<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 13, 1996
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
PACKAGING RESOURCES INCORPORATED
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 3089 36-3321568
(State or other (Primary Standard (IRS Employer
jurisdiction of Industrial Identification No.)
incorporation or Classification Code
organization) Number)
</TABLE>
<TABLE>
<S> <C>
JERRY J. CORIROSSI
ONE CONWAY PARK VICE PRESIDENT-FINANCE AND ADMINISTRATION
100 FIELD DRIVE, SUITE 300 AND CHIEF FINANCIAL OFFICER
LAKE FOREST, ILLINOIS 60045 ONE CONWAY PARK, 100 FIELD DRIVE, SUITE 300
(847) 295-6100 LAKE FOREST, ILLINOIS 60045
(847) 295-6100
(Address, including zip code, and telephone (Name, address, including zip code, and
number, including area code, of registrant's telephone number, including area code, of
principal executive offices) agent for service)
</TABLE>
------------------------
COPY TO:
Steven J. Gavin
Winston & Strawn
35 West Wacker Drive
Chicago, Illinois 60601
(312) 558-5600
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC:
AS SOON AS PRACTICABLE AFTER THE REGISTRATION STATEMENT BECOMES EFFECTIVE.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration number for
the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
MAXIMUM AGGREGATE AMOUNT OF
TITLE OF SECURITIES BEING AMOUNT BEING OFFERING PRICE OFFERING REGISTRATION
REGISTERED REGISTERED (1) PER UNIT (1) PRICE (1) FEE
<S> <C> <C> <C> <C>
11 5/8% Senior Secured Notes
due 2003..................... $110,000,000 100% $110,000,000 $37,932
</TABLE>
(1) In accordance with Rule 457(f)(2), the registration fee is calculated based
on the book value, which has been computed as of June 11, 1996, of the
outstanding 11 5/8% Senior Secured Notes due 2003 of Packaging Resources
Incorporated.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE>
PACKAGING RESOURCES INCORPORATED
CROSS-REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K
<TABLE>
<CAPTION>
ITEM
NUMBER ITEM LOCATION IN PROSPECTUS
- --------- -------------------------------------------------- ----------------------------------------------------
<C> <S> <C>
1. Forepart of the Registration Statement and Outside
Front Cover Page of Prospectus................... Facing Page; Cross-Reference Sheet; Outside Front
Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages of
Prospectus....................................... Inside Front Cover Page of Prospectus and Outside
Back Cover Page of Prospectus
3. Summary Information, Risk Factors and Ratio of
Earnings to Fixed Charges........................ Prospectus Summary; Risk Factors; Selected Financial
Data
4. Use of Proceeds................................... Use of Proceeds
5. Determination of Offering Price................... Not Applicable
6. Dilution.......................................... Not Applicable
7. Selling Security Holders.......................... Not Applicable
8. Plan of Distribution.............................. Outside Front Cover Page of Prospectus; The Exchange
Offer; Description of Exchange Notes; Plan of
Distribution
9. Description of Securities to Be Registered........ Outside Front Cover Page of Prospectus; Prospectus
Summary; Description of Exchange Notes
10. Interests of Named Experts and Counsel............ Legal Matters
11. Information with Respect to the Registrant........ Prospectus Summary; Risk Factors; Capitalization;
Selected Financial Data; Management's Discussion
and Analysis of Financial Condition and Results of
Operations; Business; Management; Security
Ownership of Certain Beneficial Owners and
Management; Description of Exchange Notes; Old
Notes Registration Rights; Financial Statements
12. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities...................................... Not Applicable
</TABLE>
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION, DATED JUNE 13, 1996
PROSPECTUS
[LOGO]
OFFER TO EXCHANGE $1,000 IN PRINCIPAL AMOUNT OF ITS
11 5/8% SENIOR SECURED NOTES DUE 2003
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT FOR
EACH $1,000 IN PRINCIPAL AMOUNT OF ITS OUTSTANDING
11 5/8% SENIOR SECURED NOTES DUE 2003
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON , 1996, UNLESS EXTENDED.
------------------------
Packing Resources Incorporated, a Delaware Corporation ("PRI" or the
"Company"), hereby offers to exchange (the "Exchange Offer") up to $110,000,000
in aggregate principal amount of its new 11 5/8% Senior Secured Notes due 2003
(the "Exchange Notes") for up to $110,000,000 in aggregate principal amount of
its outstanding 11 5/8% Senior Secured Notes due 2003 (the "Old Notes" and,
together with the Exchange Notes, the "Notes") that were issued and sold in a
transaction exempt from registration under the Securities Act of 1933, as
amended (the "Securities Act").
The terms of the Exchange Notes are substantially identical (including
principal amount, interest rate, maturity, security and ranking) to the terms of
the Old Notes for which they may be exchanged pursuant to the Exchange Offer,
except that the Exchange Notes (i) are freely transferable by holders thereof
(except as provided below) and (ii) are not entitled to certain registration
rights and certain additional interest provisions which are applicable to the
Old Notes under the Registration Rights Agreement (as defined). The Exchange
Notes will be issued under the indenture governing the Old Notes. See "Risk
Factors -- Ability to Realize on Collateral; No Assurance as to Value of
Assets." The Exchange Notes will be, and the Old Notes are, senior secured
obligations of PRI, secured by certain equipment, fixtures and general
intangibles, and mortgages on substantially all of the owned and certain of the
leased real property of the Company, and proceeds therefrom, and the Exchange
Notes will rank, and the Old Notes rank, senior to all subordinated indebtedness
of PRI and PARI PASSU in right of payment with all other senior indebtedness of
PRI. However, lenders under PRI's Senior Credit Facility (as defined) have
claims with respect to the Company's accounts receivable, raw materials and
finished goods inventory and the proceeds therefrom constituting collateral for
such indebtedness that are effectively senior in right of payment to the claims
of holders of the Notes with respect to such assets. At February 29, 1996, on a
pro forma basis, after giving effect to the offering of the Old Notes (the "Old
Notes Offering"), the application of the net proceeds therefrom and certain
related transactions, PRI would have had outstanding approximately $112.2
million in aggregate principal amount of indebtedness (excluding trade payables
and other accrued liabilities), all of which would have constituted senior
indebtedness and $0.4 million of which would have been indebtedness under the
Senior Credit Facility. In addition, PRI would have had, subject to certain
borrowing conditions and limitations, $19.6 million in unused senior secured
borrowing capacity under the Senior Credit Facility. The Indenture (as defined)
under which the Exchange Notes will be, and the Old Notes were, issued permits
PRI to incur additional indebtedness, including indebtedness that ranks PARI
PASSU with the Notes. The ability of the Company to incur any such additional
indebtedness is limited only by the covenants under the Senior Credit Facility
and the Indenture. The Indenture provides that lenders under an Acquisition
Financing Facility (as defined) will have the right to share on a PARI PASSU
basis in any proceeds from the sale of Collateral (as defined) securing the
Notes. For a complete description of the terms of the Exchange Notes, including
provisions relating to the ability of the Company to create indebtedness that is
senior or PARI PASSU to the Exchange Notes, see "Description of Exchange Notes."
There will be no cash proceeds to the Company from the Exchange Offer.
The Exchange Notes will bear interest from May 17, 1996. Holders of Old
Notes whose Old Notes are accepted for exchange will be deemed to have waived
the right to receive any payment in respect of interest on the Old Notes accrued
from May 17, 1996 to the date of the issuance of the Exchange Notes. Interest on
the Exchange Notes is payable semiannually in arrears on May 1 and November 1 of
each year, commencing November 1, 1996, accruing from May 17, 1996 at a rate of
11 5/8% per annum.
(CONTINUED ON NEXT PAGE)
--------------------------
HOLDERS OF OLD NOTES SHOULD CAREFULLY CONSIDER THE MATTERS SET FORTH IN
"RISK FACTORS" COMMENCING ON PAGE 11 OF THIS PROSPECTUS PRIOR TO MAKING A
DECISION WITH RESPECT TO THE EXCHANGE OFFER.
------------------------
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 , 1996.
<PAGE>
(COVER PAGE CONTINUED)
The Notes are redeemable at the option of the Company, in whole or in part,
at any time on or after May 1, 2000, at the redemption prices set forth herein,
plus accrued and unpaid interest to the date of redemption. In addition, at any
time on or prior to May 1, 1999, the Company, at its option, may redeem up to
30% of the aggregate principal amount of the Notes originally issued with the
net cash proceeds of one or more Public Equity Offerings (as defined) at
111 5/8% of their principal amount, together with accrued and unpaid interest,
if any, to the redemption date; provided that at least $70.0 million in
principal amount of Notes remain outstanding immediately after any such
redemption. Upon a Change of Control (as defined), each holder of Notes will
have the right to require PRI to repurchase all or any part of such holder's
Notes at a purchase price equal to 101% of the aggregate principal amount
thereof plus accrued and unpaid interest to the date of purchase. See
"Description of Exchange Notes -- Repurchase at the Option of Holders -- Change
of Control."
The Old Notes were originally issued and sold on May 17, 1996 in a
transaction not registered under the Securities Act, in reliance upon the
exemption provided in Section 4(2) of the Securities Act and Rule 144A
promulgated under the Securities Act. Accordingly, the Old Notes may not be
reoffered, resold or otherwise pledged, hypothecated or transferred in the
United States unless so registered or unless an applicable exemption from the
registration requirements of the Securities Act is available. Based upon its
view of interpretations provided to third parties by the Staff (the "Staff") of
the Securities and Exchange Commission (the "Commission"), the Company believes
that the Exchange Notes issued pursuant to the Exchange Offer in exchange for
the Old Notes may be offered for resale, resold and otherwise transferred by
holders thereof (other than any holder which is (i) an "affiliate" of the
Company within the meaning of Rule 405 under the Securities Act (an
"Affiliate"), (ii) a broker-dealer who acquired Old Notes directly from the
Company or (iii) a broker-dealer who acquired Old Notes as a result of market
making or other trading activities) without compliance with the registration and
prospectus delivery provisions of the Securities Act provided that such Exchange
Notes are acquired in the ordinary course of such holders' business and such
holders are not engaged in, and do not intend to engage in, and have no
arrangement or understanding with any person to participate in, a distribution
of such Exchange Notes. Each 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 that is filed as an exhibit to the Registration Statement of which
this Prospectus is a part (the "Letter of Transmittal") states that by so
acknowledging and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
Broker-dealers who acquired Old Notes as a result of market making or other
trading activities may use this Prospectus, as supplemented or amended, in
connection with resales of the Exchange Notes. The Company has agreed that, for
a period of 180 days after this Registration Statement is declared effective by
the Commission, it will make this Prospectus available to any broker-dealer for
use in connection with any such resale. Any holder who tenders in the Exchange
Offer for the purpose of participating in a distribution of the Exchange Notes
and any other holder that cannot rely upon such interpretations must comply with
the registration and prospectus delivery requirements of the Securities Act in
connection with a secondary resale transaction.
Old Notes initially purchased by qualified institutional buyers who did not
elect to take physical delivery of their certificates were initially represented
by a single, global Note in registered form, registered in the name of a nominee
of The Depository Trust Company ("DTC"), as depositary. Notes (i) originally
purchased by or transferred to certain "foreign purchasers" or accredited
investors (as defined in Rule 501(a)(1)(2)(3) or (7) of the Securities Act,
"Accredited Investors") or (ii) held by qualified institutional buyers who
elected to take physical delivery of their certficates instead of holding their
interest through the global Note were issued in registered form. The Exchange
Notes exchanged for Old Notes represented by the global Note will be represented
by one or more global Exchange Notes in registered form, registered in the name
of the nominee of DTC. See "Description of Exchange Notes -- Book-entry;
Delivery and Form." Exchange Notes issued to non-qualified institutional buyers
in exchange for Old Notes held by such investors will be issued only in
certificated, fully registered, definitive form. Except as described herein,
Exchange Notes in definitive certificated form will not be issued in exchange
for the global Exchange Note(s) or interests therein.
The Old Notes and the Exchange Notes constitute new issues of securities
with no established public trading market. Any Old Notes not tendered and
accepted in the Exchange Offer will remain outstanding. To the extent that Old
Notes are tendered and accepted in the Exchange Offer, a holder's ability to
sell untendered, Old Notes could be adversely affected. Following consummation
of the Exchange Offer, the holders of any remaining Old Notes will continue to
be subject to the existing restrictions on transfer thereof and the Company will
have no further obligation to such holders to provide for the registration under
the Securities Act of the Old Notes except under certain limited circumstances.
See "Old Notes Registration Rights." No assurance can be given as to the
liquidity of the trading market for either the Old Notes or the Exchange Notes.
The Old Notes are not listed on any securities exchange, and the Company does
not intend to apply for listing of the Exchange Notes on any securities
exchange.
The Exchange Offer is not conditioned upon any minimum aggregate principal
amount of Old Notes being tendered or accepted for exchange. The Exchange Offer
will expire at 5:00 p.m., New York City time, on , 1996, unless extended
(the "Expiration Date"). The date of acceptance for exchange of the Old Notes
(the "Exchange Date") will be the first business day following the Expiration
Date, upon surrender of the Old Notes. Old Notes tendered pursuant to the
Exchange Offer may be withdrawn at any time prior to the Expiration Date;
otherwise such tenders are irrevocable.
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-1 (together with all amendments, exhibits, schedules and supplements thereto,
the "Registration Statement") under the Securities Act with respect to the
Exchange Notes being offered hereby. This Prospectus, which forms a part of the
Registration Statement, does not contain all of the information set forth in the
Registration Statement, certain items of which are omitted as permitted by the
rules and regulations of the Commission. For further information with respect to
the Company and the Exchange Notes, reference is hereby made to the Registration
Statement. Statements contained in this Prospectus as to the contents of any
contract or other document are not necessarily complete and, where such contract
or other document is an exhibit to the Registration Statement, each such
statement is qualified in all respects by the provisions in such exhibit, to
which reference is hereby made.
The Company is not currently subject to the informational requirements of
the Exchange Act of 1934, as amended (the "Exchange Act"). Upon the
effectiveness of the Registration Statement or, if earlier, the Shelf
Registration Statement (as defined), the Company will become subject to the
informational requirements of the Exchange Act and, in accordance therewith,
will file all reports and other information required by the Commission. The
Registration Statement as well as periodic reports, proxy statements and other
information filed by the Company with the Commission may be inspected at the
public reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, or at its regional offices located at
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois, 60661
and Seven World Trade Center, Suite 1300, New York, New York 10048. Copies of
such material can be obtained from the Company upon request. Any such request
should be addressed to the Company's principal office at One Conway Park, 100
Field Drive, Suite 300, Lake Forest, Illinois 60045 Attention: Secretary
(telephone number (847) 295-6100).
The Company's obligation to file periodic reports with the Commission
pursuant to the Exchange Act may be suspended if the Notes are held of record by
fewer than 300 holders at the beginning of any fiscal year of the Company, other
than the fiscal year in which the Registration Statement or the Shelf
Registration Statement becomes effective. However, the Company has agreed,
pursuant to the indenture governing the Notes dated as of May 17, 1996 (the
"Indenture") between PRI and LaSalle National Bank, as trustee (the "Trustee"),
that, whether or not it is then subject to Section 13 or 15(d) of the Exchange
Act, it will furnish to the holders of the Notes and the Trustee (and, if filing
such documents with the Commission is prohibited, to prospective holders of the
Notes upon request) copies of the annual reports, quarterly reports and other
periodic reports which the Company would have been required to file with the
Commission pursuant to Section 13 or 15(d) of the Exchange Act if the Company
were subject to such Sections. In addition, the Company will furnish, upon the
request of any holder of a Note, such information as is specified in paragraph
(d)(4) of Rule 144A, to such holder or to a prospective purchaser of such Note
which such holder reasonably believes is a qualified institutional buyer within
the meaning of Rule 144A, in order to permit compliance by such holder with Rule
144A in connection with the resale of such Note by such holder unless, at the
time of such request, the Company is subject to the reporting requirements of
Section 13 or 15(d) of the Exchange Act.
NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH THE EXCHANGE OFFER MADE BY
THIS PROSPECTUS TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT
CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION
OF AN OFFER TO BUY, THE EXCHANGE NOTES IN ANY JURISDICTION WHERE, OR TO ANY
PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE
FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE THE
DATE HEREOF.
UNTIL , 1996 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
i
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS APPEARING ELSEWHERE IN THIS PROSPECTUS. AS
USED IN THIS PROSPECTUS, UNLESS THE CONTEXT OTHERWISE REQUIRES, EACH OF "PRI"
AND THE "COMPANY" REFERS TO PACKAGING RESOURCES INCORPORATED AND ITS
PREDECESSORS. THE COMPANY'S FISCAL YEAR ENDS ON THE LAST DAY OF FEBRUARY IN EACH
YEAR. ALL REFERENCES IN THIS PROSPECTUS TO FISCAL YEARS REFER TO THE FISCAL YEAR
OF THE COMPANY ENDED IN THE YEAR INDICATED. FOR EXAMPLE, "FISCAL 1996" REFERS TO
THE FISCAL YEAR OF THE COMPANY ENDED FEBRUARY 29, 1996.
THE COMPANY
GENERAL
The Company is a leading developer, manufacturer and marketer of rigid
plastic packaging, serving primarily as a supplier of customized containers for
national branded consumer products. The Company is the largest domestic
manufacturer of refrigerated yogurt containers, shelf stable, multi-layer
(impermeable to air and moisture) containers for nutritional supplements and
frosting containers. The Company also believes that it is the largest designer,
manufacturer and supplier of promotional beverage cups in the United States,
marketing these products primarily to the fast-food and beverage industries. For
the fiscal year ended February 29, 1996, the Company generated net sales of
$133.8 million. Approximately 82.8% of the Company's net sales in such period
were attributable to rigid plastic packaging and 17.2% to promotional beverage
cups. In fiscal 1996, the Company produced almost four billion plastic
containers, cups and lids.
The Company's packaging products are sold to over 450 customers, including
manufacturers of national branded food, dairy and pharmaceutical products such
as General Mills, Inc. ("General Mills"), including its Yoplait U.S.A. division
("Yoplait"), The Dannon Company, Inc. ("Dannon"), Ross Laboratories ("Ross
Labs"), a division of Abbott Laboratories, Inc. ("Abbott Labs"), The Haagen Dazs
Company, Inc. ("Haagen Dazs"), Procter & Gamble Company ("Procter & Gamble") and
Pillsbury Company ("Pillsbury"). The Company is also a major supplier of
promotional beverage cups to over 150 companies in the fast-food and beverage
industries, including McDonald's, Burger King, Pizza Hut, Hardee's, Taco Bell,
Coca-Cola and Pepsi.
The Company's rigid plastic packaging business has benefitted from, and is
positioned to continue to participate in, the growth of the markets for its
customers' products, particularly refrigerated yogurt and nutritional
supplements. According to data compiled by Find/SVP, Inc., a New York-based
market research firm ("Find/SVP"), between 1991 and 1994 U.S. retail yogurt
sales grew at a compound annual rate of 10.6%, reaching approximately $2.0
billion in 1994. This expansion of the U.S. yogurt market resulted, in part,
from new product innovations such as lower fat and lower calorie product
offerings, the introduction of new flavors and consistencies, the increasing
recognition of yogurt's nutritional benefits and innovative packaging solutions
targeting niche market segments. Despite this growth, the Company believes U.S.
yogurt consumption still lags behind that of Europe. During 1991 and 1992, the
most recent periods examined by Find/SVP, the per capita consumption of yogurt
in Europe was six times that in the U.S. Net sales of Ross Labs'
ENSURE-Registered Trademark- ready-to-drink nutritional supplement increased 20%
in 1995, reflecting, in part, the aging of the U.S. population and the
corresponding growth in the market for such products. Based on these industry
and demographic factors, management expects the markets for refrigerated yogurt
and nutritional supplements to continue to grow for the foreseeable future.
COMPETITIVE STRENGTHS
The Company attributes its leading market positions to the following
factors:
WELL ESTABLISHED CUSTOMER RELATIONSHIPS. The Company has long-standing
customer relationships, in many instances as a sole source supplier under
multi-year supply agreements. Yoplait, Dannon and Ross Labs, which accounted
for over 50% of fiscal 1996 sales, have been customers of PRI since 1979,
1984 and 1991, respectively. In addition, the Company's established position
with its largest customers is evidenced by its status as the sole supplier
of such customers' most popular sized containers, including the six ounce
container for Yoplait, the four, six and eight ounce containers for Dannon
and the eight ounce multi-layer container for Ross Labs'
ENSURE-REGISTERED TRADEMARK- nutritional supplement. PRI's status as the
sole
1
<PAGE>
supplier of such containers positions the Company to benefit from future
growth in these product markets. In recognition of the Company's
performance, Ross Labs recently awarded PRI certified supplier status in
Ross Labs' Partners in Excellence Program.
CUSTOMER INTEGRATED PRODUCT DEVELOPMENT AND MANUFACTURING. The Company
has worked closely with its customers in all phases of product design and
production and has invested heavily in customer-driven research and
development activities. For example, PRI developed the
Autoweld-Registered Trademark- system, a technology that enables Yoplait to
assemble, fill and seal its distinctive cone-shaped container. Yoplait
leases from the Company the equipment necessary to operate the
Autoweld-Registered Trademark- system for use in Yoplait's production
facilities. For Dannon, the Company recently designed and developed a four
ounce yogurt cup targeted for the food service and children's markets. The
Company also worked successfully with Ross Labs to develop the shelf stable,
multi-layer packaging applications for its nutritional supplements and
infant formula product lines. In promotional cups, the Company has worked
closely with several of its promotional beverage cup customers to develop
new and distinctive high-definition graphic designs. In 1993, for example,
the Company was the winner of the McDonald's Performance Award for the
"Jurassic Park" promotional cup. In addition, the Company's facilities are
located, in most cases, adjacent to or within close proximity to its largest
customers' manufacturing operations, which has created manufacturing and
distribution efficiencies. As more of the Company's customers adopt "just-
in-time" inventory systems, these efficiencies have become increasingly
important.
STATE-OF-THE-ART MANUFACTURING TECHNOLOGIES. The Company, through its
five manufacturing facilities, has developed production capabilities in
injection molding, linear melt phase thermoforming ("thermoforming") and
solid phase pressure forming ("pressure forming") and believes it is the
only manufacturer in the rigid plastic packaging industry with capabilities
in all three such processes. Because each of these processes offers
advantages in achieving certain performance features such as structural
strength, rigidity and graphics retention, the Company is able to be highly
responsive to customer requirements and preferences by offering a broader
range of packaging alternatives than its competitors. The Company's three
technical facilities feature design, engineering, prototype production,
graphics and diagnostic capabilities. Management believes that the Company's
in-house capability to design, engineer and build production molds
distinguishes the Company from many of its competitors. This capability
provides PRI with an important competitive advantage in maintaining product
quality as well as in controlling design, development and maintenance costs.
To satisfy the rigorous quality control standards of its customers, the
Company maintains a comprehensive quality assurance program. During fiscal
1996, based on internal estimates, the return rate for all of the Company's
products was less than one quarter of one percent.
ADVANCED GRAPHICS TECHNOLOGIES. Management believes that the Company's
MasterColor printing system, which produces high definition graphics
utilizing a computer controlled nine color press, is the most
technologically advanced color processing system in the rigid plastic
packaging and promotional beverage cup industries. The MasterColor system
enables the Company to create photograph quality images on plastic
containers at speeds comparable to conventional high speed printers and thus
provides an important competitive advantage. Although the Company employs
the MasterColor system primarily in the printing of promotional beverage
cups, management believes significant opportunities exist to apply this
technology to create more sophisticated and colorful designs for other forms
of plastic packaging as manufacturers of branded products seek to enhance
and distinguish the image of their products on store shelves.
LOW COST PRODUCTION. The Company believes that its manufacturing costs
are among the lowest in its industry primarily due to: (i) the economies of
scale provided by the Company's high volume production; (ii) the Company's
use of state-of-the-art molds and manufacturing techniques that minimize
resin requirements, reduce waste and enhance productivity; (iii) the
Company's ability to obtain favorable resin pricing based on its substantial
purchase requirements; (iv) the low transportation costs resulting from the
proximity of the Company's six manufacturing and warehouse facilities to its
major customers; and (v) the Company's continual efforts to achieve
operating efficiencies and increase
2
<PAGE>
productivity. Over the past several years, the Company has significantly
upgraded and automated its manufacturing operations, consolidated certain
manufacturing facilities and centralized all of its administrative functions
to reduce costs and increase efficiency.
The Company was founded in 1984 to capitalize on the growth in outsourcing
among nationally branded food producers for their packaging needs. Since its
formation, the Company has made six strategic acquisitions which have expanded
the Company's product mix and enhanced its competitive position. Most recently,
during fiscal 1994, the Company acquired Louisiana Plastics, Incorporated
("Louisiana Plastics") and substantially all the assets of Miner Container
Printing, Inc. and certain affiliated companies (collectively, "Miner
Container"), which established market share leadership in promotional beverage
cups, increased injection molding capacity and packaging sales and provided the
MasterColor graphics technology.
The Company believes that the fundamental benefits of plastic relative to
other packaging materials, including (i) design versatility, (ii) light weight
and low cost, (iii) strength and durability, (iv) insulating ability and (v)
clarity, will promote opportunities for growth in sales and profitability in
both the rigid plastic packaging and promotional beverage cup industries. The
Company further believes it is well-positioned to capitalize on these
opportunities through its advanced, low-cost, customer-oriented operations.
STRATEGY
The Company's strategy is to enhance its position in the industry by: (i)
participating in the growth being experienced by its largest customers by
continuing to meet their increasing packaging needs; (ii) strengthening its
relationships with these existing customers by continuing to provide new
value-added products and services; (iii) expanding into new packaging and
promotional cup products and markets; and (iv) continuing to seek opportunities
to reduce manufacturing costs and enhance productivity.
GROWTH WITH EXISTING CUSTOMERS. The Company will continue to focus on
meeting the rigid plastic packaging needs of Yoplait, Dannon and Ross Labs
to keep pace with the growth in the markets for their products. Based in
part on growth in domestic consumption of refrigerated yogurt, the Company's
net sales to Yoplait and Dannon, who rely on the Company to provide
substantially all of their single-serving yogurt containers, have increased
at a compound annual growth rate of over 19% during the last four years. In
addition, the Company's net sales as the sole source supplier of multi-layer
containers to Ross Labs for its ENSURE-REGISTERED TRADEMARK- nutritional
supplement and SIMILAC-REGISTERED TRADEMARK- infant formula grew at a
compound annual rate in excess of 29% during the last four years.
NEW APPLICATIONS FOR EXISTING CUSTOMERS. The Company intends to expand
its relationships with existing customers by developing new applications
based on its extensive manufacturing capabilities and advanced graphics
technologies. For example, the Company applied thin-wall technology, which
combines structural strength with reduced cost and weight, to develop
Dannon's six and eight ounce containers. In addition, the Company developed
the six ounce multi-layer container presently used by Yoplait which features
a glossy exterior finish designed to enhance graphics.
NEW PRODUCTS AND MARKETS. The Company plans to expand into related
product lines serving new markets with several products under development in
both rigid plastic packaging and promotional beverage cups. With respect to
packaging, management believes there will be significant opportunities to
expand the Company's shelf stable, multi-layer packaging to the extent
plastic containers are substituted for metal, glass and composites for
products requiring extended shelf life, such as condensed soups, vegetables,
baby foods and pet foods. In promotional beverage cups, the Company recently
entered the professional sports and college stadium cup market and also has
under development a number of new products, including a new cup for the
gourmet coffee market. In addition, in both packaging and promotional cups,
the Company intends to leverage its advanced graphics capabilities by
introducing new products which highlight its high definition printing and
quality designs. The Company believes these initiatives will reinforce its
reputation as an innovative, value-added marketing partner for its customers
while adding to future profitability.
3
<PAGE>
CONTINUED COST REDUCTION AND PRODUCTIVITY ENHANCEMENTS. The Company
continually seeks opportunities to reduce its costs and improve productivity
to maintain its competitive position as a low-cost manufacturer. For
example, following the acquisition of Miner Container and Louisiana
Plastics, the Company selectively consolidated certain manufacturing
facilities and centralized administrative functions. During the first
quarter of fiscal 1997, the Company completed the consolidation of its
Lenexa, Kansas printing operation into the Kansas City, Missouri facility to
reduce overhead and transportation costs and increase manufacturing
productivity. In fiscal 1997, the Company intends to initiate projects to
further reduce costs and enhance productivity, by, among other things,
increasing the automation of its packaging and handling systems.
STRUCTURE OF THE COMPANY
All of the outstanding capital stock of PRI is held by Packaging Resources
Group, Inc. ("Group"). All of the outstanding capital stock of Group is held by
HPH Industries, Ltd. ("HPH"), which is wholly-owned by Howard P. Hoeper, the
Chairman of the Board of Directors, Chief Executive Officer and President of
Group and PRI. As of May 31, 1996, assuming the exercise of all outstanding
warrants to acquire the capital stock of Group ("Warrants"), HPH, Apollo
Packaging Partners, L.P., a Delaware limited partnership and an affiliate of
Apollo Advisors, L.P. ("Apollo"), and TCW/Crescent Mezzanine Partners, L.P.
together with TCW/ Crescent Mezzanine Trust (collectively, the "TCW Entities")
would beneficially own 60%, 29.3% and 10.7% of such stock, respectively. Each of
the TCW Entities is an affiliate of Trust Company of the West.
The Company's principal executive offices are located at One Conway Park,
100 Field Drive, Suite 300, Lake Forest, Illinois 60045 and its phone number is
(847) 295-6100.
4
<PAGE>
THE FINANCING PLAN
The Old Notes Offering was part of a plan of financing designed to provide
the Company with long-term fixed rate financing and increase the Company's
revolving credit availability. In connection with such plan of financing, the
Company (i) issued $110.0 million aggregate principal amount of Notes, (ii)
entered into a credit agreement which provides for a $20.0 million revolving
loan facility, subject to certain borrowing conditions and limitations (the
"Senior Credit Facility"), (iii) repaid all outstanding borrowings under PRI's
existing senior secured credit facility (the "Old Credit Agreement") in the
aggregate principal amount of $73.5 million and (iv) funded a dividend to Group
in the amount of $31.7 million. Group, in turn, used the dividend from PRI to
redeem without penalty or premium a portion of the outstanding 12.5% Senior
Subordinated Notes due June 30, 2003 of Group (the "12.5% Notes") at an
aggregate redemption price of $31.7 million, leaving $19 million in principal of
the 12.5% Notes outstanding as of May 17, 1996. The foregoing transactions by
PRI and Group are collectively referred to herein as the "Financing Plan." See
"Use of Proceeds" and "Capitalization."
The following table illustrates the sources and uses of funds under the
Financing Plan:
<TABLE>
<CAPTION>
AMOUNT
-------------
(IN
THOUSANDS)
<S> <C>
SOURCES OF FUNDS:
Notes.......................................................................... $ 110,000
-------------
Total Sources................................................................ $ 110,000
-------------
-------------
USES OF FUNDS:
Repayment of indebtedness under Old Credit Agreement........................... $ 73,500
Dividend to Group(a)........................................................... 31,700
Fees and expenses(b)........................................................... 4,150
Working capital................................................................ 650
-------------
Total Uses................................................................... $ 110,000
-------------
-------------
</TABLE>
- ------------------------
(a) Dividend proceeds were used by Group to redeem, without penalty or premium,
a portion of the 12.5% Notes.
(b) Includes the discount paid to the Initial Purchasers (as defined) in
connection with the issuance of the Old Notes, bank financing fees and legal
and accounting expenses.
5
<PAGE>
THE EXCHANGE OFFER
<TABLE>
<S> <C>
The Exchange Offer............ The Company is offering to exchange up to $110,000,000
aggregate principal amount of Exchange Notes for up to
$110,000,000 aggregate principal amount of the Old Notes.
The Old Notes were initially offered and sold by BT
Securities Corporation and Donaldson, Lufkin & Jenrette
Securities Corporation as the initial purchasers of the Old
Notes (the "Initial Purchasers"), to certain "qualified
institutional buyers" (as defined in Rule 144A under the
Securities Act) and institutional accredited investors at a
price of 100% of the principal amount thereof. The form and
terms of the Exchange Notes are substantially identical
(including principal amount, interest rate, maturity,
security and ranking) to the form and terms of the Old Notes
for which they may be exchanged pursuant to the Exchange
Offer, except that the Exchange Notes are freely
transferable by holders thereof except as provided herein
(see "The Exchange Offer--Terms of the Exchange" and "Terms
and Conditions of the Letter of Transmittal") and are not
entitled to certain registration rights and certain
additional interest provisions which are applicable to the
Old Notes under a registration rights agreement dated as of
May 17, 1996 (the "Registration Rights Agreement") between
the Company and the Initial Purchasers.
Exchange Notes issued pursuant to the Exchange Offer in
exchange for the Old Notes may be offered for resale, resold
and otherwise transferred by holders thereof (other than any
holder which is (i) an Affiliate of the Company, (ii) a
broker-dealer who acquired Old Notes directly from the
Company or (iii) a broker-dealer who acquired Old Notes as a
result of market-making or other trading activities),
without compliance with the registration and prospectus
delivery provisions of the Securities Act provided that such
Exchange Notes are acquired in the ordinary course of such
holders' business and such holders are not engaged in, and
do not intend to engage in, and have no arrangement or
understanding with any person to participate in, a
distribution of such Exchange Notes.
Minimum Condition............. The Exchange Offer is not conditioned upon any minimum
aggregate principal amount of Old Notes being tendered or
accepted for exchange.
Expiration Date............... The Exchange Offer will expire at 5:00 p.m., New York City
time, on , unless extended.
Exchange Date................. The first date of acceptance for exchange for the Old Notes
will be the first business day following the Expiration
Date.
Conditions to the Exchange The obligation of the Company to consummate the Exchange
Offer......................... Offer is subject to certain conditions. See "The Exchange
Offer -- Conditions to the Exchange Offer." The Company
reserves the right to terminate or amend the Exchange Offer
at any time prior to the Expiration Date upon the occurrence
of any such condition.
Withdrawal Rights............. Tenders of Old Notes pursuant to the Exchange Offer may be
withdrawn at any time prior to the Expiration Date. Any Old
Notes not accepted for any reason will be returned without
expense to the tendering holders thereof as promptly as
practicable after the expiration or termination of the
Exchange Offer.
</TABLE>
6
<PAGE>
<TABLE>
<S> <C>
Procedures for Tendering Old See "The Exchange Offer -- How to Tender."
Notes.........................
Federal Income Tax The exchange of Old Notes for Exchange Notes by tendering
Consequences.................. holders will not be a taxable exchange for federal income
tax purposes, and such holders should not recognize any
taxable gain or loss as a result of such exchange.
Use of Proceeds............... There wil be no cash proceeds to the Company from the
exchange pursuant to the Exchange Offer.
Effect on Holders of Old As a result of the making of this Exchange Offer, and upon
Notes......................... acceptance for exchange of all validly tendered Old Notes
pursuant to the terms of this Exchange Offer, the Company
will have fulfilled a covenant contained in the terms of the
Old Notes and the Registration Rights Agreement, and,
accordingly, the holders of the Old Notes will have no
further registration or other rights under the Registration
Rights Agreement, except under certain limited
circumstances. See "Old Notes Registration Rights." Holders
of the Old Notes who do not tender their Old Notes in the
Exchange Offer will continue to hold such Old Notes and will
be entitled to all the rights and limitations applicable
thereto under the Indenture. All untendered, and tendered
but unaccepted, Old Notes will continue to be subject to the
restrictions on transfer provided for in the Old Notes and
the Indenture. To the extent that Old Notes are tendered and
accepted in the Exchange Offer, the trading market, if any,
for the Old Notes not so tendered could be adversely
affected. See "Risk Factors -- Consequences of Failure to
Exchange Old Notes."
</TABLE>
TERMS OF THE EXCHANGE NOTES
<TABLE>
<S> <C>
Securities Offered............ $110,000,000 principal amount of 11 5/8% Senior Secured
Notes due 2003.
Issuer........................ Packaging Resources Incorporated.
Maturity Date................. May 1, 2003.
Interest Rate................. The Exchange Notes will bear interest at the rate of 11 5/8%
per annum.
Interest Payments............. Interest on the Notes will accrue from May 17, 1996 and is
payable in cash semi-annually on each May 1 and November 1,
commencing November 1, 1996.
Optional Redemption........... The Exchange Notes may be redeemed at the option of PRI, in
whole or in part, from time to time on or after May 1, 2000,
at the redemption prices set forth herein plus accrued and
unpaid interest to the redemption date. In addition, at any
time on or prior to May 1, 1999, up to 30% of the aggregate
principal amount of the Exchange Notes may be redeemed at
the option of PRI with the cash proceeds from one or more
Public Equity Offerings at 111 5/8% of their principal
amount, together with accrued and unpaid interest to the
redemption date, if any, provided that after giving effect
to such redemption, at least $70.0 million in principal
amount of the Exchange Notes remain outstanding immediately
after any such redemption. In the case of any Public Equity
Offering by Group, PRI is required to apply to a redemption
of the Exchange Notes an amount not less than 50% of the
aggregate net proceeds of such Public Equity Offering. See
"Description of Exchange Notes -- Optional Redemption."
</TABLE>
7
<PAGE>
<TABLE>
<S> <C>
Ranking....................... The Exchange Notes will be senior secured obligations of PRI
ranking senior to all subordinated indebtedness of PRI and
PARI PASSU in right of payment with all other senior
indebtedness of PRI. However, lenders under the Senior
Credit Facility have claims with respect to the Company's
accounts receivable, raw materials and finished goods in-
ventory and the proceeds therefrom constituting collateral
for such indebtedness that are effectively senior in right
of payment to the claims of holders of the Exchange Notes
with respect to such assets. At February 29, 1996, on a pro
forma basis, after giving effect to the Financing Plan, PRI
would have had outstanding approximately $112.2 million in
aggregate principal amount of indebtedness (excluding trade
payables and other accrued liabilities), all of which would
have constituted senior indebtedness and $0.4 million of
which would have been indebtedness under the Senior Credit
Facility. In addition, PRI would have had $19.6 million in
unused senior secured borrowing capacity under the Senior
Credit Facility, subject to certain borrowing conditions and
limitations. See "Description of Exchange Notes -- Ranking
and Security."
Collateral.................... The Collateral securing the Exchange Notes will consist of
certain equipment, fixtures and general intangibles, and
mortgages on substantially all of the owned and certain of
the leased property of the Company, and the proceeds
therefrom. The Indenture provides that lenders under an
Acquisition Financing Facility will have the right to share
on a PARI PASSU basis in any proceeds from the sale of
Collateral. See "Description of Exchange Notes -- Security."
Sinking Fund.................. None.
Change of Control............. Upon a Change of Control, PRI will be required to make an
offer to purchase all of the Exchange Notes at 101% of the
principal amount thereof, plus accrued and unpaid interest
to the date of purchase. There can be no assurance that PRI
will have sufficient funds to satisfy its obligation to
repurchase the Exchange Notes upon a Change of Control. See
"Description of Certain Indebtedness -- The Senior Credit
Facility" and "Description of Exchange Notes -- Repurchase
at the Option of Holders -- Change of Control."
Asset Sales................... Under certain circumstances, PRI will be required to make an
offer to purchase all outstanding Exchange Notes at a
purchase price in cash equal to 100% of their principal
amount, plus accrued and unpaid interest to the date of
purchase, with the proceeds of Asset Sales. See "Description
of Exchange Notes -- Repurchase at the Option of Holders --
Asset Sales; Collateral Loss Events."
Certain Covenants............. The Indenture contains certain covenants that, among other
things, limit the Company's ability to make certain
restricted payments, incur indebtedness, create certain
liens, sell assets, engage in transactions with affiliates,
merge or consolidate with other entities or engage in new
lines of business. See "Description of Exchange Notes --
Certain Covenants."
</TABLE>
RISK FACTORS
Holders of Old Notes should consider carefully the specific factors set
forth under "Risk Factors," as well as the other information set forth in this
Prospectus, before making an investment decision with respect to the Exchange
Offer.
8
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA
The following table presents summary historical and pro forma financial
information for the Company. The summary statement of operations data and other
operating data set forth below for the years ended February 28, 1994 and 1995
and February 29, 1996 and the balance sheet data at February 28, 1995 and
February 29, 1996 have been derived from, and are qualified by reference to, the
audited financial statements of the Company included elsewhere in this
Prospectus. The summary statement of operations data and other operating data
set forth below for the years ended February 29, 1992 and February 28, 1993 and
the balance sheet data at February 29, 1992 and February 28, 1993 and 1994 have
been derived from the Company's audited financial statements not included
herein. Historical financial data reflects the acquisitions of Louisiana
Plastics and Miner Container from March 12, 1993 and December 15, 1993,
respectively. The unaudited pro forma financial data for fiscal 1996 give effect
to the Financing Plan as if it had occurred on March 1, 1995 for purposes of the
statement of operations data and the other operating data and as of February 29,
1996 for purposes of the balance sheet data. The unaudited pro forma financial
data do not purport to represent what the Company's results of operations would
have been if the Financing Plan had in fact occurred as of the beginning of the
period or on the date indicated, as applicable, or to project the Company's
financial position or results of operations for any future date or period. The
information in this table should be read in conjunction with "Selected Financial
Data," "Management's Discussion and Analysis of Financial Condition and Results
of Operations" and the historical financial statements of the Company included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
----------------------------------------------------------------------
FEB. 29, FEB. 28, FEB. 28, FEB. 28, FEB. 29,
1992 (A) 1993 1994 1995 1996
----------- ----------- --------- --------- --------- PRO FORMA
FEB. 29,
1996 (B)
-----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
STATEMENT OF OPERATIONS DATA:
Net sales................................................ $ 80,473 $ 74,950 $ 118,844 $ 135,696 $ 133,756 $ 133,756
Cost of goods sold (c)................................... 65,996 59,232 93,248 113,928 111,448 111,448
----------- ----------- --------- --------- --------- -----------
Gross profit............................................. 14,477 15,718 25,596 21,768 22,308 22,308
Selling, general and administrative expenses............. 4,990 4,512 6,657 8,407 6,864 6,864
Amortization of intangibles.............................. 620 424 1,122 3,102 2,434 2,434
Nonrecurring charge (d).................................. -- -- -- 7,257 -- --
----------- ----------- --------- --------- --------- -----------
Operating income......................................... 8,867 10,782 17,817 3,002 13,010 13,010
Interest expense, net (e)................................ 6,082 5,406 5,482 8,503 10,671 13,416
----------- ----------- --------- --------- --------- -----------
Income (loss) before income taxes, extraordinary item and
cumulative effect of change in accounting principle..... 2,785 5,376 12,335 (5,501) 2,339 (406)
Income tax expense (benefit)............................. 1,268 2,215 5,057 (1,980) 1,006 (175)
----------- ----------- --------- --------- --------- -----------
Income (loss) before extraordinary item and cumulative
effect of change in accounting principle................ 1,517 3,161 7,278 (3,521) 1,333 $ (231)
----------- ----------- --------- --------- --------- -----------
-----------
Extraordinary item (f)................................... -- -- (2,743) -- --
Cumulative effect of change in accounting principle
(g)..................................................... -- -- (2,300) -- --
----------- ----------- --------- --------- ---------
Net income (loss)........................................ $ 1,517 $ 3,161 $ 2,235 $ (3,521) $ 1,333
----------- ----------- --------- --------- ---------
----------- ----------- --------- --------- ---------
OTHER OPERATING DATA:
EBITDA (h)............................................... $ 12,570 $ 14,434 $ 24,096 $ 20,751 $ 22,731 $ 22,731
Depreciation and amortization (i)........................ 3,703 3,652 6,279 10,492 9,721 9,721
Capital expenditures (j)................................. 2,735 4,435 5,556 7,925 3,449 3,449
Ratio of earnings to fixed charges (k)................... 1.43x 1.93x 3.00x (l) 1.21x (l)
Ratio of EBITDA to interest expense...................... 2.07x 2.67x 4.40x 2.44x 2.13x 1.69x
Ratio of EBITDA to cash interest expense (m)............. 2.29x 3.00x 5.04x 2.71x 2.52x 1.77x
BALANCE SHEET DATA (PERIOD END):
Property, plant, and equipment, net...................... $ 30,302 $ 31,276 $ 56,912 $ 56,213 $ 52,352 $ 52,352
Total assets............................................. 61,337 62,727 136,545 121,966 110,683 112,620
Total debt............................................... 41,903 42,861 86,361 84,177 77,524 112,152
Stockholder's equity (deficit)........................... (561) 1,134 22,953 16,932 18,265 (13,563)
</TABLE>
- ------------------------------
(a) Fiscal 1992 amounts have been restated to reflect a change in accounting
for inventory. In fiscal 1993, the Company changed its inventory costing
method from the last in, first out ("LIFO") method to the first in, first
out ("FIFO") method. Cost of goods sold for all fiscal years presented is
valued using the FIFO method.
9
<PAGE>
(b) Financial data for fiscal 1996 gives effect to the Financing Plan, as if
such transactions had occurred on March 1, 1995 for purposes of the
statement of operations data and the other operating data and as of
February 29, 1996 for purposes of the balance sheet data. Pro forma
adjustments to statement of operations data and other operating data
include (i) adjustments to interest expense in the aggregate amount of $2.7
million, reflecting the elimination of interest expense relating to the Old
Credit Agreement and the addition of interest expense associated with the
Notes and the Senior Credit Facility and (ii) a non-cash extraordinary
charge of $1.4 million for the write-off of unamortized financing fees (net
of tax) and costs associated with the Old Credit Agreement. Pro forma
adjustments to balance sheet data reflect (i) a non-cash extraordinary
charge of $1.4 million (net of tax benefit) for the write-off of the
unamortized financing fees and debt issuance costs associated with the Old
Credit Agreement and (ii) a dividend from PRI to Group in the amount of
$30.5 million to redeem a portion of the 12.5% Notes. See "Capitalization."
(c) Cost of goods sold includes costs for raw materials, labor, maintenance and
repair of property, plant and equipment, manufacturing overhead and
research and development.
(d) The nonrecurring charges in fiscal 1995 include a charge of $6.4 million
relating to the closing and consolidation of certain manufacturing
facilities and the write-off of $894 in costs associated with a public debt
offering that was not completed by the Company.
(e) Interest expense, net includes interest income of $83, $129 and $77 in
fiscal 1993, 1994 and 1995, respectively.
(f) The extraordinary item in fiscal 1994 represents the write-off of
unamortized financing fees and costs and the payment of certain premiums in
connection with the recapitalization and refinancing that occurred in June
1993 (the "1993 Transaction"). See Notes 8 and 11 to the Company's
financial statements included elsewhere in this Prospectus.
(g) Cumulative effect of change in accounting principle in fiscal 1994 reflects
the Company's adoption of Statement of Financial Accounting Standards
("SFAS") 109, "Accounting for Income Taxes." See Notes 1 and 12 to the
Company's financial statements included elsewhere in this Prospectus.
(h) EBITDA represents earnings (loss) before interest expense, provision
(benefit) for income taxes, depreciation and amortization (excluding
amortization of deferred financing costs), adjusted to exclude the
nonrecurring charges, extraordinary items and cumulative effect of changes
in accounting principles described in notes (d), (f) and (g) above. EBITDA
is presented because such data is used by certain investors to measure a
company's ability to service debt. EBITDA should not be considered as an
alternative to cash flow from operations as determined by generally
accepted accounting principles, and does not necessarily indicate whether
cash flow will be sufficient for cash requirements.
(i) Depreciation and amortization as presented excludes amortization of
deferred financing costs.
(j) Capital expenditures in fiscal 1994 do not include $26.9 million expended
for property, plant and equipment obtained through the acquisitions of
Louisiana Plastics and Miner Container.
(k) For purposes of this computation, earnings are defined as income before
income taxes plus fixed charges. Fixed charges consist of interest
(including amortization of deferred financing costs and debt discount or
premium) and that portion of rental expense that is representative of
interest (deemed to be one-third of operating lease rental expense).
(l) The Company's earnings were inadequate to cover fixed charges for fiscal
1995 and pro forma 1996 by $5.5 million and $406, respectively.
(m) For the purpose of calculating the ratio of EBITDA to cash interest
expense, interest expense does not include amortization of deferred
financing costs. Amortization of deferred financing costs for fiscal 1992,
1993, 1994, 1995, 1996 and pro forma 1996 was $595, $593, $705, $848, $1.7
million and $593, respectively.
10
<PAGE>
RISK FACTORS
In addition to the other information contained in this Prospectus, before
tendering their Old Notes for the Exchange Notes offered hereby, holders of Old
Notes should consider carefully the following factors, which may be generally
applicable to the Old Notes as well as to the Exchange Notes:
CONSEQUENCES OF FAILURE TO EXCHANGE OLD NOTES
Holders of Old Notes who do not exchange their Old Notes for Exchange Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Old Notes, as set forth in the legend thereon, as a
consequence of the issuance of the Old Notes pursuant to exemptions from, or in
transactions not subject to, the registration requirements of the Securities Act
and applicable state securities laws. In general, the Old Notes may not be
offered or sold, unless registered under the Securities Act and applicable state
securities laws, or unless offered or sold pursuant to an exemption therefrom.
Except under certain limited circumstances, the Company does not intend to
register the Old Notes under the Securities Act. 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 transaction. To the extent Old Notes are tendered and accepted in the
Exchange Offer, the trading market, if any, for the Old Notes not so tendered
could be adversely affected. See "The Exchange Offer" and "Old Notes
Registration Rights."
LEVERAGE; RESTRICTIVE COVENANTS
The Company is highly leveraged and has indebtedness that is substantial in
relation to its stockholder's equity. As a result of the Financing Plan,
including the Old Notes Offering and PRI's payment of a portion of the net
proceeds therefrom as a dividend to Group, the Company's aggregate indebtedness
for borrowed money and interest expense increased and its stockholder's equity
decreased. At February 29, 1996, on a pro forma basis, after giving effect to
the Financing Plan, the Company would have had approximately $112.2 million in
aggregate principal amount of indebtedness outstanding (excluding trade payables
and other accrued liabilities) and a stockholder's deficit of approximately
$13.6 million. See "Capitalization." In addition, subject to the restrictions in
the Senior Credit Facility and the Indenture, the Company may incur additional
indebtedness from time to time to finance working capital, capital expenditures,
acquisitions or for other purposes. In fiscal 1995 and pro forma 1996, PRI's
earnings were inadequate to cover its fixed charges by $5.5 million and
$406,000, respectively.
The level of the Company's indebtedness has important consequences to
holders of the Notes, including: (i) a substantial portion of the Company's cash
flow from operations must be dedicated to debt service and will not be available
for other purposes, (ii) the Company's ability to obtain additional debt
financing in the future for working capital, capital expenditures, general
corporate purposes or other purposes may be impaired, (iii) PRI's borrowings
under the Senior Credit Facility are at floating rates of interest, which could
result in higher interest expense in the event of an increase in interest rates,
(iv) the Indenture and the Senior Credit Facility contain financial and other
restrictive covenants that could limit the Company's operating and financial
flexibility and, if violated, would result in an event of default that could
preclude the Company's access to credit under such facility or otherwise have a
material adverse effect on the Company, and (v) the level of the Company's
indebtedness could limit its flexibility in reacting to changes in its industry
and economic conditions generally.
The Indenture restricts, among other things, the Company's ability to incur
additional indebtedness, incur liens, pay dividends or make certain other
restricted payments, consummate certain asset sales, enter into certain
transactions with affiliates, merge or consolidate with any other person, sell,
assign, transfer, lease, convey or otherwise dispose of substantially all of the
assets of the Company or engage in new lines of business. In addition, the
Senior Credit Facility contains other and more restrictive covenants and
prohibits PRI from prepaying other indebtedness. See "Description of Exchange
Notes -- Certain Covenants" and "Description of Certain Indebtedness -- The
Senior Credit Facility." The Senior Credit Facility also requires PRI to
maintain specified financial ratios and satisfy certain financial condition
tests. PRI's ability to meet such financial ratios and tests can be affected by
events beyond its control, and there can be no
11
<PAGE>
assurance that PRI will meet such tests. Although there can be no assurances,
the Company anticipates that its operating cash flow, together with borrowings
under the Senior Credit Facility, will be sufficient to meet its operating
expenses, projected capital expenditures and debt service requirements as they
become due.
ABILITY TO REALIZE ON COLLATERAL; NO ASSURANCE AS TO VALUE OF ASSETS
The Notes are secured by certain equipment, fixtures and general
intangibles, and mortgages on substantially all of the owned and certain of the
leased real property of the Company, and proceeds of the foregoing. The ability
of the holders of the Notes to realize upon such Collateral may be limited and
subject to substantial delays. In an Event of Default (as defined) by the
Company, before the Trustee or the holders of the Notes can take possession of
or sell any Collateral, the Trustee and the holders of the Notes will have to
comply with all applicable state judicial or non-judicial foreclosure and sale
laws. Such laws may include cure provisions, mandatory sale notice provisions,
manner of sale provisions and redemption period provisions. These provisions may
significantly increase the time associated with taking possession or the sale of
any Collateral. Failure to comply with such provisions could void the
foreclosure on or sale of any Collateral.
The Company's manufacturing facility in Kansas City, Missouri is leased. The
lien on such leasehold interest granted in favor of the holders of the Notes is
subject to the terms of the lease and the rights of the landlord thereunder in
the event of a breach of the lease, including the landlord's right to terminate
the lease. If the lease is terminated, the Company would lose possession of the
leasehold property and its ability to conduct operations on the premises, and
the lien granted to the Trustee, for the benefit of the holders of the Notes,
would be extinguished. The Trustee has no obligation under the Indenture to cure
any such breach unless so instructed by the holders of a majority of the
outstanding Notes. There can, therefore, be no assurance that any default under
the lease will be timely cured, or that the lease will not be terminated, in
which event, the lien on such Collateral would be lost. Further, the lease
contains restrictions on assignment which may affect the ability of the Trustee
to dispose of the Collateral following a foreclosure. Finally, if the Company or
the landlord were to become the debtor in a bankruptcy proceeding, the leases
could be rejected, which may result in the loss of the leasehold interest as
Collateral, or could be assumed and assigned.
The Notes are not secured by certain other assets of the Company, such as
accounts receivable, raw materials and finished goods inventory, proceeds of any
of the foregoing or cash. To the extent that the Company grants a lien on such
assets to secure other indebtedness, the Notes will be effectively subordinated
to the claims of holders of such other indebtedness with respect to such assets.
The Company has granted a first priority lien on all of its accounts receivable
and raw materials and finished goods inventory, including proceeds thereof, to
the lenders under the Senior Credit Facility. In the event of a default on the
Notes, or a bankruptcy, liquidation or reorganization of the Company, such
assets will be available to satisfy obligations with respect to the indebtedness
secured thereby before any payment therefrom could be made on the Notes. To the
extent that the value of such collateral granted under the Senior Credit
Facility is not sufficient to satisfy the obligations thereunder, amounts
remaining outstanding on such indebtedness would be entitled to share with
holders of the Notes and other claims on the Company with respect to
unencumbered assets of the Company. At February 29, 1996, on a pro forma basis,
after giving effect to the Financing Plan, the Company would have had
outstanding $0.4 million of secured indebtedness and $19.6 million in unused
secured borrowing capacity under the Senior Credit Facility. In addition, the
Indenture provides that the lenders under an Acquisition Financing Facility will
be entitled to share, on a PARI PASSU basis, in any proceeds from any
foreclosure upon the Collateral. To the extent that PRI has outstanding
obligations to lenders under an Acquisition Financing Facility, amounts realized
by holders of the Notes in respect thereof will be reduced. See "Description of
Certain Indebtedness -- The Senior Credit Facility" and "Description of Exchange
Notes -- Security."
CERTAIN BANKRUPTCY CONSIDERATIONS
The ability of the holders of the Notes to realize upon the Collateral will
be subject to certain bankruptcy law limitations in the event of a bankruptcy of
PRI. Under applicable federal bankruptcy laws, secured creditors are prohibited
from repossessing their security from a debtor in a bankruptcy case, or from
disposing of security repossessed from such a debtor, without bankruptcy court
approval. Moreover, applicable federal bankruptcy laws generally permit the
debtor to continue to retain collateral even though the
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<PAGE>
debtor is in default under the applicable debt instruments, provided generally
that the secured creditor is given "adequate protection." The meaning of the
term "adequate protection" may vary according to the circumstances, but is
intended in general to protect the value of the secured creditor's interest in
the collateral at the commencement of the bankruptcy case and may include cash
payments or the granting of additional security, if and at such times as the
court in its discretion determines, for any diminution in the value of the
collateral as a result of the stay of repossession or disposition of the
collateral by the debtor during the pendency of the bankruptcy case. In view of
the lack of a precise definition of the term "adequate protection" and the broad
discretionary powers of a bankruptcy court, the Company cannot predict whether
payments under the Notes would be made following commencement of and during a
bankruptcy case, whether or when the Trustee could foreclose upon or sell the
Collateral or whether or to what extent holders of the Notes would be
compensated for any delay in payment or loss of value of the Collateral through
the requirement of "adequate protection." Furthermore, in the event the
bankruptcy court determines that the value of the Collateral is not sufficient
to repay all amounts due on the Notes, the holders of the Notes would hold
"undersecured claims." Applicable federal bankruptcy laws do not permit the
payment and/or accrual of interest, costs and attorney's fees for "undersecured
claims" during the debtor's bankruptcy case. See "Description of Exchange Notes
- -- Security."
RELIANCE ON KEY CUSTOMERS AND SUPPLY AGREEMENTS
The Company's business is substantially dependent on a limited number of
customers. In fiscal 1996, the Company's ten largest customers accounted for
approximately 77.7% of its total net sales. PRI's largest customers are General
Mills (including Yoplait), Dannon and Ross Labs, which represented approximately
21.9%, 18.7% and 15.2%, respectively, of the Company's total net sales for
fiscal 1996. During fiscal 1996, no customer other than General Mills, Dannon or
Ross Labs accounted for more than 4.7% of the Company's total net sales. The
loss of a substantial customer, or a significant reduction in its business,
could have a material adverse effect on the Company's business, financial
condition and results of operations. Sales to each of the Company's customers
are dependent on the Company's ability to manufacture products of acceptable
quality that meet the customer's specifications and to deliver such products on
a timely basis. Sales to each of the Company's customers are also subject to the
level of consumer demand for such customers' products for which the Company
manufactures containers. Although management does not expect the Company to lose
or suffer a significant reduction in business from any of its large customers,
there can be no assurance that it will not suffer such a loss or reduction in
the future. See "Business -- Products and Customers."
A substantial portion of the Company's sales to its largest customers,
including Yoplait, Dannon and Ross Labs, are made pursuant to multi-year supply
agreements. Supply agreements accounting for 37% and 20% of the Company's total
net sales in fiscal 1996 are scheduled to expire in fiscal 1997 and 1998,
respectively. While the Company anticipates that, upon expiration, it will be
able to extend or renew its existing supply agreements with its customers on
terms no less favorable to the Company, no assurance can be given that it will
be able to do so.
EXPOSURE TO FLUCTUATIONS IN RESIN COST AND SUPPLY
The Company uses various plastic resins in the manufacture of its products.
For fiscal 1996, the aggregate cost for such resins was $46.4 million, or 41.7%
of the Company's total cost of goods sold. Under supply agreements with
customers that accounted for approximately 57% of the Company's net sales in
fiscal 1996, the Company has the ability to pass through resin price increases
(as well as the obligation to credit any resin price decreases). In the case of
sales which are not made pursuant to supply agreements containing such
pass-through provisions, the Company historically has passed on increases in
resin prices (as well as decreases in resin prices) to its customers through
price adjustments. Sales prices for promotional beverage cups are generally
determined in advance of a promotion and, accordingly, the Company bears the
risk of resin price increases while producing such products. Because plastic
resin is the principal component in the Company's products, the Company's
financial performance is materially dependent on its ability to pass resin price
increases on to its customers through contractual arrangements or otherwise.
Plastic resin prices are subject to fluctuations due, in part, to industry
capacity, consumption levels of resins and changes in the cost of feed stocks.
Although the Company will continue to have the benefit of resin price
pass-through provisions under its supply agreements for so long as such
agreements remain in effect, there can be no
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<PAGE>
assurance that it will continue to be able to effect such a pass-through under
contractual agreements or otherwise in the future. In addition, there can be no
assurance that a significant increase in resin prices would not negatively
impact the Company's existing business or future business opportunities,
including those relating to the potential conversion from the glass, metal and
composite containers to rigid plastic, and thereby have a material adverse
effect on the Company's business, financial condition and results of operations.
See "Business -- Products and Customers."
The Company purchases one of several of the resins required for the shelf
stable, multi-layer containers that it manufactures for Ross Labs exclusively
from Exxon Corporation ("Exxon"). During fiscal 1996, these products accounted
for approximately 14.5% of the Company's total net sales. The Company's current
supply agreement with Ross Labs requires that PRI obtain such resin from this
single source, and management is unaware of any alternative supplier that
manufactures such resin which conforms to the specifications required by Ross
Labs. The Company has relied on Exxon as the sole source supplier of this
particular resin since it began manufacturing products for Ross Labs in 1991 and
has no reason to believe that Exxon will not continue to supply the Company with
this resin. However, there can be no assurance that Exxon will be able to
continue to supply the Company with adequate amounts of this resin on a timely
basis in the future to allow the Company to meet its production requirements for
Ross Labs containers. The loss of Exxon as a supplier or a delay in its
shipments could have a material adverse effect on the Company's business,
financial condition and results of operations. As is customary in its industry,
PRI maintains a renewable one-year supply contract with Exxon. This contract is
scheduled to expire on February 28, 1997.
The Company believes that alternative sources are available for its other
resin requirements. However, should any of the Company's resin suppliers fail to
deliver under their arrangements, the Company would be forced to purchase resin
in the open market, and no assurances can be given that it would be able to make
such purchases at prices which would allow it to remain competitive.
RISKS ASSOCIATED WITH PROMOTIONAL BEVERAGE CUP BUSINESS
The Company significantly expanded its promotional beverage cup business
with the acquisitions of Louisiana Plastics in March 1993 and Miner Container in
December 1993. Promotional beverage cups represented approximately 17.2% of the
Company's total net sales in fiscal 1996. Unlike the Company's customized
container products, which are sold primarily under multi-year supply agreements
that generally require the customer to provide the Company with forecasts of its
container requirements, the Company's promotional beverage cups typically are
sold pursuant to one-time purchase orders. In many instances, these orders
involve large quantities and mandate specific delivery times as the Company's
promotional beverage cups often are used in connection with extensive marketing
or promotional campaigns that are national in scope and are tied to movie
releases or sporting events. While orders for promotional beverage cups
historically are highest in the spring and summer months, the predictability of
the timing and volume of such orders is limited. There can be no assurance that
the Company will not experience a temporary or extended shortage of orders for
these products which could have a material adverse effect on the Company's
business, financial condition and results of operations.
Management believes that the use of plastic promotional beverage cups has
grown dramatically in recent years and that this growth is in large part
attributable to the emergence of such cups as a featured element of marketing
and advertising campaigns for major fast-food and beverage companies. There can
be no assurance as to the extent, if any, that fast-food and beverage companies,
the Company's principal customers for promotional beverage cups, will continue
to employ such cups as part of their marketing and advertising strategies.
COMPETITION
Most of the Company's products are sold in highly competitive markets in the
United States. The Company competes with a significant number of companies of
varying sizes, including divisions or subsidiaries of larger companies, on the
basis of price, service, quality and the ability to supply products to customers
in a timely manner. A number of the Company's competitors have financial and
other resources that are substantially greater than those of the Company.
Competitive pressures or other factors could cause the
14
<PAGE>
Company to lose existing business or opportunities to generate new business or
could result in significant price erosion, all of which would have a material
adverse effect on the Company's business, financial condition and results of
operations. See "Business -- Competition."
RISK OF INABILITY TO FINANCE A CHANGE OF CONTROL OFFER
Upon the occurrence of a Change of Control, the Company will be required to
make an offer to purchase all of the outstanding Notes at a price equal to 101%
of the principal amount thereof plus accrued and unpaid interest, if any, to the
date of repurchase. The Senior Credit Facility prohibits the purchase of the
Notes by the Company in the event of a Change of Control, unless and until such
time as the indebtedness under the Senior Credit Facility is repaid in full.
PRI's failure to purchase the Notes would result in a default under the
Indenture and the Senior Credit Facility. The inability to repay the
indebtedness under the Senior Credit Facility, if accelerated, would also
constitute an event of default under the Indenture, which could have adverse
consequences to the Company and the holders of the Notes. In the event of a
Change of Control, there can be no assurance that the Company would have
sufficient assets to satisfy all of its obligations under the Senior Credit
Facility and the Notes. See "Description of Exchange Notes--Repurchase at the
Option of Holders--Change of Control" and "Description of Certain
Indebtedness--The Senior Credit Facility."
CONTROL BY HOWARD P. HOEPER AND CERTAIN INTERESTS OF AFFILIATES
Mr. Hoeper indirectly owns all of the outstanding shares of capital stock of
Group and is the Chairman, Chief Executive Officer and President of Group and
PRI. As a result of the foregoing, Mr. Hoeper will continue to have control over
the day-to-day management policies and corporate affairs of the Company. PRI
historically has paid and will continue to pay certain management fees to HPH,
which owns all of the presently outstanding shares of capital stock of Group and
is, in turn, wholly-owned by Mr. Hoeper. See "Certain Transactions -- Management
Agreement."
Apollo owns Warrants to purchase 27,500 shares of common stock of Group (or
29.3% of the outstanding common stock of Group, assuming exercise of all of the
Warrants). Under a Stock and Warrant Holders Agreement dated as of June 30, 1993
(the "Stockholders Agreement"), Apollo has the right, which it has exercised, to
appoint two directors to the five person Boards of Directors of Group and PRI,
with Mr. Hoeper, by virtue of his ownership of HPH, having the power to appoint
the remaining directors. Group has agreed that it will not take certain
corporate actions or make material changes in its line of business (and will
cause PRI to refrain from taking such actions), unless authorized by the
affirmative vote of the directors appointed by Apollo. See "Security Ownership
of Certain Beneficial Owners and Management" and "Certain Transactions -- Stock
and Warrant Holders Agreement and Option."
Certain decisions concerning the operations or financial structure of the
Company may present conflicts of interest between the owners of the Company's
equity and the holders of the Notes. For example, if the Company encounters
financial difficulties or is unable to pay its debts as they mature, the
interests of the Company's equity investors might conflict with those of the
holders of Notes. In addition, such equity investors may have an interest in
pursuing acquisitions, divestitures, financings or other transactions that in
their judgment would enhance their equity investment, even though such
transactions might involve risks to the holders of the Notes.
ENVIRONMENTAL MATTERS
Federal, state and local governments or regulatory agencies could enact laws
or regulations concerning environmental matters that increase the cost of
producing, or otherwise adversely affect the demand for, plastic products. The
Company is aware that certain local governments have adopted ordinances
prohibiting or restricting the use or disposal of certain plastic products that
are among the types of products manufactured by the Company. If widely adopted,
such regulatory and environmental measures or a decline in consumer preference
for plastic products due to environmental considerations could have a material
adverse effect upon the Company's business, financial condition and results of
operations. In addition, certain of the Company's operations are subject to
federal, state and local environmental laws and regulations that impose
limitations on the discharge of pollutants into the air and water and establish
standards for the treatment, storage and disposal of solid and hazardous wastes.
While the Company has not been required historically to make significant capital
expenditures in order to comply with applicable environmental laws and
regulations,
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<PAGE>
in the future the Company may have to make capital expenditures in excess of
current estimates because of continually changing compliance standards and
environmental technology. Furthermore, unknown contamination of sites currently
or formerly owned or operated by the Company (including contamination caused by
prior owners and operators of such sites) and off-site disposal of hazardous
substances may give rise to additional compliance costs. The Company does not
have insurance coverage for environmental liabilities and does not anticipate
obtaining such coverage in the future. See "Business -- Environmental Matters
and Governmental Regulation."
GOVERNMENT REGULATION
The Company is subject to federal and state government regulation, including
regulation by the Food and Drug Administration (the "FDA"). The FDA regulates
the material content of direct-contact food and beverage containers and packages
and periodically examines the Company's operations. The Company uses approved
resins and pigments in its direct-contact food products and believes that it is
in material compliance with all FDA and other regulations. While compliance with
FDA and other governmental regulations has not impeded the growth of the
Company's business, no assurances can be made that future regulatory measures
will not adversely affect the Company's existing business or its ability to
generate additional business or introduce new packaging products.
The Company also must adhere to applicable regulations governing "good
manufacturing practices," including testing, quality control, manufacturing and
documentation requirements. If violations of such regulations are noted during
inspections of the Company's manufacturing facilities by public health
regulatory officials, the Company may be required or may elect to cease
manufacturing until the violation is corrected or to recall products that were
manufactured under improper conditions, either of which could have a material
adverse effect on the Company's continued marketing of its products and on the
Company's business, financial condition and results of operations.
ABSENCE OF PUBLIC MARKET FOR THE EXCHANGE NOTES
The Exchange Notes are being offered to the holders of the Old Notes. The
Old Notes were offered and sold in May 1996 to a small number of institutional
investors and are eligible for trading in the Private Offerings, Resale and
Trading through Automatic Linkages (PORTAL) Market.
The Company does not intend to apply for a listing of the Exchange Notes on
any securities exchange. There is currently no established market for the
Exchange Notes and there can be no assurance as to the liquidity of markets that
may develop for the Exchange Notes, the ability of the holders of the Exchange
Notes to sell their Exchange Notes or the price at which such holders would be
able to sell their Exchange Notes. If such markets were to exist, the Exchange
Notes could trade at prices that may be lower than the initial market values
thereof depending on many factors, including prevailing interest rates, the
markets for similar securities, and the financial performance of the Company.
Although there is currently no market for the Exchange Notes, the Initial
Purchasers advised the Company that they currently intend to make a market in
the Exchange Notes. However, the Initial Purchasers are not obligated to do so,
and any such market making with respect to the Exchange Notes may be
discontinued at any time without notice. In addition, such market-making
activities will be subject to the limits imposed by the Securities Act and the
Exchange Act and may be limited during the Exchange Offer or the pendency of an
applicable Shelf Registration Statement (as defined herein).
In addition, the liquidity of, and trading markets for, Exchange Notes also
may be adversely affected by declines in the market for high yield securities
generally. Such a decline may adversely affect such liquidity and trading
markets independent of the financial performance of, and prospects for, the
Company.
FRAUDULENT CONVEYANCE
The incurrence by PRI of indebtedness, including the indebtedness
represented by the Notes, and the granting by PRI of Liens (as defined) to
secure indebtedness, including the Liens granted on the Collateral under the
Security Documents (as defined) to secure the Notes, are subject to state and
federal fraudulent conveyance laws. If a court of competent jurisdiction in a
lawsuit by an unpaid creditor or representative of creditors of PRI, such as a
trustee in bankruptcy or a debtor-in-possession, were to find (i) that, at the
time of the incurrence of the indebtedness represented by the Notes or the
granting of the Liens securing the Notes
16
<PAGE>
(or, in certain circumstances, the indebtedness refinanced by the Notes), PRI
was insolvent, was rendered insolvent by reason of such incurrence, was engaged
in a business or transaction for which its remaining assets constituted
unreasonably small capital, or intended to incur, or believed it would incur,
debts beyond its ability to pay such debts as they matured, and that the
indebtedness was incurred for less than reasonably equivalent value, or (ii)
that the indebtedness represented by the Notes was incurred or the Liens
securing the Notes were granted with actual intent to hinder, delay or defraud
its creditors, then such court could, among other things, (a) void all or a
portion of PRI's obligations to the holders of the Notes and/or the Liens on the
Collateral or seek to recover all or a portion of any payments previously made
in respect of the Notes, the effect of which could be that the holders of the
Notes may not be repaid in full and/or (b) subordinate PRI's obligations to the
holders of the Notes to other existing or future indebtedness of PRI and/or
subordinate the Liens on the Collateral to other existing or future Liens, the
effect of which would be to entitle such other creditors to be paid in full
before any payment could be made on the Notes.
The measure of insolvency for purposes of the foregoing will vary depending
upon the law of the jurisdiction being applied. Generally, an entity would be
considered insolvent (a) if the sum of its debts (including contingent
liabilities) is greater than all of its property at a fair valuation, or (b) if
the present fair saleable value of its assets is less than the amount that will
be required to pay its probable liability on its existing debts (including
contingent liabilities) as they become absolute and matured. In addition, under
some state fraudulent transfer laws, an entity that is generally not paying its
debts as they become due is presumed to be insolvent. The Company believes that
the indebtedness represented by the Notes is being incurred, and the Liens on
the Collateral are being granted, for proper purposes and in good faith and
that, based on present forecasts and other financial information, PRI is
solvent, will continue to have sufficient capital to carry on its business and
will continue to be able to pay its debts as they mature. Furthermore, the
Company believes that the proceeds from the issuance of the Old Notes
constituted reasonably equivalent value or consideration for the incurrence of
the indebtedness represented by the Notes and the granting of the Liens on the
Collateral. There can be no assurance, however, that a court would not determine
that PRI was insolvent at the time and after giving effect to the incurrence of
the indebtedness represented by the Notes. Nor can there be any assurance that,
regardless of whether PRI was solvent, the incurrence of the indebtedness
represented by the Notes and the granting of the Liens on the Collateral would
not constitute fraudulent transfers under any other criterion listed above.
USE OF PROCEEDS
There will be no cash proceeds to the Company resulting from the Exchange
Offer.
The net proceeds from the Old Notes Offering of approximately $106.7 million
were used by PRI to (i) repay outstanding borrowings under the Old Credit
Agreement in the aggregate principal amount of $73.5 million, (ii) fund a
dividend to Group in the amount of $31.7 million, (iii) pay certain fees and
expenses in connection with the Financing Plan of approximately $850,000 and
(iv) provide working capital of approximately $650,000. Group, in turn, used the
dividend from PRI to redeem, without penalty or premium, a portion of the
outstanding 12.5% Notes at an aggregate redemption price of $31.7 million. As of
February 29, 1996, HPH, certain affiliates of Apollo and Union Bank of
Switzerland, New York Branch ("Union Bank of Switzerland"), held $3.0 million,
$33.0 million and $12.0 million in principal amount of the 12.5% Notes,
respectively. After giving effect to the redemption of the 12.5% Notes, HPH,
Apollo and Union Bank of Switzerland had $1.2 million, $13.0 million and $4.8
million, respectively, of the 12.5% Notes. See "Certain Transactions --
Repayment of Debt to Related Parties."
As of February 29, 1996, borrowings under the Old Credit Agreement totaled
$75.7 million (of which $2.25 million was paid on March 31, 1996) and had a
weighted average maturity of 1.2 years. Indebtedness repaid under the Old Credit
Agreement accrued interest at a variable rate equal to the Base Rate (generally
defined as the prime lending rate from time to time announced by Union Bank of
Switzerland) plus 1.5%. As of February 29, 1996, indebtedness under the Old
Credit Agreement accrued interest at 9.75% per annum. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Liquidity and Capital Resources."
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<PAGE>
The following table illustrates the sources and uses of funds under the
Financing Plan:
<TABLE>
<CAPTION>
AMOUNT
-------------
(IN
THOUSANDS)
<S> <C>
SOURCES OF FUNDS:
Notes.................................................................................... $ 110,000
-------------
Total Sources.......................................................................... $ 110,000
-------------
-------------
USES OF FUNDS:
Repayment of indebtedness under Old Credit Agreement..................................... $ 73,500
Dividend to Group(a)..................................................................... 31,700
Fees and expenses(b)..................................................................... 4,150
Working capital.......................................................................... 650
-------------
Total Uses............................................................................. $ 110,000
-------------
-------------
</TABLE>
- ------------------------
(a) Dividend proceeds were used by Group to redeem, without penalty or premium,
a portion of the 12.5% Notes.
(b) Includes the discount paid to the Initial Purchasers in connection with the
issuance of the Old Notes, bank financing fees and legal and accounting
expenses.
THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
The sole purpose of the Exchange Offer is to fulfill the obligations of the
Company with respect to the registration of the Old Notes.
The Old Notes were originally issued and sold on May 17, 1996 (the "Issue
Date"). Such sales were not registered under the Securities Act in reliance upon
the exemption provided by Section 4(2) of the Securities Act and Rule 144A
promulgated under the Securities Act. In connection with the sale of the Old
Notes, the Company agreed to file with the Commission a registration statement
relating to the Exchange Offer pursuant to which the Exchange Notes, consisting
of another series of senior secured notes of the Company covered by such
Registration Statement and containing substantially identical terms to the Old
Notes, except as set forth in this Prospectus, would be offered in exchange for
Old Notes tendered at the option of the holders thereof. If (i) because of any
change in law or in currently prevailing interpretations of the Staff, the
Company is not permitted to effect an Exchange Offer, (ii) the Exchange Offer is
not consummated within 165 days of the Issue Date, (iii) in certain
circumstances, certain holders of unregistered Exchange Notes so request, (iv)
the holders of not less than a majority in aggregate principal amount of the
Notes reasonably determine that the interests of the holders of Notes would be
materially adversely affected by consummation of the Exchange Offer or (v) in
the case of any holder of Old Notes that participates in the Exchange Offer,
such holder of Old Notes does not receive Exchange Notes on the date of the
exchange that may be sold without restriction under state and federal securities
laws (other than due solely to the status of such holder of Old Notes as an
Affiliate of the Company) then the Company will, within three Business Days
thereof, deliver written notice thereof to the Trustee and at its cost, as
promptly as practicable, file with the Commission a registration statement (the
"Shelf Registration Statement") to cover resales of the Old Notes. In the event
that (i) the Company fails to file the Registration Statement, (ii) the
Registration Statement or, if applicable, the Shelf Registration Statement, is
not declared effective by the Commission, or (iii) the Exchange Offer is not
consummated or the Shelf Registration Statement ceases to be effective, in each
case within specified time periods, the interest rate borne by the Old Notes
will be increased. See "Old Notes Registration Rights."
TERMS OF THE EXCHANGE
The Company hereby offers to exchange, upon the terms and subject to the
conditions set forth herein and in the Letter of Transmittal accompanying the
Registration Statement of which this Prospectus is a part (the "Letter of
Transmittal"), $1,000 in principal amount of Exchange Notes for each $1,000 in
principal amount of Old Notes. The terms of the Exchange Notes are substantially
identical to the terms of the Old
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<PAGE>
Notes for which they may be exchanged pursuant to this Exchange Offer, except
that the Exchange Notes will generally be freely transferable by holders
thereof, and the holders of the Exchange Notes (as well as remaining holders of
any Old Notes) are not entitled to certain registration rights and certain
additional interest provisions which are applicable to the Old Notes under the
Registration Rights Agreement. The Exchange Notes will evidence the same debt as
the Old Notes and will be entitled to the benefits of the Indenture. See
"Description of Exchange Notes."
The Exchange Offer is not conditioned upon any minimum aggregate principal
amount of Old Notes being tendered or accepted for exchange. The Company intends
to conduct the Exchange Offer in accordance with the applicable requirements of
the Exchange Act, and the rules and regulations of the Commission thereunder,
including Rule 14e-1, to the extent applicable.
Based on its view of interpretations set forth in no-action letters issued
by the Staff to third parties, the Company believes that Exchange Notes issued
pursuant to the Exchange Offer in exchange for the Old Notes may be offered for
resale, resold and otherwise transferred by holders thereof (other than any
holder which is (i) an Affiliate of the Company, (ii) a broker-dealer who
acquired Old Notes directly from the Company or (iii) a broker-dealer who
acquired Old Notes as a result of market making or other trading activities)
without compliance with the registration and prospectus delivery provisions of
the Securities Act provided that such Exchange Notes are acquired in the
ordinary course of such holders' business, and such holders are not engaged in,
and do not intend to engage in, and have no arrangement or understanding with
any person to participate in, a distribution of such Exchange Notes. Any
broker-dealer that resells 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. Each 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
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. Broker-dealers who acquired Old Notes as a result
of market making or other trading activities may use this Prospectus, as
supplemented or amended, in connection with resales of the Exchange Notes. The
Company has agreed that, for a period of 180 days after the Registration
Statement is declared effective, it will make this Prospectus available to any
broker-dealer for use in connection with any such resale. Any holder who tenders
in the Exchange Offer for the purpose of participating in a distribution of the
Exchange Notes or any other holder that cannot rely upon such interpretations
must comply with the registration and prospectus delivery requirements of the
Securities Act in connection with a secondary resale transaction.
Tendering holders of Old Notes will not be required to pay brokerage
commissions or fees or, subject to the instructions in the Letter of
Transmittal, transfer taxes with respect to the exchange of the Old Notes
pursuant to the Exchange Offer.
The Exchange Notes will bear interest from May 17, 1996. Holders of Old
Notes whose Old Notes are accepted for exchange will be deemed to have waived
the right to receive any payment in respect of interest on the Old Notes accrued
from May 17, 1996 to the date of the issuance of the Exchange Notes. Interest on
the Exchange Notes is payable semiannually in arrears on May 1, and November 1
of each year, commencing November 1, 1996, accruing from May 17, 1996 at a rate
of 11 5/8% per annum.
EXPIRATION DATE; EXTENSIONS; TERMINATION; AMENDMENTS
The Exchange Offer expires on the Expiration Date. The term "Expiration
Date" means 5:00 p.m., New York City time, on , 1996 unless the Company
in its sole discretion extends the period during which the Exchange Offer is
open, in which event the term "Expiration Date" means the latest time and date
on which the Exchange Offer, as so extended by the Company, expires. The Company
reserves the right to extend the Exchange Offer at any time and from time to
time prior to the Expiration Date by giving written notice to LaSalle National
Bank (the "Exchange Agent") and by timely public announcement communicated by no
later than 5:00 p.m. on the next business day following the Expiration Date,
unless otherwise
19
<PAGE>
required by applicable law or regulation, by making a release to the Dow Jones
News Service. During any extension of the Exchange Offer, all Old Notes
previously tendered pursuant to the Exchange Offer will remain subject to the
Exchange Offer.
The initial Exchange Date will be the first business day following the
Expiration Date. The Company expressly reserves the right to (i) terminate the
Exchange Offer and not accept for exchange any Old Notes for any reason,
including if any of the events set forth below under "Conditions to the Exchange
Offer" shall have occurred and shall not have been waived by the Company and
(ii) amend the terms of the Exchange Offer in any manner, whether before or
after any tender of the Old Notes. If any such termination or amendment occurs,
the Company will notify the Exchange Agent in writing and will either issue a
press release or give written notice to the holders of the Old Notes as promptly
as practicable. Unless the Company terminates the Exchange Offer prior to 5:00
p.m., New York City time, on the Expiration Date, the Company will exchange the
Exchange Notes for Old Notes on the Exchange Date.
This Prospectus and the related Letter of Transmittal and other relevant
materials will be mailed by the Company to record holders of Old Notes and will
be furnished to brokers, banks and similar persons whose names, or the names of
whose nominees, appear on the lists of holders for subsequent transmittal to
beneficial owners of Old Notes.
HOW TO TENDER
The tender to the Company of Old Notes by a holder thereof pursuant to one
of the procedures set forth below will constitute an 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.
GENERAL PROCEDURES
A holder of an Old Note may tender the same by (i) properly completing and
signing the Letter of Transmittal or a facsimile thereof (all references in this
Prospectus to the Letter of Transmittal shall be deemed to include a facsimile
thereof) and delivering the same, together with the certificate or certificates
representing the Old Notes being tendered and any required signature guarantees
(or a timely confirmation of a book-entry transfer (a "Book-Entry Confirmation")
pursuant to the procedure described below), to the Exchange Agent at its address
set forth on the back cover of this Prospectus on or prior to the Expiration
Date or (ii) complying with the guaranteed delivery procedures described below.
If tendered Old Notes are registered in the name of the signer of the Letter
of Transmittal and the Exchange Notes to be issued in exchange therefor are to
be issued (and any untendered Old Notes are to be reissued) in the name of the
registered holder, the signature of such signer need not be guaranteed. In any
other case, the tendered Old Notes must be endorsed or accompanied by written
instruments of transfer in form satisfactory to the Company and duly executed by
the registered holder and the signature on the endorsement or instrument of
transfer must be guaranteed by a bank, broker, dealer, credit union, savings
association, clearing agency or other institution (each an "Eligible
Institution") that is a member of a recognized signature guarantee medallion
program within the meaning of Rule 17Ad-15 under the Exchange Act. If the
Exchange Notes and/or Old Notes not exchanged are to be delivered to an address
other than that of the registered holder appearing on the note register for the
Old Notes, the signature on the Letter of Transmittal must be guaranteed by an
Eligible Institution.
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
Old Notes should contact such holder promptly and instruct such holder to tender
Old Notes on such beneficial owner's behalf. If such beneficial owner wishes to
tender such Old Notes himself, such beneficial owner must, prior to completing
and executing the Letter of Transmittal and delivering such Old Notes, either
make appropriate arrangements to register ownership of the Old Notes in such
beneficial owner's name or follow the procedures described in the immediately
preceding paragraph. The transfer of record ownership may take considerable
time.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Old Notes at DTC (the "Book-Entry Transfer Facility") for purposes of the
Exchange Offer within two business days after receipt of this Prospectus, and
any financial institution that is a participant in the Book-Entry Transfer
20
<PAGE>
Facility's systems may make book-entry delivery of Old Notes by causing the
Book-Entry Transfer Facility to transfer such Old Notes into the Exchange
Agent's account at the Book-Entry Transfer Facility in accordance with the
Book-Entry Transfer Facility's procedures for transfer. However, although
delivery of Old Notes may be effected through book-entry transfer at the
Book-Entry Transfer Facility, the Letter of Transmittal, with any required
signature guarantees and any other required documents, must, in any case, be
transmitted to and received by the Exchange Agent at the address specified on
the back cover of this Prospectus on or prior to the Expiration Date or the
guaranteed delivery procedures described below must be complied with.
THE METHOD OF DELIVERY OF OLD NOTES AND ALL OTHER DOCUMENTS IS AT THE
ELECTION AND RISK OF THE HOLDER. IF SENT BY MAIL, IT IS RECOMMENDED THAT
REGISTERED MAIL, RETURN RECEIPT REQUESTED, BE USED, PROPER INSURANCE BE
OBTAINED, AND THE MAILING BE MADE SUFFICIENTLY IN ADVANCE OF THE EXPIRATION DATE
TO PERMIT DELIVERY TO THE EXCHANGE AGENT ON OR BEFORE THE EXPIRATION DATE.
Unless an exemption applies under the applicable law and regulations
concerning "backup withholding" of federal income tax, the Exchange Agent will
be required to withhold, and will withhold, 31% of the gross proceeds otherwise
payable to a holder pursuant to the Exchange Offer if the holder does not
provide a taxpayer identification number (social security number or employer
identification number, as applicable) and certify that such number is correct.
Each tendering holder should complete and sign the main signature form and the
Substitute Form W-9 included as part of the Letter of Transmittal, so as to
provide the information and certification necessary to avoid backup withholding,
unless an applicable exemption exists and is proved in a manner satisfactory to
the Company and the Exchange Agent.
GUARANTEED DELIVERY PROCEDURES
If a holder desires to accept the Exchange Offer and time will not permit a
Letter of Transmittal or Old Notes to reach the Exchange Agent before the
Expiration Date, a tender may be effected if the Exchange Agent has received at
its office listed on the Letter of Transmittal on or prior to the Expiration
Date a letter, telegram or facsimile transmission from an Eligible Institution
setting forth the name and address of the tendering holder, the principal amount
of the Old Notes being tendered, the names in which the Old Notes are registered
and, if possible, the certificate numbers of the Old Notes to be tendered, and
stating that the tender is being made thereby and guaranteeing that within three
New York Stock Exchange trading days after the date of execution of such letter,
telegram or facsimile transmission by the Eligible Institution, the Old Notes,
in proper form for transfer, will be delivered by such Eligible Institution
together with a properly completed and duly executed Letter of Transmittal (and
any other required documents). Unless Old Notes being tendered by the
above-described method (or a timely Book-Entry Confirmation) are deposited with
the Exchange Agent within the time period set forth above (accompanied or
preceded by a properly completed Letter of Transmittal and any other required
documents), the Company may, at its option, reject the tender. Copies of a
Notice of Guaranteed Delivery which may be used by Eligible Institutions for the
purposes described in this paragraph are available from the Exchange Agent.
A tender will be deemed to have been received as of the date when the
tendering holder's properly completed and duly signed Letter of Transmittal
accompanied by the Old Notes (or a timely Book-Entry Confirmation) is received
by the Exchange Agent. Issuances of Exchange Notes in exchange for Old Notes
tendered pursuant to a Notice of Guaranteed Delivery or letter, telegram or
facsimile transmission to similar effect (as provided above) by an Eligible
Institution will be made only against deposit of the Letter of Transmittal (and
any other required documents) and the tendered Old Notes (or a timely Book-Entry
Confirmation).
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance for exchange of any tender of Old Notes will be
determined by the Company, whose determination will be final and binding. The
Company reserves the absolute right to reject any or all tenders not in proper
form or the acceptances for exchange of which may, in the opinion of counsel to
the Company, be unlawful. The Company also reserves the absolute right to waive
any of the conditions of the Exchange Offer or any defect or irregularities in
tenders of any particular holder whether or not similar defects or
irregularities are waived in the case of other holders. Neither the Company, the
Exchange Agent nor any other person will be under
21
<PAGE>
any duty to give notification of any defects or irregularities in tenders or
shall incur any liability for failure to give any such notification. The
Company's interpretation of the terms and conditions of the Exchange Offer
(including the Letter of Transmittal and the instructions thereto) will be final
and binding.
TERMS AND CONDITIONS OF THE LETTER OF TRANSMITTAL
The Letter of Transmittal contains, among other things, the following terms
and conditions, which are part of the Exchange Offer.
The party tendering Old Notes for exchange (the "Transferor") exchanges,
assigns and transfers the Old Notes to the Company and irrevocably constitutes
and appoints the Exchange Agent as the Transferor's agent and attorney-in-fact
to cause the Old Notes to be assigned, transferred and exchanged. The Transferor
represents and warrants that it has full power and authority to tender,
exchange, assign and transfer the Old Notes and to acquire Exchange Notes
issuable upon the exchange of such tendered Old Notes, and that, when the same
are accepted for exchange, the Company will acquire good and unencumbered title
to the tendered Old Notes, free and clear of all liens, restrictions, charges
and encumbrances and not subject to any adverse claim. The Transferor also
warrants that it will, upon request, execute and deliver any additional
documents deemed by the Company to be necessary or desirable to complete the
exchange, assignment and transfer of tendered Old Notes. All authority conferred
by the Transferor will survive the death or incapacity of the Transferor and
every obligation of the Transferor shall be binding upon the heirs, legal
representatives, successors, assigns, executors and administrators of such
Transferor.
By tendering Old Notes and executing the Letter of Transmittal, the
Transferor certifies that (a) it is not an Affiliate of the Company, that it is
not a broker-dealer that owns Old Notes acquired directly from the Company or an
Affiliate of the Company, that it is acquiring the Exchange Notes offered hereby
in the ordinary course of such Transferor's business and that such Transferor
has no arrangement with any person to participate in the distribution of such
Exchange Notes, (b) that it is an Affiliate of the Company or of the initial
purchaser of the Old Notes in the Offering and that it will comply with the
registration and prospectus delivery requirements of the Securities Act to the
extent applicable to it, or (c) that it is a broker dealer which is a beneficial
owner (as defined in Rule 13d-3 under the Exchange Act) of Exchange Notes
received by such broker dealer in the Exchange Offer (a "Participating
Broker-Dealer") and that it will deliver a prospectus in connection with any
resale of such Exchange Notes. By tendering Old Notes and executing a Letter of
Transmittal, the Transferor further certifies that it is not engaged in and does
not intend to engage in a distribution of the Exchange Notes.
WITHDRAWAL RIGHTS
Old Notes tendered pursuant to the Exchange Offer may be withdrawn at any
time prior to the Expiration Date.
For a withdrawal to be effective, a written or facsimile transmission notice
of withdrawal must be timely received by the Exchange Agent at its address set
forth on the back cover of this Prospectus prior to the Expiration Date. Any
such notice of withdrawal must specify the person named in the Letter of
Transmittal as having tendered Old Notes to be withdrawn, the certificate
numbers of Old Notes to be withdrawn, the principal amount of Old Notes to be
withdrawn, a statement that such holder is withdrawing his election to have such
Old Notes exchanged, and the name of the registered holder of such Old Notes,
and must be signed by the holder in the same manner as the original signature on
the Letter of Transmittal (including any required signature guarantees) or be
accompanied by evidence satisfactory to the Company that the person withdrawing
the tender has succeeded to the beneficial ownership of the Old Notes being
withdrawn. The Exchange Agent will return the properly withdrawn Old Notes
promptly following receipt of notice of withdrawal. All questions as to the
validity of notices of withdrawals, including time of receipt, will be
determined by the Company, and such determination will be final and binding on
all parties.
ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF EXCHANGE NOTES
Upon the terms and subject to the conditions of the Exchange Offer, the
acceptance for exchange of Old Notes validly tendered and not withdrawn and the
issuance of the Exchange Notes will be made on the
22
<PAGE>
Exchange Date. For the purposes of the Exchange Offer, the Company shall be
deemed to have accepted for exchange validly tendered Old Notes when, as and if
the Company has given written notice thereof to the Exchange Agent.
The Exchange Agent will act as agent for the tendering holders of Old Notes
for the purposes of receiving Exchange Notes from the Company and causing the
Old Notes to be assigned, transferred and exchanged. Upon the terms and subject
to conditions of the Exchange Offer, delivery of Exchange Notes to be issued in
exchange for accepted Old Notes will be made by the Exchange Agent promptly
after acceptance of the tendered Old Notes. Old Notes not accepted for exchange
by the Company will be returned without expense to the tendering holders (or in
the case of Old Notes tendered by book-entry transfer into the Exchange Agent's
account at the Book-Entry Transfer Facility pursuant to the procedures described
above, such non-exchanged Old Notes will be credited to an account maintained
with such Book-Entry Transfer Facility) promptly following the Expiration Date
or, if the Company terminates the Exchange Offer prior to the Expiration Date,
promptly after the Exchange Offer is so terminated.
CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the Exchange Offer, or any extension
of the Exchange Offer, the Company will not be required to issue Exchange Notes
in respect of any properly tendered Old Notes not previously accepted and may
terminate the Exchange Offer (by oral or written notice to the Exchange Agent
and by timely public announcement communicated by no later than 5:00 p.m. on the
next business day following the Expiration Date, unless otherwise required by
applicable law or regulation, by making a release to the Dow Jones News Service)
or, at its option, modify or otherwise amend the Exchange Offer, if (a) there
shall be threatened, instituted or pending any action or proceeding before, or
any injunction, order or decree shall have been issued by, any court or
governmental agency or other governmental regulatory or administrative agency or
commission, (i) seeking to restrain or prohibit the making or consummation of
the Exchange Offer or any other transaction contemplated by the Exchange Offer,
(ii) assessing or seeking any damages as a result thereof or (iii) resulting in
a material delay in the ability of the Company to accept for exchange or
exchange some or all of the Old Notes pursuant to the Exchange Offer; (b) any
statute, rule, regulation, order or injunction shall be sought, proposed,
introduced, enacted, promulgated or deemed applicable to the Exchange Offer or
any of the transactions contemplated by the Exchange Offer by any government or
governmental authority, domestic or foreign, or any action shall have been
taken, proposed or threatened, by any government, governmental authority, agency
or court, domestic or foreign, that in the reasonable judgment of the Company
might directly or indirectly result in any of the consequences referred to in
clauses (a)(i) or (ii) above or, in the reasonable judgment of the Company,
might result in the holders of Exchange Notes having obligations with respect to
resales and transfers of Exchange Notes which are greater than those described
in the interpretations of the Staff referred to on the cover page of this
Prospectus, or would otherwise make it inadvisable to proceed with the Exchange
Offer; or (c) a material adverse change shall have occurred in the business,
condition (financial or otherwise), operations, or prospects of the Company.
The foregoing conditions are for the sole benefit of the Company and may be
asserted by it with respect to all or any portion of the Exchange Offer
regardless of the circumstances (including any action or inaction by the
Company) giving rise to such condition or may be waived by the Company in whole
or in part at any time or from time to time in its sole discretion. The failure
by the Company at any time to exercise any of the foregoing rights will not be
deemed a waiver of any such right, and each right will be deemed an ongoing
right which may be asserted at any time or from time to time. In addition, the
Company has reserved the right, notwithstanding the satisfaction of each of the
foregoing conditions, to terminate or amend the Exchange Offer.
Any determination by the Company concerning the fulfillment or
nonfulfillment of any conditions will be final and binding upon all parties.
In addition, the Company will not accept for exchange any Old Notes tendered
and no Exchange Notes will be issued in exchange for any such Old Notes, if at
such time any stop order shall be threatened or in effect with respect to the
Registration Statement of which this Prospectus constitutes a part or
qualification of the Indenture under the Trust Indenture Act of 1939, as amended
(the "Trust Indenture Act").
23
<PAGE>
EXCHANGE AGENT
LaSalle National Bank has been appointed as the Exchange Agent for the
Exchange Offer. Letters of Transmittal must be addressed to the Exchange Agent
at:
LaSalle National Bank
Corporate Trust Division
135 South LaSalle Street
Suite 1825
Chicago, Illinois 60603
Attention: Sarah H. Webb
Telephone: (312) 904-2444
Facsimilie: (312) 904-2236
Delivery to an address other than as set forth herein, or transmissions of
instructions via a facsimile or telex number other than the ones set forth
herein, will not constitute a valid delivery.
SOLICITATION OF TENDERS; EXPENSES
The Company has not retained any dealer-manager or similar agent in
connection with the Exchange Offer and will not make any payments to brokers,
dealers or others for soliciting acceptances of the Exchange Offer. The Company
will, however, pay the Exchange Agent reasonable and customary fees for its
services and will reimburse it for reasonable out-of-pocket expenses in
connection therewith. The Company will also pay brokerage houses and other
custodians, nominees and fiduciaries the reasonable out-of-pocket expenses
incurred by them in forwarding tenders for their customers. The expenses to be
incurred in connection with the Exchange Offer, including the fees and expenses
of the Exchange Agent and printing, accounting, legal fees and miscellaneous
expenses will be paid by the Company and are estimated to be approximately
$150,000.
No person has been authorized to give any information or to make any
representations in connection with the Exchange Offer other than those contained
in this Prospectus. If given or made, such information or representations should
not be relied upon as having been authorized by the Company. Neither the
delivery of this Prospectus nor any exchange made hereunder shall, under any
circumstances, create any implication that there has been no change in the
affairs of the Company since the respective dates as of which information is
given herein. The Exchange Offer is not being made to (nor will tenders be
accepted from or on behalf of) holders of Old Notes in any jurisdiction in which
the making of the Exchange Offer or the acceptance thereof would not be in
compliance with the laws of such jurisdiction. However, the Company may, at its
discretion, take such action as it may deem necessary to make the Exchange Offer
in any such jurisdiction and extend the Exchange Offer to holders of Old Notes
in such jurisdiction. In any jurisdiction the securities laws or blue sky laws
of which require the Exchange Offer to be made by a licensed broker or dealer,
the Exchange Offer is being made on behalf of the Company by one or more
registered brokers or dealers which are licensed under the laws of such
jurisdiction.
APPRAISAL RIGHTS
HOLDERS OF OLD NOTES WILL NOT HAVE DISSENTERS' RIGHTS OR APPRAISAL RIGHTS IN
CONNECTION WITH THE EXCHANGE OFFER.
FEDERAL INCOME TAX CONSEQUENCES
The exchange of Old Notes for Exchange Notes by tendering holders will not
be a taxable exchange for federal income tax purposes, and such holders should
not recognize any taxable gain or loss as a result of such exchange.
OTHER
Participation in the Exchange Offer is voluntary and holders of Old Notes
should carefully consider whether to accept the terms and conditions thereof.
Holders of the Old Notes are urged to consult their financial and tax advisors
in making their own decisions on what action to take with respect to the
Exchange Offer.
24
<PAGE>
As a result of the making of, and upon acceptance for exchange of all
validly tendered Old Notes pursuant to the terms of this Exchange Offer, the
Company will have fulfilled a covenant contained in the terms of the Old Notes
and the Registration Rights Agreement. Holders of the Old Notes who do not
tender their Old Notes in the Exchange Offer will continue to hold such Old
Notes and will be entitled to all the rights, and limitations applicable
thereto, under the Indenture, except for any such rights under the Registration
Rights Agreement which by their terms terminate or cease to have further effect
as a result of the making of this Exchange Offer. See "Description of Exchange
Notes." All untendered Old Notes will continue to be subject to the restriction
on transfer set forth in the Indenture. To the extent that Old Notes are
tendered and accepted in the Exchange Offer, the trading market, if any, for any
remaining Old Notes could be adversely affected. See "Risk Factors --
Consequences of Failure to Exchange Old Notes."
Subject to the restrictions contained in the Indenture, the Company may in
the future seek to acquire untendered Old Notes in open market or privately
negotiated transactions, through subsequent exchange offers or otherwise. The
Company has no present plan to acquire any Old Notes which are not tendered in
the Exchange Offer.
25
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
February 29, 1996 and as adjusted to reflect the Financing Plan as described
under "Use of Proceeds." This table should be read in conjunction with the
financial statements of the Company and the related notes thereto and other
information appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
FEBRUARY 29, 1996
----------------------
ACTUAL
---------
AS ADJUSTED
-----------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
Long-term debt (including current maturities):
Old Credit Agreement (a)................................................................ $ 75,724 $ --
Other Notes Payable..................................................................... 1,800 1,800
Senior Credit Facility (b).............................................................. -- 352
11 5/8% Senior Secured Notes due 2003 (c)............................................... -- 110,000
--------- -----------
Total long-term debt (including current maturities): 77,524 112,152
--------- -----------
Stockholder's equity:
Common stock, par value $.01 per share; 1,000 shares authorized, issued and
outstanding............................................................................ -- --
Additional paid-in capital.............................................................. 20,278 20,278
Retained earnings (deficit) (d)......................................................... (2,013) (33,841)
--------- -----------
Total stockholder's equity (deficit).................................................. 18,265 (13,563)
--------- -----------
Total capitalization................................................................ $ 95,789 $ 98,589
--------- -----------
--------- -----------
</TABLE>
- ------------------------
(a) Includes $2.25 million of indebtedness paid on March 31, 1996.
(b) The Senior Credit Facility provides for revolving loans of up to $20.0
million, subject to certain borrowing conditions and limitations. See
"Description of Certain Indebtedness -- The Senior Credit Facility."
(c) Reflects the issuance of the Old Notes.
(d) Reflects (i) a non-cash extraordinary charge of $1.4 million (net of tax
benefit) for the write-off of the unamortized financing fees and debt
issuance costs associated with the Old Credit Agreement and (ii) a dividend
from PRI to Group in the amount of $30.5 million used to redeem a portion of
the 12.5% Notes. See "Security Ownership of Certain Beneficial Owners and
Management" for a description of the Warrants.
26
<PAGE>
SELECTED FINANCIAL DATA
The following table presents summary historical and pro forma financial
information for the Company. The summary statement of operations data and other
operating data set forth below for the years ended February 28, 1994 and 1995
and February 29, 1996 and the balance sheet data at February 28, 1995 and
February 29, 1996 have been derived from, and are qualified by reference to, the
audited financial statements of the Company included elsewhere in this
Prospectus. The summary statement of operations data and other operating data
set forth below for the years ended February 29, 1992 and February 28, 1993 and
the balance sheet data at February 29, 1992 and February 28, 1993 and 1994 have
been derived from the Company's audited financial statements not included
herein. Historical financial data reflects the acquisitions of Louisiana
Plastics and Miner Container from March 12, 1993 and December 15, 1993,
respectively. The unaudited pro forma financial data for fiscal 1996 give effect
to the Financing Plan as if it had occurred on March 1, 1995 for purposes of the
statement of operations data and the other operating data and as of February 29,
1996 for purposes of the balance sheet data. The unaudited pro forma financial
data do not purport to represent what the Company's results of operations would
have been if the Financing Plan had in fact occurred as of the beginning of the
period or on the date indicated, as applicable, or to project the Company's
financial position or results of operations for any future date or period. The
selected financial data below should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the historical financial statements of the Company included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-----------------------------------------------------
FEB. 29, FEB. 28, FEB. 28, FEB. 28, FEB. 29,
1992 (A) 1993 1994 1995 1996
--------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales........................................................ $ 80,473 $ 74,950 $ 118,844 $ 135,696 $ 133,756
Cost of goods sold (c)........................................... 65,996 59,232 93,248 113,928 111,448
--------- --------- --------- --------- ---------
Gross profit..................................................... 14,477 15,718 25,596 21,768 22,308
Selling, general and administrative expenses..................... 4,990 4,512 6,657 8,407 6,864
Amortization of intangibles...................................... 620 424 1,122 3,102 2,434
Nonrecurring charge (d).......................................... -- -- -- 7,257 --
--------- --------- --------- --------- ---------
Operating income................................................. 8,867 10,782 17,817 3,002 13,010
Interest expense, net (e)........................................ 6,082 5,406 5,482 8,503 10,671
--------- --------- --------- --------- ---------
Income (loss) before income taxes, extraordinary item and
cumulative effect of change in accounting principle............. 2,785 5,376 12,335 (5,501) 2,339
Income tax expense (benefit)..................................... 1,268 2,215 5,057 (1,980) 1,006
--------- --------- --------- --------- ---------
Income (loss) before extraordinary item and cumulative effect of
change in accounting principle.................................. 1,517 3,161 7,278 (3,521) 1,333
--------- --------- --------- --------- ---------
Extraordinary item (f)........................................... -- -- (2,743) -- --
Cumulative effect of change in accounting principle (g).......... -- -- (2,300) -- --
--------- --------- --------- --------- ---------
Net income (loss)................................................ $ 1,517 $ 3,161 $ 2,235 $ (3,521) $ 1,333
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
OTHER OPERATING DATA:
EBITDA (h)....................................................... $ 12,570 $ 14,434 $ 24,096 $ 20,751 $ 22,731
Depreciation and amortization (i)................................ 3,703 3,652 6,279 10,492 9,721
Capital expenditures (j)......................................... 2,735 4,435 5,556 7,925 3,449
Ratio of earnings to fixed charges(k)............................ 1.43x 1.93x 3.00x (l) 1.21x
Ratio of EBITDA to interest expense.............................. 2.07x 2.67x 4.40x 2.44x 2.13x
Ratio of EBITDA to cash interest expense (m)..................... 2.29x 3.00x 5.04x 2.71x 2.52x
BALANCE SHEET DATA (PERIOD END):
Property, plant, and equipment, net.............................. $ 30,302 $ 31,276 $ 56,912 $ 56,213 $ 52,352
Total assets..................................................... 61,337 62,727 136,545 121,966 110,683
Total debt....................................................... 41,903 42,861 86,361 84,177 77,524
Stockholder's equity (deficit)................................... (561) 1,134 22,953 16,932 18,265
<CAPTION>
PRO FORMA
FEB. 29,
1996 (B)
-----------
(UNAUDITED)
<S> <C>
STATEMENT OF OPERATIONS DATA:
Net sales........................................................ $ 133,756
Cost of goods sold (c)........................................... 111,448
-----------
Gross profit..................................................... 22,308
Selling, general and administrative expenses..................... 6,864
Amortization of intangibles...................................... 2,434
Nonrecurring charge (d).......................................... --
-----------
Operating income................................................. 13,010
Interest expense, net (e)........................................ 13,416
-----------
Income (loss) before income taxes, extraordinary item and
cumulative effect of change in accounting principle............. (406)
Income tax expense (benefit)..................................... (175)
-----------
Income (loss) before extraordinary item and cumulative effect of
change in accounting principle.................................. $ (231)
-----------
-----------
Extraordinary item (f)...........................................
Cumulative effect of change in accounting principle (g)..........
Net income (loss)................................................
OTHER OPERATING DATA:
EBITDA (h)....................................................... $ 22,731
Depreciation and amortization (i)................................ 9,721
Capital expenditures (j)......................................... 3,449
Ratio of earnings to fixed charges(k)............................ (l)
Ratio of EBITDA to interest expense.............................. 1.69x
Ratio of EBITDA to cash interest expense (m)..................... 1.77x
BALANCE SHEET DATA (PERIOD END):
Property, plant, and equipment, net.............................. $ 52,352
Total assets..................................................... 112,620
Total debt....................................................... 112,152
Stockholder's equity (deficit)................................... (13,563)
</TABLE>
27
<PAGE>
- --------------------------
(a) Fiscal 1992 amounts have been restated to reflect a change in accounting for
inventory. In fiscal 1993, the Company changed its inventory costing method
from the LIFO method to the FIFO method. Cost of goods sold for all fiscal
years presented is valued using the FIFO method.
(b) Financial data for fiscal 1996 gives effect to the Financing Plan, as if
such transactions had occurred on March 1, 1995 for purposes of the
statement of operations data and the other operating data and as of February
29, 1996 for purposes of the balance sheet data. Pro forma adjustments to
statement of operations data and other operating data include (i)
adjustments to interest expense in the aggregate amount of $2.7 million,
reflecting the elimination of interest expense relating to the Old Credit
Agreement and the addition of interest expense associated with the Notes and
the Senior Credit Facility and (ii) a non-cash extraordinary charge of $1.4
million for the write-off of unamortized financing fees (net of tax) and
costs associated with the Old Credit Agreement. Pro forma adjustments to
balance sheet data reflect (i) a non-cash extraordinary charge of $1.4
million (net of tax benefit) for the write-off of the unamortized financing
fees and debt issuance costs associated with the Old Credit Agreement and
(ii) a dividend from PRI to Group in the amount of $30.5 million to redeem a
portion of the 12.5% Notes. See "Capitalization."
(c) Cost of goods sold includes costs for raw materials, labor, maintenance and
repair of property, plant and equipment, manufacturing overhead and research
and development.
(d) The nonrecurring charges in fiscal 1995 include a charge of $6.4 million
relating to the closing and consolidation of certain manufacturing
facilities and the write-off of $894 in costs associated with a public debt
offering that was not completed by the Company.
(e) Interest expense, net includes interest income of $83, $129 and $77 in
fiscal 1993, 1994 and 1995, respectively.
(f) The extraordinary item in fiscal 1994 represents the write-off of
unamortized financing fees and costs and the payment of certain premiums in
connection with the 1993 Transaction. See Notes 8 and 11 to the Company's
financial statements included elsewhere in this Prospectus.
(g) Cumulative effect of change in accounting principle in fiscal 1994 reflects
the Company's adoption of SFAS 109, "Accounting for Income Taxes." See Notes
1 and 12 to the Company's financial statements included elsewhere in this
Prospectus.
(h) EBITDA represents earnings (loss) before interest expense, provision
(benefit) for income taxes, depreciation and amortization (excluding
amortization of deferred financing costs), adjusted to exclude the
nonrecurring charges, extraordinary items and cumulative effect of changes
in accounting principles described in notes (d), (f) and (g) above. EBITDA
is presented because such data is used by certain investors to measure a
company's ability to service debt. EBITDA should not be considered as an
alternative to cash flow from operations as determined by generally accepted
accounting principles, and does not necessarily indicate whether cash flow
will be sufficient for cash requirements.
(i) Depreciation and amortization as presented excludes amortization of deferred
financing costs.
(j) Capital expenditures in fiscal 1994 do not include $26.9 million expended
for property, plant and equipment obtained through the acquisitions of
Louisiana Plastics and Miner Container.
(k) For purposes of this computation, earnings are defined as income before
income taxes plus fixed charges. Fixed charges consist of interest
(including amortization of deferred financing costs and debt discount or
premium) and that portion of rental expense that is representative of
interest (deemed to be one-third of operating lease rental expense).
(l) The Company's earnings were inadequate to cover fixed charges for fiscal
1995 and pro forma 1996 by $5.5 million and $406, respectively.
(m) For the purpose of calculating the ratio of EBITDA to cash interest expense,
interest expense does not include amortization of deferred financing costs.
Amortization of deferred financing costs for fiscal 1992, 1993, 1994, 1995,
1996 and pro forma 1996 was $595, $593, $705, $848, $1.7 million and $593,
respectively.
28
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company is a leading developer, manufacturer and marketer of rigid
plastic packaging, serving primarily as a supplier of customized containers for
national branded consumer products. The Company is the largest domestic
manufacturer of refrigerated yogurt containers, shelf stable, multi-layer
(impermeable to air and moisture) containers for nutritional supplements and
frosting containers. The Company also believes that it is the largest designer,
manufacturer and supplier of promotional beverage cups in the United States,
marketing these products primarily to the fast-food and beverage industries.
The Company's results of operations during the last three fiscal years are
not readily comparable due to a variety of extraordinary transactions and
non-recurring items. The following discussion summarizes such extraordinary
transactions and nonrecurring items.
ACQUISITIONS. During the last quarter of fiscal 1994, the Company acquired
Miner Container for an aggregate purchase price of approximately $21.0 million.
The acquisition of Miner Container was financed primarily through incurrence of
indebtedness and was treated as a purchase for accounting purposes. Through this
transaction, the Company expanded its sales of eight ounce yogurt containers for
Dannon (enabling the Company to become the sole supplier of such containers),
increased injection molding capacity, improved graphics technology and
established market share leadership in promotional beverage cups.
RESTRUCTURING. During fiscal 1994, the Company's net income was reduced by
nonrecurring charges of $2.7 million relating to prepayment premiums and the
write-off of unamortized financing costs in connection with the 1993
Transaction. In fiscal 1995, the Company incurred a nonrecurring charge of $7.3
million, $6.4 million of which related primarily to costs associated with the
closing of the Sparks, Nevada and the Louisiana, Missouri facilities, and
$894,000 of which resulted from the write-off of costs associated with a public
debt offering which was not completed by the Company. The $6.4 million
restructuring charge relating to the closed facilities consisted primarily of
expenditures made or anticipated to be made in connection with such closings,
including employee severance benefits and costs associated with the relocation
of equipment from the closed facilities. Substantially all of the expenditures
associated with this charge were made in fiscal 1995.
ACCOUNTING CHANGES. Fiscal 1994 net income was further reduced by $2.3
million representing the cumulative effect of the Company's adoption of SFAS
109, "Accounting for Income Taxes."
OTHER. The principal elements comprising the Company's cost of goods sold
are raw materials consisting primarily of plastic resins, labor, manufacturing
overhead and research and development expenses. Historically, the Company has
been able to pass along resin price increases or decreases to packaging
customers. The Company's selling, general and administrative expenses include
salaries, management fees payable to HPH and other items of corporate overhead.
In April 1994, the Company paid discretionary bonuses to management employees
totaling $810,545. For financial reporting purposes, $250,000 and $560,545 of
such bonus payments were expensed in fiscal 1994 and 1995, respectively. No such
bonuses were paid in fiscal 1996.
29
<PAGE>
The following table sets forth, for the fiscal years indicated, the income
statement of the Company expressed as a percentage of net sales:
<TABLE>
<CAPTION>
1994 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
Net sales by product category:
Packaging products................................................. 79.9% 75.8% 82.8%
Promotional beverage cups.......................................... 19.0 21.1 17.2
Housewares......................................................... 1.1 3.1 --
--------- --------- ---------
Net sales............................................................ 100.0 100.0 100.0
Cost of goods sold................................................... 78.5 84.0 83.3
--------- --------- ---------
Gross profit......................................................... 21.5 16.0 16.7
Selling, general and administrative expenses......................... 5.6 6.2 5.1
Amortization of intangibles.......................................... 0.9 2.3 1.8
Nonrecurring charge.................................................. -- 5.3 --
--------- --------- ---------
Operating income..................................................... 15.0 2.2 9.8
Interest expense, net................................................ 4.6 6.3 8.0
--------- --------- ---------
Income (loss) before income taxes, extraordinary item and cumulative
effect of change in accounting principle............................ 10.4 (4.1) 1.8
--------- --------- ---------
Income tax expense (benefit)......................................... 4.3 (1.5) 0.8
--------- --------- ---------
Income (loss) before extraordinary item and cumulative effect of
change in accounting principle...................................... 6.1 (2.6) 1.0
Extraordinary item................................................... 2.3 -- --
Cumulative effect of change in accounting principle.................. 1.9 -- --
--------- --------- ---------
Net income (loss).................................................. 1.9 (2.6) 1.0
--------- --------- ---------
--------- --------- ---------
</TABLE>
In the first fiscal quarter of fiscal 1997, the Company will incur an
extraordinary non-cash charge of $1.4 million (net of tax benefit) for the
write-off of unamortized financing fees and costs associated with the Old Credit
Agreement.
RESULTS OF OPERATIONS
The following discussion represents the analysis by the Company's management
of the results of operations for fiscal 1994, 1995 and 1996. This discussion
should be read in conjunction with the financial statements of the Company and
the notes thereto included elsewhere in this Prospectus.
FISCAL 1996 COMPARED TO FISCAL 1995
NET SALES. Net sales decreased $1.9 million, or 1.4%, from $135.7 million
in fiscal 1995 to $133.8 million in fiscal 1996. Packaging sales increased 7.7%,
from $102.9 million in fiscal 1995, to $110.8 million in fiscal 1996. Net sales
in fiscal 1996 to Yoplait, Ross Labs and Dannon increased by $5.1 million, $2.6
million and $1.5 million, respectively, over the prior fiscal year to an
aggregate of $24.0 million, $20.3 million and $25.0 million, respectively,
primarily reflecting higher unit volume. Partially offsetting such increases was
the loss of certain low margin packaging accounts. Promotional cup sales
declined approximately $5.6 million, or 19.6%, from $28.6 million in fiscal 1995
to $23.0 million in fiscal 1996, due to fewer customer promotions. Divestiture
of the housewares product line acquired in connection with the acquisition of
Miner Container also resulted in a decline of $4.2 million in net sales.
GROSS PROFIT. Gross profit increased $0.5 million, from $21.8 million in
fiscal 1995 to $22.3 million in fiscal 1996. Gross margins improved from 16.0%
in fiscal 1995 to 16.7% in fiscal 1996. This increase in gross margin reflects a
favorable shift in product mix to higher margin products, such as yogurt
containers and shelf stable, multi-layer nutritional supplement containers, the
discontinuance of certain lower margin packaging businesses and the divestiture
of the housewares product line. The increase is also attributable to cost
savings achieved by closing the Sparks, Nevada, and Louisiana, Missouri plants.
These increases were offset, in part, by higher costs of resin used in
promotional beverage containers.
30
<PAGE>
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses decreased $1.5 million, or 17.8%, from $8.4 million in
fiscal 1995 to $6.9 million in fiscal 1996 and decreased as a percentage of net
sales from 6.2% to 5.1%. This decline reflects cost savings resulting from a
reduction in administrative staff, a reduction in variable selling expenses as a
result of fewer promotional beverage cup sales as well as the fact that no
management bonuses were paid during fiscal 1996.
AMORTIZATION EXPENSE. Amortization expense decreased $0.7 million, from
$3.1 million in fiscal 1995 to $2.4 million in fiscal 1996, primarily due to the
completion of the amortization in fiscal 1996 of the non-compete agreements
entered into in connection with the purchase of Miner Container and Louisiana
Plastics.
OPERATING INCOME. Operating income increased $10.0 million from $3.0
million, or 2.2% of net sales, in fiscal 1995 to $13.0 million, or 9.8% of net
sales, in fiscal 1996. Without giving effect to the $7.3 million nonrecurring
charge taken in fiscal 1995, operating income would have increased $2.8 million,
or 26.8%, from fiscal 1995 to fiscal 1996, reflecting the favorable change in
product mix and the impact of the cost reductions noted above. As a percentage
of net sales, operating income, without giving effect to the nonrecurring charge
in fiscal 1995, increased from 7.6% in fiscal 1995 to 9.8% in fiscal 1996.
INTEREST EXPENSE. Interest expense increased 25.9% from $8.5 million in
fiscal 1995 to $10.7 million in fiscal 1996 primarily due to accelerated
amortization of deferred financing costs as a result of the shortening of the
maturity of the Old Credit Agreement.
INCOME TAXES. Income taxes increased from a benefit of $2.0 million in
fiscal 1995 to an expense of $1.0 million in fiscal 1996 due to pre-tax income
in fiscal 1996 as compared to a pre-tax loss fiscal 1995. The Company's
effective state and Federal tax rate increased from 36.0% in fiscal 1995 to
43.0% in fiscal 1996.
NET INCOME (LOSS). For the reasons stated above, net loss was $3.5 million
in fiscal 1995 compared to net income of $1.3 million in fiscal 1996.
FISCAL 1995 COMPARED TO FISCAL 1994
NET SALES. Net sales increased $16.9 million, or 14.2%, from $118.8 million
in fiscal 1994 to $135.7 million in fiscal 1995. Packaging sales increased 8.4%,
from $94.9 million in fiscal 1994 to $102.9 million in fiscal 1995. Net sales in
fiscal 1995 to Yoplait, Ross Labs and Dannon increased by $2.4 million, $3.5
million and $8.6 million, respectively, over the prior fiscal year to an
aggregate of $18.9 million, $17.7 million and $23.6 million, respectively,
primarily reflecting higher unit volume. Approximately $3.8 million of the
increase in sales to Dannon was attributable to the acquisition of Miner
Container. Partially offsetting such increases was a decline of approximately
$6.5 million in net sales resulting from the Company's loss of, or decision to
exit, certain lower margin packaging business. Promotional cup sales increased
approximately $6.0 million, or 26.5%, from $22.6 million in fiscal 1994 to $28.6
million in fiscal 1995, due to the acquisition of Miner Container and the
Company's participation in nationwide promotions by McDonald's and Burger King.
The housewares product line, also acquired in connection with the purchase of
Miner Container, contributed additional net sales of $2.9 million in fiscal
1995.
GROSS PROFIT. Despite higher net sales, gross profit decreased $3.8
million, or 14.8%, from $25.6 million in fiscal 1994 to $21.8 million in fiscal
1995. Gross margin declined from 21.5% in fiscal 1994 to 16.0% in fiscal 1995.
The decline in gross margin was primarily due to manufacturing inefficiencies at
the Company's former Sparks, Nevada and Louisiana, Missouri facilities, excess
production capacity and higher resin costs for promotional beverage cups and
lids. The portion of depreciation expense reflected in cost of goods sold
increased from $5.0 million (4.2% of net sales) in fiscal 1994 to $7.3 million
(5.4% of net sales) in fiscal 1995 due to the acquisition of Miner Container.
These costs were partially offset by a favorable change in product mix
reflecting increased sales of higher margin products, particularly yogurt
containers and shelf stable, multi-layer nutritional supplement containers.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased $1.7 million, or 25.4%, from $6.7 million in
fiscal 1994 to $8.4 million in fiscal 1995 and increased as a
31
<PAGE>
percentage of net sales from 5.6% to 6.2%. This increase resulted primarily from
an increase in selling and administrative staff, higher variable costs
associated with increased sales of promotional beverage cups and the recognition
of $560,545 in management bonus payments in fiscal 1995.
AMORTIZATION EXPENSE. Amortization expense increased $2.0 million, from
$1.1 million in fiscal 1994 to $3.1 million in fiscal 1995. The increase is
primarily attributable to the amortization of goodwill and non-compete
agreements related to the purchase of Miner Container.
NONRECURRING CHARGE. As described above, in fiscal 1995 the Company
incurred a nonrecurring charge of $7.3 million, $6.4 million of which related to
expenses incurred in connection with the closing of manufacturing facilities in
Sparks, Nevada and Louisiana, Missouri and consolidation of operations and
$894,000 of which reflected write-off of costs associated with a public debt
offering that was not completed by the Company.
OPERATING INCOME. Operating income decreased $14.8 million, from $17.8
million, or 15.0% of net sales, in fiscal 1994 to $3.0 million, or 2.2% of net
sales, in fiscal 1995, as a result of lower gross margins, higher selling,
general and administrative expenses and the nonrecurring charge discussed above.
INTEREST EXPENSE. Interest expense increased $3.0 million, from $5.5
million in fiscal 1994 to $8.5 million in fiscal 1995. This increase reflects
higher borrowing levels under the Company's Old Credit Agreement, primarily to
finance the purchase of Miner Container, and slightly higher interest rates.
INCOME TAXES. Income taxes decreased from $5.1 million in fiscal 1994 to a
$2.0 million benefit in fiscal 1995 due to lower earnings. The Company's
effective state and Federal tax rate was 41.0% in fiscal 1994 and 36.0% in
fiscal 1995.
INCOME BEFORE EXTRAORDINARY ITEM AND CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE. For the reasons noted above, income before extraordinary
item and cumulative effect of change in accounting principle decreased from $7.3
million in fiscal 1994 to a net loss of $3.5 million in fiscal 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity needs arise primarily from capital investments,
working capital requirements and principal and interest payments on its
indebtedness. The Company has met these liquidity requirements in the past three
fiscal years primarily with funds provided by long-term borrowings and cash
generated by operating activities.
In June 1993, Group issued $40.0 million aggregate principal amount of the
12.5% Notes and PRI entered into the Old Credit Agreement. Proceeds from the
sale of the 12.5% Notes and borrowings under the Old Credit Agreement were used
to (i) refinance $39.7 million of PRI's outstanding senior bank debt, (ii)
redeem $24.0 million aggregate principal amount of PRI's 13.5% Senior
Subordinated Notes due 1996 (the "13.5% Notes"), (iii) repurchase certain
redeemable preferred stock issued by PRI with an aggregate liquidation value of
$10.0 million and (iv) acquire warrants to purchase common stock of PRI for
$13.9 million. In December 1993, PRI borrowed an additional $22.0 million under
the Old Credit Agreement to fund a portion of the purchase price for Miner
Container. Beginning in September 1994, PRI failed to comply with certain
financial covenants under the Old Credit Agreement, which caused the interest
rate applicable to outstanding borrowings thereunder to increase to the Base
Rate plus 2.0%. On March 31, 1995, the agreement was amended to modify such
covenants, establish the interest rate applicable to outstanding borrowings to
the Base Rate plus 1.5% and shorten the maturity of the facility. Since March
1995, the Company has been in compliance with all covenants under the Old Credit
Agreement. See Notes 8 and 9 to the Company's financial statements included
elsewhere in this Prospectus.
The Company used the net proceeds of the Old Notes, among other things, to
repay all outstanding borrowings under the Old Credit Agreement and pay a
dividend to Group of approximately $31.7 million that enabled Group to redeem a
portion of the 12.5% Notes. In connection with the Financing Plan, PRI also
entered into the Senior Credit Facility, which enables PRI to borrow up to $20.0
million for general working capital purposes, subject to certain terms and
conditions. See "Description of Certain Indebtedness -- The Senior Credit
Facility," "Use of Proceeds" and "Capitalization." These transactions are part
of
32
<PAGE>
the Financing Plan which was designed to provide the Company with long-term
fixed rate financing and increase revolving credit availability. As a result of
the Financing Plan, the Company's aggregate indebtedness for borrowed money and
its interest expense has increased. During fiscal 1996, the Company's total
interest expense was $10.7 million. Based on the Company's indebtedness
outstanding on February 29, 1996 (after giving effect to the Financing Plan, but
without giving effect to borrowings under the Senior Credit Facility in excess
of $0.4 million), the Company's annualized net interest expense would be $13.4
million. As of May 31, 1996, no amounts were outstanding under the Senior Credit
Facility. The Company's scheduled principal repayments in fiscal 1997 and 1998
will total $300,000 and $950,000, respectively.
Cash provided by operating activities in fiscal 1996 and 1995 was $11.8
million and $11.5 million, respectively. In fiscal 1996, cash provided from
operations declined due to a decrease in accounts payable of $5.9 million
attributable, in part, to a reduction in inventories of $3.6 million and the
timing of payments to suppliers. Despite a net loss in fiscal 1995, the Company
had an increase in cash from operations due to a decrease in receivables of $5.7
million. This was partially offset by a decrease in accrued expenses of $3.4
million primarily due to interest and acquisition reserves. In fiscal 1994,
operating activities resulted in a net use of cash of $4.5 million. In fiscal
1994, the Company's net use of cash resulted from substantial changes in certain
working capital requirements that more than offset the favorable impact of
higher net income before non-cash charges. These changes in working capital
items primarily involved an increase in inventories of $5.3 million and a
decline in accrued expenses of over $8.2 million. The increase in inventories
reflects higher levels of inventory, including production molds, necessitated by
the growth in sales over the prior fiscal year as well as the impact of the
timing of resin deliveries. The decline in accrued expenses results from the
expenditure of financing costs in connection with the 1993 Transaction and
amounts reserved in connection with the acquisitions of Louisiana Plastics and
Miner Container to fund integration and consolidation initiatives.
Excluding the acquisitions of Louisiana Plastics and Miner Container, the
Company's capital expenditures for fiscal 1994, 1995 and 1996 were $5.6 million,
$7.9 million and $3.4 million, respectively. These expenditures primarily were
incurred to expand manufacturing capacity, including the development of molds
for new products or modified versions of existing products, and to replace and
upgrade existing equipment. PRI's estimated capital expenditures for fiscal 1997
are expected to range from $7.0 million to $10.0 million. These expenditures,
which are intended to further expand production capacity and reduce costs,
include (i) the engineering and manufacture of new production molds, (ii) the
installation of automated packaging and handling systems, and (iii) the
expansion of the Company's warehouse space.
Although there can be no assurances, the Company anticipates that its
operating cash flow, together with borrowings under the Senior Credit Facility,
will be sufficient to meet its operating expenses, projected capital
expenditures and debt service requirements as they become due.
Instruments governing the Company's indebtedness, including the Senior
Credit Facility and the Indenture, contain financial and other covenants that
restrict, among other things, the Company's ability to incur additional
indebtedness, incur liens, pay dividends or make certain other restricted
payments, consummate certain asset sales, enter into certain transactions with
affiliates, merge or consolidate with any other person or sell, assign,
transfer, lease, convey or otherwise dispose of substantially all of the assets
of the Company. Such limitations, together with the highly leveraged nature of
the Company, could limit corporate and operating activities, including the
Company's ability to respond to market conditions to provide for unanticipated
capital investments or to take advantage of business opportunities. See "Risk
Factors -- Leverage; Restrictive Covenants."
SEASONALITY
The Company's business is somewhat seasonal in nature with its fourth fiscal
quarter historically the weakest due to lower consumer demand for refrigerated
yogurt and soft drink products. The Company's working capital requirements
historically have been relatively constant throughout the year but are subject
to periodic fluctuations due to, among other things, large volume orders of
promotional beverage cups that require increased inventories.
33
<PAGE>
INCOME TAX MATTERS AND IMPACT OF CERTAIN ACCOUNTING POLICIES
Effective March 1, 1993, the Company adopted the accounting principles set
forth in SFAS 109 "Accounting for Income Taxes." SFAS 109 requires the
recognition of deferred tax assets and tax liabilities for operating loss
carryforwards and certain taxable and deductible differences between the tax
basis of an asset or liability and the corresponding amount reported for
financial statement purposes. The adoption of SFAS 109 resulted in a charge to
net income of $2.3 million in fiscal 1994. At February 29, 1996, the Company had
net operating loss carryforwards ("NOL's") of approximately $12.3 million which
will expire at various dates through 2011. Such NOL's are available to reduce
future taxable income for Federal income tax purposes under a tax sharing
agreement with HPH. See "Certain Transactions -- Tax Sharing Agreement."
In connection with the acquisition of Miner Container, PRI agreed to
indemnify the former owners for up to $2.3 million of tax liabilities arising
from the operations of an affiliate of Miner Container. During fiscal 1996 the
Company paid approximately $1.5 million of this obligation. The Company is
unable to estimate whether or to what extent it will be obligated to make future
payments in respect of such liabilities. Any payment made by the Company will
result in a corresponding increase in the excess of purchase price over the fair
market value of the net assets acquired attributed to this acquisition. See Note
2 to the Company's financial statements included elsewhere in this Prospectus.
INFLATION
The principal component of the Company's products is resin. In recent years,
resin prices have fluctuated, in part, due to industry capacity, consumption
levels of resins and changes in the cost of feed stocks. In the event of
significant inflationary pressures, the cost of the Company's raw materials,
including resins, may increase. Under supply agreements with customers that
accounted for approximately 57% of the Company's net sales in fiscal 1996, the
Company has the ability to pass through resin price increases (as well as the
obligation to credit any resin price decreases). In the case of sales which are
not made pursuant to supply agreements containing such pass-through provisions,
the Company historically has passed on increases in resin prices (as well as
decreases in resin prices) to its customers through price adjustments. Sales
prices for promotional beverage cups are generally determined in advance of a
promotion and, accordingly, the Company bears the risk of resin price increases
while producing such products. Because plastic resin is the principal component
in the Company's products, the Company's financial performance is materially
dependent on its ability to pass resin price increases on to its customers
through contractual arrangements or otherwise. There can be no assurance that a
significant increase in resin prices would not negatively impact the Company.
See "Risk Factors -- Exposure to Fluctuations in Resin Cost and Supply."
34
<PAGE>
BUSINESS
GENERAL
The Company is a leading developer, manufacturer and marketer of rigid
plastic packaging, serving primarily as a supplier of customized containers for
national branded consumer products. The Company is the largest domestic
manufacturer of refrigerated yogurt containers, shelf stable, multi-layer
(impermeable to air and moisture) containers for nutritional supplements and
frosting containers. The Company also believes that it is the largest designer,
manufacturer and supplier of promotional beverage cups in the United States,
marketing these products primarily to the fast-food and beverage industries. For
the fiscal year ended February 29, 1996, the Company generated net sales of
$133.8 million. Approximately 82.8% of the Company's net sales in such period
were attributable to rigid plastic packaging and 17.2% to promotional beverage
cups. In fiscal 1996, the Company produced almost four billion plastic
containers, cups and lids.
The Company's packaging products are sold to over 450 customers, including
manufacturers of national branded food, dairy and pharmaceutical products such
as General Mills, including Yoplait, Dannon, Ross Labs, Haagen Dazs, Procter &
Gamble and Pillsbury. The Company is also a major supplier of promotional
beverage cups to over 150 companies in the fast-food and beverage industries,
including McDonald's, Burger King, Pizza Hut, Hardee's, Taco Bell, Coca-Cola and
Pepsi.
The Company's rigid plastic packaging business has benefitted from, and is
positioned to continue to participate in, the growth of the markets for its
customers' products, particularly refrigerated yogurt and nutritional
supplements. According to data compiled by Find/SVP, between 1991 and 1994 U.S.
retail yogurt sales grew at a compound annual rate of 10.6%, reaching
approximately $2.0 billion in 1994. This expansion of the U.S. yogurt market
resulted, in part, from new product innovations such as lower fat and lower
calorie product offerings, the introduction of new flavors and consistencies,
the increasing recognition of yogurt's nutritional benefits and innovative
packaging solutions targeting niche market segments. Despite this growth, the
Company believes U.S. yogurt consumption still lags behind that of Europe.
During 1991 and 1992, the most recent periods examined by Find/SVP, the per
capita consumption of yogurt in Europe was six times that in the U.S. Net sales
of Ross Labs' ENSURE-Registered Trademark- ready-to-drink nutritional supplement
increased 20% in 1995, reflecting, in part, the aging of the U.S. population and
the corresponding growth in the market for such products. Based on these
industry and demographic factors, management expects the markets for
refrigerated yogurt and nutritional supplements to continue to grow for the
foreseeable future.
COMPETITIVE STRENGTHS
The Company attributes its leading market positions to the following
factors:
WELL ESTABLISHED CUSTOMER RELATIONSHIPS. The Company has long-standing
customer relationships, in many instances as a sole source supplier under
multi-year supply agreements. Yoplait, Dannon and Ross Labs, which accounted
for over 50% of fiscal 1996 sales, have been customers of PRI since 1979,
1984 and 1991, respectively. In addition, the Company's established position
with its largest customers is evidenced by its status as the sole supplier
of such customers' most popular sized containers, including the six ounce
container for Yoplait, the four, six and eight ounce containers for Dannon
and the eight ounce multi-layer container for Ross Labs'
ENSURE-REGISTERED TRADEMARK- nutritional supplement. PRI's status as the
sole supplier of such containers positions the Company to benefit from
future growth in these product markets. In recognition of the Company's
performance, Ross Labs recently awarded PRI certified supplier status in
Ross Labs' Partners in Excellence Program.
CUSTOMER INTEGRATED PRODUCT DEVELOPMENT AND MANUFACTURING. The Company
has worked closely with its customers in all phases of product design and
production and has invested heavily in customer-driven research and
development activities. For example, PRI developed the
Autoweld-Registered Trademark- system, a technology that enables Yoplait to
assemble, fill and seal its distinctive cone-shaped container. Yoplait
leases from the Company the equipment necessary to operate the
Autoweld-Registered Trademark- system for use in Yoplait's production
facilities. For Dannon, the Company recently designed and developed a four
ounce yogurt cup targeted for the food service and children's markets. The
Company also worked successfully with Ross Labs to develop the shelf stable,
multi-layer packaging applications for its nutritional supplements
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and infant formula product lines. In promotional cups, the Company has
worked closely with several of its promotional beverage cup customers to
develop new and distinctive high-definition graphic designs. In 1993, for
example, the Company was the winner of the McDonald's Performance Award for
the "Jurassic Park" promotional cup. In addition, the Company's facilities
are located, in most cases, adjacent to or within close proximity to its
largest customers' manufacturing operations, which has created manufacturing
and distribution efficiencies. As more of the Company's customers adopt
"just-in-time" inventory systems, these efficiencies have become
increasingly important.
STATE-OF-THE-ART MANUFACTURING TECHNOLOGIES. The Company, through its
five manufacturing facilities, has developed production capabilities in
injection molding, thermoforming and pressure forming and believes it is the
only manufacturer in the rigid plastic packaging industry with capabilities
in all three such processes. Because each of these processes offers
advantages in achieving certain performance features such as structural
strength, rigidity and graphics retention, the Company is able to be highly
responsive to customer requirements and preferences by offering a broader
range of packaging alternatives than its competitors. The Company's three
technical facilities feature design, engineering, prototype production,
graphics and diagnostic capabilities. Management believes that the Company's
in-house capability to design, engineer and build production molds
distinguishes the Company from many of its competitors. This capability
provides PRI with an important competitive advantage in maintaining product
quality as well as in controlling design, development and maintenance costs.
To satisfy the rigorous quality control standards of its customers, the
Company maintains a comprehensive quality assurance program. During fiscal
1996, based on internal estimates, the return rate for all of the Company's
products was less than one quarter of one percent.
ADVANCED GRAPHICS TECHNOLOGIES. Management believes that the Company's
MasterColor printing system, which produces high definition graphics
utilizing a computer controlled nine color press, is the most
technologically advanced color processing system in the rigid plastic
packaging and promotional beverage cup industries. The MasterColor system
enables the Company to create photograph quality images on plastic
containers at speeds comparable to conventional high speed printers and thus
provides an important competitive advantage. Although the Company employs
the MasterColor system primarily in the printing of promotional beverage
cups, management believes significant opportunities exist to apply this
technology to create more sophisticated and colorful designs for other forms
of plastic packaging as manufacturers of branded products seek to enhance
and distinguish the image of their products on store shelves.
LOW COST PRODUCTION. The Company believes that its manufacturing costs
are among the lowest in its industry primarily due to: (i) the economies of
scale provided by the Company's high volume production; (ii) the Company's
use of state-of-the-art molds and manufacturing techniques that minimize
resin requirements, reduce waste and enhance productivity; (iii) the
Company's ability to obtain favorable resin pricing based on its substantial
purchase requirements; (iv) the low transportation costs resulting from the
proximity of the Company's six manufacturing and warehouse facilities to its
major customers; and (v) the Company's continual efforts to achieve
operating efficiencies and increase productivity. Over the past several
years, the Company has significantly upgraded and automated its
manufacturing operations, consolidated certain manufacturing facilities and
centralized all of its administrative functions to reduce costs and increase
efficiency.
The Company was founded in 1984 to capitalize on the growth in outsourcing
among nationally branded food producers for their packaging needs. Since its
formation, the Company has made six strategic acquisitions which have expanded
the Company's product mix and enhanced its competitive position. Most recently,
during fiscal 1994, the Company acquired Louisiana Plastics and substantially
all the assets of Miner Container, which established market share leadership in
promotional beverage cups, increased injection molding capacity and packaging
sales and provided the MasterColor graphics technology.
The Company believes that the fundamental benefits of plastic relative to
other packaging materials, including (i) design versatility, (ii) light weight
and low cost, (iii) strength and durability, (iv) insulating
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ability and (v) clarity, will promote opportunities for growth in sales and
profitability in both the rigid plastic packaging and promotional beverage cup
industries. The Company further believes it is well-positioned to capitalize on
these opportunities through its advanced, low-cost, customer-oriented
operations.
STRATEGY
The Company's strategy is to enhance its position in the industry by: (i)
participating in the growth being experienced by its largest customers by
continuing to meet their increasing packaging needs; (ii) strengthening its
relationships with these existing customers by continuing to provide new
value-added products and services; (iii) expanding into new packaging and
promotional cup products and markets; and (iv) continuing to seek opportunities
to reduce manufacturing costs and enhance productivity.
GROWTH WITH EXISTING CUSTOMERS. The Company will continue to focus on
meeting the rigid plastic packaging needs of Yoplait, Dannon and Ross Labs
to keep pace with the growth in the markets for their products. Based in
part on growth in domestic consumption of refrigerated yogurt, the Company's
net sales to Yoplait and Dannon, who rely on the Company to provide
substantially all of their single-serving yogurt containers, have increased
at a compound annual growth rate of over 19% during the last four years. In
addition, the Company's net sales as the sole source supplier of multi-layer
containers to Ross Labs for its ENSURE-REGISTERED TRADEMARK- nutritional
supplement and SIMILAC-REGISTERED TRADEMARK- infant formula grew at a
compound annual rate in excess of 29% during the last four years.
NEW APPLICATIONS FOR EXISTING CUSTOMERS. The Company intends to expand
its relationships with existing customers by developing new applications
based on its extensive manufacturing capabilities and advanced graphics
technologies. For example, the Company applied thin-wall technology, which
combines structural strength with reduced cost and weight, to develop
Dannon's six and eight ounce containers. In addition, the Company developed
the six ounce multi-layer container presently used by Yoplait which features
a glossy exterior finish designed to enhance graphics.
NEW PRODUCTS AND MARKETS. The Company plans to expand into related
product lines serving new markets with several products under development in
both rigid plastic packaging and promotional beverage cups. With respect to
packaging, management believes there will be significant opportunities to
expand the Company's shelf stable, multi-layer packaging to the extent
plastic containers are substituted for metal, glass and composites for
products requiring extended shelf life, such as condensed soups, vegetables,
baby foods and pet foods. In promotional beverage cups, the Company recently
entered the professional sports and college stadium cup market and also has
under development a number of new products, including a new cup for the
gourmet coffee market. In addition, in both packaging and promotional cups,
the Company intends to leverage its advanced graphics capabilities by
introducing new products which highlight its high definition printing and
quality designs. The Company believes these initiatives will reinforce its
reputation as an innovative, value-added marketing partner for its customers
while adding to future profitability.
CONTINUED COST REDUCTION AND PRODUCTIVITY ENHANCEMENTS. The Company
continually seeks opportunities to reduce its costs and improve productivity
to maintain its competitive position as a low-cost manufacturer. For
example, following the acquisition of Miner Container and Louisiana
Plastics, the Company selectively consolidated certain manufacturing
facilities and centralized administrative functions. During the first
quarter of fiscal 1997, the Company completed the consolidation of its
Lenexa, Kansas printing operation into the Kansas City, Missouri facility to
reduce overhead and transportation costs and increase manufacturing
productivity. In fiscal 1997, the Company intends to initiate projects to
further reduce costs and enhance productivity, by, among other things,
increasing the automation of its packaging and handling systems.
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PRODUCTS AND CUSTOMERS
The Company's products are divided into two categories: rigid plastic
packaging and promotional beverage cups.
RIGID PLASTIC PACKAGING
The Company serves a number of niche markets within the rigid plastic
packaging industry with products that include various sizes of refrigerated
yogurt containers, multi-layer containers for nutritional supplements and infant
formula and frosting cans and lids. The Company also produces container lids for
manufacturers of cottage and ricotta cheeses, whipped toppings, teas, potato
chips, dry soups, margarine, ice cream, cookie dough and dry roasted nuts.
The Company sells its products to over 450 customers throughout the United
States, including the following manufacturers of nationally branded products:
<TABLE>
<S> <C>
General Mills Ross Labs (a division of Abbott Labs)
Procter & Gamble Yoplait (a division of General Mills)
The Dannon Company General Foods
Pillsbury Haagen Dazs
Tetley Tea Company Land O'Lakes
</TABLE>
The Company supplies substantially all of the single-serving yogurt
containers used by Dannon and Yoplait, which in 1995 had a combined 58.2% share
of the U.S. refrigerated yogurt market according to Information Resources, Inc.,
a market research firm. The Company's net sales to these two customers have
grown at a compound annual rate of over 19% during the last four years. The
Company is the sole source supplier of the multi-layer plastic container used by
Ross Labs for its ENSURE-REGISTERED TRADEMARK- nutritional supplement and
SIMILAC-REGISTERED TRADEMARK- infant formula product lines. Net sales to Ross
have grown at a compound annual rate in excess of 29% during the past four
years. The Company is also the sole supplier of plastic frosting cans and lids
for Pillsbury and Procter & Gamble and supplies substantially all the frosting
containers and lids used by General Mills.
The Company believes that the markets for yogurt and nutritional supplements
will continue to grow in the foreseeable future, providing the Company with
significant opportunities to expand its business. According to Find/SVP, U.S.
retail sales of refrigerated yogurt grew at a compound annual rate of 10.6% over
the last three years. Despite this growth, the Company believes U.S. yogurt
consumption still lags behind that of Europe. The U.S. yogurt industry is
aggressively promoting yogurt in an effort to raise U.S. consumption to European
levels where, during 1991 and 1992, the per capita consumption was 25.9 pounds
versus 4.3 pounds in the U.S. New products, including yogurt/mix-ins and low
fat/calorie offerings, have served to increase the market. New flavors such as
tropical fruit and indulgent flavors like chocolate and amaretto are helping to
expand the yogurt product category, as are new products targeted at children and
specific ethnic groups. Because Ross Labs' ENSURE-REGISTERED TRADEMARK-
nutritional supplement is most often prescribed for the elderly, its consumption
growth should be helped by the aging of the U.S. population.
The only shelf stable packaging products presently manufactured by the
Company are the containers for the nutritional supplements and infant formula
produced by Ross Labs. Ross initially marketed these products in metal
containers but began switching to the Company's plastic containers (with metal
lids) in 1991. Ross Labs has advised the Company that it made the switch for
several reasons, including reduced freight costs due to the lower weight of
plastic containers, lower return rates based on the ability of plastic
containers to resist denting and consumer preference. The Company believes that
Ross Labs has converted the packaging for substantially all of its
ENSURE-REGISTERED TRADEMARK- nutritional supplement product to its shelf stable
plastic containers. In 1992, Ross Labs began using the Company's shelf stable
plastic container for a portion of its SIMILAC-REGISTERED TRADEMARK- infant
formula product line. The Company believes that the use of plastic containers by
Ross Labs for SIMILAC-REGISTERED TRADEMARK- infant formula has increased during
the past four years, but that such containers continue to account for only a
minor portion of Ross Labs' total sales of such products. In management's
opinion, the continued conversion of these containers from metal to plastic
provides the Company with a significant opportunity for growth. Management also
expects that there will be significant opportunities to expand the
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Company's product line of shelf stable multi-layer packaging to the extent
plastic containers are substituted for metal, glass and composite containers for
other products requiring extended shelf life, such as condensed soups,
vegetables, baby foods and pet foods. The Company is also marketing its
packaging capabilities to food and other companies that currently use metal,
glass and composite containers.
PROMOTIONAL BEVERAGE CUPS
The Company is engaged in the design, manufacture and marketing of a wide
assortment of promotional beverage cups. Management believes the market for
promotional beverage cups has expanded rapidly in recent years and that the
Company's superior graphics technology, low-cost molding capabilities and new
product innovation have made it the largest manufacturer of promotional beverage
cups in the United States. The Company's promotional cup products include
beverage cups ranging in size from 12 ounces to 64 ounces. In addition, the
Company recently entered the professional sports and college stadium cup market
and has under development a number of new products, including a new product for
the gourmet coffee market. The Company believes that its ability to leverage its
unique printing and design capabilities will enable it to continue to develop
innovative, value-added products.
Promotional beverage cups historically have been marketed directly to
fast-food and beverage companies, such as McDonald's, Burger King, Pizza Hut,
Hardee's, Taco Bell, Coca-Cola and Pepsi, as well as to specialty distributors
for resale to fast-food and beverage companies, sports stadiums, movie theaters
and food service companies. In recent years, the Company has manufactured
promotional beverage cups featuring blockbuster movie releases and professional
sports personalities for customers such as McDonald's (as one of the primary
suppliers for its "Jurassic Park" and NBA Legends promotions) and Burger King
(as a supplier for the "Lion King" promotion). The promotional beverage cup
business is seasonal and generally peaks with consumption of soft drinks during
the spring and summer months. This business is primarily supported by beverage
companies attempting to stimulate syrup sales to fast-food operators and by
fast-food companies featuring promotional cups with theme action figures and
personalities in connection with campaigns linked to the release of major motion
pictures or sporting events. In fiscal 1996, Hardee's, McDonald's and a
specialty distributor with whom the Company no longer has a relationship
accounted for the majority of the Company's promotional beverage cup sales. See
"-- Marketing and Sales."
MARKETING AND SALES
The Company directs its sales effort by utilizing its technical expertise,
diverse production capabilities (thermoforming, injection molding and pressure
forming) and graphics capabilities to serve the needs of its new and existing
customers. The Company's comprehensive, multiple-channel sales and marketing
approach includes both the personnel in its technical centers as well as its
direct sales force. By utilizing the capabilities provided by its technical
centers and staff, the Company is able to create prototypes when introducing new
products or concepts to its customers. Recently, to complement its technical
marketing capabilities, the Company has increased the number of its direct sales
representatives both to strengthen existing relationships and develop new
relationships. Sales representatives marketing rigid plastic packaging solutions
focus on national branded consumer food producers, while representatives selling
promotional beverage cups focus on soft drink distributors, fast food chains and
stadium promoters. The Company's emphasis on a direct sales approach represents
a strategic initiative to reduce the use of indirect sales channels, such as
specialty distributors, and strengthen relationships with end customers. In
March 1996, a promotional beverage cup distributor terminated its relationship
with the Company in order to distribute on a sole source basis plastic beverage
cups produced by another manufacturer. In fiscal 1996, this distributor
accounted for approximately 4.7% of the Company's net sales. The Company has
established contacts with this distributor's end use customers through its
practice of direct shipment, and is aggressively pursuing these customers on a
direct basis. The Company does not believe that the termination of its
relationship with this distributor will materially and adversely affect its
business.
Customer relationships in the food, dairy and pharmaceutical packaging
industry generally are developed and maintained over extended periods. These
relationships develop because of the high degree of coordination necessary
between packaging suppliers and their customers to ensure that packaging parts
conform precisely to the tolerances of the high speed automated filling systems
commonly employed by customers. The integration of product design and
manufacturing along with inventory management and
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<PAGE>
distribution systems provide suppliers, such as PRI, with a competitive
advantage in maintaining and expanding business with established customers.
Management believes that the Company's existing customers, which include several
of the leading consumer products companies in the United States, represent an
important source of new business opportunities through the modification of
existing packaging and the development of new applications.
Pursuant to multi-year supply agreements with Yoplait, Dannon and Ross Labs,
PRI manufactures and sells substantially all of the plastic containers required
for the yogurt products of Dannon and Yoplait and the nutritional supplement and
infant formula products of Ross Labs. The prices provided for in these supply
agreements generally are based on volume levels and are subject to (i)
adjustments for increases or decreases in resin prices and (ii) annual
negotiated adjustments relating to cost elements other than resin price. The
products manufactured under these agreements generally require the use of
proprietary tooling and molds, some of which are owned by the Company. In
certain cases, the tooling and molds owned by the Company are subject to
purchase options which may be exercised by the customer upon termination of the
applicable supply agreement. Certain of these supply agreements prohibit the
Company from selling similar containers to the customer's competitors. The
Company's current supply agreement with Dannon for eight ounce containers, which
commenced in January 1992, expires in December 1996. The Company's current
supply agreements with Dannon for four ounce containers, which commenced in June
1992, and six ounce containers, which commenced in March 1991, expire in
December 1997. The Company's current supply agreement with Yoplait commenced in
June 1992 and expires in July 1997. The current supply agreement with Ross Labs
was entered into in January 1991 and expires in December 1996, but may be
terminated by Ross Labs upon six month's prior written notice to PRI. All of
PRI's supply agreements require PRI to satisfy certain product quality
standards. Yoplait, Dannon and Ross Labs have been customers of the Company (or
businesses acquired by the Company) since 1979, 1984 and 1991, respectively.
While PRI anticipates that, upon expiration, it will be able to extend or renew
its existing supply agreements with its customers on substantially similar
terms, no assurance can be given that it will be able to do so.
MANUFACTURING
The Company has production capabilities in injection molding, thermoforming
and pressure forming, and believes it is the only manufacturer in the rigid
plastic packaging industry with capabilities in all three processes. Because
each of these processes offers advantages in achieving certain performance
features such as structural strength, rigidity and graphics retention, the
Company is able to be highly responsive to customer requirements and preferences
by offering a broader range of packaging alternatives than its competitors.
During fiscal 1996, approximately 65% of the Company's revenues were derived
from products manufactured using the injection molding process, including all of
the Company's promotional beverage cups. Thermoforming is currently used to
manufacture substantially all of the packaging produced for Yoplait and Ross
Labs. The Company employs the pressure forming process in the manufacture of
certain relatively low-volume products.
Management believes that the Company is the largest manufacturer of
injection molded products in the domestic rigid plastic packaging and
promotional beverage cup industries. Injection molding involves the injection of
molten plastic into multi-cavity male and female molds at extremely high
temperatures and the application of pressure to force the plastic to take the
desired form. The Company operates 89 high speed injection molding machines
utilizing modern multi-cavity hot and cold runner molds. The Company's four 660
ton clamp capacity injection molding machines are designed specifically to
produce lightweight, thin-walled parts and are among the most technologically
advanced machines of their kind. They are controlled by micro-processors that
provide statistical process control and state-of-the-art diagnostic
capabilities. Unlike most of its competitors, the Company has the in-house
capability to design, test and produce production molds for its injection
molding machines.
Injection molding generally provides more flexibility in part design than
other forming processes. The use of male and female molds allows both interior
and exterior surfaces to incorporate special design features. In addition,
injection molding results in highly uniform parts with surfaces that can be more
easily textured, pigmented and decorated. Further, injection molding requires
relatively little floor space, thus reducing associated overhead costs.
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In the thermoforming process, an extruded sheet formed from plastic resins
is rolled over a multi-cavity female steel mold and heated to its precise
melting point. Parts are then formed and cut with a vacuum mold in a single
operation. As with injection molding, the process concludes with the molded
product being ejected for automated handling and processing. Thermoforming
employs molds with higher cavitations than are presently feasible in other
manufacturing processes and, therefore, is a low-cost means of manufacturing
customized packaging products for high volume markets. Moreover, thermoforming
equipment can be retooled relatively quickly and inexpensively, making the
process well-suited for production runs requiring fast changeover times. The
Company has developed thermoforming technologies that enable substantially all
unused portions of the extruded sheet to be immediately recycled into the
manufacturing process, resulting in reduced product cost and waste.
When employed in conjunction with co-extrusion, thermoforming permits the
manufacture of shelf stable plastic containers with excellent rigidity and heat
resistance properties. Under this process, materials that combine to incorporate
the precise properties required by the customer are co-extruded into a multi-
layer sheet and then thermoformed into a container. In the manufacture of shelf
stable plastic packaging, the co-extruded sheet contains a co-polymer material
such as vinyl alcohol which effectively prevents gas and moisture from
permeating a container. The Company maintains seven thermoforming lines, six of
which employ co-extrusion. These lines are used principally in the manufacture
of yogurt containers and packaging for nutritional supplements and infant
formula. The Company believes that its thermoforming and co-extrusion abilities
are among the most advanced in the rigid plastic packaging industry.
In the pressure forming process, an extruded plastic sheet is heated to just
below its melting point and rolled over a multi-cavity steel mold. As the still
solid sheet passes over the mold, a plug presses the material into the mold and
the forming is completed by air pressure. While pressure forming cannot employ
the highest cavity molds used in thermoforming, pressure forming molding cycles
are shorter. As a result, pressure forming offers cost advantages similar to
those of thermoforming. Like thermoforming, however, pressure forming provides
limited design flexibility. In addition, because of sidewall thickness
variations, it is more difficult to texture or print on pressure molded parts.
Pressure forming is generally favored in producing packaging products that
require structural strength and rigidity as well as thin sidewalls.
Another important element of the Company's manufacturing technologies is its
Autoweld-Registered Trademark- system. Autoweld-Registered Trademark- is a
spin-welding process that joins pre-formed packaging parts with friction. The
Company's most widely distributed product assembled with the
Autoweld-Registered Trademark- process is the Yoplait yogurt container which is
filled, assembled and sealed with equipment designed and owned by the Company.
Yoplait maintains such equipment at its various production facilities under
leasing agreements with the Company. The Company believes that this joint
manufacturing effort represents a substantial competitive advantage in serving
Yoplait's current and future needs.
The Company has the ability to produce state-of-the-art graphics on plastic
packaging and promotional cups through its nine color MasterColor printing
system. MasterColor uses advanced computer technology and color processing to
create photograph-like images on pre-formed plastic containers and cups. The
Company has seven MasterColor printing machines. Management believes that the
MasterColor system has provided and will continue to provide the Company with a
competitive advantage in the promotional beverage cup market. In addition,
although it is used primarily in the manufacture of promotional beverage cups,
management believes that the MasterColor printing system may also be employed to
create more sophisticated and colorful designs to enhance the appeal of other
packaging products.
The Company, like its competitors, is subject to rigorous quality control
standards imposed by its customers. The Company has implemented a comprehensive
quality assurance program, which includes computer-aided testing of parts for
size, color, strength and, where appropriate, barrier properties. Using advanced
laser measuring technology as well as state-of-the-art high speed vision
systems, the Company is able to satisfy and exceed the most demanding customer
requirements. Statistical quality control methods are also used to promote total
customer satisfaction. Based on internal estimates, the return rate for the
Company's products during fiscal 1996 was less than one quarter of one percent.
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The Company's manufacturing operations are conducted in five facilities. The
Company's geographic coverage and the proximity of its facilities to major
customers reduce transportation costs and enable the Company to more effectively
serve its customers, many of which maintain "just-in-time" inventory systems.
TECHNICAL CENTERS
The Company's three technical centers are staffed with approximately 56
full-time personnel and feature extensive in-house design, engineering, tooling,
prototype production, graphics and processing capabilities utilizing CAD/CAM
technology. In addition to overseeing the ongoing maintenance and performance of
the Company's manufacturing operations, these technical centers provide key
support for the Company's marketing efforts. In this regard, the Company's
in-house design and production engineers work closely with existing and
potential customers in the preliminary stages of product design and development,
in many instances using single cavity thermoforming and injection molding
machines which are dedicated to product research and development to test
prototype molds and packaging parts. For example, the Company developed the
Autoweld-Registered Trademark- process and related equipment to enable Yoplait
to assemble, fill and seal its distinctive cone-shaped container. Substantially
all of the production molds used by the Company's injection molding and pressure
forming machines are designed and manufactured at the Company's New Vienna, Ohio
technical center. Thermoforming molds are designed by personnel at the Company's
Coleman, Michigan center and outsourced for fabrication to various tooling shops
with which the Company has long-established relationships. Utilizing the
thermoforming process, the Company, in conjunction with Ross Labs, developed
multi-layer packaging applications for Ross Labs' ENSURE-REGISTERED TRADEMARK-
nutritional supplement and SIMILAC-REGISTERED TRADEMARK- infant formula product
lines. The Company's Lenexa, Kansas technical center supports the Company's
graphics and printing operations with color separation and processing
facilities. In fiscal 1996, the Company spent approximately $2.1 million on
research and development activities. Management believes that the Company's
in-house design, engineering and graphics capabilities are among the most
extensive and sophisticated in the industry and significantly reduce the
Company's tooling and equipment costs as well as product development time.
COMPETITION
The Company's business is highly competitive, the degree of competition
varying with the product. Major competitive factors in the Company's business
are product quality and differentiation, graphics design and print quality,
innovation, service and price. As more companies adopt "just-in-time" inventory
systems, delivery lead time has also taken on increased importance. Since the
Company's products are shipped by customers' trucks or common carrier, the
proximity of the manufacturing facility to the customer's plant can
significantly affect the price of products. The locations of the Company's
facilities make it well-positioned to serve national markets. See "Business --
Competitive Strengths" and "-- Facilities." Because the Company's products are
bulky and shipping costs are relatively high, foreign competition has not been
an important factor.
The Company's main competitors in the rigid plastic packaging business are
Landis Plastics, Inc., Airlite Plastics Company, Polytainers Inc. and Fabri-Kal
Corp. It also competes, to a lesser extent, with Mount Vernon Plastics, a
subsidiary of Reynolds Metals Co. In the promotional beverage cup business, the
Company's principal competitors are Packer Plastics, Berry Sterling, Pescor,
Canada Cup, a division of James River Corp. of Virginia, and Sweetheart Cup
Company Inc.
RAW MATERIALS
The raw materials used by the Company for the manufacture of plastic
containers and promotional beverage cups are primarily resins in pellet form
such as polyethylene, polypropylene and polystyrene. The Company's resin
supplies are purchased under agreements with several suppliers for unspecified
quantities. The price the Company pays for resin is determined at the time of
purchase. The Company believes that its resin volume requirements are among the
largest in the industry, and that its ability to purchase such materials in
large quantity shipments enables it to obtain favorable pricing.
Most of the plastic resins used by the Company are available from a variety
of sources. The Company's current supply agreement with Ross Labs requires that
it purchase one of several of the resins required for the shelf stable,
multi-layer containers that the Company manufactures for Ross Labs exclusively
from
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<PAGE>
Exxon. During fiscal 1996, these resins accounted for approximately 5.1% of the
resins purchased by the Company. The Company has relied on Exxon as the sole
source supplier of this particular resin since it began manufacturing products
for Ross Labs in 1991 and has no reason to believe that Exxon will not continue
to supply the Company with this resin. However, there can be no assurance that
Exxon will be able to continue to supply the Company with adequate amounts of
this resin on a timely basis in the future to allow the Company to meet its
production requirements for Ross Labs containers. The unanticipated loss of
Exxon as a supplier or a delay in its shipments could have a material adverse
effect on the Company's business, financial condition and results of operations.
PRI maintains a renewable one-year supply contract with Exxon which is scheduled
to expire on February 28, 1997. With the exception of its relationship with
Exxon, the Company does not believe that it is materially dependent upon any
single source for any of its raw materials. The Company anticipates that it will
be able to purchase sufficient quantities of resin for the foreseeable future.
However, should any of its suppliers fail to deliver under their arrangements,
the Company would be forced to purchase raw materials on the open market, and no
assurances can be given that it would be able to make such purchases at prices
which would allow it to remain competitive. See "Risk Factors -- Exposure to
Fluctuations in Resin Cost and Supply."
Over one-half of the Company's net sales in fiscal 1996 were under
multi-year customer supply agreements which generally allow the Company to pass
through increases in resin prices (and obligate the Company to pass on resin
price decreases) to customers. See "Risk Factors -- Exposure to Fluctuations in
Resin Cost and Supply." Such pass-through provisions do not pertain to the
Company's sales of promotional beverage cups which are generally made on a
purchase order basis. The risk associated with resin price fluctuations in
promotional beverage cup sales is mitigated in many instances in which the time
period between product order and delivery is relatively short (approximately 3
to 6 weeks). Promotional beverage cups accounted for 17.2% of the Company's net
sales during fiscal 1996.
ENVIRONMENTAL MATTERS AND GOVERNMENT REGULATION
The past and present operations of the Company and the past and present
ownership and operations of real property by the Company are subject to
extensive and changing federal, state and local environmental laws and
regulations pertaining to the discharge of materials into the environment, the
handling and disposition of wastes or otherwise relating to the protection of
the environment. The Company believes that it is in material compliance with
applicable environmental laws and regulations. However, the Company cannot
predict with any certainty that it will not in the future incur liability under
environmental statutes and regulations with respect to contamination of sites
formerly or currently owned or operated by the Company (including contamination
caused by prior owners and operators of such sites) and the off-site disposal of
hazardous substances. See "Risk Factors -- Environmental Matters."
The FDA regulates the material content of direct-contact food containers and
packages, including certain thinwall containers manufactured by the Company. The
Company uses approved resins and pigments in its direct-contact food products
and believes it is in material compliance with all such applicable FDA
regulations.
The Company, like all companies in the plastics industry, is also subject to
federal, state, local and foreign legislation designed to reduce solid wastes by
requiring, among other things, plastics to be degradable in landfills, minimum
levels of recycled content, various recycling requirements, disposal fees and
limits on the use of plastic products. In addition, various consumer and special
interest groups have lobbied from time to time for the implementation of
additional environmental protection measures. The Company does not believe that
the legislation promulgated to date and such initiatives to date will have a
material adverse effect on its business. There can be no assurance that any such
future legislative or regulatory efforts or future initiatives would not have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Risk Factors -- Environmental Matters."
EMPLOYEES
As of February 29, 1996, the Company had approximately 950 employees, of
which 853 were engaged in production or production support, 56 in research,
development and engineering, 19 in marketing and sales
43
<PAGE>
and 22 in corporate management and administration. None of the Company's
employees are covered by a collective bargaining agreement. The Company believes
that its relations with employees are satisfactory, and it has not experienced
any strikes or work stoppages.
FACILITIES
The Company's operations are conducted through eight facilities in seven
states within the United States. The Company's principal executive offices are
located in Lake Forest, Illinois and are leased by the Company. The Company's
facilities are designed to provide for efficient manufacturing, material
handling and storage of its products and no facility is materially
underutilized. Management believes that substantially all of the Company's
property and equipment is in good condition and that it has sufficient capacity
to meet its current manufacturing and distribution requirements.
The following table provides certain information regarding the Company's
operating facilities.
<TABLE>
<CAPTION>
BUILDING
FACILITY OWNERSHIP SQ. FEET FUNCTION LEASE EXPIRATION
- ------------------- ---------- --------- -------------------------------- ----------------------
<S> <C> <C> <C> <C>
Carson, CA Leased 12,215 Warehouse October 31, 1997
Coleman, MI Owned 85,966 Manufacturing/Technical Center --
Ft. Worth, TX Owned 40,000 Manufacturing --
Kansas City, MO Leased 254,000 Manufacturing October 31, 2005
Lenexa, KS Leased 7,500 Technical Center December 31, 1996
Mt. Carmel, PA Owned 141,376 Manufacturing --
New Vienna, OH Owned 176,500 Manufacturing --
New Vienna, OH Owned 63,160 Technical Center --
</TABLE>
The Company owns a 182,463 square foot building in Louisiana, Missouri that
is currently leased to a third party. In addition, the Company is a lessee under
long-term leases for a 133,014 square foot manufacturing facility that PRI
formerly occupied in Cedar Grove, New Jersey and approximately 7,800 square feet
of office space that the Company has vacated in Lake Forest, Illinois. PRI has
entered into a sub-lease with respect to the Cedar Grove facility that is
scheduled to expire concurrently with the Company's underlying lease in June
2000. The Company has also entered into a sub-lease with respect to a portion of
its unoccupied office space in Lake Forest, Illinois. See Note 6 to the
Company's financial statements included elsewhere in this Prospectus.
PATENTS AND TRADEMARKS
The Company owns a number of patents and trademarks. However, the Company
believes that the design, innovation and quality of its products and its
relationships with its customers are substantially more important to the
maintenance and growth of its business than its patents and trademarks.
Accordingly, the Company does not believe that its business is dependent to any
material extent upon any single patent or group of patents.
LITIGATION
Management does not believe that any of the litigation in which the Company
is currently engaged will have a material effect on the Company's business,
financial condition or results of operations.
COMPANY HISTORY
PRI was formed as a Delaware corporation in 1984. Group is a Delaware
corporation that was formed in 1993 at which time PRI became a wholly-owned
subsidiary of Group.
44
<PAGE>
Since its formation, PRI has completed a series of strategic acquisitions
designed to expand and complement its product lines and manufacturing
capabilities. The following table provides certain information with respect to
such acquisitions.
<TABLE>
<CAPTION>
ACQUISITION DATE BUSINESS ACQUIRED MANUFACTURING TECHNOLOGIES
- ------------------ -------------------------------------------------- --------------------------------
<S> <C> <C>
October 1984 Certain assets of Universal Packaging, a division Injection Molding
of Kraft, Inc.
October 1986 Buckeye Molding Company, a subsidiary of Aluminum Injection Molding
Company of America Pressure Forming
April 1987 Vercon Corporation, a division of Fina Oil and Thermoforming
Chemical Company
October 1988 Captainer Corporation, a subsidiary of Injection Molding
Owens-Illinois, Inc.
March 1993 Louisiana Plastics Corporation, a subsidiary of Injection Molding
Bemis Corporation
December 1993 Miner Container Injection Molding
MasterColor Printing System
</TABLE>
45
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
Set forth below is certain information concerning the individuals who are
directors and executive officers of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------- --- ---------------------------------------------------------
<S> <C> <C>
Howard P. Hoeper 56 Chairman of the Board of Directors, Chief Executive
Officer and President
Jerry J. Corirossi 52 Vice President-Finance & Administration, Chief Financial
Officer, Secretary and Director
John D. Williams 42 Vice President-Sales & Marketing
Donald L. MacLaughlin 58 Vice President-Manufacturing (Western Operations) and
Director
Walter C. Riesen 65 Vice President-Manufacturing (Eastern Operations)
Kenneth W. Miner 53 Vice President-Graphics
Antony P. Ressler 35 Director
David B. Kaplan 28 Director
</TABLE>
Set forth below is a description of the business experience of each director
and executive officer of the Company.
HOWARD P. HOEPER. Mr. Hoeper has been Chairman of the Board, Chief
Executive Officer and President of Group since its formation in 1993, and has
served as Chairman of the Board and Chief Executive Officer of PRI since 1984.
He was also elected President of PRI in 1989. Mr. Hoeper is the sole shareholder
of HPH Industries, Ltd. which owns all of the outstanding capital stock of
Group.
JERRY J. CORIROSSI. Mr. Corirossi has been Vice President-Finance &
Administration, Chief Financial Officer and Secretary of the Company since 1989,
and has been a Director of Group since its formation in 1993 and a Director of
PRI since February 1990. Mr. Corirossi is a Certified Public Accountant and has
over twenty-five years of financial managerial experience.
JOHN D. WILLIAMS. Mr. Williams joined the Company as Vice President-Sales
and Marketing in March 1996. From 1988 to 1992, Mr. Williams was Managing
Director of Sweetheart International. From 1992 to 1995, Mr. Williams was Chief
Executive Officer of the Polarcup Group, a division of Huhtamaki Oy. From 1995
to February 1996, he was President of Donruss Trading Cards, which was owned by
the Polarcup Group. Mr. Williams has over 20 years of sales and marketing
experience in consumer-related companies.
DONALD L. MACLAUGHLIN. Mr. MacLaughlin has been Vice
President-Manufacturing (Western Operations) since 1989, and has been a Director
of Group and PRI since October 1993. Mr. MacLaughlin has more than twenty years
of experience in the rigid plastics packaging industry with a concentration in
the thermoforming process.
WALTER C. RIESEN. Mr. Riesen has been Vice President-Manufacturing (Eastern
Operations) since 1989. Mr. Riesen has more than twenty years of experience in
the rigid plastics packaging industry with a concentration in the injection
molding and pressure forming processes.
KENNETH W. MINER. Mr. Miner has been Vice President-Graphics since the
consummation of the Company's acquisition of Miner Container in December 1993.
Prior to such acquisition, Mr. Miner had been President and Chief Executive
Officer of Miner Container since August 1984. He has over twenty years of
experience in the graphics industry.
ANTONY P. RESSLER. Mr. Ressler was elected to serve as a Director of Group
and PRI in June 1993. In 1990, Mr. Ressler was one of the founding principals of
Apollo Advisors, L.P. which, together with an affiliate, serves as the managing
general partner of Apollo Investment Fund, L.P., AIF II, L.P., and Apollo
46
<PAGE>
Investment Fund III, L.P., which are private securities investment funds, and
Lion Advisors, L.P., which acts as financial advisor to and representative for
certain institutional investors with respect to securities investments. Mr.
Ressler also serves as a Director of Family Restaurants, Inc., Gillett Holdings,
Inc., United International Holdings, Inc. and Dominick's Finer Foods, Inc.
DAVID B. KAPLAN. Mr. Kaplan was elected to serve as a director of Group and
PRI in March 1996. Since 1991, Mr. Kaplan has been associated with and is a
limited partner of Apollo Advisors, L.P. which, together with an affiliate,
serves as the managing general partner of Apollo Investment Fund, L.P., AIF II,
L.P., and Apollo Investment Fund III, L.P., which are private securities
investment funds, and Lion Advisors, L.P., which acts as financial advisor to
and representative for certain institutional investors with respect to
securities investments. Mr. Kaplan also serves as a Director of BDK Holdings,
Inc. and Dominick's Finer Foods, Inc.
Non-employee directors of PRI receive a fee of $3,500 for each meeting
attended, up to a maximum of $15,000 per annum. Messrs. Kaplan and Ressler are
serving as directors of Group and PRI pursuant to the Stockholders Agreement,
which provides that two individuals designated by Apollo be elected as directors
of Group and PRI so long as Apollo owns or has the right to acquire 15% or more
of Group's voting securities (or one individual in the event Apollo owns or has
the right to acquire between 10% and 14.99% of Group's voting securities). In
addition, pursuant to the Stockholders Agreement, certain fundamental corporate
actions proposed to be taken by Group or PRI require the approval of the
directors designated by Apollo. See "Certain Transactions -- Stock and Warrant
Holders Agreement and Option." Apollo has given an undertaking to Group that, if
Group objects, no such designee will serve as a director of a direct competitor
of the Company. Mr. Hoeper has agreed with Apollo and the TCW Entities that he
will not compete directly or indirectly with the business carried on by the
Company or any of its subsidiaries until the later of (i) two years following
cessation of his employment with the Company or its subsidiaries and (ii) the
date on which he and the members of his family do not own, directly and
indirectly, at least 50% of Group's capital stock.
EXECUTIVE COMPENSATION
The following table summarizes information concerning annual and long-term
cash and non-cash compensation paid to or accrued for the benefit of the Chief
Executive Officer and each of the four other most highly compensated executive
officers of the Company (collectively, the "named executive officers") for all
services rendered in all capacities to the Company for fiscal 1996.
47
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION (1)
---------------------------------------------
OTHER ANNUAL ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS (2) COMPENSATION (3) COMPENSATION (4)
- ------------------------------------------- ---------- --------------- ---------------- -----------------
<S> <C> <C> <C> <C>
Howard P. Hoeper $ 318,270 -- $ 600,000 $ 5,250
Chairman of the Board, Chief Executive
Officer and President
Jerry J. Corirossi 182,954 -- -- 5,250
Vice President-Finance & Administration
and Chief Financial Officer
Donald L. MacLaughlin 182,954 -- -- 5,250
Vice President -- Manufacturing (Western
Operations)
Walter C. Riesen 182,954 -- -- 5,250
Vice President -- Manufacturing (Eastern
Operations)
Kenneth W. Miner 182,954 -- -- 5,250
Vice President -- Graphics
</TABLE>
- ------------------------
(1) The Company does not have restricted stock award plans or long-term
incentive plans and has not granted stock appreciation rights.
(2) No bonus awards were made in fiscal 1996 pursuant to PRI's Bonus Plan. See
"-- Bonus Plan."
(3) "Other Annual Compensation" for Mr. Hoeper consists of fees paid by PRI to
HPH pursuant to the Management Agreement. See "Certain Transactions --
Management Agreement." None of the other named executive officers received
reportable "Other Annual Compensation" in fiscal 1996.
(4) Consists of contributions made by PRI on behalf of the named executive
officers pursuant to the Pension Plan (as defined).
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's compensation policies are determined and executive officer
compensation decisions are made by Mr. Hoeper, subject to the right of the
directors designated by Apollo to approve the adoption of any employee stock
option plan, stock bonus plan or any similar plan. Mr. Hoeper is the Chairman of
the Board, Chief Executive Officer and President of the Company and indirectly
owns, through his ownership of HPH, all of the outstanding capital stock of
Group. See "Security Ownership of Certain Beneficial Owners and Management."
BONUS PLAN
The Company maintains a cash bonus plan (the "Bonus Plan") for all of its
executive officers and for certain other key management personnel. The bonus
amount and the extent of participation in the Bonus Plan are discretionary. In
the past, bonus awards to employees have been based on various qualitative and
quantitative indicators of corporate and individual performance. No bonuses were
paid during fiscal 1996.
PENSION PLAN
On September 30, 1985, the Company established a qualified defined
contribution pension plan (the "Pension Plan") for the purpose of providing
funds to its employees upon their retirement. Participation in the Pension Plan
is open to substantially all of the Company's employees. The Pension Plan
requires the Company to contribute a specified percentage of an employee's total
compensation for each plan year, and such amounts are credited to each
employee's individual account on an annual basis. If any employee retires at age
65, or at such later date as permitted under the Pension Plan, then the entire
amount of his account
48
<PAGE>
becomes 100.0% vested as of that date. The amount in an employee's account will
also be fully vested at the time of his death or total permanent disability.
Distributions under the Pension Plan may be made in one lump sum payment, in
designated installments, in installments based upon an employee's life
expectancy at retirement, or in the form of an annuity, at the employee's
election. If employment is terminated for any reason other than retirement,
death or total and permanent disability, then his account will be deemed to have
been 20.0% vested for each year of service. The amounts accrued for the benefit
of the named executive officers pursuant to the Pension Plan during fiscal 1996
are reflected in the Summary Compensation Table above.
401(K) SAVINGS PLAN
PRI has adopted a plan pursuant to Section 401(k) of the Internal Revenue
Code (the "401(k) Plan") for non-union employees that are age 18 or older and
have been employed by PRI for at least three (3) months. Under the 401(k) Plan,
each eligible employee is able to defer a portion of his or her salary each year
on a before-tax basis. The portion deferred is paid by PRI to the trustee under
the 401(k) Plan for the account of the participant. The Company does not match
employee contributions or otherwise contribute to the 401(k) Plan on behalf of
employee-participants. All employee-participant contributions are fully vested
upon contribution.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
PRI's Certificate of Incorporation contains a provision permitted under the
Delaware General Corporation Law (the "DGCL") eliminating (with limited
exceptions) each director's personal liability for monetary damages for breach
of any duty as a director. PRI's Certificate of Incorporation and Bylaws
authorize PRI to indemnify its present and former directors and officers and to
pay or reimburse expenses for such individuals in advance of the final
disposition of a proceeding to the maximum extent permitted from time to time
under the DGCL. The DGCL provides that indemnification of a person who is a
party, or threatened to be made a party, to legal proceedings by reason of the
fact that such a person is or was a director, officer, employee or agent of a
corporation, or is or was serving as a director, officer, employee or agent of a
corporation or other firm at the request of a corporation, against expenses,
judgments, fines and amounts paid in settlement, is mandatory in certain
circumstances and permissive in others, subject to authorization by the
corporation's board of directors.
PRI has entered into indemnification agreements with each of its directors
and executive officers. The indemnification agreements require, among other
things, that PRI indemnify such officers and directors to the fullest extent
permitted by law, and advance to the officers and directors all related
expenses, subject to reimbursement if it is subsequently determined that
indemnification is not permitted. The indemnification agreements also require
PRI to indemnify and advance all expenses incurred by officers and directors
seeking to enforce their rights thereunder and cover officers and directors
under the Company's directors' and officers' liability insurance. Although the
indemnification agreements offer substantially the same scope of coverage
afforded by provisions in PRI's Certificate of Incorporation and Bylaws, they
provide greater assurance to directors and officers that indemnification will be
available, because, as a contract, it cannot be unilaterally modified by the
Board of Directors or by the stockholders to eliminate the rights it provides.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Through his ownership of HPH, Mr. Hoeper beneficially owns and exercises
sole investment and voting rights with respect to 56,250 shares of the capital
stock of Group representing 100% of Group's outstanding capital stock. Apollo
and the TCW Entities own Warrants to purchase 27,500 and 10,000 shares of
Group's capital stock, respectively (or 29.3% and 10.7% of such capital stock of
Group, respectively, assuming full exercise of the Warrants). The Warrants are
exercisable for an exercise price of $213.33 per share of capital stock of Group
at any time on or after June 30, 1996, provided that the Warrants may be
exercised earlier upon the occurrence of certain events, including a sale of all
or substantially all of the Company's assets, a Change in Control (as defined)
or the occurrence of any event that the holder of the Warrants reasonably
determines could cause it to be economically disadvantaged unless it exercises
the Warrant. The Warrants expire on June 30, 2003. Apollo and the TCW Entities
also own an option to purchase additional shares of
49
<PAGE>
capital stock of Group under certain circumstances. See "Certain Transactions --
Stock and Warrant Holders Agreement and Option." Messrs. Ressler and Kaplan
serve on the Boards of Directors of Group and PRI as nominees of Apollo. See
"Management."
CERTAIN TRANSACTIONS
MANAGEMENT AGREEMENT
Since its inception, PRI has paid certain fees to HPH in exchange for
financial and management consulting services and has reimbursed HPH for expenses
incurred in connection with the performance of such services. HPH owns all of
the outstanding capital stock of Group and is itself wholly-owned by Mr. Hoeper,
the Chairman, Chief Executive Officer and President of Group and PRI. The
aggregate amount of payments received by HPH during fiscal 1994, 1995 and 1996
in respect of such fees and reimbursements were approximately $699,000, $687,000
and $662,000, respectively. In connection with the Financing Plan, PRI and HPH
entered into a management agreement pursuant to which HPH will receive a fixed
payment for financial and management consulting services in the amount of
$600,000 per fiscal year, subject to increase at the discretion of the Company
and to the extent permitted by instruments governing indebtedness of PRI,
including the Indenture, or decrease to the extent required by the terms of such
indebtedness. Because of the personal nature of the services provided by HPH and
Mr. Hoeper, the Company cannot determine whether it could obtain the same
services on more favorable terms from a third party. See "Description of
Exchange Notes -- Certain Covenants."
FORMER INDEBTEDNESS OF HOWARD P. HOEPER TO THE COMPANY
In 1992 the Company made a loan to Mr. Hoeper in the aggregate principal
amount of $2.1 million with a stated maturity of January 31, 1995. The
indebtedness bore interest at the rate of 7.5% per annum and was secured by a
second mortgage on certain residential property in Lake County, Illinois. By
November 1994, Mr. Hoeper had fully repaid such loan.
TAX SHARING AGREEMENT
The operations of Group and PRI are included in the Federal income tax
returns filed by HPH. The three companies have entered into a tax sharing
agreement (the "Tax Sharing Agreement") which apportions the consolidated income
tax liability of the affiliated group. Under the Tax Sharing Agreement, the
Federal income tax liability of PRI is calculated on a separate return basis and
the amount so calculated, which in no event may exceed the group's consolidated
tax liability for such year, is paid to HPH which then pays the group's taxes
for such year. None of HPH, Group or PRI is liable for (or is due) any amount to
(or from) the other even though the tax liability of the group may have been
reduced by reason of the inclusion of Group or PRI as a member of the group.
AGREEMENTS RELATING TO FORMER OWNERS OF MINER CONTAINER
In connection with the Company's acquisition of Miner Container, PRI entered
into a consulting agreement (the "Consulting Agreement") with Kenneth Miner, a
former principal owner of Miner Container who has been an executive officer of
PRI since such acquisition. Pursuant to the Consulting Agreement, which
terminated in March 1996, the Company paid an aggregate of $1.1 million to Mr.
Miner.
In connection with the acquisition of Miner Container, PRI agreed to
indemnify the former owners for up to $2.3 million of tax liabilities arising
from the operations of an affiliate of Miner Container. During fiscal 1996 the
Company paid approximately $1.5 million of this obligation. The Company is
unable to estimate whether or to what extent it will be obligated to make future
payments in respect of such liabilities.
Prior to the Company's acquisition of Miner Container in December 1993,
Miner Container had for several years obtained services relating to the design
and preparation of graphics for promotional beverage cups from Container Design
Inc. Mrs. Elaine Miner, the wife of Kenneth W. Miner, Vice-President-Graphics of
PRI, has been the principal owner and President of Container Design Inc. since
its inception. Since the Company's acquisition of Miner Container, Container
Design Inc. has provided the Company services on substantially the same basis as
it provided such services to Miner Container. The aggregate amount paid by the
Company to Container Design Inc. for these services for fiscal 1995 and 1996 was
$265,000 and $187,000,
50
<PAGE>
respectively. No payments were made to Container Design Inc. in fiscal 1994. The
Company believes that the terms of its transactions with Container Design Inc.
have been no less favorable to the Company than would be available from an
unrelated third party, and the Company intends to continue to obtain the
services of Container Design Inc. in the future.
FEES PREVIOUSLY PAID TO APOLLO
Under the Indenture dated October 28, 1986, as supplemented, relating to
PRI's 13.5% Notes, PRI was required to obtain the consent of the holders of the
13.5% Notes to the acquisition of Louisiana Plastics. In March 1993, PRI paid
Apollo, as a holder of $10.0 million aggregate principal amount of the 13.5%
Notes, $250,000 in exchange for its consent to the financial arrangements which
PRI made in order to acquire Louisiana Plastics.
1993 TRANSACTION
The Company entered into the 1993 Transaction, which involved the
refinancing of certain of its indebtedness, including the 13.5% Notes, and the
redemption or exchange of certain of its outstanding capital stock and warrants
to acquire such stock. In connection with the 1993 Transaction, HPH exchanged
shares of junior preferred stock of PRI having an aggregate liquidation value of
$2.5 million for 12.5% Notes of like principal amount. The junior preferred
stock, which accumulated dividends, payable quarterly, at the rate of 10% per
annum, was acquired by HPH for $2.5 million in 1989. HPH also transferred to
Group all of the outstanding common stock of PRI in exchange for 56,250 shares
of capital stock of Group, representing all of the currently outstanding capital
stock of Group. As part of the 1993 Transaction, Warrants to purchase 27,500
shares of capital stock of Group were issued to Apollo, and Warrants to purchase
10,000 shares of the capital stock of Group were issued to UBS Capital. Apollo,
UBS Capital and Group also entered into the Stockholders Agreement and the
Equity Registration Rights Agreement, and Union Bank of Switzerland, Group, HPH
and certain affiliates of Apollo entered into the Debt Registration Rights
Agreement (each of which is described below).
DIVIDENDS AND INTEREST TO HPH
Prior to the 1993 Transaction, PRI paid dividends on its outstanding junior
preferred stock, all of which was held by HPH, in the amount of $115,000 in
fiscal 1994. In addition, in fiscal 1994 and 1995, PRI paid dividends on its
outstanding common stock, all of which was held by Group, in the amount of $2.1
million and $2.5 million to permit Group to make required interest payments on
the 12.5% Notes. Interest payments made to HPH in respect of the 12.5% notes
were $130,187 in fiscal 1994 and $156,250 in fiscal 1995. In fiscal 1996, PRI
did not pay any dividends to Group and Group did not make any interest payments
to HPH.
STOCK AND WARRANT HOLDERS AGREEMENT AND OPTION
HPH, Apollo, the TCW Entities, Mr. Hoeper and Group are parties to the
Stockholders Agreement which, among other things, gives Apollo and the TCW
Entities the pre-emptive right to acquire a portion of additional shares of
capital stock of Group issued by Group, a right of first refusal on shares of
capital stock of Group owned by HPH, the right to require Group to purchase
their equity interests if Group has not had a public offering of voting stock
prior to June 30, 1999 (to the extent permitted under the Senior Credit Facility
and the Indenture governing the Notes) and, subject to certain exceptions, the
right to participate in any sale of capital stock of Group by HPH. In addition,
if at any time after June 30, 1999, the holders of a majority of the shares of
capital stock of Group propose to sell their shares, they may require the other
parties to the Stockholders Agreement to participate in such sale. The
Stockholders Agreement also provides that Mr. Hoeper will not, as long as HPH
owns at least 10% of Group, transfer any shares of capital stock of HPH, except
pursuant to the laws of descent. If any shares of HPH capital stock are
transferred pursuant to laws of descent, Apollo and the TCW Entities will have
the right to require the descendants to purchase their equity interests in Group
at the fair market value thereof. Group has granted Apollo and the TCW Entities
an option to purchase at fair market value that number of shares of capital
stock of Group which, when aggregated with the other shares owned by them or
which they have the right to acquire, equal 51% of the outstanding shares on a
fully diluted basis. The option is exercisable during the period of 180 days
following
51
<PAGE>
the date on which Mr. Hoeper and his heirs do not own and have the right to vote
all of the shares of HPH. The exercise of the option is conditioned upon a
simultaneous offer by the holders to purchase at fair market value all shares of
Group owned by HPH.
The Stockholders Agreement also provides, among other things, that Apollo
has the right to designate (i) two members of the Board of Directors of Group
and PRI so long as it owns or has the right to acquire 15% or more of the voting
securities of Group outstanding as of the date of consummation of the
Stockholders Agreement (the "Initial Voting Securities") and (ii) one member of
the Board of Directors of Group and PRI so long as it owns or has the right to
acquire between 10% and 14.99% of the Initial Voting Securities. In addition, a
majority of the Apollo designees serving as members of the Board of Directors of
Group or PRI must approve certain fundamental corporate actions proposed to be
taken by each such company, including (i) the sale of all or substantially all
of its assets, (ii) a merger, consolidation or dissolution, (iii) an acquisition
involving consideration of more than $10.0 million, (iv) certain transactions
with affiliates, (v) an amendment to its Certificate of Incorporation or
By-laws, (vi) the adoption of certain employee benefit plans and (vii) any
material change in its line of business. The Stockholders Agreement terminates
on June 30, 2003.
EQUITY REGISTRATION RIGHTS AGREEMENT
Group, Apollo and the TCW Entities are parties to the Equity Registration
Rights Agreement dated as of June 30, 1993 (the "Equity Registration Rights
Agreement"). Under the Equity Registration Rights Agreement, at any time after
June 30, 1996, or earlier upon the occurrence of certain events, the holders of
at least 25% of the Warrants (or shares of capital stock of Group obtainable
upon exercise of the Warrants (collectively, the "Registrable Equity
Securities")) on up to three separate occasions may require Group, subject to
certain conditions, to effect the registration of the Registrable Equity
Securities under the Securities Act. In addition to such demand registration
rights, such holders also may, subject to certain limitations, require Group to
register their Registrable Equity Securities if Group registers any of its
equity securities under the Securities Act. Group has agreed to bear all
expenses incident to the registration rights provided under the Equity
Registration Rights Agreement, except that expenses incurred in connection with
any second or third demand registration are to be allocated equally between
Group and the selling securityholders. Group has also agreed to indemnify
selling securityholders against certain liabilities, including liabilities under
the Securities Act.
DEBT REGISTRATION RIGHTS AGREEMENT
Group, HPH, the TCW Entities, Lion Advisors, L.P. (an affiliate of Apollo)
and AIF II, L.P. (an affiliate of Apollo) are parties to the Debt Registration
Rights Agreement dated as of June 30, 1993 and amended as of May 17, 1996 (the
"Debt Registration Rights Agreement"). Under the Debt Registration Rights
Agreement, at any time until the holders of a majority of the 12.5% Notes (or
other securities issued with respect to the 12.5% Notes (collectively, the
"Registrable Debt Securities")) make a written request that Group offer to
exchange the Registrable Debt Securities held by each holder thereof (other than
HPH) for an equivalent aggregate principal amount of such Registrable Debt
Securities (an "Exchange Offer") and, if such Exchange Offer is not consummated
for any reason within 150 days after Group has received such request,
thereafter, the holders of a majority of the Registrable Debt Securities may
require Group, subject to certain conditions, to effect the registration of the
Registrable Debt Securities under the Securities Act. In addition to such demand
registration rights, such holders also may, subject to certain limitations,
require Group to register their Registrable Debt Securities if Group registers
any of its debt securities under the Securities Act. Group has agreed to bear
all expenses incident to the registration rights provided under the Debt
Registration Rights Agreement. Group has also agreed to indemnify selling
securityholders against certain liabilities, including liabilities under the
Securities Act.
REPAYMENT OF DEBT TO RELATED PARTIES
In connection with the Financing Plan, PRI repaid all outstanding borrowings
under the Old Credit Agreement and Group redeemed without penalty or premium a
portion of the outstanding 12.5% Notes for an aggregate redemption price of
$31.7 million. See "Use of Proceeds." As of February 29, 1996, HPH, certain
affiliates of Apollo, and Union Bank of Switzerland held $3.0 million, $33.0
million and $12.0 million, respectively, in aggregate principal amount of the
12.5% Notes. After giving effect to the redemption of the
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12.5% Notes, HPH, Apollo and Union Bank of Switzerland held $1.2 million, $13.0
million and $4.8 million, respectively, in principal amount of the 12.5% Notes.
In connection with the closing of the transactions contemplated by the Financing
Plan, Union Bank of Switzerland assigned all of its interest in the 12.5% Notes
to UBS Capital LLC ("UBS Capital"), which, in turn, assigned all of its interest
in the 12.5% Notes and the Warrants to the TCW Entities. In addition, the TCW
Entities and the parties to the Stockholders Agreement, the Equity Registration
Rights Agreement and the Debt Registration Rights Agreement have acknowledged
that the TCW Entities succeed to the rights of UBS Capital and Union Bank of
Switzerland, as applicable, and have become parties with respect to such
agreements. Through his ownership of HPH, Mr. Hoeper owns 56,250 of the
outstanding shares of capital stock of Group (which presently constitutes all of
its outstanding capital stock) and is the Chairman, Chief Executive Officer and
President of Group and PRI. Apollo and the TCW Entities own Warrants to purchase
27,500 and 10,000 shares of common stock of Group, respectively (or 29.3% and
10.7% of the outstanding capital stock of Group, respectively, assuming exercise
of all of the Warrants). The Warrants are exercisable on and after June 30, 1996
(or earlier under certain circumstances) and expire on June 30, 2003.
DESCRIPTION OF CERTAIN INDEBTEDNESS
THE SENIOR CREDIT FACILITY
GENERAL. As part of the Financing Plan, PRI entered into the Senior Credit
Facility with LaSalle National Bank, as lender and administrative agent (the
"Administrative Agent"), and BT Commercial Corporation, as lender. The Senior
Credit Facility establishes a revolving credit facility in the initial aggregate
principal amount of $20.0 million (the "Revolving Credit Facility") and a letter
of credit facility in the initial aggregate amount of up to $2.0 million (the
"Letter of Credit Facility").
AVAILABILITY AND REPAYMENT. Availability under the Revolving Credit
Facility is subject to a borrowing base equal to the sum of 85% of PRI's
accounts receivable and 60% of PRI's raw materials and finished goods
inventories. Advances under the Revolving Credit Facility are available for
working capital and general corporate purposes, as well as to fund up to $4.0
million of transaction costs incurred in connection with the Financing Plan. The
amount available under the Letter of Credit Facility may not exceed the lesser
of $2.0 million or the amount available under that portion of the Revolving
Credit Facility available for working capital purposes. PRI may prepay principal
amounts outstanding under the Revolving Credit Facility, in whole or in part,
without penalty, subject to payment by PRI of all accrued interest and customary
LIBOR breakage fees.
The Senior Credit Facility matures on May 1, 1999, subject to renewal at the
lender's option for successive one year terms.
SECURITY. Obligations under the Senior Credit Facility are secured by all
of PRI's accounts receivable and raw materials and finished goods inventory,
including any proceeds therefrom.
INTEREST. At PRI's election, the interest rates per annum applicable to the
Senior Credit Facility are fluctuating rates of interest measured by reference
either to (a) an adjusted London inter-bank offered rate ("LIBOR") plus 2.00% or
(b) the prime rate of the Administrative Agent (which is based on the
Administrative Agent's published prime rate) plus 0.50%. Amounts under the
Senior Credit Facility not paid when due bear interest at a default rate of 2.0%
above the otherwise applicable rate.
FEES. PRI has agreed to pay certain fees with respect to the Revolving
Credit Facility, including a closing fee of $100,000 and a commitment fee in the
amount of 0.50% per annum on the average unused portion of the commitment
thereunder. PRI has also agreed to pay a fee with respect to the Letter of
Credit Facility in the amount of 2.0% per annum of the total maximum amount
available under all outstanding standby letters of credit and customary fees
charged by LaSalle National Bank with respect to commercial letters of credit.
COVENANTS. The Senior Credit Facility contains a number of covenants that,
among other things, restrict the ability of PRI to (i) incur certain
indebtedness or guarantee obligations, (ii) prepay other indebtedness, (iii)
make investments, loans or advances, (iv) create certain liens, (v) make certain
payments,
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dividends and distributions, (vi) merge with or sell assets to another person or
liquidate, (vii) sell or discount receivables, (viii) engage in certain
intercompany transactions and transactions with affiliates, (ix) change its
business, (x) experience a change of control and (xi) make amendments to its
charter, by-laws and other debt instruments. In addition, under the Senior
Credit Facility, PRI will be required to comply with specified financial ratios
and tests, including minimum debt service coverage ratios, maximum funded debt
to EBITDA tests and minimum working capital tests.
EVENTS OF DEFAULT. The Senior Credit Facility contains customary events of
default, including nonpayment of principal, interest or fees, violation of
covenants, inaccuracy of representations or warranties in any material respect,
cross default and cross acceleration to certain other indebtedness, bankruptcy,
material judgments and liabilities and change of control.
BEMIS NOTE
In connection with the Company's acquisition of Louisiana Plastics, PRI
issued a promissory note to Bemis Company, Inc. in the principal amount of $2.0
million (the "Bemis Note"), $1.5 million aggregate principal amount of which was
outstanding as of February 29, 1996. The Bemis Note is subordinated in right of
payment to all indebtedness of PRI to any bank, insurance company or other
financial institution. Interest on the Bemis Note is payable monthly at the
prime rate from time to time publicly announced by Bank of America, N.A., plus
2.0%. In March 1996, the Company paid $250,000 in outstanding principal amount
of the Bemis Note. The remaining outstanding principal amount of the Bemis Note
is payable in installments of $300,000, $250,000 and $700,000 in September 1996,
March 1997 and July 1997, respectively.
DESCRIPTION OF EXCHANGE NOTES
GENERAL
The Exchange Notes will be issued, and the Old Notes were issued, under the
Indenture by and among the Company and LaSalle National Bank, as Trustee and as
collateral agent (the "Collateral Agent"). The terms of the Exchange Notes are
the same in all respects (including principal amount, interest rate, maturity,
security and ranking) as the terms of the Old Notes for which they may be
exchanged pursuant to the Exchange Offer, except that the Exchange Notes (i) are
freely transferable by holders thereof (except as provided below) and (ii) are
not entitled to certain registration rights and certain additional interest
provisions which are applicable to the Old Notes under the Registration Rights
Agreement.
The terms of the Notes include those stated in the Indenture and those made
part of the Indenture by reference to the Trust Indenture Act. The Notes are
subject to all such terms, and holders of Notes are referred to the Indenture
and the Trust Indenture Act for a statement of those terms.
A copy of the Indenture is filed as an exhibit to the Registration Statement
of which this Prospectus is a part. The following is a summary of certain
provisions of the Notes and the Indenture. This summary does not purport to be
complete and is subject to the detailed provisions of, and is qualified in its
entirety by reference to, the Notes and the Indenture. The definitions of
certain terms used in the following summary are set forth below under "--
Certain Definitions." Unless the context otherwise requires, all references
herein to the "Notes" shall include the Old Notes and the Exchange Notes.
RANKING AND SECURITY
The Notes are general obligations of PRI, secured to the extent described
below by Liens on the Collateral (as defined below under "-- Security") and
ranking senior to all subordinated Indebtedness of PRI and PARI PASSU in right
of payment to all other senior Indebtedness of PRI. The lenders under the Senior
Credit Facility have claims with respect to the assets constituting collateral
for Indebtedness thereunder (which assets do not constitute Collateral securing
the Notes) that are effectively senior to the claims of holders of the Notes. In
addition, pursuant to the Indenture, in the event the Company enters into an
Acquisition Financing Facility, the lender or lenders thereunder will be
entitled, pursuant to the terms of an Intercreditor Agreement (as defined) to be
entered into in connection therewith, to share, generally on a PARI PASSU basis,
in any proceeds upon any foreclosure upon the Collateral. See "-- Security." As
of February 29, 1996, on a pro forma basis, after giving effect to the Financing
Plan, PRI would have had
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outstanding approximately $112.2 million in aggregate principal amount of senior
Indebtedness, including approximately $0.4 million of secured Indebtedness
(excluding the Notes). In addition, PRI would have had $19.6 million in unused
secured borrowing capacity under the Senior Credit Facility.
PRINCIPAL, MATURITY AND INTEREST
The Notes will be senior secured obligations of the Company limited in
aggregate principal amount at maturity to $110,000,000 and will mature on May 1,
2003. Interest on the Notes will accrue at the rate of 11 5/8% per annum and
will be payable semiannually in arrears on May 1 and November 1 in each year,
commencing on November 1, 1996, to holders of record on the immediately
preceding April 15 and October 15, respectively. Interest on the Notes will
accrue from the most recent date to which interest has been paid or, if no
interest has been paid, from the date of the original issuance of the Notes (the
"Issue Date"). Interest will be computed on the basis of a 360-day year
comprised of twelve 30-day months.
The Exchange Notes will bear interest from May 17, 1996. Holders of Old
Notes whose Old Notes are accepted for exchange will be deemed to have waived
the right to receive any payment in respect of interest on the Old Notes accrued
from May 17, 1996 to the date of the issuance of the Exchange Notes. Interest on
the Exchange Notes is payable semiannually in arrears on May 1 and November 1 of
each year, commencing November 1, 1996, accruing from May 17, 1996 at a rate of
11 5/8% per annum.
Principal of, and premium, if any, and interest on, the Notes will be
payable at the office or agency of the Company maintained for such purpose
within The City of New York or, at the option of the Company, payment of
interest may be made by check mailed to the holders of the Notes at their
respective addresses as set forth in the register of holders of Notes. Until
otherwise designated by the Company, the Company's office or agency in The City
of New York will be the office of the Trustee maintained for such purpose. The
Notes will be issued in fully registered form, without coupons, and in
denominations of $1,000 and integral multiples thereof.
OPTIONAL REDEMPTION
The Notes will not be redeemable at PRI's option prior to May 1, 2000.
Thereafter, at any time or from time to time, the Notes will be subject to
redemption at the option of PRI, in whole or in part, upon not less than 30 nor
more than 60 days' notice, at the redemption prices (expressed as percentages of
principal amount) set forth below plus accrued and unpaid interest thereon to
the applicable redemption date, if redeemed during the twelve-month period
beginning on May 1 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ----------------------------------------------------------------------- -----------
<S> <C>
2000................................................................... 105.813%
2001................................................................... 102.906%
2002 and thereafter.................................................... 100.000%
</TABLE>
Notwithstanding the foregoing, on or prior to May 1, 1999, PRI may redeem at
any time or from time to time up to 30% of the aggregate principal amount of
Notes originally issued at a redemption price of 111 5/8% of the principal
amount thereof, plus accrued and unpaid interest, if any, thereon to the
redemption date, with the net proceeds of one or more Public Equity Offerings;
PROVIDED that at least $70.0 million in aggregate principal amount of Notes
remain outstanding immediately after such redemption; and PROVIDED FURTHER, that
such redemption shall occur within 90 days of the date of the closing of any
such Public Equity Offering. In the case of any Public Equity Offering by Group,
the Indenture provides that PRI shall apply to a redemption of the Notes to the
extent permitted under the Indenture an amount not less than 50% of the
aggregate net proceeds of such Public Equity Offering, and Group has separately
agreed with PRI to make an equity contribution to PRI of 50% of such aggregate
net proceeds. PRI has also agreed pursuant to the Indenture not to repurchase
any of the Notes pursuant to open market or privately negotiated purchases until
the expiration of twelve months following any Public Equity Offering.
If less than all of the Notes are to be redeemed at any time, selection of
Notes for redemption will be made by the Trustee in compliance with the
requirements of the principal national securities exchange, if any, on which the
Notes are listed, or, if the Notes are not so listed, on a pro rata basis, by
lot or by such method as the Trustee shall deem fair and appropriate, PROVIDED
that no Notes of $1,000 or less shall be
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redeemed in part. Notices of redemption shall be mailed by first class mail at
least 30 but not more than 60 days before the redemption date to each Holder of
Notes to be redeemed at its registered address. If any Note is to be redeemed in
part only, the notice of redemption that relates to such Note shall state the
portion of the principal amount thereof to be redeemed. A new Note in principal
amount equal to the unredeemed portion thereof will be issued in the name of the
Holder thereof upon cancellation of the original Note. On and after the
redemption date (unless PRI shall default in the payment of the redemption
price, together with accrued and unpaid interest to the redemption date),
interest will cease to accrue on Notes or portions thereof called for
redemption.
MANDATORY REDEMPTION
Except as set forth above under the caption "Optional Redemption" and below
under the caption "Repurchase at the Option of Holders," PRI is not required to
make mandatory redemption or sinking fund payments with respect to the Notes.
REPURCHASE AT THE OPTION OF HOLDERS
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each Holder of Notes will have
the right to require PRI to repurchase all or any part (equal to $1,000 or an
integral multiple thereof) of such Holders's Notes pursuant to the offer
described below (the "Change of Control Offer") at an offer price in cash equal
to 101% of the aggregate principal amount thereof plus accrued and unpaid
interest, if any, to the Change of Control Payment Date (as hereinafter defined)
(the "Change of Control Payment"). Within 30 days following any Change of
Control, PRI will mail a notice to each Holder stating: (1) that the Change of
Control Offer is being made pursuant to the covenant entitled "Change of
Control" and that all Notes tendered will be accepted for payment; (2) the
purchase price and the purchase date, which will be no earlier than 30 days nor
later than 60 days from the date such notice is mailed (the "Change of Control
Payment Date"); (3) that any Note not tendered will continue to accrue interest;
(4) that, unless PRI defaults in the payment of the Change of Control Payment,
all Notes accepted for payment pursuant to the Change of Control Offer will
cease to accrue interest after the Change of Control Payment Date; (5) that
Holders electing to have any Notes purchased pursuant to a Change of Control
Offer will be required to surrender the Notes, with the form entitled "Option to
Elect Purchase" on the reverse of the Notes completed, to the Paying Agent at
the address specified in the notice prior to the close of business on the third
Business Day preceding the Change of Control Payment Date; (6) that Holders will
be entitled to withdraw their election if the Paying Agent receives, not later
than the close of business on the second Business Day preceding the Change of
Control Payment Date, a telegram, telex, facsimile transmission or letter
setting forth the name of the Holders, the principal amount of Notes delivered
for purchase, and a statement that such Holder is withdrawing his election to
have such Notes purchased; and (7) that Holders whose Notes are being purchased
only in part (which purchased portion must be equal to $1,000 in principal
amount or an integral multiple thereof) will be issued new Notes equal in
principal amount to the unpurchased portion of the Notes surrendered.
On the Change of Control Payment Date, PRI will, to the extent lawful, (1)
accept for payment Notes or portions thereof tendered pursuant to the Change of
Control Offer, (2) deposit with the Paying Agent an amount equal to the Change
of Control Payment in respect of all Notes or portions thereof so tendered and
(3) deliver or cause to be delivered to the Trustee the Notes so accepted
together with an Officers' Certificate stating the Notes or portions thereof
tendered to PRI. The Paying Agent will promptly mail to each Holder of Notes so
accepted the Change of Control Payment for such Notes, and the Trustee will
promptly authenticate and mail to each Holder a new Note equal in principal
amount to any unpurchased portion of the Notes surrendered, if any; PROVIDED
that each new Note will be in a principal amount of $1,000 or an integral
multiple thereof. PRI will publicly announce the results of the Change of
Control Offer on or as soon as practicable after the Change of Control Payment
Date.
With respect to the sale of assets referred to in the definition of "Change
of Control", the phrase "all or substantially all" as used in the Indenture
varies according to the facts and circumstances of the subject transaction, has
no clearly established meaning under New York law (which governs the Indenture)
and is subject to judicial interpretation. Accordingly, in certain circumstances
there may be a degree of uncertainty
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in ascertaining whether a particular transaction would involve a disposition of
"all or substantially all" of the assets of a person and therefore it may be
unclear whether a Change of Control has occurred and whether the Notes are
subject to, and whether PRI is required to make, a Change of Control Offer.
The Company will comply with the applicable tender offer rules, including
the requirements of Rule 14e-1 under the Exchange Act, and all other applicable
securities laws and regulations in connection with any Change of Control Offer.
Except as described above with respect to a Change of Control, the Indenture
does not contain provisions that permit the Holders of the Notes to require that
PRI repurchase or redeem the Notes in the event of a takeover, recapitalization
or similar restructuring.
The Senior Credit Facility prohibits PRI from purchasing any Notes upon a
Change of Control and also provides that certain change of control events with
respect to PRI or Group would constitute a default thereunder. Any future credit
agreements to which PRI or Group becomes a party may contain similar
restrictions and provisions. In the event a Change of Control occurs at a time
when PRI is prohibited from purchasing Notes, PRI could seek the consent of its
lenders to the purchase of Notes or could attempt to refinance the borrowings
that contain such prohibition. If PRI does not obtain such a consent or repay
such borrowings, PRI will remain prohibited from purchasing Notes. In such case,
PRI's failure to purchase tendered Notes would constitute an Event of Default
under the Indenture, which would, in turn, constitute a default under the Senior
Credit Facility.
ASSET SALES; COLLATERAL LOSS EVENTS
The Indenture provides that PRI will not, and will not permit any of its
Restricted Subsidiaries to, engage in any Asset Sale, unless (i) PRI or any such
Restricted Subsidiary, as the case may be, receives consideration at the time of
such Asset Sale at least equal to the fair market value (evidenced by a
resolution of the Board of Directors of PRI set forth in an Officers'
Certificate delivered to the Trustee) of the assets sold or otherwise disposed
of, (ii) 80% (or, in the case of an Asset Sale involving the sale or other
disposition of Collateral, 90%) of the consideration therefor received by PRI or
such Restricted Subsidiary is in the form of cash; PROVIDED, HOWEVER, that the
amount of (A) any liabilities (as shown on PRI's or such Restricted Subsidiary's
most recent balance sheet or in the notes thereto) of PRI or any Restricted
Subsidiary (other than liabilities that are by their terms subordinated in right
of payment to the Notes) that are assumed by the transferee of any such assets
and (B) any notes or other obligations received by PRI or such Restricted
Subsidiary from such transferee that are immediately converted by PRI or such
Restricted Subsidiary into cash (to the extent of the cash received), shall be
deemed to be cash for purposes of this provision; and PROVIDED, FURTHER, that
the 80% and 90% limitations referred to in this clause (ii) shall not apply to
any Asset Sale in which the cash portion of the consideration received
therefrom, determined in accordance with the foregoing proviso, is equal to or
greater than what the after-tax proceeds would have been had such Asset Sale
complied with the aforementioned 80% or 90% limitation, as applicable, and (iii)
in the event the Asset Sale involves the sale or other disposition of
Collateral, the Net Proceeds thereof are deposited promptly into the Cash
Collateral Account pending application in accordance with the next succeeding
paragraph and PRI takes such other actions, at its sole expense, as may be
required to ensure that the Trustee holds a first priority Lien on such Net
Proceeds in accordance with the Indenture.
Within 360 days after any Asset Sale, PRI or such Restricted Subsidiary may
apply the Net Proceeds from such Asset Sale (a) except in the case of an Asset
Sale involving the sale or other disposition of Collateral, to permanently
reduce Indebtedness under the Senior Credit Facility or other Senior Debt (with
a permanent reduction of availability in the case of Indebtedness under the
Senior Credit Facility or other revolving credit borrowings) or (b) to an
investment in capital expenditures or other long-term tangible assets related to
the business of the Company, or in another business, in each case in a line of
business permitted under the "Line of Business" limitation described below
(provided, however, that, in the event the Net Proceeds so invested are received
in connection with an Asset Sale involving the sale or other disposition of
Collateral, (i) such investment is in Replacement Collateral, (ii) prior to such
investment, PRI shall deliver to the Trustee an Officers' Certificate dated no
more than 30 days prior to the date of consummation of such investment,
certifying that the purchase price of such Replacement Collateral does not
exceed the
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fair market value of such Replacement Collateral as determined in good faith by
the Board of Directors and (iii) PRI shall take such actions, at its sole
expense, as shall be required to release such Net Proceeds from the Lien of the
Security Documents and to ensure that the Trustee has, from the date of such
investment, a first priority security interest in the Replacement Collateral).
Pending the final application of any such Net Proceeds, except in the case of
Net Proceeds received from an Asset Sale involving the sale or other disposition
of Collateral, PRI or such Restricted Subsidiary may invest such Net Proceeds in
any manner that is not prohibited by the Indenture. Any Net Proceeds from the
Asset Sale that are not applied or invested as provided in the first sentence of
this paragraph will be deemed to constitute "Excess Proceeds."
Pursuant to the Indenture, PRI may not, and shall not permit any of its
Restricted Subsidiaries to, directly or indirectly, suffer or permit a
Collateral Loss Event unless the Net Proceeds therefrom are paid to the Trustee
and deposited in the Cash Collateral Account and PRI takes such actions, at its
sole expense, as may be required to ensure that the Trustee has from the date of
such deposit a first priority security interest on such Net Proceeds in the Cash
Collateral Account in accordance with the Indenture. Within 270 days of receipt
of the Net Proceeds therefrom, PRI may apply all the Net Proceeds received from
a Collateral Loss Event: (i) to purchase or otherwise invest in Replacement
Collateral; or (ii) to Restore the relevant Collateral. In the event that PRI
elects to Restore the relevant Collateral, PRI, within 90 days of receipt of
such Net Proceeds from a Collateral Loss Event, shall (x) give the Trustee
irrevocable written notice of such election and (y) enter into a binding
commitment to Restore the relevant Collateral, a copy of which shall be supplied
to the Trustee, and shall carry out such Restoration with due diligence and
complete such Restoration within 270 days from the date of such binding
commitment. Any Net Proceeds from a Collateral Loss Event not so applied shall
constitute Excess Proceeds.
When the aggregate amount of Excess Proceeds exceeds $5.0 million, PRI shall
make an offer to all Holders of Notes (an "Asset Sale Offer") to purchase the
maximum principal amount of Notes that may be purchased out of the Excess
Proceeds, at an offer price in cash in an amount equal to 100% of the principal
amount thereof plus accrued and unpaid interest, if any, to the date of
purchase, in accordance with the procedures set forth in the Indenture. To the
extent that the aggregate amount of Notes tendered pursuant to an Asset Sale
Offer is less than the Excess Proceeds, (i) amounts remaining on deposit in the
Cash Collateral Account shall be retained therein and shall continue to be
subject to the Lien of the Security Documents and may be used by PRI to purchase
or invest in Replacement Collateral at any time and from time to time, and (ii)
any remaining deficiency not so deposited may be used by PRI for general
corporate purposes. If the aggregate principal amount of Notes surrendered by
Holders thereof exceeds the amount of Excess Proceeds, the Trustee shall select
the Notes to be purchased on a pro rata basis. Upon completion of such Asset
Sale Offer, the amount of Excess Proceeds shall be reset at zero.
The Company will comply with the applicable tender offer rules, including
the requirements of Rule 14e-1 under the Exchange Act, and all other applicable
securities laws and regulations in connection with any Asset Sale Offer.
SECURITY
All of the obligations of PRI under the Notes and the Indenture are secured
by a first priority Lien on the following property (collectively, the
"Collateral"): (i) mortgages on substantially all of the owned and certain of
the leased real property of the Company, (ii) certain equipment and fixtures,
(iii) certain general intangibles and (iv) proceeds of any of the foregoing, in
each case whether owned on the Issue Date or acquired thereafter, PROVIDED,
HOWEVER, that property purchased with the proceeds of a loan made pursuant to an
Acquisition Financing Facility and subject to a Lien securing such Acquisition
Financing Facility will not constitute Collateral.
If the Notes become due and payable prior to the final stated maturity
thereof for any reason or are not paid in full at the final stated maturity
thereof, the Trustee has the right to foreclose upon the Collateral in
accordance with instructions from the Holders of a majority in aggregate
principal amount of the Notes or, in the absence of such instructions, in such
manner as the Trustee deems appropriate in its absolute discretion. Pursuant to
the Indenture, in the event PRI obtains an Acquisition Financing Facility, the
lender or lenders thereunder, the Trustee and the Collateral Agent (which
initially will be the Trustee) will enter
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into an Intercreditor Agreement. Pursuant to the Intercreditor Agreement, upon
any foreclosure on the Collateral or collateral acquired with the proceeds of
the Acquisition Financing Facility, the proceeds thereof will be distributed by
the Collateral Agent (i) first, to pay certain obligations of PRI to reimburse
or indemnify the Collateral Agent, (ii) next, to the Trustee on behalf of the
Holders and to such lenders pro rata on account of certain payments, if any,
previously set aside, (iii) next, to the Trustee on behalf of the Holders and to
such lenders pro rata on account of unpaid interest, prepayment or redemption
premiums or payments due upon an Asset Sale Offer or Change of Control Offer,
(iv) next, to the Trustee on behalf of the Holders and to such lenders pro rata
on account of unpaid principal, (v) next, to the Trustee on behalf of the
Holders and to such lenders pro rata on account of other obligations of PRI and
(vi) next, to PRI or as otherwise required by law. The Intercreditor Agreement
will provide that the Trustee and the lenders under the Acquisition Financing
Facility will have recourse to the Collateral and the collateral acquired with
the proceeds of the Acquisition Financing Facility only through the Collateral
Agent and that the Trustee and such lenders will have the right to direct the
Collateral Agent to foreclose upon the Collateral and the collateral acquired
with the proceeds of the Acquisition Financing Facility, respectively.
There can be no assurance that the proceeds of any sale of the Collateral in
whole or in part pursuant to the Indenture and the related Security Documents
following an Event of Default would be sufficient to satisfy payments due on the
Notes. To the extent that PRI has outstanding obligations to lenders under an
Acquisition Financing Facility, with whom the Holders of the Notes will share
proceeds from any sales of Collateral, amounts realized by Holders of the Notes
in respect thereof will be reduced. Moreover, some or all of the Collateral will
be illiquid and may have no readily ascertainable market value. Accordingly,
there can be no assurance that the Collateral can be sold in a short period of
time, or at all. In addition, the ability of the Holders of the Notes to realize
upon the Collateral will be subject to certain bankruptcy law limitations in the
event of a bankruptcy of PRI. Under applicable federal bankruptcy laws, secured
creditors are prohibited from repossessing their security from a debtor in a
bankruptcy case, or from disposing of security repossessed from such a debtor,
without bankruptcy court approval. Moreover, applicable federal bankruptcy laws
generally permit the debtor to continue to retain collateral even though the
debtor is in default under the applicable debt instruments, provided generally
that the secured creditor is given "adequate protection." The meaning of the
term "adequate protection" may vary according to the circumstances, but is
intended in general to protect the value of the secured creditor's interest in
the collateral at the commencement of the bankruptcy case and may include cash
payments or the granting of additional security, if and at such times as the
court in its discretion determines, for any diminution in the value of the
collateral as result of the stay of repossession or disposition of the
collateral by the debtor during the pendency of the bankruptcy case. In view of
the lack of a precise definition of the term "adequate protection" and the broad
discretionary powers of a bankruptcy court, the Company cannot predict whether
payments under the Notes would be made following commencement of and during a
bankruptcy case, whether or when the Trustee could foreclose upon or sell the
Collateral or whether or to what extent Holders of the Notes would be
compensated for any delay in payment or loss of value of the Collateral through
the requirement of "adequate protection." Furthermore, in the event the
bankruptcy court determines that the value of the Collateral is not sufficient
to repay all amounts due on the Notes, the Holders would hold "undersecured
claims." Applicable federal bankruptcy laws do not permit the payment and/or
accrual of interest, costs and attorney's fees for "undersecured claims" during
the debtor's bankruptcy case.
Old Notes initially purchased by qualified institutional buyers who did not
elect to take physical delivery of their certificates were initially represented
by a single, global Note in registered form, registered in the name of a nominee
of DTC, as depositary. Notes (i) originally purchased by or transferred to
certain "foreign purchasers" or Accredited Investors or (ii) held by qualified
institutional buyers who elected to take physical delivery of their certficates
instead of holding their interest through the global Note were issued in
registered form. The Exchange Notes exchanged for Old Notes represented by the
global Note will be represented by one or more global Exchange Notes in
registered form, registered in the name of the nominee of DTC. See "Description
of Exchange Notes -- Book-entry; Delivery and Form." Exchange Notes issued to
non-qualified institutional buyers in exchange for Old Notes held by such
investors will be issued only in certificated, fully registered, definitive
form. Except as described herein, Exchange Notes in definitive certificated form
will not be issued in exchange for the global Exchange Note(s) or interests
therein.
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THE GLOBAL NOTE. PRI expects that pursuant to procedures established by DTC
(i) upon the issuance of the Global Note, DTC or its custodian will credit, on
its internal system, the principal amount of Notes of the individual beneficial
interests represented by such global securities to the respective accounts of
persons who have accounts with such depositary and (ii) ownership of beneficial
interests in the Global Note will be shown on, and the transfer of such
ownership will be effected only through, records maintained by DTC or its
nominee (with respect to interests of participants) and the records of
participants (with respect to interests of persons other than participants).
Such accounts initially will be designated by or on behalf of the Initial
Purchasers and ownership of beneficial interests in the Global Note will be
limited to persons who have accounts with DTC ("participants") or persons who
hold interests through participants. QIBs may hold their interests in the Global
Note directly through DTC if they are participants in such system, or indirectly
through organizations which are participants in such system.
So long as DTC, or its nominee, is the registered owner or holder of the
Notes, DTC or such nominee, as the case may be, will be considered the sole
owner or holder of the Notes represented by such Global Note for all purposes
under the Indenture. No beneficial owner of an interest in any of the Global
Notes will be able to transfer that interest except in accordance with DTC's
procedures, in addition to those provided for under the Indenture with respect
to the Notes.
Payments of the principal of, premium (if any) and interest (including
Additional Interest) on the Global Note will be made to DTC or its nominee, as
the case may be, as the registered owner thereof. None of PRI, 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 interest.
PRI expects that DTC or its nominee, upon receipt of any payment of
principal, premium, if any, or interest (including Additional 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 the Global Note as shown on the records of DTC or its nominee. PRI
also expects that payments by participants to owners of beneficial interests in
the Global Note held through such participants will be governed by standing
instructions and customary practice, as is now the case with securities held for
the accounts of customers registered in the names of nominees for such
customers. Such payments will be the responsibility of such participants.
Transfers between participants in DTC will be effected in the ordinary way
in accordance with DTC rules and will be settled in same day funds. If a holder
requires physical delivery of a Certificated Security for any reason, including
to sell Notes to persons in states which require physical delivery of the Notes,
or to pledge such securities, such holder must transfer its interest in the
Global Note, in accordance with the normal procedures of DTC and with the
procedures set forth in the Indenture.
DTC has advised PRI that it will take any action permitted to be taken by a
holder of Notes (including the presentation of Notes for exchange as described
below) only at the direction of one or more participants to whose account the
DTC interests in the Global Note are credited and only in respect of such
portion of the aggregate principal amount of Notes as to which such participant
or participants has or have given such direction. However, if there is an Event
of Default under the Indenture, DTC will exchange the Global Note for
Certificated Securities, which it will distribute to its participants and which
will be legended as set forth under the heading "Transfer Restrictions."
DTC has advised PRI as follows: DTC is a limited purpose trust company
organized under the laws of the State of New York, a member of the Federal
Reserve System, a "clearing corporation" within the meaning of the Uniform
Commercial Code and "Clearing Agency" registered pursuant to the provisions of
Section 17A of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). DTC 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,
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trust companies and clearing corporations and certain other organizations.
Indirect access to the DTC system is available to others such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a participant, either directly or indirectly ("indirect
participants").
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the Global Note among participants of DTC, it is under
no obligation to perform such procedures, and such procedures may be
discontinued at any time. Neither PRI nor the Trustee will have any
responsibility for the performance by DTC or its participants or indirect
participants of their respective obligations under the rules and procedures
governing their operations.
CERTIFICATED SECURITIES. Certificated Securities will be transferred to all
beneficial owners in exchange for their beneficial interests in the Global Note
if (A) DTC (i) has notified the Company that it is unwilling or unable to
continue as depositary for such Global Note or (ii) has ceased to be a clearing
agency registered under the Exchange Act or (B) there shall have occurred and be
continuing an Event of Default resulting in acceleration of the Notes. Such
Certificated Securities will bear the legends referred to under "Transfer
Restrictions," except upon satisfaction of the conditions set forth in the
Indenture permitting removal of such legends.
CERTAIN COVENANTS
RESTRICTED PAYMENTS
The Indenture provides that PRI 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 on account of the Equity Interests of PRI or
any of its Restricted Subsidiaries (other than dividends or distributions
payable in Equity Interests (other than Disqualified Stock) of PRI or such
Restricted Subsidiary or dividends or distributions payable by a Restricted
Subsidiary of PRI to PRI or to another Restricted Subsidiary of PRI); (ii)
purchase, redeem or otherwise acquire or retire for value any Equity Interests
of PRI or any Restricted Subsidiary or other Affiliate of PRI (other than any
such Equity Interests owned by PRI or a Restricted Subsidiary of PRI); (iii)
purchase, redeem or otherwise acquire or retire for value any Indebtedness that
is subordinated to the Notes; (iv) pay an amount in any fiscal year in excess of
$600,000 pursuant to the Management Services Agreement; or (v) make any
Restricted Investment (all such payments and other actions set forth in clauses
(i) through (v) above being collectively referred to as "Restricted Payments"),
unless, at the time of and after giving effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be continuing
or would occur as a consequence thereof;
(b) at the time of such Restricted Payment and after giving pro forma
effect thereto as if such Restricted Payment had been made at the
beginning of PRI's most recently ended four full fiscal quarters for which
internal financial statements are available immediately preceding the date
on which such Restricted Payment is made, the Fixed Charge Coverage Ratio
would have been greater than 2.0 to 1 for Restricted Payments made on or
prior to February 29, 2000 and greater than 2.25 to 1 for Restricted
Payments made after February 29, 2000; and
(c) such Restricted Payment (the amount of any such payment, if other
than cash, to be determined by the Board of Directors of PRI, whose
determination shall be conclusive and evidenced by a resolution in an
Officers' Certificate delivered to the Trustee), together with the aggregate
of all other Restricted Payments made by PRI and its Restricted Subsidiaries
after the date of the Indenture, shall not exceed the sum of (1) 50% of the
Consolidated Net Income of PRI for the period (taken as one accounting
period) commencing March 1, 1996 and ending on the last day of PRI's most
recently ended fiscal quarter for which internal financial statements are
available at the time of such Restricted Payment (or, if such Consolidated
Net Income for such period is a deficit, 100% of such deficit); plus (2)
100% of the aggregate net cash proceeds received by PRI from the issue, sale
or exercise since the date of the Indenture of Equity Interests of PRI or of
debt securities of PRI that have been converted into such Equity Interests
(other than (A) Equity Interests (or convertible debt securities) sold to,
or exercised by, a Restricted Subsidiary of PRI, (B) Equity Interests the
proceeds of which are applied as
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permitted by clause (ii) of the next succeeding paragraph and (C)
Disqualified Stock or debt securities that have been converted into
Disqualified Stock); plus (3) the aggregate cash received by PRI as capital
contributions to PRI after the Issue Date (other than a capital contribution
applied as permitted by clause (ii) of the next succeeding paragraph); plus
(4) the amount of the net reduction in Investments in Unrestricted
Subsidiaries of PRI resulting from (x) the payment of cash dividends or the
repayment in cash of the principal of loans or the cash return on any
Investment, in each case to the extent received by PRI or any Restricted
Subsidiary of PRI from Unrestricted Subsidiaries of PRI, (y) to the extent
that any Restricted Investment that was made after the date of the Indenture
is sold for cash or otherwise liquidated or repaid for cash, the after-tax
cash return of capital with respect to such Restricted Investment (less the
cost of disposition, if any) and (z) the redesignation of Unrestricted
Subsidiaries of PRI as Restricted Subsidiaries of PRI (valued as provided in
the definition of "Investment"), such aggregate amount of the net reduction
in Investments not to exceed in the case of Unrestricted Subsidiary, the
amount of Restricted Investments previously made by PRI or any Restricted
Subsidiary in such Unrestricted Subsidiary, which amount was included in the
calculation of the amount of Restricted Payments.
The foregoing provisions will not prohibit (i) the payment of any dividend
within 60 days after the date of declaration thereof, if at said date of
declaration such payment would have complied with the provisions of the
Indenture; (ii) the redemption, repurchase, retirement or other acquisition of
any Equity Interests of PRI, or the defeasance, redemption or repurchase of
subordinated Indebtedness in exchange for, or out of the proceeds of, the
substantially concurrent sale (other than to a Restricted Subsidiary of PRI) of
Equity Interests (other than any Disqualified Stock) of PRI or out of the
proceeds of a substantially concurrent cash capital contribution received by
PRI; (iii) the defeasance, redemption or repurchase of subordinated Indebtedness
with the net proceeds from an incurrence of Indebtedness incurred in a Permitted
Refinancing (as hereinafter defined); (iv) a Restricted Payment by PRI pursuant
to the Tax Sharing Agreement; (v) following consummation by Group of a Public
Equity Offering, a Restricted Payment to Group in such amounts as may be
necessary to pay operating and/or administrative expenses of Group, up to a
maximum of $750,000 per year; and (vi) a Restricted Payment to Group of up to
$32.0 million that is applied in full on the Issue Date to the payment of the
redemption price of a portion of the outstanding 12.5% Notes. Any payments made
pursuant to clauses (i), (iv) and (v) of this paragraph will be, and any
payments made pursuant to clauses (ii), (iii) and (vi) will not be, deemed to be
Restricted Payments for the purpose of clause (c) of the preceding paragraph.
Not later than the date of making any Restricted Payment, PRI shall deliver
to the Trustee an Officers' Certificate stating that such Restricted Payment is
permitted and setting forth the basis upon which the calculations required by
the "Restricted Payments" covenant were computed, which calculations may be
based upon PRI's latest available financial statements.
INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK
The Indenture provides that PRI will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly, create, incur, issue,
assume, guarantee or otherwise become directly or indirectly liable with respect
to (collectively, "incur") any Indebtedness (including Acquired Debt) and that
PRI will not issue any Disqualified Stock and will not permit any of its
Restricted Subsidiaries to issue any share of Disqualified Stock or preferred
stock; PROVIDED, HOWEVER, that PRI may incur Indebtedness or issue shares of
Disqualified Stock if the Fixed Charge Coverage Ratio for PRI's most recently
ended four full fiscal quarters for which internal financial statements are
available immediately preceding the date on which such additional Indebtedness
is incurred or such preferred stock is issued, determined on a pro forma basis
(including a pro forma application of the net proceeds therefrom), as if the
additional Indebtedness had been incurred, or the Disqualified Stock had been
issued, as the case may be, at the beginning of such four-quarter period would
have been greater than 2.0 to 1 for Indebtedness incurred on or prior to
February 28, 1998 and greater than 2.25 to 1 for Indebtedness incurred after
February 28, 1998.
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The foregoing limitations will not apply to:
(i)
Indebtedness incurred by PRI under the Senior Credit Facility or any
replacement credit facility in an aggregate principal amount not to
exceed the greater of (A) $20.0 million in principal amount (with letters of
credit being deemed to have a principal amount equal to the maximum
potential liability of PRI thereunder), less the aggregate amount of all
repayments after the Issue Date that permanently reduce the commitment under
the Senior Credit Facility or such replacement credit facility and (B) the
Borrowing Base at the time such Indebtedness is incurred;
(ii)
Indebtedness incurred by PRI or any Subsidiary Guarantor in respect
of Capital Lease Obligations or Purchase Money Obligations in an
aggregate principal amount not to exceed $10.0 million at any time
outstanding reduced by the principal amount of any such Indebtedness repaid
with the Net Proceeds of Asset Sales (other than Purchase Money Obligations
repaid with Net Proceeds of Asset Sales of the asset securing such
Obligations);
(iii)
Existing Indebtedness outstanding on the date of the Indenture;
(iv)
the incurrence by PRI or any Subsidiary Guarantor of Indebtedness
issued in exchange for, or the proceeds of which are used to extend,
refinance, renew, replace, defease or refund (collectively, to "Refinance"),
any Indebtedness incurred pursuant to clause (iii) above or this clause (iv)
in whole or in part (the "Refinancing Indebtedness"); PROVIDED, HOWEVER,
that (1) the principal amount of such Refinancing Indebtedness shall not
exceed the principal amount of Indebtedness so Refinanced (plus the amount
of prepayment premium and reasonable expenses incurred in connection
therewith); (2) the Refinancing Indebtedness shall have a Weighted Average
Life to Maturity equal to or greater than the Weighted Average Life to
Maturity of the Indebtedness being Refinanced; (3) if the Indebtedness is
subordinated in right of payment to the Notes, the Refinancing Indebtedness
shall be subordinated in right of payment to the Notes on terms at least as
favorable to the Holders of Notes as those contained in the documentation
governing the Indebtedness; and (4) immediately after such Refinancing, the
amount remaining outstanding or available under such Existing Indebtedness
or such Refinancing Indebtedness being so Refinanced does not exceed the
difference between (A) the amount outstanding under such Existing
Indebtedness or such Refinancing Indebtedness immediately prior to such
Refinancing together with any prepayment premium paid and expenses
reasonably incurred by PRI in connection with such Refinancing MINUS (B) the
amount of the Refinancing Indebtedness being incurred in such Refinancing
(any such Refinancing being referred to as a "Permitted Refinancing");
(v)
Hedging Obligations that are incurred for the purpose of fixing or
hedging interest rate risk with respect to any Indebtedness that is
permitted by the terms of the Indenture to be outstanding;
(vi)
intercompany Indebtedness between or among PRI and any of its
Restricted Subsidiaries;
(vii)
Indebtedness of PRI attributable to any Currency Agreement, Commodity
Agreement or Interest Rate Agreement;
(viii)
Indebtedness arising from BONA FIDE agreements providing for
indemnification, adjustment of purchase price or similar obligations,
or from Guarantees or letters of credit, surety bonds or performance bonds
securing any obligations of PRI or any of its Restricted Subsidiaries
pursuant to such agreements, in any case incurred in connection with the
disposition of any business, assets or Restricted Subsidiary of PRI in
compliance with the covenant described under "-- Repurchase at the Option of
Holders -- Asset Sales; Collateral Loss Events" above (other than Guarantees
of Indebtedness incurred by any Person acquiring all or any portion of such
business, assets or Restricted Subsidiary of PRI for the purpose of
financing such acquisition), in a principal amount not to exceed the gross
proceeds actually received by PRI or any Restricted Subsidiary in connection
with such disposition; and
(ix)
other Indebtedness in an aggregate principal amount not to exceed
$5.0 million at any time outstanding.
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LIENS
The Indenture provides that PRI will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly, create, incur, assume or
suffer to exist any Lien on (a) any item of Collateral (other than the Liens
created by the Security Documents), except as expressly permitted by the
Security Documents or (b) any other asset now owned or hereafter acquired, or
any income or profits therefrom or assign or convey any right to receive income
therefrom, except in the case of this clause (b), (1) if such Liens are
Permitted Liens or (2) effective provision is made so that the Notes will be
secured (A) equally and ratably with (or prior to) the obligations so secured
for so long as such obligations are so secured, or (B) in the event the
obligations so secured are subordinate in right of payment to the Notes, prior
to such obligations for so long as such obligations are so secured.
DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES
The Indenture provides that PRI will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or
suffer to exist or become effective any encumbrance or restriction on the
ability of any Restricted Subsidiary to (a) pay dividends or make any other
distributions to PRI or any of its Restricted Subsidiaries (1) on its Capital
Stock or (2) with respect to any other interest or participation in, or measured
by, its profits, (b) pay any Indebtedness owed to PRI or any of its
Subsidiaries, (c) make loans or advances to PRI or any of its Restricted
Subsidiaries or (d) transfer any of its properties or assets to PRI or any of
its Restricted Subsidiaries, except for such encumbrances or restrictions
existing under or by reason of (i) Existing Indebtedness as in effect on the
date of the Indenture, (ii) the Indenture and the Notes, (iii) the Senior Credit
Facility, as in effect on the date of the Indenture, and any amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacements or refinancings thereof after such date; PROVIDED that such
amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings are not more restrictive with respect
to the provisions set forth in clauses (a), (b), (c) and (d) than those
contained in the Senior Credit Facility, as in effect on the date of the
Indenture, (iv) applicable law, (v) any instrument governing Indebtedness or
Capital Stock of a Person acquired by PRI or any of its Restricted Subsidiaries
as in effect at the time of such acquisition (except to the extent such
Indebtedness was incurred in connection with or in contemplation of such
acquisition), which encumbrance or restriction is not applicable to any Person,
or the properties or assets of any Person, other than the Person, or the
property or assets of the Person, so acquired, PROVIDED that the Consolidated
Cash Flow of such Person is not taken into account in determining whether such
acquisition was permitted by the terms of the Indenture, (vi) customary
nonassignment provisions in leases entered into in the ordinary course of
business and consistent with past practices, (vii) Purchase Money Obligations
for property acquired in the ordinary course of business that impose
restrictions of the nature described in clause (d) above on the property so
acquired, (viii) restrictions with respect solely to a Subsidiary of PRI imposed
pursuant to a binding agreement (subject only to customary closing conditions
and termination provisions) that has been entered into for the sale or
disposition of all or substantially all of the Capital Stock or assets to be
sold of such Subsidiary, PROVIDED that such restrictions apply solely to the
Capital Stock or assets to be sold of such Subsidiary, and such sale or
disposition is permitted under the covenant entitled "Repurchase at Option of
Holders -- Asset Sales; Collateral Loss Events" or (ix) Refinancing
Indebtedness, PROVIDED that the restrictions contained in the agreements
governing such Refinancing Indebtedness are no more restrictive with respect to
the provisions set forth in clauses (a), (b), (c) and (d) above than those
contained in the agreements governing the Indebtedness being refinanced.
LIMITATION ON MERGER OR CONSOLIDATION
The Indenture provides that PRI may not consolidate or merge with or into
(whether or not PRI is the surviving corporation), or sell, lease, license,
transfer or otherwise dispose of all or substantially all of its properties or
assets in one or more related transactions, to another Person unless (i) PRI is
the surviving corporation or the Person formed by or surviving any such
consolidation or merger (if other than PRI) or to which such sale, lease,
license, transfer or other disposition shall have been made is a corporation
organized or existing under the laws of the United States, any state thereof or
the District of Columbia; (ii) the Person formed by or surviving any such
consolidation or merger (if other than PRI) or the Person to which such sale,
lease, license, transfer or other disposition shall have been made assumes all
the obligations of PRI under
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the Notes, the Indenture and the Security Documents, including the Trustee's
uninterrupted Lien with respect to the Collateral, pursuant to a supplemental
indenture in a form reasonably satisfactory to the Trustee; (iii) immediately
after giving effect to such transaction no Default or Event of Default exists;
(iv) PRI or any Person formed by or surviving any such consolidation or merger,
or to which such sale, lease, license, transfer or other disposition shall have
been made (A) will have Consolidated Net Worth (immediately after the
transaction but prior to any purchase accounting adjustments resulting from the
transaction) equal to or greater than the Consolidated Net Worth of PRI
immediately preceding the transaction and (B) will, at the time of such
transaction and after giving pro forma effect thereto as if such transaction had
occurred at the beginning of the applicable four-quarter period, be permitted to
incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge
Coverage Ratio test set forth in the covenant entitled "Incurrence of
Indebtedness and Issuance of Preferred Stock;" and (v) the Company has delivered
to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating
that such consolidation, merger, sale, lease, license, transfer or other
disposition complies with the "Limitation on Merger or Consolidation" covenant
and that all conditions precedent in the Indenture relating to such transaction
have been complied with.
Upon any consolidation, merger, sale, lease, license, transfer or other
disposition in accordance with such covenant, the successor Person formed by
such consolidation or into which PRI is merged or to which such sale, lease,
license, transfer or other disposition is made shall succeed to, and be
substituted for, and may exercise every right and power of, PRI under the
Indenture and the Security Documents with the same effect as if such successor
had been named as PRI in the Indenture and the Security Documents and thereafter
(except in the case of a lease) the predecessor corporation will be relieved of
all further obligations and covenants under the Indenture, the Security
Documents and the Notes.
TRANSACTIONS WITH AFFILIATES
The Indenture provides that PRI will not, and will not permit any of its
Restricted Subsidiaries to, sell, lease, license, transfer or otherwise dispose
of any of its properties or assets to, or purchase any property or assets from,
or enter into any contract, agreement, understanding, loan, advance or guarantee
with, or for the benefit of, any Affiliate (each of the foregoing, an "Affiliate
Transaction"), unless (a) such Affiliate Transaction is on terms that are no
less favorable to PRI or the relevant Restricted Subsidiary, as the case may be,
than those that would have been obtained in a comparable transaction by PRI or
such Restricted Subsidiary, as the case may be, with an unrelated Person and (b)
PRI delivers to the Trustee (i) with respect to any Affiliate Transaction
involving aggregate payments in excess of $1.0 million, a resolution of the
Board of Directors set forth in an Officers' Certificate certifying that such
Affiliate Transaction complies with clause (a) above and such Affiliate
Transaction is approved by a majority of the disinterested members of the Board
of Directors and (ii) with respect to any Affiliate Transaction involving
aggregate payments in excess of $5.0 million, an affirmative opinion as to the
fairness to PRI or such Restricted Subsidiary, as the case may be, from a
financial point of view issued by an investment banking firm of national
standing with expertise in underwriting non-investment grade debt securities;
PROVIDED, HOWEVER, that (i) any employment agreement or stock option agreement
(other than any such agreement involving options on Disqualified Stock) entered
into by PRI or any of its Restricted Subsidiaries in the ordinary course of
business and consistent with the past practice of PRI or such Restricted
Subsidiary, (ii) transactions between or among PRI and its Restricted
Subsidiaries, (iii) transactions permitted by the provisions of the Indenture
described above under "-- Restricted Payments," (iv) the payment of reasonable
fees or indemnities to directors of PRI or its Restricted Subsidiaries, (v) the
payment by PRI to HPH of an amount during any four consecutive fiscal quarters
pursuant to the Management Services Agreement not in excess of the Permitted
Amount, (vi) any issuance of Equity Interests (other than Disqualified Stock) or
other payments, awards or grants in Equity Interests pursuant to stock options
and stock ownership plans (other than plans involving Disqualified Stock) of PRI
entered into in the ordinary course of business and approved by the Board of
Directors, (vii) payments pursuant to the Miner Purchase Agreement, and (viii)
transactions and payments pursuant to the Registration Rights Agreements and the
Stock and Warrant Holders Agreement, in each case will not be deemed Affiliate
Transactions.
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GUARANTEE OF THE NOTES
The Indenture provides that PRI will not permit any Restricted Subsidiary to
incur any Indebtedness or issue any preferred stock unless (i) such Restricted
Subsidiary enters into or has entered into a Guarantee of the Notes in
accordance with the terms of the Indenture or (ii) the total principal amount of
Indebtedness and liquidation preference of preferred stock of such Restricted
Subsidiary does not exceed $250,000 individually and, together with the total
principal amount of Indebtedness and liquidation preference of preferred stock
of all other Restricted Subsidiaries that are not Guarantors, does not exceed
$500,000 in the aggregate.
Any such Guarantee of the Notes by a Restricted Subsidiary will be limited
in amount to an amount not to exceed the maximum amount that can be guaranteed
by that Restricted Subsidiary without rendering such Guarantee voidable under
applicable law relating to fraudulent conveyance or fraudulent transfer or
similar laws affecting the rights of creditors generally. With such limitations,
such Guarantee could be effectively subordinated to all other Indebtedness
(including guarantees and other contingent liabilities) of such Restricted
Subsidiary and, depending on the amount of such Indebtedness, such Restricted
Subsidiary's liability on its Guarantee could be reduced to zero. Upon the sale
or other disposition of a Restricted Subsidiary that is a Guarantor (other than
to PRI or an Affiliate of PRI) permitted by the Indenture, such Restricted
Subsidiary will be released and relieved from all of its obligations under its
Guarantee.
LINE OF BUSINESS
The Indenture provides that for so long as any Notes are outstanding, PRI
and its Restricted Subsidiaries will engage primarily in the business of
developing, manufacturing and marketing of rigid plastic packaging and plastic
promotional beverage cups.
IMPAIRMENT OF SECURITY INTEREST
Neither PRI nor any of its Subsidiaries will take or omit to take any action
that would have the result of adversely affecting or impairing the security
interest in favor of the Trustee, on behalf of itself and the Holders of the
Notes, with respect to the Collateral, and neither PRI nor any of its
Subsidiaries shall grant to any Person, or suffer any Person (other than PRI) to
have (other than to the Trustee on behalf of the Trustee and the Holders of the
Notes) any interest whatsoever in the Collateral except as expressly permitted
by the Security Documents. Neither PRI nor any of its Subsidiaries will enter
into any agreement or instrument that by its terms requires the proceeds
received from any sale of Collateral to be applied to repay, redeem, defease or
otherwise acquire or retire any Indebtedness of any Person, other than (i)
lenders under an Acquisition Financing Facility and (ii) pursuant to the
Indenture, the Notes and the Security Documents.
REPORTS
The Indenture provides that whether or not required by the rules and
regulations of the Commission, so long as any Notes are outstanding, PRI will
furnish to the Holders of Notes (i) all quarterly and annual financial
information that is substantially equivalent to that which would be required to
be contained in a filing with the Commission on Forms 10-Q and 10-K if PRI were
required to file such Forms, including a "Management's Discussion and Analysis
of Financial Condition and Results of Operations" section and, with respect to
the annual information only, a report thereon by PRI's certified independent
accountants and (ii) all reports that are substantially equivalent to that which
would be required to be filed with the Commission on Form 8-K if PRI were
required to file such reports. In addition, whether or not required by the rules
and regulations of the Commission, PRI will file a copy of all such information
with the Commission for public availability (unless the Commission will not
accept such a filing) and make such information available to investors who
request it in writing. The Indenture also requires that, so long as any of the
Notes remain outstanding, PRI will make available to any prospective purchaser
of Notes or beneficial owner of Notes in connection with any sale thereof the
information required by Rule 144A(d)(4) under the Securities Act, until such
time as PRI has either exchanged the Notes for securities identical in all
material respects which have been registered under the Securities Act or until
such time as the holders thereof have disposed of such Notes pursuant to an
effective registration statement under the Securities Act.
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EVENTS OF DEFAULT AND REMEDIES
The Indenture provides that each of the following constitutes an Event of
Default: (i) default for 30 days in the payment when due of interest on the
Notes; (ii) default in payment when due of the principal of or premium, if any,
on the Notes or in payment when due with respect to Notes tendered pursuant to a
Change of Control Offer or Asset Sale Offer; (iii) failure by PRI to comply with
the provisions described under the covenants "--Repurchase at the Option of
Holders" and "--Certain Covenants--Limitation on Merger or Consolidation;" (iv)
failure by PRI for 30 days after written notice from the Trustee or the holders
of 25% of the outstanding Notes to comply with any of its other agreements in
the Indenture or the Notes; (v) default under any mortgage, indenture or
instrument under which there may be issued or by which there may be secured or
evidenced any Indebtedness for money borrowed by PRI, Group or any Restricted
Subsidiary of PRI (or the payment of which is guaranteed by PRI, Group or any
Restricted Subsidiary of PRI) whether such Indebtedness or guarantee now exists,
or is created after the date of the Indenture, which default (a) is caused by a
failure to pay principal of or premium, if any, on such Indebtedness prior to
the expiration of the grace period, if any, provided in such Indebtedness (a
"Payment Default") or (b) results in the acceleration of such Indebtedness prior
to its express maturity and, in each case, the principal amount of any such
Indebtedness, together with the principal amount of any other such Indebtedness
under which there has been a Payment Default or the maturity of which has been
so accelerated, aggregates $5.0 million or more; (vi) failure by PRI, Group or
any Restricted Subsidiary of PRI to pay final judgments aggregating in excess of
$3.0 million, which judgments are not paid, discharged or stayed for a period of
60 days; (vii) certain events of bankruptcy or insolvency with respect to PRI,
Group or any Restricted Subsidiary of PRI that is a Significant Subsidiary or
any group of Restricted Subsidiaries of PRI that, taken together, would
constitute a Significant Subsidiary of PRI; and (viii) any of the Security
Documents cease to be in full force and effect (other than in accordance with
their respective terms or the terms of the Indenture), or any of the Security
Documents cease to give the Trustee the Liens, rights, powers and privileges
purported to be created thereby, or any Security Document is declared null and
void, or PRI denies any of its obligations under any Security Document or any
Collateral becomes subject to any Lien other than the Liens created or permitted
by the Security Documents.
If any Event of Default occurs and is continuing, the Trustee or the Holders
of at least 25% in principal amount of the then outstanding Notes may declare
all the Notes to be due and payable immediately. Notwithstanding the foregoing,
in the case of an Event of Default arising from certain events of bankruptcy or
insolvency with respect to PRI, Group, any Restricted Subsidiary of PRI that is
a Significant Subsidiary or any group of Restricted Subsidiaries of PRI that,
taken together, would constitute a Significant Subsidiary of PRI, all
outstanding Notes will become due and payable without further action or notice.
Holders of the Notes may not enforce the Indenture or the Notes except as
provided in the Indenture. Subject to certain limitations, Holders of a majority
in principal amount of the then outstanding Notes may direct the Trustee in its
exercise of any trust or power. The Trustee may withhold from Holders of the
Notes notice of any continuing Default or Event of Default (except a Default or
Event of Default relating to (i) the payment of principal or interest on the
Notes, (ii) payment when due with respect to the Notes tendered pursuant to a
Change of Control Offer or Asset Sale Offer or (iii) the failure to comply with
the covenant described above under "--Certain Covenants--Limitation on Merger or
Consolidation") if it determines that withholding such notice is in their
interest.
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of PRI with the
intention of avoiding payment of the premium that PRI would have had to pay if
PRI then had elected to redeem the Notes pursuant to the optional redemption
provisions of the Indenture, an equivalent premium shall also become and be
immediately due and payable to the extent permitted by law upon the acceleration
of the Notes. If an Event of Default occurs prior to May 1, 2000, by reason of
any willful action (or inaction) taken (or not taken) by or on behalf of PRI
with the intention of avoiding the prohibition on redemption of the Notes prior
to such date, then the amount payable for purposes of this paragraph will be
105.813%, expressed as a percentage of the amount that would otherwise be due
but for the provisions of this sentence, plus accrued interest, if any, to the
date of payment.
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The Holders of a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may on behalf of the Holders of all the
Notes waive any existing Default or Event of Default and its consequences under
the Indenture except a continuing Default or Event of Default in the payment of
interest (and premium, if any) on, or the principal of, the Notes or in
connection with a covenant or provision contained in the Indenture which cannot
be modified or amended without the consent of the Holders of the Notes affected
thereby.
PRI is required to deliver to the Trustee annually a statement regarding
compliance with the Indenture, and, upon becoming aware of any Default or Event
of Default, to deliver to the Trustee a statement specifying such Default or
Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No past, present or future director, officer, employee, incorporator or
stockholder of PRI or Group, as such, shall have any liability for any
obligations of PRI under the Notes, the Indenture or for any claim based on, in
respect of, or by reason of, such obligations or their creation. Each Holder of
Notes by accepting a Note waives and releases all such liability. The waiver and
release are part of the consideration for issuance of the Notes. Such waiver may
not be effective to waive liabilities under the federal securities laws and it
is the view of the Commission that such a waiver is against public policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
PRI may, at its option and at any time, elect to have the Collateral
released from the Lien created by the Security Documents and all of its
obligations discharged with respect to the outstanding Notes ("Legal
Defeasance") except for (i) the rights of Holders of outstanding Notes to
receive payments in respect of the principal of, premium, if any, and interest
on such Notes when such payments are due, (ii) PRI's obligations with respect to
the Notes concerning issuing temporary Notes, registration of Notes, mutilated,
destroyed, lost or stolen Notes and the maintenance of an office or agency for
payment and money for security payments held in trust, (iii) the rights, powers,
trusts, duties and immunities of the Trustee, and PRI's obligations in
connection therewith, and (iv) the Legal Defeasance provisions of the Indenture.
In addition, PRI may, at its option at any time, elect to have the Collateral
released from the Lien created by the Security Documents and its obligations
released with respect to certain covenants that are described in the Indenture
and the Security Documents ("Covenant Defeasance") and thereafter any omission
to comply with such obligations shall not constitute a Default or Event of
Default with respect to the Notes. In the event Covenant Defeasance occurs,
certain events (not including nonpayment, bankruptcy, receivership,
rehabilitation and insolvency events) described under "Events of Default" will
no longer constitute an Event of Default with respect to the Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i) PRI
must irrevocably deposit with the Trustee, in trust, for the benefit of the
holders of the Notes, cash in U.S. Dollars, non-callable Government Securities,
or a combination thereof, in such amounts as will be sufficient, in the opinion
of a nationally recognized firm of independent public accountants, to pay the
principal of, premium, if any, and interest on the outstanding Notes on the
stated maturity or on the applicable redemption date, as the case may be, of
such principal or installment of principal of, premium, if any, or interest on
the outstanding Notes; (ii) in the case of Legal Defeasance, PRI shall have
delivered to the Trustee an opinion of counsel reasonably acceptable to the
Trustee confirming that (A) PRI has received from, or there has been published
by, the Internal Revenue Service a ruling or (B) since the date of the
Indenture, there has been a change in the applicable federal income tax law, in
either case to the effect that, and based thereon such opinion of counsel shall
confirm that, the Holders of the outstanding Notes will not recognize income,
gain or loss for federal income tax purposes as a result of such Legal
Defeasance and will be subject to federal income tax on the same amounts, in the
same manner and at the same times as would have been the case if such Legal
Defeasance had not occurred; (iii) in the case of Covenant Defeasance, PRI shall
have delivered to the Trustee an Opinion of Counsel reasonably acceptable to the
Trustee confirming that the Holders of the outstanding Notes will not recognize
income, gain or loss for federal income tax purposes as a result of such
Covenant Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the case if
such Covenant Defeasance had not occurred; (iv) no
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Default or Event of Default shall have occurred and be continuing on the date of
such deposit or insofar as Events of Default from bankruptcy or insolvency
events are concerned, at any time in the period ending on the 91st day after the
date of deposit; (v) such Legal Defeasance or Covenant Defeasance shall not
result in a breach or violation of, or constitute a default under any material
agreement or instrument (other than the Indenture) to which PRI or any of its
Restricted Subsidiaries is a party or by which PRI or any of its Restricted
Subsidiaries is bound; (vi) PRI shall have delivered to the Trustee an opinion
of counsel to the effect that after the 91st day following the deposit, the
trust funds will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally; (vii) PRI shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by PRI with the intent of
preferring the Holders of Notes over the other creditors of PRI with the intent
of defeating, hindering, delaying or defrauding creditors of PRI; (viii) PRI
shall have delivered to the Trustee an Opinion of Counsel to the effect that the
trust resulting from the deposit does not constitute, or is qualified as, a
regulated investment company under the Investment Company Act of 1940, as
amended; and (ix) PRI shall have delivered to the Trustee an Officers'
Certificate and an opinion of counsel, each stating that all conditions
precedent provided for relating to the Legal Defeasance or the Covenant
Defeasance have been complied with.
POSSESSION, USE AND RELEASE OF COLLATERAL
Unless an Event of Default shall have occurred and be continuing, PRI will
have the right to remain in possession and retain exclusive control of the
Collateral securing the Notes (other than any cash and Cash Equivalents
constituting part of the Collateral and deposited with the Trustee in the Cash
Collateral Account and other than as set forth in the Security Documents), to
freely operate the Collateral and to collect, invest and dispose of any income
thereon.
RELEASE OF COLLATERAL
Upon compliance by PRI with the conditions set forth below in respect of any
Asset Sale, the Trustee will release the Released Interests (as defined below)
from the Lien of the Security Documents and reconvey the Released Interests to
PRI. PRI will have the right to obtain a release of items of Collateral (the
"Released Interests") subject to an Asset Sale upon compliance with the
condition that PRI deliver to the Trustee the following:
(a) A notice from PRI requesting the release of Released Interests, (i)
describing the proposed Released Interests, (ii) specifying the value
of such Released Interests on a date within 60 days of such notice (the
"Valuation Date"), (iii) stating that the purchase price to be received is
at least equal to the fair market value of the Released Interest, (iv)
stating that the release of such Released Interests will not interfere with
the Trustee's ability to realize the value of the remaining Collateral and
will not impair the maintenance and operation of the remaining Collateral,
(v) confirming the sale of, or an agreement to sell, such Released Interests
in a bona fide sale to a person or entity that is not an Affiliate of PRI
or, in the event that such sale is to a person or entity that is an
Affiliate, confirming that such sale is made in compliance with the
provisions set forth above under "--Certain Covenants--Transactions with
Affiliates," (vi) certifying that such Asset Sale complies with the terms
and conditions of the Indenture with respect thereto, and (vii) in the event
there is to be a substitution of Replacement Collateral for the Collateral
subject to the Asset Sale, specifying the property intended to be
substituted for the Collateral to be disposed of;
(b) An Officers' Certificate of PRI stating that (i) such Asset Sale
covers only the Released Interests and complies with the terms and
conditions of the Indenture with respect to Asset Sales, (ii) all Net Cash
Proceeds from the sale of any of the Released Interests will be applied
pursuant to the provisions of the Indenture in respect of Asset Sales, (iii)
there is no Default (unless the Default Release Conditions are complied
with) or Event of Default in effect or continuing on the date thereof, the
Valuation Date or the date of such Asset Sale, (iv) the release of the
Collateral will not result in a Default or Event of Default under the
Indenture or any Security Document, and (v) all conditions precedent in the
Indenture relating to the release in question have been complied with; and
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(c) All documentation required by the Trust Indenture Act, if any, prior
to the release of Collateral by the Trustee and, in the event there
is to be a substitution of Replacement Collateral for the Collateral subject
to the Asset Sale, all documentation necessary to effect the substitution of
such Replacement Collateral.
With respect to any release of Released Interests requested by PRI in
connection with any Asset Sale by PRI or a Restricted Subsidiary of PRI if a
Default is in effect or continuing on the date of the Officers' Certificate
referred to in clause (b) above, the applicable Valuation Date or the date of
such Asset Sale, "Default Release Conditions" mean, as a condition to such
release, (i) the receipt by PRI and delivery to the Trustee of (A) an appraisal
by an independent third party appraiser of the value of the Released Interests
as of the applicable Valuation Date (the "Appraised Value"), in the case of any
Asset Sale other than an Asset Sale involving the sale, as a going concern, of a
business or line of business (a "Business Sale"), which Appraised Value shall be
less than or equal to the consideration to be received by PRI or such Restricted
Subsidiary pursuant to such Asset Sale, or (B) in the case of an Asset Sale
involving a Business Sale, an affirmative opinion issued by an investment
banking firm of national standing with expertise in underwriting non-investment
grade debt securities as to the fairness to PRI or the Restricted Subsidiary of
PRI engaging in such Asset Sale, as the case may be, from a financial point of
view of the consideration to be received by PRI or such Restricted Subsidiary in
such Asset Sale in exchange for the assets proposed to be sold, (ii) 100% of the
consideration to be received in such Asset Sale shall be in the form of cash and
(iii) the Net Proceeds of such Asset Sale shall, concurrently with the release
of the Released Interests, be deposited in the Cash Collateral Account and
retained therein pending application as provided in the next succeeding sentence
and PRI shall have taken such other actions, at its sole expense, as may be
required to ensure that the Trustee holds a first priority Lien on such Net
Proceeds in accordance with the Indenture. Such Net Proceeds shall constitute
Excess Proceeds for purposes of determining the time at which PRI shall be
required to make an Asset Sale Offer and shall be applied solely (i) to purchase
Notes tendered pursuant to an Asset Sale Offer and (ii) following such an Asset
Sale Offer, to the extent such Net Proceeds remain on deposit in the Cash
Collateral Account, to purchase or invest in Replacement Collateral at any time
or from time to time.
DISPOSITION OF COLLATERAL WITHOUT RELEASE
Notwithstanding the provisions described under "-- Release of Collateral"
above, so long as no Default or Event of Default shall have occurred and be
continuing, PRI may, among other things, subject to certain limitations and
conditions, sell or otherwise dispose of any property subject to the Lien of the
Security Documents that may have become worn out or obsolete; abandon,
terminate, cancel, release or make alterations in or substitutions of any leases
or contracts subject to the Lien of the Security Documents; surrender or modify
any franchise, license or permit subject to the Lien of the Security Documents
that it may own or under which it may be operating; alter, repair, replace,
change the location or position of and add to its structure, machinery, systems,
equipment, fixtures and appurtenances; demolish, dismantle, tear down or scrap
any Collateral or abandon any thereof; and grant leases in respect of real
property constituting Collateral under certain circumstances.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange Notes in accordance with the Indenture.
The Registrar and the Trustee may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and PRI may require a
Holder to pay any taxes and fees required by law or permitted by the Indenture.
PRI is not required to transfer or exchange any Note selected for redemption.
Also, PRI is not required to transfer or exchange any Note for a period of 15
days before a selection of Notes to be redeemed.
The registered Holder of a Note will be treated as its owner for all
purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next succeeding paragraphs, the Indenture, the
Notes or the Security Documents may be amended or supplemented with the consent
of the Holders of at least a majority in principal amount of the Notes then
outstanding (including consents obtained in connection with a tender offer or
exchange offer for Notes), and any existing default or compliance with any
provisions of the
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Indenture or the Notes may be waived with the consent of the Holders of a
majority in principal amount of the then outstanding Notes (including consents
obtained in connection with a tender offer or exchange offer for Notes).
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any Notes held by a non-consenting Holder of Notes): (i) reduce
the percentage of principal amount of Notes whose Holders must consent to an
amendment, supplement or waiver, (ii) reduce the principal amount of or change
the fixed maturity of any Note, (iii) reduce the redemption price, including
premium, if any, or change the time at which at any Note may be redeemed, (iv)
reduce the repurchase price for the offers to purchase described above under the
caption "--Repurchase at the Option of Holder," change the time at which any
Note may be repurchased thereunder or otherwise amend in any material respect
(including through amendment of any of the definitions relating thereto) or
waive PRI's obligation to make and consummate a Change of Control Offer in the
event of a Change of Control or an Asset Sale Offer in the event of an Asset
Sale, (v) reduce the rate of, or change the time for payment of, interest on any
Note, (vi) waive a continuing Default or Event of Default in the payment of
principal of or premium, if any, or interest on the Notes (except a rescission
of acceleration of the Notes by the Holders of at least a majority in aggregate
principal amount of the Notes and a waiver of the payment default that resulted
from such acceleration), (vii) make any Note payable in money other than that
stated in the Notes, (viii) make any change in the provisions of the Indenture
relating to waivers of past Defaults or the rights of Holders of Notes to
receive payments of principal of or premium, if any, or interest on the Notes,
(ix) waive a redemption payment with respect to any Note, (x) modify or amend
the Indenture or the Security Documents, or take or fail to take any action,
that would have the effect of impairing the Lien on the Collateral granted
pursuant to the Security Documents or permitting any release of Collateral from
such Lien except as expressly contemplated by the Indenture or the Security
Documents, (xi) impair the right to institute suit for the enforcement of any
payment of principal or interest on or after the fixed maturity thereof, any
payment of the redemption price (including premium, if any) on or after the date
of redemption or any payment of the repurchase amount for the offers to purchase
described above under the caption "--Repurchase at the Option of Holders" on or
after the date of such repurchase, or (xii) make any change in the foregoing
amendment and waiver provisions.
Notwithstanding the foregoing, without the consent of any Holder of Notes,
PRI and the Trustee may amend or supplement the Indenture, the Notes or the
Security Documents to provide for the assumption of PRI's obligations to Holders
of the Notes in the case of a merger or consolidation, to make any change that
would provide any additional rights or benefits to, or security for, the Holders
of the Notes, to cure any ambiguity, defect or inconsistency, or make any other
provision which shall not be inconsistent with the Indenture or any Security
Document, provided that any such other provision does not adversely affect the
interests of the Holders.
GOVERNING LAW
The Indenture and the Notes are governed by and construed in accordance with
the laws of the State of New York without giving effect to applicable principles
of conflicts of laws to the extent that the application of the law of another
jurisdiction would be required thereby.
THE TRUSTEE
LaSalle National Bank is the Trustee under the Indenture and has been
appointed by PRI as Registrar and Paying Agent with respect to the Notes.
LaSalle National Bank is the administrative agent and a lender under the
Senior Credit Facility and may extend additional credit to PRI and Group in the
future. In the event of a Default under the Indenture, due to LaSalle National
Bank's relationship with PRI as lender under the Senior Credit Facility, LaSalle
National Bank would be deemed, under the Trust Indenture Act, to have a
conflicting interest and would be required to eliminate such conflict within 90
days, apply to the Commission for permission to continue as Trustee or resign as
Trustee. LaSalle National Bank is also trustee under the indenture governing the
12.5% Notes, a portion of which will be redeemed for cash in connection with the
Financing Plan. Upon consummation of the Financing Plan, LaSalle National Bank
will resign as trustee under such indenture.
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The Holders of a majority in principal amount of the then outstanding Notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that in case an Event of Default
shall occur (which shall not be cured), the Trustee will be required, in the
exercise of its power, to use the degree of care of a prudent man in the conduct
of his own affairs. Subject to such provisions, the Trustee will be under no
obligation to exercise any of its rights or powers under the Indenture at the
request of any Holder of Notes, unless such Holder shall have offered to the
Trustee security and indemnity satisfactory to it against any loss, liability or
expense.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.
"ACQUIRED DEBT" means, with respect to any specified Person: (i)
Indebtedness of any other Person existing at the time such other Person was
acquired by such specified Person or a Restricted Subsidiary of such specified
Person, merged with or into or became a Restricted Subsidiary of such specified
Person, including Indebtedness incurred in connection with, or in contemplation
of, such other Person merging with or into or becoming a Restricted Subsidiary
of such specified Person and (ii) Indebtedness encumbering any asset acquired by
such specified Person.
"ACQUISITION FINANCING CONDITIONS" means (i) the execution and delivery by
or on behalf of the lender or lenders parties to the Acquisition Financing
Facility of an Intercreditor Agreement, (ii) the granting to, and perfection by,
such lender or lenders of security interests on the real property, equipment and
general intangibles acquired with the proceeds of such Acquisition Financing
Facility in favor of a Collateral Agent (which initially will be the Trustee)
acting on behalf of the Holders of the Notes and such lender or lenders, (iii)
the consent to such Intercreditor Agreement by PRI and (iv) the receipt by the
Trustee of an Officers' Certificate and Opinion of Counsel that the foregoing
conditions have been satisfied.
"ACQUISITION FINANCING FACILITY" means a credit facility between PRI and the
lender or lenders party thereto providing for loans (i) incurred in compliance
with the "Incurrence of Indebtedness and Issuance of Preferred Stock" covenant,
(ii) the proceeds of which are required to be applied, and which are applied
within five days of receipt, to the purchase by PRI of property or assets used
in a line of business in which PRI is permitted to engage pursuant to the "Line
of Business" covenant and (iii) as to which the Acquisition Financing Conditions
shall have been satisfied.
"AFFILIATE" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; PROVIDED, HOWEVER,
that beneficial ownership of 10% or more of the voting securities of a Person
shall be deemed to be control. Notwithstanding the foregoing, in no event will
the Initial Purchasers or any Affiliate of an Initial Purchaser be deemed an
Affiliate of PRI for purposes of the purchase of the Notes by the Initial
Purchasers, any compensation paid or payable to the Initial Purchasers in
connection therewith or any of the other transactions contemplated by the
Purchase Agreement to be entered into by PRI and the Initial Purchasers in
connection with the Offering, including, without limitation, the indemnification
and contribution obligations of PRI contained therein.
"ASSET SALE" means, with respect to any Person, (i) the sale, lease,
conveyance or other disposition (collectively, "dispositions") of any assets
(including by way of a sale and leaseback transaction) other than (A)
dispositions of inventory in the ordinary course of business, (B) dispositions
of Autoweld machinery and related parts, and (C) Permitted Leases, (ii) the
issuance by any Restricted Subsidiary of Equity Interests of such Restricted
Subsidiary or (iii) the disposition by such Person or any Restricted
Subsidiaries of such
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Person of Equity Interests of any Restricted Subsidiary of such Person, in the
case of either clause (i), (ii) or (iii), whether in a single transaction or a
series of related transactions (a) that have a fair market value in excess of
$1.0 million or (b) for net proceeds in excess of $1.0 million. Notwithstanding
the foregoing, the following will not be deemed to be Asset Sales: (i) a
disposition of assets by PRI to any of its Restricted Subsidiaries or by a
Restricted Subsidiary of PRI to PRI or another of its Restricted Subsidiaries,
(ii) an issuance of Equity Interests by a Restricted Subsidiary of PRI to PRI or
to another Restricted Subsidiary of PRI, (iii) a disposition consisting of a
Restricted Payment permitted by the covenant described above under the caption
"--Certain Covenants--Restricted Payments", (iv) a disposition by PRI or any of
its Restricted Subsidiaries of Equity Interests of any of their respective
Unrestricted Subsidiaries and (v) the disposition of all or substantially all of
the assets of PRI and its Restricted Subsidiaries taken as a whole permitted by
the covenant described above under the caption "--Certain Covenants--Limitation
on Merger or Consolidation."
"AUTHORITY" means any federal, state, municipal or local governmental or
quasi-governmental agency or authority.
"BORROWING BASE" on any date, means the sum of (i) 90% of accounts
receivable, (ii) 75% of raw materials inventory and (iii) 75% of finished goods
inventory of PRI that would be reflected on a balance sheet of PRI, prepared in
accordance with GAAP on a separate and not a consolidated basis, on such date.
"CAPITAL LEASE OBLIGATION" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet prepared in
accordance with GAAP.
"CAPITAL STOCK" means any and all shares, interests, participations, rights
or other equivalents (however designated) of corporate stock, including, without
limitation, with respect to partnerships, partnership interests (whether general
or limited) and any other interest or participation that confers on a Person the
right to receive a share of the profits and losses of, or distributions of
assets of, such partnership.
"CASH COLLATERAL ACCOUNT" means one or more accounts in the name of the
Trustee pursuant to the applicable Security Document, and in the sole dominion
and control of the Trustee, into which certain funds are required to be
deposited by or on behalf of PRI under the terms of the Indenture and the
Security Documents.
"CASH EQUIVALENTS" means (i) United States dollars, (ii) securities issued
or directly and fully guaranteed or insured by the United States government or
any agency or instrumentality thereof having maturities of not more than six
months from the date of acquisition and bankers' acceptances with maturities not
exceeding six months from the date of acquisition, (iii) certificates of deposit
and eurodollar time deposits with maturities not exceeding six months and
overnight bank deposits, in the case of deposits in excess of $100,000, with any
commercial bank, depository institution or trust company incorporated or doing
business under the laws of the United States of America, any state thereof or
the District of Columbia or a branch or subsidiary of any such depository
institution or trust company operating outside the United States, provided, that
such depository institution or trust company has, at the time of the Investment,
having capital and surplus in excess of $200 million, (iv) repurchase
obligations with a term of not more than 30 days for underlying securities of
the types described in clauses (ii) and (iii) entered into with any financial
institution meeting the qualifications specified in clause (iii) above, (v)
commercial paper having a rating in one of the two highest rating categories
from Moody's Investors Service, Inc. or Standard & Poor's Corporation and in
each case maturing within six months after the date of acquisition and (vi)
money market mutual or similar funds having assets in excess of $200.0 million.
"CASUALTY", with respect to any Collateral, means loss of, damage to or
destruction of all or any part of such Collateral.
"CEDAR GROVE FACILITY" means the Company's leased facility located in Cedar
Grove, New Jersey.
"CHANGE OF CONTROL" means the occurrence of any of the following: (i) the
sale, lease, transfer, conveyance or other disposition, in one or a series of
related transactions, of all or substantially all of the assets of
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PRI to any Person or group (as such term is used in Sections 13(d)(3) and
14(d)(2) of the Exchange Act), (ii) the adoption of a plan relating to the
liquidation or dissolution of PRI, (iii) any Person (other than a Permitted
Holder) or group (as defined above) is or becomes the "beneficial owner" (as
defined in Rules 13d-2 and 13d-5 under the Exchange Act), directly or
indirectly, of more than 35% of the total voting power of the Voting Stock of
Group or PRI, including by way of merger, consolidation or otherwise provided
that the Permitted Holders (A) beneficially own less than a majority of any
class of Voting Stock of PRI or (B) do not have the right and ability, by
contract, voting power or otherwise, to elect or designate for election at least
a majority of the Board of Directors of each of Group (so long as Group
beneficially owns a majority of any class of Voting Stock of PRI) and PRI, and
(iv) the first day on which a majority of the members of the Board of Directors
of Group (so long as Group beneficially owns a majority of any class of Voting
Stock of PRI) or PRI are not Continuing Directors.
"COLLATERAL LOSS EVENT" means a Condemnation or Casualty involving an actual
or constructive total loss or agreed or compromised actual or constructive total
loss of Collateral with a fair market value, as determined by the Board of
Directors of PRI in good faith, in excess of $500,000.
"COMMODITY AGREEMENT" means any commodity futures contract, commodity option
or other similar agreement or arrangement entered into by PRI or any Subsidiary
designed to protect PRI or any of its Subsidiaries against fluctuations in the
price of commodities actually used to produce products in the ordinary course of
business of PRI and its Subsidiaries.
"CONDEMNATION" means any taking of the Collateral, or any part thereof, in
or by condemnation, expropriation or similar proceeding, eminent domain
proceedings, seizure or forfeiture, pursuant to any law, general or special, or
by reason of the temporary requisition of the use or occupancy of the Collateral
or any part thereof, by any Authority.
"CONSOLIDATED CASH FLOW" means, with respect to any Person for any period,
the Consolidated Net Income of such Person and its Restricted Subsidiaries for
such period, plus (a) an amount equal to any extraordinary loss plus any net
loss realized in connection with an Asset Sale, to the extent that such losses
were deducted in computing Consolidated Net Income, plus (b) provision for taxes
based on income or profits of such Person for such period, to the extent such
provision for taxes was deducted in computing Consolidated Net Income, plus (c)
Consolidated Interest Expense of such Person for such period, to the extent such
amount was deducted in computing Consolidated Net Income, plus (d) depreciation
and amortization (including amortization of goodwill and other intangibles and
amortization of deferred compensation in respect of non-cash compensation but
excluding amortization of prepaid cash expenses that were paid in a prior
period) of such Person for such period, to the extent such depreciation and
amortization were deducted in computing Consolidated Net Income, plus (e) all
other non-cash items to the extent such items were deducted in determining
Consolidated Net Income, in each case, for such period without duplication on a
consolidated basis and determined in accordance with GAAP.
"CONSOLIDATED INTEREST EXPENSE" means, with respect to any Person for any
period, the aggregate consolidated interest, whether expensed or capitalized,
paid, accrued or scheduled to be paid or accrued, of such Person and its
Restricted Subsidiaries for such period (including (i) amortization of debt
discount and deferred financing costs and noncash interest payments and
accruals, (ii) the interest portion of all deferred payment obligations,
calculated in accordance with the effective interest method and (iii) the
interest component of any payments associated with Capital Lease Obligations and
net payments (if any) pursuant to Hedging Obligations, in each case, to the
extent attributable to such period, but excluding (x) commissions, discounts and
other fees and charges incurred with respect to letters of credit and bankers'
acceptances financing and (y) any interest expense on Indebtedness of another
Person that is Guaranteed by such Person or secured by a Lien on assets of such
Person) determined in accordance with GAAP. Consolidated Interest Expense of PRI
shall not include any prepayment premiums or write down of debt discount or
deferred financing costs, to the extent such amounts are incurred as a result of
the prepayment on the date of this Indenture of any Indebtedness of PRI with the
proceeds of the Notes.
"CONSOLIDATED NET INCOME" means, with respect to any Person (the "referent
Person") for any period, the aggregate of the Net Income of such Person and its
Restricted Subsidiaries for such period, on a
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consolidated basis, determined in accordance with GAAP; PROVIDED, that (i) the
Net Income of any Person that is not a Restricted Subsidiary or that is
accounted for by the equity method of accounting shall be included only to the
extent of the amount of dividends or distributions paid to the referent Person
or a Restricted Subsidiary thereof, (ii) the Net Income of any Person that is a
Restricted Subsidiary (other than a Wholly Owned Restricted Subsidiary) shall be
included only to the extent of the amount of dividends or distributions paid to
the referent Person or a Restricted Subsidiary thereof, (iii) the Net Income of
any Person acquired in a pooling of interests transaction for any period prior
to the date of such acquisition shall be excluded and (iv) the cumulative effect
of a change in accounting principles shall be excluded. The amount of any
dividends paid in property or assets other than cash shall be valued at fair
market value on the date of such dividend (as determined in good faith by the
Board of Directors of such Person). Consolidated Net Income of PRI shall not
include any prepayment premiums or write-down or write-off of debt discount or
deferred financing costs to the extent such amounts are incurred as a result of
the prepayment on the Issue Date of any Indebtedness of PRI with the proceeds of
the Notes.
"CONSOLIDATED NET WORTH" means, with respect to any Person as of any date,
the sum of (i) the consolidated equity of the common stockholders of such Person
and its consolidated Restricted Subsidiaries as of such date plus (ii) the
respective amounts reported on such Person's balance sheet as of such date with
respect to any series of preferred stock (other than Disqualified Stock) that by
its terms is not entitled to the payment of dividends unless such dividends may
be declared and paid only out of net earnings in respect of the year of such
declaration and payment, but only to the extent of any cash received by such
Person upon issuance of such preferred stock, less (x) all write-ups (other than
write-ups resulting from foreign currency translations and write-ups of tangible
assets of a going concern business made within 12 months after the acquisition
of such business) subsequent to the date of the Indenture in the book value of
any asset owned by such Person or a consolidated Restricted Subsidiary of such
Person, (y) all investments as of such date in unconsolidated Subsidiaries and
in Persons that are not Restricted Subsidiaries (except, in each case, Permitted
Investments), and (z) all unamortized debt discount and expense and unamortized
deferred charges as of such date, all of the foregoing determined in accordance
with GAAP.
"CONTINUING DIRECTORS" means, as of any date of determination, any member of
the Board of Directors of PRI or Group (as long as Group beneficially owns a
majority of any class of Voting Stock of PRI), as applicable, who (i) was a
member of such Board of Directors on the date of the Indenture or (ii) was
nominated for election or elected to such Board of Directors with the
affirmative vote of a majority of the Continuing Directors who were members of
such Board at the time of such nomination or election.
"CURRENCY AGREEMENT" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect PRI or
any of its Subsidiaries against fluctuation in the values of the currencies of
the countries (other than the United States) in which PRI or its Subsidiaries
conduct business and which is required under any bank agreement to which PRI is
or hereafter becomes a party.
"DEFAULT" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"DISQUALIFIED STOCK" means any Capital Stock 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 redeemable at
the option of the Holder thereof, in whole or in part, on or prior to May 1,
2003.
"EQUITY INTERESTS" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"EXISTING INDEBTEDNESS" means, with respect to any Person, Indebtedness of
such Person and its Subsidiaries in existence on the date of the Indenture,
until such amounts are repaid.
"FIXED CHARGE COVERAGE RATIO" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person for such period
to the Fixed Charges of such Person for such period. In the event that such
Person or any of its Restricted Subsidiaries incurs, assumes, guarantees,
redeems, repurchases or repays any Indebtedness (other than revolving credit
borrowings) or if such Person issues,
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redeems or repurchases any preferred stock, in each case subsequent to the
commencement of the period for which the Fixed Charge Coverage Ratio is being
calculated but prior to the date of the event for which the calculation of the
Fixed Charge Ratio is made (the "Transaction Date"), then the Fixed Charge
Coverage Ratio shall be calculated giving pro forma effect to such incurrence,
assumption, guarantee, redemption, repurchase or repayment of Indebtedness, or
such issuance, redemption or repurchase of preferred stock, as if the same had
occurred at the beginning of the applicable period. For purposes of making the
computation referred to above, acquisitions (including all mergers and
consolidations), dispositions and discontinuance of operations that have been
made by such Person or any of its Restricted Subsidiaries during the relevant
period or subsequent to such period and on or prior to the Transaction Date
shall be calculated on a pro forma basis assuming that all such acquisitions,
dispositions and discontinuance of operations had occurred on the first day of
such period; provided, however, that Fixed Charges shall be reduced by amounts
attributable to operations that are so disposed of or discontinued only to the
extent that the obligations giving rise to such Fixed Charges would no longer be
obligations contributing to such Person's Fixed Charges subsequent to the
Transaction Date. If any Indebtedness bears a floating rate of interest and is
being given pro forma effect, the interest on such Indebtedness shall be
calculated as if the rate in effect on the date of determination had been the
applicable rate for the entire period.
"FIXED CHARGES" means, with respect to any Person for any period, the sum,
without duplication, of (a) Consolidated Interest Expense, (b) commissions,
discounts and other fees and charges incurred with respect to letters of credit
and bankers' acceptances financing, (c) any interest expense on Indebtedness of
another Person that is Guaranteed by such Person or secured by a Lien on assets
of such Person and (d) the product of (i) all cash dividend payments on any
series of preferred stock of such Person, times (ii) a fraction, the numerator
of which is one and the denominator of which is one minus the then current
combined federal, state and local statutory tax rate of such Person, expressed
as a decimal, determined, in each case, on a consolidated basis and in
accordance with GAAP.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, in each case, as in effect in the United States on the date of the
Indenture.
"GUARANTEE" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business) direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"GUARANTOR" means any Restricted Subsidiary of PRI that executes a Guarantee
in accordance with the provisions of the Indenture, and its respective
successors and assigns.
"HEDGING OBLIGATIONS" means, with respect to any Person, the obligations of
such Person under (i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements and (ii) other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates in each case that are required under any bank agreements to which such
Person is or hereafter becomes a party.
"INDEBTEDNESS" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or representing Capital Lease
Obligations or the balance deferred and unpaid of the purchase price of any
property or representing any Hedging Obligations, except any such balance that
constitutes an accrued expense or trade payable, if and to the extent any of the
foregoing indebtedness (other than letters of credit and Hedging Obligations)
would appear as a liability upon a balance sheet of such Person prepared in
accordance with GAAP, as well as all indebtedness of others secured by a Lien on
any asset of such Person (whether or not such indebtedness is assumed by such
Person) and, to the extent not otherwise included, the Guarantee of any
Indebtedness of such Person or any other Person.
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"INTERCREDITOR AGREEMENT" means an Intercreditor and Collateral Agency
Agreement in the form attached to the Indenture among the Collateral Agent, the
lender or lenders parties to an Acquisition Financing Facility and the Trustee,
and consented to by PRI.
"INTEREST RATE AGREEMENT" means, with respect to any Person, any interest
rate protection agreement, interest rate future, interest rate option, interest
rate swap, interest rate cap or other interest rate hedge arrangement to or
which such Person or any Restricted Subsidiary is or hereafter becomes a part or
a beneficiary and which is required under any bank agreement to which such
Person is or hereafter becomes a party.
"INVESTMENTS" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of loans (including
Guarantees), advances or capital contributions, purchases or other acquisitions
for consideration of Indebtedness, Equity Interests or other securities and all
other items that are or would be classified as investments on a balance sheet
prepared in accordance with GAAP. For purposes of the covenant described above
under "--Certain Covenants--Restricted Payments," (i) "Investment" in a
Subsidiary shall include the portion (proportionate to such Person's Equity
Interest in such Subsidiary) of the fair market value (as determined in good
faith by the Board of Directors of such Person) of such Subsidiary at the time
that such Subsidiary is designated an Unrestricted Subsidiary; provided that
upon a redesignation of such Subsidiary as a Restricted Subsidiary, such Person
shall be deemed to continue to have a permanent "Investment" in an Unrestricted
Subsidiary in an amount (if positive) equal to (x) such Person's "Investment" in
such Subsidiary at the time of such redesignation less (y) the portion
(proportionate to such Person's Equity Interest in such Subsidiary) of the fair
market value (as determined in good faith by the Board of Directors) of the net
assets of such Subsidiary at the time of such redesignation; and (ii) any
property transferred to or from an Unrestricted Subsidiary shall be valued at
its fair market value at the time of such transfer, in each case as determined
in good faith by the Board of Directors of such Person.
"ISSUE DATE" means the date the Notes are originally issued under the
Indenture.
"LAKE FOREST FACILITY" means the Company's facility in Lake Forest,
Illinois.
"LIEN" means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset, whether
or not filed, recorded or otherwise perfected under applicable law (including
any conditional sale or other title retention agreement, any lease in the nature
thereof, any option or other agreement to sell or give a security interest in
and any filing of or agreement to give any financing statement under the Uniform
Commercial Code (or equivalent statutes) of any jurisdiction).
"LOUISIANA FACILITY" means the Company's facility in Louisiana, Missouri.
"MANAGEMENT SERVICES AGREEMENT" means the Management Agreement dated as of
May 17, 1996 between PRI and HPH with respect to the provision by HPH of
services to PRI and the payment by PRI to HPH of fees, and the reimbursement of
expenses, in connection therewith as in effect on the date of the Indenture.
"MINER PURCHASE AGREEMENT" means the Asset and Stock Purchase Agreement
dated December 15, 1993 among PRI, Miner Container Printing, Inc. and the
stockholders signatory thereto.
"NET INCOME" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (a) any gain (but not
loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with (i) any Asset Sale (including, without
limitation, dispositions pursuant to sale and leaseback transactions), or (ii)
the disposition of any securities or the extinguishment of any Indebtedness of
such Person or any of its Restricted Subsidiaries, and (b) any extraordinary
gain (but not loss), together with any related provision for taxes on such
extraordinary gain (but not loss).
"NET PROCEEDS" means the aggregate proceeds in cash or Cash Equivalents
received by PRI or any of its Restricted Subsidiaries in respect of (i) any
Asset Sale, net of the direct costs relating to such Asset Sale
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(including, without limitation, legal, accounting and investment banking fees,
and sales commissions) and any relocation expenses incurred as a result thereof,
taxes paid or payable as a result thereof (after taking into account any
available tax credits or deductions and any tax sharing arrangements), amounts
required to be applied to the repayment of Indebtedness secured by a Lien on the
asset or assets the subject of such Asset Sale and the after-tax amount of an
appropriate reserve for adjustment in respect of the sale price of such asset or
assets or for any indemnification obligation by PRI or such Restricted
Subsidiary to the purchaser in respect of such Asset Sale, in each case to the
extent, and only to the extent, permitted to be reflected as a liability
(contingent or otherwise) or asset valuation allowance on a balance sheet of PRI
or such Restricted Subsidiary in accordance with GAAP or (ii) any Collateral
Loss Event, including, without limitation, proceeds received under policies of
insurance (other than policies providing business interruption insurance) and
any awards, proceeds, payments or other compensation with respect to a
Condemnation constituting a Collateral Loss Event.
"OBLIGATIONS" means any principal, premium, interest (including
post-petition interest), penalties, fees, indemnifications, reimbursements,
damages and other liabilities payable under the documentation governing any
Indebtedness.
"PERMITTED AMOUNT" means, (i) if the Fixed Charge Coverage Ratio for the
most recently ended four full fiscal quarters for which financial statements are
available is greater than 1.4 to 1, $600,000, (ii) if the Fixed Charge Coverage
Ratio for such four quarter period is greater than 1.2 to 1 but less than or
equal to 1.4 to 1, $450,000 and (iii) if the Fixed Charge Coverage Ratio is less
than or equal to 1.2 to 1, $300,000.
"PERMITTED HOLDER" means (A) Howard Hoeper, his spouse, members of his
immediate family and/or any of the lineal descendants of any such person and/or
(B) any trust or similar entity all of the beneficiaries of which, or a
corporation or partnership all of the stockholders or limited and general
partners of which, are (x) any of the persons described in the foregoing clause
(A) or (y) any entity described in this clause (B).
"PERMITTED INVESTMENTS" means, with respect to any Person, (a) any
Investments in such Person or in a Restricted Subsidiary of such Person; (b) any
Investments in Cash Equivalents; (c) Investments by such Person or any
Restricted Subsidiary of such Person in a person (the "Other Entity"), if as a
result of such Investment (i) such Other Entity becomes a Restricted Subsidiary
of such Person or (ii) such Other Entity is merged, consolidated or amalgamated
with or into, or transfers or conveys substantially all of its assets to, or is
liquidated into, such Person or a Restricted Subsidiary of such Person; (d)
Investments in any Other Entity engaged primarily in businesses permitted to be
engaged in by such Person or any of its Restricted Subsidiaries pursuant to the
"Line of Business" covenant in an aggregate amount not to exceed $1.0 million at
any time outstanding; (e) Investments in Unrestricted Subsidiaries in an
aggregate amount not to exceed $1.0 million at any time outstanding; (f)
receivables owing to such Person or any of its Restricted Subsidiaries if
created or acquired in the ordinary course of business; (g) stock, obligations
or securities received in settlement of debts created in the ordinary course of
business and owing to such Person or any of its Subsidiaries or in satisfaction
of judgments; (h) loans and advances to employees of PRI or any Restricted
Subsidiary of PRI for travel, entertainment and relocation expenses in the
ordinary course of business in an aggregate amount outstanding at any time not
to exceed $500,000; and (i) Investments received by PRI or any Restricted
Subsidiary of PRI as consideration for asset sales, including Asset Sales;
PROVIDED, HOWEVER, in the case of an Asset Sale, that such Asset Sale is
effected in compliance with the covenant described under "-- Repurchase at the
Option of Holders -- Asset Sales; Collateral Loss Events."
"PERMITTED LEASES" means the lease of the Louisiana Facility and the
subleases of the Cedar Grove Facility and the Lake Forest Facility.
"PERMITTED LIENS" means, with respect to any Person, (a) Liens in favor of
such Person; (b) in the case of PRI, Liens on accounts receivable or inventories
(or proceeds thereof) of PRI to secure Indebtedness of PRI under the Senior
Credit Facility; (c) Liens on property of another Person (the "Other Entity")
existing at the time such Other Entity is merged into or consolidated with such
Person or any Restricted Subsidiary of such Person, PROVIDED that such Liens
were not incurred in the contemplation of such merger or consolidation and do
not extend to any assets other than those of the Other Entity merged into or
consolidated with such Person; (d) Liens on property existing at the time of
acquisition thereof by such Person or any Restricted
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Subsidiary of such Person; PROVIDED that such Liens were not incurred in
contemplation of such acquisition; (e) Liens to secure the performance of
statutory obligations, surety or appeal bonds, performance bonds or other
obligations of a like nature incurred in the ordinary course of business; (f)
Liens existing on the date of the Indenture; (g) Liens for taxes, assessments or
governmental charges or claims that are not yet delinquent or that are being
contested in good faith by appropriate proceedings promptly instituted and
diligently concluded, PROVIDED that any reserve or other appropriate provision
as shall be required in conformity with GAAP shall have been made therefor; (h)
Liens imposed by law, such as mechanics', carriers', warehousemen's,
materialmen's, and vendors' Liens, incurred in good faith in the ordinary course
of business with respect to amounts not yet delinquent or being contested in
good faith by appropriate proceedings PROVIDED that any reserve or other
provisions required by GAAP shall have been made therefor; (i) zoning
restrictions, easements, licenses, covenants, reservations, restrictions on the
use of real property or minor irregularities of title incident thereto that do
not, in the aggregate, materially detract from the value of the property or the
assets of such Person or impair the use of such property in the operation of
such Person's business; (j) judgment Liens to the extent that such judgments do
not cause or constitute a Default or an Event of Default; (k) Liens to secure
Indebtedness incurred for the purpose of financing of all or a part of the
purchase price of property or assets acquired or constructed on or after the
date of the Indenture, including Liens securing any Acquisition Financing
Facility, PROVIDED that (i) such property or assets are used in a line of
business in which such Person is permitted to engage pursuant to the "Line of
Business" covenant, (ii) at the time of incurrence of any such Lien, the
aggregate principal amount of the obligations secured by such Lien shall not
exceed the lesser of the cost or fair market value of the assets or property (or
portions thereof) so acquired or constructed, (iii) each such Lien shall
encumber only the assets or property (or portions thereof) so acquired or
constructed and shall attach to such property within 120 days of the purchase or
construction thereof and (iv) any Indebtedness secured by such Lien shall have
been permitted to be incurred under the "Incurrence of Indebtedness and Issuance
of Preferred Stock" covenant; (l) ground leases in respect of the real property
on which facilities owned or leased by such Person or any of its Subsidiaries
are located; (m) Liens arising from UCC financing statements regarding property
leased by such Person or any of its Subsidiaries, PROVIDED that such Liens are
granted solely in connection with such leases and not in connection with the
borrowing of money or the obtaining of advances or credit; (n) Liens incurred
and pledges made in the ordinary course of business in connection with workers'
compensation, unemployment insurance and social security benefits; (o) Liens
securing Purchase Money Obligations, the proceeds of which are used solely to
finance the acquisition or lease by such Person or any of its Subsidiaries of
furniture, fixtures or equipment used in the ordinary course of business,
PROVIDED that such Purchase Money Obligations are (i) non-recourse to such
Person and its Subsidiaries and (ii) permitted to be incurred under the covenant
entitled "Incurrence of Indebtedness and Issuance of Preferred Stock" above, (p)
Liens securing Indebtedness incurred to refinance Indebtedness that has been
secured by a Lien permitted under the Indenture, PROVIDED that (i) any such Lien
shall not extend to or cover any assets or property not securing the
Indebtedness so refinanced and (ii) the Refinancing Indebtedness secured by such
Lien shall not have a principal amount in excess of the Indebtedness so
refinanced, and (q) Liens arising in the ordinary course of such Person's
business to the extent the fair market value of property and assets secured by
such Liens (as determined in good faith by the Board of Directors of such
Person) shall not exceed $2.0 million.
"PUBLIC EQUITY OFFERING" means a bona fide underwritten sale to the public
of Common Stock of PRI or of Group (to the extent the net proceeds thereof are
contributed to PRI as common equity) pursuant to a registration statement (other
than on Form S-8 or any other form relating to securities issuable under any
benefit plan of PRI or Group, as the case may be) that is declared effective by
the Commission.
"PURCHASE MONEY OBLIGATIONS" of any Person means any obligations of such
Person or any of its Subsidiaries to any seller or any other person incurred or
assumed in connection with the purchase of real or personal property to be used
in the business of such Person or any of its Subsidiaries within 180 days of
such incurrence or assumption.
"REGISTRATION RIGHTS AGREEMENTS" means collectively the Equity Registration
Rights Agreement dated as of June 30, 1993, among Group, the TCW Entities and
Apollo, and the Debt Registration Rights Agreement
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dated as of June 30, 1993, as amended as of May 17, 1996, among Group, the TCW
Entities, Lion Advisors, L.P. and AIF II, L.P., in each case as in effect on the
Issue Date or as thereafter amended in a manner that is not materially adverse
to PRI or the Holders of the Notes.
"REPLACEMENT COLLATERAL" means, at any relevant date in connection with an
Asset Sale involving Collateral or a Collateral Loss Event, assets used in PRI's
business other than the Collateral which (i) constitute long-term tangible
assets (and do not constitute Capital Stock of any Person), (ii) are acquired by
PRI at a purchase price which does not exceed the fair market value of such
Replacement Collateral (as determined, in good faith by the Board of Directors),
and (iii) are free and clear of all Liens, except as expressly permitted by the
Security Documents.
"RESTORATION" or "RESTORE" means the physical repair, restoration or
rebuilding of all or any portion of the Collateral following any Casualty or
Condemnation.
"RESTRICTED INVESTMENT" means an Investment other than a Permitted
Investment.
"RESTRICTED SUBSIDIARY" of a Person means any Subsidiary of such Person that
is not an Unrestricted Subsidiary.
"SECURITY DOCUMENTS" means, collectively, all security agreements,
mortgages, deeds of trust, collateral assignments or other instruments
evidencing or creating any security interests in favor of the Trustee in all or
any portion of the Collateral, in each case as amended, supplemented or modified
from time to time in accordance with their terms and the terms of the Indenture.
"SENIOR CREDIT FACILITY" means that certain Agreement, dated as of May 17,
1996, by and among PRI, LaSalle National Bank, as lender and administrative
agent, and BT Commercial Corporation, as lender, initially providing for
revolving credit loans in a principal amount of up to $20.0 million and a letter
of credit facility in an aggregate amount of up to the lesser of (i) the
remaining availability under the Senior Credit Facility and (ii) $2.0 million,
including any related notes, guarantees, collateral documents, instruments and
agreements executed in connection therewith, in each case as it may be
thereafter amended, modified or extended from time to time.
"SENIOR DEBT" means, any Indebtedness incurred by PRI, unless the instrument
under which such Indebtedness is incurred expressly provides that it is
subordinated in right of payment to the Notes; PROVIDED that Senior Debt will
not include (a) any liability for federal, state, local or other taxes owed or
owing, (b) any Indebtedness owing to any Subsidiaries of PRI, (c) any trade
payables or (d) any Indebtedness that is incurred in violation of the Indenture.
"SIGNIFICANT SUBSIDIARY" means, with respect to any Person, any Subsidiary
of such Person that would be a "significant subsidiary" as defined in Article 1,
Rule 1-02 of Regulation S-X, promulgated pursuant to the Securities Act, as such
Regulation is in effect on the date hereof.
"STOCK AND WARRANT HOLDERS AGREEMENT" means the Stock and Warrant Holders
Agreement dated as of June 30, 1993, among Group, Howard P. Hoeper, HPH, UBS
Capital, and Apollo, as in effect on the Issue Date or thereafter amended in a
manner that is not materially adverse to PRI or the Holders of the Notes.
"SUBSIDIARY" means, with respect to any Person, any corporation, association
or other business entity of which more than 50% of the total voting power of
shares of Capital Stock entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof
is at the time owned or controlled, directly or indirectly, by such Person or
one or more of the other Subsidiaries of that Person or a combination thereof.
"SUBSIDIARY GUARANTOR" means any Restricted Subsidiary of PRI that executes
a Guarantee in accordance with the provisions of the Indenture, and its
respective successors and assigns.
"TAX SHARING AGREEMENT" means the tax sharing agreement between PRI and HPH
or any other person with which PRI is required to, or is permitted to, file a
consolidated tax return or with which PRI is or could be part of an affiliated
group for tax purposes as in effect on the date of the Indenture or as
thereafter amended in a manner that is not materially adverse to PRI or the
Holders of the Notes.
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"UNRESTRICTED SUBSIDIARY" means, with respect to any Person, any Subsidiary
of such Person designated by the Board of Directors of such Person as an
Unrestricted Subsidiary pursuant to a Board Resolution set forth in an Officers'
Certificate and delivered to the Trustee (i) that, (A) at the time of
designation, has total assets not exceeding $1,000 or (B) if such Subsidiary has
total assets exceeding $1,000, then such designation would be permitted by the
covenant entitled "Restricted Payments", (ii) no portion of the Indebtedness or
any other obligations (contingent or otherwise) of such Subsidiary (A) is
guaranteed by such Person or any other Subsidiary (other than another
Unrestricted Subsidiary) of such Person, (B) is recourse to or obligates such
Person or any other Subsidiary (other than another Unrestricted Subsidiary) of
such Person in any way or (C) subjects any property or asset of such Person or
any other Subsidiary (other than another Unrestricted Subsidiary) of such
Person, directly or indirectly, contingently or otherwise, to the satisfaction
thereof, (iii) with which neither such Person nor any other Subsidiary of such
Person (other than another Unrestricted Subsidiary) has any contract, agreement,
arrangement or understanding other than on terms no less favorable to such
Person or such other Subsidiary than those that might be obtained at the time
from persons who are not Affiliates of such Person and (iv) with which neither
such Person nor any other Subsidiary of such Person (other than another
Unrestricted Subsidiary) has any obligation (A) to subscribe for additional
shares of Capital Stock or other Equity Interests therein or (B) to maintain or
preserve such Subsidiary's financial condition or to cause such Subsidiary to
achieve certain levels of operating results. Subject to the preceding sentence,
the Board of Directors of such Person may designate any Restricted Subsidiary to
be an Unrestricted Subsidiary; PROVIDED that such designation shall be deemed to
be the making of an Investment by such Person in such Subsidiary and such
designation shall only be permitted if, in addition to the requirements of the
preceding sentence, (i) such Investment is permitted under the covenant entitled
"Restricted Payments" and (ii) no Default or Event of Default would be in
existence following such designation. The Board of Directors of such Person may
designate any Unrestricted Subsidiary to be a Restricted Subsidiary; PROVIDED
that such designation shall be deemed to be an incurrence of Indebtedness by a
Restricted Subsidiary of such Person of any outstanding Indebtedness of such
Unrestricted Subsidiary and such designation shall only be permitted if (i) such
Indebtedness is permitted under the covenant entitled "Incurrence of
Indebtedness and Issuance of Preferred Stock" and (ii) no Default or Event of
Default would be in existence following such designation.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (a) the sum of the
products obtained by multiplying (x) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (y) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (b) the then outstanding principal
amount of such Indebtedness.
"WHOLLY OWNED RESTRICTED 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 Restricted
Subsidiaries of such Person or by such Person and one or more Wholly Owned
Restricted Subsidiaries of such Person.
"WHOLLY OWNED SUBSIDIARY" of any Person means a 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.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
CERTAIN FEDERAL INCOME TAX CONSEQUENCES TO HOLDERS OF EXCHANGE NOTES
The following summary of federal income tax consequences has been prepared
by Winston & Strawn. The summary is based on current law and certain proposed
regulations and is for general information only. Forthcoming legislative,
regulatory, judicial or administrative changes or interpretations could affect
the federal income tax consequences to holders of Exchange Notes. The tax
treatment of a holder may vary
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depending upon whether the holder is a cash-method or accrual-method taxpayer
and upon the holder's particular status. For example, certain holders, including
insurance companies, tax-exempt organizations, financial institutions,
broker-dealers and foreign persons may be subject to special rules not discussed
below.
EXCHANGE OFFER
The exchange of Exchange Notes for Old Notes pursuant to the Exchange Offer
will not be treated as an "exchange" for federal income tax purposes because the
Exchange Notes will not be considered to differ materially in kind or extent
from the Old Notes. Rather, the Exchange Notes received by a holder will be
treated as a continuation of the Old Notes in the hands of such holder. As a
result, there will be no federal income tax consequences to holders exchanging
the Old Notes for the Exchange Notes pursuant to the Exchange Offer. The holder
must continue to include stated interest in income as if the exchange (and
waiver of accrued interest on the Old Notes from May 17, 1996 to the date of
issuance of the Exchange Notes) had not occurred. If, however, the exchange of
the Old Notes for the Exchange Notes were treated as an "exchange" for federal
income tax purposes, such exchange would constitute a recapitalization for
federal income tax purposes. Holders exchanging the Old Notes pursuant to such
recapitalization would not recognize any gain or loss upon the exchange.
SALE OR OTHER DISPOSITION OF EXCHANGE NOTES
A holder of an Exchange Note will have a tax basis in the Exchange Note
equal to the holder's purchase price for the Old Note, increased by the amount
of interest (and market discount) that is included in the holder's gross income
and decreased by payments of cash interest received by the holder.
A holder of an Exchange Note will generally recognize gain or loss on the
sale, exchange, redemption or retirement of the Exchange Note equal to the
difference (if any) between the amount realized from such sale, exchange,
redemption or retirement and the holder's basis in the Exchange Note. Such gain
or loss will generally be long-term capital gain (except to the extent
attributable to market discount) or loss if the Exchange Note has been held more
than one year (including the period that such holder held the Old Note prior to
exchange).
BACKUP WITHHOLDING
A noncorporate holder of Exchange Notes that either (a) is (i) a citizen or
resident of the United States, (ii) a partnership or other entity created or
organized in or under the laws of the United States or of any political
subdivision thereof or (iii) an estate or trust the income of which is subject
to United States federal income taxation regardless of its source or (b) is not
described in the preceding clause (a), but whose income from interest with
respect to the Exchange Notes or proceeds from the disposition of the Exchange
Notes is effectively connected with such holder's conduct of a United States
trade or business, and that receives interest with respect to the Exchange Notes
or proceeds from the disposition of the Exchange Notes will generally not be
subject to backup withholding on such payments or distributions if it certifies,
under penalty of perjury, that it has furnished a correct Taxpayer
Identification Number ("TIN") and it is not subject to backup withholding either
because it has not been notified by the Internal Revenue Service that is subject
to backup withholding or because the Internal Revenue Service has notified it
that it is no longer subject to backup withholding. Such certification may be
made on an Internal Revenue Service Form W-9 or substantially similar form.
However, backup withholding will apply to such a holder if the holder (i) fails
to furnish its TIN, (ii) furnishes an incorrect TIN, (iii) is notified by the
Internal Revenue Service that it has failed to properly report payments of
interest or dividends or (iv) under certain circumstances, fails to make such
certification.
The Company will withhold (at a rate of 31%) all amounts required by law to
be withheld from reportable payments made and with respect to the Exchange
Notes. Any amounts withheld from a payment to a holder under the backup
withholding rules will be allowed as a credit against such holder's United
States federal income tax liability and may entitle such holder to a refund,
provided that the required information is furnished to the Internal Revenue
Service.
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Holders of the Exchange Notes should consult their tax advisors regarding
the application of backup withholding in their particular situations, the
availability of an exemption therefrom, and the procedure for obtaining such an
exemption, if available.
THE FOREGOING DISCUSSION OF CERTAIN FEDERAL INCOME TAX CONSEQUENCES IS FOR
GENERAL INFORMATION ONLY AND IS NOT TAX ADVICE. ACCORDINGLY, EACH HOLDER OF
EXCHANGE NOTES SHOULD CONSULT ITS OWN TAX ADVISOR AS TO PARTICULAR TAX
CONSEQUENCES OF HOLDING, EXCHANGING OR SELLING THE EXCHANGE NOTES INCLUDING THE
APPLICATION AND EFFECT OF ANY FEDERAL, STATE, LOCAL OR FOREIGN TAX LAWS, AND OF
ANY CHANGES IN APPLICABLE TAX LAWS.
OLD NOTES REGISTRATION RIGHTS
The Company and the Initial Purchasers entered into the Registration Rights
Agreement dated as of May 17, 1996 pursuant to which the Company agreed, for the
benefit of holders of the Old Notes, that it will, at its expense (i) on or
prior to the 45th day after the Issue Date, file the Registration Statement with
the Commission pursuant to which the Old Notes will be exchanged for the
Exchange Notes, which would have terms identical to the Old Notes (except that
the Exchange Notes will not contain terms with respect to transfer restrictions
or any provision relating to this paragraph) and (ii) use its best efforts to
cause the Registration Statement to be declared effective under the Securities
Act by the 120th day after the Issue Date. Upon effectiveness of the
Registration Statement, the Company will offer to all holders of the Old Notes
an opportunity to exchange their Old Notes for a like principal amount of the
Exchange Notes. The Company agreed to keep the Exchange Offer open for not less
than 20 business days (or longer if required by applicable law) after the date
of the commencement of the Exchange Offer, and will comply with Regulation 14E
and Rule 13e-4 under the Exchange Act (other than the filing requirements of
Rule 13e-4). For each Old Note surrendered to the Company for exchange pursuant
to the Exchange Offer, the holder of such Old Note will receive an Exchange Note
having a principal amount at maturity equal to that of the surrendered Old Note.
The Exchange Notes will bear interest from May 17, 1996. Holders of Old Notes
whose Old Notes are accepted for exchange will be deemed to have waived the
right to receive any payment in respect of interest on the Old Notes accrued
from May 17, 1996 to the date of the issuance of the Exchange Notes. Interest on
the Exchange Notes is payable semiannually in arrears on May 1 and November 1 of
each year, commencing November 1, 1996, accruing from May 17, 1996 at a rate of
11 5/8% per annum. See "The Exchange Offer."
If (i) because of any change in law of in writing prevailing interpretations
of the Staff, the Company is not permitted to effect on Exchange Offer, (ii) the
Exchange Offer is not consummated witin 165 days of the Issue Date, (iii) in
certain circumstances, certain holders of unregistered Exchange Notes so
request, (iv) the holders of not less than a majority in aggregate principal
amount of the Notes reasonably determine that the interests of the holders of
Notes would be materially adversely effected by consummation of the Exchange
Offer or (v) in the case of any holder of Old Notes that participates in the
Exchange Offer, such holder of Old Notes does not receive Exchange Notes on the
date of the exchange that may be sold without restriction under state and
federal securities laws (other than due solely to the status of such holder of
Old Notes as an Affiliate of the Company) the Company will, within three
Business Days thereof, deliver written notice thereof to the Trustee and at its
cost, as promptly as practicable, file with the Commission a Shelf Registration
Statement to cover resales of the Old Notes. The Company will use its best
efforts to cause such Shelf Registration Statement to become effective and use
its best efforts to keep such Shelf Registration Statement current and effective
until the earlier of three years after the Issue Date and such time as all of
the applicable Old Notes have been sold thereunder (the "Effective Period"). The
Company will, in the event of the filing of a Shelf Registration Statement,
provide to each holder of the Old Notes copies of the prospectus which is a part
of such Shelf Registration Statement, notify each such holder when such Shelf
Registration Statement has become effective and take certain other actions as
are required to permit unrestricted resales of the Old Notes. A holder that
sells its Old Notes pursuant to a Shelf Registration Statement generally will be
required to be named as a selling security holder in the related prospectus and
to deliver a prospectus to
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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
holder (including certain indemnification obligations).
In the event that (i) the Registration Statement is not filed within 45 days
following the Issue Date or declared effective within 120 days following the
Issue Date, (ii) the Exchange Offer is not consummated within 165 days following
the Issue Date, (iii) the Shelf Registration Statement is not filed or declared
effective within the required time periods or (iv) the Registration Statement
ceases to be effective at any time prior to the time that the Exchange Offer is
consummated or, if applicable, the Shelf Registration Statement has been
declared effective and ceases to be effective at any time during the
Effectiveness Period (each such event, a "Registration Default"), additional
interest will accrue on the Old Notes at a rate of 0.50% per annum in excess of
the stated interest rate on the Old Notes for the first 90 days immediately
following such Registration Default, and such additional interest rate shall
increase by an additional 0.50% per annum at the beginning of each subsequent
90-day period; provided however, that such additional interest rate on the Old
Notes may not exceed the aggregate of 1.0% per annum in excess of the stated
interest rate of the Old Notes and provided further that such additional
interest shall cease to accrue at such time, if any, as the Registration Default
is cured.
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 reference to, all the provisions of the Registration Rights
Agreement, a copy of which has been filed as an exhibit to the Registration
Statement of which this Prospectus is a part.
OLD NOTES TRANSFER RESTRICTIONS
Because the following restrictions will apply to any Old Notes held by
holders who do not participate in the Exchange Offer, holders of Old Notes are
advised to consult legal counsel prior to making any offer, resale, pledge or
transfer of any of the Old Notes.
None of the Old Notes has been registered under the Securities Act and they
may not be offered or sold within the United States or to, or for the account or
benefit of, U.S. persons except pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the Securities Act.
Accordingly, the Old Notes were sold only (A) to a limited number of "qualified
institutional buyers" (as defined in Rule 144A) ("QIBs") in compliance with Rule
144A, (B) to a limited number of other institutional "accredited investors" (as
defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act)
("Accredited Investors") that, prior to their purchase of any Old Notes,
delivered to the Initial Purchasers a letter containing certain representations
and agreements and (C) outside the United States to persons other than U.S.
persons ("foreign purchasers," which term shall include dealers or other
professional fiduciaries in the United States acting on a discretionary basis
for foreign beneficial owners (other than an estate or trust)) in reliance upon
Regulation S under the Securities Act ("Regulation S"). As used herein, the
terms "United States" and "U.S. person" have the respective meanings given to
them in Regulation S.
Each purchaser of Old Notes has been deemed to have represented and agreed
as follows:
1. It purchased the Old Notes for its own account or an account with respect
to which it exercises sole investment discretion and that it and any such
account is either (A) a QIB, and is aware that the sale to it is being made in
reliance on Rule 144A, (B) an Accredited Investor or (C) a foreign purchaser
that is outside the United States (or a foreign purchaser that is a dealer or
other fiduciary as referred to above).
2. It acknowledged that the Old Notes have not been registered under the
Securities Act and that they may not be offered or sold except as set
forth below.
3. It shall not resell or otherwise transfer any of such Old Notes within
three years after the original issuance of the Old Notes except (A) to
the Company or any of its subsidiaries, (B) inside the United States to a QIB in
compliance with Rule 144A, (C) inside the United States to an Accredited
Investor that, prior to such transfer, furnishes (or has furnished on its behalf
by a U.S. broker-dealer) to the Trustee a signed letter containing certain
representations and agreements relating to the restrictions on transfer of the
Notes (the
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form of which letter can be obtained from the Trustee), (D) outside the United
States in compliance with Rule 904 under the Securities Act, (E) pursuant to the
exemption from registration provided by Rule 144 under the Securities Act (if
available), or (F) pursuant to an effective registration statement under the
Securities Act.
4. It agreed that it will give to each person to whom it transfers the Old
Notes notice of any restrictions on transfer of such Old Notes.
5. It understands that all of the Old Notes will bear, and if not exchanged
pursuant to the Exchange Offer will continue to bear, a legend
substantially to the following effect unless otherwise agreed by PRI and the
holder thereof:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1)
REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN
RULE 144A UNDER THE ACT), (B) IT IS AN "ACCREDITED INVESTOR" (AS DEFINED IN
RULE 501(a)(1), (2), (3) OR (7) UNDER THE ACT) (AN "ACCREDITED INVESTOR") OR
(C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE
TRANSACTION, (2) AGREES THAT IT WILL NOT WITHIN THREE YEARS AFTER THE
ORIGINAL ISSUANCE OF THIS SECURITY RESELL OR OTHERWISE TRANSFER THIS
SECURITY EXCEPT (A) TO THE ISSUER OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE
UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE
144A UNDER THE ACT, (C) INSIDE THE UNITED STATES TO AN ACCREDITED INVESTOR
THAT, PRIOR TO SUCH TRANSFER, FURNISHES (OR HAS FURNISHED ON ITS BEHALF BY A
U.S. BROKER-DEALER) TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF
THIS SECURITY (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE FOR
THIS SECURITY), (D) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN
COMPLIANCE WITH RULE 904 UNDER THE ACT, (E) PURSUANT TO THE EXEMPTION FROM
REGISTRATION PROVIDED BY RULE 144 UNDER THE ACT (IF AVAILABLE), OR (F)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND (3) AGREES
THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A
NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY
TRANSFER OF THIS SECURITY WITHIN THREE YEARS AFTER THE ORIGINAL ISSUANCE OF
THIS SECURITY, IF THE PROPOSED TRANSFEREE IS AN ACCREDITED INVESTOR, THE
HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE AND THE ISSUER
SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF THEM
MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT
TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE ACT. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION,"
"UNITED STATES" AND "U.S. PERSON" HAVE THE RESPECTIVE MEANINGS GIVEN TO THEM
BY REGULATION S UNDER THE ACT.
6. It shall not sell or otherwise transfer such Old Notes to, and each
purchaser represented and covenanted that it did not acquire the Old
Notes for or on behalf of, and will not transfer the Old Notes to, any pension
or welfare plan (as defined in Section 3 of the Employee Retirement Income
Security Act of 1974 ("ERISA")), except that such a purchase for or on behalf of
a pension or welfare plan shall be permitted:
a. to the extent such purchase is made by or on behalf of a bank
collective investment fund maintained by the purchaser in which, at
any time while the Old Notes are held by the purchaser, no plan (together
with any other plans maintained by the same employer or employee
organization) has an interest in excess of 10% of the total assets in such
collective investment fund and the conditions of Section III of Prohibited
Transaction Class Exemption 91-38 issued by the Department of Labor are
satisfied;
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b. to the extent such purchase is made by or on behalf of an insurance
company pooled separate account maintained by the purchaser in which,
at any time while the Old Notes are held by the purchaser, no plan (together
with any other plans maintained by the same employer or employee
organization) has an interest in excess of 10% of the total of all assets in
such pooled separate account and the conditions of Section III of Prohibited
Transaction Class Exemption 90-1 issued by the Department of Labor are
satisfied;
c. to the extent such purchase is made on behalf of a plan by (i) an
investment adviser registered under the Investment Advisors Act of
1940 that had as of the last day of its most recent fiscal year total assets
under its management and control in excess of $50,000,000 and had
stockholders' or partners' equity in excess of $750,000, as shown in its
most recent balance sheet prepared in accordance with generally accepted
accounting principles, (ii) a bank as defined in Section 202(a)(2) of the
Investment Advisers Act of 1940 with equity capital in excess of $1,000,000
as of the last day of its most recent fiscal year, (iii) an insurance
company which is qualified under the laws of more than one state to manage,
acquire or dispose of any assets of a plan, which insurance company has, as
of the last day of its most recent fiscal year, net worth in excess of
$1,000,000 and which is subject to supervision and examination by a state
authority having supervision over insurance companies, or (iv) a savings and
loan association, the accounts of which are insured by the Federal Savings
and Loan Insurance Corporation, that has made application for and been
granted trust powers to manage, acquire or dispose of assets of a plan by a
State or Federal authority having supervision over savings and loan
associations, which savings and loan association has, as of the last day of
its most recent fiscal year, equity capital or net worth in excess of
$1,000,000 and, in any case, such investment adviser, bank, insurance
company or savings and loan association is otherwise a qualified
professional asset manager, as such term is used in Prohibited Transaction
Exception 84-14 issued by the Department of Labor, and the assets of such
plan when combined with the assets of other plans established or maintained
by the same employer (or affiliate thereof) or employee organization and
managed by such investment advisor, bank, insurance company or savings and
loan association do not represent more than 20% of the total client assets
managed by such investment adviser, bank, insurance company or savings and
loan association and the conditions of Section I of such exemption are
otherwise satisfied;
d. to the extent such plan is a governmental plan (as defined in Section
3 of ERISA) which is not subject to the provisions of Title I of
ERISA or Section 4975 of the Internal Revenue Code; or
e. to the extent that the assets used to acquire the Old Notes are
assets of an insurance company general account and the purchase of
the Old Notes is exempt under the provisions of Prohibited Transaction
Exemption 95-60, published by the Department of Labor in the Federal
Register on July 12, 1995.
7. It acknowledged that the Trustee for the Old Notes will not be required
to accept for registration of transfer any Old Notes acquired by it,
except upon presentation of evidence satisfactory to PRI and the Trustee that
the restrictions set forth herein have been complied with.
8. It acknowledged that PRI, the Initial Purchasers and others have relied
and will continue to rely upon the truth and accuracy of the foregoing
acknowledgments, representations and agreements and agreed that if any of the
acknowledgments, representations or agreements deemed to have been made by its
purchase of the Old Notes are no longer accurate, it shall promptly notify PRI
and the Initial Purchasers. If it acquired the Old Notes as a fiduciary or agent
for one or more investor accounts, it represented that it has sole investment
discretion with respect to each such account and it has full power to make the
foregoing acknowledgments, representations, and agreements on behalf of each
account.
PLAN OF DISTRIBUTION
Based on interpretations by the Staff 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 the Old Notes may be offered for resale,
resold and otherwise transferred by holders thereof (other than any holder which
is (i) an affiliate of the Company, (ii) a broker-dealer who acquired Old Notes
directly from the Company or (iii) a broker-dealer who acquired Old Notes as a
result of market-making or other trading activities) without compliance with the
registration and prospectus delivery provisions of the Securities Act provided
that such
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Exchange Notes are acquired in the ordinary course of such holders' business,
and such holders are not engaged in, and do not intend to engage in, and have no
arrangement or understanding with any person to participate in, a distribution
of such Exchange Notes; provided that broker-dealers ("Participating Broker-
Dealers") receiving Exchange Notes in the Exchange Offer will be subject to a
prospectus delivery requirement with respect to resales of such Exchange Notes.
To date, the Staff has taken the position that Participating Broker-Dealers may
fulfill their prospectus delivery requirements with respect to transactions
involving an exchange of securities such as the exchange pursuant to the
Exchange Offer (other than a resale of an unsold allotment from the sale of the
Old Notes to the Initial Purchasers) with the prospectus contained in the
Registration Statement. Pursuant to the Registration Rights Agreement, the
Company has agreed to permit Participating Broker Dealers and other persons, if
any, subject to similar prospectus delivery requirements to use this Prospectus
in connection with the resale of such Exchange Notes. The Company has agreed
that, for a period of 180 days after the Exchange Date, it will make this
Prospectus, and any amendment or supplement to this Prospectus, available to any
broker-dealer that requests such documents in the Letter of Transmittal.
Each holder of the Old Notes who wishes to exchange its Old Notes for
Exchange Notes in the Exchange Offer will be required to make certain
representations to the Company as set forth in "The Exchange Offer -- Terms and
Conditions of the Letter of Transmittal." In addition, each holder who is a
broker-dealer and who receives Exchange Notes for its own account in exchange
for Old Notes that were acquired by it as a result of market-making activities
or other trading activities, will be required to acknowledge that it will
deliver a prospectus in connection with any resale by it of such Exchange Notes.
The Company will not receive any proceeds from any sale of Exchange Notes by
broker-dealers. Exchange Notes received by broker-dealers for their own account
pursuant to 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 at negotiated prices. Any such resale may be
made directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer and/ or the purchasers of any such Exchange Notes. Any
broker-dealer that resells Exchange Notes that were received by it for its own
account pursuant to 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 broker-dealer will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act.
The Company has agreed to pay all expenses incidental to the Exchange Offer
other than commissions and concession of any brokers or dealers and will
indemnify holders of the Notes (including any broker-dealers) against certain
liabilities, including liabilities under the Securities Act, as set forth in the
Registration Rights Agreement.
LEGAL MATTERS
The validity of the Exchange Notes will be passed upon for the Company by
Winston & Strawn, Chicago, Illinois.
EXPERTS
The financial statements of the Company included in this Prospectus have
been audited by KPMG Peat Marwick LLP, independent certified public accountants,
to the extent and for the periods indicated in their report thereon. Such
financial statements have been included in reliance upon the reports of KPMG
Peat Marwick LLP.
87
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
REFERENCE
-------------
<S> <C>
PACKAGING RESOURCES INCORPORATED
Independent Auditors' Report........................................................................... F-2
Balance Sheets as of February 28, 1995 and February 29, 1996........................................... F-3
Statements of Operations for the years ended February 28, 1994 and 1995 and February 29, 1996.......... F-4
Statements of Stockholder's Equity for the years ended February 28, 1994 and 1995 and February 29,
1996.................................................................................................. F-5
Statements of Cash Flows for the years ended February 28, 1994 and 1995 and February 29, 1996.......... F-6
Notes to Financial Statements.......................................................................... F-7
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholder of
Packaging Resources Incorporated:
We have audited the accompanying balance sheets of Packaging Resources
Incorporated as of February 28, 1995 and February 29, 1996, and the related
statements of operations, stockholder's equity, and cash flows for each of the
years in the three-year period ending February 29, 1996. These financial
statements are the responsibility of the management of Packaging Resources
Incorporated. 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 financial position of Packaging Resources
Incorporated as of February 28, 1995 and February 29, 1996, and the results of
its operations and its cash flows for each of the years in the three-year period
ended February 29, 1996 in conformity with generally accepted accounting
principles.
As discussed in note 12 to the financial statements, the Company adopted the
provisions of Financial Accounting Standards Board Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes," in fiscal 1994.
KPMG Peat Marwick LLP
Chicago, Illinois
March 20, 1996
F-2
<PAGE>
PACKAGING RESOURCES INCORPORATED
BALANCE SHEETS
FEBRUARY 28, 1995 AND FEBRUARY 29, 1996
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE INFORMATION)
<TABLE>
<CAPTION>
ASSETS 1995 1996
--------- ---------
<S> <C> <C>
Current assets:
Cash.................................................................. $ 232 398
Accounts receivable, net of allowance for doubtful accounts of $200
and $156 in 1995 and 1996, respectively.............................. 11,286 10,719
Inventories........................................................... 24,977 21,394
Prepaid expenses...................................................... 119 646
Income tax receivable................................................. 1,468 44
Deferred income taxes................................................. 1,107 922
--------- ---------
Total current assets.................................................... 39,189 34,123
Property, plant, and equipment, net..................................... 56,213 52,352
Intangibles, net........................................................ 19,610 20,454
Other assets............................................................ 6,954 3,754
--------- ---------
$ 121,966 110,683
--------- ---------
--------- ---------
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Current maturities of long-term debt.................................. 6,550 10,350
Accounts payable...................................................... 8,547 2,615
Accrued expenses...................................................... 4,720 3,912
Income taxes payable.................................................. -- 284
--------- ---------
Total current liabilities............................................... 19,817 17,161
Long-term debt, excluding current maturities............................ 77,627 67,174
Deferred income taxes................................................... 7,590 8,083
--------- ---------
Total liabilities....................................................... 105,034 92,418
--------- ---------
Stockholder's equity:
Common stock, $.01 par value. 1,000 shares authorized, issued, and
outstanding in 1995 and 1996......................................... -- --
Additional paid-in capital............................................ 20,278 20,278
Retained earnings (accumulated deficit)............................... (3,346) (2,013)
--------- ---------
Total stockholder's equity.............................................. 16,932 18,265
--------- ---------
$ 121,966 110,683
--------- ---------
--------- ---------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
PACKAGING RESOURCES INCORPORATED
STATEMENTS OF OPERATIONS
YEARS ENDED FEBRUARY 28, 1994 AND 1995 AND FEBRUARY 29, 1996
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE INFORMATION)
<TABLE>
<CAPTION>
1994 1995 1996
---------- ---------- ----------
<S> <C> <C> <C>
Net sales.................................................................... $ 118,844 135,696 133,756
Cost of goods sold........................................................... 93,248 113,928 111,448
---------- ---------- ----------
Gross profit................................................................. 25,596 21,768 22,308
Selling, general, and administrative expenses................................ 6,657 8,407 6,864
Amortization of intangibles and other assets................................. 1,122 3,102 2,434
Nonrecurring charge (note 10)................................................ -- 7,257 --
---------- ---------- ----------
Operating income............................................................. 17,817 3,002 13,010
Interest expense, net of interest income of $129 and $77 in 1994 and 1995,
respectively................................................................ 5,482 8,503 10,671
---------- ---------- ----------
Income (loss) before income taxes, extraordinary item, and cumulative effect
of change in accounting principle........................................... 12,335 (5,501) 2,339
Income tax expense (benefit)................................................. 5,057 (1,980) 1,006
---------- ---------- ----------
Income (loss) before extraordinary item and cumulative effect of change in
accounting principle........................................................ 7,278 (3,521) 1,333
---------- ---------- ----------
Extraordinary item -- loss on early extinguishment of debt,
net of tax.................................................................. 2,743 -- --
Cumulative effect at March 1, 1993 of change in accounting for income taxes
(note 12)................................................................... 2,300 -- --
---------- ---------- ----------
Net income (loss)............................................................ $ 2,235 (3,521) 1,333
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
PACKAGING RESOURCES INCORPORATED
STATEMENTS OF STOCKHOLDER'S EQUITY
YEARS ENDED FEBRUARY 28, 1994 AND 1995 AND FEBRUARY 29, 1996
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE INFORMATION)
<TABLE>
<CAPTION>
SERIES B 10% RETAINED TOTAL
CUMULATIVE ADDITIONAL EARNINGS STOCK-
COMMON COMMON STOCK PREFERRED PAID-IN (ACCUMULATED HOLDER'S
STOCK WARRANTS STOCK CAPITAL DEFICIT) EQUITY
----------- ------------- ------------- ----------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balances at February 28, 1993.............. $ 8 2 -- 525 599 1,134
Amortization of the excess of redemption
value over fair value of Series A
preferred stock........................... -- -- -- (74) -- (74)
Repurchase of 10,000 shares of Series A,
10% cumulative preferred stock............ -- -- -- (1,327) -- (1,327)
Repurchase of common stock warrants........ -- (2) -- (13,854) -- (13,856)
Reverse stock split of 754,000 shares of
common stock, $.01 par value, to 1,000
shares of common stock, $.01 par value.... (8) -- -- 8 -- --
Redemption of 2,500 shares of Series B, 10%
cumulative preferred stock................ -- -- -- (2,500) -- (2,500)
Issuance of 1,000 shares of common stock,
$.01 par value and contribution of
additional paid-in capital................ -- -- -- 40,000 -- 40,000
Dividends paid:
Series A preferred stock................. -- -- -- -- (461) (461)
Series B preferred stock................. -- -- -- -- (115) (115)
Common stock............................. -- -- -- -- (2,083) (2,083)
Net income................................. -- -- -- -- 2,235 2,235
--- --- --- ----------- ------ ---------
Balances at February 28, 1994.............. -- -- -- 22,778 175 22,953
Dividends paid on common stock............. -- -- -- (2,500) -- (2,500)
Net income................................. -- -- -- -- (3,521) (3,521)
--- --- --- ----------- ------ ---------
Balances at February 28, 1995.............. -- -- -- 20,278 (3,346) 16,932
Net income................................. -- -- -- -- 1,333 1,333
--- --- --- ----------- ------ ---------
Balances at February 29, 1996.............. $ -- -- -- 20,278 (2,013) 18,265
--- --- --- ----------- ------ ---------
--- --- --- ----------- ------ ---------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
PACKAGING RESOURCES INCORPORATED
STATEMENTS OF CASH FLOWS
YEARS ENDED FEBRUARY 28, 1994 AND 1995 AND FEBRUARY 29, 1996
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE INFORMATION)
<TABLE>
<CAPTION>
1994 1995 1996
---------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)................................................................ $ 2,235 (3,521) 1,333
Adjustments to reconcile net income (loss) to net cash provided by (used in)
operating activities:
Depreciation and amortization.................................................. 6,984 11,340 11,381
Deferred income taxes.......................................................... 5,191 (1,481) 678
Loss on sale of property, plant, and equipment................................. 314 1,034 31
Change in assets and liabilities net of effects from the purchase of Louisiana
Plastics, Incorporated and Miner Container:
Accounts receivable.......................................................... (993) 5,710 567
Inventories.................................................................. (5,290) 977 3,583
Prepaid expenses............................................................. (391) 638 (527)
Other assets................................................................. (1,831) (87) (239)
Accounts payable............................................................. (1,058) 306 (5,932)
Accrued expenses............................................................. (8,222) (3,416) (808)
Income taxes................................................................. (1,445) (28) 1,708
---------- --------- ---------
Net cash provided by (used in) operating activities................................ (4,506) 11,472 11,775
---------- --------- ---------
Cash flows from investing activities:
Proceeds from sale of property, plant, and equipment............................. 1,241 237 29
Payment for purchase of the net assets from Louisiana Plastics, Incorporated and
Miner Container, net of cash acquired........................................... (42,957) (1,500) (1,536)
Capital expenditures............................................................. (5,556) (7,925) (3,449)
Notes receivable from related party.............................................. (130) 1,938 --
Other, net....................................................................... (155) -- --
---------- --------- ---------
Net cash used in investing activities.............................................. (47,557) (7,250) (4,956)
---------- --------- ---------
Cash flows from financing activities:
Net borrowings (payments) under credit agreement................................. 2,222 (834) (5,603)
Retirement of Miner line-of-credit agreement..................................... (1,752) -- --
Retirement of capital expenditure loan........................................... (4,440) -- --
Retirement of senior subordinated note........................................... (24,000) -- --
Retirement of term loan.......................................................... (12,117) -- --
Net borrowings from term loan.................................................... 77,161 -- --
Repurchase of common stock warrants.............................................. (13,856) -- --
Redemption of preferred stock, Series A.......................................... (10,000) -- --
Proceeds from capital contribution............................................... 37,500 -- --
Issuance (payment) of promissory notes........................................... 4,200 (1,350) (1,050)
Dividends paid................................................................... (2,659) (2,500) --
Premium on senior subordinated notes............................................. 474 -- --
---------- --------- ---------
Net cash provided by (used in ) financing activities............................... 52,733 (4,684) (6,653)
---------- --------- ---------
Net increase (decrease) in cash.................................................... 670 (462) 166
Cash at beginning of year.......................................................... 24 694 232
---------- --------- ---------
Cash at end of year................................................................ $ 694 232 398
---------- --------- ---------
---------- --------- ---------
Supplemental disclosure of cash flow information -- cash paid for:
Interest......................................................................... $ 5,003 8,881 9,239
Income taxes..................................................................... 373 432 117
Supplemental disclosure of noncash financing activities -- cancellation of
preferred stock, Series B......................................................... (2,500) -- --
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
PACKAGING RESOURCES INCORPORATED
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 28, 1994 AND 1995 AND FEBRUARY 29, 1996
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE INFORMATION)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) DESCRIPTION OF BUSINESS
Packaging Resources Incorporated (PRI or the Company) was organized in 1984
as a wholly owned subsidiary of HPH Industries, Ltd. (HPH). During fiscal 1994
PRI Holdings, Inc. (Holdings) acquired all of the common stock of PRI from HPH.
During fiscal 1995 Holdings changed its name to Packaging Resources Group, Inc.
(Group). Packaging Resources Group, Inc. is a wholly owned subsidiary of HPH.
The primary business of PRI is the manufacture and sale of promotional
beverage cups and plastic packaging for the food, dairy, and pharmaceutical
industries. PRI has manufacturing facilities in Coleman, Michigan; Fort Worth,
Texas; Kansas City, Missouri; Lenexa, Kansas; Mt. Carmel, Pennsylvania; and New
Vienna, Ohio.
(B) INVENTORIES
Inventories are stated at the lower of first-in, first-out cost or net
realizable value.
(C) PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment are stated at cost. Depreciation on plant and
equipment is calculated on the straight-line method over the following estimated
useful lives of the assets:
<TABLE>
<S> <C>
Furniture and fixtures............................................ 5 years
Molds............................................................. 3-5 years
Machinery and equipment........................................... 13 years
Buildings and improvements........................................ 25 years
Land improvements................................................. 35 years
</TABLE>
Leasehold improvements are amortized ratably over the shorter of the lease
term or estimated useful life of the assets.
(D) INTANGIBLES
Intangibles consists of patent costs and the excess of the cost over the
fair value of net assets purchased. The intangibles are amortized on a
straight-line basis over their useful lives of 14 years to 40 years. Accumulated
amortization was $3,172 and $3,865 at February 28, 1995 and February 29, 1996,
respectively.
At each balance sheet date, PRI evaluates the realizable value of
intangibles on the basis of whether the intangibles are fully recoverable from
projected, undiscounted net cash flows. Based on its most recent analysis, PRI
believes no impairment of the carrying values of intangibles exists.
(E) OTHER ASSETS
The costs of noncompete agreements and debt issuance costs included in other
assets are amortized over their respective useful lives on the straight-line
method.
(F) INCOME TAXES
PRI is included in the consolidated Federal income tax return of HPH.
Federal income taxes are calculated on a separate company basis and remitted to
HPH.
In February 1992 the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 109, "Accounting for Income Taxes"
(Statement 109). Statement 109 requires a change from the deferred method of
accounting for income taxes of APB Opinion 11 to the asset and liability method
of accounting for income taxes. Under the asset and liability method of
Statement 109, deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax
F-7
<PAGE>
PACKAGING RESOURCES INCORPORATED
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 28, 1994 AND 1995 AND FEBRUARY 29, 1996
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE INFORMATION) (CONTINUED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. Under Statement 109, the effect on deferred tax assets
and liabilities of a change in tax rates is recognized in operations for the
period that includes the enactment date.
Effective March 1, 1993 PRI adopted Statement 109 and has reported the
cumulative effect of that change in the method of accounting for income taxes in
the statement of operations for the year ended February 28, 1994.
(G) RETIREMENT PLANS
PRI has two defined contribution retirement plans covering substantially all
of its employees. PRI's Money Purchase Retirement Plan is funded entirely by
employer contributions based upon a defined percentage of participating
employees compensation. PRI also has a 401(k) plan where participants elect to
have a designated percentage of their salary withheld and contributed to the
plan.
(H) USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make certain estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
(I) FINANCIAL STATEMENT RECLASSIFICATION
Certain amounts in the 1994 and 1995 financial statements have been
reclassified to conform with the 1996 presentation.
(2) ACQUISITION OF BUSINESSES
On March 12, 1993 PRI acquired substantially all of the assets of Louisiana
Plastics, Incorporated (LPI). LPI was engaged in the business of manufacturing
plastic food containers and promotional beverage cups. Results of LPI are
included in PRI's statement of operations from the date of acquisition. The
purchase price was $22,122, consisting of $20,122 in cash and $2,000 of debt.
In connection with the purchase of LPI, PRI's bank credit agreement was
amended. The amendment extended the credit facility to $43,800, consisting of a
revolving credit facility of up to $20,000 and a term loan in aggregate
principal amount of $23,800. All property acquired from LPI together with PRI's
remaining property and assets were pledged as collateral for amounts borrowed
under this agreement. The amendment contained certain covenants relating to
PRI's financial condition and restrictions on capital expenditures. PRI borrowed
$18,182 under the amended agreement for the cash purchase price.
As part of the transaction, the preceding owner entered into a two-year
noncompete agreement with PRI. The $500 cost of the noncompete agreement was
included in the purchase price.
The acquisition of LPI is being accounted for as a purchase and,
accordingly, the acquired assets and liabilities have been recorded at their
estimated fair values at the date of the acquisition. As the purchase price did
not exceed the fair value of the net assets acquired, no goodwill was recorded.
On December 15, 1993 PRI acquired all issued and outstanding shares of
capital stock of Miner Container of Missouri, Inc. and Miner Container of Texas,
Inc. Additionally, PRI acquired specific assets and liabilities of Miner
Container Printing, Inc. (all businesses acquired are collectively hereafter
referred to
F-8
<PAGE>
PACKAGING RESOURCES INCORPORATED
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 28, 1994 AND 1995 AND FEBRUARY 29, 1996
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE INFORMATION) (CONTINUED)
(2) ACQUISITION OF BUSINESSES (CONTINUED)
as Miner). Miner is engaged in the business of manufacturing plastic food
containers and promotional beverage cups. Results of Miner are included in PRI's
statement of operations from the date of acquisition. The purchase price was
$20,950, consisting of $11,750 in cash and $9,200 of debt of which $7,000 was
paid prior to February 28, 1994.
In connection with the purchase of Miner, the credit agreement was amended
to extend the credit facility to $95,000, including a maximum revolving credit
line of $15,000 and a term loan in aggregate principal amount of $80,000. All
Miner property acquired has been pledged as collateral for amounts borrowed
under this agreement. The amendment contains certain covenants relating to PRI's
financial condition and restrictions on capital expenditures. PRI borrowed
$22,000 under the amended agreement for the cash purchase price and to retire
other debt assumed in the acquisition.
As part of the transaction, the preceding owners entered into a two-year
noncompete agreement with PRI. Of the $4,400 cost of the noncompete agreement,
$1,100 was paid December 31, 1993, $1,100 was paid January 3, 1994, $1,100 was
paid January 2, 1995, and the remaining $1,100 initially was due January 2,
1995. PRI renegotiated the payment terms relating to the final payment of
$1,100. As a result, $800 was paid on April 13, 1995, and the remaining $300 is
due in March of 1996. The outstanding obligation of $1,100 became
interest-bearing on January 2, 1995 at a rate of 1.5% over prime rate.
The Miner acquisition is being accounted for as a purchase and, accordingly,
the acquired assets and liabilities were recorded at their preliminary estimated
fair values at the date of the acquisition. The $9,918 preliminary excess of the
purchase price over the fair market value of the net assets was recorded. During
fiscal 1995 PRI's final determination of the purchase price of Miner resulted in
the excess of the purchase price over the fair market value of the net assets
acquired increasing by $1,500.
PRI had contingent consideration of up to $2,300 associated with the
purchase of Miner. During fiscal 1996, PRI made payments towards this balance of
$1,536 resulting in a remaining contingent consideration of $764. However, as
the probability and amount of payment are uncertain, no amount relating to this
remaining contingency has been recorded. Subsequent payments result in an
adjustment to increase the excess of the purchase price over the fair market
value of the net assets acquired.
(3) INVENTORIES
Inventories consist of the following at February 28, 1995 and February 29,
1996:
<TABLE>
<CAPTION>
1995 1996
--------- ---------
<S> <C> <C>
Finished goods........................................................... $ 15,637 13,065
Raw materials............................................................ 5,718 4,407
Supplies and mold materials.............................................. 3,622 3,922
--------- ---------
Total.................................................................. $ 24,977 21,394
--------- ---------
--------- ---------
</TABLE>
F-9
<PAGE>
PACKAGING RESOURCES INCORPORATED
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 28, 1994 AND 1995 AND FEBRUARY 29, 1996
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE INFORMATION) (CONTINUED)
(4) PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment consist of the following at February 28, 1995
and February 29, 1996:
<TABLE>
<CAPTION>
1995 1996
---------- ----------
<S> <C> <C>
Land...................................................................................... $ 309 309
Buildings................................................................................. 10,019 10,156
Machinery, equipment, and fixtures........................................................ 77,471 80,271
Leasehold improvements.................................................................... 157 157
Construction in progress.................................................................. 1,238 1,562
---------- ----------
89,194 92,455
Less allowance for depreciation and amortization.......................................... (32,981) (40,103)
---------- ----------
Total..................................................................................... $ 56,213 52,352
---------- ----------
---------- ----------
</TABLE>
Construction in progress includes machinery and equipment which have not yet
been placed in service and molds which are in the process of being manufactured.
Depreciation expense for the years ended February 28, 1994 and 1995 and February
29, 1996 was $5,157, $7,390, and $7,287, respectively.
(5) OTHER ASSETS
Other assets consist of the following at February 28, 1995 and February 29,
1996:
<TABLE>
<CAPTION>
1995 1996
--------- ---------
<S> <C> <C>
Debt issuance cost, net........................................................................ $ 3,673 2,213
Noncompete agreements, net..................................................................... 1,741 --
Leased equipment, net.......................................................................... 1,531 1,479
Other.......................................................................................... 9 62
--------- ---------
$ 6,954 3,754
--------- ---------
--------- ---------
</TABLE>
The debt issuance costs were incurred in connection with the revolving line
of credit, the 12.5% senior subordinated notes issued by Group, and the term
loan described in note 8. The cost is being amortized over the remaining life of
the debt. Amortization of these costs was $705, $848 and $1,660 for the years
ended February 28, 1994 and 1995 and February 29, 1996, respectively. The
noncompete agreements resulted from the acquisitions as discussed in note 2 and
are being amortized over two years from the date of acquisitions. Leased
equipment represents equipment leased and available for lease to PRI's
customers.
(6) LEASES
PRI has several noncancelable operating leases for substantial portions of
the Company's plant and office facilities and machinery and equipment. Leased
plant and office facilities generally contain renewal options. Rental expense
for operating leases for the years ended February 28, 1994 and 1995 and February
29, 1996 aggregated approximately $2,083, $2,547, and $2,062, respectively.
Additionally, PRI has several facilities which are being subleased.
F-10
<PAGE>
PACKAGING RESOURCES INCORPORATED
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 28, 1994 AND 1995 AND FEBRUARY 29, 1996
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE INFORMATION) (CONTINUED)
(6) LEASES (CONTINUED)
Future minimum lease payments and related sublease income under
noncancelable operating leases (with initial or remaining lease terms in excess
of one year) as of February 29, 1996 are:
<TABLE>
<CAPTION>
OPERATING OPERATING
LEASE SUBLEASE
FISCAL YEAR PAYMENTS INCOME
- ------------------------------------------------------------------------------------------- ----------- -----------
<S> <C> <C>
1997....................................................................................... $ 1,970 (855)
1998....................................................................................... 1,766 (570)
1999....................................................................................... 1,276 (505)
2000....................................................................................... 1,207 (505)
2001....................................................................................... 970 (168)
----------- -----------
Total minimum lease payments (income)...................................................... $ 7,189 (2,603)
----------- -----------
----------- -----------
</TABLE>
(7) ACCRUED EXPENSES
Accrued expenses consist of the following at February 28, 1995 and February
29, 1996:
<TABLE>
<CAPTION>
1995 1996
--------- ---------
<S> <C> <C>
Interest........................................................................................ $ 18 27
Vacation........................................................................................ 1,056 1,056
Pension......................................................................................... 1,095 985
Other........................................................................................... 2,551 1,844
--------- ---------
$ 4,720 3,912
--------- ---------
--------- ---------
</TABLE>
(8) LONG-TERM DEBT
On June 30, 1993 PRI obtained a credit facility, fully described below,
which includes a revolving credit loan. The revolving credit loan balance is
limited to $15,000, with substantially all of PRI's property pledged as
collateral for amounts borrowed. The balance outstanding under this revolving
credit loan was $5,000, $15,000, and $15,000 at February 28, 1994 and 1995 and
February 29, 1996, respectively.
The borrowing base for the revolving credit loan consists of specific
accounts receivable and inventories. PRI borrows at the base rate (Base Rate)
which is equal to one and one-half percent over the prime rate (8.25% at
February 29, 1996) on the outstanding balance.
Beginning in September of 1994, PRI was not in compliance with certain debt
covenants. As a result, from October 1, 1994 through March 31, 1995, PRI was
required to borrow funds at the Base Rate plus two percentage points.
On March 31, 1995, PRI restructured their credit facility and their debt
covenants. In conjunction with this restructuring, PRI received a waiver for
noncompliance with certain debt covenants through March 31, 1995. Thereafter,
PRI was in compliance with all restructured debt covenants throughout fiscal
1996.
The revolving loan matures on the earlier of the maturity date of the term
loan (June 30, 1997) or the date of repayment of the term loan.
F-11
<PAGE>
PACKAGING RESOURCES INCORPORATED
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 28, 1994 AND 1995 AND FEBRUARY 29, 1996
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE INFORMATION) (CONTINUED)
(8) LONG-TERM DEBT (CONTINUED)
Long-term debt consists of the following at February 28, 1995 and February
29, 1996:
<TABLE>
<CAPTION>
1995 1996
--------- ---------
<S> <C> <C>
Revolving credit loan, interest at Base Rate during 1995, payable in June of 1997........... $ 15,000 15,000
Term loan, interest at eurodollar rate plus 2.75% through October 1994 and interest at prime
rate plus 1.5% since October 1994, payable in quarterly installments through June 30,
1997....................................................................................... 66,327 60,724
Promissory note, interest at prime plus 0.75% and effective March 12, 1995, interest at
prime plus 2.0%, payable in installments semiannually through July of 1997................. 1,750 1,500
Promissory note, interest-bearing at prime plus 1.5% beginning January 1995; $800 payable in
April of 1995 and $300 payable in March of 1996............................................ 1,100 300
--------- ---------
84,177 77,524
Less current maturities of long-term debt................................................... 6,550 10,350
--------- ---------
$ 77,627 67,174
--------- ---------
--------- ---------
</TABLE>
On June 30, 1993, PRI entered into a new credit agreement initially
providing for a $55,000 term loan and a $20,000 revolving credit facility. On
December 15, 1993, the terms of this agreement were amended to increase the term
loan to $80,000 and reduce the revolving credit facility to $15,000.
Substantially all of PRI's property has been pledged as collateral for amounts
borrowed under the agreement. Interest is due on either a one, three, or six
month basis for borrowings under the eurodollar interest rate or quarterly for
borrowings under the Base Rate. There is an annual fee of one-half of one
percent on the unused credit commitment, payable quarterly.
This credit agreement contains restrictions on incurring additional debt or
liens, making investments, or making payments such as dividends, stock
repurchases, or debt prepayments, and payments to affiliates. These agreements
also contain various financial covenants such as interest coverage ratio,
working capital, and net worth. PRI paid approximately $4,600 in fees in
connection with the new credit agreement and the 12.5% senior subordinated notes
issued by Group.
As discussed in note 2, in connection with the Miner acquisition, a two-year
noncompete agreement was entered into by PRI. Of the $4,400 cost of the
noncompete agreement, $1,100 was paid December 31, 1993, $1,100 was paid January
3, 1994, $1,100 was paid January 2, 1995, and the remaining $1,100 initially was
due January 2, 1995. PRI renegotiated the payment terms relating to the final
payment of $1,100. As a result, $800 was paid on April 13, 1995, and the
remaining $300 is due March 1, 1996. The outstanding obligation of $1,100 became
interest-bearing on January 2, 1995 at a rate of 1.5% over prime rate.
Aggregate maturities of long-term debt after February 29, 1996 are as
follows:
<TABLE>
<CAPTION>
FISCAL YEAR AMOUNT
- ------------------------------------------------------------------------------------------------------- ---------
<S> <C>
1997................................................................................................... $ 10,350
1998................................................................................................... 67,174
1999................................................................................................... --
2000................................................................................................... --
2001................................................................................................... --
---------
$ 77,524
---------
---------
</TABLE>
F-12
<PAGE>
PACKAGING RESOURCES INCORPORATED
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 28, 1994 AND 1995 AND FEBRUARY 29, 1996
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE INFORMATION) (CONTINUED)
(9) COMMON STOCK, ADDITIONAL PAID-IN CAPITAL, REDEEMABLE EXCHANGEABLE PREFERRED
STOCK, AND COMMON STOCK PURCHASE WARRANTS
During fiscal 1990 PRI issued 52,632 detachable common stock purchase
warrants to the holder of the redeemable exchangeable preferred stock under an
amended Stock Purchase Agreement. PRI also had 246,000 outstanding detachable
common stock purchase warrants which were issued in 1986 with the 13.5% senior
subordinated notes and redeemable exchangeable preferred stock. The warrants
were purchased by PRI for $13,856 on June 30, 1993. PRI also redeemed the
Redeemable Exchangeable Preferred Stock on June 30, 1993 for $10,000 plus
accrued dividends.
Group acquired all issued and outstanding capital stock of PRI and,
simultaneously with such transaction, Group caused PRI to reconstitute its
capital structure through the replacement of its bank credit facility and
redemption of its outstanding (i) 13.5% Senior Subordinated Notes due 1996, (ii)
shares of Redeemable Exchangeable Preferred Stock, and (iii) warrants to
purchase stock. In connection with this refinancing, Group made a capital
contribution to PRI consisting of $37,500 in cash and 2,500 shares of Redeemable
Convertible Junior Preferred Stock.
In June 1993 HPH exchanged all of the outstanding shares of common stock of
PRI, par value $.01 per share, for 56,250 shares of the common stock of Group,
par value $.01 per share. HPH also exchanged its shares of PRI's Series B
Redeemable Convertible Junior Preferred Stock, par value $.01 per share, for
$2,500 principal amount of the 12.5% senior subordinated notes issued by Group.
In connection with the March of 1995 restructured credit agreement, dividend
payments are prohibited by PRI.
(10)NONRECURRING CHARGE
During fiscal 1995 a nonrecurring charge was incurred relating to the
following items:
<TABLE>
<S> <C>
Shutdown of manufacturing facilities................................................ $ 6,363
Write-off of costs associated with the public debt offering that was not completed
by PRI............................................................................. 894
---------
$ 7,257
---------
---------
</TABLE>
(11)EARLY EXTINGUISHMENT OF DEBT
During fiscal 1994, in connection with the reconstituting of the capital
structure as discussed in note 8, the difference between the amount paid to
extinguish the debt and net carrying amount of the debt was recorded as an
extraordinary item, net of taxes in the accompanying statements of operations.
(12)INCOME TAXES
As discussed in note 1, PRI adopted Statement 109 as of March 1, 1993. The
cumulative effect of this change in accounting for income taxes of $2,300 is
determined as of March 1, 1993 and is reported separately in the statement of
operations for the year ended February 28, 1994.
Total income tax expense (benefit) for the years ended February 28, 1994 and
1995 and February 29, 1996 was allocated as follows:
<TABLE>
<CAPTION>
1994 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
Income (loss) from operations........................................................ $ 5,057 (1,980) 1,006
Extraordinary item -- loss on early extinguishment of debt........................... (1,906) -- --
--------- --------- ---------
$ 3,151 (1,980) 1,006
--------- --------- ---------
--------- --------- ---------
</TABLE>
F-13
<PAGE>
PACKAGING RESOURCES INCORPORATED
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 28, 1994 AND 1995 AND FEBRUARY 29, 1996
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE INFORMATION) (CONTINUED)
(12)INCOME TAXES (CONTINUED)
Income tax expense (benefit) attributable to income before income taxes,
extraordinary item, and cumulative effect of change in accounting principle for
the years ended February 28, 1994 and 1995 and February 29, 1996 consists of:
<TABLE>
<CAPTION>
1994
-----------------------------------
CURRENT DEFERRED TOTAL
----------- ----------- ---------
<S> <C> <C> <C>
Federal............................................................................. $ 1,764 2,084 3,848
State............................................................................... 666 543 1,209
----------- ----------- ---------
$ 2,430 2,627 5,057
----------- ----------- ---------
----------- ----------- ---------
<CAPTION>
1995
-----------------------------------
CURRENT DEFERRED TOTAL
----------- ----------- ---------
<S> <C> <C> <C>
Federal............................................................................. $ (668) (1,184) (1,852)
State............................................................................... 169 (297) (128)
----------- ----------- ---------
$ (499) (1,481) (1,980)
----------- ----------- ---------
----------- ----------- ---------
<CAPTION>
1996
-----------------------------------
CURRENT DEFERRED TOTAL
----------- ----------- ---------
<S> <C> <C> <C>
Federal............................................................................. $ 103 546 649
State............................................................................... 225 132 357
----------- ----------- ---------
$ 328 678 1,006
----------- ----------- ---------
----------- ----------- ---------
</TABLE>
Income tax expense (benefit) differed from the amounts computed by applying
the U.S. Federal income tax rate of 34% in 1994, 1995 and 1996 to pretax income
as a result of the following:
<TABLE>
<CAPTION>
1994 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
Computed "expected" tax expense (benefit)............................................. $ 4,194 (1,870) 795
Increase (decrease) in income taxes resulting from:
State income taxes, net of Federal income tax benefit............................... 798 (185) 235
Other, net.......................................................................... 65 75 (24)
--------- --------- ---------
$ 5,057 (1,980) 1,006
--------- --------- ---------
--------- --------- ---------
</TABLE>
F-14
<PAGE>
PACKAGING RESOURCES INCORPORATED
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 28, 1994 AND 1995 AND FEBRUARY 29, 1996
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE INFORMATION) (CONTINUED)
(12)INCOME TAXES (CONTINUED)
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at February 28,
1994 and 1995 and February 29, 1996 are presented below:
<TABLE>
<CAPTION>
1994 1995 1996
---------- --------- ---------
<S> <C> <C> <C>
Deferred tax assets:
Compensated absences, principally due to accrual for financial reporting
purposes...................................................................... $ 419 345 343
Net operating loss carryforwards............................................... 1,786 4,612 4,785
Alternative minimum tax credit carryforwards................................... 1,103 395 495
Other.......................................................................... 906 844 686
---------- --------- ---------
Total gross deferred tax assets.................................................. 4,214 6,196 6,309
---------- --------- ---------
Deferred tax liabilities:
Plant and equipment, principally due to differences in depreciation............ (10,337) (10,354) (11,843)
Intangible assets.............................................................. (1,518) (2,243) (1,520)
Other.......................................................................... (323) (82) (107)
---------- --------- ---------
Total gross deferred liabilities................................................. (12,178) (12,679) (13,470)
---------- --------- ---------
Net deferred liability........................................................... $ (7,964) (6,483) (7,161)
---------- --------- ---------
---------- --------- ---------
</TABLE>
PRI has not recorded a valuation allowance related to the deferred tax
assets, as management believes that it is more likely than not that the results
of future operations will generate sufficient taxable income to realize the
deferred tax assets.
At February 29, 1996 PRI has net operating loss carryforwards of $12,269
which are available to reduce future taxable income for Federal income tax
purposes under a tax sharing agreement with HPH. The operating loss
carryforwards expire at various dates through 2011.
PRI also has alternative minimum tax credit carryforwards of $495 which are
available to reduce future Federal income taxes over an indefinite period under
a tax sharing agreement with HPH.
(13)DISCLOSURES ABOUT THE FAIR VALUE OF FINANCIAL INSTRUMENTS
Cash, receivables, accounts payable and accrued expenses: The carrying
amounts approximate fair value due to the short maturity of these instruments.
Notes payable: The carrying amounts approximate fair value as a majority of
the obligations incur interest at a market rate. In addition, the significant
terms of fixed rate obligations do not differ materially from those currently
available to PRI.
(14)RETIREMENT PLAN
PRI has a defined contribution retirement plan covering substantially all
employees; contributions are based upon a defined percentage of compensation.
Provisions for the plan's contributions amounted to $673, $775, and $670 for the
years ended February 28, 1994 and 1995 and February 29, 1996, respectively.
Provisions of the plan include 20% vesting per year.
F-15
<PAGE>
PACKAGING RESOURCES INCORPORATED
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 28, 1994 AND 1995 AND FEBRUARY 29, 1996
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE INFORMATION) (CONTINUED)
(15)RELATED-PARTY TRANSACTIONS
PRI has various transactions with Group and HPH. These transactions include
management fees and reimbursements to HPH of $699, $687 and $662 for each fiscal
year 1994, 1995 and 1996, respectively. Additionally, PRI paid dividends of $115
to HPH on Series B preferred stock in 1994, and $2,083 and $2,500 to Group on
common stock in 1994 and 1995, respectively.
(16)BUSINESS AND CREDIT CONCENTRATIONS
PRI's business is substantially dependent on a limited number of large
customers. In fiscal years 1994, 1995 and 1996, PRI's ten largest customers
accounted for approximately 62%, 69% and 78%, respectively, of its net sales.
PRI's largest customers are General Mills (including Yoplait), Dannon, and Ross
Labs, which represented approximately 21.9%, 18.7%, and 15.2%, respectively, of
PRI's net sales for fiscal 1996. No customer other than General Mills, Dannon,
or Ross Labs accounted for more than 5% of PRI's net sales during fiscal 1996.
Accounts receivable for General Mills, Dannon, and Ross Labs totaled $4,594,
$6,416, and $5,976 at February 28, 1994 and 1995 and February 29, 1996,
respectively.
F-16
<PAGE>
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------
NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH THE EXCHANGE OFFER MADE BY
THIS PROSPECTUS TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT
CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN
OFFER TO BUY, THE EXCHANGE NOTES IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO
WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH
IN THIS PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Available Information.......................... i
Prospectus Summary............................. 1
Risk Factors................................... 11
Use of Proceeds................................ 17
The Exchange Offer............................. 18
Capitalization................................. 26
Selected Financial Data........................ 27
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................... 29
Business....................................... 35
Management..................................... 46
Security Ownership of Certain Beneficial Owners
and Management................................ 49
Certain Transactions........................... 50
Description of Certain Indebtedness............ 53
Description of Exchange Notes.................. 54
Certain United States Federal Income Tax
Consequences.................................. 81
Old Notes Registration Rights.................. 83
Old Notes Transfer Restrictions................ 84
Plan of Distribution........................... 87
Legal Matters.................................. 87
Experts........................................ 88
Index to Financial Statements.................. F-1
</TABLE>
[LOGO]
OFFER TO EXCHANGE $1,000
PRINCIPAL AMOUNT OF ITS
11 5/8% SENIOR SECURED NOTES DUE 2003
WHICH HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT
FOR EACH $1,000 PRINCIPAL AMOUNT
OF ITS OUTSTANDING
11 5/8% SENIOR SECURED NOTES DUE 2003
---------------------
PROSPECTUS
---------------------
THE EXCHANGE AGENT
FOR THE EXCHANGE OFFER IS:
LASALLE NATIONAL BANK
BY FACSIMILE: (312) 904-2236
CONFIRMATION BY TELEPHONE:(312) 904-2444
BY MAIL/HAND DELIVERY/OVERNIGHT DELIVERY:
LaSalle National Bank
Corporate Trust Division
135 South LaSalle Street
Suite 1825
Chicago, Illinois 60603
Attention: Sarah H. Webb
, 1996
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth all fees and expenses payable by the
Registrant in connection with the issuance and distribution of the securities
being registered hereby. All of such expenses, except the SEC filing fee, are
estimated.
<TABLE>
<S> <C>
SEC filing fee..................................................... $ 37,932
Legal fees and expenses............................................ *
Accounting fees and expenses....................................... *
Printing and engraving............................................. *
Trustee's fees and expenses........................................ *
Blue Sky fees and expenses......................................... *
Miscellaneous...................................................... *
---------
Total.......................................................... $ *
---------
---------
</TABLE>
- ------------------------
* To be provided by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
As authorized by Section 145 of the General Corporation Law of Delaware (the
"Delaware Corporation Law"), each director and officer of the Registrant may be
indemnified by the respective Registrant against expenses (including attorney's
fees, judgments, fines and amounts paid in settlement) actually and reasonably
incurred in connection with the defense or settlement of any threatened, pending
or completed legal proceedings in which he is involved by reason of the fact
that he is or was a director or officer of that Registrant if he acted in good
faith and in a manner that he reasonably believed to be in or not opposed to the
best interests of that Registrant, and, with respect to any criminal action or
proceeding, if he had no reasonable cause to believe that his conduct was
unlawful. If the legal proceeding, however, is by or in the right of the
respective Registrant, the director or officer may not be indemnified in respect
to any claim, issue or matters as to which he shall have been adjudged to be
liable for negligence or misconduct in the performance of his duty to that
Registrant unless a court determines otherwise.
Article 9 of the Certificate of Incorporation of PRI, a copy of which is
filed as Exhibit 3.1 to this Registration Statement, provides that no director
of PRI shall be personally liable to PRI or its stockholders for monetary
damages for any breach of his fiduciary duty as a director, provided, however,
that such clause shall not apply to any liability of a director (1) for any
breach of his duty of loyalty to PRI or its stockholders, (2) for acts or
omissions that are not in good faith or involve intentional misconduct or a
knowing violation of the law, (3) under Section 174 of the Delaware Corporation
law, or (4) for any transaction from which the director derived an improper
personal benefit. In addition, Article VII of the By-Laws of PRI, a copy of
which is filed as Exhibit 3.2 hereto, provides for the indemnification of the
Registrant's officers and directors.
In addition, the Registrant has entered into an Indemnification Agreement
with each of its directors and officers which provides for indemnification to
the fullest extent available under Delaware Corporation Law.
Section 9 of the Purchase Agreement, a copy of which is filed as Exhibit 1.1
hereto, provides for indemnification by the Initial Purchasers of directors and
officers of the Company against certain liabilities, including liabilities under
the Securities Act of 1933, as amended (the "Securities Act"), under certain
circumstances.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
On May 17, 1996, the Company sold $110,000,000 principal amount of 11 5/8%
Senior Secured Notes due 2003 (the "Old Notes") to BT Securities Corporation and
Donaldson, Lufkin & Jenrette Securities Corporation (the "Initial Purchasers")
at 100% of the principal amount thereof (less aggregate discounts of
II-1
<PAGE>
$3.3 million). Such transaction was exempt from the registration requirements of
the Securities Act in reliance on Section 4(2) of the Securities Act and Rule
144A promulgated under the Securities Act on the basis that such transaction did
not involve a public offering. In accordance with the agreement pursuant to
which the Initial Purchasers purchased the Old Notes, the Initial Purchasers
agreed to offer and sell the Old Notes only to "qualified institutional buyers"
(as defined in Rule 144A under the Securities Act) or a limited number of
institutional "accredited investors" (as defined in Rule 501(a)(1), (2), (3) or
(7) of Regulation D under the Securities Act).
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULE
(a) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT
- --------- -------------------------------------------------------------------------------------------------------
<C> <S>
2.1 Purchase Agreement dated May 10, 1996 between PRI and BT Securities Corporation and Donaldson, Lufkin &
Jenrette Securities Corporation
3.1 Amended and Restated Certificate of Incorporation of PRI
3.2 Amended and Restated By-Laws of PRI
4.1 Indenture dated as of May 17, 1996 between PRI and LaSalle National Bank, as Trustee, relating to the
Notes (including form of certificate to be delivered in connection with transfers to institutional
accredited investors)
4.2 Registration Rights Agreement dated as of May 17, 1996 between PRI and BT Securities Corporation and
Donaldson, Lufkin & Jenrette Securities Corporation
4.3 Credit Agreement dated as of May 17, 1996 among PRI, the lenders signatory thereto and LaSalle National
Bank, as administrative agent
5.1** Opinion of Winston & Strawn regarding the validity of the issuance of the Notes
10.1 Subordinated Promissory Note dated March 12, 1993, as amended March 12, 1995, issued to Bemis Company,
Inc. by PRI
10.2 Asset Purchase Agreement dated March 12, 1993 among PRI, Louisiana Plastics, Incorporated and Bemis
Company, Inc.
10.3 Asset and Stock Purchase Agreement dated December 15, 1993 among PRI, Miner Container Printing, Inc.
and the stockholders signatory thereto
10.4 Consulting Agreement dated December 15, 1993, as amended December 22, 1994 and April 12, 1995, between
PRI and Kenneth W. Miner
10.5 Form of Management Agreement between HPH Industries, Ltd. and PRI
10.6 Agreement Apportioning the Consolidated Income Tax Liability of HPH Industries, Ltd. Affiliated Group
effective as of May 17, 1996 among HPH, Group and PRI
10.7 The Dannon Company, Inc. 4 oz. Sprinkl'ins Dannon Cup Mold and Cup Manufacture Agreement between The
Dannon Company, Inc. and PRI dated July 10, 1992, as amended April 4, 1994 and February 6, 1995*
10.8 The Dannon Company, Inc. 6 oz. Blended Cup Mold and Cup Manufacture Agreement between The Dannon
Company, Inc. and PRI dated April 18, 1991, as amended July 10, 1992, April 4, 1994 and June 26, 1995*
</TABLE>
- ------------------------
* The Registrant has omitted certain portions of this agreement for which the
Registrant seeks confidential treatment pursuant to Rule 406 of the
Securities Act; unredacted copies have been filed with the Securities and
Exchange Commission.
** To be filed by amendment.
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT
- --------- -------------------------------------------------------------------------------------------------------
<C> <S>
10.9 The Dannon Company, Inc. 8 oz. Mold Manufacture and Cup Production Agreement between The Dannon
Company, Inc. and PRI dated December 9, 1991, as amended October 27, 1992, April 4, 1994 and February
15, 1996*
10.10 The Dannon Company 8 oz. Mold Manufacture and Cup Production Agreement between The Dannon Company, Inc.
and PRI (as successor to Miner Container of Texas, Inc.) dated January 15, 1992, as amended November
16, 1992*
10.11 The Restated Parts Supply Agreement dated July 1, 1992 between Yoplait U.S.A., a Division of General
Mills Products Corp., and PRI*
10.12 The Cans Supply Agreement dated August 6, 1992 between Ross Laboratories, a Division of Abbott
Laboratories, and PRI*
10.13 Form of Indemnification Agreement between PRI and each of its directors and officers
10.14 Description of Annual Bonus Plan
12.1 Statements re Computation of Ratios
23.1 Consent of KPMG Peat Marwick LLP
23.2 Consent of Winston & Strawn (included in their opinion filed as Exhibit 5.1)
24.1 Powers of Attorney (included on the signature pages hereto)
25.1 Form T-1 for LaSalle National Bank, as Trustee
27.1 Financial Data Schedule
99.1 Form of Letter of Transmittal
99.2 Form of Notice of Guaranteed Delivery
99.3 Form of Letter to Securities Dealers, Commercial Banks, Trust Companies and Other Nominees
99.4 Form of Letters to Clients
99.5 Guidelines for Certification of Taxpayer Identification Number on Form W-9
</TABLE>
- ------------------------
* The Registrant has omitted certain portions of this agreement for which the
Registrant seeks confidential treatment pursuant to Rule 406 of the
Securities Act; unredacted copies have been filed with the Securities and
Exchange Commission.
** To be filed by amendment.
(b) Financial Statement Schedule
Report of Independent Auditors
<TABLE>
<S> <C> <C>
SCHEDULE II -- Valuation and Qualifying Accounts
</TABLE>
ITEM 17. UNDERTAKINGS
1. Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the
II-3
<PAGE>
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by them is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
2. The undersigned Registrant hereby undertakes that:
(a) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be a part of this
Registration Statement as of the time it was declared effective.
(b) For purposes of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus 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-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the undersigned
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Lake
Forest, State of Illinois on June 12, 1996.
PACKAGING RESOURCES INCORPORATED
By: /s/ HOWARD P. HOEPER
-----------------------------------
Howard P. Hoeper
CHAIRMAN, CHIEF EXECUTIVE OFFICER
AND PRESIDENT
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Howard P. Hoeper and Jerry J. Corirossi and each
of them (with full power to each of them to act alone), his true and lawful
attorney-in-fact and agents, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign any
or all amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their substitutes, may lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated:
<TABLE>
<C> <S> <C>
SIGNATURE TITLE DATE
- ------------------------------------------------------ ---------------------------------------- ---------------
/s/ HOWARD P. HOEPER
------------------------------------------- Chairman of the Board, Chief Executive June 12, 1996
Howard P. Hoeper Officer and President
/s/ JERRY J. CORIROSSI Vice President, Finance and
------------------------------------------- Administration (Principal Financial and June 12, 1996
Jerry J. Corirossi Accounting Officer)
/s/ DONALD L. MACLAUGHLIN
------------------------------------------- Director June 12, 1996
Donald L. MacLaughlin
/s/ ANTONY P. RESSLER
------------------------------------------- Director June 12, 1996
Antony P. Ressler
/s/ DAVID B. KAPLAN
------------------------------------------- Director June 12, 1996
David B. Kaplan
</TABLE>
II-5
<PAGE>
PACKAGING RESOURCES INCORPORATED
INDEX TO FINANCIAL STATEMENT SCHEDULE
<TABLE>
<S> <C>
Independent Auditors' Report.......................................................... S-2
Schedule II -- Valuation and qualifying accounts...................................... S-3
</TABLE>
S-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholder of
Packaging Resources Incorporated:
The audits referred to in our report dated March 20, 1996, included the
related financial statement schedule as of February 29, 1996, and for each of
the years in the three-year period ended February 29, 1996, included in the
Registration Statement. This financial statement schedule is the responsibility
of Packaging Resources Incorporated's management. Our responsibility is to
express an opinion on this financial statement schedule based on our audits. In
our opinion, the financial statement schedule, when considered in relation to
the basic financial statements taken as a whole, presents fairly in all material
respects the information set forth therein.
KPMG Peat Marwick LLP
Chicago, Illinois
March 20, 1996
S-2
<PAGE>
SCHEDULE II
PACKAGING RESOURCES INCORPORATED
VALUATION AND QUALIFYING ACCOUNTS
YEAR ENDED FEBRUARY 28, 1994 AND 1995 AND FEBRUARY 29, 1996
<TABLE>
<CAPTION>
ADDITIONS
------------------------
BALANCE AT CHARGED TO CHARGED TO
BEGINNING OF COSTS AND OTHER BALANCE AT
DESCRIPTION PERIOD EXPENSES ACCOUNTS DEDUCTIONS END OF PERIOD
- ---------------------------------------- ------------------ ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
1994
Allowance for Doubtful Accounts......... $ 68,000 $ 200,000 $ 3,000 $ (63,000) $ 208,000
1995
Allowance for Doubtful Accounts......... $ 208,000 $ 34,000 $ 23,000 $ (65,000) $ 200,000
1996
Allowance for Doubtful Accounts......... $ 200,000 $ -- $ 66,000 $ (110,000) $ 156,000
</TABLE>
S-3
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NO. EXHIBIT NUMBERED PAGE
- ----------- --------------------------------------------------------------------------------------- -----------------
<C> <S> <C>
2.1 Purchase Agreement dated May 10, 1996 between PRI and BT Securities Corporation and
Donaldson, Lufkin & Jenrette Securities Corporation
3.1 Amended and Restated Certificate of Incorporation of PRI
3.2 Amended and Restated By-Laws of PRI
4.1 Indenture dated as of May 17, 1996 between PRI and LaSalle National Bank, as Trustee,
relating to the Notes (including form of certificate to be delivered in connection
with transfers to institutional accredited investors)
4.2 Registration Rights Agreement dated as of May 17, 1996 between PRI and BT Securities
Corporation and Donaldson, Lufkin & Jenrette Securities Corporation
4.3 Credit Agreement dated as of May 17, 1996 among PRI, the lenders signatory thereto and
LaSalle National Bank, as administrative agent
5.1 ** Opinion of Winston & Strawn regarding the validity of the issuance of the Notes
10.1 Subordinated Promissory Note dated March 12, 1993, as amended March 12, 1995, issued to
Bemis Company, Inc. by PRI
10.2 Asset Purchase Agreement dated March 12, 1993 among PRI, Louisiana Plastics,
Incorporated and Bemis Company, Inc.
10.3 Asset and Stock Purchase Agreement dated December 15, 1993 among PRI, Miner Container
Printing, Inc. and the stockholders signatory thereto
10.4 Consulting Agreement dated December 15, 1993, as amended December 22, 1994 and April
12, 1995, between PRI and Kenneth W. Miner
10.5 Form of Management Agreement between HPH Industries, Ltd. and PRI
10.6 Agreement Apportioning the Consolidated Income Tax Liability of HPH Industries, Ltd.
Affiliated Group effective as of May 17, 1996 among HPH, Group and PRI
10.7 The Dannon Company, Inc. 4 oz. Sprinkl'ins Dannon Cup Mold and Cup Manufacture
Agreement between The Dannon Company, Inc. and PRI dated July 10, 1992, as amended
April 4, 1994 and February 6, 1995*
10.8 The Dannon Company, Inc. 6 oz. Blended Cup Mold and Cup Manufacture Agreement between
The Dannon Company, Inc. and PRI dated April 18, 1991, as amended July 10, 1992, April
4, 1994 and June 26, 1995*
10.9 The Dannon Company, Inc. 8 oz. Mold Manufacture and Cup Production Agreement between
The Dannon Company, Inc. and PRI dated December 9, 1991, as amended October 27, 1992,
April 4, 1994 and February 15, 1996*
10.10 The Dannon Company 8 oz. Mold Manufacture and Cup Production Agreement between The
Dannon Company, Inc. and PRI (as successor to Miner Container of Texas, Inc.) dated
January 15, 1992, as amended November 16, 1992*
10.11 The Restated Parts Supply Agreement dated July 1, 1992 between Yoplait U.S.A., a
Division of General Mills Products Corp., and PRI*
</TABLE>
EXHIBIT INDEX PAGE 1
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NO. EXHIBIT NUMBERED PAGE
- ----------- --------------------------------------------------------------------------------------- -----------------
<C> <S> <C>
10.12 The Cans Supply Agreement dated August 6, 1992 between Ross Laboratories, a Division of
Abbott Laboratories, and PRI*
10.13 Form of Indemnification Agreement between PRI and each of its directors and officers
10.14 Description of Annual Bonus Plan
12.1 Statements re Computation of Ratios
23.1 Consent of KPMG Peat Marwick LLP
23.2 Consent of Winston & Strawn (included in their opinion filed as Exhibit 5.1)
24.1 Powers of Attorney (included on the signature pages hereto)
25.1 Form T-1 for LaSalle National Bank, as Trustee
27.1 Financial Data Schedule
99.1 Form of Letter of Transmittal
99.2 Form of Notice of Guaranteed Delivery
99.3 Form of Letter to Securities Dealers, Commercial Banks, Trust Companies and Other
Nominees
99.4 Form of Letters to Clients
99.5 Guidelines for Certification of Taxpayer Identification Number on Form W-9
</TABLE>
- ------------------------
* The Registrant has omitted certain portions of this agreement for which the
Registrant seeks confidential treatment pursuant to Rule 406 of the
Securities Act of 1933, as amended; unredacted copies have been filed with
the Securities and Exchange Commission.
** To be filed by amendment.
EXHIBIT INDEX PAGE 2
<PAGE>
PACKAGING RESOURCES INCORPORATED
$110,000,000
11 5/8% SENIOR SECURED NOTES DUE 2003
PURCHASE AGREEMENT
May 10, 1996
BT SECURITIES CORPORATION
Donaldson, Lufkin & Jenrette
Securities Corporation
c/o BT Securities Corporation
Bankers Trust Plaza
130 Liberty Street
New York, New York 10006
Ladies and Gentlemen:
Packaging Resources Incorporated, a Delaware corporation (the
"COMPANY"), hereby confirms its agreement with you (the "INITIAL PURCHASERS"),
as set forth below. Capitalized terms used herein and not defined herein shall
have the respective meanings assigned to such terms in the Indenture (as defined
below).
1. THE SECURITIES. Subject to the terms and conditions herein
contained, the Company proposes to issue and sell to the Initial Purchasers
$110,000,000 aggregate principal amount of its 11 5/8% Senior Secured Notes due
2003 (the "NOTES"). The Notes are to be issued under an indenture (the
"INDENTURE") to be dated as of May 17, 1996 between the Company, as issuer, and
LaSalle National Bank, as trustee (the "TRUSTEE"). The Notes will be secured by
first priority security interests in the Collateral pursuant to the Security
Documents and the Indenture.
The Notes will be offered and sold to the Initial Purchasers without
being registered under the Securities Act of 1933, as amended (the "ACT"), in
reliance on exemptions therefrom.
In connection with the sale of the Notes, the Company has prepared a
preliminary offering memorandum dated April 18, 1996 (the "PRELIMINARY
MEMORANDUM"), and a final offering memorandum dated May 10, 1996 (the "FINAL
MEMORANDUM"; the Preliminary Memorandum and the Final
<PAGE>
Memorandum each herein being referred to as a "MEMORANDUM") setting forth or
including a description of the terms of the Notes, the terms of the offering
of the Notes, a description of the Company and any material developments
relating to the Company occurring after the date of the most recent
historical financial statements included therein.
The Initial Purchasers and their direct and indirect transferees of
the Notes will be entitled to the benefits of the Registration Rights Agreement,
substantially in the form attached hereto as EXHIBIT A (the "REGISTRATION RIGHTS
AGREEMENT"), pursuant to which the Company has agreed, among other things, to
file a registration statement (the "REGISTRATION STATEMENT") with the Securities
and Exchange Commission (the "COMMISSION") registering the Notes or the Exchange
Notes (as defined in the Registration Rights Agreement) under the Act.
2. REPRESENTATIONS AND WARRANTIES. The Company represents and
warrants to and agrees with each of the Initial Purchasers that:
(a) Neither the Preliminary Memorandum as of the date thereof nor the
Final Memorandum nor any amendment or supplement thereto as of the date
thereof and at all times subsequent thereto up to the Closing Date (as
defined in Section 3 below) contained or contains any untrue statement of a
material fact or omitted or omits to state a material fact necessary to
make the statements therein, in the light of the circumstances under which
they were made, not misleading, except that the representations and
warranties set forth in this Section 2(a) do not apply to statements or
omissions made in reliance upon and in conformity with information relating
to either of the Initial Purchasers furnished to the Company in writing by
the Initial Purchasers expressly for use in the Preliminary Memorandum, the
Final Memorandum or any amendment or supplement thereto.
(b) As of the Closing Date, the Company will have the authorized,
issued and outstanding capitalization set forth in the Final Memorandum;
all of the outstanding shares of capital stock of the Company have been,
and as of the Closing Date will be, duly authorized and validly issued, are
fully paid and nonassessable and were not issued in violation of any
preemptive or similar rights; except as set forth in the Final Memorandum,
there are no (i) options, warrants or other rights to purchase, (ii)
agreements or other obligations to issue or (iii) other rights to
-2-
<PAGE>
convert any obligation into, or exchange any securities for, shares of
capital stock of or ownership interests in the Company. Except as
disclosed in the Final Memorandum, the Company does not own, directly or
indirectly, any shares of capital stock or any other equity or long-term
debt securities or have any equity interest in any firm, partnership,
joint venture or other entity. The Company has no subsidiaries.
(c) The Company is duly incorporated, validly existing and in good
standing under the laws of the State of Delaware and has all requisite
corporate power and authority to own its properties and conduct its
business as now conducted and as described in the Final Memorandum; the
Company is duly qualified to do business as a foreign corporation in good
standing in all other jurisdictions where the ownership or leasing of its
properties or the conduct of its business requires such qualification,
except where the failure to be so qualified would not, individually or in
the aggregate, have a material adverse effect on the general affairs,
management, business, condition (financial or otherwise), prospects or
results of operations of the Company (any such event, a "MATERIAL ADVERSE
EFFECT").
(d) The Company has all requisite corporate power and authority to
execute, deliver and perform its obligations under the Notes, the Exchange
Notes and the Private Exchange Notes (as defined in the Registration Rights
Agreement). The Notes, when issued, will be in the form contemplated by
the Indenture. The Notes, the Exchange Notes and the Private Exchange
Notes have each been duly and validly authorized by the Company and, when
the Notes, the Exchange Notes and the Private Exchange Notes are executed
by the Company and authenticated by the Trustee in accordance with the
provisions of the Indenture and, in the case of the Notes, delivered to and
paid for by the Initial Purchasers in accordance with the terms of this
Agreement, the Notes, the Exchange Notes and the Private Exchange Notes
will constitute valid and legally binding obligations of the Company,
entitled to the benefits of the Indenture, and enforceable against the
Company in accordance with their terms, except that the enforcement thereof
may be subject to (i) bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect relating to creditors' rights
generally, and (ii) general principles of equity and the discretion of the
court before which any proceeding therefor may be brought.
-3-
<PAGE>
(e) The Company has all requisite corporate power and authority to
execute, deliver and perform its obligations under the Indenture and each
of the Security Documents. The Indenture meets the requirements for
qualification under the Trust Indenture Act of 1939, as amended (the
"TIA"). The Indenture and each of the Security Documents have been duly
and validly authorized by the Company and, when executed and delivered by
the Company (assuming, in the case of the Indenture, the due authorization,
execution and delivery by the Trustee), will each constitute a valid and
legally binding agreement of the Company, enforceable against the Company
in accordance with its terms, except that the enforcement thereof may be
subject to (i) bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights
generally and (ii) general principles of equity and the discretion of the
court before which any proceeding therefor may be brought.
(f) On the Closing Date, the Company will be the sole owner of and
have good, marketable and indefeasible title in fee simple to the real
property comprising part of the Collateral, except for that real property
comprising part of the Collateral in which the Company has good, and
marketable title to a valid leasehold estate, and good title to the balance
of the Collateral, after giving effect to the transactions contemplated by
the Security Documents, free and clear of all Liens, subject only to
Permitted Liens, and will have good right and lawful authority to mortgage,
pledge, assign and transfer the Collateral in accordance with the terms of
the relevant Security Documents.
(g) The granting of Liens on the Collateral by the Company pursuant to
the terms of the Security Documents on the Closing Date will create a valid
and perfected security interest in the Collateral securing payment of the
Notes and payment and performance of all of the Company's other obligations
under the Indenture and the Security Documents. On the Closing Date,
(i) except as permitted by the Indenture and the Security Documents, such
security interest will constitute a first, prior and exclusive Lien with
respect to the Collateral and (ii) no filings, registrations, recordings,
deliveries or other actions will be required in order to perfect the
security interest in such Collateral created under the Collateral
Documents, other than (A) filings,
-4-
<PAGE>
recordings, deliveries or other actions which, on or before the Closing
Date, will have been made by or on behalf of the Company and (B)
recordation of the Security Documents in the jurisdictions in which the
Collateral subject thereto is located.
(h) The Company has all requisite corporate power and authority to
execute, deliver and perform its obligations under the Registration Rights
Agreement. The Registration Rights Agreement has been duly and validly
authorized by the Company and, when executed and delivered by the Company,
will constitute a valid and legally binding agreement of the Company
enforceable against the Company in accordance with its terms, except that
(A) the enforcement thereof may be subject to (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally and (ii) general principles of
equity and the discretion of the court before which any proceeding therefor
may be brought and (B) any rights to indemnity or contribution thereunder
may be limited by federal and state securities laws and public policy
considerations.
(i) The Company has all requisite corporate power and authority to
execute, deliver and perform its obligations under this Agreement and to
consummate the transactions contemplated hereby. This Agreement and the
consummation by the Company of the transactions contemplated hereby have
been duly and validly authorized by the Company. This Agreement has been
duly executed and delivered by the Company.
(j) No consent, approval, authorization or order of any court or
governmental agency or body, or third party, is required for the issuance
and sale by the Company of the Notes to the Initial Purchasers, the
granting of Liens on the Collateral pursuant to the Security Documents or
the consummation by the Company of the other transactions contemplated
hereby, except such as have been obtained and such as may be required under
state securities or "Blue Sky" laws in connection with the purchase and
resale of the Notes by the Initial Purchasers. The Company (i) is not in
violation of its certificate of incorporation or bylaws (or similar
organizational document), (ii) is not in breach or violation of any
statute, judgment, decree, order, rule or regulation applicable to it or
any of its properties or assets, except for any such breach or violation
which would not, individually or in the aggregate, have a Material Adverse
Effect, and (iii) is
-5-
<PAGE>
not in breach of or default under (nor has any event occurred which, with
notice or passage of time or both, would constitute a default under) or
in violation of any of the terms or provisions of any indenture, mortgage,
deed of trust, loan agreement, note, lease, license, franchise agreement,
permit, certificate, contract or other agreement or instrument to which it
is a party or to which it or its properties or assets is subject
(collectively, "Contracts"), except for any such breach, default,
violation or event which would not, individually or in the aggregate, have
a Material Adverse Effect.
(k) The execution, delivery and performance by the Company of this
Agreement, the Indenture, the Security Documents, and the Registration
Rights Agreement and the consummation by the Company of the transactions
contemplated hereby and thereby including, without limitation, consummation
of all Related Transactions (as defined below) (including, without
limitation, the issuance and sale of the Notes to the Initial Purchasers
and the granting of Liens on the Collateral pursuant to the Security
Documents) will not conflict with or constitute or result in a breach of or
a default under (or an event which with notice or passage of time or both
would constitute a default under) or violation of any of (i) the terms or
provisions of any Contract, except for any such conflict, breach,
violation, default or event which would not, individually or in the
aggregate, have a Material Adverse Effect, (ii) the certificate of
incorporation or bylaws (or similar organizational document) of the
Company, or (iii) (assuming compliance with all applicable state securities
or "Blue Sky" laws and assuming the accuracy of the representations and
warranties of the Initial Purchasers in Section 8 hereof) any statute,
judgment, decree, order, rule or regulation applicable to the Company or
any of its properties or assets, except for any such conflict, breach or
violation which would not, individually or in the aggregate, have a
Material Adverse Effect.
(l) The audited financial statements of the Company included in the
Final Memorandum present fairly in all material respects the financial
position, results of operations and cash flows of the Company at the dates
and for the periods to which they relate and have been prepared in
accordance with generally accepted accounting principles applied on a
consistent basis, except as otherwise stated therein. The summary and
selected financial and statistical data in the
-6-
<PAGE>
Final Memorandum present fairly in all material respects the information
shown therein and have been prepared and compiled on a basis consistent
with the audited financial statements included therein, except as
otherwise stated therein. KPMG Peat Marwick LLP (the "INDEPENDENT
ACCOUNTANTS") is an independent public accounting firm within the meaning
of the Act and the rules and regulations promulgated thereunder.
(m) Any pro forma financial statements (including the notes thereto)
and the other pro forma financial information included in the Final
Memorandum have been properly computed on the bases described therein; the
assumptions used in the preparation of any pro forma financial data and
other pro forma financial information included in the Final Memorandum are
reasonable and the adjustments used therein are appropriate to give effect
to the transactions or circumstances referred to therein.
(n) There is not pending or, to the knowledge of the Company,
threatened any action, suit, proceeding, inquiry or investigation to which
the Company is a party, or to which the property or assets of the Company
are subject, before or brought by any court, arbitrator or governmental
agency or body which, if determined adversely to the Company, would,
individually or in the aggregate, have a Material Adverse Effect or which
seeks to restrain, enjoin, prevent the consummation of or otherwise
challenge the issuance or sale of the Notes to be sold hereunder or the
consummation of the other transactions described in the Final Memorandum.
(o) The Company possesses all 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, all self-regulatory organizations and all courts
and other tribunals, including, without limitation, those required by the
United States Food and Drug Administration (the "FDA"), the United States
Department of Agriculture (the "USDA") and the Occupational Safety and
Health Administration ("OSHA"), presently required or necessary to own or
lease, as the case may be, and to operate its properties and to carry on
its businesses as now or proposed to be conducted as set forth in the Final
Memorandum ("PERMITS"), except where the failure to obtain such Permits
would not, individually or in the aggregate, have a Material Adverse
Effect; the
-7-
<PAGE>
Company has fulfilled and performed all of its obligations with respect
to such Permits and no event has occurred which allows, or after notice
or lapse of time would allow, revocation or termination thereof or
results in any other material impairment of the rights of the holder of any
such Permit; and the Company has not received any notice of any proceeding
relating to revocation or modification of any such Permit, except as
described in the Final Memorandum and except where such revocation or
modification would not, individually or in the aggregate, have a Material
Adverse Effect.
(p) Since the date of the most recent financial statements appearing
in the Final Memorandum, except as described therein, (i) the Company has
not incurred any liabilities or obligations, direct or contingent, or
entered into or agreed to enter into any transactions or contracts (written
or oral) not in the ordinary course of business which liabilities,
obligations, transactions or contracts would, individually or in the
aggregate, be material to the general affairs, management, business,
condition (financial or otherwise), prospects or results of operations of
the Company, (ii) the Company has not purchased any of its outstanding
capital stock, nor declared, paid or otherwise made any dividend or
distribution of any kind on its capital stock and (iii) there shall not
have been any change in the capital stock or long-term indebtedness of the
Company.
(q) The Company has filed, or joined in a filing of, all necessary
federal, state and foreign income and franchise tax returns, except where
the failure to so file such returns would not, individually or in the
aggregate, have a Material Adverse Effect, and all taxes shown as due
thereon have been paid; and there is no tax deficiency that has been
asserted against the Company or any other member of an affiliated group of
which the Company is a member that would have, individually or in the
aggregate, a Material Adverse Effect.
(r) The statistical and market-related data included in the Final
Memorandum are based on or derived from sources which the Company believes
to be reliable and accurate.
(s) Neither the Company nor any agent acting on behalf of the Company
has taken or will take any action that might cause this Agreement or the
sale of the Notes to violate Regulation G, T, U or X of the Board
-8-
<PAGE>
of Governors of the Federal Reserve System, in each case as in effect, or
as the same may hereafter be in effect, on the Closing Date.
(t) The Company has good, marketable and indefeasible title to all
real property and good title to all personal property described in the
Final Memorandum as being owned by it and good and marketable title to a
valid leasehold estate in the real and personal property described in the
Final Memorandum as being leased by it, in each case free and clear of all
liens, charges, encumbrances or restrictions, except as described in the
Final Memorandum or to the extent the failure to have such title or the
existence of such liens, charges, encumbrances or restrictions would not,
individually or in the aggregate, have a Material Adverse Effect. All
contracts and agreements to which the Company is a party or by which it is
bound are valid and enforceable against the Company, and, to the best of
the Company's knowledge, are valid and enforceable against the other party
or parties thereto and are in full force and effect with only such
exceptions as would not, individually or in the aggregate, have a Material
Adverse Effect. The Company owns or possesses 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 it as described in the Final Memorandum, and the Company
has not received any notice of infringement of or conflict with (or knows
of any such infringement of or conflict with) asserted 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.
(u) There are no legal or governmental proceedings involving or
affecting the Company or any of its properties or assets which would be
required to be described in a prospectus pursuant to the Act that are not
described in the Final Memorandum, nor are there any material contracts or
other documents which would be required to be described in a prospectus
pursuant to the Act that are not described in the Final Memorandum.
(v) Except as would not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect (A) the Company is in
compliance with and not subject to liability under applicable Environmental
Laws (as defined below), (B) the Company
-9-
<PAGE>
has made all filings and provided all notices required under applicable
Environmental Law, and has been and is in compliance with all Permits
required under any applicable Environmental Laws and each of them is in
full force and effect, (C) there is no civil, criminal or administrative
action, hearing, proceeding,investigation, claim, notice of violation,
demand letter or request for information pending or, to the knowledge of
the Company, threatened against the Company under applicable Environmental
Laws, (D) no lien, encumbrance or restriction has been recorded under
applicable Environmental Laws with respect to any assets or property owned,
operated or leased by the Company, (E) the Company has not received notice
that it has been identified as a potentially responsible party under the
Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended ("CERCLA") or any comparable state law, (F) no property
or facility of the Company is currently (i) listed or proposed for listing
on the National Priorities List under CERCLA or is (ii) listed in the
Comprehensive Environmental Response, Compensation, Liability Information
System List promulgated pursuant to CERCLA, or on any comparable list
maintained by any state governmental authority.
For purposes of this Agreement, "Environmental Laws" means all
applicable federal, state and local laws or regulations, codes, orders,
decrees, judgments or injunctions issued, promulgated, approved or entered
thereunder, relating to pollution or protection of public or employee
health and safety or the environment, including, without limitation, laws
relating to (i) emissions, discharges, releases or threatened releases of
hazardous materials into the environment (including, without limitation,
ambient air, surface water, ground water, land surface or subsurface
strata), (ii) the manufacture, processing, distribution, use, generation,
treatment, storage, disposal, transport or handling of hazardous materials,
and (iii) underground and above ground storage tanks and related piping,
and discharges, releases or threatened releases therefrom.
(w) The Company is in compliance with all provisions of
Section 517.075 of Florida Statutes 1987, as amended.
(x) The Company carries insurance in such amounts and covering such
risks as is customary in its industry
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<PAGE>
for the conduct of its business and the value of its properties.
(y) The Company has (i) no material liability for any prohibited
transaction and (ii) no liability for any funding deficiency or any
complete or partial withdrawal liability with respect to any pension,
profit sharing or other plan which is subject to the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), to which the Company
makes or ever has made a contribution and in which any employee of the
Company is or has ever been a participant. With respect to such plans, the
Company is in compliance in all material respects with all applicable
provisions of ERISA.
(z) The Company (i) makes and keeps accurate books and records and
(ii) maintains internal accounting controls which provide reasonable
assurance that (A) transactions are executed in accordance with
management's authorization, (B) transactions are recorded as necessary to
permit preparation of its financial statements and to maintain
accountability for its assets, (C) access to its assets is permitted only
in accordance with management's authorization and (D) the reported
accountability for its assets is compared with existing assets at
reasonable intervals.
(aa) The Company will not be an "investment company" or "promoter" or
"principal underwriter" for an "investment company," as such terms are
defined in the Investment Company Act of 1940, as amended, and the rules
and regulations thereunder.
(bb) The Notes, the Indenture, the Security Documents and the
Registration Rights Agreement will conform in all material respects to the
descriptions thereof in the Final Memorandum.
(cc) The Company will, on or before the Closing Date, deliver to the
Initial Purchasers true and correct copies of the Security Documents in
form and substance satisfactory to the Initial Purchasers. The
transactions contemplated by the Security Documents to occur on or before
the Closing Date will be consummated on or prior to such date.
(dd) No holder of securities of the Company will be entitled to have
such securities registered under the registration statements required to be
filed by the
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<PAGE>
Company pursuant to the Registration Rights Agreement other than as
expressly permitted thereby.
(ee) Immediately after the consummation of the transactions
contemplated by this Agreement, including the Financing Plan (as defined in
the Final Memorandum), the fair value and present fair saleable value of
the assets of the Company will exceed the sum of its stated liabilities and
identified contingent liabilities; the Company is not, nor will it be,
after giving effect to the execution, delivery and performance of this
Agreement, and the consummation of the transactions contemplated hereby,
including the Financing Plan (as defined in the Final Memorandum), (a) left
with unreasonably small capital with which to carry on its business as it
is proposed to be conducted, (b) unable to pay its debts (contingent or
otherwise) as they mature or (c) otherwise insolvent.
(ff) Neither the Company nor any of its respective Affiliates (as
defined in Rule 501(b) of Regulation D under the Act) has directly, or
through any agent, (i) sold, offered for sale, solicited offers to buy or
otherwise negotiated in respect of, any "security" (as defined in the Act)
which is or could be integrated with the sale of the Notes in a manner that
would require the registration under the Act of the Notes or (ii) engaged
in any form of general solicitation or general advertising (as those terms
are used in Regulation D under the Act) in connection with the offering of
the Notes or in any manner involving a public offering within the meaning
of Section 4(2) of the Act. Assuming the accuracy of the representations
and warranties of the Initial Purchasers in Section 8 hereof, it is not
necessary in connection with the offer, sale and delivery of the Notes to
the Initial Purchasers in the manner contemplated by this Agreement to
register any of the Notes under the Act or to qualify the Indenture under
the TIA.
(gg) No securities of the Company are of the same class (within the
meaning of Rule 144A under the Act) as the Notes and listed on a national
securities exchange registered under Section 6 of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), or quoted in a U.S. automated
inter-dealer quotation system.
(hh) The Company has not taken, and will not take, directly or
indirectly, any action designed to, or that might be reasonably expected
to, cause or result in
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<PAGE>
stabilization or manipulation of the price of the Notes.
(ii) Except as disclosed in the Final Memorandum, there are no
business relationships or related party transactions that would be required
to be disclosed in a prospectus under the Act by Item 404 of Regulation S-K
of the Commission.
(jj) The Company has delivered to the Initial Purchasers true and
correct copies of the Credit Agreement to be entered into by the Company,
on the one hand, and LaSalle National Bank and Bankers Trust Company, on
the other hand (the "Senior Credit Facility"), and the Supplemental
Indenture (the "12.5% Supplemental Indenture") to be entered into by Group
and Harris Bank and Trust Company, as Trustee, in connection with the
Group's 12.5% Senior Subordinated Notes due June 30, 2003 (the "12.5%
Notes"), and as of the Closing Date there have been no amendments,
alterations, modifications or waivers thereto or in the exhibits or
schedules thereto. After giving effect to the transactions contemplated
hereby and by the Final Memorandum, no condition exists that would
constitute a Default or an Event of Default under the Indenture, the 12.5%
Supplemental Indenture, the Senior Credit Facility or any other
Indebtedness (as defined in the Indenture) of the Company or the Group.
(kk) Neither the Company nor any of its Affiliates or any person
acting on its behalf (other than the Initial Purchasers) has engaged in any
directed selling efforts (as that term is defined in Regulation S under the
Act ("Regulation S")) with respect to the Notes; the Company and its
Affiliates and any person acting on its behalf (other than the Initial
Purchasers) have complied with the offering restrictions requirement of
Regulation S.
Any certificate signed by any officer of the Company and delivered to
any Initial Purchaser or to counsel for the Initial Purchasers shall be deemed a
representation and warranty by the Company to each Initial Purchaser as to the
matters covered thereby.
3. PURCHASE, SALE AND DELIVERY OF THE NOTES. On the basis of the
representations, warranties, agreements and covenants herein contained and
subject to the terms and conditions herein set forth, the Company agrees to
issue and sell to the Initial Purchasers, and the Initial Purchasers, acting
severally and not jointly, agree to purchase the
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Notes in the respective amounts set forth on SCHEDULE 1 hereto from the
Company at 97.0% of their principal amount. One or more certificates in
definitive form for the Notes that the Initial Purchasers have agreed to
purchase hereunder, and in such denomination or denominations and registered
in such name or names as the Initial Purchasers request upon notice to the
Company at least 36 hours prior to the Closing Date, shall be delivered by or
on behalf of the Company to the Initial Purchasers, against payment by or on
behalf of the Initial Purchasers of the purchase price therefor by wire
transfer (same day funds), net of the overnight cost of such funds, to such
account or accounts as the Company shall specify prior to the Closing Date,
or by such means as the parties hereto shall agree prior to the Closing Date.
The Notes will (except in the case of Notes to be acquired by Accredited
Investors, as hereinafter defined) be represented by one or more definitive
global Securities in book-entry form which will be deposited by or on behalf
of the Company with The Depository Trust Company or its designated custodian.
Such delivery of and payment for the Notes shall be made at the offices of
Winston & Strawn, 35 W. Wacker Drive, Chicago, Illinois 60601, at 8:00 A.M.,
Chicago time, on May 17, 1996, or at such other place, time or date as the
Initial Purchasers, on the one hand, and the Company, on the other hand, may
agree upon, such time and date of delivery against payment being herein
referred to as the "CLOSING DATE." For purposes of Rule 15c6-1 under the
Exchange Act, the Closing Date shall be the date for payment of funds and
delivery of securities for all the Notes sold pursuant to the offering of the
Notes. The Company will make such certificate or certificates for the Notes
available for checking and packaging by the Initial Purchasers at the offices
of BT Securities Corporation in New York, New York, or at such other place as
BT Securities Corporation may designate, at least 24 hours prior to the
Closing Date.
4. OFFERING BY THE INITIAL PURCHASERS. The Initial Purchasers
propose to make an offering of the Notes at the price and upon the terms set
forth in the Final Memorandum, as soon as practicable after this Agreement is
entered into and as in the judgment of the Initial Purchasers is advisable.
5. COVENANTS OF THE COMPANY. The Company covenants and agrees with
each of the Initial Purchasers that:
(a) The Company will not amend or supplement the Final Memorandum or
any amendment or supplement thereto of which the Initial Purchasers shall
not previously
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have been advised and furnished a copy for a reasonable period of time
prior to the proposed amendment or supplement and as to which the Initial
Purchasers shall not have given their consent. The Company will promptly,
upon the reasonable request of the Initial Purchasers or counsel for the
Initial Purchasers, make any amendments or supplements to the Preliminary
Memorandum or the Final Memorandum that may be necessary or advisable in
connection with the resale of the Notes by the Initial Purchasers.
(b) The Company will cooperate with the Initial Purchasers in
arranging for the qualification of the Notes for offering and sale under
the securities or "Blue Sky" laws of which jurisdictions as the Initial
Purchasers may designate and will continue such qualifications in effect
for as long as may be necessary to complete the resale of the Notes;
PROVIDED, HOWEVER, that in connection therewith, the Company shall not be
required to qualify as a foreign corporation or to execute a general
consent to service of process in any jurisdiction or subject itself to
taxation in excess of a nominal dollar amount in any such jurisdiction
where it is not then so subject.
(c) If, at any time prior to the completion of the distribution by
the Initial Purchasers of the Notes or the Private Exchange Notes, any
event occurs or information becomes known as a result of which the Final
Memorandum as then amended or supplemented would include any untrue
statement of a material fact, or omit to state a material fact necessary to
make the statements therein, in the light of the circumstances under which
they were made, not misleading, or if for any other reason it is necessary
at any time to amend or supplement the Final Memorandum to comply with
applicable law, the Company will promptly notify the Initial Purchasers
thereof and will prepare, at its expense, an amendment or supplement to the
Final Memorandum that corrects such statement or omission or effects such
compliance.
(d) The Company will, without charge, provide to the Initial
Purchasers and to counsel for the Initial Purchasers as many copies of the
Preliminary Memorandum and the Final Memorandum or any amendment or
supplement thereto as the Initial Purchasers may reasonably request.
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<PAGE>
(e) The Company will apply the net proceeds from the sale of the
Notes as set forth under "Use of Proceeds" in the Final Memorandum.
(f) For so long as any of the Notes remain outstanding, the Company
will furnish to the Initial Purchasers copies of all reports and other
communications (financial or otherwise) furnished by the Company to the
Trustee or to the holders of the Notes and, as soon as available, copies of
any reports or financial statements furnished to or filed by the Company
with the Commission or any national securities exchange on which any class
of securities of the Company may be listed.
(g) Prior to the Closing Date, the Company will furnish to the
Initial Purchasers, as soon as they have been prepared, a copy of any
unaudited interim financial statements of the Company for any period
subsequent to the period covered by the most recent financial statements
appearing in the Final Memorandum.
(h) Neither the Company nor any of its Affiliates will sell, offer
for sale or solicit offers to buy or otherwise negotiate in respect of any
"security" (as defined in the Act) which could be integrated with the sale
of the Notes in a manner which would require the registration under the Act
of the Notes.
(i) The Company will not engage in any form of general solicitation
or general advertising (as those terms are used in Regulation D under the
Act) in connection with the offering of the Notes or in any manner
involving a public offering within the meaning of Section 4(2) of the Act.
(j) For so long as any of the Notes remain outstanding, the Company
will make available at its expense, upon request, to any holder of such
Notes and any prospective purchasers thereof the information specified in
Rule 144A(d)(4) under the Act, unless the Company is then subject to
Section 13 or 15(d) of the Exchange Act.
(k) The Company will use its best efforts to (i) permit the Notes to
be designated PORTAL securities in accordance with the rules and
regulations adopted by the NASD relating to trading in the Private
Offerings, Resales and Trading through Automated Linkages market (the
"PORTAL MARKET") and (ii) permit the Notes to be
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eligible for clearance and settlement through The Depository Trust Company.
(l) In connection with Notes offered and sold in an offshore
transaction (as defined in Regulation S) the Company will not register any
transfer of such Notes not made in accordance with the provisions of
Regulation S and will not, except in accordance with the provisions of
Regulation S, if applicable, issue any such Notes in the form of definitive
securities.
6. EXPENSES. The Company agrees to pay all costs and expenses
incident to the performance of its obligations under this Agreement, whether or
not the transactions contemplated herein are consummated or this Agreement is
terminated pursuant to Section 11 hereof, including all costs and expenses
incident to (i) the printing, word processing or other production of documents
with respect to the transactions contemplated hereby, including any costs of
printing the Preliminary Memorandum and the Final Memorandum and any amendment
or supplement thereto, and any "Blue Sky" memoranda, (ii) all arrangements
relating to the delivery to the Initial Purchasers of copies of the foregoing
documents, (iii) the fees and disbursements of the counsel, the accountants and
any other experts or advisors retained by the Company, (iv) preparation
(including printing), issuance and delivery to the Initial Purchasers of the
Notes, (v) the qualification of the Notes under state securities and "Blue Sky"
laws, including filing fees and fees and disbursements of counsel for the
Initial Purchasers relating thereto, (vi) its expenses in connection with any
meetings with prospective investors in the Notes, (vii) fees and expenses of the
Trustee including fees and expenses of counsel, (viii) all expenses and listing
fees incurred in connection with the application for quotation of the Notes on
the PORTAL Market, (ix) the costs and expenses of creating and perfecting
security interests in any Collateral pursuant to the Security Documents,
including, but not limited to, filing and recording fees and expenses, fees and
expenses of local counsel for the Company, and fees and expenses of the Trustee,
(x) all costs, premiums and expenses incurred in connection with the purchase of
title insurance policies or commitments in respect of any Collateral, (xi) all
costs and expenses incurred in connection with any survey or appraisal prepared
in respect of any Collateral and (xii) any fees charged by investment rating
agencies for the rating of the Notes. If the sale of the Notes provided for
herein is not consummated because any condition to the obligations of the
Initial Purchasers set forth in Section 7 hereof is not satisfied, because this
Agreement is terminated or because of any failure, refusal
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<PAGE>
or inability on the part of the Company to perform all obligations and
satisfy all conditions on their part to be performed or satisfied hereunder
(other than solely by reason of a default by the Initial Purchasers of their
obligations hereunder after all conditions hereunder have been satisfied in
accordance herewith), the Company agrees to promptly reimburse the Initial
Purchasers upon demand for all out-of-pocket expenses (including fees,
disbursements and charges of Sullivan & Cromwell, counsel for the Initial
Purchasers) that shall have been incurred by the Initial Purchasers in
connection with the proposed purchase and sale of the Notes.
7. CONDITIONS OF THE INITIAL PURCHASERS' OBLIGATIONS. The
obligation of the Initial Purchasers to purchase and pay for the Notes shall,
in their sole discretion, be subject to the satisfaction or waiver of the
following conditions on or prior to the Closing Date:
(a) On the Closing Date, the Initial Purchasers shall have received
an opinion, dated as of the Closing Date and addressed to the Initial
Purchasers, of Winston & Strawn, counsel for the Company, in form and
substance satisfactory to counsel for the Initial Purchasers, to the effect
that:
(i) The Company is duly incorporated, validly existing and
in good standing under the laws of its jurisdiction of
incorporation and has all requisite corporate power and authority
to own its properties and to conduct its business as described in
the Final Memorandum. The Company is duly qualified to do
business as a foreign corporation in good standing in the
jurisdictions specified in such opinion (which jurisdictions
shall be reasonably satisfactory to the Initial Purchasers).
(ii) The Company has the authorized, issued and outstanding
historical capitalization set forth in the Final Memorandum; all
of the outstanding shares of capital stock of the Company have
been duly authorized and validly issued, are fully paid and
nonassessable and to the knowledge of such counsel were not
issued in violation of any preemptive or similar rights; all of
the outstanding shares of capital stock of the Company are owned
of record by Group.
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<PAGE>
(iii) Except as set forth in the Final Memorandum, to such
counsel's knowledge (A) no options, warrants or other rights to
purchase from the Company shares of capital stock or ownership
interests in the Company are outstanding, (B) no agreements or
other obligations to issue, or other rights to convert, any
obligation into, or exchange any securities for, shares of
capital stock or ownership interests in the Company are
outstanding and (C) no holder of securities of the Company is
entitled to have such securities registered under a registration
statement filed by the Company pursuant to the Registration
Rights Agreement.
(iv) The Company has all requisite corporate power and
authority to execute, deliver and perform its obligations under
each of the Indenture, the Security Documents, the Notes, the
Exchange Notes and the Private Exchange Notes; the Indenture
meets the requirements for qualification under the TIA; the
Indenture and the Security Documents and the granting of Liens on
the Collateral pursuant to the Security Documents have been duly
and validly authorized by the Company and, when the Indenture and
the Security Documents are duly executed and delivered by the
Company (in the case of the Indenture, assuming the due
authorization, execution and delivery thereof by the Trustee),
the Indenture and the Security Documents will constitute the
valid and legally binding agreements of the Company, enforceable
against the Company in accordance with their terms, except that
the enforcement thereof may be subject to (i) bankruptcy,
insolvency, reorganization, moratorium or other similar laws now
or hereafter in effect relating to creditors' rights generally
and (ii) general principles of equity and the discretion of the
court before which any proceeding therefor may be brought.
(v) The Notes are in the form contemplated by the Indenture.
The Notes have each been duly and validly authorized by the
Company and, when duly executed and delivered by the Company and
paid for by the Initial Purchasers in accordance with the
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<PAGE>
terms of this Agreement (assuming the due authorization, execution and
delivery of the Indenture by the Trustee and due authentication
and delivery of the Notes by the Trustee in accordance with the
Indenture), will constitute the valid and legally binding
obligations of the Company, entitled to the benefits of the
Indenture, and enforceable against the Company in accordance with
their terms, except that the enforcement thereof may be subject
to (i) bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect relating to
creditors' rights generally and (ii) general principles of equity
and the discretion of the court before which any proceeding
therefor may be brought.
(vi) The Exchange Notes and the Private Exchange Notes have
been duly and validly authorized by the Company, and when the
Exchange Notes and the Private Exchange Notes have been duly
executed and delivered by the Company in accordance with the
terms of the Registration Rights Agreement and the Indenture
(assuming the due authorization, execution and delivery of the
Indenture by the Trustee and due authentication and delivery of
the Exchange Notes and the Private Exchange Notes by the Trustee
in accordance with the Indenture), will constitute the valid and
legally binding obligations of the Company, entitled to the
benefits of the Indenture, and enforceable against the Company in
accordance with their terms, except that the enforcement thereof
may be subject to (i) bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally and (ii) general
principles of equity and the discretion of the court before which
any proceeding therefor may be brought.
(vii) The Company has all requisite corporate power and
authority to execute, deliver and perform its obligations under
the Registration Rights Agreement; the Registration Rights
Agreement has been duly and validly authorized by the Company
and, when
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<PAGE>
duly executed and delivered by the Company (assuming due authorization,
execution and delivery thereof by the Initial Purchasers), will
constitute the valid and legally binding agreement of the Company,
enforceable against the Company in accordance with its terms, except
that (A) the enforcement thereof may be subject to (i) bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally and
(ii) general principles of equity and the discretion of the court
before which any proceeding therefor may be brought and (B) any
rights to indemnity or contribution thereunder may be limited by
federal and state securities laws and public policy
considerations.
(viii) The Company has all requisite corporate power and
authority to execute, deliver and perform its obligations under
this Agreement and to consummate the transactions contemplated
hereby; this Agreement and the consummation by the Company of the
transactions contemplated hereby have been duly and validly
authorized by the Company, and this Agreement has been duly
executed and delivered by the Company.
(ix) The Indenture, the Notes and the Registration Rights
Agreement conform in all material respects to the descriptions
thereof contained in the Final Memorandum.
(x) The Company is not (i) in violation of its certificate
of incorporation or bylaws (or similar organizational document),
(ii) to the knowledge such counsel, in breach or violation of any
statute, judgment, decree, order, rule or regulation applicable
to it or any of its properties or assets, except for any such
breach or violation which would not, individually or in the
aggregate, have a Material Adverse Effect, or (iii) to such
counsel's knowledge in breach or default under (nor has any event
occurred which, with notice or passage of time or both, would
constitute a default under) or in violation of any of the terms
or provisions of any Contract known to such counsel which would
be required to be filed in a registration
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<PAGE>
statement pursuant to the Act, except for any such breach, default,
violation or event which would not, individually or in the aggregate,
have a Material Adverse Effect.
(xi) The execution, delivery and performance of this
Agreement, the Indenture, the Security Documents and the
Registration Rights Agreement and the consummation of the
transactions contemplated hereby and thereby (including, without
limitation, the issuance and sale of the Notes to the Initial
Purchasers) will not conflict with or constitute or result in a
breach or a default under (or an event which with notice or
passage of time or both would constitute a default under) or
violation of any of (i) the terms or provisions of any Contract
known to such counsel which would be required to be filed in a
registration statement pursuant to the Act, except for any such
conflict, breach, violation, default or event which would not,
individually or in the aggregate, have a Material Adverse Effect,
(ii) the certificate of incorporation or bylaws (or similar
organizational document) of the Company, or (iii) (assuming
compliance with all applicable state securities or "Blue Sky"
laws and assuming the accuracy of the representations and
warranties of the Initial Purchasers in Section 8 hereof) any
statute, judgment, decree, order, rule or regulation known to
such counsel to be applicable to the Company or any of its
properties or assets, except for any such conflict, breach or
violation which would not, individually or in the aggregate, have
a Material Adverse Effect.
(xii) No consent, approval, authorization or order of any
governmental authority is required for the issuance and sale by
the Company of the Notes to the Initial Purchasers, the granting
of Liens on the Collateral pursuant to the Security Documents or
the consummation by the Company of the other transactions
contemplated hereby, except such as may be required under Blue
Sky laws, as to which such counsel need express no opinion, and
those which have previously been obtained.
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<PAGE>
(xiii) To the best of such counsel's knowledge, the
Company owns or possesses 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 Final
Memorandum, and the Company has not received any notice of
infringement of or conflict with asserted rights of others with
respect to any patents, trademarks, service marks, trade names,
copyrights or know-how which, could reasonably be likely to have
a Material Adverse Effect.
(xiv) To the knowledge of such counsel, there are no
legal or governmental proceedings involving or affecting the
Company or any of its properties or assets which would be
required to be described in a prospectus pursuant to the Act that
are not described in the Final Memorandum or which seek to
restrain, enjoin, prevent the consummation of or otherwise
challenge the issuance or sale of the Notes to be sold hereunder
or the consummation of the other transactions described in the
Final Memorandum under the caption "Use of Proceeds", nor are
there any material contracts or other documents which would be
required to be described in a prospectus pursuant to the Act that
are not described in the Final Memorandum.
(xv) The Company is not, nor immediately after the sale of
the Notes to be sold hereunder and the application of the
proceeds from such sale (as described in the Final Memorandum
under the caption "Use of Proceeds") will be, an "investment
company" as such term is defined in the Investment Company Act of
1940, as amended.
(xvi) No registration under the Act of the Notes is required
in connection with the sale of the Notes to the Initial
Purchasers as contemplated by this Agreement and the Final
Memorandum or in connection with the initial resale of the Notes
by the Initial Purchasers in accordance with Section 8 of this
Agreement, and prior to the commencement of
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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) (A) that
the purchasers who buy such Notes in the initial resale thereof
are qualified institutional buyers as defined in Rule 144A
promulgated under the Act ("QIBs") or accredited investors as
defined in Rule 501(a) (1), (2), (3) or (7) promulgated under the
Act ("Accredited Investors") or (B) that the offer or sale of the
Notes is made in an offshore transaction as defined in
Regulation S, (ii) the accuracy of the Initial Purchasers'
representations in Section 8 and those of the Company contained
in this Agreement regarding the absence of a general solicitation
in connection with the sale of such Notes to the Initial
Purchasers and the initial resale thereof and (iii) the due
performance by the Initial Purchasers of the agreements set forth
in Section 8 hereof.
(xvii) Neither the consummation of the transactions
contemplated by this Agreement nor the sale, issuance, execution
or delivery of the Notes will violate Regulation G, T, U or X of
the Board of Governors of the Federal Reserve System.
At the time the foregoing opinion is delivered, Winston & Strawn shall
additionally state that it has participated in conferences with officers and
other representatives of the Company, representatives of the independent public
accountants for the Company, representatives of the Initial Purchasers and
counsel for the Initial Purchasers, at which conferences the contents of the
Final Memorandum and related matters were discussed, and, although it has not
independently verified and is not passing upon and assumes no responsibility for
the accuracy, completeness or fairness of the statements contained in the Final
Memorandum (except to the extent specified in subsection 7(a)(ix)), no facts
have come to its attention which lead it to believe that the Final Memorandum,
on the date thereof or at the Closing Date, contained an untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements contained therein, in light of the
circumstances
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under which they were made, not misleading (it being understood that such
firm need express no opinion with respect to the financial statements and
related notes thereto and the other financial, statistical and accounting
data included in the Final Memorandum). The opinion of Winston & Strawn
described in this Section shall be rendered to the Initial Purchasers at the
request of the Company and shall so state therein.
References to the Final Memorandum in this subsection (a) shall
include any amendment or supplement thereto prepared in accordance with the
provisions of this Agreement at the Closing Date.
(b) On the Closing Date, the Initial Purchasers shall have received
an opinion, in form and substance satisfactory to the Initial Purchasers,
dated as of the Closing Date and addressed to the Initial Purchasers, of
Sullivan & Cromwell, counsel for the Initial Purchasers, with respect to
certain legal matters relating to this Agreement and such other related
matters as the Initial Purchasers may reasonably require. In rendering
such opinion, Sullivan & Cromwell shall have received and may rely upon
such certificates and other documents and information as it may reasonably
request to pass upon such matters.
(c) The Initial Purchasers shall have received from the Independent
Accountants a comfort letter or letters dated the date hereof and the
Closing Date, in form and substance satisfactory to counsel for the Initial
Purchasers.
(d) On the Closing Date, the Initial Purchasers shall have received
opinions, each dated as of the Closing Date and addressed to the Initial
Purchasers, from local counsel acceptable to the Initial Purchasers in form
and substance satisfactory to counsel for the Initial Purchasers, specified
in Exhibit B hereto. In rendering such opinions, each such counsel may
state that its opinion is limited to matters of the law of the jurisdiction
in which the Collateral is located and to matters of federal law.
(e) The Initial Purchasers shall have received on the Closing Date
from Murray, Devine & Co. a letter, dated the Closing Date, in form and
substance satisfactory to the Initial Purchasers, confirming that the
Company is, and immediately following the Closing Date will be, Solvent.
As used herein, the term "Solvent" means, with respect to an entity on a
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particular date, that on such date (i) the fair market value of the assets
of the entity is greater than the total amount of liabilities (including
contingent liabilities) of the entity, (ii) the present fair salable value
of the assets of the entity is greater than the amount that will be
required to pay the probable liabilities of the entity on its debts as they
become absolute and matured, (iii) the entity is able to realize upon its
assets and pay its debts and other liabilities, including contingent
obligations, as they mature and (iv) the entity does not have an
unreasonably small capital for the business in which it is engaged.
(f) The representations and warranties of the Company contained in
this Agreement shall be true and correct on and as of the date hereof and
on and as of the Closing Date as if made on and as of the Closing Date;
the statements of the Company's officers made pursuant to any certificate
delivered in accordance with the provisions hereof shall be true and
correct on and as of the date made and on and as of the Closing Date; the
Company shall have performed all covenants and agreements and satisfied all
conditions on its part to be performed or satisfied hereunder at or prior
to the Closing Date; and, except as described in the Final Memorandum
(exclusive of any amendment or supplement thereto after the date hereof),
subsequent to the date of the most recent financial statements in such
Final Memorandum, there shall have been no event or development, and no
information shall have become known, that, individually or in the
aggregate, has or would be reasonably likely to have a Material Adverse
Effect.
(g) The sale of the Notes hereunder shall not be enjoined
(temporarily or permanently) on the Closing Date.
(h) Subsequent to the date of the most recent financial statements in
the Final Memorandum (exclusive of any amendment or supplement thereto
after the date hereof), the Company shall not have sustained any loss or
interference with respect to its business or properties from fire, flood,
hurricane, accident or other calamity, whether or not covered by insurance,
or from any strike, labor dispute, slow down or work stoppage or from any
legal or governmental proceeding, order or decree, which loss or
interference, individually or in the aggregate, has or would be reasonably
likely to have a Material Adverse Effect.
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(i) The Initial Purchasers shall have received a certificate, dated
the Closing Date, from the Company, signed by the Chairman of the Board or
President and the Vice President-Finance of the Company, to the effect
that:
(i) The representations and warranties of the Company
contained in this Agreement are true and correct on and as of the
date hereof and on and as of the Closing Date, and the Company
has performed all covenants and agreements and satisfied all
conditions on their part to be performed or satisfied hereunder
at or prior to the Closing Date;
(ii) At the Closing Date, since the date hereof or since the
date of the most recent financial statements in the Final
Memorandum (exclusive of any amendment or supplement thereto
after the date hereof), no event or development has occurred, and
no information has become known, that, individually or in the
aggregate, has or would be reasonably likely to have a Material
Adverse Effect;
(iii) The sale of the Notes hereunder has not been enjoined
(temporarily or permanently); and
(iv) The Related Transactions have been consummated or are being
consummated on the Closing Date concurrently with the closing
hereunder. As used herein, "Related Transactions" means (i) entry by
the Company into the Senior Credit Facility, (ii) the repayment of all
outstanding borrowings under the Third Amended and Restated Credit
Agreement among the Company, Group, Union Bank of Switzerland, New
York Branch as Agent and lender and the other lender parties thereto,
and the release of all Liens on property of the Company granted in
connection therewith and (iii) the dividend of $31.7 million to Group
which Group will, in turn, use in full to redeem for cash without
premium or penalty $31.7 million in principal amount and accrued
interest of the 12.5% Notes.
(j) On the Closing Date, the Initial Purchasers shall have received
the Registration Rights Agreement executed by the Company and such
agreement shall be in
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full force and effect at all times from and after the Closing Date.
(k) On or prior to the Closing Date, the Company shall have caused to
be delivered to the Initial Purchasers the following documents and
instruments with regard to the Collateral:
(i) for each piece of real property constituting Collateral
("Mortgaged Property"), a mortgage, duly executed and
acknowledged by the Company and otherwise in form for recording
in the appropriate recording office of the political subdivision
where the related Mortgaged Property is located, together with
such certificates, affidavits, questionnaires or returns as shall
be required in connection with the recording or filing thereof
and such UCC-1 financing statements or other similar statements
as are contemplated in respect of such mortgage and the Security
Documents by the opinion set forth in paragraph 7(d) above, and
any other instruments necessary to grant the interests purported
to be granted by such mortgage and the Security Documents under
the laws of the state in which the related Mortgaged Property is
located, which Mortgage and financing statements and other
instruments shall be effective to create a valid Lien on such
Mortgaged Property subject to no Liens other than Permitted
Liens;
(ii) such consents, approvals, amendments, supplements or other
agreements as shall be deemed necessary by counsel for the Initial
Purchasers in order for the Company to grant the Liens contemplated by
the Indenture and the Security Documents;
(iii) a Form B ALTA (1990) (or, if such form cannot be lawfully
issued, such other form as shall be acceptable to the Initial
Purchasers) policy of title insurance insuring the Liens on such
Mortgaged Property as a valid first mortgage Lien on the real property
and fixtures described therein in respect of the Notes satisfactory to
the Initial Purchasers, which policy (or commitment) shall (a) be
issued by one title company acceptable to the Initial Purchasers,
(b) include such reinsurance arrangements (with
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provisions for direct access) as shall be acceptable to the Initial
Purchasers, (c) have been supplemented by such endorsements, or, where
such endorsements are not available at commercially reasonable premium
costs, opinion letters of special counsel, architects or other
professionals, which counsel, architects or other professionals shall
be acceptable to the Initial Purchasers, as shall be requested by the
Initial Purchasers and (d) contain only such exceptions to title as
shall be agreed to by counsel for the Initial Purchasers prior to the
Closing Date;
(iv) a survey of all Mortgaged Property, which survey shall (i) be
prepared, in accordance with the standards adopted by the American
Land Title Association and the American Congress on Surveying and
Mapping, known as the "Minimum Standard Detail Requirements of Land
Title Surveys", by a surveyor licensed by the state in which the
Mortgaged Property is located, (ii) be dated no more than 30 days
prior to the Closing Date (except for the survey of the Louisiana
Property, which survey is dated June 28, 1993), (iii) show all
improvements currently located on the Mortgaged Property, (iv) show
location and dimensions of encroachments, (v) show the location of all
set-back lines, restrictions of record, other restrictions established
by zoning or building code ordinances, utilities, easements and rights
of way, and (vi) shall be in sufficient form to satisfy the
requirements of the title insurer in order to permit the title insurer
to provide extended coverage over survey defects;
(v) certificates of insurance for the policies of insurance
required by the Indenture, which policies or certificates shall bear
mortgagee's endorsements naming the Trustee as an additional insured
thereunder and evidencing (a) the issuance of such policies, (b) the
payment of all premiums currently due and payable and (c) coverage
which meets all the requirements set forth in the Security Documents;
(vi) UCC, tax lien and judgment searches confirming that the
property comprising a part of such Mortgaged Property is subject to
no Liens other than Permitted Liens;
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(vii) such affidavits certificates and instruments of
indemnification as shall reasonably be required to induce the title
companies to issue the policy or policies (or the commitment)
contemplated in subparagraph (iii) above;
(viii) a certificate of an officer of the Company certifying that,
as of the date of delivery of such certificate, there has been issued
and is in effect a valid and proper certificate of occupancy or the
local equivalent, and there is not outstanding any citation, violation
or similar notice indicating that the related Mortgaged Property
contains conditions which are not in compliance with local codes or
ordinances relating to building or fire safety or structural
soundness;
(ix) a certificate of an officer of the Company certifying that,
as of the date of delivery of such certificate, there has not occurred
any Casualty or Condemnation of the related Mortgaged Property or any
portion thereof;
(x) environmental assessments and engineering reports performed
by professionals, and in form, satisfactory to the Initial Purchasers
regarding the related Mortgaged Property;
(xi) certified copies of all licenses, permits and authorizations,
governmental or otherwise, necessary for the Company to own, lease and
operate the related Mortgaged Property and to conduct its business
with respect thereto as described in the Offering Memorandum, and as
currently conducted;
(xii) all documents the Initial Purchasers may reasonably request
relating to the corporate authority for and the validity of each
Security Document or the qualification of the Company to do business
in the state where the related Mortgaged Property is located;
(xiii) evidence of compliance by the Company with all zoning and
other local laws, regulations and ordinances, and any other matters
relevant in connection with any Security Document;
(xiv) all evidence reasonably satisfactory to the Initial
Purchasers of the taking of all
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actions with respect to the Security Documents as may be necessary or,
in the opinion of counsel for the Initial Purchasers, desirable to
permit the perfection of the security interest in the Collateral as
provided in the Indenture and Security Documents; and
(xv) all documents or instruments the Initial Purchasers or
counsel to the Initial Purchasers may reasonably request relating to
the security interests granted in the Collateral pursuant to the
Indenture and the Security Documents.
(l) All filing fees and taxes in connection with all recordings or
filings of any Security Document, and such other financing statements or
security documents as may be necessary or, in the opinion of counsel for
the Initial Purchasers, desirable to perfect the Liens created, or intended
to be created, by the Security Documents and the Indenture shall have been
paid (or arrangements for the payment thereof satisfactory to the Initial
Purchasers shall have been made) and the Initial Purchasers shall have
received evidence satisfactory to them of such payments or shall have
received evidence satisfactory to them of such arrangements for payment.
(m) The Related Transactions shall have been consummated, or shall be
consummated on the Closing Date concurrently with the closing hereunder,
and counsel to the Initial Purchasers shall have received such documents
relating thereto and other evidence thereof as they may request in form and
substance satisfactory to such counsel.
On or before the Closing Date, the Initial Purchasers and counsel for
the Initial Purchasers shall have received such further documents, opinions,
certificates, letters and schedules or instruments relating to the business,
corporate, legal and financial affairs of the Company as they shall have
heretofore reasonably requested from the Company.
All such documents, opinions, certificates, letters, schedules or
instruments delivered pursuant to this Agreement will comply with the provisions
hereof only if they are reasonably satisfactory in all material respects to the
Initial Purchasers and counsel for the Initial Purchasers. The Company shall
furnish to the Initial Purchasers such conformed copies of such documents,
opinions, certificates, letters, schedules and instruments
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in such quantities as the Initial Purchasers shall reasonably request.
8. OFFERING OF NOTES; RESTRICTIONS ON TRANSFER. (a) Each of the
Initial Purchasers represents and warrants (as to itself only) that it is a QIB.
Each of the Initial Purchasers agrees with the Company (as to itself only) that
(i) it has not and will not solicit offers for, or offer or sell, the Notes 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; and (ii) it has and will solicit
offers for the Notes only from, and will offer and sell the Notes only to (A) in
the case of offers inside the United States, (x) persons whom the Initial
Purchasers reasonably believe to be QIBs or, if any such person is buying for
one or more institutional accounts for which such person is acting as fiduciary
or agent, only when such person has represented to the Initial Purchasers that
each such account is a QIB, to whom notice has been given that such sale or
delivery is being made in reliance on Rule 144A, and, in each case, in
transactions under Rule 144A or (y) no more than 100 other institutional
investors reasonably believed by the Initial Purchasers to be Accredited
Investors that, prior to their purchase of the Notes, deliver to the Initial
Purchasers a letter containing the representations and agreements set forth in
Annex A to the Final Memorandum and (B) in the case of offers outside the United
States, to persons other than U.S. Persons ("foreign purchasers," which term
shall include dealers or other professional fiduciaries in the United States
acting on a discretionary basis for foreign beneficial owners (other than an
estate or trust)); PROVIDED, HOWEVER, that, in the case of this clause (B), in
purchasing such Notes such persons are deemed to have represented and agreed as
provided under the caption "Transfer Restrictions" contained in the Final
Memorandum (or, if the Final Memorandum is not in existence, in the most recent
Memorandum).
(b) Each of the Initial Purchasers represents and warrants (as to
itself only) with respect to offers and sales outside the United States that
(i) it has and will comply with all applicable laws and regulations in each
jurisdiction in which it acquires, offers, sells or delivers Notes or has in its
possession or distributes any Memorandum or any such other material, in all
cases at its own expense; (ii) the Notes have not been and will not be offered
or sold within the United States or to, or for the account or benefit of, U.S.
persons except in accordance with Regulation S under the Act or pursuant to an
exemption from the registration requirements of the Act; (iii) it has
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offered the Notes and will offer and sell the Notes (A) as part of its
distribution at any time and (B) otherwise until 40 days after the later of
the commencement of the offering and the Closing Date, only in accordance
with Rule 903 of Regulation S and, accordingly, neither it nor any persons
acting on its behalf have engaged or will engage in any directed selling
efforts (within the meaning of Regulation S) with respect to the Notes, and
any such persons have complied and will comply with the offering restrictions
requirement of Regulation S; and (iv) it agrees that, at or prior to
confirmation of sales of the Notes, it will have sent to each distributor,
dealer or person receiving a selling concession, fee or other remuneration
that purchases Notes 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 "Securities Act"), and may not be offered and sold
within the United States or to, or for the account or
benefit of, U.S. persons (i) as part of the distribution of
the Securities at any time or (ii) otherwise until 40 days
after the later of the commencement of the offering and the
closing date of the offering, except in either case in
accordance with Regulation S (or Rule 144A if available)
under the Securities Act. Terms used above have the meaning
given to them in Regulation S."
Terms used in this Section 8 and not defined in this Agreement have the meanings
given to them in Regulation S.
9. INDEMNIFICATION AND CONTRIBUTION. (a) The Company agrees to
indemnify and hold harmless the Initial Purchasers, and each person, if any, who
controls any Initial Purchaser within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act, against any losses, claims, damages or
liabilities to which any Initial Purchaser or such controlling person may become
subject under the Act, the Exchange Act or otherwise, insofar as any such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon:
(i) any untrue statement or alleged untrue statement of any
material fact
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contained in any Memorandum or any amendment or supplement thereto or
any application or other document, or any amendment or supplement
thereto, executed by the Company or based upon written information
furnished by or on behalf of the Company filed in any jurisdiction in
order to qualify the Notes under the securities or "Blue Sky" laws
thereof or filed with any securities association or securities
exchange (each an "Application"); or
(ii) the omission or alleged omission to state, in any
Memorandum or any amendment or supplement thereto or any
Application, a material fact required to be stated therein or
necessary to make the statements therein not misleading,
and will reimburse, as incurred, the Initial Purchasers and each such
controlling person for any legal or other expenses incurred by the Initial
Purchasers or such controlling person in connection with investigating,
defending against or appearing as a third-party witness in connection with any
such loss, claim, damage, liability or action; PROVIDED, HOWEVER, that the
Company will not be liable in any such case to the extent that any such loss,
claim, damage, or liability arises out of or is based upon any untrue statement
or alleged untrue statement or omission or alleged omission made in any
Memorandum or any amendment or supplement thereto or any Application in reliance
upon and in conformity with written information concerning the Initial
Purchasers furnished to the Company by the Initial Purchasers specifically for
use therein. This indemnity agreement will be in addition to any liability that
the Company may otherwise have to the indemnified parties. The Company shall
not be liable under this Section 9 for any settlement of any claim or action
effected without its prior written consent, which shall not be unreasonably
withheld.
(b) The Initial Purchasers agree to indemnify and hold harmless the
Company and any of its directors and officers, and each person, if any, who
controls the Company within the meaning of Section 15 of the Act or Section 20
of the Exchange Act against any losses, claims, damages or liabilities to which
the Company or any such director, officer or controlling person may become
subject under the Act, the Exchange Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon (i) any untrue statement or alleged untrue statement of any
material fact
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<PAGE>
contained in any Memorandum or any amendment or supplement thereto or any
Application, or (ii) the omission or the alleged omission to state therein a
material fact required to be stated in any Memorandum or any amendment or
supplement thereto or any Application, or necessary to make the statements
therein not misleading, in each case to the extent, but only to the extent,
that such untrue statement or alleged untrue statement or omission or alleged
omission was made in reliance upon and in conformity with written information
concerning such Initial Purchaser, furnished to the Company by the Initial
Purchasers specifically for use therein; and subject to the limitation set
forth immediately preceding this clause, will reimburse, as incurred, any
legal or other expenses incurred by the Company or any such director, officer
or controlling person in connection with investigating or defending against
or appearing as a third party witness in connection with any such loss,
claim, damage, liability or action in respect thereof. This indemnity
agreement will be in addition to any liability that the Initial Purchasers
may otherwise have to the indemnified parties. The Initial Purchasers shall
not be liable under this Section 9 for any settlement of any claim or action
effected without their consent, which shall not be unreasonably withheld.
The Company shall not, without the prior written consent of the Initial
Purchasers, effect any settlement or compromise of any pending or threatened
proceeding in respect of which any Initial Purchaser is or could have been a
party, or indemnity could have been sought hereunder by any Initial
Purchaser, unless such settlement (A) includes an unconditional written
release of the Initial Purchasers, in form and substance reasonably
satisfactory to the Initial Purchasers, from all liability on claims that are
the subject matter of such proceeding and (B) does not include any statement
as to an admission of fault, culpability or failure to act by or on behalf of
any Initial Purchaser.
(c) Promptly after receipt by an indemnified party under this
Section 9 of notice of the commencement of any action for which such indemnified
party is entitled to indemnification under this Section 9, such indemnified
party will, if a claim in respect thereof is to be made against the indemnifying
party under this Section 9, notify the indemnifying party of the commencement
thereof in writing; but the omission to so notify the indemnifying party
(i) will not relieve it from any liability under paragraph (a) or (b) above
unless and to the extent such failure results in the forfeiture by the
indemnifying party of substantial rights and defenses and (ii) will not, in any
event, relieve the indemnifying party from any obligations to any indemnified
party other than the indemnification
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<PAGE>
obligation provided in paragraphs (a) and (b) above. In case any such action
is brought against any indemnified party, and it notifies the indemnifying
party of the commencement thereof, the indemnifying party will be entitled to
participate therein and, to the extent that it may wish, jointly with any
other indemnifying party similarly notified, to assume the defense thereof,
with counsel reasonably satisfactory to such indemnified party; PROVIDED,
HOWEVER, that if (i) the use of counsel chosen by the indemnifying party to
represent the indemnified party would present such counsel with a conflict of
interest, (ii) the defendants in any such action include both the indemnified
party and the indemnifying party and the indemnified party shall have been
advised by counsel that there may be one or more legal defenses available to
it and/or other indemnified parties that are different from or additional to
those available to the indemnifying party, or (iii) the indemnifying party
shall not have employed counsel reasonably satisfactory to the indemnified
party to represent the indemnified party within a reasonable time after
receipt by the indemnifying party of notice of the institution of such
action, then, in each such case, the indemnifying party shall not have the
right to direct the defense of such action on behalf of such indemnified
party or parties and such indemnified party or parties shall have the right
to select separate counsel to defend such action on behalf of such
indemnified party or parties. After notice from the indemnifying party to
such indemnified party of its election so to assume the defense thereof and
approval by such indemnified party of counsel appointed to defend such
action, the indemnifying party will not be liable to such indemnified party
under this Section 9 for any legal or other expenses, other than reasonable
costs of investigation, subsequently incurred by such indemnified party in
connection with the defense thereof, unless (i) the indemnified party shall
have employed separate counsel in accordance with the proviso to the
immediately preceding sentence (it being understood, however, that in
connection with such action the indemnifying party shall not be liable for
the expenses of more than one separate counsel (in addition to local counsel)
in any one action or separate but substantially similar actions in the same
jurisdiction arising out of the same general allegations or circumstances,
designated by the Initial Purchasers in the case of paragraph (a) of this
Section 9 or the Company in the case of paragraph (b) of this Section 9,
representing the indemnified parties under such paragraph (a) or paragraph
(b), as the case may be, who are parties to such action or actions) or (ii)
the indemnifying party has authorized in writing the employment of counsel
for the indemnified party at the expense of the indemnifying party.
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After such notice from the indemnifying party to such indemnified party, the
indemnifying party will not be liable for the costs and expenses of any
settlement of such action effected by such indemnified party without the
prior written consent of the indemnifying party (which consent shall not be
unreasonably withheld), unless such indemnified party waived in writing its
rights under this Section 9, in which case the indemnified party may effect
such a settlement without such consent.
(d) In circumstances in which the indemnity agreement provided for in
the preceding paragraphs of this Section 9 is unavailable to, or insufficient to
hold harmless, an indemnified party in respect of any losses, claims, damages or
liabilities (or actions in respect thereof), each indemnifying party, in order
to provide for just and equitable contribution, shall contribute to the amount
paid or payable by such indemnified party as a result of such losses, claims,
damages or liabilities (or actions in respect thereof) in such proportion as is
appropriate to reflect (i) the relative benefits received by the indemnifying
party or parties on the one hand and the indemnified party on the other from the
offering of the Notes or (ii) if the allocation provided by the foregoing clause
(i) is not permitted by applicable law, not only such relative benefits but also
the relative fault of the indemnifying party or parties on the one hand and the
indemnified party on the other in connection with the statements or omissions or
alleged statements or omissions that resulted in such losses, claims, damages or
liabilities (or actions in respect thereof). The relative benefits received by
the Company on the one hand and any Initial Purchaser on the other shall be
deemed to be in the same proportion as the total proceeds from the offering
(before deducting expenses) received by the Company bear to the total discounts
and commissions received by such Initial Purchaser. The relative fault of the
parties 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 Company
on the one hand, or such Initial Purchaser on the other, the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission or alleged statement or omission, and any other
equitable considerations appropriate in the circumstances. The Company and the
Initial Purchasers agree that it would not be equitable if the amount of such
contribution were determined by pro rata or per capita allocation or by any
other method of allocation that does not take into account the equitable
considerations referred to in the first
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<PAGE>
sentence of this paragraph (d). Notwithstanding any other provision of this
paragraph (d), no Initial Purchaser shall be obligated to make contributions
hereunder that in the aggregate exceed the total discounts, commissions and
other compensation received by such Initial Purchaser under this Agreement,
less the aggregate amount of any damages that such Initial Purchaser has
otherwise been required to pay by reason of the untrue or alleged untrue
statements or the omissions or alleged omissions to state a material fact,
and 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. For purposes of
this paragraph (d), each person, if any, who controls an Initial Purchaser
within the meaning of Section 15 of the Act or Section 20 of the Exchange
Act shall have the same rights to contribution as the Initial Purchasers, and
each director of the Company, each officer of the Company and each person, if
any, who controls the Company within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act, shall have the same rights to contribution as
the Company.
10. SURVIVAL CLAUSE. The respective representations, warranties,
agreements, covenants, indemnities and other statements of the Company, officers
of the Company and the Initial Purchasers set forth in this Agreement or made by
or on behalf of them pursuant to this Agreement shall remain in full force and
effect, regardless of (i) any investigation made by or on behalf of the Company,
any of its officers or directors, the Initial Purchasers or any controlling
person referred to in Section 9 hereof and (ii) delivery of and payment for the
Notes. The respective agreements, covenants, indemnities and other statements
set forth in Sections 6, 9 and 15 hereof shall remain in full force and effect,
regardless of any termination or cancellation of this Agreement.
11. TERMINATION. (a) This Agreement may be terminated in the sole
discretion of the Initial Purchasers by notice to the Company given prior to the
Closing Date in the event that the Company shall have failed, refused or been
unable to perform all obligations and satisfy all conditions on its part to be
performed or satisfied hereunder at or prior thereto or, if at or prior to the
Closing Date:
(i) the Company shall have sustained any loss or
interference with respect to its businesses or properties from
fire, flood, hurricane, accident or other calamity, whether or
not covered by insurance, or from
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any strike, labor dispute, slow down or work stoppage or any legal or
governmental proceeding, which loss or interference, in the sole
judgment of the Initial Purchasers, has had or has a Material Adverse
Effect, or there shall have been, in the sole judgment of the Initial
Purchasers, any event or development that, individually or in the
aggregate, has or could be reasonably likely to have a Material Adverse
Effect (including without limitation a change in control of the
Company), except in each case as described in the Final Memorandum
(exclusive of any amendment or supplement thereto);
(ii) trading in securities generally on the New York Stock
Exchange, American Stock Exchange or the NASDAQ National Market
shall have been suspended or minimum or maximum prices shall have
been established on any such exchange or market;
(iii) a banking moratorium shall have been declared by New
York or United States authorities;
(iv) there shall have been (A) an outbreak or escalation of
hostilities between the United States and any foreign power, or
(B) an outbreak or escalation of any other insurrection or armed
conflict involving the United States or any other national or
international calamity or emergency, or (C) any material change
in the financial markets of the United States which, in the case
of (A), (B) or (C) above and in the sole judgment of the Initial
Purchasers, makes it impracticable or inadvisable to proceed with
the offering or the delivery of the Notes as contemplated by the
Final Memorandum; or
(v) any securities of the Company shall have been downgraded
or placed on any "watch list" for possible downgrading by any
nationally recognized statistical rating organization.
(b) Termination of this Agreement pursuant to this Section 11 shall
be without liability of any party to any other party except as provided in
Section 10 hereof.
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<PAGE>
12. INFORMATION SUPPLIED BY THE INITIAL PURCHASERS. The statements
set forth in the last paragraph on the front cover page and in the last two
sentences of the second paragraph under the heading "Private Placement" in the
Final Memorandum (to the extent such statements relate to the Initial
Purchasers) constitute the only information furnished by the Initial Purchasers
to the Company for the purposes of Sections 2(a) and 9 hereof.
13. NOTICES. All communications hereunder shall be in writing and,
if sent to the Initial Purchasers, shall be mailed or delivered to (i) BT
Securities Corporation, 130 Liberty Street, New York, New York 10006, Attention:
Corporate Finance Department; if sent to the Company, shall be mailed or
delivered to the Company, as the case may be, at 100 Field Drive, Suite 300,
Lake Forest, Illinois 60045, Attention: Chief Financial Officer.
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; and one business
day after being timely delivered to a next-day air courier.
14. SUCCESSORS. This Agreement shall inure to the benefit of and be
binding upon the Initial Purchasers, the Company and its successors and legal
representatives, and nothing expressed or mentioned in this Agreement is
intended or shall be construed to give any other person any legal or equitable
right, remedy or claim under or in respect of this Agreement, or any provisions
herein contained; this Agreement and all conditions and provisions hereof being
intended to be and being for the sole and exclusive benefit of such persons and
for the benefit of no other person except that (i) the indemnities of the
Company contained in Section 9 of this Agreement shall also be for the benefit
of any person or persons who control the Initial Purchasers within the meaning
of Section 15 of the Act or Section 20 of the Exchange Act and (ii) the
indemnities of the Initial Purchasers contained in Section 9 of this Agreement
shall also be for the benefit of the directors and officers of the Company, and
any person or persons who control the Company within the meaning of Section 15
of the Act or Section 20 of the Exchange Act. No purchaser of Notes from the
Initial Purchasers will be deemed a successor because of such purchase.
15. APPLICABLE LAW. THE VALIDITY AND INTERPRETATION OF THIS
AGREEMENT, AND THE TERMS AND CONDITIONS SET FORTH HEREIN SHALL BE GOVERNED BY
AND
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CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS MADE AND TO BE PERFORMED WHOLLY THEREIN, WITHOUT GIVING EFFECT TO ANY
PROVISIONS THEREOF RELATING TO CONFLICTS OF LAW.
16. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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If the foregoing correctly sets forth our understanding, please
indicate your acceptance thereof in the space provided below for that purpose,
whereupon this letter shall constitute a binding agreement among the Company and
the Initial Purchasers.
Very truly yours,
PACKAGING RESOURCES INCORPORATED
By: /s/ Jerry Corirossi
---------------------
Name: Jerry Corirossi
Title: Vice President
The foregoing Agreement is
hereby confirmed and accepted
as of the date first above
written.
BT SECURITIES CORPORATION
By: /s/ Thomas W. Cole
--------------------
Name: Thomas W. Cole
Title: Managing Director
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ Kenneth A. Vielliero
-------------------------
Name: Kenneth A. Viellero
Title: Managing Director
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SCHEDULE 1
Principal Amount
Initial Purchaser of Notes
- ----------------- ----------------
BT Securities Corporation . . . . . . . . . . . . . . . . . . . . $ 77,000,000
Donaldson, Lufkin & Jenrette
Securities Corporation. . . . . . . . . . . . . . . . . . . . . 33,000,000
------------
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . $110,000,000
------------
------------
<PAGE>
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
PACKAGING RESOURCES INCORPORATED
It is hereby certified that:
1. (a) The present name of the corporation (hereinafter called the
"Corporation") is Packaging Resources Incorporated.
(b) The name under which the Corporation was originally
incorporated was Plastic Acquisition Corp. , and the date of filing the
original Certificate of Incorporation of the Corporation with the Secretary
of State of the State of Delaware was July 25, 1984.
2. The Certificate of Incorporation of the Corporation is hereby amended
by striking out Articles 1 through 9 in their entirety and by substituting in
lieu thereof new Articles which are set forth in the Amended and Restated
Certificate of Incorporation hereinafter provided for.
3. The provisions of the Certificate of Incorporation of the corporation
as heretofore amended and/or supplemented, and as herein amended, are hereby
restated and integrated into the single instrument which is hereinafter set
forth, and which is entitled Amended and Restated Certificate of Incorporation
of Packaging Resources Incorporated without any further amendment other than the
amendment herein certified and without any discrepancy between the provisions of
the Certificate of Incorporation as heretofore amended and supplemented and the
provisions of the said single instrument hereinafter set forth.
<PAGE>
4. The amendments and the restatement of the Restated Certificate of
Incorporation herein certified have been duly adopted by the stockholders in
accordance with the provisions of Section 228, 242 and 245 of the General
Corporation Law of the State of Delaware.
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<PAGE>
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
PACKAGING RESOURCES INCORPORATED
1. The name Of the corporation is
PACKAGING RESOURCES INCORPORATED
2. The address of its registered office in the State of Delaware is
1209 Orange Street, in the City of Wilmington, County of New Castle. The name
of its registered agent at such address is the Corporation Trust Company.
3. The nature of the business of purposes to be conducted or
promoted is:
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 stock which the corporation shall
have authority to issue is one thousand (1000) shares of Common Stock, par value
$.01 per share.
5. The corporation is to have perpetual existence.
6. Elections of directors need not be by written ballot unless the
by-laws of the corporation shall so provide.
7. In furtherance and not in limitation of the powers conferred by
statute, the board of directors is expressly authorized to make, alter or
repeal the by-laws of the corporation.
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<PAGE>
8. The corporation shall, to the fullest extent permitted by Section
145 of The General Corporation Law of the State of Delaware, indemnify any and
all persons whom it shall have power to indemnify under said section from and
against any and all of the expenses, liabilities or other matters referred to in
or covered by said section.
9. No director of the corporation shall be personally liable to the
corporation or any stockholders for monetary damages for breach of fiduciary
duty by such director as a director; provided, however, that this Article 9
shall not eliminate or limit the liability of a director to the extent provided
by applicable law (i) for any breach of the director's duty of loyalty to the
corporation or its stockholders, (ii) for acts or emissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of The General Corporation Law of the State of Delaware or (iv) for
any transaction from which the director derived an improper personal benefit.
No amendment to or repeal of this Article 10 shall apply to or have any effect
on the liability or alleged liability of any director of the corporation for or
with respect to any acts or omissions of such director occurring prior to such
amendment or repeal.
10. The corporation reserves the right to amend, alter, change or
repeal any provision contained in this certificate of incorporation, in the
manner now or hereafter prescribed by
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<PAGE>
statute, and all rights conferred upon stockholders herein are granted
subject to this reservation.
Signed and attested to on June 30, 1993.
PACKAGING RESOURCES INCORPORATED
By: /s/ Jerry Corirossi
--------------------------------
Jerry Corirossi
Vice President
Attest:
/s/ M. Finley Maxon
---------------------
M. Finley Maxson
Assistant Secretary
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<PAGE>
CERTIFICATE OF OWNERSHIP AND MERGER
MERGING
MINER CONTAINER OF MISSOURI, INC.,
MINER CONTAINER OF TEXAS, INC.
and
MINER HOUSEWARES, INC.
INTO
PACKAGING RESOURCES INCORPORATED
* * * * *
Packaging Resources Incorporated, a corporation organized and existing
under the laws of Delaware,
DOES HEREBY CERTIFY:
FIRST: That this corporation was incorporated on the 25th day of
July, 1984, pursuant to the General Corporation Law of the State of Delaware.
SECOND: That (a) this corporation owns all of the outstanding shares
(of each class) of the stock of Miner Container of Missouri, Inc., a corporation
incorporated on the 26th day of October, 1988, pursuant to The General and
Business Corporation Law of the State of Missouri, (b) this corporation owns all
of the outstanding shares (of each class) of the stock of Miner Container of
Texas, Inc., a corporation incorporated on the 10th day of December, 1987,
pursuant to the Texas Business Corporation Act and (c) Miner Container of
Missouri, Inc. owns all of the outstanding shares (of each class) of the stock
of Miner Housewares, Inc., a corporation incorporated on the 12th day of
December, 1989,
<PAGE>
pursuant to The General Business Corporation Law of the State of
Missouri.
THIRD: That this corporation, by the following resolutions of its
Board of Directors, duly adopted by the unanimous written consent of its
members, filed with the minutes of the Board on the 17th day of December, 1993,
determined to and did merge into itself said Miner Container of Missouri, Inc.,
Miner Container of Texas, Inc. and Miner Housewares, Inc.
RESOLVED, that Packaging Resources Incorporated merge,
and it hereby does merge, into itself the following
subsidiaries: Miner Container of Missouri, Inc., Miner
Container of Texas, Inc. and Miner Housewares, Inc., and
assumes all of their respective obligations;
FURTHER RESOLVED, that the merger shall be effective
upon the date of filing with the Secretary of State of
Delaware.
FURTHER RESOLVED, that the proper officers of this
corporation be and they hereby are directed to make and
execute a Certificate of Ownership and Merger setting forth
a copy of the resolutions to merge said Miner container of
Missouri, Inc., Miner Container of Texas, Inc. and Miner
Housewares, Inc. and assume their respective liabilities and
obligations, and the date of adoption thereof, and to cause
the same to be filed with the Secretary of State and a
certified copy recorded in the office of the Recorder of
Deeds of New Castle County and to do all acts and things
whatsoever, whether within or without the State of Delaware,
which may be in anywise necessary or proper to effect said
merger.
FOURTH: Anything herein or elsewhere to the contrary notwithstanding,
this merger may be amended or terminated and abandoned by the Board of Directors
of Packaging Resources
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<PAGE>
Incorporated at any time prior to the date of filing the merger with the
Secretary of State.
IN WITNESS WHEREOF, said Packaging Resources Incorporated has caused
this Certificate to be signed by H.P. Hoeper , its President and attested
------------------
by JERRY J. CORIROSSI , its Secretary, this 22 day of December,
------------------------- ---------
1993.
PACKAGING RESOURCES INCORPORATED
By: /s/ H.P. Hoeper
---------------------------
, President
---------------
ATTEST:
By: /s/ Jerry J. Corirossi
---------------------------
, Secretary
---------------
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<PAGE>
AMENDED AND RESTATED
BY-LAWS
OF
PACKAGING RESOURCES INCORPORATED
ARTICLE I
OFFICES
Section 1 REGISTERED OFFICE. The registered office of the Corporation
in the State of Delaware shall be located at 1209 Orange Street, Wilmington,
Delaware, County of New Castle. The name of the Corporation's registered agent
at such address shall be The Corporation Trust Company.
Section 2 OTHER OFFICES. The Corporation may also have offices at
such other places both within and without the State of Delaware as the Board of
Directors may from time to time determine or the business of the Corporation may
require.
ARTICLE II
STOCKHOLDERS
Section 1 ANNUAL MEETINGS. An annual meeting of stockholders shall be
held each year for the election of directors at such date, time and place either
within or without the State of Delaware as shall be designated by the Board of
Directors. Any other proper business may be transacted at the annual meeting of
stockholders.
Section 2 SPECIAL MEETINGS. Special meetings of stockholders may be
called at any time by the Board of Directors, the Chairman, if any, the Vice
Chairman, if any, or the President and shall be called by the Chairman or the
Secretary at the request, in writing, stating the purpose or purposes of the
meeting, of stockholders who hold a majority of the outstanding shares of each
class of capital stock entitled to vote at the meeting. Each special meeting
shall be held at such date, time and place either within or without the State of
Delaware as shall be designated by the person or persons calling such meeting at
least ten days prior to such meeting.
<PAGE>
Section 3 NOTICE OF MEETING. Unless otherwise provided by law,
whenever stockholders are required or permitted to take any action at a
meeting, a written notice of the meeting shall be given which shall state the
date, time and place 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
stockholder entitled to vote at the meeting. If mailed, notice is given when
deposited in the United States mail, postage prepaid, directed to the
stockholder at his address as it appears on the records of the Corporation.
Section 4 ADJOURNMENTS. Any meeting of stock-holders, 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 stockholder of record entitled to vote at the meeting.
Section 5 QUORUM. Unless otherwise provided by law or the certificate
of incorporation, at each meeting of stockholders, the presence in person or
representation by proxy of the holders of a majority of the outstanding shares
of each class of capital stock entitled to vote at the meeting shall constitute
a quorum for the transaction of business. For purposes of the foregoing, two or
more classes or series of capital stock shall be considered a single class if
the holders thereof are entitled to vote together as a single class at the
meeting. In the absence of a quorum, the stockholders so present and
represented may, by vote of the holders of a majority of the shares of capital
stock of the Corporation so present and represented, adjourn the meeting from
time to time until a quorum shall attend, and the provisions of Section 2.4 of
these by-laws shall apply to each such adjournment. Shares of its own capital
stock belonging on the record date for the meeting to the Corporation or to
another corporation, if a majority of the shares entitled to vote in the
election of directors of such other corporation is held, directly or indirectly,
by the Corporation, shall neither be entitled to vote nor be counted for quorum
purposes; provided, however, that the foregoing shall not limit the right of the
Corporation to vote stock, including but not limited to its own stock, held by
it in a fiduciary capacity.
Section 6 ORGANIZATION. Meetings of stockholders shall be presided
over by the Chairman, if any, or in his absence by the Vice Chairman, if any, or
in his absence by the President, or in the absence of the foregoing persons by a
chairman designated by
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<PAGE>
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 7 VOTING; PROXIES. Unless otherwise provided by the
certificate of incorporation, each stockholder entitled to vote at any meeting
of stockholders shall be entitled to one vote for each share of capital stock
held by him which has voting power on the subject matter submitted to a vote at
the meeting. Each stockholder entitled to vote at a meeting of stockholders 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
stockholder 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
before the proxy is voted. Unless otherwise required by law, voting of
stockholders for the election of directors need not be by written ballot.
Voting of stockholders for all other matters need not be by written ballot
unless so determined at a stockholders meeting by the vote of the holders of a
majority of the outstanding shares of each class of capital stock present in
person or represented by proxy at the meeting and entitled to vote on the
subject matter submitted to a vote at the meeting. Unless otherwise provided by
law or the certificate of incorporation, the vote of the holders of a majority
of the shares of capital stock of the Corporation present in person or
represented by proxy at a meeting at which a quorum is present and entitled to
vote on the subject matter submitted to a vote at the meeting shall be the act
of the stockholders.
Section 8 FIXING DATE FOR DETERMINATION OF STOCK-HOLDERS OF RECORD.
In order that the Corporation may determine the stockholders entitled to notice
of or to vote at any meeting of stockholders 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, more than ten days after
the date upon which the resolution fixing the record date with respect to the
taking of corporate action by written consent without a meeting is adopted by
the Board of Directors, nor more than sixty days prior to any other action. If
no record date is fixed: (a) the record date for determining stockholders
entitled to notice of
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<PAGE>
or to vote at a meeting of stockholders 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; (b) the record date for determining stockholders
entitled to express consent to corporate action in writing without a meeting,
when no prior action by the Board of Directors is necessary, shall be the day on
which the first written consent is expressed; (c) the record date for
determining stockholders entitled to express consent to corporate action in
writing without a meeting, when prior action by the Board of Directors is
required, shall be at the close of business on the day on which the Board of
Directors adopts the resolution taking such prior action; and (d) the record
date for determining stockholders for any other purpose shall be at the close of
business on the day on which the Board of Directors adopts the resolution
relating thereto. A determination of stockholders of record entitled to notice
of or to vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.
Section 9 LIST OF STOCKHOLDERS ENTITLED TO VOTE. The Secretary shall
make, at least ten days before every meeting of stockholders, a complete list of
the stockholders entitled to vote at the meeting, arranged in alphabetical
order, and showing the address of each stockholder and the number of shares
registered in the name of each stockholder. Such list shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
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 stockholder who is present.
Section 10 CONSENT OF STOCKHOLDERS IN LIEU OF MEETING. Unless
otherwise provided by the certificate of incorporation, any action required by
law to be taken at any annual or special meeting of stockholders of the
Corporation, or any action which may be taken at any annual or special meeting
of such stockholders, may be taken without a meeting, without prior notice and
without a vote, if a consent in writing, setting forth the action so taken,
shall be signed by 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. Prompt notice of the taking of the corporate action without a meeting by
less than unanimous written consent shall be given to those stockholders who
have not consented in writing.
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<PAGE>
ARTICLE III
BOARD OF DIRECTORS
Section 1 POWERS; NUMBER; QUALIFICATIONS. Unless otherwise provided
by law or the certificate of incorporation, the business and affairs of the
Corporation shall be managed by or under the direction of the Board of
Directors. Unless otherwise provided by the certificate of incorporation, the
Board of Directors shall consist of such number of directors as the Board of
Directors shall from time to time designate. Unless otherwise provided by the
certificate of incorporation, directors need not be stockholders.
Section 2 ELECTION; TERM OF OFFICE; RESIGNATION; REMOVAL; VACANCIES.
Each director shall hold office until his successor is elected and qualified or
until his earlier resignation or removal. Any director may resign at any time
upon written notice to the Corporation directed to the Board of Directors or the
Secretary. 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. Any director or the entire Board of
Directors may be removed, with or without cause, by the vote of the holders of a
majority of shares of capital stock then entitled to vote at an election of
directors. Whenever the holders of shares of any class or series of capital
stock are entitled to elect one or more directors by the provisions of the
certificate of incorporation, the provisions of the preceding sentence shall
apply, in respect to the removal without cause of a director or directors so
elected, to the vote of the holders of the outstanding shares of that class or
series of capital stock and not to the vote of the holders of the outstanding
shares of capital stock as a whole. Unless otherwise provided by the
certificate of incorporation, vacancies and newly created directorships
resulting from any increase in the authorized number of directors elected by all
of the stockholders having a right to vote as a single class may be filled by
the vote of a majority of the directors then in office, although less than a
quorum, or by the vote of the sole remaining director. Whenever the holders of
shares of any class or classes of capital 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 thereof may be filled by the vote of a majority of the
directors elected by such class or classes or series thereof then in office, or
by the vote of the sole remaining director so elected.
Section 3 REGULAR MEETINGS. Regular meetings of the Board of
Directors shall be held at such dates, times and places either within or without
the State of Delaware as the Board of Directors shall from time to time
determine.
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<PAGE>
Section 4 SPECIAL MEETINGS. Special meetings of the Board of
Directors may be called at any time by the Chairman, if any, the Vice Chairman,
if any, the President or by any two members of the Board of Directors. Each
special meeting shall be held at such date, time and place either within or
without the State of Delaware as shall be fixed by the person or persons calling
the meeting.
Section 5 NOTICE OF MEETINGS. Written notice of each meeting of the
Board of Directors shall be given which shall state the date, time and place of
the meeting. The written notice of any meeting shall be given at least
twenty-four hours in advance of the meeting to each director. Notice may be
given by letter, telegram, telex or facsimile and shall be deemed to have been
given when deposited in the United States mail, delivered to the telegraph
company or transmitted by telex or facsimile, as the case may be.
Section 6 TELEPHONIC MEETINGS PERMITTED. Members of the Board of
Directors or any committee designated by the Board of Directors may participate
in a meeting of the Board of Directors or of such committee by means of
conference telephone or similar communication equipment by means of which all
persons participating in the meeting can hear each other, and participation in
the meeting pursuant to this by-law shall constitute presence in person at such
meeting.
Section 7 QUORUM; VOTE REQUIRED FOR ACTION. Unless otherwise
required by law, at each meeting of the Board of Directors, the presence of
one-third of the total number of directors shall constitute a quorum for the
transaction of business. The vote of a majority of the directors present at a
meeting at which a quorum is present shall be the act of the Board of Directors,
unless the vote of a greater number is required by law or the certificate of
incorporation. In case at any meeting of the Board of Directors a quorum shall
not be present, the members of the Board of Directors present may by majority
vote adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall attend.
Section 8 ORGANIZATION. Meetings of the Board of Directors shall be
presided over by the Chairman, if any, or in his absence by the Vice Chairman,
if any, 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 9 ACTION BY DIRECTORS WITHOUT A MEETING. Unless otherwise
provided by the certificate of incorporation, any action required or permitted
to be taken at any meeting of the Board of Directors or any committee designated
by the Board of Directors may be taken without a meeting if all members of the
Board of Directors
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<PAGE>
or of such committee consent thereto in writing, and the
writing or writings are filed with the minutes of proceedings of the Board of
Directors or such committee.
Section 10 COMPENSATION OF DIRECTORS. Unless otherwise provided
by the certificate of incorporation, the Board of Directors shall have the
authority to fix the compensation of directors, which compensation may include
the reimbursement of expenses incurred in connection with meetings of the Board
of Directors or a committee thereof.
ARTICLE IV
COMMITTEES
Section 1 COMMITTEES. The Board of Directors may, by resolution
passed by a majority of the whole Board of Directors, designate one or more
committees, each committee to consist of one or more of the directors of the
Corporation. The Board of Directors may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member of such committee at any meeting thereof. In the absence or
disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in place of any such absent or disqualified
member.
Section 2 POWER OF COMMITTEES. Any committee designated by the Board
of Directors, to the extent provided in a resolution of the Board of Directors,
shall have and may exercise all the powers and authority of the Board of
Directors in the management of the business and affairs of the Corporation and
may authorize the seal of the Corporation to be affixed to all papers which may
require it; but no such committee shall have the power or authority to take any
action which by law may only be taken by the Board of Directors or to take any
action with reference to: amending the certificate of incorporation (except that
a committee may, to the extent authorized in the resolution or resolutions
providing for the issuance of shares of stock adopted by the Board of Directors,
fix the designation and any of the preferences or rights of such shares relating
to dividends, redemption, dissolution, any distribution of assets of the
Corporation or the conversion into, or the exchange of such shares for, shares
of any other class or classes or any other series of the same or any other class
or classes of stock of the Corporation or fix the number of shares of any series
of stock or authorize the increase or decrease of the shares of any series),
adopting an agreement of merger or consolidation, recommending to the
stockholders the sale, lease or exchange of all or substantially all of the
Corporation's property
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<PAGE>
and assets, recommending to the stockholders a dissolution of the Corporation
or a revocation of dissolution, removing or indemnifying directors or
amending these by-laws; and, unless a resolution of the Board of Directors
expressly so provides, no such committee shall have the power or authority to
declare a dividend, to authorize the issuance of stock or to adopt a
certificate of ownership and merger pursuant to Section 253 of the General
Corporation Law of the State of Delaware.
Section 3 COMMITTEE RULES. Unless the Board of Directors otherwise
provides, each committee designated by the Board of Directors may adopt, amend
and repeal rules for the conduct of its business. In the absence of a
resolution by the Board of Directors or a provision in the rules of such
committee to the contrary, the presence of a majority of the total number of
members of such committee shall constitute a quorum for the transaction of
business, and the vote of a majority of the members present at a meeting at
which a quorum is present shall be the act of such committee.
ARTICLE V
OFFICERS
Section 1 OFFICERS; ELECTIONS. As soon as practicable after the
annual meeting of stockholders in each year, the Board of Directors shall elect
from its membership or outside thereof a President and a Secretary. The Board
of Directors may also elect from its membership a Chairman of the Board of
Directors (herein called "Chairman") and a Vice Chairman of the Board of
Directors (herein called "Vice Chairman"), and from its membership or outside
thereof 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 such other officers or agents as it may determine. Unless otherwise
provided by the certificate of incorporation, any number of offices may be held
by the same person.
Section 2 TERM OF OFFICE; RESIGNATION; REMOVAL; VACANCIES. Except as
otherwise provided by the Board of Directors when electing any officer, each
officer shall hold office until the first meeting of the Board of Directors
after the annual meeting of stockholders next succeeding his election, or 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
Corporation directed to the Board of Directors and the Secretary. 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 of Directors may remove any officer or agent
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<PAGE>
with or without cause at any time. Any such removal shall be without prejudice
to the contractual rights of such officer or agent, if any, with the
Corporation, but the election of an officer or agent shall not of itself create
any contractual rights. Any vacancy occurring in any office of the Corporation
by death, resignation, removal or otherwise may be filled for the unexpired
portion of the term by the Board of Directors.
Section 3 POWERS AND DUTIES. The officers of the Corporation shall
have such powers and duties in the management of the Corporation as shall be
stated in these by-laws or in a resolution of 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 of Directors. The Secretary shall have the duty to record in a book to be
kept for that purpose the proceedings of the meetings of the stockholders, the
Board of Directors and any committees designated by the Board of Directors.
Section 4 OTHER OFFICERS; SECURITY. The other officers, if any, of
the Corporation shall have such duties and powers as generally pertain to their
respective offices and such other duties and powers as the Board of Directors
shall from time to time delegate to each such officer. The Board of Directors
may require any officer, agent or employee to give security, by bond or
otherwise, for the faithful performance of his duties.
Section 5 COMPENSATION OF OFFICERS. The compensation of each officer
shall be fixed by the Board of Directors and no officer shall be prevented from
receiving such compensation by virtue of his also being a director.
ARTICLE VI
STOCK
Section 1 CERTIFICATES. Every holder of one or more shares of capital
stock of the Corporation shall be entitled to have a certificate signed by or in
the name of the Corporation by the Chairman or Vice Chairman, if any, or the
President or a Vice President, and by the Treasurer or an Assistant Treasurer,
if any, or the Secretary or an Assistant Secretary, certifying the number of
shares owned by him in the Corporation. Any or all of the signatures 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.
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<PAGE>
Section 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 VII
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 1 RIGHT TO INDEMNIFICATION. Each person who was or is made a
party or is threatened to be made a party to or is otherwise involved in any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (hereinafter a "proceeding"), by
reason of the fact that he is or was a director or officer of the Corporation or
is or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation or of a partnership, joint venture,
trust or other enterprise, including service with respect to an employee benefit
plan (hereinafter an "indemnitee"), whether the basis of such proceeding is
alleged action in an official capacity as a director, officer, employee or agent
or in any other capacity while serving as a director, officer, employee or
agent, shall be indemnified and held harmless by the Corporation to the fullest
extent authorized by the General Corporation Law of the State of Delaware, as
the same exists or may hereafter be amended (but, in the case of any such
amendment, only to the extent that such amendment permits the Corporation to
provide broader indemnification rights than permitted prior thereto), against
all reasonable expense, liability and loss (including, without limitation,
reasonable attorneys' fees, judgments, fines and amounts paid in settlement)
incurred or suffered by such indemnitee in connection therewith and such
indemnification shall continue as to an indemnitee who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
indemnitee's heirs, executors and administrators; PROVIDED, HOWEVER, that,
except as provided in Section 7.2 below with respect to proceedings to enforce
rights to indemnification, the Corporation shall indemnify any such indemnitee
in connection with a proceeding (or part thereof) initiated by such indemnitee
only if such proceeding (or part thereof) was authorized by the Board of
Directors of the Corporation. The right to indemnification conferred in this
ARTICLE VII shall be a contract right and shall include the right to be paid by
the Corporation the expenses incurred in defending any such proceeding in
advance of
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its final disposition (hereinafter an "advancement of expenses");
PROVIDED, HOWEVER, that, if the Delaware General Corporation Law requires, an
advancement of expenses incurred by an indemnitee in his capacity as a director
or officer (and not in any other capacity in which service was or is rendered by
such indemnitee) shall be made only upon delivery to the Corporation of an
undertaking (hereinafter an "undertaking"), by or on behalf of such indemnitee,
to repay all amounts so advanced if it shall ultimately be determined by final
judicial decision from which there is no further right to appeal (hereinafter a
"final adjudication") that such indemnitee is not entitled to be indemnified for
such expenses under this ARTICLE VII or otherwise.
Section 2 RIGHT OF INDEMNITEE TO BRING SUIT. If a claim under Section
7.1 above is not paid in full by the Corporation within sixty days after a
written claim has been received by the Corporation, except in the case of a
claim for an advancement of expenses, in which case the applicable period shall
be thirty days, the indemnitee may at any time thereafter bring suit against the
Corporation to recover the unpaid amount of the claim. If successful in whole
or in part in any such suit, or in a suit brought by the Corporation to recover
an advancement of expenses pursuant to the terms of an undertaking, the
indemnitee shall be entitled to be paid also the expense of prosecuting or
defending such suit. In (a) any suit brought by the indemnitee to enforce a
right to indemnification hereunder (but not in a suit brought by the indemnitee
to enforce a right to an advancement of expenses) it shall be a defense that and
(b) in any suit by the Corporation to recover an advancement of expenses
pursuant to the terms of an undertaking the Corporation shall be entitled to
recover such expenses upon a final adjudication that, the indemnitee has not met
the applicable standard of conduct set forth in the General Corporation Law of
the State of Delaware. Neither the failure of the Corporation (including its
Board of Directors, independent legal counsel or its stockholders) to have made
a determination prior to the commencement of such suit that indemnification of
the indemnitee is proper in the circumstances because the indemnitee has met the
applicable standard of conduct set forth in the Delaware General Corporation
Law, nor an actual determination by the Corporation (including its Board of
Directors, independent counsel or its stockholders) that the indemnitee has not
met such applicable standard of conduct, shall create a presumption that the
indemnitee has not met the applicable standard of conduct or, in the case of
such a suit brought by the indemnitee, be a defense to such suit. In any suit
brought by the indemnitee to enforce a right to indemnification or to an
advancement of expenses hereunder, or by the Corporation to recover an
advancement of expenses pursuant to the terms of an undertaking, the burden of
proving that the indemnitee is not entitled to be indemnified, or to such
advancement of expenses, under this ARTICLE VII or otherwise shall be on the
Corporation.
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<PAGE>
Section 3 NON-EXCLUSIVITY OF RIGHTS UNDER THIS ARTICLE. The rights to
indemnification and to the advancement of expenses conferred in this ARTICLE VII
shall not be exclusive of any other right which any person may have or hereafter
acquire under any statute, provision of the certificate of incorporation,
by-law, agreement, vote of stockholders or disinterested directors or otherwise.
Section 4 INSURANCE. The Corporation may purchase and maintain
insurance on its own behalf or on behalf of any person who is or was a director,
officer, employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against any
expense, liability or loss asserted against him in any such capacity, or arising
out of his status as such, whether or not the Corporation would have the power
to indemnify such person against such expense, liability or loss under the
General Corporation Law of the State of Delaware.
Section 5 INDEMNIFICATION OF EMPLOYEES AND AGENTS. The Corporation
may, to the extent authorized at any time from time to time by the Board of
Directors, grant rights to indemnification and the advancement of expenses to
any employee or agent of the Corporation to the fullest extent of the provisions
of this ARTICLE VII with respect to the indemnification and advancement of
expenses of directors and officers of the Corporation.
ARTICLE VIII
MISCELLANEOUS
Section 1 FISCAL YEAR. The fiscal year of the Corporation shall be
determined by the Board of Directors.
Section 2 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.
Section 3 WAIVER OF NOTICE OF MEETINGS OF STOCK-HOLDERS, DIRECTORS AND
COMMITTEES. Whenever notice is required to be given by law, 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. Unless
-12-
<PAGE>
otherwise provided by the certificate of incorporation, neither the business
to be transacted at, nor the purpose of, any regular or special meeting of
the stockholders, directors or members of a committee of directors need be
specified in any written waiver of notice.
Section 4 INTERESTED DIRECTORS, OFFICERS; QUORUM. 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
thereof which authorizes the contract or transaction, or solely because his or
their votes are counted for such purpose, if: (a) 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 vote of a majority of the disinterested directors, even though the
disinterested directors be less than a quorum; or (b) 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 (c) 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
thereof or the stockholders. 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.
Section 5 BOOKS AND RECORDS. The books and records of the Corporation
may be kept within or without the State of Delaware at such place or places as
may be designated from time to time by the Board of Directors. 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 AMENDMENT OF BY-LAWS. These by-laws may be amended or
repealed, and new by-laws adopted, by the Board of Directors, but the
stockholders entitled to vote may adopt additional by-laws and may amend or
repeal any by-law whether or not adopted by them.
-13-
<PAGE>
- --------------------------------------------------------------------------------
PACKAGING RESOURCES INCORPORATED,
as Issuer
TO
LASALLE NATIONAL BANK
Trustee
-------------
Indenture
Dated as of May 17, 1996
-------------
$110,000,000
11 5/8% Senior Secured Notes due 2003
- --------------------------------------------------------------------------------
<PAGE>
Certain Sections of this Indenture relating to
Sections 310 through 318 of the
Trust Indenture Act of 1939:
Trust Indenture Indenture
Act Section Section
- -------------- ---------
Section 310(a)(1) . . . . . . . . . . . . . . . . . . . . . . 609
(a)(2) . . . . . . . . . . . . . . . . . . . . . . 609
(a)(3) . . . . . . . . . . . . . . . . . . . . . . 615
(a)(4) . . . . . . . . . . . . . . . . . . . . . . Not
Applicable
(a)(5) . . . . . . . . . . . . . . . . . . . . . . 608
610
(b) . . . . . . . . . . . . . . . . . . . . . . 608
610
Section 311(a) . . . . . . . . . . . . . . . . . . . . . . 613
(b) . . . . . . . . . . . . . . . . . . . . . . 613
Section 312(a) . . . . . . . . . . . . . . . . . . . . . . 701
. . . . . . . . . . . . . . . . . . . . . . 702(a)
(b) . . . . . . . . . . . . . . . . . . . . . . 702(b)
(c) . . . . . . . . . . . . . . . . . . . . . . 702(c)
Section 313(a) . . . . . . . . . . . . . . . . . . . . . . 703(a)
(a)(4) . . . . . . . . . . . . . . . . . . . . . . 101
703(a)
(b) . . . . . . . . . . . . . . . . . . . . . . 703(a)
(c) . . . . . . . . . . . . . . . . . . . . . . 703(a)
(d) . . . . . . . . . . . . . . . . . . . . . . 703(b)
Section 314(a) . . . . . . . . . . . . . . . . . . . . . . 704
(b) . . . . . . . . . . . . . . . . . . . . . . 1302
(c)(1) . . . . . . . . . . . . . . . . . . . . . . 102
(c)(2) . . . . . . . . . . . . . . . . . . . . . . 102
(c)(3) . . . . . . . . . . . . . . . . . . . . . . Not
. . . . . . . . . . . . . . . . . . . . . . Applicable
(d) . . . . . . . . . . . . . . . . . . . . . . 1305
(e) . . . . . . . . . . . . . . . . . . . . . . 102
Section 315(a) . . . . . . . . . . . . . . . . . . . . . . 601
(b) . . . . . . . . . . . . . . . . . . . . . . 602
(c) . . . . . . . . . . . . . . . . . . . . . . 601
(d) . . . . . . . . . . . . . . . . . . . . . . 601
(e) . . . . . . . . . . . . . . . . . . . . . . 514
Section 316(a) . . . . . . . . . . . . . . . . . . . . . . 101
(a)(1)(A) . . . . . . . . . . . . . . . . . . . . . . 502
. . . . . . . . . . . . . . . . . . . . . . 512
(a)(1)(B) . . . . . . . . . . . . . . . . . . . . . . 513
(a)(2) . . . . . . . . . . . . . . . . . . . . . . Not
. . . . . . . . . . . . . . . . . . . . . . Applicable
(b) . . . . . . . . . . . . . . . . . . . . . . 508
(c) . . . . . . . . . . . . . . . . . . . . . . 104(c)
Section 317(a)(1) . . . . . . . . . . . . . . . . . . . . . . 503
(a)(2) . . . . . . . . . . . . . . . . . . . . . . 504
(b) . . . . . . . . . . . . . . . . . . . . . . 1003
Section 318(a) . . . . . . . . . . . . . . . . . . . . . . 107
______________
Note: This reconciliation and tie shall not, for any purpose, be
deemed to be a part of the Indenture.
<PAGE>
TABLE OF CONTENTS
----------
PAGE
----
ARTICLE ONE
Definitions and Other Provisions
of General Application
SECTION 101. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 102. Compliance Certificates and Opinions. . . . . . . . . . . . . 32
SECTION 103. Form of Documents Delivered to Trustee. . . . . . . . . . . . 33
SECTION 104. Acts of Holders; Record Dates . . . . . . . . . . . . . . . . 34
SECTION 105. Notices, Etc., to Trustee and Company . . . . . . . . . . . . 35
SECTION 106. Notice to Holders; Waiver.. . . . . . . . . . . . . . . . . . 35
SECTION 107. Conflict with Trust Indenture Act . . . . . . . . . . . . . . 36
SECTION 108. Effect of Headings and Table of Contents. . . . . . . . . . . 36
SECTION 109. Successors and Assigns. . . . . . . . . . . . . . . . . . . . 36
SECTION 110. Separability Clause.. . . . . . . . . . . . . . . . . . . . . 36
SECTION 111. Benefits of Indenture.. . . . . . . . . . . . . . . . . . . . 37
SECTION 112. Governing Law.. . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 113. Legal Holidays. . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE TWO
Security Forms
SECTION 201. Forms Generally . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 202. Form of Face of Security. . . . . . . . . . . . . . . . . . . 39
SECTION 203. Form of Reverse of Security . . . . . . . . . . . . . . . . . 43
SECTION 204. Form of Trustee's Certificate of Authentication . . . . . . . 50
SECTION 205. Legend on Restricted Securities . . . . . . . . . . . . . . . 50
ARTICLE THREE
The Securities
SECTION 301. Title and Terms . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 302. Denominations . . . . . . . . . . . . . . . . . . . . . . . . 52
____________________
NOTE: This table of contents shall not, for any purpose, be deemed to be a part
of the Indenture.
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<PAGE>
PAGE
----
SECTION 303. Execution, Authentication, Delivery and Dating. . . . . . . . 52
SECTION 304. Temporary Securities. . . . . . . . . . . . . . . . . . . . . 53
SECTION 305. Registration, Registration of Transfer and Exchange,
Restrictions on Transfer. . . . . . . . . . . . . . . . . . . 53
SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities. . . . . . . 56
SECTION 307. Payment of Interest; Interest Rights Preserved. . . . . . . . 57
SECTION 308. Persons Deemed Owners . . . . . . . . . . . . . . . . . . . . 58
SECTION 309. Book-Entry Provisions for Global Securities . . . . . . . . . 59
SECTION 310. Cancellation. . . . . . . . . . . . . . . . . . . . . . . . . 60
SECTION 311. Computation of Interest . . . . . . . . . . . . . . . . . . . 61
SECTION 312. Special Transfer Provisions . . . . . . . . . . . . . . . . . 61
ARTICLE FOUR
Satisfaction and Discharge
SECTION 401. Satisfaction and Discharge of Indenture . . . . . . . . . . . 64
SECTION 402. Application of Trust Money. . . . . . . . . . . . . . . . . . 65
ARTICLE FIVE
Remedies
SECTION 501. Events of Default . . . . . . . . . . . . . . . . . . . . . . 66
SECTION 502. Acceleration of Maturity; Rescission and Annulment. . . . . . 69
SECTION 503. Collection of Indebtedness and Suits for Enforcement
by Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . 71
SECTION 504. Trustee May File Proofs of Claim. . . . . . . . . . . . . . . 72
SECTION 505. Trustee May Enforce Claims Without Possession
of Securities . . . . . . . . . . . . . . . . . . . . . . . . 73
SECTION 506. Application of Money Collected. . . . . . . . . . . . . . . . 73
SECTION 507. Limitation on Suits . . . . . . . . . . . . . . . . . . . . . 74
SECTION 508. Unconditional Right of Holders to Receive Principal,
Premium and Interest. . . . . . . . . . . . . . . . . . . . . 75
SECTION 509. Restoration of Rights and Remedies. . . . . . . . . . . . . . 75
-ii-
<PAGE>
PAGE
----
SECTION 510. Rights and Remedies Cumulative. . . . . . . . . . . . . . . . 75
SECTION 511. Delay or Omission Not Waiver. . . . . . . . . . . . . . . . . 76
SECTION 512. Control by Holders. . . . . . . . . . . . . . . . . . . . . . 76
SECTION 513. Waiver of Past Defaults . . . . . . . . . . . . . . . . . . . 76
SECTION 514. Undertaking for Costs . . . . . . . . . . . . . . . . . . . . 77
SECTION 515. Waiver of Stay or Extension Laws. . . . . . . . . . . . . . . 77
ARTICLE SIX
The Trustee
SECTION 601. Certain Duties and Responsibilities . . . . . . . . . . . . . 77
SECTION 602. Notice of Defaults. . . . . . . . . . . . . . . . . . . . . . 79
SECTION 603. Certain Rights of Trustee . . . . . . . . . . . . . . . . . . 79
SECTION 604. Not Responsible for Recitals or Issuance of Securities. . . . 80
SECTION 605. May Hold Securities . . . . . . . . . . . . . . . . . . . . . 81
SECTION 606. Money Held in Trust . . . . . . . . . . . . . . . . . . . . . 81
SECTION 607. Compensation and Reimbursement. . . . . . . . . . . . . . . . 81
SECTION 608. Disqualification; Conflicting Interests . . . . . . . . . . . 82
SECTION 609. Corporate Trustee Required; Eligibility . . . . . . . . . . . 82
SECTION 610. Resignation and Removal; Appointment of Successor . . . . . . 82
SECTION 611. Acceptance of Appointment by Successor. . . . . . . . . . . . 84
SECTION 612. Merger, Conversion, Consolidation or Succession
to Business . . . . . . . . . . . . . . . . . . . . . . . . . 84
SECTION 613. Preferential Collection of Claims Against Company.. . . . . . 85
SECTION 614. Appointment of Authenticating Agent . . . . . . . . . . . . . 85
SECTION 615. Separate and Co-Trustee . . . . . . . . . . . . . . . . . . . 87
ARTICLE SEVEN
Holders' Lists and Reports by Trustee and Company
SECTION 701. Company to Furnish Trustee Names and Addresses of Holders . . 88
SECTION 702. Preservation of Information; Communications to Holders. . . . 88
-iii-
<PAGE>
PAGE
----
SECTION 703. Reports by Trustee. . . . . . . . . . . . . . . . . . . . . . 89
SECTION 704. Reports by Company. . . . . . . . . . . . . . . . . . . . . . 89
ARTICLE EIGHT
Consolidation, Merger, Conveyance, Transfer or Lease
SECTION 801. Company May Consolidate, Etc., Only on Certain Terms. . . . . 90
SECTION 802. Successor Substituted . . . . . . . . . . . . . . . . . . . . 91
ARTICLE NINE
Supplements and Amendments to This Indenture
and the Security Documents
SECTION 901. Supplemental Indentures and Amendments to Security
Documents Without Consent of Holders. . . . . . . . . . . . . 92
SECTION 902. Supplemental Indentures and Amendments to Security
Documents with Consent of Holders . . . . . . . . . . . . . . 92
SECTION 903. Execution of Supplemental Indentures and Amendments
to Security Documents . . . . . . . . . . . . . . . . . . . . 94
SECTION 904. Effect of Supplemental Indentures and Amendments
to Security Documents . . . . . . . . . . . . . . . . . . . . 94
SECTION 905. Conformity with Trust Indenture Act . . . . . . . . . . . . . 95
SECTION 906. Reference in Securities to Supplemental Indentures. . . . . . 95
SECTION 907. Notice of Supplemental Indentures . . . . . . . . . . . . . . 95
ARTICLE TEN
Covenants
SECTION 1001. Payment of Principal, Premium and Interest. . . . . . . . . . 95
SECTION 1002. Maintenance of Office or Agency . . . . . . . . . . . . . . . 96
SECTION 1003. Money for Security Payments to Be Held in Trust . . . . . . . 96
SECTION 1004. Statement by Officers as to Default . . . . . . . . . . . . . 98
-iv-
<PAGE>
PAGE
----
SECTION 1005. Existence . . . . . . . . . . . . . . . . . . . . . . . . . . 98
SECTION 1006. Maintenance of Properties . . . . . . . . . . . . . . . . . . 98
SECTION 1007. Payment of Taxes and Other Claims . . . . . . . . . . . . . . 99
SECTION 1008. Restricted Payments . . . . . . . . . . . . . . . . . . . . . 99
SECTION 1009. Incurrence of Indebtedness and Issuance of
Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . 102
SECTION 1010. Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
SECTION 1011. Dividend and Other Payment Restrictions
Affecting Subsidiaries. . . . . . . . . . . . . . . . . . . . 104
SECTION 1012. Transactions with Affiliates. . . . . . . . . . . . . . . . . 106
SECTION 1013. Guarantee of the Securities . . . . . . . . . . . . . . . . . 107
SECTION 1014. Line of Business. . . . . . . . . . . . . . . . . . . . . . . 108
SECTION 1015. Impairment of Security Interest . . . . . . . . . . . . . . . 109
SECTION 1016. Asset Sales, Collateral Asset Sales and Collateral
Loss Events . . . . . . . . . . . . . . . . . . . . . . . . . 109
SECTION 1017. Change of Control . . . . . . . . . . . . . . . . . . . . . . 114
SECTION 1018. Obligation to Seek Consent for Offer to Purchase. . . . . . . 115
SECTION 1019. Reports and Delivery of Certain Information . . . . . . . . . 115
SECTION 1020. Resale of Certain Securities. . . . . . . . . . . . . . . . . 116
SECTION 1021. Book-Entry System . . . . . . . . . . . . . . . . . . . . . . 116
SECTION 1022. Waiver of Certain Covenants . . . . . . . . . . . . . . . . . 116
ARTICLE ELEVEN
Redemption and Repurchase of Securities
SECTION 1101. Right of Redemption . . . . . . . . . . . . . . . . . . . . . 117
SECTION 1102. Applicability of Article. . . . . . . . . . . . . . . . . . . 117
SECTION 1103. Election to Redeem; Notice to Trustee . . . . . . . . . . . . 118
SECTION 1104. Selection by Trustee of Securities to Be Redeemed . . . . . . 118
SECTION 1105. Notice of Redemption. . . . . . . . . . . . . . . . . . . . . 118
SECTION 1106. Deposit of Redemption Price . . . . . . . . . . . . . . . . . 119
SECTION 1107. Securities Payable on Redemption Date . . . . . . . . . . . . 119
SECTION 1108. Securities Redeemed in Part . . . . . . . . . . . . . . . . . 120
SECTION 1109. Mandatory Redemption. . . . . . . . . . . . . . . . . . . . . 120
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<PAGE>
PAGE
----
ARTICLE TWELVE
Defeasance and Covenant Defeasance
SECTION 1201. Company's Option to Effect Defeasance or
Covenant Defeasance . . . . . . . . . . . . . . . . . . . . . 120
SECTION 1202. Defeasance and Discharge. . . . . . . . . . . . . . . . . . . 121
SECTION 1203. Covenant Defeasance . . . . . . . . . . . . . . . . . . . . . 121
SECTION 1204. Conditions to Defeasance or Covenant Defeasance . . . . . . . 122
SECTION 1205. Deposited Money and U.S. Government Obligations
to be Held in Trust; Other Miscellaneous Provisions . . . . . 125
SECTION 1206. Reinstatement . . . . . . . . . . . . . . . . . . . . . . . . 125
ARTICLE THIRTEEN
Collateral And Security Documents
SECTION 1301. Security Documents. . . . . . . . . . . . . . . . . . . . . . 126
SECTION 1302. Recording . . . . . . . . . . . . . . . . . . . . . . . . . . 127
SECTION 1303. Possession of the Collateral and the Cash
Collateral Account. . . . . . . . . . . . . . . . . . . . . . 128
SECTION 1304. Suits to Protect the Collateral . . . . . . . . . . . . . . . 129
SECTION 1305. Release Upon Termination of the Company's
Obligations; Partial Release. . . . . . . . . . . . . . . . . 129
SECTION 1306. Certain Dispositions of Collateral Without Release. . . . . . 132
SECTION 1307. Collateral Agent. . . . . . . . . . . . . . . . . . . . . . . 133
SECTION 1308. Authorization of Receipt of Funds by the Trustee
Under the Security Documents. . . . . . . . . . . . . . . . . 133
ARTICLE FOURTEEN
Cash Collateral Account
SECTION 1401. Cash Collateral Account . . . . . . . . . . . . . . . . . . . 133
SECTION 1402. Terms of Cash Collateral Account. . . . . . . . . . . . . . . 134
SECTION 1403. Representations, Warranties and Covenants Specific
to the Cash Collateral Account. . . . . . . . . . . . . . . . 137
-vi-
<PAGE>
PAGE
----
TESTIMONIUM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138
SIGNATURES AND SEALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139
ACKNOWLEDGMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140
Exhibit A - Form of Intercreditor and Collateral Agency Agreement
Exhibit B - Form of Certificate to Be Delivered in Connection
with Transfers to Non-QIB Accredited Investors
Exhibit C - Form of Certificate to Be Delivered in Connection
with Transfers Pursuant to Regulation S
-vii-
<PAGE>
INDENTURE, dated as of May 17, 1996 between Packaging Resources
Incorporated, a corporation duly organized and existing under the laws of the
State of Delaware, as issuer (herein called the "Company"), having its principal
office at One Conway Park, 100 Field Drive, Suite 300, Lake Forest, Illinois
60045 and LaSalle National Bank, a national banking association duly organized
and existing under the laws of the United States as Trustee (herein called the
"Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the creation of an issue of its
11 5/8% Senior Secured Notes due 2003 (herein called the "Securities") of
substantially the tenor and amount hereinafter set forth, and to provide
therefor the Company has duly authorized the execution and delivery of this
Indenture.
All things necessary to make the Securities, when executed by the
Company and authenticated and delivered hereunder and duly issued by the
Company, the valid obligations of the Company, and to make this Indenture a
valid agreement of the Company, in accordance with their and its terms, have
been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Securities by the Holders thereof, it is mutually agreed, for the equal and
proportionate benefit of all Holders of the Securities, as follows:
ARTICLE ONE
Definitions and Other Provisions
of General Application
SECTION 101. DEFINITIONS.
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings assigned
to them in this Article and include the plural as well as the
singular;
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(2) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;
(3) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with GAAP; and
(4) the words "herein", "hereof" and "hereunder" and other words
of similar import refer to this Indenture as a whole and not to any
particular Article, Section or other subdivision.
"Account Collateral" has the meaning specified in Section 1401.
"Account-Related Obligations" has the meaning specified in
Section 1401.
"Acquired Debt" means, with respect to any specified Person: (i)
Indebtedness of any other Person existing at the time such other Person was
acquired by such specified Person or a Restricted Subsidiary of such specified
Person, merged with or into or became a Restricted Subsidiary of such specified
Person, including Indebtedness incurred in connection with, or in contemplation
of, such other Person merging with or into or becoming a Restricted Subsidiary
of such specified Person and (ii) Indebtedness encumbering any asset acquired by
such specified Person.
"Acquisition Financing Conditions" means (i) the due execution and
delivery by or on behalf of the lender or lenders parties to the Acquisition
Financing Facility of the Intercreditor Agreement, (ii) the granting to, and
perfection by, such lender or lenders of security interests on the real
property, equipment (as defined in the UCC) and general intangibles (as defined
in the UCC) (and, at the option of such lender or lenders, any other property or
assets acquired with the proceeds of such Acquisition Financing Facility) in
favor of the Collateral Agent, (iii) the due acknowledgment of, and consent to,
the Intercreditor Agreement by the Company and (iv) the receipt by the Trustee
of an Officers' Certificate and Opinion of Counsel that the conditions precedent
set forth in the foregoing clauses (i), (ii) and (iii) have been complied with.
"Acquisition Financing Facility" means a credit facility between the
Company and the lender or lenders parties thereto providing for loans (i)
incurred in
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compliance with Section 1009 hereto, (ii) the proceeds of which are required to
be applied, and which are applied within five days of receipt, to the purchase
by the Company of property or assets used in a line of business in which the
Company is permitted to engage pursuant to Section 1014 hereto and (iii) as to
which the Acquisition Financing Conditions shall have been satisfied.
"Act", when used with respect to any Holder, has the meaning specified
in Section 104.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; PROVIDED, HOWEVER,
that beneficial ownership of 10% or more of the voting securities of a Person
shall be deemed to be control. Notwithstanding the foregoing, in no event will
the Initial Purchasers or any Affiliate of an Initial Purchaser be deemed an
Affiliate of the Company for purposes of the purchase of the Securities by the
Initial Purchasers, any compensation paid or payable to the Initial Purchasers
in connection therewith or any of the other transactions contemplated by the
Purchase Agreement to be entered into by the Company and the Initial Purchasers
in connection with the offering of the Securities, including, without
limitation, the indemnification and contribution obligations of PRI contained
therein.
"Affiliate Transaction" has the meaning specified in Section 1012.
"Agent Members" has the meaning specified in Section 309.
"Aggregate Net Proceeds," with respect to any Public Equity Offering,
means the net proceeds of such Public Equity Offering after deduction of
underwriting discounts and commissions and actual expenses reasonably incurred
by Group or the Company in connection with such Public Equity Offering,
including, without limitation, fees and disbursements of accountants and
counsel, printing and engraving expenses, expenses of any registrar and transfer
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agent, fees and expenses associated with blue sky surveys and qualifications and
legal investment surveys, and fees and expenses incurred in connection with the
listing or qualification for quotation or trading of the Common Stock offered in
such Public Equity Offering on any securities exchange or inter-dealer quotation
system.
"Apollo" means Apollo Packaging Partners, L.P.
"Asset Sale" means, with respect to any Person, (i) the sale, lease,
conveyance or other disposition (collectively, "dispositions") of any assets
(including by way of a sale and leaseback transaction) other than
(A) dispositions of inventory in the ordinary course of business,
(B) dispositions of Autoweld machinery and related parts, and (C) Permitted
Leases, (ii) the issuance by any Restricted Subsidiary of Equity Interests of
such Restricted Subsidiary or (iii) the disposition by such Person or any
Restricted Subsidiaries of such Person of Equity Interests of any Restricted
Subsidiary of such Person, in the case of either clause (i), (ii) or (iii),
whether in a single transaction or a series of related transactions (a) that
have a fair market value in excess of $1.0 million or (b) for net proceeds in
excess of $1.0 million. Notwithstanding the foregoing, the following will not
be deemed to be Asset Sales: (i) a disposition of assets by the Company to any
of its Restricted Subsidiaries or by a Restricted Subsidiary of the Company to
the Company or another of its Restricted Subsidiaries, (ii) an issuance of
Equity Interests by a Restricted Subsidiary of the Company to the Company or to
another Restricted Subsidiary of the Company, (iii) a disposition consisting of
a Restricted Payment permitted by Section 1008, (iv) a disposition by the
Company or any of its Restricted Subsidiaries of Equity Interests of any of
their respective Unrestricted Subsidiaries and (v) the disposition of all or
substantially all of the assets of the Company and its Restricted Subsidiaries
taken as a whole permitted by Section 801.
"Authenticating Agent" means any Person authorized by the Trustee
pursuant to Section 614 to act on behalf of the Trustee to authenticate
Securities.
"Authority" means any federal, state, municipal or local governmental,
or quasi-governmental, agency or authority.
"Board of Directors" means, with respect to any Person, either the
board of directors of such Person or any duly authorized committee of that
board.
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"Board Resolution" means, with respect to any Person, a copy of a
resolution certified by the Secretary or an Assistant Secretary of such Person
to have been duly adopted by the Board of Directors and to be in full force and
effect on the date of such certification, and delivered to the Trustee.
"Borrowing Base" on any date, means the sum of (i) 90% of accounts
receivable, (ii) 75% of raw materials inventory and (iii) 75% of finished goods
inventory of the Company that would be reflected on a balance sheet of the
Company, prepared in accordance with GAAP on a separate and not a consolidated
basis, on such date.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in Chicago, Illinois or
New York, New York are authorized or obligated by law or executive order to
close.
"Capital Lease Obligation" means, at the time any determination
thereof is to be made, the amount of the liability in respect of a capital lease
that would at such time be required to be capitalized on a balance sheet
prepared in accordance with GAAP.
"Capital Stock" means any and all shares, interests, participations,
rights or other equivalents (however designated) of corporate stock, including,
without limitation, with respect to partnerships, partnership interests (whether
general or limited) and any other interest or participation that confers on a
Person the right to receive a share of the profits and losses of, or
distributions of assets of, such partnership.
"Cash Collateral Account" means the account established pursuant to
Section 1402(a) hereof and any one or more other accounts established in the
name of the Collateral Agent pursuant to the applicable Security Document, and
in the sole dominion and control of the Collateral Agent, into which certain
funds are required to be deposited by or on behalf of the Company under the
terms of this Indenture and the Security Documents.
"Cash Equivalents" means (i) United States dollars, (ii) securities
issued or directly and fully guaranteed or insured by the United States
government or any agency or instrumentality thereof having maturities of not
more than six months from the date of acquisition and bankers' acceptances with
maturities not exceeding six months from the date of acquisition, (iii)
certificates of
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deposit and eurodollar time deposits with maturities not exceeding six months
and overnight bank deposits, in the case of deposits in excess of $100,000, with
any commercial bank, depository institution or trust company incorporated or
doing business under the laws of the United States of America, any state thereof
or the District of Columbia or a branch or subsidiary of any such depository
institution or trust company operating outside the United States, provided, that
such depository institution or trust company has, at the time of the Investment,
having capital and surplus in excess of $200 million, (iv) repurchase
obligations with a term of not more than 30 days for underlying securities of
the types described in clauses (ii) and (iii) entered into with any financial
institution meeting the qualifications specified in clause (iii) above, (v)
commercial paper having a rating in one of the two highest rating categories
from Moody's Investors Service, Inc. or Standard & Poor's Corporation and in
each case maturing within six months after the date of acquisition and (vi)
money market mutual or similar funds having assets in excess of $200 million.
"Casualty", with respect to any Collateral, means loss of, damage to
or destruction of all or any part of such Collateral.
"Cedar Grove Facility" means the Company's leased facility located at
11 Cliffside Drive, Cedar Grove, New Jersey 07009.
"Change of Control" means the occurrence of any of the following:
(i) the sale, lease, transfer, conveyance or other disposition, in one or a
series of related transactions, of all or substantially all of the assets of the
Company to any Person or group (as such term is used in Sections 13(d)(3) and
14(d)(2) of the Exchange Act), (ii) the adoption of a plan relating to the
liquidation or dissolution of Company, (iii) any Person (other than a Permitted
Holder) or group (as defined above) is or becomes the "beneficial owner" (as
defined in Rules 13d-2 and 13d-5 under the Exchange Act), directly or
indirectly, of more than 35% of the total voting power of the Voting Stock of
Group or the Company, including by way of merger, consolidation or otherwise
provided that the Permitted Holders (A) beneficially own less than a majority of
any class of Voting Stock of the Company or (B) do not have the right and
ability, by contract, voting power or otherwise, to elect or designate for
election at least a majority of the Board of Directors of each of Group (so long
as Group beneficially owns a majority of any class of Voting Stock of the
Company) and the Company, and (iv) the first day on which a majority of the
members of the Board of Directors of Group (so long
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as Group beneficially owns a majority of any class of Voting Stock of the
Company) or the Company are not Continuing Directors.
"Collateral" means collectively, the Collateral (as defined in the
Security Agreement), the Mortgaged Property and all other property, personal or
real, on which a Lien is granted in favor of the Collateral Agent for the
benefit of the Holders pursuant to any Security Document.
"Collateral Agent" means (i) so long as no Intercreditor Agreement is
entered into in connection with one or more Acquisition Financing Facilities,
LaSalle National Bank or any successor Trustee under this Indenture and (ii) in
the event an Intercreditor Agreement is entered into, initially LaSalle National
Bank (or, in the event such Intercreditor Agreement is entered into at a time
when a successor Trustee holds office hereunder, such successor Trustee), and
thereafter any successor Collateral Agent appointed as provided in such
Intercreditor Agreement.
"Collateral Asset Sale" means an Asset Sale involving the disposition
of Collateral.
"Collateral Loss Event" means a Condemnation or Casualty involving an
actual or constructive total loss or agreed or compromised actual or
constructive total loss of Collateral with a fair market value, as determined by
the Board of Directors of the Company in good faith, in excess of $500,000.
"Commission" means the Securities and Exchange Commission, as from
time to time constituted, created under the Exchange Act, or, if at any time
after the execution of this instrument such Commission is not existing and
performing the duties now assigned to it under the Trust Indenture Act, then the
body performing such duties at such time.
"Commodity Agreement" means any commodity futures contract, commodity
option or other similar agreement or arrangement entered into by the Company or
any Subsidiary designed to protect the Company or any of its Subsidiaries
against fluctuations in the price of commodities actually used to produce
products in the ordinary course of business of the Company and its Subsidiaries.
"Company" means the Person named as the "Company" in the first
paragraph of this instrument until a successor Person shall have become such
pursuant to the applicable
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provisions of this Indenture, and thereafter "Company" shall mean such successor
Person.
"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.
"Condemnation" means any taking of the Collateral, or any part
thereof, in or by condemnation, expropriation or similar proceeding, eminent
domain proceedings, seizure or forfeiture, pursuant to any law, general or
special, or by reason of the temporary requisition of the use or occupancy of
the Collateral or any part thereof, by any Authority.
"Consolidated Cash Flow" means, with respect to any Person for any
period, the Consolidated Net Income of such Person and its Restricted
Subsidiaries for such period, plus (a) an amount equal to any extraordinary loss
plus any net loss realized in connection with an Asset Sale, to the extent that
such losses were deducted in computing Consolidated Net Income, plus
(b) provision for taxes based on income or profits of such Person for such
period, to the extent such provision for taxes was deducted in computing
Consolidated Net Income, plus (c) Consolidated Interest Expense of such Person
for such period, to the extent such amount was deducted in computing
Consolidated Net Income, plus (d) depreciation and amortization (including
amortization of goodwill and other intangibles and amortization of deferred
compensation in respect of non-cash compensation but excluding amortization of
prepaid cash expenses that were paid in a prior period) of such Person for such
period, to the extent such depreciation and amortization were deducted in
computing Consolidated Net Income, plus (e) all other non-cash items to the
extent such items were deducted in determining Consolidated Net Income, in each
case, for such period without duplication on a consolidated basis and determined
in accordance with GAAP.
"Consolidated Interest Expense" means, with respect to any Person for
any period, the aggregate consolidated interest, whether expensed or
capitalized, paid, accrued or scheduled to be paid or accrued, of such Person
and its Restricted Subsidiaries for such period (including (i) amortization of
debt discount and deferred financing costs and noncash interest payments and
accruals, (ii) the interest portion of all deferred payment obligations,
calculated in accordance with the effective interest method and (iii) the
interest component of any
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payments associated with Capital Lease Obligations and net payments (if any)
pursuant to Hedging Obligations, in each case, to the extent attributable to
such period, but excluding (x) commissions, discounts and other fees and charges
incurred with respect to letters of credit and bankers' acceptances financing
and (y) any interest expense on Indebtedness of another Person that is
Guaranteed by such Person or secured by a Lien on assets of such Person)
determined in accordance with GAAP. Consolidated Interest Expense of the
Company shall not include any prepayment premiums or write-down of debt discount
or deferred financing costs, to the extent such amounts are incurred as a result
of the prepayment on the date of this Indenture of any Indebtedness of the
Company with the proceeds of the Securities.
"Consolidated Net Income" means, with respect to any Person (the
"referent Person") for any period, the aggregate of the Net Income of such
Person and its Restricted Subsidiaries for such period on a consolidated basis,
determined in accordance with GAAP; PROVIDED, that (i) the Net Income of any
Person that is not a Restricted Subsidiary or that is accounted for by the
equity method of accounting shall be included only to the extent of the amount
of dividends or distributions paid to the referent Person or a Restricted
Subsidiary thereof, (ii) the Net Income of any Person that is a Restricted
Subsidiary (other than a Wholly Owned Restricted Subsidiary) shall be included
only to the extent of the amount of dividends or distributions paid to the
referent Person or a Restricted Subsidiary thereof, (iii) the Net Income of any
Person acquired in a pooling of interests transaction for any period prior to
the date of such acquisition shall be excluded and (iv) the cumulative effect of
a change in accounting principles shall be excluded. The amount of any
dividends paid in property or assets other than cash shall be valued at fair
market value on the date of such dividend (as determined in good faith by the
Board of Directors of such Person). Consolidated Net Income of the Company
shall not include any prepayment premiums or write-down or write-off of debt
discount or deferred financing costs to the extent such amounts are incurred as
a result of the prepayment on the Issue Date of any Indebtedness of the Company
with the proceeds of the Securities.
"Consolidated Net Worth" means, with respect to any Person as of any
date, the sum of (i) the consolidated equity of the common stockholders of such
Person and its consolidated Restricted Subsidiaries as of such date plus
(ii) the respective amounts reported on such Person's balance sheet as of such
date with respect to any series of
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preferred stock (other than Disqualified Stock) that by its terms is not
entitled to the payment of dividends unless such dividends may be declared and
paid only out of net earnings in respect of the year of such declaration and
payment, but only to the extent of any cash received by such Person upon
issuance of such preferred stock, less (x) all write-ups (other than write-ups
resulting from foreign currency translations and write-ups of tangible assets of
a going concern business made within 12 months after the acquisition of such
business) subsequent to the date hereof in the book value of any asset owned by
such Person or a consolidated Restricted Subsidiary of such Person, (y) all
investments as of such date in unconsolidated Subsidiaries and in Persons that
are not Restricted Subsidiaries (except, in each case, Permitted Investments),
and (z) all unamortized debt discount and expense and unamortized deferred
charges as of such date, all of the foregoing determined in accordance with
GAAP.
"Continuing Directors" means, as of any date of determination, any
member of the Board of Directors of the Company or Group (as long as Group
beneficially owns a majority of any class of Voting Stock of the Company), as
applicable, who (i) was a member of such Board of Directors on the date hereof
or (ii) was nominated for election or elected to such Board of Directors with
the affirmative vote of a majority of the Continuing Directors who were members
of such Board at the time of such nomination or election.
"Corporate Trust Office" means the principal office of the Trustee in
Chicago, Illinois or The City of New York at which at any particular time its
corporate trust business shall be administered.
"Currency Agreement" means any foreign exchange contract, currency
swap agreement or other similar agreement or arrangement designed to protect the
Company or any of its Subsidiaries against fluctuation in the values of the
currencies of the countries (other than the United States) in which the Company
or its Subsidiaries conduct business and which is required under any bank
agreement to which the Company is or hereafter becomes a party.
"Default" means any event that is or with the passage of time or the
giving of notice or both would be an Event of Default.
"Defaulted Interest" has the meaning specified in Section 307.
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"Default Release Conditions" has the meaning specified in
Section 1305.
"Depositary" means The Depository Trust Company until a successor
Depositary shall have become such pursuant to the applicable provisions of this
Indenture, and thereafter "Depositary" shall mean such successor Depositary.
"Disqualified Stock" means any Capital Stock 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 redeemable at
the option of the Holder thereof, in whole or in part, on or prior to May 1,
2003.
"Equity Interests" means Capital Stock and all warrants, options or
other rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Event of Default" has the meaning specified in Section 501.
"Excess Proceeds" has the meaning specified in Section 1016.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Offer" means an exchange offer pursuant to a registration
statement under the Securities Act, registering securities substantially
identical to the Securities, as provided by the Registration Rights Agreement.
"Exchange Security" means any security issued by the Company (i)
pursuant to the Exchange Offer, (ii) upon the registration of transfer of a
Security registered for resale on a Resale Registration Statement or (iii) upon
the transfer of, or in exchange for, Securities which are Exchange Securities.
"Existing Indebtedness" means, with respect to any Person,
Indebtedness of such Person and its Subsidiaries in existence on the date
hereof, until such amounts are repaid.
"Expiration Date" has the meaning specified in the definition of Offer
to Purchase.
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"Fixed Charge Coverage Ratio" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person for such period
to the Fixed Charges of such Person for such period. In the event that such
Person or any of its Restricted Subsidiaries incurs, assumes, guarantees,
redeems, repurchases or repays any Indebtedness (other than revolving credit
borrowings) or if such Person issues, redeems or repurchases any preferred
stock, in each case subsequent to the commencement of the period for which the
Fixed Charge Coverage Ratio is being calculated but prior to the date of the
event for which the calculation of the Fixed Charge Ratio is made (the
"Transaction Date"), then the Fixed Charge Coverage Ratio shall be calculated
giving pro forma effect to such incurrence, assumption, guarantee, redemption,
repurchase or repayment of Indebtedness, or such issuance, redemption or
repurchase of preferred stock, as if the same had occurred at the beginning of
the applicable period. For purposes of making the computation referred to above,
acquisitions (including all mergers and consolidations), dispositions and
discontinuance of operations that have been made by such Person or any of its
Restricted Subsidiaries during the relevant period or subsequent to such period
and on or prior to the Transaction Date shall be calculated on a pro forma basis
assuming that all such acquisitions, dispositions and discontinuance of
operations had occurred on the first day of such period; PROVIDED, HOWEVER, that
Fixed Charges shall be reduced by amounts attributable to operations that are so
disposed of or discontinued only to the extent that the obligations giving rise
to such Fixed Charges would no longer be obligations contributing to such
Person's Fixed Charges subsequent to the Transaction Date. If any Indebtedness
bears a floating rate of interest and is being given pro forma effect, the
interest on such Indebtedness shall be calculated as if the rate in effect on
the date of determination had been the applicable rate for the entire period.
"Fixed Charges" means, with respect to any Person for any period, the
sum, without duplication, of (a) Consolidated Interest Expense, (b) commissions,
discounts and other fees and charges incurred with respect to letters of credit
and bankers' acceptances financing, (c) any interest expense on Indebtedness of
another Person that is Guaranteed by such Person or secured by a Lien on assets
of such Person and (d) the product of (i) all cash dividend payments on any
series of preferred stock of such Person, times (ii) a fraction, the numerator
of which is one and the denominator of which is one minus the then current
combined federal, state and local statutory tax rate of such
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Person, expressed as a decimal, determined, in each case, on a consolidated
basis and in accordance with GAAP.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, in each case, as in effect in the United States on the date hereof.
"Global Security" means any Security in global form registered in the
Security Register in the name of a Depositary or a nominee thereof.
"Group" means Packaging Resources Group, Inc.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business) direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"Guarantor" means any Restricted Subsidiary of the Company that
executes a Guarantee in accordance with the provisions of this Indenture, and
its respective successors and assigns.
"Hedging Obligations" means, with respect to any Person, the
obligations of such Person under (i) interest rate swap agreements, interest
rate cap agreements and interest rate collar agreements and (ii) other
agreements or arrangements designed to protect such Person against fluctuations
in interest rates in each case that are required under any bank agreements to
which such Person is or hereafter becomes a party.
"Holder" means a Person in whose name a Security is registered in the
Security Register.
"HPH" means HPH Industries, Ltd.
"IAI Security" has the meaning specified in Section 201.
"Indebtedness" means, with respect to any Person, any indebtedness of
such Person, whether or not contingent, in respect of borrowed money or
evidenced by bonds, notes,
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debentures or similar instruments or letters of credit (or reimbursement
agreements in respect thereof) or representing Capital Lease Obligations or the
balance deferred and unpaid of the purchase price of any property or
representing any Hedging Obligations, except any such balance that constitutes
an accrued expense or trade payable, if and to the extent any of the foregoing
indebtedness (other than letters of credit and Hedging Obligations) would appear
as a liability upon a balance sheet of such Person prepared in accordance with
GAAP, as well as all indebtedness of others secured by a Lien on any asset of
such Person (whether or not such indebtedness is assumed by such Person) and, to
the extent not otherwise included, the Guarantee of any Indebtedness of such
Person or any other Person.
"Indenture" means this instrument as originally executed or as it may
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof
including, for all purposes of this instrument and any such supplemental
indenture, the provisions of the Trust Indenture Act that are deemed to be a
part of and govern this instrument and any such supplemental indenture,
respectively.
"Initial Purchasers" means BT Securities Corporation and Donaldson,
Lufkin & Jenrette Securities Corporation.
"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)
under the Securities Act.
"Intercreditor Agreement" means an Intercreditor and Collateral Agency
Agreement in the form of Exhibit A hereto between the Collateral Agent, on the
one hand, and the lender or lenders parties to one or more Acquisition Financing
Facilities, on the other hand, and acknowledged and consented to by the Company.
"Interest Payment Date" means the Stated Maturity of an instalment of
interest on the Securities.
"Interest Rate Agreement" means, with respect to any Person, any
interest rate protection agreement, interest rate future, interest rate option,
interest rate swap, interest rate cap or other interest rate hedge arrangement
to or which such Person or any Restricted Subsidiary is or hereafter becomes a
part or a beneficiary and which is
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required under any bank agreement to which such Person is or hereafter becomes a
party.
"Investments" means, with respect to any Person, all investments by
such Person in other Persons (including Affiliates) in the forms of loans
(including Guarantees), advances or capital contributions, purchases or other
acquisitions for consideration of Indebtedness, Equity Interests or other
securities and all other items that are or would be classified as investments on
a balance sheet prepared in accordance with GAAP. For purposes of Section 1008
hereof, (i) "Investment" in a Subsidiary shall include the portion
(proportionate to such Person's Equity Interest in such Subsidiary) of the fair
market value (as determined in good faith by the Board of Directors of such
Person) of such Subsidiary at the time that such Subsidiary is designated an
Unrestricted Subsidiary; PROVIDED that upon a redesignation of such Subsidiary
as a Restricted Subsidiary, such Person shall be deemed to continue to have a
permanent "Investment" in an Unrestricted Subsidiary in an amount (if positive)
equal to (x) such Person's "Investment" in such Subsidiary at the time of such
redesignation less (y) the portion (proportionate to such Person's Equity
Interest in such Subsidiary) of the fair market value (as determined in good
faith by the Board of Directors) of the net assets of such Subsidiary at the
time of such redesignation; and (ii) any property transferred to or from an
Unrestricted Subsidiary shall be valued at its fair market value at the time of
such transfer, in each case as determined in good faith by the Board of
Directors of such Person.
"Issue Date" means the date the Securities are originally issued under
this Indenture.
"Lake Forest Facility" means the Company's facility located at One
Conway Park, 100 Field Drive, Lake Forest, Illinois 60045.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
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"Louisiana Facility" means the Company's facility located at 3016
Georgia Street, Louisiana, Missouri 63353.
"Management Services Agreement" means the agreement to be entered into
between the Company and HPH with respect to the provision by HPH of services to
the Company and the payment by the Company to HPH of fees, and the reimbursement
of expenses, in connection therewith as in effect on the date hereof.
"Maturity", when used with respect to any Security, means the date on
which the principal of such Security becomes due and payable as therein or
herein provided, whether at the Stated Maturity or by declaration of
acceleration, call for redemption or otherwise.
"Miner Purchase Agreement" means the Asset and Stock Purchase
Agreement dated December 15, 1993 among the Company, Miner Container Printing,
Inc. and the stockholders signatory thereto.
"Mortgage/Deed of Trust" means each Mortgage, Deed of Trust, Fixture
Filing and Security Agreement, dated as of May 17, 1996, from the Company to the
Collateral Agent for the benefit of the Holders.
"Mortgaged Property" means the property described in the granting
clauses of the Mortgage/Deed of Trust.
"Net Income" means, with respect to any Person, the net income (loss)
of such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (a) any gain (but not
loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with (i) any Asset Sale (including, without
limitation, dispositions pursuant to sale and leaseback transactions), or
(ii) the disposition of any securities or the extinguishment of any Indebtedness
of such Person or any of its Restricted Subsidiaries, and (b) any extraordinary
gain (but not loss), together with any related provision for taxes on such
extraordinary gain (but not loss).
"Net Proceeds" means the aggregate proceeds in cash or Cash
Equivalents received by the Company or any of its Restricted Subsidiaries in
respect of (i) any Asset Sale, net of the direct costs relating to such Asset
Sale (including, without limitation, legal, accounting and investment banking
fees, and sales commissions) and any relocation expenses incurred as a result
thereof, taxes paid or payable as a result thereof (after taking into account
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any available tax credits or deductions and any tax sharing arrangements),
amounts required to be applied to the repayment of Indebtedness secured by a
Lien on the asset or assets the subject of such Asset Sale and the after-tax
amount of an appropriate reserve for adjustment in respect of the sale price of
such asset or assets or for any indemnification obligation by the Company or
such Restricted Subsidiary to the purchaser in respect of such Asset Sale, in
each case to the extent, and only to the extent, permitted to be reflected as a
liability (contingent or otherwise) or asset valuation allowance on a balance
sheet of the Company or such Restricted Subsidiary in accordance with GAAP or
(ii) any Collateral Loss Event, including, without limitation, proceeds received
under policies of insurance (other than policies providing business interruption
insurance) and any awards, proceeds, payments or other compensation with respect
to a Condemnation constituting a Collateral Loss Event.
"Non-U.S. Person" means a Person who is not a U.S. person, as defined
in Regulation S.
"Obligations" means any principal, premium, interest (including
post-petition interest), penalties, fees, indemnifications, reimbursements,
damages and other liabilities payable under the documentation governing any
Indebtedness.
"Offer" has the meaning specified 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 Security Register 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 a purchase
date (the "Purchase Date") for the purchase of Securities which shall be,
subject to any contrary requirements of applicable law, not less than 30 days or
more than 60 days after the date of such Offer and an expiration date (the
"Expiration Date") of the Offer to Purchase which shall be the third Business
Day prior to the Purchase 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
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expense of the Company. The Offer shall contain information concerning the
business of the Company and its Subsidiaries which the Company in good faith
believes will enable such Holders to make an informed decision with respect to
the Offer to Purchase (which at a minimum will include (i) the most recent
annual and quarterly financial statements and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" contained in the
documents required to be filed with the Trustee pursuant to Section 1018 (which
requirements may be satisfied by delivery of such documents together with the
Offer), (ii) a description of material developments in the Company's business
subsequent to the date of the latest of such financial statements referred to in
Clause (i) (including a description of the events requiring the Company to make
the Offer to Purchase), (iii) if applicable, appropriate pro forma financial
information concerning the Offer to Purchase and the events requiring the
Company to make the Offer to Purchase and (iv) any other 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;
(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 has been determined
pursuant to the Section hereof 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;
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(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 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 a Security pursuant to the
Offer to Purchase will be required to surrender such Security, with the
form entitled "Option to Elect Purchase" on the reverse of the Securities
completed, 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 second Business Day preceding the
Purchase 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 certificate 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 case of any Holder whose Security is purchased only in
part, the Company shall execute, and the Trustee shall authenticate and
deliver to the
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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.
Any Offer to Purchase shall be governed by and effected in accordance with the
Offer for such Offer to Purchase.
"Offering Memorandum" means the Offering Memorandum dated May 10,
1995, offering Securities for sale as provided therein.
"Officers' Certificate" means a certificate signed by the Chairman of
the Board, a Vice Chairman of the Board, the President or a Vice President, and
by the Treasurer, an Assistant Treasurer, the Secretary or an Assistant
Secretary, of the Company, and delivered to the Trustee. One of the officers
signing an Officers' Certificate given pursuant to Section 1004 shall be the
principal executive, financial or accounting officer of the Company.
"Offshore Physical Securities" has the meaning specified in Section
201.
"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for the Company, and who shall be reasonably acceptable to the Trustee.
"Outstanding", when used with respect to Securities, means, as of the
date of determination, all Securities theretofore authenticated and delivered
under this Indenture, EXCEPT:
(i) Securities theretofore cancelled by the Trustee or
delivered to the Trustee for cancellation;
(ii) Securities for whose payment or redemption money in the
necessary amount has been theretofore deposited with the Trustee or
any Paying Agent (other than the Company) in trust or set aside and
segregated in trust by the Company (if the Company shall act as its
own Paying Agent) for the Holders of such Securities; PROVIDED that,
if such Securities are to be redeemed, notice of such redemption has
been duly given pursuant to this Indenture or provision therefor
satisfactory to the Trustee has been made; and
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(iii) Securities which have been paid pursuant to Section 306
or in exchange for or in lieu of which other Securities have been
authenticated and delivered pursuant to this Indenture, other than any
such Securities in respect of which there shall have been presented to
the Trustee proof satisfactory to it that such Securities are held by
a bona fide purchaser in whose hands such Securities are valid
obligations of the Company;
PROVIDED, HOWEVER, that in determining whether the Holders of the requisite
principal amount of the Outstanding Securities have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Securities owned
by the Company or any other obligor upon the Securities or any Affiliate of the
Company or of such other obligor shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Trustee shall be protected
in relying upon any such request, demand, authorization, direction, notice,
consent or waiver, only Securities which the Trustee knows to be so owned shall
be so disregarded. Securities so owned which have been pledged in good faith
may be regarded as Outstanding if the pledgee establishes to the satisfaction of
the Trustee the pledgee's right so to act with respect to such Securities and
that the pledgee is not the Company or any other obligor upon the Securities or
any Affiliate of the Company or of such other obligor.
"Paying Agent" means any Person authorized by the Company to pay the
principal of (and premium, if any), interest on, or Purchase Price in respect of
any Securities on behalf of the Company.
"Permitted Amount," as of any date of determination means, (i) if the
Fixed Charge Coverage Ratio for the four full fiscal quarters for which
financial statements are available most recently ended prior to such date is
greater than 1.4 to 1, $600,000, (ii) if the Fixed Charge Coverage Ratio for
such four quarter period is greater than 1.2 to 1 but less that or equal to 1.4
to l, $450,000 and (iii) if the Fixed Charge Coverage Ratio is less than or
equal to 1.2 to 1, $300,000.
"Permitted Collateral Disposition" means the following dispositions by
the Company or its Restricted Subsidiaries of items of Collateral: (a) the sale
in any calendar year of machinery, equipment, furniture, apparatus, tools or
implements or other similar property that may be defective or may have become
worn out or obsolete or no
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longer used or useful in the operations of the business of the Company, the
aggregate fair market value of which is less than $25,000 or less than 1 percent
of the aggregate principal amount of the Securities Outstanding at the time of
such sales; (b) the abandonment, termination, cancellation, release or
alteration in or substitution of, any leases or contracts relating to
Collateral; (c) the surrender or modification of any franchise, license or
permit relating to Collateral that it may own or under which it may be
operating; (d) the alteration, repair, replacement, change in the location or
position of or addition to the structure, machinery, systems, equipment,
fixtures and appurtenances of any Collateral; and (e) the demolition,
dismantling, tearing down or scrapping of any Collateral or the abandonment of
any thereof.
"Permitted Collateral Liens" means with respect to any asset of the
Company or its Restricted Subsidiaries constituting Collateral, (a) Liens
securing the Securities arising under this Indenture or any Security Document;
(b) Liens for taxes, assessments or governmental charges or claims that are not
yet delinquent or that are being contested in good faith by appropriate
proceedings promptly instituted and diligently concluded, PROVIDED that any
reserve or other appropriate provision as shall be required in conformity with
GAAP shall have been made therefor; (c) Liens imposed by law, such as
mechanics', carriers', warehousemen's, materialmen's, and vendors' Liens,
incurred in good faith in the ordinary course of business with respect to
amounts not yet delinquent or being contested in good faith by appropriate
proceedings, PROVIDED that any reserve or other appropriate provisions required
by GAAP shall have been made therefor; (d) Liens incurred and pledges made in
the ordinary course of business in connection with workers' compensation,
unemployment insurance and social security benefits and Liens to secure the
performance of statutory obligations, surety or appeal bonds, performance bonds
or other obligations of a like nature incurred in the ordinary course of
business; and (e) zoning restrictions, easements, licenses, covenants,
reservations, restrictions on the use of real property or minor irregularities
of title incident thereto that do not, in the aggregate, materially detract from
the value of the property or impair the use of such property in the operation of
the Company's business.
"Permitted Holder" means (A) Howard Hoeper, his spouse, members of his
immediate family and/or any of the lineal descendants of any such person and/or
(B) any trust or similar entity all of the beneficiaries of which, or a
corporation or partnership all of the stockholders or
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limited and general partners of which, are (x) any of the persons described in
the foregoing clause (A) or (y) any entity described in this clause (B).
"Permitted Investments" means, with respect to any Person, (a) any
Investments in such Person or in a Restricted Subsidiary of such Person; (b) any
Investments in Cash Equivalents; (c) Investments by such Person or any
Restricted Subsidiary of such Person in a person (the "Other Entity"), if as a
result of such Investment (i) such Other Entity becomes a Restricted Subsidiary
of such Person or (ii) such Other Entity is merged, consolidated or amalgamated
with or into, or transfers or conveys substantially all of its assets to, or is
liquidated into, such Person or a Restricted Subsidiary of such Person; (d)
Investments in any Other Entity engaged primarily in businesses permitted to be
engaged in by such Person or any of its Restricted Subsidiaries pursuant to
Section 1014 hereof in an aggregate amount not to exceed $1.0 million at any
time outstanding; (e) Investments in Unrestricted Subsidiaries in an aggregate
amount not to exceed $1.0 million at any time outstanding; (f) receivables owing
to such Person or any of its Restricted Subsidiaries if created or acquired in
the ordinary course of business; (g) stock, obligations or securities received
in settlement of debts created in the ordinary course of business and owing to
such Person or any of its Subsidiaries or in satisfaction of judgments; (h)
loans and advances to employees of the Company or any Restricted Subsidiary of
the Company for travel, entertainment and relocation expenses in the ordinary
course of business in an aggregate amount outstanding at any time not to exceed
$500,000; and (i) Investments received by the Company or any Restricted
Subsidiary of the Company as consideration for asset sales, including Asset
Sales; PROVIDED, HOWEVER, in the case of an Asset Sale, that such Asset Sale is
effected in compliance with Section 1016 hereof.
"Permitted Leases" means the lease of the Louisiana Facility and the
subleases of the Cedar Grove Facility and the Lake Forest Facility.
"Permitted Liens" means, with respect to any Person, (a) Liens in
favor of such Person; (b) in the case of the Company, Liens on accounts
receivable or inventories (or proceeds thereof) of the Company to secure
Indebtedness of the Company under the Senior Credit Facility; (c) Liens on
property of another Person (the "Other Entity") existing at the time such Other
Entity is merged into or consolidated with such Person or any Restricted
Subsidiary of such Person, PROVIDED that such Liens were not incurred in the
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contemplation of such merger or consolidation and do not extend to any assets
other than those of the Other Entity merged into or consolidated with such
Person; (d) Liens on property existing at the time of acquisition thereof by
such Person or any Restricted Subsidiary of such Person, PROVIDED that such
Liens were not incurred in contemplation of such acquisition; (e) Liens to
secure the performance of statutory obligations, surety or appeal bonds,
performance bonds or other obligations of a like nature incurred in the ordinary
course of business; (f) Liens existing on the date hereof; (g) Liens for taxes,
assessments or governmental charges or claims that are not yet delinquent or
that are being contested in good faith by appropriate proceedings promptly
instituted and diligently concluded, PROVIDED that any reserve or other
appropriate provision as shall be required in conformity with GAAP shall have
been made therefor; (h) Liens imposed by law, such as mechanics', carriers',
warehousemen's, materialmen's, and vendors' Liens, incurred in good faith in the
ordinary course of business with respect to amounts not yet delinquent or being
contested in good faith by appropriate proceedings, PROVIDED that any reserve or
other provisions required by GAAP shall have been made therefor; (i) zoning
restrictions, easements, licenses, covenants, reservations, restrictions on the
use of real property or minor irregularities of title incident thereto that do
not, in the aggregate, materially detract from the value of the property or the
assets of such Person or impair the use of such property in the operation of
such Person's business; (j) judgment Liens to the extent that such judgments do
not cause or constitute a Default or an Event of Default; (k) Liens to secure
Indebtedness incurred for the purpose of financing of all or a part of the
purchase price of property or assets acquired or constructed on or after the
date of this Indenture, including Liens securing any Acquisition Financing
Facility, PROVIDED that (i) such property or assets are used in a line of
business in which such Person is permitted to engage pursuant to Section 1014
hereof, (ii) at the time of incurrence of any such Lien, the aggregate principal
amount of the obligations secured by such Lien shall not exceed the lesser of
the cost or fair market value of the assets or property (or portions thereof) so
acquired or constructed, (iii) each such Lien shall encumber only the assets or
property (or portions thereof) so acquired or constructed and shall attach to
such property within 120 days of the purchase or construction thereof and (iv)
any Indebtedness secured by such Lien shall have been permitted to be incurred
under Section 1009 hereof; (l) ground leases in respect of the real property on
which facilities owned or leased by such Person or any of its Subsidiaries are
located; (m) Liens arising from UCC financing statements regarding property
leased by such
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Person or any of its Subsidiaries, PROVIDED that such Liens are granted solely
in connection with such leases and not in connection with the borrowing of money
or the obtaining of advances or credit; (n) Liens incurred and pledges made in
the ordinary course of business in connection with workers' compensation,
unemployment insurance and social security benefits; (o) Liens securing Purchase
Money Obligations, the proceeds of which are used solely to finance the
acquisition or lease by such Person or any of its Subsidiaries of furniture,
fixtures or equipment used in the ordinary course of business, PROVIDED that
such Purchase Money Obligations are (i) non-recourse to such Person and its
Subsidiaries and (ii) permitted to be incurred under Section 1009 hereof, (p)
Liens securing Indebtedness incurred to refinance Indebtedness that has been
secured by a Lien permitted under this Indenture, PROVIDED that (i) any such
Lien shall not extend to or cover any assets or property not securing the
Indebtedness so refinanced and (ii) the Refinancing Indebtedness secured by such
Lien shall not have a principal amount in excess of the Indebtedness so
refinanced, and (q) Liens arising in the ordinary course of such Person's
business to the extent the fair market value of property and assets secured by
such Liens (as determined in good faith by the Board of Directors of such
Person) shall not exceed $2.0 million.
"Permitted Refinancing" has the meaning specified in Section 1009(iv).
"Person" means any individual, corporation, partnership, joint
venture, trust, unincorporated organization or government or any agency or
political subdivision thereof.
"Physical Securities" has the meaning specified in Section 201.
"Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same debt as that evidenced by such
particular Security; and, for the purposes of this definition, any Security
authenticated and delivered under Section 306 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Security shall be deemed to evidence the
same debt as the mutilated, destroyed, lost or stolen Security.
"Public Equity Offering" means a bona fide underwritten sale to the
public of Common Stock of the Company or of Group (to the extent the net
proceeds thereof are contributed to the Company as common equity) pursuant to a
registration statement (other than on Form S-8 or any
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other form relating to securities issuable under any benefit plan of the Company
or of Group, as the case may be) that is declared effective by the Commission.
"Purchase Amount" has the meaning specified in the definition of Offer
to Purchase.
"Purchase Date" has the meaning specified in the definition of Offer
to Purchase.
"Purchase Money Obligations" of any Person means any obligations of
such Person or any of its Subsidiaries to any seller or any other person
incurred or assumed in connection with the purchase of real or personal property
to be used in the business of such Person or any of its Subsidiaries within 180
days of such incurrence or assumption.
"Purchase Price" has the meaning specified in the definition of Offer
to Purchase.
"Qualified Institutional Buyer" or "QIB" shall have the meaning
specified in Rule 144A.
"Redemption Date", when used with respect to any Security to be
redeemed, means the date fixed for such redemption by or pursuant to this
Indenture.
"Redemption Price", when used with respect to any Security to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
"Refinance" has the meaning specified in Section 1009.
"Refinancing Indebtedness" has the meaning specified in Section 1009.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of May 17, 1996, between the Company and the Initial
Purchasers, for the benefit of themselves and the Holders, as the same may be
amended or modified from time to time in accordance with the terms thereof.
"Regular Record Date" for the interest payable on any Interest Payment
Date means the April 15 or October 15 (whether or not a Business Day), as the
case may be, next preceding such Interest Payment Date.
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"Released Interests" has the meaning specified in Section 1305.
"Regulation S" means Regulation S under the Securities Act.
"Replacement Collateral" means, at any relevant date in connection
with an Asset Sale involving Collateral or a Collateral Loss Event, assets used
in the Company's business other than the Collateral which (i) constitute long-
term tangible assets (and do not constitute Capital Stock of any Person), (ii)
are acquired by the Company at a purchase price which does not exceed the fair
market value of such Replacement Collateral (as determined, in good faith by the
Board of Directors), and (iii) are free and clear of all Liens, except as
expressly permitted by the Security Documents.
"Resale Registration Statement" means a registration statement under
the Securities Act registering the Securities for resale pursuant to the terms
of the Registration Rights Agreement.
"Responsible Officer", when used with respect to the Trustee, means
the chairman or any vice-chairman of the board of directors, the chairman or any
vice-chairman of the executive committee of the board of directors, the chairman
of the trust committee, the president, any vice president, the secretary, any
assistant secretary, the treasurer, any assistant treasurer, the cashier, any
assistant cashier, any trust officer or assistant trust officer, the controller
or any assistant controller or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his knowledge of
and familiarity with the particular subject.
"Restoration" or "Restore" means the physical repair, restoration or
rebuilding of all or any portion of the Collateral following any Casualty or
Condemnation.
"Restricted Global Security" means a Global Security representing
Restricted Securities.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Payments" has the meaning specified in Section 1008.
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"Restricted Securities" has the meaning specified in Section 205.
"Restricted Subsidiary" of a Person means any Subsidiary of such
Person that is not an Unrestricted Subsidiary.
"Rule 144" means Rule 144 under the Securities Act (including any
successor rule thereto), as the same may be amended from time to time.
"Rule 144A" means Rule 144A under the Securities Act (including any
successor rule thereto), as the same may be amended from time to time.
"Securities" has the meaning specified in the first paragraph of the
Recitals of the Company.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the Commission promulgated thereunder.
"Security Agreement" means the Security Agreement dated as of May 17,
1996, between the Company and the Collateral Agent for the benefit of the
Holders.
"Security Documents" means, collectively, the Security Agreement, the
Mortgage/Deed of Trust and all other agreements, mortgages, deeds of trust,
collateral assignments or other instruments evidencing or creating any security
interests in favor of the Collateral Agent for the benefit of the Holders in all
or any portion of the Collateral, in each case as amended, supplemented or
modified from time to time in accordance with their terms and the terms of the
Indenture.
"Security Register" and "Security Registrar" have the respective
meanings specified in Section 305.
"Senior Credit Facility" means that certain agreement, to be dated as
of May 17, 1996, by and among the Company, LaSalle National Bank, as lender and
administrative agent, and BT Commercial Corp., as lender, initially providing
for revolving credit loans in a principal amount of up to $20.0 million and a
letter of credit facility in an aggregate amount of up to the lesser of (i) the
remaining availability under the Senior Credit Facility and (ii) $2.0 million,
including any related notes, guarantees, collateral documents, instruments and
agreements executed in connection therewith, in each case as it may be
thereafter amended, modified or extended from time to time.
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"Senior Debt" means any Indebtedness incurred by the Company, unless
the instrument under which such Indebtedness is incurred expressly provides that
it is subordinated in right of payment to the Securities; PROVIDED that Senior
Debt will not include (a) any liability for federal, state, local or other taxes
owed or owing, (b) any Indebtedness owing to any Subsidiaries of the Company,
(c) any trade payables or (d) any Indebtedness that is incurred in violation of
this Indenture.
"Significant Restricted Subsidiary" means a Significant Subsidiary
that is also a Restricted Subsidiary, or any group of Restricted Subsidiaries
that together would constitute a Significant Subsidiary.
"Significant Subsidiary" means, with respect to any Person, any
Subsidiary of such Person that would be a "significant subsidiary" as defined in
Article 1, Rule 1-02 of Regulation S-X, promulgated pursuant to the Act, as such
Regulation is in effect on the date hereof.
"Special Record Date" for the payment of any Defaulted Interest means
a date fixed by the Trustee pursuant to Section 307.
"Stated Maturity", when used with respect to any Security or any
instalment of interest thereon, means the date specified in such Security as the
fixed date on which the principal of such Security or such instalment of
interest is due and payable.
"Stock and Warrant Holders Agreement" means the Stock and Warrant
Holders Agreement dated as of June 30, 1993, among Group, Howard P. Hoeper, HPH,
UBS Capital and Apollo, as in effect on the Issue Date or thereafter amended in
a manner that is not materially adverse to the Company or the Holders of the
Securities.
"Subsidiary" means, with respect to any Person, any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person or a combination
thereof.
"Tax Sharing Agreement" means the tax sharing agreement between the
Company and HPH or any other person with which the Company is required to, or is
permitted to,
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file a consolidated tax return or with which the Company is or could be part of
an affiliated group for tax purposes as in effect on the date of this Indenture
or as hereafter amended in a manner that is not materially adverse to the
Company or the Holders of the Securities.
"Transaction Date" has the meaning specified in the definition of
Fixed Charge Coverage Ratio.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this instrument until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean such successor Trustee.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as in
force at the date as of which this instrument was executed; PROVIDED, HOWEVER,
that in the event the Trust Indenture Act of 1939 is amended after such date,
"Trust Indenture Act" means, to the extent required by any such amendment, the
Trust Indenture Act of 1939 as so amended.
"UBS Capital" means UBS Capital Corporation.
"UCC" means the Uniform Commercial Code as in effect in the State of
New York.
"Unrestricted Global Security" means a Global Security representing
Securities which are not Restricted Securities.
"Unrestricted Subsidiary" means, with respect to any Person, any
Subsidiary of such Person designated by the Board of Directors of such Person as
an Unrestricted Subsidiary pursuant to a Board Resolution set forth in an
Officers' Certificate and delivered to the Trustee (i) that, (A) at the time of
designation, has total assets not exceeding $1,000 or (B) if such Subsidiary has
total assets exceeding $1,000, then such designation would be permitted by
Section 1008, (ii) no portion of the Indebtedness or any other obligations
(contingent or otherwise) of such Subsidiary (A) is guaranteed by such Person or
any other Subsidiary (other than another Unrestricted Subsidiary) of such
Person, (B) is recourse to or obligates such Person or any other Subsidiary
(other than another Unrestricted Subsidiary) of such Person in any way or (C)
subjects any property or asset of such Person or any other Subsidiary (other
than another Unrestricted Subsidiary) of such Person, directly or indirectly,
contingently or otherwise, to the satisfaction thereof, (iii) with which neither
such Person
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nor any other Subsidiary of such Person (other than another Unrestricted
Subsidiary) has any contract, agreement, arrangement or understanding other than
on terms no less favorable to such Person or such other Subsidiary than those
that might be obtained at the time from persons who are not Affiliates of such
Person and (iv) with which neither such Person nor any other Subsidiary of such
Person (other than another Unrestricted Subsidiary) has any obligation (A) to
subscribe for additional shares of Capital Stock or other Equity Interests
therein or (B) to maintain or preserve such Subsidiary's financial condition or
to cause such Subsidiary to achieve certain levels of operating results. Subject
to the preceding sentence, the Board of Directors of such Person may designate
any Restricted Subsidiary to be an Unrestricted Subsidiary; PROVIDED that such
designation shall be deemed to be the making of an Investment by such Person in
such Subsidiary and such designation shall only be permitted if, in addition to
the requirements of the preceding sentence, (i) such Investment is permitted
under Section 1008 and (ii) no Default or Event of Default would be in existence
following such designation. The Board of Directors of such Person may designate
any Unrestricted Subsidiary to be a Restricted Subsidiary; PROVIDED that such
designation shall be deemed to be an incurrence of Indebtedness by a Restricted
Subsidiary of such Person of any outstanding Indebtedness of such Unrestricted
Subsidiary and such designation shall only be permitted if (i) such Indebtedness
is permitted under Section 1009 and (ii) no Default or Event of Default would be
in existence following such designation.
"U.S. Physical Securities" has the meaning specified in Section 201.
"Vice President", when used with respect to the Company or the
Trustee, means any vice president, whether or not designated by a number or a
word or words added before or after the title "vice president".
"Voting Stock" means, with respect to any Person, securities of any
class or classes of Capital Stock in such Person entitling the Holders thereof
(whether at all times or only so long as no senior class of stock has voting
power by reason of any contingency) to vote in the election of members of the
Board of Directors or other governing body of such Person.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (a) the sum
of the products obtained by multiplying (x) the amount of each then remaining
install-
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ment, sinking fund, serial maturity or other required payments of principal,
including payment at final maturity, in respect thereof, by (y) the number of
years (calculated to the nearest one-twelfth) that will elapse between such date
and the making of such payment, by (b) the then outstanding principal amount of
such Indebtedness.
"Wholly Owned Restricted 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 Restricted
Subsidiaries of such Person or by such Person and one or more Wholly Owned
Restricted Subsidiaries of such Person.
"Wholly Owned Subsidiary" of any Person means a 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.
SECTION 102. COMPLIANCE CERTIFICATES AND OPINIONS.
Upon any application or request by the Company to the Trustee to take
any action under any provision of this Indenture, the Company shall furnish to
the Trustee such certificates and opinions as may be required under the Trust
Indenture Act. Each such certificate or opinion shall be given in the form of
an Officers' Certificate, if to be given by an officer of the Company, or an
Opinion of Counsel, if to be given by counsel, and shall comply with the
requirements of the Trust Indenture Act and any other requirement set forth in
this Indenture.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include
(1) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
(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;
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(3) a statement that, in the opinion of each such individual, 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, in the opinion of each such
individual, such condition or covenant has been complied with.
SECTION 103. FORM OF DOCUMENTS DELIVERED TO TRUSTEE.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or opinion of counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company, unless such counsel knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations with respect to such
matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
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SECTION 104. ACTS OF HOLDERS; RECORD DATES.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given or taken by
Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by agent duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to the Trustee and, where it is hereby expressly required, to the Company. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Holders signing
such instrument or instruments. Proof of execution of any such instrument or of
a writing appointing any such agent shall be sufficient for any purpose of this
Indenture and (subject to Section 601) conclusive in favor of the Trustee and
the Company, if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where
such execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of his authority. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be proved
in any other manner which the Trustee deems sufficient.
(c) The Company may, in the circumstances permitted by the Trust
Indenture Act, fix any day as the record date for the purpose of determining the
Holders entitled to give or take any request, demand, authorization, direction,
notice, consent, waiver or other action, or to vote on any action, authorized or
permitted to be given or taken by Holders. If not set by the Company prior to
the first solicitation of a Holder made by any Person in respect of any such
action, or, in the case of any such vote, prior to such vote, the record date
for any such action or vote shall be the 30th day (or, if later, the date of the
most recent list of Holders required to be provided pursuant to Section 701)
prior to such first solicitation or vote, as the case may be. With regard to
any record date, only the Holders on such date (or their duly designated
proxies)
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<PAGE>
shall be entitled to give or take, or vote on, the relevant action.
(d) The ownership of Securities shall be proved by the Security
Register.
(e) Any request, demand, authorization, direction, notice, consent,
waiver or other Act of the Holder of any Security shall bind every future Holder
of the same Security and the Holder of every Security issued upon the
registration of transfer thereof or in exchange therefor or in lieu thereof in
respect of anything done, omitted or suffered to be done by the Trustee or the
Company in reliance thereon, whether or not notation of such action is made upon
such Security.
SECTION 105. NOTICES, ETC., TO TRUSTEE AND COMPANY.
Any request, demand, authorization, direction, notice, consent, waiver
or Act of Holders or other document provided or permitted by this Indenture to
be made upon, given or furnished to, or filed with,
(1) the Trustee by any Holder or by the Company shall be
sufficient for every purpose hereunder if made, given, furnished or
filed in writing to or with the Trustee at its Corporate Trust Office,
Attention: Sarah Webb, or
(2) the Company by the Trustee or by any Holder shall be
sufficient for every purpose hereunder (unless otherwise herein
expressly provided) if in writing and mailed, first-class postage
prepaid, to the Company addressed to it at the address of its
principal office specified in the first paragraph of this instrument
or at any other address previously furnished in writing to the Trustee
by the Company.
SECTION 106. NOTICE TO HOLDERS; WAIVER.
Where this Indenture provides for notice to Holders of any event, such
notice shall be sufficiently given (unless otherwise herein expressly provided)
if in writing and mailed, first-class postage prepaid, to each Holder affected
by such event, at his address as it appears in the Security Register, not later
than the latest date (if any), and not earlier than the earliest date (if any),
prescribed for the giving of such notice. In any case where
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<PAGE>
notice to Holders is given by mail, neither the failure to mail such notice, nor
any defect in any notice so mailed, to any particular Holder shall affect the
sufficiency of such notice with respect to other Holders. Where this Indenture
provides for notice in any manner, such notice may be waived in writing by the
Person entitled to receive such notice, either before or after the event, and
such waiver shall be the equivalent of such notice. Waivers of notice by
Holders shall be filed with the Trustee, but such filing shall not be a
condition precedent to the validity of any action taken in reliance upon such
waiver.
In case by reason of the suspension of regular mail service or by
reason of any other cause it shall be impracticable to give such notice by mail,
then such notification as shall be made with the approval of the Trustee shall
constitute a sufficient notification for every purpose hereunder.
SECTION 107. CONFLICT WITH TRUST INDENTURE ACT.
If any provision hereof limits, qualifies or conflicts with a
provision of the Trust Indenture Act that is required under such Act to be a
part of and govern this Indenture, the latter provision shall control. If any
provision of this Indenture modifies or excludes any provision of the Trust
Indenture Act that may be so modified or excluded, the latter provision shall be
deemed to apply to this Indenture as so modified or to be excluded, as the case
may be.
SECTION 108. EFFECT OF HEADINGS AND TABLE OF CONTENTS.
The Article and Section headings herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.
SECTION 109. SUCCESSORS AND ASSIGNS.
All covenants and agreements in this Indenture by the Company shall
bind its successors and assigns, whether so expressed or not.
SECTION 110. SEPARABILITY CLAUSE.
In case any provision in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the
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<PAGE>
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
SECTION 111. BENEFITS OF INDENTURE.
Nothing in this Indenture, in the Security Documents or in the
Securities, express or implied, shall give to any Person, other than the parties
hereto and their successors hereunder and the Holders of Securities, any benefit
or any legal or equitable right, remedy or claim under this Indenture.
SECTION 112. GOVERNING LAW.
This Indenture and the Securities shall be governed by and construed
in accordance with the laws of the State of New York.
SECTION 113. LEGAL HOLIDAYS.
In any case where any Interest Payment Date, Redemption Date, Purchase
Date or Stated Maturity of any Security shall not be a Business Day, then
(notwithstanding any other provision of this Indenture or of the Securities)
payment of interest, principal (and premium, if any) or any Purchase Amount need
not be made on such date, but may be made on the next succeeding Business Day
with the same force and effect as if made on the Interest Payment Date or
Redemption Date, or Purchase Date, or at the Stated Maturity, PROVIDED that no
interest shall accrue for the period from and after such Interest Payment Date,
Redemption Date, Purchase Date or Stated Maturity, as the case may be.
ARTICLE TWO
Security Forms
SECTION 201. FORMS GENERALLY.
The Securities and the Trustee's certificates of authentication shall
be in substantially the forms set forth in this Article, with such appropriate
insertions, omissions, substitutions and other variations as are required or
permitted by this Indenture, and may have such letters, numbers or other marks
of identification and such legends or endorsements placed thereon as may be
required to comply
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<PAGE>
with the rules of any securities exchange or Depositary thereof, the Internal
Revenue Code of 1986, as amended, and regulations thereunder, or as may,
consistently herewith, be determined by the officers executing such Securities,
as evidenced by their execution of the Securities.
Restricted Securities shall bear the legend required by Section 205.
Securities offered and sold in reliance on Rule 144A shall be issued
initially in the form of one or more permanent Global Securities in
substantially the form set forth in this Article. The aggregate principal
amount of the Global Securities may from time to time be increased or decreased
by adjustments made on the records of the Trustee, as custodian for the
Depositary, as hereinafter provided.
Securities offered and sold in offshore transactions in reliance on
Regulation S shall be issued in the form of permanent certificated Securities in
registered form in substantially the form set forth in this Article (the
"Offshore Physical Securities"). Securities offered and sold in reliance on any
other exemption from registration under the Securities Act other than as
described in the preceding paragraph shall be issued, and Securities offered and
sold in reliance on Rule 144A may be issued, in the form of permanent
certificated Securities in registered form, in substantially the form set forth
in this Article (the "U.S. Physical Securities"). The Offshore Physical
Securities and the U.S. Physical Securities are sometimes collectively referred
to as the "Physical Securities."
Securities resold by the Initial Purchasers to an Institutional
Accredited Investor (the "IAI Securities") shall be issued in definitive, fully
registered form without interest coupons, substantially in the form of Security
set forth in this Article. IAI Securities shall be delivered to such
Institutional Accredited Investor(s) only upon the execution and delivery to the
Initial Purchasers, the Issuer and the Trustee of an Accredited Investor Letter,
substantially in the form of the letter attached as Appendix A to the Offering
Memorandum. Securities shall cease to be IAI Securities upon certain transfers
as provided in Section 312.
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<PAGE>
SECTION 202. FORM OF FACE OF SECURITY.
[INCLUDE IF SECURITY IS A RESTRICTED SECURITY -- THIS SECURITY HAS NOT
BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT AS SET FORTH BELOW. BY ITS
ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE ACT), (B) IT IS AN
"ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) or (7) UNDER THE
ACT) (AN "ACCREDITED INVESTOR), OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING
THIS SECURITY IN AN OFFSHORE TRANSACTION, (2) AGREES THAT IT WILL NOT WITHIN
THREE YEARS AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY RESELL OR OTHERWISE
TRANSFER THIS SECURITY EXCEPT (A) TO THE ISSUER OR ANY SUBSIDIARY THEREOF, (B)
INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH
RULE 144A UNDER THE ACT, (C) INSIDE THE UNITED STATES TO AN ACCREDITED INVESTOR
THAT, PRIOR TO SUCH TRANSFER, FURNISHES (OR HAS FURNISHED ON ITS BEHALF BY A
U.S. BROKER-DEALER) TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS
SECURITY (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE FOR THIS
SECURITY), (D) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN
COMPLIANCE WITH RULE 904 UNDER THE ACT, (E) PURSUANT TO THE EXEMPTION FROM
REGISTRATION PROVIDED BY RULE 144 (IF AVAILABLE), OR (F) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND (3) AGREES THAT IT WILL GIVE
TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO
THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS SECURITY
WITHIN THREE YEARS AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY, IF THE PROPOSED
TRANSFEREE IS AN ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER,
FURNISH TO THE TRUSTEE AND THE ISSUER SUCH CERTIFICATIONS, LEGAL OPINIONS OR
OTHER INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH
TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE ACT. AS USED HEREIN, THE TERMS
"OFFSHORE TRANSACTION", "UNITED STATES" AND "U.S. PERSON" HAVE THE RESPECTIVE
MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE ACT.
THIS SECURITY AND ANY RELATED DOCUMENTATION MAY BE AMENDED OR
SUPPLEMENTED FROM TIME TO TIME TO MODIFY THE RESTRICTIONS ON AND PROCEDURES FOR
RESALES AND OTHER TRANSFERS OF THIS SECURITY TO REFLECT ANY CHANGE IN APPLICABLE
LAW OR REGULATION (OR THE INTERPRETATION THEREOF) OR IN PRACTICES RELATING TO
THE RESALE OR TRANSFER OF RESTRICTED SECURITIES GENERALLY. THE HOLDER OF THIS
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<PAGE>
SECURITY SHALL BE DEEMED BY THE ACCEPTANCE OF THIS SECURITY TO HAVE AGREED TO
ANY SUCH AMENDMENT OR SUPPLEMENT.]
[INCLUDE IF SECURITY IS NOT AN EXCHANGE SECURITY -- THE HOLDER OF THIS
SECURITY IS SUBJECT TO, AND ENTITLED TO THE BENEFITS OF, A REGISTRATION RIGHTS
AGREEMENT, DATED AS OF MAY 17, 1996, ENTERED INTO BY THE COMPANY FOR THE BENEFIT
OF CERTAIN HOLDERS FROM TIME TO TIME OF SECURITIES.]
[INCLUDE IF SECURITY IS A GLOBAL SECURITY -- THIS SECURITY IS A GLOBAL
SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS
REGISTERED IN THE NAME OF A DEPOSITORY OR A NOMINEE THEREOF. THIS SECURITY MAY
NOT BE EXCHANGED IN WHOLE OR IN PART FOR A SECURITY REGISTERED, AND NO TRANSFER
OF THIS SECURITY IN WHOLE OR IN PART MAY BE REGISTERED, IN THE NAME OF ANY
PERSON OTHER THAN SUCH DEPOSITORY OR A NOMINEE THEREOF, EXCEPT IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY ("DTC"), A NEW YORK CORPORATION 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 IN SUCH OTHER NAME
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF (AND ANY PAYMENT 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 THEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.]
PACKAGING RESOURCES INCORPORATED
11 5/8% Senior Secured Notes due 2003
No. __________ $________
Packaging Resources Incorporated, a corporation duly organized and
existing under the laws of Delaware (herein called the "Company", which term
includes any successor Person under the Indenture hereinafter referred to), for
value received, hereby promises to pay to __________________, or registered
assigns, the principal sum of _____________________ Dollars [INCLUDE IF SECURITY
IS A GLOBAL SECURITY -- (which amount may from time to time be increased or
decreased by adjustments made on the records of the Trustee, as custodian for
the Depositary, in accordance
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<PAGE>
with the rules and procedures of the Depositary)] on May 1, 2003, and to pay
interest thereon from May 17, 1996 or from the most recent Interest Payment Date
to which interest has been paid or duly provided for, semi-annually on May 1 and
November 1 in each year, commencing November 1, 1996, at the rate of 11 5/8% per
annum, until the principal hereof is paid or made available for payment.
The interest so payable, and punctually paid or duly provided for, on
any Interest Payment Date will, as provided in such Indenture, be paid to the
Person in whose name this Security (or one or more Predecessor Securities) is
registered at the close of business on the Regular Record Date for such
interest, which shall be the April 15 or October 15 (whether or not a Business
Day), as the case may be, next preceding such Interest Payment Date. Any such
interest not so punctually paid or duly provided for will forthwith cease to be
payable to the Holder on such Regular Record Date and may either be paid to the
Person in whose name this Security (or one or more Predecessor Securities) is
registered at the close of business on a Special Record Date for the payment of
such Defaulted Interest to be fixed by the Trustee, notice whereof shall be
given to Holders of Securities not less than 10 days prior to such Special
Record Date, or be paid at any time in any other lawful manner not inconsistent
with the requirements of any securities exchange on which the Securities may be
listed, and upon such notice as may be required by such exchange, all as more
fully provided in said Indenture. Payment of the principal of (and premium, if
any) and interest on this Security will be made at the office or agency of the
Company maintained for that purpose in the City of New York, 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; PROVIDED, 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. If this Security is a Global Security, then notwithstanding
the foregoing, each such payment will be made in accordance with the procedures
of the Depositary as then in effect.
Reference is hereby made to the further provisions of this Security
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by
the Trustee referred to on the reverse
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<PAGE>
hereof by manual signature, this Security shall not be entitled to any benefit
under the Indenture or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.
Dated:
PACKAGING RESOURCES INCORPORATED
By
------------------------------------
Attest:
- -----------------------------------
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<PAGE>
SECTION 203. FORM OF REVERSE OF SECURITY.
This Security is one of a duly authorized issue of Securities of the
Company designated as its 11 5/8% Senior Secured Notes due 2003 (herein called
the "Securities"), limited in aggregate principal amount to $110,000,000, issued
and to be issued under an Indenture, dated as of May 17, 1996 (herein called the
"Indenture"), between the Company and LaSalle National Bank, as Trustee (herein
called the "Trustee", which term includes any successor trustee under the
Indenture), to which Indenture and all indentures supplemental thereto reference
is hereby made for a statement of the respective rights, limitations of rights,
duties and immunities thereunder of the Company, the Trustee and the Holders of
the Securities and of the terms upon which the Securities are, and are to be,
authenticated and delivered. As provided in the Indenture, the Securities are
secured by a pledge of the Collateral. The Collateral Agent shall be entitled
to the benefits of the Liens on the Collateral under the Indenture and the
Security Documents as the same may be amended from time to time pursuant to the
respective provisions thereof and of the Indenture, subject only to Permitted
Collateral Liens, for the benefit of each Holder accepting a Security. In the
event the Company shall enter into an Acquisition Financing Facility, the rights
of the Holders in respect of the pledge of the Collateral will be subject to the
terms of the Intercreditor and Collateral Agency Agreement to be entered into
among the lenders under such Acquisition Financing Facility, the Collateral
Agent and the Trustee, the form of which is available from the Company upon
request by any Holder.
No sinking fund is provided for the Securities. The Securities are
subject to redemption upon not less than 30 nor more than 60 days' notice, at
any time on or after May 1, 2000, as a whole or in part, at the election of the
Company, at the following Redemption Prices (expressed as percentages of the
principal amount): If redeemed during the 12-month period beginning May 1 of
the years indicated,
Year Redemption
Price
-------------- ---------------------
2000 105.813%
2001 102.906%
2002 100%
and thereafter at a Redemption Price equal to 100% of the principal amount,
together in the case of any such redemp-
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tion with accrued interest to the Redemption Date, but interest installments
whose Stated Maturity is on or prior to such Redemption Date will be payable to
the Holders of such Securities, or one or more Predecessor Securities, of record
at the close of business on the relevant Record Dates referred to on the face
hereof, all as provided in the Indenture.
Notwithstanding the foregoing, on or prior to May 1, 1999, the Company
may redeem at any time or from time to time up to 30% of the aggregate principal
amount of Securities originally issued at a redemption price of 111 5/8% of the
principal amount thereof, plus accrued and unpaid interest, if any, thereon to
the Redemption Date, with the net proceeds of one or more Public Equity
Offerings; PROVIDED that at least $70 million in aggregate principal amount of
Securities remain outstanding immediately after such redemption; and PROVIDED
further, that such redemption shall occur within 90 days of the date of the
closing of any such Public Equity Offering.
In the case of any Public Equity Offering by Group, the Company shall
apply to a redemption of the Securities to the extent permitted under the
Indenture an amount not less than 50% of the Aggregate Net Proceeds of such
Public Equity Offering. The Company has also agreed pursuant to the Indenture
not to repurchase any Securities pursuant to open market or privately negotiated
purchases until the expiration of twelve months following any Public Equity
Offering.
[INCLUDE IF SECURITY IS A GLOBAL SECURITY -- In the event of a deposit
or withdrawal of an interest in this Security, including an exchange, transfer,
redemption, repurchase or conversion of this Security in part only, the Trustee,
as custodian of the Depositary, shall make an adjustment on its records to
reflect such deposit or withdrawal in accordance with the rules and procedures
of the Depositary.]
[INCLUDE IF SECURITY IS A RESTRICTED SECURITY -- Subject to certain
limitations in the Indenture, at any time when the Company is not subject to
Section 13 or 15(d) of the United States Securities Exchange Act of 1934, as
amended, upon the request of a Holder of a Restricted Security, the Company will
promptly furnish or cause to he furnished Rule 144A Information (as defined
below) to such Holder of Restricted Securities, or to a prospective purchaser of
any such security designated by any such Holder, to the extent required to
permit compliance by any such holder with Rule 144A under the Securities Act of
1933,
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<PAGE>
as amended (the "Securities Act"). "Rule 144A Information" shall be such
information as is specified pursuant to Rule 144A(d)(4) under the Securities Act
(or any successor provision thereto).]
If an Event of Default shall occur and be continuing, the principal of
all the Securities may be declared due and payable in the manner and with the
effect provided in the Indenture.
The Indenture provides that, subject to certain conditions, if (i)
certain Net Proceeds are available to the Company as a result of Asset Sales or
Collateral Loss Events, or (ii) a Change of Control occurs, the Company shall be
required to make an Offer to Purchase for all or a specified portion of the
Securities.
The Indenture contains provisions for defeasance at any time, upon
compliance with certain conditions set forth therein, of (i) the entire
indebtedness of this Security or (ii) certain restrictive covenants and Events
of Default with respect to this Security, in each case together with the release
of the Collateral from the Liens of the Security Documents.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and of the Security Documents and the modification of the
rights and obligations of the Company and the rights of the Holders of the
Securities under the Indenture and the Security Documents at any time by the
Company and the Trustee with the consent of the Holders of a majority in
aggregate principal amount of the Securities at the time Outstanding. The
Indenture also contains provisions permitting the Holders of specified
percentages in aggregate principal amount of the Securities at the time
Outstanding, on behalf of the Holders of all the Securities, to waive compliance
by the Company with certain provisions of the Indenture and the Security
Documents, and certain past defaults under the Indenture and the Security
Documents, and their consequences. Any such consent or waiver by the Holder of
this Security shall be conclusive and binding upon such Holder and upon all
future Holders of this Security and of any Security issued upon the registration
of transfer hereof or in exchange herefor or in lieu hereof, whether or not
notation of such consent or waiver is made upon this Security.
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of (and premium, if
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any) and interest on this Security at the times, place and rate, and in the coin
or currency, herein prescribed.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Security is registrable in the Security
Register, upon surrender of this Security for registration of transfer at the
office or agency of the Company in The City of New York, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Company and the Security Registrar duly executed by, the Holder hereof or his
attorney duly authorized in writing, and thereupon one or more new Securities,
of authorized denominations and for the same aggregate principal amount, will be
issued to the designated transferee or transferees.
The Securities are issuable only in registered form without coupons in
denominations of [IF SECURITY IS AN IAI SECURITY, INSERT -- $250,000 and any
integral multiple of $1,000 above that amount] [IF THE SECURITY IS NOT AN IAI
SECURITY, INSERT -- $1,000 and any integral multiple thereof]. As provided in
the Indenture and subject to certain limitations therein set forth, Securities
are exchangeable for a like aggregate principal amount of Securities of a
different authorized denomination, as requested by the Holder surrendering the
same.
No service charge shall be made for any such registration of transfer
or exchange, but the Company may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name this Security is registered as the owner
hereof for all purposes, whether or not this Security be overdue, and neither
the Company, the Trustee nor any such agent shall be affected by notice to the
contrary.
All terms used in this Security which are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
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<PAGE>
OPTION TO ELECT PURCHASE
If you want to elect to have this Security purchased in its entirety
by the Company pursuant to Section 1016 or Section 1017 of the Indenture, check
the appropriate box:
Section 1016 / /
Section 1017 / /
If you want to elect to have only a part of this Security purchased by
the Company pursuant to Section 1016 or Section 1017 of the Indenture, state the
amount you elect to have purchased: $
Dated: Your Signature:
--------------------
(Sign exactly as name appears
on the other side of this Security)
Signature Guarantee:
-----------------------------------
(Signature must be guaranteed by
a member firm of the New York Stock
Exchange or a commercial bank or
trust company)
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<PAGE>
ASSIGNMENT FORM
If you 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.
Date: Signed:
------------- ----------------------------
(Sign exactly as your name
appears on the other side
this Security)
Signature Guarantee:
---------------------------------------------------
[INCLUDE IF SECURITY IS NOT AN EXCHANGE SECURITY -- In connection with any
transfer of this Security occurring prior to the date which is the earlier of
(i) the date of the declaration by the SEC of the effectiveness of a
registration statement under the Securities Act of 1933, as amended (the
"Securities Act"), covering resales of this Security (which effectiveness shall
not have been suspended or terminated at the date of the transfer) and (ii) May
17, 1999, the undersigned confirms that it has not utilized any general
solicitation or general advertising in connection with the transfer and that
this Security is being transferred:
[CHECK ONE]
(1) / / to the Company or a subsidiary thereof; or
(2) / / pursuant to and in compliance with rule 144A under the Securities Act;
or
(3) / / to an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act) that has
furnished to the Trustee a signed letter containing certain
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<PAGE>
representations and agreements (the form of which letter can be
obtained from the Trustee); or
(4) / / outside the United States to a "foreign person" in compliance with
Rule 904 of Regulation S under the Securities Act; or
(5) / / pursuant to the exemption from registration provided by Rule 144 under
the Securities Act; or
(6) / / pursuant to an effective registration statement under the Securities
Act; or
(7) / / pursuant to another available exemption from the registration
requirements of the Securities Act.
Unless one of the boxes is checked, the Trustee will refuse to register any of
the Securities evidenced by this certificate in the name of any person other
than the registered Holder thereof; PROVIDED that if box (3), (4), (5) or (7) is
checked, the Company or the Trustee may require, prior to registering any such
transfer of the Securities, in its sole discretion, such legal opinions,
certifications (including an investment letter in the case of box (3) or (4))
and other information as the Trustee or the Company may reasonably request to
confirm that such transfer is being made pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the Securities Act.
If none of the foregoing boxes is checked, the Trustee or Registrar shall not be
obligated to register this Security in the name of any person other than the
Holder hereof unless and until the conditions to any such transfer of
registration set forth herein and in Section 312 of the Indenture shall have
been satisfied.
Date: Signed:
------------- ----------------------------
(Sign exactly as your name
appears on the other side
this Security)
Signature Guarantee:
---------------------------------------------------
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<PAGE>
TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing this
Security for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act
and is aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the Company as the
undersigned has requested pursuant to Rule 144A or has determined not to request
such information and that it is aware that the transferor is relying upon the
undersigned's foregoing representations in order to claim the exemption from
registration provided by Rule 144A.
Date: Signed: ]
------------- ---------------------------
NOTICE: To be executed by
an executive officer
SECTION 204. FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION.
This is one of the Securities referred to in the within-mentioned
Indenture.
LASALLE NATIONAL BANK,
AS TRUSTEE
By
---------------------------
AUTHORIZED OFFICER
SECTION 205. LEGEND ON RESTRICTED SECURITIES.
During the period beginning on May 17, 1996 and ending on the date
three years from such date, any Security including any Security issued in
exchange therefor or in lieu thereof, shall be deemed a "Restricted Security"
and shall be subject to the restrictions on transfer provided in the legends set
forth on the face of the form of Security in Section 202; PROVIDED, HOWEVER,
that the term "Restricted Security" shall not include any Securities as to which
restrictions have been terminated in accordance with Section 305. All
Securities shall bear the applicable legends set forth on the face of the form
of Security in Section 202. Except as provided in Section 305 and
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<PAGE>
Section 312, the Trustee shall not issue any unlegended Security until it has
received an Officers' Certificate from the Company directing it to do so.
ARTICLE THREE
The Securities
SECTION 301. TITLE AND TERMS.
The aggregate principal amount of Securities which may be
authenticated and delivered under this Indenture is limited to $110,000,000,
except for Securities authenticated and delivered upon registration of transfer
of, or in exchange for, or in lieu of, other Securities pursuant to Section 304,
305, 306, 906, 1016, 1017 or 1108.
The Securities shall be known and designated as the "11 5/8% Senior
Secured Notes due 2003" of the Company. Their Stated Maturity shall be May 1,
2003 and they shall bear interest at the rate of 11 5/8% per annum, from May 17,
1996 or from the most recent Interest Payment Date to which interest has been
paid or duly provided for, as the case may be, payable semi-annually on May 1
and November 1, commencing November 1, 1996 until the principal thereof is paid
or made available for payment.
The principal of (and premium, if any) and interest on the Securities
shall be payable at the offices or agencies of the Company in Chicago, Illinois
and the City of New York maintained for such purpose and at any other office or
agency maintained by the Company for such purpose; PROVIDED, 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.
The Securities shall be redeemable as provided in Article Eleven.
The Securities shall be subject to repurchase by the Company pursuant
to an Offer to Purchase as provided in Sections 1016 and 1017.
The Securities shall be subject to defeasance at the option of the
Company as provided in Article Twelve.
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<PAGE>
SECTION 302. DENOMINATIONS.
The Securities shall be issuable only in registered form without
coupons and, in the case of IAI Securities, initially in denominations of
$250,000 and any integral multiple of $1,000 above that amount, or in the case
of Securities other than IAI Securities, in denominations of $1,000 and any
integral multiple thereof.
SECTION 303. EXECUTION, AUTHENTICATION, DELIVERY AND DATING.
The Securities shall be executed on behalf of the Company by its
Chairman of the Board, its Vice Chairman of the Board, its President or one of
its Vice Presidents, under its corporate seal reproduced thereon attested by its
Secretary or one of its Assistant Secretaries. The signature of any of these
officers on the Securities may be manual or facsimile.
Securities bearing the manual or facsimile signatures of individuals
who were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Securities or did not
hold such offices at the date of such Securities.
At any time and from time to time after the execution and delivery of
this Indenture, the Company may deliver Securities executed by the Company to
the Trustee for authentication, together with a Company Order for the
authentication and delivery of such Securities. The Company Order shall specify
the amount of Securities to be authenticated and whether the Securities are to
be Exchange Securities, and shall further specify the amount of such Securities
to be issued as a Global Security, as Offshore Physical Securities or as U.S.
Physical Securities. The Trustee in accordance with such Company Order shall
authenticate and deliver such Securities as in this Indenture provided and not
otherwise.
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this Indenture or
be valid or obligatory for any purpose unless there appears on such Security a
certificate of authentication substantially in the form provided for herein
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<PAGE>
executed by the Trustee by manual signature, and such certificate upon any
Security shall be conclusive evidence, and the only evidence, that such Security
has been duly authenticated and delivered hereunder.
SECTION 304. TEMPORARY SECURITIES.
Pending the preparation of definitive Securities, the Company may
execute, and upon Company Order the Trustee shall authenticate and deliver,
temporary Securities which are printed, lithographed, typewritten, mimeographed
or otherwise produced, in any authorized denomination, substantially of the
tenor of the definitive Securities in lieu of which they are issued and with
such appropriate insertions, omissions, substitutions and other variations as
the officers executing such Securities may determine, as evidenced by their
execution of such Securities.
If temporary Securities are issued, the Company will cause definitive
Securities to be prepared without unreasonable delay. After the preparation of
definitive Securities, the temporary Securities shall be exchangeable for
definitive Securities upon surrender of the temporary Securities at any office
or agency of the Company designated pursuant to Section 1002, without charge to
the Holder. Upon surrender for cancellation of any one or more temporary
Securities the Company shall execute and the Trustee shall authenticate and
deliver in exchange therefor a like principal amount of definitive Securities of
authorized denominations. Until so exchanged the temporary Securities shall in
all respects be entitled to the same benefits under this Indenture as definitive
Securities.
SECTION 305. REGISTRATION, REGISTRATION OF TRANSFER AND EXCHANGE,
RESTRICTIONS ON TRANSFER.
(a) The Company shall cause to be kept at the Corporate Trust Office of the
Trustee a register (the register maintained in such office and in any other
office or agency designated pursuant to Section 1002 being herein sometimes
collectively referred to as the "Security Register") in which, subject to such
reasonable regulations as it may prescribe, the Company shall provide for the
registration of Securities and of transfers of Securities. The Trustee is hereby
appointed "Security Registrar" for the purpose of registering Securities and
transfers of Securities as herein provided.
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<PAGE>
Upon surrender for registration of transfer of any Security at an
office or agency of the Company designated pursuant to Section 1002 for such
purpose, the Company shall execute, and the Trustee shall authenticate and
deliver, in the name of the designated transferee or transferees, one or more
new Securities of any authorized denominations and of a like aggregate principal
amount and tenor each such Security bearing such restrictive legends as may be
required by this Indenture (including Sections 202, 205 and 312).
At the option of the Holder and subject to the other provisions of
this Section 305 and to Section 312, Securities may be exchanged for other
Securities of any authorized denominations and of a like aggregate principal
amount, upon surrender of the Securities to be exchanged at such office or
agency. Whenever any Securities are so surrendered for exchange, the Company
shall execute and the Trustee shall authenticate and deliver, the Securities
which the Holder making the exchange is entitled to receive.
All Securities issued upon any registration of transfer or exchange of
Securities shall be the valid obligations of the Company, evidencing the same
debt, and entitled to the same benefits under this Indenture, as the Securities
surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of transfer
or for exchange shall (if so required by the Company or the Trustee) be duly
endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company and the Security Registrar duly executed, by the
Holder thereof or his attorney duly authorized in writing. As a condition to
the registration of transfer of any Restricted Securities, the Company or the
Trustee may require evidence satisfactory to them as to the compliance with the
restrictions set forth in the legend on such Securities.
Except as provided in the following sentence and in Section 312, all
Securities originally issued hereunder and all Securities issued upon transfer
or exchange or replacement thereof shall be Restricted Securities and shall bear
the legend required by Sections 202 and 205, unless the Company shall have
delivered to the Trustee (and the Security Registrar, if other than the Trustee)
a Company Order stating that the Security is not a Restricted Security and may
be issued without such legend thereon. Securities which are issued upon
transfer of, or in exchange for, Securities which are not Restricted Securities
shall not be Restricted Securities and shall not bear such legend.
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<PAGE>
No service charge shall be made for any registration of transfer or
exchange of Securities, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
with any registration of transfer or exchange of Securities, other than
exchanges pursuant to Section 304, 906 or 1108 or in accordance with any Offer
to Purchase pursuant to Section 1016 or 1017 not involving any transfer.
The Company shall not be required (i) to issue, register the transfer
of or exchange any Security during a period beginning at the opening of business
15 days before the day of the mailing of a notice of redemption of Securities
selected for redemption under Section 1104 and ending at the close of business
on the day of such mailing, or (ii) to register the transfer of or exchange any
Security so selected for redemption in whole or in part, except the unredeemed
portion of any Security being redeemed in part.
(b) Beneficial ownership of every Restricted Security shall be subject
to the restrictions on transfer provided in the legends required to be set forth
on the face of each Restricted Security pursuant to Sections 202 and 205, unless
such restrictions on transfer shall be waived with the written consent of the
Company, or terminated in accordance with this Section 305(b) or Section 312.
The Holder of each Restricted Security, by such Holder's acceptance thereof,
agrees to be bound by such restrictions on transfer.
The restrictions imposed by this Section 305 and Sections 202, 205 and
312 upon the transferability of any particular Restricted Security shall cease
and terminate upon delivery by the Company to the Trustee of an Officers'
Certificate stating that such Restricted Security has been sold pursuant to an
effective registration statement under the Securities Act or transferred in
compliance with Rule 144 under the Securities Act (or any successor provision
thereto). Any Restricted Security as to which the Company has delivered to the
Trustee an Officers' Certificate that such restrictions on transfer shall have
expired in accordance with their terms or shall have terminated may, upon
surrender of such Restricted Security for exchange to the Security Registrar or
any Transfer Agent in accordance with the provisions of this Section 305, be
exchanged for a new Security, of like tenor and aggregate principal amount,
which shall not bear the restrictive legends required by Sections 202 and 205.
The Company shall inform the Trustee in writing of the effective date of any
registration statement registering the Securities under the Securities Act. The
Trustee shall not be liable for any action taken or
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<PAGE>
omitted to be taken by it in good faith in accordance with the aforementioned
registration statement.
As used in the preceding two paragraphs of this Section 305, the term
"transfer" encompasses any sale, pledge, transfer or other disposition of any
Restricted Security.
(c) Neither the Trustee nor any of its agents shall (1) have any duty
to monitor compliance with or with respect to any federal or state or other
securities or tax laws or (2) have any duty to obtain documentation on any
transfers or exchanges other than as specifically required hereunder.
SECTION 306. MUTILATED, DESTROYED, LOST AND STOLEN SECURITIES.
If any mutilated Security is surrendered to the Trustee, the Company
shall execute and the Trustee shall authenticate and deliver in exchange
therefor a new Security of like tenor and principal amount and bearing a number
not contemporaneously outstanding.
If there shall be delivered to the Company and the Trustee (i)
evidence to their satisfaction of the destruction, loss or theft of any Security
and (ii) such security or indemnity as may be required by them to save each of
them any agent of either of them harmless, then, in the absence of notice to the
Company or the Trustee that such Security has been acquired by a bona fide
purchaser, the Company shall execute and the Trustee shall authenticate and
deliver, in lieu of any such destroyed, lost or stolen Security, a new Security
of like tenor and principal amount and bearing a number not contemporaneously
outstanding.
In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section, the Company
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Security issued pursuant to this Section in lieu of any
destroyed, lost or stolen Security shall
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<PAGE>
constitute an original additional contractual obligation of the Company, whether
or not the destroyed, lost or stolen Security shall be at any time enforceable
by anyone, and shall be entitled to all the benefits of this Indenture equally
and proportionately with any and all other Securities duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Securities.
SECTION 307. PAYMENT OF INTEREST; INTEREST RIGHTS PRESERVED.
Interest on any Security which is payable, and is punctually paid or
duly provided for, on any Interest Payment Date shall be paid to the Person in
whose name that Security (or one or more Predecessor Securities) is registered
at the close of business on the Regular Record Date for such interest.
Any interest on any Security which is payable, but is not punctually
paid or duly provided for, on any Interest Payment Date (herein called
"Defaulted Interest") shall forthwith cease to be payable to the Holder on the
relevant Regular Record Date by virtue of having been such Holder, and such
Defaulted Interest may be paid by the Company, at its election in each case, as
provided in Clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted
Interest to the Persons in whose names the Securities (or their
respective Predecessor Securities) are registered at the close of
business on a Special Record Date for the payment of such Defaulted
Interest, which shall be fixed in the following manner. The Company
shall notify the Trustee in writing of the amount of Defaulted
Interest proposed to be paid on each Security and the date of the
proposed payment, and at the same time the Company shall deposit with
the Trustee an amount of money equal to the aggregate amount proposed
to be paid in respect of such Defaulted Interest or shall make
arrangements satisfactory to the Trustee for such deposit prior to the
date of the proposed payment, such money when deposited to be held in
trust for the benefit of the Persons entitled to such Defaulted
Interest as in this Clause provided. Thereupon the Trustee
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<PAGE>
shall fix a Special Record Date for the payment of such Defaulted Interest
which shall be not more than 15 days and not less than 10 days prior to the
date of the proposed payment and not less than 10 days after the receipt by
the Trustee of the notice of the proposed payment. The Trustee shall
promptly notify the Company of such Special Record Date and, in the name
and at the expense of the Company, shall cause notice of the proposed
payment of such Defaulted Interest and the Special Record Date therefor to
be mailed, first-class postage prepaid, to each Holder at his address as it
appears in the Security Register, not less than 10 days prior to such
Special Record Date. Notice of the proposed payment of such Defaulted
Interest and the Special Record Date therefor having been so mailed, such
Defaulted Interest shall be paid to the Persons in whose names the
Securities (or their respective Predecessor Securities) are registered at
the close of business on such Special Record Date and shall no longer be
payable pursuant to the following Clause (2).
(2) The Company may make payment of any Defaulted Interest in
any other lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities may be listed, and upon
such notice as may be required by such exchange, if, after notice
given by the Company to the Trustee of the proposed payment pursuant
to this Clause, such manner of payment shall be deemed practicable by
the Trustee.
Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Security shall carry the rights to interest accrued
and unpaid, and to accrue, which were carried by such other Security.
SECTION 308. PERSONS DEEMED OWNERS.
Prior to due presentment of a Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name such Security is registered as the owner of such
Security for the purpose of receiving payment of principal of (and premium, if
any) and (subject to Section 307) interest on such Security and for all other
purposes whatsoever, whether or not such Security be overdue, and
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neither the Company, the Trustee nor any agent of the Company or the Trustee
shall be affected by notice to the contrary.
SECTION 309. BOOK-ENTRY PROVISIONS FOR GLOBAL SECURITIES.
(a) The Global Securities initially shall (i) be registered in the
name of the Depositary or the nominee of such Depositary, (ii) be delivered to
the Trustee as custodian for the Depositary and (iii) bear legends as set forth
on the face of the form of Security in Section 202.
Members of, or participants in, the Depositary ("Agent Members") shall
have no rights under this Indenture with respect to any Global Security held on
their behalf by the Depositary, or the Trustee as its custodian, or under the
Global Security, and the Depositary may be treated by the Company, the Trustee
and any agent of the Company or the Trustee as the absolute owner of the Global
Security for all purposes whatsoever. 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 furnished by the Depositary or impair, as between the Depositary
and its Agent Members, the operation of customary practices governing the
exercise of the rights of any Holder.
(b) Transfers of the Global Securities shall be limited to transfers
in whole, but not in part, to the Depositary, its successors or their respective
nominees. Interests of beneficial owners in a Global Security may be
transferred or exchanged for Physical Securities in accordance with the rules
and procedures of the Depositary and the provisions of Section 312. In
addition, Physical Securities shall be transferred to all beneficial owners in
exchange for their beneficial interests in the Global Securities if (A) such
Depositary (i) has notified the Company that it is unwilling or unable to
continue as Depositary for such Global Security or (ii) has ceased to be a
clearing agency registered under the Exchange Act or (B) there shall have
occurred and be continuing an Event of Default with respect to such Global
Security and the Outstanding Securities shall have become due and payable
pursuant to Section 502.
(c) In connection with any transfer or exchange of a portion of the
beneficial interest in the Global Security to beneficial owners pursuant to
paragraph (b), the Registrar shall (if one or more Physical Securities are to
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<PAGE>
be issued) reflect on its books and records the date and a decrease in the
principal amount of the Global Security in an amount equal to the principal
amount of the beneficial interest in the Global Security to be transferred, and
the Company shall execute, and the Trustee shall authenticate and deliver, one
or more Physical Securities of like tenor and amount.
(d) In connection with the transfer of the entire Global Security to
beneficial owners pursuant to paragraph (b), the Global Security shall be deemed
to be surrendered to the Trustee for cancellation, and the Company shall
execute, and the Trustee shall authenticate and deliver, to each beneficial
owner identified by the Depositary in exchange for its beneficial interest in
the Global Security, an equal aggregate principal amount of Physical Securities
of authorized denominations.
(e) Any Physical Security constituting a Restricted Security
delivered in exchange for an interest in the Global Security pursuant to
paragraph (c) or (d) shall, except as otherwise provided by paragraphs (a)(i)(x)
and (c) of Section 312, bear the legend regarding transfer restrictions
applicable to the Physical Securities set forth on the face of the form of
Security in Section 202.
(f) The Holder of the Global Securities may grant proxies and
otherwise authorize any person, including Agent Members and persons that may
hold interests through Agent Members, to take any action which a Holder is
entitled to take under this Indenture or the Securities.
SECTION 310. CANCELLATION.
All Securities surrendered for payment, redemption, registration of
transfer or exchange or for credit against any Offer to Purchase pursuant to
Section 1016 or 1017 shall, if surrendered to any Person other than the Trustee,
be delivered to the Trustee and shall be promptly cancelled by it. The Company
may at any time deliver to the Trustee for cancellation any Securities
previously authenticated and delivered hereunder which the Company may have
acquired in any manner whatsoever, and all Securities so delivered shall be
promptly cancelled by the Trustee. No Securities shall be authenticated in lieu
of or in exchange for any Securities cancelled as provided in this Section,
except as expressly permitted by this Indenture. All cancelled Securities held
by the Trustee shall be disposed of as directed by a Company Order.
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SECTION 311. COMPUTATION OF INTEREST.
Interest on the Securities shall be computed on the basis of a 360-day
year of twelve 30-day months.
SECTION 312. SPECIAL TRANSFER PROVISIONS.
(a) TRANSFERS TO NON-QIB INSTITUTIONAL ACCREDITED INVESTORS AND NON-U.S.
PERSONS. The following provisions shall apply with respect to the registration
of any proposed transfer of a Security constituting a Restricted Security to any
Institutional Accredited Investor which is not a QIB or to any Non-U.S. Person:
(i) the Security Registrar shall register the transfer of any Security
constituting a Restricted Security, whether or not such Security bears the
legend required by Sections 202 and 205, if (x) the requested transfer is after
May 17, 1999 or (y) (1) in the case of a transfer to an Institutional Accredited
Investor which is not a QIB (excluding Non-U.S. Persons), the proposed
transferee has delivered to the Security Registrar a certificate substantially
in the form of Exhibit B hereto or (2) in the case of a transfer to a Non-U.S.
Person, the proposed transferor has delivered to the Security Registrar a
certificate substantially in the form of Exhibit C hereto, together, in the case
of clause (i) or clause (2) with such other certifications, legal opinions or
other information as the Company or the Trustee may reasonably require to
confirm that such transfer is being made pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the Securities Act;
and
(ii) if the proposed transferor is an Agent Member holding a
beneficial interest in the Global Security, upon receipt by the Security
Registrar of (x) the certificate, if any, required by paragraph (i) above
and (y) instructions given in accordance with the Depositary's and the
Security Registrar's procedures,
whereupon (a) the Security Registrar shall reflect on its books and records the
date and (if the transfer does not involve a transfer of outstanding Physical
Securities) a decrease in the principal amount of the Global Security in an
amount equal to the principal amount of the beneficial interest in the Global
Security to be transferred, and (b) the Company shall execute and the Trustee
shall
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authenticate and deliver one or more Physical Securities of like tenor and
amount.
If the Securities to be transferred consist of IAI Securities, the
following shall apply: (x) if such IAI Securities are proposed to be transferred
to an Institutional Accredited Investor which is not a QIB, (i) upon the
registration of such transfer such Securities shall continue to be IAI
Securities, and (ii) the Physical Securities authenticated and delivered in
connection with such transfer shall be in denominations of $250,000 and any
integral multiple of $1,000 above that amount; and (y) if such IAI Securities
are proposed to be transferred to a Non-U.S. Person, (i) upon the registration
of such transfer such Securities shall cease to be IAI Securities, (ii) the
Physical Securities authenticated and delivered in connection with such transfer
shall not contain the restriction on minimum denominations applicable to IAI
Securities set forth on the form of reverse of security in Section 203 hereof,
and (iii) such Physical Securities shall be in denominations of $1,000 and any
integral multiple thereof.
(b) TRANSFERS TO QIBS. The following provisions shall apply with
respect to the registration of any proposed transfer of a Security constituting
a Restricted Security to a QIB (excluding transfers to Non-U.S. Persons):
(i) the Security Registrar shall register the transfer if such
transfer is being made by a proposed transferor who has checked the box
provided for on the form of Security stating, or has otherwise advised the
Company and the Security Registrar in writing, that the sale has been made
in compliance with the provisions of Rule 144A to a transferee who has
signed the certification provided for on the form of Security stating, or
has otherwise advised the Company and the Security Registrar in writing,
that it is purchasing the Security for its own account or an account with
respect to which it exercises sole investment discretion and that it and
any such account is a QIB within the meaning of Rule 144A, and is aware
that the sale to it is being made in reliance on Rule 144A and acknowledges
that it has received such information regarding the Company as it has
requested pursuant to Rule 144A or has determined not to request such
information and that it is aware that the transferor is relying upon its
foregoing representations in order to claim the exemption from registration
provided by Rule 144A; and
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(ii) if the proposed transferee is an Agent Member, and the
Securities to be transferred consist of Physical Securities which after
transfer are to be evidenced by an interest in the Global Security, upon
receipt by the Security Registrar of instructions given in accordance with
the Depositary's and the Security Registrar's procedures, the Security
Registrar shall reflect on its books and records the date and an increase
in the principal amount of the Global Security in an amount equal to the
principal amount of the Physical Securities to be transferred, and the
Trustee shall cancel the Physical Securities so transferred.
(iii) If the Securities to be transferred consist of IAI Securities,
upon the registration of such transfer according to this Section such
Securities shall cease to be IAI Securities and may be evidenced by
Physical Securities or interests in a Global Security in denominations of
$1,000 and any integral multiple thereof.
(c) PRIVATE PLACEMENT LEGEND. Upon the transfer, exchange or
replacement of Securities not bearing the legends required by Sections 202 and
205, the Security Registrar shall deliver Securities that do not bear such
legends. Upon the transfer, exchange or replacement of Securities bearing the
legends required by Sections 202 and 205, the Security Registrar shall deliver
only Securities that bear such legends unless (i) the circumstance contemplated
by paragraph (a)(i)(x) of this Section 312 exists or (ii) there is delivered to
the Registrar an Opinion of Counsel reasonably satisfactory to the Company and
the Trustee to the effect that neither such legend nor the related restrictions
on transfer are required in order to maintain compliance with the provisions of
the Securities Act.
(d) GENERAL. By its acceptance of any Security bearing the legends
required by Sections 202 and 205, each Holder of such a Security acknowledges
the restrictions on transfer of such Security set forth in this Indenture and in
such legends and agrees that it will transfer such Security only as provided in
this Indenture.
The Registrar shall retain copies of all letters, notices and other
written communications received pursuant to this Section 312. The Company shall
have the right to inspect and make copies of all such letters, notices or other
written communications at any reasonable time upon the giving of reasonable
written notice to the Registrar.
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ARTICLE FOUR
Satisfaction and Discharge
SECTION 401. SATISFACTION AND DISCHARGE OF INDENTURE.
This Indenture shall cease to be of further effect (except as to any
surviving rights of registration of transfer or exchange of Securities herein
expressly provided for), and the Trustee, on demand of and at the expense of the
Company, shall execute proper instruments acknowledging satisfaction and
discharge of this Indenture, when
(1) either
(A) all Securities theretofore authenticated and
delivered (other than (i) Securities which have been
destroyed, lost or stolen and which have been replaced or
paid as provided in Section 306 and (ii) Securities for
whose payment money has theretofore been deposited in trust
or segregated and held in trust by the Company and
thereafter repaid to the Company or discharged from such
trust, as provided in Section 1003) have been delivered to
the Trustee for cancellation; or
(B) all such Securities not theretofore delivered to
the Trustee for cancellation
(i) have become due and payable, or
(ii) will become due and payable at their
Stated Maturity within one year, or
(iii) are to be called for redemption
within one year under arrangements satisfactory
to the Trustee for the giving of notice of
redemption by the Trustee in the name, and at
the expense, of the Company,
and the Company, in the case of (i), (ii) or (iii) above, has
deposited or caused to be
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deposited with the Trustee as trust funds in trust for the purpose an
amount sufficient to pay and discharge the entire indebtedness on such
Securities not theretofore delivered to the Trustee for cancellation,
for principal (and premium, if any) and interest to the date of such
deposit (in the case of Securities which have become due and payable)
or to the Stated Maturity or Redemption Date, as the case may be;
(2) the Company has paid or caused to be paid all other sums
payable hereunder by the Company; and
(3) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all
conditions precedent herein provided for relating to the satisfaction
and discharge of this Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 607, the obligations of
the Trustee to any Authenticating Agent under Section 614 and, if money shall
have been deposited with the Trustee pursuant to subclause (B) of Clause (1) of
this Section, the obligations of the Trustee under Section 402 and the last
paragraph of Section 1003 shall survive.
SECTION 402. APPLICATION OF TRUST MONEY.
Subject to the provisions of the last paragraph of Section 1003, all
money deposited with the Trustee pursuant to Section 401 shall be held in trust
and applied by it, in accordance with the provisions of the Securities and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal (and premium, if
any) and interest for whose payment such money has been deposited with the
Trustee.
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ARTICLE FIVE
Remedies
SECTION 501. EVENTS OF DEFAULT.
"Event of Default", wherever used herein, means any one of the
following events (whatever the reason for such Event of Default and whether it
shall be voluntary or involuntary or be effected by operation of law or pursuant
to any judgment, decree or order of any court or any order, rule or regulation
of any administrative or governmental body):
(1) default in the payment of any interest upon any Security
when it becomes due and payable, and continuance of such default for a
period of 30 days; or
(2) default in the payment of the principal of (or premium, if
any, on) any Security at its Maturity; or
(3) default on the applicable Purchase Date, in the purchase of
Securities required to be purchased by the Company pursuant to an Offer to
Purchase as to which an Offer has been mailed to Holders; or
(4) default by the Company to comply with the covenants or
agreements set forth in Section 801, 1016 or 1017; or
(5) default in the performance, or breach, of any covenant or
warranty of the Company in this Indenture (other than a covenant or
warranty a default in whose performance or whose breach is elsewhere
in this Section specifically dealt with), and continuance of such
default or breach for a period of 30 days after there has been given,
by registered or certified mail, to the Company by the Trustee or to
the Company and the Trustee by the Holders of at least 25% in
principal amount of the Outstanding Securities a written notice
specifying such default or breach and requiring it to be remedied and
stating that such notice is a "Notice of Default" hereunder; or
(6) a default under any mortgage, indenture or instrument under
which there may be issued or by which there may be secured or
evidenced any Indebtedness for money borrowed by the Company,
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Group or any Restricted Subsidiary of the Company (or the payment of which
is guaranteed by the Company, Group or any Restricted Subsidiary of the
Company) whether such Indebtedness or guarantee now exists or shall
hereafter be created, which default shall constitute a failure to pay any
portion of or premium, if any, on, the principal of such Indebtedness when
due and payable prior to the expiration of any applicable grace period with
respect thereto (a "Payment Default") or shall have resulted in such
indebtedness becoming or being declared due and payable prior to the date
on which it would otherwise have become due and payable, and, in each case,
the principal amount of any such Indebtedness, together with the principal
amount of any other such Indebtedness under which there has been a Payment
Default or the maturity of which has been so accelerated, aggregates $5.0
million or more; or
(7) any final judgment or order for the payment of money in
excess of $3.0 million in the aggregate for all such final judgments
or orders against all such Persons not covered by insurance (treating
any deductibles, self-insurance or retention as not constituting such
insurance coverage) shall be rendered against the Company, Group or
any of Restricted Subsidiary of the Company and shall not be paid or
discharged, and there shall be any period of 60 consecutive days
following entry of the final judgment or order that causes the
aggregate amount for all such final judgments or orders outstanding
and not paid or discharged against all such Persons to exceed $3.0
million during which a stay of enforcement of such final judgment or
order, by reason of a pending appeal or otherwise, shall not be in
effect; or
(8) the entry by a court having jurisdiction in the premises of
(A) a decree or order for relief in respect of the Company, Group or
any of the Company's Significant Restricted Subsidiaries in an
involuntary case or proceeding under any applicable Federal or State
bankruptcy, insolvency, reorganization or other similar law or (B) a
decree or order adjudging the Company, Group or any of the Company's
Significant Restricted Subsidiaries as bankrupt or insolvent, or
approving as properly filed a petition seeking reorganization,
arrangement, adjustment or
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composition of or in respect of the Company, Group or any of the Company's
Significant Restricted Subsidiaries under any applicable Federal or State
law, or appointing a custodian, receiver, liquidator, assignee, trustee,
sequestrator or other similar official of the Company, Group or any of the
Company's Significant Restricted Subsidiaries or of any substantial part of
the property of the Company, Group or any of the Company's Significant
Restricted Subsidiaries, or ordering the winding up or liquidation of the
affairs of the Company, Group or any of the Company's Significant
Restricted Subsidiaries and the continuance of any such decree or order for
relief or any such other decree or order unstayed and in effect for a
period of 60 consecutive days;
(9) the commencement by the Company, Group or any of the
Company's Significant Restricted Subsidiaries of a voluntary case or
proceeding under any applicable Federal or State bankruptcy,
insolvency, reorganization or other similar law or of any other case
or proceeding to be adjudicated a bankrupt or insolvent, or the
consent by any of them to the entry of a decree or order for relief in
respect of the Company, Group or any of the Company's Significant
Restricted Subsidiaries, as the case may be, in an involuntary case or
proceeding under any applicable Federal or State bankruptcy,
insolvency, reorganization or other similar law or to the commencement
of any bankruptcy or insolvency case or proceeding against any of
them, or the filing by any of them of a petition or answer or consent
seeking reorganization or relief under any applicable Federal or State
law, or the consent by any of them to the filing of such petition or
to the appointment of or taking possession by a custodian, receiver,
liquidator, assignee, trustee, sequestrator or other similar official
of the Company, Group or any of the Company's Significant Restricted
Subsidiaries or of any substantial part of the property of the
Company, Group or any of the Company's Significant Restricted
Subsidiaries, or the making by any of them of an assignment for the
benefit of creditors, or the admission by any of them in writing of
their respective inability to pay their respective debts generally as
they become due, or the taking of corporate action by the Company,
Group or any of the Company's Significant
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Restricted Subsidiaries in furtherance of any such action; or
(10) any of the Security Documents cease to be in full force and
effect (other than in accordance with their respective terms or the terms
hereof), or any of the Security Documents cease to give the Trustee the
Liens, rights, powers and privileges purported to be created thereby, or
any Security Document is declared null and void, or the Company denies any
of its obligations under any Security Document or any Collateral becomes
subject to any Lien other than any Permitted Collateral Liens.
In the event of any Event of Default pursuant to the provisions of
this Section 501 occurring by reason of any willful action (or inaction) taken
(or not taken) by or on behalf of the Company with the intention of avoiding
payment of the premium that the Company would have had to pay if the Company
then had elected to redeem the Securities pursuant to Section 1101 hereof, an
equivalent premium shall also become and be immediately due and payable to the
extent permitted by law upon acceleration of the maturity of the Notes pursuant
to Section 502 hereof, anything in this Indenture or in the Securities to the
contrary notwithstanding. If an Event of Default occurs prior to May 1, 2000 by
reason of any willful action (or inaction) taken (or not taken) by or on behalf
of the Company with the intention of avoiding the prohibition on redemption of
the Notes prior to May 1, 2000 pursuant to Section 1101 hereof, then the amount
payable for purposes of this paragraph shall be 105.813%, expressed as a
percentage of the amount that would otherwise be due but for the provisions of
this sentence, plus accrued interest, if any, to the date of payment.
SECTION 502. ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT.
If an Event of Default (other than those specified in clause (8) or
(9) of Section 501) occurs and is continuing, then and in every such case the
Trustee or the Holders of not less than 25% in principal amount of the
Outstanding Securities may declare the principal of all the Securities to be due
and payable immediately, by a notice in writing to the Company (and to the
Trustee if given by Holders), and upon any such declaration such principal shall
become immediately due and payable.
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Notwithstanding the foregoing, in the case of an Event of Default
specified in clause (8) or (9) of Section 501, all Outstanding Securities will
IPSO FACTO become due and payable without any declaration or other Act on the
part of the Trustee or any Holder.
At any time after such a declaration of acceleration has been made and
before a judgment or decree for payment of the money due has been obtained by
the Trustee as hereinafter in this Article provided, the Holders of a majority
in principal amount of the Outstanding Securities, by written notice to the
Company and the Trustee, may rescind and annul such declaration and its
consequences if
(1) the Company has paid or deposited with the Trustee a sum
sufficient to pay
(A) all overdue interest on all Securities,
(B) the principal of (and premium, if any, on) any
Securities which have become due otherwise than by such
declaration of acceleration (including any Securities required to
have been purchased on the Purchase Date pursuant to an Offer to
Purchase made by the Company) and interest thereon at the rate
borne by the Securities,
(C) to the extent that payment of such interest is lawful,
interest upon overdue interest at the rate borne by the
Securities, and
(D) all sums paid or advanced by the Trustee hereunder and
the reasonable compensation, expenses, disbursements and advances
of the Trustee, its agents and counsel;
and
(2) all Events of Default, other than the non-payment of the
principal of Securities which have become due solely by such
declaration of acceleration, have been cured or waived as provided in
Section 513.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
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SECTION 503. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY TRUSTEE.
The Company covenants that if
(1) default is made in the payment of any interest on any
Security when such interest becomes due and payable and such default
continues for a period of 30 days, or
(2) default is made in the payment of the principal of (or
premium, if any, on) any Security at the Maturity thereof or, with
respect to any Security required to have been purchased pursuant to an
Offer to Purchase made by the Company, at the Purchase Date thereof,
the Company will, upon demand of the Trustee, pay to it, for the benefit of the
Holders of such Securities, the whole amount then due and payable on such
Securities for principal (and premium, if any) and interest, and, to the extent
that payment of such interest shall be legally enforceable, interest on any
overdue principal (and premium, if any) and on any overdue interest, at the rate
borne by the Securities, and, in addition thereto, 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.
If the Company fails to pay such amounts forthwith upon such demand,
the Trustee, in its own name and as trustee of an express trust, may institute a
judicial proceeding for the collection of the sums so due and unpaid, and may
prosecute such proceeding to judgment or final decree, and may enforce the same
against the Company or any other obligor upon such Securities and collect the
moneys adjudged or decreed to be payable in the manner provided by law out of
the property of the Company or any other obligor upon such Securities, wherever
situated.
If an Event of Default with respect to the Securities occurs and is
continuing, the Trustee may in its discretion, subject to applicable law,
proceed to protect and enforce its rights and the rights of the Holders under
this Indenture and under the applicable Security Documents, by such appropriate
private or judicial proceedings as the Trustee shall deem most effectual to
protect and enforce such rights, whether for the specific enforcement of any
covenant or warranty in the Security Documents or in aid of
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the exercise of any power granted therein, or to enforce any other proper
remedy, including appointment of a receiver for the Collateral, taking
possession of the Collateral, and foreclosure, realization and sale of
Collateral pursuant to the terms of the Security Documents. The Trustee shall
be entitled to sue and recover judgment as aforesaid to enforce any Lien of the
Security Documents, in either case, either before, after or during the pendency
of any other proceeding for the enforcement of any Lien of the Security
Documents, and the right of the Trustee to recover such judgment shall not be
affected by any sale under any of the Security Documents or by the exercise of
any right, power or remedy for the enforcement of the provisions of any of the
Security Documents, or the foreclosure or enforcement of any Lien of the
Security Documents. No recovery of any such judgment upon any property of the
Company shall affect or impair the Lien on the Collateral or any rights, powers
or remedies of the Trustee or the Holders. Neither receipt by the Trustee nor
any application whatsoever by the Trustee of insurance or other moneys under
this Section 503 shall operate as payment or novation of the Company's
obligations hereunder or as a reduction of the Liens created by the Security
Documents.
SECTION 504. TRUSTEE MAY FILE PROOFS OF CLAIM.
In case of any judicial proceeding relative to the Company (or any
other obligor upon the Securities), or the property of the Company or its
creditors, the Trustee shall be entitled and empowered, by intervention in such
proceeding or otherwise, to take any and all actions authorized by the Trust
Indenture Act in order to have claims of the Holders and the Trustee allowed in
any such proceeding. In particular, the Trustee shall be authorized to collect
and receive any moneys or other property payable or deliverable on any such
claims and to distribute the same; and any custodian, receiver, assignee,
trustee, liquidator, sequestrator or other similar official in any such judicial
proceeding is hereby authorized by each Holder 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 Holders, to pay to the Trustee any amount due it for
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 607.
No provision of this Indenture shall be deemed to authorize the
Trustee to authorize or consent to or accept or adopt on behalf of any Holder
any plan of reorganization,
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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 Holder in any such proceeding.
SECTION 505. TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF SECURITIES.
All rights of action and claims under this Indenture or the Securities
may be prosecuted and enforced by the Trustee without the possession of any of
the Securities or the production thereof in any proceeding relating thereto, and
any such proceeding instituted by the Trustee shall be brought in its own name
as trustee of an express trust, and any recovery of judgment shall, after
provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the Holders of the Securities in respect of which such
judgment has been recovered.
SECTION 506. APPLICATION OF MONEY COLLECTED.
Any money collected by the Trustee pursuant to this Article, upon
foreclosure of any Lien upon the Collateral granted pursuant to the Security
Agreement or pursuant to any Intercreditor Agreement shall, subject to the
provisions of such Intercreditor Agreement, if in effect, be applied in the
following order, at the date or dates fixed by the Trustee and, in case of the
distribution of such money on account of principal (or premium, if any) or
interest, upon presentation of the Securities and the notation thereon of the
payment if only partially paid and upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under
Section 607; and
SECOND: To the payment of the amounts then due and unpaid for
principal of (and premium, if any) and interest on the Securities in
respect of which or for the benefit of which such money has been
collected (including amounts due and payable pursuant to an Offer to
Purchase and amounts due and payable with respect to any such
Securities which have been called for redemption), ratably, without
preference or priority of any kind, according to the amounts due and
payable on such
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Securities for principal (and premium, if any), interest, and Repurchase
Amounts.
SECTION 507. LIMITATION ON SUITS.
No Holder of any Security shall have any right to institute any
proceeding, judicial or otherwise, with respect to this Indenture or for the
appointment of a receiver or trustee, or for any other remedy hereunder, unless
(1) such Holder has previously given written notice to the
Trustee of a continuing Event of Default;
(2) the Holders of not less than 25% in principal amount of the
Outstanding Securities shall have made written request to the Trustee
to institute proceedings in respect of such Event of Default in its
own name as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee
reasonable indemnity against the costs, expenses and liabilities to be
incurred in compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such
proceeding; and
(5) no direction inconsistent with such written request has been
given to the Trustee during such 60-day period by the Holders of a
majority in principal amount of the Outstanding Securities;
it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture to affect, disturb or prejudice the rights of any other Holders,
or to obtain or to seek to obtain priority or preference over any other Holders
or to enforce any right under this Indenture, except in the manner herein
provided and for the equal and ratable benefit of all the Holders.
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SECTION 508. UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE PRINCIPAL, PREMIUM AND
INTEREST.
Notwithstanding any other provision in this Indenture, the Holder of
any Security shall have the right, which is absolute and unconditional, to
receive payment of the principal of (and premium, if any), any Repurchase Amount
payable hereunder in respect of such Security and (subject to Section 307)
interest on such Security on the respective Stated Maturities expressed in such
Security (or, in the case of redemption, on the Redemption Date or, in the case
of an Offer to Purchase made by the Company and required to be accepted as to
such Security, on the Purchase Date) and to institute suit for the enforcement
of any such payment, and such rights shall not be impaired without the consent
of such Holder.
SECTION 509. RESTORATION OF RIGHTS AND REMEDIES.
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case, subject to any
determination in such proceeding, the Company, the Trustee and the Holders shall
be restored severally and respectively to their former positions hereunder and
thereafter all rights and remedies of the Trustee and the Holders shall continue
as though no such proceeding had been instituted.
SECTION 510. RIGHTS AND REMEDIES CUMULATIVE.
Except as otherwise provided with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities in the last paragraph
of Section 306, no right or remedy herein conferred upon or reserved to the
Trustee or to the Holders is intended to be exclusive of any other right or
remedy, and every right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given hereunder or
now or hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent the
concurrent assertion or employment of any other appropriate right or remedy.
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SECTION 511. DELAY OR OMISSION NOT WAIVER.
No delay or omission of the Trustee or of any Holder of any Security
to exercise any right or remedy accruing upon any Event of Default shall impair
any such right or remedy or constitute a waiver of any such Event of Default or
an acquiescence therein. Every right and remedy given by this Article or by law
to the Trustee or to the Holders may be exercised from time to time, and as
often as may be deemed expedient, by the Trustee or by the Holders, as the case
may be.
SECTION 512. CONTROL BY HOLDERS.
The Holders of a majority in principal amount of the Outstanding
Securities shall have the right to 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 the Trustee, PROVIDED that
(1) such direction shall not be in conflict with any rule of law
or with this Indenture, and
(2) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction.
SECTION 513. WAIVER OF PAST DEFAULTS.
The Holders of not less than a majority in principal amount of the
Outstanding Securities may on behalf of the Holders of all the Securities waive
any past default hereunder and its consequences, except a default
(1) in the payment of the principal of (or premium, if any) or
interest on, or any Purchase Amount payable in respect of, any
Security, or
(2) in respect of a covenant or provision hereof which under
Article Nine cannot be modified or amended without the consent of the
Holder of each Outstanding Security affected.
Upon any such waiver, such default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other default or impair any right consequent thereon.
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SECTION 514. 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, suffered or
omitted by it as Trustee, a court may require any party litigant in such suit to
file an undertaking to pay the costs of such suit, and may assess costs against
any such party litigant, in the manner and to the extent provided in the Trust
Indenture Act; PROVIDED, that neither this Section nor the Trust Indenture Act
shall be deemed to authorize any court to require such an undertaking or to make
such an assessment in any suit instituted by the Company.
SECTION 515. WAIVER OF STAY OR EXTENSION LAWS.
The Company covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, or plead, or in any manner whatsoever claim
or take the benefit or advantage of, any stay or extension law wherever enacted,
now or at any time hereafter in force, which may affect the covenants or the
performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such law
and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.
ARTICLE SIX
The Trustee
SECTION 601. CERTAIN DUTIES AND RESPONSIBILITIES.
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise the rights and powers vested in it by this Indenture and
the Security Documents, and shall 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,
(i) the Trustee undertakes to perform such duties and only such duties as are
specifically set forth in this Indenture,
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and no implied covenants or obligations shall be read into this Indenture
against the Trustee; and
(ii) 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 furnished to
the Trustee and conforming to the requirements of this Indenture; but in
the case of any such certificates or opinions which by any provision hereof
are specifically required to be furnished to the Trustee, the Trustee shall
be under a duty to examine the same to determine whether or not they
conform to the requirements of this Indenture.
(c) No provision of this Indenture shall be construed to relieve the Trustee
from liability for its own negligent action, its own negligent failure to
act, or its own wilful misconduct, except that
(i) this paragraph (c) shall not be construed to limit the effect of
paragraph (b) of this Section;
(ii) the Trustee shall not be liable for any error of judgment made
in good faith by a Responsible Officer, unless it shall be proved that the
Trustee was negligent in ascertaining the pertinent facts;
(iii) the Trustee shall not be liable with respect to any action taken
or omitted to be taken by it in good faith in accordance with the direction
of the Holders of a majority in principal amount of the Outstanding
Securities relating to the time, method and place of conducting any
proceeding for any remedy available to the Trustee, or exercising any trust
or power conferred upon the Trustee, under this Indenture; and
(iv) 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 under any Security
Document, or in the exercise of any of its rights or powers, if it shall
have reasonable grounds for believing that repayment of such funds or
adequate indemnity against such risk or liability is not reasonably assured
to it.
(c) Whether or not therein expressly so provided, every provision of
this Indenture relating to the conduct or
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affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section and to the provisions of the Trust
Indenture Act.
SECTION 602. NOTICE OF DEFAULTS.
If a Default or an Event of Default occurs and is continuing and if it
is known to the Trustee, the Trustee shall mail to each Holder notice of the
uncured Default or Event of Default within 30 days after such Default or Event
of Default becomes known to the Trustee. Except in the case of a Default or an
Event of Default in payment of principal of, or interest on, any Note, including
an accelerated payment and the failure to make payment on the Purchase Date
pursuant to an Offer to Purchase under Section 1016 or 1017, and except in the
case of a failure to comply with Article Eight hereof, the Trustee may withhold
the notice if and so long as its Board of Directors, the executive committee of
its Board of Directors or a committee of its directors and/or Trust Officers in
good faith determines that withholding the notice is in the interest of the
Holders.
SECTION 603. CERTAIN RIGHTS OF TRUSTEE.
Subject to the provisions of Section 601:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, debenture,
note, other evidence of indebtedness or other paper or document believed by it
to be genuine and to have been signed or presented by the proper party or
parties;
(b) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order and any resolution
of the Board of Directors may be sufficiently evidenced by a Board Resolution;
(c) whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder or under the Security Documents, the
Trustee (unless other evidence be herein specifically prescribed) may, in the
absence of bad faith on its part, rely upon an Officers' Certificate;
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(d) the Trustee may consult with counsel and the written advice of
such counsel or any Opinion of Counsel shall be full and complete authorization
and protection in respect of any action taken, suffered or omitted by it
hereunder or under the Security Documents in good faith and in reliance thereon;
(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 Holders pursuant to this Indenture, unless such Holders 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 shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, debenture,
note, other evidence of indebtedness or other paper or document, but the
Trustee, in its discretion, may make such further inquiry or investigation into
such facts or matters as it may see fit, and, if the Trustee shall determine to
make such further inquiry or investigation, it shall be entitled to examine the
books, records and premises of the Company, personally or by agent or attorney;
and
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder or under the Security Documents either directly or
by or through agents or attorneys and the Trustee shall not be responsible for
any misconduct or negligence on the part of any agent or attorney appointed with
due care by it hereunder.
SECTION 604. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF SECURITIES.
The recitals contained herein and in the Securities, except the
Trustee's certificates of authentication, shall be taken as the statements of
the Company, and the Trustee assumes no responsibility for their correctness.
The Trustee makes no representations as to the validity or sufficiency of this
Indenture, the Security Documents or of the Securities. The Trustee shall not
be accountable for the use or application by the Company of Securities or the
proceeds thereof.
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SECTION 605. MAY HOLD SECURITIES.
The Trustee, any Authenticating Agent, any Paying Agent, any Security
Registrar or any other agent of the Company, in its individual or any other
capacity, may become the owner or pledgee of Securities and, subject to Sections
608 and 613, may otherwise deal with the Company with the same rights it would
have if it were not Trustee, Authenticating Agent, Paying Agent, Security
Registrar or such other agent.
SECTION 606. MONEY HELD IN TRUST.
Money held by the Trustee in trust hereunder need not be segregated
from other funds except to the extent required by law. The Trustee shall be
under no liability for interest on any money received by it hereunder except as
otherwise agreed with the Company.
SECTION 607. COMPENSATION AND REIMBURSEMENT.
The Company agrees
(1) to pay to the Trustee from time to time reasonable
compensation for all services rendered by it hereunder (which
compensation shall not be limited by any provision of law in regard to
the compensation of a trustee of an express trust);
(2) except as otherwise expressly provided herein, to reimburse
the Trustee upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Trustee in
accordance with any provision of this Indenture (including the
reasonable compensation and the expenses and disbursements of its
agents and counsel), except any such expense, disbursement or advance
as may be attributable to its negligence or bad faith; and
(3) to indemnify the Trustee for, and to hold it harmless
against, any loss, liability or expense incurred without negligence or
bad faith on its part, arising out of or in connection with the
acceptance or administration of this trust, including the costs and
expenses of defending itself against any claim or liability in
connection with the exercise or performance of any of its powers or
duties hereunder.
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SECTION 608. DISQUALIFICATION; CONFLICTING INTERESTS.
If the Trustee has or shall acquire a conflicting interest within the
meaning of the Trust Indenture Act, the Trustee shall either eliminate such
interest or resign, to the extent and in the manner provided by, and subject to
the provisions of, the Trust Indenture Act and this Indenture.
SECTION 609. CORPORATE TRUSTEE REQUIRED; ELIGIBILITY.
There shall at all times be a Trustee hereunder which shall be a
Person that is eligible pursuant to the Trust Indenture Act to act as such and
has a combined capital and surplus of at least $50,000,000, and an established
place of business in Chicago, Illinois or The City of New York. If such
corporation publishes reports of condition at least annually, pursuant to law or
to the requirements of said supervising or examining authority, then for the
purposes of this Section, the combined capital and surplus of such Person shall
be deemed to be its combined capital and surplus as set forth in its most recent
report of condition so published. If at any time the Trustee shall cease to be
eligible in accordance with the provisions of this Section, it shall resign
immediately in the manner and with the effect hereinafter specified in this
Article.
SECTION 610. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR.
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee under Section 611 and
execution of supplemental Security Documents, if required.
(b) The Trustee may resign at any time by giving written notice
thereof to the Company. If an instrument of acceptance by a successor Trustee
shall not have been delivered to the Trustee within 30 days after the giving of
such notice of resignation, the resigning Trustee may petition any court of
competent jurisdiction for the appointment of a successor Trustee.
(c) The Trustee may be removed at any time by Act of the Holders of a
majority in principal amount of the Outstanding Securities, delivered to the
Trustee and to the Company.
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(d) If at any time:
(1) the Trustee shall fail to comply with Section 608 after
written request therefor by the Company or by any Holder who has been
a bona fide Holder of a Security for at least six months, or
(2) the Trustee shall cease to be eligible under Section 609 and
shall fail to resign after written request therefor by the Company or
by any such Holder, or
(3) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent or a receiver of the Trustee or of
its property shall be appointed or any public officer shall take
charge or control of the Trustee or of its property or affairs for the
purpose of rehabilitation, conservation or liquidation,
then, in any such case, (i) the Company by a Board Resolution may remove the
Trustee, or (ii) subject to Section 514, any Holder who has been a bona fide
Holder of a Security for at least six months may, on behalf of himself and all
others similarly situated, petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor Trustee.
(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause, the
Company, by a Board Resolution, shall promptly appoint a successor Trustee. If,
within one year after such resignation, removal or incapability, or the
occurrence of such vacancy, a successor Trustee shall be appointed by Act of the
Holders of a majority in principal amount of the Outstanding Securities
delivered to the Company and the retiring Trustee, the successor Trustee so
appointed shall, forthwith upon its acceptance of such appointment, become the
successor Trustee and supersede the successor Trustee appointed by the Company.
If no successor Trustee shall have been so appointed by the Company or the
Holders and accepted appointment in the manner hereinafter provided, any Holder
who has been a bona fide Holder of a Security for at least six months may, on
behalf of himself and all others similarly situated, petition any court of
competent jurisdiction for the appointment of a successor Trustee.
(f) The Company shall give notice of each resignation and each
removal of the Trustee and each appointment of a successor Trustee to all
Holders in the manner provided
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in Section 106. Each notice shall include the name of the successor Trustee and
the address of its Corporate Trust Office.
SECTION 611. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR.
Every successor Trustee appointed hereunder shall execute, acknowledge
and deliver to the Company and to the retiring Trustee an instrument accepting
such appointment, and thereupon the resignation or removal of the retiring
Trustee shall become effective and such successor Trustee, without any further
act, deed or conveyance, shall become vested with all the rights, powers, trusts
and duties of the retiring Trustee; but, on request of the Company or the
successor Trustee, such retiring Trustee shall, upon payment of its charges,
execute and deliver an instrument transferring to such successor Trustee all the
rights, powers and trusts of the retiring Trustee, including all rights, powers
and trusts under each of the Security Documents, and shall duly assign, transfer
and deliver to such successor Trustee all property and money held by such
retiring Trustee hereunder. Upon request of any such successor Trustee, the
Company shall execute any and all instruments for more fully and certainly
vesting in and confirming to such successor Trustee all such rights, powers and
trusts.
No successor Trustee shall accept its appointment unless at the time
of such acceptance such successor Trustee shall be qualified and eligible under
this Article.
SECTION 612. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS.
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all the corporate trust business
of the Trustee, shall be the successor of the Trustee hereunder, provided such
corporation shall be otherwise qualified and eligible under this Article,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto. In case any Securities shall have been
authenticated, but not delivered, by the Trustee then in office, any successor
by merger, conversion or consolidation to such authenticating Trustee may adopt
such authentication and deliver the Securities so authenticated with the same
effect as if such successor Trustee had itself authenticated such Securities.
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SECTION 613. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
If and when the Trustee shall be or become a creditor of the Company
(or any other obligor upon the Securities), the Trustee shall be subject to the
provisions of the Trust Indenture Act regarding the collection of claims against
the Company (or any such other obligor).
SECTION 614. APPOINTMENT OF AUTHENTICATING AGENT.
The Trustee may appoint an Authenticating Agent or Agents which shall
be authorized to act on behalf of the Trustee to authenticate Securities issued
upon original issue and upon exchange, registration of transfer or partial
redemption or pursuant to Section 306, and Securities so authenticated shall be
entitled to the benefits of this Indenture and shall be valid and obligatory for
all purposes as if authenticated by the Trustee hereunder. Wherever reference
is made in this Indenture to the authentication and delivery of Securities by
the Trustee or the Trustee's certificate of authentication, such reference shall
be deemed to include authentication and delivery on behalf of the Trustee by an
Authenticating Agent and a certificate of authentication executed on behalf of
the Trustee by an Authenticating Agent. Each Authenticating Agent shall be
acceptable to the Company and shall at all times be a corporation organized and
doing business under the laws of the United States of America, any State thereof
or the District of Columbia, authorized under such laws to act as Authenticating
Agent, having a combined capital and surplus of not less than $50,000,000 and
subject to supervision or examination by Federal or State authority. If such
Authenticating Agent publishes reports of condition at least annually, pursuant
to law or to the requirements of said supervising or examining authority, then
for the purposes of this Section, the combined capital and surplus of such
Authenticating Agent shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so published. If at any time
an Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, such Authenticating Agent shall resign immediately
in the manner and with the effect specified in this Section.
Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating
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Agent shall be a party, or any corporation succeeding to the corporate agency or
corporate trust business of an Authenticating Agent, shall continue to be an
Authenticating Agent, provided such corporation shall be otherwise eligible
under this Section, without the execution or filing of any paper or any further
act on the part of the Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving written
notice thereof to the Trustee and to the Company. The Trustee may at any time
terminate the agency of an Authenticating Agent by giving written notice thereof
to such Authenticating Agent and to the Company. Upon receiving such a notice
of resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, the Trustee may appoint a successor Authenticating
Agent which shall be acceptable to the Company and shall mail written notice of
such appointment by first-class mail, postage prepaid, to all Holders as their
names and addresses appear in the Security Register. Any successor
Authenticating Agent upon acceptance of its appointment hereunder shall become
vested with all the rights, powers and duties of its predecessor hereunder, with
like effect as if originally named as an Authenticating Agent. No successor
Authenticating Agent shall be appointed unless eligible under the provisions of
this Section.
The Trustee agrees to pay to each Authenticating Agent from time to
time reasonable compensation for its services under this Section, and the
Trustee shall be entitled to be reimbursed for such payments, subject to the
provisions of Section 607.
If an appointment is made pursuant to this Section, the Securities may
have endorsed thereon, in addition to the Trustee's certificate of
authentication, an alternative certificate of authentication in the following
form:
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This is one of the Securities described in the within-mentioned
Indenture.
LASALLE NATIONAL BANK,
AS TRUSTEE
By ,
---------------------------
AS AUTHENTICATING AGENT
By
----------------------------
AUTHORIZED OFFICER
SECTION 615. SEPARATE AND CO-TRUSTEE.
(a) If at any time the Trustee shall deem it necessary or prudent so
to do, the Trustee, at the expense of the Company, may appoint one or more
Persons to act as separate trustees or co-trustees, jointly with the Trustee
(except as set forth in subsection (b)(1) of this Section); and such Person
shall have such powers and duties consistent with this Indenture and the
Security Documents as shall be specified herein. The Trustee shall give notice
of such appointment to the Holders and the Company. If the Trustee shall
request the Company to do so, the Company shall join with the Trustee in the
execution of a supplemental indenture evidencing such appointment, but the
Trustee shall have the power to make such appointment without making such
request or entering into any such supplemental indenture.
(b) Every separate trustee and co-trustee shall, to the extent
permitted by law, be subject to the following terms and conditions:
(1) the rights, powers, duties and obligations conferred or imposed
upon such separate or co-trustee shall be conferred or imposed upon and
exercised or performed by the Trustee and such separate trustee or
co-trustee jointly, except to the extent that under applicable law of any
State any non-resident trustee shall be incompetent or unqualified to
perform or prohibited from exercising any such right or power, in which
event such rights and powers shall be exercised and performed by such
separate trustee or co-trustee, but only to the minimum extent required by
such law,
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and the Trustee, to the fullest extent permitted under such law, shall
direct such separate or co-trustee in the exercise and performance of such
rights and powers; and
(2) the Trustee may at any time by written instrument accept the
resignation of or remove any such separate trustee or co-trustee, and upon
the request of the Trustee, the Company shall join with the Trustee in the
execution of all instruments necessary to make effective such resignation
or removal, but the Trustee shall have the power to accept such resignation
or make such removal without making such request of the Company (and a
successor to a separate trustee or co-trustee so resigning or removed may
be appointed in the manner provided in this Section).
ARTICLE SEVEN
Holders' Lists and Reports by Trustee and Company
SECTION 701. COMPANY TO FURNISH TRUSTEE NAMES AND ADDRESSES OF HOLDERS.
The Company will furnish or cause to be furnished to the Trustee
(a) semi-annually, not more than 15 days after each Regular
Record Date, a list, in such form as the Trustee may reasonably
require, of the names and addresses of the Holders as of such Regular
Record Date, and
(b) at such other times as the Trustee may request in writing,
within 30 days after the receipt by the Company of any such request, a
list of similar form and content as of a date not more than 15 days
prior to the time such list is furnished;
EXCLUDING from any such list names and addresses received by the Trustee in its
capacity as Security Registrar.
SECTION 702. PRESERVATION OF INFORMATION; COMMUNICATIONS TO HOLDERS.
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders contained in the most recent
list furnished to
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the Trustee as provided in Section 701 and the names and addresses of Holders
received by the Trustee in its capacity as Security Registrar. The Trustee may
destroy any list furnished to it as provided in Section 701 upon receipt of a
new list so furnished.
(b) The rights of Holders to communicate with other Holders with
respect to their rights under this Indenture or under the Securities, and the
corresponding rights and duties of the Trustee, shall be as provided by the
Trust Indenture Act.
(c) Every Holder of Securities, by receiving and holding the same,
agrees with the Company and the Trustee that neither the Company nor the Trustee
nor any agent of either of them shall be held accountable by reason of any
disclosure of information as to names and addresses of Holders made pursuant to
the Trust Indenture Act.
SECTION 703. REPORTS BY TRUSTEE.
(a) The Trustee shall transmit to Holders such reports concerning the
Trustee and its actions under this Indenture as may be required pursuant to the
Trust Indenture Act at the times and in the manner provided pursuant thereto.
(b) A copy of each such report shall, at the time of such
transmission to Holders, be filed by the Trustee with each stock exchange upon
which the Securities are listed, with the Commission and with the Company. The
Company will notify the Trustee when the Securities are listed on any stock
exchange.
SECTION 704. REPORTS BY COMPANY.
(a) The Company shall file with the Trustee and the Commission, and
transmit to Holders, such information, documents and other reports, and such
summaries thereof, as may be required pursuant to the Trust Indenture Act at the
times and in the manner provided pursuant to the Trust Indenture Act; PROVIDED
that, such information which the Company is required to file with the Commission
pursuant to Section 13 or 15(d) of the Exchange Act shall be filed with the
Trustee within 15 days after the same is required to be filed with the
Commission. In the event the Company is not subject to Section 13 or 15(d) of
the Exchange Act, it shall file with the Trustee upon request the information
required
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to be delivered pursuant to Rule 144A(d)(4) under the Securities Act.
(b) The Company shall file with the Trustee such additional
information, documents and reports with respect to compliance by the Company
with the conditions and covenants provided for in this Indenture as may be
requested from time to time by the Trustee.
ARTICLE EIGHT
Consolidation, Merger, Conveyance, Transfer or Lease
SECTION 801. COMPANY MAY CONSOLIDATE, ETC., ONLY ON CERTAIN TERMS.
The Company shall not consolidate with or merge into any other Person
(whether or not the Company is the surviving corporation) or sell, lease,
license, transfer or otherwise dispose of all or substantially all of its
properties or assets in one or more related transactions, to another Person
unless:
(1) the Company is the surviving corporation or the Person formed by
or surviving any such consolidation or merger (if other than the Company)
or to which such sale, lease, license, transfer, or other disposition shall
have been made is a corporation organized or existing under the laws of the
United States, any state thereof or the District of Columbia;
(2) the Person formed by or surviving any such consolidation or
merger (if other than the Company) or the Person to which such sale,
lease, license, transfer, or other disposition shall have been made
assumes, by an indenture supplemental hereto, executed and delivered
to the Trustee, in form reasonably satisfactory to the Trustee, all of
the obligations of the Company under the Securities, this Indenture
and the Security Documents, including the Collateral Agent's
uninterrupted Lien (subject to Permitted Collateral Liens) in respect
of the Collateral;
(3) immediately after giving effect to such transaction and
treating any Indebtedness which becomes an obligation of the Company
or a Subsidiary as a result of such transaction as having been
incurred by the Company or such Subsidiary at the time of such
transaction, no
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Event of Default, and no event which, after notice or lapse of time or
both, would become an Event of Default, shall have occurred and be
continuing;
(4) the Company or any Person formed by or surviving any such
consolidation or merger, or to which such sale, lease, license,
transfer, or other disposition shall have been made (A) will have
Consolidated Net Worth (immediately after the transaction but prior to
any purchase accounting adjustments resulting from the transaction)
equal to or greater than the Consolidated Net Worth of the Company
immediately preceding the transaction and (B) will, at the time of
such transaction and after giving pro forma effect thereto as if such
transaction had occurred at the beginning of the applicable
four-quarter period, be permitted to incur at least $1.00 of
additional Indebtedness pursuant to Section 1009; and
(5) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger, conveyance, transfer or lease and, if a
supplemental indenture is required in connection with such
transaction, such supplemental indenture comply with this Article and
that all conditions precedent herein provided for relating to such
transaction have been complied with.
SECTION 802. SUCCESSOR SUBSTITUTED.
Upon any consolidation, merger, sale, lease, license, transfer or
other disposition in accordance with this Section, the successor Person formed
by such consolidation or into which the Company is merged or to which such sale,
lease, license, transfer or other disposition is made shall succeed to, and be
substituted for, the Company and may exercise every right and power of the
Company under this Indenture or under the Security Documents with the same
effect as if such successor had been named as the Company herein or under the
Security Documents, and thereafter (except in the case of a lease) the
predecessor corporation will be relieved of all further obligations and
covenants under this Indenture, the Security Documents and the Securities.
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ARTICLE NINE
Supplements and Amendments to This Indenture
and the Security Documents
SECTION 901. SUPPLEMENTAL INDENTURES AND AMENDMENTS TO SECURITY DOCUMENTS
WITHOUT CONSENT OF HOLDERS.
Without the consent of any Holders, the Company, when authorized by a
Board Resolution of the Company and the Trustee, at any time and from time to
time, may enter into one or more indentures supplemental hereto or one or more
amendments to the Security Documents, in form satisfactory to the Trustee, for
any of the following purposes:
(1) to evidence the succession of another Person to the Company and
the assumption by any such successor of the covenants of the Company herein
and in the Securities or the Security Documents; or
(2) to add to the covenants of the Company for the benefit of the
Holders, or to surrender any right or power herein or in the Security
Documents or the Securities conferred upon the Company; or
(3) to further secure the Securities; or
(4) to cure any ambiguity, to correct or supplement any provision
herein which may be defective or inconsistent with any other provision
herein or in any Security Document, or to make any other provisions with
respect to matters or questions arising under this Indenture or any
Security Document which shall not be inconsistent with the provisions
herein or therein, PROVIDED that such action pursuant to this Clause (4)
shall not adversely affect the interests of the Holders.
SECTION 902. SUPPLEMENTAL INDENTURES AND AMENDMENTS TO SECURITY DOCUMENTS
WITH CONSENT OF HOLDERS.
With the consent of the Holders of not less than a majority in
principal amount of the Outstanding Securities, by Act of said Holders delivered
to the Company and the Trustee, the Company, when authorized by a Board
Resolution of the Company and the Trustee may enter into an indenture or
indentures supplemental hereto or one or more amendments
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to any Security Document for the purpose of adding any provisions to or changing
in any manner or eliminating any of the provisions of this Indenture or any
Security Document or of modifying in any manner the rights of the Holders under
this Indenture or the rights or obligations of the parties to any Security
Document; PROVIDED, HOWEVER, that no such supplemental indenture or amendment in
respect of any Security Document shall, without the consent of the Holder of
each Outstanding Security affected thereby,
(1) reduce the percentage of principal amount of Securities whose
Holders must consent to an amendment, supplement or waiver of any provision
of this Indenture, the Securities or the Security Documents;
(2) reduce the principal amount of any Security or change the Stated
Maturity of any Security;
(3) reduce the Redemption Price, including premium, if any, payable
upon the redemption of any Security, change the time at which at any
Security may be redeemed or waive any redemption payment with respect to
any Security;
(4) reduce the Purchase Price payable upon the repurchase of any
Security pursuant to Section 1016 or 1017, or change the time at which any
Security may be repurchased thereunder or otherwise amend in any material
respect (including through amendment of any of the definitions relating
thereto) or waive the Company's obligation thereunder to make and
consummate an Offer to Purchase in the event of a Change of Control or an
Asset Sale;
(5) reduce the rate of, or change the time for payment of, interest
on any Security;
(6) except as otherwise provided in this Indenture, waive a
continuing Default or Event of Default in the payment of principal of,
premium, if any, any Purchase Amount or interest on the Securities;
(7) make any Security payable in money other than that stated in the
Securities;
(8) impair the right to institute suit for the enforcement of any
payment of principal or interest on or after the Stated Maturity thereof,
any payment of the Redemption Price (including premium, if any) on or
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after the applicable Redemption Date or any payment of the Purchase Amount
on or after the applicable Purchase Date;
(9) modify or amend this Indenture or the Security Documents, or
take or fail to take any action, that would have the effect of impairing
the Lien on the Collateral granted pursuant to the Security Documents or
permitting any release of Collateral from such Lien except as expressly
contemplated by this Indenture or the Security Documents; or
(10) make any change in the provisions of Section 508, Section 513,
Section 1022 or in this sentence of this Section 902, except to increase
any percentage contained in such Sections or to provide that certain other
provisions of this Indenture cannot be modified or waived without the
consent of the Holder of each Outstanding Security affected thereby.
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed supplemental indenture or amendment
to any Security Document, but it shall be sufficient if such Act shall approve
the substance thereof.
SECTION 903. EXECUTION OF SUPPLEMENTAL INDENTURES AND AMENDMENTS TO SECURITY
DOCUMENTS.
In executing, or accepting the additional trusts created by, any
supplemental indenture or any amendment to any Security document permitted by
this Article or the modifications thereby of the trusts created by this
Indenture and the Security Documents, the Trustee shall be entitled to receive,
and (subject to Section 601) shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of such supplemental indenture or
amendment is authorized or permitted by this Indenture or the Security
Documents. The Trustee may, but shall not be obligated to, enter into any such
supplemental indenture which affects the Trustee's own rights, duties or
immunities under this Indenture or otherwise.
SECTION 904. EFFECT OF SUPPLEMENTAL INDENTURES AND AMENDMENTS TO SECURITY
DOCUMENTS.
Upon the execution of any supplemental indenture or any amendments to
any Security Document under this Article, this Indenture or such Security
Document, as the
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case may be, shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Securities theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby.
SECTION 905. CONFORMITY WITH TRUST INDENTURE ACT.
Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the Trust Indenture Act.
SECTION 906. REFERENCE IN SECURITIES TO SUPPLEMENTAL INDENTURES.
Securities authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so determine,
new Securities so modified as to conform, in the opinion of the Trustee and the
Company, to any such supplemental indenture may be prepared and executed by the
Company and authenticated and delivered by the Trustee in exchange for
Outstanding Securities.
SECTION 907. NOTICE OF SUPPLEMENTAL INDENTURES.
Promptly after the execution of any supplemental indenture pursuant to
the provisions of Section 902, the Company shall give notice to all Holders of
Securities, in the manner provided in Section 105, of such fact, setting forth
in general terms the substance of such supplemental indenture. Any failure of
the Company to give such notice, or any defect therein, shall not in any way
impair or affect the validity of any such supplemental indenture.
ARTICLE TEN
Covenants
SECTION 1001. PAYMENT OF PRINCIPAL, PREMIUM AND INTEREST.
The Company shall duly and punctually pay the principal of (and
premium, if any) and interest on the Securities in accordance with the terms of
the Securities and this Indenture.
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SECTION 1002. 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 presented or surrendered
for payment, where Securities may be surrendered for registration of transfer or
exchange 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 Corporate Trust Office of the Trustee, and the Company hereby
appoints the Trustee as its agent to receive all such presentations, surrenders,
notices and demands.
The Company may also from time to time designate one or more other
offices or agencies (in or outside the Borough of Manhattan, The City of New
York) where the Securities may be presented or surrendered for any or all such
purposes and may from time to time rescind such designations; PROVIDED, HOWEVER,
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 Trustee of any such designation or rescission and of any change in
the location of any such other office or agency.
SECTION 1003. MONEY FOR SECURITY PAYMENTS TO BE HELD IN TRUST.
If the Company shall at any time act as its own Paying Agent, it
shall, on or before each due date of the principal of (and premium, if any) or
interest on any of the Securities, segregate and hold in trust for the benefit
of the Persons entitled thereto a sum sufficient to pay the principal (and
premium, if any) or interest so becoming due until such sums shall be paid to
such Persons or otherwise disposed of as herein provided and shall promptly
notify the Trustee of its action or failure so to act.
Whenever the Company shall have one or more Paying Agents, it shall,
prior to each due date of the principal of (and premium, if any) or interest on
any Securities, deposit with a Paying Agent a sum sufficient to pay such amount,
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such sum to be held as provided by the Trust Indenture Act, and (unless such
Paying Agent is the Trustee) the Company shall promptly notify the Trustee of
its action or failure so to act.
The Company shall cause each Paying Agent other than the Trustee to
execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee, subject to the provisions of this Section, that
such Paying Agent will (i) comply with the provisions of the Trust Indenture Act
applicable to it as a Paying Agent and (ii) during the continuance of any
default by the Company (or any other obligor upon the Securities) in the making
of any payment in respect of the Securities, upon the written request of the
Trustee, forthwith pay to the Trustee all sums held in trust by such Paying
Agent as such.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by the Company or
such Paying Agent; and, upon such payment by any Paying Agent to the Trustee,
such Paying Agent shall be released from all further liability with respect to
such money.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of (and premium, if
any) or interest on any Security and remaining unclaimed for two years after
such principal (and premium, if any) or interest has become due and payable
shall be paid to the Company on Company Request, or (if then held by the
Company) shall be discharged from such trust; and the Holder of such Security
shall thereafter, as an unsecured general creditor, look only to the Company for
payment thereof, and all liability of the Trustee or such Paying Agent with
respect to such trust money, and all liability of the Company as trustee
thereof, shall thereupon cease; PROVIDED, HOWEVER, that the Trustee or such
Paying Agent, before being required to make any such repayment, may at the
expense of the Company cause to be published once, in a newspaper published in
the English language, customarily published on each Business Day and of general
circulation in The City of New York, notice that such money remains unclaimed
and that, after a date specified therein, which shall not be less than 30 days
from the date of such publication, any unclaimed balance of such money then
remaining shall be repaid to the Company.
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SECTION 1004. STATEMENT BY OFFICERS AS TO DEFAULT.
The Company will deliver to the Trustee, within 120 days after the end
of each fiscal year of the Company ending after the date hereof, an Officers'
Certificate, stating whether or not to the best knowledge of the signers thereof
the Company is in default in the performance and observance of any of the terms,
provisions and conditions of this Indenture (without regard to any period of
grace or requirement of notice provided hereunder) and, if the Company shall be
in default, specifying all such defaults and the nature and status thereof of
which they may have knowledge.
SECTION 1005. EXISTENCE.
Subject to Article Eight, the Company shall do or cause to be done all
things necessary to preserve and keep in full force and effect its existence,
rights (charter and statutory) and franchises; PROVIDED, HOWEVER, that the
Company shall not be required to preserve any such right or franchise if the
Board of Directors shall determine that the preservation thereof is no longer
desirable in the conduct of the business of the Company and that the loss
thereof is not disadvantageous in any material respect to the Holders.
SECTION 1006. MAINTENANCE OF PROPERTIES.
The Company shall cause all properties used or useful in the conduct
of its business or the business of any Subsidiary to be maintained and kept in
good 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 shall prevent the Company from
discontinuing the operation or maintenance of any of such properties if such
discontinuance is, in the judgment of the Company, desirable in the conduct of
its business or the business of any Subsidiary and not disadvantageous in any
material respect to the Holders.
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SECTION 1007. 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 taxes, assessments and
governmental charges levied or imposed upon the Company or any Subsidiary or
upon the income, profits or property of the Company or any Subsidiary, and (2)
all lawful claims for labor, materials and supplies which, if unpaid, might by
law become a lien upon the property of the Company or any Subsidiary; 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.
SECTION 1008. 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 on account of the Equity Interests of the Company or any of its
Restricted Subsidiaries (other than dividends or distributions payable in Equity
Interests (other than Disqualified Stock) of the Company or such Restricted
Subsidiary or dividends or distributions payable by a Restricted Subsidiary of
the Company to the Company or to another Restricted Subsidiary of the Company);
(ii) purchase, redeem or otherwise acquire or retire for value any Equity
Interests of the Company or any Restricted Subsidiary or other Affiliate of the
Company (other than any such Equity Interests owned by the Company or a
Restricted Subsidiary of the Company); (iii) purchase, redeem or otherwise
acquire or retire for value any Indebtedness that is subordinated to the
Securities; (iv) pay an amount in any fiscal year in excess of $600,000 pursuant
to the Management Services Agreement; or (v) make any Restricted Investment (all
such payments and other actions set forth in clauses (i) through (v) above being
collectively referred to as "Restricted Payments"), unless, at the time of and
after giving effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof;
(b) at the time of such Restricted Payment and after giving pro
forma effect thereto as if such Restricted Payment had been made at the
beginning of the Company's most recently ended four full fiscal
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quarters for which internal financial statements are available immediately
preceding the date on which such Restricted Payment is made, the Fixed
Charge Coverage Ratio would have been greater than 2.0 to 1 for Restricted
Payments made on or prior to February 29, 2000 and greater than 2.25 to 1
for Restricted Payments made after February 29, 2000; and
(c) such Restricted Payment (the amount of any such payment, if
other than cash, to be determined by the Board of Directors of the Company,
whose determination shall be conclusive and evidenced by a resolution in an
Officers' Certificate delivered to the Trustee), together with the
aggregate of all other Restricted Payments made by the Company and its
Restricted Subsidiaries after the date hereof, shall not exceed the sum of
(1) 50% of the Consolidated Net Income of the Company for the period (taken
as one accounting period) commencing March 1, 1996 and ending on the last
day of the Company's most recently ended fiscal quarter for which internal
financial statements are available at the time of such Restricted Payment
(or, if such Consolidated Net Income for such period is a deficit, 100% of
such deficit); plus (2) 100% of the aggregate net cash proceeds received by
the Company from the issue, sale or exercise since the date hereof of
Equity Interests of the Company or of debt securities of the Company that
have been converted into such Equity Interests (other than (A) Equity
Interests (or convertible debt securities) sold to, or exercised by, a
Restricted Subsidiary of the Company, (B) Equity Interests the proceeds of
which are applied as permitted by clause (ii) of the next succeeding
paragraph and (C) Disqualified Stock or debt securities that have been
converted into Disqualified Stock); plus (3) the aggregate cash received by
the Company as capital contributions to the Company after the Issue Date
(other than a capital contribution applied as permitted by clause (ii) of
the next succeeding paragraph) plus (4) the amount of the net reduction in
Investments in Unrestricted Subsidiaries of the Company resulting from (x)
the payment of cash dividends or the repayment in cash of the principal of
loans or the cash return on any Investment, in each case to the extent
received by the Company or any Restricted Subsidiary of the Company from
Unrestricted Subsidiaries of the Company, (y) to the extent that any
Restricted Investment that was made after the date hereof is sold for cash
or otherwise liquidated or repaid for cash, the after-tax cash return of
capital with respect to such Restricted Investment (less the cost of
disposition, if any) and
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(z) the redesignation of Unrestricted Subsidiaries of the Company as
Restricted Subsidiaries of the Company (valued as provided in the
definition of "Investment"), such aggregate amount of the net reduction in
Investments not to exceed in the case of Unrestricted Subsidiary the amount
of Restricted Investments previously made by the Company or any Restricted
Subsidiary in such Unrestricted Subsidiary, which amount was included in
the calculation of the amount of Restricted Payments.
The foregoing provisions will not prohibit (i) the payment of any
dividend within 60 days after the date of declaration thereof, if at said date
of declaration such payment would have complied with the provisions of this
Indenture; (ii) the redemption, repurchase, retirement or other acquisition of
any Equity Interests of the Company, or the defeasance, redemption or repurchase
of subordinated Indebtedness in exchange for, or out of the proceeds of, the
substantially concurrent sale (other than to a Restricted Subsidiary of the
Company) of Equity Interests (other than any Disqualified Stock) of the Company
or out of the proceeds of a substantially concurrent cash capital contribution
received by the Company; (iii) the defeasance, redemption or repurchase of
subordinated Indebtedness with the net proceeds from an incurrence of
Indebtedness incurred in a Permitted Refinancing (as hereinafter defined); (iv)
a Restricted Payment by the Company pursuant to the Tax Sharing Agreement; (v)
following consummation by Group of a Public Equity Offering, a Restricted
Payment to Group in such amounts as may be necessary to pay operating and/or
administrative expenses of Group, up to a maximum of $750,000 per year; and (vi)
a Restricted Payment to Group of up to $32.0 million that is applied in full on
the Issue Date to the payment of the redemption price of a portion of the
outstanding 12.5% Notes. Any payments made pursuant to clauses (i), (iv) and
(v) of this paragraph will be, and any payments made pursuant to clauses (ii),
(iii) and (vi) will not be, deemed to be Restricted Payments for the purpose of
clause (c) of the preceding paragraph.
Not later than the date of making any Restricted Payment, the Company
shall deliver to the Trustee an Officers' Certificate stating that such
Restricted Payment is permitted and setting forth the basis upon which the
calculations required by this Section 1008 were computed, which calculations may
be based upon the Company's latest available financial statements.
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SECTION 1009. INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee
or otherwise become directly or indirectly liable with respect to (collectively,
"incur") any Indebtedness (including Acquired Debt), and the Company shall not
issue any Disqualified Stock and shall not permit any of its Restricted
Subsidiaries to issue any share of Disqualified Stock or preferred stock;
PROVIDED, HOWEVER, that the Company may incur Indebtedness or issue shares of
Disqualified Stock if the Fixed Charge Coverage Ratio for the Company's most
recently ended four full fiscal quarters for which internal financial statements
are available immediately preceding the date on which such additional
Indebtedness is incurred or such preferred stock is issued, determined on a pro
forma basis (including a pro forma application of the net proceeds therefrom),
as if the additional Indebtedness had been incurred, or the Disqualified Stock
had been issued, as the case may be, at the beginning of such four-quarter
period would have been greater than 2.0 to 1 for Indebtedness incurred on or
prior to February 28, 1998 and greater than 2.25 to 1 for Indebtedness incurred
after February 28, 1998.
The foregoing limitations shall not apply to:
(i) Indebtedness incurred by the Company under the Senior Credit Facility
or any replacement credit facility in an aggregate principal amount not to
exceed the greater of (A) $20.0 million in principal amount (with letters
of credit being deemed to have a principal amount equal to the maximum
potential liability of the Company thereunder), less the aggregate amount
of all repayments after the Issue Date that permanently reduce the
commitment under the Senior Credit Facility or such replacement credit
facility and (B) the Borrowing Base at the time such Indebtedness is
incurred;
(ii) Indebtedness incurred by the Company or any Guarantor in respect of
Capital Lease Obligations or Purchase Money Obligations in an aggregate
principal amount not to exceed $10.0 million at any time outstanding
reduced by the principal amount of any such Indebtedness repaid with the
Net Proceeds of Asset Sales (other than Purchase Money Obligations repaid
with Net Proceeds of Asset Sales of the asset securing such Obligations);
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(iii) Existing Indebtedness outstanding on the date hereof;
(iv) the incurrence by the Company or any Guarantor of Indebtedness issued
in exchange for, or the proceeds of which are used to extend, refinance,
renew, replace, defease or refund (collectively, to "Refinance"), any
Indebtedness incurred pursuant to clause (iii) above or this clause (iv) in
whole or in part (the "Refinancing Indebtedness"); PROVIDED, HOWEVER, that
(1) the principal amount of such Refinancing Indebtedness shall not exceed
the principal amount of Indebtedness so Refinanced (plus the amount of
prepayment premium and reasonable expenses incurred in connection
therewith); (2) the Refinancing Indebtedness shall have a Weighted Average
Life to Maturity equal to or greater than the Weighted Average Life to
Maturity of the Indebtedness being Refinanced; (3) if the Indebtedness is
subordinated in right of payment to the Securities, the Refinancing
Indebtedness shall be subordinated in right of payment to the Securities on
terms at least as favorable to the Holders of the Securities as those
contained in the documentation governing the Indebtedness and (4)
immediately after such Refinancing, the amount remaining outstanding or
available under such Existing Indebtedness or such Refinancing Indebtedness
being so Refinanced does not exceed the difference between (A) the amount
outstanding under such Existing Indebtedness or such Refinancing
Indebtedness immediately prior to such Refinancing together with any
prepayment premium paid and expenses reasonably incurred by the Company in
connection with such Refinancing MINUS (B) the amount of the Refinancing
Indebtedness being incurred in such Refinancing (any such Refinancing being
referred to herein as a "Permitted Refinancing");
(v) Hedging Obligations that are incurred for the purpose of fixing or
hedging interest rate risk with respect to any Indebtedness that is
permitted by the terms of this Indenture to be outstanding;
(vi) intercompany Indebtedness between or among the Company and any of its
Restricted Subsidiaries;
(vii) Indebtedness of the Company attributable to any Currency Agreement,
Commodity Agreement or Interest Rate Agreement;
viii) Indebtedness arising from BONA FIDE agreements providing for
indemnification, adjustment of purchase
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price or similar obligations, or from Guarantees or letters of credit,
surety bonds or performance bonds securing any obligations of the Company
or any of its Restricted Subsidiaries pursuant to such agreements, in any
case incurred in connection with the disposition of any business, assets or
Restricted Subsidiary of the Company in compliance with Section 1016 (other
than Guarantees of Indebtedness incurred by an Person acquiring all or any
portion of such business, assets or Restricted Subsidiary of the Company
for the purpose of financing such acquisition), in a principal amount not
to exceed the gross proceeds actually received by the Company or any
Restricted Subsidiary of the Company in connection with such disposition;
and
(ix) other Indebtedness in an aggregate principal amount not to exceed $5.0
million at any time outstanding.
SECTION 1010. LIENS.
In respect of property other than the Collateral, the Company shall
not, and shall not permit any of its Restricted Subsidiaries to, directly or
indirectly, create, incur, assume or suffer to exist any Lien, except Permitted
Liens, on any asset now owned or hereafter acquired, or any income or profits
therefrom or assign or convey any right to receive income therefrom without at
the same time effectively providing that the Securities be secured (A) equally
and ratably with (or prior to) the obligations so secured for so long as such
obligations are so secured, or (B) in the event the obligations so secured are
subordinate in right of payment to the Securities, prior to such obligations for
so long as such obligations are so secured. In respect of the Collateral, the
Company shall not, and shall not permit any of its Restricted Subsidiaries to,
directly or indirectly, create, incur, assume or suffer to exist any Lien,
except Permitted Collateral Liens, upon any of the Collateral.
SECTION 1011. DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING 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 or become effective any encumbrance or restriction on the ability of any
Restricted Subsidiary to (a) pay dividends or make any other distributions to
the Company or any of its Restricted
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Subsidiaries (1) on its Capital Stock or (2) with respect to any other interest
or participation in, or measured by, its profits, (b) pay any Indebtedness owed
to the Company or any of its Subsidiaries, (c) make loans or advances to the
Company or any of its Restricted Subsidiaries or (d) transfer any of its
properties or assets to the Company or any of its Restricted Subsidiaries,
except for such encumbrances or restrictions existing under or by reason of (i)
Existing Indebtedness as in effect on the date hereof, (ii) this Indenture and
the Securities, (iii) the Senior Credit Facility, as in effect on the date
hereof, and any amendments, modifications, restatements, renewals, increases,
supplements, refundings, replacements or refinancings thereof after such date;
PROVIDED that such amendments, modifications, restatements, renewals, increases,
supplements, refundings, replacements or refinancings are not more restrictive
with respect to the provisions set forth in clauses (a), (b), (c) and (d) than
those contained in the Senior Credit Facility, as in effect on the date hereof,
(iv) applicable law, (v) any instrument governing Indebtedness or Capital Stock
of a Person acquired by the Company or any of its Restricted Subsidiaries as in
effect at the time of such acquisition (except to the extent such Indebtedness
was incurred in connection with or in contemplation of such acquisition), which
encumbrance or restriction is not applicable to any Person, or the properties or
assets of any Person, other than the Person, or the property or assets of the
Person, so acquired, PROVIDED that the Consolidated Cash Flow of such Person is
not taken into account in determining whether such acquisition was permitted by
the terms of this Indenture, (vi) customary nonassignment provisions in leases
entered into in the ordinary course of business and consistent with past
practices, (vii) Purchase Money Obligations for property acquired in the
ordinary course of business that impose restrictions of the nature described in
clause (d) above on the property so acquired, (viii) restrictions with respect
solely to a Subsidiary of the Company imposed pursuant to a binding agreement
(subject only to customary closing conditions and termination provisions) that
has been entered into for the sale or disposition of all or substantially all of
the Capital Stock or assets to be sold of such Subsidiary, PROVIDED that such
restrictions apply solely to the Capital Stock or assets to be sold of such
Subsidiary, and such sale or disposition is permitted under Section 1016, or
(ix) Refinancing Indebtedness, PROVIDED that the restrictions contained in the
agreements governing such Refinancing Indebtedness are no more restrictive with
respect to the provisions set forth in clauses (a), (b), (c) and (d) above than
those contained in the agreements governing the Indebtedness being refinanced.
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SECTION 1012. TRANSACTIONS WITH AFFILIATES.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, sell, lease, license, transfer or otherwise dispose of any of
its properties or assets to, or purchase any property or assets from, or enter
into any contract, agreement, understanding, loan, advance or guarantee with, or
for the benefit of, any Affiliate (each of the foregoing, an "Affiliate
Transaction"), unless (a) such Affiliate Transaction is on terms that are no
less favorable to the Company or the relevant Restricted Subsidiary, as the case
may be, than those that would have been obtained in a comparable transaction by
the Company or such Restricted Subsidiary, as the case may be, with an unrelated
Person and (b) the Company delivers to the Trustee (i) with respect to any
Affiliate Transaction involving aggregate payments in excess of $1.0 million, a
resolution of the Board of Directors set forth in an Officers' Certificate
certifying that such Affiliate Transaction complies with clause (a) above and
such Affiliate Transaction is approved by a majority of the disinterested
members of the Board of Directors and (ii) with respect to any Affiliate
Transaction involving aggregate payments in excess of $5.0 million, an
affirmative opinion as to the fairness to the Company or such Restricted
Subsidiary, as the case may be, from a financial point of view issued by an
investment banking firm of national standing with expertise in underwriting
non-investment grade debt securities; PROVIDED, HOWEVER, that (i) any employment
agreement or stock option agreement (other than any such agreement involving
options on Disqualified Stock) entered into by the Company or any of its
Restricted Subsidiaries in the ordinary course of business and consistent with
the past practice of the Company or such Restricted Subsidiary, (ii)
transactions between or among the Company and its Restricted Subsidiaries, (iii)
transactions permitted by the provisions of Section 1008 hereof, (iv) the
payment of reasonable fees or indemnities to directors of the Company or its
Restricted Subsidiaries, (v) the payment in any fiscal quarter by the Company to
HPH of an amount which, taken together with all other amounts paid by the
Company in such fiscal quarter and the preceding three fiscal quarters does not
exceed the Permitted Amount, (vi) any issuance of Equity Interests (other than
Disqualified Stock) or other payments, awards or grants in Equity Interests
pursuant to stock options and stock ownership plans (other than plans involving
Disqualified Stock) of the Company entered into in the ordinary course of
business and approved by the Board of Directors, (vii) payments pursuant to the
Miner Purchase Agreement, and (viii) transactions and payments pursuant to
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the Equity Registration Rights Agreement dated as of June 30, 1993 among Group,
UBS Capital Switzerland, New York Branch and Apollo, and the Debt Registration
Rights Agreement dated as of June 30, 1993 among Group, Union Bank of
Switzerland, New York Branch, Lion Advisors, L.P. and AIF II, L.P., in each case
as in effect on the Issue Date or as thereafter amended in a manner that is not
materially adverse to the Company or the Holders of the Securities, and the
Stock and Warrant Holders Agreement, in each case shall not be deemed Affiliate
Transactions.
SECTION 1013. GUARANTEE OF THE SECURITIES.
The Company shall not permit any Restricted Subsidiary to incur any
Indebtedness or issue any preferred stock unless (i) such Restricted Subsidiary
has executed and delivered to the Trustee a supplemental indenture pursuant to
which such Restricted Subsidiary shall Guarantee all of the obligations of the
Company with respect to the Securities on a senior basis together with an
Opinion of Counsel to the effect that the supplemental indenture has been duly
executed and delivered by such Restricted Subsidiary and is in compliance in all
material respects with the terms of this Indenture or (ii) the total principal
amount of Indebtedness and liquidation preference of preferred stock of such
Restricted Subsidiary does not exceed $250,000 individually and, together with
the total principal amount of Indebtedness and liquidation preference of
preferred stock of all other Restricted Subsidiaries that are not Guarantors,
does not exceed $500,000 in the aggregate.
Any such Guarantee shall provide that such Restricted Subsidiary will,
jointly and severally, unconditionally guarantee to each Holder of a Security
authenticated and delivered by the Trustee, and to the Trustee and its
successors and assigns, irrespective of the validity and enforceability of this
Indenture, the Securities or the obligations of the Company under this Indenture
or the Securities, that the principal of, premium, if any, and interest on the
Securities will be paid in full when due, whether at Maturity, on any Interest
Payment Date, upon acceleration, call for redemption, any Offer to Purchase or
otherwise, and interest on the overdue principal of, premium, and interest, if
any, on the Securities and all other obligations of the Company to the Holders
or the Trustee under this Indenture, the Security Documents and the Securities
will be promptly paid in full or performed, all in accordance with the terms of
this Indenture, the Security Documents and the Securities. Failing payment when
due of
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any amount so guaranteed for whatever reason, such Guarantor shall be obligated
to pay the same whether or not such failure to pay has become an Event of
Default which could cause acceleration pursuant to Article Five hereof. Any
such Guarantor shall agree 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 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 any Guarantor.
Any such Guarantee shall be limited in amount to the lesser of (i) the
aggregate amount of the obligations of the Company under the Securities and this
Indenture or (ii) the amount, if any, which would not have (A) rendered such
Guarantor "insolvent" (as such term is defined in the United States Bankruptcy
Code, 11 U.S.C. Section 101 ET SEQ.) or (B) left it with unreasonably small
capital at the time its Guarantee was entered into, after giving effect to the
incurrence of existing Indebtedness immediately prior to such time; PROVIDED,
HOWEVER, that it shall be a presumption in any lawsuit or other proceeding in
which a Guarantor is a party that the amount guaranteed pursuant to such
Guarantee is the amount set forth in clause (i) above unless any creditor, or
representative of the creditors of such Guarantor, or debtor in possession or
trustee in bankruptcy of the Guarantor, otherwise proves in such a lawsuit that
the aggregate liability of the Guarantor is limited to the amount set forth in
clause (ii).
Upon the sale or other disposition of a Restricted Subsidiary that is
a Guarantor (other than to the Company or an Affiliate of the Company) permitted
by this Indenture, such Restricted Subsidiary shall be released and relieved
from all of its obligations under its Guarantee.
SECTION 1014. LINE OF BUSINESS.
For so long as any Securities are outstanding, the Company and its
Restricted Subsidiaries shall engage primarily in the business of developing,
manufacturing and marketing of rigid plastic packaging and plastic promotional
beverage cups.
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SECTION 1015. IMPAIRMENT OF SECURITY INTEREST.
Neither the Company nor any of its Subsidiaries shall take or omit to
take any action that would have the result of adversely affecting or impairing
the security interest in favor of the Collateral Agent, on behalf of itself and
the Holders of the Securities, with respect to the Collateral, and neither the
Company nor any of its Subsidiaries shall grant to any Person, or suffer any
Person (other than the Company) to have (other than the Collateral Agent on
behalf of the Trustee and the Holders of the Securities) any interest whatsoever
in the Collateral except as expressly permitted by the Security Documents.
Neither the Company nor any of its Subsidiaries shall enter into any agreement
or instrument that by its terms requires the proceeds received from any sale of
Collateral to be applied to repay, redeem, defease or otherwise acquire or
retire any Indebtedness of any Person, other than (i) lenders under an
Acquisition Financing Facility pursuant to an Intercreditor Agreement and (ii)
pursuant to the Indenture, the Securities and the Security Documents.
SECTION 1016. ASSET SALES, COLLATERAL ASSET SALES AND COLLATERAL LOSS EVENTS.
(a) The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, engage in any Asset Sale, other than a Collateral
Asset Sale, unless:
(1) The Company or any such Restricted Subsidiary, as the case may
be, receives consideration at the time of such Asset Sale at least equal to
the fair market value (evidenced by a resolution of the Board of Directors
of the Company set forth in an Officers' Certificate delivered to the
Trustee) of the assets sold or otherwise disposed of; and
(2) 80% of the consideration therefor received by the Company or
such Restricted Subsidiary is in the form of cash; PROVIDED, HOWEVER, that
the amount of (A) any liabilities (as shown on the Company's or such
Restricted Subsidiary's most recent balance sheet or in the notes thereto)
of the Company or any Restricted Subsidiary (other than liabilities that
are by their terms subordinated in right of payment to the Securities) that
are assumed by the transferee of any such assets and (B) any notes or other
obligations received by the Company or such Restricted Subsidiary from such
transferee that are immediately converted by
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the Company or such Restricted Subsidiary into cash (to the extent of the
cash received), shall be deemed to be cash for purposes of this provision;
and PROVIDED, FURTHER, that the 80% limitation referred to in this clause
(2) shall not apply to any Asset Sale in which the cash portion of the
consideration received therefrom, determined in accordance with the
foregoing proviso, is equal to or greater than what the after-tax proceeds
would have been had such Asset Sale complied with the aforementioned 80%
limitation.
Within 360 days after the consummation of any such Asset Sale, the
Company may apply, or cause the applicable Restricted Subsidiary to apply, all
of the Net Proceeds from such Asset Sale for the following purposes,
individually or in combination: (A) to the permanent repayment (in whole or in
part) of Indebtedness under the Senior Credit Facility or other Senior Debt then
outstanding (with a permanent reduction of availability in the case of
Indebtedness under the Senior Credit Facility or other revolving credit
borrowings) or (B) to invest in capital expenditures or other long-term tangible
assets related to the business of the Company or in another business, in each
case in the line of business described in Section 1014. Pending the final
application of any such Net Proceeds, the Company or the applicable Restricted
Subsidiary may invest such Net Proceeds in any manner that is not prohibited by
this Indenture. Any Net Proceeds from such Asset Sale that are not applied or
invested as provided in clause (A) or (B) of this paragraph shall be deemed to
constitute "Excess Proceeds".
(b) The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, engage in any Collateral Asset Sale, unless
(1) the Company or any such Restricted Subsidiary, as the case may
be, receives consideration at the time of such Collateral Asset Sale at
least equal to the fair market value (evidenced by a resolution of the
Board of Directors of the Company set forth in an Officers' Certificate
delivered to the Trustee) of the assets sold or otherwise disposed of; and
(2) 90% of the consideration therefor received by the Company or
such Restricted Subsidiary is in the form of cash; PROVIDED, HOWEVER, that
the amount of (A) any liabilities (as shown on the Company's or such
Restricted Subsidiary's most recent balance sheet or in the notes thereto)
of the Company or any Restricted Subsidiary (other than liabilities that
are by their
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terms subordinated in right of payment to the Securities) that are assumed by
the transferee of any such assets and (B) any notes or other obligations
received by the Company or such Restricted Subsidiary from such transferee that
are immediately converted by the Company or such Restricted Subsidiary into cash
(to the extent of the cash received), shall be deemed to be cash for purposes of
this provision; and PROVIDED, FURTHER, that the 90% limitation referred to in
this clause (2) shall not apply to any Collateral Asset Sale in which the cash
portion of the consideration received therefrom, determined in accordance with
the foregoing proviso, is equal to or greater than what the after-tax proceeds
would have been had such Collateral Asset Sale complied with the aforementioned
90% limitation;
(3) the Net Proceeds of such Collateral Asset Sale shall be paid
directly by the purchaser thereof to the Trustee and deposited into the
Cash Collateral Account pending application as provided below; and
(4) the Company takes such other actions, at its sole expense, as
may be required to permit the Collateral Agent to release the Collateral
being sold from the Lien of the Security Documents, and to ensure that the
Trustee has from the date of such deposit a first priority Lien (subject to
Permitted Collateral Liens) on such Net Proceeds in the Cash Collateral
Account pursuant to the terms of the applicable Security Document.
Within 360 days after the consummation of such Collateral Asset Sale,
the Company may apply all of the Net Proceeds from such Collateral Asset Sale to
purchase or otherwise invest in Replacement Collateral, provided that, (A) prior
to such investment, the Company shall deliver to the Trustee an Officers'
Certificate dated no more than 30 days prior to the date of consummation of such
investment, certifying that the purchase price of such Replacement Collateral
does not exceed the fair market value of such Replacement Collateral as
determined in good faith by the Board of Directors and (B) the Company shall
take such actions, at its sole expense, as shall be required to release such Net
Proceeds from the Lien of the Security Documents and to ensure that the
Collateral Agent has, from the date of such investment, a first priority
security interest in the Replacement Collateral. Any Net Proceeds from such
Collateral Asset Sale that are not applied or invested as provided in this
paragraph shall be deemed to constitute "Excess Proceeds".
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(c) The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, directly or indirectly, suffer or permit a
Collateral Loss Event unless
(1) the Net Proceeds therefrom are paid directly by the party
providing such Net Proceeds to the Trustee and deposited in the Cash
Collateral Account; and
(2) the Company takes such actions, at its sole expense, as shall be
required to ensure that the Trustee has from the date of such deposit a
first priority security interest (subject to Permitted Collateral Liens) on
such Net Proceeds in the Cash Collateral Account pursuant to the terms of
the applicable Security Document.
Within 270 days of receipt of the Net Proceeds from such Collateral
Loss Event, the Company or the applicable Restricted Subsidiary may apply all
such Net Proceeds for the following purposes, individually or in combination:
(A) to purchase or otherwise invest in Replacement Collateral or (B) to Restore
the relevant Collateral. In the event that the Company elects to Restore the
relevant Collateral pursuant to the foregoing clause (B), within 90 days of
receipt of such Net Proceeds from a Collateral Loss Event, the Company shall (x)
give the Trustee irrevocable written notice of such election and (y) enter into
a binding commitment to Restore the relevant Collateral, a copy of which shall
be supplied to the Trustee, and shall carry out such Restoration with due
diligence and complete such Restoration within 270 days from the date of such
binding commitment. Any Net Proceeds of such Collateral Loss Event that are not
applied or invested as provided in this paragraph shall be deemed to constitute
"Excess Proceeds".
(d) When the aggregate amount of Excess Proceeds exceeds $5.0
million, the Company shall make an Offer to Purchase the maximum principal
amount of Notes that may be purchased out of the Excess Proceeds (rounded down
to the nearest $1,000), at a Purchase Price in cash in an amount equal to 100%
of the principal amount thereof plus accrued and unpaid interest, if any, to the
Purchase Date; PROVIDED, HOWEVER, that installments of interest whose Stated
Maturity is on or prior to the Purchase Date shall be payable to the Holders of
such Securities, or one or more Predecessor Securities, registered as such at
the close of business on the relevant Record Date according to their terms and
the provisions of Section 307. To the extent that the aggregate amount of
Securities tendered pursuant to such Offer to Purchase is less than the Excess
Proceeds, (i) amounts
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remaining on deposit in the Cash Collateral Account shall be retained therein
and shall continue to be subject to the Lien of the Security Documents and may
be used by the Company to purchase or invest in Replacement Collateral at any
time and from time to time, and (ii) any remaining deficiency not so deposited
may be used by the Company for general corporate purposes. Upon completion of
such Offer to Purchase, the amount of Excess Proceeds shall be reset at zero.
(e) The Company shall not be entitled to any credit against its
obligations under this Section 1016 for the principal amount of any Securities
acquired by the Company otherwise than pursuant to the Offer to Purchase
pursuant to this Section 1016.
(f) Not later than the date of the Offer with respect to an Offer to
Purchase pursuant to this Section 1016, the Company shall deliver to the Trustee
an Officers' Certificate as to (i) the Purchase Amount, (ii) the allocation of
the Net Proceeds from the Asset Sale pursuant to which such Offer is being made,
including, if amounts are invested in assets related to the business, the actual
assets acquired and (iii) the compliance of such allocation with the provisions
of this Section 1016.
(g) The Company and the Trustee shall perform their respective
obligations specified in the Offer for the Offer to Purchase. On or prior to
the Purchase Date, the Company shall (i) accept for payment (on a pro rata
basis, if necessary) Securities or portions thereof tendered pursuant to the
Offer, (ii) deposit with the Paying Agent (or, if the Company is acting as its
own paying agent, segregate and hold in trust as provided in Section 1003) money
sufficient to pay the purchase price of all Securities or portions thereof so
accepted and (iii) deliver or cause to be delivered to the Trustee all
Securities so accepted together with an Officers' Certificate stating the
Securities or portions thereof accepted for payment by the Company. The Paying
Agent (or the Company, if so acting) shall promptly mail or deliver to Holders
of Securities so accepted payment in an amount equal to the Purchase Price for
such Securities, and the Trustee shall promptly authenticate and mail or deliver
to such Holders a new Security equal in principal amount to any unpurchased
portion of the Security surrendered. Any Security not accepted for payment
shall be promptly mailed or delivered by the Company to the Holder thereof. The
Company shall publicly announce the results of the Offer on or as soon as
practicable after the Purchase Date.
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(h) In the event that the Company decides to apply any portion of
the Net Proceeds from a Collateral Asset Sale or Collateral Loss Event,
respectively, to make an Offer to Purchase as required or permitted by this
Section 1016, the Company shall take such actions, at its sole expense, as shall
be required to release at the time of the consummation of such Offer such Net
Proceeds as may be required to effect such consummation from the Lien of the
Security Documents. Upon receipt of an appropriate Opinion of Counsel pursuant
to Section 102, the Trustee shall, on the Purchase Date release such Net
Proceeds as may be required to effect such consummation from the Lien of the
Security Documents.
SECTION 1017. CHANGE OF CONTROL.
(a) The Company shall, within 30 days following the date of the
consummation of a transaction resulting in a Change of Control, mail an Offer
with respect to an Offer to Purchase all Outstanding Securities at a purchase
price equal to 101% of their aggregate principal amount plus accrued interest to
the Purchase Date (provided, however, that installments of interest whose Stated
Maturity is on or prior to the Purchase Date shall be payable to the Holders of
such Securities, or one or more Predecessor Securities, registered as such at
the close of business on the relevant Record Dates according to their terms and
the provisions of Section 307).
(b) The Company and the Trustee shall perform their respective
obligations specified in the Offer for the Offer to Purchase. Prior to the
Purchase Date, the Company shall (i) accept for payment Securities or portions
thereof tendered pursuant to the Offer, (ii) deposit with the Paying Agent (or,
if the Company is acting as its own Paying Agent, segregate and hold in trust as
provided in Section 1003) money sufficient to pay the purchase price of all
Securities or portions thereof so accepted and (iii) deliver or cause to be
delivered to the Trustee all Securities so accepted together with an Officers'
Certificate stating the Securities or portions thereof accepted for payment by
the Company. The Paying Agent shall promptly mail or deliver to Holders of
Securities so accepted payment in an amount equal to the Purchase Price, and the
Trustee shall promptly authenticate and mail or deliver to such Holders a new
Security or Securities equal in principal amount to any unpurchased portion of
the Security surrendered as requested by the Holder. Any Security not accepted
for payment shall be promptly mailed or delivered by the Company to the Holder
thereof. The Company shall publicly announce the results of
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the Offer on or as soon as practicable after the Purchase Date.
SECTION 1018. OBLIGATION TO SEEK CONSENT FOR OFFER TO PURCHASE.
Prior to the time required for the mailing of an Offer with respect to
an Offer to Purchase pursuant to Section 1016 or 1017, the Company shall in good
faith (i) seek to obtain any required consent under the Senior Credit Facility
or any other Indebtedness of the Company so as to permit the making of the Offer
to Purchase and the purchase of Securities pursuant to said Sections, or (ii)
repay all or a portion of the Company's outstanding Indebtedness to the extent
necessary (including, if necessary, payment in full of such Indebtedness and
payment of any prepayment premiums, fees, expenses or penalties) to permit the
making of the Offer to Purchase and the purchase of Securities pursuant to said
Sections without such consent or (iii) attempt to refinance any Indebtedness
containing a prohibition on such Offer to Purchase. Following compliance by the
Company with the requirements of the foregoing sentence, and regardless of
whether such consent, repayment or refinancing is obtained, the Company shall,
within the time required for the mailing of an Offer with respect to an Offer to
Purchase pursuant to Section 1016 or 1017, as applicable, mail such Offer. In
the event the Company shall not comply with the requirements contained in the
first sentence of this Section 1018, the Company shall nonetheless, within such
time, mail such Offer.
SECTION 1019. REPORTS AND DELIVERY OF CERTAIN INFORMATION.
Whether or not required by the rules and regulations of the
Commission, so long as any Securities are outstanding, the Company shall furnish
to the Holders of the Securities (i) all quarterly and annual financial
information that is substantially equivalent to that which would be required to
be contained in a filing with the Commission on Forms 10-Q and 10-K if the
Company were required to file such Forms, including a "Management's Discussion
and Analysis of Financial Condition and Results of Operations" section and, with
respect to the annual information only, a report thereon by the Company's
certified independent accountants and (ii) all reports that are substantially
equivalent to that which would be required to be filed with the Commission on
Form 8-K if the Company were required to file such reports. In addition,
whether or not required by the rules and regulations of the Commission,
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the Company shall file a copy of all such information with the Commission for
public availability (unless the Commission will not accept such a filing) and
make such information available to investors who request it in writing. So long
as any of the Securities remain Outstanding, the Company shall make available to
any prospective purchaser of Securities or beneficial owner of Securities in
connection with any sale thereof the information required by Rule 144A(d)(4)
under the Securities Act, until such time as the Company has either exchanged
the Securities for securities identical in all material respects which have been
registered under the Securities Act or until such time as the Holders thereof
have disposed of such Securities pursuant to an effective registration statement
under the Securities Act.
SECTION 1020. RESALE OF CERTAIN SECURITIES.
During the period beginning on the Issue Date and ending on the date
that is three years from the Issue Date, the Company shall not, and shall not
permit any of its "affiliates" (as defined under Rule 144 under the Securities
Act or any successor provision thereto) to, resell any Securities which
constitute "restricted securities" under Rule 144 that have been reacquired by
any of them. The Trustee shall have no responsibility in respect of the
Company's performance of its agreement in the preceding sentence.
SECTION 1021. BOOK-ENTRY SYSTEM.
If the Securities cease to trade in the Depositary's book-entry
settlement system, the Company covenants and agrees that it shall use reasonable
efforts to make such other book-entry arrangements that it determines are
reasonable for the Securities.
SECTION 1022. WAIVER OF CERTAIN COVENANTS.
The Company may omit in any particular instance to comply with any
covenant or condition set forth in Section 801 and Sections 1005 to 1019
inclusive, if before the time for such compliance the Holders of at least
66 2/3% in principal amount of the Outstanding Securities shall, by Act of such
Holders, either waive such compliance in such instance or generally waive
compliance with such covenant or condition, but no such waiver shall extend to
or affect such covenant or condition except to the extent so expressly
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waived, and, until such waiver shall become effective, the obligations of the
Company and the duties of the Trustee in respect of any such covenant or
condition shall remain in full force and effect; PROVIDED, HOWEVER, with respect
to an Offer to Purchase as to which an Offer has been mailed, no such waiver may
be made or shall be effective against any Holder tendering Securities pursuant
to such Offer, and the Company may not omit to comply with the terms of such
Offer as to such Holder.
ARTICLE ELEVEN
Redemption and Repurchase of Securities
SECTION 1101. RIGHT OF REDEMPTION.
The Securities may be redeemed at the election of the Company, as a
whole or from time to time in part, at any time on or after May 1, 2000, at the
Redemption Prices specified in the form of Security hereinbefore set forth
together with accrued interest to the Redemption Date. Notwithstanding the
foregoing, on or prior to May 1, 1999, the Company may redeem at any time or
from time to time up to 30% of the aggregate principal amount of Securities
originally issued at a redemption price of 111 5/8% of the principal amount
thereof, plus accrued and unpaid interest, if any, thereon to the redemption
date, with the net proceeds of one or more Public Equity Offerings; PROVIDED
that at least $70 million in aggregate principal amount of Securities remain
outstanding immediately after such redemption; and PROVIDED FURTHER, that such
redemption shall occur within 90 days of the date of the closing of any such
Public Equity Offering. In the case of any Public Equity Offering by Group, the
Company shall apply to a redemption of Securities, to the extent permitted under
this Section 1101 an amount not less that 50% of the Aggregate Net Proceeds of
such Public Equity Offering. The Company shall not repurchase any Securities
pursuant to open market or privately negotiated purchases until the expiration
of twelve months following any Public Equity Offering.
SECTION 1102. APPLICABILITY OF ARTICLE.
Redemption of Securities at the election of the Company or otherwise,
as permitted or required by any provision of this Indenture, shall be made in
accordance with such provision and this Article.
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SECTION 1103. ELECTION TO REDEEM; NOTICE TO TRUSTEE.
The election of the Company to redeem any Securities pursuant to
Section 1101 shall be evidenced by a Board Resolution. In case of any
redemption at the election of the Company of less than all the Securities, the
Company shall, at least 60 days prior to the Redemption Date fixed by the
Company (unless a shorter notice shall be satisfactory to the Trustee), notify
the Trustee of such Redemption Date and of the principal amount of Securities to
be redeemed.
SECTION 1104. SELECTION BY TRUSTEE OF SECURITIES TO BE REDEEMED.
If less than all the Securities are to be redeemed, the particular
Securities to be redeemed shall be selected not more than 60 days prior to the
Redemption Date by the Trustee, from the Outstanding Securities not previously
called for redemption, by such method as the Trustee shall deem fair and
appropriate and which may provide for the selection for redemption of portions
(equal to $1,000 or any integral multiple thereof) of the principal amount of
Securities of a denomination larger than $1,000.
The Trustee shall promptly notify the Company and each Security
Registrar in writing of the Securities selected for redemption and, in the case
of any Securities selected for partial redemption, the principal amount thereof
to be redeemed.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Securities shall relate,
in the case of any Securities redeemed or to be redeemed only in part, to the
portion of the principal amount of such Securities which has been or is to be
redeemed.
SECTION 1105. NOTICE OF REDEMPTION.
Notice of redemption shall be given by first-class mail, postage
prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption
Date, to each Holder of Securities to be redeemed, at his address appearing in
the Security Register.
All notices of redemption shall state:
(1) the Redemption Date,
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(2) the Redemption Price,
(3) if less than all the Outstanding Securities are to be
redeemed, the identification (and, in the case of partial redemption
of any Securities, the principal amounts) of the particular Securities
to be redeemed,
(4) that on the Redemption Date the Redemption Price will become
due and payable upon each such Security to be redeemed and that
interest thereon will cease to accrue on and after said date, and
(5) the place or places where such Securities are to be
surrendered for payment of the Redemption Price.
Notice of redemption of Securities to be redeemed at the election of
the Company shall be given by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company.
SECTION 1106. DEPOSIT OF REDEMPTION PRICE.
Prior to any Redemption Date, the Company shall deposit with the
Trustee or with a Paying Agent (or, if the Company is acting as its own Paying
Agent, segregate and hold in trust as provided in Section 1003) an amount of
money sufficient to pay the Redemption Price of, and (except if the Redemption
Date shall be an Interest Payment Date) accrued interest on, all the Securities
which are to be redeemed on that date.
SECTION 1107. SECURITIES PAYABLE ON REDEMPTION DATE.
Notice of redemption having been given as aforesaid, the Securities so
to be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified, and from and after such date (unless the
Company shall default in the payment of the Redemption Price and accrued
interest) such Securities shall cease to bear interest. Upon surrender of any
such Security for redemption in accordance with said notice, such Security shall
be paid by the Company at the Redemption Price, together with accrued interest
to the Redemption Date; PROVIDED, HOWEVER, that installments of interest whose
Stated Maturity is on or prior to the Redemption Date shall be payable to the
Holders of such Securities, or one or more
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Predecessor Securities, registered as such at the close of business on the
relevant Record Dates according to their terms and the provisions of
Section 307.
If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal (and premium, if any) shall,
until paid, bear interest from the Redemption Date at the rate borne by the
Security.
SECTION 1108. SECURITIES REDEEMED IN PART.
Any Security which is to be redeemed only in part shall be surrendered
at an office or agency of the Company designated for that purpose pursuant to
Section 1002 (with, if the Company or the Trustee so requires, due endorsement
by, or 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), and the Company shall execute the Security 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 aggregate principal amount equal to and in exchange for the
unredeemed portion of the principal of the Security so surrendered.
SECTION 1109. MANDATORY REDEMPTION.
Subject to the Company's obligation to make an offer to purchase or
redeem the Securities under certain circumstances pursuant to Sections 1016 and
1017 hereof, the Company shall have no mandatory redemption or sinking fund
obligations with respect to the Securities.
ARTICLE TWELVE
Defeasance and Covenant Defeasance
SECTION 1201. COMPANY'S OPTION TO EFFECT DEFEASANCE OR COVENANT DEFEASANCE.
(a) The Company may at its option by Board Resolution, at any time,
elect to have either Section 1202 or Section 1203 applied to the Outstanding
Securities upon compliance with the conditions set forth below in this Article
Twelve.
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(b) If the Company elects to have either Section 1202 or 1203 hereof
applied to all Outstanding Securities upon compliance with the conditions set
forth below in this Article Twelve, then upon request of the Company and after
the effective time of such defeasance or covenant defeasance, the Trustee shall
release all Collateral subject to a Lien held by the Trustee pursuant to the
Security Documents other than the defeasance trust (as defined in Section 1204
hereof).
SECTION 1202. DEFEASANCE AND DISCHARGE.
Upon the Company's exercise of the option provided in Section 1201
applicable to this Section, the Company shall be deemed to have been discharged
from its obligations with respect to the Outstanding Securities on the date the
conditions set forth below are satisfied (hereinafter, "defeasance"). For this
purpose, such defeasance means that the Company shall be deemed to have paid and
discharged the entire indebtedness represented by the Outstanding Securities and
to have satisfied all its other obligations under such Securities and this
Indenture insofar as such Securities are concerned (and the Trustee, at the
expense of the Company, shall execute proper instruments acknowledging the
same), except for the following which shall survive until otherwise terminated
or discharged hereunder: (A) the rights of Holders of such Securities to
receive, solely from the trust fund described in Section 1204 and as more fully
set forth in such Section, payments in respect of the principal of (and premium,
if any) and interest on such Securities when such payments are due, (B) the
Company's obligations with respect to such Securities under Sections 304, 305,
306, 1002 and 1003, (C) the rights, powers, trusts, duties and immunities of the
Trustee hereunder and (D) this Article Twelve. Subject to compliance with this
Article Twelve, the Company may exercise its option under this Section 1202
notwithstanding the prior exercise of its option under Section 1203.
SECTION 1203. COVENANT DEFEASANCE.
Upon the Company's exercise of the option provided in Section 1201
applicable to this Section, (i) the Company shall be released from its
obligations under Sections 1006 through 1019, inclusive, and Clause (4) of
Section 801, (ii) the occurrence of an event specified in Sections 501(3),
501(4) (with respect to Clause (4) of Section 801 and with respect to
Sections 1016 and 1017), 501(5) (with respect to any of Sections 1006 through
1019,
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inclusive), 501(6), 501(7) and 501(10) shall not be deemed to be an Event of
Default on and after the date the conditions set forth below are satisfied
(hereinafter, "covenant defeasance"). For this purpose, such covenant
defeasance means that the Company may omit to comply with and shall have no
liability in respect of any term, condition or limitation set forth in any such
Section or Clause, whether directly or indirectly by reason of any reference
elsewhere herein to any such Section or Clause, or by reason of any reference in
any such Section or Clause, to any other provision herein or in any other
document, but the remainder of this Indenture and such Securities shall be
unaffected thereby.
SECTION 1204. CONDITIONS TO DEFEASANCE OR COVENANT DEFEASANCE.
The following shall be the conditions to application of either Section
1202 or Section 1203 to the then Outstanding Securities:
(1) The Company shall irrevocably have deposited or caused to be
deposited with the Trustee (or another trustee satisfying the requirements
of Section 609 who shall agree to comply with the provisions of this
Article Twelve applicable to it) as trust funds in trust (the "defeasance
trust") for the purpose of making the following payments, specifically
pledged as security for, and dedicated solely to, the benefit of the
Holders of such Securities, (A) money in an amount, or (B) U.S. Government
Obligations which through the scheduled payment of principal and interest
in respect thereof in accordance with their terms will provide, not later
than one day before the due date of any payment, money in an amount, or (C)
a combination thereof, sufficient, in the opinion of a nationally
recognized firm of independent public accountants expressed in a written
certification thereof delivered to the Trustee, to pay and discharge, and
which shall be applied by the Trustee (or other qualifying trustee) to pay
and discharge, the principal of (and premium, if any), and each instalment
of interest on the Securities, and any other obligations owing to the
Holders under the Securities, this Indenture or the Security Documents on
the Stated Maturity or on the applicable Redemption Date or Purchase Date,
as the case may be, of such principal, premium or instalment of interest in
accordance with the terms of this Indenture and of such Securities. For
this purpose, "U.S. Government Obligations" means securities that are
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(x) direct obligations of the United States of America for the payment of
which its full faith and credit is pledged or (y) obligations of a Person
controlled or supervised by and acting as an agency or instrumentality of
the United States of America the payment of which is unconditionally
guaranteed as a full faith and credit obligation by the United States of
America, which, in either case, are not callable or redeemable at the
option of the issuer thereof, and shall also include a depository receipt
issued by a bank (as defined in Section 3(a)(2) of the Securities Act of
1933, as amended) as custodian with respect to any such U.S. Government
Obligation or a specific payment of principal of or interest on any such
U.S. Government Obligation held by such custodian for the account of the
holder of such depository receipt, PROVIDED that (except as required by
law) such custodian is not authorized to make any deduction from the amount
payable to the holder of such depository receipt from any amount received
by the custodian in respect of the U.S. Government Obligation or the
specific payment of principal of or interest on the U.S. Government
Obligation evidenced by such depository receipt.
(2) In the case of an election under Section 1202, the Company shall
have delivered to the Trustee an Opinion of Counsel stating that (x) the
Company has received from, or there has been published by, the Internal
Revenue Service a ruling, or (y) 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, and based thereon such Opinion of Counsel shall confirm
that, the Holders of the Outstanding Securities will not recognize income,
gain or loss for Federal income tax purposes as a result of such deposit,
defeasance and discharge and will be subject to Federal income tax on the
same amount, in the same manner and at the same times as would have been
the case if such deposit, defeasance and discharge had not occurred.
(3) In the case of an election under Section 1203, the Company shall
have delivered to the Trustee an Opinion of Counsel to the effect that the
Holders of the Outstanding Securities will not recognize income, gain or
loss for Federal income tax purposes as a result of such deposit and
covenant defeasance and will be subject to Federal income tax on the same
amount, in the same manner and at the same times as would have been the
case if such deposit and covenant defeasance had not occurred.
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(4) No Default or Event of Default shall have occurred and be
continuing on the date of such deposit or, insofar as subsections 501(8)
and (9) are concerned, at any time during the period ending on the 91st day
after the date of such deposit (it being understood that this condition
shall not be deemed satisfied until the expiration of such period).
(5) Such defeasance or covenant defeasance shall not result in a
breach or violation of, or constitute a default under, any other material
agreement or instrument to which the Company or any of its Restricted
Subsidiaries is a party or by which the Company or any of its Restricted
Subsidiaries is bound.
(6) On or prior to the 91st day following the deposit, the Company
shall have delivered to the Trustee an Opinion of Counsel stating that
after the 91st day following such deposit, the trust funds will not be
subject to any applicable bankruptcy, insolvency, reorganization or similar
laws affecting creditors' rights generally;
(7) The Company shall have delivered to the Trustee an Officers'
Certificate stating that such deposit was not made by the Company with the
intent of preferring the Holders over any other creditors of the Company or
with the intent of defeating, hindering, delaying or defrauding any
creditors of the Company;
(8) The Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for relating to either the defeasance under Section 1202
or the covenant defeasance under Section 1203 (as the case may be) have
been complied with.
(9) The Company shall have delivered to the Trustee an Opinion of
Counsel stating that such defeasance or covenant defeasance shall not
result in the defeasance trust constituting an investment company as
defined in the Investment Company Act of 1940, as amended, or that such
trust is qualified under such act or exempt from regulation thereunder.
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SECTION 1205. DEPOSITED MONEY AND U.S. GOVERNMENT OBLIGATIONS TO BE HELD IN
TRUST; OTHER MISCELLANEOUS PROVISIONS.
All money and U.S. Government Obligations (including the proceeds
thereof) deposited with the Trustee, or other qualifying trustee (collectively,
for purposes of this Section 1205, the "Trustee"), pursuant to Section 1204 in
respect of the Securities shall be held in trust and applied by the Trustee, in
accordance with the provisions of such Securities and this Indenture, to the
payment, either directly or through any Paying Agent (including the Company
acting as its own Paying Agent) as the Trustee may determine, to the Holders of
such Securities, of all sums due and to become due thereon in respect of
principal (and premium, if any) and interest, but such money need not be
segregated from other funds except to the extent required by law.
The Company shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the U.S. Government Obligations
deposited pursuant to Section 1204 or the principal and interest received in
respect thereof other than any such tax, fee or other charge which by law is for
the account of the Holders of the Outstanding Securities.
Anything in this Article Twelve to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon Company
Request any money or U.S. Government Obligations held by it as provided in
Section 1204 which, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee, are in excess of the amount thereof which would then
be required to be deposited to effect an equivalent defeasance or covenant
defeasance.
SECTION 1206. REINSTATEMENT.
If the Trustee or the Paying Agent is unable to apply any money in
accordance with Section 1202 or 1203 by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise prohibiting
such application, then the Company's obligations under this Indenture and the
Securities shall be revived and reinstated as though no deposit had occurred
pursuant to this Article Twelve until such time as the Trustee or Paying Agent
is permitted to apply all such money in accordance with Section 1202 or 1203;
PROVIDED, HOWEVER, that if the Company makes any payment of principal of (and
premium, if any) or
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interest on any Security following 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 money held by the Trustee or the Paying Agent.
ARTICLE THIRTEEN
Collateral And Security Documents
SECTION 1301. SECURITY DOCUMENTS.
(a) As general and continuing security for the due repayment and
satisfaction of all present and future indebtedness, liabilities and obligations
of any kind whatsoever, under, in connection with or relating to this Indenture,
including without limitation, the Securities and any ultimate unpaid balance
thereof and to secure the due performance of all of the other present and future
obligations of the Company to the Trustee (including obligations under
Section 607 hereof) and the Holders under this Indenture, each Security Document
and the Securities, the Company for all purposes, has entered into the Security
Documents and pledged the Collateral.
(b) The Company covenants and agrees that it has full right, power
and lawful authority to grant, bargain, sell, release, convey, hypothecate,
assign, mortgage, pledge, transfer and confirm the property constituting the
Collateral, in the manner and form done in the Security Documents, or intended
to be done, free and clear of all Liens whatsoever (other than Permitted
Collateral Liens), and that (i) it will forever warrant and defend the title to
the same against the claims of all persons whatsoever (except as to Permitted
Collateral Liens), (ii) it will execute, acknowledge and deliver to the Trustee
and the Collateral Agent such further assignments, transfers, assurances or
other instruments as the Trustee or the Collateral Agent may require or request,
and (iii) it will do or cause to be done all such acts and things as may be
necessary or proper, or as may be required by the Trustee or the Collateral
Agent, to assume and confirm to the Trustee and the Collateral Agent the
Collateral, or any part thereof, as from time to time constituted, so as to
render the same available for the security and benefit of the Security
Documents, this Indenture and of the Securities. The Company further covenants
and agrees that each Security Document, as applicable, creates or will create,
as the case may be, a direct and valid first-ranking security interest (subject
to Permitted Collateral Liens) on the Collateral subject thereto.
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SECTION 1302. RECORDING.
The Company will cause, at its own expense, this Indenture and each
Security Document, and all amendments or supplements thereto, to be registered,
recorded and filed and/or re-recorded and/or re-filed and/or renewed in such
manner and in such place or places, if any, as may be required by law in order
to preserve, protect and maintain the perfected first-ranking Liens of the
Security Documents and all parts of the Collateral and to effectuate and
preserve the security of the Holders and all rights of the Collateral Agents.
The Company will pay all mortgage, mortgage recording, stamp, intangible or
other similar taxes required to be paid by any Person under applicable laws and
regulations in connection with the execution, delivery, recordation, filing,
perfection or enforcement of any of the Security Documents.
The Company shall furnish to the Collateral Agents:
(1) promptly after the execution and delivery of this Indenture or
other instrument of further assurance, an Opinion of Counsel stating that,
in the opinion of such counsel, this Indenture, the Security Documents, and
all other instruments of further assurance have been properly recorded,
registered and filed to the extent necessary to make effective the Lien
intended to be created by the Security Documents, and reciting the details
of such action or referring to prior Opinions of Counsel in which such
details are given, and stating that all statements have been executed and
filed that are necessary fully to preserve and protect the rights of the
Holders and the Collateral Agent hereunder and under the Security
Documents, or stating that, in the opinion of such counsel, no such action
is necessary to make such Liens effective;
(2) within three months after each anniversary of the date of this
Indenture, an Opinion or Opinions of Counsel, dated as of such date, either
stating that, in the opinion of such counsel, such action has been taken
with respect to the recording, registering, filing, re-recording,
re-registering and re-filing of (x) this Indenture, (y) the Security
Documents, and all supplemental indentures and amendments thereto, and
(z) financing statements, continuation statements or other instruments of
further assurances, as is necessary to maintain the Lien of each such
Security
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Document and reciting the details of such action or referring to prior
Opinions of Counsel in which such details are given, and stating that all
financing statements and continuation statements have been executed and
filed that are necessary to preserve and protect the rights of the Holders
and the Trustee hereunder, the rights of the Collateral Agent under the
Security Documents, or stating that, in the opinion of such counsel, no
such action is necessary to maintain such Liens; and
(3) promptly after the execution and delivery of this Indenture the
commitment of a title insurance company reasonably satisfactory to the
Collateral Agent agreeing to issue to the Collateral Agent, for the benefit
of the Holders, lenders policies of title insurance relating to the
Collateral which constitutes real property.
SECTION 1303. POSSESSION OF THE COLLATERAL AND THE CASH COLLATERAL ACCOUNT.
(a) Subject to Article Fourteen, until the security provided by the
Security Documents becomes enforceable, the Company may possess, manage, operate
and enjoy, as applicable, the Collateral in accordance with the terms of the
Security Documents.
(b) Notwithstanding the foregoing, all moneys received by the Trustee
for the release of any part of the Collateral, all proceeds in respect of the
Collateral received by the Trustee, and all amounts of money, securities,
letters of credit and other evidences of indebtedness deposited with or held by
the Trustee in accordance with this Indenture shall be held by the Trustee, as
security for the obligations of the Company under this Indenture and the
Security Documents until applied in accordance with the terms of this Indenture.
Neither receipt by the Trustee, nor any application whatsoever by the Trustee of
any moneys under this Subsection (b) shall operate as payment or novation of the
Company's indebtedness under this Indenture or the Security Documents, or as a
reduction of the mortgages, pledges and charges created under the Security
Documents, notwithstanding any law, usage or custom to the contrary.
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SECTION 1304. SUITS TO PROTECT THE COLLATERAL.
The Trustee and the Collateral Agent shall have power to institute and
to maintain such suits and proceedings as it may deem expedient to prevent any
impairment of the Collateral by any acts which may be unlawful or in violation
of this Indenture or any of the Security Documents, and such suits and
proceedings as the Trustee or the Collateral Agent may deem expedient to
preserve or protect its interests and the interests of the Trustee and the
Holders in the Collateral and in the principal, interest, issues, profits,
rents, revenues and other income arising therefrom, including power to institute
and maintain suits or proceedings to restrain the enforcement of or compliance
with any legislative or other governmental enactment, rule or order that may be
unconstitutional or otherwise invalid, if the enforcement of, or compliance
with, such enactment, rule or order would impair the security hereunder or under
any of the Security Documents, or be prejudicial to the interests of the Holders
or the Trustee.
SECTION 1305. RELEASE UPON TERMINATION OF THE COMPANY'S OBLIGATIONS; PARTIAL
RELEASE.
(a) In the event that the Company delivers an Officer's Certificate
certifying that all obligations under this Indenture have been satisfied and
discharged by complying with the provisions of Article Four or Article Twelve,
the Trustee shall (i) to the extent the satisfaction and discharge of the
Security Documents is given in accordance with Article Four or Section 1202
deliver to the Holders a notice stating that the Trustee, on behalf of the
Holders, disclaims and gives up any and all rights it has in and to the
Collateral and under this Indenture and the Security Documents, and, upon and
after the receipt by the Holders of such notice, the Collateral Agent shall not
be deemed to hold any of the Collateral pursuant to this Indenture and the
Security Documents for the benefit of the Trustee or the Holders; or (ii)
otherwise disclaim and give up any and all rights it has in and to the
Collateral, and any rights it has under any of the Security Documents, and the
Collateral Agent shall not be deemed to hold any of the Collateral for the
benefit of the Holders.
(b) Subject to the rights of any lender under an Acquisition
Financing Facility, upon compliance by the Company with the conditions set forth
below in respect of any Asset Sale, the Trustee will release, or instruct the
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Collateral Agent to release, assets constituting Collateral subject to such
Asset Sale ("Released Interests") from the Lien of the Security Documents and
reconvey, or instruct the Collateral Agent to reconvey, the Released Interests
to the Company. Subject to the rights of any lender under an Acquisition
Financing Facility, the Company will have the right to obtain a release of
Released Interests upon compliance with the condition that the Company deliver
to the Trustee the following:
(1) Notice from the Company pursuant to an Officers' Certificate
requesting the release of the Released Interests, and (i) describing the
proposed Released Interests; (ii) specifying the value of such Released
Interests on a date within 60 days of such notice (the "Valuation Date");
(iii) stating that the purchase price to be received is at least equal to
the fair market value of the Released Interest; (iv) stating that the
release of such Released Interests will not interfere with the Collateral
Agent's ability to realize the value of the remaining Collateral and will
not impair the maintenance and operation of the remaining Collateral;
(v) confirming the sale of, or an agreement to sell, such Released
Interests in a BONA FIDE sale to a Person that is not an Affiliate of the
Company or, in the event that such sale is to a Person that is an
Affiliate, confirming that such sale is made in compliance with the
provisions of Section 1012; (vi) certifying that such Asset Sale complies
with the terms and conditions of Section 1016; and (vii) in the event there
is to be a substitution of Replacement Collateral for the Collateral
subject to the Asset Sale, specifying the property intended to be
substituted for the Collateral to be disposed of;
(2) An Officers' Certificate of the Company stating that (i) such
Asset Sale covers only the Released Interests and complies with the terms
and conditions of Section 1016; (ii) all Net Proceeds from the sale of any
of the Released Interests will be applied pursuant to the provisions of
Section 1016, (iii) there is no Default (unless the Default Release
Conditions are complied with) or Event of Default in effect or continuing
on the date thereof, the Valuation Date or the date of such Asset Sale;
(iv) the release of the Collateral will not result in a Default or Event of
Default under this Indenture or any Security Document; and (v) all
conditions precedent in the Indenture relating to the release in question
have been complied with; and
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(3) All documentation required by the Trust Indenture Act, if any,
prior to the release of Collateral by the Trustee and the Collateral Agent
on behalf of the Trustee and the Holders, and, in the event there is to be
a substitution of Replacement Collateral for the Collateral subject to the
Asset Sale, all documentation necessary to effect the substitution of such
Replacement Collateral.
(c) With respect to any release of Released Interests requested by
the Company in connection with any Asset Sale by the Company or a Restricted
Subsidiary of the Company, if a Default is in effect or continuing on the date
of the Officers' Certificate referred to in clause (b)(2) above, on the
applicable Valuation Date or on the date of such Asset Sale, "Default Release
Conditions" mean, as a condition to such release, (i) the receipt by the Company
and delivery to the Trustee of (A) an appraisal by an independent third party
appraiser of the value of the Released Interests as of the applicable Valuation
Date (the "Appraised Value"), in the case of any Asset Sale other than an Asset
Sale involving the sale, as a going concern, of a business or line of business
(a "Business Sale"), which Appraised Value shall be less than or equal to the
consideration to be received by the Company or such Restricted Subsidiary
pursuant to such Asset Sale, or (B) in the case of an Asset Sale involving a
Business Sale, an affirmative opinion issued by an investment banking firm of
national standing with expertise in underwriting non-investment grade debt
securities as to the fairness to the Company or the Restricted Subsidiary of the
Company engaging in such Asset Sale, as the case may be, from a financial point
of view of the consideration to be received by the Company or such Restricted
Subsidiary in such Asset Sale in exchange for the assets proposed to be sold,
(ii) 100% of the consideration to be received in such Asset Sale shall be in the
form of cash and (iii) the Net Proceeds of such Asset Sale shall, concurrently
with the release of the Released Interests, be deposited in the Cash Collateral
Account and retained therein pending application as provided in the next
succeeding sentence and the Company shall have taken such other actions, at its
sole expense, as may be required to ensure that the Trustee holds a first
priority Lien on such Net Proceeds. Such Net Proceeds shall constitute Excess
Proceeds for purposes of determining the time at which the Company shall be
required to make an Offer to Purchase according to Section 1016 and shall be
applied solely (i) to purchase Securities tendered pursuant to an Offer to
Purchase and (ii) following the Purchase Date with respect to such an Offer to
Purchase, to the extent such Net Proceeds remain on deposit in the Cash
Collateral Account,
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to purchase or invest in Replacement Collateral at any time or from time to
time.
(d) The release of any Collateral from the terms hereof or from the
terms of any of the Security Documents, or the release, in whole or in part, of
the Lien created hereby or by any and all of the Security Documents, will not be
deemed to impair the Lien described in Section 1301 in contravention of the
provisions of this Indenture if and to the extent the Collateral or Lien are
released pursuant to, and in accordance with, the Security Documents and
pursuant to, and in accordance with, the terms hereof. The Trustee and each of
the Holders acknowledge that a release of any of the Collateral or any part of
the Lien in accordance with the terms of any of the Security Documents and the
terms hereof will not be deemed for any purpose to be an impairment of the Lien
in contravention of the terms of this Indenture. To the extent applicable, the
Company shall comply with Section 314 of the Trust Indenture Act relating to the
release of property or securities from the security interest in the Collateral.
Any certificate or opinion required by Section 314 of the Trust Indenture Act
shall be set forth in an Officer's Certificate, except in cases in which
Section 1305 of this Indenture or Section 314(d) of the Trust Indenture Act
requires that such certificate or opinion be made by an independent person.
SECTION 1306. CERTAIN DISPOSITIONS OF COLLATERAL WITHOUT RELEASE.
(a) So long as no Default or Event of Default shall have occurred and
be continuing, the Company may, without any release or consent by the Trustee,
sell or otherwise dispose of Collateral pursuant to a Permitted Collateral
Disposition.
(b) In the event that the Company has made or proposed to make a
Permitted Collateral Disposition, the Company may request the Trustee to furnish
a written disclaimer, release or quitclaim of, and written instructions to the
Collateral Agent to execute and deliver to the Company such a disclaimer,
release or quitclaim of, any interest in the property conveyed pursuant to such
Permitted Collateral Disposition under any of the Security Documents, and the
Trustee shall promptly execute such an instrument upon delivery to the Trustee
of (i) an Officers' Certificate by the Company reciting the Permitted Collateral
Disposition made or proposed to be made and describing in reasonable detail the
property affected thereby, and stating and demonstrating that such property is
property which by
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the provisions of this Section 1306 may be disposed of by the Company without
any release or consent of the Trustee and (ii) an Opinion of Counsel stating
that the disposition made or proposed to be made was or will be duly made by the
Company in conformity with Section 1306(a) and that the execution of such
written disclaimer, release or quitclaim, or instruction to the Collateral
Agent, is appropriate to confirm the propriety of such disposition under this
Section 1306.
SECTION 1307. COLLATERAL AGENT.
So long as the Trustee acts as Collateral Agent under this Indenture
or the Intercreditor Agreement, the Trustee may, from time to time, appoint one
or more additional Collateral Agents hereunder. Each of such additional
Collateral Agents may be delegated any one or more of the duties or rights of
the Trustee hereunder or under the Security Documents or which are specified in
any Security Documents, including without limitation, the right to hold any
Collateral in the name of, registered to, or in the physical possession of such
Collateral Agent, for the ratable benefit of the Holders. Each such Collateral
Agent shall have such rights and duties as may be specified in an agreement
between the Trustee and such Collateral Agent.
SECTION 1308. AUTHORIZATION OF RECEIPT OF FUNDS BY THE TRUSTEE UNDER THE
SECURITY DOCUMENTS.
The Trustee is authorized to receive in its own name or through any
Collateral Agent any funds for the benefit of the Holders distributed under the
Security Documents and any Intercreditor Agreement, and to make further
distributions of such funds to the Holders according to the provisions of this
Indenture.
ARTICLE FOURTEEN
Cash Collateral Account
SECTION 1401. CASH COLLATERAL ACCOUNT.
The Company hereby acknowledges the establishment of the Cash
Collateral Account. As collateral security for the due, full and prompt payment
or performance when due of all of the Account-Related Obligations (as defined
below), the Company hereby grants to the Trustee on behalf of the Holders a
continuing first-ranking Lien (subject to
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Permitted Collateral Liens) upon and security interest in, and pledges and
assigns to the Trustee on behalf of the Holders, all of the Company's right,
title and interest in and to the Cash Collateral Account and all funds on
deposit from time to time therein, together with all cash and non-cash proceeds
and all investments made pursuant to Section 1402(d), together with all proceeds
thereof and interest, earnings and distributions with respect thereto, inclusive
of all increments thereto (collectively, the "Account Collateral"), except for
Account Collateral distributed in accordance with the terms of this Indenture,
until the termination of the Cash Collateral Account pursuant to the terms of
this Indenture. "Account-Related Obligations" means all of the Company's
present and future indebtedness, liabilities and obligations of any kind
whatsoever, under, in connection with or relating to this Indenture, including,
without limitation, the Securities and any ultimate unpaid balance thereof and
to secure the due performance of all of the other present and future obligations
of the Company to the Trustee (including obligations under Section 607 of this
Indenture) and the Holders. From the date hereof and continuing until after
satisfaction and discharge of this Indenture pursuant to Section 401 of this
Indenture, the Cash Collateral Account shall be maintained with and managed by
the Trustee, and the Trustee shall act with respect thereto only in accordance
with this Indenture.
SECTION 1402. TERMS OF CASH COLLATERAL ACCOUNT.
(a) (i) From the date hereof and until satisfaction and discharge of
this Indenture pursuant to Section 401, there shall be established by the
Company a Cash Collateral Account with the Trustee in the name "Packaging
Resources Incorporated, subject to the lien and security interest in favor
of LaSalle National Bank" (or in the event a successor Trustee is appointed
under this Indenture, a similar account shall be established consistently
showing the name of such Trustee) which account shall be under the sole
dominion and control of the Trustee acting in accordance with this
Indenture.
(ii) The Company shall have no right under the terms of the Cash
Collateral Account established pursuant to clause (i) above, so long
as any Security is Outstanding or other payments are due under this
Indenture, to withdraw or instruct any Person to withdraw on its
behalf any money from the Cash Collateral Account. No
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passbook, certificate of deposit or other similar instrument evidencing the
Cash Collateral Account shall be issued, and the Trustee shall retain all
contracts, receipts and other papers governing or evidencing the Cash
Collateral Account. The Company shall deposit, or shall have deposited as
required by this Indenture, from time to time into the Cash Collateral
Account all Net Proceeds from any Collateral Asset Sale or Collateral Loss
Event in the manner required by Section 1016. In addition, any income
received by the Company or the Trustee with respect to the balance from
time to time standing to the credit of the Cash Collateral Account shall be
deposited in the Cash Collateral Account, and shall be applied to purchase
Replacement Collateral pursuant to Section 1016, to purchase Securities
pursuant to all Offers to Purchase made by the Company pursuant to
Section 1016 following the date of such deposit or, in the case of proceeds
deposited in the Cash Collateral Account as Net Proceeds from a Collateral
Loss Event, to Restore the relevant Collateral. All right, title and
interest in and to the Account Collateral shall vest in the Trustee, shall
constitute part of the Collateral hereunder and shall not constitute
payment of the obligations of the Company under Indenture or any Security
Document or under the Securities, whether principal, premium, interest
(including Defaulted Interest, and whether or not accruing after the
commencement of any case, proceeding or other action relating to the
bankruptcy, insolvency or reorganization of the Company) or otherwise,
until applied thereto as hereinafter provided. In the event that any amount
is required to be deposited in the Cash Collateral Account as aforesaid,
the Company shall take such actions at its sole expense as shall be
required to ensure that the Trustee has from the date of such deposit a
first-ranking security interest (subject to Permitted Collateral Liens) on
such deposit for the benefit of the Trustee and the Holders.
(iii) For so long as the Securities are Outstanding, the Trustee shall
not exercise any right of set-off or recoupment or similar right that it
may otherwise have against the Cash Collateral Account to satisfy
obligations of the Company to the Trustee (other than those obligations
that may have arisen
-135-
<PAGE>
under the Security Documents and in respect of the Collateral).
(b) Except as otherwise provided in Section 1016, or subsection (c) of
this Section 1402, no amount (including interest on amounts on deposit in the
Cash Collateral Account) shall be paid or released to or for the account of, or
withdrawn by or for the account of, the Company or any other Person from the
Cash Collateral Account.
(c) The balance from time to time standing to the credit of the Cash
Collateral Account shall be released by the Trustee and distributed to the
Company or any other Person entitled thereto only as permitted under
Section 1016; PROVIDED, HOWEVER, that the Trustee shall not distribute to the
Company or such other Person any such funds at any time a Default or an Event of
Default shall have occurred and is continuing.
(d) The Trustee shall invest from time to time amounts on deposit in
the Cash Collateral Account in U.S. Government Obligations maturing within 30
days from the date of acquisition thereof, or a longer period (not exceeding one
year) if the Company certifies to the Trustee that the funds are set aside
either: (x) to purchase or invest in Replacement Collateral pursuant to
Section 1016 in the event of a Collateral Asset Sale or Collateral Loss Event;
or (y) to Restore the relevant Collateral in accordance with Section 1016 in the
event of a Collateral Loss Event and the Trustee shall at all times have the
exclusive right to make investment decisions with respect to amounts on deposit
in the Cash Collateral Account. Such investments described above shall be held
in the name of the Trustee and shall be under the sole dominion and control of
the Trustee, pursuant to this Article Fourteen, subject to the rights of the
Trustee under Article Five. Each such investment shall be either:
(i) evidenced by negotiable certificates or instruments, or if
non-negotiable then issued in the name of the Trustee (or, in the case of
clause (2) of this sentence, in the name of the Depositary or its nominee),
which (1) are promptly upon acquisition delivered (together with any appropriate
instruments of transfer) to, and held by, the Trustee or an agent thereof (which
shall not be the Company or any of its Affiliates) in the State of Illinois or
(2) held by of on behalf of the Depositary or its nominee, and credited to a
securities account of the Trustee maintained with the Depositary; or
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<PAGE>
(ii) maintained in book-entry form on the records of a Federal Reserve
Bank and registered in the name of the Trustee, as depositary, in a book-entry
securities account maintained with respect to such investment with the Federal
Reserve Bank in the Federal Reserve District in which the Corporate Trust Office
is located.
The Company shall bear the risk of any realized losses incurred on
such investments, and if any such realized loss shall occur on a day when the
Company would not be permitted pursuant to subsection (a) of this Section 1402
to withdraw monies from the Cash Collateral Account, the Company shall promptly
remit an amount equal to the amount of any such loss to the Trustee for credit
to the Cash Collateral Account.
SECTION 1403. REPRESENTATIONS, WARRANTIES AND COVENANTS SPECIFIC TO THE CASH
COLLATERAL ACCOUNT.
The Company represents, warrants and covenants that the security
interest on the Account Collateral granted pursuant to Section 1401 is and will
remain (and the Company will make all such future filings and take all such
future actions as may be necessary or desirable in order to ensure that it
remains) a legal, valid, binding and enforceable Lien and security interest,
securing the Account-Related Obligations, ranking prior and superior to all
other Liens thereon (other than Permitted Collateral Liens), and covenants that
it shall take all necessary action to cause and maintain a perfected
first-ranking security interest (subject to Permitted Collateral Liens) in such
Cash Collateral Account. The Company represents and warrants that as of the
date hereof, all filings and other actions necessary or desirable for the
purpose of registering notice of, perfecting and establishing the first-ranking
priority of such security interest (subject to Permitted Collateral Liens) have
been duly made or taken. At any time upon the reasonable request of the Trustee,
the Company will, at the Company's sole expense, execute, acknowledge, deliver,
record and/or file such documents or instruments in form reasonably satisfactory
to the Trustee, and do such acts and things as may be reasonably necessary,
desirable or proper to carry out more effectively the purposes of such security
interest or to further assure, evidence, preserve or protect the perfection,
ranking or other benefits thereof.
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<PAGE>
--------------------
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
-138-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, and their respective corporate seals to be hereunto affixed
and attested, all as of the day and year first above written.
PACKAGING RESOURCES INCORPORATED
By /s/ Howard Hoeper
-------------------------------
Name: Howard Hoeper
Title: President
Attest:
Jerry Corirossi
- -------------------------
LASALLE NATIONAL BANK
By /s/ Sarah Webb
-------------------------------
Name: Sarah Webb
Title: Vice President
Attest:
Laura H. Macky
- -------------------------
-139-
<PAGE>
STATE OF ILLINOIS ) ss.:
COOK COUNTY )
On the 16TH day of May , 1996, before me personally came Howard
P. Hoeper , to me known, who, being by me duly sworn, did depose and say
that [he --she] is President of
Packaging Resources Incorporated, one of the corporations described in and which
executed the foregoing instrument; that [he -- she] knows the seal of said
corporation; that the seal affixed to said instrument is such corporate seal;
that it was so affixed by authority of the Board of Directors of said
corporation, and that [he -- she] signed [his -- her] name thereto by like
authority.
Rebecca C. Ambriz
----------------------------
STATE OF ILLINOIS ) ss.:
COOK COUNTY )
On the 16th day of May , 1996, before me personally came Sarah
H. Webb , to me known, who, being by me duly sworn, did depose and say
that [he --she] is Vice President of LaSalle
National Bank , one of the corporations described in and which executed the
foregoing instrument; that [he -- she] knows the seal of said corporation; that
the seal affixed to said instrument is such corporate seal; that it was so
affixed by authority of the Board of Directors of said corporation, and that
[he -- she] signed [his -- her] name thereto by like authority.
Rebecca C. Ambriz
----------------------------
-140-
<PAGE>
EXHIBIT B
FORM OF CERTIFICATE TO BE
DELIVERED IN CONNECTION WITH
TRANSFERS TO NON-QIB ACCREDITED INVESTORS
__________, ____
LaSalle National Bank
135 South LaSalle, Suite 1825
Chicago, Illinois 60603
Attention: Sarah Webb
Re: Packaging Resources Incorporated (the
"Company") 11 5/8% Senior Secured
Notes due 2003 (the "Notes")
-------------------------------------
Ladies and Gentlemen:
In connection with our proposed purchase of $_____ aggregate principal
amount of the Notes, we confirm that:
1. We have received a copy of the Offering Memorandum (the "Offering
Memorandum"), dated May 10, 1996, relating to the Notes and such other
information as we deem necessary in order to make our investment decision.
We acknowledge that we have read and agreed to the matters stated on
pages (i)-(ii) of the Offering Memorandum and in the section entitled
"Transfer Restrictions" of the Offering Memorandum, including the
restrictions on duplication and circulation of the Offering Memorandum.
2. We understand that any subsequent transfer of the Notes is subject
to certain restrictions and conditions set forth in the Indenture dated as
of May 17, 1996 relating to the Notes (the "Indenture") and the undersigned
agrees to be bound by, and not to resell, pledge or otherwise transfer the
Notes except in compliance with, such restrictions and conditions and the
Securities Act of 1933, as amended (the "Securities Act").
3. We understand that the offer and sale of the Notes have not been
registered under the Securities Act, and that the Notes may not be offered
or sold except as permitted in the following sentence. We agree, on our
own behalf and on behalf of any accounts for which we are acting as
hereinafter stated, that if we should sell or otherwise transfer any Notes
prior to the date which is within three years after the original issuance
of the Notes, we will do so only (i) to the
B-1
<PAGE>
Company or any of its subsidiaries, (ii) inside the United States in
accordance with Rule 144A under the Securities Act to a "qualified
institutional buyer" (as defined in Rule 144A under the Securities Act),
(iii) inside the United States to an institutional "accredited investor"
(as defined below) that, prior to such transfer, furnishes (or has
furnished that, prior to such transfer, furnishes (or has furnished on its
behalf of a U.S. broker-dealer) to you a signed letter containing certain
representatives and agreements relating to the restrictions on transfer of
the Notes, substantially in the form of this letter, (iv) outside the
United States in accordance with Rule 904 of Regulation S under the
Securities Act, (v) pursuant to the exemption from registration provided by
Rule 144 under the Securities Act (if available), or (vi) pursuant to an
effective registration statement under the Securities Act, and we further
agree to provide to any person purchasing any of the Notes from us a notice
advising such purchaser that resales of the Notes are restricted as stated
herein.
4. We are not acquiring the Notes for or on behalf of, and will not
transfer the Notes to, any pension or welfare plan (as defined in Section 3
of the Employee Retirement Income Security Act of 1974), except as
permitted in the section entitled "Transfer Restrictions" of the Offering
Memorandum.
5. We understand that, on any proposed resale of any Notes, we will be
required to furnish to you and the Company such certification, legal
opinions and other information as you and the Company may reasonably
require to confirm that the proposed sale complies with the foregoing
restrictions. We further understand that the Notes purchased by us will
bear a legend to the foregoing effect.
6. We are an institutional "accredited investor" (as defined in
Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act)
and have such knowledge and experience in financial and business matters as
to be capable of evaluating the merits and risks of our investment in the
Notes, and we and any accounts for which we are acting are each able to
bear the economic risk of our or their investment, as the case may be.
7. We are acquiring the Notes purchased by us for our own account or
for one or more accounts (each of
B-2
<PAGE>
which is an institutional "accredited investor") as to each of which we
exercise sole investment discretion.
You, the Company and the Initial Purchasers (as defined in the
offering Memorandum) are entitled to reply upon this letter and are irrevocably
authorized to produce this letter or a copy hereof to any interested party in
any administrative or legal proceedings or official inquiry with respect to the
matters covered hereby.
Very truly yours,
[Name of Transferee]
By:
------------------------
Authorized Signature
B-3
<PAGE>
EXHIBIT C
FORM OF CERTIFICATE TO BE DELIVERED
IN CONNECTION WITH TRANSFERS
PURSUANT TO REGULATION S
__________, ____
LaSalle National Bank
135 South LaSalle, Suite 1825
Chicago, Illinois 60603
Attention: Sarah Webb
Re: Packaging Resources Incorporated (the
"Company") 11 5/8% Senior Secured
Notes due 2003 (the "Notes")
-------------------------------------
Ladies and Gentlemen:
In connection with our proposed sale of $_________ aggregate principal
amount of the Notes, we confirm that such sale has been effected pursuant to and
in accordance with Regulation S under the U.S. Securities Act of 1933, as
amended (the "Securities Act"), and, accordingly, we represent that:
1. the offer of the Notes was not made to a person in the United
States;
2. either (a) at the time the buy offer was originated, the transferee
was outside the United States or we and any person acting on our behalf
reasonably believed that the transferee was outside the United States, or
(b) the transaction was executed in, on or through the facilities of a
designated off-shore securities market and neither we nor any person acting
on our behalf knows that the transaction has been pre-arranged with a buyer
in the United States;
3. no directed selling efforts have been made in the United States in
contravention of the requirements of Rule 903(b) or Rule 904(b) of
Regulation S, as applicable;
4. the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act; and
C-1
<PAGE>
5. we have advised the transferee of the transfer restrictions
applicable to the Notes.
You and the Company are entitled to reply upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby. Terms used in this certificate have the
meanings set forth in Regulation S.
Very truly yours,
[Name of Transferor]
By
-------------------------
Authorized Signature
C-2
<PAGE>
- --------------------------------------------------------------------------------
REGISTRATION RIGHTS AGREEMENT
Dated as of May 17, 1996
Between
PACKAGING RESOURCES INCORPORATED
and
BT SECURITIES CORPORATION
and
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
as Initial Purchasers
- --------------------------------------------------------------------------------
$110,000,000
11 5/8% SENIOR SECURED NOTES DUE 2003
<PAGE>
TABLE OF CONTENTS
Page
----
1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Additional Interest. . . . . . . . . . . . . . . . . . . . . . . . 1
Advice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Applicable Period. . . . . . . . . . . . . . . . . . . . . . . . . 1
Business Day . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Effectiveness Date . . . . . . . . . . . . . . . . . . . . . . . . 2
Effectiveness Period . . . . . . . . . . . . . . . . . . . . . . . 2
Event Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Exchange Notes . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Exchange Offer . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Exchange Registration Statement. . . . . . . . . . . . . . . . . . 2
Filing Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Holder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Indemnified Person . . . . . . . . . . . . . . . . . . . . . . . . 2
Indemnifying Person. . . . . . . . . . . . . . . . . . . . . . . . 2
Indenture. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Initial Purchasers . . . . . . . . . . . . . . . . . . . . . . . . 2
Inspectors . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Issue Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
NASD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Participant. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Participating Broker-Dealer. . . . . . . . . . . . . . . . . . . . 3
Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Private Exchange . . . . . . . . . . . . . . . . . . . . . . . . . 3
Private Exchange Notes . . . . . . . . . . . . . . . . . . . . . . 3
Prospectus . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Purchase Agreement . . . . . . . . . . . . . . . . . . . . . . . . 3
Records. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Registrable Notes. . . . . . . . . . . . . . . . . . . . . . . . . 3
Registration Statement . . . . . . . . . . . . . . . . . . . . . . 4
Rule 144 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Rule 144A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Rule 415 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SEC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Securities Act . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Shelf Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Shelf Notice Date. . . . . . . . . . . . . . . . . . . . . . . . . 4
Shelf Registration . . . . . . . . . . . . . . . . . . . . . . . . 4
TIA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
i
<PAGE>
Page
----
Underwritten Registration or Underwritten Offering . . . . . . . . 5
2. Exchange Offer. . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3. Shelf Registration. . . . . . . . . . . . . . . . . . . . . . . . . 9
(a) Shelf Registration. . . . . . . . . . . . . . . . . . . . . . 9
(b) Withdrawal of Stop Orders . . . . . . . . . . . . . . . . . . 9
(c) Supplements and Amendments. . . . . . . . . . . . . . . . . . 9
4. Additional Interest . . . . . . . . . . . . . . . . . . . . . . . . 10
5. Registration Procedures . . . . . . . . . . . . . . . . . . . . . . 12
6. Registration Expenses . . . . . . . . . . . . . . . . . . . . . . . 22
7. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . 23
8. Rule 144 and 144A . . . . . . . . . . . . . . . . . . . . . . . . . 27
9. Underwritten Registrations. . . . . . . . . . . . . . . . . . . . . 27
10. Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(a) No Inconsistent Agreements. . . . . . . . . . . . . . . . . . 28
(b) Adjustments Affecting Registrable Notes . . . . . . . . . . . 28
(c) Amendments and Waivers. . . . . . . . . . . . . . . . . . . . 28
(d) Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(e) Successors and Assigns. . . . . . . . . . . . . . . . . . . . 30
(f) Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . 30
(g) Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . 30
(h) GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . 30
(i) Severability. . . . . . . . . . . . . . . . . . . . . . . . . 30
(j) Notes Held by the Company or its Affiliates . . . . . . . . . 31
(k) Third Party Beneficiaries . . . . . . . . . . . . . . . . . . 31
ii
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is dated as of
May 17, 1996, between Packaging Resources Incorporated, a Delaware corporation
(the "Company"), and BT Securities Corporation and Donaldson, Lufkin & Jenrette
Securities Corporation (the "Initial Purchasers").
This Agreement is entered into in connection with the Purchase
Agreement, dated as of May 10, 1996, between the Company and the Initial
Purchasers (the "Purchase Agreement"), which provides for the sale by the
Company to the Initial Purchasers of $110,000,000 aggregate principal amount of
the Company's 11 5/8% Senior Secured Notes due 2003 (the "Notes"). In order to
induce the Initial Purchasers to enter into the Purchase Agreement, the Company
has agreed to provide the registration rights set forth in this Agreement for
the benefit of the Initial Purchasers and their direct and indirect transferees.
The execution and delivery of this Agreement is a condition to the obligation of
the Initial Purchasers to purchase the Notes 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(a) hereof.
ADVICE: See the last paragraph of Section 5 hereof.
AGREEMENT: See the first introductory paragraph hereto.
APPLICABLE PERIOD: See Section 2(b) hereof.
BUSINESS DAY: Each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which banking institutions in Chicago, Illinois or New
York, New York are authorized or obligated by law or executive order to close.
CLOSING DATE: The Closing Date as defined in the Purchase Agreement.
1
<PAGE>
COMPANY: See the first introductory paragraph hereto.
EFFECTIVENESS DATE: The 120th day after the Issue Date.
EFFECTIVENESS PERIOD: See Section 3(a) hereof.
EVENT DATE: See Section 4(b) hereof.
EXCHANGE ACT: The Securities Exchange Act of 1934, as amended, and
the rules and regulations of the SEC promulgated thereunder.
EXCHANGE NOTES: See Section 2(a) hereof.
EXCHANGE OFFER: See Section 2(a) hereof.
EXCHANGE REGISTRATION STATEMENT: See Section 2(a) hereof.
FILING DATE: The 45th day after the Issue Date.
HOLDER: Any holder of a Registrable Note or Registrable Notes.
INDEMNIFIED PERSON: See Section 7(c) hereof.
INDEMNIFYING PERSON: See Section 7(c) hereof.
INDENTURE: The Indenture, dated as of May 17, 1996 between the
Company and LaSalle National 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 PURCHASERS: See the first introductory paragraph hereto.
INSPECTORS: See Section 5(o) hereof.
ISSUE DATE: The date the Notes are originally issued under the
Indenture.
NASD: See Section 5(s) hereof.
NOTES: See the second introductory paragraph hereto.
PARTICIPANT: See Section 7(a) hereof.
2
<PAGE>
PARTICIPATING BROKER-DEALER: See Section 2(b) hereof.
PERSON: An individual, trustee, corporation, partnership, limited
liability company, joint stock company, trust, unincorporated association,
union, business association, firm or other legal entity.
PRIVATE EXCHANGE: See Section 2(b) hereof.
PRIVATE EXCHANGE NOTES: See Section 2(b) hereof.
PROSPECTUS: The prospectus included in any Registration Statement
(including, without limitation, any prospectus subject to completion and 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, and all other amendments and supplements to the
Prospectus, with respect to the terms of the offering of any portion of the
Registrable Notes covered by such Registration Statement, including post-
effective amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such Prospectus.
PURCHASE AGREEMENT: See the second introductory paragraph hereto.
RECORDS: See Section 5(o) hereof.
REGISTRABLE NOTES: Each Note upon original issuance of the Notes and
at all times subsequent thereto, each Exchange Note as to which Section 2(c)(v)
hereof is applicable upon original issuance and at all times subsequent thereto
and each Private Exchange Note upon original issuance thereof and at all times
subsequent thereto, until in the case of any such Note, Exchange Note or Private
Exchange Note, as the case may be, the earliest to occur of (i) a Registration
Statement (other than, with respect to any Exchange Note as to which
Section 2(c)(v) hereof is applicable, the Exchange Registration
Statement) covering such Note, Exchange Note or Private Exchange Note, as the
case may be, has been declared effective by the SEC and such Note (unless such
Note was not tendered for exchange by the Holder thereof), Exchange Note or
Private Exchange Note, as the case may be, has been disposed of in accordance
with such effective Registration Statement, (ii) such Note, Exchange Note or
Private Exchange Note, as the case may be, is sold in compliance with Rule 144,
or (iii) such Note, Exchange Note or Private Exchange Note, as
3
<PAGE>
the case may be, ceases to be outstanding for purposes of the Indenture.
REGISTRATION STATEMENT: Any registration statement of the Company,
including, but not limited to, the Exchange Registration Statement, that covers
any of the Registrable Notes 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) hereof.
SHELF NOTICE DATE: See Section 2(c) hereof.
SHELF REGISTRATION: See Section 3(a) hereof.
TIA: The Trust Indenture Act of 1939, as amended.
TRUSTEE: The trustee under the Indenture and, if existent, the
trustee under any indenture governing the Exchange Notes and Private Exchange
Notes (if any).
4
<PAGE>
UNDERWRITTEN REGISTRATION OR UNDERWRITTEN OFFERING: A registration in
which securities of the Company are sold to an underwriter for reoffering to the
public.
2. EXCHANGE OFFER
(a) The Company agrees to file with the SEC no later than the Filing
Date an offer to exchange (the "Exchange Offer) any and all of the Registrable
Notes other than the Private Exchange Notes, if any for a like aggregate
principal amount of debt securities of the Company which are identical in all
material respects to the Notes (the "Exchange Notes") (and which are entitled to
the benefits of the Indenture or a trust indenture which is identical in all
material respects to the Indenture (other than such changes to the Indenture or
any such identical trust indenture as are necessary to comply with any
requirements of the SEC to effect or maintain the qualification thereof under
the TIA) and which, in either case, has been qualified under the TIA), except
that the Exchange Notes (other than Private Exchange Notes, if any) shall have
been registered pursuant to an effective Registration Statement under the
Securities Act and shall contain no restrictive legend thereon. The Exchange
Offer shall be registered under the Securities Act on the appropriate form (the
"Exchange Registration Statement") and shall comply with all applicable tender
offer rules and regulations under the Exchange Act. The Company agrees to use
its best efforts to (x) cause the Exchange Registration Statement to be declared
effective under the Securities Act on or before the Effectiveness Date; (y) keep
the Exchange Offer open for at least 20 business days (or longer if required by
applicable law) after the date that notice of the Exchange Offer is mailed to
Holders; and (z) consummate the Exchange Offer on or prior to the 165th day
following the Issue Date. If after such Exchange Registration Statement is
declared effective by the SEC, the Exchange Offer or the issuance of the
Exchange Notes 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 required to represent that any Exchange Notes 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 or
understanding with any Person to participate in the distribution of the Exchange
Notes in violation of the provisions of the Securities Act, and that such Holder
is not an affiliate of the Company within the
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meaning of Rule 405 under the Securities Act or, if it is an affiliate, such
Holder acknowledges that it must comply with the registration and prospectus
delivery requirements of the Securities Act to the extent applicable. Each
Holder that is not a broker-dealer and that participates in the Exchange Offer
will be required to represent that it is not engaged in, and does not intend to
engage in, the distribution of the applicable Exchange Notes. Each Holder that
is a broker-dealer that will receive Exchange Notes for its own account will be
required to represent that it will receive Exchange Notes in exchange for Notes
that were acquired as a result of market-making activities or other trading
activities and it will be required to acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. Upon
consummation of the Exchange Offer in accordance with this Section 2, the
Company shall have no further obligation to register Registrable Notes (other
than Private Exchange Notes and other than in respect of any Exchange Notes as
to which clause 2(c)(v) hereof applies) pursuant to Section 3 hereof. No
securities other than the Exchange Notes shall be included in the Exchange
Registration Statement.
(b) The Company shall include within the Prospectus contained in the
Exchange Registration Statement a section entitled "Plan of Distribution,"
reasonably acceptable to the Initial Purchasers, which shall contain a summary
statement of the positions taken or policies made by the Staff of the SEC 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
Notes 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
judgment of the Initial Purchasers, represent the prevailing views of the Staff
of the SEC. Such "Plan of Distribution" section shall also expressly permit 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 Notes.
The Company shall use its 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 any Participating Broker-Dealer subject to the prospectus delivery
requirements of the Securities Act for such period of time as is necessary to
comply with applicable law in
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connection with any resale of the Exchange Notes; PROVIDED, HOWEVER, that such
period shall not exceed 180 days after the consummation of the Exchange Offer
(or such longer period if extended pursuant to the last paragraph of Section 5
hereof) (the "Applicable Period").
If, prior to consummation of the Exchange Offer, the Initial
Purchasers hold any Notes acquired by them and having the status of an unsold
allotment in the initial distribution, the Company shall, upon the request of
either of the Initial Purchasers, simultaneously with the delivery of the
Exchange Notes in the Exchange Offer issue and deliver to the Initial Purchasers
in exchange (the "Private Exchange") for such Notes held by the Initial
Purchasers a like principal amount of debt securities of the Company that are
identical in all material respects to the Exchange Notes (the "Private Exchange
Notes") (and which are issued pursuant to the same indenture as the Exchange
Notes) except for the placement of a restrictive legend on such Private Exchange
Notes. The Private Exchange Notes shall bear the same CUSIP number as the
Exchange Notes.
Interest on the Exchange Notes and the Private Exchange Notes 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.
In connection with the Exchange Offer, the Company shall:
(1) mail to each Holder a copy of the Prospectus forming part of the
Exchange Registration Statement, together with an appropriate letter of
transmittal and related documents;
(2) utilize the services of a depositary for the Exchange Offer with
an address in the Borough of Manhattan, The City of New York;
(3) permit Holders to withdraw tendered Notes at any time prior to the
close of business, New York time, on the last business day on which the
Exchange Offer shall remain open; and
(4) otherwise comply in all material respects with all applicable
laws, rules and regulations.
As soon as practicable after the close of the Exchange Offer or the
Private Exchange, as the case may be, the Company shall:
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(1) accept for exchange all Notes tendered and not validly withdrawn
pursuant to the Exchange Offer or the Private Exchange;
(2) deliver to the Trustee for cancellation all Notes so accepted for
exchange; and
(3) cause the Trustee to authenticate and deliver promptly to each
Holder of Notes, Exchange Notes or Private Exchange Notes, as the case may
be, equal in principal amount to the Notes of such Holder so accepted for
exchange.
The Exchange Notes and the Private Exchange Notes may be issued under
(i) the Indenture or (ii) an indenture identical in all material respects to the
Indenture, which in either event shall provide that (1) the Exchange Notes shall
not be subject to the transfer restrictions set forth in the Indenture and
(2) the Private Exchange Notes shall be subject to the transfer restrictions set
forth in the Indenture. The Indenture or such indenture shall provide that the
Exchange Notes, the Private Exchange Notes and the Notes shall vote and consent
together on all matters as one class and that none of the Exchange Notes, the
Private Exchange Notes or the Notes will have the right to vote or consent as a
separate class on any matter.
(c) If, (i) because of any change in law or in currently prevailing
interpretations of the Staff of the SEC, the Company is not permitted to effect
an Exchange Offer, (ii) the Exchange Offer is not consummated within 165 days of
the Issue Date, (iii) any holder of Private Exchange Notes so requests at any
time after the consummation of the Private Exchange, (iv) the Holders of not
less than a majority in aggregate principal amount of the Registrable Notes
reasonably determine that the interests of the Holders would be materially
adversely affected by consummation of the Exchange Offer or (v) in the case of
any Holder that participates in the Exchange Offer, such Holder does not receive
Exchange Notes on the date of the exchange that may be sold without restriction
under state and federal securities laws (other than due solely to the status of
such Holder as an affiliate of the Company within the meaning of the Securities
Act), then the Company shall within three Business Days thereof (the "Shelf
Notice Date") deliver written notice thereof (the "Shelf Notice") to the Trustee
and in the case of clauses (i), (ii) and (iv), all Holders, in the case of
clause (iii), the Holders of the Private Exchange Notes and in the case of
clause (v), the affected Holder, and shall file a Shelf Registration pursuant to
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Section 3 hereof.
3. SHELF REGISTRATION
If a Shelf Notice is delivered as contemplated by Section 2(c) hereof,
then:
(a) SHELF REGISTRATION. The Company shall as promptly as reasonably
practicable 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
Notes (the "Shelf Registration"). If the Company shall not have yet filed an
Exchange Registration Statement, the Company shall use its best efforts to file
with the SEC the Shelf Registration on or prior to the Filing Date. Otherwise,
the Company shall use its best efforts to file with the SEC the Shelf
Registration Statement on or prior to the 90th day after the delivery of the
Shelf Notice. The Shelf Registration shall be on Form S-1 or another
appropriate form permitting registration of such Registrable Notes for resale by
Holders in the manner or manners designated by them (including, without
limitation, one or more underwritten offerings). The Company shall not permit
any securities other than the Registrable Notes to be included in the Shelf
Registration.
The Company shall use its best efforts to cause the Shelf Registration
to be declared effective under the Securities Act on or prior to the
Effectiveness Date and to keep the Shelf Registration continuously effective
under the Securities Act until the date which is three years from the Issue
Date, subject to extension pursuant to the last paragraph of Section 5 hereof
(the "Effectiveness Period"), or such shorter period ending when all Registrable
Notes covered by the Shelf Registration have been sold in the manner set forth
and as contemplated in the Shelf Registration.
(b) WITHDRAWAL OF STOP ORDERS. If the 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 Company
shall use its best efforts to obtain the prompt withdrawal of any order
suspending the effectiveness thereof.
(c) SUPPLEMENTS AND AMENDMENTS. The Company 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
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Registration, if required by the Securities Act, or if reasonably requested by
the Holders of a majority in aggregate principal amount of the Registrable Notes
covered by such Registration Statement or by any underwriter of such Registrable
Notes.
4. ADDITIONAL INTEREST
(a) The Company and the Initial Purchasers agree that the Holders of
Registrable Notes will suffer damages if the Company fails to fulfill its
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 Company agrees to pay, as liquidated damages, additional interest on the
Notes ("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):
(i) if the Exchange Registration Statement is not filed on or prior to the
Filing Date or the Shelf Registration Statement is not filed on or prior to the
later of (A) the Filing Date and (B) the 15th day following the Shelf Notice
Date, then, commencing on the 46th day after the Issue Date or the 16th day
after the Shelf Notice Date, as applicable, Additional Interest shall accrue on
the Notes which should have been included in such Registration Statement over
and above the stated interest at a rate of 0.50% per annum for the first 90 days
immediately following the Filing Date or the 15th day after the Shelf Notice
Date, as applicable, such Additional Interest rate increasing by an additional
0.50% per annum at the beginning of each subsequent 90-day period;
(ii) if the Exchange Registration Statement is not declared effective
by the SEC on or prior to the Effectiveness Date or the Shelf Registration
Statement is not declared effective on or prior to the later of (A) the
Effectiveness Date or (B) the 90th day following the Shelf Notice Date,
then, commencing on the 121st day after the Issue Date or the 91st day
following the Shelf Notice Date, as applicable, Additional Interest shall
accrue on the Notes included or which should have been included in such
Registration Statement over and above the stated interest at a rate of
0.50% per annum for the first 90 days immediately following the
Effectiveness Date or the 90th day following the Shelf Notice Date, as
applicable, such Additional Interest rate increasing by an additional
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0.50% per annum at the beginning of each subsequent 90-day period; and
(iii) if (A) the Company has not exchanged Exchange Notes for all
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 has been declared effective and such Shelf Registration ceases
to be effective at any time during the Effectiveness Period, then
Additional Interest shall accrue (over and above any interest otherwise
payable on such Notes) at a rate of 0.50% per annum for the first 90 days
commencing on (x) the 166th day after the Issue Date with respect to the
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 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 0.50% per annum at the beginning of each
such subsequent 90-day period (it being understood and agreed that,
notwithstanding any provision to the contrary, so long as any Note which is
the subject of a Shelf Notice is then covered by an effective Shelf
Registration Statement, no Additional Interest shall accrue on such Note);
PROVIDED, HOWEVER, that the Additional Interest rate on any affected Note 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 (in the case of clause (i) of this Section 4(a)), (2) upon
the effectiveness of the Exchange Registration Statement or the Shelf
Registration (in the case of clause (ii) of this Section 4(a)), or (3) upon the
exchange of Exchange Notes for all Notes tendered (in the case of
clause (iii)(A) of this Section 4(a)), 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(a)), or upon the effectiveness of the Shelf
Registration which had ceased to remain effective (in the case of clause
(iii)(C) of this Section 4(a)), Additional Interest on the affected Notes as a
result of such clause (or the relevant subclause thereof), as the case may be,
shall cease to accrue.
(b) The Company shall notify the Trustee within
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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"). Any
amounts of Additional Interest due pursuant to clauses (a)(i), (a)(ii) or
(a)(iii) of this Section 4 will be payable to the Holders of affected Notes in
cash semi-annually on each May 1 and November 1 (to the holders of record on the
April 15 and October 15 immediately preceding such dates), commencing with the
first such date occurring after any such Additional Interest commences to
accrue. The amount of Additional Interest will be determined by multiplying the
applicable Additional Interest rate by the principal amount of the affected
Registrable Notes 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 the denominator of which is 360).
5. REGISTRATION PROCEDURES
In connection with the filing of any Registration Statement pursuant
to Sections 2 or 3 hereof, the Company shall effect such registration(s) to
permit the sale of the securities covered thereby in accordance with the
intended method or methods of disposition thereof, and pursuant thereto and in
connection with any Registration Statement filed by the Company hereunder, the
Company shall:
(a) Prepare and file with the SEC prior to the Filing Date a
Registration Statement or Registration Statements as prescribed by Sections 2 or
3 hereof, and use its best efforts to cause each such Registration Statement to
become effective and remain effective as provided herein; PROVIDED, HOWEVER,
that, if (1) such filing is pursuant to Section 3 hereof, or (2) a Prospectus
contained in an Exchange Registration Statement filed pursuant to Section 2
hereof is required to be delivered under the Securities Act by any Participating
Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period,
before filing any Registration Statement or Prospectus or any amendments or
supplements thereto, the Company shall, if requested, furnish to and afford the
Holders of the Registrable Notes covered by such Registration Statement or each
such Participating Broker-Dealer, as the case may be, 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 (in each case
at least five business days prior to such filing). The Company shall not file
any Registration
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Statement or Prospectus or any amendments or supplements thereto in respect of
which the Holders must be afforded an opportunity to review prior to the filing
of such document, if the Holders of a majority in aggregate principal amount of
the Registrable Notes covered by such Registration Statement, or any such
Participating Broker-Dealer, as the case may be, their counsel, or the managing
underwriters, if any, shall reasonably object.
(b) Prepare and file with the SEC such amendments and post-effective
amendments to each Shelf Registration 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 or
until consummation of the Exchange Offer, as the case may be; cause the related
Prospectus to be supplemented by any Prospectus supplement required by
applicable law, and as so supplemented to be filed pursuant to Rule 424 (or any
similar provisions then in force) promulgated under the Securities Act; and
comply with the provisions of the Securities Act and the Exchange Act 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 Company shall be
deemed not to have used its best efforts to keep a Registration Statement
effective during the Applicable Period if it voluntarily takes any action that
would result in selling Holders of the Registrable Notes covered thereby or
Participating Broker-Dealers seeking to sell Exchange Notes not being able to
sell such Registrable Notes or such Exchange Notes during that period unless
such action is required by applicable law or unless the Company complies 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
hereof, or (2) a Prospectus contained in an Exchange Registration Statement
filed pursuant to Section 2 hereof is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Notes during the Applicable Period, notify the selling Holders of Registrable
Notes, or each such Participating Broker-Dealer, as the case may be, their
counsel and the managing underwriters, if any, 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,
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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, at the sole
expense of the Company, one conformed copy of such Registration Statement or
post-effective amendment including financial statements and schedules, documents
incorporated 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) if at any time when a prospectus is required by the Securities Act to be
delivered in connection with sales of the Registrable Notes or resales of
Exchange Notes by Participating Broker-Dealers the representations and
warranties of the Company contained in any agreement (including any underwriting
agreement), contemplated by Section 5(n) hereof cease to be true and correct,
(iv) 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 Notes or the Exchange Notes 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, (v) of the happening of any event, the existence of any condition 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 or amendments or supplements to 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 light of the circumstances under which they were
made, not misleading, and (vi) of the determination by the Company that a post-
effective amendment to a Registration Statement would be appropriate.
(d) Use its 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 Notes or the
Exchange Notes for sale in any jurisdiction,
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and, if any such order is issued, to use its best efforts to obtain the
withdrawal of any such order at the earliest possible moment.
(e) If a Shelf Registration is filed pursuant to Section 3 and if
requested by the managing underwriter or underwriters (if any), or the Holders
of a majority in aggregate principal amount of the Registrable Notes being sold
in connection with an underwritten offering, (i) promptly incorporate in a
prospectus supplement or post-effective amendment such information as the
managing underwriter or underwriters (if any), such Holders, or counsel for any
of them reasonably request to be included therein and (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 post-effective amendment.
(f) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in an Exchange Registration Statement
filed pursuant to Section 2 hereof is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Notes during the Applicable Period, furnish to each selling Holder of
Registrable Notes and to each such Participating Broker-Dealer who so requests
and to counsel and each managing underwriter, if any, at the sole expense of the
Company, one conformed copy of the Registration Statement or Registration
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
hereof, or (2) a Prospectus contained in an Exchange Registration Statement
filed pursuant to Section 2 hereof is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Notes during the Applicable Period, deliver to each selling Holder of
Registrable Notes, or each such Participating Broker-Dealer, as the case may be,
their respective counsel, and the underwriters, if any, at the sole expense of
the Company, 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 Company
hereby consents to the use of such Prospectus and each amendment or
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supplement thereto by each of the selling Holders of Registrable Notes 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 Notes covered by, or the sale by Participating Broker-Dealers
of the Exchange Notes pursuant to, such Prospectus and any amendment or
supplement thereto.
(h) Prior to any public offering of Registrable Notes or any delivery
of a Prospectus contained in the Exchange Registration Statement by any
Participating Broker-Dealer who seeks to sell Exchange Notes during the
Applicable Period, to use its best efforts to register or qualify such
Registrable Notes (and to cooperate with selling Holders of Registrable Notes or
each such Participating Broker-Dealer, as the case may be, the managing
underwriter or underwriters, if any, and their respective counsel in connection
with the registration or qualification (or exemption from such registration or
qualification) of such Registrable Notes) 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 underwriter or
underwriters reasonably request in writing; PROVIDED, HOWEVER, that where
Exchange Notes held by Participating Broker-Dealers or Registrable Notes are
offered other than through an underwritten offering, the Company agrees 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 acts or things reasonably necessary or advisable to enable the
disposition in such jurisdictions of the Exchange Notes held by Participating
Broker-Dealers or the Registrable Notes covered by the applicable Registration
Statement; PROVIDED, HOWEVER, that the Company shall not 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
where it is not then so subject.
(i) If a Shelf Registration is filed pursuant to Section 3 hereof,
cooperate with the selling Holders of Registrable Notes and the managing
underwriter or underwriters, if any, to facilitate the timely preparation and
delivery of certificates representing Registrable Notes to be sold, which
certificates shall not bear any restrictive
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legends and shall be in a form eligible for deposit with The Depository Trust
Company; and enable such Registrable Notes to be in such denominations and
registered in such names as the managing underwriter or underwriters, if any, or
Holders may reasonably request.
(j) Use its best efforts to cause the Registrable Notes covered by
the Registration Statement to be registered with or approved by such other
governmental agencies or authorities as may be necessary to enable the Holders
thereof or the underwriter or underwriters, if any, to dispose of such
Registrable Notes, except as may be required solely as a consequence of the
nature of a selling Holder's business, in which case the Company 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
hereof, or (2) a Prospectus contained in an Exchange Registration Statement
filed pursuant to Section 2 hereof is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Notes during the Applicable Period, upon the occurrence of any event
contemplated by paragraph 5(c)(v) or 5(c)(vi) hereof, as promptly as practicable
prepare and (subject to Section 5(a) hereof) file with the SEC, at the sole
expense of the Company, a 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 Notes being
sold thereunder or to the purchasers of the Exchange Notes 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 light of the circumstances under which they were made,
not misleading.
(l) Use its best efforts to cause the Registrable Notes covered by a
Registration Statement or the Exchange Notes, as the case may be, to be rated
with the appropriate rating agencies, if so requested by the Holders of a
majority in aggregate principal amount of Registrable Notes covered by such
Registration Statement or the Exchange Notes, as the case may be, or the
managing underwriter or underwriters, if any.
(m) Prior to the effective date of the first Registration Statement
relating to the Registrable Notes,
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(i) provide the Trustee with certificates for the Registrable Notes or Exchange
Notes, as the case may be, in a form eligible for deposit with The Depository
Trust Company and (ii) provide a CUSIP number for the Registrable Notes or
Exchange Notes, as the case may be.
(n) In connection with any underwritten offering of Registrable Notes
pursuant to a Shelf Registration, enter into an underwriting agreement as is
customary in underwritten offerings of debt securities similar to the Notes and
take all such other actions as are reasonably requested by the managing
underwriter or underwriters in order to facilitate the registration or the
disposition of such Registrable Notes and, in such connection, (i) make such
representations and warranties to, and covenants with, the underwriters with
respect to the business of the Company and its subsidiaries 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 of debt securities similar to
the Notes, and confirm the same in writing if and when requested; (ii) obtain
the written opinion of counsel to the Company and written updates thereof in
form, scope and substance reasonably satisfactory to the managing underwriter or
underwriters, addressed to the underwriters covering the matters customarily
covered in opinions requested in underwritten offerings of debt similar to the
Notes and such other matters as may be reasonably requested by the managing
underwriter or underwriters; (iii) obtain "cold comfort" letters and updates
thereof in form, scope and substance reasonably satisfactory to the managing
underwriter or 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 or incorporated by reference 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 of debt similar to the Notes and such
other matters as reasonably requested by the managing underwriter or
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
Notes covered by such Registration Statement and the managing underwriter or
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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.
(o) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in an Exchange Registration Statement
filed pursuant to Section 2 hereof is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Notes during the Applicable Period, make available for inspection by any selling
Holder of such Registrable Notes being sold, or each such Participating Broker-
Dealer, as the case may be, any underwriter participating in any such
disposition of Registrable Notes, 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 instruments of the Company
and its subsidiaries (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 to supply all information reasonably requested by any such
Inspector in connection with such Registration Statement. Records which the
Company determines, in good faith, to be confidential and any Records which it
notifies the Inspectors are confidential shall not be disclosed by the
Inspectors unless (i) the disclosure of such Records is necessary to avoid or
correct a material misstatement or material 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, (iii) disclosure of such
information is, in the opinion of counsel for any Inspector, necessary or
advisable in connection with any action, claim, suit or proceeding, directly or
indirectly, involving or reasonably likely to involve such Inspector and arising
out of, based upon, relating to, or involving this Agreement, or any
transactions contemplated hereby or arising hereunder, or (iv) 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 information is generally available to the public. Each selling Holder
of such Registrable Notes
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<PAGE>
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 to
undertake appropriate action to prevent disclosure of the Records deemed
confidential at the Company's sole expense.
(p) Provide an indenture trustee for the Registrable Notes or the
Exchange Notes, as the case may be, and cause the Indenture or the trust
indenture provided for in Section 2(a) hereof, as the case may be, to be
qualified under the TIA not later than the effective date of the Exchange Offer
Registration Statement or the first Shelf Registration relating to the
Registrable Notes; and in connection therewith, cooperate with the trustee under
any such indenture and the Holders of the Registrable Notes, 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 its 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.
(q) Comply with all applicable rules and regulations of the SEC and
make generally available to its securityholders earnings 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 45 days
after the end of any 12-month period (or 90 days after the end of any 12-month
period if such period is a fiscal year) (i) commencing at the end of any fiscal
quarter in which Registrable Notes 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 Registration Statement, which statements
shall cover said 12-month periods.
(r) If an Exchange Offer or a Private Exchange is to be consummated,
upon delivery of the Registrable Notes by Holders to the Company (or to such
other Person as directed by the Company) in exchange for the Exchange Notes or
the Private Exchange Notes, as the case may be, the Company shall mark, or cause
to be marked, on such Registrable Notes that such Registrable Notes are being
cancelled in exchange for the Exchange Notes or the Private Exchange Notes, as
the case may be; in no event shall such Registrable Notes be marked as paid or
otherwise satisfied.
20
<PAGE>
(s) Cooperate with each seller of Registrable Notes covered by any
Registration Statement and each underwriter, if any, participating in the
disposition of such Registrable Notes and their respective counsel in connection
with any filings required to be made with the National Association of Securities
Dealers, Inc. (the "NASD").
(t) Use its best efforts to take all other steps necessary or
advisable to effect the registration of the Registrable Notes covered by a
Registration Statement contemplated hereby.
The Company may require each seller of Registrable Notes as to which
any Registration is being effected to furnish to the Company such information
regarding such seller and the distribution of such Registrable Notes as the
Company may, from time to time, reasonably request. The Company may exclude
from such registration the Registrable Notes of any seller 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
agrees to furnish promptly to the Company all information required to be
disclosed in order to make the information previously furnished to the Company
by such seller not materially misleading.
Each Holder of Registrable Notes and each Participating Broker-Dealer
agrees by acquisition of such Registrable Notes or Exchange Notes to be sold by
such Participating Broker-Dealer, as the case may be, that, upon actual receipt
of any notice from the Company of the happening of any event of the kind
described in Section 5(c)(ii), 5(c)(iv), 5(c)(v), or 5(c)(vi) hereof, such
Holder will forthwith discontinue disposition of such Registrable Notes covered
by such Registration Statement or Prospectus or Exchange Notes to be sold by
such Holder or Participating Broker-Dealer, as the case may be, until such
Holder's or Participating Broker-Dealer's receipt of the copies of the
supplemented or amended Prospectus contemplated by Section 5(k) hereof, 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 Notes
covered by such Registration Statement or Exchange Notes to be sold by such
Participating Broker-Dealer, as the case may be, shall have received
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<PAGE>
(x) the copies of the supplemented or amended Prospectus contemplated by Section
5(k) hereof or (y) the Advice.
6. REGISTRATION EXPENSES
(a) All fees and expenses incident to the performance of or
compliance with this Agreement by the Company shall be borne by the Company
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 Notes or Exchange Notes and
determination of the eligibility of the Registrable Notes or Exchange Notes for
investment under the laws of such jurisdictions (x) where the holders of
Registrable Notes are located, in the case of the Exchange Notes, or (y) as
provided in Section 5(h) hereof, in the case of Registrable Notes or Exchange
Notes to be sold by a Participating Broker-Dealer during the Applicable
Period)), (ii) printing expenses, including, without limitation, expenses of
printing certificates for Registrable Notes or Exchange Notes in a form eligible
for deposit with The Depository Trust Company and of printing prospectuses if
the printing of prospectuses is requested by the managing underwriter or
underwriters, if any, by the Holders of a majority in aggregate principal amount
of the Registrable Notes included in any Registration Statement or sold by any
Participating Broker-Dealer, as the case may be, (iii) messenger, telephone and
delivery expenses, (iv) fees and disbursements of counsel for the Company and
fees and disbursements of special counsel for the sellers of Registrable Notes
(subject to the provisions of Section 6(b) hereof), (v) fees and disbursements
of all independent certified public accountants referred to in Section 5(n)(iii)
hereof (including, without limitation, the expenses of any special audit and
"cold comfort" letters required by or incident to such performance), (vi) rating
agency fees, if any, and any fees associated with making the Registrable Notes
or Exchange Notes eligible for trading through The Depository Trust Company,
(vii) Securities Act liability insurance, if the Company desires such insurance,
(viii) fees and expenses of all other Persons retained by the Company, (ix)
internal expenses of the Company (including, without limitation, all salaries
and expenses of
22
<PAGE>
officers and employees of the Company 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, and (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.
(b) The Company shall reimburse the Holders of the Registrable Notes
being registered in a Shelf Registration for the reasonable 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 Notes to be included in such Registration Statement and
(ii) reimburse out-of-pocket expenses (other than legal expenses) of Holders of
Registrable Notes incurred in connection with the registration and sale of the
Registrable Notes pursuant to a Shelf Registration or in connection with the
exchange of Registrable Notes pursuant to the Exchange Offer. In addition, the
Company shall reimburse the Initial Purchasers for the reasonable fees and
expenses of one counsel in connection with the Exchange Offer, and shall not be
required to pay any other legal expenses in connection therewith.
7. INDEMNIFICATION
(a) The Company agrees to indemnify and hold harmless each Holder of
Registrable Notes offered pursuant to a Shelf Registration Statement and each
Participating Broker-Dealer selling Exchange Notes 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, arising out of or based upon any untrue statement or
alleged untrue statement of a material fact contained in any Registration
Statement pursuant to which the offering of such Registrable Notes or Exchange
Notes, as the case may be, is registered (or any amendment thereto) or related
Prospectus (or any amendments or supplements thereto) or any related preliminary
prospectus, or caused by, arising out of or based upon any omission or alleged
23
<PAGE>
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; PROVIDED, HOWEVER, that the Company will
not be required to indemnify a Participant if such losses, 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 or on behalf
of such Participant expressly for use therein.
(b) Each Participant agrees, severally and not jointly, to indemnify
and hold harmless the Company, its respective directors and officers and each
Person who controls the Company 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 Company to each Participant, but only with
reference to information relating to such Participant furnished to the Company
in writing by or on behalf of 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 Notes or Exchange Notes giving rise to such
obligations.
(c) 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 reasonably designate in such proceeding and shall pay
the reasonable fees and expenses actually incurred by such counsel related to
such proceeding; PROVIDED, HOWEVER, that the failure to so notify the
Indemnifying Person shall not relieve it of any obligation or liability which it
may have hereunder or otherwise. 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 shall have
24
<PAGE>
failed within a reasonable period of 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, unless there exists a conflict among
Indemnified Persons, the Indemnifying Person shall not, in connection with any
one such proceeding or separate but substantially similar related proceeding in
the same jurisdiction arising out of the same general allegations, 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 promptly 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 Notes and
Exchange Notes sold by all such Participants and any such separate firm for the
Company, its directors, its 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 prior
written consent, but if settled with such consent or if there be a final non-
appealable judgment for the plaintiff for which the Indemnified Person is
entitled to indemnification pursuant to this Agreement, the Indemnifying Person
agrees to indemnify and hold harmless each 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 an Indemnifying Person to reimburse the Indemnified Person for
reasonable fees and expenses actually incurred by counsel as contemplated by the
first 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 30 days after receipt
by such Indemnifying Person of the aforesaid request and (ii) such Indemnifying
Person shall not have reimbursed the Indemnified Person 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 Person 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 or compromise of any pending or threatened proceeding in respect of
which any Indemnified Person is or could have
25
<PAGE>
been a party, and indemnity could have been sought hereunder by such Indemnified
Person, unless such settlement (A) includes an unconditional written release of
such Indemnified Person, in form and substance reasonably satisfactory to such
Indemnified Person, from all liability on claims that are the subject matter of
such proceeding and (B) does not include any statement as to an admission of
fault, culpability or failure to act by or on behalf of any Indemnified Person.
(d) If the indemnification provided for in the first and second
paragraphs of this Section 7 is for any reason unavailable to, or insufficient
to hold harmless, an Indemnified Person in respect of any losses, claims,
damages or liabilities referred to therein, then each Indemnifying Person under
such paragraphs, in lieu of indemnifying such Indemnified Person thereunder and
in order to provide for just and equitable contribution, 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
(i) the relative benefits received by the Indemnifying Person or Persons on the
one hand and the Indemnified Person or Persons on the other from the offering of
the Notes or (ii) if the allocation provided by the foregoing clause (i) is not
permitted by applicable law, not only such relative benefits but also the
relative fault of the Indemnifying Person or Persons on the one hand and the
Indemnified Person or Persons on the other in connection with the statements or
omissions or alleged statements or omissions that resulted in such losses,
claims, damages or liabilities (or actions in respect thereof). The relative
fault of the parties 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 Company on the one hand or such Participant or such other
Indemnified Person, as the case may be, on the other, the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission, and any other equitable considerations appropriate
in the circumstances.
(e) The parties 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,
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<PAGE>
damages and liabilities referred to in the immediately preceding paragraph shall
be deemed to include, 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 Notes or
Exchange Notes, as the case may be, exceeds the amount of any damages that such
Participant has otherwise been required to pay or has paid 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.
(f) 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 144A
The Company covenants that it will 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 in accordance with
the requirements of the Securities Act and the Exchange Act and, if at any time
the Company is not required to file such reports, it will, upon the request of
any Holder of Registrable Notes, make publicly available annual reports and such
information, documents and other reports of the type specified in Sections 13
and 15(d) of the Exchange Act. The Company further covenants for so long as any
Registrable Notes remain outstanding, to make available to any Holder or
beneficial owner of Registrable Notes in connection with any sale thereof and
any prospective purchaser of such Registrable Notes from such Holder or
beneficial owner the information required by Rule 144A(d)(4) under the
Securities Act in order to permit resales of such Registrable Notes pursuant to
Rule 144A.
9. UNDERWRITTEN REGISTRATIONS
If any of the Registrable Notes covered by any Shelf Registration are
to be sold in an Underwritten Offering, the investment banker or investment
bankers and
27
<PAGE>
manager or managers that will manage the offering will be selected by the
Holders of a majority in aggregate principal amount of such Registrable Notes
included in such offering and reasonably acceptable to the Company.
No Holder of Registrable Notes may participate in any Underwritten
Registration hereunder unless such Holder (a) agrees to sell such Holder's
Registrable Notes 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) NO INCONSISTENT AGREEMENTS. The Company has not, as of the date
hereof, and the Company shall not, after the date of this Agreement, enter into
any agreement with respect to any of its securities that is inconsistent with
the rights granted to the Holders of Registrable Notes in this Agreement or
otherwise conflicts with the provisions hereof. The Company has not entered and
the Company will not enter into any agreement with respect to any of its
securities which will grant to any Person piggy-back registration rights with
respect to a Registration Statement.
(b) ADJUSTMENTS AFFECTING REGISTRABLE NOTES. The Company shall not,
directly or indirectly, take any action with respect to the Registrable Notes as
a class that would adversely affect the ability of the Holders of Registrable
Notes to include such Registrable Notes in a registration undertaken pursuant to
this Agreement.
(c) AMENDMENTS AND WAIVERS. The provisions of this Agreement may not
be amended, modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given, otherwise than with the prior written
consent of the Holders of not less than a majority in aggregate principal amount
of the then outstanding Registrable Notes. 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 Notes 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 Notes may be given by Holders of at least a majority in
aggregate
28
<PAGE>
principal amount of the Registrable Notes being sold by such Holders pursuant to
such Registration Statement; PROVIDED, HOWEVER, that the provisions of this
sentence may not be amended, modified or supplemented except in accordance with
the provisions of the immediately preceding sentence.
(d) 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 facsimile:
1. if to a Holder of the Registrable Notes or any Participating
Broker-Dealer, at the most current address of such Holder or Participating
Broker-Dealer, as the case may be, set forth on the records of the
registrar under the Indenture, with a copy in like manner to the Initial
Purchasers as follows:
BT Securities Corporation
Bankers Trust Plaza
130 Liberty Street
New York, New York 10006
Facsimile No: (212) 250-7200
Attention: High Yield Administration
Donaldson, Lufkin & Jenrette Securities Corporation
140 Broadway
New York, New York 10005
Facsimile No: (212) 892-3370
Attention: Corporate Finance Department
with a copy to:
Sullivan & Cromwell
444 South Flower, Suite 1200
Los Angeles, California 90071
Facsimile No: (213) 683-0457
Attention: Alison S. Ressler
2. if to the Initial Purchasers, at the addresses specified in
Section 10(d)(1);
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3. if to the Company, as follows:
Packaging Resources Incorporated
One Conway Park
100 Field Drive, Suite 300
Lake Forest, Illinois 60045
Facsimile No: (847) 295-3707
Attention: Chief Financial Officer
with copies to:
Winston & Strawn
35 West Wacker Drive
Chicago, Illinois 60601
Facsimile No: (312) 558-5700
Attention: Steven J. Gavin
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 sent by facsimile.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address and in the manner specified in such Indenture.
(e) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the parties
hereto; 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 Notes.
(f) 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.
(g) HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(h) 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
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PERFORMED WHOLLY 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.
(i) 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 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.
(j) NOTES HELD BY THE COMPANY OR ITS AFFILIATES. Whenever the
consent or approval of Holders of a specified percentage of Registrable Notes is
required hereunder, Registrable Notes 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.
(k) THIRD PARTY BENEFICIARIES. Holders of Registrable Notes and
Participating Broker-Dealers are intended third party beneficiaries of this
Agreement and this Agreement may be enforced by such Persons.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
Packaging Resources
Incorporated
By: /s/ Jerry J. Corirossi
---------------------------------
Name: Jerry J. Corirossi
Title: Vice President -
Finance & Administration
The foregoing Agreement is
hereby confirmed and accepted
as of the date first above
written:
BT SECURITIES CORPORATION
By: /s/ Daniel Horn
---------------------------
Name: Daniel Horn
Title: Vice President
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ Stanley W. Holtz
---------------------------
Name: Stanley W. Holtz
Title: Vice President
32
<PAGE>
U.S. $20,000,000
CREDIT AGREEMENT
Dated as of May 17, 1996
among
PACKAGING RESOURCES INCORPORATED,
as Borrower,
THE LENDERS NAMED HEREIN,
as Lenders,
and
LASALLE NATIONAL BANK,
as Agent and Lender
<PAGE>
TABLE OF CONTENTS
SECTION 1. DEFINITIONS AND ACCOUNTING TERMS . . . . . . . . . . . . 1
Section 1.1. Certain Defined Terms. . . . . . . . . . . . . . . . . . 1
Section 1.2. Terms Defined in the Uniform Commercial Code . . . . . . 22
Section 1.3. Computation of Time Periods. . . . . . . . . . . . . . . 22
Section 1.4. Accounting Terms . . . . . . . . . . . . . . . . . . . . 22
Section 1.5. Other Provisions Regarding Definitions . . . . . . . . . 23
SECTION 2. AMOUNT AND TERMS . . . . . . . . . . . . . . . . . . . . 23
Section 2.1. Revolving Advances . . . . . . . . . . . . . . . . . . . 23
Section 2.2. Revolving Credit Facility Commitment and
Borrowing Limit. . . . . . . . . . . . . . . . . . . . . 24
Section 2.3. Revolving Notes. . . . . . . . . . . . . . . . . . . . . 24
Section 2.4. Notice of Borrowing; Borrower's Certificate. . . . . . . 25
Section 2.5. Termination and Reduction of Revolving Credit
Facility Commitments . . . . . . . . . . . . . . . . . . 26
Section 2.6. Interest . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 2.7. Conversion of Borrowings; Renewals . . . . . . . . . . . 27
Section 2.8. Computation of Interest. . . . . . . . . . . . . . . . . 28
Section 2.9. Increased Costs. . . . . . . . . . . . . . . . . . . . . 28
Section 2.10. Change of Law Rendering Eurodollar Advances Unlawful . . 29
Section 2.11. Eurodollar Availability. . . . . . . . . . . . . . . . . 30
Section 2.12. Indemnities. . . . . . . . . . . . . . . . . . . . . . . 30
Section 2.13. Disbursement . . . . . . . . . . . . . . . . . . . . . . 33
Section 2.14. Agent's Availability Assumption. . . . . . . . . . . . . 33
Section 2.15. Pro Rata Treatment and Payments. . . . . . . . . . . . . 34
Section 2.16. Eurodollar Offices . . . . . . . . . . . . . . . . . . . 34
Section 2.17. Telephonic Notice. . . . . . . . . . . . . . . . . . . . 35
Section 2.18. Maximum Interest . . . . . . . . . . . . . . . . . . . . 35
SECTION 3. PAYMENTS, PREPAYMENTS AND REDUCTIONS . . . . . . . . . . 35
Section 3.1. Mandatory Payments . . . . . . . . . . . . . . . . . . . 35
Section 3.2. Optional Prepayments . . . . . . . . . . . . . . . . . . 36
Section 3.3. Procedures for Payment . . . . . . . . . . . . . . . . . 37
Section 3.4. Unused Facility Fee. . . . . . . . . . . . . . . . . . . 40
Section 3.5. Prepayments to Include Interest. . . . . . . . . . . . . 40
Section 3.6. Closing Fees and Renewal Fees. . . . . . . . . . . . . . 40
Section 3.7. Agent's Fee. . . . . . . . . . . . . . . . . . . . . . . 40
<PAGE>
SECTION 4A. LETTERS OF CREDIT. . . . . . . . . . . . . . . . . . . . 40
Section 4A.1. Letters of Credit. . . . . . . . . . . . . . . . . . . . 41
Section 4A.2. Letter of Credit Fees. . . . . . . . . . . . . . . . . . 42
Section 4A.3. Indemnity. . . . . . . . . . . . . . . . . . . . . . . . 42
Section 4A.4. Reimbursement of Certain Costs . . . . . . . . . . . . . 43
Section 4A.5. Payment of Drafts. . . . . . . . . . . . . . . . . . . . 44
Section 4A.6. Issuing Lender's Actions . . . . . . . . . . . . . . . . 45
SECTION 4. SECURITY AND GUARANTY. . . . . . . . . . . . . . . . . . 45
Section 4.1. Security Agreements. . . . . . . . . . . . . . . . . . . 45
Section 4.2. Intentionally Omitted. . . . . . . . . . . . . . . . . . 47
Section 4.3. Filing and Recording . . . . . . . . . . . . . . . . . . 47
Section 4.4. Interpretation of Security Documents . . . . . . . . . . 47
Section 4.5. Guaranties . . . . . . . . . . . . . . . . . . . . . . . 47
Section 4.6. Pledge of Subsidiaries' Receivables, Inventory and
Investment Property. . . . . . . . . . . . . . . . . . . 48
SECTION 5. CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . 48
Section 5.1. Opinions of Counsel. . . . . . . . . . . . . . . . . . . 48
Section 5.2. Audit of Collateral. . . . . . . . . . . . . . . . . . . 48
Section 5.3. Financial Status . . . . . . . . . . . . . . . . . . . . 48
Section 5.4. Qualification. . . . . . . . . . . . . . . . . . . . . . 49
Section 5.5. Security Documents and Instruments . . . . . . . . . . . 49
Section 5.6. Evidence of Insurance. . . . . . . . . . . . . . . . . . 49
Section 5.7. Borrowing Certificates . . . . . . . . . . . . . . . . . 50
Section 5.8. The Notes. . . . . . . . . . . . . . . . . . . . . . . . 50
Section 5.9. Overall Refinancing. . . . . . . . . . . . . . . . . . . 50
Section 5.10. Closing. . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 5.11. Completion of Due Diligence. . . . . . . . . . . . . . . 50
Section 5.12. Corporate Structure. . . . . . . . . . . . . . . . . . . 50
Section 5.13. Fees to Agent and Lenders. . . . . . . . . . . . . . . . 51
Section 5.14. Management . . . . . . . . . . . . . . . . . . . . . . . 51
Section 5.15. Litigation . . . . . . . . . . . . . . . . . . . . . . . 51
Section 5.16. Compliance with Law. . . . . . . . . . . . . . . . . . . 51
Section 5.17. Proceedings; Receipt of Documents. . . . . . . . . . . . 51
Section 5.18. Projections, etc.. . . . . . . . . . . . . . . . . . . . 52
Section 5.19. Accountant's Letter. . . . . . . . . . . . . . . . . . . 53
Section 5.20. Solvency . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 5.21. Labor Relationships. . . . . . . . . . . . . . . . . . . 53
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SECTION 6. CONDITIONS PRECEDENT TO EACH BORROWING AND EACH
ISSUANCE OF A LETTER OF CREDIT . . . . . . . . . . . . . 53
Section 6.1. Borrower's Certificate; Other Conditions . . . . . . . . 53
Section 6.2. Written Notice of Advance. . . . . . . . . . . . . . . . 54
SECTION 7. USE OF PROCEEDS. . . . . . . . . . . . . . . . . . . . . 54
SECTION 8. AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . 54
Section 8.1. Financial Statements and Other Information . . . . . . . 54
Section 8.2. Taxes and Claims . . . . . . . . . . . . . . . . . . . . 58
Section 8.3. Insurance. . . . . . . . . . . . . . . . . . . . . . . . 59
Section 8.4. Books and Reserves . . . . . . . . . . . . . . . . . . . 60
Section 8.5. Properties in Good Condition . . . . . . . . . . . . . . 60
Section 8.6. Maintenance of Existence . . . . . . . . . . . . . . . . 60
Section 8.7. Inspection by the Agent and the Lenders. . . . . . . . . 60
Section 8.8. Pay Indebtedness to Lenders and Perform
Other Covenants. . . . . . . . . . . . . . . . . . . . . 60
Section 8.9. Notice of Default. . . . . . . . . . . . . . . . . . . . 61
Section 8.10. Reporting of Misrepresentations. . . . . . . . . . . . . 61
Section 8.11. Compliance with Laws . . . . . . . . . . . . . . . . . . 61
Section 8.12. ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 8.13. Further Assurances . . . . . . . . . . . . . . . . . . . 62
Section 8.14. Audits . . . . . . . . . . . . . . . . . . . . . . . . . 62
Section 8.15. Environmental Matters. . . . . . . . . . . . . . . . . . 63
Section 8.16. Financial Covenants. . . . . . . . . . . . . . . . . . . 64
Section 8.17 Maintenance of Dominion Account(s) . . . . . . . . . . . 65
SECTION 9. NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . 66
Section 9.1. Capital Expenditures . . . . . . . . . . . . . . . . . . 66
Section 9.2. Liens. . . . . . . . . . . . . . . . . . . . . . . . . . 66
Section 9.3. Indebtedness . . . . . . . . . . . . . . . . . . . . . . 67
Section 9.4. Loans, Investments and Guarantees. . . . . . . . . . . . 68
Section 9.5. Merger, Sale of Assets, Dissolution, etc.. . . . . . . . 69
Section 9.6. Dividends Redemptions and Other Payments . . . . . . . . 70
Section 9.7. Subsidiaries . . . . . . . . . . . . . . . . . . . . . . 70
Section 9.8. Transactions with Affiliates . . . . . . . . . . . . . . 71
Section 9.9. Management Fees and Other Payments . . . . . . . . . . . 71
Section 9.10. Compromise of Receivables. . . . . . . . . . . . . . . . 71
Section 9.11. Noncompliance with ERISA . . . . . . . . . . . . . . . . 71
Section 9.12. Amendments and Modifications . . . . . . . . . . . . . . 72
Section 9.13. Agreements with Management . . . . . . . . . . . . . . . 72
Section 9.14. Fiscal Year. . . . . . . . . . . . . . . . . . . . . . . 72
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Section 9.15. Nature of Business . . . . . . . . . . . . . . . . . . . 73
Section 9.16. Negative Pledges . . . . . . . . . . . . . . . . . . . . 73
Section 9.17. Equity Issuances . . . . . . . . . . . . . . . . . . . . 73
Section 9.18. Rental Obligations . . . . . . . . . . . . . . . . . . . 73
SECTION 10. DEFAULTS AND REMEDIES. . . . . . . . . . . . . . . . . . 73
Section 10.1. Events of Default. . . . . . . . . . . . . . . . . . . . 73
Section 10.2. Suits for Enforcement. . . . . . . . . . . . . . . . . . 78
Section 10.3. Rights and Remedies Cumulative . . . . . . . . . . . . . 78
Section 10.4. Rights and Remedies Not Waived . . . . . . . . . . . . . 78
Section 10.5. Application of Proceeds. . . . . . . . . . . . . . . . . 78
SECTION 11. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . 79
Section 11.1. Corporate Status . . . . . . . . . . . . . . . . . . . . 80
Section 11.2. Power and Authority. . . . . . . . . . . . . . . . . . . 80
Section 11.3. No Violation of Agreements . . . . . . . . . . . . . . . 81
Section 11.4. No Litigation. . . . . . . . . . . . . . . . . . . . . . 81
Section 11.5. Good Title to Properties; Condition of Assets. . . . . . 81
Section 11.6. Financial Statements and Condition . . . . . . . . . . . 82
Section 11.7. Intellectual Property. . . . . . . . . . . . . . . . . . 83
Section 11.8. Tax Liability. . . . . . . . . . . . . . . . . . . . . . 83
Section 11.9. Governmental Action. . . . . . . . . . . . . . . . . . . 83
Section 11.10. Disclosure . . . . . . . . . . . . . . . . . . . . . . . 83
Section 11.11. Regulation U . . . . . . . . . . . . . . . . . . . . . . 84
Section 11.12. Investment Company . . . . . . . . . . . . . . . . . . . 84
Section 11.13. Employee Benefit Plans . . . . . . . . . . . . . . . . . 84
Section 11.14. Overall Refinancing. . . . . . . . . . . . . . . . . . . 86
Section 11.15. Solvency . . . . . . . . . . . . . . . . . . . . . . . . 86
Section 11.16. Permits, etc.. . . . . . . . . . . . . . . . . . . . . . 86
Section 11.17. Environmental Status . . . . . . . . . . . . . . . . . . 88
Section 11.18. Validity of Receivables and Inventory. . . . . . . . . . 88
Section 11.19. Representations and Warranties in Other Documents. . . . 89
SECTION 12. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . 89
Section 12.1. Collection Costs . . . . . . . . . . . . . . . . . . . . 89
Section 12.2. Amendment, Modification and Waiver . . . . . . . . . . . 90
Section 12.3. Illinois Law . . . . . . . . . . . . . . . . . . . . . . 91
Section 12.4. Notices. . . . . . . . . . . . . . . . . . . . . . . . . 91
Section 12.5. Fees and Expenses. . . . . . . . . . . . . . . . . . . . 91
Section 12.6. Stamp or Other Tax . . . . . . . . . . . . . . . . . . . 91
Section 12.7. Waiver of Jury Trial and Setoff. . . . . . . . . . . . . 92
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Section 12.8. Termination of Agreement . . . . . . . . . . . . . . . . 92
Section 12.9. Captions . . . . . . . . . . . . . . . . . . . . . . . . 93
Section 12.10. Lien; Setoff by Lenders. . . . . . . . . . . . . . . . . 93
Section 12.11. Payment Due on Non-Business Day. . . . . . . . . . . . . 94
Section 12.12. Service of Process . . . . . . . . . . . . . . . . . . . 94
Section 12.13. LaSalle National Bank, as Agent. . . . . . . . . . . . . 94
Section 12.14. Benefit of Agreement; Assignments by Lenders . . . . . . 99
Section 12.15. Counterparts; Facsimile Signature. . . . . . . . . . . . 100
Section 12.16. Letter of Credit Participation and Certain Payments. . . 100
Section 12.17. Invalidity . . . . . . . . . . . . . . . . . . . . . . . 101
Section 12.18. Disclosure of Financial Information. . . . . . . . . . . 101
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SCHEDULES AND EXHIBITS
Schedule or Exhibits Description
-------------------- -----------
Schedule 1.1 Each Lender's Revolving Loan Percentages and
Eurodollar Offices
Exhibit 2 Effective Executive Compensation and Stock
Option Agreements
Exhibit 3 Senior Note Documents
Exhibit 2.4 Borrower's Certificate
Exhibit 4 Form of Senior Notes
Exhibit 2.3 Form of Revolving Notes
Exhibit 4.1(a) Form of Security Agreement
Exhibit 4.1(B) Form of Mortgagee or Landlord Certificate
Exhibit 4.5 Form of Guaranty
Exhibit 5.15 Disbursement Authorization Letter
Exhibit 5.18(iii) States in which the Credit Parties are
Qualified to do Business
Exhibit 8.1(h) Form of Borrowing Base Certificate
Schedule 9.2 Permitted Liens
Schedule 9.3 Permitted Indebtedness
Schedule 9.4 Permitted Investments
Schedule 9.8 Agreements with Affiliates
Schedule 11.1 Corporate Status
Schedule 11.4 Litigation
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Schedule 11.5 Non-Serviceable Assets
Schedule 11.6(c) Material Adverse Changes
Schedule 11.17 Environmental Matters
Exhibit 12.14 Form of Assignments
vii
<PAGE>
CREDIT AGREEMENT, dated as of May 17, 1996, among PACKAGING RESOURCES
INCORPORATED, a Delaware corporation (the "BORROWER"), LASALLE NATIONAL BANK, a
national banking association, BT COMMERCIAL CORPORATION, a Delaware corporation,
and such other lenders and financial institutions which may hereafter become
parties hereto for Lender(such lenders and other financial institutions and
their respective successors and assigns, individually, a "LENDER" and
collectively, the "LENDERS"), and LASALLE NATIONAL BANK, individually as a
Lender ("LASALLE") and as agent for the Lenders (in such capacity, the "AGENT").
RECITALS
A. Borrower desires that Lenders extend financing for the working capital
needs and general corporate purposes of Borrower. Such financing shall be
comprised of the revolving lines of credit established by this Agreement.
B. As security for the loans to be made by Lenders to, or for the account
of, Borrower, and for the repayment of obligations incurred by Lenders for the
benefit of Borrower, Borrower will grant to Agent, for its benefit and the
ratable benefit of Lenders, a lien on, and a security interest in, certain of
its assets.
C. Simultaneously with the closing of the transactions contemplated
hereby, Borrower will close the purchase and sale of the Senior Notes (as
defined herein) and will use the proceeds from such purchase and sale to retire
all of its outstanding indebtedness for borrowed money, other than indebtedness
of Borrower outstanding under the Bemis Note and to fund the payment of a
dividend to Group, which dividend, in turn, will be used by Group to redeem a
portion of the Group Notes (as defined herein) so that the remaining principal
amount of Group Notes would equal at least $19,000,000 and will not exceed
$22,000,000.
D. Accordingly, in consideration of the mutual agreements contained
herein, and subject to the terms and conditions hereof, the parties hereto agree
as follows:
SECTION 1. DEFINITIONS AND ACCOUNTING TERMS
Section 1.1. CERTAIN DEFINED TERMS. For all purposes of this Agreement,
unless the context otherwise requires (the following meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"ADDITIONAL INDEBTEDNESS" shall mean all Lender Debt other than principal
of Advances and interest thereon.
"ADDITIONAL LENDERS" shall have the meanings set forth in Section 12.14
hereof.
<PAGE>
"ADJUSTED CURRENT ASSETS" shall mean, as of any date, the consolidated
Current Assets of the Borrower and its Subsidiaries MINUS prepaid expenses,
deposits, amounts due from employees, stockholders or Affiliates of Borrower, or
other undefined or intangible Current Assets.
"ADJUSTED CURRENT LIABILITIES" shall mean, as of any date, the consolidated
Current Liabilities of the Borrower and its Subsidiaries.
"ADJUSTED WORKING CAPITAL" shall mean, as of any date, Adjusted Current
Assets MINUS Adjusted Current Liabilities.
"ADJUSTED EURODOLLAR RATE" shall mean, with respect to each Interest Period
for a Eurodollar Advance, the rate obtained by dividing (i) the Eurodollar Rate
for such Interest Period by (ii) a percentage equal to 1 minus the stated
maximum rate (stated as a decimal) of all reserves then required to be
maintained against "Eurocurrency liabilities" as specified in Regulation D (or
against any other category of liabilities which includes deposits by reference
to which the interest rate on Eurodollar Advances is determined or any category
of extensions of credit or other assets which includes loans by a non-United
States office of any Lender to United States residents).
"ADVANCE" shall mean and include each borrowing hereunder of a Revolving
Advance, including each Eurodollar Advance and each Base Rate Advance.
"AFFILIATE" of any specified Person shall mean any other Person directly or
indirectly controlling or controlled by or under common control with such
specified Person or which is a director, officer or partner (limited or general)
of such specified Person. For the purposes of this definition, (i) "control,"
when used with respect to any specified Person, means the possession, direct or
indirect, of the power to vote five percent (5%) or more of the securities
having ordinary voting power for the election of directors or the power to
direct or cause the direction of 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 and (ii) any full time employee of the
Borrower shall not, solely by virtue of such employment, be deemed to be an
Affiliate of the Borrower, although the degree of "control" possessed by such
employee as a consequence of such employment or otherwise can be taken into
account in determining whether such employee is an Affiliate of the Borrower.
"AGENT" shall have the meaning set forth in the first paragraph of this
Agreement and in Section 12.13(j) hereof.
"AGREEMENT" shall mean this Credit Agreement, as amended, modified or
supplemented from time to time.
"APOLLO" shall mean Apollo Packaging Partners, L.P., Apollo Advisors, L.P.
(a limited partnership, the general partnership of which is Apollo Capital
Management, Inc.), any Affiliate of either of them, and any investment fund,
investment account or investment entity whose investing
2
<PAGE>
manager, investment advisor or general partner, or any principal thereof, is
Apollo Advisors, L.P. or any of its Affiliates.
"APPLICABLE MARGIN" shall mean (i) with respect to Eurodollar Advances, two
percentage points (2%) and (ii) with respect to Base Rate Advances, one half of
one percentage point (1/2%).
"ASSET SALE" shall mean any sale, lease, conveyance, transfer or other
disposition by any Credit Party (including by way of merger or consolidation of
a Subsidiary or sale-leaseback transaction), in any transaction or group of
transactions that are part of a common plan, of any asset, other than sales,
leases and other dispositions of the type described in clauses (a) through (e)
in Section 9.5 hereof.
"ASSETS" shall mean and include all of the Borrower's and its Subsidiaries'
machinery, equipment, data processing hardware and software, furniture,
fixtures, dies, tools, jigs, office equipment and other tangible personal
property of the Borrower and its Subsidiaries, and all accessions, accretions,
and additions to equipment, and all other component and auxiliary parts used or
to be used in connection with or attached to any of the same, wherever located,
whether now owned or hereafter acquired.
"AUTHORIZED REPRESENTATIVE" shall mean each Person designated from time to
time, as appropriate, in a Written Notice by the Borrower to the Agent for the
purposes of giving notices of borrowing, conversion or renewal of Advances, or
requests for issuances of Letters of Credit, which designation shall continue in
force and effect until terminated in a Written Notice to the Agent.
"BASE RATE" shall mean a fluctuating interest rate per annum (calculated on
the basis of actual days elapses over a 360 day year) as shall be in effect from
time to time, which rate per annum shall at all times be equal to the higher of
(a) the rate of interest announced publicly by LaSalle in Chicago, Illinois from
time to time as its prime rate for U.S. dollar loans, (which is not necessarily
LaSalle's lowest or most favorable rate of interest at any one time), such rate
to change when and as such announced rate changes, plus the Applicable Margin,
and (b) one-quarter percentage point (1/4%) above the Federal Funds Rate.
"BASE RATE ADVANCE" shall mean any portion of an Advance which is not a
Eurodollar Advance.
"BEMIS NOTE" shall mean the subordinated promissory note dated March 12,
1993 made by the Borrower to the order of Bemis Company, Inc. in the original
principal amount of $2,000,000, executed and delivered in connection with the
Borrower's acquisition of LPI, as such note may be amended, supplemented or
otherwise modified from time to time in accordance with its terms and in
accordance with Section 9.12 hereof.
"BOARD" shall mean the Board of Governors of the Federal Reserve System or
any successor agency or entity performing substantially the same functions.
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<PAGE>
"BORROWER" shall have the meaning set forth in the first paragraph of this
Agreement.
"BORROWER'S CERTIFICATE" shall have the meaning set forth in Section 2.4
hereof.
"BORROWING BASE" shall mean, as of any time, an amount equal to (i) the sum
of sixty percent (60%) of the Net Amount of Eligible Inventory and eighty-five
percent (85%) of the Net Amount of Eligible Receivables, in each case as
determined by reference to and as set forth in the most recent Borrowing Base
Certificate delivered to the Agent by the Borrower as of such time pursuant to
Section 8.1(i) hereof, MINUS (ii) the Miner Tax Reserve (if any), MINUS (iii)
any reserves established by Agent, in its reasonable discretion, from time to
time which reserves shall be established to insure future payment of the
Obligations.
"BORROWING BASE CERTIFICATE" shall have the meaning set forth in Section
8.1(i) hereof.
"BORROWING LIMIT" shall have the meaning set forth in Section 2.2(a)
hereof.
"BUSINESS DAY" shall mean (a) for those portions of Advances constituting
Base Rate Advances and in any event for the purposes of Section 10.1(b) and
Section 8.1(h) hereof, any day other than a Saturday, Sunday or other day on
which banks in Chicago, Illinois are authorized or required to close; and (b)
for those portions of Advances constituting Eurodollar Advances but in no event
for the purposes of Section 10.1(b) hereof, the days described in the
immediately preceding subclause (a) for the definition of Business Day, but
excluding therefrom any day on which commercial banks are not open for dealings
in U.S. dollar deposits in the London (England, U.K.) interbank market.
"CAPITAL EXPENDITURES" shall mean for any Person any expenditures made or
costs incurred by such Person for the acquisition, maintenance or repair of
fixed or capital assets (to the extent same are capitalized on the balance sheet
of such Person), including, without limitation, the incurrence or assumption of
any Indebtedness (other than Capitalized Lease Obligations) in respect of such
fixed or capital asset, and, without double counting, any payment made in
respect of such incurrence or assumption.
"CAPITAL LEASE" of any Person shall mean any lease of any property (whether
real, personal or mixed) by that Person as lessee which, in conformity with
GAAP, is, or is required to be, accounted for as a capital lease on the balance
sheet of such Person. "Capitalized Lease Obligations" of any Person shall mean,
at any time, all obligations under Capital Leases of such Person in each case
taken at the amount thereof accounted for as liabilities at such time in
accordance with GAAP.
"CHANGE OF CONTROL" shall mean such time as (i) the Borrower liquidates or
dissolves; (ii) HPH and Apollo, collectively, cease to own and control, directly
or indirectly, a majority (on a fully diluted basis) of the issued and
outstanding shares of capital stock of each class of voting stock of Borrower;
(iii) any "person" or "group" (within the meaning of Sections 13(d) and 14(d)(2)
of the Exchange Act) other than HPH or Apollo has the ability to designate a
majority of the board of
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<PAGE>
directors of Group; or (iv) any "Change of Control" has occurred as such term is
defined in the Indenture or any other Senior Note Documents.
"CHANGE OF LAW" shall mean any law, treaty, order, directive or regulation
or in the interpretation thereof or any ruling, decree, judgment or
recommendation, or any request, guideline or directive (whether or not given the
force of law) in any case adopted, issued or effective after the Closing Date,
or any change, adopted, effective or issued after the Closing Date of any of the
foregoing (and including in any event all risk based capital guidelines
heretofore adopted by the Comptroller of the Currency, the Board or any other
banking regulatory agency, domestic or foreign, to the extent that any provision
contained therein does not have to be complied with as of the Closing Date), by
any regulatory body, court or any administrative or Governmental Body charged or
claiming to be charged with the administration thereof.
"CLAIMS" shall have the meaning set forth in Section 2.12(c) hereof.
"CLOSING DATE" shall mean May 17, 1996.
"CODE" shall mean, at any date, the Internal Revenue Code of 1986, as the
same shall be in effect at such date, and the regulations thereunder.
"COLLATERAL" shall mean all property and interests therein (real and
personal, tangible and intangible) in which a Lien is now or hereafter granted
to the Agent for the benefit of itself and the Lenders or to any Issuing Lender
by any Credit Party or any Subsidiary thereof as security for the Lender Debt or
any guarantee thereof, including, without limitation, any Letter of Credit Cash
Collateral, the collateral security referred to in Section 3.4(f) hereof and in
the Security Documents.
"COMMITMENT" shall mean, with respect to each Lender, such Lender's
Revolving Commitment.
"COMMITMENT LETTER" shall mean the commitment letter, dated April 25, 1996,
and the term sheet attached thereto, from LaSalle (as Agent and Lender) and BT
Commercial Corp. (as Lender) to the Borrower and agreed and accepted by the
Borrower on April 26, 1996.
"CONTINGENT OBLIGATIONS" of any Person shall mean any direct or indirect
liability, of such Person (i) with respect to any indebtedness, lease, dividend,
letter of credit or other obligation of another if the primary purpose or intent
by the Person incurring such liability is to provide assurance to the obligee of
such obligation of another that such obligation of another will be paid or
discharged, or that any agreements relating thereto will be complied with, or
that the holders of such obligation will be protected (in whole or in part)
against loss in respect thereof; (ii) under any letter of credit issued for the
account of such Person or for which such Person is otherwise liable for
reimbursement thereof; (iii) net obligations under any Hedge Agreement; or (iv)
to advance or supply funds or otherwise to assure or hold harmless the owner of
a primary obligation against loss in respect thereof. Contingent Obligations
shall include, without limitation, (a) the direct or indirect guarantee,
endorsement (otherwise than for collection or deposit in the ordinary course of
business),
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co-making, discounting with recourse or sale with recourse by such Person of the
obligation of another, and (b) any liability of such Person for the obligations
of another through any agreement (contingent or otherwise) (i) to purchase,
repurchase or otherwise acquire such obligation or any security therefor, or to
provide funds for the payment or discharge of such obligation (whether in the
form of loans, advances, stock purchases, capital contributions or otherwise);
(ii) to maintain the Solvency or any balance sheet item, level of income or
financial condition of another; or (iii) to make take-or-pay or similar payments
if required regardless of non-performance by any other party or parties to an
agreement, if in the case of any agreement described under subclauses (i) or
(ii) of this sentence the primary purpose or intent thereof is as described in
the immediately preceding sentence. The amount of any Contingent Obligation
shall be equal to the amount of the obligation so guaranteed or otherwise
supported.
"CREDIT PARTIES" and "CREDIT PARTY" shall mean and include the Borrower,
its present or future Subsidiaries and any other Guarantor.
"CURRENT ASSETS" of any Person, determined at any time, shall mean all
assets of such Person and its Subsidiaries, on a consolidated basis, which
would, in accordance with GAAP, be classified as current assets.
"CURRENT LIABILITIES" of any Person, determined at any time, shall mean all
liabilities of such Person and its Subsidiaries, on a consolidated basis, which
would, in accordance with GAAP, be classified as current liabilities, and the
outstanding principal balance of the Revolving Loan.
"DEFAULT" shall mean an event, act or condition which with the giving of
notice or the lapse of time, or both, would constitute an Event of Default.
"DIVIDEND CONDITIONS" shall mean, at any time, the following conditions to
payment of cash dividends by the Borrower:
(a) no Default or Event of Default shall have occurred and be continuing
at such time or shall occur as a result of such payment;
(b) each such payment shall be made only on the last day of each May and
November (or next succeeding Business Day) of each Fiscal Year of the Borrower
(each a "Dividend Payment Date"), commencing with November 1, 1996;
(c) the amount of such dividend payment shall not exceed the amount of
interest due and payable under the Group Notes on the applicable Dividend
Payment Date plus the outstanding principal amount of any Group Notes issued in
lieu of interest on previous Dividend Payment Dates and the payment of any such
dividend shall not cause Borrower to violate Section 8.16(a) of this Agreement;
(d) the Agent shall have received a certificate, in form, scope and
substance acceptable to the Agent and in such detail as the Agent shall have
required, of the chief financial officer of the
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Borrower demonstrating that the Borrower is permitted to make such payment (such
certificate being required to be delivered to the Agent at least ten Business
Days' prior to the date of any such payment) and the Agent shall not have,
within five Business Days following such delivery, objected to such payment (in
whole or in part) or questioned any calculation or assertion contained in such
certificate, in any case, in writing; and
(e) the Agent shall have received a certificate in the form, scope and
substance acceptable to the Agent and in such detail as the Agent shall have
required, of the chief financial officer or chief executive officer of Group
confirming that the proceeds of each such payment shall have been applied
contemporaneously by Group, to make payments of interest on the Group Notes that
are permitted, and required to be made under the provisions of the Group
Indenture Documents (including, without limitation the subordination provisions
contained in Article X of the Group Indenture).
"DIVIDEND PAYMENT DATE" shall have the meaning set forth in the definition
of Dividend Conditions.
"DOMINION ACCOUNT" shall mean a special account(s) (lockbox account No.
1466, account No. 2306052, account No. 2306063 and/or account No. 5800022575 or
such other accounts as designated by LaSalle National Bank) of the Agent, for
its benefit and the ratable benefit of Lenders, established by the Borrower
pursuant to the Agreement at LaSalle National Bank or such other bank selected
by the Borrower, but acceptable to the Agent in its reasonable discretion, and
over which at any time when Excess Availability is less than $5,000,000, Agent
shall have sole and exclusive access and control for withdrawal purposes.
"EBITDA" for any period shall mean, consolidated pre-tax income from
operations of the Borrower and its Subsidiaries as determined in accordance with
GAAP for such period, PLUS Interest Expense for such period, PLUS the amount of
noncash charges, including, without limitation, noncash charges for depreciation
and amortization, of the Borrower and its Subsidiaries on a consolidated basis
for such period, PLUS or MINUS any extraordinary losses or gains, PLUS any
prepayment premiums or write-down or write-off of debt discount or deferred
financing costs to the extent such amounts are incurred as a result of the
prepayments of any Indebtedness of the Borrower with the proceeds of the Senior
Notes.
"ELIGIBLE INVENTORY" shall mean only such Inventory consisting of raw
materials or finished goods of the Borrower as the Agent, in its reasonable
discretion, shall from time to time elect to consider Eligible Inventory for
purposes of this Agreement. The value of such Inventory established by the
Borrower may be revised from time to time by the Agent, in its reasonable
discretion, taking into consideration the lowest of its cost (on a
first-in-first-out basis), its book value determined in accordance with GAAP and
its current market value (based on the sales price offered to its customers, as
so revised the "Net Amount of Eligible Inventory"). Criteria for eligibility
may be fixed and revised from time to time by the Agent in its reasonable
discretion. By way of example only, and without limiting the discretion of the
Agent to consider any Inventory not to be Eligible Inventory, the Agent shall
consider any of the following classes of Inventory not to be Eligible
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Inventory: (a) Inventory subject to any Lien, other than those granted in favor
of the Agent; (b) Inventory financed by bankers' acceptances, but only until the
payment in full of the related bankers' acceptances by the Borrower, (c)
Inventory which is obsolete, damaged, unsalable or otherwise unfit for use; (d)
Inventory located on any premises under a lease, or pursuant to a bailment
arrangement, as to which no Landlord's Certificate has been delivered to the
Agent; (e) Inventory in respect of which the relevant Security Agreement, after
giving effect to the related filings of financing statements that have then been
made, if any, does not or has ceased to create a valid and perfected first
priority Lien in favor of the Lenders securing the Lender Debt; (f) Inventory
with respect to which the rights granted to the Agent under the Security
Documents cannot be exercised upon without the granting by a Governmental Body
of a license or consent unless such license or consent has been granted; (g)
Inventory which consists of supplies, packaging, scrap or other regrind,
packaging labels or work-in-process.
"ELIGIBLE RECEIVABLES" shall mean, at the time of calculation, Receivables
of the Borrower:
(i) that are bona fide and outstanding, and upon which the Agent
has a first priority perfected security interest;
(ii) in respect of which the obligor has been directed by Borrower
(if so directed to do so by the Agent during the continuance of an Event of
Default) to make payment to a lockbox or similar account;
(iii) as to which all applicable services have been duly performed or
as to which all goods have been delivered to the account debtor; and
(iv) which arose in the ordinary course of Borrower's business and
which the Agent, in its reasonable judgment, shall deem eligible.
The term "Eligible Receivables" shall not include any Receivable:
(a) with respect to which more than ninety (90) days have elapsed since
the invoice date thereof or more than sixty (60) days have elapsed since the due
date thereof;
(b) with respect to which any of the representations and warranties
contained in Section 11.18 hereof are not or have ceased to be true, complete
and correct;
(c) with respect to which, in whole or in part, a check, promissory note,
draft, trade acceptance or other instrument for the payment of money has been
received, presented for payment and returned uncollected for any reason;
(d) as to which the Borrower has extended the time for payment without the
consent of the Agent;
(e) owed by an account debtor which:
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<PAGE>
(i) does not maintain its chief executive office in the United
States or is not organized under the laws of the United States or any State
thereof, unless the sale generating the relevant Receivable is on letter of
credit or acceptance terms or covered by foreign credit insurance, in each
instance, acceptable to the Agent;
(ii) has taken any action, or suffered any event to occur, of the
type described in paragraph (f) or (g) of Section 10.1 hereof;
(f) owed by an account debtor which is (i) an Affiliate of a Credit Party
or (ii) a federal or state government or an agency or instrumentality thereof;
(g) as to which either the perfection, enforceability, or validity of the
security interest in such Receivable, or the Agent's right or ability to obtain
direct payment to the Agent of the proceeds of such Receivable, is governed by
any federal, state, or local statutory requirements other than those of the UCC;
(h) owed by an account debtor to which the Borrower is indebted in any
way, or which is subject to any right of set-off by the account debtor; or if
the account debtor thereon has disputed liability or acknowledged its inability
to pay or made any claim with respect to any other Receivable due from such
account debtor; but in each such case only to the extent of such indebtedness,
set-off, dispute, or claim;
(i) if such Receivable or the sale or provision of goods or services
giving rise thereto contravenes any applicable law, rule or regulation,
including any law, rule or regulation relating to truth in lending, fair credit
billing, fair credit reporting, equal credit opportunity, fair debt collection
practices or privacy;
(j) if 25% or more of the aggregate outstanding balance of all Receivables
of the applicable account debtor have not been paid within ninety (90) days
following the invoice date thereof or more than sixty (60) days following the
due date thereof; or
(k) if the Agent (A) believes in its reasonable discretion that the
prospect of collection of such Receivable is impaired for any reason or that the
Receivable may not be paid by reason of the account debtor's financial inability
to pay, or (B) is not reasonably satisfied with the credit standing of the
account debtor in proportion to the amount of Receivables payable to the
Borrower by such account debtor.
"EMPLOYEE PLAN" shall mean an "employee benefit plan" as defined in Section
3(3) of ERISA, other than a Multiemployer Plan, which is maintained for, or to
which contributions are made on behalf of, employees of any Credit Party or any
ERISA Affiliate.
"ENVIRONMENTAL LAW" shall mean applicable provisions of the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended
("CERCLA"), the Resource Conservation and Recovery Act of 1976, as amended
("RCRA"), any "Superfund" or
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"Superlien" law, the Hazardous Materials Transportation Act, as amended, the
Occupational Safety and Health Act, as amended ("OSHA") and any other applicable
Federal, state, or local statute, rule, regulation, ordinance, interpretation,
order, judgment, decree, Permit, license or other binding determination of any
Governmental Body, as now or at any time hereafter amended or in effect and
applicable to any Credit Party, regulating, relating to or imposing liability or
standards of conduct concerning the manufacture, processing, distribution, use,
treatment, handling, storage, disposal, or transportation of Hazardous
Materials, or air emissions, water discharges or otherwise concerning the
protection of the outdoor or indoor environment, or health or safety of persons
or property.
"ENVIRONMENTAL LIEN" shall mean a Lien in favor of any Governmental Body
for any (1) liabilities under any Environmental Law or (2) damages arising from,
or costs incurred by such Governmental Body in response to, a Release of a
Hazardous Material into the environment.
"Environmental Property Transfer Act" shall mean any applicable requirement of
law that conditions, restricts, prohibits, or requires any notification or
disclosure triggered by, the closure of any Property or the transfer, sale or
lease of any Property or deed or title for any Property for environmental
reasons, including, without limitation, any so-called "Environmental Cleanup
Responsibility Act" or "Responsible Property Transfer Act."
"ERISA" shall mean, at any date, the Employee Retirement Income Security
Act of 1974 and the regulations promulgated and rulings issued thereunder, all
as the same shall be in effect at such date.
"ERISA AFFILIATE" shall mean any Person that for purposes of Title I and
Title IV of ERISA and Section 412 of the Code is a member of any Credit Party's
controlled group, or under common control with any Credit Party or is a member
of any Credit Party's affiliated service group, within the meaning of Sections
414 (b), (c) and (m) of the Code and the regulations promulgated and rulings
issued thereunder.
"ERISA EVENT" shall mean, with respect to any Credit Party or any ERISA
Affiliate and with respect to any Pension Benefit Plan subject to Title IV of
ERISA or Section 412 of the Code, (a) a Reportable Event (other than a
Reportable Event not subject to the provision for 30-day notice to the PBGC
under subsection .13, .14, .15, .18, or .19 of PBGC Reg. Section 2615), (b) the
withdrawal of the Borrower or any ERISA Affiliate from a Pension Benefit Plan
during a plan year in which it was a "substantial employer" as defined in
Section 4001(a)(2) of ERISA, (c) the failure to make required contributions
which would result in the imposition of a Lien under Section 412 of the Code or
Section 302 of ERISA, or (d) any other event or condition which might reasonably
be expected to constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Pension
Benefit Plan or to cause the imposition of any liability on the Borrower or any
ERISA Affiliate under Title IV of ERISA.
"EURODOLLAR ADVANCE" shall mean that portion of any Revolving Advance
designated to bear interest based upon the Adjusted Eurodollar Rate as provided
in Section 2 hereof.
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"EURODOLLAR RATE" shall mean, for any Interest Period for any Eurodollar
Advance, an interest rate per annum (calculated on the basis of actual days
elapsed over a 360-day year) equal to the offered quotation, if any, to
first-class banks in the London (England, U.K.) interbank market by the Agent
for U.S. dollar deposits of amounts and in funds comparable to the principal
amount of such Eurodollar Advance requested by the Borrower for which the
Eurodollar Rate is being determined with maturities comparable to the Interest
Period for which such Eurodollar Rate will apply as of approximately 10:00 A.M.
(New York time) two Business Days prior to the commencement of such Interest
Period, subject, however, to the provisions of Section 2.11 hereof.
"EVENT OF DEFAULT" and "EVENTS OF DEFAULT" shall have the meanings set
forth in Section 10.1 hereof.
"EXCESS AVAILABILITY" shall mean, as of any time the lesser of (i) the
Revolving Credit Facility Commitment MINUS the sum of (x) the outstanding
principal balance of the Revolving Loan at such time, PLUS (y) the Letter of
Credit Usage at such time and (ii) the Borrowing Base at such time MINUS the sum
of (x) the outstanding principal balance of the Revolving Loan at such time,
PLUS (y) the Letter of Credit Usage at such time.
"EXCLUDED CLAIMS" shall have the meaning set forth in Section 2.12(c)
hereof.
"EXCLUDED TAXES" shall mean franchise taxes and taxes upon or determined by
reference to any Lender's net income, in each case, imposed by the United States
of America or any political subdivision or taxing authority thereof or therein
or by any jurisdiction in which the Initial Eurodollar Office or other branch of
any Lender is located or in which any Lender is organized or has its principal
or registered office (including, without limitation, branch taxes imposed by the
United States or similar taxes imposed by any subdivision thereof).
"EXECUTIVE AGREEMENTS" shall mean the executive compensation agreements,
including all management stock option agreements, between the Borrower and
Senior Management from time to time, and on the Closing Date shall mean the
executive compensation and stock option agreements described in Exhibit 2
hereto.
"EXTRAORDINARY RECEIPT" shall mean the receipt by any Credit Party of cash
receipts not in the ordinary course of business, provided, however, that an
Extraordinary Receipt shall not include cash receipts received from: (i) an
Asset Sale; (ii) an Issuance; and (iii) proceeds of insurance on tangible
property required to be maintained under Section 8.3(a) hereof in respect of any
damage to or loss or destruction of any property insured by the Borrower to the
extent such proceeds are turned over to the Borrower pursuant to such Section
(but in any event the proceeds of any business interruption or similar insurance
shall constitute Extraordinary Receipts).
"FEDERAL BANKRUPTCY CODE" shall mean Title 11 of the United States Code
entitled "Bankruptcy," as now or hereafter in effect, or any successor thereto.
"FEDERAL FUNDS RATE" shall mean, for any day, the rate per annum (rounded
upwards, if necessary, to the nearest 1/100th of 1%) equal to the weighted
average of the rates on overnight
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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 Business Day next succeeding such day, provided, that (i) if
such day is not a Business Day, the Federal Funds Rate for such day shall be
such rate on such transactions on the next preceding Business Day as so
published on the next succeeding Business Day, and (ii) if no such rate is so
published on such next succeeding Business Day, the Federal Funds Rate for such
day shall be the average rate quoted to the Agent on such day on such
transactions as determined by the Agent.
"FINANCIAL STATEMENTS" shall have the meaning set forth in Section 5.3(a)
hereof.
"FISCAL YEAR" shall mean, with respect to the Borrower, a period beginning
on the first day of March in each calendar year and ending on the last day of
February in the succeeding calendar year.
"FIXED CHARGES" shall mean, for any period, the sum of (i) Capital
Expenditures of the Borrower and its Subsidiaries on a consolidated basis during
such period, plus (ii) Interest Expense of the Borrower and its Subsidiaries for
such period, plus (iii) the aggregate amount of payments of principal on
Indebtedness for Borrowed Money (including, without limitation, Capitalized
Lease Obligations), plus (iv) the aggregate amount of cash dividends paid by the
Borrower during such period.
"FIXED CHARGE COVERAGE RATIO" shall mean, at the end of any fiscal
quarter of the Borrower, the ratio of (a) EBITDA (i) for the fiscal quarter
ending August 31, 1996, (ii) for the two consecutive fiscal quarters ending
November 30, 1996, (iii) for the three consecutive fiscal quarters ending
February 28, 1997, and (iv) for any four consecutive fiscal quarters ending on
or after May 31, 1997 to (b) Fixed Charges of the Borrower and its Subsidiaries
on a consolidated basis for such one, two, three or four (as applicable)
consecutive fiscal quarters then ended.
"FUNDED DEBT" shall mean, as of the end of any fiscal period of the
Borrower, the aggregate Indebtedness for Borrowed Money of the Borrower and its
Subsidiaries, on a consolidated basis, outstanding at such time.
"GAAP" shall have the meaning set forth in Section 1.4 hereof.
"GOVERNMENTAL BODY" shall mean any federal, state, local or foreign
governmental authority or regulatory body, any subdivision, agency, commission
or authority thereof or any quasi-governmental or private body exercising any
governmental regulatory authority thereunder and any Person directly or
indirectly owned by and subject to the control of any of the foregoing, or any
court, arbitrator or other judicial or quasi-judicial tribunal.
"GOVERNMENTAL PERMITS" shall mean all licenses, franchises, permits,
privileges, immunities, approvals, and other authorizations from a Governmental
Body.
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"GOVERNMENTAL RULE" shall mean any statute, law, treaty, rule, code,
ordinance, regulation, permit, certificate or order of any Governmental Body or
any judgment, decree, injunction, writ, order or like action of any Governmental
Body.
"GROUP" shall have the meaning set forth in the preamble to this Agreement.
"GROUP INDENTURE" shall mean (i) that certain Indenture dated as of June
30, 1993 between Group (then known as PRI Holdings, Inc.) and Continental Bank,
National Association, as trustee, as the same may have been, or may be,
supplemented, amended or restated from time to time, and (ii) any indenture
governing notes issued in exchange for the Group Notes.
"GROUP INDENTURE DOCUMENTS" shall mean the Group Indenture and the Group
Notes, together with any other document or instrument delivered in connection
thereon with.
"GROUP NOTES" shall mean (i) those certain Senior Notes due 2003 issued by
Group pursuant to the Group Indenture, and (ii) any notes issued in exchange for
the Group Notes.
"GUARANTORS" shall mean, at any time, collectively, each of the Borrower's
present and future Subsidiaries.
"GUARANTY" shall have the meaning set forth in Section 4.7 hereof.
"HAZARDOUS MATERIAL" shall mean any pollutant, contaminant, hazardous,
toxic or special waste, substance or material, defined or regulated as such in
(or for purposes of) any Environmental Law, including (without limitation) any
asbestos, any petroleum (including crude oil or any fraction), any radioactive
substance and any polychlorinated biphenyls, or any constituent of any such
substance or waste; provided, in the event that any Environmental Law is amended
so as to broaden the meaning of any term defined thereby, such broader meaning
shall apply subsequent to the effective date of such amendment; and provided,
further, to the extent that the applicable laws of any state establish a meaning
for "hazardous material," "hazardous substance," "hazardous waste," "solid
waste" or "toxic substance" which is broader than that specified in any
Environmental Law, such broader meaning shall apply.
"HEDGE AGREEMENT" shall have the meaning set forth in clause (v) of the
definition of Indebtedness.
"HPH" shall mean Howard P. Hoeper, an individual with a business address
located at One Conway Park, Lake Forest, Illinois 60045.
"INDEBTEDNESS" of any Person shall mean all items which, in accordance with
GAAP, would be included in determining total liabilities of such Person as shown
on the liability side of a balance sheet as at the date Indebtedness of such
Person is to be determined and, in any event, shall include (without limitation
and without duplication) (i) all Indebtedness for Borrowed Money of such Person;
(ii) any liability of such Person secured by any Lien on property owned or
acquired by such
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Person, whether or not such liability shall have been assumed; (iii) all
Contingent Obligations of such Person; (iv) letters of credit and all
obligations of such Person relating thereto; and (v) all obligations (other than
obligations to pay fees in connection therewith) of such Person in respect of
interest rate swap agreements, currency swap agreements and other similar
agreements designed to hedge against fluctuations in interest rates or foreign
exchange rates (each, a "Hedge Agreement").
"INDEBTEDNESS FOR BORROWED MONEY" of any Person shall mean, without
duplication, all Indebtedness for borrowed money or evidenced by notes, bonds,
debentures or similar evidences of Indebtedness of such Person, all obligations
of such Person for the deferred and unpaid purchase price of any property,
service or business (other than trade accounts payable incurred in the ordinary
course of business and constituting Current Liabilities), and all obligations of
such Person under Capital Leases and finance leases.
"INDEMNIFIED PARTY" shall have the meaning set forth in Section 2.12(c)
hereof.
"INDENTURE" shall have the meaning set forth in the definition of Senior
Note Documents.
"INITIAL EURODOLLAR OFFICE" shall mean, for any Lender, the branch or
Affiliate of such Lender designated as the Initial Eurodollar Office of such
Lender in Schedule 1.1 hereto.
"INTEREST EXPENSE" shall mean, with respect to any Person for any period,
interest expense (whether cash or accretion) of such Person during such period
determined in accordance with GAAP, and shall include in any event, without
limitation, interest expense with respect to Indebtedness for Borrowed Money and
payments under Hedge Agreements.
"INTEREST PAYMENT DATE" shall mean, with respect to each Eurodollar
Advance, the last day of the Interest Period for such Eurodollar Advance.
"INTEREST PERIOD" shall mean, with respect to each Eurodollar Advance,
initially, the period commencing on, as the case may be, the borrowing or
conversion date with respect to such Eurodollar Advance and ending one, two or
three months thereafter, as selected by the Borrower; and thereafter, each
period commencing on the last day of the next preceding Interest Period
applicable to such Eurodollar Advance and ending one, two or three months
thereafter, as selected by the Borrower; provided, however, that no Interest
Period may be selected for a Eurodollar Advance which expires later than the
Maturity Date; and provided, further, that any Interest Period in respect of a
Eurodollar Advance which begins on the last 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 the foregoing
proviso, end on the last Business Day of a calendar month. Notwithstanding the
above, all Interest Periods shall be adjusted in accordance with Section 13.11
hereof.
"INVENTORY" of any Person shall mean any and all raw materials, work-in-
process and finished products inventory of such Person, now or hereafter
acquired, intended for sale or lease or to be furnished under contracts of
service in the ordinary course of business of such Person, of every
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kind and description, in the custody or possession, actual or constructive,
of such Person including such inventory as is temporarily out of the custody
or possession of such Person.
"INVESTMENT" shall have the meaning set forth in Section 9.4 hereof.
"INVESTMENT PROPERTY" of any Person shall mean that Person's investment
property, whether now owned or hereinafter acquired by such Person,
including, without limitation, all securities (certificated or
uncertificated), securities accounts, securities entitlements, commodity
accounts and contracts.
"ISSUANCE" shall mean the issuance by Group or any Credit Party or any
of their respective Subsidiaries on or after the Closing Date of Indebtedness
for Borrowed Money (other than the Revolving Loan, the Letters of Credit and
the other Permitted Indebtedness), or the issuance by any Credit Party of any
equity interest. Nothing contained in this definition or in any provision
relating to Issuances shall permit or be deemed to permit any Credit Party to
effect an Issuance which is otherwise prohibited hereunder.
"ISSUING LENDER" shall have the meaning set forth in Section 4A.1(a)
hereof.
"LANDLORD'S OR MORTGAGEE'S CERTIFICATE" shall have the meaning set forth
in Section 4.1(a) hereof.
"LASALLE" shall have the meaning set forth in the first paragraph of
this Agreement.
"LATEST PROJECTIONS" shall have the meaning set forth in Section 5.19
hereof.
"LEASE" shall mean each lease or sublease of real property existing on
the date hereof under which any Credit Party is the lessee or sublessee and
each future lease or sublease of real property under which the Borrower or
any of its Subsidiaries is the lessee or sublessee.
"LENDER" and "LENDERS" shall have the meanings set forth in the first
paragraph of this Agreement.
"LENDER DEBT" or "OBLIGATIONS" shall mean and include all Advances,
Additional Indebtedness and all other Indebtedness owing at any time by the
Borrower, any one or more of its Subsidiaries or any other Credit Party to
the Agent or any one or more of the other Lenders or any Issuing Lender
(including, without limitation, all principal, interest, Letter of Credit
reimbursement obligations, fees, indemnities, costs, charges and other
amounts payable under the Hedge Agreements, the Letter of Credit Agreements
or in respect of the Letters of Credit or owing under any of the other Loan
Documents) arising under or in connection with this Agreement, the Notes, any
Security Document, any of the other Loan Documents or any Guaranty in favor
of the Agent or any one or more of the Lenders or any Issuing Lender, in each
instance, whether absolute or contingent, secured or unsecured, due or not,
arising by operation of law or otherwise, and all interest and other charges
thereon, including, without limitation, post-petition interest whether or
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not such interest is an allowable claim in a bankruptcy proceeding involving
the Borrower, any of its Subsidiaries or any other Credit Party. In no event
shall any obligations owing to any Lender under any Senior Note Documents be
deemed to be "Lender Debt" or "Obligations" hereunder.
"LETTER OF CREDIT" shall mean standby letters of credit issued in
accordance with the terms hereof by Agent or an Issuing Lender at the request
of or for the account of Borrower.
"LETTER OF CREDIT AGREEMENT" shall mean an application and agreement, as
amended, modified or supplemented from time to time, with respect to the
issuance and reimbursement of and otherwise with respect to a Letter of
Credit, in form and substance satisfactory to the Agent and the applicable
Issuing Lender.
"LETTER OF CREDIT CASH COLLATERAL" shall mean cash deposited by the
Borrower to secure obligations of the Borrower under the Letters of Credit
(contingent or otherwise) pursuant to agreements in form and substance
satisfactory to the Agent.
"LETTER OF CREDIT USAGE" shall mean, at any time, (a) the aggregate
undrawn amount at such time of all outstanding Letters of Credit (or, as to
each Lender, its participating interest thereof pursuant to Section 12.17
hereof), plus (b) the aggregate amount of unreimbursed drawings at such time
under Letters of Credit.
"LIABILITIES AND COSTS" shall mean all liabilities, obligations,
responsibilities, losses, damages, personal injury, death, punitive damages,
economic damages, consequential damages, treble damages, intentional, willful
or wanton injury, damage or threat to the environment, natural resources or
public health or welfare, costs and expenses (including, without limitation,
attorney, expert, engineering and consulting fees and costs and any fees and
costs associated with any investigation, feasibility, or Remedial Action
studies), fines, penalties and monetary sanctions, interest, direct or
indirect, known or unknown, absolute or contingent, past, present or future.
"LIEN" shall mean any lien, mortgage, pledge, security interest or other
type of charge or encumbrance of any kind, or any other type of preferential
arrangement, including, without limitation, the lien or retained security
title of a conditional vendor and any easement, right of way or other
encumbrance on title to real property and any financing statement filed in
respect of any of the foregoing. For the purposes of this Agreement, a
Credit Party shall be deemed to be the owner of any property which it has
placed in trust for the benefit of the holder of Indebtedness of such Credit
Party which Indebtedness is deemed to be extinguished under GAAP but for
which such Credit Party remains legally liable, and such trust shall be
deemed to be a Lien.
"LOAN DOCUMENTS" shall mean this Agreement, each Security Document, each
Guaranty, the Notes, each Borrower's Certificate, each Borrowing Base
Certificate, each Landlord's Certificate, each Hedge Agreement, each Letter
of Credit Agreement and each other document or instrument now or hereafter
delivered to the Agent or any Lender by any Credit Party pursuant to or in
connection herewith or therewith.
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"LOANS" shall mean the Revolving Loan.
"LPI" shall mean the Borrower's business segment constituting the assets
acquired from Louisiana Plastics, Inc., a Delaware corporation, on March 12,
1993.
"MAJORITY LENDERS" shall mean, at any time, Lenders having more than
fifty-one percent (51%) of the sum of (i) the aggregate outstanding principal
balance of the Loans, (ii) the aggregate amount of unutilized Commitments of
the Lenders, and (iii) the Letter of Credit Usage (which shall be deemed to
be held by the Lenders in accordance with their exposure under Section 12.16
hereof), in each case, at such time; provided, however, that at any time that
any one Lender holds more than fifty-one percent (51%) of such sum, Majority
Lenders shall mean such Lender and any other Lender.
"MATERIAL ADVERSE CHANGE" shall mean, with respect to any Person, a
material adverse change in such Person's business, operations, liabilities,
assets, properties, prospects or condition, financial or otherwise.
"MATERIAL ADVERSE EFFECT" shall mean, (a) with respect to any Person,
(x) a material adverse effect on such Person's business, operations,
liabilities, assets, properties, prospects or condition (financial or other
vise) or (y) the impairment of the ability of such Person to perform its
obligations under any Loan Document to which it is a party or (b) the
impairment of the ability of the Agent or any Lender to enforce or collect
any of the Lender Debt or to realize on any of the Collateral or the
impairment of the Lien of the Agent or any Lender on any Collateral or the
priority of such Lien.
"MATURITY DATE" shall mean May 1, 1999, or, if the term of this
Agreement is extended pursuant to Section 3.6(b) hereof, the last day of any
applicable Renewal Term.
"MAXIMUM PERMISSIBLE RATE" shall have the meaning set forth in Section
2.18(a) hereof.
"MINER TAX RESERVE" shall mean, at any time, a reserve against the
Borrowing Base equal to $764,000 minus the aggregate amount of payments (if
any) theretofore made by the Borrower to Miner Containing Printing, Inc. or
Miner Agricultural Products, Inc. pursuant to Section 11.6 of the Acquisition
Agreement entered into by Borrower and such parties dated December 15, 1993.
"MINIMUM ADVANCE AMOUNT" shall have the meaning set forth in Section
2.1(b) hereof.
"MULTIEMPLOYER PLAN" shall mean a "multiemployer plan" (as defined in
Section 4001 (a)(3) in ERISA) maintained or contributed to during the
preceding six years for employees of (i) any Credit Party; or (ii) any ERISA
Affiliate.
"NET AMOUNT OF ELIGIBLE INVENTORY" shall have the meaning set forth in
the definition of Eligible Inventory.
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"NET AMOUNT OF ELIGIBLE RECEIVABLES" for the Borrower shall mean, at any
time, the gross amount of the Borrower's Eligible Receivables, less an amount
established by the Borrower, but subject to revision from time to time by the
Agent, in its reasonable discretion, equal to the sum of (i) sales, excise or
similar taxes in respect of such Eligible Receivables, and (ii) returns,
discounts, claims, credits and allowances of any nature at any time issued,
owing, granted, outstanding, available or claimed with respect to such
Eligible Receivables, including, without limitation, claims, credits or
offsets of any bank or other third party in respect of handling or similar
charges in respect thereof.
"NET INCOME" shall mean, for any fiscal period, the net income (or net
loss) of the Borrower and its Subsidiaries on a consolidated basis as
determined in accordance with GAAP.
"NET PROCEEDS" shall mean, with respect to any Asset Sale, Issuance,
insurance claim or Extraordinary Receipt, the aggregate amount of cash
proceeds (after a reasonable estimate of taxes payable in connection
therewith, with respect to Asset Sales and Issuances only, and payment of
associated fees and expenses (including, without limitation, reasonable fees
and expenses of counsel, accountants, appraisers and, with respect to any
Issuance, any reasonable underwriter's discount) and with respect to any
Asset Sale or insurance claim the repayment of any Indebtedness secured
specifically by and with a first lien on the asset, the sale or disposition
of which gave rise to such Asset Sale was the subject of such insurance
claim) received or receivable by such Person from such Asset Sale, Issuance
insurance claim or Extraordinary Receipt, and cash proceeds paid from time to
time with respect to any promissory note or other instrument or security
delivered in connection with any Asset Sale, Issuance, insurance claim or
Extraordinary Receipt.
"NOTES" shall mean the Revolving Notes.
"ORIGINAL TERM" shall have the meaning contained in Section 3.6(b)
hereof.
"OTHER TAXES" shall have the meaning set forth in Section 3.3(c) hereof.
"OVERALL REFINANCING" shall have the meaning set forth in Section 5.9
hereof.
"PAYMENT OFFICE" shall have the meaning set forth in Section 2.4(c)
hereof.
"PAYOFF LETTER" shall have the meaning set forth in Section 2.1(c)
hereof.
"PBG" shall mean the Pension Benefit Guaranty Corporation, or any
successor thereof under ERISA.
"PENSION BENEFIT PLAN" shall mean any plan which is an "employee pension
benefit plan," as defined in Section 3(2) of ERISA.
"PERMIT" shall mean any permit, approval authorization, license,
variance, or permission required from a Governmental Body under an applicable
Environmental Law.
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"PERMITTED INDEBTEDNESS" shall have the meaning set forth in Section 9.3
hereof.
"PERMITTED LIENS" shall have the meaning set forth in Section 9.2
hereof.
"PERMITTED SENIOR INDEBTEDNESS REFINANCING" shall mean any refinancing
of the Senior Indebtedness, provided that (i) the principal amount of the
refinanced Indebtedness shall not exceed $110,000,000 and (ii) the terms and
conditions governing such refinanced Indebtedness shall be substantially the
same as, or no less favorable to the Borrower, than the terms and conditions
of the Senior Notes (as issued on the Closing Date), or shall otherwise be
acceptable in all respects to the Majority Lenders.
"PERSON" shall mean an individual, a corporation, an association, a
joint stock company, a business trust, a limited liability company a
partnership, a trust, a joint venture, a trade or business, an unincorporated
organization or other entity, or a government or any agency or political
subdivision thereof or any other entity of whatever nature.
"PROPERTY" shall mean any real or personal property, plant, building,
facility, structure, underground storage tank, equipment or unit, or other
asset owned, leased or operated by the Credit Parties or any of their
respective Subsidiaries (including any surface water thereon or adjacent
thereto, and soil or groundwater thereunder).
"PRO RATA" (as applied to allocations among the Lenders) shall mean,
with respect to each Lender, a percentage equal to the ratio that (i) with
respect to the Revolving Loan, the Revolving Commitment of such Lender as it
bears to the Aggregate Revolving Commitments of all Lenders, and (ii) in all
other instances, the Commitment of such Lender as it bears to the Commitments
of all Lenders.
"RECEIVABLES" shall mean and include all accounts, contract rights,
instruments, documents and chattel paper, whether secured or unsecured, now
existing or hereafter created, of the Credit Parties, and whether or not
specifically sold or assigned to the Agent or the Lenders, for goods or
inventory sold or leased or services rendered.
"REFERENCE PROJECTIONS" shall have the meaning set forth in Section 5.19
hereof.
"REGULATION D" shall mean Regulation D of the Board as from time to time
in effect and any successor to all or a portion thereof establishing reserve
requirements.
"RELEASE" shall mean any releasing, spilling, leaking, seepage, pumping,
pouring, emitting, depositing, migrating, emptying, discharging, injecting,
escaping, leaching, disposing or dumping of a Hazardous Material into the
indoor or outdoor environment or into or out of any Property, including the
movement of Hazardous Materials through or in the air, soil, surface water,
groundwater or Property. The meaning of the term shall also include any
threatened Release.
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"REMEDIAL ACTION" shall mean actions required to (i) clean up, remove,
treat or in any other way address Hazardous Materials in the indoor or
outdoor environment, (ii) prevent the Release or minimize the further Release
of Hazardous Materials or (iii) perform pre-remedial studies and
investigations and post-remedial monitoring and care.
"RENEWAL TERM" shall have the meaning contained in Section 3.6(b) hereof.
"REPORTABLE EVENT" shall have the meaning set forth in Section 4043(b)
of ERISA, and the regulations thereunder, as to which the PBGC has not by
regulation waived the notice requirement of Section 4043(a) of ERISA.
"REVOLVING ADVANCE" shall have the meaning set forth in Section 2.1(a)
hereof.
"REVOLVING COMMITMENT," as to any Lender, shall have the meaning set
forth in Section 2.2(b) hereof.
"REVOLVING CREDIT FACILITY" shall mean the facility provided to the
Borrower hereunder to make borrowings of Revolving Advances and to cause the
issuance by the Issuing Lenders of the Letters of Credit.
"REVOLVING CREDIT FACILITY COMMITMENT" shall have the meaning set forth
in Section 2.2(a) hereof.
"REVOLVING LOAN" shall have the meaning set forth in Section 2.1(a)
hereof.
"REVOLVING NOTE" and "REVOLVING NOTES" shall have the meanings set forth
in Section 2.,(a) hereof.
"SECURITY AGREEMENT" shall have the meaning set forth in Section 4.1(a)
hereof.
"SECURITY DOCUMENT" and "SECURITY DOCUMENTS" shall have the meanings set
forth in Section 4.1(a) hereof.
"SENIOR MANAGEMENT" shall mean the senior executive officers of the
Borrower existing as of the Closing Date and any replacements therefor.
"SENIOR DEBT INDEBTEDNESS" shall mean the secured indebtedness of the
Borrower arising under the Senior Notes and the Senior Note Documents. For
purposes of this Agreement, "Senior Note Indebtedness" shall include any
indebtedness incurred by the Borrower or by a trustee on behalf of the
Borrower in connection with any Permitted Senior Indebtedness Refinancing.
"SENIOR NOTE DOCUMENTS" shall mean that certain Indenture dated as of
May 17, 1996 (as amended, supplemented or otherwise modified from time to
time in accordance with its terms and in accordance with Section 9.12 hereof,
the "INDENTURE"), between the Borrower and LaSalle
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National Bank, as Trustee, in the form attached hereto as Exhibit 3,
providing for the issuance of the Senior Notes, together with the Senior
Notes, the Security Agreement dated as of May 17, 1996 between the Borrower
and LaSalle National Bank, as Collateral Agent, the Mortgages and/or Deeds of
Trust dated as of May 17, 1996 between the Borrower and LaSalle National
Bank, as Collateral Agent, and any indenture or other document or instrument
hereafter delivered in connection with any Permitted Senior Indebtedness
Refinancing, as such documents may be amended, supplemented or otherwise
modified from time to time in accordance with their respective terms and in
accordance with Section 9.12 hereof.
"SENIOR NOTES" shall mean, collectively, those certain promissory notes
in the form attached hereto as Exhibit 4, in the aggregate original principal
amount of $110,000,000, issued by the Borrower on the Closing Date and any
amendment, modification, renewal or substitution of, and any notes issued in
exchange therefor, any thereof issued pursuant to and governed by the Senior
Note Documents and in accordance with Section 9.12 hereof.
"SOLVENT" and "SOLVENCY" shall mean, with respect to any Person on a
particular date, that on such date, (a) the fair saleable value of the assets
of such Person is greater than the total amount of liabilities, including,
without limitation, contingent liabilities, of such Person; and (b) the
present fair salable value of the assets of such Person is not less than the
amount that will be required to pay the probable liability of such Person on
its debts as they become absolute and matured; and (c) such Person does not
intend to, and does not believe that it will, incur debts or liabilities
beyond such Person's ability to pay such debts and liabilities as they
mature; and (d) such Person is not engaged in business or a transaction, and
is not about to engage in business or a transaction, for which such Person's
property would constitute an unreasonably small capital.
"SUBSIDIARY" of any Person shall mean (a) any corporation of which more
than fifty percent (50%) of the issued and outstanding securities having
ordinary voting power for the election of directors is owned or controlled,
directly or indirectly, by a Person and/or one or more of its Subsidiaries,
and (b) any partnership in which a Person and/or one or more Subsidiaries of
such Person shall have a general partnership interest or any other interest
(whether in the form of voting or participation in profits or capital
contribution), in each case, of more than fifty percent (50%).
"SUPERVISORY POLICY" shall have the meaning set forth in Section 9.4(b)
hereof.
"UCC" shall mean the Uniform Commercial Code (or any successor statute)
of the State of Illinois or of any other state the laws of which are required
by Section 9-103 of the UCC of Illinois to be applied in connection with the
perfection of a security interest in favor of the Agent hereunder or under
any Security Document.
"U.S. DOLLARS," "DOLLARS" and "$" shall mean lawful currency of the
United States of America.
"WRITTEN NOTICE" and "in writing" shall mean any form of written
communication, or a communication by means of telex, telecopier device,
telegraph or cable.
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Section 1.2 TERMS DEFINED IN THE UNIFORM COMMERCIAL CODE. Each term
defined in the UCC of the State of Illinois and used herein shall have the
meaning given therein unless otherwise defined herein.
Section 1.3 COMPUTATION OF TIME PERIODS. In this Agreement in the
computation of periods of time from a specified date to a later specified
date, the word "from" shall mean "from and including" and the words "to" and
"until" each shall mean "to but excluding."
Section 1.4 ACCOUNTING TERMS. (a) All accounting terms not
specifically defined herein shall be construed, as to a specified Person, in
accordance with generally accepted accounting principles in the United
States, consistent with those applied in the preparation of the financial
statements of such Person ("GAAP").
(b) If any changes in accounting principles from those used in the
preparation of the Financial Statements referred to in Section 5.3(a) hereof
are hereafter occasioned by promulgation of rules, regulations,
pronouncements or opinions by or are otherwise required by the Financial
Accounting Standards Board or the American Institute of Certified Public
Accountants (or successors thereto or agencies with similar functions), and
any of such changes results in a change in the method of calculation of, or
affects the results of such calculation of, any of the financial covenants,
standards or terms found herein, then the parties hereto agree to enter into
and diligently pursue negotiations in order to amend such financial
covenants, standards or terms so as to equitably reflect such changes, with
the desired result that the criteria for evaluating a Credit Party's
financial condition and results of operations shall be the same after such
changes as if such changes had not been made. Except for changes in
accounting principles that are required by the Financial Accounting Standards
Board or the American Institute of Certified Public Accountants (or
successors thereto or agencies with similar functions), no Credit Party shall
adopt any change in accounting principles from those used in the preparation
of the Financial Statements referred to in Section 5.3(a) hereof without the
prior written consent of the Majority Lenders.
Section 1.5 OTHER PROVISIONS REGARDING DEFINITIONS. (a) The words
"hereof," "herein" and "hereunder" and words of similar import when used in
this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement.
(b) The terms defined in this Section 1, unless the context requires
otherwise, will have the meanings applied to them in this Section 1,
references to an "Exhibit," "exhibit," "Schedule" or "schedule" are, unless
otherwise specified, to one of the exhibits or schedules attached to this
Agreement and references to a "section" or "Section" are, unless otherwise
specified, to one of the sections of this Agreement.
(c) References to the "date hereof," the "date of this Agreement" and
the like shall mean and refer to May 17, 1996.
(d) The term "or" is not exclusive.
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(e) References to the Borrower and its Subsidiaries shall mean the
Borrower and its Subsidiaries on a consolidated basis unless otherwise
specified.
SECTION 2. AMOUNT AND TERMS
Section 2.1 REVOLVING ADVANCES. (a) Each of the Lenders severally
agrees to lend to the Borrower, subject to and upon the terms and conditions
herein set forth, at any time or from time to time on or after the Closing
Date and before the Maturity Date, such Lender's PRO RATA share, as
determined under Section 2.6(c) hereof, of such amounts as may be requested
by the Borrower in accordance with the terms of this Agreement (each such
borrowing, a "REVOLVING ADVANCE" and the outstanding principal balance of all
Revolving Advances from time to time, the "REVOLVING LOAN"), subject to the
limitations contained in Section 2.2 hereof.
(b) Each Revolving Advance shall be in an amount equal to $500,000 (the
"MINIMUM ADVANCE AMOUNT") or an integral multiple of $100,000 in excess
thereof and shall be made on the date specified in the Written Notice or
telephonic notice confirmed in writing as described in Section 2.6 hereof.
Each Revolving Advance shall be either a Base Rate Advance or a Eurodollar
Advance, or a combination thereof, as the Borrower shall request, subject to
and in accordance with the provisions of this Agreement.
Section 2.2 REVOLVING CREDIT FACILITY COMMITMENT AND BORROWING LIMIT.
(a) The Revolving Loan shall not at any time, when taken together with the
Letter of Credit Usage at such time (after giving effect to any concurrent
reimbursement of a Letter of Credit with the proceeds of a Revolving Advance
pursuant to Section 4A.1(c) hereof) exceed the lesser of (i) Twenty Million
Dollars ($20,000,000) ("REVOLVING CREDIT FACILITY COMMITMENT") and (ii) the
Borrowing Base as of such time (the lesser of (i) and (ii) being the
"BORROWING LIMIT").
(b) Subject to the limitations of Sections 2 and 3 hereof, the Borrower
may borrow, repay (without premium or penalty) and reborrow the Revolving
Loan. The portion of the Revolving Loan to be funded by each Lender shall not
exceed in aggregate principal amount at any one time outstanding, and no
Lender shall have any obligation to make its PRO RATA share of any Revolving
Advance which shall result in such Lender's share of the Revolving Loan at
such time PLUS such Lender's share of the Letter of Credit Usage at such time
being in the aggregate in excess of, the revolving commitment amount set
forth opposite such Lender's name on Schedule 1.1 hereto (as such amount may
be reduced from time to time in accordance with the terms hereof, for each
Lender its "REVOLVING COMMITMENT").
(c) The Revolving Commitment of each Lender shall be reduced upon each
reduction of the Revolving Credit Facility Commitment. The amount of the
reduction for each Lender shall be equal to such Lender's PRO RATA share
(based on its percentage interest in the Revolving Credit Facility
Commitment) of the reduction in the Revolving Credit Facility Commitment.
Section 2.3 REVOLVING NOTES. (a) The PRO RATA portion of the Revolving
Advances made by each Lender to the Borrower shall be evidenced by, and be
repayable with interest in accordance with the
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terms of a promissory note issued by the Borrower, in each case payable to
the order of such Lender, and in the maximum principal amount of such
Lender's Revolving Commitment, in the form of Exhibit 2.3 hereto (together
with any replacement, modification, renewal or substitution thereof,
individually, a "REVOLVING NOTE" and collectively, the "REVOLVING NOTES").
Each Revolving Note shall be dated as of the Closing Date and be duly
completed, executed and delivered by the Borrower.
(b) Each Lender shall endorse that portion of the amount of each
Revolving Advance which it has made to the Borrower and the amount of each
payment or prepayment of principal thereon in the appropriate space on the
grid sheet attached to its Revolving Note (or so note the same in its
records); PROVIDED, HOWEVER, that the failure of any Lender to make any such
endorsement or recordation shall not in any manner affect the obligation of
the Borrower to repay to such Lender the portion of the Revolving Advance
advanced by such Lender under the Revolving Note held by such Lender. Any
such endorsement or recordation shall represent conclusive evidence of the
date and amount of such Lender's PRO RATA share of any Revolving Advance or
payment or prepayment of principal thereon, absent manifest error.
(c) Each Revolving Note shall mature on the earlier of the Maturity
Date (or earlier as hereinafter provided), and shall be subject to payment
and prepayment of all other amounts as provided in Sections 2 and 3 hereof,
including, without limitation, Section 2.5 hereof.
Section 2.4 NOTICE OF BORROWING; BORROWER'S CERTIFICATE. (a) Whenever
the Borrower desires to make a borrowing of an Advance the Borrower shall
give the Agent, at its address referred to in Section 12.4 hereof, not later
than 11:00 a.m. (Chicago time), at least three Business Days' (or, in the
case of an Advance which shall be a Base Rate Advance, same Business Day)
prior Written Notice or telephonic notice from an Authorized Representative
confirmed promptly in writing (which notice shall be irrevocable) of its
desire to make a borrowing of an Advance. Each notice of borrowing under
this Section 2.4 shall be substantially in the form of Exhibit 2.4 hereto
(each a "BORROWER'S CERTIFICATE") and specify, INTER ALIA, the date on which
the Borrower desires to make a borrowing of an Advance (which in each
instance shall be a Business Day), the amount of such borrowing, whether such
borrowing shall be a Base Rate Advance or a Eurodollar Advance or a
combination thereof, and, in the case of the selection of a Eurodollar
Advance, the proposed Interest Period therefor, and shall refer to the most
recent Borrowing Base Certificate delivered by the Borrower pursuant to
Section 8.1(h) hereof and set forth the Borrowing Base provided therein. If
such notice shall be with respect to a borrowing of a Eurodollar Advance but
fails to state an applicable Interest Period therefor, then such notice shall
be deemed to be a request for a one-month Interest Period. If the Borrower
shall fail to state in any such notice whether such Advance shall be a Base
Rate Advance or a Eurodollar Advance, then the Borrower shall be deemed to
have selected a Base Rate Advance. Subject to the other provisions of this
Agreement, Base Rate Advances and Eurodollar Advances of more than one type
may be outstanding at the same time; PROVIDED, HOWEVER, that (i) Eurodollar
Advances shall be in an amount equal to $1,000,000 or any integral multiple
of $200,000 in excess of $1,000,000, and (ii) Eurodollar Advances shall be
available for election by the Borrower only for one, two or three month
Interest Periods provided, that no more than six (6) Eurodollar Advances in
the aggregate may be outstanding at any one time. The Agent
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shall give each Lender telephonic notice (confirmed promptly in writing) on
the same day as Agent receives any such Borrower's Certificate of the
proposed borrowing of an Advance, of such Lender's PRO RATA share thereof,
and of the other matters covered by the Borrower's Certificate.
(b) The Borrower shall not be permitted to select a borrowing of a
Eurodollar Advance in any Borrower's Certificate (x) to the extent such
selection would be prohibited by Section 2.10 or 2.11 hereof, or (y) if a
Default or an Event of Default shall be in existence as of the date of
selection of the applicable Interest Period.
(c) Each Lender shall make available to the Agent such Lender's PRO
RATA portion of the Advance (subject to the conditions of this Agreement as
to the making of such Advance by such Lender), to be made on the date
specified in the Borrower's Certificate, no later than 2:00 (Chicago time) on
such specified date, in U.S. dollars in immediately available funds, at the
office of the Agent located at 120 South LaSalle Street, Chicago, Illinois
60603 or such other office as the Agent may from time to time direct (the
"PAYMENT OFFICE") for the account of such office of the Agent. The portion
of each Advance to be funded by each Lender shall be an amount equal to (x)
the dollar amount of the Advance requested under the applicable Borrower's
Certificate, multiplied by (y) the percentage set forth opposite such
Lender's name on Schedule 1.1 hereto with respect to such Lender's Revolving
Commitment (in the case of Revolving Advances).
(d) Except for Revolving Advances made pursuant to Section 4A.1(c)
hereof (which Revolving Advances shall be applied to the reimbursement of
drawings under the Letter of Credit for which such Revolving Advance was made
in accordance with such Section 4A.1(c) hereof), subject to satisfaction of
all applicable conditions precedent proceeds of each Advance received by the
Agent shall be made available to the Borrower by the Agent at its Payment
Office (or such other office of the Agent in Illinois as the Borrower may
from time to time specify in writing to the Agent).
Section 2.5 TERMINATION AND REDUCTION OF REVOLVING CREDIT FACILITY
COMMITMENTS. On the Maturity Date, the Revolving Credit Facility Commitment
shall be cancelled. Upon such cancellation, the Revolving Advances (together
with all other Lender Debt) shall become automatically immediately due and
payable together with all accrued interest thereon to such date plus any
fees, premiums, charges or costs provided for hereunder, together with the
cancellation or termination of any outstanding Letters of Credit (or the
provision of Letter of Credit Cash Collateral equal to the undrawn amount
under all outstanding Letters of Credit) and the reimbursement of any
unreimbursed Letters of Credit.
Section 2.6 INTEREST. (a) Interest on Eurodollar Advances. Except as
provided in Section 2.6(c) hereof, the Borrower shall pay interest on the
unpaid principal amount of each Eurodollar Advance made to it outstanding
from time to time, (i) on each Interest Payment Date with respect to such
Eurodollar Advance, (ii) at the date of conversion of such Eurodollar Advance
(or portion thereof) to a Base Rate Advance, (iii) at maturity of each such
Eurodollar Advance and (iv) after maturity of such Eurodollar Advance
(whether by acceleration or otherwise) upon demand, in each case at
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an interest rate per annum equal to the Adjusted Eurodollar Rate for the
Interest Period in effect for such Eurodollar Advance plus the Applicable
Margin.
(b) Interest on Base Rate Advances. Except as provided in Section
2.6(c) hereof, the Borrower shall pay interest on the unpaid principal amount
of the Base Rate Advances made to it hereunder, and, to the extent due and
payable, Additional Indebtedness incurred by it, in each case, outstanding
from time to time at an interest rate per annum equal to the Base Rate in
effect from time to time. Interest on Base Rate Advances shall be payable
monthly in arrears on the last day of each month of each calendar year
commencing with May 31, 1996, and at maturity (whether by acceleration or
otherwise) and thereafter on demand. Interest on Additional Indebtedness
shall be payable upon demand.
(c) Default Interest. Notwithstanding anything to the contrary
contained herein, while any Event of Default is continuing, interest on the
Base Rate Advances, Eurodollar Advances, and Additional Indebtedness shall be
payable on demand at a rate per annum equal to two percentage points (2%) in
excess of the rate then otherwise applicable hereunder thereto.
(d) Eurodollar Rate Determination. The Agent, upon determining the
Eurodollar Rate and the Adjusted Eurodollar Rate for any Interest Period,
shall promptly notify by telephone (confirmed promptly in writing) or in
writing the Borrower and the Lenders of such rates. Such determination
shall, in the absence of manifest error, be conclusive and binding upon the
Borrower and the Lenders.
(e) Changes in Base Rate. After each change in the Base Rate, the
Agent shall promptly notify the Borrower and each Lender by telephone
(confirmed promptly in writing) or in writing of the date of such change and
the new Base Rate; PROVIDED, HOWEVER, that the failure of the Agent to so
notify the Borrower or any Lender shall not affect the effectiveness of such
change.
Section 2.7 CONVERSION OF BORROWINGS; RENEWALS. (a) Unless otherwise
prohibited under Section 2.10 or Section 2.11 hereof, the Borrower may, from
time to time following the Closing Date and prior to the Maturity Date,
convert (i) all or a portion of its outstanding Base Rate Advances to one or
more Eurodollar Advances in aggregate amounts of $1,000,000 or any integral
multiple of $200,000 in excess of $1,000,000, or (ii) all or a portion of its
outstanding Eurodollar Advances to one or more Base Rate Advances so long as
the aggregate principal balance of the portion of the Eurodollar Advances
made to such Borrower not being converted, if any, is $1,000,000 or an
integral multiple of $200,000 in excess of $1,000,000; PROVIDED, HOWEVER,
that the Borrower shall not be entitled to convert any Eurodollar Advance, or
portion thereof, to a Base Rate Advance unless all accrued interest on the
Eurodollar Advance or portion thereof, as the case may be, to be converted
through the date of such conversion shall have been paid in full. Each
conversion by the Borrower of any Advance or portion thereof (other than a
conversion pursuant to Section 2.10 or 2.11 hereof) shall be made not later
than 11:00 a.m. (Chicago time) on a Business Day on at least three Business
Days' prior Written Notice or telephonic notice from an Authorized
Representative confirmed promptly in writing to the Agent (which shall
promptly notify each Lender thereof in writing or by telephone confirmed
promptly in writing) from the Borrower. Each such notice (which
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notice shall be irrevocable) shall specify (i) the date of the conversion and
the amount to be converted, and the type of Advance into which such Advance
is to be converted, (ii) the particular Advance, or portion thereof, to be
converted, and (iii) in the case of conversion of any Advance, or portion
thereof, to a Eurodollar Advance, the duration of the Interest Period for
such Eurodollar Advance. Notwithstanding the above, the Borrower shall not be
entitled to convert any Advance, or portion thereof, to a Eurodollar Advance
if a Default or Event of Default shall have occurred and be continuing.
Except as provided in Section 2.12 hereof, any conversion of a Eurodollar
Advance, or portion thereof, to a Base Rate Advance shall be made only on the
last day of the Interest Period with respect to such Eurodollar Advance.
(b) Each renewal by the Borrower of an outstanding Eurodollar Advance
or portion thereof (in an amount of $1,000,000 or an integral multiple of
$200,000 in excess of $1,000,000) shall be made on notice to the Agent (which
shall notify each Lender thereof on the same day as Agent receives such
notice in writing or by telephone confirmed promptly in writing) given not
later than 11:00 a.m. (Chicago time) on the third Business Day prior to the
last day of the Interest Period just ending for such Eurodollar Advance.
Each notice (which notice shall be irrevocable) by the Borrower of the
renewal of a Eurodollar Advance or portion thereof, shall be in writing or by
telephone from an Authorized Representative of the Borrower confirmed
promptly in writing and shall specify (i) the amount of such renewal of the
Eurodollar Advance or portion thereof and (ii) the duration of the Interest
Period for such renewal; PROVIDED, HOWEVER, that if the Borrower fails to
select the duration of any Interest Period for the renewal of such Eurodollar
Advance or portion thereof (in an amount of $1,000,000 or an integral
multiple of $200,000 in excess of $1,000,000), the duration of such Interest
Period shall be one month. Notwithstanding the above, the Borrower shall not
be entitled to renew a Eurodollar Advance or a portion thereof, (i) if at the
time of the selection of such renewal there shall exist a Default or an Event
of Default, or (ii) to the extent such renewal would be prohibited by Section
2.10 or 2.11 hereof.
(c) Any Eurodollar Advance or portion thereof as to which the Agent
shall not have received a proper notice of conversion or renewal as provided
in Section 2.7(a) or 2.7(b) hereof or notice of payment or prepayment by
11:00 a.m. (Chicago time) at least three Business Days prior to the last day
of the Interest Period just ending for such Eurodollar Advance shall (whether
or not any Default or Event of Default has occurred) automatically be
converted to a Base Rate Advance on the last day of the Interest Period for
such Eurodollar Advance.
Section 2.8 COMPUTATION OF INTEREST. Interest on the Loans and fees
and other amounts calculated on the basis of a rate per annum shall be
computed on the basis of actual days elapsed over a 360 day year. Any rate of
interest on the Loans and Additional Indebtedness which is computed on the
basis of the Base Rate shall change when and as the Base Rate changes.
Section 2.9 INCREASED COSTS. Regarding the PRO RATA share of any
Lender in any Eurodollar Advance, in the event of any change in conditions or
any Change of Law, which: (i) subjects such Lender or any branch or Affiliate
of such Lender to any tax, duty or other charge with respect to such share of
such Eurodollar Advance (other than Excluded Taxes); or (ii) changes the
basis of taxation of payments to any Lender or any branch or Affiliate of
such Lender of principal of and/or
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interest on such share of such Eurodollar Advance and/or other fees and
amounts payable hereunder with respect thereto (other than Excluded Taxes);
or (iii) imposes, modifies or deems applicable any reserve, deposit or
similar requirement against any assets held by, deposits with or for the
account of, or loans or commitments by, an office of any Lender or any branch
or Affiliate of such Lender; or (iv) imposes upon such Lender or any branch
or Affiliate of such Lender any other condition with respect to such share of
such Eurodollar Advance or this Agreement; and the result of any of the
foregoing is to increase the actual cost by an amount such Lender deems to be
material to such Lender or any branch or Affiliate of such Lender of making,
funding or maintaining such share of such Eurodollar Advance hereunder, or to
reduce the amount of any payment (whether of principal, interest, or
otherwise) received or receivable by such Lender or any branch or Affiliate
of such Lender, or to require such Lender or any branch or Affiliate of such
Lender to make any payment, in each case by or in an amount which such Lender
in its sole judgment deems material, then and in any such case: (l) such
Lender shall promptly notify the Borrower and the Agent in writing of the
happening of such event; (2) such Lender shall promptly deliver to the
Borrower and the Agent a certificate stating the change which has occurred,
or the reserve requirements or other conditions which have been imposed on
such Lender or branch or Affiliate of such Lender, or the request, directive
or requirement with which it has complied, together with the date thereof,
the amount of such increased cost, reduction or payment and the way in which
such amount has been calculated; and (3) the Borrower shall pay such Lender
on demand such an amount or amounts as will compensate such Lender or its
branch or Affiliate for such additional cost, reduction or payment. The
certificate of such Lender as to the additional amounts payable pursuant to
this Section 2.11 delivered to the Borrower shall in the absence of manifest
error be conclusive of the amount thereof. Each Lender agrees to use
reasonable efforts to avoid or minimize the payment by the Borrower of any
additional amounts under this Section 2.11, including, without limitation, by
the designation of another branch or Affiliate of such Lender from which such
Lender could make such Lender's PRO RATA share of Eurodollar Advances so long
as such designation is not disadvantageous to such Lender as reasonably
determined by such Lender. The protection of this Section 2.9 shall be
available to such Lender regardless of any possible contention of invalidity
or inapplicability of the law, regulation, treaty, order, directive,
interpretation or condition which has been imposed.
Section 2.10 CHANGE OF LAW RENDERING EURODOLLAR ADVANCES UNLAWFUL.
(a) Notwithstanding anything to the contrary herein contained, in the event
that any Change of Law makes it unlawful for any Lender to fund any portion
of a Eurodollar Advance or to give effect to its obligations as contemplated
hereby with respect to Eurodollar Advances, such Lender shall, upon the
happening of such event, notify the Agent and the Borrower thereof in writing
stating the reason therefor, and the obligation of such Lender to allow
conversion to or selection or renewal with respect to its PRO RATA share of
any Eurodollar Advance by the Borrower shall, upon the happening of such
event, forthwith be suspended for the duration of such illegality and during
such illegality such Lender shall fund its share of all Advances as Base Rate
Advances and there shall be no renewal of, or conversion to, any share of
such Lender in any Eurodollar Advance. If and when such illegality ceases to
exist such suspension shall cease and such affected Lender shall similarly
notify the Agent and the Borrower.
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(b) Notwithstanding anything to the contrary contained herein, in the
event that any Change of Law shall make it commercially impracticable or
unlawful for any Lender to continue in effect the funding of any portion of a
Eurodollar Advance previously made by it hereunder and then outstanding, such
Lender shall, upon the happening of such event, notify the Agent and the
Borrower thereof in writing stating the reasons therefor, and such Lender's
PRO RATA share of such Eurodollar Advance shall automatically be converted to
a Base Rate Advance. The Borrower shall pay to the Agent for the benefit of
such Lender accrued interest owing on such converted portion of such
Eurodollar Advance through the date of such conversion, together with any
amounts payable under Section 2.12 hereof with respect to such prepayment.
After such notice shall have been given and until the circumstances giving
rise to such notice no longer exist, each request for such Lender's PRO RATA
share of a Eurodollar Advance or for conversion to or renewal of such
Lender's PRO RATA share of a Eurodollar Advance shall be deemed a request by
the Borrower for a Base Rate Advance. If and when such impracticability or
illegality ceases to exist, such suspension shall cease and such affected
Lender shall similarly notify the Agent and the Borrower.
Section 2.11 EURODOLLAR AVAILABILITY. (a) In the event, and on each
occasion, that on the day two Business Days prior to the commencement of any
Interest Period for a Eurodollar Advance, the Agent shall have determined in
good faith (which determination shall, in the absence of manifest error, be
conclusive and binding upon the Borrower) that dollar deposits in the amount
of the principal amount of such Eurodollar Advance are not generally
available in the London (England, U.K.) interbank market, or that the rate at
which such dollar deposits are being offered will not accurately reflect the
cost to one or more Lenders of making or funding the principal amount of
their portions of such Eurodollar Advance during such Interest Period, or
that reasonable means do not exist for ascertaining the Eurodollar Rate, the
Agent shall, as soon as practicable thereafter, give written or telephonic
notice of such determination to the Lenders and the Borrower and any request
by the Borrower for a Eurodollar Advance pursuant to Section 2.4 hereof or
for conversion to or renewal of a Eurodollar Advance pursuant to Section 2.7
hereof shall thereupon, and until the circumstances giving rise to such
notice no longer exist (as notified by the Agent to the Borrower and the
Lenders), be deemed a request by the Borrower for the making of or conversion
to a Base Rate Advance.
(b) If, at any time, the Agent shall have determined (which
determination shall, in the absence of manifest error, be conclusive and
binding upon the Borrower) that any contingency has occurred which adversely
affects the London (England, U.K.) interbank market or that any Change of Law
or other circumstances affecting one or more Lenders, in the London (England,
U.K.) interbank market makes the funding of any portion of a Eurodollar
Advance impracticable, the Agent shall, as soon as practicable thereafter,
give written or telephonic notice of such determination to the Lenders and
the Borrower and any request by the Borrower for a Eurodollar Advance
pursuant to Section 2.4 hereof or for conversion to or renewal of a
Eurodollar Advance pursuant to Section 2.7 hereof shall thereupon, and until
the circumstances giving rise to such notice no longer exist (as notified by
the Agent to the Borrower and the Lenders), be deemed a request by the
Borrower for the making of or conversion to a Base Rate Advance.
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Section 2.12 INDEMNITIES. (a) The Borrower hereby agrees to indemnify
each Lender on demand against any loss or expense which such Lender or its
branch or Affiliate may sustain or incur as a consequence of: (i) any default
in payment or prepayment of the principal amount of any Eurodollar Advance
made to it or any portion thereof or interest accrued thereon, as and when
due and payable (at the due date thereof, by irrevocable notice of payment or
prepayment, or otherwise); (ii) the effect of the occurrence of any Event of
Default upon any Eurodollar Advance made to it; (iii) subject to Section
3.3(f) hereof, the payment or prepayment of the principal amount of any
Eurodollar Advance made to it or any portion thereof, pursuant to Section 2
or 3 hereof, or otherwise, on any day other than the last day of an Interest
Period or the payment of any interest on any Eurodollar Advance made to it,
or portion thereof, on a day other than an Interest Payment Date for such
Eurodollar Advance; or (iv) the failure by the Borrower to accept or make a
borrowing of a Eurodollar Advance or a conversion to or renewal of a
Eurodollar Advance after it has requested such borrowing, conversion or
renewal; in each case including, but not limited to, any loss or expense
sustained or incurred in liquidating or employing deposits from third parties
acquired to effect or maintain such Eurodollar Advance or any portion
thereof. Each Lender shall provide to the Borrower and the Agent a
statement, supported where applicable by documentary evidence, explaining the
amount of any such loss or expense it incurs, which statement shall be
conclusive absent manifest error.
(b) If any Change of Law, shall: (i) impose upon, modify, require,
make or deem applicable to any one or more Lenders, or any of their
Affiliates or branches, any reserve requirement, special deposit requirement,
insurance assessment or similar requirement against or affecting the
Commitment of such Lender or Lenders or such Affiliates or branches; or (ii)
impose any condition upon or cause in any manner the addition of, any
supplement to or any increase of any kind to the capital or cost base of such
Lender or Lenders, or such Affiliates or branches thereof, for extending or
maintaining the Commitment of such Lender, which results in an increase in
the capital requirement supporting such Commitment; or (iii) impose upon,
modify, require, make or deem applicable to such Lender or Lenders or any
such Affiliates or branches any capital requirement, increased capital
requirement or similar requirement, and the result of any events referred to
in clause (i), (ii) or (iii) above shall be to (A) increase the amount of
capital required or expected to be required to be maintained by such Lender
or any such Affiliate or branch and such Lender determines that the amount of
such capital requirement is incurred by or based on such Commitment or other
commitments of this type or (B) increase the costs or decrease the benefit in
any way to such Lender or Lenders, or any such Affiliate or branch, of
extending or maintaining such Commitment or extending or maintaining such
Lender's or Lenders' portion of the Loans or holding any Collateral; then and
in such event the Borrower shall, on or prior to the tenth (10th) Business
Day after the giving of Written Notice of such increased costs and/or
decreased benefits to the Borrower and the Agent by such Lender or Lenders
(or any such Affiliate or branch), pay to such Lender or Lenders all such
additional amounts which in the sole good faith calculation of such Lender or
Lenders are properly allocable to the Commitment of such Lender, such
Lender's or Lenders' portion of the Loans and/or the Collateral, as the case
may be, and which: (l) in the case of events referred to in clause (i) above,
shall be sufficient to compensate it for all such increased costs and/or
decreased benefits; and/or (2) in the case of events referred to in clauses
(ii) and (iii) above, shall be an amount equal to the reduction, as
reasonably determined by such Lender, in the
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after-tax rate of return on such Lender's capital resulting from any such
capital or increased capital or similar requirement (including, without
limitation, any such Lender's or Lender's Affiliates' or branches' cost of
taking action in anticipation of the effectiveness of any event described in
clause (ii) or (iii) in order to enable such Lender, Lenders, Affiliate or
branch to be in compliance therewith upon such effectiveness), all as
certified by such Lender or Lenders in said Written Notice to the Borrower.
Such certification shall be conclusive and binding on the Borrower absent
manifest error.
(c) The Borrower hereby agrees to indemnify and hold harmless the
Agent, and each Lender and their respective Affiliates, directors, officers,
agents, representatives, counsel and employees and each other Person, if any,
controlling them or any of their Affiliates within the meaning of either
Section 15 of the Securities Act of 1933, as amended, or Section 20(a) of the
Securities Exchange Act of 1934 (each an "INDEMNIFIED PARTY"), from and
against any and all losses, claims, damages, costs, expenses (including
reasonable counsel fees and disbursements) and liabilities which may be
incurred by or asserted against such Indemnified Party with respect to or
arising out of the commitments hereunder to make the Revolving Advances or to
issue Letters of Credit, or the financings contemplated hereby, the other
Loan Documents, the Collateral (including, without limitation, the use
thereof by any of such Persons or any other Person, the exercise by the
Agent, or any Lender of rights and remedies or any power of attorney with
respect thereto, and any action or inaction of the Agent, or any Lender under
and in accordance with any Security Document), the use of proceeds of any
financial accommodations provided hereunder, the issuance of the Senior
Notes, any investigation, litigation or other proceeding brought or
threatened relating to the issuance of the Senior Notes or any portion
thereof, or the role of any such Person or Persons in connection with the
foregoing whether or not they or any other Indemnified Party is named as a
party to any legal action or proceeding ("CLAIMS"). The Borrower will not,
however, be responsible to any Indemnified Party hereunder for any Claims to
the extent that a court having jurisdiction shall have determined by a final
judgment that any such Claim shall have arisen out of or resulted solely from
(a) (i) actions taken or omitted to be taken by such Indemnified Party by
reason of the bad faith, willful misconduct or gross negligence of such
Indemnified Party or (ii) in violation of any law or regulation applicable to
such Indemnified Party (except to the extent that such violation is
attributable to any breach of any representation, warranty or agreement by or
on behalf of the Borrower, any other Credit Party or any Subsidiary of any
Credit Party, in each case, as determined by a final nonappealable decision
of a court of competent jurisdiction), (b) disputes among Lenders, or (c) a
successful claim by any Credit Party against such Indemnified Party
("EXCLUDED CLAIM"). Further, should any employee of the Agent, or any Lender
be involved in any legal action or proceeding in connection with the
transactions contemplated hereby (other than relating to an Excluded Claim),
the Borrower hereby agrees to pay to the Agent, and each Lender such PER DIEM
compensation as the Agent, or such Lender shall request for each employee for
each day or portion thereof that such employee is involved in preparation and
testimony pertaining to any such legal action or proceeding. The Indemnified
Party shall give the Borrower prompt Written Notice of any Claim setting
forth a description of those elements of the Claim of which such Indemnified
Party has knowledge. The Borrower shall have the right at any time during
which a Claim is pending to select counsel to defend and settle any Claims so
long as in any such event the Borrower shall have stated in a writing
delivered to the applicable Indemnified Party that, as between the Borrower
and such Indemnified Party, the Borrower is responsible to such Indemnified
Party with respect to such
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Claim; PROVIDED, HOWEVER, that the Borrower shall not be entitled to control
the defense of any Claim in the event that there are defenses available to
the Indemnified Party which are not available to the Borrower. In any other
case, the Indemnified Party shall have the right to select counsel and
control the defense of any Claims; PROVIDED, HOWEVER, that no Indemnified
Party shall settle any Claim as to which it is controlling the defense
without the prior written consent of the Borrower, which consent shall not be
unreasonably withheld or delayed. With respect to any Claim for which the
Borrower is entitled to select counsel, each Indemnified Party shall have the
right, at its expense, to participate in the defense of such Claim. In the
event that, with respect to any Claim, more than one Indemnified Party shall
be permitted hereunder to select counsel to defend such Claim at the expense
of the Borrower and shall decide to do so, then all such Indemnified Parties
shall select the same counsel to defend such Indemnified Parties with respect
to such Claim; PROVIDED, HOWEVER, that if any such Indemnified Party shall in
its reasonable opinion consider that the retention of one joint counsel as
aforesaid shall result in a conflict of interest, such Indemnified Party may,
at the expense of the Borrower, select its own counsel to defend such
Indemnified Party with respect to such Claim. The Indemnified Parties and
the Borrower and their respective counsel shall cooperate with each other in
all reasonable respects in any investigation, trial and defense of any such
Claim and any appeal arising therefrom.
(d) If for any reason the foregoing indemnity is unavailable to any
Indemnified Party or insufficient to hold it free and harmless as
contemplated by the preceding paragraph (c), then the Borrower shall
contribute to the amount paid or payable by the Indemnified Party as a result
of any Claim in such proportion as is appropriate to reflect, not only the
relative benefits received by the Borrower on the one hand and such
Indemnified Party on the other hand, but also the relative fault of the
Borrower and such Indemnified Party, as well as any other relevant equitable
considerations.
Section 2.13 DISBURSEMENT. The proceeds of each Revolving Advance
shall be disbursed by the Agent from the Payment Office, shall be charged,
together with interest, fees and other amounts payable by the Borrower
hereunder, to the account of the Borrower on the books of the Agent from time
to time, and shall be payable at such office.
Section 2.14 AGENT'S AVAILABILITY ASSUMPTION. (a) Unless the Agent
shall have been notified by any Lender by Written Notice or telephonic notice
prior to a borrowing date that such Lender does not intend to make available
to the Agent such Lender's PRO RATA portion of or any Revolving Advance which
it shall be obligated to make on such date, the Agent may assume that such
Lender has made such amount available to the Agent on the date for such
borrowing and the Agent may (but shall not be obligated), in reliance upon
such assumption, make available to the Borrower a corresponding amount. If
such corresponding amount is not in fact made available to the Agent by such
Lender on such date of borrowing, the Agent shall be entitled to recover such
corresponding amount on demand from such Lender, which demand shall be made
in a reasonably prompt manner. If such Lender does not pay such
corresponding amount forthwith upon the Agent's demand therefor, the Agent
shall promptly notify the other Lenders and the Borrower, and the Borrower
shall pay such corresponding amount to the Agent.
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(b) The Agent shall also be entitled to recover from such Lender or the
Borrower interest on such corresponding amount in respect of each day from
the date such corresponding amount was made available by the Agent to the
Borrower to the date such corresponding amount is recovered by the Agent, at
a rate per annum equal to (x) if paid by such Lender, the cost to the Agent
of funding such amount as notified in writing by the Agent to such Lender in
accordance with the Rules on Interbank Compensation as stated by the National
Council for Uniform Interest Compensation, Inc.; or (y) if paid by the
Borrower, the applicable rate for Base Rate Advances or Eurodollar Advances,
as the case may be.
(c) In the event that any Lender shall fail to fund its PRO RATA share
of any Revolving Advance made pursuant to Section 4A.1(c) hereof or to fund
its purchase of any participation in any Letter of Credit taken pursuant to
Section 12.16 hereof, the Agent on behalf of the relevant Issuing Lender,
shall be entitled to recover such amount on demand from such Lender. If such
Lender does not pay such amount forthwith upon the Agent's demand therefor,
the Agent shall promptly notify the Borrower and the other Lenders thereof
and the Borrower shall pay such amount to the Agent. The Agent on behalf of
such Issuing Lender shall also be entitled to recover from such Lender or the
Borrower, as the case may be, interest on such amount in respect of each day
from the date such Revolving Advance was made or the date such purchase was
to have been made, as the case may be, to the date such amount is recovered
by the Agent, at a rate per annum equal to (x) if paid by such Lender, the
cost to the relevant Issuing Lender of the payment of the drawing under the
Letter of Credit for which such Revolving Advance was (or was to have been)
made in the case of a Revolving Advance made pursuant to Section 4A.1(c)
hereof or a participation under Section 12.16 hereof, as the case may be, in
accordance with the Rules on Interbank Compensation as stated by the National
Counsel for Uniform Interest Compensation, Inc. or (y) if paid by the
Borrower, the applicable rate for Base Rate Advances.
(d) Nothing herein shall be deemed to relieve any Lender from its
obligation to fund its PRO RATA share of any Revolving Advance as required
hereunder, or to prejudice any rights which the Borrower may have against any
Lender as a result of any default by such Lender hereunder. No Lender shall
be responsible for any default of any other Lender in respect of any other
Lender's obligation to make its PRO RATA share of or any Revolving Advances
hereunder nor shall the Revolving Commitment of any Lender hereunder be
increased as a result of such default of any other Lender. Each Lender shall
be obligated to the extent provided herein regardless of the failure of any
other Lender to fulfill its obligations hereunder.
Section 2.15 PRO RATA TREATMENT AND PAYMENTS. Except as contemplated
by this Agreement, including, without limitation, Sections 2.11, 2.12, 2.14,
3.5, 3.6, 3.7, 5.13, 12.1, 12.5, 12.13(h), 12.13A(h) and 12.14 hereof, each
borrowing by the Borrower from the Lenders and each payment (including each
prepayment) on account of the principal of and interest on the Loans and fees
described in this Agreement shall be made to the Agent for the PRO RATA
benefit of each Lender according to the respective percentages of each Lender
set forth opposite its name on Schedule 1.1 hereto. The Agent will
distribute each payment to the Lenders promptly following receipt thereof
(and in any event on the same Business Day as the date when received, if such
payment is received at or prior to 12:00 noon (Chicago time)).
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Section 2.16 EURODOLLAR OFFICES. Each Lender intends to initially
fulfill its commitment with respect to such Lender's PRO RATA share of any
Eurodollar Advance by causing the Initial Eurodollar Office of such Lender to
make such Lender's PRO RATA share of such Eurodollar Advance; PROVIDED,
HOWEVER, that each Lender may, at its option fulfill such commitment by
causing another branch or an Affiliate of such Lender to make such Lender's
PRO RATA share of such Eurodollar Advance; and PROVIDED, FURTHER, that the
selection by such Lender of the Initial Eurodollar Office of such Lender or
any other such branch or Affiliate shall not affect the obligations of the
Borrower to repay such Lender's PRO RATA share of the Eurodollar Advances in
accordance with the terms of this Agreement.
Section 2.17 TELEPHONIC NOTICE. Without in any way limiting the
Borrower's obligation to confirm in writing any telephonic notice of a
borrowing, conversion or renewal, the Agent may act without liability upon
the basis of telephonic notice believed by the Agent in good faith to be from
an Authorized Representative of the Borrower prior to receipt of written
confirmation.
Section 2.18 MAXIMUM INTEREST. (a) No provision of this Agreement or
any Note shall require the payment to any Lender or permit the collection by
any Lender of interest in excess of the maximum rate of interest from time to
time permitted (after taking into account all consideration which constitutes
interest) by laws applicable to the Lender Debt and binding on any Lender
(such maximum rate being such Lender's "MAXIMUM PERMISSIBLE RATE").
(b) If the amount of interest computed without giving effect to this
Section 2.18 and payable on any interest payment date in respect of the
preceding interest computation period would exceed the amount of interest
computed in respect of such period at the Maximum Permissible Rate, the
amount of interest payable to such Lender on such date in respect of such
period shall be computed at such Lender s Maximum Permissible Rate.
(c) If at any time and from time to time: (i) the amount of interest
payable to any Lender on any interest payment date shall be computed at such
Lender's Maximum Permissible Rate pursuant to the preceding subsection (b);
and (ii) in respect of any subsequent interest computation period the amount
of interest otherwise payable to such Lender would be less than the amount of
interest payable to such Lender computed at such Lender's Maximum Permissible
Rate, then the amount of interest payable to such Lender in respect of such
subsequent interest computation period shall continue to be computed at such
Lender's Maximum Permissible Rate until the amount of interest payable to
such Lender shall equal the total amount of interest which would have been
payable to such Lender if the total amount of interest had been computed
without giving effect to the preceding subsection (b).
SECTION 3. PAYMENTS, PREPAYMENTS AND REDUCTIONS
Section 3.1 MANDATORY PAYMENTS. (a) Asset Sales. Until such time as
there shall be outstanding no Loans and no Commitments, the Borrower shall
pay and there shall become due and payable, concurrently with the receipt by
any Credit Party of Net Proceeds with respect to any Asset Sale, a payment in
respect to the Lender Debt equal to one hundred percent (100%) of the book
value of
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any Collateral included within such Asset Sale. Said payment shall be applied
first, to the outstanding interest and principal due in respect of the
Revolving Loan until the Revolving Loan has been paid in full and second, to
provide Letter of Credit Cash Collateral until there shall have been provided
Letter of Credit Cash Collateral equal to the undrawn amount of all Letters
of Credit.
(b) Extraordinary Receipts (Including Insurance Proceeds). Until such
time as there shall be outstanding no Loans and no Commitments, the Borrower
shall pay and there shall become due and payable, concurrently with the
receipt by any Credit Party of Net Proceeds with respect to any Extraordinary
Receipt from the sale, destruction, damage or condemnation of any Collateral,
a payment in respect to Lender Debt equal to one hundred percent (100%) of
the book value of any such Collateral so sold, damaged, or destroyed or
condemned. Said payment shall be applied FIRST, to the outstanding interest
and principal due in respect of the Revolving Loan until the Revolving Loan
has been paid in full and SECOND, to provide Letter of Credit Cash Collateral
until there shall have been provided Letter of Credit Collateral equal to the
undrawn amount of all Letters of Credit.
(c) Revolving Advances in Excess of the Borrowing Limit. If at any
time the sum of the then aggregate outstanding principal amount of the
Revolving Loan PLUS the Letter of Credit Usage at such time shall exceed the
Borrowing Limit at such time, the Borrower shall immediately eliminate such
excess by paying an amount equal to such excess until the sooner to occur of
(x) the elimination in full of such excess, and (y) the Revolving Loan is
paid in full and, to the extent then necessary to eliminate any remaining
excess after payment in full, by providing Letter of Credit Cash Collateral
in an amount equal to the remaining excess for any outstanding Letters of
Credit, until there shall have been provided Letter of Credit Cash Collateral
equal to the undrawn amount of all Letters of Credit.
(d) Payments to Include Interest. All prepayments under Sections 3.1
and 3.2 hereof shall be made together with accrued interest to the date of
such prepayment on the principal amount prepaid, provided, that, all such
payments shall be subject to payment of any applicable indemnity obligations
pursuant to Section 2.12 hereto.
Section 3.2 OPTIONAL PREPAYMENTS. (a) Upon not less than three
Business Days' prior Written Notice to the Agent with respect to Revolving
Advances constituting Eurodollar Advances and not less than two Business
Day's prior Written Notice to the Agent with respect to Revolving Advances
constituting Base Rate Advances, the Borrower shall have the right from time
to time to prepay in part, without premium, fee or charge (except as provided
in Section 2.12 hereof) Revolving Advances, so long as each such prepayment
is in the amount of $500,000 or an integral multiple of $100,000 in excess
thereof or, if less, the then aggregate outstanding principal balance of the
Revolving Loan, and so long as, concurrently with the making of any such
prepayment, the Borrower pays any fees, premiums, charges or costs provided
for under Section 2.12 hereof.
(b) No Eurodollar Advance or portion thereof may be prepaid under this
Section 3.3 until the last day of the Interest Period therefor. Upon the
giving of notice of prepayment, the amount therein specified to be prepaid
shall be due and payable on the date therein specified for such
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prepayment, together with all accrued interest thereon to such date plus any
fees, premiums, charges or costs provided for under Section 2.12 hereof. The
Agent shall, promptly after receipt of any notice of prepayment of any
Advance as provided in this Section 3.3, notify each Lender in writing or by
telephone confirmed promptly in writing of the Borrower's intention so to
prepay all or part of such Advance.
Section 3.3 PROCEDURES FOR PAYMENT. (a) Each payment or prepayment
hereunder and under the Notes shall be made not later than 2:00 p.m. (Chicago
time) on the day when due in lawful money of the United States of America to
the Agent at the Payment Office in immediately available funds, without
counterclaim, offset, claim or recoupment of any kind. Each payment or
prepayment hereunder and under the Notes shall be made without setoff or
counterclaim and free and clear of, and without deduction for, any present or
future withholding or other taxes, duties or charges of any nature imposed on
such payments or prepayments by or on behalf of any Governmental Body thereof
or therein, except for Excluded Taxes. If any such taxes, duties or charges
(other than any Excluded Taxes) are so levied or imposed on any payment or
prepayment to any Lender, the Borrower will make additional payments in such
amounts as may be necessary so that the net amount received by such Lender,
after withholding or deduction for or on account of all taxes, duties or
charges, including deductions applicable to additional sums payable under
this Section 3.3(a) (other than Excluded Taxes), will be equal to the amount
provided for herein or in such Lender's Note or Notes. Whenever any taxes,
duties or charges (other than Excluded Taxes) are payable by the Borrower
with respect to any payments or prepayments hereunder or under any of the
Notes, the Borrower shall furnish promptly to the Agent for the account of
the applicable Lender certified copies of official receipts (to the extent
that the relevant governmental authority delivers such receipts) evidencing
payment of any such taxes, duties or charges so withheld or deducted. If the
Borrower fails to pay any such taxes, duties or charges when due to the
appropriate taxing authority or fail to remit to the Agent for the account of
the applicable Lender the required receipts evidencing payment of any such
taxes, duties or charges so withheld or deducted, the Borrower shall
indemnify the affected Lender for any incremental taxes, duties, charges,
interest or penalties that may become payable by such Lender as a result of
any such failure.
(b) (i) Each Lender (which, for purposes of this Section 3.3, shall
include any Affiliate of a Lender that makes any Eurodollar Advance pursuant
to the terms of this Agreement) that is not a "United States person" (as such
term is defined in Section 7701(a)(30) of the Code) shall submit to the
Borrower and the Agent on or before the Closing Date (or, in the case of a
Person that became a Lender after the Closing Date by assignment, promptly
upon such assignment), two duly completed and signed copies of either (1)
Form 1001 of the United States Internal Revenue Service entitling such Lender
to a complete exemption from withholding on all amounts to be received by
such Lender pursuant to this Agreement and/or the Notes or (2) Form 4224 of
the United States Internal Revenue Service relating to all amounts to be
received by such Lender pursuant to this Agreement and/or the Notes. Each
such Lender shall, from time to time after submitting either such form,
submit to the Borrower and the Agent such additional duly completed and
signed copies of one or the other such forms (or such successor forms or
other documents as shall be adopted from time to time by the relevant United
States taxing authorities) as may be (1) reasonably requested in writing by
the Borrower or the Agent and (2) appropriate under then current United
States law or
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regulations to avoid United States withholding taxes on payments in respect
of any amounts to be received by such Lender pursuant to this Agreement
and/or the Notes. Upon the reasonable request of the Borrower or the Agent,
each Lender that has not provided the forms or other documents, as provided
above, on the basis of being a United States person shall submit to the
Borrower and the Agent a certificate to the effect that it is such a "United
States person."
(ii) Notwithstanding any other provision of this Agreement, if
any Lender which is not a "United States person" determines that it is unable
to submit to the Borrower or the Agent any form or certificate that such
Lender is requested to submit pursuant to the preceding paragraph, or that it
is required to withdraw or cancel any such form or certificate, or that any
such form or certificate previously submitted has otherwise become
ineffective or inaccurate, such Lender shall promptly notify the Borrower and
the Agent of such fact and the provisions of Section 3.3(a) hereof shall
apply.
(iii) Except as provided in Sections 3.3(c) and 12.6 hereof, the
Borrower shall not be required to pay any additional amount in respect of
taxes, duties or charges (other than Excluded Taxes) to any Lender if and
only to the extent that (A) such Lender is subject to such taxes, duties or
charges (other than Excluded Taxes) (in such case, only to the extent of the
tax rate then in effect) on the date this Agreement is executed by such
Lender (or in the case of a Person that became a Lender after the Closing
Date by assignment, on the date of such assignment) or would be subject to
such taxes, duties or charges (other than Excluded Taxes) on such date if a
payment hereunder or on the Notes had been received by it on such date; (B)
such Lender becomes subject to such taxes, duties or charges (other than
Excluded Taxes) subsequent to the date referred to in clause (A) above (or in
the case of a Lender which is not a "United States person," the first date on
which it delivers the appropriate form or certificate to the Borrower and the
Agent as referred to in paragraph (b) of this Section) as a result of a
change in the circumstances of such Lender, other than a change in applicable
law (including without limitation an increase in any applicable tax rate),
including without limitation a change in the residence, place of
incorporation or principal place of business of the Lender, a change in the
branch or lending office of the Lender participating in the transactions set
forth herein or as a result of the sale by the Lender of participating
interests in such Lender's creditor position(s) hereunder; PROVIDED, HOWEVER,
that the Borrower will be required to pay any additional amount in respect of
taxes, duties or charges (other than Excluded Taxes) to any Lender to the
extent that after a change in the circumstances (as described above) of such
Lender a subsequent change in any applicable law results in an additional
amount that such Lender is subject to with respect to taxes, duties or
charges (other than Excluded Taxes); or (C) such taxes, duties or charges
(other than Excluded Taxes) would not have been incurred but for the failure
of such Lender to file with the appropriate tax authorities and/or provide to
the Borrower or the Agent any form or certificate that it was required so to
do pursuant to paragraph (b) of this Section and entitled so to do under
applicable law.
(iv) Within thirty (30) days after the written reasonable request
of the Borrower, each Lender shall execute and deliver to the Borrower such
certificates, forms or other documents which can be furnished consistent with
the facts and which are reasonably necessary to assist the Borrower in
applying for refunds of taxes, duties or charges (other than Excluded Taxes)
paid by
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the Borrower hereunder or making payment of taxes, duties or charges (other
than Excluded Taxes) hereunder; PROVIDED, HOWEVER, that no Lender shall be
required to furnish to the Borrower any financial information with respect to
itself or other information which it in its sole discretion considers
confidential.
(c) Notwithstanding anything to the contrary contained in this
Agreement, the Borrower agrees to pay any present or future stamp or
documentary taxes, any intangibles tax or any other sales, excise or property
taxes, charges or similar levies now or hereafter assessed that arise from
and are attributable to any payment made hereunder, under the Notes or from
the execution, delivery of, or otherwise with respect to, this Agreement, the
Notes, the Security Documents and any and all recording fees relating to any
Loan Documents securing any Lender Debt ("OTHER TAXES").
(d) The Borrower shall indemnify each Lender and the Agent for the full
amount of any taxes, duties or charges other than Excluded Taxes and Other
Taxes (including, without limitation, any taxes other than Excluded Taxes and
Other Taxes imposed by any jurisdiction on amounts payable under this Section
3.4) duly paid or payable by such Lender or the Agent and any liability
(including penalties, interest and expenses) arising therefrom or with
respect thereto. Indemnification payments shall be made within 30 days from
the date such Lender or the Agent makes written demand therefor.
(e) Without prejudice to the survival of any other agreement of the
Borrower hereunder, the agreements and obligations of the Borrower contained
in this Section 3.4 shall survive the payment in full of principal and
interest hereunder and under the Notes indefinitely.
(f) Notwithstanding anything contained in Section 3.1 or 3.2 hereof
(other than Sections 3.1(a) or 3.1(b) hereof, the Agent shall not, to the
extent requested in writing by the Borrower, apply any mandatory prepayment
under such Sections to any portion of the Revolving Loan which constitutes a
Eurodollar Advance until the last day of the respective Interest Period
therefor or the earlier maturity of such portion of such Loan by acceleration
or otherwise, such mandatory prepayment, until it can be so applied, to be
applied to the prepayment of such portion of Revolving Loan, comprising Base
Rate Advances. If there shall remain any portion of such mandatory
prepayment after payment in full of such portion of the Revolving Loan
constituting Base Rate Advances, then until such remaining portion of the
mandatory prepayment can be applied to the Eurodollar Advances as aforesaid,
such remaining portion of such mandatory prepayment shall be invested and
reinvested by and in the name of the Agent in investments of the type
permitted under Section 9.4(b) hereof with the type and maturity of such
investments to be mutually agreed to by the Agent and the Borrower. All
interest earned on such investments shall be for the account and risk of the
Borrower. Interest earned on any portion of principal applied to a
Eurodollar Advance shall be, so long as no Default or Event of Default shall
have occurred and be continuing, and to the extent received by the Agent,
turned over to the Borrower promptly following application of such principal
to such Eurodollar Advance. As additional collateral security for the Lender
Debt, the Borrower hereby grants to the Agent a security interest in (x) any
such mandatory prepayments and any investments thereof, including, without
limitation, any certificates or instruments evidencing any such investments,
and all claims and choses in action in respect of the foregoing, (y) any
interest
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or other payment made in respect of such investments and (z) any and all
proceeds of any of the above and all claims and choses in action in respect
of the foregoing (all of the foregoing constituting part of the Collateral).
To the extent the Agent makes any such investments, the Borrower hereby
authorizes the Agent to hold any certificate or instrument evidencing such
investments.
Section 3.4 UNUSED FACILITY FEE. The Borrower shall pay to the Agent
for the PRO RATA account of the Lenders a commitment fee which shall accrue
from and after the Closing Date until the date of the expiration, termination
or cancellation of the Revolving Credit Facility Commitment payable quarterly
in arrears on each March 31, June 30, September 30 and December 31,
commencing June 30, 1996 (and on the date of maturity or earlier expiration,
termination or cancellation of the Revolving Credit Facility Commitment), of
one-half of one percent (0.5%) per annum on the average amount, calculated on
a daily basis based on a 360-day year, by which the Revolving Credit Facility
Commitment exceeds the sum of (i) the aggregate outstanding principal amount
of the Revolving Loan and (ii) the Letter of Credit Usage.
Section 3.5 PREPAYMENTS TO INCLUDE INTEREST. All prepayments
pursuant to this Section 3, except optional prepayments on Revolving
Advances, shall be made together with accrued interest to the date of such
prepayment on the principal amount prepaid.
Section 3.6 CLOSING FEES AND RENEWAL FEES. (a) Borrower shall pay to
the Agent, for the PRO RATA account of the Lenders, as consideration for the
Lenders agreeing to make the Loans available to Borrower hereunder, an
origination fee in the amount of One Hundred Thousand Dollars ($100,000).
(b) Subject to Agent's and Lenders' right to cease making Loans to
Borrower at any time upon or after the occurrence of any Default or Event of
Default and Borrower's right to terminate this Agreement pursuant to Section
12.8, this Agreement shall be in effect through May 1, 1999 (the "Original
Term"), and if, prior to May 1, 1999 or the last day of any applicable
Renewal Term, the Borrower, any other Credit Party, each Lender and Agent all
so agree in writing, this Agreement shall renew itself for successive one (1)
year periods thereafter ("Renewal Terms"), unless terminated as provided in
Section 12.8 hereof. Upon the first day of each Renewal Term, Borrower shall
pay to Agent for the ratable benefit of Lenders a renewal fee in the amount
of one quarter of one percent (1/4%) of the Revolving Credit Facility
Commitment as then in effect. Said renewal fee shall be deemed fully earned
on the first day of each such Renewal Term and shall not be subject to any
proration or rebate.
Section 3.7 AGENT'S FEE. The Borrower shall pay to Agent an annual
agent's fee pursuant to the terms of a separate agreement between the Agent
and the Borrower.
SECTION 4A. LETTERS OF CREDIT
Section 4A.1. LETTERS OF CREDIT. (a) The Borrower may request,
subject to the terms and conditions herein set forth (including, without
limitation, the conditions set forth in Section 5 hereof and the definitions
contained in Section 1 hereof), from time to time, and upon five Business
Days'
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Written Notice in the form of Exhibit 2.4 hereto given by an Authorized
Representative, that LaSalle (or any other Lender approved by LaSalle) issue,
and LaSalle (or any such other approved Lender) shall, subject to such
conditions, issue (LaSalle and each such other Lender, upon issuance of a
Letter of Credit, being an "ISSUING LENDER" in respect of such Letter of
Credit) standby Letters of Credit; PROVIDED, HOWEVER, that the aggregate
undrawn amount of all Letters of Credit at any time outstanding, together
with the amount of unreimbursed drawings thereunder, and the then aggregate
unpaid principal amount of the Revolving Loan, shall not exceed the Borrowing
Limit; PROVIDED, FURTHER, that in no event shall any Lender issue any Letter
of Credit if the original undrawn amount thereof, together with the aggregate
undrawn and unreimbursed amounts of all other Letters of Credit immediately
prior to the time of such issuance, exceeds Two Million Dollars ($2,000,000)
at any time thereafter; PROVIDED, FURTHER, that in no event shall LaSalle or
any other Lender issue any Letter of Credit if the sum of the original
undrawn amount thereof, plus the aggregate undrawn and unreimbursed amounts
immediately prior to the time of such issuance of all other Letters of Credit
issued by such Lender, plus such Lender's PRO RATA portion of the aggregate
unpaid principal amount of the Revolving Loan exceeds such Lender's Revolving
Commitment. For purposes of determining the aggregate amount of undrawn and
unreimbursed Letters of Credit as at any date, the undrawn and unreimbursed
amounts under Letters of Credit that are denominated in foreign currency
shall be converted into U.S. dollars at the rate of exchange for cable
transfers (as determined by the Agent) in effect on the date of
determination.
(b) Each Letter of Credit shall be a standby letter of credit and shall
be in form, scope and substance satisfactory to the Agent, shall be issued
pursuant to a Letter of Credit Agreement and shall expire no later than the
earlier of the Maturity Date or the first anniversary date of the date of
issuance of such letter of credit.
(c) The Borrower shall reimburse the Issuing Lender with respect to
each Letter of Credit for any draft paid under such Letter of Credit within
one Business Day following the date of such payment. The Borrower shall to
the extent of availability under the Revolving Credit Facility Commitment
effect such payment with the proceeds of a Revolving Advance (which shall be
entirely a Base Rate Advance) made to the Borrower (whether or not any
request therefor has been made by the Borrower) in an amount equal to the
greater of (x) the amount of such payment and (y) the Minimum Advance Amount,
which Revolving Advance shall at such time be made and applied to payment of
reimbursement of such drawing without any notice by or consent of the
Borrower (except that no such Revolving Advance shall be required to be made
by the Lenders to the extent prevented by applicable law or upon any
acceleration of the Lender Debt as provided in Section 10 hereof or upon the
occurrence of any Event of Default of the type described in Section 10.1(f)
or 10.1(g) hereof, in which case the Borrower shall nevertheless be obligated
to make such payment), and shall be repayable, together with interest
thereon, in accordance with the provisions of Section 2 hereof; PROVIDED,
HOWEVER, that no such Revolving Advance shall be made if, after giving effect
thereto, the aggregate unpaid principal amount of the Revolving Loan shall
together with the then outstanding Letter of Credit Usage (after giving
effect to the reimbursement of such Letter of Credit with the proceeds of
such Revolving Advance) exceed the Borrowing Limit. The applicable Issuing
Lender shall, notwithstanding the foregoing, be entitled to the benefits of
the provisions of Section 12.17 hereof as to purchases of participations in
such Letter of Credit, but only after the date that
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such reimbursement, after giving effect to such postponement, shall have
become due and payable. The Issuing Lender shall promptly notify the Agent,
the other Lenders and the Borrower in writing or by telephone confirmed
promptly in writing of any such drawing under a Letter of Credit and the
making of such Revolving Advance. Any payments by an Issuing Lender of
drawings under any Letter of Credit in foreign currency shall be reimbursed
by the Borrower in U.S. dollars at the rate of exchange for cable transfers
in effect on the date of payment by such Issuing Lender.
(d) Notwithstanding anything contained in Section 4A.1(c) hereof, the
obligation of the Borrower to reimburse a drawing under a Letter of Credit
shall not be affected or impaired by any failure of any Lender to fund a
Revolving Advance under Section 4A.1(c) hereof unless the Borrower shall have
satisfied all conditions to the making of such Revolving Advance (other than
notice requirements and the delivery of a Borrower's Certificate).
Section 4A.2. LETTER OF CREDIT FEES. In addition to any other amounts
to which the Borrower and an Issuing Lender may have agreed in writing with
respect to any Letter of Credit, the Borrower shall pay to the Agent for the
PRO RATA benefit of all Lenders, in arrears on the last day of each month and
on the date of the full drawing, cancellation, expiration or termination of
such Letter of Credit, a fee on the average daily undrawn amount of such
Letter of Credit, issued by such Issuing Lender for such month or shorter
period, at a rate of two percent (2%) per annum (in either instance, computed
on the basis of the actual number of days elapsed over a year of 360 days).
Such fee shall be for the account of the Lenders to be shared among them PRO
RATA in accordance with their respective Revolving Commitment. In addition,
the Borrower shall pay to each Issuing Lender, in respect of each Letter of
Credit issued by such Issuing Lender hereunder, on demand, all standard fees
and other charges charged by such Issuing Lender with respect to the issuance
and maintenance of any Letter of Credit. Notwithstanding anything to the
contrary contained herein, while any Event of Default is continuing, letter
of credit fees shall be payable on demand at a rate per annum equal to two
percent (2%) in excess of the rate than otherwise applicable thereto.
Section 4A.3. INDEMNITY. The Borrower agrees to indemnify each Issuing
Lender and each of its correspondents and hold it harmless from and against
any and all claims, damages, losses, liabilities, costs and expenses
whatsoever which it may incur or suffer by reason of or in connection with
the execution and delivery or assignment of or payment or presentation under
or in respect of any Letter of Credit issued by such Issuing Lender or any
action taken or omitted to be taken with respect to any Letter of Credit
issued by such Issuing Lender, except to the extent that any such claims,
damages, losses, liabilities, costs or expenses shall be caused by the
willful misconduct or gross negligence of such Issuing Lender or such
correspondent in making payment against any draft presented under any Letter
of Credit which does not substantially comply with the terms thereof, or in
failing to make payment against any such draft which strictly complies with
the terms of such Letter of Credit, it being understood that (x) in making
such payment, such Issuing Lender's or such correspondent's exclusive
reliance in good faith on the documents presented to and believed to be
genuine by it in accordance with the terms of such Letter of Credit as to any
and all matters set forth therein, including, without limitation, reliance in
good faith on any affidavit presented pursuant to such Letter of Credit and
on the amount of any sight draft presented pursuant to any Letter of Credit
whether or not any statement or any other document presented pursuant to such
Letter of Credit
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proves to be forged, fraudulent, invalid or insufficient in any respect or
any statement therein proves to be untrue or inaccurate in any respect
whatsoever and (y) any such noncompliance in a nonmaterial respect shall, in
each case, not be deemed willful misconduct or gross negligence of such
Issuing Lender or such correspondent. Upon demand by any Issuing Lender or
such correspondent at any time, the Borrower shall reimburse such Issuing
Lender or such correspondent for any legal or other expenses incurred in
connection with investigating or defending against any of the foregoing,
except if the same is due to such Issuing Lender's or such correspondent's
gross negligence or willful misconduct as aforesaid. The indemnities
contained herein shall survive the expiration or termination of the Letters
of Credit and this Agreement and shall be payable upon demand.
Section 4A.4. REIMBURSEMENT OF CERTAIN COSTS. (a) Unless at the time
prohibited by an order of a court of competent jurisdiction, the obligations
of the Borrower hereunder with regard to Letters of Credit are absolute and
unconditional under any and all circumstances and irrespective of any setoff,
counterclaim or defense to payment which the Borrower may have against any
Person, including, without limitation, the beneficiary of such Letter of
Credit and any Issuing Lender, and all sums payable by the Borrower hereunder
with respect to any such Letter of Credit, whether of principal, interest,
fees, expenses or otherwise, shall be paid in full, without any deduction or
withholding whatsoever. In the event that the Borrower is compelled by
applicable law to make any such deduction or withholding, then, unless
prohibited by applicable law, it shall pay to each Issuing Lender such
additional amount as will result in the receipt by each Issuing Lender of a
net sum equal to the sum it would have received if no such deduction or
withholding had been required to be made.
(b) In the event that any Change of Law occurs which:
(i) subjects any Issuing Lender to any tax with respect to any
amount paid or to be paid by such Issuing Lender as the issuer of any Letter
of Credit or its commitment or agreement to honor drafts under any Letter of
Credit (other than any tax measured by or based upon the overall net income
of such Issuing Lender); or
(ii) changes the basis of taxation of payments to any Issuing
Lender with respect to any Letter of Credit or such commitment (other than
any tax measured by or based upon the overall net income of such Issuing
Lender); or
(iii) imposes, modifies, requires, makes or deems applicable any
reserve, deposit, insurance assessment or similar requirements against any
assets held by, deposits with or for the account of, or loans or commitments
by, an office of any Issuing Lender in connection with payments by such
Issuing Lender under any Letter of Credit or commitments under any Letter of
Credit; or
(iv) imposes any condition upon or causes in any manner the
addition of any supplement to or an increase of any kind to any Issuing
Lender's capital or cost base for issuing any Letter of Credit which results
in an increase in the capital requirement supporting such Letter of Credit;
or
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(v) imposes, modifies, requires, makes or deems applicable to
any Issuing Lender any capital requirement, increased capital requirement or
similar requirement such as, without limitation, the deeming of any Letter of
Credit to be an asset held by such Issuing Lender for capital calculation or
other purposes; and the result of any of the foregoing is to reduce the
after-tax rate of return on such Issuing Lender's capital, increase the cost
to any Issuing Lender of making any payment under, or maintaining its
commitment under, any Letter of Credit, or to reduce the amount of any
payment (whether of principal, interest or otherwise) or benefit received or
receivable by such Issuing Lender with respect to any Letter of Credit or to
require such Issuing Lender to make any payment on or calculated by reference
to the gross amount of any sum received by it with respect to any Letter of
Credit, in each case by an amount which such Issuing Lender in its sole
judgment deems material (including, without limitation, such Issuing Lender's
cost of taking action in anticipation of the effectiveness of any event
referred to above in order to enable such Issuing Lender to be in compliance
therewith upon effectiveness), then and in any such case:
(x) such Issuing Lender shall promptly notify the Borrower
and the Agent in writing of the happening of such event;
(y) such Issuing Lender shall promptly deliver to the
Borrower and the Agent a certificate stating the change which has occurred or
the reserve requirements or other conditions which have been imposed on such
Issuing Lender or the request, directive or requirement with which it has
complied, together with the date thereof and the amount of such increased
cost, reduction or payment; and
(z) the Borrower shall pay to such Issuing Lender, upon
demand, after delivery of the notice referred to in clause (x) above, such
amount or amounts as will compensate for such additional cost, reduction or
payment, to the extent permitted by law.
A certificate delivered by an Issuing Lender pursuant to clause (y)
above as to the additional amounts payable pursuant to this paragraph shall,
in the absence of manifest error, be conclusive evidence of the amount
thereof. The protection of this Section 4A.4 shall be available to each
Issuing Lender regardless of any possible contention of invalidity or
inapplicability of the applicable Change of Laws.
Section 4A.5. PAYMENT OF DRAFTS. Delivery to the Agent, any Issuing
Lender or their correspondents of any documents purporting to comply with the
requirements of any Letter of Credit shall be sufficient evidence of the
validity, genuineness, and sufficiency thereof and of the good faith and
proper performance of the shippers, drawers and/or users of any Letter of
Credit, their agents and assignees, and the Agent, such Issuing Lender and
their correspondents may rely and act thereon without liability or
responsibility with respect thereto or with respect to the correctness or
condition of any shipment of merchandise to which the same may relate. Upon
receipt by the Agent or any Issuing Lender of written approval thereof from
the Borrower, the Agent or any such Issuing Lender, as the case may be, may
(but shall not be required to) accept or pay overdrafts or irregular drafts
or drafts with irregular documents attached or with respect to which property
has been substituted or time limits have been extended, and no such
acceptance or payment shall impair any rights of the
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Agent or any Issuing Lender under this Agreement. In case of any variation
between the documents called for by any Letter of Credit and the documents
accepted by the Agent, an Issuing Lender or their correspondents, the
Borrower shall be conclusively deemed to have waived any right to object to
such variation with respect to any action of the Agent, such Issuing Lender
or such correspondents relating to such documents and to have ratified and
approved such action as having been taken on the direction of the Borrower,
unless the Borrower within ten (10) Business Days of the receipt of such
documents or acquisition of knowledge of such variation files an objection
with the Agent or such Issuing Lender in writing. No Issuing Lender (nor the
Agent) shall be liable for any delay in giving, or failing to give, notice of
the arrival of any goods or any other notice, or for any error, neglect or
default of any of its correspondents or any shipper, carrier, bailee or
insurer; nor shall any Issuing Lender (or the Agent) be responsible for the
non-fulfillment of any requirement of any Letter of Credit that (i) drafts
bear appropriate reference to any Letter of Credit, (ii) the amount of any
draft be noted on the reverse of any Letter of Credit, (iii) any Letter of
Credit be surrendered or taken up or (iv) documents be forwarded apart from
any drafts, and the Agent, each Issuing Lender and their correspondents may,
if they see fit, waive any such requirements.
Section 4A.6. ISSUING LENDER'S ACTIONS. Any Letter of Credit may, in
the discretion of the Issuing Lender that issued same or such Issuing
Lender's correspondents, be interpreted by it or any such correspondent (to
the extent not inconsistent with such Letter of Credit) in accordance with
the Uniform Customs and Practice for Documentary Credits of the International
Chamber of Commerce, as adopted or amended from time to time, or any other
rules, regulations and customs prevailing at the place where any Letter of
Credit is available or the drafts are drawn or negotiated. An Issuing Lender
and its correspondents may accept and act upon the name, signature or act of
any party purporting to be the executor, administrator, receiver, trustee in
bankruptcy or other legal representative of any party designated in any
Letter of Credit issued by such Issuing Lender in the place of the name,
signature or act of such party.
SECTION 4. SECURITY AND GUARANTY
As security for the full and timely payment and performance of the
Lender Debt, whether now existing or hereafter arising:
Section 4.1 SECURITY AGREEMENTS. (a) Each of the Credit Parties
shall duly execute and deliver to the Agent (for the PRO RATA benefit of the
Lenders) one or more security agreements, pledges or assignments,
substantially in the form of Exhibit 4.1(A) hereto (each as amended,
supplemented or otherwise modified from time to time in accordance with its
terms, a "SECURITY AGREEMENT" and, together with any other agreement now
existing or hereafter created under this Section 4 providing collateral
security for the payment or performance of the Lender Debt, including,
without limitation, the Guaranties and Pledge Agreements, in each case, as
amended, modified or supplemented from time to time, individually referred to
as a "SECURITY DOCUMENT," and collectively referred to as the "SECURITY
DOCUMENTS"), and all consents of third parties necessary to permit the
effective granting of the Liens created in such security agreements
(including, without limitation, a mortgagee's, landlord' s or bailee'
certificate substantially in the form of Exhibit 4.1 (B) hereto (each a
"LANDLORD'S OR MORTGAGEE'S CERTIFICATE") in respect of each property subject
to a Lease or owned
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by Borrower at which Inventory is located), in form and substance
satisfactory to the Agent, as may be required by the Agent to grant to the
Agent for the benefit of the Agent and the Lenders a valid, perfected and
enforceable first priority lien on and security interest in the following
property of Borrower (i) Receivables; (ii) Inventory; (iii) Investment
Property purchased with proceeds of Receivables or Inventory from funds
contained in the Dominion Account; (iv) all monies and other Property of any
kind now or at any time or times hereafter in the possession or under the
control of Agent, any Lender or a bailee or Affiliate of Agent or any Lender
constituting of proceeds of Receivables, or Inventory or Investment Property;
(v) all accessions to, substitutions for and all replacements, products and
cash and non-cash proceeds of (i) through (iv) above, including, without
limitation, proceeds of any unearned premiums with respect to insurance
policies insuring any of the foregoing; and (vi) all books and records
(including, without limitation, customer lists, credit files, computer
programs, print-outs, and other computer materials and records) of the
Borrower pertaining to any of (i) through (v) above, together with,
(x) to the extent practicable, evidence of the completion of all
other recordings and filings of or with respect to the Security Documents
that the Agent may deem necessary or desirable in order to perfect and
protect the Liens created thereby (and if not practicable, promptly after the
Closing Date),
(y) evidence of the insurance required by the terms of any
Security Document,
(z) copies of each assigned agreement, if any, referred to in any
Security Document, and
(aa) evidence that all other action that the Agent may deem
necessary or desirable in order to perfect and protect the Liens created by
the Security Documents has been taken.
(b) The Agent shall have received:
(i) to the extent practicable, acknowledgment copies or stamped
receipt copies of proper financing statements, duly filed on or before the
day of the initial borrowing hereunder under the UCC of all jurisdictions
that the Agent may deem necessary or desirable in order to perfect and
protect the Liens created by the Security Documents, covering the collateral
described in the Security Documents; and
(ii) completed requests for information, dated on or before the
date of the initial borrowing hereunder, listing the financing statements
referred to in clause (b)(i) above and all other effective financing
statements filed in the jurisdictions referred to in clause (b)(i) above that
name any Credit Party as debtor, together with copies of such other financing
statements.
(c) Upon the formation or acquisition, after the Closing Date, of any
Subsidiary of the Borrower, such Subsidiary shall execute and deliver to the
Agent a security agreement, substantially in the form of Exhibit 4.l(A)
hereto, securing all then existing or thereafter incurred Lender Debt.
Nothing contained in this Section 4.1(c) shall permit the Borrower or any
Subsidiary thereof to form
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or acquire any Subsidiary which is otherwise prohibited by this Agreement,
including, without limitation, Section 9.7 hereof.
Section 4.2 Intentionally Omitted.
Section 4.3 FILING AND RECORDING. (a) The Borrower shall, at its
cost and expense, cause all instruments and documents given as security
pursuant to this Agreement to be duly recorded and/or filed or otherwise
perfected in all places necessary, in the opinion of the Agent to perfect and
protect the Lien of the Agent in the property covered thereby.
(b) Each of the Credit Parties hereby authorizes the Agent to file one
or more financing statements or continuation statements or amendments thereto
or assignments thereof in respect of any Lien created in favor of such Person
pursuant to this Agreement and the Security Documents which may at any time
be required or which, in the opinion of the Agent may at any time be
desirable without the signature of such Credit Party where permitted by law.
(c) In the event that any re-recording or refiling of any financing
statement (or the filing of any statements of continuation or amendment or
assignment of any financing statement) is required to protect and preserve
such Lien, the Borrower shall, at its cost and expense, cause the same to be
recorded and/or refiled at the time and in the manner requested by the Agent.
Section 4.4 INTERPRETATION OF SECURITY DOCUMENTS. In the case of any
conflict between the terms and provisions of a Security Document and this
Agreement, the terms and provisions of this Agreement shall control, unless
the terms of such Security Document expressly provide otherwise.
Section 4.5 GUARANTIES. (a) On or prior to the Closing Date, any
Guarantor in existence on the Closing Date shall execute and deliver to the
Agent a guaranty, substantially in the form of Exhibit 4.5 hereto (each as
amended, supplemented or otherwise modified from time to time in accordance
with its terms, a "GUARANTY"), of all Lender Debt, including, without
limitation, all present and future Lender Debt.
(b) Upon the formation or acquisition, after the Closing Date, of any
Subsidiary of the Borrower, such Subsidiary shall execute and deliver to the
Agent a guaranty, substantially in the form of Exhibit 4.5 hereto, of all
then existing or thereafter incurred Lender Debt. Nothing contained in this
Section 4.5(b) shall permit the Borrower or any Subsidiary thereof to form or
acquire any Subsidiary which is otherwise prohibited by this Agreement,
including, without limitation, Section 9.7 hereof.
Section 4.6 PLEDGE OF SUBSIDIARIES' RECEIVABLES, INVENTORY AND
INVESTMENT PROPERTY. In the event that the Borrower shall, with Majority
Lender's consent, form one or more Subsidiaries, then the Borrower shall
cause any such Subsidiary to pledge to, and grant a security interest into,
for its benefit and the ratable benefit of Lenders all of such Subsidiaries:
(i) Receivables; (ii) Investment Property; (iii) Inventory; (iv) all monies
and other Property of any kind now or at any time or times hereafter on the
possession or under the control of Agent, any Lender or a bailee or Affiliate
of
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Agent or any Lender consisting of proceeds of Receivables, Inventory or
Investment Property purchased with proceeds of Receivables or Inventory from
funds contained in the Dominion Account; (v) all accessions to, substitutions
for and all replacements, products and cash and non-cash proceeds of (i)
through (iv) above, including, without limitation, proceeds of any unearned
premiums with respect to insurance policies insuring any of the foregoing;
and (vi) all books and records (including, without limitation, customer
lists, credit files, computer printouts and other computer materials and
records of such Subsidiary) pertaining to any of (i) through (v) above. Such
pledge and grant of a security interest shall be made pursuant to a Security
Agreement in form and substance acceptable to Agent.
SECTION 5. CONDITIONS PRECEDENT
The obligations of the Lenders to make Loans and to issue Letters of
Credit shall become effective upon the satisfaction of each of the following
conditions precedent:
Section 5.1 OPINIONS OF COUNSEL. The Agent shall have received on or
before the day of such initial borrowing, from Winston & Strawn, counsel to
the Borrower, in sufficient copies for each Lender, favorable opinions
addressed to the Lenders and the Agent and dated the Closing Date,
substantially in the form of Exhibit 5.1(a) hereto.
Section 5.2 AUDIT OF COLLATERAL. The Agent shall have been afforded
the opportunity to have had an audit conducted of Inventory, and Receivables
of the Borrower, the results of which shall be reasonably satisfactory to all
of the Lenders.
Section 5.3 FINANCIAL STATUS. (a) The Agent and each Lender shall
have received (i) audited consolidated and consolidating financial statements
of the Borrower and its Subsidiaries for the Fiscal Year ended on February
29, 1996 and (ii) all regularly prepared (as of the Closing Date) unaudited
consolidated and consolidating monthly financial statements of the Borrower
and its Subsidiaries for months ended in Fiscal Year 1997 ((i) and (ii)
collectively, the "FINANCIAL STATEMENTS"), which Financial Statements shall,
in each case, reflect a financial condition, Receivables and Inventory of the
Borrower that are not materially different, in any adverse respect, from
those set forth in the audited financial statements of the Borrower for the
Fiscal Year ended on February 29, 1996 that were delivered previously to the
Agent by the Borrower and are otherwise satisfactory to the Agent, and shall
in all other respects be in form and substance satisfactory to the Agent),
together with a certification thereof (x) by KPMG Peat Marwick in the case of
the year-end Financial Statements and (y) by the chief financial officer of
the Borrower in the case of the unaudited Financial Statements, in each case,
to the effect that such Financial Statements (A) were prepared in accordance
with GAAP, (B) fairly present the financial position and income of the
Borrower as at and for the periods indicated, subject, in the case of
unaudited financial statements, to normal recurring year-end adjustments and
the absence of footnotes and (C) may be relied upon by the Agent and the
Lenders.
(b) The Lenders shall have received such other financial and other
information and projections as the Agent and the Lenders shall have
reasonably requested, and the quantity and
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quality of such information shall be reasonably satisfactory for each of the
Lenders' evaluation of the creditworthiness of the Borrower.
(c) In the judgment of the Agent, (i) no material adverse change shall
have occurred in the business, operations, liabilities, assets, properties,
prospects or condition (financial or otherwise) of the Borrower since
February 29, 1996 as reflected in the audited financial statements of the
Borrower as at and for the period ending as of such date, and (ii) the Agent
shall not have become aware of any previously undisclosed materially adverse
information with respect to the Borrower.
Section 5.4 QUALIFICATION. Each Credit Party shall be duly qualified
and in good standing in each jurisdiction in which it owns or leases property
or in which the conduct of its business requires it to so qualify, except
where the failure to so qualify would not have a Material Adverse Effect on
such Credit Party or otherwise affect the Agent's security interest in the
Collateral.
Section 5.5 SECURITY DOCUMENTS AND INSTRUMENTS. The Agent shall have
received, in sufficient copies for each Lender, all the instruments and
documents then required to be delivered pursuant to Section 4 hereof or any
other provision of this Agreement or pursuant to the instruments and
documents referred to in Section 4 hereof and the same shall be in full force
and effect and shall grant, create or perfect the Liens, rights, powers,
priorities, remedies and benefits contemplated herein or therein, as the case
may be.
Section 5.6 EVIDENCE OF INSURANCE. The Agent shall have received, in
sufficient copies for each Lender, evidence, in form, scope and substance and
with such insurance carriers reasonably satisfactory to the Agent, of all
insurance policies required pursuant to Section 8.3 hereof. The Agent shall
have received a written report, satisfactory to it in form, scope and
substance, from an insurance broker acceptable to the Agent confirming that
the amount of insurance obtained under such policies, and the terms and
conditions thereof, are substantially similar to policies customarily
maintained by companies similarly situated to the Borrower and engaged in the
same or similar business as the Borrower.
Section 5.7 BORROWING CERTIFICATES. The Agent shall have received
from the Borrower a Borrower's Certificate dated the date of such initial
borrowing and a Borrowing Base Certificate dated the date of such initial
borrowing, in each case signed by the chief executive officer or the chief
financial officer of the Borrower.
Section 5.8 THE NOTES. Each Lender shall have received its Revolving
Note, each duly completed, executed and delivered in accordance with Section
2 hereof.
Section 5.9 OVERALL REFINANCING. All Lenders shall have approved the
terms, structure, effect, fees and expenses and all documentation and
corporate proceedings relating to each of the issuance of the Senior Notes,
and all the other transactions contemplated to occur in connection with this
Agreement (collectively, the "OVERALL REFINANCING") and all charters, bylaws
and other corporate governance documents relating to the Borrower and the
other Credit Parties.
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Section 5.10 CLOSING. Lenders shall have received evidence, in form
and substance satisfactory to Majority Lenders, that the capitalization and
structure of Group and the Borrower is satisfactory to the Agent. Without
limiting the generality of the foregoing, the Agent shall have received
evidence which is satisfactory to it that, on the Closing Date the Borrower
shall have received at least $110,000,000 as the proceeds from the sale of
the Senior Notes and at least $105,850,000 as the net cash proceeds from the
sale of the Senior Notes. All such net proceeds from issuance of the Senior
Notes shall be used by the Borrower to retire all of its outstanding
indebtedness for borrowed money, other than indebtedness outstanding
hereunder or under the Bemis Note, and to fund a dividend to Group, which
dividend will, in turn, be used by Group to redeem a portion of the Group
Notes.
Section 5.11 COMPLETION OF DUE DILIGENCE. The Lenders shall have been
afforded the opportunity prior to Closing, to further attend meetings with
management of the Borrower, to review the books, records, leases, contracts,
pension plans, workers' compensation and retiree health plans, ERISA matters,
product liability litigation, insurance coverage and properties of the
Borrower, to hold meetings with management of the Borrower and to perform
such other due diligence regarding the Borrower as the Lenders shall have
required, the results of which review and due diligence shall have been
reasonably satisfactory to the Lenders and their counsel. The Agent shall
have been afforded the opportunity to review any and all work performed by
KPMG Peat Marwick as to the Borrower's financial statements, results and
position.
Section 5.12 CORPORATE STRUCTURE. The Lenders shall be satisfied in
all respects with the legal structure and capitalization of each of the
Credit Parties and their respective Subsidiaries and all documentation
relating thereto, including, without limitation, the ownership of assets
thereby and the terms and conditions of each charter, bylaws and each class
of capital stock of each Credit Party and its Subsidiaries and all warrants,
option or similar rights existing in favor of any Person in connection with
each such class of stock. All of the capital stock of the Borrower shall be
held and controlled by Group and Group shall not own any other assets other
than such stock or operate any business other than the business of owning
such stock and activities incidental thereto.
Section 5.13 FEES TO AGENT AND LENDERS. All fees and reimbursable
expenses payable to the Agent or any one or more of the Lenders with respect
to the financing hereunder shall have been paid in full in immediately
available funds.
Section 5.14 MANAGEMENT. The Agent shall be reasonably satisfied with
(i) the Senior Management and board of directors of each of the Credit
Parties, (ii) all Executive Agreements and all other arrangements by and
among the Borrower and any member of Senior Management or any such board of
directors, (iii) all arrangements between the Borrower and any Affiliate of
the Borrower and (iv) all employment agreements to which the Borrower is a
party.
Section 5.15 LITIGATION. There shall be no litigation involving
Group, the Borrower, any Subsidiary of Group or the Borrower, HPH or
(relating to this transaction) any Lender, which in the reasonable business
judgment of LaSalle would be reasonably likely to have a Material Adverse
Effect on any Credit Party or such Lender, the ability of the Credit Parties
to perform their respective
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obligations under the Loan Documents, or the ability of the Borrower or Group
to consummate any component of the Overall Refinancing, and no judgment,
order, injunction or other similar restraint prohibiting any of the
transactions contemplated hereby.
Section 5.16 COMPLIANCE WITH LAW. The Agent shall be satisfied that
(i) each Credit Party has obtained all material and appropriate
authorizations and approvals of all Governmental Bodies required for the due
execution, delivery and performance by such Credit Party of each of the Loan
Documents to which it is or will be a party and for the perfection of or the
exercise by the Agent, LaSalle and each Lender of their respective rights and
remedies under the Loan Documents and (ii) the Overall Refinancing, the Loans
and all arrangements in connection with the capitalization of the Credit
Parties, as well as all other transactions contemplated hereby, shall be in
material compliance with, and shall have obtained all material and
appropriate approvals pertaining to, all applicable laws, rules, regulations
and orders, including, without limitation, all governmental, environmental,
ERISA retiree health benefits, workers' compensation and other requirements
regulations and laws and shall not contravene any charter, bylaw, debt
instrument or other material agreement of any of the Credit Parties or any
Subsidiary of any of them.
Section 5.17 PROCEEDINGS; RECEIPT OF DOCUMENTS. All requisite
corporate action and proceedings in connection with the borrowings and the
execution and delivery of the Loan Documents and the issuance of the
Revolving Notes shall be satisfactory in form and substance to the Agent and
the Agent shall have received, on or before Closing Date, all information and
copies of all documents, including, without limitation, records of requisite
corporate action and proceedings, which the Agent may have requested in
connection therewith, such documents where requested by the Agent to be
certified by appropriate corporate Persons or Governmental Bodies. Without
limiting the generality of the foregoing, the Agent shall have received on or
before the Closing Date the following, each dated such day (unless otherwise
specified), in form and substance satisfactory to the Agent (unless otherwise
specified) and, except the Revolving Notes, in sufficient copies for each
Lender:
(i) a copy of the certificate of incorporation for each Credit
Party and all the amendments thereto, certified (as of a date reasonably near
the date of the initial borrowing), by the Secretary of State of the state of
incorporation of each such Credit Party as being a true and correct copy
thereof;
(ii) certified copies of the resolutions of the Board of
Directors of each of the Credit Parties approving each component of the
Overall Refinancing, this Agreement, the Notes and each other Loan Document
to which it is a party, and of all documents evidencing other necessary
corporate action and governmental approvals, if any, with respect to each
component of the Overall Refinancing, this Agreement, the Notes and each
other Loan Document;
(iii) a copy of a certificate of the Secretary of State of each
State listed on Schedule 5.18(iii) attached hereto, dated a date reasonably
near the date of the initial borrowing, stating that each Credit Party, as
the case may be, is duly qualified and in good standing as a foreign entity
in such State;
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(iv) a certificate of each Credit Party signed on behalf of such
Person by its president or vice president, certifying as to (A) the absence
of any amendments to the charter of such Person since the date of the
Secretary of State's certificate for such Person referred to above, (B) a
true and correct copy of the partnership agreement or bylaws of such Person,
as applicable as in effect on the date of the initial borrowing;
(v) a certificate of the Secretary or an Assistant Secretary of
each Credit Party, as applicable, certifying the names and true signatures of
the officers of such Person authorized to sign, on behalf of such Person,
this Agreement, the Notes and each other Loan Document, to which such Person
is a party or by which it is bound; and
(vi) copies of the material documents required in connection with
the Overall Refinancing, which shall be satisfactory in form, scope and
substance to the Agent, which shall be certified by president or
vice-president of the Borrower (or other Person acceptable to the Agent) to
be true and complete in all respects.
Section 5.18 PROJECTIONS, ETC. The Agent shall have received the
Borrower's most recent projections dated the Closing Date, in form and
substance reasonably satisfactory to the Agent, of the future financial
performance of the Borrower and its Subsidiaries for the three Fiscal Year
periods ending February 28, 1997, 1998 and 1999, including a pro forma
opening balance sheet of the Borrower after giving effect to the Overall
Refinancing (the "LATEST PROJECTIONS") and such other information and
projections as the Agent or any other Lender may have requested, in each
case, in form and substance reasonably satisfactory to the Agent or such
Lender. The operating results and prospects of the Borrower through the
Closing Date and the information contained in the projections, dated as of
February 28, 1996, provided to the Agent by the Borrower (the "REFERENCE
PROJECTIONS") shall, in the opinion of all Lenders, be consistent in all
material respects with the Latest Projections. In the opinion of all
Lenders, there shall have occurred no event or financial result materially
inconsistent with achieving the results contained in the Reference
Projections or which has impaired the Agent's continuing confidence in the
Reference Projections.
Section 5.19 ACCOUNTANT'S LETTER. The Borrower shall have delivered
to its independent certified public accountants a letter indicating that it
is a primary intent of the Borrower in engaging such accountants that Agent
and Lenders rely upon the audited financial statements of Borrower and its
Subsidiaries.
Section 5.20 SOLVENCY. The Agent shall have received an opinion from
Murray, Devine & Co., Inc. satisfactory to the Agent, in form, scope and
substance reasonably satisfactory to Agent, to the effect that on the Closing
Date, both immediately prior to and after giving effect to the transactions
contemplated under the Loan Documents and to occur in connection with the
Overall Refinancing, the fair value and present fair saleable value of the
assets of the Borrower shall exceed its total liabilities on its debts
(including, without limitation, contingent liabilities) by an amount deemed
reasonably sufficient by the Agent; the Borrower will be able to pay its
debts as they mature in the normal course of business; and the Borrower will
not have unreasonably small capital to conduct its business.
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Section 5.21 LABOR RELATIONSHIPS. The Agent shall be reasonably
satisfied with the status of the Borrower's labor relationships, including
any union and labor contracts, and the Borrower shall have provided to the
Agent copies of any union and labor contracts.
SECTION 6. CONDITIONS PRECEDENT TO EACH BORROWING AND EACH ISSUANCE OF
A LETTER OF CREDIT
The obligation of the Lenders to make any Loan and to issue any Letter
of Credit is, in each case, subject to fulfillment of the following
conditions precedent unless waived in writing by the Majority Lenders:
Section 6.1 BORROWER'S CERTIFICATE; OTHER CONDITIONS. (a) Except in
the case of Revolving Advances for reimbursement of Letters of Credit as
described in Sections 4A.1(c) and 12.17 hereof the Borrower shall have
delivered to the Agent a Borrower's Certificate dated the date of the
requested Advance or Letter of Credit, as the case may be;
(b)(i) All representations and warranties made by each of the Credit
Parties contained herein or otherwise made in any Loan Document (including,
without limitation, in each Borrower' s Certificate), officer's certificate
or any agreement, instrument, certificate, document or other writing
delivered to the Agent or any Lender in connection herewith or therewith,
shall be true and correct in all material respects with the same effect as
though such representations and warranties had been made on and as of the
date of such Advance or issuance of such Letter of Credit (unless any such
representation or warranty speaks as of a particular date, in which case it
shall be deemed repeated as of such date); (ii) on the date of such Advance
or issuance of such Letter of Credit, both before and after giving effect
thereto, there shall exist no Default or Event of Default; (iii) if the
Borrower shall be requesting a Letter of Credit, the Agent on behalf of any
Issuing Lender shall have (to the extent requested by such Issuing Lender)
received a duly executed and delivered Letter of Credit Agreement with
respect thereto; (iv) the Borrower shall have complied with all procedures
and given all certificates, notices and other documents required hereunder
for such advance or issuance; (v) the Agent shall have received such other
approvals, opinions or documents as any Lender through the Agent may have
reasonably requested; and (vi) the making of such Advance or issuance of such
Letter of Credit shall not cause the Revolving Loan, Letter of Credit Usage
or a combination of both to exceed the Revolving Credit Facility Commitment
or any other limit on availability contained in this Agreement.
Section 6.2 WRITTEN NOTICE OF ADVANCE. Prior to the time of the
renewal or conversion of any Advance, or portion thereof, or the issuance of
any Letter of Credit, the Agent shall have received Written Notice of the
renewal or conversion of such Advance, or portion thereof, or the issuance of
such Letter of Credit, as the case may be, in accordance with Section 2
hereof or Section 4A, as the case may be.
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SECTION 7. USE OF PROCEEDS
Proceeds of all Revolving Advances shall be used for seasonal working
capital needs of the Borrower and to support the issuance of Letters of
Credit.
SECTION 8. AFFIRMATIVE COVENANTS
Borrower hereby covenants and agrees that, so long as any Advance is
outstanding or any Lender has any Commitment hereunder, unless specifically
waived by the Majority Lenders in writing:
Section 8.1 FINANCIAL STATEMENTS AND OTHER INFORMATION. The Borrower
shall furnish or cause to be furnished to the Agent and each Lender:
(a) as soon as practicable and in any event within ninety days after
the close of each Fiscal Year of the Borrower:
(i) an audited consolidated and consolidating balance sheet of
the Borrower and its Subsidiaries;
(ii) an audited consolidated and consolidating statement of
income of the Borrower and its Subsidiaries; and
(iii) an audited consolidated and consolidating statement of cash
flows of the Borrower and its Subsidiaries,
in each case, as at the end of and for the Fiscal Year just closed, setting
forth in comparative form the corresponding figures for the preceding Fiscal
Year, all in reasonable detail and certified (without any qualification or
exception deemed material by the Agent) by independent public accountants
selected by the Borrower and satisfactory to the Agent; and concurrently with
such financial statements, a written statement signed by such independent
accountants (x) to the effect that, in making the examination necessary for
their certification of such financial statements, they have not obtained any
knowledge of the existence of any Default or Event of Default, or, if such
independent accountants shall have obtained from such examination any such
knowledge, they shall disclose in such written statement the Default or Event
of Default and the nature thereof, it being understood that such independent
accountants shall be under no liability, directly, or indirectly, to anyone
for failure to obtain knowledge of any such Default or Event of Default, and
(y) setting forth calculations of such auditors as to the compliance by the
Borrower with all the covenants contained in Section 8.17 and Section 9.1
hereof, together with a written discussion and analysis of the consolidated
and consolidating results and operations of the Borrower prepared by the
Senior Management of the Borrower. Further within five (5) days after the
earlier of the last day of each fiscal year of Borrower and the date Borrower
engaged independent certified public accountants to audit Borrower's
financial statements, Borrower shall deliver to such independent certified
public accountants a letter from Borrower addressed to such independent
certified public accountants
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indicating that it is a primary intention of Borrower in engaging such
accountants that Agent and Lenders rely upon such financial statements of
Borrower and its Subsidiaries.
(b) as soon as practicable and in any event within thirty days
(forty-five days in respect to any calendar month at the end of which a
fiscal quarter ends and ninety days in respect to any calendar month at the
end of which a Fiscal Year ends) after the close of each calendar month, a
consolidated and consolidating:
(i) balance sheet of the Borrower and its Subsidiaries;
(ii) statement of income of the Borrower and its Subsidiaries; and
(iii) a statement of cash flows of the Borrower and its
Subsidiaries,
at the end of and for the period commencing at the end of the previous Fiscal
Year and ending with such month just closed and for the period commencing at
the end of the previous month and ending with such month just closed, in each
case prepared by Senior Management of the Borrower, setting forth in
comparative form (x) the corresponding figures for the appropriate month and
year to date of the previous Fiscal Year and (y) the forecasts of the
Borrower and its Subsidiaries for such month and year to date previously
delivered under Section 8.1(j) hereof, all in reasonable detail (including,
without limitation, stating the amount of Interest Expense on the Revolving
Loan, the Letters of Credit and all other Indebtedness for Borrowed Money of
the Borrower and its Subsidiaries for such calendar month and the
depreciation and amortization and the rental expense of the Borrower and its
Subsidiaries for such calendar month) and certified by the chief executive or
financial officer of the Borrower to have been prepared in accordance with
GAAP subject to normal recurring year-end adjustments and the absence of
footnotes;
(c) promptly upon receipt thereof, copies of all financial reports
(including, without limitation, management letters), if any, submitted to the
Borrower or any of its Subsidiaries by their auditors, in connection with
each annual or interim audit or review of any of their books by such
auditors;
(d) promptly upon the issuance thereof, copies of all reports, if any,
to or other documents filed by Group or any of its Subsidiaries with the
Securities and Exchange Commission under the Securities Act of 1933 or the
Securities Exchange Act of 1934 (other than on Form S-8 or 8A or similar
forms), and all reports, notices or statements sent or received by Group or
any of its Subsidiaries to or from the holders of any equity interests of
Group or any such Subsidiary or of any Indebtedness for Borrowed Money of
Group or any such Subsidiary or to or from the trustee under any indenture
under which the same is issued;
(e) concurrently with the delivery of the financial statements required
to be furnished by Section 8.1(a) or Section 8.1(b) hereof, a certificate
signed by the chief executive or financial officer of the Borrower, (x)
stating that a review of the activities of the Borrower and its Subsidiaries
during such Fiscal Year or fiscal month, as the case may be, has been made
under the immediate
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supervision of such officer with a view to determining whether the Borrower
and its Subsidiaries has observed, performed and fulfilled all of its
obligations under each Loan Document to which it is a party, and (y)
demonstrating, in a format satisfactory to the Agent, the compliance by the
Borrower and its Subsidiaries with the covenants contained in Sections 8.17,
(in respect to financial statements delivered for the end of each fiscal
quarter and each Fiscal Year), 9.1, 9.3, 9.4 and 9.6 hereof and stating that
there existed during such fiscal month, quarter or Fiscal Year no Default, or
Event of Default or if any such Default or Event of Default existed,
specifying the nature thereof, the period of existence thereof and what
action the Borrower proposes to take, or has taken, with respect thereto;
(f) promptly upon the commencement thereof, Written Notice of any
litigation, including arbitrations, and of any proceedings before any
Governmental Body which would, if successful, cause a Material Adverse Effect
as to Group, the Borrower or any of their respective Subsidiaries or where
the amount involved exceeds $100,000;
(g) with reasonable promptness, such other information respecting the
business, operations and financial condition of Group, the Borrower or any of
their respective Subsidiaries as any Lender may from time to time reasonably
request;
(h) not later than thirty days after the end of each month (or more
frequently as provided below), a certificate dated the last day of such month
just ended from the Borrower, in each case substantially in the form of
Exhibit 8.1(h) hereto and completed and signed by the chief executive officer
or chief financial officer of the Borrower (each such certificate, a
"BORROWING BASE CERTIFICATE"); the foregoing notwithstanding, in the event
that, at any time, Excess Availability is less than $10,000,000, Borrower
shall, not later than five Business' Days after the end of each business
week, deliver to the Agent a Borrowing Base Certificate dated the last
Business Day of said week. Further, in the event, that, at any time, Excess
Availability is less that $5,000,000, the Borrower shall on each Business
Day, deliver to the Agent a Borrowing Base Certificate dated as of such
Business Day;
(i) upon request by the Agent, on or before the fifteenth day of each
month, a detailed aged trial balance of all Receivables existing as of the
last day of the preceding month, specifying, to the extent requested by
Agent, the names, addresses, face value, dates of invoices and due dates for
each Account Debtor obligated on a Receivable so listed, and, upon Agent's
request therefor, copies of proof of delivery and the original copy of all
documents, including, without limitation, repayment histories and present
status reports relating to the Receivables so scheduled and such other
matters and information relating to the status of then existing Receivables
as the Agent shall reasonably request.
(j) not later than the commencement of each Fiscal Year of the Borrower
beginning with the Fiscal Year commencing on March 1, 1997, a three
Fiscal-Year forecast of the financial condition and results of operations of
the Borrower and its Subsidiaries for such three Fiscal Years (covering in
any event annual balance sheets, statements of cash flow and of income); and
(ii) not later than the commencement of each Fiscal Year of the Borrower, an
annual plan for the Borrower
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and its Subsidiaries for the immediately succeeding Fiscal Year, indicating
balance sheet and statements of cash flow and income on a monthly basis; in
all instances, in form, scope and substance reasonably satisfactory to the
Agent;
(k) promptly, and in any event within ten Business Days thereof, notice:
(i) of receipt by a Credit Party or any Subsidiary thereof; or
any tenant or other occupant of any property owned, operated, leased or
occupied by a Credit Party or Subsidiary thereof, of any claim, complaint,
charge or notice of a violation or potential violation of any Environmental
Law;
(ii) of the occurrence of a spill or other Release of a
Hazardous Material upon, under or about or affecting any of the properties
owned, operated, leased or occupied by a Credit Party or Subsidiary thereof,
or Hazardous Materials at levels or in amounts that may have to be reported,
remedied or responded to under any Environmental Law are detected on or in
the soil or groundwater;
(iii) that a Credit Party or Subsidiary thereof is or may be
liable for any costs of cleaning up or otherwise responding to a Release of
Hazardous Materials;
(iv) that any part of the properties owned, operated, leased or
occupied by a Credit Party or any Subsidiary thereof is or may be subject to
a Lien under any Environmental Law;
(v) that a Credit Party or Subsidiary will undertake or has
undertaken any cleanup or other response action with respect to any Hazardous
Material;
(vi) of the cancellation or nonrenewal of any supply contract
with any of The Dannon Company, Inc., Yoplait U.S.A. (a division of General
Mills Products Corp.) or Ross Laboratories (a division of Abbott Laboratories
USA);
(vii) of the cancellation or nonrenewal of any existing supply
contract with any Person to the extent that gross revenues under said supply
contract equalled or exceeded $5,000,000 in the twelve month period preceding
said extension or renewal; and
(viii) of the execution of any new supply contract with any Person
to the extent that gross revenues under said supply contract are anticipated
to equal or exceed $5,000,000 in any twelve month period following execution
thereof;
The foregoing notwithstanding, in respect to notices to be delivered
pursuant to clauses (i) through (v) above, the Borrower shall not be required
to deliver any such notice unless the subject matter of such notice could
reasonably be expected to involve expenditures, costs or damages of $250,000
or more.
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(l) not later than 10 days after entering into such agreement or
agreements, copies of all new Executive Agreements and employment agreements
to which the Borrower is a party;
(m) not more than 45, nor less than 20, days prior to any cash payment
of any nature whatsoever in excess of $250,000, excluding any cash payment
made in the ordinary course of business, notice of the amount and Person to
whom such payment is being made, provided, that in the case where it is not
possible to provide notice at least 20 days prior to any such payment, notice
shall be given as soon as any member of Senior Management is aware of the
need to make any such payment;
(n) as soon as practicable and in any event within thirty days after
the close of each fiscal month, a report detailing dollar revenues and unit
volume sales during such quarter to each of The Dannon Company, Inc., Yoplait
U.S.A. (a division of General Mills Products Corp.) and Ross Laboratories (a
division of Abbott Laboratories USA), together with any other Persons that
the Agent from time to time reasonably requests to be included, each such
report to set forth in comparative form the corresponding figures for the
appropriate month and year to date of the previous Fiscal Year and otherwise
be in form, scope and substance satisfactory to the Agent; and
(o) such other data and information (financial and otherwise) as the
Agent or the Majority Lenders, from time to time, may reasonably request,
bearing upon or related to the Collateral, the Borrower's financial condition
or results of operations, including, without limitation, federal income tax
returns of the Borrower, accounts payable ledgers and/or agings, and bank
statements.
Section 8.2 TAXES AND CLAIMS. The Borrower shall, and shall cause
each of its Subsidiaries, to, pay and discharge (a) all taxes, assessments
and governmental charges upon or against the Borrower or any such Subsidiary
or its properties or assets prior to the date on which penalties attach
thereto and (b) all lawful claims when due (except to the extent that (i) any
such taxes, assessments, governmental charges or claims are diligently
contested in good faith by appropriate proceedings and proper reserves are
established on the books of the Borrower or such Subsidiary, and (ii) any
Liens arising from the non-payment thereof when due will not attach to any of
the Collateral in a manner which could have priority over the Lien of the
Agent thereon or risk the sale of or foreclosure on such Collateral), whether
for labor, materials, supplies, services or anything else, which might or
could, if unpaid, become a Lien or charge upon the properties or assets of
the Borrower or any of its Subsidiaries.
Section 8.3 INSURANCE. (a) The Borrower shall, and shall cause each
of its Subsidiaries to, (i) keep all their properties adequately insured at
all times with responsible insurance carriers, in amounts and pursuant to
insurance policies reasonably acceptable to the Agent, against loss or damage
by fire and other hazards as well as maintain business interruption
insurance; (ii) maintain adequate insurance at all times with responsible
insurance carriers, in amounts and pursuant to insurance policies reasonably
acceptable to the Agent, against liability on account of damage to Persons
and property and under all applicable workers' compensation laws; and (iii)
maintain adequate insurance covering such other risks as the Agent may
reasonably request. For purposes of complying with this
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Section 8.3(a), adequate insurance shall in any event prevent the Borrower
and its Subsidiaries from becoming a co-insurer (excluding any deductibles
thereunder reasonably acceptable to the Agent).
(b) All insurance covering tangible property subject to a Lien in favor
of the Agent granted pursuant to this Agreement or under any Security
Document or other instrument or document given as security pursuant hereto
shall provide that, in the case of each separate loss of any amount, the full
amount of Net Proceeds with respect thereto shall be payable to the Agent as
secured party or otherwise as its interests may appear (which right of
payment the Agent may waive by Written Notice in accordance with the terms of
this Agreement) and shall further provide (i) for at least 30 days' prior
written notice to the Agent of the cancellation or substantial modification
thereof, (ii) that, in respect of the interests of the Borrower, any of its
Subsidiaries and the Agent in such insurance, such insurance shall not be
invalidated by any action or inaction of the Borrower, any such Subsidiary or
any other Person, (iii) insure the Agent's interests regardless of any breach
of or violation by the Borrower, any of its Subsidiaries or any other Person
of any warranties declarations or conditions contained in such insurance, and
(iv) provide that the Agent or the Lenders shall have the right (but not the
obligation) to cure any default by the Borrower or any of its Subsidiaries
under such insurance.
(c) Except as otherwise agreed in writing by the Agent, each liability
policy and each hazard policy on Collateral, required pursuant to this
Section 8.3 shall name the Agent and each Lender as additional insured or
first loss payee, as appropriate, and shall be primary without right of
contribution from any other insurance which is carried by the Lenders or the
Agent to the extent that such other insurance provides it with contingent
and/or excess liability insurance with respect to its interest as such in the
Collateral, and shall expressly provide that all of the provisions thereof,
except the limits of liability (which shall be applicable to all insureds as
a group) and except liability for premiums (which shall be solely a liability
of the Borrower or its Subsidiaries, as the case may be), shall operate in
the same manner as if there were a separate policy covering each insured.
(d) The Borrower shall, and shall cause each of its Subsidiaries to,
from time to time upon request of the Agent, promptly furnish or cause to be
furnished to the Agent evidence, in form and substance reasonably
satisfactory to the Agent, of the maintenance of all insurance required to be
maintained by this Section 8.3, including, but not limited to, such originals
or copies as the Agent may request of policies, certificates of insurance,
riders and endorsements relating to such insurance and proof of premium
payments.
Section 8.4 BOOKS AND RESERVES. The Borrower shall, and shall cause
each of its Subsidiaries, to (a) maintain, at all times, true and complete
books, records and accounts in which true and correct entries shall be made
of its transactions in accordance with GAAP; and (b) by means of appropriate
entries, reflect in its accounts and in all financial statements furnished
pursuant to Section 8.1 proper liabilities and reserves for all taxes and
proper provision for depreciation and amortization of its properties and bad
debts, all in accordance with GAAP.
Section 8.5 PROPERTIES IN GOOD CONDITION. The Borrower shall keep,
and shall cause each of its Subsidiaries to keep, its properties in good
repair, working order and condition, ordinary wear and
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tear excepted, in accordance with prudent operating procedures and, as to
machinery and equipment, and from time to time, make all necessary and proper
repairs, renewals, replacements additions and improvements thereto, so that
the business carried on may be properly and advantageously conducted at all
times in accordance with prudent business management.
Section 8.6 MAINTENANCE OF EXISTENCE. The Borrower shall preserve
and maintain, and cause each of its Subsidiaries to preserve and maintain,
its statutory existence, rights, franchises and licenses.
Section 8.7 INSPECTION BY THE AGENT AND THE LENDERS. The Borrower
shall allow, and shall cause each of its Subsidiaries to allow, any
representative of any Lender or of the Agent, at such Lender's or the
Agent's expense, as the case may be, to visit and inspect any of its
properties, to examine its books of account and other records and files, to
make copies thereof and to discuss its affairs, operations, business,
finances and accounts with its officers and employees and independent
accountants (and the Borrower hereby irrevocably authorizes its independent
accountants to discuss with the Agent and the Lenders the financial affairs
of the Borrower and its Subsidiaries), all at such reasonable times during
normal business hours at such times and as often as the Lenders or the Agent
may request.
Section 8.8 PAY INDEBTEDNESS TO LENDERS AND PERFORM OTHER COVENANTS.
The Borrower shall (a) make full and timely payment of all payments required
to be made in respect of the Lender Debt, including without limitation, the
Revolving Loan, whether now existing or hereafter arising, (b) strictly
comply, and cause each of its Subsidiaries, to strictly comply, with all the
terms and covenants contained in each Loan Document to which it is a party,
all at the times and places and in the manner set forth therein and (c)
except for the filing of continuation statements and the making of other
filings by the Agent as secured party or assignee, at all times take all
action necessary to maintain the Liens provided for under or pursuant to this
Agreement or any Security Document as valid and perfected Liens on the
property intended to be covered thereby (subject to no other Liens except
Permitted Liens) and supply all information to the Agent, or the Lenders
necessary for such maintenance.
Section 8.9 NOTICE OF DEFAULT. The Borrower shall promptly, and
cause each of its Subsidiaries to promptly (and in any event within five
days), notify the Agent in writing of any Default or Event of Default, or a
default under any other agreement in respect of Indebtedness for Borrowed
Money in excess of $250,000 to which the Borrower or any of its Subsidiaries
is a party, in each case describing the nature thereof and the action the
Borrower or such Subsidiary proposes to take with respect thereto.
Section 8.10 REPORTING OF MISREPRESENTATIONS. In the event the
Borrower or any of its Subsidiaries discovers that any representation or
warranty made in any Loan Document by any Credit Party was incorrect in any
material respect when made the Borrower shall promptly report, or shall cause
such Subsidiary promptly to report, the same to the Agent and take, or cause
to be taken, all available steps to correct such misrepresentation or breach
of warranty.
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Section 8.11 COMPLIANCE WITH LAWS. The Borrower shall comply, and
shall cause each of its Subsidiaries to comply, in all material respects,
with all applicable laws, rules, regulations and orders, and the Borrower
shall duly observe, and cause each of its Subsidiaries to duly observe, in
all material respects, all valid requirements of applicable governmental
authorities and all applicable statutes, rules and regulations, including,
without limitation, all applicable statutes, rules and regulations relating
to public and employee health and safety.
Section 8.12 ERISA. (a) The Borrower shall pay and discharge, and
shall cause each Credit Party and each ERISA Affiliate to pay and discharge,
when due any liability imposed upon it pursuant to the provisions of Title IV
of ERISA.
(b) The Borrower shall deliver to the Agent promptly, and in any event
within ten days,
(i) any Credit Party or any ERISA Affiliate knows, or has
reason to know, of the occurrence of any Reportable Event with respect to any
Pension Benefit Plan and subject to Title IV of ERISA, a copy of the
materials that are filed by the applicable plan administrator with the PBGC
or the materials that would have been filed if the PBGC had not waived the
notice requirements;
(ii) the receipt of notice by a Credit Party or an ERISA
Affiliate or any administrator of any Pension Benefit Plan files with
participants, beneficiaries or the PBGC a notice of intent to terminate any
Pension Benefit Plan under Section 4041 of ERISA, a copy of any such notice;
(iii) the receipt of notice by a Credit Party or any ERISA
Affiliate or any administrator of any Pension Benefit Plan from the PBGC of
the PBGC's intention to terminate any such Pension Benefit Plan or to appoint
a trustee to administer any such Pension Benefit Plan, a copy of such notice;
(iv) the filing thereof with the Internal Revenue Service,
copies of each annual report that is filed on Treasury Form 5500 with respect
to any Pension Benefit Plan subject to Title IV, together with any actuarial
statements on Schedule B to such Form 5500;
(v) a Credit Party or any ERISA Affiliate knows or has reason
to know of any event or condition which might constitute grounds under the
provisions of Section 4042 of ERISA for the termination of (or the
appointment of a trustee to administer) any Pension Benefit Plan, an
explanation of such event or condition;
(vi) the receipt by a Credit Party or any ERISA Affiliate of an
assessment of withdrawal liability under Section 4201 of ERISA from a
Multiemployer Plan, a copy of such assessment;
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(vii) a Credit Party or any ERISA Affiliate knows or has reason
to know of the termination or insolvency (under Sections 4241 or 4245 of
ERISA) of any Multiemployer Plan to which such Credit Party or ERISA
Affiliate thereof contributes, an explanation of such event; or
(viii) an application has been made to the Secretary of the
Treasury for a waiver of the minimum funding standard under the provisions of
Section 412 of the Code with respect to any Pension Benefit Plan, a copy of
such application; and in each case described above, together with a statement
signed by an appropriate officer of such Credit Party or ERISA Affiliate
setting forth details as to such Reportable Event, notice event or condition
and the action that will be taken with respect thereto.
Section 8.13 FURTHER ASSURANCES. The Borrower shall, and shall cause
each of its Subsidiaries to, at its cost and expense, upon request of the
Agent, duly execute and deliver, or cause to be duly executed and delivered,
to the Agent such further instruments and do and cause to be done such
further acts as may be necessary or proper in the reasonable opinion of the
Agent to carry out more effectually the provisions and purposes of this
Agreement or any other Loan Document.
Section 8.14 AUDITS. The Borrower shall, at its expense and upon the
request of the Agent:
(a) Cause the Borrower's auditors to perform an annual audit, in form
and substance satisfactory to the Agent, of the Inventory and Receivables of
the Borrower and its subsidiaries and shall deliver to the Agent promptly,
and in any event within five Business Days after the same becomes available,
the results of such audit.
(b) In addition to audits referred to in paragraph (a) of this Section
8.14, the Borrower shall allow, and shall cause each of its Subsidiaries to
allow, the Agent or its designee to perform such audits of the Borrower and
its Subsidiaries, including, without limitation, of Inventory and
Receivables, as the Agent may request, which audits shall be at the expense
of the Borrower; PROVIDED, that the Agent shall not perform or cause to be
performed more than one such audit in each Fiscal Year unless a Default shall
have occurred and be continuing, in which case the foregoing limitation shall
not apply.
Section 8.15 ENVIRONMENTAL MATTERS. (a) The Borrower shall comply,
and shall cause each of its Subsidiaries to comply, with the provisions of
all Environmental Laws and all Permits, and shall keep its Properties and the
Properties of its Subsidiaries free of any Lien imposed pursuant to any
Environmental Law. The Borrower shall not cause or suffer or permit, and
shall not suffer or permit any of its Subsidiaries to cause or suffer or
permit, the Property of the Borrower or of a Subsidiary thereof, to be used
for the storage, treatment, transporting or disposal of any waste or
discarded material or any Hazardous Material except for the taking of
Remedial Action in response to Hazardous Materials on or about the Properties
owned, operated, leased or occupied by the Borrower or any of its
Subsidiaries.
(b) The Borrower shall supply to the Agent copies of all material
environmental submissions by the Borrower or any of its Subsidiaries to any
Governmental Body and of the reports
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of all environmental audits and of all other environmental tests, studies or
assessments (including the data derived from any sampling or survey of
asbestos, soil, or subsurface or other materials or conditions) that may be
conducted or performed (by or on behalf of the Borrower or any of its
Subsidiaries) on or regarding the Properties owned, operated, leased or
occupied by the Borrower or any of its Subsidiaries or regarding any
conditions that might have been affected by Hazardous Materials on or
Released or removed from such Properties. The Borrower shall also permit and
authorize, and shall cause its Subsidiaries to permit and authorize, the
consultants, attorneys or other persons that prepare such submissions or
reports or perform such audits, tests, studies or assessments to discuss
non-privileged portions of such submissions or reports with the Agent and the
Lenders.
(c) The Borrower shall, and shall cause its Subsidiaries to, timely
undertake and complete any cleanup or other response actions required by any
Environmental Law. In addition, the Borrower shall diligently implement each
of the recommendations set forth in the existing Phase II environmental
reviews conducted by ENSR (copies of which have been furnished to the Agent
and the Lenders previously) concerning Remedial Action to be taken in
connection with any Property.
(d) Without in any way limiting the scope of Section 2.12 hereof and in
addition to any obligations thereunder, the Borrower hereby indemnifies and
agrees to hold the Agent and the Lenders harmless from and against any
Liabilities and Costs, including, but not limited to claims of any
Governmental Body or any third person, whether arising under CERCLA, RCA, or
any other Environmental Law or under tort, contract or common law, relating
to violation of any Environmental Law, the past, present or future operations
of the Borrower, its Subsidiaries, or any of their respective predecessors in
interest, or the past, present or future environmental, health or safety
condition of the Property, the presence of asbestos containing materials at
the Property, or the Release of any Hazardous Material into the environment,
except to the extent same is caused by the gross negligence or willful
misconduct of the Agent or the Lenders. To the extent the laws of the United
States or any state in which property owned operated, leased or occupied by
the Borrower or any of its Subsidiaries is located provide that a Lien upon
such property of the Borrower or any of its Subsidiaries may be obtained for
the removal of toxic wastes or hazardous substances which have been or may be
released and a Release has occurred on the subject property, no later than
sixty days after notice is given by the Agent to the Borrower, the Borrower
shall deliver to the Agent a report issued by a qualified third party
engineer investigating the existence of any toxic waste or hazardous
substance located upon or beneath the specified property. To the extent any
such substance or waste is located therein or thereunder either (i) subjects
the property to a Lien or (ii) requires removal to safeguard the health of
any persons, the removal thereof shall be an affirmative covenant of the
Borrower hereunder.
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Section 8.16 FINANCIAL COVENANTS. The Borrower covenants and agrees
that:
(a) FIXED CHARGE COVERAGE RATIO: The Fixed Charge Coverage Ratio, as of
the end of (i) the one fiscal quarter then ended in respect to the fiscal
quarter ending on August 31, 1996, (ii) the two consecutive fiscal quarters
then ended in respect to the fiscal quarter ending on November 30, 1996,
(iii) the three consecutive fiscal quarters then ended in respect to the
fiscal quarter ending on February 28, 1997, and (iv) the four consecutive
fiscal quarters then ended in respect to the fiscal quarter ending on May 31,
1997 and the last day of each August, November, February and May thereafter,
shall not be less than the ratio set forth opposite such date:
Four fiscal quarters
ending on the last day of Ratio
------------------------- ---------
August, 1996 1.0 to 1
November, 1996 1.0 to 1
February, 1997 1.0 to 1
May, August and November 1997 1.00 to 1.
and February, 1998, and
May, August and November 1998 1.05 to 1.
and February, 1999
(b) FUNDED DEBT TO EBITDA RATIO: The ratio of Funded Debt as of the
last day of each of the fiscal quarters listed below to EBITDA for the four
consecutive fiscal quarters then ended shall not be more than the amount set
forth below opposite such period:
Fiscal quarter
ending on the last day of Ratio
------------------------- ---------
August, 1996 5.50 to 1
November, 1996 5.50 to 1
February, 1997 5.50 to 1
May, August and November 1997 5.00 to 1.
and February, 1998, and
May, August and November 1998 5.00 to 1.
and February, 1999
(c) ADJUSTED WORKING CAPITAL: As of the last day of each fiscal quarter
listed below, Adjusted Working Capital shall equal or exceed the amount set
forth opposite such fiscal period in the following schedule:
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Fiscal quarter
ending on the last day of Amount
------------------------- ----------
August and November 1996 and $7,500,000
February, 1997
May, August and November 1997 $7,500,000
and February, 1998, and
May, August and November 1998 $7,500,000
and February, 1999
Section 8.17 MAINTENANCE OF DOMINION ACCOUNT(S). The Borrower shall
maintain a Dominion Account(s) pursuant to a lockbox arrangement acceptable
to the Agent with such bank as may be selected by Borrower and be acceptable
to Agent. The Borrower shall issue to any such bank an irrevocable letter of
instruction directing such bank to deposit all payments or other remittances
received in the lockbox to the Dominion Account for application on account of
the Obligations. All funds deposited in the Dominion Account shall
immediately become the property of the Agent, for its benefit and the ratable
benefit of the Lenders, and the Borrower shall obtain the agreement by such
banks in favor of Agent to waive any offset rights against the funds so
deposited. The Agent assumes no responsibility for such lockbox arrangement,
including, without limitation, any claim of accord and satisfaction or
release with respect to deposits accepted by any bank thereunder. All
remittances received by the Borrower on account of Receivables, together with
the proceeds of any other Collateral, shall be held as the Agent's property,
for its benefit and the ratable benefit of the Lender's, by the Borrower as
trustee of an express trust for the Agent's benefit and the Borrower shall
immediately deposit same in kind in the Dominion Account. The foregoing
notwithstanding, Agent agrees not to exercise control over any funds in the
Dominion Account(s) and agrees not to apply any funds in the Dominion
Account(s) to the repayment of the Obligations unless Excess Availability is
less than $5,000,000.
SECTION 9. NEGATIVE COVENANTS
Each of the Borrower and Group covenants and agrees that, so long as any
Loan is outstanding or any Lender has any Commitment hereunder, it shall not,
and shall not suffer or permit any of its Subsidiaries to, without the prior
written consent of the Majority Lenders:
Section 9.1 CAPITAL EXPENDITURES. (a) Make, capitalize or otherwise
permit, directly or indirectly, any Capital Expenditures of the Borrower and
its Subsidiaries during any Fiscal Year, or make any commitment for Capital
Expenditures or costs to be paid or incurred during such Fiscal Year, to the
extent that the amount of such Capital Expenditure or commitment, when taken
together with all other Capital Expenditures made or committed to be made
during such Fiscal Year, would cause Borrower to violate the covenant
contained in Section 8.16(a) hereof.
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(b) In no event shall the Borrower or any of its Subsidiaries assume or
incur any Indebtedness in connection with the acquisition of a fixed or
capital asset (including, without limitation, under a Capitalized Lease) if
the fair market value (as determined by an independent appraisal or in a
manner otherwise satisfactory to the Agent) of such asset does not exceed the
aggregate principal (or notional principal, in the case of Capitalized Lease
Obligations) amount of such Indebtedness so incurred or assumed.
(c) In no event shall the Borrower or any of its Subsidiaries enter
into a Capital Lease in any Fiscal Year which, together with all other
Capital Leases, if any, entered into by the Borrower and its Subsidiaries in
such Fiscal Year would cause Borrower to violate the covenant contained in
Section 8.16(a) hereof.
Section 9.2 LIENS. Create, incur, assume or suffer to exist any Lien
upon any assets or property of any kind or character of any Credit Party
(including, without limitation, the property and assets covered under the
Security Documents), whether owned at the date hereof or hereafter acquired,
or hold or acquire any property or assets of any character under conditional
sales, finance lease or other title retention agreements, other than the
following (collectively, "PERMITTED LIENS""):
(a) Liens in favor of the Agent or the Lenders pursuant to this
Agreement or the Security Documents;
(b)(i) Liens arising out of judgments or awards (other than any
judgment described in Section 11.1(h)) hereof in respect of which the
Borrower or any of its Subsidiaries shall in good faith be prosecuting an
appeal or proceedings for review and in respect of which it shall have
secured a subsisting stay of execution pending such appeal or proceedings for
review, provided it shall have set aside on its books adequate reserves, in
accordance with GAAP, with respect to such judgment or award;
(ii) Liens for taxes, assessments or governmental charges or levies
(excluding any Environmental Liens), provided, that payment thereof shall not
at the time be required in accordance with the provisions of Section 8.2
hereof;
(iii) deposits, Liens or pledges to secure payments of workmen's
compensation and other payments, unemployment and other insurance, old-age
pensions or other social security obligations, or the performance of bids,
tenders, leases, contracts (other than contracts for the payment of money),
public or statutory obligations, surety, stay or appeal bonds, or other
similar obligations arising in the ordinary course of business;
(iv) mechanics', workmen's, repairmen's, warehousemen's, vendors' or
carriers' Liens, or other similar Liens arising in the ordinary course of
business and securing sums which are not past due or are being contested by
appropriate proceedings in accordance with and conforming to the requirements
of Section 8.2 hereof;
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(v) zoning restrictions, easements, licenses, restrictions on the use
of real property or minor irregularities in title thereto, which do not
materially impair the use of such property in the normal operation of the
business of the Borrower or any of its Subsidiaries or the value of such
property for the purpose of such business;
(vi) unperfected Liens arising by operation of law under Article 2 of
the UCC in favor of unpaid sellers or prepaying buyers of goods relating to
amounts that are not past due in accordance with their respective terms of
sale;
(c) existing Liens set forth in Section 9.2 hereto and any renewals
thereof, but not any increase in amount thereof and not any extension thereof
to other property;
(d) purchase money mortgages or other purchase money Liens (including,
without limitation, Capital Leases) upon any fixed or capital assets
hereafter acquired, or purchase money mortgages (including, without
limitation, Capital Leases) on any such assets hereafter acquired or existing
at the time of acquisition of such assets, whether or not assumed, so long as
(i) any such Lien does not extend to or cover any other asset of the Borrower
or any of its Subsidiaries, (ii) such Lien secures the obligation to pay the
purchase price of such asset (or the obligation under such Capital Leases)
and interest thereon only and (iii) the aggregate outstanding principal
amount secured by all such Liens does not exceed $10,000,000 at any time; and
(e) Liens securing the repayment of the Senior Note Indebtedness.
Without limiting the generality of the foregoing, Group shall not
create, incur, assume or suffer to exist any Lien upon the capital stock of
Borrower.
Section 9.3 INDEBTEDNESS. Create, incur, assume or suffer to exist,
contingently or otherwise, any Indebtedness, other than (collectively,
"PERMITTED INDEBTEDNESS"): (a) Indebtedness under the Loan Documents
(including Hedge Agreements); (b) unsecured Current Liabilities incurred in
the ordinary course of business other than unsecured Current Liabilities for
Indebtedness for Borrowed Money; (c) Indebtedness (not overdue) secured by
Liens permitted by Section 9.2(b), (c) or (d) hereof; (d) Indebtedness for
Borrowed Money and Contingent Obligations set forth on Schedule 9.3 hereto;
and (e) the Senior Note Indebtedness.
Section 9.4 LOANS, INVESTMENTS AND GUARANTEES. Lend or advance money
or credit to any Person, or invest in (by capital contribution, creation of
Subsidiaries or otherwise), or purchase or repurchase the stock or
Indebtedness, or all or a substantial part of the assets or properties, of
any Person, or enter into any exchange of securities with any Person, or
guarantee, assume, endorse or otherwise become responsible for (directly or
indirectly or by any instrument having the effect of assuring any Person's
payment or performance or capability) the Indebtedness, performance,
obligations, stock or dividends of any Person (each of the foregoing, an
"INVESTMENT"), or agree to do any of the foregoing, or permit or suffer to
permit any of its Subsidiaries to do so, other than:
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(a) endorsement of negotiable instruments for deposit or collection in
the ordinary course of business;
(b)(i) Investments in securities issued, or that are directly and
fully guaranteed or insured, by the United States Government or any agency or
instrumentality thereof having maturities of not more than six months from
the date of acquisition, (ii) time deposits and certificates of deposit
having maturities of not more than six months from the date of acquisition of
(x) any Lender or (y) any other domestic commercial bank having capital and
surplus in excess of $100,000,000, the holding company of which has
outstanding commercial paper meeting the requirements specified in clause
(iv) below, (iii) repurchase agreements with a term of not more than seven
days for underlying securities of the types described in clauses (i) and (ii)
above (PROVIDED, THAT the underlying securities of the type described in
clause (i) may have maturities of more than six months from the date of
acquisition) entered into with any Lender or any other bank meeting the
qualifications specified in clause (ii) above or with securities dealers of
recognized national standing, PROVIDED, THAT the terms of such agreements
comply with the guidelines set forth in the Federal Financial Institutions
Examination Council Supervisory Policy Repurchase Agreements of Depositary
Institutions With Securities Dealers and Others as adopted by the Comptroller
of the Currency on October 31, 1985 (the "SUPERVISORY POLICY"), and PROVIDED,
FURTHER, that possession or control of the underlying securities is
established as provided in the Supervisory Policy, (iv) commercial paper
rated (as of the date of acquisition thereof) at least A- 1 or the equivalent
thereof by Standard & Poor' s Corporation and P- I or the equivalent thereof
by Moody's Investors Service, Inc. and in either case maturing within six
months after the date of its acquisition; and (v) shares of funds registered
under the Investment Company Act of 1940, as amended, having assets of at
least $100,000,000 which invest only in obligations described above and which
shares are rated by Moody's Investors Service, Inc. or Standard & Poor's
Corporation in one of its two highest rating categories assigned by such
agencies for obligations of such nature; PROVIDED, HOWEVER, that the amount
of Investments permitted by this Section 9.4(b) shall not exceed $5,000,000
unless there are no outstanding Revolving Loans or unless the Borrower has
demonstrated to Agent's reasonable satisfaction that all outstanding
Revolving Loans will be repaid upon the expiration of any applicable Interest
Period(s);
(c) Investments representing stock or obligations issued to the
Borrower or any of its Subsidiaries in settlement of claims against any other
Person by reason of a composition or readjustment of debt or a reorganization
of any debtor of the Borrower or such Subsidiary;
(d) Investments representing the Indebtedness of any Person owing as a
result of the sale by the Borrower or any of its Subsidiaries in the ordinary
course of business of products or services (on customary trade terms);
(e) Investments in the stock of the Borrower or any Subsidiary of the
Borrower existing on the Closing Date, but not any additional investments
therein, and investments in Subsidiaries of the Borrower expressly permitted
under Section 9.7 hereof;
(f) Guaranties in favor of the Agent or the Lenders;
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(g) deposits for utilities, security deposits under Leases and similar
prepaid expenses incurred in the ordinary course of business;
(h) trade credits arising in the ordinary course of business;
hereto;
(i) Investments outstanding on the Closing Date and described on
Schedule 9.4; and
(j) loans to employees of the Borrower made in the ordinary course of
business, provided, that the aggregate amount of all such loans shall not at
any time exceed $200,000.
Section 9.5 MERGER, SALE OF ASSETS, DISSOLUTION, ETC.. Enter into
any transaction of merger or consolidation, change its name, acquire all or a
substantial portion of the assets of any Person, or transfer, sell, assign,
lease, or otherwise dispose of all or any part of its properties or assets,
or any of its notes or Receivables, or any stock or Indebtedness for Borrowed
Money of the Borrower or any of its Subsidiaries, or change the general
nature of its business, or issue or sell any of its equity interests or any
rights, warrants or options to acquire such, or wind up, liquidate or
dissolve, or agree to do any of the foregoing, except:
(a) Asset Sales (of property other than Inventory or of property
described in (b) below) not exceeding $250,000 in any Fiscal Year in
aggregate book value, in the ordinary course of business of the Borrower or a
Subsidiary of the Borrower;
(b) Asset Sales or other dispositions by the Borrower or any Subsidiary
thereof of worn out or obsolete property (including motor vehicles and
inventory) in the ordinary course of business, or otherwise no longer
necessary for the proper conduct of business;
(c) sales by the Borrower and its Subsidiaries of Inventory in the
ordinary course of business; and
(d) the abandonment of any assets and properties of the Borrower or any
Subsidiary thereof which are no longer useful in its business and cannot be
sold; and
(e) the lease or the sublease by the Borrower or any of their
Subsidiaries, as lessor or sublessor, of any of facilities which are no
longer necessary for the proper conduct of business of Borrower or such
Subsidiary.
Section 9.6 DIVIDENDS REDEMPTIONS AND OTHER PAYMENTS. (a) Declare or
pay, or suffer or permit any of its Subsidiaries to declare or pay, any
distributions in cash in respect of any shares of capital stock of any class
in the Borrower or any of its Subsidiaries, or declare or pay any dividends
in cash on any shares of capital stock of any class of any of its
Subsidiaries, in any case now or hereafter outstanding, or purchase, redeem,
cancel or acquire any shares of capital stock of any class in the Borrower or
any Subsidiary of the Borrower, or any capital stock of any of its
Subsidiaries or any
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option, warrant, or other right to acquire such capital stock, or apply or
set apart any of its assets therefor, or make any distribution (by reduction
of capital or otherwise) in respect of any such shares of capital stock or
any such option, warrant or other right, other than (i) dividends paid or
distributed by any Subsidiary of the Borrower to the Borrower, (ii) any
payment of cash dividends paid or distributed by the Borrower on a Dividend
Payment Date, but only if the Agent shall have received evidence satisfactory
to it that each of the Dividend Conditions shall have been satisfied with
respect to each such dividend payment and (iii) so long as no Default or
Event of Default shall have occurred and be continuing, any payment of cash
dividends by the Borrower to Group to be applied by Group to finance the
payment of administrative and other expenses incurred by Group in connection
with the ordinary course operation of Group' business (subject to the
limitations contained in Section 9.9), but only to the extent that the amount
of such cash dividend payment, when taken together with the aggregate amount
of all such cash dividend payments made during such Fiscal Year, shall not
exceed $10,000 plus the amount of annual administrative costs under the Group
Indenture.
(b) Make any payment or prepayment of principal of or interest on, or
purchase, defease, acquire or redeem, any Indebtedness for Borrowed Money
(other than any Lender Debt) or make any deposit in respect thereof or give
notice in respect thereof, or suffer or permit any of its Subsidiaries to do
so; PROVIDED, HOWEVER, that the Borrower may make regularly scheduled
payments when due and payable of principal of and interest on the Bemis Note,
the Senior Notes and Indebtedness secured by Liens permitted by Section
9.2(d) hereof, except that Borrower may prepay a portion of the outstanding
principal balance of the Senior Notes from the proceeds of any equity
offering by Borrower or the proceeds of any equity investment by Group in
Borrower which equity investment was funded by the proceeds of an equity
offering by Group.
Section 9.7 SUBSIDIARIES. Form or caused to be formed any Subsidiary
without the prior written consent of the Majority Lenders. Without in any
way limiting the provisions of the preceding sentence, in no event shall the
Borrower form or cause to be formed a Subsidiary unless and until: (i) such
Subsidiary enters into a security agreement in accordance with the terms of
Section 4.6 hereof; (ii) such Subsidiary executes a Guaranty; and (iii) such
Subsidiary agrees in writing to be bound by the covenants set forth in
Sections 9 and 10 of this Agreement.
Section 9.8 TRANSACTIONS WITH AFFILIATES. Except as expressly
permitted under Section 10.9 hereof, enter into or perform any transaction,
including, without limitation, the purchase, leasing, sale or exchange of
property or assets or the hiring or rendering of any service, with any
Affiliate of the Borrower or any Subsidiary thereof, except for (a) any
transaction which is in the ordinary course of its business, and which
transaction is upon fair and reasonable terms no less favorable to it than it
could obtain in a comparable arm's length transaction with a Person not an
Affiliate of the Borrower or a Subsidiary thereof, (b) any transaction
pursuant to agreements listed on Schedule 9.8 hereto, (c) payment of
reasonable fee to non-employee directors and payment of indemnity obligations
to all directors, (d) any employment agreement or stock option agreement
entered into by the Borrower, Group or any of their respective Subsidiaries
in the ordinary course of business and consistent with their respective past
practices, and (e) any issuance of capital stock, warrants, options or other
rights to acquire capital stock, or other payments, awards or grants in
ownership
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plans of the Borrower or Group entered into in the ordinary course of
business. The foregoing notwithstanding, the aggregate amount of all payments
required to be made by the Borrower, in respect to any tax year of the
Borrower under the Tax Sharing Agreement listed on Schedule 9.8, shall not
exceed the lesser of (x) the aggregate amount of federal, state or local
income taxes that the Borrower would have been required to pay if the
Borrower and its Subsidiaries filed its tax returns for such tax year on a
stand alone basis and (y) the aggregate amount of federal state and local
income taxes due for such tax year from Group, the Borrower and its
Subsidiaries.
Section 9.9 MANAGEMENT FEES AND OTHER PAYMENTS. Pay, directly or
indirectly, any management, consulting or similar fees to, or make any other
payments of any kind in respect of employment, management, consulting,
servicing or similar services or in respect of any non-competition or similar
agreement to, or make any other payment (excluding salary and other
compensation to full-time employees in the ordinary course of business) to
any officers, directors, general or limited partners of, or other management
of, or any stockholders of, the Borrower or any Affiliate of the Borrower,
except that the Borrower may in any Fiscal Year pay an aggregate amount equal
to the lesser of $1,000,000 or the amount permitted under the Indenture to
HPH or an Affiliate thereof for management fees and services.
Section 9.10 COMPROMISE OF RECEIVABLES. Compromise, adjust or sell
any of the Receivables (or extend the time for payment thereof) or grant any
discounts, allowances or credits thereon, other than discounts, allowances or
credits granted in the ordinary course of business.
Section 9.11 NONCOMPLIANCE WITH ERISA. (a) Engage in any transaction
in connection with which a Credit Party or any ERISA Affiliate could be
subject to either a material civil penalty assessed pursuant to the
provisions of Section 502(i) of ERISA or a material tax imposed under the
provisions of Section 4975 of the Code;
(b) adopt an amendment to any Pension Benefit Plan requiring the
provision of security under Section 307 of ERISA or Section 401(a)(29) of the
Code;
(c) terminate any Pension Benefit Plan under Section 4041 of ERISA if
such termination could reasonably be expected to have a Material Adverse
Effect on the Borrower Group or on any of their respective Subsidiaries;
(d) fail to make payment when due of any amounts which, under the
provisions of any Employee Plan or Multiemployer Plan, it is required to pay
as contributions thereto or as premiums to the PBGC, with respect to any
Pension Benefit Plan, suffer or permit to exist any "accumulated funding
deficiency" (within the meaning of Section 302 of ERISA and Section 412 of
the Code); or
(e) withdraw from or permit any Credit Party or any ERISA Affiliate to
withdraw from a Multiemployer Plan or to create, extend or increase an
obligation to provide health or medical benefits for retirees (other than at
retirees' own expense) of any Credit Party or any ERISA Affiliate
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if such withdrawal or obligation could reasonably be expected to have a
Material Adverse Effect on the Borrower, Group, such ERISA Affiliate or any
of their respective Subsidiaries.
Section 9.12 AMENDMENTS AND MODIFICATIONS. (a) Directly or
indirectly, amend, modify, supplement, waive compliance with, seek or grant a
waiver under, or assent to noncompliance with in any manner materially
adverse to the Borrower or Agent and Lenders: (i) any instrument, document or
agreement evidencing, creating, guaranteeing or governing Indebtedness for
Borrowed Money in excess of $250,000 permitted under Section 9.3 hereof
(including, without limitation, the Bemis Note, but excluding the Senior Note
Indebtedness) or entered into in connection therewith; (ii) any of the Senior
Note Documents (it being understood that this provision shall not restrict
the Borrower from consummating a Permitted Senior Indebtedness Refinancing);
(iii) any other document or instrument executed and delivered in correction
with any component of the Overall Refinancing. The foregoing notwithstanding
any amendment, modification or waiver to any of the Senior Note Documents
other than non-material, non-substantive or non-adverse (to Borrower)
amendments, modifications or waivers shall require the consent of all Lenders.
(b) Directly or indirectly, amend, modify, supplement, waive compliance
with, seek or grant a waiver under, or assent to noncompliance with any
material term of the articles of incorporation or bylaws of any Credit Party.
Section 9.13 AGREEMENTS WITH MANAGEMENT. Enter into any agreements or
arrangements with management of the Borrower, including Senior Management,
other than Executive Agreements, employment contracts and other compensation
and benefit plans entered into in the ordinary course of business.
Section 9.14 FISCAL YEAR. Change the Fiscal Year of the Borrower or
any of its Subsidiaries.
Section 9.15 NATURE OF BUSINESS. (a) Suffer or permit the Borrower,
or any Subsidiary of the Borrower, to alter the nature of its business or
engage in any business, other than the business of developing, manufacturing
and marketing rigid plastic packaging and plastic promotional beverage cups.
(b) Suffer or permit Group to engage in any business activity other
than to own all of the capital stock of the Borrower and any activities that
are incidental thereto.
Section 9.16 NEGATIVE PLEDGES. Except for the Senior Note Documents,
and documents and agreements evidencing or securing Indebtedness permitted by
Section 9.2(d), enter into or become subject to, directly or indirectly,
including, without limitation, as a non-party Subsidiary of a party, to any
agreement (a) prohibiting or restricting, in any manner (including, without
limitation, by way of covenant, representation or event of default), (i) the
incurrence, creation or assumption of any Indebtedness, or any Lien upon any
property of any Credit Party, (ii) the sale, disposition or pledge of any
asset of any Credit Party, (iii) the incurrence or existence of any
Contingent Obligations of any Credit Party, (iv) any investments of any
Credit Party, (v) any capital expenditures by any Credit Party, (vi) any
acquisition, merger or consolidation involving any Credit Party, (vii) any
change in
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control of any Credit Party, or (viii) any amendment or supplement to or
waiver under this Agreement or any other Loan Document or other document
relating to the Lender Debt, or (b) which provides that any default by any
Credit Party which is not a party to such agreement of any obligation not
arising under such agreement is a default under such agreement. Promptly
notify Agent of any Lien granted on or in respect to Borrower's capital stock.
Section 9.17 EQUITY ISSUANCES. Issue or cause to be issued by any
Subsidiary of Borrower any form of equity in or on behalf of such Subsidiary,
other than common voting equity in a wholly-owned Subsidiary of the Borrower
issued to the Borrower subject to the provisions of this Agreement and the
other Loan Documents.
Section 9.18 RENTAL OBLIGATIONS. Incur, create, assume or suffer or
permit to exist, in respect of leases (other than Capital Leases) of real or
personal property, rental obligations or other commitments thereunder or in
connection therewith, to make any direct or indirect payment, as lessee,
sublessee, guarantor or otherwise, for fixed or minimum rentals, percentage
rentals, property taxes, insurance premiums and reciprocal easements
agreement payments, for the Borrower and its Subsidiaries, in an aggregate
amount which would cause Borrower to violate the covenant contained in
Section 8.16(a).
SECTION 10. DEFAULTS AND REMEDIES
Section 10.1 EVENTS OF DEFAULT. If any one or more of the following
events (each, an "EVENT OF DEFAULT" and collectively, called "EVENTS OF
DEFAULT") shall occur for any reason whatsoever (and whether such occurrence
shall be voluntary or involuntary or come about or be effected by operation
of law or pursuant to or in compliance with any judgment, decree or order of
any court or any order, rule or regulation of any administrative or
Governmental Body):
(a) default shall be made in the due and punctual payment of the
principal of any of the Loans or the reimbursement of any drawings under
Letters of Credit when and as the same shall become due and payable whether
pursuant to Section 2 hereof, at maturity, by acceleration or otherwise; or
(b) default shall be made in the due and punctual payment of any
installment of interest on any of the Loans or any other Lender Debt or of
any fee or expense owing to any Lender or the Agent pursuant to any of the
Loan Documents, when and as such amount of interest, fee or expense shall
become due and payable and such default shall continue unremedied for three
Business Days; or
(c) default shall be made by any Credit Party in the performance or
observance of, or shall occur under, any covenant, agreement or provision
(other than as described in clause (a) or (b) above) contained in this
Agreement or any other Loan Document or in any instrument or document
evidencing or creating any obligation, guaranty or Lien in favor of the Agent
or delivered to the Lenders or the Agent in connection with or pursuant to
this Agreement or any Lender Debt, and, except in the case of the agreements
and covenants contained in Sections 9 and 10 hereof, as to each
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of which no notice or grace period shall apply, continuance of such default
for a period of thirty days (or, in the case where agreements and covenants
contained in any Loan Document provide for a grace period that is less than
thirty days, continuance of a default for such shorter period) after there
has been given Written Notice of such default to any of the Credit Parties by
the Agent; or if this Agreement or any other Loan Document or any such other
instrument or document shall terminate, be terminated or become void or
unenforceable for any reason whatsoever without the written consent of the
Agent; or
(d) (i) one or more defaults shall occur and be continuing in the
payment of any principal, interest or premium with respect to any
Indebtedness for Borrowed Money or any obligation which is the substantive
equivalent of Indebtedness for Borrowed Money (including, without limitation,
obligations under conditional sales contracts, finance leases and the like
and the Senior Indebtedness) of which any Credit Party is principal,
guarantor, or other surety, outstanding in a principal amount of at least
$1,000,000 in the aggregate, or (ii) one or more defaults shall occur under
any agreement or instrument under or pursuant to which any such Indebtedness
for Borrowed Money or obligation (in a principal amount of at least
$1,000,000 in the aggregate) may have been issued, evidenced, created,
assumed, guaranteed or secured by any Credit Party and, in the case of either
clause (i) or (ii) of this Section 10.1 (d), such default shall continue for
more than the period of grace, if any, therein specified or any holder of any
such Indebtedness for Borrowed Money (or any agent or trustee therefor) shall
be entitled to take any action to realize upon any Lien on any property
securing same, or (iii) Indebtedness for Borrowed Money or obligation (in a
principal amount of at least $1,000,000 in the aggregate) shall be declared
due and payable prior to the stated maturity thereof; or
(e) any representation, warranty or other statement of fact made or
given herein or in any writing, certificate, report or statement at any time
furnished by or on behalf of any Credit Party to any Lender or the Agent
pursuant to or in connection with this Agreement (including, without
limitation, any Borrower's Certificate or Borrowing Base Certificate) or any
other Loan Document or any Senior Note Document or any document or instrument
relating to any component of the Overall Refinancing, shall be false or
misleading in any material respect when made or given; or
(f) any Credit Party shall (i) be unable to pay its debts generally as
they become due; (ii) file a petition to take advantage of any insolvency
act; (iii) make an assignment for the benefit of its creditors; (iv) commence
a proceeding for the appointment of a receiver, trustee, liquidator or
conservator of itself or of a whole or any substantial part of its property;
(v) file a petition or answer seeking reorganization or arrangement or
similar relief under the Federal Bankruptcy Code or any other applicable law
or statute of the United States of America or any state; or (vi) by
appropriate proceedings of the board of directors, or the general or limited
partners or other governing body of any Credit Party, authorize the filing of
any such petition, making of such assignment or commencement of such a
proceeding; or
(g) a court of competent jurisdiction shall enter an order, judgment or
decree appointing a custodian, receiver, trustee, liquidator or conservator
of any Credit Party or of the whole or any substantial part of its
properties, or approve a petition filed against any Credit Party seeking
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reorganization or arrangement or similar relief under the Federal Bankruptcy
Code or any other applicable law or statute of the United States of America
or any state; or if, under the provisions of any other law for the relief or
aid of debtors, a court of competent jurisdiction shall assume custody or
control of any Credit Party or of the whole or any substantial part of its
properties; or if there is commenced against any Credit Party any proceeding
for any of the foregoing relief and such proceeding or petition remains
undismissed for a period of sixty days; or if any Credit Party by any act
indicates its consent to or approval of any such proceeding or petition; or
(h) (i) any judgment remaining unpaid, unstayed or undismissed for
a period of 30 days is rendered against any Credit Party which by itself or
together with all other such judgments rendered against such Credit Party
remaining unpaid, unstayed or undismissed for a period of 30 days, is in
excess of $250,000, or (ii) there is any attachment, injunction or execution
against any of its properties remaining unstayed or undismissed for a period
of 30 days which by itself or together with all other attachments,
injunctions and executions against its properties remaining unstayed or
undismissed for a period of 30 days is for an amount in excess of $250,000;
or
(i) (i) a Reportable Event shall have occurred with respect to a
Pension Benefit Plan that could reasonably be expected to have a Material
Adverse Effect;
(ii) any Credit Party or any ERISA Affiliate, or an
administrator of any Pension Benefit Plan shall have filed a notice of intent
to terminate a Pension Benefit Plan in a "distress termination" under the
provisions of Section 4041(c) of ERISA;
(iii) any Credit Party or any ERISA Affiliate, or an
administrator of a Pension Benefit Plan shall have received a notice that the
PBGC has instituted proceedings to terminate (or appoint a trustee to
administer) a Pension Benefit Plan;
(iv) any other event or condition exists which might, in the
reasonable opinion of the Majority Lenders, constitute grounds under the
provisions of Section 4042(a)(1) or (2) of ERISA for the termination of (or
the appointment of a trustee to administer) any Pension Benefit Plan by the
PBGC;
(v) any Credit Party or any ERISA Affiliate has incurred, or is
likely to incur, a liability under the provisions of Section 4063, 4064 or
4201 of ERISA that could reasonably be expected to have a Material Adverse
Effect on the Borrower, Group, such ERISA Affiliate or any of their
respective Subsidiaries;
(vi) any Person shall engage in any transaction in connection
with which any Credit Party could be subject to either a civil penalty
assessed pursuant to the provisions of Section 502(i) of ERISA or a tax
imposed under the provisions of Section 4975 of the Code which tax penalty
could reasonably be expected to have a Material Adverse Effect on the
Borrower, Group, such ERISA Affiliate or any of their respective
Subsidiaries;
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(vii) any Credit Party or any ERISA Affiliate fails to pay the
full amount of any installment due under Section 412(m) of the Code that
could reasonably be expected to have a Material Adverse Effect on the
Borrower, Group, such ERISA Affiliate or any of their respective
Subsidiaries;
(viii) any other event or condition exists with respect to any
Employee Plan which could result in the imposition of any tax, penalty or
other liability under ERISA or the Code that could reasonably be expected to
have a Material Adverse Effect on the Borrower, Group, such ERISA Affiliate
or any of their respective Subsidiaries;
(ix) any other event or condition shall occur or exist, and in
each case in clauses (i) through (viii) above, in the reasonable opinion of
the Majority Lenders, such event or condition, together with all other events
or conditions, if any, could subject any Credit Party or any ERISA Affiliate
to any tax, penalty or other liabilities which in the aggregate would have a
Material Adverse Effect on the Borrower, Group, such ERISA Affiliate or any
of their respective Subsidiaries; or
(j) (i) a Change of Control resulting from the death of HPH shall
have occurred and Majority Lenders shall not have approved (in their sole
discretion) within 150 days of such Change of Control the Person succeeding
to HPH's ownership interest, or (ii) a Change of Control resulting from any
other event shall occur; or
(k) a default by any Credit Party under any provision of any Lease
shall occur which, together with other Leases in default, involve annual base
rent of $150,000 or more, shall occur and continue beyond any applicable
grace period which would permit the lessor thereunder to (i) terminate the
Lease or (ii) exercise any other rights under such Lease in a manner which
would have an adverse effect on the Lenders' interest in the Collateral
located on the premises in respect of such Lease;
then, and in any such event and at any time thereafter, if such or any other
Event of Default shall then be continuing:
(A) either or both of the following actions may be taken: (i) the
Agent may, at its option, or, the Agent shall, upon the direction of the
Majority Lenders, (x) declare any obligation to lend hereunder (including,
without limitation, each Lender's Commitment) terminated, and/or (y)
declare any obligation to issue Letters of Credit hereunder terminated,
whereupon such obligation to make further Loans or issue Letters of Credit
hereunder shall terminate immediately and (ii) the Agent may, at its
option, or, the Agent shall, upon the direction of the Majority Lenders,
(x) declare any or all of the Lender Debt to be due and payable, and the
same, all interest accrued thereon and all other Lender Debt shall
forthwith become due and payable without presentment, demand, protest or
notice of any kind, all of which are hereby expressly waived, anything
contained herein or in any instrument evidencing the Lender Debt to the
contrary notwithstanding and/or (y) demand that the Borrower and the
Guarantors provide to the Agent (for the PRO RATA benefit of the Lenders)
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Letter of Credit Cash Collateral in an amount equal to the undrawn amount
under all Letters of Credit; PROVIDED, HOWEVER, that notwithstanding the
above, if there shall occur an Event of Default under clause (f) (other
than clause (f) (i)) above or clause (g) above, then the obligation of the
Lenders to lend and issue Letters of Credit hereunder (including, without
limitation, each Lender's Commitment) shall automatically terminate and any
and all of the Lender Debt shall be immediately due and payable without any
action by the Agent or any Lender;
(B) Agent shall have and may exercise all rights and remedies of a
secured party under the UCC in effect in the State of Illinois at such
time, whether or not applicable to the affected Collateral, and otherwise,
including, without limitation, the right to foreclose the Liens granted to
it herein or in any of the Security Documents by any available judicial
procedure and/or to take possession of any or all of the Collateral in
which it has a Lien, the other security for the Lender Debt and the books
and records relating thereto, with or without judicial process; for the
purposes of the preceding sentence, the Agent, may enter upon any or all of
the premises where any of the Collateral, such other security or books or
records may be situated and take possession and remove the same therefrom;
and
(C) Agent shall have the right, in its sole discretion, to determine
which rights, Liens or remedies it shall at any time pursue, relinquish,
subordinate, modify or take any other action with respect thereto, without
in any way modifying or affecting any of them or any of the Lenders' rights
hereunder; and any moneys, deposits, Receivables, balances or other
property which may come into any Lender's, or the Agent's hands at any time
or in any manner, may be retained by such Lender or the Agent and applied
to any of the Lender Debt.
Section 10.2 SUITS FOR ENFORCEMENT. In case any one or more Events of
Default shall occur and be continuing, the Agent on behalf of the Agent and
the Lenders may proceed to protect and enforce their rights or remedies
either by suit in equity or by action at law, or both, whether for the
specific performance of any covenant, agreement or other provision contained
herein or in any document or instrument delivered in connection with or
pursuant to this Agreement or any other Loan Document, or to enforce the
payment of the Lender Debt or any other legal or equitable right or remedy.
Section 10.3 RIGHTS AND REMEDIES CUMULATIVE. No right or remedy
herein conferred upon the Lenders or the Agent is intended to be exclusive of
any other right or remedy contained herein or in any instrument or document
delivered in connection with or pursuant to this Agreement or any other Loan
Document, and every such right or remedy shall be cumulative and shall be in
addition to every other such right or remedy contained herein and therein or
now or hereafter existing at law or in equity or by statute, or otherwise.
Section 10.4 RIGHTS AND REMEDIES NOT WAIVED. No course of dealing
between any of the Credit Parties and any Lender or the Agent or any failure
or delay on the part of any Lender or the Agent in exercising any rights or
remedies hereunder shall operate as a waiver of any rights or remedies of the
Lenders or the Agent and no single or partial exercise of any rights or
remedies hereunder
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shall operate as a waiver or preclude the exercise of any other rights or
remedies hereunder or of the same right or remedy on a future occasion.
Section 10.5 APPLICATION OF PROCEEDS. (a) After the occurrence of an
Event of Default and acceleration of the Lender Debt, the proceeds of the
Collateral and of property of Persons other than the Credit Parties securing
the Lender Debt and collections from each Guaranty shall be applied by the
Agent to payment of the Lender Debt in the following order, unless the
Lenders otherwise agree in writing or a court of competent jurisdiction shall
otherwise direct:
(i) FIRST, to payment of all costs and expenses of the Agent and
the Lenders incurred in connection with the preservation, collection and
enforcement of the Lender Debt or any Guaranties, or of any of the Liens
granted to the Agent pursuant to the Security Documents or otherwise,
including, without limitation, any amounts advanced by the Agent or the
Lenders to protect or preserve such Collateral;
(ii) SECOND, ratably, to (A) each Lender (or affiliate of Lender) to
reimburse such Lender (or Affiliate of Lender) for amounts due under any
Hedge Agreements to the extent such Hedge Agreements constitute Lender Debt
and (B) to payment of that portion of the Lender Debt constituting accrued
and unpaid interest and fees and indemnities payable under Section 2
hereof, ratably amongst the Agent and the Lenders in accordance with the
proportion which (1) the accrued interest and fees and indemnities payable
under Section 2 hereof constituting the Lender Debt owing to the Agent or
any Lender, as the case may be, at such time bears to (2) the aggregate
amount of accrued interest and fees and indemnities payable under Section 2
hereof constituting the Lender Debt owing to the Agent and all of the
Lenders at such time, until such interest, fees and indemnities shall be
paid in full;
(iii) THIRD, to each Issuing Lender to reimburse the Issuing
Lender for that portion of any payments made by it with respect to Letters
of Credit for which a Lender, as a participant in such Letter of Credit,
failed to pay its PRO RATA share thereof as required pursuant to Section
12.16 hereof;
(iv) FOURTH, to payment of the principal of the Lender Debt
(excluding the aggregate undrawn amount of any then outstanding Letters of
Credit), ratably amongst the Lenders in accordance with the proportion
which the principal amount of the Lender Debt owing to each such Lender
bears to the aggregate principal amount of the Lender Debt (excluding the
aggregate undrawn amount of any then outstanding Letters of Credit) owing
to all of the Lenders until such principal of the Lender Debt shall be
paid in full;
(v) FIFTH, to the extent that the Letter of Credit Cash Collateral,
if any, held by the Agent as security for the Letters of Credit is less
than the undrawn amount of the Letters of Credit outstanding at the time of
distribution hereunder, to the Agent to be held by the Agent as additional
collateral therefor;
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(vi) SIXTH, to the payment of all other Lender Debt, ratably amongst
the Lenders in accordance with the proportion which the amount of such
other Lender Debt owing to each such Lender bears to the aggregate
principal amount of such other Lender Debt owing to all of the Lenders
until such other Lender Debt shall be paid in full; and
(vii) SEVENTH, the balance, if any, after all of the Lender Debt
has been satisfied, shall, except as otherwise provided in the Security
Documents, be deposited by the Agent in an operating account of the
Borrower with the Agent designated by the Borrower, or paid over to such
other Person or Persons as may be required by law.
The Credit Parties acknowledge and agree that they shall remain liable
to the extent of any deficiency between the amount of the proceeds of the
Collateral and collections under the Guaranties (to the fullest extent
recourse to such Credit Parties under such Guaranties) and the aggregate
amount of the sums referred to in subparagraphs (a) and (b) above.
SECTION 11. REPRESENTATIONS AND WARRANTIES
The Borrower hereby represents and warrants as follows (which
representations and warranties shall survive the execution and delivery of
this Agreement and shall be deemed to be incorporated in each Borrower's
Certificate submitted to the Agent pursuant to Section 5.7 hereof, and shall
be deemed repeated and confirmed with respect to, and as of the date of, each
borrowing and each issuance of a Letter of Credit hereunder and each notice
thereof and, in addition, in the case of the representation and warranty
contained in Section 11.6(c), in each Borrowing Base Certificate delivered to
the Agent or any Lender; PROVIDED, THAT any representation or warranty which
is made as of a specified date shall be deemed repeated as of such date):
Section 11.1 CORPORATE STATUS. (a) Each Credit Party is a duly
organized and validly existing corporation in good standing under the laws of
the state of its incorporation with perpetual corporate existence, and has
the corporate power and authority to own its properties and to transact the
business in which it is engaged or presently proposes to engage.
(b) Each Credit Party is qualified as a foreign corporation and in good
standing in each other jurisdiction in which it owns or leases property of a
nature, or transacts business of a type, that would make such qualification
necessary, except where the failure to so qualify would not have a Material
Adverse Effect on such Credit Party.
(c) The capital stock of each Credit Party is owned as set forth on
Schedule 11.1 hereto (which shall be updated from time to time upon the
formation of any new Subsidiary of the Borrower and delivered to the Agent
and each Lender), which Schedule 11.1 correctly sets forth all Liens
encumbering such equity interests.
(d) None of the Credit Parties has any Subsidiaries except as set forth
on Schedule 11.1 hereto (which shall be updated from time to time upon the
formation of any new Subsidiary of the Borrower and delivered to the Agent
and each Lender), which Schedule 11.1 correctly sets forth the
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name of each such Subsidiary, its jurisdiction of incorporation and a
statement of the outstanding capitalization of each such Subsidiary as of the
date of delivery of such Schedule 11.1.
Section 11.2 POWER AND AUTHORITY. Each of the Credit Parties has the
corporate power and authority to execute, deliver and perform the terms and
provisions of this Agreement, the other Loan Documents, the Senior Note
Documents and all other documents to which it is a party in respect of any
component of the Overall Refinancing to which it is a party, and all
instruments and documents delivered by it pursuant thereto and hereto and
each of the Credit Parties has duly taken or caused to be duly taken all
necessary corporate action (including, without limitation, the obtaining of
any consent of stockholders required by law or its certificate of
incorporation or by-laws), to authorize the execution, delivery and
performance of this Agreement, each other Loan Document, the Senior Note
Documents, and all other instruments and documents to which it is a party in
respect of any component of the Overall Refinancing to which it is a party,
and the instruments and documents delivered by it pursuant thereto and
hereto. Each of this Agreement, the other Loan Documents, the Senior Note
Documents, and each of the other instruments and documents executed and
delivered by any of the Credit Parties pursuant hereto, thereto or in respect
of any component of the Overall Refinancing to which it is a party constitute
a legal, valid and binding obligation of such Person, and is enforceable in
accordance with its terms.
Section 11.3 NO VIOLATION OF AGREEMENTS. (a) None of the Credit
Parties is in violation of any provision of its certificate or articles of
incorporation, as the case may be, or its bylaws or is in default under any
indenture, mortgage, deed of trust, agreement or other instrument (other than
any Lease) to which any of them is a party or by which any of them may be
bound.
(b) Neither the execution and delivery of this Agreement, the other
Loan Documents, the Senior Note Documents or any of the instruments and
documents to be delivered pursuant hereto, thereto or in respect of any
component of the Overall Refinancing nor the consummation of the transactions
herein and therein contemplated, nor compliance with the provisions hereof or
thereof, nor the execution, delivery and performance by any Credit Party of
this Agreement, the other Loan Documents or the Senior Note Documents or any
of such instruments or documents, nor compliance with the provisions hereof
or thereof, will violate any provision of the certificate of incorporation or
by-laws of any Credit Party or any law or regulation, or any order or decree
of any court or governmental instrumentality, or will (i) conflict with, or
result in the breach of, or constitute a default under, any indenture,
mortgage, deed of trust, agreement or other instrument to which any Credit
Party is a party or by which any of them or their respective properties may
be bound, or (ii) except as contemplated under this Agreement, result in the
creation or imposition of any Lien upon any property of any Credit Party. No
term under the documentation relating to any component of the Overall
Refinancing is in conflict with any of the Loan Documents.
Section 11.4 NO LITIGATION. (a) Except as set forth in Schedule
11.4(a) hereto, there are no actions, suits or proceedings pending or, to the
best knowledge of Group or the Borrower, threatened against HPH, Apollo, any
of the Credit Parties or any of their respective Subsidiaries before any
court, arbitrator or Governmental Body which challenge the validity or
propriety of the transactions contemplated under this Agreement, the other
Loan Documents, the Senior Note Documents or the
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documents, instruments and documents executed or delivered in connection
herewith, therewith or related thereto or any component of the Overall
Refinancing or which, if adversely determined, would result in any Material
Adverse Effect on the Borrower, Group or any of their respective Subsidiaries.
(b) No Credit Party or any Subsidiary thereof is in default in any
material respect under any applicable statute, rule, order, decree or
regulation of any court, arbitrator or Governmental Body having jurisdiction
over such Credit Party or Subsidiary.
(c) No judgment, order, injunction or other similar restraint with
respect to HPH, Apollo, any Credit Party or any Subsidiary thereof exists
which prohibits any of the other transactions contemplated hereby or in
connection herewith.
Section 11.5 GOOD TITLE TO PROPERTIES; CONDITION OF ASSETS. (a) Each
Credit Party and its Subsidiaries owns and has good and marketable title to
all the properties and assets reflected on its balance sheet and valid
leasehold interests in the property it leases, including, without limitation,
the Collateral, subject to no Liens, except Permitted Liens. All real
property owned by or leased to any Credit Party or any Subsidiary thereof is
described on Schedule 11.5 annexed hereto.
(b) Each Lease described on Schedule 11.5 hereto is in full force and
effect, is valid and binding and is enforceable in accordance with its terms.
There exists no default by any Credit Party, or to the best knowledge of the
Borrower by any other Person, under any provision of any Lease which would
permit the lessor thereunder to terminate the Lease or to exercise any other
rights under such Lease which would have an adverse effect on the Lenders'
interest in any Collateral located on the premises in respect of any Lease.
(c) Except as set forth in Schedule 11.5, the Assets are serviceable or
in good working order taken as a whole, and suitable for use in accordance
with the practices of the Borrower.
(d) Each Executive Agreement described on Schedule 11.5 hereto is in
full force and effect, is valid and binding and is enforceable in accordance
with its terms. There exists no default by any Credit Party, or to the best
knowledge of the Borrower by any other Person, under any provision of any
Executive Agreement.
(e) As of the Closing Date, each supply contract between the Borrower
and any of The Dannon Company, Inc., Yoplait U.S.A. (a division of General
Mills Products Corp.) or Ross Laboratories (a division of Abbott Laboratories
USA) is in full force and effect, is valid and binding and is enforceable in
accordance with its terms.
(f) There exists no default by any Credit Party, or to the best
knowledge of the Borrower by any other Person, under any provision of any
agreement to which any Credit Party is a party to the extent that such
default could reasonably be expected to have a Material Adverse Effect on the
Borrower, Group or any of their respective Subsidiaries.
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Section 11.6 FINANCIAL STATEMENTS AND CONDITION. (a) The audited
Financial Statements present fairly in accordance with GAAP (i) the financial
position of the Borrower as of the date of such balance sheet and (ii) the
results of operations of the Borrower for such period. To the best of the
Borrower's knowledge, (x) the Borrower had no material direct or indirect
contingent liabilities as of such date which are not either reserved for in
such balance sheet or described in footnotes thereto and (y) all Financial
Statements have been prepared in accordance with GAAP applied on a basis
consistently maintained throughout the period involved.
(b) To the best of the Borrower's knowledge, the unaudited Financial
Statements of the Borrower as at and for the period ended March 31, 1996,
present fairly in accordance with GAAP (subject to normal recurring year-end
adjustments and the absence of footnotes) (i) the financial position of the
Borrower as of the date of such balance sheet and (ii) the results of
operations of the Borrower for the period then ended.
(c) Except as set forth on Schedule 11.6(c) hereto, the Borrower has
experienced no Material Adverse Change since February 29, 1996.
(d) The Agent has been furnished a PRO FORMA balance sheet of the
Borrower and its Subsidiaries taking into account all transactions
contemplated hereby and the other transactions contemplated by the Overall
Refinancing. Upon giving effect to the Overall Refinancing, none of the
Credit Parties will have any material liabilities, contingent or otherwise,
which are not referred to in such balance sheet or in the notes thereto and
which are required to be disclosed therein in accordance with GAAP.
(e) The Agent has been furnished projections of the future performance
of the Borrower and its Subsidiaries. The projections and PRO FORMA
financial information contained in such materials are based upon good faith
estimates and assumptions believed by the Borrower to be reasonable at the
time made, it being recognized by the Lenders that such projections as to
future events are not to be viewed as facts and that actual results during
the period or periods covered by such projections may differ from the
projected results. No fact is known to any Credit Party which would have a
Material Adverse Effect on the Borrower, Group or any of their respective
Subsidiaries that has not been set forth in the financial statements referred
to in this Section 11.6 or disclosed herein or in the Schedules hereto or
otherwise disclosed to the Agent in writing prior to the Closing Date.
Section 11.7 INTELLECTUAL PROPERTY. The Borrower possesses all the
Intellectual Property listed on Schedule 11.7 hereto, which are adequate for
the conduct of its business, without conflict with the rights or claimed
rights of others.
Section 11.8 TAX LIABILITY. Each of the Credit Parties and their
respective Subsidiaries has filed all tax returns which are required to be
filed, and, except as otherwise permitted by Section 8.2 hereof, has paid all
taxes which have become due pursuant to such returns or pursuant to any
assessment received by it.
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Section 11.9 GOVERNMENTAL ACTION. No action of, or filing with, any
governmental or public body or authority (other than normal reporting
requirements or filing as to Collateral under the provisions of Section 5
hereof) is required to authorize, or is otherwise required in connection
with, the execution, delivery or performance of this Agreement, the Security
Documents, the Guaranties, the Notes, the other Loan Documents, the Senior
Note Documents or any of the instruments or documents to be delivered
pursuant hereto or thereto or pursuant to any component of the Overall
Refinancing except such as have been made or will be made as contemplated by
such agreements.
Section 11.10 DISCLOSURE. Neither the Schedules hereto, nor the
financial statements referred to in Section 11.6 hereof, nor the
certificates, statements, reports or other documents furnished to any Lender
or the Agent by or on behalf of any of the Credit Parties in connection
herewith or in connection with any transaction contemplated hereby, nor this
Agreement or any other Loan Document or Senior Note Documents, or instruments
or documents relating to any component of the Overall Refinancing, at the
time furnished, contains any untrue statement of a material fact or omits to
state any material fact (in each case, known to any such Person in the case
of any document not prepared by it) necessary in order to make the statements
contained herein or therein not misleading in light of the circumstances in
which the same were made.
Section 11.11 REGULATION U. None of the Credit Parties or any of their
respective Subsidiaries owns any "margin stock" as such term is defined in
Regulation U, as amended (12 C.F.R. Part 221), of the Board. The proceeds of
the borrowings made hereunder will be used only for the purposes set forth in
Section 8 hereof. None of the proceeds will be used, directly or indirectly,
for the purpose of purchasing or carrying any margin stock or for the purpose
of reducing or retiring any Indebtedness which was originally incurred to
purchase or carry margin stock or for any other purpose which might
constitute the Loans under this Agreement a "purpose credit" within the
meaning of said Regulation U or Regulation X (12 C.F.R. Part 224) of the
Board. None of the Credit Parties or any of their respective Subsidiaries or
any agent acting in its behalf has taken or will take any action which might
cause this Agreement or any of the documents or instruments delivered
pursuant hereto to violate any regulation of the Board or to violate the
Securities Exchange Act of 1934 or any applicable state securities laws.
Section 11.12 INVESTMENT COMPANY. None of the Credit Parties or any of
their respective Subsidiaries is an "investment company," or an "affiliated
person" of, or "promoter" or "principal underwriter" for, an "investment
company," as such terms are defined in the Investment Company Act of 1940, as
amended (15 U.S.C. Sections 80a-1, ET SEQ.). None of the transactions
contemplated by this Agreement, the other Loan Documents, the Senior Note
Documents or any instruments or documents relating to any component of the
Overall Refinancing will violate such Act.
Section 11.13 EMPLOYEE BENEFIT PLANS. (a) None of the Credit Parties
or any ERISA Affiliate maintains or contributes to any Employee Plan, or
within the preceding six years was required to contribute to any "pension
plan" as defined in Section 3(2) of ERISA, other than those listed on
Schedule 12.13 hereto. No prohibited transaction (within the meaning of
Section 406 of ERISA and Code Section 4975) has occurred with respect to any
Employee Plan which would subject any of the Credit Parties to a civil
penalty under Section 502(i) of ERISA or tax under Section 4975 of the
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Code that could reasonably be expected to have a Material Adverse Effect on
the Borrower, Group, any ERISA Affiliate or any of their respective
Subsidiaries.
(b) All of the Employee Plans comply currently both as to form and
operation, in all material respects, with their terms and with the provisions
of ERISA and the Code, and all other applicable laws, rules and regulations.
Each Employee Plan which is intended to be qualified under Code Section
401(a), has been determined by the IRS to be so qualified, and the trusts
created thereunder have been determined to be exempt from tax under the
provisions of Code Section 501. Nothing has occurred which would cause the
loss of such qualification or the impositions of any Code or ERISA tax
liability or penalty to the Borrower, Group, any ERISA Affiliate or any of
their respective Subsidiaries.
(c) The amount for which the Credit Parties or any ERISA Affiliate
would be liable pursuant to the provisions of Section 4062, 4063 or 4064 of
ERISA would be zero if each "Pension Benefit Plan" is terminated.
(d) None of the Credit Parties nor any ERISA Affiliate is now, or has
been during the preceding six years, a contributing employer to a
"Multiemployer Plan" other than those listed on Schedule 11.13 hereto. None
of the Credit Parties nor any of their respective ERISA Affiliates has (i)
ceased operations at a facility so as to become subject to the provisions of
Section 4068(f) of ERISA, (ii) withdrawn as a substantial employer so as to
become subject to the provisions of Section 4063 of ERISA, (iii) ceased
making contributions on or before the Closing Date to any Pension Benefit
Plan subject to the provisions of Section 4064(a) of ERISA to which any of
the Credit Parties or any ERISA Affiliate made contributions during any of
the six years prior to the Closing Date, (iv) incurred or caused to occur a
"complete withdrawal" (within the meaning of Section 4203 of ERISA) or a
"partial withdrawal" (within the meaning of Section 4205 of ERISA) from a
Multiemployer Plan so as to incur withdrawal liability under Section 4201 of
ERISA (without regard to subsequent reduction or waiver of such liability
under Section 4207 or 4208 of ERISA), (v) been a party to any transaction or
agreement under which the provisions of Section 4204 of ERISA were applicable
or (vi) failed to make a required contribution to a Multiemployer Plan. The
Credit Parties and ERISA Affiliates have heretofore furnished to the Agent
copies of all correspondence with the Multiemployer Plans and/or other
material which supports the representations made in the preceding sentence.
No Pension Benefit Plan has incurred an ERISA Event, nor has any accumulated
funding deficiency (as defined in Section 41 2(a) of the Code) been incurred,
not has any funding waiver from the Internal Revenue Service been received or
requested with respect-to any Pension Benefit Plan.
(e) No notice of intent to terminate a Pension Benefit Plan under the
termination provisions of Section 4041(b) or (c) of ERISA has been filed by
any of the Credit Parties or any ERISA Affiliate, nor has any Pension Benefit
Plan been terminated, pursuant to the provisions of Section 4041(e) of ERISA.
(f) The PBGC has not instituted proceedings to terminate (or appoint a
trustee to administer) a Pension Benefit Plan maintained for employees of any
of the Credit Parties or any
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ERISA Affiliate and no event has occurred or condition exists which might
constitute grounds under the provisions of Section 4042 of ERISA for the
termination of (or the appointment of a trustee to administer) any such
Pension Benefit Plan.
(g) With respect to each Pension Benefit Plan, the Credit Parties and
ERISA Affiliates have no reason to believe that the funding method used in
connection with such Plan is not acceptable under ERISA, and the actuarial
assumptions used in connection with funding such Pension Benefit Plan are not
reasonable. The assets of each such Pension Benefit Plan (other than the
Multiemployer Plans) are at least equal to the present value of the "benefit
liabilities" (within the meaning of Section 4001(a)(16) of ERISA) under such
Pension Benefit Plan, in each case as of the latest actuarial valuation date
for such Pension Benefit Plan (determined in accordance with the same
actuarial assumptions and methods as those used by such Pension Benefit
Plan's actuary in its valuation of such Plan as of such valuation date).
(h) There are no actions, suits or claims pending (other than routine
claims for benefits) or, to the knowledge of any of the Credit Parties or any
ERISA Affiliate, which could reasonably be expected to be asserted, against
any Employee Plan or the assets of any such Employee Plan. No civil or
criminal action brought pursuant to the provisions of ERISA is pending or, to
the best knowledge of any Credit Party, threatened against any fiduciary or
any Employee Plan.
(i) The Credit Parties have delivered or made available with respect to
each Employee Plan true and complete copies, as applicable, of (i) all plan
documents and amendments, trust agreements and insurance and annuity
contracts and policies, (ii) the most recent determination letter issued from
the Internal Revenue Service ("IRS") in response to an application filed on
Form 5300, 5301, 5303 or 5310, (iii) the Annual Reports (Form 5500 Series)
and accompanying schedules, as filed, for the most recently completed three
plan years, (iv) the current summary plan description, (v) the financial
statements for the most recently completed three plan years, (vi) the
actuarial reports for the most recently completed three plan years, (vii) all
correspondence with the IRS, Department of Labor or PBGC regarding any
controversy.
(j) The Credit Parties do not have any obligations under any of the
plans or arrangements to provide health benefits to its former employees,
except as specifically required by statute. The Credit Parties and all
ERISA Affiliates have at all times complied with the health care continuation
requirements of Part 6 of Title I of ERISA.
(k) There is currently no liability with respect to any of the Credit
Parties under the Worker Adjustment and Retraining Notification Act and none
of the Credit Parties contemplates taking any action, or permitting any of
its Subsidiaries to take any action, that may result in such liability.
Section 11.14 OVERALL REFINANCING. Each component of the Overall
Refinancing has been duly and validly consummated in conformity with all
applicable laws and regulations of the United States, each state thereof and
each subdivision of any such state.
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Section 11.15 SOLVENCY. Both immediately prior to and after giving
effect to the transactions contemplated under the Loan Documents and/or to
occur in connection with the Overall Refinancing, the fair value and present
fair saleable value of the assets of the Borrower shall exceed its total
liabilities on its debts (including, without limitation, contingent
liabilities) by an amount deemed reasonably sufficient by the Agent; the
Borrower will be able to pay its debts as they mature in the normal course of
business; and the Borrower will not have unreasonably small capital to
conduct its business.
Section 11.16 PERMITS, ETC. (a) Each Credit Party and each Subsidiary
thereof possesses all permits, licenses, approvals and consents of Federal,
state and local governments and regulatory authorities required to conduct
properly its business substantially as presently conducted and proposed to be
conducted, except to the extent that failure to have any such permit,
license, approval or consent could not reasonably be expected to have a
Material Adverse Effect on the Borrower, Group or any of their respective
Subsidiaries.
(b) Each such permit, license, approval and consent is and will be in
full force and effect, and no event has or shall have occurred which permits
(or with the passage of time would permit) the revocation or termination of
any such permit, license, approval or consent or the imposition of any
restriction thereon of such nature as may materially limit the operation of
the business covered thereby.
(c) All approvals, applications, filings, registrations, consents or
other actions required of any local, state or Federal authority to enable
each Credit Party and the Subsidiaries thereof to exploit any such permit,
license, approval or consent has been obtained or made.
(d) No Credit Party nor any Subsidiary of any Credit Party (i) is in
violation of any duty or obligation required by law or any rule or regulation
applicable to the operation of any of its businesses, which violation could
reasonably be expected to have a Material Adverse Effect on the Borrower or
any of its Subsidiaries, or (ii) has received any notice from the granting
body or any other governmental authority with respect to any material breach
of any covenant under, or any material default with respect to, any such
permit, license, approval or consent.
(e) Before and upon giving effect to this Agreement, the Notes and the
other Loan Documents, no material default shall have occurred and be
continuing under any such permit, license, approval or consent.
(f) All consents and approvals of, filings and registrations with, and
all other actions in respect of, all governmental agencies, authorities or
instrumentalities required to maintain any such permit, license, approval or
consent in full force and effect prior to the scheduled date of expiration
thereof has been, or, prior to the time when required, will have been,
obtained, given, filed or taken and are or will be in full force and effect.
(g) There is not pending, or, to the best knowledge of any Credit Party
or Subsidiary thereof, threatened, any action to revoke, cancel, suspend,
modify or refuse to renew any permit,
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license, approval or consent and each business covered by each such permit,
license, approval or consent is being operated in compliance in all material
respects with such permit, license, approval or consent.
(h) There is not now issued or outstanding or, to the best knowledge of
any Credit Party or Subsidiary thereof, threatened any notice of any hearing,
violation or complaint against such Credit Party or Subsidiary thereof with
respect to any such permit, license, approval or consent and no Credit Party
or Subsidiary thereof has any knowledge that any Person intends to contest
the renewal of any such permit, license, approval or consent.
Section 11.17 ENVIRONMENTAL STATUS. (a) Except as set forth on
Schedule 11.17 hereto, none of the operations of the Credit Parties or any of
their respective Subsidiaries is in violation of any Environmental Law or any
Permit, and none of the Credit Parties, nor any of their respective
Subsidiaries, nor any of their respective past or present Property or
operations are, to their best knowledge, under investigation or under review
by any Governmental Body with respect to compliance therewith or with respect
to the generation, use, treatment, storage or Release of any Hazardous
Material.
(b) Except as set forth on Schedule 11.17 hereto, none of the Credit
Parties nor any of their respective Subsidiaries has any material liability
or contingent or potential material liability in connection with the past
generation, use, treatment, storage, disposal or Release of any Hazardous
Material.
(c) Except as set forth on Schedule 11.17 hereto, to the best knowledge
of the Credit Parties there is no Hazardous Material that may pose any
material risk to safety, health, or the environment, on, under or about any
Property owned, leased or operated by any Credit Party or any Subsidiary
thereof, or, to the best knowledge of the Credit Parties, any property
adjacent to any such property, and there has heretofore been no Release of
any such Hazardous Material on, under or about such property, to the best
knowledge of the Credit Parties, any such adjacent property. Except as set
forth on Schedule 11.17 hereto, none of the present or past Property of any
Credit Party or any of their respective Subsidiaries is listed or proposed
for listing on the National Priorities List pursuant to CERCLA ("NPL") or on
the Comprehensive Environmental Response Compensation Liability Information
System List ("CERCLIS") or any similar state list of sites requiring Remedial
Action. Except as set forth on Schedule 11.17 hereto, there is not now, nor
has there ever been on, under or about any Property of any Credit Party or
any Subsidiary thereof, any landfill, waste pile, underground storage tanks,
aboveground storage tanks, surface impoundment or hazardous waste storage
facility of any kind, any polychlorinated biphenyls used in hydraulic oils,
electrical transformers or other equipment, or any asbestos containing
material.
(d) Except as set forth on Schedule 11.17 hereto, (i) none of the
Credit Parties or any of their respective Subsidiaries is subject to any
Environmental Property Transfer Act, or to the extent that any such statute
is applicable to any Property of any Credit Party or any Subsidiary thereof,
such Credit Party or such Subsidiary has fully complied with the requirements
of such
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statute(s) and (ii) none of the Credit Parties or any of their respective
Subsidiaries or Affiliates has any outstanding obligations or liabilities
under any Environmental Property Transfer Act.
Section 11.18 VALIDITY OF RECEIVABLES AND INVENTORY. (a) Each
Eligible Receivable existing on the Closing Date is, and each future Eligible
Receivable will be, at the time of its creation, a genuine obligation
enforceable against the account debtor thereof in accordance with its terms,
and represents an undisputed and bona fide indebtedness owing to the Borrower
by an account debtor, without defense, setoff or counterclaim, free and clear
of all Liens other than the security interest in favor of the Agent under the
Security Documents; and no payment has been received with respect to any
Eligible Receivable and no Eligible Receivable is subject to any credit or
extension or agreement therefor. No Eligible Receivable is evidenced by any
note, draft, trade acceptance or other instrument for the payment of money.
(b) Each Receivable reflected in each Borrowing Base Certificate
delivered to the Agent or any Lender meets the criteria enumerated in clauses
(i) through (iv) of the definition of Eligible Receivables and is not within
any category of Receivables described in clauses (a) through (g) of said
definition. Each item of Inventory reflected in each Borrowing Base
Certificate delivered to the Agent or any Lender is not within any category
of Inventory described in clauses (a) through (g) of the definition of
Eligible Inventory.
Section 11.19 REPRESENTATIONS AND WARRANTIES IN OTHER DOCUMENTS. All
representations and warranties of each of Group and the Borrower contained in
any instruments and documents to which it is a party in connection with any
component of the Overall Refinancing are true and correct in all material
respects on and as of the date of the initial borrowing hereunder as though
made on and as of such date.
SECTION 12. MISCELLANEOUS
Section 12.1 COLLECTION COSTS. In the event that the Agent or any
Lender shall retain an attorney or attorneys to collect, enforce, protect,
maintain, preserve or foreclose its interests with respect to this Agreement,
the Loans, the Letters of Credit, the Notes, any other Loan Documents, any
Lender Debt, any Receivable or the Lien on any Collateral or any other
security for the Lender Debt or under any instrument or document delivered
pursuant to this Agreement, or in connection with any Lender Debt, or to
protect the rights of any holder or holders with respect thereto, each of the
Credit Parties shall, jointly and severally, pay all of the reasonable costs
and expenses of such collection, enforcement, protection, maintenance,
preservation or foreclosure, including reasonable attorneys' fees, which
amounts shall be part of the Lender Debt, and such Lender or the Agent may
take judgment for all such amounts. The attorney's fees arising from such
services, including those of any appellate proceedings, and all expenses,
costs, charges and other fees incurred by such counsel in any way or with
respect to or arising out of or in connection with or relating to any of the
events or actions described in this Section 12.1 shall be payable by the
Credit Parties to the Agent or the Lenders, as the case may be, on demand
(with interest accruing from the earlier of two Business Days following (i)
the date of such demand, and (ii) the date that the Borrower or any other
Credit Party became aware of the incurrence of such cost), and shall be
additional obligations under this
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Agreement. Without limiting the generality of the foregoing, such expenses,
costs, charges and fees may include: recording costs, appraisal costs,
paralegal fees, costs and expenses; accountants' fees, costs and expenses;
court costs and expenses; photocopying and duplicating expenses; court
reporter fees, costs and expenses; long distance telephone charges; air
express charges; telecopier charges; telecopier charges; secretarial overtime
charges; and expenses for travel, lodging and food paid or incurred in
connection with the performance of such legal services.
Section 12.2 AMENDMENT, MODIFICATION AND WAIVER. (a) No amendment,
modification or waiver of any provision of the Loan Documents and no consent
by the Agent or the Lenders, as the case may be, to any departure therefrom
by any of the Credit Parties shall be effective unless such amendment,
modification or waiver shall be in writing and signed by a duly authorized
officer of the appropriate Credit Party, the Agent the Lenders or the
Majority Lenders, as the case may be (as more fully described below), and the
same shall then be effective only for the period and on the conditions and
for the specific instances and purposes specified in such writing.
(b) No notice to or demand on any of the Credit Parties in any case
shall entitle any of the Credit Parties to any other or further notice or
demand in similar or other circumstances.
(c) Any term or provision of any Loan Document may be amended or
modified and the observance of any provision of any Loan Document may be
waived with the written consent of the Credit Parties being a party to such
Loan Document and the Majority Lenders; PROVIDED, HOWEVER, that no such
amendment, modification or waiver shall, without the prior written consent of
the Agent, amend or waive any of the provisions of Section 2.14, 3.5, 3.6,
3.7, 3.8, 12.5, 12.13, 12.14 or 12.15 hereof, or otherwise change any of the
rights or obligations of the Agent under any of the Loan Documents; PROVIDED,
FURTHER, that no amendment, modification or waiver of any provisions of
Section 4A hereof which adversely affects any Issuing Lender shall be
effective without the prior written consent of such Issuing Lender; and
PROVIDED, FURTHER, that no such amendment, modification or waiver shall,
without the prior written consent of all of the Lenders:
(i) extend the due date of the principal of or interest on any Loan
or any other amount payable hereunder, or portion thereof, change the rate
of interest on any Loan, or portion thereof, or reduce the amount of any
principal payable on any Loan, or portion thereof, or reduce the fees
payable to the Lenders hereunder or extend the time of payment thereof;
(ii) substitute, discharge, release or surrender any material
portion of the Collateral or use any portion of the Collateral to secure
any Indebtedness for Borrowed Money other than Lender Debt, except as
permitted in such Loan Document (it being understood that a release of
Collateral under circumstances where the Net Proceeds of the disposition
of such Collateral are applied to Lender Debt shall not require unanimous
consent, but shall be governed under Section 3.1 or Section 9.5 hereof,
as applicable) or amend the terms of any Guaranty or release any such
Guaranty;
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(iii) except as provided in Section 12.12 hereof, change the
dollar amount or percentage of the Revolving Commitment of any Lender;
(iv) modify any provision of this Section 12.2 or any other
provision which expressly requires the consent of all Lenders;
(v) amend the definition of "Majority Lenders"; or
(vi) amend Section 10.5 hereof.
The Agent, the Lenders and the Credit Parties hereby agree to cooperate to
effectuate the provisions of Sections 12.14 and 12.15 hereof, including,
without limitation, with respect to the execution of one or more amendments
of this Agreement or any other Loan Document.
Section 12.3 ILLINOIS LAW. THIS AGREEMENT AND THE NOTES SHALL BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF
ILLINOIS.
Section 12.4 NOTICES. All notices, requests, demands or other
communications provided for herein shall be in writing (unless otherwise
expressly provided herein) and shall be deemed to have been given (a) if by
registered or certified mail, return receipt requested, four Business Days
following the date when sent, (b) if by telex, when sent and answerback
received, (c) if by overnight courier, when received, (d) if by telecopier,
when sent and confirmed, or (e) if personally delivered or delivered by
messenger, when receipted for, in each case, addressed to Group or the
Borrower, or to the Agent or any Lender, at its respective office under its
name on the signature pages of this Agreement and to the attention of the
Person so designated, or to such Person or address as any party hereto shall
designate to the other from time to time in writing forwarded in like manner.
Section 12.5 FEES AND EXPENSES. Whether or not any Loans or other
financial accommodations are made hereunder, the Borrower shall pay all
expenses paid or incurred by the Agent (and, during the occurrence and
continuance of an Event of Default, the Lenders) in connection with the
transactions contemplated hereunder and in respect of the Overall Refinancing
including but not limited to appraisal fees, title insurance fees, audit
fees, recording fees, computer fees, duplication fees, telephone and
telecopier fees, travel and transportation fees, search and filing fees, and
the reasonable fees and expenses of Messrs. Vedder, Price, Kaufman &
Kammholz, special counsel to the Agent and all local counsel to the Agent.
Such expenses shall also include, without limitation, any costs paid or
incurred by the Agent in connection with any waivers, amendments,
modifications, extensions, renewals, renegotiations or "work-outs" of this
Agreement, any other Loan Document or other any instrument or document
delivered in connection herewith or therewith, and any consents or approvals
provided hereunder or thereunder or otherwise requested by any Credit Party.
Without limiting the generality of the foregoing, such expenses, costs,
charges and fees may include: recording costs, appraisal costs, paralegal
fees, costs and expenses; accountants' fees, costs and expenses; photocopying
and duplicating expenses; long distance telephone charges; air express
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charges; telegram charges; telecopier charges; secretarial overtime charges;
and expenses for travel, lodging and food paid or incurred in connection with
the performance of such legal services.
Section 12.6 STAMP OR OTHER TAX. Should any stamp or excise tax
become payable in respect of this Agreement, any Note, any other Loan
Document, the Lender Debt, the Collateral or any modification hereof or
thereof, each of the Credit Parties shall pay, the liability of which is
joint and several, the same (including interest and penalties, if any) and
shall hold the Lenders and the Agent harmless with respect thereto.
Section 12.7 WAIVER OF JURY TRIAL AND SETOFF. In any litigation in
any court with respect to, in connection with, or arising out of this
Agreement, any of the Advances, any of the Notes or other Loan Documents, any
of the Collateral, or any instrument or document delivered pursuant to this
Agreement, or the validity, protection, interpretation, collection or
enforcement thereof, or any other claim or dispute howsoever arising, between
any Credit Parties and the Lenders or the Agent, EACH LENDER, THE AGENT AND
EACH CREDIT PARTY HEREBY, to the fullest extent it may effectively do so, (a)
waives the right to interpose any setoff, recoupment, counterclaim or
cross-claim in connection with any such litigation, irrespective of the
nature of such setoff, recoupment, counterclaim or cross-claim, unless such
setoff, recoupment, counterclaim or cross-claim could not, by reason of any
applicable Federal or State procedural laws, be interposed, pleaded or
alleged in any other action and (b) WAIVES TRIAL BY JURY IN CONNECTION WITH
ANY SUCH LITIGATION. EACH OF THE CREDIT PARTIES AGREES THAT THIS SECTION
12.7 IS A SPECIFIC AND MATERIAL ASPECT OF THIS AGREEMENT AND ACKNOWLEDGES
THAT THE LENDERS WOULD NOT EXTEND TO THE BORROWER ANY FINANCIAL
ACCOMMODATIONS HEREUNDER IF THIS SECTION 12.7 WERE NOT PART OF THIS AGREEMENT.
Section 12.8 TERMINATION OF AGREEMENT. (a) The Agent on behalf of
the Lenders shall have the right to, upon the direction of the Majority
Lenders, terminate this Agreement immediately, at any time, during the
continuance of an Event of Default under Section 10 hereof.
(b) The Borrower may terminate this Agreement at any time when either
(x) no Letters of Credit are outstanding, or (y) the Borrower shall have
provided Letter of Credit Cash Collateral in an amount equal to the undrawn
amount of all outstanding Letters of Credit, in each case upon not less than
ten days' prior Written Notice (which shall be irrevocable) to the Agent
(which shall promptly notify each Lender thereof in writing or by telephone
confirming immediately in writing) of termination, by prepaying the Loans in
whole and the aggregate amount of unreimbursed drawings under Letters of
Credit, terminating the Commitments and paying all other amounts payable
hereunder and all applicable penalties, fees, charges, premiums and costs,
all as provided hereunder.
(c) The termination of this Agreement shall not affect any rights of
the Credit Parties, the Lenders or the Agent or any obligation of any of the
Credit Parties, the Lenders or the Agent to the others, arising on or prior
to the effective date of such termination, and the provisions hereof
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shall continue to be fully operative until all Lender Debt of the Credit
Parties and their Subsidiaries hereunder incurred on or prior to such
termination have been paid and performed in full.
(d) Upon the giving of notice of termination of this Agreement, all
Lender Debt shall be due and payable on the date of termination specified in
such notice.
(e) The Liens and rights granted to the Agent on behalf of the Agent
and the Lenders and hereunder shall continue in full force and effect,
notwithstanding the termination of this Agreement, until all of the Lender
Debt has been indefeasibly paid in full in cash.
(f) All indemnities representations, warranties, covenants, waivers and
agreements contained herein shall survive termination hereof unless otherwise
provided.
(g) Notwithstanding the foregoing, if after receipt of any payment of
all or any part of the Lender Debt, the Agent or any Lender is for any reason
compelled to surrender such payment to any Person or entity because such
payment is determined to be void or voidable as a preference, an
impermissible setoff, a diversion of trust funds or for any other reason,
this Agreement shall continue in full force (except that the Commitment of
each Lender shall have been terminated), and the Credit Parties, as
appropriate, shall be liable to, and shall indemnify and hold such Lender or
the Agent harmless for, the amount of such payment surrendered until such
Lender or the Agent, as the case may be, shall have been finally and
irrevocably paid in full. The provisions of the foregoing sentence shall be
and remain effective notwithstanding any contrary action which may have been
taken by the Lenders or the Agent in reliance upon such payment, and any such
contrary action so taken shall be without prejudice to the Lenders' or the
Agent's rights under this Agreement and shall be deemed to have been
conditioned upon such payment having become final and irrevocable.
(h) All indemnities provided for under this Agreement and the other
Loan Documents, including, without limitation, under Sections 2.12 and 12.5,
shall survive the termination of this Agreement and the payment in full of
the Lender Debt.
Section 12.9 CAPTIONS. The captions of the various sections and
paragraphs of this Agreement have been inserted only for the purposes of
convenience; such captions are not a part of this Agreement and shall not be
deemed in any manner to modify, explain, enlarge or restrict any of the
provisions of this Agreement.
Section 12.10 LIEN; SETOFF BY LENDERS. Each of the Credit Parties
hereby grants to each Lender and the Agent a continuing Lien for all Lender
Debt upon any and all monies, securities and other property of such Credit
Party and the proceeds thereof, now or hereafter held or received by, or in
transit to, such Lender or the Agent from or for such Credit Party, whether
for safekeeping, custody, pledge, transmission, collection or otherwise, and
also upon any and all deposits (general or special) and credits of such
Credit Party with, and any and all claims of such Credit Party against, any
Lender or the Agent, at any time existing (which shall constitute part of the
Collateral). Upon the occurrence and during the continuance of an Event of
Default, each Lender and the Agent is hereby authorized at any time and from
time to time, without notice to such Credit Party, to setoff,
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appropriate and apply any or all items hereinabove referred to against all
Lender Debt. After any such setoff by the Agent or any Lender, the Agent or
such Lender shall notify the Credit Party against which it setoff of the
exercise by it of such right of setoff, PROVIDED, THAT the failure of the
Agent or such Lender to so notify such Credit Party shall not affect the
validity of such setoff or create a cause of action against the Agent or such
Lender.
Section 12.11 PAYMENT DUE ON NON-BUSINESS DAY. Whenever any payment to
be made hereunder or under any other Loan Document or on the any Advance
shall be stated to be due and payable, or whenever the last day of any
Interest Period would otherwise occur, on a day which is not a Business Day,
such payment shall be made and the last day of such Interest Period shall
occur on the next succeeding Business Day and such extension of time shall in
such case be included in computing interest on such payment; PROVIDED,
HOWEVER, that if such extension would cause a payment of a Eurodollar Advance
to be made, or the last day of such Interest Period for a Eurodollar Advance
to occur, in the next following calendar month, such payment shall be made
and the last day of such Interest Period shall occur on the next preceding
Business Day.
Section 12.12 SERVICE OF PROCESS. Each of the Credit Parties hereby
irrevocably consents to the jurisdiction of the courts of the State of
Illinois and of any Federal Court located in the City of Chicago in
connection with any action or proceeding arising out of or relating to this
Agreement, any Guaranty, any of the Security Documents, all or any of the
Lender Debt, the Collateral, all or any of the Notes, any other Loan Document
or any document or instrument delivered pursuant to this Agreement. In any
such litigation, each of the Credit Parties waives, to the fullest extent it
may effectively do so, personal service of any summons, complaint or other
process and agrees that the service thereof may be made by certified or
registered mail directed to the Borrower at its address set forth in Section
12.4 hereof. Within thirty days after such mailing, such Credit Party shall
appear, answer or move in respect of such summons, complaint or other
process. Should such Credit Party fail to appear or answer within said
thirty day period, such Credit Party shall be deemed in default and judgment
may be entered by the Agent on behalf of the Lenders against such Credit
Party for the amount as demanded in any summons, complaint or other process
so served. Each of the Credit Parties hereby waives, to the fullest extent
it may effectively do so, the defenses of forum non conveniens and improper
venue.
Section 12.13 LASALLE NATIONAL BANK, AS AGENT. (a) Each Lender hereby
irrevocably designates and appoints LaSalle as the agent of such Lender under
each of the Loan Documents in which LaSalle is named as agent, and each such
Lender hereby irrevocably authorizes LaSalle, as the agent for such Lender,
to take such action on behalf of each Lender under the provisions of the Loan
Documents to which the Agent is a party and to exercise such powers and
perform such duties as are expressly delegated to the Agent by the terms of
such Loan Documents, together with such other powers as are reasonably
incidental thereto. Notwithstanding any provision to the contrary elsewhere
in the Loan Documents to which it is a party, the Agent shall not have any
duties or responsibilities except those expressly set forth in such Loan
Documents, nor any fiduciary relationship with any Lender, and no implied
covenants, fictions, responsibilities, duties, obligations or liabilities
shall be read into the Loan Documents to which the Agent is a party or
otherwise exist against the Agent.
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(b) The Agent may execute any of its duties under the Loan Documents to
which it is a party by or through agents or attorneys-in-fact and shall be
entitled to advice of counsel concerning all matters pertaining to such
duties. The Agent shall not be responsible for the negligence or misconduct
of any agents or attorneys-in-fact selected by it with reasonable care.
(c) Neither the Agent nor any of its officers, directors, employees,
agents attorneys-in-fact or Affiliates shall be (i) liable for any action
lawfully taken or omitted to be taken by it or such Person under or in
connection with the Loan Documents to which the Agent is a party (except for
its or such Person's own gross negligence or wilful misconduct), or (ii)
responsible in any manner to any Lender for any recitals, statements,
representations or warranties made by any of the Credit Parties or any of
their respective Subsidiaries or any officer thereof contained in such Loan
Documents or in any certificate, report, statement or other document referred
to or provided for in, or received by the Agent under or in connection with
such Loan Documents, or for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of such Loan Documents or for any failure of
any of the Credit Parties or any of their respective Subsidiaries to perform
its obligations under such Loan Documents. The Agent shall not be under any
obligation to any Lender to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or conditions of, the Loan
Documents to which it is a party, or to inspect the properties, books or
records of any of the Credit Parties or any of their respective Subsidiaries.
(d) The Agent shall be entitled to rely, and shall be fully protected
in relying, upon any Note, writing, resolution, notice, consent, certificate,
affidavit, letter, cablegram, telegram, telecopy, telex or teletype message,
statement, order or other document or conversation reasonably believed by it
to be genuine and correct and to have been signed, sent or made by the proper
Person or Persons and upon advice and statements of legal counsel (including,
without limitation, counsel to the Credit Parties), independent accountants
and other experts selected by the Agent. The Agent may deem and treat the
payee of any Note as the owner thereof for all purposes unless a Written
Notice of assignment, negotiation or transfer thereof shall have been filed
with the Agent.
(e) The Agent shall be fully justified in failing or refusing to take
any action under the Loan Documents to which it is a party unless it shall
first receive such advice or concurrence of the Majority Lenders as it deems
appropriate or it shall first be indemnified to its satisfaction by the
Lenders against any and all liability and expense which may be incurred by it
by reason of taking or continuing to take any such action. The Agent shall
in all cases be fully protected in acting, or in refraining from acting,
under the Loan Documents to which it is a party in accordance with a request
of the Majority Lenders (or where required by the terms of this Agreement,
the Lenders), and such request and any action taken or failure to act
pursuant thereto shall be binding upon all the Lenders and all future holders
of the Notes.
(f) The Agent shall give prompt written notice to each Lender of
Default or Event of Default of which Agent is notified or has knowledge. The
Agent shall take such action with respect to such Default or Event of Default
as shall be reasonably directed by the Majority Lenders; PROVIDED, THAT
unless and until the Agent shall have received such directions, the Agent may
(but
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shall not be obligated to) take such action, or refrain from taking such
action, with respect to such Default or Event of Default as it shall deem
advisable in the best interests of the Lenders.
(g) Each Lender expressly acknowledges that neither the Agent nor any
of its officers, directors, employees, agents, attorneys-in-fact or
Affiliates has made any representations or warranties to it and that no act
by the Agent hereinafter taken, including any review of the affairs of any of
the Credit Parties or any of their respective Subsidiaries, shall be deemed
to constitute any representation or warranty by the Agent to any Lender.
Each Lender represents to the Agent that it has, independently and without
reliance upon the Agent or any other Lender, and based on such documents and
information as it has deemed appropriate, made its own appraisal of and
investigation into the business, operations, property, financial and other
condition and creditworthiness of each of the Credit Parties and their
respective Subsidiaries, and made its own decision to make its loans
hereunder and enter into this Agreement. Each Lender also represents that it
will, independently and without reliance upon the Agent or any other Lender,
and based on such documents and information as it shall deem appropriate at
the time, continue to make its own credit analysis, appraisals and decisions
in taking or not taking action under this Agreement, and to make such
investigation as it deems necessary to inform itself as to the business,
operations, liabilities, assets, properties and condition (financial or
otherwise) and creditworthiness of each of the Credit Parties and their
respective Subsidiaries. Except for notices, reports and other documents
expressly required to be furnished to the Lenders by the Agent hereunder, the
Agent shall not have any duty or responsibility to provide any Lender with
any credit or other information concerning the business, operations,
property, financial and other condition or creditworthiness of any of the
Credit Parties or any of their respective Subsidiaries which may come into
the possession of the Agent or any of its officers, directors, employees,
agents, attorneys-in-fact or Affiliates.
(h) Each Lender agrees to indemnify the Agent in its capacity as such
(to the extent not reimbursed by the Credit Parties and without limiting the
obligation of the Credit Parties to do so), ratably according to such
Lender's aggregate Revolving and Term Commitments percentage set forth
opposite its name on Schedule 1.1 hereto from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind whatsoever which may at
any time (including without limitation at any time following the payment of
the Notes) be imposed on, incurred by or asserted against the Agent in any
way relating to or arising out of the Loan Documents to which the Agent is a
party, any instruments or documents relating to any component of the Overall
Refinancing or the transactions contemplated hereby or thereby or any action
taken or omitted by the Agent under or in connection with any of the
foregoing; PROVIDED, THAT no Lender shall be liable for the payment of any
portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements resulting from
the Agent's gross negligence or wilful misconduct. The agreements in this
Section 12.13(h) shall survive the payment of the Notes and the Lender Debt.
(i) Intentionally omitted.
(j) The Agent may resign as Agent upon thirty days' Written Notice to
the Lenders. In the event that the Agent shall enter receivership, then the
Lenders (other than the Lender which
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is acting as Agent, if applicable) may by unanimous consent of such Lenders,
remove the Agent under this Agreement. If the Agent shall give a notice of
its intention to resign as Agent under this Agreement or the Agent shall be
removed, then the Majority Lenders shall, within thirty days of the
appropriate notice of resignation or removal, appoint a successor agent for
the Lenders, whereupon such successor agent shall succeed to the rights,
powers and duties of the Agent, and the term "AGENT" shall mean such
successor agent effective upon its appointment, and the former Agent's
rights, powers and duties as Agent shall be terminated, without any other or
further act or deed on the part of such former Agent or any of the parties to
this Agreement or any holders of the Notes. After any retiring Agent's
resignation hereunder as Agent or any Agent's removal, the provisions of this
Section 12.13 shall inure to its benefit as to any actions taken or omitted
to be taken by it while it was Agent under this Agreement. In order to be
eligible to act as an Agent under this Agreement, an entity must
simultaneously be a Lender hereunder.
(k) Each Lender agrees that (i) all Lender Debt of the Credit Parties
to each Lender under this Agreement and under the Notes rank PARI PASSU in
all respects with each other, and (ii) if any Lender shall obtain payment
with respect to its Commitments which results in its receiving more than its
pro rata share of the Commitments of all Lenders through the exercise of a
right of banker's lien, setoff or counterclaim, or, subject to the last
sentence of this subparagraph (k), any other circumstance, then (A) such
Lender shall be deemed to have simultaneously purchased from each of the
other Lenders a share in the Advances so that the amount of the Advances of
all Lenders shall be PRO RATA and (B) such other adjustments shall be made
from time to time as shall be equitable to insure that all Lenders share such
payments ratably. If all or any portion of any such excess payment is
thereafter recovered from the Lender which received the same, the purchase
provided in this Section 12.13(k) shall be deemed to have been rescinded to
the extent of such recovery, without interest. Each of the Credit Parties
expressly consents to the foregoing arrangements and agrees that each Lender
so purchasing a portion of another Lender's Loan may exercise all rights of
payment (including, without limitation, all rights of setoff, banker's lien
or counterclaim)with respect to such portion as fully as if such Lender were
the direct holder of such portion.
(l) The Agent agrees that it shall promptly deliver to each Lender
copies of all notices, demands, statements and communications which the Agent
gives to the Credit Parties, except for routine notices of payments due under
the Loan Documents to which the Agent is a party and other miscellaneous
notices, demands, statements and communications, which are not material to
the interests of any Lender. The Agent shall have no liability to any
Lender, nor shall a cause of action arise against the Agent, as a result of
the failure of the Agent to deliver to any Lender any such notice, demand,
statement or communication.
(m) The Agent shall endeavor to exercise the same care in administering
the Loan Documents to which it is a party as it exercises with respect to
similar transactions in which it is involved and where no other co-lenders or
participants are involved; PROVIDED, THAT the liability of the Agent for
failing to do so shall be limited as provided in the preceding paragraphs of
this Section 12.13.
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(n) (i) If at any time or times it shall be necessary or prudent in
order to conform to any law of any jurisdiction in which any of the
Collateral shall be located, or the Agent shall be advised by counsel, that
it is so necessary or prudent in the interest of the Lenders, or the Agent
shall deem it necessary for its own protection in the performance of its
duties hereunder, the Agent and (to the extent required by the Agent) each
Credit Party shall execute and deliver all instruments and agreements
reasonably necessary or proper to constitute another bank or trust company,
or one or more individuals approved by the Agent (to the extent necessary or
requested by the Agent) (each an "APPROVED DELEGATE"), either to act as
co-agent or co-agents or trustee of all or any of the Collateral, jointly
with the Agent originally named herein or any successor, or to act as
separate agent or agents or trustee of any such Collateral. In the event
that any of the Credit Parties shall not have joined in the execution of such
instruments or agreements with any Approved Delegate within thirty Business
Days after the receipt of a written request from the Agent to do so, or in
case an Event of Default shall have occurred and be continuing, each of the
Credit Parties hereby irrevocably appoints the Agent as its agent and
attorney to act for it under the foregoing provisions of this Section
12.13(n) in such contingency.
(ii) Every Approved Delegate (which term excludes any agent which may
be appointed as successor to the Agent), shall, to the extent permitted by
applicable law, be appointed to act and be such, subject to the following
provisions and conditions, namely:
(A) except as otherwise provided herein, all rights, remedies,
powers, duties and obligations conferred upon, reserved or imposed
upon the Agent in respect of the custody, control and management of
moneys, paper or securities shall be exercised solely by the Agent
hereunder;
(B) all rights, remedies, powers, duties and obligations
conferred upon, reserved to or imposed upon the Agent hereunder shall
be conferred, reserved or imposed and exercised or performed by the
Agent except to the extent that the instrument appointing such
Approved Delegate shall otherwise provide, and except to the extent
that under any law of any jurisdiction in which any particular act or
acts are to be performed, the Agent shall be incompetent or
unqualified to perform such act or acts, in which event such rights,
remedies, powers, duties and obligations shall be exercised and
performed by such Approved Delegate to the extent specifically
directed in writing by the Agent;
(C) no power given hereby to, or which it is provided hereby may
be exercised by, any such Approved Delegate shall be exercised
hereunder by such Approved Delegate except jointly with, or with the
consent in writing of, the Agent, anything herein contained to the
contrary notwithstanding;
(D) no Approved Delegate constituted under this Section 12.13(n)
shall be personally liable by reason of any act or omission of any
other Approved Delegate hereunder; and
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(E) the Agent, at any time by an instrument in writing, executed
by it, may accept the resignation of or remove any such Approved
Delegate, and in that case, by an instrument in writing executed by
the Agent and the Credit Parties (to the extent necessary or requested
by the Agent) jointly, may appoint a successor to such Approved
Delegate, anything herein contained to the contrary notwithstanding.
In the event that any of the Credit Parties shall not have joined in
the execution of any such instrument with a Person or entity within
ten days after the receipt of a written request from the Agent to do
so, or in the case an Event of Default shall have occurred and be
continuing, the Agent, acting alone, may appoint a successor and may
execute any instrument in connection therewith, and the Credit Parties
hereby irrevocably appoint the Agent its agent and attorney to act for
it in such connection in either or such contingencies.
Section 12.14 BENEFIT OF AGREEMENT; ASSIGNMENTS BY LENDERS. (a) This
Agreement shall be binding upon and inure to the benefit of the parties
hereto, and their respective successors and assigns, except that the
obligation of the Lenders to make Revolving Advances and other financial
accommodations hereunder shall not inure to the benefit of any successors and
assigns of the Borrower.
(b) No Credit Party may assign or transfer any of its interest
hereunder without the prior written consent of all of the Lenders. Each of
the Lenders may make, carry or transfer its PRO RATA share of the Loans at,
to or for the account of any of its branch offices or the office of one or
more of its Affiliates.
(c) Each Lender may, pursuant to an assignment and acceptance agreement
in the form of Exhibit 12.14 attached hereto (or another form acceptable to
the Agent), with the prior written consent of the Agent (which consent shall
not be withheld unreasonably and which consent shall not be required for
assignments to Affiliates of such Lender if such Affiliate is a nationally or
state chartered commercial bank), assign its rights and delegate its
obligations under this Agreement and may, with the prior written consent of
the Agent (which consent shall not be withheld unreasonably), assign, sell,
or without the consent of the Agent grant participations in, all or any part
of its PRO RATA share of any Loans or any of its Commitment or any other
interest herein or in its Notes to another bank or other entity, in which
event:
(i) in the case of an assignment, upon notice thereof by such Lender
to the Borrower, the assignee shall have, to the extent of such assignment
(unless otherwise provided therein), the same rights and benefits as it
would have if it were such Lender hereunder and the holder of a Note, and
the assigning Lender shall be relieved of its obligations hereunder to the
extent of such assignment; and
(ii) in the case of a participation, the participant shall not have
any rights under this Agreement or any Note or any other Loan Document (the
participant's rights against such Lender in respect of such participation
to be those set forth in the agreement executed by such Lender in favor of
the participant relating thereto which agreement shall not, in any
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event, grant to the participant the right of consent as to any matter
under the Loan Documents other than those which require the consent of
all Lenders).
(d) Each Lender may furnish any information concerning the Credit
Parties and their respective Subsidiaries in the possession of such Lender
from time to time to assignees and participants (including prospective
assignees and participants).
(e) In the event that any Lender shall assign or sell its Notes, such
Lender shall at the time of such assignment or sale give Written Notice to
the Agent of the name and address of the assignee (including the name of the
account officer if applicable), and shall make all endorsements to the grid
schedule attached thereto to make the information contained therein accurate.
Further, and as a condition to the effectiveness of any such assignment or
sale, the assignee shall pay to the Agent a fee of $2,500 to record such
assignment or sale.
(f) Each Lender agrees that such Lender shall not assign all or any
part of its Commitment to any Person that is not a Lender unless the assignee
thereof shall be a bank or trust company organized under the laws of the
United States of America or any State thereof having a combined capital and
surplus of not less than $1,000,000,000 or other financial institution
reasonably acceptable to the Borrower; PROVIDED, HOWEVER, that this sentence
shall in no event apply to any interests granted by any Lender through a
participation.
(g) Notwithstanding anything herein to the contrary, any partial
assignment by any Lender of any portion of the Loans and/or its Revolving
Commitment shall be in an aggregate amount at least equal to $5,000,000;
provided, however, that for purposes of this Section 12.14(g), any
contemporaneous partial assignment by LaSalle of any portion of the Loans
and/or LaSalle's Revolving Commitment in the aggregate amount of at least
$5,000,000 shall be deemed to satisfy the requirements hereof.
Section 12.15 COUNTERPARTS; FACSIMILE SIGNATURE. (a) This Agreement
may be executed by the parties hereto individually or in any combination, in
one or more counterparts, each of which shall be an original and all of which
shall together constitute one and the same agreement.
(b) Delivery of an executed counterpart of a signature page to this
Agreement by telecopier shall be effective as delivery of a manually executed
counterpart of this Agreement.
Section 12.16 LETTER OF CREDIT PARTICIPATION AND CERTAIN PAYMENTS.
(a) Each Lender agrees that upon any acceleration of the Lender Debt as
provided in Section 10 hereof, each such Lender, without any further action,
shall be deemed to have taken, as of the date of issuance of each outstanding
Letter of Credit, an undivided participating interest from each Issuing
Lender in all Letters of Credit outstanding at such time and the Letter of
Credit Agreements relating thereto in a percentage equal to such Lender's
Revolving Credit Facility percentage set forth in Schedule 1.1 hereto. Each
Lender shall hold the relevant Issuing Lender harmless and indemnify such
Issuing Lender for such Lender's pro rata share of any drawing under any
Letter of Credit in which it has taken such an undivided participating
interest under this Section 12.16.
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(b) The obligation of each Lender to make payments to an Issuing Lender
with respect to any Letter of Credit after having taken a participation
therein as provided above shall be irrevocable and shall not be subject to
any qualification or exception whatsoever and shall be made in accordance
with the terms and conditions of this Agreement under all circumstances,
including without limitation any of the following circumstances:
(i) any lack of validity or enforceability of this Agreement, any
of the Loan Documents, and all other documents and instruments executed by
any of the Credit Parties or any Affiliate thereof and delivered to the
Agent, the Issuing Lender or any other Lender in connection with or related
to the Loans, the Letters of Credit or the Collateral, together with any
and all amendments, extensions, renewals and modifications thereof;
(ii) the existence of any claim, set-off, defense or other right
which any Credit Party may have at any time against the beneficiary named
in any Letter of Credit or any transferee of any Letter of Credit (or any
person for whom any such transferee may be acting), the Agent, the Issuing
Lender thereof, or any other Lender or any other person, whether in
connection with this Agreement, such Letter of Credit, the transactions
contemplated herein or any unrelated transactions (including any underlying
transactions between any Credit Party or any Subsidiary thereof and the
beneficiary named in such Letter of Credit);
(iii) any draft, certificate or any other document presented under
any Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;
(iv) the surrender or impairment of any security for the performance
or observance of any of the terms of any of this Agreement or any of the
Loan Documents; or
(v) the occurrence of any Default or Event of Default.
Section 12.17 INVALIDITY. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid
under all applicable laws and regulations. If, however, any provision of
this Agreement shall be prohibited by or invalid under any such law or
regulation, it shall be deemed modified to conform to the minimum
requirements of such law or regulation, or, if for any reason it is not
deemed so modified, it shall be ineffective and invalid only to the extent of
such prohibition or invalidity without the remainder thereof or any of the
remaining provisions of this Agreement being prohibited or invalid.
Section 12.18 DISCLOSURE OF FINANCIAL INFORMATION. The Agent and each
Lender are each hereby authorized to deliver a copy of any financial
statement or any other information relating to the business, operations or
financial condition of Group, the Borrower and any of their respective
Subsidiaries which may be furnished to it hereunder or otherwise, to any
other Lender, any court, Governmental Body having jurisdiction over the Agent
or such Lender, to any person which shall, or shall have any right or
obligation to, succeed to all or any part of the Agent's or such Lender's
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interest in any of the Advances, this Agreement and any Collateral or to any
actual or prospective participant therein or assignee thereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective officers thereunto duly authorized as of
the day and year first above written.
PACKAGING RESOURCES INCORPORATED
By: /s/ Jerry J. Corirossi
----------------------------------------
Name: Jerry J. Corirossi
Title: Vice President
Address: One Conway Park
100 Field Drive, Suite 300
Lake Forest, Illinois 60045
Attention: [Mr. Howard P. Hoeper]
Telecopier No.: (847) 295-3707
LASALLE NATIONAL BANK, as Agent and Lender
By: /s/ Laurie C. Weidner
----------------------------------------
Name: Laurie C. Weidner
-----------------
Title: Vice President
-----------------
Address: 120 South LaSalle Street
Chicago, Illinois 60603
Attention: Ms. Lori Weidner
Telecopier No.: (312) 904-6189
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BT COMMERCIAL CORPORATION, as Lender
By: /s/ Wayne D. Hillock
----------------------------------------
Name: Wayne D. Hillock
-----------------
Title:
-----------------
Address: 8400 Sears Tower
233 South Wacker Drive
Chicago, Illinois 60606
Attention: William Howe
Telecopier No.: (312) 993-8096
101
<PAGE>
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND MAY BE OFFERED FOR SALE OR SOLD ONLY IF REGISTERED UNDER THE PROVISIONS OF
SUCH ACT OR IF AN EXEMPTION FROM REGISTRATION IS AVAILABLE.
SUBORDINATED PROMISSORY NOTE
$2,000,000.00 March 12, 1993
FOR VALUE RECEIVED, the undersigned, Packaging Resources Incorporated, a
Delaware corporation ("Debtor"), hereby promises to pay to the order of Bemis
Company, Inc. ("Creditor") the principal amount of Two Million Dollars
($2,000,000.00) (the "Principal"), together with interest thereon (the
"Interest") as provided below.
1. PAYMENT OF PRINCIPAL. Principal shall mature and be payable in
installments as follows:
Date of Payment Amount of Payment
--------------- -----------------
September 12,1994 $250,000
March 12,1995 $250,000
September 12,1995 $300,000
March 12,1996 $300,000
September 12,1996 $450,000
March 12, 1997 $450,000
2. PAYMENT OF INTEREST. Interest accrued on this Note shall be payable
monthly on the 12th day of each month of each year, commencing in April, 1993,
and at maturity. Interest shall accrue from the date hereof on the Principal
from time to time outstanding on this Note at a rate per annum equal to the
reference rate of Bank of America, N.A., in effect from time to time plus three
quarters of one percent (3/4%). Interest shall be computed on the basis of a
360-day year, 30-day month for the actual number of days elapsed. The interest
rate shall be adjusted automatically on and
<PAGE>
as of the effective date of any change in the reference rate of Bank of America,
N.A.
3. FORM AND PLACE OF PAYMENT. Payments on this Note shall be in lawful
money of the United States of America that, at the time of payment, is legal
tender for public and private debts. All payments of Principal and Interest
shall be made to Creditor at the address set forth in Section 10 hereof or at
such other place as it may from time to time designate.
4. PREPAYMENT. This Note may be prepaid in whole or in part at any time
or from time to time without penalty; PROVIDED, HOWEVER, that any prepayments
received shall be applied first to the then accrued Interest and thereafter to
installments of Principal due under Section 1 hereof in inverse order of their
maturity.
5. EVENTS OF DEFAULT. (a) Any of the following events shall constitute
an Event of Default hereunder:
(i) If Debtor shall fail to make any payment of Principal
or Interest on this Note when and as the same shall become due and payable and
such failure shall continue for a period of five (5) days; or
(ii) If Debtor shall (A) apply for or consent to the
appointment of a receiver, trustee or liquidator for all or a substantial part
of its assets, (B) admit in writing its inability to pay debts as they mature or
cease paying a substantial portion of its debts as they mature, (C) make a
general assignment for the benefit of creditors, (D) be adjudicated as bankrupt
or
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<PAGE>
insolvent or (E) file a voluntary petition in bankruptcy or a petition or an
answer seeking reorganization or an arrangement with creditors or to take
advantage of any insolvency law or an answer admitting the material allegations
of a petition filed against Debtor in any bankruptcy, reorganization or
insolvency proceeding, or take any corporate or other action for the purpose of
effecting any of the foregoing; or
(iii) If an order for relief shall be entered in any Federal
bankruptcy proceeding in which Debtor is the debtor; or bankruptcy,
receivership, insolvency, reorganization, relief, dissolution, liquidation or
other similar proceeding shall be instituted by or against Debtor or all or a
substantial part of the assets of Debtor under the Federal Bankruptcy Code or
any bankruptcy or insolvency law of any state of competent jurisdiction, unless
such proceedings are dismissed within 30 days after they are instituted; or
(iv) If an order, judgment or decree shall be entered,
without the application, approval or consent of Debtor, by any court of
competent jurisdiction approving a petition seeking reorganization of Debtor or
appointing a receiver, trustee or liquidator for Debtor or for all or a
substantial part of the assets of Debtor and such order, judgment or decree
shall continue unstayed and in effect for any period of sixty (60) consecutive
days.
(b) If an Event of Default shall occur and be continuing, the holder
hereof may, at its option, by written notice
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<PAGE>
or notices to Debtor, declare the entire remaining unpaid balance of this Note
to be due and payable, whereupon the same shall forthwith mature and become
immediately due and payable, together with all Interest accrued thereon;
PROVIDED, HOWEVER, that upon the occurrence of an Event of Default described in
Section 5(a)(ii), 5(a)(iii) or 5(a)(iv) hereof, this Note shall be automatically
accelerated without notice to Debtor or action of any kind by the holder hereof.
6. OTHER REMEDIES. In case any one or more Events of Default shall occur
and be continuing, the holder hereof may, in addition to the remedy provided in
the preceding section and any other remedies it may have, proceed to protect and
enforce its rights by an action at law, suit in equity or other appropriate
proceeding, whether for the specific performance of any agreement contained in
this Note or for an injunction against a violation of any of the terms hereof or
in aid of the exercise of any power granted hereby.
7. SUBORDINATION. Debtor covenants and agrees, and by the acceptance
hereof, Creditor and any holder of this Note covenant and agree, that this Note
and the payment of Principal and Interest shall be subordinate and junior in
right of payment to all indebtedness of Debtor to any bank, insurance company or
other financial institution for money borrowed, whether now existing or
hereafter incurred ("Senior Debt"), to the following extent:
(a) In the event of any insolvency or bankruptcy proceedings, or any
receivership, liquidation, reorganization or
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<PAGE>
other similar proceedings, or in the event of any proceedings for voluntary
liquidation, dissolution or other winding-up of Debtor, whether or not involving
insolvency or bankruptcy, all principal, premium, if any, and interest on all
Senior Debt shall first be paid in full, or such payment be provided, before any
payment on account of Principal or Interest is made upon this Note and in any
such proceedings any payment or distribution of any kind or character, whether
in cash or property or securities, which may be payable or deliverable in
respect of this Note shall be paid or delivered directly to the holders of
Senior Debt for application in payment thereof, unless and until all principal,
premium, if any, and interest on all Senior Debt shall have been paid and
satisfied in full, or such payment and satisfaction shall have been provided
for;
(b) No payment on account of Principal or Interest shall be made upon
this Note if (under circumstances when the provisions of the foregoing clause
(a) shall not be applicable) any default in the payment of principal or interest
on any Senior Debt shall have occurred and be continuing, and any payment in
violation hereof shall be held in trust for the holders of Senior Debt; and
(c) No prepayment on account of Principal or Interest on this Note
shall be made, either in whole or in part (other than regular installments of
Principal and Interest in accordance with the terms hereof), if at the time of
such prepayment any Senior Debt shall be outstanding.
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<PAGE>
Subject to the payment in full of all Senior Debt, the holder of this Note
shall be subrogated to the rights of the holders of Senior Debt to receive
payments or distributions of assets of Debtor made thereon until the Principal
and Interest on this Note shall be paid in full; and, for the purposes of such
subrogation, no payments or distributions to the holders of Senior Debt of any
cash, property or securities to which the holder of this Note would be entitled
except for the subordination provisions of this Note, and no payment to the
holders of Senior Debt by the holder of this Note as between Debtor, its
creditors (other than the holders of Senior Debt) and the holder of this Note,
shall be deemed to be a payment by Debtor to or on account of Senior Debt.
The foregoing provisions are solely for the purpose of defining the
relative rights of the holders of Senior Debt on the one hand, and the holder of
this Note on the other hand, and nothing herein shall impair, as between the
Debtor and the holder of this Note, the obligation of the Debtor, which is
unconditional and absolute, to pay to the holder of this Note the Principal and
Interest hereon in accordance with its terms, nor shall anything herein prevent
the holder of this Note from exercising all remedies otherwise permitted by
applicable law upon default hereunder, subject to the right, if any, of the
holders of Senior Debt to receive cash, property or securities otherwise payable
or deliverable to the holder of this Note; provided, however, that if an Event
of Default shall occur and be continuing, the holder of this Note shall not,
during the period of 180 days following the
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<PAGE>
occurrence of such Event of Default, exercise any of the remedies with respect
to this Note set forth herein or that otherwise may be available to the holder
of this Note, either at law or in equity, unless a holder of Senior Debt
commences legal proceedings against Debtor or unless the payment of any Senior
Debt is accelerated during such period of 180 days.
8. This Note and the payment of Principal and Interest shall be pari
passu in right of payment with the principal of, premium, if any, and interest
on Debtor's Senior Subordinated Notes Due 1996 issued pursuant to that certain
Indenture dated October 28, 1986 as amended and supplemented to the date hereof.
9. WAIVER. Debtor, for itself and its legal representatives, successors
and assigns, expressly waives presentment, protest, notice of dishonor, notice
of protest, diligence in collection and the benefit of any exemption under any
insolvency laws.
10. NOTICES. All notices, requests, demands and other communications
hereunder shall be deemed to have been duly given if delivered or mailed,
certified or registered mail with postage prepaid, addressed as follows:
If to Creditor:
Bemis Company, Inc.
222 South Ninth Street Suite 2300
Minneapolis, MN 55402
Attn: Chief Executive Officer
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<PAGE>
If to Debtor:
Packaging Resources Incorporated
717 Forest Avenue
Lake Forest, IL 60045
Attn: President and Chief Executive Officer
11. GOVERNING LAW AND CONSTRUCTION. This Note shall be governed by,
construed and enforced in accordance with the laws of the State of Illinois.
The captions utilized herein are for the convenience of the parties only and
shall not affect the construction or interpretation hereof.
IN WITNESS WHEREOF, Debtor has caused this Note to be duly executed and
delivered in its corporate name by a duly authorized officer as of the date
first written above.
Packaging Resources Incorporated
By: /S/ H.P. HOEPER
-----------------------------------
Title: President and Chief Executive Officer
--------------------------------------
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<PAGE>
FIRST AMENDMENT TO
SUBORDINATED PROMISSORY NOTE
This First Amendment to Subordinated Promissory Note dated and effective as
of March 12, 1995 ("First Amendment") amends Paragraphs one (1) and two (2) of
that Subordinated Promissory Note (the "Note") dated March 12, 1993 in the
amount of Two Million Dollars ($2,000,000) executed by Packaging Resources
Incorporated ("Debtor") payable to Bemis Company, Inc. ("Creditor"). Paragraphs
one (1) and two (2) are amended to read as follows:
Paragraph 1. PAYMENT OF PRINCIPAL. Payments made to date are:
Date of Payment Amount of Payment
--------------- -----------------
September 12, 1994 $250,000
Principal shall mature and be payable in installments as follows:
Date of Payment Amount of Payment
--------------- -----------------
September 12, 1995 $250,000
March 12, 1996 $250,000
September 12, 1996 $300,000
March 12, 1997 $250,000
July 12, 1997 $700,000
Paragraph 2. PAYMENT OF INTEREST. Interest accrued on this Note shall be
payable monthly on the twelfth (12th) day of each month of each year, commencing
April, 1993, and at maturity. Interest shall accrue from March 12, 1995 on the
Principal from time to time outstanding on this Note at a rate per annum equal
to the reference rate of Bank of America, N.A., in effect from time to time plus
two percent (2%). Interest shall be computed on the basis of a 360-day year,
30-day month for the actual number of days elapsed. The interest rate shall be
adjusted automatically on and as of the effective date of any change in the
reference rate of Bank of America, N.A.
<PAGE>
In all other respects the Note shall remain as drafted and executed.
PACKAGING RESOURCES INCORPORATED
(Debtor)
By: /s/ H.P. Hoeper
-----------------------------
Title: President and Chief Executive Officer
BEMIS COMPANY, INC.
(Creditor)
By: /s/ LeRoy F. Bazany
-----------------------------
LeRoy F. Bazany
Title: Vice President and Controller
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ASSET PURCHASE AGREEMENT
THIS AGREEMENT is made and entered into this 12th day of March, 1993
by and among PACKAGING RESOURCES INCORPORATED, a Delaware corporation
("Purchaser"), LOUISIANA PLASTICS, INCORPORATED, a Delaware corporation
("Seller"), and BEMIS COMPANY, INC., a Missouri corporation ("Shareholder").
RECITALS
Purchaser, Seller and Shareholder acknowledge the following:
A. Seller is engaged in the business of manufacturing and selling
injection molded specialty containers (the "Business").
B. Seller desires to sell to Purchaser and Purchaser desires to
purchase and acquire from Seller all of the assets of Seller described below.
C. Shareholder is the holder of all of the outstanding stock of
Seller.
AGREEMENTS
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual covenants and agreements contained herein, the parties agree as follows:
1. TRANSFER OF ASSETS. On the terms and subject to the conditions
of this Agreement, Seller agrees to sell and transfer to Purchaser, and
Purchaser agrees to purchase from Seller, on and as of the Closing Date (as
hereinafter defined), for the consideration hereinafter provided, all property
and assets of Seller, wherever located and whether or not reflected in its books
and records, other than the Excluded Assets (as hereinafter defined). The
property and assets to be transferred to Purchaser hereunder (the "Purchased
Assets") shall include, without limitation, the following:
(a) REAL PROPERTY. The manufacturing, warehouse, resin storage and
handling facilities of Seller located in Louisiana, Missouri, including the
real property legally described in Exhibit A hereto, together with all
buildings, structures, installations, fixtures and other improvements
appurtenant thereto or situated thereon and all other rights, interests and
appurtenances of Seller pertaining thereto (hereinafter collectively
referred to as the "Facilities").
(b) PERSONAL PROPERTY. All machinery, molds, equipment, computer
hardware, leasehold improvements, tools, fixtures, furniture, furnishings
and other personal property, including,
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without limitation, the personal property listed on Exhibit B hereto.
(c) VEHICLES. All automobiles, trucks, trailers, automotive
equipment and other owned vehicles, including, without limitation, the
vehicles listed on Exhibit C hereto.
(d) INTANGIBLE ASSETS. All domestic and foreign patents, licenses,
trademarks, trade names, service marks, copyrights, government approvals,
permits and authorizations (and applications for any of the foregoing) and
all technical know-how, trade secrets, confidential information and other
similar intangible assets, including, without limitation, the use of the
name "Louisiana Plastics" and all variations of and logos associated with
such name, the intangible assets described on Exhibit D hereto and the
goodwill associated with all of the foregoing; provided, however, that
nothing in this Agreement shall act to transfer to Purchaser any right,
title or interest in or to the name "Bemis Company, Inc." or any variation
of or any logo associated with such name.
(e) LEASES. The leases of the facilities described on Exhibit E
hereto (hereinafter collectively referred to as the "Facilities Leases").
(f) CONTRACTS. Except for the contracts specifically set forth on
Exhibit F hereto (hereinafter collectively referred to as the "Excluded
Contracts"), all contracts, leases, agreements and commitments with
customers, suppliers or others entered into by or on behalf of Seller,
including, without limitation, all sales and purchase orders, license
agreements, sales representative agreements, dealer and distributorship
agreements, and all other contracts, leases, agreements and commitments
entered into by or on behalf of Seller on or before the Closing Date
including, without limitation, the contracts described on Exhibit G hereto
(hereinafter collectively referred to as the "Assumed Contracts").
(g) PREPAID ASSETS. Prepaid rent and other prepaid items listed on
Exhibit H hereto.
(h) DOCUMENTS. All records, computer software including, but not
limited to, Seller's Business Planning and Control System computer software
to the extent assignable and documents, books, supplier and customer lists,
work orders, audit information and correspondence, drawings, copies of
financial information and all other documents used in connection with the
operation of Seller.
(i) ACCOUNTS RECEIVABLE. Except for the trade and other accounts and
notes receivable and notes, bonds and other
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evidence of indebtedness and rights to receive payment specifically set
forth on Exhibit I hereto (hereinafter collectively referred to as the
"Excluded Receivables"), all trade and other accounts and notes receivable
and all notes, bonds, employee travel advances and other evidences of
indebtedness and rights to receive payment from any person held by Seller
(hereinafter collectively referred to as the "Receivables").
(j) INVENTORY. All inventories of raw materials, work-in-process,
finished goods and supplies (hereinafter collectively referred to as the
"Inventory").
(k) LICENSES AND PERMITS. All of Seller's rights in all government
licenses, permits and authorizations (and applications for any of the
foregoing) necessary for the operation of Seller, including the licenses,
permits and authorizations listed on Exhibit J hereto.
(l) CLAIMS. All claims or rights under insurance policies obtained
by Seller in respect of Purchased Assets and the Assumed Liabilities and
all causes of action, judgments, claims and demands relating to the
Purchased Assets and the Assumed Liabilities.
2. ASSETS EXCLUDED FROM SALE. Notwithstanding other contrary
provisions of this Agreement, the following property and assets of Seller are
excluded from the sale to Purchaser (the "Excluded Assets"):
(a) All of Seller's cash and cash equivalents, except petty cash as
set forth on the Proposed Closing Date Balance Sheet (as hereinafter
defined).
(b) All casualty, liability or other insurance policies owned by or
obtained on behalf of Seller and all claims or rights under any such
insurance policies in respect of the Excluded Liabilities (as hereinafter
defined) or the Excluded Assets.
(c) Any federal, state and local income, property or sales tax
refunds or claims related to the operation of Seller on or prior to the
Closing Date.
(d) Any of Seller's causes of action, judgments, claims and demands
of whatever nature except those relating to the Purchased Assets or the
Assumed Liabilities.
(e) All right, title and interest of Seller in and to the name "Bemis
Company, Inc." and all variations of and logos associated with such name.
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(f) Certificate of Incorporation, By-Laws and corporate minute books
of Seller.
(g) The Excluded Receivables and Excluded Contracts.
(h) All right, title and interest of Seller in and to the real
property located in Fenton, Missouri, as described in Exhibit K hereto.
3. PURCHASE PRICE.
(a) AMOUNT TO SELLER. Purchaser shall, in addition to assuming the
Assumed Liabilities (as hereinafter defined), pay to Seller in the manner
set forth below, an amount equal to $4,000,000 plus the Closing Date Net
Assets (the "Purchase Price"). The term "Closing Date Net Assets" as used
herein shall mean the difference between the assets and liabilities shown
on the Closing Date Balance Sheet (as hereinafter defined).
(b) MANNER OF PAYMENT OF THE PURCHASE PRICE. At the Closing,
Purchaser shall:
(i) assume the Assumed Liabilities;
(ii) pay to Seller, in accordance with its directions, through a
bank wire transfer of immediately available federal funds, $18,182,125
(the "Estimated Cash Purchase Price"). Schedule 1 hereto sets forth a
calculation of the Estimated Cash Purchase Price; and
(iii) deliver to Seller its promissory note in the form attached
hereto as Exhibit L made payable to the order of Shareholder in the
principal amount of $2,000,000 ("Purchaser's Note").
(c) POST-CLOSING ADJUSTMENTS.
(i) As soon as practicable but not later than 18 days after the
Closing Date, Seller, with the assistance and cooperation of
Purchaser, shall prepare a schedule setting forth the assets and
liabilities of Seller as of the close of business on the Closing Date
(the "Proposed Closing Date Balance Sheet"). The Proposed Closing
Date Balance Sheet shall be prepared in accordance with generally
accepted accounting principles, consistently applied; provided,
however, that the Proposed Closing Date Balance Sheet shall exclude
the Excluded Assets and the Excluded Liabilities, shall not reflect
any allowance for doubtful accounts with respect to the Receivables
and shall include an accrual for vacation benefits calculated in the
manner contemplated
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by Section 5(c) hereof. Subject to the preceding and following
sentences, the Proposed Closing Date Balance Sheet shall be prepared
on a basis consistent with the January 31, 1993 proforma balance sheet
set forth on Schedule 2 hereto. For purposes of the Proposed Closing
Balance Sheet, inventory shall be priced at the lower of cost or
market on a FIFO basis. An allowance made for obsolete or slow moving
items shall be established on that inventory consistent with prior
practices. The January 31, 1993 proforma balance sheet sets forth the
assets and liabilities included in the Purchased Assets and Assumed
Liabilities as if the transactions contemplated hereby had occurred on
January 31, 1993 and is included for the purpose of illustration to
guide the preparation of the Proposed Closing Date Balance Sheet.
Seller and Shareholder shall permit Purchaser and its independent
certified public accountants, KPMG Peat Marwick, to review all
accounting records and all work papers and computations used by them
in the preparation of the Proposed Closing Date Balance Sheet. If
Purchaser does not give notice of dispute to Seller or Shareholder
within 15 days of receiving the Proposed Closing Date Balance Sheet,
the Proposed Closing Date Balance Sheet shall become the "Closing Date
Balance Sheet." If Purchaser gives notice of dispute to Seller or
Shareholder within such 15-day period, Seller and Shareholder and
Purchaser shall negotiate in good faith to resolve the dispute. If,
after 15 days from the date notice of dispute is given hereunder,
Seller and Shareholder and Purchaser cannot agree on the resolution of
the dispute, the parties shall designate an independent certified
public accounting firm acceptable to Purchaser and Shareholder and
Seller to resolve the dispute, whose decision as to the Closing Date
Balance Sheet shall be conclusive and binding upon Seller, Shareholder
and Purchaser. If after resolution of a dispute by the designated
independent certified public accounting firm, the Closing Date Net
Assets shall be within $50,000 of the Closing Date Net Assets set
forth on the Proposed Closing Date Balance Sheet, Purchaser shall be
responsible for all expenses pertaining to the resolution of such
dispute. If the Closing Date Net Assets is not within $50,000 of the
Closing Date Net Assets set forth on the Proposed Balance Sheet,
Seller and Shareholder shall be responsible for all expenses
pertaining to the resolution of such dispute.
(ii) In the event that the Closing Date Net Assets, as finally
determined, is less than $16,182,125, Seller or Shareholder shall pay
Purchaser the amount of such difference plus interest from the Closing
Date to the date of payment at the rate of 8% per annum within ten
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days of Purchaser's acceptance of the Closing Date Balance Sheet or,
if applicable, within ten days of receipt of a determination and
resolution of any dispute over the Closing Date Balance Sheet as
provided for in Section 3(c)(i). In the event that the Closing Date
Net Assets, as finally determined, is more than $16,182,125, Purchaser
shall pay to Seller the amount of such difference plus interest from
the Closing Date to the date of payment at the rate of 8% per annum
within ten days of Purchaser's acceptance of the Closing Date Balance
Sheet, or, if applicable, within ten days of receipt of a
determination and resolution of any dispute over the Closing Date
Balance Sheet as provided for in Section 3(c)(i).
(d) ALLOCATION OF PURCHASE PRICE. The parties shall allocate the
Purchase Price to the Purchased Assets and to Seller's and Shareholder's
covenants not to compete set forth in Section 14 hereof in a manner
consistent with the estimated allocation set forth on Schedule 3 hereto.
The parties acknowledge that Seller's and Shareholder's agreements not to
compete under Section 14 hereof are agreements for which Purchaser has
separately bargained.
4. ASSUMPTION OF LIABILITIES.
(a) GENERALLY. On and as of the Closing Date, Purchaser shall hereby
undertake, assume and agree to perform, pay or discharge, in accordance
with their terms, to the extent not heretofore performed, paid or
discharged or otherwise provided for, (i) all liabilities of Seller
reflected in the Closing Date Balance Sheet, (ii) all obligations of Seller
consistent with its representations and warranties arising after the
Closing Date under the Facilities Leases and the Assumed Contracts and
(iii) all other obligations of Seller specifically undertaken by Buyer
pursuant to other provisions of this Agreement (hereinafter collectively
referred to as the "Assumed Liabilities").
(b) EXCLUDED LIABILITIES. Except for the liabilities and obligations
of Seller expressly assumed by Purchaser under Section 4(a) hereof, Seller
shall be responsible for and pay, perform and discharge any and all
liabilities, obligations, losses, claims, demands, suits, actions, damages,
costs and expenses made by or owed to any party to the extent any of the
foregoing relates to operations or assets of Seller and arises in
connection with or on the basis of events, acts, omissions, conditions or
any other state of facts with respect to the Purchased Assets or Seller
occurring or existing prior to or on the Closing Date (hereinafter
collectively referred to as the "Excluded Liabilities"). Excluded
Liabilities shall, without limitation, include:
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(i) liabilities and obligations for all foreign, federal, state
and local taxes as of the Closing Date, whether or not reflected on
the books and records of Seller;
(ii) liabilities and obligations to Shareholder;
(iii) liabilities and obligations to employees of Seller for all
accrued wage, salary, commission, bonus and other employee
compensation payments as set forth in Section 5(b) hereof;
(iv) liabilities related to the actions, suits and proceedings
identified on Exhibit M attached hereto, including without limitation
any claim, damage, expense or liability (including fees and expenses
of counsel) arising in any manner related to the Mexico Feed and Seed
Company Superfund site (the "Mexico Superfund Site") in Mexico,
Missouri;
(v) liabilities and obligations with respect to the Excluded
Contracts; and
(vi) liabilities arising from or relating to any failure by
Seller to comply with its maintenance or other obligations under
Seller's lease of its facility in Panama City, Florida (the "Panama
City Plant") prior to the Closing Date.
5. LABOR AND EMPLOYMENT MATTERS.
(a) GENERALLY. Purchaser agrees to offer employment immediately
after the Closing Date to all employees of Seller except for certain
persons who are not the subject of Seller's existing labor agreements as
shall be agreed to by Purchaser and Seller on or prior to the Closing Date.
Purchaser shall not, as a condition of employment, on or immediately after
the Closing Date, require any such person to relocate. Purchaser shall
offer to employ such persons at the same rate of pay received by each such
person as of the Closing Date. Purchaser has made available to Seller a
description of the benefits proposed to be provided to persons, other than
those subject to Seller's existing labor agreements, so employed by
Purchaser. Schedule 4 hereto sets forth all employees of Seller as of the
date hereof and such Schedule shall be updated as appropriate on or prior
to the Closing Date.
(b) EMPLOYMENT TRANSITION PROVISIONS. Prior to the Closing Date,
Seller shall furnish its employees, their representatives and appropriate
governmental authorities such notice as may be required of Seller by and in
accordance with applicable laws and regulations, including, without
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limitation, any applicable plant closing or mass lay-off laws. Seller will
comply with all legal obligations it may have to bargain with the
collective bargaining representatives of its employees concerning the
decision to sell the Purchased Assets and the effects thereof. Each person
employed by Seller shall cease to be an employee of Seller effective the
Closing Date. on the Closing Date, or as soon as practicable thereafter,
Seller shall pay each such person all accrued wage, salary, commission,
bonus and other employee compensation payments for all periods prior to the
Closing Date to which such person is entitled. In addition, Seller shall
pay or provide for all other employee benefits maintained by Seller for all
periods prior to the Closing Date, all in accordance with applicable law.
(c) VACATION BENEFITS. Purchaser shall recognize the accrued
vacation benefits of each of Seller's employees who accepts employment with
Purchaser to the extent set forth on the Closing Date Balance Sheet and
shall provide such vacation with pay to such employee.
(d) PENSION PLANS. Purchaser is not assuming responsibility for the
Employee Benefit Plans (as hereinafter defined) except as set forth on
Exhibit N hereto.
6. LOSS, DESTRUCTION, CONDEMNATION OR DAMAGE TO THE PURCHASED
ASSETS. If between the date of this Agreement and the Closing Date, any of the
Purchased Assets (other than Inventory) are lost, destroyed or condemned, or
suffer any material damage and are not repaired or replaced prior to Closing,
and (ii) if applicable, Purchaser shall have waived the conditions precedent
contained in Sections 10(a) and 10(c) hereof, then Seller shall, on the Closing
Date in connection with the Closing, assign to Purchaser all insurance and/or
condemnation proceeds to the extent of the fair market value of such Purchased
Assets payable to Seller on account of such loss, destruction, condemnation or
damage pursuant to an assignment in form and substance satisfactory to
Purchaser. In the case of Purchased Assets to which a portion of the Purchase
Price has been expressly allocated in Schedule 3 hereto, the amount so allocated
shall be deemed to constitute the fair market value thereof for purposes of this
Section 6.
7. CLOSING. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Winston & Strawn,
35 West Wacker Drive, Chicago, Illinois, at 10:00 a.m., Chicago time, on March
12, 1993, or at such other place or time as Seller and Purchaser may mutually
agree (the actual date of the Closing being hereinafter referred to as the
"Closing Date"). The effective time of the Closing shall be deemed to be 11:59
p.m. on the Closing Date.
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At the Closing, (a) Purchaser shall make payments to Seller in the
manner set forth in Section 3(b) hereof and (b) Seller shall execute and deliver
all instruments and documents reasonably necessary to transfer the Purchased
Assets and the Business to Purchaser and to carry out the terms of this
Agreement. Possession of the Business and the Purchased Assets shall be
delivered to Purchaser immediately after the Closing.
8. REPRESENTATIONS AND WARRANTIES OF SELLER AND SHAREHOLDER. Except
as otherwise disclosed in Exhibit O attached hereto, Seller and Shareholder,
jointly and severally, hereby represent and warrant to Purchaser as follows:
(a) CORPORATE ORGANIZATION. Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Delaware. Seller has the corporate power and authority to carry on its
business as now being conducted. Seller is duly qualified or licensed to
do business as a foreign corporation in each jurisdiction wherein the
nature of its activities or of its properties owned or leased makes such
qualification necessary and failure to be so qualified or licensed would
have a material adverse effect upon the Business or the Purchased Assets.
Shareholder is a corporation duly organized, validly existing and in good
standing under the laws of the State of Missouri. Shareholder has the
corporate power and authority to carry on its business as now being
conducted. Except for certain data processing, accounting and other
administrative functions performed by Shareholder on behalf of Seller in
the ordinary course of business, neither Shareholder nor any officer,
director or employee of Shareholder is currently a party to any transaction
with Seller relating to any aspect of the Business.
(b) AUTHORIZATION OF AGREEMENT. Seller and Shareholder have the
requisite corporate power to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution and
delivery of this Agreement by Seller and Shareholder and the performance by
them of their respective obligations hereunder have been duly authorized by
all necessary corporate action on the part of Seller and Shareholder. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby do not and will not conflict with, or
result in a breach of, or constitute a default under, the terms or
conditions of Seller's or Shareholder's Certificate of Incorporation or
By-Laws, any court or administrative order or process, any agreement or
instrument to which Seller or Shareholder is a party or by which Seller or
Shareholder or any of their assets is bound or, to the knowledge of Seller,
any statute or regulation of any governmental agency. This Agreement and
all other instruments required hereby to be executed and delivered
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by Seller or Shareholder to Purchaser are, or when delivered will be, valid
and binding obligations of Seller and Shareholder, respectively,
enforceable against Seller or Shareholder, as the case may be, in
accordance with their terms.
(c) FINANCIAL STATEMENTS. Attached to this Agreement as Exhibit P
are (i) a balance sheet of Seller at December 31, 1992 together with the
related statements of income and stockholder's equity for the year then
ended prepared by Seller, and (ii) a balance sheet at January 31, 1993,
together with the related statements of income and stockholder's equity for
one month then ended prepared by the Seller (the "January 31, 1993
Financial Statements"). Such financial statements (x) were prepared in
accordance with the books and records of Seller; (y) present fairly the
financial condition of Seller at the balance sheet dates and the results of
its operations for the periods therein specified in all material respects;
and (z) have, in all material respects, been prepared in accordance with
generally accepted accounting principles applied on a basis consistent with
prior accounting periods, except for the format thereof and the lack of
proper footnotes and the statements of cash flows thereto. Specifically,
but not by way of limitation, to the knowledge of Seller, the balance
sheets disclose all of the debts, liabilities and obligations of any nature
(whether absolute, accrued or contingent and whether due or to become due)
of Seller at December 31, 1992 and January 31, 1993 which in accordance
with generally accepted accounting principles would be required to be
disclosed in such balance sheets. The balance sheets include appropriate
reserves for all taxes and other liabilities accrued at such date but not
yet payable.
(d) TAX RETURNS AND AUDITS. All required federal, state and local
tax returns or appropriate extension requests of Seller have been filed,
and all federal, state and local taxes required to be paid with respect to
such returns have been paid or due provision for the payment thereof has
been made. Seller is not delinquent in the payment of any such tax or in
the payment of any assessment or governmental charge. Seller has not
received notice of any tax deficiency proposed or assessed against it.
(e) BUSINESS CHANGES. Except for the transactions contemplated by
this Agreement, since January 31, 1993 (the "Balance Sheet Date"), there
has not been:
(i) any material adverse change in the financial condition,
operations, results of operations or business of Seller, or material
damage, destruction or loss (whether or not covered by insurance)
affecting Seller or the Purchased Assets;
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(ii) any sale, lease, abandonment or other disposition of any
material equipment or other operating property, except for
dispositions of Inventory in the ordinary course of business;
(iii) any transfer of the Purchased Assets (other than cash) by
Seller to Shareholder or any officer, director, employee or affiliate
of Seller or any other transfer of Purchased Assets outside of the
ordinary course of business;
(iv) any material deviation from the ordinary and usual course by
Seller in the conduct of its business, including, without limitation,
any increase in compensation of any officer, director or employee
(including, without limitation, any increase pursuant to any bonus,
pension, profit sharing or other plan or commitment) or the adoption
of any new benefit program, plan or other arrangement for officers,
directors or employees;
(v) any change in accounting methods or practices followed by
Seller, including changes to amortization or depreciation policies or
write-downs in the value of any Inventory or Receivables not otherwise
reflected on the Proposed Closing Date Balance Sheet; or
(vi) any material increase in any obligations or liabilities
(whether absolute, accrued, contingent or otherwise and whether due or
to become due), except items incurred in the ordinary course of
business.
(f) ACTIONS, SUITS, PROCEEDINGS. There are no actions, suits or
proceedings pending or, to the knowledge of Seller, threatened against
Seller or any of its properties or the Business in any court or before any
federal, state, municipal or other governmental agency relating to the
Purchased Assets or the Business or the consummation of the transactions
contemplated hereby other than as set forth in Exhibit Q attached hereto.
Seller is not subject to any order, writ, injunction or decree of any court
or governmental agency relating to the Business or the Purchased Assets.
(g) COMPLIANCE WITH APPLICABLE LAWS AND OTHER INSTRUMENTS. Except as
disclosed in the Environmental Due Diligence Assessment dated December 23,
1992 prepared for Purchaser by ENSR Consulting and Engineering (the
"Environmental Assessment"), the business and operations of Seller have
been and are being conducted in all material respects in accordance with
all applicable laws, rules or regulations of all governmental authorities,
including, without limitation all laws, rules and regulations relating to
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the environment or occupational health and safety (hereinafter collectively
referred to as "Environmental Laws"). To the knowledge of Seller, Seller
is not in material violation of any building code, special use permit,
zoning ordinance or any other applicable law, rule or regulation relating
to the Business or the Purchased Assets, and there are no administrative or
other governmental claims pending against Seller alleging or inquiring as
to the existence of any such violation. Seller is not in violation of its
Certificate of Incorporation or By-laws.
(h) ENVIRONMENTAL LAWS. Except as disclosed in the Environmental
Assessment, Seller has obtained all material permits and other governmental
authorizations required under applicable Environmental Laws (and has
complied in all material respects with the terms and conditions thereof)
and has not received any communication, whether from a governmental
authority, citizens group, employee or otherwise, that alleges Seller is
not in full compliance with applicable Environmental Laws. Except as
disclosed in the Environmental Assessment or as otherwise set forth on
Exhibit R hereto, Seller has not improperly disposed of, spilled or
otherwise released any hazardous substances or materials the release or
disposal of which is regulated by any law, rule or regulation and, to the
knowledge of Seller, no circumstances exist which would subject Seller to
any liability with respect to the environmental contamination of any
property.
(i) EMPLOYEE PLANS. Exhibit S hereto lists all employee benefit
plans covering employees of Seller engaged in the operation of the Business
(the "Employee Benefit Plans"). True and correct copies of each of the
Employee Benefit Plans, to the extent available, have been furnished by
Seller to Purchaser. Seller has also furnished to Purchaser with respect
to each of such plans, the most recent summary plan description, if any.
There are no pending, or to the knowledge of Seller, threatened claims,
lawsuits or arbitrations which have been asserted or instituted against
such plans or any fiduciaries thereof respecting their duties to the plans
or the assets or any of the trusts under any of the plans. Each of the
Employee Benefit Plans that are subject to the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), is in compliance in all
material respects with ERISA. Neither Seller, its directors, officers and
employees nor, to the knowledge of Seller, any fiduciary of any such plan
is in material breach of any obligations imposed on fiduciaries under Title
I of ERISA. No "reportable event" (as such term is defined in Section
4043(b) of ERISA) or "prohibited transactions" (within the meaning of
Section 406 of ERISA) has occurred with respect to any such plan. Seller
is in compliance in all material respects with all
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applicable requirements of section 4980B of the Internal Revenue Code of
1986, as amended (the "IRC").
(j) LABOR MATTERS. There are no labor disputes or disturbances
pending or, to the knowledge of Seller, threatened which affect the
Business or the future prospects of the Business. Except as set forth on
Exhibit T hereto, there are no existing employment agreements or collective
bargaining agreements between Seller and any of its employees engaged in
the operation of the Business or any collective bargaining unit
representing any such employees.
(k) TITLE TO THE PURCHASED ASSETS. Exhibit A correctly identifies
the real property included in the Facilities. Seller has good and
marketable title to all of the Purchased Assets, free and clear of all
security interests, liens, mortgages, encumbrances and restrictions that
will continue after the Closing Date, except encumbrances listed and
described in Exhibit U hereto (the "Permitted Encumbrances").
(l) INVENTORY. To the knowledge of Seller, Inventory reflected in
the Closing Date Balance Sheet after taking into account the allowance for
obsolete or slow moving items referred to in Section 3(c)(i) hereof will
consist of items of a quality and quantity useable or saleable in the
ordinary course of business and will not be excessive in kind or amount.
(m) REAL ESTATE.
(i) Seller has not received any written notice or communication
advising it of any general or special assessment relating to the
Facilities or the facilities subject to the Facilities Leases which is
not fully paid.
(ii) To the knowledge of Seller, there are no variances, special
exceptions, conditions or agreements pertaining to the Facilities
imposed or granted by or entered into by Seller, with or enforceable
by any state, county or municipal government, agent or body, any
neighborhood or civic group, or any similar body, except as disclosed
in Exhibit U hereto. No written notice form any city, county, or
other governmental authority has been received by the Seller requiring
or calling attention to the need for any work, repair, construction,
alteration or installation on, or in connection with, the Facilities
or the facilities subject to the Facilities Leases.
(iii) The Facilities and the facilities subject to the Facilities
Leases have connection to sanitary, sewer, storm sewer, water,
electricity, gas, telephone and all
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other utilities necessary for the operation of the Business and to the
knowledge of the Seller there are no existing circumstances or
conditions which would result in termination of such access or
connections for any significant period of time.
(n) INTELLECTUAL PROPERTY RIGHTS. Exhibit D attached hereto lists
all patents, trademarks, trade names, service marks and copyrights (and all
applications therefor) embodied in or related to the Business. To the
knowledge of Seller, Seller (i) owns or has the exclusive right to use all
such patents, trademarks, trade names, service marks and copyrights (and
all applications therefor) and all trade secrets, inventions, know-how,
designs, processes, specifications and formulas otherwise embodied in or
related to the Business and (ii) is not using any confidential information
or trade secrets of others. Seller is not a party to any agreement or
contract which obligates Seller to pay royalties, fees or other payments to
any owner of, licensor of, or other claimant to, any patent, trademark,
service mark, trade name, copyright or other intellectual property embodied
in or related to the Business. Seller has not transferred or conveyed any
rights to others in the intellectual property of Seller embodied in or
related to the Business other than rights to use that are incidental to
sales of products included within the Business. Seller has not received
notice with respect to, infringing upon or otherwise acting adversely to
any known right or claimed right of any person under or with respect to any
patents, trademarks, service marks, trade names, copyrights, licenses or
other intellectual property rights with respect to the Business.
(o) CONTRACTS, LEASES, COMMITMENTS AND AGREEMENTS. Exhibit G hereto
sets forth and describes all material contracts, leases, agreements and
commitments (i.e., a contract, lease, agreement or commitment providing for
payment or receipt of $50,000 or more or which may not be terminated
without penalty with notice of 30 days or less other than those entered
into in the ordinary course of Seller's business) to which Seller is a
party or by which it is bound with respect to the Business or the Purchased
Assets except for Excluded Contracts and the Facilities Leases. Seller
and, to the knowledge of Seller, each other party thereto, have in all
respects substantially performed all obligations required to be performed
by them to date, and are not in default under any of the Assumed Contracts
or the Facilities Leases. Each of the Assumed Contracts and the Facilities
Leases is in full force and effect and is assignable to Purchaser without
the consent of third parties except as noted in Exhibit G, and Seller has
not waived or assigned to any other person any of its rights thereunder.
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(p) COMPOSITION AND CONDITION OF PURCHASED ASSETS. The Purchased
Assets comprise all material property and assets employed by Seller in the
Business, except for the Excluded Assets. Except as disclosed on Exhibit
O, the Purchased Assets are fit for the purpose for which they are
presently used and, except for vehicles and machinery undergoing repair in
the ordinary course of business, are in good operating condition and
repair, ordinary wear and tear excepted. Purchaser acknowledges and agrees
that it may be required to make at its own expense certain repairs to the
floor and roof of the Panama City Plant as it shall deem necessary or
desirable after the Closing Date in order to operate such facility.
(q) GOVERNMENT LICENSE AND REGULATION. To the knowledge of Seller,
Seller has all material domestic and foreign governmental licenses and
permits necessary to conduct the Business and to own and use the Purchased
Assets and such licenses and permits are in full force and effect. A true
and complete list of such licenses and permits, including the issuance,
renewal and expiration dates thereof, is attached as Exhibit J hereto. To
the knowledge of Seller, except as noted in Exhibit J, all of the rights of
Seller under such licenses and permits are transferable to Purchaser under
applicable law solely upon the assignment of such licenses and permits by
Seller to Purchaser hereunder and will be exercisable by Purchaser after
the consummation of the transactions contemplated by this Agreement. No
proceeding is pending or, to the knowledge of Seller, threatened regarding
the revocation or limitation of any such governmental license or permit and
there is no basis or grounds for any such revocation or limitation.
9. REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser hereby
represents and warrants to Seller and Shareholder as follows:
(a) CORPORATE ORGANIZATION. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware and has the corporate power and authority to own its
property and carry on its business as now conducted. Purchaser is duly
qualified or licensed to do business as a foreign corporation in the State
of Illinois.
(b) AUTHORIZATION OF AGREEMENT. Purchaser has the requisite
corporate power to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this
Agreement by Purchaser and the performance by it of its obligations
hereunder have been duly authorized by all necessary corporate action on
the part of Purchaser. The execution and delivery of this Agreement and
the consummation of the transactions
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contemplated hereby do not and will not conflict with, or result in a
breach of, or constitute a default under, the terms or conditions of
Purchaser's Certificate of Incorporation or By-Laws, any court or
administrative order or process, any agreement or instrument to which
Purchaser is a party or by which Purchaser or any of its assets is bound
or, to the knowledge of Purchaser, any statute or regulation of any
governmental agency. This Agreement and all other instruments required
hereby to be executed and delivered by Purchaser to Seller or Shareholder
are, or when delivered will be, valid and binding obligations of Purchaser
enforceable against Purchaser in accordance with its terms.
(c) FINANCIAL STATEMENTS. Attached to this Agreement as Exhibit V
are (i) a balance sheet of Purchaser at February 29, 1992 together with the
related statements of income and cash flows for the year then ended, and
the report thereon of KPMG Peat Marwick, certified public accountants, and
(ii) a balance sheet at January 31, 1993 (the "Purchaser's January 31, 1993
Balance Sheet"), together with the related statements of income and cash
flows for the eleven months then ended prepared by Purchaser. Such
financial statements (x) were prepared in accordance with the books and
records of Purchaser; (y) present fairly the financial condition of
Purchaser at the balance sheet dates and the results of its operations and
cash flows for the periods therein specified in all material respects; and
(z) except for the change in accounting for inventory from the LIFO method
to the FIFO method, have, in all material respects, been prepared in
accordance with generally accepted accounting principles applied on a basis
consistent with prior accounting periods, except for the format thereof and
the lack of proper footnotes and the statements of stockholder's equity
thereto. Specifically, but not by way of limitation, to the knowledge of
Purchaser, the balance sheets disclose all of the debts, liabilities and
obligations of any nature (whether absolute, accrued or contingent and
whether due or to become due) of Purchaser at February 28, 1992 and January
31, 1993 which in accordance with generally accepted accounting principles
would be required to be disclosed in such balance sheets. The balance
sheets include appropriate reserves for all taxes and other liabilities
accrued at such date but not yet payable.
(d) SOLVENCY.
(i) On the Closing Date, the assets of Purchaser taken at a fair
valuation will exceed the amount that will be required to be paid on
or in respect of the existing debts and other liabilities (including
contingent liabilities) of Purchaser as they mature.
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(ii) On the Closing Date, the net assets of Purchaser do not
constitute unreasonably small capital for Purchaser to carry out its
business as now conducted and as proposed to be conducted including
the capital needs of Purchaser, taking into account the particular
capital requirements of the businesses conducted by Purchaser, and
projected capital requirements and capital availability thereof.
(iii) Purchaser does not intend to incur debts beyond its ability
to pay such debts as they mature (taking into account the timing and
amounts of cash to be received by it, and of amounts to be payable on
or in respect of debt of Purchaser). The cash flow of Purchaser,
after taking into account all anticipated uses of the cash of
Purchaser, will at all times be sufficient to pay all such amounts on
or in respect of debt of Purchaser when such amounts are required to
be paid.
(iv) Purchaser does not believe that final judgments against
Purchaser in actions for money damages presently pending will be
rendered at a time when, or in an amount such that, Purchaser will be
unable to satisfy any such judgments promptly in accordance with their
terms (taking into account the maximum reasonable amount of such
judgments in any such actions and the earliest reasonable time at
which such judgments might be rendered). The cash flow of Purchaser,
after taking into account all other anticipated uses of the cash of
Purchaser (including the payments on or in respect of Purchaser's
Note), will at all times be sufficient to pay all such judgments
promptly in accordance with their terms.
10. CONDITIONS TO OBLIGATION OF PURCHASER TO CLOSE. The obligation
of Purchaser to effect the closing of the transactions contemplated by this
Agreement is subject to the satisfaction prior to or at the Closing of the
following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Seller and Shareholder under this Agreement shall be true and
correct in all material respects as of the Closing Date with the same
effect as though made on and as of the Closing Date.
(b) OBSERVANCE AND PERFORMANCE. Seller and Shareholder shall have
performed and complied in all material respects with all covenants and
agreements required by this Agreement to be performed and complied with by
it prior to or as of the Closing Date.
(c) NO ADVERSE CHANGE. There shall have occurred no material adverse
change in the Purchased Assets as a whole or
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in the business, financial condition, prospects or results of operations of
Seller since January 31, 1993.
(d) OFFICERS' CERTIFICATE. Each of Seller and Shareholder shall have
delivered to Purchaser a certificate, dated the Closing Date, executed by
their respective President and senior financial officer and certifying to
the satisfaction of the conditions specified in Sections 10(a), (b) and (c)
hereof.
(e) SEARCHES. Purchaser shall have received, as of a date no more
than 10 days prior to the Closing Date, Uniform Commercial Code searches
against Seller from the Secretaries of State of Missouri, Nevada and
Florida and from such other states and/or counties as Purchaser shall
reasonably request, together with tax lien and judgment searches, in each
case certified by a reporting service satisfactory to Purchaser, and
disclosing no liens or security interests against the Purchased Assets
other than the Permitted Encumbrances and liens and security interests for
which Seller shall have obtained release on or before the Closing Date.
(f) CONSENTS OF THIRD PARTIES. Purchaser shall have received duly
executed copies of all material consents and agreements necessary to effect
the transfer of the Purchased Assets to Purchaser, including, without
limitation the assignment to Purchaser of the Facilities Leases and the
Assumed Contracts. Purchaser hereby agrees to use its best efforts to
assist Seller in obtaining such consents and agreements.
(g) LEGAL OPINION. Purchaser shall have received an opinion, dated
the Closing Date, from Scott W. Johnson, General Counsel of the
Shareholder, in the form attached hereto as Exhibit W.
(h) COPIES OF DOCUMENTS. Purchaser shall have received, to the
extent requested by Purchaser, copies of all documents and instruments
listed in any of the Exhibits to this Agreement.
(i) CLOSING DOCUMENTS. Purchaser shall have received such bills of
sale, assignments and other documents of transfer reasonably required to
transfer to Purchaser the interests of Seller in the Purchased Assets and
the Business consistent with the terms of this Agreement.
(j) NO LEGAL ACTIONS. No court or governmental authority of
competent jurisdiction shall have issued an order, not subsequently
vacated, restraining, enjoining or otherwise prohibiting the consummation
of the transactions contemplated by this Agreement, and no governmental
agency
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shall have instituted an action or proceeding which shall not have been
previously dismissed seeking to restrain, enjoin or prohibit the
consummation of the transactions contemplated by this Agreement.
(k) PROCEEDINGS AND DOCUMENTS. All corporate and other proceedings
and actions taken in connection with the transactions contemplated hereby
and all certificates, opinions, agreements, instruments and documents
mentioned herein or incident to any such transaction shall be reasonably
satisfactory in form and substance to, Purchaser and its counsel;
including, without limitation (i) a title insurance policy insuring fee
simple title to the Facilities in the name of Purchaser and containing no
exceptions to coverage other than the Permitted Encumbrances, and (ii)
amendments to, or waivers pursuant to, Purchaser's credit agreements with
its institutional lenders in order to permit it to acquire and operate the
Business.
11. CONDITIONS TO OBLIGATION OF SELLER TO CLOSE. The obligation of
Seller to effect the transactions contemplated by this Agreement is subject to
the satisfaction prior to or at the Closing of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Purchaser under this Agreement shall be true and correct as
of the Closing Date with the same effect as though made on and as of the
Closing Date.
(b) OBSERVANCE AND PERFORMANCE. Purchaser shall have performed and
complied with all covenants and agreements required by this Agreement to be
performed and complied with by it prior to or as of the Closing Date.
(c) OFFICERS' CERTIFICATE. Purchaser shall have delivered to Seller
a certificate, dated the Closing Date, executed by its President and senior
financial officer and certifying to the satisfaction of the conditions
specified in Sections 11(a) and (b) hereof.
(d) LEGAL OPINION. Seller shall have received an opinion, dated the
Closing Date, from Winston & Strawn, counsel to Purchaser, in the form
attached hereto as Exhibit X.
(e) CLOSING DOCUMENTS. Seller shall have received such assumption
agreements and other documents of transfer reasonably required to transfer
to Purchaser all obligations of Seller with respect to the Assumed
Contracts, the Facilities Leases and the Assumed Liabilities consistent
with the terms of this Agreement.
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(f) NO LEGAL ACTIONS. No court or governmental authority of
competent jurisdiction shall have issued an order, not subsequently
vacated, restraining, enjoining or otherwise prohibiting the consummation
of the transactions contemplated by this Agreement, and no governmental
agency shall have instituted an action or proceeding which shall not have
been previously dismissed seeking to restrain, enjoin or prohibit the
consummation of the transactions contemplated by this Agreement.
12. MUTUAL COVENANTS.
(a) PRE-MERGER NOTIFICATION. Seller and Purchaser shall cooperate
with respect to, and diligently pursue completion of, all filings with
governmental agencies required in connection with the transactions
contemplated by this Agreement, including, without limitation, the filings
required by, and the information formally and informally requested pursuant
to the Antitrust Improvements Act of 1976 and the regulations promulgated
thereunder (the "Hart-Scott-Rodino Filings"). Purchaser on the one hand,
and Seller and Shareholder on the other have made their initial Hart-Scott-
Rodino Filing, which filing represented by the party filing the same to be
complete, accurate and in compliance with applicable laws and regulations.
(b) ACCOUNTS RECEIVABLE. For a period of 90 days after the Closing
Date, Purchaser shall collect the Receivables (the "Collection Period").
Any payments received by Purchaser made by or on behalf of an account
debtor during the Collection Period shall be applied against such debtor's
account on an oldest-balance-first basis before any payments made by or on
behalf of such account debtor shall be applied against any item of account
or indebtedness or other obligation owed by such account debtor to
Purchaser unless other payment directions are received from an account
debtor. If Seller receives any payment with respect to a Receivable during
the Collection Period, Seller shall immediately transmit to Purchaser such
payment in the form received together with any documents or materials
received with such payment. At the end of the Collection Period, all
uncollected Receivables as confirmed by Purchaser to Seller in writing,
will be repurchased by Seller for the face amount of such uncollected
Receivables plus interest at the rate of 8% per annum from the Closing Date
to the date of repurchase. Purchaser shall furnish such information and
cooperation as Seller may reasonably request with respect to the collection
of such Receivables to be repurchased by Seller. If Purchaser receives any
payment at any time to which Seller is entitled, Purchaser shall
immediately transmit to Seller such payment in the form received together
with any documents or materials received with such payment.
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13. COVENANTS OF SELLER. Seller covenants and agrees with Purchaser
that:
(a) OPERATION OF BUSINESS PRIOR TO CLOSING. Except with the prior
written consent of Purchaser, from and after the date hereof to the Closing
Date:
(i) Seller shall use its best efforts to preserve intact the
business organization of the Business, keep available to Purchaser the
services of its employees on terms no less favorable to Seller than
those on which such employees are presently employed, and use its best
efforts to preserve for Purchaser the good will of suppliers,
customers and others having business relationships with the Business.
Seller shall maintain its books and records during such period in a
manner consistent with past practice;
(ii) Seller shall not sell, transfer, dispose of or abandon any
portion of the Purchased Assets, except in the ordinary course of
business and consistent with past practice;
(iii) Seller shall not permit any of the Purchased Assets to
become subject to any lien, pledge, security interest, conditional
sale agreement, license agreement, charge or encumbrance, other than
Permitted Encumbrances;
(iv) Seller shall not modify or amend any of the Assumed
Contracts or the Facilities Leases or waive or assign to any third
party any of its rights thereunder;
(v) Seller shall maintain and keep all tangible Purchased Assets
in good condition and repair, ordinary wear and tear excepted;
(vi) Seller shall not enter into any contract or agreement which
relates to the Business which will not be fully performed on or before
the Closing Date and which provides for payments or sales by Seller in
excess of $50,000 other than sales of Inventory and purchases of
materials in the ordinary course of business consistent with past
business practice; and
(vii) Without limiting the generality of the foregoing, Seller
shall in all other respects operate the Business in the ordinary
course.
(b) NOTICES TO EMPLOYEES; CONTINUATION OF BENEFITS. Upon cessation
of employment hereunder, Seller shall give each of Seller's employees all
required notices and information with respect to the continuation of
certain health insurance
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benefits by Seller and shall provide all such benefits required by Section
4980B of the IRC to any of Seller's employees who do not become employees
of Purchaser.
14. COVENANTS NOT TO COMPETE. In consideration of the payment by
Purchaser of the Purchase Price, Seller and Shareholder hereby agree that, for
the period of two years from the Closing Date, they shall not, directly or
indirectly, through any person controlling, controlled by or under common
control with such person (hereinafter collectively ref erred to as
"Affiliates"), alone or in association with any other person, firm, corporation
or other business organization:
(a) Engage in, or own or acquire any controlling interest in any
business which is engaged in, the business of manufacturing and selling
injection molded specialty containers (a "Competitive Business") unless
sales related to the Competitive Business were less than $5,000,000 or
represented less than 20% of net sales of such other person, corporation or
other business entity as set forth on its most recent annual financial
statements prior to acquisition by Seller or Shareholder. For purposes of
this Section 14(a), there shall be disregarded any interest which arises
solely from the ownership of less than a 1% equity interest in a
corporation whose stock is regularly traded on any national securities
exchange or in the over-the-counter market.
(b) In any way, directly or indirectly, for the purpose of conducting
or engaging in any Competitive Business, call upon, solicit, advise or
otherwise do, or attempt to do, business with any former customers of
Seller, or take away or interfere or attempt to interfere with any former
customer, trade, business or patronage of Seller relating to the
Competitive Business, or interfere with or attempt to interfere with any
former officer, employee, representative or agent of Seller in the conduct
of the Competitive Business, or directly solicit for hire any former
officer or employee of Seller who becomes an officer or employee of
Purchaser.
(c) REMEDIES FOR VIOLATION. Seller and Shareholder acknowledge that
the failure to comply with the provisions of this Section 14 will result in
irreparable and continuing damage to Purchaser for which there will be no
adequate remedy at law and that, in the event of such failure, Purchaser
and its successors and assigns shall be entitled to injunctive relief and
to such other and further relief as may be proper and necessary to ensure
compliance with the provisions of this Section 14.
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15. INSPECTION RIGHTS.
(a) PRE-CLOSING. Seller shall permit employees and agents of
Purchaser during normal business hours and on reasonable notice to Seller
to inspect the Purchased Assets and to inspect all documents and records
reflecting or reasonably relating to the Purchased Assets and the Business.
Purchaser agrees not to disclose, publish or disseminate any of the
information obtained by Purchaser from Seller or Shareholder and shall not
use any such information for its own account or authorize any other person
to disclose, publish or disseminate any such information without the
consent of Seller except in response to legal process or to the extent
required to comply with applicable law.
(b) POST-CLOSING. Purchaser agrees that all books and records
delivered to Purchaser by Seller or Shareholder pursuant to the provisions
of this Agreement shall be retained until December 31, 1997 and shall be
open for inspection by employees and agents of Seller and Shareholder at
any time during regular business hours on or prior to December 31, 1997,
and that Seller or Shareholder may during such period at their expense make
such excerpts therefrom as it may deem desirable. Seller and Shareholder
agree that all books and records retained by Seller or Shareholder and
relating to the Purchased Assets or Business shall be retained until
December 31, 1997 and shall be open for inspection by employees and agents
of Purchaser at any time during regular business hours on or prior to
December 31, 1995 and that Purchaser may during such period at its expense
make such excerpts therefrom as it may deem desirable. Thereafter, each
party shall offer to the other an opportunity to copy any such documents
and records prior to the destruction thereof. Notwithstanding the
foregoing, neither party shall have any liability to the other for its
failure to maintain such books and records after Closing unless such
failure is the result of its gross negligence or willful misconduct.
Purchaser shall permit employees and agents of Shareholder during normal
business hours and on reasonable notice to Purchaser to make periodic
environmental inspections of the Facilities and the facilities subject to
the Facilities Leases, including the taking of such air, soil and other
samples as may be reasonably necessary to determine whether any
circumstance or condition may exist for which Seller or Shareholder may be
obligated to indemnify Purchaser under Section 18(a)(iv) hereof.
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16. BULK SALES LAW. Purchaser hereby waives compliance by Seller
with the requirements of any applicable laws relating to bulk sales and
transfers and Seller and the Shareholder, jointly and severally, hereby agree
to indemnify and hold harmless Purchaser from any and all claims, liabilities
or costs arising
with respect thereto, including reasonable attorneys' fees.
17. TAXES AND FEES. Buyer shall be responsible for all sales,
transfer and similar taxes and governmental charges and recording fees and
related expenses with respect to the sale of the Purchased Assets, whether
levied against the Purchased Assets, Seller, Shareholder or Purchaser.
18. INDEMNIFICATION.
(a) INDEMNIFICATION BY SELLER AND SHAREHOLDER. Seller and
Shareholder, jointly and severally, hereby agree to indemnify and hold
harmless Purchaser at all times from and after the Closing Date against and
with respect to:
(i) The Excluded Liabilities, including without limitation any
claim, damage, expense or liability (including fees and expenses of
counsel) arising in any manner related to the Mexico Superfund Site;
(ii) Any and all loss, injury, damage or deficiency resulting
from any misrepresentation or breach of warranty on the part of Seller
or Shareholder under this Agreement;
(iii) Any and all loss, injury, damage or deficiency resulting
from any non-fulfillment of any covenant or agreement on the part of
Seller or Shareholder under this Agreement;
(iv) Any and all loss, injury, damage or deficiency resulting
from (A) any presence, use, generation, transportation, handling,
treatment, storage, release or disposal of any hazardous or toxic
substance or waste at or from the Facilities or the facilities subject
to the Facilities Leases by Seller or any predecessor in interest or
(B) the presence at the Facilities or the facilities subject to the
Facilities Leases of any material or equipment which under applicable
laws and regulations requires special handling or notification to a
governmental authority; and
(v) Any and all demands, claims, actions, suits, proceedings,
assessments, judgments, costs and legal and other expenses incident to
any of the foregoing.
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(b) INDEMNIFICATION BY PURCHASER. Purchaser hereby agrees to
indemnify and hold harmless Seller and Shareholder at all times from and
after the Closing Date against and with respect to:
(i) The Assumed liabilities;
(ii) Any and all loss, injury, damage or deficiency resulting
from any misrepresentation or breach of warranty on the part of
Purchaser under this Agreement;
(iii) Any and all loss, injury, damage or deficiency resulting
from any non-fulfillment of any covenant or agreement on the part of
Purchaser under this Agreement; and
(iv) Any and all demands, claims, actions, suits or proceedings,
assessments, judgments, costs and legal and other expenses incident to
any of the foregoing.
(c) PROCEDURES FOR INDEMNIFICATION. Promptly after receipt by an
indemnified party pursuant to the provisions of Sections (a) or (b) of this
Section 18 of notice of the commencement of any action involving the
subject matter of the foregoing indemnity provisions, such indemnified
party shall, if a claim thereof is to be made against an indemnifying party
pursuant to the provisions of such Sections 18(a) or (b), promptly notify
such indemnifying party of the commencement thereof; but the omission to so
notify such indemnifying party will not relieve it from any liability which
it may have to the indemnified party otherwise than hereunder. Without
limiting the foregoing, Purchaser agrees to give Seller and Shareholder
prompt notice of (i) any administrative or other governmental claim made
against Purchaser relating to violation of or failure to comply with
Environmental Laws or (ii) the existence of any circumstance or condition
for which Seller or Shareholder may be obligated to indemnify Purchaser
under Section (a) (iv) of this Section 18. In case such action is brought
against an indemnified party and it notifies the indemnifying party of the
commencement thereof, the indemnifying party shall have the right to
participate in, and, to the extent that it may wish, to assume the defense
thereof, with counsel satisfactory to such indemnified party; provided,
however, if the defendants in any action include both the indemnified party
and the indemnifying party and the indemnified party shall have reasonably
concluded that there may be legal defenses available to it which are
different from or additional to those available to the indemnifying party,
or if there is a conflict of interest which would prevent counsel for the
indemnifying party from also representing the indemnified party, the
indemnified party shall have the right to select separate counsel to
participate in the defense of
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such action on behalf of such indemnified party. After notice from the
indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party shall not be liable to the
indemnified party pursuant to the provisions of such Sections 18(a) or (b)
for any legal or other expense subsequently incurred by such indemnified
party in connection with the defense thereof other than reasonable costs of
investigation, unless (i) the indemnified party shall have employed counsel
in accordance with the proviso of the preceding sentence, (ii) the
indemnifying party shall not have employed counsel satisfactory to the
indemnified party to represent the indemnified party within a reasonable
time after the notice of the commencement of the action, or (iii) the
indemnifying party has authorized the employment of counsel for the
indemnified party at the expense of the indemnifying party. No
indemnifying party, in the defense of any such claim or litigation, shall,
except with the consent of each indemnified party, consent to entry of any
judgment or enter into any settlement which does not include as an
unconditional term thereof the release from all liability in respect to
such claim or litigation.
(d) ENVIRONMENTAL REMEDIATION. Purchaser agrees to consult with
Shareholder from time to time, as Shareholder reasonably requests,
regarding any Environmental Expenditures (as hereinafter defined) and
further agrees to employ methods of remediation that are reasonably
believed by Purchaser to be reasonable and cost-effective if environmental
remediation should be reasonably determined by Purchaser to be necessary.
If Purchaser proposes to incur any Environmental Expenditures, Purchaser
shall deliver written notice to Shareholder of such proposed Environmental
Expenditures, which notice shall contain a detailed listing of the proposed
Environmental Expenditures and a description of remediation proposed to be
undertaken. Shareholder shall have the right to participate in, and, to
the extent that it may wish, to assume control of such remediation or, in
lieu thereof, to take such other actions as are reasonably necessary to
address the circumstances or condition that is the subject of such
remediation; provided that if Shareholder elects to take control of the
remediation it agrees to take such steps as are reasonably necessary to
avoid undue disruption of Purchaser's business. "Environmental
Expenditures" means out-of-pocket amounts, expenses or costs paid, incurred
or contracted for by Purchaser in connection with removal, response or
other remedial actions required by any administrative or other governmental
authority or reasonably necessary in connection with the remediation of any
circumstance or condition for which Seller or Shareholder may be obligated
to indemnify Purchaser under Section (a)(iv) of this Section 18.
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(e) LIMITS ON INDEMNIFICATION. No indemnification shall be payable
by Seller or Shareholder to Purchaser (A) under Sections 18 (a) (ii), (iii)
and (v) (as it relates to Sections 18(a)(ii) or (iii)) or (B) under Section
18(a)(iv) and (v) (as it relates to Section 18(a)(iv)), above unless and
until the aggregate amount for which such indemnification is sought exceeds
$125,000 or $50,000, respectively. Thereafter, Seller and Shareholder
shall be liable to Purchaser for all amounts in excess of such amounts. In
no event shall the aggregate obligations of indemnity of Seller and
Shareholder under Sections 18(a) (ii), (iii), (iv) or (v) above exceed the
Purchase Price. Seller and Shareholder acknowledge that there shall be no
limitation whatsoever in the indemnity obligations of Seller and
Shareholder under Section 18(a)(i). Purchaser hereby acknowledges and
agrees that this Section 18 shall be Purchaser's sole and exclusive remedy
with respect to any loss, injury, damage or other liability relating to or
arising under this Agreement or the transactions contemplated hereby, other
than claims based on intentional fraudulent conduct.
19. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations
and warranties made herein by Purchaser, Seller or Shareholder shall survive the
execution and delivery of this Agreement and shall remain in full force and
effect for a period of two years, and shall be deemed to have been relied upon
by each other party hereto, notwithstanding any investigation made by or on
behalf of such party. All statements contained in any certificate, instrument
or other writing delivered by or on behalf of any party pursuant hereto shall
constitute representations and warranties of such party. The term "knowledge,"
when used herein with respect to Seller or Purchaser, shall mean actual
knowledge, after due inquiry, of officers of Seller or Purchaser, as the case
may be, and the employees of Seller listed on Exhibit Y hereto.
20. MISCELLANEOUS.
(a) FURTHER ASSURANCES. Upon reasonable request, from time to time,
each party agrees that it shall (or direct its employees to, if applicable)
execute and deliver all documents, make all rightful oaths, testify in any
proceedings and do all other acts which may be necessary or desirable in
the reasonable opinion of the other party to protect or record the right or
title of Purchaser to the Purchased Assets or to aid in the prosecution or
defense of any rights arising therefrom, all without further consideration
other than reasonable out-of-pocket expenses.
(b) GENERAL. This Agreement may only be amended by an agreement in
writing by the parties hereto. This Agreement shall be construed and
interpreted in accordance with the substantive laws of the State of
Minnesota, without giving effect to choice of law principles. The failure
of any party
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to insist, in any one or more instances, upon performance of any of the
terms and conditions of this Agreement shall not be construed as a waiver
or relinquishment of any rights granted hereunder or of the future
performance of any such tern, covenant or condition. In the event of any
controversy concerning the rights or obligations under this Agreement, such
rights or obligations shall be enforceable in a court of equity by a decree
of specific performance. Such remedy shall, however, be cumulative and
nonexclusive and shall be in addition to any other remedy which the parties
may have. If any provision, clause or part of this Agreement, or the
application thereof under certain circumstances, is held invalid, the
remainder of this Agreement, or the application of each provision, clause
or part under other circumstances, shall not be affected thereby.
(c) NOTICES. Any notice to be given hereunder shall be deemed given
and sufficient if in writing and delivered or mailed by registered or
certified mail, in the case of Seller or Shareholder, to:
Bemis Company, Inc.
222 South Ninth Street
Suite 2300
Minneapolis, MN 55402
Attn: Chief Executive Officer
with a copy to:
Bemis Company, Inc.
222 South Ninth Street
Suite 2300
Minneapolis, MN 55402
Attn: General Counsel
or in the case of Purchaser, to:
Packaging Resources Incorporated
717 Forest Avenue
Lake Forest, IL 60045
Attn: President and Chief Executive Officer
(d) BENEFIT. This Agreement shall be binding upon and inure to the
benefit of and shall be enforceable by Purchaser, Seller, Shareholder and
their respective successors and assigns. This Agreement may not be
assigned without the written consent of the other party or parties hereto;
provided, however, that Purchaser may grant a security interest in its
rights hereunder to its financing source.
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<PAGE>
(e) EXPENSES. All expenses incurred by Seller, Shareholder or
Purchaser in connection with the transactions contemplated hereby,
including, without limitation, legal, accounting and brokerage fees shall
be the responsibility of and for the account of the party which ordered the
particular service or incurred the particular expense, except as provided
herein.
(f) ENTIRE AGREEMENT. Before signing this Agreement the parties had
numerous conversations, including preliminary discussions, formal
negotiations and informal conversations at meals and social occasions, and
generated correspondence and other writings, in which the parties discussed
the transaction which is the subject of this Agreement and their
aspirations for its success. In such conversations and writings,
individuals representing the parties may have expressed their judgments and
beliefs concerning the intentions, capabilities, and practices of the
parties, and may have forecasted future events. The parties recognize that
such conversations and writings often involve an effort to be positive and
optimistic about the prospects for the transaction. It is also recognized,
however, that all business transactions contain an element of risk, and
that it is normal business practice to limit the legal obligations of
contracting parties to only those promises and representations which are
essential to their transaction so as to provide certainty as to their
respective future rights and remedies. Accordingly, this Agreement is
intended to define the full extent of the legally enforceable undertakings
of the parties hereto, and no related promise or representation, written or
oral, which is not set forth explicitly in this Agreement is intended by
the parties to be legally binding. The parties acknowledge that in
deciding to enter into this transaction they have relied on no
representations, written or oral, other than those explicitly set forth in
this Agreement.
(g) PUBLIC ANNOUNCEMENT. Except as required by law, no public
announcement of the transactions contemplated hereby shall be made after
the date hereof by way of press release, disclosure to the trade or
otherwise except with the mutual approval of the parties.
(h) ALTERNATIVE DISPUTE RESOLUTION. The parties shall attempt in
good faith to resolve any dispute arising out of or relating to this
Agreement promptly by negotiations between executives who have authority to
settle the controversy. Any party may give the other parties written
notice of any dispute not resolved in the normal course of business.
Within 20 days after delivery of said notice, executives representing the
Purchaser on the one hand and the Seller and Shareholder on the other shall
meet at a mutually acceptable time and place, and thereafter as often as
they reasonably deem necessary, to
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exchange relevant information and to attempt to resolve the dispute. If
the matter has not been resolved within 60 days of the disputing party's
notice, or if the parties fail to meet within 20 days, either party may
initiate mediation of the controversy or claim as provided hereinafter.
If a negotiator intends to be accompanied at a meeting by an attorney,
the other negotiator shall be given at least three business days' notice of
such intention and may also be accompanied by an attorney. All
negotiations pursuant to this clause are confidential and shall be treated
as compromise and settlement negotiations for purposes of the Federal Rules
of Evidence and state rules of evidence.
If the dispute has not been resolved by negotiation as provided
herein, the parties shall endeavor to settle the dispute by mediation under
the then current Center for Public Resources ("CPR") Model Procedure for
Mediation of Business Disputes. The neutral third party will be selected
from the CPR Panels of Neutrals. If the parties encounter difficulty in
agreeing on a neutral, they will seek the assistance of CPR in the
selection process.
Any dispute arising out of or relating to this Agreement which has not
been resolved by non-binding means as provided herein within 60 days of the
initiation of such procedure shall be finally settled by arbitration
conducted expeditiously in accordance with the Center for Public Resources
Rules for Non-Administered Arbitration of Business Disputes by three
independent and impartial arbitrators, all of whom shall be selected by CPR
from the CPR Panels of Neutrals; provided, however, that if one party has
requested the other to participate in a non-binding procedure and the other
has failed to participate, the requesting party may initiate arbitration
before expiration of the above period. The arbitration shall be governed
by the United States Arbitration Act, 9 U.S.C. Sections 1-16, and judgment
upon the award rendered by the Arbitrator(s) may be entered by any court
having jurisdiction thereof. The place of arbitration shall be
Minneapolis, Minnesota if initiated by Purchaser or Chicago, Illinois if
initiated by Seller. The arbitrator(s) are not empowered to award damages
in excess of compensatory damages and each party hereby irrevocably waives
any damages in excess of compensatory damages.
The procedures specified in this Section 20(h) shall be the sole and
exclusive procedures for the resolution of disputes between the parties
arising out of or relating to this Agreement; provided, however, that a
party may seek a preliminary injunction or other provisional judicial
relief if in its judgment such action is necessary to avoid irreparable
damage or to preserve the status quo. Despite such action the
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<PAGE>
parties will continue to participate in good faith in the procedures
specified in this Section 21(h).
All applicable statutes of limitation and defenses based upon the
passage of time shall be tolled while the procedures specified in this
Section 21(h) are pending. The parties will take such action, if any,
required to effectuate such tolling.
Each party is required to continue to perform its obligations under
this Agreement pending final resolution of any dispute arising out of or
relating to this Agreement.
All deadlines specified in this Section 21(h) may be extended by
mutual agreement among all the parties hereto.
(i) BROKERS. Purchaser, Seller and Shareholder represent and warrant
to each other that, except for the fees of Northstar Industries, Inc. which
shall be borne by Seller and Shareholder or as otherwise set forth on
Exhibit Z hereto, there are no brokerage or finder's fees in connection
with the transactions contemplated hereby resulting from any actions taken
by them and they hereby indemnify, save and hold each other harmless from
and against any claims by any broker or finder for a fee or expense which
is based in any way on an agreement, arrangement or understanding made or
alleged to have been made by them relating to the transaction contemplated
hereby.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the day, month and year first above written.
LOUISIANA PLASTICS INCORPORATED
By: /s/ Scott W. Johnson
---------------------------------
Its Vice President
BEMIS COMPANY, INC.
By: /s/ Leroy F. Bazany
---------------------------------
Its Vice President
PACKAGING RESOURCES INCORPORATED
By: /s/ H.P. Hoeper
--------------------------------
Its President and Chief Executive
Officer
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<PAGE>
ASSET AND STOCK PURCHASE AGREEMENT
Dated December 15, 1993
Between
PACKAGING RESOURCES INCORPORATED
and
MINER CONTAINER PRINTING, INC.
and
THE STOCKHOLDERS SIGNATORY HERETO
<PAGE>
ASSET AND STOCK PURCHASE AGREEMENT
THIS ASSET AND STOCK PURCHASE AGREEMENT ("Agreement") made December 15,
1993 by and among PACKAGING RESOURCES INCORPORATED, a Delaware corporation
("Buyer"), MINER CONTAINER PRINTING, INC., a Kansas corporation ("Miner"), and
the STOCKHOLDERS SIGNATORY HERETO (individually a "Stockholder" and collectively
the "Stockholders") (Miner and the Stockholders are sometimes referred to herein
as the "Sellers").
RECITALS
Buyer desires to acquire the business and substantially all of the assets
of Miner, subject to specified liabilities, and Miner desires to sell same to
Buyer.
Buyer desires to purchase all of the issued and outstanding shares of
capital stock of (a) Miner Container of Missouri, Inc., a Missouri corporation
("Missouri"), and (b) Miner Container of Texas, Inc., a Texas corporation
("Texas"). Missouri is the owner of all of the issued and outstanding shares of
stock of Miner Housewares, Inc., a Missouri corporation ("Housewares").
Missouri, Texas and Housewares are sometimes referred to herein collectively as
the "Companies" and individually as a "Company."
NOW, THEREFORE, in consideration of the warranties, representations,
covenants and agreements hereinafter set forth, Buyer and Sellers covenant and
agree as follows:
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<PAGE>
ARTICLE I
TRANSACTIONS
1.1 On the terms and subject to the conditions herein, at the Closing,
Miner shall sell, assign, transfer, convey and deliver to Buyer, and Buyer shall
purchase, all of Miner's right, title and interest in and to the following
assets, interests, properties and rights of Miner as same shall exist at the
time of Closing (hereinafter collectively referred to as the "Purchased
Assets"):
(a) All machinery, equipment, furniture, fixtures, tools, spare parts,
vehicles and other fixed assets or property of Miner, where located, including,
but not limited to, the fixed assets of Miner listed in Exhibit A hereto;
(b) All inventories of supplies, raw materials, work-in-process and
finished goods of Miner, where located;
(c) All accounts and notes receivable of Miner;
(d) Each contract or commitment of Miner which is set forth in Exhibit B
hereto; any contract or commitment of Miner which under the provisions of
Section 6.11(a)(i), 6.11(a)(ii) or 6.11(a)(iii) is not required to be set forth
in Exhibit B; and every other contract or commitment of Miner entered into in
accordance with the provisions of this Agreement after the date of this
Agreement and on or prior to the Closing Date (the "Contracts");
2
<PAGE>
(e) Lists of customers; all processes, trade secrets, know-how, product
formulae and manufacturing, research and technical information; all computer
software, data files and all machine-readable information; rights to or under
any United States and foreign patents, trademarks, copyrights, service marks,
trade names and brand names, and applications therefor, if any, of Miner,
including, but not limited to, Miner's corporate name and those patents and
trademarks of Miner set forth in Exhibit C hereto;
(f) Prepaid expenses of Miner;
(g) All records, files, open invoices, supplier lists and similar data of
Miner; and
(h) Any of the property of Miner, real or personal, tangible or intangible
of every kind and description, used or held for use in connection with the
business of Miner, including, without limitation, cash and cash equivalents.
The foregoing provisions of this Section 1.1 notwithstanding, Miner shall
not sell, assign, transfer, convey or deliver, and Buyer shall not purchase or
accept, the following assets, interests, properties and rights (hereinafter
collectively referred to as the "Non-Purchased Assets"):
(a) Any minute books, stock issuance and transfer records, books of
virtual entry and related source documents, payroll and income tax records, and
other books, records, data or files relating to the Non-Purchased Assets or the
Non-Assumed Liabilities (the "Non-Purchased Records");
3
<PAGE>
(b) This Agreement or any rights under this Agreement or in connection
with the transactions contemplated hereby, including, but not limited to, any
cash received as payment of the Asset Purchase Price;
(c) Any contract or commitment that would otherwise be included in the
Contracts if and to the extent the assignment thereof without the consent of
another party thereto would constitute a breach thereof or adversely affect in
any way the rights of Miner thereunder and such consent has not been given; but
Miner will cooperate with Buyer in any reasonable arrangement that does not
impose any liability, obligation, cost or expense on Miner that is designed to
provide for Buyer the benefits under any such contract or commitment, including,
but not limited to, the enforcement, at the sole liability, cost and expense and
for the sole benefit of Buyer, of any and all rights of Miner against the other
party or parties thereto arising out of any breach or cancellation thereof by
such other party or parties or otherwise;
(d) Any shares of capital stock of Miner Agricultural Products, Inc., an
Arkansas corporation ("Agricultural"), any intercompany receivables between
Miner and Agricultural or any rights related thereto.
(e) Any rights or claims relating to income tax refunds or other rights
and claims relating to Non-Assumed Liabilities;
(f) Any rights as an insured (except for the claims referred to in Section
11.5 and rights to recover all or a part of the cost of repairing or replacing
assets and properties that
4
<PAGE>
are intended to be included in the Purchased Assets that are lost, damaged or
destroyed after the date hereof);
(g) Any life insurance policy insuring the life of any Stockholder,
including, without limitation, the cash surrender value of any such policy; and
(h) Any of the assets, interests, properties or rights referred to in
Exhibit D hereto.
1.2 On the terms and subject to the conditions herein, Stockholders shall,
at the Closing, sell, assign, transfer, convey and deliver to Buyer, and Buyer
shall purchase, all of Stockholders' right, title and interest in and to the
following assets:
(a) All of Missouri's issued and outstanding shares of capital stock
(the "Missouri Shares"); and
(b) All of Texas's issued and outstanding shares of capital stock
(the "Texas Shares").
1.3 On the terms and subject to the conditions herein, Buyer shall, in
exchange for the Purchased Assets, pay to Miner the sum of $11,750,000 (the
"Asset Purchase Price") at the Closing, and assume, perform and in due course
pay and discharge the following debts, obligations and liabilities of Miner
(hereinafter referred to as the "Assumed Liabilities"):
(a) All liabilities of Miner outstanding on the Closing Date which are
reflected on the Balance Sheet (as defined in Section 5.1) or the Audited
Balance Sheet (as defined in Section
5
<PAGE>
2.5), except the deferred long-term liabilities of $193,000 and liabilities
for income taxes;
(b) Except as otherwise provided in this Section 1.3, all liabilities of
Miner outstanding on the Closing Date, other than liabilities for income taxes,
which were incurred in the ordinary course of business between the Balance Sheet
Date and the Closing Date;
(c) All liabilities of Miner that are disclosed in the Letter;
(d) All debts, obligations and liabilities under and with respect to the
Contracts, other than obligations and liabilities arising out of or attributable
to a breach or default by Miner prior to the Closing;
(e) All obligations and liabilities relating to product returns and
allowances and product liabilities of Miner, but only to the extent not covered
by Miner's insurance policies;
(f) All intercompany debts, obligations and liabilities between Miner and
any Company;
(g) The obligations and liabilities listed on Exhibit E hereto; and
(h) Any other debts, obligations or liabilities specifically undertaken or
assumed by Buyer pursuant to the provisions of this Agreement or pursuant to any
other agreement entered into by Buyer.
6
<PAGE>
Except for the Assumed Liabilities and liabilities and claims covered by
insurance to be maintained by Buyer pursuant to Section 11.4, Miner shall remain
responsible for and pay, perform and discharge any and all obligations, liens,
taxes, assessments, judgments, fines, disposal costs, liabilities and claims
made by or owed to any party that (i) are known to Sellers as of the date
hereof, (ii) relate to operations and assets of Miner, and (iii) arise in
connection with or on the basis of events, acts, omissions, conditions or other
states of fact with respect to the Purchased Assets or Miner occurring or
existing on or prior to the Closing Date (hereinafter referred to as the
"Non-Assumed Liabilities").
The Asset Purchase Price shall be allocated among the Purchased Assets in
accordance with Exhibit F hereto, and no party shall allocate the Asset Purchase
Price among the Purchased Assets in any other manner in any tax return or other
filing.
1.4 On the terms and subject to the conditions herein, Buyer shall, in
exchange for the Missouri Shares and the Texas Shares, pay to Stockholders the
sum of $4,800,000 (the "Stock Purchase Price") on January 3, 1994. The Stock
Purchase Price shall be allocated among the Missouri Shares and the Texas Shares
in accordance with Exhibit G hereto.
7
<PAGE>
ARTICLE II
CLOSING AND POST-CLOSING ADJUSTMENT
2.1 The completion of the transactions contemplated by this Agreement (the
"Closing") shall take place on the Closing Date at the offices of Winston &
Strawn, 35 West Wacker Drive, Chicago, Illinois at 10:00 A.M., local time, or at
such other place or time on the Closing Date upon which Buyer and Sellers may
agree.
2.2 The date of Closing (the "Closing Date") shall be the date on which
all conditions to the respective obligations of Buyer and Sellers to close
hereunder are satisfied or waived. For accounting purposes, the Closing shall
be deemed effective as of the close of business on the Closing Date.
2.3 If, for any reason, the Closing shall not occur on or prior to
December 31, 1993 or such later date upon which Buyer and Sellers may agree in
writing, this Agreement shall terminate upon written notice of such termination
given by any party to the other parties at any time after the later of such
dates, as the case may be, and thereupon this Agreement shall become null and
void and no party shall have any further liabilities or obligations under this
Agreement, except that the provisions of Sections 12.1, 12.6 and 12.7 shall
survive the termination of this Agreement.
2.4 At the Closing:
(a) Buyer shall (i) pay the Asset Purchase Price ($11,750,000 or such
lesser amount as may have been determined under Section 2.6 hereof) to Miner by
wire transfer of
8
<PAGE>
immediately available funds to an account designated by Miner prior to the
Closing Date; (ii) deliver to certain of the Stockholders promissory notes in
the form attached hereto as Exhibit H evidencing the obligation of Buyer to pay
the Stock Purchase Price ($4,800,000 in the aggregate) to such Stockholders on
January 3, 1994 by wire transfer of immediately available funds to an account or
accounts designated by such Stockholders prior thereto; (iii) deliver to Miner a
document in form and substance satisfactory to Miner and its legal counsel
evidencing the assumption by Buyer of the Assumed Liabilities; and (iv) deliver
to Sellers the documents referred to in Article IX; and
(b) Sellers shall deliver to Buyer (i) all such bills of sale, contract
assignments, consents and other documents and instruments of sale, assignment,
conveyance and transfer as shall be appropriate or necessary for Miner to convey
to Buyer its title to the Purchased Assets, free and clear of all liens,
security interests and encumbrances in favor of any third parties that are not
Permitted Encumbrances (as defined in Section 6.3) (ii) certificates for the
Missouri Shares and the Texas Shares, duly endorsed in blank, or accompanied by
stock powers duly endorsed in blank, by Stockholders; (iii) the documents
referred to in Article VIII; and (iv) resignations by all directors and officers
of the Companies.
2.5 As promptly as practicable after the date hereof, Buyer and Sellers
shall cause KPMG Peat Marwick to audit the Balance Sheet (as defined in Section
5.1). Such audit shall be conducted
9
<PAGE>
in accordance with generally accepted auditing standards. The fees and expenses
of KPMG Peat Marwick shall be paid by Miner prior to the Closing as an ordinary
business expense. Notwithstanding anything contained herein to the contrary, no
adjustment shall be made to the Balance Sheet unless and except to the extent
such adjustment is mandated in order for the Balance Sheet to comply with
generally accepted accounting principles applied on a consistent basis. Any
adjustments that KPMG Peat Marwick may propose to make to the Balance Sheet
shall be reviewed with Sellers, and any disputes that cannot be resolved by
mutual agreement of KPMG Peat Marwick and Sellers shall be submitted for final
resolution to a "big six" accounting firm mutually acceptable to Buyer and
Sellers. The Balance Sheet as adjusted as provided in this Section 2.5 is
herein referred to as the "Audited Balance Sheet".
2.6 Notwithstanding anything contained herein to the contrary, if the
amount of stockholders' equity (excluding depreciation for the year ended July
31, 1993, accruals for income taxes, any flood-related adjustments and accruals,
any accruals for fees and expenses of KPMG Peat Marwick, any adjustments to or
accruals for Non-Purchased Assets or Non-Assumed Liabilities, and any
adjustments or accruals for the bonuses that are referred to in the Letter that
were paid or are payable after the Balance Sheet Date) reflected on the Audited
Balance Sheet is less than $12,025,775, the Asset Purchase Price shall be
decreased dollar for dollar by the amount, if any, by
10
<PAGE>
which such deficiency exceeds $100,000. If delivery of the Audited Balance
Sheet occurs on or before the Closing Date, the amount of such decrease, if any,
shall be applied against and used to reduce the amount of the Asset Purchase
Price paid to Miner at the Closing. If the delivery of the Audited Balance
Sheet occurs after the Closing Date and there is no adjustment to the Asset
Purchase Price paid at the Closing, Miner shall pay the amount of such decrease,
if any, together with interest thereon, at the prime commercial lending rate of
Continental Bank, N.A., from the Closing Date to the date of payment, to Buyer
by bank wire transfer of immediately available funds to an account designated by
Buyer.
ARTICLE III
JOINT COVENANTS
3.1 Buyer and Sellers shall cooperate and use reasonable efforts to
prepare and file all applications and other instruments or documents as promptly
as practicable and to act thereafter with all reasonable diligence in order to
obtain such approvals, consents, authorizations, waivers and permits from any
person, firm, corporation, or governmental or other entity as may reasonably be
necessary or appropriate in order to enable Buyer to carry on and conduct the
businesses of Miner and the Companies immediately following the Closing in the
same manner as such businesses were carried on and conducted prior to the
Closing; provided, however, that (i) all costs and expenses of obtaining
11
<PAGE>
the same shall be borne by Buyer, and (ii) Sellers shall not be obligated to
take any action that could impose any obligation, liability, cost or expense on
any Seller or, if the transactions contemplated hereby are not consummated, any
Company.
3.2 On or before the Closing Date, Sellers and Buyer shall proceed with
reasonable expedition and diligence to satisfy all conditions herein in order to
close the transactions contemplated herein as soon as reasonably practicable.
ARTICLE IV
COVENANTS OF SELLERS AND BUYER
4.1 Prior to the Closing, Sellers shall furnish Buyer with all documents,
reports and other information and data (including financial statements) covering
Miner and the Companies as Buyer may reasonably request or be required to submit
to file with any person, firm, corporation or governmental or other entity in
connection with this Agreement and the transactions contemplated hereby. All
such documents, reports and other information and data shall be held and used by
Buyer subject to the provisions of Section 12.6.
4.2 Sellers shall, upon reasonable notice and at reasonable times during
normal business hours prior to the Closing, make the plants, properties,
inventories, books of account and records of Miner and the Companies available
for examination, inspection and review by Buyer and its agents and
representatives and give Buyer reasonable access to the employees of Miner and
the Companies.
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<PAGE>
No such examination, inspection or review by Buyer or its agents and
representatives shall in any way diminish, terminate or otherwise affect any of
the warranties, representations, covenants or agreements of Sellers contained in
this Agreement or in any certificate or other instrument furnished or to be
furnished by Sellers in connection with this Agreement. All such examinations,
inspections and reviews shall be subject to the provisions of Section 12.6.
4.3 Pending the Closing, Sellers shall use reasonable efforts (without the
payment of any money or incurring any additional debts, obligations or
liabilities) to preserve and protect Miner's and the Companies' goodwill,
business, rights, properties and assets, to keep available the services of
Miner's and the Companies' present employees, and to preserve and protect
Miner's and the Companies' relationships with employees, creditors, suppliers,
distributors, licensors, licensees, customers and others having business
relationships with them, all with the purpose and intent that Buyer be able,
immediately following the Closing Date, to operate the businesses of Miner and
the Companies in all material respects in the manner in which they are currently
operated. Without in any way limiting or otherwise affecting the rights of
Buyer hereunder, Sellers, upon becoming aware thereof, shall promptly notify
Buyer in writing of any material adverse change which may occur prior to the
Closing with respect to the financial condition, business, rights, properties or
assets of either Miner or any Company, whether or
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<PAGE>
not covered by insurance, or with respect to relationships between Miner or a
Company and its employees, creditors, suppliers, distributors, licensors,
licensees, customers or others having business relationships with it.
4.4 Pending the Closing, Sellers shall, except for the transactions
contemplated hereby and actions taken to consummate the transactions
contemplated hereby, and subject to any exceptions set forth in the Letter:
(a) Cause each of Miner and each Company to conduct and carry on its
business in all material respects in the ordinary and regular course;
(b) Maintain all material fixed assets and property of each of Miner and
each Company in their current operating condition and repair, normal wear and
tear excepted;
(c) Unless consented otherwise in writing by Buyer (which consent will not
be unreasonably withheld or delayed), not alter or change in any material
respect either Miner's or any Company's method of operation or its accounting
practices;
(d) Unless consented otherwise in writing by Buyer (which consent will not
be unreasonably withheld or delayed), not permit either Miner or any Company to
purchase or otherwise acquire or sell, lease, mortgage, pledge or otherwise
subject to liens or dispose of any properties or assets of Miner or such Company
except for the purchase or other acquisition or sale, lease or other disposition
of personal property in the ordinary and regular course of business, provided
that neither Miner nor any
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<PAGE>
Company shall renew any expiring lease on materially different terms and
provided, further, that in any event, Sellers shall give Buyer prior notice of
any capital expenditure, or group of related capital expenditures, by either
Miner or any Company in excess of $10,000 other than pursuant to the Contracts
or as described in Exhibit I hereto and will not agree to or permit any such
capital expenditure other than pursuant to the Contracts or as described in
Exhibit I hereto, unless the capital expenditure is to repair or replace an
asset or property that is lost, damaged or destroyed;
(e) Unless consented otherwise in writing by Buyer (which consent will not
be unreasonably withheld or delayed), not permit either Miner or any Company to
enter into or become obligated under any material contract or commitment, or
change, amend, terminate or otherwise modify any existing material contract or
commitment, relating to it, except (i) contracts or commitments entered into or
with respect to which it became obligated under, or changed, amended, terminated
or otherwise modified, in the ordinary and regular course of business, and (ii)
contracts or commitments related to this Agreement and the transactions
contemplated hereby; and
(f) Unless consented otherwise in writing by Buyer (which consent will not
be unreasonably withheld or delayed), cause each of Miner and each Company to
use reasonable efforts to maintain in full force and effect policies of
insurance of the same type,
15
<PAGE>
character and coverage as the policies of insurance presently in effect for the
benefit of each of them.
4.5 At or prior to Closing, Sellers shall cause (a) each Company to take
such reasonable steps as may be necessary or required for it to become a party
to the financing arrangements made by Buyer for the purpose of funding the cash
consideration payable to Sellers hereunder and (b) Miner to amend its Articles
of Incorporation, as of the Closing Date, in order to change its name to one
dissimilar to "Miner Container Printing, Inc."; provided, however, that (i)
Seller shall not be required to take any step that could impose any obligation,
liability, cost or expense on any Seller or, if the transactions contemplated
hereby are not consummated, any Company, and (ii) Buyer shall assume as part of
the Assumed Liabilities and be solely responsible for all obligations,
liabilities, costs and expenses of any Seller in connection with such financing
arrangements.
4.6 Buyer, upon becoming aware thereof, shall promptly notify Sellers in
writing of any material adverse change in the terms and conditions of its
financing from the terms set forth in the Commitment Letter (as defined in
Section 5.2) or of any withdrawal or termination of the Commitment Letter or of
any material adverse change which may hereafter occur with respect to the
financial condition, business, rights, properties or assets of Buyer, whether or
not covered by insurance, or with respect to relationships between Buyer and its
employees, creditors,
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suppliers, distributors, licensors, licensees, customers, or others having
business relationships with it.
ARTICLE V
DELIVERIES OF FINANCIAL STATEMENTS,
THE LETTER AND OTHER DOCUMENTS
5.1 Sellers have heretofore delivered to Buyer:
(a) The unaudited combined balance sheet of Miner (excluding assets and
liabilities relating to Agricultural) and the Companies as of July 31, 1993 and
the related statement of income (excluding income and losses relating to
Agricultural) for the year then ended. The foregoing financial statements are
herein referred to as the "Miner and Companies Financial Statements". The
unaudited combined balance sheet as of July 31, 1993 is herein referred to as
the "Balance Sheet"; and the term "Balance Sheet Date" as used herein shall mean
July 31, 1993;
(b) A disclosure letter (the "Letter") of even date herewith addressed to
Buyer and signed by Sellers;
(c) Copies of the charters and by-laws of the Companies as in effect on
the date hereof; and
(d) A copy of all resolutions adopted by the Board of Directors and
stockholders of Miner authorizing the execution and delivery of this Agreement
by Miner and the consummation of the transactions contemplated hereby, certified
by the Secretary of Miner.
5.2 Buyer has heretofore delivered, or as soon as available prior to the
Closing Date will deliver, to Sellers:
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(a) The unaudited balance sheet of Buyer as of October 31, 1993 ("Buyer
Balance Sheet").
(b) A commitment letter from Union Bank of Switzerland, New York Branch
(the "Commitment Letter") to provide all financing required for Buyer to
consummate the transactions contemplated hereby; and
(c) A copy of all resolutions adopted by the Board of Directors of Buyer
authorizing the execution and delivery of this Agreement by Buyer and the
consummation of the transactions contemplated hereby, certified by the Secretary
of Buyer.
ARTICLE VI
WARRANTIES AND REPRESENTATIONS OF SELLERS
Sellers, jointly and severally, warrant and represent, subject to any
exceptions set forth in the Letter, to Buyer that:
6.1 (a) Each of Miner and each Company is a corporation validly existing
and in good standing under the laws of the state of its incorporation, and, to
the knowledge of Sellers, is in good standing as a foreign corporation and
licensed and qualified to transact business in each jurisdiction wherein the
nature of the property owned or leased by it or the business transacted by it
requires it to be licensed or qualified to do business as a foreign corporation,
except those jurisdictions, if any, in which the failure to so qualify does not
have a material adverse effect on its condition (financial or otherwise),
results of operations, properties, assets or business; and
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(b) To the knowledge of Sellers, each of Miner and each Company has and
holds the corporate right and power and all rights, privileges, franchises,
immunities, licenses, permits, certifications, authorizations and approvals
(governmental or otherwise) necessary to the ownership of its property and the
conduct of its business as presently conducted, except those rights, permits,
privileges, franchises, immunities, licenses, permits, certifications,
authorizations and approvals which, if not held or obtained, do not have a
material adverse affect on its condition (financial or otherwise), results of
operations, properties, assets or business.
6.2 To the knowledge of Sellers, the Miner and Companies Financial
Statements, except for note disclosures and subject to normal year-end accruals
and adjustments for Miner and the Companies, present fairly in all material
respects the financial position of Miner (excluding assets and liabilities
relating to Agricultural) and the Companies as of the date thereof and the
results of their operations (excluding income and losses relating to
Agricultural) for the period covered thereby.
6.3 Each of Miner and each Company has good and marketable title (in fee
simple in the case of real property) to, or valid leasehold interests (in the
case of leased property) in, all the properties and assets (tangible and
intangible) reflected on the Balance Sheet or acquired by it since the Balance
Sheet Date, subject to no liens, charges, encumbrances, security agreements or
any other rights of others or other adverse interest of any
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kind except (a) as provided in or arising under the Contracts, (b) as otherwise
disclosed in the Miner and Companies Financial Statements or in the Letter, (c)
liens and charges for current taxes not yet due and payable, (d) imperfections
of title, liens and easements relating to real estate as do not materially
detract from or interfere with the present use of the properties subject thereto
or affected thereby or materially detract from the value thereof, or otherwise
materially impair present business operations at such properties, (e) liens,
charges, encumbrances, security agreements and other rights and adverse
interests created or arising in connection with Buyer's financing arrangements,
and (f) as to personal property only, as the same may have been sold, consumed
or otherwise disposed of after the Balance Sheet Date in the ordinary course of
business or lost, damaged or destroyed after the Balance Sheet Date in
connection with flooding (collectively, the "Permitted Encumbrances").
6.4 (a) The accounts, notes and other receivables of Miner and the
Companies reflected on the Balance Sheet were, with immaterial exceptions,
acquired in the ordinary and regular course of business and in a manner
consistent with their regular credit practices and have been or, to the
knowledge of Sellers, will be collected in full in the ordinary course of
business subject to the allowance for doubtful accounts in such Balance Sheet;
and all accounts, notes and other receivables which have been acquired by Miner
and the Companies since the Balance Sheet Date were, with immaterial exceptions,
acquired in the ordinary
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course of business and in a manner consistent with their regular credit
practices; and
(b) The inventories of Miner and the Companies reflected on the Balance
Sheet were, with immaterial exceptions, purchased or acquired in the ordinary
and regular course of business and in a manner consistent with their regular
inventory practices and, with immaterial exceptions, have been or, to the
knowledge of Sellers, will be used or sold in the ordinary and regular course of
business and in a manner consistent with their regular inventory practices. To
the knowledge of Sellers, with immaterial exceptions, (i) all inventories of
Miner and the Companies of finished products are in merchantable and undamaged
condition, will meet customer specifications (if made pursuant to
specifications), and are not obsolete, and (ii) all raw materials, work in
progress and other inventories of Miner and the Companies are of a quality
appropriate for their intended use, including processing into merchantable
finished inventories for sale in the ordinary course of business. The
inventories included in the Balance Sheet were priced at the lower of cost (on
the first in, first out basis) or market, and were in all material respects (as
to classes of items inventoried and methods of accounting and pricing)
determined in a manner consistent with prior years. With immaterial exceptions,
the inventories which have been purchased or acquired by Miner and the Companies
since the Balance Sheet Date were purchased or acquired in the ordinary course
of business and in a manner consistent with their regular
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inventory practices. Notwithstanding anything contained herein to the contrary,
Sellers make no warranty or representation as to any cups purchased by Miner and
the Companies from Buyer.
6.5 (a) Exhibit J hereto sets forth each parcel of real estate in which
either Miner or any Company has any right, title or interest as owner or lessee
and the nature of such right, title or interest and any expiration or other
termination date thereof or of any agreement relating thereto to which Miner or
any Company is a party. Each of Miner and each Company enjoys peaceful
possession of all real estate owned or leased by it and Sellers are not aware of
any fact or condition which will result in an interruption of such peaceful
possession;
(b) To the knowledge of Sellers, (i) none of the buildings, structures or
improvements owned or leased by either Miner or any Company is the subject of
any complaint or notice of violation of any applicable zoning ordinance or
building code, (ii) no such violation exists which materially detracts from or
interferes with the present use of such properties or materially detracts from
the value thereof or impairs the operations thereof, and (iii) there is no
zoning ordinance, building code, use or occupancy restriction or condemnation or
eminent domain action or proceeding pending or threatened with respect to any
such building, structure or improvement which materially detracts from or
interferes with the present use of such properties or materially detracts from
the value thereof or materially impairs the operations thereof. Sellers are not
aware of any defect in
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the condition and repair of any building, structure or improvement owned or
leased by either Miner or any Company which materially interferes with the use
thereof in the conduct of normal operations as presently conducted by them.
Sellers are not aware of any notice by any regulatory authority that any
building, structure or improvement owned or leased by either Miner or any
Company is currently or prospectively in violation of any statute, ordinance,
regulation or order which has application to the operation thereof or to worker
exposure to substances or conditions present thereat; and
(c) To the knowledge of Sellers, except as disclosed in the environmental
engineer's report with respect to Miner's facility in Forth Worth, Texas dated
November 9, 1993 prepared by ENSR Consulting and Engineering, (i) there are no
underground storage tanks located on the real estate referred in Exhibit J in
which Hazardous Materials, as hereinafter defined, have been or are being
stored, (ii) there has not been any spill, disposal, discharge or release of any
Hazardous Material into or upon or over such real estate or into or upon ground
or surface water on such real estate of a nature or in a quantity requiring
remediation under any applicable environmental law or legislation, (iii) there
are no asbestos-containing materials which are regulated by any local, state or
federal governmental authority incorporated into the buildings or interior
improvements that are part of such real estate, nor is there any electrical
transformer, fluorescent light fixture with ballasts
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or other equipment containing PCBs on such real estate which are regulated by
any local, state or federal governmental authority. As used herein, the term
"Hazardous Material" with respect to any such real estate shall mean any
substance, material or waste which is defined as hazardous or toxic or as a
pollutant or contaminant in any local, state or federal statute, law, ordinance,
code, rule, regulation, order or decree applicable to such real estate
regulating, relating to or imposing liability or standards of conduct concerning
pollution, protection of human health or the environment.
6.6 (a) Each of Miner and each Company owns or has the right to use (as
currently used in the conduct of its business) without payment to or, to the
knowledge of Sellers, interference from any other party all material proprietary
inventions, processes, know-how, formulae, trade secrets, patents, trademarks,
trade names, brand names and copyrights used by it in its business as presently
conducted, all of which patents and trademarks that are currently owned by Miner
or any Company are described on Exhibit C hereto, and, to the knowledge of
Sellers, no other material proprietary inventions, processes, know-how,
formulae, trade secrets, patents, trademarks, trade names, brand names,
copyrights, licenses or applications are necessary for the conduct of its
business as presently conducted. Except for the Permitted Encumbrances, the
interest of each of Miner and each Company in and to all such inventions,
processes, know-how, formulae, trade secrets, patents, trademarks, trade names,
brand
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names and copyrights that are owned by it is free and clear of any and all
liens, charges, encumbrances, security agreements or any other rights of others
or other adverse interests, and, to the knowledge of Sellers, such inventions,
processes, know-how, formulae, trade secrets, patents, trademarks, trade names,
brand names and copyrights are not currently being challenged in any way and are
not involved in any pending or threatened interference or opposition action or
proceeding; and
(b) To the knowledge of Sellers, neither Miner nor any Company has been
advised that use by it of such inventions, processes, know-how, formulae, trade
secrets, patents, trademarks, trade names, brand names and copyrights infringes
upon or conflicts with any patent, trademark, trade name, brand name, copyright
or other proprietary right of others.
6.7 All material rights, properties and assets (tangible and intangible)
used or necessary in the conduct of the business of each of Miner and each
Company are either owned by Miner or such Company or licensed or leased to it,
and to the knowledge of Sellers, all material fixed assets that are used in the
conduct of the business of Miner or any Company are fit for the purposes for
which they are presently used and in good operating condition and repair,
ordinary wear and tear excepted. The Letter contains a list of each bank
account, safe deposit box and lock box maintained by either Miner or a Company
and the name of all persons authorized to draw thereon or have access thereto.
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6.8 Since the Balance Sheet Date, except for this Agreement, the
transactions contemplated hereby, and actions taken and liabilities incurred in
furtherance of this Agreement and the transactions contemplated hereby:
(a) There has been no material adverse change of which Sellers are aware
in the condition (financial or otherwise), results of operations, properties,
assets, liabilities, rights, business, operations or prospects of Miner and the
Companies nor has there been any adverse change of which Sellers are aware in
the relationships of either Miner or any Company with respect to its employees,
creditors, suppliers, distributors, licensees, licensors, customers or others
with whom it has business relationships which will have a material adverse
effect on Miner and the Companies, and the Sellers do not have knowledge of any
fact or contemplated event which they believe could cause any such material
adverse change;
(b) The business and affairs of each of Miner and each Company have been
conducted and carried on in all material respects only in the ordinary and
regular course;
(c) Neither Miner nor any Company has purchased or otherwise acquired or
sold, leased, mortgaged, pledged or otherwise subjected to liens or disposed of
any material properties or assets, except for the purchase or other acquisition
or sale, lease or other disposition of personal property in the ordinary and
regular course of business;
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(d) Neither Miner nor any Company has materially altered or changed its
methods of operation or its methods of accounting or accounting practices;
(e) There has been no change made in the rate or nature of compensation
payable by either Miner or any Company to its employees, except in the ordinary
and regular course of business, and there has been no change in any bonus,
insurance, pension or other employee benefit plan or arrangement maintained by
either Miner or any Company for its employees, except for changes required to
comply with legal requirements;
(f) Neither Miner nor any Company has amended, terminated, cancelled or
waived any claims or rights of substantial value relating to it, except in the
ordinary course of business;
(g) Neither Miner nor any Company has made any material capital
expenditure or commitment for additions or improvements to property, plant or
equipment relating to it, except as listed in Exhibit I hereto;
(h) Neither Miner nor any Company has made any write down of the value of
any inventory or write off as uncollectible of any accounts receivable, except
in the ordinary course of business (none of which, individually or in the
aggregate was material);
(i) Neither Miner nor any Company has incurred any material liabilities or
obligations of any nature (whether accrued, absolute, contingent or otherwise),
except normal trade and
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business obligations incurred in the ordinary course of business and consistent
with past operations and practices; and
(j) Neither Miner nor any Company has agreed to take any of the actions
specified in the preceding clauses (c) through (i) of this Section 6.8.
6.9 To the knowledge of Sellers, on the Balance Sheet Date, neither Miner
nor any Company had any material liabilities (other than liabilities related to
Agricultural) of any nature (whether accrued, absolute, contingent or otherwise)
of the type which should be reflected on a balance sheet (other than liabilities
of the type normally disclosed in the notes thereto) prepared in accordance with
generally accepted accounting principles which were not fully disclosed,
reflected or accrued on the Balance Sheet.
6.10. To the knowledge of Sellers (i) there is no litigation at law or
in equity, no arbitration proceeding and no proceeding or investigation before
or by any court, commission, agency or other governmental, administrative or
regulatory body or authority pending or threatened or likely to be asserted
against or affecting the property, assets, rights or business of either Miner or
any Company which, either individually or in the aggregate, if adversely
determined, will materially and adversely affect the business, results of
operations, property, assets or the condition, financial or otherwise, of Miner
and the Companies, nor (ii) is there any judgment, decree, injunction, rule or
order of any court, governmental department, commission,
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agency, instrumentality or arbitrator outstanding against any of them having, or
which, insofar as is foreseen by Sellers, in the future may have, either
individually or in the aggregate, any such effect.
6.11 (a) Set forth on Exhibit B or Exhibit D hereto is each material
contract or commitment, and each outstanding bid for any such contract or
commitment, to which either Miner or a Company is a party or by which it is
obligated, including, without limitation, any relating to any purchase or sale;
any guaranty; any dealership, distributorship or franchise; any power of
attorney; any patent or trademark license, either as a licensor or licensee; any
lease, either as lessor or lessee; any indenture, deed of trust, mortgage or
chattel mortgage; any conditional or installment sale; any labor or collective
bargaining; any deferred compensation; any pension or profit sharing benefit;
any health or welfare benefit; any employment of any person; or any right or
option to purchase or sell or otherwise dispose of any rights, properties or
assets; other than (i) those contracts, agreements and arrangements entered into
in the ordinary and regular course of business for the purchase of services, raw
materials and other inventories and supplies or the sale of finished products
and services, (ii) other contracts, arrangements and commitments entered into in
the ordinary and regular course of business, which involve a consideration or
expenditure of less than $10,000 or which may be terminated without penalty with
notice of 30 days or less, (iii) those
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contracts, agreements and arrangements that are consented to in writing by Buyer
after the date hereof (which consent will not be unreasonably withheld or
delayed), and (iv) this Agreement and any other contracts, agreement and
arrangements that may be entered into to consummate the transactions
contemplated hereby. To the knowledge of Sellers, the Contracts and any
material agreements and commitments to which any Company is a party or by which
it is obligated are valid and are in full force and effect and constitute legal,
valid and binding obligations of Miner or such Company, as the case may be, and
the other parties thereto, enforceable in accordance with their respective
terms, subject to bankruptcy, insolvency, fraudulent conveyance and other
similar laws affecting creditors' rights, subject to equitable principles, and
subject to public policy considerations.
(b) To the knowledge of Sellers, (i) neither Miner nor any Company nor any
other party thereto is in breach of or default under, or has failed to comply
with any provision of, any Contract or any material agreement or commitment to
which any Company is a party or by which it is obligated, and (ii) there has not
occurred any event which, after the giving of notice, or the lapse of time or
otherwise, would constitute a material default under, or result in a material
breach of, any such Contract or material agreement or commitment.
6.12 (a) To the knowledge of Sellers, (i) each of Miner and each Company
has filed all federal, foreign, state and local tax returns, reports and
estimates for all years and periods (and
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portions thereof) for which any such returns, reports or estimates were due and
(ii) all such returns, reports and estimates were prepared in the manner
required by applicable law, and all taxes, assessments or other governmental
charges shown thereby to be payable have been paid. Neither Miner nor any
Company has ever been a member of an affiliated group of corporations filing a
consolidated income tax return, and neither Miner nor any Company has ever made
an election under Section 341(f) of the Internal Revenue Code. Since the
Balance Sheet Date, no Company has incurred any liability for taxes except those
arising from the operation of its business in the ordinary course.
(b) Each of Miner and each Company has withheld amounts from its employees
and has filed all federal, foreign, state and local returns and reports with
respect to employee income tax withholding and social security and unemployment
taxes, in compliance with the tax withholding provisions of the Internal Revenue
Code and other applicable federal, foreign, state or local laws.
6.13 To the knowledge of Sellers, hours worked by, and payments made to,
employees of each of Miner and each Company have been in compliance in all
material respects with the Fair Labor Standards Act and other applicable
federal, foreign, state or local laws.
6.14 To the knowledge of Sellers, (i) there is no pending or threatened
strike, work stoppage or labor dispute which involves
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the employees of either Miner or any Company, or any labor union or other
organization representing or claiming to represent such employees' interests,
and (ii) no union organizing or election activities involving any non-union
employees of either Miner or any Company are in progress or threatened.
6.15 Except as set forth on Exhibit B, neither Miner nor any Company
maintains, sponsors or is required to make contributions to any pension,
profit-sharing, thrift or other retirement plan, employee stock ownership plan,
deferred compensation, stock purchase, performance share, bonus or other
incentive plan, severance plan, health or welfare plan or other similar plan,
agreement, arrangement or understanding, whether or not reduced to writing and
whether or not such plan is or is intended to be qualified under Section 401(A)
of the Internal Revenue Code, including without limitation any employee welfare
benefit plan or employee pension benefit plan within the meaning of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") ("Company Plan").
True and complete copies of all plans, agreements, arrangements and
understandings referred to in Exhibit B, and all trust instruments and
insurance, group annuity and other contracts pertaining thereto, and the most
recent valuation or actuarial reports, Internal Revenue Service determination
letters and all material correspondence with the Pension Benefit Guaranty
Corporation relating thereto have heretofore been delivered to Buyer. To the
knowledge of Sellers, each Company Plan is in full force and effect in
accordance with
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its terms and has been, and each plan administrator and fiduciary of each
Company Plan is and has been, in compliance in all material respects with all
applicable requirements of ERISA (including the funding, reporting and
disclosure and prohibited transaction provisions thereof) and other applicable
laws, regulations and rulings. To the knowledge of Sellers, (i) no "reportable
event" within the meaning of Sections 4043(b) (1) through (b) (8) of ERISA has
occurred with respect to any Company Plan and (ii) no liability under Title IV
of ERISA has been incurred by, or asserted against, either Miner or any Company,
and no such liability is expected by Sellers to be incurred or asserted
subsequent to the date hereof. Each of Miner and each Company has made, accrued
or provided for all contributions required under each Company Plan.
6.16 To the knowledge of Sellers, each of Miner and each Company has owned
and operated its properties and assets, and otherwise conducted and carried on
its business and affairs, in compliance with all applicable federal, foreign,
state and local laws, statutes, ordinances, rules, regulations and court or
administrative orders and processes (including without limitation any that
relate to securities, health and safety in plants or work areas, environmental
and pollution control, pricing, sales and distribution of products and services,
participation and cooperation in trade boycotts, collective bargaining rights of
employees, equal opportunity in employment, political contributions or improper
payments), except for violations, if
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any, which, in any case or in the aggregate, have not had, and are not expected
by Sellers to have, a material adverse effect on the business, operations,
properties, assets, condition (financial or otherwise) or results of operations
of Miner and the Companies.
6.17 (a) The contracts listed in Exhibit B or Exhibit D hereto include all
insurance policies currently maintained by Miner and the Companies.
(b) Since the Balance Sheet Date, neither Miner nor any Company has
sustained any damage or loss on account of fire, flood, accident or other
calamity which singly or in the aggregate has materially and adversely
interfered with, or is expected by Sellers to materially and adversely interfere
with, the operation of its business, whether or not such loss shall have been
insured against.
6.18 Sellers have all requisite power and authority to enter into and
perform and carry out this Agreement and the transactions contemplated hereby.
This Agreement has been duly executed and delivered by Sellers and is binding
upon and enforceable against Sellers in accordance with its terms. Stockholders
own the Missouri Shares and the Texas Shares and Missouri owns all of the issued
and outstanding shares of Housewares (the "Housewares Shares") free and clear of
any mortgage, lien, claim, charge, encumbrance, assignment or other adverse
interest of any kind or nature whatsoever.
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6.19 (a) The total number of shares of capital stock, and the class and
par value thereof, which each Company is authorized to issue and the number of
such shares which are issued and outstanding are set forth in the Letter; and
the Missouri Shares, the Texas Shares and the Housewares Shares have been duly
and validly issued and are fully paid and non-assessable.
(b) There are not outstanding any (i) securities of any Company which are,
or which may become, convertible into or exchangeable for any shares of capital
stock or any other securities of such Company or (ii) subscriptions, options,
warrants or other rights which entitle any person, firm, corporation or other
entity to acquire from any Company any shares of capital stock or any other
securities of such Company.
6.20 Neither the execution and delivery of this Agreement by Sellers nor
the consummation of the transactions contemplated hereby by Sellers does or
will, after the giving of notice or the lapse of time, or both, (i) conflict
with, result in a breach of or constitute a default under, the current charter
or the by-laws of either Miner or any Company, or, to the knowledge of Sellers,
any federal, foreign, state or local law, statute, ordinance, rule, regulation
or court or administrative order or process, or, to the knowledge of Sellers,
any material agreement or commitment to which Sellers or either Miner or any
Company is a party or by which Sellers or either Miner or any Company (or any of
its rights, properties or assets) is subject or bound; (ii) result in the
creation of, or give any party the right to create, any lien,
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charge, encumbrance, security interest or any other rights of others or other
adverse interest upon any right, property or asset of either Miner or any
Company, other than Permitted Encumbrances; (iii) to the knowledge of Sellers,
terminate or give any party the right to terminate, amend, abandon or refuse to
perform any Contract or any material agreement or commitment relating to any
Company (or any of its rights, properties or assets); or (iv) to the knowledge
of Sellers, accelerate or modify, or give any party thereto the right to
accelerate or modify, the time within which, or the terms under which, either
Miner or any Company is to perform any duties or obligations or receive any
rights or benefits under any Contract or any material agreement or commitment
relating to any Company.
6.21 Sellers have not retained any broker, finder, investment banker or
financial advisor in connection with this Agreement or the transactions
contemplated herein.
6.22 Except for the Non-Purchased Assets, neither any Stockholder nor, to
the knowledge of Sellers, any relative of any of them by blood or marriage or
any entity controlled by any of them (i) has any direct or indirect interest
(except through ownership of the shares of capital stock of Miner and the
Companies) in any material right, property or asset which is utilized or
required by either Miner or any Company in the conduct of its business or (ii)
has any material contractual relationship with either Miner or any Company.
**********************
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As used in this Article VI, "knowledge of Sellers" means the actual
knowledge of Stockholders.
ARTICLE VII
WARRANTIES AND REPRESENTATIONS OF BUYER
Buyer warrants and represents to Sellers that:
7.1 Buyer is a corporation validly existing and in good standing under the
laws of the State of Delaware and has all requisite corporate power and
authority to enter into and perform and carry out this Agreement, the Consulting
Agreements and the Put Option Agreement and the transactions contemplated hereby
and thereby.
7.2 Buyer has taken all requisite corporate action to authorize the
execution and delivery of this Agreement, the Consulting Agreements and the Put
Option Agreement by Buyer and the performance and consummation of the
transactions contemplated hereby and thereby, and this Agreement and the
Consulting Agreements have been, and, when executed and delivered, the Put
Option Agreement will be, duly executed and delivered by Buyer and are binding
upon and enforceable against Buyer in accordance with their terms.
7.3 To the knowledge of Buyer (i) there is no litigation at law or in
equity, no arbitration proceeding and no proceeding or investigation before or
by any court, commission, agency or other governmental, administrative or
regulatory body or authority pending or threatened or likely to be asserted
against or
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affecting the property, assets, rights or business of Buyer which, either
individually or in the aggregate, if adversely determined, will materially and
adversely affect the business, results of operations, property, assets or the
condition, financial or otherwise, of Buyer, nor (ii) is there any judgment,
decree, injunction, rule or order of any court, governmental department,
commission, agency, instrumentality or arbitrator outstanding against Buyer
having, or which, insofar as is foreseen by Buyer, in the future may have,
either individually or in the aggregate, any such effect.
7.4 Neither the execution and delivery of this Agreement, the Consulting
Agreements and the Put Option Agreement by Buyer nor the consummation of the
transactions contemplated hereby and thereby by Buyer does or will, after the
giving of notice or the lapse of time, or both (i) conflict with, result in a
breach of or constitute a default under the current charter or the by-laws of
Buyer, or, to the knowledge of Buyer, any federal, foreign, state or local law,
statute, ordinance, rule, regulation or court or administrative order or
process, or, to the knowledge of Buyer, any material agreement or commitment to
which Buyer is a party or by which Buyer (or any of its rights, properties or
assets) is subject or bound; (ii) result in the creation of, or give any party
the right to create, any lien, charge, encumbrance, security interest or any
other rights of others or other adverse interest upon any right, property or
asset of Buyer, except as part of Buyer's financing arrangements related
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to this Agreement; (iii) to the knowledge of Buyer, terminate or give any party
the right to terminate, amend, abandon or refuse to perform any material
agreement or commitment relating to Buyer (or any of its rights, properties or
assets); or (iv) to the knowledge of Buyer, accelerate or modify, or give any
party thereto the right to accelerate or modify, the time within which, or the
terms under which, Buyer is to perform any duties or obligations or receive any
rights or benefits under any material agreement or commitment relating to Buyer.
7.5 Buyer has not retained any broker, finder, investment banker or
financial advisor in connection with this Agreement or the transactions
contemplated herein.
7.6 Buyer understands that the Missouri Shares and the Texas Shares have
not been registered or qualified under the Securities Act of 1933 or any state
securities law and may not be offered for sale, sold or otherwise transferred or
disposed of except in compliance with the registration and qualification
provisions of such laws or pursuant to an exemption therefrom. Buyer is
purchasing the Missouri Shares and the Texas Shares solely for its own account
for investment and not with a view to or for sale in connection with any
distribution thereof and will not sell or otherwise transfer the Missouri Shares
or the Texas Shares except in compliance with the registration and qualification
provisions of the Securities Act of 1933 and any applicable state securities law
or pursuant to an exemption therefrom.
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7.7 Subject to obtaining the financing contemplated by the Commitment
Letter, Buyer has the financial resources necessary to pay the Asset Purchase
Price, the Stock Purchase Price and the amounts payable to Stockholders pursuant
to the Consulting Agreements, and to pay, perform and discharge all of the
Assumed Liabilities as and when the same become due; and the Commitment Letter
has not been withdrawn or terminated, there has been no material change in the
terms and conditions of Buyer's financing arrangements from the terms and
conditions set forth in the Commitment Letter, and Buyer has no knowledge of any
fact or contemplated event which will cause Buyer not to obtain such financing.
7.8 To the knowledge of the Buyer, the Buyer Balance Sheet was prepared in
accordance with generally accepted accounting principles consistently applied,
except for normal year end accruals and adjustments and the lack of footnotes,
and presents fairly in all material respects the financial position of Buyer as
of the date thereof.
7.9 Since the date of the Buyer Balance Sheet, there has been no material
adverse change of which Buyer is aware in the condition (financial or
otherwise), results of operations, properties, assets, liabilities, rights,
business, operations or prospects of Buyer nor has there been any adverse change
of which Buyer is aware in the relationships of Buyer with respect to its
employees, creditors, suppliers, distributors, licensees, licensors, customers
or others with whom it has business
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relationships which will have a material adverse effect on Buyer, and Buyer does
not have knowledge of any fact or contemplated event which Buyer believes will
cause any such material adverse change.
ARTICLE VIII
CONDITIONS APPLICABLE TO BUYER
The obligations of Buyer hereunder (including the obligation of Buyer to
consummate the transactions contemplated hereby) are subject to the following
conditions precedent:
8.1 The warranties and representations made herein by Sellers to Buyer
shall be true and correct in all material respects on and as of the Closing Date
with the same effect as if such warranties and representations had been made on
and as of the Closing Date, and Sellers shall have performed and complied in all
material respects with all agreements and covenants contained herein on their
part required to be performed or complied with on or prior to the Closing Date.
8.2 No proceeding or litigation, at law or in equity, by any governmental
or regulatory commission, agency or other body or authority which challenges the
consummation of the transactions contemplated by this Agreement, and no
proceeding by any person which claims substantial damages (or other damages not
indemnified against by Sellers) against Buyer or any Company as a result of the
consummation of the transactions contemplated hereby, shall be pending on the
Closing Date.
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8.3 At the Closing, there shall be delivered to Buyer a copy, duly signed
by each Stockholder, of a Consulting Agreement substantially in the form
attached hereto as Exhibit K (each a "Consulting Agreement" and collectively the
"Consulting Agreements").
8.4 There shall not have been any failure to obtain any consent or waiver,
which failure would prevent Buyer from operating the businesses of Miner and the
Companies, immediately following the Closing Date, on a going concern basis
equivalent in all material respects to the manner in which Miner and the
Companies operated the same prior to the Closing Date.
8.5 At the Closing, Sellers shall have delivered to Buyer:
(a) A certificate, dated the Closing Date, executed by Sellers to the
effect that, except as disclosed therein, the conditions set forth in Section
8.1 hereof have been satisfied (the "Sellers' Closing Certificate"); and
(b) The opinion of counsel for Sellers, dated the Closing Date, in form
and substance reasonably satisfactory to Buyer and its counsel, to the effect
that, subject to normal opinion assumptions, qualifications and limitations and
except as set forth in the Letter or in the Sellers' Closing Certificate:
(i) Each of Miner and each Company is a corporation validly existing
and in good standing under the laws of the jurisdiction of its
incorporation and is in good standing as a foreign corporation under the
laws of each jurisdiction identified to such counsel as a jurisdiction
where it is
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qualified to transact business as a foreign corporation (which opinion will
be based and given solely in reliance upon certificates of good standing);
(ii) This Agreement has been duly authorized, executed and delivered
by Sellers and is binding upon and enforceable against Sellers in
accordance with its terms, subject to bankruptcy, insolvency, fraudulent
conveyance and other similar laws affecting creditors' rights and subject
to general equitable principles, and Sellers have the requisite power and
authority to enter into this Agreement and to perform their respective
obligations hereunder (however, no opinion will be expressed as to the
binding effect or enforceability of Section 11.1 hereof);
(iii) The documents and instruments being delivered to Buyer
pursuant to Section 2.4(b)(i) have been duly authorized, executed and
delivered by Sellers and are binding upon and enforceable against Sellers
in accordance with their terms, subject to bankruptcy, insolvency,
fraudulent conveyance and other similar laws affecting creditors' rights
and subject to general equitable principles;
(iv) This Agreement and the consummation of the transactions
contemplated hereby do not violate the charter or by-laws of either Miner
or any Company, or, to the knowledge of such counsel, the provisions of (A)
any judgement, decree or order of any court to which such
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counsel is aware Sellers or any Company is subject, (B) any contract,
indenture, security agreement, lease or other obligation to which Sellers
or any Company is a party which is listed on Exhibit B or Exhibit D, or (C)
any law, rule, regulation or order of any governmental authority having the
force of law which such counsel is aware to be applicable to Sellers or any
Company or to the conduct of the business of either Miner or any Company;
(v) To the knowledge of such counsel, no consent, approval, order or
other authorization of any governmental authority is or was required on the
part of Sellers or any Company in connection with the execution and
delivery of this Agreement or the consummation of any of the transactions
contemplated hereby (however, no opinion will be expressed as to the Hart-
Scott-Rodino Antitrust Improvements Act of 1976); and
(vi) To the knowledge of such counsel, there is no litigation,
proceeding or governmental investigation pending or threatened against
either Miner or any Company which may materially adversely affect Miner and
the Companies or which seeks to enjoin or delay the consummation of the
transactions contemplated by this Agreement.
(Such opinion will be limited to federal laws, the laws of the State of
Illinois, and, in the case of Miner, the General Corporation Code of the State
of Kansas).
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8.6 All proceedings to be taken in connection with the consummation of the
transactions contemplated by this Agreement, including, without limitation, an
environmental audit, and all certificates, documents and instruments incidental
thereto, shall be reasonably satisfactory in form and substance to Buyer and its
counsel, and Buyer and its counsel shall have received copies of all such
documents and instruments as Buyer and its counsel may reasonably request in
connection with such transactions.
8.7 Buyer shall have the right to waive any or all of the foregoing
conditions precedent to the obligations of Buyer; however, no waiver by Buyer of
any condition precedent to the obligations of Buyer shall constitute a waiver by
Buyer of any other condition precedent.
ARTICLE IX
CONDITIONS APPLICABLE TO SELLERS
The obligations of Sellers hereunder (including the obligation of Sellers
to consummate the transactions contemplated hereby) are subject to the following
conditions precedent:
9.1 The warranties and representations made by Buyer herein to Sellers
shall be true and correct in all material respects on and as of the Closing Date
with the same effect as if such warranties and representations had been made on
and as of the Closing Date, and Buyer shall have performed and complied in all
material respects with all agreements and covenants contained
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herein on its part required to be performed or complied with on or prior to the
Closing Date.
9.2 No proceeding or litigation, at law or in equity, by any governmental
or regulatory commission, agency or other body or authority which challenges the
consummation of the transactions contemplated by this Agreement and no
proceeding by any person which claims substantial damages (or other damages not
indemnified against by Buyer) against Sellers as a result of the consummation of
the transactions contemplated hereby, shall be pending on the Closing Date.
9.3 At or prior to the Closing, Miner shall have received a release, in
form and substance satisfactory to Miner and its legal counsel, from each bank
and other financial institution whose debt is included in the Assumed
Liabilities, or whose debt is guaranteed by Miner, if such guarantee is included
in the Assumed Liabilities, to the effect that, upon the assumption of such debt
or guarantee as part of the Assumed Liabilities, Miner shall be fully released
and discharged from any and all further obligations and liabilities related to
such debt or guarantee.
9.4 At the Closing there shall be delivered to each Stockholder a copy,
duly signed by Buyer, of such Stockholder's Consulting Agreement. Within 10
business days after the Closing Date, Buyer shall deliver to each of Michael K.
Miner and Kurtis A. Miner an irrevocable letter of credit, in form and substance
satisfactory to such Stockholder and his legal counsel, issued by Union Bank of
Switzerland, New York Branch, securing the
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obligation of Buyer to pay the $550,000.00 installment of the consideration
payable under Paragraph 4 of such Stockholder's Consulting Agreement that is due
on January 2, 1995, and each of Michael K. Miner and Kurtis A. Miner hereby
waives delivery of such letter of credit as a condition precedent to Closing,
provided that such letters of credit are delivered within 10 business days after
the Closing Date. Such letters of credit shall remain outstanding until the
close of business on January 6, 1995 and demand shall not be made thereunder
prior to January 3, 1995.
9.5 At the Closing, Buyer shall have delivered to Sellers:
(a) A certificate, dated the Closing Date, executed by a senior
officer of Buyer, to the effect that, except as disclosed therein, the
conditions set forth in Section 9.1 hereof have been satisfied (the
"Buyer's Closing Certificate"); and
(b) The opinion of counsel for Buyer, dated the Closing Date, in form
and substance reasonably satisfactory to Sellers and their counsel, to the
effect that, subject to normal opinion assumptions, qualifications and
limitations and except as set forth in the Buyer's Closing Certificate:
(i) Buyer is a corporation validly existing and in good standing
under the laws of the State of Delaware;
(ii) This Agreement and the Consulting Agreements have been duly
authorized, executed and delivered by
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Buyer and are binding upon and enforceable against Buyer in accordance
with their terms, subject to bankruptcy, insolvency, fraudulent
conveyance and other similar laws affecting creditors' rights and
subject to general equitable principles, and Buyer has the requisite
power and authority to enter into this Agreement and the Consulting
Agreements and to perform its obligations hereunder and thereunder;
(iii) The instrument being delivered to Miner pursuant to
Section 2.4(a)(iii) has been duly authorized, executed and delivered
by Buyer and is binding upon and enforceable against Buyer in
accordance with its terms, subject to bankruptcy, insolvency,
fraudulent conveyance and other similar laws affecting creditors'
rights and subject to general equitable principles;
(iv) This Agreement and the Consulting Agreements and the
consummation of the transactions contemplated hereby and thereby do
not violate the charter or by-laws of Buyer or, to the knowledge of
such counsel, the provisions of (A) any judgment, decree or order of
any court to which such counsel is aware Buyer is subject, (B) any
material contract, indenture, security agreement, lease or the
obligation to which such counsel is aware Buyer is a party or by which
such counsel is aware Buyer or any of its material
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properties are bound, or (C) any law, rule, regulation or order of any
governmental authority having the force of law which such counsel is
aware to be applicable to Buyer or to the conduct of the business of
Buyer;
(v) To the knowledge of such counsel, no consent, approval,
order or other authorization of any governmental authority is or was
required on the part of Buyer in connection with the execution and
delivery of this Agreement or the Consulting Agreements or any of the
transactions contemplated hereby or thereby; and
(vi) To the knowledge of such counsel, there is no litigation,
proceeding or governmental investigation pending or threatened against
Buyer which may materially adversely affect Buyer or which seeks to
enjoin or delay the consummation of the transactions contemplated by
this Agreement.
(Such opinion will be limited to federal laws, the laws of the State of
Illinois, and the General Corporation Law of the State of Delaware)
9.6 All proceedings to be taken in connection with the consummation of the
transactions contemplated by this Agreement, and all certificates, documents and
instruments incidental thereto, shall be reasonably satisfactory in form and
substance to Sellers and their counsel, and Sellers and their counsel shall have
received copies of all such documents and instruments as
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Sellers and their counsel may reasonably request in connection with such
transactions.
9.7 Sellers shall have the right to waive any or all of the foregoing
conditions precedent to the obligations of Sellers; however, no waiver by
Sellers of any condition precedent to the obligations of Sellers shall
constitute a waiver by Sellers of any other condition precedent.
ARTICLE X
INDEMNIFICATION
10.1 Sellers shall, jointly and severally, indemnify and hold Buyer
harmless against any loss, damage or expense (including reasonable attorneys'
fees) suffered by Buyer or any Company arising out of or resulting from (a) any
breach by Sellers of any provision of this Agreement (other than the provisions
of Article VI and the Letter), (b) the failure by Miner to pay, perform or
otherwise discharge any Non-Assumed Liability, or (c) any inaccuracy or
misrepresentation in or breach of any warranty or representation made by Sellers
in Article VI, in the Letter, in Sellers' Closing Certificate or in any other
certificate or document delivered by Sellers in accordance with the provisions
of this Agreement; provided, however, that (i) any claim for indemnification
under Section 10.1(a) for a breach of any provision of the Agreement to be
performed on or before the Closing Date and any claim for indemnification under
Section 10.1(c) must be asserted on or prior to October 31, 1994; (ii) any claim
for indemnification
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under Section 10.1(a) for a breach of any provision of this Agreement to be
performed after the Closing Date must be asserted within 12 months after the
breach is discovered by Buyer; (iii) any claim for indemnification under Section
10.1(b) for the failure of Miner to pay, perform or discharge any Non-Assumed
Liability other than the long-term liabilities of $193,000 reflected on the
Balance Sheet and income taxes must be asserted on or prior to October 31, 1994;
(iv) the aggregate liability of Sellers for claims for indemnification under
Section 10.1(b) for the failure of Miner to pay, perform or discharge any
Non-Assumed Liability other than the long-term liabilities of $193,000 reflected
on the Balance Sheet and income taxes and claims for indemnification under
Section 10.1(c) shall be limited to $1,000,000; (v) a claim for indemnification
under Section 10.1(c) may be asserted only if and when, and only with respect
to, amounts of losses, damages and expenses which exceed, in the aggregate, for
all inaccuracies and misrepresentations in and breaches of warranties and
representations made by Sellers in Article VI, in the Letter and in Sellers'
Closing Certificate, the sum of $250,000; (vi) no claim for indemnification may
be asserted under this Section 10.1 with respect to any matter affecting the
Balance Sheet (it being understood that the adjustment provided for in Section
2.6 is intended to be and shall be the exclusive remedy for matters affecting
the Balance Sheet); and (vii) no claim for indemnification under this Section
10.1 may be asserted with respect to any loss, damage or expense
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arising out of or attributable to any breach or default by Buyer under or in
connection with the Supply Agreement dated October 12, 1993 (the "Supply
Agreement") between Missouri and Buyer.
10.2 Buyer shall indemnify and hold Sellers harmless against any loss,
damage or expense (including reasonable attorneys' fees) suffered by any Seller
arising out of or resulting from (a) any breach by Buyer of any provision of
this Agreement (other than the provisions of Article VII), (b) the failure by
Buyer to pay, perform or otherwise discharge when due any Assumed Liability, (c)
any inaccuracy or misrepresentation in or breach of any of the warranties and
representations made by Buyer in Article VII, in the Buyer's Closing Certificate
or in any other certificate or documents delivered by Buyer in accordance with
the provisions of this Agreement or (d) any failure to comply with the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 in connection with this
Agreement and the transactions contemplated hereby; provided, however, that (i)
any claim for indemnification under Section 10.2(a) for a breach of any
provision of this Agreement to be performed on or before the Closing Date and
any claim for indemnification under Section 10.2(c) must be asserted on or prior
to October 31, 1994; (ii) any claim for indemnification under Section 10.2(a)
for a breach of any provision of this Agreement to be performed after the
Closing Date must be asserted within 12 months after the breach is discovered by
Sellers; and (iii) a claim for indemnification under Section 10.1(c) may be
asserted only if and when, and only
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with respect to, amounts of losses, damages and expenses which exceed, in the
aggregate, for all inaccuracies and misrepresentations in and breaches of
warranties and representations made by Buyer in Article VII and in Buyer's
Closing Certificate, the sum of $250,000.
10.3 Subject to the limitations and restrictions set forth in Sections 10.1
and 10.2, the warranties and representations contained in this Agreement, in the
Letter, in the Sellers' Closing Certificate and in the Buyer's Closing
Certificate shall survive the execution and delivery of this Agreement, the
Closing, the consummation of the transactions contemplated hereby, any
investigation or review made by or on behalf of any party and regardless of any
information with respect thereto provided by Sellers to Buyer or by Buyer to
Sellers.
10.4 A party shall satisfy its obligations for indemnification hereunder
within sixty (60) days after a written demand therefor is received from the
party entitled to receive such indemnification.
10.5 Any party seeking indemnification hereunder (the "Indemnified Party")
shall promptly notify the party from whom such indemnification is sought (the
"Indemnifying Party") upon receipt by the Indemnified Party of any claim or
demand which the Indemnified Party has determined has given or could give rise
to a right of indemnification under this Agreement, which notice shall be
determined to constitute a "claim for indemnification" for the purposes of the
provisions to Sections 10.1 and 10.2
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hereof. If such claim or demand relates to a claim or demand asserted by a
third party against the Indemnified Party, the Indemnifying Party shall have the
right to employ such counsel as is reasonably acceptable to the Indemnified
Party to defend such claim or demand; provided, however, that the Indemnifying
Party shall not settle such claim or demand without the consent of the
Indemnified Party (which consent will not be unreasonably withheld) unless such
settlement requires no more than a monetary payment (for which the Indemnified
Party is fully indemnified under this Agreement) and a standard mutual release
or involves other matters not binding upon the Indemnified Party. The
Indemnified Party shall have the right to participate in the defense of any such
claim or demand. So long as the Indemnifying Party is defending in good faith
any such claim or demand, the Indemnified Party shall not settle such claim or
demand. The Indemnified Party shall make available to the Indemnifying Party
and its representatives all records and other materials reasonably required by
them for their use in contesting any claim or demand asserted by a third party
against the Indemnified Party. Whether or not the Indemnifying Party so elects
to defend any such claim or demand, the Indemnified Party shall not have any
obligation to do so and the Indemnified Party shall not waive any rights it may
have against the Indemnifying Party hereunder with respect to any such claim or
demand by electing or failing to elect to defend any such claim or demand.
Notwithstanding anything contained herein to the contrary, Miner shall have the
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exclusive right to employ counsel and defend claims and demands relating to
income taxes of Miner and/or Agricultural.
10.6 Except in the case of fraud and except in the case of any action for
injunctive relief to enforce the restrictive covenant contained in Section 11.1
hereof, Article X sets forth the sole and exclusive rights and remedies of the
parties for any breach of any provision of this Agreement, for any failure to
pay, perform or otherwise discharge any Non-Assumed Liability or Assumed
Liability, and for any inaccuracy or misrepresentation or breach of any warranty
or representation in this Agreement, in the Letter, in the Sellers' Closing
Certificate, in the Buyers' Closing Certificate, and in any other certificate or
document delivered by any party in accordance with the provisions of this
Agreement, and any claim for indemnification or contribution or other claim
related to any of the foregoing, whether asserted under this Agreement or
otherwise, shall be subject to the limitations and restrictions set forth in
Sections 10.1 and 10.2.
ARTICLE XI
POST CLOSING COVENANTS
11.1 During the period commencing on the Closing Date and ending on
December 31, 1998, Miner shall not, without the prior written consent of Buyer
(which may be withheld for any reason), directly or indirectly, engage ,
participate or invest (as an owner, partner, shareholder, director, officer,
employee, joint venturer, agent, representative or independent contractor, or in
any other capacity calling for the making of any investment or
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the rendition of any personal services or any acts of management, operation or
control) in any business which is competitive with any business conducted by
Miner on the date hereof within the geographical area in which any such business
is being conducted. Miner acknowledges that Buyer's remedy at law for any
breach of the foregoing provisions may be inadequate and that, in the event of
any such breach, Buyer shall be entitled to injunctive relief in addition to any
other remedy to which it may be entitled under Section 10.1. It shall not be a
violation of this Section 11.1 for Miner to own up to five percent of any class
of any securities listed on a National Securities exchange or traded regularly
in the over-the-counter market.
11.2 At the Closing, Buyer shall either (i) offer employment with Buyer or
one of the Companies to each current employee of Miner (other than the
Stockholders) at not less than his or her then current salary and with his or
her then current level of benefits (or substantially equivalent or better
benefits), or (ii) as to each such employee who is not so offered employment
with Buyer, pay severance and provide benefits to such employee as provided in
Exhibit L hereto. If, at any time within a period of twelve months after the
Closing, Buyer or any Company should, for any reason other than cause, terminate
the employment of any former employee of Miner who accepts employment with Buyer
or any Company at or after the Closing or the employment of any employee of the
Company who, in either case, was an employee of Miner or any Company on the
Closing Date (other than the Stockholders),
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Buyer shall pay severance and provide benefits to each such employee as provided
in Exhibit L hereto.
11.3 After the Closing:
(a) Buyer shall provide (and cause each Company to provide) Sellers with
access (with the right to make extracts and copies), upon reasonable notice and
during normal business hours, to such books, records, data and files of Miner
(included in the Purchased Assets) and the Companies (related to the period
through the Closing Date) as any Seller may reasonably request for any proper
purpose, including, but not limited to, preparing and defending tax returns and
investigating and defending third-party claims. After the Closing, neither
Buyer nor any Company shall dispose of any such books, records, data and files
other than in accordance with Buyer's normal records retention programs and
policies.
(b) Miner shall provide Buyer with access (with the right to make extracts
and copies), upon reasonable notice and during normal business hours, to such
books, records, data and files included in the Non-Purchased Records as Buyer
may reasonably request for any proper purpose, including, but not limited to,
preparing and defending tax returns and investigating and defending third-party
claims. After the Closing, Miner shall not dispose of any such books, records,
data and files other than in accordance with Miner's normal records retention
programs and policies.
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11.4 For a period of at least five years after the Closing, Buyer shall
include Miner as a named additional insured under all liability insurance
policies of Buyer with respect to product liability and other liability claims
relating to or arising out of the conduct of the businesses of Miner and the
Companies. Upon the request of any Seller, Buyer shall furnish Sellers with (i)
a certificate of insurance evidencing the insurance required to be provided
under this Section 11.4 and/or (ii) a copy of each insurance policy pursuant to
which such insurance is provided.
11.5 Miner and the Companies have asserted claims against their insurer,
Zurich American, as set forth in Exhibit M hereto. Buyer shall have the sole
and absolute right to pursue any such claim and shall be entitled to any
recovery in connection with such claim. If Buyer has not elected to pursue such
claim prior to the first anniversary of the Closing Date or at any time
thereafter Buyer shall cease to diligently pursue such claim, Buyer shall assign
to Miner any and all rights to pursue such claim and any recoveries resulting
therefrom.
11.6 Upon presentation to Buyer of either
(a) a tax return filed by or on behalf of Miner and/or Agricultural
showing that any income taxes, interest and/or penalties that are
attributable to or arise out of the business and operations of Agricultural
are due or are being paid for any taxable period, whether ending prior to
or after the Closing Date, or
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(b) a tax deficiency notice or assessment from the Internal Revenue
Service showing that any income taxes, interest and/or penalties that are
attributable to or arise out of the business and operations of Agricultural
are due from or are being assessed against Miner and/or Agricultural for
any taxable period, whether ending prior to or after the Closing Date,
Buyer shall within five business days pay Miner the first $2,300,000 in the
aggregate of any and all amounts paid or required to be paid by Miner and/or
Agricultural for such income taxes, interest and/or penalties (the "Tax
Payment"). The payment of any Tax Payment by Buyer shall not release Buyer from
further obligations pursuant to this Section 11.6 unless and until the aggregate
of all Tax Payments made to Miner and/or Agricultural equals $2,300,000. In the
event that Buyer fails to make any Tax Payment when due pursuant hereto, Buyer
shall pay to Miner, in addition to such Tax Payment, interest thereon, at an
annual rate three percent above the prime commercial lending rate of Continental
Bank, N.A., as announced from time to time, from the date when due pursuant
hereto to the date of payment by Buyer. Any Tax Payment or other payment by
Buyer required pursuant to the provisions of this Section 11.6 shall be paid to
Miner by bank wire transfer of immediately available funds to an account
designated by Miner.
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ARTICLE XII
MISCELLANEOUS
12.1 EXPENSES. Buyer shall pay its own costs and expenses (including
attorneys' fees and other professional fees and expenses) in connection with the
negotiation, preparation, execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby and all costs and expenses
in connection with Buyer's financing arrangements relating to this Agreement and
the transactions contemplated hereby. Sellers shall pay their own costs and
expenses (including attorneys' fees and other professional fees and expenses)
and any such costs and expenses incurred by any Company in connection with the
negotiation, preparation, execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby; provided, however, that
(i) any payment of attorneys' fees by Miner must be delayed until after the
Closing and (ii) any costs and expenses of Sellers relating to Buyer's financing
relating to legal services arrangements relating to this Agreement and the
transactions contemplated hereby shall be borne by Buyer.
12.2 ENTIRE AGREEMENT. This Agreement, including the Exhibits hereto and
the Letter, contains the entire agreement among the parties with respect to the
transactions contemplated hereby and supersedes all negotiations,
representations, warranties, commitments, offers, contracts and writings prior
to the date hereof; provided, however, that the Supply Agreement
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shall survive the execution and delivery of this Agreement. No waiver,
modification or amendment of any provision of this Agreement shall be effective
unless specifically made in writing and duly signed by the party to be bound
thereby.
12.3 NOTICES. All notices, requests, demands and other communications
under this Agreement shall be in writing and delivered in person or sent by
certified mail, postage prepaid, and properly addressed as follows:
To Buyer: Suite 300
One Conway Park
100 Field Drive
Lake Forest, Illinois 60045
Attention: Chairman and President
With a copy to:
Winston & Strawn
35 West Wacker Drive
Chicago, Illinois 60601
Attention: M. Finley Maxson
To Sellers: R. Scott Norris
7402 N. Highcliff
Scottsdale, Arizona 85253
With a copy to:
Butler, Rubin, Saltarelli & Boyd
1505 Three First National Plaza
70 West Madison Street
Chicago, Illinois 60602
Attn: Craig Boyd
All notices and other communications required or permitted under this Agreement
which are addressed as provided in this Section 12.3 shall be effective upon
delivery to the address provided in this Section 12.3.
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<PAGE>
Any party may from time to time change its address for the purpose of
notices to that party by a similar notice specifying a new address, but no such
change shall be deemed to have been given until it is actually received by the
party sought to be charged with its contents.
12.4. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns and, in the case of Stockholders, their respective heirs and
representatives. This Agreement may not be assigned by any party prior to the
Closing without the prior written consent of the other parties; provided,
however, that Buyer may grant a security interest in its rights hereunder to its
financing source.
12.5 GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of Illinois, without regard to its conflict of laws
provisions.
12.6 CONFIDENTIALITY. Except for such documents, reports, information and
data (including financial statements) which are or hereafter become of a public
nature other than through the actions of Buyer, pending the Closing (and, if
this Agreement is terminated, at all times after the date hereof), Buyer shall
treat as confidential and, except as otherwise required in connection with the
consummation of the transactions contemplated hereby, or except as compelled to
disclose by judicial or administrative process or, in the opinion of its
counsel, by other requirements of law, will not use, submit or disclose to,
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<PAGE>
or file with, others, or permit any person, firm, corporation or entity under
its control (or to whom it may furnish any such documents, reports, information
or data) to use, submit or disclose to, or file with, others, any documents,
reports, information or data (including financial statements) concerning either
any Seller or any Company which Buyer has heretofore obtained or may hereafter
obtain from Sellers or their agents, representatives or legal counsel; and,
except for such documents, reports and other written materials (including
financial statements) which are or hereafter become of a public nature, if this
Agreement is terminated, Buyer shall return to Sellers any and all such
documents, reports and other written materials (including financial statements)
concerning either Miner or any Company as Sellers may reasonably request.
12.7. LITIGATION. In the event of any litigation or other legal
proceeding relating to this Agreement, any Consulting Agreement, or any of the
transactions contemplated hereby or thereby, the prevailing party or parties
therein shall be entitled to recover from the losing party or parties therein
all reasonable attorneys' fees and other costs and expenses incurred in
connection with such litigation or other legal proceeding.
63
<PAGE>
IN WITNESS WHEREOF, Buyer and Sellers shall have executed and delivered
this Agreement as of the day and year first above written.
PACKAGING RESOURCES INCORPORATED MINER CONTAINER PRINTING, INC.
By: /s/ H.P. Hoeper By: /s/ Kenneth W. Miner
----------------------------- --------------------------
Title: President Title: President
-------------------------- -----------------------
STOCKHOLDERS:
/s/ Kenneth W. Miner
-----------------------------
KENNETH W. MINER
/s/ Michael K. Miner
-----------------------------
MICHAEL K. MINER
/s/ Kurtis A. Miner
-----------------------------
KURTIS A. MINER
/s/ Robert SCOTT Norris
-----------------------------
ROBERT SCOTT NORRIS
<PAGE>
CONSULTING AGREEMENT
AGREEMENT made and entered into December 15, 1993 by and between Packaging
Resources Incorporated, a Delaware corporation ("PRI"), and Kenneth W. Miner
("Consultant").
Pursuant to an Asset and Stock Purchase Agreement dated December 15, 1993
(the "Purchase Agreement"), PRI is, among other things, concurrently herewith
acquiring all of the issued and outstanding shares of capital stock of Miner
Container of Missouri, Inc., a Missouri corporation ("Missouri"), and Miner
Container of Texas, Inc., a Texas corporation ("Texas"). Missouri is the owner
of all of the issued and outstanding shares of Miner Housewares, Inc., a
Missouri corporation ("Housewares"). Missouri, Texas and Housewares are
sometimes referred to herein collectively as the "Companies" and individually as
a "Company." Consultant has been employed in a management position by one or
more of the Companies. PRI desires to retain the service of Consultant to advise
and consult with it with respect to the business of the Companies. In addition,
PRI desires by this Agreement to provide for the protection of the goodwill and
other proprietary rights of the Companies acquired by it.
Accordingly, it is agreed as follows:
1. PRI hereby retains Consultant to render consulting services to PRI and
the Companies and Consultant agrees to be so retained. During the term of this
Agreement, Consultant shall render advice to the executive officers of PRI and
the Companies so as to facilitate the transition of the control and operation of
the
<PAGE>
business of the Companies to PRI. All consulting services shall be performed at
times and in locations mutually acceptable to PRI and Consultant. PRI shall
reimburse Consultant for all reasonable travel and other out-of-pocket costs and
expenses incurred by Consultant in connection with providing such consulting
services to PRI and the Companies.
2. The term of this Agreement shall be for the period of two years,
commencing on the date hereof.
3. During the term of this Agreement, Consultant shall not, without the
prior written consent of PRI, engage directly or indirectly in any business
(either financially or as a shareholder, employee, officer, partner, advisor,
agent, independent contractor or owner or in any other capacity calling for
rendition of personal services or acts of management, operation or control)
which is in any respect competitive with the business of any Company (whether
such business is then being conducted by such Company or a successor) within the
geographical area or territory within which such business is then being
conducted. It shall not be a violation of this Agreement for Consultant to own
any securities listed on a national securities exchange or traded regularly in
the over-the-counter market or to engage in any business or activity on behalf
of PRI or any of its subsidiaries or affiliates, including any Company, or any
of their successors.
Consultant shall keep confidential and not disclose to anyone, other than a
responsible employee of PRI or any of its subsidiaries or affiliates, at any
time any non-public, confidential
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<PAGE>
information, including but not limited to that relating to finances, trade
secrets and know how, concerning the business of the Companies of which he is
aware as a result of his services for them.
Consultant acknowledges that his compliance with the provisions of this
paragraph is necessary to protect the good will and other proprietary interest
of the Companies acquired by PRI pursuant to the Purchase Agreement. Consultant
also acknowledges that a breach of the provisions of this paragraph will result
in irreparable and continuing damage to PRI and the Company for which there will
be no adequate remedy at law; and that in the event of the breach of any
provision of this paragraph, PRI and the Companies and their respective
successors and assigns shall be entitled to injunctive relief and to such other
and further relief as may be proper.
4. In consideration of the covenants contained in this Agreement, PRI
shall pay to Consultant the sum of $1,100,000.00, payable in two equal
installments of $550,000.00 each on January 3, 1994 and January 2, 1995. Any
such installment that is not paid when due shall bear interest form the date due
until paid at a rate 4% per annum over the prime commercial lending rate of
Continental Bank, N.A.
5. The amounts payable under Paragraph 4 shall not be subject to any
setoffs, holdbacks, withholdings or deductions of any kind.
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<PAGE>
6. This Agreement and the rights and obligations of PRI hereunder shall
inure to the benefit of, and shall be binding upon, its successors and assigns.
7. This agreement and the rights and obligations of Consultant hereunder
may not be assigned or encumbered by him, but shall inure to the benefit of his
heirs, executors and administrators. In the event of Consultant's death during
the term of this Agreement, all amounts payable hereunder which would otherwise
have been payable to Consultant shall be paid at the times and in the manner
provided herein to his estate or as he shall have otherwise designated in
writing to PRI prior to his death.
IN WITNESS WHEREOF, this Agreement has been executed as of the date first
above written by PRI, by a duly authorized officer, and Consultant.
PACKAGING RESOURCES INCORPORATED
By: /S/ Jerry J. Corirossi
---------------------------------
Title: Jerry J. Corirossi
Vice President
/s/ Kenneth W. Miner
------------------------------------
KENNETH W. MINER
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<PAGE>
AMENDMENT NO. 1 TO CONSULTING AGREEMENT
This Amendment No. 1 to Consulting Agreement is made as of the 22nd
day of December, 1994 by and between Packaging Resources Incorporated, a
Delaware corporation ("PRI"), and Kenneth W. Miner (the "Consultant"").
WHEREAS, PRI and the Consultant entered into a Consulting Agreement
dated December 15, 1993 (the "Agreement").
WHEREAS, PRI and the Consultant desire to amend the Agreement upon the
terms and conditions herein set forth.
NOW THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto agree as follows:
1. Paragraph 4 shall be amended and restated in its entirety as
follows:
"4. In consideration of the covenants contained in
this Agreement, PRI shall pay to Consultant $550,000.00 on
January 3, 1994 and an amount on April 13, 1995 equal to
$550,000, plus interest thereon from January 2, 1995 at a
rate 1 1/2 per annum over the prime commercial lending rate
of Bank of America National Trust & Savings Association."
2. Except herein amended, all of the terms and conditions of the
Agreement are hereby restated and shall remain in full force and effect.
<PAGE>
IN WITNESS WHEREOF, this Amendment No. 1 to Consulting Agreement may
be duly executed by each of the parties hereto as of the date first written.
PACKAGING RESOURCES INCORPORATED
By: /s/ Jerry J. Corirossi
---------------------------------
Its: Vice President
--------------------------------
/s/ Kenneth W. Miner
------------------------------------
Kenneth W. Miner
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<PAGE>
AMENDMENT NO. 2 TO CONSULTING AGREEMENT
This Amendment No. 2 to Consulting Agreement is made as of the 12th
day of April, 1995 by and between Packaging Resources Incorporated, a Delaware
corporation ("PRI), and Kenneth W. Miner (the "Consultant").
WHEREAS, PRI and the Consultant entered into a Consulting Agreement
dated December 15, 1993, as amended by Amendment No. 1 to Consulting Agreement
dated as of December 22, 1994 (the "Agreement").
WHEREAS, PRI and the Consultant desire to amend the Agreement upon the
terms and conditions herein set forth.
NOW THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto agree as follows:
1. Paragraph 4 shall be amended and restated in its entirety as
follows:
"4. In consideration of the covenants contained in
this Agreement, PRI shall pay to Consultant an amount equal
to (a) $550,000.00 on January 3, 1994, (b) $250,000.00 on
April 13, 1995, plus interest thereon from January 2, 1995
to April 13, 1995 at a rate 1.5% per annum over the prime
commercial lending rate of Bank of America National Trust &
Savings Association (the "Prime Rate") and (c) $300,000.00
on March 1, 1996, plus interest thereon (i) from January 2,
1995 to and
<PAGE>
including April 13, 1995 at a rate 1.5% per annum over the
Prime Rate and (ii) from April 14, 1995 at a rate per annum
equal to the Prime Rate."
2. Except herein amended, all of the terms and conditions of the
Agreement are hereby restated and shall remain in full force and effect.
IN WITNESS WHEREOF, this Amendment No. 2 to Consulting Agreement has
been duly executed by each of the parties hereto as of the date first above
written.
PACKAGING RESOURCES INCORPORATED
By: /s/ Jerry J. Corirossi
---------------------------------
Jerry J. Corirossi
Vice President
/s/ Kenneth W. Miner
------------------------------------
KENNETH W. MINER
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<PAGE>
MANAGEMENT AGREEMENT
This Management Agreement dated as of May 17, 1996 (this "Agreement")
is entered into by and between HPH Industries, Ltd., a Delaware corporation
("HPH"), and Packaging Resources Incorporated, a Delaware corporation ("PRI").
RECITALS
A. HPH indirectly owns all of the issued and outstanding capital
stock of PRI.
B. HPH has extensive experience and expertise in financial
management and strategic consulting and has been advising PRI on financial and
business matters for a number of years.
C. The parties desire to memorialize the terms of their agreement
regarding the management services to be provided by HPH and the compensation to
be received therefor.
NOW, THEREFORE, intending to legally be bound hereby, in consideration
of the premises and mutual agreements hereinafter set forth, and for other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. APPOINTMENT.
(a) Subject to SECTION 4 hereof, PRI hereby retains HPH to provide
the management services set forth in SECTION 2 hereof, and agrees that, during
the term hereof, HPH may take such actions as it deems reasonably necessary to
render such services to PRI. PRI agrees to cooperate with HPH and reasonably
assist HPH in the discharge of its duties and responsibilities.
<PAGE>
(b) HPH hereby accepts the appointment made pursuant to paragraph (a)
of this SECTION 1 and agrees to act in accordance with the duties and
responsibilities set forth in this Agreement and to take such actions as may
reasonably be required to discharge such duties and responsibilities.
2. MANAGEMENT SERVICES.
During the term of this Agreement, HPH shall provide PRI with
management services of a type and nature mutually agreed upon by them, including
services with respect to the following:
(a) corporate finance matters, including, without limitation,
divestitures, acquisitions, debt and equity financing and capital expenditures;
(b) administration and operation matters, including business
development, research, marketing and promotion; and
(c) strategic planning.
3. FEES AND REIMBURSEMENT OF EXPENSES
(a) In consideration for the services to be rendered by HPH hereunder,
PRI shall pay HPH compensation in the amount of $600,000 per year, or such
greater amount as PRI may agree if permitted by instruments governing
indebtedness of PRI or such lesser amount to the extent such compensation is
limited by instruments governing indebtedness of PRI, payable in equal monthly
installments in advance on the first day of each month during the term of this
Agreement.
(b) Except as provided in SECTION 5 hereof or as otherwise may be
agreed to in writing by the parties hereto, PRI shall not be liable for any
fees, expenses and costs incurred by
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<PAGE>
HPH in connection with services rendered to PRI pursuant to this Agreement.
4. TERMINATION
This Agreement may be terminated only in accordance with the following
provisions:
(a) the parties hereto may terminate this Agreement for any reason by
mutual consent;
(b) either party hereto may terminate this Agreement if the other
party hereto fails or refuses (by act or omission) to comply with or perform in
any material respect its obligations under this Agreement and such failure or
refusal continues unremedied for more than sixty (60) days after written notice
thereof has been given to such failing or refusing party by the other party
hereto; or
(c) HPH may terminate this Agreement for any reason upon thirty (30)
days' prior written notice to PRI; PROVIDED, HOWEVER, that notwithstanding any
termination of this Agreement, the obligations of each party under SECTION 5
hereof and the obligations of PRI to pay compensation under SECTION 3 hereof for
services performed by HPH prior to such termination shall survive any
termination of this Agreement and remain in full force and effect.
5. LIMITATION OF LIABILITY; INDEMNIFICATION
(a) To the fullest extent permitted by law, HPH and any officer,
director, employee, agent or attorney of HPH (collectively, the "Indemnitees")
shall not have any liability to PRI for any loss, damage, cost or expense
(including, without
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<PAGE>
limitation, any court costs, attorneys' fees and any special, indirect,
consequential or punitive damages of PRI) allegedly arising out of HPH
management services rendered to PRI hereunder or Indemnitees' acts, conduct or
omissions in connection with management services rendered to PRI hereunder;
PROVIDED, HOWEVER, that this provision shall not apply if such loss, damage,
cost or expense arises out of (i) an act of fraud or embezzlement or commission
of a criminal felony by HPH or (ii) willful misconduct, gross negligence or bad
faith by HPH.
(b) To the fullest extent permitted by law, PRI agrees to indemnify
the Indemnitees and hold the Indemnitees harmless against, any loss, damage,
cost or expense (including, without limitation, court costs and reasonable
attorneys' fees) which the Indemnitees may sustain or incur by reason of any
threatened, pending or completed investigation, action, claim, demand, suit,
proceeding or recovery by any person (other than the Indemnities) allegedly
arising out of HPH management services rendered to PRI hereunder or the
Indemnitees' acts, conduct or omissions in connection with HPH management
services rendered to PRI hereunder, except in any instance in which the
Indemnitees would not be exempted from liability under SECTION 5(a) hereof.
(c) Any Indemnitee shall, as promptly as practicable, notify PRI of a
claim as to which indemnification is sought by such Indemnitee; PROVIDED,
HOWEVER, PRI will not be relieved of its obligations hereof by reason of the
failure by such Indemnitee to give such notice to PRI except to the extent that
such failure interferes with or adversely affects PRI's defense in connection
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<PAGE>
with such claim. PRI shall have the right in its sole discretion to defend or
compromise any claim for which indemnification is sought under this SECTION 5,
and such Indemnitee shall reasonably cooperate with all reasonable requests of
PRI in connection therewith; PROVIDED, HOWEVER, if (i) the Indemnitee has been
advised by counsel that an actual or potential conflict of interest could exist
were such Indemnitee to be represented by counsel for PRI or (ii) such
Indemnitee had been indicted or otherwise charged in a criminal complaint, such
Indemnitee may have separate counsel, the reasonable fees and expenses of
counsel engaged on behalf of such Indemnitee to be borne by PRI. An Indemnitee,
at any time and at its own expense, may participate in any judicial proceeding
controlled by PRI pursuant to this SECTION 5(c). To the extent that an
Indemnitee would be entitled to indemnification under this SECTION 5 but a court
determines the undertaking to indemnify and hold harmless set forth in this
SECTION 5 is unenforceable because it is violative of any law or public policy,
PRI shall contribute the maximum portion that it is permitted to pay and satisfy
under applicable law to the payment and satisfaction of all indemnified
liabilities and obligations incurred by the Indemnitees or any of them.
6. NOTICES
All notices and other communications required by this Agreement shall
be in writing and shall be deemed to have been given (a) when delivered in
person, or (b) when sent by telex or telecopier with answerback received, and in
either case addressed to the party for which it is intended at that party's
address as
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<PAGE>
set forth below, or at such other address as the addressee shall have designated
by notice hereunder to the other parties.
If to HPH, addressed to:
HPH Industries, Ltd.
Attention: Howard P. Hoeper
One Conway Park
100 Field Drive, Suite 300
Lake Forest, Illinois 60045
If to PRI, addressed to:
Packaging Resources Incorporated
Attention: Jerry J. Corirossi
One Conway Park
100 Field Drive, Suite 300
Lake Forest, Illinois 60045
Any notice or request sent by telecopier or similar facsimile or
telecommunication shall be confirmed promptly by the sending of a copy of such
notice or request to the address thereof by prepaid certified mail, return
receipt requested.
7. AMENDMENT ASSIGNMENT; BINDING EFFECT
This Agreement may be amended or modified only by a written instrument
signed by the parties hereto. No party shall assign or transfer its rights or
obligations under this Agreement without the consent of the other party hereto.
This Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective permitted assigns.
8. WAIVER; SEVERABILITY
The failure of a party to insist in any instance upon the strict and
punctual performance of any provision of this Agreement shall not constitute a
continuing waiver of such provision. No party shall be deemed to have waived
any right, power or privilege under this Agreement or any provisions hereof
unless such waiver
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<PAGE>
shall have been in writing and duly executed by the party to be charged with
such waiver, and such waiver shall be a waiver only with respect to the specific
instance involved and shall in no way impair the rights of the waiving party or
the obligations of any other party in any other respect or at any other time.
If any provision of this Agreement shall be waived, or be invalid, illegal or
unenforceable, the remaining provisions of this Agreement shall be unaffected
thereby and shall remain binding and in full force and effect.
9. GOVERNING LAW
THIS AGREEMENT SHALL BE CONSTRUED, INTERPRETED AND THE RIGHTS OF THE
PARTIES DETERMINED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS.
10. NO RECOURSE AGAINST OTHERS
Notwithstanding anything contained in this Agreement to the contrary,
a director, officer or employee, as such, of HPH or PRI shall not have any
liability for any obligations of HPH or PRI, as the case may be, under this
Agreement or for any claim based upon, in respect of, or by reason of such
obligations or its creation.
11. RELATIONSHIP OF THE PARTIES
In all matters relating to this Agreement, each party hereto shall be
solely responsible for the acts of its employees, and employees of one party
shall not be considered employees of the other party. Except as otherwise
provided herein, no party shall have any right, power or authority to create any
obligation, express or implied, on behalf of the other party.
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<PAGE>
12. NO STRICT CONSTRUCTION
The language used in this Agreement will be deemed to be the language
chosen by the parties hereto to express their collective mutual intent and no
rule of strict construction will be applied against either party hereto.
13. ENTIRE AGREEMENT
This Agreement constitutes the entire agreement between the parties
hereto with respect to the subject matter hereof, and supersedes all prior
agreements and understandings, either oral, or written, with respect hereto.
14. COUNTERPARTS
This Agreement may be executed in counterparts each of which shall be
deemed an original and all of which together shall constitute one instrument.
[SIGNATURE PAGE FOLLOWS]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first above written.
HPH INDUSTRIES, LTD.
By: /s/ Jerry J. Corirossi
--------------------------
Jerry J. Corirossi
Vice President
PACKAGING RESOURCES INCORPORATED
By: /s/ Jerry J. Corirossi
---------------------------
Jerry J. Corirossi
Vice President - Finance
& Administration
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<PAGE>
AGREEMENT APPORTIONING THE CONSOLIDATED
INCOME TAX LIABILITY OF
HPH INDUSTRIES, LTD. AFFILIATED GROUP
WHEREAS, HPH Industries, Ltd. (hereafter referred to as "HPH"), Packaging
Resources Group, Inc. (hereafter referred to as "PRG"), and Packaging Resources
Incorporated (hereafter referred to as "PRI") are the members of an affiliated
group of corporations which has elected to file consolidated Federal income tax
returns:
WHEREAS, other corporations may in the future become members of such affiliated
group:
WHEREAS, such affiliated group desires to establish a method of allocating its
consolidated Federal tax liability and state tax liability among its members:
NOW THEREFORE, HPH, PRG and PRI do hereby agree as follows:
1. DEFINITIONS. For purposes of this Agreement, the following terms and
symbols shall have the following meanings:
(a) "Code" shall mean the Internal Revenue Code of 1986, as amended and in
effect in the relevant tax year.
(b) "Affiliated Group" shall mean HPH and those of its subsidiary
corporations which from time to time
<PAGE>
constitute an affiliated group within the meaning of section 1504 of
the Code.
(c) "Member" shall mean a corporation which is included in the Affiliated
Group.
(d) "Federal Tax Liability" for a taxable year shall mean the Federal tax
liability of each Member computed as if it had filed a separate
Federal income tax return for such taxable year and all prior years.
(e) "Parent" shall mean HPH or any other corporation which constitutes the
common parent of the Affiliated Group for Federal income tax purposes.
(f) "State Tax Liability" shall mean the state tax liability of each
Member computed as if it had filed a separate state income tax return
in such state for such taxable year and all prior years. A "State Tax
Liability" will be determined only with respect to states for which
consolidated, combined, or unitary returns are filed and will not be
determined for states in which separate returns are filed.
(g) "Subsidiary" shall mean a Member that is not Parent.
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<PAGE>
2. FILING OF CONSOLIDATED RETURNS; PAYMENT OF CONSOLIDATED TAX LIABILITY;
COMPUTATION OF TAX ALLOCATION.
Parent shall be responsible for the filing of all consolidated Federal income
tax returns for the Affiliated Group and all consolidated, combined, or unitary
state income tax returns for the members of the Affiliated Group and the timely
payment or collection of any tax due or refund of tax in connection with such
returns. Parent shall also be responsible for computing each Member's Federal
Tax Liability and State Tax Liability in accordance with the methods prescribed
by this Agreement, and for giving timely notice to Members of any amounts
payable pursuant to paragraph 4 hereof. Separate tax calculations shall be made
with respect to each of the Federal Tax Liability and the various State Tax
Liabilities and any limitations contained herein (such as found in subparagraphs
(a) and (b) of paragraphs 3 and 4) shall be applied separately with respect to
the federal and each state calculation.
3. CALCULATION OF INDIVIDUAL FEDERAL TAX LIABILITY.
(a) Each Subsidiary shall be liable to Parent for such Subsidiary's
Federal Tax Liability with respect to a taxable year; PROVIDED,
HOWEVER, the Federal Tax Liability of a Subsidiary with respect to a
taxable year shall not exceed the federal tax liability of the
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<PAGE>
Affiliated Group for the taxable year. If a Subsidiary's liability is
reduced by application of the immediately preceding proviso, the
amount by which the Subsidiary's tax liability is reduced shall be
included in an "Excess Federal Liability Account" of the Subsidiary.
If the Affiliated Group's federal tax liability in a later taxable
year exceeds the sum of the separate Federal Tax Liabilities of the
Members (an "Excess Federal Liability"), the Subsidiary shall be
liable for its pro rata portion of the Excess Federal Liability (which
pro rata share shall be determined by dividing the Subsidiary's Excess
Federal Liability Account by the sum of the Excess Federal Liability
Accounts of all the Subsidiaries) and the Subsidiary's pro rata share
of the Excess Federal Liability shall be subtracted from the
Subsidiary's Excess Federal Liability Account and such subtraction
shall be treated as having been made from the earliest addition to the
Subsidiary's Excess Federal Liability Account.
(b) If any Subsidiary would be entitled to a refund of Federal tax if it
filed a separate Federal income tax return, Parent shall owe to that
Subsidiary the amount of such refund; PROVIDED, HOWEVER, that the
amount of such refund owing from Parent to Subsidiary with respect to
any taxable year (the "Refund Year") shall be limited to
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<PAGE>
the amount of the net Federal Tax Liability payments from Subsidiary
to Parent pursuant to subparagraph (a) of this paragraph 3 with
respect to the Refund Year (reduced by any prior refunds pursuant to
this paragraph 3 with respect to the Refund Year and increased by the
amount by which an increase to the Excess Federal Liability Account
with respect to the Refund Year caused Subsidiary to pay a portion of
an Excess Federal Liability for a later year pursuant to the last
sentence of subparagraph (a) of this paragraph 3). To the extent that
a refund is limited by the preceding proviso, the Excess Federal
Liability Account of the Subsidiary shall be reduced and the reduction
shall be treated as a reduction to the Subsidiary's Excess Federal
Liability Account with respect to the Refund Year.
(c) With the exception of amounts owing under subparagraphs a and b of
this paragraph 3, neither the Parent nor any Subsidiary shall be
liable for (or be due) any amount hereunder even though the Federal
tax liability of the Affiliated Group may have been reduced by reason
of the inclusion of a particular Subsidiary as a member of the Group.
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<PAGE>
4. CALCULATION OF INDIVIDUAL STATE TAX LIABILITY.
With respect to each state for which consolidated, combined or unitary income
tax returns are filed by the Affiliated Group:
(a) Each Subsidiary shall be liable to Parent for such Subsidiary's State
Tax Liability with respect to a taxable year; PROVIDED, HOWEVER, the
State Tax Liability of a Subsidiary with respect to a taxable year
shall not exceed the state tax liability of the Affiliated Group for
the taxable year. If a Subsidiary's liability is reduced by
application of the immediately preceding proviso, the amount by which
the Subsidiary's tax liability is reduced shall be included in an
"Excess State Liability Account" of the Subsidiary. If the Affiliated
Group's state tax liability in a later taxable year exceeds the sum of
the separate State Tax Liabilities of the Members (an "Excess State
Liability"), the Subsidiary shall be liable for its pro rata portion
of the Excess State Liability (which pro rata share shall be
determined by dividing the Subsidiary's Excess State Liability Account
by the sum of the Excess State Liability Accounts of all the
Subsidiaries) and the Subsidiary's pro rata share of the Excess State
Liability shall be subtracted from the Subsidiary's Excess State
Liability Account and such subtraction shall be treated
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<PAGE>
as having been made from the earliest addition to the Subsidiary's
Excess State Liability Account.
(b) If any Subsidiary would be entitled to a refund of State tax if it
filed a separate State income tax return, Parent shall owe to that
Subsidiary the amount of such refund; PROVIDED, HOWEVER, that the
amount of such refund owing from Parent to Subsidiary with respect to
any taxable year (the "State Refund Year") shall be limited to the
amount of the net State Tax Liability payments from Subsidiary to
Parent pursuant to subparagraph (a) of this paragraph 4 with respect
to the State Refund Year (reduced by any prior refunds with respect to
the State Refund Year and increased by the amount by which an increase
to the Excess State Liability Account with respect to the State Refund
Year caused the Subsidiary to pay a portion of an Excess State
Liability for a later year pursuant to the last sentence of
subparagraph (a) of this paragraph 4). To the extent that a refund is
limited by the preceding proviso, the Excess State Liability Account
of the Subsidiary shall be reduced and the reduction shall be treated
as a reduction to the Subsidiary's Excess State Liability Account with
respect to the State Refund Year.
-7-
<PAGE>
(c) With the exception of amounts owing under subparagraphs (a) and (b) of
this paragraph 4, neither the Parent nor any Subsidiary shall be
liable for (or be due) any amount hereunder even though the State tax
liability of the Affiliated Group may have been reduced by reason of
the inclusion of a particular Subsidiary as a member of the Group.
5. PAYMENTS REQUIRED BY TAX ALLOCATION. Each Subsidiary shall pay its
liabilities determined under paragraphs 3 and 4 to Parent at such times as
will reasonably permit Parent to make required payments (estimated and
final) of Federal and state tax on behalf of the Affiliated Group.
Promptly upon the receipt of a refund of Federal or state tax, Parent shall
make payments to other Members equal to the refunds determined under
paragraphs 3 and 4. Members shall be directly responsible for state income
taxes for states in which separate returns are filed.
6. TAX ADJUSTMENTS. In the event of any adjustment to the consolidated
Federal income tax return of the Affiliated Group as filed or to a
consolidated, combined, or unitary state income tax return as filed (by
reason of an amended return, examination by the Internal Revenue Service,
or otherwise), a Subsidiary's Federal Tax Liability or State Tax Liability
shall be redetermined under paragraphs 3 and 4 to give effect
-8-
<PAGE>
to any such adjustment as if it had been a part of the original computation
of tax liability, and payments between Members pursuant to paragraph 5
shall be made immediately before any additional payments of tax are
required to be made or promptly after any refunds are received with respect
to the consolidated Federal income tax return of the Affiliated Group or to
a consolidated, combined, or unitary state income tax return.
7. EFFECT OF CHANGE IN COMPOSITION OF AFFILIATED GROUP. This Agreement shall
become applicable to any corporation which becomes a Member after the
effective date hereof. This Agreement shall only apply to a Member with
respect to any taxable year or portion thereof for which such Member is
properly included in the consolidated Federal income tax return of the
Affiliated Group. Accordingly, no Member shall have any rights or
obligations under this Agreement subsequent to such Member's disaffiliation
from the Affiliated Group.
8. EFFECTIVE DATE. This Agreement amends and supersedes that certain
Agreement Apportioning the Consolidated Income Tax Liability of The Peck-
Lynn Group, Ltd. Affiliated Group dated June 25, 1987 between The Peck-Lynn
Group, Ltd. and PRI effective as of February 29, 1996 and shall apply to
each taxable year of the Affiliated Group ending on or after that date for
which a consolidated Federal income tax return is filed.
-9-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed in their respective corporate names by their elected officers.
HPH INDUSTRIES, LTD.
By /s/ Jerry Corirossi
----------------------------
Date May 17, 1996
--------------------------
PACKAGING RESOURCES GROUP, INC.
By /s/ Jerry Corirossi
----------------------------
Date May 17, 1996
--------------------------
PACKAGING RESOURCES INCORPORATED
By /s/ Jerry Corirossi
----------------------------
Date May 17, 1996
--------------------------
-10-
<PAGE>
July 10, 1992
Packaging Resources Incorporated
717 Forest Avenue
Lake Forest, Illinois 60045
Attention: J. Michael Anderson
Vice President, Sales and Marketing
RE: THE DANNON COMPANY, INC. / 4 OZ. SPRINKL'INS
DANNON CUP MOLD AND CUP MANUFACTURE
Dear Mr. Anderson:
This letter shall memorialize the Agreement between The Dannon Company, Inc.
(DANNON) and Packaging Resources, Incorporated (PRI), with respect to the
purchase of a sample tool, a new 14 cavity production tool and modifications to
the present Dannon owned 14 cavity tool (TOOLING) to produce, via solid phase
pressure forming (SPPF), the new shorter 4 oz Sprinkl'ins cups (CUP) herein
identified under C302S, and drawing #9002.080.001 and the manufacturing of the
(CUP) for DANNON'S SPRINKL'INS PRODUCT (DANNON PRODUCT).
1. PRI has agreed to manufacture, at its sole cost and expense, the
TOOLING necessary for PRI to manufacture and produce the (CUP) for the DANNON
PRODUCT. PRI agrees to be solely liable and responsible for the service,
maintenance and repair of the TOOLING. PRI acknowledges that the TOOLING it
shall manufacture shall be capable of producing cups in accordance with this
Agreement. PRI acknowledges that the TOOLING has the capacity to manufacture and
produce a minimum of [__________________________]*
- -------------------------
* Confidential portion omitted; unredacted version is on file with the
Securities and Exchange Commission.
<PAGE>
2
per year from each of the two production tools (total of both tools is
[___________]* for the DANNON PRODUCT. In the event DANNON's per year
requirements exceed the TOOLING capacity, PRI agrees, at DANNON's reasonable
request, to manufacture additional TOOLING at PRI's expense in accordance with
the terms of this Agreement.
2. In consideration for PRI's manufacturing of the TOOLING, DANNON agrees
that PRI shall be DANNON's exclusive (CUP) manufacturer for DANNON PRODUCT.
This exclusivity shall be for a period of two (2) years, commencing June 1,
1992, and ending May 31, 1994, with a one (1) year renewable option by mutual
consent of the parties. DANNON agrees that its consent to the one (1) year
option extension, shall be based upon PRI's supply performance of the 4 oz.
cups, including, but not limited to, cost, quality, timely delivery, and
services. In the event that either party elects not to exercise the one (1)
year extension, notification must be given to the other party, in writing, no
less than six (6) months prior to the termination date of this Agreement.
3. PRI agrees that the production of the (CUP) for the DANNON PRODUCT
shall be strictly in accordance with DANNON's specifications as set forth in
EXHIBIT "A" attached hereto and incorporated herein by reference, subject to
reasonable change by DANNON, and each cup shall conform to DANNON's incoming
quality control specification. DANNON shall have the right to inspect each
shipment of the (CUP) upon their delivery, and in the event that any such cup
does not meet with DANNON's incoming quality control specification, DANNON shall
have the right to reject the said cups and return said to PRI, at PRI's sole
cost and expense.
4. PRI and DANNON agree that the cost per cup to be charged to DANNON for
the production of the (CUP) shall be in accordance
- -------------------------
* Confidential portion omitted; unredacted version is on file with the
Securities and Exchange Commission.
<PAGE>
3
with SCHEDULE "B" "Pricing Schedule" attached hereto and incorporated herein by
reference. DANNON shall be billed at the [_____________________]* per month
rate and credited with further volume discounts at the end of each month for the
concluding month, at the end of each calendar quarter based on the average
monthly volume during the concluding quarter and at the end of each Agreement
year based on the average monthly volume in the concluding year. The prices
listed in the attached SCHEDULE "B" "Pricing Schedule" are effective September
1, 1992, or with the commencement of shipping from both molds, whichever is
later. Price changes upward or downward for "resin" shall be effective thirty
(30) days after PRI notifies DANNON of PRI's increase or decrease in resin
price, in accordance with the current resin escalator/deescalator formula
included in the "Pricing Schedule". The price per thousand in the "Pricing
Schedule" is subject to an annual review on June 1st of each year, for non resin
cost increases (e.g., "labor", "utilities", etc.) and may be increased by PRI a
maximum of [_________________]* provided that such increases are documented to
DANNON to the reasonable satisfaction of DANNON. Pricing, except for possible
changes due to resin as aforesaid, shall be firm for the following twelve (12)
month period of this Agreement. All pricing changes shall be effective thirty
days (30) after PRI notifies DANNON. DANNON's Purchase Order form (copy
attached as SCHEDULE "C") shall be used to order the production of the 4 oz.
cups. In the event there is a contradiction between the aforesaid Purchase
Order form and this Agreement, this Agreement shall control.
5. PRI agrees for the duration of this Agreement, that it shall use the
TOOLING only for the production of DANNON's (CUP) and shall not use the TOOLING
for any other customer, unless DANNON
- -------------------------
* Confidential portion omitted; unredacted version is on file with the
Securities and Exchange Commission.
<PAGE>
4
advises PRI that it shall require less than [___________]* in any one (1) year
of this Agreement. In the event of the aforesaid, PRI shall have the limited
right to use the TOOLING for other customers provided the customer's business is
not the same as or similar to DANNON's business. In the event of a breach,
threatened breach or attempted breach of this paragraph, DANNON in addition to
any other remedy it may have in law or equity, shall be entitled to an
injunction restraining PRI from committing such breach, attempted breach or
threatened breach, and to the recovery of reasonable attorneys' fees and
expenses, including court costs, incurred in attempting to remedy any such
breach.
6. In the event that PRI materially defaults (e.g., cups cracked,
printing illegible, etc.), on any terms of this Agreement, other than as
provided above in paragraph 5, DANNON shall notify PRI, in writing, of the said
default, and PRI shall have fifteen (15) days to cure such default, to DANNON's
reasonable satisfaction, or, in the event such default cannot be cured within
fifteen (15) days, PRI shall immediately commence steps to cure such default,
but in no event shall the time to cure exceed thirty (30) days. Upon PRI's
failure to timely cure in accordance with the aforesaid, DANNON shall have the
right to terminate this Agreement without further notice. Notwithstanding the
aforesaid, in the event that the same default is material and has been committed
by PRI more than three (3) times in any one year of this Agreement, or during
any 12 month period of this Agreement, persistent problems arise with respect to
PRI's production of the (CUP), DANNON shall be entitled to terminate this
Agreement, upon thirty (30) days written notice to PRI, without any rights for
PRI to cure.
- -------------------------
* Confidential portion omitted; unredacted version is on file with the
Securities and Exchange Commission.
<PAGE>
5
7. Upon termination of this Agreement, or an early termination of this
Agreement, as provided for above, DANNON shall pay PRI the lesser of the said
value of the TOOLING as determined by an independent third party, as mutually
agreed upon, or [_______________________]* for each [_____________]* sold DANNON
after 9/1/92.
In any event, PRI shall hereby acquire and maintain title for all TOOLING.
8. Notwithstanding anything to the contrary herein before set forth, this
Agreement may be terminated at any time by DANNON in the event that DANNON
discontinues its use of (CUP); by giving PRI thirty (30) days prior written
notice of DANNON's intention to discontinue. In this event, DANNON must
reimburse PRI for the TOOLING as set forth in Paragraph 7.
PRI agrees that it cannot assign this Agreement without the prior written
consent of DANNON. If this correspondence accurately sets forth your
understanding with respect to our agreement, please indicate your consent by
signing, at the space provided below, and thereafter this shall be a binding
Agreement between us, and our respective successors and assigns.
- -------------------------
* Confidential portion omitted; unredacted version is on file with the
Securities and Exchange Commission.
<PAGE>
6
Sincerely yours,
/s/ John Sofia /s/ Donald L. Junker
John Sofia Donald L. Junker
Purchasing Manager Director, Materials Management
THE DANNON COMPANY, INC. ACCEPTED AND AGREED TO:
PACKAGING RESOURCES
INCORPORATED
By: /s/ Donald E. Devine, II
-------------------------
Donald E. Devine, II By: /s/ J. Michael Anderson
----------------------------
J. MICHAEL ANDERSON
Title: Vice President, Finance
Title: Vice President
Date: 7/15/92
-----------------------
Date: 7/15/92
-------------------------
Attachments (3):
Exhibit "A" Cup Specification
Schedule "B" Pricing Schedule
Schedule "C" Purchase Order Form
<PAGE>
7
SCHEDULE "A"
[Schematic drawings of container, including size specifications omitted.
Confidential treatment requested for such schematic drawings. Unredacted
version is on file with the Securities and Exchange Commission.]
<PAGE>
8
SCHEDULE "B"
July 10, 1992
PACKING RESOURCES INCORPORATED
PRICING SCHEDULE
EFFECTIVE SEPTEMBER 1, 1992
(REFLECTS AGREEMENT PRICING TO BE EFFECTIVE EARLIER 9/1/92 OR AT
SHIPPING OF NEW 4 OZ. DESIGN FROM TWO NEW MOLDS)
THE DANNON COMPANY, INC
Ship to: Minster, Ohio
Delivered
Part Description Monthly Price/M
- ---------------- Volume Minster
POLYPROPYLENE Rate Ohio
------- ---------
C302S 4 oz. White Cup Printed [______]* [______]*
[______]* [______]*
[______]* [______]*
0.048 Gauge (5.64 Grams)
Gauge Reduction: 0.045 Gauge (5.27 Grams); [______]* Below
Above Prices
Title: F.O.B. Packaging Resources Point of
Manufacture
Freight: Packaging Resources Arranges for [_______]*
Customer Pickup Credit of [_______]* allowed
at Minster, Ohio.
Terms: Net 30 Days
Sale subject to credit approval
CURRENT RESIN ESCALATOR/DEESCALATOR:
Price Change of [________]* for each $0.01/# of Resin Change [_______]*
Price Change of [________]* for each $0.01/# of Resin Change [_______]*
- -------------------------
* Confidential portion omitted; unredacted version is on file with the
Securities and Exchange Commission.
<PAGE>
TOOLING:
Packaging Resources owns one (1) 14 cavity SPPF tool
Sample Tool: [_______]* (6 weeks)
New 14 cavity SPPF tool: [________]* (20 weeks)
New 14 cavity SPPF inserts: [________]* (16 weeks)
- -------------------------
* Confidential portion omitted; unredacted version is on file with the
Securities and Exchange Commission.
<PAGE>
APRIL 4, 1994
MR. TERRY CULLEN
VP SALES AND MARKETING
PACKAGING RESOURCES, INC.
ONE CONWAY PARK
100 FIELD DRIVE, SUITE 300
LAKE FOREST, ILLINOIS 60045
RE: 4OZ, 6OZ AND 8OZ CUP SUPPLY AGREEMENT
-------------------------------------
DEAR TERRY:
THIS LETTER SHALL MEMORIALIZE OUR ARRANGEMENT TO REVISE THE EXISTING 4OZ, 6OZ
AND 8OZ CUP SUPPLY AGREEMENT IN ACCORDANCE WITH THE TERMS AND CONDITIONS AS
HEREINAFTER SET FORTH.
1) PRI WILL MODIFY, AT ITS EXPENSE, ALL SEVEN (7) EXISTING 8OZ CUP MOLDS
TO CONFORM TO DANNON SPECIFICATION DRAWING NUMBER 70L3.080.007 DATED
3/28/94. DANNON WILL PAY FOR THE SEAL BEAD REVISION PORTION OF THIS
MODIFICATION.
2) PRI WILL BUILD, AT ITS EXPENSE, A SIXTEEN (16) AND A TWENTY FOUR (24)
CAVITY 8OZ CUP MOLD TO ACCOMMODATE DANNON CUP REQUIREMENTS. THE
SIXTEEN (16) CAVITY MOLD IS SCHEDULED FOR COMPLETION JULY 1994. THE
TWENTY FOUR (24) CAVITY MOLD IS SCHEDULED FOR COMPLETION DECEMBER
1994.
3) PRI WILL WAREHOUSE SPRINKL'INS 4OZ CUPS, FOR BOTH THE USA AND MEXICAN
MARKET, AT ITS FORTH WORTH, TEXAS PLANTS TO INSURE "JUST IN TIME"
DELIVERY TO DANNON'S FORT WORTH, TEXAS PLANT.
4) PRI WILL IMPLEMENT A UNIFORM (LAB COAT) POLICY FOR DANNON PACKAGE
PRODUCTION/PRINTING PERSONNEL AT BOTH ITS NEW VIENNA, OHIO AND FORT
WORTH, TEXAS PLANTS.
5) FOR THE 4OZ, 6OZ AND 8OZ CUPS, NO CPI NON RESIN PRICE ADJUSTMENT WILL
BE MADE. THE ANNUAL REVIEW DATE FOR ANY CPI NON RESIN INCREASE IS
CHANGED TO JANUARY 1 BEGINNING JANUARY 1, 1995. AT WHICH TIME,
ADJUSTMENTS WILL BE
<PAGE>
CONSIDERED BASED ON THE PERIOD JANUARY 1, 1994 THROUGH DECEMBER 31,
1994.
6) DANNON WILL EXTEND THE EXISTING 4OZ, 6OZ AND 8OZ CUPS SUPPLY
AGREEMENTS TO EXPIRE JANUARY 1, 1996.
EXCEPT AS OTHERWISE SET FORTH ABOVE, DANNON AND PRI REAFFIRMS AND AGREE THAT ALL
OTHER TERMS AND CONDITIONS OF OUR EXISTING 4OZ, 6OZ AND 8OZ CUPS AGREEMENTS
SHALL REMAIN IN FULL FORCE AND EFFECT FOR THE ONE (1) YEAR EXTENSION AND ANY
SUBSEQUENT RENEWALS, IF ANY.
IF THE ABOVE ACCURATELY SETS FORTH YOUR UNDERSTANDING WITH RESPECT TO OUR
AGREEMENT, PLEASE INDICATE SAME SIGNING ON THE LINE PROVIDED, AND THEREAFTER,
THIS SHALL BE A BINDING AGREEMENT AMONG OURSELVES AND OUR RESPECTIVE SUCCESSORS
AND ASSIGNS. WE LOOK FORWARD TO A CONTINUING BENEFICIAL RELATIONSHIP.
SINCERELY,
/s/ John Sofia /s/ Donald L. Junker
- ----------------------------- -------------------------------
JOHN SOFIA DONALD L. JUNKER
PURCHASING MANAGER VP PURCHASING
THE DANNON COMPANY, INC.
BY: /s/ Donald E. Devine, II
--------------------------
TITLE: Vice President Finance
-----------------------
DATE: 4/3/94
------------------------
CONSENTED TO AND AGREED TO:
PACKAGING RESOURCES, INC.
BY: /s/ Terrance V. Cullen
---------------------------
TITLE: Vice President Sales and Marketing
-----------------------------------
DATE: 4/3/94
------------------------
* 4OZ CUP - REVISED AGREEMENT DATED 7/10/92
5OZ CUP - REVISED AGREEMENT DATED 7/10/92
6OZ CUP - AGREEMENT DATED 12/9/91
<PAGE>
February 6, 1995
Mr. Terry Cullen
VP Sales and Marketing
Packaging Resources, Inc.
One Conway Park
100 Field Drive, Suite 300
Lake Forest, Illinois 60045
Re: THE DANNON COMPANY, INC./4OZ SPRINKLIN'S DANNON CUP MOLD AND CUP
MANUFACTURE AGREEMENT DATED JULY 10, 1992 ("AGREEMENT")
Dear Mr. Cullen:
This letter shall memorialize an amendment to the Agreement between Packaging
Resources Incorporated (PRI) and The Dannon Company, Inc. (DANNON) dated July
10, 1992, with revision date April 4, 1994. We agree as follows:
1. PRI will build, at its expense, one unit cavity 4oz cup injection mold
to conform to PRI 4oz cup drawing number 1019.080.005 dated 12/14/94.
(SEE EXHIBIT 1.) The unit cavity injection mold is scheduled for
completion February, 1995 and the cost is estimated at [_______]*
2. PRI will, at its expense, construct and/or modify tooling, parts
handling and mandrels compatible with forecasted 4oz requirements.
The parts provided will conform to drawing number 1019.080.005 dated
12/14/94. Production of 4oz cups conforming to PRI drawing number
1019.080.005 dated 12/14/94, is targeted to begin in July, 1995. The
estimated mold and associated costs are:
- modify a twenty-four cavity injection mold, [________]*;
- build a new thirty-two cavity injection mold, [________]*;
- parts handling equipment, [_________]*;
- print mandrels, [______]*.
3. DANNON and PRI agree to extend the termination date of Agreement to
December 31, 1997.
Initial /s/ DED, II Initial /s/ TEV
---------------- --------
DANNON PRI
- -------------------------
* Confidential portion omitted; unredacted version is on file with the
Securities and Exchange Commission.
<PAGE>
February 6, 1995
Mr. Terry Cullen
Dannon Cup Mold and Cup Manufacturers Agreement
Page 2
4. PRI and DANNON agree that the cost per cup to be charged to DANNON
shall be in accordance with Price Schedule based on the price range
appearing on Schedule "A" dated 12/19/94 attached hereto.
Except as otherwise set forth above, DANNON and PRI reaffirm and agree that all
other provisions of the agreement shall remain in full force and effect through
the term of this Agreement and any extensions thereof.
If the above accurately sets forth your understanding with respect to our
Agreement, please indicate by signing on the line provided, and thereafter, this
shall be a binding agreement among ourselves and our respective successors and
assigns. We look forward to a continuing beneficial relationship.
Sincerely,
/s/ John Sofia /s/ Donald L. Junker
- -------------------------- --------------------------------
John Sofia Donald L. Junker
Purchasing Manager Vice President Purchasing
Consented to and Agreed to:
THE DANNON COMPANY, INC. PACKAGING RESOURCES INC.
By: /s/ Donald E. Devine By: /s/ Terrance V. Cullen
----------------------- -----------------------------
Title: V.P. Finance/CFO Title: V.P. Sales & Marketing
-------------------- --------------------------
Date: 2/15/95 Date: 2/15/95
--------------------- ---------------------------
<PAGE>
SCHEDULE "A"
Thursday, December 29, 1994
John Sofia
The Dannon Company, Inc.
120 White Plains Road
Terrytown, New York 10591
RE: 80mm 4oz Pricing, Injection Molded
Drawing #1019080005 (Preliminary, approved by Dan Devine)
Dear John:
We've updated pricing for the revised, molded version of the current 4oz.
containers as follows:
<TABLE>
<CAPTION>
Item/Wall Thickness Price/M Mold Material Price "Index"
------------------- ------- ---- -------- -------------
<S> <C> <C> <C> <C>
[ ]* [ ]* 32-Cavity Copolymer PP "45"
[ ]* [ ]* 32-Cavity Copolymer PP "45"
[ ]* [ ]* 32-Cavity Copolymer PP "45"
[ ]* [ ]* 32-Cavity Copolymer PP "45"
[ ]* [ ]* 32-Cavity Copolymer PP "45"
</TABLE>
Above pricing DOES NOT include freight (case count is the same as current 4 oz
- -- freight as outlined on current schedules will apply).
TOOLING SPECIFICS: Packaging Resources will absorb all capital expenditure
associated with the above containers for molds, parts handling equipment, etc.
Capacity is adequate to support projected 1995 requirements and, as always,
should volumes increase requiring additional capacity, PRI will react
accordingly. Lead time for the above tooling is approximately 28 weeks.
WALL THICKNESS: The above thicknesses represent a realistic range. However, it
is difficult to determine prior to running the finished mold(s) optimal
thickness. We plan to build molds at the thinnest respective wall indicated;
should unforeseen circumstances preclude consistent production at this
thickness, the mold would be modified (1 week to accomplish) to increase
thickness to the next level.
- -------------------------
* Confidential portion omitted; unredacted version is on file with the
Securities and Exchange Commission.
<PAGE>
Samples of this molded 4oz container will be ready in early February. We look
forward to your advisement on how to proceed with this project and, as always,
are most appreciative of the opportunity to continue to grow with Dannon as your
primary packaging partner.
Give me a call with any questions.
Sincerely,
Mike Turney
Director of Sales
cc: Terry Cullen
<PAGE>
EXHIBIT 1
[Schematic drawing of container omitted. Confidential treatment requested
for such schematic drawing. Unredacted version on file with the Securities and
Exchange Commission.]
<PAGE>
THE DANNON COMPANY, INC.
1111 Westchester Avenue
White Plains, New York 10604
April 18, 1991
Packaging Resources, Inc.
717 Forest Avenue
Lake Forest, IL 60045
Attention: J. Michael Anderson
Vice President, Sales & Marketing
RE: THE DANNON COMPANY, INC. / 6 OZ.
BLENDED DANNON CUP MOLD AND CUP MANUFACTURE
Dear Mr. Anderson:
This letter shall memorialize the Agreement between The Dannon
Company, Inc. ("DANNON") and Packaging Resources, Inc. ("PRI"), with respect to
the purchase of the 6 oz. Blended DANNON cup mold ("MOLD"), and the
manufacturing of 6 oz. cups for the DANNON Blended Product ("DANNON PRODUCT").
For purposes of this Agreement, the MOLD is defined to mean a MOLD frame with 24
inserts consisting of a base, cores, and cavities.
1. PRI has agreed to manufacture, at their sole cost and expense, the
MOLD necessary for PRI to manufacture and produce 6 oz. cups for the DANNON
PRODUCT, however, PRI shall utilize the existing 16 cavity 6 oz. inserts from
the present 16 cavity mold in the manufacture of the new MOLD. PRI agrees to be
solely liable and
<PAGE>
- 2 -
responsible for the service, maintenance and repair of the MOLD. PRI
acknowledges that the MOLD it shall manufacture shall be capable of producing
cups in accordance with this Agreement. PRI acknowledges that the MOLD shall
have the capacity to manufacture and produce a minimum of [__________________
_______________]* per year for the DANNON PRODUCT. In the event DANNON's per
year requirements exceed the MOLD's capacity, PRI agrees, at DANNON's reasonable
request, to manufacture an additional MOLD at PRI's expense in accordance with
the terms of this Agreement.
2. In consideration for PRI's manufacturing of the MOLD, DANNON agrees
that PRI shall be DANNON's exclusive 6 oz. cup manufacturer for DANNON's PRODUCT
at the Minster Plant. This exclusivity shall be for a period of two (2) years,
commencing March 1, 1991, and ending February 28, 1993, with a one (1) year
renewable option by mutual consent of the parties. DANNON agrees that its
consent to the one (1) year option extension, shall be based upon PRI's
performance of the 6 oz. cups, including, but not limited to, cost, quality,
timely delivery, and services. In the event that either party elects not to
exercise the one (1) year extension, notification must be given, in writing, no
less than six (6) months prior to the termination date of this Agreement.
- --------------------
* Confidential portion omitted; unredacted version is on file with the
Securities and Exchange Commission.
<PAGE>
- 3 -
3. PRI agrees that the production of the 6 oz. DANNON CUP for the DANNON
PRODUCT shall be strictly in accordance with DANNON's specifications as set
forth on Schedule "A" attached hereto and incorporated herein by reference,
subject to reasonable change by DANNON and each cup shall conform to DANNON's
incoming quality control specification. DANNON shall have the right to inspect
each shipment of the 6 oz. cups upon their delivery, and in the event that any
such cup does not meet with DANNON's incoming quality control specification,
DANNON shall have the right to reject the said cups and return said to PRI, at
PRI's sole cost and expense.
4. PRI and DANNON agree that the cost per cup to be charged to DANNON for
the production of the 6 oz. cups shall be in accordance with Schedule "B",
"Pricing Schedule", attached hereto and incorporated herein by reference. The
prices listed in the attached Schedule "B", "Pricing Schedule", are effective
March 1, 1991. Prices effective March 1, 1991 are based on cups manufactured
using the existing 16 cavity mold. PRI agrees to adjust pricing downward to
reflect actual productivity gains experienced at the time the MOLD is placed
into commercial production. Price changes upward or downward for "resin" shall
be implemented within thirty (30) days after PRI notifies DANNON of PRI's
increase or decrease in resin, in accordance with the current resin
escalator/deescalator formula included in the "Pricing Schedule". The price per
thousand in the "Pricing Schedule" is
<PAGE>
- 4 -
subject to an annual review and may be increased by PRI a maximum of
[__________]* of the non resin cost per year on March 1st of each year, (e.g.,
"labor", "utilities", etc.) provided that such increases are documented to
DANNON to the reasonable satisfaction of DANNON. Pricing, except for possible
changes due to resin as aforesaid, shall be firm for each twelve (12) month
period of this Agreement. All pricing changes shall be implemented after thirty
days (30) notice to DANNON. DANNON's purchase order form (copy attached as
Exhibit A) shall be used to order the production of the 6 oz. cups. In the
event there is a contradiction between the aforesaid purchase order form and
this Agreement, this Agreement shall control.
5. PRI agrees for the duration of the Agreement that it shall only use
the MOLD for the production of DANNON's 6 oz. DANNON cup and shall not use the
MOLD for any other customer, unless DANNON advises PRI that it shall require
less than [_______________]* in any one (1) year of this Agreement. In the
event of the aforesaid, PRI shall have the limited right to use the MOLD for
other customers, provided the customer's business is not the same as or similar,
to Dannon's business. In the event of a breach, threatened breach or attempted
breach of this paragraph, DANNON in addition to any other remedy it may have in
law or equity shall be entitled to an injunction, restraining PRI from
committing
- --------------------
* Confidential portion omitted; unredacted version is on file with the
Securities and Exchange Commission.
<PAGE>
- 5 -
such breach, attempted breach or threatened breach, and to the recovery of
reasonable attorneys' fees and expenses, including court costs, incurred in
attempting to remedy any such breach.
6. In the event that PRI defaults on any term of this Agreement, other
than as provided above in paragraph 5, DANNON shall notify PRI, in writing, of
the said default, and PRI shall have fifteen (15) days to cure such defaults, to
DANNON's reasonable satisfaction, or, in the event such default cannot be cured
within fifteen (15) days, PRI shall immediately commence steps to cure such
default, but in no event shall the time to cure exceed thirty (30) days. Upon
PRI's failure to timely cure in accordance with the aforesaid, DANNON shall have
the right to terminate this Agreement without further notice. Notwithstanding
the aforesaid, in the event that the same default is material (e.g., cups
cracked, printing illegible, etc.) and has been committed by PRI more than three
(3) times in any one year of this Agreement, or during any one year of this
Agreement, persistent problems arise with respect to PRI's production of the 6
oz. cups, DANNON shall be entitled to terminate this Agreement, upon thirty (30)
days written notice to PRI, without any rights for PRI to cure.
7. Upon termination of this Agreement, or an early termination of this
Agreement, as provided for above, DANNON shall have the option to purchase the
MOLD. The purchase price shall be
<PAGE>
- 6 -
the lesser of PRI's cost of the manufactured MOLD (PRI's cost to build plus
[________]* for 16 cavity 6 oz. inserts) or the value of the MOLD including
inserts at the time of termination, such value to be determined by Husky
Injection Molding Systems, Ltd. of Canada, less the unrecovered cost of the 16
cavity 6 oz. inserts (which is calculated as [______________________]* times
number of cups produced as authorized by DANNON). For example:
Assuming at some time:
1. PRI's cost of manufactured MOLD is [________]* ([________]* to build
plus [________]* for 16 cavity 6 oz. inserts).
2. The value of the MOLD including inserts is [________]* as determined
by Husky.
3. [___________]* cups have been produced as authorized by DANNON.
Then, if this Agreement is terminated, the purchase price to DANNON would be:
[________]* (which is the lesser of 1. above and 2. above)
minus [____________________________________]*
[________]*
If DANNON elects to purchase the MOLD, then it shall pay to PRI, the full
purchase price within thirty (30) days after termination and PRI shall assign
any and all right, title and interest in the
- --------------------
* Confidential portion omitted; unredacted version is on file with the
Securities and Exchange Commission.
<PAGE>
- 7 -
MOLD to DANNON, and deliver the MOLD to DANNON simultaneously with DANNON's
payment of the purchase price.
8. Notwithstanding anything to the contrary herein before set forth, this
Agreement may be terminated at any time by DANNON in the event that DANNON
discontinues its use of 6 oz. cups at the Minster Plant, by giving PRI thirty
(30) days prior written notice of DANNON's intention to discontinue. In this
event, DANNON must purchase the mold at the purchase price set forth in
paragraph 7.
PRI agrees that it cannot assign this Agreement without the prior written
consent of DANNON. If this correspondence accurately sets forth your
understanding with respect to our agreement, please indicate your consent by
signing, at the space provided below, and thereafter this shall be a binding
Agreement between us, and our respective successors and assigns.
Sincerely yours,
ACCEPTED AND AGREED TO:
THE DANNON COMPANY, INC. PACKAGING RESOURCES INC.
BY: /s/ Richard T. Browning BY: /s/ J. Michael Anderson
------------------------ ----------------------------
DATE: April 23, 1991 DATE: April 25, 1991
---------------------- --------------------------
Attachment
<PAGE>
SCHEDULE A
[________________________]*
- --------------------
*Confidential portion omitted; unredacted version is on file with the Securities
and Exchange Commission.
<PAGE>
SCHEDULE A
[______________________________]*
- -------------------------
* Confidential portion omitted; unredacted version is on file with the
Securities and Exchange Commission.
<PAGE>
SCHEDULE A
[______________________________]*
- -------------------------
* Confidential portion omitted; unredacted version is on file with the
Securities and Exchange Commission.
<PAGE>
SCHEDULE A
[Two pages of schematic drawings of packaging specifications omitted.
Confidential treatment requested for such schematic drawings. Unredacted
version is on file with the Securities and Exchange Commission.]
<PAGE>
PRICING SCHEDULE B
CONFIDENTIAL
PACKAGING RESOURCES INCORPORATED
Pricing Schedule - Effective March 1, 1991
Price
Part Description Delivered
- ---------------- ---------
C302 6 oz. White Cup Printed [_________]*
C302 6 oz. White Cup Printed [________]*
Title: F.O.B. PRI Point of Manufacture
Freight: Motor Freight Prepaid [_________________________]*
Terms: Net 30 Days
RESIN ESCALATOR / DEESCALATOR
Price Change of [_______]* for each $0.01 / # of Resin Change
* Pricing based on 16 cavity mold production.
** Pricing based on 24 cavity mold, effective 8/1/91 [__________]* less
three (3) year amortization of existing sixteen (16) inserts at
[______]* units at [_______]* annually.
- --------------------
* Confidential portion omitted; unredacted version is on file with the
Securities and Exchange Commission.
<PAGE>
July 10, 1992
PACKAGING RESOURCES, INC.
717 Forest Avenue
Lake Forest, IL 60045
Attention: J. Michael Anderson
Vice President, Sales & Marketing
RE: THE DANNON COMPANY, INC.
AMENDED 6 OZ. BLENDED CUP MOLD AND
CUP MANUFACTURE AGREEMENT
-----------------------------------
Dear Mr. Anderson:
This letter shall memorialize our amendment to the current agreement between
Packaging Resources, Inc. (PRI) and The Dannon Company, Inc. (DANNON) dated
April 18, 1991. We agree as follows:
1. PRI shall modify one existing 16 cavity base with cavities sufficient to
produce the present 6 oz. design cup for Dannon. The aforesaid
modification shall be completed on or before September 1, 1992 in order
that PRI shall be able to commence production of the present design cup for
Dannon Product by September 1, 1992. The cost for this modification shall
be [__________]* and PRI shall be solely responsible for all costs and
expenses regarding same.
2. Upon written notification by DANNON, PRI builds tooling necessary for
conversion to "swirl" design as follows:
a. Single Cavity
-------------
[_______]
b. Upon written approval by DANNON of the "swirl" design cups from the
single cavity, PRI proceeds to build production tooling as follows:
(1) 16 Cavity Tool (1) 24 Cavity Tool
------------------- -------------------
[_______]* [_______]*
(24 Weeks leadtime) (24 Weeks leadtime)
(Approximately [_______________]* per month capacity with both "Swirl"
design molds)
Present supply Agreement extended to terminate April 30, 1995, with a
one (1) year renewable option by mutual consent of the parties.
- --------------------
* Confidential portion omitted; unredacted version is on file with the
Securities and Exchange Commission.
<PAGE>
c. PRI builds all above tools [__________]*, owns and maintains all
tooling.
d. DANNON agrees to purchase [__________]* "Swirl" design approved cups
over the two year period beginning May 1, 1993 or the delivery date
of cups approved by DANNON, whichever is later.
DANNON agrees to pay PRI [_______]* for any balance short of this
quantity.
e. See Schedule B-1 for swirl cup design pricing schedule.
3. If Dannon elects not to proceed with "Swirl" design, present design cup
Agreement will be extended to terminate February 28, 1994, with a one (1)
year renewable option by mutual consent of the parties.
4. Except as otherwise set forth in paragraphs 1 through 3, all of the other
terms and conditions of the Agreement between PRI and DANNON, including but
not limited to, confidentiality shall remain in full force and effect.
If the above accurately sets forth your understanding with respect to the
amendments to our agreement, please indicate same by signing at the foot hereof,
return same to the undersigned, and thereafter this shall become a binding
amendment between us to the above-referenced Agreement.
Sincerely,
/s/ John Sofia /s/ Donald L. Junker
John Sofia Donald L. Junker
Purchasing Manager Director of Materials Management
THE DANNON COMPANY, INC.
Witness: /s/ Claudia Johnson By: /s/ Donald E. Devine, II
-------------------- --------------------------------
Donald E. Devine, II
Title: Vice President, Finance
Date: 7/15/92
-------------------------------
- --------------------
* Confidential portion omitted; unredacted version is on file with the
Securities and Exchange Commission.
<PAGE>
PACKAGING RESOURCES, INC.
Witness: By: /s/ J. Michael Anderson
--------------- ---------------------------------
Title: Vice President
Date: 8/1/92
-------------------------------
<PAGE>
Schedule B-1
PACKAGING RESOURCES INCORPORATED
Pricing Schedule
Effective July 1, 1992
THE DANNON COMPANY, INC.
Ship to: Minster, Ohio
Part Description Price/M Price/M Price/M
- ---------------- ------- ------- -------
POLYPROPYLENE Sidewall Sidewall Sidewall
[ ]* [ ]* [ ]*
C302 6 oz. White Cup [____]* [____]* [____]*
"Swirl" Design
Printed (Up to 6 Color
Process)
Title: F.O.B. Packaging Resources, Inc. Point of Manufacture
Freight: Packaging Resources Arranges for, Prepays and Absorbs Customer Pickup
Credit of [_____]* Allowed
Terms: Net 30 Days
Sale subject to credit approval
Resin Cost Index: [______]*
CURRENT RESIN ESCALATOR/DEESCALATOR
Price change of [_____]* for each $0.01/# of resin change
([ ]* Wall)
Price change of [_____]* for each $0.01/# of resin change
([ ]* Wall)
Price change of [_____]* for each $0.01/# of resin change
([ ]* Wall)
- --------------------
* Confidential portion omitted; unredacted version is on file with the
Securities and Exchange Commission.
<PAGE>
APRIL 4, 1994
MR. TERRY CULLEN
VP SALES AND MARKETING
PACKAGING RESOURCES, INC.
ONE CONWAY PARK
100 FIELD DRIVE, SUITE 300
LAKE FOREST, ILLINOIS 60045
RE: 4OZ, 6OZ AND 8OZ CUP SUPPLY AGREEMENT
-------------------------------------
DEAR TERRY:
THIS LETTER SHALL MEMORIALIZE OUR ARRANGEMENT TO REVISE THE EXISTING 4OZ, 6OZ
AND 8OZ CUP SUPPLY AGREEMENT IN ACCORDANCE WITH THE TERMS AND CONDITIONS AS
HEREINAFTER SET FORTH.
1) PRI WILL MODIFY, AT ITS EXPENSE, ALL SEVEN (7) EXISTING 8OZ CUP MOLDS
TO CONFORM TO DANNON SPECIFICATION DRAWING NUMBER 70L3.080.007 DATED
3/28/94. DANNON WILL PAY FOR THE SEAL BEAD REVISION PORTION OF THIS
MODIFICATION.
2) PRI WILL BUILD, AT ITS EXPENSE, A SIXTEEN (16) AND A TWENTY FOUR (24)
CAVITY 8OZ CUP MOLD TO ACCOMMODATE DANNON CUP REQUIREMENTS. THE
SIXTEEN (16) CAVITY MOLD IS SCHEDULED FOR COMPLETION JULY 1994. THE
TWENTY FOUR (24) CAVITY MOLD IS SCHEDULED FOR COMPLETION DECEMBER
1994.
3) PRI WILL WAREHOUSE SPRINKL'INS 4OZ CUPS, FOR BOTH THE USA AND MEXICAN
MARKET, AT ITS FORT WORTH, TEXAS PLANT TO INSURE "JUST IN TIME"
DELIVERY TO DANNON'S FORT WORTH, TEXAS PLANT.
4) PRI WILL IMPLEMENT A UNIFORM (LAB COAT) POLICY FOR DANNON PACKAGE
PRODUCTION/PRINTING PERSONNEL AT BOTH ITS NEW VIENNA, OHIO AND FORT
WORTH, TEXAS PLANTS.
5) FOR THE 4OZ, 6OZ AND 8OZ CUPS, NO CPI NON RESIN PRICE ADJUSTMENT WILL
BE MADE. THE ANNUAL REVIEW DATE FOR ANY CPI NON RESIN INCREASE IS
CHANGED TO JANUARY 1 BEGINNING JANUARY 1, 1995. AT WHICH TIME,
ADJUSTMENTS WILL BE CONSIDERED BASED ON THE PERIOD JANUARY 1, 1994
THROUGH DECEMBER 31, 1994.
6) DANNON WILL EXTEND THE EXISTING 4OZ, 6OZ AND 8OZ CUPS SUPPLY
AGREEMENTS TO EXPIRE JANUARY 1, 1996.
<PAGE>
EXCEPT AS OTHERWISE SET FORTH ABOVE, DANNON AND PRI REAFFIRM AND AGREE THAT ALL
OTHER TERMS AND CONDITIONS OF OUR EXISTING 4OZ, 6OZ AND 8OZ CUPS AGREEMENTS
SHALL REMAIN IN FULL FORCE AND EFFECT FOR THE ONE (1) YEAR EXTENSION AND ANY
SUBSEQUENT RENEWALS, IF ANY.
IF THE ABOVE ACCURATELY SETS FORTH YOUR UNDERSTANDING WITH RESPECT TO OUR
AGREEMENT, PLEASE INDICATE SAME SIGNING ON THE LINE PROVIDED, AND THEREAFTER,
THIS SHALL BE A BINDING AGREEMENT AMONG OURSELVES AND OUR RESPECTIVE SUCCESSORS
AND ASSIGNS. WE LOOK FORWARD TO A CONTINUING BENEFICIAL RELATIONSHIP.
SINCERELY,
/s/ John Sofia /s/ Donald L. Junker
- ------------------------- ---------------------------
JOHN SOFIA DONALD L. JUNKER
PURCHASING MANAGER VP PURCHASING
THE DANNON COMPANY, INC.
BY: /s/ Donald E. Devine, II
-------------------------
TITLE: Vice President, Finance
------------------------
DATE: 4/3/94
-------------------------
CONSENTED TO AND AGREED TO:
PACKAGING RESOURCES, INC.
BY: /s/ Terrance V. Cullen
-------------------------
TITLE: V.P. Sales and Marketing
-------------------------
DATE: 4/6/94
---------------------------
4OZ CUP - REVISED AGREEMENT DATED 7/10/92
6OZ CUP - REVISED AGREEMENT DATED 7/10/92
8OZ CUP - AGREEMENT DATED 12/9/91
<PAGE>
June 26, 1995
Mr. Terrence V. Cullen
PACKAGING RESOURCES INCORPORATED
One Conway Park
100 Field Drive, Suite 300
Lake Forest, Illinois 60045
RE: THE DANNON COMPANY, INC./6OZ. DANNON CUP MOLD AND CUP MANUFACTURE AGREEMENT
DATED JULY 10, 1992 ("AGREEMENT")
Dear Terry:
This letter shall memorialize an amendment to the Agreement between Packaging
Resources Incorporated (PRI) and the Dannon Company, Inc. (DANNON) dated
July 10, 1992, with revision dated April 4, 1994. We agree as follows:
1. PRI has built, at its expense, one unit cavity 6 oz. cup injection mold to
conform to PRI 6 oz. cup drawing number 7001.074.001 dated 6/19/95. (SEE
EXHIBIT 1). This unit cavity injection mold cost [_____]*.
2. PRI will, at its expense, construct an injection mold, parts handling, and
mandrels compatible with forecasted 6 oz. requirements. The parts provided
will conform to drawing number 7001.074.001 dated 6/19/95. Production of 6
oz. cup conforming to drawing number 7001.074.001 dated 6/19/95 is targeted
to begin by December 1995. The estimated mold and associated costs are:
- One (1) NEW 32-cavity injection mold at [______]*.
- One (1) NEW parts handling equipment for 32-cavity mold at [____]*.
- NEW print mandrels at [____]*.
3. DANNON and PRI agree to extend the termination date of Agreement to
December 31, 1997.
Initial /s/DLJ Initial /s/TVC
------------------ -----------------------
DANNON PRI
- --------------------
* Confidential portion omitted; unredacted version is on file with the
Securities and Exchange Commission.
<PAGE>
June 26, 1995
Mr. Terrence Cullen
Dannon Cup Mold and Cup Manufacture Agreement, 6 oz.
Page 2
4. DANNON and PRI agree the cost per cup to be charged to DANNON shall be in
accordance with a Price Schedule based on the price range appearing on
Schedule "A" dated 1/27/95 attached hereto.
Except as otherwise set forth above, DANNON and PRI reaffirm and agree that all
other provisions of the Agreement shall remain in full force and effect through
the term of this Agreement and any extensions thereof.
If the above accurately sets forth your understanding with respect to our
Agreement, please indicate by signing on the line provided, and thereafter, this
shall be a binding Agreement among ourselves and our respective successors and
assigns. We look forward to a continuing beneficial relationship.
Sincerely,
/s/ John Sofia /s/ Donald L. Junker
- ---------------------------- ------------------------------
John Sofia Donald L. Junker
Purchasing Materials Manager Vice President Purchasing
Consented to and Agreed to:
THE DANNON COMPANY, INC. PACKAGING RESOURCES
INCORPORATED
By: /s/ Donald L. Junker By: /s/ T.V. Cullen
--------------------------- ---------------------------
Title: Vice President, Purchasing Title:V.P. Sales and Marketing
--------------------------- -------------------------
Date: 6/27/95 Date: 7/9/95
---------------------------- -------------------------
<PAGE>
EXHIBIT 1
[Schematic drawings of 6oz. tall container omitted. Confidential treatment
requested for such schematic drawings. Unredacted version is on file with the
Securities and Exchange Commission.]
<PAGE>
SCHEDULE "A"
Friday, January 27, 1995
John Sofia
The Dannon Company, Inc.
120 White Plains Road
Tarrytown, New York 10591
Re: PRICE PROPOSAL, 74MM 6OZ CONTAINERS
Dear John:
Summarizing our position relative to the above revised container designs:
- --------------------------------------------------------------------------------
Wall Thickness Price/M Index
-------------- ------- -----
[___]* [_____]* "45"
[___]* [_____]* "45"
[___]* [_____]* "45"
[___]* [_____]* "45"
[___]* [_____]* "45"
[___]* [_____]* "45"
[omitted material on original]
- --------------------
* Confidential portion omitted; unredacted version is on file with the
Securities and Exchange Commission.
<PAGE>
THE DANNON COMPANY, INC.
8 OZ. MOLD MANUFACTURE AND CUP PRODUCTION AGREEMENT
This letter shall memorialize the Agreement between The Dannon Company,
Inc. ("DANNON") and Packaging Resources, Inc. ("PRI"), with respect to PRI's
manufacturing of three (3) twenty-four (24) cavity 8 oz. DANNON cup molds
("MOLDS") and the production of 8 oz. cups for DANNON's Product ("DANNON
PRODUCT") as described in Exhibit A attached hereto and incorporated herein by
reference.
1. PRI has agreed to manufacture, at its sole cost and expense, the MOLDS
in order for PRI to produce 8 oz. cups for the DANNON PRODUCT. PRI represents
and warrants as follows: a) the MOLDS shall be completed and ready for service
no later than December 31, 1992, b) the MOLDS it shall manufacture shall be
capable of producing the 8 oz. cups in accordance with this Agreement, and c)
the MOLDS shall have the capacity to produce a minimum of [__________________
__________________________________]* Per year for the DANNON PRODUCT. In the
event DANNON's per year requirements exceed the MOLD's capacity, PRI agrees, at
DANNON's reasonable request, to manufacture an additional MOLD at PRI's expense
in accordance with the terms of this agreement. PRI agrees to be solely liable
and responsible for the service, maintenance and repair of the MOLDS during the
term of this agreement.
- ---------------
* Confidential portion omitted; unredacted version is on file with the
Securities and Exchange Commission.
<PAGE>
2. In consideration for PRI's manufacturing of the MOLDS, at its sole
cost and expense, DANNON agrees that PRI shall be DANNON's exclusive producer of
8 oz. cups for DANNON PRODUCT at DANNON's Minster, Ohio plant. This exclusivity
shall be for a period of three (3) years, commencing January 1, 1992, and ending
December 31, 1994, with a one (1) year renewable option by mutual consent of the
parties. DANNON agrees that its consent to the one (1) year option extension,
shall be based upon PRI's supply performance of 8 oz. cups for DANNON PRODUCT,
including, but not limited to, cost, quality, timely delivery, technical advice,
and customer service. In the event that either party elects not to exercise the
one (1) year extension, notification must be given, in writing, no less than six
(6) months prior to the termination date of this agreement.
3. PRI agrees that production of the 8 oz. DANNON cup for the DANNON
PRODUCT shall be strictly in accordance with DANNON's specifications, which may
be reasonably modified by DANNON from time to time, as set forth in Schedule A
attached hereto and incorporated herein by reference, and each cup shall conform
to DANNON's incoming quality control specification. DANNON shall have the right
to inspect each shipment of the 8 oz. cups upon their delivery, and in the event
that any such cup does not meet with DANNON's incoming quality control
specification, DANNON shall have the right to reject and return said cups to PRI
at PRI's sole cost and expense.
2
<PAGE>
4. PRI and DANNON agree that the total price to be charged to DANNON for
the 8 oz. cups shall be in accordance with Schedule B "Pricing Schedule"
attached hereto and incorporated herein by reference, and that the price shall
be fixed for each twelve (12) month period, subject to an increase or decrease
in the "resin" cost as hereinafter provided. Notwithstanding that the price
shall be fixed for each twelve (12) month period of this Agreement, the cost may
be changed upwards or downwards, as the case may be, in the event that PRI's
"resin" cost increases or decreases, in accordance with the then current
escalator/de-escalator formula included in Schedule B "Pricing Schedule". Any
such change in price due to the cost of resin will be implemented within thirty
(30) days after PRI notifies DANNON of PRI's increase or decrease in resin cost.
The price per thousand in Schedule B "Pricing Schedule" is subject to an annual
review by PRI, and PRI may increase said price by an amount no greater than
[________]* of PRI's non-resin cost (e.g., "labor", "utilities") per year on
January 1st of each year, provided that such increase is documented to DANNON to
the reasonable satisfaction of DANNON. DANNON's Purchase Order form (copy
attached as Exhibit B) shall be used to order the production of the 8 oz. cups.
In the event there is a contradiction between the aforesaid Purchase Order form
and this Agreement, this Agreement shall control.
5. PRI agrees for the duration of this Agreement, and any extension
hereof, that it shall use the MOLDS only for the
- -------------------------
* Confidential portion omitted; unredacted version is on file with the
Securities and Exchange Commission.
3
<PAGE>
production of cups for DANNON PRODUCT and shall not use the MOLDS for any other
customer, unless DANNON advises PRI that it shall require less than
[____________________]* in any one (1) year of this Agreement. In the event of
the aforesaid, PRI shall have the limited right to use the MOLDS for other
customers provided the customers' business is not the same as or similar to
DANNON's business. In the event of a breach, threatened breach or attempted
breach of this paragraph, DANNON in addition to any other remedy it may have in
law or equity shall be entitled to an injunction, restraining PRI from
committing such breach, attempted breach or threatened breach, and to the
recovery of reasonable attorneys' fees and expenses, including court costs,
incurred in attempting to remedy any such breach.
6. In the event that PRI materially defaults on any term of this
Agreement, other than as provided above in paragraph 5, DANNON shall notify PRI,
in writing, of the said default, and PRI shall have fifteen (15) days to cure
such default, to DANNON's reasonable satisfaction, or, in the event such default
cannot be cured within fifteen (15) days, PRI shall immediately commence steps
to cure such default, but in no event shall the time to cure exceed thirty (30)
days. Upon PRI's failure to timely cure in accordance with the aforesaid,
DANNON shall have the right to terminate this agreement without further notice.
Notwithstanding the aforesaid,
- ---------------
* Confidential portion omitted; unredacted version is on file with the
Securities and Exchange Commission.
4
<PAGE>
in the event that the same default is material (e.g., cups cracked, printing
illegible), and has been committed by PRI more than three (3) times in any
twelve (12) month period of this Agreement, or during any twelve month period of
this Agreement, persistent problems arise with respect to PRI's production of
the 8 oz. cups, DANNON shall be entitled to terminate this Agreement, upon
thirty (30) days written notice to PRI, without any rights for PRI to cure.
7. Upon normal termination of this Agreement, or an early termination of
this Agreement, as provided for above, DANNON shall have the option to purchase
the MOLDS at a price to be determined by Husky Injection Molding Systems, Inc.
of Bolton, Ontario, Canada.
If DANNON elects to purchase the MOLDS, then it shall pay to PRI, the full
purchase price within thirty (30) days after termination of this Agreement, and
PRI shall assign any and all right, title, and interest in the MOLDS to DANNON,
and deliver the MOLDS to DANNON simultaneously with DANNON's payment of the
purchase price.
8. Notwithstanding anything to the contrary herein before set forth, this
Agreement may be terminated at any time by DANNON in the event that DANNON
discontinues its use of 8 oz. cups at the Minster Plant, by giving PRI ninety
(90) days prior written notice
5
<PAGE>
of DANNON's intention to discontinue. In this event, PRI has the right to cause
DANNON to purchase the MOLDS at the purchase price stipulation set forth in
paragraph 7, only if PRI gives DANNON written notice of its election to exercise
this right not later than thirty (30) days prior to the termination of this
Agreement.
PRI agrees that it cannot assign this Agreement without the prior written
consent of DANNON. If this correspondence accurately sets forth your
understanding with respect to our Agreement, please indicate your consent by
signing, at the space provided below, and thereafter this shall be a binding
Agreement between us, and our respective successors and assigns.
Sincerely yours,
THE DANNON COMPANY, INC. ACCEPTED AND AGREED TO:
PACKAGING RESOURCES, INC.
By: /s/ Richard T. Browning By: /s/ J. Michael Anderson
-------------------------- ----------------------------
Name: Richard T. Browning Name: J. Michael Anderson
------------------------ --------------------------
Title: V.P. Finance Title:V.P. Sales and Marketing
----------------------- -------------------------
Date: 12/3/91 Date: 12/9/91
------------------------ --------------------------
Attachments
Exhibit A (1)
Exhibit B (3)
Schedule A (3)
Schedule B (1)
6
<PAGE>
THE DANNON COMPANY, INC.
EXHIBIT A
Dannon Light 8 ounce Product
Dannon Fruit on Bottom 8 ounce Product
Dannon Plain 8 ounce Product
Dannon Classic Flavors 8 ounce Product
<PAGE>
Schedule A
[Schematic drawings of 8 oz. sealed container omitted. Confidential
treatment requested for such schematic drawings. Unredacted version is on file
with the Securities and Exchange Commission.]
<PAGE>
Schedule A
[________________________________]*
- -------------------------
* Confidential portion omitted; unredacted version is on file with the
Securities and Exchange Commission.
<PAGE>
Schedule A
[________________________________]*
- -------------------------
* Confidential portion omitted; unredacted version is on file with the
Securities and Exchange Commission.
<PAGE>
Exhibit B
PURCHASE ORDER
NUMBER_____________
THE DANNON COMPANY, INC.
1111 WESTCHESTER AVE. DATE_______________
WHITE PLAINS, NY 10604-3587
(914) 697-9700 PAGE 1
SHIP TO L-1026
VENDOR PACKAGING RESOURCES, INC. MINSTER PLANT
V-iii24 5566 NEW VIENNA RD THE DANNON COMPANY
NEW VIENNA OH 45159 216 SOUTHGATE DRIVE
MINSTER OH 45865
ATTN. ART PETERS
ALL INVOICES MUST INCLUDE PURCHASE ORDER NUMBER BILL TO L-0126
--------------------------------------------- MINSTER PLANT
DATE REQUIRED SHIP VIA TERMS THE DANNON COMPANY
9/01/91 TRUCK NET 30 216 SOUTHGATE DRIVE
--------------------------------------------- MINSTER OH 45865
FOB REQUISITION NUMBER
DELIVERED 9100216
---------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
QUANTITY DESCRIPTION UNITS UNIT COST EXTENSION
1 8 OZ PRINTED FLAT TOP CUP [_____]* [_____]* [___]*
(FOB/LIGHT/CLASSIC/PLAIN
FLAVORS)
TOTAL [___]*
SPECIAL INSTRUCTIONS ****************************************************
BLANKET PURCHASE ORDER COVERING THE PERIOD 3/1/91
THROUGH 2/28/92.
THE DANNON CO. IS ONLY LIABLE FOR THOSE CUPS ACTUALLY PRODUCED
AND SHIPPED THAT ARE WITHIN THE STATED DOLLAR LIMITS OF THIS
BLANKET PURCHASE ORDER.
-------------------------------------------------------------
ISSUANCE OF THIS BLANKET PURCHASE ORDER IS NOT TIED TO ANY
SPECIFIC QUANTITY AND/OR DOLLAR AMOUNT.
-------------------------------------------------------------
BLANKET PURCHASE ORDER NOT TO EXCEED [__________]*
FREIGHT CHARGE: [___________]*.
-------------------------------------------------------------
CUP PRICE / M UNITS [_____]* IS BASED ON A POLYPROPYLENE
RESIN COST PER POUND OF [__]*. ANY RESIN INCREASE OR DECREASE THEREAFTER
WILL BE ADJUSTED THIRTY (30) DAYS AFTER BOTH
PARTIES AGREE SUCH PRICING IS FIRMLY ACCEPTED BY THE MARKET.
-------------------------------------------------------------
MOLDED CUPS MUST CONFORM TO DANNON MATERIAL SPECIFICATION
NUMBER 86-CTR-03.01.01 AND DRAWING NUMBER 85-CTR-03.01.03.
-------------------------------------------------------------
SUPPLIER IS RESPONSIBLE FOR ALL MOLD MAINTENANCE AND REPAIRS
DUE TO NORMAL WEAR AND TEAR. DANNON WILL COVER THE COST OF
MAJOR REPLACEMENTS, I.E. STRIPPER RINGS, CORES, CAVITIES,
MAINFOLD.
CONTINUED
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- ---------------
* Confidential portion omitted; unredacted version is on file with the
Securities and Exchange Commission.
- -------------------------------------------------------------------------------
BUYER AUTHORIZED BY ACCEPTANCE OF THIS ORDER
EXPRESSLY INCLUDED BY
REFERENCE TO THE TERMS AND
CONDITIONS ON THE REVERSE SIDE
OF THIS PURCHASE ORDER
- -------------------------------------------------------------------------------
<PAGE>
Exhibit B
PURCHASE ORDER
NUMBER_____________
THE DANNON COMPANY, INC.
1111 WESTCHESTER AVE. DATE_______________
WHITE PLAINS, NY 10604-3587
(914) 697-9700 PAGE 2
SHIP TO L-1026
VENDOR PACKAGING RESOURCES, INC. MINSTER PLANT
V-iii24 5566 NEW VIENNA RD THE DANNON COMPANY
NEW VIENNA OH 45159 216 SOUTHGATE DRIVE
MINSTER OH 45865
ATTN. ART PETERS
ALL INVOICES MUST INCLUDE PURCHASE ORDER NUMBER BILL TO L-0126
--------------------------------------------- MINSTER PLANT
DATE REQUIRED SHIP VIA TERMS THE DANNON COMPANY
9/01/91 TRUCK NET 30 216 SOUTHGATE DRIVE
--------------------------------------------- MINSTER OH 45865
FOB REQUISITION NUMBER
DELIVERED 9100216
---------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
QUANTITY DESCRIPTION UNITS UNIT COST EXTENSION
-------------------------------------------------------------
CUP PRICE IS F.O.B. DESTINATION. DANNON RESERVES THE RIGHT
TO PICKUP CUPS AT VENDOR LOCATION.
-------------------------------------------------------------
IN THE EVENT THIS BLANKET PURCHASE ORDER IS NOT RENEWED AT
THE END OF THE TWELVE (12) MONTHS, DANNON WILL BE
RESPONSIBLE FOR RAW MATERIALS COMMITMENTS THAT ARE
SPECIFICALLY AUTHORIZED IN WRITING.
-------------------------------------------------------------
DANNON WILL PAY FOR ORIGINAL SET OF PRINTING PLATES DUE TO
NEW GRAPHIC/COPY CHANGES. THE COST OF SUBSEQUENT
REPLACEMENT WILL BE PRI'S RESPONSIBILITY.
-------------------------------------------------------------
GOOD MANUFACTURING PRACTICES (GMP) ARE EXTREMELY IMPORTANT
FACTORS IN SUPPLYING OUR YOGURT PLANTS. THE ABILITY TO
FURNISH PRINTED CUPS OF ACCEPTABLE QUALITY AND MACHINABILITY
IS MANDATORY.
-------------------------------------------------------------
GRADE A PALLETS ARE NOT INCLUDED IN THE COST /M UNITS.
-------------------------------------------------------------
YOUR PLANT MUST BE IMS (INTERSTATE MILK SHIPPERS) CERTIFIED.
-------------------------------------------------------------
GRADE A PALLETS WILL BE USED TO SHIP CUPS TO THE MINSTER
PLANT WITH AN EXCHANGE PROGRAM SET UP FOR PALLET RETURNS.
-------------------------------------------------------------
CHANGE ORDER 002 DATED 5/24/91 BEING ISSUED TO REFLECT
RESIN COST DECREASE OF [____]* FROM [____]* TO [____]*.
NEW UNIT PRICE EFFECTIVE WITH ALL DELIVERIES ON AND AFTER
JUNE 15, 1991. CONTINUED
-------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- ---------------
* Confidential portion omitted; unredacted version is on file with the
Securities and Exchange Commission.
- -------------------------------------------------------------------------------
BUYER AUTHORIZED BY ACCEPTANCE OF THIS ORDER
EXPRESSLY INCLUDED BY
REFERENCE TO THE TERMS AND
CONDITIONS ON THE REVERSE SIDE
OF THIS PURCHASE ORDER
- -------------------------------------------------------------------------------
<PAGE>
Exhibit B
PURCHASE ORDER
NUMBER_____________
THE DANNON COMPANY, INC.
1111 WESTCHESTER AVE. DATE_______________
WHITE PLAINS, NY 10604-3587
(914) 697-9700 PAGE 3
SHIP TO L-1026
VENDOR PACKAGING RESOURCES, INC. MINSTER PLANT
V-iii24 5566 NEW VIENNA RD THE DANNON COMPANY
NEW VIENNA OH 45159 216 SOUTHGATE DRIVE
MINSTER OH 45865
ATTN. ART PETERS
ALL INVOICES MUST INCLUDE PURCHASE ORDER NUMBER BILL TO L-0126
--------------------------------------------- MINSTER PLANT
DATE REQUIRED SHIP VIA TERMS THE DANNON COMPANY
9/01/91 TRUCK NET 30 216 SOUTHGATE DRIVE
--------------------------------------------- MINSTER OH 45865
FOB REQUISITION NUMBER
DELIVERED 9100216
---------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
QUANTITY DESCRIPTION UNITS UNIT COST EXTENSIVE
CHANGE ORDER 003 DATED 7/18/91 BEING ISSUED TO REFLECT
RESIN COST DECREASE OF [____]* FROM [____]* TO [____]*
NEW UNIT PRICE EFFECTIVE WITH ALL DELIVERIES ON AND AFTER
AUGUST 1, 1991.
-------------------------------------------------------------
CHANGE ORDER 004 DATED 8/21/91 BEING ISSUED TO REFLECT A
RESIN COST DECREASE OF [____]* FROM [____]* TO [____]*
NEW UNIT PRICE EFFECTIVE WITH ALL DELIVERIES ON AND AFTER
SEPTEMBER 1, 1991.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- ---------------
* Confidential portion omitted; unredacted version is on file with the
Securities and Exchange Commission.
- -------------------------------------------------------------------------------
BUYER AUTHORIZED BY ACCEPTANCE OF THIS ORDER
EXPRESSLY INCLUDED BY
REFERENCE TO THE TERMS AND
CONDITIONS ON THE REVERSE SIDE
OF THIS PURCHASE ORDER
- -------------------------------------------------------------------------------
<PAGE>
THE DANNON COMPANY, INC.
SCHEDULE B
PRICING SCHEDULE
PART DESCRIPTION
Resin - Polypropylene
8 oz. Injection Molded Yogurt Cup
Pigmented White and Printed *
BASE PRICE: [____________](includes [___]* freight)
effective September 1, 1991
Base price will be reduced [_________]*
effective January 1, 1993
TITLE: F.O.B. Point of Delivery (Minster, Ohio)
FREIGHT: Motor Freight Arranged, Prepaid and Absorbed by Packaging
Resources. Pick-up allowance [_________]*.
TERMS: Net 30 Days
RESIN ESCALATOR/DE-ESCALATOR
Price is subject to change as provided in paragraph 4 of this Agreement.
Price Change of [__________]* for each $.01/lb. of resin change.
* Light Flavors - printed six (6) color process
FOB Flavors - printed six (6) color process
Plain Flavors - printed two (2) color line
Classic Flavors - printed four (4) color line
- ---------------
* Confidential portion omitted; unredacted version is on file with the
Securities and Exchange Commission.
<PAGE>
THE DANNON COMPANY, INC.
1111 WESTCHESTER AVE. - WHITE PLAINS, NY 10604 - (914) 697-9700
October 27, 1992
Mr. Michael Anderson
VP Sales/Marketing
PACKAGING RESOURCES, INC.
717 Forest Avenue
Lake Forest, IL 60045
RE: THE DANNON COMPANY, INC. ("DANNON") AND
PACKAGING RESOURCES, INC. ("PRI") 8 OZ MOLD
AND CUP PRODUCTION AGREEMENT
DATED DECEMBER 3, 1991 / ("AGREEMENT")
--------------------------------------
Dear Mike:
This letter shall memorialize our arrangement to revise the above-referenced
Agreement in accordance with the terms and conditions as hereinafter set forth.
1. PRI will build, at its expense, a fourth twenty-four (24) cavity 8 oz cup
mold to accommodate Dannon cup requirements. All costs associated with
building, servicing, maintaining and repair of this mold will be the sole
responsibility of PRI.
2. The current 8 oz cup design (Dannon Reference #306.100.01) dated October 1,
1989 will change to a new cup design (PRI Reference #4005.080.000 with
revisions through M dated August 4, 1992).
All 8 oz cup molds now under construction will be built for the new cup
design. Target date for completion of the four molds is MAY 1, 1993.
3. The duration of our Agreement will be extended for one (1) additional year
or through December 31, 1995.
4. Base price of the new design 8 oz cup will be [________________]*
delivered to Minster, Ohio, based on resin price of
- ---------------
* Confidential portion omitted; unredacted version is on file with the
Securities and Exchange Commission.
<PAGE>
[____]* and cup weight of [___]* grams, effective following Dannon's
approval of the production cup.
Except as otherwise set forth above, Dannon and PRI reaffirm and agree that all
other Terms and Conditions of our Agreement dated December 3, 1991 shall remain
in full force and effect for the one (1) year extension and any subsequent
renewals, if any.
If the above accurately sets forth your understanding with respect to the
extension of our Agreement, please indicate same by signing on the line
provided, and thereafter, this shall be a binding Agreement among ourselves and
our respective successors and assigns. We look forward to a continuing
beneficial relationship.
Sincerely,
/s/ John Sofia /s/ Donald L. Junker
- -------------------- --------------------
John Sofia Donald L. Junker
Purchasing Manager Director
Materials Management Materials Management
THE DANNON COMPANY, INC.
By: /s/ Donald E. Devine
----------------------
Title: CFO/V.P. Finance
-------------------
Date: October 27, 1992
--------------------
Consented to and Agreed to:
PACKAGING RESOURCES, INC.
By: /s/ J. Michael Anderson
------------------------
Title: Vice President
---------------------
Date: 11/5/92
----------------------
- -------------------------
* Confidential portion omitted; unredacted version is on file with the
Securities and Exchange Commission.
<PAGE>
CONFIDENTIAL
THE DANNON COMPANY, INC.
120 WHITE PLAINS ROAD - TARRYTOWN, NY 10591-5536 - (914) 366-9700
APRIL 4, 1994
MR. TERRY CULLEN
VP SALES AND MARKETING
PACKAGING RESOURCES, INC.
ONE CONWAY PARK
100 FIELD DRIVE, SUITE 300
LAKE FOREST, ILLINOIS 60045
RE: 4OZ, 6OZ AND 8OZ CUP SUPPLY AGREEMENT
-------------------------------------
DEAR TERRY:
THIS LETTER SHALL MEMORIALIZE OUR ARRANGEMENT TO REVISE THE EXISTING 4OZ, 6OZ
AND 8OZ CUP SUPPLY AGREEMENT IN ACCORDANCE WITH THE TERMS AND CONDITIONS AS
HEREINAFTER SET FORTH.
1) PRI WILL MODIFY, AT ITS EXPENSE, ALL SEVEN (7) EXISTING 8OZ CUP MOLDS
TO CONFORM TO DANNON SPECIFICATION DRAWING NUMBER 7013.080.001 DATED
3/28/94. DANNON WILL PAY FOR THE SEAL BEAD REVISION PORTION OF THIS
MODIFICATION.
2) PRI WILL BUILD, AT ITS EXPENSE, A SIXTEEN (16) AND A TWENTY-FOUR (24)
CAVITY 8OZ CUP MOLD TO ACCOMMODATE DANNON CUP REQUIREMENTS. THE
SIXTEEN (16) CAVITY MOLD IS SCHEDULED FOR COMPLETION JULY 1994. THE
TWENTY-FOUR (24) CAVITY MOLD IS SCHEDULED FOR COMPLETION DECEMBER
1994.
3) PRI WILL WAREHOUSE SPRINKL'INS 4OZ CUPS, FOR BOTH THE USA AND MEXICAN
MARKET, AT ITS FORT WORTH, TEXAS PLANT TO INSURE "JUST IN TIME"
DELIVERY TO DANNAN'S FORT WORTH, TEXAS PLANT.
4) PRI WILL IMPLEMENT A UNIFORM (LAB COAT) POLICY FOR DANNON PACKAGE
PRODUCTION/PRINTING PERSONNEL AT BOTH ITS NEW VIENNA, OHIO AND FORT
WORTH, TEXAS PLANTS.
5) FOR THE 4OZ, 6OZ AND 8OZ CUPS, NO CPI NONRESIN PRICE ADJUSTMENT WILL
BE MADE. THE ANNUAL REVIEW DATE FOR ANY
<PAGE>
CPI NONRESIN INCREASE IS CHANGED TO JANUARY 1 BEGINNING JANUARY 1,
1995, AT WHICH TIME, ADJUSTMENTS WILL BE CONSIDERED BASED ON THE
PERIOD JANUARY 1, 1994 THROUGH DECEMBER 31, 1994.
6) DANNON WILL EXTEND THE EXISTING 4OZ, 6OZ AND 8OZ CUPS SUPPLY
AGREEMENTS TO EXPIRE JANUARY 1, 1996.
EXCEPT AS OTHERWISE SET FORTH ABOVE, DANNON AND PRI REAFFIRM AND AGREE THAT ALL
OTHER TERMS AND CONDITIONS OF OUR EXISTING 4OZ, 6OZ AND 8OZ CUPS AGREEMENTS
SHALL REMAIN IN FULL FORCE AND EFFECT FOR THE ONE (1) YEAR EXTENSION AND ANY
SUBSEQUENT RENEWALS, IF ANY.
IF THE ABOVE ACCURATELY SETS FORTH YOUR UNDERSTANDING WITH RESPECT TO OUR
AGREEMENT, PLEASE INDICATE SAME SIGNING ON THE LINE PROVIDED, AND THEREAFTER,
THIS SHALL BE A BINDING AGREEMENT AMONG OURSELVES AND OUR RESPECTIVE SUCCESSORS
AND ASSIGNS. WE LOOK FORWARD TO A CONTINUING BENEFICIAL RELATIONSHIP.
SINCERELY,
/s/ John Sofia /s/ Donald L. Junker
- ----------------------- -------------------------
JOHN SOFIA DONALD L. JUNKER
PURCHASING MANAGER VP PURCHASING
THE DANNON COMPANY, INC.
BY: /s/ Donald E. Devine
----------------------
TITLE:Vice President/Finance
----------------------
DATE: 4/3/94
-----------------------
CONSENTED TO AND AGREED TO:
PACKAGING RESOURCES, INC.
BY: /s/ Terrance V. Cullen
--------------------------
TITLE: V.P. Sales & Marketing
-----------------------
DATE: 4/6/94
------------------------
* 4OZ CUP - REVISED AGREEMENT DATED 7/10/92
<PAGE>
6OZ CUP - REVISED AGREEMENT DATED 7/10/92
8OZ CUP - AGREEMENT DATED 12/9/91
<PAGE>
CONFIDENTIAL
February 15, 1996
Mr. Robert C. McCoy
Packaging Resources, Incorporated
One Conway Park
100 Field Drive, Suite 300
Lake Forest, Illinois 60045
RE: THE DANNON COMPANY, INC. ("DANNON") AND
PACKAGING RESOURCES, INC. ("PRI")
REVISED 8OZ MOLD MANUFACTURE AND CUP PRODUCTION AGREEMENT DATED
OCTOBER 27, 1992/("AGREEMENT")
------------------------------
Dear Mr. McCoy:
This letter shall memorialize our agreement to extend the above-referenced
Agreement in accordance with the terms and conditions as hereinafter set forth.
1. Dannon and PRI have agreed to extend the Agreement for an additional
one (1) year period commencing January 1, 1996 and terminating December 31,
1996. Thereafter, solely at Dannon's discretion, the Agreement may be renewed
for additional one (1) year periods, by Dannon giving written notice to PRI no
less than six (6) months prior to the end of the Agreement and any extensions
thereof.
2. Dannon agrees during the term of the Agreement, and any extension
thereof, to give PRI written notice of Dannon's desire not to extend the
Agreement for any additional year no less than six (6) months prior to the end
of the Agreement and any extensions thereof.
3. PRI agrees during the term of the Agreement and any extensions
thereof, to give Dannon no less than twelve (12) months' written notice of PRI's
desire not to renew the Agreement for any additional year.
Initial /s/ DED, II Initial /s/ HPH
------------ ---------
DANNON PRI
<PAGE>
4. PRI acknowledges that Dannon's election to renew this Agreement for an
additional one (1) year period is based upon PRI's continuing representation and
agreement that it shall be able to supply Dannon with cups in accordance with
Dannon's requirements.
5. Except as otherwise set forth above, Dannon and PRI reaffirm and agree
that all other terms and conditions of the Agreement dated October 27, 1992
shall remain in full force and effect for the additional one (1) year extension
and any subsequent extensions thereof. If the above accurately sets forth your
understanding with respect to the extension of our Agreement, please indicate
same by signing on the line provided, and thereafter, this shall be a binding
Agreement among ourselves and our respective successors and assigns.
Sincerely,
/s/ John Sofia /s/ Donald L. Junker
- ----------------------------------- -----------------------------
John Sofia Donald L. Junker
Purchasing Materials Manager Vice President Purchasing
THE DANNON COMPANY, INC.
By:/s/ Donald E. Devine, II
--------------------------------
Title: Vice President Finance
-----------------------------
Date: 2/26/96
------------------------------
Consented to and Agreed to:
PACKAGING RESOURCES, INC.
By:/s/ H.P. Hoeper
--------------------------------
Title: President, CEO
-----------------------------
Date: 3/7/96
------------------------------
<PAGE>
Document Number: 0101621.02
6-7-96/04:23pm
<PAGE>
THE DANNON COMPANY, INC.
8 OZ. MOLD MANUFACTURE AND CUP PRODUCTION AGREEMENT
This letter shall memorialize the Agreement between The Dannon Company,
Inc. ("DANNON") and Miner Container, Inc. ("MINER"), with respect to MINER's
manufacturing of two (2) twenty-four (24) cavity 8 oz. DANNON cup molds
("MOLDS") and the production of 8 oz. cups for DANNON's Product ("DANNON
PRODUCT") as described in Exhibit A attached hereto and incorporated herein by
reference.
1. MINER has agreed to manufacture, at its sole cost and expense, the
MOLDS in order for MINER to produce 8 oz. cups for the DANNON PRODUCT. MINER
represents and warrants as follows: a) the MOLDS shall be completed and ready
for service no later than December 31, 1992, b) the MOLDS it shall manufacture
shall be capable of producing the 8 oz. cups in accordance with this Agreement,
and c) the MOLDS shall have the capacity to produce a minimum of
[____________________________________________________]* per year for the DANNON
PRODUCT. In the event DANNON's per year requirements exceed the MOLD's
capacity, MINER agrees, at DANNON's reasonable request, to manufacture an
additional MOLD at MINER's expense in accordance with the terms of this
Agreement. MINER agrees to be solely liable and responsible for the service,
maintenance and repair of the MOLDS during the term of this Agreement.
- -------------------------
* Confidential portion omitted; unredacted version is on file with the
Securities and Exchange Commission.
<PAGE>
2. In consideration for MINER's manufacturing of the MOLDS, at its sole
cost and expense, DANNON agrees that MINER shall be DANNON's exclusive producer
of 8 oz. cups for DANNON PRODUCT at DANNON's Fort Worth, Texas plant. This
exclusivity shall be for a period commencing January 1, 1992 and terminating the
later of:
1. December 31, 1994,
and
2. Two (2) years from the first receipt of approved cups,
with a one (1) year renewable option by mutual consent of the parties. DANNON
agrees that its consent to the one (1) year option extension, shall be based
upon MINER's supply performance of 8 oz. cups for DANNON PRODUCT, including, but
not limited to, cost, quality, timely delivery, technical advice, and customer
service. In the event that either party elects not to exercise the one (1) year
extension, notification must be given, in writing, no less than six (6) months
prior to the termination date of this Agreement.
3. MINER agrees that production of the 8 oz. DANNON cup for the DANNON
PRODUCT shall be strictly in accordance with DANNON's specifications, which may
be reasonably modified by DANNON from time to time, as set forth in Schedule A
attached hereto and incorporated herein by reference, and each cup shall conform
to DANNON's incoming quality control specification. DANNON shall have the right
to inspect each shipment of the 8 oz. cups upon delivery, and in the event that
any such cup does not meet with DANNON's incoming quality control specification,
DANNON shall have the right
-2-
<PAGE>
to reject and return said cups to MINER at MINER's sole cost and expense.
4. MINER and CANNON agree that the total price to be charged to DANNON
for the 8 oz. cups shall be in accordance with Schedule B "Pricing Schedule"
attached hereto and incorporated herein by reference, and that the price shall
be fixed for each 12 month period, subject to an increase or decrease in the
"resin" cost as hereinafter provided. Notwithstanding that the price shall be
fixed for each twelve (12) month period of this Agreement, the cost may be
changed upwards or downwards, as the case may be, in the event that MINER's
"resin" cost increases or decreases, in accordance with the then current
escalator/de-escalator formula included in Schedule B "Pricing Schedule". Any
such change in price due to the cost of resin will be implemented within thirty
(30) days after MINER notifies DANNON of MINER's increase or decrease in resin
cost. The price per thousand in Schedule B "Pricing Schedule" is subject to an
annual review by MINER, and MINER may increase said price by an amount no
greater than [_____________]* of MINER's non-resin cost (e.g., "labor",
"utilities") per year on January 1st of each year, provided that such increase
is documented to DANNON to the reasonable satisfaction of DANNON. DANNON's
Purchase Order form (copy attached as Exhibit B) shall be used to order the
production of the 8 oz. cups. In the event there is a contradiction between the
aforesaid Purchase Order form and this Agreement, this Agreement shall control.
- -------------------------
* Confidential portion omitted; unredacted version is on file with the
Securities and Exchange Commission.
-3-
<PAGE>
5. MINER agrees for the duration of this Agreement, and any extension
hereof, that it shall use the MOLDS only for the production of cups for DANNON
PRODUCT and shall not use the MOLDS for any other customer, unless DANNON
advises MINER that it shall require less than [___________________]* in any one
(1) year of this Agreement. In the event of the aforesaid, MINER shall have the
limited right to use the MOLDS for other customers provided the customers'
business is not the same as or similar to DANNON's business. In the event of a
breach, threatened breach or attempted breach of this paragraph, DANNON in
addition to any other remedy it may have in law or equity shall be entitled to
an injunction, restraining MINER from committing such breach, attempted breach
or threatened breach, and to the recovery of reasonable attorneys' fees and
expenses, including court costs, incurred in attempting to remedy any such
breach.
6. In the event that MINER materially defaults on any term of this
Agreement, other than as provided above in paragraph 5, DANNON shall notify
MINER, in writing, of the said default, and MINER shall have fifteen (15) days
to cure such default, to DANNON's reasonable satisfaction, or, in the event such
default cannot be cured within fifteen (15) days, MINER shall immediately
commence steps to cure such default, but in no event shall the time to cure
exceed thirty (30) days. Upon MINER'S failure to timely
- -------------------------
* Confidential portion omitted; unredacted version is on file with the
Securities and Exchange Commission.
-4-
<PAGE>
cure in accordance with the aforesaid, DANNON shall have the right to terminate
this Agreement without further notice. Notwithstanding the aforesaid, in the
event that the same default is material (e.g., cups cracked, printing
illegible), and has been committed by MINER more than three (3) times in any
twelve month period of this Agreement, or during any twelve (12) month period at
this Agreement, persistent problems arise with respect to MINER's production of
the 8 oz. cups, DANNON shall be entitled to terminate this Agreement, upon
thirty (30) days written notice to MINER, without any rights for MINER to cure.
7. Upon normal termination of this Agreement, or an early termination of
this Agreement, as provided for above, DANNON shall have the option to purchase
the MOLDS at a price to be determined by Husky Injection Molding Systems, Inc.
of Bolton, Ontario, Canada.
If DANNON elects to purchase the MOLDS, then it shall pay to MINER, the
full purchase price within thirty (30) days after termination of this Agreement,
and MINER shall assign any and all right, title, and interest in the MOLDS to
DANNON, and deliver the MOLDS to DANNON simultaneously with DANNON's payment of
the purchase price.
8. Notwithstanding anything to the contrary herein before set forth, this
Agreement may be terminated at any time by DANNON in the event that DANNON
discontinues its use of 8 oz. cups at
-5-
<PAGE>
the Fort Worth Plant, by giving MINER ninety (90) days prior written notice of
DANNON's intention to discontinue. In this event, MINER has the right to cause
DANNON to purchase the MOLDS at the purchase price stipulation set forth in
paragraph 7, only if MINER gives DANNON written notice of its election to
exercise this right not later than thirty (30) days prior to the termination of
this Agreement.
MINER agrees that it cannot assign this Agreement without the prior written
consent of DANNON. If this correspondence accurately sets forth your
understanding with respect to our agreement, please indicate your consent by
signing, at the space provided below, and thereafter this shall be a binding
Agreement between us, and our respective successors and assigns.
Sincerely yours,
/s/ Donald L. Junker
- --------------------------------
Donald L. Junker
Director of Materials Management
THE DANNON COMPANY, INC. ACCEPTED AND AGREED TO:
MINER CONTAINER, INC.
By: /s/ Donald E. Devine, II By: /s/ Kenneth W. Miner
----------------------------- -------------------------------
Name: Donald E. Devine, II Name: Kenneth W. Miner
--------------------------- -----------------------------
Title: V.P. Finance Title: President
-------------------------- ----------------------------
Date: January 15, 1992 Date: 2-14-92
--------------------------- -----------------------------
Attachments (8)
-6-
<PAGE>
Exhibit B (3)
Schedule A (3)
-7-
<PAGE>
THE DANNON COMPANY, INC.
EXHIBIT A
Dannon Light 8 ounce Product
Dannon Fruit on Bottom 8 ounce Product
Dannon Plain 8 ounce Product
Dannon Classic Flavors 8 ounce Product
<PAGE>
THE DANNON COMPANY, INC.
SCHEDULE B
PRICING SCHEDULE
PART DESCRIPTION
Resin - Polypropylene
8 oz. Injection Molded Yogurt Cup
Pigmented White and Printed*
BASE PRICE: [___________]* (includes [____]* freight) effective
September 15, 1991
Base Price will be reduced [__________]* effective January 1,
1993 or with start of new mold.
TITLE: F.O.B. Point of Delivery (Fort Worth, Texas)
FREIGHT: Motor Freight Arranged, Prepaid and Absorbed by Miner Container,
Inc. Pick-up allowance [_______]*.
TERMS: Net 30 Days
RESIN ESCALATOR/DE-ESCALATOR
Price is subject to change as provided in paragraph 4 of this Agreement.
Price change of [____]* units for each $.0l/lb. of resin change.
* Light Flavors - Printed six (6) color process
FOB Flavors - Printed six (6) color process
Plain Flavors - Printed two (2) color line
Classic Flavors - Printed four (4) color line
- -------------------------
* Confidential portion omitted; unredacted version is on file with the
Securities and Exchange Commission.
<PAGE>
November 16, 1992
Mr. Kenneth Miner
President
Miner Container, Inc.
13905 West 101 Street
Lenexa, Kansas 66215
RE: THE DANNON COMPANY, INC. ("DANNON") AND MINER
CONTAINER, INC. ("MINER") 8 OZ MOLD MANUFACTURE
AND CUP PRODUCTION AGREEMENT
DATED JANUARY 15, 1992 / ("AGREEMENT")
Dear Ken:
This letter shall memorialize our arrangement to revise the above-referenced
Agreement in accordance with the terms and conditions as hereinafter set forth.
1. MINER will build, at its expense, a third twenty-four (24) cavity 8 oz cup
mold to accommodate Dannon cup requirements. All costs associated with
building, servicing, maintaining and repair of this mold will be the sole
responsibility of MINER.
2. The current 8 oz cup design (Dannon Reference #306.100.01) dated October 1,
1983 will change to a new cup design (PRI Reference #7007.080.000 dated
October 6, 1992).
All 8 oz cup molds now under construction will be built for the new cup
design. Target date for completion of all three molds is MAY 1, 1993.
3. The duration of our Agreement will be extended for one (1) additional year
or through December 31, 1995.
4. Base price of the new design 8 oz cup will be [_______]* delivered to Fort
Worth, Texas based on resin price of [___]* and cup weight of [__]* grams,
effective following Dannon's approval of the production cup.
Except as otherwise set forth above, Dannon and MINER reaffirm and agree that
all other Terms and Conditions of our Agreement dated
- -------------------------
* Confidential portion omitted; unredacted version is on file with the
Securities and Exchange Commission.
<PAGE>
January 15, 1992 shall remain in full force and effect for the one (1) year
extension and any subsequent renewals, if any.
If the above accurately sets forth your understanding with respect to the
extension of our Agreement, please indicate same by signing on the line
provided, and thereafter, this shall be a binding Agreement among ourselves and
our respective successors and assigns. We look forward to a continuing
beneficial relationship.
Sincerely,
/s/ John Sofia /s/ Donald L. Junker
- ----------------------------- -----------------------------
John Sofia Donald L. Junker
Purchasing Manager VP Purchasing
Materials Management Materials Management
THE DANNON COMPANY, INC.
By: /s/ Donald E. Devine, II
--------------------------
Title: CFO/ V.P. Finance
-----------------------
Date: 11/30/92
------------------------
Consented to and Agreed to:
MINER CONTAINER, INC.
By: /s/ Kenneth W. Miner
--------------------------
Title: President
-----------------------
Date: 12-14-92
------------------------
<PAGE>
ASSIGNMENT
Agreement made this 15th day of December 1993, between Miner Container of
Texas, Inc. ("Assignor") and Packaging Resources Incorporated ("Assignee").
WITNESSETH
WHEREAS, Assigner has previously entered into an Agreement with The Dannon
Company, Inc. dated January 15, 1992, and amended November 16, 1992 (the
"Agreement") attached hereto as Exhibit A and incorporated herein by reference,
as though set forth herein at length; and
WHEREAS, Assignor and Assignee acknowledge that Assignor is sometimes
incorrectly referred to in the Agreement as Miner Container, Inc.; and
WHEREAS, Assignor is desirous of assigning and Assignee is desirous of
obtaining the assignment of the Agreement, and in accordance therewith, each has
entered into this Assignment.
NOW, THEREFORE, in consideration of the mutual covenants, promises and
other good and valuable consideration herein contained, the parties agree as
follows:
1. ASSIGNMENT. For value received, Assignor hereby transfers and assigns
to Assignee all Of Assignor's right, title, and interest in the Agreement
(Exhibit A) attached hereto and incorporated herein by reference.
2. PERFORMANCE OF DUTIES. Assignee, in consideration of this Assignment,
hereby assumes and covenants to perform all the duties, responsibilities, and
any other obligations of Assignor in
<PAGE>
accordance with the Agreement. Assignee further agrees that its duties and
obligations under the Agreement may be enforced by The Dannon Company, Inc., to
the same extent as if Assignee had executed the Agreement.
3. ASSIGNMENT. Assignor and Assignee acknowledge that the Agreement
shall not and cannot be assigned without the prior written consent of The Dannon
Company, Inc. In accordance with the aforesaid, attached hereto as Exhibit B is
The Dannon Company, Inc.'s consent to this Assignment.
IN WITNESS WHEREOF the parties have signed this Assignment this 15th day of
December 1993.
MINER CONTAINER OF TEXAS, INC.
(sometimes referred to as Miner
Container, Inc.)
By: /s/ Jerry J. Corirossi
----------------------------------
Jerry J. Corirossi, President
PACKAGING RESOURCES INCORPORATED
By: /s/ Jerry J. Corirossi
----------------------------------
Jerry J. Corirossi, Vice President
-2-
<PAGE>
CONSENT TO ASSIGNMENT
The Dannon Company, Inc. ("Dannon") having entered into an Agreement with
Miner Container of Texas, Inc. (sometimes incorrectly referred to in the
aforesaid Agreement as Miner Container, Inc.) ("Assignor") dated January 15,
1992, and subsequently amended November 16, 1992, a copy of the Agreement is
attached hereto as Exhibit A, and made a part hereof, as though set forth
herein at length, hereby consents to an assignment of the rights and delegation
of performance of Assignor's duties under the attached Agreement by the Assignor
to Package Resources Incorporated, a Delaware corporation with its principal
place of business located at 1 Conway Park, 100 Field Drive, Suite 300, Lake
Forest, Illinois (the "Assignee").
This Consent does not release the Assignor from any liability or
responsibility under the annexed Agreement, and the Assignor shall be
responsible to the undersigned for any default or breach on the part of the
Assignee. Nor is this Consent a waiver or an estoppel with respect to any
rights Dannon may have by reason of the past performance or failure to perform
of the Assignor. By the Assignee accepting the Assignment, the Assignee assumes
all of the obligations and duties of the Assignor, and shall be liable jointly
and severely with the Assignor for any default or breach of the attached
Agreement, whether such default is past or future.
<PAGE>
This Consent shall not be deemed to alter or modify any of the terms and
conditions of the attached Agreement, except as in so far as such provision
relates to this Assignment.
THE DANNON COMPANY, INC.
By: /s/ Donald E. Devine, II
-------------------------------
Accepted and Approved:
MINER CONTAINER OF TEXAS, INC.
By: /s/ Jerry J. Corirossi
-------------------------------
Accepted and Approved:
PACKAGING RESOURCES INCORPORATED
By: /s/ Jerry J. Corirossi
--------------------------------
-2-
<PAGE>
July 1, 1992
RESTATED PARTS SUPPLY AGREEMENT
YOPLAIT USA
PACKAGING RESOURCES INCORPORATED
This RESTATED PARTS SUPPLY AGREEMENT ("Agreement") is made effective as of
June 1, 1992, between PACKAGING RESOURCES INCORPORATED, a Delaware corporation
("PRI"), and YOPLAIT U.S.A., a Division of General Mills Products Corp., a
Delaware corporation ("Yoplait").
W I T N E S S E T H :
WHEREAS, PRI, as successor-in-interest to Vercon, Inc., a Division of FINA
Oil and Chemical Company, a Delaware corporation, and Yoplait are parties to
that certain Parts Supply Agreement dated as of January 1, 1986 ("Parts Supply
Agreement"), pursuant to which PRI sells Parts (as hereafter defined) to Yoplait
for certain reverse tapered, spin welded containers, which are assembled into
cups ("Cups") as more particularly described in SCHEDULE A attached hereto and
incorporated herein by this reference; and
WHEREAS, PRI and Yoplait desire to restate the Parts Supply Agreement
effective as of June 1, 1992, as set forth herein;
-1-
<PAGE>
July 1, 1992
NOW, THEREFORE, in consideration of the premises and the mutual agreements
set forth herein, and for other good and valuable consideration the receipt and
adequacy of which is hereby acknowledged, the parties agree as follows:
1. PRI shall sell Parts to Yoplait, and Yoplait shall purchase and take
delivery of Parts, in accordance with Yoplait's written purchase orders
submitted to PRI. In the event there is a contradiction between the aforesaid
purchase order form and this Agreement, this Agreement shall control.
2. The term of this Agreement shall be from June 1, 1992, through July
15, 1997. Thereafter, the Agreement shall be automatically renewed on an annual
basis, unless either party gives six (6) months written notice of the intent to
terminate, prior to the end of an annual period.
3. (a) The Base Prices of Parts (the "Base Price") shall be as contained
in Schedule "B" - "Pricing Schedule".
(White Printed Tops, Yellow Printed Tops, and White Bottoms are collectively
referred to as "Parts"). THE TOTAL BASE PRICE OF CUPS SHALL BE THE SUM OF THE
BASE PRICES OF THE PARTS USED TO MANUFACTURE SUCH CUPS.
-2-
<PAGE>
July 1, 1992
(b) Price changes for "resin" shall be implemented when incurred by
Packaging Resources and in accordance with the current resin
escalator/deescalator figures included on the attached Price Schedule. Such
price changes shall be implemented only after thirty (30) days notice to
YOPLAIT.
(c) In April of each year during the term of this Agreement, PRI
shall advise YOPLAIT of all non-resin price increases and decreases, and the
Base Price will be increased or decreased, respectively, on June 1 each year by
parties' mutual WRITTEN agreement.
4. If this Agreement is terminated for any reason, Yoplait shall purchase
all Parts and goods in progress that PRI has in inventory that were produced
BASED ON A PRODUCTION SCHEDULE AGREED TO AND PROVIDED BY Yoplait to PRI under
Paragraph 5, herein.
5. At the beginning of each CALENDAR MONTH during the term of this
Agreement, Yoplait shall provide PRI with a TWO (2) calendar month forecast of
Yoplait's anticipated needs hereunder, by month, by plant locations, by flavor
(design), and by product group (totals). AT THE BEGINNING OF EACH CALENDAR
month during the term of this Agreement, Yoplait shall provide PRI with a
forecast of Yoplait's anticipated needs during the next FOUR (4) months.
-3-
<PAGE>
July 1, 1992
6. PRI shall comply with all Specifications and Quality Control Standards
as established by written agreement between Yoplait and PRI.
7. This Agreement shall, effective as of June 1, 1992, cancel, supersede,
and replace the Parts Supply Agreement of January 1, 1986. No modifications of
this Agreement shall be binding upon PRI or Yoplait unless the same are in
writing and executed by PRI and Yoplait.
8. To the extent the Parts supplied hereunder comply with the
specifications and standards agreed to by the parties, YOPLAIT shall indemnify,
defend and hold PRI harmless from and against all losses, damages, expenses
(including reasonable attorney's fees and costs) arising from or in connection
with YOPLAIT's handling, transportation, or use of the Parts, Cups, or the
products to be sold within the Cups.
9. If PRI fails to meet the specifications and standards for Parts
supplied hereunder, PRI agrees to indemnify, defend and hold YOPLAIT harmless
from and against all losses, damages, expenses (including reasonable attorney's
fees and costs), claims and penalties arising from or on account of any act of
omission or commission with respect to the handling or transportation of the
-4-
<PAGE>
July 1, 1992
Cups, the Parts, or the products to be sold within the Cups. Moreover, such
Parts shall be returned by PRI at PRI's sole expense and PRI shall, within
thirty (30) days of its receipt of such defective Parts, refund (or credit) the
entire amount of any Base Price paid therefor.
10. PRI agrees that it will not sell Parts to any third party which meet
the same specifications specified by YOPLAIT.
11. The total Base Price of Cups shall be reduced by [_______________]*
after YOPLAIT shall have purchased Parts needed to assemble [_______________]*
during the term of this Agreement. In the event YOPLAIT does not purchase, on
or before July 15, 1997, Parts needed to assemble at least [_______________]*,
YOPLAIT shall immediately pay PRI [_____________________]* of such shortfall.
12. The Agreement shall be governed by the laws of the State of Illinois.
13. Failure of either party to perform its obligations under this
Agreement shall not subject such party to any liability to the other if such
failure is caused by acts such as but not limited to acts of God, fire,
explosion, flood, drought, war, riot, sabotage,
- ---------------
* Confidential portion omitted; unredacted version is on file with the
Securities and Exchange Commission.
-5-
<PAGE>
July 1, 1992
embargo, strikes or other labor trouble, or compliance with any order or
regulation of any government entity acting with color of right.
14. This Agreement shall be binding upon and inure to the benefit of all
successors and assigns of the parties hereto.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on July 15, 1992.
PACKAGING RESOURCES INCORPORATED, YOPLAIT U.S.A., A Division of
a Delaware corporation General Mills Products Corp., a
Delaware corporation
/s/ J. Michael Anderson /s/ Jon L. Finley
By: J. Michael Anderson By: Jon L. Finley
--------------------------- -----------------------------
Title: Vice President Title: President
------------------------ --------------------------
/s/ John S. Mendesh
By: John S. Mendesh
-----------------------------
Title: Vice President Operations
--------------------------
-6-
<PAGE>
SCHEDULE "A"
[____________________________]*
- ---------------
* Confidential portion omitted; unredacted version is on file with the
Securities and Exchange Commission.
<PAGE>
SCHEDULE "A"
[Schematic drawings of 6oz. yogurt sidewall omitted. Confidential treatment
requested for such schematic drawings. Unredacted version is on file with the
Securities and Exchange Commission.]
<PAGE>
SCHEDULE "A"
[Schematic drawings of 6oz. yogurt bottom omitted. Confidential treatment
requested for such schematic drawings. Unredacted version is on file with the
Securities and Exchange Commission.]
<PAGE>
SCHEDULE "A"
[__________________________]*
- ---------------
* Confidential portion omitted; unredacted version is on file with the
Securities and Exchange Commission.
<PAGE>
SCHEDULE "B"
June 1, 1992
PACKAGING RESOURCES INCORPORATED
Pricing Schedule
Effective June 1, 1992
(Reflects INCREASE of Non-Resin Costs AND a
DECREASE of $0.01/lb Resin.)
(Supersedes Pricing Schedule Effective 3/1/92)
(Initial Agreement Pricing)
YOPLAIT U.S.A.
Ship to: Reed City, Michigan
(#2400001)
Carson, California
(#2400003)
Part Description Price/M
- ---------------- -------
POLYSTYRENE
- -----------
6 oz. White Sidewall Printed (Process - 5 to 6 Color) [_______]*
6 oz. Yellow Sidewall Printed (Line - 4 Color) [_______]*
6 oz. White Bottom Unprinted [_______]*
Title: F.O.B. Packaging Resources Point of Manufacture
Freight: Customer Pickup
Terms: 1% 10 Days, Net 30 Days
Sale subject to credit approval.
Current Resin Escalator/Deescalator
- -----------------------------------
Price change of [_____]* (Allocated 77% to Sidewalls, 23% to Bottoms) for each
$0.01/# of resin change.
Tooling
- -------
Packaging Resources owns all tools. 1 Bottom tool (100 cavity); 3 Sidewall tools
(80 cavity, 56 cavity, 56 cavity).
Packaging Resources performs and bears the cost of all routine maintenance to
include routine inspection, periodic cleaning and polishing, and recalibration
of all tooling assemblies and, at a minimum of every two years, a rebuild of
main mold assemblies to include seals, shafts, die pins and bushings.
- ---------------
* Confidential portion omitted; unredacted version is on file with the
Securities and Exchange Commission.
<PAGE>
EXHIBIT 10.12
August 6, 1992
Page 1
CANS SUPPLY AGREEMENT
This CANS SUPPLY AGREEMENT ("Agreement") is made as of January 1, 1991,
between PACKAGING RESOURCES INCORPORATED, a Delaware corporation ("PRI"), and
ROSS LABORATORIES, a Division of Abbott Laboratories, an Illinois corporation
("ROSS").
WITNESSETH:
WHEREAS, PRI desires to sell to ROSS, and ROSS desires to purchase from PRI,
barrier plastic CANS for use in ROSS' production of its product.
WHEREAS, PRI and ROSS are willing to enter into such an arrangement on the
terms and subject to the conditions set forth in this Agreement:
NOW, THEREFORE, in consideration of the premises and the mutual agreements
set forth herein, and for other good and valuable consideration the receipt
and adequacy of which is hereby acknowledged, the parties agree as follows:
<PAGE>
August 6, 1992
Page 2
1. PURCHASE AND SALE OF CANS.
(a) Pursuant to the provisions and conditions of this Agreement,
PRI shall sell barrier plastic CANS, as more particularly described in
EXHIBIT A hereto ("CANS"), to ROSS, and ROSS shall purchase and take delivery
of CANS from PRI. Purchases and sales of CANS hereunder shall be made
pursuant to ROSS' written purchase orders, on forms mutually agreed to by the
parties, received by PRI. Each such purchase order shall be governed by the
provisions and conditions of this Agreement and, to the extent consistent
with this Agreement, the terms of the applicable purchase order.
(b) ROSS shall purchase from PRI and PRI shall supply all ROSS'
requirements of CANS used in the production of its pediatric and medical
nutritional products at ROSS' facilities listed in EXHIBIT "B".
Notwithstanding the foregoing, the quantity of CANS PRI shall be obligated to
sell to ROSS each month shall not exceed the lesser of (i) one hundred
twenty-five percent (125%) of one-twelfth (1/12) of the quantity of CANS
ordered by ROSS hereunder from PRI during the twelve (12) month period
immediately preceding each such month or (ii) one hundred twenty-five percent
(125%) of each month's forecast made by ROSS pursuant to Section 5 hereof.
PRI shall dedicate the CAN capacity of PRI's facilities (as hereinafter
defined) to the production of CANS for ROSS for the term of this Agreement
and agrees to produce such CAN exclusively
<PAGE>
August 6, 1992
Page 3
for the use of ROSS for such term. This exclusivity shall be limited to the
market place for pediatric and medical nutritional products. In addition
when, in any twelve month period, CANS supplied by PRI exceed
[________________________]*, ROSS shall have the option, in that same period,
to self manufacture an additional [_____________________]* for its own use.
For requirements above [______________________]*, in any twelve month period,
ROSS shall further have the right to self manufacture up to [________________]*
of its requirements for CANS.
(c) The decision to use barrier plastic CANS as described in
EXHIBIT A or metal CANS is totally at the discretion of ROSS.
(d) PRI will perform and bear the cost of all routine maintenance
on ROSS' tools to include routine inspection, periodic cleaning and
polishing, and recalibration of all tooling main assemblies (mold bases and
trim shoe assemblies) and major overhauls, at a minimum of every two (2)
years, of the main mold base and trimming assemblies to include seals,
shafts, die pins and bushings.
Routine maintenance, as referred to above, shall not include, and Ross
shall be responsible for, the replacement of the "Tool Parts" related to the
production of the CAN ("Tool Parts" to
- -----------------------
* Confidential portion omitted; unredacted version is on file with the
Securities and Exchange Commission.
<PAGE>
August 6, 1992
Page 4
be defined herein as only the following parts of the tool: Mold Cavities,
Flange Squeezers, Mold Plugs, Trim Punches and Trim Die Plates). When and if
these tool parts cannot be used to maintain the dimensional specifications of
the CANS, they will be replaced by PRI and Ross will be invoiced, according
to the payment terms in EXHIBIT "C", for such worn tool parts. The Ross
costs for these tool parts are not to be inclusive of PRI labor. (i.e. PRI
pays/absorbs PRI labor). Ross shall not be responsible for any costs of such
replacement of these tooling parts arising out of the negligence of PRI. The
costs for replacement tool parts to Ross will not exceed in any agreement
year an amount equal to [____________________]* produced in that same
agreement year. Replaced tool parts will be made available to Ross at Ross'
request.
2. PURCHASE PRICE.
(a) The base price of CANS (the "Base Price") shall be as
described in EXHIBIT C hereto - the "Pricing Schedule".
(b) Price changes for "Resin" shall be implemented when incurred
by PRI and in accordance with the current resin escalator/deescalator figures
included in the attached Pricing Schedule. All resin price changes shall be
implemented only after thirty (30) days written notice to ROSS.
- -----------------------
* Confidential portion omitted; unredacted version is on file with the
Securities and Exchange Commission.
<PAGE>
August 6, 1992
Page 5
(c) By December 1st of each year during the term of this
Agreement, PRI shall advise ROSS of all non-resin cost increases and
decreases for the previous twelve (12) months and the Base Price shall be
increased or decreased, respectively, to reflect such non-resin costs on
January 1 each year. For any non-resin cost increase, PRI shall make
available to ROSS such reasonable documentation as may be necessary for ROSS
to verify non-resin costs. Such documentation shall be made available to
ROSS prior to the implementation of any price change.
(d) Within thirty (30) days after the later of (i) ROSS' receipt
of PRI's invoice, or (ii) delivery of the CANS subject to such invoice, ROSS
shall pay the applicable invoice in full. All payments shall be sent to PRI
at the address specified by PRI from time to time.
(e) In the event ROSS fails to pay any invoice hereunder as
scheduled, PRI shall be entitled to exercise any right it may have at law or
in equity in connection therewith.
(f) Until such time as PRI shall have established a manufacturing
facility in local proximity to ROSS' Casa Grande, Arizona plant for the
purpose of and with the capability of supplying CANS to ROSS' Casa Grande
location, PRI shall begin as of October 1, 1992, to provide a freight
allowance of
<PAGE>
August 6, 1992
Page 6
[____________________]* on CANS used at Casa Grande; the total freight
allowance not to exceed [________]* in any contract year.
(g) Beginning March 1, 1992, PRI will reduce the pricing in
EXHIBIT "C" by [____________________]*. PRI will further reduce its price by
[____________________]* upon ROSS' requirements reaching an annual rate of
[______________]*. This pricing is reflected in EXHIBIT "C" (C-1 and C-2).
An additional reduction of [____________________]* will be implemented upon
ROSS' requirements reaching an annual rate of [______________]* subject only
to the twenty-two week lead time required from December 1, 1991, to install
the 81 cavity, fifty inch system necessary to supply that annual requirement
level. This pricing is reflected in EXHIBIT "C" (C-3 and C-4).
(h) Beginning March 1, 1992, PRI will reimburse ROSS
[____________________]* for that volume supplied by PRI to ROSS during
January and February of 1992. PRI will also reimburse ROSS [_______________]*
for that same period upon ROSS' reaching an annual rate of [______________]*.
The above reimbursement will be pro-rated as a per thousand price reduction
over the forecasted volume through December 31, 1992, with final adjustments
to meet the full annual amount made prior to December 31, 1992.
- -----------------------
* Confidential portion omitted; unredacted version is on file with the
Securities and Exchange Commission.
<PAGE>
August 6, 1992
Page 7
3. SHIPMENTS AND FORCE MAJEURE.
(a) PRI shall ship CANS sold pursuant to this Agreement F.O.B.
PRI's facility(s) ("The Facility"). Title and risk of loss for any CANS sold
hereunder shall pass from PRI to ROSS upon delivery to ROSS at The Facility.
(b) All CANS shall be subject to inspection upon delivery by PRI
to ROSS. Any CANS which do not comply with specifications in Exhibit A, as
it may be modified from time to time, and with standards established pursuant
to Section 6 hereof may be rejected by ROSS. ROSS shall give written notice
to PRI of any claim hereunder within thirty (30) days from the date of
delivery. To the extent the CANS supplied hereunder do not meet the
specifications and standards agreed to by the parties pursuant to Section 6
hereof and ROSS gives PRI written notice of such failure within thirty (30)
days of delivery, ROSS' sole remedy hereunder shall be to have the defective
CANS returned to PRI at PRI's expense and PRI shall, within thirty (30) days
of its receipt of such defective CANS, replace such CANS or refund (or
credit) the entire amount paid for such CANS. Nothing herein shall be
construed to limit the exercise of ROSS' rights arising under section 7 to
the 30 day period referenced above.
(c) Failure of either party to perform its obligations under this
Agreement shall not subject such party to any liability to the other if such
failure is caused by acts such as but not
<PAGE>
August 6, 1992
Page 8
limited to acts of God, fire, explosion, flood, drought, war, riot, sabotage,
embargo, strikes or other labor trouble, or compliance with any order or
regulation of any government entity acting with color of right.
4. TERM AND TERMINATION.
(a) The term of this Agreement shall be from January 1, 1991, for
a period of six (6) years from the date hereof.
(b) Beginning four (4) years from January 1, 1991, and subject to
the provisions and conditions of this Section 4, ROSS may terminate this
Agreement by giving PRI six (6) months prior written notice.
(c) This Agreement shall terminate at the option of either party
hereto in the event, and at any time, that either party shall (i) become
insolvent within the meaning of any bankruptcy or insolvency laws, (ii) have
a receiver or trustee appointed, or (iii) made an assignment for the benefit
of creditors.
(d) In the event ROSS terminates all or part of this Agreement for
any reason, other than Section 4 (c) or PRI breach under the provisions of
this Agreement, ROSS shall be obligated to pay to PRI an amount equal to the
total unamortized capital investment or in the event of a termination of part
of this Agreement, the applicable portion of the unamortized capital
investment, as set forth in EXHIBIT D both determined by applying
<PAGE>
August 6, 1992
Page 9
generally accepted accounting procedures, which PRI has made in connection
with the production and delivery of the CANS pursuant to this Agreement. For
purposes of this Section 4(d), the parties agree that the equipment listed on
EXHIBIT D hereto constitutes all equipment initially used by PRI in
connection with PRI's production and delivery of the CANS pursuant to this
Agreement. The parties further agree that EXHIBIT D hereto may be amended
only upon mutual consent of the parties from time to time to reflect
improvements, additions and replacements of equipment used by PRI in
connection with PRI's production and delivery of the CANS hereunder. PRI
shall have ninety (90) days from the date of termination by ROSS to notify
ROSS of its intention to retain title and employ the applicable portion of
the unamortized capital investment in the business of supplying containers to
a third party. During that ninety day period, ROSS shall pay PRI monthly the
monthly amortization for the applicable capital investment and should PRI
decide to retain title to the applicable unamortized capital investment, ROSS
will continue to pay PRI the monthly amortization for the applicable capital
investment for the shorter of: a period of one (1) year from the date of
termination or until PRI has in good faith, determined it has replaced the
ROSS volume at the time of termination with comparable third party business.
If ROSS has paid the monthly amortization amount in accordance with this
provision for the time period indicated, then ROSS shall have no
<PAGE>
August 6, 1992
Page 10
further obligation under this Section 4(d) as related to the line(s) on which
such payments have been made. In no event will ROSS be obligated, except for
the reimbursement covered in the following paragraph, to pay an amount
greater than the remaining unamortized capital investment, or applicable
portion thereof, at the time of termination.
If PRI chooses not to retain its title to the applicable portion of
the unamortized capital investment, within the ninety (90) day period, then
that title shall then pass to ROSS, at ROSS' option, subject to ROSS's
obligation as stated above with the added obligation by ROSS, as mutually
agreed to, to reimburse PRI for all reasonable, actual, documented repairs to
PRI's facilities in which the applicable unamortized investment is located in
order to return those facilities to previous operating condition. In the
event ROSS opts not to take title of the applicable portion of the
unamortized capital investment, ROSS shall remain obligated to reimburse PRI
for all reasonable repairs as described above as well as pay PRI an amount
equal to the applicable portion of the unamortized capital investment as set
forth in EXHIBIT D. PRI further agrees to accept a two (2) year even monthly
payment for the lump sum owed by ROSS and, interest on the unpaid amount
equal to the prime rate determined by Security Pacific Bank plus two percent
(2%), under an unsecured note by ROSS.
<PAGE>
August 6, 1992
Page 11
The remedy set forth herein, with the remedy under 4(f), shall
constitute the sole remedy of PRI for termination by ROSS.
(e) Either party shall have the right to terminate this Agreement
following sixty (60) days written notice to the other party of a material
breach, other than failure to deliver the quantities of CANS ordered
hereunder and such breach has not been remedied within such sixty (60) days.
If PRI fails for two consecutive quarters to supply at least 90% of the
quantity of CANS as defined in paragraph 1(b) and ordered by ROSS during such
quarters, then ROSS may terminate this Agreement without any liability under
this Agreement.
(f) Notwithstanding anything to the contrary set forth herein, if
this Agreement is terminated for any reason, other than breach by PRI, ROSS
shall purchase all CANS that PRI has in inventory that were produced in
accordance with ROSS' 3-month forecast of ROSS' requirements under this
Agreement.
(g) Failure to terminate under any of the foregoing grounds or to
exercise any right or remedy hereunder shall not constitute a waiver of the
right to terminate on that or other grounds or to exercise such other right
or remedy in the future.
5. FORECASTS. At the beginning of each calendar month during the term
of this Agreement, ROSS shall provide PRI a three (3) month forecast of ROSS'
purchase requirements of CANS. PRI will
<PAGE>
August 6, 1992
Page 12
provide ROSS with a monthly update of its rolling twelve month forecast and
actual vs. forecast information.
6. QUALITY CONTROL. PRI shall comply with all Quality Control
Standards including FDA good manufacturing practices, as established by
written agreement between ROSS and PRI.
7. WARRANTIES AND LIMITATION OF DAMAGES.
(a) PRI WARRANTS THAT ALL THE CANS SOLD AND DELIVERED PURSUANT TO
THIS AGREEMENT WILL CONFORM To SPECIFICATIONS AGREED TO BY THE PARTIES IN
EXHIBIT A AND WILL BE FREE FROM DEFECTS IN WORKMANSHIP AND MATERIALS WHEN
DELIVERED.
(b) PRI HEREBY DISCLAIMS ANY AND ALL IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
(c) PRI AND ROSS AGREE THAT NEITHER ROSS NOR PRI SHALL BE
RESPONSIBLE FOR CONSEQUENTIAL OR INCIDENTAL DAMAGES ARISING UNDER THIS
AGREEMENT.
8. INDEMNIFICATION.
(a) ROSS shall indemnify, defend and hold PRI, and its officers,
directors, partners and shareholders, and each of them, harmless from and
against all claims, lawsuits, charges, actions, causes of action,
liabilities, judgments, losses, damages, expenses (including actual
reasonable attorneys' fees and costs) arising from or in connection with
ROSS' handling, transportation or use of the CANS, or the products to be sold
within the CANS.
<PAGE>
August 6, 1992
Page 13
(b) PRI shall indemnify, defend and hold ROSS, and its officers,
directors, partners and shareholders and each of them, harmless from and
against all claims, lawsuits, charges, actions, causes of action,
liabilities, judgments, losses, damages, expenses (including actual
reasonable attorneys' fees and costs) arising from or in connection with
PRI's manufacture of the CANS or breach of warranty as set forth in Section 7.
(c) If the indemnified party expects to seek indemnification under
this Article, it shall promptly give notice to the indemnifying party of the
basis for such claim of indemnification. If indemnification is sought as a
result of any third party claim or suit, such notice to the indemnifying
party shall be within fifteen (15) days after receipt by the indemnified
party of such claim or suit (Abbott Laboratories, One Abbott Park Road,
Abbott Park, IL 60064-3500, Attention Risk Management, D-317). Each party
shall cooperate fully with the other party in the defense of all such claims
or suits, and no settlement or compromise shall be binding on a party hereto
without its prior written consent.
(d) Section 8 shall survive expiration or termination of this
Agreement.
9. ENTIRE AGREEMENT. This Agreement, and any other document executed
contemporaneously herewith, memorializes and constitutes the final expression
and the complete and exclusive statement
<PAGE>
August 6, 1992
Page 14
between the parties with respect to the subject matter hereof except Purchase
Orders for ROSS tooling when not inconsistent with this Agreement. There are
not writings, conversations, representations, warranties or agreements that
the parties intend to be a part hereof except as expressly set forth in this
Agreement and any other document executed contemporaneously herewith, or to
be set forth in the instruments and other documents delivered or to be
delivered hereunder and thereunder to the extent such instruments and
documents are not inconsistent with this Agreement. This Agreement, and any
other document executed contemporaneously herewith, represents the entire
agreement between the parties and supersedes all previous written or oral
agreements or discussions between the parties and any other person or legal
entity concerning the transactions contemplated herein and therein.
10. AMENDMENTS AND WAIVERS. No change in, amendment to, or waiver of
this Agreement, or any part hereof, shall be valid unless in writing and
signed by both parties thereby obligated.
11. NO THIRD PARTY BENEFIT. The parties acknowledge and agree that the
provisions of this Agreement are for the sole benefit of the parties hereto,
and are not for the benefit, directly or indirectly, of any other person or
entity.
12. GOVERNING LAW AND VENUE. The validity of this Agreement and any of
its provisions and conditions, as well as the rights and duties of the
parties, shall be interpreted and construed pursuant
<PAGE>
August 6, 1992
Page 15
to and in accordance with the internal laws, and not the law of conflicts, of
the State of Illinois. The parties irrevocably submit to the jurisdiction of
any Illinois or United States Federal court sitting in the Northern District
of Illinois for any action filed to enforce, construe or interpret this
Agreement. The parties further waive any objection to venue in such State on
the basis of forum non conveniens.
13. HEADINGS. Section headings have been inserted in this Agreement as
a matter of convenience only; such section headings are not a part of this
Agreement and shall not be used in the interpretation of this Agreement.
14. SEVERABILITY. If any one or more of the provisions of this
Agreement are held to be invalid, illegal or unenforceable in any respect for
any reason, the validity, legality, and enforceability of any such provision
or provisions in every other respect and of the remaining provisions of this
Agreement shall not be in any way impaired.
15. TIME OF THE ESSENCE. Time is hereby expressly made of the essence
with respect to the performance and satisfaction of each of the provisions
and conditions of this Agreement.
16. GENDER AND NUMBER. Wherever the context so requires, all words
used in the singular shall be construed to include the plural, and vice
versa, and words of any gender shall include any other gender, or any entity.
<PAGE>
August 6, 1992
Page 16
17. NO ASSIGNMENT. This Agreement shall not be assigned, in whole or
in part, without the express written consent of the parties hereto, provided,
however, that ROSS may assign this Agreement without the consent of PRI to
any wholly owned subsidiary of Abbott Laboratories.
18. NOTICES. No notices, request, demand, instruction or other
documents to be given hereunder to any party shall be effective or any
purpose unless telecopied (with answerback) or personally delivered to the
person at the appropriate address set forth below (in which event, such
notice shall be deemed effective only upon such delivery) or when delivered
by mail, sent by registered or certified mail, return receipt requested or
recognized private mail carrier, as follows:
If to PRI: Packaging Resources Incorporated
717 Forest Avenue
Lake Forest, Illinois 60045
ATTN: J. Michael Anderson
If to ROSS: Ross Laboratories
625 Cleveland Avenue
Columbus, Ohio 43215
ATTN: Ralph Giangiordano
And a copy to: Helaine Nelson, Division Counsel
ROSS LABORATORIES
--------------------------------
--------------------------------
--------------------------------
<PAGE>
August 6, 1992
Page 17
Notice given by mail shall be deemed to have been given ninety-six (96) hours
after deposit of same in any United States Post Office box, postage prepaid,
addressed as set forth above. Notice given via overnight courier shall be
deemed to have been given upon verified delivery by such courier. The
addresses and addressees for the purpose of this section may be changed by
giving written notice of such change in the manner herein provided for giving
notice.
19. NON DISCLOSURE. PRI and ROSS agree not to disclose the existence of
this Agreement or use the name of the other in any publicity or advertising
without the other party's written consent.
20. SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided,
this Agreement, and each of its provisions, covenants, and conditions, shall
apply to, bind, and inure to the benefit of the parties and their respective
heirs, executors, administrators, legal representatives, transferees,
successors-in-interest, and assigns.
21. FURTHER ASSURANCES. Each party shall perform or cause to be
performed any further acts and execute and deliver any documents that may be
reasonably necessary or advisable to carry out the provisions of this
Agreement.
22. EXHIBITS INCORPORATED. All EXHIBITS referred to in this Agreement
are hereby incorporated and made a part of this Agreement except that if
there is any inconsistency between this Agreement
<PAGE>
August 6, 1992
Page 18
and the provisions of any EXHIBIT, the provisions of this Agreement shall
control.
23. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which together shall constitute one original document.
PACKAGING RESOURCES INCORPORATED,
a Delaware Corporation
By: /s/ Howard P. Hoeper
--------------------------------------
Title: Chairman & Chief Executive Officer
-----------------------------------
ROSS LABORATORIES,
a Division of Abbott Laboratories,
USA, an Illinois corporation
By: [illegible]
--------------------------------------
Title: President, Ross Products
-----------------------------------
<PAGE>
EXHIBIT A (A-1)
[Schematic drawings of Ross Opaque Can omitted. Confidential treatment
requested for such schematic drawings. Unredacted version is on file with the
Securities and Exchange Commission.]
<PAGE>
EXHIBIT A (A-2)
[Schematic drawings of Ross Can omitted. Confidential treatment requested
for such schematic drawings. Unredacted version is on file with the Securities
and Exchange Commission.]
<PAGE>
EXHIBIT A (A-3)
[___________________________________]*
- -----------------------
* Confidential portion omitted; unredacted version is on file with the
Securities and Exchange Commission.
<PAGE>
August 6, 1992
EXHIBIT B
[ROSS Laboratories Facilities]
COLUMBUS, OHIO
585 Cleveland Avenue 614-227-3333
Columbus, Ohio 43215
(Approximate Annual Volume [_________]*)
CASA GRANDE, ARIZONA
1250 West Maricopa Highway 602-836-2800
Casa Grande, Arizona 85222
(Approximate Annual Volume [_________]*)
STURGIS, MICHIGAN
700 West Lafayette Street 616-651-0738
Sturgis, Michigan 49091
(Approximate Annual Volume [_________]*)
- -----------------------
* Confidential portion omitted; unredacted version is on file with the
Securities and Exchange Commission.
<PAGE>
August 6, 1992
EXHIBIT "C"
(C-1)
PACKAGING RESOURCES INCORPORATED
Pricing Schedule
Effective August 6, 1992
(Exhibit "C" to Final Agreement)
Supersedes Pricing Schedule Effective May 1, 1992
ROSS LABORATORIES
Ship to: Columbus, Ohio
Casa Grande, Arizona
(#1700203)
Columbus $/M Casa Grande $/M
Part Description (Delivered) (Delivered)
- ---------------- ------------ ---------------
POLYPROPYLENE Part # (F304050002) (304050005)
211 x 8 oz
Barrier Plastic Can Ross Line 1
-----------
(2ml Barrier EVOH E/F) [________________ ___________ __________]*
[________________ ]
(Translucent) [________________ ___________ __________]
[________________ ___________ __________]
[________________ ___________ __________]
Ross Line 2
-----------
[________________ ___________ __________]*
[________________ ]
[________________ ___________ __________]
[________________ ___________ __________]
[________________ ___________ __________]
*Columbus to be billed at [_____]*, Casa Grande to be billed at [_____]*,
with monthly adjustments for actual volume levels.
Title: F.O.B. Packaging Resources Point of Manufacture
Freight: Packaging Resources Arranges for, Prepays and Absorbs.
Terms: Net 30 Days
Sale subject to credit approval.
CURRENT RESIN ESCALATORS/DEESCALATORS
Price change for each $0.01/# of resin/EVOH is as follows:
[_____]* for each $0.01/lb of Exxon 9122
[_____]* for each $0.01/lb of Exxon 7341
[_____]* for each $0.01/lb of EVOH Barrier
- -----------------------
* Confidential portion omitted; unredacted version is on file with the
Securities and Exchange Commission.
<PAGE>
August 6, 1992
TOOLING
Owned by Ross Laboratories. Routine maintenance performed by and paid for by
Packaging Resources. Part replacement after normal life is paid for by Ross
per agreement. Includes (1) 48; (2) 54's; and (1) 81 cavity melt phase molds.
<PAGE>
August 6, 1992
EXHIBIT "C"
(C-2)
PACKAGING RESOURCES INCORPORATED
Pricing Schedule
Effective August 6, 1992
(Exhibit "C" to Final Agreement)
Supersedes Pricing Schedule Effective May 1, 1992
ROSS LABORATORIES
Ship to: Columbus, Ohio
Casa Grande, Arizona
(#1700203)
Columbus $/M Casa Grande $/M
Part Description (Delivered) (Delivered)
- ---------------- ------------- ---------------
POLYPROPYLENE Part #: (F304050008) (304050007)
211 x 8 oz
Barrier Plastic Can Ross Line 1
-----------
(2ml Barrier EVOH E/F) [________________ ___________ _________]*
[________________ ]
(Opaque) [________________ ___________ _________]
4.535%TiO [________________ ___________ _________]
2 [________________ ___________ _________]
Ross Line 2
-----------
[________________ ___________ _________]*
[________________ ]
[________________ ___________ _________]
[________________ ___________ _________]
[________________ ___________ _________]
*Columbus to be billed at [_____]*, Casa Grande to be billed at [_____]*,
with monthly adjustments for actual volume levels.
Title: F.O.B. Packaging Resources Point of Manufacture
Freight: Packaging Resources Arranges for, Prepays and Absorbs.
Terms: Net 30 Days
Sale subject to credit approval.
CURRENT RESIN ESCALATORS/DEESCALATORS
Price change for each $0.01/# of resin/EVOH is as follows:
[_____]* for each $0.01/lb of Exxon 9122
[_____]* for each $0.01/lb of Exxon 7341
[_____]* for each $0.01/lb of EVOH Barrier
- -----------------------
* Confidential portion omitted; unredacted version is on file with the
Securities and Exchange Commission.
<PAGE>
August 6, 1992
TOOLING
Owned by Ross Laboratories. Routine maintenance performed by and paid for by
Packaging Resources. Part replacement after normal life is paid for by Ross
per agreement. Includes (1) 48; (2) 54's; and (1) 81 cavity melt phase molds.
<PAGE>
August 6, 1992
EXHIBIT "C"
(C-3)
PACKAGING RESOURCES INCORPORATED
Pricing Schedule
Effective Upon Date of Ross' Requirements Reaching
an Annual Rate of [_______________]*
(Exhibit "C" to Agreement)
(Reflects Pricing at [______________]*)
Will Supersede Pricing Schedule Effective May 1, 1992
ROSS LABORATORIES
Ship to: Columbus, Ohio
Casa Grande, Arizona
(#1700203)
Columbus $/M Casa Grande $/M
Part Description (Delivered) (Delivered)
- ---------------- ------------ ---------------
POLYPROPYLENE Part #: (F304050002) (304050005)
211 x 8 oz
Barrier Plastic Can Ross Line 1
-----------
(2ml Barrier EVOH E/F) [________________ ___________ _________]*
[________________ ]
(Translucent) [________________ ___________ _________]
[________________ ___________ _________]
[________________ ___________ _________]
Ross Line 2
-----------
[________________ ___________ _________]*
[________________ ]
[________________ ___________ _________]
[________________ ___________ _________]
[________________ ___________ _________]
*Columbus to be billed at [_____]*, Casa Grande to be billed at [_____]*,
with monthly adjustments for actual volume levels.
Title: F.O.B. Packaging Resources Point of Manufacture
Freight: Packaging Resources Arranges for, Prepays and Absorbs.
Terms: Net 30 Days
Sale subject to credit approval.
CURRENT RESIN ESCALATORS/DEESCALATORS
Price change for each $0.01/# of resin/EVOH is as follows:
[_____]* for each $0.01/lb of Exxon 9122
[_____]* for each $0.01/lb of Exxon 7341
[_____]* for each $0.01/lb of EVOH Barrier
- -----------------------
* Confidential portion omitted; unredacted version is on file
with the Securities and Exchange Commission.
<PAGE>
August 6, 1992
TOOLING
Owned by Ross Laboratories. Routine maintenance performed by and paid for by
Packaging Resources. Part replacement after normal life is paid for by Ross
per agreement. Includes (1) 48; (2) 54's; and (1) 81 cavity melt phase molds.
<PAGE>
August 6, 1992
EXHIBIT "C"
(C-4)
PACKAGING RESOURCES INCORPORATED
Pricing Schedule
Effective Upon Date of Ross' Requirements Reaching
an Annual Rate of [______________]*
(Exhibit "C" to Agreement)
(Reflects Pricing at [__]* Annual Rate)
Will Supersede Pricing Schedule Effective May 1, 1992
ROSS LABORATORIES
Ship to: Columbus, Ohio
Casa Grande, Arizona
(#1700203)
Columbus $/M Casa Grande $/M
Part Description (Delivered) (Delivered)
- ---------------- ------------ ---------------
POLYPROPYLENE Part #: (F304050008) (304050007)
211 x 8 oz
Barrier Plastic Can Ross Line 1
-----------
(2ml Barrier EVOH E/F) [________________ ___________ _________]*
[________________ ]
(Opaque) [________________ ___________ _________]
4.535%TiO [________________ ___________ _________]
2 [________________ ___________ _________]
Ross Line 2
-----------
[________________ ___________ _________]*
[________________ ]
[________________ ___________ _________]
[________________ ___________ _________]
[________________ ___________ _________]
*Columbus to be billed at [_____]*, Casa Grande to be billed at [_____]*,
with monthly adjustments for actual volume levels.
Title: F.O.B. Packaging Resources Point of Manufacture
Freight: Packaging Resources Arranges for, Prepays and Absorbs.
Terms: Net 30 Days
Sale subject to credit approval.
CURRENT RESIN ESCALATORS/DEESCALATORS
Price change for each $0.01/# of resin/EVOH is as follows:
[_____]* for each $0.01/lb of Exxon 9122
[_____]* for each $0.01/lb of Exxon 7341
[_____]* for each $0.01/lb of EVOH Barrier
- -----------------------
* Confidential portion omitted; unredacted version is on file
with the Securities and Exchange Commission.
<PAGE>
August 6, 1992
TOOLING
Owned by Ross Laboratories. Routine maintenance performed by and paid for by
Packaging Resources. Part replacement after normal life is paid for by Ross
per agreement. Includes (1) 48; (2) 54's; and (1) 81 cavity melt phase molds.
<PAGE>
August 6, 1992
EXHIBIT D
Unamortized Capital
Investment
-------------------
(As of 8/6/92)
Line 1 Complete Thermoforming Line [_______]*
Including:
AMORTIZATION
Co-Extrusion Sheetline [________________]*
Thermoformer [________________]*
Trim Press
Chillers
Monitoring System
Dryers
Granulator
Conveyer System
Vision System
Palletizer
Line 2 Complete Thermoforming Line [________________]*
Including:
AMORTIZATION
Co-Extrusion Sheetline [________________]*
Thermoformer [________________]*
Trim Press
Chiller
Monitoring System
Dryers
Granulator
Conveyer System
Vision System
Palletizer
- -----------------------
* Confidential portion omitted; unredacted version is on file with the
Securities and Exchange Commission.
<PAGE>
December 9, 1993
Packaging Resources Incorporated
One Conway Park
100 Field Drive
Suite 300
Lake Forest, IL 60045
Attn: Patrick Carroll
Sales Account Manager
Dear Mr. Carroll:
In consideration of Abbott Laboratories and Abbott Manufacturing, Inc.,
Ross Products Division ("Abbott") providing to Packaging Resources
Incorporated ("PRI") certain information in oral, written, visual, and/or
tangible form (collectively "Information") relating to Abbott's plastic and
barrier plastic containers, closures and plastic package development programs
in order for PRI to develop plastic containers and/or closures, the parties
agree as follows:
1. Any and all Information relating to Abbott's plastic programs
will be received by PRI on a confidential basis. For purposes of this
letter agreement ("Agreement"), Information shall include but not be
limited to:
a. all information relating to Abbott's plastic programs, including
the existence of the programs themselves and the physical
embodiments and materials;
b. all information relating to Abbott's plastic and barrier plastic
containers, container concepts and drawings, materials and
systems including closures associated with retortable containers
and package concepts;
c. all information relating to or arising from tests conducted by
PRI in conjunction with Abbott relating to plastic containers,
container closures or samples;
d. all information disclosed by Abbott or developed under this
Agreement on resins, additives and adhesives for retortable
containers.
<PAGE>
Packaging Resources Incorporated
December 15, 1993
Page 2
2. For a period of ten (10) years commencing January 1, 1991, PRI will
not disclose Information to any third party without Abbott's prior written
approval and PRI will not use Information disclosed hereunder for any purpose
other than that indicated in this Agreement without Abbott's prior written
approval. Such obligations shall not apply to any portion of the Information
which:
a. is known to PRI before receipt thereof under this Agreement, as
evidenced by PRI's written records;
b. is disclosed to PRI without restriction after full execution of
this Agreement by a third party having a legal right to make
such disclosure; or
c. is or becomes part of the public domain through no breach of
this Agreement.
3. All Information supplied by Abbott shall remain the property of
Abbott and will be promptly returned if requested by Abbott.
4. Nothing in this Agreement shall be construed as the granting of a
license.
5. PRI agrees not to disclose the existence of this Agreement or the
fact that PRI is evaluating the Information without Abbott's prior written
approval.
6. PRI agrees not to use the name of Abbott in any publicity,
advertising or information which is disseminated to the general public
without Abbott's prior written approval.
7. This Agreement may be modified only by written agreement signed by
the parties.
8. This Agreement shall be governed by and construed in accordance
with the laws of the State of Illinois excluding its conflict of laws
principles.
<PAGE>
Packaging Resources Incorporated
December 15, 1993
Page 3
If the foregoing terms and conditions are acceptable, please have an
authorized representative sign and date both originals of this Agreement, and
return them to Ross Products Division, Attn: Legal Department.
Very truly yours, ACCEPTED:
ROSS PRODUCTS DIVISION PACKAGING RESOURCES
ABBOTT LABORATORIES INCORPORATED
By: /s/ Ernesto Arguelles By: /s/ Terrence V. Cullen
-------------------------- ---------------------------
Ernesto Arguelles
Vice President, Operations Name: Terrence V. Cullen
-------------------------
(Printed/Typed)
ROSS PRODUCTS DIVISION Title: Vice President Sales
------------------------
Marketing
------------------------
ABBOTT MANUFACTURING, INC.
Date: December 28, 1993
-------------------------
By: /s/ Ernesto Arguelles
--------------------------
Ernesto Arguelles
Vice President, Operations
Date: January 4, 1994
------------------------
DOCUMENT NUMBER: 0102772.02
6-7-96/04:12pm
<PAGE>
INDEMNIFICATION AGREEMENT
AGREEMENT, effective as of May 17, 1996, between Packaging Resources
Incorporated, a Delaware corporation ("PRI"), and [each of the indemnitees
listed on Exhibit A hereto] (the "Indemnitee").
WHEREAS, it is essential to PRI to retain and attract as directors and
officers the most capable persons available;
WHEREAS, Indemnitee is a director and/or officer of PRI;
WHEREAS, PRI and Indemnitee recognize the increased risk of litigation and
other claims being asserted against directors and officers of public companies
in today's environment;
WHEREAS, the Certificate of Incorporation (the "Certificate of
Incorporation") and the By-laws (the "By-laws") of PRI require PRI to indemnify
and advance expenses to its directors and certain of its officers to the full
extent permitted by law, and the Indemnitee has been serving and continues to
serve as a director and officer of PRI in part in reliance on the Certificate of
Incorporation and By-laws; and
WHEREAS, in recognition of Indemnitee's need for substantial protection
against personal liability in order to enhance Indemnitee's continued service to
PRI in an effective manner and Indemnitee's reliance on the Certificate of
Incorporation and By-laws, and in part to provide Indemnitee with specific
contractual assurance that the protection promised by the Certificate of
Incorporation and By-laws will be available to Indemnitee (regardless of, among
other things, any amendment to the Certificate of Incorporation or the By-laws
or any change in the composition of PRI's Board of Directors or acquisition
transaction relating to PRI), PRI wishes to provide in this Agreement for the
indemnification of and the advancing of expenses to Indemnitee to the fullest
extent (whether partial or complete) permitted by law and as set forth in this
Agreement and, to the extent insurance is obtained, for the continued coverage
of Indemnitee under PRI's directors' and officers' liability insurance policies;
NOW, THEREFORE, in consideration of the premises and in order to induce the
Indemnitee to continue to serve PRI directly or, at its request, another
enterprise, and intending to be legally bound hereby, the parties hereto agree
as follows:
1. CERTAIN DEFINITIONS:
(a) CHANGE IN CONTROL: shall be deemed to have occurred if (i)
any "person" (as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"),
other than (A) Packaging Resources Group, Inc., a Delaware corporation
("Group"),(B) Howard P. Hoeper, (C) Apollo Packaging
<PAGE>
Partners, L.P., (D) a trustee or other fiduciary holding securities under
an employee benefit plan of PRI or Group or (E) a corporation owned
directly or indirectly by the stockholders of Group in substantially the
same proportions as their ownership of stock of Group, becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of PRI representing 20% or more of
the total voting power represented by PRI's then outstanding Voting
Securities; (ii) during any period of two consecutive years, individuals
who at the beginning of such period constitute the Board of Directors of
PRI and any new director whose election by the Board of Directors or
nomination for election by PRI's stockholder was approved by a vote of at
least a majority of the directors then still in office who either were
directors at the beginning of the period or whose election or nomination
for election was previously so approved, cease for any reason to constitute
a majority thereof; or (iii) the stockholder of PRI approves a merger or
consolidation of PRI with any other corporation, other than a merger or
consolidation which would result in the Voting Securities of PRI
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into Voting Securities of the
surviving entity) at least 80% of the total voting power represented by the
Voting Securities of PRI or such surviving entity outstanding immediately
after such merger or consolidation, or the stockholder of PRI approves a
plan of complete liquidation of PRI or an agreement for the sale or
disposition by PRI of (in one transaction or a series of transactions) all
or substantially all PRI's assets.
(b) CLAIM: any threatened, pending or completed action, suit or
proceeding, or any inquiry or investigation, whether instituted by PRI
or any other party, that Indemnitee in good faith believes might lead
to the institution of any such action, suit or proceeding, whether
civil, criminal, administrative, investigative or other.
(c) EXPENSES: include attorneys' fees and all other costs,
expenses and obligations paid or incurred in connection with
investigating, defending, being a witness in or participating in
(including on appeal), or preparing to defend, be a witness in or
participate in any Claim relating to any Indemnifiable Event.
(d) INDEMNIFIABLE EVENT: any event or occurrence related to the
fact that Indemnitee is or was a director, officer, employee or agent
of PRI, or is or was serving at the request of PRI as a director,
officer, employee, trustee, agent or fiduciary of another corporation,
-2-
<PAGE>
partnership, joint venture, employee benefit plan, trust or other
enterprise, or by reason of anything done or not done by Indemnitee in any
such capacity.
(e) INDEPENDENT LEGAL COUNSEL: an attorney or firm of
attorneys, selected in accordance with the provisions of Section 3,
who shall not have otherwise performed services for PRI or Indemnitee
within the last five years (other than with respect to matters
concerning the rights of Indemnitee under this Agreement or of other
indemnitees under similar indemnity agreements).
(f) REVIEWING PARTY: (i) the Board of Directors by a quorum
consisting of directors who were not parties to such Claim or (ii) if
such a quorum is not obtainable, or, even if obtainable, a quorum of
disinterested directors so directs, by Independent Legal Counsel.
(g) VOTING SECURITIES: any securities of PRI which vote
generally in the election of directors.
2. BASIC INDEMNIFICATION ARRANGEMENT.
(a) In the event Indemnitee was, is or becomes a party to or
witness or other participant in, or is threatened to be made a party
to or witness or other participant in, a Claim by reason of (or
arising in part out of) an Indemnifiable Event, PRI shall indemnify
Indemnitee to the fullest extent permitted by law as soon as
practicable but in any event no later than thirty days after written
demand is presented to PRI, against any and all Expenses, judgments,
fines, penalties and amounts paid in settlement (including all
interest, assessments and other charges paid or payable in connection
with or in respect of such Expenses, judgments, fines, penalties or
amounts paid in settlement) of such Claim. If so requested by
Indemnitee, PRI shall advance (within two business days of such
request) any and all Expenses to Indemnitee (an "Expense Advance").
(b) Notwithstanding the foregoing, (i) the obligations of PRI
under Section 2(a) shall be subject to the condition that the
Reviewing Party shall not have determined (in a written opinion in any
case in which the Independent Legal Counsel referred to in Section 3
hereof is involved) that Indemnitee would not be permitted to be
indemnified under applicable law and (ii) the obligation of PRI to
make an Expense Advance pursuant to Section 2(a) shall be subject to
the condition that, if, when and to the extent that the Reviewing
Party determines that Indemnitee would not be permitted to be so
indemnified under applicable law, PRI shall be entitled to be
reimbursed by Indemnitee (who hereby agrees to reimburse
-3-
<PAGE>
PRI) for all such amounts theretofore paid; provided, however, that if
Indemnitee has commenced or thereafter commences legal proceedings in a
court of competent jurisdiction to secure a determination that Indemnitee
should be indemnified under applicable law, any determination made by the
Reviewing Party that Indemnitee would not be permitted to be indemnified
under applicable law shall not be binding and Indemnitee shall not be
required to reimburse PRI for any Expense Advance until a final judicial
determination is made with respect thereto (as to which all rights of
appeal therefrom have been exhausted or lapsed). If there has not been a
Change in Control, the Reviewing Party shall be selected by the Board of
Directors, and if there has been such a Change in Control (other than a
Change in Control which has been approved by a majority of PRI's Board of
directors who were directors immediately prior to such Change in Control),
the Reviewing Party shall be the Independent Legal Counsel referred to in
Section 3 hereof. If there has been no determination by the Reviewing
Party or if the Reviewing Party determines that Indemnitee substantively
would not be permitted to be indemnified in whole or in part under
applicable law, Indemnitee shall have the right to commence litigation in
any court in the State of Delaware having subject matter jurisdiction
thereof and in which venue is proper seeking an initial determination by
the court or challenging any such determination by the Reviewing Party or
any aspect thereof, including the legal or factual bases therefor, and PRI
hereby consents to service or process and to appear in any such proceeding.
Any determination by the Reviewing Party otherwise shall be conclusive and
binding on each of PRI and Indemnitee.
3. CHANGE IN CONTROL. PRI agrees that if there is a Change in Control of
PRI (other than a Change in Control which has been approved by a majority of
PRI's Board of Directors who were directors immediately prior to such Change in
Control) then with respect to all matters thereafter arising concerning the
rights of Indemnitee to indemnity payments and Expense Advances under this
Agreement or any other agreement or By-laws of PRI now or hereafter in effect
relating to Claims for Indemnifiable Events, PRI shall seek legal advice only
from Independent Legal Counsel selected by Indemnitee and approved by PRI (which
approval shall not be unreasonably withheld). Such counsel, among other things,
shall render its written opinion to each of PRI and Indemnitee as to whether and
to what extent the Indemnitee would be permitted to be indemnified under
applicable law. PRI agrees to pay the reasonable fees of the Independent Legal
Counsel referred to above and to fully indemnify such counsel against any and
all expenses (including attorneys' fees), claims, liabilities and damages
arising out of or relating to this Agreement or its engagement pursuant thereto.
-4-
<PAGE>
4. INDEMNIFICATION FOR ADDITIONAL EXPENSES. PRI shall indemnify
Indemnitee against any and all expenses (including attorneys' fees) and, if
requested by Indemnitee, shall (within two business days of such request)
advance such expenses to Indemnitee which are incurred by Indemnitee in
connection with any action brought by Indemnitee for (i) indemnification or
advance payment of Expenses by PRI under this Agreement or any other agreement
or PRI by-law now or hereafter in effect relating to Claims for Indemnifiable
Events and/or (ii) recovery under any directors' and officers' liability
insurance policies maintained by PRI, regardless of whether Indemnitee
ultimately is determined to be entitled to such indemnification, advance expense
payment or insurance recovery, as the case may be.
5. PARTIAL INDEMNITY, ETC. If Indemnitee is entitled under any other
provision of this Agreement to indemnification by PRI for some or a portion of
the Expenses, judgments, fines, penalties and amounts paid in settlement of a
Claim but not, however, for all of the total amount thereof, PRI shall
nevertheless indemnify Indemnitee for the portion thereof to which Indemnitee is
entitled. Moreover, notwithstanding any other provision of this Agreement, to
the extent that Indemnitee has been successful on the merits or otherwise in
defense of any or all Claims relating in whole or in part to an Indemnifiable
Event or in defense of any issue or matter therein, including dismissal without
prejudice, Indemnitee shall be indemnified against all Expenses incurred in
connection therewith.
6. BURDEN OF PROOF. In connection with any determination by the
Reviewing Party or otherwise as to whether Indemnitee is entitled to be
indemnified hereunder, the burden of proof shall be on PRI to establish that
Indemnitee is not so entitled.
7. NO PRESUMPTIONS. For purposes of this Agreement, the termination of
any claim, action, suit or proceeding, by judgment, order, settlement (whether
with or without court approval) or conviction, or upon a plea of nolo
contendere, or its equivalent, shall not create a presumption that Indemnitee
did not meet any particular standard of conduct or have any particular belief or
that a court has determined that indemnification is not permitted by applicable
law. In addition, neither the failure of the Reviewing Party to have made a
determination as to whether Indemnitee has met any particular standard of
conduct or had any particular belief, nor an actual determination by the
Reviewing Party that Indemnitee has not met such standard of conduct or did not
have such belief, prior to the commencement of legal proceedings by Indemnitee
to secure a judicial determination that Indemnitee should be indemnified under
applicable law shall be a defense to Indemnitee's claim or create a presumption
that Indemnitee has not met any particular standard of conduct or did not have
any particular belief.
8. NONEXCLUSIVITY, ETC. The rights of the Indemnitee hereunder shall be
in addition to any other rights Indemnitee may
-5-
<PAGE>
have under the Certificate of Incorporation or the By-laws or the Delaware
General Corporation Law or otherwise. To the extent that a change in the
Delaware General Corporation Law (whether by statute or judicial decision)
permits greater indemnification by agreement than would be afforded currently
under PRI's By-laws and this Agreement, it is the intent of the parties hereto
that Indemnitee shall enjoy by this Agreement the greater benefits so afforded
by such change.
9. LIABILITY INSURANCE. To the extent PRI maintains an insurance policy
or policies providing directors' and officers' liability insurance, Indemnitee
shall be covered by such policy or policies, in accordance with its or their
terms, to the maximum extent of the coverage available for any PRI director or
officer.
10. PERIOD OF LIMITATIONS. No legal action shall be brought and no cause
of action shall be asserted by or in the right of PRI against Indemnitee or
Indemnitee's spouse, heirs, executors or personal or legal representatives after
the expiration of two years from the date of accrual of such cause of action,
and any claim or cause of action of PRI shall be extinguished and deemed
released unless asserted by the timely filing of a legal action within such two-
year period; provided, however, that if any shorter period of limitations is
otherwise applicable to any such cause of action, such shorter period shall
govern.
11. AMENDMENTS, ETC. No supplement, modification or amendment of this
Agreement shall be binding unless executed in writing by both of the parties
hereto. No waiver of any of the provisions of this Agreement shall be deemed or
shall constitute a waiver of any other provisions hereof (whether or not
similar) nor shall such waiver constitute a continuing waiver.
12. SUBROGATION. In the event of payment under this Agreement, PRI shall
be subrogated to the extent of such payment to all of the rights of recovery of
Indemnitee, who shall execute all papers required and shall do everything that
may be necessary to secure such rights, including the execution of such
documents necessary to enable PRI effectively to bring suit to enforce such
rights.
13. NO DUPLICATION OF PAYMENTS. PRI shall not be liable under this
Agreement to make any payment in connection with any Claim made against
Indemnitee to the extent Indemnitee has otherwise actually received payment
(under any insurance policy, By-law or otherwise) of the amounts otherwise
indemnifiable hereunder.
14. BINDING EFFECT, ETC. This Agreement shall be binding upon and inure
to the benefit of and be enforceable by the parties hereto and their respective:
successors; assigns, including any direct or indirect successor by purchase,
merger, consolidation or otherwise to all or substantially all of the business
and/or assets
-6-
<PAGE>
of PRI; spouses; heirs; executors and personal and legal representatives. This
Agreement shall continue in effect regardless of whether Indemnitee continues to
serve as a director or officer of PRI.
15. SEVERABILITY. The provisions of this Agreement shall be severable in
the event that any of the provisions hereof (including any provision within a
single section, paragraph or sentence) is held by a court of competent
jurisdiction to be invalid, void or otherwise unenforceable in any respect, and
the validity and enforceability of any such provision in every other respect and
of the remaining provisions hereof shall not be in any way impaired and shall
remain enforceable to the fullest extent permitted by law.
16. GOVERNING LAW. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Delaware applicable to
contracts made and to be performed in such state without giving effect to the
principles of conflicts of laws.
17. COUNTERPARTS. This Agreement may be executed in counterparts each of
which shall be deemed an original and all of which together shall constitute one
instrument.
[SIGNATURE PAGE FOLLOWS]
-7-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
PACKAGING RESOURCES INCORPORATED
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
----------------------------------
[INDEMNITEE]
-8-
<PAGE>
EXHIBIT A
INDEMNITEE LIST
Jerry J. Corirossi
Howard P. Hoeper
John D. Williams
Donald L. MacLaughin
Walter C. Riesen
Kenneth W. Miner
Antony P. Ressler
David B. Kaplan
<PAGE>
DESCRIPTION OF ANNUAL BONUS PLAN
The Company has adopted an annual cash bonus plan (the "Bonus Plan") for
all of its executive officers and for certain other key management personnel.
The Chairman and Chief Executive Officer of the Company, in his sole and
absolute discretion, is authorized to determine all amounts to be paid under,
and the extent of any participation in, the Bonus Plan.
<PAGE>
EXHIBIT 12.1
PACKAGING RESOURCES INCORPORATED
STATEMENT RE COMPUTATION OF FINANCIAL RATIOS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED
-------------------------------------------------------- PRO FORMA
FEB. 29 FEB. 28 FEB. 28 FEB. 29 YEAR ENDED
1992 1993 1994 FEB. 28 1995 1996 FEB. 29 1996
--------- --------- --------- ------------ --------- ------------
<S> <C> <C> <C> <C> <C> <C>
EBITDA:
Net income (loss) before extraordinary item and
cumulative effect of change in accounting
principle........................................ 1,517 3,161 7,278 (3,521) 1,333 (231)
Income tax expense (benefit)...................... 1,268 2,215 5,057 (1,980) 1,006 (175)
Interest expense.................................. 6,082 5,406 5,482 8,503 10,671 13,416
Depreciation and amortization..................... 3,703 3,652 6,279 10,492 9,721 9,721
Nonrecurring charge............................... -- -- -- 7,257 -- --
--------- --------- --------- ------ --------- ------
EBITDA.............................................. 12,570 14,434 24,096 20,751 22,731 22,731
--------- --------- --------- ------ --------- ------
--------- --------- --------- ------ --------- ------
Earnings to fixed charge ratio:
Fixed charges:
Interest expense before deferred financing
costs.......................................... 5,487 4,813 4,777 7,655 9,011 12,823
Interest element of rentals (1)................. 393 359 694 849 687 687
Amortization of deferred financing cost......... 595 593 705 848 1,660 593
--------- --------- --------- ------ --------- ------
Total fixed charges............................... 6,475 5,765 6,176 9,352 11,358 14,103
Earnings:
Net income (loss) before extraordinary item and
cumulative effect of change in accounting
principle........................................ 1,517 3,161 7,278 (3,521) 1,333 (231)
Income tax expense (benefit)...................... 1,268 2,215 5,057 (1,980) 1,006 (175)
Fixed charges..................................... 6,475 5,765 6,176 9,352 11,358 14,103
--------- --------- --------- ------ --------- ------
Total earnings...................................... 9,260 11,141 18,511 3,851 13,697 13,697
Ratio of earnings to fixed charges.................. 1.43 1.93 3.00 0.41(2) 1.21 0.97(2)
--------- --------- --------- ------ --------- ------
--------- --------- --------- ------ --------- ------
Ratio of EBITDA to interest expense:
EBITDA............................................ 12,570 14,434 24,096 20,751 22,731 22,731
Interest expense.................................. 6,082 5,406 5,482 8,503 10,671 13,416
--------- --------- --------- ------ --------- ------
Ratio of EBITDA to interest expense................. 2.07 2.67 4.40 2.44 2.13 1.69
--------- --------- --------- ------ --------- ------
--------- --------- --------- ------ --------- ------
Ratio of EBITDA to cash interest expense:
EBITDA............................................ 12,570 14,434 24,096 20,751 22,731 22,731
Interest expense before deferred financing
costs............................................ 5,487 4,813 4,777 7,655 9,011 12,823
--------- --------- --------- ------ --------- ------
Ratio of EBITDA to cash interest expense............ 2.29 3.00 5.04 2.71 2.52 1.77
--------- --------- --------- ------ --------- ------
--------- --------- --------- ------ --------- ------
</TABLE>
- ------------------------
(1) Deemed to be approximately one-third of rental expenses.
(2) Ratio is less than one; therefore, ratio is not disclosed in Prospectus.
<PAGE>
EXHIBIT 23.1
ACCOUNTANT'S CONSENT
The Board of Directors and Shareholder of
Packaging Resources Incorporated:
We consent to the use of our reports included herein and to the reference to
our firm under the heading "Experts" in the Registration Statement. Our report
refers to Packaging Resources Incorporated's adoption of the provision of
Financial Accounting Standard No. 109, "Accounting for Income Taxes," in fiscal
1994.
KPMG Peat Marwick LLP
Chicago, Illinois
June 11, 1996
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------
FORM T-1
STATEMENT OF ELIGIBILITY AND QUALIFICATION
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
-----------------------
LASALLE NATIONAL BANK
(Exact name of trustee as specified in its charter)
36-1521370
(I.R.S. Employer
Identification No.)
135 South LaSalle Street, Chicago, Illinois 60603
(Address of principal executive offices) (Zip Code)
-----------------------
M. ROBERT K. QUINN
Senior Vice President and General Counsel
Telephone: (312) 904-2010
135 South LaSalle Street
Chicago, Illinois 60603
(Name, address and telephone number of agent for service)
-----------------------
PACKAGING RESOURCES INCORPORATED
(Exact name of obligor as specified in its charter)
Delaware 36-3321568
(State or other jurisdiction (I.R.S. Employer
incorporation or organization) Identification No.)
One Conway Park
100 Field Drive, Suite 300
Lake Forest, Illinois 60045
(Address of Principal Executive Offices) (Zip Code)
-----------------------
11-5/8% Senior Secured Notes due 2003
(Title of the indenture securities)
<PAGE>
ITEM 1. GENERAL INFORMATION
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
1. Comptroller of the Currency, Washington D.C.
2. Federal Deposit Insurance Corporation, Washington, D.C.
3. The Board of Governors of the Federal Reserve Systems,
Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
ITEM 2. AFFILIATIONS WITH OBLIGOR AND UNDERWRITERS.
If the obligor or any underwriter for the obligor is an affiliate of the
trustee, describe each such affiliation.
Neither the obligor nor any underwriter for the obligor is an
affiliate of the trustee.
ITEM 3. VOTING SECURITIES OF THE TRUSTEE.
Furnish the following information as to each class of voting securities of the
trustee:
Not applicable
ITEM 4. TRUSTEESHIPS UNDER OTHER INDENTURES.
If the trustee is a trustee under another indenture under which any other
securities, or certificates of interest or participation in any other
securities, of the obligor are outstanding, furnish the following information:
(a) Title of the securities outstanding under each other indenture.
Not applicable
(b) A brief statement of the facts relied upon as a basis for the
claim that no conflicting interest within the meaning of Section 310(b)(1) of
the Act arises as a result of the trusteeship under such other indenture,
including a statement as to how the indenture securities will rank as compared
with the securities issued under such other indenture.
We have performed our annual conflict of interest check and found no
conflicts.
ITEM 5. INTERLOCKING DIRECTORATES AND SIMILAR RELATIONSHIPS WITH THE OBLIGOR
OR UNDERWRITERS.
If the trustee or any of the directors or executive officers of the trustee is a
director, officer, partner, employee, appointee, or representative of the
obligor or of any underwriter for the obligor, identify each such person having
any such connection and state the nature of each such connection.
Not applicable
<PAGE>
ITEM 6. VOTING SECURITIES OF THE TRUSTEE OWNED BY THE OBLIGOR OR ITS
OFFICIALS.
Furnish the following information as to the voting securities of the trustee
owned beneficially by the obligor and each director, partner and executive
officer of the obligor.
Not applicable
ITEM 7. VOTING SECURITIES OF THE TRUSTEE OWNED BY UNDERWRITERS OR THEIR
OFFICIALS.
Furnish the following information as to the voting securities of the trustee
owned beneficially by each underwriter for the obligor and each director,
partner, and executive officer of each such underwriter.
Not applicable
ITEM 8. SECURITIES OF THE OBLIGOR OWNED OR HELD BY THE TRUSTEE.
Furnish the following information as to securities of the obligor owned
beneficially or held as collateral security for obligations in default by the
trustee:
Not applicable
ITEM 9. SECURITIES OF THE UNDERWRITER OWNED OR HELD BY THE TRUSTEE.
If the trustee owns beneficially or holds as collateral security for obligations
in default any securities of an underwriter for the obligor, furnish the
following information as to each class of securities of such underwriter any of
which are so owned or held by the trustee.
Not applicable
ITEM 10. OWNERSHIP OR HOLDINGS BY THE TRUSTEE OF VOTING SECURITIES OF CERTAIN
AFFILIATES OR SECURITY HOLDERS OF THE OBLIGOR.
If the trustee owns beneficially or holds as collateral security for obligations
in default voting securities of a person who, to the knowledge of the trustee
(1) owns 10 percent or more of the voting securities of the obligor or (2) is an
affiliate, other than a subsidiary, of the obligor, furnish the following
information as to the voting securities of such person.
Not applicable
ITEM 11. OWNERSHIP OR HOLDINGS BY THE TRUSTEE OF ANY SECURITIES OF A PERSON
OWNING 50 PERCENT OR MORE OF THE VOTING SECURITIES OF THE OBLIGOR.
If the trustee owns beneficially or holds as collateral security for obligations
in default any securities of a person who, to the knowledge of the trustee, owns
50 percent or more of the voting securities of the obligor, furnish the
following information as to each class of securities of such person any of which
are so owned or held by the trustee.
Not applicable
<PAGE>
ITEM 12. INDEBTEDNESS OF THE OBLIGOR TO THE TRUSTEE.
If the obligor is indebted to the trustee, furnish the following information.
LaSalle National Bank has a $10 million participation in a $20 million revolving
Credit Facility with Packaging Resources Incorporated of which there is $0
currently outstanding.
ITEM 13. DEFAULTS BY THE OBLIGOR.
a) State whether there is or has been a default with respect to the securities
under this indenture. Explain the nature of any such default.
Not applicable
b) If the trustee is a trustee under another indenture under which any other
securities, or certificates of interest or participation in any other
securities, of the obligor are outstanding, or is trustee for more than one
outstanding series of securities under the indenture, state whether there has
been a default under any such indenture or series, identify the indenture or
series affected, and explain the nature of any such default.
Not applicable
ITEM 14. AFFILIATIONS WITH THE UNDERWRITERS.
If any underwriter is an affiliate of the trustee, describe each such
affiliation.
Not applicable
ITEM 15. FOREIGN TRUSTEE.
Identify the order or rule pursuant to which the foreign trustee is authorized
to act as sole trustee under indentures qualified or to be qualified.
Not applicable
ITEM 16. LIST OF EXHIBITS.
List below all exhibits filed as part of this statement of eligibility and
qualification.
1. A copy of the Articles of Association of LaSalle National Bank
now in effect.
2. A copy of the certificate of authority to commence business.
3. A copy of the authorization to exercise corporate trust powers.
4. A copy of the existing By-Laws of LaSalle National Bank.
5. Not applicable.
6. The consent of the trustee required by Section 321(b) of the
Trust Indenture Act of 1939.
7. A copy of the latest report of condition of the trustee published
pursuant to law or the requirements of its supervising or
examining authority.
<PAGE>
8. Not applicable.
9. Not applicable.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939,the trustee,
LaSalle National Bank, a corporation organized and existing under the laws of
the United States of America, has duly caused this statement of eligibility and
qualification to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of Chicago, State of Illinois, on the 5th day of
June 1996.
LASALLE NATIONAL BANK
By: /s/ Sarah H. Webb
-----------------
Sarah H. Webb
Vice President
<PAGE>
EXHIBIT 1
ARTICLES OF ASSOCIATION
<PAGE>
ARTICLES
OF
ASSOCIATION
LA SALLE NATIONAL BANK (LOGO)
LA SALLE NATIONAL BANK
CHICAGO, ILLINOIS
<PAGE>
(LOGO)
LaSalle National Bank
ARTICLES OF ASSOCIATION
FIRST. The title of this association, which shall carry on the business of
banking under the laws of the United States shall be "LaSalle National Bank."
SECOND. The place where the main banking house or office of this
association shall be located, its operations of discount and deposit carried on,
and its general business conducted, shall be Chicago, County of Cook, State of
Illinois.
THIRD. The Board of Directors of this association shall consist of such
number of its shareholders, not less than five nor more than twenty-five, as
from time to time shall be determined by a majority of the votes to which all of
its shareholders are at the time entitled. A majority of the Board of Directors
shall be necessary to constitute a quorum for the transaction of business. The
Board of Directors, by vote of a majority of the full board, may, between annual
meetings of shareholders increase the membership of the Board where the number
of directors last elected by shareholders was 15 or less, by not more than two
members, and where the number of directors last elected by shareholders was 16
or more, by not more than four members and by a like vote appoint qualified
persons to fill the vacancies created thereby; provided that the number of
Directors shall at no time exceed twenty-five.
FOURTH. The regular annual meeting of the shareholders of this association
shall be held at its main banking house, or other convenient place duly
authorized by the board of directors on such day of each year as is specified
therefor in the bylaws.
FIFTH. The amount of capital stock which this association is authorized to
issue shall be Twenty Million Dollars ($20,000,000.00) divided into 2,000,000
shares of common capital stock of the par value of $10.00 each; but said capital
stock may be increased or decreased from time to time, in accordance with the
provisions of the laws of the United States.
If the capital stock is increased by the sale of additional shares thereof,
other than to key officers and employees of the association upon the exercise of
options granted pursuant to the terms of a stock option plan then in effect, as
to which sales all pre-emptive rights are waived, each shareholder shall be
entitled to subscribe for such additional shares in proportion to the number of
shares of said capital stock owned by him at the time the increase is authorized
by the shareholders, unless another time subsequent to the date of the
shareholders' meeting is specified in a resolution adopted by the shareholders
at the time the increase is authorized. The board of directors shall have the
power to prescribe a reasonable period of time within which the pre-emptive
rights to subscribe to the new shares of capital stock may be exercised.
The association, at any time and from time to time, may authorize and issue
debt obligations, whether or not subordinated, without the approval of the
shareholders.
SIXTH. The board of directors shall appoint one of its members president of
this association, who shall be chairman of the board, but the board of directors
may appoint a director in lieu of the president to be chairman of the board, who
shall perform such duties as may be designated by the board of directors. The
board of directors shall have the power to appoint one or more vice presidents,
a cashier and such other officers as may be required to transact the business of
this association; to fix the salaries to be paid to all officers of this
association; and to dismiss such officers, or any of them.
The board of directors shall have the power to define the duties of
officers and employees of this association, to require bonds from them, and to
fix the penalty thereof; to regulate the manner in which directors shall be
elected
<PAGE>
or appointed, and to appoint judges of the election; to make all bylaws that it
may be lawful for them to make for the general regulation of the business of
this association and the management of its affairs; and generally to do and
perform all acts that it may be lawful for a board of directors to do and
perform.
SEVENTH. This association shall have succession from the date of its
organization certificate until such time as it be dissolved by act of its
shareholders in accordance with the provisions of the banking laws of the United
States, or until its franchise becomes forfeited by reason of violation of law,
or until terminated by either a general or a special act of Congress, or until
its affairs be placed in the hands of a receiver and finally wound up by him.
EIGHTH. The board of directors of this association, or any three or more
shareholders owning, in the aggregate, not less than ten per centum of the stock
of this association, may call a special meeting of shareholders at any time:
Provided, however, that, unless otherwise provided by law, not less than ten
days prior to the date fixed for any such meeting, a notice of the time, place,
and purpose of the meeting shall be given by first-class mail, postage prepaid,
to all shareholders of record of this association at their respective addresses
as shown upon the books of the association. These articles of association may
be amended at any regular or special meeting of the shareholders by the
affirmative vote of the shareholders owning at least a majority of the stock of
this association, subject to the provisions of the banking laws of the United
States. The notice of any shareholders' meeting, at which an amendment to the
articles of association of this association is to be considered, shall be given
as herein-above set forth.
NINTH. Any person, his heirs, executors, or administrators, may be
indemnified or reimbursed by the association for reasonable expenses actually
incurred in connection with any action, suit, or proceeding, civil or criminal,
to which he or they shall be made a party by reason of his being or having been
a director, officer, or employee of the association or of any firm, corporation,
or organization which he served in any such capacity at the request of the
association: Provided, however, that no person shall be so indemnified or
reimbursed in relation to any matter in such action, suit, or proceeding as to
which he shall finally be adjudged to have been guilty of or liable for
negligence or wilful misconduct in the performance of his duties to the
association: And, provided further, that no person shall be so indemnified or
reimbursed in relation to any matter in such action, suit, or proceeding which
has been made the subject of a compromise settlement except with the approval of
a court of competent jurisdiction, or the holders of record of a majority of the
outstanding shares of the association, or the board of directors, acting by vote
of directors not parties to the same or substantially the same action, suit, or
proceeding, constituting a majority of the whole number of the directors. The
foregoing right of indemnification or reimbursement shall not be exclusive of
other rights to which such person, his heirs, executors, or administrators, may
be entitled as a matter of law.
********
May 17, 1982
Form No. 181, Rev 5/17/82 GW
<PAGE>
EXHIBIT 2
CERTIFICATE OF AUTHORITY
TO COMMENCE BUSINESS
<PAGE>
STATE OF ILLINOIS
AUDITOR'S OFFICE
NO. 333 (LOGO)
NATIONAL BANK TRUST CERTIFICATE
Springfield, FEBRUARY 15th 1928
I, OSCAR NELSON, Auditor of Public Accounts of the State of Illinois, do
hereby certify that the NATIONAL BUILDERS BANK OF CHICAGO located at CHICAGO,
County of COOK and State of Illinois, a corporation organized under and by
authority of the statutes of the United States governing National Banks and
authority granted by the Federal Reserve Act for the purpose of accepting and
executing trusts, has this day deposited in this office, securities in the sum
of TWO HUNDRED THOUSAND Dollars, $200,000.00 of the character designated by
Section 6 of the Act of the Legislature of the State of Illinois entitled "An
Act to provide for and regulate the administration of trusts by trust
companies,"
The said deposit is made for the benefit of the creditors of said NATIONAL
BUILDERS BANK OF CHICAGO under and by virtue of the provisions of the Act above
referred to and the said securities are now held by me in this office in my
official capacity as such Auditor of Public Accounts, for the uses and purposes
aforesaid.
I further certify that by virtue of the Acts aforesaid, the NATIONAL
BUILDERS BANK OF CHICAGO is hereby authorized to accept and execute trusts and
receive deposits of trust funds under the provisions and limitations of "An Act
to provide for and regulate the administration of trusts in Illinois.
IN TESTIMONY WHEREOF, I hereunto subscribe my name and affix the
(SEAL) seal of my office, the day and year first above written.
/s/ Oscar Nelson
----------------
AUDITOR OF PUBLIC ACCOUNTS.
STATE OF ILLINOIS.
<PAGE>
NO. 13146.
TREASURY DEPARTMENT (LOGO)
OFFICE OF COMPTROLLER OF THE CURRENCY
Washington, D.C., NOVEMBER 29, 1927.
WHEREAS, by satisfactory evidence presented to the undersigned, it has been
made to appear that "NATIONAL BUILDERS BANK OF CHICAGO" in the CITY of CHICAGO
in the County of COOK and State of ILLINOIS has complied with all the provisions
of the Statutes of the United States, required to be complied with before an
association shall be authorized to commence the business of Banking;
NOW THEREFORE I, J.W. MCINTOSH, Comptroller of the Currency, do hereby
certify that "NATIONAL BUILDERS BANK OF CHICAGO" in the CITY of CHICAGO in the
County of COOK and State of ILLINOIS is authorized to commence the business of
Banking as provided in Section Fifty one hundred and sixty nine of the Revised
Statutes of the United States.
IN TESTIMONY WHEREOF witness my hand and Seal of (SEAL) office
(SEAL) this TWENTY-NINTH day of NOVEMBER, 1927.
/s/ J.W. McIntosh
-----------------
Comptroller of the Currency
<PAGE>
CERTIFICATE OF CHANGE OF CORPORATE TITLE
(LOGO)
NO. 13146.
TREASURY DEPARTMENT
OFFICE OF THE COMPTROLLER OF THE CURRENCY
WASHINGTON, D.C., MAY 1, 1940.
WHEREAS, by satisfactory evidence presented to me, it appears that under
authority of sections 2, 3, and 4, of the Act of Congress approved May 1, 1886,
entitled "An Act to enable national banking associations to increase their
capital stock and to change their names or location," shareholders owning two-
thirds of the stock of the national banking association heretofore known as--
"NATIONAL BUILDERS BANK OF CHICAGO," located in CHICAGO, County of COOK, State
of ILLINOIS, have voted to change the name of said association to-- "LASALLE
NATIONAL BANK," and have complied with all the provisions of the said Act
relative to national banking associations changing their name.
NOW, THEREFORE, IT IS HEREBY CERTIFIED, that the name of the said
association has been changed to-- "LASALLE NATIONAL BANK," and that such change
of name is hereby approved under authority conferred by said Act.
IN TESTIMONY WHEREOF, witness my hand and seal of office this
(SEAL) FIRST day of MAY, 1940.
/s/
----------------------------------
ACTING Comptroller of the Currency.
<PAGE>
EXHIBIT 3
AUTHORIZATION TO EXERCISE
CORPORATE TRUST POWERS
<PAGE>
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM [LETTERHEAD]
WASHINGTON
May 9, 1940
LaSalle National Bank,
Chicago, Illinois.
Gentlemen:
The Board of Governors of the Federal Reserve System has been
officially advised by the Comptroller of the Currency that on May 1, 1940,
National Builders Bank of Chicago, Chicago, Illinois, changed its title to
LaSalle National Bank, and accordingly there is enclosed herewith a certificate
showing that LaSalle National Bank has authority to exercise the fiduciary
powers enumerated therein.
Kindly acknowledge receipt of this certificate.
Very truly yours,
S. R. Carpenter
---------------
S. R. Carpenter,
Assistant Secretary.
Enclosure
<PAGE>
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON
I, S. R. Carpenter, Assistant Secretary of the Board of Governors of
the Federal Reserve System (formerly known as the Federal Reserve Board), do
hereby certify that it appears from the records of the Board of Governors of the
Federal Reserve System that:
(1) Pursuant to the authority vested in the Federal Reserve Board by an
Act of Congress approved December 23, 1913, known as the Federal Reserve Act, as
amended, the Federal Reserve Board on December 8, 1927, granted to National
Builders Bank of Chicago, Chicago, Illinois, the right to act, when not in
contravention of State or local law, as trustee, executor, administrator,
registrar of stocks and bonds, guardian of estates, assignee, receiver,
committee of estates of lunatics, or in any other fiduciary capacity in which
State banks, trust companies or other corporations which come into competition
with national banks are permitted to act under the laws of the State of
Illinois;
(2) Under the provisions of an Act of Congress approved May 1, 1886,
National Builders Bank of Chicago, Chicago, Illinois, on May 1, 1940, changed
its title to LaSalle National Bank; and
(3) By virtue of the foregoing, LaSalle National Bank, Chicago,
Illinois, has authority to act, when not in contravention of State or local law,
as trustee, executor, administrator, registrar of stocks and bonds, guardian of
estates, assignee, receiver, committee of estates of lunatics, or in any other
fiduciary capacity in which State banks, trust companies or other corporations
which come into competition with national banks are permitted to act under the
laws of the State of Illinois, subject to regulations prescribed by the Board of
Governors of the Federal Reserve System.
IN WITNESS WHEREOF, I have hereunto subscribed my name and caused the
seal of the Board of Governors of the Federal Reserve System to be affixed at
the City of Washington in the District of Columbia.
/s/ S. R. Carpenter
-------------------
Assistant Secretary.
Dated May 9, 1940
<PAGE>
EXHIBIT 4
BY-LAWS OF LA SALLE NATIONAL BANK
<PAGE>
BYLAWS
OF
LA SALLE NATIONAL BANK
CHICAGO, ILLINOIS
LA SALLE NATIONAL BANK (LOGO)
Organized Under the National Banking Laws
of the United States
<PAGE>
BYLAWS
of the
LA SALLE NATIONAL BANK
(a National Banking Association which association
is herein referred to as the "bank")
ARTICLE I
MEETINGS OF SHAREHOLDERS
SECTION 1.1. ANNUAL MEETING. The regular annual meeting of the
shareholders for the election of directors and the transaction of whatever other
business may properly come before the meeting, shall be held at the main office
of the Bank, 135 South LaSalle Street, Chicago, Illinois, or such other place as
the Board of Directors may designate, at 9:00 A.M., on the third Wednesday of
March of each year. Notice of such meeting shall be mailed, postage prepaid, at
least ten days prior to the date thereof, addressed to each shareholder at his
address appearing on the books of the Bank. If for any cause, an election of
directors is not made on the said day, the Board of Directors shall order the
election to be held on some subsequent day as soon thereafter as practicable,
according to the provisions of law; and notice thereof shall be given in the
manner herein provided for the annual meeting.
SECTION 1.2. SPECIAL MEETINGS. Except as otherwise specifically
provided by statute, special meetings of the shareholders may be called for any
purpose at anytime by the board of directors or by any three or more
shareholders owning, in the aggregate, not less than ten percent of the stock of
the bank. Every such special meeting, unless otherwise provided by law, shall be
called by mailing, postage pre-paid, not less than ten days prior to the date
fixed for such meeting, to each shareholder at his address appearing on the
books of the bank, a notice stating the purpose of the meeting.
SECTION 1.3. NOMINATIONS FOR DIRECTOR. Nominations for election to
the board of directors may be made by the board of directors or by any
shareholder of any outstanding class of capital stock of the bank entitled to
vote for the election of directors. Nominations, other than those made by or on
behalf of the existing management of the bank, shall be made in writing and
shall be delivered or mailed to the president of the bank and to the Comptroller
of the Currency, Washington, D.C., not less than 14 days nor more than 50 days
prior to any meeting of shareholders called for the election of directors,
provided, however, that if less than 21 days' notice of the meeting is given to
the shareholders, such nomination shall be mailed or delivered to the president
of the bank and to the Comptroller of the Currency not later than the close of
business on the seventh day following the day on which the notice of meeting was
mailed. Such notification shall contain the following information to the extent
known to the notifying shareholder: (a) the name and address of each proposed
nominee; (b) the principal occupation of each proposed nominee; (c) the total
number of shares of capital stock of each proposed nominee; (d) the name and
address of the notifying shareholder; and (e) the number of shares of capital
stock of the bank owned by the notifying shareholder. Nominations not made in
accordance herewith, may, in his discretion, be disregarded by the chairman of
the meeting, and upon his instructions, the vote tellers may disregard all votes
cast for each such nominee.
SECTION 1.4. JUDGES OF ELECTION. Every election of directors shall be
managed by three judges, who shall be appointed by the board of directors prior
lo the time of said election. The judges of election shall hold and conduct the
election at which they are appointed to serve; and after the election, they
shall file with the cashier a certificate under their hands, certifying the
result thereof and the names of the directors elected. The judges of election.
at the request of the chairman of the meeting, shall act as tellers of any other
vote by ballot taken at such meeting, and shall certify the result thereof.
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SECTION 1.5. PROXIES. Shareholders may vote at any meeting of the
shareholders by proxies duly authorized in writing, but no officer or employee
of this bank shall act as proxy. Proxies shall be valid only for one meeting, to
be specified therein, and any adjournments of such meeting. Proxies shall be
dated and shall be filed with the records of the meeting.
SECTION 1.6. QUORUM. A majority of the outstanding capital stock,
represented in person or by proxy, shall constitute a quorum at any meeting of
shareholders, unless otherwise provided by law; but less than a quorum may
adjourn any meeting, from time to time, and the meeting may be held, as
adjourned, without further notice. A majority of the votes cast shall decide
every question or matter submitted to the shareholders at any meeting, unless
otherwise provided by law or by the articles of association.
ARTICLE II
DIRECTORS
SECTION 2.1. BOARD OF DIRECTORS. The board of directors (hereinafter
referred to as the "board"), shall have power to manage and administer the
business affairs of the bank. Except as expressly limited by law, all corporate
powers of the bank shall be vested in and may be exercised by said board.
SECTION 2.2. NUMBER. The board shall consist of not less than five or
more than twenty-five shareholders, the exact number within such minimum and
maximum limits to be fixed and determined from time to time by resolution of a
majority of the full board or by resolution of the shareholders at any meeting
thereof; provided, however, that a majority of the full board may not increase
the number of directors by more than two if the number of directors last elected
by shareholders was fifteen or less and by not more than four where the number
of directors last elected by shareholders was sixteen or more, provided that in
no event shall the number of directors exceed twenty-five.
SECTION 2.3. ORGANIZATION MEETING. The cashier, upon receiving the
certificate of the judges, of the result of any election, shall notify the
directors-elect of their election and of the time at which they are required to
meet at the main office of the bank for the purpose of organizing the new board
and electing and appointing officers of the bank for the succeeding year. Such
meeting shall be appointed to be held on the day of election or as soon
thereafter as practicable, and, in any event, within thirty days thereof. If, at
the time fixed for such meeting, there shall not be a quorum present the
directors present may adjourn the meeting, from time to time, until a quorum is
obtained.
SECTION 2.4 REGULAR MEETINGS. The regular meetings of the board
shall be held, without notice, on the third Wednesday of each month at the main
office. When any regular meeting of the board falls upon a holiday, the meeting
shall be held on the next banking business day unless the board shall designate
some other day.
SECTION 2.5 SPECIAL MEETINGS. Special meetings of the board may be
called by the chairman of the board, the president, or at the request of three
or more directors. Each member of the board shall be given notice stating the
time and place, by telegram, letter or in person, of each such special meeting.
SECTION 2.6. QUORUM. A majority of the directors shall constitute a
quorum at any meeting, except when otherwise provided by law; but a less number
may adjourn any meeting from time to time, and the meeting may be held, as
adjourned, without further notice.
SECTION 2.7. VACANCIES. When any vacancy occurs among the directors,
the remaining members of the board, in accordance with the laws of the United
States, may appoint a director to fill such vacancy at any regular meeting of
the board, or at a special meeting called for that purpose.
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SECTION 2.8. RETIREMENT POLICY. A retirement policy adopted by the
board of directors shall be applicable to directors who are not active officers
of the bank.
ARTICLE III
COMMITTEES OF THE BOARD
SECTION 3.1. EXECUTIVE COMMITTEE. There shall be an executive
committee of the board. The members of the executive committee shall be chosen
by the board from time to time, shall hold office during its pleasure, and shall
consist of the chairman of the board, the chairman of the executive committee
selected by the board, who may but need not be the same person designated to be
president, and the president, ex officio, and not less than seven additional
members of the board who shall not be active officers of the bank. It shall be
the duty of this committee to exercise such powers and perform such duties in
respect to the making of loans and discounts as shall from time to time be
specified by resolution of the board. During such periods as the board shall not
be in session, the executive committee shall have and may exercise all the
powers of the board except such as are by law or by these bylaws required to be
exercised only by the board. The executive committee may make rules for holding
and conducting its meetings and keep in the minute book of the bank a report of
all action taken which shall be submitted for approval at each regular meeting
of the board and the action of the board shall be recorded in the minutes of
that meeting. A quorum of the executive committee shall consist of not less than
five of its members, at least three of whom shall not be active officers of the
bank. The chairman of the board, or in his absence in the order named if
present, the chairman of the executive committee or the president, may designate
any director who is not an active officer of the bank, or a designated member,
to serve as a member of the executive committee at any specified meeting.
Vacancies in the executive committee at any time existing may be filled by
appointment by the board. The board may at anytime revise or change the
membership and chairmanship of the executive committee and make new or
additional appointments thereto. The chairman of the executive committee shall
be ex officio a member of all committees except the examining committee and the
trust audit committee, and shall have such other duties as may from time to time
be assigned him by the board.
SECTION 3.2. OFFICERS' COMPENSATION COMMITTEE. There shall be an
officers' compensation committee of the board. The members of the officers'
compensation committee shall consist of the members ex officio provided for in
other sections of these bylaws and not less than three additional non-officer
members of the board who shall be appointed by the board each year at its first
meeting after the directors have been elected and qualified. It shall be the
duty of this committee to study the compensation of all officers of the bank and
from time to time report their recommendations to the board; and such other
duties, if any, as may from time to time be assigned to it by the board. A
majority of the committee, including at least two non-officer members, shall be
necessary for the committee to keep records of its action.
SECTION 3.3. EXAMINING COMMITTEE. There shall be an examining
committee of the board. The members of the examining committee shall consist of
the members ex officio provided for in other sections of these bylaws, but
exclusive of any active officer of the bank and not less than three additional
non-officer members of the board who shall be appointed by the board each year
at its first meeting after the directors have been elected and qualified. It
shall be the duty of this committee to make an examination at least twice each
year into the affairs of the bank or to cause the examinations to be made by
accountants (who may be the bank's own accountants) responsible only to the
board in such examinations, and to report the result of such examinations in
writing to the board at the next regular meeting thereafter, or it may, at its
sole discretion, submit the reports of the national bank examiner or of the
Chicago Clearing House Association examination, with or without additional
comments by the committee itself, for, and in lieu of its personal examinations.
Such reports shall state whether the bank is in sound condition, whether
adequate internal audit controls and procedures are being maintained and shall
recommend to the board such changes in the manner of doing business or
conducting the affairs of the bank as shall be deemed advisable.
3
<PAGE>
SECTION 3.4. OTHER COMMITTEES. The board may appoint, from time to
time, from its own members, other committees of one or more persons, for such
purposes and with such powers as the board may determine.
ARTICLE IV
OFFICERS AND EMPLOYEES
SECTION 4.1. CHAIRMAN OF THE BOARD. The board shall appoint one of
its members to be chairman of the board. The chairman of the board shall
supervise the carrying out of the policies adopted or approved by the board. He
shall have general executive powers, as well as the specific powers conferred by
these bylaws. He shall be ex officio a member of all committees, except the
examining committee and the trust audit committee. He shall have general
supervision and direction of the business, affairs and personnel of the bank. He
shall also have and may exercise such further powers and duties as from time to
time may be conferred upon, or assigned to him by the board.
SECTION 4. 2. VICE CHAIRMAN OF THE BOARD. The board may appoint one of
its members to be vice chairman of the board. He shall perform such duties as
may from time to time be assigned to him by the board.
SECTION 4.3. PRESIDENT. The board shall appoint one of its members to
be president of the bank. He shall be the chief executive officer and the chief
administrative officer of the bank and in the absence of the chairman of the
board, he shall preside at any meeting of the board at which he is present. The
president shall have general executive powers, and shall have and may exercise
any and all other powers and duties pertaining by law, regulation, or practice
to the office of president, or imposed by these bylaws. He shall be ex officio a
member of all committees, except the examining committee and trust audit
committee. He shall have general supervision of the business, affairs and
personnel of the bank and in the absence of the chairman of the board, shall
exercise the powers and perform the duties of the chairman of the board. He
shall also have and may exercise such further powers and duties as from time to
time may be conferred upon or assigned to him by the board.
SECTION 4.4. SENIOR OFFICERS. The board may appoint one or more
executive vice presidents and one or more senior vice presidents. Each such
senior officer shall have such powers and duties as may be assigned to him by
the board, the chairman of the board, or the president.
SECTION 4.5. VICE PRESIDENT. The board may appoint one or more vice
presidents. Each vice president shall have such powers and duties as may be
assigned to him by the board, the chairman of the board, or the president.
SECTION 4.6. CASHIER. The board shall appoint a cashier who shall
have such powers and duties as may be assigned to him by the board, the chairman
of the board, or the president. The cashier shall be custodian of the corporate
seal, records, documents and papers of the bank. He shall provide for keeping of
proper records of all transactions of the bank.
SECTION 4.7. SECRETARY. The board shall appoint a secretary who shall
be secretary of the bank. He shall also perform such duties as may be assigned
to him from time to time by the board. The board may appoint a secretary of the
board who shall keep accurate minutes of all meetings. He shall attend to the
giving of all notices; he shall also perform such other duties as may be
assigned to him from time to time by the board.
SECTION 4.8. OTHER OFFICERS. The board may appoint one or more
assistant vice presidents, one or more trust officers, one or more assistant
secretaries, one or more assistant cashiers, and such other officers and
attorneys-in-fact as from time to time may appear to the board to be required or
desirable to transact the business of
4
<PAGE>
the bank. Such officers, respectively, shall exercise such powers and perform
such duties as pertain to their several offices or as may be conferred upon or
assigned to them by the board the chairman of the board or the president.
SECTION 4.9. CLERKS AND AGENTS. The chairman of the board, the
president, or any other active officer of the bank authorized by the chairman of
the board, or the president, may appoint and dismiss all or any paying tellers
receiving tellers note tellers, vault custodians, bookkeepers and other clerks,
agents and employees as they may deem advisable for the prompt and orderly
transaction of the business of the bank, define their duties, fix the salaries
to be paid them and the conditions of their employment.
SECTION 4.10. RESPONSIBILITY FOR MONEYS, ETC. Each of the active
officers and clerks of this bank shall be responsible for all moneys, funds
valuables and property of every kind and description that may from time to time
be entrusted to his care or placed in his hands by the board or others, or that
otherwise may come into his possession as an active officer or clerk of this
bank.
SECTION 4.11. SURETY BONDS. All the active officers and clerks of this
bank may be covered by one of the blanket form bonds customarily written by the
surety companies, drawn for such an amount, and executed by such surety company,
as the board may from time to time require, and duly approve; or at the
discretion of the board, all such active officers and clerks shall, each for
himself, give such bond, with such security, and in such denominations as the
board may from time to time require and direct. All bonds approved by the board
shall assure the faithful and honest discharge of the respective duties of such
active officer or clerk and shall provide that such active officer or clerk
shall faithfully apply and account for all moneys, funds, valuables and property
of every kind and description that may from time to time come into his hands or
be entrusted to his care, and pay over and deliver the same to the order of the
board or to such other person or persons as may be authorized to demand and
receive the same.
SECTION 4.12. TERM OF OFFICE - OFFICER DIRECTOR. The chairman of the
board, the vice chairman of the board and the president, together with any other
active officers who may be duly elected members of the board, shall hold their
respective offices for the current year for which the board (of which they shall
be members) was elected and until their successors are appointed, unless they
shall resign, be disqualified, or be removed; and any vacancy occurring in the
office of the chairman of the board, the vice chairman of the board, the
president, or in the board, shall, if required by these bylaws, be filled by the
remaining members.
SECTION 4.13. TERM OF OFFICE - OFFICER. The executive vice presidents,
the senior vice presidents, the vice presidents, the assistant vice presidents,
the cashier, the secretary, the trust officers and all other officers and
attorneys-in-fact who are not duly elected members of the board, shall be
appointed to hold their offices, respectively, during the pleasure of the board.
ARTICLE V
TRUST DEPARTMENT
SECTION 5.1. TRUST DEPARTMENT. There shall be a department of the
bank known as the trust department which shall perform the fiduciary
responsibilities of the bank.
SECTION 5.2. TRUST OFFICER. There shall be a senior vice president
and trust officer, or vice president and trust officer of this bank, who shall
be designated as the managing officer of the trust department and whose duties
shall be to manage, supervise and direct all the activities of the trust
department. He shall do, or cause to be done, all things necessary or proper in
carrying on the business of the trust department in accordance with provisions
of law and regulations. He shall act pursuant to opinion of counsel where such
opinion is deemed necessary. Opinions of counsel shall be retained on file in
connection with all important matters pertaining to fiduciary activities. The
trust officer shall be responsible for all assets and documents held by the bank
in connection with fiduciary matters.
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The board may appoint such other officers of the trust department as it may deem
necessary, with such duties as may be assigned to them by the board, the
chairman of the board, or the president.
SECTION 5.3. TRUST INVESTMENT COMMITTEE. There shall be appointed by
the board a trust investment committee of this bank composed of not less than
four members, including members ex officio provided for in other sections of
these bylaws, who shall be capable and experienced officers or directors of the
bank. All investments of funds held in a fiduciary capacity shall be made,
retained or disposed of only with the approval of the trust investment
committee; and the committee shall keep minutes of all its meetings, showing the
disposition of all matters considered and passed upon by it. The committee
shall, promptly after the acceptance of an account for which the bank has
investment responsibilities, review the assets thereof, to determine the
advisability of retaining or disposing of such assets. The committee shall
conduct a similar review at least once during each calendar year thereafter and
within fifteen months of the last such review. A report of all such reviews,
together with the action taken as a result thereof, shall be noted in the
minutes of the committee. Three members of the trust investment committee shall
constitute a quorum, and any action approved by a majority of those present
shall constitute the action of the committee.
SECTION 5.4. TRUST AUDIT COMMITTEE. The board shall appoint a
committee of not less than three directors, including members ex officio
provided for in other sections of these bylaws, exclusive of any active officers
of the bank, which shall at least once during each calendar year and within
fifteen months of the last such audit make suitable audits of the trust
department, or cause suitable audits to be made, by auditors responsible only to
the board, and at such time shall ascertain whether the department has been
administered in accordance with law, Regulation 9, and sound fiduciary
principles. Notwithstanding the provisions of this Section, the board at any
time may assign to the Examining Committee, in addition to the duties of the
Examining Committee set forth in Section 3.3 of these bylaws, all of the duties
of the Trust Audit Committee and during such time as the Examining Committee is
performing the duties of both committees, the Trust Audit Committee shall cease
to function as a committee of this board. The board at any time may reassign the
duties provided for in this Section to the Trust Audit Committee.
SECTION 5.5. TRUST DEPARTMENT FILES. There shall be maintained in the
trust department, files containing all fiduciary records necessary to assure
that its fiduciary responsibilities have been properly undertaken and
discharged.
SECTION 5.6. TRUST INVESTMENTS. Funds held in a fiduciary capacity
shall be invested in accordance with the instrument establishing the fiduciary
relationship and local law. Where such instrument does not specify the character
and class of investments to be made and does not vest in the bank a discretion
in the matter, fund shield pursuant to such instrument shall be invested in
investments in which corporate fiduciaries may invest under local law.
ARTICLE VI
STOCK AND STOCK CERTIFICATES
SECTION 6.1. TRANSFERS. Shares of capital stock shall be transferable
on the books of the bank and a transfer book shall be kept in which all
transfers of stock shall be recorded. Every person becoming a shareholder be
such transfer shall in proportion to his shares, succeed to all rights and
liabilities of the prior holder of such shares.
SECTION 6.2. STOCK CERTIFICATES. Certificates of capital stock shall
bear the signature of any one of, the chairman of the board, or the president
(which may be engraved, printed or impressed) and shall be signed manually or by
facsimile process by the secretary, assistant secretary, cashier, assistant
cashier, or any other officer appointed by the board for that purpose, to be
known as an authorized officer and the seal of the bank shall be engraven
thereon. Each certificate shall recite on its face that the stock represented
thereby is transferable, properly endorsed, only on the books of the bank.
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ARTICLE VII
CORPORATE SEAL
SECTION 7.1. CORPORATE SEAL. The chairman of the board, the
president, the cashier, the secretary or any assistant cashier or assistant
secretary, or other officer thereunto designated by the board, shall have
authority to affix the corporate seal to any document requiring such seal, and
to attest the same. Such seal shall be substantially in the form set forth
herein.
ARTICLE VIII
INDEMNIFYING OFFICERS AND DIRECTORS
SECTION 8.1. INDEMNIFYING OFFICERS AND DIRECTORS. Any person, his
heirs, executors or administrators, may be indemnified or reimbursed by the bank
for reasonable expenses actually incurred in connection with any action, suit or
proceeding, civil or criminal, to which he or they shall be made a party by
reason of his being or having been a director, officer or employee of the bank
or of any firm, corporation or organization which he served in any such capacity
at the request of the bank; provided, however, that no person shall be so
indemnified or reimbursed in relation to any matter in such action, suit or
proceeding as to which he shall finally be adjudged to have been guilty of or
liable for negligence or willful misconduct in the performance of his duties to
the bank; and, provided further, that no person shall be so indemnified or
reimbursed in relation to any matter in such action, suit or proceeding which
has been made the subject of a compromise settlement except with the approval of
a court of competent jurisdiction, or the holders of record of a majority of the
outstanding shares of the bank, or the board, acting by vote of directors not
parties to the same or substantially the same action suit or proceeding,
constituting a majority of the whole number of the directors. The foregoing
right of indemnification or reimbursement shall not be exclusive of other rights
to which such person, his heirs, executors or administrators, may be entitled as
a matter of law.
ARTICLE IX
MISCELLANEOUS PROVISIONS
SECTION 9.1. FISCAL YEAR. The fiscal year of the bank shall be the
calendar year.
SECTION 9.2. EXECUTION OF INSTRUMENTS. All agreements, indentures
mortgages, deeds, conveyances transfers certificates declarations, receipts,
discharges, releases, satisfactions, settlements, petitions, schedules,
accounts, affidavits, bonds, undertakings, proxies and other instruments or
documents may be signed, executed, acknowledged, verified, delivered or accepted
for the bank by the chairman of the board, or the vice chairman of the board, or
the president, or any executive vice president, or any senior vice president, or
any vice president, or the secretary or the cashier, or, if in connection with
the exercise of fiduciary powers of the bank by any of said officers or by any
officer in the trust department. Any such instruments may also be signed,
executed, acknowledged, verified, delivered or accepted for the bank in such
other manner and by such other officers as the board may from time to time
direct. The provisions of this Section 9.2 are supplementary to any other
provisions of these bylaws.
SECTION 9.3. RECORDS. The articles of association, the bylaws, and
the proceedings of all meetings of the shareholders and of the board shall be
recorded in appropriate minute books provided for the purpose; where these
bylaws so provide, the proceedings of standing committees of the board shall be
recorded in appropriate minute books provided for the purpose.
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ARTICLE X
EMERGENCIES
SECTION 10.1. CONTINUATION OF BUSINESS. In the event of a state of
emergency of sufficient severity to interfere with the conduct and management of
the affairs of this bank, the officers and employees will continue to conduct
the affairs of the bank under such guidance from the directors as may be
available except as to matters which by statute require specific approval of the
board of directors and subject to conformance with any governmental directives
during the emergency.
SECTION 10.2. DESIGNATION OF PLACE OF BUSINESS. The offices of the
bank at which its business shall be conducted shall be the main office thereof
located at 135 South LaSalle Street, Chicago, Illinois, and any other legally
authorized location which may be leased or acquired by this bank to carry on its
business. During an emergency resulting in any authorized place of business of
this bank being unable to function, the business ordinarily conducted at such
location shall be relocated elsewhere in suitable quarters, in addition to or in
lieu of the locations heretofore mentioned, as may be designated by the board of
directors or by the executive committee or by such persons as are then, in
accordance with resolutions adopted from time to time by the board of directors
dealing with the exercise of authority in the time of such emergency, conducting
the affairs of this bank. Any temporarily relocated place of business of this
bank shall be returned to its legally authorized location as soon as practicable
and such temporary place of business shall then be discontinued.
ARTICLE XI
BYLAWS
SECTION 11.1 INSPECTION. A copy of the bylaws with all amendments
thereto, shall at all times be kept in a convenient place at the main office of
the bank and shall be open for inspection to all shareholders, during banking
hours.
SECTION 11.2 AMENDMENTS. The bylaws may be amended, altered or
repealed, at any regular meeting of the board, by a vote of a majority of the
whole number of the directors.
***
I........................................... hereby certify that I am
the................................ Cashier/Secretary of LaSalle National Bank,
Chicago, Illinois and that the foregoing is a true and correct copy of the
bylaws of this bank as amended and that the same are in full force and effect
............. day of...................19........
...............................
Cashier/Secretary.
December 15, 1982
(SEAL)
8
<PAGE>
EXHIBIT 5
NOT APPLICABLE
<PAGE>
EXHIBIT 6
LaSalle National Bank hereby consents in accordance with the provisions of
Section 321(b) of the Trust Indenture Act of 1939, that reports of examinations
by Federal, State, Territorial and District authorities may be furnished by such
authorities to the Securities and Exchange Commission upon its request therefor.
LA SALLE NATIONAL BANK
By: /s/ Sarah H. Webb
-----------------
Sarah H. Webb
Vice President
<PAGE>
EXHIBIT 7
Latest Report of Condition of
Trustee published pursuant to
law or the requirement of its
surviving or examining authority.
<PAGE>
<TABLE>
<CAPTION>
LaSalle National Bank Call Date: 03/31/96 ST-BK: 17-1520 FFIEC 031
120 South LaSalle Street Page RC- 1
Chicago, IL 60603 Vendor ID: D CERT: 15407 11
Transit Number: 71000505
CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL
AND STATE-CHARTERED SAVINGS BANKS FOR MARCH 31, 1996
All schedules are to be reported in thousands of dollars. Unless otherwise indicated,
report the amount outstanding as of the last business day of the quarter.
SCHEDULE RC - BALANCE SHEET
C400
Dollar Amounts in Thousands
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
1. Cash and balances due from depository institutions (from Schedule RC-A): RCFD
----
a. Noninterest-bearing balances and currency and coin (1)______________________________ 0081. . 446,076 1.a
b. Interest-bearing balances (2)_______________________________________________________ 0071. . 154 1.b
2. Securities:
a. Held-to-maturity securities (from Schedule RC-B, column A)__________________________ 1754. . 1,195,696 2.a
b. Available-for-sale securities (from Schedule RC-B, column D)________________________ 1773. . 2,548,598 2.b
3. Federal funds sold and securities purchased under agreements to resell in domestic
offices of the bank and of its Edge and Agreement subsidiaries, and in IBFs:
a. Federal funds sold__________________________________________________________________ 0276. . 80,011 3.a
b. Securities purchased under agreements to resell_____________________________________ 0277. . 0 3.b
4. Loans and lease financing receivables:
a. Loans and leases, net of unearned income RCFD
----
(from Schedule RC-C)__________________________________ 2122 . . 7,079,017 . . . . . . 4.a
b. LESS: Allowance for loan and lease losses_____________ 3123 . . 134,451 . . . . . . 4.b
c. LESS: Allocated transfer risk reserve_________________ 3128 . . 0 . . . . . . 4.c
d. Loans and leases, net of unearned income,
allowance, and reserve (item 4.a minus 4.b and 4.c)_________________________________ 2125. . 6,944,566 4.d
5. Trading assets (from Schedule RC-D)______________________________________________________ 3545. . 149,790 5.
6. Premises and fixed assets (including capitalized leases)_________________________________ 2145. . 33,058 6.
7. Other real estate owned (from Schedule RC-M)_____________________________________________ 2150. . 6,163 7.
8. Investments in unconsolidated subsidiaries and associated companies (from
Schedule RC-M)___________________________________________________________________________ 2130. . 0 8.
9. Customers' liability to this bank on acceptances outstanding_____________________________ 2155. . 19,344 9.
10. Intangible assets (from Schedule RC-M)___________________________________________________ 2143. . 23,057 10.
11. Other assets (from Schedule RC-F)________________________________________________________ 2160. . 193,686 11.
12. Total assets (sum of items 1 through 11)_________________________________________________ 2170. . 11,640,199 12.
</TABLE>
- -----------
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held for trading.
<PAGE>
<TABLE>
<CAPTION>
LaSalle National Bank Call Date: 03/31/96 ST-BK: 17-1520 FFIEC 031
120 South LaSalle Street Page RC- 2
Chicago, IL 60603 Vendor ID: D CERT: 15407
Transit Number: 71000505 12
SCHEDULE RC - CONTINUED
Dollar Amounts in Thousands
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES
13. Deposits:
a. In domestic offices (sum of totals of RCON
----
columns A and C from Schedule RC-E, part I). . . . . . . . . . . . . . . . . . . . . 2200. . 5,935,887 13.a
RCON
----
(1) Noninterest-bearing (1). . . . . . . . . . . . . . 6631. . 1,269,021 . . . . . . 13.a.1
(2) Interest-bearing . . . . . . . . . . . . . . . . . 6636. . 4,666,866 . . . . . . 13.a.2
RCFN
----
b. In foreign offices, Edge and Agreement subsidiaries and IBFs (from
Schedule RC-E, part II). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2200 1,900,691 13.b
RCFN
----
(1) Noninterest-bearing. . . . . . . . . . . . . . . . 6631. . 0 . . . . . . 13.b.1
(2) Interest-bearing . . . . . . . . . . . . . . . . . 6636. . 1,900,691 . . . . . . 13.b.2
14. Federal funds purchased and securities sold under agreements to repurchase in
domestic offices of the bank and of its Edge and Agreement subsidiaries, and
in IBFs: RCFD
----
a. Federal funds purchased. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0278. . 1,393,048 14.a
b. Securities sold under agreements to repurchase . . . . . . . . . . . . . . . . . . . 0279. . 234,586 14.b
RCON
----
15. a. Demand notes issued to the U.S. Treasury . . . . . . . . . . . . . . . . . . . . . . 2840. . 97,816 15.a
RCFD
----
b. Trading liabilities (from Schedule RC-D) . . . . . . . . . . . . . . . . . . . . . . 3548. . 56,962 15.b
16. Other borrowed money:
a. With a remaining maturity of one year or less. . . . . . . . . . . . . . . . . . . . 2332. . 699,840 16.a
b. With a remaining maturity of more than one year. . . . . . . . . . . . . . . . . . . 2333. . 93,592 16.b
17. Mortgage indebtedness and obligations under capitalized leases. . . . . . . . . . . . . . 2910. . 0 17.
18. Bank's liability on acceptances executed and outstanding. . . . . . . . . . . . . . . . . 2920. . 19,344 18.
19. Subordinated notes and debentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3200. . 242,500 19.
20. Other liabilities (from Schedule RC-G). . . . . . . . . . . . . . . . . . . . . . . . . . 2930. . 283,943 20.
21. Total liabilities (sum of items 13 through 20). . . . . . . . . . . . . . . . . . . . . . 2948. . 10,958,209 21.
22. Limited-life preferred stock and related surplus. . . . . . . . . . . . . . . . . . . . . 3282. . 0 22.
EQUITY CAPITAL
RCFD
----
23. Perpetual preferred stock and related surplus . . . . . . . . . . . . . . . . . . . . . . 3838. . 0 23.
24. Common stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3230. . 18,417 24.
25. Surplus (exclude all surplus related to preferred stock). . . . . . . . . . . . . . . . . 3839. . 126,213 25.
26. a. Undivided profits and capital reserves . . . . . . . . . . . . . . . . . . . . . . . 3632. . 543,327 26.a
b. Net unrealized holding gains (losses) on available-for-sale securities . . . . . . . 8434. . ( 5,967) 26.b
27. Cumulative foreign currency translation adjustments . . . . . . . . . . . . . . . . . . . 3284. . 0 27.
28. Total equity capital (sum of items 23 through 27) . . . . . . . . . . . . . . . . . . . . 3210. . 681,990 28.
29. Total liabilities, limited-life preferred stock, and equity capital (sum of
items 21, 22, and 28) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3300. . 11,640,199 29.
MEMORANDUM
TO BE REPORTED ONLY WITH THE MARCH REPORT OF CONDITION.
1. Indicate in the box at the right the number of the statement below that
best describes the most comprehensive level of auditing work performed
for the bank by independent external auditors as of any date RCFD Number
---- ------
during 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6724. . 2 M.1
</TABLE>
1 = Independent audit of the bank conducted in accordance with generally
accepted auditing standards by a certified public accounting firm which
submits a report on the bank
2 = Independent audit of the bank's parent holding company conducted in
accordance with generally accepted auditing standards by a certified public
accounting firm which submits a report on the consolidated holding company
(but not on the bank separately)
3 = Directors' examination of the bank conducted in accordance with generally
accepted auditing standards by a certified public accounting firm (may be
required by state chartering authority)
4 = Directors' examination of the bank performed by other external auditors
(may be required by state chartering authority)
5 = Review of the bank's financial statements by external auditors
6 = Compilation of the bank's financial statements by external auditors
7 = Other audit procedures (excluding tax preparation work)
8 = No external audit work
- ----------
(1) Includes total demand deposits and noninterest-bearing time and savings
deposits.
<PAGE>
EXHIBIT 8
NOT APPLICABLE
<PAGE>
EXHIBIT 9
NOT APPLICABLE
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF PACKAGING RESOURCES INCORPORATED CONTAINED IN ITS
REGISTRATION STATEMENT ON FORM S-1 FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION ON JUNE 12, 1996 AND IS QUALIFIEID IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> FEB-29-1996
<PERIOD-START> MAR-01-1995
<PERIOD-END> FEB-29-1996
<CASH> 398
<SECURITIES> 0
<RECEIVABLES> 10,875
<ALLOWANCES> 156
<INVENTORY> 21,394
<CURRENT-ASSETS> 34,123
<PP&E> 92,455
<DEPRECIATION> 40,103
<TOTAL-ASSETS> 110,683
<CURRENT-LIABILITIES> 17,161
<BONDS> 61,174
0
0
<COMMON> 20,278
<OTHER-SE> (2,013)
<TOTAL-LIABILITY-AND-EQUITY> 110,683
<SALES> 133,356
<TOTAL-REVENUES> 133,756
<CGS> 111,448
<TOTAL-COSTS> 9,298
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,671
<INCOME-PRETAX> 2,339
<INCOME-TAX> 1,006
<INCOME-CONTINUING> 1,333
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,333
<EPS-PRIMARY> 1.333
<EPS-DILUTED> 1.333
</TABLE>
<PAGE>
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
, 1996, UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERS MAY BE
WITHDRAWN PRIOR TO 5:00 P.M., EASTERN STANDARD TIME, ON THE EXPIRATION DATE.
PACKAGING RESOURCES INCORPORATED
One Conway Park
100 Field Drive, Suite 300
Lake Forest, Illinois 60045
LETTER OF TRANSMITTAL
TO EXCHANGE 11 5/8% SENIOR SECURED NOTES DUE 2003
Exchange Agent:
LASALLE NATIONAL BANK
To: LaSalle National Bank
FACSIMILE TRANSMISSION:
(312) 904-2236
CONFIRM BY TELEPHONE TO:
(312) 904-2444
BY MAIL/HAND DELIVERY/OVERNIGHT DELIVERY:
LaSalle National Bank
Corporate Trust Division
135 South LaSalle Street
Suite 1825
Chicago, Illinois 60603
Attention: Sarah H. Webb
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE DOES NOT
CONSTITUTE A VALID DELIVERY.
<PAGE>
The undersigned acknowledges receipt of the Prospectus dated ,
1996, (as the same may be amended or supplemented from time to time, the
"Prospectus") of Packaging Resources Incorporated, a Delaware corporation (the
"Issuer"), and this Letter of Transmittal for 11 5/8% Senior Secured Notes 2003
which may be amended from time to time (this "Letter"), which together
constitute the Issuer's offer (the "Exchange Offer") to exchange $1,000
principal amount of its 11 5/8% Senior Secured Notes due 2003 which have been
registered under the Securities Act of 1933, as amended (the "Exchange Notes"),
for each $1,000 in principal amount of its outstanding 11 5/8% Senior Secured
Notes due 2003 (the "Old Notes") that were issued and sold in a transaction (the
"Initial Offering") exempt from registration under the Securities Act of 1933,
as amended (the "Securities Act").
The undersigned has completed, executed and delivered this Letter to
indicate the action he or she desires to take with respect to the Exchange
Offer.
All holders of Old Notes who wish to tender their Old Notes must, prior to
the Expiration Date: (1) complete, sign, date and deliver this Letter, or a
facsimile thereof, to the Exchange Agent, in person or to the address set forth
above; and (2) tender his or her Old Notes or, if a tender of Old Notes is to be
made by book-entry transfer to the account maintained by the Exchange Agent at
The Depository Trust Company (the "Book-Entry Transfer Facility"), confirm such
book-entry transfer (a "Book-Entry Confirmation"), in each case in accordance
with the procedures for tendering described in the Instructions to this Letter.
Holders of Old Notes whose certificates are not immediately available, or who
are unable to deliver their certificates or Book-Entry Confirmation and all
other documents required by this Letter to be delivered to the Exchange Agent on
or prior to the Expiration Date, must tender their Old Notes according to the
guaranteed delivery procedures set forth under the caption "The Exchange Offer
- -- How to Tender" in the Prospectus. (See Instruction 1).
Upon the terms and subject to the conditions of the Exchange Offer, the
acceptance for exchange of Old Notes validly tendered and not withdrawn and the
issuance of the Exchange Notes will be made on the Exchange Date. For the
purposes of the Exchange Offer, the Issuer shall be deemed to have accepted for
exchange validly tendered Old Notes when, as and if the Issuer has given written
notice thereof to the Exchange Agent.
The Instructions included with this Letter must be followed in their
entirety. Questions and requests for assistance or for additional copies of the
Prospectus or this Letter may be directed to the Exchange Agent, at the address
listed above, or Jerry J. Corirossi, Vice President -- Finance and
Administration of the Issuer, at (847) 295-6100, One Conway Park, 100 Field
Drive, Suite 300, Lake Forest, Illinois 60045.
<PAGE>
PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL, INCLUDING
THE INSTRUCTIONS TO THIS LETTER, CAREFULLY
BEFORE CHECKING ANY BOX BELOW
Capitalized terms used in this Letter and not defined herein shall have the
respective meanings ascribed to them in the Prospectus.
List in Box 1 below the Old Notes of which you are the holder. If the space
provided in Box 1 is inadequate, list the certificate numbers and principal
amount of Old Notes on a separate signed schedule and affix that schedule to
this Letter.
BOX 1
TO BE COMPLETED BY ALL TENDERING HOLDERS
<TABLE>
<S> <C> <C> <C>
PRINCIPAL
PRINCIPAL AMOUNT OF
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) CERTIFICATE AMOUNT OF OLD OLD NOTES
(PLEASE FILL IN IF BLANK) NUMBER(S) (1) NOTES TENDERED (2)
Totals:
</TABLE>
(1) Need not be completed if Old Notes are being tendered by book-entry
transfer.
(2) Unless otherwise indicated, the entire principal amount of Old Notes
represented by a certificate or Book-Entry Confirmation delivered to the
Exchange Agent will be deemed to have been tendered.
<PAGE>
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned tenders to the Issuer the principal amount of Old Notes indicated
above. Subject to, and effective upon, the acceptance for exchange of the Old
Notes tendered with this Letter, the undersigned exchanges, assigns and
transfers to, or upon the order of, the Issuer all right, title and interest in
and to the Old Notes tendered.
The undersigned constitutes and appoints the Exchange Agent as his or her
agent and attorney-in-fact (with full knowledge that the Exchange Agent also
acts as the agent of the Issuer) with respect to the tendered Old Notes, with
full power of substitution, to: (a) deliver certificates for such Old Notes; (b)
deliver Old Notes and all accompanying evidence of transfer and authenticity to
or upon the order of the Issuer upon receipt by the Exchange Agent, as the
undersigned's agent, of the Exchange Notes to which the undersigned is entitled
upon the acceptance by the Issuer of the Old Notes tendered under the Exchange
Offer; (c) presentation of Old Notes for transfer on the register for such Old
Notes; and (d) receive all benefits and otherwise exercise all rights of
beneficial ownership of the Old Notes, all in accordance with the terms of the
Exchange Offer. The power of attorney granted in this paragraph shall be deemed
irrevocable and coupled with an interest.
The undersigned hereby represents and warrants that he or she has full power
and authority to tender, exchange, assign and transfer the Old Notes tendered
hereby and that the Issuer will acquire good and unencumbered title thereto,
free and clear of all liens, restrictions, charges and encumbrances and not
subject to any adverse claim. The undersigned will, upon request, execute and
deliver any additional documents deemed by the Issuer to be necessary or
desirable to complete the assignment and transfer of the Old Notes tendered.
By tendering Old Notes, the undersigned certifies (a) that it is not an
affiliate (as defined in Rule 501 of the Securities Act, an "Affiliate") of the
Issuer, that it is not a broker-dealer that owns Old Notes acquired directly
from the Issuer or an Affiliate of the Issuer, that it is acquiring the Exchange
Notes offered hereby in the ordinary course of the undersigned's business and
that the undersigned has no arrangement with any person to participate in the
distribution of such Exchange Notes; (b) that it is an Affiliate of the Issuer
or of the Initial Purchasers (as defined in the Prospectus) of the Old Notes in
the Initial Offering and that it will comply with the registration and
prospectus delivery requirements of the Securities Act to the extent applicable
to it; or (c) that it is a Participating Broker-Dealer (as defined in the
Registration Rights Agreement) and that it will deliver a prospectus in
connection with any resale of the Exchange Notes.
The undersigned acknowledges that, if it is a broker-dealer that will
receive Exchange Notes for its own account, it will deliver a prospectus in
connection with any resale of such Exchange Notes. By so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act.
The undersigned understands that the Issuer may accept the undersigned's
tender by delivering written notice of acceptance to the Exchange Agent, at
which time the undersigned's right to withdraw such tender will terminate.
All authority conferred or agreed to be conferred by this Letter shall
survive the death or incapacity of the undersigned, and every obligation of the
undersigned under this Letter shall be binding upon the undersigned's heirs,
personal representatives, successors and assigns. Tenders may be withdrawn only
in accordance with the procedures set forth in the Instructions contained in
this Letter.
Unless otherwise indicated under "Special Delivery Instructions" below, the
Exchange Agent will deliver Exchange Notes (and, if applicable, a certificate
for any Old Notes not tendered but represented by a certificate also
encompassing Old Notes which are tendered) to the undersigned at the address set
forth in Box 1.
The undersigned acknowledges that the Exchange Offer is subject to the more
detailed terms set forth in the Prospectus and, in case of any conflict between
the terms of the terms of the Prospectus and this Letter, the Prospectus shall
prevail.
<PAGE>
/ / CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE
BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution: __________________________________________
Account Number: _________________________________________________________
Transaction Code Number: ________________________________________________
- --------------------------------------------------------------------------------
/ / CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE
OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE
THE FOLLOWING:
Name(s) of Registered Owner(s): _________________________________________
Date of Execution of Notice of Guaranteed Delivery: _____________________
Window Ticket Number (if available): ____________________________________
Name of Institution which Guaranteed Delivery: __________________________
<PAGE>
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
BOX 2
PLEASE SIGN HERE
WHETHER OR NOT OLD NOTES ARE BEING
PHYSICALLY TENDERED HEREBY
This box must be signed by registered holder(s) of Old Notes as
their name(s) appear(s) on certificate(s) for Old Notes, or by
person(s) authorized to become registered holder(s) by endorsement
and documents transmitted with this Letter. If signature is by a
trustee, executor, administrator, guardian, officer or other
person acting in a fiduciary or representative capacity, such
person must set forth his or her full title below. (See
Instruction 3)
X ______________________________________________________________________________
X ______________________________________________________________________________
Signature(s) of Owner(s) or Authorized Signatory
Date: ____________, 1996
Name(s): _______________________________________________________________________
(Please Print)
Capacity: ______________________________________________________________________
Address: _______________________________________________________________________
(Include Zip Code)
Area Code and Telephone No.: ___________________________________________________
PLEASE COMPLETE SUBSTITUTE FORM W-9 HEREIN
SIGNATURE GUARANTEE (SEE INSTRUCTIONS 4 BELOW)
CERTAIN SIGNATURES MUST BE GUARANTEED BY AN ELIGIBLE INSTITUTION
________________________________________________________________________________
(Name of Eligible Institution Guaranteeing Signatures)
________________________________________________________________________________
(Address (including zip code) and Telephone Number (including area code) of
Firm)
________________________________________________________________________________
(Authorized Signature)
________________________________________________________________________________
(Title)
________________________________________________________________________________
(Printed Name)
Date: ____________, 1996
<PAGE>
BOX 3
TO BE COMPLETED BY ALL TENDERING HOLDERS
PAYOR'S NAME: LASALLE NATIONAL BANK
<TABLE>
<S> <C> <C>
Part 1 Social Security Number or
PLEASE PROVIDE YOUR TIN IN THE BOX AT RIGHT Employer Identification
AND CERTIFY BY SIGNING AND DATING BELOW. Number
SUBSTITUTE Part 2 / /
Form W-9 Department Check the box if you are NOT subject to back-up withholding under the
of the Treasury, provisions of Section 2406(a)(1)(C) of the Internal Revenue Code
Internal Revenue because (1) you have not been notified that you are subject to back-up
Service withholding as a result of failure to report all interest or dividends
or (2) the Internal Revenue Service has notified you that you are no
longer subject to back-up withholding.
Payor's Request for Part 3 / /
Taxpayer Check if
Identification Awaiting TIN
Number (TIN)
CERTIFICATION UNDER THE PENALTIES OF PERJURY, I CERTIFY THAT THE
INFORMATION PROVIDED ON THIS FORM IS TRUE, CORRECT AND COMPLETE.
Signature Date , 1996
Name: (Please Print)
</TABLE>
<PAGE>
<TABLE>
<S> <C>
BOX 4 BOX 5
SPECIAL ISSUANCE INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 3 and 4) (See Instructions 3 and 4)
To be completed ONLY if certificates for Old To be completed ONLY if certificates for Old
Notes in a principal amount not exchanged, or Notes in a principal amount not exchanged, or
Exchange Notes, are to be issued in the name Exchange Notes, are to be sent to someone
of someone other than the person whose other than the person whose signature appears
signature appears in Box 2, or if Old Notes in Box 2 or to an address other than that
delivered by book-entry transfer which are shown in Box 1.
not accepted for exchange are to be returned Deliver:
by credit to an account maintained at the (check appropriate boxes)
Book-Entry Transfer Facility other than the / / Old Notes not tendered
account indicated above. / / Exchange Notes, to:
Issue and deliver: (Please Print)
(check appropriate boxes) Name:
/ / Old Notes not tendered Address:
/ / Exchange Notes, to:
(Please Print)
Name:
Address: Please complete the Substitute Form W-9 at
Box 3
Tax I.D. or Social Security Number:
Please complete the Substitute Form W-9 at
Box 3
Tax I.D. or Social Security Number:
</TABLE>
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND
CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER AND CERTIFICATES. Certificates for Old Notes or
a Book-Entry Confirmation, as the case may be, as well as a properly completed
and duly executed copy of this Letter and any other documents required by this
Letter, must be received by the Exchange Agent at one of its addresses set forth
herein on or before the Expiration Date. The method of delivery of this Letter,
certificates for Old Notes or a Book-Entry Confirmation, as the case may be, and
any other required documents is at the election and risk of the tendering
holder, but except as otherwise provided below, the delivery will be deemed made
when actually received by the Exchange Agent. If delivery is by mail, the use of
registered mail with return receipt requested, properly insured, is suggested.
If tendered Old Notes are registered in the name of the signer of the Letter
of Transmittal and the Exchange Notes to be issued in exchange therefor are to
be issued (and any untendered Old Notes are to be reissued) in the name of the
registered holder, the signature of such signer need not be guaranteed. In any
other case, the tendered Old Notes must be endorsed or accompanied by written
instruments of transfer in form satisfactory to the Issuer and duly executed by
the registered holder and the signature on the endorsement or instrument of
transfer must be guaranteed by a bank, broker, dealer, credit union, savings
association, clearing agency or other institution (each an "Eligible
Institution") that is a member of a recognized signature guarantee medallion
program within the meaning of Rule 17Ad-15 under the Exchange Act of 1934, as
amended. If the Exchange Notes and/or Old Notes not exchanged are to be
delivered to an address other than that of the registered holder appearing on
the note register for the Old Notes, the signature on the Letter of Transmittal
must be guaranteed by an Eligible Institution.
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
Old Notes should contact such holder promptly and instruct such holder to tender
Old Notes on such beneficial owner's behalf. If such beneficial owner wishes to
tender such Old Notes himself, such beneficial owner must, prior to completing
and executing the Letter of Transmittal and delivering such Old Notes, either
make appropriate arrangements to register ownership of the Old Notes in such
beneficial owner's name or follow the procedures described in the immediately
preceding paragraph. The transfer of record ownership may take considerable
time.
Holders whose Old Notes are not immediately available or who cannot deliver
their Old Notes or a Book-Entry Confirmation, as the case may be, and all other
required documents to the Exchange Agent on or before the Expiration Date may
tender their Old Notes pursuant to the guaranteed delivery procedures set forth
in the Prospectus. Pursuant to such procedure: (i) tender must be made by or
through an Eligible Institution; (ii) prior to the Expiration Date, the Exchange
Agent must have received from the Eligible Institution a properly completed and
duly executed Notice of Guaranteed Delivery (by telegram, telex, facsimile
transmission, mail or hand delivery) (x) setting forth the name and address of
the holder, the description of the Old Notes and the principal amount of Old
Notes tendered, (y) stating that the tender is being made thereby and (z)
guaranteeing that, within five New York Stock Exchange trading days after the
date of execution of such Notice of Guaranteed Delivery, this Letter together
with the certificates representing the Old Notes or a Book-Entry Confirmation,
as the case may be, and any other documents required by this Letter will be
deposited by the Eligible Institution with the Exchange Agent; and (iii) the
certificates for all tendered Old Notes or a Book-Entry Confirmation, as the
case may be, as well as all other documents required by this Letter, must be
received by the Exchange Agent within five New York Stock Exchange trading days
after the date of execution of such Notice of Guaranteed Delivery, all as
provided in the Prospectus under the caption "The Exchange Offer -- How to
Tender."
The method of delivery of Old Notes and all other documents is at the
election and risk of the holder. If sent by mail, it is recommended that
registered mail, return receipt requested, be used, proper insurance be
obtained, and the mailing be made sufficiently in advance of the Expiration Date
to permit delivery to the Exchange Agent on or before the Expiration Date.
<PAGE>
Unless an exemption applies under the applicable law and regulations
concerning "backup withholding" of federal income tax, the Exchange Agent will
be required to withhold, and will withhold, 31% of the gross proceeds otherwise
payable to a holder pursuant to the Exchange Offer if the holder does not
provide his or her taxpayer identification number (social security number or
employer identification number) and certify that such number is correct. Each
tendering holder should complete and sign the main signature form and the
Substitute Form W-9 included as part of the Letter of Transmittal, so as to
provide the information and certification necessary to avoid backup withholding,
unless an applicable exemption exists and is proved in a manner satisfactory to
the Issuer and the Exchange Agent.
If a holder desires to accept the Exchange Offer and time will not permit a
Letter of Transmittal or Old Notes to reach the Exchange Agent before the
Expiration Date, a tender may be effected if the Exchange Agent has received at
its office listed on the back cover hereof on or prior to the Expiration Date a
letter, telegram or facsimile transmission from an Eligible Institution setting
forth the name and address of the tendering holder, the principal amount of the
Old Notes being tendered, the names in which the Old Notes are registered and,
if possible, the certificate numbers of the Old Notes to be tendered, and
stating that the tender is being made thereby and guaranteeing that within three
New York Stock Exchange trading days after the date of execution of such letter,
telegram or facsimile transmission by the Eligible Institution, the Old Notes,
in proper form for transfer, will be delivered by such Eligible Institution
together with a properly completed and duly executed Letter of Transmittal (and
any other required documents). Unless Old Notes being tendered by the
above-described method (or a timely Book-Entry Confirmation) are deposited with
the Exchange Agent within the time period set forth above (accompanied or
preceded by a properly completed Letter of Transmittal and any other required
documents), the Issuer may, at its option, reject the tender. Copies of a Notice
of Guaranteed Delivery which may be used by Eligible Institutions for the
purposes described in this paragraph are available from the Exchange Agent.
A tender will be deemed to have been received as of the date when the
tendering holder's properly completed and duly signed Letter of Transmittal
accompanied by the Old Notes (or a timely Book-Entry Confirmation) is received
by the Exchange Agent. Issuances of Exchange Notes in exchange for Old Notes
tendered pursuant to a Notice of Guaranteed Delivery or letter, telegram or
facsimile transmission to similar effect (as provided above) by an Eligible
Institution will be made only against deposit of the Letter of Transmittal (and
any other required documents) and the tendered Old Notes (or a timely Book-Entry
Confirmation).
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of tendered Old Notes will be determined by
the Issuer, whose determination will be final and binding. The Issuer reserves
the absolute right to reject any or all tenders that are not in proper form or
the acceptance of which, in the opinion of the Issuer's counsel, would be
unlawful. The Issuer also reserves the right to waive any irregularities or
conditions of tender as to particular Old Notes. All tendering holders, by
execution of this Letter, waive any right to receive notice of acceptance of
their Old Notes. The Issuer's interpretation of the terms and conditions of the
Exchange Offer (including the Letter of Transmittal and the instructions
thereto) will be final and binding.
Neither the Issuer, the Exchange Agent nor any other person shall be
obligated to give notice of defects or irregularities in any tender, nor shall
any of them incur any liability for failure to give any such notice.
2. PARTIAL TENDERS; WITHDRAWALS. If less than the entire principal amount
of any Old Note evidenced by a submitted certificate or by a Book-Entry
Confirmation is tendered, the tendering holder must fill in the principal amount
tendered in the fourth column of Box 1 above. All of the Old Notes represented
by a certificate or by a Book-Entry Confirmation delivered to the Exchange Agent
will be deemed to have been tendered unless otherwise indicated. A certificate
for Old Notes not tendered will be sent to the holder, unless otherwise provided
in Box 5, as soon as practicable after the Expiration Date, in the event that
less than the entire principal amount of Old Notes represented by a submitted
certificate is tendered (or, in the case of Old Notes tendered by book-entry
transfer, such non-exchanged Old Notes will be credited to an account maintained
by the holder with the Book-Entry Transfer Facility).
<PAGE>
If not yet accepted, a tender pursuant to the Exchange Offer may be
withdrawn prior to the Expiration Date. For a withdrawal to be effective, a
written or facsimile transmission notice of withdrawal must be timely received
by the Exchange Agent at its address set forth on the back cover of the
Prospectus prior to the Expiration Date. Any such notice of withdrawal must
specify the person named in the Letter of Transmittal as having tendered Old
Notes to be withdrawn, the certificate numbers of Old Notes to be withdrawn, the
principal amount of Old Notes to be withdrawn, a statement that such holder is
withdrawing his election to have such Old Notes exchanged, and the name of the
registered holder of such Old Notes, and must be signed by the holder in the
same manner as the original signature on the Letter of Transmittal (including
any required signature guarantees) or be accompanied by evidence satisfactory to
the Issuer that the person withdrawing the tender has succeeded to the
beneficial ownership of the Old Notes being withdrawn. The Exchange Agent will
return the properly withdrawn Old Notes promptly following receipt of notice of
withdrawal. All questions as to the validity of notices of withdrawals,
including time of receipt, will be determined by the Issuer, and such
determination will be final and binding on all parties.
3. SIGNATURES ON THIS LETTER; ASSIGNMENTS: GUARANTEE OF SIGNATURES. If
this Letter is signed by the holder(s) of Old Notes tendered hereby, the
signature must correspond with the name(s) as written on the face of the
certificate(s) for such Old Notes, without alteration, enlargement or any change
whatsoever.
If any of the Old Notes tendered hereby are owned by two or more joint
owners, all owners must sign this Letter. If any tendered Old Notes are held in
different names on several certificates, it will be necessary to complete, sign
and submit as many separate copies of this Letter as there are names in which
certificates are held.
If this Letter is signed by the holder of record and (i) the entire
principal amount of the holder's Old Notes are tendered; and/or (ii) untendered
Old Notes, if any, are to be issued to the holder of record, then the holder of
record need not endorse any certificates for tendered Old Notes, nor provide a
separate bond power. In any other case, the holder of record must transmit a
separate bond power with this Letter.
If this Letter or any certificate or assignment is signed by trustees,
executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing and proper evidence satisfactory to the
Issuer of their authority to so act must be submitted, unless waived by the
Issuer.
Signatures on this Letter must be guaranteed by an Eligible Institution,
unless Old Notes are tendered: (i) by a holder who has not completed the Box
entitled "Special Issuance Instructions" or "Special Delivery Instructions" on
this Letter; or (ii) for the account of an Eligible Institution. In the event
that the signatures in this Letter or a notice of withdrawal, as the case may
be, are required to be guaranteed, such guarantees must be by an eligible
guarantor institution which is a member of The Securities Transfer Agents
Medallion Program (STAMP), The New York Stock Exchanges Medallion Signature
Program (MSP) or The Stock Exchanges Medallion Program (SEMP). If Old Notes are
registered in the name of a person other than the signer of this Letter, the Old
Notes surrendered for exchange must be endorsed by, or be accompanied by a
written instrument or instruments of transfer or exchange, in satisfactory form
as determined by the Issuer, in its sole discretion, duly executed by the
registered holder with the signature thereon guaranteed by an Eligible
Institution.
4. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. Tendering holders should
indicate, in Box 4 or 5, as applicable, the name and address to which the
Exchange Notes or certificates for Old Notes not exchanged are to be issued or
sent, if different from the name and address of the person signing this Letter.
In the case of issuance in a different name, the tax identification number of
the person named must also be indicated. Holders tendering Old Notes by
book-entry transfer may request that Old Notes not exchanged be credited to such
account maintained at the Book-Entry Transfer Facility as such holder may
designate.
5. TAX IDENTIFICATION NUMBER. Federal income tax law requires that a
holder whose tendered Old Notes are accepted for exchange must provide the
Exchange Agent (as payor) with his or her correct taxpayer identification number
("TIN"), which, in the case of a holder who is an individual, is his or
<PAGE>
her social security number. If the Exchange Agent is not provided with the
correct TIN, the holder may be subject to a $50 penalty imposed by the Internal
Revenue Service. In addition, delivery to the holder of the Exchange Notes
pursuant to the Exchange Offer may be subject to back-up withholding. (If
withholding results in overpayment of taxes, a refund may be obtained.) Exempt
holders (including, among others, all corporations and certain foreign
individuals) are not subject to these back-up withholding and reporting
requirements. See the enclosed Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 for additional instructions.
Under federal income tax laws, payments that may be made by the Issuer on
account of Exchange Notes issued pursuant to the Exchange Offer may be subject
to back-up withholding at a rate of 31%. In order to prevent back-up
withholding, each tendering holder must provide his or her correct TIN by
completing the "Substitute Form W-9" referred to above, certifying that the TIN
provided is correct (or that the holder is awaiting a TIN) and that: (i) the
holder has not been notified by the Internal Revenue Service that he or she is
subject to back-up withholding as a result of failure to report all interest or
dividends; (ii) the Internal Revenue Service has notified the holder that he or
she is no longer subject to back-up withholding; or (iii) in accordance with the
Guidelines, such holder is exempt from back-up withholding. If the Old Notes are
in more than one name or are not in the name of the actual owner, consult the
enclosed Guidelines for information on which TIN to report.
6. TRANSFER TAXES. The Issuer will pay all transfer taxes, if any,
applicable to the transfer of Old Notes to it or its order pursuant to the
Exchange Offer. If, however, the Exchange Notes or certificates for Old Notes
not exchanged are to be delivered to, or are to be issued in the name of, any
person other than the record holder, or if tendered certificates are recorded in
the name of any person other than the person signing this Letter, or if a
transfer tax is imposed by any reason other than the transfer of Old Notes to
the Issuer or its order pursuant to the Exchange Offer, then the amount of such
transfer taxes (whether imposed on the record holder or any other person) will
be payable by the tendering holder. If satisfactory evidence of payment of taxes
or exemption from taxes is not submitted with this Letter, the amount of
transfer taxes will be billed directly to the tendering holder.
Except as provided in this Instruction 6, it will not be necessary for
transfer tax stamps to be affixed to the certificates listed in this Letter.
7. WAIVER OF CONDITIONS. The Issuer reserves the absolute right to amend
or waive any of the specified conditions in the Exchange Offer in the case of
any Old Notes tendered.
8. MUTILATED, LOST, STOLEN OR DESTROYED CERTIFICATES. Any holder whose
certificates for Old Notes have been mutilated, lost, stolen or destroyed should
contact the Exchange Agent at the address indicated above, for further
instructions.
9. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions relating to the
procedure for tendering, as well as requests for additional copies of the
Prospectus or this Letter, may be directed to the Exchange Agent.
IMPORTANT: THIS LETTER (TOGETHER WITH CERTIFICATES REPRESENTING TENDERED OLD
NOTES OR A BOOK-ENTRY CONFIRMATION AND ALL OTHER REQUIRED DOCUMENTS) MUST BE
RECEIVED BY THE EXCHANGE AGENT ON OR BEFORE THE EXPIRATION DATE.
<PAGE>
PACKAGING RESOURCES INCORPORATED
NOTICE OF GUARANTEED DELIVERY
OF 11 5/8% SENIOR SECURED NOTES DUE 2003
As set forth in the Prospectus dated , 1996 (as the same may be
amended or supplemented from time to time, the "Prospectus") of Packaging
Resources Incorporated (the "Issuer") under "The Exchange Offer -- How to
Tender" and in the Letter of Transmittal for 11 5/8% Senior Secured Notes due
2003 (the "Letter of Transmittal"), this form or one substantially equivalent
hereto must be used to accept the Exchange Offer (as defined below) of the
Issuer if: (i) certificates for the above-referenced Notes (the "Old Notes") are
not immediately available, (ii) time will not permit all required documents to
reach the Exchange Agent (as defined below) on or prior to the Expiration Date
(as defined in the Prospectus) or (iii) the procedures for book-entry transfer
cannot be completed on or prior to the Expiration Date. Such form may be
delivered by hand or transmitted by telegram, telex, facsimile transmission or
letter to the Exchange Agent.
TO: LASALLE NATIONAL BANK
(the "Exchange Agent")
BY FACSIMILE:
(312) 904-2236
CONFIRM BY TELEPHONE TO:
(312) 904-2444
BY MAIL/HAND DELIVERY/OVERNIGHT DELIVERY:
LaSalle National Bank
Corporate Trust Division
135 South LaSalle Street
Suite 1825
Chicago, Illinois 60603
Attention: Sarah H. Webb
Delivery of this instrument to an address other than
as set forth above or transmittal of this instrument to
a facsimile or telex number other then as set forth
above does not constitute a valid delivery.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to the Issuer, upon the terms and conditions
set forth in the Prospectus and the Letter of Transmittal (which together
constitute the "Exchange Offer"), receipt of which are hereby acknowledged, the
principal amount of Old Notes set forth below pursuant to the guaranteed
delivery procedures described in the Prospectus and the Letter of Transmittal.
The undersigned understands and acknowledges that the Exchange Offer will
expire at 5:00 p.m., New York City time, on , 1996, unless extended by
the Issuer. With respect to the Exchange Offer, "Expiration Date" means such
time and date, or if the Exchange Offer is extended, the latest time and date to
which the Exchange Offer is so extended by the Issuer.
All authority herein conferred or agreed to be conferred by this Notice of
Guaranteed Delivery shall survive the death or incapacity of the undersigned and
every obligation of the undersigned under this Notice of Guaranteed Delivery
shall be binding upon the heirs, personal representatives, executors,
administrators, successors, assigns, trustees in bankruptcy and other legal
representatives of the undersigned.
<TABLE>
<C> <S>
SIGNATURES Principal amount of Old Notes
Exchanged: $
Signature of Owner Certificate Nos. of Old Notes (if available)
Signature of Owner (if more than one)
Dated: , 1996 Total $
Name(s): IF OLD NOTES WILL BE DELIVERED BY BOOK-ENTRY
TRANSFER, PROVIDE THE DEPOSITORY TRUST COMPANY
(Please Print) ("DTC") ACCOUNT NO.:
Address: Account No.
(Include Zip Code)
Area Code and
Telephone No.:
Capacity (full title), if signing in a
representative
capacity:
Taxpayer Identification or Social Security No.:
</TABLE>
<PAGE>
<TABLE>
<S> <C>
GUARANTEE OF DELIVERY
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a member of a recognized signature guarantee medallion program within
the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), hereby guarantees (a) that the above-named person(s) own(s) the
above-described securities tendered hereby within the meaning of Rule 10b-4 under the
Exchange Act, (b) that such tender of the above-described securities complies with Rule
10b-4 under the Exchange Act, and (c) that delivery to the Exchange Agent of
certificates tendered hereby, in proper form for transfer, or delivery of such
certificates pursuant to the procedure for book-entry transfer, in either case with
delivery of a properly completed and duly executed Letter of Transmittal (or facsimile
thereof) and any other required documents, is being made within three New York Stock
Exchange trading days after the date of execution of a Notice of Guaranteed Delivery of
the above-named person.
Name of Firm:
(Authorized Signature)
Title:
Number and Street or P.O. Box
Date:
City State Zip Code
Tel. No.
Fax No.:
</TABLE>
NOTE: DO NOT SEND CERTIFICATES REPRESENTING OLD NOTES WITH THIS NOTICE. OLD
NOTES SHOULD BE SENT TO THE EXCHANGE AGENT TOGETHER WITH A PROPERLY
COMPLETED AND DULY EXECUTED LETTER OF TRANSMITTAL.
<PAGE>
PACKAGING RESOURCES INCORPORATED
OFFER TO EXCHANGE
$1,000 IN PRINCIPAL AMOUNT OF
11 5/8% SENIOR SECURED NOTES DUE 2003
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT
FOR
EACH $1,000 IN PRINCIPAL AMOUNT OF
OUTSTANDING 11 5/8% SENIOR SECURED NOTES DUE 2003
THAT WERE ISSUED AND SOLD IN A TRANSACTION
EXEMPT FROM REGISTRATION UNDER THE SECURITIES
ACT OF 1933, AS AMENDED
To Securities Dealers, Commercial Banks
Trust Companies and Other Nominees:
Enclosed for your consideration is a Prospectus dated , 1996 (as
the same may be amended or supplemented from time to time, the "Prospectus") and
a form of Letter of Transmittal (the "Letter of Transmittal") relating to the
offer (the "Exchange Offer") by Packaging Resources Incorporated (the "Issuer")
to exchange up to $110,000,000 in aggregate principal amount of its 11 5/8%
Senior Secured Notes due 2003 (the "Exchange Notes") for up to $110,000,000 in
aggregate principal amount of its outstanding 11 5/8% Senior Secured Notes due
2003 that were issued and sold in a transaction exempt from registration under
the Securities Act of 1933, as amended (the "Old Notes").
We are asking you to contact your clients for whom you hold Old Notes
registered in your name or in the name of your nominee, in addition, we ask you
to contact your clients who, to your knowledge, hold Old Notes registered in
their own name. The Issuer will not pay any fees or commissions to any broker,
dealer or other person in connection with the solicitation of tenders pursuant
to the Exchange Offer. You will, however, be reimbursed by the Issuer for
customary mailing and handling expenses incurred by you in forwarding any of the
enclosed materials to your clients. The Issuer will pay all transfer taxes, if
any, applicable to the tender of Old Notes to it or its order, except as
otherwise provided in the Prospectus and the Letter of Transmittal.
Enclosed are copies of the following documents:
1. The Prospectus;
2. A Letter of Transmittal for your use in connection with the exchange
of Old Notes and for the information of your clients (facsimile copies of
the Letter of Transmittal may be used to exchange Old Notes);
3. A form of letter that may be sent to your clients for whose accounts
you hold Old Notes registered in your name or the name of your nominee, with
space provided for obtaining the clients' instructions with regard to the
Exchange Offer;
4. A Notice of Guaranteed Delivery;
5. Guidelines of the Internal Revenue Service for Certification of
Taxpayer Identification Number on Substitute Form W-9; and
6. A return envelope addressed to LaSalle National Bank, the Exchange
Agent.
Your prompt action is requested. The Exchange offer will expire at 5:00
p.m., New York City time, on , , 1996, unless extended (the
"Expiration Date"). Old Notes tendered pursuant to the Exchange Offer may be
withdrawn, subject to the procedures described in the Prospectus, at any time
prior to the Expiration Date.
<PAGE>
To tender Old Notes, certificates for Old Notes or a Book-Entry Confirmation
(as defined in the Prospectus), a duly executed and properly completed Letter of
Transmittal or a facsimile thereof, and any other required documents, must be
received by the Exchange Agent as provided in the Prospectus and the Letter of
Transmittal.
Questions and requests for assistance with respect to the Exchange Offer or
for additional copies of the enclosed material may be directed to the Exchange
Agent at its address set forth in the Prospectus or at (312) 904-2444.
Very truly yours,
PACKAGING RESOURCES INCORPORATED
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
OR ANY PERSON AS AN AGENT OF THE ISSUER OR THE EXCHANGE AGENT, OR ANY AFFILIATE
THEREOF, OR AUTHORIZE YOU OR ANY OTHER PERSON TO MAKE ANY STATEMENTS OR USE ANY
DOCUMENT ON BEHALF OF ANY OF THEM WITH RESPECT TO THE EXCHANGE OFFER, EXCEPT FOR
THE ENCLOSED DOCUMENTS AND THE STATEMENTS EXPRESSLY MADE IN THE PROSPECTUS AND
THE LETTER OF TRANSMITTAL.
2
<PAGE>
PACKAGING RESOURCES INCORPORATED
OFFER TO EXCHANGE
$1,000 IN PRINCIPAL AMOUNT OF
11 5/8% SENIOR SECURED NOTES DUE 2003
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT
FOR
EACH $1,000 IN PRINCIPAL AMOUNT OF
OUTSTANDING 11 5/8% SENIOR SECURED NOTES DUE 2003
THAT WERE ISSUED AND SOLD IN A TRANSACTION
EXEMPT FROM REGISTRATION UNDER THE SECURITIES
ACT OF 1933, AS AMENDED
To Our Clients:
Enclosed for your consideration is a Prospectus dated , 1996 (as
the same may be amended or supplemented from time to time, the "Prospectus") and
a form of Letter of Transmittal (the "Letter of Transmittal") relating to the
offer (the "Exchange Offer") by Packaging Resources Incorporated (the "Issuer")
to exchange up to $110,000,000 in aggregate principal amount of its 11 5/8%
Senior Secured Notes due 2003 (the "Exchange Notes") for up to $110,000,000 in
aggregate principal amount of its outstanding 11 5/8% Senior Secured Notes due
2003 that were issued and sold in a transaction exempt from registration under
the Securities Act of 1933, as amended (the "Old Notes").
The material is being forwarded to you as the beneficial owner of Old Notes
carried by us for your account or benefit but not registered in your name. A
tender of any Old Notes may be made only by us as the registered holder and
pursuant to your instructions. Therefore, the Issuer urges beneficial owners of
Old Notes registered in the name of a broker, dealer, commercial bank, trust
company or other nominee to contact such registered holder promptly if they wish
to tender Old Notes in the Exchange Offer.
Accordingly, we request instructions as to whether you wish us to tender any
or all of the Old Notes held by us for your account, pursuant to the terms and
conditions set forth in the Prospectus and Letter of Transmittal. We urge you to
read carefully the Prospectus and Letter of Transmittal before instructing us to
tender your Old Notes.
Your instructions to us should be forwarded as promptly as possible in order
to permit us to tender Old Notes on your behalf in accordance with the
provisions of the Exchange Offer. The Exchange Offer will expire at 5:00 p.m.,
New York City time, on , , 1996, unless extended (the "Expiration
Date"). Old Notes tendered pursuant to the Exchange Offer may be withdrawn,
subject to the procedures described in the Prospectus, at any time prior to the
Expiration Date.
Your attention is directed to the following:
1. The Exchange Offer is for the exchange of $1,000 principal amount at
maturity of the Exchange Notes for each $1,000 principal amount at maturity
of the Old Notes, of which $110,000,000 aggregate principal amount of the
Old Notes was outstanding as of , 1996. The terms of the Exchange
Notes are substantially identical (including principal amount, interest
rate, maturity, security and ranking) to the terms of the Old Notes, except
that the Exchange Notes (i) are freely transferable by holders thereof
(except as provided in the Prospectus) and (ii) are not entitled to certain
registration rights and certain additional interest provisions which are
applicable to the Old Notes under a registration rights agreement dated as
of May 17, 1996 (the "Registration Rights Agreement") among the Company and
BT Securities Corporation and Donaldson, Lufkin & Jenrette Securities
Corporation, as initial purchasers.
2. THE EXCHANGE OFFER IS SUBJECT TO CERTAIN CONDITIONS, SEE "THE
EXCHANGE OFFER -- CONDITIONS TO THE EXCHANGE OFFER" IN THE PROSPECTUS.
3. The Exchange Offer and withdrawal rights will expire at 5:00 p.m.,
New York City time, on , 1996, unless extended.
<PAGE>
4. The Issuer has agreed to pay the expenses of the Exchange Offer
except as provided in the Prospectus and the Letter of Transmittal.
5. Any transfer taxes incident to the transfer of Old Notes from the
tendering Holder to the Issuer will be paid by the Issuer, except as
provided in the Prospectus and the Letter of Transmittal.
The Exchange Offer is not being made to nor will exchange be accepted from
or on behalf of holders of Old Notes in any jurisdiction in which the making of
the Exchange Offer or the acceptance thereof would not be in compliance with the
laws of such jurisdiction.
If you wish to have us tender any or all of your Old Notes held by us for
your account or benefit, please so instruct us by completing, executing and
returning to us the instruction form that appears below. The accompanying Letter
of Transmittal is furnished to you for informational purposes only and may not
be used by you to tender Old Notes held by us and registered in our name for
your account or benefit.
INSTRUCTIONS
The undersigned acknowledge(s) receipt of your letter and the enclosed
material referred to therein relating to the Exchange Offer of Packaging
Resources Incorporated, including the Prospectus and the Letter of Transmittal.
This form will instruct you to exchange the aggregate principal amount of
Old Notes indicated below (or, if no aggregate principal amount is indicated
below, all Old Notes) held by you for the account or benefit of the undersigned,
pursuant to the terms and conditions set forth in the Prospectus and Letter of
Transmittal.
<TABLE>
<S> <C>
Aggregate Principal Amount of Old Notes to be exchanged
$ *
* I (we) understand that if I (we) sign
these instruction forms without indicating
an aggregate principal amount of Old Notes Signature(s)
in the space above, all Old Notes held by
you for my (our) account will be exchanged.
(Please print name(s) and address above)
Dated: , 1996
(Area Code & Telephone Number)
(Taxpayer Identification or
Social Security Number)
</TABLE>
2
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER OF SUBSTITUTE FORM W-9
Guidelines for Determining the Proper Identification Number to Give the
Payer--Social Security numbers have nine digits separated by two hyphens: i.e.
000-00-0000. Employee identification numbers have nine digits separated by only
one hyphen: i.e. 00-0000000. The table below will help determine the number to
give the payer.
<TABLE>
<CAPTION>
------------------------------------------------------
GIVE THE
SOCIAL SECURITY
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
------------------------------------------------------
<S> <C> <C>
1. An individual's account The individual
2. Two or more individuals The actual owner of the
(joint account) account or, if combined
funds, any one of the
individuals (1)
3. Husband and wife (joint The actual owner of the
account) account or, if joint
funds, either person
(1)
4. Custodian account of a The minor (2)
minor (Uniform Gift to
Minors Act)
5. Adult and minor (joint The adult or, if the
account) minor is the only
contributor, the minor
(1)
6. Account in the name of The ward, minor, or
guardian or committee incompetent person (3)
for a designated ward,
minor, or incompetent
person
7. a. The usual revocable The grantor- trustee
savings trust account (1)
(grantor is also
trustee)
b. So-called trust The actual owner (1)
account that is not a
legal or valid trust
under State law
8. Sole proprietorship The owner (4)
account
<CAPTION>
------------------------------------------------------
GIVE THE EMPLOYER
IDENTIFICATION NUMBER
FOR THIS TYPE OF ACCOUNT: OF--
------------------------------------------------------
<S> <C> <C>
9. A valid trust, estate, The legal entity (Do
or pension trust not furnish the
identifying number of
the person
representative or
trustee unless the
legal entity itself is
not designated in the
account title) (5)
10. Corporate account The corporation
11. Religious, charitable, The organization
or educational
organization account
12. Partnership account The partnership
held in the name of the
business
13. Association, club, or The organization
other tax-exempt
organization
14. A broker or registered The broker or nominee
nominee
15. Account with the The public entity
Department of
Agriculture in the name
of a public entity
(such as a State or
local government,
school district, or
prison) that receives
agricultural program
payments
</TABLE>
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(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner.
(5) List first and circle the name of the legal trust, estate, or pension trust.
Note: If no name is circled when there is more than one name, the number will
be considered to be that of the first name listed.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER OF SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service and apply for a
number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include the
following:
- A corporation
- A financial institution
- An organization exempt from tax under
section 501(a). or an individual retirement plan.
- The United States or any agency or instrumentality
thereof.
- A State, the District of Columbia, a possession of the
United States, or any subdivision or instrumentality thereof.
- A foreign government, a political subdivision of a
foreign government, or any agency or instrumentality thereof.
- An international organization or any agency, or
instrumentality thereof.
- A registered dealer in securities or commodities
registered in the U.S. or a possession of the U.S.
- A real estate investment trust.
- A common trust fund operated by a bank under
section 584(a).
- An exempt charitable remainder trust, or a
nonexempt trust describe in section 4947(a)(1).
- An entity registered at all times under the
Investment Company Act of 1940.
- A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to
backup withholding include the following:
- Payments to nonresident aliens subject to
withholding under section 1441.
- Payments to partnerships not engaged in a trade or
business in the U.S. and which have at least one nonresident partner.
- Payments of patronage dividends where the amount
received is not paid in money.
- Payments made a by a certain foreign organizations.
- Payments made to a nominee.
Payments of interest not generally subject to backup withholding include the
following:
- Payments of Interest on obligations issued by
individuals. Note: You may be subject to backup withholding if this
interest is $600 or more and is paid in the course of the payer's trade or
business and you have not provided your correct taxpayer identification
number to the payer.
- Payments of tax-exempt interest (including exempt-
interest dividends under section 852). Payments described in section
6049(b)(5) to non-resident aliens.
- Payments on tax-free covenant bonds under
section 1451.
- Payments made by certain foreign organizations.
- Payments made to a nominee.
Exempt Payees described above should file form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO
THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO
SIGN AND DATE THE FORM.
Certain payments other than interest, dividends, and patronage dividends,
that are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045, and 6050A.
PRIVACY ACT NOTICE--Section 6109 requires most recipients of dividend, interest
or other payments to give taxpayer identification numbers to payers who must
report the payments to IRS. IRS uses the numbers for identification purposes.
Payers must be given the numbers whether or not recipients are required to file
tax returns. Beginning January 1, 1993, payers must generally withhold 31% of
taxable interest, dividend, and certain other payments to a payee who does not
furnish a taxpayer identification number to a payer. Certain penalties may also
apply.
PENALTIES
(1) PENALTIES FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you
fail to furnish your taxpayer identification number to a payer, you are subject
to a penalty of $50 for each such failure unless your failure is due to a
reasonable cause and not to willful neglect.
(2) FAILURE TO REPORT CERTAIN DIVIDEND AND INTEREST PAYMENTS.--If you fail to
include any portion of an includible payment for interest, dividends, or
patronage dividends in gross income, such failure will be treated as being due
to negligence and will be subject to a penalty of 5% on any portion of an
under-payment attributable to that failure unless there is clear and convincing
evidence to the contrary.
(3) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500
(4) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. --Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or
imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE
