<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 20-F
ANNUAL REPORT PURSUANT TO SECTION 13 OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year ended December 31, 1997
Commission file number: 1-10928
INTERTAPE POLYMER GROUP INC.
(Exact name of Registrant as specified in its charter)
Canada
(Jurisdiction of incorporation or organization)
110E Montee de Liesse, St. Laurent, Quebec H4T 1N4 Canada
(Address of principal executive offices)
Securities registered pursuant Section 12(b) of the Act:
Title of each class: Name of each exchange on which
registered:
Common Shares, without nominal or American Stock Exchange
par value Toronto Stock Exchange
Securities registered or to be registered pursuant
to Section 12(g) of the Act: -NONE-
Securities for which there is a reporting obligation pursuant to
Section 15(d) of the Act: -NONE-
The number of outstanding shares of each of the issuer's classes of
capital stock as of December 31, 1997 is:
25,019,921 Common Shares
-0- Preferred Shares
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
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Indicate by check mark which financial statement item the registrant has
elected to follow.
Item 17 X Item 18
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
ITEM CAPTION PAGE
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<S> <C> <C>
CAUTIONARY STATEMENTS AND RISK FACTORS . . . . . . . . . . . . . . . . . -ii-
PART I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1-
ITEM 1. DESCRIPTION OF BUSINESS. . . . . . . . . . . . . . . . . . . . -1-
ITEM 2. DESCRIPTION OF PROPERTY . . . . . . . . . . . . . . . . . . . . -17-
ITEM 3. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . -18-
ITEM 4. CONTROL OF REGISTRANT . . . . . . . . . . . . . . . . . . . . . -18-
ITEM 5. NATURE OF TRADING MARKET. . . . . . . . . . . . . . . . . . . . -18-
ITEM 6. EXCHANGE CONTROLS AND OTHER LIMITATIONS AFFECTING
SECURITY HOLDERS . . . . . . . . . . . . . . . . . . . . . . . -19-
ITEM 7. TAXATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . -20-
ITEM 8. SELECTED FINANCIAL DATA . . . . . . . . . . . . . . . . . . . . -22-
ITEM 9. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS. . . . . . . . . -25-
ITEM 10. DIRECTORS AND OFFICERS OF REGISTRANT. . . . . . . . . . . . . . -26-
ITEM 11. COMPENSATION OF DIRECTORS AND OFFICERS. . . . . . . . . . . . . -30-
ITEM 12. OPTIONS TO PURCHASE SECURITIES FROM REGISTRANT
OR SUBSIDIARIES. . . . . . . . . . . . . . . . . . . . . . . . -32-
ITEM 13. INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS . . . . . . . . -34-
PART II. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -35-
PART III . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -35-
ITEM 15. DEFAULTS FROM SENIOR SECURITIES . . . . . . . . . . . . . . . . -35-
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ITEM 16. CHANGES IN SECURITIES AND CHANGES IN SECURITY
FOR REGISTERED SECURITIES. . . . . . . . . . . . . . . . . . . -36-
PART IV. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -36-
ITEM 17. FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . . . . -36-
ITEM 18. FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . . . . -36-
ITEM 19. FINANCIAL STATEMENTS AND EXHIBITS . . . . . . . . . . . . . . . -36-
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -39-
</TABLE>
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CAUTIONARY STATEMENTS AND RISK FACTORS
This Annual Report contains certain "forward-looking statements" within
the meaning of Section 27A of the U.S. Securities Act of 1933, as amended
(the "Securities Act") and Section 21E of the U.S. Securities Exchange Act of
1934, as amended (the "Exchange Act") concerning, among other things,
discussions of the business strategy of Intertape Polymer Group Inc. (the
"Company" or "Intertape Polymer Group") and expectations concerning the
Company's future operations, liquidity and capital resources. When used in
this Annual Report, the words "anticipate", "believe", "estimate", "expect"
and similar expressions are generally intended to identify forward-looking
statements. Such forward-looking statements, including statements regarding
intent, belief or current expectations of the Company or its management, are
not guarantees of future performance and involve risks and uncertainties.
Actual results may differ materially from those in the forward-looking
statements as a result of various factors, including those factors set forth
below and other factors discussed elsewhere in this Annual Report. In
addition to the other information contained in this Annual Report, readers
should carefully consider the following cautionary statements and risk
factors.
IMPLEMENTATION OF BUSINESS STRATEGY
The Company's business strategy includes, among other things, increasing
manufacturing capacity, developing new products, improving distribution
efficiencies, and expanding into new geographic markets. There can be no
assurance that the Company will be able to fully implement its strategy or
that the anticipated results of this strategy will be realized.
Implementation of this strategy could also be affected by a number of factors
beyond the Company's control such as manufacturing difficulties, disruption
of distribution systems, or general or local economic conditions. Any
material failure to implement its strategy could have a material adverse
effect on the Company's business, financial condition and results of
operations.
RAW MATERIAL PRICES AND AVAILABILITY
A substantial portion of the cost of manufacturing the Company's
products is the cost of raw materials, primarily petroleum based resins.
Historically, there have been fluctuations in these raw material prices due
to factors which are beyond the Company's control, and in some instances
price movements have been volatile when associated with outside influences.
There can be no assurance that the Company will be able to pass on raw
material price increases in the future. Further, in the past, there have
been shortages from time to time in the supply of certain resins. There can
be no assurances that the Company will not be subject to such shortages in
the future.
EXCHANGE RATE RISKS
The Company's result of operations are reported in Canadian dollars.
Due to the geographic mix of the Company's business, any weakening in the
value of the Canadian dollar relative to the U.S. dollar would result in
increased consolidated earnings for the Company, expressed in Canadian
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dollars. These earnings, however, on an earnings per share basis, would be
negatively impacted when translated into U.S. dollars. Since the trading
price in the United States of the Common Shares will be quoted in U.S.
dollars, any weakening of the Canadian dollar relative to the U.S. dollar
could result in a decline in the market value and trading price of the Common
Shares measured in U.S. dollars. The exchange rate between Canadian dollars
and U.S. dollars has varied significantly over the last five years.
NEW PRODUCT DEVELOPMENT
The Company is developing returnable plastic cases for the
transportation and retail display of fruits and vegetables and other new
products. Any new product involves risk and, as in the case of stretch wrap,
may require significant capital expenditures. There can be no assurance that
the returnable plastic cases, or any other new products, will produce
revenues or profits for the Company, and that expenditures thereon will not
have a material adverse effect on the Company's results of operations.
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<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS.
GENERAL
Intertape Polymer Group develops, manufactures and sells a variety of
specialized polyolefin plastic packaging products for industrial use. These
products include pressure sensitive and water activated carton sealing tape,
masking and reinforced filament pressure sensitive tapes, acrylic coating,
EXLFILM-TM- shrink wrap ("EXLFILM-TM-"), STRETCHFLEX-TM- stretch wrap
("STRETCHFLEX-TM-") and woven products. Most of the Company's products are
derived from resins which are converted into films and adhesives. Resins
also are combined with paper and converted into a variety of packaging
products. Vertical integration, whereby the Company performs each step in the
conversion of polyolefin resins and paper into its various products, and
continuous capital expenditures to increase manufacturing efficiencies allow
the Company to be a low-cost producer of each product it manufactures. This
vertical integration combined with the use of high speed production equipment
provides competitive advantages to the Company in flexibility and control of
the manufacturing process and in speed of delivery. Management considers all
of its products to be within one operational segment because all products are
made basically from the same extrusion processes and differ only in the final
stages of manufacturing.
The Company's most recent expansion of its product offering occurred
with the December, 1997 acquisition of American Tape Co. ("American Tape"), a
leading U.S. manufacturer of masking, reinforced filament and printable and
non-printable flat back tapes, as well as certain specialty tapes.
The Company's revenues are derived primarily from sales of its products
in the United States and Canada, with approximately 80% of the Company's 1997
revenues attributable to sales in the United States. The Company is
headquartered in Montreal, Quebec and maintains 1.8 million square feet of
manufacturing facilities throughout the United States, Canada and Portugal.
The registered office of the Company is located at 1155 Rene-Levesque
Boulevard West, Suite 4000, Montreal, Quebec, Canada H3B 3V2, and its
principal executive offices are located at 110E Montee de Liesse St. Laurent,
Quebec, Canada H4T 1N4. The Company's telephone number at its principal
executive offices is (514) 731-0731.
HISTORY
The Company's business was established in 1981 by Melbourne F. Yull,
Intertape Polymer Group's Chairman of the Board and Chief Executive Officer,
when Intertape Systems Inc. ("Systems"), a predecessor of the Company,
established a pressure sensitive tape manufacturing facility in Montreal.
Intertape Polymer Group was incorporated under the laws of Canada in 1989 and
in February, 1992, completed an initial public offering of its common shares
at the offering price
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of $5.035 (US$4.25)(after giving effect to a 2:1 stock split on June 4,
1996). The Company's shares are listed on the American Stock Exchange and,
since January, 1993, on the Toronto Stock Exchange. The Company completed a
second public offering of its common shares in Canada and the United States
in October, 1995, at the offering price of $19.75 (US$14.60).
The Company has pursued a strategy of aggressive growth through both
substantial capital investments and acquisitions (See "Acquisition History"
below). When the Company commenced operations in 1981, it converted
purchased films into pressure-sensitive carton sealing tapes. Originally
intended as a local manufacturer, management of the Company decided in the
mid-1980's to take advantage of the extraordinary growth in demand for carton
sealing tapes by significantly expanding its output of such product and,
thereby, its customer base. Following adoption of this new business plan and
over the next few years, the output of the Montreal plant doubled and a new
facility was constructed in Danville, Virginia in 1987. The Virginia plant
was "upstream integrated" to include film extrusion, thereby reducing
material cost. The market for carton sealing tape has continued to grow and
the Danville facility is five times larger (measured in capacity) today than
at the date of its construction.
Even as the Company was growing its customer base in pressure sensitive
tapes, it pursued an aggressive policy of new product development to leverage
its pressure sensitive tape products. In 1992, the Company developed a new
variety of speciality shrink films and purchased and installed manufacturing
equipment to produce such films. The ability to manufacture its own shrink
films enabled the Company to participate in the shrink film market estimated
to be U.S.$500 million annually. Further, it strengthened the Company's
position with its customers.
The Company's entry into the stretch wrap market began with the
Company's concurrent development of stretch wrap products with the processes
to manufacture such products. The Company entered the stretch wrap market
(estimated at U.S.$1 billion annual sales in 1996) utilizing its existing
customer base and distribution network.
To broaden the product line and provide one-stop shopping with a "basket
of products", the Company has made a series of acquisitions. Interpak
Machinery Inc., a designer of automatic carton sealing equipment, was
acquired by the Company in 1993. In acquiring Interpak, the Company gained
technology for systems capable of utilizing large volumes of high value
carton sealing tapes. Tape Inc. was acquired in 1996 to provide a complete
line of water activated tapes. American Tape was acquired in 1997 bringing
to the Company products including high performance masking, filament and
speciality products, which mesh well with the Company's related product
lines. The combination of these various product lines enables the Company to
offer the market place a range of products to service its customers' needs.
The Company also markets products directly to the end user. Polymer
International (N.S.) Inc. ("Polymer International") and International
Container Systems, Inc. ("International Container") were acquired in 1989.
Polymer International manufactures a wide range of coated, woven polyolefin
fabrics; International Container manufactures returnable plastic cases for
the beverage
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<PAGE>
industry. Since acquiring Polymer International, sales of the Company's
woven product line have increased five-fold, assisted in part by the
development of lumber wrap and other products. In addition, two small
companies (Cajun Bag & Supply Co. and Augusta Bag & Supply Co.) were
purchased to produce flexible intermediate bulk containers ("FIBC's")
utilizing the Company's fabric as the prime raw material.
The Company also participates in two joint ventures: Fibope
Portuguesa-Filmes Biorientados, S.A. ("Fibope") and IFCO-U.S., L.L.C.
("IFCO"). Fibope produces shrink films in Portugal for the European market
and has doubled its manufacturing capacity since 1995. IFCO is a provider of
returnable plastic cases for the produce industry.
The majority of the Company's growth comes from the sale of internally
developed products. Capacity increases are ongoing throughout the
organization and all product lines. The Company's newest manufacturing
facility, a 115,000 square foot plant in Utah, is expected to be operational
by June 1998. Consistent with the Company's strategy, this plant will act not
only as a producer of shrink and stretch films but also as a distribution
center for all of the Company's products to increase sales in the western
United States and western Canada.
The Company is a holding company which owns various operating companies
in the United States and in Canada. Intertape Polymer Inc., a Canadian
corporation ("IPI"), is the principal operating company for the Company's
Canadian operations. Intertape Polymer Corp., a Virginia corporation
("IPC"), is the principal holding and operating company for the Company's
United States and international operations including, most notably, each of
the businesses referenced in the acquisition table set forth above.
As of April 13, 1998, the Company had 25,125,016 common shares
outstanding.
Unless the context otherwise requires, the terms "Intertape Polymer
Group" and the "Company" are used to refer to Intertape Polymer Group Inc.
together with all of its wholly-owned subsidiaries and joint ventures. Where
the context requires, such terms also include the predecessors of Intertape
Polymer Group. All dollar amounts referenced in this Annual Report are in
Canadian Dollars unless otherwise indicated.
ACQUISITION HISTORY
In addition to internally generated growth, the Company has engaged in a
series of acquisitions. The Company believes it now ranks among the leading
developers and manufacturers of industrial plastic packaging products in
North America. The following table illustrates the principal acquisitions
completed by the Company.
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<PAGE>
COMPLETED ACQUISITIONS
<TABLE>
<CAPTION>
Cost of
Year Acquisition Company Location Products
- ---- ----------- -------------------- --------------- ----------------
($ in
millions)
<S> <C> <C> <C> <C>
1989 $82.4 Polymer International Tampa, Florida Holding company
Corp. and its
subsidiaries:
- Polymer Truro, Nova Woven fabrics
International Scotia
- International Tampa, Florida Transport &
Container(1) display cases
1993 $ 6.6 Interpak Machinery Inc. Toronto, Canada Equipment used
to seal
corrugated boxes
Cajun Bag & Supply Co. Crowley, FIBCs
Louisiana
1995 $3.9 IFCO-U.S., L.L.C.(2) Tampa, Florida Distributor of
returnable
plastic
containers
Fibope Portugesa-Filmes Porto, Portugal EXLFILM-TM-
Biorientados S.A.(3)
1996 $12.1 Augusta Bag & Supply Augusta, FIBCs
Co. Georgia
Tape, Inc. Green Bay, Water activated
Wisconsin carton sealing
tape
1997 $65.7 American Tape Co. Marysville, Pressure
Michigan sensitive tapes,
Richmond, masking tapes
Kentucky
</TABLE>
- ----------------------
(1) The Company originally purchased a 67% interest in this company. In
1994, the Company conducted a tender offer for all the outstanding shares it
did not already own, the cost of this tender offer was $2.6 million.
(2) The Company acquired a 20% interest in this joint venture.
(3) The Company acquired a 50% interest in this joint venture.
BUSINESS STRATEGY
The Company's overall objective is to gain market share in large niche
markets which it believes are growing at rates faster than the economy as a
whole. The Company's strategies for achieving this objective are as follows:
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- SOLIDIFY THE COMPANY'S POSITION AS A LOW-COST MANUFACTURER. The
Company has pursued a vertically integrated manufacturing strategy as
a means of controlling the costs of its manufacturing inputs and, in
connection therewith, has made substantial investments in high-speed
production equipment and various forms of manufacturing automation.
For example, during the past several years the Company has installed
various extrusion lines of equipment for the making of film for
pressure sensitive carton sealing tapes. This allows the Company to
buy resin as a basic raw material to produce its own films and
adhesives rather than purchase them from other manufacturers at
greater cost. In addition, the Company continually undertakes
initiatives to reduce waste at its production facilities as a means of
further controlling its manufacturing costs.
- INCREASE MANUFACTURING CAPACITY. The Company believes that increasing
manufacturing capacity at its existing plants will contribute to its
ability to increase market share in its current markets. Over the
past four years, the Company has achieved an increase in its coating
capability at its Danville plant, an increase in its output of woven
products from its Truro facility and a doubling of the EXLFILM-TM-
production capacity at its Truro facility. In addition, the Company
is scheduled to commence EXLFILM-TM- and STRETCHFLEX-TM-
manufacturing operations at its new facility located in Tremonton,
Utah during the second quarter of 1998.
- DEVELOP NEW PRODUCTS. The Company has been increasing its investment
in research and development and believes that it can take advantage of
its manufacturing strengths and distribution network by introducing
new products and product line extensions which complement its existing
product base. The Company introduced in 1996 a new stretch wrap
product line sold under the STRETCHFLEX-TM- trademark. The Company is
also continuing market and feasibility studies for the introduction of
a system which employs reusable plastic produce containers in the
distribution of fruits and vegetables to food retailers. The Company
has developed several other new products, such as truck and rail car
flexible covers, and product line extensions, such as new acrylic
coatings and new varieties of EXLFILM-TM- shrink films, each of which
it is in the process of introducing. In addition, with the
acquisition of American Tape, the Company now offers a complete line
of masking tape products.
- DEVELOP CENTRAL DISTRIBUTION CENTERS. The Company is in the process
of installing in both its Danville and Tremonton an enhanced
facilities warehouse distribution systems which will increase
efficiency in the storage, shipping and inventory management of all
its products located in those facilities. This US$2.0 million
investment will increase the level of service that the Company
provides to its customers as well as reduce its operating costs in
these areas.
- EVALUATE FUTURE COMPLEMENTARY ACQUISITIONS. The Company is
continually evaluating the attractiveness of other companies,
technologies or products that could complement the Company's existing
product lines and manufacturing and distribution strengths. The
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Company considers complementary companies, technologies and products
as potential acquisition targets, and evaluates the merits of each
such potential acquisition. The Company's recent completion of its
purchase of American Tape is an example of such an acquisition,
providing the Company with masking, reinforced filament and printable
and non-printable flat back tapes as well as other specialty tapes not
previously manufactured by the Company but which can be integrated
into the Company's distribution system to broaden the range of
products offered to its customers.
- EXPAND SALES INTO NEW GEOGRAPHIC MARKETS. The Company intends to
continue to exploit the breadth of its product lines, distribution
network and strong market position by entering into new markets in
both North America and abroad. The Company was able to use its joint
venture arrangement with a Portuguese manufacturer of shrink films as
a springboard to market some of its North American manufactured
products in Europe. In addition, with the acquisition of American
Tape, the Company gained a market presence throughout the world in
high performance masking tapes. The Company believes that it can
leverage this market position in the sale of its other products. The
Company expects to increase its penetration in all markets either by
enhancing its internal marketing efforts or through joint ventures or
acquisitions.
PRODUCTS
CARTON SEALING TAPE: PRESSURE SENSITIVE AND WATER ACTIVATED TAPE
The Company produces a variety of pressure sensitive plastic film carton
sealing tape, ranging from commodity designed standard tape to tape tailored
to meet customers' unique requirements. The product range encompasses tape
with film thickness from 25 microns to 50 microns and adhesives formulated
for manual as well as automatic applications. Carton sealing tape lends
itself to use in high speed taping machines that replace other closure
methods such as staples, hot melt glues and cold glues. The tape produced by
the Company includes a wide range of customized colored and printed tape, as
well as tape designed for cold temperature applications and label protection.
The Company believes that it is one of the leading manufacturers of
pressure-sensitive carton sealing tape. Carton sealing tape is manufactured
and sold under the INTERTAPE-TM- name to industrial distributors and
manufactured for other customers for sale under private labels. It is
produced at the Company's Danville, Montreal, and Richmond facilities and is
utilized by end-users for sealing corrugated cartons. Geographic territories
in which the Company markets its products are serviced by sales personnel and
manufacturers' representatives coordinated by regional managers.
Distributors are appointed on a basis designed to achieve market penetration
of both commodity and higher grade products. In 1994, the Company commenced
efforts to utilize its expanded production capacity and field support to
begin to penetrate the United States west coast and the western Canadian
market and continues to increase its sales force for these markets. The
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Company expects the addition of a centralized warehouse distribution system
in the new Tremonton, Utah facility will enhance these efforts. In addition,
the Company exports this product to Europe, Asia, Central America and South
America.
The Company's acquisition in 1993 of the assets of Interpak Machinery
Inc., a manufacturer of equipment used to apply pressure sensitive tapes to
seal corrugated boxes, enabled the Company to further enhance the mix of
products it offered to its customers. The Company introduced a line of
machines designed for the high-speed application of pressure sensitive carton
sealing tape in January 1994 and has continued to design and introduce new
equipment.
In 1996, the acquisition of Tape, Inc. added a complete range of water
activated adhesive tapes to the Company's product mix. This product line is
generally sold through the same distribution network as pressure-sensitive
carton sealing tape which has allowed the Company to increase its market
penetration of this product.
The Company's principal competitors for the sale of carton sealing tape
products include Minnesota Mining & Manufacturing Co. ("3M") and Central
Products Company, Inc. ("Central"), a division of Spinnaker Industries, Inc.
MASKING TAPES: PERFORMANCE AND GENERAL PURPOSE
The Company added masking tapes to its product line in December 1997
through the acquisition of American Tape, a leading manufacturer of these
products. Masking tapes are used for a variety of end-use applications which
can be broadly described under two categories: general purpose and high
performance.
General purpose applications include packaging and bundling, residential
and commercial paint applications. Performance applications include use in
painting of aircraft, cars, buses and boats, where the properties of the
tape, such as high temperature resistance and clean adhesive release, are
individually designed for the customer's process.
The Company's processing capabilities include solvent and synthetic
rubber, hot melt and acrylic adhesive alternatives. The Company believes
that its unique adhesive systems provide it with a competitive advantage in
this market. The main competitors for the sale of masking tapes include 3M,
Anchor Continental, Inc. ("Anchor"), Shuford Mills, Inc., Industrias Tuk,
S.A. de C.V., and Tesa Tape Inc. ("Tesa").
REINFORCED FILAMENT TAPE: PERFORMANCE AND GENERAL PURPOSE
In addition to masking tapes, the Company's purchase of American Tape
also introduced reinforced filament tapes and flat back tapes to the
Company's product line. Reinforced, general and specialty products are
manufactured at the Company's facilities in Richmond, Kentucky and
Marysville, Michigan facilities which were acquired in the American Tape
acquisition. These
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<PAGE>
facilities produce filament tape using synthetic, natural rubber and hot melt
adhesives coated on a variety of plastic filaments. The reinforcement is
provided by fibreglass yarns laminated between two plastic substrates.
Many of these filament tapes are odorless, stainless, and provide clean
removal and are used in bundling, sealing, unitizing, palletizing and
packaging, notably for household appliances. The Company's main competitor
in this market is 3M, and for commodity filament tapes the Company's main
competitors are Anchor, Tesa and RJM Manufacturing, Inc.
ACRYLIC COATING
In 1995, the Company completed a $10.0 million capital expenditure
program for an acrylic coater and ancillary equipment design to apply acrylic
based adhesives to a wide variety of substrates at its Danville plant. These
acrylic coatings, when applied to filmic tapes, offer extended shelf life as
well as increased performance under the extremes of low and high temperatures.
When acrylic coating is applied to polypropylene film, the finished
product broadens the Company's line of pressure sensitive carton sealing
tape. In addition, certain applications, such as mirror backing, utilize
woven products as the base material to which acrylic coating is applied.
EXLFILM-TM- SHRINK WRAP
EXLFILM-TM- is a specialty plastic film which shrinks under controlled
heat to conform to package shape as compared to other packaging forms that
require unique machinery for different product sizes and shapes. The process
provides versatility because it permits the over-wrapping of a variety of
products of considerably different sizes and dimensions (such as printing and
paper products, packaged foods, cassettes, toys, games and sporting goods,
and hardware and housewares). The Company manufactures EXLFILM-TM- at its
plant in Truro, Nova Scotia and maintains additional extruders for
EXLFILM-TM- production there. In addition, in connection with its intention
to expand into the western United States, the Company expects that
EXLFILM-TM- production at its new Tremonton, Utah facility will begin during
the second quarter of 1998. The Company believes that its continual
investment in equipment will help it expand its exploitation of niches in
this market.
The Company's shrink wrap products are sold through its existing
industrial distribution base primarily to manufacturers of packaged goods and
printing and paper products who package their products internally. In
addition, the Company holds a 50% interest in FIBOPE, a manufacturer of
shrink films in Portugal. FIBOPE utilizes similar manufacturing equipment as
is currently operated by the Company in its Truro and Tremonton facilities.
In addition to being served by the Company, the United States and
Canadian markets for polyolefin shrink wrap are currently served by two large
United States manufacturers, W.R. Grace & Co. and E.I. DuPont de Nemours &
Co., and to a lesser extent by foreign manufacturers.
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<PAGE>
STRETCHFLEX-TM- STRETCH WRAP
STRETCHFLEX-TM- is a multi-layer plastic film that can be stretched
without application of heat. It is used industrially to wrap pallet loads of
various products to ensure a solid load for shipping and is also used in
agriculture as a bale wrap. The Company produces STRETCHFLEX-TM- at its
Danville plant and has the capacity to produce 60 million pounds of
polyolefin stretch wrap annually. Although excess capacity exists in the
stretch wrap market, management believes the performance capabilities of the
Company's film accounts for operations at its Danville plant being at
capacity. The Company's high level of production at Danville, combined with
its western oriented marketing initiatives, prompted the Company to include
additional extruders for stretch wrap production in the Tremonton facility.
The North American market for such polyolefin stretch wrap is served by
a number of manufacturers, the largest of which are Tenneco Inc. and Linear
Films, Inc.
WOVEN PRODUCTS
The Company produces a variety of finished products utilizing coated
woven polyolefin fabrics, such as bags and lumber wrap, as well as coated
woven polyolefin fabrics that are sold to other manufacturers which convert
these fabrics into finished products, such as packaging, protective covers,
pond liners, housewrap, recreational products, and temporary structures.
Depending on the needs of the customer, the Company produces valve bags
or open mouth bags. Valve bags have a one way self-closing filler valve
inserted into one corner and are used for packaging pelletized and granular
chemicals and other materials. Open mouth bags, which require a secondary
closure method such as stitching, are used primarily for packaging of
compressed material such as mineral fibers.
NOVA-THENE-Registered Trademark- lumber wrap is a polyolefin fabric
which is extrusion coated and printed to customer specifications. It is used
in the forest products industry to package kiln-dried cut lumber. The
Company believes that polyolefin products have certain advantages over
traditional paper-plastic laminate products, including superior strength,
ease of application, durability, better appearance and the potential to be
recycled.
The Company added FIBCs to its product line in 1993 with the acquisition
of Cajun Bag & Supply Co. ("Cajun Bag"). To facilitate production of
seamless FIBCs in the Crowley, Louisiana plant, the Company installed
circular weaving equipment in 1994 in its Truro plant. The Company made
additional investments in the Crowley plant in 1995 to reduce costs, increase
capacity and reduce turnover. In 1996, the Company opened an FIBC plant in
Edmundston, New Brunswick, Canada to meet the growing demands of the industry
and purchased the assets of Augusta Bag & Supply Co. ("Augusta Bag") to add
further capacity, expand market share and acquire unique manufacturing
methods. In 1997, the Company initiated an organizational review of the
operations of certain facilities manufacturing FIBCs and, during the latter
half of 1997, approved a restructuring
-9-
<PAGE>
plan designed to improve efficiency and reduce operating costs. Specifically,
while the Company will continue to produce the fabrics used to make FIBCs,
the Company has decided to outsource the conversion process due to enhanced
foreign competition. As a consequence, the Company has incurred a one-time
charge against earnings in respect of write-downs of certain assets employed
in these operations as well as goodwill associated with the Cajun Bag and
Augusta Bag acquisitions. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Restructuring Charges" in
the Annual Report attached hereto as Exhibit 4.
The Company also manufactures other coated woven polyolefin fabrics that
it supplies to converters which produce finished products for specific
application, such as synthetic fiber packaging, recreational products,
protective covers, pond liners, and flame retardant brattice cloth. The
markets for these products are diverse and considered by management to be too
small to justify the cost of further vertical integration to the finished
product stage.
The Company's NOVA-THENE-Registered Trademark- lumber wrap line competes
with products manufactured by partially integrated manufacturers and by
secondary converters. In addition, the Company competes with manufacturers
of coated woven fabrics such as Amoco Fabrics and Fibers Company and Fabrene,
Inc., which sell their products to converters.
The market for FIBCs is highly competitive and is not dominated by any
single manufacturer.
SOFT DRINK TRANSPORT AND DISPLAY CASES
The Company is engaged in the design, development and sale of reusable
plastic soft drink transport and display cases. These cases are manufactured
for the Company by independent contractors located throughout North America.
This approach is consistent with the Company's goal of being a low-cost
producer in each market it serves, as management believes the savings to its
customers on freight exceed any potential savings from in-house manufacturing.
RETURNABLE PLASTIC CASES
The Company has entered into a joint venture agreement with Schoeller
International Logistics Beteiligungsgesellschaft GmbH to develop a system of
returnable plastic cases for the transportation and retail display of fruits
and vegetables in the United States and Canada as an alternative to the use
of corrugated boxes and wooden crates. The system is in effect in Europe and
the Company is currently experimenting with the patented containers by means
of a growing number of roll-out programs in North America.
SALES AND MARKETING
As of January 1998, the Company maintained a sales force of 96
personnel. The Company participates in industry trade shows and uses trade
advertising as part of its marketing efforts. The
-10-
<PAGE>
Company's overall customer base is diverse, with no single customer
accounting for more than 5% of total sales. There are no long term contracts
with any customers. Sales to customers in the United States and Canada
accounted for approximately 78% and 22% of total sales, respectively, in 1996
and approximately 80% and 20% of total sales, respectively, in 1997. The
Company has also continued to develop its sales efforts in Europe, Asia,
Central America and South America. Management does not intend to achieve
more than 10% of its sales outside North America. Export sales currently
represent less than 5% of total sales and are included in United States or
Canadian sales depending on the manufacturing facility from which the sale
originates.
The Company sales are focused in two distinct areas: distribution products
and woven products. Distribution products go to market through a network of
paper and packaging distributors throughout North America. Products sold into
this segment include carton sealing, masking and reinforced tapes, EXLFILM-TM-
and STRETCHFLEX-TM-. In order to enhance sales of its pressure sensitive carton
sealing tape, the Company also sells carton closing systems, including automatic
and semi-automatic carton sealing equipment. Prior to the acquisition of the
Interpak Machinery Inc., these products were manufactured by others. The
Company's EXLFILM-TM- and STRETCHFLEX-TM- products are sold through its existing
industrial distribution base primarily to manufacturers of packaged goods and
printing and paper products which package their products internally.
The Company's woven products group sells its products directly to the
end-users. It offers a line of lumberwrap, valve bags, FIBCs and speciality
fabrics manufactured from plastic resins. The woven products group markets
its products throughout North America.
MANUFACTURING; QUALITY CONTROL
The Company's philosophy is, where efficient, to manufacture products from
the lowest cost raw material and add value to such products by vertical
integration. About 80% of the Company's products are manufactured through a
process which starts with a variety of polyolefin resins and extrudes them into
film for further processing. Over 50 million pounds of wide width biaxially
oriented polypropylene film is extruded annually in the Company's facilities.
This film is then coated in high-speed equipment with in-house-produced adhesive
and cut to various widths and lengths for carton sealing tape. The same basic
process applies for reinforced filament tape, which also uses polypropylene film
and adhesive but has fiberglass strands inserted between the layers. Specific
markets demand different adhesives and the Company manufactures acrylic solvent
based rubber and "Hot Melt" adhesives to respond to all demands. Masking tapes
utilize the same process with paper as the coating substrate.
The technology for basic film extrusion, essential to the low cost
production of pressure sensitive tape products, also has been utilized by the
Company to expand its product line into highly technical and sophisticated
films. Extrusion of up to five layers of various resins is done in four of the
Company's plants. These high value added films service the shrink and stretch
wrap markets, both of which have high entry barriers.
-11-
<PAGE>
A wide variety of woven products are also part of the Company's family of
products. The first manufacturing step in the production of woven products is
film extrusion utilizing various resins and additives. These speciality films
are slit in line and woven on wide width looms. They are then coated with a
variety of resins to provide unique properties for large niche markets.
Printing, bag making and FIBC converting enhance the value added on certain
products.
The Company also designs and sells specialty cases for the reusable
containers market. Propriety molds and raw materials are provided to outside
contractors which produce cases on an exclusive basis. Continuing product
development, investment in new capital equipment and advanced engineering
provide the basis that enables the Company to compete in its marketplace.
The Company maintains a quality control laboratory and a process control
program on a 24-hour basis to monitor the quality of all packaging and woven
products it manufactures. At the end of 1997, five of the Company's plants were
certified under ISO-9002 quality standards program.
EQUIPMENT AND RAW MATERIALS
The Company purchases mostly custom designed manufacturing equipment,
including extruders, coaters, finishing equipment, looms, printers, bag
manufacturing machines and injection molds, from manufacturers located in the
United States and Western Europe, and participates in the design and upgrading
of such equipment. It is not dependent on any one manufacturer for such
equipment.
Polyolefin resins are a widely produced petrochemical product and are
available from a variety of sources worldwide. The Company purchases raw
materials from a limited number of vendors with whom, over time, it has
developed long-term relationships. The Company believes that such long term
relationships, together with the Company's centralized purchasing operations,
have enhanced the Company's ability to obtain a continuity of supply of raw
materials on competitively favorable purchase terms. Historically, fluctuations
in raw material prices experienced by the Company have been passed on to its
customers over time.
RESEARCH AND DEVELOPMENT; NEW PRODUCTS
Prior to 1992, research and development consisted of activities related to
adapting new technologies as they emerged within the various manufacturing
environments. Management decided to embark upon a program, beginning in 1992,
to develop new manufacturing processes, to enhance product performance and to
develop new products throughout the Company. In 1994, the Company emphasized
developing products for existing markets, and in 1996 established a corporate
research and development group to undertake development of new products.
Expenditures for research and development in 1995, 1996 and 1997 totaled
$1,104,000, $1,763,000 and $2,228,000, respectively.
-12-
<PAGE>
The Company currently maintains active research and development programs in
three areas: woven products, pressure sensitive products and specialty films.
In woven products, the emphasis is on developing polyolefin fabrics that can
replace vinyl fabrics. Targeted end-use areas include truck tarps, protective
coverings and billboards. Research and development in pressure sensitive
products is focused on improving the Company's cost base and product line in
solvent, hot melt and acrylic based general purpose performance products. In
specialty films, the Company has recently introduced Exfilm Plus, a cross-linked
heat shrinkable film, and IP72, a low-shrink force product. The Company
believes that the development of these products will allow the Company to expand
into the specialty film market which previously was not accessible using
conventional products. Research and development is an important factor
generating internal growth for the Company.
TRADEMARKS AND PATENTS
The Company markets its carton sealing tape under the registered
trademark INTERTAPE-TM- and various private labels. The Company's valve or
open mouth bags are marketed under the registered trademark
NOVA-PAC-Registered Trademark-. Its woven polyolefin fabrics are sold under
the registered trademark NOVA-THENE-Registered Trademark-. Its shrink wrap
is sold under the trademark EXLFILM-TM-. Its stretch films are sold under
the trademark STRETCHFLEX-TM-. FIBC's are sold under the trademarks LeGRAND
SACK-Registered Trademark- and CAJUN BAGS-Registered Trademark-. The Company
has over two dozen registered trademarks, principally in the United States
and Canada, including trademarks acquired from American Tape. The Company
does not have, nor does management believe it important to the Company's
business to have, patent protection for its carton sealing tape products,
woven products, stretch wrap or shrink wrap.
COMPETITION
The Company competes with other manufacturers of plastic packaging products
as well as manufacturers of alternative packaging products, such as paper,
cardboard and paper-plastic combinations. Management believes that competition,
while primarily based on price and quality, is also based on other factors,
including product performance characteristics and service. No statistics,
however, on the packaging market are currently publicly available. See
"Products" for a discussion of the Company's main competitors.
The Company believes that significant barriers to entry exist in the
packaging market. Management considers the principal barriers to be: (i) the
high cost of vertical integration which is necessary to operate competitively,
(ii) the significant number of patents which already have been issued in respect
of various processes and equipment, and (iii) the difficulties and expense of
developing an adequate distribution network.
-13-
<PAGE>
ENVIRONMENTAL REGULATION
The Company manufactures and sells a variety of specialized polyolefin
plastic packaging products for industrial use at its manufacturing plants
throughout North America and through its joint venture in Portugal. The Company
is actively promoting environmental solutions, both in the development of its
products and in its own manufacturing facilities.
Furthermore, the Company's operations are subject to extensive regulation.
Federal and state environmental laws applicable to the Company include statutes
(i) intended to allocate the cost of remedying contamination among specifically
identified parties as well as to prevent future contamination (the
"Comprehensive Environmental Response, Compensation, and Liability Act");
(ii) imposing national ambient standards and, in some cases, emission standards,
for air pollutants which present a risk to public health or welfare (the
"Federal Clean Air Act"); (iii) governing the management, treatment, storage and
disposal of hazardous wastes (the "Resource Conservation and Recovery Act"); and
(iv) regulating the discharge of pollutants into protected waterways (the "Clean
Water Act of 1972"). The Company's use in its manufacturing processes of
hazardous substances and the generation of hazardous wastes not only by the
Company but by prior occupants of Company facilities suggest that hazardous
substances may be present at or near certain of the Company's facilities or may
come to be located there in the future. Consequently, the Company is required
to monitor closely its compliance under all the various environmental
regulations applicable to it. In addition, the Company arranges for the
off-site disposal of hazardous substances generated in the ordinary course of
its business.
Except as described below, the Company believes that all of its facilities
are in material compliance with applicable environmental laws and regulations.
THE WISCONSIN FACILITY
Since the Company's acquisition of Tape, Inc. ("Tape") in 1996, the Company
and the former shareholders of Tape have been conducting an investigation into
three areas of contamination in the soil and groundwater on the Green Bay,
Wisconsin facility purchased in the acquisition, particularly the former drum
storage area and the current and former press areas. Under the terms of the
acquisition agreement, the former shareholders of Tape are responsible for the
investigation and remediation of these matters, as well as reimbursement to the
Company of certain costs associated with overseeing the work to a maximum of
$1,000,000. To date, the former shareholders estimate the cost of the
recommended remedial alternative will be approximately $100,000 and have
incurred costs of approximately $50,000. The Company believes that ultimate
resolution of these matters should not have a material adverse effect on the
Company's business or results of operations.
-14-
<PAGE>
MICHIGAN FACILITY
The Company's environmental due diligence review conducted in connection
with the acquisition of American Tape, revealed certain issues associated
with American Tape's use of chemical solvents at its Marysville facility in
the tape-making process. These solvents (primarily toluene) are stored in
tanks on site, emitted into the air and, when mixed with other wastes from
the manufacturing process, shipped off-site as wastes for disposal.
Management undertook a comprehensive plan of investigation and remediation at
the facility, focusing on the site's approximately fifteen underground
storage tanks which contained a variety of hazardous substances. Remediation
of six 10,000 gallon tanks is expected to continue for two to three years.
The Company, however, anticipates that the full cost of remediation will be
funded through amounts available under a US$ 2.0 million escrow fund
established by the sellers at closing.
In addition, the Michigan facility emits toluene and other pollutants, but
86% of the toluene used is recaptured under existing solvent recovery systems.
While these emissions do not currently exceed permitted limits, they may exceed
limits being phased in over the next five years under Title V of the Clean Air
Act Amendments of 1990. To satisfy future Title V requirements, in 1997,
American Tape entered into an Administrative Order and Consent with the Michigan
Department of Environmental Quality under which it agreed to install a
regenerative thermal oxidizer to increase the capture rate from 86% to 95%, and
budgeted $2.2 million for such purchase and installation. The Company believes
that ultimate resolution of these matters should not have a material adverse
effect on the Company's business or results of operations.
EMPLOYEES
As of February 1997, the Company employed approximately 1,785 people, 439
of whom held either sales-related, operating or administrative positions and
1,346 of whom were employed in production. Although approximately 64 hourly
employees at the Montreal plant are unionized, the collective bargaining
agreement to which they are subject expired in November 1997 and has not been
renegotiated as of the date hereof. Approximately 79 hourly employees at the
Edmundston plant became unionized in February 1997 and are subject to a
collective bargaining agreement which expires in October 2000. Approximately 87
hourly employees at the Green Bay plant are unionized and a collective
bargaining agreement is in place that expires in February 1999. Finally,
approximately 184 hourly employees at the Marysville plant are unionized and
subject to a collective bargaining agreement which expires in May 1999. The
Company has never experienced a work stoppage and considers its employee
relations to be satisfactory.
AMERICAN TAPE ACQUISITION
On December 16, 1997 the Company acquired from STC Corp., a publicly traded
multinational company based in Seoul, South Korea, all the outstanding capital
stock of American
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<PAGE>
Tape Co., a leading manufacturer and marketer of high performance and general
purpose masking, reinforced filament pressure sensitive and other specialty
tapes. The Company paid US$122 million for the acquisition, including costs,
consisting of US$46 million in cash and US$76 million in assumed
indebtedness, substantially all of which was refinanced. The Company
acquired American Tape principally to improve and increase the Company's
product base, increase production capacity, enhance its customer base and
strengthen the Company's competitive position in the market.
In connection with the acquisition, the Company inherited two
manufacturing facilities: one in Marysville, Michigan, and one in Richmond,
Kentucky. While the Michigan facility is profitable, the Kentucky facility
had experienced production problems and has only recently achieved break even
status. The Company's strong technical expertise is expected to improve
production efficiencies at both manufacturing facilities.
The Company anticipates that it will benefit from certain synergies
resulting from the American Tape acquisition. Specifically, high performance
masking tape represents a new opportunity for the Company, while general
purpose masking tape and reinforced filament tape may be sold through the
Company's existing distribution channels. The Company believes the
acquisition of American Tape has further improved the Company's status as a
single source basket-of-products supplier to its distributor customers.
Finally, the acquisition of American Tape has positioned the Company as
a stronger supplier of industrial tape, second only, in the estimation of
management, to 3M in North America, with the additional capability to provide
shrink and stretch wrap, a product line 3M does not offer. The Company's
status as a low-cost, high value added single source supplier to its
individual distributor customer base should lead to continued strong sales
growth in the intermediate future.
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<PAGE>
ITEM 2. DESCRIPTION OF PROPERTY.
The following table illustrates the principal manufacturing and
distribution facilities owned or leased by the Company as at December 31, 1997:
<TABLE>
<CAPTION>
AREA
LOCATION USE PRODUCTS (SQ. FT.) TITLE
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
UNITED STATES:
- ----------------------------------------------------------------------------------------------------------------------------------
Augusta, Georgia Manufacturing FIBCs 41,000 Leased to July 1999
- ----------------------------------------------------------------------------------------------------------------------------------
Augusta, Georgia Warehouse FIBCs 20,000 Leased to October 2000
- ----------------------------------------------------------------------------------------------------------------------------------
Crowley, Manufacturing and FIBCs 180,000 Leased to December 1998
Louisiana Warehouse
- ----------------------------------------------------------------------------------------------------------------------------------
Danville, Manufacturing and Carton sealing tape, 281,000 Capital lease to August 2007
Virginia Distribution STRETCHFLEX-TM- with option to purchase for
acrylic coating nominal amount
- ----------------------------------------------------------------------------------------------------------------------------------
Green Bay, Manufacturing and Water activated carton sealing 156,000 Owned
Wisconsin Warehouse tape
- ----------------------------------------------------------------------------------------------------------------------------------
Marysville, Manufacturing High performance masking and 250,000 Owned
Michigan filament tape
- ----------------------------------------------------------------------------------------------------------------------------------
Rayne, Manufacturing and FIBCs 83,000 Leased to September 1998
Louisiana Corporate offices
- ----------------------------------------------------------------------------------------------------------------------------------
Richmond, Manufacturing Carton sealing, masking and 200,000 Owned
Kentucky reinforced tape
- ----------------------------------------------------------------------------------------------------------------------------------
Secaucus, New Former corporate N/A N/A Leased and to be closed prior to
Jersey offices of American June 1998
Tape
- ----------------------------------------------------------------------------------------------------------------------------------
Tampa, Corporate offices Display and crate operations 4,000 Leased to February 2003
Florida
- ----------------------------------------------------------------------------------------------------------------------------------
Tremonton, Manufacturing and EXLFILM-TM-, 115,000 Owned
Utah Distribution STRETCHFLEX-TM-(1)
- ----------------------------------------------------------------------------------------------------------------------------------
CANADA:
- ----------------------------------------------------------------------------------------------------------------------------------
Edmundston, Manufacturing FIBCs 65,000 Owned
New Brunswick
- ----------------------------------------------------------------------------------------------------------------------------------
Lachine, Manufacturing Carton sealing equipment 13,000 Leased to July 1999
Quebec
- ----------------------------------------------------------------------------------------------------------------------------------
St. Laurent, Slitting, Carton sealing tape 60,000 Leased to March 1999
Quebec Warehouse and
Corporate offices
- ----------------------------------------------------------------------------------------------------------------------------------
St. Laurent, Manufacturing Carton sealing tape 25,000 Owned
Quebec
- ----------------------------------------------------------------------------------------------------------------------------------
Truro, Manufacturing Woven products, 260,000 Owned
Nova Scotia EXLFILM-TM-
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Operations are anticipated to commence during the second quarter of 1998.
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<PAGE>
ITEM 3. LEGAL PROCEEDINGS.
The Company is not a party to, nor is the Company's property the subject
of, any pending material litigation, or any litigation which, if adversely
determined, would have a material effect, individually or in the aggregate,
on the business or financial condition of the Company. The Company is not
aware of any material proceedings being contemplated by governmental
authorities.
ITEM 4. CONTROL OF REGISTRANT.
To the knowledge of the Company, there is no person who, or corporation
that, beneficially owns or exercises control or direction over shares
carrying more than 10% of the voting rights attached to all shares of the
Corporation:
As of May 13, 1998, the directors and officers of the Company as a group
owned beneficially, directly or indirectly, 1,684,330 Common Shares,
representing approximately 6.7% of all Common Shares outstanding.
SHAREHOLDER PROTECTION RIGHTS PLAN
On August 24, 1993, the shareholders of the Company approved a
Shareholders' Protection Rights Plan (the "Rights Plan"). Under the Rights
Plan, one Common Share purchase right was issued on September 1, 1993, in
respect of each outstanding Common Share and became issuable in respect of
each Common Share issued thereafter. The rights expire on September 1, 1998,
unless terminated earlier by the Company's Board of Directors. An amendment
to extend the term of the Rights Plan has been proposed by the Board of
Directors and will be submitted to the Shareholders for approval at the
annual meeting to be held on May 21, 1998. If approved, the term of the
Rights Plan will expire on September 1, 2003. The effect of the Rights Plan
is to require anyone who seeks to acquire 20% or more of the Company's voting
shares to make a bid complying with specific provisions.
ITEM 5. NATURE OF TRADING MARKET.
The Company's Common Shares currently trade on the American Stock
Exchange and The Toronto Stock Exchange. The Common Shares were listed on
The Toronto Stock Exchange on January 6, 1993. The Common Shares are not
traded on any other exchanges. Prior to the February 21, 1992 initial public
offering of Common Shares, there was no public market for such shares. As of
May 13, 1998, 28.9% of the Company's Common Shares are held in the United
States by 44 record holders in the United States.
The following table sets forth high and low sales price information for
trading of the Common Shares on the American Stock Exchange in 1996 and 1997:
-18-
<PAGE>
<TABLE>
<CAPTION>
Period High Low
- ------ ---- ---
U.S.$ U.S.$
<S> <C> <C>
1st Quarter 1996 19.44 14.94
2nd Quarter 1996 21.81 18.81
3rd Quarter 1996 22.88 16.63
4th Quarter 1996 24.13 20.63
</TABLE>
<TABLE>
<CAPTION>
Period High Low
- ------ ---- ---
U.S$ U.S$
<S> <C> <C>
1st Quarter 1997 25.00 19.88
2nd Quarter 1997 21.00 18.38
3rd Quarter 1997 24.75 20.75
4th Quarter 1997 25.00 19.81
</TABLE>
The following table sets forth high and low sales price information for
trading of the Common Shares on The Toronto Stock Exchange in 1996 and 1997:
<TABLE>
<CAPTION>
Period High Low
- ------ ---- ---
CDN.$ CDN.$
<S> <C> <C>
1st Quarter 1996 26.50 20.25
2nd Quarter 1996 30.25 25.75
3rd Quarter 1996 31.15 23.00
4th Quarter 1996 33.00 28.00
</TABLE>
<TABLE>
<CAPTION>
Period High Low
- ------ ---- ---
CDN.$ CDN.$
<S> <C> <C>
1st Quarter 1997 33.85 27.50
2nd Quarter 1997 29.20 25.25
3rd Quarter 1997 34.30 28.50
4th Quarter 1997 34.45 27.00
</TABLE>
ITEM 6. EXCHANGE CONTROLS AND OTHER LIMITATIONS AFFECTING SECURITY HOLDERS.
There are no governmental laws, decrees or regulations in Canada that
restrict the export or import of capital, including, but not limited to,
foreign exchange controls, or that affect the remittance of dividends,
interest or other payments to nonresident holders of the Common Shares, other
than withholding tax requirements. Any such remittances, however, are
subject to withholding tax.
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<PAGE>
There is no limitation imposed by Canadian law or by the charter or
other constituent documents of the Company on the right of nonresident or
foreign owners to hold or vote Common Shares, other than the Rights Plan
discussed in ITEM 4 above or as provided in the INVESTMENT CANADA ACT
(Canada) (the "INVESTMENT CANADA ACT"). The following summarizes the
principal features of the INVESTMENT CANADA ACT.
The INVESTMENT CANADA ACT requires certain "non-Canadian" (as defined in
the INVESTMENT CANADA ACT) individuals, governments, corporations and other
entities who wish to acquire control of a "Canadian business" (as defined in
the INVESTMENT CANADA ACT) to file either a notification or an application
for review with the Director of Investments appointed under the INVESTMENT
CANADA ACT. The INVESTMENT CANADA ACT requires that in certain cases an
acquisition of control of a Canadian business by a "non-Canadian" must be
reviewed and approved by the Minister responsible for the INVESTMENT CANADA
ACT on the basis that the Minister is satisfied that the acquisition is
"likely to be of net benefit to Canada", having regard to criteria set forth
in the INVESTMENT CANADA ACT.
With respect to acquisitions of voting shares, generally only those
acquisitions of voting shares of a corporation that constitute acquisitions
of control of such corporation are reviewable under the INVESTMENT CANADA
ACT. THE INVESTMENT CANADA ACT provides detailed rules for the determination
of whether control has been acquired. For example, the acquisition of
one-third or more of the voting shares of a corporation may, in some
circumstances, be considered to constitute an acquisition of control.
Certain reviewable acquisitions of control may not be implemented before
being approved by the Minister. If the Minister does not ultimately approve
a reviewable acquisition which has been completed, the non-Canadian person or
entity may be required, among other things, to divest itself of control of
the acquired Canadian business. Failure to comply with the review provisions
of the INVESTMENT CANADA ACT could result in, among other things, a court
order directing the disposition of assets of shares.
ITEM 7. TAXATION.
CERTAIN CANADIAN FEDERAL INCOME TAX CONSIDERATIONS APPLICABLE TO U.S.
RESIDENTS
The following is a summary of the principal Canadian federal income tax
considerations generally applicable to a person who is a U.S. Holder. In
this summary, a "U.S. Holder" means a person who, for the purposes of the
CANADA-UNITED STATES TAX CONVENTION (1980) (the "Convention"), is a resident
of the United States and not of Canada and who, for the purposes of the
INCOME TAX ACT (Canada) (the "Canadian Tax Act"), deals at arms's length with
the Company, does not use or hold and is not deemed to use or hold the Common
Shares in carrying on business in Canada and who holds his Common Shares as
capital property. Generally, Common Shares will be considered to be capital
property to a U.S. Holder provided the U.S. Holder does not hold the Common
Shares in the course of carrying on a business and has not acquired the
Common Shares in one or more transactions considered to be an adventure in
the nature of trade. This summary is not applicable to a U.S. Holder that is
a "financial institution" for purposes of the mark-to-market
-20-
<PAGE>
rules in the Canadian Tax Act and to Insurers who carry on an insurance
business in Canada and elsewhere whose Common Shares are "designated
insurance property".
The summary is based upon the Convention, the current provisions of the
Canadian Tax Act, the regulations thereunder, and proposed amendments to the
Canadian Tax Act and regulations publicly announced by or on behalf of the
Minister of Finance, Canada, prior to the date hereof. It does not otherwise
take into account or anticipate any changes in law, whether by legislative,
governmental or judicial decision or action. The discussion does not take
into account the tax laws of the various provinces or territories of Canada.
It is intended to be a general description of the Canadian federal income tax
considerations and does not take into account the individual circumstances of
any particular shareholder. This summary is of a general nature only: U.S.
Holders should consult their own tax advisors with respect to the income tax
consequences to their holding and disposing of Common Shares having regard to
their particular circumstances.
DIVIDENDS.
U.S. Holders will be subject to a 15% withholding tax on the gross
amount of dividends paid or deemed to be paid by the Company. In the case of
a U.S. Holder that is a corporation which beneficially owns at least 10% of
the voting stock of the Company, the applicable withholding tax rate on
dividends is 5%.
A purchase of Common Shares by the Company (other than by a purchase in
the open market in the manner in which shares are normally purchased by a
member of the public) will give rise to a deemed dividend equal to the amount
paid by the Company on the purchase in excess of the paid-up capital of such
shares, determined in accordance with the Canadian Tax Act. Any such deemed
dividend will be subject to non-resident withholding tax, as described above,
and will reduce the proceeds of disposition to a holder of Common Shares for
the purposes of computing the amount of his capital gain or loss arising on
the disposition.
DISPOSITIONS.
A U.S. Holder will not be subject to tax under the Canadian Tax Act in
respect of any capital gain arising on a disposition of Common Shares
(including on a purchase by the Company) unless such shares constitute
taxable Canadian property and the U.S. Holder is not entitled to relief under
the Convention. Generally, Common Shares will not constitute taxable Canadian
property of a U.S. Holder unless, at any time during the five year period
immediately preceding the disposition of the Common Shares, the U.S. Holder,
persons with whom the U.S. Holder did not deal at arm's length or to any
combination thereof, owned or had a right to acquire not less than 25% of the
issued shares of any class or series of a class of the capital stock of the
Company. In any event, under the Convention, gains derived by a U.S. Holder
from the disposition of Common Shares will generally not be taxable in Canada
unless the value of the Company's shares is derived principally from real
property situated in Canada.
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<PAGE>
Common Shares will constitute taxable Canadian property of a U.S. Holder
that is a former Canadian resident who made an election under the Canadian
Tax Act to be deemed not to dispose of such shares on the U.S. Holder's
departure from Canada. Such U.S. Holders may not be eligible to claim the
exemption provided in the Convention for gains realized on a disposition of
Common Shares if they were resident in Canada at any time during the ten year
preceding the disposition.
ITEM 8. SELECTED FINANCIAL DATA.
Set forth below are selected and consolidated financial data for each of
the years ended December 31, 1993, 1994, 1995, 1996 and 1997, which data have
been derived from consolidated financial statements that been audited by
Raymond Chabot Grant Thornton, General Partnership, independent chartered
accountants, a member firm of Grant Thornton International.
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------------------
1993 1994 1995 1996 1997
-------- -------- -------- -------- --------
(in thousands of Canadian dollars, except per
share amounts)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Amounts Under Canadian GAAP (1)
Sales $134,521 $176,973 $225,378 $271,277 $348,270
Cost of Sales 97,302 125,485 159,195 192,748 251,856
-------- -------- -------- -------- --------
Gross Profit 37,219 51,488 66,183 78,529 96,414
-------- -------- -------- -------- --------
Selling, general and
administrative expenses 16,069 22,400 26,071 32,895 41,754
Research and Development 496 976 1,104 1,763 2,228
Amortization of goodwill 1,280 1,440 1,760 1,780 2,360
Financial expenses 2,966 3,289 3,194 1,695 3,247
20,811 28,105 32,129 38,133 49,589
-------- -------- -------- -------- --------
Earnings before restructuring, income
taxes and non-controlling interest 46,825
Restructuring charges 27,116
Earnings before income taxes and
non-controlling interest 16,408 23,383 34,054 40,396 19,709
Income taxes 6,720 9,050 12,500 11,800 6,110
-------- -------- -------- -------- --------
Earnings before
non-controlling interest 9,688 14,333 21,554 28,596 13,599
Non-controlling interest 65 (36) -- -- --
-------- -------- -------- -------- --------
Net earnings $9,623 $14,369 $21,554 $28,596 $13,599
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Earnings per share before restructuring:
Basic $1.30
Fully diluted 1.26
Earnings per share:
Basic $0.48 $0.71 $1.02 $1.18 $0.55
Fully diluted $0.46 $0.68 $0.97 $1.13 $0.53
</TABLE>
-22-
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------------------
1993 1994 1995 1996 1997
-------- -------- -------- -------- --------
(in thousands of Canadian dollars, except per
share amounts)
<S> <C> <C> <C> <C> <C>
U.S. GAAP Earnings Reconciliation (1)
Net earnings according
to Canadian GAAP $9,623 $14,369 $21,554 $28,596 $13,599
Net earnings before the following
U.S. GAAP adjustments 9,623 14,369 21,554 28,596 13,599
Deferred preproduction and product
development costs 644 691 530 282
Decrease in the income tax expense
for the period with respect to the
income tax effects of the above (232) (249) (191) (102)
Difference in the determination
of income taxes 180 180 180 180
-------- -------- -------- -------- --------
Net earnings according to U.S.
GAAP 10,215 14,991 22,073 28,956 13,599
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Earnings per share according
to U.S. GAAP before restructuring charge
Basic $1.30
Diluted $1.26
Earnings per share according
to U.S. GAAP
Basic $0.50 $0.74 $1.04 $1.20 $0.55
Diluted $0.50 $0.72 $1.00 $1.15 $0.53
</TABLE>
-23-
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------------------
1993 1994 1995 1996 1997
-------- -------- -------- -------- --------
(in thousands of Canadian dollars, except per
share amounts)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Amounts Under Canadian GAAP(2)
Working capital $ 23,215 $ 44,390 $ 95,672 $ 81,018 $ 60,054
Total assets 165,693 207,572 300,540 348,578 596,043
Long-term debt 32,294 51,667 54,680 64,026 230,067
Total liabilities 67,801 94,491 102,521 115,671 345,941
Shareholders' equity 97,892 113,081 198,019 232,907 250,102
</TABLE>
- --------------------------
(1) In certain respect, Canadian GAAP differ from US GAAP. For a more
extensive discussion of the differences between Canadian GAAP and U.S.
GAAP, see Note 20 to the consolidated financial statements set forth in the
1997 Annual Report to Shareholders which is attached as Exhibit 4 to, and
incorporated by reference in, this Annual Report on Form 20-F.
Starting in fiscal 1997, any U.S. GAAP reconciling matters, for the
statements of earnings, were assessed to be not material enough to require
separate disclosure.
(2) Under Canadian GAAP, the financial statements are prepared using the
proportionate consolidation method of accounting for joint ventures. Under
U.S. GAAP, these investments would be accounted for using the equity
method.
See Note 20 to the consolidated financial statements set forth in the 1997
Annual Report to Shareholders which is attached as Exhibit 4 to, and
incorporated by reference in, this Annual Report on Form 20-F.
The other differences in presentation that would be required under U.S.
GAAP to the consolidated balance sheets are not viewed as significant
enough to require further disclosure.
The following table sets forth certain exchange rates, expressed in
United States dollars per Canadian dollar, determined by the noon buying
rates in New York city for cable transfers in Canadian dollars as certified
for customs purposes by the Federal Reserve Bank of New York. On May 7,
1998, the noon buying rate was CDN. $1.00 = U.S. $0.6944.
-24-
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------------
1993 1994 1995 1996 1997
------ ------ ------ ------ ------
(All amounts in United States dollars)
<S> <C> <C> <C> <C> <C>
Exchange rate at end
of period $0.7544 $0.7128 $0.7323 $0.7297 $0.6999
Average exchange rate
during period $0.7751 $0.7302 $0.7305 $0.7296 $0.7221
Highest exchange rate
during period $0.8046 $0.7632 $0.7527 $0.7477 $0.7487
Lowest exchange rate
during period $0.7439 $0.7103 $0.7023 $0.7271 $0.6962
</TABLE>
The Company has no written policy for the payment of dividends. On
March 8, 1993, the company paid its first dividend of CDN. $0.05 or U.S.
$0.04 per common share to shareholders of record on March 19, 1993. On March
14, 1994, the Company declared a dividend of CDN. $0.06 or U.S. $0.04 per
common share to shareholders of record on March 23, 1994. Dividends totaling
CDN. $1.2 Million were paid on March 31, 1994. On March 14, 1995, the
Company declared a dividend of CDN. $0.07 or U.S. $0.05 per common share to
Shareholders of record on March 23, 1995. Dividends totaling CDN. $1.4
Million were paid on March 30, 1995. On February 28, 1996, the Company
declared a dividend of CDN. $0.085 or U.S. $0.06 per common share to
Shareholders of record on March 8, 1996. Dividends totaling CDN. $2.0
Million were paid on March 22, 1996. On March 4, 1997, the Company declared
a dividend of CDN. $0.10 or U.S.$0.073 per common share to Shareholders of
record on March 13, 1997. Dividends totaling CDN. $2.5 Million were paid on
March 27, 1997. On March 10, 1998, the Company declared a dividend of CDN.
$0.13 or U.S. $0.092 per common share to Shareholders of record on March 20,
1998. Dividends totaling CDN. $3.3 Million were paid on March 31, 1998.
ITEM 9. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Reference is made to "Management's Discussion and Analysis" on Pages 7
through 16 of Registrant's 1997 Annual Report to Shareholders, which is
incorporated herein by reference and which is included as Exhibit 4 to this
Annual Report on Form 20-F.
-25-
<PAGE>
ITEM 10. DIRECTORS AND OFFICERS OF REGISTRANT.
The name and office with the Company of each person who is, or has been
chosen to become, a Director or executive officer of the Company as of the
date hereof are set forth in the following table.
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Melbourne F. Yull 57 Chairman of the Board,
Chief Executive Officer and Director
H. Dale McSween 48 Executive Vice President and
Chief Operating Officer
Andrew M. Archibald 52 Vice-President, Finance and
Administration, Chief Financial
Officer and Secretary
Lloyd W. Jones 60 Vice-President
Kenneth R. Rogers 61 Vice-President, Sales and Marketing
Richard Gerrior 51 Vice President, Manufacturing, Truro
Eric E. Baker 64 Director
Michael L. Richards 59 Director
James A. Motley, Sr. 69 Director
Irvine Mermelstein 71 Director
L. Robbie Shaw 54 Director
Ben J. Davenport, Jr. 55 Director
Gordon R. Cunningham 53 Director(1)
(1) Nominee
</TABLE>
MELBOURNE F. YULL, founder of the Company, has been the Chief Executive
Officer and a director of the Company since 1981. He was President from 1981
to June 1994 and has been Chairman of
-26-
<PAGE>
the Board since then. Mr. Yull has over 27 years experience in the packaging
industry, primarily related to both extrusion and coating.
H. DALE MCSWEEN has served as Executive Vice-President and Chief Operating
Officer since May 1995. Prior thereto he was Senior Vice-President since
1990. From 1987 to 1989 Mr. McSween was the President and Chief Executive
Officer of Polymer International (N.S.) Incorporated. The Company indirectly
acquired all of the shares of Polymer International during 1989, and it
became part of Intertape Polymer Inc. in January 1990 in the context of a
corporate reorganization. From 1982 to 1987, Mr. McSween was the Director of
Sales and Marketing of Polymer International.
ANDREW M. ARCHIBALD has been Vice-President Finance and Administration, Chief
Financial Officer and Secretary since May 1995. Prior thereto he served as
Vice-President, Finance and Secretary of the Company since 1989. Prior to
1989 he was an audit and financial consulting service partner with Raymond,
Chabot, Martin, Pare, Chartered Accountants.
LLOYD W. JONES has been Vice-President since June 1994. Previously he was
Vice-President Manufacturing since 1990. He was also President and a
director of International Container Systems, Inc. from 1989 to 1994.
International Container was a public company which was merged with Polymer
International Corp. ("PIC") in late 1994. Mr. Jones is President of PIC.
KENNETH R. ROGERS has been Corporate Vice-President, Sales and Marketing
since 1997. He was previously Vice-President, Sales and Marketing of the
Company since 1987. From 1984 to 1987, Mr. Rogers was Marketing Manager of
Devon Tape Company, a tape manufacturer based in New Jersey.
RICHARD GERRIOR has been Vice-President, Manufacturing Truro since 1990.
From 1968 to 1989 he served in various manufacturing management positions
with Polymer International.
ERIC E. BAKER, has served as a director of the Company since 1984. He was
Chairman of the Board from 1984 to June 1994. He is the President of Almiria
Capital Corp., a venture capital company and was the President of its
predecessor, Altamira Capital Corp. since 1984.
MICHAEL L. RICHARDS has served as a Director of the Company and its
predecessor, Systems, since 1981. Mr. Richards is a Senior Partner at the
law firm of Stikeman, Elliott, Montreal, Quebec.
JAMES A. MOTLEY, SR., has been a director of the Company since February 1992.
He is a Director of American Bank and Trust Company and American National
Bank Shares, Inc. and was formerly Chairman of the Board and Chief Executive
Officer of the same firms.
IRVINE MERMELSTEIN, a director of the Company since March 1994, is a resident
of Tucson, Arizona and Halifax, Nova Scotia, and is the managing partner of
Market-Tek, management consultants.
-27-
<PAGE>
L. ROBBIE SHAW, a resident of Halifax, Nova Scotia, has been a director of
the Company since June 1994. He has been Vice-President Marketing and Public
Affairs of Nova Scotia Power since 1993. Prior to that, Mr. Shaw was
Managing Partner for Atlantic Canada of Peat Marwick Stevenson Kellogg, a
management consulting firm.
BEN J. DAVENPORT, JR. has been a director of the Company since June 1994. He
is a resident of Chatham, Virginia, and has been since 1983 the President of
Chatham Oil Company, a distributor of oil, gasoline and propane. He also is
the Chairman of the Board and Chief Executive Officer of First Piedmont
Corporation, a waste hauling business.
GORDON R. CUNNINGHAM has been nominated as a director. He is a partner with
Connor Capital Management Corp. Prior to that Mr. Cunningham was President
and Chief Executive Officer of London Life Insurance Co. and President and
Chief Executive Officer of London Insurance Group.
STATEMENT OF COMPANY GOVERNANCE PRACTICES
In 1995, The Toronto Stock Exchange adopted a requirement that
disclosure be made by each listed company of its corporate governance system
by making reference to The Toronto Stock Exchange Guidelines for Corporate
Governance (the "Guidelines"). Compliance with the Guidelines is not
mandatory but each listed corporation is required to explain where its system
of governance differs from the Guidelines.
MANDATE OF THE BOARD
The mandate of the Board of Directors is to supervise the management of
the business and affairs of the Company, including the development of major
policy and strategy. The Board meets at least quarterly, and more frequently
as required to consider particular issues or conduct specific reviews between
quarterly meetings whenever appropriate. Governance responsibilities are
undertaken by the Board as a whole, with certain specific responsibilities
delegated to the audit and compensation committees as described below.
COMPOSITION OF THE BOARD
The Company's Board currently consists of seven directors, four of whom
are unrelated directors in accordance with the definition of an unrelated
director in the Guidelines. The Board has considered its size for the 1998
fiscal year and proposes increasing its number to eight directors.
CHAIR OF THE BOARD
The Board is chaired by a director who is also the Chief Executive
Officer of the Company. The Board is of the view that this does not impair
its ability to act independently of management due, inter alia, to the
independence of the remaining members of the Board and the role of the Board
-28-
<PAGE>
in determining its own policies, procedures and practices, and ensuring that
the appropriate information is made available to the Board.
COMMITTEES
The Board has established two committees, the Audit Committee and the
Compensation Committee, to facilitate the carrying out of its duties and
responsibilities and to meet applicable statutory requirements. The
Guidelines recommend that the Audit Committee be made up of outside directors
only and that other board committees should be comprised generally of outside
directors, a majority of whom should be unrelated directors. The Audit
Committee complies with the Guidelines as it is composed of three outside
directors. The Compensation Committee, as presently constituted, does not
comply with the Guidelines as it is composed of two related directors and two
unrelated directors and the Board has decided not to modify its composition
for the reasons outlined below.
The following is a description of the Committees of the Board and their
mandate:
- Audit Committee: The mandate of the Committee is to review the
annual financial statements of the Company and to make recommendations to the
Board of Directors in respect thereto. The Committee also reviews the nature
and scope of the annual audit as proposed by the auditors and management and,
with the auditors and management, the adequacy of the internal accounting
control procedures and systems within the Company. The Committee also makes
recommendations to the Board regarding the appointment of independent
auditors and their remuneration and reviews any proposed change in accounting
practices or policies.
- Compensation Committee: The Committee is responsible for the
determination and administration of the compensation policies and levels for
the executive officers of the Company and its subsidiaries. The
recommendations of the Committee are communicated to the Board of Directors.
The compensation of the Chief Executive Officer and the recommendation for
the granting of stock options to executive officers are submitted to the
Board of Directors for approval. The Chairman and Chief Executive Officer is
a member of this Committee. The Board of Directors considers his
participation in the Committee as essential and feels he should continue to
serve on the Committee provided the other members are outside directors. Mr.
Yull does not, however, participate in the Committee's or the Board's
deliberations concerning the recommendation on his own compensation.
DECISIONS REQUIRING BOARD APPROVAL
All major decisions concerning, among other things, the Company's
corporate status, capital, debt financing, securities, distributions,
investments, acquisitions, divestitures and strategic alliances, are subject
to approval by the Board of Directors. In particular, capital investments
and other outlays of an aggregate monetary amount of one million dollars or
more are subject to the prior approval of the Board of Directors.
-29-
<PAGE>
DIRECTOR RECRUITMENT AND BOARD EFFECTIVENESS
All the directors presently in office and proposed to be elected (other
than Mr. Cunningham) at the next annual meeting of shareholders have served
as directors in good standing of the Company since 1994 and the majority of
them have served since it became a reporting issuer in 1992. The Board of
Directors has not adopted a formal policy for the recruitment of directors.
Participation of directors is expected at all Board of Directors and
Committee meetings to which they are called. Directors are asked to notify
the Company if they are unable to attend, and attendance at meetings is duly
recorded. All the directors have agreed to contribute to the evaluation of
their collective as well as their individual performances.
SHAREHOLDER COMMUNICATION AND FEEDBACK
The fundamental objective of the Company's shareholder communication
policy is to ensure open, accessible and timely exchange of information with
all shareholders respecting the business, affairs and performance of the
Company, subject to the requirements of securities legislation in effect and
other statutory and contractual obligations limiting the disclosure of such
information.
In order to facilitate the effective and timely dissemination of
information to all shareholders, the Company releases its disclosed
information through news wire services, the general media, telephone
conferences with investment analysts and mailings to shareholders.
DIRECTORS' AND OFFICERS' INSURANCE
The Company maintains directors' and officers' liability insurance
covering liability, including defense costs, of directors and officers of the
Company incurred as a result of acting as such directors and officers,
provided they acted honestly and in good faith with a view to the best
interests of the Company. The current limit of insurance is $15,000,000 and
an annual premium of $90,000 was paid by the Company in the last completed
financial year with respect to the period from October 1997 to October 1998.
Claims payable to the Company are subject to a retention of $250,000 per
occurrence.
ITEM 11. COMPENSATION OF DIRECTORS AND OFFICERS.
Under most circumstances, the Company's bonus policy provides for the
payment of bonuses to its officers based on the performance of the Company.
Bonuses are paid to certain officers if the net income of their respective
divisions reaches a certain percentage of the budgeted net income. Such
bonuses are set at 0% of the salary of the particular executive if net income
equals 80% of budgeted net income, increasing on a straight line basis to a
maximum of 50% (60% with respect
-30-
<PAGE>
to the Chief Executive Officer) as net income increases to 100% of budgeted
net income. Bonuses are paid yearly after the receipt of the audited
financial statements of the Company.
The Company provided certain executive officers with non-cash
compensation, including the use of a car or a car allowance and the
reimbursement of related expenses, during the year ended December 31, 1997.
Such non-cash compensation for the Company's officers did not exceed an
aggregate of $50,000 for that year.
The aggregate compensation paid by the Company for the year ended
December 31, 1997, to all directors and executive officers as a group, for
services in all capacities, was $1,610,290. In addition, in 1998, the
Company has paid director fees of $54,000 earned in 1997.
The aggregate amount accrued or set aside by the Company for the year
ended December 31, 1997 to provide pension, retirement or similar benefits,
to all directors and executive officers as a group was $653,000.
The following table sets forth all compensation paid in 1997 in respect
of the individuals who were, at December 31, 1997, the Chief Executive
Officer and the other four (4) most highly compensated executive officers of
the Corporation (the "named executive officers").
<TABLE>
<CAPTION>
Annual Compensation
-------------------------------------------
Other Annual
Name Salary $ Bonus $ Compensation $ (1)
---- -------- ------- ------------------
<S> <C> <C> <C>
M. F. Yull U.S. 303,270 U.S. Nil U.S. 30,326
D. McSween 238,082 Nil 16,099
A. M. Archibald 189,520 Nil 7,001
K. Rogers 197,605 Nil 9,204
L. W. Jones U.S. 213,628 U.S. Nil U.S. 8,704
</TABLE>
- ---------------
(1) Perquisites and other personal benefits do not exceed the lesser of $50,000
and 10% of the total of the annual salary and bonus for any of the named
executive officers. The amounts in this column related to taxable benefits on
employee loans and company contribution to the pension plan.
-31-
<PAGE>
ITEM 12. OPTIONS TO PURCHASE SECURITIES FROM REGISTRANT OR SUBSIDIARIES.
EXECUTIVE STOCK OPTION PLAN
In the context of its initial public offering, the Company established
an ongoing Executive Stock Option Plan. The ongoing Executive Stock Option
Plan of the Company is designed to promote a proprietary interest in the
Company among its executives, to encourage the executives to further the
development of the Company and to assist the Company in attracting and
retaining executives necessary for the Company's long-term success. The
Executive Stock Option Plan is administered by the Board of Directors. The
shares offered under the Executive Stock Option Plan are common shares of the
Company. The total number of shares reserved for issuance under the Plan and
any other insider stock option or stock purchase plan will not exceed 10% of
the issued and outstanding common shares of the Company from time to time.
The Board of Directors designates from time to time from the eligible
executives those to whom options are granted and determines the number of
shares covered by such options. Generally, participation in the Plan will be
limited to persons holding positions that can have a significant impact on
the Company's long-term results. The number of common shares to which the
options relate will be determined by taking into account, INTER ALIA, the
market price of the common shares and each optionee's base salary. The
exercise price payable for each common share covered by an option will be
determined by the Board of Directors, but will not be less than the lowest
price allowed from time to time by the applicable regulatory authorities or
any stock exchange on which the common shares are listed. The Plan provides
that options issued thereunder shall vest 25% per year over four years.
The Plan was amended in 1996 to comply with new rules adopted by The
Toronto Stock Exchange and to allow the granting of options to existing and
future directors of the Company who are not part of management. The
directors of the Company have now adopted a further amending resolution
effective as of May 28, 1997: (i) authorizing the Board of Directors of the
Company to grant, from time to time, on an annual basis, up to 2,000 options
to the directors of the Company who are not part of management; and (ii)
specifying that any new non-management director will receive a Grant of 5,000
options upon becoming a director.
On February 28, 1996, options to purchase 324,100 common shares were
granted to executive officers, directors and employees at an exercise price
of CDN. $22.50 or U.S. $16.30 per share. Of such 324,100 options, 227,200
were granted to executive officers of the Company. None of these options has
been exercised.
On August 2, 1996, options to purchase 20,000 common shares were granted
to an executive officer and an employee, at an exercise price of CDN. $24.78
or U.S. $17.84 per share. Of such 10,000 were granted to an executive
officer of the Company.
-32-
<PAGE>
As of May 13, 1998, there were outstanding options to purchase a total
of 2,004,284 of the Company's common shares, of which options to purchase a
total of 1,309,234 common shares are held by the directors and officers as a
group.
The following table sets forth the exercise price and expiration date
for all of the currently outstanding options:
<TABLE>
<CAPTION>
Number of
Option Shares Exercise Price Expiration Date
- ------------- -------------- ---------------
CDN.$ U.S.$
<S> <C> <C> <C>
146,700 $5.035 $4.25 February, 2002
92,050 $6.125 $4.813 January, 2003
5,600 $7.730 $6.022 July, 2003
150,000 $7.915 $6.040 October, 2003
100,000 $8.585 $6.406 December, 2003
39,850 $10.465 $7.710 March, 2004
8,500 $11.175 $8.260 October, 2004
94,900 $11.175 $8.135 January, 2005
49,034 $12.095 $8.575 March, 2005
100,000 $14.890 $10.860 June, 2005
290,100 $22.500 $16.300 February 2006
20,000 $24.780 $17.840 August, 2006
339,900 $26.51 $19.09 May, 2003
299,000 $29.03 $20.59 December, 2003
274,650 $32.92 $23.26 March, 2004
- ----------
2,004,284
- ---------
- ---------
</TABLE>
-33-
<PAGE>
ITEM 13. INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS.
INDEBTEDNESS TO THE COMPANY
Officers of the Company are currently indebted to the Company in
respect of interest-free loans granted during 1991 for the purpose of
purchasing Common Shares of the Company upon the exercise of options. Such
loans are repayable not later than September 30, 1999. As of April 14, 1998,
the aggregate indebtedness of all officers to the Company entered into in
connection with the purchase of Common Shares was $399,531. The following
table summarizes the largest amount of the loans outstanding since January 1,
1997, and the amount outstanding on April 14, 1998.
<TABLE>
<CAPTION>
Largest amount
Name and Municipality outstanding since Amount outstanding
of residence January 1, 1997 on April 14, 1998
- ------------ --------------- -----------------
<S> <C> <C>
Melbourne F. Yull $ 369,218 $ 369,218
Westmount, Quebec
H. Dale McSween $ 30,313 $ 30,313
Beaconsfield, Quebec
Andrew M. Archibald $ 32,853 $ Nil
Westmount, Quebec
Richard Gerrior $ 9,175 $ Nil
Truro, Nova Scotia
</TABLE>
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT
On March 10, 1992, the Company entered into an employment agreement with
Melbourne F. Yull. Pursuant to the terms of the employment agreement, Mr.
Yull agreed to continue to serve as Chief Executive Officer of the Company
and its subsidiaries initially at a fixed annual gross salary and
subsequently at compensation levels to be reviewed annually by the Company in
accordance with its internal policies. The agreement provides INTER ALIA for
annual bonuses based on budgeted objectives of the Company. The agreement
also provides for the payment of 24 months of Mr. Yull's remuneration in the
event of termination without cause or resignation within six months of a
change of control.
On June 13, 1989, predecessors of Intertape Polymer Inc. entered into an
employment agreement with Lloyd W. Jones, whereby he agreed to act as
President of a subsidiary as well as in such other positions within the
Intertape Polymer group as would be agreed upon between the parties. The
agreement is renewed yearly for an additional one-year term and Mr. Jones'
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<PAGE>
compensation is agreed upon on an annual basis, including the salary and the
basis for the determination of the annual bonus.
The Company has entered into change-in-control letter agreements dated
August 8, 1996 with Messrs. McSween, Archibald, Rogers and Jones. These letter
agreements provide that if, within a period of six months after a change in
control of the Company, (a) an executive voluntarily terminates his employment
with the Company, or (b) the Company terminates an executive's employment
without cause, such executive will be entitled to receive a lump sum in the case
of his resignation or an indemnity in lieu of notice in a lump sum in the case
of his termination, equal to fifteen months of such executive's remuneration at
the effective date of such resignation or termination. In addition, all options
for the acquisition of common shares of the Company previously granted to such
executive under the Plan shall become immediately vested and exercisable and
must be exercised within 90 days following the effective date of such
resignation or termination.
INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS
The management of the Company is unaware of any material interest of
any director or officer of the Company, of any management nominee for election
as a director of the Company or of any person who beneficially owns or exercises
control or direction over shares carrying more than 10% of the voting rights
attached to all shares of the Company or any associate or affiliate of any such
person, in any transaction since the beginning of the last completed fiscal year
of the Company or in any proposed transaction that has materially affected or
will materially affect the Company or any of its affiliates.
PART II
Not Applicable
PART III
ITEM 15. DEFAULTS FROM SENIOR SECURITIES.
None Reportable
-35-
<PAGE>
ITEM 16. CHANGES IN SECURITIES AND CHANGES IN SECURITY FOR REGISTERED
SECURITIES.
None Reportable
PART IV
ITEM 17. FINANCIAL STATEMENTS.
Reference is made to the Company's Financial Statements, and the
notes thereto, together with the Auditors' Report, on Pages 17 through 42 of
Registrant's 1997 Annual Report to Shareholders which is incorporated herein
by reference and which is included as Exhibit 4 to this Annual Report on Form
20-F, and to the Financial Statement Schedules, together with the Auditor's
Report thereon, included as part of this Annual Report on Form 20-F.
ITEM 18. FINANCIAL STATEMENTS.
Not Applicable
ITEM 19. FINANCIAL STATEMENTS AND EXHIBITS.
<TABLE>
<CAPTION>
(a) (1) FINANCIAL STATEMENTS PAGE(S)
-------------------- -------
<S> <C>
Auditors' Report A-1**
Consolidated Earnings 18*
Consolidated Retained Earnings 18*
Consolidated Changes in Cash
Resources 19*
Consolidated Balance Sheet 20*
Notes 1-20 to the Financial
Statements 21-42*
(a) (2) FINANCIAL STATEMENT SCHEDULES
-----------------------------
Auditors' Report F-1**
Schedule II - Valuation and
Qualifying Accounts F-2**
(b) EXHIBITS
1 Renewal of operating line of credit between Intertape
Polymer Inc. and the National Bank of Canada dated
April 29, 1996 ***
-36-
<PAGE>
2.1 Fourth Lease Amendment between Intertape Polymer
Corp. and Danville Industrial Development Incorporated
dated February 1, 1993 ***
2.2 Fifth Lease Amendment between Intertape Polymer
Corp. and Danville Industrial Development Incorporated
dated September 6, 1995 ***
2.3 Loan Agreement between Intertape Polymer Corp.,
Intertape Polymer Inc., Intertape Polymer Group Inc.
and Danville Industrial Development and American
National Bank and Trust Company ***
3 [Deleted]
4 Registrant's 1997 Annual Report to
Shareholders
5 Consent of Independent Auditors
6 Note agreements between Intertape Polymer Group
Inc. and various institutions dated January 1, 1996 ***
7 Amended Memorandum of lease between Intertape ***
Polymer Corp. and Danville Industrial
Development, Inc. dated May 14, 1996
8 Loan modification agreement between Danville
Industrial Development Incorporated,
American National Bank and Trust Company,
Intertape Polymer Corp., Intertape Polymer
Inc. and Intertape Polymer Group Inc. dated
July, 1996 ***
9 Loan documents between Danville Industrial
Development, Incorporated and American
National Bank and Trust Company, dated
August 15, 1996. ***
10 Acquisition Agreement between Intertape
Polymer Group Inc. and STC Corp. dated
December 16, 1997.
-37-
<PAGE>
11 Loan Documents between IPG Holdings,
L.P. and Toronto Dominion Bank dated
December 15, 1997 and Guaranty by
Intertape Polymer Group Inc.
12 Revolving Credit Facility between IPG
Holdings, L.P. and Comerica Bank
dated December 15, 1997 and Guaranty
by Intertape Polymer Group Inc.
</TABLE>
- -----------------------------
* The financial statements filed as part of this report are incorporated
herein by reference to the 1997 Annual Report to Shareholders which is
included as Exhibit 4 to this Annual Report on Form 20-F. References to
page numbers are references to the applicable page in the 1997 Annual
Report.
** References are to pages in this Annual Report on Form 20-F.
*** Previously filed as an exhibit to registrant's Annual Report on Form 20-F,
Commission File No. 1-10928, and incorporated herein by reference.
-38-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities
Exchange Act of 1934, the registrant certifies that it meets all of the
requirements for filing on Form 20-F and has duly caused this annual report
to be signed on its behalf by the undersigned, thereunto duly authorized.
INTERTAPE POLYMER GROUP INC.
(Registrant)
/s/ Andrew M. Archibald, C.A.
----------------------------------------
(Signature)
Name: Andrew M. Archibald, C.A.
Title: Vice-President, Finance and
Administration, Chief Financial
Officer and Secretary
Date: May 19, 1998
-39-
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INDEX
-------------
<S> <C> <C>
1 Renewal of operating line of credit between Intertape
Polymer Inc. and the National Bank of Canada dated
April 29, 1996 ***
2.1 Fourth Lease Amendment between Intertape Polymer
Corp. and Danville Industrial Development Incorporated
dated February 1, 1993 ***
2.2 Fifth Lease Amendment between Intertape Polymer
Corp. and Danville Industrial Development Incorporated
dated September 6, 1995 ***
2.3 Loan Agreement between Intertape Polymer Corp.,
Intertape Polymer Inc., Intertape Polymer Group Inc.
and Danville Industrial Development and American
National Bank and Trust Company ***
3 [Deleted]
4 Registrant's 1997 Annual Report to
Shareholders
5 Consent of Independent Auditors
6 Note agreements between Intertape Polymer Group
Inc. and various institutions dated January 1, 1996 ***
7 Amended Memorandum of lease between Intertape ***
Polymer Corp. and Danville Industrial
Development, Inc. dated May 14, 1996
8 Loan modification agreement between Danville
Industrial Development Incorporated,
American National Bank and Trust Company,
Intertape Polymer Corp., Intertape Polymer
Inc. and Intertape Polymer Group Inc. dated
July, 1996 ***
9 Loan documents between Danville Industrial
Development, Incorporated and American
National Bank and Trust Company, dated
August 15, 1996. ***
-40-
<PAGE>
10 Acquisition Agreement between Intertape
Polymer Group Inc. and STC Corp. dated
December 16, 1997.
11 Loan Documents between IPG Holdings,
L.P. and Toronto Dominion Bank dated
December 15, 1997 and Guaranty by
Intertape Polymer Group Inc.
12 Revolving Credit Facility between IPG
Holdings, L.P. and Comerica Bank
dated December 15, 1997 and Guaranty
by Intertape Polymer Group Inc.
</TABLE>
- -----------------------------
*** Previously filed as an exhibit to registrant's Annual Report on Form
20-F, Commission File No. 1-10928, and incorporated herein by reference.
-41-
<PAGE>
AUDITORS' REPORT
To the Shareholders of
INTERTAPE POLYMER GROUP INC.
We have audited the consolidated balance sheets of Intertape Polymer
Group Inc. as at December 31, 1997 and 1996 and the consolidated statements
of earnings, retained earnings and changes in cash resources for the years
ended December 31, 1997, 1996 and 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards in Canada. Those standards require that we plan and perform an
audit to obtain reasonable assurance 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.
In our opinion, these consolidated financial statements present fairly,
in all material respects, the financial position of the Company as at
December 31, 1997 and 1996 and the results of its operations and the changes
in its financial position for the years ended December 31, 1997, 1996 and
1995 in accordance with generally accepted accounting principles in Canada.
Generally accepted accounting principles in Canada differ in some
respects from those applicable in the United States of America (See Note 20).
Raymond Chabot Grant Thornton
General Partnership
Chartered Accountants
Montreal, Canada
March 10, 1998
<PAGE>
AUDITORS' REPORT
To the Board of Directors of
Intertape Polymer Group Inc.
Our examination of the Consolidated Financial Statements referred to in our
report dated March 10, 1998 appearing on page 17 of the 1997 Annual Report to
the shareholders of Intertape Polymer Group Inc. (which report and
Consolidated Financial Statements are incorporated by reference in this
Annual Report on Form 20-F) also included an examination of the Financial
Statement Schedule referred to in Part IV of this Form 20-F. In our opinion,
this Financial Statement Schedule presents fairly, in all material respects,
the information set forth therein when read in conjunction with the related
Consolidated Financial Statements taken as a whole.
Raymond Chabot Grant Thornton
General Partnership
Chartered Accountants
Montreal, Canada
March 10, 1998
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We have issued our reports, dated March 10, 1998 on the Consolidated
Financial Statements and the Financial Statement Schedule of Intertape Polymer
Group Inc. referred to in Items 8 and 17 of this Annual Report on Form 20-F
and we hereby consent to the use of such reports in this Annual Report on
Form 20-F.
We also consent to the reference to us under the heading "Item 8 - Selected
Financial Data" in such Annual Report.
Raymond Chabot Grant Thornton
General Partnership
Chartered Accountants
Montreal, Canada
May , 1998
<PAGE>
SCHEDULE II
INTERTAPE POLYMER GROUP INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
AMOUNTS
BALANCE AT ADDITIONS ASSUMED
BEGINNING OF CHARGED TO UNDER BALANCE AT
YEAR EXPENSE DEDUCTIONS ACQUISTIONS END OF YEAR
DESCRIPTION ------------ ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
ALLOWANCE FOR DOUBTFUL ACCOUNTS
Year ended December 31, 1997 $764 $455 $162 $878 $1,935
--- --- --- --- -----
Year ended December 31, 1996 $689 $217 $142 - $ 764
--- --- --- -----
Year ended December 31, 1995 $286 $475 $ 72 - $ 689
--- --- --- -----
</TABLE>
<PAGE>
STOCK PURCHASE AGREEMENT
DATED AS OF NOVEMBER 4, 1997
BY AND AMONG
INTERTAPE POLYMER GROUP INC.
IPG (US) ACQUISITION CORPORATION
AND
STC CORP.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE I
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
1.1. Defined Terms . . . . . . . . . . . . . . . . . . . . . . .1
1.2. Other Terms . . . . . . . . . . . . . . . . . . . . . . . .7
ARTICLE II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
PURCHASE AND SALE OF STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
ARTICLE III
CONSIDERATION AND ALLOCATION. . . . . . . . . . . . . . . . . . . . . . . . . .8
3.1. Consideration . . . . . . . . . . . . . . . . . . . . . . .8
3.2. Allocation. . . . . . . . . . . . . . . . . . . . . . . . .8
3.3. Adjustment of Purchase Price. . . . . . . . . . . . . . . .8
ARTICLE IV
LETTER OF CREDIT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE V
CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.1. Closing . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.2. Documents to be Delivered by Seller to Buyer. . . . . . . 11
5.3. Documents to be Delivered by IPG and Buyer to Seller. . . 12
5.4. Other Actions at the Closing. . . . . . . . . . . . . . . 12
ARTICLE VI
REPRESENTATIONS AND WARRANTIES RELATING TO SELLER . . . . . . . . . . . . . . 12
6.1. Corporate Organization. . . . . . . . . . . . . . . . . . 12
6.2. Stock Ownership . . . . . . . . . . . . . . . . . . . . . 12
6.3. Authorization of Agreement; No Violation. . . . . . . . . 13
6.4. Litigation. . . . . . . . . . . . . . . . . . . . . . . . 13
6.5. No Brokers and Finders. . . . . . . . . . . . . . . . . . 13
<PAGE>
ARTICLE VII
REPRESENTATIONS AND WARRANTIES RELATING TO STC TAPE . . . . . . . . . . . . . 13
7.1. Corporate Organization. . . . . . . . . . . . . . . . . . 14
7.2. Stock Ownership . . . . . . . . . . . . . . . . . . . . . 14
7.3. Subsidiaries and Other Equity Investments . . . . . . . . 14
7.4. Financial Statements. . . . . . . . . . . . . . . . . . . 14
7.5. No Undisclosed Liabilities. . . . . . . . . . . . . . . . 14
7.6. Absence of Certain Changes. . . . . . . . . . . . . . . . 15
7.7. Tax Matters . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES RELATING TO THE COMPANY . . . . . . . . . . . 19
8.1. Corporate Organization. . . . . . . . . . . . . . . . . . 19
8.2. Capitalization; Stock Ownership . . . . . . . . . . . . . 19
8.3. Subsidiaries and Other Equity Investments . . . . . . . . 19
8.4. No Violation. . . . . . . . . . . . . . . . . . . . . . . 20
8.5. Financial Statements. . . . . . . . . . . . . . . . . . . 21
8.6. No Undisclosed Liabilities. . . . . . . . . . . . . . . . 21
8.7. Absence of Certain Changes. . . . . . . . . . . . . . . . 22
8.8. Title to and Condition of Properties and Assets . . . . . 24
8.9. Inventory . . . . . . . . . . . . . . . . . . . . . . . . 24
8.10. Real Property . . . . . . . . . . . . . . . . . . . . . . 25
8.11. Tax Matters . . . . . . . . . . . . . . . . . . . . . . . 27
8.12. Contracts . . . . . . . . . . . . . . . . . . . . . . . . 28
8.13. Litigation. . . . . . . . . . . . . . . . . . . . . . . . 29
8.14. Proprietary Rights. . . . . . . . . . . . . . . . . . . . 30
8.15. Bank Accounts . . . . . . . . . . . . . . . . . . . . . . 30
8.16. Compliance with Laws. . . . . . . . . . . . . . . . . . . 31
8.17. Environmental Matters . . . . . . . . . . . . . . . . . . 31
8.18. Governmental Authorizations and Regulations . . . . . . . 32
8.19. SEC Filings . . . . . . . . . . . . . . . . . . . . . . . 32
8.20. Employee Benefit Plans and Arrangements . . . . . . . . . 33
8.21. Labor Matters . . . . . . . . . . . . . . . . . . . . . . 34
8.22. Foreign Corrupt Practices Act . . . . . . . . . . . . . . 35
8.23. Accounting Practices. . . . . . . . . . . . . . . . . . . 35
8.24. Business Relationships; Receivables . . . . . . . . . . . 35
8.25. Affiliates' Relationships to and Transactions
with the Company . . . . . . . . . . . . . . . . . . . . 36
8.26. Corporate Name. . . . . . . . . . . . . . . . . . . . . . 36
8.27. Corporate Matters. . . . . . . . . . . . . . . . . . . . .36
8.28. [Intentionally omitted.] . . . . . . . . . . . . . . . . .36
<PAGE>
8.29. Insurance. . . . . . . . . . . . . . . . . . . . . . . . .36
8.30. Product Warranties . . . . . . . . . . . . . . . . . . . .37
8.31. Barter Agreements. . . . . . . . . . . . . . . . . . . . .37
8.32. Certain Employee Matters . . . . . . . . . . . . . . . . .37
8.33. No Other Representations and Warranties. . . . . . . . . .37
ARTICLE IX
REPRESENTATIONS AND WARRANTIES BY IPG AND BUYER. . . . . . . . . . . . . . . .38
9.1. Corporate Organization . . . . . . . . . . . . . . . . . .38
9.2. Authorization of Agreement; No Violation . . . . . . . . .38
9.3. Corporate Authority. . . . . . . . . . . . . . . . . . . .38
9.4. Litigation . . . . . . . . . . . . . . . . . . . . . . . .39
9.5. No Brokers and Finders . . . . . . . . . . . . . . . . . .39
9.6. Representations Concerning the Intertape Shares. . . . . .39
9.7. Purchase for Investment. . . . . . . . . . . . . . . . . .40
ARTICLE X
COVENANTS OF SELLER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
10.1. Access, Information and Documents. . . . . . . . . . . . .40
10.2. Conduct of Business Pending Closing. . . . . . . . . . . .41
10.3. Noncompetition; Confidentiality. . . . . . . . . . . . . .44
10.4. Exclusivity. . . . . . . . . . . . . . . . . . . . . . . .46
10.5. Transfer Pricing . . . . . . . . . . . . . . . . . . . . .46
10.6. Consents and Approvals . . . . . . . . . . . . . . . . . .46
10.7. Industrial Site Recovery Act . . . . . . . . . . . . . . .46
10.8. [Intentionally omitted.] . . . . . . . . . . . . . . . . .46
10.9. Resignation of Directors and Officers. . . . . . . . . . .46
10.10. Use of Name. . . . . . . . . . . . . . . . . . . . . . . .47
10.11. Lockup . . . . . . . . . . . . . . . . . . . . . . . . . .47
10.12. Restructuring. . . . . . . . . . . . . . . . . . . . . . .47
10.13. Notification . . . . . . . . . . . . . . . . . . . . . . .47
10.14. Letter of Credit . . . . . . . . . . . . . . . . . . . . .47
10.15. Availability of Funds Under Contingent Payment
Agreement. . . . . . . . . . . . . . . . . . . . . . . .47
10.16. Certain Environmental Compliance . . . . . . . . . . . . .47
10.17. Consent of Union . . . . . . . . . . . . . . . . . . . . .47
10.18. Forms 5500 . . . . . . . . . . . . . . . . . . . . . . . .48
10.19. Termination of Benefit Plans . . . . . . . . . . . . . . .48
<PAGE>
ARTICLE XI
COVENANTS OF IPG AND BUYER . . . . . . . . . . . . . . . . . . . . . . . . . .48
11.1. Confidential Information . . . . . . . . . . . . . . . . .48
11.2. Consents and Approvals . . . . . . . . . . . . . . . . . .48
11.3. Environmental Audits . . . . . . . . . . . . . . . . . . .48
11.4. Board Seat . . . . . . . . . . . . . . . . . . . . . . . .48
11.5. Indemnification of Directors and Officers of the
Company. . . . . . . . . . . . . . . . . . . . . . . . .49
ARTICLE XII
HSR COVENANT OF IPG, BUYER AND SELLER . . . . . . . . . . . . . . . . . . . . 49
ARTICLE XIII
CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS TO SELL THE STOCK . . . . . . . .50
13.1. Accuracy of Representations and Warranties . . . . . . . .50
13.2. Compliance with Covenants. . . . . . . . . . . . . . . . .50
13.3. Consents and Approvals . . . . . . . . . . . . . . . . . .50
13.4. Officer's Certificates . . . . . . . . . . . . . . . . . .50
13.5. Opinion of Counsel . . . . . . . . . . . . . . . . . . . .50
13.6. Registration Rights. . . . . . . . . . . . . . . . . . . .50
13.7. [Intentionally omitted.] . . . . . . . . . . . . . . . . .50
13.8. Guarantees . . . . . . . . . . . . . . . . . . . . . . . .51
13.9. Company Restructuring. . . . . . . . . . . . . . . . . . .51
13.10. October Financial Statements . . . . . . . . . . . . . . .51
13.11. Transfer Pricing . . . . . . . . . . . . . . . . . . . . .51
ARTICLE XIV
CONDITIONS PRECEDENT TO IPG'S AND BUYER'S OBLIGATIONS TO PURCHASE THE STOCK. .51
14.1. Accuracy of Representations and Warranties . . . . . . . .51
14.2. Compliance with Covenants. . . . . . . . . . . . . . . . .51
14.3. Consents and Approvals . . . . . . . . . . . . . . . . . .51
14.4. Officer's Certificates . . . . . . . . . . . . . . . . . .51
14.5. [Intentionally omitted.] . . . . . . . . . . . . . . . . .52
14.6. Opinion of Counsel . . . . . . . . . . . . . . . . . . . .52
14.7. No Litigation. . . . . . . . . . . . . . . . . . . . . . .52
14.8. Employment Agreements. . . . . . . . . . . . . . . . . . .52
14.9. Resignations . . . . . . . . . . . . . . . . . . . . . . .52
14.10. Environmental and Safety Audits. . . . . . . . . . . . . .52
14.11. Physical Properties. . . . . . . . . . . . . . . . . . . .53
14.12. Due Diligence Investigation. . . . . . . . . . . . . . . .53
<PAGE>
14.13. October Financial Statements . . . . . . . . . . . . . . .53
14.14. Transfer Pricing . . . . . . . . . . . . . . . . . . . . .53
14.15. Title Insurance. . . . . . . . . . . . . . . . . . . . . .53
14.16. Financing. . . . . . . . . . . . . . . . . . . . . . . . .53
14.17. Restructuring. . . . . . . . . . . . . . . . . . . . . . .53
14.18. Environmental Compliance . . . . . . . . . . . . . . . . .53
14.19. Contracts in Respect of Environmental Remediation. . . . .53
ARTICLE XV
CONDITIONS TO OBLIGATIONS OF EACH PARTY TO EFFECT THE STOCK PURCHASE . . . . .54
15.1. No Injunction. . . . . . . . . . . . . . . . . . . . . . .54
15.2. HSR Act Waiting Period . . . . . . . . . . . . . . . . . .54
ARTICLE XVI
TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
16.1. Termination by Buyer and IPG . . . . . . . . . . . . . . .54
16.2. Termination by Seller. . . . . . . . . . . . . . . . . . .54
16.3. Termination by Mutual Consent. . . . . . . . . . . . . . .55
16.4. Termination by IPG or Seller . . . . . . . . . . . . . . .55
16.5. Effect of Termination. . . . . . . . . . . . . . . . . . .55
ARTICLE XVII
SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS. . . . . . .56
ARTICLE XVIII
INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
18.1. Seller's Obligation to Indemnify . . . . . . . . . . . . .57
18.2. Buyer's Obligations to Indemnify . . . . . . . . . . . . .59
18.2A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
18.3. Method of Asserting Claims . . . . . . . . . . . . . . . .60
18.4. Disputes . . . . . . . . . . . . . . . . . . . . . . . . .63
ARTICLE XIX
[Intentionally Omitted] . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
ARTICLE XX
MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .65
20.1. Notices. . . . . . . . . . . . . . . . . . . . . . . . . .65
20.2. Entire Agreement . . . . . . . . . . . . . . . . . . . . .67
<PAGE>
20.3. Expenses . . . . . . . . . . . . . . . . . . . . . . . . .67
20.4. Public Announcements . . . . . . . . . . . . . . . . . . .67
20.5. Waiver; Remedies Cumulative. . . . . . . . . . . . . . . .67
20.6. Amendment. . . . . . . . . . . . . . . . . . . . . . . . .68
20.7. Third Party Beneficiaries. . . . . . . . . . . . . . . . .68
20.8. Definition of Knowledge. . . . . . . . . . . . . . . . . .68
20.9. No Assignment; Binding Effect. . . . . . . . . . . . . . .68
20.10. Headings . . . . . . . . . . . . . . . . . . . . . . . . .68
20.11. Invalid Provisions . . . . . . . . . . . . . . . . . . . .68
20.12. Law. . . . . . . . . . . . . . . . . . . . . . . . . . . .68
20.13. Counterparts . . . . . . . . . . . . . . . . . . . . . . .69
20.14. Updating Disclosure Schedules. . . . . . . . . . . . . . .69
</TABLE>
<PAGE>
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of
November 5, 1997, by and among INTERTAPE POLYMER GROUP INC., a Canadian
corporation ("IPG"), IPG (US) ACQUISITION CORPORATION, a Delaware corporation
and a subsidiary of IPG ("Buyer") and STC CORP., a Korean corporation
("Seller").
W I T N E S S E T H :
WHEREAS, Seller owns all of the outstanding shares of capital stock
of STC Tape Inc., a Delaware corporation ("STC Tape"); and
WHEREAS, STC Tape owns all of the outstanding shares of capital
stock of American Tape Co., a Delaware corporation (the "Company"); and
WHEREAS, IPG desires to cause Buyer, its wholly-owned subsidiary, to
purchase from Seller, and Seller desires to sell to Buyer, all of the
outstanding capital stock of STC Tape, all upon the terms and conditions
hereinafter set forth.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1. DEFINED TERMS. When used in this Agreement, the following
terms shall have the meanings set forth in this Section 1.1. All Section
numbers used in this Agreement refer to sections of this Agreement unless
otherwise specifically described. All references to Schedules and Exhibits
in this Agreement are references to schedules and exhibits to this Agreement.
"Affiliate" means, with respect to any specified Person, a Person
that directly, or indirectly through one or more intermediaries, controls, is
controlled by or is under common control with, such specified Person.
"Benefit Plan" means any written Plan under which any employee,
former employee or director of the Company or any Company Subsidiary or any
beneficiary thereof is covered, is eligible for coverage or has benefit
rights by virtue of such Person'S employment, engagement or other
relationship with the Company or any Company Subsidiary.
"Business Combination" means any (i) merger, consolidation, business
combination or similar transaction relating to the Company or any of its
subsidiaries or (ii) any sale or other disposition of capital stock of or
other equity interests (or securities convertible into, or exercisable or
exchangeable for capital stock or other equity interests) in the Company or
any of its subsidiaries
<PAGE>
(whether by the Company, the Seller or any of its Affiliates thereof) or
(iii) any sale, dividend or other disposition of all or any material portion
of the assets and properties of the Company or any of its subsidiaries.
"Claim Notice" means written notification pursuant to Section
18.1(b) of a Third Party Claim as to which indemnity under Section 18.1 or
18.2 is sought by an Indemnified Party, enclosing a copy of all papers
served, if any, and specifying the nature of and basis for such Third Party
Claim and for the Indemnified Party's claim against the Indemnifying Party
under Section 18.1 or 18.2, together with the amount or, if not then
reasonably ascertainable, the estimated amount, determined in good faith, of
such Third Party Claim.
"Closing" has the meaning given to it in Section 5.1.
"Closing Date" has the meaning given to it in Section 5.1.
"Code" means the Internal Revenue Service Code of 1986, as amended.
"Company Indebtedness" means the difference, at the Closing Date,
between (x) the aggregate amount of the Company's interest-bearing
indebtedness (excluding trade accounts payable) and (y) the amount of any
cash and cash equivalents, where the interest bearing indebtedness is
calculated in a manner consistent with Schedule 1 hereto.
"Company Restructuring" has the meaning given to it in Section 10.12.
"Company Subsidiary" means (i) any corporation that is an issuer of
any shares of capital stock owned beneficially or of record by the Company or
any Company Subsidiary or (ii) any other business entity of which the Company
or any Company Subsidiary owns any capital or profit interests.
"Contract" means any written note, bond, mortgage, indenture, lease,
license, franchise, contract, agreement or other binding understanding,
arrangement or commitment evidenced by an agreement in writing.
"Creditors" means the entities listed in Schedule 1 hereto.
"Dispute Notification" has the meaning given to it in Section
18.4(b)(iv).
"Dispute Period" means the period ending 90 calendar days following
receipt by an Indemnifying Party of either a Claim Notice or an Indemnifying
Notice.
"Dispute Resolution Consultant" has the meaning given to it in
Section 18.4(b)(v).
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"Eight Key Employees" means InJin Choi, Kiwhan Lee, Koh-Hoon Lee,
Alex H.S. Yoo, Keith Bong, Lawrence Lawson, Hee Chung Park and Shane Betts.
"Environment" means all air, surface water, groundwater, or land,
including land surface or subsurface, including all fish, wildlife, biota and
all other natural resources.
"Environmental Claim" means any and all administrative or judicial
actions, suits, orders, claims, liens, notices, notices of violations,
investigations, complaints, requests for information, proceedings, or other
written communication, whether criminal or civil, (collectively, "Claims")
pursuant to or relating to any applicable Environmental Law by any person
(including but not limited to any Governmental Entity, private person and
citizens' group) based upon, alleging, asserting, or claiming any (i)
violation of or liability under any Environmental Law, (ii) violation of any
Environmental Permit, or (iii) liability for investigatory costs, cleanup
costs, removal costs, remedial costs, response costs, natural resource
damages, property damage, personal injury, fines, or penalties arising out
of, based on, resulting from, or related to the presence, Release, or
threatened Release into the Environment, of any Hazardous Materials at any
location, including but not limited to any off-Site location to which
Hazardous Materials or materials containing Hazardous Materials were sent for
handling, storage, treatment, or disposal.
"Environmental Clean-up Site" means any location which is listed or
proposed for listing on the National Priorities List, the Comprehensive
Environmental Response, Compensation and Liability Information System, or on
any similar state list of sites requiring investigation or cleanup, or which
is the subject of any pending or threatened action, suit, proceeding, or
investigation related to or arising from any alleged violation of any
Environmental Law, or at which there has been a Release, threatened or
suspected Release of a Hazardous Material.
"Environmental Costs and Liabilities" means any and all
out-of-pocket losses, liabilities, obligations, damages, fines, penalties,
judgment, actions, claims, costs and expenses (including, without limitation,
reasonable out-of-pocket costs, fees, disbursements and expenses of legal
counsel, experts, engineers and consultants and the reasonable out-of-pocket
cost-effective expenses of investigation and feasibility studies and such
reasonable out-of-pocket cost-effective expenses to clean up, remove, treat,
or in any other way address any Hazardous Materials) arising from or under
any Environmental Law.
"Environmental Law" means any and all current and future, federal,
state, local, provincial and foreign, civil and criminal laws, statutes,
ordinances, orders, codes, rules, regulations, Environmental Permits,
policies, guidance documents, judgments, decrees, injunctions, or agreements
with any Governmental Entity, relating to the protection of health and the
Environment, and/or governing the handling, use, generation, treatment,
storage, transportation, disposal, manufacture, distribution, formulation,
packaging, labeling, or Release of Hazardous Materials, whether now existing
or subsequently amended or enacted, including but not limited to: the Clean
Air Act, 42 U.S.C. Section 7401 ET SEQ.; the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, 42 U.S.C. Section 9601 ET
SEQ.; the Federal Water Pollution Control Act, 33 U.S.C. Section 1251 ET
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SEQ.; the Hazardous Material Transportation Act 49 U.S.C. Section 1801 ET
SEQ.; the Resource Conservation and Recovery Act of 1976 ("RCRA"), 42 U.S.C.
Section 6901 ET SEQ.; the Oil Pollution Act of 1990, 33 U.S.C. Section 2701
ET SEQ.; and the state analogies thereto, including but not limited to the
Michigan Natural Resources and Environmental Protection Act, M.C.L.A.
324.20101 ET SEQ., as amended or superseded from time to time; and any common
law doctrine, including but not limited to, negligence, nuisance, trespass,
personal injury, or property damage related to or arising out of the presence
of, Release of, or exposure to a Hazardous Material.
"Environmental Permit" means any federal, state, local, provincial,
or foreign permits, licenses, approvals, consents or authorizations required
by any Governmental Entity under or in connection with any Environmental Law
and includes any and all orders, consent orders or binding agreements issued
or entered into by a Governmental Entity under any applicable Environmental
Law.
"Environmental Response Action" has the meaning given to it in
Section 18.4(b).
"Environmental Response Action Notice" has the meaning given to it
in Section 18.4(b)(i).
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended, and the rules and regulations promulgated thereunder.
"ERISA Affiliate" means any Person who is, or at any time was, a
member of a controlled group (within the meaning of Section 412(n)(6) of the
Code) that includes, or at any time included, the Company or any Company
Subsidiary, or any predecessor of any of the foregoing.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"Financial Statements" has the meaning given to it in Section 8.5.
"GAAP" means United States generally accepted accounting principles
as currently in effect.
"Governmental Entity" means any government or any court, arbitral
tribunal, administrative agency or commission or other governmental or other
regulatory authority or agency, or any other instrumentality of the United
States, any foreign country, or any foreign or domestic state, province,
county, city or other political subdivision.
"Guarantees" means the guarantee agreements or other written
assurances listed in Schedule 2.
"Hazardous Material" means petroleum, petroleum hydrocarbons or
petroleum products, petroleum by-products, radioactive materials, underground
storage tanks, asbestos or
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asbestos-containing materials, gasoline, diesel fuel, pesticides, radon, urea
formaldehyde, lead or lead-containing materials, polychlorinated biphenyls,
ionizing and non-ionizing radiation including radon and electromagnetic
frequency radiation; and any other chemicals, materials, substances or wastes
in any amount or concentration which are now or hereafter become defined as
or included in the definition of "HAZARDOUS SUBSTANCES," "HAZARDOUS
MATERIALS," "HAZARDOUS WASTES," "EXTREMELY HAZARDOUS WASTES," "RESTRICTED
HAZARDOUS WASTES," "TOXIC SUBSTANCES," or words of similar import, under any
Environmental Law.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the rules and regulations promulgated thereunder.
"Indemnified Environmental Losses" has the meaning given to it in
Section 18.1(a)(ii).
"Indemnified Party" means any Person claiming indemnification under
any provision of Article XVIII.
"Indemnifying Party" means any Person against whom a claim for
indemnification is being asserted under any provision of Article XVIII.
"Indemnity Notice" means written notification pursuant to Section
18.3 of a claim for indemnity under Article XVIII by an Indemnified Party,
specifying the nature of and basis for such claim, together with the amount
or, if not then reasonably ascertainable, the estimated amount, determined in
good faith, of such claim.
"Intellectual Property" means domestic and foreign patents, patent
applications, inventions, invention disclosures, trademark and service mark
applications, registered trademarks, registered service marks, computer
programs and software and related codes and applications, databases,
copyrights, trademarks, service marks, brand marks, brand names, trade names,
material trade secrets, know-how, proprietary information, formulae and
processes and all other similar items of intellectual property.
"IRS" means the Internal Revenue Service.
"Laws" has the meaning given to it in Section 8.16.
"Lien" means any adverse claim, restriction on voting or transfer or
pledge, lien, charge, mortgage, encumbrance or security interest of any kind.
"Loss" means any and all damages, fines, fees, penalties,
deficiencies, losses and expenses (including without limitation all removal,
remedial and response costs, interest, court costs, fees of attorneys,
accountants and other experts or other expenses of litigation or other
proceedings or of any claim, default or assessment).
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"Material Adverse Effect" means a material adverse effect on the
business, results of operations or financial condition of a specified Person
and its subsidiaries taken as a whole, as the case may be.
"Net Operating Income" means the net operating income of the Company
computed as described in Section 3.3 hereof.
"Permit" means any license, franchise, permit, consent, concession,
order, approval, authorization or registration from, of or with a
Governmental Entity.
"Person" means an individual, a corporation, a limited liability
company, a partnership, an association, a trust or any other entity or
organization, including a Governmental Entity.
"Plan" means any written bonus, incentive compensation, deferred
compensation, pension, profit sharing, retirement, stock purchase, stock
option, stock ownership, stock appreciation rights, phantom stock, cafeteria,
life, health, accident, disability, workmen's compensation or other
insurance, severance, separation or other employee benefit plan or policy of
any kind, including, but not limited to, any "employee benefit plan" within
the meaning of Section 3(3) of ERISA.
"Purchase Price" has the meaning given to in Section 3.1.
"Real Property" has the meaning given to it in Section 8.10(a).
"Release" means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dispersing, dumping, or
disposing of a Hazardous Material into the Environment.
"Registration Rights Agreement" means the Registration Rights
Agreement dated as of the Closing Date between IPG and Seller substantially
in the form of Exhibit B.
"Resolution Period" means the period ending (30) calendar days
following receipt by an Indemnified Party of a Dispute Notice.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
"Site" means any of the real properties currently or previously
owned, leased or operated by the Company, any Company Subsidiaries or any
Affiliates thereof, or any entities previously owned by the Company,
including all soil, subsoil, surface waters and groundwater thereat.
"Stock" has the meaning given to it in Article II.
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"Tax" (including with correlative meaning, the terms "Taxes" and
"Taxable") means all forms of taxation, whenever created or imposed, whether
imposed by a local, municipal, state, foreign, federal or other governmental
body or authority, and, without limiting the generality of the foregoing,
shall include income, gross receipts, ad valorem, excise, value-added, sales,
use, transfer, franchise, license, stamp, occupation, withholding,
employment, payroll, property, environmental or other taxes, duties, fees,
levies, premiums, or other governmental charges, whether disputed or not,
together with any interest, penalty, additions to tax or additional amounts
with respect thereto imposed by any Taxing Authority.
"Taxing Authority" means any governmental agency, board, bureau,
body, department or authority of any federal, state, local or foreign
jurisdiction, having or purporting to exercise jurisdiction with respect to
any Tax.
"Tax Return" means any return, report, or statement of any nature,
including an information return, report or statement required to be filed
with any Taxing Authority.
"Third Party Claim" has the meaning given to it in Section 18.3(a).
"Trion-American Tape Agreements" means the following agreements by
and between Trion Capital Corporation and the Company, each dated as of
December 10, 1996: (i) the Equipment Lease; (ii) the Space License Agreement;
(iii) the Supply Contract; (iv) the Management Agreement and (v) the Shrink
Film Sublease.
"WARN Act" has the meaning given to it in Section 8.21(d).
1.2. OTHER TERMS. Other terms may be defined elsewhere in this
Agreement and, for the purposes of this Agreement, those other terms shall
have the meanings specified in those other portions unless the context
requires otherwise. Meanings specified in this Agreement shall be applicable
to both the singular and plural forms of such terms and to the masculine,
feminine and neuter genders, as the context requires. All amounts specified
herein are in U.S. dollars.
ARTICLE II
PURCHASE AND SALE OF STOCK
2.1. Subject to the terms and conditions set forth in this
Agreement, at the Closing, Buyer agrees to purchase and accept delivery from
Seller of, and Seller agrees to sell, assign, transfer and deliver to Buyer,
free and clear of all Liens, subscriptions, options, warrants, calls,
proxies, rights, commitments, restrictions or agreements of any kind, 160
shares of the common stock of STC Tape (the "Stock"), representing all of the
issued and outstanding capital stock of STC Tape.
2.2. Notwithstanding the foregoing, Seller may elect, between
the date hereof and Closing, to transfer the Stock to STC International,
Inc., a Bahamian corporation and a
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wholly-owned subsidiary of Seller ("STC International"). In such event, (x)
the representations and warranties contained in Section 6.2 hereof shall be
made directly by STC International, and the representations and warranties of
Seller in such Section 6.2 shall be deemed to be representations and
warranties relating to STC International's ownership of the Stock (y) all
other representations and warranties of Seller contained in this Agreement
shall be deemed to be made by each of Seller and STC International, and (z)
all the covenants and agreements of Seller to be performed in connection with
the transactions contemplated by this Agreement shall be performed by Seller
and/or STC International, as applicable, PROVIDED that any failure to perform
any covenant or agreement of Seller and/or STC International set forth in or
contemplated by this Agreement shall be deemed the nonperformance by Seller.
IPG and Buyer agree to pay the Purchase Price (as hereinafter defined), as
requested by Seller, to Seller, provided that Seller hereby agrees to
indemnify, defend and hold harmless each of IPG and Buyer from and against
any and all losses (including, without limitation, any tax liability)
suffered, incurred or sustained, or to which either of them become subject,
resulting from or arising out of the payment of all or any portion of the
Purchase Price to Seller rather than to STC International as hereinabove
contemplated.
ARTICLE III
CONSIDERATION AND ALLOCATION
3.1. CONSIDERATION. As consideration for the Stock, Buyer will
(A) at the Closing, (i) deliver to Seller certificates representing such
number of shares of the common stock of IPG, par value $.01 per share (the
"Intertape Shares"), as shall equal the dollar amount, which may be up to or
equal to $8 million, of the Purchase Price which Seller shall have elected to
receive pursuant to a written notice to such effect given by Seller to IPG at
least five days prior to Closing, and (ii) pay to Seller cash in an amount
equal to the difference between $43 million and the aggregate value of the
Intertape Shares delivered to Seller pursuant to the foregoing clause (A)(i)
hereof, by wire transfer or delivery of other available funds (the sum of (i)
and (ii) being the "Purchase Price"). In determining the number of Intertape
Shares to be delivered by IPG to Seller, the value of each Intertape Share
shall be deemed to be $22.920.
3.2. ALLOCATION. IPG, Buyer and Seller agree to allocate 100%
of the Purchase Price to the Stock.
3.3. ADJUSTMENT OF PURCHASE PRICE.
(a) Seller will cause each of STC Tape and the Company to
prepare, and Coopers & Lybrand, the Company's certified public accountants,
to audit in respect of the Company (only), financial statements
(collectively, the "October Financial Statements") of each of STC Tape and
the Company as of October 25, 1997 (the October Financial Statements as they
relate to STC Tape, the "STC Tape October Financial Statements" and as such
October Financial Statements relate to the Company, the "Company October
Financial Statements"). Seller, IPG and Buyer agree, and Seller
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agrees to instruct Coopers & Lybrand that, the October Financial Statements
will be prepared in accordance with GAAP consistently applied, with the
following exceptions:
(i) The STC Tape October Financial Statements shall not
include any of its subsidiaries, but shall be done on a stand-alone basis;
(ii) The Company October Financial Statements shall not
include any Company Subsidiaries other than ATC International, Inc., a
Barbados foreign sale corporation; and
(iii) The Company October Financial Statements shall give
effect to the cancellation of the lease between the Company and Trion
Capital Corporation, a Delaware corporation ("Trion Capital"), relating
to the shrink film business, and the transfer of all tangible and
intangible assets from Trion Capital contemplated by step 4 of the
Restructuring set forth in Exhibit J hereto.
During the course of such audit, Seller shall instruct Coopers & Lybrand to
keep Grant Thornton International ("Grant Thornton"), Buyer's certified
public accountants, and Ernst & Young LLP ("E&Y") regularly informed as
to its progress. Seller shall also instruct Coopers & Lybrand to deliver to
Seller, IPG, Buyer, Grant Thornton and E&Y copies of the draft Company
October Financial Statements together with the draft opinion of Coopers &
Lybrand with respect to such audit, and to make available to Grant Thornton
and E&Y the work papers of the Coopers & Lybrand auditors, subject to
such customary requirements as Coopers & Lybrand may impose on such access to
working papers. In addition, Seller shall instruct each of STC Tape and the
Company to provide Grant Thornton and E&Y access to all books and records
of STC Tape and the Company (respectively) as Grant Thornton and E&Y may
reasonably request. Buyer, within five days following delivery of the draft
October Financial Statements to it, may object in writing to such draft
October Financial Statements, with such objection specifying the reasons
therefor. If within five days following delivery of the draft October
Financial Statements, Buyer shall not have given Seller notice of Buyer's
objection to the draft October Financial Statements, such October Financial
Statements shall be deemed final and binding. Coopers & Lybrand will then
deliver the audited financial statements together with their opinion thereon.
If Buyer gives notice of objection, IPG, Buyer and Seller shall cooperate in
good faith to resolve the dispute. Failing such resolution, the issues in
dispute will be submitted to Deloitte & Touche LLP, certified public
accountants (the "Accountants") for resolution. If issues in dispute are
submitted to the Accountants for resolution, (i) each party will furnish to
the Accountants copies of such workpapers and other documents and information
relating to the disputed issues as the Accountants may request and as are
available to that party (or its independent public accountants), and will be
afforded the opportunity to present to the Accountants any material relating
to the determination and to discuss the determination with the Accountants;
(ii) the determination by the Accountants, as set forth in a notice delivered
to both parties by the Accountants, will be binding and conclusive on the
parties; and (iii) IPG and Buyer, on the one hand, and Seller, on the other
hand, will each bear 50% of the fees of the Accountants for such
determination. After resolution Coopers & Lybrand will then deliver copies
of the audited October
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Financial Statements with their opinion to Seller, IPG, Buyer, Grant Thornton
and E&Y. Such October Financial Statements audited by Coopers & Lybrand
shall be used for no other purpose. The STC Tape October Financial
Statements shall be delivered simultaneously with the Company October
Financial Statements.
(b) Following agreement by each of IPG and Buyer, on the one
hand, and Seller, on the other hand, in respect of the October Financial
Statements, IPG, Buyer and Seller shall compute Company Indebtedness and Net
Operating Income. Net Operating Income shall be calculated in accordance with
the methodology used to calculate net operating income shown on the unaudited
income statement of the Company for the period ended August 23, 1997,
attached as Exhibit A hereto. The parties agree that the net operating income
on Exhibit A is calculated excluding (i) loan agency fees, (ii) bank charges,
(iii) interest expenses, (iv) amortization, (v) provision for taxes, (vi)
bonus accruals, (vii) expenses associated with this transaction, and (viii)
income or expense allocations from ATC Tape Philippines Inc. or the
Trion-American Tape Agreements, but including prior period adjustments that
should have been included in net operating income if recorded in the prior
year except for the prior period inventory adjustment of $160,000. At
Closing, the Purchase Price shall be:
(i) adjusted, dollar for dollar, to the extent that the
Company Indebtedness as of the Closing Date is greater than $75,000,000
(resulting in a downward adjustment), or, correspondingly, is less than
$75,000,000 (resulting in an upward adjustment); and
(ii) decreased, dollar for dollar, to the extent that
the Net Operating Income for the ten month period ended October 25, 1997
is less than $4,500,000.
(c) At the Closing Buyer shall loan the funds necessary to
STC Tape which in turn will pay any remaining management fee (the "Management
Fee"), due from STC Tape to Seller, which amount is approximately $2,585,105.
STC Tape shall withhold from such amount and pay to the United States
Internal Revenue Service any amounts necessary to be withheld under
applicable provisions of the Code and as agreed among IPG, Buyer and Seller.
The loan to STC Tape by Buyer shall reduce the Purchase Price to the extent
of such loan.
ARTICLE IV
LETTER OF CREDIT
Seller shall cause to be issued one or more irrevocable letters of credit,
in form and substance reasonably acceptable to both IPG and Buyer, on the one
hand, and Seller, on the other hand, for the benefit of IPG and Buyer. The
letters of credit shall be issued by a bank chosen by Seller and reasonably
acceptable to Buyer (the "Letter of Credit Bank"), which shall be a Korean
bank with a New York City branch or New York City correspondent office. The
letters of credit shall initially be in face amounts equal to the maximum
potential liability of Seller to IPG or Buyer, as provided in Article XVIII
hereof, other than those indemnification provisions for which there is
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no dollar limit (E.G., the letter of credit with respect to corporate income
taxes shall have an initial face amount of $750,000). The letters of credit
shall be delivered by Seller to Buyer at the Closing, shall be held by Buyer
for the benefit of Buyer and IPG, and may be drawn against only as provided
in Article XVIII hereof. The face amount of each Letter of Credit shall be
reduced from time to time as, and to the extent that, either (a) the Letter
of Credit is drawn upon, or (b) the relevant indemnification provision has
expired pursuant to Article XVIII and the amount of pending unresolved claims
made is less than the remaining amount of the Letter of Credit. For ease of
reference, the Letters of Credit referred to in this Article IV are sometimes
referred to singularly as the "Letter of Credit".
ARTICLE V
CLOSING
5.1. CLOSING. The closing of the purchase and sale of the Stock
(the "Closing") shall take place at the office of Morgan, Lewis & Bockius
LLP, 101 Park Avenue, New York, New York 10178 at 10:00 a.m. (New York time)
on November 21, 1997, or on such other date upon which the parties shall
mutually agree (the "Closing Date"), provided that all consents, approvals,
orders, authorizations, registrations, declarations and filings under all
Laws of any Governmental Entity required to be obtained in connection with
the transactions contemplated hereby, including, but not limited to, under
the HSR Act, shall have been so given, provided for or obtained.
5.2. DOCUMENTS TO BE DELIVERED BY SELLER TO BUYER. At the
Closing, Seller will deliver to Buyer:
(i) stock certificates for the Stock, free and clear
of all Liens, subscriptions, options, warrants, calls, proxies, rights,
commitments, restrictions or agreements of any kind, which certificates
shall be duly endorsed to Buyer or accompanied by duly executed stock
powers in form satisfactory to Buyer;
(ii) a certificate of Seller in the form of Exhibit F
certifying as to the accuracy of Seller's representations and
warranties at and as of the Closing and that Seller has performed and
complied with all of the terms, provisions and conditions to be
performed and complied with by Seller at or before the Closing;
(iii) a certificate of the Secretary of Seller in the
form of Exhibit G certifying as to certain corporate matters, together with
all of the attachments referred to therein; and
(iv) such other certificates and documents as Buyer or
its counsel may reasonably request.
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5.3. DOCUMENTS TO BE DELIVERED BY IPG AND BUYER TO SELLER. At
the Closing, IPG and/or Buyer will deliver to Seller:
(i) the Purchase Price as set forth in Section 3.1;
(ii) if the Purchase Price includes more than $3,000,000
in Intertape Shares, a Registration Rights Agreement in the form
attached as Exhibit B hereto;
(iii) certificates of IPG and Buyer in the forms of
Exhibit H-1 and H-2 certifying as to the accuracy as of the Closing Date of
IPG's and Buyer's representations and warranties and that each of IPG
and Buyer has performed and complied with all of the terms, provisions
and conditions to be performed and complied with by it at or before the
Closing;
(iv) certificates of the Secretary of IPG and Buyer,
respectively, in the forms of Exhibit I-1 and I-2 certifying as to
certain corporate matters, together with all of the attachments referred
to therein; and
(v) such other certificates and documents as Seller or
its counsel may reasonably request.
5.4. OTHER ACTIONS AT THE CLOSING. Prior to, but effective at,
Closing, Buyer shall cause the Creditors to release and fully discharge
Seller (pursuant to a form of release and discharge acceptable to Seller) as
of the Closing Date from Seller's obligations under the Guarantees.
ARTICLE VI
REPRESENTATIONS AND
WARRANTIES RELATING TO SELLER
As an inducement to IPG and Buyer to enter into and deliver this
Agreement, Seller makes the following representations and warranties to IPG
and Buyer:
6.1. CORPORATE ORGANIZATION. Seller is a corporation duly
organized, validly existing and in good standing under the laws of Korea and
has the corporate power and authority to carry on its business as now being
conducted and as proposed to be conducted and to sell the Stock.
6.2. STOCK OWNERSHIP. Except as set forth in Schedule 6.2,
Seller owns of record and beneficially all of the issued and outstanding
shares of capital stock of STC Tape, free and clear of all Liens,
subscriptions, options, warrants, calls, proxies, rights, commitments,
restrictions or agreements of any kind and has full power and legal right to
sell, assign, transfer and deliver the same. Except as set forth in Schedule
6.2, Seller is not a party to any voting trust, proxy or other agreement with
respect to any capital stock of the Company. Assuming Buyer has the requisite
power and authority to be the lawful owner of the Stock, upon delivery to
Buyer of certificates representing the
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Stock, and upon Seller's receipt of the Purchase Price, good and valid title
to the Stock will pass to Buyer, free and clear of all Liens, subscriptions,
options, warrants, calls, proxies, rights, commitments, restrictions or
agreements of any kind other than those created by Buyer.
6.3. AUTHORIZATION OF AGREEMENT; NO VIOLATION. Seller has the
requisite corporate power and authority to execute, deliver and perform this
Agreement and to consummate the transactions contemplated hereby in
accordance with the terms of this Agreement. Seller has duly authorized the
execution, delivery and performance of this Agreement and the sale of the
Stock to Buyer and the consummation of the other transactions contemplated
hereby. No other corporate proceedings on the part of Seller are necessary to
authorize this Agreement or the transactions contemplated hereby. This
Agreement has been duly executed and delivered by Seller and, assuming this
Agreement constitutes the legal, valid and binding obligation of Buyer,
constitutes the legal, valid and binding obligation of Seller, enforceable
against Seller in accordance with its terms, except as may be limited by any
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
other similar laws affecting the enforcement of creditors' rights generally
or by general principles of equity (regardless of whether such enforceability
is considered in a proceeding in equity or at law). Neither the execution,
delivery or performance of this Agreement nor the consummation of any of the
transactions contemplated hereby (i) will violate or conflict with the
Certificate of Incorporation or By-Laws of Seller, or (ii) is prohibited by
or, except for filings under the HSR Act, requires Seller to obtain any
consent, authorization or approval, or make any registration or filing with
or from any Person, except such consents, authorizations and approvals the
non-receipt of which, individually or in the aggregate, would result in a
Material Adverse Effect on the Company and its Subsidiaries taken as a whole.
6.4. LITIGATION. Except as set forth in Schedule 6.4, there are
no actions, suits, proceedings or investigations, either at law or in equity,
or before any Governmental Entity in any United States or foreign
jurisdiction, of any kind now pending or, to the best of Seller's knowledge,
threatened or proposed in any manner involving Seller, STC Tape, the Company
or any Company Subsidiary or any of their respective properties or assets of
STC Tape, the Company or any Company Subsidiary that would in any manner
materially impair Seller's ability to perform its obligations hereunder.
6.5. NO BROKERS AND FINDERS. Except as set forth in Schedule
6.5, neither Seller, STC Tape nor the Company has incurred any liability for
brokerage or other commissions or finders' fees relative to this Agreement or
to the transactions herein contemplated.
ARTICLE VII
REPRESENTATIONS AND
WARRANTIES RELATING TO STC TAPE
As an inducement to Buyer to enter this Agreement, Seller and STC
Tape make the following representations and warranties to IPG and Buyer:
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7.1. CORPORATE ORGANIZATION. STC Tape is a corporation duly
organized, validly existing and in good standing under the laws of Delaware and
has the corporate power and authority to carry on its business as now being
conducted and as proposed to be conducted.
7.2. STOCK OWNERSHIP. Except as set forth in Schedule 7.2, Seller
owns of record and beneficially all of the issued and outstanding shares of
capital stock of the Company, free and clear of all Liens, subscriptions,
options, warrants, calls, proxies, rights, commitments, restrictions or
agreements of any kind and has full power and legal right to sell, assign,
transfer and deliver the same. Except as set forth in Schedule 7.2, Seller is
not a party to any voting trust, proxy or other agreement with respect to any
capital stock of the Company.
7.3. SUBSIDIARIES AND OTHER EQUITY INVESTMENTS. Except as set
forth in Schedule 7.3, STC Tape does not own, directly or indirectly, any shares
of capital stock of any corporation or any equity investment in any partnership,
association or other business organization.
7.4. FINANCIAL STATEMENTS.
(a) STC Tape has delivered (with respect to (i) below) and will
have delivered prior to Closing (with respect to (ii) below) to IPG and Buyer
copies of the following financial statements (the financial statements
referenced in (ii) below being included in the October Financial Statements and
(i) and (ii) together, the "STC Tape Unconsolidated Financial Statements"):
(i) The unaudited unconsolidated balance sheet of
STC Tape as of December 31, 1996 and related unconsolidated statements of
income and retained earnings for the fiscal year ended on that date; and
(ii) The unaudited unconsolidated balance sheet of
STC Tape as of October 25, 1997 and related unconsolidated statements of
income and retained earnings and changes in financial position for the ten
month period ended on that date, together with supporting notes, certified
by the President and the Chief Financial Officer of STC Tape.
(b) All of such STC Tape unconsolidated Financial Statements
referenced in (i) above are complete and correct and present fairly and
accurately the financial position of STC Tape as at the date of said balance
sheet. The STC Tape unconsolidated October Financial Statements referenced in
(ii) above are complete and correct and present fairly and accurately the
financial position of STC Tape as at the date of said balance sheet and the
results of the operations and changes in financial position of STC Tape for the
period then ended in conformity with GAAP applied as described in Section 3.3 of
this Agreement.
7.5. NO UNDISCLOSED LIABILITIES.
(a) Except as set forth on Schedule 8.6, and except as and to
the extent reflected, disclosed or reserved against in the STC Tape's 1996
financial statements (including the notes
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thereto), STC Tape does not have any liabilities, whether absolute, accrued,
contingent or otherwise, material to the business operations, assets or
financial condition of STC Tape which were required by GAAP (consistently
applied) to be disclosed in STC Tape's statement of condition as of December
31, 1996 or the notes thereto. Except as set forth on Schedule 8.6, and
except as and to the extent reflected, disclosed or reserved against in the
STC Tape October Financial Statements (including the notes thereto), STC Tape
does not have any liabilities, whether absolute, accrued, contingent or
otherwise, material to the business operations, assets or financial
conditions of STC Tape which were required by GAAP (consistently applied) to
be disclosed in STC Tape's statement of conditions as of October 25, 1997 or
in the notes thereto.
(b) Since October 25, 1997, except for the transactions specified on
Schedule J, STC Tape has not incurred any liabilities, whether absolute,
accrued, contingent or otherwise, other than liabilities and obligations
incurred in the ordinary course of business after October 25, 1997 and which do
not, or could not reasonably be expected to, individually or in the aggregate,
cause a Material Adverse Effect on the business of STC Tape and its subsidiaries
taken as a whole.
7.6. ABSENCE OF CERTAIN CHANGES. Since October 25, 1997 (except
(i) for the execution and delivery of this Agreement, and (ii) as set forth in
Schedule 8.7, neither STC Tape nor any of its subsidiaries has:
(i) had any change in its condition (financial or
otherwise), operations (present or prospective), business (present or
prospective), properties, assets, or liabilities, which has resulted in or
could reasonably be expected to result in a Material Adverse Effect on
STC Tape and its subsidiaries taken as a whole;
(ii) issued, sold or otherwise disposed of, or agreed to
issue, sell or otherwise dispose of, any capital stock or any other
security of STC Tape or any of its subsidiaries, or granted or agreed to
grant any option, warrant or other right to subscribe for or to purchase
any capital stock or any other security of STC Tape or any of its
subsidiaries;
(iii) declared, set aside or paid any dividend or made any
distribution (whether in cash, property or stock) with respect to any of
its capital stock or redeemed, purchased or otherwise acquired, or agreed
to redeem, purchase or otherwise acquire, any of its capital stock;
(iv) suffered any damage, destruction or loss of physical
property (not covered by insurance, except that all deductibles shall be
taken into account as an unreimbursed loss and recorded in liabilities)
materially or adversely affecting its condition (financial or otherwise) or
operations (present or prospective);
(v) (x) suffered any loss, which loss has resulted in or
could reasonably be expected to result in, a Material Adverse Effect to
STC Tape and its subsidiaries taken as a
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<PAGE>
whole, or (y) waived any right,which waiver has resulted in or could
reasonably be expected to result in, a Material Adverse Effect to STC
Tape and its subsidiaries taken as a whole;
(vi) other than in the ordinary course of business, sold,
transferred or otherwise disposed of, or agreed to sell, transfer or
otherwise dispose of, any assets (having a fair market value at the time of
sale, transfer or disposition of $25,000 or more in the aggregate), or
canceled, or agreed to cancel, any debts or claims;
(vii) mortgaged, pledged or subjected to any lien or
agreed to mortgage, pledge or subject to any lien any of its properties or
assets;
(viii) incurred or agreed to incur any indebtedness for
borrowed money;
(ix) paid or obligated itself to pay in excess of $25,000
in the aggregate for fixed assets;
(x) entered into, renewed, extended or terminated any
license or franchise Contracts or any distributor Contracts to which it is
a party, in each case where such action has resulted or could reasonably be
expected to result in a Material Adverse Effect on STC Tape and its
subsidiaries taken as a whole;
(xi) made or permitted any material amendment, renewal,
extension or termination of any material Contract or Permit to which it is
a party other than in the ordinary course of business;
(xii) made any material change, or announced any material
change, in the terms, including, but not limited to, price, payment terms
or off-invoice allowances and discounts, of the sale of any product (or
component thereof) or services; or made any change, or announcement of any
change, in the form or manner of distribution of any product (or component
thereof) other than changes which, singly or in the aggregate, have not
resulted in and could not reasonably be expected to result in a Material
Adverse Effect on the STC Tape and its subsidiaries taken as a whole;
(xiii) lost any major customer or had any material order
canceled or knows of any threatened cancellation of any material order (for
purposes of this clause (xiii), a major customer being any of the twenty
largest, by purchase order volume, of STC Tape's customers at the year
ended December 31, 1996 and at the ten month period ended October 25, 1997,
and a material order being a purchase order equal to or in excess of
$50,000);
(xiv) increased, or agreed to increase, the compensation
or bonuses or special compensation of any kind of any of its key employees
(which term shall be deemed to include all officers) over the rate being
paid to them on August 15, 1997 other than normal
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merit and/or cost-of-living increases pursuant to customary arrangements
consistently followed, or adopted or increased any benefit under any
insurance, pension or other Benefit Plan, payment or arrangement made
to, for or with any such key employee;
(xv) had any resignation or termination of employment of
any of its key employees;
(xvi) experienced any lockouts, labor strikes or work
stoppages or knows of any impending or threatened lockouts, labor strikes
or work stoppages;
(xvii) experienced any shortage or difficulty in obtaining
any raw material such that STC Tape in respect of any of its products will
be required to terminate operations within four weeks' time or institute an
extraordinary price increase;
(xviii) made any change in its accounting methods or
practices;
(xix) made any charitable or political contribution or
pledge in excess of $5,000 in the aggregate; or
(xx) entered into any transaction not in the ordinary
course of its business which has resulted, or which reasonably could be
expected to result, in a Material Adverse Effect on STC Tape or its
subsidiaries taken as a whole.
7.7. TAX MATTERS. Except as set forth in Schedule 8.11:
(a) STC Tape and its subsidiaries have duly and timely
(including extensions) filed all Tax Returns required to be filed by each of
them through the date hereof, and each such Tax Return is complete and correct
in all respects. All Taxes, including estimated Taxes, due and payable by the
STC Tape and each of its subsidiaries (whether or not shown on any Tax Return)
have been paid. All monies required to be withheld by STC Tape and its
subsidiaries from Seller, Affiliates of Seller, employees, independent
contractors, creditors or other third parties for Taxes have been collected or
withheld, and either duly and timely paid to the appropriate Taxing Authorities
or (if not yet due for payment) set aside in accounts for such purposes.
Neither STC Tape nor any of its subsidiaries will have any liability for Taxes
for any taxable period ending on or before the Closing Date in excess of the sum
of (i) the provision for current Taxes set forth on the October Financial
Statements (including both the STC Tape October Financial Statement and the
Company Financial Statement), plus (ii) Taxes arising in the ordinary course of
business of STC Tape or any of its subsidiaries during the period beginning on
October 25, 1997 and ending at the close of business on the Closing Date. For
purposes of this Section 7.7(a), a taxable period beginning on or before and
ending after the Closing Date shall be considered to end at the close of
business on the Closing Date and the allocation of Taxes between the pre-Closing
period and the post-Closing period shall be made on the basis of an interim
closing of the books as of the end of the Closing Date. To avoid any doubt,
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<PAGE>
any Taxes resulting from or attributable to the Company Restructuring shall
be deemed to have occurred outside of the ordinary course of business in the
pre-Closing period.
(b) No Taxing Authority is now asserting, or to the best
knowledge of STC Tape, any of its subsidiaries or Seller, threatening to assert
against the STC Tape or any of its subsidiaries, any deficiency or claim for
Taxes. Schedule 7.7 lists all income Tax Returns filed by or with respect to
STC Tape and each of its subsidiaries for all taxable periods ending on or after
December 1991, indicates those Tax Returns, if any, that have been audited, and
indicates those Tax Returns that currently are the subject of audit. Seller has
delivered (or has caused STC Tape and each of its subsidiaries to deliver) to
Buyer complete and correct copies of all income Tax Returns filed by or with
respect to, and all Tax examination reports and statements of deficiencies
assessed against or agreed to by, STC Tape and each of its subsidiaries for all
taxable periods ending on or after December 1991.
(c) Neither STC Tape nor any of its subsidiaries is a party to
any agreement extending, or having the effect of extending, the time within
which to file any Tax Return or the period of assessment or collection of any
Taxes.
(d) Neither STC Tape nor any of its subsidiaries (i) is a party
to or is bound by any obligations under any Tax sharing, Tax indemnity or
similar agreement or arrangement, (ii) has made and is subject to any election
under Section 341(f) of the Code, (iii) has made and is subject to any election
or deemed election under Section 338 or Section 336(e) of the Code or the
regulations thereunder, (iv) has agreed to and is required to make, and
reasonably expects that it might have to make, any adjustment under Section 481
of the Code (or any comparable provision of state, local or foreign law) by
reason of a change in accounting method or otherwise, (v) has ever entered into
any agreement or arrangement that could result separately or in the aggregate in
the payment of any "excess parachute payments" within the meaning of Section
280G of the Code, (vi) is or has at any time been a "United States real property
holding corporation" within the meaning of Section 897(c)(2) of the Code, (vii)
is a party to any joint venture, partnership or other arrangement that is
treated as a partnership for federal income Tax purposes, (viii) has liability
for Taxes of any other Person, whether as a transferee or successor, by contract
or otherwise, (ix) has or is projected to have any amounts includable in its
taxable income under section 951 of the Code, (x) is or has been a shareholder,
directly or indirectly, in any passive foreign investment company or (xi) has
any deferred gain or loss arising out of any deferred intercompany transaction
or any other income which will or might be reportable in a period ending after
the Closing Date which is attributable to a transaction or event occurring in a
period ending on or before the Closing Date.
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<PAGE>
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES
RELATING TO THE COMPANY
As an inducement to Buyer to enter into this Agreement, Seller makes
the following representations and warranties to IPG and Buyer:
8.1. CORPORATE ORGANIZATION. The Company 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 carry on its business as
now being conducted and as proposed to be conducted (which is intended to be
consistent with past practice) and to own and operate the properties and assets
now owned and being operated by it. Seller has delivered to Buyer complete and
correct copies of the Company's Certificate of Incorporation and By-Laws as in
effect on the date hereof. The Company is duly qualified or licensed to do
business and is in good standing as a foreign corporation in each of the
jurisdictions set forth in Schedule 8.1. The Company is not required to be
qualified or licensed to do business as a foreign corporation in any other
jurisdiction, except where the failure to be so qualified or licensed would not
result in a Material Adverse Effect upon the Company. Schedule 8.1 sets forth a
true and complete list of the names and titles of the directors and officers of
the Company and each Company Subsidiary.
8.2. CAPITALIZATION; STOCK OWNERSHIP. The authorized capital
stock of the Company consists of 10,000 shares of common stock, without par
value, of which 160 shares are issued and outstanding and none are held in
treasury. All of the Stock has been duly authorized and validly issued and is
fully paid and non-assessable and none of the shares of Stock have been issued
in violation of, and are subject to, any purchase option, call, right of first
refusal, right of first offer, preemptive, subscription or similar rights under
any provision of applicable law, the charter or other constitutive or governing
documents of the Company, any Contract to which the Company is subject, bound or
a party or otherwise. Except as set forth in Schedule 8.2, the Company is not a
party to or bound by any Contract to issue, sell or otherwise dispose of or
redeem, purchase or otherwise acquire any capital stock or any other security of
the Company or any other security exercisable or exchangeable for or convertible
into any capital stock or any other security of the Company, and, except for
this Agreement, there is no outstanding option, warrant or other agreement or
right to subscribe for or purchase any capital stock or any other security of
the Company or any other security exercisable for or convertible into any
capital stock or any other security of the Company.
There are no outstanding notes, bonds, mortgages, debentures or other
indebtedness having the right to vote on any matters on which stockholders of
the Company may vote.
8.3. SUBSIDIARIES AND OTHER EQUITY INVESTMENTS. Except as set
forth in Schedule 8.3, neither the Company nor any Company Subsidiary owns,
directly or indirectly, any shares of capital stock of any corporation or any
equity investment in any partnership, association or other business
organization. With respect to each Company Subsidiary, Schedule 8.3 sets forth
a true and complete list of (i) its name and jurisdiction of incorporation or
organization, (ii) the jurisdictions in which it
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<PAGE>
is duly qualified or licensed to do business as a foreign corporation or
foreign business entity, (iii) if a corporation, its authorized capital
stock, (iv) if a corporation, the number of shares of each class of stock
thereof outstanding, (v) if a corporation, the number of shares of each such
class and percentage of outstanding voting stock owned by the Company or any
Company Subsidiary, (vi) if a business entity other than a corporation, the
profit or capital interests owned by the Company or any Company Subsidiary,
and (vii) the names and titles of its members, managers, partners, directors
and officers. Seller has delivered to Buyer complete and correct copies of
the constitutional documents of each Company Subsidiary as in effect on the
date hereof. Except as set forth in Schedule 8.3, no capital stock or any
other security (including any debt security) of any Company Subsidiary is
held by any Person other than the Company or a Company Subsidiary. Each
Company Subsidiary is duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization, has the power and
authority to carry on its business as now being conducted and as proposed to
be conducted (which is intended to be consistent with past practice) and to
own and operate the properties and assets now owned and being operated by it.
Each Company Subsidiary is duly qualified or licensed to do business and is
in good standing in each of the respective jurisdictions listed in Schedule
8.3. Except as set forth in Schedule 8.3, no Company Subsidiary is required
to be qualified or licensed to do business as a foreign corporation or
foreign business entity in any other jurisdiction, except where the failure
to be so qualified or licensed would not result in a Material Adverse Effect
upon the Company. All outstanding securities or ownership interests of each
Company Subsidiary owned by the Company or a Company Subsidiary have been
duly authorized and validly issued, are fully paid and non-assessable,
subject to no Lien and are freely transferable and none of such securities or
ownership interests were issued in violation of any preemptive or other
right. Except as set forth in Schedule 8.3, neither the Company nor any
Company Subsidiary is a party to or bound by any Contract to issue, sell or
otherwise dispose of or redeem, purchase or otherwise acquire any capital
stock or any other security of any Company Subsidiary or any other security
exercisable or exchangeable for or convertible into any capital stock or any
other security of any Company Subsidiary, and there is no outstanding option,
warrant or other right to subscribe for or to purchase, or Contract with
respect to, any capital stock or any other security of any Company Subsidiary
or any other security exercisable or convertible into any capital stock or
any other security of any Company Subsidiary.
8.4. NO VIOLATION. Except as set forth in Schedule 8.4, neither
the execution, delivery or performance of this Agreement nor the consummation of
any of the transactions contemplated hereby (i) will violate or conflict with
the Certificate of Incorporation or By-Laws of the Company or any Company
Subsidiary, (ii) will result in any breach of or default under any provision of
any Contract to which the Company or any Company Subsidiary is a party or by
which the Company or any Company Subsidiary is bound or to which any property or
asset of any of them is subject, (iii) is prohibited by or requires the Company
or any Company Subsidiary to obtain or make any consent, authorization,
approval, registration or filing with or from any Person, except any applicable
filings required under the HSR Act, (iv) will cause any acceleration of maturity
of any note, instrument or other obligation to which the Company or any Company
Subsidiary is a party or by which the Company or any Company Subsidiary is bound
or with respect to which the Company or any Company Subsidiary is an obligor or
guarantor or (v) will result in the creation or imposition of
20
<PAGE>
any Lien upon or give to any other Person any interest or right (including
any right of termination or cancellation) in or with respect to any of the
properties, assets, business or Contracts of the Company or any Company
Subsidiary, except for those violations and conflicts, breaches, defaults,
consents, authorizations, approvals, registrations, filings, accelerations
and Liens (as referenced in (i) through (v) above) which, singly or in the
aggregate, would not result in a Material Adverse Effect upon the Company.
8.5. FINANCIAL STATEMENTS.
(a) Seller has delivered (with respect to (i) below) and will
have delivered prior to Closing (with respect to (ii) below) to IPG and Buyer
copies of the following financial statements (the financial statements
referenced in (i) being the "Company's 1996 Financial Statements" and the
financial statements referenced in (ii) below being included in the October
Financial Statements:
(i) The audited consolidated balance sheets of the
Company and its Company Subsidiaries as of December 31, 1996 and related
consolidated statements of income and retained earnings and changes in
financial position for the fiscal year ended on that date, together with
supporting notes and schedules and the report thereon of Coopers & Lybrand;
and
(ii) the audited balance sheet of the Company as at
October 25, 1997 and related statements of income and retained earnings and
changes in financial position for the ten month period ended on that date,
together with supporting notes and schedules, and the report thereon of
Coopers & Lybrand.
(b) All of such Financial Statements referenced in (i) above are
complete and correct and present fairly and accurately the separate and
consolidated financial positions of the Company and each of its consolidated
Company Subsidiaries as at the date of said balance sheet and the separate and
consolidated results of the operations and changes in financial position of the
Company and each of its consolidated Company Subsidiaries for the period then
ended in conformity with GAAP consistently applied. The October Financial
Statements referenced in (ii) above are complete and correct and present fairly
and accurately the financial position of the Company as at the date of said
balance sheet and the results of the operations and changes in financial
position of the Company for the period then ended in conformity with GAAP
applied as described in Section 3.3 of this Agreement.
8.6. NO UNDISCLOSED LIABILITIES.
(a) Except as set forth on Schedule 8.6, and except as and to
the extent reflected, disclosed or reserved against in the Company's 1996
Financial Statements (including the notes thereto), neither the Company nor any
Company Subsidiary has any liabilities, whether absolute, accrued, contingent or
otherwise, material to the business operations, assets or financial condition of
the Company and the Company Subsidiaries taken as a whole which were required by
GAAP
21
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(consistently applied) to be disclosed in the Company's consolidated
statement of condition as of December 31, 1996 or the notes thereto. Except
as set forth on Schedule 8.6, and except as and to the extent reflected,
disclosed or reserved against in the October Financial Statements (including
the notes thereto), neither the Company nor any Company Subsidiary has any
liabilities, whether absolute, accrued, contingent or otherwise, material to
the business operations, assets or financial conditions of the Company and
the Company Subsidiaries taken as a whole which were required by GAAP
(consistently applied) to be disclosed in the Company's statement of
conditions as of October 25, 1997 or in the notes thereto.
(b) Since October 25, 1997, the Company has not incurred any
liabilities, whether absolute, accrued, contingent or otherwise, other than
liabilities and obligations incurred in the ordinary course of business after
October 25, 1997 and which do not, or could not reasonably be expected to,
individually or in the aggregate, cause a Material Adverse Effect on the
business of the Company and the Company Subsidiaries taken as a whole.
8.7. ABSENCE OF CERTAIN CHANGES. Since October 25, 1997 (except
(i) for the execution and delivery of this Agreement, and (ii) as set forth in
Schedule 8.7), neither the Company nor any Company Subsidiary has:
(i) had any change in its condition (financial or
otherwise), operations (present or prospective), business (present or
prospective), properties, assets, or liabilities, which has resulted in or
could reasonably be expected to result in a Material Adverse Effect on the
Company and the Company Subsidiaries taken as a whole;
(ii) issued, sold or otherwise disposed of, or agreed to
issue, sell or otherwise dispose of, any capital stock or any other
security of the Company or any Company Subsidiary, or granted or agreed to
grant any option, warrant or other right to subscribe for or to purchase
any capital stock or any other security of the Company or any Company
Subsidiary;
(iii) declared, set aside or paid any dividend or made any
distribution (whether in cash, property or stock) with respect to any of
its capital stock or redeemed, purchased or otherwise acquired, or agreed
to redeem, purchase or otherwise acquire, any of its capital stock;
(iv) suffered any damage, destruction or loss of physical
property (not covered by insurance, except that all deductibles shall be
taken into account as an unreimbursed loss and recorded in liabilities)
materially or adversely affecting its condition (financial or otherwise) or
operations (present or prospective);
(v) (x) suffered any loss, which loss has resulted in or
could reasonably be expected to result in, a Material Adverse Effect to the
Company and the Company Subsidiaries taken as a whole, or (y) waived any
right, which waiver has resulted in or could
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<PAGE>
reasonably be expected to result in, a Material Adverse Effect to the
Company and the Company Subsidiaries taken as a whole;
(vi) other than in the ordinary course of business, sold,
transferred or otherwise disposed of, or agreed to sell, transfer or
otherwise dispose of, any assets (having a fair market value at the time of
sale, transfer or disposition of $25,000 or more in the aggregate), or
canceled, or agreed to cancel, any debts or claims;
(vii) mortgaged, pledged or subjected to any lien or
agreed to mortgage, pledge or subject to any lien any of its properties or
assets;
(viii) incurred or agreed to incur any indebtedness for
borrowed money;
(ix) paid or obligated itself to pay in excess of $25,000
in the aggregate for fixed assets;
(x) entered into, renewed, extended or terminated any
license or franchise Contracts or any distributor Contracts to which it is
a party, in each case where such action has resulted or could reasonably be
expected to result in a Material Adverse Effect on the Company and the
Company Subsidiaries taken as a whole;
(xi) made or permitted any material amendment, renewal,
extension or termination of any material Contract or Permit to which it is
a party other than in the ordinary course of business;
(xii) made any material change, or announced any material
change, in the terms, including, but not limited to, price, payment terms
or off-invoice allowances and discounts, of the sale of any product (or
component thereof) or services; or made any change, or announcement of any
change, in the form or manner of distribution of any product (or component
thereof) other than changes which, singly or in the aggregate, have not
resulted in and could not reasonably be expected to result in a Material
Adverse Effect on the Company and the Company Subsidiaries taken as a
whole;
(xiii) lost any major customer or had any material order
canceled or knows of any threatened cancellation of any material order (for
purposes of this clause (xiii), a major customer being any of the twenty
largest, by purchase order volume, of the Company's customers at the year
ended December 31, 1996 and at the ten month period ended October 25, 1997,
and a material order being a purchase order equal to or in excess of
$50,000);
(xiv) increased, or agreed to increase, the compensation
or bonuses or special compensation of any kind of any of its key employees
(which term shall be deemed to include all officers) over the rate being
paid to them on August 15, 1997 other than normal
23
<PAGE>
merit and/or cost-of-living increases pursuant to customary arrangements
consistently followed, or adopted or increased any benefit under any
insurance, pension or other Benefit Plan, payment or arrangement made
to, for or with any such key employee;
(xv) had any resignation or termination of employment of
any of its key employees (including without limitation those listed in
Exhibit K hereto);
(xvi) experienced any lockouts, labor strikes or work
stoppages or knows of any impending or threatened lockouts, labor strikes
or work stoppages;
(xvii) experienced any shortage or difficulty in obtaining
any raw material such that the Company in respect of any of its products
will be required to terminate operations within four weeks' time or
institute an extraordinary price increase;
(xviii) made any change in its accounting methods or
practices;
(xix) made any charitable or political contribution or
pledge in excess of $5,000 in the aggregate; or
(xx) entered into any transaction not in the ordinary
course of its business which has resulted, or which reasonably could be
expected to result, in a Material Adverse Effect on the Company.
8.8. TITLE TO AND CONDITION OF PROPERTIES AND ASSETS. (a) The
Company and the Company Subsidiaries have good and marketable title to all of
their respective properties and assets reflected as owned in the balance sheet
of the Company included in the October Financial Statements (except as
thereafter sold or otherwise disposed of in the ordinary course of business)
subject to no conditional sales contract, Lien, or right of possession in favor
of any third party, except for Permitted Liens (as defined in Section 8.10) and
except as set forth in Schedule 8.8. Subsequent to October 25, 1997, neither
the Company nor any Company Subsidiary has sold or disposed of any material
amount of their respective properties or assets or obligated themselves to do so
except in the ordinary course of business.
(b) The facilities, machinery, information systems and other
equipment of the Company and the Company Subsidiaries listed in Exhibit D hereto
are in good operating condition and repair, subject only to the ordinary wear
and tear of those businesses.
8.9. INVENTORY. A copy of Report No. AR4201 dated October 25,
1997 generated by the Company in the ordinary course of its business has been
delivered to Buyer and shall be deemed to be included within Schedule 8.9. All
inventory listed thereon consists of a quality and quantity useable and saleable
in the ordinary course of business and is valued in accordance with generally
accepted accounting principles at the lower of cost or market (consistently
applied) with provision (which management of the Company believes to be
adequate) for obsolescence, shrinkage,
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excess quantities, defective materials and deterioration. Except as set
forth in Schedule 8.9, all inventory of the Company is located on premises
owned or leased by the Company as reflected in this Agreement. Neither the
Company nor any private label customer nor customer for which products of
unique sizes are manufactured by the Company is in material breach of the
terms of any obligation to the other, no valid grounds exist for any set-off
of amounts billable to such customers on the completion of orders to which
work-in-process for such customers relates, and, except as set forth in
Schedule 8.9, no such customer has 25% or more of its receivables outstanding
more than 30 days past due. All work-in-process (including without
limitation work-in-process for private label customers and customers for
which products of unique sizes are manufactured by the Company) is of a
quality ordinarily produced in accordance with the requirements of the orders
to which such work-in-process is identified, and will require no rework with
respect to services performed prior to Closing, except to the extent labor
attributable to such rework has been reasonably taken into consideration in
valuing the work-in-process in the balance sheet of the Company included in
the October Financial Statements.
8.10. REAL PROPERTY.
(a) Schedule 8.10(a) contains an accurate and complete list, as
of the date of this Agreement, of (i)(A) all fee interests in real property and
buildings, improvements and structures owned by the Company or any Company
Subsidiary and (B) all leasehold estates (the "Leasehold Estates") in real
property and buildings, improvements and structures owned by the Company or any
Company Subsidiary (all of such fee interests, Leasehold Estates, buildings,
improvements and structures, together with all easements, rights of way,
privileges, appurtenances and other rights pertaining thereto, being the "Real
Property"), (ii) the location of such Real Property, and (iii) all Liens which
pertain to such Real Property, except the following ("Permitted Liens"):
(1) those items that secure liabilities that are reflected on the balance sheet
of the Company included in the October Financial Statements or the notes thereto
or that secure liabilities incurred in the ordinary course of business after the
date of such balance sheet, (2) statutory liens for amounts not yet delinquent
or which are being contested in good faith, (3) such encumbrances, security
interests, pledges and title imperfections that are not in the aggregate
material to the business, operations, assets, and financial condition of the
Company and the Company Subsidiaries taken as a whole, and (4) with respect to
owned real property, title imperfections noted in existing title insurance of
the Company. Schedule 8.10(a) also identifies each of the operative documents
creating a Leasehold Estate (the "Real Property Leases"). The applicable
Company or Company Subsidiary has good and indefeasible title in fee simple (or
as otherwise specified in Schedule 8.10(a)) to all of the Real Property set
forth in Schedule 8.10(a) and owns all Leasehold Estates set forth in
Schedule 8.10(a). Except as disclosed in Schedule 8.10(a), the consummation of
the transactions contemplated by this Agreement will not prevent the Company or
any Company Subsidiary, as the case may be, from using or possessing all Real
Property listed in Schedule 8.10(a) substantially in the same manner such Real
Property was used or possessed by the Company or any Company Subsidiary, as the
case may be, immediately prior to the Closing Date. The Company or a Company
Subsidiary, as the case may be, has such title or such Leasehold Estate in all
Real Property listed in Schedule 8.10(a) as is required for the conduct
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of the business of the Company or the Company Subsidiary, as the case may be,
as presently conducted, in each case free and clear of all Liens.
(b) Except as set forth in Schedule 8.10(b), no party holding an
interest superior to any Leasehold Estate has given notice of or made a claim
with respect to any material breach or default by the Company or any Company
Subsidiary with respect to such superior interest, other than in respect of a
breach or default which has been cured.
(c) Except as set forth on Schedule 8.10(c), none of the rights
of the Company or any Company Subsidiary under any of the Real Property Leases
will be subject to termination or modification as the result of the consummation
of the transactions contemplated by this Agreement.
(d) Neither the Company nor any Company Subsidiary is obligated
under or a party to, any option, right of first refusal, right of first offer or
any other contractual right to offer, purchase, acquire, sell, assign or dispose
of any Real Property listed in Schedule 8.10(a).
(e) Except as set forth in Schedule 8.10(e), none of the Eight
Key Employees has received written notice (which shall not include constructive
notice) of any condemnation, zoning or other land-use regulation proceedings,
including, without limitation, resolutions of intent, which would materially
detrimentally affect the use and operation of all or any portion of any Real
Property for its present or intended purpose or the value of all or any material
portion of the Real Property and the business conducted thereon having been
instituted or threatened.
(f) Except as set forth in Schedule 8.10(f), to the knowledge of
the Company, there are no pending or threatened material interruptions (except
in the ordinary course) of any utility services to any portion of the Real
Property.
(g) Except as set forth in Schedule 8.10(g), none of the Eight
Key Employees has received written notice (which shall not include constructive
notice) from any Governmental Entity having jurisdiction over all or any portion
of the Real Property regarding any material adverse change in the specific
application to the Real Property of any applicable laws, regulations, statutes,
rules or restrictions relating to a change in the permitted use of all or any
portion of the Real Property or the business conducted thereon, or written
notice from adjacent landowners regarding unrecorded easements and/or agreements
or encroachments in respect of all or any portion of the Real Property that
would materially adversely affect the applicable Real Property or the use
thereof by the Company or any Company Subsidiary, or any tenant or other
occupant thereof or the business conducted thereon.
(h) Except as set forth in Schedule 8.10(h), the use being made
of each building that constitutes Real Property is in substantial conformity
with the certificate of occupancy issued for the facilities located on such Real
Property. Except as set forth in Schedule 8.10(h), all required certificates
and Permits of such type have been issued and are in full force and effect,
other than those certificates and Permits the nonissuance or noneffectiveness of
which would not, singly or in the
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aggregate, result in a Material Adverse Effect upon the Company and the
Company Subsidiaries taken as a whole.
(i) Except as set forth in Schedule 8.10(i), none of the
Company, any Company Subsidiary, any Real Property or the present use thereof by
the Company or any Company Subsidiary is in material violation of any building,
fire, zoning or health code or any other Law that would result in a Material
Adverse Effect on the Company and the Company Subsidiaries taken as a whole.
(j) Except as set forth in Schedule 8.10(j), subsequent to
October 25, 1997, none of the Eight Key Employees has received actual written
notice from any Governmental Entity that Seller, STC Tape, the Company or any
Company Subsidiary is in violation of any applicable Law relating to any portion
of the Real Property requiring the performance of any work, repairs,
construction, alterations or installations on or in connection with any portion
of the Real Property, which notice has not been complied with and which would
have a Material Adverse Effect upon such Real Property.
8.11. TAX MATTERS. Except as set forth in Schedule 8.11:
(a) The Company and each Company Subsidiary have duly and timely
(including extensions) filed all Tax Returns required to be filed by each of
them through the date hereof, and each such Tax Return is complete and correct
in all respects. All Taxes, including estimated Taxes, due and payable by the
Company and each Company Subsidiary (whether or not shown on any Tax Return)
have been paid. All monies required to be withheld by the Company and each
Company Subsidiary from Seller, Affiliates of Seller, employees, independent
contractors, creditors or other third parties for Taxes have been collected or
withheld, and either duly and timely paid to the appropriate Taxing Authorities
or (if not yet due for payment) set aside in accounts for such purposes.
Neither the Company nor any Company Subsidiary will have any liability for Taxes
for any taxable period ending on or before the Closing Date in excess of the sum
of (i) the provision for current Taxes set forth on the unaudited consolidated
and consolidating balance sheets as of October 25, 1997 provided pursuant to
Section 8.5(a)(ii), plus (ii) Taxes arising in the ordinary course of business
of the Company or any Company Subsidiary during the period beginning on
October 25, 1997 and ending at the close of business on the Closing Date. For
purposes of this Section 8.11(a), a taxable period beginning on or before and
ending after the Closing Date shall be considered to end at the close of
business on the Closing Date and the allocation of Taxes between the pre-Closing
period and the post-Closing period shall be made on the basis of an interim
closing of the books as of the end of the Closing Date. To avoid any doubt, any
Taxes resulting from or attributable to the Company Restructuring shall be
deemed to have occurred outside of the ordinary course of business in the
pre-Closing period.
(b) No Taxing Authority is now asserting, or to the best
knowledge of the Company, any Company Subsidiary or Seller, threatening to
assert against the Company or any Company Subsidiary, any deficiency or claim
for Taxes. Schedule 8.11 lists all income Tax Returns filed by or with respect
to the Company and each Company Subsidiary for all taxable periods ending
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on or after December 1991, indicates those Tax Returns, if any, that have
been audited, and indicates those Tax Returns that currently are the subject
of audit. Seller has delivered (or has caused the Company and each Company
Subsidiary to deliver) to Buyer complete and correct copies of all income Tax
Returns filed by or with respect to, and all Tax examination reports and
statements of deficiencies assessed against or agreed to by, the Company and
each Company Subsidiary for all taxable periods ending on or after December
1991.
(c) Neither the Company nor any Company Subsidiary is a party to
any agreement extending, or having the effect of extending, the time within
which to file any Tax Return or the period of assessment or collection of any
Taxes.
(d) Neither the Company nor any Company Subsidiary (i) is a
party to or is bound by any obligations under any Tax sharing, Tax indemnity or
similar agreement or arrangement, (ii) has made and is subject to any election
under Section 341(f) of the Code, (iii) has made and is subject to any election
or deemed election under Section 338 or Section 336(e) of the Code or the
regulations thereunder, (iv) has agreed to and is required to make, and
reasonably expects that it might have to make, any adjustment under Section 481
of the Code (or any comparable provision of state, local or foreign law) by
reason of a change in accounting method or otherwise, (v) has ever entered into
any agreement or arrangement that could result separately or in the aggregate in
the payment of any "excess parachute payments" within the meaning of Section
280G of the Code, (vi) is or has at any time been a "United States real property
holding corporation" within the meaning of Section 897(c)(2) of the Code, (vii)
is a party to any joint venture, partnership or other arrangement that is
treated as a partnership for federal income Tax purposes, (viii) has liability
for Taxes of any other Person, whether as a transferee or successor, by contract
or otherwise, (ix) has or is projected to have any amounts includable in its
taxable income under section 951 of the Code, (x) is or has been a shareholder,
directly or indirectly, in any passive foreign investment company or (xi) has
any deferred gain or loss arising out of any deferred intercompany transaction
or any other income which will or might be reportable in a period ending after
the Closing Date which is attributable to a transaction or event occurring in a
period ending on or before the Closing Date.
8.12. CONTRACTS.
(a) Except as set forth in Schedule 8.12(a), neither the Company
nor any Company Subsidiary is currently a party to any of the following written
Contracts:
(i) employment, severance, termination, consulting or
similar Contracts;
(ii) Contracts containing covenants obligating the
Company or such Company Subsidiary not to compete or other covenants
restricting the development, manufacture, marketing, distribution or sale
of any product or service of the Company (or any Company Subsidiary);
(iii) Affiliate Contracts;
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(iv) Contracts other than with affiliates under which the
Company or any Company Subsidiary agrees to manage, or be managed by,
another entity, in whole or material part;
(v) Contracts pursuant to which the Company acquires
material rights or transfers to another Person material rights with respect
to Proprietary Rights (including any licenses or material agreements under
which the Company or any Company Subsidiary is licensee or licensor of any
such Proprietary Rights including the name "American Tape");
(vi) Contracts excluding operating leases under which the
Company or any Company Subsidiary has borrowed any money in excess of
$10,000 from, or issued any note, bond, debenture or other evidence of
indebtedness in excess of $10,000 to, any Person;
(vii) Contracts (including so-called take-or-pay or
keepwell agreements) under which the Company or any Company Subsidiary has
directly or indirectly guaranteed indebtedness, liabilities or obligations
of any Person (in each case other than in the ordinary course of business);
(viii) Contracts under which the Company or any Company
Subsidiary has, directly or indirectly, made any advance, loan, extension
of credit or capital contribution to, or other investment in, any Person,
where the amount involved exceeds $10,000;
(ix) Contracts containing a provision requiring the
consent of the other Person thereto upon a change in control of ownership
of the Company or any Company Subsidiary;
(x) powers of attorney;
(xi) Contracts to do business with any Governmental
Entity involving aggregate annual payments in excess of $50,000.
(b) Each Contract listed in Schedule 8.12(a) is in full force
and effect. Neither the Company nor any Company Subsidiary, nor to the best of
Seller's knowledge, any other party is in material default in the observance or
the performance of any material term or obligation to be performed by it under
any Contract listed in Schedule 8.12(a). Schedule 8.12(b) sets forth a list of
all requirements contracts to which the Company or any Company Subsidiary is a
party. Seller has delivered to IPG and Buyer true and complete copies (except
where certain confidential information has been redacted) of all Contracts
listed in Schedule 8.12(a) as in effect on the date hereof.
8.13. LITIGATION. Except as set forth in Schedule 8.13, there are
no actions, suits, proceedings or investigations, either at law or in equity, or
before any commission or other administrative authority in any United States or
foreign jurisdiction, of any kind now pending or, to
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the best of Seller's knowledge, threatened involving the Company or any
Company Subsidiary or any of their respective properties or assets of the
Company or any Company Subsidiary that could, individually or in the
aggregate, have or reasonably be expected to have a Material Adverse Effect
on the Company and the Company Subsidiaries taken as a whole.
8.14. PROPRIETARY RIGHTS.
(a) Schedule 8.14 lists all Proprietary Rights in which the
Company now has any interest, specifying whether such Proprietary Rights are
owned, controlled, used or held (under license or otherwise) by the Company
or its Subsidiaries, and also indicating which of such Proprietary Rights are
registered or for which applications for registration have been filed. All
Proprietary Rights shown as registered by the Company or its Subsidiaries in
Schedule 8.14 have been properly registered, all pending applications have
been properly made and filed and all annuity, maintenance, renewal and other
fees relating to registrations or applications are current. The Company and
Subsidiaries are not infringing and have not infringed any Proprietary Rights
of another in the operation of the business of the Company, nor, to the
Company's knowledge, is any other person infringing the Proprietary Rights of
the Company. All Proprietary Rights of the Company and its Subsidiaries are
valid, enforceable and in good standing, and there are no equitable defenses
to enforcement based on any act or omission of Company or its Subsidiaries
except where the failure of such representation and warranty to be true would
not have a material adverse effect on the Business. The consummation of the
transactions contemplated hereby will not impair any Proprietary Rights owned
or used by the Company or its Subsidiaries. "Proprietary Rights" shall mean
(i) all trademarks, business identifiers, trade dress, service marks, trade
names and brand names, all registrations thereof and applications therefor
and all goodwill associated with the foregoing; (ii) all copyrights,
copyright registrations and copyright applications, and all other rights
associated with the foregoing and the underlying works of authorship; (iii)
all patents and patent applications, and all international proprietary rights
associated therewith; (iv) all contracts or agreements granting any right,
title, license or privilege to the Proprietary Rights of any third party; (v)
all inventions, mask works and mask work registrations, know-how,
discoveries, improvements, designs, trade secrets, shop and royalty rights;
and (vi) all claims for infringement brought by the Company for any of the
foregoing.
(b) Except as listed on Schedule 8.14, there is no Litigation
pending or, to the Company's knowledge, threatened to challenge the Company's or
the Company Subsidiaries' right, title and interest with respect to its
continued use and right to preclude others from using any Proprietary Rights
owned by the Company or the Company Subsidiaries. Since January 1, 1997, none
of the Eight Key Employees has received written notice from any Person which
alleges that the Company or any of the Company Subsidiaries is infringing the
rights of such Person with respect to a registered patent or a registered
trademark.
8.15. BANK ACCOUNTS. Schedule 8.15 sets forth the names and
locations of all banks, trust companies, savings and loan associations and other
financial institutions at which the Company or any of its Subsidiaries maintains
a safe deposit box, lock box or checking, savings, custodial or
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other account of any nature, the type and number of each such account and the
signatories therefore, a description of any compensating balance
arrangements, and the names of all persons authorized to draw thereon, make
withdrawals therefrom or have access thereto.
8.16. COMPLIANCE WITH LAWS. The Company and the Subsidiaries have
complied with and are in compliance in all material respects with all federal,
state, local and foreign statutes, laws, ordinances, regulations, rules,
Permits, judgments, orders and decrees (collectively, "Laws") applicable to any
of them or any of their respective properties, assets, operations and businesses
except such failures of compliance that individually or in the aggregate do not
and will not materially and adversely affect the property, operations, financial
condition or prospects of the Company and the Company Subsidiaries taken as a
whole. Except as set forth in Schedule 8.16, the respective businesses of the
Company and the Company Subsidiaries are not being conducted, and no properties
or assets of the Company or any Company Subsidiary relating thereto are owned or
are being used by the Company or any Company Subsidiary, in violation of any Law
or Permit of any Governmental Entity or any judgment, order or decree, except
for such violations which do not and cannot reasonably be expected to result in,
individually or in the aggregate, a Material Adverse Effect on the Company and
the Company Subsidiaries, taken as a whole.
8.17. ENVIRONMENTAL MATTERS. Except as set forth on
Schedule 8.17:
(i) the Company and each Company Subsidiary have
obtained and hold all necessary Environmental Permits and each of these are
fully and freely transferable to Purchaser;
(ii) the Company and each Company Subsidiary are in
compliance with all terms, conditions and provisions of (a) all applicable
Environmental Laws and (b) all Environmental Permits;
(iii) there are no past, pending or threatened
Environmental Claims against the Company or any Company Subsidiary and
neither the Seller nor the Company are aware of any facts or circumstances
which could reasonably be expected to form the basis for any Environmental
Claim against the Company;
(iv) no Releases of Hazardous Materials have occurred at,
from, in, to, on, adjacent to or under any Site and no Hazardous Materials
are present in, on, about or migrating to or from any Site that could give
rise to an Environmental Claim against the Company or any Company
Subsidiary;
(v) neither the Company, nor any Company Subsidiary, nor
any entity previously owned by the Company, has transported or arranged for
the treatment, storage, handling, disposal, or transportation of any
Hazardous Material to any off-site location which is an Environmental
Clean-up Site;
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(vi) no Site other than the Marysville Site is a current
or proposed Environmental Clean-up Site;
(vii) there are no Liens arising under or pursuant to any
Environmental Law with respect to any Site and there are no facts,
circumstances, or conditions that could reasonably be expected to restrict,
encumber, or result in the imposition of special conditions under any
Environmental Law with respect to the ownership, occupancy, development,
use, or transferability of any Site;
(viii) there are no (a) underground storage tanks, active
or abandoned, (b) polychlorinated-biphenyl-containing equipment, (c)
lead-based-paint containing materials, or (d) asbestos-containing
material at any Site;
(ix) there have been no environmental investigations,
studies, audits, tests, reviews or other analyses which relate to one or
more of the Sites and which were conducted by, on behalf of, or which are
in the possession of the Seller, the Company, any of the Company
Subsidiaries, affiliates, lenders, insurers or guarantors, which have not
been delivered to Buyer prior to execution of this Agreement;
(x) there are no claims or actions by the Company or any
Company "Affiliate against any insurance carrier with respect to
Environmental Costs and Liabilities at any of the Real Properties, any
currently or formerly utilized Site, or any off-Site location where
Hazardous Material was shipped for treatment, storage or disposal; and
(xi) the balance, as of November 3, 1997, and an itemized
accounting of the intended use (if any) of remaining available funds
balance under the Contingent Payment Agreement dated July 25, 1990 by STC
of America, Inc., STC Tape Co., the Company and NBD Bank, N.A. (the
"Contingent Payment Agreement"), for certain environmental remediation
expenses at the Marysville, Michigan facility, is set forth in Schedule
8.17.
8.18. GOVERNMENTAL AUTHORIZATIONS AND REGULATIONS. The Company
and the Company Subsidiaries hold all Permits the absence of which, individually
or in the aggregate, could have a Material Adverse Effect on the business of the
Company and the Company Subsidiaries (the "Material Permits"). Such Material
Permits are valid and none of the Eight Key Employees has received any written
notice to the effect that any Governmental Entity intended to cancel, terminate
or not renew any Material Permit.
8.19. SEC FILINGS. Neither the Company nor any Company Subsidiary
has ever issued any security covered by a registration statement filed with the
SEC pursuant to the Securities Act or the Investment Company Act of 1940, as
amended, and no security issued by the Company or any Company Subsidiary has
ever been registered pursuant to the Exchange Act.
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8.20. EMPLOYEE BENEFIT PLANS AND ARRANGEMENTS. All Benefit Plans
are listed in Schedule 8.20 and copies of all documentation relating to such
Benefit Plans have been delivered or made available to Buyer (including copies
of Benefit Plans, summary plan descriptions, trust agreements, the three most
recent annual returns, representative employee communications, and IRS
determination letters, all where applicable). Except as disclosed in
Schedule 8.20:
(i) each Benefit Plan and the administration thereof
complies, and has at all times complied, in all material respects with the
requirements of all applicable law, including ERISA and the Code, and each
Benefit Plan intended to qualify under Section 401(a) of the Code has at
all times since its adoption been so qualified, and each trust which forms
a part of any such plan has at all times since its adoption been tax-exempt
under Section 501(a) of the Code;
(ii) no Benefit Plan has incurred any "accumulated
funding deficiency" within the meaning of Section 302 of ERISA or Section
412 of the Code;
(iii) no direct, contingent or secondary liability has
been incurred or is expected to be incurred by the Company or any Company
Subsidiary under Title IV of ERISA with respect to any Benefit Plan, or
with respect to any other Plan presently or heretofore maintained or
contributed to by any ERISA Affiliate;
(iv) all Benefit Plans subject to Title IV of ERISA have
been funded in accordance with the amount determined in each such Plan's
annual actuarial report;
(v) no "reportable event" (within the meaning of Section
4043 of ERISA) has occurred within the most recent five calendar years with
respect to any Benefit Plan or any Plan maintained by an ERISA Affiliate
which is subject to Title IV of ERISA;
(vi) no Benefit Plan is a multiemployer plan within the
meaning of Section 3(37) of ERISA;
(vii) neither the Company, and Company Subsidiary nor any
ERISA Affiliate has been assessed with any liability for any Tax imposed
under Section 4971 through 4980B of the Code or civil liability under
Section 502(i) or (l) of ERISA;
(viii) no benefit under any Benefit Plan, including,
without limitation, any severance or parachute payment plan or agreement,
will be established or become accelerated, vested or payable by reason of
any transaction contemplated under this Agreement;
(ix) no Tax has been incurred under Section 511 of the
Code with respect to any Benefit Plan (or trust or other funding vehicle
pursuant thereto) within the past three calendar years;
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(x) no Benefit Plan provides health or death benefit
coverage beyond the termination of an employee's employment, except as
required by Part 6 of Subtitle B of Title I of ERISA or Section 4980B of
the Code or any State Laws requiring continuation of benefits coverage
following termination of employment;
(xi) no suit, actions or other litigation (excluding
claims for benefits incurred in the ordinary course of plan activities)
have been brought or, to the knowledge of Seller, threatened against or
with respect to any Benefit Plan within the past three calendar years; and
(xii) all contributions to Benefit Plans that were
required to be made under such Benefit Plans have been made, and all
benefits accrued under any unfunded Benefit Plan have been paid, accrued
or otherwise adequately reserved in accordance with GAAP, all of which
accruals under unfunded Benefit Plans are as disclosed in Schedule 8.20, and
each of the Company and each Company Subsidiary has performed all
material obligations required to be performed under all Benefit Plans.
8.21. LABOR MATTERS. Except as set forth on Schedule 8.21:
(a) (i) Neither the Company nor any Company Subsidiary is a party
to any labor or collective bargaining agreement, and no employees of Company
or any Company Subsidiary are represented by any labor organization; (ii)
within the preceding three years, there have been no representation or
certification proceedings, or petitions seeking a representation proceeding,
pending or, to the knowledge of Seller, threatened in writing to be brought
or filed with the National Labor Relations Board or any other labor relations
tribunal or authority; and (iii) within the preceding three years, to the
knowledge of Seller, there have been no organizing activities involving the
Company or any Company Subsidiary with respect to any group of employees of
the Company or any Company Subsidiary.
(b) There are no strikes, work stoppages, slowdowns, lockouts,
material arbitrations or material grievances or other material labor disputes
pending or threatened in writing against the Company or any Company
Subsidiary. There are no unfair labor practice charges, grievances or
complaints pending or, to the knowledge of Seller, threatened in writing by
or on behalf of any employee or group of employees of the Company or any
Company Subsidiary.
(c) Except as set forth in Schedule 8.21(c), there are no
complaints, charges or claims against the Company or any Company Subsidiary
pending or, to the knowledge of Seller threatened to be brought or filed with
any Governmental Entity based on, arising out of, in connection with, or
otherwise relating to the employment or termination of employment of any
individual by the Company or any Company Subsidiary.
(d) The Company and each Company Subsidiary are in material
compliance with all Laws relating to the employment of labor, including all
such Laws relating to wages, hours,
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Worker Adjustment Retraining and Notification Act of 1988, as amended ("WARN
Act"), collective bargaining, discrimination, civil rights, safety and
health, workers' compensation and the collection and payment of withholding
and/or social security Taxes and any similar Tax.
(e) Since December 31, 1996, there has been no "mass layoff"
or "plant closing" (as defined by the WARN Act) with respect to the Company
or any Company Subsidiary.
8.22. FOREIGN CORRUPT PRACTICES ACT. Neither the Company or any
Company Subsidiary nor any director, officer, agent, employee or other Person
acting on behalf of the Company or any Company Subsidiary has violated or is
in violation of any provision of the Foreign Corrupt Practices Act of 1977,
as amended, or paid or made any bribe, rebate, payoff, influence payment,
kickback, or other unlawful payment which constitutes a violation of any U.S.
criminal statute.
8.23. ACCOUNTING PRACTICES. The Company and each Company
Subsidiary has kept books and records and has maintained internal accounting
controls sufficient to permit management to operate the business in a
reasonably prudent manner.
8.24. BUSINESS RELATIONSHIPS; RECEIVABLES.
(a) Schedule 8.24(a) lists (without identifying by name) the
twenty largest Persons whose purchases of goods or services (determined on an
accrual basis) from the Company and the Company Subsidiaries during the year
ended December 31, 1996, the twenty largest expected Persons during the year
ending December 31, 1997 and the sales volume and the accounts receivables
balances at December 31, 1996 and October 25, 1997. The Company will provide
IPG and Buyer with comments, specific as to the conduct of business and the
nature of the business relationship between each such customer and the
Company, two days before the Closing by providing the report from the
Company's system screen number 0016, which follows screen number 032002, for
the twenty largest customers.
(b) Except as set forth in Schedule 8.24(a), no Person listed
on Schedule 8.24 has terminated or substantially decreased the extent of, or
given written notice to Seller, the Company or any Company Subsidiary of the
termination or substantial reduction of, or of the intent to terminate or
substantially decrease the extent of such Person's business relationship with
the any of the Company or any Company Subsidiary.
(c) Except as set forth in Schedule 8.24(b), all accounts
receivable of the Company and each Company Subsidiary (i) arose from bona
fide transactions in the ordinary course of business and are payable on the
Company's normal trade terms, and (ii) are, to the knowledge of Seller,
legal, valid and binding obligations of the respective debtors enforceable in
accordance with their terms.
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8.25. AFFILIATES' RELATIONSHIPS TO AND TRANSACTIONS WITH THE
COMPANY.
(a) NO ADVERSE INTERESTS. Except as disclosed in Schedule
8.25(a), no Affiliate has any material direct or indirect interest in (i) any
entity which does business with the Company or is competitive with the
Company's business or (ii) any property, asset or right which is used by the
Company in the conduct of its business.
(b) OBLIGATIONS. All material obligations of any Affiliate to
the Company, and all obligations of the Company to any Affiliate, are listed
on Schedule 8.25(b).
8.26. CORPORATE NAME. The Company and each Company Subsidiary
(i) have the right to use their respective names as the name of a corporation
in each jurisdiction in which the Company or any such Company Subsidiary does
business and (ii) have not received or given any written notice of conflict
during the past five years with respect to the rights of others regarding the
corporate names of the Company or any Company Subsidiary. To the knowledge of
Seller, no Person other than the Company and the Company Subsidiaries is
presently authorized to use the name of the Company or any Company Subsidiary.
8.27. CORPORATE MATTERS. Complete and correct copies of the
minute books and stock transfer books and ledgers of the Company and each
Company Subsidiary have been delivered to Buyer. Such minute books correctly
reflect all material corporate actions taken by the directors and
shareholders of such companies and such stock transfer books and ledgers
correctly reflect all issuances and transfers of capital stock of such
companies. The original minute books and stock transfer books and ledgers of
the Company and each Company Subsidiary and the corporate and business
records and books of such companies will be in the exclusive control and
custody of such companies at the Closing.
8.28. [Intentionally omitted.]
8.29. INSURANCE.
(a) Schedule 8.29(a) contains a list and description of all
insurance policies maintained by or on behalf of the Company and each Company
Subsidiary on the assets on their respective operations and personnel,
including those Comprehensive General Liability and environmental impairment
liability policies issued to former owners of the Real Property under which
the Company may assert claims. Such description includes the insurance
carrier, the amount of premiums thereunder, the type of coverage and the
expiration dates of the current premium periods thereunder. Such insurance is
of the kinds, covering such risks and in such amounts and with such
deductibles and exclusions, as are consistent with past business practice of
the Company and each Company Subsidiary and are reasonable for the business,
assets and properties of the Company and each Company Subsidiary. All such
policies are in full force and effect.
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(b) Except as set forth in Schedule 8.29(b), neither Seller,
the Company nor any Company Subsidiary has received any notice of
cancellation or termination with respect to any material insurance policy
thereof and there are no pending disputes or controversies between the
Company or any Company Subsidiary, on the one hand, and the carrier of any
such insurance policy, on the other.
8.30. PRODUCT WARRANTIES. Except for warranties as to
conformance to specifications and product returns in the ordinary course of
business, and except as set forth in Schedule 8.30: (i) neither the Company
nor any Company Subsidiary has any unexpired, expressed, product warranty
with respect to any product that it manufactures or sells or that it has
heretofore manufactured or sold; (ii) neither the Company nor any Company
Subsidiary has received any written notice of any claim based on any product
warranty; and (iii) Seller does not know or have any reasonable ground to
know of any claim (actual or threatened) based on any product warranty of
which neither the Company nor any Company Subsidiary has received notice.
Neither the Company nor any Company Subsidiary makes any other warranties
expressed or implied, with respect to any of the products that any of them
manufactures or sells.
8.31. BARTER AGREEMENTS. Except as disclosed in Schedule 8.31,
there are no outstanding barter Contracts or arrangements with respect to the
business of the Company or any Company Subsidiary nor is the Company or any
Company Subsidiary liable for any outstanding barter obligations nor the
owner of any outstanding barter receivables.
8.32. CERTAIN EMPLOYEE MATTERS. No employee, agent, consultant
or contractor associated with any of the members of management or key
personnel of the Company or any Company Subsidiary who has contributed to or
participated in the conception and development of proprietary rights of any
of the Company or any Company Subsidiary has asserted or, to the knowledge of
Seller, threatened any claim against the Company or any Company Subsidiary in
connection with such Person's involvement in the conception and development
of such proprietary rights.
8.33. NO OTHER REPRESENTATIONS AND WARRANTIES. Except for the
representations and warranties of Seller contained in this Agreement, Seller
makes no representation or warranty, express or implied, written or oral, and
Seller hereby disclaims any such representation or warranty (including
without limitation any warranty of merchantability or of fitness for a
particular purpose), whether made by Seller or the Company or any of their
officers, directors, employees, agents or representatives, with respect to
Seller, STC Tape or the Company or the execution and delivery of this
Agreement or the transactions contemplated hereby. Without limiting the
generality of the foregoing, neither Seller, STC Tape nor the Company makes
any representation or warranty to Buyer or IPG with respect to any
projections, estimates or budgets of future revenues or expenses or
expenditures, or future results of operations, or any other information or
documents, heretofore delivered to or made available to Buyer or IPG or their
respective counsel, accountants or advisors with respect to the Company,
except as expressly covered by a representation and warranty contained in
this Agreement.
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ARTICLE IX
REPRESENTATIONS AND WARRANTIES BY IPG AND BUYER
As an inducement to Seller to enter into this Agreement, each of
IPG and Buyer makes the representations and warranties to Seller set forth
below in Sections 9.1 (as to IPG), 9.3, 9.4, 9.5, 9.6, 9.7 and 9.8, and Buyer
makes the representations and warranties set forth below in Sections 9.1 (as
to Buyer), 9.2, 9.4 (as to Buyer) 9.5 (as to Buyer), 9.7 (as to Buyer) and
9.8.
9.1. CORPORATE ORGANIZATION. IPG is a corporation duly
organized, validly existing and in good standing under the laws of Canada and
has the corporate power and authority to carry on its business as now being
conducted and as proposed to be conducted. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of Delaware
and has the corporate power and authority to carry on its business as now
being conducted and as proposed to be conducted and to acquire and own the
Stock.
9.2. AUTHORIZATION OF AGREEMENT; NO VIOLATION. Buyer has the
requisite corporate power and authority to execute, deliver and perform this
Agreement and to consummate the transactions contemplated hereby in
accordance with the terms of this Agreement. Buyer has duly authorized the
execution, delivery and performance of this Agreement and the purchase of the
Stock from Seller and the consummation of the other transactions contemplated
hereby. No other corporate proceedings on the part of Buyer are necessary to
authorize this Agreement or the transactions contemplated hereby. This
Agreement has been duly executed and delivered by Buyer and, assuming this
Agreement constitutes the legal, valid and binding obligation of Seller,
constitutes the legal, valid and binding obligation of Buyer, enforceable
against Buyer in accordance with its terms, except as may be limited by any
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
other similar laws affecting the enforcement of creditors' rights generally
or by general principles of equity (regardless of whether such enforceability
is considered in a proceeding in equity or at law). Neither the execution,
delivery or performance of this Agreement nor the consummation of any of the
transactions contemplated hereby (i) will violate or conflict with the
Certificate of Incorporation or By-Laws of Buyer, or (ii) is prohibited by
or, except for filings under the HSR Act requires Buyer to obtain or make any
consent, authorization, approval, registration or filing with or from any
Person. Buyer has delivered to Seller copies of its Certificate of
Incorporation and all amendments thereto and a copy of its By-laws, which are
true and complete copies of such instruments as in effect on the date of this
Agreement.
9.3. IPG has the requisite corporate power and authority to
execute, deliver and perform this Agreement and to consummate the
transactions contemplated hereby in accordance with the terms of this
Agreement. IPG has duly authorized the execution, delivery and performance of
this Agreement and the issuance of the Intertape Shares to Seller and the
consummation of the other transactions contemplated hereby. No other
corporate proceedings on the part of IPG are necessary to authorize this
Agreement, the issuance of the Intertape Shares to Seller or the other
transactions
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contemplated hereby. This Agreement has been duly executed and delivered by
IPG and, assuming this Agreement constitutes the legal, valid and binding
obligation of Seller, it constitutes the legal, valid and binding obligation
of IPG, enforceable against IPG in accordance with its terms, except as may
be limited by any bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance or other similar laws affecting the enforcement of
creditors' rights generally or by general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at
law). Neither the execution, delivery or performance of this Agreement nor
the consummation of any of the transactions contemplated hereby (i) will
violate or conflict with the Certificate of Incorporation or By-Laws of IPG,
or (ii) is prohibited by or, except for filings under the HSR Act requires
IPG to obtain or make any consent, authorization, approval, registration or
filing with or from any Person. IPG has delivered to Seller copies of its
Certificate of Incorporation and all amendments thereto and a copy of its
By-laws, which are true and complete copies of such instruments as in effect
on the date of this Agreement.
9.4. LITIGATION. Except as set forth in Schedule 9.4, there
are no actions, suits, proceedings or investigations, either at law or in
equity, or before any Governmental Entity in any United States or foreign
jurisdiction, of any kind now pending or, to the best of Buyer's and IPG's
knowledge, threatened or proposed in any manner involving Buyer or IPG or any
of their respective properties or assets that would in any manner impair
either Buyer's or IPG's ability to perform its obligations hereunder.
9.5. NO BROKERS AND FINDERS. Except as set forth in Schedule
9.5, neither IPG nor the Buyer has incurred any liability for brokerage or
other commissions or finders' fees relative to this Agreement or to the
transaction herein contemplated.
9.6. REPRESENTATIONS CONCERNING THE INTERTAPE SHARES.
(a) IPG has delivered to Seller copies of the audited balance
sheets of IPG and its consolidated subsidiaries as of December 31, 1996 and
the related consolidated statements of income and retained earnings and cash
flows for the year then ended. Except as set forth in the notes thereto, all
such financial statements were prepared in accordance with GAAP and fairly
present in all material respects the consolidated financial condition and
results of operations of IPG and its consolidated subsidiaries as of the date
thereof and for the period covered thereby. Except as disclosed in such
financial statements, the SEC Reports (as defined below) and/or in a document
incorporated therein by reference, IPG does not have any liabilities which
are, in the aggregate, material to the business, operations or financial
condition of IPG and its subsidiaries taken as a whole, except liabilities
incurred in the ordinary course of business consistent with past practice
since June 30, 1997.
(b) IPG has filed all forms, reports and documents required to
be filed with the Securities and Exchange Commission (the "SEC") since
December 31, 1996 and has made available to Seller in the form filed with the
SEC (i) its Annual Report on Form 20-F for the fiscal year ended December 31,
1996 and its Quarterly Reports on Form 6-K for the fiscal quarters ended
March 31, 1997 and June 30, 1997, (ii) all proxy statements relating to IPG's
meetings of stockholders held
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since December 31, 1996, (iii) all reports on Form 6-K filed by IPG with the
SEC since December 31, 1996 and (iv) all amendments and supplements to all
such reports (collectively, the "SEC Reports"). The SEC Reports (i) were
prepared in accordance with the requirements of the Securities Act of 1933,
as amended (the "Act") or the Securities Exchange Act of 1934, as amended, as
the case may be, and (ii) did not at the time they were filed (or if amended
or superseded by a filing prior to the date of this Agreement, then on the
date of such amending or superseding filing) contain any untrue statement of
a material fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(c) Since June 30, 1997 there has not been (i) any material
adverse change in the business, financial condition or results of operations
of IPG and its subsidiaries taken as a whole, or (ii) any uninsured damage
to, destruction or loss of assets or property of IPG that could reasonably be
expected to have a Material Adverse Effect.
(d) Except as disclosed in the SEC Reports and/or in documents
incorporated therein by reference, there are no actions or proceedings or, to
the knowledge of IPG, any governmental or regulatory authority
investigations, pending or, to the knowledge of IPG, threatened, against IPG
or any of its assets and properties which could reasonably be expected to
result in the issuance of an order restraining, enjoining or otherwise
prohibiting or making illegal the consummation of any of the transactions
contemplated hereby, adversely affecting the ability of IPG or Buyer to
consummate the transactions or to perform their respective obligations
hereunder, or have a Material Adverse Effect on IPG and its subsidiaries
taken as a whole.
9.7. PURCHASE FOR INVESTMENT. Buyer is acquiring the Stock for
investment purposes and not with a view towards distribution. IPG
acknowledges that the shares of Stock have not been registered, and in
connection with the transactions contemplated hereby will not be registered,
under the Act or any state blue sky law and, therefore, cannot be resold
unless they are registered under the Act or unless an exemption from
registration is available.
ARTICLE X
COVENANTS OF SELLER
10.1. ACCESS, INFORMATION AND DOCUMENTS. Pending the Closing,
Seller will cause the Company and each Company Subsidiary to give to Buyer
and to its agents and representatives (including, but not limited to,
accountants, lawyers and appraisers) reasonable access during normal working
hours to any and all of the properties, assets, books, records and other
documents of the Company and each Company Subsidiary to enable Buyer to make
such examination of the business, properties, assets, books, records, and
other documents of the Company and each Company Subsidiary as Buyer may
determine, and Seller will furnish, and will cause the Company and each
Company Subsidiary to furnish, to Buyer such information and copies of such
documents and records as Buyer shall reasonably request.
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10.2. CONDUCT OF BUSINESS PENDING CLOSING. From the date hereof
until the Closing, except as set forth on Schedule 10.2 or as otherwise
specifically contemplated hereby or consented to by Buyer in writing:
(i) Seller will cause the Company and each Company
Subsidiary to maintain itself at all times as a corporation or other
business organization duly organized, validly existing and in good
standing under the laws of the jurisdiction under which it is
incorporated or organized;
(ii) Seller will cause the Company and each Company
Subsidiary to carry on their respective businesses and operations in a
businesslike manner consistent with past practice, and will not permit
the Company or any Company Subsidiary to engage in any activity or
transaction or make any commitment to purchase or spend other than in
the ordinary course of its business as heretofore conducted; PROVIDED,
HOWEVER, without the written consent of IPG and Buyer, Seller will not
permit the Company or any Company Subsidiary to make any commitment to
purchase or spend involving $25,000 or more other than for (a) the
purchase of raw materials, (b) approved capital expenditures as set
forth in Schedule 10.2(ii) and (c) transaction expenses as contemplated
by Section 10.5 and 20.3;
(iii) Seller will not permit the Company or any Company
Subsidiary to declare, set aside or pay any dividend or make any
distribution (whether in cash, property or stock) with respect to any of
its capital stock or redeem, purchase or otherwise acquire, or agree to
redeem, purchase or otherwise acquire, any of its capital stock;
(iv) Seller will not permit the Company or any Company
Subsidiary to increase, or agree to increase, the compensation or
bonuses or special compensation of any kind of any of its key employees
(which term shall be deemed to include all officers) over the rate being
paid to them on August 15, 1997 other than normal merit and/or
cost-of-living increases pursuant to customary arrangements consistently
followed, or adopt or increase any benefit under any insurance, pension
or other Benefit Plan, payment or arrangement made to, for or with such
key employee;
(v) Seller will cause the Company and each Company
Subsidiary to continue to carry all insurance policies listed in
Schedule 8.29(a) or suitable replacements therefor, in full force and
effect. After the Closing, Seller shall cooperate with Buyer, the
Company and the Company Subsidiaries to give them the benefit of any
rights which Seller or any of its Affiliates may have under such
insurance policies covering claims relating to the Company and the
Company Subsidiaries for the period ending at the close of business on
the Closing Date;
(vi) Seller will cause the Company and each Company
Subsidiary to use reasonable business efforts to preserve its business
organization intact, to keep available to
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Buyer the services of its employees and independent contractors and to
preserve for Buyer its relationships with suppliers, licensees,
distributors and customers and others having business relationships with
it;
(vii) Seller will not permit the Company or any Company
Subsidiary to sell, transfer or otherwise dispose of, or agree to sell,
transfer or otherwise dispose of, any assets (having a fair market value
at the time of sale, transfer or disposition of $25,000 or more in the
aggregate), or cancel or agree to cancel any debts or claims, other than
in the ordinary course of business, or mortgage, pledge or subject to
any lien or agree to mortgage, pledge or subject to any lien any of its
properties or assets, or pay or obligate itself to pay in excess of
$25,000 in the aggregate for fixed assets;
(viii) Seller will not permit the Company or any Company
Subsidiary to amend its constitutional documents;
(ix) Except for the Company Restructuring, Seller will
not, and will not permit the Company or any Company Subsidiary to, take
any action that would, or that could reasonably be expected to, result
in any of the conditions precedent set forth in Articles XIII, XIV and
XV not being satisfied;
(x) Seller will not cause or permit the Company or any
Company Subsidiary to issue, sell or otherwise dispose of, or agree to
issue, sell or otherwise dispose of any capital stock or any other
security of the Company or any Company Subsidiary, or grant or agree to
grant any option, warrant or other right to subscribe for or to purchase
any capital stock or any other security of the Company or any Company
Subsidiary;
(xi) Except for the Company Restructuring, Seller will
not cause or permit the Company or any Company Subsidiary to acquire or
agree to acquire, by merging or consolidating with, or by purchasing any
equity interest in or a substantial portion of the assets of, any
business or any corporation, partnership, association or other business
organization or division thereof or otherwise acquire or agree to
acquire any assets, in any such case, except in the ordinary course of
business;
(xii) Except as required by law or in the ordinary
course of business consistent with past practice except for [specify
employment agreements and Stay-Pay Plan], Seller will not cause
or permit the Company or any Company Subsidiary to adopt any plan,
arrangement or policy which would become a Benefit Plan or amend any
such plans to the extent such adoption or amendment would result in an
increase in the benefits payable to any current or former employee of
the Company or any Company Subsidiary without the prior consent of IPG
and Buyer, such consent not to be unreasonably withheld;
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(xiii) Seller will not cause or permit the Company or any
Company Subsidiary to incur or agree to incur any indebtedness for
borrowed money outside of existing lines of credit;
(xiv) Seller will not cause or permit the Company or any
Company Subsidiary to make or permit any material amendment, renewal,
extension or termination of any material Contract or Permit to which it
is a party other than in the ordinary course of business;
(xv) Seller will not cause or permit the Company or any
Company Subsidiary to cancel or forgive any indebtedness other than
trade accounts receivable for an amount greater than $10,000
individually or in the aggregate or settle any outstanding material
litigation for an amount greater than $50,000 individually or in the
aggregate or waive, release or compromise any outstanding material claim
or right except in the ordinary course of business consistent with past
practice;
(xvi) Except for the Company Restructuring and except in
the ordinary course of business consistent with past practice, Seller
will not cause or permit the Company or any Company Subsidiary to engage
in any transaction or enter into any Contract or other commercial
arrangement with any Affiliate of Seller, the Company or any Company
Subsidiary;
(xvii) Seller will not cause or permit the Company or any
Company Subsidiary to permit, allow or suffer any of its assets to
become subjected to any Lien other than a Permitted Lien, except for
liens in ordinary course of business, right-of-way or other similar
restriction of any nature whatsoever except for liens pursuant to
existing, disclosed Contracts;
(xviii)Seller will not cause or permit the Company or
any Company Subsidiary to make any change in its accounting methods or
practices;
(xix) Seller will not cause or permit the Company or any
Company Subsidiary to make material changes in any method of marketing,
management or operation; collection or credit extension policies; or
cash management methods, practices or procedures;
(xx) Seller will not cause or permit the Company or any
Company Subsidiary to enter into or renew, extend or amend in any
material respect any lease or sublease of real property;
(xxi) Seller will not cause or permit the Company or any
Company Subsidiary to agree, whether in writing or otherwise, to do any of
the foregoing; and
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(xxii) Without limiting the foregoing, Seller will cause
the Company to consult with IPG and Buyer regarding all significant
developments, transactions and proposals relating to the business or
operations or any of the assets or liabilities of the Company or any
Company Subsidiary.
10.3. NONCOMPETITION; CONFIDENTIALITY. Subject to the Closing,
and as an inducement to Buyer to execute this Agreement and complete this
transactions contemplated hereby, and in order to preserve the goodwill
associated with the business of Company being acquired pursuant to this
Agreement, Seller covenants and agrees as follows:
(a) COVENANT NOT TO COMPETE. For a period for five years from
the date of Closing (the "Period"), Seller will not directly or indirectly:
(i) engage in, continue in or carry on any business
which competes with the tape and shrink film business of the Company or
any of its Subsidiaries as conducted on the date hereof (the "Business")
or is substantially similar thereto, including owning or controlling any
financial interest in any corporation, partnership, firm or other
business organization which is so engaged;
(ii) consult with, advise or assist in any way, whether
or not for consideration, any corporation, partnership, firm or other
business organization which is now or becomes a competitor of the
Company or Buyer in any aspect with respect to the Business, including,
but not limited to, advertising or otherwise endorsing the products of
any such competitor; soliciting customers or otherwise serving as an
intermediary for any such competitor; loaning money or rendering any
other form of financial assistance to or engaging in any form of
business transaction on other than an arm's length basis with any such
competitor; or
(iii) offer employment to an employee of the Company,
without the prior written consent of Buyer;
provided, however, that the foregoing shall not prohibit (a) the ownership by
Seller of securities of corporations which are listed on a national
securities exchange or traded in the national over-the-counter market in an
amount which shall not exceed 5% of the outstanding shares of any such
corporation or (b) any offer by Seller to employ a person in a business which
does not compete with the business of IPG or the Company or which is for a
position outside the United States, Mexico or Canada.
The parties agree that Buyer may sell, assign or otherwise transfer
this covenant not to compete, in whole or in part, to any person,
corporation, firm or entity that purchases all or part of the business of the
Company.
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The parties agree that the geographic scope of this covenant not to
compete shall extend to any city, county or other political subdivision of
any country in North America, each of which is deemed to be separately named
herein. Recognizing the specialized nature of the business transferred to
Buyer and the scope of competition, Seller acknowledges the geographic scope
of this covenant not to compete to be reasonable. The parties intend that the
covenant contained in this Section 10.3 shall be construed as a series of
separate covenants, one for each city, county or political subdivision of
each country in North America, each of which is deemed to be separately named
herein, each for a series of one-year periods within the Period. Except for
geographic coverage and periods of effectiveness, each such separate covenant
shall be identical in terms. If in any judicial proceeding a court shall
refuse to enforce any of the separate covenants deemed included in this
Section 10.3(a), then such unenforceable covenant shall be deemed eliminated
for the purpose of that proceeding to the extent necessary to permit the
remaining separate covenants to be enforced.
In the event a court of competent jurisdiction determines that the
provisions of this covenant not to compete are excessively broad as to
duration, geographic scope or activity, it is expressly agreed that this
covenant not to compete shall be construed so that the remaining provisions
shall not be affected, but shall remain in full force and effect, and any
such over broad provisions shall be deemed, without further action on the
part of any person, to be modified, amended and/or limited, but only to the
extent necessary to render the same valid and enforceable in such
jurisdiction.
(b) COVENANT OF CONFIDENTIALITY. Except as necessary in
connection with its indemnification obligations hereunder, Seller shall not
at any time subsequent to the Closing, except as explicitly requested by
Buyer, (i) use for any purpose, (ii) disclose to any person, or (iii) keep or
make copies of documents, tapes, discs or programs containing, any
confidential information concerning the Company. For purposes hereof,
"confidential information" shall mean and include, without limitation, all
Trade Rights in which the Company has an interest, all customer lists and
customer information, and all other information concerning the Company's
processes, apparatus, equipment, packaging, products, marketing and
distribution methods, not previously disclosed to the public directly by the
Company. If at any time after Closing, the Seller should discover that it is
in possession of any records containing the confidential information of the
Company, then the Seller shall immediately turn such records over to the
Company, which shall upon request make available to the Seller any
information contained therein which is not confidential information. Seller
agrees that it will not assert a waiver or loss of confidential or privileged
status of the information based upon such possession or discovery.
(c) Seller agrees that the provisions and restrictions
contained in this Section 10.3 are necessary to protect the legitimate
continuing interests of IPG and Buyer in acquiring the Stock, and that any
violation or breach of these provisions will result in irreparable injury to
IPG and Buyer for which a remedy at law would be inadequate. Seller, IPG and
Buyer agree that in the event of a violation or breach and regardless of any
other provision contained in this Agreement, Buyer shall be entitled to
injunctive and other equitable relief as a court may grant after considering
the intent of this Section 10.3, and IPG and Buyer shall not be entitled to
any other form of relief from such violation or breach.
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10.4. EXCLUSIVITY. Except for the Company Restructuring, prior
to the termination of this Agreement, Seller will not cause or permit the
Company to engage in any Business Combination other than the Acquisition
contemplated hereby, and will not authorize or permit any of its
subsidiaries, affiliates or representatives (including, without limitation,
directors, officers, legal, financial and other advisors) to take, directly
or indirectly, any action to initiate, assist, solicit, negotiate, encourage,
accept or otherwise pursue any offer or inquiry from any person or entity to
engage in any Business Combination other than the acquisition contemplated
hereby (and other than the merger of the Company and its subsidiaries) or
otherwise attempt to consummate any Business Combination other than the
acquisition contemplated hereby.
10.5. TRANSFER PRICING. Seller shall promptly engage Coopers &
Lybrand, at Seller's sole expense to document the transfer pricing practices
of the Company, STC Tape and STC America Inc., an affiliate of the Company
and to prepare and deliver a report thereon, prior to the Closing, to each of
Seller, the Company, IPG and Buyer.
10.6. CONSENTS AND APPROVALS. Seller shall use its best efforts
to obtain prior to the Closing all consents, approvals, orders,
authorizations, registrations, declarations and filings under all Laws of any
Governmental Entity or of any other Person required to be obtained by Seller
in connection with the execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby.
10.7. INDUSTRIAL SITE RECOVERY ACT. Seller shall cause the
Company to fully comply with and meet all obligations under the New Jersey
Industrial Site Recovery Act ("ISRA"), including but not limited to making
all filings with the New Jersey Department of Environmental Protection
("NJDEP"), conducting any and all investigation and remediation activities
required by the NJDEP, and satisfying any financial assurance requirements
thereunder. Prior to all such filings, investigations and/or remediation
activities, Seller shall provide Buyer with all reports (including but not
limited to draft and final consultant reports, workplans and sampling data),
consult with Buyer thereon and give reasonable consideration to Buyer's
comments regarding investigation, remediation and filings with NJDEP. Buyer
shall review such reports, workplans and data and provide comments to the
Company in a prompt manner. Seller shall notify Buyer and shall give Buyer
the opportunity to attend any meetings with NJDEP or inspections by NJDEP.
Seller shall conduct at its own sole cost and expense any and all
investigation, environmental testing and remediation required by the NJDEP
pursuant to ISRA, including but not limited to any additional sampling of
soil and groundwater at the Real Properties subject to ISRA.
10.8. [Intentionally omitted.]
10.9. RESIGNATION OF DIRECTORS AND OFFICERS. Prior to or at the
Closing, Seller will cause each of the directors and officers of the Company
and each Company Subsidiary to resign as a director and/or officer of the
Company or the Company Subsidiary effective at the Closing.
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10.10. USE OF NAME. Seller will not use the name "American Tape"
or any protected logos associated therewith or any derivatives thereof in any
way whatsoever at any time after the Closing.
10.11. LOCKUP. Seller shall not, directly or indirectly, sell or
otherwise transfer any of the Intertape Shares during the 180-day period
following the Closing Date. Seller may pledge all or any portion of the
Intertape Shares during such period to secure borrowings, provided that
Seller requires the lender to agree, and the lender does agree not to sell
such Intertape Shares during the lockup period; and the Intertape Shares are
legended to restrict such sale.
10.12. RESTRUCTURING. Seller will cause each of the transactions
listed in Exhibit J (collectively, the "Restructuring") to occur prior to
Closing, on terms and conditions, and pursuant to documentation, reasonably
acceptable to Buyer. Seller shall furnish to Buyer, at least one week prior
to the date of the Closing, copies of the draft documentation pursuant to
which such transactions shall be consummated for Buyer's review.
10.13. NOTIFICATION. Between the date of this Agreement and the
Closing Date, Seller or the Company will promptly notify Buyer in writing if
Seller or the Company becomes aware of any fact or condition that causes or
constitutes a breach of any of the representations or warranties, or would
preclude Seller from performing any of the covenants contained herein as of
the date of this Agreement.
10.14. LETTER OF CREDIT. Seller shall arrange for the issuance
by the Letter of Credit Bank of the Letter of Credit.
10.15. AVAILABILITY OF FUNDS UNDER CONTINGENT PAYMENT AGREEMENT
Seller covenants and agrees that any and all funds available under and in
accordance with the Contingent Payment Agreement as of Closing will be for
the sole and exclusive benefit of the Company, no portion of the balance
reflected in Schedule 8.17 having been expended between the date of this
Agreement and Closing.
10.16. CERTAIN ENVIRONMENTAL COMPLIANCE. Prior to Closing,
Seller will (i) cause the Company to report to appropriate authorities the
July 1997 discovery of contamination at the Marysville, Michigan facility
during the repair of a city water main, and (ii) cause the Company to comply
with all requirements of "Stipulation for Entry of Final Order by Consent,
AQD No. 10-1997," entered on July 7, 1997 with the Michigan Department of
Environmental Quality ("MDEQ"), as amended by letter from Diane Kavanaugh
Vetort, MDEQ, to Frederick J. Dindoffer, counsel for Company, dated October
20, 1997, including without limitation all recordkeeping, reporting and
testing requirements therein.
10.17. CONSENT OF UNION. Prior to Closing, Seller will cause the
Company to obtain the written consent of Local 1149, United Automobile
Aerospace and Agricultural Implement
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Workers of America to the First Amendment to the American Tape Company Hourly
Employees' Pension Plan.
10.18. FORMS 5500. Prior to Closing, Seller shall cause the
Company to promptly file all Forms 5500 relating to the Company's Benefit
Plans and not timely filed herewith.
10.19. TERMINATION OF BENEFIT PLANS. Prior to Closing, Seller
shall cause each of the (x) American Tape Company Long Term Incentive Plan
and (y) American Tape Company Short Term Management Incentive Plan to be
terminated, effective as of the Closing Date.
ARTICLE XI
COVENANTS OF IPG AND BUYER
11.1. CONFIDENTIAL INFORMATION. Each of IPG and Buyer shall
preserve and maintain all confidential information, proprietary information
and trade secrets of the Company and the Company Subsidiaries received or
confirmed in documentary form by Buyer or IPG or their representatives from
Seller, the Company or any Company Subsidiary and shall not disclose to any
third Person or use any such confidential information, proprietary
information or trade secret, except that Buyer and IPG shall be free to use
and disclose all or any of such proprietary information and trade secrets
which: (i) were already in its possession at the time of disclosure to it;
(ii) are a matter of public knowledge; (iii) have been or are hereafter
published other than through Buyer or IPG; (iv) are required to be disclosed
by any Law; or (v) are lawfully obtained by Buyer or IPG from a third Person
without restrictions of confidentiality. The covenants of Buyer and IPG
contained in this Section 11.1 shall terminate at the Closing but shall
continue indefinitely if there is no Closing.
11.2. CONSENTS AND APPROVALS. Each of Buyer and IPG shall use
its best efforts to obtain prior to the Closing all consents, approvals,
orders, authorizations and filings under Laws of any Governmental Entity or
of any other Person required to be obtained by either Buyer or IPG in
connection with the execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated hereby.
11.3. ENVIRONMENTAL AUDITS. Buyer and IPG will promptly retain
a firm engaged in the regular business of environmental engineering to
conduct (at Buyer's and IPG's expense) such environmental, engineering and
safety audits of Company's operations and the Real Estate occupied by Company
as Buyer and IPG in their discretion shall consider necessary or appropriate.
11.4. BOARD SEAT. Subject to his continued employment by the
Company or an affiliate thereof, IPG shall elect and appoint Mr. I. J. Choi
as a member of the Board of Directors of IPG for a term of two years. On and
after the Closing, IPG shall cause the Company (or an affiliate thereof) to
provide an office (which office shall be located in the State of New Jersey
and within reasonable proximity to New York) to Mr. Choi for the tenure of
his employment.
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11.5. INDEMNIFICATION OF DIRECTORS AND OFFICERS OF THE COMPANY.
(a) Buyer shall not, and IPG agrees to preclude Buyer from
taking any action to, cause STC Tape to approve any amendment to the
Certificate of Incorporation or By-laws of the Company existing on the date
hereof (provided no amendment has been made to either thereof since August
15, 1997 altering the indemnification provisions contained therein) which
amendment would have the effect of reducing or limiting, in any manner
whatsoever, the indemnification rights (including without limitation, any
rights to advancement of expenses) of those individuals who are serving as
directors or officers of the Company on the date hereof, or who have served
in such capacities at any time during the preceding three years.
(b) In the event IPG, Buyer or any of their respective
successors or assigns (i) causes the Company to reorganize or consolidate
with or merge into or enter into another business combination transaction
with any other Person where the Company is not the resulting, continuing or
surviving corporation or entity of such consolidation, merger or transaction,
or (ii) causes the Company to liquidate, dissolve or transfer all or
substantially all of its properties and assets to any other Person, then, and
in each such case, proper provision shall be made so that the successors and
assigns of the Company continue, or cause to be continued, the
indemnification rights provided to the directors and officers of the Company
as described in (a) above.
(c) IPG shall cause the directors' and officers' insurance
coverage of IPG to be amended, immediately upon Closing, to include STC Tape
and the Company, thereby providing the same coverage to directors and
officers of STC Tape and the Company as is made available to the other U.S.
employees of subsidiary companies of IPG. A summary description of such
insurance coverage has been delivered by IPG to Seller.
(d) IPG agrees to promptly advance legal expenses (which
expenses shall be reasonable) to each of the Eight Key Employees in
connection with the defense of any action asserted against any of such Eight
Key Employees in his or her capacity as such for actions or inactions prior
to the Closing, provided the Company shall have declined to assume the
defense of any such action or shall have been precluded from assuming the
defense of any such action because of a conflict of interests, and further
provided that the Company shall have agreed to the officer's or director's
selection of counsel, which agreement shall not be unreasonably withheld.
ARTICLE XII
HSR COVENANT OF IPG, BUYER AND SELLER
To the extent such filings have not been completed prior to the
execution of this Agreement, each of IPG, Buyer and Seller shall, in
cooperation with the other, promptly file or cause to be filed any reports or
notifications that may be required to be filed by it under the HSR Act, with
the Federal Trade Commission and the Antitrust Division of the Department of
Justice, and shall furnish to the others all such information in its
possession as may be necessary for the completion of
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the reports or notifications to be filed by the other. Prior to making any
communication, written or oral, with the Federal Trade Commission, the
Antitrust Division of the Department of Justice or any other governmental
agency or authority or members of their respective staffs with respect to
this Agreement or the transactions contemplated hereby, each of IPG, Buyer
and Seller shall consult with the other.
ARTICLE XIII
CONDITIONS PRECEDENT TO SELLER'S
OBLIGATIONS TO SELL THE STOCK
The obligation of Seller to sell the Stock is subject to the
fulfillment prior to or at the Closing of the following conditions, unless
waived in writing by Seller:
13.1. ACCURACY OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties made by IPG and Buyer herein qualified as to
materiality shall be true and correct in all respects and those not so
qualified shall be true and correct in all material respects with the same
force and effect as though such representations and warranties had been made
on and as of the Closing Date, except for changes permitted or contemplated
by this Agreement.
13.2. COMPLIANCE WITH COVENANTS. Each of IPG and Buyer shall
have performed or complied in all material respects with all obligations and
agreements, and complied in all material respects with all covenants,
contained in this Agreement to be performed or complied with by it prior to
or at the Closing Date.
13.3. CONSENTS AND APPROVALS. All consents, approvals, orders,
authorizations, registrations, declarations and filings required to be
obtained or made prior to the Closing Date shall have been made or obtained.
13.4. OFFICER'S CERTIFICATES. Seller shall have received such
certificates of Buyer and of IPG, dated the Closing Date and signed by an
executive officer of Buyer and of IPG, to evidence satisfaction of the
conditions set forth in this Article XIII as may be reasonably requested by
Seller.
13.5. OPINION OF COUNSEL. Seller shall have received an
opinion, dated the Closing Date, of Morgan, Lewis & Bockius LLP, counsel for
Buyer and IPG, in form and substance reasonably satisfactory to Seller.
13.6. REGISTRATION RIGHTS. Buyer, IPG and Seller shall have
entered into the Registration Rights Agreement, provided the Purchase Price
shall include the delivery to Seller of $3,000,000 or more of Intertape
Shares.
13.7. [Intentionally omitted.]
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13.8. GUARANTEES. The Seller shall have received from the
Creditors releases of the Guarantees, which releases shall be satisfactory in
form and substance to Seller, IPG and Buyer.
13.9. COMPANY RESTRUCTURING. The Company Restructuring shall
have been consummated.
13.10. OCTOBER FINANCIAL STATEMENTS. Seller shall have received
and been satisfied with, in its sole discretion, the October Financial
Statements and the accompanying opinion of Coopers & Lybrand.
13.11. TRANSFER PRICING. Seller shall have received and been
satisfied with, in its sole discretion, the report of Coopers & Lybrand
concerning, and the implications of, the transfer pricing practices of the
Company (as contemplated by Section 10.5 of this Agreement).
ARTICLE XIV
CONDITIONS PRECEDENT TO IPG'S AND BUYER'S
OBLIGATIONS TO PURCHASE THE STOCK
The obligation of Buyer to purchase the Stock is subject to the
fulfillment prior to or at the Closing of the following conditions, unless
waived in writing by Buyer:
14.1. ACCURACY OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties made by Seller herein qualified as to
materiality shall be true and correct in all respects and those not so
qualified shall be true and correct in all material respects with the same
force and effect as though such representations and warranties had been made
on and as of the Closing Date, except for changes permitted or contemplated
by this Agreement and except for representations and warranties that are made
as of a specific date or time, which, if qualified as to materiality shall be
true and correct in all respects, and if not so qualified shall be true and
correct in all material respects only as of such specific date or time.
14.2. COMPLIANCE WITH COVENANTS. Seller shall have performed or
complied in all material respects with all obligations and agreements, and
complied in all material respects with all covenants, contained in this
Agreement to be performed or complied with by it prior to or at the Closing
Date.
14.3. CONSENTS AND APPROVALS. All consents, approvals, orders,
authorizations, registrations, declarations and filings required to be
obtained or made prior to the Closing Date shall have been made or obtained.
14.4. OFFICER'S CERTIFICATES. IPG and Buyer shall have received
such certificates of Seller, dated the Closing Date and signed by an
executive officer of Seller to evidence satisfaction of the conditions set
forth in this Article XIV as may be reasonably requested by Buyer.
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14.5. [Intentionally omitted.]
14.6. OPINION OF COUNSEL. IPG and Buyer shall have received
opinions, dated the Closing Date, of (Korean) counsel for Seller, and of
Pitney Hardin Kipp & Szuch, United States counsel for the Company, in form
and substance reasonably satisfactory to IPG and Buyer.
14.7. NO LITIGATION. There shall not be pending or threatened
by any Governmental Entity any suit, action or proceeding (or by any other
Person any suit, action or proceeding which has a reasonable likelihood of
success), (i) challenging or seeking to restrain or prohibit the purchase of
the Stock contemplated by this Agreement or any of the other transactions
contemplated by this Agreement or seeking to obtain from Buyer in connection
with the purchase of the Stock contemplated by this Agreement any damages
that are material in relation to Buyer taken as a whole, (ii) seeking to
prohibit or limit the ownership or operation by Buyer, the Company or any of
their respective subsidiaries of any material portion of the business or
assets of Buyer, the Company or any of their respective subsidiaries, or to
compel Buyer, the Company or any of their respective subsidiaries to dispose
of or hold separate any material portion of the business or assets of Buyer,
the Company or any of their respective subsidiaries, in each case as a result
of the purchase of the Stock contemplated by this Agreement or any of the
other transactions contemplated by this Agreement, (iii) seeking to impose
limitations on the ability of Buyer to acquire or hold, or exercise full
rights of ownership of, the Stock, including the right to vote the Stock on
all matters properly presented to the stockholders of the Company or (iv)
seeking to prohibit Buyer from effectively controlling in any material
respect the business or operations of the Company or any of the Company
Subsidiaries.
14.8. EMPLOYMENT AGREEMENTS. The Company shall (A) have entered
into (i) employment agreements with each of Messrs. I. J. Choi (three year
term), Kiwhan Lee (two year term), Alex H.S. Yoo (two-year term), Koh-Hoon
Lee (two year term) and Keith Bong (two year term) in the forms of Exhibits
P, Q, R, S and T hereto, respectively, and (ii) noncompetition agreements
with [key employees not covered by clause (i) to be specified] in the form of
Exhibit U hereto and (B) have offered written "stay pay" plans to each of the
individuals listed in Schedule 14.8 in the form of Exhibit V hereto.
14.9. RESIGNATIONS. Buyer shall have received resignations,
effective as of the Closing, from each officer and director of the Company
and each Company Subsidiary.
14.10. ENVIRONMENTAL AND SAFETY AUDITS. The results of the
engineering, environmental and safety audits conducted by IPG and Buyer shall
not have disclosed any past or present condition, process or practice with
respect to the Company or any property owned by the Company which is not in
full compliance with all applicable environmental laws or laws related to
health and safety or which otherwise requires repair or remediation.
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14.11. PHYSICAL PROPERTIES. There shall have occurred no
material damage to or destruction or loss (not covered by insurance) of any
of the Company's or any Company Subsidiary's facilities, machinery, equipment
or other assets.
14.12. DUE DILIGENCE INVESTIGATION. IPG and Buyer shall have
completed its due diligence investigation of the Company, the Company
Subsidiaries and the business, the results of which shall be reasonably
acceptable to Buyer in its sole discretion.
14.13. OCTOBER FINANCIAL STATEMENTS. IPG and Buyer shall have
received and been satisfied with, in their sole discretion, the October
Financial Statements and the accompanying opinion of Coopers & Lybrand.
14.14. TRANSFER PRICING. IPG and Buyer shall have received and
been satisfied with, in their sole discretion, the report of Coopers &
Lybrand concerning, and the implication of, the transfer pricing practices of
the Company and its subsidiaries, STC Tape and STC America, Inc. (as
contemplated by Section 10.5 of this Agreement).
14.15. TITLE INSURANCE. Buyer shall have obtained, at IPG's or
Buyer's expense, a policy or policies of title insurance in form satisfactory
to it and its special counsel, insuring in amounts deemed satisfactory by
Buyer, fee simple interests in each of the Real Properties.
14.16. FINANCING. IPG and/or Buyer shall have received financing
and consents from Buyer's lenders, on terms and conditions satisfactory to
Buyer in its sole discretion, to enable Buyer to consummate the transactions
contemplated hereby.
14.17. RESTRUCTURING. The Company Restructuring shall have been
consummated.
14.18. ENVIRONMENTAL COMPLIANCE. IPG and Buyer shall be
satisfied, in their sole discretion, after discussion with appropriate
authorities, if desired, that, as a result of the environmental compliance
actions taken by the Company as contemplated by Section 10.16 hereof, that no
material penalties will be issued to the Company for related past
non-compliance by the Company.
14.19. CONTRACTS IN RESPECT OF ENVIRONMENTAL REMEDIATION. IPG
and Buyer shall be satisfied, in their sole discretion, as to the amount of
funds needed to be expended in connection with the regenerative thermal
oxidizer.
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ARTICLE XV
CONDITIONS TO OBLIGATIONS OF EACH
PARTY TO EFFECT THE STOCK PURCHASE
The respective obligations of each party hereto to effect the sale
and purchase of the Stock contemplated by this Agreement shall be subject to
the satisfaction at or prior to the Closing Date of the following conditions,
any or all of which may be waived in writing by Buyer and IPG, on the one
hand, or Seller, on the other hand, in whole or in part, to the extent
permitted by applicable law.
15.1. NO INJUNCTION. No Governmental Entity of competent
jurisdiction shall have enacted, issued, promulgated or enforced any Law or
preliminary or permanent injunction which is in effect and which prohibits,
enjoins or otherwise restrains the consummation of the transactions
contemplated hereby; PROVIDED, that the parties shall use commercially
reasonable efforts to cause any such Law or preliminary or permanent
injunction or order to be vacated or lifted.
15.2. HSR ACT WAITING PERIOD. Any applicable waiting period
under the HSR Act relating to the transactions contemplated hereby shall have
expired or terminated and no action shall have been instituted by the
Department of Justice or the Federal Trade Commission challenging or seeking
to enjoin the consummation of the transactions contemplated hereby, other
than an action which shall have been withdrawn or terminated.
ARTICLE XVI
TERMINATION
16.1. TERMINATION BY BUYER AND IPG. Buyer and IPG may, without
liability to Seller, terminate this Agreement by notice to Seller (i) at any
time prior to the Closing if default shall be made by Seller in the
observance or in the due and timely performance of any of the terms hereof to
be performed by Seller and Seller does not cure the default within five
business days after Buyer and IPG deliver written notice thereof, (ii) at the
Closing if any of the conditions precedent to the performance of Buyer's and
IPG's obligations at the Closing shall not have been fulfilled, or (iii) if
at any time prior to Closing, Buyer and IPG, in their reasonable opinion,
determines that compliance with any request for additional information made
by the Federal Trade Commission or the Department of Justice pursuant to the
HSR Act would be unduly burdensome or expensive.
16.2. TERMINATION BY SELLER. Seller may, without liability to
either Buyer or IPG, terminate this Agreement by notice to IPG (i) at any
time prior to the Closing if default shall be made by either Buyer or IPG in
the observance or in the due and timely performance of any of the terms
hereof to be performed by it and Buyer and IPG do not cure the default within
five business days after Seller delivers written notice thereof to IPG, or
(ii) at the Closing if any of the conditions precedent to the performance of
Seller's obligations at the Closing shall not have been fulfilled.
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16.3. TERMINATION BY MUTUAL CONSENT. The parties may terminate
this Agreement by mutual written consent.
16.4. TERMINATION BY IPG OR SELLER. Either IPG or Seller may
terminate this Agreement, without liability to the other parties hereto, if
(i) the sale and purchase of the Stock contemplated by this Agreement shall
not have been consummated by 5:00 p.m. Eastern time on November 30, 1997,
(ii) any Governmental Entity of competent jurisdiction shall have issued any
judgment, injunction, order or decree prohibiting, enjoining or otherwise
restraining the transactions contemplated by this Agreement and such
judgment, injunction, order or decree shall have become final and
nonappealable (PROVIDED, that the party seeking to terminate this Agreement
pursuant to this Section 16.4 shall have used commercially reasonable efforts
to remove such judgment, injunction, order or decree) or (iii) any Law
promulgated or enacted by any Governmental Entity after the date of this
Agreement which prohibits the consummation of the transactions contemplated
hereby shall be in effect.
16.5. EFFECT OF TERMINATION. If this Agreement is terminated,
this Agreement shall no longer be of any force or effect and there shall be
no liability on the part of any party or its respective directors, officers
or shareholders, except in any such case (i) in accordance with the expense
provisions of Section 20.3, the public announcement provisions of Section
20.4, the no brokers or finders provisions of Sections 6.5 and 9.5, the
provisions of this Section 16.5 and the confidentiality provisions of
Sections 10.3 and 11.1, which shall survive any such termination and (ii) to
the extent such termination results from the willful breach by such party of
any of its representations, warranties, covenants or agreements contained in
this Agreement. If this Agreement shall be terminated, each party will (i)
redeliver all documents, work papers and other materials of any other party
relating to the transactions contemplated hereby, whether so obtained before
or after the execution of this Agreement, to the party furnishing the same,
and (ii) destroy all documents, work papers and other materials developed by
its accountants, agents and employees in connection with the transactions
contemplated hereby which embody confidential information, proprietary
information or trade secrets furnished by any party hereto or deliver such
documents, work papers and other materials to the party furnishing the same
or excise such information or secrets therefrom and all information received
by any party hereto with respect to the business of any other party or any of
its subsidiaries (other than information which is a matter of public
knowledge or which has heretofore been or is hereafter published in any
publication for public distribution or filed as public information with any
Governmental Entity) shall not at any time be used for personal advantage or
disclosed by such party to any third Person to the detriment of the party
furnishing such information or any of its subsidiaries.
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ARTICLE XVII
SURVIVAL OF REPRESENTATIONS,
WARRANTIES, COVENANTS AND AGREEMENTS
(a) Notwithstanding any right of any party (whether or not
exercised) to invesitgate the accuracy of the representations and warranties
of the other party contained in this Agreement, Seller on the one hand, and
Buyer and IPG, on the other hand, have the right to rely fully upon the
representations, warranties, covenants and agreements of the other contained
in this Agreement as, and for the periods, set forth below.
(b) The representations and warranties contained in Sections
6.4, 7.4, 7.5(a), 8.5, 8.6(a), 8.8(a), 8.9, 8.10(a), 8.10(b), 8.10(f),
8.10(h), 8.10(i), 8.12(a)(viii), 8.14(a), 8.21, 8.24(b), 8.24(c), 8.25, 8.26,
8.27, 8.29, 8.30, 8.31, 8.32 and 9.4 do not survive the Closing.
(c) The representations and warranties contained in Sections
8.12(a)(i) and 8.12(a)(xi) do not survive the Closing except to the extent of
the nondisclosure in this Agreement of a Contract which involves an annual
aggregate payment of $100,000 or more.
(d) The representations and warranties contained in Section
8.12(a)(iv) do not survive the Closing except to the extent of the
nondisclosure in this Agreement of a Contract which involves an annual
aggregate payment of $50,000 or more.
(e) The representations, warranties, covenants and agreements
contained in Sections 7.6(i), 7.6(iv), 7.6(v)(x), 7.6(xiii), 7.6(xv),
7.6(xvi), 7.6(xvii), 8.7(i), 8.7(iv), 8.7(v)(x), 8.7(xiii), 8.7(xv),
8.7(xvi), 8.7(xvii), 8.10(g) and 8.10(j) survive the Closing until March 31,
1998, but only as to breaches thereof which have not been disclosed prior to
the Closing.
(f) The representations and warranties contained in Sections
8.8(b), 8.12(a)(ii), 8.12(a)(iii), 8.16 and 8.18 survive the Closing until
March 31, 1998, but only to the extent that a breach of such representations
and warranties results in a Material Adverse Effect on the Company and the
Company Subsidiaries taken as a whole.
(g) The representations, warranties, covenants and agreements
contained in Sections 8.12(a)(v), 8.12(a)(vii), 8.12(a)(ix), 8.12(a)(x) and
8.12(b) survive the Closing until March 31, 1998, but only to the extent that
the Contracts or other matters required to be disclosed thereby and not
disclosed have, or could reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect on the Company and the Company
Subsidiaries taken as a whole.
(h) The representations, warranties, covenants and agreements
contained in Sections 6.1, 6.2, 6.3, 6.5, 7.1, 7.2, 7.3, 7.5(b), 7.6(ii),
7.6(iii), 7.6(v)(y), 7.6(vi), 7.6(vii), 7.6(viii), 7.6(ix), 7.6(x), 7.6(xi),
7.6(xii), 7.6(xiv), 7.6(xviii), 7.6(xix), 7.6(xx), 8.1, 8.2, 8.3, 8.4,
8.6(b), 8.7(ii), 8.7(iii), 8.7(v)(y), 8.7(vi), 8.7(vii), 8.7(viii), 8.7(ix),
8.7(x), 8.7(xi), 8.7(xii), 8.7(xiv), 8.7(xviii),
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8.7(xix), 8.7(xx), 8.13, 8.14(b), 8.15, 8.19, 8.22, 8.24(a), 9.1, 9.2, 9.3,
9.5 and 9.6 survive the Closing until March 31, 1998.
(i) The representations and warranties contained in Sections
7.7, 8.11 and 8.33 survive the Closing until the fourth anniversary of the
Closing Date.
(j) The representations and warranties contained in Section
8.12(a)(vi) survive the Closing until March 31, 1998 to the extent not
reflected in the calculation of Company Indebtedness at the Closing.
(k) The representations and warranties contained in Section
8.17 survive the Closing until three and one half years following the Closing
Date.
(l) The representations and warranties contained in Section
8.20 survive the Closing until March 31, 1998 as they relate to penalties
(without regard to whether such penalties, individually or in the aggregate,
have a Material Adverse Effect on the Company and the Company Subsidiaries
taken as a whole), and as to all other matters only to the extent that a
breach of such representations and warranties results in a Material Adverse
Effect on the Company and the Company Subsidiaries taken as a whole.
(m) The representations and warranties contained in Sections
8.10(c), 8.10(d), 8.10(e) and 8.23 survive the Closing until March 31, 1998,
but only to the extent that such representations and warranties were breached
after October 25, 1997.
ARTICLE XVIII
INDEMNIFICATION
18.1. SELLER'S OBLIGATION TO INDEMNIFY.
(a) Subject to the limitations set forth in Section 18.1(b),
Seller shall indemnify IPG, Buyer, and each of their respective officers,
directors, employees, agents and Affiliates (each, an "Indemnified Party") in
respect of, and hold each of them harmless from and against the following,
without duplication:
(i) any and all Losses suffered, incurred or sustained
by any of them or to which any of them becomes subject, resulting from,
arising out of or relating to liabilities for taxes (including all
penalties relating thereto) owing by the Company, STC Tape or any of
their respective subsidiaries (A) incurred in connection with the
Restructuring, or (B) imposed in connection with STC Tape's and the
Company's transfer pricing policies; provided however, that Seller shall
be notified of and have the right to defend (at Seller's expense), with
Buyer, any audit or assessment and appeal thereof;
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(ii) 50% of the first $2,400,000 in Losses (i.e., a
maximum liability of $1,200,000), and 75% of any and all Losses in
excess of $2,400,000, suffered, incurred or sustained by any of them or
to which any of them becomes subject, resulting from, arising out of or
relating to noncompliance with any Environmental Law at Seller's
currently or formerly utilized Sites and off-Site locations to which
Hazardous Materials were shipped for treatment, storage, handling or
disposal arising, in whole or in part, from pre-Closing conditions or
actions, except and excluding any and all expenses and actions required
to be taken in connection with the July 7, 1997 Stipulation For Entry of
Final Order by Consent with the Michigan Department of Environmental
Quality, including without limitation installation of the regenerative
thermal oxidizer (all losses under this clause (ii), "Indemnified
Environmental Losses");
(iii) any and all Losses suffered, incurred or sustained
by any of them or to which any of them becomes subject, resulting from,
arising out of or relating to liabilities for Taxes (including all
penalties relating thereto) which also constitute a breach of the
representations and warranties contained in the last two sentences of
Sections 7.7(a) and 8.11(a);
(iv) any and all Losses suffered, incurred or sustained
by any of them or to which any of them becomes subject, resulting from,
arising out of or relating to penalties (which term is specifically
intended to exclude all non-penalty Losses) arising from any failure of
Seller, STC Tape, the Company or any Company Subsidiary to comply with
any legal or regulatory requirements relating to Benefit Plans,
Environmental matters and OSHA matters applicable to Seller, STC Tape,
the Company or any Company Subsidiary prior to Closing (all penalties
under this clause (iv), "Indemnified Penalties"); and
(v) any and all Losses suffered, incurred or sustained
by any of them or to which any of them becomes subject, not covered by
any of the preceding four clauses, and resulting from, arising out of or
relating to any misrepresentation, breach of warranty or nonfulfillment
of or failure to perform any covenant or agreement on the part of Seller
(or STC International) contained in this Agreement;
PROVIDED, HOWEVER, that the maximum aggregate amount payable by Seller as a
result of all claims asserted under clause (i) above shall have no dollar
limit; the maximum aggregate amount payable by Seller as a result of all
claims asserted under clause (ii) above shall be limited to the Environmental
Cap (as such term is defined below); the maximum aggregate amount payable by
Seller as a result of all claims asserted under clause (iii) above shall be
$750,000; the maximum aggregate amount payable by Seller as a result of all
claims asserted under clause (iv) above shall be $1,000,000; provided that
such limitation shall be reduced to $750,000 once Seller provides evidence to
IPG and Buyer's satisfaction that the Company has reported the water main
break in Michigan to Michigan regulatory authorities by mailing the letter on
such issue previously reviewed and approved by Buyer's counsel to the
addresses thereof; and the maximum aggregate amount payable by Seller as a
result of all claims asserted under clause (v) above shall be $1,000,000.
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The Environmental Cap shall initially be $1,200,000, but shall be
increased prior to Closing if, and to the extent, appropriate to cover
Indemnified Environmental Losses as identified in the McLaren-Hart Phase II
Report. The Environmental Cap shall be adjusted upward only by mutual
agreement of Buyer and Seller prior to Closing, provided the parties shall
negotiate in good faith to agree upon the amount (if any) of such upward
adjustment. The Environmental Cap shall further be adjusted, downward by
one-half of the amount, if any, that the Company shall recover (after the
date hereof and whether before or after the Closing) from the escrow under
the Contingent Payment Agreement.
(b) Any claims under (a)(i) and (iii) above for Losses shall
be made by written notice by the Indemnified Party to Seller (a "Claim
Notice"), delivered in accordance with Section 20.1 hereunder prior to the
fourth anniversary of the Closing. Any claims under (a)(ii) above shall be
made by delivery by IPG or Buyer of a Claim Notice to Seller (in accordance
with Section 20.1 hereof) prior to the date which is three and one-half years
following the Closing Date. Any claims under (a)(iv) and (v) shall be made
by delivery by IPG and Buyer of a Claim Notice to Seller (in accordance with
Section 20.1 hereof) prior to the first anniversary of the Closing Date. Any
claims under (a)(ii) above for Indemnified Environmental Losses shall be
resolved pursuant to Section 18.4(b). In each such instance the Claim Notice
shall contain a description and a statement of the amount of the Loss in
respect of which the claim is asserted.
(c) In determining claims for indemnification by any
Indemnified Party pursuant to any of clauses (i), (iii), (iv) and (v) of
paragraph (a) above, no claim shall be payable (x) unless with respect to any
individual claim, such claim involves a Loss (excluding legal fees) in excess
of $25,000; and (y) until, and then only to the extent that, the Indemnified
Party has suffered, incurred, sustained or become subject to Losses pursuant
to clauses (i), (iii), (iv) or (v) of paragraph (a) above taken together, in
excess of $200,000 in the aggregate.
18.2. BUYER'S OBLIGATIONS TO INDEMNIFY. Buyer shall indemnify
Seller, its officers and directors in respect of, and hold each of them
harmless from and against, any and all Losses suffered, incurred or sustained
by any of them or to which any of them becomes subject, resulting from,
arising out of or relating to the breach of any representation or warranty of
IPG or Buyer contained in this Agreement or the nonfulfillment of or failure
to perform any of the covenants or agreements on the part of IPG or Buyer
contained in this Agreement, provided, however, in no event shall IPG's or
Buyer's aggregate liability under this Section 18.2 exceed $1,000,000.
18.2A (a) MITIGATION. Notwithstanding anything to the
contrary contained in this Agreement, the amounts of indemnity otherwise
payable as a result of any claim under Section 18.1 with respect to any Loss
shall be offset, and reduced, to the extent of any amount of any recoveries
made by an Indemnified Party under any policy of insurance and to the extent
of any specific reserves on the October Financial Statements to which the
Loss relates. To the extent the Indemnified Party has an opportunity to
recover from a third party and elects to do so, any recoveries realized from
such action, less the cost (including legal fees) of obtaining such
recoveries, also shall be an offset to the amount of indemnity otherwise
payable hereunder, it being understood and agreed, however, that the
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Indemnified Party shall not be obligated by the provisions of this Section or
otherwise to institute any action against a third party. To the extent that
IPG, Buyer, the Company or STC Tape has a right to proceed against third
parties to recover any amounts which a Buyer Indemnified Party claims as an
indemnified Loss against Seller or STC International and does not so proceed
against such third party, Seller shall be subrogated to the rights of Buyer,
the Company and STC Tape and may proceed, at its own expense, against such
third party or parties.
(b) CONSEQUENTIAL DAMAGES. No amounts of indemnity otherwise
payable hereunder shall be so paid to the extent such amounts constitute
consequential damages.
(c) NO OTHER CLAIMS. Except to the extent provided for in
Section 18.1, the rights of IPG and Buyer to injunctive relief under Section
10.3 shall be the exclusive remedy of IPG and Buyer with respect to the
nonperformance by Seller of any covenant or agreement contained in this
Agreement. The rights of IPG and Buyer under Section 18.1(a) shall be the
exclusive remedy of IPG and Buyer and each other Buyer Indemnified Party with
respect to the monetary remedies provided for IPG or Buyer against Seller or
STC International contained in this Agreement. IPG and Buyer, on behalf of
themselves and each other Buyer Indemnified Party, hereby waive and release
Seller and each Seller Indemnified Party from any statutory or other rights
of contribution or indemnity (except as set forth in Section 18.1) relating
to the transactions contemplated by this Agreement.
Except to the extent provided for in Section 18.2, the exclusive
remedy of Seller with respect to the nonperformance by IPG or Buyer of any
covenant or agreement contained in this Agreement shall be injunctive relief.
The rights of Seller under Section 18.2 shall be the exclusive remedy of
Seller or STC International and each other Seller Indemnified Party with
respect to the monetary remedies provided for Seller against IPG or Buyer
contained in this Agreement (excluding, however, the Registration Rights
Agreement). Seller, on behalf of itself and each other Seller Indemnified
Party (excluding, however, those employees referenced in Section 10.2, to the
extent of such employees' rights thereunder) hereby waives and releases IPG,
Buyer and each other Buyer Indemnified Party from any statutory or other
rights of contribution or indemnity (except as set forth in Section 18.2)
relating to the transactions contemplated by this Agreement.
18.3. METHOD OF ASSERTING CLAIMS.
(a) In the event any claim or demand in respect of which any
Indemnified Party might seek indemnity under Section 18.1 or Section 18.2 is
asserted against or sought to be collected from such Indemnified Party by a
Person other than Buyer, IPG or any Affiliate of Seller, Buyer or IPG (a
"Third Party Claim"), the Indemnified Party shall deliver a Claim Notice with
reasonable promptness to the Indemnifying Party. If the Indemnified Party
fails to provide the Claim Notice with reasonable promptness after the
Indemnified Party receives notice of such Third Party Claim, the Indemnifying
Party will not be obligated to indemnify the Indemnified Party with respect
to such Third Party Claim to the extent that the Indemnifying Party's ability
to defend has been materially prejudiced by such failure of the Indemnified
Party. The Indemnifying Party will notify the Indemnified Party as soon as
practicable within the Dispute Period whether the Indemnifying Party
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disputes its liability to the Indemnified Party hereunder and whether the
Indemnifying Party desires, at its sole cost and expense, to defend the
Indemnified Party against such Third Party Claim.
(i) If the Indemnifying Party notifies the Indemnified
Party within the Dispute Period that the Indemnifying Party desires to
defend the Indemnified Party with respect to the Third Party Claim
pursuant to this Section 18.3, then the Indemnifying Party will have the
right to defend, with counsel reasonably satisfactory to the Indemnified
Party, at the sole cost and expense of the Indemnifying Party, such
Third Party Claim by all appropriate proceedings, which proceedings will
be vigorously and diligently prosecuted by the Indemnifying Party to a
final conclusion or will be settled at the discretion of the
Indemnifying Party (but only with the consent of the Indemnified Party
in the case of any settlement that provides for any relief other than
the payment of monetary damages or that provides for the payment of
monetary damages as to which the Indemnified Party will not be
indemnified in full pursuant to Section 18.1 or Section 18.2). The
Indemnifying Party will have full control of such defense and
proceedings, including any compromise or settlement thereof; PROVIDED,
HOWEVER, that the Indemnified Party may, at the sole cost and expense of
the Indemnified Party, at any time prior to the Indemnifying Party's
delivery of the notice referred to in the first sentence of this Section
18.3(a)(i) file any motion, answer or other pleadings or take any other
action that the Indemnified Party reasonably believes to be necessary or
appropriate to protect its interests; and PROVIDED FURTHER, that if
requested by the Indemnifying Party, the Indemnified Party will, at the
sole cost and expense of the Indemnifying Party, provide reasonable
cooperation to the Indemnifying Party in contesting any Third Party
Claim that the Indemnifying Party elects to contest. The Indemnified
Party may participate in, but not control, any defense or settlement of
any Third Party Claim controlled by the Indemnifying Party pursuant to
this Section 18.3, and except as provided in the preceding sentence, the
Indemnified Party will bear its own costs and expenses with respect to
such participation. Notwithstanding the foregoing, the Indemnified
Party may take over the control of the defense or settlement of a Third
Party Claim at any time if it irrevocably waives its right to indemnity
under Section 18.3 with respect to such Third Party Claim.
(ii) If the Indemnifying Party fails to notify the
Indemnified Party within the Dispute Period that the Indemnifying Party
desires to defend the Third Party Claim pursuant to this Section 18.3,
or if the Indemnifying Party gives such notice but fails to prosecute
vigorously and diligently or settle the Third Party Claim, or if the
Indemnifying Party fails to give any notice whatsoever within the
Dispute Period, then the Indemnified Party will have the right to
defend, at the sole cost and expense of the Indemnifying Party, the
Third Party Claim by all appropriate proceedings, which proceedings will
be prosecuted by the Indemnified Party in good faith or will be settled
at the discretion of the Indemnified Party (with the consent of the
Indemnifying Party, which consent will not be unreasonably withheld).
The Indemnified Party will have full control of such defense and
proceedings, including any compromise or settlement thereof; PROVIDED,
HOWEVER, that if requested by the Indemnified Party, the Indemnifying
Party will, at the sole cost and expense of the
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Indemnifying Party, provide reasonable cooperation to the Indemnified
Party and its counsel in contesting any Third Party Claim which the
Indemnified Party is contesting. Notwithstanding the foregoing
provisions of this Section 18.3, if the Indemnifying Party has notified
the Indemnified Party within the Dispute Period that the Indemnifying
Party disputes its liability hereunder to the Indemnified Party with
respect to such Third Party Claim and if such dispute is resolved in
favor of the Indemnifying Party in the manner provided in clause (iii)
below, the Indemnifying Party will not be required to bear the costs and
expenses of the Indemnified Party's defense pursuant to this Section
18.3 or of the Indemnifying Party's participation therein at the
Indemnified Party's request, and the Indemnified Party will reimburse
the Indemnifying Party in full for all reasonable costs and expenses
incurred by the Indemnifying Party in connection with such litigation.
The Indemnifying Party may participate in, but not control, any defense
or settlement controlled by the Indemnified Party pursuant to this
Section 18.3, and the Indemnifying Party will bear its own costs and
expenses with respect to such participation.
(iii) If the Indemnifying Party notifies the Indemnified
Party that it does not dispute its liability to the Indemnified Party
with respect to a Third Party Claim or fails to notify the Indemnified
Party within the Dispute Period whether the Indemnifying Party disputes
its liability to the Indemnified Party with respect to such Third Party
Claim, the Loss in the amount specified in the Claim Notice will be
conclusively deemed a liability of the Indemnifying Party, and the
Indemnifying Party shall pay the amount of such Loss to the Indemnified
Party on demand. If the Indemnifying Party has timely disputed its
liability with respect to such claim, the Indemnifying Party and the
Indemnified Party will proceed in good faith to negotiate a resolution
of such dispute, and if not resolved through negotiations within the
Resolution Period, such dispute shall be resolved by arbitration as
provided for in Section 18.4.
(b) In the event any Indemnified Party should have a claim not
involving a Third Party Claim, the Indemnified Party shall deliver an
Indemnity Notice with reasonable promptness to the Indemnifying Party. The
failure by any Indemnified Party to give the Indemnity Notice shall not
impair such party's rights hereunder except to the extent that an
Indemnifying Party demonstrates that it has been irreparably prejudiced
thereby. If the Indemnifying Party notifies the Indemnified Party that it
does not dispute the claim described in such Indemnity Notice or fails to
notify the Indemnified Party within the Dispute Period whether the
Indemnifying Party disputes the claim described in such Indemnity Notice, the
Loss in the amount specified in the Indemnity Notice will be conclusively
deemed a liability of the Indemnifying Party hereunder and the Indemnifying
Party shall pay the amount of such Loss to the Indemnified Party on demand.
If the Indemnifying Party has timely disputed its liability with respect to
such claim, the Indemnifying Party and the Indemnified Party will proceed in
good faith to negotiate a resolution of such dispute, and if not resolved
through negotiations within the Resolution Period, such dispute shall be
resolved by litigation in a court of competent jurisdiction.
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(c) LETTER OF CREDIT. At any time and from time to time that
IPG or Buyer shall assert a claim for indemnification hereunder and there
remain amounts available under the letter of credit relating to such claim:
(i) the remaining face amount of such letter of credit shall not thereafter
be reduced below an amount equal to the aggregate amount of the pending
unresolved claims to which such letter of credit relates, and (ii) upon final
resolution, pursuant to Section 18.4(a) or (b), as applicable, of any such
claim in favor of Buyer, Buyer may draw against the letter of credit in an
amount equal to the amount of the claim by delivering a drawing certificate
executed by each of IPG and Buyer, on the one hand, and by Seller, on the
other hand, to the Letter of Credit Bank.
(d) ADJUSTMENT OF PURCHASE PRICE. Any reimbursement by Seller
in connection with a claim made by Buyer or IPG pursuant to this Agreement
will be deemed a reduction in the Purchase Price and shall occur by IPG or
Buyer obtaining such reimbursement in accordance with the provisions of this
Agreement.
18.4. DISPUTES.
(a) RESOLUTION OF DISPUTES BETWEEN THE PARTIES.
Any controversy or claim arising out of or relating to this
Agreement shall be determined by arbitration in accordance with the
International Arbitration Rules of the American Arbitration Association, and
(i) the number of arbitrators shall be three;
(ii) the place of arbitration shall be Honolulu, Hawaii;
and
(iii) the language of the arbitration shall be English.
(b) ENVIRONMENTAL CLAIMS. Notwithstanding anything to the
contrary elsewhere in this Agreement, Buyer shall determine the manner of
resolution of, and shall otherwise control the management and implementation
of any part of the defense, response, proceedings or settlement relating to
any Losses for which Seller has an indemnity obligation under Section
18.1(a)(ii), which involves or relates to the investigation, study, sampling,
testing, abatement, monitoring, cleanup, removal, remediation, or other
response action relating to noncompliance with Environmental Law at any Site
or off-Site ("Environmental Response Action"); provided, however, that such
defense, response, proceeding or settlement in accordance with the following
procedures:
(i) Buyer shall provide written notice to Seller (each
such notice an "Environmental Response Action Notice") setting forth
with reasonable particularity the nature of the condition or event
giving rise to the related Environmental Response Action Notice, the
nature of the activities undertaken or to be undertaken by Buyer with
respect thereto (to the extent then determinable), and the estimated
cost associated with such activities (to the extent then estimable). In
circumstances where Buyer must take immediate
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Environmental Response Action to address an imminent threat to human
health or the Environment, or to satisfy requirements under any
Environmental Law or requirements established by a Governmental Entity,
Buyer shall provide in advance, if practicable, an Environmental
Response Action Notice to Seller that describes the time period within
which such immediate action must be taken by Buyer and the necessity and
basis for taking such immediate action ("Immediate Environmental
Response Action Notice"). If Seller does not or is unable to respond
within the time period described in such Immediate Environmental
Response Action Notice, Buyer, in its best judgment, may take
appropriate Environmental Response Action ("Immediate Environmental
Response Action"), provided, however, that Seller, by not responding
within such time period, does not waive its right to the proceeding in
(ii)-(vi) below.
(ii) Seller shall within ninety (90) days after receipt
of an Environmental Response Action Notice, notify Buyer in writing that
Seller, in whole or in part, approves or objects to the Environmental
Response Action set forth in the Environmental Response Action Notice.
Seller agrees that its approval of the activities undertaken or to be
undertaken pursuant to the Environmental Response Action Notices will
not be unreasonably withheld.
(iii) If Seller notifies Buyer that it approves of all
or part of the Environmental Response Action set forth in the related
Environmental Response Action Notice, the Losses (or the part thereof so
approved by Seller) associated with the Environmental Response Action
shall be conclusively deemed Losses for which Seller has an indemnity
obligation and Seller shall pay the amount of such Losses to Buyer on
demand and in accordance with the provisions of Section 18.3 of this
Agreement.
(iv) In the event Seller objects to all or any part of
an Environmental Response Action Notice or an Immediate Environmental
Response Action Notice on a timely basis, in accordance with Section
18.3(b)(ii), Seller shall notify Buyer in writing of their specific
disagreement (and the basis therefor) regarding such Environmental
Response Action or Immediate Environmental Response Action. If Seller's
objection relates to the nature of Buyer's proposed activities or
response to the relevant condition or event, Seller shall provide an
alternative proposal describing in reasonable detail the proposed
activities or response, including estimated costs associated therewith
("Dispute Notification"), within ninety (90) days of its receipt of the
related Environmental Response Action Notice or Immediate Environmental
Response Action Notice. Buyer and Seller shall thereafter negotiate in
good faith in an attempt to reach agreement as to the disputed
Environmental Response Action Notice or Immediate Environmental Response
Action Notice.
(v) In the event that Buyer and Seller are unable to
resolve the dispute within 30 days after commencing negotiations
pursuant to (iv) above, Buyer and Seller shall immediately refer the
dispute for compromise or resolution to an independent environmental
consulting firm that is (A) mutually acceptable to the Buyer and Seller;
(B) does business in the region where the Site at issue is located, (C)
is qualified in environmental matters relating
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to the operations conducted at the Site, but (D) who will not be engaged
or has not been engaged to perform such Environmental Response Action or
Immediate Environmental Response Action (the "Dispute Resolution
Consultant"), it being understood that the decision of such Dispute
Resolution Consultant shall be binding on both Buyer and Seller. In the
event that Buyer and Seller are unable to agree upon a Dispute
Resolution Consultant by the 25th day of such 30-day period, the Dispute
Resolution Consultant shall be chosen by the thirtieth (30th) day by the
American Arbitration Association ("AAA") pursuant to the criteria in
Section 18.4(b)(v)(B)-(D).
(vi) The Dispute Resolution Consultant shall render its
decision no later than 90 days after being selected by Buyer and Seller
or by the AAA, provided that the decision date may be extended by mutual
agreement of Buyer and Seller. The party against whom the Dispute
Resolution Consultant finds shall pay the fees and expenses of the
Dispute Resolution Consultant, except if there is no clear losing
position, Buyer and Seller shall each pay one-half of such costs.
ARTICLE XIX
[INTENTIONALLY OMITTED]
ARTICLE XX
MISCELLANEOUS
20.1. NOTICES. All notices, requests and other communications
hereunder must be in writing and will be deemed to have been duly given only
if delivered Personally or by facsimile transmission or mailed (first class
postage prepaid) to the parties at the following addresses or facsimile
numbers:
If to Buyer and/or IPG to:
Intertape Polymer Group Inc.
110E Montee de Liesse
St.-Laurent, Quebec H4T IN4
Canada
Attn.: Mr. Andrew M. Archibald
Facsimile No.: (514) 731-5477
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with a copy to:
Morgan, Lewis & Bockius LLP
101 Park Avenue
New York, NY 10178-0060
Attn.: Nancy H. Corbett, Esq.
Facsimile No.: (212) 309-6273
If to Seller to:
STC Corp.
STC Building
32 Munrae-dong 3-ga
Yongdungpo-gu, Seoul
South Korea
Attn: Mr. Injin Choi
Facsimile No.: 011-82-2-675-1595
with a copy to:
Mr. I.J. Choi
420 Pinehill Road
Leonia, NJ 07605
and a copy to:
Ronald H. Janis, Esq.
Pitney, Hardin, Kipp & Szuch
P.O. Box 1945
Morristown, NJ 07962-1945
Facsimile No.: (973) 966-1550
All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this Section 20.1, be deemed given
upon delivery, (ii) if delivered by facsimile transmission to the facsimile
number as provided in this Section 20.1, be deemed given upon confirmed
receipt, and (iii) if delivered by mail in the manner described above to the
address as provided in this Section 20.1, be deemed given upon receipt (in
each case regardless of whether such notice, request or other communication
is received by any other Person to whom a copy of such notice is to be
delivered pursuant to this Section 20.1). Any party from time to time may
change its address, facsimile number or other information for the purpose of
notices to that party by giving notice specifying such change to the other
party hereto.
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20.2. ENTIRE AGREEMENT. This Agreement supersedes all prior
discussions and agreements between the parties with respect to the subject
matter hereof, and contains the sole and entire agreement between the parties
hereto with respect to the subject matter hereof.
20.3. EXPENSES.
(a) Except as otherwise expressly provided below, Buyer and
IPG on the one hand, and Seller, the Company and STC Tape and affiliates
thereof on the other hand, shall bear and pay their own costs and expenses
incurred in connection with the negotiation, execution, and closing of this
Agreement and the transactions contemplated hereby.
(b) To the extent that STC Tape or the Company incurs prior to
Closing and pays after Closing costs or expenses in connection with this
transaction for attorneys, investment advisors, accountants (other than
Coopers & Lybrand for its audit work on the October Financial Statements) or
filing fees, in connection with this transaction collectively greater than
$350,000, Seller will reimburse IPG or Buyer for such expenses. To the extent
that STC Tape and/or the Company incur and pay such expenses in an amount up
to $350,000 prior to the Closing, the expenses paid on or before the Closing
shall be deemed cash and cash equivalents in the calculation of Company
Indebtedness.
(c) With respect to the costs incurred by the Company or STC
Tape for engaging Coopers & Lybrand to perform the audit of the October
Financial Statements, all expenses in excess of $25,000 shall be borne and
paid by Buyer and IPG. The costs of Coopers & Lybrand for such audit work in
excess of $25,000 shall be excluded from the calculation of Net Operating
Income. To the extent that such fees of Coopers & Lybrand are paid on or
prior to the Closing and exceed $25,000, the excess over $25,000 shall be
deemed to be cash or cash equivalents for purposes of the calculation of
Company Indebtedness.
(d) In the event that the transaction does not close for any
reason whatsoever, the costs incurred by the Company and STC Tape for
engaging Coopers & Lybrand to perform the audit of the October Financial
Statements to the extent that such costs exceeds $25,000 will be reimbursed
to the Company by IPG and Buyer and IPG and Buyer agree, on demand, to
reimburse the Company in cash for the documented amount in excess of $25,000,
paid by the Company and STC Tape to Coopers & Lybrand for such audit.
20.4. PUBLIC ANNOUNCEMENTS. The form of press release to be
issued immediately upon execution of this Agreement is attached as Exhibit W.
The text of any other press release in respect of the transactions herein
contemplated shall be agreed upon collectively by Seller, IPG and Buyer.
20.5. WAIVER; REMEDIES CUMULATIVE. Any term or condition of
this Agreement may be waived at any time by the party that is entitled to the
benefit thereof, but no such waiver shall be effective unless set forth in a
written instrument duly executed by or on behalf of the party waiving
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such term or condition. No waiver by any party of any term or condition of
this Agreement, in any one or more instances, shall be deemed to be or
construed as a waiver of the same or any other term or condition of this
Agreement on any future occasion. All remedies, either under this Agreement
or by law or otherwise afforded, will be cumulative and not alternative.
20.6. AMENDMENT. This Agreement may be amended, supplemented or
modified only by a written instrument duly executed by or on behalf of each
party hereto.
20.7. THIRD PARTY BENEFICIARIES. The terms and provisions of
this Agreement are intended solely for the benefit of each party hereto and
their respective successors or permitted assigns, and it is not the intention
of the parties to confer third-party beneficiary rights upon any other Person
other than any Person entitled to indemnification under Section 11.5 or
Article XVIII.
20.8. DEFINITION OF KNOWLEDGE. As used in this Agreement, the
expression "to the knowledge" of Seller means the actual knowledge of one or
more of the Eight Key Employees.
20.9. NO ASSIGNMENT; BINDING EFFECT. Neither this Agreement nor
any right, interest or obligation hereunder may be assigned by any party
hereto without the prior written consent of the other parties hereto and any
attempt to do so will be void, except (i) for assignments and transfers by
operation of law and (ii) that Buyer may assign any or all of its rights,
interests and obligations hereunder (including, without limitation, its
rights under Article II) to a wholly-owned subsidiary or an Affiliate of
Buyer, PROVIDED that any such subsidiary or Affiliate agrees in writing to be
bound by all of the terms, conditions and provisions contained herein.
Subject to the preceding sentence, this Agreement is binding upon, inures to
the benefit of and is enforceable by the parties hereto and their respective
successors and assigns.
20.10. HEADINGS. The headings used in this Agreement have been
inserted for convenience of reference only and do not define or limit the
provisions hereof.
20.11. INVALID PROVISIONS. If any provision of this Agreement is
held to be illegal, invalid or unenforceable under any present or future law,
and if the rights or obligations of any party hereto under this Agreement
will not be materially and adversely affected thereby, (i) such provision
will be fully severable, (ii) this Agreement will be construed and enforced
as if such illegal, invalid or unenforceable provision had never comprised a
part hereof, (iii) the remaining provisions of this Agreement will remain in
full force and effect and will not be affected by the illegal, invalid or
unenforceable provision or by its severance herefrom and (iv) in lieu of such
illegal, invalid or unenforceable provision, there will be added
automatically as a part of this Agreement a legal, valid and enforceable
provision as similar in terms to such illegal, invalid or unenforceable
provision as may be possible.
20.12. LAW. The governing law of this Agreement shall be the
substantive law of the State of New York.
68
<PAGE>
20.13. COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which will be deemed an original, but all of
which together will constitute one and the same instrument.
20.14. UPDATING DISCLOSURE SCHEDULES. Each party hereto has
endeavored in good faith to provide disclosure schedules which are complete
and correct as of the date hereof. Each party shall have the right, until
November 14, 1997, to amend or supplement its disclosure schedules in order
to provide corrected or additional information. Such amended or supplemental
disclosure schedules shall be treated for all purposes as though they were
delivered contemporaneously herewith. Thereafter, the parties shall continue
to update the disclosure schedules for new and additional information so that
the representations and warranties are true and correct as of the date of
Closing.
69
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the duly authorized officer of each of IPG, Buyer and Seller as
of the date first above written.
IPG:
INTERTAPE POLYMER GROUP INC.
By: [Illegible]
-----------------------------
Name:
Title:
BUYER:
IPG (US) ACQUISITION CORPORATION
By: [Illegible]
-----------------------------
Name:
Title:
SELLER:
STC CORP.
By: [Illegible]
-----------------------------
Name:
Title:
<PAGE>
EURODOLLAR REVOLVING NOTE
TAX I.D. NO. 59-3479359
$33,000,000 Detroit, Michigan
December 15, 1997
On or before January 31, 1999 FOR VALUE RECEIVED, the undersigned,
IPG HOLDINGS LP, a Delaware limited partnership (herein called "Borrower"),
promises to pay to the order of COMERICA BANK, a Michigan banking corporation
(herein called "Bank"), in lawful currency of the United States of America at
the main office of Bank, THIRTY THREE MILLION DOLLARS ($33,000,000), or so
much of said sum as has been advanced and is then outstanding under this
Note, together with interest thereon as hereinafter set forth.
This Note is a note under which Advances, repayments and re-Advances
may be made from time to time, subject to the terms and conditions of this
Note; provided however, in no event shall Bank be obligated to make any
Advances or re-Advances hereunder (or refunds or conversions of existing
Advances) in the event that and so long as any Event of Default, or any
condition or event which, with the giving of notice or the running of time,
or both, would constitute an Event of Default, shall have occurred and be
continuing hereunder.
Each of the Advances made hereunder shall bear interest at the
Eurodollar-based Rate or the Prime-based Rate, as elected by Borrower, or as
otherwise determined under this Note.
Interest on the unpaid balance of each outstanding Prime-based Advance
shall be payable monthly, commencing on January 1, 1998, and on the first
Business Day of each succeeding month thereafter. Interest accruing at the
Prime-based Rate shall be computed on the basis of a year of 360 days, and
shall be assessed for the actual number of days elapsed, and in such
computation, effect shall be given to any change in the Prime-based Rate as a
result of any change in the Prime-based Rate on the date of each such change.
Interest on each Eurodollar-based Advance shall be payable on the last
day of the Interest Period applicable thereto; provided, however, in the
event that the Interest Period applicable to any such Eurodollar-based
Advance is more than three (3) months, interest on such Eurodollar-based
Advance shall also be payable at intervals of three (3) months from the date
of such Advance. Interest accruing at the Eurodollar-based Rate shall be
computed on the basis of a 360 day year and shall be assessed for the actual
number of days elapsed from the first day of the Interest Period applicable
thereto but not including the last day thereof.
From and after the occurrence of any Event of Default hereunder, or any
condition or event which, with the giving of notice or the running of time,
or both, would constitute an Event of Default, and so long as any such Event
of Default or such condition or event remains unremedied or uncured
thereafter, the indebtedness outstanding under this Note shall bear interest
at a per annum rate of three percent (3%) above the otherwise Applicable
Interest Rate, which interest shall be payable upon demand.
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<PAGE>
The amount and date of each Advance, its Applicable Interest Rate, its
Interest Period, if any, and the amount and date of any repayment shall be
noted on Bank's records, which records shall be conclusive evidence thereof,
absent manifest error; provided, however, any failure by Bank to make any
such notation, or any error in any such notation, shall not relieve Borrower
of its obligations to repay Bank the amount of any Advances, all accrued and
unpaid interest thereon, and all other amounts payable by Borrower to Bank
under or pursuant to this Note.
The Borrower may request an Advance hereunder, including the refunding
or conversion of an outstanding Advance, upon the delivery to Bank of a
Request for Advance executed by an authorized representative of Borrower,
subject to the following:
(a) no Event of Default, and no condition or event which, with the
giving of notice or the running of time, or both, would constitute
an Event of Default, shall have occurred and be continuing under
this Note;
(b) each such Request for Advance shall set forth the information
required on the Request for Advance form annexed hereto as Exhibit
"A";
(c) each such Request for Advance shall be delivered to Bank by 11:00
a.m. (Detroit, Michigan time) three (3) Business Days prior to the
proposed date of Advance in the case of Eurodollar-based Advances,
and by 11:00 a.m. (Detroit, Michigan time) on the proposed date of
Advance in the case of Prime-based Advances;
(d) the principal amount of each Eurodollar-based Advance, plus the
amount of any outstanding indebtedness to be then combined
therewith having the same Applicable Interest Rate and Interest
Period shall be at least Five Hundred Thousand Dollars ($500,000),
and if greater, in integral multiples of One Hundred Thousand
Dollars ($100,000);
(e) the proposed date of any refunding or conversion of any outstanding
Eurodollar-based Advance shall only be on the last day of the
Interest Period applicable thereto;
(f) a Request for Advance, once delivered to Bank, shall not be
revocable by Borrower.
If, as to any outstanding Eurodollar-based Advance, Bank shall not
receive a timely Request for Advance in accordance with the foregoing
requesting the refunding of such Advance as a Eurodollar-based Advance, the
principal amount of such Advance which is not then repaid shall be
automatically converted to a Prime-based Advance on the last day of the
Interest Period applicable thereto, subject in all respects to the terms and
conditions of this Note. The foregoing shall not in any way whatsoever limit
or otherwise affect any of Bank's rights or remedies under this Note upon the
occurrence of any Event of Default hereunder, or any condition or event
which, with the giving of notice or the running of time, or both, would
constitute an Event of Default.
- 2 -
<PAGE>
Borrower may prepay all or part of the outstanding balance of any
Prime-based Advance under this Note at any time. Borrower may prepay all or
part of any Eurodollar-based Advance on the last day of the Interest Period
applicable thereto, provided that the amount of any such partial prepayment
shall be at least One Hundred Thousand Dollars ($100,000), or, if greater, in
integral multiples thereof, the aggregate balance of Eurodollar-based
Advances outstanding after such prepayment shall be at least One Hundred
Thousand Dollars ($100,000), and the unpaid portion of such Eurodollar-based
Advance which is refunded or converted shall be subject to the limitations
set forth in this Note. Any prepayment made in accordance with this paragraph
shall be without premium or penalty. Any other prepayment shall be otherwise
restricted by and subject to the terms of this Note.
Subject to the definition of an "Interest Period" hereunder, in the
event that any payment under this Note becomes due and payable on any day
which is not a Business Day, the due date thereof shall be extended to the
next succeeding Business Day, and, to the extent applicable, interest shall
continue to accrue and be payable thereon during such extension at the rates
set forth in this Note.
All payments to be made by Borrower to Bank under or pursuant to this
Note shall be in immediately available funds, without setoff or counterclaim,
and in the event that any payments submitted hereunder are in funds not
available until collected, said payments shall continue to bear interest
until collected. Borrower hereby authorizes Bank to charge any account of
Borrower with Bank for all sums due hereunder when due in accordance with the
terms hereof.
If Borrower makes any payment of principal with respect to any
Eurodollar-based Advance on any day other than the last day of the Interest
Period applicable thereto (whether voluntarily, by acceleration, or
otherwise), or if Borrower fails to borrow any Eurodollar-based Advance after
notice has been given by Borrower to Bank in accordance with the terms of
this Note requesting such Advance, or if Borrower fails to make any payment
of principal or interest in respect of a Eurodollar-based Advance when due,
Borrower shall reimburse Bank on demand for any resulting loss, cost or
expense incurred by Bank as a result thereof, including, without limitation,
any such loss, cost or expense incurred in obtaining, liquidating, employing
or redeploying deposits from third parties, whether or not Bank shall have
funded or committed to fund such Advance. Such amount payable by Borrower to
Bank may include, without limitation, an amount equal to the excess, if any,
of (a) the amount of interest which would have accrued on the amount so
prepaid, or not so borrowed, refunded or converted, for the period from the
date of such prepayment or of such failure to borrow, refund or convert,
through the last day of the relevant Interest Period, at the applicable rate
of interest for said Advance(s) provided under this Note, over (b) the amount
of interest (as reasonably determined by Bank) which would have accrued to
Bank on such amount by placing such amount on deposit for a comparable period
with leading banks in the interbank eurodollar market. Calculation of any
amounts payable to Bank under this paragraph shall be made as though Bank
shall have actually funded or committed to fund the relevant Eurodollar-based
Advance through the purchase of an underlying deposit in an amount equal to
the amount of such Advance and having a maturity comparable to the relevant
Interest Period; provided, however, that Bank may fund any Eurodollar-based
Advance in any manner it deems fit and the foregoing assumptions shall be
utilized only for the purpose of the calculation of amounts payable under
this paragraph. Upon
- 3 -
<PAGE>
the written request of Borrower, Bank shall deliver to Borrower a certificate
setting forth the basis for determining such losses, costs and expenses,
which certificate shall be conclusively presumed correct, absent manifest
error.
For any Interest Period for which the Applicable Interest Rate is the
Eurodollar-based Rate, if Bank shall designate a Eurodollar Lending Office
which maintains books separate from those of the rest of Bank, Bank shall
have the option of maintaining and carrying the relevant Eurodollar-based
Advance on the books of such Eurodollar Lending Office.
If, with respect to any Interest Period, Bank determines that, (a) by
reason of circumstances affecting the foreign exchange and interbank markets
generally, deposits in Eurodollars in the applicable amounts or for the
relative maturities are not being offered to Bank for such Interest Period,
or (b) if the rate of interest referred to in the definition of
"Eurodollar-based Rate" upon the basis of which the rate of interest for a
Eurodollar-based Advance is to be determined does not accurately or fairly
cover or reflect the cost to Bank of making or maintaining a Eurodollar-
based Advance hereunder, then Bank shall forthwith give notice thereof to the
Borrower. Thereafter, until Bank notifies Borrower that such circumstances no
longer exist, the right of Borrower to request a Eurodollar-based Advance and
to convert an Advance to or refund an Advance as a Eurodollar-based Advance
shall be suspended.
If, after the date hereof, the introduction of, or any change in, any
applicable law, rule or regulation or in the interpretation or administration
thereof by any governmental authority charged with the interpretation or
administration thereof, or compliance by Bank (or its Eurodollar Lending
Office) with any request or directive (whether or not having the force of
law) of any such authority, shall make it unlawful or impossible for the Bank
(or its Eurodollar Lending Office) to make or maintain any Advance with
interest at the Eurodollar-based Rate, Bank shall forthwith give notice
thereof to Borrower. Thereafter, (a) the right of Borrower to request a
Eurodollar-based Advance and to convert an Advance to or refund an Advance as
a Eurodollar-based Advance shall be suspended, and thereafter, Borrower may
select only the Prime-based Rate as the Applicable Interest Rate hereunder,
and (b) if Bank may not lawfully continue to maintain an outstanding Advance
to the end of the then current Interest Period applicable thereto, the Prime-
based Rate shall be the Applicable Interest Rate for the remainder of such
Interest Period with respect to such outstanding Advance.
If the adoption after the date hereof, or any change after the date
hereof in, any applicable law, rule or regulation of any governmental
authority, central bank or comparable agency charged with the interpretation
or administration thereof, or compliance by Bank (or its Eurodollar Lending
Office) with any request or directive (whether or not having the force of
law) made by any such authority, central bank or comparable agency after the
date hereof:
(a) shall subject Bank (or its Eurodollar Lending Office) to any tax,
duty or other charge with respect to this Note or any Advance
hereunder or shall change the basis of taxation of payments to Bank
(or its Eurodollar Lending Office) of the principal of or interest
on any Advance or any other amounts due under this Note in respect
thereof (except for changes in the rate of tax on the overall net
income of Bank or its Eurodollar Lending Office imposed by the
jurisdiction in which Bank's principal executive office or
Eurodollar Lending Office is located); or
- 4 -
<PAGE>
(b) shall impose, modify or deem applicable any reserve (including,
without limitation, any imposed by the Board of Governors of the
Federal Reserve System), special deposit or similar requirement
against assets of, deposits with or for the account of, or credit
extended by Bank (or its Eurodollar Lending Office) or shall impose
on Bank (or its Eurodollar Lending Office) or the foreign exchange
and interbank markets any other condition affecting any Advance
under this Note;
and the result of any of the foregoing is to increase the cost to Bank of
maintaining any part of the indebtedness hereunder or to reduce the amount of
any sum received or receivable by Bank under this Note by an amount deemed by
the Bank to be material, then Borrower shall pay to Bank, within fifteen (15)
days of Borrower's receipt of written notice from Bank demanding such
compensation, such additional amount or amounts as will compensate Bank for
such increased cost or reduction. The Bank shall use reasonable efforts to
advise Borrower of any event described in this paragraph within a reasonable
time. A certificate of Bank, prepared in good faith and in reasonable detail
by Bank and submitted by the Bank to the Borrower, setting forth the basis
for determining such additional amount or amounts necessary to compensate
Bank shall be conclusive and binding for all purposes, absent manifest error
in computation.
In the event that any applicable law, treaty, rule or regulation
(whether domestic or foreign) now or hereafter in effect and whether or not
presently applicable to the Bank, or any interpretation or administration
thereof by any governmental authority charged with the interpretation or
administration thereof, or compliance by the Bank with any guideline, request
or directive of any such authority (whether or not having the force of law),
including any risk-based capital guidelines, affects or would affect the
amount of capital required or expected to be maintained by the Bank (or any
corporation controlling the Bank), and the Bank determines that the amount of
such capital or any reserve requirements (including any marginal, special,
supplemental or emergency reserve requirements imposed with respect to any
category of extensions of credit or assets which include "Eurocurrency
Liabilities" as defined in Regulation D of the Federal Reserve System) to
which Bank or its Eurodollar Lending Office is increased by or based upon the
existence of any obligations of the Bank hereunder or the making or
maintaining any Advances hereunder and such increase has the effect of
reducing the rate of return on the Bank's (or such controlling corporation's)
capital as a consequence of such obligations or the making or maintaining
such Advances hereunder to a level below that which the Bank (or such
controlling corporation) could have achieved but for such circumstances
(taking into consideration its policies with respect to capital adequacy) by
an amount deemed by the Bank to be material, then the Borrower shall pay to
the Bank, within fifteen (15) days of Borrower's receipt of written notice
from Bank demanding such compensation, additional amounts sufficient to
compensate the Bank (or such controlling corporation) for any increase in the
amount of capital and reduced rate of return which the Bank reasonably
determines to be allocable to the existence of any obligations of the Bank
hereunder or to the making or maintaining any Advances hereunder. A
certificate of Bank as to the amount of such compensation, prepared in good
faith and in reasonable detail by the Bank and submitted by the Bank to the
Company, shall be conclusive and binding for all purposes absent manifest
error in computation.
- 5 -
<PAGE>
Upon the occurrence and during the continuance of any Event of Default,
Bank may at any time and from time to time, without notice to the Borrower
(any requirement for such notice being expressly waived by the Borrower), set
off and apply against any and all of the indebtedness of Borrower to Bank any
and all deposits (general or special, time or demand, provisional or final)
at any time held and other indebtedness at any time owing by Bank to or for
the credit or the account of the Borrower and any property of the Borrower
from time to time in possession of Bank, irrespective of whether or not Bank
shall have made any demand hereunder and although such obligations may be
contingent and unmatured. The rights of Bank under this paragraph are in
addition to other rights and remedies (including, without limitation, other
rights of setoff) which Bank may otherwise have.
Upon the occurrence of any Event of Default, Bank may declare this Note
due forthwith and collect, deal with and dispose of all or any part of any
security in any manner permitted or authorized by the Indiana Uniform
Commercial Code or other applicable law (including public or private sale)
and after deducting expenses (including reasonable attorneys' fees and
expenses), Bank may apply the proceeds and any deposits or credits in part or
full payment of any of said liabilities, whether due or not, in any manner or
order Bank elects.
For the purposes of this Note, the following terms have the following
meanings:
"Advance" means a borrowing requested by Borrower and made by Bank
under this Note, including any refunding or conversions of such borrowing,
and shall include a Eurodollar-based Advance and a Prime-based Advance.
"Applicable Interest Rate" means the Eurodollar-based Rate or the
Prime-based Rate, as selected by Borrower from time to time subject to the
terms and conditions of this Note.
"Business Day" means any day, other than a Saturday, Sunday or holiday,
on which Bank is open for all or substantially all of its domestic and
international business (including dealings in foreign exchange) in Detroit,
Michigan.
"Eurodollar-based Advance" means an Advance which bears interest at the
Eurodollar-based Rate.
"Eurodollar-based Rate" means a per annum interest rate which is equal
to the sum of one and one-quarter percent (1-1/4%), plus the the per annum
interest rate at which Bank's Eurodollar Lending Office offers deposits to
prime banks in the eurodollar market in an amount comparable to the relevant
Eurodollar-based Advance and for a period equal to the relevant Interest
Period at or about 11:00 a.m. (Detroit, Michigan time) (or as soon thereafter
as practical) two (2) Business Days prior to the first day of such Interest
Period.
"Eurodollar Lending Office" means Bank's office located in the Grand
Cayman Islands, British West Indies, or such other branch of Bank, domestic
or foreign, as it may hereafter designate as its Eurodollar Lending Office by
notice to Borrower.
"Event of Default" means the occurrence of any one of the following:
- 6 -
<PAGE>
(a) Borrower shall fail to pay the principal or interest under any
Advance or shall fail to pay any other amount owing by Borrower to
Bank, whether under this Note or otherwise, when due in accordance
with the terms hereof or thereof;
(b) any representation, warranty, certification or statement made or
deemed to have been made by Borrower herein or in any certificate,
financial statement or other document or agreement delivered to
Bank pursuant hereto shall prove to be untrue in any material
respect;
(c) Borrower shall fail to observe or perform any condition, covenant
or agreement of Borrower set forth in the Loan Agreement or any
other loan or security agreement or other agreement with Bank,
other than as provided in subparagraph (a) above, and Borrower
shall fail to cure such failure within any grace or cure period
provided with respect thereto;
(d) Borrower shall make any assignment for the benefit of creditors, or
there shall be commenced any bankruptcy, receivership, insolvency,
reorganization, dissolution or liquidation proceedings by or
against Borrower, or the entry of any judgment, levy, attachment,
garnishment or other process, or the filing of any lien against the
Borrower, which proceeding, if involuntary, judgment, levy,
attachment, garnishment or other process shall not be discharged,
dismissed, vacated or otherwise stayed by the Borrower within
forty-five (45) days after the commencement or filing thereof, as
applicable;
(e) Borrower shall have defaulted in the payment when due and payable
(whether at maturity, by reason of acceleration or otherwise),
after the expiration of any applicable cure period, of the
principal of or interest on any indebtedness of Borrower for
borrowed money in excess of Five Million Dollars ($5,000,000) or the
maturity of any such indebtedness shall have been accelerated in
accordance with the provisions of any indenture, contract, agreement
or instrument providing for the creation of or concerning or
otherwise governing or evidencing such indebtedness, or any event or
condition shall have occurred and be continuing which, with the
giving of notice or the passage of time, or both, would permit any
holder or holders of such indebtedness, any trustee or agent acting
on behalf of such holder or holders, or any other person, to
accelerate the maturity of such indebtedness.
"Interest Period" means a period of 1, 2, 3 or 6 months; as selected by
Borrower pursuant to the terms of this Note, commencing on the day a
Eurodollar-based Advance is made, provided that:
(a) any Interest Period which would otherwise end on a day which is not
a Business Day shall be extended to the next succeeding Business
Day, except that if the next succeeding Business Day falls in
another calendar month, the Interest Period shall end on the next
preceding Business Day, and when an Interest Period begins on a day
which has no numerically corresponding day in the calendar month
during
- 7 -
<PAGE>
which such Interest Period is to end, it shall end on the last
Business Day of such calendar month, and
(b) no Interest Period shall extend beyond the maturity date of this
Note.
"Loan Agreement" shall mean that certain Revolving Credit Agreement of
even date herewith among Borrower and Bank.
"Prime-based Advance" shall mean an Advance which bears interest at the
Prime-based Rate.
"Prime Rate" means the per annum interest rate established by Bank as
its prime rate for its borrowers, as such rate may vary from time to time,
which rate is not necessarily the lowest rate on loans made by Bank at any
such time.
"Prime-based Rate" shall mean a per annum interest rate which is equal
to the greater of (i) the Prime Rate; or (ii) the rate of interest equal to
the sum of (a) one percent (1%) and (b) the rate of interest equal to the
average of the rates on overnight Federal funds transactions with members of
the Federal Reserve System arranged by Federal funds brokers (the "Overnight
Rates"), as published by the Federal Reserve Bank of New York, or, if the
overnight Rates are not so published for any day, the average of the
quotations for the Overnight Rates received by Bank from three (3) Federal
funds brokers of recognized standing selected by Bank, as the same may be
changed from time to time. Effect shall be given to any change in the
Prime-based Rate as a result of any change in the Prime Rate or Overnight
Rates on the date of any such change in the Prime Rate or Overnight Rates, as
applicable.
"Request for Advance" means a Request for Advance issued by Borrower
under this Note in the form annexed to this Note as Exhibit "A".
Borrower agrees to make all payments to Bank of any and all amounts due
and owing by Borrower to Bank hereunder, including, without limitation, the
payment of principal and interest on any Advance, on the date provided for
such payment, in United States Dollars in immediately available funds at any
the office of Bank located in the State of Michigan, or such other address as
Bank may notify Borrower in writing.
No delay or failure of Bank in exercising any right, power or privilege
hereunder shall affect such right, power or privilege, nor shall any single
or partial exercise thereof preclude any further exercise thereof, or the
exercise of any other power, right or privilege. The rights of Bank under
this Agreement are cumulative and not exclusive of any right or remedies
which Bank would otherwise have, whether by other instruments or by law.
- 8 -
<PAGE>
This Note has been deemed to have been delivered at Detroit, Michigan,
and shall be governed by and construed and enforced in accordance with the
laws of the State of Michigan. Whenever possible each provision of this Note
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Note shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating the remainder
of such provision or the remaining provisions of this Note.
BORROWER AND THE BANK ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS A
CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED. EACH PARTY, AFTER CONSULTING
(OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF THEIR CHOICE,
KNOWINGLY AND VOLUNTARILY, AND FOR THEIR MUTUAL BENEFIT, WAIVES ANY RIGHT TO
TRIAL BY JURY IN THE EVENT OF LITIGATION REGARDING THE PERFORMANCE OR
ENFORCEMENT OF, OR IN ANY WAY RELATED TO, THIS NOTE OR THE INDEBTEDNESS
HEREUNDER.
THE BORROWER ACKNOWLEDGES THAT ANY APPROVAL OR EXTENSION OF CREDIT
PURSUANT TO THIS NOTE IS EXTENDED BY THE BANK FROM ITS PRINCIPAL OFFICE IN
DETROIT, MICHIGAN.
IPG HOLDINGS LP
By Intertape Polymer, Inc.
By: [signature]
________________________________________
Its: [illegible]
________________________________________
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<PAGE>
EXHIBIT "A"
REQUEST FOR ADVANCE
The undersigned hereby requests COMERICA BANK ("Bank") to make a(an)
____________________________ * Advance to the undersigned on
________________, _____, in the amount of ________________________ Dollars
($__________) under the Promissory Note dated as of December 15, 1997, issued
by the undersigned to said Bank in the face amount of Thirty Three Million
Dollars ($33,000,000) (herein called "Note"). The Interest Period for the
requested Advance, if applicable, shall be ____________________ **. The last
day of the Interest Period for the amounts being converted or refunded
hereunder, if applicable, is ____________________, 19_____.
The undersigned certifies that no Event of Default, or any condition or
event which, with the giving of notice or the running of time, or both, would
constitute an Event of Default, has occurred and is continuing under the
Note, and none will exist upon the making of the Advance requested hereunder.
The undersigned further certifies that upon advancing the sum requested
hereunder, the aggregate principal amount outstanding under the Note will not
exceed the face amount thereof. If the amount advanced to the undersigned
under the Note shall at any time exceed the face amount thereof, the
undersigned will pay such excess amount on demand.
The undersigned hereby authorizes said Bank to disburse the proceeds of
this Request for Advance by crediting the account of the undersigned with
Bank separately designated by the undersigned or as the undersigned may
otherwise direct, unless this Request for Advance is being submitted for a
conversion or refunding, in which case it shall refund or convert that
portion stated above of the existing outstandings under the Note.
Dated this _____ day of ________________________, _____.
IPG HOLDINGS LP
By Intertape Polymer, Inc.
Its General Partner
By:________________________________________
Its:________________________________________
_________________________
* Insert Eurodollar-based or Prime-based Advance.
** Insert one 1, 2, 3 or 6 months.
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<PAGE>
IPG HOLDINGS LP,
AS BORROWER
-and-
INTERTAPE POLYMER GROUP INC.,
AS GUARANTOR
-and-
THE TORONTO-DOMINION BANK, AS
ADMINISTRATIVE AGENT AND LENDER
as of
December 15, 1997
- ------------------------------------------------------------------------------
CREDIT AGREEMENT
US $100,000,000
- ------------------------------------------------------------------------------
HEENAN BLAIKIE
1250 Rene Levesque Blvd. West
Suite 2500
Montreal (Quebec) H3B 4Y1
Telephone: (514) 846-1212
Telecopier: (514) 846-3427
<PAGE>
TABLE OF CONTENTS
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1 INTERPRETATION ........................................................ 2
1.1 DEFINITIONS ................................................. 2
1.2 INTERPRETATION ..............................................19
1.3 CURRENCY ....................................................20
1.4 GENERALLY ACCEPTED ACCOUNTING PRINCIPLES ....................20
1.5 DIVISION AND TITLES .........................................20
2 THE CREDIT ............................................................20
2.1 THE FACILITIES ..............................................20
2.2 FACILITY A ..................................................20
2.3 FACILITY B ..................................................21
3 PURPOSE ...............................................................21
3.1 PURPOSE OF THE ADVANCES .....................................21
4 INTERPRETATION ........................................................21
4.1 NOTICE OF BORROWING .........................................21
4.2 LIBOR ADVANCES AND CONVERSIONS ..............................22
4.3 LETTERS OF CREDIT ...........................................22
4.4 CURRENCY ....................................................23
4.5 OPERATION OF ACCOUNTS .......................................23
4.6 LIMITATIONS ON ADVANCES .....................................23
4.7 NETTING .....................................................23
5 INTEREST AND FEES .....................................................23
5.1 INTEREST ON THE US PRIME RATE BASIS .........................23
5.2 PAYMENT OF INTEREST ON THE US PRIME RATE BASIS ..............24
5.3 INTEREST ON THE LIBOR BASIS .................................24
5.4 PAYMENT OF INTEREST ON THE LIBOR BASIS ......................24
5.5 LIMITS TO THE DETERMINATION OF LIBOR ........................25
5.6 FIXING OF LIBOR .............................................25
5.7 INTEREST ON THE LOAN ........................................25
5.8 ARREARS OF INTEREST .........................................25
5.9 MAXIMUM INTEREST RATE .......................................25
5.10 FEES ........................................................25
5.11 INTEREST ACT ................................................26
6 RESTRICTIONS, LIMITATIONS AND MARKET CONDITIONS .......................26
6.1 MARKET FOR LIBOR ADVANCES ...................................26
6.2 SUSPENSION OF LIBOR ADVANCE OPTION ..........................27
6.3 LIMITS ON THE LETTERS OF CREDIT AND LIBOR ADVANCES ..........27
7 CHANGES IN CIRCUMSTANCES, INCREASED FEES AND INDEMNIFICATION ..........27
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7.1 ILLEGALITY, INCREASED COSTS .................................27
7.2 INDEMNITY ...................................................29
7.3 WITHHOLDING TAXES ...........................................29
7.4 SURVIVAL ....................................................29
8 PAYMENT, REPAYMENT AND PREPAYMENT......................................30
8.1 REPAYMENT OF THE LOAN .......................................30
8.2 PREPAYMENT, REDUCTION AND CANCELLATION OF THE CREDIT ........30
8.3 PAYMENT OF LOSSES RESULTING FROM A PREPAYMENT ...............30
8.4 IMPUTATION OF PREPAYMENTS ...................................31
8.5 CURRENCY OF PAYMENTS ........................................31
8.6 PAYMENTS BY THE BORROWER TO THE LENDER ......................31
8.7 PAYMENT ON A BUSINESS DAY ...................................31
8.8 PAYMENTS BY LENDER TO THE BORROWER ..........................31
8.9 APPLICATION OF PAYMENTS .....................................31
8.10 NO SET-OFF OR COUNTERCLAIM BY BORROWER ......................32
8.11 DEBIT AUTHORIZATION .........................................32
9 CONDITIONS PRECEDENT ..................................................32
9.1 INITIAL ADVANCE UNDER THE CREDIT ............................32
9.2 CONDITIONS PRECEDENT TO ANY ADVANCE .........................34
10 REPRESENTATIONS AND WARRANTIES ........................................34
10.1 INCORPORATION ...............................................35
10.2 AUTHORIZATION ...............................................35
10.3 COMPLIANCE OF THIS AGREEMENT ................................35
10.4 BUSINESS ....................................................36
10.5 FINANCIAL STATEMENTS ........................................36
10.6 TITLE TO ASSETS .............................................36
10.7 LITIGATION ..................................................36
10.8 TAXES .......................................................37
10.9 INSURANCE ...................................................37
10.10 NO ADVERSE CHANGE ...........................................37
10.11 REGULATORY APPROVALS ........................................37
10.12 COMPLIANCE WITH LAWS ........................................37
10.13 FOREIGN ASSETS CONTROL REGULATIONS, ETC. ....................37
10.14 PENSION AND EMPLOYMENT LIABILITIES, COMPLIANCE WITH ERISA ...38
10.15 PRIORITY ....................................................39
10.16 COMPLETE AND ACCURATE INFORMATION ...........................39
10.17 EVENT OF DEFAULT ............................................39
10.18 AGREEMENTS WITH THIRD PARTIES ...............................40
10.19 ENVIRONMENT .................................................40
10.20 SURVIVAL OF REPRESENTATIONS AND WARRANTIES ..................41
11 POSITIVE COVENTANTS ...................................................41
11.1 PRESERVATION OF JURIDICAL PERSONALITY .......................41
11.2 PRESERVATION OF LICENSES ....................................41
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11.3 COMPLIANCE WITH APPLICABLE LAWS .............................41
11.4 MAINTENANCE OF ASSETS .......................................42
11.5 BUSINESS ....................................................42
11.6 INSURANCE ...................................................42
11.7 PAYMENT OF TAXES AND DUTIES .................................42
11.8 ACCESS AND INSPECTION .......................................42
11.9 MAINTENANCE OF ACCOUNT ......................................43
11.10 PERFORMANCE OF OBLIGATIONS ..................................43
11.11 MAINTENANCE OF RATIOS .......................................43
11.12 PAYMENT OF LEGAL FEES AND OTHER EXPENSES ....................43
11.13 FINANCIAL REPORTING .........................................44
11.14 NOTICE OF CERTAIN EVENTS ....................................46
11.15 ACCURACY OF REPORTS .........................................47
11.16 LENDER'S OPTION TO OBTAIN IMPROVED TERMS AND CONDITIONS .....47
11.17 DESIGNATION OF RESTRICTED SUBSIDIARIES ......................47
12 NEGATIVE COVENANTS ....................................................47
12.1 LIQUIDATION, AMALGAMATION, MERGERS, CONSOLIDATIONS AND SALE
OF ASSETS ..............................................48
12.2 LIMITATIONS ON DEBT .........................................49
12.3 BORROWER'S BUSINESS .........................................50
12.4 CHARGES .....................................................51
12.5 RESTRICTED INVESTMENTS AND RESTRICTED PAYMENTS ..............51
12.6 TRANSACTIONS WITH AFFILIATES ................................52
12.7 TERMINATION OF PENSION PLANS ................................53
12.8 OWNERSHIP OF SUBSIDIARIES ...................................53
13 EVENTS OF DEFAULT AND REALIZATION .....................................53
13.1 EVENT OF DEFAULT ............................................53
13.2 REMEDIES ....................................................55
13.3 BANKRUPTCY AND INSOLVENCY ...................................56
13.4 APPLICATION OF PROCEEDS .....................................56
13.5 NOTICE ......................................................56
13.6 COSTS .......................................................56
13.7 RELATIONS WITH THE BORROWER .................................57
14 JUDGMENT CURRENCY .....................................................57
14.1 RULES OF CONVERSION .........................................57
14.2 DETERMINATION OF AN EQUIVALENT CURRENCY .....................57
15 ASSIGNMENT ............................................................58
15.1 ASSIGNMENT BY THE BORROWER ..................................58
15.2 ASSIGNMENTS AND TRANSFERS BY THE LENDER .....................58
15.3 TRANSFER AGREEMENT ..........................................59
15.4 NOTICE ......................................................59
15.5 SUB-PARTICIPATIONS ..........................................59
15.6 GENERAL .....................................................60
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TABLE OF CONTENTS
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16 RELATIONSHIP WITH AND BETWEEN THE LENDERS .............................60
16.1 ALLOCATION AS BETWEEN THE LENDERS ...........................60
16.2 ACCOUNT OPERATIONS ..........................................61
16.3 SHARING OF INFORMATION ......................................61
16.4 LIABILITY OF THE LENDERS ....................................61
16.5 INTERLENDER AGREEMENT .......................................61
17 MISCELLANEOUS .........................................................62
17.1 NOTICES .....................................................62
17.2 AMENDMENT AND WAIVER ........................................62
17.3 DETERMINATIONS FINAL ........................................62
17.4 ENTIRE AGREEMENT ............................................62
17.5 INDEMNIFICATION AND COMPENSATION ............................63
17.6 BENEFIT OF AGREEMENT ........................................63
17.7 COUNTERPARTS ................................................63
17.8 APPLICABLE LAW ..............................................63
17.9 SEVERABILITY ................................................63
17.10 FURTHER ASSURANCES ..........................................64
17.11 GOOD FAITH AND FAIR CONSIDERATION ...........................64
17.13 INDEMNITY ...................................................64
17.13 JURISDICTION AND SERVICE IN RESPECT OF THE GUARANTOR AND
THE BORROWER ...........................................65
17.14 UNDERTAKING AND REPRESENTATION OF
THE TORONTO-DOMINION BANK ..............................65
17.15 LANGUAGE ....................................................65
18 FORMAL DATE ...........................................................66
18.1 FORMAL DATE .................................................66
SCHEDULE "A" -- LIST OF LENDERS AND PARTICIPATIONS
SCHEDULE "B" -- NOTICE OF BORROWING AND CERTIFICATE
SCHEDULE "C" -- IPG GUARANTEE
SCHEDULE "D" -- TRANSFER AGREEMENT
SCHEDULE "E" -- RESTRICTED SUBSIDIARIES
SCHEDULE "F" -- OFFICER'S CERTIFICATE
SCHEDULE "G" -- OPINION
SCHEDULE "H" -- LITIGATION
SCHEDULE "I" -- ERISA AFFILIATES AND PLANS
SCHEDULE "I-1" -- ERISA DISCLOSURE
SCHEDULE "J" -- EXISTING SECURITY
SCHEDULE "K" -- INTERLENDER AGREEMENT
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CREDIT AGREEMENT entered into in the City of New York, State of New York, as
of December 15, 1997,
BETWEEN: IPG HOLDINGS LP, a limited partnership
constituted in accordance with the laws of
the State of Delaware, having its registered
office c/o RL&F Service Corp, One Rodney
Square, Tenth floor, Tenth and King Streets,
in the City of Wilmington, State of Delaware
(hereinafter called the "BORROWER"),
represented herein by its general partner,
INTERTAPE POLYMER INC., having its principal
place of business at 110E Montee de Liesse,
in the City of St. Laurent, Province of
Quebec
PARTY OF THE FIRST PART
AND: INTERTAPE POLYMER GROUP INC., a company
constituted in accordance with the laws of
Canada, having its principal place of
business at 110E Montee de Liesse, in the
City of St. Laurent, Province of Quebec
(hereinafter called the "GUARANTOR")
PARTY OF THE SECOND PART
AND: THE TORONTO-DOMINION BANK, a banking
corporation organized under the laws of
Canada, acting by and through its Houston
Agency, having an office at 909 Fannin
Street, Suite 1700, in the City of Houston,
State of Texas, 77010, acting as
administrative agent and as Lender
(hereinafter called the "LENDER")
PARTY OF THE THIRD PART
WHEREAS the Borrower wishes to borrow certain amounts from the Lender
and the Lender has agreed to lend such amounts to the Borrower, subject to
and in accordance with the provisions hereof;
NOW THEREFORE, THE PARTIES HERETO HAVE AGREED AS FOLLOWS:
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1 INTERPRETATION
1.1 DEFINITIONS
The following words and expressions, when used in this Agreement, in the
Schedules hereto or in any deed or agreement supplementary hereto, unless
the contrary is stipulated, have the following meaning:
1.1.1 "ADVANCE" means any advance by the Lender under this
Agreement, including direct Advances by way of US Prime Rate
Advances and Libor Advances, and indirect Advances by way of
Letters of Credit;
1.1.2 "AFFILIATE" means any Person (other than a Restricted
Subsidiary) (i) which directly or indirectly through one or more
intermediaries controls, or is controlled by, or is under common
control with, the Guarantor, (ii) which beneficially owns or holds
5% or more of any class of the Voting Stock of the Guarantor or
(iii) 5% or more of the Voting Stock (or in the case of a Person
which is not a corporation, 5% or more of the equity interest) of
which is beneficially owned or held by the Guarantor or a
Subsidiary. The term "CONTROL" means the possession, directly or
indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through the ownership
of Voting Stock, by contract or otherwise;
1.1.3 "AGREEMENT", "CREDIT AGREEMENT", "THESE PRESENTS", "HEREIN",
"HEREBY", "HEREUNDER" and other similar expressions refer
collectively to this Credit Agreement and the Schedules hereto and
include any deed or document which is supplementary or accessory or
which is made in order to complete this Agreement;
1.1.4 "ASSIGNMENT" means an assignment of all or a portion of the
Lender's rights and obligations under this Agreement in accordance
with Sections 15.2 and 15.3, and "ASSIGNEE" has the meaning
ascribed to it in subsection 15.2.1;
1.1.5 "ATC" means American Tape Corporation;
1.1.6 "AVAILABLE CASH" means cash and Cash Equivalents which are
freely available to the Guarantor or the Restricted Subsidiaries,
in that there are no restrictions of any nature whatsoever on the
Guarantor's or the Restricted Subsidiaries' access thereto
including any restrictions arising out of any (i) agreement, (ii)
incorporating, constituting or charter documents, (iii) foreign
exchange or currency controls, (iv) Law, (v) Charge, or (vi)
otherwise;
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1.1.7 "BRANCH" means the office of the Lender located at 909
Fannin, Suite 1700, Houston, Texas, 77010, or any other office
designated by the Lender from time to time by notice to the
Borrower;
1.1.8 "BUSINESS DAY" means any day, except Saturdays, Sundays and
other days which in New York, New York, London (England) or
Montreal, Quebec, are holidays or a day upon which banks in such
locations are generally not open for business;
1.1.9 "CAPITALIZED LEASE" means any lease (i) the obligation for
Rentals with respect to which is required to be capitalized on a
consolidated balance sheet of the lessee and its Subsidiaries in
accordance with GAAP or (ii) for which the amount of the asset and
liability thereunder as if so capitalized should be disclosed in a
note to such balance sheet;
1.1.10 "CAPITALIZED RENTALS" of any Person means as of the
date of any determination thereof the amount at which the aggregate
Rentals due and to become due under all Capitalized Leases under
which such Person is a lessee would be reflected as a liability on
a consolidated balance sheet of such Person.
1.1.11 "CASH EQUIVALENTS" means, as of the date of any
determination thereof, Investments of the type described in clauses
1.1.75.2, 1.1.75.3 and 1.1.75.4 of the definition of the term
"Restricted Investments".
1.1.12 "CDN. $" means the lawful currency of Canada;
1.1.13 "CHARGE" means any right to any property, or the income
or benefits flowing therefrom, which secures an obligation due to a
Person or a claim of such Person, whether such interest is based on
the common law, statute or contract, and includes any security
interest, hypothec, pledge, pawn, mortgage, privilege, prior claim,
lien, charge, assignment, transfer, cession, encumbrance,
Capitalized Lease, conditional sale or trust receipt or a lease in
which such Person is lessor, consignment or bailment for security
purposes. The term "Charge" shall include reservations,
exceptions, encroachments, easements, rights-of-way, covenants,
conditions, restrictions, leases and other title exceptions and
encumbrances (including, with respect to stock, stockholder
agreements, voting trust agreements, buy-back agreements and all
similar arrangements) affecting property. For the purposes of this
Agreement, the Guarantor or a Restricted Subsidiary shall be deemed
to be the owner of any property which it has acquired or holds
subject to a conditional sale agreement, Capitalized Lease or other
arrangement pursuant to which title to the property has been
retained by or vested in some other Person for security purposes
and such retention or vesting shall constitute a Charge;
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1.1.14 "CLOSING DATE" means December 15, 1997;
1.1.15 "CODE" means the Internal Revenue Code of 1986, as
amended;
1.1.16 "CONSOLIDATED" means produced by aggregating the
relevant financial statements or accounts of the Subsidiaries (or
other Persons which, in accordance with GAAP, are to be included in
such computation) of a Person on a line-by-line basis (i.e.: adding
together corresponding items of assets, liabilities, revenues and
expenses) with the relevant financial statements or accounts of
such Person, eliminating inter-company balances and transactions
and providing for any Minority Interests, all as determined in
accordance with GAAP; for greater certainty, the Consolidated
ratios contemplated by Section 11.11 with respect to the Guarantor
shall include its Restricted Subsidiaries as well as all
Unrestricted Subsidiaries the Debt of which is guaranteed by the
Guarantor;
1.1.17 "CONSOLIDATED ASSETS" means, as of the date of any
determination thereof, the Consolidated total assets of the
Guarantor and its Restricted Subsidiaries determined in accordance
with GAAP (excluding, in any event, assets or equity attributable
to Unrestricted Subsidiaries);
1.1.18 "CONSOLIDATED CURRENT LIABILITIES" means as of the date
of any determination thereof such liabilities of the Guarantor and
its Restricted Subsidiaries on a Consolidated basis as shall be
determined in accordance with GAAP to constitute current
liabilities (excluding, in any event, liabilities attributable to
Unrestricted Subsidiaries);
1.1.19 "CONSOLIDATED NET INCOME" for any period means the
gross revenues of the Guarantor and its Restricted Subsidiaries for
such period less all expenses and other proper charges (including
taxes on income), determined on a Consolidated basis after
eliminating earnings or losses attributable to outstanding Minority
Interests, but excluding in any event:
1.1.19.1 any gains or losses (i) on the sale or other
disposition of Investments or fixed or capital assets, and
any taxes on such excluded gains and any tax deductions or
credits on account of any such excluded losses or (ii)
attributable to any non-recurring or extraordinary items
including, without limitation, any discontinuance of
operations;
1.1.19.2 the proceeds of any life insurance policy;
1.1.19.3 net earnings and losses of any Restricted
Subsidiary accrued prior to the date it became a Restricted
Subsidiary;
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1.1.19.4 net earnings and losses of any corporation (other
than a Restricted Subsidiary), substantially all the assets
of which have been acquired in any manner by the Guarantor or
any Restricted Subsidiary, realized by such corporation prior
to the date of such acquisition;
1.1.19.5 net earnings and losses of any corporation (other
than a Restricted Subsidiary) with which the Guarantor or a
Restricted Subsidiary shall have consolidated or which shall
have merged into or with the Guarantor or a Restricted
Subsidiary prior to the date of such consolidation or merger;
1.1.19.6 net earnings of any business entity (other than a
Restricted Subsidiary) in which the Guarantor or any
Restricted Subsidiary has an ownership interest unless such
net earnings shall have actually been received by the
Guarantor or such Restricted Subsidiary in the form of cash
distributions;
1.1.19.7 any portion of the net earnings of any Restricted
Subsidiary which for any reason is unavailable for payment of
dividends to the Guarantor or any other Restricted
Subsidiary;
1.1.19.8 earnings resulting from any reappraisal,
revaluation or write-up of assets;
1.1.19.9 any deferred or other credit representing any
excess of the equity in any Subsidiary at the date of
acquisition thereof over the amount invested in such
Subsidiary;
1.1.19.10 any gain arising from the acquisition of any
Securities of the Guarantor or any Restricted Subsidiary; and
1.1.19.11 any reversal of any contingency reserve, except to
the extent that provision for such contingency reserve shall
have been made from income arising during such period;
1.1.20 "CONSOLIDATED NET WORTH" means, as of the date of any
determination thereof, the consolidated total shareholders' equity
of the Guarantor and its Restricted Subsidiaries, determined in
accordance with GAAP, but, in any event (a) excluding any amount of
such shareholders' equity allocable or attributable to (i) Minority
Interests and (ii) all Restricted Investments by the Guarantor or
any Restricted Subsidiary;
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1.1.21 "CONSOLIDATED TOTAL CAPITALISATION" means, as of the
date of any determination thereof, the sum of (i) the aggregate
principal amount of Consolidated Funded Debt then outstanding PLUS
(ii) Consolidated Net Worth;
1.1.22 "CURRENT DEBT" of any Person means as of the date of
any determination thereof all Debt of such Person other than Funded
Debt of such Person;
1.1.23 "CREDIT" has the meaning ascribed thereto in Section
2.1 hereof;
1.1.24 "DEBT" of any Person means, as of the date of any
determination thereof (without duplication):
1.1.24.1 all Indebtedness for borrowed money or evidenced
by notes, bonds, debentures or similar evidences of
Indebtedness of such Person;
1.1.24.2 obligations secured by any Charge upon property
owned by such Person or created or arising under any
conditional sale or other title retention agreement with
respect to property acquired by such Person, notwithstanding
the fact that the rights and remedies of the seller, lender
or lessor under any such arrangement in the event of default
are limited to repossession or sale of property including,
without limitation, obligations secured by Charges arising
from the sale or transfer of notes or accounts receivable,
but, in all events, excluding trade payables and accrued
expenses constituting Consolidated Current Liabilities;
1.1.24.3 Capitalized Rentals;
1.1.24.4 reimbursement obligations in respect of credit
enhancement instruments including letters of credit
(excluding, however, short-term letters of credit and surety
bonds issued in commercial transactions in the ordinary
course of business); and
1.1.24.5 (without duplication of any of the foregoing)
Guarantees of obligations of others of the character referred
to hereinabove in this definition;
1.1.25 "DEFAULT" means an event or circumstances, the
occurrence or non-occurrence of which would, with the giving of a
notice, lapse of time or combination thereof, constitute an Event
of Default unless remedied within the prescribed delays or
renounced to in writing by the Lender;
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1.1.26 "DESIGNATED PERIOD" means, with respect to the Libor
Advance, a period designated by the Borrower in accordance with
Section 4.2;
1.1.27 "DISBURSEMENT PERIOD" means, with respect to each of
the Facilities, the period from the date of the satisfaction of the
conditions precedent set out in Section 9.1 until:
1.1.27.1 with respect to Facility A, the expiry of the
Term; and
1.1.27.2 with respect to Facility B, five (5) Business Days
following the Closing Date;
1.1.28 "EBITDA" means, during a fiscal period, the
Consolidated Net Income of the Guarantor plus Interest Expense,
taxes, depreciation and amortization, calculated on a Consolidated
basis in accordance with GAAP;
1.1.29 "ERISA" means the Employee Retirement Income Security
Act of 1974, as amended, and any successor statute of similar
import, together with the regulations thereunder, in each case as
in effect from time to time. References to sections of ERISA shall
be construed to also refer to any successor sections.
1.1.30 "ERISA AFFILIATE" means any corporation, trade or
business that is, along with the Borrower or the Guarantor, a
member of a controlled group of corporations or a controlled group
of trades or businesses, as described in section 414(b) and 414(c),
respectively, of the Code or Section 4001 of ERISA.
1.1.31 "EXTENSION REQUEST" means a request by the Borrower
and the Guarantor to extend the Term for an additional 12 months,
the whole in accordance with the provisions of Section 2.2;
1.1.32 "EVENT OF DEFAULT" means one or more of the events
described in Section 13.1;
1.1.33 "FACILITY A" means the portion of the Advances
available pursuant to subsection 2.1.1;
1.1.34 "FACILITY B" means the portion of the Advances
available pursuant to subsection 2.1.2;
1.1.35 "FEES" means the fees payable to the Lender in
accordance with the provisions of Section 5.10;
1.1.36 "FIRST CURRENCY" has the meaning ascribed to it in
Section 14.1;
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1.1.37 "FIXED CHARGES" for any period means on a Consolidated
basis the sum of (i) all Rentals (other than Rentals on Capitalized
Leases) payable during such period by the Guarantor and its
Restricted Subsidiaries, and (ii) all Interest Expense on all
Indebtedness (including the interest component of Rentals on
Capitalized Leases) of the Guarantor and its Restricted
Subsidiaries.
1.1.38 "FUNDED DEBT" of any Person means all Debt of such
Person having a final maturity of one or more than one year from
the date of origin thereof (or which is renewable or extendible at
the option of the obligor for a period or periods of one or more
than one year from the date of origin), including all payments in
respect thereof that are required to be made within one year from
the date of any determination of Funded Debt, whether or not the
obligation to make such payments shall constitute a current
liability of the obligor under GAAP;
1.1.39 "GENERALLY ACCEPTED ACCOUNTING PRINCIPLES" or "GAAP"
means the generally accepted accounting principles acknowledged by
the Canadian Institute of Chartered Accountants and published in
the Canadian Institute of Chartered Accountants' Handbook;
1.1.40 "GUARANTEES" by any Person means all obligations (other
than endorsements in the ordinary course of business of negotiable
instruments for deposit or collection) of such Person guaranteeing,
or in effect guaranteeing, any Indebtedness, dividend or other
obligation of any other Person (the "PRIMARY OBLIGOR") in any
manner, whether directly or indirectly, including, without
limitation, all obligations incurred through an agreement,
contingent or otherwise, by such Person: (a) to purchase such
Indebtedness or obligation or any property or assets constituting
security therefor, (b) to advance or supply funds (i) for the
purchase or payment of such Indebtedness or obligation, or (ii) to
maintain working capital or other balance sheet condition or
otherwise to advance or make available funds for the purchase or
payment of such Indebtedness or obligation, (c) to lease property
or to purchase Securities or other property or services primarily
for the purpose of assuring the owner of such Indebtedness or
obligation, or (d) otherwise to assure the owner of the
Indebtedness or obligation of the Primary Obligor against loss in
respect thereof. For the purposes of all computations made under
this Agreement, a Guarantee in respect of any Indebtedness for
borrowed money which has been guaranteed, and a Guarantee in
respect of any other obligation or liability or any dividend, shall
be deemed to be Indebtedness equal to the maximum aggregate amount
of such obligation, liability or dividend.
1.1.41 "GUARANTOR" means INTERTAPE POLYMER GROUP INC., and any
Person who succeeds to all, or substantially all, of the assets and
business of INTERTAPE POLYMER GROUP INC.;
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1.1.42 "INDEBTEDNESS" of any Person means and includes all
obligations of such Person which in accordance with GAAP shall be
classified upon a balance sheet of such Person as liabilities of
such Person, and in any event shall include all (a) obligations of
such Person for borrowed money or which has been incurred in
connection with the acquisition of property or assets, (b)
obligations secured by any Charge upon property or assets owned by
such Person, even though such Person has not assumed or become
liable for the payment of such obligations, (c) obligations created
or arising under any conditional sale or other title retention
agreement with respect to property acquired by such Person,
notwithstanding the fact that the rights and remedies of the
seller, lender or lessor under such agreement in the event of
default are limited to repossession or sale of property, (d)
Capitalized Rentals and (e) Guarantees of obligations of others of
the character referred to in this definition.
1.1.43 "INTEREST EXPENSE" for any period means all interest
and all amortization of debt discount and expense on any particular
Indebtedness for which such calculations are being made.
Computations of Interest Expense on a PRO FORMA basis for
Indebtedness having a variable interest rate shall be calculated at
the rate in effect on the date of any determination;
1.1.44 "INVESTMENTS" means all investments, in cash or by
delivery of property made, directly or indirectly in any Person,
whether by acquisition of shares of capital stock, Indebtedness or
other obligations or Securities or by loan, advance, capital
contribution or otherwise; PROVIDED, HOWEVER, that "Investments"
shall not mean or include routine investments in property to be
used or consumed in the ordinary course of business;
1.1.45 "IPG GUARANTEE" means the Guarantee by the Guarantor of
the obligations of the Borrower to the Lender, in the form of
Schedule "C";
1.1.46 "LAWS" or "LAW" means all applicable provisions of all
laws, ordinances, decrees, orders, rules, regulations and
directives of governmental bodies, and all applicable provisions of
treaties as well as all ordinances and other decrees of tribunals
and arbitrators;
1.1.47 "LENDER" means The Toronto-Dominion Bank, acting
through its Houston Agency, and any Assignee, in accordance with
the provisions of Section 15.2;
1.1.48 "LETTER OF CREDIT" means a stand-by letter of credit or
a letter of guarantee issued by the Lender in accordance with the
provisions hereof;
1.1.49 "LIBOR" means, with respect to any Designated Period
relating to a Libor Advance, the interest rate which the Lender or
any Assignee, in accordance
9
<PAGE>
with its normal practice, would be prepared to offer to the major
banks in the London interbank market for delivery on the first
day of each of the relevant Rollover Dates for a period equal to
the Designated Period, based on the number of days included in
such periods, in respect of US Dollar deposits in amounts
comparable to each Selected Amount, to become due at or about the
expiry of such Designated Period, determined at or about 11:00
A.M., London, England time, two Business Days prior to a drawdown
date or Rollover Date in accordance with Section 5.6;
1.1.50 "LIBOR ADVANCE" means, at any time, the part of the
Advances with respect to which the Borrower has chosen to pay
interest on the Libor Basis;
1.1.51 "LIBOR BASIS" means the basis of calculation of
interest on the Advances or any part thereof, in accordance with
the provisions of Sections 5.3, 5.5 and 5.6;
1.1.52 "LIKE ASSETS" means, as of the date of any
determination thereof, capital assets, used or to be used by the
Guarantor or any Restricted Subsidiary in the lines of business in
which the Guarantor or such Restricted Subsidiary is engaged as of
the Closing Date or in a business reasonably related thereto;
1.1.53 "LLC DOCUMENTS" has the meaning ascribed to it in
subsection 9.1.3;
1.1.54 "LOAN" means, at any time, the aggregate of the
Advances outstanding in accordance with the provisions hereof,
including the face amount of any Letters of Credit issued in
accordance with the provisions hereof, together with any other
amount in principal, interest and accessory costs payable to the
Lender by the Borrower pursuant hereto;
1.1.55 "LONG-TERM LEASE" means any lease of real or personal
property (other than a Capitalized Lease) having an original term,
including any period for which the lease may be renewed or extended
at the option of the lessor, of more than three years;
1.1.56 "MARGIN" means, with respect to Sections 4.3, 5.1 and
5.10:
10
<PAGE>
<TABLE>
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Ratio of Total Debt to
Consolidated Total Standby Fee with respect US Prime Rate plus Libor plus;
Capitalization to Facility A Letter of Credit Fee
- ---------------------------------------------------------------------------------------------------------------------------------
LESS THAN OR EQUAL TO 30% .12% 0% .95%
- ---------------------------------------------------------------------------------------------------------------------------------
LESS THAN OR EQUAL TO 35% .12% 0% 1.0%
- ---------------------------------------------------------------------------------------------------------------------------------
LESS THAN OR EQUAL TO 40% .15% 0% 1.025%
- ---------------------------------------------------------------------------------------------------------------------------------
LESS THAN OR EQUAL TO 50% .20% 0% 1.062%
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The foregoing grid also shows the amount of the Standby Fee
referred to in Section 5.10 and the fees payable in respect of
Letters of Credit in accordance with the provisions of Section 4.3,
and will be applicable provided that the ratio of Total Funded Debt
to EBITDA remains below 4:1 at all times, failing which each of the
Margins indicated above other than those dealing with Standby Fees
will increase by .25%, and the applicable Margin dealing with
Standby Fees will increase by .05%.
In addition, once all Loans under Facility B have been repaid and
the Borrower has no further right to borrow under Facility B, the
above grid will be replaced by the following:
<TABLE>
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Ratio of Total Debt to
Consolidated Total Standby Fee with respect US Prime Rate plus Libor plus;
Capitalization to Facility A Letter of Credit Fee
- ---------------------------------------------------------------------------------------------------------------------------------
LESS THAN OR EQUAL TO 30% .12% 0% .40%
- ---------------------------------------------------------------------------------------------------------------------------------
LESS THAN OR EQUAL TO 35% .12% 0% .50%
- ---------------------------------------------------------------------------------------------------------------------------------
LESS THAN OR EQUAL TO 40% .15% 0% .55%
- ---------------------------------------------------------------------------------------------------------------------------------
LESS THAN OR EQUAL TO 50% .20% 0% .625%
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The foregoing grid also shows the amount of the Standby Fee
referred to in Section 5.10 and the fees payable in respect of
Letters of Credit in accordance with the provisions of Section 4.3,
and will be applicable provided that the ratio of Total Funded Debt
to EBITDA remains below 4:1 at all times, failing which each of the
Margins indicated above other than those dealing with Standby Fees
will increase by .25%, and the applicable Margin dealing with
Standby Fees will increase by .05%;
1.1.57 "MATERIAL ADVERSE CHANGE" means a material adverse
change in the business, assets, liabilities, financial position,
operating results or business prospects of the Guarantor or any of
the Restricted Subsidiaries, or in the ability of the
11
<PAGE>
Borrower or the Guarantor to perform any of its obligations under
this Agreement or under the IPG Guarantee;
1.1.58 "MATERIAL DEBT" means any Debt which has or relates to,
in the aggregate, an unpaid principal amount (or aggregate
liability) of more than US $5,000,000 or an equivalent amount of
money in any other currency;
1.1.59 "MINORITY INTERESTS" means any shares of stock of any
class of a Restricted Subsidiary (other than directors' qualifying
shares as required by law) that are not owned by the Guarantor
and/or one or more of its Restricted Subsidiaries. Minority
Interests shall be valued by valuing Minority Interests
constituting preferred stock at the voluntary or involuntary
liquidating value of such preferred stock, whichever is greater,
and by valuing Minority Interests constituting common stock at the
book value of capital and surplus applicable thereto adjusted, if
necessary, to reflect any changes from the book value of such
common stock required by the foregoing method of valuing Minority
Interests in preferred stock;
1.1.60 "MULTIEMPLOYER PLAN" shall have the same meaning as in
ERISA;
1.1.61 "NET INCOME AVAILABLE FOR FIXED CHARGES" for any period
means the sum of Consolidated Net Income during such period plus
(to the extent deducted in determining Consolidated Net Income),
(a) all provisions for any Federal, state, provincial or other
income taxes made by the Guarantor and its Restricted Subsidiaries
during such period, (b) Fixed Charges of the Guarantor and its
Restricted Subsidiaries during such period and (c) all amortization
expenses.
1.1.62 "NOTE AGREEMENT" means the agreements entered into by
the Guarantor dated as of January 1, 1996, with respect to the
issuance and sale of three series of senior notes in an aggregate
principal amount of US $33,000,000, and "NOTES" means the Notes
issued thereunder;
1.1.63 "NOTICE OF BORROWING" means a notice transmitted to the
Lender by the Borrower in accordance with the provisions of
Sections 4.1, 4.2 or 4.3;
1.1.64 "PARTICIPATION" means the portion of the Credit for
which the Lender is responsible, as set out in Schedule "A" hereof;
1.1.65 "PBGC" means the Pension Benefit Guaranty Corporation
and any entity succeeding to any or all of its functions under
ERISA.
1.1.66 "PERMITTED CHARGES" means the CB/ATC Temporary Charges
(as defined in subsection 9.1.1) and
12
<PAGE>
1.1.66.1 any Charge created by law that is assumed in the
ordinary course of business and in order to exercise same,
which has not at such date been registered in accordance with
applicable Laws against the Guarantor or its Restricted
Subsidiaries, which relates to obligations which are not yet
due, which is not related to any loan of money or obtention
of credit and which, in the aggregate, do not affect in a
material way the use, the income or the benefits flowing from
the property so charged in the conduct of the business of
such Person; any Charge resulting from judgments or decisions
which the Borrower has, at such date, appealed or in respect
of which it has sought revision and obtained a suspension of
execution pending the appeal or the revision; any Charge for
taxes, assessments or governmental claims or other
impositions not yet due or matured or in respect of which the
validity at such date has been contested in good faith by the
Borrower before a competent tribunal or other governmental
body in accordance with the provisions of Section 11.7; or
which relates to a deposit of monies or securities in the
ordinary course of business with respect to any Charge
referred to in this paragraph, or to secure workman's
compensation, surety or appeal bonds or security for costs of
litigation;
1.1.66.2 any right of a municipality, governmental body or
other public authority pursuant to any lease, license,
franchise, grant or permit obtained by the Guarantor or a
Restricted Subsidiary, or any right resulting from a
legislative provision, to terminate such lease, license,
franchise, grant or permit, or requiring an annual or
periodic payment as a condition of its extension;
1.1.66.3 any real right granted by the Guarantor or a
Restricted Subsidiary to a public body, or to a municipal or
governmental authority or public utility, or which may be
imposed by one or the other, when required by such body or
authority with respect to the operations of the Guarantor or
a Restricted Subsidiary or in the ordinary course of its
business;
1.1.66.4 real rights granted in favour of municipal
authorities or public utilities on real property acquired
from time to time by the Guarantor or a Restricted Subsidiary
during the Term which do not adversely affect the value or
marketability of the Guarantor's or a Restricted Subsidiary's
real property;
1.1.66.5 minor title defects, homologated lines, zoning and
building by-laws, ordinances, regulations and other
governmental restrictions on the use of property which
customarily exist on properties of Persons
13
<PAGE>
engaged in similar activities and similarly situated and
which do not, in any event, materially impair their use in
the operation of the businesses carried on by the
Guarantor or the relevant Restricted Subsidiary;
1.1.66.6 Charges securing Indebtedness of a Restricted
Subsidiary to the Guarantor or to another Wholly-owned
Restricted Subsidiary, or Charges on shares of stock of
Unrestricted Subsidiaries;
1.1.66.7 Charges on assets of the Guarantor or any
Restricted Subsidiary relating to so-called "operating lines"
or short-term or revolving bank facilities to the extent that
such assets consist of inventory or receivables of the
Guarantor or any Restricted Subsidiary;
1.1.66.8 Charges incurred after the Closing Date given to
secure the payment of the purchase price incurred in
connection with (and within twelve months of) the acquisition
after the Closing Date of fixed assets useful and intended to
be used in carrying on the business of the Guarantor or a
Restricted Subsidiary, including Charges existing on such
fixed assets at the time of acquisition thereof or at the
time of acquisition by the Guarantor or a Restricted
Subsidiary of any business entity then owning such fixed
assets, whether or not such existing Charges were given to
secure the payment of the purchase price of the fixed assets
to which they attach so long as they were not incurred,
extended or renewed in contemplation of such acquisition,
provided that (a) the Charges shall attach solely to the
fixed assets acquired or purchased, (b) at the time of
acquisition of such fixed assets, the aggregate amount
remaining unpaid on all Indebtedness secured by Charges on
such fixed assets whether or not assumed by the Guarantor or
a Restricted Subsidiary shall not exceed an amount equal to
the lesser of the total purchase price or fair market value
at the time of acquisition of such fixed assets (as
determined in good faith by the Board of Directors of the
Guarantor), and (c) all such Indebtedness shall have been
incurred within the other applicable limitations of
subsection 11.11.1 and Section 12.2;
1.1.66.9 security which is already encumbering assets
acquired by the Guarantor or a Restricted Subsidiary prior to
the date hereof and described in Schedule "J";
provided that after giving effect to the incurrence of all Debt
secured by such Charges, (a) the aggregate Secured Priority Debt
(as defined in subsection 12.2.1 (c)) shall not exceed 20% of
Consolidated Net Worth, and, together with the aggregate
14
<PAGE>
Unsecured Priority Debt (as defined in subsection 12.2.1 (c)),
shall not exceed an amount equal to Cdn. $60,000,000 and (b) all
such Debt shall have been incurred within the other applicable
limitations of subsection 11.11.1 and Section 12.2; provided
further, however, that except for the Charges permitted by
subsection 1.1.66.7, the Guarantor will not, and will not permit
any Restricted Subsidiary to, incur or maintain any such
operating lines or short-term or revolving bank facilities
secured by Charges on any assets of the Guarantor or any
Restricted Subsidiary;
1.1.67 "PERSON" means a moral person, a physical person, a
joint venture, a partnership, a limited liability company, a trust,
an entity without juridical personality, a government or any
ministry, organization or intermediary of such government;
1.1.68 "PLAN" means a "pension plan," as such term is defined
in ERISA, established or maintained by the Guarantor, a Restricted
Subsidiary or any ERISA Affiliate or as to which the Guarantor, a
Restricted Subsidiary or any ERISA Affiliate contributed or is a
member or otherwise may have any liability;
1.1.69 "PRIORITY DEBT" shall have the meaning set forth in
subsection 12.2.1(c);
1.1.70 "QUALIFYING EU JURISDICTION" means any country (other
than Greece) which as of the Closing Date is a member of the
European Union.
1.1.71 "RENTALS" means and includes as of the date of any
determination thereof all fixed payments (including all such
payments which the lessee is obligated to make to the lessor on
termination of the lease or surrender of the property) payable by
the Guarantor or a Restricted Subsidiary, as lessee or sublessee
under a lease of real or personal property, but shall be exclusive
of any amounts required to be paid by the Guarantor or a Restricted
Subsidiary (whether or not designated as rents or additional rents)
on account of maintenance, repairs, insurance, taxes and similar
charges. Fixed rents under any so-called "percentage leases" shall
be computed solely on the basis of the minimum rents, if any,
required to be paid by the lessee regardless of sales volume or
gross revenues;
1.1.72 "REPORTABLE EVENT" has the same meaning as in ERISA;
1.1.73 "RESPONSIBLE OFFICER" means any Senior Financial
Officer and any other officer of the Borrower or the Guarantor with
responsibility for the administration of the relevant portion of
this Agreement;
1.1.74 "RESTRICTED GROUP" means, as of the date of
determination thereof, the Guarantor and its Restricted
Subsidiaries;
15
<PAGE>
1.1.75 "RESTRICTED INVESTMENTS" means all Investments, other
than:
1.1.75.1 Investments by the Guarantor and its Restricted
Subsidiaries in and to Restricted Subsidiaries, including,
without limitation, Investments (a) directly out of the
cash proceeds to the Guarantor of the concurrent sale of
shares of capital stock of the Guarantor or (b) pursuant
to a direct share exchange offer by the Guarantor, and
including any investment in a corporation which, after
giving effect to such investment, will become a Restricted
Subsidiary;
1.1.75.2 Investments in commercial paper maturing in 270
days or less from the date of issuance which, at the time
of acquisition by the Guarantor or any Restricted
Subsidiary, is accorded a rating of at least A-2 by
Standard & Poor's Corporation or at least Prime-2 by
Moody's Investors Service, Inc.;
1.1.75.3 Investments in (a) direct obligations of the
United States of America or any agency or instrumentality of
the United States of America, the payment or guarantee of
which constitutes a full faith and credit obligation of the
United States of America or (b) direct obligations of Canada
or any agency or instrumentality of Canada, the payment or
guarantee of which constitutes a full faith and credit
obligation of Canada, in either case, maturing in twelve
months or less from the date of acquisition thereof;
1.1.75.4 Investments in certificates of deposit maturing
within one year from the date of issuance thereof, issued by
a bank or trust company organized under the laws of the
United States, any state thereof or Canada or any province
thereof, having capital, surplus and undivided profits
aggregating at least US $500,000,000 (or its equivalent in
Canadian currency) and whose long-term certificates of
deposit are, at the time of acquisition thereof by the
Guarantor or a Restricted Subsidiary, rated A- or better by
Standard & Poor's Corporation or A3 or better by Moody's
Investors Service, Inc. or Investments in Eurodollar
Certificates of deposit maturing within one year after the
acquisition thereof and issued by a bank in western Europe
or England having capital, surplus and undivided profits of
at least US $1,000,000,000 (or its equivalent in such
country's local currency); and
1.1.75.5 loans and advances (including, without
limitation, loans or advances to employees of the Guarantor
for the purchase by such employee of shares of stock of the
Guarantor by such employee)
16
<PAGE>
in the usual and ordinary course of business to officers,
directors and employees for expenses (including moving
expenses related to a transfer) incidental to carrying on
the business of the Guarantor or any Restricted Subsidiary
provided that the aggregate amount of all such loans or
advances shall at no time exceed US $2,000,000;
1.1.76 "RESTRICTED PAYMENTS" means, for any period,
1.1.76.1 the declaration or payment, directly or
indirectly, of any dividend either in cash or property, on
any shares of capital stock of the Guarantor or any
Restricted Subsidiary;
1.1.76.2 the purchase, redemption or retirement, directly
or indirectly, of any shares of capital stock of any class
or of any warrants, rights or options to purchase or
acquire any shares of capital stock of the Guarantor or
any Restricted Subsidiary; and
1.1.76.3 any payment or distribution, directly or
indirectly, by the Guarantor or a Restricted Subsidiary in
respect of its capital stock;
PROVIDED, HOWEVER, that "Restricted Payments" shall not include any
such dividends, purchases, redemptions, retirements or other
distribution by a Restricted Subsidiary to the Guarantor or to a
Wholly-owned Restricted Subsidiary;
1.1.77 "RESTRICTED SUBSIDIARY" means and includes
1.1.77.1 each of the Borrower and its Subsidiaries,
including IPG Holding Company of Nova Scotia ("CANCO") and
IPG Finance LLC notwithstanding the fact that they might be
Unrestricted Subsidiaries under the Note Agreement;
1.1.77.2 IPG (US) Acquisition Corporation, IPG (US)
Holdings Inc., IPG (US) Inc. and ATC, notwithstanding the
fact that they might be Unrestricted Subsidiaries under the
Note Agreement; and
1.1.77.3 any Subsidiary of the Guarantor any of whose
Debt is guaranteed by the Guarantor, notwithstanding the
fact that such Subsidiary might be an Unrestricted
Subsidiary under the Note Agreement;
1.1.77.4 Intertape Polymer Corp., Polymer International
Corp., Intertape Polymer Inc., any other Subsidiary so
described in Schedule "E" hereto and any other Subsidiary
(a) which is organized
17
<PAGE>
under the laws of the United States, Puerto Rico, Canada or
any Qualifying EU Jurisdiction or any jurisdiction thereof;
(b) which conducts substantially all of its business and
has substantially all of its assets within the United
States, Puerto Rico, Canada or any Qualifying EU
Jurisdiction; (c) of which more than 80% (by number of
votes) of the Voting Stock is beneficially owned by the
Guarantor or any wholly-owned Restricted Subsidiary, and
(d) which has been designated by the Board of Directors of
the Guarantor as a Restricted Subsidiary in accordance
with Section 11.17;
1.1.78 "ROLLOVER DATE" means, with respect to a Libor
Advance, the date of any such Advance, or the first day of any
Designated Period;
1.1.79 "SECOND CURRENCY" has the meaning ascribed to it in
Section 14.1;
1.1.80 "SECURITY" shall have the same meaning as in Section
2(1) of the Securities Act of 1933, as amended;
1.1.81 "SELECTED AMOUNT" means, with respect to the Libor
Advance, the amount in respect of which the Borrower, has asked, in
accordance with Section 4.2, that the interest payable thereon be
calculated on the Libor Basis;
1.1.82 "SENIOR FINANCIAL OFFICER" means the chief financial
officer, principal accounting officer, treasurer or comptroller of
the Guarantor;
1.1.83 "SUBSIDIARY" means any moral Person in respect of
which the majority of the issued and outstanding capital stock
granting a right to vote in all circumstances is at the relevant
time owned by the Guarantor or one or more of its Subsidiaries and
includes a limited partnership which would be an Affiliate;
1.1.84 "TERM" means the term commencing on the date hereof
and terminating:
1.1.84.1 with respect to Facility A, on December 2, 1999,
subject to extension following an Extension Request (as
defined in Section 2.2) which is accepted by the Lender;
1.1.84.2 with respect to Facility B, on January 31, 1999;
1.1.85 "TOTAL DEBT" means all Debt of the Guarantor and the
Restricted Subsidiaries (and for greater certainty, includes any
Debt of an Unrestricted Subsidiary Guaranteed by the Guarantor) on
a Consolidated basis, less Available Cash;
18
<PAGE>
1.1.86 "TRANSFER AGREEMENT" means the form of transfer
agreement annexed hereto as Schedule "D";
1.1.87 "UNRESTRICTED SUBSIDIARY" means any Subsidiary which
is not a Restricted Subsidiary;
1.1.88 "US PRIME RATE" means, on any day, the rate of
interest, expressed as an annual rate, publicly announced or posted
by the Lender or any Assignee as being its reference rate then in
effect for determining interest rates on demand commercial loans
granted in the United States of America in US Dollars to clients of
the Lender or an Assignee, whether or not any such loans are
actually made;
1.1.89 "US PRIME RATE BASIS" means the basis of calculation
of interest on the US Dollar Advances, or any part thereof, in
accordance with the provisions of Sections 5.1, and 5.2;
1.1.90 "US PRIME RATE ADVANCE" means, at any time, the part
of the US Dollar Advances with respect to which the Borrower has
chosen, or, in accordance with the provisions hereof, is obliged,
to pay interest on the US Prime Rate Basis;
1.1.91 "US DOLLARS" or "US $" means the lawful currency of
the United States of America in same day immediately available
funds or, if such funds are not available, the form of currency of
the United States of America which is ordinarily used in the
settlement of international banking operations on the day on which
any payment or any calculation must be made pursuant to this
Agreement;
1.1.92 "US DOLLAR ADVANCES" means, at any time, the total
of all Loans in US Dollars, and includes the amount of all Letters
of Credit denominated in US Dollars;
1.1.93 "VOTING STOCK" means Securities of any class or
classes, the holders of which are ordinarily, in the absence of
contingencies, entitled to elect a majority of the corporate
directors (or Persons performing similar functions);
1.1.94 "WHOLLY-OWNED" when used in connection with any
Subsidiary means a Subsidiary of which all of the issued and
outstanding shares of stock (except shares required as directors'
qualifying shares) shall be owned by the Borrower, the Guarantor
and/or one of its Wholly-owned Restricted Subsidiaries.
1.2 INTERPRETATION
Unless stipulated to the contrary, the words used herein which indicate
the singular include the plural and vice versa and the words indicating
masculine include the feminine and vice versa. In addition, (a) the word
"INCLUDES" (or "INCLUDING") shall be interpreted to mean "INCLUDES
19
<PAGE>
(OR INCLUDING) WITHOUT LIMITATION", and (b) where any provision in this
Agreement refers to action to be taken by any Person, or which such
Person is prohibited from taking, such provision shall be applicable
whether the action in question is taken directly or indirectly by such
person.
1.3 CURRENCY
Unless the contrary is indicated, all amounts referred to herein are
expressed in US Dollars.
1.4 GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
Unless the Lender shall otherwise expressly agree or unless otherwise
expressly provided herein, all of the terms of this Agreement which are
defined under the rules constituting Generally Accepted Accounting
Principles shall be interpreted, and all financial statements to be
prepared hereunder shall be prepared, in accordance with Generally
Accepted Accounting Principles.
1.5 DIVISION AND TITLES
The division of this Agreement into Articles, Sections and subsections
and the insertion of titles are for convenience of reference only
and shall not affect the meaning or interpretation of this Agreement.
2 THE CREDIT
2.1 THE FACILITIES
Subject to the provisions hereof, the Lender agrees to make available to
the Borrower, individually and not jointly and severally or solidarily
with any future Assignee, its Participation in the Credit, which Credit
consists of:
2.1.1 a maximum amount of $50,000,000 under Facility A; and
2.1.2 a maximum amount of $50,000,000 under Facility B;
for a total of up to US $100,000,000 (the "CREDIT").
2.2 FACILITY A
All Advances borrowed under Facility A may be repaid and re-borrowed by
the Borrower at all times during the Term. The Lender may, in its
absolute discretion, agree to extend the Term in respect of Facility A
for a further period of 12 months, provided that the Borrower
20
<PAGE>
makes a request to the Lender not more than 90 days prior to the
then-current expiry of the Term (the "EXTENSION REQUEST"). The Lender
undertakes to respond to such request within a delay not exceeding 45
days from receipt thereof. If the Lender fails to so respond, the
Lender shall be deemed to have refused to grant any such extension.
2.3 FACILITY B
All Advances available to the Borrower under Facility B may be drawn by
way of one single Advance during the Disbursement Period, and may not be
re-borrowed by the Borrower during the Term. However, the Borrower may
convert from one form of Advance to another subject to the provisions of
this Agreement.
3 PURPOSE
3.1 PURPOSE OF THE ADVANCES
All Advances made by the Lender to the Borrower in accordance with the
provisions hereof (a) under Facility A, shall be used by the Borrower
(directly or indirectly) exclusively to acquire the shares of ATC and for
general corporate or business purposes, and (b) under Facility B, shall
be used by the Borrower, directly or indirectly, exclusively to refinance
existing Funded Debt of ATC and for general corporate or business
purposes. No proceeds of any Advance will be used to acquire any equity
security of a class which is registered pursuant to Section 12 of the
Securities Exchange Act of 1934 or any "margin stock", as defined in
Federal Reserve System Board of Governors Regulation U.
4 ADVANCES, CONVERSIONS AND OPERATION OF ACCOUNTS
4.1 NOTICE OF BORROWING
Subject to the applicable provisions of this Agreement, at all times
during the relevant Disbursement Period, the Borrower shall be entitled
to draw upon the Credit, on one or more occasions, up to the maximum
amount of the Credit, provided that at least one (1) Business Day prior
to the day on which any US Prime Rate Advance is required, the Borrower
shall have provided to the Lender an irrevocable telephone notice at or
before 10:00 A.M., New York time, on any Business Day, followed by the
delivery on the same day of a written notice of confirmation
substantially in the form of Schedule "B". Notices in respect of Libor
Advances and Letters of Credit shall be made in accordance with the
provisions of Sections 4.2 and 4.3, respectively.
21
<PAGE>
4.2 LIBOR ADVANCES AND CONVERSIONS
On any Business Day during the Term, upon an irrevocable telephone notice
to the Lender given prior to 10:00 A.M., NEW YORK time at least three
Business Days prior to the date of a proposed Libor Advance or a Rollover
Date, followed by the delivery on the same day of a written notice of
confirmation substantially in the form annexed hereto as Schedule "B",
the Borrower may request that a Libor Advance be made, that one or more
Advances not borrowed as Libor Advances be converted into one or more
Libor Advances or that a Libor Advance or any part thereof be extended,
as the case may be. The Lender shall determine the LIBOR which will be
in effect on the date of the Advance or the Rollover Date, as the case
may be (which in such case must be a Business Day), with respect to the
Selected Amount or to each of the Selected Amounts, as the case may be,
having a maturity:
4.2.1 under Facility A, of 30, 60, 90 or 180 days; and
4.2.2 under Facility B, of 30, 60 or 90 days;
from the date of the Advance or the Rollover Date, as the case may be.
However, if the Borrower has not delivered a notice to the Lender in a
timely manner in accordance with the provisions of this Section 4.2, the
Borrower shall be deemed to have chosen to have the interest on the
amount of such Advance calculated on the US Prime Rate Basis.
4.3 LETTERS OF CREDIT
As part of the Credit available hereunder, the Borrower may cause to be
issued by the Lender one or more Letters of Credit in a maximum aggregate
amount outstanding at any time not exceeding:
4.3.1 Under Facility A, US $10,000,000; and
4.3.2 Under Facility B, US $20,000,000;
and for a duration not exceeding the lesser of one (1) year from the date
of issuance or the remaining duration of the Term, subject to the
signature by the Borrower of the Lender's standard documentation then
currently used in connection with letters of credit. The Borrower shall
pay non-refundable fees in respect of any such Letters of Credit equal to
the rate per annum indicated in the definition of "Margin" multiplied by
the face amount thereof, subject to a minimum fee for each Letter of
Credit in an amount of $250, payable in advance. The Guarantor expressly
acknowledges that it will remain liable hereunder irrespective of the
fact that it has not executed such documentation together with the
Borrower. For greater certainty, each of the Borrower and the Guarantor
acknowledge that any Letters of Credit issued under Facility B must be
issued during the relevant Disbursement Period, since Facility B is not
revolving in nature.
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4.4 CURRENCY
Subject to the provisions of Section 2.1, at any time during the relevant
Disbursement Period the Borrower may borrow, on one or more occasions, up
to the maximum amount of the Credit in US Dollars.
4.5 OPERATION OF ACCOUNTS
The Lender shall maintain in its books at the Branch a record of the
Loan, including the Letters of Credit issued by the Lender at the request
of the Borrower, attesting as to the total of the Borrower's indebtedness
to the Lender in accordance with the provisions hereof. These accounts
or registers shall constitute, in the absence of manifest error, PRIMA
FACIE proof of the total amount of the indebtedness of the Borrower to
the Lender in accordance with the provisions hereof, of the date of any
Advance made to the Borrower and of the total of all amounts paid by the
Borrower from time to time with respect to principal and interest owing
on the Loan and the fees and other sums exigible in accordance with the
provisions hereof.
4.6 LIMITATIONS ON ADVANCES
Any amount of the Credit available under Facility A and Facility B shall
cease to be available at the expiry of the Term.
4.7 NETTING
On the date of any Advance or on a Rollover Date, the Lender shall be
entitled to net amounts payable on such date by the Lender to the
Borrower against amounts payable on such date by the Borrower to the
Lender.
5 INTEREST AND FEES
5.1 INTEREST ON THE US PRIME RATE BASIS
The principal amount of the US Dollar Advances which at any time and from
time to time remains outstanding and in respect of which the Borrower has
chosen or, in accordance with the provisions hereof, is obliged to pay
interest on the US Prime Rate Basis, shall bear interest, calculated
daily, on the daily balance of such Loan, from the date of the Advance up
to and including the day preceding the date of repayment in full (whether
in accordance with Article 8 or Article 14, as the case may be) of the US
Dollar Advances at the annual rate (calculated based on a 365 or 366 day
year, as the case may be) applicable to each of such days which
corresponds to the US Prime Rate at the close of business on each of such
days, plus the Margin; provided that in the event that the US Prime Rate
is, for any period, less than the Federal Funds Effective Rate plus the
Margin then applicable to Libor Advances, US Base Rate
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shall be deemed to be equal to the Federal Funds Effective Rate plus the
greater of .50% or the Margin then applicable to Libor Advances. For the
purposes hereof, the term "FEDERAL FUNDS EFFECTIVE RATE" means, for any
period, a fluctuating interest rate per annum (calculated based on a 360
day year) equal, for each day during such period, to the weighted average
of the rates on overnight federal funds transactions with members of the
Federal Reserve System arranged by Federal Funds brokers as published for
such day (or, if such day is not a Business Day, for the next preceding
Business Day) by the Federal Reserve Bank of New York or, for any day on
which such rate is not so published for such day by the Federal Reserve
Bank of New York, the average of the quotations for such day for such
transactions received by the Lender from three Federal Funds brokers of
recognized standing selected by the Lender. If for any reason the Lender
shall have determined (which determination shall be conclusive, absent
manifest error) that it is unable to ascertain the Federal Funds
Effective Rate for any reason, including without limitation, the
inability or failure of the Lender to obtain sufficient bids or
publications in accordance with the terms hereof, the Lender's US Prime
Rate will apply.
5.2 PAYMENT OF INTEREST ON THE US PRIME RATE BASIS
The interest payable in accordance with Section 5.1 and calculated in the
manner hereinabove described is payable to the Lender monthly, in arrears,
on the last day of each month.
5.3 INTEREST ON THE LIBOR BASIS
The principal amount of the Libor Advances which at any time and from
time to time remains outstanding shall bear interest, calculated daily,
on the daily balance of such Libor Advances, from each Rollover Date, at
the annual rate (calculated based on a 360-day year) applicable to each
of such days which corresponds to the LIBOR applicable to each Selected
Amount, plus the Margin, and shall be effective as and from each Rollover
Date up to and including the date prior to the next Rollover Date.
5.4 PAYMENT OF INTEREST ON THE LIBOR BASIS
The interest payable in accordance with the provisions of Section 5.3 and
calculated in the manner hereinabove set out on the amount outstanding
from time to time is payable to the Lender, in arrears,
5.4.1 on the next Rollover Date when the Designated Period is 30
to 90 days,
5.4.2 when the Designated Period exceeds 90 days, on the first
Business Day following each period of 90 days during such
Designated Period and at the next Rollover Date, if the Designated
Period is more than 90 days and is not a multiple of 90 days.
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5.5 LIMITS TO THE DETERMINATION OF LIBOR
Nothing herein contained shall be interpreted as authorizing the
Borrower, with respect to the determination of LIBOR, to choose a
Selected Amount with respect to each Designated Period of less than
US $1,000,000 or a greater amount other than in whole multiples of
US $100,000.
5.6 FIXING OF LIBOR
LIBOR shall be transmitted to the Borrower by the Lender at approximately
11:00 A.M., New York time, two Business Days prior to:
5.6.1 the date on which the Libor Advance is to be made; or
5.6.2 the relevant Rollover Date.
5.7 INTEREST ON THE LOAN
Where no specific provision with respect to interest on an outstanding
portion of the Loan is contained in this Agreement, the interest on such
portion of the Loan shall be calculated and payable on the US Prime Rate
Basis.
5.8 ARREARS OF INTEREST
Any arrears of interest or principal shall bear interest at a rate that
is two percent (2%) per annum higher than the rate of interest payable in
respect of the relevant principal amount of the Loan and shall be
calculated and exigible on the same basis.
5.9 MAXIMUM INTEREST RATE
The amount of the interest or fees exigible in applying this agreement
shall not exceed the maximum rate permitted by Law. Where the amount of
such interest or such fees is greater than the maximum rate, the amount
shall be reduced to the highest rate which may be recovered in accordance
with the applicable provisions of Law.
5.10 FEES
The Borrower shall pay the following fees (the "FEES") to the Lender:
5.10.1 a Standby Fee equal to the percentage set out in the
definition of "Margin", multiplied by an amount equal to the
unused portions of Facility A of the Credit, calculated daily and
payable monthly in arrears based on a 365/366 day year on the last
day of each calendar month or on such other date as the Lender may
determine, commencing in respect of the month ending on December
31, 1997;
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5.10.2 an arrangement fee: (a) in respect of Facility A, equal
to .35% of the Credit available under Facility A, being an amount
of US $175,000, payable to the Lender upon the signature hereof,
and (b) in respect of Facility B, equal to .35% of the Credit
available under Facility B, being an amount of US $175,000,
payable to the Lender upon the signature hereof; and
5.10.3 in the event of any syndication, assignment or granting
of participations in accordance with the provisions of Section
15.2, an annual agency fee in an amount to be negotiated at the
time.
However, notwithstanding the provisions of subsection 5.10.2 hereof, if
by March 31, 1998 the Guarantor and the Restricted Subsidiaries have not
completed a private placement and remitted the proceeds thereof to the
Lender in full payment of the Loans under Facility B, the Borrower and
the Guarantor shall pay to the Lender an additional fee equal to .35% of
the Credit under Facility B.
5.11 INTEREST ACT
5.11.1 For the purposes of the Interest Act of Canada, any amount
of interest or fees calculated herein using 360, 365 or 366 days
per year and expressed as an annual rate is equal to the said rate
of interest or fees multiplied by the actual number of days
comprised within the calendar year, divided by 360, 365 or 366,
as the case may be.
5.11.2 The parties agree that all interest in this Agreement will
be calculated using the nominal rate method and not the effective
rate method, and that the deemed re-investment principle shall not
apply to such calculations. In addition, the parties acknowledge
that there is a material distinction between the nominal and
effective rates of interest and that they are capable of making
the calculations necessary to compare such rates.
6 RESTRICTIONS, LIMITATIONS AND MARKET CONDITIONS
6.1 MARKET FOR LIBOR ADVANCES
If at any time or from time to time: (a) as a result of market
conditions, there exists no appropriate or reasonable method to establish
LIBOR, for a Selected Amount or a Designated Period, or (c) US Dollar
deposits are not available to the Lender in such market in the ordinary
course of business in amounts sufficient to permit it to make the Libor
Advance, for a Selected Amount or a Designated Period, the Lender shall
so advise the Borrower and the Lender shall not be obliged to honour any
notices of borrowing in connection with any Libor Advances, and
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the Libor Advance option shall thereupon be suspended upon such notice by
the Lender to the Borrower.
6.2 SUSPENSION OF LIBOR ADVANCE OPTION
If a notice has been given by the Lender in accordance with Section 6.1,
the Libor Advance, or any part thereof, as the case may be, shall not be
made (whether as an Advance, a conversion or an extension) by the Lender
and the right of the Borrower to choose that Advances be made or, once
made, be converted or extended into the Libor Advance shall be suspended
until such time as the Lender has determined that the circumstances
having given rise to such suspension no longer exist, in respect of which
determination the Lender shall advise the Borrower within a reasonable
delay, and the Borrower shall within ten (10) days following receipt of a
demand to such effect, pay to the Lender the amounts referred to in
Section 7.2.
6.3 LIMITS ON THE LETTERS OF CREDIT AND LIBOR ADVANCES
Nothing in this Agreement shall be interpreted as authorizing the
Borrower:
6.3.1 to borrow by way of Libor Advances, nor as obliging the
Lender to accept such Notices of Borrowing in respect of Libor
Advances, for a Designated Period; nor
6.3.2 to cause to be issued Letters of Credit;
maturing on a date which results in a situation where the Credit cannot
be reduced as required by this Agreement, or on a date which is after
the expiry of the Term.
7 CHANGES IN CIRCUMSTANCES, INCREASED FEES AND INDEMNIFICATION
7.1 ILLEGALITY, INCREASED COSTS
If the Lender, acting reasonably, determines (which determination shall
be attested to by a certificate submitted to the Borrower and which shall
be final and binding between the parties hereto in the absence of
manifest error) that i) the adoption by a governmental or international
authority (including the Bank for International Settlements (the "BIS"))
of a law, directive, requirement or guideline, whether or not having the
force of law, ii) any modification to a law, directive or guideline,
whether or not having the force of law, or to the interpretation or
application of same by a tribunal or governmental or international
authority (including the BIS) or other body charged with such
interpretation or application, or iii) any quashing by a tribunal or
other governmental or international authority or body (including the BIS)
of an interpretation of any law, directive, requirement or guideline,
whether or not having the force of law:
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7.1.1 has rendered or will render it illegal or contrary to any
law, directive or guideline for the Lender to maintain or to give
effect to all or part of the obligations stipulated in this
Agreement, including the obligation to make or maintain all or any
part of a Libor Advance pursuant to the terms hereof, then the
obligation of the Lender to maintain or to give effect to such
part of its obligations, will become null and, subject to the
provisions of the particular law, directive or guideline and of
Section 7.2 with respect to losses, costs and expenses, if the
Loan affected is a Libor Advance, the Borrower may convert the
principal amount thereof into a US Prime Rate Advance, and pay the
interest accrued thereon, or may reimburse the particular Libor
Advance in whole with interest accrued thereon.
Such conversion or reimbursement shall be made at the expiry of
the relevant Designated Period which is the last to expire prior
to the effective date of such adoption, change or quashing, or,
if in the judgment of the Lender, an immediate conversion or
reimbursement is necessary, immediately upon demand by the Lender;
or
7.1.2 i) has imposed, modified or deemed applicable any loan
ceiling with respect to the Lender, or imposed, modified or deemed
applicable any special tax, reserve, deposit, capital adequacy or
similar requirement with respect to the assets held by, deposited
at or used for the purchase of funds, or to the loans made by the
Lender, or ii) changes the basis of taxation on payments made to
the Lender under this Agreement (other than a change affecting the
taxes based on net profits or capital of the Lender), or iii)
imposes upon the Lender any other monetary conditions or
restrictions with respect to this Agreement, all or any part of a
Loan, as the case may be, or any other document, effect or
operation contemplated hereby, and if the result of any of the
foregoing is to increase the cost to the Lender of making or
maintaining any Loan, or any part thereof, as the case may be, or
to reduce any amount otherwise receivable by the Lender hereunder
with respect thereto, then, in any such case, the Borrower shall
promptly pay to the Lender, within 10 Business Days from demand,
such additional amounts necessary to compensate the Lender for
such additional cost or reduced amount receivable as is determined
in good faith by the Lender. The Lender shall use reasonable
efforts to advise the Borrower of any event described in this
Section 7.1 within a reasonable delay. If the Lender becomes
entitled to claim any additional amounts pursuant to this Section
7.1, it shall promptly notify the Borrower of the event by reason
of which it has become so entitled and provide reasonable
particulars of the calculation of such amount. A certificate of
the Lender as to any such additional amounts payable to it shall
be conclusive and binding in the absence of manifest error.
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7.2 INDEMNITY
The Borrower shall indemnify the Lender against and hold the Lender as
well as its directors, officers or employees harmless from any loss or
expense, including without limitation any loss or expense arising from
interest or fees payable by the Lender to lenders of funds obtained by it
in order to make or maintain any Advance and any loss or expense incurred
in liquidating or re-employing deposits from which such funds were
obtained, which the Lender may sustain or incur as a consequence of any
i) default by the Borrower in the payment when due of the amount of or
interest on any Loan or in the payment when due of any other amount
hereunder, ii) default by the Borrower in obtaining an Advance after the
Borrower has given notice hereunder that it desires to obtain such
Advance, iii) default by the Borrower in making any voluntary reduction
of the outstanding amount of any Loan after the Borrower has given notice
hereunder that it desires to make such reduction, and iv) the payment of
any Libor Advance otherwise than on the maturity date thereof (including
without limitation any such payment required pursuant to Section 8.1 or
upon acceleration pursuant to Section 13.2). A certificate of the Lender
providing reasonable particulars of the calculation of any such loss or
expense shall be conclusive and binding in the absence of manifest error.
If the Lender becomes entitled to claim any amount pursuant to this
Section 7.2, it shall promptly notify the Borrower of the event by reason
of which it has become so entitled and reasonable particulars of the
related loss or expense.
7.3 WITHHOLDING TAXES
The Borrower and the Guarantor, for the benefit of the Lender and any
Assignees which are residents, citizens or domestic corporations of the
United States of America at the time of any payment made by the Borrower
or the Guarantor hereunder (the "RELEVANT HOLDERS"), agree that in the
event any such payments made by the Borrower or the Guarantor under this
Agreement are subject to any present or future tax, duty, assessment,
impost, levy or other similar charge (a "RELEVANT TAX") imposed, levied,
collected, assessed, deducted or withheld by the government of Canada (or
any authority therein or thereof) or by the government of any other
country or jurisdiction (or any authority therein or thereof) other than
the United States from or through which payments hereunder are actually
made (each a "TAXING JURISDICTION"), the Borrower or the Guarantor will
pay to the Relevant Holder such additional amounts as may be necessary in
order that the net amounts paid to such Relevant Holder pursuant to the
terms of this Agreement after imposition of any such Relevant Tax
(including, without limitation, any Relevant Tax on such additional
amount) shall be not less than the amounts specified in this Agreement
to be then due and payable (after giving effect to the exclusion for
Relevant Taxes imposed by the government of the United States as
described above).
7.4 SURVIVAL
Without prejudice to the survival or termination of any other agreement
of the Borrower or the Guarantor under this Agreement, the obligations of
the Borrower under Sections 7.2 and 7.3
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shall survive the payment of principal and interest on all Loans and the
termination of the Credit.
8 PAYMENT, REPAYMENT AND PREPAYMENT
8.1 REPAYMENT OF THE LOAN
The Borrower hereby agrees to repay the Loan on the last day of the Term.
However, if the Guarantor or the Restricted Subsidiaries complete a
private placement as contemplated, the proceeds thereof shall promptly be
used to prepay the Loans under Facility B, subject to the provisions of
Section 8.2 with respect to such prepayment.
8.2 PREPAYMENT, REDUCTION AND CANCELLATION OF THE CREDIT
On any Business Day during the Term, after having given notice to the
Lender at least five (5) days prior to the proposed prepayment, the
Borrower may repay or prepay in minimum amounts of US $1,000,000, or in
whole multiples of such amount, all or part of the principal amount of
the Loan, provided that in respect of the Libor Advance, no repayment
may be made on a day other than a Rollover Date, save as provided in
Sections 7.2 and 8.3, with, in each case, all interest accrued and unpaid
on the amounts so prepaid. However, the Borrower may not, in respect of
Facility B at any time during the Term, again borrow all or part of the
Loan repaid, whether such payment was a prepayment or otherwise.
In addition, the Borrower may, upon the same notice, cancel any portion
of the Credit under Facility A which has not been drawn by the Borrower.
No Standby Fee (described in Section 5.10) shall be payable in respect of
any portion of the Credit so cancelled as and from the effective date of
its cancellation. The Borrower shall not be permitted to draw Advances
in respect of any portion of the Credit so cancelled. If necessary in
connection with such cancellation or reduction, the Borrower shall repay
all or any part of the Loan, provided that in respect of a Libor
Advance, no repayment may be made on a day other than a Rollover Date,
save as provided in Section 7.2 and in Section 8.3, with all interest
accrued and unpaid on the amounts so prepaid.
8.3 PAYMENT OF LOSSES RESULTING FROM A PREPAYMENT
If a prepayment in respect of the Libor Advance is made on a date other
than a Rollover Date, simultaneously with such prepayment, the Borrower
shall pay to the Lender the losses, costs and expenses suffered or
incurred by the Lender with respect to such prepayment, which are
referred to in Section 7.2.
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8.4 IMPUTATION OF PREPAYMENTS
Any prepayment made in accordance with Section 8.2 shall be imputed
firstly to Facility B, and secondly to Facility A.
8.5 CURRENCY OF PAYMENTS
All payments, repayments or prepayments, made hereunder shall be made in
US Dollars.
8.6 PAYMENTS BY THE BORROWER TO THE LENDER
All payments to be made by the Borrower in connection with this
Agreement shall be made in funds having same day value to the Lender at
the Branch, or at any other office or account in Canada or the United
States of America designated by the Lender. Any such payment shall be
made on the date upon which such payment is due, in accordance with the
terms hereof, no later than 11:00 A.M., NEW YORK time.
8.7 PAYMENT ON A BUSINESS DAY
Each time a payment, repayment or prepayment is due on a day which is
not a Business Day, it shall be made on the previous Business Day.
8.8 PAYMENTS BY LENDER TO THE BORROWER
Any amounts payable to the Borrower shall be paid by the Lender on a
Business Day, in funds having same day value, to the Borrower's account
located at Toronto Dominion Bank, 31 West 52nd Street, 19th floor, New
York, New York.
8.9 APPLICATION OF PAYMENTS
Except as otherwise indicated herein or as otherwise determined by the
Lender, all payments made to the Lender by the Borrower shall be applied
by the Lender as follows:
a) to the fees, costs, expenses and accessories contemplated by
Article 7, Section 13.6 and Section 16.5;
b) to all amounts due under Article 5 hereunder;
c) to the repayment of the principal amount of the Loan subject,
in the case of prepayments, to the imputation rules set out in
Section 8.4;
d) to any other amounts due pursuant to this Agreement.
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8.10 NO SET-OFF OR COUNTERCLAIM BY BORROWER
All payments by the Borrower shall be made free and clear of and without
any deduction for or on account of any set-off or counterclaim.
8.11 DEBIT AUTHORIZATION
The Lender is hereby authorized to debit the Borrower's, the Guarantor's
and the Restricted Subsidiaries' account or accounts maintained from
time to time at the Branch or elsewhere, and to set off and compensate
against any and all accounts, credits and balances maintained at any
time by the Borrower, the Guarantor or the Restricted Subsidiaries for
the amount of any interest or any other amounts due and owing hereunder
from time to time payable by the Borrower to the Lender, in order to
obtain payment thereof. The Lender agrees to give notice of any such
debit, set off or compensation within a reasonable delay thereafter,
provided that the failure to give such notice shall not invalidate any
action taken by the Lender nor render it liable to the Borrower, the
Guarantor or the other Restricted Subsidiaries.
9 CONDITIONS PRECEDENT
9.1 INITIAL ADVANCE UNDER THE CREDIT
The obligation of the Lender to make an initial Advance under the Credit
is conditional upon each of the following conditions having been
satisfied, together with the conditions set out in Section 9.2:
9.1.1 all Charges on the property of the Guarantor and the
Restricted Subsidiaries, other than Permitted Charges, shall have
been discharged; provided that the Charges in favour of Comerica
Bank may continue to charge the property of ATC if the Lender is
in possession of an authorized, valid undertaking from Comerica
Bank to discharge such Charges within a delay not exceeding
30 days from the Closing Date (the "CB/ATC TEMPORARY CHARGES");
9.1.2 each of this Agreement and the IPG Guarantee shall have
been executed and delivered;
9.1.3 a Guarantee by IPG Finance LLC of the obligations of the
Borrower to the Lender, substantially in the form of the IPG
Guarantee, together with an assignment of all amounts owing to
IPG Finance LLC from IPG (US) Acquisition Corporation and ATC
(collectively the "LLC DOCUMENTS"), shall have been executed and
delivered;
9.1.4 the Guarantor and the Restricted Subsidiaries shall have
obtained all necessary governmental, regulatory and other
approvals (including Federal Trade
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Commission approval) and all Laws, including environmental Laws,
shall have been complied with;
9.1.5 the Lender shall have received evidence satisfactory
to it that:
a) ATC's Funded Debt will remain as Funded Debt and not
be accelerated or otherwise become payable as a result of
the contemplated acquisition of ATC; and
b) ATC's Debt will rank PARI PASSU with the Loans
hereunder, subject to the provisions of subsection
12.2.1 (c);
9.1.6 the opening balance sheet of each of the Borrower
and its Subsidiaries and IPG (US) Acquisition Corporation and its
Subsidiaries shall have been delivered to the Lender, and shall
be satisfactory to it;
9.1.7 the results of the due diligence conducted by the
Lender concerning ATC's operations, including site visits,
accounts receivable audit, environmental due diligence, base-case
PRO FORMA statements and the assumptions contained therein, shall
be completely satisfactory to the Lender, acting reasonably;
9.1.8 each of the Guarantor and the Borrower shall have delivered
to the Lender a certificate in the form of Schedule "F" signed by
a Responsible Officer stipulating and certifying that:
a) such officer has taken cognizance of all the terms and
conditions of this Agreement and of all contracts,
agreements and deeds pertaining hereto; and
b) no Default or Event of Default has occurred nor exist
hereunder; and
c) each of the Guarantor and its Restricted Subsidiaries
holds the permits, licences and authorizations required in
order to permit it to possess its property and its real
estate and to carry on its business in the manner in which
it is being carried on at present;
9.1.9 there shall have been delivered to the Lender a written
undertaking from each of the Borrower's Subsidiaries, IPG Finance
LLC and Canco, as well as from IPG (US) Acquisition Corporation,
IPG (US) Holdings Inc. and IPG (US) Inc., pursuant to which each
of them undertakes that for so long as the Borrower or the
Guarantor has any obligations to the Lender hereunder:
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a) it shall not carry on any business, except for the
purposes of the acquisition of ATC;
b) it shall not, individually or collectively, incur or
have at any time any Indebtedness in excess of an aggregate
amount of US $100,000;
c) IPG Finance LLC shall not assign or transfer, other
than to the Lender and to Comerica Bank (with respect to
the Borrower's operating facility with Comerica Bank), its
rights against ATC or IPG (US) Acquisition Corporation with
respect to amounts owed to it from either or both of them;
9.1.10 the Borrower shall have delivered to the Lender the
favourable legal opinion of the counsel to the Borrower and the
Guarantor, addressed to the Lender and its counsel, substantially
in the form set forth in Schedule "G" and covering as well such
other ancillary matters as pertain to the transactions
contemplated hereunder and the acquisition of ATC, as required by
the Lender, acting reasonably.
9.2 CONDITIONS PRECEDENT TO ANY ADVANCE
The obligation of the Lender to make any Advance under the Credit is
conditional upon each of the following conditions having been satisfied:
9.2.1 the representations and warranties contained in this
Agreement shall continue to be true and correct (except where
stated to be made as at a particular date); and
9.2.2 the Borrower shall have paid all amounts due to the Lender
up to the date of any proposed Advance, whether on account of
Fees, disbursements or related matters;
9.2.3 nothing shall have occurred since December 31, 1996 which
would constitute a Material Adverse Change;
9.2.4 no Default shall have occurred and be continuing and no
Event of Default shall have occurred.
10 REPRESENTATIONS AND WARRANTIES
For so long as the Loan or any other amounts payable to the Lender hereunder
remain outstanding and unpaid, or the Borrower is entitled to borrow
hereunder (whether or not the conditions precedent to such borrowing have or
may be satisfied) each of the Guarantor and the Borrower hereby represents
and warrants to the Lender that:
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10.1 INCORPORATION
The Guarantor and each of the Restricted Subsidiaries is a corporation
duly incorporated or a limited partnership or limited liability company
duly constituted, and is organized, validly existing and in good standing
under the Laws of its jurisdiction of incorporation or constitution and
of all jurisdictions in which it carries on business. The Guarantor and
each of the Restricted Subsidiaries has the capacity and power, whether
corporate or otherwise, to hold its assets and carry on the business
presently carried on by it or which it proposes to carry on hereafter in
each jurisdiction where such business is carried on.
10.2 AUTHORIZATION
The Borrower has the power and has taken all necessary steps under the Law
in order to be authorized to borrow hereunder and to execute and deliver
and perform its obligations under this Agreement in accordance with the
terms and conditions thereof and to complete the transactions contemplated
herein. This Agreement has been duly executed and delivered by duly
authorized officers of the Borrower and is a legal, valid and binding
obligation of the Borrower, enforceable in accordance with its terms.
The Guarantor has the power and has taken all necessary steps under the
Law in order to be authorized to provide the IPG Guarantee and to execute
and deliver and perform its obligations under this Agreement and the IPG
Guarantee in accordance with the terms and conditions thereof and to
complete the transactions contemplated in the IPG Guarantee and herein.
Each of this Agreement and the IPG Guarantee has been duly executed and
delivered by duly authorized officers of the Guarantor, and is a legal,
valid and binding obligation of the Guarantor, enforceable in accordance
with its terms.
IPG Finance LLC has the power and has taken all necessary steps under the
Law in order to be authorized to provide the LLC Documents and to execute
and deliver and perform its obligations under the LLC Documents in
accordance with the terms and conditions thereof and to complete the
transactions contemplated in the LLC Documents. Each of the LLC Documents
has been duly executed and delivered by duly authorized officers of IPG
Finance LLC, and is a legal, valid and binding obligation of IPG Finance
LLC, enforceable in accordance with its terms.
10.3 COMPLIANCE OF THIS AGREEMENT
The execution and delivery of and performance of the obligations under
this Agreement and the IPG Guarantee in accordance with their respective
terms and the completion of the transactions contemplated therein and
herein do not require any consents or approvals which have not been
obtained, do not violate any Laws, do not conflict with, violate or
constitute a breach under the documents of incorporation or by-laws of
the Guarantor or the Restricted
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Subsidiaries or under any agreements, contracts or deeds to which the
Guarantor or any of the Restricted Subsidiaries is a party or binding
upon it or its assets and do not result in or require the creation or
imposition of any Charge whatsoever on the assets of the Guarantor or any
of the Restricted Subsidiaries, whether presently owned or hereafter
acquired, save for the Permitted Charges.
10.4 BUSINESS
The Guarantor currently operates as a holding company. ATC currently
operates the business of manufacturing and distributing masking tape. Each
of the Borrower and its Subsidiaries and IPG (US) Acquisition Corporation
and its Subsidiaries was created for the purpose of facilitating the
acquisition of ATC and none of them, other than ATC, carries on any
business.
The Borrower is not engaged in the business of extending credit for the
purpose of purchasing or carrying margin stock, and no proceeds of any
Advances will be used for a purpose which violates, or would be
inconsistent with, Federal Reserve System Board of Governors Regulation G,
U or X. Terms used in this Section or in Section 3.1 of this Agreement for
which meanings are provided in Federal Reserve System Board of Governors
Regulation G, U or X or any regulations substituted therefor, as from time
to time in effect, have the meaning so provided.
10.5 FINANCIAL STATEMENTS
The Consolidated financial statements dated December 31, 1996 have been
prepared in accordance with GAAP applied on a consistent basis throughout
the periods specified (except as noted thereon) and are an accurate
representation of the financial position of the Guarantor and the
Restricted Subsidiaries to which they relate as of the respective dates
specified and the results of their operations and changes in financial
position for the respective periods specified.
10.6 TITLE TO ASSETS
The Guarantor and each of the Restricted Subsidiaries has good, valid and
marketable title to all of its real property and valid title to all of its
other material properties and assets, free and clear of any Charges other
than Permitted Charges.
10.7 LITIGATION
Except as set out in Schedule "H" annexed hereto, on the date hereof,
there are no actions, suits or legal proceedings instituted or pending
nor, to the knowledge of the Guarantor and each of the Restricted
Subsidiaries, threatened, against any of them or their property before any
court or arbitrator or any governmental body or instituted by any
governmental body which, if decided against the Guarantor or any of the
Restricted Subsidiaries, could, individually or in the aggregate,
constitute a Material Adverse Change.
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10.8 TAXES
The Guarantor and each of the Restricted Subsidiaries has filed within the
prescribed delays all federal, provincial or other tax returns which it is
required by Law to file and all taxes, assessments and other duties levied
by the various governmental authorities with respect to the Guarantor and
each of the Restricted Subsidiaries have been paid when due, except to the
extent that (a) payment thereof is being contested in good faith by the
Guarantor or any of the Restricted Subsidiaries in accordance with the
appropriate procedures, for which adequate reserves have been established
in the books of the Guarantor or the Restricted Subsidiaries, as the case
may be, and (b) the outcome of such contestation, if decided against the
Guarantor or such Restricted Subsidiaries, could not, individually or in
the aggregate, reasonably be expected to result in a Material Adverse
Change.
10.9 INSURANCE
The Guarantor and each of the Restricted Subsidiaries have contracted for
the insurance coverage described in Section 11.6.
10.10 NO ADVERSE CHANGE
No Material Adverse Change, considered on a Consolidated basis, has
occurred from December 31, 1996 to the Closing Date.
10.11 REGULATORY APPROVALS
Neither the Guarantor nor any of the Restricted Subsidiaries is required
to obtain any consent, approval, authorization, permit or licence, nor to
effect any filing or registration with any federal, provincial or other
regulatory authority in connection with the execution, delivery or
performance, in accordance with their respective terms, of this Agreement,
any borrowings hereunder and the granting of the IPG Guarantee or any
other Guarantee.
10.12 COMPLIANCE WITH LAWS
Each of the Guarantor and the Restricted Subsidiaries is in material
compliance with all requirements of applicable Laws and with all of the
material conditions attaching to its permits, authorizations, licenses,
certificates and approvals, including without limitation its articles of
incorporation and by-laws.
10.13 FOREIGN ASSETS CONTROL REGULATIONS, ETC.
Neither the transactions contemplated hereby nor its use of the proceeds
of any Advances hereunder will violate the Trading with the Enemy Act, as
amended, or any of the foreign assets control regulations of the United
States Treasury Department (31 CFR, Subtitle B,
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Chapter V, as amended) or any enabling legislation or executive order
relating thereto. The Guarantor and the Restricted Subsidiaries are in
compliance with the Cuban Liberty and Democratic Solidarity (LIBERTAD)
Act, 22 U.S.C. Sections 6021 ET SEQ.
10.14 PENSION AND EMPLOYMENT LIABILITIES, COMPLIANCE WITH ERISA
10.14.1 Except as disclosed in subsection 10.14.3, neither the
Guarantor nor any of the Restricted Subsidiaries has any unfunded
pension liabilities, whether valued on a going concern or a wind-up
basis, and all compensation obligations (including wages,
salaries, commissions and vacation pay) to current employees and to
former employees of the Guarantor and the Restricted Subsidiaries
have been paid or accrued in full.
10.14.2 Each of the Guarantor, the Borrower and each ERISA
Affiliate has operated and administered each Plan in compliance
with all applicable laws except for such instances of noncompliance
as have not resulted in and could not reasonably be expected to
result in a liability in excess of US $2,500,000. Neither the
Guarantor nor any ERISA Affiliate has incurred any liability
pursuant to Title I or IV of ERISA or the penalty or excise tax
provisions of the Code relating to employee benefit plans (as
defined in section 3 of ERISA), and no event, transaction or
condition has occurred or exists that could reasonably be expected
to result in the incurrence of any such liability by the Guarantor
or any ERISA Affiliate, or in the imposition of any Charge on any
of the rights, properties or assets of the Guarantor or any ERISA
Affiliate, in either case pursuant to Title I or IV of ERISA or to
such penalty or excise tax provisions or to section 401(a)(29) or
412 of the Code, other than such liabilities or Charges as would
not, individually or in the aggregate, be expected to result in a
liability in excess of US $2,500,000.
10.14.3 Except as disclosed on Schedule "I-1" hereto, the
present value of the aggregate benefit liabilities under each of
the Plans (other than Multiemployer Plans), determined as of the
end of such Plan's most recently ended plan year on the basis of
the actuarial assumptions specified for funding purposes in such
Plan's most recent actuarial valuation report, did not exceed the
aggregate current value of the assets of such Plan allocable to
such benefit liabilities. The term "BENEFIT LIABILITIES" has the
meaning specified in section 4001 of ERISA and the terms "CURRENT
VALUE" and "PRESENT VALUE" have the meaning specified in section
3 of ERISA.
10.14.4 The Guarantor, the Borrower and the ERISA Affiliates
have not incurred withdrawal liabilities (and are not subject to
contingent withdrawal liabilities) under section 4201 or 4204 of
ERISA in respect of Multiemployer Plans that individually or in the
aggregate would be expected to result in a liability in excess of
US $2,500,000.
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10.14.5 The expected post-retirement benefit obligation
(determined as of the last day of the Guarantor's and its
Subsidiaries most recently ended fiscal year in accordance with
Financial Accounting Standards Board Statement No. 106, without
regard to liabilities attributable to continuation coverage
mandated by section 4980B of the Code) of the Guarantor and its
Subsidiaries has been disclosed in the appropriate financial
statements and, in any event, would not be expected to result in a
liability in excess of US $2,500,000.
10.14.6 The execution and delivery of this Agreement and the
borrowings hereunder will not involve any transaction that is
subject to the prohibitions of section 406 of ERISA or in
connection with which a tax could be imposed pursuant to section
4975(c)(1)(A)-(D) of the Code with respect to the employee benefit
plans of the Guarantor or any ERISA Affiliate.
10.14.7 Schedule "I" sets forth all ERISA Affiliates and all
"employee benefit plans" maintained by the Guarantor (or any
"affiliate" thereof) or in respect of which the Notes could
constitute an "employer security" ("EMPLOYEE BENEFIT PLAN" has the
meaning specified in section 3 of ERISA, "AFFILIATE" has the
meaning specified in section 407(d) of ERISA and section V of the
Department of Labor Prohibited Transaction Exemption 95-60 (60 FR
35925, July 12, 1995) and "EMPLOYER SECURITY" has the meaning
specified in section 407(d) of ERISA).
10.15 PRIORITY
The rights of the Lender hereunder, under the IPG Guarantee and under the
LLC Documents rank, and shall continue to rank, at all times during the
Term, at least PARI PASSU with all of the Indebtedness of the Guarantor
and each of the Restricted Subsidiaries, save and except as permitted
pursuant to subsection 12.2.1 (c).
10.16 COMPLETE AND ACCURATE INFORMATION
All of the information, reports and other documents and all data, as well
as the amendments thereto, provided to the Lender by or on behalf of the
Guarantor and the Restricted Subsidiaries were, at the time same were
provided, and are at the date hereof, complete, true and accurate in all
material respects.
10.17 EVENT OF DEFAULT
There exists no Default or Event of Default hereunder.
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10.18 AGREEMENTS WITH THIRD PARTIES
Each of the Guarantor and the Restricted Subsidiaries is in compliance in
all material respects with each and every one of its obligations under
agreements with third parties to which it is a party or by which it is
bound, the breach of which could reasonably be expected to result in a
Material Adverse Change.
10.19 ENVIRONMENT
10.19.1 There are no existing claims, demands, damages,
expenses, suits, proceedings, actions, negotiations or causes of
action of any nature whatsoever, whether threatened or pending,
arising out of the presence on any property owned or controlled by
the Guarantor or the Restricted Subsidiaries, either past or
present, of any hazardous substance or hazardous waste, or out of
any past or present activity conducted on any property now owned by
the Guarantor or the Restricted Subsidiaries, whether or not
conducted by the Guarantor or the Restricted Subsidiaries,
involving hazardous substances or hazardous waste which would
reasonably be expected to result in a Material Adverse Change;
10.19.2 To the best of the knowledge of the Borrower and the
Guarantor, after due enquiry:
(a) there is no hazardous substance or hazardous waste
existing on or under any property of the Guarantor or
any of the Restricted Subsidiaries which constitutes a
violation of any ordinance, statute or law for which an
owner or person in control of a property may be held
liable and which could reasonably be expected to result
in a Material Adverse Change;
(b) the business of the Guarantor and each of the
Restricted Subsidiaries is being carried on so as to
respect in all material ways the rules and regulations
applicable to environmental and health and safety
matters; and
(c) no contaminant, pollutant, toxic substance or
material or dangerous waste has been spilled or emitted
in reportable quantities into the environment from any
property owned or controlled by the Guarantor or any of
the Restricted Subsidiaries which could reasonably be
expected to result in a Material Adverse Change.
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10.20 SURVIVAL OF REPRESENTATIONS AND WARRANTIES
All of the statements contained in any certificate, attestation, financial
statements, reports, statements, data or other documents delivered to the
Lender by or on behalf of the Borrower, including under or pertaining to
this agreement or any other document contemplated hereby, and any
amendments thereto, or pertaining to any transactions contemplated therein
or hereby, constitute representations and warranties made hereunder,
subject to the limits and restrictions stipulated herein. All of the
representations and warranties made hereunder are true and correct at the
date hereof, shall be true and correct at the date of any Advance
hereunder, shall survive the execution and delivery of this agreement, any
investigation by or on behalf of the Lender or the making of any Advance
hereunder, and none of same are nor shall be waived, except in writing.
11 POSITIVE COVENANTS
For so long as the Loan remains outstanding and unpaid, or the Borrower is
entitled to borrow hereunder (whether or not the conditions precedent to such
borrowing have or may be satisfied) and unless the Lender shall otherwise agree
in writing, each of the Borrower and the Guarantor, for itself and each of the
other Restricted Subsidiaries and with respect to itself and each of the other
Restricted Subsidiaries, agrees as follows:
11.1 PRESERVATION OF JURIDICAL PERSONALITY
It shall do or cause to be done all things necessary to preserve and
maintain its existence in full force and effect.
11.2 PRESERVATION OF LICENSES
It shall maintain in effect and obtain, where necessary, all such
authorizations, approvals, licences or consents of such governmental
agencies, whether federal, state, provincial or local, which may be or
become necessary or required for the Guarantor and the Restricted
Subsidiaries to satisfy their obligations hereunder and under the IPG
Guarantee.
11.3 COMPLIANCE WITH APPLICABLE LAWS
It shall conduct its business in a proper and efficient manner and shall
keep or cause to be kept appropriate books and records of account, in
compliance with the Law, and shall record or cause to be recorded
faithfully and accurately all transactions with respect to its business in
accordance with GAAP applied on a consistent basis, and shall comply with
all material requirements of Law and with all the conditions attaching to
its permits, authorizations, licences, certificates and approvals including
the Occupational Safety and Health Act of 1970, as amended and ERISA.
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11.4 MAINTENANCE OF ASSETS
It shall maintain or cause to be maintained in good operating condition all
of its assets used or useful in the conduct of its business, as would a
prudent owner of similar property, whether same are held under lease or
under any agreement providing for the retention of ownership, and shall
from time to time make or cause to be made thereto all necessary and
appropriate repairs, renewals, replacements, additions, improvements and
other works.
11.5 BUSINESS
It will continue to carry on substantially the same type of business
currently carried on and activities which are ancillary, incidental or
necessary to its ongoing business as presently conducted, and will not
change the nature of its business activities as described in Section 10.4
without the prior written consent of the Lender.
11.6 INSURANCE
It will maintain insurance coverage by financially sound and reputable
insurers in such forms and amounts and against such risks as are customary
for corporations of established reputation engaged in the same or a similar
business and owing and operating similar properties in accordance with good
business practice and, in any event, in amounts and against risks
acceptable to the Lender, acting reasonably.
11.7 PAYMENT OF TAXES AND DUTIES
It shall pay all taxes, assessments and other governmental duties which are
imposed on it or on its income or profits or its assets, when due and
payable, provided that no such tax, assessment or duty need be paid if (a)
it is being contested in good faith by appropriate proceedings promptly
initiated and diligently conducted and (b) such reserves or other
appropriate provision, if any, as shall be required by GAAP shall have been
made therefor, and (c) the outcome of such contestation, if decided
adversely to the Guarantor or the Restricted Subsidiaries, would not
reasonably be expected to result in a Material Adverse Change, considered
on a Consolidated basis.
11.8 ACCESS AND INSPECTION
It shall allow the employees and representatives of the Lender, during
normal business hours, to have access to and inspect, in conjunction with
the Guarantor, the assets of the Guarantor and the Restricted
Subsidiaries, to inspect and take extracts from or copies of the books and
records of the Guarantor and the Restricted Subsidiaries and to discuss the
business, assets, liabilities, financial position, operating results or
business prospects of the Guarantor and the Restricted Subsidiaries with
the principal officers of the Guarantor and the Restricted
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Subsidiaries and, after obtaining the approval of the Borrower which
shall not be unreasonably withheld, with the auditors of the Borrower.
11.9 MAINTENANCE OF ACCOUNT
It shall maintain an operating account at each Branch at all times during
the Term.
11.10 PERFORMANCE OF OBLIGATIONS
It shall perform all obligations in accordance with usual and customary
business terms, except to the extent that the non-fulfilment of same would
not reasonably be expected to result in a Material Adverse Change,
considered on a Consolidated basis, and except where the same are being
contested in good faith, if the outcome of such contestation, if decided
adversely to the Guarantor or the Restricted Subsidiaries, would not
reasonably be expected to result in a Material Adverse Change, considered
on a Consolidated basis. Notwithstanding the foregoing contained in this
Section 11.10, it shall punctually pay all amounts due or to become due
under this Agreement.
11.11 MAINTENANCE OF RATIOS
The Guarantor shall maintain:
11.11.1 at all times during the Term, a ratio of Consolidated
Funded Debt to Consolidated Total Capitalization not exceeding 50%;
11.11.2 a Consolidated ratio (determined as of the end of each
fiscal quarter of the Guarantor) of Net Income Available for Fixed
Charges to Fixed Charges for the immediately preceding period of
four consecutive fiscal quarters including the fiscal quarter
ending on the calculation date (taken as a single accounting
period) at not less than 2.0 to 1.0; and
11.11.3 at all times during the Term, a minimum Consolidated
Net Worth of Cdn. $200,000,000;
For greater certainty and without limiting any provision of this Agreement,
each of the Borrower and the Guarantor acknowledges that the failure to
respect any of the foregoing financial ratios at any time during the Term
constitutes a material breach of this Agreement.
11.12 PAYMENT OF LEGAL FEES AND OTHER EXPENSES
Whether the transactions contemplated by this Agreement are concluded or
not and whether or not any part of the Credit is actually advanced, in
whole or in part, the Borrower shall pay all reasonable costs relating to
the Credit, including in particular:
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11.12.1 the reasonable legal fees and costs incurred by the
Lender (including those incurred by Comerica Bank) for the
negotiation, drafting, signing, registration, publication and/or
service of this Agreement and the IPG Guarantee as well as any
amendments, renunciations, consents or examinations pertaining to
this Agreement and the IPG Guarantee; and
11.12.2 all reasonable fees, including reasonable legal fees
and costs, incurred by the Lender to preserve, enforce or exercise
its rights hereunder or under the IPG Guarantee following an
action, a Default or an omission of the Guarantor or of a
Restricted Subsidiary.
All amounts due to the Lender pursuant hereto shall bear interest on the
US Prime Rate Basis from the date of their disbursement by the Lender or
from the date of their undertaking until the Borrower has repaid same in
full, with interest on unpaid interest, as in the case of the US Prime
Rate Advances, taking into account such modifications as may be necessary.
The obligations of the Borrower under this Section 11.12 shall subsist
notwithstanding the full repayment of the Loan under the provisions hereof.
11.13 FINANCIAL REPORTING
For so long as the Loan or any other amounts payable to the Lender
hereunder remain outstanding and unpaid, or the Borrower is entitled to
borrow hereunder (whether or not the conditions precedent to such
borrowing have or may be satisfied) and unless the Lender shall otherwise
agree in writing, each of the Guarantor and the Borrower agrees to provide
or cause to be provided to the Lender and so undertakes:
11.13.1 QUARTERLY STATEMENTS
Within 60 days after the end of each fiscal quarter of each fiscal
year of the Guarantor (other than the last quarter), the unaudited
Consolidated and unConsolidated balance sheet of the Guarantor and
each of the Restricted Subsidiaries which carries on business as at
the end of such quarter and the related Consolidated statements of
earnings and changes in financial position, prepared in accordance
with GAAP, for the period then ended, in each case with comparative
figures for the same period for the immediately preceding fiscal
year, accompanied by a certificate of the Senior Financial Officer
of the Guarantor and setting forth the information necessary to
determine whether the Guarantor has complied with the covenants
contained in Section 11.11, certifying that each of the Guarantor
and the Borrower is in compliance with all of its covenants
hereunder and that no Default or Event of Default has come to the
attention of such Senior Financial Officer of the Guarantor signing
the certificate, after due inquiry, or if a Default or Event of
Default has
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occurred, setting out the relevant particulars thereof, the period
of existence thereof and what action the Guarantor has taken or
proposes to take with respect thereto.
11.13.2 ANNUAL STATEMENTS
Within 120 days following the end of each fiscal year of the
Guarantor:
(a) the audited Consolidated balance sheet of the
Guarantor as at the end of such year and the related
Consolidated statements of earnings and changes in
financial position for such fiscal year, together with
comparative figures for the immediately preceding
year, the whole as certified without qualification by
a reputable firm of independent chartered accountants
acceptable to the Lender, together with the unaudited
unConsolidated balance sheet of the Guarantor and each
Restricted Subsidiary as at the end of such year and
the related unConsolidated statements of earnings and
changes in financial position for such fiscal year,
together with comparative figures for the immediately
preceding year, and any audited statements of any
Restricted Subsidiary which may be prepared; and
(b) a certificate of a Senior Financial Officer
setting forth the information necessary to determine
whether the Guarantor has complied with the covenants
contained in Section 11.11, and certifying that each
of the Guarantor and the Borrower is in compliance
with all of its covenants hereunder and that no
Default or Event of Default has come to the attention
of the Senior Financial Officer of the Guarantor
signing the certificate, after due inquiry, or if a
Default or Event of Default has occurred, setting out
the relevant particulars thereof, the period of
existence thereof and what action the Guarantor has
taken or proposes to take with respect thereto.
11.13.3 OTHER INFORMATION
a) BUDGET: Within 60 days following the end of each fiscal
year of the Guarantor, the annual Consolidated pre-tax
operating forecast and the Consolidated Capital Expenditures
budget of the Guarantor;
b) AUDIT REPORTS: Promptly upon receipt thereof, one copy
of each interim or special audit made by independent
accountants of the books of the Guarantor or any Restricted
Subsidiary and any management letter received from such
accountants;
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c) GOVERNMENTAL AND OTHER REPORTS: Promptly upon their
becoming available, one copy of each financial statement,
report, notice or proxy statement sent by the Guarantor to
stockholders generally and of each regular or periodic
report, and any registration statement or prospectus filed by
the Guarantor or any Subsidiary with any securities exchange
or any governmental regulatory body including, but without
limitation, the Guarantor's Form 20F and unaudited quarterly
reports, and copies of any orders in any proceedings to which
the Guarantor or any of its Subsidiaries is a party, issued
by any governmental agency having jurisdiction over the
Guarantor or any of its Subsidiaries;
d) UNRESTRICTED SUBSIDIARIES: Within the respective periods
provided in subsections 11.13.1 and 11.13.2, financial
statements of the character and for the dates and periods as
in said subsections 11.13.1 and 11.13.2 above, covering each
Unrestricted Subsidiary (or groups of Unrestricted
Subsidiaries on a consolidated basis);
e) OTHER INFORMATION: From time to time and upon demand by
and reasonable notice from the Lender, the data, reports,
statements, documents or other additional information
pertaining to the business, assets, liabilities, financial
position, operating results or business prospects of the
Guarantor or any of the Restricted Subsidiaries, as well as
any documents, writings or books of account in connection
therewith, as the Lender may request, acting reasonably.
11.14 NOTICE OF CERTAIN EVENTS
The Borrower and the Guarantor shall advise the Lender forthwith upon the
occurrence of any of the following events:
11.14.1 The commencement of any proceeding or investigation by
or before any governmental body and any action or proceeding before
any court or arbitrator against the Guarantor, the Restricted
Subsidiaries, or any of their property, assets or activities which,
in the event that a decision is rendered which is adverse to them,
could constitute a Material Adverse Change;
11.14.2 Promptly upon the occurrence thereof, written notice of
(a) a Reportable Event with respect to any Plan; (b) the
institution of any steps by the Guarantor, the Borrower, any ERISA
Affiliate, the PBGC or any other person to terminate any Plan; (c)
the institution of any steps by the Guarantor or any ERISA
Affiliate to withdraw from any Plan; (d) a non-exempt "prohibited
transaction" within the meaning of Section 406 of the ERISA in
connection with any Plan; (e) any material increase in the
contingent liability of the Guarantor or any Subsidiary with
respect to any post-retirement welfare liability; or (f) the taking
of any action by, or
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the threatening of the taking of any action by, the Internal
Revenue Service, the Department of Labour or the PBGC with respect
to any of the foregoing;
11.14.3 The occurrence of any Material Adverse Change
(considered on a Consolidated basis) which is known to the Borrower
or the Guarantor, acting reasonably;
11.14.4 Any Default or Event of Default, specifying in each
case the relevant details and the action contemplated in this
respect.
11.15 ACCURACY OF REPORTS
All information, reports, statements and other documents and data provided
to the Lender, whether pursuant to this Article or any other provisions of
this Agreement shall, at the time same shall be provided, be true, complete
and accurate in all material respects to the extent necessary to provide
the Lender with a true and accurate understanding of their effect.
11.16 LENDER'S OPTION TO OBTAIN IMPROVED TERMS AND CONDITIONS
The Lender shall immediately be notified of the terms and conditions of
any Debt to be created by the Borrower or the Guarantor. The Lender shall
have the option to require the Borrower and the Guarantor to amend this
Agreement to incorporate the provisions of any such agreement relating to
Debt if the Lender so wishes, it being understood that the provisions which
may be so incorporated shall not extend to pricing, Margins and, with
respect to any demand facilities, the maturity date of such facilities.
11.17 DESIGNATION OF RESTRICTED SUBSIDIARIES
The Guarantor may designate any Subsidiary a Restricted Subsidiary by
giving written notice to the Lender that the Board of Directors of the
Guarantor has made such designation, provided, however, no Subsidiary may
be designated a Restricted Subsidiary unless, at the time of such
designation and after giving effect thereto, no Default or Event of Default
shall exist. Any such designation shall be irrevocable.
12 NEGATIVE COVENANTS
For so long as the Loan or any other amounts payable hereunder to the Lender
remain outstanding and unpaid, or the Borrower is entitled to borrow hereunder
(whether or not the conditions precedent to such borrowing have or may be
satisfied), each of the Borrower and the Guarantor, for itself and each of the
other Restricted Subsidiaries and with respect to itself and each of the other
Restricted Subsidiaries, agrees that it shall not do any of the following:
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12.1 LIQUIDATION, AMALGAMATION, MERGERS, CONSOLIDATIONS AND SALE OF
ASSETS
12.1.1 Consolidate or amalgamate with or be a party to a
merger with any other corporation, or sell, lease or otherwise
dispose of all or any substantial part (as defined in subsection
12.1.4) of Consolidated Assets; provided, however, that:
(a) any Restricted Subsidiary may merge or amalgamate or
consolidate with or into the Guarantor or any Wholly-owned
Restricted Subsidiary so long as in any merger or
consolidation involving the Guarantor, the Guarantor shall be
the surviving or continuing corporation;
(b) the Guarantor may consolidate or amalgamate or merge
with any other corporation if (i) in the case of any
consolidation or merger, the purchasing, surviving or
continuing corporation shall be the Guarantor, or in the case
of any amalgamation, the Guarantor's existence shall continue
with the amalgamation and all obligations hereunder and under
the IPG Guarantee shall constitute obligations of the
amalgamated entity and (ii) at the time of such amalgamation,
consolidation or merger after giving effect thereto, no
Default or Event of Default shall have occurred and be
continuing; and
(c) any Restricted Subsidiary may sell, lease or otherwise
dispose of all or any substantial part of its assets to the
Guarantor or any Wholly-owned Restricted Subsidiary.
12.1.2 Permit any Restricted Subsidiary to issue or sell any
shares of stock of any class of such Restricted Subsidiary
(including as "stock" for the purposes of this Section 12.1, any
warrants, rights or options to purchase or otherwise acquire stock
or other Securities exchangeable for or convertible into stock) to
any Person other than the Guarantor or a Wholly-owned Restricted
Subsidiary, except for the purpose of qualifying directors, or
except in satisfaction of the validly pre-existing preemptive
rights of minority shareholders in connection with the simultaneous
issuance of stock to the Guarantor and/or a Restricted Subsidiary
whereby the Guarantor and/or such Restricted Subsidiary maintain
their same proportionate interest in such Restricted Subsidiary.
12.1.3 Sell, transfer or otherwise dispose of any shares of
stock of any Restricted Subsidiary (except to qualify directors)
and will not permit any Restricted Subsidiary to sell, transfer or
otherwise dispose of (except to the Guarantor or a Wholly-owned
Restricted Subsidiary) any shares of stock of any other Restricted
Subsidiary, unless:
(a) simultaneously with such sale, transfer, or
disposition, all shares of stock of such Restricted
Subsidiary at the time owned by the Guarantor and by
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every other Restricted Subsidiary shall be sold, transferred
or disposed of as an entirety; and
(b) such sale or other disposition does not involve a
substantial part (as hereinafter defined) of the assets of
the Guarantor and its Restricted Subsidiaries;
provided, however, that nothing in subsections 12.1.3 and 12.1.4
shall permit any disposition by the Guarantor of any of the limited
partnership units or other interest in the Borrower, the
disposition by the Borrower of the shares of Canco, any disposition
of the shares of IPG Finance LLC by Canco, or any disposition of
the shares of IPG (US) Holdings Inc. or IPG (US) Inc..
12.1.4 As used in this Section 12.1, a sale, lease or other
disposition of assets shall be deemed to be a "substantial part" of
the assets of the Guarantor and its Restricted Subsidiaries if the
book value of such assets, when added to the book value of all
other assets sold, leased or otherwise disposed of by the Guarantor
and its Restricted Subsidiaries (other than in the ordinary course
of business) during the 12-month period ending with the date of
such sale, lease or other disposition, exceeds 10% of Consolidated
Assets, determined as of the end of the immediately preceding
fiscal quarter.
For the purpose of making any determination of "substantial part",
any sale, lease or other dispositions of assets of the Guarantor
and its Restricted Subsidiaries shall not be included if and to the
extent the net proceeds are segregated from the general accounts of
the Guarantor and any Restricted Subsidiary, invested in Cash
Equivalents until applied in accordance with clauses (1) or (2)
below, and either (1) within one year after such sale, lease or
other disposition, are used to acquire Like Assets, or (2) within
one year after such sale, lease or disposition, are applied to the
optional prepayment of Indebtedness for borrowed money on a PARI
PASSU basis with all other lenders owed any such Indebtedness for
borrowed money.
12.2 LIMITATIONS ON DEBT
12.2.1 Create, assume or incur or in any manner become liable
in respect of any Debt, except:
(a) Funded Debt of the Guarantor and its Restricted
Subsidiaries permitted by subsection 11.11.1;
(b) Current Debt of the Guarantor or any Restricted
Subsidiary, provided that during the twelve-month period
immediately preceding the date of any determination
hereunder, there shall have been a period of 30 consecutive
days
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during which Current Debt of the Guarantor and its
Restricted Subsidiaries shall be an amount no greater than
the amount of additional Funded Debt that could have been
issued on each such day of said 30-day period within the
limitations of subsection 12.2.1(a);
(c) in addition to the limitations with respect to Debt
pursuant to the foregoing paragraphs (a) and (b), in the case
of (i) unsecured Debt of any Restricted Subsidiary
("UNSECURED PRIORITY DEBT") and (ii) Debt of the Guarantor
and its Restricted Subsidiaries secured by Permitted Charges
("SECURED PRIORITY DEBT", and, collectively with the
Unsecured Priority Debt being herein referred to as
"PRIORITY DEBT"), at the time of issuance of any such
Priority Debt and after giving effect thereto and the
application of the proceeds thereof, (x) the aggregate
principal amount of Priority Debt shall not exceed an amount
equal to Cdn. $60,000,000, (y) the aggregate amount of
Secured Priority Debt shall not exceed 20% of Consolidated
Net Worth and (z) all such Priority Debt shall have been
incurred within the other applicable limitations of this
Section 12.2; and
(d) Debt of a Restricted Subsidiary to the Guarantor or to
a Wholly-owned Restricted Subsidiary.
12.2.2 Any corporation which becomes a Restricted Subsidiary
after the date hereof shall, for all purposes of this Section 12.2,
be deemed to have created, assumed or incurred at the time it
becomes a Restricted Subsidiary all Debt of such corporation
existing immediately after it becomes a Restricted Subsidiary.
12.2.3 If the Guarantor or any Restricted Subsidiary incurs
additional Debt in excess of Cdn. $50,000,000 in connection with an
acquisition which is permitted as a Restricted Investment, such
Debt shall be Funded Debt and shall be subject to terms and
conditions no more restrictive than those contained in the Note
Agreement.
12.2.4 The Borrower shall not, individually or collectively
with its Subsidiaries, IPG Finance LLC and Canco, as well as with
IPG (US) Acquisition Corporation, IPG (US) Holdings Inc. and IPG
(US) Inc., incur or have at any time any Indebtedness in excess of
an aggregate amount of US $100,000, save with respect to the
liability of the Borrower in respect of the Loan.
12.3 BORROWER'S BUSINESS
Permit any of the Borrower, Canco or IPG Finance LLC to carry on any
business, other than taking such steps as may be necessary to maintain its
existence or to hold securities of Restricted Subsidiaries.
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12.4 CHARGES
Create, incur, assume, enter into or permit to subsist, directly or
indirectly, any Charge on its or their property or assets, whether now
owned or hereafter acquired, or upon any income or profits therefrom, or
transfer any property for the purpose of subjecting the same to the
payment of obligations in priority to the payment of its or their general
creditors, or acquire or agree to acquire, or permit any Restricted
Subsidiary to acquire, any property or assets upon conditional sales
agreements or other title retention devices, except Permitted Charges, and
only to the extent that the aggregate amount secured by Permitted Charges
does not exceed 20% of Consolidated Net Worth, and, together with the
aggregate Unsecured Priority Debt (as defined in subsection 12.2.1 (c)),
does not exceed Cdn. $60,000,000.
12.5 RESTRICTED INVESTMENTS AND RESTRICTED PAYMENTS
Make any Restricted Investment or Restricted Payment, if, after giving
effect thereto, the sum of:
12.5.1 the aggregate amount of Restricted Payments made during
the period from and after January 1, 1996 to and including the date
of the making of the Restricted Payment in question, plus
12.5.2 the aggregate amount of all Restricted Investments made
by the Guarantor or any Restricted Subsidiary during said period
would exceed the sum of (a) Cdn. $85,000,000 plus (b) 75% of Consolidated
Net Income for such period, computed on a cumulative basis for said entire
period (or if such Consolidated Net Income is a deficit figure for any
fiscal period within such period, then minus 100% of such deficit) plus (c)
an amount equal to the aggregate net cash proceeds received by the
Guarantor from the issuance or sale after the Closing Date (other than to
the Guarantor or any Subsidiary) of shares of common stock of the Guarantor
(such sum described in clauses (a), (b) and (c) being referred to as the
"AVAILABLE POOL").
In addition to and not in limitation of the foregoing restrictions, the
Guarantor will not, and will not permit any Restricted Subsidiary to make
any Investment in or make any Restricted Payment to, any Unrestricted
Subsidiary:
12.5.3 not engaged in a business substantially related to the
business of the Guarantor and its Restricted Subsidiaries if, after
giving effect thereto, the sum of (a) all Investments in such
Unrestricted Subsidiaries made by the Guarantor and its Restricted
Subsidiaries during the period from and after January 1, 1996 plus
(b) the aggregate amount of Restricted Payments made by the
Guarantor and its Restricted Subsidiaries to such Unrestricted
Subsidiaries during the period from and after
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January 1, 1996, would exceed an amount equal to the Available Pool
minus Cdn. $70,000,000; or
12.5.4 if, after giving effect thereto, the sum of (a) all
Investments in such Unrestricted Subsidiaries made by the Guarantor
and its Restricted Subsidiaries during the period from and after
January 1, 1996 plus (b) the aggregate amount of Restricted
Payments made by the Guarantor and its Restricted Subsidiaries to
such Unrestricted Subsidiaries during the period from and after the
Closing Date, would exceed US $20,000,000.
In addition to the foregoing restrictions, the Guarantor will not make any
Restricted Payments or any Restricted Investment if, at the time thereof or
after giving effect thereto, any Default or Event of Default shall exist.
The Guarantor will not declare any dividend which constitutes a Restricted
Payment payable more than 60 days after the date of declaration thereof.
For the purposes of this section 12.5, the amount of any Restricted Payment
declared, paid or distributed in property shall be deemed to be the greater
of the book value or fair market value (as determined in good faith by the
Board of Directors of the Guarantor) of such property at the time of the
making of the Restricted Payment in question.
In valuing any Restricted Investments for the purpose of applying the
limitations set forth in this Section 12.5, such Restricted Investments
shall be taken at the original cost thereof, without allowance for any
subsequent write-offs or appreciation or depreciation therein, but less any
amount repaid or recovered on account of capital or principal.
For the purposes of this Section 12.5, at any time when a corporation
becomes a Restricted Subsidiary, all Restricted Investments of such
corporation at such time shall be deemed to have been made by such
corporation, as a Restricted Subsidiary, at such time.
12.6 TRANSACTIONS WITH AFFILIATES
Enter into or be a party to any transaction or arrangement with any
Affiliate (including, without limitation, the purchase from, sale to or
exchange of property with, or the rendering of any service by or for, any
Affiliate), except in the ordinary course of and pursuant to the reasonable
requirements of the Guarantor's or such Restricted Subsidiary's business
and upon fair and reasonable terms no less favourable to the Guarantor and
such Restricted Subsidiary than would obtain in a comparable arm's-length
transaction with a Person other than an Affiliate.
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12.7 TERMINATION OF PENSION PLANS
Withdraw, or permit any Subsidiary to withdraw, from any Multiemployer
Plan or permit any employee benefit plan maintained by it to be terminated
if such withdrawal or termination could result in withdrawal liability (as
described in Part 1 of Subtitle E of Title IV of ERISA) or the imposition
of a Charge on any property of the Guarantor or any Subsidiary pursuant to
section 4068 of ERISA.
12.8 OWNERSHIP OF SUBSIDIARIES
Permit each of Intertape Polymer Inc. and Intertape Polymer Corporation to
be other than Wholly-owned Subsidiaries, or at any time own less than 80%
of the Voting Stock of its Restricted Subsidiaries, together with such
Securities of the Restricted Subsidiaries as are necessary to provide
the Guarantor with an economic interest of not less than 80% of each
Restricted Subsidiary.
13 EVENTS OF DEFAULT AND REALIZATION
13.1 EVENT OF DEFAULT
The occurrence of any of the following events during the Term shall
constitute an Event of Default unless remedied within the prescribed
delays or renounced to in writing:
13.1.1 If the Borrower fails to make any payment of interest
or principal with respect to the Loan when due, or fails to pay any
other amount due to the Lender within two (2) Business Days after
notice thereof; or
13.1.2 If the Guarantor or any one or more of the Restricted
Subsidiaries fails to respect any of its other obligations and
undertakings hereunder or under the IPG Guarantee or another
undertaking of the Guarantor or any of the Restricted Subsidiaries
with respect to the Loan not otherwise contemplated by this Section
13.1 and has not remedied the Default within ten (10) days
following the date on which the Lender has given written notice to
the Borrower; or
13.1.3 If the Guarantor or any of the Restricted Subsidiaries
(a) is generally not paying, or admits in writing its inability to
pay, its debts as they become due; or (b) commits another act of
bankruptcy within the meaning of the Bankruptcy and Insolvency Act
(Canada); or (c) makes an assignment in favour of its creditors; or
(d) files or consents to the filing of a petition for a receiving
order or a proposal within the meaning of the Bankruptcy and
Insolvency Act (Canada); or (e) is insolvent or bankrupt, or makes
a motion to a tribunal to name a trustee, receiver, liquidator or
sequestrator with respect to its property; or (f) files or consents
in any way to the
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filing of a petition for relief or reorganization or arrangement,
or otherwise commences a proceeding with respect to itself or its
property under the provisions of any law contemplating
reorganizations, proposals, rectification, compromise or
liquidation, in any jurisdiction whatsoever (hereinafter in this
subsection 13.1.3 called a "PROCEEDING"); or (g) is the object of a
Proceeding which is not settled or withdrawn within a delay of five
(5) Business Days; or (h) if a trustee, receiver, liquidator or
sequestrator with respect to the Guarantor, any of the Restricted
Subsidiaries or any of their property is named; or (i) if the
Guarantor or any of the Restricted Subsidiaries consent, approve or
accept any Proceeding or the nomination of any trustee, receiver,
liquidator or sequestrator with respect to it or its property;
provided that, if a Proceeding is commenced against the Guarantor
or a Restricted Subsidiary, the Borrower or the Restricted
Subsidiaries shall have the right to contest in good faith, if the
Lender is absolutely satisfied, in its complete discretion, that
the repayment of the Loan, the interest and the accessories
relating thereto and the ability of the Borrower and the Guarantor
to service their Debt shall not be compromised; or
13.1.4 If property of the Guarantor or any of the Restricted
Subsidiaries having a total value of more than US $2,500,000 is the
object of a seizure or of a taking of possession or other
Proceeding by a creditor, provided that if such legal proceedings
are commenced against the Guarantor or a Restricted Subsidiary, the
Guarantor or the Restricted Subsidiary shall have the right to
contest in good faith, if the Lender is absolutely satisfied, in
its complete discretion, that the repayment of the Loan, the
interest and the accessories relating thereto and the ability of
the Borrower and the Guarantor to service its Debt will not be
compromised; or
13.1.5 If any statement, attestation, financial statement,
report, data, representation or warranty which was given by, for
the account of or in the name of the Guarantor or any of the
Restricted Subsidiaries to the Lender, with respect to this
Agreement or the IPG Guarantee, is revealed to be false, misleading
or incomplete in any material respect at any time, or if the
auditors certifying the financial statements in accordance with
subsection 11.13.2 insert a material qualification in their
opinion; or
13.1.6 If the Guarantor or any of the Restricted Subsidiaries
is in default with respect to any Material Debt (other than amounts
due to the Lender hereunder), if:
(a) such default was caused by the failure to make any
payment of an amount in excess of US $5,000,000 when due, and
such default is not remedied within ten (10) days of its
occurrence; or
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(b) such default could permit the creditor of such
obligations to cause an amount in excess of US $5,000,000 to
become due and payable prior to its stated maturity or
scheduled payment date; or
13.1.7 If a judgment is rendered by a competent tribunal
against the Guarantor or any of the Restricted Subsidiaries in an
aggregate amount in excess of US $2,500,000 (net of applicable
insurance coverage pursuant to which liability is acknowledged in
writing by the insurer to the Agent on behalf of the Lender) and
remains undischarged for a period ending not more than five (5)
Business Days before the date on which such judgment becomes
executory;
13.1.8 If IPG Finance LLC assigns or transfers any of its
rights against ATC or IPG (US) Acquisition Corporation with respect
to amounts owed to it from either or both of them, other than to
the Lender;
13.1.9 If the Notes become payable in advance following a
Change in Control, as defined in the Note Agreement;
13.1.10 If in the opinion of the Lender, acting in good faith,
there is a Material Adverse Change, on a Consolidated basis.
13.2 REMEDIES
If an Event of Default occurs under subsection 13.1.3, the Loans shall
immediately become due and exigible, without presentation, demand, protest
or other notice of any nature, to which the Borrower hereby expressly
renounces. If any other Event of Default occurs and is continuing, the
Lender may declare immediately due and exigible, without presentation,
demand, protest or other notice of any nature, to which the Borrower
hereby expressly renounces, notwithstanding any provision to the contrary
effect in this Agreement or in the IPG Guarantee:
13.2.1 the entire amount of the Loan, including the amount
corresponding to the face amount of all Letters of Credit then
outstanding, in principal and interest, notwithstanding the fact
that one or more of the holders of the Letters of Credit issued
pursuant to the provisions hereof have not demanded payment in
whole or in part or have demanded only partial payment from the
Lender. Neither the Guarantor nor the Borrower shall have the
right to invoke against the Lender any defence or right of action,
indemnification or compensation of any nature or kind whatsoever
that the Borrower may at any time have or have had with respect to
any holder of one or more of the Letters of Credit issued in
accordance with the provisions hereof. Any amounts paid to the
Lender in respect of any outstanding Letters of Credit shall be
retained by the Lender to be applied against such Letters of Credit
when payment thereon is requested, with any balance, after payment
of all Loans, to be returned to the Borrower; and
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13.2.2 an amount equal to the amount of losses, costs and expenses
assumed by the Lender and referred to in Section 7.2; and
the Credit shall cease and as and from such time shall be annulled, and the
Lender may exercise all of its rights and recourses under the provisions of
this Agreement and the Guarantee. For greater certainty, from and after
the occurrence of any Default or Event of Default, the Lender shall not be
obliged to make any further Advances under the Credit.
13.3 BANKRUPTCY AND INSOLVENCY
If the Guarantor or any of the Restricted Subsidiaries files a notice of
intention to file a proposal, or files a proposal under the Bankruptcy and
Insolvency Act, or files a petition under the US Bankruptcy Code, or if the
Guarantor or any of the Restricted Subsidiaries obtains the permission of a
Canadian court to file a Plan of Arrangement under the Companies' Creditors
Arrangements Act, and if a stay of proceedings is obtained or ordered under
the provisions of any such statute, without prejudice to the Lender's
rights to contest such stay of proceedings, each of the Borrower and the
Guarantor covenants and agrees to continue to pay interest on all amounts
due to the Lender. In this regard, each of the Borrower and the Guarantor
acknowledges that permitting the Borrower to continue to use the proceeds
of the Loan constitutes valuable consideration provided after the filing of
any such proceeding in the same way that permitting the Borrower to use
leased premises constitutes such valuable consideration.
13.4 APPLICATION OF PROCEEDS
The Lender may apply the proceeds of realization of the property of the
Borrower and the Guarantor, and of any credit or compensating balance, in
reduction of the part of the Indebtedness of the Borrower to the Lender
(in principal, interest or accessories) which the Lender judges
appropriate.
13.5 NOTICE
Except where otherwise expressly provided herein, no notice or demand of
any nature is required to be given to the Borrower or the Guarantor by the
Lender in order to put the Borrower and the Guarantor in default, which
shall occur by the simple lapse of time granted to execute an obligation or
by the simple occurrence of a Default.
13.6 COSTS
If an Event of Default occurs, and within the limits contemplated by
Section 11.12, the Lender may impute to its account and pay to other
persons reasonable sums for services rendered with respect to the
realization, recovery, sale, transfer, delivery and obtention of payment,
and may
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deduct the amount of such costs and payments from the proceeds
which it receives therefrom. The balance of such proceeds may be held by
the Lender and, when the Lender decides it is opportune, acting reasonably,
may be applied to the account of the part of the Indebtedness of the
Borrower and the Guarantor to the Lender which the Lender deems preferable,
without prejudice to the rights of the Lender against the Borrower and the
Guarantor for any loss of profit.
13.7 RELATIONS WITH THE BORROWER
The Lender may grant delays, take security or renounce thereto, accept
compromises, grant acquittances and releases and otherwise negotiate with
the Borrower and the Guarantor as it deems advisable without in any way
diminishing the liability of the Borrower or the Guarantor.
14 JUDGMENT CURRENCY
14.1 RULES OF CONVERSION
If for the purpose of obtaining judgment in any court or for any other
purpose hereunder, it is necessary to convert an amount due, advanced or to
be advanced hereunder from the currency in which it is due (the "FIRST
CURRENCY") into another currency (the "SECOND CURRENCY") the rate of
exchange used shall be that at which, in accordance with normal banking
procedures, the Lender could purchase, in the Canadian money market or the
Canadian exchange market, as the case may be, the First Currency with the
Second Currency on the date on which the judgment is rendered, the sum is
exigible or advanced or to be advanced, as the case may be. Each of the
Borrower and the Guarantor agrees that its obligations in respect of any
First Currency due from it to the Lender in accordance with the provisions
hereof shall, notwithstanding any judgment rendered or payment made in the
Second Currency, be discharged by a payment made to the Lender on account
thereof in the Second Currency only to the extent that, on the Business Day
following receipt of such payment in the Second Currency, the Lender may,
in accordance with normal banking procedures, purchase on the Canadian
money market or the Canadian foreign exchange market, as the case may be,
the First Currency with the amount of the Second Currency so paid or which
a judgment rendered exigible; and if the amount of the First Currency which
may be so purchased is less than the amount originally due in the First
Currency, each of the Borrower and the Guarantor agrees as a separate and
independent obligation and notwithstanding any such payment or judgment to
indemnify the Lender against such deficiency.
14.2 DETERMINATION OF AN EQUIVALENT CURRENCY
If, in its discretion, the Lender chooses or, pursuant to the terms of this
Agreement, is obliged to choose the equivalent in Canadian Dollars of any
securities or amounts expressed in US
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Dollars or the equivalent in US Dollars of any securities or amounts
expressed in Canadian Dollars, the Lender, in accordance with the
conversion rules as stipulated in Section 14.1:
14.2.1 on the date indicated in the Notice of Borrowing as the
date of a request for an Advance; and
14.2.2 at any other time which in the opinion of the Lender is
desirable;
may, using the spot rate of the Lender on such date, determine the
equivalent in Canadian Dollars or in US Dollars, as the case may be, of any
Security or amount expressed in the other currency pursuant to the terms
hereof. Immediately following such determination, the Lender shall inform
the Borrower and the Guarantor of the conclusion which the Lender has
reached.
15 ASSIGNMENT
15.1 ASSIGNMENT BY THE BORROWER
The rights of the Borrower under the provisions hereof are purely personal
and may not be transferred or assigned, and the Borrower may not transfer
or assign any of its obligations, such assignment being null and of no
effect opposite the Lender and rendering any balance outstanding of the
amounts referred to in Section l3.2 immediately due and exigible at the
option of the Lender and further releasing the Lender from any obligation
to make any further Advances under the provisions hereof.
15.2 ASSIGNMENTS AND TRANSFERS BY THE LENDER
15.2.1 The Lender may transfer 50% of its Participation under
Facility B to Comerica Bank at any time. If by March 31, 1998, the
Guarantor and the Restricted Subsidiaries have not completed a
private placement and remitted the proceeds thereof to the Lender
in full payment of the Loans under Facility B, the Lender may, at
its own cost, assign or transfer to a financial institution
entitled to lend money in Canada (the "ASSIGNEE") in accordance
with this Article 15 any or all of its rights, benefits and
obligations under Facility A and/or Facility B hereunder with the
prior consent of the Borrower, which will not be unreasonably
withheld or delayed. After the occurrence of a Default, the Lender
may transfer all or any part of its rights, benefits and
obligations hereunder to any Person, without the consent of the
Borrower, but upon notice to the Borrower.
15.2.2 Any such assignment or transfer shall be for a minimum
amount of US $5,000,000 and in multiples of US $1,000,000
thereafter, of any of Facilities A or B.
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15.2.3 Notwithstanding subsection 15.2.1, the Lender shall be
entitled to assign or transfer, at its own cost, in accordance with
the other provisions of this Section 15 (including 15.5), its
rights, benefits and obligations hereunder, in whole or in part, to
a parent, a Subsidiary or an Affiliate of the Lender, provided that
there are no resulting adverse tax consequences for the Borrower.
15.3 TRANSFER AGREEMENT
If the Lender wishes to assign or transfer all or any of its rights,
benefits and obligations hereunder in accordance with Section 15.2, then
such assignment or transfer shall be effected by the delivery by the Lender
to the Borrower of a duly completed and executed Transfer Agreement
whereupon, to the extent that in such Transfer Agreement the Lender seeks
to assign or transfer its rights and obligations hereunder:
15.3.1 the Lender shall be released from further obligations
to the Borrower with respect to the portion of the obligations of
the Lender assumed by the Assignee;
15.3.2 the Assignee shall assume the obligations of the Lender
and acquire the rights of the Lender in respect of the Borrower and
the Guarantor, without novation of the Borrower's obligations;
15.3.3 the Lender and the Assignee shall acquire the same
rights and assume the same obligations between themselves as they
would have acquired and assumed had the Assignee been an original
party hereto with the obligations assumed and the rights acquired
by it as a result of such assignment or transfer; and
15.3.4 the Borrower and the Guarantor shall execute such
documents and perform such acts as may be required to give effect
to the transfer or assignment.
15.4 NOTICE
The Lender shall promptly deliver a copy of any Transfer Agreement to the
Borrower and the Guarantor.
15.5 SUB-PARTICIPATIONS
The Lender may, at its own cost, grant one or more sub-participations in
its rights, benefits and obligations hereunder, provided that,
notwithstanding any such sub-participation, the Lender shall remain,
insofar as the Borrower is concerned, as the Lender responsible hereunder,
and the Borrower shall not be obliged to recognize any such sub-participant
as having the rights against it which it would have if it had been a party
hereto.
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15.6 GENERAL
Notwithstanding anything contained in this Article:
15.6.1 the Lender shall act as agent (the "AGENT") for each
Assignee and, in this connection, with respect to all decisions,
notices and other matters relating to anything referred to in this
Agreement, the Borrower shall only be obliged to give notice to or
request consents from the Lender;
15.6.2 subject to the provisions of the interlender agreement
referred to in subsection 15.6.5, all decisions to be taken by the
Lender with respect to any matter referred to in this Agreement
must be taken by the Lender and the Assignee(s) and must first be
approved by a majority of the Lender and the Assignee(s), acting
together, holding at least 66 2/3% of the Credit;
15.6.3 following any assignment, the term "Lender" shall mean,
as the context allows, the Lender in its role as Agent or the
Lender and the Assignees collectively;
15.6.4 the Borrower and the Guarantor shall pay an agency fee
to be negotiated between them and the Lender;
15.6.5 the Lender and the Assignee(s) shall enter into an
interlender agreement on terms and conditions to be negotiated
among them; and
15.6.6 the amounts payable by the Borrower under this
Agreement shall not increase, whether in respect of withholding on
account of taxes or otherwise, as a result of any such assignment
or transfer to an Assignee which is organized under the laws of a
jurisdiction outside of the United States of America, unless such
Assignee provides the Borrower with an IRS Form 4224 certifying
that the interest paid to such Assignee is in connection with a
U.S. trade or business conducted by the Assignee and therefore
exempt from U.S. withholding taxes.
16 RELATIONSHIP WITH AND BETWEEN THE LENDERS
In the event that Comerica Bank (herein ("CB") takes a 50% Participation under
Facility B, the following provisions shall apply:
16.1 ALLOCATION AS BETWEEN THE LENDERS
All Advances made under Facility A shall be made solely by TD. All
Advances made under Facility B shall be allocated between TD and CB in
accordance with their respective Participations, and any prepayments will
be allocated accordingly. The Borrower shall request
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its initial Advance equally from both Lenders under Facility B, and will
ensure that all renewals and conversions of such Advances are effected
with the Lender which made such initial Advance.
16.2 ACCOUNT OPERATIONS
The Borrower will maintain accounts at a branch of each of the Lenders and
will deal with each Lender separately with respect to the administration of
Advances and Loans, including Advances by way of Letter of Credit. The
Fees payable in respect of Facility B pursuant to subsection 5.10.2 shall
be paid to the Lenders in accordance with their respective Participations.
16.3 SHARING OF INFORMATION
The Borrower and the Guarantor hereby authorize the Lenders to provide each
other with any and all documentation and information which they have at any
time concerning the financial position of any of the Guarantor and its
Subsidiaries.
16.4 LIABILITY OF THE LENDERS
No Lender shall have any responsibility, (a) to the Borrower or the
Guarantor on account of the failure of any other Lender to perform its
obligations hereunder, or (b) to any other Lender on account of the failure
of the Borrower to perform its obligations hereunder.
Each Lender severally represents and warrants to the other that it has made
its own independent investigation of the financial condition and affairs of
the Borrower and the Guarantor in connection with the making and
continuation of its Participation in the Loan hereunder and has not relied
on any information provided to such Lender by another Lender in connection
herewith, and each Lender represents and warrants to the other that it
shall continue to make its own independent appraisal of the
creditworthiness of the Borrower and the Guarantor while the Loan is
outstanding or the Lenders have any obligations hereunder.
16.5 INTERLENDER AGREEMENT
The Lenders shall enter into an interlender agreement substantially in the
form of Schedule "K" in order to govern their relationship hereunder.
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17 MISCELLANEOUS
17.1 NOTICES
Except where otherwise specified herein, all notices, requests, demands or
other communications between the parties hereto shall be in writing and
shall be deemed to have been duly given or made to the party to whom such
notice, request, demand or other communication is given or permitted to be
given or made hereunder, when delivered to the party (by certified or
registered mail, postage prepaid, or by telegraph, telex, facsimile or by
physical delivery) to the address of such party and to the attention
indicated under the signature of such party or to any other address which
the parties hereto may subsequently communicate to each other in writing.
Any notice given by mail is deemed to have been received on the second
Business Day following the day on which the envelope containing the notice
has been deposited in a post office or in a mail box in the United States
of America. If normal postal or telegraph service is interrupted by
strike, work slow-down, fortuitous event or other cause, the party sending
the notice shall use such services which have not been interrupted or shall
deliver such notice by messenger in order to ensure its prompt receipt by
the other party.
17.2 AMENDMENT AND WAIVER
The rights and recourses of the Lender under this Agreement and the IPG
Guarantee are cumulative and do not exclude any other rights and recourses
which the Lender might have, and no omission or delay on the part of the
Lender in the exercise of any right shall have the effect of operating as a
waiver of such right, and the partial or sole exercise of a right or power
will not prevent the Lender from exercising thereafter any other right or
power. The provisions of this Agreement may only be amended or waived by
an instrument in writing (and not orally) in each case signed by the
requisite majority of Lenders, as will be determined in accordance with the
provisions of the interlender agreement to be entered into between them.
17.3 DETERMINATIONS FINAL
In the absence of any manifest error, any determinations to be made by the
Lender in accordance with the provisions hereof, when made, are final and
irrevocable for all parties.
17.4 ENTIRE AGREEMENT
The entire agreement between the parties is expressed herein, and no
variation or modification of its terms shall be valid unless expressed in
writing and signed by the parties. All previous agreements, promises,
proposals, representations, understandings and negotiations between the
parties hereto which relate in any way to the subject matter of this
Agreement are hereby deemed to be null.
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17.5 INDEMNIFICATION AND COMPENSATION
In addition to the other rights now or hereafter conferred by law and those
described in Section 8.11, and without limiting such rights, if a Default
or Event of Default should occur, the Lender is hereby authorized by the
Borrower and the Guarantor, at any time and from time to time, subject to
the obligation to give notice to the Borrower and the Guarantor
subsequently and within a reasonable delay, to indemnify, compensate, use
and allocate any deposit (general or special, term or demand, including,
without limitation, any debt evidenced by certificates of deposit, whether
or not matured) and any other debt at any time held or due by the Lender to
the Guarantor or the Restricted Subsidiaries or to its or their credit or
its or their account, with respect to and on account of any obligation and
indebtedness of the Borrower and the Guarantor to the Lender in accordance
with the provisions hereof or the IPG Guarantee, including, without
limitation, the accounts of any nature or kind which flow from or relate to
this Agreement, whether or not the Lender has made demand under the terms
hereof or have declared the amounts referred to in Section 13.2 as exigible
in accordance with the provisions of that Section and even if such
obligation and Debt or either of them is a future or unmatured Debt.
17.6 BENEFIT OF AGREEMENT
This Agreement shall be binding upon and ensure to the benefit of each
party hereto and its successors and permitted assigns.
17.7 COUNTERPARTS
This Agreement may be signed in any number of counterparts, each of which
shall be deemed to constitute an original, but all of the separate
counterparts shall constitute one single document.
17.8 APPLICABLE LAW
This Agreement, its interpretation and its application shall be governed by
the Laws of the State of New York.
17.9 SEVERABILITY
Each provision of this Agreement is separate and distinct from the others,
such that any decision of a court or tribunal to the effect that any
provision of this Agreement is null or unenforceable shall in no way affect
the validity of the other provisions of this Agreement or the
enforceability thereof. Any provision of this agreement which is
prohibited or un-enforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and
any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render
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unenforceable such provision in any other jurisdiction. To the extent
permitted by applicable Laws, the Guarantor and the Restricted
Subsidiaries hereby waive any provision of any Laws which renders any
provision hereof prohibited or unenforceable in any respect.
17.10 FURTHER ASSURANCES
The Guarantor covenants and agrees on its own behalf and on behalf of each
of the Restricted Subsidiaries that, at the request of the Lender, the
Guarantor and each of the Restricted Subsidiaries will at any time and from
time to time execute and deliver such further and other documents and
instruments and do all acts and things as the Lender in its reasonable
discretion requires in order to evidence the indebtedness of the Borrower
and the Guarantor under this Agreement, under the IPG Guarantee, or
otherwise.
17.11 GOOD FAITH AND FAIR CONSIDERATION
Each of the Borrower and the Guarantor acknowledges and declares that it
has entered into this Agreement freely and of its own will. In particular,
each of the Borrower and the Guarantor acknowledges that the Agreement was
negotiated by it and by the Lender in good faith, and that there was no
exploitation of the Borrower or the Guarantor by the Lender, nor is there
any serious disproportion between the consideration provided by the Lender
and that provided by the Borrower and the Guarantor.
17.12 INDEMNITY
Each of the Guarantor and the Borrower agrees to indemnify and defend the
Lender and its directors, officers, agents and employees from, and hold
each of them harmless against, any and all losses, liabilities, claims,
damages or expenses of any kind which at any time or from time to time may
be asserted against or incurred or paid by any of them for or in connection
with: (i) the participation of the Lender in the transactions contemplated
by this Agreement, (ii) the role of the Lender in any investigation,
litigation or other proceeding brought or threatened relating to the
Credit, (iii) any liability arising directly or indirectly from or relating
to the presence on or under or the release or migration from any property
or into the environment of any hazardous material, and/or (iv) the
compliance with or enforcement of any of their rights or obligations
hereunder, including without limitation:
17.12.1 the fees and disbursements of counsel; and
17.12.2 the costs of defending, counterclaiming or claiming
over against third parties in respect of any action or matter and
any cost, liability or damage arising out of any settlement;
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other than losses, liabilities, claims, damages or expenses incurred by
reason of the gross negligence or willful misconduct of the indemnified
party, as determined by a final judgment of a court of competent
jurisdiction.
17.13 JURISDICTION AND SERVICE IN RESPECT OF THE GUARANTOR AND THE
BORROWER
Any legal action or proceeding with respect to this Agreement or any
document related thereto may be brought in the courts of the State of New
York or of the United States of America for the Southern District of New
York, and, by execution and delivery of this Agreement, the Borrower and
the Guarantor hereby accepts for itself and in respect of its property,
generally and unconditionally, the jurisdiction of the aforesaid courts.
Each of the Borrower and the Guarantor hereby irrevocably and
unconditionally waives any objection, including, without limitation, any
objection to the laying of venue or based on the grounds of forum non
conveniens, which it may now or hereafter have to the bringing of any
action or proceeding in such respective jurisdictions. Each of the
Borrower, the Guarantor and Lender hereby irrevocably and unconditionally
waives trial by jury.
Each of the Borrower and the Guarantor further consents that all service
of process may be made by delivery to it at the address of the Borrower or
the Guarantor, as the case may be, set forth on the signature page hereof
or to its agent referred to below at such agent's address set forth below
and that service so made shall be deemed to be completed upon actual
receipt. Each of the Borrower and the Guarantor for itself hereby
irrevocably appoints CT Corporation System with an office on the date
hereof at 1633 Broadway, New York, New York, 10019, as its agent for the
purpose of receiving service of any process within the State of New York.
Nothing contained in this Section 16.13 shall affect the right of the
Lender to serve legal process in any other manner permitted by Law or to
bring any action or proceeding in the courts of any jurisdiction against
the Borrower or the Guarantor or to enforce a judgment obtained in the
courts of any other jurisdiction.
17.14 UNDERTAKING AND REPRESENTATION OF THE TORONTO-DOMINION BANK
The Toronto-Dominion Bank shall provide the Borrower with an IRS Form 4224
certifying that, and represents to the Borrower and the Guarantor that,
the interest paid to it hereunder is in connection with a U.S. trade or
business conducted by it and therefore exempt from U.S. withholding taxes.
17.15 LANGUAGE
The parties acknowledge that they have required that the present
agreement, as well as all documents, notices and legal proceedings
entered into, given or instituted pursuant hereto or relating directly or
indirectly hereto be drawn up in English. Les parties reconnaissent avoir
exige la redaction en anglais de la presente convention ainsi que de tous
documents executes,
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avis donnes et procedures judiciaires intentees, directement ou
indirectement, relativement ou a la suite de la presente convention.
18 FORMAL DATE
18.1 FORMAL DATE
For the purposes of convenience, this Agreement may be referred to as
bearing Formal Date of December 15, 1997 notwithstanding its actual date
of signature.
IN WITNESS WHEREOF THE PARTIES HERETO HAVE SIGNED THIS AGREEMENT ON THE DATE
AND AT THE PLACE FIRST HEREINABOVE MENTIONED.
IPG HOLDINGS LP, represented by its INTERTAPE POLYMER GROUP INC.
General Partner, INTERTAPE POLYMER INC.
Per:_____________________________ Per:_____________________________
Per:_____________________________ Per:_____________________________
Address:- Address: 110 E Montee de Liesse
- - St. Laurent, Quebec
- - H4T 1N4
Attention: Chief Financial Officer Attention: Chief Financial Officer
Telephone: ( )_____-________ Telephone: ( )_____-________
Fax: ( )_____-________ Fax: ( )_____-________
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THE TORONTO-DOMINION BANK
Per:_____________________________
Address: 909 Fannin, Suite 1700
Houston, Texas, 77010
ATTENTION: MANAGER, CREDIT ADMINISTRATION
Tel: (713) 653-8250
Fax: (713) 951-9921
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SCHEDULE "A" - LIST OF LENDERS AND PARTICIPATIONS
FACILITY A
<TABLE>
<CAPTION>
MAXIMUM
LENDER PARTICIPATION (%) PARTICIPATION ($)
- ------ ---------------- -----------------
<S> <C> <C>
THE TORONTO-DOMINION BANK 100% US $50,000,000
</TABLE>
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _
FACILITY B
<TABLE>
<CAPTION>
MAXIMUM
LENDER PARTICIPATION (%) PARTICIPATION ($)
- ------ ---------------- -----------------
<S> <C> <C>
THE TORONTO-DOMINION BANK 100% US $25,000,000
</TABLE>
<PAGE>
SCHEDULE "B" - NOTICE OF BORROWING AND CERTIFICATE
TO: [LENDER]
Attention:
FROM: IPG HOLDINGS LP
DATE:
1) This Notice of Borrowing and Certificate is delivered to you pursuant to
the credit agreement (the "CREDIT AGREEMENT") dated as of December 15, 1997.
All defined terms set forth in this Notice of Borrowing and Certificate shall
have the respective meanings set forth in the Credit Agreement.
2) We hereby request an Advance under Facility___ (INDICATE A OR B) pursuant
to Sections_________ of the Credit Agreement as follows:
(a) Date of Advance: ___________________________________________________
(b) Amount of Advance: _________________________________________________
(c) Type of Advance: ___________________________________________________
(d) Designated Period(s) (if any): _____________________________________
(e) Maturity Date(s) (if applicable): __________________________________
(f) Payment Instruction (if any): ______________________________________
3) We have understood the provisions of the Credit Agreement which are
relevant to the furnishing of this Notice of Borrowing and Certificate. To
the extent that this Notice of Borrowing and Certificate evidences, attests
or confirms compliance with any covenants or conditions precedent provided
for in the Credit Agreement, we have made such examination or investigation
as was, in our opinion, necessary to enable us to express an informed opinion
as to whether such covenants or conditions have been complied with.
<PAGE>
4) WE HEREBY CERTIFY THAT, in our opinion, as of the date hereof:
(a) All of the representations and warranties of the Borrower contained
in Article 10 of the Credit Agreement are true and correct on and as of the
date hereof, except for those, if any, that expressly relate to an earlier
date, as though made on and as of the date hereof.
(b) All of the covenants of the Borrower contained in Articles 11 and
12 of the Credit Agreement together with all of the conditions precedent to
an Advance and all other terms and conditions contained in the Credit
Agreement have been fully complied with.
(c) No Event of Default has occurred and no Default has occurred and is
continuing.
Yours truly,
IPG HOLDINGS LP, represented by its
General Partner, INTERTAPE POLYMER INC.
Per:_____________________________
Title: __________________________
<PAGE>
SCHEDULE "C" - IPG GUARANTEE
<PAGE>
GUARANTEE entered into in the City of Montreal, Province of Quebec, as of
December 15, 1997,
BY: INTERTAPE POLYMER GROUP INC., a
company constituted in accordance with
the laws of Canada, having its
principal place of business at 110E
Montee de Liesse, in the City of St.
Laurent, Province of Quebec
(hereinafter called the "GUARANTOR")
IN FAVOUR OF: THE TORONTO-DOMINION BANK, a banking
corporation organized under the laws of
Canada, acting by and through its
Houston Agency, having an office at 909
Fannin Street, Suite 1700, in the City
of Houston, State of Texas, 77010
(hereinafter called the "LENDER")
WHEREAS pursuant to the Credit Agreement entered into among the
Borrower, the Guarantor and the Lender dated as of December 15, 1997 (the
"CREDIT AGREEMENT"), the Guarantor has agreed to provide the Lender with a
guarantee of the obligations of IPG Holdings LP (the "BORROWER") to the
Lender;
NOW THEREFORE, THE PARTIES HERETO HAVE AGREED AS FOLLOWS:
1 GUARANTEE
1.1 GUARANTEE
For valuable consideration, the undersigned (herein referred to as the
"GUARANTOR") hereby solidarily (jointly and severally) guarantees to the
Lender (at the address set out in the Credit Agreement or such other address
as the Lender may advise the Guarantor in writing), forthwith after demand
therefor (at the Guarantor's address specified in the Credit Agreement or
such other address as the Guarantor may advise the Lender in writing),
payment of all present and future debts and liabilities, and the performance
of all obligations of every nature, absolute or contingent, direct, indirect
or otherwise, in any currency, now or at any time and from time to time
hereafter due or owing by the Borrower to the Lender, whether arising under
the Credit Agreement, from dealings between the Lender and the Borrower, or
from any other dealings by which the Borrower may become in any manner
whatever liable to the Lender (the "OBLIGATIONS"). The Guarantor expressly
renounces to the benefits of division and discussion.
<PAGE>
1.2 GUARANTEE ABSOLUTE:
The liability of the Guarantor hereunder shall be absolute and unconditional
and shall not be affected by:
(a) any lack of validity or enforceability of any agreements between the
Borrower and the Lender; any change in the time, manner or place of
payment of or in any other term of such agreements or the failure on
the part of the Borrower to carry out any of its obligations under
such agreements;
(b) any impossibility, impracticability, frustration of purpose,
illegality, FORCE MAJEURE or act of government;
(c) the bankruptcy, winding-up, liquidation, dissolution or insolvency of
the Borrower, the Lender or any other Person;
(d) any lack or limitation of power, incapacity or disability on the
part of the Borrower or of the directors, partners or agents thereof
or any other irregularity, defect or informality on the part of the
Borrower in its obligations to the Lender;
(e) any change or changes in the name, corporate existence or structure
of the Borrower or the Guarantor;
(e) any other law, regulation or other circumstance which might
otherwise constitute a defence available to, or a discharge of, the
Borrower in respect of any or all of the Obligations.
1.3 RECOVERY AS PRINCIPAL DEBTOR
Any amount which may not be recoverable from the Guarantor by the Lender
on the basis of a guarantee shall be recoverable by the Lender from the
Guarantor as principal debtor in respect thereof and shall be paid to the
Lender forthwith after demand therefor.
2 DEALINGS WITH BORROWER AND OTHERS
2.1 NO RELEASE
The liability of the Guarantor hereunder shall not be released,
discharged, limited or in any way affected by anything done, suffered or
permitted by the Lender in connection with any duties or liabilities of the
Borrower to the Lender or any security therefor including any loss of or in
respect of any security received by the Lender from the Borrower or others.
Without limiting the
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<PAGE>
generality of the foregoing and without releasing, discharging, limiting or
otherwise affecting in whole or in part the Guarantor's liability hereunder,
without obtaining the consent of or giving notice to the Guarantor, the
Lender may discontinue, reduce, increase or otherwise vary the credit of the
Borrower in any manner whatsoever and may:
(a) grant time, renewals, extensions, indulgences, releases and
discharges to the Borrower;
(b) take or abstain from taking or enforcing securities or collateral
from the Borrower or from perfecting securities or collateral of the
Borrower;
(c) accept compromises from the Borrower;
(d) apply all money at any time from the Borrower or from securities upon
such part of the Obligations as the Lender may see fit or change any
such application in whole or in part from time to time as the
Lender may see fit; for greater certainty, the Lender may at any
time and from time to time, to the fullest extent permitted by law,
set-off and apply any and all deposits (general or special, time or
demand, provisional or final) at any time held and other indebtedness
at any time owing by the Lender to or for the credit of the Guarantor
against any and all of the liabilities of the Borrower, whether or
not the Lender shall have made any demand under this guarantee. The
Lender shall promptly notify the Guarantor after any such set-off
and application, provided that the failure to give such notice shall
not affect the validity of such set-off and application. The rights of
the Lender under this paragraph are in addition to other rights and
remedies (including without limitation, other rights of set-off)
which the Lender may have; and
(f) otherwise deal with the Borrower and all other persons and
securities as the Lender may see fit, acting reasonably.
2.2 NO EXHAUSTION OF REMEDIES
The Lender shall not be bound or obligated to exhaust its recourse
against the Borrower or other persons or any securities or collateral it may
hold or take any other action before being entitled to demand payment from
the Guarantor hereunder.
2.3 ACCOUNTS BINDING UPON THE GUARANTOR
Any account settled or stated in writing by or between the Lender and
the Borrower shall be accepted by the Guarantor as conclusive evidence,
absent manifest error, that the balance or
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<PAGE>
amount thereby appearing due by the Borrower to the Lender is so due.
2.4 NO SET-OFF
In any claim by the Lender against the Guarantor, the Guarantor may not
assert any set-off or counterclaim that the Guarantor or the Borrower may
have against the Lender. In particular, any loss of or in respect of any
securities received by the Lender from the Borrower or any other person, and
the failure to perfect any mortgage, hypothec, prior claim or security
interest of any nature whatsoever, whether occasioned through the fault or
negligence of the Lender or otherwise, shall not discharge, limit or lessen
the liability of the Guarantor under this guarantee.
3 CONTINUING GUARANTEE
This Guarantee shall be a continuing guarantee of the Obligations and
shall apply to and secure any ultimate balance due or remaining due to the
Lender under or as contemplated by the Credit Agreement or otherwise and
shall not be considered as wholly or partially satisfied by the payment or
liquidation at any time of any sum of money for the time being due or
remaining unpaid to the Lender. This Guarantee shall continue to be effective
even if at any time any payment of any of the Obligations is rendered
unenforceable or is rescinded or must otherwise be returned by the Lender
upon the occurrence of any action or event including the insolvency,
bankruptcy or reorganization of the Borrower or otherwise, all as though such
payment had not been made. The Guarantor expressly waives the provisions of
Articles 2353, 2362 and 2366 of the Civil Code of Quebec (the "CCQ").
4 RIGHT TO PAYMENTS
Should the Lender receive from the Guarantor one or more payments on
account of the liability under this guarantee, the Guarantor shall not be
entitled to claim repayment against the Borrower or the Borrower's estate
until the Lender's claims against the Borrower have been paid in full. In the
event of the liquidation, winding-up or bankruptcy of the Borrower (whether
voluntary or compulsory); or if the Borrower shall make a sale of an
enterprise within the meaning of articles 1767 et seq. CCQ or a bulk sale of
any of the Borrower's assets within the meaning of any applicable legislation
of any other province of Canada or under the Uniform Commercial Code of the
USA; or should the Borrower make any proposal, composition or scheme of
arrangement with its creditors; then, in any of such events the Lender shall
have the right to rank for its full claim and receive all dividends or other
payments in respect thereof until its claim has been paid in full and the
Guarantor shall remain liable up to the amount guaranteed, less any payments
made by the Guarantor, for any balance which may be owing to the Lender by
the Borrower; and in the event of the valuation by the Lender of any security
held in respect of the Borrower's debts, or of the retention by the Lender of
such security, such valuation and/or retention shall not, as between the
Lender and the Guarantor, be considered as a purchase of such security, or as
4
<PAGE>
payment or satisfaction or reduction of the Borrower's liabilities to the
Lender, or any part thereof.
5 TAXES
All payments to be made hereunder by the Guarantor shall be made free
and clear of deduction for any present or future tax, levy, impost, duty,
charge, assessment or fee of any nature (including interest, penalties and
additions thereto) that is imposed by any government or other taxing
authority ("TAXES"). If any Taxes are imposed and required to be withheld
from any payment hereunder, the Guarantor shall (a) increase the amount of
such payment so that the Lender will receive a net amount (after deduction of
all taxes, including any Taxes on the amount of any such increase) equal to
the amount due hereunder, (b) pay such Taxes to the appropriate taxing
authority for the account of the Lender and (c) as promptly as possible
thereafter, send the Lender an original receipt showing payment thereof,
together with such additional documentary evidence as the Lender may from
time to time reasonably require. If the Guarantor fails to perform its
obligations under parts (b) or (c) of the preceding sentence, the Guarantor
shall indemnify the Lender for any incremental taxes, interest or penalties
that may become payable by the Lender as a consequence of such failure.
6 SUBROGATION
To the fullest extent permitted by law, the Guarantor hereby irrevocably
waives any claim or other rights that it may now or hereafter acquire against
the Borrower that arise from the existence, payment, performance or
enforcement of the Guarantor's obligations under this Guarantee including,
without limitation, any right of subrogation, reimbursement, exoneration,
contribution or indemnification and any right to participate in any claim or
remedy against the Borrower or any collateral securing any obligation of the
Borrower, whether or not such claim, remedy or right arises in equity or
under contract, statute or common law, including, without limitation, the
right to take or receive from the Borrower, directly or indirectly, in cash
or other property or by set-off or in any other manner, payment or security
on account of such claim, remedy or right. If any amount shall be paid to the
Guarantor in violation of the preceding sentence at any time prior to the
indefeasible cash payment in full of the Obligations and all other amounts
payable under this Guarantee, such amount shall be held in trust for the
benefit of the Lender and shall forthwith be paid to the Lender to be
credited and applied to the Obligations and all other amounts payable under
this Guarantee.
5
<PAGE>
7 GENERAL
7.1 REPRESENTATIONS AND WARRANTIES
The Guarantor reiterates the representations and warranties to the Lender it
made in the Credit Agreement (which representations and warranties will be
deemed to be repeated by the Guarantor on the date of any advance made by the
Lender to the Borrower).
7.2 PAYMENT OF FEES AND COSTS
The Guarantor agrees to pay on demand all out-of-pocket expenses (including
the reasonable fees and expenses of the Lender's counsel) in any way relating
to the enforcement or protection of the rights of the Lender hereunder.
7.3 CURRENCY
(a) Each payment to be made under this guarantee will be made in US
Dollars (the "SPECIFIED CURRENCY"). To the fullest extent
permitted by applicable law, any obligation of the Guarantor to make
payments under this guarantee in the Specified Currency will not be
discharged or satisfied by any tender in any currency other than the
Specified Currency.
(b) To the fullest extent permitted by applicable law, if any judgment
or order expressed in a currency other than the Specified Currency
is rendered (i) for any payment of any amount owing in respect of
this Guarantee or (ii) in respect of a judgment or order of another
court for the payment of any amount described in (i) above, the
Lender, after recovery in full of the aggregate amount to which they
are entitled pursuant to the judgment or order, will be entitled to
receive immediately from the Guarantor the amount of any shortfall
of the Specified Currency received by the Lender as a consequence of
sums paid in such other currency and will refund promptly to the
Guarantor any excess of the Specified Currency received by the
Lender as a consequence of sums paid in such other currency if such
shortfall or such excess arises or results from any variation between
the rate of exchange at which the Specified Currency are converted
into the currency of the judgment or order for the purposes of such
judgment or order and the rate of exchange at which the Lender is
able, acting in a reasonable manner and in good faith, in converting
the currency received into the Specified Currency, to purchase the
Specified Currency with the amount of the currency of the judgment or
order actually received by the Lender. The term "rate of exchange"
includes, without limitation, any premiums and costs of exchange
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<PAGE>
payable in connection with the purchase of or conversion into the
Specified Currency.
(c) To the fullest extent permitted by applicable law, the indemnities
in this Section 7.3 constitute separate and independent obligations
of the Guarantor from the other obligations in this Guarantee, will
be enforceable as separate and independent causes of action, will
apply notwithstanding any indulgence granted by the Lender and will
not be affected by judgment being obtained or claim or proof being
made for any other sums due in respect of this guarantee.
(d) For the purposes of this Section 7.3, it will be sufficient for a
party to demonstrate that it would have suffered a loss had an
actual exchange or purchase been made.
7.4 DISCHARGE
The Guarantor will not be discharged from any of its obligations
hereunder except by a release or discharge signed in writing by the Lender.
7.5 ENTIRE AGREEMENT
This Guarantee, together with the Credit Agreement, constitutes the
entire agreement between the Guarantor and the Lender with respect to the
subject matter hereof and cancels and supersedes any prior understandings and
agreements between such parties with respect thereto. There are no
representations, warranties, terms, conditions, undertakings or collateral
agreements, express, implied or statutory, between the parties except as
expressly set forth herein. The Lender shall not be bound by any
representations or promises made by the Borrower to the Guarantor and
possession of this Guarantee by the Lender shall be conclusive evidence
against the Guarantor that the Guarantee was not delivered in escrow or
pursuant to any agreement that it should not be effective until any condition
precedent or subsequent has been complied with and this Guarantee shall be
operative and binding notwithstanding the non-execution thereof by any
proposed signatory.
7.6 AMENDMENTS AND WAIVERS
No amendment to this Guarantee will be valid or binding unless set forth
in writing and duly executed by the Guarantor and the Lender. No waiver of
any breach of any provision of this Guarantee will be effective or binding
unless made in writing and signed by the party purporting to give the same
and, unless otherwise provided in the written waiver, will be limited to the
specific breach waived.
7
<PAGE>
7.7 SEVERABILITY
If any provision of this Guarantee is determined to be invalid or
unenforceable in whole or in part, such invalidity or unenforceability will
attach only to such provision or part thereof and the remaining part of such
provision and all other provisions hereof will continue in full force and
effect.
7.8 INTERPRETATION
If more than one guarantor executes this instrument the provisions
hereof shall be read with all grammatical changes thereby rendered necessary
and each reference to the Guarantor shall include the undersigned and each
and every one of them severally and this guarantee and all covenants and
agreements herein contained shall be deemed to be solidary.
7.9 ADDITIONAL RIGHTS
This agreement is in addition and supplemental to all other guarantees
and/or postponement agreements (whether or not in the same form as this
instrument) held or which may hereafter be held by the Lender.
7.10 COLLATERAL AGREEMENTS
There are no representations, collateral agreements or conditions with
respect to this instrument or affecting the Guarantor's liability hereunder
other than as contained herein or in the Credit Agreement.
7.11 GOVERNING LAW
This agreement shall be governed by and construed in accordance with the
laws of the Province of Quebec.
7.12 BENEFIT OF THE GUARANTEE
This agreement shall extend to and enure to the benefit of the
successors and assigns of the Lender and shall be binding upon the Guarantor
and the successors of the Guarantor.
7.13 LANGUAGE
The Guarantor acknowledges that it has required that the present
agreement, as well as all documents, notices and legal proceedings entered
into, given or instituted pursuant hereto or relating directly or indirectly
hereto be drawn up in English. Le soussigne reconnait avoir exige
8
<PAGE>
la redaction en anglais de la presente convention ainsi que de tous documents
executes, avis donnes et poursuites judiciaires intentees, directement ou
indirectement, relativement ou a la suite de la presente convention.
7.14 EXECUTED COPY
The Guarantor acknowledges receipt of a fully executed copy of this
Guarantee.
IN WITNESS WHEREOF the Guarantor has executed this Guarantee on the date and
at the place first hereinabove mentioned.
INTERTAPE POLYMER GROUP INC.
Per: __________________________________
Per: __________________________________
ACCEPTED AND AGREED as of December 15, 1997:
THE TORONTO-DOMINION BANK, acting
by and through its Houston Agency
Per: __________________________________
Per: __________________________________
9
<PAGE>
SCHEDULE "D" - TRANSFER AGREEMENT
TO: ____________________ (the "AGENT"), ____________________ (the "BORROWER")
and ____________________ (the "GUARANTOR")
WHEREAS the Borrower entered into a Credit Agreement dated as of December
15, 1997 (the "CREDIT AGREEMENT") with the Agent, as [Agent and] Lender,
whereby the Agent agreed to provide the Borrower with certain credit
facilities; and
WHEREAS pursuant to and in accordance with Article 15 of the Credit
Agreement the Lender may, without the prior consent of the Borrower, assign
or transfer all or any part of its rights, benefits and obligations under the
Credit Agreement by duly completing, executing and delivering to the Agent
and to the Borrower this Transfer Agreement; and
WHEREAS ____________________ (the "TRANSFEROR") wishes to assign or
transfer to ____________________ (the "ASSIGNEE") the rights, benefits and
obligations of the Transferor under the Credit Agreement specified herein;
WHEREAS the Borrower has consented in writing to such assignment or
transfer pursuant to the provisions of the Credit Agreement; and has
reiterated its consent hereby;
NOW THEREFORE in consideration of the foregoing and of one dollar ($l.00) and
other good and valuable consideration, the receipt of which is hereby
acknowledged, the signatories hereto agree as follows:
1. All capitalized terms defined in the Credit Agreement and not otherwise
defined herein have the same meaning as in the Credit Agreement.
2. The Transferor assigns and transfers to the Assignee the following
rights, benefits and obligations (the "TRANSFER"):
(description of the transferred rights, benefits and obligations,
indicating retained interest or fees, if applicable, extent of the
Assignee's interest and any applicable arrangements if any Libor
Advances or Letters of Credit are outstanding at the time of the
Assignment)
(the "TRANSFERRED RIGHTS" and the "TRANSFERRED OBLIGATIONS", as applicable).
3. The Assignee accepts the Transfer and assumes the Transferred
Obligations without novation (the "ASSUMPTION"). The Borrower and the
Guarantor each release the Transferor from all obligations and liabilities
associated with the Transferred Rights and acknowledge the assumption by the
Assignee of the Transferred Obligations.
<PAGE>
4. The Transfer and the Assumption are governed by and subject to Article
15 of the Credit Agreement.
5. The Assignee acknowledges and confirms that it has not relied upon and
that neither the Transferor nor the Agent has made any representation or
warranty whatsoever as to the due execution, legality, effectiveness,
validity or enforceability of the Credit Agreement or any other documentation
or information delivered by the Transferor or the Agent to the Assignee in
connection therewith or for the performance thereof by any party thereto or
for the performance of any obligation by any Restricted Subsidiary or for the
financial condition of the Guarantor or of any Restricted Subsidiary. All
representations, warranties and conditions expressed or implied by law or
otherwise are hereby excluded.
6. The Assignee represents and warrants that it has itself been, and will
continue to be, solely responsible for making its own independent appraisal
of and investigation into the financial condition, creditworthiness, affairs,
status and nature of the Guarantor and the Restricted Subsidiaries and has
not relied and will not hereafter rely on the Transferor and/or the Agent to
appraise or keep under review on its behalf the financial condition,
creditworthiness, affairs, status or nature of the Guarantor or the
Restricted Subsidiaries. The Assignee acknowledges and agrees that it has no
right to obtain any non-public information directly from the Guarantor and
the Restricted Subsidiaries and that it will request any information it
requires solely from the Agent.
7. Each of the Transferor and the Assignee represents and warrants to the
other and to the Agent and the other Lender(s), if any, and the Guarantor and
the Borrower, that it has the right, capacity and power to enter into the
Transfer and the Assumption in accordance with the terms hereof and to
perform its obligations arising therefrom, and all action required to
authorize the execution and delivery hereof and the performance of such
obligations has been duly taken.
8. This Transfer Agreement shall be governed by and construed in accordance
with the laws of the State of New York, USA.
DATED this day of , 19 .
[BORROWER] (TRANSFEROR)
per: ___________________ per: ___________________
per: ___________________
[LENDER/AGENT] (ASSIGNEE)
per: ___________________ per: ___________________
<PAGE>
SCHEDULE "E" - RESTRICTED SUBSIDIARIES
Intertape Polymer Inc. ("IPI")
IPG Holdings LP ("LP")
IPG Holdings Company of Nova Scotia ("NS ULC")
IPG Finance LLC ("LLC")
IPG (US) Holdings Inc.
IPG (US) Inc.
Intertape Polymer Corp. ("IPC")
IPG (US) Acquisition Corporation
STC Tape Inc. ("STC")
American Tape ("ATC")
Tape ACQ
Tape Inc.
TAPE FSC Inc.
Polymer International Corp. ("PIC")
IFCO MFG (USA)
ICS Inc. (USA)
Cajun Bag Corp. (Augusta, USA)
<PAGE>
SCHEDULE "F" - OFFICER'S CERTIFICATE
[SAME FOR BORROWER]
I, the undersigned, ____________________, the ____________________ of
Intertape Polymer Group Inc. (the "GUARANTOR"), do hereby certify as follows:
a) I have taken cognizance of all the terms and conditions of the
Credit Agreement (the "CREDIT AGREEMENT") dated as of December 15,
1997 entered into among the Borrower, the Guarantor and The
Toronto-Dominion Bank, as well as of the Guarantee (as defined in the
Credit Agreement) and all other contracts, agreements and deeds
pertaining thereto; and
b) no Default or Event of Default has occurred nor exists thereunder;
and
c) each of the Borrower and the Restricted Subsidiaries holds the
permits, licences and authorizations required in order to permit it
to possess its property and its real estate and to carry on its
business in the manner in which it is being carried on at present.
Executed at the City of ____________________, ____________________ this
_th day of December, 1997.
____________________
[Name of Officer]
<PAGE>
SCHEDULE "G" - OPINION
____________________, 199_
THE TORONTO-DOMINION BANK
____________________
____________________
_____________
- - and -
HEENAN BLAIKIE
Suite 2500
1250 Rene Levesque Blvd. W.
Montreal, Quebec
H3B 4Y1
Dear Sirs:
RE: IPG HOLDINGS LP AND INTERTAPE POLYMER GROUP INC.
We have acted as counsel to IPG Holdings LP (the "BORROWER") and Intertape
Polymer Group Inc. (the "GUARANTOR") as well as to the Restricted
Subsidiaries in connection with a Credit Agreement bearing formal date of
December 15, 1997 (the "CREDIT AGREEMENT") entered into among the Borrower,
the Guarantor and The Toronto-Dominion Bank (the "LENDER"), providing for a
Credit made available to the Borrower in an aggregate amount of up to US
$100,000,000. The terms used herein which are defined in the Credit
Agreement have the respective meanings set forth in the Credit Agreement and
this opinion is delivered to you in accordance with the provisions of
subsection 9.1.8 of the Credit Agreement.
In this connection, we have examined such certificates of public officials,
such certificates of officers of the Borrower and the Guarantor and originals
or copies certified to our satisfaction of all such corporate documents and
records of the Guarantor and the Restricted Subsidiaries, and all of such
other documents, records and papers, as we have deemed relevant and necessary
as a basis for our opinions hereinafter set forth. We have also made such
other investigations as we have deemed relevant and necessary in order to
enable us to render our opinions herein set forth.
Without restricting the generality of the foregoing, we have examined the
following documents:
a) The Credit Agreement;
b) The IPG Guarantee;
<PAGE>
c) The Guarantee and assignment by IPG Finance LLC ("LLC") in favour of the
Lender (the "LLC DOCUMENTS");
d) Documents pertaining to the acquisition by one of the Guarantor's
Restricted Subsidiaries of all of the issued shares of the capital stock of
ATC;
In making our examination of the foregoing documents, we have assumed the
genuineness of all signatures not known to us, the authenticity of all
documents tendered to us as originals, the conformity to the originals of all
documents submitted to us as certified or photostatic copies and the legal
competency of any individual executing such documents.
Based on the foregoing, we are of the opinion that:
1. Each of the Guarantor, the Borrower and the other Restricted Subsidiaries
is a corporation or limited partnership duly incorporated or constituted
and organized, validly existing and in good standing under the Laws of
its jurisdiction of incorporation or constitution and of all jurisdictions
in which it carries on business. The Guarantor and each of the Restricted
Subsidiaries has the capacity and power, whether corporate or otherwise,
to hold its assets and carry on the business presently carried on by it or
which it proposes to carry on hereafter in each jurisdiction where such
business is carried on.
2. The Borrower has the power, capacity and authority to borrow all amounts
contemplated under the Credit Agreement, as well as to execute and
deliver and perform its obligations under the Credit Agreement, and has
taken all necessary steps under the Law in order to be authorized to
borrow thereunder and to execute and deliver and perform its obligations
thereunder in accordance with the terms and conditions thereof and to
complete the transactions contemplated therein. The Credit Agreement has
been duly executed and delivered by duly authorized officers of the
Borrower and is a legal, valid and binding obligation of the Borrower,
enforceable in accordance with its terms.
3. The Credit Agreement has been duly executed and delivered by duly
authorized officers of the Borrower and the Guarantor and is a legal,
valid and binding obligation of the Borrower and the Guarantor,
enforceable in accordance with its terms.
4. The Guarantor has the power, capacity and authority to, and has taken
all necessary steps under the Law in order to be authorized to, provide
the IPG Guarantee and to execute and deliver and perform its obligations
under the Credit Agreement and the IPG Guarantee in accordance with the
terms and conditions thereof and to complete the transactions contemplated
in the IPG Guarantee and in the Credit Agreement.
5. Each of the Credit Agreement and the IPG Guarantee has been duly executed
and delivered by duly authorized officers of the Guarantor, and is a
legal, valid and binding obligation of the Guarantor, enforceable in
accordance with its terms.
6. LLC has the power, capacity and authority to, and has taken all necessary
steps under the Law in order to be authorized to, provide the LLC
Documents and to execute and deliver and
<PAGE>
perform its obligations under the LLC Documents in accordance with the
terms and conditions thereof and to complete the transactions contemplated
in the LLC Documents.
7. Each of the LLC Documents has been duly executed and delivered by duly
authorized officers of LLC, and is a legal, valid and binding obligation
of LLC, enforceable in accordance with its terms.
8. The execution and delivery by the Borrower, the Guarantor and the other
Restricted Subsidiaries of the Credit Agreement, the IPG Guarantee and
the LLC Documents and all other agreements and instruments referred to
therein do not conflict with, or result in a breach of, the terms,
conditions or provisions of, or constitute a default under, or result in
any violation of any of the terms or provisions of, the constating
documents or by-laws of the Borrower, the Guarantor or any of the other
Restricted Subsidiaries or, to the best of our knowledge after due
enquiry, under any agreements, contracts or deeds to which the Borrower,
the Guarantor or any of the other Restricted Subsidiaries is a party or
binding upon it or its assets and do not result in or require the creation
or imposition of any Charge whatsoever on the assets of the Borrower, the
Guarantor or any of the other Restricted Subsidiaries, whether presently
owned or hereafter acquired, save for the Permitted Charges.
9. The acquisition of ATC was effected in accordance with all applicable
Laws. All of the issued shares of ATC are owned by one or more Restricted
Subsidiaries of the Guarantor.
10. The structure established in order to acquire ATC, including the
constitution of the Borrower and its Subsidiaries and _________ and its
Subsidiaries was established solely for the purpose of such acquisition
and to our knowledge, none of the Persons referred to carry on any
business other than in connection with the aforesaid acquisition.
11. Neither the Borrower, the Guarantor nor any of the other Restricted
Subsidiaries is required to obtain any consent, approval, authorization,
permit or license, nor to effect any filing or registration with any
federal, provincial or other regulatory authority in connection with the
execution, delivery or performance, in accordance with their respective
terms, of the Credit Agreement, the IPG Guarantee or the LLC Documents,
or any borrowings under the Credit Agreement.
12. Based on search reports concerning _________________, _________________,
_________________ and _________________, all Debt of the Guarantor,
considered on a Consolidated basis, is subject to no Charge, other than
the Permitted Charges.
13. [PARI PASSU NATURE OF DEBT?]
14. To the best of our knowledge, after making reasonable enquiries, there is
no litigation threatened or pending against the Borrower, the Guarantor
or the other Restricted Subsidiaries other than the litigation described
in Schedule "H" to the Credit Agreement.
In connection with the foregoing opinions:
a) As to the enforceability of the obligations of the Borrower, the Guarantor
or LLC in specific documents, we are not opining upon the question of
whether or not the remedy of specific
<PAGE>
performance or injunctive or other equitable relief would be available,
inasmuch as the availability of such remedies is subject to the
discretion of the court before which any proceedings for such remedy may
be brought;
b) we have assumed that the Credit Agreement, the IPG Guarantee and the LLC
Documents have been duly authorized, executed and delivered by the parties
thereto other than the Borrower, the Guarantor and LLC.
The foregoing opinions extend only to the laws of the State of New York and
the laws of the United States of America applicable therein.
Finally, the enforceability of the Credit Agreement, the IPG Guarantee and
the LLC Documents is subject to such limitations and prohibitions of
enforceability as may exist or may be enacted in laws relating to bankruptcy,
insolvency, liquidation, reorganization, moratorium or other laws of general
application affecting the enforceability of creditors' rights and may only be
relied upon by the parties to whom they are addressed for the purposes of the
transactions herein contemplated.
Yours truly,
<PAGE>
SCHEDULE "H" - LITIGATION
None
<PAGE>
SCHEDULE "I" - ERISA AFFILIATES AND PLANS
- - Intertape Polymer Inc. employer funded defined contribution pension plan.
- - Intertape Polymer Group USA Retirement Plan (401K).
- - Tape Inc. retirement plan (401K).
<PAGE>
SCHEDULE "I-1" - ERISA DISCLOSURE
RE: AMERICAN TAPE COMPANY HOURLY EMPLOYEES PENSION PLAN
Based on asset and liability information provided in the January 1, 1997
valuation report, the plan on an ongoing (funding) basis is underfunded by
approximately $615,000. This is based on an actuarial value of assets of
$3,739,424 and an actuarial liability of $4,354,147.
On a termination basis, the plan would be underfunded by approximately
$1,714,000. This is based on a market value of assets of $4,286,019. An
estimated liability of $6,000,000.
<PAGE>
SCHEDULE "J" - EXISTING SECURITY
<PAGE>
SCHEDULE "K" - INTERLENDER AGREEMENT
<PAGE>
INTERLENDER AGREEMENT entered into in the City of New York, State of New
York, as of ______________________, 1997.
BETWEEN: THE TORONTO-DOMINION BANK, a banking
corporation organized under the laws of
Canada, acting by and through its
Houston Agency, having an office at
909 Fannin Street, Suite 1700, in the
City of Houston, State of Texas, 77010
(hereinafter called "TD")
AND: COMERICA BANK, a Michigan banking
corporation, having a branch at ______,
__th floor, in the City of ___________,
State of ________ (hereinafter called
"CB")
(CB and TD are herein collectively
called the "LENDERS")
WHEREAS TD entered into a Credit Agreement as of December 15, 1997 with
IPG HOLDINGS LP (hereinafter called the "BORROWER") and INTERTAPE POLYMER
GROUP INC. (hereinafter called the "GUARANTOR") (hereinafter called the
"CREDIT AGREEMENT"); and
WHEREAS CB has become an Assignee under the Credit Agreement, and the
Lenders desire to establish certain rights and obligations as between
themselves;
NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:
1 INTERPRETATION
Capitalized terms not otherwise defined herein have the meaning ascribed to
them in the Credit Agreement.
2 PARTICIPATIONS OF TD AND CB
2.1 Each of the Lenders agrees to make its Participation available to the
Borrower. The Lenders agree, as between themselves, that each of them
will make the Advances (including by way of Letters of Credit) provided
for in the Credit Agreement, as requested by the Borrower, to the extent
of their respective Participations.
2.2 Each of the Lenders will maintain its own accounts and administer its
own Advances.
2.3 The Lenders acknowledge that the allocation of the Advances under
Facility B as between the Lenders may not always be PRO RATA to the
Participations of the Lenders, the whole as contemplated by Section 16.1
of the Credit Agreement. Notwithstanding that at any time the allocation
of the Loans as between the Lenders may not be in proportion to their
respective Participations, the Lenders will share the risks and suffer
<PAGE>
any losses on a PARI PASSU basis in any distribution of any amounts paid
by, or arising out of the proceeds of realization of the property of, the
Borrower and the Guarantor. Each of the Lenders acknowledges that based
on the respective Participations of TD and CB in Facility B of the Credit
as at the Closing Date, any such proceeds would be shared on the basis of
50% for TD and 50% for CB.
3 AMENDMENTS TO THE CREDIT AGREEMENT WITH RESPECT TO FACILITY B
If the Borrower from time to time submits a written request to the Lenders:
a) that the amount of the Credit available under Facility B be
increased and such request is accompanied by a proposed
allocation of the requested increase as between the Lenders by
way of increased Participations; or
b) that any of the terms of the Credit Agreement affecting
Facility B be changed;
each of the Lenders will, within 30 days following the receipt of such
notice, advise the other in writing whether or not it agrees to the
proposed increase or change, and the following provisions will apply:
3.1 if each Lender agrees to the proposed increase or change within the said
(30) day delay, they will advise the Borrower thereof and will negotiate
and will enter into the appropriate amendment to the Credit Agreement and
the Lenders will amend this Interlender agreement accordingly;
3.2 if each Lender refuses the proposed increase or change, they will advise
the Borrower thereof;
3.3 if only one of the Lenders agrees to the proposed increase or change to
the Credit Agreement in connection with Facility B, the Lender who so
agrees (the "AGREEING LENDER") will be entitled to negotiate arrangements
with the Borrower to take over the position of the other Lender (the
"REFUSING LENDER") with respect to Facility B and if an agreement is
reached between the Agreeing Lender and the Borrower within 60 days
following the receipt by the Lenders of the request, and the Refusing
Lender is advised thereof by the Agreeing Lender within that delay, the
Refusing Lender will cease to participate in the Credit available under
Facility B. Once all amounts owing to the Refusing Lender have been paid
in full and the Refusing Lender has received the appropriate
indemnifications with respect to any of its then outstanding Letters of
Credit under Facility B, the Refusing Lender will enter into an Assignment
in favour of the Agreeing Lender. If no agreement is reached between the
Agreeing Lender and
2
<PAGE>
Borrower within the said 60 day period, the Lenders will advise the
Borrower that the request has been refused.
4 SHARING OF INFORMATION
Each Lender will, if requested by the other(s) provide such information as it
has received from the Borrower as the other may request and each of the
Lenders shall promptly give notice to the other of any Default of which it
becomes aware under the Credit Agreement and of any information it receives
which might reasonably be considered to be materially adverse to the
Borrower. It is agreed that failure to provide notice of such Default or such
materially adverse information will not result in any liability on the part
of the Lender which fails to give such notice or information to the other
Lender.
5 DEFAULTS
5.1 If a Lender discovers or believes that a Default or an Event of Default
has occurred, it will forthwith so advise the other in writing.
5.2 If a Default exists which requires the giving of a notice in order to
give rise to an Event of Default, either of the Lenders desiring that
the notice be given will notify the other thereof in writing. If the
holders of Participations representing 66 2/3% of the Credit under
Facility B (the "MAJORITY LENDERS") agree, the Lenders may give the
required notice.
Notwithstanding the foregoing, the decision to waive the Default or Event
of Default in respect of any of the following matters, and the decision
to amend the Credit Agreement in respect of any of the following matters,
shall require the unanimous consent of the Lenders: (i) any extension of
the date for, or alteration in the amount, currency or mode of
calculation or computation or any payment of principal or interest or
other amount, (ii) any increase in the Participation of a Lender, (iii)
any extension of any maturity date, (iv) any change in the terms of this
Section, (v) any change in the manner of making decisions among the
Lenders, (vi) the release of the Borrower or the Guarantor, in whole or
in part, (vii) any change in or any waiver of the conditions precedent
provided for in Article 9 of the Credit Agreement, or (viii) any amendment
to this Section 5.2.
5.3 None of the Lenders will make any Advances to the Borrower (including by
the issuance of any Letter of Credit) at a time when a Default or an
Event of Default should be invoked, unless it is determined by a decision
of the Majority Lenders to withdraw the notice invoking the Event of
Default or the Default or, in the case of a Default, the Default has been
remedied.
3
<PAGE>
5.4 Should there occur an Event of Default and a Lender has so notified the
other in writing, the Lenders will consult with each other as to what
steps, if any, should be taken. If the Majority Lenders desire that a
demand should be made under the Credit Agreement, the Lenders will make
a joint demand or give the appropriate notice of enforcement within 5
Business Days of the receipt of such a notice. However, no demand will
be made if the other Lender (the "SUPPORTING LENDER") desires not to so
proceed and the Supporting Lender agrees to pay the other Lender (the
"RETIRING LENDER") the entire amount of the Loan due to it under the
Credit Agreement and undertakes to indemnify and hold the Retiring
Lender harmless from any liability under any outstanding Letter of
Credit. The Supporting Lender will make payment to the Retiring Lender
and will provide the appropriate indemnification documentation by the
time demand was otherwise to have been made hereunder, and the Retiring
Lender will enter into an Assignment in favour of the Supporting Lender.
5.5 Neither of the Lenders will make any demand for payment under the Credit
Agreement except as provided for in the immediately preceding paragraph.
5.6 Within 5 Business Days following the making of any demand for payment
under the Credit Agreement, the Lenders will make adjustments between
themselves so that their Loans to the Borrower will be PRO RATA to their
respective Participations in the Credit. They will make further such
adjustments between themselves as and when any Letters of Credit mature.
5.7 Any amounts received by any of the Lenders from or for the account of
any of the Borrower or the Guarantor after the making of a demand for
payment will be distributed as follows:
5.7.1 Firstly, in payment of all costs and expenses incurred in the
making of the demand for payment and enforcement of the Credit
Agreement;
5.7.2 Secondly, in payment to the Lenders, PRO RATA, of the Loans of
the Borrower to each of them under the Credit Agreement, as at the
date of the making of a demand for payment (as adjusted pursuant to
section 5.6 and otherwise in due course between the Lenders),
taking account of all Advances, interest, and Fees, but excluding
any amounts referred to in subsection 5.7.4 hereof;
5.7.3 Thirdly, in payment to the Lenders, PRO RATA, of any interest
accrued after the date of the making of demand for payment on the
amounts referred to in subsection 5.7.2;
4
<PAGE>
5.7.4 Fourthly, in payment of the Lenders, PRO RATA, of any
indebtedness of the Borrower to each of them in respect of Advances
made at a time when a Default or Event of Default has occurred and
has been invoked and notice invoking such Default has not been
withdrawn or the Default has not been remedied; and
5.7.5 Fifthly, in payment to the Lenders, PRO RATA, of any Indebtedness
of the Borrower or the Guarantor to them in respect of loans,
advances and credit facilities other than under the Credit
Agreement.
6 NO RIGHTS IN FAVOUR OF THE BORROWER OR THE GUARANTOR
Nothing herein contained will be deemed to restrict, lessen or prejudicially
affect the rights of the Lenders as against the Borrower or the Guarantor,
and without limiting the generality of the foregoing, nothing herein
contained will be interpreted as constituting a stipulation for the benefit of
any of the Borrower or the Guarantor.
7 GENERAL
7.1 This agreement will continue in full force and effect until terminated
by the mutual consent of the Lenders or until such time as the Credit
Agreement has terminated and there remains nothing further owing
(including contingently) to each of the Lenders thereunder.
7.2 Any notices required or permitted to be given hereunder shall be in
writing and may be given in accordance with the provisions of the Credit
Agreement.
7.3 This Agreement will enure to the benefit of and be binding upon the
Lenders and their respective successors and assigns.
7.4 The preamble hereof shall form part of these presents as if recited at
length herein.
7.5 This agreement is made pursuant to the laws of the State of New York and
will be construed, interpreted, performed and enforced in accordance
therewith.
7.6 The parties acknowledge that they have required that this agreement and
all related documents be drawn up in English. Les parties reconnaissent
avoir exige que la presente convention et tous les documents connexes
soient rediges en anglais.
5
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EXECUTED AT THE CITY OF ___________________, as of _________________, 1997.
THE TORONTO-DOMINION BANK COMERICA BANK
Per: _______________________ Per: _______________________
Per: _______________________ Per: _______________________
6
