC or its Affiliates purchase High Output Extrusion Blow Molding
Equipment from any supplier other than GEC (other than High Output Extrusion
Blow Molding Equipment acquired directly as the result of the purchase of a
business) notwithstanding that GEC has met the conditions of the immediately
preceding proviso, then GEC shall have the right to terminate the exclusivity
rights set forth in Section 2.1(a) above.
2.2. Terms of Purchase.
(a) The purchase price to be offered by GEC to GPC
and its Affiliates for GEC Wheel Systems shall be set forth in a written price
quote from GEC. The price (excluding delivery and importation duties and other
taxes) for such GEC Wheel Systems will be determined on the basis of a
percentage mark-up of material, labor and overhead costs that is as favorable
to GPC as the percentage mark-up historically offered by GEC to GPC and its
Affiliates for comparable equipment and as favorable as the price at which GEC
is then offering comparable equipment except for the initial five GEC Wheel
Systems sold after the date of this Agreement in each country outside the
Territory (collectively, the "Pricing Methodology"). For purposes of verifying
the Pricing Methodology, GPC shall be entitled to have an audit conducted (at
its expense) of relevant portions of GEC's records pertaining to the pricing to
customers with respect to GEC Wheel Systems by an independent internationally
recognized accounting firm (no more frequently than annually). Such firm shall
be authorized to report to GPC whether or not GEC has complied with the Pricing
Methodology, and shall agree in writing not to disclose to GPC any other
information relating to GEC. In the event GEC has not complied with the Pricing
Methodology to GPC's detriment, GPC shall be entitled to a price rebate as
appropriate.
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<PAGE>
(b) GPC shall pay 30% of the purchase price for
equipment ordered from GEC at the time of the order, 60% of the purchase price
prior to delivery of such equipment, and 10% of the purchase price upon
completion of the acceptance of such equipment. Except as otherwise provided in
this Agreement, all other material terms and conditions of sale with respect to
such equipment purchased from GEC are detailed in Schedule A to this Agreement,
as the same may be amended from time to time by GEC.
ARTICLE III. Consulting Services
3.1. GEC Consulting Services. GEC, at GPC's request on
reasonable notice, shall provide such consulting services, including technical
support and know-how, to or on behalf of GPC and its Affiliates as are provided
by GEC as of the date hereof to or on behalf of GPC and its Affiliates ("GEC
Consulting Services"). After December 31, 1998, GEC may terminate GPC's and its
Affiliates' rights to receive GEC Consulting Services by providing written
notice of such termination to GPC, provided that the termination of GEC
Consulting Services shall not become effective until the first anniversary of
GPC's receipt of such notice of termination.
3.2. GPC Consulting Services. GPC, at GEC's request on
reasonable notice, shall provide such consulting services, including technical
support and know-how, to or on behalf of GEC as are provided by GPC and its
Affiliates as of the date hereof to or on behalf of GEC and its Affiliates or
as have been provided to Tetra Pak International S.A. prior to the date hereof
(collectively, the "GPC Consulting Services"). After December 31, 1998, GPC may
terminate GEC's rights to receive GPC Consulting Services by providing written
notice of such termination to GEC, provided that the termination of GPC
Consulting Services shall not become effective until the first anniversary of
GEC's receipt of such notice of termination.
3.3. Provision of Personnel. Each Party shall make available
to the other Party the appropriate personnel required to perform the services
described in Sections 3.1 and 3.2. The overall time requirement of each Party
to the other shall not be materially in excess of past time requirements.
3.4. Reimbursement of Costs. Each Party shall promptly
reimburse the other Party for all reasonable out-of-pocket costs and expenses
for food, travel and lodging of the other Party in connection with the
activities of all personnel of such other Party or its Affiliates under this
Agreement, upon presentation of receipts and other supporting documentation
therefor.
3.5. Fees.
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(a) In consideration for the services to be provided
by a Party under this Article III, the receiving Party shall pay to the
providing Party such hourly rates for such services that are consistent with
the rates currently charged for such services by the providing Party to the
receiving Party, such hourly rates currently ranging from $60 per hour to $200
per hour. Such fees shall be paid in accordance with Section 3.5(b) below. In
addition, upon each anniversary of the date of this Agreement, such hourly
rates for services shall be increased by an amount equal to the product of such
agreed upon rates multiplied by a fraction, the numerator of which shall be the
CPI (as hereinafter defined) for the calendar month immediately preceding such
anniversary date, and the denominator of which shall be the CPI for the same
month of the immediately preceding year. For purposes of this Section 3.5, the
term "CPI" shall mean the Consumer Price Index - All Urban Consumers - All
Items, as published by the Bureau of Labor Statistics of the United States
Department of Labor, or of any revised or successor index hereafter published
by the Bureau of Labor Statistics or other agency of the United States
Government succeeding to its functions.
(b) The fees described in Section 3.5(a) shall be
paid monthly within twenty (20) days of a Party's receipt of a written report
produced by the other Party detailing the amount due for the applicable month,
computed in accordance with Section 3.5(a) hereto. Such written report shall be
delivered within twenty (20) days following the end of the applicable month.
(c) Each Party shall have the right, during normal
business hours and upon reasonable notice to the other Party, to inspect and
permit its accountants to inspect those portions of the books and records of
such Party that are relevant to the computation of fees payable pursuant to
this Section 3.5, provided that without good cause such inspections shall not
be conducted more than once in any calendar year.
ARTICLE IV. Proprietary Technology
4.1. Grant of License by GEC. GEC hereby grants to GPC a
nontransferable (except to entities that are or become and remain Affiliates of
GPC or as permitted under Section 7.3), non-exclusive, perpetual, royalty-free
right and license to use the Proprietary Technology or have it used in the
operation of the equipment sold by GEC to GPC or its Affiliates under this
Agreement.
4.2. Certain Restrictions With Respect to the License.
Nothing contained in this Agreement shall be construed as granting GPC or its
Affiliates any right or license to manufacture or otherwise produce, cause to
be manufactured or otherwise produced, or to sell or cause to be sold,
equipment embodying Proprietary
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Technology or any other technology proprietary to GEC or its Affiliates, except
that repairs, maintenance, rebuilds and retrofits to equipment supplied by GEC
shall be permitted.
4.3. Grant of License by GPC. GPC and its Affiliates shall
own and have the right to utilize in the Territory any improvements to the GEC
Wheel Systems or any other equipment proprietary to GEC or its Affiliates and
to any of the technology embodied therein that may be discovered or developed
by GPC or any of its Affiliates (an "Improvement"), subject to Section 5.2(a)
hereto. Such right of utilization shall be (i) exclusive in the case of
Improvements developed solely by GPC or its Affiliates and (ii) nonexclusive in
the case of Improvements jointly developed by GPC or its Affiliates, on the one
hand, and GEC or its Affiliates, on the other ("Joint Improvements"). A
non-exclusive, perpetual, worldwide, royalty-free right and license, with the
right to grant sublicenses, for all applications with respect to Joint
Improvements shall vest automatically in GEC without the payment of any
additional consideration by GEC. GPC shall fully disclose promptly to GEC any
Joint Improvement and take all such action as may be necessary to secure to GEC
its rights under this Section 4.3, including securing assignments from any
employees or agents of GPC and its Affiliates. Notwithstanding anything to the
contrary contained in this Section 4.3, GPC shall own and have the exclusive
rights (subject to Section 5.2(a) hereto) with respect to any Improvement which
GPC and GEC agree in writing in advance is to be developed for and funded by
GPC.
4.4. Future Development of Proprietary Technology. The
Parties acknowledge their intent to work together in the future to develop new
lines of rotary blow molding equipment proprietary to GPC to the extent that
such developments are agreed to by the Parties and funded by GPC.
ARTICLE V. Confidentiality; Certain Restrictions
5.1. Confidentiality.
(a) During the term of this Agreement and
thereafter, GPC shall (and shall cause its Affiliates to) employ all reasonable
efforts (including as a minimum all efforts used by GPC to protect its own
technology) to protect the confidentiality of, and shall utilize only on its
behalf or that of any Affiliate for the purpose of manufacturing and selling
extrusion blow molded rigid plastic bottles, information relating to the
design, manufacture, sale or service of equipment proprietary to GEC and its
Affiliates or information proprietary to GEC or its Affiliates or as to which
GEC or any of its Affiliates has a duty of confidentiality to any third party
heretofore provided by GEC or its Affiliates or hereafter provided by GEC or
its Affiliates under this Agreement or any information derived therefrom,
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including without limitation the Proprietary Technology. GEC shall (and shall
cause its Affiliates to) employ all reasonable efforts (including as a minimum
all efforts used by GEC to protect its own technology) to protect the
confidentiality of, and shall utilize only on its behalf or that of any
Affiliate not inconsistent with this Agreement, information proprietary to GPC
or its Affiliates or as to which GPC or any of its Affiliates has a duty of
confidentiality to any third party heretofore provided by GPC or its Affiliates
or hereafter provided by GPC or its Affiliates under this Agreement or any
information derived therefrom. All information as described in the preceding
two sentences is hereafter referred to as the "Information." Each of GPC and
GEC hereby agrees to take all reasonable steps, including but not limited to at
least those steps which such Party takes to protect its own proprietary or
confidential property, to prevent any such unauthorized disclosure by any
partner, officer, employee, agent or other representative of it or its
Affiliates without the prior written consent of the other Party, which consent
may be granted or withheld in the sole party. The foregoing provision shall not
apply to any Information, other than Information disclosed under previously
executed agreements between the Parties or their Affiliates, of a disclosing
Party as to which the receiving Party or its Affiliates or any of its partners,
officers, employees, agents or other representatives can demonstrate that such
Information:
(i) is or became public knowledge through
no action of the receiving Party or its Affiliates, or such
partner, officer, employee, agent or other representative; or
(ii) has been properly provided to the
receiving Party or its Affiliates, or such partner, officer,
employee, agent or other representatives without restriction
by an independent third party; or
(iii) was properly in the possession of the
receiving Party or its Affiliates, or such partner, officer,
employee, agent or other representatives at the time of
receipt of such Information under this Agreement; or
(iv) has been developed independently by
the receiving Party or its Affiliates or such partner,
officer, employee, agent or other representative in the
course of work by employees of the receiving Party or such
partners, officers, employees, agents or other
representatives without use of such Information.
(b) Subject to Sections 4.2 and 4.3 above, jointly developed
Information may be used by either of the Parties as agreed to by the Parties
prior to any such use; provided that the non-disclosure restrictions set forth
in Section 5.1(a) shall apply to such jointly developed Information.
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(c) Each Party shall notify all of its partners, officers,
employees agents and representatives to whom any Information is to be disclosed
of the terms of this Article V, and take reasonable measures to preclude their
use or divulgence of confidential information except as permitted under this
Agreement.
(d) Anything in this Agreement to the contrary
notwithstanding, neither Party shall be required to divulge to the other Party
information that is subject to third party confidentiality agreements.
5.2. Certain Restrictions With Respect to Information. In
order to protect against the unauthorized use of the Information (including the
Proprietary Technology) of GEC and its Affiliates, within the limits of
applicable law:
(a) During the term of this Agreement and
thereafter, GPC shall not (and shall cause its Affiliates not to) use any
Information (including the Proprietary Technology) or any Improvement to (i)
design, manufacture, sell or service equipment, or (ii) assist any other party
in the design, manufacture, sale or service of equipment, in each case without
the prior written consent of GEC, which consent may be withheld in GEC's sole
discretion.
(b) During the term of this Agreement and
thereafter, GPC shall not (and shall cause its Affiliates not to) use or
install or sell for installation any GEC Wheel System purchased pursuant to
this Agreement on-site at a Dairy or at an Off-Site Dairy Focused Facility for
the purposes of manufacturing Dairy Containers without the prior written
consent of GEC, which consent may be withheld in GEC's sole discretion;
provided that this restriction shall not preclude GPC or its Affiliates from
using or installing or selling for installation any GEC Wheel System purchased
pursuant to this Agreement on-site at a Dairy or at an Off-Site Dairy Focused
Facility for the purposes of manufacturing (i) Dairy Containers for juice or
juice drink products, which containers are formed in customized shapes with
molds that are unique to the specific juice/juice drink company involved, and
(ii) containers for lactic acid drinks, yogurt drinks, or any non-liquid food
products, such as yogurt.
(c) During the term of this Agreement and
thereafter, if GPC or any of its Affiliates desires to transfer to any third
party any equipment developed or produced by GEC using technology proprietary
to GEC (other than in connection with the acquisition of GPC or a controlling
interest therein (through merger or otherwise) or the acquisition of
substantially all of the assets of GPC), GPC shall (or shall cause its
Affiliate to) first offer in writing to transfer such equipment to GEC at a
price and on terms no less favorable to GEC than the price and terms contained
in the bona fide written arm's length offer of such third party. GEC shall have
15 days in which to accept the offer of GPC or its Affiliate. No counteroffer
or negotiations on the part of GEC shall be deemed a rejection of such offer.
If GEC accepts such
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offer, a closing with respect to such purchase shall take place on a date
specified by GEC within 15 days of its acceptance. If GEC rejects such offer or
fails to accept the same within the first aforementioned 15-day period (each, a
"Rejection"), GPC or its Affiliate shall be entitled to transfer the equipment
to the aforementioned third party within 30 days after GEC's Rejection of the
offer of GPC or its Affiliate at the price and on the terms offered to GEC. If
such transfer to such third party is not made with such 30-day period, GEC's
right of first refusal shall automatically be reinstated with respect to any
subsequent transfer of such equipment.
(d) While the restrictions contained in this Section
5.2 are considered by the Parties to be reasonable in all the circumstances, it
is recognized that restrictions of the nature in question may be unenforceable,
and accordingly it is hereby agreed and declared that if any of such
restrictions shall be adjudged to be void as going beyond what is reasonable in
all the circumstances for the protection of the interests of the Parties and
their Affiliates, but would be valid if part of the wording thereof were
deleted or the periods thereof reduced or the range of activities or area dealt
with thereby reduced in scope, the said restriction shall apply with such
modifications as may be necessary to make it valid and effective.
ARTICLE VI. Term and Termination
6.1. Term. This Agreement shall become effective on the date
hereof and, unless terminated at an earlier date as provided herein, shall
continue until December 31, 2007 or until such later date to which the term of
this Agreement may be extended by mutual agreement of the Parties (the
"Expiration Date").
6.2. Termination.
(a) This Agreement may be terminated at any time
prior to the Expiration Date by mutual consent of the Parties.
(b) In the event either Party hereto breaches this
Agreement in any material respect and fails to remedy such breach within 60
days after written notice thereof by the other Party, then said other Party may
terminate this Agreement on written notice to the breaching Party.
(c) Notwithstanding anything in this Agreement to
the contrary, the continuing obligations of either Party to make payments
accrued as of the date of termination and the obligations under Articles IV and
V hereof shall survive the termination of this Agreement, subject to the
applicable time limitations set forth therein.
ARTICLE VII. Miscellaneous
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7.1. Notices. Any notice or other communication required or
permitted hereunder to be given to a Party to this Agreement shall be in
writing and shall be deemed to be delivered on the date received by such Party.
All notices and documents mailed to a Party shall be duly given when delivered
personally or transmitted by telecopier, receipt acknowledged, or in the case
of documented overnight delivery service or registered or certified mail,
return receipt requested, postage prepaid, on the date shown on the receipt
thereof. All notices and other communications shall be given to the party at
its respective address set out opposite its name below, or at such other
address as it shall have theretofore specified by written notice similarly
delivered:
If to GEC, to:
Graham Engineering Corporation
c/o The Graham Companies
1420 Sixth Avenue
York, Pennsylvania 17405
Attn: William H. Kerlin, Jr.
If to GPC, to:
BCP/Graham Holdings LLC
c/o Blackstone Capital Partners III Merchant Banking Fund LP
345 Park Avenue
New York, NY 10154
Attention: Howard A. Lipson
Facsimile: (212) 754-8703
7.2. Governing Law; Consent to Jurisdiction. The validity,
performance, construction, and effect of this Agreement shall be governed by
the laws of the Commonwealth of Pennsylvania, without regard to the principles
thereof of conflicts of law, for the determination of any controversy
whatsoever arising under or in connection with this Agreement. The parties
hereby irrevocably consent to the jurisdiction of the federal court in the
Eastern District of Pennsylvania and any state court in which venue would
otherwise be proper in the Eastern District of Pennsylvania. Such courts shall
have non-exclusive jurisdiction over any such applications or actions and the
parties hereby waive any objections or defenses to the exercise of personal
jurisdiction by or venue of such courts. Each of the parties agrees that any
notice, process or notice of motion or other application to any of said courts
may be served inside or outside of the United States by personal service, or in
any other manner as may be permitted under the rules of any said court or
pursuant to any international agreement to which the United States is a party.
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7.3. Binding Effect; Assignment. This Agreement shall inure
to the benefit of and be binding upon the successors or permitted assigns of
the Parties. This Agreement shall not be assignable by either Party outside of
its Affiliate group without the prior written consent of the other, except that
each Party shall be entitled to assign all or any of its rights and delegate
all or any of its duties hereunder to any person or entity to which such Party
transfers all or substantially all of its assets, provided that such an
assignment by GPC shall not be to a direct competitor of GEC (or an Affiliate
of such a competitor) unless GEC consents to the assignment.
7.4. Indemnification. (a) GPC shall indemnify and defend and
hold GEC and its Affiliates harmless from and against any and all claims,
losses, damages, actions, amounts paid in settlement and expenses (including
attorney's fees) resulting in whole or in part from claims by third parties
against GEC or any of its Affiliates (i) based on personal injury or property
damage or other injury alleged to have been caused by products manufactured by
GPC or its Affiliates or by the manufacture of such products, or (ii) arising
from any patent, trade secret or trademark infringement claim involving the
alleged infringement of any patent, trade secret or trademark in connection
with any act or omission of GPC or its Affiliates other than the use of GEC
Wheel Systems supplied by GEC that are utilized in accordance with the terms of
this Agreement.
(b) GEC shall indemnify and defend and hold GPC and
its Affiliates harmless from and against any and all claims, losses, damages,
actions, amounts paid in settlement and expenses (including attorney's fees)
resulting in whole or in part from claims by third parties against GPC or any
of its Affiliates arising from any patent, trade secret or trademark
infringement claim involving the alleged infringement of any patent, trade
secret or trademark in connection with the manufacture and sale of GEC Wheel
Systems by GEC pursuant to this Agreement.
(c) The Parties shall cooperate in the defense and/or
settlement of any claim brought against a Party or its Affiliates which would
be covered by the indemnity provided for in this Section 7.4.
7.5. Equitable Remedies. The Parties expressly acknowledge
that damages alone will be an inadequate remedy for any breach or violation of
any of the provisions of Article V hereof, and that either Party, in addition
to all other remedies, shall be entitled as a matter of right to equitable
relief, including injunctions and specific performance, in any court of
competent jurisdiction.
7.6. Unauthorized Use of Information. The Parties shall
promptly, but in all events within five calendar days, notify one another in
writing of any circumstances surrounding any unauthorized possession, use or
knowledge of information relating to the Information after the applicable party
has knowledge
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<PAGE>
thereof, shall cooperate with one another in preventing the recurrence of such
unauthorized possession, use or knowledge, and shall cooperate with one another
in any litigation against third parties brought by either Party to protect its
proprietary rights.
7.7. Change in Control. In the event GEC proposes, by merger,
sale of securities or other means to transfer to a competitor of GPC or its
Affiliates (a "Competitor") a controlling interest in GEC's business or
substantially all of its assets or that portion of its assets comprising rotary
extrusion blow molding equipment (a "Transfer"), then GEC shall, at GPC's
option, (1) enter into a licensing and technical assistance agreement with GPC
on terms mutually agreeable to the Parties securing to GPC the right to
manufacture GEC Wheel Systems consistent with its rights under this Agreement,
or (2) grant to GPC on reasonable terms a right of first refusal to meet the
terms and conditions offered by or to be offered to such Competitor with
respect to the Transfer.
7.8. Cooperation. It is the intent of GEC, prior to any
Change in Control, to cooperate with GPC in identifying potential acquisition
and expansion opportunities for GPC.
7.9. Replacement Parts. GEC shall sell to GPC upon GPC's
order and on terms and conditions, including price, as favorable to GPC as
those generally offered by GEC to its other customers, replacement parts for
GEC Wheel Systems during the term of this Agreement and, except in the case of
a termination of this Agreement by GEC pursuant to Section 6.2(b) hereof, for
five years following termination of this Agreement, provided that GEC is then
still stocking and selling such replacement parts.
7.10. Entire Agreement. This Agreement constitutes the entire
understanding between the Parties with respect to the subject matter hereof,
supersedes all prior oral or written understandings of the Parties with respect
hereto, and may be amended only by a document in writing executed by both
Parties. This Agreement specifically supersedes the Master Purchase and License
Agreement between the Parties dated April 3, 1989, as amended, which agreement
is hereby terminated.
7.11. Waiver. Failure by either Party to insist on
compliance with this Agreement by the other Party to this Agreement shall not
be deemed a waiver of any
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<PAGE>
term or condition of this Agreement, and such Party may thereafter insist upon
compliance with all terms and conditions of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the day and year first above written.
GRAHAM ENGINEERING CORPORATION
By:/s/ William H. Kerlin
----------------------
Title: Chairman
GRAHAM PACKAGING HOLDINGS
COMPANY
By: Graham Packaging Corporation,
its General Partner
By:/s/ William H. Kerlin
----------------------
Title:Chief Executive Officer
------------------------
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<PAGE>
Terms and Conditions of Sales
1. Proposal. In order to accept the attached proposal ("Proposal") from
Graham Engineering Corporation ("GEC), upon the terms and conditions set forth
therein, Buyer must execute and deliver to GEC the Proposal by the validity date
stated in the Proposal.
2. Freight Charges. The prices stated in this Proposal are given F.O.B.
GEC's place of manufacture in York, Pennsylvania and do not include any special
handling charges or special painting which shall be at the Buyer's expense.
Extra expenses incurred incident to shipment abroad shall be considered special
handling expenses and shall be paid by the Buyer.
3. Terms. All payments shall be made in United States dollars and shall
be made in accordance with these Terms and Conditions and the
Proposal. Notwithstanding the foregoing if shipment is delayed at
Buyer's request or due to conditions beyond the control of either GEC
or the Buyer, the final payment as stated in the Proposal shall become
due upon notification by GEC that the equipment is ready for shipment.
In such event GEC may, at its option and at Buyer's risk, store the
equipment in a warehouse or within GEC's premises. Upon submission of
the appropriate invoices, Buyer shall pay all handling, transportation
and storage costs incurred in connection with such storage.
4. Taxes. Prices set forth in the Proposal are exclusive of taxes. The
amount of any present or any future occupation, sales, use, value
added, service, excise or other similar tax which GEC shall be liable
for, either on its own behalf or on behalf of the Buyer, with respect
to any orders for machinery or services, shall be in addition to the
billing prices and shall be paid by the Buyer.
5. Cancellation. In the event the Buyer requests that work stop on or
upon the cancellation of all or any part of an accepted order, Buyer
shall pay liquidated damages to GEC as follows:
(a) If the ordered equipment is manufactured and
ready for shipment at the time GEC receives from Buyer notice
to stop work on or cancel the order, then such equipment
shall be paid for at the full purchase price; provided
however, that if GEC sells any portion of the canceled order
to another buyer, the proceeds from such sale will reduce the
amount owed by the amount of such sale.
(b) If the equipment is work in process at the time
GEC receives from Buyer notice to stop work on or cancel the
order, then liquidated damages shall be paid on the basis of
GEC's reasonable determination of fall accumulated costs for
all services, supplies,
<PAGE>
engineering work, work in process (including all direct and
indirect costs), and all commitments made by GEC in
preparation for, and in manufacturing the equipment up to the
time of receipt of such notice plus any profit that would
have otherwise been realized had the Buyer not notified GEC
to stop work on or cancel the orders. Any components which
can be applied to other unfulfilled orders in process shall
be so applied and will reduce the liquidated damages by an
amount equivalent to GEC's reasonable determination of
accumulated costs of such components.
In the event that Buyer request that work stop on or upon the
cancellation of the order, the Buyer shall promptly instruct
GEC as to the disposition of the equipment. GEC shall, if
requested, hold the equipment for Buyer's account. All costs
of storage, insurance, handling and boxing shall be paid by
the Buyer.
6. Delivery. Delivery dates are given as estimates only and should be
considered as the dates when it is estimated that the equipment will
be ready for shipment. GEC shall not be liable for any loss of profits
or other damages due to delays in manufacture or delivery, regardless
of the reason that such delays occur.
7. Risk of Loss. Risk of loss shall pass to the Buyer as soon as the
equipment is placed with a carrier for shipment to Buyer or placed in
GEC's storage facilities. The Buyer shall pay all costs of insurance
from the time that risk of loss passes to the Buyer. GEC shall
cooperate fully with the Buyer with respect to the Buyer obtaining
insurance protection for the equipment.
8. Applicable Law. The agreement between GEC and Buyer shall be governed
by the Uniform Commercial Code as effective in Pennsylvania and other
applicable laws of the Commonwealth of Pennsylvania, without regard to
the principles thereof of conflicts of law. The agreement shall not be
governed by the United Nations Convention on the International Sale of
Goods.
9. Equipment Warranties. GEC warrants equipment, to the extent that it is
of its manufacture, to be free from defects in material and
workmanship for one (1) year after the date of shipment from GEC's
factory or 4,000 hours of operation, whichever occurs first, when used
by the Buyer under normal production conditions and operated by a
qualified operator. Warranty of equipment manufactured by others is
limited to the warranty as issued by the equipment supplier; GEC
hereby agrees to transfer any such warranty to the Buyer. The sole
obligation of GEC under this warranty is, at its option, to repair
without charge the defective part F.O.B. GEC's place of manufacture in
York, Pennsylvania or to furnish without charge F.O.B. GEC's place of
manufacture in York, Pennsylvania a replacement part. Any part claimed
to be
<PAGE>
defective under this warranty must be returned by the Buyer,
transportation prepaid to GEC, to establish a claim.
Furthermore, this warranty is conditioned upon GEC receiving prompt
notice of such defect. GEC shall have no obligation to install or pay
for the installation of the replacement part. For repairs which must
be carried out at the customers facility, GEC's standard service call
rates for both labor and expenses will apply. Repair by any party
other than GEC shall void the warranty. This express warranty is in
lieu of any and all implied warranties referenced in Paragraph 10.
10. Disclaimer. ANY DESCRIPTION OF THE GOODS CONTAINED IN THE
PROPOSAL OR IN ANY OTHER DOCUMENT IS FOR THE SOLE
PURPOSE OF IDENTIFYING THEM, IS NOT PART OF THE BASIS OF
THE BARGAIN, AND DOES NOT CONSTITUTE A WARRANTY THAT
THE GOODS SHALL CONFORM TO THAT DESCRIPTION.
FURTHERMORE, THE USE OF ANY SAMPLE OR MODEL IN
CONNECTION WITH THIS CONTRACT IS FOR ILLUSTRATIVE
PURPOSES ONLY, IS NOT PART OF THE BASIS OF THE BARGAIN
AND IS NOT TO BE CONSTRUED AS A WARRANTY THAT THE
GOODS WILL CONFORM TO THE SAMPLES OR MODELS. NO
AFFIRMATION OR FACT OR PROMISE MADE BY GEC WHETHER OR
NOT IN THESE TERMS AND CONDITIONS OR THE PROPOSAL OR
ELSEWHERE, SHALL CONSTITUTE A WARRANTY THAT THE GOODS
WILL CONFORM TO THE AFFIRMATION OR PROMISE.
THIS SALE IS MADE ON THE EXPRESS UNDERSTANDING THAT THERE IS NO
IMPLIED WARRANTY THAT THE GOODS SHALL BE MERCHANTABLE OR FIT FOR ANY
PARTICULAR PURPOSE.
ANYTHING IN THESE TERMS AND CONDITIONS OR IN THE PROPOSAL TO THE
CONTRARY NOTWITHSTANDING, UNDER NO CIRCUMSTANCES SHALL GEC BE LIABLE
TO BUYER FOR ANY CONSEQUENTIAL, INDIRECT OR SPECIAL DAMAGES, RELATED
TO, IN CONNECTION WITH OR ARISING AS A RESULT OF THE PROPOSAL OR GEC'S
MANUFACTURING, SALE OR DELIVERY OF THE EQUIPMENT OR THE USE, STORAGE
OR OPERATION THEREOF OR ANY PERFORMANCE OR FAILURE OF PERFORMANCE OF
GEC OR THE EQUIPMENT, INCLUDING ANY BREACH OF ANY WARRANTY OR OTHER
OBLIGATION OF GEC HEREUNDER.
11. Patents. Buyer agrees that it will notify GEC in writing by certified
mail within one (1) week after receiving any information or notice of
any claim whether made formally or informally that equipment
manufactured by and
<PAGE>
purchased from GEC infringes patents held by anyone else. If GEC is so
notified and suit is brought against Buyer in the United States
claiming that such equipment or any part thereof as supplied by GEC
constitutes in and of itself an infringement of any patent of the
United States, GEC will pay the cost of defending any such patent suit
provided Buyer promptly turns over the defense thereof to GEC and
fully cooperates with GEC in such defense. GEC at its own option and
expense shall have the right to settle such suit or demand. GEC shall
be entitled to satisfy its obligations hereunder either by procuring
for Buyer the right to continue using the apparatus, or part thereof
furnished by GEC; by replacing same with non-infringing apparatus; by
modifying same so that it becomes non-infringing apparatus; or by
removal of the alleged infringing apparatus and refunding the purchase
price less any amounts claimed on Buyer's Federal Income Tax returns
as depreciation on the apparatus. GEC assumes no legal obligation or
liability in connection with patent infringement suits against Buyer
claiming that the product produced by the equipment, rather than the
equipment itself, or any part thereof, infringes anothers patents;
Buyer will indemnify GEC for all cost of defending such a patent
infringement suit and any damages.
12. Installation & Start-up Assistance. Installation and start-up
assistance can be provided by GEC at current contract rates. Buyer
will assume the responsibility for injuries and accidents to GEC
personnel, when on his (its) premises and will provide safe and
suitable working conditions for such personnel.
13. Drawings. GEC shall not be required to furnish detailed manufacturing
drawings of the equipment. However, GEC will supply Buyer with those
documents and reference drawings which GEC determines are necessary
for proper maintenance.
Any drawings, specifications, and general technical information such
as, but not limited to, foundation drawings, lay-out drawings,
dimensional drawings, etc., given by GEC are believed by GEC to be
adequate under normal operating conditions but should be adapted by
Buyer to meet local or unusual conditions. GEC reserves the right to
change, amend or modify such drawings as well as its equipment without
prior notice and without incurring any obligation on equipment
previously delivered; to modify equipment to include subsequent
improvements.
14. Security Deposit. GEC retains a security interest in all equipment
ordered by Buyer pursuant to the Proposal to secure the payment of all
sums due until the full purchase price thereof is paid by Buyer. Buyer
shall execute any and all instruments necessary to perfect such
security interest and shall pay any and all fees, taxes or assessments
incurred by GEC in filing such instruments.
<PAGE>
15. Condition Precedent. In the event Buyer accepts the Proposal,
performance under the resulting agreement of sale shall be subject to,
and conditioned upon, GEC's review of and satisfaction with, in GEC's
sole discretion, Buyer's financial condition. Buyer shall cooperate
fully with GEC in proving Buyer's financial information.
<PAGE>
EXHIBIT 10.4
FORM OF
RETENTION INCENTIVE AGREEMENT
This Retention Incentive Agreement ("Agreement") is dated
_____________ __, 199_, and is between ________________ ("Employee") and Graham
Packaging Company, a Pennsylvania limited partnership ("Graham").
Employee and Graham, intending to be legally bound hereby and
in consideration of the provisions contained herein, agree that upon a Change in
Control (as defined below) Graham shall make a Change in Control payment (as
described below) to the Employee. The Change in Control payment will continue
after a Qualifying Termination Event (as defined below); provided, that Employee
signs a Release (as described below) upon such Qualifying Termination Event, as
follows:
1. Change in Control. A Change in Control shall be deemed to
have occurred when the beneficial ownership of 50 percent or more of the GP(LP)
Group, or when 50 percent or more of the GP(LP) Group's business and assets, is
sold or otherwise transferred to any person(s) other than (i) Donald C. Graham
or his descendants (natural and adopted) or their spouses or (ii) a business
entity controlled by Donald C. Graham.
For purposes of this Agreement, the term "GP(LP)
Group" shall mean, in the aggregate, Graham and any of its subsidiaries,
including those whose principal offices are located in North, Central, and South
America, Europe, and Asia. The term "GP(LP) Group," as of the date of this
Agreement, consists of Graham, Graham Packaging Canada Limited, Graham Packaging
Poland, L.P., Masko Graham Spolka, z.o.o., Graham Packaging Holdings I, Graham
Recycling Company, Graham Packaging France Partners, Graham Packaging France
Holding, S.A., Graham Packaging France, S.A., Graham Packaging Italy, Srl, SIP,
Srl, Lido Plast- Graham, Graham Packaging Latin America, LLC, Graham Brasil
Paricipacoes Ltda., and Graham Packaging do Brasil, S.A.
2. Qualifying Termination Event
(a) A Qualifying Termination Event shall be
deemed to have occurred if, during the period after the date of a Change in
Control and before the date the payment described in Paragraph 3 is made,
Employee ceases to be employed by Graham or its successor (referred to jointly
as "Graham") for any of the following reasons:
(1) Employee's death, retirement at or after age
65, or total disability (entitling him to
<PAGE>
2
benefits under Graham's long-term disability
plan);
(2) Except as provided in (b) below, Graham
terminates Employee's employment; or
(3) After Employee gives Graham written notice
of one or more of the following events and
Graham fails to cure the event(s) during the
30-day period following Graham's receipt of
such notice, Employee terminates his
employment with Graham as a result of any of
the following events:
(i) Employee's position is materially and
adversely changed (without his consent)
from his position as of the Change in
Control;
(ii) Employee is assigned duties
and responsibilities
(without his consent) that
are inconsistent in a
material respect with the
scope of duties and
responsibilities associated
with his position as of the
Change in Control;
(iii) Employee is directly requested by the
person to whom the Employee directly
reports to commit an unethical,
dishonest, or illegal act of a material
nature, knowing that such act is
unethical, dishonest, or illegal
(provided that whether the act cited by
Employee is in fact unethical or
dishonest shall be determined by the
Chief Executive Officer of Graham in his
sole discretion);
(iv) Employee's annual salary
rate as in effect on the
day before the Change in
Control is reduced; or
(v) Graham requires Employee to be based at
an office which is more than 50 miles
further from Employee's residence than
Employee's office on the day before the
Change in Control (other than travel
reasonably required in the performance
of Employee's responsibilities).
(b) Notwithstanding (a) above, Employee's termination of
employment will not be considered a Qualifying Termination Event for purposes
of this Agreement if one of the following applies:
<PAGE>
3
(1) Employee's employment with Graham is
involuntarily terminated due to Employee's
continuing refusal to perform his duties or
to follow any lawful direction of Graham,
provided the performance of such duties or
the following of such lawful direction would
not result in an event described in
(a)(3)(i) or (ii) above;
(2) Employee's employment with Graham is
involuntarily terminated due to Employee's
intentional act or acts of dishonesty which
Employee intended to result in his personal,
more-than-immaterial enrichment;
(3) prior to the occurrence of an event
described in (a)(3)(i) through (v) above,
Employee's employment with Graham is
involuntarily terminated due to Employee's
documented willful malfeasance or willful
misconduct in connection with his employment
or Employee's documented willful and
deliberate insubordination;
(4) Employee's employment with Graham is
involuntarily terminated because Employee is
convicted of a felony;
(5) Employee's employment with Graham is
terminated, but during the seven calendar
days after such termination, Employee is
offered (and declines) employment by the
buyer of the entire business (or
substantially all of the business) of
Graham, on substantially the same terms
(including this Agreement) as Employee's
employment on the day before such
termination; or
(6) any other voluntary termination not
described in (a) above.
3. Change in Control Payment. On the first anniversary of a
Change in Control, Graham or its successor shall make one payment to Employee of
$47,000 (less applicable withholding). The payment shall be made as soon as
practicable after the first anniversary of the Change in Control.
If the Employee experiences a Qualifying Termination Event
after the Change in Control, Graham or its successor shall make the Change in
Control payment at the time described above; provided, that Employee signs a
Release (as provided in Paragraph 5) upon such Qualifying Termination Event.
If the Employee's termination of employment is not considered a Qualifying
Termination Event and a Change in Control has
<PAGE>
4
occurred, the obligation of Graham or its successors to make the payment
shall cease as of the date of the Employee's termination of employment.
4. Beneficiary. If Employee dies before the amount due under
the provisions of Paragraph 3 of this Agreement has been paid, any such unpaid
amount will be paid in a single sum within 90 days of his death to his surviving
spouse or, if she does not survive him, to his estate.
5. Release. Upon a Qualifying Termination Event and prior to
the Change in Control payment, Employee, for himself, his executors,
administrators, heirs, and assigns, shall sign a separate release (the
"Release") in which Employee shall:
(a) agree that no charge, complaint, claim, or
lawsuit of any kind will be filed in
connection with any claim released by this
Agreement or the Release against Graham, its
successors, parents, subsidiaries, and
affiliates, incorporated and unincorporated,
past and present, and each of them, as well
as its and their directors, officers, agents
, servants, and employees, past and present,
and each of them (all collectively referred
to as "Releasees"); and
(b) acknowledge full and complete satisfaction
of, and release and discharge Releasees from
, any and all claims, demands, and causes of
action of whatever kind or nature, whether
known or unknown to, or suspected or
unsuspected by, Employee, which Employee at
the time of the Release owns or holds or has
at any time owned or held against any
Releasee(s) arising out of or by reason of
Employee's employment or termination of
employment due to a Change in Control.
The Release shall include, but shall not be limited to, claims under the Age
Discrimination in Employment Act of 1967, as amended ("ADEA"). The Release shall
not, however, preclude Employee's right to pursue any claims arising (i) under
this Agreement or (ii) under any benefit programs in which Employee has accrued
any rights which arise on, or after, the Qualifying Termination Event.
6. Noncompetition and Nondisclosure Requirements
(a) Noncompetition. Employee covenants that he
will not (i) directly or indirectly own, manage, operate, control, advise,
participate in, become a proprietor, partner, director, officer, or employee of,
provide services to, or become
<PAGE>
5
financially interested in, any business (other than solely by virtue of the
ownership of less than five percent of any class of publicly traded securities)
competitive with the business of Graham or any of its affiliates (the
"Companies") as of the date this Agreement is executed, or (ii) engage or
participate in any effort or act to induce any of the customers or employees of
Graham to take any action which might be disadvantageous to the Companies.
(b) Nondisclosure. Employee covenants that he
will not (other than in the good faith performance of his services to Graham
before Employee's termination of employment) disclose or make known to anyone
other than employees of the Companies, or use for the benefit of himself or any
other person, firm, operation, or entity unrelated to the Companies, any
knowledge, information, or materials, whether tangible or intangible, belonging
to the Companies, about their products, services, know-how, customers, business
plans, or financial, marketing, pricing, compensation, and other proprietary
matters relating to the Companies. On or before Employee's termination of
employment with Graham, Employee shall promptly deliver to Graham or to any
affiliate designated by Graham any and all tangible, confidential information in
his possession.
(c) Remedies for Breach. If Employee breaches
the covenant set forth in (a) above and/or the covenant set forth in (b) above,
Employee's employment with Graham and/or Graham's obligation to make the payment
described herein shall terminate at Graham's option. In addition, Employee
expressly acknowledges that damages alone will be an inadequate remedy for any
breach or violation of (a) and/or (b) above and that Graham, in addition to all
other remedies, shall be entitled as a matter of right to equitable relief,
including injunctions and specific performance, in any court of competent
jurisdiction. If any of the provisions of (a) or (b) above are held to be in any
respect unenforceable, then they shall be deemed to extend only over the maximum
period of time, geographic area, or range of activities as to which they may be
enforceable against Employee.
7. Confidentiality. The terms of this Agreement are
confidential. Employee shall not disclose in any way this Agreement or any of
its terms to any person other than his spouse; his legal counsel, accountant,
financial adviser, or superior to whom he directly reports; William H. Kerlin,
Jr.; or Donald C. Graham or a member of Donald C. Graham's family.
8. Governing Law. This Agreement is made and entered into in
the Commonwealth of Pennsylvania, and except as provided in Paragraph 5, at all
times and for all purposes shall be interpreted, enforced, and governed under
its laws.
9. Arbitration. Without in any way affecting the terms of
Paragraph 5, any controversy or claim arising out of or relating to this
Agreement shall be settled exclusively by
<PAGE>
6
arbitration in Philadelphia, Pennsylvania, in accordance with the Commercial
Arbitration Rules of the American Arbitration Association, and judgment upon the
award rendered by the Arbitrator(s) may be entered in any court having
jurisdiction thereof. To the fullest extent permitted by applicable law and by
the Commercial Arbitration Rules, the arbitration proceedings and award shall be
kept confidential.
10. Entire Agreement; Amendment. This Agreement contains the
entire agreement between Employee and Graham as to the payment described herein.
Any amendment to this Agreement must be in writing, must be signed by both
Graham and Employee, and must be consented to in writing by the "Graham
Partners," as such term is defined in the Agreement and Plan of
Recapitalization, Redemption and Purchase entered into by and among Graham et
al. as of December 18, 1997.
11. Successor Employer. In the event of the dissolution,
merger, consolidation, or reorganization of Graham, or the sale of the entire
(or substantially all of the) business of Graham, this Agreement shall be
continued by Graham's successor. The successor shall assume all liabilities
under this Agreement and shall have the powers, duties, and responsibilities of
Graham under this Agreement.
12. Termination of Agreement. This Agreement shall terminate
at 12:00 midnight on December 31, 1998, unless a Change in Control occurs prior
to such time. However, if Graham has entered into a binding agreement on or
before
<PAGE>
7
December 31, 1998 pursuant to which Graham will or could experience a Change in
Control after December 31, 1998, this Agreement shall not terminate until after
such binding agreement is either consummated or terminated.
IN WITNESS WHEREOF, the persons named below have signed this
Retention Incentive Agreement as of the date first set forth above.
ATTEST: GRAHAM PACKAGING COMPANY
By: Graham Packaging Corporation,
Its General Partner
By:
------------------------
- ----------------
Title:----------
WITNESS: EMPLOYEE
- ----------------
- ----------------
<PAGE>
8
RETENTION INCENTIVE AGREEMENT PARTIES
Andris, Paul Lajiness, Michael
Arnold, Jay Litton, John
Atkinson, Thomas Lombard, Jeff
Bailie, Paul Luka, Gregory
Barker, Robert Lyons, Crawford
Barrett, Mike Mankosa, Mitchell
Bekka, Mustapha Mattia, Jack
Bristol, Jeff McCormack, Lisa
Carvallo, Luis McQuitty, Shawn
Claes, Gerry Miller, Mike
Craig, Peter Montanari, David
Cray, Steven Montgomery, Mary
Cummons, Joseph Mooney, Michael
Davies, Gary Muesegaes, Robert
Deits, Roger Nico, Frank
Denner, John Nguyen, Michael
Diller, Robert O'Connell, Patrick
Dintaman, John Ogg, Richard
Doyle, John Owens, Jeff
Duncan, Barbara Paquet, Giles
Dunman, James Peterson, George
Dyer, Tim Phillips, James
Ellis, Earle Phillips, John
Ervin, Peter Plummer, George
Fedyszyn, Moe Ponder, Ray
Fischer, Martin Reisig, Val
Gauthier, Mike Rishel, Jeffrey
Geiser, Arlene Saupp, Lisa
Geldart, Don Schellang, Larry
George, Kevin Smeltzer, Thomas
Gibson, Jeanne Smith, Marvin
Gibson, Robert Stephan, Michael
Goss, Kent Stewart, Andrew
Graham, Robert Stoops, Jerry
Gross, John Stout, James
Harmon, Tim Taylor, Andy
Hart, Warren Taylor, Gregory
Holland, Tony Taylor, Larry
Johnston, Robert Thompson, Al
Kelly, Michael Tobias, John
Kesselman, David Walker, Ronnie
Klingenmaier, Bernd Wark, Aron
Krohn, Roy Weiss, Stephen
White, Sandy
Wiese, Wayne
Wileczek, Richard
Young, Richard
Yourist, Sheldon
<PAGE>
EXHIBIT 10.5
FORM OF
SEVERANCE AGREEMENT
-------------------
This Severance Agreement is dated _____________ __, 199__, and is
between __________ ("Executive") and Graham Packaging Company, a Pennsylvania
limited partnership ("Graham").
Executive and Graham, intending to be legally bound hereby and in
consideration of the provisions contained herein, agree that upon a Termination
Event (as defined below) Graham shall provide severance benefits (as described
below) to the Executive; provided, that Executive signs a Release (as described
below) upon such Termination Event; as follows:
1. Severance Benefits. Upon a Termination Event (as defined in
Paragraph 2), Graham or its successor shall pay severance benefits to Executive
as follows:
(a) Severance Allowance. Graham or its successor shall pay to
Executive a severance allowance equal to Executive's then current annual salary
(less applicable withholding) over a period of one year. Executive's severance
allowance shall be paid to Executive in the normal payroll cycle for similarly
situated employees.
(b) Bonus Payment. Graham or its successor shall pay to
Executive the targeted bonus, if any, that Executive expected to receive had
Executive been employed by Graham on the day Executive would have had to be
employed to receive the bonus payment for the period in which the Termination
Event occurred. However, such targeted bonus will be prorated for the portion
of the period occurring prior to Executive's Termination Event. Executive's
bonus payment, if any, shall be paid to Executive in a single sum on the date
the bonus payment would have been paid to Executive had Executive remained
employed by Graham.
(c) Vacation Days. Graham or its successor shall pay to
Executive the cash value of Executive's earned, unused vacation days as of the
date of Executive's Termination Event.
(d) Group Health and Group Life Insurance. Graham or its
successor shall provide Executive with the group health insurance and group
life insurance that Executive was entitled to as of the date of Executive's
Termination Event, for a period of one year. Executive's contributions for such
coverage will be the same as those of similarly situated employees and will be
deducted from Executive's severance allowance.
<PAGE>
2
2. Termination Event
(a) A Termination Event shall be deemed to have occurred if,
during the three-year period after the date of a Change in Control (as defined
in Paragraph 3 below), Executive ceases to be employed by Graham or its
successor (referred to jointly as "Graham") for any of the following reasons:
(1) Executive's death, retirement at or after age 65,
or total disability (entitling him to benefits
under Graham's long-term disability plan);
(2) Except as provided in (b) below, Graham terminates
Executive's employment; or
(3) After Executive gives Graham written notice of one
or more of the following events and Graham fails to
cure the event(s) during the 30-day period
following Graham's receipt of such notice,
Executive terminates his employment with Graham as
a result of any of the following events:
(i) Executive's position is materially and
adversely changed (without his consent) from
his position as of the Change in Control;
(ii) Executive is assigned duties and
responsibilities (without his consent) that
are inconsistent in a material respect with
the scope of duties and responsibilities
associated with his position as of the
Change in Control;
(iii) Executive is directly requested by the
person to whom the Executive directly
reports to commit an unethical, dishonest,
or illegal act of a material nature, knowing
that such act is unethical, dishonest, or
illegal (provided that whether the act cited
by Executive is in fact unethical or
dishonest shall be determined by the Chief
Executive Officer of Graham in his sole
discretion);
(iv) Executive's annual salary rate as in effect
on the day before the Change in Control is
reduced; or
<PAGE>
3
(v) Graham requires Executive to be based at an
office which is more than 50 miles further
from Executive's residence than Executive's
office on the day before the Change in
Control (other than travel reasonably
required in the performance of Executive's
responsibilities).
(b) Notwithstanding (a) above, Executive's termination of
employment will not be considered a Termination Event for purposes of this
Agreement if one of the following applies:
(1) Executive's employment with Graham is involuntarily
terminated due to Executive's continuing refusal to
perform his duties or to follow a lawful direction
of Graham, provided the performance of such duties
or the following of such lawful direction would not
result in an event described in (a)(3)(i) or (ii)
above;
(2) Executive's employment with Graham is involuntarily
terminated due to Executive's intentional act or
acts of dishonesty which Executive intended to
result in his personal, more-than-immaterial
enrichment;
(3) prior to the occurrence of an event described in
(a)(3)(i) through (v) above, Executive's employment
with Graham is involuntarily terminated due to
Executive's documented willful malfeasance or
willful misconduct in connection with his
employment or Executive's documented willful and
deliberate insubordination;
(4) Executive's employment with Graham is involuntarily
terminated because Executive is convicted of a
felony;
(5) Executive's employment with Graham is terminated,
but during the seven calendar days after such
termination, Executive is offered (and declines)
employment by the buyer of the entire business (or
substantially all of the business) of Graham, on
substantially the same terms (including this
Agreement) as Executive's employment on the day
before such termination; or
(6) any other voluntary termination not described in
(a) above.
<PAGE>
4
3. Change in Control. A Change in Control shall be deemed to have
occurred when the beneficial ownership of 50 percent or more of the GP(LP)
Group (as defined below), or when 50 percent or more of the GP(LP) Group's
business and assets, is sold or otherwise transferred to any person(s) other
than (i) Donald C. Graham or his descendants (natural and adopted) or their
spouses or (ii) a business entity controlled by Donald C. Graham.
For purposes of this Severance Agreement, the term "GP(LP) Group"
shall mean, in the aggregate, Graham and any of its subsidiaries, including
those whose principal offices are located in North, Central, and South America,
Europe, and Asia. The term "GP(LP) Group," as of the date of this Severance
Agreement, consists of Graham, Graham Packaging Canada Limited, Graham
Packaging Poland, L.P., Masko Graham Spolka, z.o.o., Graham Packaging Holdings
I, Graham Recycling Company, Graham Packaging France Partners, Graham Packaging
France Holding, S.A., Graham Packaging France, S.A., Graham Packaging Italy,
Srl, SIP, Srl, Lido Plast-Graham, Graham Packaging Latin America, LLC, Graham
Brasil Paricipacoes Ltda., and Graham Packaging do Brasil, S.A.
4. Payments After Death. If any portion of Executive's severance
benefits under Paragraph 1(a) and (b) remain unpaid at Executive's death, the
remaining amount shall be paid in a single sum to the beneficiary Executive
most recently designated with respect to this Agreement. In the event no such
beneficiary has been designated or survives Executive, Executive's most recent
beneficiary designation with respect to the group life insurance provided by
Graham shall govern.
5. Release. Upon a Termination Event, prior to the payment of
Executive's severance benefits and as consideration for such benefits,
Executive, for himself, his executors, administrators, heirs, and assigns,
shall sign a release (the "Release") in which Executive shall:
(a) agree that no charge, complaint, claim, or lawsuit
of any kind will be filed in connection with any
claim released by the Release against Graham, its
successors, parents, subsidiaries, and affiliates,
incorporated and unincorporated, past and present,
and each of them, as well as its and their
directors, officers, agents, servants, and
employees, past and present, and each of them (all
collectively referred to as "Releasees"); and
(b) acknowledge full and complete satisfaction of, and
release and discharge Releasees from, any and all
claims, demands, and causes of action of whatever
kind or nature, whether known or unknown to, or
suspected or unsuspected by, Executive, which
Executive at the time of the Release owns or holds
or has at any time owned or held against any
<PAGE>
5
Releasee(s) arising out of or by reason of
Executive's employment or termination of employment
due to a Change in Control.
The Release shall include, but shall not be limited to, claims under the Age
Discrimination in Employment Act of 1967, as amended ("ADEA"). The Release
shall not, however, preclude Executive's right to pursue any claims arising (i)
under this Agreement or (ii) under any benefit programs in which Executive has
accrued any rights which arise on, or after, the date the Release is executed.
6. Noncompetition and Nondisclosure Requirements
(a) Noncompetition. Executive covenants that he will
not (i) directly or indirectly own, manage,
operate, control, advise, participate in, become a
proprietor, partner, director, officer, or employee
of, provide services to, or become financially
interested in, any business (other than solely by
virtue of the ownership of less than five percent
of any class of publicly traded securities)
competitive with the business of Graham or any of
its affiliates (the "Companies") as of the date
this Agreement is executed, or (ii) engage or
participate in any effort or act to induce any of
the customers or employees of Graham to take any
action which might be disadvantageous to the
Companies.
(b) Nondisclosure. Executive covenants that he will not
(other than in the good faith performance of his
services to Graham before Executive's termination
of employment) disclose or make known to anyone
other than employees of the Companies, or use for
the benefit of himself or any other person, firm,
operation, or entity unrelated to the Companies;
any knowledge, information, or materials, whether
tangible or intangible, belonging to the Companies,
about their products, services, know-how,
customers, business plans, or financial, marketing,
pricing, compensation, and other proprietary
matters relating to the Companies. On or before
Executive's termination of employment with Graham,
Executive shall promptly deliver to Graham or to
any affiliate designated by Graham any and all
tangible, confidential information in his
possession.
(c) Remedies for Breach. If Executive breaches the
covenant set forth in (a) above and/or the covenant
set forth in (b) above, Executive's employment with
Graham and/or Graham's obligation to make the
payments described herein shall
<PAGE>
6
terminate at Graham's option. In addition,
Executive expressly acknowledges that damages alone
will be an inadequate remedy for any breach or
violation of (a) and/or (b) above and that Graham,
in addition to all other remedies, shall be
entitled as a matter of right to equitable relief,
including injunctions and specific performance, in
any court of competent jurisdiction. If any of the
provisions of (a) or (b) above are held to be in
any respect unenforceable, then they shall be
deemed to extend only over the maximum period of
time, geographic area, or range of activities as to
which they may be enforceable against Executive.
7. Severance Benefits Not Funded. Any severance benefits paid pursuant
to this Agreement will be paid out of the general funds of Graham. Executive
shall not have any secured or preferred interest by way of trust, escrow, lien,
or otherwise in any specific assets. Executive's rights shall be solely those
of an unsecured general creditor of Graham.
8. Assignment of Benefit Prohibited. No severance benefits under this
Agreement shall be subject in any manner to anticipation, alienation,
assignment (either at law or in equity), encumbrance, garnishment, levy,
execution, or other legal or equitable process.
9. Claims. If Executive believes he may be entitled to benefits under
this Agreement that have not been received, or if he is in disagreement with
any determination that has been made, Executive should follow this procedure:
(a) Making a Claim. Executive must make all claims for severance
benefits under this Agreement in writing to a person (the "Claims Coordinator")
named by Graham to receive claims under this Agreement. The Claims Coordinator
will approve or disapprove each claim within 90 days following his receipt of
the necessary information, unless special circumstances require more time. If
more time is required, written notice of the extension will be forwarded to
Executive before the extension begins. In no event will the extension exceed
180 days after the Claims Coordinator receives Executive's claim. If the Claims
Coordinator takes no action on a claim within the time periods described above,
the claim will be considered denied.
If the Claims Coordinator denies Executive's claim for severance
benefits, Executive will be notified in writing and told about Executive's
right to a review of the decision by Graham. The notice will also tell
Executive --
o the specific reason for the denial;
<PAGE>
7
o the specific provision(s) of this Agreement on which the
denial is based;
o any additional material or information necessary to make
Executive's claim, and why such material or information is
necessary; and
o about this Agreement's claims review procedure.
(b) Requesting Review of a Denied Claim. If Executive's claim for
severance benefits is denied, Executive may ask in writing for a review of the
decision by Graham. Executive's appeal must be made within 60 days after he
receives written notice of the denial, as described above. Executive's appeal
must be submitted in writing within the 60-day period and must --
o request a review of Executive's claim by Graham;
o set forth all of the grounds upon which Executive's
request for review is based and any facts in support of
it; and
o set forth any issues or comments which Executive believes
are important for the appeal.
Graham will act upon Executive's appeal within 60 days
after receiving it, unless special circumstances require more time. If more
time is required, written notice of the extension will be forwarded to
Executive before the extension begins. In no event will the extension exceed
120 days after Graham receives Executive's appeal.
Graham will make a full and fair review of Executive's
appeal and will make an independent determination of Executive's eligibility
for severance benefits under this Agreement. The decision of Graham on any
claim for severance benefits is final and conclusive.
If Graham denies Executive's appeal, it will give
Executive written notice of the decision setting forth the specific reasons for
the denial and making specific reference to the provision(s) of this Agreement
on which the decision was based.
10. Confidentiality. The terms of this Agreement are confidential.
Executive shall not disclose in any way this Agreement or any of its terms to
any person other than his spouse; his legal counsel, accountant, financial
adviser, or superior to whom he directly reports; William H. Kerlin, Jr.; or
Donald C. Graham or a member of Donald C. Graham's family.
11. Governing Law. This Agreement is made and entered into in the
Commonwealth of Pennsylvania, and except as provided in
<PAGE>
8
Paragraph 5, at all times and for all purposes shall be interpreted, enforced,
and governed under its laws.
12. Entire Agreement; Amendment. This Agreement contains the entire
agreement between Executive and Graham as to payments to be made to Executive
upon a Termination Event. Any amendment to this Agreement must be in writing,
must be signed by both Graham and Executive, and must be consented to in
writing by the "Graham Partners," as such term is defined in the Agreement and
Plan of Recapitalization, Redemption and Purchase entered into by and among
Graham et al. as of December 18, 1997.
13. Successor Employer. In the event of the dissolution, merger,
consolidation, or reorganization of Graham, or the sale of the entire (or
substantially all of the) business of Graham, this Agreement shall be continued
by Graham's successor. The successor shall assume all liabilities under this
Agreement and shall have the powers, duties, and responsibilities of Graham
under this Agreement.
IN WITNESS WHEREOF, the persons named below have signed this Severance
Agreement as of the date first set forth above.
ATTEST: GRAHAM PACKAGING COMPANY
By: Graham Packaging Corporation,
Its General Partner
By:
-----------------------------
- --------------------------------
Title:
--------------------------
WITNESS: EXECUTIVE
- --------------------------------
- --------------------------------
<PAGE>
9
APPENDIX A
----------
BENEFICIARY DESIGNATION
This Beneficiary Designation is for Executive's use under this
Severance Agreement to name a beneficiary for the amount payable to Executive
under this Agreement. Executive should complete a Beneficiary Designation, sign
and date it, and return it to Graham Packaging Company.
Beneficiary Election. I understand that in the event of my death
before I receive the entire amount payable under this Agreement (if any), the
remaining amount will be paid in a single sum to the beneficiary designated by
me below or, if none or if my designated beneficiary predeceases me, to my most
recent beneficiary designated with respect to the group life insurance provided
by Graham Packaging Company. I further understand that the last beneficiary
designation filed by me during my lifetime under this Agreement cancels all
prior beneficiary designations previously filed by me under this Agreement.
I hereby designate _____________ [insert name], residing at __________
[insert address], whose Social Security number is ______________, as my
beneficiary.
- ---------------------------------
- ---------------------------------
Signature of Participant Date
ATTEST: ACCEPTED:
GRAHAM PACKAGING COMPANY
- -----------------------------------
By:
--------------------------------
Secretary President
---------------------------------
Date
<PAGE>
10
APPENDIX B
----------
ADDITIONAL INFORMATION REQUIRED UNDER THE
EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED
Type of Agreement
This Agreement is a severance pay employee welfare benefit plan. This
Agreement is not an employee pension benefit plan.
Sponsor
The name, address, phone number, and federal employer identification
number ("EIN") of the employer sponsoring this Agreement are:
Graham Packaging Company
110 East Princess Street
York, PA 17405
Telephone: 717-849-8500
EIN: 23-2553000
Administrator
This Agreement is administered by Graham Packaging Company.
Communications addressed to the Administrator should be sent to
the above address.
Service of Legal Process
The President of Graham Packaging Company is designated as the agent
for service of legal process with respect to this Agreement.
<PAGE>
11
SEVERANCE AGREEMENT PARTIES
Roger Prevot
G. Robinson Beeson
Scott Booth
John Hamilton
Alex Everhart
Geoffrey Lu
Phil Yates
<PAGE>
EXHIBIT 10.6
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (the "Agreement") made and
entered into as of this 2nd day of February, 1998 by and among GRAHAM PACKAGING
HOLDINGS COMPANY, a Pennsylvania limited partnership (formerly known as Graham
Packaging Company, the "Partnership"); GPC CAPITAL CORP. II, a Delaware
corporation and a wholly-owned subsidiary of the Partnership (the "Company");
GRAHAM CAPITAL CORPORATION, a Pennsylvania corporation ("Capital"); GRAHAM
FAMILY GROWTH PARTNERSHIP, a Pennsylvania limited partnership ("Family
Growth"); BLACKSTONE CAPITAL PARTNERS III MERCHANT BANKING FUND L.P., a
Delaware limited partnership, BLACKSTONE OFFSHORE CAPITAL PARTNERS III L.P., a
Cayman Islands exempted limited partnership, and BLACKSTONE FAMILY INVESTMENT
PARTNERSHIP III L.P., a Delaware limited partnership (collectively, the
"Blackstone Funds"); BCP/GRAHAM HOLDINGS, L.L.C., a Delaware limited liability
company ("BCP"); BMP/GRAHAM HOLDINGS CORPORATION, a Delaware corporation
("BMP").
BACKGROUND
1. This Agreement is made pursuant to the Agreement and Plan
of Recapitalization, Redemption and Purchase dated as of December 18, 1997 by
and among the Partnership, Capital, Family Growth, Graham Engineering
Corporation ("Engineering"), Graham Recycling Corporation ("Recycling"), Graham
Packaging Corporation ("GP Corp"), Donald C. Graham ("DCG"), BCP and BMP (the
"Recapitalization Agreement"). The Blackstone Funds, BCP and BMP are
collectively referred to herein as "Blackstone," and Family Growth and Capital
are collectively referred to herein as the "Graham Partners."
2. After the date hereof, the Partnership may (i) transfer
all or substantially all of its assets and liabilities to the Company for the
purpose of effecting an initial public offering of shares of common stock
("Common Stock") of the Company pursuant to an effective registration statement
under the Securities Act of 1933, as amended, and (ii) in connection therewith,
effect a dissolution of the Partnership and the distribution to its partners of
all of the shares of Common Stock held by the Partnership (the "IPO
Reorganization").
3. In order to induce BCP, BMP, Capital, Family Growth,
Engineering, Recycling, GP Corp and DCG to enter into the Recapitalization
Agreement, the Partnership and the Company have agreed to provide Blackstone,
Capital and Family Growth with the registration rights set forth in this
Agreement.
4. The execution of this Agreement by the Partnership is a
condition to the consummation of the transactions contemplated under the
Recapitalization Agreement.
<PAGE>
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements contained in this Agreement, the parties
hereto, intending to be legally bound, agree as follows:
1. CERTAIN DEFINITIONS.
In addition to the other terms defined in this Agreement, the
following terms shall have the following meanings, applicable to both the
singular and plural forms thereof:
"Business Day" means any day on which the New York Stock
Exchange ("NYSE") is open for trading.
"Closing Date" means February 2, 1998.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the SEC thereunder, all as the same
shall be in effect at the relevant time.
"Holders" means Blackstone, Capital and Family Growth, for so
long as (and to the extent that) each owns any Registrable Securities, and each
of their respective successors, assigns, and direct and indirect transferees
who become registered owners of Registrable Securities or securities
exercisable, exchangeable or convertible into Registrable Securities in
accordance with the Partnership Agreement.
"IPO" means the first underwritten public offering pursuant
to an effective registration statement of the Company under the Securities Act
covering the offering and sale of Common Stock of the Company.
"Outstanding" means with respect to any securities as of any
date, all such securities theretofore issued, except any such securities
theretofore converted, exercised or canceled or held by the issuer or any
successor thereto (whether in its treasury or not) or any affiliate of the
issuer or any successor thereto. For purposes of this definition, Holders shall
not be considered affiliates of the issuer.
"Partnership Agreement" means the Fifth Amended and Restated
Agreement of Limited Partnership of the Partnership dated the date hereof, as
amended from time to time.
"Person" means an individual, a partnership (general or
limited), corporation, limited liability company, joint venture, business
trust, cooperative, association or other form of business organization, whether
or not regarded as a legal entity under applicable law, a trust (inter vivos or
testamentary), an estate of a deceased, insane or incompetent person, a
quasi-governmental entity, a government or any agency, authority, political
subdivision or other instrumentality thereof, or any other entity.
-2-
<PAGE>
"Registrable Security(ies)" means any shares of Common Stock
of the Company received by the Holders in the IPO Reorganization in respect of
(i) any partnership interests or other equity securities of the Partnership
held by the Holders on the date hereof under the Partnership Agreement and (ii)
any additional partnership interests or other equity securities of the
Partnership issued or issuable after the Closing Date in respect of any such
equity securities (or other equity securities issued in respect thereof) by way
of a dividend, distribution or split, in connection with a combination,
exchange, reorganization, recapitalization or reclassification of Partnership
securities, or pursuant to a merger, division, consolidation or other similar
business transaction or combination involving the Partnership; provided that:
as to any particular Registrable Securities, such securities shall cease to
constitute Registrable Securities (i) when a registration statement with
respect to the sale of such securities shall have become effective under the
Securities Act and such securities shall have been disposed of thereunder; or
(ii) when and to the extent such securities are permitted to be publicly sold
without limitation as to amount pursuant to Rule 144(k) (or any successor
provision to such Rule) under the Securities Act or are otherwise freely
transferrable to the public without further registration under the Securities
Act; or (iii) when such securities shall have ceased to be issued and
outstanding.
"Registration Expenses" means all expenses incident to the
Company's performance of or compliance with the registration requirements set
forth in this Agreement including, without limitation, the following: (i) the
fees, disbursements and expenses of the Company's counsel(s), accountants, and
experts in connection with the registration under the Securities Act of
Registrable Securities; (ii) all expenses in connection with the preparation,
printing and filing of the registration statement, any preliminary prospectus
or final prospectus, any other offering document and amendments and supplements
thereto, and the mailing and delivering of copies thereof to the underwriters
and dealers, if any; (iii) the cost of printing or producing any agreement(s)
among underwriters, underwriting agreement(s) and blue sky or legal investment
memoranda, any selling agreements, and any other documents in connection with
the offering, sale or delivery of Registrable Securities to be disposed of;
(iv) any other expenses in connection with the qualification of Registrable
Securities for offer and sale under state securities laws, including the fees
and disbursements of counsel for the underwriters in connection with such
qualification and in connection with any blue sky and legal investment surveys;
(v) the filing fees incident to securing any required review by the National
Association of Securities Dealers, Inc. of the terms of the sale of Registrable
Securities to be disposed of and any blue sky registration or filing fees, and
(vi) the fees and expenses incurred in connection with the listing of
Registrable Securities on each securities exchange (or The NASDAQ National
Market) on which the securities of the Company of the same class are then
listed; provided, however, that Registration Expenses with respect to any
registration pursuant to this Agreement shall not include (x) expenses incurred
by any Holder in connection with any offering, including the fees and expenses
of counsel, accountants, and experts retained by such Holder (other than the
fees and expenses of one counsel for the Holders as and to the extent provided
in Section 11, or (y) any underwriting discounts or commissions attributable to
Registrable Securities.
-3-
<PAGE>
"SEC" means the United States Securities and Exchange
Commission, or such other federal agency at the time having the principal
responsibility for administering the Securities Act.
"Securities Act" means the Securities Act of 1933, as
amended, and the rules and regulations of the SEC thereunder, all as the same
shall be in effect at the relevant time.
"Trading Day" means a day on which the principal securities
exchange or stock market on which the applicable security is traded is open for
the transaction of business.
2. DEMAND REGISTRATION.
(a) (i) A Holder or Holders other than Blackstone ("Graham
Holders") may request (at any time after the Company completes an IPO) by
written notice delivered to the Company that the Company register under the
Securities Act all or any portion of the Registrable Securities then held by
such Graham Holder or Graham Holders (the "Requesting Graham Holders"),
representing in the aggregate not less than fifty percent (50%) of the
Registrable Securities held by the Graham Holders, for sale in the manner
specified in such notice (including, but not limited to, an underwritten public
offering). In each such case, such notice shall specify the number of
Registrable Securities for which registration is requested, the proposed manner
of disposition of such securities, and the minimum price per share at which the
Requesting Graham Holders would be willing to sell such securities in an
underwritten offering. The Company shall, within five (5) Business Days after
its receipt of any Requesting Graham Holders' notice under this Section
2(a)(i), give written notice of such request to all other Graham Holders and
afford them the opportunity of including in the requested registration
statement such of their Registrable Securities as they shall specify in a
written notice given to the Company within twenty (20) days after their receipt
of the Company's notice. Within ten (10) Business Days after the expiration of
such twenty (20) day period, the Company shall notify all Graham Holders
requesting registration of (A) the aggregate number of Registrable Securities
proposed to be registered by all Graham Holders, (B) the proposed filing date
of the registration statement, and (C) such other information concerning the
offering as any Holder may have reasonably requested. If the Graham Holders of
a majority in aggregate amount of the Registrable Securities to be included in
such offering shall have requested that such offering be underwritten, the
managing underwriter for such offering shall be chosen by the Graham Holders of
a majority in aggregate amount of the Registrable Securities being registered,
with the consent of the Company, which consent shall not be unreasonably
withheld, not less than thirty (30) days prior to the proposed filing date
stated in the Company's notice, and the Company shall thereupon promptly notify
such Graham Holders as to the identity of the managing underwriter, if any, for
the offering. On or before the 30th day prior to such anticipated filing date,
any Graham Holder may give written notice to the Company and the managing
underwriter specifying either that (A) Registrable Securities of such Graham
Holder are to be included in the underwriting, on the same terms and conditions
as the securities otherwise being sold through the underwriters under such
registration or (B) such Registrable Securities are to be registered pursuant
to such registration statement and
-4-
<PAGE>
sold in the open market without any underwriting, on terms and conditions
comparable to those normally applicable to offerings in reasonably similar
circumstances, regardless of the method of disposition originally specified in
Holder's request for registration.
(ii) Blackstone and its affiliates may request at any
time, and from time to time, that the Company register under the Securities Act
all or any portion of the Registrable Securities held by them for sale by
written notice delivered to the Company in the manner specified in such notice
(including, but not limited to, an underwritten public offering). If such
manner is an underwritten public offering, the managing underwriter shall be
selected by Blackstone.
(iii) The Company shall use all commercially
reasonable efforts to file with the SEC within eighty (80) days (thirty (30)
days if the Company may use a Registration Statement on Form S-3 to register
such Registrable Securities) after the Company's receipt of the initial
Requesting Graham Holders' or Blackstone's written notice pursuant to Section
2(a)(i) or (ii), a registration statement for the public offering and sale, in
accordance with the method of disposition specified by such Holders, of the
number of Registrable Securities specified in such notice, and thereafter use
all commercially reasonable efforts to cause such registration statement to
become effective within sixty (60) days after its filing. Such registration
statement may be on Form S-1 or another appropriate form (including Form S-3)
that the Company is eligible to use and that is reasonably acceptable to the
managing underwriter.
(iv) The Company shall not have any obligation
hereunder (A) to permit or participate in more than two offerings pursuant to
this Section 2(a)(i), except as and to the extent provided by Section 2(a)(vi)
or Section 7(b), or (B), except in connection with any one registration
pursuant to Section 2(a)(vi), to register any Registrable Securities under
Section 2(a)(i) unless it shall have received requests from Holders to register
at least five percent (5%) of the Outstanding Registrable Securities.
(v) If the Company is required to use all
commercially reasonable efforts to register Registrable Securities in a
registration initiated upon the demand of any Holder pursuant to Section
2(a)(i) or (ii) of this Agreement and the managing underwriters for such
offering advise that the inclusion of all securities sought to be registered
pursuant to Section 2 or 3 hereof may interfere with an orderly sale and
distribution of or may materially adversely affect the price of such offering,
then the Company will include in such offering (x) first, the aggregate number
of Registrable Securities requested to be included by the Holders pursuant to
Section 2(a)(i) or (ii), as the case may be, and Section 3 which the managing
underwriters advise will not likely have such effect, allocated pro rata based
on the number of securities duly requested to be included in such registration
and (y) second, all other securities requested to be included in such
registration.
(vi) If all of the Registrable Securities of the
Graham Holders requested to be included in any registration pursuant to Section
2(a)(i) are not included in such registration as a result of the inclusion of
any Registrable Securities in such registration pursuant to Section 3, the
Graham Holders shall have one additional registration right under Section
2(a)(i).
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(b) Notwithstanding any other provision of this Agreement,
the Company shall have the right to defer or suspend the filing or
effectiveness of a registration statement relating to any registration
requested under Section 2(a) for a reasonable period of time not to exceed 90
days if a prior registration statement of the Company for an underwritten,
primary public offering by the Company of its securities was declared effective
by the SEC less than 120 days prior to the anticipated effective date of the
requested registration.
(c) No registration of Registrable Securities under this
Article 2 shall relieve the Company of its obligation (if any) to effect
registrations of Registrable Securities pursuant to Article 3.
3. INCIDENTAL REGISTRATION.
(a) Until all securities subject to this Agreement have
ceased to be Registrable Securities, if the Company proposes, including
pursuant to Article 2 hereof, to register any equity securities of the Company
(collectively, "Other Securities") for public sale under the Securities Act
(whether proposed to be offered for sale by the Company or by any other Person)
on a form and in a manner which would permit registration of Registrable
Securities for sale to the public under the Securities Act, it will give prompt
written notice (which notice shall specify the intended method or methods of
disposition) to the Holders of its intention to do so, and upon the written
request of any Holder delivered to the Company within five (5) Business Days
after the giving of any such notice (which request shall specify the number of
Registrable Securities intended to be disposed of by such Holder) the Company
will use all commercially reasonable efforts to effect, in connection with the
registration of the Other Securities, the registration under the Securities Act
of all Registrable Securities which the Company has been so requested to
register by the Holders; provided, however, that:
(i) if, at any time after giving such written notice
of its intention to register Other Securities and prior to the effective date
of the registration statement filed in connection with such registration, the
Company shall determine for any reason not to register such Other Securities,
the Company may, at its election, give written notice of such determination to
the Holders requesting registration and thereupon the Company shall be relieved
of its obligation to register such Registrable Securities in connection with
the registration of such Other Securities (but not from its obligation to pay
Registration Expenses to the extent incurred in connection therewith as
provided in Article 11), without prejudice, however, to the rights (if any) of
the Holders to request that such registration be effected as a registration
under Article 2; and
(ii) the Company will not be required to effect any
registration of Registrable Securities pursuant to this Article 3 if the
Company shall have been advised (with a copy to the Holders requesting
registration if such notice is in writing) by a nationally recognized
investment banking firm (which may be the managing underwriter for the
offering) selected by the Company that, in such firm's opinion, a registration
of Registrable Securities at that time may interfere with an orderly sale and
distribution of the securities being sold in such offering or materially and
adversely affect the price of such securities; provided, however, that if an
offering of some but not all of the Registrable Securities requested to be
registered by the Holders and all other Persons having rights to include
securities held by them in such registration
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would not adversely affect the distribution or price of the securities to be
sold in the offering in the opinion of such firm or are included in such
offering notwithstanding any such opinion, then the Company will include in
such offering: (x) first, the Other Securities (other than securities requested
to be registered pursuant to Section 2), (y) second, the Registrable Securities
requested to be registered pursuant to Section 2 and 3, allocated pro rata
among such Holders based on the number of securities duly requested to be
included therein by each such Holder and (z) third, all other securities
requested to be included in such registration; and
(iii) The Company shall not be required to give
notice of, or effect any registration of Registrable Securities under this
Article 3 incidental to, the registration of any of its securities in
connection with mergers, consolidations, acquisitions, exchange offers,
subscription offers, dividend reinvestment plans or stock options or other
employee benefit or compensation plans.
(iv) Notwithstanding anything to the contrary in
this Section 3, the Graham Holders shall not have the right to have any of
their Registrable Securities registered pursuant to this Section 3 in
connection with the IPO unless Blackstone is registering any of its Registrable
Securities in the IPO.
(b) No registration of Registrable Securities effected under
this Article 3 shall relieve the Company of its obligations (if any) to effect
registrations of Registrable Securities pursuant to Article 2.
4. HOLDBACKS AND OTHER RESTRICTIONS.
(a) Each Holder hereby covenants and agrees with the Company
that such Holder shall not effect, if requested by the managing underwriters in
an underwritten offering that includes such Holder's Registrable Securities,
any public sale or distribution of equity securities of the Company, including
a sale pursuant to Rule 144(k) under the Securities Act (except pursuant to
this Agreement) during the ten (10) day period prior to, and during the ninety
(90) day period (or such longer period of not more than one hundred eighty
(180) days if such longer period is also required of the Company and all other
Persons having securities included in such registration) beginning on, the
effective date of the registration statement relating to the underwritten
offering of equity securities of the Company, to the extent timely notified in
writing by the Company or the managing underwriters.
(b) The Company covenants and agrees with the Holders not to
effect any public or private sale or distribution of equity securities of the
Company (other than distributions pursuant to employee benefit plans) of its
securities, including a sale pursuant to Regulation D under the Securities Act
(or Section 4(2) thereof), during the ten (10) day period prior to, and during
the ninety (90) day period beginning with, the effective date of a registration
statement filed under Section 2(a) hereof, to the extent timely requested in
writing by the managing underwriters, if any, or, if there be none, by the
Holders of a majority in aggregate amount of the Registrable Securities
included on such registration statement for such registration, except pursuant
to registrations on Form S-4, Form S-8 or any successor forms.
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5. REGISTRATION PROCEDURES.
If and whenever the Company is required by the provisions of this
Agreement to use all commercially reasonable efforts to effect or cause a
registration as provided in this Agreement, the Company will:
(a) Use all commercially reasonable efforts to prepare and
file with the SEC, a registration statement within the time periods specified
herein, and use its commercially reasonable efforts to cause such registration
statement to become effective as promptly as practicable and to remain
effective under the Securities Act until the earlier of such time as all
securities covered thereby are no longer Registrable Securities or twelve (12)
months after such registration statement becomes effective with respect to
registrations pursuant to Section 2(a), in every case as any such period may be
extended pursuant to Section 5(h) or Article 7 hereto;
(b) Prepare and file with the SEC such amendments,
post-effective amendments and supplements to such registration statement and
the prospectus used in connection therewith as may be necessary to keep such
registration statement effective for such period of time required by Section
5(a) above, as such period may be extended pursuant to Section 5(h) or Article
7 hereto;
(c) Comply in all material respects with the provisions of
the Securities Act with respect to the disposition of all securities covered by
such registration statement during the period during which any such
registration statement is required to be effective;
(d) Furnish to any Holder and any underwriter of Registrable
Securities, (i) such number of copies (including manually executed and
conformed copies) of such registration statement and of each amendment thereof
and supplement thereto (including all annexes, appendices, schedules and
exhibits), (ii) such number of copies of the prospectus, used in connection
with such registration statement (including each preliminary prospectus, any
summary prospectus and the final prospectus), and (iii) such number of copies
of other documents, in each case as such Holder or such underwriter may
reasonably request;
(e) Use all commercially reasonable efforts to register or
qualify all Registrable Securities covered by such registration statement under
the securities or "blue sky" laws of states of the United States as any Holder
or any underwriter shall reasonably request, and do any and all other acts and
things which may be reasonably requested by such Holder or such underwriter to
consummate the offering and disposition of Registrable Securities in such
jurisdictions; provided, however, that the Company shall not be required to
qualify generally to do business as a foreign corporation or as a dealer in
securities, subject itself to taxation, or consent to general service of
process in any jurisdiction wherein it is not then so qualified or subject;
(f) Use, as soon as practicable after the effectiveness of
the registration statement, commercially reasonable efforts to cause the
Registrable Securities covered by such registration statement to be registered
with, or approved by, such other United States public, governmental or
regulatory authorities, if any, as may be required in connection with the
disposition of such Registrable Securities;
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(g) Use its commercially reasonable best efforts to list the
securities covered by such registration statement on any securities exchange
(or if applicable, The NASDAQ National Market) on which any securities of the
Company is then listed, if the listing of such Registrable Securities are then
permitted under the applicable rules of such exchange (or if applicable, The
NASDAQ National Market);
(h) Notify each Holder as promptly as practicable and, if
requested by any Holder, confirm such notification in writing, (i) when a
prospectus or any prospectus supplement has been filed with the SEC, and, with
respect to a registration statement or any post-effective amendment thereto,
when the same has been declared effective by the SEC, (ii) of the issuance by
the SEC of any stop order or the coming to the Company's attention of the
initiation of any proceedings for such or a similar purpose, (iii) of the
receipt by the Company of any notification with respect to the suspension of
the qualification of any of the Registrable Securities for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose, (iv) of the occurrence of any event which requires the making of any
changes to a registration statement or related prospectus so that such
documents will not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading (and the Company shall promptly prepare and furnish to each
Holder a reasonable number of copies of a supplemented or amended prospectus
such that, as thereafter delivered to the purchasers of such Registrable
Securities, such prospectus shall not include an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they are made, not misleading), and (v) of the Company's determination
that the filing of a post-effective amendment to the Registration Statement
shall be necessary or appropriate. Upon the receipt of any notice from the
Company of the occurrence of any event of the kind described in clause (iv) or
(v) of this Section 5(h), the Holders shall forthwith discontinue any offer and
disposition of Registrable Securities pursuant to the registration statement
covering such Registrable Securities until all Holders shall have received
copies of a supplemented or amended prospectus which is no longer defective
and, if so directed by the Company, shall deliver to the Company, at the
Company's expense, all copies (other than permanent file copies) of the
defective prospectus covering such Registrable Securities which are then in the
Holders' possession. If the Company shall provide any notice of the type
referred to in the preceding sentence, the period during which the registration
statements are required to be effective as set forth under Section 5(a) shall
be extended by the number of days from and including the date such notice is
provided, to and including the date when Holders shall have received copies of
the corrected prospectus; and
(i) Enter into such agreements and take such other
appropriate actions as are customary and reasonably necessary to expedite or
facilitate the disposition of such Registrable Securities, and in that regard,
deliver to the Holders such documents and certificates as may be reasonably
requested by any Holder of the Registrable Securities being sold or, as
applicable, the managing underwriters, to evidence the Company's compliance
with this Agreement including, without limitation, using all commercially
reasonable efforts to cause its independent accountants to deliver to the
Company (and to the Holders of Registrable Securities being sold in any
registration) an accountants' comfort letter substantially similar to that in
scope delivered in an underwritten public offering and covering audited and
interim financial statements included in the registration statement or, if such
letter can not be obtained through the exercise of all
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commercially reasonable efforts, cause its independent accountants to deliver
to the Company (and to the Holders of Registrable Securities being sold in any
registration) a comfort letter based on negotiated procedures providing comfort
with respect to the Company's financial statements included or incorporated by
reference in the registration statement at the highest level permitted to be
given by such accountants under the then applicable standards of the
Association of Independent Certified Accountants with respect to such
registration statement. In addition, the Company shall furnish to the Holders
of Registrable Securities being included in any registration hereunder an
opinion of counsel in substance and scope to that customarily delivered to
underwriters in public offerings.
6. UNDERWRITING.
(a) If requested by the underwriters for any underwritten
offering of Registrable Securities pursuant to a registration hereunder, the
Company will enter into and perform its obligations under an underwriting
agreement with the underwriters for such offering, such agreement to contain
such representations and warranties by the Company and such other terms and
provisions as are customarily contained in underwriting agreements with respect
to secondary distributions, including, without limitation, customary provisions
relating to indemnities and contribution and the provision of opinions of
counsel and accountants' letters.
(b) If any registration pursuant to Article 3 hereof shall
involve, in whole or in part, an underwritten offering, the Company may require
Registrable Securities requested to be registered pursuant to Article 3 to be
included in such underwriting on the same terms and conditions as shall be
applicable to the securities being sold through underwriters under such
registration. In such case, each Holder requesting registration shall be a
party to any such underwriting agreement. Such agreement shall contain such
representations and warranties by the Holders requesting registration and such
other terms and provisions as are customarily contained in underwriting
agreements with respect to secondary distributions, including, without
limitation, provisions relating to indemnities and contribution.
(c) In any offering of Registrable Securities pursuant to a
registration hereunder, each Holder requesting registration shall also enter
into such additional or other agreements as may be customary in such
transactions, which agreements may contain, among other provisions, such
representations and warranties as the Company or the underwriters of such
offering may reasonably request (including, without limitation, those
concerning such Holder, its Registrable Securities, such Holder's intended plan
of distribution and any other information supplied by it to the Company for use
in such registration statement), and customary provisions relating to
indemnities and contribution.
7. INFORMATION BLACKOUT.
(a) Upon written notice from the Company to the Holders that
the Company has determined in good faith that sale of Registrable Securities
pursuant to the registration statement would require disclosure of non-public
material information not otherwise required to be disclosed under applicable
law (A) which disclosure would have a material adverse effect on the Company or
(B) relating to a material business transaction involving the Company (an
"Information Blackout"), the Company may postpone the filing of effectiveness
of any registration statement required hereunder and, if such registration
statement has become effective,
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<PAGE>
the Company shall not be required to maintain the effectiveness of such
registration statement and all Holders shall suspend sales of Registrable
Securities pursuant to such registration statement, in each case, until the
earlier of:
(i) forty-five (45) days after the Company makes
such good faith determination, and
(ii) such time as the Company notifies the Holders
that such material information has been disclosed to the public or has
ceased to be material or that sales pursuant to such registration
statement may otherwise be resumed (the number of days from such
notice from the Company until the day when the Information Blackout
terminates hereunder is hereinafter called a "Blackout Period").
(b) Any delivery by the Company of notice of an Information
Blackout during the forty-five (45) days immediately following effectiveness of
any registration statement effected pursuant to Section 2(a) hereof shall give
the Holders of a majority in aggregate amount of Registrable Securities being
sold the right, by written notice to the Company within twenty (20) Business
Days after the end of such Blackout Period, to cancel such registration, in
which event the Graham Holders shall have one additional registration right
under Section 2(a)(i) hereof (a "Blackout Termination Right").
(c) If there is an Information Blackout and the cancellation
right, if any, pursuant to (b) above, is not available or exercised, the time
period set forth in clause (ii) of Section 5(a) shall be extended for a number
of days equal to the number of days in the Blackout Period.
(d) Notwithstanding the foregoing, there shall be no more
than two (2) Information Blackouts during the term of this Agreement and no
Blackout Period shall continue for more than forty-five (45) consecutive days.
8. RULE 144.
The Company shall use all commercially reasonable efforts to
take all actions necessary to comply with the filing requirements described in
Rule 144(c)(1) or any successor thereto so as to enable the Holders to sell
Registrable Securities without registration under the Securities Act. Upon the
written request of any Holder, the Company will deliver to such Holder a
written statement as to whether it has complied with the filing requirements
under Rule 144(c)(1) or any successor thereto.
9. PREPARATION; REASONABLE INVESTIGATION; INFORMATION.
In connection with the preparation and filing of each
registration statement registering Registrable Securities under the Securities
Act, (a) the Company will give the Holders and the underwriters, if any, and
their respective counsel and accountants, drafts of such registration statement
for their review and comment prior to filing and (during normal business hours
and subject to such reasonable limitations as the Company may impose to prevent
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disruption of its business) such reasonable and customary access to its books
and records and such opportunities to discuss the business of the Company with
its officers and the independent public accountants who have certified its
financial statements as shall be necessary, in the reasonable opinion of the
Holders of a majority in aggregate amount of the Registrable Securities being
registered and such underwriters or their respective counsel, to conduct a
reasonable investigation within the meaning of the Securities Act and (b) as a
condition precedent to including any Registrable Securities of any Holder in
any such registration, the Company may require such Holder to furnish the
Company such information regarding such Holder and the distribution of such
securities as the Company may from time to time reasonably request in writing
or as shall be required by law or the SEC in connection with any registration;
provided, however, that, upon the reasonable request of the supplier of any
such information, the recipient thereof shall enter into a confidentiality
agreement respecting such information in customary form for an underwritten
public offering.
10. INDEMNIFICATION AND CONTRIBUTION.
(a) In the case of each offering of Registrable Securities
made pursuant to this Agreement, the Company shall indemnify and hold harmless
each Holder, its officers, directors and affiliates, each underwriter of
Registrable Securities so offered and each Person, if any, who controls any of
the foregoing Persons within the meaning of the Securities Act ("Holder
Indemnitees"), from and against any and all claims, liabilities, losses,
damages, expenses and judgments, joint or several, to which they or any of them
may become subject, under the Securities Act or otherwise, including any amount
paid in settlement of any litigation commenced or threatened, and shall
promptly reimburse them, as and when incurred, for any legal or other expenses
reasonably incurred by them in connection with investigating any claims and
defending any actions, insofar as such losses, claims, damages, liabilities or
actions, shall arise out of, or should be based upon, any violation or alleged
violation by the Company of the Securities Act, or shall arise out of, or shall
be based upon, any untrue statement or alleged untrue statement of a material
fact contained in the registration statement (or in any preliminary or final
prospectus included therein) relating to the offering and sale of such
Registrable Securities, or any amendment thereof or supplement thereto, or in
any document incorporated by reference therein, or any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading; provided, that the
Company shall not be liable to any Holder Indemnitee in any such case to the
extent that any such loss, claim, damage, liability or action arises out of, or
is based upon, any untrue statement or alleged untrue statement, or any
omission, if such statement or omission shall have been made in reliance upon
and in conformity with information furnished to the Company in writing by or on
behalf of such Holder specifically for use in the preparation of the
registration statement (or in any preliminary or final prospectus included
therein), or any amendment thereof or supplement thereto. Such indemnity shall
remain in full force and effect regardless of any investigation made by or on
behalf of any Holder and shall survive the transfer of such securities. The
foregoing indemnity agreement is in addition to any liability which the Company
may otherwise have to any Holder Indemnitee.
(b) In the case of each offering of Registrable Securities
made pursuant to this Agreement, each Holder, severally and not jointly, shall
indemnify and hold harmless the Company, its officers and affiliates, and each
Person, if any, who controls any of the foregoing
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within the meaning of the Securities Act and (if requested by the underwriters)
each underwriter who participates in the offering and each Person, if any, who
controls any such underwriter within the meaning of the Securities Act (the
"Company Indemnitees"), from and against any and all claims, liabilities,
losses, damages, expenses and judgments, joint or several, to which they or any
of them may become subject, under the Securities Act or otherwise, including
any amount paid in settlement of any litigation commenced or threatened, and
shall promptly reimburse them, as and when incurred, for any legal or other
expenses incurred by them in connection with investigating any claims and
defending any actions, insofar as any such losses, claims, damages, liabilities
or actions shall arise out of, or shall be based upon, any violation or alleged
violation by such Holder of the Securities Act, any blue sky laws, securities
laws or other applicable laws of any state or country in which the Registrable
Securities are offered and relating to action taken or action or inaction
required of such Holder in connection with such offering, or shall arise out
of, or shall be based upon, any untrue statement or alleged untrue statement of
a material fact contained in the registration statement (or in any preliminary
or final prospectus included therein) relating to the offering and sale of such
Registrable Securities or any amendment thereof or supplement thereto, or any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, but
in each case only to the extent that such untrue statement is contained in, or
such fact is omitted from, information furnished in writing to the Company by
or on behalf of such Holder specifically for use in the preparation of such
registration statement (or in any preliminary or final prospectus included
therein). The liability of each Holder under such indemnity provision shall be
limited to an amount equal to the total net proceeds received by such Holder
from such offering. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of the Company and shall
survive the transfer of such securities. The foregoing indemnity is in addition
to any liability which Holder may otherwise have to any Company Indemnitee.
(c) In case any proceeding (including any governmental
investigation) shall be instituted involving any Person in respect of which
indemnity may be sought pursuant to this Article 10, such Person (the
"indemnified party") shall promptly notify the Person against whom such
indemnity may be sought (the "indemnifying party") in writing. Indemnification
provided for in Section 10(a) or (b) shall not be available to any person who
shall fail to give notice as provided in this Section 10(c) to the extent the
indemnifying party to whom notice was not given was unaware of the proceeding
to which such notice would have related and was prejudiced by the failure to
give such notice, but the failure to give such notice shall not relieve the
indemnifying party for contribution or otherwise than on account of the
provision of Section 10(a) or (b). In case any such proceeding shall be brought
against any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
therein and, to the extent that it shall wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel reasonably satisfactory to such indemnified party and shall pay as
incurred the reasonable fees and disbursements of such counsel related to such
proceeding. In any such proceeding, any indemnified party shall have the right
to retain its own counsel at its own expense. Notwithstanding the foregoing,
the indemnifying party shall pay as incurred the fees and expenses of one
counsel retained by the indemnified party in the event (i) the indemnifying
party and the indemnified party shall have mutually agreed to the retention of
such counsel or (ii) the named parties to any such proceeding (including any
impleaded parties) include both the indemnifying party and the indemnified
party and representation of both parties by the same counsel, in the
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written opinion of such counsel, would be inappropriate due to actual or
potential differing interests between them. It is understood that the
indemnifying party shall not, in connection with any proceeding or related
proceedings in the same jurisdiction, be liable for the reasonable fees and
expenses of more than one separate firm for all such indemnified parties. Such
firm shall be designated in writing by the Holders of a majority of the
Registrable Securities held by such Holders in the case of parties indemnified
pursuant to Section 10(a) and by the Company in the case of parties indemnified
pursuant to Section 10(b). The indemnifying party shall not be liable for any
settlement of any proceeding effected without its written consent but if
settled with such consent or if there be a final judgement for the plaintiff,
the indemnifying party agrees to indemnify the indemnified party from and
against any loss or liability by reason of such settlement or judgment.
(d) If the indemnification provided for in this Article 10 is
unavailable in respect of any losses, claims, damages or liabilities (or
actions or proceedings in respect thereof) referred to herein, then each
indemnifying party shall contribute to the amount paid or payable by the
indemnified party as a result of such losses, claims, damages or liabilities
(or actions or proceedings in respect thereof) in proportion as is appropriate
to reflect not only both the relative benefits received by such party (as
compared to the benefits received by all other parties) from the offering in
respect of which indemnity is sought, but also the relative fault of all
parties in connection with the statements or omissions which resulted in such
losses, claims, damages or liabilities (or actions or proceedings in respect
thereof), as well as any other relevant equitable considerations. The relative
benefits received by a party shall be deemed to be in the same proportion as
the total net proceeds from the offering (before deducting expenses) received
by it bear to the total amounts (including, in the case of any underwriter,
underwriting commission and discounts) received by each other party. Relative
fault shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by
the party and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission.
The parties agree that it would not be just and equitable if
contributions pursuant to this Section 10(d) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to above in this Section 10(d). The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages or liabilities (or actions or proceedings in respect thereof)
referred to above shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
subsection (d), no person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
(e) The indemnity provided for hereunder shall not inure to
the benefit of any indemnified party to the extent that such indemnified party
failed to comply with the applicable prospectus delivery requirements of the
Securities Act as then applicable to the person asserting the loss, claim,
damage or liability for which indemnity is sought.
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11. EXPENSES.
In connection with any registration under this Agreement, the
Company shall pay all Registration Expenses. In addition, in connection with
each registration, the Company shall pay the reasonable fees and expenses of
one counsel to represent the interests of the Holders selling Registrable
Securities in such registration.
12. NOTICES.
Except as otherwise provided below, whenever it is provided
in this Agreement that any notice, demand, request, consent, approval,
declaration or other communication shall or may be given to or served upon any
of the parties hereto, or whenever any of the parties hereto desires to provide
to or serve upon the other party any other communication with respect to this
Agreement, each such notice, demand, request, consent, approval, declaration or
other communication shall be in writing and shall be delivered in person,
mailed by registered or certified mail (return receipt requested) or sent by
overnight courier service or via facsimile transmission (which is confirmed),
as follows:
(a) if to either Capital or Family Growth, to:
Graham Capital Corporation
1420 Sixth Avenue
York, PA 17403
Attn: William H. Kerlin, Jr.
Facsimile: (717) 848-5951
(b) if to Blackstone, BCP, BMP or IPO Corporation, to:
Blackstone Management Associates III LLC
c/o Blackstone Capital Partners III
Merchant Banking Fund LP
345 Park Avenue
New York, New York 10154
Attention: Howard A. Lipson
Facsimile: (212) 754-8703
The furnishing of any notice required hereunder may be waived
in writing by the party entitled to receive such notice. Every notice, demand,
request, consent, approval, declaration or other communication hereunder shall
be deemed to have been duly furnished or served on the party to which it is
addressed, in the case of delivery in person or by facsimile, on the date when
sent, in the case of overnight mail, on the day after it is sent and in all
other cases, five business days after it is sent. Failure or delay in
delivering copies of any notice, demand, request, consent, approval,
declaration or other communication to the persons designated above to receive
copies shall in no way adversely affect the effectiveness of such notice,
demand, request, consent, approval, declaration or other communication.
-15-
<PAGE>
13. ENTIRE AGREEMENT.
This Agreement represents the entire agreement and
understanding among the parties hereto with respect to the subject matter
hereof and supersedes any and all prior oral and written agreements,
arrangements and understandings among the parties hereto with respect to such
subject matter; and this Agreement can be amended, supplemented or changed, and
any provision hereof can be waived or a departure from any provision hereof can
be consented to, only by a written instrument making specific reference to this
Agreement signed by the Company, Blackstone, the Graham Partners (or any entity
controlled by or is an affiliate of a Graham Partner as long as such entity
holds Registrable Securities) and the Holders of at least 50% of the
Registrable Securities then outstanding; provided that any amendment that
adversely affects the rights of any Holder must be signed by the adversely
affected Holder; provided further that any waiver must be signed by the party
entitled to the benefit of the term or matter being waived.
14. PARAGRAPH HEADINGS.
The paragraph headings contained in this Agreement are for
general reference purposes only and shall not affect in any manner the meaning,
interpretation or construction of the terms or other provisions of this
Agreement.
15. APPLICABLE LAW.
This Agreement shall be governed by, construed and enforced
in accordance with the laws of the State of New York applicable to contracts to
be made, executed, delivered and performed wholly within such state and, in any
case, without regard to the conflicts of law principles of such state.
16. SEVERABILITY.
If at any time subsequent to the date hereof, any provision
of this Agreement shall be held by any court of competent jurisdiction to be
illegal, void or unenforceable, such provision shall be of no force and effect,
but the illegality or unenforceability of such provision shall have no effect
upon and shall not impair the enforceability of any other provision of this
Agreement.
17. EQUITABLE REMEDIES.
The parties hereto agree that irreparable harm would occur in
the event that any of the agreements and provisions of this Agreement were not
performed fully by the parties hereto in accordance with their specific terms
or conditions or were otherwise breached, and that money damages are an
inadequate remedy for breach of this Agreement because of the difficulty of
ascertaining and quantifying the amount of damage that will be suffered by the
parties hereto in the event that this Agreement is not performed in accordance
with its terms or conditions or is otherwise breached. It is accordingly hereby
agreed that the parties hereto shall be entitled to an injunction or
injunctions to restrain, enjoin and prevent breaches of this Agreement by the
other parties and to enforce specifically the terms and provisions hereof in
any court of the
-16-
<PAGE>
United States or any state having jurisdiction, such remedy being in addition
to and not in lieu of, any other rights and remedies to which the other parties
are entitled to at law or in equity.
18. NO WAIVER.
The failure of any party at any time or times to require
performance of any provision hereof shall not affect the right at a later time
to enforce the same. No waiver by any party of any condition, and no breach of
any provision, term, covenant, representation or warranty contained in this
Agreement, whether by conduct or otherwise, in any one or more instances, shall
be deemed to be construed as a further or continuing waiver of any such
condition or of the breach of any other provision, term, covenant,
representation or warranty of this Agreement.
19. COUNTERPARTS.
This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute but one and the same original instrument.
20. SUCCESSORS AND ASSIGNS.
This Agreement shall inure to the benefit of and be binding
upon the successors, assigns and transferees of each of the parties hereto
including, without limitation and without the need for an express assignment,
subsequent Holders; provided that nothing herein shall be deemed to permit any
assignment, transfer or other disposition of Registrable Securities in
violation of the terms of the Partnership Agreement or applicable law. If any
transferee of any Holder shall acquire Registrable Securities prior to the IPO,
in any manner, whether by operation of law or otherwise, such Registrable
Securities shall be held subject to all of the rights and obligations of this
Agreement, and by taking and holding such Registrable Securities such person
shall be conclusively deemed to have agreed to be bound by and to perform all
of the terms and provisions of this Agreement. Notwithstanding anything herein
to the contrary, if any transferee of any Holder shall acquire Registrable
Securities in any manner, whether by operation of law or otherwise, at any time
after the Company completes an IPO, then such Registrable Securities held by
such transferee shall not be held subject to, or have the rights set forth in,
this Agreement.
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<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed and
delivered as of the date first above written.
GRAHAM PACKAGING HOLDLINGS COMPANY
By: Graham Packaging Corporation,
its General Partner
By: /s/ William H. Kerlin, Jr.
--------------------------
Name: William H. Kerlin, Jr.
Title: Chief Executive Officer
GRAHAM CAPITAL CORPORATION
By:/s/ William H. Kerlin, Jr.
---------------------------
Name: William H. Kerlin, Jr.
Title: President
GRAHAM FAMILY GROWTH PARTNERSHIP
By: Graham Packaging Corporation,
its General Partner
By:/s/ William H. Kerlin Jr.
---------------------------
Name: William H. Kerlin, Jr.
Title: Chief Executive Officer
BLACKSTONE CAPITAL PARTNERS III
MERCHANT BANKING FUND L.P.
By: Blackstone Management Associates III LLC,
its General Partner
By:/s/ Howard A. Lipson
---------------------------
Name: Howard A. Lipson
Title: Member
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<PAGE>
BLACKSTONE OFFSHORE CAPITAL
PARTNERS III L.P.
By: Blackstone Management Associates III LLC,
its General Partner
By: /s/ Howard A. Lipson
-----------------------
Name: Howard A. Lipson
Title: Member
BLACKSTONE FAMILY INVESTMENT
PARTNERSHIP III L.P.
By: Blackstone Management Associates III LLC,
its General Partner
By: /s/ Howard A. Lipson
-----------------------
Name: Howard A. Lipson
Title: Member
GPC CAPITAL CORP. II
By: /s/ John E. Hamilton
-----------------------
Name: John E. Hamilton
Title:
-19-
<PAGE>
EXHIBIT 10.7
MONITORING AGREEMENT (this "Agreement"), dated as of February 2, 1998,
among GRAHAM PACKAGING HOLDINGS COMPANY, a Pennsylvania limited partnership
formerly known as Graham Packaging Company ("GPHC"), GRAHAM PACKAGING COMPANY,
a Delaware limited partnership formerly known as Graham Packaging Holdings I,
L.P. ("Opco"), and BLACKSTONE MANAGEMENT PARTNERS III L.L.C., a Delaware
limited liability company ("BMP").
WHEREAS, BMP, by and through itself, its affiliates and their
respective officers, employees and representatives, has expertise in the areas
of finance, strategy, investment and acquisitions relating to the business of
GPHC and Opco; and
WHEREAS, GPHC and Opco desire to avail themselves, for the
term of this Agreement, of the expertise of BMP in the aforesaid areas and BMP
wishes to provide the services to GPHC and Opco as herein set forth;
NOW, THEREFORE, in consideration of the foregoing recitals
and the covenants and conditions contained herein, the parties hereto agree as
follows:
1. Appointment. GPHC and Opco hereby appoint BMP to render the
advisory and consulting services described in Section 2 hereof for the term of
this Agreement.
2. Services. BMP hereby agrees that during the term of this
Agreement it shall render to GPHC and Opco, by and through itself, its
affiliates, and their respective officers, employees and representatives as BMP
in its sole discretion shall designate from time to time, advisory and
consulting services in relation to the affairs of GPHC, Opco and their
subsidiaries, including, without limitation, (i) advice in designing financing
structures and advice regarding relationships with GPHC, Opco and their
subsidiaries' lenders and bankers; (ii) advice regarding the structure and
timing of public offerings of debt and equity securities of GPHC, Opco and
their subsidiaries; (iii) advice regarding property dispositions or
acquisitions; and (iv) such other advice directly related or ancillary to the
above financial advisory services as may be reasonably requested by GPHC and
Opco. It is expressly agreed that the services to be performed hereunder shall
not include investment banking or other financial advisory services rendered by
BMP or its affiliates to GPHC and Opco in connection with any specific
acquisition, divestiture, refinancing or recapitalization by GPHC, Opco or any
of their subsidiaries. BMP may be entitled to receive additional compensation
for providing services of the type specified in the preceding sentence by
mutual agreement of GPHC, Opco or such subsidiary and BMP.
3. Fees. In consideration of the services contemplated by
Section 2, for the term of this Agreement, GPHC and Opco and their respective
successors, jointly and severally, agree to pay to BMP an annual fee (the
"Monitoring Fee") of $1,000,000, payable in quarterly installments on March 31,
June 30, September 30 and December 31 of each year commencing on the Closing
Date (as defined below) through the date (the "Termination Date") on which
affiliates of BMP hold, directly or indirectly, beneficial ownership of less
than 10% of the equity interests of GPHC and Opco acquired on the Closing Date,
or such
<PAGE>
2
earlier date as GPHC, Opco and BMP shall agree. The Monitoring Fee shall not be
prorated for the first calendar year of this Agreement. Any Monitoring Fee for
the last calendar year of this Agreement shall be prorated for the period of
such year ending on the Termination Date. To the extent required by any debt
financing of GPHC, Opco or their subsidiaries, the Monitoring Fee shall be
deferred until the earlier of (i) dissolution of GPHC, and (ii) payment of such
deferred Monitoring Fee is permitted under such debt financing. Any deferred
Monitoring Fee shall bear interest at a rate of ten percent (10%) per annum,
compounded annually, from the date deferred until paid. The "Closing Date"
shall mean the date of the closing of the transactions contemplated by the
Agreement and Plan of Recapitalization, Redemption and Purchase (the
"Recapitalization Agreement") dated as of December 18, 1997 by and among GPHC,
Graham Packaging Corporation, a Pennsylvania corporation, Graham Family Growth
Partnership, a Pennsylvania limited partnership, Graham Engineering
Corporation, a Pennsylvania corporation, Graham Capital Corporation, a
Pennsylvania corporation, Graham Recycling Corporation, a Pennsylvania
corporation, Donald C. Graham, BCP/Graham Holdings L.L.C., a Delaware limited
liability company, and BMP/Graham Holdings Corporation, a Delaware corporation.
4. Reimbursements. In addition to the fees payable pursuant
to this Agreement, GPHC and Opco shall, subject to Sections 6.4(vii) and 6.7 of
the Fifth Amended and Restated Agreement of Limited Partnership of GHPC,
jointly and severally, pay directly or reimburse BMP for its Out-of-Pocket
Expenses (as defined below). For the purposes of this Agreement, the term
"Out-of-Pocket Expenses" shall mean the reasonable out-of-pocket costs and
expenses reasonably incurred by BMP or its affiliates in connection with the
services rendered hereunder in pursuing, or otherwise related to, the business
of GPHC or Opco, including, without limitation, (i) fees and disbursements of
any independent professionals and organizations, including independent
accountants, outside legal counsel or consultants, (ii) costs of any outside
services or independent contractors such as financial printers, couriers,
business publications, on-line financial services or similar services and (iii)
transportation, per diem costs, word processing expenses or any similar expense
not associated with its ordinary operations. All reimbursements for
Out-of-Pocket Expenses shall be made promptly upon or as soon as practicable
after presentation by BMP to GPHC or Opco of a written statement thereof.
5. Indemnification. (a) GPHC and Opco, jointly and severally,
will indemnify and hold harmless BMP, its affiliates and their respective
partners (both general and limited), members (both managing and otherwise),
officers, directors, employees, agents and representatives (each such person
being an "Indemnified Party") from and against any and all losses, claims,
damages and liabilities, whether joint or several (the "Liabilities"), related
to, arising out of or in connection with the advisory and consulting services
contemplated by this Agreement or the engagement of BMP pursuant to, and the
performance by BMP of the services contemplated by, this Agreement, whether or
not pending or threatened, whether or not an Indemnified Party is a party,
whether or not resulting in any liability and whether or not such action,
claim, suit, investigation or proceeding is initiated or brought by GPHC or
Opco. GPHC and Opco, jointly and severally, will reimburse any Indemnified
Party for all reasonable costs and expenses (including reasonable attorneys'
fees and expenses) as they are incurred in connection with investigating,
preparing, pursuing, defending or assisting in the
<PAGE>
3
defense of any action, claim, suit, investigation or proceeding for which the
Indemnified Party would be entitled to indemnification under the terms of the
previous sentence, or any action or proceeding arising therefrom, whether or
not such Indemnified Party is a party thereto. GPHC and Opco will not be liable
under the foregoing indemnification provision with respect to any Indemnified
Party, to the extent that any loss, claim, damage, liability, cost or expense
is determined by a court, in a final judgment from which no further appeal may
be taken, to have resulted primarily from the gross negligence or willful
misconduct of BMP. If an Indemnified Party is reimbursed hereunder for any
expenses, such reimbursement of expenses shall be refunded to the extent it is
finally judicially determined that the Liabilities in question resulted
primarily from the gross negligence or willful misconduct of BMP.
(b) Notwithstanding any provision herein to the contrary, no
partner of GPHC or Opco shall be liable for any obligations of GPHC or Opco
hereunder, including, without limitation, the payment of the Monitoring Fee
pursuant to Section 3, the payment or reimbursement of Out-of-Pocket Expenses
pursuant to Section 4 and the indemnification obligations under Section 5(a).
6. Accuracy of Information. GPHC and Opco shall furnish or
cause to be furnished to BMP such information as BMP believes appropriate to
its monitoring services hereunder and to the ownership by affiliates of BMP of
equity interests of GPHC and/or Opco (all such information so furnished being
the "Information"). GPHC and Opco recognize and confirm that BMP (i) will use
and rely primarily on the Information and on information available from
generally recognized public sources in performing the services contemplated by
this Agreement without having independently verified the same, (ii) does not
assume responsibility for the accuracy or completeness of the Information and
such other information and (iii) is entitled to rely upon the Information
without independent verification.
7. Term. This Agreement shall be effective as of the date
hereof and shall continue until the Termination Date, provided that Section 4
shall remain in effect with respect to Out-of-Pocket Expenses incurred prior to
the Termination Date. The provisions of Sections 5, 6 and 8 and otherwise as
the context so requires shall survive the termination of this Agreement.
8. Permissible Activities. Subject to applicable law, nothing
herein shall in any way preclude BMP, its affiliates or their respective
partners (both general and limited), members (both managing and otherwise),
officers, directors, employees, agents or representatives from engaging in any
business activities or from performing services for its or their own account or
for the account of others, including for companies that may be in competition
with the business conducted by GPHC or Opco.
9. Miscellaneous.
(a) No amendment or waiver of any provision of this
Agreement, or consent to any departure by either party hereto from any such
provision, shall be effective unless the same shall be in writing and signed by
all of the parties hereto. Any amendment, waiver or consent shall be effective
only in the specific instance and for the specific purpose for which
<PAGE>
4
given. The waiver by any party of any breach of this Agreement shall not
operate as or be construed to be a waiver by such party of any subsequent
breach.
(b) Any notices or other communications required or permitted
hereunder shall be sufficiently given if delivered personally or sent by
facsimile, Federal Express, or other overnight courier, addressed as follows or
to such other address of which the parties may have given notice:
If to BMP: c/o The Blackstone Group L.P.
345 Park Avenue, 31st Floor
New York, New York 10154
Attention: Howard A. Lipson
Facsimile: (212) 754-8703
If to GPHC
or to Opco: Graham Packaging Holdings Company
1110 East Princess Street
York, PA 17403
Attention: John Hamilton
Facsimile: (717) 849-8541
Unless otherwise specified herein, such notices or other communications shall
be deemed received (i) on the date delivered, if delivered personally or sent
by facsimile, and (ii) one business day after being sent by Federal Express or
other overnight courier.
(c) This Agreement shall constitute the entire agreement
between the parties with respect to the subject matter hereof, and shall
supersede all previous oral and written (and all contemporaneous oral)
negotiations, commitments, agreements and understandings relating hereto.
(d) This Agreement shall be governed by, and construed and
interpreted in accordance with, the laws of the State of New York. This
Agreement shall inure to the benefit of, and be binding upon, BMP, GPHC, Opco
and their respective successors and assigns. The provisions of Section 5 shall
inure to the benefit of each Indemnified Party.
(e) This Agreement may be executed by one or more parties to
this Agreement on any number of separate counterparts, and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument.
(f) The waiver by any party of any breach of this Agreement
shall not operate as or be construed to be a waiver by such party of any
subsequent breach.
(g) Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such
<PAGE>
5
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
<PAGE>
6
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their duly authorized officers or agents as of the
date first above written.
BLACKSTONE MANAGEMENT PARTNERS III
L.L.C.
By:/s/ Howard A. Lipson
-----------------------------------------
Name: Howard A. Lipson
Title: Member
GRAHAM PACKAGING HOLDINGS
COMPANY
By: BCP/Graham Holdings L.L.C., general
partner
By: BMP/Graham Holdings Corporation, member
By:/s/ Simon Lonergan
--------------------------------------
Name: Simon Lonergan
Title:
GRAHAM PACKAGING COMPANY
By: GPC Opco GP LLC, general partner
By: Graham Packaging Holdings Company, member
By: BCP/Graham Holdings L.L.C., general
partner
By: BMP/Graham Holdings Corporation, member
By:/s/ Simon Lonergan
---------------------------------------
Name: Simon Lonergan
Title:
<PAGE>
EXHIBIT 10.8
===============================================================================
MANAGEMENT STOCKHOLDERS' AGREEMENT
dated as of February 3, 1998
among
BLACKSTONE CAPITAL PARTNERS III MERCHANT BANKING FUND L.P.,
BLACKSTONE OFFSHORE CAPITAL PARTNERS III L.P.,
BLACKSTONE FAMILY INVESTMENT PARTNERSHIP III L.P.,
BMP/GRAHAM HOLDINGS CORPORATION,
GRAHAM PACKAGING HOLDINGS COMPANY,
GPC CAPITAL CORP. II
and
THE MANAGEMENT INVESTORS
===============================================================================
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<PAGE>
TABLE OF CONTENTS
Page
----
SECTION 1. DEFINITIONS.............................................. 2
1.1 Defined Terms............................................ 2
1.2 Other Definitional Provisions; Interpretation............ 5
SECTION 2. PURCHASE OF AND GRANT OF BMP STOCK....................... 6
2.1 Purchase of and Grant of BMP Stock....................... 6
2.2 The Closing.............................................. 6
SECTION 3. TRANSFERS AND ISSUANCES.................................. 6
3.1 Limitations on Transfer.................................. 6
3.2 Certain Permitted Transfers.............................. 7
3.3 Effect of Void Transfers................................. 7
3.4 Legend on Securities..................................... 7
3.5 Tag-Along Rights......................................... 8
3.6 Public Offerings, etc.................................... 9
3.7 Drag-Along Rights........................................ 9
SECTION 4. CERTAIN SALES UPON TERMINATION OF EMPLOYMENT............. 9
4.1 Put Options.............................................. 9
4.2 Call Options............................................. 10
4.3 Purchase Price........................................... 10
4.4 Obligation to Sell Several............................... 11
SECTION 5. CERTAIN LIMITATIONS ON THE COMPANY'S OBLIGATIONS
TO PURCHASE COMMON STOCK................................. 11
5.1 Deferral of Purchases.................................... 11
5.2 Payment for Common Stock................................. 12
SECTION 6. REGISTRATION RIGHTS...................................... 13
6.1 Incidental Registration.................................. 13
SECTION 7. INVESTMENT REPRESENTATIONS AND COVENANTS................. 13
7.1 Investment Intention; No Resales......................... 13
7.2 BMP Stock Unregistered................................... 13
7.3 Additional Investment Representations.................... 14
SECTION 8. MISCELLANEOUS............................................ 15
8.1 Additional Securities Subject to Agreement............... 15
8.2 Termination.............................................. 15
8.3 Injunctive Relief........................................ 15
8.4 Amendments............................................... 15
8.5 Successors, Assigns and Transferees...................... 15
8.6 Notices.................................................. 16
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<PAGE>
Page
----
8.7 Integration.............................................. 17
8.8 Severability............................................. 17
8.9 Counterparts............................................. 17
8.10 Governing Law............................................ 17
8.11 Jurisdiction............................................. 17
8.12 Additional Management Investors.......................... 18
-ii-
<PAGE>
EXHIBIT 10.8
MANAGEMENT STOCKHOLDERS' AGREEMENT, dated as of February 3,
1998, among Blackstone Capital Partners III Merchant Banking Fund L.P., a
Delaware limited partnership, Blackstone Offshore Capital Partners III L.P., a
Cayman Islands exempted limited partnership, and Blackstone Family Investment
Partnership III L.P., a Delaware limited partnership (collectively,
"Blackstone"), BMP/Graham Holdings Corporation, a Delaware corporation ("BMP"),
Graham Packaging Holdings Company, a Pennsylvania limited partnership formerly
known as Graham Packaging Company ("Holdings"), GPC Capital Corp. II, a
Delaware corporation ("CapCo. II"), and the parties identified on the signature
pages hereto or to the supplementary agreements referred to in Section 8.12
hereof as Management Investors (the "Management Investors").
W I T N E S S E T H :
---------------------
WHEREAS, on the date hereof, 20,825 shares of common stock,
par value $.01 per share (the "BMP Stock"), of BMP are outstanding, of which
Blackstone owns 19,825 shares;
WHEREAS, pursuant to the transactions contemplated by the
Recapitalization Agreement (as defined below), BMP holds indirectly a 4%
general partnership interest and directly an 81% limited partnership interest
in Holdings;
WHEREAS, CapCo. II is a wholly owned subsidiary of Holdings
and would be the successor to Holdings upon an IPO Reorganization (as defined
below);
WHEREAS, each Management Investor and Holdings are parties to
an Equity Incentive Agreement dated as of February 3, 1998 (each, an "Equity
Incentive Agreement"), which provides that such Management Investor will
receive certain equity incentive awards from Holdings or its affiliates;
WHEREAS, in furtherance of the Equity Incentive Agreements
and on the terms and subject to the conditions hereof and thereof, (i) each
Management Investor desires to purchase from Blackstone, and Blackstone desires
to sell to such Management Investor, one-half of the number of shares of BMP
Stock set forth on such Management Investor's signature page (which aggregate
to 305.185 shares of BMP Stock for all Management Investors) and (ii)
Blackstone desires to grant to each Management Investor one-half of the number
of shares of BMP Stock set forth on such Management Investor's signature page
(which aggregate to 305.185 shares of BMP Stock for all Management Investors),
in each case as hereinafter set forth;
WHEREAS, the parties hereto wish to enter into certain
agreements with respect to the holdings by Blackstone and the Management
Investors and their respective Permitted Transferees of stock of the Company
(as defined below) and securities exercisable or exchangeable for or
convertible into stock of the Company; and
<PAGE>
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, the parties hereto agree as follows:
SECTION 1. DEFINITIONS
1.1 Defined Terms. As used in this Agreement, terms defined
in the headings and the recitals shall have their respective assigned meanings,
and the following capitalized terms shall have the meanings ascribed to them
below:
"Affiliate" means, with respect to any Person, (i) any Person
that directly or indirectly controls, is controlled by or is under common
control with, such Person, or (ii) any director, officer, partner or employee
of such Person or any Person specified in clause (i) above, or (iii) any
spouse, parent, child or sibling of any Person specified in clause (i) or (ii)
above.
"Agreement" means this Management Stockholders' Agreement, as
the same may be amended, supplemented or otherwise modified from time to time.
"Applicable Percentage" means, with respect to any
termination of employment described in Section 4.2(a)(iii) or 4.2(a)(iv)
hereof, (a) 0% if such termination occurs at any time prior to the first
anniversary of the Closing Date, (b) 33.3% if such termination occurs during
the 365 day period commencing on the first anniversary of the Closing Date; (c)
66.6% if such termination occurs during the 365 day period commencing on the
second anniversary of the Closing Date; and (d) 100% if such termination occurs
at any time on or after the third anniversary of the Closing Date.
"Business Day" means a day other than a Saturday, Sunday,
holiday or other day on which commercial banks in New York City or the
Commonwealth of Pennsylvania are authorized or required by law to close.
"Cause" used in connection with the termination of employment
of the Management Investor means a termination of employment of the Management
Investor by the Company or any Subsidiary thereof described in Sections
4(b)(1), (2), (3) or (4) of the applicable Equity Incentive Agreement.
"Closing Date" means the date of the closing under this
Agreement.
"Common Stock" means the common stock, par value $.01 per
share, of the Company.
"Common Stock Equivalents" means any stock, warrants, rights,
calls, options or other securities exchangeable or exercisable for or
convertible into Common Stock.
"Company" means (i) prior to the initial Public Offering, BMP
and (ii) in connection with or after the initial Public Offering, CapCo. II.
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<PAGE>
"Cost" means, with respect to shares of Common Stock acquired
pursuant to Section 1 or otherwise, the price per share paid by the Management
Investor (in each case, as proportionately adjusted for all subsequent stock
splits, stock dividends and other recapitalizations).
"Disability" of a Management Investor means the inability of
the Management Investor to perform the essential functions of his job, with or
without reasonable accommodation, by reason of a physical or mental infirmity,
(i) for a continuous period of six (6) months or (ii) at such earlier time as
the Company receives satisfactory medical evidence that the Management Investor
has a physical or mental disability or infirmity which is reasonably likely to
prevent him from returning to the performance of his work duties for six (6)
months or longer. The date of such Disability shall be on the last day of such
six-month period or the fifteenth day following the day on which the Company
receives such satisfactory medical evidence, as the case may be.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder, as the same may
be amended from time to time.
"Fair Market Value" used in connection with the value of
shares of Common Stock means, as of any date (the "Valuation Date") with
respect to each share, the fair market value thereof, disregarding any discount
for minority interest or marketability of shares and assuming the prior
conversion, exercise or exchange of all outstanding Common Stock Equivalents,
as determined within six (6) months of the Valuation Date by the Board of
Directors in its sole discretion (the "Board Determination"), provided that if
the Board Determination is in excess of $500,000 in the aggregate for all
shares being valued and if the Management Investor disagrees, in good faith,
with the Board Determination, the Management Investor shall promptly notify the
Company of such disagreement, in which event an independent appraiser,
accountant, or investment banking firm (the "Appraiser") selected by mutual
agreement of the Management Investor and the Board of Directors of the Company
shall make a determination of the fair market value thereof, disregarding any
discount for minority interest or marketability of shares and assuming the
prior conversion, exercise or exchange of all outstanding Common Stock
Equivalents (the "Appraiser Determination"), and if the Appraiser Determination
is (i) not at least 110% of the Board Determination or greater, "Fair Market
Value" shall be the Appraiser Determination and the Management Investor shall
pay the cost of such Appraiser Determination or (ii) 110% of the Board
Determination or greater, "Fair Market Value" shall be the Appraiser
Determination and the Company shall pay the cost of such Appraiser
Determination.
"Financing Default" means an event which would constitute (or
with notice or lapse of time or both would constitute) an event of default
(which event of default has not been cured) under any of the following as
originally entered into or as they may be amended from time to time: (i) any
agreement under which an amount of indebtedness of the Company or any of its
Subsidiaries in excess of $1,000,000 is outstanding as of the time of the
aforementioned event, and any extensions, renewals, refinancings or refundings
thereof in whole or in part; and (ii) any provision of the Company's or any of
its Subsidiary's certificate of incorporation.
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"Good Reason" used in connection with the termination of
employment by a Management Investor means a termination of employment with the
Company or any Subsidiary thereof described in Section 4(a)(3) of the
applicable Equity Incentive Agreement.
"IPO Reorganization" means, collectively, (i) the transfer of
all or substantially all of Holdings' assets and liabilities to CapCo. II upon
an initial Public Offering, (ii) the dissolution or liquidation of BMP,
BCP/Graham Holdings LLC and Holdings and (iii) all transactions necessary or
incidental thereto.
"NASDAQ" means the Nasdaq Stock Market.
"Permitted Transferee" means any Person to whom the
Management Investors (or any direct or indirect Permitted Transferee thereof)
transfers Securities in accordance with the terms of this Agreement (other than
pursuant to a Public Offering or pursuant to Rule 144 under the Securities Act)
and who becomes a party to, and is bound to the same extent as its transferor
by the terms of, this Agreement.
"Person" means any individual, corporation, partnership,
trust, joint stock company, business trust, unincorporated association, joint
venture, governmental authority or other entity of any nature whatsoever.
"Public Offering" means the sale of Common Stock to the
public in a firm commitment underwritten public offering pursuant to an
effective registration statement (other than a registration statement on Form
S-4, S-8 or similar form) filed under the Securities Act, which results in an
active trading market in such Common Stock (it being understood that such an
active trading market shall be deemed to exist if, among other things, such
Common Stock are listed on a national securities exchange or on NASDAQ).
"Recapitalization Agreement" means the Agreement and Plan of
Recapitalization, Redemption and Purchase dated as of December 18, 1997 by and
among Holdings, Donald C. Graham and certain of his Affiliates, BCP/Graham
Holdings LLC and BMP, as the same may be amended, supplemented or otherwise
modified from time to time.
"Registration Rights Agreement" means the Registration Rights
Agreement dated as of February 2, 1998 among Holdings, CapCo. II, Blackstone,
Graham Capital Corporation and Graham Family Growth Partnership attached as
Exhibit A hereto, as the same may be amended, supplemented or otherwise
modified from time to time.
"Retirement" means, with respect to the Management Investor,
the Management Investor's retirement as an employee of the Company or any of
its Subsidiaries on or after reaching age 65 (or such earlier age as may be
otherwise determined by the Board of Directors of the Company) after at least
three (3) years employment with the Company after the Closing Date.
"Securities" means shares of Common Stock or Common Stock
Equivalents, whether owned on the date hereof or hereafter acquired.
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"Securities Act" means the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder, as the same may
be amended from time to time.
"Stockholders" means Blackstone and the Management Investors
and their respective Permitted Transferees.
"Subsidiary" means, with respect to any Person, any
corporation, partnership, association or other business entity of which fifty
percent (50%) or more of the total voting power of shares of capital stock
entitled (without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof, or fifty percent (50%) or
more of the equity interest therein, is at the time owned or controlled,
directly or indirectly, by any Person or one or more of the other Subsidiaries
of such Person or a combination thereof.
"Third Party" means any Person other than the Company, the
Stockholders and their Affiliates.
"Transfer" means any transfer, sale, assignment,
distribution, exchange, mortgage, pledge, hypothecation or other disposition of
any Securities or any interest therein.
1.2 Other Definitional Provisions; Interpretation. (a) The
words "hereof", "herein", and "hereunder" and words of similar import when used
in this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement, and Section, Subsection, Schedule and
Exhibit references are to this Agreement unless otherwise specified.
(b) The headings in this Agreement are included for
convenience of reference only and shall not limit or otherwise affect the
meaning or interpretation of this Agreement.
(c) The meanings given to terms defined herein shall be
equally applicable to both the singular and plural forms of such terms.
(d) For purposes of comparing the beneficial ownership of any
Person on the date of execution and delivery of this Agreement to the level of
such ownership at any later time, the level of ownership on such later date
shall be adjusted to eliminate the effect of any subdivision of the Common
Stock, any combination of the Common Stock, any issuance of Common Stock or
Common Stock Equivalents by reason of any reorganization or reclassification
(including, without limitation, the IPO Reorganization and any reclassification
in connection with a merger or consolidation), or any dividend payable in
Common Stock or Common Stock Equivalents.
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SECTION 2. PURCHASE OF AND GRANT OF BMP STOCK
2.1 Purchase of and Grant of BMP Stock. (a) Pursuant to the
terms and subject to the conditions set forth in this Agreement and the
applicable Equity Incentive Agreement, each Management Investor hereby agrees
to purchase, and Blackstone hereby agrees to sell to such Management Investor,
on the Closing Date, one-half of the number of shares of BMP Stock set forth on
such Management Investor's signature page hereto, at a price per share equal to
$10,000 (which Blackstone represents is the purchase price per share paid by
Blackstone). Each Management Investor agrees to apply all cash payments
received pursuant to Section 3 of the applicable Equity Incentive Agreement to
fund his purchase of BMP Stock pursuant to this Section 2.1(a) and, by
executing this Agreement, such Management Investor hereby (i) appoints Drinker
Biddle & Reath LLP to act as its escrow agent for receiving and disbursing such
cash payments on his behalf pursuant to and in accordance with the terms set
forth in this Section 2, (ii) authorizes Holdings to wire transfer such cash
payments to Drinker Biddle & Reath LLP in full satisfaction of Holdings'
obligations under Section 3 of the applicable Equity Incentive Agreement and
(iii) authorizes Drinker Biddle & Reath LLP to wire transfer all of such cash
payments to Blackstone on such Management Investor's behalf in full
satisfaction of the purchase price for such BMP Stock.
(b) Pursuant to the terms and subject to the conditions set
forth in this Agreement and the applicable Equity Incentive Agreement,
concurrently with the purchase of the BMP Stock pursuant to Section 2.1(a),
Blackstone shall grant to each Management Investor one-half of the number of
shares of BMP Stock set forth on such Management Investor's signature page
hereto.
(c) The parties hereto agree that all shares of BMP Stock
purchased or granted pursuant to this Section 2.1 shall be subject to the
restrictions, terms and conditions set forth in the applicable Equity Incentive
Agreements as well as those set forth herein.
2.2 The Closing. The closing (the "Closing") of the purchase
and grant of BMP Stock hereunder shall take place on or as soon as practicable
after the date hereof at the offices of Simpson Thacher & Bartlett, 425
Lexington Avenue, New York, New York.
SECTION 3. TRANSFERS AND ISSUANCES
3.1 Limitations on Transfer. (a) Each Management Investor and
his Permitted Transferees hereby agrees that such Stockholder will not,
directly or indirectly, Transfer any Securities unless such Transfer complies
with the provisions hereof and (i) such Transfer is pursuant to an effective
registration statement under the Securities Act and has been registered under
all applicable state securities or "blue sky" laws or (ii) such Stockholder
shall have furnished the Company with a written opinion of counsel reasonably
satisfactory to the Company in form and substance reasonably satisfactory to
the Company to the effect that no such registration is required because of the
availability of an exemption from registration under the Securities Act and all
applicable state securities or "blue sky" laws.
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(b) Each Management Investor and his Permitted Transferees
hereby agrees that, except as otherwise provided in Section 3.2 hereof, so long
as Blackstone and its Affiliates beneficially own an aggregate number of shares
of Common Stock that is not less than one-half of the number of shares of
Common Stock beneficially owned by Blackstone on the date hereof (giving effect
to the transactions contemplated hereby), such Stockholder shall not, without
the prior written consent of Blackstone (which consent may be withheld by
Blackstone in its absolute discretion), effect a Transfer prior to the date of
the initial Public Offering, except for Transfers pursuant to Section 3.5, 3.7
or 4 hereof.
3.2 Certain Permitted Transfers. Notwithstanding any other
provision of this Agreement to the contrary, each Management Investors and his
Permitted Transferees shall be entitled from time to time to Transfer any or
all of the Securities beneficially owned by them to (i) such Stockholder or
such Stockholder's spouse or direct lineal descendants or a charitable
remainder trust or trust, in either case the current beneficiaries of which, or
to a corporation or partnership, the stockholders or limited or general
partners of which, include only such Stockholder and/or such Stockholder's
spouse and/or such Stockholder's direct lineal descendants or (ii) the
executor, administrator, testamentary trustee, legatee or beneficiary of any
deceased individual holder of Securities referred to in clause (i), provided
that any such transferee agrees to become a party to, and be bound to the same
extent as its transferor by the terms of, this Agreement and the applicable
Equity Incentive Agreement.
3.3 Effect of Void Transfers. In the event of any purported
Transfer of any Securities in violation of the provisions of this Agreement or
any applicable Equity Incentive Agreement, such purported Transfer shall be
void and of no effect and the Company shall not give effect to such Transfer.
3.4 Legend on Securities. Each certificate representing
Securities issued to any Management Investor or any of its Permitted
Transferees shall bear the following legend on the face thereof:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A
MANAGEMENT STOCKHOLDERS' AGREEMENT AMONG BLACKSTONE CAPITAL PARTNERS
III MERCHANT BANKING FUND L.P., BLACKSTONE OFFSHORE CAPITAL PARTNERS
III L.P., BLACKSTONE FAMILY INVESTMENT PARTNERSHIP L.P., GRAHAM
PACKAGING HOLDINGS COMPANY, GPC CAPITAL CORP. II AND THE MANAGEMENT
INVESTORS PARTIES THERETO, A COPY OF WHICH IS ON FILE WITH THE
SECRETARY OF THE ISSUER. NO TRANSFER, SALE, ASSIGNMENT, PLEDGE,
HYPOTHECATION OR OTHER DISPOSITION OF THE SECURITIES REPRESENTED BY
THIS CERTIFICATE MAY BE MADE EXCEPT IN ACCORDANCE WITH THE PROVISIONS
OF SUCH MANAGEMENT STOCKHOLDERS' AGREEMENT AND (A) PURSUANT TO A
REGISTRATION STATEMENT EFFECTIVE UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR (B) IF THE ISSUER HAS BEEN FURNISHED WITH AN OPINION
REASONABLY SATISFACTORY IN FORM AND SUBSTANCE TO THE ISSUER OF COUNSEL
REASONABLY SATISFACTORY TO THE ISSUER THAT SUCH TRANSFER, SALE,
ASSIGNMENT, PLEDGE, HYPOTHECATION
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OR OTHER DISPOSITION IS EXEMPT FROM THE PROVISIONS OF SECTION 5 OF THE
SECURITIES ACT OF 1933, AS AMENDED, AND THE RULES AND REGULATIONS
THEREUNDER. THE HOLDER OF THIS CERTIFICATE, BY ACCEPTANCE OF THIS
CERTIFICATE, AGREES TO BE BOUND BY ALL OF THE PROVISIONS OF SUCH
MANAGEMENT STOCKHOLDERS' AGREEMENT."
3.5 Tag-Along Rights. (a) So long as (x) this Agreement shall
remain in effect, (y) an initial Public Offering shall not have occurred and
(z) Blackstone and its Affiliates beneficially own an aggregate number of
shares of Common Stock that is not less than one-half of the number of shares
of Common Stock beneficially owned by Blackstone on the date hereof (giving
effect to the transactions contemplated hereby), with respect to any proposed
Transfer by Blackstone of Common Stock (other than to an Affiliate of
Blackstone, including any of its partners), Blackstone shall have the
obligation, and each other Stockholder shall have the right, to require the
proposed transferee to purchase from each Stockholder having and exercising
such right (each, including any Person having and exercising similar rights
pursuant to any other agreement, a "Tagging Stockholder") a number of shares of
Common Stock up to the product (rounded up to the nearest whole number) of (i)
the quotient determined by dividing (A) the aggregate number of shares of
Common Stock beneficially owned on a fully diluted basis by such Tagging
Stockholder and sought by the Tagging Stockholder to be included in the
contemplated Transfer by (B) the aggregate number of shares of Common Stock
beneficially owned on a fully diluted basis by Blackstone and all Tagging
Stockholders and sought by Blackstone and all Tagging Stockholders to be
included in the contemplated Transfer and (ii) the total number of shares of
Common Stock proposed to be Transferred to the transferee in the contemplated
Transfer, and at the same price per share of Common Stock and upon the same
terms and conditions (including, without limitation, time of payment and form
of consideration) as to be paid and given to Blackstone; provided that in order
to sell shares of Common Stock to the proposed transferee pursuant to this
Section 3.5(a), a Tagging Stockholder must make to the transferee the same
representations, warranties, covenants, indemnities and agreements as
Blackstone makes in connection with the proposed Transfer by Blackstone of
Common Stock (except that in the case of representations, warranties,
covenants, indemnities and agreements pertaining specifically to Blackstone, a
Tagging Stockholder shall make the comparable representations, warranties,
covenants, indemnities and agreements pertaining specifically to itself and
only to itself); and provided further that all representations, warranties and
indemnities shall be made by the Tagging Stockholders severally and not jointly
and that the liability of Blackstone and the Tagging Stockholders thereunder
shall be borne by each of them on a pro rata basis.
(b) Blackstone shall give notice to all relevant Stockholders
of each proposed Transfer giving rise to the rights of the Tagging Stockholders
set forth in Section 3.5(a) at least 20 days prior to the proposed consummation
of such Transfer, setting forth the name of Blackstone, the number of shares of
Common Stock proposed to be so Transferred, the name and address of the
proposed transferee, the proposed amount and form of consideration and other
terms and conditions offered by the proposed transferee. The tag-along rights
provided by this Section 3.5 must be exercised by each Tagging Stockholder
within 10 days following receipt of the notice required by the preceding
sentence, by delivery of a written notice to Blackstone indicating such Tagging
Stockholder's desire to exercise its rights and specifying the number of shares
of Common Stock it desires to sell.
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3.6 Public Offerings, etc. The provisions of Sections 3.5 and
3.7 shall not be applicable to offers and sales of Securities in a Public
Offering or pursuant to Rule 144 under the Securities Act.
3.7 Drag-Along Rights. So long as (x) this Agreement shall
remain in effect, (y) an initial Public Offering shall not have occurred and
(z) Blackstone and its Affiliates beneficially own an aggregate number of
shares of Common Stock that is not less than one-half of the number of shares
of Common Stock beneficially owned by Blackstone on the date hereof (giving
effect to the transactions contemplated hereby), if any of Blackstone and its
Affiliates receives an offer from a Third Party to purchase all outstanding
shares of Common Stock (other than shares not being purchased in order to
preserve the availability of recapitalization accounting treatment) owned by
Blackstone and its Affiliates and such offer is accepted by Blackstone, then
each Stockholder hereby agrees that it will Transfer all Securities owned by it
to such Third Party at the same price per share of Common Stock and upon the
same terms and conditions of the offer so accepted by Blackstone, including
making the same representations, warranties, covenants, indemnities and
agreements that Blackstone agrees to make (except that, in the case of
representations, warranties, covenants, indemnities and agreements pertaining
specifically to Blackstone, each other Stockholder shall make the comparable
representations, warranties, covenants, indemnities and agreements pertaining
specifically to itself and only to itself); provided that all representations,
warranties and indemnities shall be made by Blackstone and such Stockholders
severally and not jointly and that the liability of Blackstone and such
Stockholders thereunder shall be borne by each of them on a pro rata basis.
SECTION 4. CERTAIN SALES UPON TERMINATION OF EMPLOYMENT
4.1 Put Options. (a) If any Management Investor's employment
with the Company or its Subsidiaries is terminated due to the Disability, death
or Retirement of such Management Investor prior to an initial Public Offering,
each such Management Investor and his Permitted Transferees (hereinafter
sometimes collectively referred to as the "Management Investor Group") shall
have the right, subject to the provisions of Section 5 hereof, for 90 days
(provided that, in the case of death, such period shall be extended to the
extent reasonably necessary to accommodate any probate proceedings or as may be
otherwise extended by the Board of Directors in its sole discretion) following
the date of such termination of employment of the Management Investor, to sell
to the Company, and the Company shall be required to purchase (subject to the
provisions of Section 5 hereof), on one occasion from each member of the
Management Investor Group, all (but not less than all) shares of Common Stock
(including any fractional shares) then owned by such member, at a price per
share equal to the applicable purchase price determined pursuant to Section 4.3
hereof.
(b) Each member of the Management Investor Group who desires
to sell all of his shares of Common Stock which may be sold pursuant to this
Section 4.1 shall, not later than 90 days after the date of termination of
employment, send written notice to the Company of his intention to sell all of
such shares of Common Stock pursuant to this Section 4.1. Subject to the
provisions of Section 5.1, the closing of the purchase shall take place at the
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principal office of the Company on a date specified by the Company no later
than 30 days after the giving of such notice.
4.2 Call Options. (a) If any Management Investor's employment
with the Company or its Subsidiaries terminates for any of the reasons set
forth in clauses (i), (ii), (iii) and (iv) below prior to an initial Public
Offering, the Company (or any of its assignees) shall have the right and option
to purchase, for a period of 90 days following the date of such termination of
employment of such Management Investor, and each member of the Management
Investor Group shall be required to sell to the Company (or to any such
assignee), any or all of the shares of Common Stock (including any fractional
shares) then owned by such member of the Management Investor Group, at a price
per share equal to the applicable purchase price determined pursuant to Section
4.3 hereof:
(i) if the Management Investor's employment with the
Company or its Subsidiaries is terminated due to the Disability, death
or Retirement of the Management Investor;
(ii) if the Management Investor's employment with the
Company or its Subsidiaries is terminated by the Company or its
Subsidiaries without Cause or by the Management Investor for Good
Reason;
(iii) if the Management Investor's employment with the
Company or its Subsidiaries is terminated by the Management Investor
for any reason not set forth in Sections 4.2(a)(i), (ii) or (iv); or
(iv) if the Management Investor's employment with the
Company or its Subsidiaries is terminated by the Company or its
Subsidiaries for Cause.
(b) If the Company desires to exercise its option to purchase
any shares pursuant to this Section 4.2, the Company shall, not later than 90
days after the date of termination of employment, send written notice to the
Management Investor or such other member of the Management Investor Group of
its intention to purchase shares, specifying the number of shares to be
purchased. Subject to the provisions of Section 5.1, the closing of the
purchase shall take place at the principal office of the Company on a date
specified by the Company no earlier than the tenth and no later than 30 days
after the giving of such notice.
4.3 Purchase Price. In the event of a purchase by the Company
pursuant to Section 4.1(a) or 4.2(a) hereof, the purchase price shall be:
(a) in the case of a termination of employment described
in Section 4.1(a), 4.2(a)(i) or 4.2(a)(ii), a price per share equal to
Fair Market Value; and
(b) in the case of a termination of employment described
in Section 4.2(a)(iii) or 4.2(a)(iv), with respect to the number of
shares being purchased which are the product of (x) the total number
of shares being purchased and (y) the Applicable Percentage, a price
per share equal to Fair Market Value, and (if
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the Applicable Percentage is less than 100%) the purchase price with
respect to the remaining shares being sold shall be a price per share
equal to $0;
provided that in any case the Board of Directors of the Company shall have the
right, in its sole discretion, to increase any purchase price set forth above.
4.4 Obligation to Sell Several. In the event there is more
than one member of the Management Investor Group, the failure of any one member
thereof to perform its obligations hereunder shall not excuse or affect the
obligations of any other member thereof, and the closing of the purchases from
such other members by the Company shall not excuse, or constitute a waiver of
its rights against, the defaulting member.
SECTION 5. CERTAIN LIMITATIONS ON THE COMPANY'S
OBLIGATIONS TO PURCHASE COMMON STOCK
5.1 Deferral of Purchases. (a) Notwithstanding anything to
the contrary elsewhere herein, the Company shall not be obligated to purchase
any shares of Common Stock at any time pursuant to Section 4 hereof, regardless
of whether it has delivered a notice of its election to purchase any such
shares, (i) to the extent that the purchase of such shares (together with any
other purchases of Common Stock pursuant to Section 4 hereof, or pursuant to
similar provisions in the stock purchase, stock subscription or other
agreements with other investors of which the Company has at such time been
given or has given notice) would result (A) in a violation of any law, statute,
rule, regulation, policy, order, writ, injunction, decree or judgment
promulgated or entered by any governmental authority applicable to the Company
or any of its Subsidiaries or any of its or their property or (B) after giving
effect thereto (including any dividends or other distributions or loans from a
Subsidiary of the Company to the Company in connection therewith), in a
Financing Default, (ii) if immediately prior to such purchase there exists a
Financing Default which prohibits such purchase (including any dividends or
other distributions or loans from a Subsidiary of the Company to the Company in
connection therewith), or (iii) if the Company does not have funds available to
effect such purchase. The Company shall within 30 days of learning of any such
fact so notify the members of the applicable Management Investor Group that it
is not obligated to purchase such shares and has deferred its right and/or
obligation to make such purchase until such violation, Financing Default or
unavailability of funds would not result therefrom or be in existence. If, in a
purchase pursuant to Section 4.1, the Company gives such a notice the members
of the applicable Management Investor Group shall have ten (10) days thereafter
to rescind their election to sell the shares to be purchased (the "Purchased
Shares") or to reduce the number of shares to be purchased to the maximum
number of shares which the Company is able to purchase without such violation,
Financing Default or unavailability of funds occurring, subject to any minimum
number thereof being specified by the members of the Management Investor Group.
The Company agrees to use all commercially reasonable efforts to cure any such
Financing Default which is curable.
(b) Anything to the contrary contained in Section 4 hereof
notwithstanding, any shares of Common Stock which a member of a Management
Investor Group has elected to sell to the Company or which the Company has
elected to purchase from members of the
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Management Investor Group, but which in accordance with Section 5.1(a) hereof
are not purchased at the applicable time provided in Section 4 hereof, shall be
purchased by the Company on the tenth business day after such date or dates
that (after taking into account any purchases to be made at such time pursuant
to stock purchase, subscription or other agreements with other investors and
any other agreements or instruments to which any of the Company and its
Subsidiaries is a party or by which any of them is bound on a pro rata basis
therewith (subject to any binding obligation to do otherwise pursuant to any
such agreement or instrument)) it is no longer permitted to defer purchasing
such shares under Section 5.1(a) hereof, and the Company shall give the
Management Investor Group five (5) business days prior notice of any such
purchase.
5.2 Payment for Common Stock. If at any time the Company
elects or is required to purchase any shares of Common Stock pursuant to
Section 4 hereof, the Company shall pay the purchase price for the shares of
Common Stock it purchases (i) by the cancellation of any indebtedness, if any,
owing from the Management Investor to the Company or any of its Subsidiaries
and (ii) then, by the Company's delivery of a bank cashier's check or certified
check for the remainder of the purchase price, if any, against delivery of the
certificates or other instruments representing the Common Stock so purchased,
duly endorsed; provided that if a Financing Default exists or, after giving
effect to such payment (including any dividend or other distribution or loan
from a Subsidiary of the Company to the Company in connection therewith), would
exist which prohibits such cash payment, or if the Company does not have
available funds to make such payment, the portion of the cash payment so
prohibited or unavailable shall be made by the Company's delivery of a junior
subordinated promissory note (which shall be subordinated and subject in right
of payment to the prior payment of all indebtedness of the Company and its
Subsidiaries) of the Company or any of its Subsidiaries (a "Junior Subordinated
Note") in a principal amount equal to the amount of the purchase price which
cannot be paid in cash, payable on the third anniversary of the issuance
thereof and bearing interest payable annually at the publicly announced prime
rate of Bankers Trust Company on the date of issuance; and provided further
that in the case of a purchase pursuant to Section 4.2(a)(iv) the Company may
in any event elect to deliver a Junior Subordinated Note in a principal amount
equal to all or a portion of the cash purchase price (in lieu of paying such
portion of the purchase price in cash). If, in a purchase pursuant to Section
4.1, the Company will pay all or any portion of the purchase price for
purchased shares with a Junior Subordinated Note, the Company shall give the
members of the applicable Management Investor Group notice of the amount of
such note at least 20 days prior to such purchase, and the members of the
applicable Management Investor Group shall have ten days thereafter to rescind
their election to sell such shares. The Company shall have the right set forth
in clause (i) of the first sentence of this Section 5.2(a) whether or not the
member of the Management Investor Group selling such shares is an obligor of
the Company. If the Management Investor Group elects pursuant to the second
preceding sentence to rescind its election to sell such shares, the Management
Investor Group may exercise its right pursuant to Section 4.1 to require the
Company to purchase such shares for a period of ten business days after
receiving notice that the Company is not required to pay any portion of the
purchase price with a Junior Subordinated Note.
SECTION 6. REGISTRATION RIGHTS
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6.1 Incidental Registration. The parties hereto agree that
the Management Investors and their Permitted Transferees shall have all of the
rights and obligations of a "Holder" under the Registration Rights Agreement
(other than those set forth in Section 2 thereof) and that any shares of Common
Stock owned by the Management Investors and their Permitted Transferees shall
constitute "Registrable Securities" under the Registration Rights Agreement
(other than for purposes of Section 2 thereof).
SECTION 7. INVESTMENT REPRESENTATIONS AND COVENANTS
7.1 Investment Intention; No Resales. Each Management
Investor hereby represents and warrants that he is acquiring the BMP Stock for
investment solely for his own account and not with a view to, or for resale in
connection with, the distribution or other disposition thereof.
7.2 BMP Stock Unregistered. Each Management Investor
acknowledges and represents that it has been advised by the Company that:
(a) the offer and sale of the BMP Stock have not been
registered under the Securities Act;
(b) the BMP Stock must be held indefinitely and the
Management Investor must continue to bear the economic risk of the investment
in the BMP Stock unless the offer and sale of such BMP Stock is subsequently
registered under the Securities Act and all applicable state securities laws or
an exemption from such registration is available;
(c) there is no established market for the BMP Stock and it
is not anticipated that there will be any public market for the BMP Stock in
the foreseeable future;
(d) Rule 144 promulgated under the Securities Act is not
presently available with respect to the sale of any securities of the Company,
and, except as set forth herein, the Company has made no covenant to make such
Rule available;
(e) when and if shares of the BMP Stock may be disposed of
without registration under the Securities Act in reliance on Rule 144, such
disposition can be made only in limited amounts in accordance with the terms
and conditions of such Rule;
(f) if the Rule 144 exemption is not available, public offer
or sale of BMP Stock without registration will require compliance with some
other exemption under the Securities Act;
(g) if any of the shares of BMP Stock are at any time
disposed of in accordance with Rule 144, the Management Investor will deliver
to the Company at or prior to the time of such disposition an executed Form 144
(if required by Rule 144) and such other documentation as the Company may
reasonably require in connection with such sale;
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(h) a restrictive legend in the form heretofore set forth
herein shall be placed on the certificates representing the BMP Stock; and
(i) a notation shall be made in the appropriate records of
the Company indicating that the BMP Stock is subject to restrictions on
transfer and, if the Company should at some time in the future engage the
services of a securities transfer agent, appropriate stop-transfer instructions
will be issued to such transfer agent with respect to the BMP Stock.
7.3 Additional Investment Representations. Each Management
Investor represents and warrants that:
(a) the Management Investor's financial situation is such
that he can afford to bear the economic risk of holding the BMP Stock for an
indefinite period of time, has adequate means for providing for his current
needs and personal contingencies, and can afford to suffer a complete loss of
his investment in the BMP Stock;
(b) the Management Investor's knowledge and experience in
financial and business matters are such that he is capable of evaluating the
merits and risks of the investment in the BMP Stock;
(c) the Management Investor understands that the BMP Stock is
a speculative investment which involves a high degree of risk of loss of his
investment therein, there are substantial restrictions on the transferability
of the BMP Stock, and, on the Closing Date and for an indefinite period
following the Closing, there will be no public market for the BMP Stock and,
accordingly, it may not be possible for the Management Investor to liquidate
his investment in case of emergency, if at all;
(d) the Management Investor understands and has taken
cognizance of all the risk factors related to the purchase of the BMP Stock,
and no representations or warranties have been made to the Management Investor
or his representatives concerning the BMP Stock or the Company or any of its
Subsidiaries or their prospects or other matters;
(e) in making his decision to purchase the BMP Stock hereby,
the Management Investor has relied upon independent investigations made by him
and, to the extent believed by the Management Investor to be appropriate, his
representatives, including his own professional, financial, tax and other
advisors; and
(f) the Management Investor has been given the opportunity to
examine all documents and to ask questions of, and to receive answers from, the
Company and its Subsidiaries and their representatives concerning the Company
and its Subsidiaries, the transactions contemplated by the Recapitalization
Agreement and the terms and conditions of the purchase of the BMP Stock and to
obtain any additional information which the Management Investor deems
necessary.
-14-
<PAGE>
SECTION 8. MISCELLANEOUS
8.1 Additional Securities Subject to Agreement. Each
Stockholder agrees that any other Securities which it shall hereafter acquire
by means of the IPO Reorganization or a stock split, stock dividend,
distribution, exercise of stock options, or otherwise shall be subject to the
provisions of this Agreement to the same extent as if held on the date hereof.
8.2 Termination. This Agreement shall terminate, and thereby
become null and void, as to any particular Securities, on the date on which
they are sold in a Public Offering or are sold pursuant to Rule 144 under the
Securities Act (unless such Securities are reacquired by a Stockholder).
8.3 Injunctive Relief. The Stockholders and their Permitted
Transferees acknowledge and agree that a violation of any of the terms of this
Agreement will cause the Stockholders and their Permitted Transferees
irreparable injury for which adequate remedy at law is not available.
Accordingly, it is agreed that each Stockholder and Permitted Transferee shall
be entitled to an injunction, restraining order or other equitable relief to
prevent breaches of the provisions of this Agreement and to enforce
specifically the terms and provisions hereof in any court of competent
jurisdiction in the United States or any state thereof, in addition to any
other remedy to which they may be entitled at law or equity.
8.4 Amendments. This Agreement may be amended only by a
written instrument signed by (a) the Company and (b) Stockholders which own on
a fully diluted basis Securities representing at least a majority of the voting
power represented by all Securities outstanding on a fully diluted basis and
owned by all Stockholders; provided, however, that this Agreement shall not be
amended in a manner that adversely affects the Management Investors and their
Permitted Transferees without the prior written consent of holders of a
majority of the Common Stock then beneficially owned by the Management
Investors.
8.5 Successors, Assigns and Transferees. The provisions of
this Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their Permitted Transferees and their respective successors,
each of which Permitted Transferees shall agree, in a writing in form and
substance satisfactory to the Company, to become a party hereto and be bound to
the same extent as its transferor hereby, provided that no Stockholder may
assign to any Permitted Transferee any of its rights hereunder other than in
connection with a Transfer to such Permitted Transferee of Securities in
accordance with the provisions of this Agreement.
8.6 Notices. All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing (including by
telecopy), and, unless otherwise expressly provided herein, shall be deemed to
have been duly given or made when delivered by hand, or when delivered by a
recognized courier or, in the case of telecopy notice, when received, addressed
as follows to the parties hereto, or to such other address as may be hereafter
notified by the respective parties hereto:
-15-
<PAGE>
if to the Company:
c/o Graham Packaging Company
1110 East Princess Street
York, Pennsylvania 17403
Attention: Philip R. Yates
Telecopy: (717) 849-8575
with copies to:
The Blackstone Group L.P.
345 Park Avenue
31st Floor
New York, New York 10154
Attention: Howard A. Lipson
Telecopy: (212) 754-8703
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: Wilson S. Neely, Esq.
Telecopy: (212) 455-2502
if to Blackstone:
The Blackstone Group L.P.
345 Park Avenue
31st Floor
New York, New York 10154
Attention: Howard A. Lipson
Telecopy: (212) 754-8703
with copies to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: Wilson S. Neely, Esq.
Telecopy: (212) 455-2502
if to a Management Investor, to him
at his address or telecopy number set
forth in the books and records of the Company.
8.7 Integration. This Agreement and the documents
referred to herein or delivered pursuant hereto contain the entire understanding
of the parties with respect to the
-16-
<PAGE>
subject matter hereof and thereof. There are no agreements, representations,
warranties, covenants or undertakings with respect to the subject matter hereof
and thereof other than those expressly set forth herein and therein.
8.8 Severability. If one or more of the provisions,
paragraphs, words, clauses, phrases or sentences contained herein, or the
application thereof in any circumstances, is held invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision, paragraph, word, clause, phrase or
sentence in every other respect and of the remaining provisions, paragraphs,
words, clauses, phrases or sentences hereof shall not be in any way impaired,
it being intended that all rights, powers and privileges of the parties hereto
shall be enforceable to the fullest extent permitted by law.
8.9 Counterparts. This Agreement may be executed in two or
more counterparts, and by different parties on separate counterparts each of
which shall be deemed an original, but all of which shall constitute one and
the same instrument.
8.10 Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of New York
without regard to the conflicts of law principles thereof, except for matters
directly within the purview of the General Corporation Law of the State of
Delaware (the "DGCL"), which shall be governed by the DGCL.
8.11 Jurisdiction. Any action to enforce, which arises out of
or in any way relates to, any of the provisions of this Agreement may be
brought and prosecuted in such court or courts located within the State of New
York or the Commonwealth of Pennsylvania as provided by law; and the parties
consent to the jurisdiction of such court or courts located within the State of
New York or the Commonwealth of Pennsylvania and to service of process by
registered mail, return receipt requested, or by any other manner provided by
the law of such applicable jurisdiction.
8.12 Additional Management Investors. Any employee or
director of the Company or any of its Subsidiaries who becomes party to a stock
subscription agreement or option agreement after the date hereof may become a
party hereto and may become bound hereby by entering into a supplementary
agreement with the Company agreeing to be bound by the terms hereof (or only
specific sections hereof) in the same manner as the other Management Investors.
Each such supplementary agreement shall become effective upon its execution by
the Company and such employee or director, and it shall not require the
signature or consent of any other party hereto. Such supplementary agreement
may modify some of the terms hereof as they effect such employee or director.
-17-
<PAGE>
IN WITNESS WHEREOF, each of the undersigned has executed this
Agreement or caused this Agreement to be executed on its behalf as of the date
first written above.
BLACKSTONE CAPITAL PARTNERS III
MERCHANT BANKING FUND L.P.
By: Blackstone Management Associates III LLC,
its General Partner
By: /s/ Howard A. Lipson
` -------------------------------------------
Name: Howard A. Lipson
Title: Member
BLACKSTONE OFFSHORE CAPITAL PARTNERS
III L.P.
By: Blackstone Management Associates III LLC,
its General Partner
By: /s/ Howard A. Lipson
--------------------------------------
Name: Howard A. Lipson
Title: Member
BLACKSTONE FAMILY INVESTMENT
PARTNERSHIP III L.P.
By: Blackstone Management Associates III LLC,
its General Partner
By: /s/ Howard A. Lipson
------------------------------------------
Name: Howard A. Lipson
Title: Member
-18-
<PAGE>
BMP/GRAHAM HOLDINGS CORPORATION
By: /s/ Simon Lonergan
--------------------------
Name: Simon Lonergan
Title: Vice President
GRAHAM PACKAGING HOLDINGS COMPANY
By: BCP/Graham Holdings LLC, a general partner
By: /s/ Simon Lonergan
--------------------------
Name: Simon Lonergan
Title: Vice President
GPC CAPITAL CORP. II
By: /s/ Simon Lonergan
--------------------------
Name: Simon Lonergan
Title: Vice President
-19-
<PAGE>
[SIGNATURE PAGE TO MANAGEMENT STOCKHOLDERS' AGREEMENT]
MANAGEMENT INVESTOR:
----------------------------------
Name: Philip R. Yates
BMP Shares: 212.63
-20-
<PAGE>
[SIGNATURE PAGE TO MANAGEMENT STOCKHOLDERS' AGREEMENT]
MANAGEMENT INVESTOR:
-----------------------------------
Name: Roger Prevot
BMP Shares: 106.31
-21-
<PAGE>
[SIGNATURE PAGE TO MANAGEMENT STOCKHOLDERS' AGREEMENT]
MANAGEMENT INVESTOR:
------------------------------------
Name: G. Robinson Beeson
BMP Shares: 59.07
-22-
<PAGE>
[SIGNATURE PAGE TO MANAGEMENT STOCKHOLDERS' AGREEMENT]
MANAGEMENT INVESTOR:
-------------------------------------
Name: Scott Booth
BMP Shares: 59.07
-23-
<PAGE>
[SIGNATURE PAGE TO MANAGEMENT STOCKHOLDERS' AGREEMENT]
MANAGEMENT INVESTOR:
--------------------------------------
Name: John Hamilton
BMP Shares: 37.84
-24-
<PAGE>
[SIGNATURE PAGE TO MANAGEMENT STOCKHOLDERS' AGREEMENT]
MANAGEMENT INVESTOR:
--------------------------------------
Name: Alex Everhart
BMP Shares: 37.84
-25-
<PAGE>
[SIGNATURE PAGE TO MANAGEMENT STOCKHOLDERS' AGREEMENT]
MANAGEMENT INVESTOR:
--------------------------------------
Name: Geoffrey Lu
BMP Shares: 21.28
-26-
<PAGE>
[SIGNATURE PAGE TO MANAGEMENT STOCKHOLDERS' AGREEMENT]
MANAGEMENT INVESTOR:
--------------------------------------
Name: Albert P.M. Seguin
BMP Shares: 10.67
-27-
<PAGE>
[SIGNATURE PAGE TO MANAGEMENT STOCKHOLDERS' AGREEMENT]
MANAGEMENT INVESTOR:
---------------------------------------
Name: George Lane
BMP Shares: 12.76
-28-
<PAGE>
[SIGNATURE PAGE TO MANAGEMENT STOCKHOLDERS' AGREEMENT]
MANAGEMENT INVESTOR:
----------------------------------------
Name: Ashok Sudan
BMP Shares: 11.71
-29-
<PAGE>
[SIGNATURE PAGE TO MANAGEMENT STOCKHOLDERS' AGREEMENT]
MANAGEMENT INVESTOR:
---------------------------------------
Name: William Mertens
BMP Shares: 10.23
-30-
<PAGE>
[SIGNATURE PAGE TO MANAGEMENT STOCKHOLDERS' AGREEMENT]
MANAGEMENT INVESTOR:
---------------------------------------
Name: David Cargill
BMP Shares: 10.23
-31-
<PAGE>
[SIGNATURE PAGE TO MANAGEMENT STOCKHOLDERS' AGREEMENT]
MANAGEMENT INVESTOR:
---------------------------------------
Name: Robert Cochran
BMP Shares: 10.01
-32-
<PAGE>
[SIGNATURE PAGE TO MANAGEMENT STOCKHOLDERS' AGREEMENT]
MANAGEMENT INVESTOR:
---------------------------------------
Name: George Stevens
BMP Shares: 10.72
-33-
<PAGE>
EXHIBIT 10.9
EQUITY INCENTIVE AGREEMENT
This Equity Incentive Agreement ('Agreement') is dated ,
199 , and is between ('Executive') and Graham Packaging
Company, a Pennsylvania limited partnership ('Graham').
Executive and Graham, intending to be legally bound hereby and in
consideration of the provisions contained herein, agree that upon a Change in
Control (as defined below) Graham shall make an incentive payment (as described
below) to Executives and shall grant Executive a restricted equity award (as
described below) (provided that Executive makes a Section 83(b) election--as
described below--upon such grant), as follows:
1. Equity Incentive Benefit. Upon a Change in Control (as defined in
Paragraph 4), Graham or its successor shall provide Executive with an equity
Incentive benefit in the aggregate amount of $ . Executive's equity
incentive benefit shall be paid in accordance with Paragraphs 2 and 3.
2. Incentive Payment. Upon a Change in Control, Graham or its successor
shall make one payment to Executive of $ (representing 45 percent of
Executive's equity incentive benefit). Graham shall reduce the dollar amount
payable to Executive by applicable tax withholding, both with respect to the
provisions of this Paragraph and Paragraph 3. The single-sum payment shall be
made within 30 days after the date of the Change in Control.
3. Restricted Equity Away. Upon a Change in Control, Graham, or its
successors or affiliates, shall grant to Executive a restricted equity award
(the 'Award') for an aggregate of shares of common stock of
BMP/Graham Holdings Corporation ('BMP/Holdings') ('Common Stock') and/or award
cash to be used concurrently by Executive only to purchase Common Stock (such
Common Stock and/or cash representing 55 percent of Executive's equity incentive
benefit); provided that Executive makes a Section 83(b) Election (as defined in
subparagraph (f) below) upon such grant. The Award shall be granted as of the
date of the Change in Control.
(a) Vesting. Executive shall become vested in the shares of Common Stock
subject to the Award as follows:
o 1/3 of the shares on the first anniversary of the Change in Control;
o 1/3 of the shares on the second anniversary of the Change in Control; and
o 1/3 of the shares on the third anniversary of the Change in Control.
Notwithstanding the preceding vesting schedule, Executive shall become vested in
all of the shares of Common Stock subject to the Award upon either (i) the
initial public offering of equity securities of Graham or any of its
subsidiaries under the Securities Act of 1933, as amended, or (ii) a sale of a
controlling interest in Graham.
(b) Termination of Employment. If Executive experiences Qualifying
Termination Event (as defined in Paragraph 5) offer the Change in Control,
Executive shall become 100 percent vested in all shares of Common Stock subject
to the Award. If Executive's termination of employment is not considered a
Qualifying Termination Event, all of Executive's unvested shares of Common Stock
shall be forfeited.
(c) Stock Certificate. Certificates for Common Stock subject to the Award
shall be registered in Executive's name (or, if Executive so requests, in the
name of Executive and Executive's spouse, jointly with right of survivorship)
and shall be delivered to Executive as soon as practicable With respect to
shares in which Executive is not vested on the date of the Award, Executive
shall, immediately upon receipt thereof, deposit all certificates for such
unvested Common Stock together with a stock power executed in favor of Graham,
with Graham. Certificates for such unvested Common Stock shall be held by
(graham until Executive becomes vested in such Common Stock. The certificates
may include a legend setting forth restrictions on transfer.
(d) Dividends: Rights as Shareholder in Unvested Common Stock. Executive
shall be entitled to receive dividends on unvested Common Stock subject to the
Award (if any), shall have the right to vote such unvested Common Stock and
shall have all other shareholder's rights in such unvested Common Stock, with
the exception that (i) Executive shall not be entitled to delivery of the stock
certificates until he becomes vested in the Common
<PAGE>
Stock, (ii) Graham shall retain custody of the certificates representing the
unvested Common Stock until Executive becomes vested in such Common Stock, at
which time such certificates shall be delivered to Executive, and (iii)
Executive's rights to such unvested Common Stock shall be forfeited upon
Executive's termination of employment with Graham, if such termination is not
considered a Qualifying Termination Event.
(e) Transferability. Executive may not assign or transfer, in whole or in
part, Common Stock subject to the Award in which Executive is not vested, other
than by will or by the laws of descent and distribution. Executive may not
assign or transfer, in whole or in part, Common Stock subject to the Award in
which Executive is vested other than pursuant to the terms of any shareholders'
agreement to which such Common Stock is subject, and the Certificate(s)
representing such shares of Common Stock shall bear a legend to the effect that
Executive's rights as a shareholder are subject to any such shareholders'
agreement.
(f) Section 83(b) Election. As a condition of Executive's Award, Executive
must make an election under section 83(b) of the Internal Revenue Code of 1986,
as amended, to include in gross income in the year of grant the fair market
value of all shares of Common Stock granted under the Award ('Section 83(b)
Election').
4. Change in Control. A Change in Control shall be deemed to have occurred
when the beneficial ownership of 50 percent or more of the GP(LP) Group, or when
50 percent or more of the GP(LP) Group's business and assets, is sold or
otherwise transferred to any person(s) other than (i) Donald C. Graham or his
descendants (natural and adopted) or their spouses or (ii) a business entity
controlled by Donald C. Graham.
For purposes of this Agreement, the term 'GP(LP) Group' shall mean, in the
aggregate, Graham and any of its subsidiaries, including those whose principal
offices are located in North, Central, and South America, Europe, and Asia. The
term 'GP(LP) Group,' as of the date of this Agreement, consists of Graham,
Graham Packaging Canada Limited, Graham Packaging Poland, L.P., Masko Graham
Spolka, z.o.o., Graham Packaging Holdings I, Graham Recycling Company, Graham
Packaging France Partners, Graham Packaging France Holding, S.A., Graham
Packaging France, S.A., Graham Packaging Italy, Srl, SIP, Srl, Lido
Plast-Graham, Graham Packaging Latin America, LLC, Graham Brasil Paricipacoes
Ltda., and Graham Packaging do Brasil, S.A.
5. Qualifying Termination Event
(a) A Qualifying Termination Event shall be deemed to have occurred if,
during the three-year period after the date of a Change in Control, Executive
ceases to be employed by Graham or its successor (referred to jointly as
'Graham') for any of the following reasons:
(1) Executive's death, retirement at or after age 65, or total
disability (entitling him to benefits under Graham's long-term disability
plan);
(2) Except as provided in (b) below, Graham terminates Executive's
employment; or
(3) After Executive gives Graham written notice of one or more of the
following events and Graham fails to cure the event(s) during the 30-day
period following Graham's receipt of such notice, Executive terminates his
employment with Graham as a result of any of the following events:
(i) Executive's position is materially and adversely changed
(without his consent) from his position as of the Change in Control;
(ii) Executive is assigned duties and responsibilities (without his
consent) that are inconsistent in a material respect with the scope of
duties and responsibilities associated with his position as of the
Change in Control;
(iii) Executive is directly requested by the person to whom the
Executive directly reports to commit an unethical, dishonest, or illegal
act of a material nature, knowing that such act is unethical, dishonest,
or illegal (provided that whether the act cited by Executive is in fact
unethical or dishonest shall be determined by the Chief Executive
Officer of Graham in his sole discretion);
(iv) Executive's annual salary rate as in effect on the day before
the Change in Control is reduced; or
2
<PAGE>
(v) Graham requires Executive to be based at an office which is
more than 50 miles further from Executive's residence than Executive's
office on the day before the Change in Control (other than travel
reasonably required in the performance of Executive's responsibilities)
(b) Notwithstanding (a) above, Executive's termination of employment will
not be considered a Qualifying Termination Event for purposes of this Agreement
if one of the following applies:
(1) Executive's employment with Graham is involuntarily terminated due
to Executive's continuing refusal to perform his duties or to follow a
lawful direction of Graham, provided the performance of such duties or the
following of such lawful direction would not result in an event described
in (a)13(iii) or (ii) above;
(2) Executive's employment with Graham is involuntarily terminated due
to Executive's intentional act or acts of dishonesty which Executive
intended to result in his personal, more-than-immaterial enrichment;
(3) Prior to the occurrence of an event described in (a)(3)(i) through
(v) above, Executive's employment with Graham is involuntarily terminated
due to Executive's documented willful malfeasance or willful misconduct in
connection with his employment or Executive's willful and deliberate
insubordination;
(4) Executive's employment with Graham is involuntarily terminated
because Executive is convicted of a felony;
(5) Executive's employment with Graham is terminated, but during the
seven calendar days after such termination, Executive is offered (and
declines) employment by the buyer of the entire business for substantially
all of the business) of Graham, on substantially the same terms (including
this Agreement) as Executive's employment on the day before such
termination; or
(6) Any other voluntary termination not described in (a) above.
6. Noncompetition and Disclosure Requirements.
(a) Noncompetition. Executive covenants that he will not (i) directly or
indirectly own, manage, operate, control, advise, participate in, become
proprietor, partner, director, officer, or employee of, provicie services to, or
become financially interested in, any business (other than solely by virtue of
the ownership of less than five percent of any class of publicly traded
securities) competitive with the business of Graham or any of its affiliates the
'Companies') as of the date this Agreement is executed, or (ii) engage or
participate in any effort or act to induce any of the customers or employees of
Graham to take any action which might be disadvantageous to the Companies.
(b) Nondisclosure. Executive covenants that he will not (other then in the
good faith performance of his services to Graham before Executive's termination
of employment) disclose or make known to anyone other than employees of the
Companies, or uses for the benefit of himself or any other person, firm,
operation, or entity unrelated to the Companies, any knowledge, information, or
materials, whether tangible or intangible, belonging to the Companies. about
their products, services, know-how, customers, business plans, or financial,
marketing, pricing, compensation, and other proprietary matters relating to the
Companies on or before Executive's termination of employment with Graham,
Executive shall promptly deliver to Graham or to any affiliate designated by
Graham any and all tangible, confidential information in his possession.
(c) Remedies for Breach. If Executive breaches the covenant set forth in
(a) above and/or the covenant set forth in (b) above, Executive's employment
with Graham and/or Graham's obligation to make the payment and vest the Common
Stock described herein shall terminate at Graham's option. In addition,
Executive expressly acknowledges that damages alone will be an inadequate remedy
for any breach or violation of (a) and/or (b) above and that Graham, in addition
to all other remedies, shall be entitled as a matter of right to equitable
relief, including injunctions and specific performance, in any court of
competent jurisdiction. If any of the provisions of (a) or (b) above are held to
be in any respect unenforceable, then they shall be deemed to extend only over
three maximum period of time, geographic area, or range of activities as to
which they may be enforceable against Executive.
3
<PAGE>
7. Beneficiary. If Executive dies before the amount due under the
provisions of Paragraph 2 of this Agreement have been paid, such unpaid amount
shall be paid in a single sum within 90 days of his death to his surviving
spouse or, it she does not survive him, to his estate.
8. Confidentiality. The terms of this Agreement are confidential.
Executive shall not disclose in any way this Agreement or any of its terms to
any person other than his spouse; his legal counsel, accountant, financial
adviser, or superior to whom he directly reports; William H. Kerlin, Jr.; or
Donald C. Graham or a member of Donald C. Graham's family.
9. Governing Law. This Agreement is made and entered into in the
Commonwealth of Pennsylvania, and at all times and for all purposes shall be
interpreted, enforced, and governed under its laws.
10. Entire Agreement Amendment. This Agreement contains the they're
agreement between Executive and Graham as to the payment and Award ascribed
herein. Any amendment to this Agreement must be in writing, must be speed by
both Graham and Executive, and must be consented to in writing by the 'Graham
Partners,' as such term is defined in the Agreement and Plan of
Rccepitalization, Redemption and Purchase entered into by and among Graham et
al, as of December 18, 1997.
11. Successor Employer. In the event of the dissolution, merger,
consolidation, or reorganization of Graham, or the sale of the entire (or
substantially all of the) business of Graham, this Agreement shall be continued
by Graham's successor. The successor shall assume all liabilities under this
Agreement and shall have the provers, duties, and responsibilities of Graham
under this Agreement.
12. Termination of Agreement. This Agreement shall terminate unless the
transactions contemplated by the Agreement and Plan of Recapitalization and
Redemption described in Paragraph 10 are consummated.
IN WITNESS WHEREOF, the persons named below have signed this Equity
Incentive Agreement as of the date first set forth above.
<TABLE>
<S> <C>
ATTEST: GRAHAM PACKAGING COMPANY
By
WITNESS EXECUTIVE
</TABLE>
4
<PAGE>
EXHIBIT 10.10
================================================================================
STOCKHOLDERS' AGREEMENT
dated as of February 2, 1998
among
BLACKSTONE CAPITAL PARTNERS III MERCHANT BANKING FUND L.P.,
BLACKSTONE OFFSHORE CAPITAL PARTNERS III L.P.,
BLACKSTONE FAMILY INVESTMENT PARTNERSHIP III L.P.,
BMP/GRAHAM HOLDINGS CORPORATION,
GRAHAM PACKAGING HOLDINGS COMPANY,
GPC CAPITAL CORP. II
and
BT INVESTMENT PARTNERS, INC.
================================================================================
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
SECTION 1. DEFINITIONS........................................ 1
1.1 Defined Terms...................................... 1
1.2 Other Definitional Provisions; Interpretation...... 3
SECTION 2. PURCHASE OF BMP STOCK.............................. 4
2.1 Purchase of BMP Stock.............................. 4
2.2 The Closing........................................ 4
SECTION 3. TRANSFERS AND ISSUANCES............................ 4
3.1 Limitations on Transfer............................ 4
3.2 Certain Permitted Transfers........................ 4
3.3 Effect of Void Transfers........................... 4
3.4 Legend on Securities............................... 5
3.5 Tag-Along Rights................................... 5
3.6 Public Offerings, etc.............................. 6
3.7 Drag-Along Rights.................................. 6
SECTION 4. REGISTRATION RIGHTS................................ 6
4.1 Incidental Registration............................ 6
SECTION 5. VOTING AGREEMENTS.................................. 7
5.1 Election of Directors.............................. 7
5.2 Other Voting Matters............................... 7
SECTION 6. REPRESENTATIONS AND WARRANTIES..................... 7
6.1 Representations and Warranties of BMP.............. 7
6.2 Representations and Warranties of the BT Investor.. 8
6.3 Certain Agreements................................. 9
SECTION 7. MISCELLANEOUS...................................... 9
7.1 Additional Securities Subject to Agreement......... 9
7.2 Termination........................................ 9
7.3 Injunctive Relief.................................. 9
7.4 Amendments.......................................... 9
7.5 Successors, Assigns and Transferees..................9
7.6 Notices............................................ 10
7.7 Integration........................................ 11
7.8 Severability....................................... 11
7.9 Counterparts....................................... 11
7.10 Governing Law...................................... 11
7.11 Jurisdiction....................................... 11
7.12 No Recourse........................................ 11
-i-
<PAGE>
STOCKHOLDERS' AGREEMENT, dated as of February 2, 1998, among Blackstone
Capital Partners III Merchant Banking Fund L.P., a Delaware limited partnership,
Blackstone Offshore Capital Partners III L.P., a Cayman Islands exempted limited
partnership, and Blackstone Family Investment Partnership III L.P., a Delaware
limited partnership (collectively, "Blackstone"), BMP/Graham Holdings
Corporation, a Delaware corporation ("BMP"), Graham Packaging Holdings Company,
a Pennsylvania limited partnership ("Holdings"), GPC Capital Corp. II, a
Delaware corporation ("CapCo. II"), and BT Investment Partners, Inc. (the "BT
Investor").
W I T N E S S E T H :
WHEREAS, on the date hereof, Blackstone owns 20,825 shares of common
stock, par value $.01 per share (the "BMP Stock"), of BMP, which are all of the
outstanding shares of BMP Stock;
WHEREAS, pursuant to the transactions contemplated by the
Recapitalization Agreement (as defined below), BMP holds indirectly a 4% general
partnership interest and directly an 81% limited partnership interest in
Holdings;
WHEREAS, CapCo. II is a wholly owned subsidiary of Holdings;
WHEREAS, on the terms and subject to the conditions hereof, the BT
Investor desires to purchase from Blackstone, and Blackstone desires to sell to
the BT Investor, 1,000 shares of BMP Stock (which represents approximately 4.8%
of the shares of BMP Stock outstanding on the date hereof), as hereinafter set
forth;
WHEREAS, the parties hereto wish to enter into certain agreements with
respect to the holdings by Blackstone and the BT Investor and its Permitted
Transferees of stock of the Company (as defined below); and
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties hereto agree as follows:
SECTION 1. DEFINITIONS
1.1 Defined Terms. As used in this Agreement, terms defined in the
headings and the recitals shall have their respective assigned meanings, and the
following capitalized terms shall have the meanings ascribed to them below:
"Affiliate" means, with respect to any Person, (i) any Person that
directly or indirectly controls, is controlled by or is under common control
with, such Person, or (ii) any director, officer, partner or employee of such
Person or any Person specified in clause (i) above, or (iii) any spouse, parent,
child or sibling of any Person specified in clause (i) or (ii) above.
<PAGE>
"Agreement" means this Stockholders' Agreement, as the same may be
amended, supplemented or otherwise modified from time to time.
"Business Day" means a day other than a Saturday, Sunday, holiday or
other day on which commercial banks in New York City or the State of
Pennsylvania are authorized or required by law to close.
"Closing Date" means the date of the closing under this Agreement.
"Common Stock" means the common stock, par value $.01 per share, of the
Company.
"Common Stock Equivalents" means any stock, warrants, rights, calls,
options or other securities exchangeable or exercisable for or convertible into
Common Stock.
"Company" means (i) prior to the initial Public Offering, BMP and (ii)
in connection with or after the initial Public Offering, CapCo. II.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder, as the same may be amended
from time to time.
"IPO Reorganization" means, collectively, (i) the transfer of all or
substantially all of Holdings' assets and liabilities to CapCo. II upon an
initial Public Offering, (ii) the dissolution or liquidation of BMP, BCP/Graham
Holdings LLC and Holdings (and the distribution to the equity holders of each
such entity all of the assets of such entity on a pro rata basis) and (iii) all
transactions necessary or incidental thereto.
"NASD" means the National Association of Securities Dealers, Inc.
"NASDAQ" means the National Association of Securities Dealers Automated
Quotation System.
"Permitted Transferee" means any Person to whom Blackstone or the BT
Investor (or any direct or indirect Permitted Transferee thereof) transfers
Securities in accordance with the terms of this Agreement (other than pursuant
to a Public Offering or pursuant to Rule 144 under the Securities Act) and who
becomes a party to, and is bound to the same extent as its transferor by the
terms of, this Agreement.
"Person" means any individual, corporation, partnership, trust, joint
stock company, business trust, unincorporated association, joint venture,
governmental authority or other entity of any nature whatsoever.
"Public Offering" means the sale of Common Stock to the public in a
firm commitment underwritten public offering pursuant to an effective
registration statement (other than a registration statement on Form S-4, S-8 or
similar form) filed under the Securities Act, which results in an active trading
market in such Common Stock (it being understood that
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such an active trading market shall be deemed to exist if, among other things,
such Common Stock are listed on a national securities exchange or on NASDAQ).
"Recapitalization Agreement" means the Agreement and Plan of
Recapitalization, Redemption and Purchase dated as of December 18, 1997 by and
among Holdings, Donald C. Graham and certain of his Affiliates, BCP/Graham
Holdings LLC and BMP, as the same may be amended, supplemented or otherwise
modified from time to time.
"Registration Rights Agreement" means the Registration Rights Agreement
dated as of February 2, 1998 among Holdings, CapCo. II, Blackstone, Graham
Capital Corporation and Graham Family Growth Partnership and attached as Exhibit
A hereto, as the same may be amended, supplemented or otherwise modified from
time to time.
"Securities" means shares of Common Stock or Common Stock Equivalents,
whether owned on the date hereof or hereafter acquired.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder, as the same may be amended from
time to time.
"Stockholders" means Blackstone and the BT Investor and its respective
Permitted Transferees.
"Third Party" means any Person other than the Company, the Stockholders
and their Affiliates.
"Transfer" means any transfer, sale, assignment, distribution,
exchange, mortgage, pledge, hypothecation or other disposition of any Securities
or any interest therein.
1.2 Other Definitional Provisions; Interpretation. (a) The words
"hereof", "herein", and "hereunder" and words of similar import when used in
this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement, and Section, Subsection, Schedule and
Exhibit references are to this Agreement unless otherwise specified.
(b) The headings in this Agreement are included for convenience of
reference only and shall not limit or otherwise affect the meaning or
interpretation of this Agreement.
(c) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
(d) For purposes of comparing the beneficial ownership of any Person on
the date of execution and delivery of this Agreement to the level of such
ownership at any later time, the level of ownership on such later date shall be
adjusted to eliminate the effect of any subdivision of the Common Stock, any
combination of the Common Stock, any issuance of Common Stock or Common Stock
Equivalents by reason of any reorganization or reclassification (including,
without limitation, the IPO Reorganization and any reclassification
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in connection with a merger or consolidation), or any dividend payable in Common
Stock or Common Stock Equivalents.
SECTION 2. PURCHASE OF BMP STOCK
2.1 Purchase of BMP Stock. Pursuant to the terms and subject to the
conditions set forth in this Agreement, the BT Investor hereby agrees to
purchase, and Blackstone hereby agrees to sell to the BT Investor, on the
Closing Date 1,000 shares of BMP Stock at a price per share equal to $10,000.
2.2 The Closing. The closing (the "Closing") of the purchase of BMP
Stock hereunder shall take place on or as soon as practicable after the date
hereof at the offices of Simpson Thacher & Bartlett, 425 Lexington Avenue, New
York, New York. At the Closing, the BT Investor shall deliver to Blackstone
$10,000,000 by delivery of a certified check or by wire transfer in immediately
available funds.
SECTION 3. TRANSFERS AND ISSUANCES
3.1 Limitations on Transfer. (a) The BT Investor and its Permitted
Transferees hereby agrees that such Stockholder will not, directly or
indirectly, Transfer any Securities unless such Transfer complies with the
provisions hereof and (i) such Transfer is pursuant to an effective registration
statement under the Securities Act and has been registered under all applicable
state securities or "blue sky" laws or (ii) such Stockholder shall have
furnished the Company with a written opinion of counsel reasonably satisfactory
to the Company in form and substance reasonably satisfactory to the Company to
the effect that no such registration is required because of the availability of
an exemption from registration under the Securities Act and all applicable state
securities or "blue sky" laws.
(b) The BT Investor and its Permitted Transferees hereby agrees that,
except for Transfers in connection with a Public Offering, Transfers pursuant to
Section 3.5 or 3.7 hereof and Transfers pursuant to Rule 144 under the
Securities Act, no Transfer shall occur unless the transferee shall agree to
become a party to, and be bound to the same extent as its transferor by the
terms of, this Agreement in accordance with the provisions of Section 7.5
hereof.
(c) Each of the BT Investor and its Permitted Transferees hereby agrees
that, except as otherwise provided in Section 3.2 hereof, such Stockholder shall
not, without the prior written consent of Blackstone (which consent may be
withheld by Blackstone in its absolute discretion), effect a Transfer, except
for Transfers pursuant to Section 3.5, 3.7 or 4 hereof.
3.2 Certain Permitted Transfers. Notwithstanding any other provision of
this Agreement to the contrary, the BT Investor and its Permitted Transferees
shall be entitled from time to time to Transfer any or all of the Securities
beneficially owned by them to any Affiliate of the BT Investor or Permitted
Transferee (including any of its partners), provided
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that any such transferee agrees to become a party to, and be bound to the same
extent as its transferor by the terms of, this Agreement.
3.3 Effect of Void Transfers. In the event of any purported Transfer of
any Securities in violation of the provisions of this Agreement, such purported
Transfer shall be void and of no effect and the Company shall not give effect to
such Transfer.
3.4 Legend on Securities. Each certificate representing Securities
issued to the BT Investor or any of its Permitted Transferees shall bear the
following legend on the face thereof:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT
TO A STOCKHOLDERS' AGREEMENT AMONG THE ISSUER, BLACKSTONE
CAPITAL PARTNERS III MERCHANT BANKING FUND L.P., BLACKSTONE
OFFSHORE CAPITAL PARTNERS III L.P., AND BLACKSTONE FAMILY
INVESTMENT PARTNERSHIP L.P. AND BT INVESTMENT PARTNERS, INC.,
A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE ISSUER.
NO TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER
DISPOSITION OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
MAY BE MADE EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF SUCH
STOCKHOLDERS' AGREEMENT AND (A) PURSUANT TO A REGISTRATION
STATEMENT EFFECTIVE UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR (B) IF THE ISSUER HAS BEEN FURNISHED WITH AN
OPINION REASONABLY SATISFACTORY IN FORM AND SUBSTANCE TO THE
ISSUER OF COUNSEL REASONABLY SATISFACTORY TO THE ISSUER THAT
SUCH TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR
OTHER DISPOSITION IS EXEMPT FROM THE PROVISIONS OF SECTION 5
OF THE SECURITIES ACT OF 1933, AS AMENDED, AND THE RULES AND
REGULATIONS THEREUNDER. THE HOLDER OF THIS CERTIFICATE, BY
ACCEPTANCE OF THIS CERTIFICATE, AGREES TO BE BOUND BY ALL OF
THE PROVISIONS OF SUCH STOCKHOLDERS' AGREEMENT."
3.5 Tag-Along Rights. (a) So long as this Agreement shall remain in
effect, with respect to any proposed Transfer by Blackstone of Common Stock
(other than to an Affiliate of Blackstone, including any of its partners),
Blackstone shall have the obligation, and each other Stockholder shall have the
right, to require the proposed transferee to purchase from each Stockholder
having and exercising such right (each, including any Person having similar
rights pursuant to any other agreement, a "Tagging Stockholder") a number of
shares of Common Stock up to the product (rounded up to the nearest whole
number) of (i) the quotient determined by dividing (A) the aggregate number of
shares of Common Stock beneficially owned on a fully diluted basis by such
Tagging Stockholder and sought by the Tagging Stockholder to be included in the
contemplated Transfer by (B) the aggregate number of shares of Common Stock
beneficially owned on a fully diluted basis by Blackstone and all Tagging
Stockholders and (ii) the total number of shares of Common Stock proposed to be
Transferred to the transferee in the contemplated Transfer, and at the same
price per share of Common Stock and upon the same terms and conditions
(including, without limitation, time of payment and form of consideration) as to
be paid and given to Blackstone; provided that in order to be entitled to
exercise its right to sell shares of Common Stock to
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the proposed transferee pursuant to this Section 3.5(a), a Tagging Stockholder
must agree to make to the transferee the same representations, warranties,
covenants, indemnities and agreements as Blackstone agrees to make in connection
with the proposed Transfer of the shares of Common Stock of Blackstone (except
that in the case of representations and warranties pertaining specifically to
Blackstone a Tagging Stockholder shall make the comparable representations and
warranties pertaining specifically to itself); and provided further that all
representations, warranties and indemnities shall be made by the Tagging
Stockholders severally and not jointly and that the liability of Blackstone and
the Tagging Stockholders thereunder shall be borne by each such Stockholder on a
pro rata basis and be limited to the proceeds received by such Stockholder in
such Transfer.
(b) Blackstone shall give notice to all relevant Stockholders of each
proposed Transfer giving rise to the rights of the Tagging Stockholders set
forth in the first sentence of Section 3.5(a) at least 15 days prior to the
proposed consummation of such Transfer, setting forth the name of Blackstone,
the number of shares of Common Stock proposed to be so Transferred, the name and
address of the proposed transferee, the proposed amount and form of
consideration and other terms and conditions of payment offered by the proposed
transferee. The tag-along rights provided by this Section 3.5 must be exercised
by each Tagging Stockholder within 7 days following receipt of the notice
required by the preceding sentence, by delivery of a written notice to
Blackstone indicating such Tagging Stockholder's desire to exercise its rights
and specifying the number of shares of Common Stock it desires to sell.
3.6 Public Offerings, etc. The provisions of Sections 3.5 and 3.7 shall
not be applicable to offers and sales of Securities in a Public Offering or
pursuant to Rule 144 under the Securities Act.
3.7 Drag-Along Rights. So long as this Agreement shall remain in
effect, if any of Blackstone and its Affiliates receives an offer from a Third
Party to purchase any outstanding shares of Common Stock owned by Blackstone and
its Affiliates and such offer is accepted by Blackstone, then each Stockholder
hereby agrees that it will Transfer a number of shares of Common Stock owned by
it to such Third Party up to the product (rounded up to the nearest whole
number) of (i) the quotient determined by dividing (A) the aggregate number of
shares of Common Stock beneficially owned on a fully diluted basis by such
Stockholder by (B) the aggregate number of shares of Common Stock beneficially
owned on a fully diluted basis by Blackstone and all such Stockholders and (ii)
the total number of shares of Common Stock proposed to be Transferred to the
transferee in the contemplated Transfer, at the same price per share of Common
Stock and upon the same terms and conditions of the offer so accepted by
Blackstone; including making the same representations, warranties, covenants,
indemnities and agreements that Blackstone agrees to make (except that, in the
case of representations and warranties pertaining specifically to Blackstone,
each other Stockholder shall make the comparable representations and warranties
pertaining specifically to itself); provided that all representations,
warranties and indemnities shall be made by Blackstone and such Stockholders
severally and not jointly and that the liability of Blackstone and such
Stockholders thereunder shall be borne by each such Stockholder on a pro rata
basis and be limited to the proceeds received by such Stockholder in such
Transfer.
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SECTION 4. REGISTRATION RIGHTS
4.1 Incidental Registration. The parties hereto agree that the BT
Investor and its Permitted Transferees shall have all of the rights and
obligations of a "Holder" under the Registration Rights Agreement (other than
those set forth in Section 2 thereof) and that any shares of Common Stock owned
by the BT Investor and its Permitted Transferees shall constitute "Registrable
Securities" under the Registration Rights Agreement (other than for purposes of
Section 2 thereof); provided that, notwithstanding anything to the contrary in
this Agreement or the Registration Rights Agreement, the BT Investor and its
Permitted Transferees shall not sell any shares of Common Stock in any
transaction unless Blackstone is selling its shares of Common Stock in such
transaction.
SECTION 5. VOTING AGREEMENTS
5.1 Election of Directors. (a) The BT Investor and its Permitted
Transferees hereby agree that, so long as this Agreement shall remain in effect,
such Stockholder will vote all of the voting Securities owned or held of record
by it so as to elect and, during such period, to continue in office a Board of
Directors of the Company and each subsidiary of the Company, every (and solely)
designees of Blackstone and its Permitted Transferees.
(b) If at any time while this Agreement shall remain in effect
Blackstone shall notify the other Stockholders of its desire to remove, with or
without cause, any director of the Company or any of its Subsidiaries previously
designated by it (or its Permitted Transferees), each Stockholder shall vote all
of the voting Securities owned or held of record by it so as to remove such
director.
5.2 Other Voting Matters. (a) The BT Investor and its Permitted
Transferees hereby agrees that, so long as this Agreement shall remain in
effect, such Stockholder will vote all of the Securities owned or held of record
by it, either in person or by proxy, whether at a meeting of stockholders or by
executing a written consent, to ratify, approve and adopt any and all actions
adopted or approved by the Board of Directors of the Company.
(b) In order to effectuate the provisions of Sections 3.1 and 3.2
hereof, each of the BT Investor and its Permitted Transferees hereby grants to
Blackstone a proxy to vote at any annual or special meeting of stockholders of
the Company, or to take action by written consent in lieu of such meeting with
respect to, or to otherwise take action in respect of, all of the Securities
owned or held of record by such Stockholders in connection with the matters set
forth in Sections 3.1 and 3.2 hereof in accordance with the provisions of
Sections 3.1 and 3.2 hereof. Each of the proxies granted hereby is irrevocable
and is coupled with an interest.
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SECTION 6. REPRESENTATIONS, WARRANTIES AND AGREEMENTS
6.1 Representations and Warranties of BMP. BMP represents and warrants
to the BT Investor as follows:
(a) Each of the parties hereto (other than the BT Investor) (each a
"BMP Party") is a corporation or limited partnership duly organized, validly
existing and in good standing under the laws of the state of its organization
and has all requisite power and authority to execute and deliver this Agreement
and to perform its obligations hereunder. The execution and delivery by the BMP
Parties of this Agreement, the performance by the BMP Parties of its obligations
hereunder, and the consummation by the BMP Parties of the transactions
contemplated hereby have been duly authorized by all requisite action. This
Agreement has been duly executed and delivered by each BMP Party and, assuming
the due authorization, execution and delivery thereof by the BT Investor,
constitutes a legal, valid and binding obligation of such BMP Party, enforceable
against such BMP Party in accordance to its terms.
(b) The BMP Stock purchased hereunder is duly authorized, validly
issued, fully paid and nonassessable. Upon consummation of the transactions
contemplated hereby, the BT Investor will acquire valid title to the BMP Stock
purchased hereunder.
(c) The execution, delivery and performance by each BMP Party of this
Agreement and the consummation by such BMP Party of the transactions
contemplated hereby do not and will not, with or without the giving of notice or
the passage of time or both, (i) violate the provisions of any law, rule or
regulation applicable to such BMP Party or its properties or assets; (ii)
violate the provisions of the certificate of incorporation, bylaws or other
organizational documents of such BMP Party; or (iii) violate any judgment,
decree, order or award of any court, governmental or quasi-governmental agency
or arbitrator applicable to such BMP Party or its properties or assets.
(d) No consent, approval, exemption or authorization is required to be
obtained from, no notice is required to be given to and no filing is required to
be obtained from any third party (including, without limitation, governmental
and quasi-governmental agencies, authorities and instrumentalities of competent
jurisdiction) by any BMP Party, in order (i) for this Agreement to constitute a
legal, valid and binding obligation of such BMP Party or (ii) to authorize or
permit the consummation by such BMP Party of the sale of the BMP Stock purchased
hereunder.
6.2 Representations and Warranties of the BT Investor. The BT Investor
represents and warrants to the BMP Parties as follows:
(a) The BT Investor is a corporation duly organized, validly existing
and in good standing under the laws of the state of its organization and has all
requisite power and authority to execute and deliver this Agreement and to
perform its obligations hereunder. The execution and delivery of this Agreement,
the performance by the BT Investor of its obligations hereunder and the
consummation by the BT Investor of the transactions contemplated hereby have
been duly authorized by all requisite action on the part of the BT Investor.
This Agreement has been duly executed and delivered by the BT Investor and,
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assuming the due authorization, execution and delivery thereof by the BMP
Parties, constitutes a legal, valid and binding obligation of the BT Investor,
enforceable against the BT Investor in accordance with its terms.
(b) The execution, delivery and performance by the BT Investor of this
Agreement and the consummation by the BT Investor of the transactions
contemplated hereby do not and will not, with or without the giving of notice or
the passage of time or both, (i) violate the provisions of any law, rule or
regulation applicable to the BT Investor or its properties or assets; (ii)
violate the provisions of the certificate of incorporation, by-laws or other
organizational documents of the BT Investor; (iii) violate any judgment, decree,
order or award of any court, governmental or quasi-governmental agency or
arbitrator applicable to the BT Investor or its properties or assets.
(c) No consent, approval, exemption or authorization is required to be
obtained from, no notice is required to be given to, and no filing is required
to be obtained from, any third party (including, without limitation,
governmental and quasi-governmental agencies, authorities and instrumentalities
of competent jurisdiction) by the BT Investor, in order (i) for this Agreement
to constitute a legal, valid and binding obligation of the BT Investor or (ii)
to authorize or permit the consummation by the BT Investor of the purchase of
the BMP Stock sold hereunder.
(d) The BT Investor is acquiring the BMP Stock purchased hereunder for
investment solely for its own account and not with a view to, or for resale in
connection with, the distribution or other disposition thereof.
6.3 Certain Agreements. Each party hereto agrees that such party will
not take any action which is reasonably likely to cause the shares of Common
Stock purchased hereunder and owned by the BT Investor to exceed 5% of the
outstanding shares of Common Stock without giving reasonable prior notice to the
other parties and reasonably cooperating with the other parties so that such
ownership of Common Stock by the BT Investor will not contravene any applicable
federal banking laws or regulations existing on the date hereof.
SECTION 7. MISCELLANEOUS
7.1 Additional Securities Subject to Agreement. Each Stockholder agrees
that any other Securities which it shall hereafter acquire by means of the IPO
Reorganization or a stock split, stock dividend, distribution, exercise of stock
options, or otherwise shall be subject to the provisions of this Agreement to
the same extent as if held on the date hereof.
7.2 Termination. This Agreement shall terminate, and thereby become
null and void, as to any particular Securities, on the date on which they are
sold in a Public Offering or are sold pursuant to Rule 144 under the Securities
Act (unless such Securities are reacquired by a Stockholder).
7.3 Injunctive Relief. The Stockholders and their Permitted Transferees
acknowledge and agree that a violation of any of the terms of this Agreement
will cause the Stockholders and their Permitted Transferees irreparable injury
for which adequate remedy at law is not available. Accordingly, it is agreed
that each Stockholder and Permitted Transferee
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shall be entitled to an injunction, restraining order or other equitable relief
to prevent breaches of the provisions of this Agreement and to enforce
specifically the terms and provisions hereof in any court of competent
jurisdiction in the United States or any state thereof, in addition to any other
remedy to which they may be entitled at law or equity.
7.4 Amendments. This Agreement may be amended only by a written
instrument signed the parties hereto.
7.5 Successors, Assigns and Transferees. The provisions of this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their Permitted Transferees and their respective successors, each of
which Permitted Transferees shall agree, in a writing in form and substance
satisfactory to the Company, to become a party hereto and be bound to the same
extent as its transferor hereby, provided that no Stockholder may assign to any
Permitted Transferee any of its rights hereunder other than in connection with a
Transfer to such Permitted Transferee of Securities in accordance with the
provisions of this Agreement.
7.6 Notices. All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing (including by
telecopy), and, unless otherwise expressly provided herein, shall be deemed to
have been duly given or made when delivered by hand, or when delivered by a
recognized courier or, in the case of telecopy notice, when received, addressed
as follows to the parties hereto, or to such other address as may be hereafter
notified by the respective parties hereto:
if to Blackstone or the Company, to:
c/o The Blackstone Group L.P.
345 Park Avenue
31st Floor
New York, New York 10154
Attention: Howard A. Lipson
Telecopy: (212) 754-8703
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: Wilson S. Neely, Esq.
Telecopy: (212) 455-2502
if to the BT Investor, to:
BT Capital Partners, Inc.
130 Liberty Street
New York, New York 10006
Attention: James M. Dworkin
Telecopy: (212) 250-7651
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with a copy to:
Paul, Hastings, Janofsky & Walker
399 Park Avenue
New York, New York
Attention: William Schwitter, Esq.
Telecopy: (212) 319-4090
7.7 Integration. This Agreement and the documents referred to herein or
delivered pursuant hereto, contain the entire understanding of the parties with
respect to the subject matter hereof and thereof. There are no agreements,
representations, warranties, covenants or undertakings with respect to the
subject matter hereof and thereof other than those expressly set forth herein
and therein. This Agreement supersedes all prior agreements and understandings
between the parties with respect to such subject matter.
7.8 Severability. If one or more of the provisions, paragraphs, words,
clauses, phrases or sentences contained herein, or the application thereof in
any circumstances, is held invalid, illegal or unenforceable in any respect for
any reason, the validity, legality and enforceability of any such provision,
paragraph, word, clause, phrase or sentence in every other respect and of the
remaining provisions, paragraphs, words, clauses, phrases or sentences hereof
shall not be in any way impaired, it being intended that all rights, powers and
privileges of the parties hereto shall be enforceable to the fullest extent
permitted by law.
7.9 Counterparts. This Agreement may be executed in two or more
counterparts, and by different parties on separate counterparts each of which
shall be deemed an original, but all of which shall constitute one and the same
instrument.
7.10 Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of New York without regard
to the conflicts of law principles thereof, except for matters directly within
the purview of the General Corporation Law of the State of Delaware (the
"DGCL"), which shall be governed by the DGCL.
7.11 Jurisdiction. Any action to enforce, which arises out of or in any
way relates to, any of the provisions of this Agreement may be brought and
prosecuted in such court or courts located within the State of New York as
provided by law; and the parties consent to the jurisdiction of such court or
courts located within the State of New York and to service of process by
registered mail, return receipt requested, or by any other manner provided by
New York law.
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7.12 No Recourse. Notwithstanding anything that may be expressed or
implied in this Agreement, the parties hereto covenant, agree and acknowledge
that no recourse under this Agreement or any documents or instruments delivered
in connection with this Agreement shall be had against any current or future
director, officer, employee, general or limited partner, member, Affiliate,
agent or assignee of any party hereto or of any of the foregoing, whether by the
enforcement of any assessment or by any legal or equitable proceeding, or by
virtue of any statute, regulation or other applicable law, it being expressly
agreed and acknowledged that no personal liability whatsoever shall attach to,
be imposed on or otherwise be incurred by any current or future director,
officer, employee, general or limited partner, member, Affiliate or assignee of
any party hereto or of any of the foregoing, as such for any obligation of any
party hereto under this Agreement or any documents or instruments delivered in
connection with this Agreement for any claim based on, in respect of or by
reason of such obligations or their creation.
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IN WITNESS WHEREOF, each of the undersigned has executed this Agreement
or caused this Agreement to be executed on its behalf as of the date first
written above.
BLACKSTONE CAPITAL PARTNERS III
MERCHANT BANKING FUND L.P.
By: Blackstone Management Associates III LLC,
its General Partner
By: /s/ Howard A. Lipson
--------------------------------------
Name: Howard A. Lipson
Title:
BLACKSTONE OFFSHORE CAPITAL PARTNERS
III L.P.
By: Blackstone Management Associates III LLC,
its General Partner
By: /s/ Howard A. Lipson
--------------------------------------
Name: Howard A. Lipson
Title:
BLACKSTONE FAMILY INVESTMENT
PARTNERSHIP III L.P.
By: Blackstone Management Associates III LLC,
its General Partner
By: /s/ Howard A. Lipson
--------------------------------------
Name: Howard A. Lipson
Title:
<PAGE>
BMP/GRAHAM HOLDINGS CORPORATION
By: /s/ Simon Lonergan
-----------------------------------------------
Name: Simon Lonergan
Title:
GRAHAM PACKAGING HOLDINGS COMPANY
By: BCP/Graham Holdings LLC
By: /s/ Simon Lonergan
--------------------------------------
Name: Simon Lonergan
Title:
GPC CAPITAL CORP. II
By: /s/ Simon Lonergan
-----------------------------------------------
Name: Simon Lonergan
Title:
BT INVESTMENT PARTNERS, INC.
By: /s/ James M. Dworkin
-----------------------------------------------
Name: James M. Dworkin
Title: Managing Director
<PAGE>
EXHIBIT 10.11
GRAHAM ENGINEERING CORPORATION
AMENDED SUPPLEMENTAL INCOME PLAN
This Amended Supplemental Income Plan is hereby adopted this 23rd day of
December, 1997, by Graham Engineering Corporation.
WHEREAS, Graham Engineering Corporation has adopted a Supplemental Income
Plan for the benefit of key management employees of Graham Engineering
Corporation and Affiliated Companies, effective January 1, 1986; and
WHEREAS, Graham Engineering wishes to revise and amend this Plan.
NOW, THEREFORE, the Graham Engineering Corporation Supplemental Income Plan
is revised to read as follows:
ARTICLE I
NAME AND PURPOSE
1.01 Name. The name of this Plan is the Graham Engineering Corporation
Supplemental Income Plan.
1.02 Purpose. The purpose of this Plan is to provide funds for retirement
and/or death for key management Employees of the Company, of Affiliated
Companies and their Beneficiaries. It is intended to aid the Company and
Affiliated Companies in attracting and retaining Employees of exceptional
ability by providing these Employees with the means to supplement their income
and standard of living at retirement.
<PAGE>
2
ARTICLE II
DEFINITIONS
2.01 Affiliated Company. (a) Any other corporation which is included within
a "controlled group of corporations" within which the Company is also included,
as determined under ss. 1563 of the Internal Revenue Code of 1954 as amended
(the "Code") without regard to subsections (a)(4) and (e)(3)(C) of said Section
1563; (b) any other trades or businesses (whether or not incorporated) which,
based on principles similar to those defining a "controlled group of
corporations" for purposes of (a) above, are under common control and (c) any
other organization so designated by the Board.
2.02 Beneficiary. The person, persons or entity designated by a Participant
in his participation agreement or, if applicable, the person provided in Section
7.03 to receive any benefits payable under the Plan.
2.03 Board. The Board of Directors of the Company.
2.04 Committee. The Committee appointed to administer the Plan pursuant to
Article X.
2.05 Company. Graham Engineering Corporation, a Pennsylvania corporation,
and all Affiliated Companies.
2.06 Compensation. The total salary, exclusive of bonuses or director's
fees, if any, paid or payable to a Participant by the Company.
2.07 Disabled Participant. A Participant who, prior to his Normal
Retirement Date (a) due to a physical or mental condition which, in the judgment
of the Committee, based upon medical reports and other evidence it deems
satisfactory, cannot substantially perform the duties assigned to the
Participant at the time of his disability or any similar duties
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3
or (b)(1) has total and permanent loss of sight of both eyes or (2) has both
hands severed at or above the wrist or (3) has both feet severed at or above the
ankle or (4) has such severance of one hand and one foot.
2.08 Effective Date. January 1, 1986. However, no amendment shall apply to
any Participant who became entitled to a benefit under this Plan prior to the
date of adoption of the amendment.
2.09 Employee. Any individual in the service of the Company.
2.10 Final Salary. A Participant's annual Compensation, as of the date the
Participant becomes entitled to benefits under this Plan, whether by reason of
retirement, disability, death, voluntary separation from employment, reduction
in service, or involuntary termination of employment.
2.11 Normal Retirement Date. The day on which a Participant reaches the age
of sixty-five (65) years.
2.12 Participant. An Employee who becomes a Participant pursuant to Article
III of this Plan.
2.13 Plan. The Supplemental Income Plan set forth in this document and all
amendments hereto.
2.14 Spouse. A Participant's wife or husband who was lawfully married to
the Participant at the time of the Participant's death.
ARTICLE III
PARTICIPATION
3.01 Participation in General. An Employee shall be eligible to become a
Participant upon being designated as eligible by the Board.
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4
3.02 Enrollment. An Employee eligible to become a Participant shall become
a Participant by executing a participation agreement and delivering it to the
Committee.
3.03 Annual Designation. The Board shall designate Employees eligible to
become Participants. An Employee who becomes a Participant shall remain a
Participant until declared ineligible for further participation by action of the
Board.
ARTICLE IV
CONTRIBUTIONS
4.01 Company Contributions. The Company may or may not make contributions
to a fund or otherwise to assist in meeting its obligations under this Plan.
Regardless of whether the Company does or does not make contributions, a
Participant shall have no right, title, or interest whatsoever in or to any
investments which the Company may make to aid it in meeting such obligations as
may rise under the Plan. Nothing contained in the Plan, nor any action taken
pursuant to its provisions, will create or be construed to create a trust or a
fiduciary relationship between the Company and any Participant or any other
person. To the extent that any person acquires a right to benefits under this
Plan, such right will be no greater than the right of an unsecured general
creditor of the Company. All payments to be made under the Plan will be paid
from the general funds of the Company and no special or separate fund will be
established and no segregation of assets will be made to assure payment of such
amounts.
4.02 Participant Contributions. No Participant contributions are required
or permitted under this Plan.
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5
ARTICLE V
RETIREMENT BENEFITS
5.01 Normal Retirement Benefit. A Participant who retires on or after his
Normal Retirement Date will be entitled to receive an annual normal retirement
benefit equal to a percentage (not less than 10% nor more than 50% as specified
in his Participation Agreement) of his Final Salary payable for a period of
fifteen (15) years. This annual normal retirement benefit shall be increased by
four percent (4%) per year during each of the fifteen (15) years in which it is
paid.
5.02 Voluntary Separation From or Reduction in Service Before Normal
Retirement Date. A Participant who voluntarily leaves the employ of the Company
prior to his Normal Retirement Date or who at any time prior to his Normal
Retirement Date voluntarily becomes employed for fewer than 1,500 hours during a
calendar year will be entitled to receive a normal retirement benefit under this
Plan commencing at his Normal Retirement Date, calculated in accordance with
Section 5.01 except that his Final Salary will be determined at the time of his
voluntary separation or reduction in service. Notwithstanding the foregoing, if
the Participant has not reached the age of 55 years at the time of his voluntary
separation or by multiplying the amount determined under Section 5.01 of this
Plan by the following applicable percentage:
Age at Separation or
Reduction in Service Percentage
-------------------- ----------
45 18
46 19
47 20
48 22
49 23
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6
Age at Separation or
Reduction in Service Percentage
-------------------- ----------
50 24
51 25
52 29
53 32
54 36
The benefit determined in this section shall be subject to the provisions of
Sections 5.03, 5.04, and 5.05.
5.03 Normal Form of Payment. Retirement benefits will be paid in the form
of equal annual, quarterly or monthly payments, as requested by the Participant
at the time payments commence and approved by the Committee.
5.04 Commencement of Payments. A Participant's normal retirement benefit
will commence on the first day of the calendar month following the date on which
a Participant reaches his Normal Retirement Date.
5.05 Forfeiture of Benefits Upon Competing With The Company.
Notwithstanding any provisions of this Plan to the contrary, should a
Participant directly or indirectly engage in, represent in any way, be connected
with, furnish consulting services to, be employed by, or have any interest in
(whether as owner, partner, servant, agent, employee, consultant, officer,
director or shareholder) any trade or business located within the continental
United States (or such smaller geographic area as a court of competent
jurisdiction deems reasonable) similar to the trade or business of the Company
in which Participant is employed at his termination of employment, the Committee
may, in its sole discretion, terminate all payments to be made under this Plan,
even if benefit payments have already commenced.
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7
ARTICLE VI
DEATH BENEFITS
6.01 Pre-Retirement Death Benefit. If a Participant has not commenced
receiving benefits hereunder prior to his death, his Beneficiary shall receive
an annual death benefit, payable for a period of ten (10) years, equal to a
percentage (as stated in his Participation Agreement) of his Final Salary as of
the date of the Participant's death.
6.02 Post-Retirement Death Benefit. If a Participant has commenced
receiving benefits hereunder prior to his death, his Beneficiary shall receive
the remaining benefits that otherwise would have been payable to the
Participant.
6.03 Commencement of Payments. If a Participant dies after payment of
benefits to him hereunder has commenced, such benefits will continue to be paid
to his Beneficiary, either as monthly, quarterly or annual payments as requested
by the Beneficiary and approved by the Committee. If a Participant dies before
payment of benefits to him hereunder has commenced, the death benefit provided
herein will commence to be paid to his Beneficiary on the first day of the
calendar month following the Participant's death in annual, quarterly or monthly
payments as requested by the Beneficiary and approved by the Committee.
ARTICLE VII
BENEFICIARY DESIGNATION
7.01 Beneficiary Designation. Each Participant shall have the right, at any
time, to designate any person or persons as his Beneficiary or Beneficiaries to
whom payment under this Plan shall be paid in the event of his death prior to
complete distribution to Participant of the benefits due him under the Plan.
<PAGE>
8
7.02 Amendments, Marital Status. If a Participant's Compensation is
considered community property within such Participant's state of residence, any
Beneficiary designation (other than Spouse) made by a Participant then married
shall not be valid or effective if such Beneficiary (or combination thereof) is
to receive more than fifty percent (50%) of such Participant's aggregate
benefits payable hereunder unless the Spouse shall, in writing, approve such
designation. Any Beneficiary designation may be changed by a Participant by the
written filing of such change on a form prescribed by the Company. The filing of
a new Beneficiary designation form will cancel all Beneficiary designations
previously filed. Any finalized divorce of a Participant subsequent to the date
of filing of a Beneficiary designation form shall revoke any such designation in
favor of the former spouse.
7.03 No Beneficiary Designation. If a Participant fails to designate a
Beneficiary as provided above, or if his Beneficiary designation is revoked by
divorce or otherwise without execution of a new designation, or if all
designated Beneficiaries predecease the Participant or die prior to complete
distribution of the benefits provided hereunder, the Participant's designated
Beneficiary shall be deemed to be the person or persons then surviving in the
first of the following classes in which there is a survivor, share and share
alike:
(a) The Participant's surviving Spouse.
(b) The Participant's children, except that if any of the children
predecease the Participant but leave issue surviving, then such issue shall take
by right of representation the share their parent would have taken if living.
The Payment to the deemed Beneficiary shall completely discharge the Company's
obligations under this Plan. If no person described in (a) or (b) survives,
however, no further payments shall be made.
<PAGE>
9
ARTICLE VIII
DISABILITY BENEFITS
8.01 Disabled Participants. A Disabled Participant whose employment with
the Company terminates because of his disability will be entitled to receive a
normal retirement benefit under this Plan, commencing at his Normal Retirement
Date, calculated in accordance with Section 5.01 except that his Final Salary
will be determined at the time his employment terminates.
8.02 Recovery from Disability. A Disabled Participant who continues or
resumes employment with the Company shall be entitled to remain or resume his
status as a Participant under this Plan if he is redesignated as a Participant
by the Board.
ARTICLE IX
TERMINATION OF EMPLOYMENT: REEMPLOYMENT
9.01 Involuntary Termination of Employment. (a) A Participant whose
employment is terminated by the Employer prior to his reaching his Normal
Retirement Date will, except as provided in subsections (b) and (c) of this
section, be entitled to receive a normal retirement benefit under this Plan,
commencing at his Normal Retirement Date, calculated in accordance with Section
5.01 except that his Final Salary will be determined at the time his employment
terminates.
(b) The provisions of subsection (a) of this section will not apply and no
benefit will be paid to any Participant whose employment is terminated for just
cause. For this purpose, "just cause" shall mean any wilful conduct related to
and adverse to the interests of the Company, whether or not criminal in nature,
and shall include, but not be limited to, unauthorized disclosure of Company
business matters and embezzlement of Company funds.
<PAGE>
10
(c) Should any Participant whose employment termination is subject to
subsection (a) engage thereafter in any activity which, if engaged in by him
after his Normal Retirement Date, would cause his benefits to be terminated, as
provided in Section 5.05, he shall forfeit any and all rights to any benefit
provided under this Section 9.01.
9.02 Termination of Status. If a Participant who has not reached his Normal
Retirement Date remains employed by the Company but ceases to be a Participant,
he will be considered a Participant whose employment has been terminated by the
Employer and will be entitled to receive benefits hereunder in accordance with
the provisions of Section 9.01 hereof. If any such Participant subsequently is
designated by the Board to again become a Participant, the Participant will be
deemed to have remained a Participant at all times for all purposes of this
Plan.
9.03 Reemployment Benefits Suspension. If a retired Participant is
reemployed by the Company, payment of his benefits hereunder will be suspended
during the period of his reemployment.
ARTICLE X
ADMINISTRATION
10.01 Committee; Duties. This Plan shall be administered by a Committee
which shall consist of not more than three (3) persons appointed by the Board.
Members of the Committee may be Participants under this Plan. The Committee
shall have the authority to make, amend, interpret, and enforce all appropriate
rules and regulations for the administration of this Plan and decide or resolve
any and all questions, including interpretations of this Plan, as may arise in
connection with the Plan.
<PAGE>
11
10.02 Agents. In the administration of this Plan, the Committee may, from
time to time, employ agents and delegate to them such administrative duties as
it sees fit and may from time to time consult with counsel who may be counsel to
the Employer.
10.03 Binding Effect of Decisions. The decision or action of the Committee
in respect of any question arising out of or in connection with the
administration, interpretation and application of the Plan and the rules and
regulations promulgated hereunder shall be final and conclusive and binding upon
all persons having any interest in the Plan.
ARTICLE XI
GENERAL PROVISIONS
11.01 Unsecured General Creditor. Participants and their Beneficiaries,
heirs, successors and assigns shall have no legal or equitable rights, interest
or claims in any property or assets of the Company, nor shall they be
Beneficiaries of, or have any rights, claims or interests in any life insurance
policies, annuity contracts or the proceeds therefrom owned or which may be
acquired by the Company ("Policies"). Such Policies or other assets of the
Company may not be held under any trust for the benefit of Participants, their
Beneficiaries, heirs, successors or assigns, or held in any way as collateral
security for the fulfilling of the obligations of the Company under this Plan.
Any and all of the Company's assets and Policies shall be, and remain, the
general unpledged and unrestricted assets of the Company. The Company's
obligation under the Plan shall be merely that of an unfunded and unsecured
promise of the Company to pay a benefit in the future.
11.02 Obligations to the Company. If a Participant becomes entitled to a
distribution of benefits under the Plan and if at such time the Participant has
outstanding any debt, obligation, or other liability representing an amount
owing to the Company, then the
<PAGE>
12
Company may offset such amount owed it against the amount of benefits otherwise
distributable. Such determination shall be made by the Committee.
11.03 Withholding Payroll Taxes. To the extent required by the law in
effect at the time payments are made, the Company shall withhold from payments
made hereunder any taxes required to be withheld from an employee's wages for
the federal or any state or local government.
11.04 Right to Amend or Terminate. The Company expects and intends to
continue the Plan indefinitely; but it reserves the right, by action of the
Board, to amend, alter, suspend or terminate the Plan in whole or in part, and
at any time. In the event this Plan is terminated or is amended in any way which
reduces by more than twenty-five percent (25%) a benefit to which a Participant
is entitled, a Participant shall nevertheless be entitled to receive a benefit
determined as provided in Section 9.01 except that (a) the effective date of the
termination or amendment of the Plan shall be considered the date of termination
of employment as provided in that section and (b) the percentage of his normal
retirement benefit to be used in determining his annual benefit shall be the
greater of the percentage stated in item 7 of his participation agreement or
fifty percent (50%).
11.05 Alienation of Benefits. No benefits payable under the Plan will be
subject in any manner to anticipation, alienation, sale, transfer, assignment,
pledge, encumbrance or charge; and any action by way of anticipating,
alienating, selling, transferring, assigning, pledging, encumbering or charging
the same will be void and of no effect. No benefit will be in any manner liable
for or subject to the debts, contracts, liabilities, engagements or torts of the
person entitled to such benefit.
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13
11.06 Payment to Minors and Incompetents. If any individual entitled to
receive any benefits hereunder is a minor, or is deemed by the Board or is
adjudged to be legally incapable of giving a valid receipt and discharge for
such benefits, his benefits will be paid to the duly appointed guardian or
committee of such minor or incompetent or to such person or persons who the
Committee believes is or are caring for or supporting such individual. Any such
payments, to the extent thereof, will be a complete discharge for the payment of
such benefit.
11.07 Unclaimed Benefits. If any benefit under the Plan has been payable to
and unclaimed by any person for a period of four (4) years since the whereabouts
or existence of such person was last known to the Committee, the Committee may
direct that all rights of such person to payments then accrued and to future
payments be terminated absolutely, provided that if such person subsequently
appears and identifies himself to the satisfaction of the Board, benefits will
be reinstated.
11.08 Not a Contract of Employment. The Plan is purely voluntary on the
part of the Company. Neither the establishment of the Plan, nor any amendment
thereto, nor the creation of any fund or account, nor the payment of any benefit
will be construed as conferring upon any Participant the right to be retained in
the employ of the Company; and all Participants will remain subject to
discharge, discipline or termination to the same extent as if the Plan had never
been established.
11.09 Gender and Number. Whenever used herein, the masculine pronoun will
include the feminine and the singular the plural, unless a different meaning is
plainly required by the context.
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11.10 Construction. The Plan will be construed, enforced and administered
according to the laws of the Commonwealth of Pennsylvania. In the event any
provision of the Plan is held illegal or invalid for any reason, it will not
affect the remaining provisions of the Plan, but the Plan will be construed and
enforced as if such illegal and invalid provision had not been included therein.
IN WITNESS WHEREOF, Graham Engineering Corporation has executed this Plan
the day, month and year first above written.
Attest: GRAHAM ENGINEERING CORPORATION
____________________________ By:_______________________________
Secretary
<PAGE>
GRAHAM ENGINEERING CORPORATION
SUPPLEMENTAL INCOME PLAN
PARTICIPATION AGREEMENT
1. Name and address of Participant:
Philip R. Yates
1260 Oakdale Drive
York, PA 17403
2. Birth Date of Participant:
December 14, 1947
3. Beneficiary Designated by Participant (Name, address and relationship (if
any)):
Souse, if living
Descendants per Stirpes if Spouse is not living.
4. Applicable Percentage of Final Salary as Provided in Section 5.01:
Twenty-Five Percent (25%)
5. Applicable Percentage for Pre-Retirement Death Benefit as Provided in
Section 6.01:
Twenty-Five Percent (25%)
Intending to be legally bound hereby, I hereby accept the provisions of the
Graham Engineering Corporation Amended Supplemental Income Plan and have
executed this Participation Agreement this ____ day of ____________ , 1998.
Witness:
__________________________ ______________________
Philip R. Yates
<PAGE>
EXHIBIT 16.1
July 10, 1998
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Ladies and Gentlemen:
We have read the 'Change in Independent Accountants' section on Page 177 of
Amendment No. 1 to the Form S-4 dated July 10, 1998 of Graham Packaging Company,
GPC Capital Corp. I, Graham Packaging Holdings Company and GPC Capital Corp. II
and are in agreement with the statements contained therein.
/S/ ERNST & YOUNG LLP
<PAGE>
Exibit 21.1
Subsidiaries
Jurisdiction and Type of
Name: Graham Packaging Company Formation
- ------------------------------------ ---------------------------
GPC Capital Corp. I Delaware corporation
GPC Sub GP LLC Delaware limited liability
company
Graham Packaging Canada Limited Canadian Ltda.
Graham Packaging France Partners Pennsylvania general
partnership
Graham Packaging France Holdings S.A. French S.A.
Graham Packaging France, S.A French S.A.
Graham Packaging Italy, S.r.L Italian S.r.L.
S.I.P. Srl Italian S.r.L.
LIDO Plast-Graham Argentine S.r.L.
Graham Packaging Poland, L.P. Pennsylvania limited
partnership
Masko Graham Polish Ltda.
Graham Recycling Company Pennsylvania limited
partnership
Graham Packaging Latin America, LLC Delaware limited liability
company
Graham Brasil Participacoes Brazilian Ltda.
Graham Packaging do Brasil Brazilian S.A.
Note: Certain foreign subsidiaries' statutory shares are not included in the
Table above. SCHEDULE 2
<PAGE>
Exhibit 21.2
Subsidiaries
------------
Jurisdiction and Type of
Name: Graham Packaging Holdings Company Formation
- --------------------------------------- -------------------------
Graham Packaging Company
GPC Capital Corp. I Delaware corporation
GPC Capital Corp. II
GPC OPCO GP LLC
GPC Sub GP LLC Delaware limited liability company
Graham Packaging Canada Limited Canada Ltda.
Graham Packaging France Partners Pennsylvania general partnership
Graham Packaging France Holdings S.A. French S.A.
Graham Packaging France, S.A. French S.A.
Graham Packaging Italy, S.r.L Italian S.r.L.
S.I.P. Srl Italian S.r.L.
LIDO Plast-Graham Argentine S.r.L.
Graham Packaging Poland, L.P. Pennsylvania limited partnership
Masko Graham Polish Ltda.
Graham Recycling Company Pennsylvania limited partnership
Graham Packaging Latin America, LLC Delaware limited liability company
Graham Brasil Participacoes Brazilian Ltda.
Graham Packaging do Brasil Brazilian S.A.
Note: Certain foreign subsidiaries' statutory shares are not included in
the Table above.
<PAGE>
EXHIBIT 23.3
INDEPENDENT AUDITORS' CONSENT
We consent to the references to our firm under the captions 'Summary Historical
and Pro Forma Financial Data,' 'Selected Historical Financial Data,' and
'Experts' and to the use of our report dated March 23, 1998 (except for the
matters discussed in the last paragraph of Notes 13 and 17, as to which the date
is April 24, 1998) with respect to the combined financial statements and
schedule of Graham Packaging Group included in Amendment No. 1 to the
Registration Statement (Form S-4, No. 333-53603) and related Prospectus of
Graham Packaging Company, GPC Capital Corp. I, Graham Packaging Holdings Company
and GPC Capital Corp. II dated July 10, 1998.
/S/ ERNST & YOUNG LLP
Harrisburg, Pennsylvania
July 9, 1998
