<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 30, 1997
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
ISSUER OF EXCHANGE NOTES REGISTERED HEREBY
TEKNI-PLEX, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 3086 22-3286312
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
GUARANTOR OF EXCHANGE NOTES REGISTERED HEREBY
DOLCO PACKAGING CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 3086 95-2467518
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
201 INDUSTRIAL PARKWAY
SOMERVILLE, NEW JERSEY 08876
(908) 722-4800
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANTS' PRINCIPAL EXECUTIVE OFFICES)
------------------------
DR. F. PATRICK SMITH
CHIEF EXECUTIVE OFFICER
TEKNI-PLEX, INC.
DOLCO PACKAGING CORP.
201 INDUSTRIAL PARKWAY
SOMERVILLE, NEW JERSEY 08876
(908) 722-4800
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPY TO:
ROBERT W. GRAY, ESQ.
WINTHROP, STIMSON, PUTNAM & ROBERTS
ONE BATTERY PARK PLAZA
NEW YORK, NEW YORK 10004
(212) 858-1000
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF SECURITIES TO THE
PUBLIC: As soon as practicable after this Registration Statement becomes
effective.
------------------------
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
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===========================================================================================================
PROPOSED MAXIMUM
PROPOSED MAXIMUM AGGREGATE
TITLE OF EACH CLASS AMOUNT TO BE OFFERING PRICE OFFERING AMOUNT OF
OF SECURITIES TO BE REGISTERED REGISTERED(1) PER UNIT(1) PRICE(1) REGISTRATION FEE
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Series B 11 1/4% Senior Subordinated Notes $1,000 principal
due 2007................................ $75,000,000 amount $75,000,000 $22,727.27
- -----------------------------------------------------------------------------------------------------------
Guarantees of Series B 11 1/4% Senior
Subordinated Notes due 2007............. -- -- -- None
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</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
------------------------
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A)
MAY DETERMINE.
================================================================================
<PAGE> 2
CROSS REFERENCE SHEET
FURNISHED PURSUANT TO ITEM 501(b) OF REGULATION S-K
<TABLE>
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FORM S-4 ITEM NUMBER AND CAPTION LOCATION IN PROSPECTUS
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<C> <S> <C>
1. Forepart of Registration Statement and
Outside Front Cover Page of Prospectus... Facing Page of the Registration Statement;
Cross Reference Sheet; Outside Front Cover
Page
2. Inside Front and Outside Back Cover Pages
of Prospectus............................ Inside Front Cover Page; Available
Information
3. Risk Factors, Ratio of Earnings to Fixed
Charges and Other Information............ Prospectus Summary; Risk Factors; Selected
Historical Financial Information; Pro Forma
Unaudited Condensed Financial Information
4. Terms of the Transaction................... Outside Front Cover Page; Prospectus Summary;
Description of New Credit Facility; The
Exchange Offer; Description of Exchange
Notes; Certain United States Federal Income
Tax Considerations
5. Pro Forma Financial Information............ Pro Forma Unaudited Condensed Financial
Information
6. Material Contracts with the Company Being
Acquired................................. *
7. Additional Information Required for
Reoffering by Persons and Parties Deemed
to be Underwriters....................... *
8. Interests of Named Experts and Counsel..... Legal Matters; Experts
9. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities.............................. *
10. Information with Respect to S-3
Registrants.............................. *
11. Incorporation of Certain Information by
Reference................................ *
12. Information with Respect to S-2 or S-3
Registrants.............................. *
13. Incorporation of Certain Information by
Reference................................ *
14. Information with Respect to Registrants
Other Than S-3 or S-2 Registrants........ Outside Front Cover Page; Prospectus Summary;
Risk Factors; Use of Proceeds;
Capitalization; Selected Historical
Financial Information; Pro Forma Unaudited
Condensed Financial Information;
Management's Discussion and Analysis of
Financial Condition and Results of
Operations; Industry; Business; Management;
Security Ownership; Certain Transactions
15. Information with Respect to S-3
Companies................................ *
16. Information with Respect to S-2 or S-3
Companies................................ *
17. Information with Respect to Companies Other
than S-3 and S-2 Companies............... *
18. Information if Proxies, Consents or
Authorizations are to be Solicited....... *
19. Information if Proxies, Consents or
Authorizations are not to be Solicited,
or in an Exchange Offer.................. Management; Security Ownership; Certain
Transactions
</TABLE>
- ---------------
* Not Applicable
<PAGE> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED MAY 30, 1997
PROSPECTUS
TEKNI-PLEX, INC.
OFFER TO EXCHANGE ITS
SERIES B 11 1/4% SENIOR SUBORDINATED NOTES DUE 2007
FOR ANY AND ALL OF ITS OUTSTANDING
11 1/4% SENIOR SUBORDINATED NOTES DUE 2007
- --------------------------------------------------------------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
, 1997, UNLESS EXTENDED.
- --------------------------------------------------------------------------------
Tekni-Plex, Inc., a Delaware corporation ("Tekni-Plex"), hereby offers (the
"Exchange Offer"), upon the terms and subject to the conditions set forth in
this Prospectus (the "Prospectus") and the accompanying Letter of Transmittal
(the "Letter of Transmittal"), to exchange $1,000 principal amount of its Series
B 11 1/4% Senior Subordinated Notes due 2007 (the "Exchange Notes"), which will
have been registered under the Securities Act of 1933, as amended (the
"Securities Act"), pursuant to a Registration Statement of which this Prospectus
is a part, for each $1,000 principal amount of its outstanding 11 1/4% Senior
Subordinated Notes due 2007 (the "Old Notes"), of which $75,000,000 aggregate
principal amount is outstanding. The form and terms of the Exchange Notes are
substantially identical to the form and terms of the Old Notes except that the
Exchange Notes will bear a Series B designation and will have been registered
under the Securities Act and, therefore, will not bear legends restricting their
transfer and will not contain certain provisions relating to an increase in the
interest rate which were included in the terms of the Old Notes in certain
circumstances relating to the timing of the Exchange Offer. The Exchange Notes
will evidence the same debt as the Old Notes (which they replace) and will be
issued under and be entitled to the benefits of the Indenture dated as of April
1, 1997 (the "Indenture") among Tekni-Plex, Dolco Packaging Corp., a wholly
owned subsidiary of Tekni-Plex (the "Guarantor"), and Marine Midland Bank, as
trustee (the "Trustee"), governing the Old Notes. The Exchange Notes will be
fully and unconditionally guaranteed (the "Exchange Guarantee") by the Guarantor
in and on substantially identical form and terms as the guarantee by the
Guarantor of the Old Notes (the "Old Guarantee"). See "The Exchange Offer" and
"Description of Exchange Notes."
Tekni-Plex will accept for exchange any and all Old Notes validly tendered
and not withdrawn prior to 5:00 p.m., New York City time, on , 1997,
unless extended by Tekni-Plex in its sole discretion (the "Expiration Date").
Notwithstanding the foregoing, Tekni-Plex will not extend the Expiration Date
beyond , 1997. Tenders of Old Notes may be withdrawn at any time
prior to 5:00 p.m. on the Expiration Date. The Old Notes may be tendered only in
integral multiples of $1,000 principal amount. The Exchange Offer is subject to
certain customary conditions. See "The Exchange Offer."
The Old Notes were sold on April 4, 1997 (the "Issue Date") to the Initial
Purchaser (as defined) in a transaction not registered under the Securities Act
in reliance upon an exemption under the Securities Act. The Initial Purchaser
subsequently placed the Old Notes with qualified institutional buyers in
reliance upon Rule 144A under the Securities Act and with a limited number of
institutional accredited investors that agreed to comply with certain transfer
restrictions and other conditions. Accordingly, the Old Notes may not be
reoffered, resold or otherwise transferred in the United States unless
registered under the Securities Act or unless an applicable exemption from the
registration requirements of the Securities Act is available. The Exchange Notes
are being offered hereunder in order to satisfy certain obligations of
Tekni-Plex and the Guarantor under the Registration Rights Agreement (as
defined) entered into in connection with the offering of the Old Notes. See "The
Exchange Offer."
Based on no-action letters issued by the staff of the Securities and
Exchange Commission (the "Commission") to third parties, Tekni-Plex and the
Guarantor believe the Exchange Notes issued pursuant to the Exchange Offer may
be offered for resale, resold and otherwise transferred by any holder thereof
(other than any such holder that is an "affiliate" of Tekni-Plex or the
Guarantor within the meaning of Rule 405 under the Securities Act) without
compliance with the registration and prospectus delivery requirements of the
Securities Act, provided that such Exchange Notes are acquired in the ordinary
course of such holder's business and such holder has no arrangement or
understanding with any person to participate in the distribution of such
Exchange Notes. See "The Exchange Offer -- Purpose and Effect of the Exchange
Offer" and "The Exchange Offer -- Resale of the Exchange Notes." Each
broker-dealer (a "Participating Broker-Dealer") that receives Exchange Notes for
its own account pursuant to the Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange Notes. The
Letter of Transmittal states that by so acknowledging and by delivering a
prospectus, a Participating Broker-Dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act. This Prospectus, as
it may be amended or supplemented from time to time, may be used by a
Participating Broker-Dealer in connection with resales of Exchange Notes
received in exchange for Old Notes where such Old Notes were acquired by such
Participating Broker-Dealer as a result of market-making activities or other
trading activities. Tekni-Plex has agreed that, for a period of 180 days after
the Expiration Date, it will make this Prospectus available to any Participating
Broker-Dealer for use in connection with any such resale. See "Plan of
Distribution."
Holders of Old Notes not tendered and accepted in the Exchange Offer will
continue to hold such Old Notes and will be entitled to all the rights and
benefits and will be subject to the limitations applicable thereto under the
Indenture and with respect to transfer under the Securities Act. Tekni-Plex will
pay all the expenses incurred by it incident to the Exchange Offer. See "The
Exchange Offer."
SEE "RISK FACTORS" BEGINNING ON PAGE 13 FOR A DESCRIPTION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION WITH THE EXCHANGE OFFER AND IN
EVALUATING AN INVESTMENT IN THE EXCHANGE NOTES OFFERED HEREBY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is 1997.
<PAGE> 4
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH THE EXCHANGE
OFFER MADE BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
(AS DEFINED). THIS PROSPECTUS DOES NOT CONSTITUTE AN EXCHANGE OFFER TO, AND THE
COMPANY WILL NOT ACCEPT SURRENDERS FOR EXCHANGE FROM, HOLDERS OF OLD NOTES IN
ANY JURISDICTION IN WHICH THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD BE
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY EXCHANGE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS
NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS
OF THE COMPANY SINCE THE DATE HEREOF OR THAT INFORMATION SET FORTH HEREIN IS
CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
------------------------
UNTIL , 1997, ALL DEALERS EFFECTING TRANSACTIONS IN THE
EXCHANGE NOTES, WHETHER OR NOT PARTICIPATING IN THE EXCHANGE OFFER, MAY BE
REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATIONS OF
DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO
THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
------------------------
TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C>
Prospectus Summary.................... 4
Risk Factors.......................... 13
Use of Proceeds....................... 17
Capitalization........................ 17
Selected Historical Financial
Information......................... 18
Pro Forma Unaudited Condensed
Financial Information............... 19
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 23
Industry.............................. 28
Business.............................. 30
<CAPTION>
PAGE
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Management............................ 39
Security Ownership.................... 41
Certain Transactions.................. 42
Description of New Credit Facility.... 42
The Exchange Offer.................... 44
Description of Exchange Notes......... 53
Certain United States Federal Income
Tax Considerations.................. 77
Plan of Distribution.................. 78
Legal Matters......................... 79
Experts............................... 79
Available Information................. 79
Index to Financial Statements......... F-1
</TABLE>
There has not previously been any public market for the Old Notes or the
Exchange Notes. Tekni-Plex does not intend to list the Exchange Notes on any
securities exchange or to seek approval for quotation through any automated
quotation system. There can be no assurance that an active market for the
Exchange Notes will develop. See "Risk Factors -- Lack of Public Market for the
Notes." Moreover, to the extent that Old Notes are tendered and accepted in the
Exchange Offer, the trading market for untendered and tendered but unaccepted
Old Notes could be adversely affected.
Initially, the Exchange Notes will be available only in book-entry form.
Tekni-Plex expects that the Exchange Notes issued pursuant to this Exchange
Offer will be issued in the form of a Global Note (as defined), which will be
deposited with, or on behalf of, The Depository Trust Company (the "Depositary"
or "DTC") and registered in its name or in the name of Cede & Co., its nominee.
Beneficial interests in the Global Note representing the Exchange Notes will be
shown on, and transfers thereof to qualified institutional buyers will be
effected through, records maintained by DTC and its participants. After the
initial issuance of the Global Note, Exchange Notes in certified form will be
issued in exchange for the Global Note only on the terms set forth in the
Indenture. See "Description of Exchange Notes -- Book-Entry; Delivery and Form."
2
<PAGE> 5
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
THIS PROSPECTUS INCLUDES "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF
SECTION 27A OF THE SECURITIES ACT AND SECTION 21E OF THE EXCHANGE ACT. ALL
STATEMENTS OTHER THAN STATEMENTS OF HISTORICAL FACTS INCLUDED IN THIS
PROSPECTUS, INCLUDING, WITHOUT LIMITATION, CERTAIN STATEMENTS UNDER THE
"PROSPECTUS SUMMARY," "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS," "INDUSTRY," AND "BUSINESS" AND LOCATED
ELSEWHERE HEREIN REGARDING THE COMPANY'S FINANCIAL POSITION AND BUSINESS
STRATEGY, MAY CONSTITUTE FORWARD-LOOKING STATEMENTS. ALTHOUGH THE COMPANY
BELIEVES THAT THE EXPECTATIONS REFLECTED IN SUCH FORWARD-LOOKING STATEMENTS ARE
REASONABLE, IT CAN GIVE NO ASSURANCE THAT SUCH EXPECTATIONS WILL PROVE TO HAVE
BEEN CORRECT. IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY FROM THE COMPANY'S EXPECTATIONS ("CAUTIONARY STATEMENTS") ARE
DISCLOSED IN THIS PROSPECTUS, INCLUDING WITHOUT LIMITATION IN CONJUNCTION WITH
THE FORWARD-LOOKING STATEMENTS INCLUDED IN THIS PROSPECTUS AND UNDER "RISK
FACTORS." 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.
3
<PAGE> 6
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements, including the notes thereto, appearing
elsewhere in this Prospectus. Unless the context otherwise requires, references
in this Prospectus to "Tekni-Plex" refer to Tekni-Plex, Inc., and references to
the "Company" refer to Tekni-Plex, Inc. and its subsidiary. All references in
this Prospectus to "fiscal year" refer to the Company's fiscal year which ends
on the Friday closest to June 30 of that calendar year. For example, fiscal year
1996 refers to the year-ended June 28, 1996. Unless otherwise noted, all
references in this Prospectus to market share refer to market share within the
United States.
THE COMPANY
GENERAL
The Company designs, manufactures and markets packaging materials primarily
for the pharmaceutical and food industries. Currently, its products fall into
two categories. The Flexible Packaging Group produces laminated and coated
packaging materials primarily for pharmaceutical end-uses. The Company is the
market leader for clear, high-barrier laminations for pharmaceutical blister
packaging with an estimated greater than 90% share of the market for such
products. These packaging materials are used for fast-acting pharmaceuticals
that are generally highly reactive to moisture. The Foam Products Group produces
foamed polystyrene packaging products such as egg cartons and processor trays
for the poultry and meat industries. The Company produces in excess of 80% of
all foam egg cartons and has over 40% of the egg carton market. The Company has
also built a strong presence in the processor tray market, where it has an
estimated share of greater than 20%.
The management of the Company focuses on organizational development,
imparting a results-oriented culture to all areas of its businesses. Management
seeks and implements product and process improvements to produce higher quality
products, improve efficiencies, reduce labor and material costs, and create
differentiated products and product line extensions. The Company has also
expanded its product offerings by acquiring synergistic packaging companies and
has significantly reduced costs through product line rationalization and
re-negotiation of supplier agreements. Management believes that this focus will
continue with respect to the Company's on-going business and will be the basis
for successfully integrating future acquisitions.
In March 1994, the Company was acquired by its current controlling
shareholder, and Dr. F. Patrick Smith was appointed its Chief Executive Officer.
Kenneth W.R. Baker, the current Chief Operating Officer, was appointed in April
1994. At the time of the acquisition, the Company had two operating facilities
located in Somerville, New Jersey ("Somerville"), and Brooklyn, New York
("Brooklyn"), and its principal product lines were clear, high barrier
laminations and closure liners sold primarily to the pharmaceutical industry,
and foam processor trays used predominantly for poultry packaging. In December
1995, the Company acquired the Flemington, New Jersey, operation ("Flemington")
of Hargro Flexible Packaging Corporation ("Hargro"), thereby expanding the
Company's flexible packaging product line. In February 1996, the Company
acquired Dolco Packaging Corp. ("Dolco"), the nation's leading supplier of foam
egg cartons.
Since its acquisition by the current owners, the Company has achieved
significant improvements in profitability. For the trailing twelve months ended
March 28, 1997, the Company had revenues of $143.5 million and EBITDA of $29.7
million for an EBITDA margin of 20.7%, compared with revenues of $44.9 million
and EBITDA of $3.8 million for an EBITDA margin of 8.5% for the year ended
December 31, 1993. This improvement has continued. For the nine months ended
March 28, 1997, the Company had revenues of $109.8 million and EBITDA of $22.9
million for an EBITDA margin of 20.8%, compared with revenues of $47.2 million
and EBITDA of $7.3 million for an EBITDA margin of 15.5% for the nine months
ended March 29, 1996.
The Company competes within the nearly $15 billion flexible and semi-rigid
segment of the packaging industry. The Company believes that this segment is
growing at the expense of the more mature rigid packaging segments (e.g., glass,
metal and folding cartons) that currently account for roughly $28 billion in
4
<PAGE> 7
revenues. The Company generally competes in technically sophisticated areas,
such as primary pharmaceutical packaging which is subject to strict Federal Food
and Drug Administration ("FDA") regulatory requirements.
COMPETITIVE STRENGTHS
The Company believes that its competitive strengths include:
- Producer of high quality, technically sophisticated products. The
Company has a long-standing reputation as a manufacturer of high-quality,
high performance primary packaging products (where the packaging material
comes into direct contact with the end-product). The Company's emphasis
on quality is evidenced by its product lines which address the high-end
of their respective markets. The Company primarily competes in
technically sophisticated areas such as the high-barrier pharmaceutical
blister packaging market where high performance characteristics are
required due to the sensitive nature of the product. A significant
portion of the Company's processor tray product line is aimed at the
high-performance segment of the processor tray market where strength and
durability are essential due to the high speed, automated machinery used
by the processors. As the leading supplier of foam egg cartons, the
Company produces a high quality product with superior performance
characteristics compared to competitive offerings.
- Cost efficient producer. The Company continually focuses on improving
underlying operations and reducing costs. Since the 1994 acquisition,
current management has improved the Company's cost structure from an
EBITDA margin of 8.5% on sales of $44.9 million for the year ended
December 31, 1993 to an EBITDA margin of 20.7% on sales of $143.5 million
for the twelve months ended March 28, 1997.
- Experienced management team. The current management team has been
successful in selecting and integrating strategic acquisitions and in
improving underlying business fundamentals in the regular course of
business. Members of the management team have worked together in the
packaging industry for many years and have a strong track record.
Together, they have integrated acquisitions, effected turnarounds,
provided strategic direction and leadership, increased sales and market
share, improved manufacturing efficiencies and productivity, and
developed new technologies to enhance the competitive strengths of the
companies they have managed. See "Management."
- Strong market share in core businesses. The Company has a strong market
presence in most of its core product lines. The Company produces in
excess of 80% of all foam egg cartons and has over 40% of the overall egg
carton market which is split approximately equally between foam and
pulp-based products. The Company has an estimated greater than 90% share
of the market for clear, high-barrier laminations for pharmaceutical
blister packaging. The Company has also built a strong presence in the
processor tray market where it has an estimated share of greater than
20%.
- Successful integration of acquisitions. The Company has a strong track
record of identifying and integrating both small and large acquisitions.
After significantly improving the business of Tekni-Plex following the
1994 acquisition, management successfully integrated both the Flemington
and Dolco operations, the latter being a public company then nearly twice
the Company's size. During the same period, the Brooklyn and Flemington
operations were merged, substantially improving production efficiencies
and reducing waste.
- Strong customer relationships. The Company has long-standing
relationships with many of its customers. The Company estimates the
average tenure among the Company's top ten customers at more than 14
years. The Company attributes its long relationships with its customers
to the ability to consistently manufacture high quality products and to
consistently provide a superior level of customer service. The Company
routinely wins recognition for its superior products and customer service
including a recent Outstanding Supplier Award from Pharmacia & Upjohn,
and an Outstanding Quality Award from Abbott Laboratories.
5
<PAGE> 8
BUSINESS STRATEGY
The Company seeks to maximize its growth and profitability and take
advantage of its competitive strengths by pursuing the following business
strategy:
- Ongoing cost reduction through technical process improvement. The
Company has an ongoing program to improve manufacturing and other
processes in order to drive down costs. Examples of cost improvement
programs include: (i) material and energy conservation through enhanced
process controls; (ii) reduction in machine set-up time through the use
of proprietary technology; (iii) continual product line rationalization;
and (iv) development of backward integration opportunities.
- Growth through acquisitions. The Company believes that there is a
significant opportunity to consolidate the highly fragmented packaging
industry in the United States. The Company makes acquisitions based on
the following factors: (i) the Company seeks to acquire product lines
which logically extend its presence in the markets it currently serves,
thereby enhancing the Company's value to its customers; (ii) the Company
seeks add-on acquisitions which increase its market share in a particular
product line, thereby providing opportunity to gain economies of scale
and reduce costs; (iii) the Company seeks opportunities for technology
sharing where acquired and existing operations are enhanced by combining
and sharing complementary technologies; and (iv) the Company seeks
acquisitions that provide opportunity for synergistic cost reduction due
to duplication of effort and acquisitions where imparting the Company's
focused, results-oriented culture will lead to enhanced operating
results.
- Internal growth through product line extension and improvement. The
Company continually seeks to improve and extend its product lines and
leverage its existing technological capabilities in order to increase
market share and improve profitability. Before 1994, the Company's line
of pharmaceutical blister laminations addressed a relatively small
(although important) range of performance requirements, namely the
high-barrier segment of the market. New products developed since that
time have extended the Company's offerings to include the ultra-high
barrier segment (previously confined to foil-based products) and the
low-to-medium barrier segment (previously confined to solution-coated
products). In addition, the Company believes that it has a significant
opportunity to increase sales of its foamed polystyrene packaging
products by focusing on incremental improvements to these products.
- Growth through international expansion. The Company currently exports
approximately ten percent of its pharmaceutical packaging sales. Given
the Company's reputation, its recently expanded product line, and the
multi-national nature of many of its customers, the Company believes
there is significant opportunity to expand international sales.
Accordingly, the Company has hired an international sales manager who has
significant experience in selling to the international pharmaceutical
industry. The Company has also begun to set up a network of agents in
various international markets.
6
<PAGE> 9
THE EXCHANGE OFFER
Old Notes.................. The Old Notes were sold on April 4, 1997 to J.P.
Morgan Securities Inc. (the "Initial Purchaser")
pursuant to a Purchase Agreement dated as of April
1, 1997 (the "Purchase Agreement") by and among the
Company, the Guarantor and the Initial Purchaser.
The Initial Purchaser subsequently resold the Old
Notes to qualified institutional buyers pursuant to
Rule 144A under the Securities Act and to a limited
number of institutional accredited investors that
agreed to comply with certain transfer restrictions
and other conditions.
Registration Rights
Agreement.................. Pursuant to the Purchase Agreement, the Company,
the Guarantor and the Initial Purchaser entered
into a Registration Rights Agreement dated as of
April 4, 1997 (the "Registration Rights
Agreement"), which grants to the holders of the Old
Notes certain exchange and registration rights. The
Exchange Offer is intended to satisfy certain of
such exchange rights which will terminate upon the
consummation of the Exchange Offer.
The Exchange Offer......... The Company is offering to exchange $1,000
principal amount of Exchange Notes for each $1,000
principal amount of Old Notes. As of the date
hereof, $75,000,000 aggregate principal amount of
Old Notes are outstanding.
Based on an interpretation by the staff of the
Commission set forth in no-action letters issued to
third parties, the Company believes that Exchange
Notes issued pursuant to the Exchange Offer in
exchange for Old Notes may be offered for resale,
resold and otherwise transferred by any holder
thereof (other than any such holder which is an
"affiliate" of the Company within the meaning of
Rule 405 under the Securities Act) without
compliance with the registration and prospectus
delivery requirements of the Securities Act,
provided that such Exchange Notes are acquired in
the ordinary course of such holder's business and
that such holder does not intend to participate and
has no arrangement or understanding with any person
to participate in the distribution of such Exchange
Notes.
Each Participating Broker-Dealer that receives
Exchange Notes for its own account pursuant to the
Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale
of such Exchange Notes. The Letter of Transmittal
states that by so acknowledging and by delivering a
prospectus, a Participating Broker-Dealer will not
be deemed to admit that it is an "underwriter"
within the meaning of the Securities Act. This
Prospectus, as it may be amended or supplemented
from time to time, may be used by a Participating
Broker-Dealer in connection with resales of
Exchange Notes received in exchange for Old Notes
where such Old Notes were acquired by such
Participating Broker-Dealer as a result of
market-making activities or other trading
activities. The Company has agreed that, for a
period of 180 days after the Expiration Date, it
will make this Prospectus available to any
Participating Broker-Dealer for use in connection
with any such resale. See "Plan of Distribution."
Any holder of Old Notes who tenders in the Exchange
Offer with the intention to participate, or for the
purpose of participating, in a distribution of the
Exchange Notes could not rely on the position of
the staff of the Commission enunciated in no-action
letters and, in the absence of an exemption
therefrom, must comply with the registration and
prospectus delivery requirements of the Securities
Act in connection with any resale
7
<PAGE> 10
transaction. Failure to comply with such
requirements in such instance may result in such
holder incurring liability under the Securities Act
for which the holder is not indemnified by the
Company.
Expiration Date............ 5:00 p.m., New York City time, on , 1997
unless the Exchange Offer is extended by the
Company in its sole discretion, in which case the
term "Expiration Date" means the latest date and
time to which the Exchange Offer is extended.
Notwithstanding the foregoing, the Company will not
extend the Expiration Date beyond , 1997.
Interest................... Interest on Exchange Notes shall accrue from the
last interest payment date on which interest was
paid on the Old Notes so surrendered, or, if no
interest has been paid on such Old Notes, from
April 4, 1997. No interest will be paid on the Old
Notes accepted for exchange.
Conditions to the
Exchange Offer........... The Exchange Offer is subject to certain customary
conditions, which may be waived by the Company. See
"The Exchange Offer -- Conditions."
Procedures for Tendering
Old Notes................ Each holder of Old Notes wishing to accept the
Exchange Offer must complete, sign and date the
accompanying Letter of Transmittal, or a facsimile
thereof, in accordance with the instructions
contained herein and therein, and mail or otherwise
deliver such Letter of Transmittal, or such
facsimile, together with the Old Notes and any
other required documentation to the Exchange Agent
(as defined) at the address set forth herein. By
executing the Letter of Transmittal, each holder
will be deemed to represent to the Company, among
other things, that (i) the Exchange Notes acquired
pursuant to the Exchange Offer are being obtained
in the ordinary course of business of the person
receiving such Exchange Notes, whether or not such
person is the holder, (ii) neither the holder nor
any such other person has any arrangement or
understanding with any person to participate in the
distribution of such Exchange Notes in violation of
the Securities Act, (iii) neither the holder nor
any such other person is an "affiliate," as defined
under Rule 405 of the Securities Act, of the
Company and (iv) such holder has full power and
authority to exchange the Old Notes for the
Exchange Notes. See "The Exchange Offer -- Purpose
and Effect of the Exchange Offer" and
"-- Procedures for Tendering."
Untendered Notes........... Following the consummation of the Exchange Offer,
holders of Old Notes eligible to participate but
who do not tender their Old Notes will not have any
further registration rights and such Old Notes will
continue to be subject to certain restrictions on
transfer. Accordingly, the liquidity of the market
for such Old Notes could be adversely affected.
Consequences of
Failure to Exchange...... Old Notes that are not exchanged pursuant to the
Exchange Offer will remain restricted securities.
Accordingly, such Old Notes may be resold only (i)
to the Company, (ii) pursuant to Rule 144A or Rule
144 under the Securities Act or pursuant to some
other exemption under the Securities Act, (iii)
outside the United States to a foreign person
pursuant to the requirements of Rule 904 under the
Securities Act, or (iv) pursuant to an effective
registration statement under the Securities Act.
See "The Exchange Offer -- Consequences of Failure
to Exchange."
8
<PAGE> 11
Shelf Registration
Statement.................. If any holder of the Old Notes (other than any such
holder which is an "affiliate" of the Company
within the meaning of Rule 405 under the Securities
Act) is not eligible under applicable securities
laws to participate in the Exchange Offer, and such
holder has provided information regarding such
holder and the distribution of such holder's Old
Notes to the Company for use therein, the Company
has agreed to register the Old Notes on a shelf
registration statement (the "Shelf Registration
Statement") and to use its best efforts to cause it
to be declared effective by the Commission as
promptly as reasonably practical on or after the
consummation of the Exchange Offer. The Company has
agreed to maintain the effectiveness of the Shelf
Registration Statement, under certain
circumstances, until the date on which the Old
Notes are no longer "restricted securities" (within
the meaning of Rule 144 under the Securities Act).
Special Procedures for
Beneficial Owners........ Any beneficial owner whose Old Notes are registered
in the name of a broker, dealer, commercial bank,
trust company or other nominee and who wishes to
tender should contact such registered holder
promptly and instruct such registered holder to
tender on such beneficial owner's behalf. If such
beneficial owner wishes to tender on such owner's
own behalf, such owner must, prior to completing
and executing the Letter of Transmittal and
delivering its Old Notes, either make appropriate
arrangements to register ownership of the Old Notes
in such owner's name or obtain a properly completed
bond power from the registered holder. The transfer
of registered ownership may take considerable time.
Guaranteed Delivery
Procedures............... Holders of Old Notes who wish to tender their Old
Notes and whose Old Notes are not immediately
available or who cannot deliver their Old Notes,
the Letter of Transmittal or any other documents
required by the Letter of Transmittal to the
Exchange Agent (or comply with the procedures for
book-entry transfer) prior to the Expiration Date,
must tender their Old Notes according to the
guaranteed delivery procedures set forth in "The
Exchange Offer -- Guaranteed Delivery Procedures."
Withdrawal Rights.......... Tenders may be withdrawn at any time prior to 5:00
p.m., New York City time, on the Expiration Date.
Acceptance of Old Notes
and Delivery of
Exchange Notes........... The Company will accept for exchange any and all
Old Notes which are properly tendered in the
Exchange Offer prior to 5:00 p.m., New York City
time, on the Expiration Date. The Exchange Notes
issued pursuant to the Exchange Offer will be
delivered on the earliest practicable date
following the Expiration Date. See "The Exchange
Offer -- Terms of the Exchange Offer."
Use of Proceeds............ The Company will not receive any cash proceeds from
the issuance of the Exchange Notes in the Exchange
Offer. See "Use of Proceeds."
Exchange Agent............. Marine Midland Bank, as Trustee, is serving as
Exchange Agent in connection with the Exchange
Offer.
9
<PAGE> 12
THE EXCHANGE NOTES
General.................... The form and terms of the Exchange Notes are
substantially identical to the form and terms of
the Old Notes except that (i) the Exchange Notes
bear a Series B designation, (ii) the Exchange
Notes have been registered under the Securities Act
and, therefore, will not bear legends restricting
the transfer thereof, and (iii) the holders of
Exchange Notes will not be entitled to certain
rights under the Registration Rights Agreement,
including the provisions providing for an increase
in the interest rate on the Old Notes in certain
circumstances relating to the timing of the
Exchange Offer, which rights will terminate when
the Exchange Offer is consummated. See "The
Exchange Offer -- Purpose and Effect of the
Exchange Offer." The Exchange Notes will evidence
the same debt as the Old Notes (which they replace)
and will be entitled to the benefits of the
Indenture. See "Description of Exchange Notes." The
Old Notes and/or the Exchange Notes, whichever was,
is or will be outstanding in the particular
context, are referred to herein collectively as the
"Notes."
Securities Offered......... $75,000,000 aggregate principal amount of Series B
11 1/4% Senior Subordinated Notes due 2007 of the
Company.
Maturity Date.............. April 1, 2007.
Interest Payment Dates..... April 1 and October 1 of each year, commencing
October 1, 1997.
Ranking.................... The Exchange Notes will constitute unsecured debt
obligations of the Company and will rank
subordinate in right of payment to all existing and
future Senior Debt including any Indebtedness (as
defined) under the Credit Agreement. At March 28,
1997, after giving pro forma effect to the
Transactions, there would have been no outstanding
indebtedness to which the Notes would have been
subordinated. However, the Company can borrow up to
approximately $75 million under the terms of the
Credit Agreement, all of which would constitute
Senior Debt. See "Description of New Credit
Facility."
Exchange Guarantee......... The Exchange Notes will be fully and
unconditionally guaranteed on a senior subordinated
basis by the Guarantor. The form and terms of the
Exchange Guarantee is substantially identical to
the form and terms of the Old Guarantee. The
Exchange Guarantee will be a general unsecured
obligation of the Guarantor and will rank
subordinate in right of payment to all existing and
future Senior Debt of such Guarantor, including
such Guarantor's guarantee of Indebtedness under
the Credit Agreement. The Exchange Guarantee will
rank pari passu in right of payment with any other
senior subordinated indebtedness of the Guarantor.
The Old Guarantee and/or the Exchange Guarantee,
whichever was, is or will be outstanding in the
particular context, are referred to herein
collectively as the "Guarantee."
Optional Redemption........ The Exchange Notes will be redeemable at the option
of the Company, in whole or in part, at any time on
or after April 1, 2002, at the redemption prices
set forth herein, plus accrued and unpaid interest
to the redemption date. In addition, on or prior to
April 1, 2000, the Company may redeem up to 33% in
aggregate principal amount of the Notes at a
redemption price of 111.25% of the principal amount
thereof, plus accrued and unpaid interest to the
redemption date, with the net cash proceeds
received by the Company from one or more public
offerings of its Capital Stock (as defined) (other
than Disqualified Stock
10
<PAGE> 13
(as defined)); provided, however, that at least
$60.0 million in aggregate principal amount of the
Notes remains outstanding immediately after any
such redemption (excluding any Notes owned by the
Company or any of its Affiliates (as defined)). See
"Description of Exchange Notes -- Optional
Redemption."
Change of Control.......... Upon a Change of Control (as defined), each holder
of the Exchange Notes may require the Company to
repurchase such holder's Exchange Notes, in whole
or in part, at a purchase price equal to 101% of
the principal amount thereof plus accrued and
unpaid interest to the purchase date. See
"Description of Exchange Notes -- Change of
Control." The Credit Agreement prohibits the
purchase of outstanding Exchange Notes prior to
repayment of the borrowings under the Credit
Agreement. There can be no assurance that upon a
Change of Control the Company will have sufficient
funds to repurchase any of the Exchange Notes. See
"Description of New Credit Facility."
Modification of
the Indenture............ The Company and the Trustee, with the consent of
the holders of a majority in aggregate principal
amount of the outstanding Notes, may amend the
Indenture; provided, however, that consent is
required from the holder of each Note affected
thereby in instances such as reductions in the
amount or changes in the timing of interest
payments, reductions in the principal and changes
in the maturity, redemption or repurchase dates of
the Notes. See "Description of Exchange
Notes -- Modification and Waiver."
Events of Default.......... An Event of Default (as defined) occurs under the
Indenture in instances such as the failure to pay
principal when due, the failure to pay any interest
within 30 days of when due and payable, the failure
to perform or comply with various covenants under
the Indenture or the default under the terms of
certain other indebtedness of the Company. See
"Description of Exchange Notes -- Events of
Default."
Covenants.................. The Indenture contains certain covenants that,
among other things, limits the ability of the
Company or any of its Restricted Subsidiaries (as
defined) to incur additional Indebtedness, make
certain Restricted Payments (as defined) and
Investments (as defined), create Liens (as
defined), permit dividend or other payment
restrictions to apply to Subsidiaries (as defined),
enter into certain transactions with Affiliates or
Related Persons (as defined) or consummate certain
merger, consolidation or similar transactions. In
addition, in certain circumstances, the Company
will be required to offer to purchase Exchange
Notes at 100% of the principal amount thereof with
the net proceeds of certain asset sales. These
covenants are subject to a number of significant
exceptions and qualifications. See "Description of
Exchange Notes."
For additional information regarding the Exchange Notes, see "Description
of Exchange Notes."
RISK FACTORS
Prospective investors should carefully consider the specific matters set
forth under "Risk Factors" as well as the other information and data included in
this Prospectus in evaluating the Exchange Offer and an investment in the
Exchange Notes.
11
<PAGE> 14
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS)
The following table sets forth (i) summary historical consolidated
financial information of the Company for the periods provided below, and (ii)
adjusted pro forma financial information for the Company as of and for the year
ended June 28, 1996 and as of and for the nine month period ended March 28,
1997. The information contained in the table has been derived from, and should
be read in conjunction with, the audited consolidated financial statements and
unaudited interim consolidated financial statements of the Company, including
the notes thereto. Unaudited interim data reflect, in the opinion of the
Company's management, all adjustments (consisting solely of normal recurring
adjustments) considered necessary for a fair presentation of results for such
interim periods. Results of operations for the unaudited interim periods are not
necessarily indicative of the results that may be expected for any other interim
or annual period. In addition, on March 18, 1994, the Company was acquired by
current ownership, in a transaction accounted for under the purchase method of
accounting. The financial statements for the periods prior to March 18, 1994 are
presented on the predecessors' basis of accounting and accordingly, are not
comparable to the periods subsequent to March 18, 1994. The accompanying pro
forma unaudited condensed statements of operations are based upon the
consolidated financial statements of Tekni-Plex and Dolco, adjusted to give
effect to the Dolco acquisition (accounted for as a purchase) and the
Transactions (as defined), as if the acquisition and the Transactions had
occurred at the beginning of the periods presented. The accompanying pro forma
unaudited condensed balance sheet data are adjusted to give effect to the
Transactions as if they had occurred on March 28, 1997.
<TABLE>
<CAPTION>
ADJUSTED
PRO FORMA (a)
FOR THE PERIODS --------------------
----------------------------------- NINE
YEAR YEARS ENDED NINE MONTHS ENDED YEAR MONTHS
ENDED JAN. 1 TO MAR. 19 TO -------------------- -------------------- ENDED ENDED
DEC. 31, MAR. 18, JUL. 1, JUN. 30, JUN. 28, MAR. 29, MAR. 28, JUN. 28, MAR. 28,
1993 1994 1994 1995 1996 1996 1997 1996 1997
-------- --------- ---------- -------- -------- -------- -------- -------- --------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF
OPERATIONS DATA:
Net sales........... $44,878 $ 9,418 $12,723 $44,688 $ 80,917 $ 47,248 $109,828 $135,800 $109,828
Gross profit........ 8,274 1,494 2,762 9,747 18,582 9,669 28,589 28,708 28,589
Income from
operations........ 3,198 892 1,241 4,933 8,243 4,355 16,594 11,753 16,594
Interest expense.... 160 22 1,141 4,322 5,816 3,663 6,068 9,143 6,830
Other (income)
expense........... 7 45 62 234 469 252 524 336 524
Pre-tax income...... 3,031 825 38 377 1,958 440 10,002 2,274 9,240
Income tax provision
(b)............... 267 56 17 211 982 220 3,555 976 3,265
Net income.......... $ 2,764 $ 769 $ 21 $ 166 $ 976 $ 220 $ 6,447 $ 1,298 $ 5,975
OTHER FINANCIAL
DATA:
EBITDA (c).......... $ 3,800 $ 985 $ 1,988 $ 7,922 $ 14,157 $ 7,317 $ 22,881 $ 20,262 $ 22,881
EBITDA margin (c)... 8.5% 10.5% 15.6% 17.7% 17.5% 15.5% 20.8% 14.9% 20.8%
Depreciation and
amortization...... $ 608 $ 138 $ 879 $ 3,462 $ 6,821 $ 3,393 $ 7,259 $ 8,845 $ 7,259
Capital
expenditures...... 1,423 420 157 614 2,275 1,026 2,735 2,275 2,735
RATIOS:
Ratio of earnings to
fixed charges
(d)............... 19.9x 38.5x 1.0x 1.1x 1.3x 1.1x 2.6x 1.2x 2.4x
Ratio of EBITDA to
interest
expense........... 2.2 3.4
BALANCE SHEET DATA
(END OF PERIOD):
Working capital..... $ 6,023 $ 4,565 $ 1,673 $ 3,173 $ 11,660 $ 7,508 $ 13,290 $ 26,125
Total assets........ 15,701 14,900 53,724 53,415 121,770 125,873 117,678 127,177
Total debt
(including current
portion).......... 1,616 588 36,396 35,004 70,436 78,020 60,801 75,989
Stockholders'
equity............ 10,086 10,855 11,521 11,687 24,162 23,407 30,609 27,843
</TABLE>
- ---------------
(a) Amounts represent the pro forma statement of operations data, balance sheet
data and other financial data of the Company after giving effect to the
acquisition of Dolco and the Transactions in the manner described under "Pro
Forma Unaudited Condensed Financial Information."
(b) Prior to the acquisition of Tekni-Plex by the current owners, the previous
owners elected to be taxed as an "S" corporation for federal income tax
purposes. Accordingly, there was no provision for federal income taxes for
periods prior to March 18, 1994 as such income was reported on the federal
income tax returns of the shareholders.
(c) EBITDA is defined as net income before interest, income taxes, depreciation
and amortization. EBITDA is presented because it is a widely accepted
financial indicator of a company's ability to incur and service debt.
However, EBITDA should not be considered in isolation as a substitute for
net income or cash flow data prepared in accordance with generally accepted
accounting principles or as a measure of the Company's profitability or
liquidity. In addition, this measure of EBITDA may not be comparable to
similar measures reported by other companies. EBITDA margin is calculated as
the ratio of EBITDA to net sales for the period. For fiscal 1996,
amortization included $522 related to the write off of prior unamortized
debt costs.
(d) For purposes of the ratio of earnings to fixed charges, (i) earnings are
calculated as the Company's earnings before income taxes and fixed charges
and (ii) fixed charges include interest on all indebtedness, amortization of
deferred financing costs and accretion of all warrants.
12
<PAGE> 15
RISK FACTORS
Holders of Old Notes should consider carefully the following factors as
well as the other information and data included in this Prospectus prior to
tendering their Old Notes in the Exchange Offer.
SUBSTANTIAL LEVERAGE; RESTRICTIONS IMPOSED BY TERMS OF THE COMPANY'S
INDEBTEDNESS
On a pro forma basis after giving effect to the Transactions, the Company's
total debt and stockholder's equity would have been $76.0 million and $27.8
million, respectively, as of March 28, 1997, and the Company and its subsidiary
would have had approximately $1.0 million of long-term indebtedness outstanding
in addition to the Notes. On a pro forma basis after giving effect to the
Transactions, the Company's ratio of earnings to fixed charges would have been
1.2 to 1 for the fiscal year ended June 28, 1996.
On a pro forma basis after giving effect to the Transactions as of March
28, 1997, and subject to certain restrictions, the Company could have borrowed
up to $75.0 million of secured senior indebtedness under the New Credit Facility
without requiring the consent of the holders of Exchange Notes. A substantial
increase in the Company's leverage and obligations could have important
consequences to the holders of Exchange Notes, including: (i) the impairment of
the Company's ability to obtain additional financing for working capital,
capital expenditures, acquisitions or other purposes; (ii) the use of a
substantial portion of the Company's cash flow from operations for debt service;
(iii) the competitive disadvantages that may result from the Company being more
highly leveraged than some of its competitors; and (iv) making the Company more
vulnerable to economic downturns and limiting its ability to withstand
competitive pressures.
In addition, the Company's operating flexibility with respect to certain
business matters will be limited by covenants contained in the Indenture and the
New Credit Facility. Among other things, these covenants will limit the ability
of the Company and its subsidiaries to incur additional indebtedness, create
liens upon assets, apply the proceeds from disposal of assets, make dividend
payments and other distributions on capital stock and redeem capital stock.
There can be no assurance that such covenants will not adversely affect the
Company's ability to finance its future operations or capital needs or to engage
in other business activities that may be in the interest of the Company. See
"Description of New Credit Facility" and "Description of Exchange
Notes -- Covenants."
The Company expects that its cash flow will be sufficient to cover its
expenses, including fixed charges. However, no assurance can be given that the
Company's operating results will be sufficient for the Company to meet such
obligations. The Company's ability to satisfy its obligations will be dependent
upon its future performance, which is subject to prevailing economic conditions
and financial, business and other factors, including factors beyond the
Company's control.
RAW MATERIAL PRICE VOLATILITY AND AVAILABILITY
The Company's polystyrene foam products are manufactured from high heat
crystal polystyrene resin ("polystyrene resin"). Polystyrene resin is a
commodity petrochemical that is readily available in bulk quantities from
numerous large, vertically integrated chemical companies. The Company purchases
polystyrene resin from several of the top suppliers. Prices for polystyrene
resin have fluctuated in the past and may continue to do so in the future.
Historically, the Company has been able to pass on substantially all of the
price increases in raw materials to its customers. However, there can be no
assurance that the Company will be able to do so in the future. If raw material
prices increase and the Company is unable to pass such price increases on to its
customers, employ successful hedging strategies, enter into supply contracts at
favorable prices or buy on the spot market at favorable prices, the Company's
profitability may be adversely affected.
A key raw material used in manufacturing the Company's blister packaging
materials is Aclar(R), a proprietary material produced by Allied Signal. Allied
Signal is currently the sole manufacturer and supplier of Aclar(R). There is no
long-term supply contract with Allied Signal and any interruption in the supply
of this material could disrupt production of the Company's blister packaging
materials. To the extent that the Company's supply of raw materials is hindered
and no alternative source can be found, the Company's profitability may be
adversely affected.
13
<PAGE> 16
COMPETITION
Many of the Company's competitors are larger and, in some cases, have
significantly greater resources than the Company. Within the polystyrene foam
processor tray market, the Company competes principally with Tenneco Packaging
and W.R. Grace, both of which have significantly greater financial resources
than the Company and together control the largest share of this market. In the
egg packaging market, the Company's primary competitor is Tenneco Packaging
which manufactures pulp-based egg cartons. The Company's clear, high-barrier
pharmaceutical blister packaging products primarily compete with solution-coated
and foil-based products manufactured by various competitors including Klockner
Pentaplast. See "Business -- Competition." While the packaging industry overall
is relatively large, the market for high performance pharmaceutical-type
packaging materials is considerably smaller, and the Company's achievement of
its internal expansion goals assumes expansion of its customers' volume for its
products, finding new applications for its existing high performance materials,
and development of new materials for new applications.
INTEGRATION OF ACQUISITIONS
As part of its business strategy, the Company intends to pursue suitable
acquisitions. Nonetheless, there can be no assurance that the Company will
identify suitable acquisitions or that such acquisitions can be made at an
acceptable price. In the event the Company acquires additional businesses, it
may require substantial capital. Although the Company will be able to borrow
under the New Credit Facility under certain circumstances to fund acquisitions,
there can be no assurance that such borrowings will be available in sufficient
amount or that other financing will be available in amounts and on terms that
the Company deems acceptable. Furthermore, the integration of acquired
businesses may result in unforeseen difficulties that require a disproportionate
amount of management's attention and other Company resources. There can be no
assurance that the Company will continue to achieve synergies comparable to
those from recent acquisitions.
DEPENDENCE ON KEY PERSONNEL
The Company is dependent on the management experience and continued
services of its executive officers, including Dr. F. Patrick Smith and Kenneth
W.R. Baker. See "Management." The loss of the services of these officers could
have a material adverse effect on the Company's business. In addition, the
Company's continued growth depends on its ability to attract and retain
experienced key employees.
ENVIRONMENTAL MATTERS
Like similar companies, the Company's facilities, operations, and
properties are subject to federal, state, and local environmental laws and
regulations. As a result, the Company is involved from time to time in
administrative or legal proceedings relating to environmental matters. There can
be no assurance that the aggregate amount of future compliance costs and other
environmental liabilities will not be material. The Company cannot predict what
environmental legislation or regulations will be enacted in the future, how
existing or future laws or regulations will be administered or interpreted or
what environmental conditions may be found to exist. Enactment of more stringent
laws or regulations or more strict interpretation of existing laws and
regulations may require additional expenditures by the Company, some of which
could be material. See "Business -- Environmental Matters."
Prior to the 1994 acquisition of the Company, public awareness and interest
in environmental issues adversely affected the polystyrene foam packaging
industry. In particular, in 1990, McDonald's discontinued its well-recognized
polystyrene foam clam shell sandwich package in favor of paper packaging. In
response, various recycling programs were commenced in the United States.
Although the Company believes that the environmental concerns that negatively
affected demand for these products in the 1980s have subsided and, to some
extent, given way to a view by many that polystyrene foam does not have
significantly worse environmental problems than other materials, there can be no
assurance that public awareness and interest in environmental issues will not
adversely affect the plastics and polystyrene industry.
14
<PAGE> 17
CONTROL OF THE COMPANY
The Company is owned by Tekni-Plex Partners L.P., a limited partnership
organized under the laws of the State of Delaware, and its related investors
(the "Tekni-Plex Partnership"). Tekni-Plex Partnership beneficially owns 100
percent of the outstanding shares of the Company and 97.5% of the Company on a
fully diluted basis and controls the affairs and policies of the Company.
Tekni-Plex Partnership is controlled by MST/TP Partners, L.P. ("MST/TP L.P."),
which in turn is controlled, directly or indirectly, by J. Andrew McWethy, Barry
A. Solomon, and Stephen A. Tuttle, who are all directors of the Company.
Circumstances may occur in which the interests of Tekni-Plex Partnership, MST/TP
L.P. and the three individuals could be in conflict with the interests of the
holders of the Exchange Notes. In addition, Tekni-Plex Partnership may have an
interest in pursuing acquisitions, divestitures or other transactions that, in
its judgment, could enhance the value of its individual partners' equity
investments in the partnership, even though such transactions may involve risks
to the holders of the Exchange Notes.
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each holder of Exchange Notes
may require the Company to repurchase all or a portion of such holder's Exchange
Notes. If a Change of Control were to occur, there can be no assurance that the
Company would have sufficient financial resources, or would be able to arrange
financing to pay the repurchase price for all Exchange Notes tendered by holders
thereof. Further, the provisions of the Indenture may not afford holders of
Exchange Notes protection in the event of a highly leveraged transaction,
reorganization, restructuring, merger or similar transaction involving the
Company that may adversely affect holders of Exchange Notes, if such transaction
does not result in a Change of Control. In addition, the terms of the New Credit
Facility may limit the Company's ability to repurchase any Exchange Notes and
will also identify certain events that would constitute a Change of Control, as
well as certain other events with respect to the Company or certain of its
subsidiaries, that would constitute an event of default under the New Credit
Facility. Any future credit agreements or other agreements relating to other
indebtedness to which the Company becomes a party may contain similar
restrictions and provisions. In the event a Change of Control occurs at a time
when the Company is prohibited from repurchasing Exchange Notes, the Company
could seek the consent of its lenders to repurchase Exchange Notes or could
attempt to refinance the borrowings that contain such prohibition. If the
Company does not obtain such consent or repay such borrowing, the Company would
remain prohibited from repurchasing Exchange Notes. In such case, the Company's
failure to repurchase tendered Exchange Notes would constitute an Event of
Default under the Indenture, which would, in turn, constitute a further default
under certain of the Company's existing debt agreements and may constitute a
default under the terms of other indebtedness that the Company may enter into
from time to time. See "Description of Exchange Notes -- Change of Control."
RANKING OF THE EXCHANGE NOTES
The Exchange Notes will be senior subordinated unsecured obligations of the
Company, and will rank subordinate in right of payment to all existing and
future senior indebtedness of the Company. In addition, the Exchange Notes will
be effectively subordinated in right of payment to all existing and future
secured indebtedness of the Company and the Company's subsidiaries, including
indebtedness under the New Credit Facility. Loans under the New Credit Facility
will be secured by substantially all of the assets of the Company. As of March
28, 1997, after giving pro forma effect to the Transactions, there would have
been no outstanding indebtedness to which the Exchange Notes would have been
subordinated. However, the Company could have borrowed up to $75.0 million of
indebtedness under the New Credit Facility and, without the consent of the
holders of the Exchange Notes, may increase such facility to $100.0 million, all
of which would constitute Senior Debt. Further, the Company intends to borrow
under such facility in the relative short term. The Guarantee will be senior
subordinated unsecured obligations of the Guarantor, and will rank subordinate
in right of payment to all existing and future senior indebtedness of the
Guarantor, including its guarantee under the New Credit Facility. Under the
terms of the Indenture, the Company will be permitted, upon the satisfaction of
certain conditions, to incur additional senior indebtedness. See "Description of
New Credit Facility," "Description of Exchange Notes -- Ranking" and
"-- Covenants."
15
<PAGE> 18
LACK OF PUBLIC MARKET FOR THE NOTES
Prior to the Exchange Offer, there has not been any public market for the
Old Notes. The Old Notes have not been registered under the Securities Act and
will be subject to restrictions on transferability to the extent that they are
not exchanged for Exchange Notes by holders who are entitled to participate in
the Exchange Offer. The holders of Old Notes (other than any such holder that is
an "affiliate" of the company within the meaning of Rule 405 under the
Securities Act) who are not eligible to participate in the Exchange Offer are
entitled to certain registration rights, and the Company is required to file a
Shelf Registration Statement with respect to such Old Notes. The Exchange Notes
will constitute a new issue of securities with no established trading market,
and there can be no assurance as to (i) the liquidity of any such market that
may develop, (ii) the ability of holders of Exchange Notes to sell their
Exchange Notes or (iii) the price at which the holders of Exchange Notes would
be able to sell their Exchange Notes. If such a market were to exist, the
Exchange Notes could trade at prices that may be higher or lower than their
principal amount or purchase price, depending on many factors, including
prevailing interest rates, the market for similar notes and the financial
performance of the Company and its subsidiary. The Company does not intend to
list the Exchange Notes on any national securities exchange or to seek the
admission thereof to trading in the National Association of Securities Dealers
Automated Quotation System. The Company has been advised by the Initial
Purchaser that, following completion of the Exchange Offer, the Initial
Purchaser presently intends to make a market in the Exchange Notes. However, the
Initial Purchaser is not obligated to do so, and any market-making activity with
respect to the Exchange Notes may be discontinued at any time without notice. In
addition, such market-making activity will be subject to the limits imposed by
the Securities Act and the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and may be limited during such exchange offer or the pendency
of an applicable shelf registration statement. There can be no assurance that an
active trading market will develop for the Exchange Notes or that such trading
market will be liquid. If a trading market does not develop or is not
maintained, holders of the Exchange Notes may experience difficulty in reselling
the Exchange Notes or may be unable to sell them at all. If a market for the
Exchange Notes develops, any such market may be discontinued at any time.
EXCHANGE OFFER PROCEDURES
Issuance of the Exchange Notes in exchange for the Old Notes pursuant to
the Exchange Offer will be made only after a timely receipt by the Company of
such Old Notes, a properly completed and duly executed Letter of Transmittal and
all other required documents. Therefore, holders of the Old Notes desiring to
tender such Old Notes in exchange for Exchange Notes should allow sufficient
time to ensure timely delivery. The Company is under no duty to give
notification of defects or irregularities with respect to the tenders of Old
Notes for exchange. Old Notes that are not tendered or are tendered but not
accepted will, following the consummation of the Exchange Offer, continue to be
subject to the existing restrictions upon transfer thereof and, upon
consummation of the Exchange Offer, certain registration rights under the
Registration Rights Agreement will terminate. In addition, any holder of Old
Notes who tenders in the Exchange Offer for the purpose of participating in a
distribution of the Exchange Notes may be deemed to have received restricted
securities and, if so, will be required to comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
resale transactions. Each Participating Broker-Dealer that receives Exchange
Notes for its own account in exchange for Old Notes, where such Old Notes were
acquired by such Participating Broker-Dealer as a result of market-making
activities or other trading activities, must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. See "Plan of
Distribution." To the extent that Old Notes are tendered and accepted in the
Exchange Offer, the trading market for untendered and tendered but unaccepted
Old Notes could be adversely affected. See "The Exchange Offer."
16
<PAGE> 19
USE OF PROCEEDS
The Exchange Offer is intended to satisfy certain of the Company's
obligations under the Registration Rights Agreement. The Company will not
receive any cash proceeds from the issuance of the Exchange Notes in the
Exchange Offer.
On April 4, 1997, the gross proceeds of $75.0 million from the issuance of
the Old Notes and the net proceeds of approximately $18.2 million from the
additional contribution of capital to the Company were used to: (i) repay all
outstanding obligations under the then Existing Credit Facility (approximately
$36.8 million); (ii) repay the then existing senior subordinated notes,
including accrued interest and the applicable premium, (approximately $25.2
million); (iii) repurchase the then outstanding warrants ($20.0 million); and
(iv) pay transaction expenses related to the issuance of Old Notes
(approximately $4.2 million); and the remainder (approximately $8.0 million) was
retained for general corporate purposes. The issuance of the Old Notes, the
execution of the New Credit Facility and the additional contribution of capital
to the Company, collectively with the use of proceeds thereof set forth above,
are referred to herein as the "Transactions."
CAPITALIZATION
The following table sets forth the actual capitalization of the Company as
of March 28, 1997 and the pro forma capitalization of the Company on such date
after giving effect to the Transactions. See "Use of Proceeds."
<TABLE>
<CAPTION>
ACTUAL PRO FORMA
------- ---------
(DOLLARS IN
THOUSANDS)
(UNAUDITED)
<S> <C> <C>
Long-term debt (including current portion):
Existing Credit Facility.............................................. $36,500 $ --
New Credit Facility(a)................................................ -- --
Existing senior subordinated notes(b)................................. 23,312 --
11 1/4% Senior Subordinated Notes due 2007............................ -- 75,000
Other................................................................. 989 989
------- -------
Total long-term debt.................................................... 60,801 75,989
------- -------
Redeemable warrants..................................................... 2,227 --
Stockholder's equity:
Common stock and additional paid-in capital........................... 23,000 41,248
Retained earnings(c).................................................. 7,609 (13,405)
------- -------
Total stockholder's equity......................................... 30,609 27,843
------- -------
Total capitalization.......................................... $93,637 $ 103,832
======= =======
</TABLE>
- ---------------
(a) On a pro forma basis as of March 28, 1997, the Company would have had
approximately $75,000 unused and available, subject to certain restrictions,
under the New Credit Facility.
(b) Before prepayment penalty and net of discounts.
(c) Reflects loss on early extinguishment of notes, repurchase of warrants and
write-off of debt issue costs.
17
<PAGE> 20
SELECTED HISTORICAL FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS)
The following table sets forth selected historical consolidated financial
information of the Company, and has been derived from and should be read in
conjunction with the audited consolidated financial statements and unaudited
interim consolidated financial statements, including the notes thereto.
Unaudited interim data reflect, in the opinion of the Company's management, all
adjustments (consisting solely of normal recurring adjustments) considered
necessary for a fair presentation of results for such interim periods. Results
of operations for the unaudited interim periods are not necessarily indicative
of the results that may be expected for any other interim or annual period. In
addition, on March 18, 1994, Tekni-Plex was acquired by the current owners, in a
transaction accounted for under the purchase method of accounting. The financial
statements for the periods prior to March 18, 1994 are presented on the
predecessors' basis of accounting and accordingly, are not comparable to the
periods subsequent to March 18, 1994.
<TABLE>
<CAPTION>
FOR THE PERIODS
----------------------- YEARS ENDED NINE MONTHS ENDED
YEARS ENDED DEC. 31, JAN. 1 TO MAR. 19 TO -------------------- --------------------
----------------------------- MAR. 18, JUL. 1, JUN. 30, JUN. 28, MAR. 29, MAR. 28,
1991 1992 1993 1994 1994 1995 1996 1996 1997
------- ------- ------- --------- ---------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net sales............... $36,773 $43,453 $44,878 $ 9,418 $12,723 $44,688 $ 80,917 $ 47,248 $109,828
Cost of goods sold...... 31,405 35,860 36,604 7,924 9,961 34,941 62,335 37,579 81,239
Gross profit............ 5,368 7,593 8,274 1,494 2,762 9,747 18,582 9,669 28,589
Selling, general and
administrative
expenses.............. 2,783 4,057 5,076 602 1,521 4,814 10,339 5,314 11,995
Income from
operations............ 2,585 3,536 3,198 892 1,241 4,933 8,243 4,355 16,594
Interest expense........ 338 196 160 22 1,141 4,322 5,816 3,663 6,068
Other (income)
expense............... (2) (33) 7 45 62 234 469 252 524
Pre-tax income.......... 2,249 3,373 3,031 825 38 377 1,958 440 10,002
Income tax
provision(a).......... 190 305 267 56 17 211 982 220 3,555
Net income.............. $ 2,059 $ 3,068 $ 2,764 $ 769 $ 21 $ 166 $ 976 $ 220 $ 6,447
OTHER FINANCIAL DATA:
EBITDA(b)............... $ 3,268 $ 4,204 $ 3,800 $ 985 $ 1,988 $ 7,922 $ 14,157 $ 7,317 $ 22,881
EBITDA margin(b)........ 8.9% 9.7% 8.5% 10.5% 15.6% 17.7% 17.5% 15.5% 20.8%
Depreciation and
amortization.......... $ 681 $ 636 $ 608 $ 138 $ 879 $ 3,462 $ 6,821 $ 3,393 $ 7,259
Capital expenditures.... 58 502 1,423 420 157 614 2,275 1,026 2,735
Ratio of earnings to
fixed charges(c)...... 7.7x 18.2x 19.9x 38.5x 1.0x 1.1x 1.3x 1.1x 2.6x
Ratio of EBITDA to
interest expense...... 1.7 1.8 2.4 2.0 3.8
BALANCE SHEET DATA:
Working capital......... $ 3,479 $ 5,307 $ 6,023 $ 4,565 $ 1,673 $ 3,173 $ 11,660 $ 7,508 $ 13,290
Total Assets............ 11,820 13,204 15,701 14,900 53,724 53,415 121,770 125,873 117,678
Total debt (including
current portion)...... 2,208 1,913 1,616 588 36,396 35,004 70,436 78,020 60,801
Stockholders' equity.... 4,885 7,565 10,086 10,855 11,521 11,687 24,162 23,407 30,609
</TABLE>
- ---------------
(a) Prior to the acquisition of Tekni-Plex by the current owners, the previous
owners elected to be taxed as an "S" corporation for federal income tax
purposes. Accordingly, there was no provision for federal income taxes for
periods prior to March 18, 1994 as such income was reported on the federal
income tax returns of the shareholders.
(b) EBITDA is defined as net income before interest, income taxes, depreciation
and amortization. EBITDA is presented because it is a widely accepted
financial indicator of the Company's ability to incur and service debt.
However, EBITDA should not be considered in isolation as a substitute for
net income or cash flow data prepared in accordance with generally accepted
accounting principles or as a measure of a company's profitability or
liquidity. In addition, this measure of EBITDA may not be comparable to
similar measures reported by other companies. EBITDA margin is calculated as
the ratio of EBITDA to net sales for the period. For fiscal 1996,
amortization included $522 related to the write off of prior unamortized
debt costs.
(c) For purposes of the ratio of earnings to fixed charges, (i) earnings are
calculated as the Company's earnings before income taxes and fixed charges
and (ii) fixed charges include interest on all indebtedness, amortization of
deferred financing costs and accretion of the warrant.
18
<PAGE> 21
PRO FORMA UNAUDITED CONDENSED FINANCIAL INFORMATION
The accompanying pro forma unaudited condensed statements of operations are
based upon the historical consolidated financial statements of Tekni-Plex and
Dolco, adjusted to give effect to the Dolco acquisition (accounted for as a
purchase) and the Transactions, as if the acquisition and the Transactions had
occurred at the beginning of the periods presented. The accompanying pro forma
unaudited condensed balance sheet is adjusted to give effect to the Transactions
as if they had occurred on March 28, 1997. The pro forma condensed statements of
operations are not necessarily indicative of the results that would have been
obtained if the acquisition and the Transactions had occurred on the dates
indicated or for any future period or date. The pro forma adjustments give
effect to available information and assumptions that the Company believes are
reasonable. The pro forma condensed financial information should be read in
conjunction with the Company's historical consolidated financial statements and
notes thereto and the historical consolidated financial statements of Dolco and
the notes thereto. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
PRO FORMA UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED JUNE 28, 1996
--------------------------------------------------------------------------
ACQUISITION TRANSACTION ADJUSTED
TEKNI-PLEX(A) DOLCO(A) ADJUSTMENTS ADJUSTMENTS PRO FORMA
-------------- --------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Net sales...................... $ 80,917 $ 54,883 $ -- $ -- $ 135,800
Cost of sales.................. 62,335 43,664 1,093(b) -- 107,092
------- ------- ------- ----- --------
Gross profit................... 18,582 11,219 (1,093) -- 28,708
Selling, general and
administrative expenses...... 10,339 7,785 (1,169)(c) -- 16,955
------- ------- ------- ----- --------
Income from operations......... 8,243 3,434 76 -- 11,753
Other expenses (income):
Interest..................... 5,816 198 2,242(d) 887(f) 9,143
Other........................ 469 (133) -- -- 336
------- ------- ------- ----- --------
Income before tax provision for
income taxes................. 1,958 3,369 (2,166) (887) 2,274
Provision for income taxes..... 982 (1,324) 1,655(e) (337)(g) 976
------- ------- ------- ----- --------
Net income........... $ 976 $ 4,693 $(3,821) $(550) $ 1,298
======= ======= ======= ===== ========
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED MARCH 28, 1997
--------------------------------------------
TRANSACTION ADJUSTED
TEKNI-PLEX(A) ADJUSTMENTS PRO FORMA
-------------- ----------- ---------
<S> <C> <C> <C>
Net sales.............................................. $109,828 $ -- $ 109,828
Cost of sales.......................................... 81,239 -- 81,239
------- -------
Gross profit........................................... 28,589 -- 28,589
Selling, general and administrative expenses........... 11,995 -- 11,995
------- ------- -------
Income from operations................................. 16,594 -- 16,594
Other expenses (income):
Interest............................................. 6,068 762(f) 6,830
Other................................................ 524 -- 524
------- ------- -------
Income before tax provision for income taxes........... 10,002 (762) 9,240
Provision for income taxes............................. 3,555 (290)(g) 3,265
------- ------- -------
Net income................................... $ 6,447 $(472) $ 5,975
======= ======= =======
</TABLE>
See Notes to Pro Forma Unaudited Condensed Statements of Operations.
19
<PAGE> 22
NOTES TO PRO FORMA UNAUDITED CONDENSED STATEMENT OF OPERATIONS
Adjustments to reflect the acquisition of Dolco as of July 1, 1995 are to
record the following:
(a) Dolco information in the Dolco column is for the period from July 1,
1995 to February 21, 1996. Subsequent to February 21, 1996, Dolco
information is included in the statement of operations of Tekni-Plex.
(b) The increase in depreciation of $1,093 as the result of the write-up of
the fixed assets of $15,076 to fair market value.
(c) The increase in depreciation of $22 as the result of the write-up of the
fixed assets to fair market value and the increase in amortization of
$909 relating to goodwill of $14,044 as a result of the acquisition is
offset by the reduction of administrative expenses of $2,100 resulting
from the elimination of redundant costs related to the existence of a
separate public company. Such redundant costs include duplicate
executive and administrative personnel, reports to stockholders, audit
fees, bank fees, and others.
(d) The increase in interest expense of $2,242 to reflect the increased debt
as a result of the acquisition.
(e) The tax benefit of $823 as a result of adjustments (b), (c) and (d)
above, calculated at the Company's marginal effective tax rate of 38%,
is offset by the elimination of the Dolco tax benefit and recording
taxes of $2,478, calculated at the same marginal effective tax rate.
Adjustments to reflect the Transaction, as if it had occurred as of the
beginning of the periods presented, are to record the following:
(f) The pro forma adjustments to interest expense reflect the following:
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
JUNE 28, MARCH 28,
1996 1997
---------- ------------
<S> <C> <C>
Elimination of historical interest expense on the following:
Existing Credit Facility..................................................... $ (4,747) $ (3,265)
Existing senior subordinated notes........................................... (2,880) (2,160)
Amortization of existing deferred financing costs and warrants............... (498) (447)
Interest expense on the Notes at a rate of 11.25%............................ 8,438 6,329
Interest expense on the New Credit Facility at an assumed rate of 7.5%....... 154 --
Amortization of estimated net deferred financing costs....................... 420 305
------- --------
$ 887 $ 762
======= ========
</TABLE>
The Pro Forma Unaudited Condensed Statement of Operations exclude the effect
of an extraordinary loss on the early extinguishment of debt of $21,014 that
the Company will record upon the consummation of the Transactions.
(g) The tax benefit of $337 and $290 for the year ended June 28, 1996 and
the nine months ended March 28, 1997, respectively, on adjustment (f),
calculated at the Company's marginal effective tax rate of 38%
20
<PAGE> 23
PRO FORMA UNAUDITED CONDENSED BALANCE SHEET
<TABLE>
<CAPTION>
AT MARCH 28, 1997
-----------------------------------------------------------
TRANSACTION OTHER ADJUSTED
COMPANY PROCEEDS (A) ADJUSTMENTS PRO FORMA
-------- ------------ ----------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS
Current:
Cash................................... $ 1,829 $ 89,048 $ (81,700)(b,c) $ 9,177
Accounts receivable, net of an
allowance........................... 13,772 -- -- 13,772
Inventory.............................. 13,493 -- -- 13,493
Deferred income taxes.................. 1,615 -- -- 1,615
Prepaid expenses and other current
assets.............................. 1,971 -- 1,291(b) 3,262
-------- ------- -------- --------
Total current assets................ 32,680 89,048 (80,409) 41,319
Property, plant and equipment, net....... 42,678 -- -- 42,678
Intangible assets, net of accumulated
amortization........................... 37,656 -- -- 37,656
Deferred charges, net of accumulated
amortization........................... 4,242 4,200 (3,340)(d) 5,102
Other assets............................. 422 422
-------- ------- -------- --------
$117,678 $ 93,248 $ (83,749) $ 127,177
======== ======= ======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Current portion of long-term debt...... $ 3,500 $ -- $ (3,500)(b) $ --
Accounts payable-trade................. 5,730 -- -- 5,730
Accrued payroll and benefits........... 2,337 -- -- 2,337
Accrued interest....................... 1,045 -- -- 1,045
Accrued liabilities-other.............. 6,082 -- -- 6,082
Income taxes payable................... 696 -- (696)(b,d) --
-------- ------- -------- --------
Total current liabilities........... 19,390 -- (4,196) 15,194
-------- ------- -------- --------
Long-term debt........................... 57,301 -- (56,312)(b) 989
Notes.................................... -- 75,000 -- 75,000
Deferred income taxes.................... 7,450 -- -- 7,450
Other liabilities........................ 701 -- -- 701
Redeemable warrants...................... 2,227 -- (2,227)(c) --
Stockholder's equity:
Capital stock and additional paid-in
capital............................. 23,000 18,248 -- 41,248
Retained earnings...................... 7,609 -- (21,014)(b,c,d) (13,405)
-------- ------- -------- --------
Total stockholder's equity............... 30,609 18,248 (21,014) 27,843
-------- ------- -------- --------
$117,678 $ 93,248 $ (83,749) $ 127,177
======== ======= ======== ========
</TABLE>
See Notes to Pro Forma Unaudited Condensed Balance Sheet.
21
<PAGE> 24
NOTES TO PRO FORMA UNAUDITED CONDENSED BALANCE SHEET
Adjustments to reflect the Transactions as if they had occurred on March
28, 1997 are as follows:
(a) The issuance of $75,000 of Notes net of debt issue costs of $4,200 and
proceeds of $18,248 from the additional contribution of capital.
(b) The repayment of the Existing Credit Facility and long term debt including a
prepayment penalty of $1,200 (calculated as of the Closing Date) and the
extraordinary loss on early extinguishment of debt of $688, net of tax
benefit of $717.
(c) The repurchase of the warrants and the related loss on extinguishment of
$17,773.
(d) The write-off of existing deferred debt issue costs of $3,340, net of tax
benefit of $1,270.
22
<PAGE> 25
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
COMPARABILITY OF PERIODS
Prior to 1994, Tekni-Plex operated on a calendar year basis. The current
owners acquired Tekni-Plex on March 18, 1994. In connection with that purchase,
the fiscal year end of Tekni-Plex was changed to the Friday closest to June 30.
Financial results for the six months ended July 1, 1994 were divided into two
periods, from January 1 to March 18, and from March 19 to July 1. Financial
results for the fiscal year 1995 are compared to the periods ended July 1 and
March 18, 1994 and the calendar year ended December 31, 1993. These financial
results are not fully comparable because of the differences in length of the
relevant periods, and the periods prior to March 18, 1994 are not fully
comparable due to the differing basis of accounting as a result of the
acquisition by the current owners.
Financial results for the nine months ended March 28, 1997 are not fully
comparable to the nine months ended March 29, 1996, and financial results for
the year ended June 28, 1996 are not fully comparable to the year ended June 30,
1995, because of the acquisition of Flemington on December 22, 1995 (although
the Company does not consider this acquisition in itself to be substantial in
the overall context) and the acquisition of Dolco on February 21, 1996.
RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
"Selected Historical Financial Information" and the Financial Statements
included elsewhere in this Prospectus. The following table sets forth, for the
periods indicated, selected operating data as a percentage of net sales.
SELECTED FINANCIAL INFORMATION
(PERCENTAGE OF NET SALES)
<TABLE>
<CAPTION>
FOR THE PERIODS
------------------------ YEARS ENDED NINE MONTHS ENDED
YEAR ENDED JAN. 1 TO MAR. 19 TO --------------------- ---------------------
DEC. 31, MAR. 18, JUL. 1, JUN. 30, JUN. 28, MAR. 29, MAR. 28,
1993 1994 1994 1995 1996 1996 1997
---------- --------- ---------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales............ 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales........ 81.6 84.1 78.3 78.2 77.0 79.5 74.0
Gross profit......... 18.4 15.9 21.7 21.8 23.0 20.5 26.0
Selling, general and
administrative
expenses........... 11.3 6.4 12.0 10.8 12.8 11.3 10.9
Income from
operations......... 7.1 9.5 9.8 11.0 10.2 9.2 15.1
Interest expense..... 0.4 0.2 9.0 9.7 7.2 7.8 5.5
Provision for income
taxes.............. 0.6 0.6 0.1 0.5 1.2 0.5 3.2
Net income........... 6.2 8.2 0.2 0.4 1.2 0.5 5.9
Depreciation and
amortization....... 1.4 1.5 6.9 7.7 8.4 7.3 6.6
EBITDA............... 8.5 10.5 15.6 17.7 17.5 15.5 20.8
</TABLE>
NINE MONTHS ENDED MARCH 28, 1997 COMPARED TO NINE MONTHS ENDED MARCH 29, 1996
Net Sales for the nine months ended March 28, 1997 were $109.8 million,
more than double net sales of $47.2 million for the nine months ended March 29,
1996. The increase was due primarily to the acquisition of Dolco in February
1996, which accounted for $55.2 million, and somewhat to the acquisition of
Flemington in December 1995.
23
<PAGE> 26
Cost of sales increased to $81.2 million for the nine months ended March
28, 1997, of which the Dolco operation accounted for $40.3 million of such
increase, from $37.6 million for the same period in 1996. Expressed as a
percentage of net sales, cost of sales improved to 74.0% for the nine months
ended March 28, 1997 from 79.5% for the same period in 1996. The decline in cost
of sales as a percentage of net sales was due primarily to a decline in raw
material costs resulting from improved market conditions and the increased
purchasing power of the Company, reductions in manufacturing overhead as a
result of the Dolco and Flemington acquisitions, and improved fixed cost
absorption from higher sales volume at the Somerville plant.
Gross profit, as a result, increased to $28.6 million or 26.0% of net sales
for the nine months ended March 28, 1997, from $9.7 million or 20.5% of net
sales for the same period in 1996.
Selling, general and administrative expenses increased to $12.0 million or
10.9% of net sales for the nine months ended March 28, 1997, from $5.3 million
or 11.3% of net sales for the same period in 1996. Selling, general and
administrative expenses decreased as a percentage of net sales due primarily to
savings associated with the elimination of duplicate Dolco corporate functions
and, to a lesser extent, the combination of the Brooklyn and Flemington
facilities.
Income from operations increased to $16.6 million or 15.1% of net sales for
the nine months ended March 28, 1997, from $4.4 million or 9.2% of net sales for
the same period in 1996, for the reasons stated above.
Interest expense increased to $6.1 million or 5.5% of net sales for the
nine months ended March 28, 1997, from $3.7 million or 7.8% of net sales for the
same period in 1996 due primarily to increased borrowings related to the
acquisitions. Expressed as a percentage of net sales, interest expense for the
1997 period fell to 5.5% from 7.8% for the 1996 period as a result of the
decreasing debt as a percentage of net sales following the Dolco and Flemington
acquisitions.
Provision for income taxes increased to $3.6 million or 3.2% of net sales
for the nine months ended March 28, 1997, from $0.2 million or 0.5% of net sales
for the same period in 1996. The Company's effective tax rate was 36% for the
nine months ended March 28, 1997. The decrease from the Company's expected rate
of 38% was a result of the realization of certain state tax benefits.
Net income increased to $6.4 million or 5.9% of net sales for the nine
months ended March 28, 1997, from $0.2 million or 0.5% of net sales for the same
period in 1996, for the reasons discussed above.
Depreciation and amortization increased to $7.3 million or 6.6% of net
sales for the nine months ended March 28, 1997 from $3.4 million or 7.3% of net
sales for the same period in 1996. The increase in depreciation and amortization
is due to the acquisitions of Dolco and Flemington and, to a lesser extent, to
increased purchases of fixtures and equipment to support the Company's
underlying business.
EBITDA increased to $22.9 million or 20.8% of net sales for the nine months
ended March 28, 1997, from $7.3 million or 15.5% of net sales or the same period
in 1996, for the reasons stated above.
YEAR ENDED JUNE 28, 1996 COMPARED TO YEAR ENDED JUNE 30, 1995
Net sales increased to $80.9 million in fiscal year 1996, representing an
increase of $36.2 million or 81.1% over net sales of $44.7 million in fiscal
year 1995. The increase in net sales was primarily the effect of four full
months of Dolco results and six full months of Flemington results being
reflected in fiscal year 1996.
Cost of sales increased to $62.3 million in fiscal year 1996 from $34.9
million in fiscal year 1995, primarily due to the acquisitions. However, when
expressed as a percent of net sales, cost of sales decreased to 77.0% for fiscal
year 1996 from 78.2% for fiscal year 1995. The decline in cost of sales as a
percentage of net sales was due primarily to the increased purchasing power of
the Company and reductions in manufacturing overhead as a result of the Dolco
and Flemington acquisitions.
Gross profit, as a result, increased to $18.6 million or 23.0% of net sales
in fiscal year 1996 from $9.7 million or 21.8% of net sales in fiscal year 1995.
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Selling, general and administrative expenses increased to $10.3 million or
12.8% of net sales in fiscal year 1996, from $4.8 million or 10.8% of net sales
in fiscal year 1995. The increase in selling, general and administrative
expenses was due primarily to the Dolco and Flemington acquisitions. The
increase in selling, general and administrative expenses as a percentage of net
sales was due to the to the historically higher selling, general and
administrative expenses as a percentage of net sales in the Dolco operation.
Income from operations increased to $8.2 million or 10.2% of net sales in
fiscal year 1996 from $4.9 million or 11.0% of net sales for the same period in
1995. As a percentage of net sales, the increase in gross profit was more than
offset by the increase in selling, general and administrative expenses.
Interest expense increased to $5.8 million or 7.2% of net sales in fiscal
year 1996, from $4.3 million or 9.7% of net sales in fiscal year 1995 due
primarily to an increase in borrowings related to the Dolco and Flemington
acquisitions. The lower percentage of net sales for 1996 interest expenses
reflects the decreasing debt as a percentage of net sales following the Dolco
and Flemington acquisitions.
Provision for income taxes increased to $1.0 million and an effective tax
rate of 50.2% in fiscal year 1996, from $0.2 million and an effective tax rate
of 56.0% in fiscal year 1995. The effective tax rate is higher than the
Company's expected rate of 38% due to certain state and local taxes incurred
which relate to prior periods in both fiscal years.
Net income increased to $1.0 million or 1.2% of net sales in fiscal year
1996 from $0.2 million or 0.4% of net sales in fiscal year 1995, for the reasons
discussed above.
Depreciation and amortization increased to $6.8 million or 8.4% of net
sales for the year ended June 28, 1996 from $3.5 million or 7.7% of net sales
for the same period in 1995. The increase in depreciation and amortization is
due to the acquisitions of Dolco and Flemington and, to a lesser extent, to
increased purchases of fixtures and equipment to support the Company's
underlying business.
EBITDA increased to $14.2 million or 17.5% of net sales in fiscal year 1996
from $7.9 million or 17.7% of net sales for fiscal year 1995, for the reasons
stated above.
YEAR ENDED JUNE 30, 1995 COMPARED TO PERIODS FROM MARCH 19 TO JULY 1, 1994 AND
FROM JANUARY 1 TO MARCH 18, 1994 AND TO YEAR ENDED DECEMBER 31, 1993
Net sales were $44.7 million for fiscal year 1995 compared to $12.7
million, $9.4 million and $44.9 million for the periods ended July 1, 1994 and
March 18, 1994 and the year ended December 31, 1993, respectively. Expressed as
net sales per week, revenues were steady at approximately $860,000 for fiscal
year 1995 and each of the preceding periods.
Cost of sales decreased to 78.2% of net sales in fiscal year 1995, from
78.3%, 84.1% and 81.6% of net sales for the preceding periods, respectively. The
decline in cost of sales as a percentage of net sales for the periods following
the March 18, 1994 acquisition by the current owners was due primarily to price
increases in selected flexible packaging products, elimination of low-margin
business and reduction of waste in the Brooklyn plant, and improved material
efficiencies in foam products.
Gross profit, as a result, increased to 21.8% of net sales in fiscal year
1995 from 21.7%, 15.9% and 18.4% of net sales for the preceding periods,
respectively.
Selling, general and administrative expenses were 10.8% of net sales in
fiscal year 1995, compared to 12.0%, 6.4% and 11.3% of net sales for the
preceding periods, respectively. The change in selling, general and
administrative expenses was due primarily to reorganization of Brooklyn plant
management, and reorganization of the Somerville foam operation. The low
percentage of net sales for the period ended March 18, 1994 was primarily due to
the fact no executive or management bonuses were paid or accrued for such
period.
Income from operations increased to 11.0% of net sales in fiscal year 1995,
from 9.8%, 9.5% and 7.1% of net sales for the preceding periods, respectively,
for the reasons stated above.
Interest expense increased to 9.7% and 9.0% of net sales in fiscal year
1995 and the period ended July 1, 1994, respectively, from 0.2% and 0.4% of net
sales for the period ended March 18, 1994 and year ended
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<PAGE> 28
December 31, 1993, respectively, due primarily to increased borrowings arising
from the acquisition by the current owners on March 18, 1994.
Provision for income taxes was 0.5% of net sales in fiscal year 1995, and
0.1%, 0.6% and 0.6% of net sales for the preceding periods, respectively. The
effective tax rate was 56.0%, 44.9%, 6.8% and 8.8% for the respective periods.
The effective tax rate for the periods prior to March 18, 1994 are not
comparable to subsequent periods due to Tekni-Plex's being taxed as an "S"
Corporation under the prior ownership.
Net income was 0.4% of net sales for fiscal year 1995, and 0.2%, 8.2% and
6.2% of net sales for the preceding periods, respectively, as the increase in
income from operations was more than offset by the increase in interest expense,
following the acquisition in 1994 and other reasons outlined above.
Depreciation and amortization increased to 7.7% and 6.9% of net sales in
fiscal year 1995 and the period ended July 1, 1994, respectively, from 1.5% and
1.4% of net sales for the period ended March 18, 1994 and year ended December
31, 1993, respectively. The increase in depreciation and amortization is due
primarily to the acquisition of Tekni-Plex by the current owners and, to a
lesser extent, due to increased purchases of fixtures and equipment to support
Tekni-Plex's underlying business.
EBITDA increased to 17.7% of net sales in fiscal year 1995 from 15.6%,
10.5% and 8.5% of net sales for the preceding periods, respectively, for the
reasons stated above.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal sources of funds since March 1994 consisted of cash
from operations and financing sources. For the nine months ended March 28, 1997,
net cash provided by operating activities was $13.3 million compared to net cash
used in operating activities of $4.3 million for the same period in 1996, and
for the year ended June 28, 1996, net cash provided by operating activities was
$6.6 million compared to $2.4 million for the year ended June 30, 1995.
Working capital at March 28, 1997 was $13.3 million compared to $11.7
million at June 28, 1996 and $3.2 million at June 30, 1995. The increase in
working capital at March 28, 1997 was due primarily to higher accounts
receivable and inventory associated with increased sales. The increase in
working capital at June 28, 1996 compared to the prior fiscal year end was due
primarily to the effects of the Flemington and Dolco acquisitions. The Company
has managed its growth in working capital through a combination of operating
cash flow and borrowings under the Existing Credit Facility (as defined).
As of March 28, 1997, there was no outstanding balance under the $19
million revolving credit line of the Existing Credit Facility. On May 8, 1997,
the Company entered into the New Credit Facility, and the Company has terminated
the Existing Credit Facility. See "Use of Proceeds" and "Description of New
Credit Facility."
The Company's capital expenditures for the years ended June 30, 1995 and
June 28, 1996 and the nine months ended March 28, 1997 were $0.6 million, $2.3
million and $2.7 million, respectively. Management expects that annual capital
expenditures will increase from historical levels during the next few years as
the Company makes improvements needed to address air emissions at three of the
Company's manufacturing facilities, and as the Company pursues new development
and cost-reduction opportunities. Management has identified potential capital
investment opportunities of approximately $5.7 million for calendar year 1997 in
addition to approximately $3.0 million of non-discretionary capital expenditures
anticipated during such period.
Apart from acquisitions, the Company's principal uses of cash for the next
several years will be debt service, capital expenditures and working capital
requirements. Management believes that cash generated from operations plus funds
from the current credit facilities will be sufficient to meet the Company's
expected debt service requirements, planned capital expenditures, and operating
needs. However, there can be no assurance that sufficient funds will be
available from operations or borrowings under the New Credit Facility to meet
the Company's cash needs to the extent management anticipates. The reduction in
debt service
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requirements resulting from the Transactions will provide the Company with
increased flexibility to make capital expenditures that management believes will
provide an attractive return on investment.
Part of the Company's strategy is to explore possible future acquisitions.
Under the New Credit Facility, the Company will be able to borrow initially up
to $50 million for use in possible acquisitions, with an additional $25 million
upon approval of the lenders thereunder. To the extent the Company pursues
future acquisitions, the Company may be required to obtain additional financing.
There can be no assurance that it will be able to obtain such financing in
amounts and on terms acceptable to it.
SEASONALITY
Although certain different product lines of the Company experience some
seasonality, their effects are generally offsetting, and the Company overall has
not experienced any material seasonality in the periods reflected herein.
EFFECTS OF INFLATION
The Company believes that inflation has not significantly affected its
results of operation in the periods reflected herein.
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INDUSTRY
The packaging industry in the United States has overall annual sales of
over $70 billion with growth prospects in line with Gross Domestic Product
("GDP"). The stability of the packaging industry through economic cycles results
from its central role in the distribution of basic consumer items such as food,
beverages, personal care products, and pharmaceuticals. The industry as a whole
has very diverse products.
A packaging customer's product choice criteria can be grouped into a small
number of categories: overall cost, physical characteristics of the product
being packaged, physical characteristics of the packaging itself, and consumer
preferences. The industry can be broken down into the following seven segments:
flexible and semi-rigid packaging, plastic bottles, metal cans, glass
containers, paper-corrugated, paper-folding, and closures. Several of the market
segments, including the flexible and semi-rigid segment, are highly fragmented
and are undergoing consolidations. The Company competes within the flexible and
semi-rigid segment of the packaging industry which accounts for nearly $15
billion or approximately 20% of total annual industry revenues.
FLEXIBLE AND SEMI-RIGID PACKAGING
The Company believes the flexible and semi-rigid packaging segment is
growing at a higher rate than GDP, driven by both favorable economic factors and
environmental issues. The Company believes that the plastics area of this
segment, which includes most of the Company's products, is growing at a faster
rate than the non-plastics areas because of the generally lower package cost and
broader range of functional characteristics of plastic packaging. The Company
believes that the technologies used to manufacture plastic packaging materials
continue to develop at a faster pace than those used in the more mature paper,
glass, and metal segments.
Source reduction in packaging is a growing focus of environmental
conservation. The term "source reduction" refers to the idea of accomplishing
requisite packaging functions with a minimum of packaging materials. By using
less material to perform the packaging function, the minimum environmental
impact is achieved: greater conservation of the Earth's resources, lower energy
usage in both the production of packaging materials and product distribution
costs, and fewer disposal issues. The Company believes that the flexible and
semi-rigid segment of the packaging industry consistently provides the materials
of choice from a source reduction viewpoint.
Much of the growth in the flexible and semi-rigid packaging segment of the
industry has come at the expense of the more mature metal, glass, and
paper-folding segments. The Company believes that this growth results from
flexible and semi-rigid materials generally offering a lower cost packaging
alternative to the more mature materials. The Company believes that the sheer
diversity of product offerings within the flexible and semi-rigid segment allows
the fine-tuning of materials to meet the customer's needs for product protection
(shelf-life), and marketing impact (customized graphics and package shape) at
the lowest cost.
The Company's primary product lines are discussed below:
High-barrier blister materials. Transparent, high-barrier blister
packaging is primarily used to protect ethical drugs from moisture vapor
infiltration or desiccation. Blister packaging is the preferred packaging form
when dispenser handling can affect shelf life or drug efficacy, or when unit
dose packaging is needed. Unit dose packaging is being used to improve patient
compliance with regard to dosage regimen, and has been identified as the
packaging form of choice in addressing child safety aspects of drug packaging.
The advantages of transparent blisters, as opposed to opaque foil-based
materials, include the ability to visually inspect the contents of the blister
and to present the product with maximum confidence.
Closure liner materials. Closure liners perfect the seal between a
container and its closure, for example, between a bottle and its cap. The liner
material has become an integral part of the container/closure package. Without
the gasketing effect of the liner, most container/closure packages would not be
secure enough to protect the contents from contamination or loss of freshness.
The Company manufacturers a broad line of closure liner materials including some
of the most innovative structures available for tamper protection and special
barrier applications.
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Foamed polystyrene packaging. Foamed polystyrene packaging has been the
material of choice for food packaging cartons and trays for many years. In terms
of economic and functional characteristics, foamed polystyrene products offer a
combination of high strength, minimum material content and superior moisture
barrier performance. Foamed polystyrene products also offer greater dimensional
consistency that enhances the high speed mechanical feeding of cartons and trays
into automated package filling operations.
Entry barriers for the Company's pharmaceutical packaging products are high
due to the lengthy and stringent approval process employed by the FDA. Approval
requires that the drug be tested while packaged in the same packaging materials
intended for commercial use, so that changing materials after approval risks
renewed scrutiny by the FDA. Also, the high manufacturing and audit compliance
standards imposed by the pharmaceutical companies on their suppliers provide a
significant barrier to entry. There are significant disincentives for new
competitors to the Company's egg packaging products including (i) high capital
costs, including high opportunity costs associated with switching assets
presently dedicated to other uses to egg carton production; (ii) the high level
of technical competence required for the associated manufacturing processes; and
(iii) the high cost of meeting required customer order response times in a
job-shop environment.
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BUSINESS
GENERAL
The Company designs, manufactures and markets packaging materials primarily
for the pharmaceutical and food industries. Currently, its products fall into
two categories. The Flexible Packaging Group produces laminated and coated
packaging materials primarily for pharmaceutical end-uses. The Company is the
market leader for clear, high-barrier laminations for pharmaceutical blister
packaging with an estimated greater than 90% share of the market for such
products. These packaging materials are used for fast-acting pharmaceuticals
that are generally highly reactive to moisture. The Foam Products Group produces
foamed polystyrene packaging products such as egg cartons and processor trays
for the poultry and meat industries. The Company produces in excess of 80% of
all foam egg cartons and has over 40% of the egg carton market. The Company has
also built a strong presence in the processor tray market, where it has an
estimated share of greater than 20%.
The management of the Company focuses on organizational development,
imparting a results-oriented culture to all areas of its businesses. Management
seeks and implements continual product and process improvements to produce
higher quality products, improve efficiencies, reduce labor and material costs,
and create differentiated products and product line extensions. The Company has
also expanded its product offerings by acquiring synergistic packaging companies
and has significantly reduced costs through product line rationalization and
re-negotiation of supplier agreements. Management believes that this focus will
continue with respect to the Company's on-going business and will be the basis
for successfully integrating future acquisitions.
Since its acquisition by the current owners, the Company has achieved
significant improvements in profitability. For the trailing twelve months ended
March 28, 1997, the Company had revenues of $143.5 million and EBITDA of $29.7
million for an EBITDA margin of 20.7%, compared with revenues of $44.9 million
and EBITDA of $3.8 million for an EBITDA margin of 8.5% for the year ended
December 31, 1993. This improvement has been continuous. For the nine months
ended March 28, 1997, the Company had revenues of $109.8 million and EBITDA of
$22.9 million for an EBITDA margin of 20.8%, compared with revenues of $47.2
million and EBITDA of $7.3 million for an EBITDA margin of 15.5% for the nine
months ended March 29, 1996.
COMPANY HISTORY
Tekni-Plex was founded as a Delaware corporation in 1967 to acquire the
General Felt Products division of Standard Packaging Corporation. The Company,
then located in Brooklyn, New York, built a reputation for solving difficult
packaging problems and providing customers with high quality, advanced packaging
materials. In 1970, the Company built an additional manufacturing facility in
Somerville, New Jersey, diversifying into the business of producing polystyrene
foam trays for the poultry processing industry. The Somerville facility serves
as the current headquarters of the Company.
1994 -- Acquisition by the Current Owner
In March 1994, Tekni-Plex was acquired by its current controlling
shareholder, and Dr. F. Patrick Smith was appointed its Chief Executive Officer.
Mr. Kenneth W.R. Baker, the current Chief Operating Officer, was appointed in
April 1994. At that time, the principal product lines in the Flexible Packaging
Group consisted of clear, high-barrier laminations for pharmaceutical blister
packaging, and closure (bottle cap) liners, primarily for pharmaceutical
end-uses. The principal product lines in the Foam Products Group consisted of
padded and unpadded foam processor trays primarily for the poultry industry.
At the time of the 1994 acquisition, the current management was faced with
three distinctly different situations in Tekni-Plex's three primary product
lines: (i) the clear, high-barrier blister packaging product line, produced in
Somerville, had achieved good operating margins, but, because it was limited to
a relatively narrow (but important) range of performance characteristics, it was
not positioned to take full advantage of the trends in new drug development in
the pharmaceutical industry; (ii) the closure liner products, produced
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in the Brooklyn plant, had consistently generated operating losses; and (iii)
the foam processor tray market had become intensely competitive as to price and
Tekni-Plex's heavy duty products were too costly and thus ill-suited to compete
in this environment.
In the ensuing months, management changed the Company's culture into a
focused, results-oriented, professional organization capable of managing change
and addressed each of the strategic issues facing the principal product lines as
follows:
Clear, high-barrier laminations. New lines of clear, high-barrier
laminations were developed that extended the range of pharmaceutical
packaging applications and laid the groundwork for future sales growth. By
working with suppliers and reorganizing and improving the production
scheduling function, management substantially reduced order lead times. In
addition, production waste was reduced and productivity was improved.
Closure liner products. In the Brooklyn operation, management
developed and implemented an item-specific, customer-specific-product
costing system. Once the true costs of the 600-plus basic items were
understood, a rational pricing policy was established. As a result,
unprofitable products were pared, simplifying the operation and allowing
further improvements in productivity as well as reduced waste. After five
consecutive years of negative cash flow prior to the 1994 acquisition,
management believed that it had turned around the Brooklyn operation so
that it could sustain on-going positive profit contributions. Nonetheless,
within 16 months the Brooklyn operation was moved and consolidated into the
Flemington operation for further efficiencies, as described below.
Foam processor trays. The foam processor tray operation was
reorganized, primarily to establish a clear delineation of
responsibilities. More cost-effective supply agreements were negotiated. A
new line of material-efficient products was introduced with increased
strength and lower production costs, allowing the Company to participate in
the price competitive market place. The manufacturing operation was
reconfigured to improve material flows, and focus was brought to bear on
the padding operations to reduce waste and inefficiency.
1995 -- Flemington Acquisition
In December 1995, Tekni-Plex acquired the Flemington, New Jersey, plant and
business of Hargro for approximately $7.5 million. The Flemington plant utilizes
lamination and coating technology to produce packaging materials for: (i)
pharmaceutical products (transdermal patches, sutures, iodine and alcohol swabs,
aspirin and other physician samples); (ii) electronics and telecommunications
products (optical fiber and conventional cable shielding, transformer and
ballast insulation); (iii) industrial products (photographic and automotive);
and (iv) food products (snack foods, dry powders). Management believed that the
Flemington acquisition offered significant benefits by providing a modern
facility that increased capacity and removed physical limitations associated
with the older Brooklyn plant, adding new technologies complimentary to
Tekni-Plex's then existing capabilities, and avoiding capital expenditures for
environmental compliance that would have been required at the Brooklyn plant.
Following the Flemington acquisition, management implemented a number of
changes: (i) the salaried workforce was reorganized to establish a clear
delineation of responsibilities; (ii) pricing changes were implemented that
resulted in the paring of unprofitable products with the associated labor and
overhead being eliminated; and (iii) needed capital improvements were made.
The Company relocated the Brooklyn equipment, personnel and business into
the Flemington facility during the quarter ending in June 1996, which was
concurrent with the expiration of the Brooklyn lease. The modern design and
layout of the Flemington plant lowered manufacturing waste levels and reduced
labor requirements in the production of closure liners. Having similar
technologies under one roof led to improved efficiencies as each group learned
the subtle enhancements developed over the years by the other. The merged
operations benefitted from new economies of scale. The result has been a
combined operation with considerably higher efficiencies and lower costs than
the sum of the stand-alone operations.
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1996 -- Dolco Acquisition
In February 1996, as Tekni-Plex was integrating the Flemington acquisition
from eight weeks earlier, it completed its acquisition of Dolco, a
publicly-traded $81 million foam products company which at the time was nearly
twice the size of Tekni-Plex. Dolco had been in the business of producing foam
packaging products since the 1960s and had attained the leading share of foam
egg carton sales in the United States. While Dolco had continued to address
changing market needs by, for example, introducing the use of post-consumer
recycled materials into its products, and had produced calendar year 1995 EBITDA
of approximately $8.7 million, the Company believed it was under-performing
financially.
Following the acquisition, management closed Dolco's headquarters in
California and absorbed the requisite functions into the Company. The Dolco
research and development facility in Lawrenceville, Georgia, was also closed
and, in part, moved to the nearby Dolco plant also in Lawrenceville. Dolco's
operations in Wenatchee (Washington), Dallas and Lawrenceville were reorganized.
Management negotiated more favorable material supply agreements, instituted
pricing policies consistent with those of the Company, and devised strategies to
address the environmental issues facing the Company.
COMPETITIVE STRENGTHS
The Company believes that its competitive strengths include:
- Producer of high quality, technically sophisticated products. The
Company has a long-standing reputation as a manufacturer of high-quality,
high performance primary packaging products (where the packaging material
comes into direct contact with the end-product). The Company's emphasis
on quality is evidenced by its product lines which address the high-end
of their respective markets. The Company primarily competes in
technically sophisticated areas such as the high-barrier pharmaceutical
blister packaging market where high performance characteristics are
required due to the sensitive nature of the product. A significant
portion of the Company's processor tray product line is aimed at the
high-performance segment of the processor tray market where strength and
durability are essential due to the high speed, automated machinery used
by the processors. As the leading supplier of foam egg cartons, the
Company produces a high quality product with superior performance
characteristics compared to competitive offerings.
- Cost efficient producer. The Company continually focuses on improving
underlying operations and reducing costs. Since the 1994 acquisition,
current management has improved the Company's cost structure from an
EBITDA margin of 8.5% on sales of $44.9 million for the year ended
December 31, 1993 to an EBITDA margin of 20.7% on sales of $143.5 million
for the twelve months ended March 28, 1997.
- Experienced management team. The current management team has been
successful in selecting and integrating strategic acquisitions and in
improving underlying business fundamentals in the regular course of
business. Members of the management team have worked together in the
packaging industry for many years and have a strong track record.
Together, they have integrated acquisitions, effected turnarounds,
provided strategic direction and leadership, increased sales and market
share, improved manufacturing efficiencies and productivity, and
developed new technologies to enhance the competitive strengths of the
companies they have managed. See "Management."
- Strong market share in core businesses. The Company has a strong market
presence in most of its core product lines. The Company produces in
excess of 80% of all foam egg cartons and has over 40% of the overall egg
carton market which is split approximately equally between foam and
pulp-based products. The Company has an estimated greater than 90% share
of the market for clear, high-barrier laminations for pharmaceutical
blister packaging. The Company has also built a strong presence in the
processor tray market where it has an estimated share of greater than
20%.
- Successful integration of acquisitions. The Company has a strong track
record of identifying and integrating both small and large acquisitions.
After significantly improving the business of Tekni-Plex following the
1994 acquisition, management successfully integrated both the Flemington
and Dolco
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operations, the latter being a public company then nearly twice the
Company's size. During the same period, the Brooklyn and Flemington
operations were merged, substantially improving production efficiencies
and reducing waste.
- Strong customer relationships. The Company has long-standing
relationships with many of its customers. The Company estimates the
average tenure among the Company's top ten customers at more than 14
years. The Company attributes its long relationships with its customers
to the ability to consistently manufacture high quality products and to
consistently provide a superior level of customer service. The Company
routinely wins recognition for its superior products and customer service
including a recent Outstanding Supplier Award from Pharmacia & Upjohn,
and an Outstanding Quality Award from Abbott Laboratories.
BUSINESS STRATEGY
The Company seeks to maximize its growth and profitability and take
advantage of its competitive strengths by pursuing the following business
strategy:
- Ongoing cost reduction through technical process improvement. The
Company has an ongoing program to improve manufacturing and other
processes in order to drive down costs. Examples of cost improvement
programs include: (i) material and energy conservation through enhanced
process controls; (ii) reduction in machine set-up time through the use
of proprietary technology; (iii) continual product line rationalization;
and (iv) development of backward integration opportunities.
- Growth through acquisitions. The Company believes that there is a
significant opportunity to consolidate the highly fragmented packaging
industry in the United States. The Company makes acquisitions based on
the following factors: (i) the Company seeks to acquire product lines
which logically extend its presence in the markets it currently serves,
thereby enhancing the Company's value to its customers; (ii) the Company
seeks add-on acquisitions which increase its market share in a particular
product line, thereby providing opportunity to gain economies of scale
and reduce costs; (iii) the Company seeks opportunities for technology
sharing where acquired and existing operations are enhanced by combining
and sharing complementary technologies; and (iv) the Company seeks
acquisitions that provide opportunity for synergistic cost reduction due
to duplication of effort and acquisitions where imparting the Company's
focused, results-oriented culture will lead to enhanced operating
results.
- Internal growth through product line extension and improvement. The
Company continually seeks to improve and extend its product lines and
leverage its existing technological capabilities in order to increase
market share and improve profitability. Before 1994, the Company's line
of pharmaceutical blister laminations addressed a relatively small
(although important) range of performance requirements, namely the
high-barrier segment of the market. New products developed since that
time have extended the Company's offerings to include the ultra-high
barrier segment (previously confined to foil-based products) and the
low-to-medium barrier segment (previously confined to solution-coated
products). In addition, the Company believes that it has a significant
opportunity to increase sales of its foamed polystyrene packaging
products by focusing on incremental improvements to these products.
- Growth through international expansion. The Company currently exports
approximately ten percent of its pharmaceutical packaging sales. Given
the Company's reputation, its recently expanded product line, and the
multi-national nature of many of its customers, the Company believes
there is significant opportunity to expand international sales.
Accordingly, the Company has hired an international sales manager who has
significant experience in selling to the international pharmaceutical
industry. The Company has also begun to set up a network of agents in
various international markets.
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PRODUCTS
Flexible Packaging Group
The Flexible Packaging Group manufactures printed and unprinted multi-layer
constructions of plastic, paper and metal films and sheets combined with layers
of other materials for particular purposes, with emphasis on pharmaceutical and
telecommunications applications. The principal product lines in this group are
clear, high-barrier laminations for pharmaceutical blister packaging, and
closure (bottle cap) liner products primarily for pharmaceutical end-uses.
The Company's line of pharmaceutical-grade, clear, high-barrier (to
moisture transmission) laminations are high quality, proprietary products which
have superior clarity and moisture-barrier characteristics. Manufacture of these
products uses proprietary adhesive technology to laminate Aclar(R) films, a
material that does not lend itself easily to adhesion onto other plastic films
and sheets.
The Company has a broad range of closure liner products currently available
in the marketplace. The Company's major closure liner products include PS22 (a
pressure sensitive coated polystyrene foam generally used for ethical drugs and
vitamins), VapoSeal(R) (vinyl coated aluminum foil used for highly hygroscopic
products such as antacid), Heat Sealable Innerseals (high-barrier seals for
highly-sensitive products), and Tekniseal(R) 33 (extruded polyethylene liner
used generally as a backing for aqueous applications).
Before 1994, the Company's line of blister laminations addressed a
relatively small (although important) range of performance requirements, namely,
the high-barrier category. New products developed since the 1994 acquisition
have extended the Company's offerings to include the ultra-high barrier
category, previously confined to foil-based (non-transparent) products, and the
low-to-medium barrier category, previously confined to solution-coated products
(as opposed to laminated products). The Flemington acquisition added
strategically important new pharmaceutical products to the Company's line for
the packaging of transdermal patches, sutures, iodine and alcohol swabs, aspirin
and other physician samples. In addition, the Company manufactures food
packaging laminations, optical fiber cable shielding materials, specialty wire
and cable wrap, electrical laminates, and other specialty coating laminates for
industrial applications.
Foam Products Group
The Foam Products Group produces a wide variety of foamed polystyrene
products, including egg packaging, processor trays for the poultry, pork and
sausage industries, apple packaging, mushroom tills, containers for food
products and baked goods, supermarket meat trays, disposable plates, and
hinged-lid containers for the foodservice industry. These products are primarily
used for the sale of food items and are designed for protection, freshness,
insulation, sanitation, and merchandising impact.
The principal product lines in this group are egg cartons and processor
trays. These products may be printed, embossed or laminated to meet customer
specifications. Egg packaging is almost always printed in multiple colors. By
utilizing both the inside and the outside surfaces of the egg cartons the
maximum amount of space can be made available for each customer's unique
advertising requirements. Processor trays are most often sold with an absorbent
pad fixed to the tray bottom. The trays and pads are generally designed to the
customer's specifications to meet functionality requirements.
The Company's Dolco subsidiary is the leading manufacturer of foam egg
packaging products. The precise dimensions of polystyrene foam cartons lend
themselves to automated, high-speed, machine dispensing systems used in the egg
packing industry. Dolco has been the innovator of new packaging concepts and
designs and was the first to manufacture foam egg cartons in eight, twelve, and
eighteen egg configurations. In addition, Dolco was the first to manufacture and
sell foam egg cartons with post-consumer recycle content with the approval of
the FDA.
Processor trays require greater dimensional consistency, strength and
higher resiliency than trays used by supermarkets because of their use in
high-speed automated poultry and meat packaging machines and because of handling
during shipping. The Company's processor trays are widely recognized for their
high performance qualities. Since the 1994 acquisition, the Company, through
proprietary technological advances, has developed
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<PAGE> 37
a new line of products that have a lower density of polystyrene foam but still
meet all customer requirements for strength and durability.
SALES, MARKETING AND CUSTOMERS
As of March 28, 1997, the Company had a sales team comprised of 41 people,
covering both domestic and international sales. There were 14 salespeople in the
Flexible Packaging Group and 27 in the Foam Products Group. The Company believes
it has earned a solid reputation with its customers for high quality service.
The Company engages in various marketing activities such as participation in
trade shows, mailings of samples, direct calls to potential customers and
advertising. The Company is currently developing its own web-site on the
internet.
The Company's high-barrier, blister laminations are sold directly to the
major pharmaceutical companies (or their designated contract packagers), while
closure liners are sold to the closure (bottle cap) producers who, in turn,
supply these same pharmaceutical companies.
Distribution is accomplished from the manufacturing locations to the
customers via common carrier and/or customer pick up. In the Foam Products
Group, most sales are in full truckload quantities.
The Company has begun to market its full pharmaceutical product line
directly on a worldwide basis and is assembling a global network of sales
personnel (both direct and outside manufacturer's representatives).
The Company's customer base includes most of the major pharmaceutical
manufacturers, most of the egg packagers (including those owned by egg
retailers) and many of the poultry processors. Overall customer concentration is
low with the largest single customer accounting for less than six percent of
total sales and the top ten customers generating approximately 25% of sales.
MANUFACTURING
Flexible Packaging Group
The Company manufactures primary flexible packaging materials in two
locations: Somerville, New Jersey, and Flemington, New Jersey. Both locations
have thermal oxidation devices that provide the controls necessary to meet clean
air emissions standards.
The manufacturing processes involve laminating, coating, printing and
slitting. Raw materials used include plastic films, metal foils, plastic resins,
paper, adhesives, inks and coatings. The Company has what it considers to be
numerous proprietary methods and formulations that are used to produce a wide
variety of multi-layer heterogeneous structures. These structures have specific
sets of functional properties suited for specific packaging end uses.
The packaging materials for pharmaceutical applications require special
documentation of material sources and uses within the manufacturing process as
well as heightened quality assurance measures. See "-- Competition."
Foam Products Group
The Company manufactures foamed polystyrene packaging and foodservice
products in five locations: Somerville, Wenatchee (Washington), Decatur
(Indiana), Dallas (Texas) and Lawrenceville (Georgia).
The manufacturing processes include foam extrusion, thermoforming, printing
and application of absorbent padding. Raw materials used are polystyrene,
blowing agents, color concentrates, inks, tray padding materials and plastic
bags. The beginning step of the manufacturing process is foam extrusion. Solid
plastic pellets are introduced into an extrusion line along with a blowing agent
and a foamed sheet is generated in roll form. The rolls of foam sheet are then
held for a minimum period to allow for equilibration of the plastic and the
blowing agent, and are then thermoformed into various shapes using heat and
pressure. Upon exiting the thermoforming process, the formed articles are
trimmed out of the sheet to become individual products. Post thermoforming
processes can include printing or the application of an absorbent pad to a tray
article.
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<PAGE> 38
RAW MATERIALS
Polystyrene resin is the Company's largest single raw material component,
accounting for about one-third of total raw material costs. The Company
purchases polystyrene resin from several of the top suppliers. Aclar(R), a
specialty film material produced by Allied Signal and used in high barrier
laminations, is the second largest material component, accounting for roughly
about one-sixth of total material costs. Allied Signal is currently the sole
manufacturer and supplier of Aclar(R) films.
Historically, the Company has been able to pass through substantially all
of the price increases in raw materials to its customers. For example, over the
18 month period from January 1994 to June 1995, polystyrene prices rose by a
total of approximately 49%. Over that same period, the Company's gross margin,
expressed as a percentage of sales, rose from 18.4% to 21.8%. However, there can
be no assurance that the Company will be able to pass on raw material price
increases in the future.
PROPRIETARY TECHNOLOGY AND TRADEMARKS
The Company safeguards its proprietary technology through the filing and
registering of patents and trademarks, the use of confidentiality agreements,
and by restricting access to its plants. The Company does not consider its
patents and trademarks material to its operations.
COMPETITION
Flexible Packaging Group
The Company considers itself to be the market leader in clear, high-barrier
laminated blister materials with a greater than 90% share of the market for
these products. These products primarily compete with solution-coated and
foil-based products manufactured by various competitors including Klockner
Pentaplast. The closure liner market is somewhat fragmented, and it is more
difficult to estimate the Company's share since most cap manufacturers are
privately held, and many produce a portion of their needs internally.
Nonetheless, management, based on its own knowledge of the industry, estimates
that the Company holds about a 10% share of this market.
The Company believes that pharmaceutical packaging products sold in the
United States enjoy a significant barrier to entry due to the stringent approval
process employed by the FDA. The entire process for new drug approval in the
past has averaged approximately 10 years, beginning with clinical trials and
ending with stability testing. The stability step requires that the drug be
tested in the packaging materials intended for commercial use. The cost of
stability testing is substantial. Therefore, when FDA approval is finally
attained, the drug companies are generally compelled, as a practical matter,
either to use the same packaging materials (from the same supplier) or to
re-submit to the stability test phase all over again. If the drug company opts
to re-submit to the stability test phase, it risks the uncertainty of renewed
scrutiny by the FDA. Manufacturers of primary packaging materials for
pharmaceutical products (where the drug is in direct contact with the material)
must maintain a confidential Drug Master File at the FDA that describes each of
its products. Manufacturers of primary packaging materials for pharmaceutical
products must also submit to regular, on-site compliance audits performed by the
major pharmaceutical companies. Pharma-class Good Manufacturing Practices must
be followed, and documentation of each production run must provide an audit
trail to allow the drug companies to identify the genesis of each single package
released to the market. Suppliers that have a long history of consistently
meeting the rigid requirements of the pharmaceutical industry, such as the
Company, are generally considered a valuable asset to their pharmaceutical
customers.
Foam Products Group
The Company believes that competition within the foam processor tray market
is based primarily on customer service, product quality and price. There are two
other domestic companies that are significant in the foam processor tray market,
namely Tenneco Packaging and the Formpac division of W.R. Grace. The Company
estimates, based on its own views of the market, that it has in excess of 20% of
the processor tray market.
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<PAGE> 39
The Company is one of the market leaders in producing egg cartons taking
into account both foam and pulp-based cartons. The Company believes that it
currently produces more than 80% of all foam egg cartons, and has in excess of a
40% share of the overall egg carton market. In this product line, the Company's
primary competitor is Tenneco Packaging which manufactures pulp-based egg
cartons.
The Company believes that, for its foam egg packaging products, there are
significant disincentives for new competitors that include: (i) high capital
costs, including high opportunity costs associated with switching assets
presently dedicated to other uses to egg carton production; (ii) the high level
of technical competence required for the associated manufacturing processes; and
(iii) the high cost of meeting required customer order response times in a
job-shop environment.
ENVIRONMENTAL MATTERS
Like similar companies, the Company's facilities, operations and properties
are subject to federal, state and local laws and regulations relating to, among
other things, emissions to air, discharges to water, the generation, handling,
storage, transportation and disposal of hazardous and nonhazardous materials and
wastes and the health and safety of employees. The Company maintains a primary
commitment to employee health and safety, and environmental responsibility. The
Company's intention and policy are to be at all times a responsible corporate
citizen.
The Company's management includes a Director of Environmental Affairs who
is primarily engaged in making certain that the Company is in compliance in all
material respects with all federal, state and local laws and regulations
relating to the environment, and health and safety. This director performs
internal auditing procedures at all of the Company's facilities and provides
direction to local facility managers in the compliance areas. The Director of
Environmental Affairs and the President of the Company direct outside
environmental counsel and an outside environmental consulting firm to ensure
that regulations are properly interpreted and reporting requirements are met.
With respect to air emissions, in each state where the Company operates a
manufacturing facility, the Company has obtained or is in the process of
obtaining an agreement with the regulatory authorities to ensure that it has
their consent for current operations and, where necessary, to place the Company
on an approved compliance schedule. There are currently no known environmental
improvements required within the Flexible Packaging Group of the Company. Within
the Foam Products Group, the Company expects improvements will be needed to
address air emissions at three of its manufacturing facilities. The Company has
established a capital budget to address such issues.
Although the Company believes that, based on historical experience, the
costs of achieving and maintaining compliance with environmental laws and
regulations are unlikely to have a material adverse effect on the Company's
financial condition or operating results, it is possible that the Company could
incur significant fines, penalties, capital costs or other liabilities
associated with any confirmed noncompliance or cleanup liability at or related
to any of its current or former facilities, the precise nature of which the
Company cannot now predict. Furthermore, there can be no assurance that future
environmental laws or regulations will not require substantial expenditures by
the Company or significant modifications of the Company's operations. See "Risk
Factors -- Environmental Matters."
FACILITIES
The Company operates six manufacturing facilities, including the
Somerville, New Jersey plant where the Company's headquarters are located. The
Company owns all of its manufacturing facilities with the exception of the
Dallas manufacturing facility which is currently leased. The Decatur,
Lawrenceville, and
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<PAGE> 40
Wenatchee plants also lease additional warehousing space. The Company owns or
leases manufacturing, office and warehouse facilities at the locations shown in
the following table:
<TABLE>
<CAPTION>
OWNED/ SIZE (APPROX.
LOCATION LEASED SQUARE FEET) TYPE OF FACILITY (A) PRODUCT CATEGORY (B)
- --------------------------------- ------ ------------- --------------------- ---------------------
<S> <C> <C> <C> <C>
Somerville, NJ................... O 122,960 M/W/O P/F
Flemington, NJ................... O 145,000 M/W/O F
Lawrenceville, GA................ O 150,000 M/W/O P
L 31,662 W P
Wenatchee, WA.................... O 99,000 M/W/O P
L 26,400 W P
Decatur, IN...................... O 187,000 M/W/O P
L 3,750 W P
Dallas, TX....................... L 139,000 M/W/O P
</TABLE>
- ---------------
(a) M = Manufacturing; W = Warehouse: O = Office.
(b) P = Foam Products; F = Flexible Packaging.
The Company has closed Dolco's 5,850 square feet office facility in Studio
City, California, and subleased it to a third party. The Company is currently
investigating an option to purchase the manufacturing facility located in
Dallas. The Company believes that its present facilities are adequate for its
current and projected operations.
EMPLOYEES
As of March 28, 1997, the Company employed an average of 757 hourly and 127
salaried persons. The Company provides a competitive employee benefits package
that includes medical insurance, life insurance, holiday pay, vacations and a
401(k) savings plan. There is also a performance based incentive compensation
program for selected managers.
Among the Company's approximately 884 total employees, all are non-union
with the exception of approximately 85 employees in the Flemington, New Jersey,
manufacturing facility who are represented by a collective bargaining agent.
Their collective bargaining agreement will expire on September 30, 1999. The
Company believes that its relations with all of its employees are good.
LEGAL PROCEEDINGS
The Company is regularly involved in legal proceedings arising in the
ordinary course of business, none of which is currently expected to have a
material adverse effect on the Company's businesses or financial condition.
GENERAL
The Company's executive offices are located at 201 Industrial Parkway,
Somerville, New Jersey 08876, and its telephone number is (908) 722-4800.
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<PAGE> 41
MANAGEMENT
The directors and executive officers of Tekni-Plex are listed below. Each
director is elected at the annual meeting of the stockholders of Tekni-Plex to
serve a one year term until the next annual meeting or until a successor is
elected and qualified, or until his earlier resignation. Each executive officer
holds his office until a successor is chosen and qualified or until his earlier
resignation or removal. Pursuant to its by-laws, Tekni-Plex indemnifies its
officers and directors to the fullest extent permitted by the General
Corporation Law of the State of Delaware and Tekni-Plex's certificate of
incorporation.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------ --- --------------------------------------------------------
<S> <C> <C>
Dr. F. Patrick Smith................ 49 Chairman of the Board and Chief Executive Officer
Kenneth W.R. Baker.................. 52 President and Chief Operating Officer
Arthur P. Witt...................... 67 Corporate Secretary and Director
William H. Kaplan................... 46 Controller
Marvin Weintraub.................... 51 Director of Management and Information Systems
J. Andrew McWethy................... 56 Director
Barry A. Solomon.................... 49 Director
Stephen A. Tuttle................... 56 Director
Michael F. Cronin................... 43 Director
</TABLE>
In addition to the foregoing, Dr. Smith serves as Chairman of the Board and
Chief Executive Officer of the Guarantor and Mr. Baker serves as its President,
Corporate Secretary and Director. Dr. Smith and Mr. Baker are the sole directors
of the Guarantor. Directors of the Guarantor are elected at the annual meeting
of stockholders of the Guarantor to serve a one year term until the next annual
meeting or until a successor is elected and qualified, or until his earlier
resignation. Executive officers of the Guarantor are designated from time to
time by the Guarantor's board of directors and serve until a successor is chosen
and qualified or until his earlier resignation or removal. Pursuant to its
by-laws, the Guarantor indemnifies its officers and directors to the fullest
extent permitted by the General Corporation Law of the State of Delaware and the
Guarantor's certificate of incorporation.
Dr. F. Patrick Smith has been Chairman of the Board and Chief Executive
Officer of Tekni-Plex since March 1994. In addition, Dr. Smith has been Chairman
of the Board and Chief Executive Officer of the Guarantor since February 1996.
He received his doctorate degree in chemical engineering from Texas A&M
University in 1975. He served as Senior Chemical Engineer to Texas Eastman
Company, a wholly owned chemical and plastics subsidiary of Eastman Kodak, where
he developed new grades of polyolefin resins and hot melt and pressure sensitive
adhesives. In 1979, he became Technical Manager of the Petrochemicals and
Plastics Division of Cities Service Company, and a Member of the Business
Steering Committee of that division. From 1982 to 1984, Dr. Smith was Vice
President of R&D and Marketing for Guardian Packaging Corporation, a diversified
flexible packaging company. Thereafter, he joined Lily-Tulip, Inc. and managed
their research and marketing functions before becoming Senior Vice President of
Manufacturing and Technology. Following the acquisition of Lily-Tulip by Fort
Howard Corporation in 1986, he became the Corporate Vice President of Fort
Howard, responsible for the manufacturing and technical functions of the
combined Sweetheart Products and Lily-Tulip operations. From 1987 to 1990, Dr.
Smith was Chairman and Chief Executive Officer of WFP Corporation. Since 1990,
Dr. Smith has been a principal of Brazos Financial Group, a business consulting
firm. Dr. Smith is a limited partner of Tekni-Plex Partnership.
Kenneth W.R. Baker has served as Tekni-Plex's Chief Operating Officer since
April 1994 and as President since July 1995. In addition, Mr. Baker has served
as the President and Corporate Secretary of the Guarantor since May 1996 and was
elected to the Guarantor's Board of Directors in July 1996. He joined the Lily
Division of Owens-Illinois, Inc. in 1975, serving as its Manager of Systems
Development from 1975 to 1977 and as its Financial and Planning Manager from
1977 to 1980. Since 1980, he has served in a number of technical and managerial
positions. These include Manager, Industrial Engineering at the Lily Division
from 1980 to 1981, Director, Corporate Technology at Lily-Tulip, Inc. from 1981
to 1986 and Vice President, Operations at Fort Howard Cup Corporation from 1986
to 1987. In 1987, Mr. Baker joined WFP Corporation,
39
<PAGE> 42
Inc. as Senior Vice President, Operations and eventually became the company's
President and CEO before leaving the company in 1992. Thereafter, Mr. Baker
became Vice President, Research and Development at the Molded Products Division
of Carlisle Plastics, Inc. where he stayed until joining the Company.
Concurrently with the Offering, Mr. Baker will become a limited partner of
Tekni-Plex Partnership.
Arthur P. Witt has been a director of Tekni-Plex since March 1994 and was
appointed Secretary in January 1997. Since July 1989, he has been president of
PAJ Investments which is involved in financial consulting and property
management. Over the same period, Mr. Witt also served as a temporary chief
financial officer for WFP Corporation and Flexible Technology. Prior to 1989,
Mr. Witt served in a number of senior management positions for companies such as
Lily-Tulip, Inc., BMC Industries and Fort Howard Paper Co. Mr. Witt is a limited
partner of Tekni-Plex Partnership.
William H. Kaplan joined Tekni-Plex in August 1992 and has been the
Company's Controller since March 1994. From 1977 until 1992, Mr. Kaplan was a
manager with Rich Baker Berman & Co., P.A.
Marvin Weintraub has served as Tekni-Plex's Director of Management and
Information Systems since August 1996. From 1980 until joining the Company, Mr.
Weintraub served as the MIS Director for N. Erlanger Blumgart Inc. where he was
responsible for all of that company's data processing activities.
J. Andrew McWethy has served as a director of Tekni-Plex since March 1994.
He is a co-founder of MST Partners L.P. ("MST L.P.") and MST Offshore Partners,
C.V. (together with MST L.P., the "MST Investment Partnerships"), each of which
was formed in 1989, and is a general partner of MST Management, L.P., a general
partner of MST Investment Partnerships. Prior to 1989, Mr. McWethy was employed
by Irving Trust Company for twelve years. See "Risk Factors -- Control of the
Company."
Barry A. Solomon has served as a director of Tekni-Plex since March 1994.
He is a co-founder of the MST Investment Partnerships and is a general partner
of MST Management, L.P. Prior to 1989, Mr. Solomon was employed by Irving Trust
Company for ten years. See "Risk Factors -- Control of the Company."
Stephen A. Tuttle has served as a director of Tekni-Plex since March 1994.
He is a co-founder of the MST Investment Partnerships and is a general partner
of MST Management, L.P. Prior to 1989, Mr. Tuttle was employed by Irving Trust
Company for four years. See "Risk Factors -- Control of the Company."
Michael F. Cronin has served as a director of Tekni-Plex since March 1994.
He has invested in emerging growth companies and various industrial and service
businesses since 1978. Since June 1991, Mr. Cronin has been a general partner of
Weston Presidio Capital.
COMPENSATION OF DIRECTORS
Each of Tekni-Plex and the Guarantor reimburses directors for any
reasonable out-of-pocket expenses incurred by them in connection with services
provided in such capacity. In addition, each of Tekni-Plex and the Guarantor
compensates outside directors for services provided in such capacity of $15,000
or less per fiscal year for each such director. Neither Dr. Smith nor Mr. Baker
receives any compensation from the Guarantor in their capacity as directors of
the Guarantor.
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<PAGE> 43
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth the remuneration paid by Tekni-Plex to the
Chief Executive Officer and the next most highly compensated executive officer
of Tekni-Plex whose salary and bonus exceeded $100,000 for the years indicated
in connection with his position with Tekni-Plex:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
--------------------------------
FISCAL OTHER ANNUAL
NAME & PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION
----------------------------------------- ------ -------- -------- ------------
<S> <C> <C> <C> <C>
Dr. F. Patrick Smith,.................... 1996 $351,923 $859,248 $ 21,245(c)
Chief Executive Officer 1995 300,000 333,678 6,624(c)
1994 87,692(a) 0 0
Mr. Kenneth W.R. Baker,.................. 1996 $217,308 $429,624 $ 13,870(c)
President and Chief Operating Officer 1995 162,500 166,839 0
1994 31,731(b) 0 0
</TABLE>
- ---------------
(a) Salary earned from March 19, 1994 to July 1, 1994.
(b) Salary earned from April 4, 1994 to July 1, 1994.
(c) Amount reimbursed during the fiscal year for payment of taxes.
Neither Dr. Smith nor Mr. Baker receives any compensation from the
Guarantor in their capacities as executive officers of the Guarantor.
EMPLOYMENT AGREEMENTS
Tekni-Plex recently renewed its employment agreements with Dr. F. Patrick
Smith and Mr. Kenneth W.R. Baker. Both Dr. Smith and Mr. Baker's employment
agreements expire June 30, 2000 and have renewal provisions. The employment
agreements provide, among other things, for (i) payment of a base annual salary
in the amount of $550,000 in the case of Dr. Smith and $275,000 in the case of
Mr. Baker, and that these salaries may be increased (but not decreased) at the
sole discretion of Tekni-Plex's Board of Directors, (ii) payment of bonuses
based on Tekni-Plex's performance, and (iii) certain fringe benefits. Each
employment agreement provides that the executive may be terminated by Tekni-Plex
upon the following bases: (i) for cause or (ii) death or disability of the
executive. Each of Dr. Smith and Mr. Baker are entitled to severance benefits if
he is terminated due to the occurrence of an event specified in the preceding
sentence. The employment agreements also provide that the executives may not
compete with Tekni-Plex or its subsidiaries during the period of employment and
for one year thereafter.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Witt, who is also the corporate secretary of Tekni-Plex, has served as
a member of the compensation committee of Tekni-Plex's board of directors. In
addition, as Chief Executive Officer of Tekni-Plex, Dr. Smith participated in
deliberations concerning the compensation of certain executive officers of
Tekni-Plex (but not the compensation for himself or Mr. Witt).
SECURITY OWNERSHIP
Tekni-Plex Partnership owns 100% of the outstanding shares of Tekni-Plex
and 97.5% of Tekni-Plex on a fully diluted basis.
Tekni-Plex Partnership has one general partner and six limited partners.
Messrs. McWethy, Solomon and Tuttle are affiliated with the general partner of
Tekni-Plex Partnership which owns an aggregate interest in the net profits of
Tekni-Plex Partnership equal to approximately 55% and Dr. Smith owns an interest
in the net profits of Tekni-Plex Partnership equal to approximately 18%, in each
case, subject to certain conditions
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<PAGE> 44
contained in Tekni-Plex Partnership's agreement of limited partnership and after
giving effect to the Transactions and all other transactions occurring
concurrently herewith.
In 1994, Kenneth W.R. Baker was granted options on 2.5% of Tekni-Plex's
common stock, with anti-dilution provisions. Mr. Baker's option has a term of
fifteen years from the date of the grant. The option terminates immediately upon
Mr. Baker's termination for cause from Tekni-Plex. If Mr. Baker for any other
reason ceases to be employed by Tekni-Plex or is terminated by reason of a
disability, the option may be exercised for a period of six months following Mr.
Baker's cessation of employment. The option may be exercised by Mr. Baker's
estate for a year following Mr. Baker's death.
In connection with the Transactions, Tekni-Plex, Tekni-Plex Partnership and
Dr. F. Patrick Smith entered into an agreement pursuant to which: (i) so long as
Tekni-Plex Partnership continues, Dr. Smith has an option to acquire an interest
in Tekni-Plex Partnership representing up to 1.4% of the outstanding equity
interest in Tekni-Plex Partnership; and (ii) if Tekni-Plex Partnership has been
dissolved, Dr. Smith has an option to acquire shares of common stock of
Tekni-Plex representing up to 1.4% (less any options exercised pursuant to
clause (i) above) of the outstanding common stock. These options have a term of
five years from the date of the grant.
Tekni-Plex owns 100% of the outstanding shares of the Guarantor.
CERTAIN TRANSACTIONS
Tekni-Plex has a management consulting agreement with MST Management
Company and MST/TP Holding, Inc., both of whom are affiliated with Tekni-Plex's
controlling shareholder. Pursuant to their respective agreements, MST Management
Company and MST/TP Holding, Inc. provide regular and customary management
consulting services to Tekni-Plex. The terms of each agreement require
Tekni-Plex to pay a monthly management fee to MST Management Company and MST/TP
Holding, Inc. for a period of ten years from March 18, 1994. Consulting service
fees were in the aggregate approximately $274,000 for fiscal year 1996, and will
increase to approximately $400,000 for fiscal year 1997 as a result of the Dolco
acquisition.
Tekni-Plex has an arrangement with Arthur P. Witt, a director of
Tekni-Plex, whereby Mr. Witt provides customary management consulting services
to Tekni-Plex on an "as needed" basis. Tekni-Plex anticipates that compensation
to Mr. Witt for services rendered on behalf of Tekni-Plex will be roughly
$60,000 for fiscal year 1997.
In connection with the Dolco acquisition, Tekni-Plex loaned to Arthur P.
Witt $100,000, at 8% annual interest, enabling Mr. Witt to acquire a partnership
interest in Tekni-Plex Partnership as a limited partner.
Concurrently with the Transactions, Tekni-Plex loaned to Kenneth W.R. Baker
$100,000, at 8% annual interest, enabling Mr. Baker to acquire a partnership
interest in Tekni-Plex Partnership as a limited partner.
DESCRIPTION OF NEW CREDIT FACILITY
On May 8, 1997, the Company entered into a revolving credit agreement
providing for bank commitments of $75.0 million, which amount may be increased
to $100.0 million (the "New Credit Facility"), of which $15.0 million may be
used for letters of credit.
The available commitments under the Credit Agreement can be used for
permitted acquisitions and general corporate purposes of the Company, including
working capital. Loans will bear interest at a rate based upon LIBOR or the
higher of the administrative agent's prime rate and a federal funds based rate.
The Company is required to pay quarterly commitment fees based on the amount of
unused commitments and fees
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<PAGE> 45
based on the aggregate undrawn amount of all letters of credit outstanding from
time to time. The Credit Agreement will terminate on the fifth anniversary of
the date of execution of the Credit Agreement, unless terminated sooner upon an
event of default (as defined in the Credit Agreement). Outstanding loans will be
payable on such termination date or such earlier date as may be required
following the occurrence of an event of default.
The Credit Agreement contains various covenants customary for agreements of
this type. These covenants include but are not limited to the following:
financial covenants that require the Company to maintain minimum levels of net
worth, minimum levels of earnings before interest, taxes, depreciation,
amortization and other similar non-cash charges, minimum fixed charge coverage
and maximum leverage ratios; restrictions on liens; restrictions on capital
expenditures; limitations on dividends and payments in respect of capital stock
of the Company, including loans or advances to, or guarantees of the obligations
of, other persons; limitations on acquisitions and other investments;
limitations on incurrence and repurchase or voluntary repayment of debt;
limitations on mergers, liquidations, consolidations and the sale and purchase
of assets; limitations on transactions with affiliates; restrictions on changes
in the nature of the Company's business; and limitations on guarantees and other
contingent obligations.
The Credit Agreement contains events of default customary in credit
agreements of this nature including but not limited to the following: failure to
pay amounts due under the Credit Agreement or the related security documents;
failure to perform or observe other covenants; if any of the representations or
warranties of the Company or any subsidiary is incorrect in any material respect
when made or given; the occurrence of a cross-default with respect to certain
other obligations of the Company and its subsidiaries; a default with respect to
ERISA obligations; if a judgment or decree is rendered against the Company or
any subsidiary, subject to certain limitations; certain changes in ownership or
control of the Company; the failure in the validity, perfection or priority of
any lien on any of the collateral securing the indebtedness under the Credit
Agreement; and insolvency, bankruptcy, reorganization or other similar
proceedings of the Company and any of its subsidiaries.
Indebtedness under the Credit Agreement ranks senior to the Exchange Notes
and is secured by a first priority lien on substantially all assets of the
Company, including but not limited to, receivables, inventory, equipment, real
estate, leases, licenses, patents, brand names, trademarks, contracts,
securities, and the proceeds of the foregoing. The Guarantor guarantees the
Company's obligations under the New Credit Facility and any future subsidiaries
of the Company will also be required to guarantee such obligations. Such
guarantees are and will be secured by first priority liens on substantially all
the assets of the respective guarantors.
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<PAGE> 46
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Old Notes were originally sold on April 4, 1997 to the Initial
Purchaser pursuant to the Purchase Agreement. The Initial Purchaser subsequently
resold the Notes to qualified institutional buyers in reliance on Rule 144A
under the Securities Act and to a limited number of institutional accredited
investors that agreed to comply with certain transfer restrictions and other
conditions. As a condition to the Purchase Agreement, the Company and the
Guarantor entered into the Registration Rights Agreement with the Initial
Purchaser pursuant to which the Company and the Guarantor have agreed, for the
benefit of the holders of the Old Notes, at the Company's cost, to use their
best efforts (i) to file the Exchange Registration Statement (as defined) within
60 days after the Issue Date of the Old Notes (April 4, 1997) with the
Commission with respect to the Exchange Offer for the Exchange Notes and (ii) to
cause the Exchange Registration Statement to be declared effective under the
Securities Act within 135 days after the date of original issuance of the Old
Notes. Upon the Exchange Registration Statement being declared effective, the
Company will offer the Exchange Notes in exchange for surrender of the Old
Notes. The Company will keep the Exchange Offer open for not less than 30
calendar days (or longer if required by applicable law) after the date on which
notice of the Exchange Offer is mailed to the holders of the Old Notes. For each
Old Note surrendered to the Company pursuant to the Exchange Offer, the holder
of such Old Note will receive an Exchange Note having a principal amount equal
to that of the surrendered Old Note. Interest on Exchange Notes will accrue from
the last interest payment date on which interest was paid on the Old Notes so
surrendered, or, if no interest has been paid on such Old Notes, from April 4,
1997. No interest will be paid on the Old Notes accepted for exchange.
Under existing interpretations of the staff of the Commission contained in
several no-action letters to third parties, the Exchange Notes would in general
be freely tradeable after the Exchange Offer without further registration under
the Securities Act. However, any purchaser of Old Notes who is an "affiliate" of
the Company or who intends to participate in the Exchange Offer for the purpose
of distributing the Exchange Notes (i) will not be able to rely on the
interpretation of the staff of the Commission, (ii) will not be able to tender
its Old Notes in the Exchange Offer and (iii) must comply with the registration
and prospectus delivery requirements of the Securities Act in connection with
any sale or transfer of the Old Notes, unless such sale or transfer is made
pursuant to an exemption from such requirements.
Each holder of the Old Notes (other than certain specified holders) who
wishes to exchange the Old Notes for Exchange Notes in the Exchange Offer will
be deemed to represent in the Letter of Transmittal that (i) it is not an
affiliate of the Company, (ii) the Exchange Notes to be received by it were
acquired in the ordinary course of its business, (iii) at the time of
commencement of the Exchange Offer, it has no arrangement or understanding with
any person to participate in the distribution (within the meaning of the
Securities Act) of the Exchange Notes in violation of the Securities Act and
(iv) such holder has full power and authority to tender the Old Notes in
exchange for the Exchange Notes. In addition, in connection with any resales of
Exchange Notes, any Participating Broker-Dealer who acquired the Old Notes for
its own account as a result of market-making or other trading activities must
deliver a prospectus meeting the requirements of the Securities Act. The
Commission has taken the position that Participating Broker-Dealers may fulfill
their prospectus delivery requirements with respect to the Exchange Notes (other
than a resale of an unsold allotment from the original sale of the Old Notes)
with the prospectus contained in the Exchange Registration Statement. Under the
Registration Rights Agreement, the Company is required to allow Participating
Broker-Dealers and other persons, if any, subject to similar prospectus delivery
requirements to use the prospectus contained in the Exchange Registration
Statement in connection with the resale of such Exchange Notes.
In the event that changes in the law or the applicable interpretations of
the staff of the Commission do not permit the Company to effect such an Exchange
Offer, or if for any other reason the Exchange Offer is not consummated within
165 days after the original issue date of the Old Notes, or if any holder of the
Old Notes (other than an "affiliate" of the Company or the Initial Purchaser) is
not eligible to participate in the Exchange Offer, or upon the request of the
Initial Purchaser under certain circumstances, the Company will,
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<PAGE> 47
at its cost, (a) as promptly as practicable, file the Shelf Registration
Statement covering resales of the Old Notes, (b) use its best efforts to cause
the Shelf Registration Statement to be declared effective under the Securities
Act and (c) use its best efforts to keep effective the Shelf Registration
Statement until the earlier of the date on which the Old Notes are no longer
"restricted securities" (within the meaning of Rule 144 under the Securities
Act) and such time as all of the applicable Old Notes have been sold thereunder.
The Company will, in the event of the filing of the Shelf Registration
Statement, provide to each applicable holder of the Old Notes copies of the
prospectus which is a part of the Shelf Registration Statement, notify each such
holder when the Shelf Registration Statement has become effective and take
certain other actions as are required to permit unrestricted resales of the Old
Notes. A holder of Old Notes that sells such Old Notes pursuant to the Shelf
Registration Statement generally will be required to be named as a selling
securityholder in the related prospectus and to deliver a prospectus to
purchasers, will be subject to certain of the civil liability provisions under
the Securities Act in connection with such sales and will be bound by the
provisions of the Registration Rights Agreement which are applicable to such a
holder (including certain indemnification obligations). In addition, each holder
of the Old Notes will be required to deliver information to be used in
connection with the Shelf Registration Statement and to provide comments on the
Shelf Registration Statement within the time periods set forth in the
Registration Rights Agreement in order to have their Old Notes included in the
Shelf Registration Statement and to benefit from the provisions set forth in the
following paragraph.
If the Company fails to comply with the above provisions or if such
registration statement fails to become effective, then, as liquidated damages,
additional interest (the "Additional Interest") shall become payable with
respect to the Old Notes as follows:
(i) if neither the Exchange Registration Statement nor the Shelf
Registration Statement is filed on or prior to the 60th day after the Issue
Date, Additional Interest shall be accrued on the Old Notes over and above
the stated interest at a rate of 0.25% per annum for the first 90 days
commencing on the 61st day after the Issue Date, such Additional Interest
rate increasing by an additional 0.25% per annum at the beginning of each
subsequent 90-day period;
(ii) if neither the Exchange Registration Statement nor Shelf
Registration Statement is declared effective by the Commission on or prior
to the 135th day after the Issue Date, Additional Interest shall be accrued
on the Old Notes over and above the stated interest at a rate of 0.25% per
annum for the first 90 days commencing on the 136th day after the Issue
Date, such Additional Interest rate increasing by an additional 0.25% per
annum at the beginning of each subsequent 90-day period; or
(iii) if (A) the Company has not exchanged Exchange Notes for all Old
Notes validly tendered in accordance with the terms of the Exchange Offer
on or prior to the 165th day after the Issue Date or (B) the Exchange
Registration Statement ceases to be effective at any time prior to the time
that the Exchange Offer is consummated or (C) if applicable, the Shelf
Registration Statement has been declared effective and such Shelf
Registration Statement ceases to be effective at any time prior to the date
on which the Old Notes are no longer "restricted securities" (within the
meaning of Rule 144 under the Securities Act) (unless all the Old Notes
have been sold thereunder), then Additional Interest shall be accrued on
the Old Notes over and above the stated interest at a rate of 0.25% per
annum for the first 90 days commencing on (x) the 166th day after the Issue
Date with respect to the Old Notes validly tendered and not exchanged by
the Company in the case of (A) above, or (y) the day the Exchange
Registration Statement ceases to be effective or usable for its intended
purpose in the case of (B) above, or (z) the day such Shelf Registration
Statement ceases to be effective in the case of (C) above, such Additional
Interest rate increasing by an additional 0.25% per annum at the beginning
of each subsequent 90-day period;
provided, however, that the Additional Interest rate on the Old Notes may not
exceed at any one time in the aggregate 1.0% per annum; and provided, further,
that (1) upon the filing of the Exchange Registration Statement or a Shelf
Registration Statement (in the case of clause (i) above), (2) upon the
effectiveness of the Exchange Registration Statement or a Shelf Registration
Statement (in the case of clause (ii) above), or (3) upon the exchange of
Exchange Notes for all Old Notes validly tendered (in the case of clause
(iii)(A) above), or upon the effectiveness of the Exchange Registration
Statement which had ceased to remain
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<PAGE> 48
effective (in the case of clause (iii)(B) above), or upon the effectiveness of
the Shelf Registration Statement which had ceased to remain effective (in the
case of clause (iii)(C) above), Additional Interest on the Old Notes as a result
of such clause (or the relevant subclause thereof), as the case may be, shall
cease to accrue.
Any amounts of Additional Interest due pursuant to clauses (i), (ii) or
(iii) above will be payable in cash, on the same original interest payment dates
as the Old Notes. The amount of Additional Interest will be determined by
multiplying the applicable Additional Interest rate by the principal amount of
the Old Notes, multiplied by a fraction, the numerator of which is the number of
days such Additional Interest rate was applicable during such period (determined
on the basis of a 360-day year comprised of twelve 30-day months and, in the
case of a partial month, the actual number of days elapsed), and, the
denominator of which is 360.
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified in
its entirety by, all the provisions of the Registration Rights Agreement, a copy
of which is filed as an exhibit to the Exchange Registration Statement of which
this Prospectus is a part.
Following the consummation of the Exchange Offer, holders of the Old Notes
who were eligible to participate in the Exchange Offer but who did not tender
their Old Notes will not have any further registration rights and such Old Notes
will continue to be subject to certain restrictions on transfer. Accordingly,
the liquidity of the market for such Old Notes could be adversely affected.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Company will accept any and all Old Notes
validly tendered and not withdrawn prior to 5:00 p.m., New York City time, on
the Expiration Date. The Company will issue $1,000 principal amount of Exchange
Notes in exchange for each $1,000 principal amount of outstanding Old Notes
accepted in the Exchange Offer. Holders may tender some or all of their Old
Notes pursuant to the Exchange Offer. However, Old Notes may be tendered only in
integral multiples of $1,000.
The form and terms of the Exchange Notes are substantially identical to the
form and terms of the Old Notes except that (i) the Exchange Notes bear a Series
B designation and a different CUSIP Number from the Old Notes, (ii) the Exchange
Notes have been registered under the Securities Act and hence will not bear
legends restricting the transfer thereof and (iii) the holders of the Exchange
Notes will not be entitled to certain rights under the Registration Rights
Agreement, including the provisions providing for an increase in the interest
rate on the Old Notes in certain circumstances relating to the timing of the
Exchange Offer, all of which rights will terminate when the Exchange Offer is
terminated. The Exchange Notes will evidence the same debt as the Old Notes
(which they replace) and will be entitled to the benefits of the Indenture.
The Exchange Notes will be fully and unconditionally guaranteed on a senior
subordinated basis by the Guarantor. The form and terms of the Exchange
Guarantee is substantially identical to the form and terms of the Old Guarantee.
As of the date of this Prospectus, of the $75,000,000 aggregate principal
amount of Old Notes outstanding, $73,750,000 principal amount of the Old Notes
is registered in the name of Cede & Co., as nominee for DTC, and the remainder
of the Old Notes are registered in the respective names of the holders thereof.
Solely for reasons of administration (and for no other purpose) the Company has
fixed the close of business on , 1997 as the record date for the
Exchange Offer for purposes of determining the persons to whom this Prospectus
and the Letter of Transmittal will be mailed initially. Only a registered holder
of Old Notes (or such holder's legal representative or attorney-in-fact) as
reflected on the records of the Trustee under the Indenture may participate in
the Exchange Offer. There will be no fixed record date for determining
registered holders of Old Notes entitled to participate in the Exchange Offer.
Holders of Old Notes do not have any appraisal or dissenters' rights under
the General Corporation Law of Delaware or the Indenture in connection with the
Exchange Offer. The Company intends to conduct the Exchange Offer in accordance
with the applicable requirements of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and the rules and regulations of the Commission
thereunder.
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<PAGE> 49
The Company shall be deemed to have accepted validly tendered Old Notes
when, as and if the Company has given oral or written notice thereof to the
Exchange Agent. The Exchange Agent will act as agent for the tendering holders
of Old Notes and for the purpose of receiving the Exchange Notes from the
Company.
If any tendered Old Notes are not accepted for exchange because of an
invalid tender, the occurrence of certain other events set forth herein or
otherwise, the certificates for any such unaccepted Old Notes will be returned
(or in the case of Old Notes tendered by book-entry transfer through DTC, will
be credited to an account maintained with DTC), without expense, to the
tendering holder thereof as promptly as practicable after the Expiration Date.
Holders who tender Old Notes in the Exchange Offer will not be required to
pay brokerage commissions or fees or, subject to the instructions in the Letter
of Transmittal, transfer taxes with respect to the exchange of Old Notes
pursuant to the Exchange Offer. The Company will pay all charges and expenses,
other than transfer taxes in certain circumstances, in connection with the
Exchange Offer. See "-- Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on
, 1997, unless the Company, in its sole discretion, extends the
Exchange Offer, in which case the term "Expiration Date" shall mean the latest
date and time to which the Exchange Offer is extended. Notwithstanding the
foregoing, the Company will not extend the Expiration Date beyond ,
1997.
In order to extend the Exchange Offer, the Company will notify the Exchange
Agent of any extension by oral or written notice and will mail to the registered
holders an announcement thereof, each prior to 9:00 a.m., New York City time, on
the next business day after the previously scheduled expiration date.
The Company reserves the right, in its sole discretion, (i) to delay
accepting any Old Notes, to extend the Exchange Offer or to terminate the
Exchange Offer if any of the conditions set forth below under "-- Conditions"
shall not have been satisfied, by giving oral or written notice of such delay,
extension or termination to the Exchange Agent or (ii) to amend the terms of the
Exchange Offer in any manner. Any such delay in acceptance, extension,
termination or amendment will be followed as promptly as practicable by oral or
written notice thereof to the registered holders.
INTEREST ON THE EXCHANGE NOTES
Interest on Exchange Notes shall accrue from the last interest payment date
on which interest was paid on the Old Notes so surrendered, or, if no interest
has been paid on such Old Notes, from April 4, 1997. No interest will be paid on
the Old Notes accepted for exchange.
PROCEDURES FOR TENDERING
For a holder of Old Notes to tender Old Notes validly pursuant to the
Exchange Offer, a properly completed and duly executed Letter of Transmittal (or
facsimile thereof), with any required signature guarantee, or (in the case of a
book-entry transfer) an Agent's Message in lieu of the Letter of Transmittal,
and any other required documents, must be received by the Exchange Agent at the
address set forth below under "-- Exchange Agent" prior to 5:00 p.m., New York
City time, on the Expiration Date. In addition, prior to 5:00 p.m., New York
City time, on the Expiration Date, either (a) certificates for tendered Old
Notes must be received by the Exchange Agent at such address or (b) such Old
Notes must be transferred pursuant to the procedures for book-entry transfer
described below (and a confirmation of such tender received by the Exchange
Agent, including an Agent's Message if the tendering holder has not delivered a
Letter of Transmittal).
The term "Agent's Message" means a message transmitted by DTC, received by
the Exchange Agent and forming part of the confirmation of a book-entry
transfer, which states that DTC has received an express acknowledgment from the
participant in DTC tendering Old Notes which are the subject of such book-entry
confirmation, that such participant has received and agrees to be bound by the
terms of the Letter of
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<PAGE> 50
Transmittal and that the Company may enforce such agreement against such
participant. In the case of an Agent's Message relating to guaranteed delivery,
the term means a message transmitted by DTC and received by the Exchange Agent,
which states that DTC has received an express acknowledgment from the
participant in DTC tendering Old Notes that such participant has received and
agrees to be bound by the Notice of Guaranteed Delivery.
By tendering Old Notes pursuant to the procedures set forth above, each
holder will be deemed to make to the Company the representations set forth above
in the third paragraph under the heading "-- Purpose and Effect of the Exchange
Offer."
The tender by a holder of Old Notes and the acceptance thereof by the
Company will constitute agreement between such holder and the Company in
accordance with the terms and subject to the conditions set forth herein and in
the Letter of Transmittal.
THE METHOD OF DELIVERY OF OLD NOTES AND THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND SOLE RISK
OF THE HOLDER. AS AN ALTERNATIVE TO DELIVERY BY MAIL, HOLDERS MAY WISH TO
CONSIDER OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION
DATE. NO LETTER OF TRANSMITTAL OR OLD NOTES SHOULD BE SENT TO THE COMPANY.
HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST
COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH HOLDERS.
Any beneficial owner whose Old Notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact the registered holder promptly and instruct such
registered holder to tender on such beneficial owner's behalf. See "Instruction
to Registered Holder and/or Book-Entry Transfer Facility Participant from Owner"
included with the Letter of Transmittal.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by an Eligible Institution (as defined below)
unless the Old Notes tendered pursuant thereto are tendered (i) by a registered
holder who has not completed the box entitled "Special Registration
Instructions" or "Special Delivery Instructions" on the Letter of Transmittal or
(ii) for the account of an Eligible Institution. In the event that signatures on
a Letter of Transmittal or a notice of withdrawal, as the case may be, are
required to be guaranteed, such guarantee must be by a member firm of the
Medallion System (an "Eligible Institution").
If the Letter of Transmittal is signed by a person other than the
registered holder of any Old Notes listed therein, such Old Notes must be
endorsed or accompanied by a properly completed bond power, signed by such
registered holder as such registered holder's name appears on such Old Notes
with the signature thereon guaranteed by an Eligible Institution.
If the Letter of Transmittal or any Old Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, offices of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and evidence satisfactory to the
Company of their authority to so act must be submitted with the Letter of
Transmittal.
The Company understands that the Exchange Agent will make a request
promptly after the date of this Prospectus to establish accounts with respect to
the Old Notes at the book-entry transfer facility, The Depository Trust Company
("DTC" or the "Book-Entry Transfer Facility"), for the purpose of facilitating
the Exchange Offer, and subject to the establishment thereof, any financial
institution that is a participant in the Book-Entry Transfer Facility's system
may make book-entry delivery of Old Notes by causing such Book-Entry Transfer
Facility to transfer such Old Notes into the Exchange Agent's account with
respect to the Old Notes in accordance with the Book-Entry Transfer Facility's
procedures for such transfer. Although delivery of the Old Notes may be effected
through book-entry transfer into the Exchange Agent's account at the Book-Entry
Transfer Facility, an appropriate Letter of Transmittal properly completed and
duly executed with any required signature guarantee, or, in the case of a
book-entry transfer, an Agent's Message in lieu of the Letter
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<PAGE> 51
of Transmittal and all other required documents must in each case be transmitted
to and received or confirmed by the Exchange Agent at its address set forth
below on or prior to the Expiration Date, or, if the guaranteed delivery
procedures described below are complied with, within the time period provided
under such procedures. Delivery of documents to the Book-Entry Transfer Facility
does not constitute delivery to the Exchange Agent.
The Exchange Agent and DTC have confirmed that the Exchange Offer is
eligible for the DTC Automated Tender Offer Program ("ATOP"). Accordingly, DTC
participants may electronically transmit their acceptance of the Exchange Offer
by causing DTC to transfer Old Notes to the Exchange Agent in accordance with
DTC's ATOP procedures for transfer. DTC will then send an Agent's Message to the
Exchange Agent.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Old Notes and withdrawal of tendered Old Notes
will be determined by the Company in its sole discretion, which determination
will be final and binding. The Company reserves the absolute right to reject any
and all Old Notes not properly tendered or any Old Notes the Company's
acceptance of which would, in the opinion of counsel for the Company, be
unlawful. The Company also reserves the right in its sole discretion to waive
any defects, irregularities or conditions of tender as to particular Old Notes.
The Company's interpretation of the terms and conditions of the Exchange Offer
(including the instructions in the Letter of Transmittal) will be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Old Notes must be cured within such time as the
Company shall determine. Although the Company intends to notify holders of
defects or irregularities with respect to tenders of Old Notes, neither the
Company, the Exchange Agent nor any other person shall incur any liability for
failure to give such notification. Tenders of Old Notes will not be deemed to
have been made until such defects or irregularities have been cured or waived.
Any Old Notes received by the Exchange Agent that are not properly tendered and
as to which the defects or irregularities have not been cured or waived will be
returned by the Exchange Agent to the tendering holders, unless otherwise
provided in the Letter of Transmittal, as soon as practicable following the
Expiration Date.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available, (ii) who cannot deliver their Old Notes, the Letter of
Transmittal or any other required documents to the Exchange Agent or (iii) who
cannot complete the procedures for book-entry transfer, prior to the Expiration
Date, may effect a tender if:
(a) the tender is made through an Eligible Institution;
(b) prior to the Expiration Date, the Exchange Agent receives from
such Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the holder, the certificate number(s)
of such Old Notes and the principal amount of Old Notes tendered, stating
that the tender is being made thereby and guaranteeing that, within three
New York Stock Exchange trading days after the Expiration Date, the Letter
of Transmittal (or facsimile thereof) together with the certificate(s)
representing the Old Notes (or a confirmation of book-entry transfer of
such Old Notes into the Exchange Agent's account at the Book-Entry Transfer
Facility), and any other documents required by the Letter of Transmittal
will be deposited by the Eligible Institution with the Exchange Agent; and
(c) such properly completed and executed Letter of Transmittal (of
facsimile thereof), as well as the certificate(s) representing all tendered
Old Notes in proper form for transfer (or a confirmation of book-entry
transfer of such Old Notes into the Exchange Agent's account at the
Book-Entry Transfer Facility), and all other documents required by the
Letter of Transmittal are received by the Exchange Agent upon three New
York Stock Exchange trading days after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their Old Notes according to the guaranteed
delivery procedures set forth above.
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WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Old Notes may be withdrawn
at any time prior to 5:00 p.m., New York City time, on the Expiration Date.
To withdraw a tender of Old Notes in the Exchange Offer, a telegram, telex,
letter or facsimile transmission notice of withdrawal must be received by the
Exchange Agent at its address set forth herein prior to 5:00 p.m., New York City
time, on the Expiration Date. Any such notice of withdrawal must (i) specify the
name of the person having deposited the Old Notes to be withdrawn (the
"Depositor"), (ii) identify the Old Notes to be withdrawn (including the
certificate number(s) and principal amount of such Old Notes, or, in the case of
Old Notes transferred by book-entry transfer, the name and number of the account
at the Book-Entry Transfer Facility to be credited), (iii) be signed by the
holder in the same manner as the original signature on the Letter of Transmittal
by which such Old Notes were tendered (including any required signature
guarantees) or be accompanied by documents of transfer sufficient to have the
Trustee with respect to the Old Notes register the transfer of such Old Notes
into the name of the person withdrawing the tender and (iv) specify the name in
which any such Old Notes are to be registered, if different from that of the
Depositor. All questions as to the validity, form and eligibility (including
time of receipt) of such notices will be determined by the Company, whose
determination shall be final and binding on all parties. Any Old Notes so
withdrawn will be deemed not to have been validly tendered for purposes of the
Exchange Offer and no Exchange Notes will be issued with respect thereto unless
the Old Notes so withdrawn are validly retendered. Any Old Notes which have been
tendered but which are not accepted for exchange will be returned to the holder
thereof without cost to such holder as soon as practicable after withdrawal,
rejection of tender or termination of the Exchange Offer. Properly withdrawn Old
Notes may be retendered by following one of the procedures described above under
"-- Procedures for Tendering" at any time prior to the Expiration Date.
CONDITIONS
Notwithstanding any other term of the Exchange Offer, the Company shall not
be required to accept for exchange, or exchange Exchange Notes for, any Old
Notes, and may terminate or amend the Exchange Offer as provided herein before
the acceptance of such Old Notes, if:
(a) any action or proceeding is instituted or threatened in any court
or by or before any governmental agency with respect to the Exchange Offer
(or other similar exchange offers) which, in the sole judgment of the
Company, might materially impair the ability of the Company to proceed with
the Exchange Offer or any material adverse development has occurred in any
existing action or proceeding with respect to the Company or any of its
subsidiaries;
(b) any law, statute, rule, regulation or interpretation by the staff
of the Commission is proposed, adopted or enacted, which, in the sole
judgment of the Company, might materially impair the ability of the Company
to proceed with the Exchange Offer or materially impair the contemplated
benefits of the Exchange Offer to the Company; or
(c) any governmental approval has not been obtained, which approval
the Company shall, in its sole discretion, deem necessary for the
consummation of the Exchange Offer as contemplated hereby.
If the Company determines in its sole discretion that any of the conditions
are not satisfied, the Company may (i) refuse to accept any Old Notes and return
all tendered Old Notes to the tendering holders, (ii) extend the Exchange Offer
and retain all Old Notes tendered prior to the expiration of the Exchange Offer,
subject, however, to the rights of holders to withdraw such Old Notes (see
"-- Withdrawal of Tenders") or (iii) waive such unsatisfied conditions with
respect to the Exchange Offer and accept all properly tendered Old Notes which
have not been withdrawn.
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EXCHANGE AGENT
Marine Midland Bank has been appointed as Exchange Agent for the Exchange
Offer. Questions and requests for assistance, requests for additional copies of
this Prospectus or of the Letter of Transmittal and requests for Notice of
Guaranteed Delivery should be directed to the Exchange Agent addressed as
follows:
<TABLE>
<S> <C>
By Registered or Certified Mail,
Overnight Courier or Hand: By Facsimile:
Marine Midland Bank Marine Midland Bank
140 Broadway -- A Level Attention: Frank Godino
New York, New York 10005-1180 (212) 658-2292
Attention: Corporate Trust
Operations
Tel: (212) 658-5931
</TABLE>
Originals of all documents submitted by facsimile should be sent promptly
by registered or certified mail, overnight courier or hand. Delivery to an
address other than as set forth above will not constitute a valid delivery.
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, facsimile, telephone or in person by officers and
regular employees of the Company and its affiliates.
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers, or others
soliciting acceptances of the Exchange Offer. The Company, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
it for its reasonable out-of-pocket expenses in connection therewith.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Company. Such expenses include fees and expenses of the Exchange
Agent and Trustee, accounting and legal fees and printing costs, among others.
ACCOUNTING TREATMENT
The Exchange Notes will be recorded at the same carrying value as the Old
Notes, which is face value, as reflected in the Company's accounting records on
the date of exchange. Accordingly, no gain or loss for accounting purposes will
be recognized by the Company. The expenses of the Exchange Offer will be
expensed over the term of the Exchange Notes.
CONSEQUENCES OF FAILURE TO EXCHANGE
The Old Notes that are not exchanged for Exchange Notes pursuant to the
Exchange Offer will remain restricted securities. Accordingly, such Old Notes
may be resold only (i) to the Company (upon redemption thereof or otherwise),
(ii) so long as the Old Notes are eligible for resale pursuant to Rule 144A, to
a person inside the United States whom the seller reasonably believes is a
qualified institutional buyer within the meaning of Rule 144A under the
Securities Act in a transaction meeting the requirements of Rule 144A, in
accordance with Rule 144 under the Securities Act, or pursuant to another
exemption from the registration requirements of the Securities Act (and based
upon an opinion of counsel reasonably acceptable to the Company), (iii) outside
the United States to a foreign person in a transaction meeting the requirements
of Rule 904 under the Securities Act, or (iv) pursuant to an effective
registration statement under the Securities Act, in each case in accordance with
any applicable securities laws of any state of the United States.
RESALE OF THE EXCHANGE NOTES
With respect to resales of Exchange Notes, based on interpretations by the
staff of the Commission set forth in no-action letters issued to third parties,
the Company believes that a holder or other person who
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<PAGE> 54
receives Exchange Notes, whether or not such person is the holder (other than a
person that is an "affiliate" of the Company within the meaning of Rule 405
under the Securities Act) who receives Exchange Notes in exchange for Old Notes
in the ordinary course of business and who is not participating, does not intend
to participate, and has no arrangement or understanding with any person to
participate, in the distribution of the Exchange Notes, will be allowed to
resell the Exchange Notes to the public without further registration under the
Securities Act and without delivering to the purchasers of the Exchange Notes a
prospectus that satisfies the requirements of Section 10 of the Securities Act.
However, if any holder acquires Exchange Notes in the Exchange Offer for the
purpose of distributing or participating in a distribution of the Exchange
Notes, such holder cannot rely on the position of the staff of the Commission
enunciated in such no-action letters or any similar interpretive letters, and
must comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale transaction, unless an exemption
from registration is otherwise available. Further, each Participating
Broker-Dealer that receives Exchange Notes for its own account in exchange for
Old Notes where such Old Notes were acquired by such Participating Broker-Dealer
as a result of market-making activities or other trading activities, must
acknowledge that it will deliver a prospectus in connection with any resale of
such Exchange Notes.
As contemplated by these no-action letters and the Registration Rights
Agreement, each holder accepting the Exchange Offer is required to represent to
the Company in the Letter of Transmittal that (i) the Exchange Notes are to be
acquired by the holder or the person receiving such Exchange Notes, whether or
not such person is the holder, in the ordinary course of business, (ii) the
holder or any such other person (other than a broker-dealer referred to in the
next sentence) is not engaging and does not intend to engage, in the
distribution of the Exchange Notes, (iii) the holder or any such other person
has no arrangement or understanding with any person to participate in the
distribution of the Exchange Notes, (iv) neither the holder nor any such other
person is an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act, and (v) the holder or any such other person acknowledges that if
such holder or other person participates in the Exchange Offer for the purpose
of distributing the Exchange Notes it must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
resale of the Exchange Notes and cannot rely on those no-action letters. As
indicated above, each Participating Broker-Dealer that receives an Exchange Note
for its own account in exchange for Old Notes must acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange Notes. For a
description of the procedures for such resales by Participating Broker-Dealers,
see "Plan of Distribution."
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<PAGE> 55
DESCRIPTION OF EXCHANGE NOTES
As used below in this "Description of Exchange Notes" section, the
"Company" means Tekni-Plex, Inc. but not any of its subsidiaries. The Old Notes
were, and the Exchange Notes will be, issued under the Indenture, dated as of
April 1, 1997 (the "Indenture"), among the Company, the Guarantor and Marine
Midland Bank, as Trustee (the "Trustee"). The terms of the Exchange Notes
include those stated in the Indenture and those made part of the Indenture by
reference to the Trust Indenture Act of 1939, as amended (the "Trust Indenture
Act"). The Exchange Notes are subject to all such terms, and holders of the
Exchange Notes are referred to the Indenture and the Trust Indenture Act for a
statement thereof. A copy of the Indenture and the Registration Rights Agreement
described below will be made available to holders and prospective investors upon
request. The statements under this caption relating to the Exchange Notes, the
Indenture and the Registration Rights Agreement are summaries and do not purport
to be complete, and where reference is made to particular provisions of the
Indenture or the Registration Rights Agreement, such provisions, including the
definitions of certain terms, are qualified in their entirety by such reference.
The Old Notes are, and the Exchange Notes will be, general unsecured
obligations of the Company, limited to $150,000,000 aggregate principal amount
of which $75,000,000 aggregate principal amount was issued in the offering of
the Old Notes. Additional amounts may be issued in one or more series from time
to time subject to the limitations set forth under "Covenants -- Limitation on
Indebtedness" and restrictions contained in the Credit Agreement. The Exchange
Notes will be senior subordinated obligations of the Company, subordinated in
right of payment to all Senior Debt of the Company. The Exchange Notes will be
issued only in fully registered form, without coupons, in denominations of
$1,000 and any integral multiple thereof. No service charge will be made for any
registration of transfer or exchange of Exchange Notes, but the Company may
require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith. Initially, the Trustee will act as
paying agent and registrar for the Exchange Notes. The form and terms of the
Exchange Notes are substantially identical to the form and terms of the Old
Notes except that (i) the Exchange Notes bear a Series B designation, (ii) the
Exchange Notes have been registered under the Securities Act and, therefore,
will not bear legends restricting the transfer thereof, and (iii) the holders of
Exchange Notes will not be entitled to certain rights under the Registration
Rights Agreement, including the provisions providing for an increase in the
interest rate on the Old Notes in certain circumstances relating to the timing
of the Exchange Offer, which rights will terminate when the Exchange Offer is
consummated.
PRINCIPAL, MATURITY AND INTEREST
The Notes will mature on April 1, 2007 and will bear interest at the rate
per annum shown on the cover page hereof from April 4, 1997 or from the most
recent interest payment date to which interest has been paid or provided for.
Interest will be payable semiannually on April 1 and October 1 of each year,
commencing October 1, 1997, to the Person in whose name a Note is registered at
the close of business on the preceding March 15 or September 15 (each, a "Record
Date"), as the case may be. Interest on the Notes will be computed on the basis
of a 360-day year of twelve 30-day months. Holders must surrender the Notes to
the paying agent for the Notes to collect principal payments. The Company will
pay principal and interest by check and may mail interest checks to a holder's
registered address.
OPTIONAL REDEMPTION
The Notes will be subject to redemption, at the option of the Company, in
whole or in part, at any time on or after April 1, 2002 and prior to maturity,
upon not less than 30 nor more than 60 days' notice mailed to each holder of
Notes to be redeemed at his address appearing in the register for the Notes, in
amounts of $1,000 or an integral multiple of $1,000, at the following redemption
prices (expressed as percentages of principal amount) plus accrued interest to
but excluding the date fixed for redemption (subject to the right of holders of
record on the relevant Record Date to receive interest due on an interest
payment date that is on or
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<PAGE> 56
prior to the date fixed for redemption), if redeemed during the 12-month period
beginning April 1 of the years indicated:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
-------------------------------------------------- ----------
<S> <C>
2002.............................................. 105.625%
2003.............................................. 103.750
2004.............................................. 101.875
2005 and thereafter............................... 100.000
</TABLE>
In addition, prior to April 1, 2000, the Company may redeem up to 33% of
the principal amount of the Notes with the net cash proceeds received by the
Company from one or more public offerings of Capital Stock (other than
Disqualified Stock) of the Company, at a redemption price (expressed as a
percentage of the principal amount) of 111.25% of the principal amount thereof,
plus accrued and unpaid interest to the date fixed for redemption; provided,
however, that at least $60.0 million in aggregate principal amount of the Notes
remains outstanding immediately after any such redemption (excluding any Notes
owned by the Company or any of its Affiliates). Notice of redemption pursuant to
this paragraph must be mailed to holders of Notes not later than 60 days
following the consummation of such public offering.
Selection of Notes for any partial redemption shall be made by the Trustee,
in accordance with the rules of any national securities exchange on which the
Notes may be listed or, if the Notes are not so listed, pro rata or by lot or in
such other manner as the Trustee shall deem appropriate and fair. Notes in
denominations larger than $1,000 may be redeemed in part but only in integral
multiples of $1,000. Notice of redemption will be mailed before the date fixed
for redemption to each holder of Notes to be redeemed at his or her registered
address. On and after the date fixed for redemption, interest will cease to
accrue on Notes or portions thereof called for redemption.
The Notes do not, and will not, have the benefit of any sinking fund.
RANKING
The payment of principal, premium, if any, and interest on the Notes and
any claims arising out of or with respect to the Indenture is subordinated and
subject in right of payment, to the extent and in the manner provided in the
Indenture, to the prior payment in full of all Senior Debt of the Company.
Upon any payment or distribution of assets or securities of the Company of
any kind or character, whether in cash, property or securities, upon any
dissolution or winding up or total or partial liquidation or reorganization of
the Company, whether voluntary or involuntary or in bankruptcy, insolvency,
receivership or other proceedings, all amounts due or to become due with respect
to Senior Debt of the Company (including any interest accruing on or after, or
which would accrue but for, an event of bankruptcy, regardless of whether such
interest is an allowed claim enforceable against the debtor under the Bankruptcy
Code) shall first be paid in full, or payment provided for, in either case in
cash or cash equivalents or otherwise in a form satisfactory to the holders of
Senior Debt, before the Holders of the Notes or the Trustee on behalf of such
Holders shall be entitled to receive any payment by the Company of the principal
of, premium, if any, or interest on the Notes, or any payment to acquire any of
the Notes for cash, property or securities, or any distribution with respect to
the Notes of any kind or character, whether in cash, property or securities, by
set-off or otherwise (all such payments and distributions referred to
individually and collectively, as a "Securities Payment"). Before any payment
may be made by, or on behalf of, the Company of the principal of, premium, if
any, or interest on the Notes upon any such dissolution or winding up or
liquidation or reorganization, any payment or distribution of assets or
securities of the Company of any kind or character, whether in cash, property or
securities, to which the Holders of the Notes or the Trustee on their behalf
would be entitled, but for the subordination provisions of the Indenture, shall
be made by the Company or by any receiver, trustee in bankruptcy, liquidating
trustee, agent or other person making such payment or distribution, directly to
the holders of Senior Debt of the Company (pro rata to such holders on the basis
of the respective amounts of Senior Debt held by such holders) or their
representatives or to the trustee or trustees under any indenture pursuant to
which any such Senior Debt may have been issued as their respective interests
may appear, to the extent necessary to pay all
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<PAGE> 57
such Senior Debt in full in cash or cash equivalents or otherwise in a form
satisfactory to the holders of such Senior Debt after giving effect to any
concurrent payment, distribution or provision therefor to or for the holders of
such Senior Debt.
No Securities Payment by or on behalf of the Company, whether pursuant to
the terms of the Notes or upon acceleration or otherwise, will be made if, at
the time of such payment, there exists a default in the payment of all or any
portion of the obligations on any Designated Senior Debt, whether at maturity,
on account of mandatory redemption or prepayment, acceleration or otherwise (but
if the Trustee is otherwise able to make such Securities Payment, only insofar
as the Trustee is concerned, if the Trustee has received written notice of such
default), and such default shall not have been cured or waived or the benefits
of this sentence waived by or on behalf of the holders of such Designated Senior
Debt. In addition, during the continuance of any non-payment default or
non-payment event of default with respect to any Designated Senior Debt pursuant
to which the maturity thereof may be accelerated, and upon receipt by the
Trustee of notice (a "Payment Blockage Notice") from a holder or holders of such
Designated Senior Debt or the trustee or agent acting on behalf of such
Designated Senior Debt, then, unless and until such default or event of default
has been cured or waived or has ceased to exist or such Designated Senior Debt
has been discharged or repaid in full in cash or cash equivalents or otherwise
in a form satisfactory to the holders of such Designated Senior Debt, no
Securities Payment will be made by or on behalf of the Company, except from
those funds held in trust for purposes of defeasance for the benefit of the
Holders of any Notes to such Holders, during a period (a "Payment Blockage
Period") commencing on the date of receipt of such Payment Blockage Notice by
the Trustee and ending 179 days thereafter. Notwithstanding anything herein to
the contrary, (x) in no event will a Payment Blockage Period extend beyond 179
days from the date of the Payment Blockage Notice in respect thereof was given
and (y) there must be 180 days in any 365 day period during which no Payment
Blockage Period is in effect. Not more than one Payment Blockage Period may be
commenced with respect to the Notes during any period of 365 consecutive days.
No default or event of default that existed or was continuing on the date of
commencement of any Payment Blockage Period with respect to the Designated
Senior Debt initiating such Payment Blockage Period may be, or be made, the
basis for the commencement of any other Payment Blockage Period by the holder or
holders of such Designated Senior Debt or the trustee or agent acting on behalf
of such Designated Senior Debt, whether or not within a period of 365
consecutive days, unless such default or event of default has been cured or
waived for a period of not less than 90 consecutive days.
The failure to make any payment or distribution for or on account of the
Notes by reason of the provisions of the Indenture described under this section
will not be construed as preventing the occurrence of an Event of Default
described in clause (a), (b) or (c) of the first paragraph under "-- Events of
Default."
By reason of the subordination provisions described above, in the event of
insolvency of the Company, funds which would otherwise be payable to Holders of
the Notes will be paid to the holders of Senior Debt of the Company to the
extent necessary to repay such Senior Debt in full, and the Company may be
unable to fully meet its obligations with respect to the Notes. Subject to the
restrictions set forth in the Indenture, in the future the Company may incur
additional Senior Debt.
At March 28, 1997, after giving pro forma effect to the Transactions, there
would have been no Senior Debt outstanding. However, the Company could have
borrowed up to $75.0 million of Indebtedness under the Credit Agreement, all of
which would have constituted Senior Debt.
THE GUARANTEE
The Indenture provides that the Guarantors will unconditionally guarantee
on a senior subordinated basis all of the obligations of the Company under the
Indenture, including its obligation to pay principal, premium, if any, and
interest with respect to the Notes. The obligation of each Guarantor is limited
to the maximum amount which, after giving effect to all other contingent and
fixed liabilities of such Guarantor, will result in the obligations of such
Guarantor under the Guarantee not constituting a fraudulent conveyance or
fraudulent transfer under federal or state law. Except as provided in
"-- Covenants" below, the Company is not restricted from selling or otherwise
disposing of a Guarantor.
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<PAGE> 58
The Indenture provides that if the Notes are defeased in accordance with
the terms of the Indenture, or if all or substantially all of the assets of a
Guarantor or all of the Capital Stock of a Guarantor is sold (including by
issuance or otherwise) by the Company or any of its Restricted Subsidiaries in a
transaction constituting an Asset Disposition, and if (x) the Net Available
Proceeds from such Asset Dispositions are used in accordance with the covenant
described under "-- Covenants -- Limitation on Certain Asset Dispositions" or
(y) the Company delivers to the Trustee an Officers' Certificate to the effect
that the Net Available Proceeds from such Asset Disposition shall be used in
accordance with the covenant described under "-- Covenants -- Limitation on
Certain Asset Dispositions" and within the time limits specified by such
covenant, then such Guarantor (in the event of a sale or other disposition of
all or substantially all of its assets) shall be released and discharged from
its Guarantee obligations.
The obligations of each Guarantor under the Guarantee are subordinated to
the prior payment in full of all Senior Debt of such Guarantor on the same basis
as the obligations of the Company on the Notes are subordinated to Senior Debt
of the Company. The Guarantee will be pari passu in right of payment with any
other senior subordinated indebtedness of each Guarantor and senior to any
future Subordinated Indebtedness of each Guarantor.
COVENANTS
The Indenture contains, among others, the following covenants:
Limitation on Indebtedness
The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries to, directly or indirectly, Incur any
Indebtedness (including Acquired Indebtedness), except: (i) Indebtedness of the
Company or any of its Restricted Subsidiaries, if immediately after giving
effect to the Incurrence of such Indebtedness and the receipt and application of
the net proceeds thereof, the Consolidated Cash Flow Ratio of the Company for a
year consisting of the four full fiscal quarters for which quarterly or annual
financial statements are available next preceding the Incurrence of such
Indebtedness (calculated on a pro forma basis in accordance with Article 11 of
Regulation S-X under the Securities Act or any successor provision as if such
Indebtedness had been Incurred on the first day of such year) would be greater
than 2.0 to 1.0; (ii) Indebtedness of the Company and its Restricted
Subsidiaries Incurred under the Credit Agreement in an amount not to exceed
$100.0 million in aggregate principal amount less the amount of any such
Indebtedness that is permanently repaid or, without duplication, the amount by
which commitments thereunder are permanently reduced, in either case, from the
proceeds of Asset Dispositions (it being understood that the amount incurred
under the Credit Agreement may be increased as a result of the operation of
clause (xiii) below); (iii) Indebtedness owed by the Company to any direct or
indirect Wholly Owned Subsidiary of the Company or Indebtedness owed by a direct
or indirect Restricted Subsidiary of the Company to the Company or a direct or
indirect Wholly Owned Subsidiary of the Company; provided, however, upon either
(I) the transfer or other disposition by such direct or indirect Wholly Owned
Subsidiary or the Company of any Indebtedness so permitted under this clause
(iii) to a Person other than the Company or another direct or indirect Wholly
Owned Subsidiary of the Company or (II) the issuance (other than directors'
qualifying shares), sale, transfer or other disposition of shares of Capital
Stock or other ownership interests (including by consolidation or merger) of
such direct or indirect Wholly Owned Subsidiary to a Person other than the
Company or another such Wholly Owned Subsidiary of the Company, the provisions
of this clause (iii) shall no longer be applicable to such Indebtedness and such
Indebtedness shall be deemed to have been Incurred at the time of any such
issuance, sale, transfer or other disposition, as the case may be; (iv)
Indebtedness of the Company or any Restricted Subsidiary under any interest rate
or foreign currency hedge or exchange or other similar agreement to the extent
entered into to hedge any other Indebtedness permitted under the Indenture
(including the Notes); (v) Indebtedness Incurred to defer, renew, extend,
replace, refinance or refund, whether under any amendment, supplement or
otherwise (collectively for purposes of this clause (v) to "refund") any
Indebtedness outstanding on the Issue Date, any Indebtedness Incurred under the
prior clause (i) above or the Notes and the Guarantee; provided, however, that
(I) such Indebtedness does not exceed the principal amount (or accrual amount,
if less) of Indebtedness so refunded
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<PAGE> 59
plus the amount of any premium required to be paid in connection with such
refunding pursuant to the terms of the Indebtedness refunded or the amount of
any premium reasonably determined by the issuer of such Indebtedness as
necessary to accomplish such refunding by means of a tender offer, exchange
offer, or privately negotiated repurchase, plus the expenses of such issuer
reasonably incurred in connection therewith and (II)(A) in the case of any
refunding of Indebtedness that is pari passu with the Notes, such refunding
Indebtedness is made pari passu with or subordinate in right of payment to the
Notes, and, in the case of any refunding of Indebtedness that is subordinate in
right of payment to the Notes, such refunding Indebtedness is subordinate in
right of payment to the Notes on terms no less favorable to the holders of the
Notes than those contained in the Indebtedness being refunded, (B) in either
case, the refunding Indebtedness by its terms, or by the terms of any agreement
or instrument pursuant to which such Indebtedness is issued, does not have an
Average Life that is less than the remaining Average Life of the Indebtedness
being refunded and does not permit redemption or other retirement (including
pursuant to any required offer to purchase to be made by the Company or a
Restricted Subsidiary of the Company) of such Indebtedness at the option of the
holder thereof prior to the final stated maturity of the Indebtedness being
refunded, other than a redemption or other retirement at the option of the
holder of such Indebtedness (including pursuant to a required offer to purchase
made by the Company or a Restricted Subsidiary of the Company) which is
conditioned upon a change of control of the Company pursuant to provisions
substantially similar to those contained in the Indenture described under
"-- Change of Control" below and (C) any Indebtedness Incurred to refund any
Indebtedness is Incurred by the obligor on the Indebtedness being refunded or by
the Company; (vi) commodity agreements of the Company or any of its Restricted
Subsidiaries to the extent entered into to protect the Company and its
Restricted Subsidiaries from fluctuations in the prices of raw materials used in
their businesses; (vii) Indebtedness of the Company under the Notes and
Indebtedness of the Guarantors, under the Guarantee incurred in accordance with
the Indenture; (viii) Indebtedness outstanding on the Issue Date; (ix)
guarantees by the Company or its Restricted Subsidiaries of Indebtedness
otherwise permitted to be incurred hereunder; (x) Indebtedness the net proceeds
of which are applied to defease the Notes in their entirety; (xi) Indebtedness
of the Company or any of its Subsidiaries that is an endorsement of bank drafts
and similar negotiable instruments for collection or deposit in the ordinary
course of business; (xii) Indebtedness incurred by the Company or any of its
Restricted Subsidiaries constituting reimbursement obligations with respect to
letters of credit issued in the ordinary course of business, including, without
limitation, letters of credit in respect of workers' compensation claims or
self-insurance, or other Indebtedness with respect to reimbursement type
obligations regarding workers' compensation claims or self-insurance and
obligations in respect of performance and surety bonds and completion guarantees
provided by the Company or any Restricted Subsidiary of the Company in the
ordinary course of business not in excess of $2.0 million; and (xiii)
Indebtedness of the Company or its Restricted Subsidiaries not otherwise
permitted to be Incurred pursuant to clauses (i) through (xii) above which,
together with any other outstanding Indebtedness Incurred pursuant to this
clause (xiii), has an aggregate principal amount not in excess of $20.0 million
at any time outstanding, which Indebtedness may be incurred under the Credit
Agreement or otherwise.
Limitation on Restricted Payments
The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries to, directly or indirectly, (i) declare or pay
any dividend, or make any distribution of any kind or character (whether in
cash, property or securities), on or in respect of any class of the Capital
Stock of the Company or any of its Restricted Subsidiaries excluding any (x)
dividends or distributions payable solely in shares of Capital Stock of the
Company (other than Disqualified Stock) or in options, warrants or other rights
to acquire Capital Stock of the Company (other than Disqualified Stock), or (y)
in the case of any Restricted Subsidiary of the Company, dividends or
distributions payable to the Company or a Restricted Subsidiary of the Company,
(ii) purchase, redeem, or otherwise acquire or retire for value shares of
Capital Stock of the Company or any of its Restricted Subsidiaries, any options,
warrants or rights to purchase or acquire shares of Capital Stock of the Company
or any of its Restricted Subsidiaries or any securities convertible or
exchangeable into shares of Capital Stock of the Company or any of its
Restricted Subsidiaries, excluding any such shares of Capital Stock, options,
warrants, rights or securities which are owned by the Company or a Restricted
Subsidiary of the Company, (iii) make any Investment in (other than a Permitted
Investment), or
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<PAGE> 60
make any payment on a guarantee of any obligation of, any Person, other than the
Company or a direct or indirect Wholly Owned Subsidiary of the Company, or (iv)
redeem, defease, repurchase, retire or otherwise acquire or retire for value,
prior to any scheduled maturity, repayment or sinking fund payment, Subordinated
Indebtedness (each of the transactions described in clauses (i) through (iv)
(other than any exception to any such clause) being a "Restricted Payment"), if
at the time thereof: (1) a Default or an Event of Default shall have occurred
and be continuing, or (2) upon giving effect to such Restricted Payment, the
Company could not Incur at least $1.00 of additional Indebtedness pursuant to
the terms of the Indenture described in clause (i) of "-- Limitation on
Indebtedness" above, or (3) upon giving effect to such Restricted Payment, the
aggregate of all Restricted Payments made on or after the Issue Date exceeds the
sum of: (a) 50% of cumulative Consolidated Net Income of the Company (or, in the
case cumulative Consolidated Net Income of the Company shall be negative, less
100% of such deficit) since the Issue Date, plus (b) 100% of the aggregate net
proceeds received after the Issue Date, including the fair market value of
property other than cash (determined in good faith by the Board of Directors of
the Company as evidenced by a resolution of such Board of Directors filed with
the Trustee) from the issuance of, or equity contribution with respect to,
Capital Stock (other than Disqualified Stock) of the Company and warrants,
rights or options on Capital Stock (other than Disqualified Stock) of the
Company (other than in respect of any such issuance to a Restricted Subsidiary
of the Company) and the principal amount of Indebtedness of the Company or any
of its Restricted Subsidiaries that has been converted into or exchanged for
Capital Stock of the Company which Indebtedness was Incurred after the Issue
Date; plus (c) the excess of (x) 100% of the aggregate net cash proceeds
received on the Issue Date from the issuance of, or the equity contribution with
respect to, Capital Stock of the Company over (y) $10,875,000; plus (d) 100% of
the aggregate after-tax net cash proceeds, of the sale or other disposition of
any Investment constituting a Restricted Payment made after the Issue Date;
provided that any gain on the sale or disposition to the extent included in this
clause (d) shall not be included in determining Consolidated Net Income for
purposes of clause (a) above; provided, further, that amounts included in this
clause (d) shall not exceed the Net Investment by the Company in the asset so
sold or disposed.
The foregoing provision will not be violated by (i) any dividend on any
class of Capital Stock of the Company or any of its Restricted Subsidiaries paid
within 60 days after the declaration thereof if, on the date when the dividend
was declared, the Company or such Restricted Subsidiary, as the case may be,
could have paid such dividend in accordance with the provisions of the
Indenture, (ii) the renewal, extension, refunding or refinancing of any
Indebtedness otherwise permitted pursuant to the terms of the Indenture
described in clause (v) of "-- Limitation on Indebtedness" above, (iii) the
exchange or conversion of any Indebtedness of the Company or any of its
Restricted Subsidiaries for or into Capital Stock of the Company (other than
Disqualified Stock), (iv) so long as no Default or Event of Default has occurred
and is continuing, any Investment made with the proceeds of a substantially
concurrent sale (other than in respect of any issuance to a Restricted
Subsidiary of the Company) for cash of Capital Stock of the Company (other than
Disqualified Stock); provided, however, that the proceeds of such sale of
Capital Stock, to the extent used in any such Investment, shall not be (and have
not been) included in subclause (b) of clause (3) of the preceding paragraph,
(v) the redemption, repurchase, retirement or other acquisition of any Capital
Stock of the Company in exchange for or out of the net cash proceeds of a
substantially concurrent sale (other than to a Restricted Subsidiary of the
Company) of Capital Stock of the Company (other than Disqualified Stock);
provided, however, that the proceeds of such sale of Capital Stock, to the
extent used for such redemption, repurchase, retirement or other acquisition or
retirement, shall not be (and have not been) included in subclause (b) of clause
(3) of the preceding paragraph (vi) payments made to purchase, redeem or
otherwise acquire or retire for value shares of Capital Stock of the Company or
any of its Restricted Subsidiaries at no more than fair market value (determined
in good faith by the Board of Directors of the Company as evidenced by a
resolution of such Board of Directors filed with the Trustee) from present and
former officers and directors of the Company or any such Restricted Subsidiary
(other than F. Patrick Smith, J. Andrew McWethy, Barry A. Solomon and Stephen A.
Tuttle) in an amount not in excess of up to $2.0 million for each fiscal year
and $5.0 million in the aggregate, (vii) all payments, not exceeding $600,000 in
the aggregate, for each fiscal year, required to be made to Tekni-Plex
Partnership, MST/TP Partners, L.P., MST Management, L.P., MST Partners L.P. or
their respective Affiliates or partners under the terms of existing agreements
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and notes, (viii) so long as no Default or Event of Default has occurred and is
continuing, the redemption, repurchase or retirement of Subordinated
Indebtedness of the Company in exchange for, by conversion into, or out of the
net proceeds of, a substantially concurrent sale or incurrence of Subordinated
Indebtedness (other than any Indebtedness owed to a Subsidiary) of the Company
that is contractually subordinated in right of payment to the Notes to at least
the same extent, and which has an Average Life at least as long, in each case,
as the subordinated Indebtedness being redeemed, repurchased or retired; (ix) so
long as no Default or Event of Default has occurred and is continuing,
Investments not otherwise permitted pursuant to the clauses above up to $10.0
million in the aggregate; and (x) so long as no Default or Event of Default has
occurred and is continuing, Restricted Payments not otherwise permitted pursuant
to the clauses above up to $2.0 million in the aggregate. Each Restricted
Payment described in clauses (i) (to the extent not already taken into account
for purposes of computing the aggregate amount of all Restricted Payments
pursuant to clause 3 above), (iv), (vi), (vii), (ix) and (x) of the previous
sentence shall be taken into account for purposes of computing the aggregate
amount of all Restricted Payments pursuant to clause (3) of the preceding
paragraph.
The Indenture provides that for purposes of this covenant, (i) an
"Investment" shall be deemed to have been made at the time any Restricted
Subsidiary is designated as an Unrestricted Subsidiary in an amount
(proportionate to the Company's equity interest in such Subsidiary) equal to the
net worth of such Restricted Subsidiary at the time that such Restricted
Subsidiary is designated as an Unrestricted Subsidiary; (ii) at any date the
aggregate of all Restricted Payments made as Investments since the Issue Date
shall exclude and be reduced by an amount (proportionate to the Company's equity
interest in such Subsidiary) equal to the net worth of an Unrestricted
Subsidiary at the time that such Unrestricted Subsidiary is designated a
Restricted Subsidiary, not to exceed, in the case of any such redesignation of
an Unrestricted Subsidiary as a Restricted Subsidiary, the amount of Investments
previously made by the Company and the Restricted Subsidiaries in such
Unrestricted Subsidiary (in each case (i) and (ii) "net worth" to be calculated
based upon the fair market value of the assets of such Subsidiary as of any such
date of designation); and (iii) any property transferred to or from an
Unrestricted Subsidiary shall be valued at its fair market value at the time of
such transfer.
Limitations Concerning Distributions and Transfers by Restricted Subsidiaries
The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries to, directly or indirectly, create or otherwise
cause or suffer to exist any consensual encumbrance or restriction on the
ability of any Restricted Subsidiary of the Company to (i) pay, directly or
indirectly, dividends or make any other distributions in respect of its Capital
Stock or pay any Indebtedness or other obligation owed to the Company or any
Restricted Subsidiary of the Company, (ii) make loans or advances to the Company
or any Restricted Subsidiary of the Company or (iii) transfer any of its
property or assets to the Company or any Restricted Subsidiary of the Company,
except for such encumbrances or restrictions existing under or by reason of (a)
any agreement in effect on the Issue Date as any such agreement is in effect on
such date, (b) the Credit Agreement, (c) any agreement relating to any
Indebtedness Incurred by such Restricted Subsidiary prior to the date on which
such Restricted Subsidiary was acquired by the Company and outstanding on such
date and not Incurred in anticipation or contemplation of becoming a Restricted
Subsidiary and provided such encumbrance or restriction shall not apply to any
assets of the Company or its Restricted Subsidiaries other than such Restricted
Subsidiary, (d) customary provisions contained in an agreement which has been
entered into for the sale or disposition of all or substantially all of the
Capital Stock or assets of a Restricted Subsidiary; provided, however, that such
encumbrance or restriction is applicable only to such Restricted Subsidiary or
assets, (e) an agreement effecting a renewal, exchange, refunding, amendment or
extension of Indebtedness Incurred pursuant to an agreement referred to in
clause (a) above; provided, however, that the provisions contained in such
renewal, exchange, refunding, amendment or extension agreement relating to such
encumbrance or restriction are no more restrictive in any material respect than
the provisions contained in the agreement that is the subject thereof in the
reasonable judgment of the Board of Directors of the Company as evidenced by a
resolution of such Board of Directors filed with the Trustee, (f) the Indenture,
(g) applicable law, (h) customary provisions restricting subletting or
assignment of any lease governing any leasehold interest of any Restricted
Subsidiary of the Company, (i) restrictions contained in Indebtedness permitted
to be incurred subsequent to the Issue Date pursuant to
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the provisions of the covenant described under "-- Limitation on Indebtedness";
provided that any such restrictions are ordinary and customary with respect to
the type of Indebtedness incurred, (j) purchase money obligations for property
acquired in the ordinary course of business that impose restrictions of the type
referred to in clause (iii) of this covenant or (k) restrictions of the type
referred to in clause (iii) of this covenant contained in security agreements
securing Indebtedness of a Restricted Subsidiary of the Company to the extent
that such Liens were otherwise incurred in accordance with "-- Limitation on
Liens" below and restrict the transfer of property subject to such agreements.
Limitation on Liens
The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries to, incur any Lien on or with respect to any
property or assets of the Company or such Restricted Subsidiary owned on the
Issue Date or thereafter acquired or on the income or profits thereof to secure
Indebtedness, without making, or causing any such Restricted Subsidiary to make,
effective provision for securing the Notes and all other amounts due under the
Indenture (and, if the Company shall so determine, any other Indebtedness of the
Company or such Restricted Subsidiary, including Subordinated Indebtedness;
provided, however, that Liens securing the Notes and any Indebtedness pari passu
with the Notes are senior to such Liens securing such Subordinated Indebtedness)
equally and ratably with such Indebtedness or, in the event such Indebtedness is
subordinate in right of payment to the Notes or the Guarantee, prior to such
Indebtedness, as to such property or assets for so long as such Indebtedness
shall be so secured.
The foregoing restrictions shall not apply to (i) Liens existing on the
Issue Date securing Indebtedness existing on the Issue Date; (ii) Liens securing
Senior Debt (including Liens securing Indebtedness outstanding under the Credit
Agreement) and any guarantees thereof to the extent that the Indebtedness
secured thereby is permitted to be incurred under the covenant described under
"-- Limitation on Indebtedness" above; provided, however, that Indebtedness
under the Credit Agreement shall be deemed not to have been Incurred in
violation of such provisions for purposes of this clause (ii) if the holder(s)
of such Indebtedness or their agent or representative shall have received a
representation from the Company to the effect that the Incurrence of such
Indebtedness does not violate such provision; (iii) Liens securing only the
Notes and the Guarantees; (iv) Liens in favor of the Company or a Guarantor; (v)
Liens to secure Indebtedness Incurred for the purpose of financing all or any
part of the purchase price or the cost of construction or improvement of the
property (or any other capital expenditure financing) subject to such Liens;
provided, however, that (a) the aggregate principal amount of any Indebtedness
secured by such a Lien does not exceed 100% of such purchase price or cost, (b)
such Lien does not extend to or cover any other property other than such item of
property and any improvements on such item, (c) the Indebtedness secured by such
Lien is Incurred by the Company within 180 days of the acquisition, construction
or improvement of such property and (d) the Incurrence of such Indebtedness is
permitted by the provisions of the Indenture described under "-- Limitation on
Indebtedness" above; (vi) Liens on property existing immediately prior to the
time of acquisition thereof (and not created in anticipation or contemplation of
the financing of such acquisition); (vii) Liens on property of a Person existing
at the time such Person is acquired or merged with or into or consolidated with
the Company or any such Restricted Subsidiary (and not created in anticipation
or contemplation thereof); (viii) Liens to secure Indebtedness Incurred to
extend, renew, refinance or refund (or successive extensions, renewals,
refinancings or refundings), in whole or in part, any Indebtedness secured by
Liens referred to in clauses (i)-(vii) and (ix)-(xii) of this paragraph so long
as such Liens do not extend to any other property and the principal amount of
Indebtedness so secured is not increased except for the amount of any premium
required to be paid in connection with such renewal, refinancing or refunding
pursuant to the terms of the Indebtedness renewed, refinanced or refunded or the
amount of any premium reasonably determined by the Company as necessary to
accomplish such renewal, refinancing or refunding by means of a tender offer,
exchange offer or privately negotiated repurchase, plus the expenses of the
issuer of such Indebtedness reasonably incurred in connection with such renewal,
refinancing or refunding; (ix) Liens in favor of the Trustee as provided for in
the Indenture on money or property held or collected by the Trustee in its
capacity as Trustee (x) Liens securing a tax, assessment or other governmental
charge or levy or the claim of a materialman, mechanic, carrier, warehouseman or
landlord for labor, materials, supplies or rentals incurred in the ordinary
course or business; (xi) Liens consisting of a deposit or pledge made in the
ordinary
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course of business in connection with, or to secure payment of, obligations
under worker's compensation, unemployment insurance or similar legislation;
(xii) Liens arising pursuant to an order of attachment, distraint or similar
legal process arising in connection with legal proceedings; and (xiii) Liens
incurred in the ordinary course of business securing assets not having a fair
market value in excess of $500,000.
Limitation on Certain Asset Dispositions
The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries to, directly or indirectly, make one or more
Asset Dispositions unless: (i) the Company or such Restricted Subsidiary, as the
case may be, receives consideration for such Asset Disposition at least equal to
the fair market value of the assets sold or disposed of as determined by the
Board of Directors of the Company in good faith and evidenced by a resolution of
such Board of Directors filed with the Trustee; (ii) not less than 75% of the
consideration for the disposition consists of cash or readily marketable cash
equivalents or the assumption of Indebtedness (other than non-recourse
Indebtedness or any Subordinated Indebtedness) of the Company or such Restricted
Subsidiary or other obligations relating to such assets (and release of the
Company or such Restricted Subsidiary from all liability on the Indebtedness or
other obligations assumed); and (iii) all Net Available Proceeds, less any
amounts invested within 360 days of such Asset Disposition in assets related to
the business of the Company or its Restricted Subsidiaries (including in the
Capital Stock of another Person (other than any Person that is a Restricted
Subsidiary of the Company immediately prior to such investment); provided,
however, that immediately after giving effect to any such investment in Capital
Stock (and not prior thereto) such Person shall be a Restricted Subsidiary of
the Company), are applied, on or prior to the 360th day after such Asset
Disposition, unless and to the extent that the Company shall determine to make
an Offer to Purchase, to the permanent reduction and prepayment of any Senior
Debt of the Company then outstanding (including a permanent reduction of
commitments in respect thereof). Any Net Available Proceeds from any Asset
Disposition which is subject to the immediately preceding sentence that are not
applied as provided in the immediately preceding sentence shall be used promptly
after the expiration of the 360th day after such Asset Disposition, or promptly
after the Company shall have earlier determined to not apply any Net Available
Proceeds therefrom as provided in clause (iii) of the immediately preceding
sentence, to make an Offer to Purchase outstanding Notes at a purchase price in
cash equal to 100% of their principal amount plus accrued interest to the
Purchase Date. Notwithstanding the foregoing, the Company may defer making any
Offer to Purchase outstanding Notes until there are aggregate unutilized Net
Available Proceeds from Asset Dispositions otherwise subject to the two
immediately preceding sentences equal to or in excess of $5.0 million (at which
time, the entire unutilized Net Available Proceeds from Asset Dispositions
otherwise subject to the two immediately preceding sentences, and not just the
amount in excess of $5.0 million, shall be applied as required pursuant to this
paragraph). Any remaining Net Available Proceeds following the completion of the
required Offer to Purchase may be used by the Company for any other purpose
(subject to the other provisions of the Indenture) and the amount of Net
Available Proceeds then required to be otherwise applied in accordance with this
covenant shall be reset to zero, subject to any subsequent Asset Disposition.
These provisions will not apply to a transaction consummated in compliance with
the provisions of the Indenture described under "-- Mergers, Consolidations and
Certain Sales of Assets" below.
In the event that the Company makes an Offer to Purchase the Notes, the
Company shall comply with any applicable securities laws and regulations,
including any applicable requirements of Section 14(e) of, and Rule 14e-1 under,
the Exchange Act.
Limitation on Senior Subordinated Indebtedness
The Indenture provides that the Company will not (i) directly or indirectly
Incur any Indebtedness that by its terms would expressly rank senior in right of
payment to the Notes and expressly rank subordinate in right of payment to any
Senior Debt and (ii) permit a Guarantor to, and no Guarantor will, directly or
indirectly Incur any Indebtedness that by its terms would expressly rank senior
in right of payment to the Guarantee of such Guarantor and expressly rank
subordinate in right of payment to any Senior Debt of such Guarantor.
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Limitation on Issuance and Sale of Capital Stock of Restricted Subsidiaries
The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries to, (a) transfer, convey, sell or otherwise
dispose of any shares of Capital Stock of any Restricted Subsidiary of the
Company (other than to the Company or a Wholly Owned Subsidiary of the Company),
except that the Company and any such Restricted Subsidiary may, in any single
transaction, sell all, but not less than all, of the issued and outstanding
Capital Stock of any such Restricted Subsidiary to any Person, subject to
complying with the provisions of the Indenture described under "-- Limitation on
Certain Asset Dispositions" above and (b) issue shares of Capital Stock of a
Restricted Subsidiary of the Company (other than directors' qualifying shares),
or securities convertible into, or warrants, rights or options to subscribe for
or purchase shares of, Capital Stock of a Restricted Subsidiary of the Company
to any Person other than to the Company or a Wholly Owned Subsidiary of the
Company and other than to the holders of the Capital Stock of such Restricted
Subsidiary made pro rata to the relative amounts of such Capital Stock held by
such holders.
Limitation on Transactions with Affiliates and Related Persons
The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries to, enter into directly or indirectly any
transaction with any of their respective Affiliates or Related Persons (other
than the Company or a Restricted Subsidiary of the Company), including, without
limitation, the purchase, sale, lease or exchange of property, the rendering of
any service, or the making of any guarantee, loan, advance or Investment, either
directly or indirectly, involving aggregate consideration in excess of $1.0
million unless a majority of the disinterested directors of the Board of
Directors of the Company determines, in its good faith judgment evidenced by a
resolution of such Board of Directors filed with the Trustee, that the terms of
such transaction are at least as favorable as the terms that could be obtained
by the Company or such Restricted Subsidiary, as the case may be, in a
comparable transaction made on an arm's-length basis between unaffiliated
parties; provided, however, that if the aggregate consideration is in excess of
$5.0 million the Company shall also obtain, prior to the consummation of the
transaction, the favorable opinion as to the fairness of the transaction to the
Company or such Restricted Subsidiary, from a financial point of view from an
independent financial advisor. The provisions of this covenant shall not apply
to (i) transactions permitted by the provisions of the Indenture described above
under the caption "-- Limitation on Restricted Payments" above and (ii)
reasonable fees and compensation paid to, and indemnity provided on behalf of,
officers, directors and employees of the Company and its Restricted Subsidiaries
as determined in good faith by the Board of Directors or authorized executive
officers, as the case may be, of the Company.
Change of Control
Within 30 days following the date of the consummation of a transaction
resulting in a Change of Control, the Company will commence an Offer to Purchase
all outstanding Notes at a purchase price in cash equal to 101% of their
principal amount plus accrued interest to the Purchase Date. Such Offer to
Purchase will be consummated not earlier than 30 days and not later than 60 days
after the commencement thereof. Each holder shall be entitled to tender all or
any portion of the Notes owned by such holder pursuant to the Offer to Purchase,
subject to the requirement that any portion of a Note tendered must bear an
integral multiple of $1,000 principal amount. A "Change of Control" will be
deemed to have occurred in the event that (whether or not otherwise permitted by
the Indenture), after the Issue Date (a) any Person or any Persons acting
together that would constitute a group (for purposes of Section 13(d) of the
Exchange Act, or any successor provision thereto) (a "Group"), together with any
Affiliates or Related Persons thereof, other than any such Person, Persons,
Affiliates or Related Person who are Permitted Holders, shall "beneficially own"
(as defined in Rule 13d-3 under the Exchange Act, or any successor provision
thereto), directly or indirectly, at least (i) 50% of the voting power of the
outstanding Voting Stock of the Company or (ii) 40% of the voting power of the
outstanding Voting Stock of the Company, and the Permitted Holders own less than
such Person or Group (in doing the "own less than" comparison in this clause
(ii), the holdings of the Permitted Holders who are members of the new Group
shall not be counted in the shares held in the aggregate by Permitted Holders);
(b) any sale, lease or other transfer (in one transaction or a series of related
transactions) is made by the
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Company or any of its Restricted Subsidiaries of all or substantially all of the
consolidated assets of the Company and its Restricted Subsidiaries to any
Person; (c) the Company consolidates with or merges with or into another Person
or any Person consolidates with, or merges with or into, the Company, in any
such event pursuant to a transaction in which immediately after the consummation
thereof Persons owning a majority of the Voting Stock of the Company immediately
prior to such consummation shall cease to own a majority of the Voting Stock of
the Company or the surviving entity if other than the Company; (d) Continuing
Directors cease to constitute at least a majority of the Board of Directors of
the Company; or (e) the stockholders of the Company approve any plan or proposal
for the liquidation or dissolution of the Company. In no event would the sale of
common stock of the Company to an underwriter or a group of underwriters in
privity of contract with the Company (or anybody in privity of contract with
such underwriters) be deemed to be a Change of Control or be deemed the
acquisition of more than 40% of the voting power of the outstanding Voting Stock
of the Company by a Person or any Group unless such common stock is not held in
an investment account in which case the investment account would be treated
without giving effect to the foregoing part of this sentence.
In the event that the Company makes an Offer to Purchase the Notes, the
Company shall comply with any applicable securities laws and regulations,
including any applicable requirements of Section 14(e) of, and Rule 14e-1 under,
the Exchange Act.
With respect to the sale of assets referred to in the definition of "Change
of Control," the phrase "all or substantially all" of the assets of the Company
will likely be interpreted under applicable law and will be dependent upon
particular facts and circumstances. As a result, there may be a degree of
uncertainty in ascertaining whether a sale or transfer of "all or substantially
all" of the assets of the Company has occurred. In addition, no assurances can
be given that the Company will be able to acquire Notes tendered upon the
occurrence of a Change of Control. The ability of the Company to pay cash to the
holders of Notes upon a Change of Control may be limited by its then existing
financial resources. The Credit Agreement will contain certain covenants
prohibiting, or requiring waiver or consent of the lenders thereunder prior to,
the repurchase of the Notes upon a Change of Control and future debt agreements
of the Company may provide the same. If the Company does not obtain such waiver
or consent or repay such Indebtedness, the Company will remain prohibited from
repurchasing the Notes. In such event, the Company's failure to purchase
tendered Notes would constitute an Event of Default under the Indenture which
would in turn constitute a default under the Credit Agreement and possibly other
Indebtedness. None of the provisions relating to a repurchase upon a Change of
Control are waivable by the Board of Directors of the Company or the Trustee.
The foregoing provisions will not prevent the Company from entering into
transactions of the types described above with management or their affiliates.
In addition, such provisions may not necessarily afford the holders of the Notes
protection in the event of a highly leveraged transaction, including a
reorganization, restructuring, merger or similar transaction involving the
Company that may adversely affect the holders because such transactions may not
involve a shift in voting power or beneficial ownership, or even if they do, may
not involve a shift of the magnitude required under the definition of Change of
Control to trigger the provisions.
Future Guarantors
The Indenture provides that the Company shall not create or acquire, nor
permit any of its Domestic Restricted Subsidiaries to create or acquire, any
Domestic Restricted Subsidiary after the Issue Date unless, at the time such
Domestic Restricted Subsidiary has either assets or stockholder's equity in
excess of $25,000, such Domestic Restricted Subsidiary (a) executes and delivers
to the Trustee a supplemental indenture in form reasonably satisfactory to the
Trustee pursuant to which such Domestic Restricted Subsidiary shall
unconditionally guarantee all of the Company's obligations under the Notes and
the Indenture on the terms set forth in the Indenture and (b) delivers to the
Trustee an opinion of counsel that such supplemental indenture has been duly
authorized, executed and delivered by such Domestic Restricted Subsidiary and
constitutes a legal, valid, binding and enforceable obligation of such Domestic
Restricted Subsidiary.
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Provision of Financial Information
Whether or not the Company is subject to Section 13(a) or 15(d) of the
Exchange Act, or any successor provision thereto, the Company shall file with
the Commission the annual reports, quarterly reports and other documents which
the Company would have been required to file with the Commission pursuant to
such Section 13(a) or 15(d) or any successor provision thereto if the Company
were so required, such documents to be filed with the Commission on or prior to
the respective dates (the "Required Filing Dates") by which the Company would
have been required so to file such documents if the Company were so required.
The Company shall also in any event (a) within 15 days of each Required Filing
Date (i) transmit by mail to all holders of Notes, as their names and addresses
appear in the Note Register, without cost to such holders, and (ii) file with
the Trustee, copies of the annual reports, quarterly reports and other documents
which the Company is required to file with the Commission pursuant to the
preceding sentence, and (b) if, notwithstanding the preceding sentence, filing
such documents by the Company with the Commission is not permitted under the
Exchange Act, promptly upon written request supply copies of such documents to
any prospective holder of Notes.
Mergers, Consolidations and Certain Sales of Assets
The Company will not consolidate or merge with or into any Person, or sell,
assign, lease, convey or otherwise dispose of (or cause or permit any Restricted
Subsidiary of the Company to consolidate or merge with or into any Person or
sell, assign, lease, convey or otherwise dispose of) all or substantially all of
the Company's assets (determined on a consolidated basis for the Company and its
Restricted Subsidiaries), whether as an entirety or substantially an entirety in
one transaction or a series of related transactions, including by way of
liquidation or dissolution, to any Person unless, in each such case: (i) the
entity formed by or surviving any such consolidation or merger (if other than
the Company or such Restricted Subsidiary, as the case may be), or to which such
sale, assignment, lease, conveyance or other disposition shall have been made
(the "Surviving Entity"), is a corporation organized and existing under the laws
of the United States, any state thereof or the District of Columbia; (ii) if
there is a Surviving Entity, the Surviving Entity assumes by supplemental
indenture all of the obligations of the Company on the Notes and under the
Indenture; (iii) immediately after giving effect to such transaction and the use
of any net proceeds therefrom on a pro forma basis, the Company or the Surviving
Entity, as the case may be, (A) shall have a Consolidated Net Worth equal to or
greater than the Consolidated Net Worth of the Company immediately prior to such
transaction and (B) could Incur at least $1.00 of Indebtedness pursuant to
clause (i) of the provisions of the Indenture described under "-- Limitation on
Indebtedness" above; (iv) immediately before and after giving effect to such
transaction and treating any Indebtedness which becomes an obligation of the
Company or any of its such Restricted Subsidiaries as a result of such
transaction as having been incurred by the Company or such Restricted
Subsidiary, as the case may be, at the time of the transaction, no Default or
Event of Default shall have occurred and be continuing; and (v) if, as a result
of any such transaction, property or assets of the Company or a Restricted
Subsidiary would become subject to a Lien not excepted from the provisions of
the Indenture described under "-- Limitation on Liens" above, the Company,
Restricted Subsidiary or the Surviving Entity, as the case may be, shall have
secured the Notes as required by said covenant. The provisions of this paragraph
shall not apply to any merger of a Restricted Subsidiary of the Company with or
into the Company or a Wholly Owned Subsidiary of the Company or any transaction
pursuant to which a Guarantor, is to be released in accordance with the terms of
the Guarantee and the Indenture in connection with any transaction complying
with the provisions of the Indenture described under "-- Limitation on Certain
Asset Dispositions" above.
EVENTS OF DEFAULT
The following will be Events of Default under the Indenture: (a) failure to
pay principal of (or premium, if any, on) any Note when due (whether or not
prohibited by the provisions of the Indenture described under "-- Ranking"
above); (b) failure to pay any interest on any Note when due, and the default
continues for 30 days (whether or not prohibited by the provisions of the
Indenture described under "-- Ranking" above); (c) default in the payment of
principal of and interest on Notes required to be purchased pursuant to an Offer
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to Purchase as described under "-- Covenants -- Change of Control" and
"-- Covenants -- Limitation on Certain Asset Dispositions" above when due and
payable (whether or not prohibited by the provisions of the Indenture described
under "-- Ranking" above); (d) failure to perform or comply with any of the
provisions described under "-- Covenants -- Mergers, Consolidations and Certain
Sales of Assets" above; (e) failure to perform any other covenant or agreement
of the Company under the Indenture or the Notes and the default continues for 30
days after written notice to the Company by the Trustee or holders of at least
25% in aggregate principal amount of outstanding Notes; (f) default under the
terms of one or more instruments evidencing or securing Indebtedness of the
Company or any of its Restricted Subsidiaries having an outstanding principal
amount of $5 million or more individually or in the aggregate that has resulted
in the acceleration of the payment of such Indebtedness or failure to pay
principal when due at the stated maturity of any such Indebtedness; (g) the
rendering of a final judgment or judgments (not subject to appeal) against the
Company or any of its Restricted Subsidiaries in an amount of $5 million or more
which remains undischarged or unstayed for a period of 60 days after the date on
which the right to appeal has expired; (h) certain events of bankruptcy,
insolvency or reorganization affecting the Company or any of its Material
Subsidiaries; and (i) any Guarantee ceases to be in full force and effect or is
declared null and void and unenforceable or is found to be invalid or a
Guarantor denies its liability under the Guarantee (other than by reason of a
release of such Guarantor from the Guarantee in accordance with the terms of the
Indenture and the Guarantee).
If an Event of Default (other than an Event of Default with respect to the
Company described in clause (h) of the preceding paragraph) shall occur and be
continuing, either the Trustee or the holders of at least 25% in aggregate
principal amount of the outstanding Notes may accelerate the maturity of all
Notes; provided, however, that after such acceleration, but before a judgment or
decree based on acceleration, the holders of a majority in aggregate principal
amount of outstanding Notes may, under certain circumstances, rescind and annul
such acceleration if all Events of Default, other than the non-payment of
accelerated principal, have been cured or waived as provided in the Indenture;
and provided, further, that so long as the Credit Agreement shall be in full
force and effect, if an Event of Default shall have occurred and be continuing
(other than as specified under clause (h) above), the Notes shall not become due
and payable until the earlier to occur of (x) five business days following
delivery of a written notice of such acceleration of the Notes to the agent
under the Credit Agreement, if such Event of Default has not been cured prior to
such fifth business day, and (y) the acceleration of any Indebtedness under the
Credit Agreement. If an Event of Default specified in clause (h) of the
preceding paragraph with respect to the Company occurs, the outstanding Notes
will ipso facto become immediately due and payable without any declaration or
other act on the part of the Trustee or any holder. For information as to waiver
of defaults, see "-- Modification and Waiver."
The Indenture provides that the Trustee shall, within 30 days after the
occurrence of any Default or Event of Default with respect to the Notes, give
the holders thereof notice of all uncured Defaults or Events of Default known to
it; provided, however, that, except in the case of an Event of Default or a
Default in payment with respect to the Notes or a Default or Event of Default in
complying with "-- Covenants -- Mergers, Consolidations and Certain Sales of
Assets," the Trustee shall be protected in withholding such notice if and so
long as the Board of Directors or responsible officers of the Trustee in good
faith determine that the withholding of such notice is in the interest of the
holders of the Notes.
No holder of any Note will have any right to institute any proceeding with
respect to the Indenture or for any remedy thereunder, unless such holder shall
have previously given to the Trustee written notice of a continuing Event of
Default and unless the holders of at least 25% in aggregate principal amount of
the outstanding Notes shall have made written request, and offered reasonable
indemnity, to the Trustee to institute such proceeding as Trustee, and the
Trustee shall not have received from the holders of a majority in aggregate
principal amount of the outstanding Notes a direction inconsistent with such
request and shall have failed to institute such proceeding within 60 days.
However, such limitations do not apply to a suit instituted by a holder of a
Note for enforcement of payment of the principal of and premium, if any, or
interest on such Note on or after the respective due dates expressed in such
Note.
The Company will be required to furnish to the Trustee annually a statement
as to its performance of certain of its obligations under the Indenture and as
to any default in such performance.
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SATISFACTION AND DISCHARGE OF INDENTURE; DEFEASANCE
The Company may terminate its substantive obligations and the substantive
obligations of the Guarantors in respect of the Notes and the Guarantees by
delivering all outstanding Notes to the Trustee for cancellation and paying all
sums payable by the Company on account of principal of, premium, if any, and
interest on all Notes or otherwise. In addition to the foregoing, the Company
may, provided that no Default or Event of Default has occurred and is continuing
or would arise therefrom (or, with respect to a Default or Event of Default
specified in clause (h) of "-- Events of Default" above, any time on or prior to
the 91st calendar day after the date of such deposit (it being understood that
this condition shall not be deemed satisfied until after such 91st day)) and
provided that no default under any Senior Debt would result therefrom, terminate
its substantive obligations and the substantive obligations of the Guarantors in
respect of the Notes and the Guarantees (except for the Company's obligation to
pay the principal of (and premium, if any, on) and the interest on the Notes and
such Guarantors' guarantee thereof) by (i) depositing with the Trustee, under
the terms of an irrevocable trust agreement, money or United States Government
Obligations sufficient (without reinvestment) to pay all remaining indebtedness
on the Notes, (ii) delivering to the Trustee either an Opinion of Counsel or a
ruling directed to the Trustee from the Internal Revenue Service to the effect
that the holders of the Notes will not recognize income, gain or loss for
federal income tax purposes as a result of such deposit and termination of
obligations, (iii) delivering to the Trustee an Opinion of Counsel to the effect
that the Company's exercise of its option under this paragraph will not result
in the Company, the Trustee or the trust created by the Company's deposit of
funds pursuant to this provision becoming or being deemed to be an "investment
company" under the Investment Company Act of 1940, as amended, and (iv)
complying with certain other requirements set forth in the Indenture. In
addition, the Company may, provided that no Default or Event of Default has
occurred, and is continuing or would arise therefrom (or, with respect to a
Default or Event of Default specified in clause (h) of "-- Events of Default"
above, any time on or prior to the 91st calendar day after the date of such
deposit (it being understood that this condition shall not be deemed satisfied
until after such 91st day)) and provided that no default under any Senior Debt
would result therefrom, terminate all of its substantive obligations and all of
the substantive obligations of the Guarantors in respect of the Notes and the
Guarantees (including the Company's obligation to pay the principal of (and
premium, if any, on) and interest on the Notes and such Guarantors' guarantee
thereof by (i) depositing with the Trustee, under the terms of an irrevocable
trust agreement, money or United States Government Obligations sufficient
(without reinvestment) to pay all remaining indebtedness on the Notes, (ii)
delivering to the Trustee either a ruling directed to the Trustee from the
Internal Revenue Service to the effect that the holders of the Notes will not
recognize income, gain or loss for federal income tax purposes as a result of
such deposit and termination of obligations or an Opinion of Counsel based upon
such a ruling addressed to the Trustee or a change in the applicable Federal tax
law since the date of the Indenture, to such effect, (iii) delivering to the
Trustee an Opinion of Counsel to the effect that the Company's exercise of its
option under this paragraph will not result in the Company, the Trustee or the
trust created by the Company's deposit of funds pursuant to this provision
becoming or being deemed to be an "investment company" under the Investment
Company Act of 1940, as amended, and (iv) complying with certain other
requirements set forth in the Indenture.
The Company may make an irrevocable deposit pursuant to this provision only
if at such time it is not prohibited from doing so under the subordination
provisions of the Indenture or certain covenants in the instruments governing
Senior Debt and the Company has delivered to the Trustee and any Paying Agent an
Officers' Certificate to that effect.
GOVERNING LAW
The Indenture, the Notes and the Guarantee will be governed by the laws of
the State of New York without regard to principles of conflicts of laws.
MODIFICATION AND WAIVER
Modifications and amendments of the Indenture may be made by the Company
and the Trustee with the consent of the holders of a majority in aggregate
principal amount of the outstanding Notes; provided,
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however, that no such modification or amendment may, without the consent of the
holder of each Note affected thereby, (a) change the Stated Maturity of the
principal of or any installment of interest on any Note or alter the optional
redemption or repurchase provisions of any Note or the Indenture in a manner
adverse to the holders of the Notes, (b) reduce the principal amount of (or the
premium) of any Note, (c) reduce the rate of or extend the time for payment of
interest on any Note, (d) change the place or currency of payment of principal
of (or premium) or interest on any Note, (e) modify any provisions of the
Indenture relating to the waiver of past defaults (other than to add sections of
the Indenture subject thereto) or the right of the holders to institute suit for
the enforcement of any payment on or with respect to any Note or the Guarantee,
or the modification and amendment of the Indenture and the Notes (other than to
add sections of the Indenture or the Notes which may not be amended,
supplemented or waived without the consent of each holder affected), (f) reduce
the percentage of the principal amount of outstanding Notes necessary for
amendment to or waiver of compliance with any provision of the Indenture or the
Notes or for waiver of any Default, (g) waive a default in the payment of
principal of, interest on, or redemption payment with respect to, any Note
(except a recision of acceleration of the Notes by the holders as provided in
the Indenture and a waiver of the payment default that resulted from such
acceleration), (h) modify the ranking or priority of the Notes or the Guarantee,
or modify the definition of Senior Debt or Designated Senior Debt or amend or
modify the subordination provisions of the Indenture in any manner adverse to
the Holders, (i) release the Guarantors from any of their respective obligations
under the Guarantee or the Indenture otherwise than in accordance with the
Indenture, or (j) modify the provisions relating to any Offer to Purchase
required under the covenants described under "-- Covenants -- Limitation on
Certain Asset Dispositions" or "-- Covenants -- Change of Control" in a manner
materially adverse to the holders of Notes with respect to any Asset Disposition
that has been consummated or Change of Control that has occurred.
The holders of a majority in aggregate principal amount of the outstanding
Notes, on behalf of all holders of Notes, may waive compliance by the Company
with certain restrictive provisions of the Indenture. Subject to certain rights
of the Trustee, as provided in the Indenture, the holders of a majority in
aggregate principal amount of the outstanding Notes, on behalf of all holders of
Notes, may waive any past default under the Indenture, except a default in the
payment of principal, premium or interest or a default arising from failure to
purchase any Note tendered pursuant to an Offer to Purchase, or a default in
respect of a provision that under the Indenture cannot be modified or amended
without the consent of the holder of each outstanding Note affected.
THE TRUSTEE
The Indenture provides that, except during the continuance of a Default,
the Trustee will perform only such duties as are specifically set forth in the
Indenture. During the existence of a Default, the Trustee will exercise such
rights and powers vested in it under the Indenture and use the same degree of
care and skill in their exercise as a prudent person would exercise under the
circumstances in the conduct of such person's own affairs. The Indenture and
provisions of the Trust Indenture Act incorporated by reference therein contain
limitations on the rights of the Trustee, should it become a creditor of the
Company, the Guarantors, or any other obligor upon the Notes, to obtain payment
of claims in certain cases or to realize on certain property received by it in
respect of any such claim as security or otherwise. The Trustee is permitted to
engage in other transactions with the Company or an Affiliate of the Company;
provided, however, that if it acquires any conflicting interest (as defined in
the Indenture or in the Trust Indenture Act), it must eliminate such conflict or
resign.
BOOK-ENTRY; DELIVERY AND FORM
The Exchange Notes will initially be represented by one or more global
Notes in definitive, fully registered form without interest coupons
(collectively, the "Global Note") and will be deposited with the Trustee as
custodian for the Depositary and registered in the name of a nominee of the
Depository.
Upon the issuance of the Global Note, the Depositary or its custodian will
credit, on its internal system, the respective principal amount of the
individual beneficial interests represented by such Global Note to the accounts
of persons who have accounts with such depositary. Ownership of beneficial
interests in the Global
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Note will be limited to persons who have accounts with the Depositary
("participants") or persons who hold interests through participants. Ownership
of beneficial interests in the Global Note will be shown on, and the transfer of
that ownership will be effected only through, records maintained by the
Depositary or its nominee (with respect to interests of participants) and the
records of participants (with respect to interests of persons other than
participants).
So long as the Depositary, or its nominee, is the registered holder of the
Global Note, the Depositary or such nominee, as the case may be, will be
considered the sole owner or holder of the Exchange Notes represented by such
Global Note for all purposes under the Indenture and the Exchange Notes. No
beneficial owner of an interest in the Global Note will be able to transfer that
interest except in accordance with the Depositary's applicable procedures.
Payments of the principal of, and interest on, the Global Note will be made
to the Depositary or its nominee, as the case may be, as the registered owner
thereof. None of the Company, the Trustee or any Paying Agent will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in the Global Note or
for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests.
The Company expects that the Depositary or its nominee, upon receipt of any
payment of principal or interest in respect of the Global Note will credit
participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of such Global Note as
shown on the records of the Depositary or its nominee. The Company also expects
that payments by participants to owners of beneficial interests in such Global
Note held through such participants will be governed by standing instructions
and customary practices, as is now the case with securities held for the
accounts of customers registered in the name of nominees for such customers.
Such payments will be the responsibility of such participants. Transfers between
participants in the Depositary will be effected in the ordinary way in
accordance with the Depositary rules and will be settled in same-day funds.
The Depositary has advised the Company that it will take any action
permitted to be taken by a holder of Exchange Notes only at the direction of one
or more participants to whose accounts an interest in the Global Note is
credited and only in respect of such portion of the aggregate principal amount
of Exchange Notes as to which such participant or participants has or have given
such direction.
The Depositary has advised the Company as follows: the Depositary is a
limited purpose trust company organized under the laws of the State of New York,
a "banking organization" within the meaning of New York Banking Law, a member of
the Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code and a "Clearing Agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. The Depositary was created to
hold securities for its participants and facilitate the clearance and settlement
of securities transactions between participants through electronic book-entry
changes in accounts of its participants, thereby eliminating the need for
physical movement of certificates. Participants include securities brokers and
dealers, banks, trust companies and clearing corporations and certain other
organizations. Indirect access to the Depositary system is available to others
such as banks, brokers, dealers and trust companies that clear through or
maintain a custodial relationship with a participant, either directly or
indirectly ("indirect participants").
Although the Depositary has agreed to the foregoing procedures in order to
facilitate transfers of interests in the Global Note among participants of the
Depositary, it is under no obligation to perform or continue to perform such
procedures, and such procedures may be discontinued at any time. Neither the
Company nor the Trustee will have any responsibility for the performance by the
Depositary or its participants or indirect participants of their respective
obligations under the rules and procedures governing their operations.
CERTIFICATED EXCHANGE NOTES
If the Depositary is at any time unwilling or unable to continue as a
depositary for the Global Note and a successor depositary is not appointed by
the Company within 90 days, the Company will issue certificated notes in
exchange for the Global Note.
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CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
Indenture or the Registration Rights Agreement. Reference is made to the
Indenture or the Registration Rights Agreement for the full definition of all
such terms, as well as any other terms used herein for which no definition is
provided.
"Acquired Indebtedness" means, with respect to any Person, Indebtedness of
such Person (i) existing at the time such Person becomes a Restricted Subsidiary
or (ii) assumed in connection with the acquisition of assets from another
Person, including Indebtedness Incurred in connection with, or in contemplation
of, such Person becoming a Restricted Subsidiary or such acquisition, as the
case may be.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with any specified Person. For purposes of this definition, "control"
when used with respect to any Person means the power to direct the management
and policies of such Person, directly or indirectly, whether through the
ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"Asset Disposition" means any sale, transfer or other disposition
(including, without limitation, by merger, consolidation or sale-and-leaseback
transaction) of (i) shares of Capital Stock of a Subsidiary of the Company
(other than directors' qualifying shares) or (ii) property or assets of the
Company or any Restricted Subsidiary of the Company other than in the ordinary
course of business; provided, however, that an Asset Disposition shall not
include (a) any sale, transfer or other disposition of shares of Capital Stock,
property or assets by a Restricted Subsidiary of the Company to the Company or
to any Wholly Owned Subsidiary of the Company, (b) any sale, transfer or other
disposition of defaulted receivables for collection or any sale, transfer or
other disposition of property or assets in the ordinary course of business, (c)
any isolated sale, transfer or other disposition that does not involve aggregate
consideration in excess of $1 million individually, (d) the grant in the
ordinary course of business of any non-exclusive license of patents, trademarks,
registrations therefor and other similar intellectual property, (e) any Lien (or
foreclosure thereon) securing Indebtedness to the extent that such Lien is
granted in compliance with "-- Covenants -- Limitation on Liens" above, (f) any
Restricted Payment permitted by "-- Covenants -- Limitation on Restricted
Payments" above, (g) any disposition of assets or property in the ordinary
course of business to the extent such property or assets are obsolete, worn-out
or no longer useful in the Company's or any of its Restricted Subsidiaries'
business, (h) the sale, lease, conveyance or disposition or other transfer of
all or substantially all of the assets of the Company as permitted under
"-- Covenants -- Mergers, Consolidations and Certain Sales of Assets" above;
provided, that the assets not so sold, leased, conveyed, disposed of or
otherwise transferred shall be deemed an Asset Disposition, or (i) any
disposition that constitutes a Change of Control.
"Average Life" means, as of the date of determination, with respect to any
Indebtedness for borrowed money or Preferred Stock, the quotient obtained by
dividing (i) the sum of the products of the number of years from the date of
determination to the dates of each successive scheduled principal or liquidation
value payments of such Indebtedness or Preferred Stock, respectively, and the
amount of such principal or liquidation value payments, by (ii) the sum of all
such principal or liquidation value payments.
"Capital Lease Obligations" of any Person means the obligations to pay rent
or other amounts under a lease of (or other Indebtedness arrangements conveying
the right to use) real or personal property of such Person which are required to
be classified and accounted for as a capital lease or liability on the face of a
balance sheet of such Person in accordance with GAAP. The amount of such
obligations shall be the capitalized amount thereof in accordance with GAAP and
the stated maturity thereof shall be the date of the last payment of rent or any
other amount due under such lease prior to the first date upon which such lease
may be terminated by the lessee without payment of a penalty.
"Capital Stock" of any Person means any and all shares, interests,
participations or other equivalents (however designated) of corporate stock of
such Person.
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"Common Stock" of any Person means Capital Stock of such Person that does
not rank prior, as to the payment of dividends or as to the distribution of
assets upon any voluntary or involuntary liquidation, dissolution or winding up
of such Person, to shares of Capital Stock of any other class of such Person.
"Consolidated Cash Flow Available for Fixed Charges" of any Person means
for any period the Consolidated Net Income of such Person for such period
increased (to the extent Consolidated Net Income for such period has been
reduced thereby) by the sum of (without duplication) (i) Consolidated Interest
Expense of such Person for such period, plus (ii) Consolidated Income Tax
Expense of such Person for such period, plus (iii) the consolidated depreciation
and amortization expense included in the income statement of such Person
prepared in accordance with GAAP for such period, plus (iv) any other non-cash
charges to the extent deducted from or reflected in Consolidated Net Income
except for any non-cash charges that represent accruals of, or reserves for,
cash disbursements to be made in any future accounting period.
"Consolidated Cash Flow Ratio" of any Person means for any period the ratio
of (i) Consolidated Cash Flow Available for Fixed Charges of such Person for
such period to (ii) the sum of (A) Consolidated Interest Expense of such Person
for such period, plus (B) the annual interest expense with respect to any
Indebtedness proposed to be Incurred by such Person or its Restricted
Subsidiaries, minus (C) Consolidated Interest Expense of such Person to the
extent included in clause (ii)(A) with respect to any Indebtedness that will no
longer be outstanding as a result of the Incurrence of the Indebtedness proposed
to be Incurred, plus (D) the annual interest expense with respect to any other
Indebtedness Incurred by such Person or its Restricted Subsidiaries since the
end of such period to the extent not included in clause (ii)(A), minus (E)
Consolidated Interest Expense of such Person to the extent included in clause
(ii)(A) with respect to any Indebtedness that no longer is outstanding as a
result of the Incurrence of the Indebtedness referred to in clause (ii)(D);
provided, however, that in making such computation, the Consolidated Interest
Expense of such Person attributable to interest on any Indebtedness bearing a
floating interest rate shall be computed on a pro forma basis as if the rate in
effect on the date of computation (after giving effect to any hedge in respect
of such Indebtedness that will, by its terms, remain in effect until the earlier
of the maturity of such Indebtedness or the date one year after the date of such
determination) had been the applicable rate for the entire period; provided,
further, however, that, in the event such Person or any of its Restricted
Subsidiaries has made any Asset Dispositions or acquisitions of assets not in
the ordinary course of business (including acquisitions of other Persons by
merger, consolidation or purchase of Capital Stock) during or after such period
and on or prior to the date of measurement, such computation shall be made on a
pro forma basis as if the Asset Dispositions or acquisitions had taken place on
the first day of such period. Calculations of pro forma amounts in accordance
with this definition shall be done in accordance with Article 11 of Regulation
S-X under the Securities Act or any successor provision and may include
reasonably ascertainable cost savings.
"Consolidated Income Tax Expense" of any Person means for any period the
consolidated provision for income taxes of such Person and its Restricted
Subsidiaries for such period calculated on a consolidated basis in accordance
with GAAP.
"Consolidated Interest Expense" for any Person means for any period,
without duplication, (a) the consolidated interest expense included in a
consolidated income statement (without deduction of interest or finance charge
income) of such Person and its Restricted Subsidiaries for such period
calculated on a consolidated basis in accordance with GAAP and (b) dividend
requirements of such Person and its Restricted Subsidiaries with respect to
Disqualified Stock and with respect to all other Preferred Stock of Restricted
Subsidiaries of such Person (in each case whether in cash or otherwise (except
dividends payable solely in shares of Capital Stock of such Person or such
Restricted Subsidiary)) paid, accrued or accumulated during such period times a
fraction the numerator of which is one and the denominator of which is one minus
the then effective consolidated Federal, state and local tax rate of such
Person, expressed as a decimal.
"Consolidated Net Income" of any Person means for any period the
consolidated net income (or loss) of such Person and its Restricted Subsidiaries
for such period determined on a consolidated basis in accordance with GAAP;
provided, however, that there shall be excluded therefrom (a) the net income (or
loss) of any Person acquired by such Person or a Restricted Subsidiary of such
Person in a pooling-of-interests transaction for any period prior to the date of
such transaction, (b) the net income (but not net loss) of any Restricted
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Subsidiary of such Person which is subject to restrictions which prevent or
limit the payment of dividends or the making of distributions to such Person to
the extent of such restrictions (regardless of any waiver thereof), (c) non-cash
gains and losses due solely to fluctuations in currency values, (d) the net
income of any Person that is not a Restricted Subsidiary of such Person, except
to the extent of the amount of dividends or other distributions representing
such Person's proportionate share of such other Person's net income for such
period actually paid in cash to such Person by such other Person during such
period, (e) gains but not losses on Asset Dispositions by such Person or its
Restricted Subsidiaries, (f) all extraordinary gains and losses determined in
accordance with GAAP and (g) in the case of a successor to the referent Person
by consolidation or merger or as a transferee of the referent Person's assets,
any earnings (or losses) of the successor corporation prior to such
consolidation, merger or transfer of assets.
"Consolidated Net Worth" of any Person means the consolidated stockholders'
equity of such Person, determined on a consolidated basis in accordance with
GAAP, less (without duplication) amounts attributable to Disqualified Capital
Stock of such Person.
"Continuing Director" means a director who either was a member of the Board
of Directors of the Company on the Issue Date or who became a director of the
Company subsequent to the Issue Date and whose election, or nomination for
election by the Company's stockholders, was duly approved by a majority of the
Continuing Directors then on the Board of Directors of the Company, either by a
specific vote or by approval of the proxy statement issued by the Company on
behalf of the entire Board of Directors of the Company in which such individual
is named as nominee for director.
"Credit Agreement" means the Credit Agreement among the Company as borrower
thereunder, and Morgan Guaranty Trust Company of New York, as agent on behalf of
itself and the others named therein, and any deferrals, renewals, extensions,
replacements, refinancings or refundings thereof, or amendments, modifications
or supplements thereto or replacements thereof (including, without limitation,
any amendment increasing the amount borrowed thereunder) and any agreement
providing therefor whether by or with the same or any other lender, creditors,
or group of creditors and including related notes, guarantee agreements,
security agreements and other instruments and agreements executed in connection
therewith.
"Default" means any event that is, or after notice or lapse of time or both
would become, an Event of Default.
"Designated Senior Debt" means (i) so long as the Credit Agreement is in
effect, the Senior Debt incurred thereunder and (ii) thereafter, any other
Senior Debt which has at the time of initial issuance an aggregate outstanding
principal amount in excess of $25.0 million which has been so designated as
Designated Senior Debt by the Board of Directors of the Company at the time of
initial issuance in a resolution delivered to the Trustee.
"Disqualified Stock" of any Person means any Capital Stock of such Person
which, by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is redeemable at the option of the holder thereof,
in whole or in part, on or prior to the final maturity of the Notes.
"Domestic Restricted Subsidiary" means any Restricted Subsidiary of the
Company organized and existing under the laws of the United States, any state
thereof or the District of Columbia.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated by the Commission thereunder.
"GAAP" means generally accepted accounting principles, consistently
applied, as in effect on the Issue Date in the United States of America, as set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as is approved by a significant segment of the
accounting profession in the United States.
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"Guarantee" means the guarantee of the Senior Subordinated Notes by each
Guarantor under the Indenture.
"Guarantor" means (i) each Restricted Subsidiary on the Issue Date and (ii)
each Restricted Subsidiary, if any, of the Company formed or acquired after the
Issue Date, which pursuant to the terms of the Indenture executes a supplement
to the Indenture as a Guarantor.
"Incur" means, with respect to any Indebtedness or other obligation of any
Person, to create, issue, incur (including by conversion, exchange or
otherwise), assume, guarantee or otherwise become liable in respect of such
Indebtedness or other obligation or the recording, as required pursuant to GAAP
or otherwise, of any such Indebtedness or other obligation on the balance sheet
of such Person (and "Incurrence," "Incurred" and "Incurring" shall have meanings
correlative to the foregoing). Indebtedness of any Person or any of its
Restricted Subsidiaries existing at the time such Person becomes a Restricted
Subsidiary of the Company (or is merged into or consolidates with the Company or
any of its Restricted Subsidiaries), whether or not such Indebtedness was
incurred in connection with, or in contemplation of, such Person becoming a
Restricted Subsidiary of the Company (or being merged into or consolidated with
the Company or any of its Restricted Subsidiaries), shall be deemed Incurred at
the time any such Person becomes a Restricted Subsidiary of the Company or
merges into or consolidates with the Company or any of its Restricted
Subsidiaries.
"Indebtedness" means (without duplication), with respect to any Person,
whether recourse is to all or a portion of the assets of such Person and whether
or not contingent, (i) every obligation of such Person for money borrowed, (ii)
every obligation of such Person evidenced by bonds, debentures, notes or other
similar instruments, including obligations incurred in connection with the
acquisition of property, assets or businesses, (iii) every reimbursement
obligation of such Person with respect to letters of credit, bankers'
acceptances or similar facilities issued for the account of such Person, (iv)
every obligation of such Person issued or assumed as the deferred purchase price
of property or services (but excluding trade accounts payable or accrued
liabilities arising in the ordinary course of business which are not overdue or
which are being contested in good faith), (v) every Capital Lease Obligation of
such Person, (vi) every net obligation under interest rate swap or similar
agreements or foreign currency hedge, exchange or similar agreements of such
Person and (vii) every obligation of the type referred to in clauses (i) through
(vi) of another Person and all dividends of another Person the payment of which,
in either case, such Person has guaranteed or is responsible or liable for,
directly or indirectly, as obligor, guarantor or otherwise. Indebtedness shall
include the liquidation preference and any mandatory redemption payment
obligations in respect of any Disqualified Stock of the Company owned by any
Person other than the Company or a Restricted Subsidiary of the Company, and any
Preferred Stock of a Restricted Subsidiary of the Company. Indebtedness shall
never be calculated taking into account any cash and cash equivalents held by
such Person. Indebtedness shall not include obligations arising from agreements
of the Company or a Restricted Subsidiary of the Company to provide for
indemnification, adjustment of purchase price, earn-out, or other similar
obligations, in each case, incurred or assumed in connection with the
disposition of any business or assets of a Restricted Subsidiary of the Company.
"Investment" by any Person means any direct or indirect loan, advance,
guarantee or other extension of credit (excluding credit balances in bank
accounts or similar accounts with other financial institutions) or capital
contribution to (by means of transfers of cash or other property to others or
payments for property or services for the account or use of others, or
otherwise), or purchase or acquisition of Capital Stock, bonds, notes,
debentures or other securities or evidence of Indebtedness issued by any other
Person.
"Issue Date" means the original issue date of the Notes.
"Lien" means, with respect to any property or assets, any mortgage or deed
of trust, pledge, hypothecation, assignment, security interest, lien, charge,
easement (other than any easement not materially impairing usefulness or
marketability), encumbrance, preference, priority or other security agreement
with respect to such property or assets (including, without limitation, any
conditional sale or other title retention agreement having substantially the
same economic effect as any of the foregoing).
"Material Subsidiary" means, at any date of determination, any Subsidiary
that, together with its Subsidiaries, (i) for the most recent fiscal year of the
Company accounted for more than 5% of the
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consolidated revenues of the Company or (ii) as of the end of such fiscal year,
was the owner of more than 5% of the consolidated assets of the Company, all as
set forth on the most recently available consolidated financial statements of
the Company for such fiscal year prepared in conformity with GAAP.
"Net Available Proceeds" from any Asset Disposition by any Person means
cash or readily marketable cash equivalents received (including by way of sale
or discounting of a note, installment receivable or other receivable, but
excluding any other consideration received in the form of assumption by the
acquiror of Indebtedness or other obligations relating to such properties or
assets or received in any other non-cash form) therefrom by such Person,
including any cash received by way of deferred payment or upon the monetization
or other disposition of any non-cash consideration (including notes or other
securities) received in connection with such Asset Disposition, net of (i) all
legal, title and recording tax expenses, commissions and other fees and expenses
incurred and all federal, state, foreign and local taxes required to be accrued
as a liability as a consequence of such Asset Disposition, (ii) all payments
made by such Person or its Restricted Subsidiaries on any Indebtedness which is
secured by such assets in accordance with the terms of any Lien upon or with
respect to such assets or which must by the terms of such Lien, or in order to
obtain a necessary consent to such Asset Disposition or by applicable law, be
repaid out of the proceeds from such Asset Disposition, (iii) all payments made
with respect to liabilities associated with the assets which are the subject of
the Asset Disposition, including, without limitation, trade payables and other
accrued liabilities, (iv) appropriate amounts to be provided by such Person or
any Restricted Subsidiary thereof, as the case may be, as a reserve in
accordance with GAAP against any liabilities associated with such assets and
retained by such Person or any Restricted Subsidiary thereof, as the case may
be, after such Asset Disposition, including, without limitation, liabilities
under any indemnification obligations and severance and other employee
termination costs associated with such Asset Disposition, until such time as
such amounts are no longer reserved or such reserve is no longer necessary (at
which time any remaining amounts will become Net Available Proceeds to be
allocated in accordance with the provisions of clause (iii) of the covenant of
the Indenture described under "-- Covenants -- Limitation on Certain Asset
Dispositions") and (v) all distributions and other payments made to minority
interest holders in Restricted Subsidiaries of such Person or joint ventures as
a result of such Asset Disposition.
"Net Investment" means the excess of (i) the aggregate amount of all
Investments in Unrestricted Subsidiaries or joint ventures made by the Company
or any Restricted Subsidiary on or after the Issue Date (in the case of an
Investment made other than in cash, the amount shall be the fair market value of
such Investment as determined in good faith by the Board of Directors of the
Company or such Restricted Subsidiary) over (ii) the aggregate amount returned
in cash on or with respect to such Investments whether through interest
payments, principal payments, dividends or other distributions or payments;
provided, however that such payments or distributions shall not be (and have not
been) included in subclause (b) of clause (3) of the first paragraph described
under "-- Covenants -- Limitation on Restricted Payments;" provided, further
that with respect to all Investments made in any Unrestricted Subsidiary or
joint venture the amounts referred to in clause (ii) above with respect to such
Investments shall not exceed the aggregate amount of all such Investments made
in such Unrestricted Subsidiary or joint venture.
"Offer to Purchase" means a written offer (the "Offer") sent by the Company
by first class mail, postage prepaid, to each holder at his address appearing in
the register for the Notes on the date of the Offer offering to purchase up to
the principal amount of Notes specified in such Offer at the purchase price
specified in such Offer (as determined pursuant to the Indenture). Unless
otherwise required by applicable law, the Offer shall specify an expiration date
(the "Expiration Date") of the Offer to Purchase which shall be not less than 30
days nor more than 60 days after the date of such Offer and a settlement date
(the "Purchase Date") for purchase of Notes within five Business Days after the
Expiration Date. The Company shall notify the Trustee at least 15 Business Days
(or such shorter period as is acceptable to the Trustee) prior to the mailing of
the Offer of the Company's obligation to make an Offer to Purchase, and the
Offer shall be mailed by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company. The Offer shall contain
all the information required by applicable law to be included therein. The Offer
shall
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contain all instructions and materials necessary to enable such holders to
tender Notes pursuant to the Offer to Purchase. The Offer shall also state:
(1) the Section of the Indenture pursuant to which the Offer to Purchase is
being made;
(2) the Expiration Date and the Purchase Date;
(3) the aggregate principal amount of the outstanding Notes offered to be
purchased by the Company pursuant to the Offer to Purchase (including, if
less than 100%, the manner by which such amount has been determined
pursuant to the Section of the Indenture requiring the Offer to Purchase)
(the "Purchase Amount");
(4) the purchase price to be paid by the Company for each $1,000 aggregate
principal amount of Notes accepted for payment (as specified pursuant to
the Indenture) (the "Purchase Price");
(5) that the holder may tender all or any portion of the Notes registered in
the name of such holder and that any portion of a Note tendered must be
tendered in an integral multiple of $1,000 principal amount;
(6) the place or places where Notes are to be surrendered for tender pursuant
to the Offer to Purchase;
(7) that interest on any Note not tendered or tendered but not purchased by the
Company pursuant to the Offer to Purchase will continue to accrue;
(8) that on the Purchase Date the Purchase Price will become due and payable
upon each Note being accepted for payment pursuant to the Offer to Purchase
and that interest thereon shall cease to accrue on and after the Purchase
Date;
(9) that each holder electing to tender all or any portion of a Note pursuant
to the Offer to Purchase will be required to surrender such Note at the
place or places specified in the Offer prior to the close of business on
the Expiration Date (such Note being, if the Company or the Trustee so
requires, duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Company and the Trustee duly executed
by, the holder thereof or his attorney duly authorized in writing);
(10) that holders will be entitled to withdraw all or any portion of Notes
tendered if the Company (or its Paying Agent) receives, not later than the
close of business on the fifth Business Day next preceding the Expiration
Date, a telegram, telex, facsimile transmission or letter setting forth the
name of the holder, the principal amount of the Note the holder tendered,
the certificate number of the Note the holder tendered and a statement that
such holder is withdrawing all or a portion of his tender;
(11) that (a) if Notes in an aggregate principal amount less than or equal to
the Purchase Amount are duly tendered and not withdrawn pursuant to the
Offer to Purchase, the Company shall purchase all such Notes and (b) if
Notes in an aggregate principal amount in excess of the Purchase Amount are
tendered and not withdrawn pursuant to the Offer to Purchase, the Company
shall purchase Notes having an aggregate principal amount equal to the
Purchase Amount on a pro rata basis (with such adjustments as may be deemed
appropriate so that only Notes in denominations of $1,000 or integral
multiples thereof shall be purchased); and
(12) that in the case of any holder whose Note is purchased only in part, the
Company shall execute and the Trustee shall authenticate and deliver to the
holder of such Note without service charge, a new Note or Notes, of any
authorized denomination as requested by such holder, in an aggregate
principal amount equal to and in exchange for the unpurchased portion of
the Note so tendered.
An Offer to Purchase shall be governed by and effected in accordance with
the provisions above pertaining to any Offer.
"Permitted Holder" means any of any member of the Board of Directors of the
Company as of the Issue Date, Tekni-Plex Partnership, MST/TP Partners, L.P., MST
Management, L.P., MST Partners L.P., any Affiliate of or partner in any of the
foregoing (including any Person receiving common stock of the Company upon a
distribution by any of the foregoing partnerships, whether a partner or
designated by a partner for purposes of estate or similar personal planning), or
any group if the majority of the shares of Common Stock
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of the Company owned by such group are beneficially owned by any or all of the
foregoing and their Related Persons and Affiliates.
"Permitted Investments" means (i) Investments in marketable, direct
obligations issued or guaranteed by the United States of America, or any
governmental entity or agency or political subdivision thereof (provided, that
the full faith and credit of the United States of America is pledged in support
thereof), maturing within one year of the date of purchase; (ii) Investments in
commercial paper issued by corporations or financial institutions maturing
within 180 days from the date of the original issue thereof, and rated "P-1" or
better by Moody's Investors Service or "A-1" or better by Standard & Poor's
Corporation or an equivalent rating or better by any other nationally recognized
securities rating agency; (iii) Investments in certificates of deposit issued or
acceptances accepted by or guaranteed by any bank or trust company organized
under the laws of the United States of America, any state thereof, the District
of Columbia, Canada or any province thereof, in each case having a combined
capital, surplus and undivided profits totalling more than $500,000,000,
maturing within one year of the date of purchase; (iv) Investments representing
Capital Stock or obligations issued or otherwise transferred to the Company or
any of its Restricted Subsidiaries in the course of the good faith settlement of
claims against any other Person or by reason of a composition or readjustment of
debt or a reorganization of any debtor of the Company or any of its Restricted
Subsidiaries; (v) deposits, including interest-bearing deposits, maintained in
the ordinary course of business in banks; (vi) any acquisition of the Capital
Stock of any Person; provided, however, that after giving effect to any such
acquisition such Person shall become a Restricted Subsidiary of the Company;
(vii) receivables and prepaid expenses, in each case arising in the ordinary
course of business; provided, however, that such receivables and prepaid
expenses would be recorded as assets of such Person in accordance with GAAP;
(viii) endorsements for collection or deposit in the ordinary course of business
by such Person of bank drafts and similar negotiable instruments of such other
Person received as payment for ordinary course of business trade receivables;
(ix) any interest swap or hedging obligation with an unaffiliated Person
otherwise permitted by the Indenture; (x) Investments received as consideration
for an Asset Disposition in compliance with the provisions of the Indenture
described under "-- Covenants -- Limitation on Certain Asset Dispositions"
above, (xi) Investments in Restricted Subsidiaries or by virtue of which a
person becomes a Restricted Subsidiary; and (xii) loans and advances to
employees of the Company or any of its Restricted Subsidiaries in the ordinary
course of business.
"Person" means any individual, corporation, limited or general partnership,
joint venture, association, joint stock company, trust, unincorporated
organization or government or any agency or political subdivision thereof.
"Preferred Stock", as applied to the Capital Stock of any Person, means
Capital Stock of such Person of any class or classes (however designated) that
ranks prior, as to the payment of dividends or as to the distribution of assets
upon any voluntary or involuntary liquidation, dissolution or winding up of such
Person, to shares of Capital Stock of any other class of such Person.
"Purchase Date" has the meaning set forth in the definition of "Offer to
Purchase" above.
"Related Person" of any Person means any other Person directly or
indirectly owning (a) 5% or more of the outstanding Common Stock of such Person
(or, in the case of a Person that is not a corporation, 5% or more of the equity
interest in such Person) or (b) 5% or more of the combined voting power of the
Voting Stock of such Person.
"Restricted Subsidiary" means any Subsidiary of the Company other than an
Unrestricted Subsidiary.
"Senior Debt" means, with respect to any Person at any date, (i) in the
case of the Company or the Guarantor, all Indebtedness and other obligations
under the Credit Agreement, including, without limitation, principal, premium,
if any, and interest on such Indebtedness and all other amounts due on or in
connection with such Indebtedness including all charges, fees and expenses, (ii)
all other Indebtedness of such Person for money borrowed, including principal,
premium, if any, and interest on such Indebtedness, unless the instrument under
which such Indebtedness for money borrowed is created, incurred, assumed or
guaranteed expressly provides that such Indebtedness for money borrowed is not
senior or superior in right of payment to the Notes, and all renewals,
extensions, modifications, amendments, refinancing or replacements thereof and
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all other Indebtedness of such Person of the types referred to in clauses (iii),
(iv) (not including obligations issued or assumed as the deferred purchase price
of services) and (vi) of the definition of Indebtedness and (iii) all interest
on any Indebtedness referred to in clauses (i) and (ii) accruing during, or
which would accrue but for, the pendency of any bankruptcy or insolvency
proceeding, whether or not allowed thereunder. Notwithstanding the foregoing,
Senior Debt shall not include (a) Indebtedness which is pursuant to its terms or
any agreement relating thereto or by operation of law subordinated or junior in
right of payment or otherwise to any other Indebtedness of such Person;
provided, however, that no Indebtedness shall be deemed to be subordinate or
junior in right of payment or otherwise to any other Indebtedness of a Person
solely by reason of such other Indebtedness being secured and such Indebtedness
not being secured, (b) the Notes, (c) any Indebtedness of such Person to any of
its Subsidiaries, (d) Indebtedness Incurred in violation of the provisions of
the Indenture described under "-- Covenants -- Limitation on Indebtedness";
provided, however, that Indebtedness under the Credit Agreement shall be deemed
not to have been Incurred in violation of such provisions for purposes of this
clause (d) if the holder(s) of such Indebtedness or their agent or
representative shall have received a representation from the Company to the
effect that the Incurrence of such Indebtedness does not violate such provision
and (e) any Indebtedness which, when incurred and without respect to any
election under Section 1111(b) of the Bankruptcy Code, is without recourse to
the Company.
"Subordinated Indebtedness" means any Indebtedness (whether outstanding on
the date hereof or hereafter incurred) which is by its terms expressly
subordinate or junior in right of payment to the Notes.
"Subsidiary" of any Person means (i) a corporation more than 50% of the
outstanding Voting Stock of which is owned, directly or indirectly, by such
Person or by one or more other Subsidiaries of such Person or by such Person and
one or more other Subsidiaries thereof or (ii) any other Person (other than a
corporation) in which such Person, or one or more other Subsidiaries of such
Person or such Person and one or more other Subsidiaries thereof, directly or
indirectly, have at least a majority ownership and voting power relating to the
policies, management and affairs thereof.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company formed or
acquired after the Issue Date that at the time of determination is designated an
Unrestricted Subsidiary by the Board of Directors in the manner provided below
and (ii) any Subsidiary of an Unrestricted Subsidiary. Any such designation by
the Board of Directors will be evidenced to the Trustee by promptly filing with
the Trustee a copy of the board resolution giving effect to such designation and
an officers' certificate certifying that such designation complied with the
foregoing provisions. The Board of Directors of the Company may not designate
any Subsidiary of the Company to be an Unrestricted Subsidiary if, after such
designation, (a) the Company or any other Restricted Subsidiary (i) provides
credit support for, or a guarantee of, any Indebtedness of such Subsidiary
(including any undertaking, agreement or instrument evidencing such
Indebtedness) or (ii) is directly or indirectly liable for any Indebtedness of
such Subsidiary, (b) a default with respect to any Indebtedness of such
Subsidiary (including any right which the holders thereof may have to take
enforcement action against such Subsidiary) would permit (upon notice, lapse of
time or both) any holder of any other Indebtedness of the Company or any
Restricted Subsidiary to declare a default on such other Indebtedness or cause
the payment thereof to be accelerated or payable prior to its final scheduled
maturity or (c) such Subsidiary owns any Capital Stock of, or owns or holds any
Lien on any property of, any Restricted Subsidiary which is not a Subsidiary of
the Subsidiary to be so designated.
"Voting Stock" of any Person means the Capital Stock of such Person which
ordinarily has voting power for the election of directors (or persons performing
similar functions) of such Person, whether at all times or only so long as no
senior class of securities has such voting power by reason of any contingency.
"Wholly Owned Subsidiary" of any Person means a Restricted Subsidiary of
such Person all of the outstanding Capital Stock or other ownership interests of
which (other than directors' qualifying shares) shall at the time be owned by
such Person or by one or more Wholly Owned Subsidiaries of such Person or by
such Person and one or more Wholly Owned Subsidiaries of such Person.
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CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a discussion of certain material United States federal
income tax consequences of the Exchange Offer to holders of Old Notes. Unless
otherwise stated, this discussion addresses the United States federal income tax
consequences to persons that hold Old Notes as capital assets, and that are (i)
citizens or residents of the United States, (ii) corporations, partnerships or
other entities created or organized in or under the laws of the United States or
any political subdivision thereof or therein, (iii) estates the income of which
is subject to United States federal income tax regardless of its source, or (iv)
trusts the administration of which is subject to the primary supervision of a
court within the United States and for which one or more United States
fiduciaries have the authority to control all substantial decisions ("U.S.
Holders"). This discussion does not purport to address specific tax consequences
that may be relevant to particular persons (including, for example, financial
institutions, broker-dealers, insurance companies, tax-exempt organizations, and
persons in special situations, such as those who hold Old Notes or Exchange
Notes as part of a straddle, hedge, conversion transaction, or other integrated
investment). This discussion does not address the tax consequences to persons
that have a "functional currency" other than the U.S. dollar. In addition, this
discussion does not address United States federal alternative minimum tax
consequences or any aspect of state, local or foreign taxation. This discussion
is based upon the Internal Revenue Code of 1986, as amended (the "Code"), the
Treasury Department regulations promulgated thereunder, and administrative and
judicial interpretations thereof, all as of the date hereof and all of which are
subject to change, possibly on a retroactive basis.
HOLDERS OF NOTES ARE URGED TO CONSULT THEIR TAX ADVISORS CONCERNING THE
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES TO THEM OF ACQUIRING, OWNING AND
DISPOSING OF THE EXCHANGE NOTES, AS WELL AS THE APPLICATION OF STATE, LOCAL AND
FOREIGN INCOME AND OTHER TAX LAWS.
THE EXCHANGE
The exchange of an Old Note for an Exchange Note pursuant to the Exchange
Offer should not be treated as an exchange or otherwise as a taxable event for
U.S. federal income tax purposes. Accordingly, the Exchange Notes should have
the same issue price as the Old Notes and each holder should have the same
adjusted basis and holding period in the Exchange Notes as it had in the Old
Notes immediately before the Exchange Offer. It is assumed, for purposes of the
following discussion, that the consummation of the Exchange Offer will not be
treated as a taxable event and that the Exchange Notes and the Old Notes will be
treated as the same instruments for U.S. federal income tax purposes.
DISPOSITION OF EXCHANGE NOTES
If a U.S. Holder sells an Exchange Note between interest payment dates, the
U.S. Holder will recognize gain or loss equal to the difference between the
amount realized on the sale (except to the extent such amount is attributable to
accrued but previously unrecognized interest, which is taxable as ordinary
interest income) and the U.S. Holder's adjusted tax basis in the Exchange Note.
A U.S. Holder's adjusted tax basis in an Exchange Note will be equal to the
amount the U.S. Holder paid to purchase the Old Note, (i) increased by any
interest that has accrued since the last interest payment date, any "original
issue discount" within the meaning of Section 1273 of the Code, and any market
discount, in each case that has previously been included by such U.S. Holder in
taxable income with respect to such Note, and (ii) decreased by any bond premium
previously amortized and any principal payments previously received by such U.S.
Holder with respect to such Note. Subject to the market discount rules, any such
gain or loss will be capital gain or loss, long-term or short-term depending
upon whether the Holder has held such Note for more than one year. Subject to
certain limited exceptions, capital losses cannot be used to offset ordinary
income.
FOREIGN HOLDERS
For purposes of this discussion, a "Foreign Holder" is any noteholder other
than a U.S. Holder.
A Foreign Holder generally will not be subject to United States federal
withholding tax on interest paid on the Exchange Notes so long as the Foreign
Holder (i) is not actually or constructively a "10 percent
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shareholder" of the Company or a "controlled foreign corporation" with respect
to which the Company is a "related person" within the meaning of the Code, and
(ii) provides an appropriate statement, signed under penalties of perjury,
certifying that the beneficial owner of the Exchange Note is a foreign person
and providing that foreign person's name and address. If the information
provided in this statement changes, the foreign person must so inform the
Company within 30 days of such change. The statement generally must be provided
in the year a payment occurs or in either of the two preceding years. If the
foregoing conditions are not satisfied, then interest paid on the Exchange Notes
will be subject to United States withholding tax at a rate of 30%, unless such
rate is reduced or eliminated pursuant to an applicable tax treaty.
Any capital gain a Foreign Holder realizes on the sale, redemption,
retirement or other taxable disposition of an Exchange Note will be exempt from
United States federal income and withholding tax, provided that (i) the gain is
not effectively connected with the Foreign Holder's conduct of a trade or
business in the United States, (ii) in the case of a Foreign Holder that is an
individual, the Foreign Holder is not present in the United States for 183 days
or more in the taxable year of the disposition and (iii) the Foreign Holder is
not subject to tax pursuant to the provisions of U.S. tax law applicable to
certain U.S. expatriates.
If the interest, gain or other income a Foreign Holder recognizes on an
Exchange Note is effectively connected with the Foreign Holder's conduct of a
trade or business in the United States, the Foreign Holder (although exempt from
the withholding tax previously discussed if an appropriate statement is
furnished) generally will be subject to United States federal income tax on the
interest, gain or other income at regular federal income tax rates. In addition,
if the Foreign Holder is a foreign corporation, it may be subject to a branch
profits tax equal to 30% of its "effectively connected earnings and profits," as
adjusted for certain items, unless it qualifies for a lower rate under an
applicable tax treaty.
INFORMATION REPORTING AND BACKUP WITHHOLDING
The Company will be required to report annually to the IRS, and to each
U.S. Holder of record, the amount of interest paid on the Exchange Notes (and
the amount, if any, withheld) for each calendar year, except as to exempt
holders (generally, corporations, tax-exempt organizations, qualified pension
and profit-sharing trusts, individual retirement accounts, or non-resident
aliens that provide certification as to their status). Each U.S. Holder (other
than holders, including, among others, corporations, that are not subject to the
reporting requirements) will be required to provide to the Company, under
penalties of perjury, a certificate containing the U.S. Holder's name, address,
correct federal taxpayer identification number and a statement that the U.S.
Holder is not subject to backup withholding. Should a nonexempt U.S. Holder fail
to provide the required certificate, the Company will be required to withhold
31% of the interest otherwise payable to the U.S. Holder and to remit the
withheld amount to the IRS as a credit against the U.S. Holder's federal income
tax liability.
PLAN OF DISTRIBUTION
Prior to the Exchange Offer, there has been no market for any of the
Exchange Notes. The Old Notes are eligible for trading in the Private Offerings,
Resales and Trading through Automatic Linkages ("PORTAL") market. There can be
no assurance that an active trading market will develop for, or as to the
liquidity of, any of the Notes.
Each Participating Broker-Dealer that receives Exchange Notes for its own
account pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a Participating Broker-Dealer in connection with resales of Exchange Notes
received in exchange for Old Notes where such Old Notes were acquired as a
result of market-making activities or other trading activities. The Company has
agreed that for a period of 180 days after the Expiration Date, the Company will
make this Prospectus, as amended or supplemented, available to any Participating
Broker-Dealer for use in connection with any such resale. In addition, until
, 1997, all dealers effecting transactions in the Exchange Notes may
be required to deliver a prospectus.
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The Company will not receive any proceeds from any sales of the Exchange
Notes by Participating Broker-Dealers. Exchange Notes received by Participating
Broker-Dealers for their own account pursuant to the Exchange Offer may be sold
from time to time in one or more transactions in the over-the-counter market, in
negotiated transactions, through the writing of options on the Exchange Notes or
a combination of such methods of resale, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or negotiated
prices. Any such resale may be made directly to purchaser or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such Participating Broker-Dealer and/or the purchasers of
any such Exchange Notes. Any Participating Broker-Dealer that resells the
Exchange Notes that were received by it for its own account pursuant to the
Exchange Offer and any broker or dealer that participates in a distribution of
such Exchange Notes may be deemed to be an "underwriter" within the meaning of
the Securities Act and any profit on any such resale of Exchange Notes and any
commissions or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The Letter of Transmittal
states that by acknowledging that it will deliver and by delivering a
prospectus, a Participating Broker-Dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act.
For a period of 180 days after the Expiration Date the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any Participating Broker-Dealer that requests
such documents in the Letter of Transmittal.
LEGAL MATTERS
Certain legal matters relating to the Exchange Notes offered hereby will be
passed upon for the Company by Winthrop, Stimson, Putnam & Roberts, New York,
New York.
EXPERTS
The consolidated financial statements of Tekni-Plex included in this
Prospectus have been audited by BDO Seidman, LLP, independent certified public
accountants, to the extent and for the periods set forth in their report
appearing elsewhere herein, and are included in reliance upon such report given
upon the authority of said firm as experts in auditing and accounting.
The financial statements of Tekni-Plex included in this Prospectus have
been audited by Rich Baker Berman & Co., P.A., independent certified public
accountants, to the extent and for the period set forth in their report
appearing elsewhere herein, and are included in reliance upon such report given
upon the authority of said firm as experts in auditing and accounting.
The financial statements of Dolco included in this Prospectus have been
audited by Coopers & Lybrand L.L.P., independent certified public accountants,
to the extent and for the periods set forth in their report appearing elsewhere
herein, and are included in reliance upon such report given upon the authority
of said firm as experts in auditing and accounting.
AVAILABLE INFORMATION
Tekni-Plex and the Guarantor have filed with the Commission a Registration
Statement on Form S-4 (the "Exchange Registration Statement," which term shall
encompass all amendments, exhibits, annexes and schedules thereto) pursuant to
the Securities Act, and the rules and regulations promulgated thereunder,
covering the securities being offered hereby. This Prospectus does not contain
all the information set forth in the Exchange Registration Statement. For
further information with respect to Tekni-Plex, the Guarantor and the Exchange
Offer, reference is made to the Exchange Registration Statement. Statements made
in this Prospectus as to the contents of any contract, agreement or other
document referred to are not necessarily complete. With respect to each such
contract, agreement or other document filed as an exhibit to the Exchange
Registration Statement, reference is made to the exhibit for a more complete
description of the document or matter involved, and each such statement shall be
deemed qualified in its entirety by such
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reference. The Exchange Registration Statement, including the exhibits thereto,
can be inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, at the
Regional Offices of the Commission at 75 Park Place, New York, New York 10007
and at Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such materials can be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates.
Additionally, the Commission maintains a web site (http://www.sec.gov) that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission.
As a result of the filing of the Exchange Registration Statement with the
Commission, the Company will become subject to the informational requirements of
the Exchange Act, and in accordance therewith will be required to file periodic
reports and other information with the Commission. The obligation of the Company
to file periodic reports and other information with the Commission will be
suspended if the Exchange Notes are held of record by fewer than 300 holders as
of the beginning of any fiscal year of the Company other than the fiscal year in
which the Exchange Registration Statement is declared effective. The Company
will nevertheless be required to continue to file reports with the Commission if
the Exchange Notes are listed on a national securities exchange. In the event
the Company ceases to be subject to the informational requirements of the
Exchange Act, the Company will be required under the Indenture to continue to
file with the Commission the annual and quarterly reports, information,
documents or other reports, including, without limitation, reports on Forms
10-K, 10-Q and 8-K, which would be required pursuant to the informational
requirements of the Exchange Act. Under the Indenture, the Company shall file
with the Trustee annual, quarterly and other reports within fifteen days after
it files such reports with the Commission. Further, to the extent that annual,
quarterly or other financial reports are furnished by the Company to
stockholders generally it will mail such reports to holders of Exchange Notes.
The Company will furnish annual and quarterly financial reports to stockholders
of the Company and will mail such reports to holders of Exchange Notes pursuant
to the Indenture, thus holders of Exchange Notes will receive financial reports
every quarter. Annual reports delivered to the Trustee and the holders of
Exchange Notes will contain financial information that has been examined and
reported upon, with an opinion expressed by an independent public or certified
public accountant. The Company will also furnish such other reports as may be
required by law.
80
<PAGE> 83
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
TEKNI-PLEX, INC.
Report of Independent Certified Public Accountants.................................... F-2
Independent auditors' report.......................................................... F-3
Financial statements:
Consolidated balance sheets as of June 30, 1995, June 28, 1996 and ..... F-4
Consolidated statements of operations for the year ended December 31, 1993, the
periods ended March 18, 1994 and July 1, 1994, the years ended June 30, 1995 and
June 28, 1996, and the nine months ended March 29, 1996 (unaudited), and March
28, 1997 (unaudited)............................................................. F-5
Statements of consolidated stockholders' equity for the year ended December 31,
1993, the periods ended March 18, 1994 and July 1, 1994, the years ended June 30,
1995 and June 28, 1996, and the nine months ended March 29, 1996 (unaudited), and
March 28, 1997 (unaudited)....................................................... F-6
Consolidated statements of cash flows for the year ended December 31, 1993, the
periods ended March 18, 1994 and July 1, 1994, the years ended June 30, 1995 and
June 28, 1996, and the nine months ended March 29, 1996 (unaudited), and March
28, 1997 (unaudited)............................................................. F-7
Notes to consolidated financial statements.......................................... F-8
DOLCO PACKAGING CORP.
Report of Independent Accountants..................................................... F-18
Financial statements:
Balance sheets as of December 31, 1994 and December 31, 1995........................ F-19
Statements of income for the years ended December 31, 1993, 1994 and 1995........... F-20
Statements of changes in stockholders' equity for the years ended December 31, 1993,
1994 and 1995.................................................................... F-21
Statements of cash flows for the years ended December 31, 1993, 1994 and 1995....... F-22
Notes to financial statements....................................................... F-23
</TABLE>
F-1
<PAGE> 84
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
Tekni-Plex, Inc.
Somerville, New Jersey
We have audited the accompanying consolidated balance sheets of Tekni-Plex,
Inc. and its wholly owned subsidiary (the "Company") as of June 28, 1996 and
June 30, 1995, and the related consolidated statements of operations,
stockholders' equity and cash flows for the years ended June 28, 1996 and June
30, 1995 and the periods March 19, 1994 through July 1, 1994 and January 1, 1994
through March 18, 1994. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements 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 consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated 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.
As discussed in Note 1, on March 18, 1994, Tekni-Plex was acquired in a
transaction accounted for under the purchase method of accounting. The financial
statements for the period January 1, 1994 through March 18, 1994 referred to
above are presented on the predecessors' basis of accounting and accordingly,
are not comparable to the financial statements presented for periods subsequent
to March 18, 1994.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Tekni-Plex,
Inc. and its wholly owned subsidiary as of June 28, 1996 and June 30, 1995, and
the results of their operations and their cash flows for the years ended June
28, 1996 and June 30, 1995 and the periods March 19, 1994 through July 1, 1994
and January 1, 1994 through March 18, 1994, in conformity with generally
accepted accounting principles.
BDO SEIDMAN, LLP
September 20, 1996
Woodbridge, NJ
F-2
<PAGE> 85
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Tekni-Plex, Inc.
Brooklyn, New York 11232
We have audited the accompanying statements of income and retained
earnings, and cash flows of Tekni-Plex, Inc. for the year ended December 31,
1993. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements 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 results of its operations and cash flows for the
year ended December 31, 1993 of Tekni-Plex, Inc. in conformity with generally
accepted accounting principles.
RICH BAKER BERMAN & CO., P.A.
Maplewood, New Jersey
February 18, 1994
F-3
<PAGE> 86
TEKNI-PLEX, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, JUNE 28, MARCH 28,
1995 1996 1997
----------- ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash............................................ $ 333,380 $ 1,048,287 $ 1,828,840
Accounts Receivable, net of an allowance of
$93,000 $565,000 and $791,000 for possible
losses....................................... 5,413,725 12,955,647 13,771,881
Inventory....................................... 4,671,765 12,954,993 13,493,073
Deferred income taxes........................... 300,000 2,900,000 1,615,000
Prepaid and other current assets................ 418,867 1,738,009 1,971,048
----------- ------------ ------------
Total current assets.................... 11,137,737 31,596,936 32,679,842
----------- ------------ ------------
Property, plant and equipment, net................ 11,507,481 44,506,233 42,678,024
Intangible assets, net of accumulated amortization
of $2,646,500, $4,821,400 and $6,945,600........ 28,418,524 40,751,682 37,656,620
Deferred charges, net of accumulated amortization
of $346,800, $496,200 and $968,700.............. 2,206,696 4,515,045 4,241,687
Other assets...................................... 144,579 400,142 422,156
----------- ------------ ------------
$53,415,017 $121,770,038 $117,678,329
=========== ============ ============
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Current portion of long term debt............... $ 2,591,655 $ 3,226,149 $ 3,500,000
Accounts payable-trade.......................... 2,305,155 5,480,514 5,729,868
Accrued payroll and benefits.................... 858,866 3,917,404 2,337,194
Accrued interest................................ 580,526 1,068,690 1,044,931
Accrued liabilities-other....................... 1,628,982 5,448,782 6,081,960
Income taxes payable............................ -- 795,000 695,938
----------- ------------ ------------
Total current liabilities............... 7,965,184 19,936,539 19,389,891
----------- ------------ ------------
Long-term debt.................................... 32,412,101 67,209,889 57,300,753
Deferred income taxes............................. 510,000 7,655,000 7,450,000
Other liabilities................................. -- 1,135,869 701,985
Redeemable Warrants............................... 841,100 1,670,374 2,226,774
Commitments and contingencies
Stockholder's equity:
Common Stock, $.01 par value, authorized 20,000
Shares, issued and outstanding 850 shares at
June 30, 1995 and 1,707 shares at June 28,
1996 and March 28, 1997...................... 9 17 17
Additional paid-in capital...................... 11,499,991 22,999,983 22,999,983
Retained earnings............................... 186,632 1,162,367 7,608,926
----------- ------------ ------------
Total stockholder's equity.............. 11,686,632 24,162,367 30,608,926
----------- ------------ ------------
$53,415,017 $121,770,038 $117,678,329
=========== ============ ============
</TABLE>
See accompanying notes to the consolidated financial statements.
F-4
<PAGE> 87
TEKNI-PLEX, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE PERIODS
YEAR ENDED ------------------------- YEARS ENDED NINE MONTHS ENDED
------------ JANUARY 1 TO MARCH 19 TO ------------------------ -------------------------
DECEMBER 31, MARCH 18, JULY 1, JUNE 30, JUNE 28, MARCH 29, MARCH 28,
1993 1994 1994 1995 1996 1996 1997
------------ ------------ ----------- ----------- ----------- ----------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales............... $44,878,265 $9,417,813 $12,722,716 $44,688,453 $80,917,205 $47,248,463 $109,827,847
Cost of Sales........... 36,604,570 7,923,516 9,960,280 34,941,442 62,335,102 37,579,649 81,239,224
----------- ---------- ----------- ----------- ----------- ----------- -----------
Gross Profit........ 8,273,695 1,494,297 2,762,436 9,747,011 18,582,103 9,668,814 28,588,623
Operating expenses:
Selling, general and
administrative...... 5,075,592 602,545 1,521,067 4,813,583 10,338,632 5,313,636 11,994,825
----------- ---------- ----------- ----------- ----------- ----------- -----------
Income from
operations........ 3,198,103 891,752 1,241,369 4,933,428 8,243,471 4,355,178 16,593,798
Other expenses:
Interest.............. 160,405 21,522 1,140,758 4,321,979 5,816,166 3,662,990 6,067,873
Other................. 6,201 45,102 62,685 234,743 469,370 252,276 524,366
----------- ---------- ----------- ----------- ----------- ----------- -----------
Income before
provision for
income taxes...... 3,031,497 825,128 37,926 376,706 1,957,935 439,912 10,001,559
Provision for income
taxes................. 267,058 56,000 17,000 211,000 982,200 220,000 3,555,000
----------- ---------- ----------- ----------- ----------- ----------- -----------
Net income.............. $ 2,764,439 $ 769,128 $ 20,926 $ 165,706 $ 975,735 $ 219,912 $ 6,446,559
=========== ========== =========== =========== =========== =========== ===========
</TABLE>
See accompanying notes to the consolidated financial statements.
F-5
<PAGE> 88
TEKNI-PLEX, INC.
STATEMENTS OF CONSOLIDATED STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
ADDITIONAL MINIMUM
COMMON PAID-IN PENSION RETAINED TREASURY
STOCK CAPITAL LIABILITY EARNINGS STOCK TOTAL
--------- ------------ --------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1993.......... $ 250,000 $ -- $(487,057) $13,597,299 $(5,795,000) $ 7,565,242
Net Income........................ 2,764,439 2,764,439
Change in pension liability....... (243,878) -- -- (243,878)
-------- ----------- --------- ----------- ----------- -----------
Balance, December 31, 1993........ 250,000 -- (730,935) 16,361,738 (5,795,000) 10,085,803
Net Income........................ 769,128 769,128
Change in pension liability....... 730,935 (730,935) --
-------- ----------- --------- ----------- ----------- -----------
Balance, March 18, 1994........... $ 250,000 $ -- $ -- $16,399,931 $(5,795,000) $10,854,931
======== =========== ========= =========== =========== ===========
- ----------------------------------------------------------------------------------------------------------------
Balance, March 19, 1994........... $ 9 $ 11,499,991 $ -- $11,500,000
Net Income........................ 20,926 20,926
-------- ----------- --------- ----------- ----------- -----------
Balance, July 1, 1994............. 9 11,499,991 -- 20,926 -- 11,520,926
Net Income........................ 165,706 165,706
-------- ----------- --------- ----------- ----------- -----------
Balance, June 30, 1995............ 9 11,499,991 -- 186,632 -- 11,686,632
Proceeds from capital
contribution.................... 8 11,499,992 11,500,000
Net Income........................ 975,735 975,735
-------- ----------- --------- ----------- ----------- -----------
Balance, June 28, 1996............ 17 22,999,983 -- 1,162,367 -- 24,162,367
Net Income (unaudited)............ 6,446,559 6,446,559
-------- ----------- --------- ----------- ----------- -----------
Balance, March 28, 1997
(unaudited)..................... $ 17 $ 22,999,983 $ -- $ 7,608,926 $ -- $30,608,926
======== =========== ========= =========== =========== ===========
</TABLE>
See accompanying notes to the consolidated financial statements.
F-6
<PAGE> 89
TEKNI-PLEX, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE PERIODS YEARS ENDED NINE MONTHS ENDED
YEAR ENDED ----------------------------- -------------------------- ---------------------------
DECEMBER 31, JANUARY 1 TO MARCH 19 TO JUNE 30, JUNE 28, MARCH 29, MARCH 28,
1993 MARCH 18, 1994 JULY 1, 1994 1995 1996 1996 1997
------------ -------------- ------------ ----------- ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Cash flows from
operating activities:
Net income............ $ 2,764,439 $ 769,128 $ 20,926 $ 165,706 $ 975,735 $ 219,912 $ 6,446,559
Adjustments to
reconcile net income
to net cash provided
by operating
activities:
Depreciation........ 608,032 137,988 196,455 1,018,157 3,247,239 1,488,033 4,579,247
Amortization........ -- -- 682,482 2,444,222 3,573,592 1,905,065 2,679,262
Deferred income
taxes............. 39,909 -- 17,000 210,000 63,700 51,773 1,080,000
Allowance for
doubtful
accounts.......... -- (59) 51,349 -- 120,614 127,063 226,091
Amortization of
redeemable
warrants.......... -- -- -- 391,100 379,274 684,000 556,400
Gain on sale of
property, plant
and equipment..... (40,000) -- -- -- -- -- --
Loss on marketable
securities........ 119,302 57,123 -- -- -- -- --
(Increase) decrease,
net of the effect
of acquired
companies:
Accounts
receivable...... 292,081 (862,308) 484,248 (1,005,933) 1,160,960 (1,921,834) (1,042,325)
Inventories....... (377,886) (298,108) 389,889 (801,591) 1,394,980 698,351 (538,080)
Prepaid and other
current
assets.......... (115,571) (38,808) (11,425) (128,978) (791,519) (320,011) (233,039)
Deferred charges
and other
assets.......... (284,619) 136,374 (85,268) 44,637 163,146 (180,272) --
Increase (decrease),
net of effect of
acquired
companies:
Accounts payable
and other
current
liabilities..... 607,190 (465,621) (598,797) 16,681 (4,516,499) (7,318,231) (364,821)
Income taxes
payable......... (100,976) -- -- -- 796,343 237,004 (99,062)
----------- ----------- ------------ ----------- ------------ ------------ ------------
Net cash
provided by
(used in)
operating
activities.... 3,511,901 (564,291) 1,146,859 2,354,001 6,567,565 (4,329,147) 13,290,232
----------- ----------- ------------ ----------- ------------ ------------ ------------
Cash flows from
investing activities:
Acquisitions of net
assets including
acquisition costs,
net of cash
acquired............ -- -- (45,268,917) -- (47,246,686) (47,246,686) --
Capital
expenditures........ (1,422,897) (419,670) (157,372) (614,344) (2,275,215) (1,025,671) (2,751,048)
Proceeds from sale of
property, plant and
equipment........... 40,000 -- -- -- -- -- --
Purchase of marketable
securities.......... (442,510) -- -- -- -- -- --
Proceeds from sale of
marketable
securities.......... 333,597 877,538 -- -- -- -- --
Increase (decrease) in
deposits............ (378,832) (142,894) (140,922) -- -- -- (22,014)
----------- ----------- ------------ ----------- ------------ ------------ ------------
Net cash
provided by
(used in)
investing
activities.... (1,870,642) 314,974 (45,567,211) (614,344) (49,521,901) (48,272,357) (2,773,052)
----------- ----------- ------------ ----------- ------------ ------------ ------------
Cash flow from financing
activities:
Proceeds from
long-term debt...... -- -- 32,350,000 -- 51,614,974 51,614,974 --
Repayments of
long-term debt...... (295,000) (1,617,500) (533,072) (1,500,000) (19,550,000) (18,050,000) (3,125,000)
Borrowings/payments on
line of credit,
net................. 100,000 (100,000) 3,266,212 131,969 3,459,324 9,000,891 (6,583,654)
Proceeds from note
payable-officer..... 596,196 -- -- -- -- --
Repayment of notes
payable............. (375,000) -- (1,182,576) (83,380) (92,016) -- --
Proceeds from capital
contribution........ -- -- 11,500,000 -- 11,500,000 11,500,000 --
Debt financing
costs............... -- -- (1,385,078) -- (3,713,039) (2,227,228) (28,000)
Proceeds from issuance
of warrants......... -- -- 450,000 -- 450,000 450,000 --
----------- ----------- ------------ ----------- ------------ ------------ ------------
Net cash
provided by
(used in)
financing
activities.... (570,000) (1,121,304) 44,465,486 (1,451,411) 43,669,243 52,288,637 (9,736,627)
----------- ----------- ------------ ----------- ------------ ------------ ------------
Net increase (decrease)
in cash............... 1,071,259 (1,370,621) 45,134 288,246 714,907 (312,867) 780,553
Cash, beginning of
period................ 367,767 1,439,026 -- 45,134 333,380 333,380 1,048,287
----------- ----------- ------------ ----------- ------------ ------------ ------------
Cash, end of period..... $ 1,439,026 $ 68,405 $ 45,134 $ 333,380 $ 1,048,287 $ 20,513 $ 1,828,840
=========== =========== ============ =========== ============ ============ ============
</TABLE>
See accompanying notes to the consolidated financial statements.
F-7
<PAGE> 90
TEKNI-PLEX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF ACCOUNTING POLICIES
Nature of Business
Tekni-Plex, Inc. is a New Jersey based manufacturer of primary packaging
materials for the pharmaceutical, food, foodservice disposables and
telecommunications industries. The Company is organized into two operating
groups. The Flexible Packaging Group produces printed and unprinted multi-layer
constructions of plastic, paper and metal films and sheets, with emphasis on
pharmaceutical and telecommunications applications. The Foam Products Group
primarily produces polystyrene foam packaging products for the food and
foodservice disposables industries.
The Company operates six manufacturing plants in New Jersey (2), Indiana,
Washington, Georgia and Texas. All facilities are owned with the exception of
the Texas plant. The Company's products are sold to both domestic and
international customers.
On March 18, 1994, T.P. Acquisition Company, Inc., acquired Tekni-Plex,
Inc. for approximately $43,775,000. The companies were merged. The acquisition
was accounted for using the purchase method of accounting and, accordingly, the
purchase price was allocated to assets acquired and liabilities assumed based on
their fair market value on the closing date. The excess of cost over the fair
value of net assets acquired amounted to $31,035,000 after providing for certain
restructuring costs. The Company also entered into a long-term consulting
agreement including a covenant not to compete with former management (the
"Consulting Agreement") totaling $2,000,000.
The accompanying consolidated financial statements for periods prior to
March 18, 1994 are separated by a black line from periods after March 18, 1994
due to the periods not being comparable as a result of the purchase accounting
adjustments.
Consolidation Policy
The consolidated financial statements include the financial statements of
Tekni-Plex, Inc. and its wholly-owned subsidiary, Dolco Packaging Corp.
("Dolco"). All intercompany transactions and balances have been eliminated in
consolidation.
Interim Financial Information
The unaudited balance sheet as of March 28, 1997, the unaudited
consolidated statements of earnings for the nine month periods ended March 29,
1996 and March 28, 1997 and the unaudited consolidated statements of cash flows
for the nine month periods ended March 29, 1996 and March 28, 1997, and the
unaudited statement of stockholders' equity for the nine month period ended
March 28, 1997 have been prepared in accordance with generally accepted
accounting principles for interim financial information. In the opinion of
management, all adjustments (which include normal recurring accruals) necessary
to present fairly the financial position, results of operations and cash flows
at March 29, 1996 and March 28, 1997 and for the nine month periods presented,
have been included.
The results of operations for the nine months ended March 28, 1997 are not
necessarily indicative of the results to be expected for the entire fiscal year.
Inventories
Inventories are stated at the lower of cost (weighted average) or market.
F-8
<PAGE> 91
TEKNI-PLEX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation and
amortization are computed over the estimated useful lives of the assets by the
straight-line method for financial reporting purposes and by accelerated methods
for income tax purposes.
Intangible Assets
The Company amortizes the excess of cost over the fair value of net assets
acquired on a straight-line basis over 15 years, and the cost of acquiring
certain patents and trademarks, over seventeen and ten years, respectively.
Recoverability is evaluated periodically based on the expected undiscounted net
cash flows of the related businesses.
Deferred Charges
The Company amortizes the deferred financing costs incurred in connection
with the Company's borrowings over the life of the related indebtedness (5-8
years). The covenant not to compete portion of the Consulting Agreement with
former management is amortized over its related term of 10 years. (See Note 10).
Income Taxes
The Company accounts for income taxes under the provisions of Statement of
Financial Accounting Standards No. 109 ("SFAS 109"), "Accounting for Income
Taxes." Deferred income tax assets and liabilities are recognized for
differences between the financial statement and income tax basis of assets and
liabilities based upon statutory rates enacted for future periods. Valuation
allowances are established when necessary to reduce deferred tax assets to the
amount expected to be realized.
Statement of Cash Flows
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments with a maturity of three months or less to be
cash equivalents.
Fiscal Year-End
The Company utilizes a 52/53 week fiscal year ending on the Friday closest
to June 30.
Significant Risks and Uncertainties
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
The Company purchases polystyrene resin ("resin"), the raw material used in
the foam products line from two suppliers. Resin represents approximately 33% of
the Company's raw material purchases. The Company currently has contracts with
these suppliers for minimum quantities.
Aclar(R), a specialty material used in high barrier laminations, represents
approximately 17% of the Company's raw material purchases. This product is
currently manufactured by only one company. The inability to timely obtain
sufficient quantities of Aclar(R) could have a material adverse effect on the
Company's operating results.
F-9
<PAGE> 92
TEKNI-PLEX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
New Accounting Pronouncements
Effective June 29, 1996, the Company adopted SFAS No. 121, "Accounting for
the Impairment of Long-Lived Assets and Long-Lived Assets Being Disposed Of,"
which provides guidance on how and when impairment losses are recognized on
long-lived assets. This statement did not have a material impact on the
financial position or results of operations of the Company.
Effective June 29, 1996, the Company adopted SFAS No. 123 "Accounting for
Stock-Based Compensation." The Company chose to apply APB Opinion 25 and related
interpretations in accounting for its stock options. As a result, this statement
did not have an effect on the financial position or results of operations of the
Company.
2. ACQUISITIONS
On February 22, 1996, the Company purchased 100% of the common stock of
Dolco for approximately $40,000,000. Dolco is the nation's leading producer of
foamed egg cartons and various grocery store containers for meat, poultry, baked
goods and produce. The acquisition was recorded under the purchase method and
Dolco's operations have been reflected in the statement of operations since that
date. As a result of the acquisition, goodwill of approximately $14,044,000 has
been recorded, which is being amortized over 15 years.
In connection with this acquisition, a reserve of $5,000,000 was
established for the costs to integrate Dolco's operations with the Company and
to eliminate duplicate personnel. At June 28, 1996, the Company had
approximately $4,200,000 remaining in this reserve. During the nine months ended
March 28, 1997, the Company reduced its estimate of these costs and,
accordingly, reduced this reserve and goodwill by $790,000. At March 28, 1997,
the remaining balance in this reserve was approximately $1,857,000.
The following table presents the unaudited pro forma results of operations
as though the acquisition of Dolco occurred on July 2, 1994:
<TABLE>
<CAPTION>
1995 1996
------------- -------------
<S> <C> <C>
Net sales............................................... $ 117,920,000 $ 135,800,000
Income from operations.................................. 10,748,000 11,753,000
Net income.............................................. 1,623,000 1,848,000
</TABLE>
The pro forma results are not necessarily indicative of what actually would
have occurred if the acquisition had been in effect for the entire periods
presented. In addition, they are not intended to be a projection of future
results and do not reflect any synergies that might be achieved from combined
operations.
On December 22, 1995, the Company purchased certain assets and assumed
certain liabilities of Hargro Flexible Packaging Corporation in Flemington, NJ,
for approximately $7,500,000, which approximated the fair value of the net
assets acquired. The acquisition was recorded under the purchase method. As a
result of this acquisition, the former Brooklyn, New York Closure Liners
Operation of Tekni-Plex was closed on May 31, 1996. The machinery and equipment
along with many of the employees have been relocated to the Flemington facility.
Pro forma results of operations, assuming the Hargro acquisition had been made
on July 2, 1994, would not be materially different from the unaudited pro forma
results presented above.
F-10
<PAGE> 93
TEKNI-PLEX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. INVENTORIES
Inventories are summarized as follows:
<TABLE>
<CAPTION>
JUNE 30, JUNE 28, MARCH 28,
1995 1996 1997
----------- ------------ ------------
<S> <C> <C> <C>
Raw materials................................ $ 2,532,000 $ 3,642,000 $ 6,160,000
Work-in-process.............................. 1,320,000 4,038,000 3,259,000
Finished goods............................... 820,000 5,275,000 4,074,000
---------- ----------- -----------
$ 4,672,000 $ 12,955,000 $ 13,493,000
========== =========== ===========
</TABLE>
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
JUNE 30, JUNE 28, MARCH 28, ESTIMATED
1995 1996 1997 USEFUL LIVES
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Land.......................... $ 610,000 $ 1,886,000 $ 1,901,000
Building and improvements..... 2,676,000 10,209,000 10,265,000 30-40 years
Machinery and equipment....... 9,240,000 35,837,000 36,603,000 5-10 years
Furniture and fixtures........ 157,000 338,000 341,000 5-10 years
Construction in progress...... -- 660,000 2,563,000
------------ ------------ ------------
12,683,000 48,930,000 51,673,000
Less: Accumulated
depreciation................ 1,176,000 4,424,000 8,995,000
------------ ------------ ------------
$ 11,507,000 $ 44,506,000 $ 42,678,000
============ ============ ============
</TABLE>
5. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
JUNE 30, JUNE 28, MARCH 28,
1995 1996 1997
----------- ----------- ------------
<S> <C> <C> <C>
Revolving line of credit(a)................. $ 3,398,000 $ 6,858,000 $ --
Term loans(a)............................... 18,800,000 39,250,000 36,500,000
Subordinated note payable I (less
unamortized discount of $376,000, $330,000
and $297,000)(b).......................... 11,624,000 11,670,000 11,703,000
Subordinated note payable II (less
unamortized discount of $432,000 and
$391,000)(c).............................. -- 11,568,000 11,609,000
Notes payable --covenant not to compete
(less unamortized discount of $560,000,
$443,000 and $383,000)(d)................. 1,182,000 1,090,000 989,000
----------- ----------- ------------
35,004,000 70,436,000 60,801,000
Less: Current maturities.................... 2,592,000 3,226,000 3,500,000
----------- ----------- ------------
$32,412,000 $67,210,000 $ 57,301,000
========== ========== ==========
</TABLE>
The recorded value of long-term debt approximates fair value based on
current rates available to the Company for debt of the same remaining
maturities.
F-11
<PAGE> 94
TEKNI-PLEX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(a) The Company maintains a revolving line of credit and two term notes with a
bank, expiring February 21, 2002. Advances under the revolving line are
limited to the sum of eligible accounts receivable and inventory, not to
exceed $19,000,000. Outstanding borrowings under the revolving loan bear
interest, payable monthly, at the bank's prime rate plus 1 1/2% (9 1/2% at
June 28, 1996) or LIBOR plus 2 3/4% (8.2% at June 28, 1996). At June 28,
1996, the Company had approximately $12,142,000 available for borrowing
under this line of credit. The maximum amount outstanding was $3,266,000 for
the period March 19 through July 1, 1994 and $4,525,000 and $11,771,000 for
the years ended June 30, 1995 and June 28, 1996, respectively. The average
amount outstanding and average rate of interest were $2,733,000 at 8.1% for
the period March 19 through July 1, 1994, $3,664,000 at 9.8% for the year
ended June 30, 1995 and $5,389,000 at 7.6% for the year ended June 28, 1996.
The average amount outstanding and average interest rate were $50,000 at 6%
for the year ended December 27, 1993 and for the period ended January 1,
1994 through March 18, 1994.
The term loans are payable in increasing quarterly principal installments
commencing May 31, 1996 with a final payment of $2,500,000 due on August 1,
2002. The term loans bear interest, payable monthly, at LIBOR plus 2 3/4%
and 3% (8.195% and 8.281% at June 28, 1996).
The loan agreement contains, among other things, provisions for maximum
capital expenditures, and requires the Company to comply with certain
financial ratios. The loans are secured by substantially all of the
Company's assets, including a first mortgage on the Company's facilities.
(b) Subordinated note payable I in the original principal amount of $12,000,000
was amended on February 21, 1996 and is due in two annual principal
installments of $6,000,000 on February 21 in 2003 and 2004, with interest
payable quarterly at 12 1/2%. In connection with this note, the Company
issued warrants for the purchase of 150 shares of the Company's common
stock, exercisable at par value. The warrants are effective as of March 18,
1994 and expire on February 21, 2004.
(c) Subordinated note payable II in the original principal amount of
$12,000,000, issued on February 21, 1996 is due in two annual principal
installments of $6,000,000 in February 21 in 2003 and 2004, with interest
payable quarterly at 12 1/2%. In connection with this note, the Company
issued warrants for the purchase of 150 shares of the Company's common
stock, exercisable at par value. The warrants are effective as of February
21, 1996 and expire February 21, 2004.
Each of the subordinated notes were discounted by $450,000, representing the
estimated fair market value of the warrants at the time of issuance. The
discounts are being amortized on the interest method over the terms of the
notes. The note agreements contain, among other things, provisions for
maximum capital expenditures and require the Company to comply with certain
financial ratios. The notes are subordinated to the aforementioned bank
revolver and term loans.
The Company entered into a put option agreement ("agreement") with the
warrant holders that may require the Company to acquire all or a portion of
shares of the Company's common stock issuable in connection with the
warrants at a price equal to, approximately, the greater of book value or
fair market value per share of common stock as of the end of the month
immediately preceding the date notice is given of the put option exercise.
The put options are exercisable from March 18, 2001 through February 21,
2004 or immediately after the occurrence of specific events prescribed in
the agreement. At March 28, 1997, the estimated value of the put option was
$5,438,000. The difference between the calculated value and the recorded
value is being accreted, as a charge to interest expense, over the remaining
life of the put option.
(d) The Company entered into a Consulting Agreement with former management, the
terms of which call for 120 monthly payments of $16,667 through the year
2004, the total of such payments being $2,000,000. The Company is amortizing
the covenant not to compete portion over 10 years. The net present value was
calculated using an implied interest rate of 9 1/2% (see Note 10).
F-12
<PAGE> 95
TEKNI-PLEX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Maturities of long term debt obligations are as follows:
<TABLE>
<CAPTION>
YEAR ENDING JUNE 28, AMOUNT
-------------------------------------------------------------- -----------
<S> <C>
1997.......................................................... $ 3,226,000
1998.......................................................... 4,075,000
1999.......................................................... 5,575,000
2000.......................................................... 6,825,000
2001.......................................................... 7,950,000
Thereafter.................................................... 43,961,000
-----------
71,612,000
Less: Unamortized discount.................................... 1,176,000
-----------
$70,436,000
===========
</TABLE>
(e) Subsequent Events -- On April 4, 1997, the Company issued $75,000,000 of
11 1/4% ten year notes. Interest on the notes is payable semi-annually. The
Company also received $18,248,000 in additional capital contribution. These
proceeds were used to repay the balance of $36,500,000 on the credit
facility, repay the senior subordinated notes of $25,200,000, including a
prepayment penalty of $1,200,000 and repurchase the redeemable warrants for
$20,000,000. These transactions resulted in an extraordinary loss of
approximately $21,000,000.
6. INCOME TAXES
The provision for income taxes is summarized as follows:
<TABLE>
<CAPTION>
JANUARY
1, MARCH 19, YEARS ENDED NINE MONTHS ENDED
YEAR ENDED 1994 TO 1994 TO ------------------- ---------------------------
DECEMBER 31, MARCH 18, JULY 1, JUNE 30, JUNE 28, MARCH 29, MARCH 28,
1993 1994 1994 1995 1996 1996 1997
------------ --------- --------- -------- -------- ------------ ------------
(IN 000'S)
<S> <C> <C> <C> <C> <C> <C> <C>
Current:
Federal....... $ -- $-- $-- $ -- $735 $165 $2,248
State and
local...... 227 56 -- 1 183 40 227
---- --- --- ---- ---- ---- ------
227 56 -- 1 918 205 2,475
Deferred........ 40 -- 17 210 64 15 1,080
---- --- --- ---- ---- ---- ------
Provision for
income
taxes......... $267 $56 $17 $211 $982 $220 $3,555
========= ====== ====== ======= ======= ========= =========
</TABLE>
The provision for income taxes differs from the amounts computed by
applying the applicable Federal statutory rates due to the following:
<TABLE>
<CAPTION>
JANUARY
1, MARCH 19, YEARS ENDED NINE MONTHS ENDED
YEAR ENDED 1994 TO 1994 TO ------------------- ---------------------------
DECEMBER 31, MARCH 18, JULY 1, JUNE 30, JUNE 28, MARCH 29, MARCH 28,
1993 1994 1994 1995 1996 1996 1997
------------ --------- --------- -------- -------- ------------ ------------
(IN 000'S)
<S> <C> <C> <C> <C> <C> <C> <C>
Provision for
Federal income
taxes at the
statutory rate.... $1,031 $ 281 $13 $128 $666 $150 $3,401
State and local
income taxes, net
of Federal
benefit........... 176 37 2 81 305 70 144
S Corporation
earnings not
subject to Federal
income taxes...... (940) (262) -- -- -- -- --
Other, net.......... -- -- 2 2 11 -- 10
--------- ------ ------ ------ ------ ------- ---------
Provision for income
taxes............. $ 267 $ 56 $17 $211 $982 $220 $3,555
========= ======= ====== ====== ====== ======== =========
</TABLE>
F-13
<PAGE> 96
TEKNI-PLEX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Significant components of the Company's deferred tax assets and liabilities
are as follows:
<TABLE>
<CAPTION>
JUNE 30, JUNE 28, MARCH 28,
1995 1996 1996
--------- ----------- -----------
<S> <C> <C> <C>
Current deferred taxes:
Allowance for doubtful accounts............ $ 37,000 $ 226,000 $ 313,000
Inventory.................................. 195,000 338,000 412,000
Tax credit and net operating loss
carryforwards........................... -- 1,002,000 --
Accrued expenses........................... 68,000 1,334,000 890,000
--------- ----------- -----------
Total current deferred taxes................. 300,000 2,900,000 1,615,000
--------- ----------- -----------
Long-term deferred taxes:
Net operating loss carryforwards........... 322,000 325,000 --
Difference in book vs tax basis of
assets.................................. (832,000) (7,980,000) (7,450,000)
--------- ----------- -----------
Total deferred tax liabilities............... (510,000) (7,655,000) (7,450,000)
--------- ----------- -----------
$(210,000) $(4,755,000) $(5,835,000)
========= =========== ===========
</TABLE>
Before March 18, 1994, the prior stockholders of the Company elected to
treat the Company as an S Corporation under the provisions of the Internal
Revenue Code. Under these provisions, all earnings and losses of the Company
were reported on the federal income tax returns of the stockholders.
Accordingly, no provision for federal income taxes was made prior to March 18,
1994. In connection with the acquisition of the Company by the present owners,
the Company was converted to a C Corporation.
7. EMPLOYEE BENEFIT PLANS
The Company maintains a discretionary profit sharing plan covering all
eligible employees, excluding those employed by Dolco, with at least one year of
service. Contributions to the plan are determined annually by the Board of
Directors. There was no contribution for the period March 19 through July 1,
1994 or for the years ended June 30, 1995 and June 28, 1996 or for the nine
months ended March 28, 1997.
The Company has a defined contribution profit sharing plan for the benefit
of all employees having completed one year of service with Dolco Packaging Corp.
The Company contributes 3% of each participant's compensation on a weekly basis.
In 1993, the plan was amended to reintroduce the company matching contribution
of up to 1% when an employee contributes 3% of compensation. Contributions
totaled approximately $188,232 for the period February 22, 1996 to June 28,
1996.
The Company had a defined benefit pension plan covering all eligible
non-union employees. Benefit accruals under the plan ceased as of May 31, 1992.
On May 18, 1994, the Company began proceedings to terminate the plan and as of
June 28, 1996, the plan was terminated and all assets were distributed.
The Company also has a defined benefit pension plan for the benefit of all
employees having completed one year of service with Dolco. The Company's policy
is to fund the minimum amounts required by applicable regulations. Dolco's Board
of Directors approved a plan to freeze the pension plan on June 30, 1987, at
which time benefits ceased to accrue. Dolco has not been required to contribute
to the plan since 1990.
8. RELATED PARTY TRANSACTIONS
The Company has a management consulting agreement with an affiliate of a
stockholder. The terms of the agreement require the Company to pay a fee of
approximately $30,000 per month for a period of ten years. Consulting service
fees were approximately $150,000 and $270,000 for the nine months ended March
29, 1996 and March 28, 1997. Consulting service fees were approximately $58,000
for the period March 19, 1994 to July 1, 1994 and $203,000 and $274,000 for the
year ending June 30, 1995 and June 28, 1996, respectively.
F-14
<PAGE> 97
TEKNI-PLEX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
There were no such fees for the period January 1, 1994 to March 18, 1994 or for
the year ended December 31, 1993.
9. STOCK OPTIONS
In April 1994, the Company granted options to an employee to acquire 2.5%
of the outstanding common stock, with anti-dilution provisions. The options are
exercisable as to 33 1/3% of the shares on the first, second and third
anniversary dates of the original grant.
The Company applies APB Opinion 25 and related Interpretations in
accounting for these options. Accordingly, no compensation cost has been
recognized. Had compensation cost been determined based on the fair value at the
grant dates for these awards consistent with the method of SFAS Statement 123,
the Company's net income (loss) would have been reduced to the pro forma amounts
indicated below:
<TABLE>
<CAPTION>
MARCH 19, YEARS ENDED NINE MONTHS ENDED
1994 TO --------------------- -----------------------------
JULY 1, JUNE 30, JUNE 28, MARCH 29, MARCH 28,
1994 1995 1996 1996 1997
--------- -------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net income (loss):
As reported......... $ 20,900 $165,700 $975,700 $ 220,000 $ 6,447,000
Pro forma........... 11,400 127,600 904,100 183,040 6,342,932
</TABLE>
10. COMMITMENTS AND CONTINGENCIES
Commitments
(a) During the year ended June 28, 1996, the Company rented building space
in New York on a month to month basis. The Company also leases building space in
Texas, California, Georgia and Washington. At June 28, 1996, the Company's
future minimum lease payments are as follows:
<TABLE>
<S> <C>
1997..................................................................... $ 676,000
1998..................................................................... 667,000
1999..................................................................... 649,000
2000..................................................................... 591,000
2001..................................................................... 122,000
----------
$2,705,000
==========
</TABLE>
Rent expense including escalation charges amounted to approximately
$337,000 for the year ended December 31, 1993, $68,000 for the period January 1,
1994 to March 18, 1994, $95,000 for the period March 19, 1994 to July 1, 1994,
$343,000 and $614,000 for the years ended June 30, 1995 and June 28, 1996 and
$393,000 and $405,000 for the nine months ended March 29, 1996 and March 28,
1997.
(b) The Company has employment contracts with two employees. These
contracts provide aggregate minimum annual compensation for the years ended June
30 as follows: 1997 -- $700,000; 1998 -- $825,000; 1999 -- $825,000.
Contingencies
(a) The Company had received notification from the New York Department of
Environmental Conservation (NYDEC) regarding violations of certain regulations
concerning air emissions. The Company has complied with all environmental
regulations in the state of New York attendant to the closing of its former
Brooklyn, New York Closure Liners manufacturing facility.
F-15
<PAGE> 98
TEKNI-PLEX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(b) The Company filed an action under the arbitration provisions of the
Merger and Acquisition Agreement, dated March 18, 1994 (the "Merger Agreement")
demanding a reduction in the purchase price paid due to a breach of that
agreement. In the arbitration, the Company pursued claims for damages resulting
from misrepresentations and omissions in the representations and warranties made
by the former shareholder. In the above action, the Company also sought to
nullify its obligation under the Consulting Agreement. (See Note 3).
The former shareholder answered the Company's claim and asserted two
counterclaims, demanding the Company to fulfill certain tax obligations under
the Merger Agreement and specific performance under the Consulting Agreement.
On April 18, 1997, the Company and the former shareholder reached a
settlement in arbitration (the "Settlement"). All obligations of each party to
the other were nullified. This Settlement did not have a material impact on the
financial condition or results of operations of the Company.
(c) The Company is a party to various other legal proceedings arising in
the normal conduct of business. Management believes that the final outcome of
these proceedings will not have a material adverse effect on the Company's
financial position.
11. CONCENTRATIONS OF CREDIT RISKS
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of cash deposits and trade
accounts receivable.
The Company provides credit to customers on an unsecured basis after
evaluating customer credit worthiness. Since the Company sells to a broad range
of customers concentrations of credit risk are limited. The Company provides an
allowance for bad debts where there is a possibility for loss.
The Company maintains demand deposits at several major banks throughout the
United States. As part of its cash management process, the Company periodically
reviews the credit standing of these banks.
12. SUPPLEMENTAL CASH FLOW INFORMATION
(a) Cash paid
<TABLE>
<CAPTION>
JANUARY 1, MARCH 19, YEARS ENDED NINE MONTHS ENDED
YEAR ENDED 1994 TO 1994 TO ------------------- ---------------------------
DECEMBER 31, MARCH 18, JULY 1, JUNE 30, JUNE 28, MARCH 29, MARCH 28,
1993 1994 1994 1995 1996 1996 1997
------------ ---------- --------- -------- -------- ------------ ------------
(IN 000'S)
<S> <C> <C> <C> <C> <C> <C> <C>
Interest........ $167 $20 $1,056 $3,502 $4,730 $2,620 $5,273
Income taxes.... 372 -- -- 467 188 80 2,556
</TABLE>
(b) Acquisitions
The Company purchased certain assets and assumed certain liabilities of
Hargro Flexible Packaging Corporation, effective December 22, 1995, for
approximately $7,500,000 in cash. In conjunction with the acquisition,
liabilities were assumed as follows:
<TABLE>
<S> <C>
Fair value of assets acquired........................................... $10,592,000
Cash paid............................................................... (7,543,000)
-----------
Liabilities assumed..................................................... $ 3,049,000
===========
</TABLE>
F-16
<PAGE> 99
TEKNI-PLEX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company purchased all of the outstanding common and preferred stock of
Dolco, effective February 22, 1996, for approximately $40,000,000 in cash. In
conjunction with the acquisition, liabilities were assumed as follows:
<TABLE>
<S> <C>
Fair value of assets acquired.......................................... $ 46,293,000
Goodwill............................................................... 14,044,000
Cash paid.............................................................. (39,434,000)
------------
Liabilities assumed.................................................... $ 20,903,000
============
</TABLE>
F-17
<PAGE> 100
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
Dolco Packaging Corp.
We have audited the balance sheets of Dolco Packaging Corp. as of December
31, 1995 and 1994, and the related statements of income, changes in
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1995. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements 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 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 financial position of Dolco Packaging Corp. as of
December 31, 1995 and 1994, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1995, in conformity
with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Sherman Oaks, California
February 21, 1996
F-18
<PAGE> 101
DOLCO PACKAGING CORP.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1995 1994
----------- -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................................. $ 2,258,299 $ 811,236
Accounts receivable (less allowance for doubtful accounts:
1995 -- $128,797, and 1994 -- $220,979)................................. 6,830,633 5,720,703
Inventories............................................................... 5,917,383 6,418,534
Deferred tax asset........................................................ 1,071,969
Prepaid expenses and other................................................ 353,017 424,572
----------- -----------
Total current assets............................................... 16,431,301 13,375,045
Property, Plant and Equipment:
Buildings and improvements................................................ 8,280,809 6,221,953
Machinery and equipment................................................... 32,521,891 30,822,887
Molds and dies............................................................ 6,194,194 7,089,604
Furniture and fixtures.................................................... 334,352 375,153
Assets under capital leases............................................... 48,356 48,356
----------- -----------
47,379,602 44,557,953
Less accumulated depreciation and amortization.......................... 34,523,392 35,260,996
----------- -----------
12,856,210 9,296,957
Construction in progress.................................................. 641,902 2,092,218
Land...................................................................... 668,294 668,294
----------- -----------
Net property, plant and equipment..................................... 14,166,406 12,057,469
Deferred tax asset........................................................ 649,242
Other assets.............................................................. 430,569 341,876
----------- -----------
Total assets....................................................... $31,677,518 $25,774,390
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Short-term note payable to bank........................................... $ $ 800,000
Current maturities of long-term debt (includes $818,923 payable to
stockholder in 1994).................................................... 645,528 1,200,179
Accounts payable.......................................................... 2,783,184 2,123,875
Accounts payable to stockholders.......................................... 713,203 799,324
Accrued payroll and benefits.............................................. 1,021,218 818,140
Accrued liabilities....................................................... 1,006,453 1,316,328
----------- -----------
Total current liabilities.......................................... 6,169,586 7,057,846
Long-term debt, less current maturities (includes $699,787 payable to
stockholder in 1994)...................................................... 2,675,100 1,561,596
Minimum pension liaibility.................................................. 572,000
Deferred items.............................................................. 1,243,454 986,100
Commitments and contingencies
Stockholders' equity:
Preferred stock -- $.01 par value; 2,500,000 shares authorized; 1,824,923
and 2,074,995 shares outstanding in 1995 and 1994, respectively, stated
at aggregate liquidation preference..................................... 7,299,692 8,299,980
Common stock -- $.01 par value; 3,000,000 shares authorized; 1,468,145
outstanding in 1995 and 1,459,520 outstanding in 1994................... 14,681 14,595
Additional paid-in capital................................................ 6,675,714 6,621,737
Minimum pension liability, net of deferred income tax benefit of
$222,000................................................................ (350,000)
Retained earnings......................................................... 7,377,291 1,232,536
----------- -----------
Total stockholders' equity......................................... 21,017,378 16,168,848
----------- -----------
Total liabilities and stockholders' equity......................... $31,677,518 $25,774,390
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-19
<PAGE> 102
DOLCO PACKAGING CORP.
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Net sales........................................... $81,492,144 $66,988,257 $62,531,009
Cost of sales....................................... 65,205,346 52,137,665 49,066,585
----------- ----------- -----------
Gross profit................................... 16,286,798 14,850,592 13,464,424
Selling, general and administrative expenses........ 10,518,344 9,832,641 8,999,235
----------- ----------- -----------
Operating income............................... 5,768,454 5,017,951 4,465,189
Other income (expense):
Interest.......................................... (342,412) (221,406) (364,761)
Loss on disposition and write-off of property,
plant and equipment............................ (75,886) (37,527) (180,742)
Other, net........................................ 247,373 158,315 156,161
----------- ----------- -----------
Income before income taxes..................... 5,597,529 4,917,333 4,075,847
Provision for (benefit from) income taxes........... (1,249,211) 150,000 150,000
----------- ----------- -----------
Net income.......................................... $ 6,846,740 $ 4,767,333 $ 3,925,847
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-20
<PAGE> 103
DOLCO PACKAGING CORP.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
-----------------------------------------------------------------------------------------------------
PREFERRED STOCK COMMON STOCK ADDITIONAL MINIMUM EARNINGS
STATED PAR PAID-IN PENSION (ACCUMULATED STOCKHOLDERS'
SHARES VALUE SHARES VALUE CAPITAL LIABILITY DEFICIT) EQUITY
--------- ----------- --------- ------- ---------- --------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1992.................. 2,500,000 $10,000,000 1,409,081 $14,091 $6,481,475 $(5,827,906) $ 10,667,660
Common stock issued from
exercise of stock
options............... 22,500 225 50,400 50,625
Redemption of preferred
stock................. (175,036) (700,144) (700,144)
Preferred stock
dividends............. (863,242) (863,242)
Net income for the
year.................. 3,925,847 3,925,847
---------- ---------- ---------- ------- ---------- --------- ---------- -----------
Balance at December 31,
1993.................. 2,324,964 9,299,856 1,431,581 14,316 6,531,875 (2,765,301) 13,080,746
Common stock issued from
exercise of stock
options............... 28,875 288 91,775 92,063
Retirement of fractional
shares................ (936) (9) (1,913) (1,922)
Redemption of preferred
stock................. (249,969) (999,876) (999,876)
Preferred stock
dividends............. (769,496) (769,496)
Net income for the
year.................. 4,767,333 4,767,333
---------- ---------- ---------- ------- ---------- --------- ---------- -----------
Balance at December 31,
1994.................. 2,074,995 8,299,980 1,459,520 14,595 6,621,737 1,232,536 16,168,848
Common stock issued from
exercise of stock
options............... 8,625 86 53,977 54,063
Redemption of preferred
stock................. (250,072) (1,000,288) (1,000,288)
Preferred stock
dividends............. (701,985) (701,985)
Minimum pension
liability, net of
deferred income tax
benefit of $222,000... $(350,000) (350,000)
Net income for the
year.................. 6,846,740 6,846,740
---------- ---------- ---------- ------- ---------- --------- ---------- -----------
Balance at December 31,
1995.................. 1,824,923 $ 7,299,692 1,468,145 $14,681 $6,675,714 $(350,000) $ 7,377,291 $ 21,017,378
========== ========== ========== ======= ========== ========= ========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-21
<PAGE> 104
DOLCO PACKAGING CORP.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Operating Activities:
Net income........................................ $ 6,846,740 $ 4,767,333 $ 3,925,847
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization.................. 2,749,372 2,393,398 2,239,408
Provision for losses on receivables............ 85,304 40,837 173,911
Loss on disposition and write-off of property,
plant and equipment.......................... 75,886 37,527 180,742
Change in assets and liabilities:
Accounts receivable............................ (1,195,234) (979,977) 221,448
Inventories.................................... 501,151 (1,469,665) 246,402
Deferred tax asset............................. (1,499,211)
Prepaid expenses and other assets.............. (42,138) (42,994) (74,981)
Accounts payable............................... 573,188 703,937 (186,211)
Accrued and other long-term liabilities........ 173,062 151,267 409,392
----------- ----------- -----------
Net cash provided by operating
activities.............................. 8,268,120 5,601,663 7,135,958
----------- ----------- -----------
Investing Activities:
Additions to property, plant and equipment........ (4,914,194) (3,660,460) (1,614,510)
Proceeds from disposition of property, plant and
equipment...................................... 5,000 9,736 118,644
----------- ----------- -----------
Net cash used for investing activities.... (4,909,194) (3,650,724) (1,495,866)
----------- ----------- -----------
Financing Activities:
Proceeds from current and long-term debt.......... 1,900,000 -- --
Payments of current and long-term debt............ (1,341,147) (1,700,587) (1,744,555)
Net increase (decrease) of short-term note payable
to bank........................................ (800,000) 800,000 (1,300,000)
Redemption of preferred stock..................... (1,000,288) (999,876) (700,144)
Payment of dividends.............................. (724,491) (791,993) (878,996)
Proceeds from exercise of stock options........... 54,063 92,063 50,625
Retirement of common stock........................ -- (1,922) --
----------- ----------- -----------
Net cash used for financing activities.... (1,911,863) (2,602,315) (4,573,069)
----------- ----------- -----------
Net increase (decrease) in cash..................... 1,447,063 (651,376) 1,067,023
Cash and cash equivalents at beginning of year...... 811,236 1,462,612 395,589
----------- ----------- -----------
Cash and cash equivalents at end of year............ $ 2,258,299 $ 811,236 $ 1,462,612
=========== =========== ===========
Supplemental disclosures of cash flow information:
Cash disbursed during the year for:
Interest, net of amount capitalized............ $ 333,450 $ 253,284 $ 389,211
Income taxes................................... 255,878 155,763 162,044
Noncash investing and financing activities:
Additions to property, plant and equipment
under capital leases......................... -- -- 34,420
Declaration of dividend........................ 164,243 186,750 209,247
</TABLE>
The accompanying notes are an integral part of these statements.
F-22
<PAGE> 105
DOLCO PACKAGING CORP.
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business
Dolco Packaging Corp. ("Dolco") was established in 1966 and was the first
company to manufacture foam egg cartons in the United States. In addition to egg
cartons, Dolco's largest product line, Dolco also develops, manufactures and
sells high volumes of various grocery store containers for meat, poultry, baked
goods and produce as well as specialty items for food service and industrial
uses.
Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that effect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reported
period. Actual results could differ from those estimates.
Fiscal Year
Dolco's fiscal year ends on the Saturday nearest December 31. The fiscal
years ended December 31, 1995, 1994 and 1993 are comprised of 52 weeks each.
Cash and Cash Equivalents
Dolco considers all highly liquid instruments purchased with an original
maturity of three months or less to be cash equivalents.
Concentration of Risk
Dolco places its temporary cash investments with high credit quality
financial institutions. At times, such investments may be in excess of the FDIC
insurance limit. At Dolco's year end, $2,300,000 was invested overnight in
commercial paper.
Dolco performs periodic credit evaluations of its customer's financial
condition and generally does not require collateral. Receivables generally are
due in 30 days. Credit losses have consistently been within management's
expectations.
Inventories
Inventories are valued at the lower of cost or market with cost determined
on the first-in first-out (FIFO) basis.
Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation is provided
on the straight-line method at rates based on estimated useful lives of
individual assets or classes of assets. Leasehold improvements are amortized
over the estimated useful life or period of lease, whichever is shorter.
Estimated useful lives include:
<TABLE>
<S> <C>
Buildings and improvements..................................... 5 to 30 years
Machinery and equipment........................................ 3 to 8 years
Furniture and fixtures......................................... 5 years
Assets under capital lease..................................... 3 to 5 years
</TABLE>
F-23
<PAGE> 106
DOLCO PACKAGING CORP.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Repairs and maintenance are charged to operations in the year incurred.
Repairs and maintenance approximated $6,279,000, $5,614,000 and $5,180,000 in
1995, 1994 and 1993, respectively. Major renewals or betterments are capitalized
and depreciated over estimated useful lives. When assets are disposed of, any
resulting gain or loss on disposition is included in operations.
Capitalized Interest
Interest incurred in conjunction with property additions is capitalized as
part of the asset cost. Interest of approximately $54,000, $60,000 and $47,000
was capitalized during 1995, 1994 and 1993, respectively.
Impairment of Long-Lived Assets
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 121. "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of ". SFAS No. 121
requires companies to adopt its provisions for fiscal years beginning after
December 15, 1995. SFAS No. 121 requires an entity to review long-lived assets
and certain identifiable intangibles whenever events or changes in circumstances
indicate the carrying amount of assets may not be recoverable. Impairment losses
are recognized when the carrying amount of the asset exceeds the estimated fair
value of the assets. Dolco expects to adopt the provisions of SFAS No. 121
beginning with its fiscal year ending December 31, 1996. At this time, it is not
expected that the adoption of the provisions of SFAS No. 121 will have any
significant impact on Dolco.
Revenue Recognition
Dolco recognizes revenue when product is shipped.
Research and Development
Research and development costs are expensed as incurred and are included in
selling, general and administrative expenses. Dolco incurred approximately
$1,096,000, $1,029,100 and $812,000 of research and development expense for the
years ended December 31, 1995, 1994 and 1993, respectively.
Income Taxes
During 1993, Dolco adopted Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes" ("Statement 109"). Statement 109 requires the
liability method in accounting for income taxes. Adoption of this statement had
no effect on Dolco's net income for 1993. (See Note 5 to the Financial
Statements.)
Stock Split
A three-for-two stock split of Dolco's Common Stock in the form of a 50%
stock dividend was paid on September 30, 1994. Prior year information pertaining
to Common Stock in the accompanying financial statements has been restated to
reflect this transaction.
Reclassification
Certain reclassifications have been made to the 1994 and 1993 financial
statements to conform to the presentation used in 1995.
F-24
<PAGE> 107
DOLCO PACKAGING CORP.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
2. INVENTORIES
Dolco's inventories at December 31, 1995 and 1994 comprise the following:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Finished goods...................................... $1,628,449 $2,025,187
Raw materials....................................... 2,821,028 2,726,851
Work-in-process..................................... 1,467,906 1,666,496
---------- ----------
Total..................................... $5,917,383 $6,418,534
========== ==========
</TABLE>
3. FINANCING
Dolco had a $4,000,000 revolving line of credit which was due to expire in
May 1996 and bore interest at a rate equal to the bank's prime rate. At December
31, 1995, there was no balance outstanding on this line of credit. The prime
rate was 8.5% at December 31, 1995 and 1994. This line was canceled as a result
of the merger described in Note 11.
4. LONG-TERM DEBT
Dolco's long-term debt at December 31, 1995 and 1994 consists of:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Bank term loan, due in monthly principal payments of $47,461
per month through July 31, 1998, with interest at 1/4%
above the prime rate paid monthly......................... $ 1,471,292 $ 2,040,824
Bank term loan, due in monthly principal payments of $6,333
per month through March 1, 2000, with final installment of
all unpaid principal payable on April 1, 2000 and interest
at 1.25% above the prime rate paid monthly................ 1,849,336 --
Notes payable to a related party, collateralized by
equipment, with interest at 1.5% above the prime rate due
in monthly installments of $55,022, paid in full in
December 1995............................................. -- 707,228
Present value of capital lease obligations.................. -- 13,723
----------- -----------
3,320,628 2,761,775
Less current maturities..................................... 645,528 1,200,179
----------- -----------
Total long-term debt.............................. $ 2,675,100 $ 1,561,596
=========== ===========
</TABLE>
The bank term loans and line of credit were collateralized by accounts
receivable, inventory, certain equipment and the first mortgage on the
Wenatchee, Washington property. The credit agreement covering the term loan and
the revolving line of credit contained certain covenants which provided, among
other things, requirements for the maintenance of certain measures of liquidity
and equity at the end of each fiscal quarter. The line of credit was canceled
and the bank term loans were repaid during February of 1996 as a result of the
merger discussed in Note 11.
Assets Under Capital Leases
Dolco had a lease agreement with the Gwinnett County Industrial Building
Authority, Georgia, for use of facilities that have been constructed with funds
provided from proceeds of an Industrial Revenue Bond. The bond was due serially
in annual payments of $250,000 with the final payment due on May 1, 1995 and had
an interest rate of 9.25%. The balance due on this lease was paid in full during
1994.
F-25
<PAGE> 108
DOLCO PACKAGING CORP.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Dolco also leases transportation and manufacturing equipment under various
lease agreements accounted for as capital leases.
The following summarizes leased property under capital leases:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Machinery and equipment.......................................... $ 48,356 $ 48,356
Accumulated amortization......................................... 34,427 24,756
------- -------
$ 13,929 $ 23,600
======= =======
</TABLE>
5. INCOME TAXES
During 1993, Dolco adopted Statement of Financial Accounting Standards No.
109. Under Statement 109, the liability method is used in accounting for income
taxes. Under this method, deferred tax assets and liabilities are determined
based on differences between financial reporting and tax bases of assets and
liabilities; and are measured using the enacted tax rates and laws that will be
in effect when the differences are expected to reverse.
Components of the provision for (benefit from) income taxes are:
<TABLE>
<CAPTION>
1995 1994 1993
----------- -------- --------
<S> <C> <C> <C>
Currently payable:
Federal........................................ $217,662.... $117,395 $121,793
State.......................................... 32,338 32,605 28,207
---------- -------- --------
250,000 150,000 150,000
Deferred:
Federal........................................ (1,499,211) -- --
---------- -------- --------
$(1,249,211) $150,000 $150,000
========== ======== ========
</TABLE>
The differences between the expected U. S. federal income taxes and the
actual taxes are:
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Expected tax on pre-tax earnings............ $ 1,903,160 $ 1,671,893 $ 1,385,787
State taxes................................. 32,338 32,605 28,207
Effect of alternative minimum tax on current
liability................................. 250,782 104,163 96,811
Utilization of net operating loss
carryforwards............................. (2,027,023) (1,548,867) (1,420,040)
Reversal of valuation allowance............. (1,499,211) -- --
Other-net................................... 90,743 (109,794) 59,235
---------- -------- --------
$(1,249,211) $ 150,000 $ 150,000
========== ======== ========
</TABLE>
F-26
<PAGE> 109
DOLCO PACKAGING CORP.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The major components of deferred tax assets (liabilities) at December 31,
1995 and 1994 are:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Inventory-uniform capitalization........................ $ 101,218 $ 112,843
Accrued expenses........................................ 110,279 318,186
Deferred rent........................................... 318,819 281,379
Net operating loss carryforwards........................ 364,198 2,354,350
ITC credit carryforwards................................ 1,052,608 995,139
Other credit carryforwards.............................. 419,284 229,692
Depreciation and amortization........................... (1,075,023) (1,388,730)
Pension liability....................................... 222,000
Other................................................... 207,828 210,591
----------- -----------
1,721,211 3,113,450
Valuation allowance..................................... -- (3,113,450)
----------- -----------
$ 1,721,211 $ --
=========== ===========
</TABLE>
At December 31, 1995, Dolco had net operating loss carryforwards for
federal income tax purposes of approximately $930,000 which expire in 2005; and
for California state purposes of approximately $940,000, of which $160,000
expires in 1997 and $780,000 in 2000. In 1995 and 1994, Dolco utilized
approximately $5,961,000 and $4,556,000, respectively, of net operating loss
carryforwards. Tax credit carryforwards of approximately $1,472,000 are
available to reduce future federal income taxes. If not used, these
carryforwards will expire in 1996 through 2002.
The Internal Revenue Code of 1986, as amended, contains provisions which
might limit Dolco's utilization of its net operating loss and credit
carryforwards in any year upon and after the occurrence of certain events,
including a substantial change in the ownership of its stock over a period of up
to three years (an "ownership change").
6. PENSION PLAN AND PROFIT SHARING PLAN
Dolco has a defined contribution profit sharing plan for the benefit of all
employees having completed one year of service. Dolco contributed 3% of each
participant's compensation on a weekly basis for 1993, 1994 and 1995. In 1993,
the plan was amended to reintroduce the company matching contribution of up to
1% when an employee contributes 3%. Contributions totaled approximately $536,000
in 1995, $410,000 in 1994 and $347,000 in 1993.
Dolco also has a defined benefit pension plan for the benefit of all
employees having completed one year of service. Dolco's policy is to fund the
minimum amounts required by applicable regulations. Dolco's Board of Directors
approved a plan to freeze the pension plan on June 30, 1987, at which time
benefits ceased to accrue. Dolco has not been required to contribute to the plan
since 1990.
F-27
<PAGE> 110
DOLCO PACKAGING CORP.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Net pension cost for the pension plan includes the following assumptions
and components:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Assumptions:
Discount rate................................. 7.0% 8.5% 7.0%
Expected rate of return on assets............. 8.5% 8.5% 7.5%
Components:
Interest cost................................. $ 217,089 $ 228,780 $ 232,356
-------- -------- --------
Actual return................................. (442,861) (30,971) (183,372)
Deferred gain (loss).......................... 227,744 (176,660) (32,561)
-------- -------- --------
(215,117) (207,631) (215,933)
Amortization of transition asset................ -- -- --
-------- -------- --------
Net periodic pension cost....................... $ 1,972 $ 21,149 $ 16,423
======== ======== ========
</TABLE>
There is no service cost for 1995 or 1994 since the pension plan was frozen
on June 30, 1987. The following table sets forth the funded status of the plan
and amounts recognized in Dolco's balance sheets at December 31:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Actuarial present value of accumulated vested benefit
obligations............................................... $3,473,181 $2,570,019
---------- ----------
Projected benefit obligation for services rendered to
date...................................................... $3,473,181 $2,570,019
Plan assets at fair value................................... 2,901,181 2,552,878
---------- ----------
Projected benefit obligation in excess of plan assets....... (572,000) (17,141)
Unrecognized net assets..................................... (51,114) (59,634)
Unrecognized net loss from past experience different from
that assumed and effects of changes in assumptions........ 51,114 76,775
---------- ----------
Accrued pension cost recognized on balance sheet............ $ (572,000) $ --
========== ==========
</TABLE>
Assets of the pension plan consist of an immediate participation guarantee
contract and various mutual funds.
During 1995 the Company recorded $572,000 to recognize the minimum pension
liability required by the provisions of Statement of Financial Accounting
Standards No. 87, "Employers' Accounting for Pensions." The additional minimum
liability at December 31, 1995 represents the excess of the accumulated benefit
obligation over the fair value of plan assets and accrued pension liability. The
transaction, which had no effect on income, was recorded by reducing equity by
$350,000, which is net of a deferred tax asset of $222,000.
F-28
<PAGE> 111
DOLCO PACKAGING CORP.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
7. COMMITMENTS AND CONTINGENCIES
Dolco is obligated under operating lease agreements with minimum annual
rents as summarized below:
<TABLE>
<CAPTION>
YEAR
------------------------------------------------------------------------
<S> <C>
1996.................................................................... $ 791,438
1997.................................................................... 819,893
1998.................................................................... 811,373
1999.................................................................... 758,250
2000.................................................................... 605,147
Thereafter.............................................................. 7,053,263
-----------
$10,839,364
===========
</TABLE>
Dolco's operating leases are primarily for equipment and the Dallas
manufacturing facility. Rent expense was approximately $1,734,000 in 1995,
$1,988,000 in 1994 and $2,134,000 in 1993.
8. STOCK OPTIONS
In 1992, the Board of Directors and stockholders of Dolco adopted and
approved a Stock Option Plan under which 150,000 shares of Common Stock are
reserved for issuance on exercise of options or nonstatutory options to
employees and nonstatutory options to directors who are not employees. The
exercise price of an option may not be less than the fair market value of the
shares of Common Stock on the date of grant. No option may be exercised during
the first year or more than ten years from the date of grant.
The following is a summary of the options outstanding as of December 31,
1995; the number of shares and the exercise price have been restated to reflect
the three-for-two stock split in the form of a 50% stock dividend which was paid
on September 30, 1994:
<TABLE>
<CAPTION>
NUMBER EXERCISE
OF SHARES PRICE
--------- --------------
<S> <C> <C>
Balance at December 31, 1992.............................. 69,000 $2.25
Options granted........................................... 45,000 6.50 - 12.75
Stock options exercised................................... (22,500) 2.25
-------
Balance at December 31, 1993.............................. 91,500 2.25 - 12.75
Canceled options.......................................... (17,250) 2.25 - 12.75
Options granted........................................... 33,000 13.00 - 13.833
Stock options exercised................................... (28,875) 2.25 - 6.50
-------
Balance at December 31, 1994.............................. 78,375 2.25 - 13.833
Options granted........................................... 6,000 13.00 - 13.60
Stock options exercised................................... (8,625) 2.25 - 13.00
-------
75,750 2.25 - 13.833
=======
</TABLE>
These options terminate five years from the date of grant and 50% may be
exercised after the first anniversary and 100% after the second anniversary. The
times at which options may be exercised can be accelerated under certain
circumstances. At December 31, 1995, 53,625 options were exercisable.
9. CAPITAL STOCK
Dolco Preferred Stock has stated, redemption and liquidation values of
$4.00 per share. Holders of Dolco's Preferred Stock are entitled to receive a
cash dividend of 9% per annum of the stated value when and
F-29
<PAGE> 112
DOLCO PACKAGING CORP.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
if declared by Dolco. Dividends accrue and are payable quarterly in arrears. The
dividends cumulate without interest. Preferred stock dividends of $.36 per share
were declared during 1995, 1994 and 1993.
Dolco Preferred Stock is redeemable for a cash price of $4.00 per share
plus any accrued but unpaid dividends at Dolco's discretion subject to
limitations determined by a formula set forth in Dolco's Certificate of
Incorporation. In the event of a partial redemption, the shares will be redeemed
on a pro rata basis. Preferred stockholders are entitled to one vote for each
share of Dolco Preferred Stock held.
Holders of Dolco Common Stock will not be entitled to receive dividends
until all shares of Dolco Preferred Stock have been redeemed in full.
Thereafter, holders of Dolco Common Stock will be entitled to receive dividends,
when and if declared by the Board of Directors, out of funds legally available.
Common stockholders are entitled to one vote for each share of Dolco Common
Stock held.
10. RELATED PARTY TRANSACTIONS
Payments to major stockholders consist of raw material purchases under
normal trade terms totaling approximately $24,799,000 for 1995, $18,769,000 for
1994 and $17,392,000 for 1993 and interest payments on a note to stockholder for
equipment financing for approximately $45,000, $86,000 and $128,000 for 1995,
1994 and 1993 respectively.
11. SUBSEQUENT EVENTS
On November 7, 1995, Dolco signed an Agreement and Plan of Merger pursuant
to which Packaging Acquisition Corp., a newly-formed corporation owned by MST
Partners, L.P. and MST Offshore Partners C.V. will merge with and into Dolco,
which would remain in existence. According to the Agreement and Plan of Merger,
holders of the outstanding shares of Dolco's Common Stock and Preferred Stock
will, upon effectiveness of the merger, be entitled to receive $21 in cash for
each outstanding share of Common Stock and $4 in cash plus the amount of any
dividends accrued and unpaid as of the effective date of the merger for each
outstanding share of Preferred Stock. The merger was approved by Dolco's
stockholders during a special meeting of the stockholders held on February 20,
1996. Subsequent (unaudited) events are as follows : On February 21, 1996, MST
Partners, L.P. and MST Offshore Partners, C.V. assigned all of the stock of
Packaging Acquisition Corporation and all rights under the Agreement and Plan of
Merger to Tekni-Plex, Inc., an entity that they collectively control. On
February 21, 1996, Packaging Acquisition Corporation was merged with and into
Dolco, with Dolco the surviving entity. As a result, Dolco became a wholly owned
subsidiary of Tekni-Plex, Inc.
F-30
<PAGE> 113
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Tekni-Plex and the Guarantor are both incorporated under the laws of the
State of Delaware. Section 145 of the Delaware General Corporation Law (as the
same exists or may thereafter be amended, the "DGCL") provides that a Delaware
corporation may indemnify any persons who were, are or are threatened to be
made, parties to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other than
an action by or in the right of such corporation), by reason of the fact that
such person is or was a director, officer, employee or agent of such
corporation, or is or was serving at the request of such corporation as a
director, officer, employee or agent of another corporation or other enterprise.
The indemnity may include expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by such person
in connection with such action, suit or proceeding, provided such person acted
in good faith and in a manner such person reasonably believed to be in or not
opposed to the corporation's best interests and, with respect to any criminal
action or proceeding, had no reasonable cause to believe that such person's
conduct was unlawful. A Delaware corporation may indemnify any persons who are,
were or are threatened to be made, a party to any threatened, pending or
completed action or suit by or in the right of the corporation by reason of the
fact that such person is or was a director, officer, employee or agent of such
corporation, or is or was serving at the request of such corporation as a
director, officer, employee or agent of another corporation or other enterprise.
The indemnity may include expenses (including attorneys' fees) actually and
reasonably incurred by such person in connection with the defense or settlement
of such action or suit, provided such person acted in good faith and in a manner
such person reasonably believed to be in or not opposed to the corporation's
best interests, provided that no indemnification is permitted without judicial
approval if such person is adjudged to be liable to the corporation. Where a
director, officer, employee or agent is successful on the merits or otherwise in
the defense of any such action, suit or proceeding, the corporation must
indemnify such person against the expenses which such person has actually and
reasonably incurred. In addition, Section 145 of the DGCL allows, subject to
specified conditions and exclusions, the advancement of expenses incurred in
defending against such action, suit or proceeding, and permits the corporation
to purchase and maintain insurance on behalf of such persons, whether or not the
corporation would otherwise have the power to indemnify such person under
Section 145. The indemnification and advancement of expenses provided by Section
145 are not exclusive of any other rights to which those seeking indemnification
or advancement may be entitled under any by-laws, agreement, vote of
stockholders or otherwise.
Tekni-Plex's Certificate of Incorporation (the "Certificate") provides that
a director of the Company will not be liable to the Company or its stockholders
for monetary damages for breach of fiduciary duty as a director, except for
liability (i) for any breach of the director's duty of loyalty to the Company or
its stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174 of
the DGCL, which concerns unlawful payments of dividends, stock purchases or
redemptions, or (iv) for any transactions from which the director derived an
improper personal benefit. While the Certificate provides directors with
protection from awards for monetary damages for breach of their fiduciary duty,
it does not eliminate such duty. Accordingly, the Certificate will have no
effect on the availability of equitable remedies such as an injunction or
rescission based on a director's breach of his or her duty of care. The
Guarantor's certificate of incorporation contains provisions substantially
similar to those described in this paragraph.
The Certificate as well as Tekni-Plex's By-laws (the "By-laws") provide for
the indemnification of directors and officers of the Company on substantially
similar terms and conditions as Section 145 of the DGCL. The By-laws provide for
the advancement of expenses reasonably incurred by a director or officer in
defending a civil or criminal action, suit or proceeding on substantially
similar terms and conditions as Section 145, and that all rights to
indemnification and to the advancement of expenses under the By-laws shall be
deemed to be provided by a contract between the Company and the director or
officer who serves in such capacity at any time while the By-Laws and any other
relevant provisions of the DGCL and any other
II-1
<PAGE> 114
applicable law, if any, are in effect. The By-laws further provide that
references to "the Company" in the above described section of the By-laws shall
be deemed to include any subsidiary of the Company now or hereafter organized
under the laws of the State of Delaware.
The by-laws of the Guarantor contain provisions substantially similar to
the by-laws of Tekni-Plex.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(A) EXHIBITS
<TABLE>
<C> <S>
3.1 Restated Certificate of Incorporation of Tekni-Plex, Inc.
3.2 Restated Certificate of Incorporation of Dolco Packaging Corp.
3.3 By-laws of Tekni-Plex Inc.
3.4 By-laws of Dolco Packaging Corp.
4.1 Indenture dated as of April 1, 1997 among Tekni-Plex, Inc., Dolco Packaging Corp.
and Marine Midland Bank, as Trustee.
4.2 Senior Subordinated Note and Guarantee (original not included; form of Note and
Guarantee included in Exhibit 4.1).
4.3 Purchase Agreement dated as of April 1, 1997 among Tekni-Plex, Inc., Dolco Packaging
Corp., and J.P. Morgan Securities Inc.
4.4 Registration Right Agreement, dated as of April 4, 1997 among Tekni-Plex, Inc.,
Dolco Packaging Corp. and J.P. Morgan Securities, Inc. as the Initial Purchaser.
*5.1 Opinion of Winthrop, Stimson, Putnam & Roberts.
10.1 Credit Agreement, dated as of May 8, 1997, among Tekni-Plex, Inc., Dolco Packaging
Corp., the Banks party thereto, the LC Issuing Banks referred to therein and Morgan
Guaranty Trust Company of New York, as Agent.
10.2 Note (original not included; form of Note included in Exhibit 10.1).
10.3 Security Agreement, dated as of May 8, 1997, among Tekni-Plex, Inc., Dolco Packaging
Corp. and Morgan Guaranty Trust Company of New York, as Agent (original not
included; form of Security Agreement included in Exhibit 10.1).
10.4 Pledge Agreement, dated as of May 8, 1997, between Tekni-Plex, Inc. and Morgan
Guaranty Trust Company of New York, as Agent (original not included; form of Pledge
Agreement included in Exhibit 10.1).
10.5 Form of Mortgage, dated as of May 8, 1997, made by Tekni-Plex, Inc. or Dolco
Packaging Corp. in favor of Morgan Guaranty Trust Company, as Agent (originals not
included; form of Mortgage included in Exhibit 10.1).
10.6 Employment Agreement, dated as of January 30, 1997, between Dr. F. Patrick Smith and
Tekni-Plex, Inc.
10.7 Employment Agreement, dated as of April 4, 1997, between Mr. Kenneth W.R. Baker and
Tekni-Plex, Inc.
*10.8 Stock Option Agreement, dated as of April 4, 1997, among Tekni-Plex, Inc.,
Tekni-Plex Partners L.P. and F. Patrick Smith.
*10.9 Amended and Restated Stock Option Agreement, dated as of April 4, 1997, between
Tekni-Plex, Inc. and Kenneth W.R. Baker.
10.10 Management Fee Agreement, dated as of April 4, 1997, between Tekni-Plex, Inc. and
MST Management Company, Inc.
*10.11 Management Fee Agreement, dated as of April 4, 1997, between Tekni-Plex, Inc. and
MST/TP Holding, Inc.
12.1 Statement regarding Computation of Ratios.
21.1 Subsidiaries of Tekni-Plex, Inc.
21.2 Subsidiaries of Dolco Packaging Corp.
23.1 Consent of BDO Seidman LLP.
23.2 Consent of Coopers & Lybrand L.L.P.
23.3 Consent of Rich Baker Berman & Co., P.A.
*23.4 Consent of Winthrop, Stimson, Putnam & Roberts.
</TABLE>
II-2
<PAGE> 115
<TABLE>
<C> <S>
25.1 Statement of Eligibility of Trustee, Marine Midland Bank, on Form T-1.
27.1 Financial Data Schedule.
*99.1 Form of Letter of Transmittal.
*99.2 Form of Notice of Guaranteed Delivery.
*99.3 Form of Tender Instructions.
*99.4 Form of Exchange Agent Agreement.
</TABLE>
- ---------------
*To be filed by amendment.
(B) FINANCIAL STATEMENT SCHEDULES
Not applicable.
ITEM 22. UNDERTAKINGS
(a) The undersigned registrants hereby undertake:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1993, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrants hereby undertake as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuers undertake that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
(c) The registrants undertake that every prospectus: (i) that is filed
pursuant to paragraph (b) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-3
<PAGE> 116
(d) Insofar as indemnification for liabilities arising under the Securities
Act of 1993 may be permitted to directors, officers and controlling persons of
the registrants pursuant to the foregoing provisions or otherwise, the
registrants have been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrants of expenses
incurred or paid by a director, officer or controlling person in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, each
of the registrants will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(e) The undersigned registrants hereby undertake to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11 or 13 of this form, within one business day of receipt of such
request, and to send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of the registration statement through the date
of responding to the request.
(f) The undersigned registrants hereby undertake to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not subject of and included in
the registration statement when it became effective.
II-4
<PAGE> 117
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Tekni-Plex, Inc., a Delaware corporation, has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized in Somerville, New Jersey on May 30, 1997.
TEKNI-PLEX, INC.
By: /s/ F. PATRICK SMITH
------------------------------------
F. Patrick Smith
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below on the 30th day of May, 1997 by the
following persons in the capacities indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ------------------------------------------ -----------------------------------------------
<C> <S>
/s/ F. PATRICK SMITH Chairman of the Board and Chief Executive
- ------------------------------------------ Officer
F. Patrick Smith
/s/ KENNETH W.R. BAKER President and Chief Operating Officer
- ------------------------------------------
Kenneth W.R. Baker
/s/ WILLIAM H. KAPLAN Controller (and principal financial officer)
- ------------------------------------------
William H. Kaplan
/s/ ARTHUR P. WITT Corporate Secretary and Director
- ------------------------------------------
Arthur P. Witt
/s/ J. ANDREW MCWETHY Director
- ------------------------------------------
J. Andrew McWethy
/s/ BARRY A. SOLOMON Director
- ------------------------------------------
Barry A. Solomon
/s/ STEPHEN A. TUTTLE Director
- ------------------------------------------
Stephen A. Tuttle
/s/ MICHAEL F. CRONIN Director
- ------------------------------------------
Michael F. Cronin
</TABLE>
II-5
<PAGE> 118
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Dolco Packaging Corp., a Delaware corporation, has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized in Somerville, New Jersey on May 30, 1997.
DOLCO PACKAGING CORP.
By: /s/ F. PATRICK SMITH
------------------------------------
F. Patrick Smith
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below on the 30th day of May, 1997 by the
following persons in the capacities indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ------------------------------------------ -----------------------------------------------
<C> <S>
/s/ F. PATRICK SMITH Chairman of the Board and Chief Executive
- ------------------------------------------ Officer
F. Patrick Smith
/s/ KENNETH W.R. BAKER President, Corporate Secretary and Director
- ------------------------------------------
Kenneth W.R. Baker
</TABLE>
II-6
<PAGE> 119
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGES
- ------- ------------------------------------------------------------------------- ------------
<C> <S> <C>
3.1 Restated Certificate of Incorporation of Tekni-Plex, Inc.................
3.2 Restated Certificate of Incorporation of Dolco Packaging Corp. ..........
3.3 By-laws of Tekni-Plex Inc. ..............................................
3.4 By-laws of Dolco Packaging Corp. ........................................
4.1 Indenture dated as of April 1, 1997 among Tekni-Plex, Inc., Dolco
Packaging Corp. and Marine Midland Bank, as Trustee. ....................
4.2 Senior Subordinated Note and Guarantee (original not included; form of
Note and Guarantee included in Exhibit 4.1). ............................
4.3 Purchase Agreement dated as of April 1, 1997 among Tekni-Plex, Inc.,
Dolco Packaging Corp., and J.P. Morgan Securities Inc. ..................
4.4 Registration Right Agreement, dated as of April 4, 1997 among Tekni-Plex,
Inc., Dolco Packaging Corp. and J.P. Morgan Securities, Inc. as the
Initial Purchaser. ......................................................
*5.1 Opinion of Winthrop, Stimson, Putnam & Roberts. .........................
10.1 Credit Agreement, dated as of May 8, 1997, among Tekni-Plex, Inc., Dolco
Packaging Corp., the Banks party thereto, the LC Issuing Banks referred
to therein and Morgan Guaranty Trust Company of New York, as Agent. .....
10.2 Note (original not included; form of Note included in Exhibit 10.1). ....
10.3 Security Agreement, dated as of May 8, 1997, among Tekni-Plex, Inc.,
Dolco Packaging Corp. and Morgan Guaranty Trust Company of New York, as
Agent (original not included; form of Security Agreement included in
Exhibit 10.1). ..........................................................
10.4 Pledge Agreement, dated as of May 8, 1997, between Tekni-Plex, Inc. and
Morgan Guaranty Trust Company of New York, as Agent (original not
included; form of Pledge Agreement included in Exhibit 10.1). ...........
10.5 Form of Mortgage, dated as of May 8, 1997, made by Tekni-Plex, Inc. or
Dolco Packaging Corp. in favor of Morgan Guaranty Trust Company, as Agent
(originals not included; form of Mortgage included in Exhibit 10.1). ....
10.6 Employment Agreement, dated as of January 30, 1997, between Dr. F.
Patrick Smith and Tekni-Plex, Inc. ......................................
10.7 Employment Agreement, dated as of April 4, 1997, between Mr. Kenneth W.R.
Baker and Tekni-Plex, Inc. ..............................................
*10.8 Stock Option Agreement, dated as of April 4, 1997, among Tekni-Plex,
Inc., Tekni-Plex Partners L.P. and F. Patrick Smith. ....................
*10.9 Amended and Restated Stock Option Agreement, dated as of April 4, 1997,
between Tekni-Plex, Inc. and Kenneth W.R. Baker. ........................
10.10 Management Fee Agreement, dated as of April 4, 1997, between Tekni-Plex,
Inc. and MST Management Company, Inc. ...................................
*10.11 Management Fee Agreement, dated as of April 4, 1997, between Tekni-Plex,
Inc. and MST/TP Holding, Inc. ...........................................
12.1 Statement regarding Computation of Ratios. ..............................
21.1 Subsidiaries of Tekni-Plex, Inc. ........................................
21.2 Subsidiaries of Dolco Packaging Corp. ...................................
23.1 Consent of BDO Seidman LLP. .............................................
23.2 Consent of Coopers & Lybrand L.L.P. .....................................
23.3 Consent of Rich Baker Berman & Co., P.A. ................................
*23.4 Consent of Winthrop, Stimson, Putnam & Roberts. .........................
25.1 Statement of Eligibility of Trustee, Marine Midland Bank, on Form
T-1. ....................................................................
27.1 Financial Data Schedule. ................................................
*99.1 Form of Letter of Transmittal. ..........................................
</TABLE>
<PAGE> 120
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGES
- ------- ------------------------------------------------------------------------- ------------
<C> <S> <C>
*99.2 Form of Notice of Guaranteed Delivery. ..................................
*99.3 Form of Tender Instructions. ............................................
*99.4 Form of Exchange Agent Agreement. .......................................
</TABLE>
- ---------------
*To be filed by amendment.
<PAGE> 1
EXHIBIT 3.1
RESTATED CERTIFICATE OF INCORPORATION
OF
TEKNI-PLEX, INC.
1. The name of the corporation is TEKNI-PLEX, INC. (the
"Corporation").
2. The address of the Corporation's registered office in the
State of Delaware is: Three Christina Center, 201 N. Walnut Street, City of
Wilmington, County of New Castle, Delaware 19801. The name of its registered
agent at such address is The Company Corporation.
3. The nature of the business or purposes to be conducted or
promoted by the Corporation are to engage in any lawful act or activity for
which corporations may be organized under the General Corporation Law of the
State of Delaware.
4. The total number of shares of capital stock which the
Corporation shall have authority to issue is Twenty Thousand (20,000) shares of
common stock, $.01 par value per share (the "Common Stock").
5. The following provisions relate to the management of the
business and the conduct of the affairs of the Corporation and are not inserted
for the purpose of creating, defining, limiting and regulating the powers of the
Corporation and its directors and stockholders:
(A) The election of officers may be conducted in any manner
the By-Laws provide, and need not be by written ballot.
(B) The Board of Directors shall have the power to make,
alter, amend or repeal the By-Laws of the Corporation, except to the
extent that the By-Laws otherwise provide.
6. The Corporation shall indemnify to the full extent
authorized by law any person made or threatened to be made a party to an action
or proceeding whether criminal, civil, administrative or investigative, by
reason of the fact that he, his testator or intestate is or was a director or
officer of the Corporation or serves or served any other enterprise as a
director or officer at the request of the Corporation or any predecessor of the
Corporation. No director of the Corporation shall be liable to the Corporation
or its stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability (i) for any breach of the director's duty of
loyalty to the Corporation or its stockholders; (ii) for acts or omissions not
in good faith or which involve intentional
<PAGE> 2
misconduct or a knowing violation of law; (iii) under Section 174 of the
Delaware General Corporation Law; or (iv) for any transaction from which the
director derived an improper personal benefit.
7. The Corporation reserves the right to amend or repeal any
provisions contained in this Certificate of Incorporation from time to time and
at any time in the manner now or hereafter prescribed by the law of the State of
Delaware, and all rights herein conferred upon stockholders, directors and
officers are subject to this reserved power.
-2-
<PAGE> 1
EXHIBIT 3.2
RESTATED CERTIFICATE OF INCORPORATION
OF
DOLCO PACKAGING CORP.
FIRST: The name of the corporation is
Dolco Packaging Corp.
SECOND: The registered office of the Corporation in the State
of Delaware is to be located at 1209 Orange Street, Wilmington, County of New
Castle. The name and address of its registered agent is The Corporation Trust
Company, Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware
19801.
THIRD: The purpose of the Corporation is to engage in any
lawful act or activity for which corporations may be organized under the
Delaware General Corporation Law.
FOURTH: The total number of shares of stock which the
Corporation shall have authority to issue is one-thousand (1,000) shares of
Common Stock, par value $1.00 per share.
FIFTH: This Corporation is to have perpetual existence.
SIXTH: The private property of the stockholders shall not be
subject to the payment of corporate debts to any extent whatever.
SEVENTH:
(a) No contract or transaction between the Corporation and one
or more of its directors or officers, or between the Corporation and any other
corporation, partnership, association, or other organization in which one or
more of its directors or officers are directors or officers, or have a financial
interest, shall be void or voidable solely for this reason, or solely because
the director or officer is present at or participates in the meeting of the
Board of Directors or committee which authorizes the contract or transaction, or
solely because his or their votes are counted for such purpose, if:
(1) The material facts as to his relationship or
interest and as to the contract or transaction are disclosed or are
known to the Board of Directors or the committee, and the Board of
Directors or committee in good faith authorizes the contract or
transaction by the affirmative votes of a majority of the disinterested
directors, even though the disinterested directors be less than a
quorum; or
<PAGE> 2
(2) The material facts as to his relationship or
interest and as to the contract or transaction are disclosed or are
known to the stockholders entitled to vote thereon, and the contract or
transaction is specifically approved in good faith by vote of the
stockholders; or
(3) The contract or transaction is fair as to the
Corporation as of the time it is authorized, approved or ratified, by
the Board of Directors, a committee, or the stockholders.
(b) Common or interested directors may be counted in
determining the presence of a quorum at a meeting of the Board of Directors or
of a committee which authorizes the contract or transaction.
EIGHTH: REPEALED
NINTH: REPEALED
TENTH: A director of the Corporation shall not be personally
liable to the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except that liability of a director shall not be
eliminated or limited (i) for any breach of the director's duty of loyalty to
the Corporation or its stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(iii) under Section 174 of Title 8 of the Delaware General Corporation Law or
(iv) for any transaction from which the director derived an improper personal
benefit. If the Delaware General Corporation Law is amended to authorize
corporate action further eliminating or limiting the personal liability of
directors, then the liability of a director of the Corporation shall be
eliminated or limited to the fullest extent permitted by the Delaware General
Corporation Law, as so amended. Any repeal or modification of this Article Tenth
by the stockholders of the Corporation shall not adversely affect any right or
protection of a director of the Corporation existing at the time of such repeal
or modification.
ELEVENTH: REPEALED
TWELFTH: REPEALED
THIRTEENTH: REPEALED
-2-
<PAGE> 1
Exhibit 3.3
BY-LAWS
OF
TEKNI-PLEX, INC.
ARTICLE I
Shareholders' Meetings; Voting
Section 1.1. Annual Meetings. An annual meeting of
shareholders shall be held for the election of directors on the first Monday in
May of each year, if not a legal holiday, and, if a legal holiday, then on the
next day not a legal holiday, at 10:00 o'clock in the forenoon at such time and
place either within or without the State of Delaware as may be designated by the
Board of Directors from time to time. Any other proper business may be
transacted at the annual meeting.
Section 1.2. Special Meetings. Special meetings of
shareholders may be called at any time by the Chairman of the Board, the
President, or the Board of Directors, to be held at such date, time and place
either within or without the State of Delaware as may be stated in the notice of
the meeting. A special meeting of shareholders shall be called by the Secretary
upon the written request, stating the purpose of the meeting, of shareholders
who together own of record at least ten percent (10%) of the outstanding shares
of stock entitled to vote at such meeting.
Section 1.3. Notice of Meetings. Whenever shareholders are
required or permitted to take any action at a meeting, a written notice of the
meeting shall be given which shall state the place, date and hour of the
meeting, and, in the case of a special meeting, the purpose or purposes for
which the meeting is called. Unless otherwise provided by law, the written
notice of any meeting shall be given not less than ten nor more than sixty days
before the date of the meeting to each shareholder entitled to vote at such
meeting. If mailed, such notice shall be deemed to be given when deposited in
the United States mail, postage prepaid, directed to the shareholder at his
address as it appears on the records of the Corporation. The Corporation shall,
at the written request of any shareholder, cause such notice to such shareholder
to be confirmed to such other address and/or by such other means as such
shareholder may reasonably request, provided that if such written request is
received after the date any such notice is mailed, such request shall be
effective for subsequent notices only.
<PAGE> 2
Section 1.4. Adjournments. Any meeting of shareholders, annual
or special, may adjourn from time to time to reconvene at the same or some other
place, and notice need not be given of any such adjourned meeting if the time
and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting the Corporation may transact any business which
might have been transacted at the original meeting. If the adjournment is for
more than thirty days, or if after the adjournment a new record date is fixed
for the adjourned meeting, a notice of the adjourned meeting shall be given to
each shareholder of record entitled to vote at the meeting.
Section 1.5. Quorum. At each meeting of shareholders, except
where otherwise provided by law or the certificate of incorporation or these
by-laws, the holders of a majority of the outstanding shares of each class of
stock entitled to vote at the meeting, present in person or represented by
proxy, shall constitute a quorum. With respect to any matter on which
shareholders vote separately as a class, the holders of a majority of the
outstanding shares of such class shall constitute a quorum for a meeting with
respect to such matter. Two or more classes or series of stock shall be
considered a single class for purposes of determining existence of a quorum for
any matter to be acted on if the holders thereof are entitled or required to
vote together as a single class at the meeting on such matter. In the absence of
a quorum the shareholders so present may, by majority vote, adjourn the meeting
from time to time in the manner provided by Section 1.4 of these by-laws until a
quorum shall attend.
Section 1.6. Organization. Meetings of shareholders shall be
presided over by the Chairman of the Board, or in his absence by the President,
or in his absence by a Vice President, or in the absence of the foregoing
persons by a chairman designated by the Board of Directors, or in the absence of
such designation by a chairman chosen at the meeting. The Secretary shall act as
secretary of the meeting, but in his absence the chairman of the meeting may
appoint any person to act as secretary of the meeting.
Section 1.7. Voting; Proxies. Unless otherwise provided in the
certificate of incorporation, each shareholder entitled to vote at any meeting
of shareholders shall be entitled to one vote for each share of stock held by
him which has voting power upon the matter in question. Each shareholder
entitled to vote at a meeting of shareholders or to express consent or dissent
to corporate action in writing without a meeting may authorize another person or
persons to act for him by proxy, but no such proxy shall be voted or acted upon
after three years from its date, unless the proxy provides for a longer period.
A duly executed proxy shall be irrevocable if it states that it is irrevocable
and if, and only as long as, it is coupled with an interest sufficient in law to
support an irrevocable power. A
-2-
<PAGE> 3
shareholder may revoke any proxy which is not irrevocable by attending the
meeting and voting in person or by filing an instrument in writing revoking the
proxy or another duly executed proxy bearing a later date with the Secretary of
the Corporation. Voting at meetings of shareholders need not be by written
ballot and need not be conducted by inspectors unless the holders of a majority
of the outstanding shares of any class of stock entitled to vote thereon present
in person or by proxy at such meeting shall so determine. At all meetings of
shareholders for the election of directors, such election and all other
elections and questions shall, unless otherwise provided by law or by the
certificate of incorporation or these by-laws, be decided by the vote of the
holders of a majority of the outstanding shares of all classes of stock entitled
to vote thereon present in person or by proxy at the meeting, voting as a single
class.
Section 1.8. Fixing Date for Determination of Shareholders of
Record. In order that the Corporation may determine the shareholders entitled to
notice of or to vote at any meeting of shareholders or any adjournment thereof,
or to express consent to corporate action in writing without a meeting, or
entitled to receive payment of any dividend or other distribution or allotment
of any rights, or entitled to exercise any rights in respect of any change,
conversion or exchange of stock or for the purpose of any other lawful action,
the Board of Directors may fix, in advance, a record date, which shall not be
more than sixty nor less than ten days before the date of such meeting, nor more
than sixty days prior to any other action. If no record date is fixed: (1) the
record date for determining shareholders entitled to notice of or to vote at a
meeting of shareholders shall be at the close of business on the day next
preceding the day on which notice is given, or, if notice is waived, at the
close of business on the day next preceding the day on which the meeting is
held; (2) the record date for determining shareholders entitled to express
consent to corporate action in writing without a meeting, when no prior action
by the Board is necessary, shall be the day on which the first written consent
is expressed; and (3) the record date for determining shareholders for any other
purpose shall be at the close of business on the day on which the Board adopts
the resolution relating thereto. A determination of shareholders of record
entitled to notice of or to vote at a meeting of shareholders shall apply to any
adjournment of the meeting; provided, however, that the Board may fix a new
record date for the adjourned meeting.
Section 1.9. List of Shareholders Entitled to Vote. The
Secretary shall prepare and make, at least ten days before every meeting of
shareholders, a complete list of the shareholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
shareholder and the number of shares registered in the name of each shareholder.
Such list shall be open to the examination of any shareholder, for any purpose
germane to the meeting, during
-3-
<PAGE> 4
ordinary business hours, for a period of at least ten days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof and may be inspected by any shareholder who is present.
Section 1.10. Consent of Shareholders in Lieu of Meeting. To
the extent provided by any statute at the time in force, whenever the vote of
shareholders at a meeting thereof is required or permitted to be taken for or in
connection with any corporate action, by any statute, by the certificate of
incorporation or by these bylaws, the meeting and prior notice thereof and vote
of shareholders may be dispensed with if the holders of outstanding stock having
not less than the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled to vote thereon
were present and voted shall consent in writing to such corporate action without
a meeting by less than unanimous written consent and notice thereof shall be
given to those shareholders who have not consent in writing.
ARTICLE II
Board of Directors
Section 2.1. Powers; Number; Qualifications. The business and
affairs of the Corporation shall be managed by or under the direction of the
Board of Directors, except as may be otherwise provided by law or in the
certificate of incorporation. The number of Directors which shall constitute the
whole Board of Directors shall not be less than one (1) nor more than nine (9).
Within such limits, the number of directors may be fixed from time to time by
vote of the shareholders, or of the Board of Directors, at any regular or
special meeting, subject to the provisions of the certificate of incorporation.
Section 2.2. Election; Term of Office; Resignation; Removal;
Vacancies; Special Elections. Except as otherwise provided in this Section 2.2,
the directors shall be elected annually at the annual meeting of the
shareholders. Each director (whenever elected) shall hold office until the
annual meeting of shareholders or any special meeting of shareholders called to
elect directors next succeeding his election and until his successor is elected
and qualified or until his earlier resignation or removal, except as provided in
the certificate of incorporation. Any director may resign at any time upon
written notice to the Board of Directors or to the Chairman of the Board or to
the President of the Corporation. Such resignation shall take effect at the time
specified therein, and unless otherwise specified therein no acceptance of such
resignation shall be
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necessary to make it effective. Any director may be removed with or without
cause at any time upon the affirmative vote of the holders of a majority of the
outstanding shares of stock of the Corporation entitled to vote for the election
of such director, given at a special meeting of such shareholders called for the
purpose. If any vacancies shall occur in the Board of Directors, by reason of
death, resignation, removal or otherwise, or if the authorized number of
directors shall be increased, the directors then in office shall continue to
act, and such vacancies may be filled by a majority of the directors then in
office, though less than a quorum; provided, however, that whenever the holders
of any class or classes of stock or series thereof are entitled to elect one or
more directors by the provisions of the certificate of incorporation, vacancies
and newly created directorships of such class or classes or series shall be
filled by a majority of the directors elected by such class or classes or series
thereof then in office though less than a quorum or by a sole remaining director
so elected. Any such vacancies or newly created directorships may also be filled
upon the affirmative vote of the holders of a majority of the outstanding shares
of stock of the Corporation entitled to vote for the election of directors,
given at a special meeting of the shareholders called for the purpose.
Section 2.3. Regular Meetings. Regular meetings of the Board
of Directors may be held at such places within or without the State of Delaware
and at such times as the Board may from time to time determine, and if so
determined notice thereof need not be given.
Section 2.4. Special Meetings. Special meetings of the Board
of Directors may be held at any time or place within or without the State of
Delaware whenever called by the Chairman of the Board, by the President or by
any two directors. Reasonable notice thereof shall be given by the person or
persons calling the meeting.
Section 2.5. Telephonic Meetings Permitted. Unless otherwise
restricted by the certificate of incorporation or these by-laws, any member of
the Board of Directors, or any committee designated by the Board, may
participate in a meeting of the Board or of such committee, as the case may be,
by means of a conference telephone or similar communications equipment by means
of which all persons participating in the meeting can hear each other, and
participation in a meeting pursuant to this by-law shall constitute presence in
person at such meeting.
Section 2.6. Quorum; Vote Required for Action. At all meetings
of the Board of Directors the presence of a majority of the total number of
directors shall constitute a quorum for the transaction of business. The vote of
at least a majority of the directors present at any meeting at which a quorum is
present shall be necessary to constitute and shall be the act of the Board
unless the certificate of incorporation or these by-laws shall otherwise
provide. In case at any meeting of the Board a
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quorum shall not be present, the members of the Board present may adjourn the
meeting from time to time until a quorum shall attend.
Section 2.7. Organization. Meetings of the Board of Directors
shall be presided over by the Chairman of the Board, or in his absence by the
President, or in their absence by a chairman chosen at the meeting. The
Secretary shall act as secretary of the meeting, but in his absence the chairman
of the meeting may appoint any person to act as secretary of the meeting.
Section 2.8. Action by Directors Without a Meeting. Unless
otherwise restricted by the certificate of incorporation or these by-laws, any
action required or permitted to be taken at any meeting of the Board of
Directors, or of any committee thereof, may be taken without a meeting if all
members of the Board or such committee, as the case may be, consents thereto in
writing, and the writing or writings are filed with the minutes of proceedings
of the Board or committee.
ARTICLE III
Committees
Section 3.1. Committees. The Board of Directors may, by
resolution passed by a majority of the total number of directors, designate one
or more committees, each committee to consist of one or more of the directors of
the Corporation. Any such committee, to the extent provided in the resolution of
the Board, and unless otherwise restricted by the certificate of incorporation
or these by-laws, shall have and may exercise all the powers and authority of
the Board in the management of the business and affairs of the Corporation, to
the full extent permitted by law.
Section 3.2. Committee Rules. Unless the Board of Directors
otherwise provides, each committee designated by the Board may adopt, amend and
repeal rules for the conduct of its business. In the absence of a provision by
the Board or a provision in the rules of such committee to the contrary, the
entire authorized number of members of such committee shall constitute a quorum
for the transaction of business, the vote of all such members present at a
meeting shall be the act of such committee, and in other respects each committee
shall conduct its business pursuant to Article II of these by-laws.
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ARTICLE IV
Officers
Section 4.1. Officers; Election. As soon as practicable after
the annual meeting of shareholders in each year, the Board shall elect a
President and a Secretary. The Board may also elect a Chairman of the Board, one
or more Vice Presidents, one or more Assistant Vice Presidents, one or more
Assistant Secretaries, a Treasurer and one or more Assistant Treasurers and may
give any of them such further designations or alternate titles as it considers
desirable. Any number of offices may be held by the same person.
Section 4.2. Term of Office; Resignation; Removal; Vacancies.
Except as otherwise provided in the resolution of the Board of Directors
electing any officer, each officer shall hold office until the first meeting of
the Board after the annual meeting of shareholders next succeeding his election,
and until his successor is elected and qualified or until his earlier
resignation or removal. Any officer may resign at any time upon written notice
to the Board or to the President of the Corporation. Such resignation shall take
effect at the time specified therein, and unless otherwise specified therein no
acceptance of such resignation shall be necessary to make it effective. The
Board may remove any officer with or without cause at any time, provided that
such action by the Board shall require the vote of a majority of the whole
Board. Any such removal shall be without prejudice to the contractual rights of
such officer, if any, with the Corporation, but the election of an officer shall
not of itself create contractual rights. Any vacancy occurring in any office of
the Corporation by death, resignation, removal or otherwise shall or may be
filled for the unexpired portion of the term by the Board at any regular or
special meeting in the manner provided in Section 4.1 for election of officers
following the annual meeting of shareholders.
Section 4.3. Chairman of the Board. The Chairman of the Board
or, if there is not a Chairman of the Board, the President, shall be the chief
executive officer and shall have general charge and supervision of the business
of the Corporation. In addition, he shall preside at all meetings of the Board
of Directors and of the shareholders at which he shall be present. He shall have
and may exercise such powers and perform such other duties as are, from time to
time, assigned to him by the Board and as may be provided by law.
Section 4.4. President. The President shall be the chief
operating officer and shall perform all duties incident to such office, and such
other duties as, from time to time, may be assigned to him by the Board or as
may be provided by law.
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Section 4.5. Vice Presidents. The Vice President or Vice
Presidents, at the request of the President or in his absence or during his
inability to act, shall perform the duties of the President, and when so acting
shall have the powers of the President. If there be more than one Vice
President, the Board of Directors may determine which one or more of the Vice
Presidents shall perform any of such duties; or if such determination is not
made by the Board, the President may make such determination; otherwise any of
the Vice Presidents may perform any of such duties. The Vice President or Vice
Presidents shall have such other powers and perform such other duties as may be
assigned to him or them by the Board or the President or as may be provided by
law.
Section 4.6. Secretary or Assistant Secretary. The Secretary
or Assistant Secretary shall have the duty to record the proceedings of the
meetings of the shareholders, the Board of Directors and any committees in a
book to be kept for that purpose; he shall see that all notices are duly given
in accordance with the provisions of these by-laws or as required by law; he
shall be custodian of the records of the Corporation; he may affix the corporate
seal to any document the execution of which, on behalf of the Corporation, is
duly authorized, and when so affixed may attest the same; and, in general, he
shall perform all duties incident to the office of secretary of a corporation,
and such other duties as, from time to time, may be assigned to him by the Board
or the President or as may be provided by law.
Section 4.7. Treasurer. The Treasurer shall have charge of and
be responsible for all funds, securities, receipts and disbursements of the
Corporation, and shall deposit or cause to be deposited, in the name of the
Corporation, all moneys or other valuable effects in such banks, trust companies
or other depositories as shall, from time to time, be selected by or under
authority of the Board of Directors; if required by the Board, he shall give a
bond for the faithful discharge of his duties, with such surety or sureties as
the Board may determine; he shall keep or cause to be kept full and accurate
records of all receipts and disbursements in books of the Corporation and shall
render to the President and to the Board, whenever requested, an account of the
financial condition of the Corporation; and, in general, he shall perform all
the duties incident to the office of treasurer of a corporation, and such other
duties as may be assigned to him by the Board or the President or as may be
provided by law.
Section 4.8. Other Officers. The other officers, if any, of
the Corporation shall have such powers and duties in the management of the
Corporation as shall be stated in a resolution adopted by the Board of Directors
which is not inconsistent with these by-laws and, to the extent not so stated,
as generally pertain to their respective offices, subject to the control of the
Board. The Board may require any officer, agent or employee to give security for
the faithful performance of his duties.
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ARTICLE V
Stock
Section 5.1. Certificates. Every holder of stock in the
Corporation shall be entitled to have a certificate signed by or in the name of
the Corporation by the Chairman of the Board of Directors, or the President or a
Vice President, and by the Treasurer or an Assistant Treasurer, or the Secretary
or an Assistant Secretary, of the Corporation, certifying the number of shares
owned by him in the Corporation. If such certificate is manually signed by one
officer or manually countersigned by a transfer agent or by a registrar, any
other signature on the certificate may be a facsimile. In case any officer,
transfer agent or registrar who has signed or whose facsimile signature has been
placed upon a certificate shall have ceased to be such officer, transfer agent
or registrar before such certificate is issued, it may be issued by the
Corporation with the same effect as if he were such officer, transfer agent or
registrar at the date of issue.
Section 5.2. Lost, Stolen or Destroyed Stock Certificates;
Issuance of New Certificates. The Corporation may issue a new certificate of
stock in the place of any certificate theretofore issued by it, alleged to have
been lost, stolen or destroyed, and the Corporation may require the owner of the
lost, stolen or destroyed certificate, or his legal representative, to give the
Corporation a bond sufficient to indemnify it against any claim that may be made
against it on account of the alleged loss, theft or destruction of any such
certificate or the issuance of such new certificate.
ARTICLE VI
Miscellaneous
Section 6.1. Seal. The Corporation may have a corporate seal
which shall have the name of the Corporation inscribed thereon and shall be in
such form as may be approved from time to time by the Board of Directors. The
corporate seal may be used by causing it or a facsimile thereof to be impressed
or affixed or in any other manner reproduced.
Section 6.2. Waiver of Notice of Meetings of Shareholders,
Directors and Committees. Whenever notice is required to be given by law or
under any provision of the certificate of incorporation or these by-laws, a
written waiver thereof, signed by the person entitled to notice, whether before
or after the time stated therein, shall be deemed equivalent to notice.
Attendance of a person at a meeting shall constitute a waiver of notice of such
meeting, except when the person attends a meeting for the express purpose of
objecting, at the beginning of the meeting, to the transaction of any business
because the
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meeting is not lawfully called or convened. Neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the
shareholders, directors, or members of a committee of directors need be
specified in any written waiver of notice unless so required by the certificate
of incorporation or these by-laws.
Section 6.3. Form of Records. Any records maintained by the
Corporation in the regular course of its business, including its stock ledger,
books of account and minute books, may be kept on, or be in the form of, punch
cards, magnetic tape, photographs, microphotographs or any other information
storage device, provided that the records so kept can be converted into clearly
legible form within a reasonable time. The Corporation shall so convert any
records so kept upon the request of any person entitled to inspect the same.
Section 6.4. Dividends. Dividends upon the stock of the
Corporation, subject to the provisions of the Certificate of Incorporation, if
any, may be declared by the Board of Directors at any regular or special
meeting, pursuant to law. Dividends may be paid in cash, bonds, in property, or
in shares of stock, subject to the provisions of the Certificate of
Incorporation.
Section 6.5. Reserves. Before the payment of any dividend,
there may be set aside out of any funds of the Corporation available for
dividends such sum or sums as the directors from time to time, in their absolute
discretion, think proper as a reserve or reserves to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
Corporation, or for such other purposes as the directors shall think conducive
to the interest of the Corporation, and the directors may modify or abolish any
such reserve.
Section 6.6. Checks. All checks or demands for money and notes
of the Corporation shall be signed by such officer or officers or such other
person or persons as the Board of Directors may from time to time designate.
Section 6.7. Fiscal Year. The fiscal year of the Corporation
shall be fixed by resolution of the Board of Directors.
Section 6.8. Offices. The registered office of the Corporation
shall be in the City of Wilmington, County of New Castle, State of Delaware. The
Corporation may also have offices at such other places within or outside the
State of Delaware as the Board of Directors may from time to time determine or
the business of the Corporation may require.
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ARTICLE VII
Amendments
Section 7.1. Amendments. These by-laws may be altered, amended
or repealed at any regular meeting of the shareholders or of the Board of
Directors or at any special meeting of the shareholders or of the Board of
Directors if notice of such alteration, amendment or repeal be contained in the
notice of such special meeting.
ARTICLE VIII
Indemnification
Section 8.1. Indemnification. The Corporation shall indemnify
to the fullest extent permitted by law any person made or threatened to be made
a party to any action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that such person, or a
person of whom he or she is the legal representative, is or was a director,
officer, employee or agent of the Corporation or any predecessor of the
Corporation, or serves or served any other enterprise as a director, officer,
employee or agent at the request of the Corporation or any predecessor of the
Corporation.
The Corporation shall pay any expenses reasonably incurred by
a director or officer in defending a civil or criminal action, suit or
proceeding in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such director or
officer to repay such amount if it shall ultimately be determined that he or she
is not entitled to be indemnified by the Corporation under this Article or
otherwise. The Corporation may, by action of its Board of Directors, provide for
the payment of such expenses incurred by employees and agents of the Corporation
as it deems appropriate.
The rights conferred on any person under this Article shall
not be deemed exclusive of any other rights that such person may have or
hereafter acquire under any statute, provision of the Corporation's Certificate
of Incorporation, by-law, agreement, vote of shareholders or disinterested
directors or otherwise. All rights to indemnification and to the advancement of
expenses under this Article shall be deemed to be provided by a contract between
the Corporation and the director, officer, employee or agent who serves in such
capacity at any time while these By-Laws and any other relevant provisions of
the Delaware General Corporation Law and any other applicable law, if any, are
in effect. Any repeal or modification thereof shall not affect any rights or
obligations then existing.
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For purposes of this Article, references to "the Corporation"
shall be deemed to include any subsidiary of the Corporation now or hereafter
organized under the laws of the State of Delaware.
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Exhibit 3.4
BY-LAWS
OF
DOLCO PACKAGING CORP.
ARTICLE I
Shareholders' Meetings; Voting
Section 1.1. Annual Meetings. An annual meeting of
shareholders shall be held for the election of directors on the first Monday in
November of each year, if not a legal holiday, and, if a legal holiday, then on
the next day not a legal holiday, at 10:00 A.M. or at such other time and place
either within or without the State of Delaware as may be designated by the Board
of Directors from time to time. Any other proper business may be transacted at
the annual meeting.
Section 1.2. Special Meetings. Special meetings of
shareholders may be called at any time by the Chairman of the Board, the Chief
Executive Officer, the President, or the Board of Directors, to be held at such
date, time and place either within or without the State of Delaware as may be
stated in the notice of the meeting. A special meeting of shareholders shall be
called by the Secretary upon the written request, stating the purpose of the
meeting, of shareholders who together own of record at least ten percent (10%)
of the outstanding shares of stock entitled to vote at such meeting.
Section 1.3. Notice of Meetings. Whenever shareholders are
required or permitted to take any action at a meeting, a written notice of the
meeting shall be given which shall state the place, date and hour of the
meeting, and, in the case of a special meeting, the purpose or purposes for
which the meeting is called. Unless otherwise provided by law, the written
notice of any meeting shall be given not less than ten nor more than sixty days
before the date of the meeting to each shareholder entitled to vote at such
meeting. If mailed, such notice shall be deemed to be given when deposited in
the United States mail, postage prepaid, directed to the shareholder at his
address as it appears on the records of the Corporation. The Corporation shall,
at the written request of any shareholder, cause such notice to such shareholder
to be confirmed to such other address and/or by such other means as such
shareholder may reasonably request, provided that if such written request is
received after the date any such notice is mailed, such request shall be
effective for subsequent notices only.
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Section 1.4. Adjournments. Any meeting of shareholders, annual
or special, may adjourn from time to time to reconvene at the same or some other
place, and notice need not be given of any such adjourned meeting if the time
and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting the Corporation may transact any business which
might have been transacted at the original meeting. If the adjournment is for
more than thirty days, or if after the adjournment a new record date is fixed
for the adjourned meeting, a notice of the adjourned meeting shall be given to
each shareholder of record entitled to vote at the meeting.
Section 1.5. Quorum. At each meeting of shareholders, except
where otherwise provided by law or the certificate of incorporation or these
by-laws, the holders of a majority of the outstanding shares of each class of
stock entitled to vote at the meeting shall constitute a quorum. With respect to
any matter on which shareholders vote separately as a class, the holders of a
majority of the outstanding shares of such class shall constitute a quorum for a
meeting with respect to such matter. Two or more classes or series of stock
shall be considered a single class for purposes of determining existence of a
quorum for any matter to be acted on if the holders thereof are entitled or
required to vote together as a single class at the meeting on such matter. In
the absence of a quorum the shareholders so present may, by majority vote,
adjourn the meeting from time to time in the manner provided by Section 1.4 of
these by-laws until a quorum shall attend.
Section 1.6. Organization. Meetings of shareholders shall be
presided over by the Chairman of the Board, or in his absence by the Chief
Executive Officer, or in his absence by the President, or in his absence by a
Vice President, or in the absence of the foregoing persons by a chairman
designated by the Board of Directors, or in the absence of such designation by a
chairman chosen at the meeting. The Secretary shall act as secretary of the
meeting, but in his absence the chairman of the meeting may appoint any person
to act as secretary of the meeting.
Section 1.7. Voting; Proxies. Unless otherwise provided in the
certificate of incorporation, each shareholder entitled to vote at any meeting
of shareholders shall be entitled to one vote for each share of stock held by
him which has voting power upon the matter in question. Each shareholder
entitled to vote at a meeting of shareholders or to express consent or dissent
to corporate action in writing without a meeting may authorize another person or
persons to act for him by proxy, but no such proxy shall be voted or acted upon
after three years from its date, unless the proxy provides for a longer period.
A duly executed proxy shall be irrevocable if it states that it is irrevocable
and if, and only as long as, it is coupled with an interest sufficient in law to
support an irrevocable power. A
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shareholder may revoke any proxy which is not irrevocable by attending the
meeting and voting in person or by filing an instrument in writing revoking the
proxy or another duly executed proxy bearing a later date with the Secretary of
the Corporation. Voting at meetings of shareholders need not be by written
ballot and need not be conducted by inspectors unless the holders of a majority
of the outstanding shares of any class of stock entitled to vote thereon present
in person or by proxy at such meeting shall so determine. At all meetings of
shareholders for the election of directors, such election and all other
elections and questions shall, unless otherwise provided by law or by the
certificate of incorporation or these by-laws, be decided by the vote of the
holders of a majority of the outstanding shares of all classes of stock entitled
to vote thereon present in person or by proxy at the meeting, voting as a single
class.
Section 1.8. Fixing Date for Determination of Shareholders of
Record. In order that the Corporation may determine the shareholders entitled to
notice of or to vote at any meeting of shareholders or any adjournment thereof,
or to express consent to corporate action in writing without a meeting, or
entitled to receive payment of any dividend or other distribution or allotment
of any rights, or entitled to exercise any rights in respect of any change,
conversion or exchange of stock or for the purpose of any other lawful action,
the Board of Directors may fix, in advance, a record date, which shall not be
more than sixty nor less than ten days before the date of such meeting, nor more
than sixty days prior to any other action. If no record date is fixed: (1) the
record date for determining shareholders entitled to notice of or to vote at a
meeting of shareholders shall be at the close of business on the day next
preceding the day on which notice is given, or, if notice is waived, at the
close of business on the day next preceding the day on which the meeting is
held; (2) the record date for determining shareholders entitled to express
consent to corporate action in writing without a meeting, when no prior action
by the Board is necessary, shall be the day on which the first written consent
is expressed; and (3) the record date for determining shareholders for any other
purpose shall be at the close of business on the day on which the Board adopts
the resolution relating thereto. A determination of shareholders of record
entitled to notice of or to vote at a meeting of shareholders shall apply to any
adjournment of the meeting; provided, however, that the Board may fix a new
record date for the adjourned meeting.
Section 1.9. List of Shareholders Entitled to Vote. The
Secretary shall prepare and make, at least ten days before every meeting of
shareholders, a complete list of the shareholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
shareholder and the number of shares registered in the name of each shareholder.
Such list shall be open to the examination of any shareholder, for any purpose
germane to the meeting, during
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ordinary business hours, for a period of at least ten days prior to the meeting,
either at a place within the city where the meeting is to be held, which place
shall be specified in the notice of the meeting, or, if not so specified, at the
place where the meeting is to be held. The list shall also be produced and kept
at the time and place of the meeting during the whole time thereof and may be
inspected by any shareholder who is present.
Section 1.10. Consent of Shareholders in Lieu of Meeting. To
the extent provided by any statute at the time in force, whenever the vote of
shareholders at a meeting thereof is required or permitted to be taken for or in
connection with any corporate action, by any statute, by the certificate of
incorporation or by these bylaws, the meeting and prior notice thereof and vote
of shareholders may be dispensed with if the holders of outstanding stock having
not less than the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled to vote thereon
were present and voted shall consent in writing to such corporate action without
a meeting by less than unanimous written consent and notice thereof shall be
given to those shareholders who have not consent in writing.
ARTICLE II
Board of Directors
Section 2.1. Powers; Number; Qualifications. The business and
affairs of the Corporation shall be managed by or under the direction of the
Board of Directors, except as may be otherwise provided by law or in the
certificate of incorporation. The number of Directors which shall constitute the
whole Board of Directors shall not be less than one (1) nor more than nine (9).
Within such limits, the number of directors may be fixed from time to time by
vote of the shareholders, or of the Board of Directors, at any regular or
special meeting, subject to the provisions of the certificate of incorporation.
Section 2.2. Election; Term of Office; Resignation; Removal;
Vacancies; Special Elections. Except as otherwise provided in this Section 2.2,
the directors shall be elected annually at the annual meeting of the
shareholders. Each director (whenever elected) shall hold office until the
annual meeting of shareholders or any special meeting of shareholders called to
elect directors next succeeding his election and until his successor is elected
and qualified or until his earlier resignation or removal, except as provided in
the certificate of incorporation. Any director may resign at any time upon
written notice to the Board of Directors, Chairman of the Board, Chief Executive
Officer or President of the Corporation. Such resignation shall take effect at
the time specified therein, and unless otherwise specified therein no acceptance
of such
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resignation shall be necessary to make it effective. Any director may be removed
with or without cause at any time upon the affirmative vote of the holders of a
majority of the outstanding shares of stock of the Corporation entitled to vote
for the election of such director, given at a special meeting of such
shareholders called for the purpose. If any vacancies shall occur in the Board
of Directors, by reason of death, resignation, removal or otherwise, or if the
authorized number of directors shall be increased, the directors then in office
shall continue to act, and such vacancies may be filled by a majority of the
directors then in office, though less than a quorum; provided, however, that
whenever the holders of any class or classes of stock or series thereof are
entitled to elect one or more directors by the provisions of the certificate of
incorporation, vacancies and newly created directorships of such class or
classes or series shall be filled by a majority of the directors elected by such
class or classes or series thereof then in office though less than a quorum or
by a sole remaining director so elected. Any such vacancies or newly created
directorships may also be filled upon the affirmative vote of the holders of a
majority of the outstanding shares of stock of the Corporation entitled to vote
for the election of directors, given at a special meeting of the shareholders
called for the purpose.
Section 2.3. Regular Meetings. Regular meetings of the Board
of Directors may be held at such places within or without the State of Delaware
and at such times as the Board may from time to time determine, and if so
determined notice thereof need not be given.
Section 2.4. Special Meetings. Special meetings of the Board
of Directors may be held at any time or place within or without the State of
Delaware whenever called by the Chairman of the Board, Chief Executive Officer,
President or any two directors. Reasonable notice thereof shall be given by the
person or persons calling the meeting.
Section 2.5. Telephonic Meetings Permitted. Unless otherwise
restricted by the certificate of incorporation or these by-laws, any member of
the Board of Directors, or any committee designated by the Board, may
participate in a meeting of the Board or of such committee, as the case may be,
by means of a conference telephone or similar communications equipment by means
of which all persons participating in the meeting can hear each other, and
participation in a meeting pursuant to this by-law shall constitute presence in
person at such meeting.
Section 2.6. Quorum; Vote Required for Action. At all meetings
of the Board of Directors the presence of a majority of the total number of
directors shall constitute a quorum for the transaction of business. The vote of
at least a majority of the directors present at any meeting at which a quorum is
present shall be necessary to constitute and shall be the act of the Board
unless the certificate of incorporation or these by-laws
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<PAGE> 6
shall otherwise provide. In case at any meeting of the Board a quorum shall not
be present, the members of the Board present may adjourn the meeting from time
to time until a quorum shall attend.
Section 2.7. Organization. Meetings of the Board of Directors
shall be presided over by the Chairman of the Board, or in his absence by the
Chief Executive Officer or President, or in their absence by a chairman chosen
at the meeting. The Secretary shall act as secretary of the meeting, but in his
absence the chairman of the meeting may appoint any person to act as secretary
of the meeting.
Section 2.8. Action by Directors Without a Meeting. Unless
otherwise restricted by the certificate of incorporation or these by-laws, any
action required or permitted to be taken at any meeting of the Board of
Directors, or of any committee thereof, may be taken without a meeting if all
members of the Board or such committee, as the case may be, consents thereto in
writing, and the writing or writings are filed with the minutes of proceedings
of the Board or committee.
ARTICLE III
Committees
Section 3.1. Committees. The Board of Directors may, by
resolution passed by a majority of the total number of directors, designate one
or more committees, each committee to consist of one or more of the directors of
the Corporation. Any such committee, to the extent provided in the resolution of
the Board, and unless otherwise restricted by the certificate of incorporation
or these by-laws, shall have and may exercise all the powers and authority of
the Board in the management of the business and affairs of the Corporation, to
the full extent permitted by law.
Section 3.2. Committee Rules. Unless the Board of Directors
otherwise provides, each committee designated by the Board may adopt, amend and
repeal rules for the conduct of its business. In the absence of a provision by
the Board or a provision in the rules of such committee to the contrary, the
entire authorized number of members of such committee shall constitute a quorum
for the transaction of business, the vote of all such members present at a
meeting shall be the act of such committee, and in other respects each committee
shall conduct its business pursuant to Article II of these by-laws.
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<PAGE> 7
ARTICLE IV
Officers
Section 4.1. Election and Appointment. The elected officers of the
Corporation shall consist of a Chief Executive Officer, a President, a Secretary
and such other elected officers as shall from time to time be designated and
elected by the Board of Directors. The Board of Directors may, if it so
determines, choose a Chairman of the Board and a Vice Chairman of the Board from
among its members to preside at meetings of the Board of Directors and the
Executive Committee, if any, and with such other authority as the Board of
Directors may determine. The Board or the Chief Executive Officer may also
appoint, or provide for the appointment of, Vice Presidents and such other
officers, employees and agents as may from time to time appear necessary or
advisable in the conduct of the affairs of the Corporation. Any number of
offices may be held by the same person.
Section 4.2. Duties of Chief Executive Officer. The Chief Executive
Officer of the Corporation shall preside at all meetings of stockholders and,
subject to the control of the Board, shall have such authority as is customary
for the chief executive officer of an enterprise similar to the Corporation,
general authority to execute any and all documents in the name of the
Corporation and responsibility for the operation and management of the business
and affairs of the Corporation, including, without limitation, the right to hire
and terminate employees of the Corporation. In the absence of the Chief
Executive Officer, his duties shall be performed and his powers may be exercised
by the President or by such other officer as shall be designated either by the
Chief Executive Officer in writing or (failing such designation) by the Board of
Directors.
Section 4.3. Duties of President. The President of the Corporation
shall, subject to control of the Board and the control and direction of the
Chief Executive Officer, be the chief operating officer of the Corporation.
Section 4.4. Duties of Other Officers. The other officers of the
Corporation shall have such powers and duties not inconsistent with these
by-laws as may from time to time be conferred upon them in or pursuant to
resolutions of the Board of Directors, and shall have such additional powers and
duties not inconsistent with such resolutions as may from time to time be
assigned to them by any competent superior officer. The Board shall assign, to
one or more of the officers of the Corporation, the duty to record the
proceedings of the meetings of the stockholders and the Board of Directors in a
book to be kept for that purpose.
Section 4.5. Term of Office and Vacancies. So far as practicable, the
elected officers shall be elected by the Board as provided in Section 4.1 and,
subject to Section 4.6 and such
-7-
<PAGE> 8
officer's rights under any contract of employment, shall serve at the pleasure
of the Board. If a vacancy shall occur in any elected office, the Board of
Directors may elect a successor. Appointed officers shall hold office at the
pleasure of the Board and the Chief Executive Officer. Any officer may resign by
written notice to the Corporation.
Section 4.6. Removal of Elected Officers. Elected officers may be
removed at any time, either for or without cause, by the affirmative vote of a
majority of the whole Board of Directors, except provided that removal of the
Chief Executive Officer shall require the unanimous vote of the Board of
Directors except that the Chief Executive Officer, if a member of the Board of
Directors, is not entitled to vote on the issue.
ARTICLE V
Stock
Section 5.1. Certificates. Every holder of stock in the
Corporation shall be entitled to have a certificate signed by or in the name of
the Corporation by the Chairman of the Board of Directors, Chief Executive
Officer, President or a Vice President, and by the Treasurer or an Assistant
Treasurer, or the Secretary or an Assistant Secretary, of the Corporation,
certifying the number of shares owned by him in the Corporation. If such
certificate is manually signed by one officer or manually countersigned by a
transfer agent or by a registrar, any other signature on the certificate may be
a facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent or registrar before such certificate is
issued, it may be issued by the Corporation with the same effect as if he were
such officer, transfer agent or registrar at the date of issue.
Section 5.2. Lost, Stolen or Destroyed Stock Certificates;
Issuance of New Certificates. The Corporation may issue a new certificate of
stock in the place of any certificate theretofore issued by it, alleged to have
been lost, stolen or destroyed, and the Corporation may require the owner of the
lost, stolen or destroyed certificate, or his legal representative, to give the
Corporation a bond sufficient to indemnify it against any claim that may be made
against it on account of the alleged loss, theft or destruction of any such
certificate or the issuance of such new certificate.
ARTICLE VI
Miscellaneous
-8-
<PAGE> 9
Section 6.1. Seal. The Corporation may have a corporate seal
which shall have the name of the Corporation inscribed thereon and shall be in
such form as may be approved from time to time by the Board of Directors. The
corporate seal may be used by causing it or a facsimile thereof to be impressed
or affixed or in any other manner reproduced.
Section 6.2. Waiver of Notice of Meetings of Shareholders,
Directors and Committees. Whenever notice is required to be given by law or
under any provision of the certificate of incorporation or these by-laws, a
written waiver thereof, signed by the person entitled to notice, whether before
or after the time stated therein, shall be deemed equivalent to notice.
Attendance of a person at a meeting shall constitute a waiver of notice of such
meeting, except when the person attends a meeting for the express purpose of
objecting, at the beginning of the meeting, to the transaction of any business
because the meeting is not lawfully called or convened. Neither the business to
be transacted at, nor the purpose of, any regular or special meeting of the
shareholders, directors, or members of a committee of directors need be
specified in any written waiver of notice unless so required by the certificate
of incorporation or these by-laws.
Section 6.3. Form of Records. Any records maintained by the
Corporation in the regular course of its business, including its stock ledger,
books of account and minute books, may be kept on, or be in the form of, punch
cards, magnetic tape, photographs, microphotographs or any other information
storage device, provided that the records so kept can be converted into clearly
legible form within a reasonable time. The Corporation shall so convert any
records so kept upon the request of any person entitled to inspect the same.
Section 6.4. Dividends. Dividends upon the stock of the
Corporation, subject to the provisions of the Certificate of Incorporation, if
any, may be declared by the Board of Directors at any regular or special
meeting, pursuant to law. Dividends may be paid in cash, bonds, in property, or
in shares of stock, subject to the provisions of the Certificate of
Incorporation.
Section 6.5. Reserves. Before the payment of any dividend,
there may be set aside out of any funds of the Corporation available for
dividends such sum or sums as the directors from time to time, in their absolute
discretion, think proper as a reserve or reserves to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
Corporation, or for such other purposes as the directors shall think conducive
to the interest of the Corporation, and the directors may modify or abolish any
such reserve.
Section 6.6. Checks. All checks or demands for money and notes
of the Corporation shall be signed by such officer or
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<PAGE> 10
officers or such other person or persons as the Board of Directors may from time
to time designate.
Section 6.7. Fiscal Year. The fiscal year of the
Corporation shall be fixed by resolution of the Board of Directors.
Section 6.8. Offices. The registered office of the Corporation
shall be in the City of Wilmington, County of New Castle, State of Delaware. The
Corporation may also have offices at such other places within or outside the
State of Delaware as the Board of Directors may from time to time determine or
the business of the Corporation may require.
ARTICLE VII
Amendments
Section 7.1. Amendments. These by-laws may be altered, amended
or repealed by a majority vote at any regular meeting of the shareholders or at
any special meeting of the shareholders if notice of such alteration, amendment
or repeal be contained in the notice of such special meeting.
ARTICLE VIII
Indemnification
Section 8.1. Indemnification. The Corporation shall indemnify
to the fullest extent permitted by law any person made or threatened to be made
a party to any action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that such person, or a
person of whom he or she is the legal representative, is or was a director,
officer, employee or agent of the Corporation or any predecessor of the
Corporation, or serves or served any other enterprise as a director, officer,
employee or agent at the request of the Corporation or any predecessor of the
Corporation.
The Corporation shall pay any expenses reasonably incurred by
a director or officer in defending a civil or criminal action, suit or
proceeding in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such director or
officer to repay such amount if it shall ultimately be determined that he or she
is not entitled to be indemnified by the Corporation under this Article or
otherwise. The Corporation may, by action of its Board of Directors, provide for
the payment of such expenses incurred by employees and agents of the Corporation
as it deems appropriate.
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<PAGE> 11
The rights conferred on any person under this Article shall
not be deemed exclusive of any other rights that such person may have or
hereafter acquire under any statute, provision of the Corporation's Certificate
of Incorporation, by-law, agreement, vote of shareholders or disinterested
directors or otherwise. All rights to indemnification and to the advancement of
expenses under this Article shall be deemed to be provided by a contract between
the Corporation and the director, officer, employee or agent who serves in such
capacity at any time while these By-Laws and any other relevant provisions of
the Delaware General Corporation Law and any other applicable law, if any, are
in effect. Any repeal or modification thereof shall not affect any rights or
obligations then existing.
For purposes of this Article, references to "the Corporation"
shall be deemed to include any subsidiary of the Corporation now or hereafter
organized under the laws of the State of Delaware.
-11-
<PAGE> 1
EXHIBIT 4.1
================================================================================
INDENTURE
Dated as of April 1, 1997
Among
TEKNI-PLEX, INC.,
DOLCO PACKAGING CORP.
and
MARINE MIDLAND BANK, Trustee
---------------
$150,000,000
11 1/4% Senior Subordinated Notes due 2007
================================================================================
<PAGE> 2
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
Indenture
Trust Indenture Act Section Section
- --------------------------- -------
<S> <C> <C>
Section 310(a)(1).......................................................... 7.10
(a)(2).......................................................... 7.10
(a)(3).......................................................... N.A.
(a)(4).......................................................... N.A.
(a)(5).......................................................... N.A.
(b)............................................................. 7.08; 7.10; 13.02
(c)............................................................. N.A.
Section 311(a)............................................................. 7.11
(b)............................................................. 7.11
(c)............................................................. N.A.
Section 312(a)............................................................. 2.05
(b)............................................................. 13.03
(c)............................................................. 13.03
Section 313(a)............................................................. 7.06
(b)(1).......................................................... N.A.
(b)(2).......................................................... 7.06
(c)............................................................. 7.06; 13.02
(d)............................................................. 7.06
Section 314(a)............................................................. 4.11; 4.12; 13.02
(b)............................................................. N.A.
(c)(1).......................................................... 13.04
(c)(2).......................................................... 13.04
(c)(3).......................................................... N.A.
(d)............................................................. N.A.
(e)............................................................. 13.05
(f)............................................................. N.A.
Section 315(a)............................................................. 7.01(b)
(b)............................................................. 7.05; 13.02
(c)............................................................. 7.01(a)
(d)............................................................. 7.01(c)
(e)............................................................. 6.11
Section 316(a)(last sentence).............................................. 2.09
(a)(1)(A)....................................................... 6.05
(a)(1)(B)....................................................... 6.04
(a)(2).......................................................... N.A.
(b)............................................................. 6.07
(c)............................................................. 10.04
Section 317(a)(1).......................................................... 6.08
(a)(2).......................................................... 6.09
(b)............................................................. 2.04
Section 318(a)............................................................. 13.01
</TABLE>
<PAGE> 3
- ---------------
N.A. means Not Applicable.
NOTE: This Cross-Reference Table shall not, for any purpose, be deemed to
be a part of this Indenture.
<PAGE> 4
TABLE OF CONTENTS
Page
ARTICLE ONE DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions......................................................1
SECTION 1.02. Other Definitions...............................................21
SECTION 1.03. Incorporation by Reference of Trust
Indenture Act.................................................21
ARTICLE TWO THE SECURITIES
SECTION 2.01. Form and Dating.................................................22
SECTION 2.02. Execution and Authentication....................................24
SECTION 2.03. Registrar and Paying Agent......................................25
SECTION 2.04. Paying Agent To Hold Money in Trust.............................26
SECTION 2.05. Securityholder Lists............................................26
SECTION 2.06. Transfer and Exchange...........................................26
SECTION 2.07. Replacement Securities..........................................37
SECTION 2.08. Outstanding Securities..........................................37
SECTION 2.09. Treasury Securities.............................................37
SECTION 2.10. Temporary Securities............................................38
SECTION 2.11. Cancellation....................................................38
SECTION 2.12. Defaulted Interest..............................................38
SECTION 2.13. CUSIP or CINS Number............................................39
SECTION 2.14. Payments of Interest............................................39
ARTICLE THREE REDEMPTION
SECTION 3.01. Notices to Trustee..............................................40
SECTION 3.02. Selection of Securities To Be Redeemed..........................40
SECTION 3.03. Notice of Redemption............................................41
SECTION 3.04. Effect of Notice of Redemption..................................42
SECTION 3.05. Deposit of Redemption Price.....................................42
SECTION 3.06. Securities Redeemed in Part.....................................42
ARTICLE FOUR COVENANTS
SECTION 4.01. Payment of Securities...........................................43
SECTION 4.02. Maintenance of Office or Agency.................................43
SECTION 4.03. Limitation on Transactions with Affiliates and
Restated Persons).............................................................44
SECTION 4.04. Limitation on Indebtedness......................................44
SECTION 4.05. Limitation on Certain Asset Dispositions........................47
SECTION 4.06. Limitation on Restricted Payments...............................48
SECTION 4.07. Corporate Existence.............................................52
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<PAGE> 5
Page
SECTION 4.08. Payment of Taxes and Other Claims...............................52
SECTION 4.09. Notice of Defaults..............................................52
SECTION 4.10. Maintenance of Properties.......................................53
SECTION 4.11. Compliance Certificate..........................................53
SECTION 4.12. Provision of Financial Information..............................54
SECTION 4.13. Waiver of Stay, Extension or Usury
Laws...........................................................54
SECTION 4.14. Change of Control...............................................55
SECTION 4.15. Limitation on Senior Subordinated
Indebtedness..................................................56
SECTION 4.16. Limitations Concerning Distributions
and Transfers by Restricted
Subsidiaries...................................................56
SECTION 4.17. Limitation on Issuance and Sale of
Capital Stock of Restricted
Subsidiaries...................................................57
SECTION 4.18. Limitation on Liens.............................................58
SECTION 4.19. Future Guarantors...............................................60
ARTICLE FIVE MERGERS; SUCCESSOR CORPORATION
SECTION 5.01. Restriction on Mergers,
Consolidations and Certain Sales of Assets....................60
SECTION 5.02. Successor Corporation Substituted...............................61
ARTICLE SIX DEFAULT AND REMEDIES
SECTION 6.01. Events of Default...............................................62
SECTION 6.02. Acceleration....................................................64
SECTION 6.03. Other Remedies..................................................65
SECTION 6.04. Waiver of Past Default..........................................65
SECTION 6.05. Control by Majority.............................................66
SECTION 6.06. Limitation on Suits.............................................66
SECTION 6.07. Rights of Holders To Receive Payment............................67
SECTION 6.08. Collection Suit by Trustee......................................67
SECTION 6.09. Trustee May File Proofs of Claim................................67
SECTION 6.10. Priorities......................................................68
SECTION 6.11. Undertaking for Costs...........................................68
ARTICLE SEVEN TRUSTEE
SECTION 7.01. Duties of Trustee...............................................69
SECTION 7.02. Rights of Trustee...............................................70
SECTION 7.03. Individual Rights of Trustee....................................71
SECTION 7.04. Trustee's Disclaimer............................................71
SECTION 7.05. Notice of Defaults..............................................72
SECTION 7.06. Reports by Trustee to Holders...................................72
-ii-
<PAGE> 6
SECTION 7.07. Compensation and Indemnity......................................72
SECTION 7.08. Replacement of Trustee..........................................74
SECTION 7.09. Successor Trustee by Merger, etc................................75
SECTION 7.10. Eligibility; Disqualification...................................75
SECTION 7.11. Preferential Collection of Claims Against Company...............76
ARTICLE EIGHT SUBORDINATION OF SECURITIES
SECTION 8.01. Securities Subordinated to Senior
Debt...........................................................76
SECTION 8.02. No Payment on Securities in Certain
Circumstances..................................................76
SECTION 8.03. Payment Over of Proceeds upon
Dissolution, etc...............................................78
SECTION 8.04. Subrogation.....................................................79
SECTION 8.05. Obligations of Company Unconditional............................80
SECTION 8.06. Notice to Trustee...............................................80
SECTION 8.07. Reliance on Judicial Order or
Certificate of Liquidating Agent..............................82
SECTION 8.08. Trustee's Relation to Senior Debt...............................82
SECTION 8.09. Subordination Rights Not Impaired by
Acts or Omissions of the Company or
Holders of Senior Debt........................................82
SECTION 8.10. Securityholders Authorize Trustee To
Effectuate Subordination of
Securities....................................................83
SECTION 8.11. This Article Not To Prevent Events of
Default.......................................................83
SECTION 8.12. Trustee's Compensation Not
Prejudiced....................................................83
SECTION 8.13. No Waiver of Subordination
Provisions....................................................83
SECTION 8.14. Subordination Provisions Not
Applicable to Money Held in Trust for
Securityholders; Payments May
Be Paid Prior to Dissolution..................................84
SECTION 8.15. Acceleration of Securities......................................84
ARTICLE NINE DISCHARGE OF INDENTURE
SECTION 9.01. Termination of Company's Obligations............................84
SECTION 9.02. Conditions Precedent to Termination.............................85
SECTION 9.03. Survival of Certain Obligations of..............................86
SECTION 9.04. Trustee's Obligations upon Termination..........................87
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<PAGE> 7
Page
ARTICLE TEN AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 10.01. Without Consent of Holders.....................................88
SECTION 10.02. With Consent of Holders........................................89
SECTION 10.03. Compliance with Trust Indenture Act............................90
SECTION 10.04. Revocation and Effect of Consents..............................90
SECTION 10.05. Notation on or Exchange of
Securities....................................................91
SECTION 10.06. Trustee To Sign Amendments, etc................................92
ARTICLE ELEVEN GUARANTEE
SECTION 11.01. Unconditional Guarantee........................................92
SECTION 11.02. Severability...................................................93
SECTION 11.03. Release of a Guarantor.........................................93
SECTION 11.04. Limitation of Guarantor's Liability............................94
SECTION 11.05. Contribution...................................................94
SECTION 11.06. Execution of Guarantee.........................................95
SECTION 11.07. Subordination of Subrogation and Other Rights..................95
ARTICLE TWELVE SUBORDINATION OF GUARANTEE
SECTION 12.01. Guarantee Obligations Subordinated
to Senior Debt of Guarantor...................................96
SECTION 12.02. No Payment on Guarantees in Certain
Circumstances.................................................96
SECTION 12.03. Payment Over of Proceeds upon
Dissolution, etc..............................................98
SECTION 12.04. Subrogation....................................................99
SECTION 12.05. Obligations of Guarantors
Unconditional................................................100
SECTION 12.06. Notice to Trustee.............................................100
SECTION 12.07. Reliance on Judicial Order or
Certificate of Liquidating Agent.............................102
SECTION 12.08. Trustee's Relation to Senior Debt
of Guarantors................................................102
SECTION 12.09. Subordination Rights Not Impaired by
Acts or Omissions of the Guarantors
or Holders of Senior Debt of
Guarantors...................................................102
SECTION 12.10. Securityholders Authorize Trustee To
Effectuate Subordination of
Guarantee....................................................103
SECTION 12.11. This Article Not To Prevent Events
of Default...................................................103
SECTION 12.12. Trustee's Compensation Not
Prejudiced...................................................103
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<PAGE> 8
Page
SECTION 12.13. No Waiver of Guarantee Subordination
Provisions...................................................103
SECTION 12.14. Payments May Be Paid Prior to
Dissolution..................................................104
ARTICLE THIRTEEN MISCELLANEOUS
SECTION 13.01. Trust Indenture Act Controls..................................104
SECTION 13.02. Notices.......................................................105
SECTION 13.03. Communications by Holders with
Other Holders...............................................106
SECTION 13.04. Certificate and Opinion as to
Conditions Precedent........................................106
SECTION 13.05. Statements Required in Certificate
or Opinion..................................................107
SECTION 13.06. Rules by Trustee, Paying Agent,
Registrar...................................................107
SECTION 13.07. Governing Law.................................................107
SECTION 13.08. No Recourse Against Others....................................107
SECTION 13.09. Successors....................................................108
SECTION 13.10. Count`erpart Originals........................................108
SECTION 13.11. Severability..................................................108
SECTION 13.12. No Adverse Interpretation of Other Agreements.................108
SECTION 13.13. Legal Holidays................................................108
SIGNATURES
EXHIBIT A - Form of Security.................................................A-1
EXHIBIT B - Form of Certificate of Transfer..................................B-1
EXHIBIT C - Form of Certificate of Exchange..................................C-1
- ---------------
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<PAGE> 9
-1-
INDENTURE dated as of April 1, 1997, among TEKNI-PLEX, INC. a
Delaware corporation (the "Company"), DOLCO PACKAGING CORP., a Delaware
corporation, and MARINE MIDLAND BANK, a banking corporation and trust company
organized under the laws of the State of New York, as trustee (the "Trustee").
Each party hereto agrees as follows for the benefit of the
other parties and for the equal and ratable benefit of the Holders of the
Company's 11 1/4% Senior Subordinated Notes due 2007:
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions.
"Acquired Indebtedness" means, with respect to any Person,
Indebtedness of such Person (i) existing at the time such Person becomes a
Restricted Subsidiary or (ii) assumed in connection with the acquisition of
assets from another Person, including Indebtedness Incurred in connection with,
or in contemplation of, such Person becoming a Restricted Subsidiary or such
acquisition, as the case may be.
"Additional Interest" shall have the meaning set forth in the
Registration Rights Agreement.
"Affiliate" of any specified Person means any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with any specified Person. For purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"Agent" means any Registrar, Paying Agent or co-Registrar. See
Section 2.03.
"Applicable Procedures" means with respect to any transfer or
exchange of interests in a Global Security, the rules and procedures of DTC,
Euroclear or Cedel that apply to such transfer or exchange.
"Asset Disposition" means any sale, transfer or other
disposition (including, without limitation, by merger, consoli-
<PAGE> 10
-2-
dation or sale-and-leaseback transaction) of (i) shares of Capital Stock of a
Subsidiary of the Company (other than directors' qualifying shares) or (ii)
property or assets of the Company or any Restricted Subsidiary of the Company
other than in the ordinary course of business; provided, however, that an Asset
Disposition shall not include (a) any sale, transfer or other disposition of
shares of Capital Stock, property or assets by a Restricted Subsidiary of the
Company to the Company or to any Wholly Owned Subsidiary of the Company, (b) any
sale, transfer or other disposition of defaulted receivables for collection or
any sale, transfer or other disposition of property or assets in the ordinary
course of business, (c) any isolated sale, transfer or other disposition that
does not involve aggregate consideration in excess of $1.0 million individually,
(d) the grant in the ordinary course of business of any non-exclusive license of
patents, trademarks, registrations therefor and other similar intellectual
property, (e) any Lien (or foreclosure thereon) securing Indebtedness to the
extent that such Lien is granted in compliance with Section 4.18, (f) any
Restricted Payment permitted by Section 4.06, (g) any disposition of assets or
property in the ordinary course of business to the extent such property or
assets are obsolete, worn-out or no longer useful in the Company's or any of its
Restricted Subsidiaries' business, (h) the sale, lease, conveyance or
disposition or other transfer of all or substantially all of the assets of the
Company as permitted under Section 5.01; provided, that the assets not so sold,
leased, conveyed, disposed of or otherwise transferred shall be deemed an Asset
Disposition, or (i) any disposition that constitutes a Change of Control.
"Average Life" means, as of the date of determination, with
respect to any Indebtedness for borrowed money or Preferred Stock, the quotient
obtained by dividing (i) the sum of the products of the number of years from the
date of determination to the dates of each successive scheduled principal or
liquidation value payments of such Indebtedness or Preferred Stock,
respectively, and the amount of such principal or liquidation value payments, by
(ii) the sum of all such principal or liquidation value payments.
"Board of Directors" means the Board of Directors of the
Company or any Guarantor, as the case may be, or any authorized committee of
that Board.
"Board Resolution" means, with respect to any Person, a duly
adopted resolution of the Board of Directors of such
<PAGE> 11
-3-
Person and, if applicable, certified and delivered to the Trustee.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday
and Friday that is not a day on which banking institutions in the City of New
York are authorized or obligated by law, resolution or executive order to close.
"Capital Lease Obligations" of any Person means the
obligations to pay rent or other amounts under a lease of (or other Indebtedness
arrangements conveying the right to use) real or personal property of such
Person which are required to be classified and accounted for as a capital lease
or liability on the face of a balance sheet of such Person in accordance with
GAAP. The amount of such obligations shall be the capitalized amount thereof in
accordance with GAAP and the stated maturity thereof shall be the date of the
last payment of rent or any other amount due under such lease prior to the first
date upon which such lease may be terminated by the lessee without payment of a
penalty.
"Capital Stock" of any Person means any and all shares,
interests, participations or other equivalents (however designated) of corporate
stock of such Person.
"Cedel" means Cedel Bank, societe anonyme.
"Common Stock" of any Person means Capital Stock of such
Person that does not rank prior, as to the payment of dividends or as to the
distribution of assets upon any voluntary or involuntary liquidation,
dissolution or winding up of such Person, to shares of Capital Stock of any
other class of such Person.
"Company" means the Person named as the "Company" in the first
paragraph of this Indenture until a successor shall have become such pursuant to
the applicable provisions of this Indenture, and thereafter "Company" shall mean
such successor.
"Company Request" or "Company Order" means a written request
or order signed in the name of the Company by its Chairman of the Board, its
Vice Chairman of the Board, its President or a Vice President, and by its
Treasurer, an Assistant Treasurer, its Secretary or an Assistant Secretary, and
delivered to the Trustee.
"Consolidated Cash Flow Available for Fixed Charges" of any
Person means for any period the Consolidated Net Income
<PAGE> 12
-4-
of such Person for such period increased (to the extent Consolidated Net Income
for such period has been reduced thereby) by the sum of (without duplication)
(i) Consolidated Interest Expense of such Person for such period, plus (ii)
Consolidated Income Tax Expense of such Person for such period, plus (iii) the
consolidated depreciation and amortization expense included in the income
statement of such Person prepared in accordance with GAAP for such period, plus
(iv) any other non-cash charges to the extent deducted from or reflected in
Consolidated Net Income except for any non-cash charges that represent accruals
of, or reserves for, cash disbursements to be made in any future accounting
period.
"Consolidated Cash Flow Ratio" of any Person means for any
period the ratio of (i) Consolidated Cash Flow Available for Fixed Charges of
such Person for such period to (ii) the sum of (A) Consolidated Interest Expense
of such Person for such period, plus (B) the annual interest expense with
respect to any Indebtedness proposed to be Incurred by such Person or its
Restricted Subsidiaries, minus (C) Consolidated Interest Expense of such Person
to the extent included in clause (ii)(A) with respect to any Indebtedness that
will no longer be outstanding as a result of the Incurrence of the Indebtedness
proposed to be Incurred, plus (D) the annual interest expense with respect to
any other Indebtedness Incurred by such Person or its Restricted Subsidiaries
since the end of such period to the extent not included in clause (ii)(A), minus
(E) Consolidated Interest Expense of such Person to the extent included in
clause (ii)(A) with respect to any Indebtedness that no longer is outstanding as
a result of the Incurrence of the Indebtedness referred to in clause (ii)(D);
provided, however, that in making such computation, the Consolidated Interest
Expense of such Person attributable to interest on any Indebtedness bearing a
floating interest rate shall be computed on a pro forma basis as if the rate in
effect on the date of computation (after giving effect to any hedge in respect
of such Indebtedness that will, by its terms, remain in effect until the earlier
of the maturity of such Indebtedness or the date one year after the date of such
determination) had been the applicable rate for the entire period; provided,
further, however, that, in the event such Person or any of its Restricted
Subsidiaries has made any Asset Dispositions or acquisitions of assets not in
the ordinary course of business (including acquisitions of other Persons by
merger, consolidation or purchase of Capital Stock) during or after such period
and on or prior to the date of measurement, such computation shall be made on a
pro forma basis as if the Asset Dispositions or acquisitions had taken place on
the first day of such period. Calculations of pro
<PAGE> 13
-5-
forma amounts in accordance with this definition shall be done in accordance
with Article 11 of Regulation S-X under the Securities Act or any successor
provision and may include reasonably ascertainable cost savings.
"Consolidated Income Tax Expense" of any Person means for any
period the consolidated provision for income taxes of such Person and its
Restricted Subsidiaries for such period calculated on a consolidated basis in
accordance with GAAP.
"Consolidated Interest Expense" for any Person means for any
period, without duplication, (a) the consolidated interest expense included in a
consolidated income statement (without deduction of interest or finance charge
income) of such Person and its Restricted Subsidiaries for such period
calculated on a consolidated basis in accordance with GAAP and (b) dividend
requirements of such Person and its Restricted Subsidiaries with respect to
Disqualified Stock and with respect to all other Preferred Stock of Restricted
Subsidiaries of such Person (in each case whether in cash or otherwise (except
dividends payable solely in shares of Capital Stock of such Person or such
Restricted Subsidiary)) paid, accrued or accumulated during such period times a
fraction the numerator of which is one and the denominator of which is one minus
the then effective consolidated Federal, state and local tax rate of such
Person, expressed as a decimal.
"Consolidated Net Income" of any Person means for any period
the consolidated net income (or loss) of such Person and its Restricted
Subsidiaries for such period determined on a consolidated basis in accordance
with GAAP; provided, however, that there shall be excluded therefrom (a) the net
income (or loss) of any Person acquired by such Person or a Restricted
Subsidiary of such Person in a pooling-of-interests transaction for any period
prior to the date of such transaction, (b) the net income (but not net loss) of
any Restricted Subsidiary of such Person which is subject to restrictions which
prevent or limit the payment of dividends or the making of distributions to such
Person to the extent of such restrictions (regardless of any waiver thereof),
(c) non-cash gains and losses due solely to fluctuations in currency values, (d)
the net income of any Person that is not a Restricted Subsidiary of such Person,
except to the extent of the amount of dividends or other distributions
representing such Person's proportionate share of such other Person's net income
for such period actually paid in cash to such Person by such other Person during
such period, (e) gains but not losses on Asset Dispositions by such Person or
its Restricted Subsidiaries, (f) all extraordinary gains and
<PAGE> 14
-6-
losses determined in accordance with GAAP and (g) in the case of a successor to
the referent Person by consolidation or merger or as a transferee of the
referent Person's assets, any earnings (or losses) of the successor corporation
prior to such consolidation, merger or transfer of assets.
"Consolidated Net Worth" of any Person means the consolidated
stockholders' equity of such Person, determined on a consolidated basis in
accordance with GAAP, less (without duplication) amounts attributable to
Disqualified Capital Stock of such Person.
"Continuing Director" means a director who either was a member
of the Board of Directors of the Company on the Issue Date or who became a
director of the Company subsequent to the Issue Date and whose election, or
nomination for election by the Company's stockholders, was duly approved by a
majority of the Continuing Directors then on the Board of Directors of the
Company, either by a specific vote or by approval of the proxy statement issued
by the Company on behalf of the entire Board of Directors of the Company in
which such individual is named as nominee for director.
"Corporate Trust Office of the Trustee" shall be at the
address of the Trustee specified in Section 13.02 or such other address as the
Trustee may give notice to the Company.
"Credit Agreement" means the Credit Agreement among the
Company as borrower thereunder, and Morgan Guaranty Trust Company of New York,
as agent on behalf of itself and the others named therein, and any deferrals,
renewals, extensions, replacements, refinancings or refundings thereof, or
amendments, modifications or supplements thereto or replacements thereof
(including, without limitation, any amendment increasing the amount borrowed
thereunder) and any agreement providing therefor whether by or with the same or
any other lender, creditors or group of creditors and including related notes,
guarantee agreements, security agreements and other instruments and agreements
executed in connection therewith.
"Default" means any event that is, or after notice or lapse of
time or both would become, an Event of Default.
"Designated Senior Debt" means (i) so long as the Credit
Agreement is in effect, the Senior Debt incurred thereunder and (ii) thereafter,
any other Senior Debt which has at the time of initial issuance an aggregate
outstanding principal amount in excess of $25.0 million which has been so
designated
<PAGE> 15
-7-
as Designated Senior Debt by the Board of Directors of the Company at the time
of initial issuance in a resolution certified pursuant to an Officers'
Certificate and delivered to the Trustee.
"Disqualified Stock" of any Person means any Capital Stock of
such Person which, by its terms (or by the terms of any security into which it
is convertible or for which it is exchangeable), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is redeemable at the option of the holder thereof,
in whole or in part, on or prior to the final maturity of the Securities.
"Domestic Restricted Subsidiary" means any Restricted
Subsidiary of the Company organized and existing under the laws of the United
States, any state thereof or the District of Columbia.
"DTC" means The Depository Trust Company or its successors.
"Euroclear" means Morgan Guaranty Trust Company of New York
(Brussels Office) as operator of the Euroclear system.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated by the Commission thereunder.
"Exchange Registration Statement" shall have the meaning set
forth in the Registration Rights Agreement.
"Expiration Date" has the meaning set forth in the definition
of "Offer to Purchase".
"GAAP" means generally accepted accounting principles,
consistently applied, as in effect on the Issue Date in the United States of
America, as set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board or in
such other statements by such other entity as is approved by a significant
segment of the accounting profession in the United States.
"Global Security" means the global security, without coupons,
representing all or a portion of the Securities depos-
<PAGE> 16
-8-
ited with DTC substantially in the form of Exhibit A attached hereto.
"guarantee" by any Person means any obligation, contingent or
otherwise, of such Person guaranteeing any Indebtedness of any other Person (the
"primary obligor") in any manner, whether directly or indirectly, and including,
without limitation, any obligation of such Person (i) to purchase or pay (or
advance or supply funds for the purchase or payment of) such Indebtedness or to
purchase (or to advance or supply funds for the purchase of) any security for
the payment of such Indebtedness, (ii) to purchase property, securities or
services for the purpose of assuring the holder of such Indebtedness of the
payment of such Indebtedness, or (iii) to maintain working capital, equity
capital or other financial statement condition or liquidity of the primary
obligor so as to enable the primary obligor to pay such Indebtedness (and
"guaranteed," "guaranteeing" and "guarantor" shall have meanings correlative to
the foregoing); provided, however, that the guarantee by any Person shall not
include endorsements by such Person for collection or deposit, in either case,
in the ordinary course of business.
"Guarantee" means the guarantee of the Securities by each
Guarantor under this Indenture.
"Guarantor" means (i) each Restricted Subsidiary on the Issue
Date and (ii) each Restricted Subsidiary, if any, of the Company formed or
acquired after the Issue Date which pursuant to the terms of this Indenture
executes a supplement to this Indenture as a Guarantor.
"Holder" or "Securityholder" means the Person in whose name a
Security is registered on the books of the Registrar or any co-Registrar.
"Incur" means, with respect to any Indebtedness or other
obligation of any Person, to create, issue, incur (including by conversion,
exchange or otherwise), assume, guarantee or otherwise become liable in respect
of such Indebtedness or other obligation or the recording, as required pursuant
to GAAP or otherwise, of any such Indebtedness or other obligation on the
balance sheet of such Person (and "Incurrence," "Incurred" and "Incurring" shall
have meanings correlative to the foregoing). Indebtedness of any Person or any
of its Restricted Subsidiaries existing at the time such Person becomes a
Restricted Subsidiary of the Company (or is merged into or consolidates with the
Company or any of its Restricted Subsidi-
<PAGE> 17
-9-
aries), whether or not such Indebtedness was incurred in connection with, or in
contemplation of, such Person becoming a Restricted Subsidiary of the Company
(or being merged into or consolidated with the Company or any of its Restricted
Subsidiaries), shall be deemed Incurred at the time any such Person becomes a
Restricted Subsidiary of the Company or merges into or consolidates with the
Company or any of its Restricted Subsidiaries.
"Indebtedness" means (without duplication), with respect to
any Person, whether recourse is to all or a portion of the assets of such Person
and whether or not contingent, (i) every obligation of such Person for money
borrowed, (ii) every obligation of such Person evidenced by bonds, debentures,
notes or other similar instruments, including obligations incurred in connection
with the acquisition of property, assets or businesses, (iii) every
reimbursement obligation of such Person with respect to letters of credit,
bankers' acceptances or similar facilities issued for the account of such
Person, (iv) every obligation of such Person issued or assumed as the deferred
purchase price of property or services (but excluding trade accounts payable or
accrued liabilities arising in the ordinary course of business which are not
overdue or which are being contested in good faith), (v) every Capital Lease
Obligation of such Person, (vi) every net obligation under interest rate swap or
similar agreements or foreign currency hedge, exchange or similar agreements of
such Person and (vii) every obligation of the type referred to in clauses (i)
through (vi) of another Person and all dividends of another Person the payment
of which, in either case, such Person has guaranteed or is responsible or liable
for, directly or indirectly, as obligor, guarantor or otherwise. Indebtedness
shall include the liquidation preference and any mandatory redemption payment
obligations in respect of any Disqualified Stock of the Company owned by any
Person other than the Company or a Restricted Subsidiary of the Company, and any
Preferred Stock of a Restricted Subsidiary of the Company. Indebtedness shall
never be calculated taking into account any cash and cash equivalents held by
such Person. Indebtedness shall not include obligations arising from agreements
of the Company or a Restricted Subsidiary of the Company to provide for
indemnification, adjustment of purchase price, earn-out, or other similar
obligations, in each case, incurred or assumed in connection with the
disposition of any business or assets of a Restricted Subsidiary of the Company.
"Indenture" means this Indenture as amended or supplemented
from time to time.
<PAGE> 18
-10-
"Initial Global Securities" means the Regulation S Global
Security and the 144A Global Security, each of which contains a Securities Act
Legend.
"Initial Securities" means the Securities containing a
Securities Act Legend.
"Interest Payment Date" means the stated maturity of an
installment of interest on the Securities.
"Institutional Accredited Investor" means an institution that
is an "accredited investor" as that term is defined in Rule 501(a)(1), (2), (3)
or (7) of Regulation D promulgated under the Securities Act.
"Investment" by any Person means any direct or indirect loan,
advance, guarantee or other extension of credit (excluding credit balances in
bank accounts or similar accounts with other financial institutions) or capital
contribution to (by means of transfers of cash or other property to others or
payments for property or services for the account or use of others, or
otherwise), or purchase or acquisition of Capital Stock, bonds, notes,
debentures or other securities or evidence of Indebtedness issued by any other
Person.
"Issue Date" means April 4, 1997.
"Lien" means, with respect to any property or assets, any
mortgage or deed of trust, pledge, hypothecation, assignment, security interest,
lien, charge, easement (other than any easement not materially impairing
usefulness or marketability), encumbrance, preference, priority or other
security agreement with respect to such property or assets (including, without
limitation, any conditional sale or other title retention agreement having
substantially the same economic effect as any of the foregoing).
"Material Subsidiary" means, at any date of determination, any
Subsidiary that, together with its Subsidiaries, (i) for the most recent fiscal
year of the Company accounted for more than 5% of the consolidated revenues of
the Company or (ii) as of the end of such fiscal year, was the owner of more
than 5% of the consolidated assets of the Company, all as set forth on the most
recently available consolidated financial statements of the Company for such
fiscal year prepared in conformity with GAAP.
<PAGE> 19
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"Maturity Date" means the date, which is set forth on the face
of the Securities, on which the Securities will mature.
"Net Available Proceeds" from any Asset Disposition by any
Person means cash or readily marketable cash equivalents received (including by
way of sale or discounting of a note, installment receivable or other
receivable, but excluding any other consideration received in the form of
assumption by the acquiror of Indebtedness or other obligations relating to such
properties or assets or received in any other non-cash form) therefrom by such
Person, including any cash received by way of deferred payment or upon the
monetization or other disposition of any non-cash consideration (including notes
or other securities) received in connection with such Asset Disposition, net of
(i) all legal, title and recording tax expenses, commissions and other fees and
expenses incurred and all federal, state, foreign and local taxes required to be
accrued as a liability as a consequence of such Asset Disposition, (ii) all
payments made by such Person or its Restricted Subsidiaries on any Indebtedness
which is secured by such assets in accordance with the terms of any Lien upon or
with respect to such assets or which must by the terms of such Lien, or in order
to obtain a necessary consent to such Asset Disposition or by applicable law, be
repaid out of the proceeds from such Asset Disposition, (iii) all payments made
with respect to liabilities associated with the assets which are the subject of
the Asset Disposition, including, without limitation, trade payables and other
accrued liabilities, (iv) appropriate amounts to be provided by such Person or
any Restricted Subsidiary thereof, as the case may be, as a reserve in
accordance with GAAP against any liabilities associated with such assets and
retained by such Person or any Restricted Subsidiary thereof, as the case may
be, after such Asset Disposition, including, without limitation, liabilities
under any indemnification obligations and severance and other employee
termination costs associated with such Asset Disposition, until such time as
such amounts are no longer reserved or such reserve is no longer necessary (at
which time any remaining amounts will become Net Available Proceeds to be
allocated in accordance with the provisions of clause (iii) of Section 4.05),
and (v) all distributions and other payments made to minority interest holders
in Restricted Subsidiaries of such Person or joint ventures as a result of such
Asset Disposition.
"Net Investment" means the excess of (i) the aggregate amount
of all Investments in Unrestricted Subsidiaries or joint ventures made by the
Company or any Restricted Subsidiary
<PAGE> 20
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on or after the Issue Date (in the case of an Investment made other than in
cash, the amount shall be the fair market value of such Investment as determined
in good faith by the Board of Directors of the Company or such Restricted
Subsidiary) over (ii) the aggregate amount returned in cash on or with respect
to such Investments whether through interest payments, principal payments,
dividends or other distributions or payments; provided, however, that such
payments or distributions shall not be (and have not been) included in subclause
(b) of clause (3) of the first paragraph of Section 4.06; provided, further,
that with respect to all Investments made in any Unrestricted Subsidiary or
joint venture the amounts referred to in clause (ii) above with respect to such
Investments shall not exceed the aggregate amount of all such Investments made
in such Unrestricted Subsidiary or joint venture.
"Offer" has the meaning set forth in the definition of "Offer
to Purchase".
"Offer to Purchase" means a written offer (the "Offer") sent
by the Company by first class mail, postage prepaid, to each Holder at his
address appearing in the register for the Securities on the date of the Offer
offering to purchase up to the principal amount of Securities specified in such
Offer at the purchase price specified in such Offer (as determined pursuant to
this Indenture). Unless otherwise required by applicable law, the Offer shall
specify an expiration date (the "Expiration Date") of the Offer to Purchase
which shall be not less than 30 days nor more than 60 days after the date of
such Offer and a settlement date (the "Purchase Date") for purchase of
Securities within five Business Days after the Expiration Date. The Company
shall notify the Trustee at least 15 Business Days (or such shorter period as is
acceptable to the Trustee) prior to the mailing of the Offer of the Company's
obligation to make an Offer to Purchase, and the Offer shall be mailed by the
Company or, at the Company's request, by the Trustee in the name and at the
expense of the Company. The Offer shall contain all the information required by
applicable law to be included therein. The Offer shall contain all instructions
and materials necessary to enable such Holders to tender Securities pursuant to
the Offer to Purchase. The Offer shall also state:
(1) the Section of this Indenture pursuant to which the Offer
to Purchase is being made;
(2) the Expiration Date and the Purchase Date;
<PAGE> 21
-13-
(3) the aggregate principal amount of the outstanding
Securities offered to be purchased by the Company pursuant to the Offer
to Purchase (including, if less than 100%, the manner by which such
amount has been determined pursuant to the Section of this Indenture
requiring the Offer to Purchase) (the "Purchase Amount");
(4) the purchase price to be paid by the Company for each
$1,000 aggregate principal amount of Securities accepted for payment
(as specified pursuant to this Indenture) (the "Purchase Price");
(5) that the Holder may tender all or any portion of the
Securities registered in the name of such Holder and that any portion
of a Security tendered must be tendered in an integral multiple of
$1,000 principal amount;
(6) the place or places where Securities are to be surrendered
for tender pursuant to the Offer to Purchase;
(7) that interest on any Security not tendered or tendered but
not purchased by the Company pursuant to the Offer to Purchase will
continue to accrue;
(8) that on the Purchase Date the Purchase Price will become
due and payable upon each Security being accepted for payment pursuant
to the Offer to Purchase and that interest thereon shall cease to
accrue on and after the Purchase Date;
(9) that each Holder electing to tender all or any portion of
a Security pursuant to the Offer to Purchase will be required to
surrender such Security at the place or places specified in the Offer
prior to the close of business on the Expiration Date (such Security
being, if the Company or the Trustee so requires, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to
the Company and the Trustee duly executed by, the Holder thereof or his
attorney duly authorized in writing);
(10) that Holders will be entitled to withdraw all or any
portion of Securities tendered if the Company (or its Paying Agent)
receives, not later than the close of business on the fifth Business
Day next preceding the Expiration Date, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the
principal amount of the Security the Holder tendered, the certifi-
<PAGE> 22
-14-
cate number of the Security the Holder tendered and a statement that
such Holder is withdrawing all or a portion of his tender;
(11) that (a) if Securities in an aggregate principal amount
less than or equal to the Purchase Amount are duly tendered and not
withdrawn pursuant to the Offer to Purchase, the Company shall purchase
all such Securities and (b) if Securities in an aggregate principal
amount in excess of the Purchase Amount are tendered and not withdrawn
pursuant to the Offer to Purchase, the Company shall purchase
Securities having an aggregate principal amount equal to the Purchase
Amount on a pro rata basis (with such adjustments as may be deemed
appropriate so that only Securities in denominations of $1,000 or
integral multiples thereof shall be purchased); and
(12) that in the case of any Holder whose Security is
purchased only in part, the Company shall execute and the Trustee shall
authenticate and deliver to the Holder of such Security without service
charge, a new Security or Securities, of any authorized denomination as
requested by such Holder, in an aggregate principal amount equal to and
in exchange for the unpurchased portion of the Security so tendered.
An Offer to Purchase shall be governed by and effected in
accordance with the provisions above pertaining to any Offer.
"Officer" means the Chairman, the President, any Vice
President, the Chief Financial Officer, the Treasurer, the Secretary, or the
Controller of the Company.
"Officers' Certificate" means a certificate signed by two
Officers (one of whom shall be the Chief Executive Officer, the Chief Operating
Officer, or the Chief Financial Officer of the Company) or by an Officer and the
Treasurer, the Secretary, an Assistant Treasurer or Assistant Secretary of the
Company complying with Sections 13.04 and 13.05.
"Opinion of Counsel" means a written opinion reasonably
satisfactory in form and substance to the Trustee from legal counsel who is
reasonably acceptable to the Trustee. The counsel may be an employee of or
counsel to the Company or the Trustee.
<PAGE> 23
-15-
"Participant" means, with respect to DTC, Euroclear or Cedel,
a Person who has an account with DTC, Euroclear or Cedel, respectively (and,
with respect to DTC, shall include Euroclear and Cedel).
"Permitted Holder" means any of any member of the Board of
Directors of the Company as of the Issue Date, Tekni-Plex Partners L.P., MST/TP
Partners, L.P., MST Management, L.P., MST Partners L.P., any Affiliate of or
partner in any of the foregoing (including any Person receiving common stock of
the Company upon a distribution by any of the foregoing partnerships, whether a
partner or designated by a partner for purposes of estate or similar personal
planning), or any group if the majority of the shares of Common Stock of the
Company owned by such group are beneficially owned by any or all of the
foregoing and their Related Persons and Affiliates.
"Permitted Investments" means (i) Investments in marketable,
direct obligations issued or guaranteed by the United States of America, or any
governmental entity or agency or political subdivision thereof (provided, that
the full faith and credit of the United States of America is pledged in support
thereof), maturing within one year of the date of purchase; (ii) Investments in
commercial paper issued by corporations or financial institutions maturing
within 180 days from the date of the original issue thereof, and rated "P-1" or
better by Moody's Investors Service or "A-1" or better by Standard & Poor's
Corporation or an equivalent rating or better by any other nationally recognized
securities rating agency; (iii) Investments in certificates of deposit issued or
acceptances accepted by or guaranteed by any bank or trust company organized
under the laws of the United States of America, any state thereof, the District
of Columbia, Canada or any province thereof, in each case having a combined
capital, surplus and undivided profits totalling more than $500 million,
maturing within one year of the date of purchase; (iv) Investments representing
Capital Stock or obligations issued or otherwise transferred to the Company or
any of its Restricted Subsidiaries in the course of the good faith settlement of
claims against any other Person or by reason of a composition or readjustment of
debt or a reorganization of any debtor of the Company or any of its Restricted
Subsidiaries; (v) deposits, including interest-bearing deposits, maintained in
the ordinary course of business in banks; (vi) any acquisition of the Capital
Stock of any Person; provided, however, that after giving effect to any such
acquisition such Person shall become a Restricted Subsidiary of the Company;
(vii) receivables and prepaid expenses, in each case arising in the ordinary
course of
<PAGE> 24
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business; provided, however, that such receivables and prepaid expenses would be
recorded as assets of such Person in accordance with GAAP; (viii) endorsements
for collection or deposit in the ordinary course of business by such Person of
bank drafts and similar negotiable instruments of such other Person received as
payment for ordinary course of business; (ix) any interest swap or hedging
obligation with an unaffiliated Person otherwise permitted by this Indenture;
(x) Investments received as consideration for an Asset Disposition in compliance
with Section 4.05; (xi) Investments in Restricted Subsidiaries or by virtue of
which a Person becomes a Restricted Subsidiary; and (xii) loans and advances to
employees of the Company or any of its Restricted Subsidiaries in the ordinary
course of business.
"Person" means any individual, corporation, limited or general
partnership, limited liability company, joint venture, association, joint stock
company, trust, unincorporated organization or government or any agency or
political subdivision thereof.
"Preferred Stock," as applied to the Capital Stock of any
Person, means Capital Stock of such Person of any class or classes (however
designated) that ranks prior, as to the payment of dividends or as to the
distribution of assets upon any voluntary or involuntary liquidation,
dissolution or winding up of such Person, to shares of Capital Stock of any
other class of such Person.
"principal" of a debt security means the principal of the
security plus, when appropriate, the premium, if any, on the security.
"Private Exchange Securities" shall have the meaning set forth
in the Registration Rights Agreement.
"Purchase Amount" has the meaning set forth in the definition
of "Offer to Purchase".
"Purchase Date" has the meaning set forth in the definition of
"Offer to Purchase".
"Purchase Price" has the meaning set forth in the definition
of "Offer to Purchase".
"QIB" means a "qualified institutional buyer" as defined in
Rule 144A.
<PAGE> 25
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"redemption date," when used with respect to any Security to
be redeemed, means the date fixed for such redemption pursuant to this
Indenture.
"redemption price," when used with respect to any Security to
be redeemed, means the price fixed for such redemption pursuant to this
Indenture as set forth in the form of Security annexed as Exhibit A.
"Registration Rights Agreement" means the Registration Rights
Agreement dated as of April 4, 1997 among the Company, the Guarantor and J.P.
Morgan Securities Inc.
"Regulation S" means Regulation S promulgated under the
Securities Act (including any successor regulation thereto) as it may be amended
from time to time.
"Related Person" of any Person means any other Person directly
or indirectly owning (a) 5% or more of the outstanding Common Stock of such
Person (or, in the case of a Person that is not a corporation, 5% or more of the
equity interest in such Person) or (b) 5% or more of the combined voting power
of the Voting Stock of such Person.
"Restricted Physical Security" means a Physical Security
containing a Securities Act Legend.
"Restricted Subsidiary" means any Subsidiary of the Company
other than an Unrestricted Subsidiary.
"Rule 144" shall have the meaning set forth in the
Registration Rights Agreement.
"Rule 144A" shall have the meaning set forth in the
Registration Rights Agreement.
"Securities" means the 11 1/4% Senior Subordinated Notes due
2007 issued pursuant to the terms of this Indenture, as amended or supplemented
from time to time.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations promulgated by the Commission thereunder.
"Securityholder" has the meaning set forth in the definition
of "Holder" above.
<PAGE> 26
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"Senior Debt" means, with respect to any Person at any date,
(i) in the case of the Company or the Guarantor, all Indebtedness and other
obligations under the Credit Agreement, including, without limitation,
principal, premium, if any, and interest on such Indebtedness and all other
amounts due on or in connection with such Indebtedness including all charges,
fees and expenses, (ii) all other Indebtedness of such Person for money
borrowed, including principal, premium, if any, and interest on such
Indebtedness, unless the instrument under which such Indebtedness for money
borrowed is created, incurred, assumed or guaranteed expressly provides that
such Indebtedness for money borrowed is not senior or superior in right of
payment to the Securities, and all renewals, extensions, modifications,
amendments, refinancing or replacements thereof and all other Indebtedness of
such Person of the types referred to in clauses (iii), (iv) (not including
obligations issued or assumed as the deferred purchase price of services) and
(vi) of the definition of Indebtedness and (iii) all interest on any
Indebtedness referred to in clauses (i) and (ii) accruing during, or which would
accrue but for, the pendency of any bankruptcy or insolvency proceeding, whether
or not allowed thereunder. Notwithstanding the foregoing, Senior Debt shall not
include (a) Indebtedness which is pursuant to its terms or any agreement
relating thereto or by operation of law subordinated or junior in right of
payment or otherwise to any other Indebtedness of such Person; provided,
however, that no Indebtedness shall be deemed to be subordinate or junior in
right of payment or otherwise to any other Indebtedness of a Person solely by
reason of such other Indebtedness being secured and such Indebtedness not being
secured, (b) the Securities, (c) any Indebtedness of such Person to any of its
Subsidiaries, (d) Indebtedness Incurred in violation of Section 4.04; provided,
however, that Indebtedness under the Credit Agreement shall be deemed not to
have been Incurred in violation of such provisions for purposes of this clause
(d) if the holder(s) of such Indebtedness or their agent or representative shall
have received a representation from the Company to the effect that the
Incurrence of such Indebtedness does not violate such provision, and (e) any
Indebtedness which, when incurred and without respect to any election under
Section 1111(b) of the Bankruptcy Code, is without recourse to the Company.
"Shelf Registration Statement" shall have the meaning set
forth in the Registration Rights Agreement.
"Stated Maturity," when used with respect to any Security or
any installment of interest thereon, means the date specified in such Security
as the fixed date on which the prin-
<PAGE> 27
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cipal of such Security or such installment of interest is due and payable.
"Subordinated Indebtedness" means any Indebtedness (whether
outstanding on the date hereof or hereafter incurred) which is by its terms
expressly subordinate or junior in right of payment to the Securities.
"Subsidiary" of any Person means (i) a corporation more than
50% of the outstanding Voting Stock of which is owned, directly or indirectly,
by such Person or by one or more other Subsidiaries of such Person or by such
Person and one or more other Subsidiaries thereof or (ii) any other Person
(other than a corporation) in which such Person, or one or more other
Subsidiaries of such Person or such Person and one or more other Subsidiaries
thereof, directly or indirectly, have at least a majority ownership and voting
power relating to the policies, management and affairs thereof.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code
Section 77aaa-77bbbb) as in effect on the date of this Indenture, except
as provided in Section 10.03.
"Trustee" means the party named as such in this Indenture
until a successor replaces it in accordance with the provisions of this
Indenture and thereafter means such successor.
"Trust Officer" means any officer within the corporate trust
department (or any successor group of the Trustee) including any vice president,
assistant vice president, assistant secretary or any other officer or assistant
officer of the Trustee customarily performing functions similar to those
performed by the persons who at that time shall be such officers, and also
means, with respect to a particular corporate trust matter, any other officer to
whom such trust matter is referred because of his knowledge of and familiarity
with the particular subject.
"Unrestricted Global Securities" means one or more Global
Securities that do not and are not required to bear the Securities Act Legend.
"Unrestricted Physical Securities" means one or more Physical
Securities that do not and are not required to bear the Securities Act Legend.
<PAGE> 28
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"Unrestricted Securities" means the Securities that do not and
are not required to bear the Securities Act Legend.
"Unrestricted Subsidiary" means (i) any Subsidiary of the
Company formed or acquired after the Issue Date that at the time of
determination is designated an Unrestricted Subsidiary by the Board of Directors
in the manner provided below and (ii) any Subsidiary of an Unrestricted
Subsidiary. Any such designation by the Board of Directors will be evidenced to
the Trustee by promptly filing with the Trustee a copy of the Board Resolution
giving effect to such designation and an Officers' Certificate certifying that
such designation complied with the foregoing provisions. The Board of Directors
of the Company may not designate any Subsidiary of the Company to be an
Unrestricted Subsidiary if, after such designation, (a) the Company or any other
Restricted Subsidiary (i) provides credit support for, or a guarantee of, any
Indebtedness of such Subsidiary (including any undertaking, agreement or
instrument evidencing such Indebtedness) or (ii) is directly or indirectly
liable for any Indebtedness of such Subsidiary, (b) a default with respect to
any Indebtedness of such Subsidiary (including any right which the holders
thereof may have to take enforcement action against such Subsidiary) would
permit (upon notice, lapse of time or both) any holder of any other Indebtedness
of the Company or any Restricted Subsidiary to declare a default on such other
Indebtedness or cause the payment thereof to be accelerated or payable prior to
its final scheduled maturity or (c) such Subsidiary owns any Capital Stock of,
or owns or holds any Lien on any property of, any Restricted Subsidiary which is
not a Subsidiary of the Subsidiary to be so designated.
"Voting Stock" of any Person means the Capital Stock of such
Person which ordinarily has voting power for the election of directors (or
persons performing similar functions) of such Person, whether at all times or
only so long as no senior class of securities has such voting power by reason of
any contingency.
"Wholly Owned Subsidiary" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall at
the time be owned by such Person or by one or more Wholly Owned Subsidiaries of
such Person or by such Person and one or more Wholly Owned Subsidiaries of such
Person.
<PAGE> 29
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SECTION 1.02. Other Definitions.
<TABLE>
<CAPTION>
Term Defined in Section
---- ------------------
<S> <C>
"Bankruptcy Law" 6.01
"Change of Control" 4.14
"Custodian" 6.01
"Event of Default" 6.01
"Funding Guarantor" 11.05
"Guarantor Blockage Period" 12.02(a)
"Guarantor Payment Blockage Notice" 12.02(a)
"Guarantor Securities Payment" 12.02
"144A Global Security" 2.01(a)
"Paying Agent" 2.03
"Payment Blockage Notice" 8.02(a)
"Payment Blockage Period" 8.02(a)
"Physical Security" 2.01(b)
"Registrar" 2.03
"Regulation S Global Security" 2.01(a)
"Required Filing Date" 4.12
"Securities Act Legend" 2.06(f)
"Securities Payment" 8.02
"United States Government Obligation" 9.01
</TABLE>
SECTION 1.03. Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture. The
following TIA terms used in this Indenture have the following meanings:
"Commission" means the Securities and Exchange Commission.
"indenture securities" means the Securities.
"indenture security holder" means a Holder or Securityholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the
Trustee.
"obligor" on the indenture securities means the Company or any
other obligor on the Securities.
<PAGE> 30
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All other TIA terms used in this Indenture that are defined by
the TIA, defined by TIA reference to another statute or defined by Commission
rule and not otherwise defined herein have the meanings assigned to them
therein.
SECTION 1.04. Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with generally accepted accounting
principles in effect from time to time, and any other reference in this
Indenture to "generally accepted accounting principles" refers to GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and words in the
plural include the singular;
(5) provisions apply to successive events and transactions;
(6) "herein," "hereof" and other words of similar import refer
to this Indenture as a whole and not to any particular Article, Section
or other subdivision; and
(7) whenever in this Indenture there is mentioned, in any
context, principal, interest or any other amount payable under or with
respect to any Security, such mention shall be deemed to include
mention of the payment of Additional Interest to the extent that, in
such context, Additional Interest is, was or would be payable in
respect hereof.
ARTICLE TWO
THE SECURITIES
SECTION 2.01. Form and Dating.
(a) Global Securities. Securities offered and sold to QIBs in
reliance on Rule 144A shall be issued initially substantially in the form of
Exhibit A hereto in the name of Cede & Co. as nominee of DTC, duly executed by
the Company and authenticated by the Trustee as hereinafter provided. Such
Se-
<PAGE> 31
-23-
curity shall be referred to herein as the "144A Global Security." Securities
offered and sold in reliance on Regulation S shall be issued initially
substantially in the form of Exhibit A hereto in the name of Cede & Co. as
nominee of DTC, duly executed by the Company and authenticated by the Trustee as
hereinafter provided. Such Security shall be referred to herein as the
"Regulation S Global Security." Unrestricted Global Securities shall be issued
initially in accordance with Sections 2.06(b)(iv), 2.06(c)(ii) and 2.06(e) in
the name of Cede & Co. as nominee of DTC, duly executed by the Company and
authenticated by the Trustee as hereinafter provided. The aggregate principal
amount of each of the Global Security may from time to time be increased or
decreased by adjustments made on the records of the Trustee as hereinafter
provided.
Each Global Security shall represent such of the outstanding
Securities as shall be specified therein and each shall provide that it shall
represent the aggregate principal amount of outstanding Securities from time to
time endorsed thereon and that the aggregate principal amount of outstanding
Securities represented thereby may from time to time be reduced or increased, as
appropriate, to reflect exchanges, redemptions and transfers of interests
therein in accordance with the terms of this Indenture. Any endorsement of a
Global Security to reflect the amount of any increase or decrease in the
principal amount of outstanding Securities represented thereby shall be made by
the Trustee in accordance with instructions given by the Holder thereof as
required by Section 2.06 hereof.
Upon the issuance of the Global Security to DTC, DTC shall
credit, on its internal book-entry registration and transfer system, its
Participant's accounts with the respective interests owned by such Participants.
Interests in the Global Securities shall be limited to Participants, including
Euroclear and Cedel, and indirect Participants.
The Participants shall not have any rights either under this
Indenture or under any Global Security with respect to such Global Security held
on their behalf by DTC, and DTC may be treated by the Company, the Trustee and
any agent of the Company or the Trustee as the absolute owner of such Global
Security for the purpose of receiving payment of or on account of the principal
of and, subject to the provisions of this Indenture, interest and Additional
Interest, if any, on the Global Securities and for all other purposes.
Notwithstanding the foregoing, nothing herein shall prevent the Company, the
Trustee or any agent of the Company or the Trustee from giving effect to any
written certification, proxy or other authorization
<PAGE> 32
-24-
furnished by DTC or impair, as between DTC and its Participants, the operation
of customary practices of DTC governing the exercise of the rights of an owner
of a beneficial interest in any Global Security.
The provisions of the "Operating Procedures of the Euroclear
System" and "Terms and Conditions Governing Use of Euroclear" and the "General
Terms and Conditions of Cedel Bank" and "Customer Handbook" of Cedel shall be
applicable to interests in the Regulation S Global Security that are held by the
Participants through Euroclear or Cedel.
(b) Physical Securities. Securities offered and sold to
Institutional Accredited Investors who are not also QIBs shall be issued
initially substantially in the form of Exhibit A hereto, in certificated form
and issued in the names of the purchasers thereof (or their nominees), duly
executed by the Company and authenticated by the Trustee as hereinafter
provided. Such Securities, together with any Securities subsequently issued,
whether pursuant to the terms of Section 2.06 hereof or otherwise, that are not
Global Securities, shall be referred to herein as the "Physical Securities."
(c) Securities. The provisions of the form of Securities
contained in Exhibit A hereto are incorporated herein by reference. The
Securities and the Trustee's Certificates of Authentication shall be
substantially in the form of Exhibit A hereto. The Securities may have
notations, legends or endorsements required by law, stock exchange rule, usage
or agreement to which the Company is subject. The Company shall approve the form
of the Securities and any notation, legend or endorsement (including notations
relating to the Guarantee) on them. If required, the Securities may bear the
appropriate legend regarding original issue discount for federal income tax
purposes. Each Security shall be dated the date of its authentication. The terms
and provisions contained in the Securities shall constitute, and are hereby
expressly made, a part of this Indenture.
SECTION 2.02. Execution and Authentication.
Two Officers of the Company shall sign the Securities for the
Company by manual or facsimile signature.
If an Officer whose signature is on a Security no longer holds
that office at the time the Trustee authenticates the Security, the Security
shall be valid nevertheless.
<PAGE> 33
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A Security shall not be valid until an authorized officer of
the Trustee manually signs the certificate of authentication on the Security.
The signature shall be conclusive evidence that the Security has been
authenticated under this Indenture.
The Trustee shall authenticate (i) Initial Securities for
original issue on the Issue Date in the aggregate principal amount of
$75,000,000, (ii) Private Exchange Securities from time to time only in exchange
for a like principal amount of Initial Securities, (iii) Unrestricted Securities
from time to time in exchange for a like principal amount of Initial Securities,
or (iv) one or more series of Securities (which may be in the form of Initial
Securities) in an aggregate principal amount of not more than the excess of
$150,000,000 over the sum of the aggregate principal amount of (A) Initial
Securities then outstanding, (B) Private Exchange Securities then outstanding
and (C) Unrestricted Securities issued in accordance with clause (iii), in each
case upon a Company Order (an "Authentication Order"). The Authentication Order
shall be based upon a Board Resolution of the Company to similar effect filed
with the Trustee and shall specify the amount of such Securities to be
authenticated and the date on which the original issue of such Securities is to
be authenticated. The Authentication Order shall also provide instructions
concerning registration, amounts for each Holder and delivery. The aggregate
principal amount of Securities outstanding at any time may not exceed
$150,000,000 except as provided in Section 2.07. The Securities shall be issued
only in registered form, without coupons and only in denominations of $1,000 and
any integral multiple thereof All Securities issued under this Indenture shall
vote and consent together on all matters as one class and no series of
Securities will have the right to vote or consent as a separate class on any
matter.
SECTION 2.03. Registrar and Paying Agent.
The Company shall maintain an office or agency where
Securities may be presented for registration of transfer or for exchange
("Registrar") and an office or agency where Securities may be presented for
payment ("Paying Agent"). The Company may have one or more co-Registrars and one
or more additional paying agents. The term "Paying Agent" includes any
additional paying agent.
The Company shall enter into an appropriate agency agreement
with any Agent not a party to this Indenture. The agreement shall implement the
provisions of this Indenture that
<PAGE> 34
-26-
relate to such Agent and shall, if required, incorporate the provisions of the
TIA. The Company shall notify the Trustee of the name and address of any such
Agent. If the Company fails to maintain a Registrar or Paying Agent, the Trustee
shall act as such and shall be entitled to appropriate compensation in
accordance with the provisions of Section 7.07.
The Company initially appoints the Trustee as Registrar and
Paying Agent. The Company shall give written notice to the Trustee in the event
that the Company decides to act as Registrar. None of the Company, its
Subsidiaries or any of their Affiliates may act as Paying Agent.
SECTION 2.04. Paying Agent To Hold Money in Trust.
The Company shall require each Paying Agent to agree in
writing (if other than the Trustee, who hereby agrees) to hold in trust for the
benefit of Securityholders or the Trustee all money held by the Paying Agent for
the payment of principal of or interest on the Securities (whether such money
has been paid to it by the Company or any other obligor on the Securities), and
the Company and the Paying Agent shall each notify the Trustee of any default by
the Company (or any other obligor on the Securities) in making any such payment.
The Company at any time may require a Paying Agent to pay all money held by it
to the Trustee and account for any funds disbursed and the Trustee may at any
time during the continuance of any payment default, upon written request to a
Paying Agent, require such Paying Agent to pay all money held by it to the
Trustee and to account for any funds disbursed. Upon making such payment the
Paying Agent shall have no further liability for the money delivered to the
Trustee.
SECTION 2.05. Securityholder Lists.
The Trustee shall preserve in as current a form as is
reasonably practicable the most recent list available to it of the names and
addresses of Securityholders. If the Trustee is not the Registrar, the Company
shall furnish to the Trustee at least five Business Days before each Interest
Payment Date and at such other times as the Trustee may request in writing a
list in such form and as of such date as the Trustee may reasonably require of
the names and addresses of Securityholders.
SECTION 2.06. Transfer and Exchange.
(a) Transfer and Exchange of Global Securities. Transfer of
the Global Securities shall be by delivery. Global
<PAGE> 35
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Securities will be exchanged by the Company for Physical Securities only (i) if
DTC notifies the Company that it is unwilling or unable to continue to act as
depositary with respect to the Global Securities or ceases to be a clearing
agency registered under the Exchange Act and, in either case, a successor
depositary registered as a clearing agency under the Exchange Act is not
appointed by the Company within 120 days, (ii) at any time if the Company in its
sole discretion determines that the Global Securities (in whole but not in part)
should be exchanged for Physical Securities or (iii) if the beneficial owner of
an interest in the Global Securities requests such Physical Securities,
following an Event of Default under this Indenture, in a writing delivered
through DTC to the Trustee.
Upon the occurrence of any of the events specified in the
previous paragraph, Physical Securities shall be issued in such names as DTC
shall instruct the Trustee and the Trustee shall cause the aggregate principal
amount of the applicable Global Security to be reduced accordingly and direct
DTC to make a corresponding reduction in its book-entry system. The Company
shall execute and the Trustee shall authenticate and deliver to the Person
designated in such instructions a Physical Security in the appropriate principal
amount. The Trustee shall deliver such Physical Securities to the Persons in
whose names such Securities are so registered. Physical Securities issued in
exchange for an Initial Global Security pursuant to this Section 2.06(a) shall
bear the Securities Act Legend and shall be subject to all restrictions on
transfer contained therein. Global Securities may also be exchanged or replaced,
in whole or in part, as provided in Sections 2.07 and 2.10. Every Security
authenticated and delivered in exchange for, or in lieu of, a Global Security or
any portion thereof, pursuant to Section 2.07 or 2.10, shall be authenticated
and delivered in the form of, and shall be, a Global Security. A Global Security
may not be exchanged for another Security other than as provided in this Section
2.06(a).
(b) Transfer and Exchange of Interests in Global Securities.
The transfer and exchange of interests in Global Securities shall be effected
through DTC, in accordance with this Indenture and the procedures of DTC
therefor. Interests in Initial Global Securities shall be subject to
restrictions on transfer comparable to those set forth herein to the extent
required by the Securities Act. The Trustee shall have no obligation to
ascertain DTC's compliance with any such restrictions on transfer. Transfers of
interests in Global Securities shall also require compliance with subparagraph
(i) below, as
<PAGE> 36
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well as one or more of the other following subparagraphs as applicable:
(i) All Transfers and Exchanges of Interests in Global
Securities. In connection with all transfers and exchanges of interests
in Global Securities (other than transfers of interests in a Global
Security to Persons who take delivery thereof in the form of an
interest in the same Global Security), the transferor of such interest
must deliver to the Registrar (1) instructions given in accordance with
the Applicable Procedures from a Participant or an indirect Participant
directing DTC to credit or cause to be credited an interest in the
specified Global Security in an amount equal to the interest to be
transferred or exchanged, (2) a written order given in accordance with
the Applicable Procedures containing information regarding the
Participant account to be credited with such increase and (3)
instructions given by the Holder of the Global Security to effect the
transfer referred to in (1) and (2) above.
(ii) Transfer of Interests in the Same Initial Global
Security. Interests in any Initial Global Security may be transferred
to Persons who take delivery thereof in the form of an interest in the
same Initial Global Security in accordance with the transfer
restrictions set forth in Section 2.06(f) hereof.
(iii) Transfer of Interests to Another Initial Global
Security. Interests in any Initial Global Security may be transferred
to Persons who take delivery thereof in the form of an interest in
another Initial Global Security if the Registrar receives the
following:
(A) if the transferee will take delivery in the form
of an interest in the 144A Global Security, then the
transferor must deliver a certificate in the form of Exhibit B
hereto, including the certifications in item 1 thereof; or
(B) if the transferee will take delivery in the form
of an interest in the Regulation S Global Security, then the
transferor must deliver a certificate in the form of Exhibit B
hereto, including the certifications in item 2 thereof.
(iv) Transfer and Exchange of Interests in Initial Global
Security for Interests in an Unrestricted Global
<PAGE> 37
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Security. Interests in any Initial Global Security may be exchanged by
the holder thereof for an interest in the Unrestricted Global Security
or transferred to a Person who takes delivery thereof in the form of an
interest in the Unrestricted Global Security if:
(A) such exchange or transfer is effected pursuant to
the Exchange Registration Statement in accordance with the
Registration Rights Agreement;
(B) any such transfer is effected pursuant to the
Shelf Registration Statement in accordance with the
Registration Rights Agreement; or
(C) the Registrar receives the following:
(1) if the beneficial holder of such an
interest in an Initial Global Security proposes to
exchange it for an interest in the Unrestricted
Global Security, a certificate from such beneficial
holder in the form of Exhibit C hereto, including the
certifications in item 1(a) thereof;
(2) if the beneficial holder of such an
interest in an Initial Global Security proposes to
transfer it to a Person who shall take delivery
thereof in the form of an interest in an Unrestricted
Global Security, a certificate in the form of Exhibit
B hereto, including the certification in item 4
thereof; and
(3) in each such case set forth in this
paragraph (C), an Opinion of Counsel in form
reasonably acceptable to the Company, to the effect
that such exchange or transfer is in compliance with
the Securities Act and, that the restrictions on
transfer contained herein and in Section 2.06(f)
hereof are not required in order to maintain
compliance with the Securities Act.
If any such transfer is effected pursuant to paragraph (B) above at a
time when an Unrestricted Global Security has not yet been issued, the
Company shall issue and, upon receipt of an Authentication Order in
accordance with Section 2.02, the Trustee shall authenticate one or
more Unrestricted Global Securities in an aggregate principal amount
equal to the principal amount of interests in the
<PAGE> 38
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Initial Global Security transferred pursuant to paragraph (B) above.
(v) Notation by the Trustee of Transfer of Interests Among
Global Securities. Upon satisfaction of the requirements for transfer
of interests in Global Securities pursuant to clauses (iii) or (iv)
above, the Trustee shall reduce or cause to be reduced the aggregate
principal amount of the relevant Global Security from which the
interests are being transferred, and increase or cause to be increased
the aggregate principal amount of the Global Security to which the
interests are being transferred, in each case, by the principal amount
so transferred and shall direct DTC to make corresponding adjustments
in its book-entry system. No transfer of interests of a Global Security
shall be effected until, and any transferee pursuant thereto shall
succeed to the rights of a holder of such interests only when, the
Registrar has made appropriate adjustments to the applicable Global
Security in accordance with this paragraph.
(c) Transfer or Exchange of Physical Securities for Interests
in a Global Security.
(i) If any Holder of Physical Securities required to contain
the Securities Act Legend proposes to exchange such Securities for an
interest in a Global Security or to transfer such Physical Securities
to a Person who takes delivery thereof in the form of an interest in a
Global Security, then, upon receipt by the Registrar of the following
documentation (all of which may be submitted by facsimile):
(A) if the Holder of such Physical Registered
Securities proposes to exchange such Securities for an
interest in an Initial Global Security, a certificate from
such Holder in the form of Exhibit C hereto, including the
certifications in item 2 thereof;
(B) if such Physical Securities are being transferred
to a QIB in accordance with Rule 144A under the Securities
Act, a certificate to the effect set forth in Exhibit B
hereto, including the certifications in item 1 thereof; or
(C) if such Physical Securities are being transferred
to a Non-U.S. Person (as defined in Regu-
<PAGE> 39
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lation S) in an offshore transaction in accordance with Rule
904 under the Securities Act, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in
item 2 thereof,
the Trustee shall cancel the Physical Securities, increase or cause to
be increased the aggregate principal amount of, in the case of clause
(B) above, the 144A Global Security or, in the case of clause (C)
above, the Regulation S Global Security, and direct DTC to make a
corresponding increase in its book-entry system.
(ii) A Holder of Physical Securities required to contain the
Securities Act Legend may exchange such Securities for an interest in
the Unrestricted Global Security or transfer such Restricted Physical
Securities to a Person who takes delivery thereof in the form of an
interest in the Unrestricted Global Security only:
(A) if such exchange or transfer is effected pursuant
to the Exchange Registration Statement in accordance with the
Registration Rights Agreement;
(B) any such transfer is effected pursuant to the
Shelf Registration Statement in accordance with the
Registration Rights Agreement;
(C) upon receipt by the Registrar of the following
documentation (all of which may be submitted by facsimile):
(1) if the Holder of such Physical
Securities proposes to exchange such Securities for
an interest in the Unrestricted Global Security, a
certificate from such Holder in the form of Exhibit C
hereto, including the certifications in item 1(b)
thereof;
(2) the Holder of such Registered Securities
proposes to transfer such Securities to a Person who
shall take delivery thereof in the form of an
interest in the Unrestricted Global Security, a
certificate in the form of Exhibit B hereto,
including the certifications in item 4 thereof; and
(3) in each such case set forth in this
paragraph (C), an Opinion of Counsel in form
<PAGE> 40
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reasonably acceptable to the Company, to the effect
that such exchange or transfer is in compliance with
the Securities Act and that the restrictions on
transfer contained herein and in Section 2.06(f)
hereof are not required in order to maintain
compliance with the Securities Act.
If any such transfer is effected pursuant to paragraph (B)
above at a time when an Unrestricted Global Security has not
yet been issued, the Company shall issue and, upon receipt of
an Authentication Order in accordance with Section 2.02, the
Trustee shall authenticate one or more Unrestricted Global
Securities in an aggregate principal amount equal to the
principal amount of Physical Securities transferred pursuant
to paragraph (B) above.
(d) Transfer and Exchange of Physical Securities.
(i) Transfer of a Physical Security to Another Physical
Security. Following the occurrence of one or more of the events
specified in Section 2.06(a), a Physical Security may be transferred to
Persons who take delivery thereof in the form of another Physical
Security if the Registrar receives the following:
(A) if the transfer is being effected pursuant to and
in accordance with Rule 144A, then the transferor must deliver
a certificate in the form of Exhibit B hereto, including the
certifications in item 3(a) thereof; or
(B) if the transfer is being effected pursuant to and
in accordance with Regulation S, then the transferor must
deliver a certificate in the form of Exhibit B hereto,
including the certifications in item 3(b) thereof.
(ii) Transfer and Exchange of Restricted Physical Security for
Physical Security Which Does Not Bear the Securities Act Legend.
Following the occurrence of one or more of the events specified in
Section 2.06(a), a Restricted Physical Security may be exchanged by the
Holder thereof for a Physical Security or transferred to a Person who
takes delivery thereof in the form of a Physical Security which does
not bear the Securities Act Legend if:
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(A) such exchange or transfer is effected pursuant to the Exchange
Registration Statement in accordance with the Registration Rights
Agreement;
(B) any such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement; or
(C) the Registrar receives a certificate from such Holder in the
form of Exhibit C hereto, including the certifications in item 1(c)
thereof and an Opinion of Counsel in form reasonably acceptable to the
Company, to the effect that such exchange or transfer is in compliance
with the Securities Act and, that the restrictions on transfer
contained herein and in Section 2.06(f) hereof are not required in
order to maintain compliance with the Securities Act.
(iii) Exchange of Physical Securities. When Physical Securities are
presented by a Holder to the Registrar with a request to register the
exchange of such Physical Securities for an equal principal amount of
Physical Securities of other authorized denominations, the Registrar shall
make the exchange as requested only if the Physical Securities are endorsed
or accompanied by a written instrument of transfer in form satisfactory to
the Registrar duly executed by such Holder or by his attorney duly
authorized in writing and shall be issued only in the name of such Holder or
its nominee. The Physical Securities issued in exchange for Physical
Securities shall bear the Securities Act Legend and shall be subject to all
restrictions on transfer contained herein in each case to the same extent as
the Physical Securities so exchanged.
(iv) Return of Physical Securities. In the event of a transfer pursuant
to clauses (i) or (ii) above and the Holder thereof has delivered
certificates representing an aggregate principal amount of Securities in
excess of that to be transferred, the Company shall execute and the Trustee
shall authenticate and deliver to the Holder of such Security without
service charge, a new Physical Security or Securities of any authorized
denomination requested by the Holder, in an aggregate principal amount equal
to the portion of the Security not so transferred.
(e) Exchange Offer. Upon the occurrence of the Exchange Offer (as
defined in the Registration Rights Agreement)
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in accordance with the Registration Rights Agreement, the Company shall issue
and, upon receipt of an Authentication Order in accordance with Section 2.02,
the Trustee shall authenticate one or more Unrestricted Global Securities in an
aggregate principal amount equal to the principal amount of the interests in the
Initial Global Securities and Restricted Physical Securities tendered for
acceptance by persons participating therein. Concurrently with the issuance of
such Securities, the Trustee shall cause the aggregate principal amount of the
applicable Initial Global Securities to be reduced accordingly and direct DTC to
make a corresponding reduction in its book-entry system. The Trustee shall
cancel any Restricted Physical Certificates in accordance with Section 2.11
hereof.
In the case that one or more of the events specified in Section 2.06(a)
have occurred, upon the occurrence of such Exchange Offer, the Company shall
issue and, upon receipt of an Authentication Order in accordance with Section
2.02, the Trustee shall authenticate Unrestricted Physical Securities in an
aggregate principal amount equal to the principal amount of the Restricted
Physical Securities tendered for acceptance by persons participating therein.
(f) Legends. Each Initial Global Security and each Restricted Physical
Security shall bear the legend (the "Securities Act Legend") in substantially
the following form:
"THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY
ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND THE SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THE SECURITY
EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON
THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT
PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THE SECURITY EVIDENCED
HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY MAY
BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1)(a) TO A PERSON
WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER
(AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144A, (b) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT OR (c) OUTSIDE THE
UNITED STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT, (2) TO
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THE COMPANY OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND,
IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY
STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B)
THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY
PURCHASER FROM IT OF THE SECURITY EVIDENCED HEREBY OF THE RESALE
RESTRICTIONS SET FORTH IN (A) ABOVE."
(g) Global Security Legend. Each Global Security shall bear a legend in
substantially the following form:
"UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN
DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE
BY THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO A
NOMINEE OF DTC, OR BY ANY NOMINEE OF DTC, OR BY DTC TO A SUCCESSOR
DEPOSITORY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITORY. UNLESS THIS
CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF DTC TO THE
COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT,
AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR
SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC
(AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR
THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS
GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH
THE RESTRICTIONS SET FORTH IN SECTION 2.06 OF THE INDENTURE."
(h) Cancellation and/or Adjustment of Global Securities. At such time
as all interests in the Global Securities have been exchanged for Physical
Securities, all Global Securities shall be returned to or retained and cancelled
by the Trustee in accordance with Section 2.11 hereof. At any time prior to such
cancellation, if any interest in a Global Security is exchanged for an interest
in another Global Security or for Physical Securities, the principal amount of
Securities represented by such Global Security shall be reduced accordingly and
an endorsement shall be made on such Global Security, by the Trustee to reflect
such reduction.
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(i) General Provisions Relating to All Transfers and Exchanges.
(i) To permit registrations of transfers and exchanges, the Company
shall execute and the Trustee shall authenticate Global Securities and
Physical Securities upon a written order signed by an Officer of the Company
or at the Registrar's request.
(ii) No service charge shall be made to a Holder for any registration
of transfer or exchange, but the Company may require payment of a sum
sufficient to cover any stamp or transfer tax or similar governmental charge
payable in connection therewith (other than any such stamp or transfer taxes
or similar governmental charge payable upon exchange or transfer pursuant to
Sections 2.10, 3.06, 4.05, 4.14 and 10.05 hereof).
(iii) All Global Securities and Physical Securities issued upon any
registration of transfer or exchange of Global Securities or Physical
Securities shall be the valid obligations of the Company, evidencing the
same debt, and entitled to the same benefits under this Indenture, as the
Global Securities or Physical Securities surrendered upon such registration
of transfer or exchange.
(iv) The Company shall not be required (A) to issue, to register the
transfer of or to exchange Securities during a period beginning at the
opening of business 15 days before the day of any selection of Securities
for redemption under Section 3.02 hereof and ending at the close of business
on the day of selection, (B) to register the transfer of or to exchange any
Security so selected for redemption in whole or in part, except the
unredeemed portion of any Security being redeemed in part or (C) to register
the transfer of or to exchange a Security between a record date and the next
succeeding Interest Payment Date.
(v) Prior to due presentment for the registration of a transfer of
any Security, the Trustee, any Agent and the Company may deem and treat the
Person in whose name any Security is registered as the absolute owner of
such Security for the purpose of receiving payment of principal of and
interest on such Securities and for all other purposes, and none of the
Trustee, any Agent or the Company shall be affected by notice to the
contrary.
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SECTION 2.07. Replacement Securities.
If a mutilated Security is surrendered to the Trustee or if the Holder
of a Security claims that the Security has been lost, destroyed or wrongfully
taken, the Company shall issue and the Trustee shall authenticate a replacement
Security if the Trustee's requirements are met. An indemnity bond in an amount
sufficient in the judgment of the Company and the Trustee to protect the
Company, the Trustee or any Agent from any loss which any of them may suffer if
a Security is replaced may be required by the Trustee or the Company. The
Company and the Trustee each may charge such Holder for its expenses in
replacing such Security.
Every replacement Security is an additional obligation of the Company.
SECTION 2.08. Outstanding Securities.
Securities outstanding at any time are all Securities that have been
authenticated by the Trustee except for those cancelled by it, those delivered
to it for cancellation and those described in this Section as not outstanding. A
Security does not cease to be outstanding because the Company or one of its
Affiliates holds the Security.
If a Security is replaced pursuant to Section 2.07, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced Security is held by a bona fide purchaser.
If the Paying Agent holds on a redemption date or Maturity Date money
sufficient to pay the principal of, and interest on Securities payable on that
date, then on and after that date such Securities cease to be outstanding and
interest on them ceases to accrue.
SECTION 2.09. Treasury Securities.
In determining whether the Holders of the required principal amount of
Securities have concurred in any direction, waiver or consent, Securities owned
by the Company, any Subsidiary or any of their respective Affiliates shall be
disregarded, except that for the purposes of determining whether the Trustee
shall be protected in relying on any such direction, waiver or consent, only
Securities that the Trustee actually knows are so owned shall be so disregarded.
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The Trustee may require an Officers' Certificate listing securities
owned by the Company, any Subsidiary or any of their respective Affiliates.
SECTION 2.10. Temporary Securities.
Until definitive Securities are ready for delivery, the Company may
prepare and the Trustee shall authenticate temporary Securities. Temporary
Securities shall be substantially in the form of definitive Securities but may
have variations that the Company considers appropriate for temporary Securities.
Without unreasonable delay, the Company shall prepare and the Trustee shall
authenticate definitive Securities in exchange for temporary Securities. Until
such exchange, temporary Securities shall be entitled to the same rights,
benefits and privileges as definitive Securities.
SECTION 2.11. Cancellation.
The Company at any time may deliver Securities to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Securities surrendered to them for transfer, exchange or payment. The
Trustee and no one else shall cancel all Securities surrendered for transfer,
exchange, payment or cancellation. The Company may not issue new Securities to
replace, or reissue or resell, Securities which the Company has redeemed or paid
or have been delivered to the Trustee for cancellation. The Trustee (subject to
the record-retention requirements of the Exchange Act) shall destroy cancelled
Securities and deliver a certificate of destruction thereof to the Company.
SECTION 2.12. Defaulted Interest.
If the Company defaults in a payment of interest on the Securities, it
shall pay the defaulted interest, plus any interest payable on the defaulted
interest pursuant to Section 4.01 hereof, to the persons who are Securityholders
on a subsequent special record date, and such term, as used in this Section 2.12
with respect to the payment of any defaulted interest, shall mean the fifteenth
day next preceding the date fixed by the Company for the payment of defaulted
interest, whether or not such day is a Business Day. At least 15 days before
such special record date, the Company shall mail to each Securityholder and to
the Trustee a notice that states such special record date, the payment date and
the amount of defaulted interest to be paid.
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SECTION 2.13. CUSIP or CINS Number.
The Company in issuing the Securities may use a "CUSIP" or "CINS"
number, and if so, such CUSIP or CINS number shall be included in notices of
redemption or exchange as a convenience to Holders; provided that any such
notice may state that no representation is made as to the correctness or
accuracy of the CUSIP or CINS number printed in the notice or on the Securities,
and that reliance may be placed only on the other identification numbers printed
on the Securities. The Company will promptly notify the Trustee of any change in
the CUSIP or CINS number.
In the event that the Company shall issue and the Trustee shall
authenticate any Securities issued under this Indenture subsequent to the Issue
Date pursuant to the fourth paragraph of Section 2.02, the Company shall use its
best efforts to obtain the same "CUSIP" number for such Securities as is printed
on the Securities outstanding at such time; provided, however, that if any
series of Securities issued under this Indenture subsequent to the Issue Date is
determined, pursuant to an Opinion of Counsel of the Company in a form
reasonably satisfactory to the Trustee to be a different class of security than
the Securities outstanding at such time for federal income tax purposes, the
Company may obtain a "CUSIP" number for such Securities that is different than
the "CUSIP" number printed on the Securities then outstanding.
SECTION 2.14. Payments of Interest.
(a) The Holder of a Physical Security at the close of business on the
regular record date with respect to any Interest Payment Date shall be entitled
to receive the interest and Additional Interest, if any, payable on such
Interest Payment Date notwithstanding any transfer or exchange of such Physical
Security subsequent to the regular record date and prior to such Interest
Payment Date, except if and to the extent the Company shall default in the
payment of the interest or Additional Interest due on such Interest Payment
Date, in which case such defaulted interest and Additional Interest, if any,
shall be paid in accordance with Section 2.12; provided that, in the event of an
exchange of a Physical Security for a beneficial interest in any Global Security
subsequent to a regular record date or any special record date and prior to or
on the related Interest Payment Date or other payment date under Section 2.12,
any payment of the interest and Additional Interest payable on such payment date
with respect to any such Physical Security shall be made to the Person in whose
name
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such Physical Security was registered on such record date. Payments of
interest on the Global Securities will be made to the Holder of the Global
Security on each Interest Payment Date; provided that, in the event of an
exchange of all or a portion of a Global Security for Physical Security
subsequent to the regular record date or any special record date and prior to or
on the related Interest Payment Date or other payment date under Section 2.12
any payment of interest or Additional Interest payable on such Interest Payment
Date or other payment date with respect to the Physical Security shall be made
to the Holder of the Global Security.
(b) The Trustee shall pay interest and Additional Interest, if any, to
DTC, with respect to any Global Security held by DTC, on the applicable Interest
Payment Date in accordance with instructions received from DTC at least five
Business Days before the applicable Interest Payment Date.
ARTICLE THREE
REDEMPTION
SECTION 3.01. Notices to Trustee.
If the Company wants to redeem Securities pursuant to paragraph 5 of
the Securities at the applicable redemption price set forth thereon, it shall
notify the Trustee in writing of the redemption date and the principal amount of
Securities to be redeemed.
The Company shall give the notice provided for in this Section 3.01 at
least 45 days before the redemption date (unless a shorter notice shall be
agreed to by the Trustee in writing) but not more than 60 days before the
redemption date, together with an Officers' Certificate stating that such
redemption will comply with the conditions contained herein.
SECTION 3.02. Selection of Securities To Be Redeemed.
If less than all of the Securities are to be redeemed pursuant to
paragraph 5 thereof, the Trustee shall select the Securities to be redeemed pro
rata or by lot or in such other manner as the Trustee shall deem appropriate and
fair. The Trustee shall make the selection from the Securities then outstanding,
subject to redemption and not previously called for redemption. The Trustee may
select for redemption portions (equal to $1,000 or any integral multiple
thereof) of the principal of Securities that have denominations larger than
$1,000.
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Provisions of this Indenture that apply to Securities called for redemption also
apply to portions of Securities called for redemption.
SECTION 3.03. Notice of Redemption.
At least 30 days but not more than 60 days before a redemption date,
the Company shall mail a notice of redemption by first class mail to each Holder
whose Securities are to be redeemed.
The notice shall identify the Securities to be redeemed and shall
state:
(1) the redemption date;
(2) the redemption price;
(3) the CUSIP number;
(4) the name and address of the Paying Agent to which the Securities
are to be surrendered for redemption;
(5) that Securities called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(6) that, unless the Company defaults in making the redemption payment,
interest on Securities called for redemption ceases to accrue on and after
the redemption date and the only remaining right of the Holders is to
receive payment of the redemption price upon surrender to the Paying Agent;
and
(7) if any Security is being redeemed in part, the portion of the
principal amount of such Security to be redeemed and that, after the
redemption date, upon surrender of such Security, a new Security or
Securities in principal amount equal to the unredeemed portion thereof will
be issued.
At the Company's request, the Trustee shall give the notice of
redemption on behalf of the Company, in the Company's name and at the Company's
expense.
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SECTION 3.04. Effect of Notice of Redemption.
Once a notice of redemption is mailed, Securities called for redemption
become due and payable on the redemption date and at the redemption price. Upon
surrender to the Paying Agent, such Securities shall be paid at the redemption
price, plus accrued interest thereon to the redemption date, but interest
installments whose maturity is on or prior to such redemption date shall be
payable to the Holders at the close of business on the relevant record dates
referred to in the Securities. The Trustee shall not be required to (i) issue,
authenticate, register the transfer of or exchange any Security during a period
beginning 15 days before the date a notice of redemption is mailed and ending at
the close of business on the date the redemption notice is mailed, or (ii)
register the transfer or exchange of any Security so selected for redemption in
whole or in part, except the unredeemed portion of any Security being redeemed
in part.
SECTION 3.05. Deposit of Redemption Price.
At least one Business Day before the redemption date, the Company shall
deposit with the Paying Agent money sufficient to pay the redemption price of
and accrued interest on all Securities to be redeemed on that date other than
Securities or portions thereof called for redemption on that date which have
been delivered by the Company to the Trustee for cancellation.
SECTION 3.06. Securities Redeemed in Part.
Upon surrender of a Security that is redeemed in part, the Trustee
shall authenticate for the Holder a new Security equal in principal amount to
the unredeemed portion of the Security surrendered.
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ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Securities.
The Company shall pay the principal of and interest on the Securities
in the manner provided in the Securities. An installment of principal or
interest shall be considered paid on the date due if the Trustee or Paying Agent
holds on that date money designated for and sufficient to pay the installment in
full and is not prohibited from paying such money to the Holders of the
Securities pursuant to the terms of this Indenture.
The Company shall pay interest on overdue principal (including, to the
extent permitted by applicable law, post-petition interest in a proceeding under
any Bankruptcy Law) at the same rate per annum borne by the Securities. The
Company shall pay interest on overdue installments of interest at the same rate
per annum borne by the Securities, to the extent lawful.
SECTION 4.02. Maintenance of Office or Agency.
The Company shall maintain in the Borough of Manhattan, The City of New
York, an office or agency where Securities may be surrendered for registration
of transfer or exchange or for presentation for payment and where notices and
demands to or upon the Company in respect of the Securities and this Indenture
may be served. The Company shall give prompt written notice to the Trustee of
the location, and any change in the location, of such office or agency. If at
any time the Company shall fail to maintain any such required office or agency
or shall fail to furnish the Trustee with the address thereof, such
presentations, surrenders, notices and demands may be made or served at the
address of the Trustee set forth in Section 13.02.
The Company may also from time to time designate one or more other
offices or agencies where the Securities may be presented or surrendered for any
or all such purposes and may from time to time rescind such designations;
provided that no such designation or rescission shall in any manner relieve the
Company of its obligation to maintain an office or agency in the Borough of
Manhattan, The City of New York, for such purposes. The Company shall give
prompt written notice to the
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Trustee of any such designation or rescission and of any change in the location
of any such other office or agency.
SECTION 4.03. Limitation on Transactions with Affiliates and Related Persons.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, enter into directly or indirectly any transaction with any of
their respective Affiliates or Related Persons (other than the Company or a
Restricted Subsidiary of the Company), including, without limitation, the
purchase, sale, lease or exchange of property, the rendering of any service, or
the making of any guarantee, loan, advance or Investment, either directly or
indirectly, involving aggregate consideration in excess of $1.0 million unless a
majority of the disinterested directors of the Board of Directors of the Company
determines, in its good faith judgment evidenced by a resolution of such Board
of Directors filed with the Trustee, that the terms of such transaction are at
least as favorable as the terms that could be obtained by the Company or such
Restricted Subsidiary, as the case may be, in a comparable transaction made on
an arm's-length basis between unaffiliated parties; provided, however, that if
the aggregate consideration is in excess of $5.0 million the Company shall also
obtain, prior to the consummation of the transaction, the favorable opinion as
to the fairness of the transaction to the Company or such Restricted Subsidiary
from a financial point of view from an independent financial advisor. The
provisions of this covenant shall not apply to (i) transactions permitted by
Section 4.06 and (ii) reasonable fees and compensation paid to, and indemnity
provided on behalf of, officers, directors and employees of the Company and its
Restricted Subsidiaries as determined in good faith by the Board of Directors or
authorized executive officers, as the case may be, of the Company.
SECTION 4.04. Limitation on Indebtedness.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, Incur any Indebtedness (including
Acquired Indebtedness), except: (i) Indebtedness of the Company or any of its
Restricted Subsidiaries, if immediately after giving effect to the Incurrence of
such Indebtedness and the receipt and application of the net proceeds thereof,
the Consolidated Cash Flow Ratio of the Company for a year consisting of the
four full fiscal quarters for which quarterly or annual financial statements are
available next preceding the Incurrence of such Indebtedness (calculated on a
pro forma basis in accordance with Article 11
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of Regulation S-X under the Securities Act or any successor provision as if such
Indebtedness had been Incurred on the first day of such year) would be greater
than 2.0 to 1.0; (ii) Indebtedness of the Company and its Restricted
Subsidiaries Incurred under the Credit Agreement in an amount not to exceed
$100.0 million in aggregate principal amount less the amount of any such
Indebtedness that is permanently repaid or, without duplication, the amount by
which commitments thereunder are permanently reduced, in either case, from the
proceeds of Asset Dispositions (it being understood that the amount incurred
under the Credit Agreement may be increased as a result of the operation of
clause (xiii) below); (iii) Indebtedness owed by the Company to any direct or
indirect Wholly Owned Subsidiary of the Company or Indebtedness owed by a direct
or indirect Restricted Subsidiary of the Company to the Company or a direct or
indirect Wholly Owned Subsidiary of the Company; provided, however, upon either
(I) the transfer or other disposition by such direct or indirect Wholly Owned
Subsidiary or the Company of any Indebtedness so permitted under this clause
(iii) to a Person other than the Company or another direct or indirect Wholly
Owned Subsidiary of the Company or (II) the issuance (other than directors'
qualifying shares), sale, transfer or other disposition of shares of Capital
Stock or other ownership interests (including by consolidation or merger) of
such direct or indirect Wholly Owned Subsidiary to a Person other than the
Company or another such Wholly Owned Subsidiary of the Company, the provisions
of this clause (iii) shall no longer be applicable to such Indebtedness and such
Indebtedness shall be deemed to have been Incurred at the time of any such
issuance, sale, transfer or other disposition, as the case may be; (iv)
Indebtedness of the Company or any Restricted Subsidiary under any interest rate
or foreign currency hedge or exchange or other similar agreement to the extent
entered into to hedge any other Indebtedness permitted under this Indenture
(including the Securities); (v) Indebtedness Incurred to defer, renew, extend,
replace, refinance or refund, whether under any amendment, supplement or
otherwise (collectively for purposes of this clause (v), to "refund") any
Indebtedness outstanding on the Issue Date, any Indebtedness Incurred under the
prior clause (i) above or the Securities and the Guarantee; provided, however,
that (I) such Indebtedness does not exceed the principal amount (or accrual
amount, if less) of Indebtedness so refunded plus the amount of any premium
required to be paid in connection with such refunding pursuant to the terms of
the Indebtedness refunded or the amount of any premium reasonably determined by
the issuer of such Indebtedness as necessary to accomplish such refunding by
means of a tender offer, exchange offer, or privately negotiated repurchase,
plus the expenses of
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such issuer reasonably incurred in connection therewith and (II)(A) in the case
of any refunding of Indebtedness that is pari passu with the Securities, such
refunding Indebtedness is made pari passu with or subordinate in right of
payment to the Securities, and, in the case of any refunding of Indebtedness
that is subordinate in right of payment to the Securities, such refunding
Indebtedness is subordinate in right of payment to the Securities on terms no
less favorable to the Holders of the Securities than those contained in the
Indebtedness being refunded, (B) in either case, the refunding Indebtedness by
its terms, or by the terms of any agreement or instrument pursuant to which such
Indebtedness is issued, does not have an Average Life that is less than the
remaining Average Life of the Indebtedness being refunded and does not permit
redemption or other retirement (including pursuant to any required offer to
purchase to be made by the Company or a Restricted Subsidiary of the Company) of
such Indebtedness at the option of the holder thereof prior to the final stated
maturity of the Indebtedness being refunded, other than a redemption or other
retirement at the option of the holder of such Indebtedness (including pursuant
to a required offer to purchase made by the Company or a Restricted Subsidiary
of the Company) which is conditioned upon a change of control of the Company
pursuant to provisions substantially similar to those contained in Section 4.14
and (C) any Indebtedness Incurred to refund any Indebtedness is Incurred by the
obligor on the Indebtedness being refunded or by the Company; (vi) commodity
agreements of the Company or any of its Restricted Subsidiaries to the extent
entered into to protect the Company and its Restricted Subsidiaries from
fluctuations in the prices of raw materials used in their businesses; (vii)
Indebtedness of the Company under the Exchange Securities (as defined in the
Registration Rights Agreement) and Indebtedness of the Guarantors, under the
Guarantee incurred in accordance with this Indenture; (viii) Indebtedness
outstanding on the Issue Date; (ix) guarantees by the Company or its Restricted
Subsidiaries of Indebtedness otherwise permitted to be incurred hereunder; (x)
Indebtedness the net proceeds of which are applied to defease the Securities in
their entirety; (xi) Indebtedness of the Company or any of its Subsidiaries that
is an endorsement of bank drafts and similar negotiable instruments for
collection or deposit in the ordinary course of business; (xii) Indebtedness
incurred by the Company or any of its Restricted Subsidiaries constituting
reimbursement obligations with respect to letters of credit issued in the
ordinary course of business, including, without limitation, letters of credit in
respect of workers' compensation claims or self-insurance, or other Indebtedness
with respect to reimbursement type obligations regarding workers' com-
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pensation claims or self-insurance and obligations in respect of performance and
surety bonds and completion guarantees provided by the Company or any Restricted
Subsidiary of the Company in the ordinary course of business not in excess of
$2.0 million; and (xiii) Indebtedness of the Company or its Restricted
Subsidiaries not otherwise permitted to be Incurred pursuant to clauses (i)
through (xii) above which, together with any other outstanding Indebtedness
Incurred pursuant to this clause (xiii), has an aggregate principal amount not
in excess of $20.0 million at any time outstanding, which Indebtedness may be
Incurred under the Credit Agreement or otherwise.
SECTION 4.05. Limitation on Certain Asset Dispositions.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, make one or more Asset Dispositions
unless: (i) the Company or such Restricted Subsidiary, as the case may be,
receives consideration for such Asset Disposition at least equal to the fair
market value of the assets sold or disposed of as determined by the Board of
Directors of the Company in good faith and evidenced by a resolution of such
Board of Directors filed with the Trustee; (ii) not less than 75% of the
consideration for the disposition consists of cash or readily marketable cash
equivalents or the assumption of Indebtedness (other than non-recourse
Indebtedness or any Subordinated Indebtedness) of the Company or such Restricted
Subsidiary or other obligations relating to such assets (and release of the
Company or such Restricted Subsidiary from all liability on the Indebtedness or
other obligations assumed); and (iii) all Net Available Proceeds, less any
amounts invested within 360 days of such Asset Disposition in assets related to
the business of the Company or its Restricted Subsidiaries (including in Capital
Stock of another Person (other than any Person that is a Restricted Subsidiary
of the Company immediately prior to such investment); provided, however, that
immediately after giving effect to any such investment in Capital Stock (and not
prior thereto) such Person shall be a Restricted Subsidiary of the Company), are
applied, on or prior to the 360th day after such Asset Disposition, unless and
to the extent that the Company shall determine to make an Offer to Purchase, to
the permanent reduction and prepayment of any Senior Debt of the Company then
outstanding (including a permanent reduction of commitments in respect thereof).
Any Net Available Proceeds from any Asset Disposition which is subject to the
immediately preceding sentence that are not applied as provided in the
immediately preceding sentence shall be used promptly after the expiration of
the 360th day after such Asset Disposition, or promptly after the
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Company shall have earlier determined to not apply any Net Available Proceeds
therefrom as provided in clause (iii) of the immediately preceding sentence, to
make an Offer to Purchase outstanding Securities at a purchase price in cash
equal to 100% of their principal amount plus accrued interest to the Purchase
Date. Notwithstanding the foregoing, the Company may defer making any Offer to
Purchase outstanding Securities until there are aggregate unutilized Net
Available Proceeds from Asset Dispositions otherwise subject to the two
immediately preceding sentences equal to or in excess of $5.0 million (at which
time, the entire unutilized Net Available Proceeds from Asset Dispositions
otherwise subject to the two immediately preceding sentences, and not just the
amount in excess of $5.0 million, shall be applied as required pursuant to this
paragraph). Any remaining Net Available Proceeds following the completion of the
required Offer to Purchase may be used by the Company for any other purpose
(subject to the other provisions of this Indenture) and the amount of Net
Available Proceeds then required to be otherwise applied in accordance with this
Section 4.05 shall be reset to zero, subject to any subsequent Asset
Disposition. These provisions will not apply to a transaction consummated in
compliance with the provisions of Section 5.01.
In the event that the Company makes an Offer to Purchase the
Securities, the Company shall comply with any applicable securities laws and
regulations, including any applicable requirements of Section 14(e) of, and Rule
14e-1 under, the Exchange Act.
SECTION 4.06. Limitation on Restricted Payments.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, (i) declare or pay any dividend, or
make any distribution of any kind or character (whether in cash, property or
securities), on or in respect of any class of the Capital Stock of the Company
or any of its Restricted Subsidiaries excluding any (x) dividends or
distributions payable solely in shares of Capital Stock of the Company (other
than Disqualified Stock) or in options, warrants or other rights to acquire
Capital Stock of the Company (other than Disqualified Stock), or (y) in the case
of any Restricted Subsidiary of the Company, dividends or distributions payable
to the Company or a Restricted Subsidiary of the Company, (ii) purchase, redeem,
or otherwise acquire or retire for value shares of Capital Stock of the Company
or any of its Restricted Subsidiaries, any options, warrants or rights to
purchase or acquire shares of Capital Stock of the Company or any
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of its Restricted Subsidiaries or any securities convertible or exchangeable
into shares of Capital Stock of the Company or any of its Restricted
Subsidiaries, excluding any such shares of Capital Stock, options, warrants,
rights or securities which are owned by the Company or a Restricted Subsidiary
of the Company, (iii) make any Investment in (other than a Permitted
Investment), or make any payment on a guarantee of any obligation of, any
Person, other than the Company or a direct or indirect Wholly Owned Subsidiary
of the Company, or (iv) redeem, defease, repurchase, retire or otherwise acquire
or retire for value, prior to any scheduled maturity, repayment or sinking fund
payment, Subordinated Indebtedness (each of the transactions described in
clauses (i) through (iv) (other than any exception to any such clause) being a
"Restricted Payment"), if at the time thereof: (1) a Default or an Event of
Default shall have occurred and be continuing, or (2) upon giving effect to such
Restricted Payment, the Company could not Incur at least $1.00 of additional
Indebtedness pursuant to clause (i) of Section 4.04, or (3) upon giving effect
to such Restricted Payment, the aggregate of all Restricted Payments made on or
after the Issue Date exceeds the sum of: (a) 50% of cumulative Consolidated Net
Income of the Company (or, in the case cumulative Consolidated Net Income of the
Company shall be negative, less 100% of such deficit) since the Issue Date, plus
(b) 100% of the aggregate net proceeds received after the Issue Date, including
the fair market value of property other than cash (determined in good faith by
the Board of Directors of the Company as evidenced by a resolution of such Board
of Directors filed with the Trustee) from the issuance of, or equity
contribution with respect to, Capital Stock (other than Disqualified Stock) of
the Company and warrants, rights or options on Capital Stock (other than
Disqualified Stock) of the Company (other than in respect of any such issuance
to a Restricted Subsidiary of the Company) and the principal amount of
Indebtedness of the Company or any of its Restricted Subsidiaries that has been
converted into or exchanged for Capital Stock of the Company which Indebtedness
was Incurred after the Issue Date; plus (c) the excess of (x) 100% of the
aggregate net cash proceeds received on the Issue Date from the issuance of, or
the equity contribution with respect to, Capital Stock of the Company over (y)
$10,875,000; plus (d) 100% of the aggregate after-tax net cash proceeds, of the
sale or other disposition of any Investment constituting a Restricted Payment
made after the Issue Date; provided that any gain on the sale or disposition to
the extent included in this clause (d) shall not be included in determining
Consolidated Net Income for purposes of clause (a) above; provided, further,
that amounts included in this clause
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(d) shall not exceed the Net Investment by the Company in the asset so sold or
disposed.
The foregoing provision shall not be violated by (i) any dividend on
any class of Capital Stock of the Company or any of its Restricted Subsidiaries
paid within 60 days after the declaration thereof if, on the date when the
dividend was declared, the Company or such Restricted Subsidiary, as the case
may be, could have paid such dividend in accordance with the provisions of this
Indenture, (ii) the renewal, extension, refunding or refinancing of any
Indebtedness otherwise permitted pursuant to clause (v) of Section 4.04, (iii)
the exchange or conversion of any Indebtedness of the Company or any of its
Restricted Subsidiaries for or into Capital Stock of the Company (other than
Disqualified Stock), (iv) so long as no Default or Event of Default has occurred
and is continuing, any Investment made with the proceeds of a substantially
concurrent sale (other than in respect of any issuance to a Restricted
Subsidiary of the Company) for cash of Capital Stock of the Company (other than
Disqualified Stock); provided, however, that the proceeds of such sale of
Capital Stock, to the extent used in any such Investment, shall not be (and have
not been) included in subclause (b) of clause (3) of the preceding paragraph,
(v) the redemption, repurchase, retirement or other acquisition of any Capital
Stock of the Company in exchange for or out of the net cash proceeds of a
substantially concurrent sale (other than to a Restricted Subsidiary of the
Company) of Capital Stock of the Company (other than Disqualified Stock);
provided, however, that the proceeds of such sale of Capital Stock, to the
extent used for such redemption, repurchase, retirement or other acquisition or
retirement, shall not be (and have not been) included in subclause (b) of clause
(3) of the preceding paragraph, (vi) payments made to purchase, redeem or
otherwise acquire or retire for value shares of Capital Stock of the Company or
any of its Restricted Subsidiaries at no more than fair market value (determined
in good faith by the Board of Directors of the Company as evidenced by a
resolution of such Board of Directors filed with the Trustee) from present and
former officers and directors of the Company or any such Restricted Subsidiary
(other than F. Patrick Smith, J. Andrew McWethy, Barry A. Solomon and Stephen A.
Tuttle) in an amount not in excess of up to $2.0 million for each fiscal year
and $5.0 million in the aggregate, (vii) all payments, not exceeding $600,000 in
the aggregate, for each fiscal year, required to be made to Tekni-Plex Partners,
L.P. MST/TP Partners, L.P., MST Management, L.P., MST Partners L.P. or their
respective Affiliates or partners under the terms of existing agreements and
notes, (viii) so long as no Default or Event of Default has oc-
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curred and is continuing, the redemption, repurchase or retirement of
Subordinated Indebtedness of the Company in exchange for, by conversion into, or
out of the net proceeds of, a substantially concurrent sale or incurrence of
Subordinated Indebtedness (other than any Indebtedness owed to a Subsidiary) of
the Company that is contractually subordinated in right of payment to the
Securities to at least the same extent, and which has an Average Life at least
as long, in each case, as the subordinated Indebtedness being redeemed,
repurchased or retired, (ix) so long as no Default or Event of Default has
occurred and is continuing, Investments not otherwise permitted pursuant to the
clauses above up to $10.0 million in the aggregate, and (x) so long as no
Default or Event of Default has occurred and is continuing, Restricted Payments
not otherwise permitted pursuant to the clauses above up to $2.0 million in the
aggregate. Each Restricted Payment described in clauses (i) (to the extent not
already taken into account for purposes of computing the aggregate amount of all
Restricted Payments pursuant to clause 3 above), (iv), (vi), (vii), (ix) and (x)
of the previous sentence shall be taken into account for purposes of computing
the aggregate amount of all Restricted Payments pursuant to clause (3) of the
preceding paragraph.
For purposes of this Section 4.06, (i) an "Investment" shall be deemed
to have been made at the time any Restricted Subsidiary is designated as an
Unrestricted Subsidiary in an amount (proportionate to the Company's equity
interest in such Subsidiary) equal to the net worth of such Restricted
Subsidiary at the time that such Restricted Subsidiary is designated as an
Unrestricted Subsidiary; (ii) at any date the aggregate of all Restricted
Payments made as Investments since the Issue Date shall exclude and be reduced
by an amount (proportionate to the Company's equity interest in such Subsidiary)
equal to the net worth of an Unrestricted Subsidiary at the time that such
Unrestricted Subsidiary is designated a Restricted Subsidiary, not to exceed, in
the case of any such redesignation of an Unrestricted Subsidiary as a Restricted
Subsidiary, the amount of Investments previously made by the Company and the
Restricted Subsidiaries in such Unrestricted Subsidiary (in each case (i) and
(ii) "net worth" to be calculated based upon the fair market value of the assets
of such Subsidiary as of any such date of designation); and (iii) any property
transferred to or from an Unrestricted Subsidiary shall be valued at its fair
market value at the time of such transfer.
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SECTION 4.07. Corporate Existence.
Subject to Article Five, the Company shall do or shall cause to be done
all things necessary to preserve and keep in full force and effect its corporate
existence and the corporate, partnership or other existence of each of its
Restricted Subsidiaries in accordance with the respective organizational
documents of each such Restricted Subsidiary and the rights (charter and
statutory) and material franchises of the Company and its Restricted
Subsidiaries; provided, however, that the Company shall not be required to
preserve any such right or franchise, or the corporate existence of any
Restricted Subsidiary, if the Board of Directors of the Company shall determine
that the preservation thereof is no longer desirable in the conduct of the
business of the Company and its Restricted Subsidiaries, taken as a whole, and
that the loss thereof is not, and will not be, adverse in any material respect
to the Holders; provided, further, however, that a determination of the Board of
Directors of the Company shall not be required in the event of a merger of one
or more wholly-owned Subsidiaries of the Company with or into another
wholly-owned Subsidiary of the Company or another Person, if the surviving
Person is a wholly-owned Subsidiary of the Company organized under the laws of
the United States or a State thereof or of the District of Columbia.
SECTION 4.08. Payment of Taxes and Other Claims.
The Company shall pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (1) all material taxes, assessments and
governmental charges levied or imposed upon the Company or any Subsidiary of the
Company or upon the income, profits or property of the Company or any Subsidiary
of the Company and (2) all lawful claims for labor, materials and supplies
which, in each case, if unpaid, might by law become a material liability, or
Lien upon the property, of the Company or any Subsidiary of the Company;
provided, however, that the Company shall not be required to pay or discharge or
cause to be paid or discharged any such tax, assessment, charge or claim whose
amount, applicability or validity is being contested in good faith by
appropriate proceedings and for which appropriate provision has been made.
SECTION 4.09. Notice of Defaults.
(1) In the event that any Indebtedness of the Company or any of its
Restricted Subsidiaries is declared due and payable before its maturity
because of the occurrence
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of any default (or any event which, with notice or lapse of time, or both,
would constitute such a default) under such Indebtedness, the Company shall
promptly give written notice to the Trustee of such declaration, the status
of such default or event and what action the Company is taking or proposes
to take with respect thereto.
(2) Upon becoming aware of any Default or Event of Default, the Company
shall promptly deliver an Officers' Certificate to the Trustee specifying
the Default or Event of Default.
SECTION 4.10. Maintenance of Properties.
The Company shall cause all material properties owned by or leased to
it or any of its Restricted Subsidiaries and used or useful in the conduct of
its business or the business of any of its Restricted Subsidiaries to be
maintained and kept in normal condition, repair and working order and supplied
with all necessary equipment and shall cause to be made all necessary repairs,
renewals, replacements, betterments and improvements thereof, all as in the
judgment of the Company may be necessary, so that the business carried on in
connection therewith may be properly and advantageously conducted at all times;
provided, however, that nothing in this Section 4.10 shall prevent the Company
or any of its Restricted Subsidiaries from discontinuing the use, operation or
maintenance of any of such properties, or disposing of any of them, if such
discontinuance or disposal is, in the judgment of the Board of Directors or of
the board of directors of the Restricted Subsidiary concerned, or of an officer
(or other agent employed by the Company or of any of its Restricted
Subsidiaries) of the Company or such Restricted Subsidiary having managerial
responsibility for any such property, desirable in the conduct of the business
of the Company or any of its Restricted Subsidiaries, and if such discontinuance
or disposal is not adverse in any material respect to the Holders.
SECTION 4.11. Compliance Certificate.
The Company shall deliver to the Trustee within 100 days after the
close of each fiscal year a certificate signed by the principal executive
officer, principal financial officer or principal accounting officer stating
that a review of the activities of the Company has been made under the
supervision of the signing officers with a view to determining whether a Default
or Event of Default has occurred and whether or not the signers know of any
Default or Event of Default by the Company
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that occurred during such fiscal year. If they do know of such a Default or
Event of Default, the certificate shall describe all such Defaults or Events of
Default, their status and the action the Company is taking or proposes to take
with respect thereto. The first certificate to be delivered by the Company
pursuant to this Section 4.11 shall be for the fiscal year ending on or about
June 30, 1997.
SECTION 4.12. Provision of Financial Information.
Whether or not the Company is subject to Section 13(a) or 15(d) of the
Exchange Act, or any successor provision thereto, the Company shall file with
the Commission the annual reports, quarterly reports and other documents which
the Company would have been required to file with the Commission pursuant to
such Section 13(a) or 15(d), or any successor provision thereto if the Company
were so required, such documents to be filed with the Commission on or prior to
the respective dates (the "Required Filing Dates") by which the Company would
have been required so to file such documents if the Company were so required.
The Company shall also in any event (a) within 15 days of each Required Filing
Date (i) transmit by mail to all Holders of Securities, as their names and
addresses appear in the Security Register, without cost to such Holders, and
(ii) file with the Trustee, copies of the annual reports, quarterly reports and
other documents which the Company is required to file with the Commission
pursuant to the preceding sentence, and (b) if, notwithstanding the preceding
sentence, filing such documents by the Company with the Commission is not
permitted under the Exchange Act, promptly upon written request supply copies of
such documents to any prospective holder of Securities.
SECTION 4.13. Waiver of Stay, Extension or Usury Laws.
The Company covenants (to the extent that it may lawfully do so) that
it shall not at any time insist upon, plead, or in any manner whatsoever claim
or take the benefit or advantage of, any stay or extension law or any usury law
or other law, which would prohibit or forgive the Company from paying all or any
portion of the principal of and/or interest on the Securities as contemplated
herein, wherever enacted, now or at any time hereafter in force, or which may
affect the covenants or the performance of this Indenture; and (to the extent
that it may lawfully do so) the Company hereby expressly waives all benefit or
advantage of any such law, and covenants that it shall not hinder, delay or
impede the execution of any power herein granted to the Trustee, but shall
suffer and permit the
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execution of every such power as though no such law had been enacted.
SECTION 4.14. Change of Control.
Within 30 days following the date of the consummation of a transaction
resulting in a Change of Control, the Company shall commence an Offer to
Purchase all outstanding Securities at a purchase price in cash equal to 101% of
their principal amount plus accrued interest to the Purchase Date. Such Offer to
Purchase will be consummated not earlier than 30 days and not later than 60 days
after the commencement thereof. Each Holder shall be entitled to tender all or
any portion of the Securities owned by such Holder pursuant to the Offer to
Purchase, subject to the requirement that any portion of a Security tendered
must be an integral multiple of $1,000 principal amount. A "Change of Control"
will be deemed to have occurred in the event that (whether or not otherwise
permitted by this Indenture) after the Issue Date (a) any Person or any Persons
acting together that would constitute a group (for purposes of Section 13(d) of
the Exchange Act, or any successor provision thereto) (a "Group"), together with
any Affiliates or Related Persons thereof, other than any such Person, Persons,
Affiliates or Related Parties who are Permitted Holders, shall "beneficially
own" (as defined in Rule 13d-3 under the Exchange Act, or any successor
provision thereto), directly or indirectly, at least (i) 50% of the voting power
of the outstanding Voting Stock of the Company or (ii) 40% of the voting power
of the outstanding Voting Stock of the Company, and the Permitted Holders own
less than such Person or Group (in doing the "own less than" comparison in this
clause (ii), the holdings of the Permitted Holders who are members of the new
Group shall not be counted in the shares held in the aggregate by Permitted
Holders); (b) any sale, lease or other transfer (in one transaction or a series
of related transactions) is made by the Company or any of its Restricted
Subsidiaries of all or substantially all of the consolidated assets of the
Company and its Restricted Subsidiaries to any Person; (c) the Company
consolidates with or merges with or into another Person or any Person
consolidates with, or merges with or into, the Company, in any such event
pursuant to a transaction in which immediately after the consummation thereof
Persons owning a majority of the Voting Stock of the Company immediately prior
to such consummation shall cease to own a majority of the Voting Stock of the
Company or the surviving entity if other than the Company; (d) Continuing
Directors cease to constitute at least a majority of the Board of Directors of
the Company; or (e) the stockholders of the Company approve any plan or proposal
for the
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liquidation or dissolution of the Company. In no event would the sale of common
stock of the Company to an underwriter or a group of underwriters in privity of
contract with the Company (or anybody in privity of contract with such
underwriters) be deemed to be a Change of Control or be deemed the acquisition
of more than 40% of the voting power of the outstanding Voting Stock of the
Company by a Person or any Group unless such common stock is not held in an
investment account in which case the investment account would be treated without
giving effect to the foregoing part of this sentence.
In the event that the Company makes an Offer to Purchase the
Securities, the Company shall comply with any applicable securities laws and
regulations, including any applicable requirements of Section 14(e) of, and Rule
14e-1 under, the Exchange Act.
SECTION 4.15. Limitation on Senior Subordinated Indebtedness.
The Company shall not (i) directly or indirectly Incur any Indebtedness
that by its terms would expressly rank senior in right of payment to the
Securities and expressly rank subordinate in right of payment to any Senior Debt
and (ii) permit a Guarantor to, and no Guarantor shall, directly or indirectly
Incur any Indebtedness that by its terms would expressly rank senior in right of
payment to the Guarantee of such Guarantor and expressly rank subordinate in
right of payment to any Senior Debt of such Guarantor.
SECTION 4.16. Limitations Concerning Distributions and Transfers by
Restricted Subsidiaries.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist any consensual encumbrance or restriction on the ability of any Restricted
Subsidiary of the Company to (i) pay, directly or indirectly, dividends or make
any other distributions in respect of its Capital Stock or pay any Indebtedness
or other obligation owed to the Company or any Restricted Subsidiary of the
Company, (ii) make loans or advances to the Company or any Restricted Subsidiary
of the Company or (iii) transfer any of its property or assets to the Company or
any Restricted Subsidiary of the Company, except for such encumbrances or
restrictions existing under or by reason of (a) any agreement in effect on the
Issue Date as any such agreement is in effect on such date, (b) the Credit
Agreement, (c) any agreement relating to any Indebtedness Incurred
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by such Restricted Subsidiary prior to the date on which such Restricted
Subsidiary was acquired by the Company and outstanding on such date and not
Incurred in anticipation or contemplation of becoming a Restricted Subsidiary
and provided such encumbrance or restriction shall not apply to any assets of
the Company or its Restricted Subsidiaries other than such Restricted
Subsidiary, (d) customary provisions contained in an agreement which has been
entered into for the sale or disposition of all or substantially all of the
Capital Stock or assets of a Restricted Subsidiary; provided, however, that such
encumbrance or restriction is applicable only to such Restricted Subsidiary or
assets, (e) an agreement effecting a renewal, exchange, refunding, amendment or
extension of Indebtedness Incurred pursuant to an agreement referred to in
clause (a) above; provided, however, that the provisions contained in such
renewal, exchange, refunding, amendment or extension agreement relating to such
encumbrance or restriction are no more restrictive in any material respect than
the provisions contained in the agreement that is the subject thereof in the
reasonable judgment of the Board of Directors of the Company as evidenced by a
resolution of such Board of Directors filed with the Trustee, (f) this
Indenture, (g) applicable law, (h) customary provisions restricting subletting
or assignment of any lease governing any leasehold interest of any Restricted
Subsidiary of the Company, (i) restrictions contained in Indebtedness permitted
to be incurred subsequent to the Issue Date pursuant to Section 4.04; provided
that any such restrictions are ordinary and customary with respect to the type
of Indebtedness incurred, (j) purchase money obligations for property acquired
in the ordinary course of business that impose restrictions of the type referred
to in clause (iii) of this Section 4.16 or (k) restrictions of the type referred
to in clause (iii) of this Section 4.16 contained in security agreements
securing Indebtedness of a Restricted Subsidiary of the Company to the extent
that such Liens were otherwise incurred in accordance with Section 4.18 and
restrict the transfer of property subject to such agreements.
SECTION 4.17. Limitation on Issuance and Sale of Capital Stock of Restricted
Subsidiaries.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, (a) transfer, convey, sell or otherwise dispose of any shares
of Capital Stock of any Restricted Subsidiary of the Company (other than to the
Company or a Wholly Owned Subsidiary of the Company), except that the Company
and any such Restricted Subsidiary may, in any single transaction, sell all, but
not less than all, of the issued and
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outstanding Capital Stock of any such Restricted Subsidiary to any Person,
subject to complying with Section 4.05 and (b) issue shares of Capital Stock of
a Restricted Subsidiary of the Company (other than directors' qualifying
shares), or securities convertible into, or warrants, rights or options to
subscribe for or purchase shares of, Capital Stock of a Restricted Subsidiary of
the Company to any Person other than to the Company or a Wholly Owned Subsidiary
of the Company and other than to the holders of the Capital Stock of such
Restricted Subsidiary made pro rata to the relative amounts of such Capital
Stock held by such holders.
SECTION 4.18. Limitation on Liens.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, incur any Lien on or with respect to any property or assets of
the Company or such Restricted Subsidiary owned on the Issue Date or thereafter
acquired or on the income or profits thereof to secure Indebtedness, without
making, or causing any such Restricted Subsidiary to make, effective provision
for securing the Securities and all other amounts due under this Indenture (and,
if the Company shall so determine, any other Indebtedness of the Company or such
Restricted Subsidiary, including Subordinated Indebtedness; provided, however,
that Liens securing the Securities and any Indebtedness pari passu with the
Securities are senior to such Liens securing such Subordinated Indebtedness)
equally and ratably with such Indebtedness or, in the event such Indebtedness is
subordinate in right of payment to the Securities or the Guarantee, prior to
such Indebtedness, as to such property or assets for so long as such
Indebtedness shall be so secured.
The foregoing restrictions shall not apply to (i) Liens existing on the
Issue Date securing Indebtedness existing on the Issue Date; (ii) Liens securing
Senior Debt (including Liens securing Indebtedness outstanding under the Credit
Agreement) and any guarantees thereof to the extent that the Indebtedness
secured thereby is permitted to be incurred under Section 4.04; provided,
however, that Indebtedness under the Credit Agreement shall be deemed not to
have been Incurred in violation of such provisions for purposes of this clause
(ii) if the holder(s) of such Indebtedness or their agent or representative
shall have received a representation from the Company to the effect that the
Incurrence of such Indebtedness does not violate such provision; (iii) Liens
securing only the Securities and the Guarantees; (iv) Liens in favor of the
Company or a Guarantor; (v) Liens to secure Indebtedness Incurred for the
purpose of financing all or any part of the purchase
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price or the cost of construction or improvement of the property (or any other
capital expenditure financing) subject to such Liens; provided, however, that
(a) the aggregate principal amount of any Indebtedness secured by such a Lien
does not exceed 100% of such purchase price or cost, (b) such Lien does not
extend to or cover any other property other than such item of property and any
improvements on such item, (c) the Indebtedness secured by such Lien is Incurred
by the Company within 180 days of the acquisition, construction or improvement
of such property and (d) the Incurrence of such Indebtedness is permitted by
Section 4.04; (vi) Liens on property existing immediately prior to the time of
acquisition thereof (and not created in anticipation or contemplation of the
financing of such acquisition); (vii) Liens on property of a Person existing at
the time such Person is acquired or merged with or into or consolidated with the
Company or any such Restricted Subsidiary (and not created in anticipation or
contemplation thereof); (viii) Liens to secure Indebtedness Incurred to extend,
renew, refinance or refund (or successive extensions, renewals, refinancings or
refundings), in whole or in part, any Indebtedness secured by Liens referred to
in clauses (i)-(vii) and (ix)-(xii) of this paragraph so long as such Liens do
not extend to any other property and the principal amount of Indebtedness so
secured is not increased except for the amount of any premium required to be
paid in connection with such renewal, refinancing or refunding pursuant to the
terms of the Indebtedness renewed, refinanced or refunded or the amount of any
premium reasonably determined by the Company as necessary to accomplish such
renewal, refinancing or refunding by means of a tender offer, exchange offer or
privately negotiated repurchase, plus the expenses of the issuer of such
Indebtedness reasonably incurred in connection with such renewal, refinancing or
refunding; (ix) Liens in favor of the Trustee as provided for in this Indenture
on money or property held or collected by the Trustee in its capacity as
Trustee; (x) Liens securing a tax, assessment or other governmental charge or
levy or the claim of a materialman, mechanic, carrier, warehouseman or landlord
for labor, materials, supplies or rentals incurred in the ordinary course or
business; (xi) Liens consisting of a deposit or pledge made in the ordinary
course of business in connection with, or to secure payment of, obligations
under worker's compensation, unemployment insurance or similar legislation;
(xii) Liens arising pursuant to an order of attachment, distraint or similar
legal process arising in connection with legal proceedings; and (xiii) Liens
incurred in the ordinary course of business securing assets not having a fair
market value in excess of $500,000.
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SECTION 4.19. Future Guarantors.
The Company shall not create or acquire, nor permit any of its Domestic
Restricted Subsidiaries to create or acquire, any Domestic Restricted Subsidiary
after the Issue Date unless, at the time such Domestic Restricted Subsidiary has
either assets or stockholder's equity in excess of $25,000, such Domestic
Restricted Subsidiary (a) executes and delivers to the Trustee a supplemental
indenture in form reasonably satisfactory to the Trustee pursuant to which such
Domestic Restricted Subsidiary shall unconditionally guarantee all of the
Company's obligations under the Securities and this Indenture on the terms set
forth in Articles Eleven and Twelve and (b) delivers to the Trustee an Opinion
of Counsel that such supplemental indenture has been duly authorized, executed
and delivered by such Domestic Restricted Subsidiary and constitutes a legal,
valid, binding and enforceable obligation of such Domestic Restricted Subsidiary
(subject to customary exceptions).
ARTICLE FIVE
MERGERS; SUCCESSOR CORPORATION
SECTION 5.01. Restriction on Mergers, Consolidations and Certain Sales of
Assets.
The Company shall not consolidate or merge with or into any Person, or
sell, assign, lease, convey or otherwise dispose of (or cause or permit any
Restricted Subsidiary of the Company to consolidate or merge with or into any
Person or sell, assign, lease, convey or otherwise dispose of) all or
substantially all of the Company's assets (determined on a consolidated basis
for the Company and its Restricted Subsidiaries), whether as an entirety or
substantially an entirety in one transaction or a series of related
transactions, including by way of liquidation or dissolution, to any Person
unless, in each such case: (i) the entity formed by or surviving any such
consolidation or merger (if other than the Company or such Restricted
Subsidiary, as the case may be), or to which such sale, assignment, lease,
conveyance or other disposition shall have been made (the "Surviving Entity"),
is a corporation organized and existing under the laws of the United States, any
state thereof or the District of Columbia; (ii) if there is a Surviving Entity,
the Surviving Entity assumes by supplemental indenture all of the obligations of
the Company on the Securities and under this Indenture; (iii) immediately after
giving effect to such transaction and the use of any net proceeds therefrom on a
pro forma basis, the Company or the Surviving
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Entity, as the case may be, (A) shall have a Consolidated Net Worth equal to or
greater than the Consolidated Net Worth of the Company immediately prior to such
transaction and (B) could Incur at least $1.00 of Indebtedness pursuant to
clause (i) of Section 4.04; (iv) immediately before and after giving effect to
such transaction and treating any Indebtedness which becomes an obligation of
the Company or any of its such Restricted Subsidiaries as a result of such
transaction as having been incurred by the Company or such Restricted
Subsidiary, as the case may be, at the time of the transaction, no Default or
Event of Default shall have occurred and be continuing; and (v) if, as a result
of any such transaction, property or assets of the Company or a Restricted
Subsidiary would become subject to a Lien not excepted from Section 4.18, the
Company, Restricted Subsidiary or the Surviving Entity, as the case may be,
shall have secured the Securities as required by Section 4.18. The provisions of
this paragraph shall not apply to any merger of a Restricted Subsidiary of the
Company with or into the Company or a Wholly Owned Subsidiary of the Company or
any transaction pursuant to which a Guarantor, is to be released in accordance
with the terms of the Guarantee and this Indenture in connection with any
transaction complying with Section 4.05.
SECTION 5.02. Successor Corporation Substituted.
Upon any consolidation of the Company or any Restricted Subsidiary of
the Company with, or merger of the Company or any such Restricted Subsidiary
into, any other Person or any sale, assignment, lease, conveyance or other
disposition of all or substantially all of the Company's consolidated assets (as
an entirety or substantially as an entirety in one transaction or a series of
related transactions, including by way of liquidation or dissolution) in
accordance with Section 5.01, upon the execution of a supplemental indenture by
the Surviving Person in form and substance satisfactory to the Trustee (as
evidenced by the Trustee's execution thereof), the Surviving Person shall
succeed to, and be substituted for, and may exercise every right and power of
and shall assume all obligations of, the Company or such Restricted Subsidiary,
as the case may be, under this Indenture and the Securities or the Guarantees,
as the case may be, with the same effect as if such Surviving Person had been
named as the Company or such Restricted Subsidiary, as the case may be, herein,
and thereafter, except in the case of a lease of all or substantially all of the
Company's consolidated assets, the predecessor Person shall be relieved of all
obligations and covenants under this Indenture and the Securities or the
Guarantees, as the case may be.
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In connection with any consolidation, merger or transfer of
assets contemplated by Section 5.01, the Company shall deliver, or cause to be
delivered, to the Trustee, in form and substance reasonably satisfactory to the
Trustee, an Officers' Certificate and an Opinion of Counsel, each stating that
such consolidation, merger or transfer and the supplemental indenture in respect
thereof, if any, comply with Section 5.01 and that all conditions precedent
herein provided for relating to such transactions have been complied with.
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default.
An "Event of Default" occurs if:
(1) the Company fails to pay principal of (or premium, if any,
on) any Security when due (whether or not prohibited by Article Eight
or Eleven);
(2) the Company fails to pay any interest on any Security when
due, and the default continues for 30 days (whether or not prohibited
by Article Eight or Eleven);
(3) the Company defaults in the payment of principal of and
interest on Securities required to be purchased pursuant to an Offer to
Purchase as described under Section 4.05 or 4.14 hereof when due and
payable (whether or not prohibited by Article Eight or Eleven);
(4) the Company fails to perform or comply with any of the
provisions of Section 5.01;
(5) the Company fails to perform any other covenant or
agreement of the Company under this Indenture or the Securities and the
default continues for 30 days after written notice to the Company by
the Trustee or holders of at least 25% in aggregate principal amount of
outstanding Securities;
(6) the Company defaults under the terms of one or more
instruments evidencing or securing Indebtedness of the Company or any
of its Restricted Subsidiaries having an outstanding principal amount
of $5.0 million or more individually or in the aggregate that has
resulted in the acceleration of the payment of such Indebtedness or the
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Company or any of its Restricted Subsidiaries fails to pay principal
when due at the stated maturity of any such Indebtedness;
(7) there shall have been rendered any final judgment or
judgments (not subject to appeal) against the Company or any of its
Restricted Subsidiaries in an amount of $5.0 million or more which
remain undischarged or unstayed for a period of 60 days after the date
on which the right to appeal has expired;
(8) the Company or any of its Material Subsidiaries
pursuant to or within the meaning of any Bankruptcy Law:
(A) commences a voluntary case or proceeding,
(B) consents to the entry of an order for relief
against it in an involuntary case or proceeding,
(C) consents to the appointment of a Custodian of
it or for all or substantially all of its property, or
(D) makes a general assignment for the benefit of
its creditors;
(9) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:
(A) is for relief against the Company or any
Material Subsidiary in an involuntary case or proceeding,
(B) appoints a Custodian of the Company or any
Material Subsidiary or for all or substantially all of its
property, or
(C) orders the liquidation of the Company or any
Material Subsidiary,
and in each case the order or decree remains unstayed and in effect for
60 days; provided, however, that if the entry of such order or decree
is appealed and dismissed on appeal then the Event of Default hereunder
by reason of the entry of such order or decree shall be deemed to have
been cured; or
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(10) any Guarantee ceases to be in full force and effect or is
declared null and void and unenforceable or found to be invalid or any
Guarantor denies its liability under its Guarantee (other than by
reason of a release of such Guarantor from its Guarantee in accordance
with the terms of this Indenture and the Guarantee).
The term "Bankruptcy Law" means Title 11, U.S. Code or any
similar Federal, state or foreign law for the relief of debtors. The term
"Custodian" means any receiver, trustee, assignee, liquidator, sequestrator or
similar official under any Bankruptcy Law.
SECTION 6.02. Acceleration.
If an Event of Default with respect to the Securities (other
than an Event of Default with respect to the Company described in clause (8) or
(9) of Section 6.01) shall occur and be continuing, the Trustee or the Holders
of at least 25% in aggregate principal amount of the outstanding Securities may
accelerate the maturity of all Securities; provided, however, that after such
acceleration, but before a judgment or decree based on acceleration, the Holders
of a majority in aggregate principal amount of outstanding Securities may, under
certain circumstances, rescind and annul such acceleration if all Events of
Default, other than the non-payment of accelerated principal, have been cured or
waived as provided in this Indenture; and provided, further, that so long as the
Credit Agreement shall be in full force and effect, if an Event of Default shall
have occurred and be continuing (other than as specified in clauses (8) or (9)
above), the Securities shall not become due and payable until the earlier to
occur of (x) five business days following delivery of a written notice of such
acceleration of the Securities to the agent under the Credit Agreement, if such
an Event of Default has not been cured prior to such fifth business day and (y)
the acceleration of any Indebtedness under the Credit Agreement. If an Event of
Default specified in clause (8) or (9) of Section 6.01 with respect to the
Company occurs, the outstanding Securities will ipso facto become immediately
due and payable without any declaration or other act on the part of the Trustee
or any Holder.
After a declaration of acceleration, but before a judgment or
decree of the money due in respect of the Securities has been obtained, the
Holders of not less than a majority in aggregate principal amount of the
Securities then outstanding by written notice to the Trustee may rescind an
acceleration and its consequences if all existing Events of Default
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(other than the nonpayment of principal of and interest on the Securities which
has become due solely by virtue of such acceleration) have been cured or waived
and if the rescission would not conflict with any judgment or decree. No such
rescission shall affect any subsequent Default or impair any right consequent
thereto.
SECTION 6.03. Other Remedies.
If an Event of Default occurs and is continuing, the Trustee
may pursue any available remedy by proceeding at law or in equity to collect the
payment of principal of or interest on the Securities or to enforce the
performance of any provision of the Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not
possess any of the Securities or does not produce any of them in the proceeding.
A delay or omission by the Trustee or any Securityholder in exercising any right
or remedy maturing upon an Event of Default shall not impair the right or remedy
or constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative to the
extent permitted by law.
SECTION 6.04. Waiver of Past Default.
Subject to Sections 2.09, 6.07 and 10.02, prior to the
declaration of acceleration of the Securities, the Holders of not less than a
majority in aggregate principal amount of the outstanding Securities by written
notice to the Trustee may waive an existing Default or Event of Default and its
consequences, except a Default in the payment of principal of or interest on any
Security as specified in clauses (1) and (2) of Section 6.01 or a Default in
respect of any term or provision of this Indenture that may not be amended or
modified without the consent of each Holder affected as provided in Section
10.02. The Company shall deliver to the Trustee an Officers' Certificate stating
that the requisite percentage of Holders have consented to such waiver and
attaching copies of such consents. In case of any such waiver, the Company, the
Trustee and the Holders shall be restored to their former positions and rights
hereunder and under the Securities, respectively. This paragraph of this Section
6.04 shall be in lieu of Section 316(a)(1)(B) of the TIA and such Section
316(a)(1)(B) of the TIA is hereby expressly excluded from this Indenture and the
Securities, as permitted by the TIA.
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Upon any such waiver, such Default shall cease to exist and be
deemed to have been cured and not to have occurred, and any Event of Default
arising therefrom shall be deemed to have been cured and not to have occurred
for every purpose of this Indenture and the Securities, but no such waiver shall
extend to any subsequent or other Default or Event of Default or impair any
right consequent thereon.
SECTION 6.05. Control by Majority.
Subject to Section 2.09, the Holders of a majority in
principal amount of the outstanding Securities may direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on it. However, the Trustee may refuse
to follow any direction that conflicts with law or this Indenture, that the
Trustee determines may be unduly prejudicial to the rights of another
Securityholder, or that may involve the Trustee in personal liability; provided,
however, that the Trustee may take any other action deemed proper by the Trustee
which is not inconsistent with such direction. In the event the Trustee takes
any action or follows any direction pursuant to this Indenture, the Trustee
shall be entitled to indemnification satisfactory to it in its sole discretion
against any loss or expense caused by taking such action or following such
direction. This Section 6.05 shall be in lieu of Section 316(a)(1)(A) of the
TIA, and such Section 316(a)(1)(A) of the TIA is hereby expressly excluded from
this Indenture and the Securities, as permitted by the TIA.
SECTION 6.06. Limitation on Suits.
A Securityholder may not pursue any remedy with respect to
this Indenture or the Securities unless:
(1) the Holder gives to the Trustee written notice of a
continuing Event of Default;
(2) the Holders of at least 25% in aggregate principal amount
of the outstanding Securities make a written request to the Trustee to
pursue a remedy;
(3) such Holder or Holders offer and, if requested, provide to
the Trustee indemnity satisfactory to the Trustee against any loss,
liability or expense;
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(4) the Trustee does not comply with the request within 60
days after receipt of the request and the offer and, if requested, the
provision of indemnity; and
(5) during such 60-day period the Holders of a majority in
principal amount of the outstanding Securities (excluding Affiliates of
the Company) do not give the Trustee a direction which, in the opinion
of the Trustee, is inconsistent with the request.
A Securityholder may not use this Indenture to prejudice the
rights of another Securityholder or to obtain a preference or priority over such
other Securityholder.
SECTION 6.07. Rights of Holders To Receive Payment.
Notwithstanding any other provision of this Indenture, the
right of any Holder to receive payment of principal of and interest on the
Security, on or after the respective due dates expressed in the Security, or to
bring suit for the enforcement of any such payment on or after such respective
dates, shall not be impaired or affected without the consent of the Holder.
SECTION 6.08. Collection Suit by Trustee.
If an Event of Default in payment of interest or principal
specified in Section 6.01(1) or (2) occurs and is continuing, the Trustee may
recover judgment in its own name and as trustee of an express trust against the
Company or any other obligor on the Securities for the whole amount of principal
and accrued interest remaining unpaid, together with interest overdue on
principal and to the extent that payment of such interest is lawful, interest on
overdue installments of interest, in each case at the rate per annum borne by
the Securities and such further amount as shall be sufficient to cover the costs
and expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
SECTION 6.09. Trustee May File Proofs of Claim.
The Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Securityholders allowed in any judicial proceedings relative to the Company (or
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any other obligor upon the Securities), its creditors or its property and shall
be entitled and empowered to collect and receive any monies or other property
payable or deliverable on any such claims and to distribute the same, and any
Custodian in any such judicial proceedings is hereby authorized by each
Securityholder to make such payments to the Trustee and, in the event that the
Trustee shall consent to the making of such payments directly to the
Securityholders, to pay to the Trustee any amount due to it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agent and
counsel, and any other amounts due the Trustee under Section 7.07. Nothing
herein contained shall be deemed to authorize the Trustee to authorize or
consent to or accept or adopt on behalf of any Securityholder any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
or the rights of any Holder thereof, or to authorize the Trustee to vote in
respect of the claim of any Securityholder in any such proceeding.
SECTION 6.10. Priorities.
If the Trustee collects any money or property pursuant to this
Article Six, it shall pay out the money or property in the following order:
First: to the Trustee for amounts due under Section 7.07;
Second: to Holders for amounts due and unpaid on the
Securities for principal and interest, ratably, without preference or
priority of any kind, according to the amounts due and payable on the
Securities for principal and interest, respectively; and
Third: to the Company.
The Trustee, upon prior written notice to the Company, may fix
a record date and payment date for any payment to Securityholders pursuant to
this Section 6.10.
SECTION 6.11. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under
this Indenture or in any suit against the Trustee for any action taken or
omitted by it as Trustee, a court in its discretion may require the filing by
any party litigant in the suit of an undertaking to pay the costs of the suit,
and the court in its discretion may assess reasonable costs, including
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reasonable attorneys' fees, against any party litigant in the suit, having due
regard to the merits and good faith of the claims or defenses made by the party
litigant. This Section 6.11 shall not apply to a suit by the Trustee, a suit by
a Holder or group of Holders of more than 10% in aggregate principal amount of
the outstanding Securities, or to any suit instituted by any Holder for the
enforcement or the payment of the principal or interest on any Securities on or
after the respective due dates expressed in the Security.
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Duties of Trustee.
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture and use the same degree of care and skill in their exercise as a
prudent person would exercise or use under the circumstances in the conduct of
such person's own affairs.
(b) Except during the continuance of an Event of Default:
(1) The Trustee shall not be liable except for the performance
of such duties as are specifically set forth herein; and
(2) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions conforming to the requirements of this Indenture; however, the
Trustee shall examine the certificates and opinions to determine
whether or not they conform to the requirements of this Indenture (but
need not confirm or investigate the accuracy of mathematical
calculations or other facts stated therein).
(c) The Trustee shall not be relieved from liability for its
own negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(1) This paragraph does not limit the effect of paragraph (b)
of this Section 7.01;
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(2) The Trustee shall not be liable for any error of judgment
made in good faith by a Trust Officer, unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts; and
(3) The Trustee shall not be liable with respect to any action
it takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05.
(d) No provision of this Indenture shall require the Trustee
to expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder or to take or omit to take any
action under this Indenture or take any action at the request or direction of
Holders if it shall have reasonable grounds for believing that repayment of such
funds is not assured to it or it does not receive an indemnity satisfactory to
it in its sole discretion against such risk, liability, loss, fee or expense
which might be incurred by it in compliance with such request or direction.
(e) Every provision of this Indenture that in any way relates
to the Trustee is subject to paragraphs (a), (b), (c) and (d) of this Section
7.01.
(f) The Trustee shall not be liable for interest on any money
or assets received by it except as the Trustee may agree with the Company. Money
or assets held in trust by the Trustee need not be segregated from other funds
or assets except to the extent required by law.
SECTION 7.02. Rights of Trustee.
Subject to Section 7.01:
(a) The Trustee may request and conclusively rely on any
document believed by it to be genuine and to have been signed or
presented by the proper person. The Trustee need not investigate any
fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may
consult with counsel and may require an Officers' Certificate and an
Opinion of Counsel, which shall conform to the provisions of Section
13.05. The Trustee shall not be liable for any action it takes or omits
to take in good faith in reliance on such certificate or opinion.
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(c) The Trustee may act through attorneys and agents of its
selection and shall not be responsible for the misconduct or negligence
of any agent or attorney (other than an agent who is an employee of the
Trustee) appointed with due care.
(d) The Trustee shall not be liable for any action it takes or
omits to take in good faith which it reasonably believes to be
authorized or within its rights or powers.
(e) The Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Indenture at the request
or direction of any of the Securityholders pursuant to this Indenture,
unless such Securityholders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and
liabilities which might be incurred by it in compliance with such
request or direction.
(f) The Trustee may consult with counsel of its selection, and
the advice or opinion of such counsel as to matters of law shall be
full and complete authorization and protection from liability in
respect of any action taken, omitted or suffered by it hereunder in
good faith and in accordance with the advice or opinion of such
counsel.
(g) The Trustee shall not be deemed to have knowledge of any
Default or Event of Default except (i) any Event of Default occurring
pursuant to clause (1) or (2) of Section 6.01 hereof or (ii) any
Default or Event of Default of which the Trustee shall have received
notification or obtained actual knowledge.
SECTION 7.03. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become
the owner or pledgee of Securities and may otherwise deal with the Company or
its Affiliates with the same rights it would have if it were not Trustee. Any
Agent may do the same with like rights. However, the Trustee is subject to
Sections 7.10 and 7.11.
SECTION 7.04. Trustee's Disclaimer.
The Trustee shall not be responsible for and makes no
representation as to the validity or adequacy of this Indenture
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or the Securities, it shall not be accountable for the Company's use of the
proceeds from the Securities, and it shall not be responsible for any statement
of the Company in this Indenture or any document issued in connection with the
sale of Securities or any statement in the Securities other than the Trustee's
certificate of authentication.
SECTION 7.05. Notice of Defaults.
If a Default or an Event of Default occurs and is continuing
and the Trustee knows of such Defaults or Events of Default, the Trustee shall
mail to each Securityholder notice of the Default or Event of Default within 30
days after the occurrence thereof; provided however, that, except in the case of
an Event of Default or a Default in payment with respect to the Securities or a
Default or Event of Default complying with Section 5.01, the Trustee shall be
protected in withholding such notice if and so long as the Board of Directors or
responsible officers of the Trustee in good faith determine that the withholding
of such notice is in the interest of the Holders.
SECTION 7.06. Reports by Trustee to Holders.
If required by TIA Section 313(a), within 60 days after each
June 30 beginning with the June 30 following the date of this Indenture, the
Trustee shall mail to each Securityholder a report dated as of such June 30 that
complies with TIA Section 313(a). The Trustee also shall comply with TIA Section
313(b), (c) and (d).
A copy of each such report at the time of its mailing to
Securityholders shall be filed with the Commission and each stock exchange, if
any, on which the Securities are listed.
The Company shall promptly notify the Trustee in writing if
the Securities become listed on any securities exchange or of any delisting
thereof.
SECTION 7.07. Compensation and Indemnity.
The Company shall pay to the Trustee from time to time such
compensation as the Company and the Trustee shall from time to time agree in
writing for its services. The Trustee's compensation shall not be limited by any
law on compensation of a trustee of an express trust. The Company shall
reimburse the Trustee upon request for all reasonable disbursements, expenses
and advances (including fees, disbursements and expenses of its agents and
counsel) incurred or made by it in
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addition to the compensation for its services except any such disbursements,
expenses and advances as may be attributable to the Trustee's negligence or bad
faith. Such expenses shall include the reasonable compensation, disbursements
and expenses of the Trustee's agents, accountants, experts and counsel and any
taxes or other expenses incurred by a trust created pursuant to Section 9.01
hereof.
The Company shall indemnify the Trustee and its agents for,
and hold them harmless against any and all loss, damage, claims, liability or
expense, including taxes (other than franchise taxes imposed on the Trustee and
taxes based upon, measured by or determined by the income of the Trustee),
arising out of or in connection with the acceptance or administration of the
trust or trusts hereunder, including the costs and expenses of enforcing this
Indenture against the Company (including Section 7.07) and of defending itself
against any claim (whether asserted by any Securityholder or the Company) or
liability in connection with the exercise or performance of any of their powers
or duties hereunder, except to the extent that such loss, damage, claim,
liability or expense is due to their own negligence or bad faith. The Trustee
shall notify the Company promptly of any claim asserted against the Trustee for
which it may seek indemnity. However, the failure by the Trustee to so notify
the Company shall not relieve the Company of its obligations hereunder. The
Company shall defend the claim and the Trustee shall cooperate in the defense
(and may employ its own counsel) at the Company's expense; provided, however,
that the Company's reimbursement obligation with respect to counsel employed by
the Trustee will be limited to the reasonable fees and expenses of a single
counsel. The Company need not pay for any settlement made without its written
consent, which consent shall not be unreasonably withheld. The Company need not
reimburse any expense or indemnify against any loss or liability incurred by the
Trustee as a result of the violation of this Indenture by the Trustee.
To secure the Company's payment obligations in this Section
7.07, the Trustee shall have a Lien prior to the Securities against all money or
property held or collected by the Trustee, in its capacity as Trustee, except
money or property held in trust to pay principal of or interest on particular
Securities.
When the Trustee incurs expenses or renders services after an
Event of Default specified in Section 6.01(8) or (9) occurs, the expenses
(including the reasonable fees and expenses of its agents and counsel) and the
compensation for the
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services shall be preferred over the status of the Holders in a proceeding under
any Bankruptcy Law and are intended to constitute expenses of administration
under any Bankruptcy Law. The Company's obligations under this Section 7.07 and
any claim arising hereunder shall survive the resignation or removal of any
Trustee, the discharge of the Company's obligations pursuant to Article Nine and
any rejection or termination under any Bankruptcy Law.
SECTION 7.08. Replacement of Trustee.
The Trustee may resign at any time by so notifying the Company
in writing. The Holders of a majority in principal amount of the outstanding
Securities may remove the Trustee by so notifying the Trustee and the Company in
writing and may appoint a successor Trustee with the Company's consent. The
Company may remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged a bankrupt or an insolvent under
any Bankruptcy Law;
(3) a custodian or other public officer takes charge of the
Trustee or its property; or
(4) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in
the office of Trustee for any reason (the Trustee in such event being referred
to herein as the retiring Trustee), the Company shall promptly appoint a
successor Trustee. Within one year after the successor Trustee takes office, the
Holders of a majority in principal amount of the Securities may appoint a
successor Trustee to replace the successor Trustee appointed by the Company.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. As promptly as
practicable after that, the retiring Trustee shall transfer, after payment of
all sums then owing to the Trustee pursuant to Section 7.07, all property held
by it as Trustee to the successor Trustee, subject to the Lien provided in
Section 7.07, the resignation or removal of the retiring Trustee shall become
effective, and the successor Trustee shall have the rights, powers and duties of
the Trustee under this Indenture. A successor Trustee shall mail notice of its
succession to each Securityholder.
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If a successor Trustee does not take office within 60 days
after the retiring Trustee resigns or is removed, the retiring Trustee, the
Company or the Holders of at least 10% in principal amount of the outstanding
Securities may petition any court of competent jurisdiction for the appointment
of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any
Securityholder may petition any court of competent jurisdiction for the removal
of the Trustee and the appointment of a successor Trustee.
Notwithstanding replacement of the Trustee pursuant to this
Section 7.08, the Company's obligations under Section 7.07, to the extent
incurred, shall continue for the benefit of the retiring Trustee.
SECTION 7.09. Successor Trustee by Merger, etc.
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation or banking corporation, the resulting, surviving or transferee
corporation or banking corporation without any further act shall be the
successor Trustee.
SECTION 7.10. Eligibility; Disqualification.
This Indenture shall always have a Trustee which shall be
eligible to act as Trustee under TIA Sections 310(a)(1) and 310(a)(5). The
Trustee (or in the case of a corporation included in a bank holding company, the
related bank holding company) shall have a combined capital and surplus of at
least $50,000,000 as set forth in its most recent published annual report of
condition. If the Trustee has or shall acquire any "conflicting interest" within
the meaning of TIA Section 310(b), the Trustee and the Company shall comply with
the provisions of TIA Section 310(b); provided, however, that there shall be
excluded from the operation of TIA Section 310(b)(1) any indenture or indentures
under which other securities, or certificates of interest or participation in
other securities, of the Company are outstanding, if the requirements for such
exclusion set forth in TIA Section 310(b)(1) are met. If at any time the Trustee
shall cease to be eligible in accordance with the provisions of this Section,
the Trustee shall resign immediately in the manner and with the effect
hereinbefore specified in this Article Seven.
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SECTION 7.11. Preferential Collection of Claims Against Company.
The Trustee shall comply with TIA Section 311(a), excluding
any creditor relationship listed in TIA Section 311(b). A Trustee who has
resigned or been removed shall be subject to TIA Section 311(a) to the extent
indicated therein.
ARTICLE EIGHT
SUBORDINATION OF SECURITIES
SECTION 8.01. Securities Subordinated to Senior Debt.
The Company covenants and agrees, and the Trustee and each
Holder by acceptance of the Securities likewise covenants and agrees, that all
Securities shall be issued subject to the provisions of this Article; and each
person holding any Security, whether upon original issue or upon transfer,
assignment or exchange thereof, accepts and agrees that all payments of the
principal of (and premium, if any) and interest on the Securities by the Company
and any claims arising out of or with respect to this Indenture shall, to the
extent and in the manner set forth in this Article, be subordinated and junior
in right of payment to the prior payment in full of all Senior Debt of the
Company.
SECTION 8.02. No Payment on Securities in Certain Circumstances.
(a) No payment by or on behalf of the Company of the principal
of, premium, if any, or interest on the Securities, or any payment to acquire
any of the Securities for cash, property or securities, or any distribution with
respect to the Securities of any kind or character, whether in cash, property or
securities, by set-off or otherwise (all such payments and distributions
referred to individually and collectively as a "Securities Payment"), whether
pursuant to the terms of the Securities or upon acceleration or otherwise, will
be made if, at the time of such payment, there exists a default in the payment
of all or any portion of the obligations on any Designated Senior Debt, whether
at maturity, on account of mandatory redemption or prepayment, acceleration or
otherwise (but if the Trustee is otherwise able to make such Securities Payment,
only insofar as the Trustee is concerned, if the Trustee has received written
notice of such default), and such default shall not have been cured or waived or
the benefits of this sentence waived by or on behalf of the holders of such
Designated Senior
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Debt. In addition, during the continuance of any non-payment default or
non-payment event of default with respect to any Designated Senior Debt pursuant
to which the maturity thereof may be accelerated, and upon receipt by the
Trustee of notice (a "Payment Blockage Notice") from a holder or holders of such
Designated Senior Debt or the trustee or agent acting on behalf of such
Designated Senior Debt, then, unless and until such default or event of default
has been cured or waived or has ceased to exist or such Designated Senior Debt
has been discharged or repaid in full in cash or cash equivalents or otherwise
in a form satisfactory to the holders of such Designated Senior Debt, no
Securities Payment will be made by or on behalf of the Company, except from
those funds held in trust for purposes of defeasance for the benefit of the
Holders of any Securities to such Holders, during a period (a "Payment Blockage
Period") commencing on the date of receipt of such Payment Blockage Notice by
the Trustee and ending 179 days thereafter. Notwithstanding anything herein to
the contrary, (x) in no event will a Payment Blockage Period extend beyond 179
days from the date of the Payment Blockage Notice in respect thereof was given
and (y) there must be 180 days in any 365 day period during which no Payment
Blockage Period is in effect. Not more than one Payment Blockage Period may be
commenced with respect to the Securities during any period of 365 consecutive
days. No default or event of default that existed or was continuing on the date
of commencement of any Payment Blockage Period with respect to the Designated
Senior Debt initiating such Payment Blockage Period may be, or be made, the
basis for the commencement of any other Payment Blockage Period by the holder or
holders of such Designated Senior Debt or the trustee or agent acting on behalf
of such Designated Senior Debt, whether or not within a period of 365
consecutive days, unless such default or event of default has been cured or
waived for a period of not less than 90 consecutive days.
(b) In the event that, notwithstanding the foregoing, any
payment shall be received by the Trustee or any Holder when such payment is
prohibited by Section 8.02(a), such payment shall be held for the benefit of,
and shall be paid over or delivered to, the holders of Designated Senior Debt or
their respective representatives, or to the trustee or trustees under any
indenture pursuant to which any of such Designated Senior Debt may have been
issued, as their respective interests may appear, but only to the extent that,
upon notice from the Trustee to the holders of Designated Senior Debt that such
prohibited payment has been made, the holders of the Designated Senior Debt (or
their representative or representatives or a trustee) notify the Trustee in
writing of the amounts then due and
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owing on the Designated Senior Debt, if any, and only the amounts specified in
such notice to the Trustee shall be paid to the holders of Designated Senior
Debt.
SECTION 8.03. Payment Over of Proceeds upon Dissolution, etc.
(a) Upon any payment or distribution of assets or securities
of the Company of any kind or character, whether in cash, property or
securities, upon any dissolution or winding up or total or partial liquidation
or reorganization of the Company, whether voluntary or involuntary or in
bankruptcy, insolvency, receivership or other proceedings, all amounts due or to
become due with respect to Senior Debt of the Company (including any interest
accruing on or after, or which would accrue but for, an event of bankruptcy,
regardless of whether such interest is an allowed claim enforceable against the
debtor under the Bankruptcy Code) shall first be paid in full, or payment
provided for, in either case in cash or cash equivalents or otherwise in a form
satisfactory to the holders of Senior Debt, before the Holders of the Securities
or the Trustee on behalf of such Holders shall be entitled to receive any
Securities Payment. Before any payment may be made by, or on behalf of, the
Company of the principal of, premium, if any, or interest on the Securities upon
any such dissolution or winding up or liquidation or reorganization, any payment
or distribution of assets or securities of the Company of any kind or character,
whether in cash, property or securities, to which the Holders of the Securities
or the Trustee on their behalf would be entitled, but for the subordination
provisions of this Indenture, shall be made by the Company or by any receiver,
trustee in bankruptcy, liquidating trustee, agent or other person making such
payment or distribution, directly to the holders of Senior Debt of the Company
(pro rata to such holders on the basis of the respective amounts of Senior Debt
held by such holders) or their representatives or to the trustee or trustees
under any indenture pursuant to which any such Senior Debt may have been issued
as their respective interests may appear, to the extent necessary to pay all
such Senior Debt in full in cash or cash equivalents or otherwise in a form
satisfactory to the holders of such Senior Debt after giving effect to any
concurrent payment, distribution or provision therefor to or for the holders of
such Senior Debt.
(b) In the event that, notwithstanding the foregoing provision
prohibiting such payment or distribution, any payment or distribution of assets
or securities of the Company of any kind or character, whether in cash, property
or securities,
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shall be received by the Trustee or any Holder of Securities at a time when such
payment or distribution is prohibited by Section 8.03(a) and before all
obligations in respect of Senior Debt are paid in full, or payment provided for,
such payment or distribution shall be received and held for the benefit of, and
shall be paid over or delivered to, the holders of Senior Debt or their
respective representatives, or to the trustee or trustees under any indenture
pursuant to which any of such Senior Debt may have been issued, as their
respective interests may appear, for application to the payment of Senior Debt
remaining unpaid until all such Senior Debt has been paid in full after giving
effect to any concurrent payment, distribution or provision therefor to or for
the holders of such Senior Debt.
The consolidation of the Company with, or the merger of the
Company with or into, another corporation or the liquidation or dissolution of
the Company following the conveyance or transfer of its property as an entirety,
or substantially as an entirety, to another corporation upon the terms and
conditions provided in Article Five shall not be deemed a dissolution,
winding-up, liquidation or reorganization for the purposes of this Section if
such other corporation shall, as a part of such consolidation, merger,
conveyance or transfer, comply with the conditions stated in Article Five.
SECTION 8.04. Subrogation.
Upon the payment in full of all Senior Debt of the Company, or
provision for payment, the Holders of the Securities shall be subrogated to the
extent of the payments or distributions made to the holders of such Senior Debt
pursuant to the provisions of this Article to the rights of the holders of such
Senior Debt to receive payments or distributions of cash, property or securities
of the Company made on such Senior Debt until the principal of and interest on
the Securities shall be paid in full; and, for the purposes of such subrogation,
no payments or distributions to the holders of the Senior Debt of any cash,
property or securities to which the Holders of the Securities or the Trustee on
their behalf would be entitled except for the provisions of this Article, and no
payment over pursuant to the provisions of this Article to the holders of Senior
Debt by Holders of the Securities or the Trustee on their behalf shall, as
between the Company, its creditors other than holders of Senior Debt, and the
Holders of the Securities, be deemed to be a payment by the Company to or on
account of the Senior Debt. It is understood that the provisions of this Article
are and are intended solely for the purpose of defining the relative rights of
the Holders of the Securities, on the
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one hand, and the holders of the Senior Debt, on the other hand.
If any payment or distribution to which the Holders of the
Securities would otherwise have been entitled but for the provisions of this
Article shall have been applied, pursuant to the provisions of this Article, to
the payment of all amounts payable under Senior Debt, then and in such case, the
Holders of the Securities shall be entitled to receive from the holders of such
Senior Debt any payments or distributions received by such holders of Senior
Debt in excess of the amount required to make payment in full, or provision for
payment, of such Senior Debt.
SECTION 8.05. Obligations of Company Unconditional.
Nothing contained in this Article or elsewhere in this
Indenture or in the Securities is intended to or shall impair, as among the
Company and the Holders of the Securities, the obligation of the Company, which
is absolute and unconditional, to pay to the Holders of the Securities the
principal of and interest on the Securities as and when the same shall become
due and payable in accordance with their terms, or is intended to or shall
affect the relative rights of the Holders of the Securities and creditors of the
Company other than the holders of the Senior Debt, nor shall anything herein or
therein prevent the Holder of any Security or the Trustee on their behalf from
exercising all remedies otherwise permitted by applicable law upon default under
this Indenture, subject to the rights, if any, under this Article of the holders
of the Senior Debt in respect of cash, property or securities of the Company
received upon the exercise of any such remedy.
Without limiting the generality of the foregoing, nothing
contained in this Article shall restrict the right of the Trustee or the Holders
of Securities to take any action to declare the Securities to be due and payable
prior to their stated maturity pursuant to Section 6.01 or to pursue any rights
or remedies hereunder; provided, however, that all Senior Debt then due and
payable shall first be paid in full before the Holders of the Securities or the
Trustee are entitled to receive any direct or indirect payment from the Company
of principal of or interest on the Securities.
SECTION 8.06. Notice to Trustee.
The Company shall give prompt written notice to the Trustee of
any fact known to the Company which would prohibit
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the making of any payment to or by the Trustee in respect of the Securities
pursuant to the provisions of this Article. The Trustee shall not be charged
with knowledge of the existence of any default or event of default with respect
to any Senior Debt or of any other facts which would prohibit the making of any
payment to or by the Trustee unless and until the Trustee shall have received
notice in writing at its Corporate Trust Office to that effect signed by an
Officer of the Company, or by a holder of Senior Debt or trustee or agent
therefor; and prior to the receipt of any such written notice, the Trustee
shall, subject to Article Seven, be entitled to assume that no such facts exist;
provided that if the Trustee shall not have received the notice provided for in
this Section 8.06 at least two Business Days prior to the date upon which by the
terms of this Indenture any moneys shall become payable for any purpose
(including, without limitation, the payment of the principal of or interest on
any Security), then, regardless of anything herein to the contrary, the Trustee
shall have full power and authority to receive any moneys from the Company and
to apply the same to the purpose for which they were received, and shall not be
affected by any notice to the contrary which may be received by it on or after
such prior date. Nothing contained in this Section 8.06 shall limit the right of
the holders of Senior Debt to recover payments as contemplated by Section 8.02
or 8.03. The Trustee shall be entitled to rely on the delivery to it of a
written notice by a Person representing himself or itself to be a holder of any
Senior Debt (or a trustee on behalf of, or other representative of, such holder)
to establish that such notice has been given by a holder of such Senior Debt or
a trustee or representative on behalf of any such holder.
In the event that the Trustee determines in good faith that
any evidence is required with respect to the right of any Person as a holder of
Senior Debt to participate in any payment or distribution pursuant to this
Article, the Trustee may request such Person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of Senior Debt held by
such Person, the extent to which such Person is entitled to participate in such
payment or distribution and any other facts pertinent to the rights of such
Person under this Article, and if such evidence is not furnished, the Trustee
may defer any payment to such Person pending judicial determination as to the
right of such Person to receive such payment.
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SECTION 8.07. Reliance on Judicial Order or Certificate of Liquidating
Agent.
Upon any payment or distribution of assets or securities
referred to in this Article, the Trustee and the Holders of the Securities shall
be entitled to rely upon any order or decree made by any court of competent
jurisdiction in which bankruptcy, dissolution, winding-up, liquidation or
reorganization proceedings are pending, or upon a certificate of the receiver,
trustee in bankruptcy, liquidating trustee, agent or other person making such
payment or distribution, delivered to the Trustee or to the Holders of the
Securities for the purpose of ascertaining the persons entitled to participate
in such distribution, the holders of the Senior Debt and other indebtedness of
the Company, the amount thereof or payable thereon, the amount or amounts paid
or distributed thereon and all other facts pertinent thereto or to this Article.
SECTION 8.08. Trustee's Relation to Senior Debt.
The Trustee and any Paying Agent shall be entitled to all the
rights set forth in this Article with respect to any Senior Debt which may at
any time be held by it in its individual or any other capacity to the same
extent as any other holder of Senior Debt, and nothing in this Indenture shall
deprive the Trustee or any Paying Agent of any of its rights as such holder.
With respect to the holders of Senior Debt, the Trustee
undertakes to perform or to observe only such of its covenants and obligations
as are specifically set forth in this Article, and no implied covenants or
obligations with respect to the holders of Senior Debt shall be read into this
Indenture against the Trustee. The Trustee shall not be deemed to owe any
fiduciary duty to the holders of Senior Debt.
SECTION 8.09. Subordination Rights Not Impaired by Acts or Omissions of
the Company or Holders of Senior Debt.
No right of any present or future holders of any Senior Debt
to enforce subordination as provided herein shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the Company
or by any act or failure to act, in good faith, by any such holder, or by any
noncompliance by the Company with the terms of this Indenture, regardless of any
knowledge thereof which any such holder may have or otherwise be charged with.
The provisions of this Ar-
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ticle are intended to be for the benefit of, and shall be enforceable directly
by, the holders of Senior Debt.
SECTION 8.10. Securityholders Authorize Trustee To Effectuate
Subordination of Securities.
Each Holder of Securities by his acceptance of such Securities
authorizes and expressly directs the Trustee on his behalf to take such action
as may be necessary or appropriate to effectuate the subordination provided in
this Article, and appoints the Trustee his attorney-in-fact for such purposes,
including, in the event of any dissolution, winding up, liquidation or
reorganization of the Company (whether in bankruptcy, insolvency, receivership,
reorganization or similar proceedings or upon a general assignment for the
benefit of creditors or otherwise) tending towards liquidation of the business
and assets of the Company, the filing of a claim for the unpaid balance of its
or his Securities in the form required in those proceedings.
SECTION 8.11. This Article Not To Prevent Events of Default.
The failure to make a payment on account of principal of or
interest on the Securities by reason of any provision of this Article shall not
be construed as preventing the occurrence of an Event of Default specified in
clause (1), (2) or (3) of Section 6.01.
SECTION 8.12. Trustee's Compensation Not Prejudiced.
Nothing in this Article shall apply to amounts due to the
Trustee pursuant to Section 7.07.
SECTION 8.13. No Waiver of Subordination Provisions.
Without in any way limiting the generality of Section 8.09,
the holders of Senior Debt may, at any time and from time to time, without the
consent of or notice to the Trustee or the Holders of the Securities, without
incurring responsibility to the Holders of the Securities and without impairing
or releasing the subordination provided in this Article or the obligations
hereunder of the Holders of the Securities to the holders of Senior Debt, do any
one or more of the following: (a) change the manner, place or terms of payment
or extend the time of payment of, or renew or alter, Senior Debt or any
instrument evidencing the same or any agreement under which Senior Debt is
outstanding or secured; (b) sell, exchange, release
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or otherwise deal with any property pledged, mortgaged or otherwise securing
Senior Debt; (c) release any Person liable in any manner for the collection of
Senior Debt; and (d) exercise or refrain from exercising any rights against the
Company and any other Person.
SECTION 8.14. Subordination Provisions Not Applicable to Money Held in
Trust for Securityholders; Payments May Be Paid Prior to
Dissolution.
All money and United States Government Obligations deposited
in trust with the Trustee pursuant to and in accordance with Article Nine shall
be for the sole benefit of the Holders and shall not be subject to this Article
Eight.
Nothing contained in this Article or elsewhere in this
Indenture shall prevent (i) the Company, except under the conditions described
in Section 8.02, from making payments of principal of and interest on the
Securities, or from depositing with the Trustee any moneys for such payments or
from effecting a termination of the Company's and the Guarantors' obligations
under the Securities and this Indenture as provided in Article Nine, or (ii) the
application by the Trustee of any moneys deposited with it for the purpose of
making such payments of principal of and interest on the Securities, to the
Holders entitled thereto unless at least two Business Days prior to the date
upon which such payment becomes due and payable, the Trustee shall have received
the written notice provided for in Section 8.02(b) or in Section 8.06. The
Company shall give prompt written notice to the Trustee of any dissolution,
winding-up, liquidation or reorganization of the Company.
SECTION 8.15. Acceleration of Securities.
If payment of the Securities is accelerated because of an
Event of Default, the Company shall promptly notify holders of the Senior Debt
of the acceleration.
ARTICLE NINE
DISCHARGE OF INDENTURE
SECTION 9.01. Termination of Company's Obligations.
(a) Discharge. Subject to the provisions of Article Eight, the
Company may terminate its substantive obligations and the substantive
obligations of the Guarantors, in respect of the Securities by delivering all
outstanding Securities to
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the Trustee for cancellation and paying all sums payable by the Company on
account of principal of, premium, if any, and interest on all the Securities.
(b) Defeasance. Subject to the provisions of Sections 9.02
and 9.03 below, the Company may:
(i) Covenant Defeasance. terminate its obligations under
Section 4.03 through 4.19 and Article Five (a "Covenant Defeasance") by
(A) satisfying the conditions specified in Section 9.02 and (B)
delivering to the Trustee an Opinion of Counsel confirming that the
Holders will not recognize income, gain or loss for federal income tax
purposes as a result of the Covenant Defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the
same times as would have been the case if no Covenant Defeasance had
been effected; or
(ii) Legal Defeasance. terminate all of its substantive
obligations under the Indenture (other than those set forth in Section
9.03(a) (a "Legal Defeasance") by (A) satisfying the conditions
specified in Section 9.02 and (B) delivering to the Trustee an Opinion
of Counsel confirming that (I) the Company has received from, or there
has been published by, the Internal Revenue Service a ruling or (II)
since the date of this Indenture there has been a change in the
applicable federal income tax law, in either case to the effect that
the Holders will not recognize income, gain or loss for federal income
tax purposes as a result of Legal Defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the
same times as would have been the case if no Legal Defeasance had been
effected.
SECTION 9.02. Conditions Precedent to Termination .
In order to effect either a Covenant Defeasance or Legal
Defeasance, the following conditions must be satisfied:
(i) the Company shall have deposited with the Trustee, under
the terms of an irrevocable trust agreement, money or direct
non-callable obligations of the United States of America for the
payment of which its full faith and credit is pledged ("United States
Government Obligations") sufficient (without reinvestment) to pay all
remaining indebtedness on the Securities (a "Defeasance Deposit");
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(ii) no Default shall have occurred and be continuing or
could arise as a result of the Defeasance Deposit (or with respect to a
Default or Event of Default specified in clause (8) or (9) of Section
6.01, any time on or prior to the 91st calendar day after the date of
the Defeasance Deposit (it being understood that this condition shall
not be deemed satisfied until after such 91st day)) and no default
under any Senior Debt would result therefrom;
(iii) the Defeasance Deposit shall not be prohibited at the
time it is made by the provisions of Article Eight of this Indenture or
any covenants in the instruments governing Senior Debt and the Company
shall have delivered to the Trustee and any Paying Agent an Officers'
Certificate to that effect; and
(iv) the Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that (A)
the Defeasance Deposit will not result in any of the Company, the
Trustee or the trust created by such deposit being deemed to be an
"investment company" under the Investment Company Act of 1940, as
amended, and (B) all conditions precedent relating to either the Legal
Defeasance or the Covenant Defeasance, as the case may be, have been
complied with.
SECTION 9.03. Survival of Certain Obligations of the Company.
(a) Survival of Obligations. In effecting either a Covenant
Defeasance or a Legal Defeasance, the Company's obligations contained in
Sections 2.03, 2.05, 2.06, 2.07, 4.02, 7.07, 7.08, this Section 9.03 and Section
9.04(c), and in addition, in effecting a Covenant Defeasance, the Company's
obligations contained in Section 4.01, shall survive until the Securities are no
longer outstanding. Thereafter the Company's obligations in Section 7.07, this
Section 9.03 and Section 9.04(c) shall survive.
(b) Taxes. The Company shall pay any taxes or other expenses
incurred by any trust created pursuant to this Article Nine.
(c) Reinstatement. If the Trustee is unable to apply the
Defeasance Deposit in accordance with Section 9.02 by reason of any legal
proceeding or by reason of any order or judgment of any court or governmental
authority enjoining, restraining or otherwise prohibiting such application, the
Company's obligations under this Indenture and the Securities shall be revived
and re-
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instated as though no deposit had occurred pursuant to Section 9.02 until such
time as the Trustee is permitted to apply the Defeasance Deposit in accordance
with Section 9.02; provided that if the Company has made any payment of interest
on or principal of any Securities because of the reinstatement of its
obligations, the Company shall be subrogated to the rights of the Holders of
such Securities to receive such payment from the Defeasance Deposit held by the
Trustee.
SECTION 9.04. Trustee's Obligations upon Termination .
(a) Acknowledgment. The Trustee upon a Company Request shall
acknowledge in writing the discharge of the Company's and the Guarantor's (if
any) obligations under the Securities, the Guarantee and this Indenture other
than those obligations specified in Section 9.03.
(b) Application of Trust Money. The Trustee shall hold the
Defeasance Deposit pursuant to Section 9.02, and shall apply the Defeasance
Deposit in accordance with this Article Nine solely to the payment of the
principal of, premium, if any, and interest on the Securities.
(c) Repayment to the Company. Subject to Sections 7.07 and
9.03, the Trustee shall promptly pay to the Company upon request any excess
money held by it at any time. The Trustee shall pay to the Company upon written
request any money held by it for the payment of principal or interest that
remains unclaimed for two years; provided, however, that the Trustee before
being required to make any payment may at the expense of the Company cause to be
published once in a newspaper of general circulation in the City of New York or
to be mailed to each Holder entitled to such money notice that such money
remains unclaimed and that, after a date specified therein, which shall be at
least 30 days from the date of such publication or mailing, any unclaimed
balance of such money then remaining will be repaid to the Company. After
payment to the Company, Holders entitled to such money must look to the Company
for payment as general creditors unless an applicable law designates another
person and all liability of the Trustee with respect to such money shall
thereupon cease.
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ARTICLE TEN
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 10.01. Without Consent of Holders.
The Company and the Guarantors and the Trustee may amend or
supplement this Indenture or the Securities without notice to or consent of any
Securityholder:
(i) to cure any ambiguity, defect or inconsistency;
provided, however, that such amendment or supplement does not adversely
affect the rights of any Holder in any material respect;
(ii) to effect the assumption by a successor Person of all
obligations of the Company under the Securities and this Indenture in
connection with any transaction complying with Article Five of this
Indenture;
(iii) to provide for uncertificated Securities in addition
to or in place of certificated Securities;
(iv) to comply with any requirements of the Commission in
order to effect or maintain the qualification of this Indenture under
the TIA;
(v) to make any change that would provide any additional
benefit or rights to the Holders;
(vi) to make any other change that does not adversely
affect the rights of any Holder under this Indenture;
(vii) to evidence the succession of another Person to any
Guarantor and the assumption by any such successor of the covenants of
such Guarantor herein and in the Guarantee;
(viii) to add to the covenants of the Company or the
Guarantors for the benefit of the Holders, or to surrender any right or
power herein conferred upon the Company or any Guarantor;
(ix) to secure the Securities pursuant to the requirements
of Section 4.18 or otherwise; or
(x) to reflect the release of a Guarantor from its
obligations with respect to its Guarantee in accordance
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with the provisions of Section 11.03 and to add a Guarantor pursuant to
the requirements of Section 11.07;
provided, however, that the Company has delivered to the Trustee an Opinion of
Counsel and an Officers' Certificate each stating that such amendment or
supplement complies with the provisions of this Section 10.01.
SECTION 10.02. With Consent of Holders.
The Company, the Guarantors, if any, and the Trustee may amend
or supplement this Indenture or the Securities with the written consent of the
Holders of at least a majority in principal amount of the outstanding
Securities. However, without the consent of each Holder affected, an amendment,
supplement or waiver may not:
(1) change the Stated Maturity of the principal of or any
installment of interest on any Security or alter the optional
redemption or repurchase provisions of any Security or this Indenture
in a manner adverse to the Holders of the Securities;
(2) reduce the principal amount of (or the premium) of any
Security;
(3) reduce the rate of or extend the time for payment of
interest on any Security;
(4) change the place or currency of payment of principal of
(or premium) or interest on any Security;
(5) modify any provisions of this Indenture relating to the
waiver of past defaults (other than to add sections of this Indenture
subject thereto) or the right of the Holders to institute suit for the
enforcement of any payment on or with respect to any Security or the
Guarantee, or the modification and amendment of this Indenture and the
Securities (other than to add sections of this Indenture or the
Securities which may not be amended, supplemented or waived without the
consent of each Holder affected);
(6) reduce the percentage of the principal amount of
outstanding Securities necessary for amendment to or waiver of
compliance with any provision of this Indenture or the Securities or
for waiver of any Default;
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(7) waive a default in the payment of principal of, interest
on, or redemption payment with respect to, any Security (except a
recision of acceleration of the Securities by the Holders as provided
in this Indenture and a waiver of the payment default that resulted
from such acceleration);
(8) modify the ranking or priority of the Securities or the
Guarantee, or modify the definition of Senior Debt or Designated Senior
Debt or amend or modify the subordination provisions of this Indenture
in any manner adverse to the Holders;
(9) release the Guarantors from any of their respective
obligations under the Guarantee or this Indenture otherwise than in
accordance with this Indenture; or
(10) modify the provisions relating to any Offer to Purchase
required under Section 4.05 or Section 4.14 in a manner materially
adverse to the Holders of Securities with respect to any Asset
Disposition that has been consummated or Change of Control that has
occurred.
The Holders of a majority in aggregate principal amount of the
outstanding Securities, on behalf of all Holders of Securities, may waive
compliance by the Company with certain restrictive provisions of this Indenture.
Subject to certain rights of the Trustee, as provided in this Indenture, the
Holders of a majority in aggregate principal amount of the outstanding
Securities, on behalf of all Holders of Securities, may waive any past default
under this Indenture, except a default in the payment of principal, premium or
interest or a default arising from failure to purchase any Security tendered
pursuant to an Offer to Purchase, or a default in respect of a provision that
under this Indenture cannot be modified or amended without the consent of the
Holder of each outstanding Security affected.
SECTION 10.03. Compliance with Trust Indenture Act.
Every amendment to or supplement of this Indenture or the
Securities shall comply with the TIA as then in effect.
SECTION 10.04. Revocation and Effect of Consents.
Until an amendment or waiver becomes effective, a consent to
it by a Holder is a continuing consent by the Holder and every subsequent Holder
of that Security or portion of that
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Security that evidences the same debt as the consenting Holder's Security, even
if notation of the consent is not made on any Security. Subject to the following
paragraph, any such Holder or subsequent Holder may revoke the consent as to
such Holder's Security or portion of such Security by notice to the Trustee or
the Company received before the date on which the Trustee receives an Officers'
Certificate certifying that the Holders of the requisite principal amount of
Securities have consented (and not theretofore revoked such consent) to the
amendment, supplement or waiver.
The Company may, but shall not be obligated to, fix a record
date for the purpose of determining the Holders entitled to consent to any
amendment, supplement or waiver. If a record date is fixed, then,
notwithstanding the last sentence of the immediately preceding paragraph, those
persons who were Holders at such record date (or their duly designated proxies),
and only those persons, shall be entitled to consent to such amendment,
supplement or waiver or to revoke any consent previously given, whether or not
such persons continue to be Holders after such record date. No such consent
shall be valid or effective for more than 90 days after such record date.
After an amendment, supplement or waiver becomes effective, it
shall bind every Securityholder, unless it makes a change described in any of
clauses (1) through (10) of Section 10.02. In that case the amendment,
supplement or waiver shall bind each Holder of a Security who has consented to
it and every subsequent Holder of a Security or portion of a Security that
evidences the same debt as the consenting Holder's Security.
SECTION 10.05. Notation on or Exchange of Securities.
If an amendment, supplement or waiver changes the terms of a
Security, the Trustee may require the Holder of the Security to deliver it to
the Trustee. The Trustee may place an appropriate notation on the Security about
the changed terms and return it to the Holder. Alternatively, if the Company or
the Trustee so determines, the Company in exchange for the Security shall issue
and the Trustee shall authenticate a new Security that reflects the changed
terms. Failure to make the appropriate notation or issue a new Security shall
not affect the validity and effect of such amendment, supplement or waiver.
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SECTION 10.06. Trustee To Sign Amendments, etc.
The Trustee shall be entitled to receive, and shall be fully
protected in relying upon, an Opinion of Counsel and an Officers' Certificate
each stating that the execution of any amendment, supplement or waiver
authorized pursuant to this Article Ten is authorized or permitted by this
Indenture and that such amendment, supplement or waiver constitutes the legal,
valid and binding obligation of the Company and the Guarantors, enforceable in
accordance with its terms (subject to customary exceptions). The Trustee may,
but shall not be obligated to, execute any such amendment, supplement or waiver
which affects the Trustee's own rights, duties or immunities under this
Indenture or otherwise. In signing any amendment, supplement or waiver, the
Trustee shall be entitled to receive an indemnity reasonably satisfactory to it.
ARTICLE ELEVEN
GUARANTEE
SECTION 11.01. Unconditional Guarantee.
Each Guarantor who becomes a party to this Indenture hereby
unconditionally, jointly and severally, guarantees to each Holder of a Security
authenticated and delivered by the Trustee and to the Trustee and its successors
and assigns that: the principal of and interest on the Securities will be
promptly paid in full when due, subject to any applicable grace period, whether
at maturity, by acceleration or otherwise, and interest on the overdue principal
and interest on any overdue interest on the Securities and all other obligations
of the Company to the Holders or the Trustee hereunder or under the Securities
will be promptly paid in full or performed, all in accordance with the terms
hereof and thereof; subject, however, to the limitations set forth in Section
11.04. Each such Guarantor hereby agrees that its obligations hereunder shall be
unconditional, irrespective of the validity, regularity or enforceability of the
Securities or this Indenture, the absence of any action to enforce the same, any
waiver or consent by any Holder of the Securities with respect to any provisions
hereof or thereof, the recovery of any judgment against the Company, any action
to enforce the same or any other circumstance which might otherwise constitute a
legal or equitable discharge or defense of a guarantor. Each such Guarantor
hereby waives diligence, presentment, demand of payment, filing of claims with a
court in the event of insolvency or bankruptcy of the Company, any right to
require a proceeding first against the
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Company, protest, notice and all demands whatsoever and covenants that the
Guarantee will not be discharged except by complete performance of the
obligations contained in the Securities, this Indenture, and this Guarantee. If
any Holder or the Trustee is required by any court or otherwise to return to the
Company, any Guarantor, or any custodian, trustee, liquidator or other similar
official acting in relation to the Company or any Guarantor, any amount paid by
the Company or any Guarantor to the Trustee or such Holder, this Guarantee, to
the extent theretofore discharged, shall be reinstated in full force and effect.
Each Guarantor further agrees that, as between each Guarantor, on the one hand,
and the Holders and the Trustee, on the other hand, (x) the maturity of the
obligations guaranteed hereby may be accelerated as provided in Article Six for
the purpose of this Guarantee, notwithstanding any stay, injunction or other
prohibition preventing such acceleration in respect of the obligations
guaranteed hereby, and (y) in the event of any acceleration of such obligations
as provided in Article Six, such obligations (whether or not due and payable)
shall forth become due and payable by each Guarantor for the purpose of this
Guarantee.
SECTION 11.02. Severability.
In case any provision of this Guarantee shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
SECTION 11.03. Release of a Guarantor.
If the Securities are defeased in accordance with Section
9.01(b)(ii), or if all or substantially all of the assets of any Guarantor or
all of the Capital Stock of any Guarantor is sold (including by issuance or
otherwise) by the Company or any of its Subsidiaries in a transaction
constituting an Asset Disposition and if (x) the Net Available Proceeds from
such Asset Disposition are used in accordance with Section 4.05 or (y) the
Company delivers to the Trustee an Officers' Certificate covenanting that the
Net Available Proceeds from such Asset Disposition shall be used in accordance
with Section 4.05 and within the time limits specified by such Section 4.05,
then such Guarantor (in the event of a sale or other disposition of all of the
Capital Stock of such Guarantor) or the corporation acquiring such assets (in
the event of a sale or other disposition of all or substantially all of the
assets of such Guarantor), shall be deemed released from all obligations under
this Article Eleven without any further action required on the part
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of the Trustee or any Holder. The Trustee shall, at the sole cost and expense of
the Company and upon receipt at the reasonable request of the Trustee of an
Opinion of Counsel that the provisions of this Section 11.03 have been complied
with, deliver an appropriate instrument evidencing such release upon receipt of
a request by the Company accompanied by an Officers' Certificate certifying as
to the compliance with this Section. Any Guarantor not so released remains
liable for the full amount of principal of and interest on the Securities and
the other obligations of the Company hereunder as provided in this Article
Eleven.
SECTION 11.04. Limitation of Guarantor's Liability.
Each Guarantor, and by its acceptance hereof each Holder and
the Trustee, hereby confirms that it is the intention of all such parties that
the guarantee by such Guarantor pursuant to its Guarantee not constitute a
fraudulent transfer or conveyance for purposes of title 11 of the United States
Code, as amended, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent
Transfer Act or any similar U.S. Federal or state or other applicable law. To
effectuate the foregoing intention, the Holders and such Guarantor hereby
irrevocably agree that the obligations of such Guarantor under the Guarantee
shall be limited to the maximum amount as will, after giving effect to all other
contingent and fixed liabilities of such Guarantor and after giving effect to
any collections from or payments made by or on behalf of any other Guarantor in
respect of the obligations of such other Guarantor under its Guarantee or
pursuant to Section 11.05, result in the obligations of such Guarantor under the
Guarantee not constituting such fraudulent transfer or conveyance.
SECTION 11.05. Contribution.
In order to provide for just and equitable contribution among
the Guarantors, the Guarantors agree, inter se, that in the event any payment or
distribution is made by any Guarantor (a "Funding Guarantor") under the
Guarantee, such Funding Guarantor shall be entitled to a contribution from all
other Guarantors in a pro rata amount, based on the net assets of each Guarantor
(including the Funding Guarantor), determined in accordance with GAAP, subject
to Section 11.04, for all payments, damages and expenses incurred by that
Funding Guarantor in discharging the Company's obligations with respect to the
Securities or any other Guarantor's obligations with respect to the Guarantee.
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SECTION 11.06. Execution of Guarantee.
To further evidence their Guarantee to the Holders, any
Guarantor required to Guarantee the Securities pursuant to the terms of Section
4.19 shall execute the Guarantee in substantially the form set forth in Exhibit
A hereto to be endorsed on each Security ordered to be authenticated and
delivered by the Trustee. Each such Guarantor hereby agrees that its Guarantee
set forth in Section 11.01 shall remain in full force and effect notwithstanding
any failure to endorse on each Security a notation of such Guarantee. Each such
Guarantee shall be signed on behalf of each Guarantor by its Chairman of the
Board, its President or one of its Vice Presidents prior to the authentication
of the Security on which it is endorsed, and the delivery of such Security by
the Trustee, after the authentication thereof hereunder, shall constitute due
delivery of such Guarantee on behalf of such Guarantor. Such signature upon the
Guarantee may be manual or facsimile signature of such officer and may be
imprinted or otherwise reproduced on the Guarantee, and in case such officer who
shall have signed the Guarantee shall cease to be such officer before the
Security on which such Guarantee is endorsed shall have been authenticated and
delivered by the Trustee or disposed of by the Company, such Security
nevertheless may be authenticated and delivered or disposed of as though the
Person who signed the Guarantee had not ceased to be such officer of the
Guarantor.
SECTION 11.07. Subordination of Subrogation and Other Rights.
Each Guarantor hereby agrees that any claim against the
Company that arises from the payment, performance or enforcement of such
Guarantor's obligations under its Guarantee or this Indenture, including,
without limitation, any right of subrogation, shall be subject and subordinate
to, and no payment with respect to any such claim of such Guarantor shall be
made before, the payment in full in cash of all outstanding Securities in
accordance with the provisions provided therefor in this Indenture.
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ARTICLE TWELVE
SUBORDINATION OF GUARANTEE
SECTION 12.01. Guarantee Obligations Subordinated
to Senior Debt of Guarantor.
Each Guarantor covenants and agrees, and the Trustee and each Holder of
the Securities by his acceptance thereof likewise covenant and agree, that the
Guarantees shall be issued subject to the provisions of this Article; and each
person holding any Security, whether upon original issue or upon transfer,
assignment or exchange thereof, accepts and agrees that all payments of the
principal of and interest on the Securities pursuant to the Guarantee made by or
on behalf of any Guarantor shall, to the extent and in the manner set forth in
this Article, be subordinated and junior in right of payment to the prior
payment in full of all amounts payable under Senior Debt of such Guarantor.
SECTION 12.02. No Payment on Guarantees in Certain
Circumstances.
(a) No payment by or on behalf of any Guarantor of principal of,
premium, if any, or interest on the Securities, or any payment to acquire any of
the Securities for cash, property or securities, or any distribution with
respect to the Securities of any kind or character, whether in cash, property or
securities, by set-off or otherwise (all such payments and distributions
referred to individually and collectively as a "Guarantor Securities Payment"),
whether pursuant to the terms of such Guarantor's Guarantee, upon acceleration
or otherwise, will be made if, at the time of such payment, there exists a
default in the payment of all or any portion of the obligations on any
Designated Senior Debt of such Guarantor whether at maturity, on account of
mandatory redemption or prepayment, acceleration or otherwise (but if the
Trustee is otherwise able to make such Guarantor Securities Payment, only
insofar as the Trustee is concerned, if the Trustee has received written notice
of such default), and such default shall not have been cured or waived or the
benefits of this sentence waived by or on behalf of the holders of such
Designated Senior Debt. In addition, during the continuance of any non-payment
default or event of default with respect to any Designated Senior Debt pursuant
to which the maturity thereof may be accelerated, and upon receipt by the
Trustee of written notice (the "Guarantor Payment Blockage Notice") from a
holder or holders of such Designated Senior Debt or the trustee or agent acting
on behalf of
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such Designated Senior Debt, then, unless and until such default or event of
default has been cured or waived or has ceased to exist or such Designated
Senior Debt has been discharged or repaid in full, in cash or cash equivalents
or otherwise in a form satisfactory to the holders of such Senior Debt, no
Guarantor Securities Payment will be made by or on behalf of such Guarantor,
except from those funds held in trust for purposes of defeasance for the benefit
of the Holders of any Securities to such Holders, during a period (a "Guarantor
Blockage Period") commencing on the date of receipt of such notice by the
Trustee and ending 179 days thereafter.
Notwithstanding anything herein or in the Securities to the contrary,
(x) in no event shall a Guarantor Blockage Period extend beyond 179 days from
the date the Guarantor Payment Blockage Notice was given and (y) there must be
180 days in any 365 day period during which no Guarantor Payment Blockage Period
is in effect. Not more than one Guarantor Blockage Period may be commenced with
respect to any Guarantor during any period of 365 consecutive days. No default
or event of default that existed or was continuing on the date of commencement
of any other Guarantor Blockage Period with respect to the Designated Senior
Debt initiating such Guarantor Payment Blockage Period may be, or be made, the
basis for the commencement of any other Guarantor Blockage Period by the holder
or holders of such Designated Senior Debt or the trustee or agent acting on
behalf of such Designated Senior Debt, whether or not within a period of 365
consecutive days, unless such default or event of default has been cured or
waived for a period of not less than 90 consecutive days.
(b) In the event that, notwithstanding the foregoing, any payment
shall be received by the Trustee or any Holder when such payment is prohibited
by Section 12.02(a), such payment shall be held for the benefit of, and shall be
paid over or delivered to, the holders of such Designated Senior Debt or their
respective representatives, or to the trustee or trustees under any indenture
pursuant to which any of such Designated Senior Debt may have been issued, as
their respective interests may appear, but only to the extent that, upon notice
from the Trustee to the holders of such Designated Senior Debt that such
prohibited payment has been made, the holders of such Designated Senior Debt (or
their representative or representatives or a trustee) notify the Trustee in
writing of the amounts then due and owing on such Designated Senior Debt, if
any, and only the amounts specified in such notice to the Trustee shall be paid
to the holders of such Designated Senior Debt.
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SECTION 12.03. Payment Over of Proceeds upon Dissolution,
etc.
(a) Upon any payment or distribution of assets or securities of any
Guarantor of any kind or character, whether in cash, property or securities,
upon any dissolution or winding-up or total or partial liquidation or
reorganization of such Guarantor, whether voluntary or involuntary or in
bankruptcy, insolvency, receivership or other proceedings, all amounts due or to
become due with respect to all Senior Debt of such Guarantor (including any
interest accruing on or after, or which would accrue but for, an event of
bankruptcy, regardless of whether such interest is an allowed claim enforceable
against the debtor under the Bankruptcy Code) shall first be paid in full, or
payment provided for, in either case in cash or cash equivalents or otherwise in
a form satisfactory to the holders of Senior Debt, before the Holders of the
Securities or the Trustee on behalf of such Holders shall be entitled to receive
any Guarantor Securities Payment. Before any payment may be made by, or on
behalf of, any Guarantor of the principal of or interest on the Securities upon
any such dissolution or winding-up or liquidation or reorganization, any payment
or distribution of assets or securities of such Guarantor of any kind or
character, whether in cash, property or securities, to which the Holders of the
Securities or the Trustee on their behalf would be entitled, but for the
subordination provisions of this Indenture, shall be made by such Guarantor or
by any receiver, trustee in bankruptcy, liquidating trustee, agent or other
Person making such payment or distribution, directly to the holders of the
Senior Debt of such Guarantor (pro rata to such holders on the basis of the
respective amounts of Senior Debt held by such holders) or their representatives
or to the trustee or trustees under any indenture pursuant to which any of such
Senior Debt may have been issued, as their respective interests may appear, to
the extent necessary to pay all such Senior Debt in full in cash or cash
equivalents or otherwise in a form satisfactory to the holders of such Senior
Debt after giving effect to any concurrent payment, distribution or provision
therefor to or for the holders of such Senior Debt.
(b) In the event that, notwithstanding the foregoing provision
prohibiting such payment or distribution, any payment or distribution of assets
or securities of any kind or character, whether in cash, property or securities,
shall be received by the Trustee or any Holder of Securities at a time when such
payment or distribution is prohibited by Section 12.03(a) and before all
obligations in respect of the Senior Debt of such Guarantor are paid in full, or
payment provided for, such pay-
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ment or distribution shall be received and held for the benefit of, and shall be
paid over or delivered to, the holders of such Senior Debt or their respective
representatives, or to the trustee or trustees under any indenture pursuant to
which any of such Senior Debt may have been issued, as their respective
interests may appear, for application to the payment of such Senior Debt
remaining unpaid until all such Senior Debt has been paid in full after giving
effect to any concurrent payment, distribution or provision therefor to or for
the holders of such Senior Debt.
(c) The consolidation of any Guarantor with, or the merger of any
Guarantor with or into, another corporation or the liquidation or dissolution of
any Guarantor following the conveyance or transfer of its property as an
entirety, or substantially as an entirety, to another corporation upon the terms
and conditions provided in Article Five or Section 11.03 shall not be deemed a
dissolution, winding-up, liquidation or reorganization for the purposes of this
Section if such other corporation shall, as a part of such consolidation,
merger, conveyance or transfer, comply with the conditions stated in Article
Five or such Guarantor or successor entity shall be released from the Guarantee
pursuant to the terms of Section 11.03.
SECTION 12.04. Subrogation.
Upon the payment in full of all Senior Debt of a Guarantor, or
provision for payment, the Holders of the Securities shall be subrogated to the
rights of the holders of such Senior Debt to receive payments or distributions
of cash, property or securities of such Guarantor made on such Senior Debt until
the principal of and interest on the Securities shall be paid in full; and, for
the purposes of such subrogation, no payments or distributions to the holders of
such Senior Debt of any cash, property or securities to which the Holders of the
Securities or the Trustee on their behalf would be entitled except for the
provisions of this Article, and no payment over pursuant to the provisions of
this Article to the holders of such Senior Debt by Holders of the Securities or
the Trustee on their behalf shall, as between such Guarantor, its creditors
other than holders of such Senior Debt, and the Holders of the Securities, be
deemed to be a payment by such Guarantor to or on account of such Senior Debt.
It is understood that the provisions of this Article are and are intended solely
for the purpose of defining the relative rights of the Holders of the
Securities, on the one hand, and the holders of Senior Debt of the Guarantors,
on the other hand.
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If any payment or distribution to which the Holders of the Securities
would otherwise have been entitled but for the provisions of this Article shall
have been applied, pursuant to the provisions of this Article, to the payment of
all amounts payable under Senior Debt, then and in such case, the Holders of the
Securities shall be entitled to receive from the holders of such Senior Debt any
payments or distributions received by such holders of Senior Debt in excess of
the amount required to make payment in full, or provision for payment, of such
Senior Debt.
SECTION 12.05. Obligations of Guarantors Unconditional.
Nothing contained in this Article or elsewhere in this Indenture or in
the Securities or the Guarantee is intended to or shall impair, as among the
Guarantors and the Holders of the Securities, the obligation of each Guarantor,
which is absolute and unconditional, to pay to the Holders of the Securities the
principal of and interest on the Securities as and when the same shall become
due and payable in accordance with the terms of the Guarantee, or is intended to
or shall affect the relative rights of the Holders of the Securities and
creditors of any Guarantor other than the holders of Senior Debt, nor shall
anything herein or therein prevent the Holder of any Security or the Trustee on
their behalf from exercising all remedies otherwise permitted by applicable law
upon default under this Indenture, subject to the rights, if any, under this
Article of the holders of Senior Debt in respect of cash, property or securities
of any Guarantor received upon the exercise of any such remedy.
Without limiting the generality of the foregoing, nothing contained in
this Article shall restrict the right of the Trustee or the Holders of
Securities to take any action to declare the Securities to be due and payable
prior to their stated maturity pursuant to Section 6.01 or to pursue any rights
or remedies hereunder; provided, however, that all Senior Debt of any Guarantor
then due and payable shall first be paid in full before the Holders of the
Securities or the Trustee are entitled to receive any direct or indirect payment
from such Guarantor of principal of or interest on the Securities pursuant to
such Guarantor's Guarantee.
SECTION 12.06. Notice to Trustee.
The Company shall give prompt written notice to the Trustee of any fact
known to the Company or such Guarantor which would prohibit the making of any
payment to or by the
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Trustee in respect of the Securities pursuant to the provisions of this Article.
The Trustee shall not be charged with knowledge of the existence of any default
or event of default with respect to any Senior Debt or of any other facts which
would prohibit the making of any payment to or by the Trustee unless and until
the Trustee shall have received notice in writing at its Corporate Trust Office
to that effect signed by an Officer of the Company, or by a holder of Senior
Debt or trustee or agent therefor; and prior to the receipt of any such written
notice, the Trustee shall, subject to Article Seven, be entitled to assume that
no such facts exist; provided that if the Trustee shall not have received the
notice provided for in this Section at least two Business Days prior to the date
upon which by the terms of this Indenture any moneys shall become payable for
any purpose (including, without limitation, the payment of the principal of or
interest on any Security), then, regardless of anything herein to the contrary,
the Trustee shall have full power and authority to receive any moneys from any
Guarantor and to apply the same to the purpose for which they were received, and
shall not be affected by any notice to the contrary which may be received by it
on or after such prior date. Nothing contained in this Section 12.06 shall limit
the right of the holders of Senior Debt of a Guarantor to recover payments as
contemplated by Section 12.02 or 12.03. The Trustee shall be entitled to rely on
the delivery to it of a written notice by a Person representing himself or
itself to be a holder of any Senior Debt of a Guarantor (or a trustee on behalf
of, or other representative of, such holder) to establish that such notice has
been given by a holder of such Senior Debt or a trustee or representative on
behalf of any such holder.
In the event that the Trustee determines in good faith that any
evidence is required with respect to the right of any Person as a holder of
Senior Debt of a Guarantor to participate in any payment or distribution
pursuant to this Article, the Trustee may request such Person to furnish
evidence to the reasonable satisfaction of the Trustee as to the amount of such
Senior Debt held by such Person, the extent to which such Person is entitled to
participate in such payment or distribution and any other facts pertinent to the
rights of such Person under this Article, and if such evidence is not furnished,
the Trustee may defer any payment to such Person pending judicial determination
as to the right of such Person to receive such payment.
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SECTION 12.07. Reliance on Judicial Order or Certificate
of Liquidating Agent.
Upon any payment or distribution of assets or securities of a Guarantor
referred to in this Article, the Trustee and the Holders of the Securities shall
be entitled to rely upon any order or decree made by any court of competent
jurisdiction in which bankruptcy, dissolution, winding-up, liquidation or
reorganization proceedings are pending, or upon a certificate of the receiver,
trustee in bankruptcy, liquidating trustee, agent or other person making such
payment or distribution, delivered to the Trustee or to the Holders of the
Securities for the purpose of ascertaining the persons entitled to participate
in such distribution, the holders of Senior Debt of such Guarantor and other
indebtedness of such Guarantor, the amount thereof or payable thereon, the
amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Article.
SECTION 12.08. Trustee's Relation to Senior Debt of
Guarantors.
The Trustee and any Paying Agent shall be entitled to all the rights
set forth in this Article with respect to any Senior Debt of Guarantors which
may at any time be held by it in its individual or any other capacity to the
same extent as any other holder of such Senior Debt, and nothing in this
Indenture shall deprive the Trustee or any Paying Agent of any of its rights as
such holder.
With respect to the holders of a Guarantor's Senior Debt, the Trustee
undertakes to perform or to observe only such of its covenants and obligations
as are specifically set forth in this Article, and no implied covenants or
obligations with respect to the holders of such Senior Debt shall be read into
this Indenture against the Trustee. The Trustee shall not be deemed to owe any
fiduciary duty to the holders of Senior Debt of Guarantors.
SECTION 12.09. Subordination Rights Not Impaired by Acts
or Omissions of the Guarantors or Holders
of Senior Debt of Guarantors.
No right of any present or future holders of any Senior Debt of
Guarantors to enforce subordination as provided herein shall at any time in any
way be prejudiced or impaired by any act or failure to act on the part of any
Guarantor or by any act or failure to act, in good faith, by any such holder,
<PAGE> 111
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or by any noncompliance by any Guarantor with the terms of this Indenture,
regardless of any knowledge thereof which any such holder may have or otherwise
be charged with. The provisions of this Article are intended to be for the
benefit of, and shall be enforceable directly by, the holders of Senior Debt of
Guarantors.
SECTION 12.10. Securityholders Authorize Trustee To
Effectuate Subordination of Guarantee.
Each Holder of Securities by his acceptance of such Securities
authorizes and expressly directs the Trustee on his behalf to take such action
as may be necessary or appropriate to effectuate the subordination provided in
this Article, and appoints the Trustee his attorney-in-fact for such purposes,
including, in the event of any dissolution, winding up, liquidation or
reorganization of any Guarantor (whether in bankruptcy, insolvency,
receivership, reorganization or similar proceedings or upon a general assignment
for the benefit of creditors or otherwise) tending towards liquidation of the
business and assets of such Guarantor, the filing of a claim for the unpaid
balance of its or his Securities in the form required in those proceedings.
SECTION 12.11. This Article Not To Prevent Events
of Default.
The failure to make a payment on account of principal of or interest on
the Securities by reason of any provision of this Article shall not be construed
as preventing the occurrence of an Event of Default specified in clauses (1) or
(2) of Section 6.01.
SECTION 12.12. Trustee's Compensation Not Prejudiced.
Nothing in this Article shall apply to amounts due to the Trustee
pursuant to Section 7.07.
SECTION 12.13. No Waiver of Guarantee Subordination
Provisions.
Without in any way limiting the generality of Section 12.09, the
holders of Senior Debt of Guarantors may, at any time and from time to time,
without the consent of or notice to the Trustee or the Holders of the
Securities, without incurring responsibility to the Holders of the Securities
and without impairing or releasing the subordination provided in this Article or
the obligations hereunder of the Holders of the
<PAGE> 112
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Securities to the holders of Senior Debt of Guarantors, do any one or more of
the following: (a) change the manner, place or terms of payment or extend the
time of payment of, or renew or alter, Senior Debt of Guarantors or any
instrument evidencing the same or any agreement under which such Senior Debt is
outstanding or secured; (b) sell, exchange, release or otherwise deal with any
property pledged, mortgaged or otherwise securing such Senior Debt; (c) release
any Person liable in any manner for the collection of such Senior Debt; and (d)
exercise or refrain from exercising any rights against any Guarantor and any
other Person.
SECTION 12.14. Payments May Be Paid Prior to Dissolution.
Nothing contained in this Article or elsewhere in this Indenture shall
prevent (i) a Guarantor, except under the conditions described in Section 12.02,
from making payments of principal of and interest on the Securities, or from
depositing with the Trustee any moneys for such payments, or (ii) the
application by the Trustee of any moneys deposited with it for the purpose of
making such payments of principal of and interest on the Securities, to the
Holders entitled thereto unless at least two Business Days prior to the date
upon which such payment becomes due and payable, the Trustee shall have received
the written notice provided for in Section 12.02(b) or in Section 12.06. A
Guarantor shall give prompt written notice to the Trustee of any dissolution,
winding-up, liquidation or reorganization of such Guarantor.
ARTICLE THIRTEEN
MISCELLANEOUS
SECTION 13.01. Trust Indenture Act Controls.
This Indenture is subject to the provisions of the TIA that are
required to be a part of this Indenture, and shall, to the extent applicable, be
governed by such provisions. If any provision of this Indenture modifies any TIA
provision that may be so modified, such TIA provision shall be deemed to apply
to this Indenture as so modified. If any provision of this Indenture excludes
any TIA provision that may be so excluded, such TIA provision shall be excluded
from this Indenture.
The provisions of TIA Sections 310 through 317 that impose duties
on any Person (including the provisions automatically deemed included unless
expressly excluded by this Indenture)
<PAGE> 113
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are a part of and govern this Indenture, whether or not physically contained
herein.
SECTION 13.02. Notices.
Any notice or communication shall be sufficiently given if in writing
and delivered in person, by facsimile and confirmed by overnight courier, or
mailed by first-class mail addressed as follows:
if to the Company or a Guarantor:
Tekni-Plex, Inc.
201 Industrial Parkway
Somerville, New Jersey 08876
Attention: Dr. F. Patrick Smith
Facsimile: (908) 722-4967
Telephone: (908) 722-4800
with a copy to:
Winthrop, Stimson, Putnam & Roberts
One Battery Park Plaza
New York, New York 10004
Attention: Robert W. Gray
Facsimile: (212) 858-1500
Telephone: (212) 858-1412
if to the Trustee:
Marine Midland Bank
140 Broadway
New York, New York 10005
Attention: Corporate Trust Services-Tekni-Plex
Facsimile: (212) 658-6425
Telephone: (212) 658-6433
The Company or the Trustee by notice to the other may designate
additional or different addresses for subsequent notices or communications.
<PAGE> 114
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Any notice or communication mailed, first class, postage prepaid,
to a Securityholder, including any notice delivered in connection with TIA
Section 310(b), TIA Section 313(c), TIA Section 314(a) and TIA Section 315(b),
shall be mailed to him at his address as set forth on the registration books of
the Registrar and shall be sufficiently given to him if so mailed within the
time prescribed. To the extent required by the TIA, any notice or communication
shall also be mailed to any Person described in TIA Section 313(c).
Failure to mail a notice or communication to a Securityholder or
any defect in it shall not affect its sufficiency with respect to other
Securityholders. Except for a notice to the Trustee, which is deemed given only
when received, if a notice or communication is mailed in the manner provided
above, it is duly given, whether or not the addressee receives it.
SECTION 13.03. Communications by Holders with Other
Holders.
Securityholders may communicate pursuant to TIA Section 312(b)
with other Securityholders with respect to their rights under this Indenture or
the Securities. The Company, the Trustee, the Registrar and any other person
shall have the protection of TIA Section 312(c).
SECTION 13.04. Certificate and Opinion as to Conditions
Precedent.
Upon any request or application by the Company to the Trustee to
take or refrain from taking any action under this Indenture, the Company shall
furnish to the Trustee at the request of the Trustee:
(1) an Officers' Certificate in form and substance satisfactory to
the Trustee stating that, in the opinion of the signers, all conditions
precedent, if any, provided for in this Indenture relating to the
proposed action have been complied with;
(2) an Opinion of Counsel in form and substance satisfactory to
the Trustee stating that, in the opinion of such counsel, all such
conditions precedent have been complied with; and
(3) where applicable, a certificate or opinion by an independent
certified public accountant satisfactory to the Trustee that complies
with TIA Section 314(c).
<PAGE> 115
-107-
SECTION 13.05. Statements Required in Certificate
or Opinion.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(1) a statement that the person making such certificate or opinion
has read such covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such person, he has made
such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(4) a statement as to whether or not, in the opinion of such
person, such condition or covenant has been complied with; provided,
however, that with respect to matters of fact an Opinion of Counsel may
rely on an Officers' Certificate or certificates of public officials.
SECTION 13.06. Rules by Trustee, Paying Agent, Registrar.
The Trustee may make reasonable rules for action by or at a
meeting of Securityholders. The Paying Agent or Registrar may make reasonable
rules for its functions.
SECTION 13.07. Governing Law.
Pursuant to Section 5-1401 of the General Obligations Law of the
State of New York this Indenture, the Securities and the Guarantee shall be
governed by and construed in accordance with the laws of the State of New York,
without giving effect to any other conflicts of law provisions.
SECTION 13.08. No Recourse Against Others.
A director, officer, employee or stockholder, as such, of the
Company or any Guarantor shall not have any liability for any obligations of the
Company or any Guarantor under the Securities, the Guarantee or this Indenture
or for any claim based on, in respect of or by reason of such obligations
<PAGE> 116
-108-
or their creation. Each Securityholder by accepting a Security waives and
releases all such liability.
SECTION 13.09. Successors.
All agreements of the Company in this Indenture and the Securities
shall bind its successor. Subject to Section 11.03, all agreements of each
Guarantor in this Indenture and Securities shall bind its successor. All
agreements of the Trustee in this Indenture shall bind its successor.
SECTION 13.10. Counterpart Originals.
The parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together represent the same
agreement.
SECTION 13.11. Severability.
In case any provision in this Indenture, in the Securities or in
the Guarantee shall be invalid, illegal or unenforceable, the validity, legality
and enforceability of the remaining provisions shall not in any way be affected
or impaired thereby, and a Holder shall have no claim therefor against any party
hereto.
SECTION 13.12. No Adverse Interpretation of Other
Agreements.
This Indenture may not be used to interpret another indenture,
loan or debt agreement of the Company or a Subsidiary. Any such indenture, loan
or debt agreement may not be used to interpret this Indenture.
SECTION 13.13. Legal Holidays.
If a payment date is a Legal Holiday at a place of payment,
payment may be made at that place on the next succeeding day that is not a Legal
Holiday, and no interest shall accrue for the intervening period.
[Signature Page Follows]
<PAGE> 117
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SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture
to be duly executed as of the date first written above.
TEKNI-PLEX, INC.
By: /s/ Kenneth W.R. Baker
---------------------------------
Name: Kenneth W.R. Baker
Title: President
DOLCO PACKAGING CORP.
By: /s/ Kenneth W.R. Baker
---------------------------------
Name: Kenneth W.R. Baker
Title: President
MARINE MIDLAND BANK,
as Trustee
By: /s/ Frank Godino
---------------------------------
Name: Frank Godino
Title: Assistant Vice
President
<PAGE> 118
EXHIBIT A
TEKNI-PLEX, INC.
No. $
11 1/4% SENIOR SUBORDINATED NOTE DUE 2007
Tekni-Plex, Inc. promises to pay to or registered assigns the
principal sum of Dollars on the Maturity Date of April 1, 2007.
Interest Payment Dates: April and October 1, beginning
October 1, 1997.
Record Dates: March 15 and September 15, beginning
September 15, 1997.
IN WITNESS WHEREOF, TEKNI-PLEX, INC. has caused this instrument to
be executed in its corporate name by manual or a facsimile signature of its
________________ and its ___________________.
TEKNI-PLEX, INC.
By: ________________________________
Name:
Title:
Dated: By: ________________________________
Name:
Title:
Certificate of Authentication:
This is one of the 11 1/4% Senior Subordinated Notes due 2007
referred to in the within-mentioned Indenture.
MARINE MIDLAND BANK, as Trustee
By ________________________________ Date:
Authorized Signatory
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<PAGE> 119
(REVERSE OF SECURITY)
TEKNI-PLEX, INC.
11 1/4% Senior Subordinated Note due 2007
1. Interest.
Tekni-Plex, Inc., a Delaware corporation (the "Company"), promises to
pay interest at the rate of 11 1/4% per annum on the principal amount of this
Security semiannually commencing on October 1, 1997, until the principal hereof
is paid or made available for payment. Interest on the Securities will accrue
from and including the most recent date to which interest has been paid or, if
no interest has been paid, from and including April 4, 1997, through but
excluding the date on which interest is paid. If an Interest Payment Date falls
on a day that is not a Business Day, the interest payment to be made on such
Interest Payment Date will be made on the next succeeding Business Day with the
same force and effect as if made on such Interest Payment Date, and no
additional interest will accrue as a result of such delayed payment. Interest
will be computed on the basis of a 360-day year of twelve 30-day months.
2. Method of Payment.
The interest payable on the Securities, and punctually paid or duly
provided for, on any Interest Payment Date will, as provided in the Indenture
(as defined below), be paid to the person in whose name this Security is
registered at the close of business on the regular record date, which shall be
the March 15 or September 15 (whether or not a Business Day) next preceding such
Interest Payment Date. Any such interest not so punctually paid or duly provided
for, and any interest payable on such defaulted interest (to the extent lawful),
will forthwith cease to be payable to the Holder on such regular record date and
shall be paid to the person in whose name this Security is registered at the
close of business on a special record date for the payment of such defaulted
interest to be fixed by the Company, notice of which shall be given to Holders
not less than 15 days prior to such special record date. Payment of the
principal of and interest on this Security will be made at the agency of the
Company maintained for that purpose in New York, New York and at any other
office or agency maintained by the Company for such purpose, in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts; pro-
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<PAGE> 120
vided, however, that at the option of the Company payment of interest may be
made by check mailed to the address of the person entitled thereto as such
address shall appear in the Security register.
3. Paying Agent and Registrar.
Initially, Marine Midland Bank (the "Trustee") will act as Paying Agent
and Registrar. The Company may change any Paying Agent, Registrar or
co-Registrar without notice to the Holders of Securities. The Company or any of
its Subsidiaries may act as Registrar or co-Registrar but may not act as Paying
Agent.
4. Indenture.
This Security is one of a duly authorized issue of Securities of the
Company, designated as its 11 1/4% Senior Subordinated Notes due 2007 (the
"Securities"), limited in aggregate principal amount to $150,000,000 (except for
Securities issued in substitution for destroyed, lost or stolen Securities)
issuable under an indenture dated as of April 1, 1997 (the "Indenture"), among
the Company, Dolco Packaging Corp. and the Trustee. The terms of the Securities
include those stated in the Indenture and those made part of the Indenture by
the Trust Indenture Act of 1939 (the "Act") (15 U.S. Code Sections
77aaa-77bbbb) as in effect on the date of the Indenture. The Securities are
subject to all such terms, and Holders of Securities are referred to the
Indenture and the Act for a statement of them. Each Securityholder, by accepting
a Security, agrees to be bound to all of the terms and provisions of the
Indenture, as the same may be amended from time to time. Payment on each
Security is guaranteed, jointly and severally, by the Guarantors pursuant to
Article Eleven of the Indenture.
Capitalized terms contained in this Security to the extent not defined
herein shall have the meanings assigned to them in the Indenture.
5. Optional Redemption.
The Securities will be subject to redemption, at the option of the
Company, in whole or in part, at any time on or after April 1, 2002 and prior to
maturity, upon not less than 30 nor more than 60 days' notice mailed to each
holder of Securities to be redeemed at his address appearing in the register for
the Securities, in amounts of $1,000 or an integral multiple of $1,000, at the
following redemption prices (expressed as
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<PAGE> 121
percentages of principal amount) plus accrued interest to but excluding the date
fixed for redemption (subject to the right of holders of record on the relevant
Record Date to receive interest due on an interest payment date that is on or
prior to the date fixed for redemption), if redeemed during the 12-month period
beginning April 1 of the years indicated:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
<S> <C>
2002........................................ 105.625%
2003........................................ 103.750
2004........................................ 101.875
2005 and thereafter......................... 100.000
</TABLE>
In addition, prior to April 1, 2000, the Company may redeem up to 33%
of the principal amount of the Securities with the net cash proceeds received by
the Company from one or more public offerings of Capital Stock (other than
Disqualified Stock) of the Company, at a redemption price (expressed as a
percentage of the principal amount) of 111.25% of the principal amount thereof,
plus accrued and unpaid interest to the date fixed for redemption; provided,
however, that at least $60.0 million in aggregate principal amount of the
Securities remains outstanding immediately after any such redemption (excluding
any Securities owned by the Company or any of its Affiliates). Notice of
redemption pursuant to this paragraph must be mailed to holders of Securities
not later than 60 days following the consummation of such public offering.
Selection of Securities for any partial redemption shall be made by the
Trustee, in accordance with the rules of any national securities exchange on
which the Securities may be listed or, if the Securities are not so listed, pro
rata or by lot or in such other manner as the Trustee shall deem appropriate and
fair. Securities in denominations larger than $1,000 may be redeemed in part but
only in integral multiples of $1,000. Notice of redemption will be mailed before
the date fixed for redemption to each holder of Securities to be redeemed at his
or her registered address. On and after the date fixed for redemption, interest
will cease to accrue on Securities or portions thereof called for redemption.
The Securities will not have the benefit of any sinking fund.
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<PAGE> 122
6. Purchase upon Occurrence of a
Change of Control.
Within 30 days of the occurrence of a Change of Control, the Company
will offer to purchase the Securities, in whole and not in part, at a purchase
price equal to 101% of the principal amount thereof plus any accrued and unpaid
interest thereon.
7. Notice of Redemption.
Notice of redemption will be mailed by first class mail at least 30
days but not more than 60 days before the redemption date to each Holder of
Securities to be redeemed at his registered address. Securities in denominations
larger than $1,000 may be redeemed in part. On and after the redemption date,
interest ceases to accrue on those Securities or portion of them called for
redemption.
8. Denominations; Transfer; Exchange.
The Securities are in registered form without coupons in denominations
of $1,000 and integral multiples of $1,000. A Holder may transfer or exchange
Securities in accordance with the Indenture. The Registrar may require a Holder,
among other things, to furnish appropriate endorsements and transfer documents
and to pay any taxes and fees required by law or permitted by the Indenture. The
Registrar need not transfer or exchange any Securities selected for redemption.
9. Persons Deemed Owners.
The registered Holder of a Security may be treated as the owner of it
for all purposes.
10. Unclaimed Funds.
If funds for the payment of principal or interest remain unclaimed for
two years, the Trustee or Paying Agent will repay the funds to the Company at
its request. After such repayment Holders of Securities entitled to such funds
must look to the Company for payment unless an applicable abandoned property law
designates another person.
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<PAGE> 123
11. Discharge Prior to Redemption or
Maturity.
The Indenture will be discharged and cancelled except for certain
Sections thereof, subject to the terms of the Indenture, upon the payment of all
the Securities or upon the irrevocable deposit with the Trustee of funds or
United States Government Obligations sufficient for such payment or redemption.
12. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture or the Securities may be
amended or supplemented with the consent of the Holders of at least a majority
in principal amount of the outstanding Securities, and any past default or
compliance with any provision may be waived with the consent of the Holders of a
majority in principal amount of the outstanding Securities. Without notice to or
the consent of any Holder, the Company, the Guarantors and the Trustee may amend
or supplement the Indenture or the Securities to cure any ambiguity, defect or
inconsistency, or to make any change that does not adversely affect the rights
of any Holder of Securities.
13. Restrictive Covenants.
The Indenture restricts, among other things, the ability of the Company
or any of its Restricted Subsidiaries to permit any Liens to be imposed on their
assets, to make certain Restricted Payments and Investments, limits the
Indebtedness which the Company and its Restricted Subsidiaries may incur and
limits the terms on which the Company may engage in Asset Dispositions. The
Company is also obligated under certain circumstances to make an offer to
purchase Securities with the net cash proceeds of certain Asset Dispositions.
The Company must report annually to the Trustee on compliance with the covenants
in the Indenture.
14. Successor Corporation.
Pursuant to the Indenture, the ability of the Company to consolidate
with, merge with or into or transfer its assets to another person is conditioned
upon certain requirements, including certain financial requirements applicable
to the surviving Person.
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<PAGE> 124
15. Defaults and Remedies.
If an Event of Default shall occur and be continuing, the principal of
all of the outstanding Securities, plus all accrued and unpaid interest, if any,
to the date the Securities become due and payable, may be declared due and
payable in the manner and with the effect provided in the Indenture.
16. Trustee Dealings with Company.
The Trustee in its individual or any other capacity, may become the
owner or pledgee of Securities and make loans to, accept deposits from, and
perform services for the Company or its Affiliates, and may otherwise deal with
the Company or its Affiliates, as if it were not Trustee.
17. No Recourse Against Others.
A director, officer, employee or stockholder, as such, of the Company
or any Guarantor shall not have any liability for any obligations of the Company
or any Guarantor under the Securities, the Guarantee or the Indenture or for any
claim based on, in respect of or by reason of such obligations or their
creation. Each Holder of a Security by accepting a Security waives and releases
all such liability. The waiver and release are part of the consideration for the
issue of the Securities.
18. Authentication.
This Security shall not be valid until the Trustee signs the
certificate of authentication on the other side of this Security.
19. Abbreviations.
Customary abbreviations may be used in the name of Securityholder or an
assignee, such as TEN COM (= tenants in common), TEN ENT (= tenants by the
entireties), JT TEN (= joint tenants with right of survivorship and not as
tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors
Act).
20. CUSIP or CINS Numbers.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company has caused CUSIP or CINS numbers
to be printed on the Se-
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<PAGE> 125
curities and has directed the Trustee to use CUSIP or CINS numbers in notices of
redemption as a convenience to Securityholders. No representation is made as to
the accuracy of such numbers either as printed on the Securities or as contained
in any notice of redemption and reliance may be placed only on the other
identification numbers placed thereon.
21. Governing Law.
The laws of the State of New York shall govern the Indenture, this
Security and the Guarantee without regard to principles of conflicts of law.
The Company will furnish to any Holder of record of Securities upon
written request and without charge a copy of the Indenture.
A-8
<PAGE> 126
[FORM OF NOTATION ON SECURITY RELATING TO GUARANTEE]
SENIOR SUBORDINATED GUARANTEE
The Guarantors (as defined in the Indenture referred to in the Security
upon which this notation is endorsed) hereby, jointly and severally,
unconditionally guarantee (such guarantee by each Guarantor being referred to
herein as the "Guarantee") the due and punctual payment of the principal of,
premium, if any, and interest on the Securities, whether at maturity, by
acceleration or otherwise, the due and punctual payment of interest on the
overdue principal, premium and interest, if any, on the Securities, and the due
and punctual performance of all other obligations of the Company to the Holders
or the Trustee, all in accordance with the terms set forth in Article Eleven of
the Indenture.
The obligations of each Guarantor to the Holders of Securities and to
the Trustee pursuant to the Guarantee and the Indenture are expressly set forth,
to the extent and in the manner provided, in Article Twelve of the Indenture,
and reference is hereby made to such Indenture for the precise terms of the
Guarantee therein made.
The Guarantee shall not be valid or obligatory for any purpose until
the certificate of authentication on the Securities upon which the Guarantee is
noted shall have been executed by the Trustee under the Indenture by the manual
signature of one of its authorized officers.
This Guarantee shall be governed by and construed in accordance with
the laws of the State of New York without regard to principles of conflicts of
law.
This Guarantee is subject to release upon the terms set forth in the
Indenture.
DOLCO PACKAGING CORP.
By: ________________________________
Name:
Title:
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<PAGE> 127
ASSIGNMENT FORM
If you the Holder want to assign this Security, fill in the form below
and have your signature guaranteed:
I or we assign and transfer this Security to:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type name, address and zip code and
social security or tax ID number of assignee)
and irrevocably appoint _________________________________________, agent to
transfer this Security on the books of the Company. The agent may substitute
another to act for him.
Dated: _______________________ Signed: _________________________________
(Sign exactly as name
appears on the other
side of this Security)
Signature Guarantee: ___________________________________________________________
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<PAGE> 128
OPTION OF HOLDER TO ELECT PURCHASE
If you the Holder want to elect to have this Security purchased by the Company,
check the box: / /
If you want to elect to have only part of this Security purchased by the
Company, state the amount: $ _______________
Dated: _______________________ Signed: _________________________________
(Sign exactly as name
appears on the other
side of this Security)
Signature Guarantee: ___________________________________________________________
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<PAGE> 129
EXHIBIT B
FORM OF CERTIFICATE OF TRANSFER
Tekni-Plex, Inc.
201 Industrial Parkway
Somerville, New Jersey 08876
Attention:
Marine Midland Bank
140 Broadway
New York, New York 10005
Attention: Corporate Trust Services-
Tekni-Plex
Re: 11 1/4% Senior Subordinated Notes due 2007
Reference is hereby made to the Indenture, dated as of April 1, 1997
(the "Indenture"), among Tekni-Plex, Inc. (the "Company"), Dolco Packaging Corp.
and Marine Midland Bank, as trustee. Capitalized terms used but not defined
herein shall have the meanings given to them in the Indenture.
________________, (the "Transferor") owns and proposes to transfer the
Security[s] specified in Annex A hereto in the principal amount of $___ in such
Security[s] (the "Transfer"), to ________ (the "Transferee"), as further
specified in Annex A hereto. In the event that Transferor holds Physical
Securities, this Certificate is accompanied by one or more certificates
aggregating at least the principal amount of Securities proposed to be
Transferred. In connection with the Transfer, the Transferor hereby certifies
that:
1. / / CHECK IF TRANSFEREE WILL TAKE AN INTEREST IN THE 144A GLOBAL SECURITY.
The Transfer is being effected pursuant to and in accordance with Rule 144A
under the United States Securities Act of 1933, as amended (the "Securities
Act"), and, accordingly, the Transferor hereby further certifies that the
Securities are being transferred to a Person that the Transferor reasonably
believes is purchasing the Securities for its own account, or for one or more
accounts with respect to which such Person exercises sole investment discretion,
and such Person and each such account is a "qualified institutional buyer"
within the meaning of Rule 144A in a transaction meeting the requirements of
Rule 144A and such Transfer is in compliance with any applicable blue sky
securities laws of any state of
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<PAGE> 130
the United States. Upon consummation of the proposed Transfer in accordance with
the terms of the Indenture, the transferred Security will be subject to the
restrictions on transfer enumerated in the Securities Act Legend and in the
Indenture and the Securities Act.
2. / / CHECK IF TRANSFEREE WILL TAKE AN INTEREST IN THE REGULATION S GLOBAL
SECURITY PURSUANT TO REGULATION S. The Transfer is being effected pursuant to
and in accordance with Rule 904 under the Securities Act and, accordingly, the
Transferor hereby further certifies that (i) the Transfer is not being made to a
person in the United States and (x) at the time the buy order was originated,
the Transferee was outside the United States or such Transferor and any Person
acting on its behalf reasonably believed and believes that the Transferee was
outside the United States or (y) the transaction was executed in, on or through
the facilities of a designated offshore securities market and neither such
Transferor nor any Person acting on its behalf knows that the transaction was
prearranged with a buyer in the United States, (ii) no directed selling efforts
have been made in contravention of the requirements of Rule 904(b) of Regulation
S under the Securities Act and (iii) the transaction is not part of a plan or
scheme to evade the registration requirements of the Securities Act. Upon
consummation of the proposed transfer in accordance with the terms of the
Indenture, the Security will be subject to the restrictions on Transfer
enumerated in the Securities Act Legend printed on the Regulation S Global
Security and in the Indenture and the Securities Act.
3. / / CHECK AND COMPLETE IF TRANSFEREE WILL TAKE DELIVERY OF A RESTRICTED
PHYSICAL SECURITY PURSUANT TO RULE 144A OR REGULATION S. One or more of the
events specified in Section 2.06(a) of the Indenture have occurred and the
Transfer is being effected in compliance with the transfer restrictions
applicable to Securities bearing the Securities Act Legend and pursuant to and
in accordance with the Securities Act, and accordingly the Transferor hereby
further certifies that (check one):
(a) / / such Transfer is being effected pursuant to and in accordance with
Rule 144A under the Securities Act and the Transferor certifies to the effect
set forth in paragraph 1 above; or
(b) / / such Transfer is being effected pursuant to and in accordance with
Rule 904 under the Securities Act and the
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<PAGE> 131
Transferor certifies to the effect set forth in paragraph 2 above.
4. / / CHECK IF TRANSFEREE WILL TAKE AN INTEREST IN THE UNRESTRICTED GLOBAL
SECURITY. The Transfer is being effected pursuant to and in accordance with Rule
144 under the Securities Act and in compliance with the transfer restrictions
contained in the Indenture, and the restrictions on transfer contained in the
Indenture and the Securities Act Legend are not required in order to maintain
compliance with the Securities Act. Upon consummation of the proposed Transfer
in accordance with the terms of the Indenture, the transfer Securities will no
longer be subject to the restrictions on transfer enumerated in the Securities
Act Legend and in the Indenture and the Securities Act.
5. / / CHECK IF TRANSFEREE WILL TAKE AN INTEREST IN THE PHYSICAL GLOBAL
SECURITY THAT DOES NOT BEAR THE SECURITIES ACT LEGEND. One or more of the events
specified in Section 2.06(a) of the Indenture have occurred and the Transfer is
being effected pursuant to and in accordance with Rule 144 under the Securities
Act and in compliance with the transfer restrictions contained in the Indenture,
and the restrictions on transfer contained in the Indenture and the Securities
Act Legend are not required in order to maintain compliance with the Securities
Act. Upon consummation of the proposed Transfer in accordance with the terms of
the Indenture, the transferred Securities will no longer be subject to the
restrictions on transfer enumerated in the Securities Act Legend and in the
Indenture and the Securities Act.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company.
____________________________________
[Insert Name of Transferor]
By: ________________________________
Name:
Title:
Dated:_______________________
B-3
<PAGE> 132
FORM OF ANNEX A TO CERTIFICATE
OF TRANSFER
1. The Transferor owns and proposes to transfer the following:
[CHECK ONE OF (a) OR (b)]
(a) / / Interests in the
(i) / / 144A Global Security (CUSIP _____), or
(ii) / / Regulation S Global Security (CINS _____).
(b) / /Physical Security.
2. That the Transferee will hold:
[CHECK ONE]
(a) / / Interests in the:
(i) / / 144A Global Security (CUSIP _____), or
(ii) / / Regulation S Global Security (CINS _____), or
(iii) / / Unrestricted Global Security (CUSIP _____); or
(b) / / Physical Securities that bear the Securities Act Legend;
(c) / / Physical Securities that do not bear the Securities Act
Legend;
in accordance with the terms of the Indenture.
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<PAGE> 133
EXHIBIT C
FORM OF CERTIFICATE OF EXCHANGE
Tekni-Plex, Inc.
201 Industrial Parkway
Somerville, New Jersey 08876
Attention:
Marine Midland Bank
140 Broadway
New York, New York 10005
Attention: Corporate Trust Services-
Tekni-Plex
Re: 11 1/4% Senior Subordinated Notes due 2007
(CUSIP _______________)
Reference is hereby made to the Indenture, dated as of April 1, 1997
(the "Indenture"), among Tekni-Plex, Inc. (the "Company"), Dolco Packaging Corp.
and Marine Midland Bank, as trustee. Capitalized terms used but not defined
herein shall have the meanings given to them in the Indenture.
__________ (the "Holder") owns and proposes to exchange the Security[s]
specified herein, in the principal amount of $___ in such Security[s] (the
"Exchange"). In the event Holder holds Physical Securities, this Certificate is
accompanied by one or more certificates aggregating at least the principal
amount of Securities proposed to be Exchanged. In connection with the Exchange,
the Holder hereby certifies that:
1. EXCHANGE OF RESTRICTED PHYSICAL SECURITIES OR INTERESTS IN THE
INITIAL GLOBAL SECURITY FOR PHYSICAL SECURITIES THAT DO NOT BEAR THE SECURITIES
ACT LEGEND OR UNRESTRICTED GLOBAL SECURITIES
(a) / / CHECK IF EXCHANGE IS FROM INITIAL GLOBAL SECURITIES TO THE
UNRESTRICTED GLOBAL SECURITY. In connection with the Exchange of the Holder's
Initial Global Security to the Unrestricted Global Security in an equal
principal amount, the Holder hereby certifies (i) the Unrestricted Global
Securities are being acquired for the Holder's own account without transfer,
(ii) such Exchange has been effected in compliance with the transfer
restrictions applicable to the Initial Global Se-
C-1
<PAGE> 134
curities and pursuant to and in accordance with the Securities Act of 1933, as
amended (the "Securities Act") and (iii) the restrictions on transfer contained
in the Indenture and the Securities Act Legend are not required in order to
maintain compliance with the Securities Act.
(b) / / CHECK IF EXCHANGE IS FROM RESTRICTED PHYSICAL SECURITIES TO AN
INTEREST IN THE UNRESTRICTED GLOBAL SECURITY. In connection with the Holder's
Exchange of Restricted Physical Securities for Interest in the Unrestricted
Global Security, (i) the Interest in the Unrestricted Global Security are being
acquired for the Holder's own account without transfer, (ii) such Exchange has
been effected in compliance with the transfer restrictions applicable to
Restricted Physical Securities and pursuant to and in accordance with the
Securities Act and (iii) the restrictions on transfer contained in the Indenture
and the Securities Act Legend are not required in order to maintain compliance
with the Securities Act.
(c) / / CHECK IF EXCHANGE IS FROM RESTRICTED PHYSICAL SECURITIES TO
PHYSICAL SECURITIES THAT DO NOT BEAR THE SECURITIES ACT LEGEND. In connection
with the Holder's Exchange of a Restricted Physical Security for Physical
Securities that do not bear the Securities Act Legend, the Holder hereby
certifies (i) the Physical Securities that do not bear the Securities Act Legend
are being acquired for the Holder's own account without transfer, (ii) such
Exchange has been effected in compliance with the transfer restrictions
applicable to Restricted Physical Securities and pursuant to and in accordance
with the Securities Act, (iii) the restrictions on transfer contained in the
Indenture and the Securities Act Legend are not required in order to maintain
compliance with the Securities Act and (iv) one or more of the events specified
in Section 2.06(a) of the Indenture have occurred.
2. / / CHECK IF EXCHANGE IS FROM RESTRICTED PHYSICAL SECURITIES TO INTERESTS
IN AN INITIAL GLOBAL SECURITY. In connection with the Exchange of the Holder's
Restricted Physical Security for interests in the Initial Global Security in the
[CHECK ONE] / / 144A Global Security, / / Regulation S Global Security, with an
equal principal amount, (i) the interests in the Initial Global Security are
being acquired for the Holder's own account without transfer and (ii) such
Exchange has been effected in compliance with the transfer restrictions
applicable to the Restricted Physical Security and pursuant to and in accordance
with the Securities Act. Upon consummation of the proposed Exchange in
accordance with the terms of the Indenture, the Initial Global Security issued
will be subject to the restrictions
C-2
<PAGE> 135
on transfer enumerated in the Securities Act Legend printed on the Initial
Global Securities and in the Indenture and the Securities Act.
This certificate and the statements contained herein are made for
your benefit and the benefit of the Company.
____________________________________
[Insert Name of Holder]
By: ________________________________
Name:
Title:
Dated:_______________________
C-3
<PAGE> 1
EXHIBIT 4.3
TEKNI-PLEX, INC.
$75,000,000
11 1/4% Senior Subordinated Securities due 2007
Purchase Agreement
April 1, 1997
J.P. Morgan Securities Inc.
60 Wall Street
New York, New York 10260-0060
Ladies and Gentlemen:
Tekni-Plex, Inc., a corporation formed under the laws of Delaware (the
"Company"), proposes to issue and sell to J.P. Morgan Securities Inc. (the
"Initial Purchaser") $75,000,000 principal amount of its 11 1/4% Senior
Subordinated Securities due 2007 (the "Notes"). The Notes will be issued
pursuant to the provisions of an Indenture to be dated as of April 1, 1997 (the
"Indenture") among the Company, the Guarantor (as defined) and Marine Midland
Bank, as trustee (the "Trustee"). The Notes will be guaranteed (the "Guarantee"
and, collectively with the Notes, the "Securities") on a senior subordinated
basis by Dolco Packaging Corp., a Delaware corporation (the "Guarantor").
The sale of the Securities to the Initial Purchaser will be made
without registration of the Securities under the Securities Act of 1933, as
amended (the "Act"), in reliance upon the exemption therefrom provided by
Section 4(2) of the Act. Holders of the Securities will have the benefits of a
Registration Rights Agreement to be dated as of April 4, 1997 among the Company,
the Guarantor and the Initial Purchaser (the "Registration Rights Agreement").
The Company and the Guarantor hereby agree with the Initial Purchaser
as follows:
1. The Company agrees to issue and sell the Notes and the Guarantor
agrees to issue the Guarantee to the Initial Purchaser as hereinafter provided,
and the Initial Purchaser, upon the basis of the representations and warranties
herein contained, but subject to the conditions hereinafter stated, agrees to
purchase from the Company all of the Securities at a price (the "Purchase
Price") equal to 97% of their principal amount. No additional consideration
shall be paid by the Initial Purchaser for the Guarantee.
2. The Company and the Guarantor understand that the Initial Purchaser
intends (x) to offer privately the Securities as soon after this Agreement has
become effective as in the
<PAGE> 2
judgment of the Initial Purchaser is advisable and (y) initially to offer the
Securities upon the terms set forth in the Offering Memorandum (as defined
below).
The Company and the Guarantor confirm that they have authorized the
Initial Purchaser, subject to the restrictions set forth below, to distribute
copies of the Offering Memorandum in connection with the offering of the
Securities. The Initial Purchaser hereby makes to the Company and the Guarantor
the following representations and agreements:
(i) it is a qualified institutional buyer within the meaning
of Rule 144A under the Act; and
(ii) (A) it will not solicit offers for, or offer to sell, the
Securities by any form of general solicitation or general advertising
(as those terms are used in Regulation D under the Act) or in any
manner involving a public offering within the meaning of Section 4(2)
of the Act (B) it will solicit offers for the Securities only from, and
will offer, sell or deliver the Securities only to, (1) persons whom it
reasonably believes to be "qualified institutional buyers" within the
meaning of Rule 144A under the Act to whom notice has been given that
such offer, sale or delivery is being made in reliance on Rule 144A in
transactions under Rule 144A, (2) institutions which it reasonably
believes are "accredited investors" as defined in Rule 501(a)(1), (2),
(3) or (7) of Regulation D under the Act ("Accredited Investors") who,
in the case of purchasers described in this clause (B)(2), purchase not
less than $250,000 principal amount of Securities for their own account
and for any discretionary account for which they are acquiring
Securities and provide it a letter in the form of Annex A to the
Offering Memorandum or (3) upon the terms and conditions set forth in
Annex I to this Agreement, and (C) it is not purchasing with a view to
or for offer or sale in connection with any distribution that would be
in violation of federal or state law.
3. Payment for the Securities shall be made by wire transfer in
immediately available funds, to the account specified by the Company to the
Initial Purchaser no later than noon on the Business Day (as defined below)
prior to the Closing Date (as defined below), on April 4, 1997, or at such other
time on the same or such other date, not later than the fifth Business Day
thereafter, as the Initial Purchaser and the Company may agree upon in writing.
The time and date of such payment are referred to herein as the "Closing Date".
As used herein, the term "Business Day" means any day other than a day on which
banks are permitted or required to be closed in New York City.
Payment for Securities sold in reliance on Rule 144A under the
Securities Act or in offshore transactions in reliance on Regulation S under the
Securities Act shall be made against delivery to the nominee of The Depository
Trust Company for the account of the Initial Purchaser of one or more global
notes representing the Securities (collectively, the "Global Notes"), with any
transfer taxes payable in connection with the transfer to the Initial Purchaser
of the Securities duly paid by the Company. Payment for Securities sold to
Accredited Investors shall be made against delivery to the Initial Purchaser of
one or more certificated notes ("Certificated Notes") registered in such names
and in such denominations as the Initial Pur-
-2-
<PAGE> 3
chaser shall request in writing not later than two full Business Days prior to
the Closing Date, with any transfer taxes payable in connection with the
transfer to the Initial Purchasers of such Securities duly paid by the Company.
The Global Notes and the Certificated Notes will be made available for
inspection by the Initial Purchaser at the office of J.P. Morgan Securities Inc.
at the address set forth above not later than 1:00 P.M., New York City time, on
the Business Day prior to the Closing Date.
4. Each of the Company and the Guarantor represents and warrants to the
Initial Purchaser that:
(a) A preliminary offering memorandum, dated March 14, 1997
(the "Preliminary Offering Memorandum") and an offering memorandum,
dated April 1, 1997 (the "Offering Memorandum") have been prepared in
connection with the offering of the Securities. Any reference to the
Preliminary Offering Memorandum or the Offering Memorandum shall be
deemed to refer to and include any Rule 144A(d)(4) Information (as
defined in Section 5(m)) furnished by the Company prior to the
completion of the distribution of the Securities. The Preliminary
Offering Memorandum or the Offering Memorandum and any amendments or
supplements thereto did not and will not, as of their respective dates,
contain an untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading;
provided that this representation and warranty does not apply to
statements or omissions made in reliance upon and in conformity with
information furnished in writing by the Initial Purchaser relating to
the Initial Purchaser to the Company expressly for use in the
Preliminary Offering Memorandum, the Offering Memorandum or any
amendment or supplement thereto;
(b) the financial statements, and the related notes thereto,
included in the Offering Memorandum present fairly the consolidated
financial position of the Company and its consolidated subsidiary, as
of the dates indicated and the results of their operations and the
changes in their consolidated cash flows for the periods specified;
said financial statements have been prepared in conformity with
generally accepted accounting principles and practices applied on a
consistent basis; and the pro forma financial information, and the
related notes thereto, included in the Offering Memorandum are based
upon good faith estimates and assumptions believed by the Company to be
reasonable;
(c) since the respective dates as of which information is
given in the Offering Memorandum, except as otherwise stated therein,
there has not been any material change in the capital stock or
long-term debt of the Company or its subsidiary, or any material
adverse change, or any development involving a prospective material
adverse change, in or affecting the business, prospects, financial
position, stockholders' equity or results of operations of the Company
and the Guarantor, taken as a whole, otherwise than as set forth or
contemplated in the Offering Memorandum; and except as set forth or
contemplated in the Offering Memorandum, neither the Company nor the
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<PAGE> 4
Guarantor has entered into any transaction or agreement (whether or not
in the ordinary course of business) material to the Company and the
Guarantor, taken as a whole;
(d) the Company has been duly incorporated and is validly
existing as a corporation under the laws of its jurisdiction of
incorporation, with power and authority (corporate and other) to own
its properties and conduct its business as described in the Offering
Memorandum, and has been duly qualified as a foreign corporation for
the transaction of business and is in good standing under the laws of
each other jurisdiction in which it owns or leases properties, or
conducts any business, so as to require such qualification, other than
where the failure to be so qualified or in good standing would not have
a material adverse effect on the Company and the Guarantor, taken as a
whole;
(e) the Company has no subsidiary other than the Guarantor;
the Guarantor has been duly incorporated and is validly existing as a
corporation under the laws of its jurisdiction of incorporation, with
power and authority (corporate and other) to own its properties and
conduct its business as described in the Offering Memorandum, and has
been duly qualified as a foreign corporation for the transaction of
business and is in good standing under the laws of each jurisdiction in
which its owns or leases properties or conducts any business, so as to
require such qualification, other than where the failure to be so
qualified or in good standing would not have a material adverse effect
on the Company and the Guarantor, taken as a whole; and all the
outstanding shares of capital stock of the Guarantor has been duly
authorized and validly issued, are fully-paid and non-assessable under
the corporate laws of the state of incorporation, and (except as
described in the Offering Memorandum) are owned by the Company free and
clear of all liens, encumbrances, security interests and claims;
(f) this Agreement has been duly authorized, executed and
delivered by each of the Company and the Guarantor;
(g) the Registration Rights Agreement has been duly authorized
by each of the Company and the Guarantor, and when executed and
delivered by them and (assuming the due authorization, execution and
delivery by the other party thereto) will constitute a valid agreement
of each of the Company and the Guarantor and, subject to (i) the effect
of applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance and other laws affecting creditors' rights
generally, (ii) general principles of equity and (iii) principles of
public policy limiting the rights to enforce indemnification provisions
(clauses (i), (ii) and (ii) being referred to herein as the "Creditors'
Rights Limitations"), will be binding and will be enforceable in
accordance with its terms; and will conform, in all material respects,
to the description thereof in the Offering Memorandum;
(h) the Notes have been duly authorized by the Company, and
when issued and delivered pursuant to this Agreement, will have been
duly executed, issued and delivered and, when the Notes are
authenticated by the Trustee in accordance with the
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<PAGE> 5
terms of the Indenture (assuming the due authorization, execution and
delivery by the Trustee) and are delivered to and paid for by the
Initial Purchaser in accordance with the terms of this Agreement, will
constitute valid obligations of the Company entitled to the benefits
provided by the Indenture and, subject to the Creditors' Rights
Limitations, will be binding and will be enforceable in accordance with
their terms; the Indenture has been duly authorized and, when executed
and delivered by each of the Company and the Guarantor (assuming the
due authorization, execution and delivery by the Trustee), the
Indenture will constitute a valid instrument of the Company and,
subject to the Creditors' Rights Limitations, will be binding and will
be enforceable in accordance with its terms; and the Securities and the
Indenture will conform, in all material respects, to the descriptions
thereof in the Offering Memorandum;
(i) the Guarantee has been duly authorized by the Guarantor,
and when the Notes are issued and delivered pursuant to this Agreement,
will have been duly executed and delivered and, when the Notes are
authenticated by the Trustee in accordance with the terms of the
Indenture (assuming the due authorization, execution and delivery by
the Trustee) and are delivered to and paid for by the Initial Purchaser
in accordance with the terms of this Agreement, will constitute a valid
obligation of the Guarantor and, subject to the Creditors' Rights
Limitations, will be binding and will be enforceable in accordance with
its terms; the Indenture has been duly authorized by the Guarantor and,
when executed and delivered by each of the Guarantor and the Company
(assuming the due authorization, execution and delivery by the
Trustee), the Indenture will constitute a valid instrument of Guarantor
and, subject to the Creditors' Rights Limitations, will be binding and
will be enforceable in accordance with its terms;
(j) none of the transactions contemplated by this Agreement
(including, without limitation, the use of the proceeds from the sale
of the Securities) will violate or result in a violation of Section 7
of the Exchange Act, or any regulation promulgated thereunder,
including, without limitation, Regulations G, T, U, and X of the Board
of Governors of the Federal Reserve System;
(k) neither the Company nor the Guarantor is, or with the
giving of notice or lapse of time or both would be, in violation of or
in default under its Certificate of Incorporation or By-Laws or any
indenture, mortgage, deed of trust, loan agreement or other agreement
or instrument to which the Company or the Guarantor is a party or by
which it or the Guarantor or any of their respective properties is
bound, except for violations and defaults which individually and in the
aggregate are not material to the Company and the Guarantor, taken as a
whole or to the holders of the Securities as such; the issue and sale
of the Securities and the performance by each of the Company and the
Guarantor of all of the provisions of their obligations under the
Securities, the Indenture, the Registration Rights Agreement and this
Agreement and the consummation of the transactions herein and therein
contemplated will not conflict with or result in a breach of any of the
terms or provisions of, or constitute a default under, any indenture,
mortgage, deed of trust, loan agreement or other agreement or
instrument to which the Company or the Guarantor is a party or by which
the Company or the Guar-
-5-
<PAGE> 6
antor is bound or to which any of the property or assets of the Company
or the Guarantor is subject, nor will any such action result in any
violation of the provisions of the Certificate of Incorporation or
By-Laws of the Company or the Guarantor or (assuming the accuracy of
the representations by, and compliance with the agreements of, the
Initial Purchaser set forth in paragraph 2 of this Agreement) any
applicable law or statute or any order, rule or regulation of any court
or governmental agency or body having jurisdiction over the Company,
the Guarantor or any of their respective properties; and no consent,
approval, authorization, order, license, registration or qualification
of or with any such court or governmental agency or body is required
for the issue and sale of the Securities or the consummation by the
Company or the Guarantor of the transactions contemplated by this
Agreement or the Indenture, except such consents, approvals,
authorizations, registrations or qualifications as may be required
under any state securities or Blue Sky Laws in connection with the
purchase and distribution of the Securities by the Initial Purchaser;
(l) other than as set forth or contemplated in the Offering
Memorandum, there are no legal or governmental investigations, actions,
suits or proceedings pending or, to the knowledge of the Company or the
Guarantor, threatened against or affecting the Company or the Guarantor
or any of their respective properties or to which the Company or the
Guarantor is or may be a party or to which any property of the Company
or the Guarantor is or may be the subject which, if determined
adversely to the Company or the Guarantor, could individually or in the
aggregate have, or reasonably be expected to have, a material adverse
effect on the business, prospects, financial position, stockholders'
equity or results of operations of the Company and the Guarantor, taken
as a whole and, to the best of the Company's and the Guarantor's
knowledge, no such proceedings are threatened or contemplated by
governmental authorities or threatened by others;
(m) neither the Company nor any affiliate (as defined in Rule
501(b) of Regulation D under the Act ("Regulation D")) of the Company
has directly, or through any agent, sold, offered for sale, solicited
offers to buy or otherwise negotiated in respect of, any security (as
defined in the Act) which is or will be integrated with the sale of the
Securities in a manner that would require the registration under the
Act of the offering contemplated by the Offering Memorandum;
(n) neither the Company, the Guarantor nor any person (other
than the Initial Purchaser, as to which the Company makes no
representation) acting on their behalf has offered or sold the
Securities by means of any general solicitation or general advertising
within the meaning of Rule 502(c) under the Act or, with respect to
Securities sold outside the United States to non-U.S. persons (as
defined in Rule 902 under the Act), by means of any directed selling
efforts within the meaning of Rule 902 under the Act and the Company,
the Guarantor and any of their affiliates and any person (other than
the Initial Purchaser) acting on their behalf has complied with and
will implement the "offering restriction" within the meaning of such
Rule 902;
-6-
<PAGE> 7
(o) the Company is not, and will not be after giving effect to
the offering and sale of the Securities to be sold and the application
of the proceeds from such sale (as described in the Offering Memorandum
under the caption "Use of Proceeds"), an "investment company" or an
entity "controlled" by an "investment company" as such terms are
defined in the Investment Company Act of 1940, as amended;
(p) assuming that the representations of the Initial Purchaser
set forth in paragraph 2 of this Agreement are true, correct and
complete and assuming compliance by the Initial Purchaser with its
agreements in paragraph 2 of this Agreement, and assuming that the
representations contained in the accredited investor letter
(substantially in the form of Annex A to the Offering Memorandum)
completed by Accredited Investors purchasing Securities are true and
correct as of the Closing Date, and assuming compliance by such
Accredited Investors with the agreements in such letter, it is not
necessary in connection with the offer, sale and delivery of the
Securities in the manner contemplated by this Agreement to register the
Securities under the Act or to qualify an indenture under the Trust
Indenture Act of 1939, as amended (the "TIA");
(q) the Securities satisfy the requirements set forth in Rule
144A(d)(3) under the Act;
(r) BDO Seidman, LLP and Rich Baker Berman & Co., P.A., who
have certified certain financial statements of the Company and its
subsidiaries and Coopers & Lybrand L.L.P. who have certified certain
financial statements of Dolco Packaging Corporation, are independent
public accountants as required by the Act;
(s) the Company and the Guarantor have good and marketable
title in fee simple to all material items of real property and good and
marketable title to all material personal property owned by them, in
each case free and clear of all liens, encumbrances and defects except
such as are otherwise described or referred to in the Offering
Memorandum or such as do not materially affect the value of such
property and do not interfere with the use made or proposed to be made
of such property by the Company and the Guarantor; and any real
property and buildings held under lease by the Company and the
Guarantor are held by them under valid, existing and enforceable leases
(subject to the Creditors' Rights Limitations) with such exceptions as
are not material and do not interfere with the use made or proposed to
be made of such property and buildings by the Company or the Guarantor.
The Company and the Guarantor own or possess, or have no reason to
believe they cannot acquire on reasonable terms, adequate licenses or
other rights to use all patents, trademarks, service marks, trade
names, copyrights and know-how necessary to conduct the businesses now
or proposed to be operated by them as described in the Offering
Memorandum, except where the failure to own, possess or have the
ability to acquire any such licenses or other rights could not,
individually or in the aggregate, be reasonably expected to have a
material adverse effect on the Company and the Guarantor, taken as a
whole, and neither the Company nor the Guarantor has received any
written or, to the best knowledge of the Company or the Guarantor, oral
notice of infringement of or conflict with as-
-7-
<PAGE> 8
serted rights of others with respect to any patents, trademarks,
service marks, trade names, copyrights or know-how which, if such
assertion of infringement or conflict were sustained, would have a
material adverse effect on the business, prospects, financial position,
stockholders' equity or results of operations of the Company and the
Guarantor, taken as a whole;
(t) the Company has, to the extent required, complied with all
provisions of Section 517.075, Florida Statutes (Chapter 92-198, Laws
of Florida) relating to doing business with the Government of Cuba or
with any person or affiliate located in Cuba;
(u) the Company and its subsidiaries have filed all federal,
state, local and foreign tax returns which have been required to be
filed and have paid all taxes shown thereon and all assessments
received by them or any of them to the extent that such taxes have
become due and are not being contested in good faith, except that the
Guarantor has not filed tax returns for 1995 and for the
pre-acquisition fiscal period ended February 21, 1996, which are
currently in preparation, and except for the payment of the taxes to be
shown thereon; such taxes for 1995 of the Guarantor have been estimate
and accrued in the Guarantor's income statement for 1995 presented in
the Offering Memorandum and such taxes for the fiscal period ended
February 21, 1996 of the Guarantor have been estimated and accrued in
the Guarantor's internal income statement for such fiscal period; and,
except as disclosed in the Offering Memorandum and apart from the
amounts to be shown as due on such tax returns of the Guarantor now
being prepared (which in the aggregate will not exceed, by a material
amount, the amount accrued therefor in such income statements), the
Company has no knowledge of any tax deficiency which has been or might
reasonably be expected to be asserted or threatened against the Company
or the Guarantor;
(v) each of the Company and the Guarantor owns, possesses or
has obtained all material licenses, permits, certificates, consents,
orders, approvals and other authorizations from, and has made all
declarations and filings with, all federal, state, local and other
governmental authorities (including foreign regulatory agencies), all
self-regulatory organizations and all courts and other tribunals,
domestic or foreign, necessary to own or lease, as the case may be, and
to operate its properties and to carry on its business as conducted as
of the date hereof, except to the extent that the failure to so obtain
or file, individually or in the aggregate, could not reasonably be
expected to have a material adverse effect on the Company and the
Guarantor, taken as a whole, and neither the Company nor the Guarantor
has received any actual notice, or is not aware, of any proceeding
relating to revocation or modification of any such license, permit,
certificate, consent, order, approval or other authorization, except as
described in the Offering Memorandum; and, each of the Company and the
Guarantor is in compliance with all laws and regulations relating to
the conduct of its business as of the date hereof;
(w) there are no existing or, to the best knowledge of the
Company, threatened labor disputes with the employees of the Company or
the Guarantor which are
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<PAGE> 9
likely to have a material adverse effect on the Company and the
Guarantor, taken as a whole;
(x) each of the Company and the Guarantor (i) is in compliance
with any and all applicable federal, state and local laws and
regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("Environmental Laws"), (ii) has received all permits,
licenses or other approvals required of it under applicable
Environmental Laws to conduct its business and (iii) is in compliance
or is in the process of complying with all terms and conditions of any
such permit, license or approval, except where such noncompliance with
Environmental Laws, failure to receive required permits, licenses or
other approvals or failure to comply with the terms and conditions of
such permits, licenses or approvals would not, individually or in the
aggregate, reasonably be expected to have a material adverse effect on
the Company and the Guarantor, taken as a whole; associated costs and
liabilities (including, without limitation, any capital or operating
expenditures required for clean-up, closure of properties or compliance
with Environmental Laws or any permit, license or approval, any related
constraints on operating activities and any potential liabilities to
third parties) would not, individually or in the aggregate, reasonably
be expected to have a material adverse effect on the Company and the
Guarantor, taken as a whole; and
(y) each employee benefit plan, within the meaning of Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), that is maintained, administered or contributed to by the
Company or any affiliates of the Company for employees or former
employees of the Company and its affiliates has been maintained, in all
material respects, in compliance with its terms and the requirements of
any applicable statutes, orders, rules and regulations, including but
not limited to ERISA and the Internal Revenue Code of 1986, as amended
(the "Code"); no prohibited transaction, within the meaning of Section
406 of ERISA or Section 4975 of the Code has occurred with respect to
any such plan excluding transactions effected pursuant to a statutory
or administrative exemption; and for each such plan which is subject to
the funding rules of Section 412 of the Code or Section 302 of ERISA no
"accumulated funding deficiency" as defined in Section 412 of the Code
has been incurred, whether or not waived, and the fair market value of
the assets of each such plan which is subject to Title IV of ERISA
(excluding for these purposes accrued but unpaid contributions)
exceeded the present value of all benefits accrued under such plan as
determined pursuant to the actuarial report prepared by Coopers &
Lybrand as of December 31, 1995.
5. Each of the Company and the Guarantor covenants and agrees with the
Initial Purchaser as follows:
(a) before distributing any amendment or supplement to the
Offering Memorandum, to furnish to the Initial Purchaser a copy of the
proposed amendment or
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<PAGE> 10
supplement for review and not to distribute any such proposed amendment
or supplement to which the Initial Purchaser reasonably objects;
(b) if, at any time prior to the completion of the initial
placement of the Securities, any event shall occur as a result of which
it is necessary to amend or supplement the Offering Memorandum in order
that the Offering Memorandum does not contain an untrue statement of a
material fact or omit to state a material fact necessary in order to
make the statements therein, in the light of the circumstances when the
Offering Memorandum is delivered to a purchaser, not misleading, or if
it is necessary to amend or supplement the Offering Memorandum to
comply with law, forthwith to prepare and furnish, at the expense of
the Company, to the Initial Purchaser and to the dealers (whose names
and addresses the Initial Purchaser will furnish to the Company) to
which Securities may have been sold by the Initial Purchaser on behalf
of the Initial Purchaser and to any other dealers upon request, such
amendments or supplements to the Offering Memorandum as may be
necessary so that the Offering Memorandum as so amended or supplemented
will not contain an untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements
therein, in the light of the circumstances when the Offering Memorandum
is delivered to a purchaser, not misleading or so that the Offering
Memorandum will comply with law;
(c) to cooperate with you and your counsel in connection with
the registration or qualification of the Securities for offering and
sale by the Initial Purchaser and by dealers under the securities or
Blue Sky laws of such jurisdictions as you may designate and will file
such consents to service of process or other documents necessary or
appropriate in order to effect such registration or qualification;
provided that in no event shall the Company or the Guarantor be
obligated to qualify to do business in any jurisdiction where it is not
now so qualified or to take any action that would subject it to
taxation or service of process in suits, other than those arising out
of the Offering or sale of the Securities, in any jurisdiction where it
is not now so subject;
(d) so long as the Securities are outstanding, to furnish to
the Initial Purchaser copies of all reports or other communications
(financial or other) furnished to holders of Securities, and copies of
any reports and financial statements furnished to or filed with the
Commission or any national securities exchange;
(e) during the period beginning on the date hereof and
continuing to and including the Business Day following the Closing
Date, not to offer, sell, contract to sell, or otherwise dispose of any
debt securities of or guaranteed by the Company or the Guarantor which
are substantially similar to the Securities;
(f) to use the net proceeds received by the Company from the
sale of the Securities pursuant to this Agreement in the manner
specified in the Offering Memorandum under the caption "Use of
Proceeds";
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<PAGE> 11
(g) if requested by you, to use its best efforts to cause such
Securities to be eligible for the PORTAL trading system of the National
Association of Securities Dealer, Inc.;
(h) to furnish to the holders of the Securities as soon as
practicable after the end of each fiscal year an annual report
(including a balance sheet and statements of income, stockholders'
equity and cash flows of the Company and its consolidated subsidiaries
certified by independent public accountants) and, as soon as
practicable after the end of each of the first three quarters of each
fiscal year (beginning with the fiscal quarter ending after the date of
the Offering Memorandum), consolidated summary financial information of
the Company and its subsidiaries of such quarter in reasonable detail;
(i) during the period of two years after the Closing Date, not
to, and not to permit any of its "affiliates" (as defined in Rule 144
under the Act) to, resell any of the Securities which constitute
"restricted securities" under Rule 144 that have been reacquired by any
of them;
(j) whether or not the transactions contemplated by this
Agreement are consummated or this Agreement is terminated, to pay or
cause to be paid all costs and expenses incident to the performance of
their obligations hereunder, including without limiting the generality
of the foregoing, all costs and expenses (i) incident to the
preparation, issuance, execution, authentication and delivery of the
Securities, including any expenses of the Trustee, (ii) incident to the
preparation, printing and distribution of the Offering Memorandum and
any preliminary offering memorandum (including in each case all
exhibits, amendments and supplements thereto), (iii) incurred in
connection with the registration or qualification and determination of
eligibility for investment of the Securities under the laws of such
jurisdictions as the Initial Purchaser may designate (including fees of
counsel for the Initial Purchaser and their disbursements), (iv) in
connection with the application for eligibility for trading of the
Securities in the PORTAL trading system, (v) in connection with the
printing (including word processing and duplication costs) and delivery
of this Agreement, the Indenture, the Registration Rights Agreement,
the Preliminary and Supplemental Blue Sky Memoranda and any Legal
Investment Survey and the furnishing to the Initial Purchaser and
dealers of copies of the Offering Memorandum, including mailing and
shipping, as herein provided, (vi) payable to rating agencies in
connection with the rating of the Securities, and (vii) incurred by the
Company in connection with a "road show" presentation to potential
investors;
(k) to take all reasonable action that is appropriate or
necessary to assure that its offerings of other securities will not be
integrated for purposes of the Act with the offerings contemplated
hereby;
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<PAGE> 12
(l) not to solicit any offer to buy or offer to sell
Securities by means of any form of general solicitation or general
advertising within the meaning of Rule 502(c) of Regulation D under the
Act;
(m) while the Securities remain outstanding and are
"restricted securities" within the meaning of Rule 144(a)(3) under the
Act, during any period in which it is not subject to Section 13 or
15(d) under the Exchange Act, to make available to the Initial
Purchaser and any holder of Securities in connection with any sale
thereof and any prospective purchaser of Securities, in each case upon
request, the information specified in, and meeting the requirements of,
Rule 144A(d)(4) ("Rule 144A(d)(4) Information") under the Act (or any
successor thereto); and
(n) not to take any action prohibited by Regulation M under
the Exchange Act (or any successor provision), in connection with the
distribution of the Securities contemplated hereby.
6. The obligations of the Initial Purchaser hereunder to purchase the
Securities on the Closing Date are subject to the performance, in all material
respects, by each of the Company and the Guarantor of their obligations
hereunder and to the following additional conditions:
(a) the representations and warranties of each of the Company
and the Guarantor contained herein are true and correct on and as of
the Closing Date as if made on and as of the Closing Date and each of
the Company and the Guarantor shall have complied, in all material
respects, with all agreements and all conditions on its part to be
performed or satisfied hereunder at or prior to the Closing Date;
(b) subsequent to the execution and delivery of this Agreement
and prior to the Closing Date, there shall not have occurred any
downgrading, nor shall any notice have been given of (i) any
downgrading, (ii) any intended or potential downgrading or (iii) any
review or possible change that does not indicate an improvement, in the
rating accorded any securities of or guaranteed by the Company by any
"nationally recognized statistical rating organization", as such term
is defined for purposes of Rule 436(g)(2) under the Act;
(c) since the respective dates as of which information is
given in the Offering Memorandum, except as otherwise stated therein,
there shall not have been any material change in the capital stock or
long-term debt of any of the Company or the Guarantor or any material
adverse change, or any development involving a prospective material
adverse change, in or affecting the business, prospects, financial
position, stockholders' equity or results of operations of the Company
or the Guarantor, taken as a whole, otherwise than as set forth or
contemplated in the Offering Memorandum, the effect of which in the
judgment of the Initial Purchaser makes it impracticable or inadvisable
to proceed with the offering or the delivery of the Securities on the
Closing Date on the terms and in the manner contemplated in the
Offering Memorandum; and
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<PAGE> 13
neither the Company nor the Guarantor has sustained since the date of
the latest audited financial statements included in the Offering
Memorandum any material loss or interference with its business from
fire, explosion, flood or other calamity, whether or not covered by
insurance, or from any labor dispute or court or governmental action,
order or decree, otherwise than as set forth or contemplated in the
Offering Memorandum;
(d) the Initial Purchaser shall have received on and as of the
Closing Date a certificate of the Company and the Guarantor signed for
the Company and the Guarantor by an executive officer of each of the
Company and the Guarantor, with specific knowledge about such Company's
or Guarantor's financial matters, respectively, satisfactory to the
Initial Purchaser to the effect set forth in subsections (a) and (b) of
this Section and to the further effect that there has not occurred any
material adverse change, or any development involving a prospective
material adverse change, in or affecting the business, prospects,
financial position, stockholders' equity or results of operations of
the Company and the Guarantor, taken as a whole, from those set forth
or contemplated in the Offering Memorandum;
(e) Winthrop, Stimpson, Putnam & Roberts, Counsel for the
Company, shall have furnished to the Initial Purchaser their written
opinion, dated the Closing Date in form and substance satisfactory to
the Initial Purchaser, to the effect that:
(i) the Company has been duly organized and is
validly existing as a corporation in good standing under the
laws of Delaware with power and authority to own its
properties and conduct its business as described in the
Offering Memorandum;
(ii) the Company has been duly qualified as a foreign
corporation for the transaction of business and is in good
standing under the laws of New Jersey;
(iii) the Guarantor has been duly organized and is
validly existing as a corporation under the laws of its
jurisdiction of incorporation with power and authority to own
its properties and conduct its business as described in the
Offering Memorandum and has been duly qualified as a foreign
corporation for the transaction of business and is in good
standing under the laws of the states of New Jersey, Georgia,
Indiana, Texas, and Washington; and all of the outstanding
shares of capital stock of the Guarantor have been duly and
validly authorized and issued, are fully paid and
non-assessable under the corporate laws of Delaware.
(iv) to the best of such counsel's knowledge, other
than as set forth or contemplated in the Offering Memorandum,
there are no legal or governmental investigations, actions,
suits or proceedings (i) pending or threatened against or
affecting the Company or the Guarantor or any of their
respective
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<PAGE> 14
properties or to which the Company or the Guarantor is or may
be a party or to which any property of the Company or the
Guarantor is or may be the subject which, if determined
adversely to the Company or the Guarantor, could individually
or in the aggregate have, or reasonably be expected to have, a
material adverse effect on the general affairs, business,
prospects, management, financial position, stockholders'
equity or results of operations of the Company and the
Guarantor, taken as a whole or (ii) which seek to restrain,
enjoin, prevent the consummation of or otherwise challenge the
issuance or sale of the Securities in the manner contemplated
by the Offering Memorandum or the consummation of the
Transactions; to such counsel's knowledge, no such proceedings
are threatened or contemplated by governmental authorities or
threatened by others (its being acknowledged that such counsel
acts in connection with corporate and securities law matters
and are not counsel of record in any litigated matters);
(v) this Agreement has been duly authorized, executed
and delivered by each of the Company and the Guarantor; the
Registration Rights Agreement has been duly authorized,
executed and delivered by each of the Company and the
Guarantor and is a valid agreement of each of the Company and
the Guarantor and, subject to the Creditors' Rights
Limitations, is binding and is enforceable in accordance with
its terms;
(vi) the Guarantee has been duly authorized, executed
and delivered by the Guarantor and, and upon delivery to and
payment for the Notes by the Initial Purchaser in accordance
with the terms of this Agreement, will constitute a valid
obligation of the Guarantor and, subject to the Creditors'
Rights Limitations, is binding and is enforceable against the
Guarantor in accordance with its terms;
(vii) the Notes have been duly authorized, executed
and delivered by the Company and, when duly authenticated in
accordance with the terms of the Indenture and delivered to
and paid for by the Initial Purchaser in accordance with the
terms of this Agreement, will constitute valid obligations of
the Company entitled to the benefits provided by the Indenture
and, subject to the Creditors' Rights Limitations, are binding
and are enforceable against the Company in accordance with
their terms; and the Securities and the Indenture conform to
the descriptions thereof in the Offering Memorandum;
(viii) the Indenture has been duly authorized,
executed and delivered by the Company and the Guarantor and
(assuming the due authorization, execution and delivery by the
Trustee) constitutes a valid agreement of the Company and the
Guarantor and, subject to the Creditors' Rights Limitations,
is binding and is enforceable against the Company and the
Guarantor, respectively, in accordance with its terms;
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<PAGE> 15
(ix) other than the subject matter of subparagraphs
(x) and (xiv), the issue and sale of the Securities and the
performance by the Company and the Guarantor of their
obligations under the Securities, the execution and delivery
of this Agreement, the Indenture and the Registration Rights
Agreement and the consummation by the Company and the
Guarantor of the transactions contemplated hereby and thereby
will not conflict with or constitute or result in a breach or
a default under or violation of any of (i) the terms or
provisions of any indenture, mortgage, deed of trust, loan
agreement or other material agreement or instrument known to
such counsel to which the Company or the Guarantor is a party
or by which they or any of their properties is known by such
counsel to be bound, (ii) the Certificate of Incorporation or
By-Laws of the Company or the Guarantor, or (iii) any
applicable statute or, to the best of such counsel's
knowledge, any order, rule or regulation of any governmental
agency or body having jurisdiction over the Company, the
Guarantor or any of their respective properties or any
judgment, decree or order of any court to which the Company or
the Guarantor is a named party;
(x) other than the subject matter of paragraph (xi),
to their knowledge, no consent, approval, authorization,
order, license, registration or qualification of or with any
court or governmental agency or body is required for the issue
and sale of the Securities or the consummation of the other
transactions contemplated by this Agreement or the Indenture,
except as may be required under state securities or Blue Sky
laws in connection with the purchase and distribution of the
Securities by the Initial Purchaser;
(xi) no registration under the Act of the Securities
is required in connection with the sale of the Securities to
the Initial Purchaser as contemplated by this Agreement and
the Offering Memorandum or in connection with the initial
resale of the Securities by the Initial Purchaser in
accordance with Section 2 (including Annex I) of this
Agreement, and prior to the commencement of the Exchange Offer
(as defined in the Registration Rights Agreement) or the
effectiveness of the Shelf Registration Statement (as defined
in the Registration Rights Agreement), the Indenture is not
required to be qualified under the TIA, in each case assuming
(i) that the purchasers who buy the Securities in the initial
resales are qualified institutional buyers (as defined in Rule
144A under the Act), non-U.S. Persons (as defined in Rule 902
under the Act) or Accredited Investors, (ii) the accuracy of
the Initial Purchaser's representations and those of the
Company and the Guarantor contained in this Agreement
regarding the absence of a general solicitation in connection
with the sale of the Securities to the Initial Purchaser and
the initial resales thereof and (iii) the accuracy of the
representations made by each Accredited Investor who purchases
Securities in the initial resale as set forth in the Offering
Memorandum;
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<PAGE> 16
(xii) the Securities satisfy the requirements set
forth in Rule 144A(d)(3) under the Act;
(xiii) the statements in the Offering Memorandum
under "Business -- Environmental Matters," "Description of
Notes," and "Certain U.S. Federal Income Tax Considerations,"
insofar as such statements constitute a description of the
legal matters, documents or proceedings referred to therein,
present a fair summary of such legal matters, documents or
proceedings;
(xiv) on the basis stated below, no facts have come
to the attention of such counsel that lead such counsel to
believe, except for the financial statements, related
financial statement schedules, and other financial and
statistical information contained in the Offering Memorandum
as to which such counsel expresses no opinion, that the
Offering Memorandum, as of its date of issuance and as amended
or supplemented, if applicable, as of the Closing Date,
contained an untrue statement of a material fact or omitted to
state a material fact necessary in order to make the
statements therein, in the light of the circumstances under
which they were made, not misleading; and
(xv) the Company is not and, after giving effect to
the offering and sale of the Securities to be sold and the
application of the proceeds from such sale (as described in
the Offering Memorandum under the caption "Use of Proceeds")
will not be, an "investment company" as defined in the
Investment Company Act of 1940, as amended.
In rendering such opinions, such counsel may rely (A) as to
matters involving the application of laws other than the federal laws
of the United States, the corporate law of the State of Delaware and
the laws of the State of New York, to the extent such counsel deems
proper and to the extent specified in such opinion, if at all, upon an
opinion or opinions (reasonably satisfactory to the Initial Purchaser's
counsel) of other counsel, reasonably acceptable to the Initial
Purchaser's counsel, familiar with the applicable laws; and (B) as to
matters of fact, to the extent such counsel deems proper, on the
representations and warranties made by the Company and the Guarantor
herein, and certificates and statements of public officials and
officers and other representatives of the Company and the Guarantor
(and such counsel has not independently verified or investigated, nor
does such counsel assume any responsibility for, the factual accuracy
or completeness of such representations and warranties or certificates
or of such factual statements). The opinion of such counsel for the
Company shall state that the opinion of any such other counsel upon
which they relied is in form satisfactory to such counsel and, in such
counsel's opinion, the Initial Purchaser and they are justified in
relying thereon. With respect to the matters to be covered in
subparagraph (xiv) above counsel may state that their opinion and
belief is based upon their participation in the preparation of the
Offering Memorandum and any amendment or supplement thereto, and that
since such counsel has not conducted any independent investigation with
regard to the information set forth in the Offering Memorandum and any
amendment or supple-
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<PAGE> 17
ment thereto, such counsel is not passing upon and does not assume any
responsibility for the accuracy, completeness or fairness of the
statements contained therein except with respect to the opinions set
forth in subparagraph (xiii) above.
The opinion of Winthrop, Stimpson, Putnam & Roberts described
above shall be rendered to the Initial Purchaser at the request of the
Company and shall so state therein.
(f) on the date of the issuance of the Offering Memorandum and
also on the Closing Date, BDO Seidman, LLP, Coopers & Lybrand L.L.P.
and Rich Baker Berman & Co., P.A. shall have furnished to the Initial
Purchaser letters, dated the respective dates of delivery thereof, in
form and substance satisfactory to you, containing statements and
information of the type customarily included in accountants "comfort
letters" to underwriters with respect to the financial statements and
certain financial information contained in the Offering Memorandum;
(g) the Company and the Guarantor shall have executed and
delivered the Registration Rights Agreement substantially in the form
attached hereto as Annex II;
(h) the sale of common stock to Tekni-Plex Partners L.P., a
limited partnership organized under the laws of the State of Delaware
in the amount of at least $18.2 million shall have occurred; the
Company shall have previously executed the New Credit Facility (as
defined in the Offering Memorandum) in form and substance reasonably
satisfactory to the Initial Purchaser;
(i) the Initial Purchaser shall have received on and as of the
Closing Date an opinion of Cahill Gordon & Reindel, counsel to the
Initial Purchaser, with respect to the validity of the Indenture and
the Securities, and such other related matters as the Initial Purchaser
may reasonably request, and such counsel shall have received such
papers and information as they may reasonably request to enable them to
pass upon such matters; and
(j) on or prior to the Closing Date, the Company shall have
furnished to the Initial Purchaser such further certificates and
documents as the Initial Purchaser shall reasonably request.
7. Each of the Company and the Guarantor, jointly and severally, agrees
to indemnify and hold harmless the Initial Purchaser, each affiliate of the
Initial Purchaser which assists the Initial Purchaser in the distribution of the
Securities, its officers and directors, and each person, if any, who controls
the Initial Purchaser within the meaning of either Section 15 of the Act or
Section 20 of the Exchange Act, from and against any and all losses, claims,
damages and liabilities (including without limitation the legal fees and other
expenses reasonably incurred in connection with any suit, action or proceeding
or any claim asserted) caused by any untrue statement or alleged untrue
statement of a material fact contained in the Offering Memorandum (and any
amendment or supplement thereto if the Company shall have furnished
-17-
<PAGE> 18
any amendments or supplements thereto) or any Preliminary Offering Memorandum,
or caused by any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading,
except insofar as such losses, claims, damages or liabilities are caused by any
untrue statement or omission or alleged untrue statement or omission (i) made in
reliance upon and in conformity with information relating to the Initial
Purchaser furnished to the Company in writing by the Initial Purchaser expressly
for use therein or (ii) contained in the Preliminary Offering Memorandum if the
Initial Purchaser was required to and failed to send or deliver a copy of the
Offering Memorandum to the person asserting such losses, claims, damages or
liabilities on or prior to the delivery of written confirmation of sale of the
Securities to such person and such Offering Memorandum would have corrected such
untrue statement or omission and it shall have been determined that such losses,
claims, damages or liabilities would not have arisen had the Offering Memorandum
been delivered or sent.
The Initial Purchaser agrees to indemnify and hold harmless each of the
Company, the Guarantor, their respective directors and officers and each person
who controls the Company within the meaning of Section 15 of the Act and Section
20 of the Exchange Act, to the same extent as the foregoing indemnity from the
Company to the Initial Purchaser, but only with reference to information
relating to the Initial Purchaser furnished to the Company in writing by the
Initial Purchaser expressly for use in the Offering Memorandum, any amendment or
supplement thereto, or any preliminary offering memorandum.
If any suit, action, proceeding (including any governmental or
regulatory investigation), claim or demand shall be brought or asserted against
any person in respect of which indemnity may be sought pursuant to either of the
two preceding paragraphs, such person (the "Indemnified Person") shall promptly
notify the person against whom such indemnity may be sought (the "Indemnifying
Person") in writing, and the Indemnifying Person, upon request of the
Indemnified Person, shall retain counsel reasonably satisfactory to the
Indemnified Person to represent the Indemnified Person and any others the
Indemnifying Person may designate in such proceeding and shall pay the fees and
expenses of such counsel related to such proceeding. In any such proceeding, any
Indemnified Person shall have the right to retain its own counsel, but the fees
and expenses of such counsel shall be at the expense of such Indemnified Person
unless (i) the Indemnifying Person and the Indemnified Person shall have
mutually agreed in writing to the contrary, (ii) the Indemnifying Person has
failed within a reasonable time to retain counsel reasonably satisfactory to the
Indemnified Person or (iii) the named parties in any such proceeding (including
any impleaded parties) include both the Indemnifying Person and the Indemnified
Person and representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between them. It is
understood that the Indemnifying Person shall not, in connection with any
proceeding or related proceeding in the same jurisdiction, be liable for the
fees and expenses of more than one separate firm (in addition to any local
counsel) for all Indemnified Persons, and that all such fees and expenses shall
be reimbursed as they are incurred. Any such separate firm for the Initial
Purchaser, each affiliate of the Initial Purchaser which assists the Initial
Purchaser in the distribution of the Securities, its officers and directors and
such control persons of Initial Purchaser shall be designated in writing by J.P.
Morgan Securities Inc. and any such separate firm for the
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<PAGE> 19
Company, the Guarantor, their directors, their officers and such control persons
of the Company shall be designated in writing by the Company. The Indemnifying
Person shall not be liable for any settlement of any proceeding effected without
its written consent, but if settled with such consent or if there be a final
judgment for the plaintiff, the Indemnifying Person agrees to indemnify any
Indemnified Person from and against any loss or liability by reason of such
settlement or judgment. Notwithstanding the foregoing sentence, if at any time
an Indemnified Person shall have requested in writing to the chief legal officer
or, if no chief legal officer exists, to the chief executive officer of the
Indemnifying Person to reimburse the Indemnified Person for fees and expenses of
counsel as contemplated by the third sentence of this paragraph, the
Indemnifying Person agrees that it shall be liable for any settlement of any
proceeding or claim effected without its written consent if (i) such settlement
is entered into more than 60 days after receipt by such Indemnifying Person of
the aforesaid request, (ii) a second such written request shall have been sent
to and received by the chief legal officer or, if no chief legal officer exists,
by the chief executive officer of the Indemnifying Person at least 30 days after
the first such request but at least 15 days prior to the date of such
settlement, and (iii) with respect to such request, such Indemnifying Person
shall not have reimbursed such Indemnified Person for all reasonable fees and
expenses of such counsel prior to the date of such settlement. No Indemnifying
Person shall, without the prior written consent of the Indemnified Person,
effect any settlement of any pending or threatened proceeding in respect of
which any Indemnified Person is or could have been a party and indemnity could
have been sought hereunder by such Indemnified Person, unless such settlement
includes an unconditional release of such Indemnified Person from all liability
on claims that are the subject matter of such proceeding.
If the indemnification provided for in the first and second paragraphs
of this Section 7 is unavailable to an Indemnified Person in respect of any
losses, claims, damages or liabilities referred to therein, then each
Indemnifying Person under such paragraph, in lieu of indemnifying such
Indemnified Person thereunder, shall contribute to the amount paid or payable by
such Indemnified Person as a result of such losses, claims, damages or
liabilities (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company and the Guarantor on the one hand and the
Initial Purchaser on the other hand from the offering of the Securities or (ii)
if the allocation provided by clause (i) above is not permitted by applicable
law, in such proportion as is appropriate to reflect not only the relative
benefits referred to in clause (i) above but also the relative fault of the
Company and the Guarantor on the one hand and the Initial Purchaser on the other
in connection with the statements or omissions that resulted in such losses,
claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative benefits received by the Company and the Guarantor
on the one hand and the Initial Purchaser on the other shall be deemed to be in
the same respective proportions as the net proceeds from the offering (before
deducting expenses) received by the Company and the total discounts and
commissions received by the Initial Purchaser, in each case as set forth in the
table on the cover of the Offering Memorandum, bear to the aggregate offering
price of the Securities. The relative fault of the Company and the Guarantor on
the one hand and the Initial Purchaser on the other shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to
-19-
<PAGE> 20
state a material fact relates to information supplied by the Company or the
Guarantor or by the Initial Purchaser and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
The Company, the Guarantor and the Initial Purchaser agree that it
would not be just and equitable if contribution pursuant to this Section 7 were
determined by pro rata allocation or by any other method of allocation that does
not take account of the equitable considerations referred to in the immediately
preceding paragraph. The amount paid or payable by an Indemnified Person as a
result of the losses, claims, damages and liabilities referred to in the
immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses incurred by such
Indemnified Person in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this Section 7, in no event shall
the Initial Purchaser be required to contribute any amount in excess of the
amount by which the total price at which the Securities purchased by it were
offered exceeds the amount of any damages that the Initial Purchaser has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation.
The remedies provided for in this Section 7 are not exclusive and shall
not limit any rights or remedies which may otherwise be available to any
indemnified party at law or in equity.
The indemnity and contribution agreements contained in this Section 7
and the representations and warranties made as of the date hereof and as of
Closing Date of the Company, the Guarantor and the Initial Purchaser set forth
in this Agreement shall remain operative and in full force and effect regardless
of (i) any termination of this Agreement, (ii) any investigation made by or on
behalf of the Initial Purchaser or any person controlling the Initial Purchaser
or by or on behalf of the Company, the Guarantor, such Company's officers or
directors or any other person controlling the Company and (iii) acceptance of
and payment for any of the Securities.
8. Notwithstanding anything herein contained, this Agreement may be
terminated in the absolute discretion of the Initial Purchaser, by notice given
to the Company, if after the execution and delivery of this Agreement and prior
to the Closing Date (i) trading generally shall have been suspended or
materially limited on or by, as the case may be, any of the New York Stock
Exchange, the American Stock Exchange or the National Association of Securities
Dealers, Inc., (ii) trading of any securities of or guaranteed by the Company
shall have been suspended on any exchange or in any over-the-counter market,
(iii) a general moratorium on commercial banking activities in New York shall
have been declared by either Federal or New York State authorities, or (iv)
there shall have occurred any outbreak or escalation of hostilities or any
change in financial markets or any calamity or crisis that, in the judgment of
the Initial Purchaser, is material and adverse and which, in the judgment of the
Initial Purchaser,
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<PAGE> 21
makes it impracticable to market the Securities on the terms and in the manner
contemplated in the Offering Memorandum.
9. This Agreement shall become effective upon the execution and
delivery hereof by the parties hereto.
10. If this Agreement shall be terminated by the Initial Purchaser,
because of any failure or refusal on the part of any of the Company to comply
with the terms or to fulfill any of the conditions of this Agreement, or if for
any reason any of the Company shall be unable to perform its obligations under
this Agreement or any condition of the Initial Purchaser's obligations cannot be
fulfilled other than solely by reason of a default by the Initial Purchaser in
payment for the Securities on the Closing Date, the Company agrees to reimburse
the Initial Purchaser for all out-of-pocket expenses (including the fees and
expenses of its counsel) reasonably incurred by the Initial Purchaser in
connection with this Agreement or the offering contemplated hereunder.
11. This Agreement shall inure to the benefit of and be binding upon
the Company, the Initial Purchaser, any controlling persons referred to herein
and their respective successors and assigns. Nothing expressed or mentioned in
this Agreement is intended or shall be construed to give any other person, firm
or corporation any legal or equitable right, remedy or claim under or in respect
of this Agreement or any provision herein contained. No purchaser of Securities
from the Initial Purchaser shall be deemed to be a successor by reason merely of
such purchase.
12. All notices and other communications hereunder shall be in writing
and shall be deemed to have been duly given if mailed or transmitted by any
standard form of telecommunication. Notices to the Initial Purchaser shall be
given to them at the following address: J.P. Morgan Securities Inc., 60 Wall
Street, New York, New York 10260; Attention: Syndicate Department. Notices to
the Company shall be given to them at the following address: Tekni-Plex, Inc.,
201 Industrial Parkway, Somerville, New Jersey 08876; Attention: Patrick Smith;
with a copy to Winthrop, Stimson, Putnam & Roberts, One Battery Park Plaza, New
York, New York 10004; Attention: Robert W. Gray, Esq.
13. This Agreement may be signed in counterparts, each of which shall
be an original and all of which together shall constitute one and the same
instrument.
14. Pursuant to Section 5-1401 of the General Obligations Laws of the
State of New York, this Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to any
other conflicts of laws provisions.
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<PAGE> 22
If the foregoing is in accordance with your understanding, please sign
and return four counterparts hereof.
Very truly yours,
TEKNI-PLEX, INC.
By: /s/ Kenneth W.R. Baker
------------------------------
Name: Kenneth W.R. Baker
Title: President
DOLCO PACKAGING CORP.
By: /s/ Kenneth W.R. Baker
------------------------------
Name: Kenneth W.R. Baker
Title: President
Accepted: April 1, 1997
J.P. MORGAN SECURITIES INC.
By: /s/ Michael Y. Leder
------------------------------
Name: Michael Y. Leder
Title: Vice President
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<PAGE> 23
ANNEX I
(A) In addition to offers pursuant to clauses (B)(1) and (B)(2) of
paragraph 2(ii) of the Agreement, the Initial Purchaser intends to offer and
sell the Securities in accordance with Regulation S under the Act. Accordingly,
the Initial Purchaser agrees that neither it, its affiliates nor any persons
acting on its or their behalf has engaged or will engage in any directed selling
efforts within the meaning of Rule 902 under the Act with respect to the
Securities and it and they have complied and will comply with the offering
restrictions requirement of Regulation S. The Initial Purchaser agrees that, at
or prior to confirmation of sale of Securities (other than a sale pursuant to
and in accordance with paragraph 2(ii) of the Agreement to purchasers described
in clauses (B)(1) and (B)(2) thereof), it will have sent to each distributor,
dealer or person receiving a selling concession, fee or other remuneration that
purchases Securities from it during the restricted period a confirmation or
notice to substantially the following effect:
"The Securities covered hereby have not been registered under
the United States Securities Act of 1933, as amended (the "Act"), and
may not be offered, sold or delivered within the United States or to,
or for the account or benefit of, U.S. persons (i) as part of their
distribution at any time or (ii) otherwise until 40 days after the
later of the commencement of the offering and the closing date, except
in either case in accordance with Regulation S (or Rule 144A if
available) under the Act. Terms used above have the meaning given to
them by Regulation S."
Terms used in this paragraph have the meanings given to them by Regulation S.
The Initial Purchaser agrees that it has not entered and will not enter
into any contractual arrangement with respect to the distribution or delivery of
the Securities in accordance with this paragraph (A), except with its affiliates
or with the prior written consent of the Company.
(B) The Initial Purchaser represents and agrees that (i) it has not
offered or sold, and will not offer or sell, in the United Kingdom by means of
any document, any Securities other than to persons whose ordinary activities
involve them in acquiring, holding, managing or disposing of investments (as
principal or agent) for the purposes of their business or which it is reasonable
to expect will so do, or in circumstances which do not otherwise constitute an
offer to the public in the United Kingdom within the meaning of the Public
Offers of Securities Regulations 1995 of Great Britain, (ii) it has complied,
and will comply, with all applicable provisions of the Financial Services Act
1986 and any regulation promulgated thereto of Great Britain with respect to
anything done by it in relation to the Securities in, from or otherwise
involving the United Kingdom, and (iii) it has only issued or passed on, and
will only issue or pass on, in the United Kingdom, any document received by it
in connection with the issuance of the Securities to a person who is of a kind
described in Article 11(3) of the Financial Serv-
<PAGE> 24
ices Act 1986 (Investment Advertisements) (Exemptions) Order 1995 of Great
Britain or is a person to whom such document may otherwise lawfully be issued or
passed on.
(C) The Initial Purchaser agrees that it will not directly or
indirectly offer, sell or deliver any of the Securities or distribute any
offering memorandum, prospectus or other document or information in any
jurisdiction outside the United States except under circumstances that will
result in compliance with the applicable laws thereof, and that it will take at
its own expense whatever action is required to permit its purchase and resale of
the Securities in such jurisdictions. The Initial Purchaser understands that no
action has been taken by the Company to permit a public offering in any
jurisdiction outside the United States where action would be required for such
purposes. The Initial Purchaser agrees not to cause any advertisement of the
Securities to be published in any newspaper or periodical or posted in any
public place and not to issue any circular relating to the Securities in any
jurisdiction outside of the United States. Without prejudice to the generality
of the foregoing, the Initial Purchaser is not authorized to give any
information or to make any representation in connection with the offering or
sale of the Securities other than those contained in the Offering Memorandum.
-2-
<PAGE> 1
EXHIBIT 4.4
REGISTRATION RIGHTS AGREEMENT
Dated as of April 4, 1997
among
TEKNI-PLEX, INC.,
THE GUARANTOR NAMED HEREIN
and
J.P. MORGAN SECURITIES INC.
<PAGE> 2
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is dated as of
April 4, 1997, by and among TEKNI-PLEX, INC., a corporation formed under the
laws of the State of Delaware (the "Company"), DOLCO PACKAGING CORP. (the
"Guarantor" and, together with the Company, the "Issuers"), and J.P. MORGAN
SECURITIES INC. (the "Initial Purchaser").
This Agreement is entered into in connection with the Purchase
Agreement, dated as of April 1, 1997, among the Company, the Guarantor and the
Initial Purchaser (the "Purchase Agreement") relating to the sale by the Company
to the Initial Purchaser of $75,000,000 aggregate principal amount of its 11
1/4% Senior Subordinated Notes due 2007 (the "Notes") and the issuance by the
Guarantor to the Initial Purchaser of a guarantee (the "Guarantee" and together
with the Notes, the "Securities"). In order to induce the Initial Purchaser to
enter into the Purchase Agreement, the Issuers have agreed to provide the
registration rights set forth in this Agreement for the benefit of the Initial
Purchaser and its direct and indirect transferees. The execution and delivery of
this Agreement is a condition to the Initial Purchaser's obligation to purchase
the Securities under the Purchase Agreement.
The parties hereby agree as follows:
1. Definitions
As used in this Agreement, the following terms shall have the following
meanings:
Additional Interest: See Section 4.
Advice: See Section 5.
Applicable Period: See Section 2(b).
Closing Date: The Closing Date as defined in the Purchase Agreement.
Company: See the introductory paragraph to this Agreement.
Consummation Date: The 165th day after the Closing.
Effectiveness Date: The 135th day after the Closing Date.
<PAGE> 3
-2-
Effectiveness Period: See Section 3(a).
Event Date: See Section 4(b).
Exchange Act: The Securities Exchange Act of 1934, as amended, and the
rules and regulations of the SEC promulgated thereunder.
Exchange Offer: See Section 2(a).
Exchange Registration Statement: See Section 2(a).
Exchange Securities: See Section 2(a).
Filing Date: The 60th day after the Closing Date.
Guarantor: See the introductory paragraph to this Agreement.
Holder: Any record holder of Registrable Securities.
Indemnified Person: See Section 7.
Indemnifying Person: See Section 7.
Indenture: The Indenture, dated as of April 1, 1997, among the Company,
the Guarantor and Marine Midland Bank, as trustee, pursuant to which the Notes
are being issued, as amended or supplemented from time to time in accordance
with the terms thereof.
Initial Purchaser: See the introductory paragraph to this Agreement.
Initial Shelf Registration: See Section 3(a).
Inspectors: See Section 5(p).
Issue Date: The original issue date of the Notes.
Issuers: See the introductory paragraph to this Agreement.
NASD: See Section 5(t).
Notes: See the preamble to this Agreement.
Participant: See Section 7.
<PAGE> 4
-3-
Participating Broker-Dealer: See Section 2(b).
Person: An individual, corporation, limited or general partnership,
joint venture, association, joint stock company, trust, unincorporated
organization or government or any agency or political subdivision thereof.
Private Exchange: See Section 2(b).
Private Exchange Securities: See Section 2(b).
Prospectus: The prospectus included in any Registration Statement
(including, without limitation, a prospectus that includes any information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A promulgated under the Securities Act), as
amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of the Registrable Securities covered by such
Registration Statement, and all other amendments and supplements to the
Prospectus, including post-effective amendments, and all material incorporated
by reference or deemed to be incorporated by reference in such Prospectus.
Records: See Section 5(p).
Registrable Securities: The Securities, upon original issuance thereof
and at all times subsequent thereto, each Exchange Security as to which Section
2(c)(1)(i) hereof is applicable upon original issuance and at all times
subsequent thereto and, if issued, the Private Exchange Securities, until, in
the case of any such Securities, Exchange Securities or Private Exchange
Securities, as the case may be, (i) a Registration Statement (other than, with
respect to any Exchange Security as to which Section 2(c)(1)(i) hereof is
applicable, the Exchange Registration Statement) covering such Securities,
Exchange Securities or Private Exchange Securities has been declared effective
by the SEC and such Securities, Exchange Securities or Private Exchange
Securities, as the case may be, have been disposed of in accordance with such
effective Registration Statement, (ii) such Securities, Exchange Securities or
Private Exchange Securities, as the case may be, are sold in compliance with
Rule 144, or (iii) such Securities, Exchange Securities or Private Exchange
Securities, as the case may be, cease to be outstanding.
Registration Statement: Any registration statement of the Company and
the Guarantor, including, but not limited
<PAGE> 5
-4-
to, the Exchange Registration Statement, that covers any of the Registrable
Securities pursuant to the provisions of this Agreement, including the
Prospectus, amendments and supplements to such registration statement, including
post-effective amendments, all exhibits, and all material incorporated by
reference or deemed to be incorporated by reference in such registration
statement.
Rule 144: Rule 144 promulgated under the Securities Act, as such Rule
may be amended from time to time, or any similar rule (other than Rule 144A) or
regulation hereafter adopted by the SEC providing for offers and sales of
securities made in compliance therewith resulting in offers and sales by
subsequent holders that are not affiliates of an issuer of such securities being
free of the registration and prospectus delivery requirements of the Securities
Act.
Rule 144A: Rule 144A promulgated under the Securities Act, as such Rule
may be amended from time to time, or any similar rule (other than Rule 144) or
regulation hereafter adopted by the SEC.
Rule 415: Rule 415 promulgated under the Securities Act, as such Rule
may be amended from time to time, or any similar rule or regulation hereafter
adopted by the SEC.
SEC: The Securities and Exchange Commission.
Securities Act: The Securities Act of 1933, as amended, and the rules
and regulations of the SEC promulgated thereunder.
Shelf Notice: See Section 2(c).
Shelf Registration: See Section 3(b).
Subsequent Shelf Registration: See Section 3(b).
TIA: The Trust Indenture Act of 1939, as amended.
Trustee: The trustee as defined in the Indenture and, if existent, the
trustee under any indenture governing the Exchange Securities and Private
Exchange Securities (if any).
Underwritten registration or underwritten offering: A registration in
connection with which securities are sold to an underwriter for reoffering to
the public pursuant to an effective Registration Statement.
<PAGE> 6
-5-
2. Exchange Offer
(a) The Issuers agree to file with the SEC as soon as practicable after
the Closing Date, but in no event later than the Filing Date, an offer to
exchange (the "Exchange Offer") any and all of the Registrable Securities
for a like aggregate principal amount of debt securities of the Company
which are identical in all material respects to the Notes and guaranteed by
the Guarantor with terms identical in all material respects to the Guarantee
(the "Exchange Securities") (and which are entitled to the benefits of a
trust indenture which is identical in all material respects to the Indenture
(other than such changes as are necessary to comply with any requirements of
the SEC to effect or maintain the qualification of such trust indenture
under the TIA) and which has been qualified under the TIA), except that the
Exchange Securities shall have been registered pursuant to an effective
Registration Statement under the Securities Act and shall contain no
restrictive legend thereon. The Issuers agree to use their reasonable best
efforts to keep the Exchange Offer open for at least 30 business days (or
longer if required by applicable law) after the date notice of the Exchange
Offer is mailed to Holders and to consummate the Exchange Offer on or prior
to the Effectiveness Date. The Exchange Offer will be registered under the
Securities Act on the appropriate form (the "Exchange Registration
Statement") and will comply with all applicable tender offer rules and
regulations under the Exchange Act. If after such Exchange Registration
Statement is initially declared effective by the SEC, the Exchange Offer or
the issuance of the Exchange Securities thereunder is interfered with by any
stop order, injunction or other order or requirement of the SEC or any other
governmental agency or court such Exchange Registration Statement shall be
deemed not to have become effective for purposes of this Agreement. Each
Holder who participates in the Exchange Offer will be deemed to represent
that any Exchange Securities received by it will be acquired in the ordinary
course of its business, that at the time of the consummation of the Exchange
Offer such Holder will have no arrangement with any person to participate in
the distribution of the Exchange Securities in violation of the provisions
of the Securities Act, and that such Holder is not an affiliate of the
Company within the meaning of Rule 501(b) of Regulation D under the
Securities Act and such Holder has full power and authority to exchange the
Registrable Securities in exchange for the Exchange Securities. Upon
consummation of
<PAGE> 7
-6-
the Exchange Offer in accordance with this Section 2, the provisions of this
Agreement shall continue to apply, mutatis, mutandis, solely with respect to
Registrable Securities that are Private Exchange Securities and Exchange
Securities held by Participating Broker-Dealers, and the Issuers shall have
no further obligation to register Registrable Securities (other than Private
Exchange Securities and other than Exchange Securities as to which clause
(c)(1)(i) hereof applies) pursuant to Section 3 of this Agreement. No
securities other than the Exchange Securities shall be included in the
Exchange Registration Statement.
(b) The Issuers shall include within the Prospectus contained in the
Exchange Registration Statement one or more section(s) reasonably acceptable
to the Initial Purchaser, which shall contain a summary statement of the
positions taken or policies made by the Staff of the SEC (which are
available to the Issuers) with respect to the potential "underwriter" status
of any broker-dealer that is the beneficial owner (as defined in Rule 13d-3
under the Exchange Act) of Exchange Securities received by such
broker-dealer in the Exchange Offer (a "Participating Broker-Dealer"),
whether such positions or policies have been publicly disseminated by the
Staff of the SEC or such positions or policies, in the reasonable judgment
of the Initial Purchaser, represent the prevailing views of the Staff of the
SEC. Such section(s) shall also allow the use of the prospectus by all
persons subject to the prospectus delivery requirements of the Securities
Act, including all Participating Broker-Dealers, and include a statement
describing the means by which Participating Broker-Dealers may resell the
Exchange Securities.
The Issuers shall use their reasonable best efforts to keep the
Exchange Registration Statement effective and to amend and supplement the
Prospectus contained therein in order to permit such Prospectus to be lawfully
delivered by all persons subject to the prospectus delivery requirements of the
Securities Act for such period of time as such persons must comply with such
requirements in order to resell the Exchange Securities, provided that such
period shall not exceed 180 days (or such longer period if extended pursuant to
the last paragraph of Section 5) (the "Applicable Period").
If, prior to consummation of the Exchange Offer, the Initial Purchaser
holds any Notes acquired by it and having the status of an unsold allotment in
the initial distribution, the
<PAGE> 8
-7-
Company upon the request of the Initial Purchaser shall, simultaneously with the
delivery of the Exchange Securities in the Exchange Offer, issue and deliver to
the Initial Purchaser, in exchange (the "Private Exchange") for the Securities
held by the Initial Purchaser, a like principal amount of debt securities of the
Company that are identical in all material respects to the Exchange Securities
(the "Private Exchange Securities") (and which are issued pursuant to the same
indenture as the Exchange Securities) except for the placement of a restrictive
legend on such Private Exchange Securities. If possible, the Private Exchange
Securities shall bear the same CUSIP number as the Exchange Securities. Interest
on the Exchange Securities and Private Exchange Securities will accrue from the
last interest payment date on which interest was paid on the Notes surrendered
in exchange therefor or, if no interest has been paid on the Notes, from the
Issue Date.
Any indenture under which the Exchange Securities or the Private
Exchange Securities will be issued shall provide that the holders of any of the
Exchange Securities and the Private Exchange Securities will vote and consent
together on all matters (to which such holders are entitled to vote or consent)
as one class and that none of the holders of the Exchange Securities and the
Private Exchange Securities will have the right to vote or consent as a separate
class on any matter (to which such holders are entitled to vote or consent).
(c) If (1) prior to the consummation of the Exchange Offer, the Company
reasonably determines in good faith or Holders of at least a majority in
aggregate principal amount of the Registrable Securities notify the Company
that they have reasonably determined in good faith that (i) in the opinion
of counsel, the Exchange Securities would not, upon receipt, be tradeable by
such Holders who are not affiliates of the Company without restriction under
the Securities Act and without restrictions under applicable blue sky or
state securities laws or (ii) in the opinion of counsel, the SEC is unlikely
to permit the consummation of the Exchange Offer and/or (2) subsequent to
the consummation of the Private Exchange, holders of at least a majority in
aggregate principal amount of the Private Exchange Securities so request
with respect to the Private Exchange Securities and/or (3) the Exchange
Offer is commenced and not consummated prior to the 45th day following the
Consummation Date for any reason, then the Company shall promptly deliver to
the Holders and the Trustee notice thereof (the "Shelf Notice") and shall
thereafter file an Initial Shelf Registration as set forth
<PAGE> 9
-8-
in Section 3 (which only in the circumstances contemplated by clause (2) of
this sentence will relate solely to the Private Exchange Securities)
pursuant to Section 3. The parties hereto agree that, following the delivery
of a Shelf Notice to the Holders of Registrable Securities (only in the
circumstances contemplated by clauses (1) and/or (3) of the preceding
sentence), the Issuers shall not have any further obligation to conduct the
Exchange Offer or the Private Exchange under this Section 2.
3. Shelf Registration
If a Shelf Notice is delivered as contemplated by Section 2(c), then:
(a) Initial Shelf Registration. The Issuers shall as promptly as
reasonably practicable prepare and file with the SEC a Registration
Statement for an offering to be made on a continuous basis pursuant to Rule
415 covering all of the Registrable Securities (the "Initial Shelf
Registration"). If the Issuers shall have not yet filed an Exchange Offer,
the Issuers shall use their reasonable best efforts to file with the SEC the
Initial Shelf Registration on or prior to the Filing Date. Otherwise, the
Issuers shall use their reasonable best efforts to file with the SEC the
Initial Shelf Registration within 45 days of the delivery of the Shelf
Notice. The Initial Shelf Registration shall be on Form S-1 or another
appropriate form permitting registration of such Registrable Securities for
resale by such holders in the manner or manners designated by them
(including, without limitation, one or more underwritten offerings). The
Issuers shall not permit any securities other than the Registrable
Securities to be included in the Initial Shelf Registration or any
Subsequent Shelf Registration. The Issuers shall use their reasonable best
efforts to cause the Initial Shelf Registration to be declared effective
under the Securities Act on or prior to the 75th day after the filing
thereof with the Commission and to keep the Initial Shelf Registration
continuously effective under the Securities Act until the date on which the
Securities are no longer "restricted securities" (within the meaning of Rule
144 under the Act) (subject to extension pursuant to the last paragraph of
Section 5 hereof) (the "Effectiveness Period"), or such shorter period
ending when (i) all Registrable Securities covered by the Initial Shelf
Registration have been sold in the manner set forth and as contemplated in
the Initial Shelf Registration or (ii) a Subse-
<PAGE> 10
-9-
quent Shelf Registration covering all of the Registrable Securities has been
declared effective under the Securities Act.
(b) Subsequent Shelf Registrations. If the Initial Shelf Registration
or any Subsequent Shelf Registration ceases to be effective for any reason
at any time during the Effectiveness Period (other than because of the sale
of all of the securities registered thereunder), the Issuers shall use their
reasonable best efforts to obtain the prompt withdrawal of any order
suspending the effectiveness thereof, and in any event shall within 45 days
of such cessation of effectiveness amend the Shelf Registration in a manner
reasonably expected to obtain the withdrawal of the order suspending the
effectiveness thereof, or file an additional "shelf" Registration Statement
pursuant to Rule 415 covering all of the Registrable Securities (a
"Subsequent Shelf Registration"). If a Subsequent Shelf Registration is
filed, the Issuers shall use their reasonable best efforts to cause the
Subsequent Shelf Registration to be declared effective as soon as
practicable after such filing and to keep such Registration Statement
continuously effective for a period equal to the number of days in the
Effectiveness Period less the aggregate number of days during which the
Initial Shelf Registration or any Subsequent Shelf Registration was
previously continuously effective. As used herein the term "Shelf
Registration" means the Initial Shelf Registration and any Subsequent Shelf
Registration.
(c) Supplements and Amendments. The Issuers shall promptly supplement
and amend the Shelf Registration if required by the rules, regulations or
instructions applicable to the registration form used for such Shelf
Registration, if required by the Securities Act, or if reasonably requested
by the Holders of a majority in aggregate principal amount of the
Registrable Securities covered by such Registration Statement or by any
underwriter of such Registrable Securities.
4. Additional Interest
(a) The Issuers and the Initial Purchasers agree that the Holders of
Registrable Securities will suffer damages if the Issuers fail to fulfill
their obligations under Section 2 or Section 3 hereof and that it would not
be feasible to ascertain the extent of such damages with precision.
Accordingly, the Issuers, jointly and sever-
<PAGE> 11
-10-
ally, agree to pay, as liquidated damages, additional interest on the
Registrable Securities ("Additional Interest") under the circumstances and
to the extent set forth below (each of which shall be given independent
effect and shall not be duplicative except as otherwise provided below):
(i) if neither the Exchange Registration Statement nor the Initial
Shelf Registration has been filed on or prior to the Filing Date, Additional
Interest shall accrue on the Registrable Securities over and above the
stated interest at a rate of .25% per annum for the first 90 days
immediately following the Filing Date, such Additional Interest rate
increasing by an additional .25% per annum at the beginning of each
subsequent 90-day period;
(ii) if neither the Exchange Registration Statement nor the Initial
Shelf Registration is declared effective by the SEC on or prior to the
Effectiveness Date, Additional Interest shall be accrued on the Registrable
Securities included or which should have been included in such Registration
Statement over and above the stated interest at a rate of .25% per annum for
the first 90 days immediately following the day after the Effectiveness
Date, such Additional Interest rate increasing by an additional .25% per
annum at the beginning of each subsequent 90-day period; and
(iii) if (A) the Company has not exchanged Exchange Securities for all
Securities validly tendered in accordance with the terms of the Exchange
Offer on or prior to the Consummation Date or (B) the Exchange Registration
Statement ceases to be effective at any time prior to the time that the
Exchange Offer is consummated or (C) if applicable, the Shelf Registration
has been declared effective and such Shelf Registration ceases to be
effective at any time during the Effectiveness Period, then Additional
Interest shall be accrued on the Registrable Securities (over and above any
interest otherwise payable on the Registrable Securities) at a rate of .25%
per annum for the first 90 days commencing on the (x) 166th day after the
Issue Date, in the case of (A) above, or (y) the day the Exchange
Registration Statement ceases to be effective in the case of (B) above, or
(z) the day such Shelf Registration ceases to be effective in the case of
(C) above, such Additional Interest rate increasing by an additional .25%
per annum at the beginning of each such subsequent 90-day period;
<PAGE> 12
-11-
provided, however, that the Additional Interest rate on the Registrable
Securities may not exceed at any one time in the aggregate 1.0% per annum;
and provided, further, that (1) upon the filing of the Exchange Registration
Statement or a Shelf Registration as required hereunder (in the case of
clause (i) of this Section 4), (2) upon the effectiveness of the Exchange
Registration Statement or the Shelf Registration as required hereunder (in
the case of clause (ii) of this Section 4), or (3) upon the exchange of
Exchange Securities for all Notes tendered (in the case of clause (iii)(A)
of this Section 4), or upon the effectiveness of the Exchange Registration
Statement which had ceased to remain effective (in the case of (iii)(B) of
this Section 4), or upon the effectiveness of the Shelf Registration which
had ceased to remain effective (in the case of (iii)(C) of this Section 4),
Additional Interest on the Registrable Securities as a result of such clause
(or the relevant subclause thereof), as the case may be, shall cease to
accrue. It is understood and agreed that, notwithstanding any provision to
the contrary, so long as any Registrable Security is then covered by an
effective Shelf Registration Statement, no Additional Interest shall accrue
on such Registrable Security.
(b) The Company shall notify the Trustee within one business day after
each and every date on which an event occurs in respect of which Additional
Interest is required to be paid (an "Event Date"). The Issuers shall pay the
Additional Interest due on the Registrable Securities by depositing with the
Trustee, in trust, for the benefit of the Holders thereof, on or before the
applicable semi-annual interest payment date, immediately available funds in
sums sufficient to pay the Additional Interest then due to Holders of
Registrable Securities. The Additional Interest amount due shall be payable
on each interest payment date to the record Holder of Registrable Securities
entitled to receive the interest payment to be made on such date as set
forth in the Indenture. The amount of Additional Interest will be determined
by multiplying the applicable Additional Interest rate by the principal
amount of the affected Registrable Securities of such Holders, multiplied by
a fraction, the numerator of which is the number of days such Additional
Interest rate was applicable during such period (determined on the basis of
a 360-day year comprised of twelve 30-day months and, in the case of a
partial month, the actual number of days elapsed including the first day but
excluding the last day of such period), and, the denominator of which is
360. Each obligation to pay Additional Interest shall be deemed to accrue
immediately following the occurrence of the ap-
<PAGE> 13
-12-
plicable Event Date. The parties hereto agree that the Additional Interest
provided for in this Section 4 constitutes a reasonable estimate of the
damages that may be incurred by Holders of Registrable Securities by reason
of the failure of a Shelf Registration or Exchange Offer to be filed or
declared effective, or a Shelf Registration to remain effective, as the case
may be, in accordance with this Section 4.
5. Registration Procedures
In connection with the registration of any Registrable Securities
pursuant to Sections 2 or 3 hereof, the Issuers shall effect such registrations
to permit the sale of such Registrable Securities in accordance with the
intended method or methods of disposition thereof, and pursuant thereto the
Issuers shall:
(a) Use their reasonable best efforts to prepare and file with the SEC,
as soon as practicable after the date hereof but in any event prior to the
Filing Date in the case of the Exchange Registration Statement and the 45th
day following the Consummation Date in the case of the Shelf Registration
Statement, a Registration Statement or Registration Statements as prescribed
by Section 2 or 3, and to use their reasonable best efforts to cause each
such Registration Statement to become effective and remain effective as
provided herein, provided that, if (1) such filing is pursuant to Section 3,
or (2) a Prospectus contained in an Exchange Registration Statement filed
pursuant to Section 2 is required to be delivered under the Securities Act
by any Participating Broker-Dealer who seeks to sell Exchange Securities
during the Applicable Period, before filing any Registration Statement or
Prospectus or any amendments or supplements thereto, the Issuers shall upon
written request furnish to and afford the Holders of the Registrable
Securities (which in the case of Registrable Securities in the form of
global certificates shall be The Depository Trust Company ("DTC")) and each
such Participating Broker-Dealer, as the case may be, covered by such
Registration Statement, their counsel and the managing underwriters, if any,
a reasonable opportunity to review copies of all such documents (including
copies of any documents to be incorporated by reference therein and all
exhibits thereto) proposed to be filed.
(b) Prepare and file with the SEC such amendments and post-effective
amendments to each Shelf Registration
<PAGE> 14
-13-
or Exchange Registration Statement, as the case may be, as may be necessary
to keep such Registration Statement continuously effective for the
Effectiveness Period or the Applicable Period, as the case may be; cause the
related Prospectus to be supplemented by any required Prospectus supplement,
and as so supplemented to be filed pursuant to Rule 424 (or any similar
provisions then in force) under the Securities Act; and comply with the
provisions of the Securities Act, the Exchange Act and the rules and
regulations of the SEC promulgated thereunder applicable to it with respect
to the disposition of all securities covered by such Registration Statement
as so amended or in such Prospectus as so supplemented and with respect to
the subsequent resale of any securities being sold by a Participating
Broker-Dealer covered by any such Prospectus; the Issuers shall not be
deemed to have used their reasonable best efforts to keep a Registration
Statement effective during the Applicable Period if either of them
voluntarily takes any action that would result in selling Holders of the
Registrable Securities covered thereby or Participating Broker-Dealers
seeking to sell Exchange Securities not being able to sell such Registrable
Securities or such Exchange Securities during that period unless such action
is required by applicable law or unless the Issuers comply with this
Agreement, including without limitation, the provisions of paragraph 5(k)
hereof and the last paragraph of this Section 5.
(c) If (1) a Shelf Registration is filed pursuant to Section 3, or (2)
a Prospectus contained in an Exchange Registration Statement filed pursuant
to Section 2 is required to be delivered under the Securities Act by any
Participating Broker-Dealer who seeks to sell Exchange Securities during the
Applicable Period, notify the selling Holders of Registrable Securities, or
each such Participating Broker-Dealer, as the case may be, their counsel and
the managing underwriters, if any, who have provided the Issuers with their
names and addresses promptly (but in any event within two business days),
and confirm such notice in writing, (i) when a Prospectus or any Prospectus
supplement or post-effective amendment has been filed, and, with respect to
a Registration Statement or any post-effective amendment, when the same has
become effective under the Securities Act (including in such notice a
written statement that any Holder may, upon request, obtain, without charge,
one conformed copy of such Registration Statement or post-effective
amendment including financial statements and schedules, documents
incorporated
<PAGE> 15
-14-
or deemed to be incorporated by reference and exhibits), (ii) of the
issuance by the SEC of any stop order suspending the effectiveness of a
Registration Statement or of any order preventing or suspending the use of
any preliminary prospectus or the initiation of any proceedings for that
purpose, (iii) of the receipt by the Company of any notification with
respect to the suspension of the qualification or exemption from
qualification of a Registration Statement or any of the Registrable
Securities or the Exchange Securities to be sold by any Participating
Broker-Dealer for offer or sale in any jurisdiction, or the initiation or
threatening of any proceeding for such purpose, (iv) of the happening of any
event or any information becoming known that makes any statement made in
such Registration Statement or related Prospectus or any document
incorporated or deemed to be incorporated therein by reference untrue in any
material respect or that requires the making of any changes in such
Registration Statement, Prospectus or documents so that, in the case of the
Registration Statement, it will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading, and that
in the case of the Prospectus, it will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, and (v) of the
Company's reasonable determination that a post-effective amendment to a
Registration Statement would be appropriate.
(d) If (1) a Shelf Registration is filed pursuant to Section 3, or (2)
a Prospectus contained in an Exchange Registration Statement filed pursuant
to Section 2 is required to be delivered under the Securities Act by any
Participating Broker-Dealer who seeks to sell Exchange Securities during the
Applicable Period, use their reasonable best efforts to prevent the issuance
of any order suspending the effectiveness of a Registration Statement or of
any order preventing or suspending the use of a Prospectus or suspending the
qualification (or exemption from qualification) of any of the Registrable
Securities or the Exchange Securities to be sold by any Participating
Broker-Dealer, for sale in any jurisdiction, and, if any such order is
issued, to use their reasonable best efforts to obtain the withdrawal of any
such order at the earliest possible moment.
<PAGE> 16
-15-
(e) If a Shelf Registration is filed pursuant to Section 3 and if
requested by the managing underwriters, if any, or the Holders of a majority
in aggregate principal amount of the Registrable Securities being sold in
connection with an underwritten offering, (i) promptly incorporate in a
prospectus supplement or post-effective amendment such information as the
managing underwriters, if any, or such Holders or counsel reasonably request
to be included therein, or (ii) make all required filings of such prospectus
supplement or such post-effective amendment as soon as practicable after the
Company has received notification of the matters to be incorporated in such
prospectus supplement or post-effective amendment provided that the Company
shall not be required to take any action pursuant to this Section 5(e) that
would, in the opinion of counsel for the Company, violate applicable law.
(f) If (1) a Shelf Registration is filed pursuant to Section 3, or (2)
a Prospectus contained in an Exchange Registration Statement filed pursuant
to Section 2 is required to be delivered under the Securities Act by any
Participating Broker-Dealer who seeks to sell Exchange Securities during the
Applicable Period, furnish to each selling Holder of Registrable Securities
and to each such Participating Broker-Dealer who so requests and to counsel
and each managing underwriter, if any, without charge, one conformed copy of
the Registration Statement or Statements and each post-effective amendment
thereto, including financial statements and schedules, and if requested, all
documents incorporated or deemed to be incorporated therein by reference and
all exhibits.
(g) If (1) a Shelf Registration is filed pursuant to Section 3, or (2)
a Prospectus contained in an Exchange Registration Statement filed pursuant
to Section 2 is required to be delivered under the Securities Act by any
Participating Broker-Dealer who seeks to sell Exchange Securities during the
Applicable Period, deliver to each selling Holder of Registrable Securities,
or each such Participating Broker-Dealer, as the case may be, their counsel,
and the underwriters, if any, without charge, as many copies of the
Prospectus or Prospectuses (including each form of preliminary prospectus)
and each amendment or supplement thereto and any documents incorporated by
reference therein as such Persons may reasonably request; and, subject to
the last paragraph of this Section 5, the Issuers hereby consent to the use
of such Prospectus and each amendment or supplement thereto by each of the
sell-
<PAGE> 17
-16-
ing holders of Registrable Securities or each such Participating
Broker-Dealer, as the case may be, and the underwriters or agents, if any,
and dealers (if any), in connection with the offering and sale of the
Registrable Securities covered by or the sale by Participating
Broker-Dealers of the Exchange Securities pursuant to such Prospectus and
any amendment or supplement thereto.
(h) Prior to any public offering of Registrable Securities or any
delivery of a Prospectus contained in the Exchange Registration Statement by
any Participating Broker-Dealer who seeks to sell Exchange Securities during
the Applicable Period, to use their reasonable best efforts to register or
qualify, and to cooperate with the selling Holders of Registrable Securities
or each such Participating Broker-Dealer, as the case may be, the
underwriters, if any, and their respective counsel in connection with the
registration or qualification (or exemption from such registration or
qualification) of such Registrable Securities for offer and sale under the
securities or Blue Sky laws of such jurisdictions within the United States
as any selling Holder, Participating Broker-Dealer, or the managing
underwriters reasonably request in writing, provided that where Exchange
Securities held by Participating Broker-Dealers or Registrable Securities
are offered other than through an underwritten offering, the Issuers agree
to cause their counsel to perform Blue Sky investigations and file
registrations and qualifications required to be filed pursuant to this
Section 5(h); keep each such registration or qualification (or exemption
therefrom) effective during the period such Registration Statement is
required to be kept effective and do any and all other reasonable acts or
things necessary or advisable to enable the disposition in such
jurisdictions of the Exchange Securities held by Participating
Broker-Dealers or the Registrable Securities covered by the applicable
Registration Statement, provided that neither of the Issuers shall be
required to (A) qualify generally to do business in any jurisdiction where
it is not then so qualified, (B) take any action that would subject it to
general service of process in any such jurisdiction where it is not then so
subject or (C) subject itself to taxation in excess of a nominal dollar
amount in any such jurisdiction.
(i) If a Shelf Registration is filed pursuant to Section 3, reasonably
cooperate with the selling Holders of Registrable Securities and the
managing underwriters,
<PAGE> 18
-17-
if any, to facilitate the timely preparation and delivery of certificates
representing Registrable Securities to be sold, which certificates shall not
bear any restrictive legends and shall be in a form eligible for deposit
with DTC; and enable such Registrable Securities to be registered in such
names as the managing underwriter or underwriters, if any, or Holders may
request at least two business days prior to any sale of Registrable
Securities.
(j) Use their reasonable best efforts to cause the Registrable
Securities covered by the Registration Statement to be registered with or
approved by such other United States governmental agencies or authorities of
the United States as may be necessary to enable the seller or sellers
thereof or the underwriters, if any, to consummate the disposition of such
Registrable Securities, except as may be required solely as a consequence of
the nature of such selling Holder's business, in which case the Issuers will
cooperate in all reasonable respects with the filing of such Registration
Statement and the granting of such approvals.
(k) If (1) a Shelf Registration is filed pursuant to Section 3, or (2)
a Prospectus contained in an Exchange Registration Statement filed pursuant
to Section 2 is required to be delivered under the Securities Act by any
Participating Broker-Dealer who seeks to sell Exchange Securities during the
Applicable Period, upon the occurrence of any event contemplated by
paragraph 5(c)(iv) or 5(c)(v) above, as promptly as practicable prepare and
(subject to Section 5(a) above) file with the SEC, solely at the expense of
the Issuers, a supplement or post-effective amendment to the Registration
Statement or a supplement to the related Prospectus or any document
incorporated or deemed to be incorporated therein by reference, or file any
other required document so that, as thereafter delivered to the purchasers
of the Registrable Securities being sold thereunder or to the purchasers of
the Exchange Securities to whom such Prospectus will be delivered by a
Participating Broker-Dealer, any such Prospectus will not contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading.
(l) Use their reasonable best efforts to cause the Registrable
Securities covered by a Registration Statement
<PAGE> 19
-18-
or the Exchange Securities, as the case may be, to be rated, or, if
previously rated, updated, with the appropriate rating agencies, if so
requested by the Holders of a majority in aggregate principal amount of
Registrable Securities covered by such Registration Statement or the
Exchange Securities, as the case may be, or the managing underwriters, if
any.
(m) Prior to the effective date of the first Registration Statement
relating to the Registrable Securities, (i) provide the Trustee with printed
certificates for the Registrable Securities in a form eligible for deposit
with DTC and (ii) provide a CUSIP number for the Registrable Securities.
(n) Use their best efforts to cause all Registrable Securities covered
by such Registration Statement or the Exchange Securities, as the case may
be, to be (i) listed on each securities exchange, if any, on which similar
securities issued by either of the Issuers are then listed, or (ii)
authorized to be quoted on the National Association of Securities Dealers
Automated Quotation System ("NASDAQ") or the National Market System of
NASDAQ if similar securities of the Issuers are so authorized.
(o) In connection with an underwritten offering of Registrable
Securities pursuant to a Shelf Registration, enter into an underwriting
agreement as is customary in underwritten offerings and take all such other
actions as are reasonably requested by the managing underwriters in order to
expedite or facilitate the registration or the disposition of such
Registrable Securities, and in such connection, (i) make such
representations and warranties to the underwriters, with respect to the
business of the Company and its subsidiaries, if any, and the Registration
Statement, Prospectus and documents, if any, incorporated or deemed to be
incorporated by reference therein, in each case, as are customarily made by
issuers to underwriters in underwritten offerings, and confirm the same if
and when reasonably requested; (ii) obtain an opinion of counsel to the
Issuers and updates thereof in form and substance reasonably satisfactory to
the managing underwriters (if any), addressed to the underwriters covering
the matters customarily covered in opinions requested in underwritten
offerings and such other matters as may be reasonably requested by
underwriters; (iii) obtain "cold comfort" letters and updates thereof in
form and substance reasonably satisfactory to the man-
<PAGE> 20
-19-
aging underwriters from the independent certified public accountants of the
Company (and, if necessary, any other independent certified public
accountants of any subsidiary of the Company or of any business acquired by
the Company for which financial statements and financial data are, or are
required to be, included in the Registration Statement), addressed to each
of the underwriters, such letters to be in customary form and covering
matters of the type customarily covered in "cold comfort" letters in
connection with underwritten offerings and such other matters as may be
reasonably requested by underwriters; and (iv) if an underwriting agreement
is entered into, the same shall contain indemnification provisions and
procedures no less favorable than those set forth in Section 7 hereof (or
such other provisions and procedures acceptable to Holders of a majority in
aggregate principal amount of Registrable Securities covered by such
Registration Statement and the managing underwriters or agents) with respect
to all parties to be indemnified pursuant to said Section. The above shall
be done at each closing under such underwriting agreement, or as and to the
extent required thereunder.
(p) If (1) a Shelf Registration is filed pursuant to Section 3, or (2)
a Prospectus contained in an Exchange Registration Statement filed pursuant
to Section 2 is required to be delivered under the Securities Act by any
Participating Broker-Dealer who seeks to sell Exchange Securities during the
Applicable Period, make available for inspection by any selling Holder of
such Registrable Securities being sold, or each such Participating
Broker-Dealer, as the case may be, any underwriter participating in any such
disposition of Registrable Securities, if any, and any attorney, accountant
or other agent retained by any such selling holder or each such
Participating Broker-Dealer, as the case may be, or underwriter
(collectively, the "Inspectors"), at the offices where normally kept, during
reasonable business hours, all financial and other records, pertinent
corporate documents and properties of the Company and its subsidiaries, if
any (collectively, the "Records"), as shall be reasonably necessary to
enable them to exercise any applicable due diligence responsibilities, and
cause the officers, directors and employees of the Company and its
subsidiaries, if any to supply all information in each case reasonably
requested by any such Inspector in connection with such Registration
Statement; provided that such Inspectors shall first agree in writing with
the Company that any informa-
<PAGE> 21
-20-
tion reasonably designated by the Company in good faith in writing as
confidential at the time of delivery of such information shall be kept
confidential by such Inspector (and such Inspector shall enter into
reasonable confidentiality agreements, and observe other customary
confidentiality procedures, as the Company may reasonably request), except
to the extent that (i) the disclosure of such Records is necessary to avoid
or correct a misstatement or omission in such Registration Statement, (ii)
the release of such Records is ordered pursuant to a subpoena or other order
from a court of competent jurisdiction or (iii) the information in such
Records has been made generally available to the public. Each selling Holder
of such Registrable Securities and each such Participating Broker-Dealer
will be required to agree that information obtained by it as a result of
such inspections shall be deemed confidential and shall not be used by it as
the basis for any market transactions in the securities of the Company
unless and until such is made generally available to the public. Each
selling Holder of such Registrable Securities and each such Participating
Broker-Dealer will be required to further agree that it will, upon learning
that disclosure of such Records is sought in a court of competent
jurisdiction, give notice to the Company and allow the Company at its
expense to undertake appropriate action to prevent disclosure of the Records
deemed confidential.
(q) Provide an indenture trustee for the Registrable Securities or the
Exchange Securities, as the case may be, and cause the Indenture or the
trust indenture provided for in Section 2(a), as the case may be, to be
qualified under the TIA not later than the effective date of the Exchange
Offer or the first Registration Statement relating to the Registrable
Securities; and in connection therewith, cooperate with the trustee under
any such indenture and the holders of the Registrable Securities, to effect
such changes to such indenture as may be required for such indenture to be
so qualified in accordance with the terms of the TIA; and execute, and use
their reasonable best efforts to cause such trustee to execute, all
documents as may be required to effect such changes, and all other forms and
documents required to be filed with the SEC to enable such indenture to be
so qualified in a timely manner.
(r) Comply in all material respects with all applicable rules and
regulations of the SEC and make generally
<PAGE> 22
-21-
available to their securityholders earning statements satisfying the
provisions of Section 11(a) of the Securities Act and Rule 158 thereunder
(or any similar rule promulgated under the Securities Act) no later than 90
days after the end of any 12-month period (i) commencing at the end of any
fiscal quarter in which Registrable Securities are sold to underwriters in a
firm commitment or best efforts underwritten offering and (ii) if not sold
to underwriters in such an offering, commencing on the first day of the
first fiscal quarter of the Company after the effective date of a Shelf
Registration Statement, which statements shall cover said 12-month periods.
(s) If an Exchange Offer or a Private Exchange is to be consummated,
upon delivery of the Registrable Securities by Holders to the Company (or to
such other Person as directed by the Company) in exchange for the Exchange
Securities or the Private Exchange Securities, as the case may be, the
Company shall mark, or caused to be marked, on such Registrable Securities
that such Registrable Securities are being cancelled in exchange for the
Exchange Securities or the Private Exchange Securities, as the case may be;
in no event shall such Registrable Securities be marked as paid or otherwise
satisfied.
(t) Reasonably cooperate with each seller of Registrable Securities
covered by any Registration Statement and each underwriter, if any,
participating in the disposition of such Registrable Securities and their
respective counsel in connection with any filings required to be made with
the National Association of Securities Dealers, Inc. (the "NASD").
(u) Use their reasonable best efforts to take all other steps necessary
to effect the registration of the Registrable Securities covered by a
Registration Statement contemplated hereby.
(v) Upon consummation of an Exchange Offer or a Private Exchange,
obtain an opinion of counsel to the Company and the Guarantor, in a form
customary for underwritten offerings of debt securities similar to the
Notes, addressed to the Trustee solely for the benefit of the Trustee, and
not for the benefit of Holders of Registrable Securities participating in
the Exchange Offer or the Private Exchange, as the case may be, and which
includes an opinion that (i) each of the Company and the Guarantors has duly
authorized, executed and delivered the Exchange
<PAGE> 23
-22-
Securities and Private Exchange Securities and the related indenture and
(ii) each of the Exchange Securities or the Private Exchange Securities, as
the case may be, and related indenture constitute a legal, valid and binding
obligation of each of the Company and the Guarantors, enforceable against
each of the Company and the Guarantors in accordance with its respective
terms (with customary exceptions).
The Issuers may require each seller of Registrable Securities or
Participating Broker-Dealer as to which any registration is being effected to
furnish to the Issuers such information regarding such seller or Participating
Broker-Dealer and the distribution of such Registrable Securities or Exchange
Securities to be sold by such Participating Broker-Dealer, as the case may be,
as the Issuers may, from time to time, reasonably request. The Issuers may
exclude from such registration the Registrable Securities of any seller or
Participating Broker-Dealer who unreasonably fails to furnish such information
within a reasonable time after receiving such request. Each seller as to which
any Shelf Registration is being effected is deemed to agree to furnish promptly
to the Issuers all information required to be disclosed in order to make the
information previously furnished to the Issuers by such seller not materially
misleading.
Each Holder of Registrable Securities and each Participating
Broker-Dealer agrees by acquisition of such Registrable Securities or Exchange
Securities to be sold by such Participating Broker-Dealer, as the case may be,
that, upon receipt of any notice from the Company of the happening of any event
of the kind described in Section 5(c)(ii), 5(c)(iii), 5(c)(iv), or 5(c)(v), such
Holder will forthwith discontinue disposition of such Registrable Securities
covered by such Registration Statement or Prospectus or Exchange Securities to
be sold by such Participating Broker-Dealer, as the case may be, until such
holder's receipt of the copies of the supplemented or amended Prospectus
contemplated by Section 5(k), or until it is advised in writing (the "Advice")
by the Company that the use of the applicable Prospectus may be resumed, and has
received copies of any amendments or supplements thereto. In the event the
Company shall give any such notice, each of the Effectiveness Period and the
Applicable Period shall be extended by the number of days during such periods
from and including the date of the giving of such notice to and including the
date when each seller of Registrable Securities covered by such Registration
Statement or Exchange Securities to be sold by such Participating Broker-Dealer,
as the case may be, shall have re-
<PAGE> 24
-23-
ceived (x) the copies of the supplemented or amended Prospectus contemplated by
Section 5(k) or (y) the Advice.
6. Registration Expenses
(a) All fees and expenses incident to the performance of or compliance
with this Agreement by the Issuers shall be borne by the Issuers, jointly
and severally, whether or not the Exchange Offer or a Shelf Registration is
filed or becomes effective, including, without limitation, (i) all
registration and filing fees (including, without limitation, (A) fees with
respect to filings required to be made with the NASD in connection with an
underwritten offering and (B) fees and expenses of compliance with state
securities or Blue Sky laws (including, without limitation, reasonable fees
and disbursements of counsel in connection with Blue Sky qualifications of
the Registrable Securities or Exchange Securities and determination of the
eligibility of the Registrable Securities or Exchange Securities for
investment under the laws of such jurisdictions in the United States (x)
where the holders of Registrable Securities are located, in the case of the
Exchange Securities, or (y) as provided in Section 5(h), in the case of
Registrable Securities or Exchange Securities to be sold by a Participating
Broker-Dealer during the Applicable Period)), (ii) printing expenses
(including, without limitation, expenses of printing certificates for
Registrable Securities or Exchange Securities in a form eligible for deposit
with DTC and of printing prospectuses if the printing of prospectuses is
requested by the managing underwriters, if any, or, in respect of
Registrable Securities or Exchange Securities to be sold by any
Participating Broker-Dealer during the Applicable Period, by the Holders of
a majority in aggregate principal amount of the Registrable Securities
included in any Registration Statement or of such Exchange Securities, as
the case may be), (iii) messenger, telephone and delivery expenses, (iv)
fees and disbursements of counsel for the Issuers and fees and disbursements
of special counsel for the sellers of Registrable Securities (subject to the
provisions of Section 6(b)), (v) fees and disbursements of all independent
certified public accountants referred to in Section 5(o)(iii) (including,
without limitation, the expenses of any special audit and "cold comfort"
letters required by or incident to such performance), (vi) rating agency
fees, (vii) Securities Act liability insurance, if the Issuers desire such
insurance, (viii) fees and expenses of all other Persons retained by either
of the Is-
<PAGE> 25
-24-
suers, (ix) internal expenses of the Issuers (including, without limitation,
all salaries and expenses of officers and employees of the Issuers
performing legal or accounting duties), (x) the expense of any annual audit,
(xi) the fees and expenses incurred in connection with the listing of the
securities to be registered on any securities exchange, if applicable, (xii)
the expenses relating to printing, word processing and distributing all
Registration Statements, underwriting agreements, securities sales
agreements, indentures and any other documents necessary in order to comply
with this Agreement, and (xiii) fees and expenses of the Trustee (including
reasonable fees and expenses of counsel to the Trustee).
(b) In connection with any Shelf Registration hereunder, the Issuers
shall reimburse the Holders of the Registrable Securities being registered
in such registration for the fees and disbursements of not more than one
counsel (in addition to appropriate local counsel) chosen by the Holders of
a majority in aggregate principal amount of the Registrable Securities to be
included in such Registration Statement. Such Holders shall be responsible
for any and all other out-of-pocket expenses of the Holders of Registrable
Securities incurred in connection with the registration of the Registrable
Securities.
7. Indemnification
The Issuers agree, jointly and severally, to indemnify and hold
harmless each Holder of Registrable Securities and each Participating
Broker-Dealer selling Exchange Securities during the Applicable Period, the
officers and directors of each such person, and each person, if any, who
controls any such person within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act (each, a "Participant"), from
and against any and all losses, claims, damages and liabilities (including,
without limitation, the reasonable legal fees and other expenses actually
incurred in connection with any suit, action or proceeding or any claim
asserted) caused by any untrue statement or alleged untrue statement of a
material fact contained in any Registration Statement (or any amendment thereto)
or Prospectus (as amended or supplemented if the Issuers shall have furnished
any amendments or supplements thereto) or any preliminary prospectus, or caused
by any omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, except insofar as such
losses,
<PAGE> 26
-25-
claims, damages or liabilities are caused by any untrue statement or omission or
alleged untrue statement or omission made in reliance upon and in conformity
with information relating to any Participant furnished to the Company in writing
by such Participant expressly for use therein; provided that the foregoing
indemnity with respect to any preliminary prospectus shall not inure to the
benefit of any Participant (or to the benefit of any person controlling such
Participant) from whom the person asserting any such losses, claims, damages or
liabilities purchased Registrable Securities or Exchange Securities if such
untrue statement or omission or alleged untrue statement or omission made in
such preliminary prospectus is eliminated or remedied in the related Prospectus
(as amended or supplemented if the Issuers shall have furnished any amendments
or supplements thereto) and a copy of the related Prospectus (as so amended or
supplemented) shall not have been furnished to such person at or prior to the
sale of such Registrable Securities or Exchange Securities, as the case may be,
to such person.
Each Participant will be required to agree, severally and not jointly,
to indemnify and hold harmless the Issuers, their directors, their officers and
each person who controls the Issuers within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act to the same extent as the
foregoing indemnity from the Issuers to each Participant, but only with
reference to information relating to such Participant furnished to the Company
in writing by such Participant expressly for use in any Registration Statement
or Prospectus, any amendment or supplement thereto, or any preliminary
prospectus. The liability of any Participant under this paragraph shall in no
event exceed the proceeds received by such Participant from sales of Registrable
Securities giving rise to such obligations.
If any suit, action, proceeding (including any governmental or
regulatory investigation), claim or demand shall be brought or asserted against
any person in respect of which indemnity may be sought pursuant to either of the
two preceding paragraphs, such person (the "Indemnified Person") shall promptly
notify the person against whom such indemnity may be sought (the "Indemnifying
Person") in writing, and the Indemnifying Person, upon request of the
Indemnified Person, shall retain counsel reasonably satisfactory to the
Indemnified Person to represent the Indemnified Person and any others the
Indemnifying Person may designate in such proceeding and shall pay the
reasonable fees and expenses actually incurred by such counsel related to such
proceeding, provided that the failure to so no-
<PAGE> 27
-26-
tify the Indemnifying Person shall not relieve it of any obligation or liability
which it may have hereunder or otherwise (unless and only to the extent that
such failure directly results in the loss or compromise of any material rights
or defenses). In any such proceeding, any Indemnified Person shall have the
right to retain its own counsel, but the fees and expenses of such counsel shall
be at the expense of such Indemnified Person unless (i) the Indemnifying Person
and the Indemnified Person shall have mutually agreed in writing to the
contrary, (ii) the Indemnifying Person has failed within a reasonable time to
retain counsel reasonably satisfactory to the Indemnified Person or (iii) the
named parties in any such proceeding (including any impleaded parties) include
both the Indemnifying Person and the Indemnified Person and representation of
both parties by the same counsel would be inappropriate due to actual or
potential differing interests between them. It is understood that the
Indemnifying Person shall not, in connection with any proceeding or related
proceeding in the same jurisdiction, be liable for the fees and expenses of more
than one separate firm (in addition to any local counsel) for all Indemnified
Persons, and that all such fees and expenses shall be reimbursed as they are
incurred. Any such separate firm for the Participants and such control persons
of Participants shall be designated in writing by Participants who sold a
majority in interest of Registrable Securities sold by all such Participants and
any such separate firm for the Issuers, their directors, their officers and such
control persons of the Issuers shall be designated in writing by the Company.
The Indemnifying Person shall not be liable for any settlement of any proceeding
effected without its written consent, but if settled with such consent or if
there be a final non-appealable judgment for the plaintiff, the Indemnifying
Person agrees to indemnify any Indemnified Person from and against any loss or
liability by reason of such settlement or judgment. Notwithstanding the
foregoing sentence, if at any time an Indemnified Person shall have requested in
writing the chief legal officer or, if no chief legal officer exists, to the
chief executive officer of an Indemnifying Person to reimburse the Indemnified
Person for reasonable fees and expenses actually incurred by counsel as
contemplated by the third sentence of this paragraph, the Indemnifying Person
agrees that it shall be liable for any settlement of any proceeding effected
without its written consent if (i) such settlement is entered into more than 60
days after receipt by such Indemnifying Person of the aforesaid request and (ii)
a second such written request shall have been sent to and received by the chief
legal officer or, if no chief legal officer exists, by the chief executive
officer of the Indemnifying Person at least 30 days after the first such
<PAGE> 28
-27-
request but at least 15 days prior to the date of such settlement, and (iii)
with respect to such request, such Indemnifying Person shall not have reimbursed
the Indemnified Person for all reasonable fees and expenses of such counsel in
accordance with such request prior to the date of such settlement; provided,
however, that the Indemnifying Person shall not be liable for any settlement
effected without its consent pursuant to this sentence if the Indemnifying Party
is contesting, in good faith, the request for reimbursement. No Indemnifying
Person shall, without the prior written consent of the Indemnified Person,
effect any settlement of any pending or threatened proceeding in respect of
which any Indemnified Person is or could have been a party and indemnity could
have been sought hereunder by such Indemnified Person, unless such settlement
includes an unconditional release of such Indemnified Person from all liability
on claims that are the subject matter of such proceeding.
If the Indemnification provided for in the first and second paragraphs
of this Section 7 is unavailable to an Indemnified Person in respect of any
losses, claims, damages or liabilities referred to therein, then each
Indemnifying Person under such paragraph, in lieu of indemnifying such
Indemnified Person thereunder, shall contribute to the amount paid or payable by
such Indemnified Person as a result of such losses, claims, damages or
liabilities in such proportion as is appropriate to reflect the relative fault
of the Issuers on the one hand and the Participants on the other in connection
with the statements or omissions that resulted in such losses, claims, damages
or liabilities, as well as any other relevant equitable considerations. The
relative fault of the Issuers on the one hand and the Participants on the other
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the Issuers or by
the Participants and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The parties shall agree that it would not be just and equitable if
contribution pursuant to this Section 7 were determined by pro rata allocation
(even if the Participants were treated as one entity for such purpose) or by any
other method of allocation that does not take account of the equitable
considerations referred to in the immediately preceding paragraph. The amount
paid or payable by an Indemnified Person as a result of the losses, claims,
damages and liabilities referred to in the immediately preceding paragraph shall
be deemed to include,
<PAGE> 29
-28-
subject to the limitations set forth above, any reasonable legal or other
expenses actually incurred by such Indemnified Person in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 7, in no event shall a Participant be required to
contribute any amount in excess of the amount by which proceeds received by such
Participant from sales of Registrable Securities exceeds the amount of any
damages that such Participant has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
The indemnity and contribution agreements contained in this Section 7
will be in addition to any liability which the Indemnifying Persons may
otherwise have to the Indemnified Persons referred to above.
8. Rule 144 and Rule 144A
Each of the Issuers shall use their reasonable best efforts to file the
reports required to be filed by it under the Securities Act and the Exchange Act
and the rules and regulations adopted by the SEC thereunder in a timely manner
and, if at any time the Issuers are not required to file such reports, they
shall, upon the request of any Holder of Registrable Securities, make publicly
available other information so long as necessary to permit sales pursuant to
Rule 144 and Rule 144A under the Securities Act. The Issuers shall use their
reasonable best efforts to take such further action as any Holder of Registrable
Securities may reasonably request, all to the extent required from time to time
to enable such holder to sell Registrable Securities without registration under
the Securities Act within the limitation of the exemptions provided by (a) Rule
144 and Rule 144A under the Securities Act, as such Rules may be amended from
time to time, or (b) any similar rule or regulation hereafter adopted by the
SEC. Notwithstanding the foregoing, nothing in this section 8 shall be deemed to
require the Issuers to register any of their securities pursuant to the Exchange
Act.
9. Underwritten Registrations
If any of the Registrable Securities covered by any Shelf Registration
are to be sold in an underwritten offering, the investment banker or investment
bankers and manager or man-
<PAGE> 30
-29-
agers that will manage the offering will be selected by the Holders of a
majority in aggregate principal amount of such Registrable Securities included
in such offering and reasonably acceptable to the Company.
No Holder of Registrable Securities may participate in any underwritten
registation hereunder unless such Holder (a) agrees to sell such Holder's
Registrable Securities on the basis provided in any underwriting arrangements
approved by the Persons entitled hereunder to approve such arrangements and (b)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents required under the terms of such
underwriting arrangements.
10. Miscellaneous
(a) Remedies. In the event of a breach by the Issuers of any of their
obligations under this Agreement, each Holder of Registrable Securities, in
addition to being entitled to exercise all rights provided herein, in the
Indenture or, in the case of the Initial Purchasers, in the Purchase
Agreement or granted by law, including recovery of damages, will be entitled
to specific performance of its rights under this Agreement. The Issuers
agree that monetary damages would not be adequate compensation for any loss
incurred by reason of a breach by them of any of the provisions of this
Agreement and hereby further agree that, in the event of any action for
specific performance in respect of such breach, they shall waive the defense
that a remedy at law would be adequate.
(b) No Inconsistent Agreements. The Issuers have not, as of the date
hereof, entered and shall not, after the date of this Agreement, enter into
any agreement with respect to any of their securities that is inconsistent
with the rights granted to the Holders of Registrable Securities in this
Agreement or otherwise conflicts with the provisions hereof. The Issuers
have not entered and will not enter into any agreement with respect to any
of their securities which will grant to any Person piggy-back rights with
respect to a Registration Statement.
(c) Adjustments Affecting Registrable Securities. The Issuers shall
not, directly or indirectly, take any action with respect to the Registrable
Securities as a class that would adversely affect the ability of the Holders
of Registrable Securities to include such Registrable
<PAGE> 31
-30-
Securities in a registration undertaken pursuant to this Agreement.
(d) Amendments and Waivers. The provisions of this Agreement, including
the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions
hereof may not be given, unless the Company has obtained the written consent
of Holders of at least a majority of the then outstanding aggregate
principal amount of Registrable Securities. Notwithstanding the foregoing, a
waiver or consent to depart from the provisions hereof with respect to a
matter that relates exclusively to the rights of Holders of Registrable
Securities whose securities are being sold pursuant to a Registration
Statement and that does not directly or indirectly affect, impair, limit or
compromise the rights of other Holders of Registrable Securities may be
given by Holders of at least a majority in aggregate principal amount of the
Registrable Securities being sold by such Holders pursuant to such
Registration Statement, provided that the provisions of this sentence may
not be amended, modified or supplemented except in accordance with the
provisions of the immediately preceding sentence.
(e) Notices. All notices and other communications (including without
limitation any notices or other communications to the Trustee) provided for
or permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, next-day air courier or telecopier:
(i) if to a Holder of Registrable Securities, at the most current
address given by the Trustee to the Company; and
(ii) if to the Issuers, at Tekni-Plex, Inc., 201 Industrial Parkway,
Somerville, New Jersey 08876, Attention: Dr. F. Patrick Smith; with a copy
to Winthrop, Stimson, Putnam & Roberts, One Battery Park Plaza, New York,
New York 10004, Attention: Robert Gray, Esq..
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; five business days
after being deposited in the mail, postage prepaid, if mailed; one business
day after being timely delivered to a next-day air courier; and when receipt
is acknowledged by the addressee, if telecopied.
<PAGE> 32
-31-
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the trustee under
the Indenture at the address specified in such Indenture.
(f) Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the successors and assigns of each of the parties,
including without limitation and without the need for an express assignment,
subsequent Holders of Registrable Securities; provided, that, with respect
to the indemnity and contribution agreements in Section 7, each Holder of
Registrable Securities subsequent to the Initial Purchaser shall be bound by
the terms thereof if such Holder elects to include Registrable Securities in
a Shelf Registration; provided, however, that this Agreement shall not inure
to the benefit of or be binding upon a successor or assign of a Holder
unless and to the extent such successor or assign holds Registrable
Securities.
(g) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS
MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO SUBMIT
TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT.
(j) Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the
parties hereto shall use their best efforts to find and employ an
alternative means to achieve the same or substantially the same result as
<PAGE> 33
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that contemplated by such term, provision, covenant or restriction. It is
hereby stipulated and declared to be the intention of the parties that they
would have executed the remaining terms, provisions, covenants and
restrictions without including any of such that may be hereafter declared
invalid, illegal, void or unenforceable.
(k) Entire Agreement. This Agreement is intended by the parties as a
final expression of their agreement, and is intended to be a complete and
exclusive statement of the agreement and understanding of the parties hereto
in respect of the subject matter contained herein.
(l) Securities Held by the Company or Its Affiliates. Whenever the
consent or approval of holders of a specified percentage of Registrable
Securities is required hereunder, Registrable Securities held by the Company
or its affiliates (as such term is defined in Rule 405 under the Securities
Act) shall not be counted in determining whether such consent or approval
was given by the Holders of such required percentage.
(m) Subsidiary Guarantor a Party. Immediately upon the designation of
any subsidiary of the Company as a Guarantor (as defined in the Indenture),
the Company shall cause such Guarantor to guarantee the obligations of the
Company hereunder (including, without limitation, the obligation to pay
Additional Interest, if any, pursuant to the terms of Section 4 hereof), by
executing and delivering to the Initial Purchaser an appropriate amendment
to this Agreement.
<PAGE> 34
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
TEKNI-PLEX, INC.
By: /s/ Kenneth W.R. Baker
------------------------------------
Name: Kenneth W.R. Baker
Title: President
DOLCO PACKAGING CORP.
By: /s/ Kenneth W.R. Baker
------------------------------------
Name: Kenneth W.R. Baker
Title: President
J.P. MORGAN SECURITIES INC.
By: /s/ Michael Y. Leder
------------------------------------
Name: Michael Y. Leder
Title: Vice President
<PAGE> 1
EXHIBIT 10.1
$75,000,000
CREDIT AGREEMENT
dated as of
May 8, 1997
among
Tekni-Plex, Inc.
The Guarantors Party Hereto
The Banks Party Hereto
The LC Issuing Banks Referred to Herein
and
Morgan Guaranty Trust Company of New York,
as Agent
----------------------------------
J.P. Morgan Securities Inc.,
as Arranger
<PAGE> 2
TABLE OF CONTENTS
-------------
PAGE
ARTICLE 1
DEFINITIONS
Section 1.01. Definitions.................................................. 1
Section 1.02. Accounting Terms and Determinations.......................... 18
ARTICLE 2
THE CREDITS
Section 2.01. Commitments to Lend.......................................... 18
Section 2.02. Method of Borrowing.......................................... 19
Section 2.03. Maturity of Loans............................................ 20
Section 2.04. Interest Rates............................................... 20
Section 2.05. Method of Electing Interest Rates............................ 22
Section 2.06. Fees......................................................... 24
Section 2.07. Termination or Optional Reduction of
Commitments.............................................. 24
Section 2.08. Mandatory Reduction of Commitments........................... 25
Section 2.09. Optional Prepayments......................................... 26
Section 2.10. General Provisions as to Payments............................ 27
Section 2.11. Funding Losses............................................... 28
Section 2.12. Computation of Interest and Fees............................. 28
Section 2.13. Notes........................................................ 28
Section 2.14. Letters of Credit............................................ 29
ARTICLE 3
CONDITIONS
Section 3.01. Closing...................................................... 35
Section 3.02. Borrowings and Issuances of Letters
of Credit................................................ 37
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
Section 4.01. Corporate Existence and Power................................ 38
Section 4.02. Corporate and Governmental Authorization;
No Contravention......................................... 38
Section 4.03. Binding Effect............................................... 39
Section 4.04. Financial Information........................................ 39
Section 4.05. Litigation................................................... 39
i
<PAGE> 3
Section 4.06. Compliance with ERISA........................................ 40
Section 4.07. Environmental Compliance..................................... 40
Section 4.08. Taxes........................................................ 42
Section 4.09. Subsidiaries................................................. 42
Section 4.10. No Regulatory Restrictions on Borrowing...................... 42
Section 4.11. Full Disclosure.............................................. 42
Section 4.12. Representations in Collateral Documents
True and Correct......................................... 43
Section 4.13. Representations of Guarantors................................ 43
Section 4.14. Intellectual Property........................................ 44
Section 4.15. Solvency..................................................... 44
ARTICLE 5
COVENANTS
Section 5.01. Information.................................................. 44
Section 5.02. Payment of Obligations....................................... 47
Section 5.03. Maintenance of Property; Insurance........................... 47
Section 5.04. Conduct of Business and Maintenance of
Existence................................................ 48
Section 5.05. Compliance with Laws......................................... 48
Section 5.06. Inspection of Property, Books and Records.................... 48
Section 5.07. Mergers and Sales of Assets.................................. 49
Section 5.08. Use of Proceeds.............................................. 49
Section 5.09. Negative Pledge.............................................. 49
Section 5.10. Limitation on Debt........................................... 51
Section 5.11. Minimum Consolidated Net Worth............................... 51
Section 5.12. Fixed Charge Coverage Ratio.................................. 52
Section 5.13. Leverage Ratio............................................... 52
Section 5.14. Minimum Consolidated EBITDA.................................. 53
Section 5.15. Restricted Payments.......................................... 53
Section 5.16. Investments.................................................. 53
Section 5.17. Consolidated Capital Expenditures............................ 55
Section 5.18. Transactions with Affiliates................................. 55
Section 5.19. Limitation on Restrictions Affecting
Subsidiaries............................................. 56
Section 5.20. Retirement of Subordinated and Other
Long-Term Debt........................................... 56
Section 5.21. Limitation on Fixed-Price Contracts.......................... 57
Section 5.22. Further Assurances........................................... 57
ARTICLE 6
DEFAULTS
Section 6.01. Events of Defaults........................................... 58
Section 6.02. Notice of Default............................................ 62
Section 6.03. Cash Cover................................................... 62
ii
<PAGE> 4
ARTICLE 7
THE AGENT
Section 7.01. Appointment and Authorization................................ 62
Section 7.02. Agent and Affiliates......................................... 63
Section 7.03. Action by Agent.............................................. 63
Section 7.04. Consultation with Experts.................................... 63
Section 7.05. Liability of Agent........................................... 63
Section 7.06. Indemnification.............................................. 64
Section 7.07. Credit Decision.............................................. 64
Section 7.08. Successor Agent.............................................. 64
Section 7.09. Agent's Fee.................................................. 65
ARTICLE 8
CHANGE IN CIRCUMSTANCES
Section 8.01. Basis for Determining Interest Rate
Inadequate or Unfair..................................... 65
Section 8.02. Illegality................................................... 65
Section 8.03. Increased Cost and Reduced Return............................ 66
Section 8.04. Taxes........................................................ 67
Section 8.05. Base Rate Loans Substituted for Affected
Euro-Dollar Loans........................................ 70
Section 8.06. Substitution of Bank......................................... 71
ARTICLE 9
GUARANTY
Section 9.01. The Guaranty................................................. 71
Section 9.02. Guaranty Unconditional....................................... 71
Section 9.03. Discharge Only upon Payment in Full;
Reinstatement in Certain Circumstances................... 72
Section 9.04. Waiver by Each Guarantor..................................... 73
Section 9.05. Subrogation and Contribution................................. 73
Section 9.06. Stay of Acceleration......................................... 73
Section 9.07. Limit of Liability........................................... 73
Section 9.08. Release upon Sale............................................ 73
ARTICLE 10
MISCELLANEOUS
Section 10.01. Notices..................................................... 74
Section 10.02. No Waivers.................................................. 74
Section 10.03. Expenses; Indemnification................................... 74
Section 10.04. Sharing of Set-offs......................................... 75
Section 10.05. Amendments and Waivers; Release of
Collateral............................................... 76
iii
<PAGE> 5
Section 10.06. Successors; Participations and Assignments.................. 76
Section 10.07. Reliance on Margin Stock.................................... 78
Section 10.08. Governing Law; Submission to Jurisdiction................... 79
Section 10.09. Counterparts; Integration; Effectiveness.................... 79
Section 10.10. Confidentiality............................................. 79
Section 10.11. Waiver of Jury Trial........................................ 80
COMMITMENT SCHEDULE
PRICING SCHEDULE
SCHEDULE 1 -- Debt of the Borrower and its Subsidiaries
SCHEDULE 2 -- Subsidiaries
EXHIBIT A -- Note
EXHIBIT B -- Opinion of Counsel for the Obligors
EXHIBIT C -- Opinion of Special Counsel for the Agent
EXHIBIT D -- Assignment and Assumption Agreement
EXHIBIT E -- Form of Security Agreement
EXHIBIT F -- Form of Pledge Agreement
EXHIBIT G -- Forms of Mortgage, Assignment of Leases and Rents, Security
Agreement and Fixture Filing
EXHIBIT H -- Form of Opinion of Local Counsel
EXHIBIT I -- Form of Intercompany Note
EXHIBIT J -- Form of Payoff Letter
iv
<PAGE> 6
AGREEMENT dated as of May 8, 1997 among TEKNI-PLEX, INC., the
GUARANTORS parties hereto, the BANKS parties hereto, the LC ISSUING BANKS
referred to herein and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Agent.
The parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions. The following terms, as used herein, have
the following meanings:
"Acquisition" means any acquisition, whether in a single transaction or
series of related transactions, by the Borrower or any one or more Subsidiaries,
or any combination thereof, of (i) all or a substantial part of the assets, or a
going business or division, of any Person, whether through purchase of assets or
securities, by merger or otherwise, (ii) control of securities of an existing
corporation or other Person having ordinary voting power (apart from rights
accruing under special circumstances) to elect a majority of the board of
directors of such corporation or other Person or (iii) control of a greater than
50% ownership interest in any existing partnership, joint venture or other
Person.
"Additional Debt Incurrence" means the incurrence of any Debt by the
Borrower or any of its Subsidiaries (other than Debt which is permitted under
Section 5.10) to which the Required Banks have consented.
"Administrative Questionnaire" means, with respect to each Bank, an
administrative questionnaire in the form prepared by the Agent, completed by
such Bank and returned to the Agent (with a copy to the Borrower).
"Affiliate" means (i) any Person that directly, or indirectly through
one or more intermediaries, controls the Borrower (a "Controlling Person") or
(ii) any Person (other than the Borrower or a Subsidiary) which is controlled by
or is under common control with a Controlling Person. As used herein, the term
"control" means possession, directly or indirectly, of the power to vote 10% or
more of any class of voting securities of a Person or to direct or cause the
direction of the management or policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.
<PAGE> 7
"Agent" means Morgan Guaranty Trust Company of New York in its capacity
as agent for the Banks hereunder, and its successors in such capacity.
"Aggregate LC Exposure" means, at any time, the sum, without
duplication, of (i) the aggregate amount that is (or may thereafter become)
available for drawing under all Letters of Credit outstanding at such time and
(ii) the aggregate unpaid amount of all LC Reimbursement Obligations at such
time.
"Applicable Lending Office" means, with respect to any Bank, (i) in the
case of its Base Rate Loans and its participations in Letters of Credit, its
Domestic Lending Office and (ii) in the case of its Euro-Dollar Loans, its
Euro-Dollar Lending Office.
"Asset Sale" means any sale, lease or other disposition (including any
such transaction effected by way of merger or consolidation) by the Borrower or
any of its Subsidiaries of any asset, including, without limitation, any
sale-leaseback transaction, whether or not involving a capital lease, but
excluding (i) dispositions of inventory, cash, cash equivalents and other cash
management investments and obsolete, unused or unnecessary equipment, in each
case in the ordinary course of business, and (ii) dispositions to the Borrower
or a Subsidiary of the Borrower.
"Assignee" has the meaning set forth in Section 10.06(c).
"Bank" means each bank listed on the signature pages hereof, each
Assignee which becomes a Bank pursuant to Section 10.06(c), and their respective
successors.
"Bank Parties" means the Banks, the LC Issuing Banks and the Agent.
"Base Rate" means, for any day, a rate per annum equal to the higher of
(i) the Prime Rate for such day and (ii) the sum of 1/2 of 1% plus the Federal
Funds Rate for such day.
"Base Rate Loan" means a Loan which bears interest at the Base Rate
pursuant to the applicable Notice of Borrowing or Notice of Interest Rate
Election or the provisions of Section 2.05(a) or Article 8.
"Base Rate Margin" has the meaning set forth in Section 2.04(a).
"Borrower" means Tekni-Plex, Inc., a Delaware corporation, and its
successors.
2
<PAGE> 8
"Borrowing" means a borrowing hereunder consisting of Loans made to the
Borrower on the same day pursuant to Article 2, all of which Loans are of the
same type (subject to Article 8) and, except in the case of Base Rate Loans,
have the same initial Interest Period. A Borrowing is a Base Rate Borrowing if
such Loans are Base Rate Loans or a Euro-Dollar Borrowing if such Loans are
Euro-Dollar Loans.
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended from time to time, and regulations
promulgated thereunder.
"Closing Date" means the date on or after the Effective Date on which
the Agent shall have received all the documents specified in or pursuant to
Section 3.01.
"Collateral" means collateral subject to the Collateral Documents.
"Collateral Account" means an account in the name and under the control
of the Agent into which there shall be deposited from time to time amounts
required to be delivered to the Agent pursuant to Section 2.08 or 6.03 of this
Agreement.
"Collateral Documents" means the Pledge Agreement, the Security
Agreement, the Mortgages, any additional pledges, security agreements or
mortgages delivered pursuant to the Loan Documents and any instruments of
assignment or other instruments or agreements executed pursuant to the
foregoing.
"Commitment" means (i) with respect to each Bank listed on the
Commitment Schedule, the amount set forth opposite the name of such Bank on the
Commitment Schedule and (ii) with respect to any Assignee, the amount of the
transferor Bank's Commitment assigned to it pursuant to Section 10.06(c), in
each case as such amount may be changed from time to time pursuant to Section
2.07 or 10.06(c); provided that, if the context so requires, the term
"Commitment" means the obligation of a Bank to extend credit up to such amount
to the Borrower hereunder.
"Commitment Percentage" means, with respect to any Bank at any time,
the percentage which the amount of such Bank's Commitment at such time
represents of the aggregate amount of all the Commitments at such time. At any
time after the Commitments shall have terminated, the term "Commitment
Percentage" shall refer to a Bank's Commitment Percentage immediately before
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<PAGE> 9
such termination, adjusted to reflect any subsequent assignments pursuant to
Section 10.06.
"Commitment Schedule" means the Commitment Schedule attached hereto.
"Consolidated Capital Expenditures" means, for any period, the
additions to property, plant and equipment and other capital expenditures of the
Borrower and its Consolidated Subsidiaries for such period, as the same are or
would be set forth in a consolidated statement of cash flows of the Borrower and
its Consolidated Subsidiaries for such period.
"Consolidated Debt" means, at any date, the consolidated Debt of the
Borrower and its Consolidated Subsidiaries as of such date.
"Consolidated EBITDA" means, for any period, Consolidated Net Income
for such period plus, to the extent deducted in determining Consolidated Net
Income for such period, the aggregate amount of (i) Consolidated Interest
Expense, (ii) income tax expense and (iii) depreciation, amortization and other
similar non-cash charges.
"Consolidated Interest Expense" means, for any period, the interest
expense of the Borrower and its Consolidated Subsidiaries, determined on a
consolidated basis for such period.
"Consolidated Net Income" means, for any period, the net income of the
Borrower and its Consolidated Subsidiaries, determined on a consolidated basis
for such period, adjusted to exclude the effect of any extraordinary or other
non-recurring gain (but not loss).
"Consolidated Net Working Investment" means at any date (i)
consolidated current assets of the Borrower and its Consolidated Subsidiaries
(exclusive of cash and cash equivalents) minus (ii) the consolidated current
liabilities of the Borrower and its Consolidated Subsidiaries (exclusive of
Debt), all determined as of such date.
"Consolidated Net Worth" means, at any date, the consolidated
stockholders' equity of the Borrower and its Consolidated Subsidiaries
determined as of such date.
"Consolidated Subsidiary" means, at any date, any Subsidiary or other
entity the accounts of which would be consolidated with those of the Borrower in
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<PAGE> 10
its consolidated financial statements if such statements were prepared as of
such date.
"Control Group" means MST/TP Partners, L.P., Tekni-Plex Partners, L.P.,
Dr. F. Patrick Smith, Mr. Kenneth Baker, each of the partners in either of the
foregoing partnerships, and each Person designated by a partner for purposes of
estate or similar personal planning who receives shares of capital stock of the
Borrower in connection with a liquidation, unwinding or the like of either of
the foregoing partnerships.
"Credit Exposure" means, with respect to any Bank at any time, (i) the
amount of its Commitment at such time or (ii) if its Commitment shall have
terminated, an amount equal to its Outstanding Committed Amount at such time.
"Debt" of any Person means, at any date, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (iii)
all obligations of such Person to pay the deferred purchase price of property or
services, except trade accounts payable arising in the ordinary course of
business, (iv) all obligations of such Person as lessee which are capitalized in
accordance with GAAP, (v) all non-contingent obligations (and, for purposes of
Section 5.09 and the definitions of Material Debt and Material Financial
Obligations, all contingent obligations) of such Person to reimburse any bank or
other Person in respect of amounts paid under a letter of credit or similar
instrument, (vi) all Debt secured by a Lien on any asset of such Person, whether
or not such Debt is otherwise an obligation of such Person, and (vii) all
Guarantees by such Person of Debt of another Person (each such Guarantee to
constitute Debt in an amount equal to the amount of such other Person's Debt
Guaranteed thereby).
"Default" means any condition or event which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
"Derivatives Obligations" of any Person means all obligations of such
Person in respect of any rate swap transaction, basis swap, forward rate
transaction, commodity swap, commodity option, equity or equity index swap,
equity or equity index option, bond option, interest rate option, foreign
exchange transaction, cap transaction, floor transaction, collar transaction,
currency swap transaction, cross-currency rate swap transaction, currency option
or any other similar transaction (including any option with respect to any of
the foregoing transactions) or any combination of the foregoing transactions.
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<PAGE> 11
"Domestic Business Day" means any day except a Saturday, Sunday or
other day on which commercial banks in New York City are authorized or required
by law to close.
"Domestic Lending Office" means, as to each Bank, its office located at
its address set forth in its Administrative Questionnaire (or identified in its
Administrative Questionnaire as its Domestic Lending Office) or such other
office as such Bank may hereafter designate as its Domestic Lending Office by
notice to the Borrower and the Agent.
"Effective Date" means the date this Agreement becomes effective in
accordance with Section 10.09.
"Environmental Laws" means any and all federal, state, local and
foreign statutes, laws, judicial decisions, regulations, ordinances, rules,
judgments, orders, decrees, plans, injunctions, permits, concessions, grants,
franchises, licenses, agreements and other governmental restrictions relating to
the environment or the effect of the environment on human health or to
emissions, discharges or releases of pollutants, contaminants, Hazardous
Substances or wastes into the environment, including (without limitation)
ambient air, surface water, ground water or land, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants, Hazardous Substances or
wastes or the clean-up or other remediation thereof.
"Environmental Liabilities" means all liabilities in connection with or
relating to the business, assets presently or previously owned, leased or
operated, activities (including, without limitation, off-site disposal) or
operations of the Borrower and each Subsidiary, whether vested or unvested,
contingent or fixed, actual or potential, known or unknown, which arise under or
relate to matters covered by Environmental Laws.
"Equity Issuance" means the issuance of any equity securities by the
Borrower or any of its Subsidiaries (other than equity securities issued to the
Borrower or any of its Subsidiaries), if at the time of such issuance the
Leverage Ratio is greater than 4:1.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, or any successor statute.
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<PAGE> 12
"ERISA Group" means the Borrower, any Subsidiary and all members of a
controlled group of corporations and all trades or businesses (whether or not
incorporated) under common control which, together with the Borrower or any
Subsidiary, are treated as a single employer under Section 414 of the Internal
Revenue Code.
"Euro-Dollar Business Day" means any Domestic Business Day on which
commercial banks are open for international business (including dealings in
dollar deposits) in London.
"Euro-Dollar Lending Office" means, as to each Bank, its office, branch
or affiliate located at its address set forth in its Administrative
Questionnaire (or identified in its Administrative Questionnaire as its
Euro-Dollar Lending Office) or such other office, branch or affiliate of such
Bank as it may hereafter designate as its Euro-Dollar Lending Office by notice
to the Borrower and the Agent.
"Euro-Dollar Loan" means a Loan which bears interest at a Euro-Dollar
Rate pursuant to the applicable Notice of Borrowing or Notice of Interest Rate
Election.
"Euro-Dollar Margin" has the meaning set forth in Section 2.04(b).
"Euro-Dollar Rate" means a rate of interest determined pursuant to
Section 2.04(b) on the basis of a London Interbank Offered Rate.
"Euro-Dollar Reserve Percentage" has the meaning set forth in Section
2.04(b).
"Events of Default" has the meaning set forth in Section 6.01.
"Evergreen Letter of Credit" means a Letter of Credit that is
automatically extended unless the relevant LC Issuing Bank gives notice to the
beneficiary thereof stating that such Letter of Credit will not be extended.
"Excess Cash Flow" means, for any period the excess (if any) of: (a)
the sum of (i) Consolidated Net Income for such period plus (ii) to the extent
deducted in determining Consolidated Net Income for such period, depreciation,
amortization and other similar noncash charges plus (iii) any increase (or minus
any decrease) during such period in deferred tax liabilities of the Borrower and
its Consolidated Subsidiaries, taken as a whole, for such fiscal period, plus
(iv) any decrease in Consolidated Net Working Investment between the beginning
and the
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<PAGE> 13
end of such period; minus (b) the sum of (i) Consolidated Capital Expenditures
for such period, (ii) any increase in Consolidated Net Working Investment
between the beginning and the end of such period, (iii) cash dividends paid on
preferred stock during such period, (iv) mandatory prepayments and repayments of
long-term Debt of the Borrower and its Consolidated Subsidiaries during such
period (other than prepayments on account of Excess Cash Flow for a prior
period), (v) repayments during such period of the revolving credit loans and
short-term Debt of the Borrower and its Consolidated Subsidiaries which were not
made with the proceeds of other Debt, and (vi) to the extent included in
Consolidated Net Income for such period, the amount of any gain on disposition
of an asset if such disposition constitutes an Asset Sale.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time.
"Federal Funds Rate" means, for any day, the rate per annum (rounded
upward, if necessary, to the nearest 1/100 of 1%) equal to the weighted average
of the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers on such day, as published by
the Federal Reserve Bank of New York on the Domestic Business Day next
succeeding such day, provided that (i) if such day is not a Domestic Business
Day, the Federal Funds Rate for such day shall be such rate on such transactions
on the next preceding Domestic Business Day as so published on the next
succeeding Domestic Business Day and (ii) if no such rate is so published on
such next succeeding Domestic Business Day, the Federal Funds Rate for such day
shall be the average rate quoted to Morgan Guaranty Trust Company of New York on
such day on such transactions as determined by the Agent.
"Fiscal Quarter" means a fiscal quarter of the Borrower.
"Fiscal Year" means a fiscal year of the Borrower.
"Fixed Charge Coverage Ratio" means, at any date, the ratio of (i) the
result of (A) Consolidated EBITDA minus (B) Consolidated Capital Expenditures
for the period of four consecutive Fiscal Quarters then ended to (ii)
Consolidated Interest Expense for such period.
"GAAP" means generally accepted accounting principles as in effect from
time to time, applied on a basis consistent (except for changes concurred in by
the Borrower's independent public accountants) with the most recent audited
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<PAGE> 14
consolidated financial statements of the Borrower and its Consolidated
Subsidiaries delivered to the Banks.
"Group of Loans" means, at any time, a group of Loans consisting of (i)
all Loans which are Base Rate Loans at such time or (ii) all Euro-Dollar Loans
having the same Interest Period at such time, provided that, if a Loan of any
particular Bank is converted to or made as a Base Rate Loan pursuant to Article
8, such Loan shall be included in the same Group or Groups of Loans from time to
time as it would have been in if it had not been so converted or made.
"Guarantee" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Debt or other
obligation of any other Person and, without limiting the generality of the
foregoing, any obligation, direct or indirect, contingent or otherwise, of such
Person (i) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Debt or other obligation (whether arising by virtue of
partnership arrangements, by agreement to keep-well, to purchase assets, goods,
securities or services, to take-or-pay, or to maintain financial statement
conditions or otherwise), (ii) to reimburse a bank for amounts drawn under a
letter of credit for the purpose of paying such Debt or (iii) entered into for
the purpose of assuring in any other manner the holder of such Debt or other
obligation of the payment thereof or to protect such holder against loss in
respect thereof (in whole or in part); provided that the term Guarantee shall
not include endorsements for collection or deposit in the ordinary course of
business. The term Guarantee used as a verb has a corresponding meaning.
"Guarantor" means, subject to Section 9.08, each Person who has
executed this Agreement as a guarantor.
"Hazardous Substance" means any toxic, radioactive, caustic or
otherwise hazardous substance, including petroleum, its derivatives, by-products
and other hydrocarbons, or any substance having any constituent elements
displaying any of the foregoing characteristics.
"Indemnitee" has the meaning set forth in Section 10.03(b).
"Information Memorandum" means the confidential descriptive memorandum
dated February, 1997 furnished to the Banks in connection with the transactions
contemplated hereby.
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<PAGE> 15
"Interest Period" means, with respect to each Euro-Dollar Loan, the
period commencing on the date of borrowing specified in the applicable Notice of
Borrowing or on the date specified in an applicable Notice of Interest Rate
Election and ending one, two, three or six months thereafter, as the Borrower
may elect in such notice; provided that:
(a) any Interest Period which would otherwise end on a day
which is not a Euro-Dollar Business Day shall be extended to the next
succeeding Euro-Dollar Business Day unless such Euro-Dollar Business
Day falls in another calendar month, in which case such Interest Period
shall end on the next preceding Euro-Dollar Business Day;
(b) any Interest Period which begins on the last Euro-Dollar
Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such
Interest Period) shall, subject to clause (c) below, end on the last
Euro-Dollar Business Day of a calendar month; and
(c) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended, or any successor statute.
"Investment" means any investment in any Person, whether by means of
share purchase, capital contribution, loan, Guarantee, time deposit or otherwise
(but not including any demand deposit). "LC Exposure" means, with respect to any
Bank at any time, an amount equal to its Commitment Percentage of the Aggregate
LC Exposure at such time.
"LC Indemnitees" has the meaning set forth in Section 2.14(k).
"LC Issuing Bank" means Morgan Guaranty Trust Company of New York (and
any other Bank which, at the Borrower's request, shall have agreed to issue
Letters of Credit hereunder and confirmed such agreement in a notice to the
Agent), each in its capacity as an LC Issuing Bank under the letter of credit
facility described in Section 2.14.
"LC Office" means, with respect to any LC Issuing Bank, the office at
which it books any Letter of Credit issued by it.
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<PAGE> 16
"LC Payment Date" has the meaning set forth in Section 2.14(g).
"LC Reimbursement Due Date" has the meaning set forth in Section
2.14(h).
"LC Reimbursement Obligations" means, at any time, all obligations of
the Borrower to reimburse the LC Issuing Banks for amounts paid by the LC
Issuing Banks in respect of drawing under Letters of Credit, including any
portion of any such obligations to which a Bank has become subrogated pursuant
to Section 2.14(i).
"Letter of Credit" means a letter of credit issued hereunder by an LC
Issuing Bank.
"Leverage Ratio" means, on any date, the ratio of (i) Consolidated Debt
on such date to (ii) Consolidated EBITDA for the period of four consecutive
fiscal quarters of the Borrower most recently ended on or prior to such date.
For purposes of determining Consolidated EBITDA at any time during the first
four Fiscal Quarters ending after a Fiscal Quarter in which an Acquisition has
been made, Consolidated EBITDA shall be increased for any Fiscal Quarter which
began prior to such Acquisition by the amount of EBITDA which the Borrower (with
the consent of the Agent, such consent not to be unreasonably withheld or
delayed) shall determine would have been attributable to the acquired assets for
the Fiscal Quarter most recently ended on or prior to the date of such
Acquisition; provided that for the Fiscal Quarter in which the Acquisition has
occurred, such increase shall be prorated to reflect only the days during such
Fiscal Quarter prior to the consummation of the Acquisition.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind, or any other type of
preferential arrangement that has substantially the same practical effect as a
security interest, in respect of such asset. For purposes hereof, the Borrower
or any Subsidiary shall be deemed to own subject to a Lien any asset which it
has acquired or holds subject to the interest of a vendor or lessor under any
conditional sale agreement, capital lease or other title retention agreement
relating to such asset.
"Loan" means a loan made by a Bank pursuant to Section 2.01.
"Loan Documents" means this Agreement, the Notes and the Collateral
Documents.
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<PAGE> 17
"London Interbank Offered Rate" has the meaning set forth in Section
2.04(b).
"Major Casualty Proceeds" means (i) the aggregate insurance proceeds
received by the Borrower or any of its Subsidiaries in connection with one or
more related events under any insurance policy maintained by the Borrower or any
of its Subsidiaries covering losses with respect to tangible real or personal
property or improvements or losses from business interruption or (ii) any award
or other compensation with respect to any condemnation of property (or any
transfer or disposition of property in lieu of condemnation) received by the
Borrower or any of its Subsidiaries, if the amount of such aggregate proceeds or
award or other compensation exceeds $1,000,000.
"Material Adverse Effect" means (i) any material adverse effect upon
the condition (financial or otherwise), results of operations, properties,
assets, or business of the Borrower and its Subsidiaries, taken as a whole; (ii)
a material adverse effect on the ability of the Borrower or any other Person to
consummate the transactions contemplated hereby to occur on the Closing Date;
(iii) a material adverse effect on the ability of the Borrower to perform under
this Agreement and the Notes and the other Loan Documents; or (iv) a material
adverse effect on the rights and remedies of the Agent and the Banks under this
Agreement and the Notes and the other Loan Documents.
"Material Debt" means Debt (except Debt outstanding hereunder) of the
Borrower and/or one or more of its Subsidiaries, arising in one or more related
or unrelated transactions, in an aggregate principal or face amount exceeding
$5,000,000.
"Material Financial Obligations" means a principal or face amount of
Debt (other than the Loans and LC Reimbursement Obligation) and/or payment or
collateralization obligations in respect of Derivatives Obligations of the
Borrower and/or one or more of its Subsidiaries, arising in one or more related
or unrelated transactions, exceeding in the aggregate $5,000,000.
"Material Plan" means, at any time, a Plan or Plans having aggregate
Unfunded Liabilities in excess of $5,000,000.
"Mortgage" means each mortgage, deed of trust or deed to secure debt
substantially in the form of Exhibit G hereto between each Obligor party
thereto, as mortgagor or trustor, and the Agent, as mortgagee or beneficiary,
entered into as of the Closing Date and relating to the Borrower's facilities in
Decatur,
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<PAGE> 18
Indiana, Lawrenceville, Georgia, Flemington, New Jersey, Wenatchee, Washington
and Somerset County, New Jersey, and any mortgage, deed of trust or deed to
secure debt entered into pursuant hereto after the Closing Date, in each case as
amended from time to time.
"Multiemployer Plan" means, at any time, an employee pension benefit
plan within the meaning of Section 4001(a)(3) of ERISA to which any member of
the ERISA Group is then making or accruing an obligation to make contributions
or has within the preceding five plan years made contributions, including for
these purposes any Person which ceased to be a member of the ERISA Group during
such five year period.
"Net Cash Proceeds" means, with respect to any Reduction Event, an
amount equal to the cash proceeds received by the Borrower or any of its
Subsidiaries from or in respect of such Reduction Event (including any cash
proceeds, received as income or other proceeds, of any noncash proceeds of any
Asset Sale), less (x) any expenses reasonably incurred by such Person in respect
of such Reduction Event and (y) if such Reduction Event is an Asset Sale, (I)
the amount of any Debt secured by a Lien on any asset disposed of in such Asset
Sale and discharged from the proceeds thereof and (II) any taxes actually paid
or to be payable by such Person (as estimated by a senior financial or
accounting officer of the Borrower, giving effect to the overall tax position of
the Borrower) in respect of such Asset Sale.
"Notes" means promissory notes of the Borrower, substantially in the
form of Exhibit A hereto, evidencing the Borrower's obligation to repay the
Loans, and "Note" means any one of such promissory notes issued hereunder.
"Notice of Borrowing" has the meaning set forth in Section 2.02.
"Notice of Interest Rate Election" has the meaning set forth in Section
2.05.
"Obligors" means the Borrower and the Guarantors, and "Obligor" means
any of them.
"Outstanding Committed Amount" means, with respect to any Bank at any
time, the sum of (i) the outstanding principal amount of each of its Loans and
(ii) its LC Exposure, all determined at such time after giving effect to any
prior assignments by or to such Bank pursuant to Section 10.06(c).
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<PAGE> 19
"Parent" means, with respect to any Bank, any Person controlling such
Bank.
"Participant" has the meaning set forth in Section 10.06(c).
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Person" means an individual, a corporation, a limited liability
company, a partnership, an association, a trust or any other entity or
organization, including a government or political subdivision or an agency or
instrumentality thereof.
"Plan" means, at any time, an employee pension benefit plan (other than
a Multiemployer Plan) which is covered by Title IV of ERISA or subject to the
minimum funding standards under Section 412 of the Internal Revenue Code and
either (i) is maintained, or contributed to, by any member of the ERISA Group
for employees of any member of the ERISA Group or (ii) has at any time within
the preceding five years been maintained, or contributed to, by any Person which
was at such time a member of the ERISA Group for employees of any Person which
was at such time a member of the ERISA Group.
"Pledge Agreement" means the pledge agreement substantially in the form
of Exhibit F hereto between each Obligor party thereto and the Agent entered
into as of the Closing Date, as amended from time to time.
"Pricing Schedule" means the Pricing Schedule attached hereto.
"Prime Rate" means the rate of interest publicly announced by Morgan
Guaranty Trust Company of New York in New York City from time to time as its
Prime Rate.
"Quarterly Payment Dates" means each March 31, June 30, September 30
and December 31.
"Reduction Event" means (i) any Asset Sale, (ii) any Additional Debt
Incurrence or (iii) any Equity Issuance. The description of any transaction as
falling within the above definition does not affect any limitation on such
transaction imposed by Article 5 of this Agreement.
"Reduction Percentage" means (i) in respect of an Asset Sale or
Additional Debt Incurrence, 100% of the Net Cash Proceeds thereof; (ii) in
respect of an
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<PAGE> 20
Equity Issuance, 50% of the Net Cash Proceeds thereof, and (iii) in respect of
Excess Cash Flow, 50% of the amount thereof.
"Reference Banks" means the principal London offices of Fleet Bank,
National Association, LaSalle National Bank and Morgan Guaranty Trust Company of
New York, and "Reference Bank" means any one of such Reference Banks; provided
that upon the resignation of any Reference Bank, the Agent and the Borrower
shall designate a mutually satisfactory substitute Reference Bank.
"Regulated Activity" means any generation, treatment, storage,
recycling, transportation or disposal of any Hazardous Substance.
"Regulation U" means Regulation U of the Board of Governors of the
Federal Reserve System, as in effect from time to time.
"Release" means any discharge, emission or release, including a Release
as defined in CERCLA at 42 U.S.C. Section 9601(22). The term "Released" has a
corresponding meaning.
"Required Banks" means, at any time, Banks having at least 51% of the
aggregate amount of the Credit Exposures at such time.
"Restricted Investment" means any Investment by the Borrower and its
Subsidiaries in any Person, other than (i) Investments in Guarantors or Persons
which, within 30 days after the consummation of such Investment, become
Guarantors, (ii) Temporary Cash Investments and (iii) Investments constituting
intercompany loans permitted under Section 5.10(d).
"Restricted Payment" means (i) any dividend or other distribution on
any shares of the Borrower's capital stock (except dividends payable solely in
shares of its capital stock other than mandatorily redeemable preferred stock)
or (ii) any payment on account of the purchase, redemption, retirement or
acquisition of (a) any shares of the Borrower's capital stock or (b) any option,
warrant (other than the redeemable warrants issued to Rice Mezzanine Lenders,
L.P., and Rice Partners II, L.P. if retired on or prior to the Closing Date for
an amount not to exceed $20,000,000) or other right to acquire shares of the
Borrower's capital stock (but not including payments of principal, premium (if
any) or interest made pursuant to the terms of convertible debt securities prior
to conversion); provided that (x) payments in an aggregate amount not to exceed
$5,000,000 in respect of the repurchase of the Borrower's capital stock from
employees of the Borrower and its Subsidiaries, former employees and their
estates and (y) payments in an
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<PAGE> 21
aggregate amount not to exceed $400,000 in respect of the repurchase of the
Borrower's capital stock from Tekni-Plex Partners L.P. and/or Thomas S. Ablum
shall not be Restricted Payments.
"Revolving Credit Period" means the period from and including the
Effective Date to but not including the Termination Date.
"Rollover Amount" has the meaning set forth in Section 5.17.
"SEC" means the Securities and Exchange Commission.
"Security Agreement" means the security agreement substantially in the
form of Exhibit E hereto between each Obligor party thereto and the Agent
entered into as of the Closing Date, as amended from time to time.
"Special Expenses" means (i) non-recurring expenses incurred in
connection with the preparation of this Agreement and the closing hereunder, and
(ii) in the case of an Acquisition otherwise permitted under this Agreement,
non-recurring expenses and charges related to such Acquisition, such as
investment banking fees, breakup fees, legal fees, severance expense,
restructuring charges and other non-recurring expenses and charges, up to a
maximum aggregate amount of $12,000,000 for all such Acquisitions during the
term of this Agreement; provided, however, that if the Borrower reasonably
believes that the expenses and charges referred to in the preceding clause (ii)
are likely to exceed $2,000,000 for any Acquisition, prior to the consummation
of such Acquisition the Borrower shall provide the Agent and the Banks with a
written good faith estimate of the nature and amount of such expenses and
charges.
"Subordinated Debt" means the Subordinated Notes and up to $75 million
of other subordinated Debt issued by the Borrower which contains terms and
conditions no more favorable to the holders of such Debt that those governing
the Subordinated Notes.
"Subordinated Notes" means (i) the senior subordinated notes, in an
aggregate principal amount of $75,000,000, issued on or prior to the Closing
Date pursuant to the Indenture, dated as of April 1, 1997, between the Borrower
and Marine Midland Bank, as Trustee, as the same, subject to Section 5.20 may be
amended, supplemented, waived or otherwise modified and in effect from time to
time, and (ii) any notes of the Borrower with terms identical to the senior
subordinated notes described in clause (i) hereof that are exchanged for such
senior subordinated notes as part of a registered offer as described under
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<PAGE> 22
"Description of Notes -- Registration Rights" in the Offering Memorandum for
such senior subordinated notes dated April 1, 1997.
"Subsidiary" means, as to any Person, any corporation or other entity
of which securities or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions are at the time directly or indirectly owned by such Person. Unless
otherwise specified, "Subsidiary" means a Subsidiary of the Borrower; provided
that Dolco Packaging Ltd. shall not be considered a Subsidiary of the Borrower.
"Temporary Cash Investment" means any Investment in (i) direct
obligations of the United States or any agency thereof or obligations guaranteed
by the United States or any agency thereof, (ii) commercial paper rated at least
A-1 by Standard & Poor's Ratings Services and P-1 by Moody's Investors Service,
Inc., (iii) time deposits with, including certificates of deposit issued by, any
office located in the United States of any bank or trust company which is
organized or licensed under the laws of the United States or any State thereof
and has capital, surplus and undivided profits aggregating at least
$1,000,000,000 or (iv) repurchase agreements with respect to securities
described in clause (i) above entered into with an office of a bank or trust
company meeting the criteria specified in clause (iii) above, provided in each
case that such Investment matures within one year after it is acquired by the
Borrower or a Subsidiary.
"Termination Date" means May 8, 2002, or, if such day is not a
Euro-Dollar Business Day, the next succeeding Euro-Dollar Business Day unless
such Euro-Dollar Business Day falls in another calendar month, in which case the
Termination Date shall be the next preceding Euro-Dollar Business Day.
"Unfunded Liabilities" means, with respect to any Plan at any time, the
amount (if any) by which (i) the value of all benefit liabilities under such
Plan, determined on a plan termination basis using the assumptions prescribed by
the PBGC for purposes of Section 4044 of ERISA, exceeds (ii) the fair market
value of all Plan assets allocable to such liabilities under Title IV of ERISA
(excluding any accrued but unpaid contributions), all determined as of the then
most recent valuation date for such Plan, but only to the extent that such
excess represents a potential liability of a member of the ERISA Group to the
PBGC or any other Person under Title IV of ERISA.
"United States" means the United States of America.
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SECTION 1.02. Accounting Terms and Determinations. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
accounting determinations hereunder shall be made, and all financial statements
required to be delivered hereunder shall be prepared, in accordance with GAAP;
provided that, if the Borrower notifies the Agent that the Borrower wishes to
amend any provision hereof to eliminate the effect of any change in GAAP (or if
the Agent notifies the Borrower that the Required Banks wish to amend any
provision hereof for such purpose), then such provision shall be applied on the
basis of GAAP in effect immediately before the relevant change in GAAP became
effective, until either such notice is withdrawn or such provision is amended in
a manner satisfactory to the Borrower and the Required Banks.
ARTICLE 2
THE CREDITS
SECTION 2.01. Commitments to Lend. (a) Each Bank severally agrees, on
the terms and conditions set forth in this Agreement, to make loans to the
Borrower from time to time during the Revolving Credit Period; provided that,
immediately after each such loan is made, such Bank's Outstanding Committed
Amount shall not exceed its Commitment and the aggregate Outstanding Committed
Amounts shall not exceed the aggregate Commitments. The initial Borrowing under
this Section shall be in an aggregate principal amount not less than $5,000,000,
and each subsequent Borrowing shall be in an amount of $1,000,000 or any larger
integral multiple of $1,000,000 (except that any Borrowing may be in the
aggregate amount of the unused Commitments) and shall be made from the several
Banks ratably in proportion to their respective Commitments. Within the
foregoing limits, the Borrower may borrow under this Section, prepay Loans to
the extent permitted by Section 2.09 and reborrow at any time during the
Revolving Credit Period under this Section.
(b) On any Domestic Business Day during the Revolving Credit Period, if
no Default shall have occurred and be continuing at such time, the Borrower may,
with the consent of the Required Banks, increase the aggregate amount of the
Commitments by agreeing with each existing Bank that each such Bank shall make
available its pro rata share of the amount by which the Commitments are to be
increased or, to the extent that any existing Bank declines to so increase its
Commitment, either by designating a Person not theretofore a Bank and acceptable
to the Agent to become a Bank or by agreeing with an existing Bank that such
Bank's Commitment shall be further increased. Upon execution and delivery by the
Borrower and such Bank or other Person of an instrument of assumption in
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form and amount satisfactory to the Agent, such existing Bank shall have a
Commitment as therein set forth or such other Person shall become a Bank with a
Commitment as therein set forth and all the rights and obligations of a Bank
with such a Commitment hereunder; provided that (i) the Borrower shall provide
prompt notice of such increase to the Agent, which shall promptly notify the
other Banks and (ii) the aggregate amount of each such increase shall be at
least $5,000,000 and shall not exceed $25,000,000. Upon an increase in the
aggregate amount of the Commitments pursuant to this subsection (b), within five
Domestic Business Days in the case of each Base Rate Borrowing outstanding, and
at the end of the then current Interest Period with respect thereto in the case
of each Euro-Dollar Borrowing then outstanding, the Borrower shall prepay or
repay such Borrowing in its entirety, and, to the extent the Borrower elects to
do so and subject to the conditions specified in Article 3, the Borrower shall
reborrow Loans from the Banks in proportion to their respective Commitments
after giving effect to such increase, until such time as all outstanding Loans
are held by the Banks in such proportion.
SECTION 2.02. Method of Borrowing. (a) The Borrower shall give the
Agent notice (a "Notice of Borrowing") not later than 11:00 A.M. (New York City
time) on (x) the date of each Base Rate Borrowing and (y) the third Euro-Dollar
Business Day before each Euro-Dollar Borrowing, specifying:
(i) the date of such Borrowing, which shall be a Domestic
Business Day in the case of a Base Rate Borrowing or a Euro-Dollar
Business Day in the case of a Euro-Dollar Borrowing;
(ii) the aggregate amount of such Borrowing;
(iii) whether the Loans comprising such Borrowing are to bear
interest initially at the Base Rate or a Euro-Dollar Rate; and
(iv) in the case of a Euro-Dollar Borrowing, the duration of
the initial Interest Period applicable thereto, subject to the
provisions of the definition of Interest Period.
(b) Promptly after receiving a Notice of Borrowing, the Agent shall
notify each Bank of the contents thereof and of such Bank's ratable share of
such Borrowing, and such Notice of Borrowing shall not thereafter be revocable
by the Borrower.
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(c) Not later than 1:00 P.M. (New York City time) on the date of each
Borrowing, each Bank shall make available its ratable share of such Borrowing,
in Federal or other funds immediately available in New York City, to the Agent
at its address specified in or pursuant to Section 10.01. The failure of any
Bank to make available such funds shall not relieve any other Bank of its
obligations hereunder. Unless the Agent determines that any applicable condition
specified in Article 3 has not been satisfied, the Agent will make any funds so
received from the Banks available to the Borrower in Federal or other funds
immediately available in New York City no later than 2:00 P.M. (New York City
time) on the date of such Borrowing by credit to an account of the Borrower at
the Agent's aforesaid address or to such other account of the Borrower in New
York City as may have been specified in the applicable Notice of Borrowing and
as shall be reasonably acceptable to the Agent.
(d) Unless the Agent shall have received notice from a Bank before the
date of any Borrowing that such Bank will not make available to the Agent such
Bank's share of such Borrowing, the Agent may assume that such Bank has made
such share available to the Agent on the date of such Borrowing in accordance
with subsection (b) of this Section, and the Agent may, in reliance upon such
assumption, make available to the Borrower on such date a corresponding amount.
If and to the extent that such Bank shall not have so made such share available
to the Agent, such Bank and the Borrower severally agree to repay to the Agent
forthwith on demand such corresponding amount together with interest thereon,
for each day from the date such amount is made available to the Borrower until
the date such amount is repaid to the Agent, at (i) if such amount is repaid by
the Borrower, a rate per annum equal to the higher of the Federal Funds Rate and
the interest rate applicable thereto pursuant to Section 2.04 and (ii) if such
amount is repaid by such Bank, the Federal Funds Rate. If such Bank shall repay
to the Agent such corresponding amount, the Borrower shall not be required to
repay such amount and the amount so repaid by such Bank shall constitute such
Bank's Loan included in such Borrowing for purposes of this Agreement.
SECTION 2.03. Maturity of Loans. Each Loan shall mature, and the
principal amount thereof shall be due and payable (together with interest
accrued thereon), on the Termination Date.
SECTION 2.04. Interest Rates. (a) Each Base Rate Loan shall bear
interest on the outstanding principal amount thereof, for each day from the date
such Loan is made until it becomes due, at a rate per annum equal to the sum of
(x) the Base Rate Margin plus (y) the Base Rate for such day. Such interest
shall be payable quarterly in arrears on each Quarterly Payment Date and, with
respect
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to the principal amount of any Base Rate Loan converted to a Euro-Dollar Loan,
on the date such amount is so converted. Any overdue principal of or interest on
any Base Rate Loan shall bear interest, payable on demand, for each day until
paid at a rate per annum equal to the sum of 2% plus the Base Rate Margin for
such day plus the Base Rate for such day.
"Base Rate Margin" means a rate per annum determined in accordance with
the Pricing Schedule.
(b) Each Euro-Dollar Loan shall bear interest on the outstanding
principal amount thereof, for each day during each Interest Period applicable
thereto, at a rate per annum equal to the sum of the Euro-Dollar Margin for such
day plus the Adjusted London Interbank Offered Rate applicable to such Interest
Period. Such interest shall be payable for each Interest Period on the last day
thereof and, if such Interest Period is longer than three months, at intervals
of three months after the first day thereof.
"Euro-Dollar Margin" means a rate per annum determined in accordance
with the Pricing Schedule.
The "Adjusted London Interbank Offered Rate" applicable to any Interest
Period means a rate per annum equal to the quotient obtained (rounded upward, if
necessary, to the next higher 1/100 of 1%) by dividing (i) the applicable London
Interbank Offered Rate by (ii) 1.00 minus the Euro-Dollar Reserve Percentage.
The "London Interbank Offered Rate" applicable to any Interest Period
means the average (rounded upward, if necessary, to the next higher 1/16 of 1%)
of the respective rates per annum at which deposits in dollars are offered to
each of the Reference Banks in the London interbank market at approximately
11:00 A.M. (London time) two Euro-Dollar Business Days before the first day of
such Interest Period in an amount approximately equal to the principal amount of
the Euro-Dollar Loan of such Reference Bank to which such Interest Period is to
apply and for a period of time comparable to such Interest Period.
"Euro-Dollar Reserve Percentage" means, for any day, that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement for a member bank of the Federal
Reserve System in New York City with deposits exceeding five billion dollars in
respect of "Eurocurrency liabilities" (or in respect of any other category of
liabilities which includes deposits by reference to which the interest rate on
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Euro-Dollar Loans is determined or any category of extensions of credit or other
assets which includes loans by a non-United States office of any Bank to United
States residents).
(c) Any overdue principal of or interest on any Euro-Dollar Loan shall
bear interest, payable on demand, for each day until paid at a rate per annum
equal to the higher of (i) the sum of 2% plus the Euro-Dollar Margin for such
day plus the Adjusted London Interbank Offered Rate applicable to such Loan on
the day before such payment was due and (ii) the sum of 2% plus the Base Rate
Margin for such day plus the Base Rate for such day (or, if the circumstances
described in clause (a) or (b) of Section 8.01 shall exist, at a rate per annum
equal to the sum of 2% plus the Base Rate Margin for such day plus the Base Rate
for such day).
(d) The Agent shall determine each interest rate applicable to the
Loans hereunder. The Agent shall promptly notify the Borrower and the
participating Banks of each rate of interest so determined, and its
determination thereof shall be conclusive in the absence of manifest error.
(e) Each Reference Bank agrees to use its best efforts to furnish
quotations to the Agent as contemplated by this Section. If any Reference Bank
does not furnish a timely quotation, the Agent shall determine the relevant
interest rate on the basis of the quotation or quotations furnished by the
remaining Reference Bank or Banks or, if none of such quotations is available on
a timely basis, the provisions of Section 8.01 shall apply.
SECTION 2.05. Method of Electing Interest Rates. (a) The Loans included
in each Borrowing shall bear interest initially at the type of rate specified by
the Borrower in the applicable Notice of Borrowing. Thereafter, the Borrower may
from time to time elect to change or continue the type of interest rate borne by
each Group of Loans (subject to subsection (d) of this Section and the
provisions of Article 8), as follows:
(i) if such Loans are Base Rate Loans, the Borrower may elect
to convert such Loans to Euro-Dollar Loans as of any Euro-Dollar
Business Day, and
(ii) if such Loans are Euro-Dollar Loans, the Borrower may
elect to convert such Loans to Base Rate Loans or elect to continue
such Loans as Euro-Dollar Loans for an additional Interest Period,
subject to Section
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2.11 if any such conversion is effective on any day other than the last
day of an Interest Period applicable to such Loans.
Each such election shall be made by delivering a notice (a "Notice of
Interest Rate Election") to the Agent not later than 11:00 A.M. (New York City
time) on the third Euro-Dollar Business Day before the conversion or
continuation selected in such notice is to be effective. A Notice of Interest
Rate Election may, if it so specifies, apply to only a portion of the aggregate
principal amount of the relevant Group of Loans; provided that (i) such portion
shall be allocated ratably among the Loans comprising such Group and (ii) the
portion to which such Notice applies, and the remaining portion to which it does
not apply, shall each be at least $5,000,000 (unless such portion is comprised
of Base Rate Loans). If no such notice is timely received before the end of an
Interest Period for any Group of Euro-Dollar Loans, the Borrower shall be deemed
to have elected that such Group of Loans be converted to Base Rate Loans at the
end of such Interest Period.
(b) Each Notice of Interest Rate Election shall specify:
(i) the Group of Loans (or portion thereof) to which such
notice applies;
(ii) the date on which the conversion or continuation selected
in such notice is to be effective, which shall comply with the
applicable clause of subsection (a) above;
(iii) if the Loans comprising such Group are to be converted,
the new type of Loans and, if the Loans resulting from such conversion
are to be Euro-Dollar Loans, the duration of the next succeeding
Interest Period applicable thereto; and
(iv) if such Loans are to be continued as Euro-Dollar Loans
for an additional Interest Period, the duration of such additional
Interest Period.
Each Interest Period specified in a Notice of Interest Rate Election
shall comply with the provisions of the definition of Interest Period.
(c) Promptly after receiving a Notice of Interest Rate Election from
the Borrower pursuant to subsection (a) above, the Agent shall notify each Bank
of the contents thereof and such notice shall not thereafter be revocable by the
Borrower.
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(d) The Borrower shall not be entitled to elect to convert any Loans
to, or continue any Loans for an additional Interest Period as, Euro-Dollar
Loans if (i) the aggregate principal amounts of any Group of Euro-Dollar Loans
created or continued as a result of such election would be less than $5,000,000
or (ii) a Default shall have occurred and be continuing when the Borrower
delivers notice of such election to the Agent.
SECTION 2.06. Fees. (a) The Borrower shall pay to the Agent, for the
account of the Banks ratably in proportion to their Commitments, a commitment
fee at the Commitment Fee Rate (determined daily in accordance with the Pricing
Schedule) per annum on the daily amount by which the aggregate amount of the
Commitments exceeds the aggregate Outstanding Committed Amounts. Such commitment
fee shall accrue from and including the Effective Date to but excluding the date
on which the Commitments terminate in their entirety.
(b) The Borrower shall pay to the Agent, for the several accounts of
the Banks ratably in proportion to their Commitment Percentages, a letter of
credit fee for each day at the LC Fee Rate (determined daily in accordance with
the Pricing Schedule) per annum on the aggregate amount available for drawing
(whether or not conditions for drawing have been satisfied) under all Letters of
Credit outstanding at the close of business on such day. The Borrower shall pay
to each LC Issuing Bank a fronting fee of 0.25% per annum on the aggregate
amount available for drawing (whether or not conditions for drawing have been
satisfied) under all Letters of Credit issued by such LC Issuing Bank, and other
standard and customary processing charges.
(c) Fees accrued for the several accounts of the Banks under this
Section shall be payable quarterly in arrears on each Quarterly Payment Date and
on the day on which the Commitments terminate in their entirety.
SECTION 2.07. Termination or Optional Reduction of Commitments. (a) The
Borrower may, upon at least three Domestic Business Days' notice to the Agent,
(i) terminate the Commitments at any time, if there are no Outstanding Committed
Amounts at such time, or (ii) ratably reduce from time to time by an aggregate
amount of $5,000,000 or a larger multiple of $1,000,000, the aggregate amount of
the Commitments in excess of the aggregate Outstanding Committed Amounts.
Promptly after receiving a notice pursuant to this subsection, the Agent shall
notify each Bank of the contents thereof.
(b) Unless previously terminated, the Commitments shall terminate in
their entirety on the Termination Date.
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SECTION 2.08. Mandatory Reduction of Commitments. (a) If the Borrower
or any of its Subsidiaries shall at any time, or from time to time, after the
date hereof receive any Net Cash Proceeds of any Reduction Event, the
Commitments shall be reduced in an amount equal to the Reduction Percentage of
such Net Cash Proceeds; provided that, so long as no Default has occurred and is
continuing, receipt of Net Cash Proceeds of any Asset Sale shall require
reduction of the Commitments only to the extent that such Net Cash Proceeds are
not actually expended within 180 days of receipt (or committed, within 180 days
of receipt, to be expended and subsequently actually expended) for reinvestment
in other assets owned or to be owned by the Borrower or a Subsidiary.
(b) If the Leverage Ratio for any Fiscal Year ending after the date
hereof exceeds 4:1, the Commitments shall be reduced in an amount equal to the
Reduction Percentage of Excess Cash Flow for such Fiscal Year.
(c) Promptly following the receipt thereof by the Borrower or any of
its Subsidiaries, the Borrower shall deposit with the Agent in the Collateral
Account an amount of cash equal to the aggregate Major Casualty Proceeds
received by such Person. With respect to any such Major Casualty Proceeds, so
long as no Default has occurred and is continuing, the aggregate amount of such
cash proceeds which such Person has expended or committed to expend for the
restoration or replacement of the asset in respect of which such payment or
award was made (or for investment in any other fixed assets) shall be released
by the Agent to the Borrower; provided that if within 180 days of receipt of
such Major Casualty Proceeds such Person shall not have expended or committed to
expend an equivalent amount for the restoration or replacement of the asset in
respect of which such Major Casualty Proceeds were received (or for investment
in any other fixed assets), the excess of the amount of such Major Casualty
Proceeds over the amount of such expenditures and commitments shall be applied
to reduce the Commitments on such 180th day.
(d) On the date of a reduction of the Commitments pursuant to clause
(a), (b) or (c) of this Section, the Borrower shall prepay or repay the Loans or
provide cover for Aggregate LC Exposure in such amounts as shall be necessary so
that immediately after such payment the result of (i) the aggregate Outstanding
Committed Amounts minus (ii) the amount of any cover for Aggregate LC Exposure
then held by the Agent pursuant to this clause (d) does not exceed the aggregate
amount of the Commitments as then reduced, first, by prepaying or repaying
Loans, and, second, following payment in full of the Loans, by providing cover
for Aggregate LC Exposure. Cover for Aggregate LC Exposure
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shall be effected by paying to the Agent immediately available funds, to be held
by the Agent in the Collateral Account, in an amount required by the preceding
sentence (after giving effect to repayments and prepayments of the Loans
pursuant to the preceding sentence) which amount shall be retained by the Agent
in such Collateral Account until such time as the Letters of Credit shall have
been terminated and all of the Aggregate LC Exposure paid in full; provided that
if the Commitments shall have been terminated, all other amounts payable
hereunder shall have been paid in full and no Default shall have occurred and be
continuing, the Agent shall from time to time upon the request of the Borrower
return to the Borrower such portion of such amount as the Agent in its sole
discretion determines is no longer needed to provide cover for Aggregate LC
Exposure and related fees and expenses payable under this Agreement.
(e) The reductions required by clause (a) (and the corresponding
prepayments required by clause (d)) of this Section shall be made forthwith upon
receipt by the Borrower or any of its Subsidiaries, as the case may be, of any
Net Cash Proceeds of any Reduction Event; provided that if the Reduction
Percentage of the Net Cash Proceeds in respect of any Reduction Event is less
than $1,000,000, such prepayment shall be made upon receipt of proceeds such
that, together with all other such amounts not previously applied, the Reduction
Percentage of such Net Cash Proceeds is equal to at least $1,000,000; and
provided further that if any such prepayment or reduction would otherwise
require prepayment of Euro-Dollar Loans or portions thereof prior to the last
day of the related Interest Periods, such prepayment shall, unless the Agent
otherwise notifies the Borrower upon the instructions of the Required Banks, be
deferred to such last day. The reductions required by clause (b) (and the
corresponding prepayments required by clause (d)) of this Section shall be made
on the last Euro-Dollar Business Day of the first Fiscal Quarter following the
end of the related Fiscal Year. The Borrower shall give the Agent at least three
Euro-Dollar Business Days' notice of each prepayment required pursuant to this
Section. The reductions required by clause (c) of this Section shall be made on
the date specified therein, and the corresponding prepayments required by clause
(d) of this Section shall be made on such date or, if such date is not a
Domestic Business Day, on the next succeeding Domestic Business Day.
SECTION 2.09. Optional Prepayments. (a) Subject in the case of
Euro-Dollar Loans to Section 2.11, the Borrower may, upon notice to the Agent by
11:00 A.M. (New York City time) on the date of such prepayment, prepay any Group
of Base Rate Loans or, upon at least three Euro-Dollar Business Days' notice to
the Agent, prepay any Group of Euro-Dollar Loans, in each case in whole at any
time, or from time to time in part in amounts aggregating
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$1,000,000 or any larger multiple of $1,000,000, by paying the principal amount
to be prepaid together with interest accrued thereon to the date of prepayment.
Each such optional prepayment shall be applied to prepay ratably the Loans of
the several Banks included in such Group of Loans.
(b) Promptly after receiving a notice of prepayment pursuant to this
Section, the Agent shall notify each Bank of the contents thereof and of such
Bank's ratable share of such prepayment, and such notice shall not thereafter be
revocable by the Borrower.
SECTION 2.10. General Provisions as to Payments. (a) The Borrower shall
make each payment of principal of, and interest on, the Loans and LC
Reimbursement Obligations and each payment of fees hereunder (other than fees
payable directly to the LC Issuing Banks) not later than 1:00 P.M. (New York
City time) on the date when due, in Federal or other funds immediately available
in New York City, to the Agent at its address specified in or pursuant to
Section 10.01. The Agent will promptly distribute to each Bank its ratable share
of each such payment received by the Agent for the account of the Banks.
Whenever any payment of principal of, or interest on, the Base Rate Loans or LC
Reimbursement Obligations or of fees shall be due on a day which is not a
Domestic Business Day, the date for payment thereof shall be extended to the
next succeeding Domestic Business Day. Whenever any payment of principal of, or
interest on, the Euro-Dollar Loans shall be due on a day which is not a
Euro-Dollar Business Day, the date for payment thereof shall be extended to the
next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day
falls in another calendar month, in which case the date for payment thereof
shall be the next preceding Euro-Dollar Business Day. If the date for any
payment of principal is extended by operation of law or otherwise, interest
thereon shall be payable for such extended time.
(b) Unless the Borrower notifies the Agent before the date on which any
payment is due to the Banks hereunder that the Borrower will not make such
payment in full, the Agent may assume that the Borrower has made such payment in
full to the Agent on such date, and the Agent may, in reliance on such
assumption, cause to be distributed to each Bank on such due date an amount
equal to the amount then due such Bank. If and to the extent that the Borrower
shall not have so made such payment, each Bank shall repay to the Agent
forthwith on demand such amount distributed to such Bank together with interest
thereon, for each day from the date such amount is distributed to such Bank
until the date such Bank repays such amount to the Agent, at the Federal Funds
Rate.
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SECTION 2.11. Funding Losses. If the Borrower makes any payment of
principal with respect to any Euro-Dollar Loan or any Euro-Dollar Loan is
converted to a different type of Loan (whether such payment or conversion is
pursuant to Article 2, 6 or 8 or otherwise) on any day other than the last day
of an Interest Period applicable thereto, or the last day of an applicable
period fixed pursuant to Section 2.04(c), or if the Borrower fails to borrow,
prepay, convert or continue any Euro-Dollar Loan after notice has been given to
any Bank in accordance with Section 2.02(b), 2.05(c) or 2.09(b), the Borrower
shall reimburse each Bank within 15 days after demand for any resulting loss or
expense incurred by it (or, without duplication, by an existing or prospective
Participant in the related Loan), including (without limitation) any loss
incurred in obtaining, liquidating or employing deposits from third parties, but
excluding loss of margin for the period after such payment or conversion or
failure to borrow, prepay, convert or continue; provided that such Bank shall
have delivered to the Borrower a certificate as to the amount of such loss or
expense and its method of calculation, which certificate shall be conclusive in
the absence of manifest error.
SECTION 2.12. Computation of Interest and Fees. All interest and fees
shall be computed on the basis of a year of 360 days and paid for the actual
number of days elapsed (including the first day but excluding the last day).
SECTION 2.13. Notes. (a) The Borrower's obligation to repay the Loans
of each Bank shall be evidenced by a single Note payable to the order of such
Bank for the account of its Applicable Lending Office.
(b) Each Bank may, by notice to the Borrower and the Agent, request
that the Borrower's obligation to repay such Bank's Loans of a particular type
be evidenced by a separate Note. Each such Note shall be in substantially the
form of Exhibit A hereto with appropriate modifications to reflect the fact that
it relates solely to Loans of the relevant type. Each reference in this
Agreement to the "Note" of such Bank shall be deemed to refer to and include any
or all of such Notes, as the context may require.
(c) Promptly after it receives each Bank's Note pursuant to Section
3.01(a), the Agent shall forward such Note to such Bank. Each Bank shall record
the date, amount and type of each Loan made by it and the date and amount of
each payment of principal made by the Borrower with respect thereto, and may, if
such Bank so elects in connection with any transfer or enforcement of its Note,
endorse on the schedule forming a part thereof appropriate notations to evidence
the foregoing information with respect to each such Loan then outstanding;
provided that a Bank's failure to make (or any error in making) any such
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recordation or endorsement shall not affect the Borrower's obligations hereunder
or under the Notes. Each Bank is hereby irrevocably authorized by the Borrower
so to endorse its Note and to attach to and make a part of its Note a
continuation of any such schedule as and when required.
SECTION 2.14. Letters of Credit. (a) Issuance. Each LC Issuing Bank
agrees, on the terms and conditions set forth in this Agreement, to issue
letters of credit hereunder at the request of the Borrower from time to time
prior to the date that is 30 days before the Termination Date; provided that,
immediately after each such letter of credit is issued and participations
therein are sold to the Banks as provided in this subsection:
(i) the Aggregate LC Exposure shall not exceed $15,000,000;
(ii) in the case of each Bank, its Outstanding Committed
Amount shall not exceed its Commitment; and
(iii) the aggregate Outstanding Committed Amounts shall not
exceed the aggregate Commitments.
Whenever an LC Issuing Bank issues a Letter of Credit hereunder, such LC Issuing
Bank shall be deemed, without further action by any party hereto, to have sold
to each other Bank, and each such Bank shall be deemed, without further action
by any party hereto, to have purchased from such LC Issuing Bank, a
participation in such Letter of Credit, on the terms specified in this Section,
equal to such Bank's Commitment Percentage thereof.
(b) Notice of Proposed Issuance. With respect to each Letter of Credit,
the Borrower shall give the relevant LC Issuing Bank and the Agent at least five
Domestic Business Days' prior notice (i) specifying the date such Letter of
Credit is to be issued and (ii) describing the proposed terms of such Letter of
Credit and the nature of the transactions to be supported thereby. Promptly
after it receives such notice, the Agent shall notify each Bank of the contents
thereof.
(c) Conditions to Issuance. No LC Issuing Bank shall issue any Letter
of Credit unless:
(i) such Letter of Credit shall be satisfactory in form and
substance to such LC Issuing Bank,
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(ii) the Borrower shall have executed and delivered such
other instruments and agreements relating to such Letter of Credit as
such LC Issuing Bank shall have reasonably requested,
(iii) such LC Issuing Bank shall have confirmed with the Agent
on the date of such issuance that the limitations specified in clauses
(i), (ii) and (iii) of subsection (a) of this Section will not be
exceeded immediately after such Letter of Credit is issued, and
(iv) such LC Issuing Bank shall not have been notified in
writing by the Borrower or the Agent expressly to the effect that any
condition specified in clause (d) or (e) of Section 3.02 is not
satisfied at the time such Letter of Credit is to be issued.
(d) Expiry Dates. No Letter of Credit shall have an expiry date
later than the fifth Domestic Business Day before the Termination Date. Subject
to the preceding sentence, each Letter of Credit issued hereunder shall expire
on or before the first anniversary of the date of such issuance; provided that
the expiry date of any Letter of Credit may be extended from time to time (i) at
the Borrower's request for a period not exceeding one year or (ii) in the case
of an Evergreen Letter of Credit, automatically, in each case so long as such
extension is granted (or the last day on which notice can be given to prevent
such extension occurs) no earlier than three months before the then existing
expiry date thereof.
(e) Notice of Proposed Extensions of Expiry Dates. The relevant LC
Issuing Bank shall give the Agent at least three Domestic Business Days' notice
before such LC Issuing Bank extends (or allows an automatic extension of) the
expiry date of any Letter of Credit issued by it. Such notice shall identify
such Letter of Credit, the date on which it is to be extended (or the last day
on which notice can be given to prevent such extension) and the date to which it
is to be extended. Promptly after it receives such notice, the Agent shall
notify each Bank of the contents thereof. No LC Issuing Bank shall extend (or
allow the extension of) the expiry date of any Letter of Credit if (x) such
extension does not comply with subsection (d) of this Section, (y) such LC
Issuing Bank shall not have confirmed with the Agent on the date of such
extension that the limitations specified in clauses (i), (ii) and (iii) of
subsection (a) of this Section will not be exceeded immediately after such
Letter of Credit is extended, or (z) such LC Issuing Bank shall have been
notified by the Borrower or the Agent expressly to the effect that any condition
specified in clause (d) or (e) of Section 3.02 is not satisfied at the time of
such proposed extension.
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(f) Notice of Actual Issuances and Extensions. Promptly after it issues
any Letter of Credit or extends any Letter of Credit (or allows any Evergreen
Letter of Credit to be extended), the relevant LC Issuing Bank will notify the
Agent of the date, face amount, beneficiary or beneficiaries and expiry date or
extended expiry date of such Letter of Credit. Promptly after it receives such
notice, the Agent shall notify each Bank of the contents thereof and the amount
of such Bank's participation in such Letter of Credit. Promptly after it issues
any Letter of Credit, the relevant LC Issuing Bank will send a copy of such
Letter of Credit to the Agent.
(g) Drawings. If an LC Issuing Bank receives a demand for payment under
any Letter of Credit issued by it and determines that such demand should be
honored, such LC Issuing Bank shall (i) promptly notify the Borrower and the
Agent as to the amount to be paid by such LC Issuing Bank as a result of such
demand and the date of such payment (an "LC Payment Date") and (ii) make such
payment in accordance with the terms of such Letter of Credit.
(h) Reimbursement by the Borrower. (A) If any amount is drawn under any
Letter of Credit, the Borrower irrevocably and unconditionally agrees to
reimburse the relevant LC Issuing Bank for such amount, together with any and
all reasonable charges and expenses which such LC Issuing Bank may pay or incur
relative to such drawing. Such reimbursement shall be due and payable on the
relevant LC Payment Date or the date on which such LC Issuing Bank notifies the
Borrower of such drawing, whichever is later; provided that, if such notice is
given after 12:00 Noon (New York time) on the later of such dates, such
reimbursement shall be due and payable on the next following Domestic Business
Day (the date on which it is due and payable being an "LC Reimbursement Due
Date").
(B) In addition, the Borrower agrees to pay, on the applicable LC
Reimbursement Due Date, interest on each amount drawn under a Letter of Credit,
for each day from and including the date such amount is drawn to but excluding
such LC Reimbursement Due Date, at a rate per annum equal to the sum of the Base
Rate Margin for such day plus the Base Rate for such day. The Borrower also
agrees to pay, on demand, interest on any overdue amount (including any overdue
interest) payable under this subsection (h), for each day from and including the
date when such amount becomes due to but excluding the date such amount is paid
in full, at a rate per annum equal to the sum of 2% plus the Base Rate Margin
for such day plus the Base Rate for such day.
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(C) Each payment by the Borrower pursuant to this subsection (h)
shall be made to the relevant LC Issuing Bank in Federal or other funds
immediately available to it at its address specified in or pursuant to Section
10.01.
(i) Payments by Banks. (A) If the Borrower fails to pay any LC
Reimbursement Obligation in full when due, the relevant LC Issuing Bank may
notify the Agent of the unreimbursed amount and request that the Banks reimburse
such LC Issuing Bank for their respective Commitment Percentages thereof.
Promptly after it receives any such notice, the Agent shall notify each Bank of
the unreimbursed amount and such Bank's Commitment Percentage thereof. Upon
receiving such notice from the Agent, each Bank shall make available to such LC
Issuing Bank, at its address specified in or pursuant to Section 10.01, an
amount equal to such Bank's Commitment Percentage of such unreimbursed amount,
in Federal or other funds immediately available to such LC Issuing Bank, by 3:00
P.M. (New York time) (i) on the day such Bank receives such notice if it is
received at or before 12:00 Noon (New York time) on such day or (ii) on the next
Domestic Business Day if such notice is received after 12:00 Noon (New York
time) on the date of receipt, in each case together with interest on such amount
for each day from and including the relevant LC Payment Date to but excluding
the day such payment is due from such Bank at the Federal Funds Rate for such
day. Upon payment in full thereof, such Bank shall be subrogated to the rights
of such LC Issuing Bank against the Borrower to the extent of such Bank's
Commitment Percentage of the related LC Reimbursement Obligation (including
interest accrued thereon).
(B) If any Bank fails to pay when due any amount to be paid by it
pursuant to clause (A) of this subsection, interest shall accrue on such Bank's
obligation to make such payment, for each day from and including the date such
payment became due to but excluding the date such Bank makes such payment, at a
rate per annum equal to (x) for each day from the day such payment is due to the
third succeeding Domestic Business Day, inclusive, the Federal Funds Rate for
such day and (y) for each day thereafter the sum of 2% plus the Base Rate Margin
for such day plus the Base Rate for such day.
(C) If the Borrower shall reimburse any LC Issuing Bank for any
drawing with respect to which any Bank shall have made funds available to such
LC Issuing Bank in accordance with clause (A) of this subsection, such LC
Issuing Bank shall promptly upon receipt of such reimbursement distribute to
such Bank its Commitment Percentage thereof, including interest, to the extent
received by such LC Issuing Bank.
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(j) Exculpatory Provisions. The obligations of the Borrower and the
Banks under this Section shall be absolute and unconditional under any and all
circumstances and irrespective of any setoff, counterclaim or defense to payment
which the Borrower or any Bank may have or have had against any LC Issuing Bank,
any Bank, any beneficiary of any Letter of Credit, the Agent or any other
Person. The Borrower assumes all risks of the acts or omissions of any
beneficiary of any Letter of Credit with respect to the use of such Letter of
Credit by such beneficiary. None of the LC Issuing Banks, the Banks, the Agent
and their respective officers, directors, employees and agents shall be
responsible for, and the obligations of each Bank to make payments to each LC
Issuing Bank and of the Borrower to reimburse each LC Issuing Bank for drawings
pursuant to this Section (other than obligations resulting solely from the gross
negligence or willful misconduct of the relevant LC Issuing Bank) shall not be
excused or affected by, among other things, (i) the use which may be made of any
Letter of Credit or any acts or omissions of any beneficiary or transferee in
connection therewith; (ii) the validity, sufficiency or genuineness of documents
presented under any Letter of Credit or of any endorsements thereon, even if
such documents should in fact prove to be in any or all respects invalid,
insufficient, fraudulent or forged; (iii) payment by any LC Issuing Bank against
presentation of documents to it which do not comply with the terms of the
relevant Letter of Credit; or (iv) any dispute between or among the Borrower,
any beneficiary of any Letter of Credit or any other Person or any claims or
defenses whatsoever of the Borrower or any other Person against any beneficiary
of any Letter of Credit. No LC Issuing Bank shall be liable for any error,
omission, interruption or delay in transmission, dispatch or delivery of any
message or advice, however transmitted, in connection with any Letter of Credit.
Any action taken or omitted by the Agent, any LC Issuing Bank or any Bank in
connection with any Letter of Credit and the related drafts and documents, if
done without willful misconduct or gross negligence, shall be binding on the
Borrower and shall not place the Agent, any LC Issuing Bank or any Bank under
any liability to the Borrower.
(k) Indemnification by Borrower. The Borrower agrees to indemnify and
hold harmless each Bank, each LC Issuing Bank and the Agent (collectively, the
"LC Indemnitees") from and against any and all claims, damages, losses,
liabilities, costs or expenses (including, without limitation, the reasonable
fees and disbursements of counsel) which such LC Indemnitee may reasonably incur
(or which may be claimed against such LC Indemnitee by any Person whatsoever) by
reason of or in connection with any execution and delivery or transfer of or
payment or failure to pay under any Letter of Credit or any actual or proposed
use of any Letter of Credit, including any claims, damages, losses, liabilities,
costs or expenses which any LC Issuing Bank may incur by reason of any Bank's
failure to
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comply with its obligations to such LC Issuing Bank hereunder in connection with
any Letter of Credit (but nothing herein contained shall affect any rights the
Borrower may have against such defaulting Bank); provided that the Borrower
shall not be required to indemnify any LC Issuing Bank for any claims, damages,
losses, liabilities, costs or expenses to the extent, but only to the extent,
caused by (i) the willful misconduct or gross negligence of such LC Issuing Bank
in determining whether a request presented under any Letter of Credit issued by
it complied with the terms of such Letter of Credit or (ii) such LC Issuing
Bank's failure to pay under any Letter of Credit issued by it after the
presentation to it of a request strictly complying with the terms and conditions
of such Letter of Credit. Nothing in this subsection is intended to limit the
obligations of the Borrower under any other provision of this Section.
(l) Indemnification by Banks. The Banks shall, ratably in proportion to
their Commitment Percentages, indemnify each LC Issuing Bank (to the extent not
reimbursed by the Borrower) against any claims, damages, losses, liabilities,
reasonable costs and reasonable expenses (including, without limitation,
reasonable fees and disbursements of counsel) that any such indemnitee may
suffer or incur in connection with this Section or any action taken or omitted
by such indemnitee under this Section; provided that the Banks shall not be
required to indemnify any LC Issuing Bank for any such claims, damages, losses,
liabilities, costs or expenses to the extent, but only to the extent, caused by
(i) its own gross negligence or willful misconduct, (ii) its failure to pay
under any Letter of Credit issued by it after the presentation to it of a
request strictly complying with the terms and conditions of such Letter of
Credit or (iii) its liabilities under any Letter of Credit issued by it in
contravention of subsection (c)(iii) of this Section or extended by it in
contravention of clause (y) of the last sentence of subsection (e) of this
Section (to the extent that the limitations referred to therein were in fact
exceeded).
(m) Liability for Damages. Nothing in this Section shall preclude the
Borrower or any Bank from asserting against any LC Issuing Bank any claim for
direct (but not consequential) damages suffered by the Borrower or such Bank to
the extent, but only to the extent, caused by (A) the willful misconduct or
gross negligence of such LC Issuing Bank in determining whether a request
presented under any Letter of Credit issued by it complied with the terms
thereof or (B) such LC Issuing Bank's failure to pay under any such Letter of
Credit after the presentation to it of a request strictly complying with the
terms and conditions thereof.
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(n) Dual Capacities. In its capacity as a Bank, each LC Issuing Bank
shall have the same rights and obligations under this Section as any other Bank.
(o) Information to be Provided to Agent. The LC Issuing Banks shall
furnish to the Agent upon request such information as the Agent shall reasonably
request in order to calculate (i) the Aggregate LC Exposure existing from time
to time and (ii) the amount of any fee payable for the account of the Banks
under Section 2.06(b).
ARTICLE 3
CONDITIONS
SECTION 3.01. Closing. The closing hereunder shall occur upon the
satisfaction of the following events (in the case of each document to be
received, such document to be dated the Closing Date unless otherwise
indicated):
(a) receipt by the Agent of a duly executed Note for the account of
each Bank dated on or before the Closing Date and complying with the provisions
of Section 2.13;
(b) receipt by the Agent of an opinion of Winthrop, Stimson, Putnam &
Roberts, counsel for the Obligors, substantially in the form of Exhibit B hereto
and covering such additional matters relating to the transactions contemplated
hereby as the Required Banks may reasonably request;
(c) receipt by the Agent of an opinion of Davis Polk & Wardwell,
special counsel for the Agent, substantially in the form of Exhibit C hereto and
covering such additional matters relating to the transactions contemplated
hereby as the Required Banks may reasonably request;
(d) receipt by the Agent of duly executed counterparts of each of the
Collateral Documents, together with (i) evidence satisfactory to the Agent of
the effectiveness and perfection (to the extent required thereby) of the Liens
contemplated thereby (including the filing of UCC-1's and the delivery of any
promissory notes and stock certificates comprising the Collateral) or, with
respect to the Mortgages, arrangements satisfactory to the Agent for the prompt
recording thereof; (ii) opinions of Ice Miller Donadio & Ryan, special Indiana
counsel, Powell, Goldstein, Frazer & Murphy, special Georgia counsel, Shanley &
Fisher, special New Jersey counsel, and Lane Powell Spears Lubersky LLP, special
Washington counsel, substantially in the form of Exhibit H hereto, with such
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changes as are acceptable to the Agent; and (iii) with respect to each property
subject to a Mortgage (A) policies of title insurance (or irrevocable and
binding commitments, dated and recertified as of the Closing Date, to issue such
policies), on forms issued by the American Land Title Association and otherwise
in form and substance reasonably satisfactory to the Agent and issued by such
title insurance company or companies as are acceptable to the Agent, with all
premiums, expenses and fees paid or caused to be paid by the Borrower, insuring
(or committing to insure) the Liens created under each Mortgage, in such amounts
as the Agent shall request, subject only to Liens permitted under the Loan
Documents, containing such endorsements and affirmative assurances as are
satisfactory to the Agent, and reinsured in amounts and under reinsurance
agreements in form and substance satisfactory to the Agent; (B) recent
"as-built" surveys that comply with the current Minimum Standard Detail
Requirements for ALTA/ACSM Land Title Surveys and that are otherwise in form and
substance satisfactory to the Agent; and (C) to the extent requested by the
Agent, environmental reports with respect to such properties in form and
substance satisfactory to the Agent;
(e) receipt by the Agent of evidence satisfactory to it of the
insurance coverage required by Section 5.03 and the Collateral Documents;
(f) receipt by the Agent of a certificate of the chief executive
officer of the Borrower as to the solvency of the Borrower, in form acceptable
to the Banks;
(g) receipt by the Agent of all documents the Agent may reasonably
request relating to the existence of the Obligors, the corporate authority for
and the validity of the Loan Documents, and any other matters relevant hereto,
all in form and substance satisfactory to the Agent;
(h) receipt by the Agent of payment in full of all costs, fees,
expenses (including, without limitation, legal fees and expenses, title
premiums, survey charges and recording taxes and fees) and other amounts payable
for the account of the Banks or the Agent in the amounts previously agreed upon
to be payable on or before the Closing Date;
(i) there shall not be pending or, to the best of the Borrower's
knowledge, threatened, any action, suit or other proceeding (1) with respect to
which, in the judgment of the Required Banks, there is a reasonable possibility
of a decision which could reasonably be expected to have a Material Adverse
Effect or (2) which, in the judgment of the Required Banks, in any manner draws
into question the validity or enforceability of the Loan Documents;
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(j) receipt by the Agent and the Banks of a pro forma consolidated
balance sheet and consolidated statement of operations of the Borrower and its
Consolidated Subsidiaries, which pro forma financial statements shall be
satisfactory to the Agent and demonstrate that the Borrower is in compliance
with the covenants contained in Sections 5.11 to 5.14, inclusive, after giving
effect to all Borrowings and issuances of Letters of Credit on the Closing Date;
(k) receipt by the Agent of payoff letters in substantially the form
attached as Exhibit J hereto or such other evidence as the Agent may reasonably
require that all Debt of the Borrower and its Subsidiaries identified on
Schedule 1 hereto (other than Debt identified in Part B of such Schedule 1) has
been retired, and any commitments with respect thereto terminated, on terms and
conditions satisfactory to the Banks, and all Liens securing such Debt have been
discharged; and
(l) receipt by the Agent of evidence satisfactory to it that the
Borrower shall have received cash proceeds of not less than $72,750,000 (before
payment of related expenses estimated to be $600,000) from the issuance of the
Subordinated Notes.
Promptly after the Closing Date occurs, the Agent shall notify the Borrower and
the Banks thereof, and such notice shall be conclusive and binding on all
parties hereto.
SECTION 3.02. Borrowings and Issuances of Letters of Credit. The
obligation of any Bank to make a Loan on the occasion of any Borrowing, and the
obligation of any LC Issuing Bank to issue (or extend or allow an extension of
the expiry date of) any Letter of Credit, are each subject to the satisfaction
of the following conditions:
(a) the Closing Date shall have occurred on or before May 15,
1997;
(b) receipt by the Agent of a Notice of Borrowing as required
by Section 2.02, or receipt by the relevant LC Issuing Bank of a notice
of proposed issuance or extension as required by Section 2.14(b) or
2.14(e), as the case may be;
(c) immediately after such Borrowing or issuance or extension
of a Letter of Credit, the aggregate Outstanding Committed Amounts will
not exceed the aggregate Commitments;
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(d) immediately before and after such Borrowing or issuance or
extension of a Letter of Credit, no Default shall have occurred and be
continuing; and
(e) the representations and warranties of the Obligors
contained in this Agreement shall be true on and as of the date of such
Borrowing or issuance or extension of a Letter of Credit.
Each Borrowing and each issuance or extension of a Letter of Credit hereunder
shall be deemed to be a representation and warranty by the Borrower on the date
of such Borrowing or issuance or extension of a Letter of Credit as to the facts
specified in clauses (c), (d) and (e) of this Section and by each Obligor, with
respect to itself only, as to the fact specified in clause (e) of the Section.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants, and each Guarantor represents and
warrants, with respect to itself only, as to the matters set forth in Section
4.13, that:
SECTION 4.01. Corporate Existence and Power. The Borrower is a
corporation duly incorporated, validly existing and in good standing under the
laws of the jurisdiction of its incorporation, and has all corporate powers and
all material governmental licenses, consents, authorizations and approvals
required to carry on its business as now conducted.
SECTION 4.02. Corporate and Governmental Authorization; No
Contravention. The execution, delivery and performance by the Borrower of the
Loan Documents to which it is a party are within the Borrower's corporate
powers, have been duly authorized by all necessary corporate action, require no
action by or in respect of, or filing with, any governmental body, agency or
official (other than filings which have been made on or prior to the Closing
Date) and do not (i) contravene any provision of applicable law or regulation or
of the Borrower's certificate of incorporation or by-laws, (ii) contravene, or
constitute a default under, any agreement, judgment, injunction, order, decree
or other instrument binding upon the Borrower or any Subsidiary, the
consequences of which contravention or default, singly or in the aggregate,
could reasonably be expected to have a Material Adverse Effect, or (iii) except
as contemplated by the
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Collateral Documents, result in the creation or imposition of any Lien on any
asset of the Borrower or any Subsidiary.
SECTION 4.03. Binding Effect. Each of the Loan Documents (other than
the Notes) to which the Borrower is a party constitutes a valid and binding
agreement of the Borrower and each Note constitutes a valid and binding
obligation of the Borrower, in each case enforceable in accordance with its
terms except (i) as may be limited by bankruptcy, insolvency or similar laws
affecting creditors' rights generally, (ii) as rights of acceleration and the
availability of equitable remedies may be limited by equitable principles of
general applicability, and (iii) as limited by principles of reasonableness,
good faith and fair dealing.
SECTION 4.04. Financial Information. (a) The consolidated balance sheet
of the Borrower and its Consolidated Subsidiaries as of June 28, 1996 and the
related consolidated statements of operations, cash flows and stockholders'
equity for the Fiscal Year then ended, reported on by BDO Seidman, LLP, a copy
of which has been delivered to each of the Banks, fairly present, in conformity
with GAAP, the consolidated financial position of the Borrower and its
Consolidated Subsidiaries as of such date and their consolidated results of
operations and cash flows for such Fiscal Year.
(b) The unaudited consolidated balance sheet of the Company as of
December 27, 1996 and the related unaudited consolidated statements of
operations, cash flows and stockholders' equity for the six months then ended, a
copy of which has been delivered to the Banks, fairly present, in conformity
with GAAP, the consolidated financial position of the Borrower and its
Consolidated Subsidiaries as of such date and their consolidated results of
operations and cash flows for such six-month period.
(c) Since June 28, 1996, there has been no material adverse change in
the business, financial position, results of operations or prospects of the
Borrower and its Consolidated Subsidiaries, considered as a whole.
SECTION 4.05. Litigation. There is no action, suit or proceeding
pending against, or to the best of the Borrower's knowledge threatened against
or affecting, the Borrower or any Subsidiary before any court or arbitrator or
any governmental body, agency or official (i) in which there is a reasonable
possibility of an adverse decision which could have a Material Adverse Effect or
(ii) which in any manner draws into question the validity or enforceability of
the Loan Documents.
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SECTION 4.06. Compliance with ERISA. Each member of the ERISA Group has
fulfilled its obligations under the minimum funding standards of ERISA and the
Internal Revenue Code with respect to each Plan and is in compliance in all
material respects with the presently applicable provisions of ERISA and the
Internal Revenue Code with respect to each Plan. No member of the ERISA Group
has (i) sought a waiver of the minimum funding standard under Section 412 of the
Internal Revenue Code in respect of any Plan, (ii) failed to make any
contribution or payment to any Plan or Multiemployer Plan, or made any amendment
to any Plan, which has resulted or could reasonably be expected to result in the
imposition of a Lien or the posting of a bond or other security under ERISA or
the Internal Revenue Code or (iii) incurred any liability under Title IV of
ERISA other than a liability to the PBGC for premiums under Section 4007 of
ERISA.
SECTION 4.07. Environmental Compliance. (a) Except (x) to the extent
addressed by prior or present remediation activities by the Borrower and its
Subsidiaries or by third parties pursuant to contractual obligations or (y) to
the extent that the Environmental Liabilities of the Borrower and its
Subsidiaries, taken as a whole, that relate to or can reasonably be expected to
result from the matters referred to in clauses (i) through (vii), would not
exceed $6,000,000 for any individual issue arising at or relating to a
particular facility, or $15,000,000 in the aggregate:
(i) no notice, notification, demand, request for information,
citation, summons, complaint or order has been received, no complaint
has been served, no penalty has been assessed and, to the best of the
Borrower's knowledge, no investigation or review is pending or
threatened by any governmental or other entity with respect to any (A)
alleged violation by the Borrower or any Subsidiary of any
Environmental Law, (B) alleged failure by the Borrower or any
Subsidiary to have any environmental permit, certificate, license,
approval, registration or authorization required in connection with the
conduct of its business, (C) Regulated Activity or (D) Release of
Hazardous Substances;
(ii) other than Regulated Activity undertaken in compliance
with all applicable Environmental Laws, (A) neither the Borrower nor
any Subsidiary has engaged in any Regulated Activity and (B) no
Regulated Activity has occurred at or on any property now or previously
owned, leased or operated by the Borrower or any Subsidiary during the
period of such ownership, lease or operation by the Borrower or any
Subsidiary;
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(iii) to the best of the Borrower's knowledge, no
polychlorinated biphenyls, radioactive material, urea formaldehyde,
lead, asbestos, asbestos-containing material or underground storage
tank (active or abandoned) is or has been present at any property now
or previously owned, leased or operated by the Borrower or any
Subsidiary during the period of such ownership, lease or operation by
the Borrower or any Subsidiary;
(iv) no Hazardous Substance has been Released (and no written
notification of such Release has been filed) or is present (whether or
not in a reportable or threshold planning quantity) at, on or under any
property now or previously owned, leased or operated by the Borrower or
any Subsidiary during the period of such ownership, lease or operation
by the Borrower or any Subsidiary;
(v) to the best of the Borrower's knowledge, no property now
or previously owned, leased or operated by the Borrower or any
Subsidiary or any property to which the Borrower or any Subsidiary has,
directly or indirectly, transported or arranged for the transportation
of any Hazardous Substances, is listed or, to the best of the
Borrower's knowledge, proposed for listing, on the National Priorities
List promulgated pursuant to CERCLA, on CERCLIS (as defined in CERCLA)
or on any similar federal, state or foreign list of sites requiring
investigation or clean-up;
(vi) there are no liens under Environmental Laws on any of the
real property or other assets owned or leased by the Borrower or any
Subsidiary, to the best of the Borrower's knowledge no government
actions have been taken or are in process which could subject any of
such properties or assets to such liens, and neither the Borrower nor
any Subsidiary would be required to place any notice or restriction
relating to Hazardous Substances at any property owned by it in any
deed to such property; and
(vii) there has been no environmental investigation, study,
audit, test, review or other analysis conducted of which the Borrower
has knowledge in relation to the current or prior business of the
Borrower or any property or facility now or previously owned, leased or
operated by the Borrower or any Subsidiary, access to which has not
been provided to the Banks at least five days prior to the date hereof.
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(b) For purposes of this Section, the terms "Borrower" and "Subsidiary"
shall include any business or business entity (including a corporation) which is
a predecessor, in whole or in part, of the Borrower or any Subsidiary.
SECTION 4.08. Taxes. The Borrower and its Subsidiaries have filed all
United States Federal income tax returns and all other material tax returns
which are required to be filed by them and have paid all taxes due pursuant to
such returns or pursuant to any assessment received by the Borrower or any
Subsidiary, except any such taxes or charges which are being diligently
contested in good faith by appropriate proceedings. The charges, accruals and
reserves on the books of the Borrower and its Subsidiaries in respect of taxes
or other governmental charges are, in the Borrower's opinion, adequate.
SECTION 4.09. Subsidiaries. (a) Each of the Borrower's corporate
Subsidiaries is a corporation duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation, and has all
corporate powers and all material governmental licenses, authorizations,
consents and approvals required to carry on its business as now conducted.
(b) Schedule 2 lists all of the Subsidiaries of the Borrower as of the
Closing Date. Each Subsidiary of the Borrower is a Guarantor, and each Guarantor
is a direct or indirect Subsidiary of the Borrower.
SECTION 4.10. No Regulatory Restrictions on Borrowing. The Borrower is
not (i) an "investment company" within the meaning of the Investment Company Act
of 1940, as amended, (ii) a "holding company" or a "subsidiary company" of a
holding company within the meaning of the Public Utility Holding Company Act of
1935, as amended, or (iii) otherwise subject to any regulatory scheme which
restricts its ability to incur debt.
SECTION 4.11. Full Disclosure. (a) All information heretofore furnished
by the Borrower to the Agent or any Bank for purposes of or in connection with
this Agreement or any transaction contemplated hereby is, and all such
information hereafter furnished by the Borrower to the Agent or any Bank will
be, to the best of the Borrower's knowledge, true and accurate in all material
respects on the date as of which such information is stated or certified in
light of the circumstances under which such information was provided. The
Borrower has, to the best of the Borrower's knowledge, disclosed to the Banks in
writing any and all facts which materially and adversely affect, or may affect
(to the extent the Borrower can now reasonably foresee), the business,
operations or financial
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<PAGE> 48
condition of the Borrower and its Consolidated Subsidiaries, taken as a whole,
or the Obligors' ability to perform their obligations under the Loan Documents.
(b) The projected financial statements set forth in the Information
Memorandum were based on reasonable assumptions and as of their date represented
the best estimate of future performance of the Borrower and its Subsidiaries.
During the period from the respective dates as of which information is stated in
the Information Memorandum to and including the Closing Date, no event has
occurred and no condition has come into existence which would have caused the
projected financial statements therein to be materially misleading.
SECTION 4.12. Representations in Collateral Documents True and Correct.
Each of the representations and warranties of the Borrower contained in the
Collateral Documents is true and correct.
SECTION 4.13. Representations of Guarantors. Each Guarantor is a
corporation duly incorporated, validly existing and in good standing under the
laws of the jurisdiction of its incorporation, and has all corporate powers and
all material governmental licenses, authorizations, consents and approvals
required to carry on its business as now conducted. The execution, delivery and
performance by each Guarantor of the Loan Documents to which it is a party are
within such Guarantor's corporate powers, have been duly authorized by all
necessary corporate action, require no action by or in respect of, or filing
with, any governmental body, agency or official and do not (i) contravene any
provision of applicable law or regulation or of the certificate of incorporation
or by-laws of such Guarantor, (ii) contravene, or constitute a default under,
any agreement, judgment, injunction, order, decree or other instrument binding
upon such Guarantor the consequences of which contravention or default, singly
or in the aggregate, could reasonably be expected to have a Material Adverse
Effect, or (iii) except as contemplated by the Collateral Documents, result in
the creation or imposition of any Lien on any asset of such Guarantor. The Loan
Documents to which each Guarantor is a party constitute valid and binding
agreements of such Guarantor, in each case enforceable against the Borrower in
accordance with their respective terms except (i) as may be limited by
bankruptcy, insolvency or similar laws affecting creditors' rights generally,
(ii) as rights of acceleration and the availability of equitable remedies may be
limited by equitable principles of general applicability, and (iii) as may be
limited by principles of reasonableness, good faith and fair dealing. Each of
the representations and warranties of each Guarantor contained in the Collateral
Documents to which such Guarantor is a party is true and correct.
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SECTION 4.14. Intellectual Property. The Borrower and each of its
Subsidiaries owns, possesses or holds under valid licenses all patents,
trademarks, service marks, trade names, copyrights, licenses and other
intellectual property rights that are necessary for the operation of their
respective properties and businesses, and neither the Borrower nor any of its
Subsidiaries is in violation of any provision thereof. Neither the Borrower nor
its Subsidiaries has received actual notice of, or knows of any valid basis for,
any claim of infringement of any material license, patent, trademark, trade
name, service mark, copyright, trade secret or any other intellectual property
right of others, and, to the best knowledge of the Borrower and each of its
Subsidiaries, there is no infringement or claim of infringement by others of any
material license, patent, trademark, trade name, service mark, copyright, trade
secret or other intellectual property right of the Borrower and its
Subsidiaries.
SECTION 4.15. Solvency. Subject to Section 9.07 hereof, as of the
Closing Date after giving effect to the transactions contemplated hereby to
occur on the Closing Date, and at all times thereafter: (i) the aggregate fair
market value of the assets of each of the Borrower and the Guarantors will
exceed its liabilities (including contingent, subordinated, unmatured and
unliquidated liabilities), (ii) each of the Borrower and the Guarantors will
have sufficient cash flow to enable it to pay its debts as they mature and (iii)
none of the Borrower and the Guarantors will have unreasonably small capital for
the business in which it is engaged.
ARTICLE 5
COVENANTS
The Borrower agrees that, so long as any Bank has any Credit Exposure
hereunder or interest or fees accrued hereunder remain unpaid:
SECTION 5.01. Information. The Borrower will deliver to each of the
Banks:
(a) as soon as available and in any event within 90 days after the end
of each Fiscal Year, a consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries as of the end of such Fiscal Year and the related
consolidated statements of operations, cash flows and stockholders' equity for
such Fiscal Year, setting forth in each case in comparative form the figures for
the previous Fiscal Year, all reported on in a manner which would be acceptable
to the SEC by BDO Seidman, LLP or other independent public accountants of
nationally recognized standing;
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<PAGE> 50
(b) as soon as available and in any event within 45 days after the end
of each of the first three Fiscal Quarters of each Fiscal Year, a consolidated
balance sheet of the Borrower and its Consolidated Subsidiaries as of the end of
such Fiscal Quarter, the related consolidated statement of operations for such
Fiscal Quarter and the related consolidated statements of cash flows for the
portion of the Fiscal Year ended at the end of such Fiscal Quarter, setting
forth in the case of each such statement of cash flows in comparative form the
figures for the corresponding period in the previous Fiscal Year, all certified
(subject to normal year-end adjustments) as to fairness of presentation and
consistency with GAAP by the Borrower's chief executive officer or chief
accounting officer;
(c) simultaneously with the delivery of each set of financial
statements referred to in clauses (a) and (b) above, a certificate of the
Borrower's chief executive officer or chief accounting officer (i) setting forth
in reasonable detail the calculations required to establish whether the Borrower
was in compliance with the requirements of Sections 5.09 to 5.17, inclusive, on
the date of such financial statements, and (ii) stating whether any Default
exists on the date of such certificate and, if any Default then exists, setting
forth the details thereof and the action which the Borrower is taking or
proposes to take with respect thereto;
(d) simultaneously with the delivery of each set of financial
statements referred to in clause (a) above, a statement of the firm of
independent public accountants which reported on such statements (i) stating
whether anything has come to their attention to cause them to believe that any
Default existed on the date of such statements, and (ii) confirming the
calculations set forth in the officer's certificate delivered simultaneously
therewith pursuant to clause (c) above;
(e) within five Domestic Business Days after any officer of the
Borrower obtains knowledge of any Default, if such Default is then continuing, a
certificate of the Borrower's chief executive officer or chief accounting
officer setting forth the details thereof and the action which the Borrower is
taking or proposes to take with respect thereto;
(f) as soon as reasonably practicable after any officer of the Borrower
obtains knowledge thereof, notice of any event or condition which has had or
threatens to have a Material Adverse Effect and the nature of such Material
Adverse Effect;
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<PAGE> 51
(g) promptly after the mailing thereof to the Borrower's shareholders
generally, copies of all financial statements, reports and proxy statements so
mailed;
(h) promptly after the filing thereof, copies of all registration
statements (other than the exhibits thereto and any registration statements on
Form S-8 or its equivalent) and reports on Forms 10-K, 10-Q and 8-K (or their
equivalents) filed by the Borrower with the SEC;
(i) if and when any member of the ERISA Group (i) gives or is required
to give notice to the PBGC of any "reportable event" (as defined in Section 4043
of ERISA) with respect to any Plan which might reasonably constitute grounds for
a termination of such Plan under Title IV of ERISA, or knows that the plan
administrator of any Plan has given or is required to give notice of any such
reportable event, a copy of the notice of such reportable event given or
required to be given to the PBGC; (ii) receives notice of complete or partial
withdrawal liability under Title IV of ERISA or notice that any Multiemployer
Plan is in reorganization, is insolvent or has been terminated, a copy of such
notice; (iii) receives notice from the PBGC under Title IV of ERISA of an intent
to terminate, impose liability (other than for premiums under Section 4007 of
ERISA) in respect of, or appoint a trustee to administer any Plan, a copy of
such notice; (iv) applies for a waiver of the minimum funding standard under
Section 412 of the Internal Revenue Code, a copy of such application; (v) gives
notice of intent to terminate any Plan under Section 4041(c) of ERISA, a copy of
such notice and other information filed with the PBGC; (vi) gives notice of
withdrawal from any Plan pursuant to Section 4063 of ERISA, a copy of such
notice; or (vii) fails to make any payment or contribution to any Plan or
Multiemployer Plan or makes any amendment to any Plan which has resulted or
could reasonably result in the imposition of a Lien or the posting of a bond or
other security, a certificate of the Borrower's chief executive officer or chief
accounting officer setting forth details as to such occurrence and the action,
if any, which the Borrower or applicable member of the ERISA Group is required
or proposes to take;
(j) promptly, upon receipt of any complaint, order, citation, notice or
other written communication from any Person with respect to, or upon the
Borrower's obtaining knowledge of, (i) the existence or alleged existence of a
violation of any applicable Environmental Law or any Environmental Liability in
connection with any property now or previously owned, leased or operated by the
Borrower or any of its Subsidiaries, (ii) any Release of any Hazardous Substance
on such property or any part thereof in a quantity that is reportable under any
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<PAGE> 52
applicable Environmental Law, and (iii) any pending or threatened proceeding for
the termination, suspension or non-renewal of any permit required under any
applicable Environmental Law, in each case (x) which could result in liability
or expenses in excess of $6,000,000 for any individual issue arising at or
relating to a particular facility, or $15,000,000 in the aggregate or (y) which
individually or in the aggregate could have a material adverse effect on the
condition (financial or otherwise), assets, liabilities (including, without
limitation, environmental liabilities) or prospects, taken as a whole, of the
Borrower and its Subsidiaries, notice thereof; and
(k) from time to time such additional information regarding the
financial position or business of the Borrower and its Subsidiaries (including,
without limitation, any Guarantor) as the Agent, at the request of any Bank, may
reasonably request.
SECTION 5.02. Payment of Obligations. The Borrower will pay and
discharge, and will cause each Subsidiary to pay and discharge, at or before
maturity, all of their respective material obligations and liabilities
(including, without limitation, tax liabilities and claims of materialmen,
warehousemen and the like which if unpaid might by law give rise to a Lien other
than inchoate statutory liens in respect of obligations not yet due and
payable), except where the same are contested in good faith by appropriate
proceedings, and will maintain, and will cause each Subsidiary to maintain, in
accordance with GAAP, any appropriate reserves for the accrual thereof.
SECTION 5.03. Maintenance of Property; Insurance. (a) The Borrower will
keep, and will cause each Subsidiary to keep, all material property useful and
necessary in its business in good working order and condition, ordinary wear and
tear excepted.
(b) The Borrower will, and will cause each Subsidiary to, maintain
(either in the Borrower's name or in such Subsidiary's own name) with
financially sound and responsible insurance companies, insurance on all their
respective properties in at least such amounts, against at least such risks and
with no greater risk retention as are usually maintained, insured against or
retained, as the case may be, in the same general area by companies of
established repute engaged in the same or a similar business. The Borrower will
furnish to the Banks, upon request from the Agent, information presented in
reasonable detail as to the insurance so carried.
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SECTION 5.04. Conduct of Business and Maintenance of Existence. The
Borrower and its Subsidiaries will engage in business activity involving the
manufacture and distribution of packaging materials, other disposable products,
and related materials and related businesses, and will preserve, renew and keep
in full force and effect their respective corporate existences and their
respective rights, privileges and franchises necessary or desirable in the
normal conduct of business; provided that nothing in this Section shall
prohibit:
(i) the merger of a Subsidiary into the Borrower if, after
giving effect thereto, no Default shall have occurred and be
continuing;
(ii) the merger or consolidation of a Subsidiary with or into
a Person other than the Borrower if the corporation surviving such
consolidation or merger is a Subsidiary and, after giving effect
thereto, no Default shall have occurred and be continuing;
(iii) the merger or consolidation of the Borrower with or into
any other Person if the corporation surviving such consolidation or
merger is the Borrower and, after giving effect thereto, no Default
shall have occurred and be continuing; or
(iv) the termination of the corporate existence of a
Subsidiary if the Borrower in good faith determines that such
termination is in the best interest of the Borrower and is not
materially disadvantageous to the Banks.
The Borrower will not, and will not permit any of its Subsidiaries to,
engage in any line or lines of business activity other than those engaged in on
the Closing Date and any other line or lines of business activity involving the
manufacture and distribution of packaging materials, other disposable products,
and related materials and related businesses.
SECTION 5.05. Compliance with Laws. The Borrower will comply, and will
cause each Subsidiary to comply, in all material respects with all applicable
laws, ordinances, rules, regulations and requirements of governmental
authorities (including, without limitation, Environmental Laws and ERISA and the
rules and regulations thereunder), except where the necessity or manner of
compliance therewith is contested in good faith by appropriate proceedings.
SECTION 5.06. Inspection of Property, Books and Records. The Borrower
will keep, and will cause each Subsidiary to keep, proper books of record and
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<PAGE> 54
account in which full and correct entries shall be made of all dealings and
transactions in relation to its business and activities; and will permit, and
will cause each Subsidiary to permit, representatives of any Bank at such Bank's
expense to visit and inspect any of their respective properties, to examine and
make abstracts from any of their respective books and records and to discuss
their respective affairs, finances and accounts with their respective officers,
employees and independent public accountants, all at such reasonable times and
as often as may reasonably be requested.
SECTION 5.07. Mergers and Sales of Assets. (a) The Borrower will not,
and will not permit any Subsidiary to, consolidate or merge with or into any
other Person; provided that the Borrower may merge with any other Person if the
corporation surviving the merger is the Borrower, and any Subsidiary may merge
with any other Person if the corporation surviving the merger is the Borrower or
a Subsidiary, in each case only if immediately after giving effect to such
merger, no Default shall have occurred and be continuing.
(b) No Obligor will sell, lease or otherwise transfer, directly or
indirectly, any Collateral except for (i) dispositions of inventory, cash, cash
equivalents and other cash management investments and obsolete, unused or
unnecessary equipment, in each case in the ordinary course of business, (ii)
dispositions to the Borrower or a Subsidiary, (iii) dispositions of portions of
any business acquired in an Acquisition, so long as such portions have an
aggregate value not in excess of 15% of the aggregate purchase price for such
Acquisition, and (iv) Permitted Dispositions (as defined in the Mortgages).
SECTION 5.08. Use of Proceeds. The proceeds of the Loans and the
Letters of Credit will be used by the Borrower (a) in an aggregate amount not to
exceed $50,000,000 (plus any amount by which the Commitments have been increased
pursuant to Section 2.01(b)), to finance Acquisitions otherwise permitted under
the terms of this Agreement, and (b) for general corporate purposes, including
for working capital purposes. Neither any proceeds of the Loans nor any Letter
of Credit will be used, directly or indirectly, for the purpose, whether
immediate, incidental or ultimate, of buying or carrying any "margin stock"
within the meaning of Regulation U.
SECTION 5.09. Negative Pledge. Neither the Borrower nor any Subsidiary
will create, assume or suffer to exist any Lien on any asset now owned or
hereafter acquired by it, except:
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(a) any Lien existing on any asset of any Person at the time such Person
becomes a Subsidiary and not created in contemplation of such event;
(b) any Lien on any asset securing Debt in an aggregate principal amount at
any time outstanding not to exceed $2,500,000 incurred or assumed for the
purpose of financing all or any part of the cost of acquiring, constructing or
improving such asset, provided that such Lien attaches to such asset
concurrently with or within 180 days after the acquisition thereof;
(c) any Lien on any asset of any Person existing at the time such Person is
merged or consolidated with or into the Borrower or a Subsidiary and not created
in contemplation of such event;
(d) any Lien existing on any asset prior to the acquisition thereof by the
Borrower or a Subsidiary and not created in contemplation of such acquisition;
(e) any Lien arising out of the refinancing, extension, renewal or
refunding of any Debt secured by any Lien permitted by any of the foregoing
clauses of this Section, provided that such Debt is not secured by any
additional assets and the amount of such Debt is not increased (except for the
amount of any premium required to be paid pursuant to the terms of such Debt,
plus expenses reasonably incurred by the issuer of such Debt, in connection with
such refinancing, extension, renewal or refunding);
(f) Liens arising in the ordinary course of its business which (i) do not
secure Debt or Derivatives Obligations and (ii) do not secure any single
obligation or liability (or class of obligations or liabilities having a common
cause) in an amount exceeding $5,000,000;
(g) Liens created by the Collateral Documents;
(h) Permitted Encumbrances (as defined in the Mortgages) and those Liens
permitted to be contested under Section 2.06 of the Mortgages;
(i) Liens in favor of the Trustee under the Indenture governing the
Subordinated Notes, to the extent such Liens are permitted under the Indenture;
and
(j) Liens to secure a Debt owed to the Borrower or a Guarantor.
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SECTION 5.10. Limitation on Debt. The Borrower will not, and will not
permit any of its Subsidiaries to, incur or at any time be liable with respect
to any Debt except:
(a) Debt under this Agreement;
(b) Debt secured by Liens permitted by Section 5.09;
(c) Debt of the Borrower owed to a Guarantor, or Debt of a Guarantor owed
to the Borrower or another Guarantor, provided that any such Debt shall be
evidenced by an instrument in substantially the form of Exhibit I hereto;
(d) Subordinated Debt; and
(e) Debt of the Borrower and its Subsidiaries not otherwise permitted by
this Section incurred after the Closing Date in an aggregate principal amount at
any time outstanding not to exceed $5,000,000; provided that the aggregate
principal amount of Debt incurred by all Subsidiaries pursuant to this clause
(f) shall not exceed $2,500,000 at any time outstanding.
SECTION 5.11. Minimum Consolidated Net Worth. Consolidated Net Worth will
at no time during any fiscal period set forth below be less than an amount equal
to the sum of (i) $22,000,000 plus (ii) an amount equal to 75% of Consolidated
Net Income for each Fiscal Quarter ending after June 27, 1997 but before the
date of determination, in each case, for which Consolidated Net Income is
positive (but with no deduction on account of negative Consolidated Net Income
for any Fiscal Quarter) plus (iii) 100% of the aggregate net proceeds, including
the fair market value of property other than cash (as determined in good faith
by the Borrower's board of directors), received by the Borrower from the
issuance and sale after the date hereof of any capital stock of the Borrower
(other than the proceeds of any issuance and sale of any capital stock (x) to a
Subsidiary or (y) which is required to be redeemed, or is redeemable at the
option of the holder, if certain events or conditions occur or exist or
otherwise) or in connection with the conversion or exchange of any Debt of the
Borrower into capital stock of the Borrower after the date hereof. For purposes
of determining compliance with this Section, Special Expenses and payments
permitted pursuant to the proviso to the definition of Restricted Payment shall
not be taken into account in calculating Consolidated Net Worth (and each
certificate delivered pursuant to Section 5.01(c) with respect to compliance
shall set forth the foregoing adjustments in reasonable detail).
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SECTION 5.12. Fixed Charge Coverage Ratio. On the last day of each Fiscal
Quarter ending during one of the periods set forth below, the Fixed Charge
Coverage Ratio will not be less than the ratio set forth below opposite such
period:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
Fourth Fiscal Quarter of 1997 through
Second Fiscal Quarter of 1999 2.00:1.00
Third Fiscal Quarter of 1999 through
Second Fiscal Quarter of 2000 2.25:1.00
Third Fiscal Quarter of 2000 through
Fourth Fiscal Quarter of 2000 2.30:1.00
First Fiscal Quarter of 2001 through
Fourth Fiscal Quarter of 2001 2.50:1.00
First Fiscal Quarter of 2002 through
Third Fiscal Quarter of 2002 2.75:1.00
</TABLE>
For purposes of determining compliance with this Section, Special Expenses shall
not be taken into account in calculating Consolidated EBITDA (and each
certificate delivered pursuant to Section 5.01(c) with respect to compliance
shall set forth the foregoing adjustments in reasonable detail).
SECTION 5.13. Leverage Ratio. At no time during any Fiscal Quarter ending
during one of the periods set forth below shall the Leverage Ratio be greater
than the ratio set forth below opposite such period.
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
Fourth Fiscal Quarter of 1997 through
Second Fiscal Quarter of 1998 5.00:1.00
Third Fiscal Quarter of 1998 4.75:1.00
Fourth Fiscal Quarter of 1998 through
Second Fiscal Quarter of 1999 4.50:1.00
Third Fiscal Quarter of 1999 through
Fourth Fiscal Quarter of 1999 4.25:1.00
First Fiscal Quarter of 2000 through
Fourth Fiscal Quarter of 2000 4.00:1.00
First Fiscal Quarter of 2001 through
Fourth Fiscal Quarter of 2001 3.75:1.00
First Fiscal Quarter of 2002 through
Third Fiscal Quarter of 2002 3.50:1.00
</TABLE>
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For purposes of determining compliance with this Section, Special Expenses shall
not be taken into account in calculating Consolidated EBITDA (and each
certificate delivered pursuant to Section 5.01(c) with respect to compliance
shall set forth the foregoing adjustments in reasonable detail).
SECTION 5.14. Minimum Consolidated EBITDA. Consolidated EBITDA for any four
consecutive Fiscal Quarters will at no time be less than $24,000,000. For
purposes of determining compliance with this Section, Special Expenses shall not
be taken into account in calculating Consolidated EBITDA (and each certificate
delivered pursuant to Section 5.01(c) with respect to compliance shall set forth
the foregoing adjustments in reasonable detail).
SECTION 5.15. Restricted Payments. Neither the Borrower nor any Subsidiary
will declare or make any Restricted Payment.
SECTION 5.16. Investments. Neither the Borrower nor any Subsidiary will (a)
hold, make or acquire any Restricted Investment in any Person or (b) consummate
or agree to consummate any Acquisition unless:
(i) both before and immediately after giving effect to such
Acquisition or Restricted Investment, no Default shall have occurred and be
continuing;
(ii) immediately after any such Restricted Investment is made or
acquired or any such Acquisition is consummated or agreed to, the sum,
without duplication, of (A) the aggregate amount expended by the Borrower
and its Subsidiaries with respect to Acquisitions (including the value of
capital stock of the Borrower used to make Acquisitions) after the date
hereof plus (B) the aggregate net book value of all Restricted Investments
does not in the aggregate exceed the sum of (x) an amount equal to 50% of
the aggregate amount of Excess Cash Flow for each Fiscal Year ending after
the date hereof (any such incremental amount pursuant to this clause (x) to
be added on the date of receipt of the financial statements referred to in
Section 5.01 for such Fiscal Year), and (y) an additional amount equal to
$100,000,000 for all periods after the Closing Date; and
(iii) in the case of an Acquisition, (A) the Person whose assets,
securities or other equity interests are acquired by the Borrower or its
Subsidiaries is engaged in the same line of business activity as the
Borrower and its Subsidiaries or any other line or lines of business
activity involving the manufacture and distribution of packaging materials,
other
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disposable products, and related materials and related businesses; (B)
immediately after such Acquisition is consummated, the aggregate proceeds
of the Loans expended by the Borrower and its Subsidiaries in connection
with Acquisitions made after the Closing Date does not exceed $50,000,000
(plus any amount by which the Commitments have been increased pursuant to
Section 2.01(b)); (C) the purchase price for such Acquisition does not
exceed $100,000,000; and (D) the Borrower would be in compliance with
Sections 5.11 to 5.14, inclusive, after the Fixed Charge Coverage Ratio,
Leverage Ratio and Consolidated EBITDA are each adjusted with respect to
such Acquisition on the date of consummation or proposed consummation
thereof (the "Transaction Date") as follows: in calculating Consolidated
EBITDA, Consolidated Interest Expense and Consolidated Capital
Expenditures, (1) the incurrence of any Debt incurred in connection with
such Acquisition and the application of the proceeds therefrom shall be
assumed to have occurred on the first day of the period of four consecutive
Fiscal Quarters (or other period) for which such amounts are required to be
determined in accordance with the definitions of Fixed Charge Coverage
Ratio and Leverage Ratio (the "Reference Period"), (2) pro forma effect
shall be given to any Acquisition (including adjustments to operating
results permitted to be made in accordance with generally accepted
accounting principles and any pro forma cost savings which the Borrower
expects to realize and to the inclusion of which the Agent and, if such
expected pro forma cost savings are in excess of $2,000,000, the Required
Banks, have consented (such consents not to be unreasonably withheld or
delayed)) which occurs during the Reference Period or subsequent to the
Reference Period and prior to the Transaction Date as if such Acquisition
had occurred on the first day of the Reference Period, (3) the incurrence
of any Debt during the Reference Period or subsequent to the Reference
Period and prior to the Transaction Date and the application of the
proceeds therefrom shall be assumed to have occurred on the first day of
such Reference Period and (4) Consolidated Interest Expense attributable to
any Debt (whether existing or being incurred) bearing a floating interest
rate shall be computed on a pro forma basis as if the rate in effect on the
date of computation had been the applicable rate for the entire period,
unless such Person or any of its Subsidiaries is a party to an interest
party swap or cap or similar agreement (which shall remain in effect for
the twelve month period after the Transaction Date) which has the effect of
fixing the interest rate on the date of computation, in which case such
rate (whether higher or lower) shall be used.
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At least thirty (30) days prior to the closing date for any Acquisition (or, in
the case of any Acquisition that occurs within 30 days after the Effective Date,
within such time as the Borrower and the Agent agree), the Borrower shall have
delivered to each of the Bank Parties (i) a compliance certificate certifying
the Borrower's compliance with the provisions of this Agreement, including,
without limitation, Sections 5.11 to 5.14, inclusive, after giving effect on a
pro forma basis to such Acquisition and (ii) a report of the chief executive
officer or chief accounting officer of the Borrower, in a form and providing
sufficient detail and justification for the information provided therein,
including assumptions, as shall be found to be reasonable by the Agent in its
good faith discretion after completion of reasonable due diligence, establishing
(x) the basis for such certification and (y) that after giving effect to such
Acquisition and the financing therefor, the Borrower shall be in compliance at
the end of each Fiscal Year until the Termination Date with the covenants
contained in Sections 5.11 to 5.14, inclusive.
SECTION 5.17. Consolidated Capital Expenditures. Consolidated Capital
Expenditures relating to operations existing on the Closing Date of the Borrower
and its Subsidiaries existing on the Closing Date will not exceed $10,000,000
for any Fiscal Year; provided that if the aggregate amount of such Consolidated
Capital Expenditures actually made in any Fiscal Year shall be less than
$10,000,000 (before giving effect to any Rollover Amount from prior years
permitted in such Fiscal Year), then the amount of such shortfall may be added
to the amount of such Consolidated Capital Expenditures permitted for succeeding
Fiscal Years (such shortfall amount in any Fiscal Year, the "Rollover Amount"
for such Fiscal Year); provided further, however, that such Consolidated Capital
Expenditures for any Fiscal Year (after giving effect to any Rollover Amount
from prior years) will under no circumstances exceed $20,000,000.
SECTION 5.18. Transactions with Affiliates. The Borrower will not, and will
not permit any Subsidiary to, directly or indirectly, pay any funds to or for
the account of, make any investment (whether by acquisition of stock or
indebtedness, by loan, advance, transfer of property, guarantee or other
agreement to pay, purchase or service, directly or indirectly, any Debt, or
otherwise) in, lease, sell, transfer or otherwise dispose of any assets,
tangible or intangible, to, or participate in, or effect, any transaction with,
any Affiliate except on an arms-length basis on terms at least as favorable to
the Borrower or such Subsidiary as could have been obtained from a third party
that was not an Affiliate; provided that the foregoing provisions of this
Section shall not prohibit (i) any such Subsidiary from declaring or paying any
lawful dividend or other payment ratably in respect of all its capital stock of
the relevant class so long as,
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after giving effect thereto, no Default shall have occurred and be continuing,
or (ii) so long as no Default has occurred and is continuing, payments by the
Borrower, not exceeding $600,000 in the aggregate in any fiscal year, required
to be made to Tekni-Plex Partnership or MST Partners L.P. or their respective
affiliates or partners under the terms of existing agreements and notes.
SECTION 5.19. Limitation on Restrictions Affecting Subsidiaries. Neither
the Borrower nor any of its Subsidiaries will enter into, or suffer to exist,
any agreement with any Person, other than this Agreement, which prohibits or
limits the ability of any Subsidiary to (a) pay dividends or make other
distributions to, or pay any Debt owed to, the Borrower or any Subsidiary, (b)
make loans or advances to the Borrower or any Subsidiary, (c) transfer any of
its properties or assets to the Borrower or any Subsidiary or (d) create, incur,
assume or suffer to exist any Lien upon any of its property, assets or revenues,
whether now owned or hereafter acquired (other than with respect to assets
subject to consensual liens permitted under Section 5.09); provided that the
foregoing shall not apply to (i) restrictions in effect on the date of this
Agreement contained in agreements governing Debt outstanding on the date of this
Agreement (including, without limitation, the Subordinated Notes) and, if such
Debt is renewed, extended or refinanced, restrictions in the agreements
governing the renewed, extended or refinancing Debt (and successive renewals,
extensions and refinancings thereof) if such restrictions are no more
restrictive than those contained in the agreements governing the Debt being
renewed, extended or refinanced, or (ii) restrictions applicable to an acquired
entity or its assets in effect at the Acquisition thereof by the Borrower or a
Subsidiary and not incurred in contemplation of such Acquisition.
SECTION 5.20. Retirement of Subordinated and Other Long-Term Debt. The
Borrower will not, and will not permit any of its Subsidiaries to, directly or
indirectly, redeem, retire, purchase, acquire, defease or otherwise make any
payment in respect of the principal of any Subordinated Debt other than
regularly scheduled mandatory repayments, redemptions or sinking fund payments.
The Borrower will not, and will not permit any of its Subsidiaries to, consent
to or solicit any amendment, supplement, waiver or other modification of any
agreement or instrument evidencing or governing any Subordinated Debt, without
the prior written consent of the Required Banks. The Borrower will not, and will
not permit any of its Subsidiaries to, directly or indirectly, optionally
redeem, retire, purchase, acquire, defease or otherwise make any payment in
respect of the principal of any other long-term Debt (other than the Loans).
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SECTION 5.21. Limitation on Fixed-Price Contracts. Excluding contracts,
purchase orders and arrangements in respect of which and to the extent the
Borrower or any Subsidiary has entered into option, swap or other hedging
arrangements, the Borrower will not, and will not permit any of its Subsidiaries
to, enter into any contract, purchase order or other arrangement providing for
delivery more than six months after the execution thereof pursuant to which the
Borrower or any Subsidiary agrees to manufacture, produce, supply, sell,
distribute or otherwise transfer any material or product at a fixed price that
may not be adjusted to reflect fluctuations in market conditions and such
Person's cost of goods sold if the aggregate contract price to be paid under all
such arrangements during any fiscal year would exceed 10% of the consolidated
net sales of the Borrower and its Subsidiaries during such year.
SECTION 5.22. Further Assurances. (a) The Borrower will, and will cause
each of the other Obligors to, at the Borrower's sole cost and expense, do,
execute, acknowledge and deliver all such further acts, deeds, conveyances,
mortgages, assignments, notices of assignment and transfers as the Agent shall
from time to time request, which may be necessary in the reasonable judgment of
the Agent from time to time to assure, perfect, convey, assign and transfer to
the Agent the property and rights conveyed or assigned pursuant to the
Collateral Documents, or which may facilitate the performance of the terms of
the Collateral Documents, or the filing, registering or recording of the
Collateral Documents. Without limiting the foregoing, the Borrower shall use all
reasonable efforts to deliver to the Agent waivers of contractual and statutory
landlord's, landlord's mortgagee's and warehouseman's Liens in form and
substance satisfactory to the Agent under each existing lease, warehouse
agreement or similar agreement to which the Borrower is a party and each
amendment, renewal or extension thereof, and with respect to each new lease to
which the Borrower becomes a party.
(b) All costs and expenses in connection with the grant of any security
interests under the Collateral Documents, including, without limitation,
reasonable legal fees and other reasonable costs and expenses in connection with
the granting, perfecting and maintenance of any security interests under the
Collateral Documents or the preparation, execution, delivery, recordation or
filing of documents and any other acts as the Agent may reasonably request in
connection with the grant of such security interests, shall be paid by the
Borrower promptly upon demand.
(c) The Borrower will not, and will not permit any of its Subsidiaries to,
enter into or become subject to any agreement which would impair their ability
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to comply, or which would purport to prohibit them from complying, with the
provisions of this Section.
(d) The Borrower will cause each Subsidiary acquired after the Closing Date
(i) to become a party to this Agreement as guarantor by executing a supplement
hereto in form and substance satisfactory to the Agent and (ii) to enter into a
Security Agreement and any other agreements as may be necessary or desirable in
order to grant (subject to and to the extent permitted by restrictions permitted
by Section 5.19 hereof, and subject to Liens permitted by Section 5.09 hereof)
perfected first priority security interests upon all of its assets to secure its
obligations hereunder. In addition, the Borrower will pledge, or cause to be
pledged, pursuant to a Pledge Agreement, all of the capital stock or other
equity interests of such Subsidiary owned directly or indirectly by the
Borrower. The Borrower shall cause each such Subsidiary to take such actions as
may be necessary or desirable to effect the foregoing within 30 days after such
Subsidiary is acquired, including, without limitation, causing such Subsidiary
to (x) execute and deliver to the Agent such number of copies as the Agent may
specify of such supplements and Security Agreement and other documents creating
security interests and (y) deliver such certificates, evidences of corporate
action or other documents as the Agent may reasonably request, all in form and
substance satisfactory to the Agent, relating to the satisfaction of the
Borrower's obligations under this Section. Upon compliance by the Borrower with
the provisions of this subsection (d), Schedule 2 shall be deemed to have been
amended to reflect that such Subsidiary is a Guarantor.
ARTICLE 6
DEFAULTS
SECTION 6.01. Events of Defaults. If one or more of the following events
("Events of Default") shall have occurred and be continuing:
(a) the Borrower shall fail to pay when due any principal of any Loan or
any LC Reimbursement Obligation, or shall fail to pay within five days any
interest, fee or other amount payable by it hereunder;
(b) the Borrower shall fail to observe or perform any covenant contained in
Article 5, other than those contained in Sections 5.01 through 5.06, or any
Obligor shall fail to observe or perform any covenant contained in Section 4(A)
or 4(J) of the Security Agreement or Section 5(B) of the Pledge Agreement;
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(c) any Obligor shall fail to observe or perform any covenant or agreement
(other than those covered by clause (a) or (b) above) contained in the Loan
Documents for 15 days after the Agent gives notice thereof to the Borrower at
the request of any Bank;
(d) any representation, warranty, certification or statement made by any
Obligor in any Loan Document or in any certificate, financial statement or other
document delivered pursuant to any Loan Document shall prove to have been
incorrect in any material respect when made (or deemed made);
(e) the Borrower or any Subsidiary shall fail to make one or more payments
in respect of Material Financial Obligations when due or within any applicable
grace period;
(f) any event or condition shall occur which results in the acceleration of
the maturity of any Material Debt or enables (or, with the giving of notice or
lapse of time or both, would enable) the holder of such Debt or any Person
acting on such holder's behalf to accelerate the maturity thereof;
(g) the Borrower or any Subsidiary shall commence a voluntary case or other
proceeding seeking liquidation, reorganization or other relief with respect to
itself or its debts under any bankruptcy, insolvency or other similar law now or
hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any substantial part of
its property, or shall consent to any such relief or to the appointment of or
taking possession by any such official in an involuntary case or other
proceeding commenced against it, or shall make a general assignment for the
benefit of creditors, or shall fail generally to pay its debts as they become
due, or shall take any corporate action to authorize any of the foregoing;
(h) an involuntary case or other proceeding shall be commenced against the
Borrower or any Subsidiary seeking liquidation, reorganization or other relief
with respect to it or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, and such involuntary case or other proceeding
shall remain undismissed and unstayed for a period of 60 days; or an order for
relief shall be entered against the Borrower or any Subsidiary under the federal
bankruptcy laws as now or hereafter in effect;
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(i) any member of the ERISA Group shall fail to pay when due an amount or
amounts aggregating in excess of $5,000,000 which it shall have become liable to
pay under Title IV of ERISA; or notice of intent to terminate a Material Plan
shall be filed under Title IV of ERISA by any member of the ERISA Group, any
plan administrator or any combination of the foregoing; or the PBGC shall
institute proceedings under Title IV of ERISA to terminate, to impose liability
(other than for premiums under Section 4007 of ERISA) in respect of, or to cause
a trustee to be appointed to administer, any Material Plan; or a condition
described in Section 4042(a)(1)-(3) of ERISA shall exist by reason of which the
PBGC would be entitled to obtain a decree adjudicating that any Material Plan
must be terminated; or there shall occur a complete or partial withdrawal from,
or a default, within the meaning of Section 4219(c)(5) of ERISA, with respect
to, one or more Multiemployer Plans which causes one or more members of the
ERISA Group to incur a current payment obligation in excess of $5,000,000 and
such payment obligation shall continue unsatisfied and unstayed for a period of
15 days;
(j) judgments or orders for the payment of money exceeding $5,000,000 in
aggregate amount shall be rendered against the Borrower or any Subsidiary and
such judgments or orders shall continue unsatisfied and unstayed for a period of
15 days;
(k) any Lien created by any of the Collateral Documents shall at any time
fail to constitute a valid and (to the extent required by the Collateral
Documents) perfected Lien prior to all other Liens except for Permitted Liens
(as defined in the Security Agreement) on any material part of the Collateral
purported to be subject thereto, securing the obligations purported to be
secured thereby, with the priority required by the Loan Documents, or any
Obligor shall so assert in writing;
(l) the Borrower or any Subsidiary of the Borrower incurs after the date
hereof Environmental Liabilities in excess of $15,000,000 in the aggregate,
which Environmental Liabilities would, under GAAP, be reflected in the financial
statements (or the footnotes thereto) of the Borrower; or
(m) (1) so long as Tekni-Plex Partners, L.P. has not liquidated or unwound
or otherwise distributed its shares of capital stock of the Borrower, MST/TP
Partners, L.P. ceases to be the sole general partner of Tekni-Plex Partners,
L.P.; (2) members of the Control Group shall cease to own, directly or
indirectly, more than a fifty percent (50%) economic interest in the Borrower;
provided that in the event of an issuance by the Borrower of shares of its
capital
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stock, the economic interest in the Borrower held by members of the Control
Group may be reduced to not less than a thirty percent (30%) economic interest
in the Borrower; (3) members of the Control Group shall cease to control
directly or indirectly more than fifty percent (50%) of the shares of capital
stock of the Borrower entitled (excluding stock that is entitled to vote only
upon the occurrence of a contingency that has not yet occurred) to vote in the
election of a majority of the members of the board of directors of the Borrower;
provided that in the event of an issuance by the Borrower of capital stock of
the Borrower, such voting stock interest in the Borrower held by members of the
Control Group may be reduced to not less than a thirty percent (30%) voting
stock interest in the Borrower; (4) any person or group of persons (within the
meaning of Section 13 or 14 of the Exchange Act), excluding from such group any
members of the Control Group, shall have acquired after the date hereof,
beneficial ownership (within the meaning of Rule 13d-3 promulgated by the SEC
under said Act) of the lesser of (x) more than 40% of the outstanding shares of
common stock of the Borrower or (y) a greater voting stock interest in the
Borrower than is held by members of the Control Group; or (5) during any period
of twelve consecutive calendar months, individuals who were directors of the
Borrower on the first day of such period ("Initial Directors") or who were
nominated for election by all of the Initial Directors (other than any such
Initial Directors who shall have died, become incapacitated or resigned for
family, health or other personal reasons prior to such nomination), shall cease
to constitute a majority of the Borrower's board of directors;
then, and in every such event, the Agent shall:
(i) if requested by Banks having more than 50% in aggregate amount of
the Commitments, by notice to the Borrower terminate the Commitments and
they shall thereupon terminate;
(ii) if requested by Banks having more than 50% of the Aggregate LC
Exposure, by notice to each LC Issuing Bank instruct such LC Issuing Bank
(x) not to extend the expiry date of any outstanding Letter of Credit
and/or (y) in the case of any Evergreen Letter of Credit, to give notice to
the beneficiary thereof terminating such Letter of Credit as soon as is
permitted by the provisions thereof, whereupon such LC Issuing Bank shall
deliver notice to that effect promptly (or as soon thereafter as is
permitted by the provisions of the relevant Letter of Credit) to the
beneficiary of each such Letter of Credit and the Borrower; and
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(iii) if requested by Banks holding Notes evidencing more than 50% in
aggregate outstanding principal amount of the Loans, by notice to the
Borrower declare the Loans (together with accrued interest thereon) to be,
and the Loans (together with accrued interest thereon) shall thereupon
become, immediately due and payable without presentment, demand, protest or
other notice of any kind, all of which are hereby waived by the Borrower;
provided that, if any Event of Default specified in clause 6.01(g) or 6.01(h)
occurs with respect to the Borrower, then without any notice to the Borrower or
any other act by the Agent or the Banks, the Commitments shall thereupon
terminate and the Loans (together with accrued interest thereon) shall become
immediately due and payable without presentment, demand, protest or other notice
of any kind, all of which are hereby waived by the Borrower.
SECTION 6.02. Notice of Default. The Agent shall give notice to the
Borrower under Section 6.01(c) promptly upon being requested to do so by any
Bank and shall thereupon notify all the Banks thereof.
SECTION 6.03. Cash Cover. The Borrower agrees that, if an Event of Default
shall have occurred and be continuing and Banks having more than 50% of the
Aggregate LC Exposure instruct the Agent to request cash collateral pursuant to
this Section, the Borrower will, promptly after it receives such request from
the Agent, pay to the Agent an amount in immediately available funds equal to
the then aggregate amount available for subsequent drawings under all
outstanding Letters of Credit, to be held by the Agent in the Collateral Account
to secure the payment of all LC Reimbursement Obligations arising from
subsequent drawings under such Letters of Credit; provided that, if any Event of
Default specified in clause (g) or (h) of Section 6.01 occurs with respect to
the Borrower, the Borrower shall pay such amount to the Agent forthwith without
any notice or demand or any other act by the Agent or the Banks.
ARTICLE 7
THE AGENT
SECTION 7.01. Appointment and Authorization. Each Bank irrevocably appoints
and authorizes the Agent to enter into and act as its agent in connection with
the Collateral Documents and to take such action as agent on its behalf and to
exercise such powers under the Loan Documents as are delegated to the Agent by
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the terms hereof or thereof, together with all such powers as are reasonably
incidental thereto.
SECTION 7.02. Agent and Affiliates. Morgan Guaranty Trust Company of New
York shall have the same rights and powers under the Loan Documents as any other
Bank and may exercise or refrain from exercising the same as though it were not
the Agent, and Morgan Guaranty Trust Company of New York and its affiliates may
accept deposits from, lend money to and generally engage in any kind of business
with the Borrower or any Subsidiary or affiliate of the Borrower as if it were
not the Agent.
SECTION 7.03. Action by Agent. The obligations of the Agent hereunder are
only those expressly set forth herein. Without limiting the generality of the
foregoing, the Agent shall not be required to take any action with respect to
any Default, except as expressly provided in Article 6.
SECTION 7.04. Consultation with Experts. The Agent may consult with legal
counsel (who may be counsel for any Obligor), independent public accountants and
other experts selected by it and shall not be liable for any action taken or
omitted to be taken by it in good faith in accordance with the advice of such
counsel, accountants or experts.
SECTION 7.05. Liability of Agent. Neither the Agent nor any of its
affiliates or any of their respective directors, officers, agents or employees
shall be liable for any action taken or not taken by it in connection herewith
(i) with the consent or at the request of the Required Banks (or such different
number of Banks as any provision hereof expressly requires for such consent or
request) or (ii) in the absence of its own gross negligence or willful
misconduct. Neither the Agent nor any of its affiliates nor any of their
respective directors, officers, agents or employees shall be responsible for or
have any duty to ascertain, inquire into or verify (i) any statement, warranty
or representation made in connection with the Loan Documents or any borrowing
hereunder; (ii) the performance or observance of any of the covenants or
agreements of any Obligor; (iii) the satisfaction of any condition specified in
Article 3, except receipt of items required to be delivered to the Agent; or
(iv) the validity, effectiveness or genuineness of the Loan Documents or any
other instrument or writing furnished in connection herewith. The Agent shall
not incur any liability by acting in reliance upon any notice, consent,
certificate, statement or other writing (which may be a bank wire, telex,
facsimile or similar writing) believed by it to be genuine or to be signed by
the proper party or parties. Without limiting the generality of the foregoing,
the use of the term "agent" in this Agreement with reference to the Agent is not
intended
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to connote any fiduciary or other implied (or express) obligations arising under
agency doctrine of any applicable law. Instead, such term is used merely as a
matter of market custom and is intended to create or reflect only an
administrative relationship between independent contracting parties.
SECTION 7.06. Indemnification. The Banks shall, ratably in accordance with
their Credit Exposures, indemnify the Agent, its affiliates and their respective
directors, officers, agents and employees (to the extent not reimbursed by the
Borrower) against any cost, expense (including counsel fees and disbursements),
claim, demand, action, loss or liability (except such as result from such
indemnitees' gross negligence or willful misconduct) that such indemnitees may
suffer or incur in connection with the Loan Documents or any action taken or
omitted by such indemnitees thereunder.
SECTION 7.07. Credit Decision. Each Bank acknowledges that it has,
independently and without reliance on the Agent or any other Bank, and based on
such documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement. Each Bank also acknowledges
that it will, independently and without reliance on the Agent or any other Bank,
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 any
action under the Loan Documents.
SECTION 7.08. Successor Agent. Subject to the appointment of and acceptance
of appointment by a successor Agent as provided below, the Agent may resign at
any time by giving notice thereof to the Banks and the Borrower. Upon receipt of
such notice, the Required Banks shall have the right with, so long as no Default
has occurred and is continuing, the consent of the Borrower (not to be
unreasonably withheld), to appoint a successor Agent. If no successor Agent
shall have been so appointed by the Required Banks, and shall have accepted such
appointment, within 30 days after the retiring Agent gives notice of
resignation, then the retiring Agent may, on behalf of the Banks with, so long
as no Default has occurred and is continuing, the consent of the Borrower (not
to be unreasonably withheld), appoint a successor Agent, which shall be a
commercial bank organized or licensed under the laws of the United States or of
any State thereof and having a combined capital and surplus of at least
$100,000,000. Upon the acceptance of its appointment as Agent hereunder by a
successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights and duties of the retiring Agent, and the retiring
Agent shall be discharged from its duties and obligations hereunder. After any
retiring Agent resigns as Agent
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hereunder, the provisions of this Article shall inure to its benefit as to
actions taken or omitted to be taken by it while it was Agent.
SECTION 7.09. Agent's Fee. The Borrower shall pay to the Agent for its own
account fees in the amounts and at the times previously agreed upon by the
Borrower and the Agent.
ARTICLE 8
CHANGE IN CIRCUMSTANCES
SECTION 8.01. Basis for Determining Interest Rate Inadequate or Unfair. If
on or before the first day of any Interest Period for any Euro-Dollar Loan:
(a) the Agent is advised by the Reference Banks that deposits in
dollars (in the applicable amounts) are not being offered to the
Reference Banks in the London interbank market for such Interest
Period, or
(b) Banks holding 50% or more of the aggregate principal amount
of the affected Loans advise the Agent that the Adjusted London
Interbank Offered Rate as determined by the Agent will not adequately
and fairly reflect the cost to such Banks of funding their Euro-Dollar
Loans for such Interest Period,
the Agent shall forthwith give notice thereof to the Borrower and the Banks,
whereupon until the Agent notifies the Borrower that the circumstances giving
rise to such suspension no longer exist, (i) the obligations of the Banks to
make Euro-Dollar Loans or to continue or convert outstanding Loans as or into
Euro-Dollar Loans shall be suspended and (ii) each outstanding Euro-Dollar Loan
shall be converted into a Base Rate Loan on the last day of the then current
Interest Period applicable thereto. Unless the Borrower notifies the Agent at
least two Domestic Business Days before the date of any affected Borrowing for
which a Notice of Borrowing has previously been given that it elects not to
borrow on such date, such Borrowing shall instead be made as a Base Rate
Borrowing.
SECTION 8.02. Illegality. If, on or after the date hereof, the adoption of
any applicable law, rule or regulation, or any change in any applicable law,
rule or regulation, or any change in the interpretation or administration
thereof by any governmental authority, central bank or comparable agency charged
with the interpretation or administration thereof, or compliance by any Bank (or
its
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Euro-Dollar Lending Office) with any request or directive (whether or not having
the force of law) of any such authority, central bank or comparable agency,
shall make it unlawful or impossible for any Bank (or its Euro-Dollar Lending
Office) to make, maintain or fund its Euro-Dollar Loans and such Bank shall so
notify the Agent, the Agent shall forthwith give notice thereof to the other
Banks and the Borrower, whereupon until such Bank notifies the Borrower and the
Agent that the circumstances giving rise to such suspension no longer exist, the
obligation of such Bank to make Euro-Dollar Loans, or to convert outstanding
Loans into Euro-Dollar Loans or continue outstanding Loans as Euro-Dollar Loans,
shall be suspended. Before giving any notice to the Agent pursuant to this
Section, such Bank shall designate a different Euro-Dollar Lending Office if
such designation will avoid the need for giving such notice and will not, in the
judgment of such Bank, be otherwise disadvantageous to such Bank. If such notice
is given, each Euro-Dollar Loan of such Bank then outstanding shall be converted
to a Base Rate Loan either (a) on the last day of the then current Interest
Period applicable to such Euro-Dollar Loan if such Bank may lawfully continue to
maintain and fund such Loan as a Euro-Dollar Loan to such day or (b) immediately
if such Bank shall determine that it may not lawfully continue to maintain and
fund such Loan as a Euro-Dollar Loan to such day.
SECTION 8.03. Increased Cost and Reduced Return. (a) If on or after the
date hereof, the adoption of any applicable law, rule or regulation, or any
change in any applicable law, rule or regulation, or any change in the
interpretation or administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by any Bank (or its Applicable Lending Office) or any LC
Issuing Bank with any request or directive (whether or not having the force of
law) of any such authority, central bank or comparable agency, shall impose,
modify or deem applicable any reserve (including, without limitation, any such
requirement imposed by the Board of Governors of the Federal Reserve System, but
excluding with respect to any Euro-Dollar Loan any such requirement included in
an applicable Euro-Dollar Reserve Percentage), special deposit, insurance
assessment or similar requirement against assets of, deposits with or for the
account of, or credit (including letters of credit and participations therein)
extended by, any Bank (or its Applicable Lending Office) or any LC Issuing Bank
or shall impose on any Bank (or its Applicable Lending Office) or any LC Issuing
Bank or the London interbank market any other condition affecting its
Euro-Dollar Loans, its Notes or its obligation to make Euro-Dollar Loans or its
obligations hereunder in respect of Letters of Credit and the result of any of
the foregoing is to increase the cost to such Bank (or its Applicable Lending
Office) or such LC Issuing Bank of making or maintaining any Euro-Dollar Loan or
issuing or participating in any Letter of
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Credit, or to reduce the amount of any sum received or receivable by such Bank
(or its Applicable Lending Office) or such LC Issuing Bank under this Agreement
or under its Note with respect thereto, by an amount deemed by such Bank or LC
Issuing Bank to be material, then, within 15 days after demand by such Bank
(with a copy to the Agent), the Borrower shall pay to such Bank or LC Issuing
Bank such additional amount or amounts as will compensate such Bank or LC
Issuing Bank for such increased cost or reduction.
(b) If any Bank shall have determined that, after the date hereof, the
adoption of any applicable law, rule or regulation regarding capital adequacy,
or any change in any such law, rule or regulation, or any change in the
interpretation or administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or any request or directive regarding capital adequacy (whether or not
having the force of law) of any such authority, central bank or comparable
agency, has or would have the effect of reducing the rate of return on capital
of such Bank (or its Parent) as a consequence of such Bank's obligations
hereunder to a level below that which such Bank (or its Parent) could have
achieved but for such adoption, change, request or directive (taking into
consideration its policies with respect to capital adequacy) by an amount deemed
by such Bank to be material, then from time to time, within 15 days after demand
by such Bank (with a copy to the Agent), the Borrower shall pay to such Bank
such additional amount or amounts as will compensate such Bank (or its Parent)
for such reduction.
(c) Each Bank and LC Issuing Bank will promptly notify the Borrower and the
Agent of any event of which it has knowledge, occurring after the date hereof,
which will entitle such Bank or LC Issuing Bank to compensation pursuant to this
Section and will designate a different Applicable Lending Office if such
designation will avoid the need for, or reduce the amount of, such compensation
and will not, in the judgment of such Bank or LC Issuing Bank, be otherwise
disadvantageous to it. A certificate of any Bank or LC Issuing Bank claiming
compensation under this Section and setting forth the additional amount or
amounts to be paid to it hereunder and the basis thereof shall be conclusive in
the absence of manifest error; provided that no Bank shall be required to
disclose information that it considers in its sole discretion to be
confidential. In determining such amount, such Bank or LC Issuing Bank may use
any reasonable averaging and attribution methods.
SECTION 8.04. Taxes. (a) For the purposes of this Section, the following
terms have the following meanings:
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"Taxes" means any and all present or future taxes, duties, levies,
imposts, deductions, charges or withholdings with respect to any payment by any
Obligor pursuant to this Agreement or under any Note, and all liabilities with
respect thereto, excluding (i) in the case of each Bank Party, taxes imposed on
its net income, and franchise or similar taxes imposed on it, by a jurisdiction
under the laws of which it is organized or in which its principal executive
office is located or, in which its Applicable Lending Office is located and (ii)
in the case of each Bank, any United States withholding tax imposed on such
payment, but not excluding any portion of such tax that exceeds the United
States withholding tax which would have been imposed on such a payment to such
Bank under the laws and treaties in effect when such Bank first becomes a party
to this Agreement.
"Other Taxes" means any present or future stamp or documentary taxes
and any other excise or property taxes, or similar charges or levies, which
arise from any payment made pursuant to this Agreement or under any Note or from
the execution, delivery, registration or enforcement of, or otherwise with
respect to, any Loan Document.
(b) Subject to Section 8.04(e), all payments by any Obligor to or for the
account of any Bank Party hereunder or under any Note shall be made without
deduction for any Taxes or Other Taxes; provided that, if any Obligor shall be
required by law to deduct any Taxes or Other Taxes from any such payment, (i)
the sum payable shall be increased as necessary so that after making all
required deductions (including deductions applicable to additional sums payable
under this Section) such Bank Party receives an amount equal to the sum it would
have received had no such deductions been made, (ii) such Obligor shall make
such deductions, (iii) such Obligor shall pay the full amount deducted to the
relevant taxation authority or other authority in accordance with applicable law
and (iv) such Obligor shall promptly furnish to the Agent, at its address
specified in or pursuant to Section 10.01, to the extent available, the original
or a certified copy of a receipt evidencing payment thereof or any other
document reasonably requested by the Agent.
(c) Subject to Section 8.04(e), Obligors agree to indemnify each Bank Party
for the full amount of Taxes and Other Taxes (including, without limitation, any
Taxes or Other Taxes imposed or asserted by any jurisdiction on amounts payable
under this Section) paid by such Bank Party and any liability (including
penalties, interest and expenses) arising therefrom or with respect thereto.
This indemnification shall be paid within 15 days after such Bank Party makes
demand therefor, which demand shall be accompanied by a statement providing an
explanation of the facts and calculations that form the basis for such demand.
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Such statement shall be final, conclusive and binding on the Obligors absent
manifest error.
(d) Each Bank organized under the laws of a jurisdiction outside the United
States, before it signs and delivers this Agreement in the case of each Bank
listed on the signature pages hereof and before it becomes a Bank in the case of
each other Bank, and, from time to time thereafter, before any Bank designates a
new Euro-Dollar Lending Office which is an Affiliate or if requested in writing
by the Borrower (but only so long as such Bank remains lawfully able to do so),
shall provide each of the Borrower and the Agent with Internal Revenue Service
form 1001 or 4224, as appropriate, or any successor form prescribed by the
Internal Revenue Service, certifying that such Bank is entitled to benefits
under an income tax treaty to which the United States is a party which exempts
such Bank from United States withholding tax or reduces the rate of withholding
tax on payments of interest for the account of such Bank or certifying that the
income receivable by it pursuant to this Agreement is effectively connected with
the conduct of a trade or business in the United States.
(e) For any period with respect to which a Bank has failed to provide the
Borrower or the Agent with the appropriate form referred to in Section 8.04(d)
(unless such failure is due to a change in treaty, law or regulation occurring
after the date on which such form originally was required to be provided), no
Obligor shall be required to increase any payment to such Bank pursuant to
Section 8.04(b)(i) and such Bank shall not be entitled to indemnification under
Section 8.04(b) or 8.04(c) with respect to Taxes imposed by the United States;
provided that if a Bank that is otherwise exempt from, or subject to a reduced
rate of, withholding tax becomes subject to Taxes because of its failure to
deliver a form required hereunder, the Borrower shall, at such Bank's expense,
take such steps as such Bank shall reasonably request to assist such Bank to
recover such Taxes.
(f) If any Obligor is required to pay additional amounts to or for the
account of any Bank pursuant to this Section as a result of a change in law or
treaty occurring after such Bank first became a party to this Agreement, then
such Bank will, at the Borrower's request and expense, change the jurisdiction
of its Applicable Lending Office if, in the sole judgment of such Bank, such
change (i) will eliminate or reduce any such additional payment which may
thereafter accrue and (ii) is not otherwise disadvantageous to such Bank.
(g) Upon the reasonable request of the Borrower, and at the Borrower's
expense, a Bank Party shall use reasonable efforts to cooperate with the
Borrower with a view to obtain a refund of any Taxes or Other Taxes which were
not
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correctly or legally imposed and for which the Borrower has indemnified such
Bank Party under this Section 8.04 if obtaining such refund would not, in the
sole judgment of the Bank Party, be disadvantageous to such Bank Party; provided
that nothing in this Section 8.04(g) shall be construed to require any Bank
Party to institute any administrative proceeding (other than the filing of a
claim for any such refund) or judicial proceeding to obtain any such refund. If
a Bank Party shall receive a refund from a taxing authority (as a result of any
error in the imposition of Taxes or Other Taxes by such taxing authority) of any
Taxes or Other Taxes paid by the Borrower pursuant to subsection 8.04(b) or (c)
above, such Bank Party shall promptly pay to the Borrower the amount so received
without interest (other than interest received from the taxing authority with
respect to such refund) and net of out-of-pocket expenses; provided that such
Bank Party shall only be required to pay to the Borrower such amounts as such
Bank Party in its sole discretion, determines are attributable to Taxes or Other
Taxes paid by the Borrower. In the event such Bank Party or the Agent is
required to repay the amount of such refund (including interest, if any), the
Borrower, upon the request of such Bank Party or the Agent (as the case may be),
agrees to promptly return to such Bank Party or the Agent the amount of such
refund and interest, if any (plus penalties, interest and other charges imposed
in connection with the repayment of such amounts by such Bank Party or the
Agent).
(h) Notwithstanding the foregoing, nothing in this Section 8.04 shall be
construed to (i) entitle the Borrower or any other persons to any information
determined by any Bank Party or the Agent, in its sole discretion, to be
confidential or proprietary information of such Bank Party or the Agent, to any
tax or financial information of any Bank Party or the Agent or to inspect or
review any books and records of any Bank Party or the Agent, or (ii) interfere
with the rights of any Bank Party or the Agent to conduct its fiscal or tax
affairs in such manner as it deems fit.
SECTION 8.05. Base Rate Loans Substituted for Affected Euro-Dollar Loans.
If (i) the obligation of any Bank to make, or to continue or convert outstanding
Loans as or to, Euro-Dollar Loans has been suspended pursuant to Section 8.02 or
(ii) any Bank has demanded compensation under Section 8.03 or 8.04 with respect
to its Euro-Dollar Loans, and in any such case the Borrower shall, by at least
five Euro-Dollar Business Days' prior notice to such Bank through the Agent,
have elected that the provisions of this Section shall apply to such Bank, then,
unless and until such Bank notifies the Borrower that the circumstances giving
rise to such suspension or demand for compensation no longer exist, all Loans
which would otherwise be made by such Bank as (or continued as or converted to)
Euro-Dollar Loans shall instead be Base Rate Loans
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(on which interest and principal shall be payable contemporaneously with the
related Euro-Dollar Loans of the other Banks). If such Bank notifies the
Borrower that the circumstances giving rise to such suspension or demand for
compensation no longer exist, the principal amount of each such Base Rate Loan
shall be converted into a Euro-Dollar Loan on the first day of the next
succeeding Interest Period applicable to the related Euro-Dollar Loans of the
other Banks.
SECTION 8.06. Substitution of Bank. If (i) the obligation of any Bank to
make Euro-Dollar Loans has been suspended pursuant to Section 8.02 or (ii) any
Bank or LC Issuing Bank has demanded compensation under Section 8.03 or 8.04,
the Borrower shall have the right, with the assistance of the Agent, to seek a
mutually satisfactory substitute bank or banks (which may be one or more of the
Bank Parties) to purchase the Note and assume the Commitment of such Bank or
replace the Letter of Credit issued by such LC Issuing Bank.
ARTICLE 9
GUARANTY
SECTION 9.01. The Guaranty. Each Guarantor hereby unconditionally
guarantees the full and punctual payment (whether at stated maturity, upon
acceleration or otherwise) of the principal of and interest on each Note issued
by the Borrower pursuant to this Agreement, and the full and punctual payment of
all other amounts payable by the Borrower or any other Guarantor under the Loan
Documents. Upon failure by the Borrower or any other Guarantor to pay punctually
any such amount, each Guarantor shall forthwith on demand pay the amount not so
paid at the place and in the manner specified in this Agreement or the other
Loan Documents.
SECTION 9.02. Guaranty Unconditional. The obligations of each Guarantor
hereunder shall be unconditional and absolute and, without limiting the
generality of the foregoing, shall not be released, discharged or otherwise
affected by:
(i) any extension, renewal, settlement, compromise, waiver or release
in respect of any obligation of the Borrower or any other Guarantor under
the Loan Documents, by operation of law or otherwise;
(ii) any modification or amendment of or supplement to the Loan
Documents;
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(iii) any release, impairment, non-perfection or invalidity of any
direct or indirect security for any obligation of the Borrower or any other
Guarantor under the Loan Documents;
(iv) any change in the corporate existence, structure or ownership of
the Borrower or any other Guarantor, or any insolvency, bankruptcy,
reorganization or other similar proceeding affecting the Borrower, any
other Guarantor or their respective assets or any resulting release or
discharge of any obligation of the Borrower or any other Guarantor
contained in the Loan Documents;
(v) the existence of any claim, set-off or other rights which such
Guarantor may have at any time against the Borrower, any other Guarantor,
the Agent, any LC Issuing Bank, any Bank or any other Person, whether in
connection herewith or any unrelated transactions, provided that nothing
herein shall prevent the assertion of any such claim by separate suit or
compulsory counterclaim;
(vi) any invalidity or unenforceability relating to or against the
Borrower or any other Guarantor for any reason of the Loan Documents, or
any provision of applicable law or regulation purporting to prohibit the
payment by the Borrower or any other Guarantor of the principal of or
interest on any Note or any other amount payable by the Borrower or any
other Guarantor under the Loan Documents; or
(vii) any other act or omission to act or delay of any kind by the
Borrower, any other Guarantor, the Agent, any LC Issuing Bank, any Bank or
any other Person or any other circumstance whatsoever which might, but for
the provisions of this paragraph, constitute a legal or equitable discharge
of the Guarantor's obligations hereunder.
SECTION 9.03. Discharge Only upon Payment in Full; Reinstatement in Certain
Circumstances. Each Guarantor's obligations hereunder shall remain in full force
and effect until the Commitments shall have terminated and the principal of and
interest on the Notes and all other amounts payable by the Obligors under the
Loan Documents shall have been paid in full. If at any time any payment of the
principal of or interest on any Note or any other amount payable by the Obligors
under the Loan Documents is rescinded or must be otherwise restored or returned
upon the insolvency, bankruptcy or reorganization of any Obligor or otherwise,
each Guarantor's obligations hereunder with respect to such payment
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shall be reinstated at such time as though such payment had been due but not
made at such time.
SECTION 9.04. Waiver by Each Guarantor. Each Guarantor irrevocably waives
acceptance hereof, presentment, demand, protest and any notice not provided for
herein, as well as any requirement that at any time any action be taken by any
Person against the Borrower or any other Guarantor or any other Person.
SECTION 9.05. Subrogation and Contribution. Until all amounts payable by
the Obligors under the Loan Documents shall have been paid in full, each
Guarantor agrees not to enforce or exercise any and all rights to which it may
be entitled, by operation of law or otherwise, upon making any payment hereunder
(i) to be subrogated to the rights of the payee against the Borrower with
respect to such payment or against any direct or indirect security therefor, or
otherwise to be reimbursed, indemnified or exonerated by or for the account of
the Borrower in respect thereof or (ii) to receive any payment, in the nature of
contribution or for any other reason, from any other Guarantor with respect to
such payment.
SECTION 9.06. Stay of Acceleration. If acceleration of the time for payment
of any amount payable by any Obligor under the Loan Documents is stayed upon
insolvency, bankruptcy or reorganization of the Borrower, all such amounts
otherwise subject to acceleration under the terms of this Agreement shall
nonetheless be payable by each Guarantor hereunder forthwith on demand by the
Agent made at the request of the requisite proportion of the Banks specified in
Article 6 of the Agreement.
SECTION 9.07. Limit of Liability. The obligations of each Guarantor
hereunder shall be limited to an aggregate amount equal to the largest amount
that would not render its obligations hereunder subject to avoidance under
Section 548 of the United States Bankruptcy Code or any comparable provisions of
any applicable state law.
SECTION 9.08. Release upon Sale. Upon any sale by the Borrower of a
Guarantor permitted by this Agreement, such Guarantor shall automatically and
without further action by any Bank or the Agent be released from its obligations
as a Guarantor hereunder.
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ARTICLE 10
MISCELLANEOUS
SECTION 10.01. Notices. All notices, requests and other communications to
any party under any Loan Document shall be in writing (including bank wire,
facsimile or similar writing) and shall be given to such party: (a) in the case
of the Borrower or the Agent, at its address or facsimile number set forth on
the signature pages hereof, (b) in the case of any Guarantor, in care of the
Borrower, (c) in the case of any Bank, at its address or facsimile number set
forth in its Administrative Questionnaire or (d) in the case of any party, at
such other address or facsimile number as such party may hereafter specify for
the purpose by notice to the Agent and the Borrower. Each such notice, request
or other communication shall be effective (i) if given by facsimile, when
transmitted to the facsimile number referred to in this Section and confirmation
of receipt is received, (ii) if given by mail, 72 hours after such communication
is deposited in the mails with first class postage prepaid, addressed as
aforesaid, or (iii) if given by any other means, when delivered at the address
referred to in this Section; provided that notices to the Agent or any LC
Issuing Bank under Article 2 or Article 8 shall not be effective until received.
SECTION 10.02. No Waivers. No failure or delay by any Bank Party in
exercising any right, power or privilege hereunder or under any Note shall
operate as a waiver thereof nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies herein provided shall be
cumulative and not exclusive of any rights or remedies provided by law.
SECTION 10.03. Expenses; Indemnification. (a) The Borrower shall pay (i)
all out-of-pocket expenses of the Agent, including reasonable fees and
disbursements of special counsel for the Agent, in connection with the
preparation and administration of the Loan Documents, any waiver or consent
thereunder or any amendment thereof or any Default or alleged Default thereunder
and (ii) if an Event of Default occurs, all out-of-pocket expenses incurred by
each Bank Party, including (without duplication) the fees and disbursements of
outside counsel and the allocated cost of inside counsel, in connection with
such Event of Default and collection, bankruptcy, insolvency and other
enforcement proceedings resulting therefrom.
(b) The Borrower agrees to indemnify each Bank Party, its respective
affiliates and the respective directors, officers, agents and employees of the
foregoing (each an "Indemnitee") and hold each Indemnitee harmless from and
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against any and all liabilities, losses, damages, costs and expenses of any
kind, including, without limitation, the reasonable fees and disbursements of
counsel, which may be incurred by such Indemnitee in connection with any
investigative, administrative or judicial proceeding (whether or not such
Indemnitee shall be designated a party thereto) brought or threatened relating
to or arising out of the Loan Documents or any actual or proposed use of any
Letter of Credit or any proceeds of Loans hereunder; provided that no Indemnitee
shall have the right to be indemnified hereunder for such Indemnitee's own gross
negligence or willful misconduct as determined by final judgment of a court of
competent jurisdiction.
(c) The Borrower hereby indemnifies each Indemnitee from and against and
agrees to hold each of them harmless from any and all liabilities, losses,
damages, costs and expenses of any kind (including, without limitation,
reasonable expenses of investigation by engineers, environmental consultants and
similar technical personnel and reasonable fees and disbursements of counsel) of
any Indemnitee arising out of, in respect of or in connection with any and all
Environmental Liabilities. Without limiting the generality of the foregoing, the
Borrower hereby waives all rights for contribution or any other rights of
recovery with respect to liabilities, losses, damages, costs and expenses
arising under or related to Environmental Laws that it might have by statute or
otherwise against any Indemnitee.
SECTION 10.04. Sharing of Set-offs. Each Bank agrees that if it shall, by
exercising any right of set-off or counterclaim or otherwise, receive payment of
a proportion of the aggregate amount of principal and interest then due with
respect to the Loans and participations in LC Reimbursement Obligations held by
it which is greater than the proportion received by any other Bank in respect of
the aggregate amount of principal and interest then due with respect to the
Loans and participations in LC Reimbursement Obligations held by such other
Bank, the Bank receiving such proportionately greater payment shall purchase
such participations in the Loans and participations in LC Reimbursement
Obligations held by the other Banks, and such other adjustments shall be made,
as may be required so that all such payments of principal and interest with
respect to the Loans and participations in LC Reimbursement Obligations held by
the Banks shall be shared by the Banks pro rata; provided that nothing in this
Section shall impair the right of any Bank to exercise any right of set-off or
counterclaim it may have and to apply the amount subject to such exercise to the
payment of indebtedness of any Obligor other than its indebtedness in respect of
the Loans and the LC Reimbursement Obligations. Each Obligor agrees, to the
fullest extent it may effectively do so under applicable law, that any holder of
a participation in a Loan or LC Reimbursement Obligation, whether or not
acquired pursuant to the
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foregoing arrangements, may exercise rights of set-off or counterclaim and other
rights with respect to such participation as fully as if such holder of a
participation were a direct creditor of such Obligor in the amount of such
participation.
SECTION 10.05. Amendments and Waivers; Release of Collateral. Any provision
of this Agreement or the Notes may be amended or waived if, but only if, such
amendment or waiver is in writing and is signed by the Borrower and the Required
Banks (and, if the rights or duties of the Agent or any LC Issuing Bank are
affected thereby, by the Agent or such LC Issuing Banks, as the case may be);
provided that no such amendment or waiver shall, unless signed by all the Banks,
(i) increase or decrease the Commitment of any Bank (except for an increase
pursuant to Section 2.01(b) or a ratable decrease in the Commitments of all
Banks) or subject any Bank to any additional obligation, (ii) reduce the
principal of or rate of interest on any Loan or the amount of any LC
Reimbursement Obligation or any interest thereon or any fees hereunder, except
as provided below, (iii) postpone the date fixed for any payment of principal of
or interest on any Loan or of any LC Reimbursement Obligation or any interest
thereon or any fees hereunder or for the termination of any Commitment or
(except as expressly provided in Section 2.14) extend the expiry date of any
Letter of Credit, (iv) release any Guarantor from its obligations hereunder or
(v) change the percentage of the Commitments or of the Aggregate LC Exposure or
of the aggregate unpaid principal amount of the Loans, or the number of Banks,
which shall be required for the Banks or any of them to take any action under
this Section or any other provision of this Agreement. Any provision of the
Collateral Documents may be amended or waived if, but only if, such amendment or
waiver is in writing and is signed by the relevant Obligor and the Agent with
the consent of the Required Banks; provided that no such amendment or waiver
shall, unless signed by all the Banks, effect or permit a release of all or
substantially all of the Collateral. Notwithstanding the foregoing, Collateral
shall be released from the Lien of the Collateral Documents from time to time as
necessary to effect any sale or pledge of assets permitted by the Loan
Documents, and the Agent shall execute and deliver all release documents
reasonably requested to evidence such release.
SECTION 10.06. Successors; Participations and Assignments. (a) The
provisions of this Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns, except that the
Borrower may not assign or otherwise transfer any of its rights under this
Agreement without the prior written consent of all the Bank Parties.
(b) Any Bank may at any time grant to one or more banks or other
institutions (each a "Participant") participating interests in its Commitment or
any
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or all of its Loans and participations in Letters of Credit. If a Bank grants
any such participating interest to a Participant, whether or not upon notice to
the Borrower and the Agent, such Bank shall remain responsible for the
performance of its obligations hereunder, and the Borrower, the LC Issuing Banks
and the Agent shall continue to deal solely and directly with such Bank in
connection with such Bank's rights and obligations under this Agreement. Any
agreement pursuant to which any Bank may grant such a participating interest
shall provide that such Bank shall retain the sole right and responsibility to
enforce the obligations of the Borrower and the LC Issuing Banks hereunder
including, without limitation, the right to approve any amendment, modification
or waiver of any provision of this Agreement; provided that such participation
agreement may provide that such Bank will not agree to any modification,
amendment or waiver of this Agreement described in clause (i), (ii) or (iii) of
Section 10.05 without the consent of the Participant. The Borrower agrees that
each Participant shall, to the extent provided in its participation agreement,
be entitled to the benefits of Article 8 with respect to its participating
interest; provided that no Participant shall be entitled to receive any greater
payment under Article 8 unless such transfer is with the Borrower's consent. An
assignment or other transfer which is not permitted by subsection (c) or (d)
below shall be given effect for purposes of this Agreement only to the extent of
a participating interest granted in accordance with this subsection. Any Bank
that grants a participation shall (A) withhold or deduct from each payment to
the Participant the amount of tax required under applicable law to be withheld
or deducted from such payment (other than amounts the Borrower or the Agent are
required to withhold or deduct under this Agreement), (B) pay any tax so
withheld or deducted by it to the appropriate taxing authority in accordance
with applicable law and (C) indemnify the Borrower and the Agent for and against
any losses, costs and expenses incurred by the Borrower or the Agent (as the
case may be) as a result of any failure by such Bank to so withhold or deduct
and pay such tax. If any Bank is required to make any payment under this Section
10.06(b), the Borrower (i) shall pay to such Bank the amount of any tax benefit
realized by the Borrower related to such payments made by such Bank, and (ii)
agrees to reasonably cooperate with such Bank to minimize any such indemnity
payment and to recover any tax benefit available to the Borrower.
(c) Any Bank may at any time assign to one or more banks or other
institutions (each an "Assignee") all, or a proportionate part (equivalent to an
initial Commitment of not less than $5,000,000) of all, of its rights and
obligations under this Agreement and its Note, and such Assignee shall assume
such rights and obligations, pursuant to an Assignment and Assumption Agreement
substantially in the form of Exhibit D hereto signed by such Assignee and such
transferor Bank, with (and subject to) the subscribed consent of the
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Agent and, so long as no Default has occurred and is continuing, the Borrower
(which consents shall not be unreasonably withheld or delayed); provided that if
an Assignee is an affiliate of such transferor Bank or was a Bank immediately
before such assignment, no such consent shall be required; and provided,
further, that after any such assignment such assigning Bank shall, if it has not
transferred all of its rights and obligations, retain a Commitment of not less
than $5,000,000. When such instrument has been signed and delivered by the
parties thereto and such Assignee has paid to such transferor Bank the purchase
price agreed between them, such Assignee shall be a Bank party to this Agreement
and shall have all the rights and obligations of a Bank with a Commitment as set
forth in such instrument of assumption, and the transferor Bank shall be
released from its obligations hereunder to a corresponding extent, and no
further consent or action by any party shall be required. Upon the consummation
of any assignment pursuant to this subsection, the transferor Bank, the Agent
and the Borrower shall make appropriate arrangements so that, if required, a new
Note is issued to the Assignee. In connection with any such assignment, the
transferor Bank shall pay to the Agent an administrative fee for processing such
assignment in the amount of $3,500. If the Assignee is not incorporated under
the laws of the United States or a State thereof, it shall deliver to the
Borrower and the Agent certification as to exemption from deduction or
withholding of any United States federal income taxes in accordance with Section
8.04.
(d) Any Bank may at any time assign all or any portion of its rights under
this Agreement and its Note to a Federal Reserve Bank. No such assignment shall
release the transferor Bank from its obligations hereunder.
(e) No Assignee, Participant or other transferee of any Bank's rights shall
be entitled to receive any greater payment under Section 8.03 or 8.04 than such
Bank would have been entitled to receive with respect to the rights transferred,
unless such transfer is made with the Borrower's prior written consent or by
reason of the provisions of Section 8.02, 8.03 or 8.04 requiring such Bank to
designate a different Applicable Lending Office under certain circumstances or
at a time when the circumstances giving rise to such greater payment did not
exist.
SECTION 10.07. Reliance on Margin Stock. Each of the Banks represents to
the Agent and each of the other Banks that it in good faith is not relying upon
any "margin stock" (as defined in Regulation U) as collateral in the extension
or maintenance of the credit provided for in this Agreement.
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SECTION 10.08. Governing Law; Submission to Jurisdiction. This Agreement
and each Note shall be governed by and construed in accordance with the laws of
the State of New York. Each Obligor hereby submits to the nonexclusive
jurisdiction of the United States District Court for the Southern District of
New York and of any New York State court sitting in New York City for purposes
of all legal proceedings arising out of or relating to this Agreement or the
transactions contemplated hereby. Each Obligor irrevocably waives, to the
fullest extent permitted by law, any objection which it may now or hereafter
have to the laying of the venue of any such proceeding brought in such a court
and any claim that any such proceeding brought in such a court has been brought
in an inconvenient forum.
SECTION 10.09. Counterparts; Integration; Effectiveness. This Agreement may
be signed in any number of counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement constitutes the entire agreement and understanding
among the parties hereto and supersedes any and all prior agreements and
understandings, oral or written, relating to the subject matter hereof. This
Agreement shall become effective when the Agent has received from each of the
parties hereto a counterpart hereof signed by such party or facsimile or other
written confirmation satisfactory to the Agent confirming that such party has
signed a counterpart hereof.
SECTION 10.10. Confidentiality. Each Bank Party agrees to keep any
information delivered or made available by the Borrower pursuant to or in
connection with this Agreement confidential from anyone other of than persons
employed or retained by such Bank Party who are engaged in evaluating,
approving, structuring or administering the credit facility contemplated hereby;
provided that nothing herein shall prevent any Bank Party from disclosing such
information (a) to any other Bank Party, (b) to any other Person if reasonably
incidental to the administration of the credit facility contemplated hereby, (c)
upon the order of any court or administrative agency, (d) upon the request or
demand of any regulatory agency or authority, (e) which had been publicly
disclosed other than as a result of a disclosure by any Bank Party prohibited by
this Agreement, (f) in connection with any litigation to which any Bank Party or
its subsidiaries or Parent may be a party, (g) to the extent necessary in
connection with the exercise of any remedy hereunder, (h) to legal counsel and
independent auditors and (i) subject to obtaining a prior written agreement for
the benefit of the Borrower on terms substantially similar to those contained in
this Section, to any actual or proposed Participant or Assignee.
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SECTION 10.11. WAIVER OF JURY TRIAL. EACH OBLIGOR AND EACH BANK PARTY
HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
TEKNI-PLEX, INC., as Borrower
By /s/ F. Patrick Smith
------------------------------------
Title: Chief Executive Officer
Address: 201 Industrial Parkway
Somerville, NJ
Facsimile: 908-722-4867
DOLCO PACKAGING CORP., as
Guarantor
By /s/ F. Patrick Smith
------------------------------------
Title: Chief Executive Officer
Address: 201 Industrial Parkway
Somerville, NJ
Facsimile: 908-722-4967
FLEET BANK, NATIONAL ASSOCIATION
By /s/ Orest Temnycky
------------------------------------
Title: Vice President
HELLER FINANCIAL, INC.
By /s/ Christopher A. O'Donnell
------------------------------------
Title: Vice President
LASALLE NATIONAL BANK
By /s/ J.C. Tucker
------------------------------------
Title: Senior Vice President
SUMMIT BANK
By /s/ Robert D. Mace
------------------------------------
Title: Assistant Vice President
81
<PAGE> 87
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Bank
and LC Issuing Bank
By /s/ Kathleen McGowan
------------------------------------
Title: Vice President
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Agent
By /s/ Kathleen McGowan
------------------------------------
Title: Vice President
82
<PAGE> 88
COMMITMENT SCHEDULE
<TABLE>
<CAPTION>
Bank Commitment
---- ----------
<S> <C>
Morgan Guaranty Trust Company of New York $15,000,000
Fleet Bank, National Association $15,000,000
Heller Financial, Inc. $15,000,000
LaSalle National Bank $15,000,000
Summit Bank/United Jersey Bank $15,000,000
-----------
Total $75,000,000
</TABLE>
<PAGE> 89
PRICING SCHEDULE
Each of "Commitment Fee Rate", "Euro-Dollar Margin", "LC Fee Rate" and
"Base Rate Margin" means, for any date, the percentage set forth below in the
row opposite such term and in the column corresponding to the Pricing Level that
applies at such date:
<TABLE>
<CAPTION>
================================================================================
Pricing Level Level I Level II Level III Level IV Level V Level VI
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Commitment Fee Rate 0.25% 0.30% 0.375% 0.375% 0.50% 0.50%
- --------------------------------------------------------------------------------
Euro-Dollar Margin 1.0% 1.25% 1.50% 1.75% 2.125% 2.50%
- --------------------------------------------------------------------------------
Base Rate Margin 0.0% 0.25% 0.50% 0.75% 1.125% 1.50%
- --------------------------------------------------------------------------------
LC Fee Rate 1.0% 1.25% 1.50% 1.75% 2.125% 2.50%
================================================================================
</TABLE>
For purposes of this Schedule, the following terms have the following
meanings:
"Level I Pricing" applies at any date after September 30, 1997 if, as of
such date, the Leverage Ratio is less than 2 to 1.
"Level II Pricing" applies at any date after September 30, 1997 if, as of
such date, (i) the Leverage Ratio is less than or equal to 2.25 to 1 and (ii)
Level I Pricing does not apply.
"Level III Pricing" applies at any date after September 30, 1997 if, as of
such date, (i) the Leverage Ratio is less than or equal to 2.5 to 1 and (ii)
neither Level I Pricing nor Level II Pricing applies.
"Level IV Pricing" applies from the Closing Date through
September 30, 1997 and at any date thereafter if, as of such date, (i) the
Leverage Ratio is less than or equal to 3 to 1 and (ii) none of Level I Pricing,
Level II Pricing and Level III Pricing applies.
"Level V Pricing" applies on any date after September 30, 1997 if, as of
such date, (i) the Leverage Ratio is less than or equal to 4 to 1 and (ii) none
of Level I Pricing, Level II Pricing, Level III Pricing and Level IV Pricing
applies.
<PAGE> 90
"Level VI Pricing" applies on any date after September 30, 1997 if, as of
such date, (i) the Leverage Ratio is greater than 4 to 1.
"Leverage Ratio" means, on any date, the Leverage Ratio set forth in the
most recent certificate delivered pursuant to Section 5.01(c); provided that
unless the Required Banks otherwise agree, if the Borrower has failed to deliver
the financial statements and accompanying certificates most recently required to
have been delivered within the periods specified therefor in Section 5.01, Level
VI Pricing shall apply until the next date on which financial statements and
accompanying certificates are timely delivered.
"Pricing Level" refers to the determination of which of Level I, Level II,
Level III, Level IV, Level V or Level VI Pricing applies on any day.
2
<PAGE> 91
SCHEDULE 1
DEBT OF THE BORROWER AND ITS SUBSIDIARIES
A. None
B. None
<PAGE> 92
SCHEDULE 2
SUBSIDIARIES*
DOLCO PACKAGING CORP., a Delaware corporation
- --------
* Tekni-Plex Inc. has an additional subsidiary, Dolco Packaging Ltd., a
corporation organized under the laws of British Columbia, which holds no assets,
conducts no business and has filed for dissolution under the laws of British
Columbia.
<PAGE> 93
EXHIBIT A - Note
NOTE
New York, New York
--------- --, ----
For value received, TEKNI-PLEX, INC., a Delaware corporation (the
"Borrower"), promises to pay to the order of ______________________ (the
"Bank"), for the account of its Applicable Lending Office, the unpaid principal
amount of each Loan made by the Bank to the Borrower pursuant to the Credit
Agreement referred to below on the maturity date provided for in the Credit
Agreement. The Borrower promises to pay interest on the unpaid principal amount
of each such Loan on the dates and at the rate or rates provided for in the
Credit Agreement. All such payments of principal and interest shall be made in
lawful money of the United States in Federal or other immediately available
funds at the office of Morgan Guaranty Trust Company of New York, 60 Wall
Street, New York, New York.
All Loans made by the Bank, the respective types thereof and all
repayments of the principal thereof shall be recorded by the Bank and, if the
Bank so elects in connection with any transfer or enforcement hereof,
appropriate notations to evidence the foregoing information with respect to each
such Loan then outstanding may be endorsed by the Bank on the schedule attached
hereto, or on a continuation of such schedule attached to and made a part
hereof; provided that the failure of the Bank to make any such recordation or
endorsement shall not affect the Borrower's obligations hereunder or under the
Credit Agreement.
This note is one of the Notes referred to in the Credit Agreement dated as
of May 8, 1997 among Tekni-Plex, Inc., the Guarantors party thereto, the Banks
party thereto, the LC Issuing Banks party thereto and Morgan Guaranty Trust
Company of New York, as Agent (as the same may be amended from time to time, the
"Credit Agreement"). Terms defined in the Credit Agreement are used herein with
the same meanings. Reference is made to the Credit Agreement for provisions for
the prepayment hereof and the acceleration of the maturity hereof.
<PAGE> 94
The payment in full of the principal and interest on this note has,
pursuant to the provisions of the Credit Agreement, been unconditionally
guaranteed by certain Guarantors.
TEKNI-PLEX, INC.
By_______________________
Name:
Title:
2
<PAGE> 95
Loans and Payments of Principal
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
Date Amount Type Amount of
of Principal Notation
Loan Repaid Made By
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
</TABLE>
3
<PAGE> 96
EXHIBIT B - Opinion of Counsel for the Obligors
OPINION OF
COUNSEL FOR THE OBLIGORS
[LETTERHEAD OF WSP&R]
May 8, 1997
To the Banks and the Agent
Referred to Below
c/o Morgan Guaranty Trust Company
of New York, as Agent
60 Wall Street
New York, New York 10260
Ladies and Gentlemen:
We have acted as New York counsel to Tekni-Plex, Inc. (the "Borrower") and
Dolco Packaging Corp. ("Dolco"; each of the Borrower and Dolco being referred to
herein, individually, as an "Obligor" and, collectively, as the "Obligors") in
connection with the negotiation, execution and delivery of the Credit Agreement,
dated as of May 8, 1997, among the Borrower, the Guarantors parties thereto, the
Banks parties thereto, the LC Issuing Banks referred to therein and Morgan
Guaranty Trust Company of New York, as Agent (the "Credit Agreement").
This opinion is delivered to you pursuant to Section 3.01(b) of the Credit
Agreement. Capitalized terms used herein and not otherwise defined herein are
used with the meanings ascribed to such terms in the Credit Agreement. The
Credit Agreement, together with the Notes, the Mortgages, the Security
Agreement, the Pledge Agreement, the Copyright Security Agreement (as defined in
the Security Agreement), the Patent Security Agreement (as defined in the
Security Agreement) and the Trademark Security Agreement (as defined in the
Security Agreement) being entered into on the date hereof, are referred to
herein as the "Loan Documents".
<PAGE> 97
We have examined originals or copies, certified or otherwise identified to
our satisfaction, of such documents, corporate records, certificates of public
officials and other instruments, and have conducted such other investigations of
fact and law, as we have deemed necessary or advisable for purposes of this
opinion.
On the basis of the foregoing and the assumptions hereinafter set forth,
and subject to the qualifications and limitations hereinafter set forth, we are
of the opinion that:
1. Each Obligor is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Delaware, and has all corporate
power and authority required to carry on its business as described in the
Offering Memorandum dated April 1, 1997 of the Borrower relating to its 11 1/4%
Senior Subordinated Notes due 2007.
2. The execution and delivery by each Obligor of the Loan Documents to
which such Obligor is a party and the performance by such Obligor of its
obligations thereunder (i) are within such Obligor's corporate powers and have
been duly authorized by all necessary corporate action, (ii) require no action
by or in respect of, or filing with, any governmental body, agency or official
of the State of New York or the United States of America (except as contemplated
by the Loan Documents), (iii) do not contravene, or constitute a default under,
any provision of any applicable law or regulation of the State of New York or
the United States of America or of the charter or by-laws of such Obligor or of
(x) any agreement or instrument known to us to which either Obligor is a party
or by which either Obligor or any of its properties is bound or (y) to the best
of our knowledge after due inquiry, any judgment, injunction, order or decree
binding upon such Obligor, and (iv) to the best of our knowledge after due
inquiry, will not result in the creation or imposition of any Lien on any asset
of such Obligor (except for the Liens created pursuant to the Collateral
Documents).
3. The Loan Documents stated to be governed by the law of the State of New
York and to which each Obligor is a party constitute the valid and binding
agreements of such Obligor, and the Notes issued by the Borrower constitute the
valid and binding obligations of the Borrower, in each case enforceable in
accordance with its terms.
4. To the best of our knowledge after due inquiry, there is no action,
suit or proceeding pending against, or threatened against, either Obligor before
any court or arbitrator or any governmental body, agency or official, in which
there is
2
<PAGE> 98
a reasonable possibility of an adverse decision which could materially adversely
affect the business, financial position or results of operations of such
Obligor, or which in any manner questions the validity of any Loan Document.
5. Neither Obligor is an "investment company" within the meaning of the
Investment Company Act of 1940, as amended, or is, directly or indirectly,
controlled by or acting on behalf of any Person which is an "investment company"
within the meaning of said Act.
6. Neither Obligor is a "holding company", or an "affiliate" of a "holding
company" or a "subsidiary company" of a "holding company", within the meaning of
the Public Utility Holding Company Act of 1935, as amended.
7. Each of the Collateral Documents stated to be governed by the law of
the State of New York creates as security for the secured obligations described
therein, including any future obligations which are secured obligations, a valid
security interest, for the benefit of the secured parties named therein, in all
of the right, title and interest of each Obligor, in such Obligor's Collateral
described therein, to the extent that the New York Uniform Commercial Code (the
"UCC"), the United States Copyright Act, the United States Patent Act or the
United States Trademark Act is applicable to the creation of security interests
therein (the "Security Interests").
8. Upon delivery of the certificate representing the outstanding shares of
Dolco (the "Pledged Stock"), together with the related duly executed stock
power, to the Agent in the State of New York in accordance with the terms of the
Pledge Agreement and assuming the continued possession thereof in the State of
New York by the Agent and the absence of any notice on the part of the Agent or
any Bank of any adverse claim (as defined in Section 8-302(2) of the UCC) in
respect thereof, the Security Interest in such Pledged Stock will constitute a
perfected security interest under such Pledge Agreement, which security interest
will have priority over any other security interest in the Pledged Stock which
can be perfected under the UCC, and no registration, recordation or filing with
any governmental body or agency is required for the perfection of such security
interest.
9. The Security Interests (as defined in the Security Agreement and the
Pledge Agreement) will validly secure the Secured Obligations (as so defined) in
respect of all future Loans made by the Banks to, and all obligations with
respect to Letters of Credit incurred by, either Obligor, whether or not at the
time such Loans are made or such obligations are incurred an Event of Default or
other
3
<PAGE> 99
event not within the control of the Banks has relieved or may relieve the Banks
from their obligations to make such Loans or to issue such Letters of Credit,
and are perfected to the extent set forth in paragraph 8 above with respect to
such Secured Obligations.
The opinion expressed above are subject to the following qualifications
and limitations:
(a) our opinion is subject to the effect of (i) applicable bankruptcy,
insolvency, reorganization, fraudulent conveyance and other laws affecting
creditors' rights generally, (ii) general equitable principles, (iii)
requirements of reasonableness, good faith and fair dealing, and (iv)
additionally in the case of indemnities and exculpatory provisions
(including certain waivers) in the Loan Documents, public policy;
(b) certain remedial provisions of the Collateral Documents we are opining
on may be unenforceable in whole or in part, but the inclusion of such
provisions does not affect the validity of the balance of such Loan
Documents, and the practical realization of the benefits created by such
Loan Documents taken as a whole will not be materially impaired by the
unenforceability of those particular provisions; in addition, certain
remedial provisions of such Loan Documents may be subject to procedural
requirements not set forth therein;
(c) the Security Interests will not be enforceable with respect to, or
attach to, any Collateral until value has been given and the applicable
Obligor has rights in such Collateral;
(d) we express no opinion as to the right, title or interest of any Person
in or to, or the legal or equitable ownership of, any of the Collateral or
the perfection or priority of any Lien (except to the limited extent set
forth in paragraph 8 above);
(e) we express no opinion as to Section 10.08 of the Credit Agreement,
insofar as such Section relates to the subject matter jurisdiction of
federal courts;
(f) we express no opinion as to the effect of the law of any jurisdiction
other than the State of New York in which enforcement of the Credit
Agreement or the Notes may be sought which limits the rate of interest
legally chargeable or collectible; and
4
<PAGE> 100
(g) whenever our opinion is stated to be "to the best of our knowledge
after due inquiry", we have relied exclusively upon certificates of
officers (after the discussion of the contents thereof with such officers)
of the Borrower or certificates of others or representations and
warranties in the Loan Documents, as to the existence or nonexistence of
the circumstances upon which such opinion is predicated. We have no reason
to believe, however, that any such certificate or representation or
warranty is untrue or inaccurate in any material respect.
We have assumed the accuracy and completeness of all, and the authenticity
of all original, certificates, agreements, documents, records and other
materials submitted to us, the conformity with the originals of any copies
submitted to us, the genuineness of all signatures and the legal capacity of all
natural persons. We have assumed that the Loan Documents constitute (subject to
the same qualifications as are contained in subparagraph (a) of the immediately
preceding paragraph) the valid and legally binding agreements of the Banks, the
LC Issuing Banks and the Agent parties thereto.
We are members of the bar of the State of New York, and we do not express
herein any opinion as to any law other than the law of the State of New York,
the federal law of the United States of America and the General Corporation Law
of the State of Delaware.
This opinion is being furnished only to the Banks and the Agent and is
solely for their benefit in connection with the transactions provided for in or
contemplated by the Credit Agreement. This opinion may not be otherwise
distributed or relied upon by any person, firm or corporation for any purpose,
or quoted or reproduced, in whole or in part, in any other document or filed
with any government agency without our prior written consent, except that a copy
of this opinion may be delivered to any Participant or Assignee under the Credit
Agreement.
Very truly yours,
5
<PAGE> 101
EXHIBIT C - Opinion of Special Counsel for the Agent
OPINION OF
DAVIS POLK & WARDWELL, SPECIAL COUNSEL
FOR THE AGENT
April , 1997
To the Banks and the Agent
Referred to Below
c/o Morgan Guaranty Trust Company
of New York, as Agent
60 Wall Street
New York, New York 10260
Dear Sirs:
We have participated in the preparation of the Credit Agreement dated as
of April , 1997 (the "Credit Agreement") among Tekni-Plex, Inc., a Delaware
corporation (the "Borrower"), the Guarantors party thereto, the Banks party
thereto, the LC Issuing Banks referred to therein and Morgan Guaranty Trust
Company of New York, as Agent, and have acted as special counsel for the Agent
for the purpose of rendering this opinion pursuant to Section 3.01(c) of the
Credit Agreement. Terms defined in the Credit Agreement are used herein as
therein defined.
We have examined originals or copies, certified or otherwise identified to
our satisfaction, of such documents, corporate records, certificates of public
officials and other instruments and have conducted such other investigations of
fact and law as we have deemed necessary or advisable for purposes of this
opinion.
Upon the basis of the foregoing, we are of the opinion that:
1. The execution, delivery and performance by the Borrower of the Loan
Documents to which it is a party are within the Borrower's corporate powers and
have been duly authorized by all necessary corporate action.
<PAGE> 102
2. Each Loan Document to which the Borrower is a party (other than the
Notes) constitutes a valid and binding agreement of the Borrower and each Note
issued thereunder today constitutes a valid and binding obligation of the
Borrower, in each case enforceable in accordance with its terms, subject to
applicable bankruptcy, insolvency or similar laws affecting creditors' rights
generally and general principles of equity.
We are members of the Bar of the State of New York and the foregoing
opinion is limited to the laws of the State of New York, the federal laws of the
United States of America and the General Corporation Law of the State of
Delaware. In giving the foregoing opinion, we express no opinion as to the
effect (if any) of any law of any jurisdiction (except the State of New York) in
which any Bank is located which limits the rate of interest that such Bank may
charge or collect. This opinion is rendered solely to you in connection with the
above matter.
This opinion may not be relied upon by you for any other purpose or relied
upon by any other Person without our prior written consent.
Very truly yours,
2
<PAGE> 103
EXHIBIT D - Assignment and Assumption Agreement
ASSIGNMENT AND ASSUMPTION AGREEMENT
AGREEMENT dated as of _________, 19__ among <NAME OF ASSIGNOR> (the
"Assignor"), <NAME OF ASSIGNEE> (the "Assignee")[, TEKNI-PLEX, INC. (the
"Borrower") and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Agent (the
"Agent").]
WHEREAS, this Assignment and Assumption Agreement (the "Agreement")
relates to the Credit Agreement dated as of May 8, 1997 among the Borrower, the
Guarantors party thereto, the Assignor and the other Banks party thereto, the LC
Issuing Banks party thereto and the Agent (as amended from time to time, the
"Credit Agreement");
WHEREAS, as provided under the Credit Agreement, the Assignor has a
Commitment to make Loans to the Borrower and participate in Letters of Credit in
an aggregate principal amount at any time outstanding not to exceed
$____________;
WHEREAS, Loans made to the Borrower by the Assignor under the Credit
Agreement in the aggregate principal amount of $__________ are outstanding at
the date hereof; and
WHEREAS, Letters of Credit with a total amount available for drawing
thereunder of $__________ are outstanding at the date hereof
WHEREAS, the Assignor proposes to assign to the Assignee all of the rights
of the Assignor under the Credit Agreement in respect of a portion of its
Commitment thereunder in an amount equal to $__________ (the "Assigned Amount"),
together with a corresponding portion of each of its outstanding Loans and its
LC Exposure, and the Assignee proposes to accept assignment of such rights and
assume the corresponding obligations from the Assignor on such terms;
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements contained herein, the parties hereto agree as follows:
SECTION 1. Definitions. All capitalized terms not otherwise defined herein
have the respective meanings set forth in the Credit Agreement.
<PAGE> 104
SECTION 2. Assignment. The Assignor hereby assigns and sells to the
Assignee all of the rights of the Assignor under the Credit Agreement to the
extent of the Assigned Amount, and the Assignee hereby accepts such assignment
from the Assignor and assumes all of the obligations of the Assignor under the
Credit Agreement to the extent of the Assigned Amount, including the purchase
from the Assignor of the corresponding portion of the outstanding principal
amount of each Loan made by the Assignor and the corresponding portion of each
component of its LC Exposure. Upon the execution and delivery hereof by the
Assignor, the Assignee, [the Borrower, the Agent and the LC Issuing Banks] and
the payment of the amounts specified in Section 3 required to be paid on the
date hereof (i) the Assignee shall, as of the date hereof, succeed to the rights
and be obligated to perform the obligations of a Bank under the Credit Agreement
with a Commitment in an amount equal to the Assigned Amount, and (ii) the
Commitment of the Assignor shall, as of the date hereof, be reduced by a like
amount and the Assignor released from its obligations under the Credit Agreement
to the extent such obligations have been assumed by the Assignee. The assignment
provided for herein shall be without recourse to the Assignor.
SECTION 3. Payments. As consideration for the assignment and sale
contemplated in Section 2 hereof, the Assignee shall pay to the Assignor on the
date hereof in Federal funds the amount heretofore agreed between them.*
Commitment and/or facility fees accrued before the date hereof are for the
account of the Assignor and such fees accruing on and after the date hereof with
respect to the Assigned Amount are for the account of the Assignee. Each of the
Assignor and the Assignee agrees that if it receives any amount under the Credit
Agreement which is for the account of the other party hereto, it shall receive
the same for the account of such other party to the extent of such other party's
interest therein and promptly pay the same to such other party.
[SECTION 4. Consent of the Agent and the LC Issuing Banks. This Agreement
is conditioned upon the consent of the Agent and the LC Issuing Banks pursuant
to Section 10.06(c) of the Credit Agreement. Pursuant to Section 10.06(c), the
Borrower agrees to execute and deliver a Note payable to the order of the
Assignee to evidence the assignment and assumption provided for herein.]
- --------
* Amount should combine principal together with accrued interest and breakage
compensation, if any, to be paid by the Assignee, net of any portion of any
upfront fee to be paid by the Assignor to the Assignee. It may be preferable in
an appropriate case to specify these amounts generically or by formula rather
than as a fixed sum.
2
<PAGE> 105
SECTION 5. Non-Reliance on Assignor. The Assignor makes no representation
or warranty in connection with, and shall have no responsibility with respect
to, the solvency, financial condition or statements of any Obligor, or the
validity and enforceability of the any Obligor's obligations under the Credit
Agreement or any Note. The Assignee acknowledges that it has, independently and
without reliance on the Assignor, and based on such documents and information as
it has deemed appropriate, made its own credit analysis and decision to enter
into this Agreement and will continue to be responsible for making its own
independent appraisal of the business, affairs and financial condition of the
Obligors.
SECTION 6. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
SECTION 7. Counterparts. This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered by their duly authorized officers as of the date first
above written.
<NAME OF ASSIGNOR>
By____________________________
Name:
Title:
<NAME OF ASSIGNEE>
By____________________________
Name:
Title:
The undersigned consent to the foregoing assignment.
[TEKNI-PLEX, INC.
By____________________________
Name:
3
<PAGE> 106
Title:
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK,
as Agent and LC Issuing Bank
By____________________________
Name:
Title:
[OTHER LC ISSUING BANKS]
By____________________________
Name:
Title: ]
4
<PAGE> 107
EXHIBIT E
SECURITY AGREEMENT
AGREEMENT dated as of May 8, 1997 between TEKNI-PLEX, INC. (with its
successors, the "Borrower"), DOLCO PACKAGING CORP. (together with the Borrower
and any other Person which becomes a Grantor pursuant to Section 3(B), the
"Grantors" and each a "Grantor") and MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
as Agent (with its successor in such capacity, the "Agent").
WITNESSETH:
WHEREAS, the Borrower, certain banks (the "Banks") and Morgan Guaranty
Trust Company of New York, as agent for such Banks, are parties to a Credit
Agreement of even date herewith (as the same may be amended from time to time,
the "Credit Agreement"); and
WHEREAS, in order to induce said Banks and Morgan Guaranty Trust
Company of New York, as agent for such Banks, to enter into the Credit
Agreement, each Grantor has agreed to grant a continuing security interest in
and to the Collateral (as hereafter defined) to secure the Grantors' obligations
under the Credit Agreement and the obligations of the Borrower under the Notes
issued pursuant thereto;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
SECTION 1. Definitions
Terms defined in the Credit Agreement and not otherwise defined herein
have, as used herein, the respective meanings provided for therein. The
following additional terms, as used herein, have the following respective
meanings:
5
<PAGE> 108
"Accounts" means all "accounts" (as defined in the UCC) now owned or
hereafter acquired by any Grantor, and shall also mean and include all accounts
receivable, contract rights, book debts and other obligations or indebtedness
owing to any Grantor arising from the sale, lease or exchange of goods or other
property by it and/or the performance of services by it (including, without
limitation, any such obligation which might be characterized as an account,
contract right or general intangible under the Uniform Commercial Code in effect
in any jurisdiction) and all of any Grantor's rights in, to and under all
purchase orders for goods, services or other property, and all of any Grantor's
rights to any goods, services or other property represented by any of the
foregoing (including returned or repossessed goods and an unpaid seller's right
of rescission, replevin, reclamation and rights to stoppage in transit) and all
monies due to or to become due to any Grantor under all contracts for the sale,
lease or exchange of goods or other property and/or the performance of services
by it (whether or not yet earned by performance on the part of such Grantor), in
each case whether now in existence or hereafter arising or acquired including,
without limitation, the right to receive the proceeds of said purchase orders
and contracts and all collateral security and guarantees of any kind given by
any Person with respect to any of the foregoing.
"Collateral" has the meaning set forth in Section 3.
"Copyright License" means any agreement now or hereafter in existence
granting to any Grantor, or pursuant to which any Grantor has granted to any
other Person, any right to use, copy, reproduce, distribute, prepare derivative
works based upon, display or publish any records or other materials on which a
Copyright is in existence or may come into existence.
"Copyrights" means all the following: (i) all copyrights under the laws
of the United States or any other country (whether or not the underlying works
of authorship have been published), all registrations and recordings thereof,
all intellectual property rights to works of authorship (whether or not
published), and all applications for copyrights under the laws of the United
States or an other country, including, without limitation, registrations,
recordings and applications in the United States Copyright Office or in any
similar office or agency of the United States, any State thereof or any other
country or any political subdivision thereof, including, without limitation,
those described in Schedule 1 to Exhibit E hereto, (ii) all reissues, renewals
and extensions thereof, (iii) all claims for, and rights to sue for, past or
future infringements of any of the foregoing, and (iv) all income, royalties,
damages and payments now or hereafter due or payable with respect to any of the
foregoing, including, without limitation, damages and payments for past or
future infringements thereof.
"Copyright Security Agreement" means a Copyright Security Agreement
executed and delivered by a Grantor in favor of the Agent, for the benefit of
the Banks, substantially in the form of Exhibit E hereto, as the same may be
amended from time to time.
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"Documents" means all "documents" (as defined in the UCC) or other
receipts covering, evidencing or representing goods, now owned or hereafter
acquired by any Grantor.
"Equipment" means all "equipment" (as defined in the UCC) now owned or
hereafter acquired by any Grantor, including, without limitation, all motor
vehicles, trucks, trailers and Rolling Stock.
"General Intangibles" means all "general intangibles" (as defined in
the UCC) now owned or hereafter acquired by any Grantor, including, without
limitation, (i) all obligations or indebtedness owing to any Grantor (other than
Accounts) from whatever source arising, (ii) all Copyrights, Copyright Licenses,
Patents, Patent Licenses, Trademarks, Trademark Licenses, rights in intellectual
property, goodwill, trade names, brand names, service marks, trade secrets,
permits and licenses, (iii) all rights or claims in respect of refunds for taxes
paid, and (iv) all rights in respect of any pension plan or similar arrangement
maintained for employees of any member of the ERISA Group.
"Instruments" means all "instruments", "chattel paper" or "letters of
credit" (each as defined in the UCC) evidencing, representing, arising from or
existing in respect of, relating to, securing or otherwise supporting the
payment of, any of the Accounts, including (but not limited to) promissory
notes, drafts, bills of exchange and trade acceptances, now owned or hereafter
acquired by any Grantor.
"Inventory" means all "inventory" (as defined in the UCC), now owned or
hereafter acquired by any Grantor, wherever located, and shall also mean and
include, without limitation, all raw materials and other materials and supplies,
work-in-process and finished goods and any products made or processed therefrom
and all substances, if any, commingled therewith or added thereto.
"Leased Rolling Stock" has the meaning set forth in Section 3(A).
"Patent License" means any agreement now or hereafter in existence
granting to any Grantor, or pursuant to which any Grantor has granted to any
other Person, any right with respect to any Patent or any invention now or
hereafter in existence, whether patentable or not, whether a patent or
application for patent is in existence on such invention or not, and whether a
patent or application for patent on such invention may come into existence.
"Patents" means all of the following: (i) all letters patent and design
letters patent of the United States or any other country and all applications
for letters patent and design letters patent of the United States or any other
country, including, without limitation, applications in the United States Patent
and Trademark Office or in any similar office or agency of the
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United States, any State thereof or any other country or any political
subdivision thereof, including, without limitation, those described in Schedule
1 to Exhibit C hereto, (ii) all reissues, divisions, continuations,
continuations-in-part, renewals and extensions thereof, (iii) all claims for,
and rights to sue for, past or future infringements of any of the foregoing, and
(iv) all income, royalties, damages and payments now or hereafter due or payable
with respect to any of the foregoing, including, without limitation, damages and
payments for past or future infringements thereof
"Patent Security Agreement" means the Patent Security Agreement
executed and delivered by each Grantor in favor of the Agent, for the benefit of
the Banks, substantially in the form of Exhibit C hereto, as the same may be
amended from time to time.
"Perfection Certificate" means a certificate substantially in the form
of Exhibit A, completed and supplemented with the schedules and attachments
contemplated thereby to the satisfaction of the Agent, and duly executed by the
chief executive officer of each Grantor.
"Permitted Liens" means the Security Interests and the Liens on the
Collateral permitted to be created, to be assumed or to exist pursuant to
Section 5.09 of the Credit Agreement.
"Proceeds" means all proceeds of, and all other profits, products,
rents or receipts, in whatever form, arising from the collection, sale, lease,
exchange, assignment, licensing or other disposition of, or other realization
upon, Collateral, including, without limitation, all claims of each Grantor
against third parties for loss of, damage to or destruction of, or for proceeds
payable under, or unearned premiums with respect to, policies of insurance in
respect of, any Collateral, and any condemnation or requisition payments with
respect to any Collateral, in each case whether now existing or hereafter
arising.
"Rolling Stock" means all railcars, barges and other water carrier
equipment, and all accessions, appurtenances and parts installed on and
additions thereto, and replacements thereof, now owned or hereafter acquired by
the Company.
"Rolling Stock Leases" has the meaning set forth in Section 3(A).
"Rolling Stock Revenues" means any monies, revenues, payments or
credits now owned or hereafter acquired by any Grantor which are generated by or
attributable to the Rolling Stock or Leased Rolling Stock, including, without
limitation, railcar hire payments, mileage allowances, per diem mileage
payments, empty mileage allowances, mileage credits and excess mileage credits,
in each case whether now existing or hereafter arising.
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"Secured Obligations" means the obligations secured under this
Agreement including (a) all principal of and interest (including, without
limitation, any interest which accrues after the commencement of any case,
proceeding or other action relating to the bankruptcy, insolvency or
reorganization of any Grantor, whether or not allowed or allowable as a claim in
any such proceeding) on any loan or any letter of credit reimbursement
obligation under, or any note issued pursuant to, the Credit Agreement, (b) all
other amounts payable by the Grantors hereunder or under the Credit Agreement or
any other Security Document, and (c) any renewals or extensions of any of the
foregoing.
"Security Interests" means the security interests in the Collateral
granted hereunder securing the Secured Obligations.
"Trademark License" means any agreement now or hereafter in existence
granting to any Grantor, or pursuant to which any Grantor has granted to any
other Person, any right to use any Trademark.
"Trademarks" means all of the following: (i) all trademarks, trade
names, corporate names, company names, business names, fictitious business
names, trade styles, service marks, logos, brand names, trade dress, prints and
labels on which any of the foregoing have appeared or appear, package and other
designs, and any other source or business identifiers, and general intangibles
of like nature, and the rights in any of the foregoing which arise under
applicable law, (ii) the goodwill of the business symbolized thereby or
associated with each of them, (iii) all registrations and applications in
connection therewith, including, without limitation, registrations and
applications in the United States Patent and Trademark Office or in any similar
office or agency of the United States, any State thereof or any other country or
any political subdivision thereof, including, without limitation, those
described in Schedule 1 to Exhibit D hereto, (iv) all reissues, extensions and
renewals thereof, (v) all claims for, and rights to sue for, past or future
infringements of any of the foregoing, and (vi) all income, royalties, damages
and payments now or hereafter due or payable with respect to any of the
foregoing, including, without limitation, damages and payments for past or
future infringements thereof.
"Trademark Security Agreement" means the Trademark Security Agreement
executed and delivered by each Grantor in favor of the Agent, for the benefit of
the Banks, substantially in the form of Exhibit D hereto, as the same may be
amended from time to time.
"UCC" means the Uniform Commercial Code as in effect on the date hereof
in the State of New York; provided that if by reason of mandatory provisions of
law, the perfection or the effect of perfection or non-perfection of the
Security Interest in any Collateral is governed by the Uniform Commercial Code
as in effect in a jurisdiction other than New
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York, "UCC" means the Uniform Commercial Code as in effect in such other
jurisdiction for purposes of the provisions hereof relating to such perfection
or effect of perfection or non-perfection.
SECTION 2. Representations and Warranties
Each Grantor represents and warrants as follows:
(A) The Grantors have good and marketable title to all of the
Collateral, free and clear of any Liens other than Permitted Liens. Each Grantor
has taken all actions necessary under the UCC to perfect its interest in any
Accounts purchased or otherwise acquired by it, as against its assignors and
creditors of its assignors.
(B) No Grantor has performed any acts which would prevent the Agent
from enforcing any of the terms of this Agreement or which would limit the Agent
in any such enforcement. Other than financing statements or other similar or
equivalent documents or instruments with respect to the Security Interests and
Permitted Liens and other than documents or instruments in respect of which a
termination statement or other termination document has been filed, no financing
statement, mortgage, security agreement or similar or equivalent document or
instrument covering all or any part of the Collateral is on file or of record in
any jurisdiction in which such filing or recording would be effective to perfect
a Lien on such Collateral. No Collateral is in the possession of any Person
(other than the Grantors) asserting any claim thereto or security interest
therein, except that the Agent or its designee may have possession of Collateral
as contemplated hereby and warehousemen, carriers or other bailees may from time
to time assert claims to or security interests in Collateral in their
possession.
(C) Not less than five Domestic Business Days prior to the date of the
first Borrowing under the Credit Agreement, the Grantors shall deliver a
Perfection Certificate to the Agent. The information set forth therein shall be
correct and complete. The Grantors shall use all reasonable efforts to furnish
to the Agent, not later than 60 days following the date of the first Borrowing,
file search reports from each UCC filing office set forth in Schedule 7 to the
Perfection Certificate confirming the filing information set forth in such
Schedule.
(D) To the extent that the Collateral is subject to the UCC, the
Security Interests constitute valid security interests under the UCC securing
the Secured Obligations. When UCC financing statements in the form specified in
Exhibit A shall have been filed in the offices specified in the Perfection
Certificate, and this Agreement and any amendments hereto in appropriate form
have been filed in the office of the Secretary of the Interstate Commerce
Commission, with respect to any Rolling Stock, Leased Rolling Stock or Rolling
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Stock Leases, the Security Interests shall constitute perfected security
interests in the Collateral (except Inventory in transit) to the extent that a
security interest therein may be perfected by filing pursuant to the UCC and the
Interstate Commerce Act, prior to all other Liens and rights of others therein
except for the Permitted Liens. When the Patent Security Agreement and the
Trademark Security Agreement have been filed with the United States Patent and
Trademark Office, the Security Interests shall constitute perfected security
interests in all right, title and interest of the Grantors in Patents and
Trademarks, prior to all other Liens and rights of others therein except for
Permitted Liens. When a Copyright Security Agreement has been filed with the
United States Copyright Office, the Security Interests shall constitute
perfected security interests in all right, title and interest of the Grantors in
Copyrights, prior to all other Liens and rights of others therein except for
Permitted Liens.
(E) The Inventory and Equipment are insured in accordance with the
requirements of the Credit Agreement.
(F) The Grantors have produced or will produce all Inventory produced
by them in compliance with the applicable requirements of the Fair Labor
Standards Act, as amended.
SECTION 3. The Security Interests
(A) In order to secure the full and punctual payment of the Secured
Obligations in accordance with the terms thereof, and to secure the performance
of all of the obligations of the Grantors hereunder and under the Credit
Agreement, the Grantors hereby grant to the Agent for the ratable benefit of the
Banks a continuing security interest in and to all of the following property of
the Grantors, whether now owned or existing or hereafter acquired or arising and
regardless of where located (all being collectively referred to as the
"Collateral"):
(1) Accounts;
(2) Inventory;
(3) General Intangibles;
(4) Documents;
(5) Instruments;
(6) Equipment;
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(7) All books and records (including, without limitation, customer
lists, marketing information, credit files, price lists, operating records,
vendor and supplier price lists, sales literature, computer programs, printouts
and other computer materials and records) of any Grantor pertaining to any of
the Collateral;
(8) All right, title, claims and benefits now owned or hereafter
acquired by any Grantor in and to any railcar leases, subleases, rental
agreements and car hire contracts in which any Grantor shall at any time have
any interest, and any right, title, claim and benefits of any Grantor now owned
or hereafter acquired in and to any management agreement concerning all such
leases and agreements (collectively, "Rolling Stock Leases"); and all right,
title and interest of any Grantor in the railcars and equipment provided
pursuant to any Rolling Stock Leases ("Leased Rolling Stock"); in each case,
including, without limitation, all rights of any Grantor to receive and apply
any Rolling Stock Revenues attributable to any Leased Rolling Stock or pursuant
to any Rolling Stock Leases;
(9) All rights now owned or hereafter acquired by any Grantor to
receive and collect any Rolling Stock Revenues; and
(10) All Proceeds of all or any of the Collateral described in Clauses
1 through 9 hereof.
(B) The Borrower will cause any Subsidiary acquired after the Closing
Date to take appropriate steps to (i) become a Grantor hereunder and (ii)
immediately grant to the Agent for the ratable benefit of the Banks a first
priority security interest (subject to Permitted Liens and to restrictions
permitted by Section 5.19 of the Credit Agreement) upon all of its assets as
additional security for the Secured Obligations.
(C) The Security Interests are granted as security only and shall not
subject the Agent or any Bank to, or transfer or in any way affect or modify,
any obligation or liability of any Grantor with respect to any of the Collateral
or any transaction in connection therewith.
SECTION 4. Further Assurances; Covenants
(A) No Grantor will change its name, identity or corporate structure in
any manner unless it shall have given the Agent not less than 30 days' prior
notice thereof and delivered an opinion of counsel with respect thereto in
accordance with Section 4(L). No Grantor will change the location of (i) its
chief executive office or chief place of business or (ii) the locations where it
keeps or holds any Collateral or any records relating thereto from the
applicable location described in the Perfection Certificate unless it shall have
given the Agent
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not less than 30 days' prior notice thereof and delivered an opinion of counsel
with respect thereto in accordance with Section 4(L). The Grantors shall not in
any event change the location of any Collateral if such change would cause the
Security Interests in such Collateral to lapse or cease to be perfected, it
being understood, however, that the Grantors shall be able to transfer cash to
the extent permitted by the other provisions of this Agreement and the other
Loan Documents.
(B) Each Grantor will, from time to time, at its expense, execute,
deliver, file and record any statement, assignment, instrument, document,
agreement or other paper and take any other action, (including, without
limitation, any filings with the United States Patent and Trademark Office, any
filings with the United States Copyright Office, any filings with the Interstate
Commerce Commission, any filings of financing or continuation statements under
the UCC and any filings in, or agreements governed by the laws of, foreign
jurisdictions) that from time to time may be necessary, or that the Agent may
reasonably request, in order to create, preserve, perfect, confirm or validate
the Security Interests or to enable the Agent and the Banks to obtain the full
benefits of this Agreement, or to enable the Agent to exercise and enforce any
of its rights, powers and remedies hereunder with respect to any of the
Collateral. To the extent permitted by applicable law, each Grantor hereby
authorizes the Agent to execute and file financing statements or continuation
statements without such Grantor's signature appearing thereon. The Grantors
agree that a carbon, photographic, photostatic or other reproduction of this
Agreement or of a financing statement is sufficient as a financing statement.
The Grantors shall pay the costs of, or incidental to, any recording or filing
of any financing or continuation statements concerning the Collateral.
(C) If any Collateral is at any time in the possession or control of
any warehouseman, bailee or any of a Grantor's agents or processors, such
Grantor, if any Event of Default shall have occurred and be continuing and if
requested to do so by the Agent acting on the instructions of the Required
Banks, shall notify such warehouseman, bailee, agent or processor of the
Security Interests created hereby and to hold all such Collateral for the
Agent's account subject to the Agent's instructions.
(D) Each Grantor shall keep full and accurate books and records
relating to the Collateral, and stamp or otherwise mark such books and records
in such manner as the Required Banks may reasonably require in order to reflect
the Security Interests.
(E) Each Grantor will immediately deliver and pledge each Instrument to
the Agent, appropriately endorsed to the Agent, provided that so long as no
Event of Default shall have occurred and be continuing, each Grantor may retain
for collection in the ordinary course any Instruments received by it in the
ordinary course of business, and the Agent shall, promptly upon request of a
Grantor, make appropriate arrangements for making any other Instrument pledged
by such Grantor available to it for purposes of presentation, collection or
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renewal (any such arrangement to be effected, to the extent deemed appropriate
to the Agent, against trust receipt or like document).
(F) Each Grantor shall use all reasonable efforts to cause to be
collected from its account debtors, as and when due, any and all amounts owing
under or on account of each Account (including, without limitation, Accounts
which are delinquent, such Accounts to be collected in accordance with lawful
collection procedures) and shall apply forthwith upon receipt thereof all such
amounts as are so collected to the outstanding balance of such Account. Subject
to the rights of the Agent and the Banks hereunder if an Event of Default shall
have occurred and be continuing, each Grantor may allow in the ordinary course
of business as adjustments to amounts owing under its Accounts (i) an extension
or renewal of the time or times of payment, or settlement for less than the
total unpaid balance, which such Grantor finds appropriate in accordance with
sound business judgment and (ii) a refund or credit due as a result of returned
or damaged merchandise, all in accordance with such Grantor's ordinary course of
business consistent with its or the Borrower's historical collection practices.
The costs and expenses (including, without limitation, attorney's fees) of
collection, whether incurred by the Grantors or the Agent, shall be borne by the
Grantors.
(G) Upon the occurrence and during the continuance of any Event of
default, upon request of the Required Banks through the Agent, each Grantor will
promptly notify (and each Grantor hereby authorizes the Agent so to notify) each
account debtor in respect of any Account or Instrument that such Collateral has
been assigned to the Agent hereunder, and that any payments due or to become due
in respect of such Collateral are to be made directly to the Agent or its
designee.
(H) Each Grantor shall, (i) as soon as practicable after the date
hereof, in the case of Equipment now owned in which a security interest is
perfected by a notation on the certificate of title or similar evidence of the
ownership of such goods and (ii) within 10 days of acquiring any other similar
Equipment, in each case, (a) having a value in excess of $100,000, or (b) having
a value in excess of $50,000, if the aggregate of all such items owned by the
Grantors at any time is greater than $250,000, deliver to the Agent any and all
certificates of title, applications for title or similar evidence of ownership
of such Equipment and shall cause the Agent to be named as lienholder on any
such certificate of title or other evidence of ownership. Each Grantor shall
promptly inform the Agent of any additions to or deletions from the Equipment
exceeding $250,000 in the aggregate and shall not permit any such items to
become a fixture to real estate except pursuant to the Mortgages or an accession
to other personal property except such other property that is Collateral.
(I) Each Grantor shall as soon as practicable after the date hereof, at
its own cost and expense, cause to be plainly, distinctly, permanently and
conspicuously placed, fastened or painted upon each side of each item of Rolling
Stock a legend bearing such words as the
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Agent may request indicating the Lien over and security interest in such Rolling
Stock created hereby in letters not less than one inch in height. The Grantors
may permit the Rolling Stock to be operated within the United States, but shall
not permit the Rolling Stock to be operated outside the boundaries of the
continental United States.
(J) Subject to Section 12, without the prior written consent of the
Required Banks, no Grantor will (a) sell, lease, exchange, assign or otherwise
dispose of, or grant any option with respect to, any Collateral, except that,
subject to the rights of the Agent and the Banks hereunder if an Event of
Default shall have occurred and be continuing, such Grantor may sell, lease or
exchange ( ) Inventory and obsolete, unused or unnecessary Equipment in the
ordinary course of business, and (y) portions of any business acquired in an
Acquisition, so long as such portions have an aggregate value not in excess of
15% of the aggregate purchase price for such Acquisition, whereupon, in the case
of such a sale or exchange, the Security Interests created hereby in such item
(but not in any Proceeds arising from such sale or exchange) shall cease
immediately without any further action on the part of the Agent; or (b) create,
incur or suffer to exist any Lien with respect to any Collateral, except for
Permitted Liens.
(K) Prior to the date of the first Borrowing under the Credit
Agreement, each Grantor will cause the Agent to be named as an insured party on
each insurance policy covering risks relating to any of its Inventory and
Equipment. Each Grantor will deliver to the Agent, upon request of the Agent,
the insurance policies for such insurance or certificates of insurance
evidencing such coverage. Each such insurance policy shall include effective
waivers by the insurer of all claims for insurance premiums against the Agent or
any Bank, provide for coverage to the Agent regardless of the breach by relevant
Grantor of any warranty or representation made therein, not be subject to
co-insurance, and provide that no cancellation, termination or material
modification thereof shall be effective until at least 30 days (or, in the case
of non-payment of premiums, at least 10 days) after receipt by the Agent of
notice thereof.
(L) Each Grantor will, promptly upon request, provide to the Agent all
information and evidence it may reasonably request concerning the Collateral to
enable the Agent to enforce the provisions of this Agreement.
(M) Each Grantor shall notify the Agent promptly if it knows, or has
reason to know, that any application or registration relating to any Copyright,
Patent or Trademark may become abandoned. In the event that any Grantor receives
notice of or becomes aware that any right to a Copyright, Copyright License,
Patent, Patent License, Trademark or Trademark License has been infringed,
misappropriated or diluted by a third party, such Grantor shall notify the Agent
promptly after it learns thereof and shall, unless such Grantor shall reasonably
determine that any such action would be of insufficient economic value,
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promptly take such other actions as such Grantor shall reasonably deem
appropriate under the circumstances to protect such Copyright, Copyright
License, Patent, Patent License, Trademark or Trademark License. Within thirty
(30) days after having filed an application for the registration of any
Copyright with the United States Copyright Office or any Patent or Trademark
with the United States Patent and Trademark Office, or with any similar office
or agency in any other country or any political subdivision thereof, upon
request of the Agent, each Grantor shall execute and deliver any and all
agreements, instruments, documents and papers the Agent may request to evidence
the Security Interests in such Copyright, Patent or Trademark and the goodwill
and general intangibles of such Grantor relating thereto or represented thereby.
Each Grantor hereby appoints the Agent its attorney-in-fact to execute and file
all such writings for the foregoing purposes, all acts of such attorney being
hereby ratified and confirmed; such power, being coupled with an interest, shall
be irrevocable until the Secured Obligations are paid in full. The Agent shall
provide copies to each Grantor of any writings in which the Agent has acted as
attorney-in-fact within 30 days after the execution of such writings.
(N) Not more than four months nor less than 10 days prior to (i) as to
all Collateral, each anniversary of the date hereof during the term of the
Credit Agreement, if requested to do so by the Agent acting on the instructions
of the Required Banks, and (ii) as to the Collateral affected by such action,
each date on which it proposes to take any action contemplated by Section 4(A),
each Grantor shall, at its cost and expense, cause to be delivered to the Banks
an opinion of counsel, satisfactory to the Agent, substantially in the form of
Exhibit B to the effect that all financing statements and amendments or
supplements thereto, continuation statements and other documents required to be
recorded or filed in order to perfect and protect the Security Interests, to the
extent such Security Interests can be perfected by recording or filing, for a
period, specified in such opinion, continuing until a date not earlier than six
months from the date of such opinion, against all creditors of and purchasers
from such Grantor have been filed in each filing office necessary for such
purpose and that all filing fees and taxes, if any, payable in connection with
such filings have been paid in full.
(O) Within five (5) Business Days of entering into, amending, modifying
or terminating any Rolling Stock Lease, each Grantor will deliver a copy of such
Rolling Stock Lease, amendment or modification or notice of such termination to
the Agent.
(P) From time to time upon request by the Agent, each Grantor shall, at
its cost and expense, cause to be delivered to the Banks an opinion of counsel
satisfactory to the Agent as to such matters relating to the transactions
contemplated hereby as the Required Banks may reasonably request.
SECTION 5. General Authority
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Each Grantor hereby irrevocably appoints the Agent its true and lawful
attorney, with full power of substitution, in the name of the Grantors, the
Agent, the Banks or otherwise, for the sole use and benefit of the Agent and the
Banks, but at such Grantor's expense, to the extent permitted by law to
exercise, at any time and from time to time while an Event of Default has
occurred and is continuing, all or any of the following powers with respect to
all or any of the Collateral:
(i) to demand, sue for, collect, receive and give acquittance for any
and all monies due or to become due thereon or by virtue thereof,
(ii) to settle, compromise, compound, prosecute or defend any action or
proceeding with respect thereto,
(iii) to sell, transfer, assign or otherwise deal in or with the same
or the proceeds or avails thereof, as fully and effectually as if the Agent were
the absolute owner thereof, and
(iv) to extend the time of payment of any or all thereof and to make
any allowance and other adjustments with reference thereto;
provided that the Agent shall give each Grantor not less than thirty (30) days'
prior notice of the time and place of any sale or other intended disposition of
any of the Collateral, except any Collateral which is perishable or threatens to
decline speedily in value or is of a type customarily sold on a recognized
market. The Agent and each Grantor agree that such notice constitutes
"reasonable notification" within the meaning of Section 9-504(3) of the UCC.
SECTION 6. Remedies upon Event of Default
(A) If any Event of Default has occurred and is continuing, the Agent
may exercise on behalf of the Banks all rights of a secured party under the UCC
(whether or not in effect in the jurisdiction where such rights are exercised),
and, in addition, the Agent may, without being required to give any notice,
except as herein provided or as may be required by mandatory provisions of law,
(i) apply cash, if any, then held by it as Collateral as specified in Section 8
and (ii) if there shall be no such cash or if such cash shall be insufficient to
pay all the Secured Obligations in full, sell the Collateral or any part thereof
at public or private sale, for cash, upon credit or for future delivery, and at
such price or prices as the Agent may deem satisfactory. The Agent or any Bank
may be the purchaser of any or all of the Collateral so sold at any public sale
(or, if the Collateral is of a type customarily sold in a recognized market or
is of a type which is the subject of widely distributed standard price
quotations, at any private sale). Each Grantor will execute and deliver such
documents and take such other action as the Agent deems necessary or advisable
in order that any such sale may be made in compliance with law. Upon any such
sale the Agent shall have the right to
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deliver, assign and transfer to the purchaser thereof the Collateral so sold.
Each purchaser at any such sale shall hold the Collateral so sold to it
absolutely and free from any claim or right of whatsoever kind, including any
equity or right of redemption of any Grantor which may be waived, and each
Grantor, to the extent permitted by law, hereby specifically waives all rights
of redemption, stay or appraisal which it has or may have under any law now
existing or hereafter adopted. The notice (if any) of such sale required by
Section 5 shall (1) in the case of a public sale, state the time and place fixed
for such sale, and (2) in the case of a private sale, state the day after which
such sale may be consummated. Any such public sale shall be held at such time or
times within ordinary business hours and at such place or places as the Agent
may fix in the notice of such sale. At any such sale the Collateral may be sold
in one lot as an entirety or in separate parcels, as the Agent may determine.
The Agent shall not be obligated to make any such sale pursuant to any such
notice. The Agent may, without notice or publication, adjourn any public or
private sale or cause the same to be adjourned from time to time by announcement
at the time and place fixed for the sale, and such sale may be made at any time
or place to which the same may be so adjourned. In the case of any sale of all
or any part of the Collateral on credit or for future delivery, the Collateral
so sold may be retained by the Agent until the selling price is paid by the
purchaser thereof, but the Agent shall not incur any liability in the case of
the failure of such purchaser to take up and pay for the Collateral so sold and,
in the case of any such failure, such Collateral may again be sold upon like
notice. The Agent, instead of exercising the power of sale herein conferred upon
it, may proceed by a suit or suits at law or in equity to foreclose the Security
Interests and sell the Collateral, or any portion thereof, under a judgment or
decree of a court or courts of competent jurisdiction.
(B) For the purpose of enforcing any and all rights and remedies under
this Agreement, if any Event of Default has occurred and is continuing, the
Agent may (i) require each Grantor to, and each Grantor agrees that it will, at
its expense and upon the request of the Agent, forthwith assemble all or any
part of the Collateral as directed by the Agent and make it available at a place
designated by the Agent which is, in its opinion, reasonably convenient to the
Agent and such Grantor, whether at the premises of such Grantor or otherwise,
(ii) to the extent permitted by applicable law, enter, with or without process
of law and without breach of the peace, any premise where any of the Collateral
is or may be located, and without charge or liability to it seize and remove
such Collateral from such premises, (iii) have access to and use each Grantors'
books and records relating to the Collateral and (iv) prior to the disposition
of the Collateral, store or transfer it without charge in or by means of any
storage or transportation facility owned or leased by the relevant Grantor,
process, repair or recondition it or otherwise prepare it for disposition in any
manner and to the extent the Agent deems appropriate and, in connection with
such preparation and disposition, use without charge any trademark, trade name,
brand name,
18
<PAGE> 121
copyright, patent or technical process used by the Borrower. The Agent may also
render any or all of the Collateral unusable at any Grantor's premises and may
dispose of such Collateral on such premises without liability for rent or costs.
(C) Without limiting the generality of the foregoing, if any Event of
Default has occurred and is continuing,
(i) subject to any outstanding licenses or sublicenses to or by any
Grantor, the Agent may license or sublicense, whether general, special or
otherwise, and whether on an exclusive or non-exclusive basis, any Copyrights,
Patents or Trademarks included in the Collateral throughout the world for such
term or terms, on such conditions and in such manner as the Agent shall in its
sole discretion determine;
(ii) the Agent may (without assuming any obligations or liability
thereunder), at any time and from time to time, in its sole discretion, enforce
(and shall have the exclusive right to enforce) against any licensee or
sublicensee all rights and remedies of each Grantor in, to and under any
Copyright Licenses, Patent Licenses or Trademark Licenses and take or refrain
from taking any action under any thereof, and each Grantor hereby releases the
Agent and each of the Banks from, and agrees to hold the Agent and each of the
Banks free and harmless from and against any claims and expenses arising out of,
any lawful action so taken or omitted to be taken with respect thereto; and
(iii) upon request by the Agent, each Grantor will execute and deliver
to the Agent a power of attorney, in form and substance satisfactory to the
Agent, for the implementation of any lease, assignment, license, sublicense,
grant of option, sale or other disposition of a Copyright, Patent or Trademark
or any action related thereto. In the event of any such disposition pursuant to
this Section, each Grantor shall supply its know-how and expertise relating to
the manufacture and sale of the products bearing Trademarks or the products or
services made or rendered in connection with Patents, and its customer lists and
other records relating to such Patents and Trademarks and to the distribution of
said products, to the Agent.
SECTION 7. Limitation on Duty of Agent in Respect of Collateral.
Beyond the exercise of reasonable care in the custody thereof, the
Agent shall have no duty as to any Collateral in its possession or control or in
the possession or control of any agent or bailee or any income thereon or as to
the preservation of rights against prior parties or any other rights pertaining
thereto. The Agent shall be deemed to have exercised reasonable care in the
custody of the Collateral in its possession if the Collateral is accorded
treatment substantially equal to that which it accords its own property, and
shall not be liable or responsible for any loss or damage to any of the
Collateral, or for any diminution in the
19
<PAGE> 122
value thereof, by reason of the act or omission of any warehouseman, carrier,
forwarding agency, consignee or other agent or bailee selected by the Agent in
good faith.
SECTION 8. Application of Proceeds
(A) Upon the occurrence and during the continuance of an Event of
Default, the proceeds of any sale of, or other realization upon, all or any part
of the Collateral shall be applied by the Agent in the following order of
priorities:
first, to payment of the expenses of such sale or other
realization, including reasonable compensation to agents and counsel
for the Agent, and all expenses, liabilities and advances incurred or
made by the Agent in connection therewith, and any other unreimbursed
expenses for which the Agent or any Bank is to be reimbursed pursuant
to Section 10.03 of the Credit Agreement or Section 11 hereof and
unpaid fees owing to the Agent under the Credit Agreement;
second, to the ratable payment of unpaid principal of the Secured
Obligations;
third, to the ratable payment of accrued but unpaid interest on
the Secured Obligations in accordance with the provisions of the Credit
Agreement;
fourth, to the ratable payment of all other Secured Obligations,
until all Secured Obligations shall have been paid in full; and
finally, to payment to the Grantors or their successors or
assigns, or as a court of competent jurisdiction may direct, of any
surplus then remaining from such proceeds.
(B) The Agent may make distributions hereunder in cash or in kind or,
on a ratable basis, in any combination thereof. The Agent shall invest all
amounts to be applied to LC Exposures in Temporary Cash Investments selected by
it and hold such amounts in trust for application to future drawings under the
Letters of Credit notified to it by the LC Issuing Banks in the order in which
such drawings are made. If the Agent holds any amounts which were distributable
in respect of LC Exposures after the Letters of Credit have expired and all
amounts payable with respect thereto have been paid, such amounts shall be
applied in the order set forth in subsection (A) above.
(C) In making the determinations and allocations required by this
Section, the Agent shall have no liability to any of the Banks for actions taken
in reliance on information supplied by the Banks as to the amounts of the
Secured Obligations held by them. All distributions made by the Agent pursuant
to this Section shall be final, and the Agent shall have no duty to inquire as
to the application by the Banks of any amount distributed to them.
20
<PAGE> 123
However, if at any time the Agent determines that an allocation or distribution
previously made pursuant to this Section was based on a mistake of fact
(including, without limiting the generality of the foregoing, mistakes based on
any assumption that principal or interest has been paid by payments which are
subsequently recovered from the recipient thereof through the operation of any
bankruptcy, reorganization, insolvency or other laws or otherwise), the Agent
may in its discretion, but shall not be obligated to, adjust subsequent
allocations and distributions hereunder so that, on a cumulative basis, the
Agent and the Banks receive the distributions to which they would have been
entitled if such mistake of fact had not been made.
SECTION 9. Concerning the Agent
The provisions of Article 7 of the Credit Agreement shall inure to the
benefit of the Agent in respect of this Agreement and shall be binding upon the
parties to the Credit Agreement in such respect. In furtherance and not in
derogation of the rights, privileges and immunities of the Agent therein set
forth:
(A) The Agent is authorized to take all such action as is provided to
be taken by it as Agent hereunder and all other action reasonably incidental
thereto. As to any matters not expressly provided for herein (including, without
limitation, the timing and methods of realization upon the Collateral) the Agent
shall act or refrain from acting in accordance with written instructions from
the Required Banks or, in the absence of such instructions, in accordance with
its discretion.
(B) The Agent shall not be responsible for the existence, genuineness
or value of any of the Collateral or for the validity, perfection, priority or
enforceability of the Security Interests in any of the Collateral, whether
impaired by operation of law or by reason of any action or omission to act on
its part hereunder. The Agent shall have no duty to ascertain or inquire as to
the performance or observance of any of the terms of this Agreement by any
Grantor.
SECTION 10. Appointment of Co-Agents
At any time or times, in order to comply with any legal requirement in
any jurisdiction, the Agent may appoint another bank or trust company or one or
more other persons, either to act as co-agent or co-agents, jointly with the
gent, or to act as separate agent or agents on behalf of the Banks with such
power and authority as may be necessary for the effectual operation of the
provisions hereof and may be specified in the instrument of appointment (which
may, in the discretion of the Agent, include provisions for the protection of
such co-agent or separate agent similar to the provisions of Section 9).
21
<PAGE> 124
SECTION 11. Expenses
In the event that any Grantor fails to comply with the provisions of
the Credit Agreement or this Agreement, such that the value of any Collateral or
the validity, perfection, rank or value of any Security Interest is thereby
diminished or potentially diminished or put at risk, the Agent if requested by
the Required Banks may, but shall not be required to, effect such compliance on
behalf of such Grantor, and such Grantor shall reimburse the Agent for the costs
thereof on demand. The Grantors jointly and severally agree that all insurance
expenses and all expenses of protecting, storing, warehousing, appraising,
insuring, handling, maintaining and shipping the Collateral, any and all excise,
property, sales and use taxes imposed by any state, federal or local authority
on any of the Collateral, or in respect of periodic appraisals and inspections
of the Collateral to the extent the same may reasonably be requested by the
Required Banks from time to time, or in respect of the sale or other disposition
thereof shall be borne and paid by the Grantors; and if the Grantors fail to
promptly pay any portion thereof when due, the Agent or any Bank may, at its
option, but shall not be required to, pay the same and charge any Grantor's
account therefor, and the Grantors jointly and severally agree to reimburse the
Agent or such Bank therefor on demand. All sums so paid or incurred by the Agent
or any Bank for any of the foregoing and any and all other sums for which any
Grantor may become liable hereunder and all costs and expenses (including
attorneys' fees, legal expenses and court costs) reasonably incurred by the
Agent or any Bank in enforcing or protecting the Security Interests or any of
their rights or remedies under this Agreement, shall, together with interest
thereon until paid at the rate applicable to Base Rate Loans plus 2%, be
additional Secured Obligations hereunder.
SECTION 12. Termination of Security Interests; Release of Collateral
Upon the repayment in full of all Secured Obligations and the
termination of the Commitments under the Credit Agreement, the Security
Interests shall terminate and all rights to the Collateral shall revert to the
Grantors. At any time and from time to time prior to such termination of the
Security Interests, the Agent may release any of the Collateral with the prior
written consent of the Required Banks; provided that the Agent may not release
all or substantially all of the Collateral (as defined in the Credit Agreement)
without the prior written consent of all the Banks. Upon any such termination of
the Security Interests or release of Collateral, the Agent will, at the expense
of the relevant Grantor, execute and deliver to each Grantor such documents as
such Grantor shall reasonably request to evidence the termination of the
Security Interests or the release of such Collateral, as the case may be.
22
<PAGE> 125
SECTION 13. Notices
All notices, communications and distributions hereunder shall be given
in accordance with Section 10.01 of the Credit Agreement.
SECTION 14. Waivers; Non-exclusive Remedies
No failure on the part of the Agent to exercise, and no delay in
exercising and no course of dealing with respect to, any right under this
Agreement shall operate as a waiver thereof; nor shall any single or partial
exercise by the Agent of any right under the Credit Agreement or this Agreement
preclude any other or further exercise thereof or the exercise of any other
right. The rights in this Agreement and the Credit Agreement are cumulative and
are not exclusive of any other remedies provided by law.
SECTION 15. Successors and Assigns
This Agreement is for the benefit of the Agent and the Banks and their
successors and assigns, and in the event of an assignment of all or any of the
Secured Obligations, the rights hereunder, to the extent applicable to the
indebtedness so assigned, may be transferred with such indebtedness. This
Agreement shall be binding on each Grantor and its successors and assigns.
SECTION 16. Changes in Writing
Neither this Agreement nor any provision hereof may be changed, waived,
discharged or terminated orally, but only in writing signed by each Grantor and
the Agent with he consent of the Required Banks; provided that no such
modification shall, unless signed by all the Banks, effect or permit a release
of all or substantially all of the Collateral (as defined in the Credit
Agreement) or amend this Section 16.
SECTION 17. New York Law
This Agreement shall be construed in accordance with and governed by
the laws of the State of New York, except as otherwise required by mandatory
provisions of law and except to the extent that remedies provided by the laws of
any jurisdiction other than New York are governed by the laws of such
jurisdiction.
SECTION 18. Severability
If any provision hereof is invalid or unenforceable in any
jurisdiction, then, to the fullest extent permitted by law, (i) the other
provisions hereof shall remain in full force and effect in such jurisdiction and
shall be liberally construed in favor of the Agent and the
23
<PAGE> 126
Banks in order to carry out the intentions of the parties hereto as nearly as
may be possible; and (ii) the invalidity or unenforceability of any provision
hereof in any jurisdiction shall not affect the validity or enforceability of
such provision in any other jurisdiction.
SECTION 19. Counterparts
This Agreement may be executed in any number of counterparts, all of
which taken together shall constitute one and the same instrument, and any of
the parties hereto may execute this Agreement by signing any such counterpart.
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.
TEKNI-PLEX, INC.
By ______________________________
Title:
DOLCO PACKAGING CORP.
By ______________________________
Title:
MORGAN GUARANTY TRUST COMPANY OF NEW
YORK, as Agent
By ______________________________
Title:
24
<PAGE> 127
EXHIBIT A
PERFECTION CERTIFICATE
The undersigned, the chief executive officers and chief legal officers
of Tekni-Plex, Inc., a Delaware corporation (the "Borrower") and Dolco Packaging
Corp., a Delaware corporation (together with the Borrower, the "Grantors" and
each "Grantor"), hereby certify with reference to the Security Agreement dated
as of May 8, 1997 between the Grantors and Morgan Guaranty Trust Company of New
York, as Agent (terms defined therein being used herein as therein defined), to
the Agent and each Bank as follows:
1. Names. (a) The exact corporate name of each Grantor as it appears
in its certificate of incorporation is as follows:
(b) Set forth below is each other corporate name each Grantor has had
since its organization, together with the date of the relevant change:
(c) Except as set forth in Schedule 1, no Grantor has changed its
identity or corporate structure in any way within the past five years. To the
extent that any Grantor has changed its identity or corporate structure within
the past 5 years pursuant to a merger, consolidation, acquisition or other
change in form, Schedule 1 sets forth the information required by paragraphs 1,
2 and 3 hereof as to each acquiree or constituent party to such merger or
consolidation, unless such acquiree or constituent party was (i) transitory in
nature, (ii) held no assets (other than on a temporary basis for the sole
purpose of consummating such acquisition, merger or consolidation) and (iii)
conducted no activities. No such change in form has occurred with respect to any
Grantor since _______.
[Changes in identity or corporate structure would include mergers,
consolidations and acquisitions, as well as any change in the form, nature or
jurisdiction of corporate organization. If any such change has occurred, include
in Schedule 1 the information required by paragraphs 1, 2 and 3 of this
certificate as to each acquiree or constituent party to a merger or
consolidation.]
<PAGE> 128
(d) The following is a list of all other names (including trade names
or similar appellations) used by each Grantor or any of its divisions or other
business units at any time during the past five years:
2. Current Locations. (a) The chief executive office of each Grantor is
located at the following address:
Mailing Address County State
--------------- ------ -----
(b) The following are all the locations where each Grantor maintains
any books or records relation to any Accounts:
Mailing
Name Address County State
---- ------- ------ -----
(c) The following are all the places of business of each Grantor not
identified above:
Mailing
Name Address County State
---- ------- ------ -----
(d) The following are all the locations where each Grantor maintains
any Inventory not identified above:
<PAGE> 129
Mailing
Name Address County State
---- ------- ------ -----
(e) The following are the names and addresses of all Persons other than
the Grantors which have possession of any of the Inventory of any Grantor:
Mailing
Name Address County State
---- ------- ------ -----
3. Prior Locations. (a) Set forth below is the information required by
subparagraphs (a), (b) and (c) of paragraph 2 with respect to each location or
place of business maintained by each Grantor at any time during the past five
years:
(b) Set forth below is the information required by subparagraphs (d)
and (e) of paragraph 2 with respect to each location or bailee here or with whom
Inventory has been lodged at any time during the past four months:
4. Unusual Transactions. Except as set forth in Schedule 4, all
Accounts have been originated by a Grantor and all Inventory and Equipment has
been acquired by a Grantor in the ordinary course of its business.
5. File Search Reports. Attached hereto as Schedule 5(A) is a true copy
of a file search report from the Uniform Commercial Code filing officer in each
jurisdiction identified in paragraph 2 or 3 above with respect to each name set
forth in paragraph 1 above. Attached hereto as Schedule 5(B) is a true copy of
each financing statement or other filing identified in such file search reports.
3
<PAGE> 130
6. UCC Filings. A duly signed financing statement on Form UCC-1 in
substantially the form of Schedule 6(A) hereto has been duly filed in the
Uniform Commercial Code filing office in each jurisdiction identified i
paragraph 2 hereof. Attached hereto as Schedule 6(B) is a true copy of each such
filing duly acknowledged by the filing officer.
7. Schedule of Filings. Attached hereto as Schedule 7 is a schedule
setting forth filing information with respect to the filings described in
paragraph 6 above.
8. Filing Fees. All filing fees and taxes payable in connection with
the filings described in paragraph 6 above have been paid.
4
<PAGE> 131
IN WITNESS WHEREOF, we have hereunto set our hands this day of May,
1997.
----------------------------
Title:
----------------------------
Title:
5
<PAGE> 132
SCHEDULE 6(A)
DESCRIPTION OF COLLATERAL
All accounts, chattel paper, contract rights, general intangibles, inventory,
equipment and documents, now owned or hereafter acquired, wherever located, and
all proceeds thereof.
<PAGE> 133
SCHEDULE 7
SCHEDULE OF FILINGS
<TABLE>
<CAPTION>
Debtor Filing Officer File Number
- ------ -------------- -----------
Date of Filing*
---------------
<S> <C> <C>
Tekni-Plex, Inc. Secretary of State, NJ
Tekni-Plex, Inc. Somerset County, NJ
Tekni-Plex, Inc. Hunterdon County, NJ
Dolco Packaging Corp. Secretary of State, NJ
Dolco Packaging Corp. Somerset County, NJ
Dolco Packaging Corp. Hunterdon County, NJ
Dolco Packaging Corp. Gwinnett County, GA
Dolco Packaging Corp. Secretary of State, IN
Dolco Packaging Corp. Secretary of State, WA
Dolco Packaging Corp. Secretary of State, TX
Dolco Packaging Corp. Secretary of State, MA
Dolco Packaging Corp. Town of Haverhill, MA
</TABLE>
- ---------------
* Indicate lapse date, if other than fifth anniversary.
<PAGE> 134
EXHIBIT B
TO SECURITY
AGREEMENT
1. The Security Agreement creates a valid security interest, for the
benefit of the Secured Parties, in all of the Company's right, title and
interest in all Collateral to the extent that the Uniform Commercial Code (the
"UCC") is applicable to the creation of a security interest therein and, to the
extent provided in Section 9-306 of the UCC, all proceeds thereof.
2. The filing of the financing statements described as items ________
in the offices designated in Schedule A are the only filings, recordings and
registrations necessary to perfect, publish notice of and preserve the security
interest in the Collateral covered by the UCC (the "UCC Collateral") created by
the Security Agreement to the extent such security interest may be perfected by
filing under the UCC, and no further filing or recording of any document or
instrument or other action will be required so to perfect and preserve such
security interest, except that (i) continuation statements relating to said
financing statements must be filed within _______________ [state time period]
and (ii) additional filings may be necessary with respect to the UCC Collateral
if the Company [or __________, as the case may be,] changes its name, identity
or corporate structure or the jurisdiction in which its places of business or
the UCC Collateral are located.
3. The Liens and security interests created by the Security Agreement
on or in the UCC Collateral will validly secure the payment of all future
advances pursuant to the Credit Agreement, whether or not at the time such
advances are made an Event of Default or other event not within the control of
the Banks has relieved or may relieve the Banks from their obligations to make
such advances, and are perfected to the extent set forth in paragraph 2 above
with respect to such future advances.
<PAGE> 135
EXHIBIT C TO
SECURITY
AGREEMENT
PATENT SECURITY AGREEMENT
(PATENTS, PATENT APPLICATIONS AND PATENT LICENSES)
WHEREAS, _______________, a [Delaware] corporation (herein referred to
as "Grantor") owns the Patents (as defined in the Security Agreement referred to
below) (including design patents and applications for patents) listed on
Schedule 1 annexed hereto, and is a party to the Patent Licenses (as defined in
the Security Agreement referred to below) identified in Schedule 1 annexed
hereto;
WHEREAS, Grantor, certain banks and Morgan Guaranty Trust Company of
New York, as agent for such banks, are parties to a Credit Agreement of even
date herewith (as the same may be amended and in effect from time to time among
said parties and such banks (the "Banks") as may from time to time be parties
thereto, the "Credit Agreement");
WHEREAS, pursuant to the terms of the Security Agreement of even date
herewith (as said Agreement may be amended and in effect from time to time, the
"Security Agreement") between Grantor and Morgan Guaranty Trust Company of New
York, as agent for the secured parties referred to therein (in such capacity,
together with its successors in such capacity, "Grantee"), Grantor has granted
to Grantee for the benefit of such secured parties a continuing security
interest in substantially all the assets of Grantor, including all right, title
and interest of Grantor in, to and under the Patent Collateral (as defined
herein) whether now owned or existing or hereafter acquired or arising, to
secure the Secured Obligations (as defined in the Security Agreement);
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Grantor does hereby grant to
Grantee a continuing security interest in all of Grantor's right, title and
interest in, to and under the following (all of the following items or types of
property being herein collectively
<PAGE> 136
referred to as the "Patent Collateral"), whether now owned or existing or
hereafter acquired or arising:
(i) each Patent (including each design patent and patent
application), including, without limitation, each Patent (including
each design patent and patent application) referred to in Schedule 1
annexed hereto;
(ii) each Patent License, including, without limitation, each
Patent License identified in Schedule 1 annexed hereto; and
(iii) all proceeds of and revenues from the foregoing, including,
without limitation, all proceeds of and revenues from any claim by
Grantor against third parties for past, present or future infringement
of any Patent (including any design patent), including, without
limitation, any Patent referred to in Schedule 1 annexed hereto
(including, without limitation, any such Patent issuing from any
application referred to in Schedule 1 annexed hereto), and all rights
and benefits of Grantor under any Patent License, including, without
limitation, any Patent License identified in Schedule 1 annexed hereto.
Grantor hereby irrevocably constitutes and appoints Grantee and any
officer or agent thereof, with full power of substitution, as its true and
lawful attorney-in-fact with full power and authority in the name of Grantor or
in its name, from time to time, in Grantee's discretion, so long as any Event of
Default (as defined in the Credit Agreement) has occurred and is continuing, to
take with respect to the Patent Collateral any and all appropriate action which
Grantor might take with respect to the Patent Collateral and to execute any and
all documents and instruments which may be necessary or desirable to carry out
the terms of this Patent Security Agreement and to accomplish the purposes
hereof.
Except to the extent not prohibited in the Security Agreement, Grantor
agrees not to sell, license, exchange, assign or otherwise transfer or dispose
of, or grant any rights with respect to, or mortgage or otherwise encumber, any
of the foregoing Patent Collateral.
This security interest is granted in conjunction with the security
interests granted to Grantee pursuant to the Security Agreement. Grantor does
hereby further acknowledge and affirm that the rights and remedies of Grantee
with respect to the security interest in the Patent Collateral made and granted
hereby are more fully set forth in the Security Agreement, the terms and
provisions of which are incorporated by reference herein as if fully set forth
herein.
2
<PAGE> 137
IN WITNESS WHEREOF, Grantor has caused this Patent Security Agreement
to be duly executed by its officer thereunto duly authorized as of the ____ day
of ____________, 19__.
[COMPANY]
By:_________________________
Title:
Acknowledged:
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK, as Agent
By:_________________________
Title:
3
<PAGE> 138
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
I, ______________________, a Notary Public in and for said County, in
the State aforesaid, DO HEREBY CERTIFY, that _________________________,
_______________ of [NAME OF COMPANY], personally known to me to be the same
person whose name is subscribed to the foregoing instrument as such
_________________, appeared before me this day in person and acknowledged that
(s)he signed, executed and delivered the said instrument as her/his own free and
voluntary act and as the free and voluntary act of said Company, for the uses
and purposes therein set forth being duly authorized so to do.
GIVEN under my hand and Notarial Seal this ___ day of _______________,
19__.
[Seal]
________________________________
Signature of notary public
My Commission expires __________
4
<PAGE> 139
SCHEDULE 1
TO PATENT
SECURITY AGREEMENT
PATENTS
A. U.S. Patents and Design Patents
I.D. No. Patent No. Issue Date Title
-------- ---------- ---------- -----
B. U.S. Patent Applications
Serial No. Date Filed Title
---------- ---------- -----
C. Foreign Patents
I.D. No. Patent No. Issue Date Title
-------- ---------- ---------- -----
5
<PAGE> 140
EXCLUSIVE PATENT LICENSES
Name of Parties Date of Subject
Agreement Licensor/Licensee Agreement Matter
- --------- ----------------- --------- -------
6
<PAGE> 141
EXHIBIT D TO
SECURITY
AGREEMENT
TRADEMARK SECURITY AGREEMENT
(TRADEMARKS, TRADEMARK REGISTRATIONS, TRADEMARK
APPLICATIONS AND TRADEMARK LICENSES)
WHEREAS, _______________, a [Delaware] corporation (herein referred to
as "Grantor"), owns the Trademarks (as defined in the Security Agreement
referred to below) listed on Schedule 1 annexed hereto, and is a party to the
Trademark Licenses (as defined in the Security Agreement referred to below)
identified in Schedule 1 annexed hereto;
WHEREAS, Grantor, certain banks and Morgan Guaranty Trust Company of
New York, as agent for such banks, are parties to a Credit Agreement of even
date herewith (as the same may be amended and in effect from time to time among
said parties and such banks (the "Banks") as may from time to time be parties
thereto, the "Credit Agreement");
WHEREAS, pursuant to the terms of the Security Agreement of even date
herewith (as said Agreement may be amended and in effect from time to time, the
"Security Agreement") between Grantor and Morgan Guaranty Trust Company of New
York as agent for the secured parties referred to therein (in such capacity,
together with its successors in such capacity, "Grantee"), Grantor has granted
to Grantee for the benefit of such secured parties a security interest in
substantially all the assets of Grantor, including all right, title and interest
of Grantor in, to and under the Trademark Collateral (as defined herein),
whether now owned or existing or hereafter acquired or arising, to secure the
Secured Obligations (as defined in the Security Agreement);
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Grantor does hereby grant to
Grantee a continuing security interest in all of Grantor's right, title and
interest in, to and under the following (all of the following items or types of
property being herein collectively referred to as the "Trademark Collateral"),
whether now owned or existing or hereafter acquired or arising:
<PAGE> 142
(i) each Trademark, including, without limitation, each Trademark
application referred to in Schedule 1 annexed hereto, and all of the
goodwill of the business connected with the use of, or symbolized by,
each such Trademark;
(ii) each Trademark License, including, without limitation, each
Trademark License identified in Schedule 1 annexed hereto, and all of
the goodwill of the business connected with the use of, or symbolized
by, each Trademark licensed pursuant thereto; and
(iii) all proceeds of and revenues from the foregoing, including,
without limitation, all proceeds of and revenues from any claim by
Grantor against third parties for past, present or future unfair
competition with, or violation of intellectual property rights in
connection with or injury to, or infringement or dilution of, any
Trademark, including, without limitation, any Trademark referred to in
Schedule 1 hereto, and all rights and benefits of Grantor under any
Trademark License, including, without limitation, any Trademark License
identified in Schedule 1 hereto, or for injury to the goodwill
associated with any of the foregoing.
Grantor hereby irrevocably constitutes and appoints Grantee and any
officer or agent thereof, with full power of substitution, as its true and
lawful attorney-in-fact with full power and authority in the name of Grantor or
in its name, from time to time, in Grantee's discretion, so long as any Event of
Default (as defined in the Credit Agreement) has occurred and is continuing, to
take with respect to the Trademark Collateral any and all appropriate action
which Grantor might take with respect to the Trademark Collateral and to execute
any and all documents and instruments which may be necessary or desirable to
carry out the terms of this Trademark Security Agreement and to accomplish the
purposes hereof.
Except to the extent not prohibited in the Security Agreement, Grantor
agrees not to sell, license, exchange, assign or otherwise transfer or dispose
of, or grant any rights with respect to, or mortgage or otherwise encumber, any
of the foregoing Trademark Collateral.
This security interest is granted in conjunction with the security
interests granted to Grantee pursuant to the Security Agreement. Grantor does
hereby further acknowledge and affirm that the rights and remedies of Grantee
with respect to the security interest in the Trademark Collateral made and
granted hereby are more fully set forth in the Security Agreement, the terms and
provisions of which are incorporated by reference herein as if fully set forth
herein.
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<PAGE> 143
IN WITNESS WHEREOF, Grantor has caused this Trademark Security
Agreement to be duly executed by its officer thereunto duly authorized as of the
____ day of __________, 19__.
[COMPANY]
By: _________________________
Title:
Acknowledged:
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK, as Agent
By: ________________________
Title:
3
<PAGE> 144
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
I, ______________________, a Notary Public in and for said County, in
the State aforesaid, DO HEREBY CERTIFY, that _________________________,
_______________ of [NAME OF COMPANY], personally known to me to be the same
person whose name is subscribed to the foregoing instrument as such
_________________, appeared before me this day in person and acknowledged that
(s)he signed, executed and delivered the said instrument as her/his own free and
voluntary act and as the free and voluntary act of said Company, for the uses
and purposes therein set forth being duly authorized so to do.
GIVEN under my hand and Notarial Seal this ___ day of _______________,
19__.
[Seal]
________________________________
Signature of notary public
My Commission expires __________
<PAGE> 145
SCHEDULE 1
TO TRADEMARK
SECURITY
AGREEMENT
U.S. TRADEMARKS AND TRADEMARK REGISTRATIONS
A. U.S. Trademarks and Trademark Registrations
Reg. No. Reg. Date Mark
-------- --------- ----
B. U.S. Trademark Applications
Serial No. Date Filed Mark
---------- ---------- ----
EXCLUSIVE TRADEMARK LICENSES
Name of Parties Date of Subject
Agreement Licensor/Licensee Agreement Matter
--------- ----------------- --------- -------
<PAGE> 146
EXHIBIT E TO
SECURITY
AGREEMENT
COPYRIGHT SECURITY AGREEMENT
(COPYRIGHTS, COPYRIGHT REGISTRATIONS, COPYRIGHT
APPLICATIONS AND COPYRIGHT LICENSES)
WHEREAS, _______________, a [Delaware] corporation (herein referred to
as "Grantor") owns the Copyrights (as defined in the Security Agreement referred
to below) listed on Schedule 1 annexed hereto, and is a party to the Copyright
Licenses (as defined in the Security Agreement referred to below) identified in
Schedule 1 annexed hereto;
WHEREAS, Grantor, certain banks and Morgan Guaranty Trust Company of
New York, as agent for such banks, are parties to a Credit Agreement of even
date herewith (as the same may be amended and in effect from time to time among
said parties and such banks (the "Banks") as may from time to time be parties
thereto, the "Credit Agreement");
WHEREAS, pursuant to the terms of the Security Agreement of even date
herewith (as said Agreement may be amended and in effect from time to time, the
"Security Agreement") between Grantor and Morgan Guaranty Trust Company of New
York, as agent for the secured parties referred to therein (in such capacity,
together with its successors in such capacity, the "Grantee"), Grantor has
granted to Grantee for the benefit of such secured parties a security interest
in substantially all the assets of the Grantor, including all right, title and
interest of Grantor in, to and under the Copyright Collateral (as defined
herein), whether now owned or existing or hereafter acquired or arising, to
secure the Secured Obligations (as defined in the Security Agreement);
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Grantor does hereby grant to
Grantee a continuing security interest in all of Grantor's right, title and
interest in, to and under the following (all of the following items or types of
property being herein collectively referred to as the "Copyright Collateral"),
whether now owned or existing or hereafter acquired or arising:
(i) each Copyright, including, without limitation, each Copyright
referred to in Schedule 1 annexed hereto;
<PAGE> 147
(ii) each Copyright License, including, without limitation, each
Copyright License identified in Schedule 1 annexed hereto; and
(iii) all proceeds of and revenues from the foregoing, including,
without limitation, all proceeds of and revenues from any claim by
Grantor against third parties for past, present or future infringement
of any Copyright, including, without limitation, any Copyright referred
to in Schedule 1 annexed hereto, and all rights and benefits of Grantor
under any Copyright License, including, without limitation, any
Copyright License identified in Schedule 1 annexed hereto.
Grantor hereby irrevocably constitutes and appoints Grantee and any
officer or agent thereof, with full power of substitution, as its true and
lawful attorney-in-fact with full power and authority in the name of Grantor or
in its name, from time to time, in Grantee's discretion, so long as any Event of
Default (as defined in the Credit Agreement) has occurred and is continuing, to
take with respect to the Copyright Collateral any and all appropriate action
which Grantor might take with respect to the Copyright Collateral and to execute
any and all documents and instruments which may be necessary or desirable to
carry out the terms of this Copyright Security Agreement and to accomplish the
purposes hereof.
Except to the extent not prohibited in the Security Agreement, Grantor
agrees not to sell, license, exchange, assign or otherwise transfer or dispose
of, or grant any rights with respect to, or mortgage or otherwise encumber, any
of the foregoing Copyright Collateral.
This security interest is granted in conjunction with the security
interests granted to Grantee pursuant to the Security Agreement. Grantor does
hereby further acknowledge and affirm that the rights and remedies of Grantee
with respect to the security interest in the Copyright Collateral made and
granted hereby are more fully set forth in the Security Agreement, the terms and
provisions of which are incorporated by reference herein as if fully set forth
herein.
2
<PAGE> 148
IN WITNESS WHEREOF, Grantor has caused this Copyright Security
Agreement to be duly executed by its officer thereunto duly authorized as of the
____ day of _______, 19__.
[COMPANY]
By: ______________________
Title:
Acknowledged:
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK, as Agent
By:_____________________
Title:
3
<PAGE> 149
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
I, ______________________, a Notary Public in and for said County, in
the State aforesaid, DO HEREBY CERTIFY, that _________________________,
_______________ of [NAME OF COMPANY], personally known to me to be the same
person whose name is subscribed to the foregoing instrument as such
_________________, appeared before me this day in person and acknowledged that
(s)he signed, executed and delivered the said instrument as her/his own free and
voluntary act and as the free and voluntary act of said Company, for the uses
and purposes therein set forth being duly authorized so to do.
GIVEN under my hand and Notarial Seal this ___ day of _______________,
19__.
[Seal]
________________________________
Signature of notary public
My Commission expires __________
<PAGE> 150
SCHEDULE 1
TO COPYRIGHT
SECURITY
AGREEMENT
COPYRIGHTS AND COPYRIGHT REGISTRATION
Registration No. Reg. Date Title
- ---------------- --------- -----
COPYRIGHT APPLICATIONS
Serial No. Date Filed Title
- ---------- ---------- -----
COPYRIGHT LICENSES
Name of Parties Date of Subject
Agreement Licensor/Licensee Agreement Matter
- --------- ----------------- --------- --------
<PAGE> 151
EXHIBIT F
PLEDGE AGREEMENT
AGREEMENT dated as of May 8, 1997 between TEKNI-PLEX, INC. (with
its successors, the "Borrower", and, together with any other Person
which becomes a Grantor pursuant to Section 3(B), the "Grantors" and
each a "Grantor") and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as
Agent (with its successors in such capacity, the "Agent").
WITNESSETH:
WHEREAS, the Borrower, certain banks (the "Banks") and Morgan Guaranty
Trust Company of New York, as agent for such banks, are parties to a Credit
Agreement of even date herewith (as the same may be amended from time to time,
the "Credit Agreement"); and
WHEREAS, in order to induce said Banks and Morgan Guaranty Trust
Company of New York, as agent for such Banks, to enter into the Credit
Agreement, each Grantor has agreed to grant a continuing security interest in
and to the Collateral (as hereafter defined) to secure its obligations under the
Credit Agreement and the obligations of the Borrower under the Notes issued
pursuant thereto;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
SECTION 1. Definitions
Terms defined in the Credit Agreement and not otherwise defined herein
have, as used herein, the respective meanings provided for therein. The
following additional terms, as used herein, have the following respective
meanings:
"Collateral" has the meaning assigned to such term in Section 3(A).
"Issuer" means (i) each of the Subsidiaries listed on Schedule I hereto
and (ii) any other Person which becomes a Subsidiary after the date of this
Agreement.
<PAGE> 152
"Pledged Instruments" means (i) all intercompany notes listed on
Schedule I hereto and (ii) any instrument required to be pledged to the Agent
pursuant to Section 3(B).
"Pledged Securities" means the Pledged Instruments and the Pledged
Stock.
"Pledged Stock" means (i) the Subsidiary Shares and (ii) any other
capital stock required to be pledged to the Agent pursuant to Section 3(B).
"Secured Obligations" means the obligations secured under this
Agreement including (i) all principal of and interest (including, without
limitation, any interest which accrues after, or would accrue but for, the
commencement of any case, proceeding or other action relating to the bankruptcy,
insolvency or reorganization of any Grantor, whether or not allowed or allowable
as a claim in any such proceeding) on any loan under, or any note issued
pursuant to, the Credit Agreement, (ii) all other amounts payable by any Grantor
hereunder or under the Credit Agreement and (iii) any renewals or extensions of
any of the foregoing.
"Security Interests" means the security interests in the Collateral
granted hereunder securing the Secured Obligations.
"Subsidiary Shares" means all shares of capital stock of the Subsidiary
listed on Schedule I hereto.
Unless otherwise defined herein, or unless the content otherwise
requires, all terms used herein which are defined in the New York Uniform
Commercial Code as in effect on the date hereof shall have the meanings therein
stated.
SECTION 2. Representations and Warranties
Each Grantor represents and warrants as follows:
(A) Title to Pledged Securities. The Grantors own all of the Pledged
Securities, free and clear of any Liens other than the Security Interests. The
Pledged Stock includes all of the issued and outstanding capital stock of Dolco
Packaging Corp. and all of the issued and outstanding stock of each other Issuer
owned by the Grantors. All of the Pledged Stock has been duly authorized and
validly issued, and is fully paid and non-assessable, and is subject to no
options to purchase or similar rights of any Person. No Grantor is or will
become a party to or otherwise bound by any agreement, other than this
Agreement, which restricts in any manner the rights of any present or future
holder of any of the Pledged Securities with respect thereto.
(B) Validity, Perfection and Priority of Security Interests. Upon the
delivery of the Pledged Instruments and certificates representing the Pledged
Stock to the Agent in
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<PAGE> 153
accordance with Section 4 hereof, the Agent will have valid and perfected
security interests in the Collateral subject to no prior Lien. No registration,
recordation or filing with any governmental body, agency or official is required
in connection with the execution or delivery of this Agreement or necessary for
the validity or enforceability hereof or for the perfection or enforcement of
the Security Interests. Neither the Borrower nor any of its Subsidiaries has
performed or, subject to bankruptcy, insolvency, reorganization and other laws
relating to the rights or relief of debtors, will perform any acts which might
prevent the Agent from enforcing any of the terms and conditions of this
Agreement or which would limit the Agent in any such enforcement.
(C) UCC Filing Locations. The chief executive office of the Borrower is
located at its address set forth on the signature pages of the Credit Agreement.
Under the Uniform Commercial Code as in effect in the State in which such office
is located, no local filing is required to perfect a security interest in
collateral consisting of general intangibles.
SECTION 3. The Security Interests
In order to secure the full and punctual payment of the Secured
Obligations in accordance with the terms thereof, and to secure the performance
of all the obligations of the Grantors hereunder:
(A) Each Grantor hereby assigns and pledges to and with the Agent for
the benefit of the Banks and grants to the Agent for the benefit of the Banks
security interests in the Pledged Securities, and all of its rights and
privileges with respect to the Pledged Securities, and all income and profits
thereon, and all interest, dividends and other payments and distributions with
respect thereto, and all proceeds of the foregoing (the "Collateral").
Contemporaneously with the execution and delivery hereof, the Borrower is
delivering the intercompany notes constituting the Pledged Instruments and
certificates representing the Subsidiary Shares in pledge hereunder.
(B) In the event that any Person becomes an Issuer, or any Issuer at
any time issues any additional or substitute shares of capital stock of any
class to a Grantor or any other Subsidiary, or issues any substitute note, or
owes any other Debt to a Grantor or any other Subsidiary, the relevant Grantor
will, or will cause such Subsidiary to take appropriate steps to become a
Grantor hereunder (including, in connection therewith, the delivery of
appropriate limited recourse guaranties of the Borrower's obligations under the
Credit Agreement and legal opinions and the making of appropriate
representations and warranties) and to, immediately pledge and deposit with the
Agent certificates representing all such shares and such note or an instrument
evidencing such other Debt as additional security for the Secured Obligations.
All such shares, notes and instruments constitute Pledged Securities and are
subject to all provisions of this Agreement.
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<PAGE> 154
(C) The Security Interests are granted as security only and shall not
subject the Agent or any Bank to, or transfer or in any way affect or modify,
any obligation or liability of the Borrower or any of its Subsidiaries with
respect to any of the Collateral or any transaction in connection therewith.
SECTION 4. Delivery of Pledged Securities
All Pledged Instruments shall be delivered to the Agent by the Grantors
pursuant hereto endorsed to the order of the Agent, and accompanied by any
required transfer tax stamps, all in form and substance satisfactory to the
Agent. All certificates representing Pledged Stock delivered to the Agent by the
Grantors pursuant hereto shall be in suitable form for transfer by delivery, or
shall be accompanied by duly executed instruments of transfer or assignment in
blank, with signatures appropriately guaranteed, and accompanied by any required
transfer tax stamps, all in form and substance satisfactory to the Agent.
SECTION 5. Further Assurances
(A) Each Grantor agrees that it will, at its expense and i such manner
and form as the Agent may reasonably require, execute, deliver, file and record
any financing statement, specific assignment or other paper and take any other
action that may be necessary or desirable, or that the Agent may request, in
order to create, preserve, perfect or validate any Security Interest or to
enable the Agent to exercise and enforce its rights hereunder with respect to
any of the Collateral. To the extent permitted by applicable law, each Grantor
hereby authorizes the Agent to execute and file, in the name of the Borrower or
otherwise, Uniform Commercial Code financing statements (which may be carbon,
photographic, photostatic or other reproductions of this Agreement or of a
financing statement relating to this Agreement) which the Agent in its sole
discretion may deem necessary or appropriate to further perfect the Security
Interests.
(B) Each Grantor agrees that it will not change (i) its name, identity
or corporate structure in any manner or (ii) the location of its chief executive
office unless it shall have given the Agent not less than 30 days' prior notice
thereof.
SECTION 6. Record Ownership of Pledged Stock
The Agent may at any time or from time to time during the continuance
of an Event of Default, in its sole discretion, cause any or all of the Pledged
Stock to be transferred of record into the name of the Agent or its nominee.
Each Grantor will promptly give to the Agent copies of any notices or other
communications received by it with respect to Pledged Stock registered in its
name, and the Agent will promptly give to the Borrower copies of any
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<PAGE> 155
notices and communications received by the Agent with respect to Pledged Stock
registered in the name of the Agent or its nominee.
SECTION 7. Right to Receive Distributions on Collateral
During the continuance of any Event of Default, the Agent shall have
the right to receive and to retain as Collateral hereunder all dividends,
interest and other payments and distributions made upon or with respect to the
Collateral, and each Grantor shall take all such action as the Agent may deem
necessary or appropriate to give effect to such right. All such dividends,
interest and other payments and distributions which are received by a Grantor
shall be received in trust for the benefit of the Agent and the Banks (but,
unless an Event of Default shall have occurred and be continuing, may be used by
such Grantor as permitted by the other provisions of this Agreement and the
other Loan Documents). If the Agent so directs during the continuance of an
Event of Default, such dividends, interest and other payments and distributions
shall be segregated from other funds of such Grantor and shall, forthwith upon
demand by the Agent during the continuance of an Event of Default, be paid over
to the Agent as Collateral in the same form as received (with any necessary
endorsement). After all Events of Default have been cured, the Agent's right to
retain dividends, interest and other payments and distributions under this
Section 7 shall cease, and the Agent shall pay over to such Grantor any such
Collateral retained by it during the continuance of an Event of Default.
SECTION 8. Right to Vote Pledged Stock
Unless an Event of Default shall have occurred and be continuing, each
Grantor shall have the right, from time to time, to vote and to give consents,
ratifications and waivers with respect to the Pledged Stock, and the Agent
shall, upon receiving a written request from such Grantor accompanied by a
certificate signed by the principal executive officer or principal financial
officer of the Borrower stating that no Event of Default has occurred and is
continuing, deliver to such Grantor or as specified in such request such
proxies, powers of attorney, consents, ratifications and waivers in respect of
any of the Pledged Stock which is registered in the name of the Agent or its
nominee as shall be specified in such request and be in form and substance
satisfactory to the Agent.
If an Event of Default shall have occurred and be continuing, the Agent
shall have the right to the extent permitted by law, and each Grantor shall take
all such action as may be necessary or appropriate to give effect to such right,
to vote and to give consents, ratifications and waivers, and take any other
action with respect to any or all of the Pledged Stock with the same force and
effect as if the Agent were the absolute and sole owner thereof.
SECTION 9. General Authority
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<PAGE> 156
Each Grantor hereby irrevocably appoints the Agent its true and lawful
attorney, with full power of substitution, in the name of the Grantors, the
Agent, the Banks or otherwise, for the sole use and benefit of the Agent and
Banks, but at the expense of such Grantor, to the extent permitted by law to
exercise, at any time and from time to time while an Event of Default has
occurred and is continuing, all or any of the following powers with respect to
all or any of the Collateral:
(i) to demand, sue for, collect, receive and give acquittance for any
and all monies due or to become due upon or by virtue thereof,
(ii) to settle, compromise, compound, prosecute or defend any action or
proceeding with respect thereto,
(iii) to sell, transfer, assign or otherwise deal in or with the same
or the proceeds or avails thereof, as fully and effectually as if the Agent were
the absolute owner thereof, and
(iv) to extend the time of payment of any or all thereof and to make
any allowance and other adjustments with reference thereto;
provided that the Agent shall give the relevant Grantor not less than thirty
(30) days' prior written notice of the time and place of any sale or other
intended disposition of any of the Collateral. The Agent and the Grantors agree
that such notice constitutes "reasonable notification" within the meaning of
Section 9-504(3) of the Uniform Commercial Code.
SECTION 10 Remedies upon Event of Default
If any Event of Default shall have occurred and be continuing, the
Agent may exercise on behalf of the Bank all the rights of a secured party under
the Uniform Commercial Code (whether or not in effect in the jurisdiction where
such rights are exercised), and, in addition, the Agent may, without being
required to give any notice, except as herein provided or as may be required by
mandatory provisions of law, (i) apply the cash, if any, then held by it as
Collateral as specified in Section 13 and (ii) if there shall be no such cash or
if such cash shall be insufficient to pay all the Secured Obligations in full,
after not less than thirty (30) days' prior written notice to the relevant
Grantor, sell the Collateral or any part thereof at public or private sale or at
any broker's board or on any securities exchange, for cash, upon credit or for
future delivery, and at such price or prices as the Agent may deem satisfactory.
Any Bank may be the purchaser of any or all of the Collateral so sold at any
public sale (or, if the Collateral is of a type customarily sold in a recognized
market or is of a type which is the subject of widely distributed standard price
quotations, at any private sale). The Agent is authorized, in connection with
any such sale, if it deems it advisable so to do, (i) to restrict the
prospective bidders on or purchasers of any of the Pledged Securities to a
limited number of sophisticated investors who will
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<PAGE> 157
represent and agree that they are purchasing for their own account for
investment and not with a view to the distribution or sale of any of such
Pledged Securities, (ii) to cause to be placed on certificates for any or all of
the Pledged Securities or on any other securities pledged hereunder a legend to
the effect that such security has not been registered under the Securities Act
of 1933 and may not be disposed of in violation of the provisions of said Act,
and (iii) to impose such other limitations or conditions in connection with any
such sale as the Agent deems necessary or advisable in order to comply with said
Act or any other law. Each Grantor will execute and deliver such documents and
take such other action as the Agent reasonably deems necessary or advisable in
order that any such sale may be made in compliance with law. Upon any such sale
the Agent shall have the right to deliver, assign and transfer to the purchaser
thereof the Collateral so sold. Each purchaser at any such sale shall hold the
Collateral so sold absolutely and free from any claim or right of whatsoever
kind, including any equity or right of redemption of the Grantors which may be
waived, and each Grantor, to the extent permitted by law, hereby specifically
waives all rights of redemption, stay or appraisal which it has or may have
under any law now existing or hereafter adopted. The notice of such sale
required by Section 9 and this Section 10 shall (1) in the case of a public
sale, state the time and place fixed for such sale, (2) in the case of a sale at
a broker's board or on a securities exchange, state the board or exchange at
which such sale is to be made and the day on which the Collateral, or the
portion thereof so being sold, will first be offered for sale at such board or
exchange, and (3) in the case of a private sale, state the day after which such
sale may be consummated. Any such public sale shall be held at such time or
times within ordinary business hours and at such place or places as the Agent
may fix in the notice of such sale. At any such sale the Collateral may be sold
in one lot as an entirety or in separate parcels, as the Agent may determine.
The Agent shall not be obligated to make any such sale pursuant to any such
notice. The Agent may, without notice or publication, adjourn any public or
private sale or cause the same to be adjourned from time to time by announcement
at the time and place fixed for the sale, and such sale may be made at any time
or place to which the same may be so adjourned. In the case of any sale of all
or any part of the Collateral on credit or for future delivery, the Collateral
so sold may be retained by the Agent until the selling price is paid by the
purchaser thereof, but the Agent shall not incur any liability in the case of
the failure of such purchaser to take up and pay for the Collateral so sold and,
in the case of any such failure, such Collateral may again be sold upon like
notice. The Agent, instead of exercising the power of sale herein conferred upon
it, may proceed by a suit or suits at law or in equity to foreclose the Security
Interests and sell the Collateral, or any portion thereof, under a judgment or
decree of a court or courts of competent jurisdiction.
SECTION 11. Expenses
The Grantors jointly and severally agree that they will forthwith upon
demand pay to the Agent:
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<PAGE> 158
(i) the amount of any taxes which the Agent may have been required to
pay by reason of the Security Interests or to free any of the Collateral from
any Lien thereon, and
(ii) the amount of any and all reasonable out-of-pocket expenses,
including the fees and disbursements of counsel and of any other experts, which
the Agent may incur in connection with (w) the administration or enforcement of
this Agreement, including such expenses as are incurred to preserve the value of
the Collateral and the validity, perfection, rank and value of any Security
Interest, (x) the collection, sale or other disposition of any of the
Collateral, (y) the exercise by the Agent of any of the rights conferred upon it
hereunder or (z) any Default or Event of Default.
Any such amount not paid within five business days after demand shall
bear interest at the rate applicable to Base Rate Loans plus 2% and shall be an
additional Secured Obligation hereunder.
SECTION 12. Limitation on Duty of Agent in Respect of Collateral
Beyond the exercise of reasonable are in the custody thereof, the Agent
shall have no duty as to any Collateral in its possession or control or in the
possession or control of any agent or bailee or any income thereon or as to the
preservation of rights against prior parties or any other rights pertaining
thereto. The Agent shall be deemed to have exercised reasonable care in the
custody and preservation of the Collateral in its possession if the Collateral
is accorded treatment substantially equal to that which it accords its own
property, and the Agent shall not be liable or responsible for any loss or
damage to any of the Collateral, or for any diminution in the value thereof, by
reason of the act or omission of any agent or bailee selected by the Agent in
good faith.
SECTION 13. Application of Proceeds
Upon the occurrence and during the continuance of an Event of Default,
the proceeds of any sale of, or other realization upon, all or any part of the
Collateral and any cash held shall be applied by the Agent in the following
order of priorities:
first, to payment of the expenses of such sale or other realization,
including reasonable compensation to agents and counsel for the Agent, and all
expenses, liabilities and advances incurred or made by the Agent in connection
therewith, and any other unreimbursed expenses for which the Agent or any Bank
is to be reimbursed pursuant to Section 10.03 of the Credit Agreement or Section
11 hereof and unpaid fees owing to the Agent under the Credit Agreement;
second, to the ratable payment of unpaid principal of the Secured
Obligations;
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<PAGE> 159
third, to the ratable payment of accrued but unpaid interest on the
Secured Obligations in accordance with the provisions of the Credit Agreement;
fourth, to the ratable payment of all other Secured Obligations, until
all Secured Obligations shall have been paid in full; and
finally, to payment to the Grantors or their successors or assigns, or
as a court of competent jurisdiction may direct, of any surplus then remaining
from such proceeds.
The Agent may make distributions hereunder in cash or in kind or, on a
ratable basis, in any combination thereof.
SECTION 14. Concerning the Agent
The provisions of Article VII of the Credit Agreement shall inure to
the benefit of the Agent in respect of this Agreement and shall be binding upon
the parties to the Credit Agreement in such respect. In furtherance and not in
derogation of the rights, privileges and immunities of the Agent therein set
forth:
(A) The Agent is authorized to take all such action as is provided to
be taken by it as Agent hereunder and all other action reasonably incidental
thereto. As to any matters not expressly provided for herein (including, without
limitation, the timing and methods of realization upon the Collateral), the
Agent shall act or refrain from acting in accordance with written instructions
from the Required Banks or, in the absence of such instructions, in accordance
with its discretion.
(B) The Agent shall not be responsible for the existence, genuineness
or value of any of the Collateral or for the validity, perfection, priority or
enforceability of the Security Interests in any of the Collateral, whether
impaired by operation of law or by reason of any action or omission to act on
its part hereunder. The Agent shall have no duty to ascertain or inquire as to
the performance or observance of any of the terms of this Agreement by the
Grantors.
SECTION 15. Appointment of Co-agents
At any time or times, in order to comply with any legal requirement in
any jurisdiction, the Agent may appoint another bank or trust company or one or
more other persons, either to act as co-agent or co-agents, jointly with the
Agent, or to act as separate agent or agents on behalf of the Banks, with such
power and authority as may be necessary for the effectual operation of the
provisions hereof and may be specified in the instrument of appointment (which
may, in the discretion of the Agent, include provisions for the protection of
such co-agent or separate agent similar to the provisions of Section 14).
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<PAGE> 160
SECTION 16. Termination of Security Interests; Release of Collateral
Upon the repayment in full of all Secured Obligations and the
termination of the Commitments under the Credit Agreement, the Security
Interests shall terminate and all rights to the Collateral shall revert to the
Grantors. At any time and from time to time prior to such termination of the
Security Interests, the Agent may release any of the Collateral with the prior
written consent of the Required Banks; provided that the Agent may not release
all or substantially all of the Collateral (as defined in the Credit Agreement)
without the prior written consent of all the Banks. Upon any such termination of
the Security Interests or release of Collateral, the Agent will, at the expense
of the Grantors, execute and deliver to the Grantors such documents as the
Grantors shall reasonably request to evidence the termination of the Security
Interests or the release of such Collateral, as the case may be.
SECTION 17. Notices
All notices hereunder shall be given in accordance with Section 10.01
of the Credit Agreement.
SECTION 18. Waivers, Non-exclusive Remedies
No failure on the part of the Agent to exercise, and no delay in
exercising and no course of dealing with respect to, any right under this
Agreement shall operate as a waiver thereof; nor shall any single or partial
exercise by the Agent of any right under the Credit Agreement or this Agreement
preclude any other or further exercise thereof or the exercise of any other
right. The rights in this Agreement and the Credit Agreement are cumulative and
are not exclusive of any other remedies provided by law.
SECTION 19. Successors and Assigns
This Agreement is for the benefit of the Agent and the Banks and their
successors and assigns, and in the event of an assignment of all or any of the
Secured Obligations, the rights hereunder, to the extent applicable to the
indebtedness so assigned, may be transferred with such indebtedness. This
Agreement shall be binding on the Agent, the Banks, the Grantors and their
respective successors and assigns.
SECTION 20. Changes in Writing
Neither this Agreement nor any provision hereof may be changed, waived,
discharged or terminated orally, but only in writing signed by the Grantors and
the Agent with the consent of the Required Banks; provided that no such
modification shall, unless signed by all the Banks, effect or permit a release
of all or substantially all of the Collateral (as defined in the Credit
Agreement) or amend this Section 20.
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SECTION 21. New York Law
This Agreement shall be construed in accordance with and governed by
the laws of the State of New York, except as otherwise required by mandatory
provisions of law and except to the extent that remedies provided by the laws of
any jurisdiction other than New York are governed by the laws of such
jurisdiction.
SECTION 22. Severability
If any provision hereof is invalid or unenforceable in any
jurisdiction, hen, to the fullest extent permitted by law, (i) the other
provisions hereof shall remain in full force and effect in such jurisdiction and
shall be liberally construed in favor of the Agent and the Banks in order to
carry out the intentions of the parties hereto as nearly as may be possible; and
(ii) the invalidity or unenforceability of any provision hereof in any
jurisdiction shall not affect the validity or enforceability of such provision
in any other jurisdiction.
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<PAGE> 162
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.
TEKNI-PLEX, INC.
By: ___________________________________
Title: Chief Financial Officer
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK,
as Agent
By: ___________________________________
Title: Vice President
12
<PAGE> 163
SCHEDULE 1
SUBSIDIARIES
Dolco Packaging Corp. 100 shares Certif. No. 1
INTERCOMPANY NOTES
[To come]
<PAGE> 164
EXHIBIT G
This instrument was prepared by the attorney described below in consultation
with counsel in the State in which the Property is located and, when recorded,
the recorded counterparts should be returned to:
James P. McIntyre, Esq.
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
===========================================================
MORTGAGE, ASSIGNMENT OF LEASES AND RENTS,
SECURITY AGREEMENT AND FIXTURE FILING
dated as of May 8, 1997
by
TEKNI-PLEX, INC.,
the Mortgagor,
to
MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
as Agent for the Banks,
the Mortgagee
Property:
Somerville
Branchburg Township
County of Somerset
State of New Jersey
===========================================================
THIS INSTRUMENT CONTAINS AFTER-ACQUIRED PROPERTY PROVISIONS AND SECURES
OBLIGATIONS CONTAINING PROVISIONS FOR CHANGES IN INTEREST RATES. THIS INSTRUMENT
ALSO SECURES FUTURE ADVANCES.
<PAGE> 165
TABLE OF CONTENTS*
Page
----
PREAMBLE................................................................... 01
RECITALS .................................................................. 01
GRANTING CLAUSES .......................................................... 02
GRANTING CLAUSE I. Land ............................................. 02
GRANTING CLAUSE II. Improvements .................................... 02
GRANTING CLAUSE III. Equipment......................................... 03
GRANTING CLAUSE IV. Appurtenant Rights................................ 04
GRANTING CLAUSE V. Agreements........................................ 04
GRANTING CLAUSE VI. Leases............................................ 04
GRANTING CLAUSE VII. Rents, Issues and Profits......................... 04
GRANTING CLAUSE VIII. Permits........................................... 05
GRANTING CLAUSE IX. Proceeds and Awards............................... 05
GRANTING CLAUSE X. Books and Records................................. 06
GRANTING CLAUSE XI. Other Intangible Property......................... 06
GRANTING CLAUSE XII. Additional Property .............................. 06
ARTICLE I
DEFINITIONS AND INTERPRETATION
SECTION 1.01 Definitions.......................................... 07
1.02 Interpretation....................................... 11
1.03 Resolution of Drafting Ambiguities................... 11
ARTICLE II
CERTAIN WARRANTIES AND COVENANTS OF THE MORTGAGOR
SECTION 2.01 Title ............................................... 12
2.02 Secured Obligations.................................. 13
2.03 Impositions.......................................... 13
2.04 Legal and Insurance Requirements..................... 13
2.05 Status of the Property............................... 14
2.06 Permitted Contests................................... 14
2.07 Liens. . . .......................................... 15
2.08 Transfer ............................................ 15
- ----------------
*The Table of Contents is not part of this Mortgage.
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<PAGE> 166
Page
----
ARTICLE III
INSURANCE, CASUALTY AND CONDEMNATION
SECTION 3.01 Insurance. . ....................................... 15
3.02 Casualty and Condemnation........................... 16
3.03 Insurance Claims and Proceeds;
Condemnation Awards............................... 17
ARTICLE IV
CERTAIN SECURED OBLIGATIONS
SECTION 4.01 Interest After Default.............................. 18
4.02 Changes in the Laws Regarding Taxation ............. 18
4.03 Indemnification .................................... 18
ARTICLE V
DEFAULTS, REMEDIES AND RIGHTS
SECTION 5.01 Events of Default................................... 19
5.02 Remedies .................................. 19
5.03 Waivers by the Mortgagor............................ 23
5.04 Jurisdiction and Process............................ 24
5.05 Sales. . . . ....................................... 24
5.06 Proceeds .................................. 27
5.07 Assignment of Leases................................ 27
5.08 Dealing With the Mortgaged Property................. 28
5.09 Right of Entry...................................... 29
5.10 Right to Perform Obligations........................ 29
5.11 Concerning the Mortgagee............................ 29
5.12 Expenses .................................. 30
ARTICLE VI
SECURITY AGREEMENT AND FIXTURE FILING
SECTION 6.01 Security Agreement.................................. 31
6.02 Fixture Filing...................................... 31
ii
<PAGE> 167
Page
----
ARTICLE VII
MISCELLANEOUS
SECTION 7.01 Revolving Loans......................................... 32
7.02 Release of Mortgaged Property........................... 32
7.03 Notices . ...................................... 33
7.04 Amendments in Writing................................... 33
7.05 Severability............................................ 33
7.06 Binding Effect.......................................... 34
7.07 GOVERNING LAW........................................... 34
Exhibit A - Description of the Land
Exhibit B - Permitted Encumbrances
iii
<PAGE> 168
THIS MORTGAGE, ASSIGNMENT OF LEASES AND RENTS, SECURITY AGREEMENT AND
FIXTURE FILING(this "Mortgage") dated as of May 8, 1997 by TEKNI-PLEX, INC., a
Delaware corporation, having an address at 201 Industrial Parkway, Somerville,
NJ 08876 (the "Mortgagor"), to MORGAN GUARANTY TRUST COMPANY OF NEW YORK, a New
York banking corporation, as Agent for the Banks (hereinafter defined), having
an address at 500 Stanton Christiana Road, Newark, Delaware 19713 (the
"Mortgagee").
W I T N E S S E T H:*
RECITALS
A. Credit Agreement. Reference is hereby made to the Credit Agreement
(as amended from "Credit Agreement"), dated as of May 8, 1997 among the
Mortgagor, each Guarantor which is or may hereafter become a party thereto, each
Bank which is or may hereafter become a party thereto and Morgan Guaranty Trust
Company of New York, as Agent.
B. Mortgage. The Lien of this Mortgage is being granted to secure
payment, performance and observance of the following indebtedness, liabilities
and obligations, whether now or hereafter owed or owing, hereinafter referred to
collectively as the "Secured Obligations":
(i) (a) all principal of and interest (including any interest which
accrues after the commencement of any case, proceeding or other action
relating to the bankruptcy, insolvency or reorganization of any Obligor on
any Note or Loan and any LC Reimbursement Obligation arising under the
Credit Agreement, (b) all other amounts payable by the Mortgagor hereunder
or under any other Loan Document and (c) any renewals or extensions of any
of the foregoing; and
(ii) the performance and observance of each other term, covenant,
agreement, obligation, requirement, condition and provision to be performed
or observed by the Mortgagor under this Mortgage or any other Loan Document.
- -------------------
*Capitalized terms are defined in, or by reference in, Section 1.01.
<PAGE> 169
GRANTING CLAUSES
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, for the purpose of securing the due and punctual payment,
performance and observance of the Secured Obligations and intending to be bound
hereby, the Mortgagor does hereby GRANT, BARGAIN, SELL, CONVEY, MORTGAGE,
ASSIGN, TRANSFER and WARRANT to the Mortgagee and its successors under the Loan
Documents, with power of sale and right of entry as hereinafter provided, and
(to the extent covered by the Local UCC) does hereby GRANT AND WARRANT to the
Mortgagee and its successors under the Loan Documents, a continuing first
security interest in and to all of the property and rights described in the
following Granting Clauses (all of which property and rights are collectively
called the "Mortgaged Property"), to wit:
GRANTING CLAUSE I.
Land. The parcel or parcels of land located in Somerset County, State
of New Jersey and more particularly described in Exhibit A (the "Land").
GRANTING CLAUSE II.
Improvements. All estate, right, title and interest of the Mortgagor
in, to, under or derived from: all buildings, structures, facilities and other
improvements of every kind and description now or hereafter located on the Land,
including all parking areas, roads, driveways, walks, fences, walls and berms;
all estate, right, title and interest of the Mortgagor, if any, in, to, under or
derived from: all recreation, drainage and lighting facilities and other site
improvements; all water, sanitary and storm sewer, drainage, electricity, steam,
gas, telephone, telecommunications and other utility equipment and facilities;
all plumbing, lighting, heating, ventilating, air-conditioning, refrigerating,
incinerating, compacting, fire protection and sprinkler, surveillance and
security, vacuum cleaning, public address and communications equipment and
systems; all kitchen and laundry appliances; all walls, screens, awnings, floor
coverings, partitions, elevators, escalators, motors, electrical, computer and
other wiring, machinery, pipes, fittings and racking and shelving; and all other
items of fixtures, equipment and personal property of every kind and
description, in each case now or hereafter located on the Land or affixed
(actually or constructively) to the Improvements which by the nature of their
location thereon or affixation thereto are real property under applicable law;
and including all materials intended for the construction, reconstruction,
repair, replacement, alteration, addition or improvement of or to such
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buildings, equipment, fixtures, structures and improvements, all of which
materials shall be deemed to be part of the Mortgaged Property immediately upon
delivery thereof on the Land and to be part of the Improvements immediately upon
their incorporation therein (the foregoing being collectively called the
"Improvements").
GRANTING CLAUSE III.
Equipment. All estate, right, title and interest of the Mortgagor, if
any, in, to, under or derived from: all fixtures, chattels and articles of
personal property owned or leased by the Mortgagor or in which the Mortgagor has
or shall acquire an interest, wherever situated, and now or hereafter located on
or in the Land or the Improvements, whether or not affixed thereto (actually or
constructively) and which are not real property under applicable law, including
all cabinets, lockers, bookcases, shelving, keys or other entry systems,
partitions, shades, blinds, curtains, drapes, draperies, carpets, rugs,
furniture and furnishings, china, glassware, silverware, pots, pans, utensils,
linens, stoves, refrigerators, freezers, dishwashers, laundry and kitchen
appliances and equipment; all heating, lighting, plumbing, ventilating, air
conditioning, refrigerating, gas, steam, electrical, incinerating and compacting
plants, systems, fixtures and equipment, bulbs and bells; all elevators, stoves,
ranges, vacuum and other cleaning systems, floor cleaning, waxing and polishing
equipment, intercom, paging and call systems, switchboards, sprinkler systems
and other fire prevention, alarm and extinguishing apparatus and materials; all
pictures, paintings, works of art and decorations; all pipes, conduits, dynamos,
engines, compressors, generators, boilers, stokers, furnaces, pumps, trunks,
ducts, utensils, tools, implements and fittings; and all other furniture,
appliances, equipment, supplies, and tangible property of every kind and nature
whatsoever owned or leased by the Mortgagor, or in which the Mortgagor has or
shall have an interest, now or hereinafter located upon the Land, or
appurtenances thereto, or usable in connection with the present or future
operation or occupancy of the Land or the Improvements, and including any of the
foregoing that is temporarily removed from the Land or Improvements to be
repaired and later reinstalled thereon or therein (the foregoing being
collectively called the "Equipment"; and the Land with the Improvements thereon
and the Equipment therein being collectively called the "Property"). If the Lien
of this Mortgage is subject to a security interest covering any Property
described in this GRANTING CLAUSE III, then all of the right, title and interest
of the Mortgagor in and to any and all such Property is hereby assigned to the
Mortgagee, together with the benefits of all deposits and payments now or
hereafter made thereon by or on behalf of the Mortgagor.
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<PAGE> 171
GRANTING CLAUSE IV.
Appurtenant Rights. All estate, right, title and interest of the
Mortgagor, if any, in, to, under or derived from all tenements, hereditaments
and appurtenances now or hereafter relating to the Property; the streets, roads,
sidewalks and alleys abutting the Property; all strips and gores within or
adjoining the Land; all land in the bed of any body of water adjacent to the
Land; all land adjoining the Land created by artificial means or by accretion;
all air space and rights to use air space above the Land; all development or
similar rights now or hereafter appurtenant to the Land; all rights of ingress
and egress now or hereafter appertaining to the Property; all easements and
rights of way now or hereafter appertaining to the Property; and all royalties
and other rights now or hereafter appertaining to the use and enjoyment of the
Property, including alley, party walls, support, drainage, crop, timber,
agricultural, horticultural, oil, gas and other mineral, water stock, riparian
and other water rights.
GRANTING CLAUSE V.
Agreements. All estate, right, title and interest of the Mortgagor, if
any, in, to, under or derived from: all Insurance Policies (including all
unearned premiums and dividends thereunder), all guarantees and warranties
relating to the Property, all supply and service contracts for water, sanitary
and storm sewer, drainage, electricity, steam, gas, telephone and other
utilities now or hereafter relating to the Property and all other contract
rights, now or hereafter relating to the use or operation of the Property (the
foregoing being collectively called the "Agreements").
GRANTING CLAUSE VI.
Leases. All estate, right, title and interest of the Mortgagor, if any,
in, to, under or derived from all Leases now or hereafter in effect, whether or
not of record, for the use or occupancy of all or any part of the Property,
together with all amendments, supplements, consolidations, replacements,
extensions, renewals and other modifications of any thereof.
GRANTING CLAUSE VII.
Rents, Issues and Profits. All estate, right, title and interest of the
Mortgagor, if any, in, to, under or derived from: all rents, royalties, issues,
profits, receipts, revenue, income and other benefits now or hereafter,
including during any period of redemption, accruing with respect to the
Property, including all rents and other sums now or hereafter, including during
any
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<PAGE> 172
period of redemption, payable pursuant to the Leases; all other sums now or
hereafter, including during any period of redemption, payable with respect to
the use, occupancy, management, operation or control of the Property; and all
other claims, rights and remedies now or hereafter, including during any period
of redemption, belonging or accruing with respect to the Property, including
fixed, additional and percentage rents, occupancy charges, security deposits,
parking, maintenance, common area, tax, insurance, utility and service charges
and contributions (whether collected under the Leases or otherwise), proceeds of
sale of electricity, gas, heating, air-conditioning and other utilities and
services (whether collected under the Leases or otherwise), and deficiency rents
and liquidated damages following default or cancellation (the foregoing rents
and other sums described in this Granting Clause being collectively called the
"Rents"), all of which the Mortgagor hereby irrevocably directs be paid to the
Mortgagee, subject to the license granted to the Mortgagor pursuant to Section
5.07(b), to be held, applied and disbursed as provided in this Mortgage.
GRANTING CLAUSE VIII.
Permits. All estate, right, title and interest of the Mortgagor, if
any, in, to, under or derived from all licenses, authorizations, certificates,
variances, concessions, grants, franchises, consents, approvals and other
permits now or hereafter pertaining to the ownership, management or operation of
the Property (the foregoing being collectively called the "Permits").
GRANTING CLAUSE IX.
Proceeds and Awards. All estate, right, title and interest of the
Mortgagor, if any, in, to, under or derived from all proceeds of any Transfer,
financing, refinancing or conversion into cash or liquidated claims, whether
voluntary or involuntary, of any of the Mortgaged Property, including all
Insurance Proceeds, Awards and title insurance proceeds under any title
insurance policy now or hereafter held by the Mortgagor, and all rights,
dividends and other claims of any kind whatsoever (including damage, secured,
unsecured, priority and bankruptcy claims) now or hereafter relating to any of
the Mortgaged Property, all of which the Mortgagor hereby irrevocably directs be
paid to the Mortgagee to the extent provided hereunder, to be held, applied and
disbursed as provided in this Mortgage.
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GRANTING CLAUSE X.
Books and Records. All books and records (including customer lists,
credit files, computer programs, print outs and other computer materials and
records) of the Mortgagor, if any, now or hereafter pertaining to the ownership,
management or operation of the Property.
GRANTING CLAUSE XI.
Other Intangible Property. All estate, right, title and interest of the
Mortgagor, if any, in, to, under or derived from all intangible property, to the
extent not described in the foregoing Granting Clauses, now or hereafter
necessary to operate the Property as a going concern.
GRANTING CLAUSE XII.
Additional Property. All greater, additional or other estate, right,
title and interest of the Mortgagor in, to, under or derived from the Mortgaged
Property now or hereafter acquired by the Mortgagor, including all right, title
and interest of the Mortgagor in, to, under or derived from all extensions,
improvements, betterments, renewals, substitutions and replacements of, and
additions and appurtenances to, any of the Mortgaged Property hereafter acquired
by or released to the Mortgagor or constructed or located on, or affixed to, the
Property, in each case, immediately upon such acquisition, release,
construction, location or affixation; all estate, right, title and interest of
the Mortgagor in, to, under or derived from any other property and rights which
are, by the provisions of the Loan Documents, required to be subjected to the
Lien hereof; all estate, right, title and interest of the Mortgagor in, to,
under or derived from any other property and rights which are necessary to
maintain the Property and the Mortgagor's business or operations conducted
therein as a going concern, in each case, to the fullest extent permitted by
law, without any further conveyance, mortgage, assignment or other act by the
Mortgagor; and all estate, right, title and interest of the Mortgagor in, to,
under or derived from all other property and rights which are by any instrument
or otherwise subjected to the Lien hereof by the Mortgagor or anyone acting on
its behalf.
TO HAVE AND TO HOLD the Mortgaged Property, together with all estate,
right, title and interest of the Mortgagor and anyone claiming by, through or
under the Mortgagor in, to, under or derived from the Mortgaged Property and all
rights and appurtenances relating thereto, to the Mortgagee, forever.
PROVIDED ALWAYS that this Mortgage is upon the express condition that
the Mortgaged Property shall be released from the
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<PAGE> 174
Lien of this Mortgage in full or in part in the manner and at the time provided
in Section 7.02.
THE MORTGAGOR ADDITIONALLY COVENANTS AND AGREES WITH THE MORTGAGEE AS
FOLLOWS:
ARTICLE I
DEFINITIONS AND INTERPRETATION
SECTION 1.01. Definitions. (a) Capitalized terms used in this Mortgage,
but not otherwise defined herein, are defined in, or are defined by reference
to, the Credit Agreement and have the same meanings herein as therein.
(b) In addition, as used herein, the following terms have the following
meanings:
"Agreements" is defined in Granting Clause V.
"Awards" means, at any time, all awards or payments received or
receivable by reason of any Condemnation, including all amounts received or
receivable with respect to any Transfer in lieu or anticipation of
Condemnation or in connection with any agreement with any condemning
authority which has been made in settlement of any proceeding relating to a
Condemnation.
"Bankruptcy Code" means the Bankruptcy Code of 1978, as amended.
"Casualty" means any damage to, or destruction of, the Property.
"Condemnation" means any condemnation or other taking or temporary or
permanent requisition of the Property, any interest therein or right
appurtenant thereto, or any change of grade affecting the Property, as the
result of the exercise of any right of condemnation or eminent domain. A
Transfer to a governmental authority in lieu or anticipation of Condemnation
shall be deemed to be a Condemnation.
"Credit Agreement" is defined in the Recitals.
"Equipment" is defined in Granting Clause III.
"Impositions" means all taxes (including real estate taxes, transfer
taxes and sales and use taxes), assessments (including all assessments for
public improvements or benefits, whether or not commenced or completed prior
to the date hereof), water, sewer or other rents, rates and
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<PAGE> 175
charges, excises, levies, license fees, permit fees, inspection fees and
other authorization fees and other charges, in each case whether general or
special, ordinary or extraordinary, foreseen or unforeseen, of every
character (including all interest and penalties thereon), which at any time
may be assessed, levied, confirmed or imposed on or in respect of, or be a
Lien upon, (i) the Property, any other Mortgaged Property or any interest
therein, (ii) any occupancy, use or possession of, or activity conducted
on, the Property to the extent that the failure to pay the same would
create a Lien on the Property, (iii) the Rents from the Property or the use
or occupancy thereof to the extent that the failure to pay the same would
create a Lien on the Property, or (iv) the Secured Obligations or the Loan
Documents, but excluding income, excess profits, franchise, capital stock,
estate, inheritance, succession, gift or similar taxes of the Mortgagor or
the Mortgagee or any other Secured Party, except to the extent that such
taxes of the Mortgagor or the Mortgagee or any other Secured Party are
imposed in whole or in part in lieu of, or as a substitute for, any taxes
which are or would otherwise be Impositions.
"Improvements" is defined in Granting Clause II.
"Insurance Policies" means the insurance policies and coverages
required to be maintained by the Mortgagor with respect to the Property
pursuant to the Credit Agreement.
"Insurance Premiums" means all premiums payable under the Insurance
Policies.
"Insurance Proceeds" means, at any time, all insurance proceeds (except
proceeds of business interruption insurance) or payments to which the
Mortgagor may be or become entitled under the Insurance Policies by reason
of any Casualty plus all insurance proceeds and payments to which the
Mortgagor may be or become entitled by reason of any Casualty under any
other insurance policies or coverages maintained by the Mortgagor with
respect to the Property.
"Insurance Requirements" means all provisions of the Insurance
Policies, all requirements of the issuer of any of the Insurance Policies
and all orders, rules, regulations and any other requirements of the
National Board of Fire Underwriters (or any other body exercising similar
functions) binding upon the Mortgagor and applicable to the Property, any
adjoining vaults, sidewalks, parking areas or driveways or any use or
condition thereof.
"Land" is defined in Granting Clause I.
"Lease" means each lease, sublease, tenancy, subtenancy, license,
franchise, concession or other
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<PAGE> 176
occupancy agreement relating to the Property, together with any guarantee
of the obligations of the tenant or occupant thereunder or any right to
possession under any federal or state bankruptcy code in the event of the
rejection of any sublease by the sublandlord thereof or its trustee
pursuant to said code.
"Legal Requirements" means all provisions of the Leases, the
Agreements, the Permitted Liens, and the Permits and all applicable laws,
statutes, codes, acts, ordinances, orders, judgments, decrees, injunctions,
rules, regulations, directions and requirements of, and agreements with,
governmental bodies, agencies or officials, now or hereafter applicable to
the Property, any adjoining vaults, sidewalks, streets or ways, or any use
or condition thereof.
"Local UCC" means the Uniform Commercial Code as in effect in the State
in which the Property is located.
"Mortgage" is defined in the Preamble.
"Mortgaged Property" is defined in the Granting Clauses.
"Mortgagee" is defined in the Preamble.
"Mortgagor" is defined in the Preamble.
"National Flood Insurance Program" means the National Flood Insurance
Act of 1968 and the Flood Disaster Protection Act of 1973 (42 U.S.C.
Sections 4001 et seq.).
"Permits" is defined in Granting Clause VIII.
"Permitted Disposition" means any (i) Transfer in connection with a
Condemnation, (ii) Transfer of obsolete, unused or unnecessary Equipment in
the ordinary course of business or (iii) easement or similar encumbrance
with respect to the Property granted by the Mortgagor to any adjoining
landowner or any railroad, telephone, cable television, water, sewer,
utility or similar company, municipality or other governmental subdivision
in the ordinary course of business.
"Permitted Liens" means (i) any Liens permitted under clauses (g),(h)
and (k) of Section 5.09 of the Credit Agreement and, with respect to
Equipment, clauses (a) through (f) of Section 5.09 of the Credit Agreement,
(ii) Liens being contested pursuant to Section 2.06 and (iii) Permitted
Encumbrances.
"Permitted Encumbrances" means those matters set forth on Exhibit B
annexed hereto.
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<PAGE> 177
"Post-Default Rate" means, with respect to any amount payable by the
Mortgagor hereunder which is not paid when due, a rate per annum equal to
the sum of 2% plus the rate applicable to Base Rate Loans from time to time.
"Property" is defined in Granting Clause III.
"Receiver" is defined in Section 5.02(a)(iv).
"Rents" is defined in Granting Clause VII.
"Restoration" means the restoration, repair, replacement or rebuilding
of the Property after a Casualty or Condemnation, and "Restore" means to
restore, repair, replace or rebuild the Property after a Casualty or
Condemnation, in each case to a utility and condition adequate to the
Mortgagor's use as conducted immediately prior to the Casualty or
Condemnation.
"Secured Obligations" is defined in the Recitals.
"Secured Parties" means the Mortgagee and all other holders of any of
the Secured Obligations (including all Persons to whom any of the Secured
Obligations may be payable from time to time).
"Transfer" means, when used as a noun, any sale, conveyance,
assignment, lease, or other transfer and, when used as a verb, to sell,
convey, assign, lease, or otherwise transfer, in each case (i) whether
voluntary or involuntary, (ii) whether direct or indirect and (iii)
including any agreement providing for a Transfer or granting any right or
option providing for a Transfer.
"Unavoidable Delays" means delays due to acts of God, fire, flood,
earthquake, explosion or other Casualty, inability to procure or shortage of
labor, equipment, facilities, sources of energy (including electricity,
steam, gas or gasoline), materials or supplies, failure of transportation,
strikes, lockouts, action of labor unions, Condemnation, litigation relating
to Legal Requirements, inability to obtain Permits or other causes beyond
the reasonable control of the Mortgagor, provided that lack of funds shall
not be deemed to be a cause beyond the control of the Mortgagor.
(c) In this Mortgage, unless otherwise specified, references to this
Mortgage or to Agreements, Leases, Permits, the Credit Agreement, Notes, Loan
Documents and Collateral Documents include all amendments, supplements,
consolidations, replacements, restatements, extensions, renewals and other
modifications thereof, in whole or in part.
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SECTION 1.02. Interpretation. In this Mortgage, unless otherwise
specified, (i) singular words include the plural and plural words include the
singular; (ii) words which include a number of constituent parts, things or
elements, including the terms Leases, Improvements, Land, Secured Obligations,
Property and Mortgaged Property, shall be construed as referring separately to
each constituent part, thing or element thereof, as well as to all of such
constituent parts, things or elements as a whole; (iii) words importing any
gender include the other genders; (iv) references to any Person include such
Person's successors and assigns and in the case of an individual, the word
"successors" includes such Person's heirs, devisees, legatees, executors,
administrators and personal representatives; (v) references to any statute or
other law include all applicable rules, regulations and orders adopted or made
thereunder and all statutes or other laws amending, consolidating or replacing
the statute or law referred to; (vi) the words "consent", "approve", "agree" and
"request", and derivations thereof or words of similar import, mean the prior
written consent, approval, agreement or request of the Person in question; (vii)
the words "include" and "including", and words of similar import, shall be
deemed to be followed by the words "without limitation"; (viii) the words
"hereto", "herein", "hereof" and "hereunder", and words of similar import, refer
to this Mortgage in its entirety; (ix) references to Articles, Sections,
Schedules, Exhibits, subsections, paragraphs and clauses are to the Articles,
Sections, Schedules, Exhibits, subsections, paragraphs and clauses of this
Mortgage; (x) the Schedules and Exhibits to this Mortgage are incorporated
herein by reference; (xi) the titles and headings of Articles, Sections,
Schedules, Exhibits, subsections, paragraphs and clauses are inserted as a
matter of convenience and shall not affect the construction of this Mortgage;
(xii) all obligations of the Mortgagor hereunder shall be satisfied by the
Mortgagor at the Mortgagor's sole cost and expense; and (xiii) all rights and
powers granted to the Mortgagee hereunder shall be deemed to be coupled with an
interest and be irrevocable.
SECTION 1.03. Resolution of Drafting Ambiguities. The Mortgagor
acknowledges that it was represented by counsel in connection with this
Mortgage, that it and its counsel reviewed and participated in the preparation
and negotiation of this Mortgage and that any rule of construction to the effect
that ambiguities are to be resolved against the drafting party or the Mortgagee
shall not be employed in the interpretation of this Mortgage.
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ARTICLE II
CERTAIN WARRANTIES AND COVENANTS OF THE MORTGAGOR
SECTION 2.01. Title. (a) The Mortgagor warrants that, as of the date
hereof, (i) (x) the Mortgagor has good and marketable title to the fee simple
interest in the Land and the Improvements thereon, (y) the Mortgagor is the
owner of, or has a valid leasehold interest in, the Equipment and all other
items constituting the Mortgaged Property, and (z) this Mortgage constitutes a
valid, binding and enforceable first Lien on the Mortgaged Property, in each
case subject only to Permitted Encumbrances with respect thereto; and (ii) the
Permitted Encumbrances do not materially interfere with the enjoyment, use or
operation of the Property or materially, adversely affect the value thereof.
(b) The Mortgagor shall forever preserve, protect, warrant and defend
(i) the estate, right, title and interest of the Mortgagor in and to the
Mortgaged Property; (ii) the validity, enforceability and priority of the Lien
of this Mortgage on the Mortgaged Property; and (iii) the right, title and
interest of the Mortgagee and any purchaser at any sale of the Mortgaged
Property hereunder or relating hereto, in each case against all other Liens and
claims whatsoever, subject only to Permitted Liens.
(c) The Mortgagor, at its sole cost and expense, shall (i) upon the
request of the Mortgagee, promptly correct any defect or error which may be
discovered in this Mortgage or any financing statement or other document
relating hereto; and (ii) promptly execute, acknowledge, deliver, record and
re-record, register and re-register, and file and re-file this Mortgage and any
financing statements or other documents which the Mortgagee may require from
time to time (all in form and substance reasonably satisfactory to the
Mortgagee) in order (A) to effectuate, complete, perfect, continue or preserve
the Lien of this Mortgage as a first Lien on the Mortgaged Property, whether now
owned or hereafter acquired, subject only to the Permitted Liens, or (B) to
effectuate, complete, perfect, continue or preserve any right, power or
privilege granted or intended to be granted to the Mortgagee hereunder or
otherwise accomplish the purposes of this Mortgage, provided the same does not,
in any material respect, increase the obligations of, or diminish the rights
reserved to, the Mortgagor hereunder. To the extent permitted by law, the
Mortgagor hereby authorizes the Mortgagee to execute and file financing
statements or continuation statements without the Mortgagor's signature
appearing thereon. The Mortgagor shall pay within fifteen (15) days of demand
therefor the costs of, or incidental to, any recording or filing of any
financing or continuation statement, or amendment thereto, concerning the
Mortgaged Property.
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(d) Nothing herein shall be construed to subordinate the Lien of this
Mortgage to any Permitted Lien to which the Lien of this Mortgage is not
otherwise subordinate.
SECTION 2.02. Secured Obligations. The Mortgagor shall duly and
punctually pay, perform and observe the Secured Obligations in accordance with
the terms and provisions of the Loan Documents.
SECTION 2.03. Impositions. The Mortgagor shall (i) subject to Section
2.06, duly and punctually pay all material Impositions prior to the delinquency
date thereof; (ii) subject to Section 2.06, duly and punctually file all returns
and other statements required to be filed with respect to any material
Imposition prior to the delinquency date thereof; (iii) promptly notify the
Mortgagee of the receipt by the Mortgagor of any notice of default in the
payment of any material Imposition or in the filing of any return or other
statement relating to any material Imposition and simultaneously furnish to the
Mortgagee a copy of such notice of default; and (iv) not make deduction from or
claim any credit on any Secured Obligation by reason of any Imposition and, to
the extent permitted under applicable law, hereby irrevocably waives any right
to do so, provided, however, that if any such Imposition may be paid in
installments (whether or not interest shall accrue on the unpaid balance
thereof), the Mortgagor may pay the same in installments (together with any
accrued interest payable on the unpaid balance thereof) as the same respectively
become due, before any fine or penalty, attaches thereto, and provided further,
that if the Mortgagor contests the validity or amount of any such Imposition or
claim by appropriate proceedings and in accordance with Section 2.06, the
Mortgagor may defer payment thereof during the pendency of such contest
including any appeal period.
SECTION 2.04. Legal and Insurance Requirements. (a) The Mortgagor
represents and warrants that as of the date hereof, (i) to the best of the
Mortgagor's knowledge, (x) the Property and the use and operation thereof comply
with all Insurance Requirements and all material Legal Requirements, and (y)
there is no default under any Legal Requirement or Insurance Requirement which
would have a material adverse effect on the use or operation of the Property,
and (ii) the execution, delivery and performance of this Mortgage will not
contravene any provision of or constitute a default under any Legal Requirement
or Insurance Requirement.
(b) The Mortgagor shall (i) duly and punctually comply with all
material Legal Requirements and Insurance Requirements other than Legal
Requirements and Insurance Requirements the validity or applicability of which
are being contested pursuant to Section 2.06; (ii) procure, maintain and duly
and punctually comply with all Permits required for any construction,
reconstruction, repair, alteration, addition, improvement,
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maintenance, management, use and operation of the Property as then conducted
other than Permits the necessity of which are being contested pursuant to
Section 2.06; (iii) promptly notify the Mortgagee of the receipt by the
Mortgagor of any notice of default regarding any Legal Requirement, Insurance
Requirement or Permit or any possible or actual termination, of any Permit or
Insurance Policy and furnish to the Mortgagee a copy of such notice of default
or termination, except with respect to any default or termination which would
not have a material adverse effect on the use or operation of the Property as
then conducted; and (iv) promptly after obtaining knowledge thereof notify the
Mortgagee of any condition which, with or without the giving of notice or the
passage of time or both, would constitute a default regarding any Legal
Requirement or Insurance Requirement or a termination of any Permit or Insurance
Policy which default or termination would have a material adverse effect on the
use or operation of the Property as then conducted and the action being taken to
remedy such condition.
SECTION 2.05. Status of the Property. The Mortgagor represents and
warrants that, to the best of the Mortgagor's knowledge, (i) the Property is
served by all necessary water, sanitary and storm sewer, drainage, electric,
steam, gas, telephone and other utilities and utility facilities, which utility
facilities have capacities which are sufficient to serve the current use and
occupancy of the Property; (ii) the Property has legal access to all streets,
roads or alleys adjacent to the Property (including, as appropriate, access over
properly granted, perpetual, private right-of-way or easement Agreements)
sufficient to serve the current use and operation of the Property; (iii) the
Improvements are not located in an area designated as "flood prone" (as defined
under the regulations adopted under the National Flood Insurance Program), or to
the extent the Improvements are located in an area designated as "flood prone",
the Mortgagor maintains in full force and effect flood insurance under the
National Flood Insurance Program to the extent and in the minimum amounts
required by applicable law; and (iv) since the date of the survey described on
Exhibit B, there have been no material additions to or material alterations of
the Improvements.
SECTION 2.06. Permitted Contests. After prior notice to the Mortgagee,
the Mortgagor may contest, by appropriate proceedings conducted in good faith
and with due diligence, any Legal Requirement, any Insurance Requirement or any
Imposition, provided that (i) no Event of Default has occurred and is continuing
(it being agreed that the failure to comply with such Legal Requirement or
Insurance Requirement, or to pay such Imposition or to discharge such Lien
during such contest shall not constitute an Event of Default, provided that the
Mortgagor is otherwise in compliance with this Section); (ii) no Mortgaged
Property or interest therein is in danger of being sold, forfeited or lost, or
the priority of the Lien of the Mortgagee
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is not at risk, as a result of such contest or proceedings; (iii) in the case of
any Legal Requirement, the Mortgagee and the other Secured Parties are not in
danger of any criminal or material civil penalty or any other liability for
failure to comply therewith and no Mortgaged Property or interest therein is
subject to the imposition of any Lien as a result of such failure which is not
properly contested pursuant to this Section; and (iv) in the case of any
Insurance Requirement, no Insurance Policy or coverage is in danger of being
forfeited or lost as a result of such contest or proceedings, unless replaced;
and provided further that the Mortgagor establishes any reserve or other
appropriate provision required with respect to such contest under generally
accepted accounting principles consistently applied.
SECTION 2.07. Liens. Subject to the rights of contest provided the
Mortgagor in Section 2.06, the Mortgagor shall not create or permit to be
created or to remain, any Lien on the Mortgaged Property or any interest therein
and shall cause to be discharged any such Lien within forty-five (45) days
following receipt of notice of such Lien, in each case (i) whether voluntarily
or involuntarily created, (ii) whether directly or indirectly a Lien thereon and
(iii) whether subordinated hereto, except Permitted Liens. The provisions of
this Section shall apply to each and every Lien (other than Permitted Liens) on
the Mortgaged Property or any interest therein, regardless of whether a consent
to, or waiver of a right to consent to, any other Lien thereon has been
previously obtained in accordance with the terms of the Loan Documents. Nothing
herein shall obligate the Mortgagor to remove any inchoate statutory Lien in
respect of obligations not yet due and payable.
SECTION 2.08. Transfer. The Mortgagor shall not Transfer, or suffer any
Transfer of, the Mortgaged Property or any part thereof or interest therein,
except Permitted Dispositions. The provisions of this Section shall apply to
each and every Transfer of the Mortgaged Property or any interest therein,
regardless of whether a consent to, or waiver of a right to consent to, any
other Transfer thereof has been previously obtained in accordance with the terms
of the Loan Documents.
ARTICLE III
INSURANCE, CASUALTY AND CONDEMNATION
SECTION 3.01. Insurance. (a) The Mortgagor shall maintain in full force
and effect Insurance Policies with respect to the Property as required by the
Credit Agreement. The physical damage insurance maintained with respect to the
Property shall name the Mortgagee as an insured party and shall provide that all
property losses insured against shall be adjusted by the Mortgagor, subject to
the Mortgagee's rights
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pursuant to Section 3.03(a) hereof and the Credit Agreement. All insurance
maintained by the Mortgagor with respect to the Property shall provide that no
cancellation or material change thereof shall be effective until at least 30
days after receipt by the Mortgagee of written notice thereof; and all losses
shall be payable notwithstanding any foreclosure or other action or proceeding
taken pursuant to this Mortgage.
(b) The Mortgagor shall furnish to the Mortgagee from time to time not
later than 15 days prior to the expiration date of each policy required to be
maintained by the Mortgagor hereunder, an insurance certificate or certificates
executed by the insurer or its authorized agent with respect to the new or
extended policy. If the Mortgagor fails to maintain the Insurance Policies
required to be maintained under this Section, the Mortgagee shall have the right
to obtain such Insurance Policies and pay the premiums therefor. If the
Mortgagee obtains such Insurance Policies or pays the premiums therefor, upon
demand, the Mortgagor shall reimburse the Mortgagee for its reasonable expenses
in connection therewith, together with interest thereon, pursuant to Section
4.01.
(c) The Mortgagor may effect such coverage under subsection (a) of this
Section under blanket insurance policies covering other properties of the
Mortgagor, provided that (i) any such blanket insurance policy shall specify
therein, or the insurer under such policy shall certify to the Mortgagee, (A)
the maximum amount of the total insurance afforded by the blanket policy
allocated to the Property, and (B) any sublimits in such blanket policy
applicable to the Property, which sublimits shall not be less than the amounts
required pursuant to this Section; (ii) any such blanket insurance policy shall
comply in all respects with the other provisions of this Section; and (iii) the
protection afforded under any such blanket insurance policy shall be no less
than that which would have been afforded under a separate policy relating only
to the Property.
(d) The Mortgagor shall not maintain additional or separate insurance
concurrent in form or contributing in the event of loss with the insurance
required under this Section, unless (i) the policies providing such additional
or separate insurance are submitted to the Mortgagee for its approval, which
approval shall not be unreasonably withheld; (ii) the insurers under such
policies and the terms thereof are approved by the Mortgagee, which approval
shall not be unreasonably withheld; and (iii) the Mortgagee and the other
Secured Parties are included in such policies as additional insureds.
SECTION 3.02. Casualty and Condemnation. (a) The Mortgagor represents
and warrants that, as of the date hereof, (i) there is no Casualty or
Condemnation affecting in any material respect the use and occupancy of the
Property, (ii) there are no negotiations or proceedings presently pending
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in connection with a Condemnation and (iii) to the knowledge of the Mortgagor,
no Condemnation is proposed or threatened.
(b) If any Casualty occurs, the Mortgagor shall immediately take such
action as may be necessary or appropriate to preserve the undamaged portion of
the Property and to protect against personal injury or property damage.
(c) If any Casualty or Condemnation occurs (and provided the applicable
Insurance Proceeds or Awards have not been applied to the prepayment of the
Loans in accordance with Section 2.08(c) of the Credit Agreement and have been
made available to the Mortgagor, the Mortgagor shall promptly commence and
diligently pursue to completion the Restoration of such Property, subject to
Unavoidable Delays, whether or not the Insurance Proceeds or Awards with respect
to such Casualty or Condemnation are sufficient for such purpose; provided that
(i) any such Restoration shall be effected with due diligence, in a good and
workmanlike manner, in compliance with all applicable Legal Requirements and
Insurance Requirements; (ii) any such Restoration shall be conducted under the
supervision of an architect or engineer if customary for such Restoration (iii)
any such Restoration shall be located wholly on the Land and, unless consented
to by the Mortgagee and by the owner of the adjacent property, shall be
independent of and not connected with improvements located on adjacent property;
(iv) each such Restoration shall be promptly and fully paid for by the Mortgagor
except to the extent that any such payment is being contested in good faith; and
(vi) the Mortgagor shall procure prior to the commencement of any such
Restoration, and maintain throughout the continuation of the work involved, such
insurance and performance and payment bonds as are customary for the type of
construction and work involved.
SECTION 3.03. Insurance Claims and Proceeds; Condemnation Awards. (a)
If any Casualty occurs, (i) the Mortgagor shall promptly make proof of loss
under the applicable Insurance Policies and diligently pursue to conclusion its
claim for the Insurance Proceeds payable thereunder and any suit, action or
other proceeding necessary or appropriate to obtain payment of such Insurance
Proceeds and (ii) all such Insurance Proceeds shall be paid to the Mortgagor in
accordance with the Credit Agreement. If such Insurance Proceeds are required to
be delivered by the Mortgagor to the Mortgagee, then, until so delivered, any
such Insurance Proceeds received by the Mortgagor shall be held in trust by the
Mortgagor for and as the property of the Mortgagee and the other Secured Parties
and shall not be commingled with any other funds or property of the Mortgagor.
(b) If any Condemnation occurs, or if any negotiation or proceeding is
commenced which might in the reasonable judgment of the Mortgagor result in a
Condemnation, or if any Condemnation is proposed or threatened, the Mortgagor
shall, promptly after
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receiving notice or obtaining knowledge thereof, do all things deemed reasonably
necessary or appropriate by the Mortgagor to preserve the Mortgagor's interest
in such Property and promptly make claim for the Awards payable with respect
thereto and diligently pursue to conclusion such claim for such Awards and any
suit, action or other proceeding necessary or appropriate to obtain payment
thereof. All Awards with respect to any Condemnation shall be paid to the
Mortgagor in accordance with the Credit Agreement. If such Awards are required
to be delivered by the Mortgagor to the Mortgagee, then, until so delivered, any
such Awards received by the Mortgagor shall be held in trust by the Mortgagor
for and as the property of the Mortgagee and the other Secured Parties and shall
not be commingled with any other funds or property of the Mortgagor.
ARTICLE IV
CERTAIN SECURED OBLIGATIONS
SECTION 4.01. Interest After Default. If, pursuant to the terms of this
Mortgage, the Mortgagee shall make any payment on behalf of the Mortgagor
(including any payment made by the Mortgagee pursuant to Section 5.10), or shall
incur hereunder any expense for which the Mortgagee is entitled to reimbursement
pursuant to the terms of the Loan Documents, such Secured Obligation shall be
payable within fifteen (15) days of notice and any amounts not paid within
fifteen (15) days of notice shall bear interest at the Post-Default Rate from
the date incurred until paid. Such interest, and any other interest on the
Secured Obligations payable at the Post-Default Rate pursuant to the terms of
the Loan Documents, shall accrue through the date paid notwithstanding any
intervening judgment of foreclosure or sale. All such interest shall be part of
the Secured Obligations and shall be secured by this Mortgage.
SECTION 4.02. Changes in the Laws Regarding Taxation. If, after the
date hereof, there shall be enacted any applicable law deducting from the value
of the Property for the purpose of taxation the Lien of any Collateral Document
or changing in any way the applicable law for the taxation of mortgages, deeds
of trust or other Liens or obligations secured thereby, or the manner of
collection of such taxes, so as to adversely affect this Mortgage, the Secured
Obligations or any Secured Party, upon demand by the Mortgagee or any other
affected Secured Party and to the extent permitted under applicable law, the
Mortgagor shall pay all taxes, assessments or other charges resulting therefrom
or shall reimburse such Secured Party for all such taxes, assessments or other
charges which such Secured Party is obligated to pay as a result thereof.
SECTION 4.03. Indemnification. The Mortgagor shall protect, indemnify
and defend each of the Mortgagee and the other Secured Parties from and against
all liabilities, obligations,
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losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind and nature whatsoever (including reasonable attorneys'
fees and expenses) which may be imposed on, incurred by or asserted against any
Secured Party by reason or on account of, or in connection with (a) the
Mortgagee's exercise of any of its rights and remedies hereunder; (b) any
accident, injury to or death of persons or loss of or damage to property
occurring in, on or about the Mortgaged Property or any part thereof or on the
adjoining sidewalks, curbs, adjacent property or adjacent parking areas, street
or ways; (c) any failure on the part of the Mortgagor to perform or comply with
any of the terms of this Mortgage; (d) the performance of any labor or services
or the furnishing of any materials or other property in respect of the Mortgaged
Property or any part thereof; or (e) any other conduct or misconduct of the
Mortgagor, any lessee of any of the Mortgaged Property, or any of their
respective agents, contractors, subcontractors, servants, employees, licensees
or invitees; provided, however, that any claims caused by the willful misconduct
or gross negligence of any Secured Party as determined by a court of competent
jurisdiction shall be excluded from the foregoing indemnification of such
Secured Party. Any amount payable under this Section will be deemed a demand
obligation and will bear interest pursuant to Section 4.01. The obligations of
the Mortgagor under this Section shall survive the termination of this Mortgage.
ARTICLE V
DEFAULTS, REMEDIES AND RIGHTS
SECTION 5.01. Events of Default. Any Event of Default under the Credit
Agreement shall constitute an Event of Default hereunder. All notice and cure
periods provided in the Credit Agreement and the other Loan Documents shall run
concurrently with any notice or cure periods provided under applicable law.
SECTION 5.02. Remedies. (a) Upon the occurrence and continuance of an
Event of Default, the Mortgagee shall have the right and power to exercise any
of the following remedies and rights, subject to mandatory provisions of
applicable law, to wit:
(i) to institute a proceeding or proceedings, by advertisement,
judicial process or otherwise as provided under applicable law, for the
complete or partial foreclosure of this Mortgage or the complete or partial
sale of the Mortgaged Property under the power of sale hereunder or under
any applicable provision of law; or
(ii) to sell the Mortgaged Property, and all estate, right, title,
interest, claim and demand of the Mortgagor
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therein and thereto, and all rights of redemption thereof, at one or more
sales, as an entirety or in parcels, with such elements of real or personal
property, at such time and place and upon such terms as the Mortgagee may
deem expedient or as may be required under applicable law, and in the event
of a sale hereunder or under any applicable provision of law of less than
all of the Mortgaged Property, this Mortgage shall continue as a Lien on the
remaining Mortgaged Property; or
(iii) to institute a suit, action or proceeding for the specific
performance of any of the provisions of this Mortgage; or
(iv) to be entitled to the appointment of a receiver, supervisor,
trustee, liquidator, conservator or other custodian (a "Receiver") of the
Mortgaged Property, without notice to Mortgagor, to the fullest extent
permitted by law, as a matter of right and without regard to, or the
necessity to disprove, the adequacy of the security for the Secured
Obligations or the solvency of the Mortgagor or any other Obligor, and the
Mortgagor hereby, to the fullest extent permitted by applicable law,
irrevocably waives such necessity and consents to such appointment, without
notice, said appointee to be vested with the fullest powers permitted under
applicable law, including to the extent permitted under applicable law those
under clause (v) of this subsection (a); or
(v) to enter upon the Property, by the Mortgagee or a Receiver
(whichever is the Person exercising the rights under this clause), and, to
the extent permitted by applicable law, exclude the Mortgagor and its
managers, employees, contractors, agents and other representatives therefrom
in accordance with applicable law, without liability for trespass, damages
or otherwise, and take possession of all other Mortgaged Property and all
books, records and accounts relating thereto, and upon demand the Mortgagor
shall surrender possession of the Property, the other Mortgaged Property and
such books, records and accounts to the Person exercising the rights under
this clause; and having and holding the same, the Person exercising the
rights under this clause may use, operate, manage, preserve, control and
otherwise deal therewith and conduct the business thereof, either personally
or by its managers, employees, contractors, agents or other representatives,
without interference from the Mortgagor or its managers, employees,
contractors, agents and other representatives; and, upon each such entry and
from time to time thereafter, at the expense of the Mortgagor and the
Mortgaged Property, without interference by the Mortgagor or its managers,
employees, contractors, agents and other representatives, the Person
exercising the rights under this
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clause may, as such Person deems expedient, (A) insure or reinsure the
Property, (B) make all reasonably necessary or proper repairs, renewals,
replacements, alterations, additions, Restorations, betterments and
improvements to the Property and (C) in such Person's own name or, at the
option of such Person, in the Mortgagor's name, exercise all rights, powers
and privileges of the Mortgagor with respect to the Mortgaged Property,
including the right to enter into Leases with respect to the Property,
including Leases extending beyond the time of possession by the Person
exercising the rights under this clause; and the Person exercising the
rights under this clause shall not be liable to account for any action
taken hereunder, other than for Rents actually received by such Person, and
shall not be liable for any loss sustained by the Mortgagor resulting from
any failure to let the Property or from any other act or omission of such
Person, except to the extent, in any case, such loss is caused by such
Person's own willful misconduct or gross negligence; or
(vi) with or, to the fullest extent permitted by applicable law,
without entry upon the Property, in the name of the Mortgagee or a Receiver
as required by law (whichever is the Person exercising the rights under this
clause) or, at such Person's option, in the name of the Mortgagor, to
collect, receive, sue for and recover all Rents and proceeds of or derived
from the Mortgaged Property, and after deducting therefrom all costs,
expenses and liabilities of every character incurred by the Person
exercising the rights under this clause in collecting the same and in using,
operating, managing, preserving and controlling the Mortgaged Property and
otherwise in exercising the rights under clause (v) of this subsection (a)
or any other rights hereunder, including all amounts necessary to pay
Impositions, Rents, Insurance Premiums and other costs, expenses and
liabilities relating to the Property, as well as reasonable compensation for
the services of such Person and its managers, employees, contractors, agents
or other representatives, and to apply the remainder as provided in Section
5.06; or
(vii) to take any action with respect to any Mortgaged Property
permitted under the Local UCC; or
(viii) to take any other action, or pursue any other remedy or right,
as the Mortgagee may have under applicable law, including the right to
foreclosure through court action, and the Mortgagor does hereby grant the
same to the Mortgagee.
(b) To the fullest extent permitted by applicable law,
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(i) each remedy or right hereunder shall be in addition to, and not
exclusive or in limitation of, any other remedy or right hereunder, under
any other Loan Document or under applicable law;
(ii) every remedy or right hereunder, under any other Loan Document or
under applicable law may be exercised concurrently or independently and
whenever and as often as deemed appropriate by the Mortgagee;
(iii) no failure to exercise or delay in exercising any remedy or right
hereunder, under any other Loan Document or under applicable law shall be
construed as a waiver of any Default or other occurrence hereunder or under
any other Loan Document;
(iv) no waiver of, failure to exercise or delay in exercising any
remedy or right hereunder, under any other Loan Document or under applicable
law upon any Default or other occurrence hereunder or under any other Loan
Document shall be construed as a waiver of, or otherwise limit the exercise
of, such remedy or right upon any other or subsequent Default or other or
subsequent occurrence hereunder or under any other Loan Document;
(v) no single or partial exercise of any remedy or right hereunder,
under any other Loan Document or under applicable law upon any Default or
other occurrence hereunder or under any other Loan Document shall preclude
or otherwise limit the exercise of any other remedy or right hereunder,
under any other Loan Document or under applicable law upon such Default or
occurrence or upon any other or subsequent Default or other or subsequent
occurrence hereunder or under any other Loan Document;
(vi) the acceptance by the Mortgagee or any other Secured Party of any
payment less than the amount of the Secured Obligation in question shall be
deemed to be an acceptance on account only and shall not be construed as a
waiver of any Default hereunder or under any other Loan Document with
respect thereto; and
(vii) the acceptance by the Mortgagee or any other Secured Party of any
payment of, or on account of, any Secured Obligation shall not be deemed to
be a waiver of any Default or other occurrence hereunder or under any other
Loan Document with respect to any other Secured Obligation.
(c) If the Mortgagee has proceeded to enforce any remedy or right
hereunder or with respect hereto by foreclosure, sale, entry or otherwise, it
may compromise, discontinue or abandon such proceeding for any reason without
notice to the Mortgagor or any other Person (except other Secured Parties to the
extent
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required by the other Loan Documents); and, if any such proceeding shall be
discontinued, abandoned or determined adversely for any reason, the Mortgagor
and the Mortgagee shall retain and be restored to their former positions and
rights hereunder with respect to the Mortgaged Property, subject to the Lien
hereof except to the extent any such adverse determination specifically provides
to the contrary.
(d) For the purpose of carrying out any provisions of Section
5.02(a)(v), 5.02(a)(vi), 5.05, 5.07, 5.10 or 6.01 or, if an Event of Default has
occurred, any other provision hereunder authorizing the Mortgagee or any other
Person to perform any action on behalf of the Mortgagor, the Mortgagor hereby
irrevocably appoints the Mortgagee or a Receiver appointed pursuant to Section
5.02(a)(iv) or such other Person as the attorney-in-fact of the Mortgagor (with
a power to substitute any other Person in its place as such attorney-in-fact) to
act in the name of the Mortgagor or, at the option of the Person appointed to
act under this subsection, in such Person's own name, to take the action
authorized under Section 5.02(a)(v), 5.02(a)(vi), 5.05, 5.07, 5.10 or 6.01 or
such other provision, and to execute, acknowledge and deliver any document in
connection therewith or to take any other action incidental thereto as the
Person appointed to act under this subsection shall deem appropriate in its
discretion (subject to the provisions of this Mortgage); and the Mortgagor
hereby irrevocably authorizes and directs any other Person to rely and act on
behalf of the foregoing appointment and a certificate of the Person appointed to
act under this subsection that such Person is authorized to act under this
subsection.
SECTION 5.03. Waivers by the Mortgagor. To the fullest extent permitted
under applicable law, the Mortgagor shall not assert, and hereby irrevocably
waives, any right or defense the Mortgagor may have under any statute or rule of
law or equity now or hereafter in effect relating to (i) appraisement,
valuation, homestead exemption, extension, moratorium, stay, statute of
limitations, redemption, marshalling of the Mortgaged Property or the other
assets of the Mortgagor, sale of the Mortgaged Property in any order or notice
of deficiency or intention to accelerate any Secured Obligation; (ii) impairment
of any right of subrogation or reimbursement; (iii) any requirement that at any
time any action must be taken against any other Person, any portion of the
Mortgaged Property or any other asset of the Mortgagor or any other Person; (iv)
any provision barring or limiting the right of the Mortgagee to sell any
Mortgaged Property after any other sale of any other Mortgaged Property or any
other action against the Mortgagor or any other Person; (v) any provision
barring or limiting the recovery by the Mortgagee of a deficiency after any sale
of the Mortgaged Property; or (vi) the right of the Mortgagee to foreclose this
Mortgage in its own name on behalf of all of the Secured Parties by judicial
action as the real party in interest without the necessity of joining
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any other Secured Party. Nothing herein, however, shall be construed to limit
any rights, including right to notice, afforded to the Mortgagor under the Loan
Documents.
SECTION 5.04. Jurisdiction and Process. (a) To the extent permitted
under applicable law, in any suit, action or proceeding arising out of or
relating to this Mortgage or any other Collateral Document as it relates to any
Mortgaged Property, the Mortgagor (i) irrevocably consents to the non-exclusive
jurisdiction of any state or federal court sitting in the State in which the
Property is located and irrevocably waives any defense or objection which it may
now or hereafter have to the jurisdiction of such court or the venue of such
court or the convenience of such court as the forum for any such suit, action or
proceeding; and (ii) irrevocably consents to the service of (A) any process in
any such suit, action or proceeding, or (B) any notice relating to any sale, or
the exercise of any other remedy by the Mortgagee hereunder by mailing a copy of
such process or notice by United States registered or certified mail, postage
prepaid, return receipt requested to the Mortgagor at its address specified in
or pursuant to Section 7.03, such service to be effective when such process or
notice is mailed as aforesaid.
(b) Nothing in this Section shall affect the right of the Mortgagee to
bring any suit, action or proceeding arising out of or relating to this Mortgage
or any other Collateral Document in any court having jurisdiction under the
provisions of any other Collateral Document or applicable law or to serve any
process, notice of sale or other notice in any manner permitted by any other
Collateral Document or applicable law.
SECTION 5.05. Sales. Except as otherwise provided herein, to the
fullest extent permitted under applicable law, at the election of the Mortgagee,
the following provisions shall apply to any sale of the Mortgaged Property
hereunder, whether made pursuant to the power of sale hereunder, any judicial
proceeding or any judgment or decree of foreclosure or sale or otherwise:
(a) The Mortgagee or the court officer (whichever is the Person
conducting any sale) may conduct any number of sales from time to time. The
power of sale hereunder or with respect hereto shall not be exhausted by any
sale as to any part or parcel of the Mortgaged Property which is not sold,
unless and until the Secured Obligations shall have been paid in full, and
shall not be exhausted or impaired by any sale which is not completed or is
defective. Any sale may be as a whole or in part or parcels and, as provided
in Section 5.03, the Mortgagor has waived its right to direct the order in
which the Mortgaged Property or any part or parcel thereof is sold.
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(b) Any sale may be postponed or adjourned by public announcement at
the time and place appointed for such sale or for such postponed or
adjourned sale without further notice.
(c) After each sale, the Person conducting such sale shall execute and
deliver to the purchaser or purchasers at such sale a good and sufficient
instrument or instruments granting, conveying, assigning, Transferring and
delivering all right, title and interest of the Mortgagor in and to the
Mortgaged Property sold and shall receive the proceeds of such sale and
apply the same as provided in Section 5.06. The Mortgagor hereby irrevocably
appoints the Person conducting such sale as the attorney-in-fact of the
Mortgagor (with full power to substitute any other Person in its place as
such attorney-in-fact) to act in the name of the Mortgagor or, at the option
of the Person conducting such sale, in such Person's own name, to make
without warranty by such Person any conveyance, assignment, Transfer or
delivery of the Mortgaged Property sold, and to execute, acknowledge and
deliver any instrument of conveyance, assignment, Transfer or delivery or
other document in connection therewith or to take any other action
incidental thereto, as the Person conducting such sale shall deem
appropriate in its discretion; and the Mortgagor hereby irrevocably
authorizes and directs any other Person to rely and act upon the foregoing
appointment and a certificate of the Person conducting such sale that such
Person is authorized to act hereunder. Nevertheless, upon the request of
such attorney-in-fact the Mortgagor shall promptly execute, acknowledge and
deliver any documentation which such attorney-in-fact may require for the
purpose of ratifying, confirming or effectuating the powers granted hereby
or any such conveyance, assignment, Transfer or delivery by such
attorney-in-fact.
(d) Any statement of fact or other recital made in any instrument
referred to in Section 5.05(c) given by the Person conducting any sale as to
the nonpayment of any Secured Obligation, the occurrence of any Event of
Default, the amount of the Secured Obligations due and payable, the request
to the Mortgagee to sell, the notice of the time, place and terms of sale
and of the Mortgaged Property to be sold having been duly given, the
refusal, failure or inability of the Mortgagee to act, the appointment of
any substitute or successor agent, any other act or thing having been duly
done by the Mortgagor, the Mortgagee or any other such Person, shall be
taken as conclusive and binding against all other Persons as evidence of the
truth of the facts so stated or recited.
(e) The receipt by the Person conducting any sale of the purchase money
paid at such sale shall be sufficient
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discharge therefor to any purchaser of any Mortgaged Property sold, and no
such purchaser, or its representatives, grantees or assigns, after paying
such purchase price and receiving such receipt, shall be bound to see to
the application of such purchase price or any part thereof upon or for any
trust or purpose of this Mortgage or the other Loan Documents, or, in any
manner whatsoever, be answerable for any loss, misapplication or
nonapplication of any such purchase money or be bound to inquire as to the
authorization, necessity, expediency or regularity of such sale.
(f) Subject to mandatory provisions of applicable law, any sale
shall operate to divest all of the estate, right, title, interest, claim
and demand whatsoever, whether at law or in equity, of the Mortgagor in and
to the Mortgaged Property sold, and shall be a perpetual bar both at law
and in equity against the Mortgagor and any and all Persons claiming such
Mortgaged Property or any interest therein by, through or under the
Mortgagor.
(g) At any sale, the Mortgagee may bid for and acquire the
Mortgaged Property sold and, in lieu of paying cash therefor, may make
settlement for the purchase price by causing the Secured Parties to credit
against the Secured Obligations, including the expenses of the sale and the
cost of any enforcement proceeding hereunder, the amount of the bid made
therefor to the extent necessary to satisfy such bid.
(h) If the Mortgagor or any Person claiming by, through or under
the Mortgagor shall transfer or fail to surrender possession of the
Mortgaged Property, after the exercise by the Mortgagee of the Mortgagee's
remedies under Section 5.02(a)(v) or after any sale of the Mortgaged
Property pursuant hereto, then the Mortgagor or such Person shall be deemed
a tenant at sufferance of the purchaser at such sale, subject to eviction
by means of summary process for possession of land, or subject to any other
right or remedy available hereunder or under applicable law.
(i) Upon any sale, it shall not be necessary for the Person
conducting such sale to have any Mortgaged Property being sold present or
constructively in its possession.
(j) If a sale hereunder shall be commenced by the Mortgagee, the
Mortgagee may at any time before the sale abandon the sale, and may
institute suit for the collection of the Secured Obligations or for the
foreclosure of this Mortgage; or if the Mortgagee shall institute a suit
for collection of the Secured Obligations or the foreclosure of this
Mortgage, the Mortgagee may at any time before the entry of final judgment
in said suit dismiss the same and
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sell the Mortgaged Property in accordance with the provisions of this
Mortgage.
SECTION 5.06. Proceeds. Except as otherwise provided herein or required
under applicable law, upon being instructed to do so in an Enforcement Notice,
the proceeds of any sale of, or other realization upon, the Mortgaged Property
hereunder, whether made pursuant to the power of sale hereunder, any judicial
proceeding or any judgment or decree of foreclosure or sale or otherwise, shall
be applied and paid as follows:
(a) First: to the payment of all expenses of such sale or other
realization, including compensation for the Person conducting such sale
(which may include the Mortgagee), the cost of title searches, foreclosure
certificates and attorneys' fees and expenses incurred by such Person,
together with interest on any such expenses paid by such Person at the
Post-Default Rate from the date of demand through the date repaid to such
Person;
(b) Second: to the payment of the expenses and other amounts payable
under Sections 4.02 and 5.10, if any;
(c) Third: to the payment of the other Secured Obligations in the order
and priority set forth in Section 9 of the Security Agreement, until all
Secured Obligations shall have been paid in full; and
(d) Fourth: to pay to the Mortgagor or its successors and assigns, or
as a court of competent jurisdiction may direct, any surplus then remaining
from such proceeds.
SECTION 5.07. Assignment of Leases. (a) Subject to paragraph (d) below,
the assignments of the Leases and the Rents under Granting Clauses VI and VII
are and shall be present, absolute and irrevocable assignments by the Mortgagor
to the Mortgagee and, subject to the license to the Mortgagor under Section
5.07(b), the Mortgagee or a Receiver appointed pursuant to Section 5.02(a)(iv)
(whichever is the Person exercising the rights under this Section) shall have
the absolute, immediate and continuing right to collect and receive all Rents
now or hereafter, including during any period of redemption, accruing with
respect to the Property. At the request of the Mortgagee or such Receiver, the
Mortgagor shall promptly execute, acknowledge, deliver, record, register and
file any additional general assignment of the Leases or specific assignment of
any Lease which the Mortgagee or such Receiver may require from time to time
(all in form and substance satisfactory to the Mortgagee or such Receiver) to
effectuate, complete, perfect, continue or preserve the assignments of the
Leases and the Rents under Granting Clauses VI and VII.
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<PAGE> 195
(b) The Mortgagor shall have a license granted hereby to collect and
receive all Rents and apply the same subject to the provisions of the Loan
Documents, such license to be terminable by the Mortgagee as provided in Section
5.07(c).
(c) Upon the occurrence and continuance of an Event of Default, the
Mortgagee or a Receiver appointed pursuant to Section 5.02(a)(iv) (whichever is
the Person exercising the rights under this Section) shall have the right to
terminate the license granted under Section 5.07(b) by notice to the Mortgagor
and to exercise the rights and remedies provided under Section 5.07(a), under
Sections 5.02(a)(v) and (vi) or under applicable law. Upon demand by the Person
exercising the rights under this Section, the Mortgagor shall promptly pay to
such Person all security deposits under the Leases and all Rents allocable to
any period after such demand. Subject to Sections 5.02(a)(v) and (vi) and any
applicable requirement of law, any Rents received hereunder by such Person shall
be promptly paid to the Mortgagee, and any Rents received hereunder by the
Mortgagee shall be deposited in the Collateral Account, to be held as provided
in the Credit Agreement, provided that, subject to Sections 5.02(a)(v) and (vi)
and any applicable requirement of law, any security deposits actually received
by such Person shall be promptly paid to the Mortgagee, and any security
deposits actually received by the Mortgagee shall be held, applied and disbursed
as provided in the applicable Leases and applicable law. Once the Event of
Default is remedied, the license granted in Section 5.07(b) shall automatically
be reinstated.
(d) Nothing herein shall be construed to be an assumption by the Person
exercising the rights under this Section, or otherwise to make such Person
liable for the performance, of any of the obligations of the Mortgagor under the
Leases, provided that such Person shall be accountable as provided in Section
5.07(c) for any Rents or security deposits actually received by such Person.
SECTION 5.08. Dealing With the Mortgaged Property. Subject to Section
7.02, the Mortgagee shall have the right to release any portion of the Mortgaged
Property, or grant or consent to the granting of any Lien affecting any portion
of the Mortgaged Property, to or at the request of the Mortgagor, for such
consideration as the Mortgagee may require without, as to the remainder of the
Mortgaged Property, in any way impairing or affecting the Lien or priority of
this Mortgage, or improving the position of any subordinate lienholder with
respect thereto, or the position of any guarantor, endorser, co-maker or other
obligor of the Secured Obligations, except to the extent that the Secured
Obligations shall have been reduced by any actual monetary consideration
received for such release and applied to the Secured Obligations, and may accept
by assignment, pledge or otherwise any other property in place thereof as the
Mortgagee
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may require without being accountable therefor to any other lienholder.
SECTION 5.09. Right of Entry. The Mortgagee and the representatives of
the Mortgagee shall have the right, upon being instructed to do so by the
Required Banks (i) without notice, if an Event of Default has occurred and is
continuing, (ii) with simultaneous notice, if any payment or performance is
required in the reasonable opinion of the Mortgagee to preserve the Mortgagee's
rights under this Mortgage or with respect to the Mortgaged Property, or (iii)
after reasonable notice, in all other cases, to enter upon the Property at
reasonable times, and with reasonable frequency, to inspect the Mortgaged
Property or, subject to the provisions hereof, to exercise any right, power or
remedy of the Mortgagee hereunder, provided that any Person so entering the
Property shall not unreasonably interfere with the ordinary conduct of the
Mortgagor's business, and provided further that no such entry on the Property,
for the purpose of performing obligations under Section 5.10 or for any other
purpose, shall be construed to be (x) possession of the Property by such Person
or to constitute such Person as a mortgagee in possession, unless such Person
exercises its right to take possession of the Property under Section 5.02(a)(v),
or (y) a cure of any Default or waiver of any Default or Secured Obligation. The
expense of any inspection pursuant to clause (iii) above shall be borne by the
Mortgagee unless an Event of Default shall have occurred and be continuing at
the time of such inspection, in which case the Mortgagor shall pay, or reimburse
the Mortgagee for, such expense.
SECTION 5.10. Right to Perform Obligations. If the Mortgagor fails to
pay or perform any obligation of the Mortgagor hereunder, the Mortgagee and the
representatives of the Mortgagee shall have the right, upon being instructed to
do so by the Required Banks at any time, to pay or perform such obligation (i)
without notice, if an Event of Default has occurred and is continuing, (ii) with
simultaneous notice, if such payment or performance is required in the
reasonable opinion of the Mortgagee to preserve the Mortgagee's rights under
this Mortgage or with respect to the Mortgaged Property or (iii) after notice
given reasonably in advance to allow the Mortgagor an opportunity to pay or
perform such obligation, provided that the Mortgagor is not contesting payment
or performance in accordance with the terms hereof and further provided that no
such payment or performance shall be construed to be a cure of any Default or
waiver of any Default or Secured Obligation. The Mortgagor shall reimburse the
Mortgagee on demand for the reasonable costs of performing any such obligations
and any amounts not paid on demand shall bear interest, payable on demand, for
each day until paid at the Post-Default Rate for such day.
SECTION 5.11. Concerning the Mortgagee. (a) The provisions of Article 7
of the Credit Agreement shall inure to
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the benefit of the Mortgagee in respect of this Mortgage and shall be binding
upon the parties to the Credit Agreement in such respect. In furtherance and not
in derogation of the rights, privileges and immunities of the Mortgagee therein
set forth:
(i) The Mortgagee is authorized to take all such action as is provided
to be taken by it as Mortgagee hereunder and all other action reasonably
incidental thereto. As to any matters not expressly provided for herein
(including the timing and methods of realization upon the Mortgaged
Property) the Mortgagee shall act or refrain from acting in accordance with
written instructions from the Required Banks or, in the absence of such
instructions, in accordance with its discretion.
(ii) The Mortgagee shall not be responsible for the existence,
genuineness or value of any of the Mortgaged Property or for the validity,
perfection, priority or enforceability of the Lien of this Mortgage on any
of the Mortgaged Property, whether impaired by operation of law or by reason
of any action or omission to act on its part hereunder. The Mortgagee shall
have no duty to ascertain or inquire as to the performance or observance of
any of the terms of this Mortgage by the Mortgagor.
(b) At any time or times, in order to comply with any legal requirement
in any jurisdiction, the Mortgagee may appoint another bank or trust company or
one or more other Persons, either to act as co-agent or co-agents, jointly with
the Mortgagee, or to act as separate agent or agents on behalf of the Secured
Parties with such power and authority as may be necessary for the effectual
operation of the provisions hereof and may be specified in the instrument of
appointment (which may, in the discretion of the Mortgagee, include provisions
for the protection of such co-agent or separate agent similar to the provisions
of this Section 5.11). References to the Mortgagee in Section 5.12 shall be
deemed to include any co-agent or separate agent appointed pursuant to this
Section 5.11.
Section 5.12. Expenses. The Mortgagor agrees that it will within
fifteen (15) days of demand pay to the Mortgagee (i) the amount of any taxes
which the Mortgagee may have been required to pay by reason of the Lien of this
Mortgage and has failed to pay or to free any of the Mortgaged Property from any
Lien thereon (other than Permitted Liens), (ii) the amount of any and all
reasonable out-of-pocket expenses, including the reasonable fees and
disbursements of counsel and of any other experts, which the Mortgagee may incur
in connection with preserving the value of the Mortgaged Property and the
validity, perfection, rank and value of the Lien of this Mortgage and (iii) the
amount of any and all out-of-pocket expenses, including the fees and
disbursements of counsel and of any other experts, which
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the Mortgagee may incur in connection with the collection, sale or other
disposition of any of the Mortgaged Property.
ARTICLE VI
SECURITY AGREEMENT AND FIXTURE FILING
SECTION 6.01. Security Agreement. To the extent that the Mortgaged
Property constitutes or includes tangible or intangible personal property,
including goods or items of personal property which are or are to become
fixtures under applicable law, the Mortgagor hereby grants a security interest
therein and this Mortgage shall also be construed as a pledge and a security
agreement under the Local UCC; and, upon the occurrence and continuance of an
Event of Default, the Mortgagee shall be entitled to exercise with respect to
such tangible or intangible personal property all remedies available under the
Local UCC and all other remedies available under applicable law. Without
limiting the foregoing, upon the occurrence and continuation of an Event of
Default, any personal property may, at the Mortgagee's option and, except as
otherwise required by applicable law, without the giving of notice, (i) be sold
hereunder, (ii) be sold pursuant to the Local UCC or (iii) be dealt with by the
Mortgagee in any other manner permitted under applicable law. The Mortgagee may
require the Mortgagor to assemble the personal property and make it available to
the Mortgagee at a place to be designated by the Mortgagee. At any time and from
time to time upon the occurrence and continuance of an Event of Default, the
Mortgagee shall be the attorney-in-fact of the Mortgagor with respect to any and
all matters pertaining to the personal property with full power and authority to
give instructions with respect to the collection and remittance of payments, to
endorse checks, to enforce the rights and remedies of the Mortgagor and to
execute on behalf of the Mortgagor and in Mortgagor's name any instruction,
agreement or other writing required therefor. The Mortgagor acknowledges and
agrees that a disposition of the personal property in accordance with the
Mortgagee's rights and remedies in respect to the Property as heretofore
provided is a commercially reasonable disposition thereof. Notwithstanding the
foregoing, to the extent that the Mortgaged Property includes personal property
covered by the Security Agreement the provisions of the Security Agreement shall
govern with respect to such personal property.
SECTION 6.02. Fixture Filing. To the extent that the Mortgaged Property
includes goods or items of personal property which are or are to become fixtures
under applicable law, and to the extent permitted under applicable law, the
filing of this Mortgage in the real estate records of the county in which the
Mortgaged Property is located shall also operate from the time of filing as a
fixture filing with respect to such Mortgaged
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<PAGE> 199
Property, and the following information is applicable for the purpose of such
fixture filing, to wit:
(a) Name and Address of the debtor:
Tekni-Plex, Inc.
201 Industrial Parkway
Somerville, NJ 08876
(b) Name and Address of the secured party:
Morgan Guaranty Trust Company of New York
as Agent
500 Stanton Christiana Road
Newark, Delaware 19713
(c) This document covers goods or items of personal property which are
or are to become fixtures upon the Property.
(d) The name of the record owner of the real estate on which such
fixtures are or are to be located is Tekni-Plex, Inc.
ARTICLE VII
MISCELLANEOUS
SECTION 7.01. Revolving Loans. The Secured Obligations secured by this
Mortgage include Loans made and LC Reimbursement Obligations relating to Letters
of Credit issued or extended under the Credit Agreement which are advanced, paid
and readvanced from time to time. Notwithstanding the amount outstanding at any
particular time, this Mortgage secures the total amount of Secured Obligations.
The unpaid balance of the Loans and the unpaid balance of the LC Reimbursement
Obligations may at certain times be, or be reduced to, zero. A zero balance, by
itself, does not affect any Bank's or LC Issuing Bank's obligation to issue or
extend Letters of Credit or to make payments upon draws under Letters of Credit,
or any Bank's obligation to advance Loans which are obligatory subject to the
conditions stated in the Credit Agreement. Each of the security interest of the
Mortgagee hereunder and the priority of the Lien of this Mortgage will remain in
full force and effect with respect to all of the Secured Obligations
notwithstanding such a zero balance of the Loans or the LC Reimbursement
Obligations, and the Lien of this Mortgage will not be extinguished until this
Mortgage has been terminated pursuant to Section 7.02(a).
SECTION 7.02. Release of Mortgaged Property. (a) This Mortgage shall
cease, terminate and thereafter be of no further force or effect (except as
provided in Section 4.03) upon payment in full of all Secured Obligations, the
expiration of all Letters of Credit issued under the Credit Agreement and the
termination
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<PAGE> 200
of all Commitments under the Credit Agreement. At any time and from time to time
prior to such termination of this Mortgage, the Mortgagee may release any of the
Mortgaged Property with the consent of the Required Banks, provided that if such
release is in connection with the release of all or substantially all of the
collateral granted to secure the Secured Obligations, such release shall require
the consent of all Banks. In addition, the Mortgagee shall release any and all
Mortgaged Property required in connection with any transaction, or sale,
transfer, assignment or other disposition of the Mortgaged Property, consummated
by the Mortgagor and not prohibited by any Loan Document, and shall be fully
protected in relying on a certificate of an authorized officer of the Mortgagor
to such effect.
(b) Any termination or release under this Section 7.02 shall be at the
Mortgagor's request and expense and either in the statutory form or in a form
reasonably satisfactory to the Mortgagee.
SECTION 7.03. Notices. All notices, requests and other communications
required or permitted to be given under this Mortgage shall be in writing
(including facsimile transmission or similar writing) and shall be given to the
Mortgagor or the Mortgagee as specified in Section 10.01 of the Credit
Agreement. Except as otherwise provided herein, each notice, request or other
communication shall be effective as determined by Section 10.01 of the Credit
Agreement.
SECTION 7.04. Amendments in Writing. No provision of this Mortgage
shall be modified, waived or terminated, and no consent to any departure by the
Mortgagor from any provision of this Mortgage shall be effective, unless the
same shall be by an instrument in writing, signed by the Mortgagor and the
Mortgagee in accordance with Section 10.05 of the Credit Agreement. Any such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given.
SECTION 7.05. Severability. All rights, powers and remedies provided in
this Mortgage may be exercised only to the extent that the exercise thereof does
not violate applicable law, and all the provisions of this Mortgage are intended
to be subject to all mandatory provisions of applicable law and to be limited to
the extent necessary so that they will not render this Mortgage illegal,
invalid, unenforceable or not entitled to be recorded, registered or filed under
applicable law. If any provision of this Mortgage or the application thereof to
any Person or circumstance shall, to any extent, be illegal, invalid or
unenforceable, or cause this Mortgage not to be entitled to be recorded,
registered or filed, the remaining provisions of this Mortgage or the
application of such provision to other Persons or circumstances shall not be
affected thereby, and each provision
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<PAGE> 201
of this Mortgage shall be valid and be enforced to the fullest extent permitted
under applicable law.
SECTION 7.06. Binding Effect. (a) The provisions of this Mortgage shall
be binding upon and inure to the benefit of each of the parties hereto and their
respective successors and assigns.
(b) To the fullest extent permitted under applicable law, the
provisions of this Mortgage binding upon the Mortgagor shall be deemed to be
covenants which run with the land.
(c) Nothing in this Section shall be construed to permit the Mortgagor
to Transfer or grant a Lien upon the Mortgaged Property contrary to the
provisions of the Credit Agreement.
SECTION 7.07. GOVERNING LAW. THIS MORTGAGE SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE IN WHICH THE PROPERTY IS
LOCATED.
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IN WITNESS WHEREOF, the Mortgagor has executed and delivered this
Mortgage as of the day first set forth above.
TEKNI-PLEX, INC.
[Seal]
By:__________________________________
Name:
Title:
35
<PAGE> 203
[Add State acknowledgment]
<PAGE> 204
EXHIBIT A
Description of the Land
<PAGE> 205
EXHIBIT B
Permitted Encumbrances
1. All those matters as shown on a survey prepared by Bohren and Bohren
Engineering Associates, Inc., dated March 11, 1996.
2. The other exceptions described in Schedule B, to that certain title
commitment number N-3007 issued with respect to the Property and insuring
Mortgagee by Lawyers Title Insurance Corporation dated as of the date
hereof.
<PAGE> 206
EXHIBIT H
OPINION OF LOCAL COUNSEL
[Letterhead of Local Counsel]
May 8, 1997
To the Banks and the Agent
Referred to Below
c/o Morgan Guaranty Trust Company
of New York
60 Wall Street
New York, NY 10260
Ladies and Gentlemen:
We have acted as special counsel to the Agent in the State of __________
(the "State") in connection with the transactions contemplated by the Credit
Agreement (the "Credit Agreement") dated as of May 8, 1997 among Tekni-Plex,
Inc., a Delaware corporation (the "Company"), the banks listed on the signature
pages thereof (the "Banks"), the Guarantors party thereto, the LC Issuing Banks
referred to therein and Morgan Guaranty Trust Company of New York, as agent for
the Banks (the "Agent"), have assisted in the preparation of the Mortgage[s],
the Security Agreement and the Financing Statements (as defined below), and have
been requested to render this opinion pursuant to Section 3.01(d)(ii) of the
Credit Agreement. Capitalized terms used but not defined herein have the
meanings assigned to them in the Credit Agreement.
We have examined the Credit Agreement, the Notes, the mortgage[s] or
deed[s] of trust described in Schedule A hereto (the "Mortgage[s]"), the
Security Agreement dated as May 8, 1997 among the Company, Dolco Packaging Corp.
and the Agent (the "Security Agreement") and the financing statements described
in Schedule B hereto (the "Financing Statements"; the Credit Agreement, the
Notes, the Mortgage[s], the Security Agreement and the Financing Statements
being collectively referred to herein as the "Loan Documents"). The terms
"Mortgaged Property" and "Secured Parties" have the meanings assigned to them in
the Mortgage[s]. The term "Collateral" has the meaning assigned to it in the
Security Agreement.
We have also examined and relied upon the originals, or copies certified or
otherwise identified to our satisfaction, of such documents, corporate records,
certificates of public officials and other instruments, and have conducted such
other investigations of fact and law as we have deemed necessary or advisable
for purposes of this opinion.
<PAGE> 207
In rendering this opinion, we have assumed that:
(a) [Each of] the Company [and _____] is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation, has been duly qualified as a foreign
corporation for the transaction of business, is in good standing in the
State and has all requisite corporate power and all material governmental
licenses, authorizations, consents and approvals necessary to own and
operate the Mortgaged Property and the Collateral.
(b) The execution, delivery and performance by the Company of
[each of] the Mortgage[s] [and the execution, delivery and performance by
[each of] the Company [and ______] of each of the other Loan Documents to
which it is a party] (i) are within its corporate powers, (ii) have been
duly authorized by all necessary corporate action, (iii) do not require any
authorization, approval or consent of, or filings or registrations with,
any governmental or regulatory authority or agency outside of the State
except for authorizations, consents, approvals that have already been
obtained or filings that have already been made and that remain in effect,
(iv) do not contravene any provision of its certificate of incorporation or
by-laws, and (v) do not contravene or constitute a breach of or default
under any applicable provision of the laws of any jurisdiction other than
the State and the federal laws of the United States or any applicable
regulation thereunder or under any agreement, judgment, injunction, order,
decree or other instrument binding upon it.
(c) The Mortgage and Financing Statements have been duly executed
and delivered by the Company [and ______].
(d) The Loan Documents other than the Mortgage[s] constitute
legal, valid and binding obligations of [each of] the Company [and ______]
under the laws of the State of New York.
(e) The Company owns the Mortgaged Property [and ______ and the
Company own] the Collateral.
Upon the basis of the foregoing, we are of the opinion that, under
applicable law in effect on the date of this opinion:
1. None of the execution, delivery and performance of the Mortgage[s] and
the other Loan Documents and the consummation of the transactions contemplated
thereby (i) contravene or constitute a breach of or default under any applicable
provision of the laws of the State or any applicable regulation thereunder, (ii)
require any authorization, approval or consent of, or filings or registrations
with any governmental or regulatory authority or agency of or in the State or
(iii) create any Lien upon any revenues or assets of the Company located in the
State other than the Liens created under the Mortgage[s] and the Security
Agreement on the Mortgaged Property and the Collateral.
2
<PAGE> 208
2. The [Each] Mortgage constitutes a legal, valid and binding obligation of
the Company, enforceable in accordance with its terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency or other similar
laws relating to the enforcement of creditors' rights generally and by general
equitable principles. [Each of the Loan Documents which provides for its
governing law to be the laws of the State of New York would, if governed by the
laws of the State constitute a legal, valid and binding obligation of the
Company [and __________, as the case may be,] enforceable in accordance with its
terms, subject to the exceptions noted in the preceding sentence.]*
3. No authorizations, approvals or consents of, or filings or registrations
with, any governmental or regulatory authority or agency of or in the State of
__________ are necessary for the execution, delivery or performance by the
Company of the Mortgage[s] or for the execution, delivery or performance by the
Company [and __________] of the other Loan Documents or for the validity or
enforceability thereof or the consummation of any transaction contemplated
thereby, except for authorizations, consents, approvals that have already been
obtained or filings that have already been made and that remain in effect.
4. None of the Agent or the Banks is required to pay any tax or be
qualified to do business or file any designation for service of process or file
any reports in the State or comply with any statutory or regulatory rule or
requirement applicable only to financial institutions chartered or qualified to
do business in the State solely by reason of its execution and delivery or
acceptance of the Mortgage[s] or the other Loan Documents or by reason of its
participation in any of the transactions under or contemplated by the Loan
Documents, including, without limitation, the making of any Loan, the making and
receipt of payments pursuant thereto and the exercise of any right or remedy
under or with respect to the Mortgage[s], and the validity and enforceability of
the Mortgage[s] and the other Loan Documents will not be affected by any failure
to so qualify or file.
5. The [Each] Mortgage creates a valid mortgage or deed of trust Lien upon
such of the Mortgaged Property described therein (the "Real Property") as
constitutes real property under the law of the State and a valid security
interest in such of the other Mortgaged Property described therein (the "UCC
Property") as is subject to the provisions of Article 9 of the Uniform
Commercial Code as in effect in the State (the "Local UCC"), in each case in
favor of the Agent for the ratable benefit of the Secured Parties (as defined in
the Mortgage[s]) and securing the Secured Obligations (as defined in the
Mortgage[s]). The recording of the Mortgage[s] in the office[s] designated in
Schedule A hereto and the filing of the Financing Statements described as items
________ in the offices designated in Schedule B hereto are the only filings,
recordings and registrations necessary to perfect, publish notice of and
preserve the Lien of and security interest in the Mortgaged Property created by
the Mortgage[s] and the UCC Property created by the Mortgage and the Financing
Statements, except that (i) continuation statements relating to the Financing
Statements must be filed within _______________ [state time period], and (ii)
additional filings may be
- ----------
* This opinion is necessary only if a court in your jurisdiction would require
this determination in order to enforce the provision of the Mortgage[s].
3
<PAGE> 209
necessary with respect to the UCC Property if the Company changes its name,
identity or corporate structure or the jurisdiction in which its places of
business in the State or the UCC Property are located.
6. The Security Agreement creates a valid security interest, for the
benefit of the Secured Parties, in all of the Company's right, title and
interest in all Collateral to the extent that the Local UCC is applicable to the
creation of a security interest therein and, to the extent provided in Section
9-306 of the Local UCC, all proceeds thereof.
7. The filing of the Financing Statements described as items ________ in
the offices designated in Schedule B are the only filings, recordings and
registrations necessary to perfect, publish notice of and preserve the security
interest in the Collateral covered by the Local UCC (the "UCC Collateral")
created by the Security Agreement to the extent such security interest may be
perfected by filing under the Local UCC, and no further filing or recording of
any document or instrument or other action will be required so to perfect and
preserve such security interest, except that (i) continuation statements
relating to said Financing Statements must be filed within _______________
[state time period] and (ii) additional filings may be necessary with respect to
the UCC Collateral if the Company [or __________, as the case may be,] changes
its name, identity or corporate structure or the jurisdiction in which its
places of business in the State or the UCC Collateral are located.
8. No taxes or other charges, including, without limitation, intangible or
documentary stamp taxes, mortgage or recording taxes, transfer taxes or similar
charges, are payable to the State or to any jurisdiction therein on account of
the execution or delivery of the Mortgage[s], the Security Agreement or the
other Loan Documents, the creation of the indebtedness evidenced or secured
thereby, the creation of the Liens and security interests thereunder, or the
filing, recording or registration of the Mortgage[s] or the Financing
Statements, except for nominal filing or recording fees.
9. The Liens and security interests created by the Mortgage[s] and the
Security Agreement on or in the Mortgaged Property and the UCC Collateral will
validly secure the payment of all future advances pursuant to the Credit
Agreement, whether or not at the time such advances are made an Event of Default
or other event not within the control of the Banks has relieved or may relieve
the Banks from their obligations to make such advances, and are perfected to the
extent set forth in paragraph 7 above with respect to such future advances. The
priority of the Liens and security interests created by the Mortgage[s] and the
Security Agreement will be the same with respect to Loans made or deemed made
after the date hereof as with respect to any such Loans made on the date hereof,
except to the extent that any priority may be affected by any security interest,
Lien or other encumbrance imposed by law in favor of any government or
governmental authority or agency.
10. The Mortgage[s], the Security Agreement and the Financing Statements
conform to all requirements of the laws of the State and the Mortgage[s] and the
Security Agreement contain substantially all of the remedial, waiver and other
provisions normally contained in mortgages or deeds of trust and security
agreements used in connection with transactions of
4
<PAGE> 210
the type and value described in the Loan Documents. Enforcement of the remedies
provided in the Mortgage[s] will not deprive any Secured Party of its right to
seek a deficiency judgment nor will it limit the right of the Agent to foreclose
on other security securing the Secured Obligations (as defined in any of the
Collateral Documents).
[11. The choice of New York law to govern the Loan Documents in which such
choice is stipulated is a valid and effective choice of law under the laws of
the State and adherence to existing judicial precedents would require a court
sitting in the State to abide by such choice of law.]*
12. In connection with the remedies provided in the Mortgage[s] and the
Security Agreement:
(i) The exercise at any time and in any order of any remedies
available against the UCC Property or the UCC Collateral relating to the Real
Property located within the State would not be affected by, nor would the
exercise at any time of such remedies affect, the exercise of any remedies
relating to the Real Property, unless the Secured Obligations have been paid and
performed in full.
(ii) The exercise of any remedies with respect to any security or
collateral located outside of the State securing the Secured Obligations will
not affect or limit the Agent's ability to foreclose against, or exercise any
other remedies with respect to, the Mortgaged Property or UCC Collateral, either
contemporaneously with, or before or after the exercise of such remedies against
the Collateral located outside of the State except to the extent that the fair
value of such security or collateral so sold or disposed of has been
appropriately applied to the payment of such Secured Obligations, or unless such
Secured Obligations have been paid and performed in full.
(iii) There is no "one form of action" or similar law in the State
which would limit the Secured Parties to choosing only one remedy to enforce
their rights under the Mortgage[s] and the other Collateral Documents.
13. The Agent will have the power, without naming all of the Secured
Parties, to exercise remedies under the Mortgage and the Security Agreement for
the realization of the Mortgaged Property or the Collateral (as the case may be)
in its name as Agent.
The opinion expressed above as to the enforceability of the Mortgage[s] and
Security Agreement is subject to the qualification that certain of the remedial
provisions thereof may be limited by applicable law, although such limitations
do not in our opinion make the remedies provided for therein inadequate for the
practical realization of the benefits of the security intended to be afforded
thereby.
- ----------
* This opinion is not necessary if you are going to give the
opinion set forth in the second sentence of paragraph 2 above.
5
<PAGE> 211
We are admitted to practice only in the State of __________, and the
foregoing opinions are limited to the laws of said State and the federal laws of
the United States of America.
Very truly yours,
6
<PAGE> 212
EXHIBIT I
FORM OF INTERCOMPANY NOTE
Dated:
FOR VALUE RECEIVED, the undersigned,__________________, a corporation (the
"Payor"), hereby promises to pay to the order of ______________, a corporation
(the "Payee"), on demand, at [address] , the principal sum of ______________
Dollars, in lawful money of the United States of America and in immediately
available funds.
The undersigned agrees that the accounts of the Payee shall be prima facie
evidence of the amounts loaned by the Payee to the undersigned and the amounts
repaid by the undersigned to the Payee. All loans made by the Payee to the Payor
hereunder, and all payments made on account of principal hereof, shall be
recorded by the Payee, and, prior to any transfer hereof, shall be endorsed on
the schedule attached hereto which is part of this Intercompany Note.
The undersigned also agrees to pay on demand all costs and expenses
(including reasonable fees and expenses of counsel) incurred by the Payee in
enforcing this Intercompany Note.
This Note is one of the Intercompany Notes referred to in the Credit
Agreement dated as of April___ , 1997 (as amended, supplemented or modified from
time to time, the "CREDIT AGREEMENT") among the [Payor][Payee], Tekni-Plex,
Inc., the lenders named therein and Morgan Guaranty Trust Company of New York,
as Agent. Capitalized terms used in this Intercompany Note have the respective
meanings assigned to them in the Credit Agreement.
If at any time demand is made against the Payor under, and pursuant to the
terms of, any guaranty executed by the Payor in connection with the Senior Debt
(as defined below), this Intercompany Note, and the payment obligations of the
Payor evidenced hereby, shall therewith be null and void and the Payee shall be
deemed to have contributed such obligations to the capital of the Payor.
The indebtedness evidenced by this Intercompany Note is subordinate and
subject in right of payment to the prior payment in full of the Senior Debt (as
defined below) in the manner and to the extent set forth below:
(a) The term "SENIOR DEBT" means all obligations of the Payor
incurred or to be incurred under, or in respect of, the Loan Documents
(including, without limitation, interest at the rate specified in the
relevant loan document accruing after the filing of a
<PAGE> 213
petition initiating any proceeding under the Bankruptcy Code of 1978, as
amended, whether or not such interest is allowed as a claim in such
proceeding).
(b) In the event of (i) any insolvency or bankruptcy case or
proceeding, or any receivership, liquidation, reorganization or other
similar case or proceeding in connection therewith, relative to the Payor
or to its creditors as such, or to its properties or assets, or (ii) any
liquidation, dissolution or other winding-up of the Payor, whether
voluntary or involuntary and whether or not involving insolvency or
bankruptcy, or (iii) any assignment for the benefit of creditors or any
other marshalling of assets or liabilities of the Payor, then and in any
such event the holders of Senior Debt shall be entitled to receive payment
in full of all amounts due on or to become due on or in respect of Senior
Debt then outstanding, in cash or in any other manner acceptable to the
holders of Senior Debt, before the holder is entitled to receive any
payment or distribution of any kind or character on account of principal of
or interest on this Intercompany Note, and to that end the holders of
Senior Debt shall be entitled to receive, for application to the payment
thereof, any payment or distribution of assets of the Payor of any kind or
character including, without limitation, securities that are subordinated
in right of payment to all Senior Debt to substantially the same extent as,
or to a greater extent than, this Intercompany Note, that may be payable or
deliverable in respect of this Intercompany Note in any such case,
proceeding, dissolution, liquidation or other winding-up or event referred
to in clauses (i) through (iii) above.
(c) In the event that the Payee shall receive any payment or
distribution of assets of the Payor of any kind or character in respect of
principal of or interest on this Intercompany Note in contravention of
subsection (b) hereof, then and in such event such payment or distribution
shall be received and held by the Payee in trust for the holders of the
Senior Debt and shall be paid over or delivered forthwith to the trustee in
bankruptcy, receiver, liquidating trustee, custodian, assignee, agent or
other Person making payment or distribution of assets of the Payor in trust
for the holders of, and for application to the payment of, all Senior Debt
remaining unpaid, to the extent necessary to pay all Senior Debt in full,
in cash or in any other manner acceptable to the holders of Senior Debt,
after giving effect to any concurrent payment or distribution to or for the
holders of Senior Debt.
The undersigned hereby waives presentment for payment, demands, notice of
dishonor and protest of this Intercompany Note and further agrees that none of
its terms or provisions may be waived, altered, modified or amended except as
the Payee may consent in a writing duly signed for and on its behalf.
No failure or delay on the part of the Payee in exercising any of its
rights, powers or privileges hereunder shall operate as a waiver thereof, nor
shall a single or partial exercise thereof preclude any other or further
exercise of any right, power or privilege. The remedies provided herein are
cumulative and are not exclusive of any remedies provided by law.
2
<PAGE> 214
THIS PROMISSORY NOTE SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW
YORK.
[Payor]
Address:
By:
Title:
3
<PAGE> 215
ADVANCES AND PAYMENTS OF PRINCIPAL
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<TABLE>
<CAPTION>
Amount Amount of Unpaid
of Principal Principal Notation
Date Loan Paid or Prepaid Balance Made By
<S> <C> <C> <C> <C>
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- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
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</TABLE>
<PAGE> 216
EXHIBIT J
[LENDER OR AGENT]
PAY-OFF LETTER
Re: Tekni-Plex, Inc. (the "Company")
Gentlemen:
Reference is made to the [loan instrument], pursuant to which
the [Lenders] have made secured loans to, and issued letters of credit for the
account of, the Company (together with all amendments and modifications thereto,
the "Existing Credit Agreement"). All capitalized terms used and not otherwise
defined in this letter shall have the meanings attributed to them in the
Existing Credit Agreement.
We, as lender and as agent for the lenders, have entered into,
or are about to enter into, a financing arrangement with the Company, pursuant
to which the lenders will make secured loans to the Company (the "New Credit
Agreement"). Pursuant to the Company's instructions in connection with the New
Credit Agreement, we will be paying the outstanding balance of loans and all
other amounts owing by the Company to the Lenders under the Existing Credit
Agreement.
Therefore, pursuant to mutual understanding, it is hereby
agreed that subject to and upon receipt in immediately available funds of the
amount of $__________ representing $___________ outstanding under Term Loan A,
$__________ outstanding under [identify loan types], $__________ in accrued
interest on the [Loans], $ __________ in accrued [commitment and letter of
credit] fees, and $________ in legal expenses no later than the close of
business on :
1. You hereby release any and all liens upon and security
interests in any Collateral securing the Company's obligations
under the Existing Credit Agreement and the related
documentation (collectively, the "Loan Documents"), and
further confirm that: (i) upon such receipt by you, you shall
claim no lien or security interests on or in any of the
Company's assets or property securing the loans that were made
pursuant to the Loan Documents,
<PAGE> 217
and (ii) all amounts owing to you as of ___________________
under the loans that were made pursuant to the Existing Credit
Agreement have been paid in full;
2. You hereby agree to promptly execute and deliver to us any and
all appropriate UCC termination statements and/or other
releases to evidence your release of such liens and security
interests; and
3. You hereby confirm and agree that, from time to time
hereafter, you will, upon the Company's or our reasonable
request, and at the Company's expense, execute and deliver
such additional lien releases and/or termination documents as
may be necessary to effectively terminate any and all of such
liens and/or security interests on any public record.
-2-
<PAGE> 218
Very truly yours,
MORGAN GUARANTY TRUST COMPANY OF NEW YORK, in
its capacity as agent for the lenders under
the New Credit Agreement
By_____________________________________
Name:
Title:
Each of the undersigned hereby
acknowledges its receipt and
acceptance of and agreement to
the terms and conditions of
this letter:
[LENDER OR AGENT]
By_____________________________
Name:.
Title:
Date:
TEKNI-PLEX, INC.
By_____________________________
Name:
Title:
Date:
-3-
<PAGE> 1
EXHIBIT 10.6
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") made effective as
of the 30th day of January, 1997 (the "Effective Date") by and between
Tekni-Plex, Inc., a Delaware corporation (the "Employer"), having its principal
offices at 201 Industrial Parkway, Somerville, NJ 08876, and F. Patrick Smith,
an individual (the "Executive"), residing at 3615 Brannon Drive, Waco, TX 76710.
W I T N E S S E T H:
WHEREAS, the Employer desires to retain the Executive as the
Chairman of the Board of Directors and Chief Executive Officer of Employer, and
the Executive is willing, upon the terms and conditions herein set forth, to
serve as Chairman of the Board of Directors and Chief Executive Officer of
Employer.
WHEREAS, this Agreement supersedes the original Employment
Agreement between Employer and Executive dated as of March 18, 1994, Amendment
Number 1 to the Employment Agreement dated as of July 11, 1995, and Amendment
Number 2 to the Employment Agreement dated as of February 21, 1996
(collectively, the "Prior Agreements").
NOW, THEREFORE, in consideration of the foregoing and of the
mutual covenants contained in this Agreement, the Employer and the Executive,
intending to be legally bound hereby, agree as follows:
1. Employment. Subject to the terms and conditions hereinafter
set forth, the Employer hereby employs the Executive as Chairman of the Board of
Directors and Chief Executive Officer of Employer, and the Executive hereby
accepts such employment.
2. Term. The term of employment of the Executive by the
Employer pursuant to this Agreement (the "Employment Term") shall commence as of
the effective date hereof, and shall reflect continuing and continuous
employment of Executive by Employer from March 18, 1994. The term of employment
pursuant to this agreement shall terminate upon the earlier of: (a) June 30,
2000, to coincide with the fiscal year-end of Employer, or (b) the date on which
the employment of the Executive is terminated pursuant to Section 9 hereof.
Absent written notice of intent not to renew by either party 90 days prior to
the end of each fiscal year, the term of this Agreement shall be automatically
extended at the end of each fiscal year of Employer, for a period of one year,
beginning with the end of fiscal year 1998.
3. Duties. During the Employment Term, the Executive shall
devote such time as necessary to discharge his duties and responsibilities as
Chairman of the Board of Directors and Chief Executive Officer of the Employer
and shall possess all rights
<PAGE> 2
and authorities as have been exercised previously under the Prior Agreements,
such duties and authorities not to be diminished. In addition to the foregoing,
the Executive shall hold, without the requirement of additional compensation
therefor, such other offices, directorships or memberships of committees of the
Employer and/or any subsidiary or affiliate of the Employer, as the Board of
Directors may reasonably request, and to which, from time to time, during the
Employment Term, the Executive may be elected or appointed.
4. Salary Compensation. In consideration of the services to be
rendered by the Executive as described in Section 3 above, the Employer shall
pay or cause to be paid to the Executive during the Employment Term, and the
Executive shall accept, compensation at the rate of five hundred fifty thousand
($550,000.00) dollars per annum (the current "Base Salary"), such compensation
subject to increase, but not decrease. The Base Salary shall be reviewed and
adjusted upon the consummation of any future acquisition, and shall otherwise be
subject to an annual merit review as of the anniversary date of the last
adjustment. The Base Salary shall be payable in equal installments in accordance
with the usual payroll practices of Employer which are in effect from time to
time during the Employment Term, but in no event less frequently than monthly.
The Executive's Base Salary shall be subject to all applicable withholding and
other taxes.
5. Bonus Compensation. At the end of each of the Employer's
fiscal years, the Executive shall be entitled to receive from the Employer a
performance bonus (the "Performance Bonus").
(a) The amount of the Performance Bonus shall be determined by
the level of actual earnings before interest, taxes, depreciation and
amortization, and extraordinary items ("EBITDA") of Employer, reduced by actual
capital expenditures ("Cap-Ex") incurred in such year (actual EBITDA reduced by
actual Cap-Ex defining the "Actual Performance"). Extraordinary items shall
include management fees, board of directors fees and expenses, executive
management bonuses, investment income, expenses incurred in pursuit of
acquisitions not consummated, expenditures associated with the consummation of
acquisitions, and any other expense categories determined by the Employer's
independent auditors to be properly so classified according to generally
accepted accounting principles. The determination of the Employer's actual
EBITDA for purposes of calculating the amount of the Performance Bonus to which
the Executive is entitled, and the amount of such Performance Bonus, shall be
made by the independent public accountants then auditing the books and records
of the Employer (the "Auditors") and shall be based on audited financial
statements of the Employer. Such determination shall be made in accordance with
generally accepted accounting principles applied on a consistent basis, and the
determination of the Auditors shall be final and binding on the parties hereto.
-2-
<PAGE> 3
(b) The Performance Bonus to which the Executive is entitled
for any fiscal year of Employer shall be determined by the degree to which the
Actual Performance (actual EBITDA reduced by actual Cap-Ex as defined above)
compares with the Targeted Performance for that fiscal year. The term "Targeted
Performance" is defined as the targeted EBITDA reduced by the targeted Cap-Ex
for any given fiscal year. For fiscal years ended June 27, 1997 and beyond, the
targeted EBITDA and targeted Cap-Ex are listed in Exhibit A, attached hereto and
incorporated herein. Upon the consummation of future acquisitions or
divestitures, targeted EBITDA and targeted Cap-Ex are subject to modification by
mutual agreement of the Employer and the Executive, and, in such event, Exhibit
A shall be modified accordingly. Calculation of the Executive's Performance
Bonus shall be accomplished by comparison of the Actual Performance and Targeted
Performance for any given fiscal year, and shall be determined by calculation of
the performance percentage (the "Performance Percentage") for such year. The
Performance Percentage is a ratio, the numerator of which is the Actual
Performance, and the denominator of which is the Targeted Performance, adjusted
per Section 5(c) below, for the same fiscal year. The amount of the Performance
Bonus for any given fiscal year shall be the amount that corresponds to the
Performance Percentage for that year, as set forth on Exhibit B, attached
hereto. If the Performance Percentage achieved in a given fiscal year is an
amount not specifically enumerated on Exhibit B, then the Performance Bonus
shall be determined by the process of linear interpolation between the two
Performance Percentage values on Exhibit B most closely equal to the actual
Performance Percentage.
(c) The Executive may, at Executive's sole discretion,
identify and reclassify any capital expenditures, targeted but not spent during
any fiscal year under consideration, as capital Executive expects to be spent
during the following fiscal year ("Delayed Cap-Ex"). For any such year for which
Delayed Cap-Ex has been identified by the Executive, the Actual Performance for
the fiscal year under consideration shall be reduced, dollar-for-dollar, and the
Targeted Cap-Ex for the following fiscal year shall be increased by the same
amount. The calculation of the Performance Percentage for each fiscal year shall
reflect such adjustments accordingly. Employer hereby acknowledges that, for
fiscal year 1996, the Executive identified Delayed Cap-Ex in the amount of
$1,600,000.00, and Executive's Actual Performance for fiscal year 1996 was
reduced by that amount prior to calculation of Executive's Performance
Percentage for fiscal year 1996. Accordingly, the Targeted Cap-Ex for fiscal
year 1997 shall be increased by $1,600,000.00 over the amount shown in Exhibit
A, for purposes of calculating Executive's Performance Bonus for fiscal 1997.
(d) The Performance Bonus shall be determined as
follows:
-3-
<PAGE> 4
(i) For Actual Performance equal to the Targeted Performance
(Performance Percentage equal to 100%), the Executive will receive a
Performance Bonus equal to 66.7% of his Base Salary.
(ii) The threshold at which a Performance Bonus shall begin
to be earned will be at 80% of the Targeted Performance (the "Threshold
Performance"). At an Actual Performance equal to the Threshold
Performance (Performance Percentage equal to 80%), the Executive will
receive a Performance Bonus equal to 33.3% of his Base Salary.
(iii) Linear interpolation shall be used to calculate the
Performance Bonus for Actual Performance falling between the Threshold
Performance and the Targeted Performance (that is, where the
Performance Percentage falls between 80% and 100%).
(iv) For Actual Performance levels in excess of Targeted
Performance (the "Excess Actual Performance," or "EAP"), the Executive
shall receive, in addition to the Performance Bonus payable at Targeted
Performance, a
percentage of the EAP as follows:
<TABLE>
<CAPTION>
EAP as Percentage of Percentage of EAP
Targeted Performance Allocated to Executive
-------------------- ----------------------
<S> <C>
greater than 0% but less than 10% 10%
greater than or equal to 10% but less than 20% 11%
greater than or equal to 20% but less than 30% 12%
greater than or equal to 30% but less than 40% 13%
greater than or equal to 40% but less than 50% 14%
greater than or equal to 50% 15%
</TABLE>
Examples of calculations at various performance levels are
shown in Exhibit C attached hereto.
(e) Any Performance Bonus earned shall be payable in cash by
the Employer to the Executive within thirty (30) days following determination by
the Auditors of the amount of the Performance Bonus, but in no event later than
ninety (90) days following the end of the Employer's fiscal year for which such
Performance Bonus is payable, provided that the Employer is not in default under
any of its obligations pursuant to its then applicable loan agreements (the
"Loan Documents") in which case the lender must approve the payment. In the
event approval is required but not received within the thirty day time period,
then such payment will be deferred until such time the lender permits the
payment thereof, or until the aforementioned default is cured, whichever occurs
first. Any amounts deferred pursuant to this paragraph shall earn interest as
described in Section 5(f) of this Agreement. In any event, the bonus earned is
not lost to the Executive; it is merely deferred until either the lender's
approval is received or the default is cured. At Executive's
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<PAGE> 5
option, the Performance Bonus earned may be paid in two installments, the first
being the maximum amount that avoids an event of default under the Employer's
loan agreements, such portion to be paid immediately, and a second installment
payable, with interest, when the lender's approval is received or the default is
cured, as described above.
(f) The amount of any Performance Bonus deferred by operation
of Section 5(e) above, shall accrue interest at Employer's then current average
cost of borrowed funds or 8% per annum, whichever is greater. Such Performance
Bonus together with any accrued interest shall be paid to the Executive upon
satisfaction of the requirements of Section 5(e) above.
(g) In the event that in any fiscal year for which the
Executive is employed hereunder during a period less than the full fiscal year,
the Performance Bonus for such period shall be calculated using a Performance
Percentage wherein the numerator is the Actual Performance for the fiscal
year-to-date through Executive's last date of employment and the denominator is
the Targeted Performance, pro rated for the actual number of days the Executive
was employed during such year, and such pro rated Targeted Performance then
adjusted by any carryover of Delayed Cap-Ex from the previous fiscal year.
6. Employment Benefits. During the Employment Term, the
Executive shall be entitled, in addition to the benefits generally available to
other executive officers of Employer, the following employment benefits at
Employer's cost:
(a) Four weeks paid vacation for each year of the Employment
Term and sick leave in accordance with the Employer's policies from
time to time in effect for executive officers of the Employer.
(b) Participation in a reasonable medical and hospitalization
plan, but in no event providing lesser benefits than those in effect at
March 18, 1994, and applicable to its executive officers generally.
(c) A long-term disability policy (non-Employer policy naming
Executive as beneficiary and owner) providing for benefits in the
amount of 50% of Executive's Base Salary to age 65, and Executive's
compensation shall be grossed-up annually to cover any additional taxes
resulting from the annual premium paid for such policy by the Employer
and treated as compensation to the Executive.
(d) Participation, subject to classification requirements and
continued maintenance thereof by Employer, in other employee benefit
plans, such as profit sharing plans, which are from time to time
applicable to the Employer's executive officers generally.
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<PAGE> 6
(e) In the event Executive is relocated, a temporary monthly
living allowance until Executive is permanently relocated to cover
reasonable living and travel expenses in connection with maintenance of
a temporary residence, reimbursement, upon presentation of appropriate
receipts, of all reasonable moving expenses, brokerage commissions and
closing expenses related to the sale of his current residence and the
purchase of his new residence, and, following such relocation, provided
Executive's current home remains unrented and a good faith effort is
being made to sell Executive's current residence, Employer shall
reimburse Executive for the cost of interest on mortgages (not to
exceed current levels of debt) and real estate taxes for a period not
to exceed twelve months.
(f) A leased Lincoln Continental (or comparable) automobile.
(g) Tax return preparation and reasonable financial planning
services.
(h) A $1 million term life insurance policy on the Executive's
life for a beneficiary selected by him.
(i) The reasonable cost of a country club membership (and
dues).
7. Expenses. During the Employment Term, the Employer will
reimburse the Executive, upon presentation of appropriate receipts, for all
travel, entertainment and other out-of-pocket expenses which are reasonably
incurred by the Executive in the performance of his duties hereunder.
8. Insurance. The Executive agrees to cooperate with the
Employer in obtaining any insurance on the life or on the disability of the
Executive which the Employer may reasonably desire to obtain at its cost for its
own benefit and shall undergo reasonable physical and other examinations for
this sole purpose, and shall execute any consents or applications which the
Employer may reasonably request in connection with the issuance of one or more
of such insurance policies.
9. Termination.
(a) Executive's employment under this Agreement may be
terminated without further liability by Employer at any time for "Cause". For
purposes of this Agreement, Cause is defined as (i) Executive's willful refusal,
after 30 days' prior written notice by Employer (such notice detailing with
specificity the nature of such breach and the steps required to satisfy Employer
that such breach will be cured), to begin to take such steps to cure any
continuing material breach hereof or (ii) a final non-appealable adjudication in
a criminal or civil proceeding that Executive has committed a fraud or felony
relating to his employment.
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<PAGE> 7
(b) In addition to life insurance benefits which will be
payable in lump sum, in the event of Executive's death during the Employment
Term, the Employer will pay a severance benefit (the "Severance Benefit"), as
defined below, to Executive's designated beneficiary (or, failing such
designation, to his estate) payable in 12 equal monthly installments. The
Severance Benefit shall consist of an amount equal to the then current annual
Base Salary, a pro rated Performance Bonus for the then current fiscal year
calculated according to Section 5(g) above, any Performance Bonus amounts earned
in prior fiscal years but unpaid, and any other accrued benefits due and payable
at the time of Executive's death.
(c) In the event of Executive's disability or incapacity which
renders him unable to perform his duties for a period in excess of 120
consecutive days or a total of more than 180 days in any 12-month period, the
Employer may terminate this Agreement. Upon termination under this Section 9(c),
Employer will pay Executive the Severance Benefit as defined above. In addition,
Employer will cause ownership of all insurance policies on Executive's life to
be transferred to Executive.
(d) If, at any time during the Employment Term, the Executive
resigns from the employ of the Employer for any reason other than Employer's
failure to meet its obligations hereunder, Employer and Executive shall have no
further obligations hereunder after such resignation date other than the payment
of amounts accrued and unpaid under Sections 4, 5, 6 and 7 hereof through such
resignation date, and continuing obligations under Sections 10 and 11 hereof.
10. Restrictive Covenant. Without prior written consent of the
Board of Directors of Employer, such consent not to be unreasonably withheld,
Executive agrees that he will not for a period of one year following the
termination by Executive of his employment with Employer whether before or after
the expiration of the Employment Term (or to such lesser extent and for such
lesser period as may be deemed enforceable by a court of competent jurisdiction,
it being the intention of the parties that this Section 10 shall be so
enforced): (i) directly or indirectly engage, in the United States, in any
business in competition with the primary business conducted by Employer, either
as employee, independent contractor, owner, partner, lender or stockholder, at
the time of termination of the Executive (provided that the foregoing shall not
be construed to prohibit ownership of less than 5% of the outstanding shares of
any public corporation); (ii) solicit, canvass, or accept any business for any
other competing company, or business similar to any business of Employer, from
any past, present or future ("future," as used herein, shall mean at or prior to
the time of termination of employment) customer of Employer; (iii) directly or
indirectly induce or attempt to influence any employee of Employer to terminate
his employment; or (iv) directly or indirectly request any present or future (as
defined above)
-7-
<PAGE> 8
entities with whom Employer has significant business relationships to curtail or
cancel their business with Employer. In addition and without limiting the
foregoing, upon the termination of the Executive's employment by the Employer
for any reason, whether before or after the expiration of the term of this
Agreement, Executive shall not (x) at any time directly or indirectly disclose
to any person, firm or corporation any trade, technical or technological
secrets, or (y) for a period of one year following termination disclose any
details of organization or business affairs, or any names of past or present
customers of Employer. For purposes of this Section 10, the term "Employer"
shall be deemed to include Employer and all of its subsidiary corporations.
11. Inventions. All inventions, discoveries, improvements,
processes, formulae and data relating to Employer's business that Executive may
make, conceive or learn during the employment of the Executive with the Employer
(during the term of this Agreement, whether during working hours or otherwise)
and relating to the Employer's lines of business shall be the exclusive property
of Employer. Executive agrees to make prompt disclosure to the Board of
Directors of Employer of all such inventions, etc., and to do at Employer's
expense all lawful things necessary or useful to assist Employer in securing
their full enjoyment and protection. In the event of any breach or threatened
breach of the provisions of this Section 11 or the preceding Section 10,
Employer may apply to any court of competent jurisdiction to enjoin such breach.
Any such remedy shall be in addition to Employer's remedies at law under such
circumstances.
12. Conflicting Agreements. Each of the parties hereby
represents and warrants to the other that (a) neither the execution of this
Agreement by such party nor the performance by such party of any of its
obligations or duties hereunder will conflict with or violate or constitute a
breach of the terms of any other agreement to which such party is a party or by
which it is bound, and (b) such party is not required to obtain the consent of
any person, firm, corporation or other entity in order to enter into this
Agreement or to perform any of his obligations or duties hereunder.
13. Notices. Any notice, request, information or other
document to be given under this Agreement to any party by any other party shall
be in writing and delivered personally, sent by registered or certified mail,
postage prepaid, delivered by a nationally recognized overnight courier service,
or transmitted by facsimile machine followed by delivery of original documents
by a nationally recognized overnight courier service addressed as follows:
-8-
<PAGE> 9
If to Employer:
MST Partners
841 Broadway, Suite 504
New York, NY 10003
Attention: Mr. J. Andrew McWethy
Facsimile No.: (212) 674-6821
with a copy to
Winthrop, Stimson, Putnam & Roberts
One Battery Park Plaza
New York, NY 10004-1490
Attention: Stephen R. Rusmisel, Esq.
Facsimile No.: (212) 858-1500
If to the Executive:
F. Patrick Smith
at his then current address
included in the employment records
of the Employer
with a copy to:
David L. Keligian, Esq.
The Busch Firm P.C.
2532 Dupont Drive
Irvine, CA 92612-1254
Facsimile No.: (714) 474-7732
or to such other address as a party hereto may hereafter designate in writing to
the other party, provided that any notice of a change of address shall become
effective only upon receipt thereof.
14. Assignment; Successors and Assigns. This Agreement may not
be assigned by either party. This Agreement shall be binding upon and shall
inure to the benefit of the Employer and the Executive and their respective
heirs, legal representatives, successors and assigns.
15. Entire Agreement. This Agreement contains the entire
understanding between the Employer and the Executive with respect to the
employment of the Executive and supersedes all prior negotiations and
understandings between the Employer and the Executive with respect to the
employment of the Executive by the Employer. This Agreement may not be amended
or modified except by a written instrument signed by both the Employer and the
Executive.
16. Severability. In the event any one or more provisions of
this Agreement is held to be invalid or unenforceable, such illegality or
unenforceability shall not
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<PAGE> 10
affect the validity or enforceability of the other provisions hereof and such
other provisions shall remain in full force and effect, unaffected by such
invalidity or unenforceability.
17. Construction. The parties hereto acknowledge and agree
that: (i) each party and its counsel reviewed and negotiated the terms and
provisions of this Agreement and have contributed to its revision; (ii) the rule
of construction to the effect that any ambiguities are resolved against the
drafting party shall not be employed in the interpretation of this Agreement;
and (iii) the terms and provisions of this Agreement shall be construed fairly
as to all parties hereto and not in favor of or against any party, regardless of
which party was generally responsible for the preparation of this Agreement.
18. Applicable Law; Submission to Jurisdiction; Litigation
Expenses. This Agreement and the rights, obligations and relations of the
parties hereto shall be governed by and construed and enforced in accordance
with the laws of the State of New York without giving effect to the principles
of conflicts of law thereof.
The parties hereto (i) submit for themselves, and any legal
action or proceeding relating to this Agreement or for recognition and
enforcement of any judgment in respect hereof, to the exclusive jurisdiction of
the courts of the State of New York, the courts of the United States of America
for the Southern District of New York, and appellate courts from any therefor,
(ii) consent that any action or proceeding shall be brought in such courts, and
waive any objection that each may now or hereafter have to the venue of any such
action or proceeding in any such court, (iii) agree that service of process of
any such action or proceeding may be effected by certified mail (or any
substantially similar form of mail), postage prepaid, to the appropriate party
at its address as set forth herein, and service made shall be deemed to be
completed upon the earlier of actual receipt or five (5) days after the same
shall have been posted as aforesaid, and (iv) agree that nothing herein shall
affect the right to effect service of process in any other manner permitted by
law.
The prevailing party in any litigation relating to this
Agreement shall be entitled to recover reasonable professional fees, including
attorneys' fees and litigation expenses relating to such dispute.
19. Headings. The headings of sections and subsections of this
Agreement are for convenience of reference only and are not to be considered in
construing this Agreement.
20. Execution in Counterparts. This Agreement may be executed
in counterparts, each of which shall be deemed to be an original, but all of
which, when taken together, shall constitute one and the same instrument.
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<PAGE> 11
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the day and year first above written.
TEKNI-PLEX, INC.
By:/s/ Arthur P. Witt
---------------------------
Name: Arthur P. Witt
Title: Secretary & Director
/s/ F. Patrick Smith
------------------------------
F. Patrick Smith
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<PAGE> 12
EXHIBIT A
TARGETED PERFORMANCE
($000)
<TABLE>
<CAPTION>
FISCAL YEAR TARGETED TARGETED
ENDED EBITDA CAP-EX
----- ------ ------
<S> <C> <C>
June 27, 1997 26,811 6,807
July 3, 1998 29,173 5,700
July 2, 1999 30,625 4,700
June 30, 2000 31,806 6,900
June 29, 2001 33,030 4,075
June 28, 2002 34,238 4,075
June 27, 2003 35,554 4,100
July 2, 2004 36,922 4,100
July 1, 2005 38,273 4,100
June 30, 2006 39,643 4,100
</TABLE>
<PAGE> 13
EXHIBIT B
PERFORMANCE BONUSES
<TABLE>
<CAPTION>
Performance Incremental
Bonus Performance
Performance (% Base Bonus
Percentage Salary) (% EAP)
---------- ------- -------
<S> <C> <C>
80% 33.3%
85% 41.7%
90% 50.0%
95% 58.3%
100% 66.7%
105% 66.7% 10.0%
110% 66.7% 11.0%
115% 66.7% 11.0%
120% 66.7% 12.0%
125% 66.7% 12.0%
130% 66.7% 13.0%
135% 66.7% 13.0%
140% 66.7% 14.0%
145% 66.7% 14.0%
150% 66.7% 15.0%
155% 66.7% 15.0%
160% 66.7% 15.0%
165% 66.7% 15.0%
170% 66.7% 15.0%
</TABLE>
<PAGE> 14
EXHIBIT C
EXAMPLES OF PERFORMANCE BONUS CALCULATIONS
Example Targeted Performance = $20,000,000
Assumed Base Salary = $550,000
<TABLE>
<CAPTION>
Performance Bonus Performance
Percentage Calculation Bonus (000)
---------- ----------- -----------
<S> <C> <C>
75% N/A 0
80% 0.333 x 550 = 183
92% 0.533 x 550 = 293
100% 0.667 x 550 = 367
109% Incremental Performance = 0.09 x 20000 = 1800
Incremental Bonus = 0.10 x 1800 = 180
Total Bonus = 367 + 180 = 547
115% 1st Incremental Performance = 0.10 x 20000 =
2000
2nd Incremental Performance = 0.05 x 20000 =
1000
1st Incremental Bonus = 0.10 x 2000 = 200
2nd Incremental Bonus = 0.11 x 1000 = 110
Total Bonus = 367 + 200 + 110 = 677
122% 1st Incremental Performance = 0.10 x 20000 =
2000
2nd Incremental Performance = 0.10 x 20000 =
2000
3rd Incremental Performance = 0.02 x 20000 =
400
1st Incremental Bonus = 0.10 x 2000 = 200
2nd Incremental Bonus = 0.11 x 2000 = 220
3rd Incremental Bonus = 0.12 x 400 = 48
Total Bonus = 367 + 200 + 220 + 48 = 835
</TABLE>
<PAGE> 1
EXHIBIT 10.7
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") made effective as
of the 4th day of April, 1997 (the "Effective Date") by and between Tekni-Plex,
Inc., a Delaware corporation (the "Employer"), having its principal offices at
201 Industrial Parkway, Somerville, NJ 08876, and Kenneth W.R. Baker, an
individual (the "Executive"), residing at 25 Sutton Farm Road, Flemington, New
Jersey 08822.
W I T N E S S E T H:
WHEREAS, the Employer desires to retain the Executive as the
President and Chief Operating Officer of Employer, and the Executive is willing,
upon the terms and conditions herein set forth, to serve as President and Chief
Operating Officer of Employer.
WHEREAS, this Agreement supersedes the original Employment
Agreement between Employer and Executive dated as of April 4, 1994 (the "Prior
Agreement").
NOW, THEREFORE, in consideration of the foregoing and of the
mutual covenants contained in this Agreement, the Employer and the Executive,
intending to be legally bound hereby, agree as follows:
1. Employment. Subject to the terms and conditions
hereinafter set forth, the Employer hereby employs the Executive
as President and Chief Operating Officer of Employer, and the
Executive hereby accepts such employment.
2. Term. The term of employment of the Executive by the
Employer pursuant to this Agreement (the "Employment Term") shall commence as of
the effective date hereof, and shall reflect continuing and continuous
employment of Executive by Employer from April 4, 1994. The term of employment
pursuant to this agreement shall terminate upon the earlier of: (a) June 30,
2000, to coincide with the fiscal year-end of Employer, or (b) the date on which
the employment of the Executive is terminated pursuant to Section 9 hereof.
Absent written notice of intent not to renew by either party at least 90 days
prior to the end of each fiscal year, the term of this Agreement shall be
automatically extended at the end of each fiscal year of Employer, for a period
of one year, beginning with the end of fiscal year 1998.
3. Duties. During the Employment Term, the Executive shall
render his services to the Employer as President and Chief Operating Officer to
perform the duties and services usually pertaining to such offices and to
perform such other administrative and managerial functions as may be assigned to
Executive from time to time by the Chief Executive Officer or by
<PAGE> 2
the Board of Directors of the Corporation. In addition to the foregoing, the
Executive shall hold, without additional compensation therefor, such other
offices, directorships or memberships of committees of the Employer and/or any
subsidiary or affiliate of the Employer to which, from time to time during the
Employment Term, the Executive may be elected or appointed. During the
Employment Term, the Executive shall devote his full business time, efforts and
entire energy and skill to the business of the Employer in accordance with the
reasonable directions and orders of the Chief Executive Officer of the Employer
and will use his best efforts to promote the interests of Employer.
4. Salary Compensation. In consideration of the services to be
rendered by the Executive, including, without limitation, any services which may
be rendered by the Executive as an officer, director or member of any committee
of the Employer or any subsidiary or affiliate of the Employer, the Employer
shall pay or cause to be paid to the Executive during the Employment Term, and
the Executive shall accept, compensation at the rate of two hundred seventy-five
thousand ($275,000.00) dollars per annum (the current "Base Salary"). The Base
Salary shall be reviewed annually by the Board of Directors and shall be subject
to increase at the sole discretion of the Board of Directors. In no event shall
the Base Salary be decreased during the Employment Term. The Employer's
obligation to pay the Base Salary shall be payable in equal installments in
accordance with the usual payroll practices of the Employer which are in effect
from time to time during the Employment Term, but in no event less frequently
than monthly. The Executive's Base Salary shall be subject to all applicable
withholding and other taxes.
5. Bonus Compensation. At the end of each of the
Employer's fiscal years, the Executive shall be entitled to
receive from the Employer a performance bonus (the "Performance
Bonus").
(a) The amount of the Performance Bonus shall be determined by
the level of actual earnings before interest, taxes, depreciation and
amortization, and extraordinary items ("EBITDA") of Employer, reduced
by actual capital expenditures ("Cap-Ex") incurred in such year (actual
EBITDA reduced by actual Cap-Ex defining the "Actual Performance").
Extraordinary items shall include management fees, board of directors
fees and expenses, executive management bonuses, investment income,
expenses incurred in pursuit of acquisitions not consummated,
expenditures associated with the consummation of acquisitions, and any
other expense categories determined by the Employer's independent
auditors to be properly so classified according to generally accepted
accounting principles. The determination of the Employer's actual
EBITDA for purposes of calculating the amount of the Performance Bonus
to which the Executive is entitled, and the amount of such Performance
Bonus, shall be made by the
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<PAGE> 3
independent public accountants then auditing the books and records of
the Employer (the "Auditors") and shall be based on audited financial
statements of the Employer. Such determination shall be made in
accordance with generally accepted accounting principles applied on a
consistent basis, and the determination of the Auditors shall be final
and binding on the parties hereto.
(b) The Performance Bonus to which the Executive is entitled
for any fiscal year of Employer shall be determined by the degree to
which the Actual Performance (actual EBITDA reduced by actual Cap-Ex as
defined above) compares with the Targeted Performance for that fiscal
year. The term "Targeted Performance" is defined as the targeted EBITDA
reduced by the targeted Cap-Ex for any given fiscal year. For fiscal
years ended June 27, 1997 and beyond, the targeted EBITDA and targeted
Cap-Ex are listed in Exhibit A, attached hereto and incorporated
herein. Upon the consummation of future acquisitions or divestitures,
targeted EBITDA and targeted Cap-Ex are subject to modification by the
Employer, and, in such event, Exhibit A shall be modified accordingly.
Calculation of the Executive's Performance Bonus shall be accomplished
by comparison of the Actual Performance and Targeted Performance for
any given fiscal year, and shall be determined by calculation of the
performance percentage (the "Performance Percentage") for such year.
The Performance Percentage is a ratio, the numerator of which is the
Actual Performance, and the denominator of which is the Targeted
Performance, adjusted per Section 5(c) below, for the same fiscal year.
The amount of the Performance Bonus for any given fiscal year shall be
the amount that corresponds to the Performance Percentage for that
year, as set forth on Exhibit B, attached hereto. If the Performance
Percentage achieved in a given fiscal year is an amount not
specifically enumerated on Exhibit B, then the Performance Bonus shall
be determined by the process of linear interpolation between the two
Performance Percentage values on Exhibit B most closely equal to the
actual Performance Percentage.
(c) The Chief Executive Officer of Employer may, in his sole
discretion, identify and reclassify any capital expenditures, targeted
but not spent during any fiscal year under consideration, as capital he
expects to be spent during the following fiscal year ("Delayed
Cap-Ex"). For any such year for which Delayed Cap-Ex has been so
identified, the Actual Performance for the fiscal year under
consideration shall be reduced, dollar-for-dollar, and the Targeted
Cap-Ex for the following fiscal year shall be increased by the same
amount. The calculation of the Performance Percentage for each fiscal
year shall reflect such adjustments accordingly. Employer hereby
acknowledges that, for fiscal year 1996, the Chief Executive Officer
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<PAGE> 4
identified Delayed Cap-Ex in the amount of $1,600,000.00, and
Executive's Actual Performance for fiscal year 1996 was reduced by that
amount prior to calculation of Executive's Performance Percentage for
fiscal year 1996. Accordingly, the Targeted Cap-Ex for fiscal year 1997
shall be increased by $1,600,000.00 over the amount shown in Exhibit A,
for purposes of calculating Executive's Performance Bonus for fiscal
1997.
(d) The Performance Bonus shall be determined as
follows:
(i) For Actual Performance equal to the Targeted Performance
(Performance Percentage equal to 100%), the Executive will
receive a Performance Bonus equal to 66.7% of his Base Salary.
(ii) The threshold at which a Performance Bonus shall begin to
be earned will be at 80% of the Targeted Performance (the
"Threshold Performance"). At an Actual Performance equal to
the Threshold Performance (Performance Percentage equal to
80%), the Executive will receive a Performance Bonus equal to
33.3% of his Base Salary.
(iii) Linear interpolation shall be used to calculate the
Performance Bonus for Actual Performance falling between the
Threshold Performance and the Targeted Performance (that is,
where the Performance Percentage
falls between 80% and 100%).
(iv) For Actual Performance levels in excess of Targeted
Performance (the "Excess Actual Performance," or "EAP"), the
Executive shall receive, in addition to the Performance Bonus
payable at Targeted Performance, a percentage of the EAP as
follows:
<TABLE>
<CAPTION>
EAP as Percentage of Percentage of EAP
Targeted Performance Allocated to Executive
-------------------- ----------------------
<S> <C>
greater than 0% but less than 10% 5.0%
greater than or equal to 10% but less than 20% 5.5%
greater than or equal to 20% but less than 30% 6.0%
greater than or equal to 30% but less than 40% 6.5%
greater than or equal to 40% but less than 50% 7.0%
greater than or equal to 50% 7.5%
</TABLE>
Examples of calculations at various performance levels are
shown in Exhibit C attached hereto.
(e) Any Performance Bonus earned shall be payable in cash by
the Employer to the Executive within thirty (30) days following
determination by the Auditors of the amount of the Performance Bonus,
but in no event later than ninety
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<PAGE> 5
(90) days following the end of the Employer's fiscal year for which
such Performance Bonus is payable, provided that the Employer is not in
default under any of its obligations pursuant to its then applicable
loan agreements (the "Loan Documents") in which case the lender must
approve the payment. In the event approval is required but not received
within the thirty day time period, then such payment will be deferred
until such time the lender permits the payment thereof, or until the
aforementioned default is cured, whichever occurs first. Any amounts
deferred pursuant to this paragraph shall earn interest as described in
Section 5(f) of this Agreement. In any event, the bonus earned is not
lost to the Executive; it is merely deferred until either the lender's
approval is received or the default is cured.
(f) The amount of any Performance Bonus deferred by operation
of Section 5(e) above, shall accrue interest at Employer's then current
average cost of borrowed funds or 8% per annum, whichever is greater.
Such Performance Bonus together with any accrued interest shall be paid
to the Executive upon satisfaction of the requirements of Section 5(e)
above.
(g) In the event that in any fiscal year for which the
Executive is employed hereunder during a period less than the full
fiscal year, the Performance Bonus for such period shall be calculated
using a Performance Percentage wherein the numerator is the Actual
Performance for the fiscal year-to-date through Executive's last date
of employment and the denominator is the Targeted Performance, pro
rated for the actual number of days the Executive was employed during
such year, and such pro rated Targeted Performance then adjusted by any
carryover of Delayed Cap-Ex from the previous fiscal year.
6. Employment Benefits. During the Employment Term, the
Executive shall be entitled to the following employment benefits:
(a) Four weeks paid vacation for each year of the Employment
Term and sick leave in accordance with the Employer's policies from
time to time in effect for executive officers of the Employer.
(b) Participation, subject to qualification requirements, in
medical, life or other insurance or hospitalization plans and long-term
disability policies which are presently in effect or hereinafter
instituted by the Employer and applicable to its executive officers
generally.
(c) Participation, subject to classification requirements and
continued maintenance thereof by Employer,
-5-
<PAGE> 6
in other employee benefit plans, such as profit sharing plans, which
are from time to time applicable to the Employer's executive officers
generally.
(d) In the event Executive is relocated at Employer's request,
reasonable temporary living expenses for a maximum of 120 days;
reasonable expenses incurred for the purpose of finding a permanent
residence at the new location, and reimbursement, upon presentation of
appropriate receipts, for all reasonable moving expenses, brokerage
commissions and closing expenses related to the sale of his current
residence and the purchase of his new residence.
(e) Reimbursement of reasonable disability insurance premiums
to provide an annual benefit equal to 50% of Executive's Base Salary to
age 65, and Executive's compensation shall be grossed-up annually to
cover any additional taxes resulting from the annual premium paid for
such policy by the Employer and treated as compensation to the
Executive.
(f) A leased full-size automobile, including insurance and
maintenance therefor.
7. Expenses. During the Employment Term, the Employer will
reimburse the Executive, upon presentation of appropriate receipts, for all
travel, entertainment and other out-of-pocket expenses which are reasonably and
necessarily incurred by the Executive in the performance of his duties
hereunder.
8. Insurance. The Executive agrees to cooperate with the
Employer in obtaining any insurance on the life or on the disability of the
Executive which the Employer may desire to obtain for its own benefit or
pursuant to Section 6(e) above, and shall undergo such physical and other
examinations, and shall execute any consents or applications, which the Employer
may request in connection with the issuance of one or more of such insurance
policies.
9. Termination.
(a) Executive's employment under this agreement may be
terminated without further liability by Employer at any time for
"extreme cause" (defined, for purposes of this Agreement, as (i)
Executive's willful refusal, after 30 days' prior written notice by
Employer (detailing with specificity the nature of such breach), to
cure any continuing material breach hereof or (ii) a final
non-appealable adjudication in a criminal or civil proceeding that
Executive has committed a fraud or felony relating to or adversely
affecting his employment, or, subject to giving the Executive full
opportunity to make a presentation to the Board of Directors, at the
instance of the Board of
-6-
<PAGE> 7
Directors upon indictment of the Executive charging him with a crime
which is a felony). The foregoing to the contrary notwithstanding, if
Executive's employment is terminated as a result of an indictment, and
such indictment is finally dismissed, the Executive shall be entitled
to receive an amount equal to the Severance Benefit (referred to in the
following clause (b), computed as of the date of termination.
(b) Employer may terminate Executive's employment hereunder at
any time, upon 30 days' notice to Executive, in the event that Employer
is in default of its payment (interest or principal) obligations under
any Loan Documents for a period of more than 30 days. In the event of
such termination, Employer's sole obligation shall be payment of a
severance benefit (the "Severance Benefit") equal to Executive's then
current annual Base Salary plus any bonus pro-rated to the date of
termination. The Severance Benefit shall be payable in 12 monthly
installments.
(c) In the event of Executive's death, the Employer will pay
an amount equal to the Severance Benefit to his designated beneficiary
(or, failing such designation, to his estate) payable in 12 monthly
installments.
(d) In the event of Executive's disability or incapacity which
renders him unable to perform his duties for a period in excess of 120
consecutive days or a total of more than 180 days in any 12-month
period, the Employer may terminate this Agreement without further
compensation.
(e) If, at any time during the Employment Term, the Executive
resigns from the employ of the Employer for any reason other than
Employer's failure to meet its obligations hereunder, the Employer
shall have no further obligations hereunder after such resignation date
other than the payment of amounts accrued and unpaid under Sections 4,
5, 6 and 7 hereof through such resignation date; provided, however,
that any bonus shall be subject to the payment conditions set forth in
Section 5(e) of this Agreement.
10. Restrictive Covenant. Without prior written consent of the
Board of Directors of Employer, Executive agrees that he will not for a period
of one year following the termination by Executive of his employment with
Employer whether before or after the expiration of the Employment Term (or to
such lesser extent and for such lesser period as may be deemed enforceable by a
court of competent jurisdiction, it being the intention of the parties that this
Section 10 shall be so enforced): (i) directly or indirectly engage, in the
United States, in any business in competition with the primary business
conducted by Employer, either as employee, independent contractor, owner,
partner, lender or stockholder, at the time of termination of the Executive
(provided that the foregoing shall
-7-
<PAGE> 8
not be construed to prohibit ownership of less than 5% of the outstanding shares
of any public corporation); (ii) solicit, canvass, or accept any business for
any other company, or business similar to any business of Employer, from any
past, present or future ("future," as used herein, shall mean at or prior to the
time of termination of employment) customer of Employer; (iii) directly or
indirectly induce or attempt to influence any employee of Employer to terminate
his employment; or (iv) directly or indirectly request any present or future (as
defined above) entities with whom Employer has significant business
relationships to curtail or cancel their business with Employer. In addition and
without limiting the foregoing, upon the termination of the Executive's
employment by the Employer for any reason, whether before or after the
expiration of the term of this Agreement, Executive shall not (x) at any time
directly or indirectly disclose to any person, firm or corporation any trade,
technical or technological secrets, or (y) for a period of one year following
termination disclose any details of organization or business affairs, or any
names of past or present customers of Employer. For purposes of this Section 10,
the term "Employer" shall be deemed to include Employer and all of its
subsidiary corporations.
11. Inventions. All inventions, discoveries, improvements,
processes, formulae and data relating to Employer's business that Executive may
make, conceive or learn during the employment of the Executive with the Employer
(during the term of this Agreement, whether during working hours or otherwise)
and relating to the Employer's lines of business shall be the exclusive property
of Employer. Executive agrees to make prompt disclosure to Employer of all such
inventions, etc., and to do at Employer's expense all lawful things necessary or
useful to assist Employer in securing their full enjoyment and protection. In
the event of any breach or threatened breach of the provisions of this Section
11 or the preceding Section 10, Employer may apply to any court of competent
jurisdiction to enjoin such breach. Any such remedy shall be in addition to
Employer's remedies at law under such circumstances.
12. Conflicting Agreements. Each of the parties hereby
represents and warrants to the other that (a) neither the execution of this
Agreement by such party nor the performance by such party of any of its
obligations or duties hereunder will conflict with or violate or constitute a
breach of the terms of any other agreement to which such party is a party or by
which it is bound, and (b) such party is not required to obtain the consent of
any person, firm, corporation or other entity in order to enter into this
Agreement or to perform any of his obligations or duties hereunder.
13. Notices. Any notice, request, information or other
document to be given under this Agreement to any party by any other party shall
be in writing and delivered personally, sent by registered or certified mail,
postage prepaid, delivered
-8-
<PAGE> 9
by a nationally-recognized overnight courier service, or transmitted by
facsimile machine followed by delivery of original documents by a
nationally-recognized overnight courier service addressed as follows:
If to Employer:
Tekni-Plex, Inc.
201 Industrial Parkway
Somerville, NJ 08876
Attention: Dr. F. Patrick Smith
Facsimile No.: (908) 722-4967
with a copy to
Winthrop, Stimson, Putnam & Roberts
One Battery Park Plaza
New York, NY 10004-1490
Attention: Stephen R. Rusmisel, Esq.
Facsimile No.: (212) 858-1500
If to the Executive:
Kenneth W.R. Baker
at his then current address
included in the employment records
of the Employer
or to such other address as a party hereto may hereafter designate in writing to
the other party, provided that any notice of a change of address shall become
effective only upon receipt thereof.
14. Assignment; Successors and Assigns. This Agreement may not
be assigned by either party. This Agreement shall be binding upon and shall
inure to the benefit of the Employer and the Executive and their respective
heirs, legal representatives, successors and assigns.
15. Entire Agreement. This Agreement contains the entire
understanding between the Employer and the Executive with respect to the
employment of the Executive and supersedes all prior negotiations and
understandings (including the Prior Agreement) between the Employer and the
Executive with respect to the employment of the Executive by the Employer. This
Agreement may not be amended or modified except by a written instrument signed
by both the Employer and the Executive.
16. Severability. In the event any one or more provisions of
this Agreement is held to be invalid or unenforceable, such illegality or
unenforceability shall not affect the validity or enforceability of the other
provisions hereof and such other provisions shall remain in full force and
effect, unaffected by such invalidity or unenforceability.
-9-
<PAGE> 10
17. Applicable Law; Submission to Jurisdiction; Litigation
Expenses. This Agreement and the rights, obligations and relations of the
parties hereto shall be governed by and construed and enforced in accordance
with the laws of the State of New York without giving effect to the principles
of conflicts of law thereof.
The parties hereto (i) submit for themselves, and any legal
action or proceeding relating to this Agreement or for recognition and
enforcement of any judgment in respect hereof, to the exclusive jurisdiction of
the courts of the State of New York, the courts of the United States of America
for the Southern District of New York, and appellate courts from any therefor,
(ii) consent that any action or proceeding shall be brought in such courts, and
waive any objection that each may now or hereafter have to the venue of any such
action or proceeding in any such court, (iii) agree that service of process of
any such action or proceeding may be effected by certified mail (or any
substantially similar form of mail), postage prepaid, to the appropriate party
at its address as set forth herein, and service made shall be deemed to be
completed upon the earlier of actual receipt or five (5) days after the same
shall have been posted as aforesaid, and (v) agree that nothing herein shall
affect the right to effect service of process in any other manner permitted by
law.
18. Headings. The headings of sections and subsections of this
Agreement are for convenience of reference only and are not to be considered in
construing this Agreement.
19. Execution in Counterparts. This Agreement may be executed
in counterparts, each of which shall be deemed to be an original, but all of
which, when taken together, shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the day and year first above written.
Tekni-Plex, Inc.
By:/s/ F. Patrick Smith /s/ Kenneth W.R. Baker
------------------------------ ----------------------
Name: F. Patrick Smith Kenneth W.R. Baker
Title: Chief Executive Officer
-10-
<PAGE> 11
EXHIBIT A
TARGETED PERFORMANCE
($000)
<TABLE>
<CAPTION>
FISCAL YEAR TARGETED TARGETED
ENDED EBITDA CAP-EX
- ----------- -------- --------
<S> <C> <C>
June 27, 1997 26,811 6,807
July 3, 1998 29,173 5,700
July 2, 1999 30,625 4,700
June 30, 2000 31,806 6,900
June 29, 2001 33,030 4,075
June 28, 2002 34,238 4,075
June 27, 2003 35,554 4,100
July 2, 2004 36,922 4,100
July 1, 2005 38,273 4,100
June 30, 2006 39,643 4,100
</TABLE>
<PAGE> 12
EXHIBIT B
PERFORMANCE BONUSES
<TABLE>
<CAPTION>
Incremental
Performance Performance
Performance Bonus Bonus
Percentage (% Base Salary) (% EAP)
- ----------- --------------- -----------
<S> <C> <C>
80% 33.3%
85% 41.7%
90% 50.0%
95% 58.3%
100% 66.7%
105% 66.7% 5.0%
110% 66.7% 5.5%
115% 66.7% 5.5%
120% 66.7% 6.0%
125% 66.7% 6.0%
130% 66.7% 6.5%
135% 66.7% 6.5%
140% 66.7% 7.0%
145% 66.7% 7.0%
150% 66.7% 7.5%
155% 66.7% 7.5%
160% 66.7% 7.5%
165% 66.7% 7.5%
170% 66.7% 7.5%
</TABLE>
<PAGE> 13
EXHIBIT C
EXAMPLES OF PERFORMANCE BONUS CALCULATIONS
Example Targeted Performance = $20,000,000
Assumed Base Salary = $275,000
<TABLE>
<CAPTION>
Performance Bonus Performance
Percentage Calculation Bonus (000)
- ---------- ----------- -----------
<S> <C> <C>
75% N/A 0.0
80% 0.333 x 275 = 91.7
92% 0.533 x 275 = 146.7
100% 0.667 x 275 = 183.3
109% Incremental Performance = 0.09 x 20000 = 1800
Incremental Bonus = 0.05 x 1800 = 90
Total Bonus = 183.3 + 90 = 273.3
115% 1st Incremental Performance = 0.10 x 20000 = 2000
2nd Incremental Performance = 0.05 x 20000 = 1000
1st Incremental Bonus = 0.05 x 2000 = 100
2nd Incremental Bonus = 0.055 x 1000 = 55
Total Bonus = 183.3 + 100 + 55 = 338.3
122% 1st Incremental Performance = 0.10 x 20000 = 2000
2nd Incremental Performance = 0.10 x 20000 = 2000
3rd Incremental Performance = 0.02 x 20000 = 400
1st Incremental Bonus = 0.05 x 2000 = 100
2nd Incremental Bonus = 0.055 x 2000 = 110
3rd Incremental Bonus = 0.06 x 400 = 24
Total Bonus = 183.3 + 100 + 110 + 24 = 417.3
152% 1st Incremental Performance = 0.10 x 20000 = 2000
2nd Incremental Performance = 0.10 x 20000 = 2000
3rd Incremental Performance = 0.10 x 20000 = 2000
4th Incremental Performance = 0.10 x 20000 = 2000
5th Incremental Performance = 0.10 x 20000 = 2000
6th Incremental Performance = 0.02 x 20000 = 400
1st Incremental Bonus = 0.05 x 20000 = 100
2nd Incremental Bonus = 0.055 x 2000 = 110
3rd Incremental Bonus = 0.06 x 2000 = 120
4th Incremental Bonus = 0.065 x 2000 = 130
5th Incremental Bonus = 0.07 x 2000 = 140
6th Incremental Bonus = 0.075 x 400 = 30
Total Bonus = 183.3+100+110+120+130+140+30 813.3
</TABLE>
<PAGE> 1
EXHIBIT 10.10
TEKNI-PLEX, INC.
Somerville, New Jersey
April 4, 1997
MST Management Company, Inc.
c/o MST Partners L.P.
841 Broadway, Suite 504
New York, NY 10003
Attention: Barry A. Solomon
Gentlemen:
This letter when accepted by you, will confirm the
understanding of TEKNI-PLEX, INC., a Delaware corporation (formerly known as TP
Acquisition Company, Inc.) (the "Company"), on the terms and conditions set
forth below to continue to retain you to perform management consulting services
to the Company. This letter shall constitute the entire agreement between the
parties with respect to the subject matter contained herein and shall supersede
all other prior agreements between the parties with respect to the subject
matter hereof, including (i) the letter agreement dated March 18, 1994 among the
Company, you and MST/TP Holding Inc., (ii) the letter and acknowledgement of
instructions dated as of March 18, 1994 executed by certain officers of the
Company, and (iii) the letter agreement dated February 21, 1996 between the
Company and MST Management Company, Inc. The terms and conditions of our
agreement are as follows:
1. You shall continue to provide the Company with such regular and
customary management consulting services as you determine, in your sole
discretion, to be appropriate for a period of ten (10) years from March 18, 1994
(the "Term"; to be extended for an additional ten (10) years unless you provide
notice to the Company of your intention not to renew this Agreement at least one
(1) year prior to the expiration of this Agreement); such consulting services to
include but not be limited to advising the Company in the areas of financial
management, marketing and general management (the "Services").
2. In full consideration for the Services to be rendered by you to the
Company hereunder, the Company shall pay to you a management consulting service
fee for each period as indicated below (each a "Contract Year") during the
remainder of the Term (the "Management Fee"), as follows:
-1-
<PAGE> 2
<TABLE>
<CAPTION>
MST MANAGEMENT COMPANY,
CONTRACT YEAR INC. MANAGEMENT FEE
- ------------- -------------------
<S> <C>
3/18/97 - 3/17/98 $284,237
3/18/98 - 3/17/99 $284,237
3/18/99 - 3/17/00 $284,237
3/18/00 - 3/17/01 $284,237
3/18/01 - 3/17/02 $284,237
3/18/02 - 3/17/03 $284,237
3/18/03 - 3/17/04 $284,237
</TABLE>
Should this Agreement be renewed in accordance with paragraph 2 hereof, the
Management Fee for each Contract Year shall be $284,237 per Contract Year;
provided, that, each such Contract Year shall be calculated from March 18th of
the year to March 17th of the following year.
3. The Management Fee payable hereunder shall be payable on a monthly
basis, in advance for the Services to be rendered during said month; provided,
however, that, unless and until you otherwise direct by notice to the Company,
on behalf of you $416.67 of each monthly payment (a total of $5,000.00 per
Contract Year) shall be paid directly to Forrest Binkley & Brown, 800 Newport
Center Drive, Newport Beach, CA 92660, Attention: Jeffrey J. Brown.
4. In addition to any Management Fee payable hereunder, upon submission
to the Company of appropriate supporting documentation, the Company shall
promptly reimburse you for all reasonable out-of-pocket expenses incurred in
connection with the Services performed by you hereunder.
7. This Agreement shall inure to the benefit of and be binding upon you
and the Company, and the respective successors and assigns of each. In
particular, provided one or more of your shareholders remains available to
provide the Services you have agreed to provide hereunder, you may assign this
Agreement to your shareholders.
Please confirm that the foregoing constitutes our entire
understanding with respect to the matters set forth herein signing this letter
in the space provided below and returning
-2-
<PAGE> 3
this originally signed letter to the Company.
Very truly yours,
TEKNI-PLEX, INC.
By: /s/ F. Patrick Smith
----------------------------
Name: F. Patrick Smith
Title: C.E.O.
AGREED TO AND ACCEPTED:
MST MANAGEMENT COMPANY, INC.
By: /s/ Barry A. Solomon
--------------------------
Name: Barry A. Solomon
Title: V.P.
-3-
<PAGE> 1
TEKNI-PLEX, INC.
EXHIBIT 12.1
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
Years Ended Nine Months Ended Adjusted Pro Forma
Year Year Nine
Ended Jan. 1, to Mar. 19 to Ended Months
Dec. 31, Mar. 18, Jul. 1, Jun. 30, Jun. 28, Mar. 29, Mar. 28, Jun. 28, Mar. 28,
1993 1994 1994 1995 1996 1996 1997 1996 1997
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Pre-tax income 3,031 825 38 377 1,958 440 10,002 2,274 9,240
Interest expense
including amortization
of deferred financing
costs and accretion
of warrants 160 22 1,141 4,322 5,816 3,663 6,068 9,143 6,830
Earnings before fixed
charges 3,191 847 1,179 4,699 7,774 4,103 16,070 11,417 16,070
Ratio of earnings to
fixed charges 19.9 38.5 1.0 1.1 1.3 1.1 2.6 1.2 2.4
</TABLE>
<PAGE> 1
EXHIBIT 21.1
Subsidiaries of Tekni-Plex, Inc.
Dolco Packaging Corp.
-1-
<PAGE> 1
EXHIBIT 21.2
Subsidiaries of Dolco Packaging Corp.
None.
-1-
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Tekni-Plex, Inc.
Somerville, New Jersey
We hereby consent to the inclusion in this Registration Statement of Tekni-Plex,
Inc. on Form S-4 of our reports dated September 20, 1996, on our audits of the
consolidated financial statements of Tekni-Plex, Inc. and subsidiary as of June
28, 1996 and June 30, 1995, and the related consolidated statements of
operations, stockholders' equity and cash flows for the years ended June 28,
1996 and June 30, 1995 and the periods March 19, 1994 through July 1, 1994 and
January 1, 1994 through March 18, 1994, which reports included an explanatory
paragraph related to the predecessors' basis of accounting for the period
January 1, 1994 through March 18, 1994, which reports are included in this Form
S-4. We also consent to the reference to our firm under the heading "Experts" in
the Registration Statement.
/s/ BDO Seidman, LLP
BDO Seidman, LLP
Woodbridge, New Jersey
May 29, 1997
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-4 (File
No. 333- ) of our report dated February 21, 1996, on our audits of the
financial statements of Dolco Packaging Corp. We also consent to the reference
to our Firm under the caption "Experts."
/s/ COOPERS & LYBRAND L.L.P.
Sherman Oaks, California
May 28, 1997
<PAGE> 1
Exhibit 23.3
[ROSENBERG RICH BAKER BERMAN & COMPANY LETTERHEAD]
INDEPENDENT AUDITORS' CONSENT
To the Board of Directors
Tekni-Plex, Inc.
201 Industrial Parkway
Somerville, NJ 08876
We consent to the use in this Registration Statement, Form S-4, of Tekni-Plex,
Inc. of our report dated February 18, 1994 which is part of this Registration
Statement, and of our report dated February 18, 1994 relating to the financial
statement schedules appearing elsewhere in this Registration Statement.
We also consent to the reference to us under the headings "Selected Historical
Financial Information" and "Experts" in such Registration.
/s/ ROSENBERG RICH BAKER BERMAN & CO.
ROSENBERG RICH BAKER BERMAN & CO.
May 29, 1997
<PAGE> 1
EXHIBIT 25.1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST
INDENTURE ACT OF 1939 OF A CORPORATION
DESIGNATED TO ACT AS TRUSTEE
-----------
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2)
-----------
MARINE MIDLAND BANK
(Exact name of trustee as specified in its charter)
New York 16-1057879
(Jurisdiction of incorporation (I.R.S. Employer
or organization if not a U.S. Identification No.)
national bank)
140 Broadway, New York, N.Y. 10005-1180
(212) 658-1000 (Zip Code)
(Address of principal executive offices)
Charles E. Bauer
Vice President
Marine Midland Bank
140 Broadway
New York, New York 10005-1180
Tel: (212) 658-1792
(Name, address and telephone number of agent for service)
TEKNI-PLEX, INC.
(Exact name of obligor as specified in its charter)
Delaware 22-3286312
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
Guarantor of Exchange Notes registered hereby
DOLCO PACKAGING CORP.
(Exact name of obligor as specified in its charter)
Delaware 95-2467518
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
<PAGE> 2
201 Industrial Parkway
Somerville, New Jersey 08876
(908) 722-4800 (Zip Code)
(Address of principal executive offices)
SERIES B 11 1/4% SENIOR SUBORDINATED NOTES DUE 2007
GUARANTEES OF SERIES B 11 1/4% SENIOR SUBORDINATED NOTES DUE 2007
(Title of Indenture Securities)
<PAGE> 3
General
Item 1. General Information.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervisory
authority to which it is subject.
State of New York Banking Department.
Federal Deposit Insurance Corporation, Washington, D.C.
Board of Governors of the Federal Reserve System,
Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
Item 2. Affiliations with Obligor.
If the obligor is an affiliate of the trustee, describe each
such affiliation.
None
<PAGE> 4
Item 16. List of Exhibits.
Exhibit
T1A(i) * - Copy of the Organization Certificate of
Marine Midland Bank.
T1A(ii) * - Certificate of the State of New York
Banking Department dated December 31,
1993 as to the authority of Marine Midland
Bank to commence business.
T1A(iii) - Not applicable.
T1A(iv) * - Copy of the existing By-Laws of Marine
Midland Bank as adopted on January 20,
1994.
T1A(v) - Not applicable.
T1A(vi) * - Consent of Marine Midland Bank required
by Section 321(b) of the Trust Indenture
Act of 1939.
T1A(vii) - Copy of the latest report of condition of
the trustee (March 31, 1997), published
pursuant to law or the requirement of its
supervisory or examining authority.
T1A(viii) - Not applicable.
T1A(ix) - Not applicable.
* Exhibits previously filed with the Securities and Exchange
Commission with Registration No. 33-53693 and incorporated
herein by reference thereto.
<PAGE> 5
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the Trustee,
Marine Midland Bank, a banking corporation and trust company organized under the
laws of the State of New York, has duly caused this statement of eligibility to
be signed on its behalf by the undersigned, thereunto duly authorized, all in
the City of New York and State of New York on the 20th day of May, 1997.
MARINE MIDLAND BANK
By: /s/ Frank J. Godino
---------------------------------
Frank J. Godino
Assistant Vice President
<PAGE> 6
EXHIBIT T1A (vii)
FEDERAL FINANCIAL INSTITUTIONS EXAMINATION COUNCIL
Board of Governors of the Federal Reserve System
OMB Number: 7100-0036
Federal Deposit Insurance Corporation
OMB Number: 3064-0052
Office of the Comptroller of the Currency
OMB Number: 1557-0081
Expires March 31, 1999
- --------------------------------------------------------------------------------
THIS FINANCIAL INFORMATION HAS NOT BEEN REVIEWED, OR CONFIRMED
FOR ACCURACY OR RELEVANCE, BY THE FEDERAL RESERVE SYSTEM.
Please refer to page 1, /1/
Table of Contents, for
the required disclosure
of estimated burden.
- --------------------------------------------------------------------------------
CONSOLIDATED REPORTS OF CONDITION AND INCOME FOR
A BANK WITH DOMESTIC AND FOREIGN OFFICES--FFIEC 031
REPORT AT THE CLOSE OF BUSINESS MARCH 31, 1997
This report is required by law; 12 U.S.C. Section 324 (State member banks); 12
U.S.C. Section 1817 (State nonmember banks); and 12 U.S.C. Section 161 (National
banks).
(950630)
-------------
(RCRI 9999)
This report form is to be filed by banks with branches and consolidated
subsidiaries in U.S. territories and possessions, Edge or Agreement
subsidiaries, foreign branches, consolidated foreign subsidiaries, or
International Banking Facilities.
- --------------------------------------------------------------------------------
NOTE: The Reports of Condition and Income must be signed by an authorized
officer and the Report of Condition must be attested to by not less than two
directors (trustees) for State nonmember banks and three directors for State
member and National Banks.
I, Gerald A. Ronning, Executive VP & Controller
-----------------------------------------------------------------------------
Name and Title of Officer Authorized to Sign Report
of the named bank do hereby declare that these Reports of Condition and Income
(including the supporting schedules) have been prepared in conformance with the
instructions issued by the appropriate Federal regulatory authority and are true
to the best of my knowledge and believe.
/s/ Gerald A. Ronning
- ------------------------------------------------------------
Signature of Officer Authorized to Sign Report
4/28/97
- ------------------------------------------------------------
Date of Signature
The Reports of Condition and Income are to be prepared in accordance with
Federal regulatory authority instructions. NOTE: These instructions may in some
cases differ from generally accepted accounting principles.
We, the undersigned directors (trustees), attest to the correctness of this
Report of Condition (including the supporting schedules) and declare that it has
been examined by us and to the best of our knowledge and belief has been
prepared in conformance with the instructions issued by the appropriate Federal
regulatory authority and is true and correct.
/s/ James H. Cleave
- ------------------------------------------------------------
Director (Trustee)
/s/ Bernard J. Kennedy
- ------------------------------------------------------------
Director (Trustee)
/s/ Malcom Burnett
- ------------------------------------------------------------
Director (Trustee)
- --------------------------------------------------------------------------------
FOR BANKS SUBMITTING HARD COPY REPORT FORMS:
STATE MEMBER BANK: Return the original and one copy to the appropriate Federal
Reserve District Bank.
STATE NONMEMBER BANKS: Return the original only in the special return address
envelope provided. If express mail is used in lieu of the special return address
envelope, return the original only to the FDIC, c/o Quality Data Systems, 2127
Espey Court, Suite 204, Crofton, MD 21114.
NATIONAL BANKS: Return the original only in the special return address envelope
provided. If express mail is used in lieu of the special return address
envelope, return the original only to the FDIC, c/o Quality Data Systems, 2127
Espey Court, Suite 204, Crofton, MD 21114.
- --------------------------------------------------------------------------------
FDIC Certificate Number 0 0 5 8 9
(RCRI 9030)
<PAGE> 7
NOTICE
This form is intended to assist institutions with state publication
requirements. It has not been approved by any state banking authorities. Refer
to your appropriate state banking authorities for your state publication
requirements.
REPORT OF CONDITION
Consolidating domestic and foreign subsidiaries of the
Marine Midland Bank of Buffalo
Name of Bank City
in the state of New York, at the close of business March 31, 1997
ASSETS
Thousands
of dollars
<TABLE>
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances
currency and coin ............................ $ 1,026,267
Interest-bearing balances ...................... 2,219,196
Held-to-maturity securities .................... 0
Available-for-sale securities .................. 3,728,393
Federal funds sold and securities purchased
under agreements to resell ................... 1,830,419
Loans and lease financing receivables:
Loans and leases net of unearned
income ....................................... 21,110,911
LESS: Allowance for loan and lease
losses ....................................... 441,315
LESS: Allocated transfer risk reserve .......... 0
Loans and lease, net of unearned
income, allowance, and reserve ............... 20,669,596
Trading assets ................................. 1,005,199
Premises and fixed assets (including
capitalized leases) .......................... 217,027
Other real estate owned ........................... 18,586
Investments in unconsolidated
subsidiaries and associated companies ........... 0
Customers' liability to this bank on
acceptances outstanding ......................... 21,351
Intangible assets ................................. 495,502
Other assets ...................................... 709,342
Total assets ...................................... 31,940,878
</TABLE>
<PAGE> 8
<TABLE>
<S> <C>
LIABILITIES
Deposits:
In domestic offices .................... 20,236,232
Noninterest-bearing .................... 4,166,679
Interest-bearing ....................... 16,069,553
In foreign offices, Edge, and Agreement
subsidiaries, and IBFs ................. 2,639,327
Noninterest-bearing .................... 0
Interest-bearing ....................... 2,639,327
Federal funds sold and securities purchased
under agreements to resell ............. 3,281,586
Demand notes issued to the U.S. Treasury .. 197,415
Trading Liabilities ....................... 267,837
Other borrowed money:
With a remaining maturity of one year
or less .............................. 1,800,280
With a remaining maturity of more than
one year ............................. 371,195
Bank's liability on acceptances
executed and outstanding ............... 21,351
Subordinated notes and debentures ......... 497,585
Other liabilities ......................... 525,585
Total liabilities ......................... 29,838,393
Limited-life preferred stock and
related surplus ........................ 0
EQUITY CAPITAL
Perpetual preferred stock and related
surplus ................................ 0
Common Stock .............................. 205,000
Surplus ................................... 1,983,378
Undivided profits and capital reserves .... (76,867)
Net unrealized holding gains (losses)
on available-for-sale securities ....... (9,026)
Cumulative foreign currency translation
adjustments ............................... 0
Total equity capital ...................... 2,102,485
Total liabilities, limited-life
preferred stock, and equity capital .... 31,940,878
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001039542
<NAME> TEKNI PLEX INC
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> YEAR YEAR 9-MOS
<FISCAL-YEAR-END> JUN-30-1995 JUN-28-1996 JUN-27-1997
<PERIOD-START> JUL-02-1994 JUL-01-1995 JUN-29-1996
<PERIOD-END> JUN-30-1995 JUN-28-1996 MAR-28-1997
<CASH> 333 1,048 1,829
<SECURITIES> 0 0 0
<RECEIVABLES> 5,507 13,521 14,563
<ALLOWANCES> 93 565 791
<INVENTORY> 4,672 12,955 13,493
<CURRENT-ASSETS> 11,138 31,597 32,680
<PP&E> 12,683 48,930 51,673
<DEPRECIATION> 1,176 4,424 8,995
<TOTAL-ASSETS> 53,415 121,770 117,678
<CURRENT-LIABILITIES> 7,965 19,937 19,390
<BONDS> 32,412 67,210 57,301
0 0 0
0 0 0
<COMMON> 11,500 23,000 23,000
<OTHER-SE> 187 1,162 7,609
<TOTAL-LIABILITY-AND-EQUITY> 53,415 121,770 117,678
<SALES> 44,688 80,917 109,828
<TOTAL-REVENUES> 44,688 80,917 109,828
<CGS> 34,941 62,335 81,239
<TOTAL-COSTS> 34,941 62,335 81,239
<OTHER-EXPENSES> 5,048 10,687 12,293
<LOSS-PROVISION> 0 121 226
<INTEREST-EXPENSE> 4,322 5,816 6,068
<INCOME-PRETAX> 377 1,958 10,002
<INCOME-TAX> 211 982 3,555
<INCOME-CONTINUING> 166 976 6,447
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 166 976 6,447
<EPS-PRIMARY> 0 0 0
<EPS-DILUTED> 0 0 0
</TABLE>
