UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _____
Commission File Number: 333-53603-03
GRAHAM PACKAGING HOLDINGS COMPANY
(Exact name of registrant as specified in its charter)
Pennsylvania 23-25553000
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1110 East Princess Street
York, Pennsylvania
(Address of principal executive offices)
17403
(zip code)
(717) 849-8500
(Registrant's telephone number, including area code)
Securities Registered pursuant to Section 12(b) of the Act: None
Securities Registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No[ ].
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
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There is no established public trading market for any of the general or
limited partnership interests in the registrant. The aggregate market value
of the voting securities held by non-affiliates of the registrant as of
February 28, 1999 was $-0-. As of February 28, 1999, the general partnership
interests in the registrant were owned by BCP /Graham Holdings L.L.C. and
Graham Packaging Corporation, and the limited partnership interests in the
registrant were owned by BMP/Graham Holdings Corporation and certain members
of the family of Donald C. Graham and entities controlled by them. See
Item 12, "Security Ownership of Certain Beneficial Owners and Management."
_______________
DOCUMENTS INCORPORATED BY REFERENCE
None.
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GRAHAM PACKAGING HOLDINGS COMPANY
INDEX
PART I: Page
Number
Item 1. Business. 4
Item 2. Properties. 28
Item 3. Legal Proceedings. 31
Item 4. Submission of Matters to a Vote of Security Holders. 32
PART II: 33
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters. 33
Item 6. Selected Financial Data. 34
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations. 38
Item 7A. Quantitative and Qualitative Disclosures about
Market Risk. 47
Item 8. Financial Statements and Supplementary Data. 49
Item 9. Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure. 84
PART III: 84
Item 10. Advisory Committee Members, Directors and Executive
Officers of the Registrant. 84
Item 11. Executive Compensation. 88
Item 12. Security Ownership of Certain Beneficial Owners and
Management. 96
Item 13. Certain Relationships and Related Transactions. 97
PART IV: 107
Item 14: Exhibits, Financial Statement Schedules, and Reports on
Form 8-K 107
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PART I
Item 1. Business
Unless the context otherwise requires, all references herein to the
"Company," with respect to periods prior to the recapitalization described
below (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, Graham Packaging Company (the "Operating Company") has been
a wholly owned subsidiary of Holdings. All references to the
"Recapitalization" herein shall mean the collective reference to the
recapitalization of Holdings and related transactions as described under "The
Recapitalization" below, including the initial borrowings under the New
Credit Agreement (as defined below), the Offerings (as defined below) 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). Since
July 27, 1998, the Company's operations have included the operations of Graham
Emballages Plastiques S.A.; Graham Packaging U.K. Ltd.; Graham Plastpak Plastic,
Ambalaj A.S; and Graham Packaging Deutschland Gmbh, as a result of the
acquisition of selected plants of Crown Cork & Seal. 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.
CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS
All statements other than statements of historical facts included in
this Report on Form 10-K, including, without limitation, statements regarding
the Company's future financial position, economic performance and results of
operations, 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
Company believes that the expectations reflected in such forward-looking
statements are reasonable, the Company can give no assurance that such
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expectations will prove to have been correct. Important factors that could
cause actual results to differ materially from the issuers' expectations
("cautionary statements") include, without limitation, the high degree of
leverage and substantial debt service obligations of the Operating Company
and Holdings, the restrictive covenants contained in instruments governing
indebtedness of the Company, including the New Credit Agreement, competition
in the Company's markets, including the impact of possible new technologies,
a decline in the domestic motor oil business, risks associated with the
Company's international operations, the Company's exposure to fluctuations in
resin prices and its dependence on resin supplies, the Company's dependence
on significant customers and the risk that customers will not purchase the
Company's products in the amounts expected by the Company under their
requirements contracts, the Company's dependence on key employees and the
material adverse effect that could result from the loss of their services,
the Company's dependence on certain continuing relationships with Graham
Engineering and other Graham Partners and affiliates thereof, risks
associated with environmental regulation, risks associated with possible
future acquisitions, risks associated with hedging transactions, and the
possibility that the Company may not be able to achieve success in developing
and expanding its business, including, without limitation, the Company's hot-
fill PET plastic container business. See "--Certain Risks of the Business."
All subsequent written and oral forward-looking statements attributable to
the Company, or persons acting on its behalf, are expressly qualified in
their entirety by the cautionary statements.
General
The Company is a worldwide leader in the design, manufacture
and sale of customized blow molded rigid plastic bottles, as hereinafter
described. 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
subsequent to 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.
The principal executive offices of the Company are located at 1110 East
Princess Street, York, Pennsylvania 17403, Telephone (717) 849-8500.
The Company is managed in three operating segments: North America,
which includes the United States and Canada; Europe; and Latin America.
Each operating segment includes three major service lines: Automotive,
Food and Beverage and Household Cleaning and Personal Care.
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The Company's customized blow molded rigid plastic bottles are made
primarily from high density polyethylene ("HDPE") and polyethylene
terephthalate ("PET") resins. The Company's customers include 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 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 16 years at a
compounded annual growth rate ("CAGR") of over 23%. 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, Management believes, based on
internal estimates, that 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 51 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
enjoyed long-standing relationships averaging 15 years with its top 20
customers. For the year ended December 31, 1998, over 70% of the Company's
net sales were generated by its top 20 customers, the majority 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, 1998,
the Company generated net sales and Adjusted EBITDA (as defined in Note 8 to
"Selected Financial Data" (Item 6) below) of $588.1 million and
$119.7 million, respectively.
Automotive. The Company is the preeminent supplier of one quart HDPE
motor oil containers in the United States, producing over 1.4 billion units
in 1998, which Management believes, based on internal estimates, represents
approximately 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 Ashland Inc. ("Ashland," producer
of Valvoline motor oil), Castrol Inc. ("Castrol"), Chevron Corporation
("Chevron"), Equilon Enterprises LLC ("Equilon", an alliance between Texaco
Inc. "Texaco" and Shell Oil Company "Shell"), Pennzoil-Quaker State Company
("Pennzoil-Quaker State", the result of the merger between Pennzoil Products
Company, "Pennzoil", and The Quaker State Corporation, "Quaker State"), and
Sun Company, Inc ("Sun Company"), and management believes the Company is the
sole supplier of one quart motor oil containers to five of these producers.
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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 has expanded its operations in Latin
America. In Brazil, where Management believes, based on internal estimates,
that the Company is among the largest independent suppliers of plastic
packaging for motor oil, the Company currently operates five plants. 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. For the years ended December 31, 1996,
1997 and 1998, the Company generated approximately 39.4%, 37.6% and 32.1%,
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 1993 through December 31, 1998, the Company
grew its food and beverage business at a CAGR of 88%. 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 and preferred by consumers. 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, 1998, the Company invested over $166
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 non-
refrigerated, 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. The
Company's largest customers in the food and beverage business include
Clement-Pappas & Company, Inc. ("Clement-Pappas"), Groupe Danone ("Danone"),
Hershey Foods Corporation ("Hershey's"), Hi-Country Foods Corporation ("Hi-
Country"), The Minute Maid Company ("Minute Maid"), Nestle Food Company
("Nestle's"), Northland Cranberries, Inc. ("Northland Cranberries"), 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 years ended December 31, 1996, 1997 and
1998, the Company generated approximately 25.3%, 28.9% and 37.6%,
respectively, of its net sales from the food and beverage business.
Household Cleaning & Personal Care ("HC/PC"). The Company is a leading
supplier of HDPE custom bottles to the North American HC/PC products business
which includes products such as hair care, liquid fabric care and dish care
products and hard service cleaners. By focusing on its customized product
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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 fabric care products, which are packaged in plastic
containers, capture an increased share from powdered detergents, which are
predominantly packaged in cardboard. For the years ended December 31, 1996,
1997 and 1998, the Company generated approximately 35.3%, 33.5%, and 30.3%
respectively, of its net sales from the HC/PC business.
Additional information regarding business segments is provided in Note 19
of the Notes to Financial Statements.
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 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, fabric care, dish care, 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
North American HDPE units produced contain post-consumer 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 ("CSD"), 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
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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.
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. A majority 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, 1998 the Company had only one customer
(Unilever) that accounted for over 10% of the Company's total net sales (12%
for the year ended December 31, 1998). For the year ended December 31, 1998
the Company's twenty largest customers, who accounted for over 70% of net
sales, were, in alphabetical order:
Company Customer
Customer(1) Business Since(1)
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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
Equilon Automotive Early 1970's
Hershey's Food & Beverage Mid 1980's
Hi-Country Food & Beverage Early 1990's
Northland Cranberries Food & Beverage Late 1990's
Ocean Spray Food & Beverage Early 1990's
Pennzoil-Quaker State Automotive Early 1970's
Petrobras Distribuidora S.A. Automotive Early 1990's
Procter & Gamble HC/PC Early 1980's
Sun Company Automotive Early 1960's
Tree Top Food & Beverage Early 1990's
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Company Customer
Customer(1) Business Since(1)
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Tropicana Food & Beverage Mid 1980's
Unilever HC/PC, Food & Beverage Early 1970's
Welch's Food & Beverage Early 1990's
(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 21 plants located in countries outside of the
United States, including Canada (4), Brazil (5), France (5), Germany (1),
Italy (2), Poland (1), Turkey (1), United Kingdom (1) and Hungary (1).
Brazil and Argentina. In Brazil, the Company operates four 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. 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 Industria e Comercio S.A. ("Graham Packaging do
Brasil") 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 Brasil. 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 an on-site plant in each of France
and Hungary, respectively, and nine off-site plants in France, Germany,
Italy, Turkey and the United Kingdom, all 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.
Poland. Through Masko-Graham, a 50% owned joint venture in Poland, the
Company manufactures HDPE bottles for HC/PC and the liquid food products.
Competition
The Company faces substantial competition across its product lines from
a number of well-established businesses operating both regionally and
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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 Company , Inc., which during 1998 was 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 design 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, among other places, in Houston, Texas; Cincinnati, Ohio;
Levittown, Pennsylvania; Burlington, Ontario; Mississauga, 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.
Design and Development
Design 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 design and development capabilities, 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
and has filed for numerous patents. See "--The Recapitalization,"
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"--Intellectual Property"; and "Certain Relationships and Related
Transactions--Certain Business Relationships--Equipment Sales Agreement"
(Item 13).
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 providing
on-site manufacturing arrangements, with over a third of its 51 facilities
on-site at customers' facilities, substantially more than its competitors. See
"Properties" (Item 2). Within its 51 plants, the Company runs over 400
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 to seven days a week, although not
every production line is run constantly. When customer demand requires, the
Company runs its plants seven days a week.
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 parison as it leaves 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 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
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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 various types of 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. Quality control 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 its 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 design 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 1996, 1997 and 1998 were approximately $31.3
million, $53.2 million and $133.9 million, respectively. Management estimates
that the annual capital expenditure required to maintain the Company's
current facilities are approximately $20 million per year. 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
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assurance 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 North American HDPE units
produced 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 near the
Company's headquarters in York, Pennsylvania.
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
("Investor LP") formed by Blackstone Capital Partners III Merchant Banking
Fund L.P. (together with its affiliates, "Blackstone"), 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, 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
1933, as amended (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
("FIRSTS"SM) (the "Floating Rate Senior Subordinated Old Notes" and, together
with the Fixed Rate Senior Subordinated Old Notes, the "Senior Subordinated
Old Notes"). ("FIRSTS" is a service mark of BT Alex. Brown Incorporated.)
On February 2, 1998, as part of the Recapitalization, Holdings and GPC
Capital Corp. II ("CapCo II" and, together with the Holdings, 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
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Due 2009, Series A (the "Senior Discount Old Notes" and, together with the
Senior Subordinated Old Notes, the "Old Notes").
In connection with the Recapitalization, the Issuers entered into
Registration Rights Agreements with the Initial Purchasers of the Old Notes,
pursuant to which the Issuers agreed to exchange the respective issues of Old
Notes for Notes having the same terms but registered under the Securities Act
and not containing the restrictions on transfer that are applicable to the
Old Notes.
Pursuant to the related Registration Rights Agreement, on September 8,
1998, the Company Issuers consummated exchange offers (the "Senior
Subordinated Exchange Offers"), pursuant to which the Company Issuers issued
$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 Exchange Notes, the "Senior Subordinated Exchange
Notes"), which were registered under the Securities Act, in exchange for
equal principal amounts of Fixed Rate Senior Subordinated Old Notes and
Floating Rate Senior Subordinated Old Notes, respectively. The Senior
Subordinated Old Notes and the Senior Subordinated Exchange Notes are herein
collectively referred to as the "Senior Subordinated Notes." Pursuant to the
applicable Registration Rights Agreement, on September 8, 1998, the Holdings
Issuers consummated an exchange offer (the "Senior Discount Exchange Offer"),
pursuant to which the Holdings Issuers issued $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" and, together with the Senior
Discount Old Notes, the "Senior Discount Notes"), which were registered under
the Securities Act, in exchange for an equal principal amount at maturity of
Senior Discount Old Notes.
The Senior Subordinated Notes were issued under an Indenture dated as of
February 2, 1998 (the "Senior Subordinated Indenture") between the Company
Issuers, Holdings, as guarantor, and United States Trust Company of New York,
as Trustee. The Senior Discount Notes (together with the Senior Subordinated
Notes, the " Notes") were issued under an Indenture dated as of February 2,
1998 (the "Senior Discount Indenture" and together with the Senior
Subordinated Indenture, the "Indentures") between the Holdings Issuers and
The Bank of New York, as Trustee. The Senior Subordinated Old Notes were,
and the Senior Subordinated Exchange Notes are, fully and unconditionally
guaranteed by Holdings on a senior subordinated basis.
The other principal components of the Recapitalization included the
following transactions:
- - The contribution by Holdings of substantially all of its assets and
liabilities to the Operating Company;
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- - 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");
- - The initial borrowing by the Operating Company of $403.5 million (the
"Bank Borrowings") in connection with the New Credit Agreement by and
among the Operating Company, Holdings and a syndicate of lenders (see
"Management's Discussion and Analysis of Financial Condition and Results
of Operations--Liquidity and Capital Resources" (Item 7) ;
- - 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);
- - 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;
- - The repayment by the Graham Partners of $21.2 million owed to Holdings
under certain promissory notes;
- - The redemption by Holdings of certain partnership interests in Holdings
held by the Graham Partners for $429.6 million;
- - The purchase by the Equity Investors of certain partnership interests in
Holdings held by the Graham Partners for $208.3 million; and
- - 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. 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 of Certain Beneficial Owners and Management" (Item 12).
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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. The sole purpose of CapCo I is to act as co-obligor of the
Senior Subordinated Notes and as co-borrower under the New Credit Agreement.
The sole purpose of CapCo II is to act as co-obligor of the Senior Discount
Notes and as co-guarantor with Holdings under the New Credit Agreement.
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 must rely on the cash flow and assets of the Operating Company or
the cash flow and assets of Holdings, as the case may be, for payment of the
Notes.
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 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 Transactions" (Item 13).
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.
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AMOUNT
(In Millions)
SOURCE 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
------
$997.0
Total . . . . . . . . . . . . . . . . . . . . . . . . ======
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
------
$997.0
Total . . . . . . . . . . . . . . . . . . . . . . . . ======
(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 of Certain Beneficial
Owners and Management" (Item 12).
(3) Included $264.5 million of existing indebtedness and $0.4 million of
accrued interest.
Employees
As of December 31, 1998, the Company had approximately 3650 employees,
2000 of which were located in the United States. Approximately 75% of the
Company's employees are hourly wage employees, 50% of whom are members of
various labor unions and are covered by collective bargaining agreements that
expire between April 1999 and March 2004. During the past three years, the
Company's subsidiary in France, Graham Packaging 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.
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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 1998 and are not expected to be
material in the future.
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 North American HDPE units
produced contain recycled HDPE bottles. To date these initiatives and
developments have not materially and adversely affected the Company.
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Intellectual Property
The Company holds various patents and trademarks. While in the
aggregate its patents are of material importance to its business, the Company
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.
Certain Risks of the Business
Substantial Leverage. Upon the consummation of the Recapitalization,
the Operating Company and Holdings became highly leveraged. The New Credit
Agreement, as amended by the Amendment (as defined below), includes four
term loans to the Operating Company totaling up to $570.0 million, a $155.0
million Revolving Credit Facility, and a $100.0 million Growth Capital
Revolving Credit 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: 1999--$11.9
million; 2000--$15.2 million; 2001--$20.2 million; 2002--$25.8 million; and
2003 $28.9 million The Company can incur $75 million in additional
indebtedness beyond the amount of the New Credit Agreement. 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.
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 Agreement is secured and matures prior to the maturity of the
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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 Credit Agreement, 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.
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
Agreement 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. In the future, the Operating Company
will be required to make the following scheduled principal payments on the
Term Loans under the New Credit Agreement: 1999--$5.0 million; 2000--$15.0
million; 2001--$20.0 million; 2002--$25.0 million; 2003--$27.5 million; 2004
- --$93.0 million; 2005--$64.9 million; 2006--$242.7 million; and 2007--$74.0
million. The Term Loan Facilities under the New Credit Agreement 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 Agreement) 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.
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 Agreement, 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
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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 Agreement 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
Agreement 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 its partnership interests in
the Operating Company. All such interests are pledged by Holdings
as collateral under the New Credit Agreement. 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 satisfy
such amounts would be subject to the prior satisfaction in full of all
amounts owing under the New Credit Agreement. 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 Agreement
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 Agreement
would control the disposition and sale of the Operating Company partnership
interests after an event of default under the New Credit Agreement 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.
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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 Agreement, the holders of the Senior
Subordinated Notes and trade creditors. 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 Agreement and the creditors of Holdings'
subsidiaries including in the case of the Operating Company, the lenders
under the New Credit Agreement 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 Agreement, 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
Agreement 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 Agreement 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 Agreement, 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
Agreement, 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 Agreement.
The Indentures and the New Credit Agreement 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
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Indebtedness, the lenders under the New Credit Agreement 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 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. 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 Notes are fully and unconditionally guaranteed
by Holdings on a senior subordinated basis. The Holdings Guarantee is
subordinated to all senior indebtedness of Holdings and effectively
subordinated to all indebtedness and other liabilities (including but not
limited to trade payables) of Holdings' subsidiaries. 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 Agreement 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 Agreement, 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 Agreement, 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. The breach of any of these
covenants could result in a default under the New Credit Agreement. 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. In addition, the lenders could elect to declare all
amounts borrowed under the New Credit Agreement, 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
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Company would be sufficient to repay in full that indebtedness and the other
indebtedness of the Operating Company.
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 21 plants located in countries outside the United States, including
Canada (4), Brazil (5), France (5), Germany (1), Hungary (1), Italy (2),
Poland (1), Turkey (1) and the United Kingdom (1). As a result, the Company
is subject to risks associated with operating in foreign countries, including
fluctuations in currency exchange rates (recently in Brazil in particular),
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 in Europe, North America and Latin America have not had a material
impact on the Company's operations, but no assurance can be given that such
risks will not have a material adverse effect on the Company in the future.
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.
Dependence on Significant Customer. The Company's largest customer
(Unilever) accounted for approximately 12% of the Company's net sales for the
twelve months ended December 31, 1998. 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.
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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, John E. Hamilton, Philippe LeJeune, Geoffrey R. Lu, Roger M. Prevot,
George W. Stevens 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.
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. The
obligations of Holdings to make payments to the Graham affiliates under the
Equipment Sales Agreement and the Consulting Agreement would be
unsubordinated obligations of Holdings. Accordingly, such obligations would
be pari passu with the Senior Discount Notes and would be structurally
subordinated to the Senior Subordinated Notes. 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.
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). 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, (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
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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
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extraordinary transactions. There can be no assurance that the interests of
Blackstone will not conflict with the interests of holders of the Notes.
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 Agreement 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.
Item 2. Properties
The Company currently owns or leases 51 plants located in the United
States, Canada, Brazil, France, Germany, Hungary, Italy, Poland, Turkey and
the United Kingdom, not including the Lido Plast-Graham joint venture
facilities which are wholly owned and operated by its joint venture partner.
Twenty of the Company's packaging plants are located on-site at customer
plants. The Company's operation in Poland is pursuant to a joint venture
arrangement where the Company owns a 50% interest. Currently, the Company's
corporate headquarters are in multiple facilities located in York,
Pennsylvania, totaling approximately 45,000 square feet. In early 1999, the
Company will be consolidating and relocating its headquarters to a 58,000
square foot facility located in York, Pennsylvania. 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.
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On Site Size
Location Or Off Site Leased/Owned (Sq. ft.)
- -------- ----------- ------------ ---------
U.S. Packaging Facilities
1. York, Pennsylvania* Off Site Owned 395,554
2. York, Pennsylvania Off Site Leased 110,270
York, Pennsylvania (a) N/A Leased 45,000
3. Maryland Heights, Missouri Off Site Owned 308,961
4. Atlanta, Georgia On Site Leased 165,000
5. Atlanta, Georgia Off Site Leased 112,400
6. Emigsville, Pennsylvania Off Site Leased 148,300
7. Levittown, Pennsylvania Off Site Leased 148,000
8. Rancho Cucamonga, California Off Site Leased 143,063
9. Santa Ana, California Off Site Owned 127,680
10. Muskogee, Oklahoma Off Site Leased 125,000
11. Woodridge, Illinois Off Site Leased 124,137
12. Cincinnati, Ohio Off Site Leased 103,119
13. Berkeley, Missouri * Off Site Owned 75,000
14. Selah, Washington On Site Owned 70,000
15. Cambridge, Ohio On Site Leased 57,000
16. Shreveport, Louisiana On Site Leased 56,400
17. Whiting, Indiana (e) On Site Leased 56,000
18. Richmond, California Off Site Leased 54,985
19. Houston, Texas Off Site Owned 52,500
20. New Kensington, Pennsylvania On Site Leased 48,000
21. Bradford, Pennsylvania Off Site Leased 44,000
22. Port Allen, Louisiana On Site Leased 44,000
23. N. Charleston, South Carolina On Site Leased 40,000
24. Jefferson, Louisiana On Site Leased 37,000
25. Vicksburg, Mississippi On Site Leased 31,200
26. Bordentown, New Jersey On Site Leased 30,000
27. Tulsa, Oklahoma On Site Leased 28,500
28. Wapato, Washington Off Site Leased 20,300
29. Bradenton, Florida On Site Leased 12,191
Canadian Packaging Facilities
30. Burlington, Ontario, Canada * Off Site Owned 145,200
Burlington, Ontario, Canada N/A Owned 4,800
(a) *
31. Mississauga, Ontario, Canada * Off Site Owned 78,416
32. Anjou, Quebec, Canada * Off Site Owned 44,875
33. Toronto, Ontario, Canada On Site N/A 5,000
European Packaging Facilities
34. Asnieres, France (f) On Site Leased 15,000
35. Assevent, France Off Site Owned 186,470
36. Bad Bevensen, Germany Off Site Owned 80,000
37. Blyes, France Off Site Owned 89,000
38. Campochiaro, Italy Off Site Owned 93,200
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On Site Size
Location Or Off Site Leased/Owned (Sq. ft.)
- -------- ----------- ------------ ---------
39. Istanbul, Turkey Off Site Owned 50,000
40. Meaux, France Off Site Owned 80,000
41. Noeux-les-Mines, France Off Site Owned 120,000
42. Nyirbator, Hungary On Site Leased 5,000
Rueil, Paris, France(a) Off Site Leased 4,300
43. Sovico (Milan), Italy Off Site Leased 74,500
44. Sulejowek, Poland (b) Off Site Owned 83,700
45. Wrexham UK Off Site Owned 120,000
Latin American Packaging Facilities
46. Sao Paulo, Brazil Off Site Leased 23,440
47. Rio de Janeiro, Brazil On Site Owned/Leased 20,000
(c)
Rio de Janeiro, Brazil (a) N/A Leased 1,650
48. Santos, Brazil On Site Leased 5,400
49. Rio de Janeiro, Brazil On Site N/A 10,000
50. Rio de Janeiro, Brazil On Site Leased 16,685
Graham Recycling
51. York, Pennsylvania * Off Site Owned 44,416
Graham Affiliated Packaging Facilities
(Lido Plast-Graham--Joint Venture) (d)
52. Buenos Aires, Argentina Off Site N/A N/A
53. San Luis, Argentina Off Site N/A N/A
____________________
(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" (Item 1)
(e) Facility closed at the end of February 1999.
(f) Facility to close at the end of March 1999.
* Contributed to the Operating Company as part of the Graham Contribution.
With respect to the Berkeley, Missouri facility (Location 13 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.
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Item 3. 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 were consolidated for all purposes. The Company
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
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
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materially from the amounts accrued in Special Charges and Unusual Items in
respect thereof for the year ended December 31, 1997. The cash paid in
settlement was funded by drawdowns under the New Credit Agreement. See Note
18 to the Financial Statements (Item 8).
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the
fourth quarter of 1998.
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PART II
Item 5. Market for Registrant's Common Equity
and Related Stockholder Matters
Because Holdings is a limited partnership, equity interests in Holdings
take the form of general and limited partnership interests. There is no
established public trading market for any of the general or limited
partnership interests in Holdings.
There are two owners of general partner interests in Holdings: Investor
GP and Graham Packaging Corporation. The limited partnership interests in
Holdings are owned by Investor LP and two Graham family entities. See Item
12, "Security Ownership of Certain Beneficial Owners and Management."
Opco GP is the sole owner of a general partnership interest in the
Operating Company, and Holdings is the sole owner of a limited partnership
interest in the Operating Company.
The Operating Company owns all of the outstanding capital stock of
CapCo I. Holdings owns all of the outstanding capital stock of CapCo II.
Holdings has made distributions to its partners totaling the amounts set
forth in the Statements of Partners' Capital/Owners' Equity (Deficit)
included in Item 8 of this Report, during the periods indicated therein.
Under the New Credit Agreement, the Operating Company is subject to
restrictions on the payment of dividends and other distributions to Holdings,
as described in Item 7, "Management's Discussion and Analysis of Financial
Condition and Results of Operations -Liquidity and Capital Resources."
As indicated under Item 1, "Business---The Recapitalization", upon the
Closing of the Recapitalization, (i) certain limited and general partnership
interests in Holdings held by the Graham Partners were redeemed by Holdings
for $429.6 million, and (ii) certain limited and general partnership
interests in Holdings held by the Graham Partners were purchased by the
Equity Investors for $208.3 million.
As indicated under Item 1, "Business---The Recapitalization", upon the
Closing of the Recapitalization on February 2, 1998, 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. On February 2, 1998, as part of the
Recapitalization, the Holdings Issuers also consummated an offering pursuant
to Rule 144A under the Securities Act of $169,000,000 aggregate principal
amount at maturity of their Senior Discount Old Notes. Pursuant to the
Purchase Agreement dated January 23, 1998 (the "Purchase Agreement"), the
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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% or a total discount of
$6,750,000. Pursuant to the Purchase Agreement, the Initial Purchasers
purchased the Senior Discount Old Notes at a price of 57.173% of the
principal amount for a discount of 2.361% from the initial offering price of
59.534% or a total discount of $3,990,090. Pursuant to the Purchase
Agreement, the Issuers also reimbursed the Initial Purchasers for certain
expenses. Pursuant to the Senior Subordinated Exchange Offers, on
September 8, 1998, the Company Issuers exchanged $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. Pursuant to the Senior Discount Exchange Offer, on September
8, 1998, the Holdings Issuers exchanged $169,000,000 aggregate principal
amount at maturity of their Senior Discount Exchange Notes for an equal
principal amount of Senior Discount Old Notes. The Senior Subordinated Old
Notes were, and the Senior Subordinated Exchange Notes are, fully and
unconditionally guaranteed by Holdings on a senior subordinated basis.
Item 6. Selected Financial Data
The following table sets forth certain selected historical financial
data for the Company for and at the end of each of the years in the five-year
period ended December 31, 1998. The selected historical financial data for
each of the four years in the period ended December 31, 1997 are derived from
the Graham Packaging Group's combined financial statements. The selected
historical financial data for the year ended December 31, 1998 are derived from
Holdings' 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 consolidated financial statements as of, and for the year ended,
December 31, 1998 have been audited by Deloitte & Touche LLP, independent
auditors. The combined financial statements of Graham Packaging Group (as
defined in Note 1 to the Financial Statements (Item 8)) have been prepared
for periods prior to the Recapitalization 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 financial data as of
December 31, 1994, 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 following table should
be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" (Item 7) 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, included under Item 8.
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<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------------------------------
1994 (13) (14) 1995 (2) 1996 1997 (3) 1998(3)
---------------- ------------- ------------- ------------ ----------
(In millions)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Net Sales (4) $396.0 $466.8 $459.7 $521.7 $588.1
Gross Margin (4) 69.5 66.8 77.2 84.4 117.4
Selling, general and administrative expenses 29.7 35.5 35.5 34.9 37.8
Special charges and unusual items (5) -- 5.9 7.0 24.4 24.2
Operating income 39.8 25.4 34.7 25.1 55.4
Interest expense, net 12.5 16.2 14.5 13.4 68.0
Other expense (income), net (0.2) (11.0) (1.0) 0.7 (0.1)
Recapitalization expenses (1) -- -- -- -- 11.8
Income tax expense (benefit) (6) (0.3) (0.3) -- 0.6 1.1
Minority interest -- -- -- 0.2 --
Extraordinary loss (7) -- 1.8 -- -- 0.7
------ ------ ------ ------ ------
Net income (loss) $ 27.8 $ 18.7 $ 21.2 $ 10.2 $(26.1)
====== ====== ====== ====== ======
OTHER DATA:
Cash flows provided by (used in):
Operating activities $ 74.6 $ 60.5 $ 68.0 $ 66.9 $ 41.8
Investing activities (53.0) (68.4) (32.8) (72.3) (181.2)
Financing activities (26.2) 9.2 (34.6) 9.5 139.7
Adjusted EBITDA (8) 81.3 77.1 90.6 89.8 119.7
Capital expenditures 53.8 68.6 31.3 53.2 133.9
Investments (9) -- 3.2 1.2 19.0 45.2
Depreciation and amortization (10) 41.3 45.7 48.2 41.0 39.3
Ratio of earnings to fixed charges (11) 2.7x 2.0x 2.2x 1.6x
BALANCE SHEET DATA:
Working capital (deficit) (as defined) (12) $ 16.6 $ 18.0 $ 17.0 $ 2.4 $(5.5)
Total assets 332.5 360.7 338.8 385.5 596.7
Total debt 233.3 257.4 240.5 268.5 875.4
Partners' capital/owners' equity (deficit) 15.6 15.3 16.8 0.3 (438.8)
____________________
<FN>
(1) See "Management Discussion and Analysis of Financial Condition
and Results of Operations" (Item 7) and the Financial Statements of
Holdings, including the related notes thereto (Item 8).
(2) 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
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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.
(3) 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. In July 1998, Graham Packaging
Group acquired selected plastic bottle manufacturing operations of
Crown, Cork & Seal located in France, Germany, the United Kingdom and
Turkey for $41.0 million (excluding direct costs of the acquisition),
net of liabilities assumed, subject to certain adjustments. These
transactions were accounted for under the purchase method of accounting.
Results of operations are included since the dates of acquisitions.
(4) 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.
(5) In 1997, represents certain legal, restructuring and systems conversion
costs. In 1998, represents certain recapitalization compensation,
restructuring, systems conversion, aborted acquisition and legal costs.
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" (Item 7) and the Financial Statements of
Holdings, including the related notes thereto (Item 8).
(6) 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.
(7) Represents costs incurred (including the write-off of unamortized
deferred financing fees) in connection with the early extinguishment of
debt.
(8) Adjusted 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. "Adjusted 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, Adjusted 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 (2) above. Adjusted EBITDA
is included in this Report to provide additional information with
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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 Adjusted
EBITDA and similar variations thereof are frequently used as a measure
of operations and the ability to meet debt service requirements, these
terms are not necessarily comparable to other similarly titled captions
of other companies due to the potential inconsistencies in the method of
calculation.
(9) Investments include the acquisitions made by Graham Packaging Group in
Italy, Canada, France, the UK, Brazil, Germany and Turkey described in
notes (2) and (3) 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.
(10) Depreciation and amortization excludes amortization of deferred
financing fees, which is included in interest expense, net.
(11) 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 $24.3 million for
the year ended December 31, 1998.
(12) Working capital is defined as current assets (less cash and cash
equivalents) minus current liabilities (less current maturities of long-
term debt).
(13) 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.
(14) Balance sheet data at December 31, 1994 were derived from unaudited
financial statements.
</TABLE>
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<PAGE>
<PAGE>
Item 7. 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 "Business -The Recapitalization," 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 Financial
Data" (Item 6) and "Financial Statements and Supplementary Data" (Item 8),
including the related notes thereto, appearing elsewhere in this Report.
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.
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 1-2% per year and, as a result, the Company
has experienced competitive price pressures in this business throughout 1996,
1997 and 1998. 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 since signed agreements to operate two
additional plants in Brazil, both of which are now in production.
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<PAGE>
<PAGE>
The Company's Household and Personal Care ("HC/PC") business continues
to grow, as package conversion trends continue from other packaging forms in
certain segments of the Company's product lines. The Company continues to
benefit as liquid fabric care products, which are packaged in plastic
containers, capture an increased share from powdered detergents, which are
predominantly packaged in cardboard. The Company has upgraded its proprietary
machinery to new larger blow molders to standardize its production lines ,
improve flexibility and reduce manufacturing costs.
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 1998 the Company has invested
over $166 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, 1998 sales of hot-fill
PET containers had grown to $134.4 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, Germany, Hungary, Italy, Poland, Turkey
and the United Kingdom. Management is focusing on its operations in France,
which is a competitive arena and suffers from a lagging economy, and is
seeking to improve the profitability in that country. The Company recently
acquired its operations in Germany, Turkey and the United Kingdom and
additional operations in France. Management believes that the recent
acquisition of manufacturing plants in Europe from Crown/CMB has provided
additional competitive scale to the Company's global sales efforts. In
addition, given the recent troubled economy in Latin America, and more
specifically Brazil, management is closely monitoring its operations and
investment there.
For the year ended December 31, 1998, over 70% of the Company's net
sales were generated by the top twenty customers, the majority 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:
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<PAGE>
<PAGE>
Year Ended December 31,
----------------------------------
1996 1997 1998
-------- -------- --------
PET $0.63 $0.50 $0.53
HDPE 0.41 0.46 0.37
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 analyzed as a
percentage of net sales.
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:
Year Ended December 31,
---------------------------------------------------
(In Millions)
1996 1997 1998
---------------- --------------- ----------------
Automotive $180.9 39.4% $196.4 37.6% $188.7 32.1%
Food & Beverage 116.4 25.3% 150.6 28.9% 221.1 37.6%
HC/PC 162.4 35.3% 174.7 33.5% 178.3 30.3%
------ ---- ------ ---- ------ ----
Total Net Sales $459.7 100.0% $521.7 100.0% $588.1 100.0%
====== ===== ====== ===== ====== =====
Year Ended December 31,
(In Millions)
----------------------------------------------------
1996 1997 1998
--------------- -------------- ------------
North America $381.9 83.1% $440.0 84.3% $465.3 79.1%
Europe 77.8 16.9% 67.4 12.9% 100.8 17.2%
Latin America -- -- 14.3 2.8% 22.0 3.7%
------ ------ ------ ----- ------ ------
Total Net Sales $459.7 100.0% $521.7 100.0% $588.1 100.0%
====== ===== ====== ===== ====== =====
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<PAGE>
<PAGE>
1998 Compared to 1997
Net Sales. Net sales for the year ended December 31, 1998 increased
$66.4 million to $588.1 million from $521.7 million for the year ended
December 31, 1997. The increase in sales was primarily due to a 12.4%
increase in resin pounds sold and changes in product mix. These increases
were partially offset by a net decrease in average resin prices. On a
geographic basis, sales for the year ended December 31, 1998 in North America
were up $25.3 million or 5.8% from the year ended December 31, 1997. The
North American sales increase included higher pounds sold of 8.4%. North
American sales in the food and beverage business contributed $48.5 million to
the increase, while North American sales in the automotive business and HC/PC
business were $14.4 million and $8.8 million lower respectively.
Approximately 76% of the decrease in North American sales in the automotive
business and approximately all of the decrease in North American sales in the
HC/PC business were attributable to declining resin pricing. Sales for the
year ended December 31, 1998 in Europe were up $33.4 million or 49.6% from
the year ended December 31, 1997, principally in the food & beverage and
HC/PC businesses, primarily due to the inclusion of the Company's newly-
acquired European subsidiaries. Overall, European sales reflected a 40.2%
increase in pounds sold. Additionally, sales in Latin America for the year
ended December 31, 1998 were up $7.7 million primarily as a result of the
Company's investment in its Latin American subsidiary in the second quarter
of 1997.
Gross Profit. Gross profit for the year ended December 31, 1998
increased $33.0 million to $117.4 million from $84.4 million for the year
ended December 31, 1997. The increase in gross profit resulted primarily from
the higher sales volume as compared to the prior year, continued operational
improvements and the favorable impact of lower depreciation. Gross profit in
North America was up $27.4 million or 33.6%. Additionally, gross profit
increased $3.9 million in Europe and $1.7 million in Latin America.
Selling, General & Administrative Expenses. Selling, general and
administrative expenses for the year ended December 31, 1998 increased $2.9
million to $37.8 million from $34.9 million for the year ended December 31,
1997. As a percent of sales, selling, general and administrative expenses
declined to 6.4% of sales in 1998 from 6.7% in 1997 generally due to the
leveraging of costs that are fixed in nature on higher sales. The dollar
increase in 1998 selling, general and administrative expenses is due
primarily to the inclusion of the Company's Latin American subsidiary and the
newly-acquired European subsidiaries which were acquired in the second
quarter of 1997 and the third quarter of 1998, respectively.
Special Charges and Unusual Items. In 1998, special charges and unusual
items included $20,609,000 related to recapitalization compensation costs
(see "Business -- The Recapitalization" for a further discussion of the
recapitalization compensation), $1,960,000 of restructuring charges relating
to the operations in Europe ($1,220,000) and in North America ($740,000),
$963,000 in costs related to year 2000 system conversion (see "--Information
-41-
<PAGE>
<PAGE>
Systems Initiative" for a further discussion), $427,000 of aborted
acquisition costs, and $285,000 of legal fees. In 1997, special charges and
unusual items included $22,624,000 of legal fees and amounts expected to be
paid in settlement related to the JCI-Schmalbach-Lubeca litigation,
$1,222,000 of restructuring charges relating to operations in Europe
($746,000) and in North America ($476,000), and $515,000 in costs related to
year 2000 system conversion.
Recapitalization Expenses. Recapitalization expenses of $11.8 million
relate to the Recapitalization that occurred on February 2, 1998 and also
include transaction fees and costs associated with the termination of
interest rate collar and swap agreements.
Interest Expense, Net. Interest expense, net increased $54.6 million
to $68.0 million (including $10.1 million of non-cash interest on the Senior
Discount Notes) for the year ended December 31, 1998 from $13.4 million for
the year ended December 31, 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 was $(0.1) million for
the year ended December 31, 1998 as compared to $0.8 million for the year
ended December 31, 1997. The higher income was due primarily to lower
foreign exchange loss in the year ended December 31, 1998 as compared to the
year ended December 31, 1997.
Net Income (loss). Primarily as a result of factors discussed above,
net loss for the year ended December 31, 1998 was $26.1 million compared to
net income of $10.2 million for the year ended December 31, 1997.
Adjusted EBITDA. Primarily as a result of factors discussed above,
Adjusted EBITDA in 1998 increased 33.3% to $119.7 million from $89.8 million
in 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
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<PAGE>
<PAGE>
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-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 $1.8 million
in 1997 to $0.8 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.
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<PAGE>
<PAGE>
Adjusted EBITDA. Primarily as a result of factors discussed above,
Adjusted EBITDA in 1997 decreased 0.9% to $89.8 million from $90.6 million in
1996.
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 1996, 1997 or 1998.
Information Systems Initiative
The Company has assembled a team of professionals and consultants to
ensure that significant Year 2000 issues which might have a material impact
on the Company's results of operations, liquidity or financial position are
timely identified and any resulting remediation timely resolved.
The Company 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
decided to replace all of its core application systems, including its
financial accounting system, manufacturing operation system and payroll and
human resources system. Currently the Company is in the process of
converting its core application systems. The Company expects to complete the
testing and training phases of the core application systems conversion by the
end of April 1999. The conversion in the Company's North American operations
is expected to be completed by the end of the second quarter of 1999. The
conversion in the Company's European operations will immediately follow the
North American conversion and is expected to be completed by the end of 1999.
The conversion in the Company's Latin American operations is not expected to
be completed until after 1999. For the Company's Latin American operations,
and if for some unforeseen reason the Company is unable to complete the
conversion of its IT systems on the timetable previously described for the
North American and European operations, the existing software will be
modified to allow for uninterrupted business operations until such conversion
can be completed.
During 1998 and 1997, the Company expensed $1.0 million and $0.5
million, respectively, associated with its information systems evaluation and
assessment and capitalized $5.5 million related to the purchase of software and
and hardware. The Company expects to incur during 1999 through the year 2000.
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<PAGE>
<PAGE>
approximately $12.6 million to purchase, test and install new software as
well as incur internal staff costs, consulting fees and other expenses.
Based on the extensive reviews completed to date, the Company is not
aware of any conditions that will result in an interruption to production
capacity. In addition, all critical material suppliers are either year 2000
compliant or have plans that will achieve these goals by the end of 1999.
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. As stated, critical material vendors are,
or will be year 2000 compliant by the end of 1999. However, in forming a
total assessment, the ability of all critical 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. Risks to the Company include
the possible interruption of production and negative effects on cash flow
associated with reduced sales, increased production costs and reduced
customer collections.
While there are issues beyond the control of the Company, where
practical, contingency plans are being implemented. Contingency plans, such
as switching transportation modes, reviewing year-end inventory levels by
plant and performing record keeping functions on a manual basis are being
formulated.
Derivatives
The Company enters into interest rate swap agreements to hedge the
exposure to increasing rates with respect to the New Credit Agreement. The
differential to be paid or received as a result of these swap agreements is
accrued as interest rates change and recognized as an adjustment to interest
expense related to the New Credit Agreement. The Company also enters into
forward exchange contracts, when appropriate, to hedge the exchange rate
exposure on transactions that are denominated in a foreign currency.
Liquidity and Capital Resources
In 1996, 1997 and 1998, the Company generated $176.7 million of cash
from operations and $618.8 million from increased indebtedness. This $795.5
million was primarily used to fund $218.4 million of capital expenditures,
$65.4 million of investments, make distributions of $55.3 million to the
Company's partners, make $409.3 million recapitalization cash distribution to
owners (net of owner note repayments), make $39.6 million of debt issuance
fee payments and for $7.5 million of other net uses.
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<PAGE>
<PAGE>
On February 2, 1998, the Company 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 was amended on August 13, 1998 (the "Amendment") to
provide for an additional Term Loan Borrowing of up to an additional $175
million which can be drawn in two installments (of which $75 million was
drawn and outstanding as of December 31, 1998 and the remaining $100 million
was drawn in February 1999). A commitment fee of .75% is
due on the unused portion. The New Credit Agreement and the Amendment consist
of four term loans to the Operating Company totaling up to $570 million and
two revolving loan facilities to the Operating Company totaling $255 million.
The obligations of the Operating Company under the New Credit Agreement and
Amendment are guaranteed by Holdings and certain other subsidiaries of
Holdings. The term loans are payable in quarterly installments through
January 31, 2007, and require payments of $5.0 million in 1999, $15.0
million in 2000, $20.0 million in 2001, $25.0 million in 2002 and $27.5
million in 2003. 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 3.0%. A commitment fee ranging from 0.20% to 0.50% is due on
the unused portion of the revolving loan commitment. As part of the
Amendment to the New Credit Agreement, if certain events of default were to
occur (including, without limitation, if the Company's Net Leverage Ratio
were above 5.15:1.0 at March 31, 2000), Blackstone has agreed to make an
equity contribution to the Company through the administrative agent of up to
$50 million. In addition, the New Credit Agreement and Amendment contain
certain affirmative and negative covenants as to the operations and financial
condition of the Company, as well as certain restrictions on the payment of
dividends and other distributions to Holdings.
The Recapitalization also included the issuance of $225 million of
Senior Subordinated Old Notes and $100.6 million gross proceeds of Senior
Discount Old 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 $32.4 million. At December 31,
1998, the Company's outstanding indebtedness was $875.4 million.
During 1999, the Company expects to incur capital expenditures that are
similar in nature and size to those incurred in 1998. However, total capital
expenditures for 1999 may vary significantly depending on the timing of
growth related opportunities. 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 Agreement.
Management believes that capital investment to maintain and upgrade
property, plant and equipment is important to remain competitive. Total
capital expenditures for 1996, 1997 and 1998 were approximately $31.3
million, $53.2 million and $133.9 million, respectively. Management estimates
that the annual capital expenditure required to maintain the Company's
current facilities are approximately $20 million per year. Additional
capital expenditures beyond this amount will be required to expand capacity.
Under the New Credit Agreement, 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
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<PAGE>
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. The cash paid in settlement was
funded by drawdowns under the New Credit Agreement. See Notes 7 and 18 to the
Financial Statements as of December 31, 1998 and 1997 and for each of the
three years in the period ended December 31, 1998 (Item 8).
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 March 1998, the AICPA issued Statement of Position
("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 has not yet assessed
what the impact of the SOP will be on the Company's future earnings or
financial position.
In April 1998, the AICPA issued SOP 98-5, "Reporting on the Costs of
Start-Up Activities." The SOP is effective for the Company on January 1,
1999. The SOP requires costs of start-up activities and organization costs
to be expensed as incurred. The Company does not expect the adoption of the
SOP to have a significant impact on the Company's results of operations or
financial position.
In June 1998, the Financial Accounting Standards Board issued SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities".
This standard 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 assessment of
SFAS No. 133 and has not determined the impact adoption will have on the
Company's results of operations or financial position.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
As a result of the Recapitalization, the Company has significant long and
short-term debt commitments outstanding as of December 31, 1998. These
on-balance sheet financial instruments, to the extent they provide for variable
rates of interest, expose the Company to interest rate risk. The Company
manages its interest rate risk by entering into interest rate swap agreements.
All of the Company's derivative financial instrument transactions are
entered into for non-trading purposes.
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<PAGE>
To the extent that the Company's financial instruments, including
off-balance sheet derivative instruments, expose the Company to interest rate
risk and market risk, they are presented in the table below. For variable rate
debt obligations, the table presents principal cash flows and related actual
weighted average interest rates as of December 31, 1998. For fixed rate debt
obligations, the table presents principal cash flows and related weighted
average interest rates by maturity dates. For interest rate swap agreements,
the table presents notional amounts and the interest rates by expected
(contractual) maturity dates for the pay rate and actual interest rates at
December 31, 1998 for the receive rate. Note 8 to the Financial Statements
should be read in conjunction with the table below.
<TABLE>
<CAPTION> (In thousands)
Expected Maturity Date of Long-Term Debt (Including Current
Portion) and Interest Rate Swap Agreements at December 31, 1998 Fair Value
------------------------------------------------------ December 31,
1999 2000 2001 2002 2003 Thereafter Total 1998
--------- --------- --------- ------- --------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Interest rate sensitive
liabilities:
Variable rate borrowings,
including short-term
amounts . . . . . . . . . . . 11,929 15,192 20,208 25,771 28,905 512,695 614,700 614,700
Average interest rate . . . . 6.39% 7.46% 7.41% 7.36% 7.28% 8.02%
Fixed rate borrowings . . . . . -- -- -- -- -- 260.697 260,697 271,400
Average interest rate . . . . -- -- -- -- -- 9.60% -- --
11,929 15,192 20,208 25,771 28,905 773,392 875,397 886,100
====== ====== ====== ====== ====== ====== ======= =======
Derivatives matched against
liabilities:
Pay fixed swaps . . . . . . . . -- -- 150,000 200,000 100,000 -- 450,000 (8,784)
Pay rate . . . . . .. . . . . -- -- 5.51% 5.81% 5.77% -- -- --
Receive rate . . . . . . .. . -- -- 5.56% 5.56% 5.56% -- -- --
The Company also enters into forward exchange contracts, when considered
appropriate, to hedge foreign exchange rate exposure on transactions that are
denominated in a foreign currency. See Note 8 to the Financial Statements.
</TABLE>
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<PAGE>
<PAGE>
Item 8. Financial Statements and Supplementary Data
INDEX TO FINANCIAL STATEMENTS
Page
Number
------
Reports of Independent Auditors 50
Audited Financial Statements 52
Balance Sheets at December 31, 1998 and 1997 52
Statements of Operations for the years ended December 31, 1998,
1997 and 1996 54
Statements of Partners' Capital/Owners' Equity (Deficit) for
the years ended December 31, 1998, 1997 and 1996 55
Statements of Cash Flows for the years ended December 31, 1998,
1997 and 1996 56
Notes to Financial Statements 58
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<PAGE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Owners
Graham Packaging Holdings Company
We have audited the accompanying consolidated balance sheet of Graham
Packaging Holdings Company as of December 31, 1998, and the related
consolidated statements of operations, partners' capital/owners' equity
(deficit), and cash flows for the year then ended. Our audit also included
financial statement schedules I and II (as it pertains to 1998) listed in the
index at Item 14(a). These financial statements and schedules are the
responsibility of the Company's management. Our responsibility is to express
n opinion on these financial statements and schedules based on our audit.
We conducted our audit 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 audit provides a
reasonable basis for our opinion.
In our opinion, such 1998 consolidated financial statements present
fairly, in all material respects, the financial position of the Company
as of December 31, 1998, and the results of its operations and its cash
flows for the year then ended in conformity with generally accepted
accounting principles. Also in our opinion, the related financial
statement schedules (as they pertain to 1998), when considered in
relation to the basic financial statements taken as a whole, present
fairly in all material respects the information set forth therein.
DELOITTE & TOUCHE LLP
Philadelphia, Pennsylvania
March 19, 1999
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<PAGE>
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Owners
Graham Packaging Group
We have audited the accompanying combined balance sheet of the entities
and operations listed in Note 1, collectively referred to as the Graham
Packaging Group, as of December 31, 1997, and the related combined
statements of operations, partners' capital/owners' equity (deficit), and
cash flows for each of the two years in the period ended December 31, 1997.
Our audits also included financial statement Schedule II (as it pertains to 1997
and 1996) as listed in the Index at Item 14(a). 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, 1997, and
the combined results of their operations and their cash flows for each of the
two years in the period ended December 31, 1997, in conformity with
generally accepted accounting principles. Also, in our opinion, the related
financial statement Schedule II, when considered in relation to the basic
1997 and 1996 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 Note 14 and the next to last
paragraph of Note 18, as to which the date is
April 24, 1998
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<PAGE>
<PAGE>
GRAHAM PACKAGING HOLDINGS COMPANY
BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
December 31,
---------------------------------------
1998 1997
Consolidated Combined
----------------- -------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 7,476 $ 7,218
Accounts receivable, net 87,618 69,295
Inventories 41,247 32,236
Prepaid expenses and other current assets 14,587 9,198
-------- --------
Total current assets 150,928 117,947
Property, plant, and equipment:
Machinery and equipment 560,585 478,534
Land, buildings, and leasehold improvements 85,462 68,146
Construction in progress 105,541 41,230
-------- --------
751,588 587,910
Less accumulated depreciation and amortization 364,896 327,614
-------- --------
386,692 260,296
Other assets 59,127 7,248
-------- --------
Total assets $ 596,747 $385,491
======== ========
LIABILITIES AND PARTNERS' CAPITAL/OWNERS' EQUITY (DEFICIT)
Current Liabilities:
Accounts payable $ 77,485 $ 56,547
Accrued expenses 71,431 51,814
Current portion of long-term debt 11,929 4,771
-------- --------
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<PAGE>
<PAGE>
Total current liabilities 160,845 113,132
Long-term debt 863,468 263,694
Other non-current liabilities 11,228 3,345
Minority interest -- 4,983
Commitments and contingent liabilities -- --
Partners' capital/owners' equity (deficit):
Partners'/owners' capital (442,271) 20,383
Notes receivable for ownership interests -- (20,240)
Accumulated other comprehensive income 3,477 194
-------- --------
Total partners' capital/owners' equity (deficit) 0(438,794) 337
-------- --------
Total liabilities and partners' capital/owners' equity $596,747 $385,491
(deficit)
======== ========
See accompanying notes to financial statements.
</TABLE>
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<PAGE>
<PAGE>
GRAHAM PACKAGING HOLDINGS COMPANY
STATEMENTS OF OPERATIONS
(In thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------------------
1998 1997 1996
Consolidated Combined Combined
----------------- ----------------- -----------------
<S> <C> <C> <C>
Net sales $588,131 $521,707 $459,740
Cost of goods sold 470,762 437,301 382,547
-------- -------- --------
Gross profit 117,369 84,406 77,193
Selling, general, and administrative expenses 37,765 34,882 35,472
Special charges and unusual items 24,244 24,361 7,037
-------- -------- --------
Operating income 55,360 25,163 34,684
Recapitalization expenses 11,769 -- --
Interest expense 68,379 14,940 15,686
Interest income (371) (1,510) (1,233)
Other (income) expense (122) 755 (977)
Minority interest -- 165 --
-------- -------- --------
Income (loss) before income taxes and extraordinary item (24,295) 10,813 21,208
Income tax provision (benefit) 1,092 600 (24)
-------- -------- --------
Income (loss) before extraordinary item (25,387) 10,213 21,232
Extraordinary loss from early extinguishment of debt 675 -- --
-------- -------- --------
Net income (loss) $(26,062) $ 10,213 $ 21,232
======== ======== ========
See accompanying notes to financial statements.
</TABLE>
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<PAGE>
<PAGE>
GRAHAM PACKAGING HOLDINGS COMPANY
STATEMENTS OF PARTNERS' CAPITAL/OWNERS' EQUITY (DEFICIT)
(In thousands)
<TABLE>
<CAPTION>
Partners' Notes Accumulated
Capital Receivable Other
Owners' for Ownership Comprehensive
Equity Interests Income Total
------------ ------------ ---------------- --------------
<S> <C> <C> <C> <C>
Combined balance at January 1, 1996 $ 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)
--------- -------- -------- ---------
Combined 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
--------- -------- -------- ---------
Combined balance at December 31, 1997 20,383 (20,240) 194 337
---------
Net loss for the year (26,062) -- -- (26,062)
Cumulative translation adjustment -- -- 3,283 3,283
---------
Comprehensive income (22,779)
---------
Cash distributions to owners (6,852) -- -- (6,852)
Recapitalization (429,740) 20,240 -- (409,500)
--------- -------- -------- ---------
Consolidated balance at December 31, 1998 $(442,271) -- $ 3,477 $(438,794)
========= ======== ======== =========
See accompanying notes to financial statements.
</TABLE>
-55-
<PAGE>
<PAGE>
GRAHAM PACKAGING HOLDINGS COMPANY
STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------------
1998 1997 1996
Consolidated Combined Combined
---------------- ---------------- ----------------
<S> <C> <C> <C>
Operating activities:
Net income (loss) $(26,062) $ 10,213 $ 21,232
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
Depreciation and amortization 39,281 41,039 48,218
Amortization of debt issuance fees 3,823 320 216
Accretion of senior discount notes 10,085 -- --
Extraordinary loss 675 -- --
Write-off of license fees 1,436 -- --
Minority interest -- 165 --
Equity in earnings of joint venture (274) (200) (257)
Foreign currency transaction (gain) loss 43 1,124 (1,045)
Other non-current assets and liabilities 450 565 (1,499)
Other non-cash recapitalization expense 3,419 --
Changes in operating assets and liabilities, net of acquisitions of
businesses:
Accounts receivable (1,565) (10,918) (996)
Inventories (2,770) (3,605) 1,773
Prepaid expenses and other current assets (4,025) (3,935) 3,751
Accounts payable and accrued expenses 17,291 32,137 (3,375)
-------- -------- --------
Net cash provided by operating activities 41,807 66,905 68,018
Investing activities:
Net purchases of property, plant, and equipment (133,912) (53,173) (31,252)
Acquisitions of Brazilian and European businesses, net of cash acquired (45,152) (19,016) --
Joint ventures and other investments -- -- (1,239)
Other (2,130) (88) (271)
-------- -------- --------
Net cash used in investing activities (181,194) (72,277) (32,762)
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<PAGE>
<PAGE>
Financing activities:
Proceeds from issuance of long-term debt 1,130,411 174,049 117,528
Payment of long-term debt (271,068) (136,430) (131,321)
Recapitalization debt repayments (264,410) -- --
Recapitalization owner note repayments 20,240 -- --
Recapitalization cash distributions to owners (429,566) -- --
Other cash distributions to owners (6,852) (28,073) (20,339)
Debt issuance fees (39,100) -- (541)
Other -- -- 51
-------- -------- --------
Net cash provided by (used in) financing activities 139,655 9,546 (34,622)
Effect of exchange rate changes (10) (387) 352
-------- -------- --------
Increase in cash and cash equivalents 258 3,787 986
Cash and cash equivalents at beginning of year 7,218 3,431 2,445
-------- -------- --------
Cash and cash equivalents at end of year $ 7,476 $ 7,218 $ 3,431
======== ======== ========
See accompanying notes to financial statements.
</TABLE>
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<PAGE>
<PAGE>
GRAHAM PACKAGING HOLDINGS COMPANY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
1. Summary of Significant Accounting Policies
Principles of Consolidation and Combination
The consolidated and combined financial statements include the operations
of Graham Packaging Holdings Company, a Pennsylvania limited partnership
formerly known as Graham Packaging Company ("Holdings"); Graham Packaging
Company L.P., a Delaware limited partnership formerly known as Graham Packaging
Holdings I,L.P. (the "Operating Company"); Graham Packaging Italy, S.r.L.;
Graham Packaging France Partners; Graham Packaging Poland, L.P.; Graham
Packaging do Brasil Industria e Comercio S.A.; Graham Packaging Canada Limited;
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 Graham Packaging Group (as defined). Prior
to February 2, 1998, these operations of the Graham Packaging Group were
under common control by virtue of ownership of the Group by the Donald C.
Graham family. In addition, the 1998 consolidated financial statements of the
Group include GPC Capital Corp. I, a wholly owned subsidiary of the
Operating Company and GPC Capital Corp. II, a wholly owned subsidiary of
Holdings. The purpose of GPC Capital Corp. I is solely to act as
co-obligor of the Senior Subordinated Notes and as co-borrower under
the New Credit Agreement, and the purpose of GPC Capital Corp. II
is solely to act as co-obligor of the Senior Discount Notes and
as guarantor of the New Credit Agreement. GPC Capital Corp. I and GPC
Capital Corp. II have only nominal assets and do not conduct any independent
operations. Furthermore, since July 27, 1998 the consolidated financial
statements of the Group include the operations of Graham Emballages Plastiques
S.A.; Graham Packaging U.K. Ltd.; Graham Plastpak Plastic, Ambalaj A.S.; and
Graham Packaging Deutschland Gmbh as a result of the acquisition of selected
plants of Crown Cork & Seal (see Note 3). These entities and assets are
referred to collectively as Graham Packaging Group (the "Group"). With
respect to the periods subsequent to the Recapitalization that occurred on
February 2, 1998 (see Note 2), the 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. Allamounts in the financial statements are those reported in the
historic financial statements of the individual operations. All significant
intercompany accounts and transactions have been eliminated in the
consolidated and combined 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. Holdings has fully and
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<PAGE>
<PAGE>
unconditionally guaranteed the Operating Company's Senior Subordinated Notes
on a senior subordinated basis.
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, United Kingdom, France, Germany, Italy, Poland,
Turkey, Hungary 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 at 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. Interest
costs are capitalized during the period of construction of capital assets as
a component of the cost of acquiring those assets.
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, twenty years for goodwill and from
five to ten years for license fees. Accumulated amortization on goodwill
is $342,000 as of December 31, 1998.
Long-Lived Assets
Long-lived assets are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may
not be recoverable. Any impairment loss, if indicated, is measured on the
amount by which the carrying amount of the asset exceeds the estimated fair
value of the asset.
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<PAGE>
<PAGE>
Derivatives
The Group enters into interest rate 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 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 considered appropriate, to hedge the exchange rate
exposure on transactions that are denominated in a foreign currency. During
1997, the Group used a combination of interest rate collar and swap agreements
to hedge interest rate risk.
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 included in Accumulated Other
Comprehensive Income as a component of Partners' capital/owners' equity.
Comprehensive Income
As of January 1, 1998, the Group adopted Statement of Financial
Accounting Standards ("SFAS") No. 130, Reporting Comprehensive Income.
SFAS No. 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 partners'
capital/owners' equity. SFAS No. 130 requires foreign currency translation
adjustments, which prior to adoption were reported separately in partners'
capital/owners' equity, to be included in other
comprehensive income and added with net income to determine total
comprehensive income which is displayed in the Statements of Partners'
Capital/Owners' Equity (Deficit). Prior year financial statements have been
reclassified to conform to the requirements of SFAS No. 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 partners/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.
Segment Disclosure
The Group adopted SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information", which requires certain information to be
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<PAGE>
<PAGE>
reported about operating segments on a basis consistent with the Group's
internal reporting structure (see Note 19).
Management Option Plan
The Group accounts for equity based compensation using the intrinsic
value method prescribed in Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees". SFAS No. 123, "Accounting For
Stock Based Compensation", established accounting and disclosure requirements
using a fair-value based method of accounting for equity based employee
compensation plans. The Group has elected to remain on its current method of
accounting as described above and has adopted the disclosure requirements of
SFAS No. 123.
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.
Reclassifications
Certain Reclassifications have been made to the 1997 and 1996 financial
statements to conform to the 1998 presentation.
New Accounting Pronouncements Not Yet Adopted
In March 1998, the AICPA issued Statement of Position ("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
has not yet assessed what the impact of the SOP will be on the Group's future
earnings or financial position.
In April 1998, the AICPA issued SOP 98-5, "Reporting on the Costs of
Start-Up Activities." The SOP is effective for the Group on January 1, 1999.
The SOP requires costs of start-up activities and organization costs to be
expensed as incurred. The Group does not expect the adoption of the SOP to
have a significant impact on the Group's results of operations or financial
position.
In June 1998, the Financial Accounting Standards Board issued
SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities." This standard 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 Group's financial statements for all quarters in the year
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<PAGE>
<PAGE>
beginning January 1, 2000. Management has not completed its assessment of
SFAS No. 133 and has not determined the impact adoption will have on the
Group's results of operations or financial position.
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:
- - A change in the name of Holdings to Graham Packaging Holdings Company;
- - The contribution by Holdings of substantially all of its assets and
liabilities to the Operating Company, which was renamed "Graham
Packaging Company";
- - 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;
- - 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;
- - 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;
- - The repayment by the Operating Company of substantially all of the
existing indebtedness and accrued interest of Holdings and its
subsidiaries;
- - The distribution by the Operating Company to Holdings of all of the
remaining net proceeds of the Bank Borrowings and the Senior
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<PAGE>
<PAGE>
Subordinated Notes (other than amounts necessary to pay certain fees and
expenses and payments to Management);
- - The redemption by Holdings of certain partnership interests in Holdings
held by the Graham Partners for $429.6 million;
- - The purchase by the Equity Investors of certain partnership interests in
Holdings held by the Graham Partners for $208.3 million;
- - The repayment by the Graham Partners of amounts owed to Holdings under
the $20.2 million promissory notes;
- - The recognition of additional compensation expense under the Equity
Appreciation Plan;
- - The payment of certain bonuses and other cash payments and the granting
of certain equity awards to senior and middle level management;
- - The execution of various other agreements among the parties; and
- - The payment of a $6.2 million tax distribution by the Operating Company
on November 2, 1998 to certain Graham Partners for tax periods prior to
the Recapitalization.
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 $32 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 $25 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.
The Recapitalization also resulted in the write-off of unamortized debt
issuance fees which is reflected as an extraordinary loss in the financial
statements. Compensation expense totaling $10.7 million, of which $6.8
million had been expensed as of December 31, 1998, related to stay bonuses
and the granting of certain ownership interests to management which will be
recognized over a period up to three years from the date of the
Recapitalization. See Note 14.
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<PAGE>
3. Acquisitions
Purchase of Certain Plants of Crown, Cork & Seal:
On July 27, 1998 the Company acquired selected plastic bottle
manufacturing operations of Crown, Cork & Seal located in France, Germany,
the United Kingdom and Turkey for a total purchase price (including
acquisition-related costs) of $42.2 million, net of liabilities assumed,
subject to certain adjustments. The acquisition was recorded under the
purchase method of accounting and accordingly, the results of operations of
the acquired operations are included in the financial statements of the Group
beginning on July 27, 1998. The initial purchase price has been allocated on
a preliminary basis to assets acquired and liabilities assumed based on
estimated fair values. Negotiations regarding the final purchase price are
still ongoing which could result in a reduction of the purchase price which
is not expected to be significant. Goodwill is being amortized over 20 years
on the straight-line basis.
The initial allocated fair value of assets acquired and liabilities
assumed is summarized as follows (in thousands):
Current assets $21,771
Property, plant and equipment 29,597
Other assets 2,379
Goodwill 16,230
-------
Total 69,977
Less liabilities assumed 27,820
-------
Net cost of acquisition $42,157
=======
Purchase of Rheem-Graham Embalagens, Ltda:
On April 30, 1997, Graham Packaging do Brasil Industria e Comercio S.A.,
then a wholly owned subsidiary of Holdings with no operations, 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 Industria e Comercio 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 Industria e
Comercio S.A. are included in the financial statements of the Group
beginning on April 30, 1997, less a minority interest amount equal to 20% of
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<PAGE>
Graham Packaging do Brasil Industria e Comercio 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
Industria e Comercio S.A. during 1997 is summarized as follows (in thousands):
Net working capital $2,451
Property, plant and equipment 23,679
-------
$26,130
=======
In February 1998, the Group acquired the remaining 20% minority interest
of $4,983,000 in Graham Packaging do Brasil Industria e Comercio S.A.
from Rheem Empreendimentos Industrialis e Comerciais for $2,995,000.
The difference of $1,988,000 has been recorded as a
reduction of the carrying amount of property, plant & equipment
Pro Forma Information
The following table sets forth unaudited pro forma results of
operations, assuming that both of the above acquisitions had taken place at the
beginning of each period presented:
Year Ended December 31,
--------------------------
1998 1997
-------- --------
(In thousands)
Net sales $631,567 $600,507
Net income (loss) (29,322) 4,128
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
and increased interest expense on acquisition debt. They do not purport to
be indicative of the results of operations which actually would have resulted
had the combinations been in effect at the beginning of each period presented,
or of future results of operations of the entities.
4. Accounts Receivable
Accounts receivable are presented net of an allowance for doubtful
accounts of $1,435,000 and $1,635,000 at December 31, 1998 and 1997
respectively. Management performs ongoing credit evaluations of its customers
and generally does not require collateral.
The Group's sales to one customer, which exceeded 10% of total sales in
each of the past three years, were 12%, 14% and 12% for the years ended
December 31, 1998, 1997 and 1996, respectively. For the year ended
December 31, 1998, approximately 67%, 24% and 9% of the sales to this
customer were made in the United States, Europe and Canada, respectively.
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<PAGE>
<PAGE>
5. Inventories
Inventories consisted of the following:
December 31,
----------------------
1998 1997
-------- --------
(In thousands)
Finished goods $23,497 $18,759
Raw materials and parts 17,750 15,447
------- -------
41,247 34,206
Less LIFO allowance -- 1,970
------- -------
$41,247 $32,236
======= =======
The December 31, 1998 and 1997 inventories valued using the LIFO method
totaled $23,269,000 and $22,446,000 respectively.
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<PAGE>
<PAGE>
6. Accrued Expenses
Accrued expenses consisted of the following:
December 31,
-------------------------
1998 1997
-------- --------
(In thousands)
Accrued employee compensation and
benefits $19,983 $16,305
Special charges and unusual items 7,744 18,472
Accrued Interest 16,736 512
Other 26,968 16,525
------- -------
$71,431 $51,814
======= =======
7. Debt Arrangements
Long-term debt consisted of the following:
December 31,
-----------------------
1998 1997
-------- --------
(In thousands)
Credit Agreement:
Term loan $466,800 $125,000
Revolving loan 61,000 132,179
Revolving credit facilities 7,055 6,653
Senior Subordinated Notes 225,000 --
Senior Discount Notes 110,697 --
Other 4,845 4,633
-------- --------
875,397 268,465
Less amounts classified as current 11,929 4,771
-------- --------
$863,468 $263,694
======== ========
On February 2, 1998, as discussed in Note 2 to the 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 was amended on August 13, 1998 (the "Amendment") to provide for an
additional Term Loan Borrowing of up to an additional $175 million which can
be drawn in two installments (of which $75 million was drawn and outstanding
as of December 31, 1998). A commitment fee of .75% is due on the unused
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<PAGE>
<PAGE>
portion. The New Credit Agreement and the Amendment consist of four term
loans to the Operating Company totaling up to $570 million and two revolving
loan facilities to the Operating Company totaling $255 million. The
obligations of the Operating Company under the New Credit Agreement and
Amendment are guaranteed by Holdings and certain other subsidiaries of
Holdings. The term loans are payable in quarterly installments through
January 31, 2007, and require payments of $5.0 million in 1999, $15.0
million in 2000, $20.0 million in 2001, $25.0 million in 2002 and $27.5
million in 2003. 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. As part of the
Amendment to the New Credit Agreement, if certain events of default were to
occur (including, without limitation, if the Group's Net Leverage Ratio
were above 5.15:1.0 at March 31, 2000), Blackstone has agreed to make an
equity contribution to the Group through the administrative agent of up to
$50 million. In addition, the New Credit Agreement and Amendment contain
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 a fixed rate of
8.75% and with interest payable on $75 million at LIBOR plus 3.625%. The
Senior Discount Notes mature on January 15, 2009, with cash interest payable
quarterly beginning January 15, 2003 at 10.75%. The effective interest rate to
maturity on the Senior Discount Notes is 10.75%.
At December 31, 1998, the Operating Company had entered into three U.S.
Dollar interest rate swap agreements that effectively fix the Eurocurrency
Rate on $450 million of the term loans, on $200 million through April 9, 2002
at 5.8075%, on $100 million through April 9, 2003 at 5.77% and on $150
million through September 10, 2001 at 5.5075%.
Under the New Credit Agreement and Amendment, 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 their 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.
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<PAGE>
<PAGE>
On September 8, 1998, Holdings and GPC Capital Corp. II consummated an
exchange offer for all of their outstanding Senior Discount Notes Due 2009
which had been issued on February 2, 1998 (the "Senior Discount Old Notes")
and issued in exchange therefor their Senior Discount Notes Due 2009,
Series B (the "Senior Discount Exchange Notes"), and the Operating Company
and GPC Capital Corp. I consummated exchange offers for all of their
outstanding Senior Subordinated Notes Due 2008 which had been issued on
February 2, 1998 (the "Senior Subordinated Old Notes" and, together with the
Senior Discount Old Notes, the "Old Notes") and issued in exchange therefor
their Senior Subordinated Notes Due 2008, Series B (the "Senior Subordinated
Exchange Notes" and, together with the Senior Discount Exchange Notes, the
"Exchange Notes"). Each issue of Exchange Notes has the same terms as the
corresponding issue of Old Notes, except that the Exchange Notes are
registered under the Securities Act of 1933 and do not include the
restrictions on transfer applicable to the Old Notes. The Senior
Subordinated Old Notes were, and the Senior Subordinated Exchange Notes are,
fully and unconditionally guaranteed by Holdings on a senior subordinated
basis.
The Group's effective rate on the outstanding borrowings under the term
loan and revolving loan was 7.73% and 6.03% at December 31, 1998 and 1997,
respectively.
The Group had several variable-rate revolving credit facilities
denominated in U.S. Dollars, French Francs and Italian Lire, with aggregate
available borrowings at December 31, 1998 equivalent to $15.9 million. The
Group's average effective rate on borrowings of $7.1 million on these credit
facilities at December 31, 1998 was 4.95%. The Group's average effective rate
on borrowings of $6.7 million on these credit facilities at December 31, 1997
was 6.70%.
Interest paid during 1998, 1997 and 1996, net of amounts capitalized of
$2,639,000, $615,000 and $572,000 respectively, totaled $41,985,000,
$14,900,000 and $15,868,000 respectively.
Based upon the repayment terms under the New Credit Agreement,
maturities of long-term debt for the succeeding five years are as follows:
1999--$11.9 million; 2000--$15.2 million; 2001--$20.2 million; 2002--$25.8
million; 2003--$28.9 million.
8. Fair Value of Financial Instruments and Derivatives
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.
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<PAGE>
<PAGE>
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 based on market price information and was estimated using discounted cash
flow analyses based on current incremental borrowing rates for similar types
of borrowing arrangements. Other long-term debt at December 31, 1998
consisted of approximately $260.7 million of fixed-rate debt instruments. The
fair value of this long-term debt, including the current portion, was
approximately $271.4 million at December 31, 1998. The fair value of other
long-term debt at December 31, 1997 approximates the carrying amounts.
Derivatives
The Group is exposed to market risk from changes in interest rates and
currency exchange rates. The Group manages these exposures on a consolidated
basis and enters into various derivative transactions for selected exposure
areas. The financial impacts of these hedging instruments are offset by
corresponding changes in the underlying exposures being hedged. The Group
does not hold or issue derivative financial instruments for trading purposes.
Interest rate swap agreements are used to hedge exposure to interest
rates associated with the Group's Credit Agreement. Under these agreements,
the Group agrees to exchange with a third party at specified intervals, the
difference between fixed and variable interest amounts calculated by
reference to an agreed-upon notional principal amount. The interest rate
differential is reflected as an adjustment to interest expense over the life
of the interest rate swap agreements.
The following table presents information for all interest rate
instruments. The notional amount does not necessarily represent amounts
exchanged by the parties and, therefore is not a direct measure of the
Group's exposure to credit risk. The fair value approximates the cost to
settle the outstanding contracts. The carrying value, which represents
accrued interest due to counterparties under swap agreements, was not
material.
(in thousands) 1998 1997 (1)
---------- --------
Notional amount $450,000 $179,045
Fair value (8,784) 354
(1) The Group used a combination of interest rate collar and swap agreements
in 1997.
Although derivatives are an important component of the Group's interest
rate management program, their incremental effect on interest expense for
1998, 1997 and 1996 was not material.
-70-
<PAGE>
<PAGE>
The Group manufactures and sells its products in a number of countries
throughout the world and, as a result, is exposed to movements in foreign
currency exchange rates. The Group utilizes foreign currency hedging
activities to protect against volatility associated with purchase commitments
that are denominated in foreign currencies for machinery, equipment and
other items created in the normal course of business. The terms of these
contracts are generally less than one year.
Gains and losses related to qualifying hedges of foreign currency firm
commitments or anticipated transactions are deferred in other current assets
and are included in the basis of the underlying transactions. To the extent
that a qualifying hedge is terminated or ceases to be effective as a hedge,
any deferred gains and losses up to that point continue to be deferred and
are included in the basis of the underlying transaction. At December 31,
1998 the Group had foreign currency forward exchange contracts totalling
$5,793,000 with a fair value of $5,936,000. The deferred gains and losses on
these instruments were not material. There were no similar instruments at
December 31, 1997.
Credit risk arising from the inability of a counterparty to meet the
terms of the Group's financial instrument contracts is generally limited to
the amounts, if any, by which the counterparty's obligations exceed the
obligations of the Group. It is the Group's policy to enter into financial
instruments with a diversity of creditworthy counterparties. Therefore, the
Group does not expect to incur material credit losses on its risk management
or other financial instruments.
9. Lease Commitments
The Group was a party to various leases involving real property and
equipment during 1998, 1997 and 1996. Total rent expense for operating leases
amounted to $10,627,000 in 1998, $9,599,000 in 1997 and $8,432,000 in 1996.
Minimum future lease obligations on long-term noncancelable operating leases
in effect at December 31, 1998, are as follows: 1999--$5,620,000; 2000--
$4,213,000; 2001--$3,261,000; 2002--$2,425,000; 2003--$1,900,000; and
thereafter--$4,155,000.
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<PAGE>
<PAGE>
10. Transactions with Affiliates
Transactions with entities affiliated through common ownership included
the following:
Year Ended December 31,
-----------------------
1998 1997 1996
(In thousands)
Equipment purchases from affiliates $22,045 $11,104 $5,223
Management services provided by affiliates,
including management, legal,
tax, accounting, insurance, treasury,
and employee benefits administration
services $2,071 $2,820 $2,623
Management services provided and sales to
Graham Engineering Corporation including
engineering services and raw materials $1,414 $945 $739
Interest income on notes receivable from
owners $103 $1,026 $1,026
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<PAGE>
<PAGE>
Account balances with affiliates include the following:
Year Ended December 31,
-----------------------
1998 1997
-------- --------
(In thousands)
Accounts receivable $1,116 $361
Prepaid expenses and other current assets -- 917
Accounts payable 2,804 3,470
Certain land and buildings included in the accompanying 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 zero in 1998, and approximately $2.6 million in 1997 and
$2.8 million in 1996 are classified as distributions to owners in the
accompanying 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.
11. Pension Plans
Substantially all employees of the Group participate in noncontributory,
defined benefit or defined contribution pension plans.
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.
Prior to the Recapitalization, the Group participated in a plan
sponsored by an affiliated company. As part of the Recapitalization, the
Group's portion of pension obligations and related plan assets were spun off
into a newly established plan. The transactions resulted in a one-time
allocation of additional plan assets.
Effective December 31, 1998, the Group adopted SFAS No. 132,
"Employers' Disclosures about Pensions and other Postretirement Benefits."
SFAS No. 132 does not change the measurement or recognition of these plans,
but revises the disclosure requirements for pension and other postretirement
benefit plans for all years presented."
The following table sets forth the change in the Group's benefit
obligation and pension plan assets at market value for the years ended
December 31, 1998 and 1997:
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<PAGE>
<PAGE>
<TABLE>
<CAPTION>
1998 1997
----------------- -----------------
<S> <C> <C>
Change in benefit obligation:
Benefit obligation at beginning of year $(15,018) $(11,898)
Service cost (1,628) (1,317)
Interest cost (1,120) (947)
Benefits paid 276 158
Change in benefit payments due to experience (109) (37)
Increase in benefit obligation due to change in discount (1,975) (958)
rate
Increase in benefit obligation due to plan change (385) (19)
-------- --------
Benefit obligation at end of year (19,959) (15,018)
Change in plan assets:
Plan assets at market value at beginning of year 12,092 9,489
Actual return on plan assets 1,914 850
Employer contribution 1,997 1,911
Benefits paid (276) (158)
Acquisitions (spin off from affiliated company) 1,424
-------- --------
Plan assets at market value at end of year 17,151 12,092
Funded status (2,808) (2,926)
Unrecognized net actuarial loss (338) (4)
Unrecognized prior service cost 785 446
-------- --------
Accrued pension expense $(2,361) $(2,484)
======== ========
</TABLE>
Significant actuarial assumptions used to develop the projected benefit
obligations were as follows:
December 31,
--------------------
1998 1997
Assumed discount rate 7.0% 7.5%
Assumed rate of compensation increase (salaried plan) 5.0% 5.0%
Expected return on plan assets 8.0% 8.0%
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<PAGE>
<PAGE>
The Group's net pension cost for its defined benefit pension plans
includes the following components:
Year Ended December 31,
------------------------------
1998 1997 1996
--------- -------- -------
(In thousands)
Service cost $1,628 $1,317 $1,349
Interest cost 1,120 947 793
Actual return on plan assets (1,914) (850) (320)
Net amortization and deferral 1,041 135 (238)
------ ------ ------
Net periodic pension costs $1,875 $1,549 $1,584
====== ====== ======
The Group sponsors a defined contribution plan under Internal Revenue
Code Section 401(k) which covers all hourly and salaried employees other than
employees represented by a collective bargaining unit. The Group also
sponsored other defined contribution plans under collective bargaining
agreements. The Group's contributions are determined as a specified
percentage of employee contributions, subject to certain maximum limitations.
The Group's cost for these plans for 1998, 1997, and 1996 were $787,000,
$742,000 and $722,000 respectively.
12. Partners' Capital/Owners' Equity
Owners' equity included the partners' capital and shareholders' equity
of the various entities and operations included in the financial statements,
as described in Note 1. Prior to the Recapitalization, as described in Note
2, owners' equity included the partners' capital and shareholders' equity of
those entities and operations included in the combined financial statements.
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.
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<PAGE>
<PAGE>
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 Industria e Comercio 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 Industria e Comercio S.A. was owned directly
by owners of Holdings and the remaining 20% was owned by an unrelated entity.
As noted in Note 3 in February 1998, the Group acquired the remaining 20%
interest in Graham Packaging do Brasil Industria e Comercio S.A.
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
balance sheets. As a result of the Recapitalization (see note 2), this
obligation was repaid by the limited partners in 1998.
At December 31, 1998, Holdings owned a 99% direct limited
partnership interest in the Operating Company. The remaining 1% interest
in the Operating Company is owned as a general partnership interest by
GPC Opco GP LLC, which is 100% owned by Holdings. The Operating Company
in turn owns a 99% interest and, through its 100% owned subsidiary GP Sub
GP, LLC, a 1% general partnership interest in the various entities and
operations included in the financial statements, as described in Note 1,
except for Graham Packaging Canada, Ltd. GPC Capital Corp. I and CMB
Plastpak Plastic, Ambalaj Sanayi A.S., where the Operating Company owns
100% of the capital stock of these subsidiaries. In addition, Holdings
owns 100% of the capital stock of GPC Capital Corp. II. As a result of
the Recapitalization, any interests in these entities formerly held by
owners of Holdings were contributed to Holdings , which in turn
contributed these interests to the Operating Company.
13. Management Option Plan
Pursuant to the Recapitalization Agreement, the Group has adopted the
Graham Packaging Holdings Company Management Option Plan (the "Option Plan").
The Option Plan provides for the grant to certain 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.
The exercise price per Unit shall be the fair market value of the 0.01%
interest on the date of the grant. 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
Group by allowing such employees to acquire an ownership interest in the
Group, thereby motivating them to contribute to the success of the Group and
to remain in the employ of the Group.
A committee has been appointed to administer the Option Plan, including,
without limitation, the determination of the employees to whom grants will be
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<PAGE>
<PAGE>
made, the number of Units subject to each grant, and the various terms of
such grants. As of December 31, 1998, 399.1 Unit Options have been granted
at an exercise price of $25,789 per Unit. No options were vested, forfeited,
cancelled or exercised as of December 31, 1998.
The Group applies APB 25 in accounting for the Option Plan. The
exercise price of the Unit equals the fair market value of the 0.01% interest
on the date of the grant and, accordingly no compensation cost has been
recognized under the provisions of APB 25 for Units granted. Under SFAS 123,
compensation cost is measured at the grant date based on the value of the
award and is recognized over the service (or vesting) period. Had
compensation cost for the option plan been determined under SFAS 123, based
on the fair market value at the grant dates, the Group's pro forma net loss
for 1998 would have been reflected as follows:
(In thousands)
Net loss ---------------
As reported $(26,062)
Pro forma $(26,483)
The fair value of each option Unit is estimated on the date of the grant
using the Black-Scholes option pricing model with the following weighted-
average assumptions used for Units granted in 1998: pay out yield 0%,
expected volatility of 0%, risk free interest rate of 5.558%, and expected
life of 4.6 years.
14. Special Charges and Unusual Items
The special charges and unusual items were as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------
1998 1997 1996
------------- ---------- --------
(In thousands)
<S> <C> <C> <C>
Restructuring of facilities $ 1,960 $ 1,222 $ 754
Systems conversion 963 515 --
Litigation 285 22,624 6,283
Recapitalization compensation 20,609 -- --
Aborted acquisition costs 427 -- --
------- ------- -------
$24,244 $ 24,361 $7,037
======= ======= =======
</TABLE>
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
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<PAGE>
<PAGE>
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. In 1998, the Group incurred restructuring charges of
$1,960,000 related to the decision to close a plant in Whiting, Indiana and to
restructure a plant in Blyes, France. Included in the $1,960,000 is
$1,200,000 related to the legal liability of severing 51 employees at the
Blyes plant in France and $350,000 related to the severing of 26 employees
at the Whiting, Indiana plant. Additional severance costs of $1,000,000
are expected to be incurred in the first quarter of 1999 related to the
restructuring of the Blyes plant.
The systems conversion expenses relate to costs incurred by the Group as
part of a multi-year project to ensure that its information systems and
related hardware will be year 2000 compliant. The Group engaged outside
consultants beginning in 1997 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 and to write-off of unamortized licensing fees.
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 in 1997 and 1996 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 the claims in the JCI Schmalbach-Lubeca matter. See Note 18 to the
Financial Statements.
15. Other (Income) Expense
Other (income) expense consisted of the following:
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------
1998 1997 1996
-------- -------- --------
(In thousands)
------------------
<S> <C> <C> <C>
Foreign exchange (gain) loss 152 $ 955 $ (720)
Equity income in earnings of joint ventures (274) (200) (257)
------ ------ ------
$ (122) $ 755 $ (977)
------ ------ ------
</TABLE>
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<PAGE>
<PAGE>
16. 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 are exceeded
by the related tax bases of their assets net of liabilities by $482.6 million
at December 31, 1998. The reported amount of their assets net of the
reported amount of their liabilities exceeded the related tax bases of their
assets net of liabilities by $14.8 million at December 31, 1997.
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,
---------------------------------------------
1998 1997
--------------------- ---------------------
(In thousands)
--------------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards $ 24,654 $ 13,613
Accrued retirement indemnities 1,614 799
Inventories 582 253
Accruals and reserves 1,149 17
Capital leases 829 256
Other items 24
-------- --------
Gross deferred tax assets 28,852 14,938
Valuation allowance (13,903) (7,034)
-------- --------
Net deferred tax assets 14,949 7,904
Deferred tax liabilities:
Fixed Assets, principally due to differences in depreciation
and assigned values 10,778 8,359
Goodwill 4,462
Other items 41 328
-------- --------
Gross deferred tax liabilities 15,281 8,687
-------- --------
Net deferred tax liabilities $ 332 $ 783
-------- --------
</TABLE>
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<PAGE>
<PAGE>
The valuation allowance reduces the Group's deferred tax assets
to an amount that Management believes is more likely than not to be realized.
The provision for income taxes at December 31, 1998 is comprised of
$328,000 of current provision and $764,000 of deferred. The amounts relate
entirely to the Group's foreign legal entities.
The difference between the 1998 actual income tax provision computed by
applying the U.S. federal statutory rate to earnings before income taxes
is attributable to the following:
Year Ended
December 31, 1998
---------------
(In thousands)
---------------
Taxes at U.S. federal statutory rate $(9,504)
Partnership income not subject to
federal income taxes 7,531
Foreign loss without current tax benefit 2,617
Other 448
-------
$1,092
=======
At December 31, 1998, the Group's various taxable entities had net
operating loss carryforwards for purposes of reducing future taxable income
by approximately $59.6 million, for which no benefit has been recognized. Of
this amount, $15.9 million related to carryforwards that will expire, if
unused, at various dates ranging from 1999 to 2003 and the remaining
carryforwards have no expiration date.
At December 31, 1998, the unremitted earnings of non-U.S. subsidiaries
totalling $7.0 million were deemed to be permanently invested No deferred tax
liability has been recognized with regard to the remittance of such earnings.
If such earnings were remitted to the United States, approximately $260,000 of
withholdings taxes would apply.
17. Commitments
In connection with plant expansion and improvement programs, the Group
had commitments for capital expenditures of approximately $33.0 million at
December 31, 1998.
18. Contingencies and Legal Proceedings
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 were 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
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<PAGE>
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 believed that the amounts that would ultimately be paid
in settlement, as well as estimated litigation expenses and professional fees,
would 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 14 to the Financial Statements.
In June 1998, the Group 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 in 1997. See Note 14 to the Financial Statements.
19. Segment Information
The Group has adopted SFAS No. 131, "Disclosures about Segments of a
Business Enterprise and Related Information". The Group is managed in three
operating segments: North America, which includes the United States and
Canada; Europe and Latin America. The accounting policies of the segments
are consistent with those described in Note 1.
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<PAGE>
<PAGE>
(In thousands)
<TABLE>
<CAPTION>
North Latin
Year America Europe America Eliminations Total
----------- ----------- ----------- ----------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net sales 1998 $465,317 $100,835 $21,979 $588,131
1997 439,977 67,408 14,322 521,707
1996 381,916 77,824 459,740
Special charges and unusual items 1998 $22,422 $ 1,572 $250 $24,244
1997 23,615 746 -- 24,361
1996 6,283 754 -- 7,037
Operating income (loss) 1998 $61,891 $(7,010) $479 $55,360
1997 34,393 (8,841) (389) 25,163
1996 39,606 (4,922) 34,684
Depreciation and amortization 1998 $31,384 $9,405 $2,315 $43,104
1997 33,065 6,436 1,858 41,359
1996 41,373 7,061 48,434
Interest expense (income), net 1998 $68,331 $(496) $173 $68,008
1997 11,191 1,517 722 13,430
1996 11,982 2,471 14,453
Income tax expense (benefit) 1998 $311 $781 $1,092
1997 28 572 600
1996 (24) (24)
Identifiable assets 1998 $569,521 $172,553 $38,783 $(184,110) $596,747
1997 319,760 80,896 36,555 (51,720) 385,491
1996 294,516 85,152 (40,855) 338,813
Capital expenditures 1998 $114,048 $13,243 $6,621 $133,912
1997 33,471 11,018 8,684 53,173
1996 25,784 5,468 31,252
Extraordinary loss on
extinguishment of debt 1998 $ 675 $ $ -- $ 675
1997 -- -- -- --
1996 -- -- -- --
</TABLE>
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<PAGE>
<PAGE>
Product Net Sales Information
The following is supplemental information on net sales by product category
(in millions):
Household
Cleaning &
Food & Personal
Automotive Beverage Care Total
---------- -------- ----------- -------
1998 $188.7 $221.1 $178.3 $588.1
1997 196.4 150.6 174.7 521.7
1996 180.9 116.4 162.4 459.7
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<PAGE>
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure
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 financial statements of the
Group for the years ended December 31, 1997 and 1996 and for each of the
two 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 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.
PART III
Item 10. Advisory Committee Members, Directors and Executive Officers of the
Registrant
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."
Name Age Position
- ---- --- --------
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 51 President and Chief Executive
Officer of the Operating Company
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<PAGE>
<PAGE>
Name Age Position
- ---- --- --------
John E. Hamilton 40 Chief Financial Officer of the
Operating Company
G. Robinson Beeson 50 Senior Vice President and General
Manager, Automotive of the Operating
Company
Scott G. Booth 42 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
Philippe LeJeune 50 Senior Vice President and General
Manager, Europe of the Operating
Company
George M. Lane 54 Senior Vice President Global Human
Resources of the Operating Company
Geoffrey R. Lu 43 Vice President and General Manager,
Latin America of the Operating
Company
George W. Stevens 55 Vice President and General Manager,
Canada of the Operating Company
Robert M. Gibson 59 Vice President Global Procurement of
the Operating Company
Jay W. Hereford 48 Vice President, Finance and
Administration of the Operating
Company
Chinh E. Chu 32 Member of the Advisory Committee of
Holdings
Howard A. Lipson 35 Member of the Advisory Committee of
Holdings
Simon P. Lonergan 30 Member of the Advisory Committee of
Holdings
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.
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<PAGE>
<PAGE>
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.
John E. Hamilton has served as Chief Financial Officer or Senior Vice
President, Finance and Administration or Vice President, Finance and
Administration of the Operating Company since the Recapitalization. Since
January 21, 1999, Mr. Hamilton has served as Chief Financial Officer of Opco
GP and Holdings, and has served as Treasurer and Secretary of Opco GP and of
various subsidiaries of the Operating Company or their general partner since
the Recapitalization. Since the Recapitalization, Mr. Hamilton has served 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.
Subsequent to the Recapitalization and until January 21, 1999, Mr. Hamilton
served as Vice President, Finance and Administration of Opco GP and Holdings.
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.
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.
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.
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<PAGE>
<PAGE>
From June 1991 to October 1994, Mr. Prevot also served as President and
General Manager of Graham Recycling.
Philippe LeJeune has served as Senior Vice President and General
Manager, Europe of the Operating Company since October 1998. Prior to
joining the company. Mr. LeJeune served as Group Vice President, Plastic
Bottles for Carnaud Metalbox SA from February 1997 to October 1998, as Vice
President, South Europe, for Danisco Flexible from December 1995 to February
1997 and as Division Director, CMB Flexibles, for Carnaud Metal Box from
February 1992 until December 1995.
George M. Lane has served as Senior Vice President, Global Human
Resources of the Operating Company since September 1998. From July 1990 to
September 1998, Mr. Lane served as Vice President, Human Resources of the
Operating Company.
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.
George W. Stevens has served as Vice President and General Manager,
Canada of the Operating Company since March 1998. From August 1992 to March
1998, Mr. Stevens served as Director of Sales North America, Household
Cleaning and Personal Care of the Operating Company.
Robert M. Gibson has served as Vice President Global Procurement of the
Operating Company since November 1998. Prior to that he served as Vice
President Procurement for the Operating Company.
Jay W. Hereford has served as Vice President, Finance and
Administration, Assistant Treasurer and Assistant Secretary of the Operating
Company since November 1998. Mr. Hereford has also served as Vice President,
Finance and Administration, Assistant Treasurer and Assistant Secretary of
Opco GP, and as Vice President, Secretary, Assistant Secretary and Assistant
Treasurer of various subsidiaries of the Operating Company. Prior to joining
the company, Mr. Hereford served as Vice President, Treasurer and Chief
Financial Officer of Continental Plastic Containers, Inc. and Continental
Caribbean Containers, Inc. from 1992 to November 1998.
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
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<PAGE>
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.
Item 11. Executive Compensation
The following table sets forth all cash compensation paid to the Chief
Executive Officers and four other most highly compensated executive officers
of the Company (the "Named Executive Officers") for the year ended
December 31, 1998, and their respective titles at December 31, 1998.
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<PAGE>
<PAGE>
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
-------------------------------------- ---------------------
Awards Payouts
--------
(3) (4) (5)
Restricted
Name and Principal Position Other annual Stock LTIP All Other
-------------------------------------- Year Salary Bonus Compensation Awards Payouts Compensation
---- ---------- ----------- ----------- --------- ---------- ------------
$ $ $ $ $ $
<S> <C> <C> <C> <C> <C> <C> <C>
Philip R. Yates (1) 1998 300,019 100,474 -0- 3,866,000 2,225,000 4,800
Chief Executive Officer 1997 250,016 120,000 -0- -0- -0- 5,053
1996 237,109 90,000 -0- -0- -0- 4,194
William H. Kerlin, Jr. (2) 1998 12,000 6,000 -0- -0- -0- 240
Chief Executive Officer 1997 140,000 70,000 -0- -0- -0- 2,750
1996 135,900 67,950 -0- -0- -0- 2,670
John E. Hamilton 1998 158,520 132,864 -0- 688,000 400,000 3,586
Chief Financial Officer 1997 133,207 60,000 -0- -0- -0- 3,503
1996 121,336 50,000 -0- -0- -0- 3,386
G. Robinson Beeson 1998 164,719 138,273 -0- 1,074,000 500,000 4,194
Senior Vice President and General 1997 138,677 52,000 -0- -0- -0- 3,812
Manager, Automotive 1996 128,767 45,000 -0- -0- -0- 3,449
Scott G. Booth 1998 158,104 132,489 -0- 1,074,000 500,000 3,625
Senior Vice President and General 1997 132,463 52,000 -0- -0- -0- 3,600
Manager, Household Cleaning and 1996 118,973 40,000 -0- -0- -0- 3,409
Personal Care
Roger M. Prevot 1998 194,404 164,169 -0- 1,933,000 750,000 3,554
Senior Vice President and General 1997 164,180 72,000 -0- -0- -0- 3,544
Manager, Food & Beverage 1996 154,813 60,000 -0- -0- -0- 3,440
<FN>
(1) Philip R. Yates has served as Chief Executive Officer since the
Recapitalization (see Item 10, Advisory Committee Members,
Directors and Executive Officers of the Registrant).
(2) William H. Kerlin, Jr. served as Chief Executive Officer prior to
the Recapitalization (see Item 10, Advisory Committee Members,
Directors and Executive Officers of the Registrant). Mr. Kerlin,
who is compensated solely by Graham Capital, provided services to
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<PAGE>
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.
(3) Represents bonus paid in the current year, but accrued in the prior
year under Company's annual discretionary bonus plan.
(4) Represents cash payments to the named executive officers which was
used by the recipients to purchase shares of restricted common
stock of Investor LP, the value of a grant of the same number of
additional restricted shares as the shares purchased and taxes
payable in respect of these awards (see Management Awards).
(5) Represents contributions to the Company's 401(k) plan and amounts
attributable to group term life insurance.
</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, Hamilton, Beeson, Booth, Prevot,
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<PAGE>
Stevens and Lu. 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 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 the Company, without "just cause" (as defined in the
SIP) terminates Mr. Yates' employment, 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.
The exercise price per Unit for those Units granted is $25,789. The
exercise price per Unit for Units not yet granted 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
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<PAGE>
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.
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<PAGE>
The following table sets forth certain information with respect to
Options granted to the Named Executive Officers for the year ended
December 31, 1998.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential Realizable Value
At
Assumed Annual Rates Of
Stock
Price Appreciation For
Option Alternative:
Individual Grants Term Grant Date Value
-------------------------------------------- ------------------------- -----------------
Percent of
Number of total Options/
Securities SARs Granted To Exercise
Underlying Employees In or Base Expi- Grant Date
Option/SARs Fiscal Price ration Present
Name Granted (#) Year ($/Sh) Date 5% ($) 10% ($) Value $
- ------------------ -------------- ------------- -------- -------- ----------- ------------ ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Philip R. Yates 63.8 16.0% $25,789 2/2/02 $1,035,000 $2,622,000 N/A
Chief Executive
Officer
William H. Kerlin, 0 0% 0 " 0 0 N/A
Jr. Chief
Executive Officer
John E. Hamilton 29.8 7.5% 25,789 " 483,000 1,225,100 N/A
Chief Financial
Officer
G. Robinson Beeson 29.8 7.5% 25,789 " 483,000 1,225,000 N/A
Senior Vice
President and
General Manager,
Automotive
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<PAGE>
Scott G. Booth 29.8 7.5% 25,789 " 483,000 1,225,000 N/A
Senior Vice
President and
General Manager,
Household Cleaning
and Personal Care
Roger M. Prevot 43.4 10.9% 25,789 " 704,000 1,784,000 N/A
Senior Vice
President and
General Manager,
Food & Beverage
</TABLE>
Pension Plans
In the year ended December 31, 1998, the Company participated in a
noncontributory, defined benefit pension plan 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 11 to the Financial
Statements of Graham Packaging Group for each of the three years in
the period ended December 31, 1998.
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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 five Named Executive Officers who
participated in the plan. The estimated credited years of service for the
year ended December 31, 1998 for each of the five Named Executive Officers
participating in the plan was as follows: Philip R. Yates, 27 years; John E.
Hamilton, 15 years; G. Robinson Beeson, 24 years; Scott G. Booth, 11 years;
and Roger M. Prevot, 11 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 provided 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 was completed in 1998.
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401(k) Plan
During 1998 the Company also participated in a defined contribution plan
under Internal Revenue Code Section 401(k), which covered all U.S. employees
of the Company except those represented by a collective bargaining unit. The
Company also sponsored other noncontributory defined contribution plans under
collective bargaining agreements. The Company's contributions were determined
as a specified percentage of employee contributions, subject to certain
maximum limitations. The Company's costs for the salaried and non-collective
bargaining hourly plan for 1996, 1997, and 1998 were $722,000, $742,000 and
$787,000 respectively. See Note 11 to the Financial Statements of
Graham Packaging Group for each of the three years in the period ended
December 31, 1998.
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.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The following table and accompanying footnotes set forth certain
information regarding beneficial ownership of the limited partnership and
general partnership interests in the Issuers, as of the date hereof, by (i)
each person who is known by the Issuers to own beneficially more than 5% of
such interests, (ii) each member of the Advisory Committee of Holdings and
each of the executive officers of the Operating Company and (iii) all members
of the Advisory Committee of Holdings and the executive officers of the
Operating Company as a group. For a more detailed discussion of certain
ownership interests following the Recapitalization, see "Business The
Recapitalization" (Item 1) and "Certain Relationships and Related Party
Transactions" (Item 13).
Name and Address
of Beneficial Percentage
Issuer Owner Type of Interest Interest
- ----------------------- ----------------- --------------- ----------
Limited
Graham Packaging Company Holdings Partnership 99%
General
Opco GP(1) Partnership 1%
GPC Capital Corp. I Operating Company Common Stock 100%
Graham Packaging
Holdings Company Investor LP(2) Limited 81%
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Name and Address
of Beneficial Percentage
Issuer Owner Type of Interest Interest
- ----------------------- ----------------- --------------- ----------
General
Investor GP(2) Partnership 4%
Graham Family Limited
entities(3) Partnership 14%
Graham Packaging General
Corporation(3) Partnership 1%
GPC Capital Corp. II Holdings Common Stock 100%
(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, Blackstone Offshore
Capital Partners III L.P. and Blackstone Family Investment Partnership
III L.P. became, collectively, the beneficial owner of 100.0% of the
common stock of Investor LP. Blackstone Management Associates III L.L.C.
("BMA") is the general partner of each of such entities. Messrs. Peter
G. Peterson, Stephen A. Schwarzman and Howard A. Lipson are members of
BMA, which has investment and voting control over the shares held or
controlled by Blackstone. Each of such persons disclaims beneficial
ownership of such shares. The address of each of the Equity Investors is
c/o The Blackstone Group L.P., 345 Park Avenue, New York, New York
10154. Following the consummation of the Recapitalization, Blackstone
transferred to Management approximately 3.0% of the common stock of
Investor LP. See "Management--Management Awards." 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 4.8% of the common stock of Investor LP. After giving
effect to these transactions, Blackstone's beneficial ownership of the
common stock of Investor LP declined by a corresponding 3.0% and 4.8%,
respectively, to approximately 92.2%.
(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.
Item 13. Certain Relationships and Related 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 this Report on Form 10-K.
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<PAGE>
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.
At the time of the Recapitalization, Donald C. Graham and Jean Rubie
were 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 $5.2 million and
$3.5 million for such equipment for the year ended December 31, 1998 and
1997, respectively. Prior to the Recapitalization, Mr. Rubie served as
General Manager, Europe, of the Company. Subsequent to the Recapitalization,
Mr. Graham sold his ownership interest in Techne.
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<PAGE>
Graham Engineering has supplied both services and equipment to the
Company. The Company paid Graham Engineering approximately $16.8 million and
$11.3 million for such services and equipment for the years ended
December 31, 1998 and 1997, respectively.
The Company has provided certain services to Graham Engineering. Graham
Engineering paid the Company approximately $1.4 million and $1.0 million for
such services for the years ended December 31, 1998 and 1997, respectively.
Graham Capital and Viking Graham, Inc. (an affiliate of the Graham
Partners) has supplied management services to the Company. The Company paid
Graham Capital and Viking Graham, Inc. approximately $1.1 million for such
services for the year ended December 31, 1998.
Blackstone has supplied management services to the Company. The Company
paid Blackstone approximately $1.0 million for such services for the year
ended December 31, 1998.
The Company has entered into an Airplane Time Sharing Agreement with
Graham Capital Company. Other parties to the agreement were Graham
Architectural Products Corporation, Viking Graham, Inc. and Graham
Engineering Corporation. The Company paid $3,500 for the year ended
December 31, 1998 pursuant to such agreement.
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 Agreement
entered into in connection with the Recapitalization, for which it received
customary commitment and other fees and compensation.
The New Credit Agreement includes a $100 million Growth Capital
Revolving Credit Facility under which the Operating Company is entitled to
draw amounts for capital expenditure requirements and to finance acquisitions
and investments; provided that loans under the Growth Capital Revolving
Credit 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.
As part of the Amendment to the New Credit Agreement, if certain events
of default were to occur (including, without limitation, if the Company's
Net Leverage Ratio were above 5.15:1.0 at March 31, 2000), Blackstone has
agreed to make an equity contribution to the Company through the
administrative agent of up to $50 million.
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<PAGE>
<PAGE>
Pursuant to the Purchase Agreement 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% or a total discount of
$6,750,000. Pursuant to the Purchase Agreement, the Initial Purchasers
purchased the Senior Discount Old Notes at a price of 57.173% of the
principal amount, for a discount of 2.361% from the initial offering price of
59.534% or a total discount of $3,990,090. Pursuant to the Purchase
Agreement, the Issuers also reimbursed the Initial Purchasers for certain
expenses.
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<PAGE>
<PAGE>
The Partnership Agreements
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
-101-
<PAGE>
<PAGE>
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.
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
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<PAGE>
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.
-103-
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<PAGE>
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 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.
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
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<PAGE>
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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PART IV
Item 14. Exhibits, Financial Statements Schedules and Reports on Form 8-K
(a) The following Financial Statement Schedules are included herein:
Schedule I - Registrant's Condensed Financial Statements
Schedule II - Valuation and Qualifying Accounts
All other schedules are not submitted because they are not applicable or
not required or because the required information is included in the financial
statements or the notes thereto.
(b) The following exhibits are filed herewith or incorporated herein by
reference:
Exhibit
Number Description of 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 Holdings Company, BCP
/Graham Holdings L.L.C., BMP/Graham Holdings Corporation and the
other parties named therein (incorporated herein by reference to
Exhibit 2.1 to the Registration Statement on Form S-4 (File No.
333-53603-06)).
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. L.L.C. and Salomon
Brothers Inc (incorporated herein by reference to Exhibit 2.2 to
the Registration Statement on Form S-4 (File No. 333-53603-03)).
2.3 - Purchase Agreement between CarnaudMetalbox S.A. and Graham
Packaging Company dated as of July 27, 1998.
3.1 - Certificate of Limited Partnership of Graham Packaging Company
(incorporated herein by reference to Exhibit 3.2 to the
Registration Statement on Form S-4 (File No. 333-53603-03)).
3.2 - Amended and Restated Agreement of Limited Partnership of Graham
Packaging Company dated as of February 2, 1998 (incorporated
herein by reference to Exhibit 3.2 to the Registration Statement
on Form S-4 (File No. 333-53603-03)).
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Exhibit
Number Description of Exhibit
- ------- ----------------------
3.3 - Certificate of Incorporation of GPC Capital Corp. I
(incorporated herein by reference to Exhibit 3.3 to the
Registration Statement on Form S-4 (File No. 333-53603-03)).
3.4 - By-Laws of GPC Capital Corp. I (incorporated herein by reference
to Exhibit 3.4 to the Registration Statement on Form S-4 (File
No. 333-53603-03)).
3.5 - Certificate of Limited Partnership of Graham Packaging Holdings
Company (incorporated herein by reference to Exhibit 3.5 to the
Registration Statement on Form S-4 (File No. 333-53603-03)).
3.6 - Fifth Amended and Restated Agreement of Limited Partnership of
Graham Packaging Holdings Company dated as of February 2, 1998
(incorporated herein by reference to Exhibit 3.6 to the
Registration Statement on Form S-4 (File No. 333-53603-03)).
3.7 - Certificate of Incorporation of GPC Capital Corp. II
(incorporated herein by reference to Exhibit 3.7 to the
Registration Statement on Form S-4 (File No. 333-53603-03)).
3.8 - By-Laws of GPC Capital Corp. II (incorporated herein by
reference to Exhibit 3.8 to the Registration Statement on Form
S-4 (File No. 333-53603-03)).
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
(incorporated herein by reference to Exhibit 4.1 to the
Registration Statement on Form S-4 (File No. 333-53603-03)).
4.2 - Form of 8 3/4% Senior Subordinated Note Due 2008, Series A
(included in Exhibit 4.1) (incorporated herein by reference to
Exhibit 4.2 to the Registration Statement on Form S-4 (File No.
333-53603-03)).
4.3 - Form of 8 3/4% Senior Subordinated Note Due 2008, Series B
(included in Exhibit 4.1) (incorporated herein by reference to
Exhibit 4.3 to the Registration Statement on Form S-4 (File No.
333-53603-03)).
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Exhibit
Number Description of Exhibit
- ------- ----------------------
4.4 - Form of Floating Interest Rate Term Security Due 2008, Series A
(included in Exhibit 4.1) (incorporated herein by reference to
Exhibit 4.4 to the Registration Statement on Form S-4 (File No.
333-53603-03)).
4.5 - Form of Floating Interest Rate Term Security Due 2008, Series B
(included in Exhibit 4.1) (incorporated herein by reference to
Exhibit 4.5 to the Registration Statement on Form S-4 (File No.
333-53603-03)).
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. L.L.C. 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 (incorporated herein by reference to Exhibit
4.6 to the Registration Statement on Form S-4 (File No. 333-
53603-03)).
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
(incorporated herein by reference to Exhibit 4.7 to the
Registration Statement on Form S-4 (File No. 333-53603-03)).
4.8 - Form of 10 3/4% Senior Discount Note Due 2009, Series A
(included in Exhibit 4.7) (incorporated herein by reference to
Exhibit 4.8 to the Registration Statement on Form S-4 (File No.
333-53603-03)).
4.9 - Form of 10 3/4% Senior Discount Note Due 2009, Series B
(included in Exhibit 4.7) (incorporated herein by reference to
Exhibit 4.8 to the Registration Statement on Form S-4 (File No.
333-53603-03)).
-109-
<PAGE>
<PAGE>
Exhibit
Number Description of Exhibit
- ------- ----------------------
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. L.L.C. and Salomon Brothers Inc. relating to
the Senior Discount Notes Due 2009 of Graham Packaging Holdings
Company and GPC Capital Corp. II (incorporated herein by
reference to Exhibit 4.10 to the Registration Statement on Form
S-4 (File No. 333-53603-03)).
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 (incorporated herein by reference to Exhibit 10.1 to
the Registration Statement on Form S-4 (File No. 333-53603-03)).
10.2 - Consulting Agreement dated as of February 2, 1998 between Graham
Packaging Holdings Company and Graham Capital Corporation
(incorporated herein by reference to Exhibit 10.2 to the
Registration Statement on Form S-4 (File No. 333-53603-03)).
10.3 - Equipment Sales, Service and License Agreement dated February 2,
1998 between Graham Engineering Corporation and Graham Packaging
Holdings Company (incorporated herein by reference to Exhibit
10.3 to the Registration Statement on Form S-4 (File No. 333-
53603-03)).
10.4 - Forms of Retention Incentive Agreement (incorporated herein by
reference to Exhibit 10.4 to the Registration Statement on Form
S-4 (File No. 333-53603-03)).
10.5 - Forms of Severance Agreement (incorporated herein by reference
to Exhibit 10.5 to the Registration Statement on Form S-4 (File
No. 333-53603-03)).
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 L.L.C.,
BMP/Graham Holdings Corporation and the other parties named
therein (incorporated herein by reference to Exhibit 10.6 to the
Registration Statement on Form S-4 (File No. 333-53603-03)).
-110-
<PAGE>
<PAGE>
Exhibit
Number Description of Exhibit
- ------- ----------------------
10.7 - Monitoring Agreement dated as of February 2, 1998 among Graham
Packaging Holdings Company, Graham Packaging Company and
Blackstone (incorporated herein by reference to Exhibit 10.7 to
the Registration Statement on Form S-4 (File No. 333-53603-03)).
10.8 - Management Stockholders Agreement (incorporated herein by
reference to Exhibit 10.8 to the Registration Statement on Form
S-4 (File No. 333-53603-03)).
10.9 - Form of Equity Incentive Agreement (incorporated herein by
reference to Exhibit 10.9 to the Registration Statement on Form
S-4 (File No. 333-53603-03)).
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. (incorporated herein
by reference to Exhibit 10.10 to the Registration Statement on
Form S-4 (File No. 333-53603-03)).
10.11 - Graham Packaging Holdings Company Management Option Plan
(incorporated herein by reference to Exhibit 10.11 to the
Registration Statement on Form S-4 (File No. 333-53603-03)).
10.12 - First Amendment to Credit Agreement dated as of
August 13, 1998.
21.1 - Subsidiaries of Graham Packaging Holdings Company
24 - Power of Attorney--Page II- of Form 10-K.
27 - Financial Data Schedule
99.1 - Form of Fixed Rate Senior Subordinated Letter of Transmittal
(incorporated herein by reference to Exhibit to the Registration
Statement on Form S-4 (File No. 333-53603-03)).
99.2 - Form of Fixed Rate Senior Subordinated Notice of guaranteed
Delivery (incorporated herein by reference to Exhibit to the
Registration Statement on Form S-4 (File No. 333-53603-03)).
-111-
<PAGE>
<PAGE>
Exhibit
Number Description of Exhibit
- ------- ----------------------
99.3 - Form of Floating Rate Senior Subordinated Letter of Transmittal
(incorporated herein by reference to Exhibit to the Registration
Statement on Form S-4 (File No. 333-53603-03)).
99.4 - Form of Floating Rate Senior Subordinated Notice of guaranteed
Delivery (incorporated herein by reference to Exhibit to the
Registration Statement on Form S-4 (File No. 333-53603-03)).
99.5 - Form of Senior Discount Letter of Transmittal (incorporated
herein by reference to Exhibit to the Registration Statement on
Form S-4 (File No. 333-53603-03)).
99.6 - Form of Senior Discount Notice of guaranteed Delivery
(incorporated herein by reference to Exhibit to the Registration
Statement on Form S-4 (File No. 333-53603-03)).
(c) Reports on Form 8-K
No Reports on Form 8-K were required to be filed during the quarter
ended December 31, 1998.
-112-
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
Dated: March 31, 1999
GRAHAM PACKAGING HOLDINGS COMPANY
(Registrant)
By: BCP /Graham Holdings L.L.C.,
its General Partner
By: /s/ John E. Hamilton
Name: John E. Hamilton
Title: Chief Financial Officer
(chief accounting officer and
duly authorized officer)
-113-
<PAGE>
<PAGE>
POWER OF ATTORNEY
We, the undersigned officers of BCP Graham Holdings L.L.C., as general
partner of Graham Packaging Holdings Company, and directors of BMP/Graham
Corporation, as sole member of BCP/Graham Holdings L.L.C., as the general
partner of Graham Packaging Holdings Company, do hereby constitute and
appoint Philip R. Yates and John E. Hamilton, or either of them, our true and
lawful attorneys and agents, to sign for us, or any of us, in our names in
the capacities indicated below, any and all amendments to this report, and to
cause the same to be filed with the Securities and Exchange Commission,
granting to said attorneys, and each of them, full power and authority to do
and perform any act and thing necessary or appropriate to be done in the
premises, as fully to all intents and purposes as the undersigned could do if
personally present, and we do hereby ratify and confirm all that said
attorneys and agents, or either of them, shall do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed on the 31st day of March, 1999 by the following
persons on behalf of the registrant and 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:
Signature Title
--------- -----
/s/ Howard A. Lipson President, Treasurer and Assistant Secretary
------------------------
Howard A. Lipson (Principal Executive Officer) of BCP /Graham
Holdings L.L.C.
/s/ John E. Hamilton Chief Financial Officer,
------------------------
John E. Hamilton Assistant Secretary and Assistant Treasurer
(Principal Financial Officer and Principal
Accounting Officer) of BCP / Graham Holdings
L.L.C.
/s/ Howard A. Lipson Director of BMP/Graham Holdings Corporation
------------------------
Howard A. Lipson
-114-
<PAGE>
<PAGE>
Signature Title
--------- -----
/s/ Chinh E. Chu Director of BMP/Graham Holdings Corporation
------------------------
Chinh E. Chu
/s/ Simon P. Lonergan Director of BMP/Graham Holdings Corporation
------------------------
Simon P. Lonergan
-115-
<PAGE>
<PAGE>
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO
SECTION 15(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES
PURSUANT TO SECTION 12 OF THE ACT.
No annual report to security holders covering the registrant's last fiscal
year has been sent to security holders. No proxy statement, form of proxy
or other proxy soliciting material has been sent to more than 10 of the
registrant's security holders with respect to any annual or other meeting
of security holders.
-116-
<PAGE>
SCHEDULE I
GRAHAM PACKAGING HOLDINGS COMPANY
REGISTRANT'S CONDENSED FINANCIAL STATEMENTS
(In thousands)
BALANCE SHEET
<TABLE>
<CAPTION>
December 31, 1998
------------------------------
<S> <C>
Assets
Current assets --
Intangible assets, net 5,047
---------
Total assets $ 5,047
=========
Liabilities and Partners' Capital
Current liabilities $ 6,972
Long-term Debt 110,697
Investment in subsidiary 326,172
---------
Total liabilities 443,841
Partners' capital (438,794)
---------
Total liabilities and partners' capital $ 5,047
=========
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended December 31, 1998
------------------------------
<S> <C>
Equity in earnings of subsidiaries $ (14,516)
Recapitalization expenses (1,000)
Interest expense (10,546)
--------
Net Loss $ (26,062)
=========
</TABLE>
-117-
<PAGE>
<PAGE>
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31, 1998
------------------------------
<S> <C>
Cash flows from operating activities:
Net Loss $ (26,062)
Adjustments to reconcile net income to net cash provided by
operating activities:
Amortization of debt issuance costs
Accretion of senior discount notes 462
Changes in current liabilities 10,085
Net cash provided by operating activities 6,972
Equity income in subsidiaries 14,516
--------
5,973
Cash flows from investing activities:
Investments in a Business 314,477
Cash flows from financing activities:
Borrowings on long-term debt
Cash distributions to Partners 100,612
Debt issuance fees (415,554)
Net cash used in financing activities (5,508)
--------
(320,450)
Net change in cash and cash equivalents
Cash and cash equivalents at beginning of period 0
Cash and cash equivalents at end of period 0
--------
$ 0
========
Supplemental cash flow information:
Cash paid for interest $ --
See footnotes to consolidated financial statements of Graham Packaging
Holdings Company.
</TABLE>
-118-
<PAGE>
<PAGE>
SCHEDULE II
GRAHAM PACKAGING HOLDINGS COMPANY
VALUATION AND QUALIFYING ACCOUNTS
(In thousands)
<TABLE>
<CAPTION>
Balance @ Balance @
beginning of end of
Year ended December 31, 1998 year Additions Deductions Other(1) year
--------------------------------- --------------- --------------- --------------- ------- ------------
<S> <C> <C> <C> <C> <C>
Allowance for Doubtful Accounts $1,635 $ 32 $395 163 $1,435
Allowance for Inventory Losses 566 514 220 587 1,447
Year ended December 31, 1997
---------------------------------
Allowance for Doubtful Accounts 1,202 512 79 1,635
Allowance for Inventory Losses 901 75 410 566
Year ended December 31, 1996
---------------------------------
Allowance for Doubtful Accounts 619 816 233 1,202
Allowance for Inventory Losses 1,217 298 614 901
(1) Represents allowance attributable to entities acquired during 1998.
</TABLE>
-119
Exhibit 2.3
PURCHASE AGREEMENT
This PURCHASE AGREEMENT ("Agreement") of this 27th day of July
1998, between Graham Packaging Company, a limited partnership organized under
the laws of the State of Delaware of the United States of America, whose head
office is located at 1100 East Princess Street, York PA 17403, ("Buyer") and
CarnaudMetalbox S.A., a French societe anonyme, having a corporate capital of
FRF 529,486,300, whose head office is located at 67, rue Arago, 93400 Saint
Ouen, registered with the Registry of Commerce and Companies of Bobigny under
number B 775 721 996 ("Seller"), which acts (x) as owner of the French Shares
and the Turkish Shares, (y) as controlling shareholder of Societe de
Participation CarnaudMetalbox, a French societe anonyme having a corporate
capital of FRF 290,050,200, whose head office is located at 67 rue Arago,
93400 Saint-Ouen, registered with the Registry of Commerce and Companies of
Bobigny under number B 389 579 012 ("SPC") with respect to the Aggregate
Closing Date Intragroup Indebtedness and of CMB Germany with respect to
actions to be taken by CMB Germany and (z) as affiliate of CMB U.K. with
respect to actions to be taken by CMB U.K.
R E C I T A L S:
WHEREAS, Seller and Seller's affiliates hold directly or indirectly
the following assets and shares:
(i) 100% of the issued and outstanding shares and voting rights,
less one (1) share, that is 470,499 shares ("French Shares") of CMB Plastique
S.A., a French societe anonyme, having a corporate capital of FRF 47,050,000,
whose head office is located at 67, rue Arago, 93400 Saint Ouen, registered
with the Registry of Commerce and Companies of Bobigny under number B 342 952
694 ("CMB France") and which owns and operates two plants located at Meaux
("Meaux Plant") and Noeux-les-Mines ("Noeux Plant") and an in-house bottle
manufacturing facility located at Asnieres ("Asnieres Facility") engaged in
the manufacture of plastic products identified in Schedule 0.1 attached
hereto ("Plastic Products");
(ii) 100% of the issued and outstanding shares and voting rights of
CarnaudMetalbox plc, a corporation organized under the laws of England,
having a corporate capital of (Pound Sterling)85,000,000, whose head office
is located at Downsview Road, Wantage, Oxfordshire ("CMB U.K."), and which
owns a plant, formerly operated by CMB Bottles and Closures plc ("CMB&C"),
located at Wrexham (said plant, together with other fixed and movable assets,
contracts, goodwill and real property related to the conduct of the business
at the plant which are to be transferred and associated liabilities which are
to be assumed pursuant to the U.K. Asset Purchase Agreement attached hereto
as Exhibit IV, and are more fully described therein, the "U.K. Plant")
engaged in the manufacture of Plastic Products identified in Schedule 0.1
attached hereto;
<PAGE>
<PAGE>
(iii) 100% of the issued and outstanding shares and voting
rights of Raku GmbH, a corporation organized under the laws of Germany,
having a corporate capital of DM 3,100,000, whose head office is located at
Im Woehr 2, 76437 Rastatt ("CMB Germany") and which owns and operates a plant
located at Bad Bevensen engaged in the manufacture of Plastic Products
identified in Schedule 0.1 attached hereto (said plant, together with other
fixed and movable assets, contracts, goodwill and real property related to
the conduct of business at the plant which are to be transferred and
associated liabilities which are to be assumed pursuant to the German Asset
Purchase Agreement attached as Exhibit II, and are more fully described
therein, the "German Plant");
(iv) 100% of the issued and outstanding shares and voting rights,
that is 80,000,000 shares ("Turkish Shares") of CMB Plastpak Plastic, Ambalaj
Sanayi A.S., a corporation organized under the laws of Turkey, having a
corporate capital of TL 80,000,000,000, whose head office is located at
Firuzkoeyue Ba lar Mevkii, Avcilar, Istanbul ("CMB Turkey") and which owns
and operates one plant located at Istanbul ("Istanbul Plant") engaged in the
manufacture of Plastic Products identified in Schedule 0.1 attached hereto;
WHEREAS, Seller desires to sell or cause to sell to Buyer, or an
affiliate of Buyer, and Buyer desires to purchase, or cause its designated
affiliate to purchase, all of the French Shares and the Turkish Shares
(collectively the "Shares") and the U.K. Plant and the German Plant
(sometimes collectively the "Plants") for the Purchase Price (as hereinafter
defined) and Seller agrees to sell, or cause its designated affiliate to sell
to Buyer, or an affiliate of Buyer, and Buyer agrees to purchase or cause its
designated affiliate to purchase the Aggregate Closing Date Intragroup
Indebtedness (as hereinafter defined), all upon the terms and conditions
hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual promises and
covenants contained herein, the parties hereto agree as follows:
ARTICLE 1
PURCHASE AND SALE OF SHARES, PLANTS AND
AGGREGATE CLOSING DATE INTRAGROUP INDEBTEDNESS.
1.1 Purchase of Shares, Plants and Aggregate Closing Date
Intragroup Indebtedness. Subject to the terms and conditions hereof, Seller
agrees to sell, assign and transfer or to cause to sell, assign and transfer,
as the case may be, to Buyer or an affiliate of Buyer and Buyer agrees to
purchase or cause its designated affiliate to purchase from Seller, on the
Closing Date and at the Closing (as defined in Section S.1 hereof), (i) the
Shares, (ii) the Plants, comprising the tangible and intangible assets,
-2-
<PAGE>
<PAGE>
rights, properties, contracts and liabilities described herein, in the form
of the real property deed of conveyance, and the asset purchase agreements
attached hereto as Exhibits I, II, III and IV, and to be executed and
delivered at the Closing, and (iii) the Aggregate Closing Date Intragroup
Indebtedness (as defined in Section 1.2.1(b) hereof).
1.2 Purchase Price and Payment.
1.2.1 Purchase Price for Shares and Plants. (a) The aggregate
purchase price for the Shares and the Plants payable at Closing shall be
equal to: (i) thirty-seven million five hundred thousand U.S. Dollars
(US$37,500,000), minus (ii) the estimated amount of Aggregate Closing Date
Intragroup Indebtedness, minus (iii) the estimated amount of Closing Date
Third Party Financial Indebtedness, plus (iv) the estimated amount of
Reimbursed Capital Expenditures, plus (v) the estimated amount of Reimbursed
Restructuring Costs, plus (vi) interest on the net amount of items (i)
through (v) above from July 1, 1998 to the Closing Date at the Agreed
Interest Rate (as defined at Section 1.2.2 below).
(b) As used in this Agreement, "Aggregate Closing Date Intragroup
Indebtedness" shall mean the principal amount of aggregate Intragroup
indebtedness and accrued interest thereon of CMB France and CMB Turkey to
Seller and/or its affiliates, determined as of the Closing Date, the amount
of which was equal to approximately US$14.482 million at December 31, 1997.
"Closing Date Third Party Financial Indebtedness" shall mean any
indebtedness, other than the Aggregate Closing Date Intragroup Indebtedness,
owed by CMB France or CMB Turkey, or to be assumed by Buyer or its affiliates
in respect of the Plants as of the Closing Date and which (i) is owed to
banks or other financial institutions or third party lenders, in full or
partial repayment of amounts advanced up to the Closing Date (including both
the current and longterm portions of such indebtedness); or (ii) constitutes
capital lease obligations under U.S. GAAP (as defined in Section 1.2.3) for
buildings, goods or equipment provided or made available to CMB France, CMB
Turkey or the Plants up to the Closing Date including future payments to be
made in satisfaction of such capital lease obligations, the net amount of
which was equal to approximately US$707,000 at December 31, 1997. "Reimbursed
Capital Expenditures" shall mean capital expenditures which have been
invoiced on or after January 1, 1998 to and including the Effective Date to
CMB U.K. or CMB Germany (in respect of the Plants) or to CMB France or CMB
Turkey, with respect to those 1998 capital expenditure projects identified at
Schedule 1.2.1 (b) hereto (and shall include amounts disbursed as deposits in
respect thereof in 1997). "Reimbursed Restructuring Costs" shall mean, with
respect to the German Plant, those costs incurred to and including the
Effective Date in respect of restructuring of the labor force and with
respect to CMB France such costs actually paid, as more fully itemized at
Schedule 1.2.1(b) (such costs including in each case non-capitalized costs in
addition to direct payments to employees). The parties have agreed that, for
-3-
<PAGE>
<PAGE>
the purposes of the calculation set forth above in this Section 1.2.1, the
Reimbursed Capital Expenditures plus the Reimbursed Restructuring Costs shall
not exceed US$8,400,000 and the Reimbursed Restructuring Costs shall not
exceed US$3,000,000.
(c) The net amount of items (i), minus (ii), minus (iii), plus
(iv), plus (v), plus (vi) as estimated immediately prior to the Closing Date
is herein referred to as the "Unadjusted Purchase Price". The allocation of
the Unadjusted Purchase Price among the French Shares, the Turkish Shares,
the U.K. Plant and the German Plant, and the estimated allocation of the
Aggregate Closing Date Intragroup Indebtedness, is set forth in Schedule
1.2.1(c) attached hereto. Seller shall receive the Unadjusted Purchase Price,
the estimated amount of the Aggregate Closing Date Intragroup Indebtedness
and the Post-Closing Adjustment Amount (or shall pay the Post-Closing
Adjustment Amount, as defined in Section 1.2.6 hereof) in its own name and on
its own behalf with respect to the French Shares, the Turkish Shares, in the
name and on behalf of SPC with respect to the Aggregate Closing Date
Intragroup Indebtedness, and (to the extent payment is not made and received
directly by the relevant local affiliates) in the name and on behalf of CMB
Germany and CMB U.K. with respect to the German Plant and the U.K. Plant.
1.2.2 General Method of Payment. The payment of the Unadjusted
Purchase Price, the Aggregate Closing Date Intragroup Indebtedness, the Post-
Closing Adjustment Amount and all other cash payments under this Agreement
shall be made to the receiving party by depositing, by bank wire transfer,
the required amount in immediately available funds in an account designated
by the receiving party for such purpose (or, at the option of the receiving
party, by certified or bank check). Without prejudice to the provisions of
Section 1.2.7, all sums payable hereunder which are not paid in a timely
fashion shall bear interest, in U.S. Dollars and net of withholding tax, at
the rate per annum equal to LIBOR for deposits of three months duration plus
one hundred (100) basis points ("Agreed Interest Rate") from and including
the day payment was due through and including the day payment is made.
1.2.3 Base Balance Sheets. Attached hereto as Schedule 1.2.3 are
(i) unaudited pro forma balance sheets of the assets and liabilities of the
German Plant (including all German assets to be transferred and all
liabilities to be assumed pursuant to the German Asset Purchase Agreement)
and the U.K. Plant (including all U.K. assets to be transferred and all
liabilities to be assumed pursuant to the U.K. Asset Purchase Agreement) as
at December 31, 1997, (respectively the "German and U.K. Pro-Forma Base
Balance Sheets") and (ii) the unaudited balance sheets of CMB France and CMB
Turkey as at December 31, 1997 (respectively the "French and Turkish Base
Balance Sheets") (the German and U.K. Pro-Forma Base Balance Sheets and the
French and Turkish Base Balance Sheets being referred to collectively as the
"Base Balance Sheets"). The Base Balance Sheets have been prepared in
accordance with generally accepted accounting principles in the United States
-4-
<PAGE>
<PAGE>
("U.S. GAAP") as applied by Seller's group for such year-end ("Seller's
Accounting Principles"). The German and U.K. Pro Forma Base Balance Sheets
reflect as assets and liabilities only such categories thereof as will
constitute Transferred Assets and Transferred Liabilities (as defined in the
deed of conveyance and asset purchase agreements attached hereto as Exhibits
I, II, III and IV).
1.2.4 Effective Date Balance Sheets and Closing Statements. As
soon as practicable and, in any event, not later than seventy-five (75)
calendar days after the Closing, Seller shall deliver to Buyer (i) unaudited
pro-forma balance sheets of the Plants as of June 30, 1998 ("Effective Date")
and unaudited balance sheets of CMB France and CMB Turkey as of the Effective
Date ("Effective Date Balance Sheets") together with (ii) statements
("Closing Statements") setting forth (A) the amount of the Pro Forma Year-to-
Effective Date Net Income (as defined in Section 1.2.6(c) below), Net Working
Capital as of the Effective Date (as defined in Section 1.2.6(c) hereof),
Reimbursed Capital Expenditures, Reimbursed Restructuring Costs, Aggregate
Closing Date Intragroup Indebtedness and Closing Date Third Party Financial
Indebtedness, (B) any adjustment to the Base Balance Sheets or Effective Date
Balance Sheets required to appropriately reflect, consistently between the
Base Balance Sheets and Effective Date Balance Sheets, pension or retirement
liabilities in accordance with FAS 87 and FAS 106 of U.S. GAAP and (C) the
resulting Post-Closing Adjustment Amount, if any, determined in accordance
with Section 1.2.6(a) hereof. The Effective Date Balance Sheets shall be
prepared on a basis consistent with the Base Balance Sheets. Buyer's
independent accountant, Deloitte Touche Tohmatsu ("Buyer's Auditor"), on
behalf of Buyer, shall have access to all work papers prepared by Seller, and
any other documents, accounting records or evidence of financial transactions
as they consider necessary in connection with the audit of the Effective Date
Balance Sheets and the Closing Statements.
1.2.5 Disputes Regarding Effective Date Balance Sheets and Closing
Statements. (a) As soon as practicable and, in any event, not later than
sixty (60) calendar days after the delivery to Buyer of the Effective Date
Balance Sheets and the Closing Statements, Buyer shall have reviewed such
documents. Unless Buyer notifies Seller in writing within such period of any
objection to the Effective Date Balance Sheets and/or the Closing Statements,
specifying in reasonable detail the items and amounts subject to such
objection ("Disputed Items"), the Effective Date Balance Sheets and the
Closing Statements (including the Post-Closing Adjustment Amount, if any,
shown thereon) shall be conclusive and binding on Buyer. If within such
period Buyer notifies Seller in writing of any such objection, then Buyer and
Seller shall use reasonable efforts for thirty (30) calendar days after the
expiration of such initial period to resolve in good faith their differences
and agree upon any adjustments to the Effective Date Balance Sheets and/or
the Closing Statements (including any Post-Closing Adjustment Amount shown
thereon). Any Disputed Items which are not resolved by the mutual agreement
-5-
<PAGE>
<PAGE>
of Buyer and Seller within such thirty-day period shall be submitted for
resolution to the Paris, France office of KPMG, or, if KPMG shall not accept
such mission, to another internationally recognized independent certified
public accounting firm mutually acceptable to Seller and Buyer ("Independent
Accounting Firm"). Seller and Buyer shall instruct the Independent Accounting
Firm to limit its examination to the unresolved Disputed Items, to resolve
any Disputed Items affecting the Effective Date Balance Sheets and/or the
Closing Statements in such manner as to preserve the conformity of the
Effective Date Balance Sheets and/or the Closing Statements with the
requirements described in Sections 1.2.4 and 1.2.6(c) hereof and to use its
best efforts to make its determination thereon within twenty (20) calendar
days after its engagement hereunder. The resolution of any such previously
unresolved Disputed Items by such accounting firm shall be made in a writing
delivered to Buyer and Seller as promptly as practicable (which writing shall
set forth the amount of any Post-Closing Adjustment Amount as finally
determined) and shall be final, conclusive and binding upon Seller and Buyer
in accordance with Article 1592 of the French Civil Code. The fees and
expenses charged by the Independent Accounting Firm with respect to Disputed
Items shall be borne by the non-prevailing party or pro-rated between the
parties to the extent the resolution thereof involves an allocation between
the parties of the amount of the Disputed Items.
(b) The Effective Date Balance Sheets and the Closing Statements
to which Buyer does not object as provided in Section 1.2.5(a) hereof, or to
which Seller and Buyer agree, or as otherwise conclusively determined
pursuant to Section 1.2.5(a) hereof (such final form of the Effective Date
Balance Sheets and the Closing Statements being referred to herein
respectively as the "Final French, U.K., Turkish and German Effective Date
Balance Sheets" or sometimes collectively "Final Effective Date Balance
Sheets") and the Final Closing Statements shall be used in determining the
Post-Closing Adjustment Amount.
1.2.6 Determination of any Post-Closing Adjustment Amount. (a)
The payment of a post-closing adjustment and the amount thereof, if any,
shall be determined as follows:
(i) If the Pro Forma Year-to-Effective Date Net Income (as
defined in Section 1.2.6(c) hereof) is a positive amount (profit), said
amount shall be credited to Seller for purposes of the calculation of
the Post-Closing Adjustment Amount.
(ii) If the Pro Forma Year-to-Effective Date Net Income is a
negative amount (loss), said amount (expressed as a positive number)
shall be credited to Buyer for the purposes of the calculation of the
Post-Closing Adjustment Amount.
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(iii) If the Net Working Capital as of the Effective Date exceeds
US$1,413,000, said excess shall be credited to Seller for purposes of
the calculation of the Post-Closing Adjustment Amount.
(iv) If the Net Working Capital as of the Effective Date is less
than US$1,413,000, said deficit shall be credited to Buyer for the
purposes of the calculation of the Post-Closing Adjustment Amount.
(v) To the extent the sum of the Aggregate Closing Date
Intragroup Indebtedness and the Closing Date Third Party Financial
Indebtedness (expressed as positive numbers) minus the sum of the
Reimbursed Capital Expenditures and the Reimbursed Restructuring Costs
(expressed as positive numbers) as finally determined on the Closing
Statements shall exceed the result of such amounts as estimated for the
purposes of Section 1.2.1 above, said excess shall be credited to Buyer
for the purposes of the calculation of the Post-Closing Adjustment
Amount (provided always that the sum of Reimbursed Capital Expenditures
and Reimbursed Restructuring Costs for purposes hereof shall not exceed
US$8,400,000 and that Reimbursed Restructuring Costs shall not exceed
US$3,000,000).
(vi) To the extent the sum of the Aggregate Closing Date
Intragroup Indebtedness and the Closing Date Third Party Financial
Indebtedness (expressed as positive numbers) minus the sum of the
Reimbursed Capital Expenditures and the Reimbursed Restructuring Costs
(expressed as positive numbers) as finally determined on the Closing
Statements shall be less than the result of such amounts as estimated
for the purposes of Section 1.2.1 above, said deficit shall be credited
to Seller for the purposes of the calculation of the Post Closing
Adjustment Amount (provided always that the sum of Reimbursed Capital
Expenditures and Reimbursed Restructuring Costs for purposes hereof
shall not exceed US$8,400,000 and that Reimbursed Restructuring Costs
shall not exceed US$3,000,000).
(b) The net amount due to Buyer by Seller or to Seller by Buyer as
the case may be, resulting from the calculations set forth at paragraph (a)
(i) through (vi) above, shall constitute the "Post Closing Adjustment
Amount".
(c) As used in this Agreement, the "Pro Forma Year-to-Effective
Date Net Income" shall mean the combined pro forma net income (loss) of CMB
France, CMB Turkey, the German Plant and the U.K. Plant from January 1, 1998
to June 30, 1998 determined in accordance with the Hyperion reporting system
that services as the basis for the Base Balance Sheets attached hereto at
Schedule 1.2.6(c). "Net Working Capital as of the Base Balance Sheet Date"
and "Working Capital as of the Effective Date" shall respectively equal the
sum of inventories plus accounts receivables plus Intragroup receivables plus
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prepaid accounts plus other current and non-current assets minus accounts
payables minus Intragroup payables minus accruals minus other current and
non-current liabilities, as set forth on the respective Base Balance Sheets
or the Effective Date Balance Sheets, all as defined and determined in
accordance with Schedule 1.2.6(c) hereto. For the avoidance of doubt,
Schedule 1.2.6(c) hereto sets forth hypothetical determination of the Post-
Closing Adjustment Amount.
(d) The Post-Closing Adjustment shall be allocated among Seller
(with respect to the French and Turkish Shares), CMB Germany (with respect to
the German Plant), CMB U.K. (with respect to the U.K. Plant) and SPC (with
respect to the Aggregate Closing Date Intragroup Indebtedness), in accordance
with the respective individual adjustments comprising the Post-Closing
Adjustment, and shall be debited or credited, as the case may be, to Seller,
CMB Germany, CMB U.K. or SPC. Buyer shall apply such allocation of the Post-
Closing Adjustment
on a basis consistent with that determined pursuant to the above.
1.2.7 Payment of Purchase Price and Aggregate Closing Date
Intragroup Indebtedness. The Purchase Price and the Aggregate Closing Date
Intragroup Indebtedness shall be paid as follows:
(a) At the Closing, Buyer shall pay (or procure the payment of) to
Seller an amount equal to the Unadjusted Purchase Price plus estimated amount
of the Aggregate Closing Date Intragroup Indebtedness, all as set forth at
Section 1.2.1 above (such payment to be received by Seller as set forth in
Section 1.2.1(c) above).
(b) Within sixty (60) calendar days after Seller's delivery of the
Effective Date Balance Sheets to Buyer, the estimated amount of any Post-
Closing Adjustment Amount, minus any amount of any Disputed Items, shall be
paid to or by Seller, as the case may be. The remaining unpaid amount of any
Post-Closing Adjustment Amount, if any, shall be paid to or by Seller (such
payment to be paid or received by Seller as set forth in Section 1.2.1(c)
above), as the case may be, within ten (10) calendar days of the resolution
of all Disputed Items and determination of the Final Effective Date Balance
Sheets in accordance with Section 1.2.5 hereof together with interest
accruing on such amount, in U.S. Dollars and net of withholding tax, at the
rate per annum equal to LIBOR for deposits of three months duration plus one
hundred (100) basis points from the date on which the Post-Closing Adjustment
Amount was paid for undisputed items to and including the date the remaining
unpaid amounts in respect of Disputed Items of any Post-Closing Adjustment
Amount is paid. The Unadjusted Purchase Price as finally adjusted in
accordance with the terms hereof is hereinafter referred to as the "Purchase
Price" and the Aggregate Closing Date Intragroup Indebtedness as finally
adjusted in accordance with the terms hereof is hereinafter referred to as
the "Aggregate Closing Date Intragroup Indebtedness".
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1.2.8 Maximum Closing Date Third Party Financial Indebtedness and
Aggregate Closing Date Intragroup Indebtedness. (a) It is understood and
agreed that, to the extent Closing Date Third Party Financial Indebtedness
shall exceed the sum of (i) thirty-seven million five hundred thousand U.S.
Dollars (US$37,500,000) plus (ii) the maximum amount of Reimbursed Capital
Expenditures (as set forth in Section 1.2.1 above) plus (iii) the maximum
amount of Reimbursed Restructuring Costs (as set forth in Section 1.2.1
above) then (x) the Purchase Price will be equal to one U.S. Dollar (US$1.00)
and (y) the Aggregate Closing Date Intragroup Indebtedness shall be
transferred for consideration of one U.S. Dollar (US$1.00) and (z) Seller
shall relieve and hold harmless Buyer and its affiliates from any liability
for Closing Date Third Party Financial Indebtedness in excess of such sum.
(b) It is further understood and agreed that the maximum amount
payable in consideration of the Aggregate Closing Date Intragroup
Indebtedness shall not exceed the sum of (i) thirty-seven million five
hundred thousand U.S. Dollars (US$37,500,000) plus (ii) the maximum amount of
Reimbursed Capital Expenditures (as set forth in Section 1.2.1 above) plus
(iii) the maximum amount of Reimbursed Restructuring Costs (as set forth in
Section 1.2.1 above) minus (iv) the Closing Date Third Party Financial
Indebtedness.
1.2.9 Payment of Seller's and Seller's Affiliates Intragroup
Charges. Seller shall cause to be invoiced to and booked in the June 1998
accounts of CMB France, CMB Turkey, CMB U.K. (with respect to the U.K.
Plant), and CMB Germany (with respect to the German Plant), all
CarnaudMetalbox Intragroup charges (including without limitation accrued
interest on the Aggregate Closing Date Intragroup Indebtedness and
management, head office and other such charges).
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties of Seller.
Except in the case of representations and warranties made as of a
specific date, which shall be deemed made as of such date, Seller's
representations and warranties are made as of the date hereof and as of the
Closing Date.
All representations and warranties made herein relating to CMB
Germany and CMB U.K. shall be deemed limited to Transferred Assets,
Transferred Liabilities and to the operations of the German Plant and the
U.K. Plant, as the case may be, exclusively, and, for the avoidance of doubt,
representations and warranties with respect to CMB U.K. shall as appropriate
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be deemed to relate to the business and assets of the U.K. Plant conducted
previously by CMB&C.
The parties hereby acknowledge that the Seller makes no
representations and gives no warranties as to the Transferred Assets,
Transferred Liabilities and operations of the U.K. Plant (the "U.K.
Representations and Warranties") provided that the Seller will procure that
CMB U.K. will make such U.K. Representations and give such U.K. Warranties to
the affiliate of Buyer party to the U.K. Asset Purchase Agreement in
accordance with the terms of the U.K. Asset Purchase Agreement.
2.1.1 Corporate Status.
(a) Seller. Seller is duly organized and validly existing under
the laws of France and has all requisite corporate power to own its
properties and carry on its business as now conducted.
(b) France, CMB U.K., CMB Germany and CMB Turkey. Each of CMB
France, CMB U.K., CMB Germany and CMB Turkey is duly organized and validly
existing under the laws of jurisdiction and has all requisite corporate power
to own its properties and carry on its businesses now conducted. A copy of
their memorandum, articles and by-laws as of the date hereof is annexed
hereto as Schedule 2.1.1(b). Except as disclosed in Schedule 2.1.1(b), all of
the statutory books, registers and corporate documents required by applicable
regulations of each of CMB France and CMB Turkey have been kept by them in
accordance with all applicable laws and regulations and are all up-to-date
and remain in their possession at their respective registered of rices.
(c) Except as disclosed in Schedule 2.1.1(c), the directors and
officers of each of CMB France and CMB Turkey have been validly appointed in
accordance with applicable laws and regulations and their respective
memorandum, articles and by-laws in each respective jurisdiction and all
board and shareholder resolutions have been validly adopted.
2.1.2 Share Capital of CMB France and CMB Turkey. The share
capital of each of CMB France and CMB Turkey is set forth in their
memorandum, articles and by-laws, respective copies of which are annexed
hereto as Schedule 2.1.1(b). Except pursuant hereto or as may be provided in
their memorandum, articles and by-laws, all of the shares of CMB France and
CMB Turkey are fully paid-up and validly issued and are not subject to any
calls or assessments and are not encumbered by any pledge or other charge of
whatsoever kind, are freely transferable and have never been the subject of
any litigation, claim or demand. Except pursuant hereto, no option, priority
right, preference or pre-emption arrangement exists over the shares of CMB
France and CMB Turkey. At the Closing, there will be no commitments providing
for the issuance of any additional shares of capital stock of CMB France or
CMB Turkey (with or without voting rights), or providing for the issuance of
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securities convertible into shares of capital stock or providing for the
issuance of other securities. CMB France and CMB Turkey have not made any
public offering of debt or equity securities.
2.1.3 Title to Shares, U.K. Plant and German Plant. At the
Closing, Seller will have full ownership and valid legal title to the French
Shares and the Turkish Shares and to all of the rights afforded thereby, free
of all options, guarantees and any other encumbrances. Except as set forth in
Schedule 2.1.3 hereto and except for Permitted Liens (as defined in Section
2.1.11 hereof), CMB U.K. will have full ownership and valid legal title to
the U.K. Plant free of all liens and encumbrances and CMB Germany will have
full ownership and valid legal title to the German Plant, free of all liens
and encumbrances.
2.1.4 Authority, Restrictions and Conflicts. (a) Seller, with
respect to the French and Turkish Shares, CMB U.K. with respect to the U.K.
Plant, CMB Germany with respect to the German Plant and SPC, with respect to
the Aggregate Closing Date Intragroup Indebtedness, have full corporate power
and authority to enter into this Agreement and any other documents
contemplated hereby and save as set out in Schedule 2.1.4(a) to transfer,
assign and deliver or cause to transfer, assign and deliver, as the case may
be, the Shares, the U.K. Plant, the German Plant and the Aggregate Closing
Date Intragroup Indebtedness as provided in this Agreement. Except as
disclosed in Schedule 2.1.4 (a) such delivery will convey to Buyer full
ownership and legal title to the Shares, the U.K. Plant, the German Plant and
the Aggregate Closing Date Intragroup Indebtedness.
(b) The consummation of the transactions contemplated by this
Agreement will not be in violation of the charter documents of the Seller,
SPC, CMB U.K. or CMB Germany.
(c) There is no lawsuit, arbitration or proceeding pending or, to
the Seller's knowledge, threatened against Seller, SPC, CMB U.K. or CMB
Germany which might prevent the consummation of any of the transactions
contemplated by this Agreement, and except as set forth in Schedule 2.1.4(c),
no approval or authorization of any Governmental Entity (as defined at
Section 3.3.5 hereof), or of any third party is required in connection with
the execution, delivery and performance of this Agreement and the other
documents contemplated hereby or thereby.
(d) Except as set forth at Schedule 2.1.4(d) hereto, neither the
execution nor performance of this Agreement will conflict with, or result in
a breach of, or give rise to an event of default under, or require the
consent of a person under, or enable a person to terminate, or relieve a
person from any obligation under an agreement, contract or commitment to
which CMB France or CMB Turkey is a party, or relating to the operation of
the U.K. Plant and the German Plant.
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2.1.5 Financial Statements. (a) Subject to any adjustment that
may be required pursuant to Section 1.2.4(ii)(B), the Base Balance Sheets
have been, and the Effective Date Balance Sheets will be prepared by Seller
in accordance with U.S. GAAP and Seller's Accounting Principles (as disclosed
to Buyer as part of the data room documents) applied consistently to the
preparation of the Base Balance Sheets and the Effective Date Balance Sheets.
Subject to any adjustment that may be required pursuant to Section
1.2.4(ii)(B), the Base Balance Sheets do and the Effective Date Balance
Sheets will fairly present, in accordance with U.S. GAAP, the financial
position of CMB France, CMB U.K. (with respect to the U.K. Plant), CMB
Germany (with respect to the German Plant) and CMB Turkey as of the
respective dates specified therein.
(b) Attached hereto at Schedule 2.1.5(b) are the respective
December 31, 1997 certified statutory accounts of each of CMB France and CMB
Turkey (the "Statutory Accounts"). The Statutory Accounts have been prepared
on a basis consistent with each such company's past practice and in
compliance with the law and applicable standards, principles and practices of
each respective jurisdiction.
(c) Except as disclosed in Schedule 2.1.5(c) or save to the extent
reserved against in the Base Balance Sheets or identified in the notes
thereto or as adjusted pursuant to Section 1.2.4(ii)(B), there are no
contingent or off-balance sheet liabilities (whether or not required to be
disclosed under U.S. GAAP) as of December 31, 1997 and no such liabilities
arising subsequent to such date and through the Closing Date.
2.1.6 Subsidiaries. Except as set forth in Schedule 2.1.6, none of
CMB France and CMB Turkey has any subsidiaries or directly or indirectly owns
any capital stock of or any other equity interests in any corporation,
partnership, or other person, or is a member of or a participant in any
partnership, joint venture or similar enterprise or any other entity of
whatsoever nature and have never held any shareholding in any entity in
respect of which the retiring shareholder remains liable vis-a-vis third
parties for the whole or part of the debts in such entity prior to its
departure.
2.1.7 Material Actions. Since December 31, 1997, except as set
forth in Schedule 2.1.7 hereto, or in this Agreement:
(a) each of CMB France, CMB U.K. with respect to the U.K. Plant,
CMB Turkey and CMB Germany with respect to the German Plant has been
reasonably managed ("en bon pere de famille") consistent with past practice,
and has:
(i) not incurred any obligation or liability or entered into any
transaction with a third party entailing an aggregate payment obligation
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or liability in excess of US$500,000 or with any officers, directors, or
affiliates;
(ii) not permitted or allowed any Real Property (as defined in
Section 2.1.9 hereof) or any Movable Property (as defined in Section
2.1.10 hereof) or any intangible property (including any fonds de
commerce) to be mortgaged, pledged or subjected to any other
encumbrance, except for any Permitted Liens;
(iii) not sold, transferred or purchased or committed to sell,
transfer or purchase (except as disclosed in Schedule 1.2.1(b)), any
fixed asset having a book value in excess of US$20,000 individually per
item, whether or not in the ordinary course of business;
(iv) not acquired or agreed to acquire any share capital or other
equity or debt securities of any other business or entered into any
licensing agreement or joint venture in relation to the operation of CMB
France, CMB U.K. (with respect to the U.K. Plant), CMB Turkey or CMB
Germany (with respect to the German Plant);
(v) not declared or paid dividends or any other distributions;
(vi) complied with all labor, tax, economic, customs, transport,
environment, hygiene or other regulations non-compliance with which
could have a material adverse effect on any of the operations of CMB
France, CMB U.K. with respect to the U.K. Plant, CMB Turkey or CMB
Germany with respect to the German Plant;
(vii) not recruited or dismissed any Executives (as defined in
Section 9.11 hereof), except as disclosed in Schedule 2.1.7 or
materially amended the terms of any employment contract with any
Executive;
(viii) not suffered any damage, destruction or casualty loss,
whether or not covered by insurance, adversely affecting the assets,
liabilities, business or prospects of each of CMB France, CMB U.K. with
respect to the U.K. Plant, CMB Turkey and CMB Germany with respect to
the German Plant;
(ix) not amended or modified the bylaws of any of CMB France and
CMB Turkey nor altered in any way any of its share capital;
(x) not changed its accounting methods or made or changed any
tax elections, changed any method of accounting with respect to taxes,
or settled or compromised any tax liability;
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(xi) not failed to pay premiums under, or have allowed coverage
to lapse, under the property, casualty and liability insurance policies
identified at Section 2.1.12(a)(xiii); or
(xii) not settled or compromised any claim brought against, or
by, CMB France or CMB Turkey or the Plants other than for fair value.
(b) There has been no Material Adverse Change (as defined in
Section 9.11 hereof).
2.1.8 Intellectual and Industrial Property. (a) Schedule 2.1.8(a)
hereto contains a true and complete list (including inter alia application
and registration dates, application and registration numbers, expiration
dates) of each requested or registered patent, trademark, design, copyright
and any other intellectual or industrial property rights including without
limitation molds ("Molds"), technology, and trade secrets, said list
identifying those items (i) owned by CMB France or CMB Turkey ("Owned
Intellectual Property Rights"), (ii) owned by Seller, any of Seller's
affiliates, CMB Germany or CMB U.K. and used in or necessary for the
operations of CMB France, CMB Turkey or the Plants as presently conducted
("Affiliated Intellectual Property Rights") and (iii) owned by any other
party and licensed to CMB France, CMB Turkey, CMB Germany or CMB U.K. or
otherwise used in the operations of CMB France, CMB Turkey or the Plants as
presently conducted ("Third Party Intellectual Property Rights")
(collectively referred to hereinafter as the "Intellectual Property Rights")
(it being understood and agreed between the parties that Buyer has relied,
without independent investigation, on Seller's representation as to the Owned
Intellectual Property, Affiliated Intellectual Property Rights and Third
Party Intellectual Property Rights, notwithstanding any documents delivered
by Seller to Buyer, in the due diligence process).
(b) The use of Owned Intellectual Property Rights, the Affiliated
Intellectual Property Rights and the Molds do not, and to Seller's knowledge,
the use of other Third Party Intellectual Property Rights do not, infringe
any other prior rights held by any other entity.
(c) CMB France and CMB Turkey have valid rights to their company
name, title to their trade names and title to the Owned Intellectual Property
Rights; Seller, Seller's affiliates, CMB Germany and CMB U.K. have valid
title to the Affiliated Intellectual Property Rights; and all of such
entities have carried out all necessary formalities, have paid all amounts
and taken all necessary steps to maintain and protect such Intellectual
Property Rights and except as set forth in Schedule 2.1.8(c), such
Intellectual Property Rights are not subject to any other charge,
restriction, tax, condition or payment obligation.
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(d) All licenses pursuant to which Affiliated Intellectual
Property Rights or Third Party Intellectual Property Rights are made
available to CMB France, CMB Turkey or the Plants are valid, binding and
enforceable, have not been pledged, encumbered or assigned, and none of CMB
France, CMB Turkey or the Plants is in default thereunder.
(e) No action, proceeding, claim, suit, threat or other similar
risk relating to the infringement or breach of any Intellectual Property
Rights has been initiated or filed by Seller, any of Seller's affiliates, or
CMB France, CMB U.K., CMB Turkey and CMB Germany against any third party.
(f) Except as set forth in Schedule 2.1.8(f), no action, claim,
suit or proceedings or notice of any such action, claim, suit, or proceedings
or any threat or similar risk relating to the infringement or breach of any
third party's intellectual or industrial property rights has been made
against CMB France, CMB U.K., CMB Turkey or CMB Germany or any other party
which may have an effect on CMB France, CMB Turkey or the Plants and to
Seller's knowledge none is threatened and no fact or omission may serve as a
basis for any such claim.
(g) None of the Owned Intellectual Property Rights nor the
Affiliated Intellectual Property Rights is mortgaged or pledged or is the
subject of co-ownership with third parties.
2.1.9 Real Property; Leases of Real Property. (a) Schedule
2.1.9(a) hereto contains a brief description of the real property which is
owned by CMB France, CMB U.K. (with respect to the U.K. Plant), CMB Turkey or
CMB Germany (with respect to the German Plant) indicating any mortgages
granted in respect thereof ("Owned Real Property") or leased by any of them
("Leased Real Property") (the Owned Real Property and the Leased Real
Property collectively herein the "Real Property"). The Real Property
constitutes all the real property which CMB France, CMB U.K. (with respect to
the U.K. Plant), CMB Turkey and CMB Germany (with respect to the German
Plant) use to perform their activities as they presently exist. Each of CMB
France, CMB U.K. (with respect to the U.K. Plant), CMB Turkey and CMB Germany
(with respect to the German Plant) has and as of the Closing will have, all
easements and rights of ingress and egress necessary for utilities and
services and for all operations conducted on the Real Property.
(b) Except as disclosed in Schedule 2.1.9(b), CMB France, CMB U.K.
(with respect to the U.K. Plant), CMB Turkey and CMB Germany (with respect to
the German Plant) have valid freehold or leasehold interests in, and quiet
enjoyment of, the Real Property.
(c) Except as set forth in Schedule 2.1.9(c), CMB France, CMB U.K.
(with respect to the U.K. Plant), CMB Turkey and CMB Germany (with respect to
the German Plant) have not granted any lease or sub-lease or any other right
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of occupation over the Real Property, all the Real Property being used for
their own needs and business activities and does not include any private
accommodation including employee accommodations and there is no person in
possession or occupation of or who has any right or interest in the Real
Property.
(d) Except as set forth in Schedule 2.1.9(d), CMB France, CMB U.K.
(with respect to the U.K. Plant), CMB Turkey and CMB Germany (with respect to
the German Plant) have no right or obligation to purchase, sell, lease or
have leased to them any real property whatsoever.
(e) Except as set forth in Schedule 2.1.9(e): CMB France enjoys
commercial ownership (propriete commerciale) in respect of the Leased Real
Property which is not subject to any financial lease and no Leased Real
Property has been tacitly renewed; and CMB France, CMB U.K. (with respect to
the U.K. Plant), CMB Turkey and CMB Germany (with respect to the German
Plant) have not been parties to any transfer of any leases for the five year
period preceding the Closing Date and CMB France, CMB U.K. (with respect to
the U.K. Plant), CMB Turkey and CMB Germany (with respect to the German
Plant) do not have any liabilities vis-a-vis third parties in respect of the
previous leases entered into by them.
(f) CMB France, CMB U.K. (with respect to the U.K. Plant), CMB
Turkey and CMB Germany (with respect to the German Plant) are and have been
in compliance with regulations relating to the construction, occupation and
use of the Real Property and, in particular, with all orders, specifications,
rules of co-ownership and internal regulations together with all relevant
legislation or regulations.
(g) Except as set forth in Schedule 2.1.9(g), no easement exists
over the Real Property other than those resulting from the natural position
of the Real Property and the town planning rules applying thereto and those
indicated in the title deeds of CMB France, CMB U.K. (with respect to the
U.K. Plant), CMB Turkey and CMB Germany (with respect to the German Plant).
(h) Except as set forth in Schedule 2.1.9(h), all demolition
permits, building permits and all other necessary declarations or
authorizations and approvals ("Permit") have been properly sought, obtained
and published as far as the building of each Real Property is concerned and
all works relating thereto, including any exceeding of any of the permitted
plot ratios and/or any legal density limits of any applicable laws,
regulations or decisions of any applicable authority. The Permits are not
subject to any objection or claim whatsoever (including any claim for
withdrawal or cancellation) by any third party during the legal time-limits
and all such legal time-limits have now expired. All corresponding
certificates of conformity relating to Permits issued within the past ten
years have been obtained.
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(i) Except as set forth in Schedule 2.1.9(i), the Real Property is
in a satisfactory state of repair, maintenance and functioning, normal wear
and tear excepted, free of all major defects and subject to appropriate
security measures. All reserves made at the time of the delivery of the Real
Property have been released. Each of the Real Property is in accordance with
the regulations currently in force (in particular with regard to security,
hygiene and work conditions as well as any opening authorizations) which are
applicable to the activities of CMB France, CMB U.K. (with respect to the
U.K. Plant), CMB Turkey and CMB Germany (with respect to the German Plant) as
they presently exist.
(j) Each Real Property is covered by the insurance policies fully
in force as described in Schedule 2.1.9(j), which policies will cover the
Real Property through but not beyond the Closing Date.
(k) CMB France, CMB U.K. (with respect to the U.K. Plant), CMB
Turkey and CMB Germany (with respect to the German Plant) are not in default
under any of their agreements in respect of Real Property, all such
agreements are valid, binding and enforceable by each of them, and further,
all rents, charges, property taxes, rental payments and other costs which may
be due or will become due by CMB France, CMB U.K. (with respect to the U.K.
Plant), CMB Turkey and CMB Germany (with respect to the German Plant) have
been paid or an appropriate provision has been made.
2.1.10 Movable Property. (a) Schedule 2.1.10(a) hereto contains
true and complete lists of the owned movable property (excluding inventory)
("Owned Movable Property") and leased movable property with annual lease
payments greater than US$50,000 ("Leased Movable Property") (Owned Movable
and Leased Movable Property, collectively the "Movable Property").
(b) Except as set forth in Schedule 2.1.10(b), all Owned Movable
Property included in the Base Balance Sheets or Effective Date Balance Sheets
with a non-nominal residual value and all Leased Movable Property and all
other leased movable property is in satisfactory working condition, normal
wear and tear and periodic repair and maintenance excepted, and has been
regularly and routinely maintained and complies with all applicable laws and
regulations.
(c) The Owned Movable Property and the Leased Movable Property
constitute substantially all the movable property necessary to conduct the
business of CMB France, CMB Turkey, the U.K. Plant and the German Plant as
presently conducted, and except as set forth at Schedule 2.1.10(c) there are
no other material items of movable property so necessary.
2.1.11 Title to Property. At the Closing, each of CMB France, CMB
U.K., CMB Turkey and CMB Germany will have full ownership and valid legal
title (immuable et incommutable) to all Owned Real Property and Owned Movable
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Property and CMB France will have full ownership and valid legal title
(immuable et incommutable) to its fonds de commerce and such fonds de
commerce shall be validly registered with the appropriate registry of
commerce. Except as set forth in Schedule 2.1.11, such Owned Real Property
and Owned Movable Property is freely transferable (without any restriction or
limitation whatsoever) and free of any lien, mortgage, pledge, security
interest, promise, option, right of pre-emption or any other encumbrance
except for Permitted Liens. As used in this Agreement, the term "Permitted
Liens" shall mean, collectively, any liens of any nature whatsoever and with
respect to Real Property, all easements, servitudes and rights of way,
arising and continuing in the ordinary course of business or by operation of
law for obligations which are not delinquent and which do not materially
affect the value of the property or the usefulness thereof to any of CMB
France, CMB U.K., CMB Turkey and CMB Germany. Permitted Liens shall not
include mortgages on real property, pledges of shares or nantissements de
fonds de commerce or analogous security interests.
2.1.12 Material Contracts and Commitments.
(a) Schedule 2.1.12(a) lists all contracts, obligations or
undertakings (excluding employee contracts which are the subject of Section
2.1.18 below and real property contracts which are the subject of Section
2.1.9 above) (copies of which have been made available to Buyer) entered into
by CMB France, CMB U.K. (with respect to the U.K. Plant), CMB Turkey or CMB
Germany (with respect to the German Plant) ("Material Contracts") which
remain in effect on the date hereof and which are:
(i) contracts made in the ordinary course of business involving
estimated total future payments or receipts on an annual basis in excess
of US$250,000;
(ii) consulting or personal services agreements which have an
aggregate future liability in excess of US$100,000;
(iii) any non-competition, confidentiality or secrecy agreements,
and any other agreements which restrict the carrying on of the business
of CMB France or CMB Turkey as conducted on the date hereof or, with
respect to the U.K. Plant and the German Plant, materially restricts the
use or exploitation of the Transferred Assets;
(iv) dealership, manufacturer's representative, distributor, or
agency agreements terminable upon notice of more than ninety (90) days
or requiring a termination indemnity;
(v) contracts or commitments for capital expenditures involving
estimated total future payments in excess of US$20,000;
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(vi) partnership or joint venture agreements;
(vii) mortgages, pledges, charges, conditional sales contracts,
security agreements, factoring agreements or other similar agreements
other than Permitted Liens;
(viii) agreements, contracts or other instruments under which CMB
France, CMB U.K. (with respect to the U.K. Plant), CMB Turkey or CMB
Germany (with respect to the German Plant) has borrowed any money from,
or issued any note, bond, debenture or other evidence of indebtedness
to, any person;
(ix) agreements, contracts or other instruments under which (i)
any person has directly or indirectly guaranteed, to Seller's knowledge,
any indebtedness, liabilities or obligations of CMB France, CMB U.K.
(with respect to the U.K. Plant), CMB Turkey and CMB Germany (with
respect to the German Plant) or (ii) CMB France, CMB U.K. (with respect
to the U.K. Plant), CMB Turkey or CMB Germany (with respect to the
German Plant) has directly or indirectly guaranteed any indebtedness,
liabilities or obligations of any person (in each case, other than
endorsements for the purpose of collection in the ordinary course of
business or product warranties);
(x) agreements, contracts or other instruments under which CMB
France, CMB U.K. (with respect to the U.K. Plant), CMB Turkey or CMB
Germany (with respect to the German Plant) has, directly or indirectly,
made any advance, loan, extension of credit (other than standard trade
credit) or capital contribution to, or other investment in, any person
in excess of US$50,000;
(xi) agreements, contracts, commitments or undertakings presently
in effect, whether or not fully performed, between CMB France, CMB U.K.
(with respect to the U.K. Plant), CMB Turkey and CMB Germany (with
respect to the German Plant) and any of their respective officers,
directors, Executives or affiliates;
(xii) agreements, contracts or other instruments including a
change of control provision;
(xiii) property, casualty and liability and other insurance
policies provided by third party carriers, coverage under which is
available to CMB France, CMB U.K. (with respect to the U.K. Plant), CMB
Turkey, or CMB Germany (with respect to the German Plant) which are in
effect up to but not beyond the Closing Date;
(xiv) agreements, obligations or undertakings that constitute
onerous or loss contracts which would be required to be reserved against
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on the financial statements of any of such companies in accordance with
U.S. GAAP; or
(xv) grants or subsidies made to it by a body (including without
limitation any Governmental Entity).
(b) Except as disclosed at Schedule 2.1.12(b), the Material
Contracts are valid, binding and enforceable obligations of the parties
thereto; CMB France, CMB Turkey, CMB U.K. (with respect to the U.K. Plant)
and CMB Germany (with respect to the German Plant) are not in default under
any of the material terms of the Material Contracts (entailing a right to
termination, penalties, or modification of its terms); and to Seller's
knowledge, CMB France, CMB Turkey, CMB U.K. (with respect to the U.K. Plant)
and CMB Germany (with respect to the German Plant) are not in default under
any other contract or obligation other than the Material Contracts.
(c) Set forth in Schedule 2.1.12(c) is a list of sales by month,
since January 1, 1997 and through the month preceding the signature date
hereof, of the top twenty customers of CMB France, and the top ten customers
of each of CMB U.K. (with respect to the U.K. Plant), CMB Turkey and CMB
Germany (with respect to the German Plant). Not later than 7 calendar days
prior to the date hereof, Seller has made available to Buyer for inspection
copies of firm commitment letters of intent, bottle supply contracts, and
other relevant customer contracts, and shall make available to Buyer terms
and conditions of supply purchase and sale relating to such suppliers. Except
as disclosed in Schedule 2.1.12(c), Seller has no knowledge that any of such
suppliers has expressed its intention to suspend or materially reduce its
level of business with any of CMB France, CMB U.K. (with respect to the U.K.
Plant), CMB Turkey or CMB Germany (with respect to the German Plant) with the
effect of reducing annual sales revenue from that customer of CMB France, CMB
U.K. (with respect to the U.K. Plant), CMB Turkey and CMB Germany (with
respect to the German Plant) by more than 20% or by more than US$200,000 per
product.
(d) Except as set forth in Schedule 2.1.12(d), each of CMB France,
CMB U.K. (with respect to the U.K. Plant), CMB Turkey and CMB Germany (with
respect to the German Plant) is not liable to repay an investment or other
grant or subsidy made to it by a body (including without limitation any
Governmental Entity).
2.1.13 Inventory. (a) Save to the extent reserved against on the
Effective Date Balance Sheets, or as set forth in Schedule 2.1.13(a), the
inventory, including in particular all finished products, raw materials,
goods in production or processing, packaging materials and supplies, samples,
displays, publicity and promotional materials of CMB France and CMB Turkey
and the inventory of CMB U.K. and CMB Germany included in the Transferred
Assets ("Inventories"), all appropriately identified, will consist of items
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usable and saleable in the ordinary course and comply with specifications and
are not defective or unfit for their usual purpose. All finished goods that
have been shipped to customers comply with specifications and are not
defective or unfit for their usual purpose.
(b) as set forth in Schedule 2.1.13(b), since January 1, 1997,
there have not been any product returns that have generated claims in excess
of US$20,000, recalls, or any post-sale warnings issued by CMB France, CMB
U.K. (with respect to the U.K. Plant), CMB Turkey or CMB Germany (with
respect to the German Plant) nor any products which fail to comply with their
terms of sale.
2.1.14 No Lawsuits. (a) Except as set forth on Schedule
2.1.14(a), there is no pending claim that has been made by any person against
any of CMB France, CMB U.K. (with respect to the U.K. Plant), CMB Turkey or
CMB Germany (with respect to the German Plant) for an individual account of
more than twenty thousand U.S. Dollars (US$20,000).
(b) Except as set forth on Schedule 2.1.14(b), there is (and there
has been for the last two years) no lawsuit, arbitration or other proceeding
(civil or criminal or of any other nature) in any jurisdiction pending or, to
Seller's knowledge threatened, against or brought by any of CMB France, CMB
U.K. (with respect to the U.K. Plant), CMB Turkey and CMB Germany (with
respect to the German Plant) or, to Seller's knowledge, any person for whose
acts or defaults any of CMB France, CMB U.K. (with respect to the U.K.
Plant), CMB Turkey and CMB Germany (with respect to the German Plant) may be
vicariously liable, and sufficient provision has been made in the Base
Balance Sheets and will be made in the Effective Date Balance Sheets to cover
such risks.
(c) To the Seller's knowledge, no fact or circumstance exists
which might give rise to any proceeding of any nature in any jurisdiction
involving CMB France, CMB U.K. (with respect to the U.K. Plant), CMB Turkey
and CMB Germany (with respect to the German Plant)
or a person for whose acts or defaults CMB France, CMB U.K. (with respect to
the U.K. Plant), CMB Turkey and CMB Germany (with respect to the German
Plant) may be vicariously liable.
(d) Except as set forth on Schedule 2.1.14(d) there is no
outstanding judgment, order, decree, arbitral award or decision of a court,
tribunal, arbitrator or governmental agency in any jurisdiction against CMB
France, CMB U.K. (with respect to the U.K. Plant), CMB Turkey and CMB Germany
(with respect to the German Plant) or, to Seller's knowledge, a person for
whose acts or defaults CMB France, CMB U.K. (with respect to the U.K. Plant),
CMB Turkey and CMB Germany (with respect to the German Plant) may be
vicariously liable.
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(e) Except as disclosed in Schedule 2.1.14(e), there is and has
been no governmental or other investigation, inquiry or disciplinary
proceeding concerning CMB France, CMB U.K. (with respect to the U.K. Plant),
CMB Turkey and CMB Germany (with respect to the German Plant) in any
jurisdiction and none is pending or threatened. To the Seller's knowledge, no
fact or circumstance exists which might give rise to an investigation,
inquiry or proceeding of that type.
2.1.15 No Broker. Seller and its agents have incurred no
obligation or liability, contingent or otherwise, for brokerage or finders'
fees or agents' commissions or other similar payment in connection with this
Agreement.
2.1.16 Governmental Permits; Compliance with Laws. (a) Each of
the material permits and authorizations necessary to the conduct of the
business of CMB France, CMB U.K. (with respect to the U.K. Plant), CMB Turkey
and CMB Germany (with respect to the German Plant) as heretofore conducted is
listed on Schedule 2.1.16(a), and is valid and in full force and effect. At
the Closing Date, CMB France, CMB U.K. (with respect to the U.K. Plant), CMB
Turkey and CMB Germany (with respect to the German Plant) will hold all
governmental or regulatory permits and authorizations which are required for
the conduct of their business as currently being conducted. No notices have
been received by any of CMB France, CMB U.K. (with respect to the U.K.
Plant), CMB Turkey or CMB Germany (with respect to the German Plant) relating
to any modification, termination or cancellation of, and none of them is in
violation of the terms and conditions of, any such permits or authorizations.
Except as set forth in Schedule 2.1.16(a), the Seller is not aware that any
permits and authorizations necessary to the conduct of the business of NIB
France, CMB U.K. (with respect to the U.K. Plant), CMB Turkey and CMB Germany
(with respect to the German Plant) may be terminated in a period of one year
following the Closing Date. Except as set forth in Schedule 2.1.16(a), since
January 1, 1998, none of CMB France, CMB U.K. (with respect to the U.K.
Plant), CMB Turkey or CMB Germany (with respect to the German Plant) has
received any complaint, citation or notice of violation from any Governmental
Entity and, to the Seller's knowledge, none is threatened, alleging that any
of them has violated any laws or regulations of Governmental Entities
applicable to any of them. Furthermore, CMB France, CMB U.K. (with respect to
the U.K. Plant), CMB Germany (with respect to the German Plant) has not
received any complaint, citation or notice of violation from any Governmental
Entity before January 1, 1998 which remains unresolved. The representations
contained in this Section 2.1.16 as they relate to Environmental Laws (as
defined at Section 2.1.17(c) hereof) are qualified by the representations and
disclosures of Seller made pursuant to Section 2.1.17 hereunder.
(b) Each of CMB France, CMB U.K. (with respect to the U.K. Plant),
CMB Turkey and CMB Germany (with respect to the German Plant) has conducted
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its business and dealt with its assets in accordance with all applicable
legal and administrative requirements in any jurisdiction.
(c) Except as set forth in Schedule 2.1.16(c), neither the
execution nor performance of this Agreement will result in CMB France, CMB
U.K. (with respect to the U.K. Plant), CMB Turkey and CMB Germany (with
respect to the German Plant) losing the benefit of any permit, authorization,
or license listed in Schedule 2.1.16(a), subject to continued compliance with
terms thereof.
2.1.17 Environmental Matters. (a) Except as set forth in
Schedule 2.1.17(a) hereto which includes the Phase I surveys conducted at the
Meaux Plant, the Noeux Plant, the U.K. Plant and the German Plant dated 30
April 1998: (i) each of CMB France, CMB U.K. (with respect to the U.K.
Plant), CMB Turkey and CMB Germany (with respect to the German Plant) holds
and is in material compliance with, and as of the Closing each of them will
hold and will be in material compliance with, all permits and authorizations
required to conduct its business under Environmental Laws, (ii) no
proceedings have been initiated or to Seller's knowledge are pending which
would lead to their revocation, modification or suspension, (iii) each of CMB
France, CMB U.K. (with respect to the U.K. Plant), CMB Turkey and CMB Germany
(with respect to the German Plant) is in material compliance with, and at the
Closing will be in material compliance with all Environmental Laws, including
without limitation all restrictions, conditions, standards, limit values,
prohibitions, requirements, obligations, schedules and timetables contained
in the Environmental Laws, (iv) the state of preservation of asbestos used in
the construction of the Real Property is not such as to require removal or
other remediation works to be carried out pursuant to Environmental Laws, and
there is no asbestos in the materials stored or handled in the Real Property
and each of CMB France, CMB U.K. (with respect to the U.K. Plant), CMB Turkey
and CMB Germany (with respect to the German Plant) has complied with all
Environmental Laws in this respect, (v) none of CMB France, CMB U.K. (with
respect to the U.K. Plant), CMB Turkey and CMB Germany (with respect to the
German Plant) has received any written communication from any person,
including an Environmental Authority alleging that any of them is not in
compliance in any material respect with any Environmental Laws or otherwise
may be liable under any Environmental Law including, without limitation,
liability for Remedial Action, and (vi) no arbitral, judicial or
administrative proceedings have been initiated or are, to Seller's knowledge,
threatened to be initiated by any Environmental Authority (as defined in
Section 2.1.17(b) herein) or third party regarding any act or activity
carried out by CMB France, CMB U.K. (with respect to the U.K. Plant), CMB
Turkey or CMB Germany (with respect to the German Plant) which may have
caused pollution to the air, water, soil or subsoil or any other nuisance
which may affect the environment or create a hazard for health and safety.
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(b) Schedule 2.1.17(b) hereto contains: (i) a list of material
environmental permits and authorizations necessary for the conduct of the
business of CMB France, CMB U.K. (with respect to the U.K. Plant), CMB Turkey
and CMB Germany (with respect to the German Plant), (ii) a description of the
waste disposal practices of each of them, including the names of owners and
operators of each location to which waste had been sent for treatment,
storage or disposal, (iii) a list of Hazardous Materials used or generated by
each of them, (iv) copies of material environmental instructions by
Governmental Entities received by any of them, and (v) a list and description
of the location of all underground tanks, sumps or pits at the Real Property
currently or formerly used to contain Hazardous Materials or Contaminants (as
defined below), on a continuous basis. Seller and each of CMB France, CMB
U.K. (with respect to the U.K. Plant), CMB Turkey and CMB Germany (with
respect to the German Plant) have fully and accurately disclosed to Buyer all
material environmental studies, investigations and audits of which either of
them has knowledge concerning the Sites (as defined in Section 8.4(b))
including in particular, the ERM summary reports dated January, June and July
1996, copies of which were delivered to Buyer.
As used in this Agreement, the term "Environmental Laws" means any
and all applicable treaties, EU legislation, laws (which in England and Wales
shall include the common law), regulations, decrees, ministerial instructions
(including French "circulaires ministerielles" to the extent they are legally
binding), instructions of Environmental Authorities to the extent legally
binding, judgments, permits, authorizations, binding agreements relating to
the protection of the environment, health and safety, or common law nuisance,
in each case as in effect on the date hereof in France with respect to CMB
France, in the United Kingdom with respect to the U.K. Plant, in Turkey with
respect to CMB Turkey and in Germany with respect to the German Plant. As
used in this Agreement, the term "Environmental Authorities" means any local,
regional, national or federal department, agency, ministry or any similar
body having jurisdiction over environmental laws. As used in this Agreement,
the term "Contaminants" means those substances whose Releases (as defined
below) are regulated by, or form the basis of, liability under any
Environmental Laws. As used in this Agreement, the term "Hazardous Materials"
means all materials or substances regulated as explosive, flammable, toxic or
radioactive pursuant to any Environmental Laws. As used in this Agreement,
the term "Release" means any spill, emission, leaking, pumping, injection,
deposit, or discharge of any Contaminant in, onto, or through the environment
(including ambient air, surface water, groundwater, or soils).
2.1.18 Transferred Employees; Employee Benefits; Health and
Safety. (a) Schedule 2.1.18(a) hereto contains: (A) a true and complete
list identifying by age, seniority, classification and remuneration
(including all bonuses of whatever kind, payments in kind), (i) the employees
(including all directors and other officers) of CMB France (excluding,
however, Head Office Employees as-defined at Section 3.1.5), CMB Turkey and
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the Plants as of March 31, 1998 ("Transferred Employees"), and (ii) any
person working for CMB France, CMB Turkey or the Plants who has been provided
by a third party including any affiliate of the Seller. Such list indicates
the date of termination of the fixed term contracts (if any), and the date on
which contracts for employees provided by third parties terminate together
with the identity of such third party (if any) and any Transferred Employees
who have tendered their resignation. Furthermore, such list sets out the
period of time which remains, for any Transferred Employee subject to an
indeterminable contract who has been issued with or has issued a notice of
termination; (B) a true and complete list of any increase or decision to
increase, taken in the twelve (12) months prior to the date hereof, the
general level of compensation in addition to any increase or decision, taken
in the twelve (12) months prior to the date hereof, to increase the level of
individual compensation of a Transferred Employee by more than US$5,000 per
annum; (C) a true and complete list as of March 31, 1998 of (i) the
Transferred Employees having borrowed sums from any of CMB France, CMB U.K.,
CMB Turkey and CMB Germany or their affiliates, the amounts of such
borrowings and the outstanding principal amounts as of such date and (ii) all
protected Transferred Employees in accordance with any law or regulation of
CMB France, CMB U.K. (with respect to the U.K. Plant), CMB Turkey and CMB
Germany (with respect to the German Plant); (D) a definition of any and all
pension or retirement benefits, bonus, profit sharing, stock purchase or
stock option plans, company savings plans or employee funds concerning the
Transferred Employees together with particulars of any obligation of CMB
France, CMB U.K. (with respect to the U.K. Plant), CMB Turkey and CMB Germany
(with respect to the German Plant) to provide death, disability or medical
benefits put in place to the benefit of the Transferred Employees
(collectively, "Benefit Plans"); (E) a true and complete list of any
collective bargaining agreement or any other collective agreement, internal
rules, code of conduct or other manual containing internal procedures and
regulations with respect to the Transferred Employees; (F) a copy of the
contracts of employment (including amendments hereto) for the Executives who
are Transferred Employees; and (G) standard form of labor contracts.
(b) CMB France, CMB U.K. (with respect to the U.K. Plant), CMB
Turkey and CMB Germany (with respect to the German Plant) conform and have
conformed in all respects, to the law, applicable regulations and all
mandatory statutory or regulatory requirements (including all collective
agreements) with respect to the Transferred Employees (including, with
respect to the German Plant, Section 613a of the Burgerliches Gesetzbuch).
(c) The Benefit Plans (excluding the U.K. pension plan) conform
and have conformed with the law, applicable regulations and all mandatory or
statutory requirements and have not been subject, up to the Closing Date, to
any requalification or reassessment by any tax or any other social
administration. All contributions payable and due by CMB France, CMB U.K.
(with respect to the U.K. Plant), CMB Turkey and CMB Germany (with respect to
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the German Plant) for the Benefit Plans have been duly paid or provisions
have been duly made in respect thereof.
(d) The standard form of labor contracts contained in Schedule
2.1.18(a) have been applied consistently without any significant modification
and CMB France, CMB U.K. (with respect to the U.K. Plant), CMB Turkey and CMB
Germany (with respect to the German Plant) are not in breach of (i) any
clause of such standard form contracts and (ii) any of the contracts of
employment for the Executives which comply with all applicable law and
regulations and with the applicable collective agreements. All salaries,
commissions, bonuses, other payments and repayments and payment of expenses
and generally all sums due to the beneficiaries of such contracts, and, more
generally, to all of the Transferred Employees as at the Closing Date, have
been duly and fully paid or a provision has been duly made in respect
thereof. Save as reserved against on the Effective Date Balance Sheets, CMB
France, CMB U.K. (with respect to the U.K. Plant), CMB Turkey and CMB Germany
(with respect to the German Plant) have no outstanding obligations vis-a-vis
their former employees (including all directors and other officers).
(e) CMB France, CMB U.K. (with respect to the U.K. Plant), CMB
Turkey and CMB Germany (with respect to the German Plant) have not granted
any employment advantage, subsidy or bonus whatsoever except as set forth in
Schedule 2.1.18(a) and have not entered into any pay agreement outside their
usual field of business activities, and no Transferred Employee of CMB
France, CMB U.K. (with respect to the U.K. Plant), CMB Turkey and CMB Germany
(with respect to the German Plant) benefits from any particular advantage
(whether or not in case of termination of his contract) differing from the
general provisions of the standard form contracts or the contracts of
employment for the executives.
(f) CMB France, CMB U.K. (with respect to the U.K. Plant), CMB
Turkey and CMB Germany (with respect to the German Plant) have at all times,
up to the Closing Date complied with all social security regulations in
force. CMB France, CMB U.K. (with respect to the U.K. Plant), CMB Turkey and
CMB Germany (with respect to the German Plant) are up to date in the payment
of their contributions relating to social security, family allowances and the
various organizations dealing with retirement and unemployment and, more
generally, with all other contribution, installment or payment connected with
social welfare. No claim, investigation or dispute exists in connection with
any of the social welfare organizations as at the date hereof.
(g) France, CMB U.K. (with respect to the U.K. Plant), CMB Turkey
and CMB Germany (with respect to the German Plant) have at all times, up to
the Closing Date, complied with all the rules and regulations in force in
connection with personnel representation.
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(h) Except as disclosed at Schedule 2.1.18(h), CMB France, CMB
U.K. (with respect to the U.K. Plant), CMB Turkey and CMB Germany (in respect
of the German Plant) are not in the process of making any individual or group
redundancies or "social plan" or dismissing or transferring any of their
Transferred Employees for whatever reason and have not made any individual or
group redundancies or "social plan" or transferred any of their Transferred
Employees during the past twelve (12) months.
(i) Except as disclosed at Schedule 2.1.18(i), CMB France, CMB
U.K. (with respect to the U.K. Plant), CMB Turkey and CMB Germany (in respect
of the German Plant) have not made any binding offer for employment which
remains outstanding to any person who would have the status of Executive.
(j) Except as set forth in Schedule 2.1.18(j), there has not been
during the last three (3) years, nor is there currently pending or, to
Seller's knowledge, threatened, any strike or work stoppage.
(k) Except as set forth in Schedule 2.1.18(k), there is no
lawsuit, arbitration, formal or informal settlement or proceeding pending and
Seller has no knowledge of any such proceeding or settlement, threatened
against any of CMB France, CMB U.K. (with respect to the U.K. Plant), CMB
Turkey and CMB Germany (with respect to the German Plant) in connection with
any of the Transferred Employees, which would have an adverse effect on their
business, and sufficient provision has been made in the Base Balance Sheets
and will be made in the Effective Date Balance Sheets to cover such risks.
(l) Except as set forth in Schedule 2.1.18(1), each of CMB France,
CMB U.K. (with respect to the U.K. Plant), CMB Turkey and CMB Germany (with
respect to the German Plant) is in compliance with all health and safety laws
and regulations issued by any Governmental Entities.
2.1.19 Taxes. (a) Each of CMB France, CMB U.K. (with respect to
the U.K. Plant), CMB Turkey and CMB Germany (with respect to the German
Plant) are and have been for the applicable statute of limitations period in
complete compliance with all tax regulations.
(b) Except as set forth in Schedule 2.1.19(b)(i), each of CMB
France, CMB U.K. (with respect to the U.K. Plant), CMB Turkey and CMB Germany
(with respect to the German Plant) has filed with the appropriate
Governmental Entities all tax returns and all formalities or
documents imposed by the tax regulations required to be filed in respect of
their activities and each of them has paid all taxes shown or claimed to be
due (whether or not shown as due on such tax returns or documents) thereon
within the required time limits or have constituted, and will constitute,
sufficient or have registered and will register sufficient charges to be
paid, (excluding deferred taxes that reflect the difference between book
value and tax basis in assets and liabilities), in the Base Balance Sheets
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and in the Effective Date Balance Sheets. These returns or documents have for
the applicable statute of limitations period been and remain true and
complete and do not contain any errors, omissions or inaccurate statements.
Except as set forth in Schedule 2.1.19(b)(ii), none of CMB France, CMB U.K.
(with respect to the U.K. Plant), CMB Turkey and CMB Germany (with respect to
the German Plant) is a party to any action or proceeding by any Governmental
Entity for assessment and collection of taxes, nor has any of them received
notice of any claim for such assessment and collection of taxes in respect of
its activities.
(c) The basis and the amount of tax which each of CMB France, CMB
U.K. (with respect to the U.K. Plant), CMB Turkey, and CMB Germany (with
respect to the German Plant) has owed or still owes, have for the applicable
statute of limitations period been properly determined in compliance with the
tax regulations and are not liable to be corrected or reassessed.
(d) Each of CMB France, CMB Turkey, CMB U.K. (with respect to the
U.K. Plant) and CMB Germany (with respect to the German Plant) has available
all the documents needed to justify the information contained in the returns
or documents referred in paragraph (b) above as well as the applied tax
regulations. Each of CMB France and CMB Turkey has available all the
documents necessary to justify the existence and the amount of any tax losses
that remain available to be carried forward in accordance with the applicable
regulations (if any), whatever be the original financial year, of any tax
credits or claims it may have against any tax or administrative authority
whatsoever which it has used (by deduction or otherwise) or obtained
reimbursement in the past or which it could use (by deduction or otherwise)
or could obtain reimbursement in the future (it being understood that neither
of CMB France nor CMB Turkey shall be entitled to seek reimbursement or
compensation from Seller or any of Seller's affiliates of tax losses incurred
by any of them and transferred to a consolidated tax group during those tax
periods in which they were included in such consolidated tax group).
(e) None of CMB France, nor CMB Turkey have concluded any deed or
have been party to any transaction which is likely to be reassessed, rejected
or requalified for the reason that the company had attempted to evade,
circumvent or diminish its tax obligations or that of another person or was
not acting in its own corporate interest (acte anorrnal de gestion).
(f) CMB France and CMB Turkey have never been party to a transfer,
sale, exchange, contribution or transfer of any sort whatsoever for which
each or all of them would not have paid registration, contribution or
transfer taxes, stamp duties or real estate publicity taxes, that it would be
legally or contractually liable to pay after the Closing Date.
(g) Except as-set forth in Schedule 2.1.19(g), the transfer of the
Shares will not in and of itself involve any taxation at the expense of CMB
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France or CMB Turkey or the loss of carryforward tax losses or any rights of
a fiscal nature. CMB Turkey and CMB France do not benefit from any particular
tax regime which could cease or be questioned in particular by the transfer
of their Shares or by reason of any act or omission prior to the Closing
Date.
(h) CMB France and CMB Turkey do not benefit, nor have benefited
from, by reason of a transaction made prior to the Closing Date, a
suspension, postponement or deferral of tax.
(i) Except as set forth at Schedule 2.1.19(i), the value of the
assets and liabilities shown in the year-end 1997 statutory accounts of each
of CMB France and CMB Turkey corresponds to the fiscal value of the said
assets and liabilities at the date of establishment of such accounts.
(j) Each of CMB France and CMB Turkey are and always have been
exclusively resident in their countries of incorporation for tax purposes.
2.1.20 Disclosure. To the Seller's knowledge, none of the
information contained in the representations, warranties or covenants of
Seller set forth in this Agreement, in the Schedules hereto or in any of the
certificates, lists, documents, exhibits or other instruments delivered or to
be delivered to the Buyer as contemplated by any provision of this Agreement,
contains or will contain any untrue statement of a material fact or omits or
will omit to state a material fact necessary to make the statements contained
herein or therein, in light of the circumstances under which they were made
and when taken as a whole not misleading.
2.1.21 Bankruptcy and Liquidation. CMB France, CMB U.K., CMB
Turkey and CMB Germany are not and have never been subject to any winding up,
liquidation, administration or dissolution procedure of any nature and have
never had a suspension of their payments. CMB France, CMB U.K., CMB Turkey
and CMB Germany are not and have never been subject to any composition
procedure.
2.1.22 Competition. (a) Undertakers and orders. CMB France, CMB
U.K. (with respect to the U.K. Plant), CMB Turkey and CMB Germany (with
respect to the German Plant) have not given in the past two (2) years an
undertaking or written assurance which is still in force to a Governmental
Entity including any authority of the European Communities or of any
jurisdiction. CMB France, CMB U.K. (with respect to the U.K. Plant), CMB
Turkey and CMB Germany (with respect to the German Plant) are not currently
affected by an order or regulation made by a decision of the Commission of
the European Communities or by a competition authority Many jurisdiction.
(b) Investigations. CMB France, CMB U.K. (with respect to the U.K.
Plant), CMB Turkey and CMB Germany (with respect to the German Plant) have
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not received in the past two (2) years a communication or request for
information from or by the Commission of the European Communities or by or
from a competition authority of any other jurisdiction. No agreement,
arrangement or conduct (by omission or otherwise) of CMB France, CMB U.K.,
CMB Turkey and CMB Germany has been in the past two (2) years the subject of
an investigation, report or decision by any of those persons or bodies.
2.1.23 Binding Effect. This Agreement is a legal, valid, and
binding obligation of Seller, enforceable against it in accordance with its
terms.
2.2 Representations and Warranties of Buyer.
Except in the case of representations and warranties made as of a
specific date, which shall be deemed made as of such date, Buyer's
representations and warranties to Seller are made as of the date hereof and
as of the Closing Date.
2.2.1 Corporate Status. Buyer is a partnership duly organized and
validly existing under the laws of the State of Delaware (USA), and has all
requisite corporate power to own its properties and carry on its business as
now being conducted.
2.2.2 No Broker. Buyer and its agents have incurred no obligation
or liability, contingent or otherwise, for brokerage or finders' fees or
agents' commissions or other similar payment in connection with this
Agreement.
2.2.3 Authority and Restrictions. (a) Buyer has full corporate
power and authority to enter into this Agreement and any other documents
contemplated hereby and to pay the Purchase Price and the Aggregate Closing
Date Intragroup Indebtedness as provided in this Agreement.
(b) The consummation of the transactions contemplated by this
Agreement will not result in a breach in any material respect of, or give
rise to a right of termination of, any Material Contract, material permit or
authorization to which Buyer is subject or a party, or violate any of the
provisions of the charter documents of Buyer.
2.2.4 No Lawsuits; Consents. There is no lawsuit, arbitration or
proceeding pending or, to the knowledge of Buyer, threatened against Buyer
which might prevent the consummation of any of the transactions contemplated
by this Agreement, and except as set forth in Schedule 2.2.4, no approval or
authorization of any Governmental Entity or of any third party on the part of
Buyer is required in connection with the execution, delivery and performance
of this Agreement and the other documents contemplated hereby and thereby.
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2.2.5 Execution and Effect of Agreement. Buyer and its designated
affiliates, as the case may be, have the full corporate power and authority
to enter into this Agreement and the other documents contemplated hereby. The
execution and delivery of this Agreement, and other document contemplated
hereby and the consummation of the transactions contemplated hereby have been
duly authorized by the necessary corporate action of Buyer, and this
Agreement constitutes a valid and binding obligation of Buyer, enforceable
against Buyer in accordance with its terms.
2.2.6 Financial Capacity. Buyer and its designated affiliates, as
the case may be, have adequate financial resources to complete the
transactions contemplated hereby and pay the Purchase Price and Aggregate
Closing Date Intragroup Indebtedness and the commitments of Buyer herein are
not subject to the obtaining of third party financing.
2.2.7 Access to Data Room Documents. Buyer acknowledges that it
has enjoyed full and complete access to the documents made available to it in
the data room of Seller and has reviewed each of such documents; a list of
such documents is set forth at Schedule 2.2.7 hereto. Buyer also acknowledges
that it has had the opportunity to conduct a due diligence review of each of
CMB France, CMB Turkey, the U.K. Plant and the German Plant, that it has had
access to confidential documents, data and other materials pertaining to
CMB France, CMB Turkey, the U.K. Plant and the German Plant and that it has
visited the sites of each of CMB France, CMB Turkey, the U.K. Plant and the
German Plant and met with key employees.
ARTICLE 3
COVENANTS
3.1 Covenants of Seller. Seller hereby covenants and agrees as
follows:
3.1.1 Business in Ordinary Course. Except as contemplated by this
Agreement or as otherwise disclosed in Schedule 3.1.1, during the period from
the date hereof to the Closing Date, Seller will cause each of CMB France,
CMB U.K. (with respect to the U.K. Plant), CMB Turkey and CMB Germany (with
respect to the German Plant) to conduct their business in the ordinary course
of business consistent with past practice and to maintain their corporate
books, records and accounts in compliance with law. Without limiting the
generality of the foregoing and except as otherwise expressly provided in
this Agreement or as otherwise disclosed in Schedule 3.1.1, during the period
from the date hereof to the Closing Date, neither Seller nor CMB France, CMB
U.K. (with respect to the U.K. Plant), CMB Turkey and CMB Germany (with
respect to the German Plant) with respect to their businesses will take any
action which will cause the representations and warranties contained in
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Section 2.1.7 not to be true and correct as of the Closing Date, without the
prior written consent of Buyer, which consent Buyer agrees will not
unreasonably be withheld.
3.1.1 Perform Contracts; Comply with Permits. Except to the
extent performance would prove commercially unreasonable, and in such event
after prior consultation with Buyer, each of CMB France, CMB U.K. (with
respect to the U.K. Plant), CMB Turkey and CMB Germany (in respect of the
German Plant) shall perform or cause to be performed on a timely basis and in
compliance with the terms thereof all obligations to be performed under all
the contracts, leases and documents relating to their properties and business
and shall comply with all permits, authorizations and licenses.
3.1.2 Disclosure and Supplemental Disclosure. Seller has prepared
the Schedules and shall prepare any additional Schedules as set forth below
in good faith and with reasonable care and diligence. At any time prior to
the Closing Date, Seller shall be entitled to supplement or amend the
Schedules or add additional Schedules with respect to any matter herein,
necessary to supply, correct or update any information called for under this
Agreement. Seller shall provide to Buyer not less than five (5) days prior to
the Closing Date amended and supplemented Schedules with respect to matters
to be disclosed as of the date of delivery. No such Schedule addition,
supplement or amendment shall be deemed to qualify, supplement or amend
Seller's representations or warranties (including for a Material Adverse
Change) unless Seller shall agree to indemnify Buyer on a dollar for dollar
basis (without application of Section 7.4(b) with respect to such matters. If
the matters disclosed therein reflect or constitute, individually or in the
aggregate, a Material Adverse Change (as defined in Section 9.11 hereof):
Buyer's sole remedy in the event it shall not accept such addition,
supplement or amendment shall be the termination of this Agreement without
liability or indemnity in accordance with Section 6.1(b) hereof and Seller
shall have the termination right set forth at Section 4.2.4 below.
3.1.3 Repurchase of Certain Inventory. Seller hereby covenants
and agrees that in the event that Buyer is unable (despite its best
commercial efforts) to use, sell, market, or otherwise dispose of for value
those finished products and raw materials including "master batch" products
within six (6) months after the Closing Date, such products having been in
the inventories of CMB France, CMB U.K. (with respect to the U.K. Plant), CMB
Turkey or CMB Germany (with respect to the German Plant) on the Closing Date
and included on the Effective Date Balance Sheets, Buyer may submit a written
claim to Seller at the end of the above time period, and Seller upon receipt
of such written claim within the above time periods, shall repurchase or
procure the repurchase of the products within thirty (30) calendar days from
Buyer for value equal to net book value at the time of Closing. At Seller's
request, Buyer shall deliver the products to Seller or Seller's designated
affiliate within thirty (30) calendar days at Buyer's expense.
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3.1.4 Head Office. On or prior to the Closing Date, Seller shall
cause those employees of CMB France listed at Schedule 3.1.5 and who are
dedicated to Seller's head office ("Head Office Employees") to be transferred
to Seller or another of Seller's affiliates and shall hold Buyer harmless
without regard to the limitations set forth at Section 7.4 from and against
any liabilities in connection with such employees.
3.1.5 Interim Management Reports. During the period from the date
hereof up to the Closing Date, Seller shall deliver, or cause to be
delivered, to Buyer promptly upon their availability in accordance with
Seller's internal reporting practices the periodic monthly balance sheets and
income statements with respect to CMB France, CMB Turkey and the Plants.
3.1.6 Capital Expenditures and Restructuring Costs. Seller hereby
covenants and agrees that: (a) the sum of Reimbursed Capital Expenditures
plus other capital expenditures relating to the 1998 capital expenditure
projects identified at Schedule 1.2.1(b) (and including amounts disbursed as
deposits in respect thereof in 1997) committed but not invoiced plus
Reimbursed Restructuring Costs in respect of the Plants, CMB France and CMB
Turkey shall not exceed US$8,400,000 at the Closing Date; and (b) the sum of
Reimbursed Restructuring Costs plus other costs committed but not invoiced in
respect of the restructuring as more fully itemized at Schedule 1.2.1(b) of
CMB France and the German Plant shall not exceed US$3,000,000 at the Closing
Date.
3.1.7 Non-competition. Seller shall refrain, and shall cause its
affiliates to refrain, for a period equal to the duration of the respective
product design covered by the Molds, from competing, directly or indirectly,
with Buyer or its affiliates for customers orders in respect of such product
designs, provided, however, that such covenant shall not apply to shampoo and
shower gel packages and bottles.
3.1.8 Post-Closing Transitional Services. For a period of ninety
(90) days after the Closing, Buyer may request, and Seller shall provide,
such transitional, operational, commercial, financial and administrative
services at CMB France, CMB Turkey, the U.K. and German Plants as may be
reasonably required, at a mutually agreed rate reflecting Seller's actual
all-in costs. Seller agrees that Mr. Gregory, Mr. Laurin and Mr. Lejeune
shall be made available, where and when possible, to the Buyer for the
purposes of providing information and advice, which shall not conflict with
the business of Seller and particularly the personal care sector, during a
transition period commencing immediately after the Closing and ending on 30
September 1998. To the extent that any of the employees covered are still in
the employment of Seller Group, the Buyer shall pay the Seller's costs in
providing that information and advice.
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3.1.9 Real Estate Formalities. On or before November 30, 1998,
Seller undertakes to carry out the necessary formalities with the French
administration such as land registries, tax authorities and any other
administrative body so that the title of CMB France to the freehold
properties situated in Meaux, Noeux-les-Mines and Labourse is regular and
binding and enforceable vis-a-vis third parties and to bear all the
subsequent costs and fees which may be due in this respect. In the event that
the necessary formalities as referred to herein are not completed by December
31, 1998, a penalty of US$1,700 per week payable monthly in arrears will be
owed by Seller to Buyer until the last formalities have been completed
notwithstanding Schedule 7.4(e) hereto, unless Seller shall demonstrate that
such non-completion is not due to Seller's failure to take any required
action or carry out any required formality or that Buyer shall not have
rendered all assistance reasonably required in connection herewith.
3.1.10 Intellectual Property Formalities. On or before September
30, 1998, Seller undertakes to provide or to cause to provide to Buyer all
the necessary documents which will allow Buyer to register with INPI and any
other administrative body all the changes in respect of the ownership of the
French Patent number 89 06 814 including without limitation the original
merger agreement and copies of company searches and minutes of meetings
showing changes in the company name. Seller shall hold CMB France harmless
from and against for any damages, losses or expenses which result from the
fact that the above mentioned documents are not provided to Buyer thus
preventing the valid registration of the above-mentioned changes.
3.1.11 Release of Inscription. On or before October 31, 1998,
Seller shall undertake all formalities required to obtain the release
(mainlevee) of Inscription No 97PT1259 of July 30, 1997 for the benefits of
the French Treasury in the amount of FF 127,468 set forth in the Etat
Sommaire des Inscriptions of the Tribunal de Commerce of Meaux.
3.1.12 Transfer of share. On or before December 31, 1998, at the
latest, Seller shall cause to be transferred and conveyed to Buyer or Buyer's
designee, at Seller's sole cost and expense, one (1) share of CMB France
currently registered in the name of B.A.P. (a former affiliate of Seller, in
liquidation). Seller shall promptly undertake all necessary steps, including
with the Commissaire a Execution du plan and the juge commissaire, to
effectuate such transfer and conveyance.
3.1.13 Books and Records. Promptly after the date hereof, Seller
shall deliver and/or cause to be delivered to Buyer all such corporate books
and records (or excerpts thereof) as shall relate exclusively or
substantially exclusively to CMB France, CMB Turkey, the German Plant or the
U.K. Plant provided that Seller shall be entitled to retain copies of such
books and records to the extent necessary or appropriate for the purposes of
ongoing regulatory and tax reporting and compliance.
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3.1.14 ION Bottle Design License. Seller shall exert its best
efforts to cause CMB Germany to conclude negotiations with ION regarding the
bottle design commissioned for Kraft, pursuant to which CMB Germany shall
obtain a license assignable or sub-licensable to Seller's German affiliate
(with a sub-license to Seller's affiliate Zeller as regards the closure),
without cost or expense to Buyer Group.
3.2 Covenants of Buyer.
3.2.1 Fulfillment of Assumed Liabilities. Buyer shall, and shall
cause its affiliates to, fulfill and perform the terms of the deed of
conveyance and the asset purchase agreements and to indemnify and hold
harmless Seller and its affiliates from and against any breach or violation
by Buyer or its affiliates of any and all contracts, liabilities, obligations
and undertakings transferred and assumed under the deed of conveyance and the
asset purchase agreements.
3.2.2 Change of Company Name and Discontinuation of Use of
Trademarks and Tradenames. (a) Buyer hereby covenants and agrees that,
Buyer and its affiliate shall not acquire hereunder any right to use the
"CMB", "CarnaudMetalbox", "Raku", "Crown" or "Carnaud" names and logos or the
stylized "R" logo utilized by CMB Germany ("CMB Names"), Buyer shall not and
shall procure that its affiliates do not send out invoices bearing the CMB
Names and that Buyer shall use its best commercial efforts to promptly remove
the CMB Names from all products, packaging, shipping materials, stationery,
literature, invoices, marketing materials and any other materials which are
sent by Buyer and/or Buyer's affiliates to third parties, and in any event
shall remove the CMB Names from all products, packaging, shipping materials,
stationery, literature, invoices, marketing materials and any other materials
no later than the six (6) month anniversary of this Agreement.
(b) Buyer covenants that it shall remove or cause to be removed
the CMB Names from all Moulds, it being understood by the parties that Buyer
shall remove the CMB Names from at least one (1) Mould per plant per week.
Buyer shall remove or cause to be removed within three (3) months after
signature of this Agreement any sign or other marking containing the CMB
Names from buildings, trucks or any other property.
(c) Buyer covenants that it shall take the necessary steps to
change the corporate name of CMB France and CMB Turkey promptly after the
Closing Date.
3.2.3 Best Commercial Efforts Regarding Certain Inventory. Buyer
hereby covenants and agrees that it shall or procure that its affiliates
shall take all actions necessary to use, sell, remarket or otherwise dispose
of for value the finished products, raw materials and the "master batch"
products and in the inventory of CMB France, CMB U.K. (with respect to the
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U.K. Plant), CMB Turkey and CMB Germany (with respect to the German Plant) as
reflected on the Effective Date Balance Sheets.
[3.2.4 reserved]
3.2.5 Capital Expenditures and Restructuring Costs. Buyer hereby
covenants and agrees to pay and satisfy, and/or to cause its affiliates to
pay and satisfy, those invoices, commitments or other payment obligations of
the Plants, CMB France and CMB Turkey in respect of the capital expenditures
and restructuring costs described at Section 3.1.7 above, subject to the
maximum amounts set forth therein.
3.3 Mutual Covenants. Each of Seller and Buyer covenants and
agrees as follows:
3.3.1 No Solicitation of Employees. Except for those employees
agreed to in writing by the parties hereto prior to Closing, for a period of
three (3) years after the Closing, the parties shall refrain, directly or
indirectly through their respective present or future affiliates, from
employing, engaging, soliciting or seeking to employ or engage any person who
at the Closing Date or within a period of eighteen (18) months prior to such
date had been an employee of the other party or any of the other party's
affiliates, unless such employee was previously terminated by the party or
any of the party's affiliates.
3.3.2 Environmental Remediation. Buyer hereby undertakes to carry
out, and Seller undertakes to fund, the environmental remediation with
respect to those items set forth in Schedule 3.3.2. Such schedule sets forth
the estimated cost of such remediation with respect to each such item. Seller
shall, as and when expenditures are incurred by Buyer or its affiliates in
respect of such remediation, reimburse such expenditures upon presentation of
reasonable documentation. Seller may, at its option, pay directly any third
party suppliers or contractors upon presentation of invoices. With respect to
direct costs of Buyer or its affiliates (employee costs, materials, etc.),
such direct costs shall be determined by mutual agreement but shall not
exceed Buyer's actual direct cost. Buyer shall carry out the remedial action
through the most cost effective means. Buyer shall reimburse to Seller any
amounts received by Buyer or its affiliates in excess of the actual costs
incurred and Seller shall in no event be required to fund or reimburse
aggregate remediation in excess of the aggregate agreed amount set forth in
Schedule 3.3.2; it being understood that any excess resulting from the actual
cost of a particular item being lower than its estimated cost may be used to
fund any other item above its estimated cost.
3.3.3 Publicity. Seller and Buyer agree that, from the date
hereof through the Closing Date, no public release or announcement concerning
the transactions contemplated hereby shall be issued by either party without
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the prior consent of the other party (which consent shall not be unreasonably
withheld), except as such release or announcement may be required by law or
the rules or regulations of any Governmental Entity, in which case the party
required to make the release or announcement shall allow the other party
reasonable time to comment on such release or announcement in advance of such
issuance. Notwithstanding the foregoing, Seller and Buyer shall be entitled
to proceed with all information and consultation procedures required under
relevant labor law regulations or collective bargaining agreements. Seller
and Buyer shall consult with each other concerning the means by which the
Seller's employees, customers, and suppliers and others having dealings with
the Seller will be informed of the contemplated transactional and Buyer will
have the right to be present for any such communication.
3.3.4 Commercially Reasonable Efforts. Subject to the terms and
conditions of this Agreement, each party shall use its commercially
reasonable efforts to cause each of the conditions to Closing to be
fulfilled, the Closing to occur and relations with customers, suppliers,
Transferred Employees and Governmental Entities to be coordinated, during the
transitional period.
3.3.5 Cooperation. (a) Each of Buyer and Seller shall furnish or
cause to be furnished after the Closing, upon reasonable written notice, to
the other and its employees, counsel, auditors and representatives access,
during normal business hours, to such information and assistance relating to
CMB France, CMB U.K., CMB Turkey and the German Plant as is reasonably
necessary for financial reporting and accounting matters, the preparation and
filing of any tax returns, reports or forms or the defense of any tax claim
or assessment as well as the preparation of any filing or submission which is
necessary under any applicable legislation, rules or regulations. Seller and
Buyer shall keep each other apprised of the status of any communication with,
and any inquiries or requests for additional information from, any foreign or
domestic antitrust or competition authority or Governmental Entity, and shall
comply promptly with any such inquiries or requests. Each of Seller and Buyer
shall use its best efforts to obtain any clearance required under any
applicable legislation, rules or regulations for the purchase and sale of the
Shares. All such antitrust and other requisite consents of Governmental
Entities as may be so required, are set forth in Schedule 3.3.5 hereto
(collectively, "Governmental Consents"). As used in this Agreement, the term
"Governmental Entity" means any State or local authority or any court of
competent jurisdiction, administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign, including any
court, administrative agency, commission or other organ of the European
Union. Each party shall reimburse the other for reasonable out-of-pocket
third party costs and expenses incurred in assisting the other pursuant to
this Section 3.3.5. Neither party shall be required by this Section 3.3.5 to
take any action that would unreasonably interfere with the conduct of its
business or unreasonably disrupt its normal operations (or, in the case of
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Buyer, the business or operations of CMB France, CMB U.K., CMB Turkey and CMB
Germany (with respect to the German Plant).
(b) To the extent that consent to the assignment of any contracts
of the U.K. Plant or the German Plant shall not have been obtained at the
Closing Date, Seller and Buyer shall cause their respective affiliates to
comply with the relevant terms of the U.K. Asset Purchase Agreement and the
German Asset Purchase Agreement, respectively.
3.3.6 Confidentiality. Each of the parties hereto shall treat the
contents of this Agreement as confidential and shall refrain from disclosing
this Agreement, in whole or in part to any third party, except as required by
any laws or regulations of Governmental Entities.
3.3.7 CMB Turkey. The parties shall cooperate with respect to the
calling of Board and Shareholders meetings of CMB Turkey to inter alia
acknowledge the resignation of directors, appoint new directors designated by
Buyers, change authorized signatories and bank powers and change the
corporate name.
[3.3.8 reserved]
[3.3.9 reserved
3.3.10 Filing on Form 8-K. Seller shall cooperate with Buyer in
connection with the preparation of combined financial statements for the year
ended December 31, 1997 for incorporation in the filing on Form 8-K which
Buyer (or Buyer's parent) is obligated to make with the United States
Securities and Exchange Commission. The audit of these combined financial
statements will be carried out by Price Waterhouse at Buyer's expense and
such financial statements shall be delivered to Buyer within sixty (60) days
after the Closing Date.
3.3.11 Regulatory Filings. The parties shall cooperate with
respect to all filings with any applicable foreign or domestic antitrust or
competition authority or Governmental Entity required for the transactions
contemplated hereby and shall comply with all supplemental information
requests in connection therewith in order to obtain the requisite approval
from the appropriate authorities on or prior to the Closing Date, and shall
make all filings with the competent authorities required for approval of a
foreign investment.
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ARTICLE 4
CONDITIONS
4.1 Conditions to Obligations of Buyer. The obligations of Buyer
to complete the purchase or cause the completion of the purchase of the
Shares, the Plants and the Aggregate Closing Date Intragroup Indebtedness on
the Closing Date are subject to the following conditions:
[4.1.1 reserved]
[4.1.2 reserved]
4.1.3 Required Consents. The material regulatory and contractual
consents, which the parties by mutual agreement deem necessary for purposes
of the continuity of operations of the U.K. Plant and the German Plant, as
set forth at Schedule 4.1.3 hereto ("Required Consents") shall have been
obtained.
4.2 Conditions to Obligations of Seller. The obligations of
Seller to complete or procure the completion of the sale of the Shares, the
Plants and the Aggregate Closing Date Intragroup Indebtedness on the Closing
Date are subject to the following conditions:
[4.2.1 reserved]
[4.2.2 reserved]
[4.2.3 reserved]
4.2.4 No Material Adverse Change. There shall have been no
Material Adverse Change since the date hereof (except that Seller shall not
be entitled to invoke this condition to the extent (a) it shall willfully and
wrongfully have caused such Material Adverse Change or (b) Buyer shall have
waived any right to indemnification with respect thereto).
4.3 Mutual Conditions.
4.3.1 Governmental Consents. All required Governmental Consents
shall have been obtained.
4.3.2 Related Agreements. The parties hereto shall have executed
the Related Agreements attached hereto as Exhibits I through V.
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ARTICLE 5
CLOSING
5.1 Closing. The closing hereunder ("Closing") shall take place at
the offices of Jones, Day, Reavis & Pogue, 480 avenue Louise, Brussels 1050,
Belgium, on July 23, 1998, or at such other place and at such other time and
date as may be mutually agreed upon in writing by Buyer and Seller ("Closing
Date").
5.2 Deliveries. At the Closing:
5.2.1 Seller's Deliveries. Seller shall deliver, or shall cause
to be delivered, to Buyer the following:
(a) Duly signed and completed share transfer forms in favor of
Buyer or its designee(s) for all of the French Shares and the share
certificates representing the Turkish Shares duly signed and endorsed in
favor of the Buyer or its nominee.
(b) The share transfer registers and the stockholder registers of
CMB France and the sharebook of CMB Turkey.
(c) The minutes of all meetings of shareholders and directors of
CMB France, CMB U.K., CMB Turkey, CMB Germany and SPC with respect to any
required corporate authorization for the transaction contemplated hereby.
(d) A letter of resignation signed by each of the directors of CMB
France and CMB Turkey.
(e) The notice calling a meeting of the Board of Directors of CMB
France on July 27, 1998, to inter alia: (A) acknowledge the resignation of
their directors, (B) appoint new directors, whose names shall be communicated
by Buyer to Seller, and (C) transfer the registered head office of CMB
France.
(f) Corporate approvals of CMB Germany and CMB U.K. approving the
sale of the German Plant and the U.K. Plant, respectively.
(g) [reserved]
(h) Certificate of a duly authorized officer of Seller attesting
that (i) all persons listed in Schedule S.2.1(h) duly authorized to perform
banking transactions for the account of CMB France or CMB Turkey at banks or
financial institutions in which CMB France or CMB Turkey has an account are
no longer authorized to perform such transactions, and (ii) all powers of
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attorney granted to persons listed in Schedule 5.2.1(h) empowering them to
act on behalf of CMB France or CMB Turkey have been revoked.
5.2.2 Buyer's Deliveries. Buyer shall deliver, or shall cause to
be delivered, to Seller the following:
(a) The payment of the Unadjusted Purchase Price by bank wire
transfer in immediately available funds or certified or bank check as set
forth at Section 1.2 hereof, to the account previously designated by Seller
to Buyer.
(b) The payment by bank wire transfer in immediately available
funds of the estimated amount of the Aggregate Closing Date Intragroup
Indebtedness as set forth in Section 1.2.1.
(c) [reserved]
5.2.3 Mutual Deliveries. Buyer and Seller shall deliver, or shall
cause to be delivered, to the other party the following:
(a) Executed counterparts of each of the Related Agreements.
(b) Copy of the approval of the transaction contemplated hereby by
the appropriate authorities.
(c) Duly executed powers of attorney or other evidence of
authority authorizing the signatory to execute all documents contemplated
hereby.
(d) Acte de Cession de Creance evidencing the transfer of
repayment obligations of the respective debtors for their portion of
Aggregate Closing Date Intragroup Indebtedness executed by the Seller and by
Buyer's designee(s).
ARTICLE 6
TERMINATION
6.1 Termination. This Agreement may only be terminated (a) by
mutual written consent of the parties hereto; (b) by Buyer, if any of the
conditions provided for in Sections 4.1 or 4.3 of this Agreement has not been
met by July 31, 1998 and has not been waived by Buyer by such date; or (c) by
Seller, if any of the conditions provided for in Sections 4.2 or 4.3 of this
Agreement has not been met by July 31, 1998 and has not been waived by Seller
by such date; in each such case, and save as otherwise provided at Section
6.2(c) below, such termination shall be without liability or indemnity.
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6.2 Consequences. If this Agreement is terminated and the
transactions contemplated hereby are abandoned as described in this Article
6:
(a) this Agreement shall become void and of no further force or
effect, except for the provisions of (i) Section 9.5 relating to certain
expenses, (ii) Section 3.3.3 relating to publicity, (iii) Sections 2.1.15 and
2.2.2 relating to broker's fees and (iv) this Section 6.2;
(b) all confidential information provided by either party to the
other shall be returned to such first party or, upon such first party's
instruction, destroyed; and
(c) neither party shall be liable to the other party, save for
willful and wrongful breach of covenant.
ARTICLE 7
INDEMNIFICATION
7.1 Indemnification by Seller Group. Subject to the terms and
conditions of this Agreement (and, with respect to Environmental
Indemnifiable Losses subject to Article 8 hereof), Seller Group (as defined
in Section 7.8) agrees to indemnify and hold Buyer Group (as defined in
Section 7.8) harmless from and against any liabilities, damages, losses or
costs resulting from any and all liabilities, obligations, damages
(excluding, however, incidental or consequential damages) (i.e. only dommage
direct), deficiencies, losses, claims, actions, lawsuits, proceedings,
judgments, demands, costs (including costs of posting bank guarantees and
securities) and penalties (including reasonable attorneys' fees)
("Indemnifiable Losses") suffered or incurred by Buyer Group and resulting
from (i) any breach of representation or warranty of Seller Group contained
in this Agreement (except to the extent waived in writing by Buyer Group
pursuant to this Agreement) or (ii) any breach of covenant on the part of
Seller Group whether or not a mutual covenant contained in this Agreement, it
being understood that Seller Group shall not be liable for any Indemnifiable
Loss resulting from a change in law after Closing, and that Buyer Group
waives any other remedy than those provided by this Article 7 and Article 8,
which shall constitute Buyer Group's exclusive remedy in respect of any
Indemnifiable Losses.
7.2 Indemnification by Buyer Group. Subject to the terms and
conditions of this Agreement (and, with respect to Environmental
Indemnifiable Losses, subject to Article 8 hereof), Buyer Group agrees to
indemnify and hold Seller Group harmless from and against any and all
Indemnifiable Losses suffered or incurred by Seller Group resulting from (i)
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any breach of representation or warranty of Buyer Group contained in this
Agreement (except to the extent waived in writing by Seller Group pursuant to
this Agreement), or (ii) any breach of covenant on the part of Buyer Group
contained in this Agreement whether or not a mutual covenant, it being
understood that Buyer Group shall not be liable for any Indemnifiable Loss
resulting from a change in the law after Closing and that Seller Group waives
any other remedy other than those provided by this Article 7 and Article 8,
which shall constitute Seller Group's exclusive remedy in respect of any
Indemnifiable Losses.
7.3 When Payable. (a) Indemnification under this Article 7 shall
be payable with respect to any claim concerning an Indemnifiable Loss upon
the later of (a) the date any payment is required to be made in respect of
any Third Party Claim (as defined in Article 7.5 hereof), (b) the resolution
of such claim by mutual agreement between Seller Group and Buyer Group, or
(c) the final settlement of such claim by the arbitration award as provided
pursuant to Section 9.4.
(b) Notwithstanding paragraph (a) above, with respect to Third
Party Claims, if the Indemnifying Party shall have acknowledged its
obligation to indemnify the Indemnified Party and shall have assumed the
defense of such Third Party Claim pursuant to Section 7.5(b) below, then the
Indemnifying Party shall be obligated to make all payments and post all such
bonds, guarantees and securities as may be required by administrative
authorities, courts or tribunals having jurisdiction.
7.4 Limitations on Indemnification. (a) Neither the
indemnification obligations of Seller Group under Section 7.1 above (save as
regards indemnification obligations of Seller Group for any Environmental
Indemnifiable Losses as to which Section 8.7 shall apply) nor the
indemnification obligations of Buyer Group under Section 7.2 (save as regards
indemnification obligations of Buyer Group for any Environmental
Indemnifiable Loss as to which Section 8.2 shall apply) shall exceed in the
aggregate three million two hundred thousand U.S. Dollars (US$3,200,000).
Notwithstanding the foregoing, any Indemnifiable Loss for: (i) breach of
representations and warranties under Section 2.1.19; (ii) Indemnifiable
Liabilities for Discontinued Operations; (iii) Non-Operational Indemnifiable
Liabilities for Continued Operation (as such terms are defined in Section
9.11); and (iv) Disclosed Indemnifiable Losses (as identified in Schedule
7.4(b) hereto) shall not be subject to the limitation set forth above.
(b) (i) No claim in respect of any individual event or occurrence
(it being understood that any series of events or occurrences arising out of
the same or substantially similar and related facts and circumstances shall
be treated as one individual event or occurrence) shall be deemed to give
rise to an Indemnifiable Loss (other than an Environmental Indemnifiable
Loss, as to which Section 8.7 shall apply) unless and until the liability,
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loss or damage claimed exceeds ten thousand U.S. Dollars (US$10,000),
(subject to clause (ii) below); and (ii) no party shall be entitled to make a
claim hereunder unless and until the aggregate amount of claims for
Indemnifiable Losses (other than an Environmental Indemnifiable Loss, as to
which Section 8.7 shall apply) under clause (i) above exceeds the equivalent
of two hundred thousand U.S. Dollars (US$200,000) and then only to the extent
of the excess. Notwithstanding the foregoing, Seller Group shall indemnify
and hold harmless Buyer Group on a dollar for dollar basis from and against
Disclosed Indemnifiable Losses (as identified in Schedule 7.4(b) hereto).
(c) Subject to paragraph (b) above, with respect to Non-
Operational Indemnifiable Liabilities for Continued Operations, Seller Group
shall indemnify and hold harmless Buyer Group for Indemnifiable Losses, up to
an aggregate amount of Indemnifiable Losses of five hundred thousand U.S.
Dollars (US$500,000). To the extent such Indemnifiable Losses exceed in the
aggregate five hundred thousand U.S. Dollars (US$500,000) but do not exceed
in the aggregate three million U.S. Dollars (US$3,000,000), Seller Group
shall indemnify and hold harmless Buyer Group for fifty percent of such
tranche of Indemnifiable Losses. To the extent such Indemnifiable Losses
exceed three million U.S. Dollars (US$3,000,000) in the aggregate, Seller
Group shall indemnify and hold harmless Buyer Group for one hundred percent
of such tranche of Indemnifiable Losses.
(d) Notwithstanding paragraphs (a) through (c) above, each party
shall indemnify and hold harmless the other party on a dollar for dollar
basis from and against Indemnifiable Losses arising out of any breach of
covenant.
7.5 Procedures Relating to Indemnification of Third Party Claims.
(a) In order for a party ("Indemnified Party") to be entitled to
any indemnification of any Indemnified Loss provided for under this Agreement
(including claims for Environmental Indemnifiable Losses) in respect of,
arising out of or involving a claim or demand made by any third party against
the Indemnified Party ("Third Party Claim"), such Indemnified Party must
notify the other party ("Indemnifying Party") in writing, and in reasonable
detail, of the Third Party Claim within thirty (30) business days after
receipt by such Indemnified Party of written notice of the Third Party Claim
provided that for the purpose of this Agreement, any tax reassessment notice
shall be considered as a Third Party Claim and any Third Party Claim relating
to tax shall be notified to the Indemnifying Party within ten (10) business
days of their receipt by the Indemnified Party. Thereafter, the Indemnified
Party shall deliver to the Indemnifying Party, within ten (10) business days
after the Indemnified Party's receipt thereof, copies of all notices and
documents (including court papers) received by the Indemnified Party from the
Third Party relating to the Third Party Claim, provided, however, that the
Indemnified Party's non-compliance with such notice periods shall not
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preclude its right to indemnification if the interests of the Indemnifying
Party shall not have been prejudiced or adversely affected. If the
Indemnifying Party shall have suffered such prejudice or adverse effect, the
Indemnified Party may nevertheless claim partial indemnification if it
sustains the burden of proof that a portion of the Indemnifiable Loss was not
attributable to such non-compliance with notice periods.
(b) If a Third Party Claim is made against an Indemnified Party,
the Indemnifying Party shall be entitled to participate in the defense
thereof and, if it so chooses and acknowledges its obligation to indemnify
the Indemnified Party therefor, to assume the defense thereof with counsel
selected by the Indemnifying Party at its own expense; provided, however,
that such counsel is not reasonably objected to by the Indemnified Party.
Should the Indemnifying Party so elect to assume the defense of a Third Party
Claim, (x) the Indemnifying Party shall not be liable to the Indemnified
Party for legal expenses subsequently incurred by the Indemnified Party in
connection with the defense thereof and (y) the limitations on
indemnification set forth at Section 7.4(a) above shall not apply and the cap
set forth in Section 8.7 shall not apply (but the percentages set forth in
Schedule 8.7 shall continue to apply up to the cap amount). If the
Indemnifying Party assumes such defense, the Indemnified Party shall have the
right to participate in the defense thereof and to employ counsel, at its own
expense, separate from the counsel employed by the Indemnifying Party, it
being understood that the Indemnifying Party shall be liable for the fees and
expenses of counsel employed by the Indemnified Party for any period during
which the Indemnifying Party has failed to assume the defense thereof (other
than during the period prior to the time the Indemnified Party shall have
given notice of the Third Party Claim as provided above).
(c) If the Indemnifying Party so elects to assume the defense of
any Third Party Claim, all of the Indemnified Parties shall cooperate with
the Indemnifying Party in the defense or prosecution thereof. Such
cooperation shall include (upon the Indemnifying Party's request) the
retention and the provision to the Indemnifying Party of records and
information to the extent practicable which are reasonably relevant to such
Third Party Claim, and making employees available on a mutually convenient
basis to provide additional information and explanation of any material
provided hereunder. If the Indemnifying Party shall have assumed the defense
of a Third Party Claim, the Indemnified Party shall not admit any liability
with respect to, or settle, compromise or discharge, such Third Party Claim
without the Indemnifying Party's prior written consent (which consent shall
not be unreasonably withheld). If the Indemnifying Party shall have assumed
the defense of a Third Party Claim, the Indemnified Party shall agree to any
settlement, compromise or discharge of a Third Party Claim which the
Indemnifying Party may recommend and which by its terms obligates the
Indemnifying Party to pay the full amount of the liability in connection with
such Third Party Claim, which releases the Indemnified Parties completely in
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connection with such Third Party Claim and which would not otherwise
adversely affect the Indemnified Parties.
(d) If the Indemnifying Party does not elect to assume the defense
of the Third Party Claim, the Indemnified Party shall have the conduct of the
Third Party Claim and shall be entitled to settle such claim at such time and
upon such terms as the Indemnified Party deems fair and reasonable without
prejudice to any right of indemnification it may have against the
Indemnifying Party, provided that at least ten (10) business days before such
settlement becomes effective, the Indemnified Party notifies (the
"Notification") the Indemnifying Party of the amount of the proposed
settlement (the "Proposed Settlement Amount"). Within the ten (10) business
days following the sending of the Notification, the Indemnifying Party may
deliver to the Indemnified Party (a) a notice disputing the Proposed
Settlement Amount (a "Disapproval Notice") or (b) a notice approving the
Proposed Settlement Amount (an "Approval Notice"). If no notice is received
by the Indemnified Party within ten business days following the sending by it
of the Notification, the Indemnifying Party shall be deemed to have delivered
an Approval Notice. Delivery by the Indemnifying Party of an Approval Notice
shall constitute an admission by the Indemnifying Party of an obligation by
it to indemnify the Indemnified Party subject to the limitations set forth in
Section 7.4. If the Indemnified Party delivers a Disapproval Notice, it
shall immediately assume the defense of the Third Party Claim and in which
case the provisions of (b) and (c) above will apply.
(e) If the Indemnifying Party has not assumed defense of a Third
Party Claim and the liability of the Indemnified Party (or of CMB France,
U.K. Plant, CMB Turkey or the German Plant) in respect of such Third Party
Claim is determined by a judgment of a Court or Tribunal (which is not
final), the provisions of paragraph (d) above shall apply except that the
Indemnified Party shall inform the Indemnifying Party within ten (10)
business days of notification of the said judgment and the Proposed
Settlement Amount shall mean the amount determined in the said judgment. In
this event, the provisions of (d) shall also apply mutatis mutandis.
7.6 Survival of Indemnification. (a) The right of each of Seller
Group or Buyer Group to make a claim for a breach of the other party's
representations or warranties under this Agreement, shall survive the Closing
Date for a period expiring on July 31, 2000, provided
(i) claims for indemnification pursuant to representations relating to
Transferred Employees shall survive for a period of five (5) years after the
Closing Date; (ii) claims for breach of Section 2.1.3, Section 2.1.9(b)
(other than the representation as to quiet enjoyment, which shall be subject
to the general survival period stipulated above this proviso) and/or Section
2.1.19 shall survive for a period of three (3) months after the expiry of the
applicable statute of limitations; (iii) claims for Environmental
Indemnifiable Losses shall be governed by Section 8.8 hereof; (iv) claims for
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indemnification in respect of Indemnifiable Liabilities for Discontinued
Operations and Non-Operational Indemnifiable Liabilities for Continued
Operations shall survive for a period of seven (7) years after the Closing
Date and (v) Disclosed Indemnifiable Losses shall not be subject to any
survival limitation. Subject to Section 7.5 above as regards procedures for
Third Party Claims, in order for a party to claim indemnification hereunder,
it must notify the other party in writing, and in reasonable detail, of the
nature of the claim within thirty (30) business days of the date such first
party shall have actual knowledge of the facts or circumstances giving rise
to the claim, provided, however, that the Indemnified Party's noncompliance
with such notice periods shall not preclude its right to indemnification if
the interests of the Indemnifying Party shall not have been prejudiced or
adversely affected. If the Indemnifying Party shall have suffered such
prejudice or adverse effect, the Indemnified Party may nevertheless claim
partial indemnification if it sustains the burden of proof that a portion of
the Indemnifiable Loss was not attributable to such non-compliance with
notice periods.
(b) Any claim made in accordance with (a) above, shall survive the
expiry of the applicable statute of limitations period until final settlement
of such claim.
(c) The covenants of the parties contained in this Agreement shall
survive indefinitely, save to the extent a specific time period is identified
in the relevant covenant.
7.7 Miscellaneous Provisions. (a) The amount of any indemnity
payable hereunder on account of an Indemnifiable Loss shall be reduced by any
insurance proceeds actually received by the Indemnified Party with respect
thereto, and further reduced by the value of any net tax benefit or tax
savings realized by the Indemnified Party as a result of or related to the
foregoing (including without limitation a tax deduction or loss, basis
adjustment and/or shifting of income, deductions, gains, loss and/or
credits), and increased by any tax incurred by the Indemnified Party as a
result of or related to the foregoing so that the net amount retained by the
Indemnified Party after tax corresponds to the amount of the Indemnifiable
Loss (including without limitation any tax related to the inclusion, if
required by law, in gross income of insurance proceeds or a payment pursuant
hereto).
(b) The increase in tax incurred by the Indemnified Party shall be
determined by computing the tax with such increase and without such increase.
The reduction of the tax losses of the Indemnified Party should be treated as
an increase in tax for the purposes of this paragraph.
(c) The amount of any indemnity payable hereunder on account of
any Indemnifiable Loss shall be increased by interest calculated thereon as
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provided for in Section 1.2.2 in cash for the period which runs from the date
on which any Indemnifiable Loss was actually incurred by the Indemnified
Party to the date on which the indemnity is actually paid.
(d) Any indemnity payment by Seller Group to Buyer Group on
account of an Indemnifiable Loss shall be understood to constitute damages
and not a reduction in purchase price (except that such payments under the
U.K. Asset Purchase Agreement shall be deemed a reduction in purchase price).
Such payment by Seller Group shall be made to the Buyer Group or directly to
any other entity designated by the Buyer Group or in respect of a Third Party
Claim upon Buyer Group's request, directly to the third party claimant
concerned.
(e) None of CMB France or CMB Turkey shall be entitled to seek
reimbursement or compensation from Seller Group or any of Seller Group's
affiliates for tax losses incurred by any of them and transferred to a
consolidated tax group during those tax periods in which they were included
in such consolidated tax group.
7.8 Seller Group and Buyer Group. "Seller Group" shall include
the Seller, CMB Germany and CMB U.K. represented by Seller duly authorized.
"Buyer Group" shall include Buyer, Graham Packaging Europe S.A.S., Graham
Packaging Deutschland GmbH and Graham Packaging U.K. Limited represented by
Buyer duly authorized. For the purposes of indemnification, actions for
breach of representations and warranties contained in Article 2 hereof and
brought under this Article 7 or Article 8 hereunder, or for breach of any
covenant herein, it is understood and agreed between parties that the
respective Indemnifying Party and Indemnified Party shall be the member of
the Buyer Group and Seller Group, or Seller Group and Buyer Group, as the
case may be, with respect to which the Indemnifiable Loss is suffered and the
parties shall covenant to cause their respective affiliates to make or
receive indemnity payments accordingly. Any representations, warranties and
indemnities contained in the U.K. Asset Purchase Agreement and the German
Asset Purchase Agreement shall be deemed comprised within and subject to this
Article 7 and Article 8 hereunder, shall not modify or increase the Buyer
Group's or the Seller Group's aggregate obligations hereunder for breach of
representation or warranty and shall in no event give rise to a double-
recovery. Seller and Buyer each hereby covenant to cause the members of their
respective groups to fulfill the obligations contained on this Article 7 and
Article 8 hereunder and in the respective local asset purchase agreements,
and each of them hereby irrevocably and unconditionally guarantees such
fulfillment by them.
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ARTICLE 8
ENVIRONMENTAL INDEMNIFICATION
8.1 Environmental Indemnification by Seller Group. (a) Seller
Group agrees to indemnify and hold harmless Buyer Group from and against any
and all Environmental Indemnifiable Losses (as defined at Section 8.3 below)
suffered or incurred by Buyer Group resulting from (a) any breach of
representation or warranty of Seller Group, and (b) any Remedial Action (as
defined at Section 8.3 below) that is required to be taken on account of a
Third Party Claim for which responsibility is to be borne by Seller Group in
accordance with Section 8.4, it being understood that (i) Seller Group shall
not be liable for any Environmental Indemnifiable Loss resulting from a
change in Environmental Laws after Closing and that (ii) Buyer Group waives
any other remedy than those provided by this Article 8, which shall
constitute Buyer Group's exclusive remedy in respect of any Environmental
Indemnifiable Losses.
(b) Seller Group's liability for Environmental Indemnifiable
Losses with respect to or arising out of these items identified at Schedule
3.3.2 shall be as defined in Section 3.3.2 and such Section 3.2.2 shall
constitute Buyer Group's exclusive remedy in respect such items.
(c) Buyer Group and Seller Group hereby agree and acknowledge that
the Seller Group shall not be liable for any (i) environmental condition for
such time period during the survival period set forth at Section 8.8 below as
which such condition has not yet given rise to an action by any Environmental
Authorities or Third Party Claim, and that does not pose an immediate
significant hazard to human health or the environment, (ii) any unknown
environmental liability to the extent discovered through Non-Permitted
Testing (as defined below), or (ii) any response or corrective action which
is required or arises as a result of any decision to vacate, sell, convey,
shut down, reduce or cease operations at or modify any site after Closing, to
the extent such response or corrective action exceeds that which would have
been required had the site continued its existing industrial operations as
currently conducted. "Non-Permitted Testing" means any and all environmental
sampling, testing or analysis of the ambient air, soils, groundwater, surface
waters, interior of the building or any building component that is directly,
or indirectly, voluntarily initiated by Buyer Group or their affiliates that
is not required to respond to a manifest or patent environmental condition,
it being understood that any sampling, testing or analysis required under any
Environmental Law shall not constitute a Non-Permitted Testing.
(d) Notwithstanding the limitations set out in Section 8.7, Seller
Group agrees to indemnify and hold harmless Buyer Group against any breach of
Environmental Laws disclosed under Schedule 2.1.17(a) in relation to the
Asnieres Facility and agrees to bear without limitation all costs,
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consequences and liabilities arising therefrom including but not limited to
any Remedial Actions which may be required by Environmental Authorities upon
termination of activities on the Asnieres Facility; provided that operations
of CMB France at the Asnieres Facility shall have been wound up on or before
June 30, 1999, failing which the limitations set forth in Section 8.7 shall
apply.
8.2 Environmental Indemnification by Buyer Group. Buyer Group
agrees to indemnify and hold Seller Group harmless from and against any and
all Environmental Indemnifiable Losses suffered or incurred by Seller Group
resulting from any Remedial Action that is required to be taken on account of
a Third Party Claim for which responsibility is to be borne by Buyer Group in
accordance with Section 8.4, it being understood that Seller Group waives any
other remedy than those provided by this Article 8, which shall constitute
Seller Group's exclusive remedy in respect of any Environmental Indemnifiable
Losses.
8.3 Environmental Indemnifiable Losses. "Environmental
Indemnifiable Losses" shall mean and be deemed to include Indemnifiable
Losses required to be taken on account of Third Party Claims arising from any
breach of any of the representations and warranties set forth at Section
2.1.17 and more generally arising from any harm or damage to the environment,
including the atmosphere, ground soil, subsoil and surface and subsoil
waterbodies and any Remedial Action required under relevant Environmental Law
in connection herewith. "Remedial Action" shall mean the removal,
investigation, cure, containment, neutralization, or remediation of any
Release in each case as required by the relevant Environmental Laws or in
order to respond to a significant hazard to human health or the environment.
8.4 Responsibility for Remedial Action. (a) Seller Group shall
bear responsibility for any Remedial Action to the extent the Release(s)
giving rise to the requirement of Remedial Action relate solely to the
operation of the Sites (as defined at Section 8.4 (b)) prior to the Closing.
Buyer Group shall bear responsibility for Remedial Action pursuant to Section
8.2 to the extent the Release(s) giving rise to the requirement of Remedial
Action relate solely to the operation of the Sites after the Closing Date. To
the extent the Release(s) giving rise to the requirement of Remedial Action
relate to the operation of the Sites both prior to and after the Closing
Date, responsibility for such Remedial Action shall be allocated between
Seller Group and Buyer Group, Seller Group bearing responsibility for
Remedial Action with respect to that portion of Release(s) originating prior
to the Closing Date even though manifestations thereof occurred after the
Closing Date and Buyer Group bearing responsibility for Remedial Action with
respect to that portion of Release(s) originating subsequent to such date.
Any dispute regarding die allocation of responsibility under this Section 8.4
that cannot be resolved by good faith negotiation among the parties shall be
submitted to such independent environmental consulting group as may be
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mutually agreed between Buyer and Seller. Such consulting group shall make a
determination as to the appropriate allocation of responsibility for Remedial
Action, based upon its evaluation of the respective responsibilities of the
parties as regards the relevant Releases that are subject of the Remedial
Action. The fees and expenses of such consulting group shall be shared
equally by the parties. Any dispute regarding the choice of the environmental
consulting group shall be resolved according to the procedure set forth at
Section 9.4 below. The parties hereto agree that for the purposes of this
Agreement the appropriate remediation standard shall be the most cost
effective method to achieve the least stringent cleanup or remediation
imposed by the relevant Environmental Law.
(b) For the duration of Seller Group's indemnification obligation
hereunder, Buyer Group shall inform Seller Group of the results of all
measurements and sampling of Contaminants on the sites of Meaux, Noeux and
Asnieres in France, Wrexham in the United Kingdom, Bad Bevensen in Germany
and Istanbul in Turkey (the "Sites") as may be undertaken by Buyer Group,
pursuant to 8.4(a) above, but Buyer Group shall not undertake any action with
relevant Environmental Authorities that may give rise to an enquiry,
proceeding or claim with respect to Remedial Action or a potential
Environmental Indemnifiable Loss unless Buyer has previously informed Seller
in writing and consulted with Seller in such regard (except that Buyer shall
not be prohibited from taking such urgent actions as may be required to
comply with Environmental Laws or prevent an imminent hazard to human health
or the environment). Buyer shall inform Seller of any Release on the Sites
from and after the Closing Date, and any material changes in the use of raw
materials and/or industrial procedures or processes to the extent such
changes may be relevant to any required allocation of responsibility pursuant
to paragraph (a) above.
8.5 Procedures with respect to Remedial Actions. (a) Subject to
the terms and conditions of Section 7.5 of the Agreement, if a Third Party
Claim is made against an Indemnified Party with respect to an Environmental
Indemnifiable Loss or Remedial Action for which responsibility is to be borne
wholly or partially by the Indemnifying Party, the Indemnifying Party shall
be entitled to participate in discussions and negotiations conducted between
the Indemnified Party and the relevant third party or Environmental Authority
as regards the Third Party Claim and in particular as regards any proposed
Remedial Action. To this effect, the Indemnified Party shall promptly inform
the Indemnifying Party of any pending or threatened claim or enforcement
action, and notify in advance and afford the Indemnifying Party the
opportunity to participate in any proposed meeting or discussion with such
third party or Environmental Authority. The Indemnified Party shall also
provide to the Indemnifying Party all relevant information and documents
received from such third party or Environmental Authority as required by this
Agreement. In instances where the Indemnifying Party is the Seller, the
Indemnifying Party shall have the right to visit the Real Property of the
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Sites concerned and the premises concerned and to conduct or cause to be
conducted (at its own expense) an environmental inspection of the Real
Property of the Sites concerned.
(b) Before initiating any Remedial Action, the Indemnified Party
shall agree with the Indemnifying Party as regards the scope, nature,
methodology and cost of such Remedial Action in accordance with Environmental
Laws. To this effect, the Indemnified Party and the Indemnifying Party shall
mutually prepare a written document describing in detail the timing, scope,
nature, methodology and cost of Remedial Actions to be taken regarding the
Third Party Claim ("Claim"). The Plan shall also include the name of the
entity in charge of the conduct of the Remedial Actions. Any amendment to the
Plan shall be made through the written consent of both parties. The
Indemnifying Party shall not be liable to indemnify the Indemnified Party for
any and all Remedial Actions made outside the scope of the Plan. In case of
dispute regarding the Plan, the parties shall cause an independent
environmental consulting firm mutually agreeable to them, to conduct an
environmental inspection in order to set forth the nature, timing, scope,
methodology and cost of the Remedial Action. The Indemnifying Party shall be
entitled to monitor or cause an independent consultant of its choice to
monitor the conduct of the Remedial Actions until full completion. Any
dispute regarding the choice of the environmental consulting group shall be
resolved according to the procedure set forth at Section 9.4 below.
8.6 Access. Seller shall be entitled to visit the Real Property
and the premises concerned, at least four times a year at dates mutually
agreed with Buyer, during the period of survival of indemnification defined
at Section 8.7 below.
8.7 Limitations on Environmental Indemnification. (a) Except as
provided in Section 8.1(b),with respect to the Sites, Seller Group shall
indemnify and hold harmless Buyer Group for Environmental Indemnifiable
Losses in accordance with the percentages set forth in Schedule 8.7 hereto
(it being understood that any series of events or occurrences arising out of
the same or substantially similar events or occurrences shall be treated as
one individual event or occurrence) and up to and including an aggregate
amount of claims for Environmental Indemnifiable Losses of twelve million
U.S. Dollars (US$12,000,000).
8.8 Survival of Indemnification. The right of any party to make a
claim for Environmental Indemnifiable Losses shall survive the Closing Date
for a period of five (5) years, provided however that any representations and
warranties with respect to which a claim for breach has been notified by
Buyer within such five-year period shall survive the expiry of such period
until final settlement of such claim.
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ARTICLE 9
MISCELLANEOUS
9.1 Notices. Any notices or other communications required
or permitted hereunder shall be sufficiently given if in writing and
personally delivered or sent by registered or certified mail, return receipt
requested, postage prepaid, or if sent by facsimile transmission with
confirmation of receipt addressed as follows or to such other address as the
parties shall have given notice of pursuant hereto:
Buyer: Graham Packaging Company
1100 East Princess Street, York, PA 17403, USA
Attn: Philip R. Yates
Telecopy: (1) 717-849-4269
With copy to: Clifford Chance
112 avenue Kleber
75116 Paris
Attn: Yves Wehrli
Telecopy: (33-1) 44-05-52-00
Seller: CarnaudMetalbox S.A.
67 rue Arago
93400 Saint Ouen
Attn: General Counsel
Telecopy: (33-1) 49-18-45-08
With copy to: Jones, Day, Reavis & Pogue
120, rue du Faubourg Saint Honore
75008 Paris
Attn: Wesley R. Johnson, Jr. I i
Telecopy: (33-1) 56-59-39-38
9.2 Entire Agreement; Hierarchy of Agreements. (a) This
Agreement and the Schedules and the Exhibits hereto represent the entire
understanding and agreement of the parties and supersede all prior
agreements, understandings or arrangements among the parties hereto with
respect to the subject matter hereof and can be amended, supplemented or
changed, and any provision hereof can be waived, only by written instrument
making specific reference to this Agreement signed by the party against whom
enforcement of such amendment, supplement, modification or waiver is sought.
Buyer acknowledges that Seller has made no representation or warranty to
Buyer, and that Buyer has relied on no representation or warranty, other than
those specifically set forth herein.
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(b) In the event of any conflict or discrepancy between this
Agreement and the terms of any of the other agreements the forms of which are
set forth as Exhibits hereto, the terms of this Agreement shall prevail.
9.3 Section Headings. The section headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
9.4 Applicable Law/Disputes. This Agreement shall be governed by
and construed and enforced in accordance with the laws of France. All
disputes arising in connection with this Agreement shall be exclusively and
finally settled by arbitration as defined by the terms of an Arbitration
Agreement entered into on the date hereof to which the parties agree to be
bound. Save as regards the German Real Property, with respect to which the
jurisdiction of the competent German court shall apply, the parties shall
cause their respective German affiliates to subject any disputes to the
arbitration proceeding described in the Arbitration Agreement, to adhere to
the clause compromissoire set forth therein, and to refrain from taking any
action before the German courts.
9.5 Expenses. Whether or not the transactions contemplated hereby
are consummated, the parties hereto shall pay their own respective expenses
provided that all transfer taxes in connection with the purchase of the
Shares, the German Plant, the U.K. Plant and all notarial costs and expenses
in connection with the transactions contemplated by this Agreement be
allocated as set forth in Schedule 9.5 promptly after the date hereof (and
with respect to U.K. stamp duty to be borne by Seller, not later from ten
(10) days hereafter).
9.6 Waiver. Any party may, by written notice to another party:
(a) extend the time for the performance of any of the obligations or other
actions of such other party; (b) waive any inaccuracies in the
representations of such other party contained in this Agreement; or (c) waive
compliance with any of the agreements of such other party contained in this
Agreement or waive or consent to the modification of performance of any of
the obligations of such other party. Except as specifically provided in
Section 3.1.3, no other action taken pursuant to this Agreement, including
without limitation, any investigation by or on behalf of any party, shall be
deemed to constitute a waiver by the party taking such action of compliance
with any representation, warranty, condition, or agreement contained herein,
except if provided otherwise in writing by the parties.
9.7 Severability. If at any time subsequent to the date hereof,
any provisions 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 if feasible the illegality or unenforceability of
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such provision shall have no effect upon and shall not impair the
enforceability of any other provision of this Agreement.
9.8 Incorporation by Reference; Disclosure Schedules. The
Schedules and Exhibits to this Agreement constitute integral parts of this
Agreement and are hereby incorporated into this Agreement by this reference.
A disclosure in a given Schedule (but not any documentary attachment) shall
be deemed a disclosure for the purposes of each other representation,
warranty and Schedule to which it may relate provided that the disclosure so
made in such Schedule is reasonably and substantially apparent. The Seller
agrees that no additional attachments to the Schedules disclosed after close
of business on Wednesday 22 July, 1998 with respect to the U.K. Plant shall
form part of the attachments to the Schedules except for Schedules 0.1,
1.2.1(b) and 1.2.1(c).
9.9 Counterparts. This Agreement shall be executed in two
counterparts, each of which shall be deemed an original, but all of which
taken together shall constitute one and the same instrument.
9.10 Assignment. The rights and obligations under this Agreement
may not be assigned or delegated by any party hereto, in whole or in part, to
any third party without the prior written consent of the other party hereto;
provided however, that prior to the Closing Date, Buyer may assign its rights
and obligations hereunder to a wholly owned subsidiary if Buyer, as a
condition to such assignment, irrevocably and unconditionally guarantees the
full performance of the obligations of such assignee; provided further, that
any merger, consolidation, spin-off, liquidation or other corporate
reorganization with respect to CMB France, CMB Turkey or the Plants shall not
extinguish or limit Seller's obligations under the representations,
warranties, covenants and indemnities to the successors-in-interest of such
corporate reorganization provided that such successors-in-interest are, or
are wholly-owned and controlled by, affiliates of Buyer which are affiliates
as of the date hereof. It is further understood and agreed that CMB France
and CMB Turkey shall be third party beneficiaries (stipulation pour autrui)
of the representations, warranties and indemnities of Seller hereunder to the
extent any breach thereof constituted Indemnifiable Loss suffered by CMB
France or CMB Turkey.
9.11 Certain Definitions. For purposes of this Agreement, the
term:
(a) "affiliate" of any person means any other person that directly
or indirectly, through one or more intermediaries, controls, is controlled
by, or is under common control with, the first mentioned person. A person
shall be deemed to control another person if such person owns, directly or
indirectly, 50% or more of the voting rights of the second mentioned person,
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and the general partner of a partnership shall be deemed to control such
partnership;
(b) "business day" means any day other than a Saturday, Sunday or
a public bank holiday in France;
(c) "enforceability", "binding and enforceable in accordance with
its terms" or terms of similar import, where they describe an obligation of a
party to any agreement, shall be deemed in all cases to be subject to
applicable bankruptcy, fraudulent conveyance, insolvency, reorganization or
other similar laws now or hereafter in effect or by legal or equitable
principles relating to or limiting creditors' rights generally;
(d) "Executive" or "Executives" shall mean any Transferred
Employee with an annual base salary greater than US$50,000 or equivalent
thereof;
(e) "Indemnifiable Liabilities for Discontinued Operations" shall
mean any liabilities, including environmental liabilities, of CMB France or
CMB Turkey related to the operations of CMB France or CMB Turkey sold or
discontinued prior to the date hereof (including without limitation those
previously located at Nimes, Marseille and Vitrolles, France);
(f) "material" when used in the representations and warranties in
connection with CMB France, CMB U.K., CMB Turkey and/or the German Plant
shall mean material to any of the German Plant, the Meaux Plant, the Noeux
Plant or the U.K. Plant; "Material Adverse Change" shall mean any change in
the business of CMB France, the U.K. Plant, CMB Turkey and the German Plant
which, for the purposes hereof, shall be deemed not to comprise changes that
result from general economic or political conditions or other conditions
affecting the packaging industry generally that are materially adverse to the
financial condition or results of operations of any of the Meaux Plant, the
Noeux Plant, the U.K. Plant, CMB Turkey and the German Plant and that shall
not have been cured by Seller at or before the Closing Date;
(g) "Non-Operational Indemnifiable Liabilities for Continued
Operations" shall mean undisclosed contingent financial liabilities of CMB
France or CMB Turkey, that (i) constitute a breach of Section 2.1.5(c) hereof
but of no other representation or warranty hereunder; (ii) were incurred
outside of the ordinary course of their respective businesses; and (iii) were
either not authorized by board or shareholder actions or not recorded in the
books and accounting records of the respective business.
(h) "person" means an individual, corporation, partnership,
association, trust or any unincorporated organization;
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(i) "Related Agreements" means collectively the German Real
Property Deed of Conveyance, the German Asset Purchase Agreement, the U.K.
Real Property Deed of Conveyance, the U.K. Asset Purchase Agreement, the
License Agreement and the Arbitration Agreement, attached hereto in Exhibits
I through VI;
(j) "Tax" or "Taxation" used in this agreement means any taxes,
duties, rights, deductions, contributions, levies or charges, including
especially income tax withholding tax, deduction, indirect taxes, local
taxes, VAT, registration or stamp duties, custom duties imposed or collected
by any State or local authority, national or supra-national, or any other
organization and includes the interests, penalties, fines, reassessments and
other related charges;
(k) "Tax regulation" used in this agreement means tax or customs
laws as well as decrees, orders, memorandums or other texts of application or
interpretation of the said laws applicable in a given country as well as any
international treaty (including the derivative law -directives, regulations
or others -of this treaty);
(l) "to Seller's knowledge" or terms of similar import shall mean
Seller's after due inquiry of those individuals listed on Schedule 9.11(l);
9.12 Exchange rate.
(a) For purposes of establishing the Effective Date Balance Sheets
and the Closing Statements, the French franc, Turkish lira, British pound
sterling and German mark amounts shall be converted into U.S. Dollars at the
respective closing exchange rates applied by Seller for purposes of its
December 1997 month-end consolidated group closing. For purposes of
calculating the Post-Closing Adjustment Amount, the Base Balance Sheets shall
be restated in U.S. Dollar terms by applying such respective December 1997
month-end exchange rates to the French franc, Turkish lira, British pound
sterling and German mark amounts that formed the basis of the respective Base
Balance Sheets.
(b) For purposes of applying the various dollar limits to
Indemnifiable Losses and Environmental Indemnifiable Losses, claims brought
and denominated in French francs, Turkish lira, British pound sterling and
German mark amounts shall be converted into U.S. Dollars by applying the
respective December 1997 month-end exchange rates referred to above.
9.13 Guarantees of Buyer and Seller. (a) In consideration of the
Seller causing CMB UK to enter into the UK Asset Purchase Agreement the Buyer
hereby guarantees to the Seller on behalf of CMB U.K. the performance and
observance by Graham Packaging U.K. Limited (the "U.K. Buyer") of all its
obligations, undertakings, warranties, indemnities and covenants in
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accordance with the U.K. Asset Purchase Agreement. If and whenever the U.K.
Buyer defaults for any reason whatsoever in the performance of any obligation
or liability undertaken by it in accordance with the U.K. Asset Purchase
Agreement, the Buyer shall perform (or procure performance of) and satisfy
(or procure the satisfaction of) the obligation or liability in regard to
which such default has been made in the manner prescribed by this Agreement.
The guarantee is to be a continuing security to the Seller for all
obligations, commitments, warranties, undertakings, indemnities and covenants
on the part of the U.K. Buyer under or pursuant to the U.K. Asset Purchase
Agreement notwithstanding any settlement of account or other matter or thing
whatsoever.
(b) In consideration of Buyer causing Graham Packaging U.K.
Limited to enter into the U.K. Asset-Purchase Agreement, the Seller hereby
guarantees to the Buyer the performance and observance by CMB U.K. ("U.K.
Seller") of all its obligations, undertakings, warranties, indemnities and
covenants in accordance with the U.K. Asset Purchase Agreement. If and
whenever U.K. Seller defaults for any reason whatsoever in the performance of
any obligation or liability undertaken by it in accordance with the U.K.
Asset Purchase Agreement, the Seller shall perform (or procure performance
of) and satisfy (or procure the satisfaction of) the obligation or liability
in regard to which such default has been made in the manner prescribed by
this Agreement. The guarantee is to be a continuing security to the Buyer for
all obligations, commitments, warranties, undertakings, indemnities and
covenants on the part of the U.K. Seller under or pursuant to the U.K. Asset
Purchase Agreement notwithstanding any settlement of account or other matter
or thing whatsoever.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement, as of the day and year first above written.
CarnaudMetalbox S.A.
By:_______________________
Title:_____________________
Graham Packaging Company
By:_______________________
Title:_____________________
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LIST OF EXHIBITS
Exhibit I: German Real Property Deed of Conveyance
Exhibit II: German Asset Purchase Agreement
Exhibit III: U.K. Asset Purchase Agreement (Short-form)
Exhibit IV: License Agreement
Exhibit V: Arbitration Agreement
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LIST OF SCHEDULES
Schedule 0.1: List of Plastic Products
Schedule 1.2.1(b): Reimbursed Capital Expenditures and Reimbursed
Restructuring Costs
Schedule 1.2.1(c): Allocation of the Unadjusted Purchase Price,
estimated Aggregate Closing Date Intragroup
Indebtedness and Post-Closing Adjustment
Schedule 1.2.3: Base Balance Sheets
Schedule 1.2.6(c): Hypothetical determination of Post-Closing
Adjustment Amount
Schedule 2.1.1(b): Memorandum, Articles and By-Laws of CMB France,
CMB U.K., CMB Germany and CMB Turkey
Schedule 2.1.1(c): Appointment of Directors and officers
Schedule 2.1.3: Title to Shares and Plants
Schedule 2.1.4(a): Restrictions on Title to Shares and Plants
Schedule 2.1.4(c): Governmental Approvals and Authorizations
Schedule 2.1.4(d): Event of Default
Schedule 2.1.5(b): Statutory Accounts of CMB France and CMB Turkey
Schedule 2.1.5(c): Contingent or Off-Balance Sheet Liabilities
Schedule 2.1.6: Subsidiaries
Schedule 2.1.7: Material Actions since December 31, 1997
Schedule 2.1.8(a): List of Intellectual Property Rights
Schedule 2.1.8(c): Restrictions on Intellectual Property Rights
Schedule 2.1.8(f): Intellectual Property Infringement Actions
Schedule 2.1.9(a): Description of Real Property
Schedule 2.1.9(b): Restrictions on Freehold Interests
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Schedule 2.1.9(c): Lease of Real Property, Use of Real Property,
etc.
Schedule 2.1.9(d): Purchase, Sale, Lease, Sub-Lease Obligations
relating to Real Property
Schedule 2.1.9(e): Transfer Lease
Schedule 2.1.9(g): Easements
Schedule 2.1.9(h): Building Permits
Schedule 2.1.9(i): State of Real Property
Schedule 2.1.9(j): Insurance Policies regarding Real Property
Schedule 2.1.10(a): List of Movable Property
Schedule 2.1.10(b): State of Owned Movable Property
Schedule 2.1.10(c): Other movable property
Schedule 2.1.11: List of Encumbrances on Owned Real Property or
Owned Movable Property
Schedule 2.1.12(a): List of Material Contracts
Schedule 2.1.12(b): List of invalid, non-binding, unenforceable
Material Contracts
Schedule 2.1.12(c) List of the Top Customer Orders and Products
Intention to Suspend or Reduce Level of Business
Schedule 2.1.12(d): Grants and Subsidies
Schedule 2.1.13(a): Certain Inventory
Schedule 2.1.13(b): List of Product Returns, Recalls or Post-Sale
Warnings
Schedule 2.1.14(a): List of Litigation over US$20,000
Schedule 2.1.14(b): Pending or Threatened Litigation; Vicarious
Liability Claims
Schedule 2.1.14(d): Outstanding Judgment; Vicarious Liability
Judgments
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Schedule 2.1.14(e): Governmental Investigation and Proceedings
Schedule 2.1.16(a): Governmental Permits and compliance with laws
Schedule 2.1.16(c): Permits which may be withdrawn or revoked
Schedule 2.1.17(a): Non-compliance with Environmental Laws and Phase
I Survey
Schedule 2.1.17(b): List of Environmental Permits and Environmental
Disclosure
Schedule 2.1.18(a): Transferred Employees, Employee Compensation and
Benefit Plans
Schedule 2.1.18(h): Social Plans
Schedule 2.1.18(i): Binding Offers to Executives
Schedule 2.1.18(l): Strike and Work Stoppage
Schedule 2.1.18(k): Employee Litigation
Schedule 2.1.18(1): Compliance with Health & Safety terms
Schedule 2.1.19(b)(i): Non-compliance with tax filing obligations
Schedule 2.1.19(b)(ii): Tax Assessment Actions or Proceedings
Schedule 2.1.19(g): Taxes Resulting from Transfer of Shares
Schedule 2.1.19(i): Fiscal Value
Schedule 2.2.4: Governmental Entity Consents
Schedule 2.2.7: List of Data Room Documents
Schedule 3.1.1: Business not in the Ordinary Course
Schedule 3.1.5: List of Seller's Head Office Employees
Schedule 3.3.2: Environmental Remedial Actions
Schedule 3.3.5: Governmental Consents
Schedule 3.3.7: Work Force Reduction Plans
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Schedule 3.3.11: Regulatory Filings
Schedule 4.1.3: Required Consents
Schedule 5.2.1(h): Persons authorized to perform banking
transactions; Powers of Attorney
Schedule 7.4(b): Disclosed Indemnifiable Losses
Schedule 8.7: Environmental Indemnification Schedule
Schedule 9.5: Allocation of Expenses
Schedule 9.1 l(j): Seller's Knowledge
[Exhibits and Schedules omitted. Schedules will be furnished supplementally
to the Commission upon request, subject to any request for
confidential treatment.]
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PURCHASE AGREEMENT
by and between
CarnaudMetalbox S.A.
and
Graham Packaging Company
Dated July 27, 1998
Exhibit 10.12
FIRST AMENDMENT TO CREDIT AGREEMENT
FIRST AMENDMENT TO CREDIT AGREEMENT (this "First Amendment"),
dated as of August 13, 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 various Lenders party to
the Credit Agreement referred to below, 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"). All capitalized
terms used herein and not otherwise defined shall have the respective
meanings provided such terms in the Credit Agreement referred to below.
W I T N E S S E T H:
WHEREAS, Holdings, the Borrower, the Co-Borrower, the Lenders,
the Agents and the Fronting Bank are parties to a Credit Agreement, dated
as of February 2, 1998 (as amended, modified or supplemented to, but not
including, the date hereof, the "Credit Agreement"); and
WHEREAS, the parties hereto wish to amend the Credit Agreement
as herein provided;
NOW, THEREFORE, it is agreed:
I.
Amendments to Credit Agreement.
1. The fourth paragraph of the Credit Agreement is hereby
amended by deleting said paragraph in its entirety and by inserting in
lieu thereof the following new paragraph:
"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) Tranche D Term Loans on up to two Tranche D Term
Loan Borrowing Dates, in an aggregate principal amount not in
excess of $175,000,000, (e) 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,
(f) 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 (g) 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."
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2. The fifth paragraph of the Credit Agreement is hereby
amended by deleting said paragraph in its entirety and by inserting in
lieu thereof the following new paragraph:
"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, 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 the
Tranche D Term Loans will be used to repay outstanding Revolving
Loans, to finance Permitted Business Acquisitions and Capital
Expenditures and for general corporate purposes. 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."
3. Section 1.01 of the Credit Agreement is hereby amended by
deleting the definitions of "ABR Margin", "Fund", "LIBOR Margin", "Loan
Documents", "Mortgages", "Revolving Credit Commitment", "Security
Documents", "Term Commitments" and "Tranche" appearing therein and by
inserting the following new definitions in the appropriate alphabetical
order:
"ABR Margin" shall mean for Tranche A Term Loans, Tranche B
Term Loans, Tranche C Term Loans, Tranche D 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.
"Asset Disposition" shall mean any sale, transfer or other
disposition by Holdings, the Borrower or any of their respective
Subsidiaries to any person other than the Borrower or any
Subsidiary Guarantor of any asset, the Net Proceeds from which
exceed $10,000,000.
"Assumed Note" shall mean that certain demand note (as amended
from time to time) issued by CMB Plastique S.A. in the face
principal amount of 106,229,000 French francs (approximately
$16,800,000).
"Blackstone Capital Partners" shall mean Blackstone Capital
Partners III Merchant Banking Fund L.P., a Delaware limited
partnership.
"Blackstone Family Partnership" shall mean Blackstone Family
Investment Partnership III L.P., a Delaware limited partnership.
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"Blackstone Offshore Partners" shall mean Blackstone Offshore
Capital Partners III L.P., a Cayman Islands limited partnership.
"Capital Call Agreement" shall mean the Capital Call
Agreement, substantially in the form of Exhibit K, among Blackstone
Capital Partners, Blackstone Offshore Partners, Blackstone Family
Partnership, Investor LP, Holdings, the Borrower, the
Administrative Agent and the Collateral Agent.
"Capital Call Contributions" shall mean the capital
contributions made (or deemed made) by Blackstone Capital Partners,
Blackstone Offshore Partners, Blackstone Family Partnership and/or
Investor LP to Holdings (which capital contributions are, in turn,
contributed (or deemed contributed) by Holdings to the Borrower)
from time to time pursuant to the Capital Call Agreement.
"Converted Foreign Debt" shall mean Indebtedness (or any
portion thereof) which (x) constitutes Indebtedness of a Foreign
Subsidiary of the Borrower to the Borrower or a domestic Subsidiary
of the Borrower and (y) is converted into (or otherwise accounted
for as) equity (in accordance with GAAP) of such Foreign Subsidiary
of the Borrower.
"Designated Business Acquisitions" shall mean the acquisition
of all or substantially all the assets of, or shares or other
equity interests in, the following persons (or any subsequent
investment made in a previously acquired Designated Business
Acquisition): (i) Graham Emballages Plastiques France S.A. (f/k/a
CMB Plastique S.A.), (ii) Graham Packaging U.K. Ltd. (f/k/a
CarnaudMetalbox plc), (iii) CMB Plastpak Plastic, Ambalaj Sanayi
A.S., (iv) Graham Packaging Deutschland GmbH (f/k/a Raku GmbH), (v)
Euroflex Industria e Comercio Ltda., (vi) Cimplast S.A.C.I., (vii)
Lido Plast S.A., (viii) Amerpack S.A., (ix) Dodisa S.A. and (x)
Lido Plast San Luis S.A.
"First Amendment" shall mean the First Amendment, dated as of
August 13, 1998, to this Agreement.
"First Amendment Effective Date" shall mean the date the First
Amendment becomes effective in accordance with its terms.
"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 Cayman Islands limited
partnership.
"Information Systems and Equipment" means, with respect to any
person, all computer hardware, firmware and software, as well as
other information processing systems, or any equipment containing
embedded microchips, whether directly owned, licensed, leased,
operated or otherwise controlled by such person, including through
third-party service providers, and which, in whole or in part, are
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used, operated, relied upon, or integral to, such person's conduct
of its business.
"IRB Financing" shall mean the incurrence by the Borrower and
its domestic Subsidiaries of industrial revenue bond financing the
proceeds of which shall be used to finance the construction (or
expansion) of an on-site (or near-site) Quaker Oats plant facility
in the State of Georgia.
"IRB Financing Documents" shall mean each of the agreements
and documents entered into in connection with the IRB Financing.
"LIBOR Margin" shall mean for Tranche A Term Loans, Tranche B
Term Loans, Tranche C Term Loans, Tranche D 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.
"Loan Documents" shall mean this Agreement, the Letters of
Credit, the Guarantee Agreements, the Security Documents and, after
the execution and delivery thereof pursuant to the terms of this
Agreement, any Note and the Capital Call Agreement.
"Mortgage Amendments" shall have the meaning provided such
term in the First Amendment.
"Mortgages" shall mean the mortgages, deeds of trust,
assignments of leases and rents and other security documents (in
each case as amended pursuant to the respective Mortgage Amendment)
delivered pursuant to clause (i) of Section 4.02(h) or pursuant to
Section 5.11, each substantially in the form of Exhibit E.
"Permitted Refinancing Indebtedness" means any Indebtedness of
the Borrower or a Subsidiary of the Borrower issued in exchange
for, or the net proceeds of which are used to extend, refinance,
renew, replace, defease or refund (collectively, to "Refinance"),
Indebtedness permitted by Section 6.01(j) (or previous refinancings
thereof constituting Permitted Refinancing Indebtedness) of the
Borrower or such Subsidiary of the Borrower, as the case may be,
provided that (i) the principal amount (or accreted value, if
applicable) of such Permitted Refinancing Indebtedness does not
exceed the principal amount (or accreted value, if applicable) of
the Indebtedness so Refinanced (plus unpaid accrued interest and
premium thereon), (ii) the average life to maturity of such
Permitted Refinancing Indebtedness is greater than or equal to that
of the Indebtedness being Refinanced, (iii) if the Indebtedness
being Refinanced is subordinated in right of payment to the
Obligations under this Agreement, such Permitted Refinancing
Indebtedness shall be subordinated in right of payment to such
Obligations on terms at least as favorable to the Lenders as those
contained in the documentation governing the Indebtedness being
Refinanced, (iv) no Permitted Refinancing Indebtedness shall have
different obligors, or greater guarantees or security, than the
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Indebtedness being Refinanced and (v) if the Indebtedness being
Refinanced is secured by any collateral (whether equally and
ratably with, or junior to, the Secured Parties or otherwise), such
Permitted Refinancing Indebtedness may be secured by such
collateral (including any collateral pursuant to after-acquired
property clauses to the extent any such collateral secured the
Indebtedness being Refinanced) on terms no less favorable to the
Secured Parties than those contained in the documentation governing
the Indebtedness being Refinanced.
"Pro Forma Basis" shall mean, as to any person, for any events
as described in clauses (ii) and (iii) below which occur subsequent
to the commencement of a period for which the financial effect of
such events is being calculated, and giving effect to the events
for which such calculation is being made, such calculation as will
give pro forma effect to such events as if same had occurred at the
beginning of such period of calculation, and
(i) for purposes of the foregoing calculation, each
transaction giving rise to the need to calculate the pro forma
effect to any of the following events shall be assumed to have
occurred on the first day of the four consecutive fiscal
quarter period last ended on or before the occurrence of the
respective event for which such pro forma effect is being
determined (the "Reference Period");
(ii) in making any determination of EBITDA, (x) pro forma
effect shall be given to any Asset Disposition and to any
Permitted Business Acquisition (or any similar transaction or
transactions which require a waiver or consent of the Required
Lenders pursuant to Section 6.05), in each case which occurred
during the Reference Period (or, in the case of determinations
made pursuant to the definition of Permitted Business
Acquisition contained herein, occurring during the Reference
Period or thereafter and through and including the date upon
which the respective Permitted Business Acquisition is
consummated) as if such Asset Disposition, Permitted Business
Acquisition or other transaction, as the case may be, occurred
on the first day of the Reference Period and (y) to the extent
applicable, effect shall be given to the first proviso to the
definition of Net Leverage Ratio or the first proviso to
Section 6.11, as the case may be; and
(iii) in making any determination on a Pro Forma Basis,
(x) all Indebtedness (including Indebtedness incurred or
assumed and for which the financial effect is being
calculated, whether incurred under this Agreement or other-
wise, but excluding normal fluctuations in revolving
indebtedness incurred for working capital purposes and not to
finance any acquisition) incurred or permanently repaid during
the Reference Period (or, in the case of determinations made
pursuant to the definition of Permitted Business Acquisition
contained herein, occurring during the Reference Period or
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thereafter and through and including the date upon which the
respective Permitted Business Acquisition is consummated)
shall be deemed to have been incurred or repaid at the
beginning of such period and (y) Interest Expense of such
person attributable to interest on any Indebtedness, for which
pro forma effect is being given as provided in preceding
clause (x), bearing floating interest rates shall be computed
on a pro forma basis as if the rates which would have been in
effect during the period for which pro forma effect is being
given had been actually in effect during such periods.
Pro forma calculations made pursuant to the definition of Pro
Forma Basis 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, merger or Asset
Disposition or (ii) eliminate the effect of any extraordinary
accounting event with respect to any acquired person or assets on
Consolidated Net Income.
"Reference Period" shall have the meaning provided in the
definition of Pro Forma Basis.
"Revolving Credit Commitment" shall mean, with respect to each
Lender, the amount set forth opposite such Lender's name on
Schedule 2.01 directly below the column entitled "Revolving Credit
Commitment" 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.
"Security Documents" shall mean the Mortgages, the Security
Agreement, the Intellectual Property Security Agreement, the Pledge
Agreement, the Capital Call 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.
"Term Commitments" shall mean the Tranche A Term Loan
Commitments, the Tranche B Term Loan Commitments, the Tranche C
Term Loan Commitments and the Tranche D Term Loan Commitments.
"Test Period" shall mean, on any date of determination, the
period of four consecutive fiscal quarters of the Borrower then
last ended (taken as one accounting period), provided that in the
case of determinations made pursuant to the first proviso to the
definition of Net Leverage Ratio or the first proviso to Section
6.11, the Test Period shall instead constitute the respective two
or three fiscal quarter period being tested as described in said
provisos.
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"Total Available Growth Capital Commitment" shall mean, at any
time, the aggregate amount of Available Growth Capital Commitments,
as in effect at such time.
"Total Tranche D Term Loan Commitment" shall mean, at any
time, the aggregate amount of the Tranche D Term Loan Commitments,
as in effect at such time.
"Tranche" shall mean the respective facility and commitments
utilized in making Loans hereunder, with there being seven separate
Tranches, i.e., Tranche A Term Loans, Tranche B Term Loans, Tranche
C Term Loans, Tranche D Term Loans, Revolving Loans, Growth Capital
Revolving Loans and Swingline Loans.
"Tranche D Maturity Date" shall mean January 31, 2007.
"Tranche D 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 Lenders pursuant to Section 9.04)
relating to Tranche D Term Loan Commitments has been completed.
"Tranche D Term Borrowing" shall mean a Borrowing comprised of
Tranche D Term Loans.
"Tranche D Term Loan Borrowing Date" shall have the meaning
provided in Section 2.01(a)(iv).
"Tranche D Term Loan Commitment" shall mean with respect to
each Lender, the commitment of such Lender to make Tranche D Term
Loans hereunder as set forth in Section 2.01(a)(iv), as the same
may be reduced from time to time pursuant to Section 2.09.
"Tranche D Term Loan Installment Date" shall have the meaning
provided in Section 2.11(a).
"Tranche D Term Loans" shall mean the term loans made by the
Lenders to the Borrower pursuant to Section 2.01(a)(iv).
"Year 2000 Compliant" means, with respect to any Information
Systems and Equipment, that such Information Systems and Equipment
accurately process date data (including, but not limited to,
calculating, comparing and sequencing), before, during and after
the year 2000, as well as same and multi-century dates, or between
the years 1999 and 2000, taking into account all leap years,
including the fact that the year 2000 is a leap year, and further,
that when used in combination with, or interfacing with, other
Information Systems and Equipment, shall accurately accept, release
and exchange date data, and shall in all material respects continue
to function in the same manner as it performs as of the date hereof
and shall not otherwise impair the accuracy or functionality of any
Information Systems and Equipment.
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4. The definition of "Available Investment Basket Amount"
appearing in Section 1.01 of the Credit Agreement is hereby amended by
deleting the reference to "Section 6.01(j)" therein and by inserting in
lieu thereof a reference to "Section 6.04(j)".
5. The definition of "Capital Expenditures" appearing in
Section 1.01 of the Credit Agreement is hereby amended by inserting,
immediately at the end thereof, the following new sentence:
"Notwithstanding anything to the contrary contained above and for
avoidance of doubt, it is expressly understood and agreed that, to
the extent not otherwise included above, Capital Expenditures shall
include (without duplication of amounts) the aggregate outstanding
principal amount of all IRB Financings incurred under Section
6.01(w)."
6. The definition of "Designated Capital Contributions"
appearing in Section 1.01 of the Credit Agreement is hereby amended by
inserting, immediately after the phrase "pursuant to Section 7.02"
appearing in the last sentence thereof, the phrase "or by way of Capital
Call Contributions".
7. The definition of "Indebtedness" appearing in Section
1.01 of the Credit Agreement is hereby amended by deleting the
parenthetical set forth in clause (d) thereof and by inserting in lieu
thereof the following new parenthetical: "(other than current trade
liabilities and current intercompany liabilities (but not any
refinancings, extensions, renewals or replacements thereof) incurred in
the ordinary course of business and maturing within 365 days after the
incurrence thereof)".
8. The definition of "Net Leverage Ratio" appearing in
Section 1.01 of the Credit Agreement is hereby amended by inserting,
immediately at the end of the first sentence thereof, the following new
proviso:
", provided, further, to the extent any Asset Disposition or any
Permitted Business Acquisition (or any similar transaction or
transactions which require a waiver or a consent of the Required
Lenders pursuant to Section 6.05) has occurred during the relevant
Test Period, EBITDA shall be determined for the respective Test
Period on a Pro Forma Basis for such occurrences".
9. The definition of "Net Proceeds" appearing in Section
1.01 of the Credit Agreement is hereby amended by inserting, immediately
after the phrase "Designated Capital Contributions" appearing in sub-
clause (ii) of the parenthetical set forth in clause (c) thereof, the
phrase "and Capital Call Contributions".
10. The definition of "Permitted Business Acquisition"
appearing in Section 1.01 of the Credit Agreement is hereby amended by
(i) in clause (d)(i) thereof, deleting the term "pro forma basis"
appearing therein and inserting in lieu thereof the phrase "Pro Forma
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Basis", (ii) in clause (e) thereof, inserting the following parenthetical
at the end thereof: "(it being understood and agreed that the foregoing
restriction in this clause (e) shall not be applicable with respect to
any proposed Designated Business Acquisition so long as after giving
effect to such proposed Designated Business Acquisition the aggregate
consideration paid (or payable) in connection with all Designated
Business Acquisitions theretofore effected (and including such proposed
Designated Business Acquisition) shall not have exceeded $110,000,000)"
and (iii) deleting the last sentence thereof in its entirety.
11. Section 2.01 of the Credit Agreement is hereby amended by
deleting clauses (a), (b) and (d)(iv) thereof in their entirety and by
inserting in lieu thereof the following new clauses (a), (b) and (d)(iv),
respectively:
"(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;
(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; and
(iv) to make Tranche D Term Loans to the Borrower, at the
Borrower's option, (x) on a single date occurring on, or
within two Business Days after, the First Amendment Effective
Date and (y) on a single date on any date during the six month
period immediately subsequent to the First Amendment Effective
Date (each date upon which Tranche D Term Loans are made being
herein referred to as a "Tranche D Term Loan Borrowing Date"),
in an aggregate principal amount not to exceed the Tranche D
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, provided that on the date specified
in preceding clause (x), the Borrower shall be required to
incur at least $50,000,000 aggregate principal amount of
Tranche D Term Loans."
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"(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
result in such Lender's Revolving Credit Exposure at such time
exceeding the Revolving Credit Commitment of such Lender at such
time, 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."
"(d) (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 a Revolving Loan of the Swingline Lender.
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
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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 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."
12. Section 2.02 of the Credit Agreement is hereby amended by
deleting clauses (b) and (e) thereof in their entirety and by inserting
in lieu thereof the following new clauses (b) and (e), respectively:
"(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 to each Tranche (other than
Tranche D Term Loans): (I) 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, provided, further, that prior to the earlier of (A) the
35th day after the First Amendment Effective Date and (B) the
Tranche D Syndication Date, no more than one borrowing of Tranche D
Term Loans may be incurred as Eurodollar Loans, which borrowing of
Eurodollar Loans shall be incurred on the fifth day after the First
Amendment Effective 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 25
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."
"(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, Tranche D Maturity Date, Revolving Credit Maturity
Date or Growth Capital Maturity Date, as applicable."
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13. Section 2.05 of the Credit Agreement is hereby amended by
deleting clauses (a) and (c) thereof in their entirety and by inserting
in lieu thereof the following new clauses (a) and (c), respectively:
"(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 (x) in the case of Tranche D Term Loan
Commitments, a rate equal to 0.75% per annum and (y) in the case of
all other Commitments, 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 (or in the case of Tranche D Term Loan
Commitments, the First Amendment Effective 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."
"(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 and in the Fee Letter dated as of July 11,
1998, at the times specified therein (the "Administrative Agent
Fees")."
14. Section 2.06 of the Credit Agreement is hereby amended by
deleting said Section in its entirety and inserting in lieu thereof the
following new Section 2.06:
"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 or Tranche D Term Loans, 2.00%.
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(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 (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 or Tranche D 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, Tranche D 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."
15. Section 2.09 of the Credit Agreement is hereby amended by
deleting clauses (a) and (c) thereof in their entirety and by inserting
in lieu thereof the following new clauses (a) and (c), respectively:
"(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 Tranche D Term Loan
Commitments shall be automatically and permanently (x) reduced at
5:00 p.m., New York City time, on each date on which Tranche D Term
Loans are incurred (after giving effect to the making of Tranche D
Term Loans on such date), in an amount equal to the aggregate
principal amount of Tranche D Term Loans incurred on such date, (y)
terminated at 5:00 p.m., New York City time, in their entirety on
the date occurring on the earlier of (A) six calendar months after
the First Amendment Effective Date and (B) the second Tranche D
Term Loan Borrowing Date, in each case, after giving effect to the
making of any Tranche D Term Loans on or prior to such date and (z)
prior to the termination of the Tranche D Term Loan Commitments as
provided in preceding clause (y), be reduced from time to time to
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the extent required by Section 2.11. 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."
"(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 Tranche
D Term Loan Commitment as then in effect, (y) second, to the extent
in excess of the amount pursuant to preceding clause (x), to
permanently reduce the Total Growth Capital Commitment as then in
effect and (z) third, to the extent in excess of the amount applied
pursuant to preceding clauses (x) and (y), to permanently reduce
the Total Revolving Credit Commitment."
16. Section 2.10 of the Credit Agreement is hereby amended by
deleting clause (viii) thereof in its entirety and by inserting in lieu
thereof the following new clause (viii):
"(viii) (A) with respect to each Tranche (other than Tranche
D Term Loans), 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) and (B) with respect to Tranche D
Term Loans, prior to the earlier of (i) the 35th day after the
First Amendment Effective Date and (ii) the Tranche D Syndication
Date, conversions of ABR Loans into Eurodollar Loans may only be
made if the conversion is effective on the fifth day after the
First Amendment Effective Date and otherwise in accordance with
Section 2.02(b)."
17. Section 2.11 of the Credit Agreement is hereby amended by
(i) in clause (a)(iii) thereof, deleting the parenthetical contained
therein and by inserting in lieu thereof the following new parenthetical:
"(each such date being called a "Tranche C Term Loan
Installment Date")",
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(ii) inserting, immediately after the amortization table
contained in clause (a)(iii) thereof, the following new clause (iv):
"(iv) The Tranche D 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 D Term Loan Installment Date"
and, together with the Tranche A Term Loan Installment Dates, the
Tranche B Term Loan Installment Dates and the Tranche C Term Loan
Installment Dates, the "Installment Dates"):
Tranche D
Term Loan
Date Amount
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 $ 437,500
June 30, 2004 $ 437,500
September 30, 2004 $ 437,500
December 31, 2004 $ 437,500
March 31, 2005 $ 437,500
June 30, 2005 $ 437,500
September 30, 2005 $ 437,500
December 31, 2005 $ 437,500
March 31, 2006 $40,687,500
June 30, 2006 $40,687,500
September 30, 2006 $40,687,500
January 31, 2007 $40,687,500
; provided that in the event the aggregate principal amount of
Tranche D Term Loans incurred (irrespective of any repayments or
prepayments of any such Tranche D Term Loans) at the time that
the Tranche D Term Loan Commitments are terminated in accordance
with Section 2.09 is less than $175,000,000, an amount equal to
such difference shall be applied to reduce the then remaining
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scheduled installments (as determined on the date the Tranche D
Term Loan Commitments are terminated) set forth above in the
table above pro rata based on the then remaining principal
amount of each such amount.",
(iii) deleting clause (b) thereof in its entirety and
by inserting in lieu thereof the following new clause (b):
"(b) Except as set forth in paragraphs (c) and (d)
below,
(i) all Net Proceeds, Capital Call Contributions 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, Tranche C Term Borrowings and Tranche D 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, the
Tranche C Term Borrowings and the Tranche D 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, all Tranche C Term Borrowings shall be due and
payable on the Tranche C Maturity Date and all Tranche D Term
Borrowings shall be due and payable on the Tranche D 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." and
(iv) deleting clause (d) thereof in its entirety and by
inserting in lieu thereof the following new clause (d):
"(d) Any Lender holding Tranche B Term Loans, Tranche C
Term Loans or Tranche D 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
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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 prepayment made pursuant to
Section 2.12(c) or (d), not to have such prepayment applied to
such Lender's Tranche B Term Loans, Tranche C Term Loans or
Tranche D 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)."
18. Section 2.12(c) of the Credit Agreement is hereby
amended by deleting said Section in its entirety and inserting in lieu
thereof the following new Section 2.12(c):
"(c) The Borrower shall apply all Net Proceeds and
Capital Call Contributions 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, provided that to the extent Capital Call
Contributions are required by the express terms of the Capital
Call Agreement to be applied to outstanding obligations pursuant
to this Agreement in a manner different from that provided above
in this Section 2.12(c), such Capital Call Contributions shall
be applied in accordance with the express requirements of the
Capital Call Agreement."
19. Section 2.21 of the Credit Agreement is hereby
amended by deleting the reference to "Revolving Commitment" therein and
by inserting in lieu thereof a reference to "Revolving Credit
Commitment".
20. Article III of the Credit Agreement is hereby
amended by adding the following new section at the end thereof:
"SECTION 3.25 Year 2000. Except to the extent the
failure to do so, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect, each
of Holdings, the Borrower and each of their respective
Subsidiaries has taken (or is taking) all reasonable measures
(including reprogramming, remediation, internal testing and
other corrective action) to ensure that all of its Information
Systems and Equipment are Year 2000 Compliant. Furthermore, to
the extent that such reprogramming, remediation, testing or
other corrective action is required, the cost thereof, as well
as the cost of the reasonably foreseeable consequences of
failure of such Information Systems and Equipment to become Year
2000 Compliant, to Holdings and its Subsidiaries (including,
without limitation, reprogramming errors and the failure of
other systems or equipment) could not reasonably result in a
Material Adverse Effect."
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21. Section 4.01 of the Credit Agreement is hereby
amended by (i) inserting, immediately after clause (c) thereof, the
following new clause (d):
"(d) In the event of any Tranche D Term Borrowings,
to the best of the knowledge of Holdings and the Borrower (in
each case, after due inquiry), no Capital Call Event (as defined
in the Capital Call Agreement) shall have theretofore occurred."
and
(ii) deleting the penultimate sentence thereof and
inserting in lieu thereof the following new sentence:
"Each Borrowing (including without limitation each Tranche D
Term 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 and, with respect to any Tranche D Term Borrowings,
as to the matter specified in paragraph (d) of this Section
4.01."
22. Section 6.01 of the Credit Agreement is hereby
amended by (i) deleting clause (a) thereof and inserting in lieu thereof
the following new clause (a):
"(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
which exceeds the Indebtedness being renewed, extended or
refinanced (plus unpaid accrued interest and premium thereon),
provided, further, that, for purposes of preceding sub-clause
(ii), refinancings of Indebtedness thereunder shall include,
with respect to any Indebtedness existing on the date hereof and
set forth in Schedule 6.01 and which constitutes Converted
Foreign Debt, incurrence of Indebtedness which would otherwise
satisfy the requirements of this paragraph (a) of Section 6.01
assuming that such Converted Foreign Debt had not been converted
into (or otherwise accounted for as) equity of the obligor and
that such Converted Foreign Debt constitutes the Indebtedness
being refinanced and is outstanding on the date of such
incurrence of Indebtedness (provided, that no premium, interest,
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penalties, fees, indemnification, reimbursements, damages or any
other liabilities shall be attributable to, or deemed to have
accrued or otherwise become due and payable with respect to, any
such Converted Foreign Debt);",
(ii) in clause (j) thereof, (x) deleting the phrase "paragraph (j) shall
not at any time outstanding exceed $15,000,000" appearing therein and by
inserting in lieu thereof the phrase "paragraph (j) (including the amount
of any Permitted Refinancing Indebtedness incurred pursuant to the last
parenthetical of this paragraph (j) of Section 6.01) shall not at any
time outstanding exceed $25,000,000 (plus, upon the assumption of the
Assumed Note by a Subsidiary of the Borrower, an amount equal to the
aggregate principal amount (not to exceed 106,229,000 French francs) of
the Assumed Note)" and (y) inserting the following parenthetical at the
end thereof: "(it being understood and agreed that Permitted Refinancing
Indebtedness incurred to refinance Indebtedness otherwise permitted under
this paragraph (j), or refinancings thereof previously effected pursuant
to this parenthetical, shall be permitted)", (iii) in clause (o) thereof,
changing the reference therein to "$20,000,000" to "$50,000,000", (iv)
deleting clause (v) thereof and inserting in lieu thereof the following
new clause (v):
"(v) Indebtedness of any Foreign Subsidiary that is a
Subsidiary of the Borrower (which Subsidiary must be a Wholly
Owned Subsidiary of the Borrower to the extent the aggregate
principal amount of Indebtedness at any time outstanding
pursuant to this clause (v) exceeds $30,000,000) to the Borrower
or any domestic Subsidiary of the Borrower (which domestic
Subsidiary must be a Wholly Owned Subsidiary of the Borrower to
the extent the aggregate principal amount of Indebtedness at any
time outstanding pursuant to this clause (v) exceeds
$30,000,000) in an aggregate principal amount outstanding at any
time not in excess of the higher of (i) $30,000,000 and (ii) the
aggregate principal amount of Indebtedness necessary or
desirable (as determined in good faith by the Borrower and such
Foreign Subsidiary) to be incurred by such Foreign Subsidiary in
connection with the consummation of the Designated Business
Acquisitions; 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); it being
understood and agreed that to the extent any Indebtedness
incurred under this paragraph (v) of Section 6.01 in connection
with the Designated Business Acquisitions constitutes at any
time or from time to time Converted Foreign Debt, incurrence of
Indebtedness shall be permitted hereunder to refinance such
Converted Foreign Debt (assuming for purposes of succeeding
clauses (i) through (iv), inclusive, that such Converted Foreign
Debt had not been converted into (or otherwise accounted for as)
equity of the obligor), provided that (i) the principal amount
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of such refinancings does not exceed the principal amount of
such Converted Foreign Debt, (ii) the average life to maturity
of such refinancings is greater than or equal to that of such
Converted Foreign Debt, (iii) if the Converted Foreign Debt is
subordinated in right of payment to the Obligations under this
Agreement, such refinancing shall be subordinated in right of
payment to such Obligations on terms at least as favorable to
the Lenders as those contained in the documentation governing
the Converted Foreign Debt and (iv) no refinancings shall have
different obligors or obligees (i.e., the obligees shall be the
Borrower or any domestic Subsidiary of the Borrower (which
domestic Subsidiary must be a Wholly Owned Subsidiary of the
Borrower to the extent the aggregate principal amount of
Indebtedness at any time outstanding pursuant to this clause (v)
exceeds $30,000,000)), or greater guarantees or security, than
the Converted Foreign Debt, provided, further, no premium,
interest, penalties, fees, indemnification, reimbursements,
damages or any other liabilities shall be attributable to, or
deemed to have accrued or otherwise become due and payable with
respect to, any such Converted Foreign Debt;",
(v) redesignating clause "(w)" thereof as clause "(x)" thereof and
changing the reference therein to clause "(v)" to "(w)" and (vi)
inserting, immediately after clause (v) thereof, the following new
clause:
"(w) Indebtedness of the Borrower and its domestic
Subsidiaries in respect of one or more IRB Financings so long as
(i) the aggregate outstanding principal amount thereof does not
at any time exceed $30,000,000 (as reduced by any repayments of
principal thereof), (ii) such Indebtedness is incurred on or
before the date occurring eighteen calendar months after the
First Amendment Effective Date, (iii) no Default or Event of
Default exists at the time of the incurrence of the respective
IRB Financing or would result therefrom and (iv) all of the
terms and conditions of the respective IRB Financing Documents
(as well as the structure of the respective IRB Financing) are
in form and substance satisfactory to the Administrative Agent
(it being understood and agreed that promptly (A) upon any
increase in the aggregate outstanding principal amount of IRB
Financings from time to time on or before the date occurring
eighteen calendar months after the First Amendment Effective
Date or (B) upon request of the Administrative Agent, the
Borrower shall deliver a certificate to the Administrative
Agent, signed by a Responsible Officer of the Borrower and
certifying as to (1) the aggregate principal amount of all IRB
Financings theretofore incurred by the Borrower and its domestic
Subsidiaries (irrespective of any repayments or prepayments of
any such IRB Financings) and (2) if different than the amount
set forth in immediately preceding sub-clause, the then
aggregate outstanding principal amount of such IRB Financings);
and".
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23. Section 6.02(d) of the Credit Agreement is hereby
amended by inserting, immediately after the first reference therein to
"Indebtedness", the following parenthetical:
"(or Permitted Refinancing Indebtedness, in which case any such
Lien shall be permitted subject to compliance with clause (iv)
of the definition of Permitted Refinancing Indebtedness
contained herein)".
24. Section 6.04 of the Credit Agreement is hereby
amended by (i) in clause (k) thereof, changing the reference therein to
"$20,000,000" to "$25,000,000", (ii) in clause (l) thereof, inserting the
following parenthetical at the end thereof: "(it being understood and
agreed that investments by the Borrower and its Subsidiaries in Foreign
Subsidiaries that are Wholly Owned Subsidiaries of the Borrower shall be
permitted to the extent necessary or desirable (as determined in good
faith by the Borrower) to be made in connection with the Designated
Business Acquisitions)", (iii) in clause (m) thereof, inserting,
immediately after the reference to "Designated Capital Contributions"
therein, the phrase "and Capital Call Contributions", (iv) in clause (r)
thereof, deleting the word "and" at the end thereof and (v) inserting,
immediately after clause (r) thereof, the following new clause:
"(s) investments constituting Converted Foreign Debt
permitted under Sections 6.01(a) and/or (v); and".
25. Section 6.07 of the Credit Agreement is hereby
amended by (i) deleting clause (a) thereof and inserting in lieu thereof
the following new clause (a):
"(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 (or
required) under this Agreement or the Capital Call 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." and
(ii) in clause (b) thereof, deleting sub-clause (viii)
thereof in its entirety and inserting in lieu thereof the following new
sub-clause (viii):
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"(viii) any purchase by the Investors or the Continuing Partners
of Equity Interests of Holdings or Investor LP (whether pursuant
to the Capital Call Agreement or otherwise) 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 Borrower purchased by Holdings shall
be pledged to the Collateral Agent on behalf of the Lenders
pursuant to the Pledge Agreement,".
26. Section 6.09 of the Credit Agreement is hereby
amended by (i) in clause (b)(i) thereof, inserting, immediately before
the phrase "any Holdings Discount Notes", the phrase "any IRB Financings
(without the prior written consent of the Administrative Agent)," and
(ii) in clause (b)(ii) thereof, (x) inserting, immediately before the
first reference to the phrase "any Holdings Discount Notes", the phrase
"any IRB Financings (without the prior written consent of the
Administrative Agent)," and (y) inserting, immediately before the phrase
"any Holdings Discount Notes Document", the phrase "any of the respective
IRB Financing Documents,".
27. Section 6.10(a) of the Credit Agreement is hereby
amended by deleting said Section in its entirety and inserting in lieu
thereof the following new Section 6.10(a):
"(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 $200,000,000
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 $140,000,000
2000 $110,000,000
2001 $ 90,000,000
2002 and each fiscal $ 80,000,000".
year thereafter
28. Section 6.11 of the Credit Agreement is hereby
amended by inserting, immediately after the phrase "December 31, 1998,
multiplied by 4/3" appearing therein, the following additional proviso:
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", provided, further, to the extent any Asset Disposition or any
Permitted Business Acquisition (or any similar transaction or
transactions which require a waiver or a consent of the Required
Lenders pursuant to Section 6.05) has occurred during the
relevant Test Period, the Interest Coverage Ratio shall be
determined for the respective Test Period on a Pro Forma Basis
for such occurrences".
29. Section 7.01 of the Credit Agreement is hereby
amended by (i) deleting the word "or" appearing at the end of clause (k)
thereof, (ii) inserting the word "or" at the end of clause (l) thereof
and (iii) inserting, immediately after clause (l) thereof, the following
new clause (m):
"(m) (i) the Capital Call Agreement or any material
provision thereof shall cease to be in full force and effect, or
Blackstone Capital Partners, Blackstone Offshore Partners,
Blackstone Family Partnership, Investor LP, any Loan Party or
any person acting by or on behalf of Blackstone Capital
Partners, Blackstone Offshore Partners, Blackstone Family
Partnership, Investor LP or any such Loan Party shall deny or
disaffirm in writing its obligations under the Capital Call
Agreement or Blackstone Capital Partners, Blackstone Offshore
Partners, Blackstone Family Partnership, Investor LP, any Loan
Party or any person acting on or behalf of Blackstone Capital
Partners, Blackstone Offshore Partners, Blackstone Family
Partnership, Investor LP or any such Loan Party shall default in
the due performance or observance of any term, covenant or
agreement on its part to be performed or observed pursuant to
the Capital Call Agreement and such default shall continue
unremedied for a period of 10 days or (ii) any representation,
warranty or statement made (or deemed made) by Blackstone
Capital Partners, Blackstone Offshore Partners, Blackstone
Family Partnership or Investor LP in the Capital Call Agreement
shall prove to be false or misleading in any material respect on
the date as of which made or deemed made;".
30. Section 7.02 of the Credit Agreement is hereby
amended by adding the following new clause (c) immediately at the end
thereof:
"(c) Limitation Regarding Capital Call Agreement.
Notwithstanding anything herein to the contrary, it is
understood and agreed that any increases to EBITDA pursuant to
Section 7.02(a) shall have no effect (and shall not increase
EBITDA) in measuring Financial Performance Covenants for
purposes of determining compliance with the Capital Call
Agreement."
31. Section 9.18 of the Credit Agreement is hereby
amended by deleting the references to "(except, if any such Holdings
Partner is a Loan Party, for such Loan Party's obligations under the Loan
Documents)" appearing in clauses (a) and (b) thereof and by inserting in
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lieu of each reference thereto a reference to "(except, if any such
Holdings Partner is a Loan Party or is otherwise a party to any Loan
Documents, for such person's obligations under such Loan Documents)".
32. The Credit Agreement is hereby amended by deleting
Schedules A and 2.01 thereto in their entirety and by inserting in lieu
thereof new Schedules A and 2.01, respectively, in the form of the
respective such Schedules attached hereto.
33. The Credit Agreement is hereby amended by (i)
deleting Exhibits A and B thereto in their entirety and by inserting in
lieu thereof new Exhibits A and B, respectively, in the forms of the
respective such Exhibits attached hereto and (ii) inserting new Exhibit K
in the form of Exhibit K attached hereto.
II.
Acknowledgment with respect to Various Loan Documents.
1. For avoidance of doubt, the Borrower hereby
acknowledges and confirms its due execution and delivery of all Loan
Documents (each Loan Document as amended, modified or supplemented
through and including the date hereof), including all instruments,
financing statements, agreements, certificates and documents executed and
delivered in connection therewith, and hereby ratifies all actions
heretofore taken in connection therewith.
2. Each Loan Party, by its execution and delivery of a
copy of this First Amendment, hereby consents to the extensions of credit
pursuant to the Credit Agreement. Each Loan Party further acknowledges
and agrees to the provisions of this First Amendment and hereby agrees
for the benefit of the Lenders that all extensions of credit (including
without limitation all Tranche D Term Loans) pursuant to the Credit
Agreement (as same is amended by this First Amendment, and as same may be
further amended, modified or supplemented from time to time) shall be
fully entitled to all benefits of (and shall be fully guaranteed pursuant
to) each of the Guarantee Agreements and shall be fully secured pursuant
to, and in accordance with the terms of, all the Security Documents.
III.
Miscellaneous.
1. In order to induce the Lenders to enter into this
First Amendment, each of Holdings and the Borrower hereby represents and
warrants to each of the Lenders that (i) all representations and
warranties contained in Section 3 of the Credit Agreement and in the
other Loan Documents are true and correct in all material respects on and
as of the First Amendment Effective Date and after giving effect to this
First Amendment (unless such representations and warranties relate to a
specific earlier date, in which case such representations and warranties
shall be true and correct as of such earlier date) and (ii) there exists
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no Default or Event of Default on the First Amendment Effective Date
after giving effect to this First Amendment.
2. This First Amendment is limited as specified and
shall not constitute a modification, acceptance or waiver of any other
provision of the Credit Agreement or any other Loan Document.
3. This First Amendment may be executed in any number
of counterparts and by the different parties hereto on separate
counterparts, each of which counterparts when executed and delivered
shall be an original, but all of which shall together constitute one and
the same instrument. A complete set of counterparts shall be lodged with
the Company and the Administrative Agent.
4. THIS FIRST AMENDMENT AND THE RIGHTS AND OBLIGATIONS
OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAW OF THE STATE OF NEW YORK.
5. This First Amendment shall become effective on the
date (the "First Amendment Effective Date") when:
(a) Each Loan Party (including, without limitation,
Holdings, the Borrower, the Co-Borrower and each Subsidiary
Guarantor) and the Required Lenders shall have signed a
counterpart hereof (whether the same or different counterparts)
and shall have delivered (including by usage of facsimile
transmission) same to the Administrative Agent at its office
located at 130 Liberty Street, New York, New York;
(b) Each of Blackstone Capital Partners, Blackstone
Offshore Partners, Blackstone Family Partnership, Investor LP,
Holdings and the Borrower shall have signed a counterpart of the
Capital Call Agreement (whether the same or different
counterparts) and shall have delivered (including by usage of
facsimile transmission) same to the Administrative Agent at its
office located at 130 Liberty Street, New York, New York, and
the Capital Call Agreement 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 shall have been delivered to the
Collateral Agent;
(c) The Administrative Agent shall have received, on
behalf of itself, the Syndication Agent, the Documentation
Agent, the Collateral Agent, the Lenders and the Fronting Bank,
a favorable written opinion, in form and substance satisfactory
to the Administrative Agent, of special New York counsel,
special Pennsylvania counsel and special Cayman Islands counsel
for the various Loan Parties and the other parties (other than
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the Administrative Agent and the Collateral Agent) to the
Capital Call Agreement (each of which counsel shall be
reasonably satisfactory to the Administrative Agent), in each
case (i) dated the First Amendment Effective Date,
(ii) addressed to the Fronting Bank, the Administrative Agent,
the Syndication Agent, the Collateral Agent, the Documentation
Agent and the Lenders and (iii) covering such matters incident
to this First Amendment, the Capital Call Agreement and the
transactions contemplated herein and therein as the
Administrative Agent and the Required Lenders may reasonably
request;
(d) All legal matters incident to this First Amendment
(including the borrowings and extensions of credit pursuant to
the Credit Agreement as amended hereby), the Capital Call
Agreement and the other Loan Documents shall be reasonably
satisfactory to the Administrative Agent and the Required
Lenders;
(e) With respect to the Loan Parties, the
Administrative Agent shall have received each of the following
items: (i) a certificate of the Secretary or Assistant Secretary
of each Loan Party dated the First Amendment Effective Date and
certifying (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 this First Amendment (and the
Capital Call Agreement, in the case of Holdings and the
Borrower) and the consummation of the transactions contemplated
hereby, and that such resolutions have not been modified,
rescinded or amended and are in full force and effect and (y) as
to the incumbency and specimen signature of each officer
executing this First Amendment (and the Capital Call Agreement,
in the case of Holdings and the Borrower) on behalf of such Loan
Party, (ii) a certificate of another officer as to the
incumbency and specimen signature of the Secretary or Assistant
Secretary executing the certificate pursuant to preceding clause
(i), (iii) in the case of Holdings and the Borrower, a
certificate as to the good standing of such person as of a
recent date from the Secretary of State of the Commonwealth of
Pennsylvania or the State of Delaware, as the case may be, and
(iv) such other documents as the Administrative Agent and the
Required Lenders may reasonably request, and all of the
foregoing shall be reasonably acceptable to the Administrative
Agent in its reasonable discretion;
(f) With respect to each of Blackstone Capital
Partners, Blackstone Offshore Partners, Blackstone Family
Partnership and Investor LP, each of the following items shall
have been made available (and be satisfactory) to the
Administrative Agent: (i) a true and complete copy of the
certificate or articles of incorporation, partnership agreement
-26-
<PAGE>
<PAGE>
or other constituent documents, including all amendments
thereto, of such person, (x) in the case of a corporation,
certified as of a recent date by the Secretary of State of the
state of its organization, or (y) in the case of a partnership,
certified by an authorized person of such person and (ii) a true
and complete copy of the by-laws (or partnership agreement or
other equivalent governing documents) of such person as in
effect on the First Amendment Effective Date and at all times
since a date prior to the date of the resolutions described in
succeeding clause (g);
(g) With respect to each of Blackstone Capital
Partners, Blackstone Offshore Partners, Blackstone Family
Partnership and Investor LP, the Administrative Agent shall have
received each of the following items: (i) a certificate of an
authorized person of such person dated the First Amendment
Effective Date and certifying (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 person (or,
its managing general partner or managing member) authorizing the
execution, delivery and performance of the Capital Call
Agreement to which such person is a party 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 other constituent
documents and by-laws of such person made available pursuant to
clause (f) above have not been amended since the date of the
last amendment thereto disclosed and (z) as to the incumbency
and specimen signature of each person executing the Capital Call
Agreement or any other document delivered in connection herewith
on behalf of such person, (ii) a certificate of another
authorized person as to the incumbency and specimen signature of
the authorized person executing the certificate pursuant to (i)
above, (iii) a certificate as to the good standing of such
person as of a recent date from the applicable Governmental
Authority and (iv) such other documents as the Administrative
Agent and the Required Lenders may reasonably request, and all
of the foregoing shall be reasonably acceptable to the
Administrative Agent in its reasonable discretion;
(h) The Administrative Agent shall have received a
certificate of the Borrower, dated the First Amendment Effective
Date and signed by the Borrower, confirming compliance with the
conditions precedent set forth in paragraphs (b), (c) and (d) of
Section 4.01; and
(i) The Collateral Agent shall have received (i) fully
executed counterparts of amendments (the "Mortgage Amendments"),
in form and substance satisfactory to the Administrative Agent
and the Required Lenders, to each of the Mortgages, together
with evidence that counterparts of each of the Mortgage
Amendments have been delivered to the title insurance company
insuring the Lien of the Mortgages for recording in all places
-27-
<PAGE>
<PAGE>
to the extent necessary or, in the reasonable opinion of the
Collateral Agent, desirable to effectively maintain a valid and
enforceable first priority (subject to any Lien expressly
permitted by Section 6.02 of the Credit Agreement) mortgage lien
on each Mortgaged Property in favor of the Collateral Agent (or
such other trustee as may be required or desired under local
law) for the benefit of the Secured Parties, (ii) endorsements
of the authorized issuing agent for title insurers reasonably
satisfactory to the Collateral Agent to each policy or policies
of title insurance relating to the Mortgages Properties assuring
the Collateral Agent that each Mortgage is a valid and
enforceable first priority mortgage lien on the respective
Mortgaged Property, free and clear of all defects and
encumbrances (except any Lien expressly permitted by Section
6.02 of the Credit Agreement) and (iii) such other documents as
the Administrative Agent and the Required Lenders may reasonably
request, and all of the foregoing shall be reasonably acceptable
to the Administrative Agent in its reasonable discretion.
Unless the Administrative Agent has received actual notice from any
Lender that the conditions contained in this Section 5 of Part III have
not been met to its satisfaction, upon the satisfaction of the conditions
described in clauses (a) and (b) above and upon the Administrative
Agent's good faith determination that the conditions described in clauses
(c) through (i), inclusive, above have been met, then the First Amendment
Effective Date shall have been deemed to have occurred, regardless of any
subsequent determination that one or more of the conditions thereto had
not been met (although the occurrence of the First Amendment Effective
Date shall not release Holdings, the Borrower, any other Loan Party or
any other relevant person from any liability for failure to satisfy one
or more of the applicable conditions contained in this Section 5 of Part
III). The Administrative Agent will give the Borrower and each Lender
prompt written notice of the occurrence of the First Amendment Effective
Date.
6. Promptly following any request from the
Administrative Agent (and in any event within 60 days after receiving any
such request), Holdings, the Borrower, the Co-Borrower and the other Loan
Parties shall take such action or actions as may be reasonably requested
by the Administrative Agent to protect and preserve any security
interests created, or intended to be created, pursuant to the various
Security Documents (including without limitation the Capital Call
Agreement). It is understood and agreed by the parties hereto that the
provisions of this Section 6 of Part III shall constitute a covenant and
agreement for purposes of the Credit Agreement.
7. From and after the First Amendment Effective Date,
all references in the Credit Agreement and each of the Loan Documents to
the Credit Agreement shall be deemed to be references to the Credit
Agreement as amended hereby.
* * *
-28-
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
First Amendment 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/ John E. Hamilton
___________________________________
Name: John E. Hamilton
Title:
GRAHAM PACKAGING COMPANY
By: GPC Opco GP LLC, its general partner
By: /s/ John E. Hamilton
___________________________________
Name: John E. Hamilton
Title:
GPC CAPITAL CORP. I
By: /s/ John E. Hamilton
___________________________________
Name: John E. Hamilton
Title:
BANKERS TRUST COMPANY,
Individually, as Administrative Agent,
as Syndication Agent and as Fronting Bank
By: /s/ Mary Kay Coyle
___________________________________
Name: Mary Kay Coyle
Title: Managing Director
NATIONSBANK, N.A.,
Individually and as Documentation Agent
By: /s/ Philip Durand
___________________________________
Name: Philip Durand
Title: Vice President
-29-
<PAGE>
<PAGE>
ABN AMRO BANK, NV
By: /s/ Roy D. Hasbrook
___________________________________
Name: Roy D. Hasbrook
Title: Group Vice President and Director
By: /s/ Louis K. McLinden, Jr.
___________________________________
Name: Louis K. McLinden, Jr.
Title: Vice President
AG CAPITAL FUNDING PARTNERS L.P.
By: Angello Gordon & Co., L.P.,
as Investment Advisor
By: /s/ Jeffrey H. Aronson
___________________________________
Name: Jeffrey H. Aronson
Title: Managing Director
ALLIANCE CAPITAL MANAGEMENT L.P.,
as Manager on behalf of ALLIANCE CAPITAL
FUNDING, L.L.C.
By: ALLIANCE CAPITAL MANAGEMENT
CORPORATION, General Partner of Alliance
Capital Management L.P.
By: /s/ Kenneth G. Ostmann
___________________________________
Name: Kenneth G. Ostmann
Title: Vice President
AMARA-I FINANCE LIMITED
By: /s/ Ian David Moore
___________________________________
Name: Ian David Moore
Title: Director
ARCHIMEDES FUNDING, L.L.C.
By: ING Capital Advisors, Inc.,
as Collateral Manager
By: /s/ Michael D. Hatley
___________________________________
Name: Michael D. Hatley
Title: Senior Vice President
-30-
<PAGE>
<PAGE>
ARES LEVERAGED INVESTMENT FUND, L.P.
By: Ares Management, L.P.
General Partner
By: /s/ Merritt S. Hooper
___________________________________
Name: Merritt S. Hooper
Title: Vice President
THE BANK OF NOVA SCOTIA
By: /s/ J. Alan Edwards
___________________________________
Name: J. Alan Edwards
Title: Authorized Signatory
BANK OF TOKYO-MITSUBISHI TRUST
COMPANY
By: /s/ Nicholas J. Campbell
___________________________________
Name: Nicholas J. Campbell
Title: Vice President
THE CHASE MANHATTAN BANK
By: /s/ Robert T. Sacks
___________________________________
Name: Robert T. Sacks
Title: Managing Director
CIBC, INC.
By: /s/ Frank Fiorito
___________________________________
Name: Frank Fiorito
Title: Authorized Signatory
-31-
<PAGE>
<PAGE>
CREDIT AGRICOLE INDOSUEZ
By: /s/ Craig Welch
___________________________________
Name: Craig Welch
Title: First Vice President
By: /s/ Sarah McClintock
___________________________________
Name: Sarah McClintock
Title: Vice President & Team Leader
CONTINENTAL ASSURANCE COMPANY
SEPARATE ACCOUNT (E)
By: TCW Asset Management Company
as Attorney-in-Fact
By: /s/ Mark L. Gold
___________________________________
Name: Mark L. Gold
Title: Managing Director
By: /s/ Justin L. Driscoll
___________________________________
Name: Justin L. Driscoll
Title: Senior Vice President
CREDIT LYONNAIS, NEW YORK BRANCH
By: /s/ Attila Koc
___________________________________
Name: Attila Koc
Title: First Vice President
CYPRESSTREE INVESTMENT MANAGEMENT
COMPANY, INC.
As: Attorney-in-Fact and on behalf on First
Allmerica Financial Life Insurance Company as
Portfolio Manager
By: /s/ Catherine C. McDermott
___________________________________
Name: Catherine C. McDermott
Title: Principal
-32-
<PAGE>
<PAGE>
CYPRESSTREE INVESTMENT PARTNERS I, LTD.
By: CypressTree Investment Management
Company, Inc., as Portfolio Manager.
By: /s/ Catherine C. McDermott
___________________________________
Name: Catherine C. McDermott
Title: Principal
DEEPROCK & COMPANY
By: Eaton Vance Management,
as investment advisor
By: /s/ Scott H. Page
___________________________________
Name: Scott H. Page
Title: Vice President
DELANO COMPANY
By: PACIFIC INVESTMENT MANAGEMENT
COMPANY, as its Investment Advisor
By: Illegible
___________________________________
Name:
Title:
FIRSTRUST BANK
By: /s/ Edward D'Ancona
___________________________________
Name: Edward D'Ancona
Title: Executive Vice President
FIRST DOMINION FUNDING I
By: /s/ Andrew H. Marshak
___________________________________
Name: Andrew H. Marshak
Title: Authorized Signatory
-33-
<PAGE>
<PAGE>
FIRSTUNION NATIONAL BANK, successor by
merger to Corestates Bank, N.A.
By: /s/ Joan Anderson
___________________________________
Name: Joan Anderson
Title: Vice President
FRANKLIN FLOATING RATE TRUST
By: /s/ Chauncey Lufkin
___________________________________
Name: Chauncey Lufkin
Title: Vice President
THE FUJI BANK, LTD.
By: /s/ Teiji Teramoto
___________________________________
Name: Teiji Teramoto
Title: Vice President & Manager
GOLDMAN SACHS CREDIT PARTNERS L.P.
By: /s/ Stephen B. Kim
___________________________________
Name: Stephen B. Kim
Title: Authorized Signatory
IMPERIAL BANK, a California banking
corporation
By: /s/ Ray Vadalma
___________________________________
Name: Ray Vadalma
Title: Senior Vice President
INDOSUEZ CAPITAL FUNDING IV, L.P.
By: INDOSUEZ CAPITAL LUXEMBOURG,
as Collateral Manager
By: /s/ Denis Sergent
___________________________________
Name: Denis Sergent
Title: Authorized Signatory
-34-
<PAGE>
<PAGE>
INDOSUEZ CAPITAL FUNDING IIA, LIMITED.
By: INDOSUEZ CAPITAL LUXEMBOURG,
as Collateral Manager
By: /s/ Denis Sergent
___________________________________
Name: Denis Sergent
Title: Authorized Signatory
KZH-CRESCENT-2 CORPORATION
By: /s/ Virginia Conway
___________________________________
Name: Virginia Conway
Title: Authorized Agent
KZH - CYPRESS TREE - I CORPORATION
By: /s/ Virginia Conway
___________________________________
Name: Virginia Conway
Title: Authorized Agent
KZH HOLDING CORPORATION III
By: /s/ Virginia Conway
___________________________________
Name: Virginia Conway
Title: Authorized Agent
KZH-SOLEIL CORPORATION
By: /s/ Virginia Conway
___________________________________
Name: Virginia Conway
Title: Authorized Agent
THE LONG-TERM CREDIT BANK OF JAPAN,
LIMITED, New York Branch
By: /s/ Koji Sasayama
___________________________________
Name: Koji Sasayama
Title: Deputy General Manager
-35-
<PAGE>
<PAGE>
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
By: /s/ Andrew Dickey
___________________________________
Name: Andrew Dickey
Title: Managing Director
MASSMUTUAL CORPORATE
VALUE PARTNERS LIMITED
By: MASSMUTUAL MUTUAL LIFE
INSURANCE COMPANY,
as Investment Manager
By: /s/ Andrew Dickey
___________________________________
Name: Andrew Dickey
Title: Managing Director
MASSMUTUAL/DARBY CBO LLC
By: MASSMUTUAL/DARBY CBO IM INC.,
as Investment Manager
By: /s/ Andrew Dickey
___________________________________
Name: Andrew Dickey
Title: Vice President
MASSACHUSETTS MUTUAL LIFE
INSURANCE COMPANY
By: /s/ John B. Wheeler
___________________________________
Name: John B. Wheeler
Title: Managing Director
MASSMUTUAL HIGH YIELD PARTNERS II,
L.L.C.
By: HYP Management, Inc., as managing member
By: /s/ John B. Wheeler
___________________________________
Name: John B. Wheeler
Title: Vice President
-36-
<PAGE>
<PAGE>
MERRILL LYNCH DEBT STRATEGIES
PORTFOLIO
By: MERRILL LYNCH ASSET MANAGEMENT
L.P, as Investment Advisor
By: /s/ Joseph P. Matteo
___________________________________
Name: Joseph P. Matteo
Title: Authorized Signatory
MERRILL LYNCH GLOBAL INVESTMENT
SERIES, INCOME STRATEGIES PORTFOLIO
By: MERRILL LYNCH ASSET MANAGEMENT
L.P, as Investment Advisor
By: /s/ Joseph P. Matteo
___________________________________
Name: Joseph P. Matteo
Title: Authorized Signatory
MERRILL LYNCH PRIME RATE PORTFOLIO
By: MERRILL LYNCH ASSET MANAGEMENT
L.P, as Investment Advisor
By: /s/ Joseph P. Matteo
___________________________________
Name: Joseph P. Matteo
Title: Authorized Signatory
MERRILL LYNCH SENIOR FLOATING RATE
FUND, INC.
By: /s/ Joseph P. Matteo
___________________________________
Name: Joseph P. Matteo
Title: Authorized Signatory
DEBT STRATEGIES FUND III, INC.
By: /s/ Joseph P. Matteo
___________________________________
Name: Joseph P. Matteo
Title: Authorized Signatory
-37-
<PAGE>
<PAGE>
METROPOLITAN LIFE INSURANCE COMPANY
By: /s/ James R. Dingler
___________________________________
Name: James R. Dingler
Title: Director
THE MITSUBISHI TRUST AND BANKING
CORPORATION
By: /s/ Beatrice E. Kossodo
___________________________________
Name: Beatrice E. Kossodo
Title: Senior Vice President
ML BCO IV (CAYMAN)
By: Highland Capital Management, L.P.
as Collateral Manager
By: /s/ Mark K. Okada
___________________________________
Name: Mark K. Okada
Title: Executive Vice President
ML CLO XV PILGRIM AMERICA (CAYMAN)
LTD.
By: PILGRIM AMERICA INVESTMENTS, INC.,
as its Investment Manager
By: /s/ Jeffrey A. Bakalar
___________________________________
Name: Jeffrey A. Bakalar
Title: Vice President
MORGAN STANLEY DEAN WITTER PRIME
INCOME TRUST
By: /s/ Peter Gewirtz
___________________________________
Name: Peter Gewirtz
Title: Authorized Signatory
-38-
<PAGE>
<PAGE>
NATEXIS BANQUE BFCE
By: /s/ Kevin McOwen
___________________________________
Name: Kevin McOwen
Title: Assistant Treasurer
By: Illegible
___________________________________
Name:
Title:
NORSE CBO, LTD.
By: Peterson Capital Management, LLC
as its Investment Advisor
By: Peterson Capital Advisors, LLC
its Manager and Pursuant to delegated
authority
By: /s/ Timothy S. Peterson
___________________________________
Name: Timothy S. Peterson
Title: President
NORTHERN LIFE INSURANCE COMPANY
By: ING Capital Advisors Inc.,
as Investment Advisor
By: /s/ Michael D. Hatley
___________________________________
Name: Michael D. Hatley
Title: Senior Vice President
OAK HILL SECURITIES FUND, L.P.
By: Oak Hill Securities by GenPar, 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
-39-
<PAGE>
<PAGE>
OCTAGON LOAN TRUST
By: Octagon Credit Investors, as manager
By: /s/ Joyce C. DeLucca
___________________________________
Name: Joyce C. DeLucca
Title: Managing Director
Pam Capital Funding LP
By: Highland Capital Management, L.P.
as Collateral Manager
By: /s/ Mark K. Okada
___________________________________
Name: Mark K. Okada
Title: Executive Vice President
PARIBAS
By: /s/ David I. Canavan
___________________________________
Name: David I. Canavan
Title: Director
PARIBAS
By: /s/ Sean Reddington
___________________________________
Name: Sean Reddington
Title: Vice President
PRESIDENT & FELLOWS OF HARVARD
COLLEGE
By: /s/ Timothy S. Peterson
___________________________________
Name: Timothy S. Peterson
Title: Authorized Signatory
By: /s/ Jack Meyer
___________________________________
Name: Jack Meyer
Title: President and CEO
-40-
<PAGE>
<PAGE>
PRESIDENTIAL LIFE INSURANCE COMPANY
By: /s/ Stanley Rubin
___________________________________
Name: Stanley Rubin
Title: Senior Vice President
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
By: /s/ Thomas Cecka
___________________________________
Name: Thomas Cecka
Title: Vice President
SENIOR DEBT PORTFOLIO
By: Boston Management and Research,
as Investment Advisor
By: /s/ Scott H. Page
___________________________________
Name: Scott H. Page
Title: Vice President
SOCIETE GENERALE
By: /s/ Jerry Parisi
___________________________________
Name: Jerry Parisi
Title: Director
SOUTHERN PACIFIC BANK
By: /s/ Cheryl A. Wasilewski
___________________________________
Name: Cheryl A. Wasilewski
Title: Vice President
SUMMIT BANK
By: /s/ Bruce A. Gray
___________________________________
Name: Bruce A. Gray
Title: Vice President
-41-
<PAGE>
<PAGE>
THE TRAVELERS INSURANCE COMPANY
By: /s/ John W. Petchler
___________________________________
Name: John W. Petchler
Title: Second Vice President
VAN KAMPEN AMERICAN CAPITAL PRIME
RATE INCOME TRUST
By: /s/ Jeffrey W. Maillet
___________________________________
Name: Jeffrey W. Maillet
Title: Senior Vice President & Director
Acknowledged and Agreed:
GPC CAPITAL CORP. II
GPC OPCO GP LLC
GPC CAPITAL CORP. I
GRAHAM PACKAGING POLAND, L.P.,
By: GPC Sub GP LLC, its general partner
GRAHAM RECYCLING COMPANY,
By: GPC Sub GP LLC, its general partner
GRAHAM PACKAGING FRANCE PARTNERS,
By: GPC Sub GP LLC, its general partner
GRAHAM PACKAGING LATIN AMERICA, LLC
GPC SUB GP LLC
By: /s/ John E. Hamilton
___________________________________
Name: John E. Hamilton
Title:
On Behalf of each of the above
Subsidiary Guarantors
-42-
<PAGE>
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
LIBOR Margin ABR Margin
for Revolving LIBOR for Revolving ABR Margin
Loans, Growth Margin for Loans, Growth for
Capital Tranche C Capital Tranche C
Revolving LIBOR Term Loans Revolving ABR Margin Term Loans
Loans and Margin for and Loans and for and Tranche
Tranche A Term Tranche B Tranche D Tranche A Tranche B D Term Commitment
Level Net Leverage Ratio Loans Term Loans Term Loans Term Loans Term Loans Loans Fee
------ --------------------- ------------- --------- ---------- ------------ ----------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 Greater than 5.5 to 2.25% 2.75% 3.00% 1.25% 1.75% 2.00 % 0.50%
1.00
2 Greater than 5.0 to 2.00% 2.50% 2.75% 1.00% 1.50% 1.75% 0.50%
1.00 but less than or
equal to 5.5 to 1.00
3 Greater than 4.5 to 1.75% 2.25% 2.50% 0.75% 1.25% 1.50% 0.375%
1.00 but less than or
equal to 5.0 to 1.00
4 Greater than 4.0 to 1.50% 2.00% 2.25% 0.50% 1.00% 1.25% 0.375%
1.00 but less than or
equal to 4.5 to 1.00
5 Greater than 3.5 to 1.25% 1.75% 2.00% 0.25% 0.75% 1.00% 0.25%
1.00 but less than or
equal to 4.0 to 1.00
6 Greater than 3.0 to 1.00% 1.50% 1.75% 0.0% 0.50% 0.75 % 0.25%
1.00 but less than or
equal to 3.5 to 1.00
7 Greater than 2.5 to 0.75% 1.50% 1.75% 0.0% 0.50% 0.75 % 0.25%
1.00 but less than or
equal to 3.0 to 1.00
8 Less than or equal to 0.625% 1.50% 1.75% 0.0% 0.50% 0.75 % 0.20%
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
-43-
<PAGE>
<PAGE>
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 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.
-44-
<PAGE>
<PAGE>
SCHEDULE 2.01
COMMITMENTS AND OUTSTANDING PRINCIPAL
OF TRANCHE A, B AND C TERM LOANS<F1>
<TABLE>
<CAPTION>
Outstanding Principal of Outstanding Principal of Outstanding Principal of
Tranche A Term Loans Tranche B Term Loans Tranche C Term Loans
------------------------ ------------------------- -------------------------
<S> <C> <C> <C>
Bankers Trust Company $4,886,363.92 $27,252,604.29 $24,838,802.19
NationsBank, N.A.
Goldman Sachs Credit Partners L.P. 2,272,727.28
The Bank of Nova Scotia 4,318,181.82
The Chase Manhattan Bank 4,318,181.82
Credit Lyonnais, New York Branch 4,318,181.82
Societe Generale 4,318,181.82
ABN AMRO Bank, N.V. 3,409,090.91
Bank of Tokyo-Mitsubishi Ltd. 3,181,818.18
Credit Agricole Indosuez 3,181,818.18
First Union 3,181,818.18
The Fuji Bank, Ltd. 3,181,818.18
The Imperial Bank 3,181,818.18
The Long-Term Credit Bank of Japan, 3,181,818.18
Limited
The Mitsubishi Trust and Banking 3,181,818.18
Corporation
Natexis Banque BFCE 2,386,363.63 2,452,734.38 2,032,265.63
National City Bank 3,181,818.18
The Prudential Insurance Company of 3,181,818.18
America
Summit Bank 3,181,818.18
Southern Pacific Bank 2,272,727.27
Cypress Tree 2,272,727.00 5,450,520.84 2,258,072.92
AG Capital Funding 5,450,520.84 4,516,145.84
Alliance Capital 5,450,520.84 4,516,145.84
ARES Leveraged Investment Fund L.P. 5,450,520.84 4,516,145.84
Indosuez Capital Funding IV, L.P. 5,450,520.84 4,516,145.84
KZH Soleil Corporation (SunAmerica) 5,450,520.84 4,516,145.84
KZH Holding Corporation III - Oakmont 5,450,520.84 4,516,145.84
ML CLO XV Pilgrim 5,450,520.84 4,516,145.84
Morgan Stanley Dean Witter Prime Income 5,450,520.84 4,516,145.84
Trust
<FN>
<F1>Schedule prepared as at August 7,
1998.
-1-
<PAGE>
<PAGE>
Outstanding Principal of Outstanding Principal of Outstanding Principal of
Tranche A Term Loans Tranche B Term Loans Tranche C Term Loans
------------------------ ------------------------- -------------------------
<S> <C> <C> <C>
Octagon Credit Investors Loan Portfolio 5,450,520.84 4,516,145.84
Presidential Life Insurance Company 5,450,520.84 4,516,145.84
The Travelers Insurance Company 5,450,520.84 4,516,145.84
Van Kampen American Capital Prime Rate 5,450,520.84 4,516,145.84
Income Trust
ML CBO IV (Cayman)/ Protective 5,000,000.00 2,180,208.34 1,806,458.34
Eaton Vance Senior Debt Portfolio 4,905,468.76 4,064,531.26
Merrill Lynch Inc Strategies Portfolio 4,905,468.76 4,064,531.26
Paribas 1,818,181.82
Archimedes 4,360,416.67 3,612,916.67
Delano Company 4,087,890.63 3,387,109.38
Firstrust 1,590,909.09
KZH-Crescent 2 Corporation 3,815,364.59 3,161,302.09
Indosuez Capital Funding IIA 2,734,375.00 2,265,625.00
First Dominion Funding I 2,725,260.42 2,258,072.92
Franklin Floating Rate Trust 2,725,260.42 2,258,072.92
KZH - Cypress Tree-1 2,725,260.42 2,258,072.92
Merrill Lynch Debt Strategies Portfolio 2,725,260.42 2,258,072.92
Merrill Lynch Prime Rate Portfolio 2,725,260.42 2,258,072.92
Merrill Lynch Senior Floating Rate Fund,
Inc.
Debt Strategies Fund III, Inc.
PAM Capital (Protective) 2,725,260.42 2,258,072.92
Amara-1 2,725,260.42 2,258,072.92
Toronto Dominion 2,725,260.42 2,258,072.92
Eaton Vance Deeprock 545,052.08 451,614.58
Mass Mutual CVP 1,353,364.32 1,121,359.02
Harvard Management Company, Inc. 2,725,260.42 2,258,072.92
Northern Life Insurance Company 1,090,104.17 903,229.17
Massmutual Life 3,068,643.24 2,542,590.11
Massmutual/Darby CBO LLC 1,028,513.28 852,196.73
Massmutual High Yield Partners II
Metropolitan Life Insurance Company 8,175,781.27 6,774,218.77
Oakhill Securities Fund 5,441,406.27 4,508,593.77
CIBC Inc.
Continental Assurance Company 1,635,156.25 1,354,843.75
TOTAL: $75,000,000.00 $174,416,667.00 $144,516,667.00
</TABLE>
-2-
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Tranche D Term Revolving Credit Growth Capital Swingline Loan
Loan Commitments Commitments Commitments Commitments
------------------- ------------------- ------------------- ------------------
<S> <C> <C> <C> <C>
Bankers Trust Company $81,000,000.00 $14,795,454.51 $9,545,454.57 $20,000,000.00
NationsBank, N.A. 10,333,333.33 6,666,666.67
Goldman Sachs Credit Partners L.P. 4,696,969.69 3,030,303.03
The Bank of Nova Scotia 8,924,242.42 5,757,575.76
The Chase Manhattan Bank 8,924,242.42 5,757,575.76
Credit Lyonnais, New York Branch 8,924,242.42 5,757,575.76
Societe Generale 8,924,242.42 5,757,575.76
ABN AMRO Bank, N.V. 7,045,454.55 4,545,454.54
Bank of Tokyo-Mitsubishi Ltd. 6,575,757.58 4,242,424.24
Credit Agricole Indosuez 6,575,757.58 4,242,424.24
First Union 6,575,757.58 4,242,424.24
The Fuji Bank, Ltd. 6,575,757.58 4,242,424.24
The Imperial Bank 6,575,757.58 4,242,424.24
The Long-Term Credit Bank of Japan, 6,575,757.58 4,242,424.24
Limited
The Mitsubishi Trust and Banking 6,575,757.58 4,242,424.24
Corporation
Natexis Banque BFCE 4,931,818.19 3,181,818.18
National City Bank 6,575,757.58 4,242,424.24
The Prudential Insurance Company of 6,575,757.58 4,242,424.24
America
Summit Bank 6,575,757.58 4,242,424.24
Southern Pacific Bank 4,696,969.70 3,030,303.03
Cypress Tree
AG Capital Funding
Alliance Capital
ARES Leveraged Investment Fund L.P.
Indosuez Capital Funding IV, L.P. 6,750,000
KZH Soleil Corporation (SunAmerica)
KZH Holding Corporation III - Oakmont
ML CLO XV Pilgrim
Morgan Stanley Dean Witter Prime Income 6,750,000
Trust
Octagon Credit Investors Loan Portfolio 6,750,000
Presidential Life Insurance Company
The Travelers Insurance Company 6,750,000
Van Kampen American Capital Prime Rate
Income Trust
ML CBO IV (Cayman)/ Protective
Eaton Vance Senior Debt Portfolio
Merrill Lynch Inc Strategies Portfolio
Paribas 3,757,575.76 2,424,242.42
Archimedes
Delano Company
Firstrust 3,287,878.79 2,121,212.12
-3-
<PAGE>
<PAGE>
Tranche D Term Revolving Credit Growth Capital Swingline Loan
Loan Commitments Commitments Commitments Commitments
------------------- ------------------- ------------------- ------------------
KZH-Crescent 2 Corporation 6,250,000
Indosuez Capital Funding IIA
First Dominion Funding I
Franklin Floating Rate Trust 6,750,000
KZH - Cypress Tree-1 6,750,000
Merrill Lynch Debt Strategies Portfolio
Merrill Lynch Prime Rate Portfolio
Merrill Lynch Senior Floating Rate Fund, 7,000,000
Inc.
Debt Strategies Fund III, Inc. 3,000,000
PAM Capital (Protective)
Amara-1
Toronto Dominion
Eaton Vance Deeprock
Mass Mutual CVP
Harvard Management Company, Inc. 3,000,000
Northern Life Insurance Company 2,750,000
Massmutual Life
Massmutual/Darby CBO LLC 4,500,000
Massmutual High Yield Partners II 2,250,000
Metropolitan Life Insurance Company 6,750,000
Oakhill Securities Fund 6,750,000
CIBC Inc. 10,750,000
Continental Assurance Company 500,000
TOTAL: $175,000,000.00 $155,000,000.00 $100,000,000.00 $20,000,000.00
</TABLE>
-4-
<PAGE>
<PAGE>
EXHIBIT A
FORM OF
ASSIGNMENT AND ACCEPTANCE
_________________________________________________________________________
Reference is made to the Credit Agreement described in Item 2 of Annex I
hereto (as such Credit Agreement may hereafter be amended, supplemented
or otherwise modified from time to time, the "CREDIT AGREEMENT"). Unless
defined in Annex I hereto, terms defined in the Credit Agreement are used
herein as therein defined. BANKERS TRUST COMPANY (the "ASSIGNOR") and
__________ (the "ASSIGNEE") hereby agree as follows:
1. The Assignor hereby sells and assigns to the
Assignee without recourse and without representation or warranty (other
than as expressly provided herein), and the Assignee hereby purchases and
assumes from the Assignor, that interest in and to all of the Assignor's
rights and obligations under the Credit Agreement as of the date hereof
which represents the percentage interest specified in Item 4 of Annex I
hereto (the "ASSIGNED SHARE") of all of the outstanding rights and
obligations under the Credit Agreement relating to the facilities listed
in Item 4 of Annex I hereto, including, without limitation, [(q) in the
case of any assignment of all or any portion of the Total Tranche A Term
Loan Commitment, all rights and obligations with respect to the Assigned
Share of such Total Tranche A Term Loan Commitment,]<F1> [(r) in the case
of any assignment of all or any portion of the Total Tranche B Term Loan
Commitment, all rights and obligations with respect to the Assigned Share
of such Total Tranche B Term Loan Commitment,]<F2> [(s) in the case of
arty assignment of all or any portion of the Tranche C Term Loan
Commitment, all rights and obligations Rich respect to the Assigned Share
of such Total Tranche C Term Loan Commitment,]<F3>; [(t) in the case of
any assignment of all or any portion of the Tranche D Term Loan
Commitment, all rights and obligations with respect to the Assigned Share
of such Total Tranche D Term Loan Commitment,]<F4> (u) in the case of any
_______________
[FN]
<F1> Delete bracketed language in Assignment and Acceptances executed
after the termination of the Total Tranche A Term Loan
Commitment.
<F2> Delete bracketed language in Assignment and Acceptances executed
after the termination of the Total Tranche B Term Loan
Commitment.
<F3> Delete bracketed language in Assignment and Acceptances executed
after the termination of the Total Tranche C Term Loan
Commitment.
<F4> Delete bracketed language in Assignment and Acceptances executed
after the termination of the Total Tranche D Term Loan
Commitment.
-1-
<PAGE>
<PAGE>
assignment of outstanding Tranche A Term Loans, all rights and
obligations with respect to the Assigned Share of such Tranche A Term
Loans, (v) in the case of any assignment of outstanding Tranche B Term
Loans, all rights and obligations with respect to the Assigned Share of
such outstanding Tranche B Term Loans, (w) in the case of any assignment
of outstanding Tranche C Term Loans, all rights and obligations with
respect to Me Assigned Share of such outstanding Tranche C Term Loans,
(x) in the case of any assignment of outstanding Tranche D Term Loans,
all rights and obligations with respect to the Assigned Share of such
outstanding Tranche D Term Loans, (y) in the case of any assignment of
all or any portion of the Total Revolving Credit Commitment, all rights
and obligations with respect to the Assigned Share of such Total
Revolving Credit Commitment and of any outstanding loans and Letters of
Credit and (z) in the case of any assignment of all or any portion of the
Total Growth Capital Commitment, all rights and obligations with respect
to the Assigned Share of such Total Growth Capital Commitment and any
outstanding Growth Capital Revolving Loans. After giving effect to such
sale and assignment, the Assignee's Revolving Credit Commitment, Growth
Capital Commitment[, Tranche A Term Loan Commitment]<F5> [, Tranche B
Term Loan Commitment]<F6> [, Tranche C Term Loan Commitment]<F7> [,
Tranche D Term loran Commitment]<F8> and the amount of the outstanding
Term Loans opting to the Assignee will be as set forth in Item 4 of Annex
I hereto.
2. The Assignor (i) represents and warrants that
it is the legal and beneficial owner of the interest being assigned by it
hereunder and that such interest is free and clear of any adverse claim;
(ii) makes no representation or warranty and assumes no responsibility
with respect to any statements, warranties or representations made in or
in connection with the Credit Agreement or the other Loan Documents or
the execution, legality, validity, enforceability, genuineness,
sufficiency or value of the Credit Agreement or the other Loan Documents
or any other instrument or document furnished pursuant thereto; and (iii)
_______________
[FN]
<F5> Delete bracketed language in Assignment and Acceptances executed
after the termination of the Total Tranche A Term Loan
Commitment.
<F6> Delete bracketed language in Assignment and Acceptances executed
after the termination of the Total Tranche B Term Loan
Commitment.
<F7> Delete bracketed language in Assignment and Acceptances executed
after the termination of the Total Tranche C Term Loan
Commitment.
<F8> Delete bracketed language in Assignment and Acceptances executed
after the termination of the Total Tranche D Term Loan
Commitment.
-2-
<PAGE>
<PAGE>
makes no representation or warranty and assumes no responsibility with
respect to the financial condition of Holdings, the Borrower or any of
their Subsidiaries or the performance or observance by Holdings, the
Borrower or any of their Subsidiaries of any of their obligations under
the Credit Agreement or the other Loan Documents to which they are a
party or any other instrument or document furnished pursuant thereto.
3. The Assignee (i) confirms that it has received
a copy of the Credit Agreement and the other Loan Documents, together
with copies of the financial statements referred to therein and such
other documents and information as it has deemed appropriate to make its
own credit analysis and decision to enter into this Assignment and
Acceptance; (ii) agrees that it will, independently and without reliance
upon the Administrative Agent, the Assignor or any other Lender or Agent
and based on such documents and information as it shall deem appropriate
at the time, continue to make its own credit decisions in taking or not
taking action under the Credit Agreement; (iii) confirms that it is an
Eligible Transferee under Section 9.04(b) of the Credit Agreement; (iv)
appoints and authorizes the Administrative Agent and the Collateral Agent
to take such action as agent on its behalf and to exercise such powers
under the Credit Agreement and the other Loan Documents as are delegated
to the Administrative Agent and the Collateral Agent, as the case may be,
by the terns thereof, together smith such powers as are reasonably
incidental thereto; [and] (v) agrees that it will perform in accordance
with their terms all of the obligations which by the terms of the Credit
Agreement are required to be performed by it as a Lenders; and (vii) to
the extent legally entitled to do so, attaches the forms described in
Section 9.04(b) of the Credit Agreement]<F9>.
4. Following the execution of this Assignment and
Acceptance by the Assignor and the Assignee, an executed original hereof
(together with all attachments) will be delivered to the Administrative
Agent. This Assignment and Acceptance shall be effective, unless
otherwise specified in Item 5 of Annex I hereto (the "SETTLEMENT DATE"),
upon the receipt of the consent of the Administrative Agent and/or the
Borrower to the extent required by Section 9.04(b) of the Credit
Agreements receipt by the Administrative Agent of the administrative fee
referred to in such Section 9.04(b), and the registration of the transfer
as provided by Section 9.05(c) of the Credit Agreement.
5. Upon the Settlement Date of this Assignment and
Acceptance, (i) the Assignee shall be a party to the Credit Agreement
and, to the extent provided in this Assignment and Acceptance, have the
rifles and obligations of a Lender thereunder and under the other Loan
_______________
[FN]
<F9> Include if the Assignee is organized under the laws of a
jurisdiction outside of the United States.
-3-
<PAGE>
<PAGE>
Documents and (ii) the Assignor shall, to the extent provided in this
Assignment and Acceptance, relinquish its rights and be released from its
obligations under the Credit Agreement and the other Loan Documents
except with respect to indemnification provisions under the Credit
Agreement (including, without limitation, Sections 2.13, 2.15, 2.19 and
9.05).
6. It is agreed that the Assignee shall be
entitled to (x) all interest on the Assigned Share of the Loans at the
rates specified in Item 6 of Annex I; (y) all Commitment Fees (if
applicable) on the Assigned Share of the Total Revolving Credit
Commitment, Total Growth Capital Commitment and/or Total Term Loan
Commitment (if not theretofore terminated) at the rate specified in Item
7 of Annex I hereto; and (z) all L/C Participation Fees (if applicable)
on the Assignee's participation in all Genes of Credit at the rate
specified in Item 8 of Annex I hereto, which, in each case, accrue on and
after the Settlement Date, such interest and, if applicable, Commitment
Fees and L/C Participation Fees, to be paid by the Administrative Agent
directly to the Assignee. It is further agreed that all payments of
principal made on the Assigned Share of the Loans which occur on and
after the Settlement Date will be paid directly by the Administrative
Agent to the Assignee. Upon the Settlement Date, the Assignee shall pay
to the Assignor an amount specified by the Assignor in writing which
represents the Assigned Share of the principal amount of the respective
Loans made by the Assignor pursuant to the Credit Agreement which are
outstanding on the Settlement Date, and which are being assigned
hereunder. The Assignor and the Assignee shall make 811 appropriate
adjustments in payments under the Credit Agreement for periods prior to
the Settlement Date directly between themselves.
7. THIS ASSIGNMENT AND ACCEPTANCE SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
NEW YORK.
-4-
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused their
duly authorized officers to execute and deliver this Assignment and
Acceptance as of the date first above written, such execution also being
made on Annex I hereto.
Accepted this _____ day of _________, 1998
BANKERS TRUST COMPANY, NAME OF ASSIGNEE,
as Assignor as Assignee
By: ____________________________ By: _________________________
____________________________ _________________________
(Print Name and Title) (Print Name and Title)
[Acknowledged and Agreed:
BANKERS TRUST COMPANY,
as Administrative Agent, Swingline Lender
and Fronting Bank
By: ____________________________
____________________________
(Print Name and Title)
GRAHAM PACKAGING COMPANY
By: ____________________________
its managing general partner
____________________________
(Print Name and Title)]<F10>
_______________
[FN]
<F10> The consent of the Administrative agent and the Borrower
required for assignments made as (and to the extent) provided in
Section 9.04(b)(y)(ii) of the Credit Agreement.
-5-
<PAGE>
<PAGE>
ANNEX I
_________________________________________________________________________
1. Borrower: Graham Packaging Company
2. Name and Date of Credit Agreement:
Credit Agreement, dated as of February 2, 1998, among Graham
Packaging Holdings Company, a Pennsylvania limited partnership,
Graham Packaging Company, a Delaware limited partnership (the
"Borrower"), GPC CAPITAL CORP. I. a Delaware corporation (the
"Co-Borrower"), certain financial institutions party thereto,
NationsBanc Montgomery Securities L.L.C., as Documentation Agent,
Bankers Trust Company, as Administrative Agent, as Syndication Agent
as Collateral Agent and as Fronting Bank.
3. Date of Assignment and Acceptance: ___________, 1998
4. Amounts (as of date of Item #3 above):
<TABLE>
<CAPTION>
a. b. c.
---------------- ---------------- ----------------
Aggregate Amount
Amount for all Assigned of Assigned
Lenders Share Share
---------------- ---------------- ----------------
<S> <C> <C> <C>
[Total Tranche A Term Loan Commitment $ % $]<F11>
[Total Tranche B Term Loan Commitment $ % $]<F12>
[Total Tranche C Term Loan Commitment $ % $]<F13>
[Total Tranche D Term Loan Commitment $ % $]<F14>
_______________
<FN>
<F11> This row should be deleted in the case of Assignment and Acceptances executed after the termination of
the Total Tranche A Term Loan Commitment.
<F12> This row should be deleted in the case of Assignment and Acceptances executed after the termination of
the Total Tranche B Term Loan Commitment.
<F13> This row should be deleted in the case of Assignment and Acceptances executed after the termination of
the Total Tranche C Term Loan Commitment.
<F14> This row should be deleted in the case of Assignment and Acceptances executed after the termination of
the Total Tranche D Term Loan Commitment.
Outstanding Principal of Tranche A $ % $
Term Loans
-6-
<PAGE>
<PAGE>
a. b. c.
---------------- ---------------- ----------------
Aggregate Amount
Amount for all Assigned of Assigned
Lenders Share Share
---------------- ---------------- ----------------
Outstanding Principal of Tranche B $ % $
Term Loans
Outstanding Principal of Tranche C $ % $
Term Loans
Outstanding Principal of Tranche D $ % $
Term Loans
Revolving Credit Commitment $ % $
Growth Capital Revolving Commitment $ % $
</TABLE>
5. Settlement Date: _____________, 1998
6. Rate of Interest to the Assignee: As set forth in Section 2.06 of the
Credit Agreement (unless otherwise
agreed to by the Assignor and the
Assignee)<F15>
7. Commitment Fees to the Assignee: As set forth in Section 2.05(a) of
the Credit Agreement (unless
otherwise agreed to by the Assignor
and the Assignee)<F16>
[FN]
<F15> The Borrower and the Administrative Agent shall direct the entire
amount of the interest to the Assignee at the rate set forth in
Section 2.06 of the Credit Agreement, with the Assignor and Assignee
effecting the agreed upon sharing of the interest through payments by
the Assignee to the Assignor.
<F16> Insert "NOT APPLICABLE" in lieu of text if no portion of the Total
Revolving Credit Commitment or Total Growth Capital Commitment is
being assigned. Otherwise, the Borrower and the Administrative Agent
shall direct the entire amount of the Commitment Fees to the Assignee
at the rate set forth in Section 2.05(a) of the Credit Agreement, with
the Assignor and the Assignee effecting the agreed upon sharing of
Commitment Fees through payment by the Assignee to the Assignor.
-7-
<PAGE>
<PAGE>
8. L/C Participation
Fees to the Assignee: As set forth in Section
2.05(b) of the Credit
Agreement (unless otherwise
agreed to by the Assignor and
the Assignee)<F17>
9. Notice Instructions:
ASSIGNOR Bankers Trust Company
Loan Syndications Division
One Bankers Trust Plaza,
14th Floor
New York, NY 10006
Attention: Deborah Jacob
Telephone: (212) 250-6514
Telecopier: (212) 250-7351/6029
Reference: Graham Packaging Company
ASSIGNEE ____________________
____________________
____________________
Attention:
Telephone:
Telecopier:
Reference: Graham Packaging Company
10. Payment Instructions:
ASSIGNOR Bankers Trust Company
ABA Number 021001033
Commercial Loan Division
Account Number 99401268
Reference: Graham Packaging Company
ASSIGNEE ____________________
____________________
____________________
Reference: Graham Packaging Company
[FN]
<F17> Insert "NOT APPLICABLE" in lieu of text if no portion of the Total
Revolving Credit Commitment is being assigned. Otherwise, the
Borrower and the Administrative Agent shall direct the entire amount
of the L/C Participation Fees to the Assignee at the rate set forth in
Section 2.05(b) of the Credit Agreement, with the Assignor and the
Assignee effecting the agreed upon sharing of L/C Participation Fees
through payment by the Assignee to the Assignor.
-8-
<PAGE>
<PAGE>
Accepted and Agreed:
BANKERS TRUST COMPANY, NAME OF ASSIGNEE,
By: _________________________ By: _________________________
_________________________ _________________________
(Print Name and Title) (Print Name and Title)
-9-
<PAGE>
<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, as Co-Borrower, the various
Lenders party thereto, NATIONSBANK, N.A., as Documentation Agent, BANKERS
TRUST COMPANY, as Administrative Agent, as Syndication Agent and as
Collateral Agent for the Lenders, and BANKERS TRUST COMPANY, as Fronting
Bank. 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<F1> ___________________________________
(B) Interest rate basis<F2> ___________________________________
(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: ____________________________________________
[FN]
<F1> 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).
<F2> Eurodollar Borrowing or ABR Borrowing.
-1-
<PAGE>
<PAGE>
Account Number: ____________________________________________
(E) Principal Amount of Borrowing<F3> __________________________
(F) Interest Period and the last day
thereof<F4> __________________________
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 [ ]
[FN]
<F3> 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.
<F4> 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, Tranche C Maturity Date or Tranche D
Maturity Date, as applicable.
-2-
<PAGE>
<PAGE>
EXHIBIT K
FORM OF
CAPITAL CALL AGREEMENT
CAPITAL CALL AGREEMENT (as amended, supplemented or modified
from time to time, this "Agreement"), dated as of August 13, 1998, among
BLACKSTONE CAPITAL PARTNERS III MERCHANT BANKING FUND L.P., a Delaware
limited partnership ("Blackstone Capital Partners"), BLACKSTONE OFFSHORE
CAPITAL PARTNERS III L.P., a Cayman Islands limited partnership
("Blackstone Offshore Partners" and, together with Blackstone Capital
Partners, being collectively referred to herein as the "Fund"),
BLACKSTONE FAMILY INVESTMENT PARTNERSHIP III L.P., a Delaware limited
partnership ("Blackstone Family Partnership"), BMP/GRAHAM HOLDINGS
CORPORATION, a Delaware corporation ("Investor LP"), GRAHAM PACKAGING
HOLDINGS COMPANY, a Pennsylvania limited partnership ("Holdings"), GRAHAM
PACKAGING COMPANY, a Delaware limited partnership (the "Borrower"),
BANKERS TRUST COMPANY, as administrative agent (the "Administrative
Agent") for the benefit of the various lenders (the "Lenders") from time
to time party to the Credit Agreement referred to below and BANKERS TRUST
COMPANY, as collateral agent (the "Collateral Agent") for the benefit of
the Secured Parties (as defined in the Security Agreement referred to
below). All capitalized terms used herein and not otherwise defined
shall have the respective meanings provided such terms in the Credit
Agreement referred to below.
W I T N E S S E T H :
WHEREAS, Holdings, the Borrower, the Co-Borrower, the Lenders,
the Agents and the Fronting Bank are parties to a Credit Agreement, dated
as of February 2, 1998 (as amended, modified or supplemented from time to
time, the "Credit Agreement");
WHEREAS, pursuant to the First Amendment to Credit Agreement,
dated as of the date hereof (the "First Amendment"), the Agents and
certain of the Lenders (the "Tranche D Lenders") have agreed to make
available to the Borrower the Total Tranche D Term Loan Commitment in
accordance with the terms thereof;
WHEREAS, (i) prior to the date hereof, the Fund has formed
Investor LP (which is wholly owned by the Fund, Blackstone Family
Partnership and one or more other Investors) and (ii) as of the date
hereof, (x) Investor LP has, directly and through one or more wholly-
owned subsidiaries, acquired limited and general partnership interests in
Holdings and owns (directly and indirectly) approximately 85% of the
issued and outstanding Equity Interests of Holdings and (y) Holdings owns
100% of the issued and outstanding Equity Interests of the Borrower free
and clear of any and all Liens (other than liens in favor of the
Collateral Agent pursuant to the Pledge Agreement);
WHEREAS, each of the Fund (and each of Blackstone Capital
Partners and Blackstone Offshore Partners), Blackstone Family
-1-
<PAGE>
<PAGE>
Partnership, Investor LP, Holdings and the Borrower will obtain benefits
as a result of the First Amendment and the making of Tranche D Term Loans
to the Borrower under the Credit Agreement;
WHEREAS, it is a condition precedent to the entering into the
First Amendment and the making of Tranche D Term Loans to the Borrower
under the Credit Agreement that each of the Fund, Blackstone Family
Partnership, Investor LP, Holdings and the Borrower shall have executed
and delivered this Agreement; and
WHEREAS, in order to induce the Lenders to approve the First
Amendment and the Agents and the Tranche D Lenders to make the Tranche D
Term Loans provided for therein, each of the Fund, Blackstone Family
Partnership, Investor LP, Holdings and the Borrower desires to execute
and deliver this Agreement in order to satisfy the condition described in
the immediately preceding recital;
NOW, THEREFORE, it is agreed:
1. Certain Defined Terms. As used herein, the following
terms shall have the following meanings:
"Administrative Agent" shall have the meaning provided
in the first paragraph of this Agreement.
"Agreement" shall have the meaning provided in the first
paragraph of this Agreement.
"Blackstone Capital Partners" shall have the meaning
provided in the first paragraph of this Agreement.
"Blackstone Family Partnership" shall have the meaning
provided in the first paragraph of this Agreement.
"Blackstone Offshore Partners" shall have the meaning
provided in the first paragraph of this Agreement.
"Borrower" shall have the meaning provided in the first
paragraph of this Agreement.
"Capital Call Amount" shall mean, on any date of
determination, an amount of cash equal to $50,000,000 (reduced by the
aggregate amount of net cash equity proceeds (including without
limitation net cash equity proceeds received through the public markets
or other sources but in any event exclusive of (i) Designated Capital
Contributions and (ii) contributions to capital to effect any exercise of
Cure Rights pursuant to Section 7.02 of the Credit Agreement) which have
been received after the date hereof by Holdings, and in turn contributed
by Holdings to the equity of the Borrower; provided, however, no such
reduction to the Capital Call Amount shall be effective if, on the date
any cash equity proceeds of the type described in this parenthetical are
received by Holdings or the Borrower, a Capital Call Event or any other
Event of Default exists except to the extent the Capital Call Amount has
-2-
<PAGE>
<PAGE>
been applied strictly in accordance with Section 3 hereof) multiplied by
a fraction (A) the numerator of which shall be the sum of (x) the
aggregate principal amount of all Tranche D Term Loans incurred by the
Borrower on or prior to the respective date of determination of the
Capital Call Amount (irrespective of any repayments or prepayments of
such Tranche D Term Loans) and (y) the aggregate principal amount of IRB
Financings incurred by the Borrower and its domestic Subsidiaries on or
prior to the respective date of determination of the Capital Call Amount
(irrespective of any repayments or prepayments of any such IRB
Financings), provided, however, notwithstanding anything to the contrary
contained above, if the numerator would otherwise exceed $150,000,000,
then the numerator shall be deemed to equal $150,000,000 and (B) the
denominator of which shall be equal to $150,000,000. Notwithstanding the
immediately preceding sentence, in the case of a Capital Call Event of
the type described in clause (v)(x) of the definition thereof and
provided that no Capital Call Event of the type described in any of
clauses (i) through (iv), inclusive, of the definition thereof has
theretofore occurred (and except as set forth in Section 2(a) hereof),
the Capital Call Amount shall mean an amount of cash equal to the lesser
of (x) the amount calculated pursuant to the immediately preceding
sentence and (y) that amount which is necessary to be subtracted from
Total Net Debt to cause the Net Leverage Ratio to be equal to or less
than 5.15:1.0 in respect of the Test Period ending closest to March 31,
2000; it being expressly understood and agreed that the amount referred
to in preceding clause (y) shall be determined without giving effect to
any exercise of Cure Rights pursuant to Section 7.02 of the Credit
Agreement (i.e., any increases to EBITDA pursuant to Section 7.02(a) of
the Credit Agreement shall have no effect (and shall not increase EBITDA)
in measuring the Net Leverage Ratio). Notwithstanding the foregoing to
the contrary, on any date of determination, the Capital Call Amount shall
at no time be less than $0.
"Capital Call Event" shall mean:
(i) the occurrence of an Event of Default pursuant to
paragraph (h) or (i) of Section 7.01 of the Credit Agreement
(other than with respect to Insignificant Subsidiaries); or
(ii) the Loans then outstanding under the Credit
Agreement shall have been declared by the Administrative Agent
to be due and payable in whole or in part pursuant to the last
paragraph of Section 7.01 of the Credit Agreement; or
(iii) the commencement of an involuntary proceeding or
the filing of an involuntary petition in a court of competent
jurisdiction seeking (a) relief in respect of any of the
Designated Capital Call Investors or Investor LP, or of a
substantial part of the property or assets of such person 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, (b) the
appointment of a receiver, trustee, custodian, sequestrator,
conservator or similar official for any of the Designated
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Capital Call Investors or Investor LP or for a substantial part
of the property or assets of such person or (c) the winding-up
or liquidation of any of the Designated Capital Call Investors
or Investor LP; and such proceeding or petition shall have
continued undismissed for 60 days or an order or decree
approving or ordering any of the foregoing shall be entered; or
(iv) any of the Designated Capital Call Investors or
Investor LP shall have (a) voluntarily commenced any proceeding
or filed 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, (b) consented to the institution
of, or failed to contest in a timely and appropriate manner, any
proceeding or the filing of any petition described in preceding
clause (a), (c) applied for or consented to the appointment of a
receiver, trustee, custodian, sequestrator, conservator or
similar official for such person or for a substantial part of
its property or assets, (d) filed an answer admitting the
material allegations of a petition filed against it in any such
proceeding, (e) made a general assignment for the benefit of
creditors, (f) become unable, admitted in writing its inability
or fail generally to pay its debts as they become due or
(g) taken any action for the purpose of effecting any of the
foregoing; or
(v) (x) the Net Leverage Ratio shall exceed 5.15:1.0 in
respect of the Test Period ending closest to March 31, 2000 or
(y) the financial statements (and the accompanying
certification) with respect to the Test Period ending closest to
March 31, 2000 shall have not been delivered to the
Administrative Agent on or prior to the thirtieth day after same
are due pursuant to Section 5.04 of the Credit Agreement;
it being expressly understood and agreed that for purposes of this
definition the Net Leverage Ratio shall be determined without giving
effect to any exercise of Cure Rights pursuant to Section 7.02 of the
Credit Agreement (i.e., any increases to EBITDA pursuant to Section
7.02(a) of the Credit Agreement shall have no effect (and shall not
increase EBITDA) in measuring the Net Leverage Ratio).
"Capital Call Percentages" shall mean (i) with respect
to Blackstone Capital Partners, 79.785225%, (ii) with respect to
Blackstone Offshore Partners, 14.214775% and (iii) Blackstone Family
Partnership, 6.000000%, in each case as such Capital Call Percentage may
be adjusted at any time and from time to time with the prior written
consent of the Administrative Agent (with the consent of the Required
Lenders).
"Chattel Paper" shall have the meaning ascribed thereto
in the Uniform Commercial Code in effect in the State of New York on the
date hereof.
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"Collateral" shall mean, collectively, this Agreement,
all rights (including all contract rights and rights to receive payments
and capital contributions) hereunder and all Proceeds (as defined in the
Security Agreement) hereof and thereof.
"Collateral Agent" shall have the meaning provided in
the first paragraph of this Agreement.
"Credit Agreement" shall have the meaning provided in
the first recital of this Agreement.
"Designated Capital Call Investors" shall mean,
collectively, Blackstone Capital Partners, Blackstone Offshore Partners
and Blackstone Family Partnership.
"Event of Default" shall have the meaning provided in
the Credit Agreement.
"First Amendment" shall have the meaning provided in the
second recital of this Agreement.
"Fund" shall have the meaning provided in the first
paragraph of this Agreement.
"Grantors" shall mean, collectively, all of the parties
to this Agreement (other than the Designated Capital Call Investors, the
Collateral Agent and the Administrative Agent).
"Holdings" shall have the meaning provided in the first
paragraph of this Agreement.
"Insignificant Subsidiary" shall mean, on any date of
determination, any Subsidiary of Holdings which would not be a
Significant Subsidiary (within the meaning of Rule 1-02(w) of Regulation
S-X (as in effect on the date hereof, provided that each reference to "10
percent" appearing therein shall be deemed for purposes of this Agreement
to be a reference to (i) "20 percent" on any date of determination
occurring during the calendar year ending December 31, 1998, (ii) "17 1/2
percent" on any date of determination occurring during the calendar year
ending December 31, 1999 and (iii) "15 percent" on any date of
determination occurring during any calendar year thereafter) promulgated
by the SEC) of Holdings.
"Instruments" shall have the meaning ascribed thereto in
the Uniform Commercial Code in effect in the State of New York on the
date hereof.
"Interest Rate Protection Agreements" shall mean any
interest rate hedging agreement or arrangement designed to protect
against fluctuations in interest rates entered into by the Borrower or a
Subsidiary of the Borrower with any of the Other Creditors (as defined in
the Security Agreement).
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"Investment" shall mean a cash contribution made (or
deemed made) by a Designated Capital Call Investor after the date hereof
to the equity capital of Investor LP pursuant to this Agreement.
"Investor LP" shall have the meaning provided in the
first paragraph of this Agreement.
"Lenders" shall have the meaning provided in the first
paragraph of this Agreement.
"Obligations" shall have the meaning provided in the
Security Agreement.
"Proportionate Share" of each Lender at any time shall
mean a fraction (x) the numerator of which is the sum of (I) the
aggregate principal amount of all Loans made by such Lender and then
outstanding plus (II) the amount (if any) of such Lender's participation
at such time in outstanding Swingline Loans and Letters of Credit and (y)
the denominator of which is the sum of (I) the aggregate principal amount
of all Loans then outstanding plus (II) the aggregate stated amount of
all Letters of Credit at such time.
"Secured Parties" shall have the meaning provided in the
Security Agreement.
"Security Agreement" shall mean the Security Agreement,
dated as of February 2, 1998, among Holdings, the Borrower, each
Subsidiary Guarantor and the Collateral Agent for the benefit of the
Secured Parties, as same is amended, modified or supplemented from time
to time.
"Tranche D Lenders" shall have the meaning provided in
the second recital of this Agreement.
2. (a) Each of the Designated Capital Call Investors
hereby severally and not jointly agrees on an absolute, irrevocable and
unconditional basis that, within 14 days after the occurrence of a
Capital Call Event, it will make a payment (in cash) directly to the
Administrative Agent in an amount equal to its Capital Call Percentage of
the Capital Call Amount (determined as of the date of the occurrence of
the Capital Call Event); it being understood and agreed that, in the case
of a Capital Call Event of the type described in clause (v)(x) of the
definition thereof, such 14-day period shall begin on the date on which
financial statements (and as certified by an accounting firm or Financial
Officer of Holdings or the Borrower, as the case may be, on behalf of
Holdings or the Borrower, respectively) in respect of the Test Period
ending closest to March 31, 2000 are made available pursuant to Section
5.04 of the Credit Agreement. In calculating the Capital Call Amount,
EBITDA and Total Net Debt (and related calculations) shall be determined
(except as otherwise expressly provided in the definition of Capital Call
Event contained herein) in accordance with the Credit Agreement.
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(b) To the extent the Designated Capital Call Investors
are prohibited by operation of law from making Investments in Investor LP
(which are contributed by Investor LP to the equity capital of Holdings
which are further contributed by Holdings to the equity capital of the
Borrower) as contemplated by Section 3(a) below due to any bankruptcy or
similar proceeding relating to Investor LP or Holdings (or any of
Holdings' Subsidiaries) or for any other reason whatsoever, then, at the
election of the Administrative Agent (with the consent of the Required
Lenders), the Designated Capital Call Investors' respective Investments
shall instead be promptly made by means of the purchase by such
Designated Capital Call Investors from each of the Lenders of a
subordinated participation in such Lenders' outstanding Loans (including
such Lenders' participations in outstanding Swingline Loans and Letters
of Credit), pro rata among the Lenders based on their respective
Proportionate Shares at such time, with such participations to be
evidenced by a subordinated participation agreement in form and substance
satisfactory to the Administrative Agent (it being expressly understood
and agreed (and the subordinated participation agreement shall provide)
that no payment or distribution of any kind or character, whether in
cash, property, securities or otherwise, shall be made under any
circumstances whatsoever with respect to any such subordinated
participation until the date on which (i) all Commitments and Letters of
Credit under the Credit Agreement shall have been terminated, (ii) all
Obligations (except those evidenced by the subordinated participations
purchased pursuant to this Section 3(b)) shall have been paid in full in
cash in accordance with the requirements of the Credit Agreement (or the
other Loan Documents) or the Interest Rate Protection Agreements, as the
case may be, (iii) all Interest Rate Protection Agreements shall have
been terminated and (iv) all Obligations (as defined in the Senior
Subordinated Note Indenture and, for avoidance of doubt, including
without limitation all obligations for principal, premium, interest,
penalties, fees, indemnification, reimbursements, damages and other
liabilities under the Senior Subordinated Note Indenture) on the Senior
Subordinated Notes shall have been paid in full in cash (or such other
payment provided for to the satisfaction of the holders of the Senior
Subordinated Notes)).
3. (a) All payments received by the Administrative
Agent pursuant to Section 2(a) above shall automatically be deemed (as of
the date of receipt by the Administrative Agent of such respective
payments) to be Investments by the respective Designated Capital Call
Investors in Investor LP which have been further contributed (as cash) by
Investor LP to the equity capital of Holdings which have been further
contributed (as cash) by Holdings to the equity capital of the Borrower.
(b) All payments received by the Administrative Agent
pursuant to Section 2(a) above shall be promptly applied by it in the
following manner:
(i) if on (x) the date that payments are due and
payable to the Administrative Agent pursuant to Section 2(a)
above or (y) the date that any such payment is actually made to
(and received by) the Administrative Agent, there exists (A) a
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Default under paragraph (h) or (i) of Section 7.01 of the Credit
Agreement (other than with respect to Insignificant
Subsidiaries) or (B) a Capital Call Event of the type described
in clause (i) or (ii) of the definition thereof, the
Administrative Agent shall forward all such payments to the
Collateral Agent, which shall promptly thereafter apply such
payments in accordance with Section 7 of the Security Agreement
as though same constituted a portion of the Collateral (as
defined in the Security Agreement) thereunder; and
(ii) to the extent that payments are not required to be
applied pursuant to preceding clause (i), the Administrative
Agent shall, on behalf of the Borrower, promptly apply same
directly to the repayment of Term Loans pursuant to Section
2.12(c) of the Credit Agreement (and in accordance with
paragraphs (b) and (d) of Section 2.11 of the Credit Agreement).
(c) Each of the Designated Capital Call Investors,
Investor LP, Holdings and the Borrower hereby consents on an absolute,
irrevocable and unconditional basis to the application of the payments
received by the Administrative Agent pursuant to Section 2(a) above in
the manner contemplated by this Section 3.
4. All payments required to be made by any Designated
Capital Call Investor, Investor LP, Holdings and/or the Borrower pursuant
to this Agreement shall be made in Dollars and in immediately available
funds, and shall be made on the same basis as provided in Sections 2.18
and 2.19 of the Credit Agreement; it being expressly understood and
agreed that, without limiting the foregoing and for avoidance of doubt,
(x) none of the Designated Capital Call Investors and Investor LP shall
incur any additional or supplemental liabilities or obligations in
connection with the application by the Administrative Agent (whether on
behalf of the Borrower or otherwise) of any payments received by it
pursuant to Section 3 above and (y) Holdings and the Borrower shall be
liable for any and all additional or supplemental amounts required to be
paid under the Credit Agreement (including without limitation Sections
2.13 and 2.19 of the Credit Agreement) and the other Loan Documents to
the extent Holdings and/or the Borrower, as the case may be, would be so
liable if repayment of Term Loans (as contemplated by Section 3 above)
had been effectuated directly by the Borrower in accordance with the
Credit Agreement and not by the Administrative Agent on behalf of the
Borrower.
5. The obligations of each of the Designated Capital
Call Investors and Investor LP hereunder are independent of the
obligations of any Guarantor, the Borrower or any other party, and a
separate action or actions may brought and prosecuted against any of the
Designated Capital Call Investors and Investor LP whether or not an
action is brought against any Guarantor, the Borrower or any other party
and whether or not any Guarantor, the Borrower or any other party shall
be joined in any such action or actions. Each of the Designated Capital
Call Investors, Investor LP, Holdings and the Borrower waives, to the
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fullest extent permitted by law, the benefit of statute of limitations
affecting its liability hereunder or the enforcement hereof.
6. Each of the Designated Capital Call Investors,
Investor LP, Holdings and the Borrower hereby waives notice of acceptance
of this Agreement and notice of any liability to which it may apply, and
waives presentment, demand of payment, protest, notice of dishonor, or
nonpayment of any such liability, suit or taking of other action by
Holdings and/or the Borrower (in the case of the Designated Capital Call
Investors and Investor LP), the Collateral Agent, the Administrative
Agent, any Secured Party or any Lender against, and any other notice to
any such person or any other party liable thereon.
7. (a) As security for the prompt and complete payment
and performance when due, whether at the stated maturity, by
acceleration, upon one or more dates set for prepayment or otherwise of
the Obligations, each of the Grantors hereby grants to the Collateral
Agent, for the ratable benefit of the Secured Parties, a first priority
security interest in the Collateral. Such security interests are granted
as security only and shall not subject any Secured Party or the
Collateral Agent to, or in any way alter or modify, any obligation or
liability of any Grantor with respect to or arising out of the
Collateral. All rights of the Collateral Agent hereunder, the security
interest and all obligations of the Grantors hereunder shall be absolute,
irrevocable and unconditional.
(b) Each Grantor covenants and agrees with the
Collateral Agent, for the ratable benefit of the Secured Parties, from
and after the date of this Agreement until this Agreement and the
security interests created hereby are terminated pursuant to Section 17
below:
(i) If any amount payable under or in connection with
any of the Collateral shall be or become evidenced by any
promissory note, other Instrument or Chattel Paper, such
promissory note, Instrument or Chattel Paper shall be
immediately delivered to the Collateral Agent, duly indorsed in
a manner reasonably satisfactory to the Collateral Agent, to be
held as Collateral pursuant to this Agreement.
(ii) Each Grantor shall cause to be done the filing of
UCC financing statements in the jurisdictions listed on
Schedule I hereto with respect to it. Each Grantor shall
maintain the security interests created by this Agreement as
first priority perfected security interests and shall defend
such security interests against all claims and demands of all
persons whomsoever.
(iii) At any time and from time to time, upon the
written request of the Collateral Agent, and at the sole expense
of a Grantor, such Grantor shall promptly and duly execute and
deliver such further instruments and documents and take such
further action as the Collateral Agent may reasonably request
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for the purpose of obtaining or preserving the full benefits of
this Section 7 and of the rights and powers herein granted,
including, without limitation, the filing of any financing or
continuation statements under the Uniform Commercial Code in
effect in any jurisdiction with respect to the security
interests created hereby.
(iv) No Grantor shall, except (x) upon prior written
notice to the Collateral Agent and (y) if filings under the UCC
or otherwise have been made which maintain in favor of the
Collateral Agent a valid, legal and perfected security interest
in the Collateral subject to no Liens,
(1) change the location of its chief executive
office and chief place of business from that specified
on Schedule II hereto; or
(2) change its (A) corporate name or any trade
name used to identify it in its conduct of business or
in the ownership of its properties, (B) identity or
(C) corporate or partnership structure to such an extent
that any financing statement filed in favor of the
Collateral Agent in connection with this Agreement would
become seriously misleading.
(v) Each Grantor shall advise the Collateral Agent
promptly, in reasonable detail, at its address set forth in
Section 9.01 of the Credit Agreement or as set forth immediately
below its signature below, as the case may be, of:
(1) any Lien (other than security interests
created hereby) on any material portion of the
Collateral; and
(2) the occurrence of any other event which
could reasonably be expected to have a material adverse
effect on the security interests created hereby or on
the aggregate value of the Collateral.
(vi) Notwithstanding anything to the contrary provided
herein, the Collateral Agent assumes no liabilities with respect
to any claims regarding each Grantor'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 Grantors, be borne exclusively by the Grantors.
(vii) The Borrower agrees to pay all expenses of the
Collateral Agent and to indemnify the Collateral Agent with
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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 same extent the Borrower is required to do
so with respect to the Credit Agreement pursuant to Section 9.05
of the Credit Agreement. Any amounts payable as provided
hereunder shall be additional Obligations secured hereby and by
the 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, all Interest Rate Protection
Agreements or this Agreement.
(viii) A Grantor shall not (x) make or permit to be
made an assignment, pledge or hypothecation of the Collateral,
and shall grant no other security interest in such Collateral or
(y) make or permit to be made any transfer of such Collateral,
and shall remain at all times in possession thereof other than
transfers to the Collateral Agent pursuant to the provisions
hereof.
(ix) Anything herein to the contrary notwithstanding,
each Grantor shall remain liable under this Agreement to observe
and perform all the conditions and obligations to be observed
and performed by it hereunder, all in accordance with and
pursuant to the terms and provisions of this Agreement. No
Secured Party shall have any obligation or liability under this
Agreement by reason of or arising out of this Agreement or the
receipt by any such Secured Party of any payment relating to
this Agreement pursuant hereto, nor shall any Secured Party be
obligated in any manner to perform any of the obligations of a
Grantor under or pursuant to this Agreement, to make any
payment, to make any inquiry as to the nature or the sufficiency
of any payment received by it or as to the sufficiency of any
performance by any party under this Agreement, to present or
file any claim, to take any action to enforce any performance or
to collect the payment of any amounts which may have been
assigned to it or to which it may be entitled at any time or
times.
(x) The parties hereto acknowledge that the Collateral
Agent shall be entitled to exercise such remedies, powers and
rights with respect to the Collateral as are set forth in
Sections 7 (excluding Section 7.2 and, with respect to Investor
LP, Sections 7.3(g) and 7.5 thereof) through 11, inclusive, of
the Security Agreement and all provisions of such Sections of
the Security Agreement relating to such remedies, powers and
rights, together with all definitions therein applicable to such
provisions, are hereby incorporated by reference as if set forth
herein in their entirety, provided that:
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(1) all references to "Grantor" or "Grantors"
therein shall have the respective meanings ascribed
thereto herein;
(2) all references to "Collateral" therein
shall have the meaning ascribed thereto herein;
(3) all references to "the Contracts" therein
shall be deemed to be references to "this Agreement"
herein;
(4) all references to "Default" or "Event of
Default" therein shall be deemed to be references to
"Capital Call Event" herein;
(5) all references to "Section 17(a)" therein
shall be deemed to be references to "Section 17 of this
Agreement" herein; and
(6) all references to "this Agreement",
"herein", "hereunder" and words of similar import
therein shall mean and be a reference to "this
Agreement" as defined herein.
(xi) Each Grantor waives and agrees not to assert any
rights or privileges it may acquire under Section 9-112 of the
Uniform Commercial Code as from time to time in effect in the
State of New York.
8. The Collateral Agent, the Administrative Agent, the
Secured Parties (or any of the Secured Parties) and/or the Lenders (or
any of the Lenders) may (except as shall be required by applicable
statute and cannot be waived) at any time and from time to time without
the consent of, or notice to, any of the Designated Capital Call
Investors, Investor LP, Holdings or the Borrower, in each case without
incurring responsibility to any such person, without impairing or
releasing the obligations of any such person hereunder, upon or without
any terms or conditions and in whole or in part:
(i) change the manner, place or terms of payment of,
and/or change or extend the time of payment of, renew, alter or
increase any of the Obligations, any security therefor, or any
liability incurred directly or indirectly in respect thereof;
(ii) take and hold security for the payment of the
Obligations and sell, exchange, release, impair, surrender,
realize upon or otherwise deal with in any manner and in any
order any property by whomsoever at any time pledged or
mortgaged to secure, or howsoever securing, the Obligations or
any liabilities (including any of those hereunder) incurred
directly or indirectly in respect thereof or hereof, and/or any
offset there against;
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(iii) exercise or refrain from exercising any rights
against the Borrower, any other Loan Party or others or
otherwise act or refrain from acting;
(iv) settle or compromise any of the Obligations, any
security therefor or any liability (including any of those
hereunder) incurred directly or indirectly in respect thereof or
hereof, and may subordinate the payment of all or any part
thereof to the payment of any liability (whether due or not) of
the Borrower to creditors of the Borrower other than the Secured
Parties;
(v) except as otherwise expressly provided herein,
apply any sums by whomsoever paid or howsoever realized to any
liability or liabilities of the Borrower to the Collateral
Agent, the Administrative Agent, the Secured Parties or the
Lenders regardless of what liability or liabilities of the
Designated Capital Call Investors, Investor LP, Holdings or the
Borrower remain unpaid;
(vi) release or substitute any one or more endorsers,
guarantors, Loan Parties or other obligors;
(vii) consent to or waive any breach of, or any act,
omission or default under, any of the Loan Documents or any of
the instruments or agreements referred to therein, or otherwise
amend, modify or supplement any of the Loan Documents or any of
such other instruments or agreements, provided that no such
consent, waiver, amendment, modification or supplement relating
to the definition of "Net Leverage Ratio" shall be effective for
purposes of this Agreement without the consent of the Designated
Capital Call Investors and Investor LP;
(viii) act or fail to act in any manner referred to in
this Agreement which may deprive any of the Designated Capital
Call Investors, Investor LP or Holdings of any right to
subrogation against the Borrower to recover any payments made
pursuant to this Agreement;
(ix) pursue its rights and remedies under this
Agreement and/or under any guaranty of all or any part of the
Obligations in whatever order, or collectively, and the
Collateral Agent, the Administrative Agent, the Secured Parties
and the Lenders shall be entitled to the strict performance of
each Designated Capital Call Investor, Investor LP, Holdings and
the Borrower hereunder, notwithstanding any action taken (or not
taken) by the Collateral Agent, the Administrative Agent, the
Secured Parties and the Lenders to enforce any of its rights or
remedies against any Designated Capital Call Investor, Investor
LP, Holdings, the Borrower or any other person, for all or any
part of the Obligations or any payment received under this
Agreement or any other such guaranty; and/or
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(x) take any other action which would, under otherwise
applicable principles of common law, give rise to a legal or
equitable discharge of any Designated Capital Call Investor,
Investor LP, Holdings or the Borrower from its liabilities under
this Agreement.
9. No invalidity, irregularity or unenforceability of
all or any of the Loans, Letters of Credit and/or any of the other
Obligations or of any security therefor shall affect, impair or be a
defense to this Agreement, and the obligations of the Designated Capital
Call Investors, Investor LP, Holdings and the Borrower hereunder shall be
absolute, irrevocable and unconditional notwithstanding the occurrence of
any event or the existence of any circumstance, including, without
limitation, any bankruptcy or insolvency proceeding with respect to any
Designated Capital Call Investor, Investor LP, Holdings or any of its
Subsidiaries or any event or circumstance which would constitute a legal
or equitable discharge, except payment in full in cash of all Obligations
in accordance with the Credit Agreement (or the other Loan Documents) or
the Interest Rate Protection Agreements, as the case may be.
10. In order to induce the Lenders (including the
Tranche D Lenders) to enter into the First Amendment, each of the
Designated Capital Call Investors, Investor LP, Holdings and the Borrower
makes the following representations, warranties and agreements:
(a) (i) Each of Blackstone Capital Partners,
Blackstone Offshore Partners, Blackstone Family Partnership,
Holdings and the Borrower is a duly organized and validly
existing limited partnership in good standing under the laws of
the State of Delaware (or, in the case of (x) Blackstone
Offshore Partners, the Cayman Islands and (y) Holdings, the
Commonwealth of Pennsylvania) and has the power and authority to
own its property and assets and to transact the business in
which it is engaged and presently proposes to engage and (ii)
Investor LP is a duly organized and validly existing corporation
in good standing under the laws of the State of Delaware and has
the power and authority to own its property and assets and to
transact the business in which it is engaged and presently
proposes to engage.
(b) Each of the Designated Capital Call Investors,
Investor LP, Holdings and the Borrower has the full power and
authority to grant the security interest in the Collateral
pursuant hereto and to execute, deliver and perform the terms
and provisions of this Agreement and has taken all necessary
action to authorize the execution, delivery and performance by
it of this Agreement. Each of the Designated Capital Call
Investors, Investor LP, Holdings and the Borrower has duly
executed and delivered this Agreement, and this Agreement
constitutes its legal, valid and binding obligation enforceable
against it in accordance with its terms, except to the extent
that the enforceability hereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other
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similar laws generally affecting creditors' rights and by
equitable principles (regardless of whether enforcement is
sought in equity or at law).
(c) Neither the execution, delivery or performance by
any of the Designated Capital Call Investors, Investor LP,
Holdings or the Borrower of this Agreement, nor compliance by it
with the terms and provisions hereof, nor the consummation of
the transactions contemplated herein, (x) will contravene any
provision of any applicable law, statute, rule or regulation or
any applicable order, writ, injunction or decree of any court or
governmental instrumentality, (y) will conflict with or result
in any breach of any of the terms, covenants, conditions or
provisions of, or constitute a default under, or result in the
creation or imposition of (or the obligation to create or
impose) any Lien upon any of the property or assets of such
person pursuant to the terms of any indenture, mortgage, deed of
trust, credit agreement, loan agreement or any other material
agreement, contract or instrument to which it is a party or by
which it or any of its property or assets is bound or to which
it may be subject or (z) will violate any provision of any of
the organizational documents of such person, in the case of each
of the preceding sub-clauses, which could reasonably be expected
to have (i) a materially adverse effect on the assets, business,
operations, properties, liabilities, profits or condition
(financial or otherwise) of such person, (ii) a material
impairment of the ability of such person to perform any of its
material obligations hereunder or (iii) an impairment of the
validity or enforceability of, or a material impairment of the
material rights, remedies or benefits available to the Lenders,
the Secured Parties, the Administrative Agent or the Collateral
Agent hereunder.
(d) Other than the filing of financing statements in
appropriate form in the jurisdictions specified on Schedule I
hereto, no other order, consent, approval, license,
authorization or validation of, or filing, recording or
registration with, or exemption or any other action by, any
Governmental Authority is or will be required to authorize, or
is required in connection with, (x) the execution, delivery and
performance of this Agreement or (y) the legality, validity,
binding effect or enforceability of this Agreement.
(e) 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, upon the filing of financing statements in
appropriate form in the jurisdictions specified on Schedule I
hereto, this Agreement will constitute a fully perfected Lien
on, and security interest in, all right, title and interest of
the Grantors in such Collateral and, subject to Section 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
-15-
<PAGE>
<PAGE>
respect to Liens expressly permitted by Section 6.02 of the
Credit Agreement.
(f) As of the First Amendment Effective Date (as
defined in the First Amendment), each Grantor's chief executive
office and chief place of business is located at the location
listed on Schedule II hereto.
(g) There are no actions, suits or proceedings pending
or, to the knowledge of any of the Designated Capital Call
Investors, Investor LP, Holdings and the Borrower, threatened
(x) with respect to this Agreement or (y) that could reasonably
be expected to (i) materially and adversely effect the business,
operations, property, assets, liabilities or condition
(financial or otherwise) of such person or (ii) have a material
adverse effect on the rights or remedies of the Secured Parties,
the Lenders, the Collateral Agent or the Administrative Agent
hereunder or on the ability of such person to perform its
obligations to the Secured Parties, the Lenders, the Collateral
Agent or the Administrative Agent hereunder.
(h) Each of the Designated Capital Call Investors,
Investor LP, Holdings and the Borrower is in compliance with all
applicable statutes, regulations and orders of, and all
applicable restrictions imposed by, all governmental bodies,
domestic or foreign, in respect of the conduct of its business
and the ownership of its property, except such noncompliances as
could not, individually or in the aggregate, reasonably be
expected to have a material adverse effect on either (i) the
business, operations, property, assets, liabilities or condition
(financial or otherwise) of such person or (ii) the rights or
remedies of the Secured Parties, the Lenders, the Collateral
Agent or the Administrative Agent hereunder or on its ability to
perform its obligations hereunder.
(i) (x) Each of Blackstone Capital Partners and
Blackstone Offshore Partners (or, in each case, the general
partner(s) thereof) has, and will at all times during the term
of this Agreement have, the right to call cash capital
contributions from the respective partners of Blackstone Capital
Partners or Blackstone Offshore Partners, as the case may be, in
amounts, and at times, sufficient to fund in a timely manner all
of the respective obligations of Blackstone Capital Partners or
Blackstone Offshore Partners, as the case may be, under this
Agreement and (y) Blackstone Family Partnership has, and will at
all times during the term of this Agreement have, sufficient
assets to fund in a timely manner all of its obligations under
this Agreement.
11. (a) Each of Blackstone Capital Partners and
Blackstone Offshore Partners (and, in each case, the general partner(s)
thereof) agrees to take all action as may be necessary so that, at all
times prior to the satisfaction and release of all of the respective
-16-
<PAGE>
<PAGE>
obligations of Blackstone Capital Partners or Blackstone Offshore
Partners, as the case may be, under this Agreement pursuant to Section 17
below, Blackstone Capital Partners or Blackstone Offshore Partners, as
the case may be, (and/or, in each case, the general partner(s) thereof)
shall have the right to call cash capital contributions from the
respective partners of Blackstone Capital Partners or Blackstone Offshore
Partners, as the case may be, in amounts, and at times, sufficient to
fund in a timely manner all of the respective obligations of Blackstone
Capital Partners or Blackstone Offshore Partners, as the case may be,
under this Agreement.
(b) Blackstone Family Partnership (and the general
partner thereof) agrees to take all action as may be necessary so that,
at all times prior to the satisfaction and release of all of its
obligations under this Agreement pursuant to Section 17 below, Blackstone
Family Partnership shall have sufficient assets to fund in a timely
manner all of its obligations under this Agreement.
12. Blackstone Offshore Partners (and the general
partners thereof) agrees to take all necessary actions (including without
limitation all necessary authorizations, consents or approvals of, the
giving of notice to, or the registration or filing with, or the taking of
any other action in respect of, any governmental or judicial authority or
agency in the Cayman Islands) prior to the 90th day after the First
Amendment Effective Date to ensure (x) continued compliance by Blackstone
Offshore Partners (and the general partners thereof) with all applicable
Cayman Islands statutory requirements, (y) maintenance of existence and
good standing of Blackstone Offshore Partners as an exempted limited
partnership and (z) the authority of the General Partners to act on
behalf of, and to bind, Blackstone Offshore Partners; it being understood
and agreed that such actions shall specifically include, without
limitation, (A) the establishment and maintenance of proper books of
record and account in which full, true and correct entries in conformity
with all requirements of applicable law shall be made of all dealings and
transactions (including the entering into the Capital Call Agreement) in
relation to the business and activities of Blackstone Offshore Partners
and (B) the filing of all original documents and completion of the
statutory registers in connection with recording Blackstone Services
(Cayman) III LDC as the Administrative General Partner of Blackstone
Offshore Partners.
13. No failure or delay on the part of the Collateral
Agent, the Administrative Agent, any Secured Party, any Lender, any
Designated Capital Call Investor, Investor LP, Holdings, the Borrower or
any other Loan Party in exercising any right, power or privilege
hereunder and no course of dealing between or among the Collateral Agent,
the Administrative Agent, any Secured Party, any Lender, any Designated
Capital Call Investor, Investor LP, Holdings, the Borrower or any other
Loan Party shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, power or privilege hereunder preclude any
other or further exercise thereof or the exercise of any other right,
power or privilege. The rights, powers and remedies herein expressly
provided are cumulative and not exclusive of any rights, powers or
-17-
<PAGE>
<PAGE>
remedies which the Collateral Agent, the Administrative Agent, any
Secured Party or any Lender would otherwise have. No notice to or demand
on any Designated Capital Call Investor, Investor LP, Holdings or the
Borrower in any case shall entitle such person to any other further
notice or demand in similar or other circumstances or constitute a waiver
of the rights of the Collateral Agent, the Administrative Agent, any
Secured Party or any Lender to any other or further action in any
circumstances without notice or demand.
14. This Agreement shall be binding upon each
Designated Capital Call Investor, Investor LP, Holdings and the Borrower,
and their respective successors and assigns (including, without
limitation, any executors or administrators) and shall inure to the
benefit of the Collateral Agent, the Administrative Agent, the Secured
Parties and the Lenders and their respective successors and assigns.
Each of the Designated Capital Call Investors, Investor LP, Holdings and
the Borrower acknowledges and agrees that this Agreement is made for the
benefit of the Collateral Agent, the Administrative Agent, the Secured
Parties and the Lenders and that the Collateral Agent, the Administrative
Agent, the Secured Parties and/or the Lenders may enforce all of the
obligations of the Designated Capital Call Investors, Investor LP,
Holdings and the Borrower hereunder directly against them. Neither the
Designated Capital Call Investors, Investor LP, Holdings nor the Borrower
may assign any of its rights or obligations hereunder without the consent
of the Required Lenders.
15. This Agreement is expressly made for the benefit of
the Collateral Agent, the Administrative Agent, the Lenders and the
Secured Parties. Neither this Agreement nor any provision hereof may be
changed, modified, amended or waived except with the written consent of
each Designated Capital Call Investor, Investor LP, Holdings, the
Borrower, the Collateral Agent and the Administrative Agent (with the
consent of the Required Lenders).
16. All notices and other communication hereunder shall
be made at the addresses, in the manner and with the effect provided in
Section 9.01 of the Credit Agreement (or, in the case of the Collateral
Agent, Section 12 of the Security Agreement), provided that, for this
purpose, the address of Blackstone Capital Partners, Blackstone Offshore
Partners, Blackstone Family Partnership and Investor LP shall be the
address specified immediately below its respective signature below.
17. (a) This Agreement and the security interests
created hereby shall terminate and be of no further force and effect
(except to the extent any party's obligations, if any, arising prior to
such time hereunder have not theretofore been fulfilled) upon the
earliest of (i) the occurrence of a Capital Call Event and the making of
all of the required payments to the Administrative Agent pursuant to
Section 2(a) above, (ii) so long as no Capital Call Event has theretofore
occurred, the date on which Holdings or the Borrower delivers the
applicable financial statements (and accompanying certification) pursuant
to Section 5.04 of the Credit Agreement demonstrating to the reasonable
satisfaction of the Administrative Agent that the Net Leverage Ratio did
-18-
<PAGE>
<PAGE>
not exceed 5.15:1.0 in respect of the Test Period ending closest to March
31, 2000 (so long as no Capital Call Event has theretofore occurred) and
(iii) the date on which all Commitments and Letters of Credit under the
Credit Agreement shall have been terminated, all Obligations shall have
been repaid in full in cash in accordance with the requirements of the
Credit Agreement (or the other Loan Documents) or the Interest Rate
Protection Agreements, as the case may be, and all Interest Rate
Protection Agreements shall have been terminated. Notwithstanding
anything to the contrary contained herein, none of the Designated Capital
Call Investors and Investor LP shall have any obligations under this
Agreement in respect of a Capital Call Event of the type described in any
of clauses (i) through (iv), inclusive, of the definition thereof, in
each case if same occurs after March 31, 2000.
(b) In connection with any termination pursuant to
paragraph (a) above, (i) the Borrower shall, on behalf of the Grantors,
deliver to the Collateral Agent a certificate signed by a Responsible
Officer of the Borrower certifying that such termination is permitted
pursuant to paragraph (a) of this Section 17, and the Collateral Agent
shall be entitled (but not required) to conclusively rely thereon and in
any event shall not incur any liability to any person in acting (or
refraining from acting) in reliance thereon and (ii) the Collateral Agent
shall execute and deliver to each Grantor, at the expense of such Grantor
or the Borrower, all Uniform Commercial Code termination statements and
similar documents that such Grantor shall reasonably request to evidence
such termination. Any execution and delivery of termination statements or
documents pursuant to this Section 17 shall be without recourse to or
warranty by the Collateral Agent.
18. (a) THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS
OF EACH DESIGNATED CAPITAL CALL INVESTOR, INVESTOR LP, HOLDINGS, THE
BORROWER, THE COLLATERAL AGENT, THE ADMINISTRATIVE AGENT, THE SECURED
PARTIES AND THE LENDERS HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH
AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICT OF LAWS.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS
AGREEMENT MAY BE BROUGHT IN THE COURTS OF THE CITY, COUNTY AND STATE OF
NEW YORK AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH
DESIGNATED CAPITAL CALL INVESTOR, INVESTOR LP, HOLDINGS AND THE BORROWER
HEREBY IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY,
UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS WITH RESPECT TO
ANY SUCH ACTION OR PROCEEDING. EACH DESIGNATED CAPITAL CALL INVESTOR,
INVESTOR LP, HOLDINGS AND THE BORROWER HEREBY FURTHER IRREVOCABLY WAIVES
ANY CLAIM THAT ANY SUCH COURTS LACK JURISDICTION OVER SUCH PERSON, AND
AGREES NOT TO PLEAD OR CLAIM, IN ANY LEGAL ACTION OR PROCEEDING WITH
RESPECT TO THIS AGREEMENT BROUGHT IN ANY OF THE AFORESAID COURTS, THAT
ANY SUCH COURT LACKS JURISDICTION OVER SUCH PERSON. EACH DESIGNATED
CAPITAL CALL INVESTOR, INVESTOR LP, HOLDINGS AND THE BORROWER IRREVOCABLY
CONSENTS TO THE SERVICE OF PROCESS IN ANY SUCH ACTION OR PROCEEDING BY
THE MAILING OF COPES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE
PREPAID, TO SUCH PERSON, AT ITS ADDRESS FOR NOTICES PURSUANT TO SECTION
9.01 OF THE CREDIT AGREEMENT (OR, IN THE CASE OF THE COLLATERAL AGENT,
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<PAGE>
SECTION 12 OF THE SECURITY AGREEMENT) OR AS SET FORTH IMMEDIATELY BELOW
ITS SIGNATURE BELOW, AS THE CASE MAY BE, SUCH SERVICE TO BECOME EFFECTIVE
30 DAYS AFTER SUCH MAILING. EACH DESIGNATED CAPITAL CALL INVESTOR,
INVESTOR LP, HOLDINGS AND THE BORROWER HEREBY IRREVOCABLY WAIVES ANY
OBJECTION TO SUCH SERVICE OF PROCESS AND FURTHER IRREVOCABLY WAIVES AND
AGREES NOT TO PLEAD OR CLAIM IN ANY ACTION OR PROCEEDING COMMENCED
HEREUNDER THAT SERVICE OF PROCESS WAS IN ANY WAY INVALID OR INEFFECTIVE.
NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE COLLATERAL AGENT, THE
ADMINISTRATIVE AGENT, ANY SECURED PARTY, ANY LENDER OR THE HOLDER OF ANY
NOTE TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE
LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST ANY DESIGNATED CAPITAL
CALL INVESTOR, INVESTOR LP, HOLDINGS OR THE BORROWER IN ANY OTHER
JURISDICTION.
(c) EACH DESIGNATED CAPITAL CALL INVESTOR, INVESTOR LP,
HOLDINGS AND THE BORROWER HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH
IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF THE
AFORESAID ACTIONS OR PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH
THIS AGREEMENT BROUGHT IN THE COURTS REFERRED TO IN CLAUSE (b) ABOVE AND
HEREBY FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY
SUCH COURT THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT
HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH DESIGNATED CAPITAL CALL
INVESTOR, INVESTOR LP, HOLDINGS AND THE BORROWER FURTHER IRREVOCABLY
WAIVES ANY RIGHT IT MAY HAVE TO TRIAL BY JURY IN ANY COURT OR
JURISDICTION, INCLUDING, WITHOUT LIMITATION, THOSE REFERRED TO IN CLAUSE
(b) ABOVE, IN RESPECT OF ANY MATTER ARISING OUT OF OR RELATING TO THIS
AGREEMENT.
19. The Borrower hereby agrees to pay all reasonable
out-of-pocket costs and expenses of each of the Collateral Agent, the
Administrative Agent, each Secured Party and each Lender in connection
with the administration and enforcement of this Agreement and the
Borrower hereby agrees to pay all reasonable out-of-pocket costs and
expenses of the Collateral Agent, the Administrative Agent in connection
with any amendment, waiver or consent relating hereto (including, without
limitation, in each case, the reasonable fees and disbursements of
counsel employed by the Collateral Agent, the Administrative Agent, each
Secured Party and each Lender, as the case may be), in each case within
10 Business Days after any request is made by the Collateral Agent, the
Administrative Agent, any such Secured Party or any such Lender for any
such payment.
20. If any of the Designated Capital Call Investors,
Investor LP, Holdings or the Borrower shall default in the payment of the
Capital Call Amount or any other amount becoming due hereunder, such
person shall on demand from time to time pay interest, to the extent
permitted by law, directly to the Administrative Agent 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 (x) 2%
per annum in excess of the rate applicable to Tranche D Term Loans
maintained as ABR Loans (assuming same are outstanding under the Credit
-20-
<PAGE>
<PAGE>
Agreement) from time to time and (y) the rate which is 2% in excess of
the rate then borne by such Loans (assuming same are outstanding under
the Credit Agreement). Any such interest shall be applied by the
Administrative Agent on the same basis and in the same manner as interest
paid pursuant to Section 2.07 of the Credit Agreement. Notwithstanding
the foregoing, if on the date the Capital Call Amount (or any portion
thereof) shall have become due and payable hereunder the Designated
Capital Call Investors are prohibited by operation of law from making
Investments in Investor LP (which are contributed by Investor LP to the
equity capital of Holdings which are further contributed by Holdings to
the equity capital of the Borrower) as contemplated by Section 3(a)
hereof due to any bankruptcy or similar proceeding relating to Investor
LP or Holdings (or any of Holdings' Subsidiaries) or for any other reason
whatsoever, no interest under this Section 20 shall accrue on the Capital
Call Amount (or such portion thereof) for the period beginning on the
date when the Capital Call Amount (or such portion thereof) shall have
become due and payable hereunder up to (but not including) the earlier to
occur of: (x) such legal prohibition on the ability of the Designated
Capital Call Investors to make Investments in Investor LP shall, in the
reasonable opinion of the Administrative Agent, cease to exist and (y)
the Administrative Agent shall have exercised its election to require the
Designated Capital Call Investors to purchase from the Lenders
subordinated participations in the Loans in accordance with Section 2(b)
hereof.
21. Each of the Administrative Agent and the Collateral
Agent shall be entitled to rely, and shall be fully protected in relying,
upon any note, writing, resolution, notice, statement, certificate,
telex, teletype or telecopier message, cablegram, radiogram, order or
other document or telephone message signed, sent or made by any person
that the Administrative Agent or the Collateral Agent, as the case may
be, believed to be the proper person, and, with respect to all legal
matters pertaining to this Agreement and any other Loan Document and its
duties hereunder and thereunder, upon advice of counsel selected by the
Administrative Agent or the Collateral Agent, as the case may be.
22. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate
counterparts, each of which when so executed and delivered shall be an
original, but all of which shall together constitute one and the same
instrument. A set of counterparts executed by all the parties hereto
shall be lodged with each Designated Capital Call Investor, Investor LP,
Holdings, the Borrower, the Collateral Agent and the Administrative
Agent.
23. Notwithstanding anything contained herein to the
contrary, each Lender, each Secured Party and each Agent agree that (a)
in an action to collect any amounts due under, or otherwise in respect
of, this Agreement, no future, current or former partner in Investor LP
or in any Designated Capital Call Investor (except, if any such partner
is a Loan Party or is otherwise a party to any Loan Documents, for such
person's obligations under such Loan Documents) in its capacity as such
will be personally liable for any amounts due or any other liability
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<PAGE>
under this Agreement, and no deficiency or personal judgment will be
sought against any such partner in its capacity as such for payment of
any amount contemplated herein and (b) no property or assets of any such
future, current or former partner in Investor LP or in any Designated
Capital Call Investor (except, if any such partner is a Loan Party or is
otherwise a party to any Loan Documents, for such person's obligations
under such 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; provided,
however, that nothing contained in this Section 23 shall (i) affect,
limit, restrict or impair in any way whatsoever (x) the obligations and
liability of the Designated Capital Call Investors or Investor LP
hereunder as parties hereto or (y) the validity of the obligations
evidenced by this Agreement, (ii) prevent the taking of any action
permitted by law against any of the Designated Capital Call Investors,
Investor LP, Holdings, the Borrower or any other Loan Party (or, in each
case, their respective assets or the proceeds thereof) in respect of such
obligations or (iii) in any way whatsoever affect or impair the right of
any Agent, any Lender or any Secured Party to take any action permitted
by law to realize upon any Collateral or any other collateral or security
which may secure such obligations of the Designated Capital Call
Investors or Investor LP or of Holdings, the Borrower or any other Loan
Party.
* * *
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<PAGE>
<PAGE>
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: ________________________________
Name:
Title:
GRAHAM PACKAGING COMPANY
By: GPC Opco GP LLC, its general
partner
By: ________________________________
Name:
Title:
-23-
<PAGE>
<PAGE>
BLACKSTONE CAPITAL PARTNERS III
MERCHANT BANKING FUND L.P.
By: Blackstone Management Associates
III LLC, its general partner
By: ________________________________
Name:
Title:
Address:
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<PAGE>
<PAGE>
BLACKSTONE OFFSHORE CAPITAL
PARTNERS III L.P.
By: Blackstone Services (Cayman) III
LDC, its general partner
By: ________________________________
Name:
Title:
Address:
By: Blackstone Management Associates
III LLC, its general partner
By: ________________________________
Name:
Title:
Address:
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<PAGE>
<PAGE>
BLACKSTONE FAMILY INVESTMENT
PARTNERSHIP III L.P.
By: Blackstone Management Associates
III LLC, its general partner
By: ________________________________
Name:
Title:
Address:
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<PAGE>
<PAGE>
BMP/GRAHAM HOLDINGS CORPORATION
By: ________________________________
Name:
Title:
Address:
-27-
<PAGE>
<PAGE>
Accepted and Agreed to:
BANKERS TRUST COMPANY,
as Collateral Agent and
as Administrative Agent
By:_______________________________
Name:
Title:
-28-
<PAGE>
<PAGE>
SCHEDULE I
LIST OF
JURISDICTIONS FOR UCC FILINGS
-29-
<PAGE>
<PAGE>
SCHEDULE II
LIST OF
CHIEF EXECUTIVE OFFICES AND CHIEF PLACES OF BUSINESS
-30-
Exhibit 21.1
List of Subsidiaries of
Graham Packaging Holdings Company
Name: Jurisdiction and Type of Formation
- ------------------------------ ----------------------------------
Graham Packaging Company Delaware limited partnership
GPC Capital Corp. I Delaware corporation
GPC Capital Corp. II Delaware corporation
GPC OPCO GP LLC Delaware limited liability company
GPC Sub GP LC Delaware limited liability company
Graham Packaging Canada Limited Ontario corporation
Graham Packaging France Partners Pennsylvania general partnership
Graham Packaging France Holdings French S.A.
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 SRL Argentine S.r.L.
Graham Packaging Poland, L.P. Pennsylvania limited partnership
Masko Graham Spolka Z.O.O. Polish Ltda.
Graham Recycling Company Pennsylvania limited partnership
<PAGE>
<PAGE>
Name: Jurisdiction and Type of Formation
- ------------------------------ ----------------------------------
Graham Packaging Latin America, Delaware limited liability company
LLC
Graham Brasil Participacoes Ltda. Brazilian Ltda.
Graham Packaging do Brasil Brazilian S.A.
Industria e Comercio S.A.
Graham Packaging U.K. Ltd. England corporation
Graham Packaging Deutschland Gmbh German LLC
Graham Plastpak Plastic Ambalaj Turkish LLC
A.S.
Graham Packaging Europe S.A.S. French Societe
Graham Emballlages Plastiques S.A. French corporation
Resin Rio Comercio Ltda. Brazil LLC
Note: Certain foreign subsidiaries' statutory shares are not included in the
table above.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1998
<PERIOD-END> DEC-31-1997 DEC-31-1998
<CASH> 7,218 7,476
<SECURITIES> 0 0
<RECEIVABLES> 70,930 89,053
<ALLOWANCES> 1,635 1,435
<INVENTORY> 32,236 41,247
<CURRENT-ASSETS> 117,947 150,928
<PP&E> 587,910 751,588
<DEPRECIATION> 327,614 364,896
<TOTAL-ASSETS> 385,491 596,747
<CURRENT-LIABILITIES> 113,132 160,845
<BONDS> 0 0
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 337 (438,794)
<TOTAL-LIABILITY-AND-EQUITY> 385,491 596,747
<SALES> 521,707 588,131
<TOTAL-REVENUES> 521,707 588,131
<CGS> 437,301 470,762
<TOTAL-COSTS> 437,301 470,762
<OTHER-EXPENSES> 58,653 73,285
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 14,940 68,379
<INCOME-PRETAX> 10,813 (24,295)
<INCOME-TAX> 600 1,092
<INCOME-CONTINUING> 10,213 (25,387)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 675
<CHANGES> 0 0
<NET-INCOME> 10,213 (26,062)
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
