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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, 1999
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 to Section 12(b) of the Act:
Title of each class: Name of each exchange on which registered:
Common Shares, without nominal or New York Stock Exchange
par value The 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, 1999 is:
28,296,392 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 _____
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
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Item Caption Page
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CAUTIONARY STATEMENTS AND RISK FACTORS..................................................1
PART I.......................................................................................2
ITEM 1. DESCRIPTION OF BUSINESS.......................................................2
ITEM 2. DESCRIPTION OF PROPERTY......................................................17
ITEM 3. LEGAL PROCEEDINGS............................................................18
ITEM 4. CONTROL OF REGISTRANT........................................................18
ITEM 5. NATURE OF TRADING MARKET.....................................................19
ITEM 6. EXCHANGE CONTROLS AND OTHER LIMITATIONS AFFECTING SECURITY HOLDERS...........20
ITEM 7. TAXATION.....................................................................21
ITEM 8. SELECTED FINANCIAL DATA......................................................22
ITEM 9. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS................................................................24
ITEM 9A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK...................25
ITEM 10. DIRECTORS AND OFFICERS OF REGISTRANT.........................................28
ITEM 11. COMPENSATION OF DIRECTORS AND OFFICERS.......................................32
ITEM 12. OPTIONS TO PURCHASE SECURITIES FROM REGISTRANT OR SUBSIDIARIES...............34
ITEM 13. INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS...............................36
PART II.....................................................................................38
PART III....................................................................................38
ITEM 15. DEFAULTS FROM SENIOR SECURITIES.............................................38
ITEM 16. CHANGES IN SECURITIES AND CHANGES IN SECURITY FOR REGISTERED SECURITIES.....38
PART IV.....................................................................................39
ITEM 17. FINANCIAL STATEMENTS........................................................39
ITEM 18. FINANCIAL STATEMENTS........................................................39
ITEM 19. FINANCIAL STATEMENTS AND EXHIBITS...........................................39
SIGNATURES.............................................................................41
EXHIBIT INDEX..........................................................................42
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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 cautionary statements and risk factors
contained in Item 9A below.
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 were reported in Canadian dollars
through December 31, 1998. Commencing January 1, 1999, due to increased
activity in the U.S., the Company adopted the U.S. dollar as its reporting
currency. Since the trading price in the United States of the Common Shares
of the Company is 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
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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's business plan involves the introduction of new products,
which are both developed internally and acquired through acquisition. There
can be no assurance that the market will accept these products or that
competitors will not introduce similar products, which will impact the
company's ability to expand its markets and generate organic growth.
PART I
ITEM 1. DESCRIPTION OF BUSINESS.
GENERAL
Intertape Polymer Group develops, manufactures and sells a variety of
specialized polyolefin plastic packaging products. These products include
INTERTAPE-Registered Trademark- pressure-sensitive and water-activated tape,
EXLFILM-TM- shrink film ("EXLFILM-TM-"), STRETCHFLEX-Registered Trademark-
stretch wrap ("STRETCHFLEX-Registered Trademark-") and woven products. Most
of the Company's products are derived from resins that 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 among the low-cost
producers 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 similar extrusion processes and differ only in the final stages of
manufacturing.
The Company's most recent expansion of its product offering occurred
with its 1999 acquisitions of Spinnaker Electrical Tape Company, a U.S.
manufacturer of pressure-sensitive electrical tapes, and Central Products
Company, a U.S. manufacturer of a natural rubber pressure-sensitive tape.
Central Products Company also manufactured hot melt and acrylic
pressure-sensitive tapes, and a line of water-activated carton sealing tapes,
giving the Company what it now believes to be 70% of the market.
The Company's revenues are derived primarily from sales of its products
in the United States and Canada, with approximately 95% of the Company's 1999
revenues attributable to sales from manufacturing facilities in the United
States. The Company is headquartered in Montreal, Quebec and maintains
approximately 2.9 million square feet of manufacturing facilities throughout
the United States, Canada and Portugal.
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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 of $4.25 (CDN$5.035) (after giving effect to a 2:1
stock split on June 4, 1996). The Company's Common Shares were previously
listed on the American Stock Exchange and, commencing August 1999, are now
listed on the New York Stock Exchange. In addition, since January 1993, the
Company's Common Shares have been listed 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 $14.60
(CDN$19.75). The Company completed a third public offering of its Common
Shares in Canada on a "bought deal" basis in March 1999, at the offering
price of $26.31 (CDN$40.25) per share.
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 $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
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Company entered the stretch wrap market (estimated at $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. Interpack
Machinery Inc. ("Interpack"), a designer of automatic carton sealing
equipment, was acquired by the Company in 1993. In acquiring Interpack, 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 Co. ("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. Anchor Continental, Inc. ("Anchor") was
acquired in 1998 and was a main competitor of the Company for the sale of
masking tapes. Rexford Paper Company ("Rexford"), a redistributor of a
variety of pressure-sensitive tapes, as well as a manufacturer of
water-activated tapes, was also acquired in 1998. In 1999, the Company
acquired Spinnaker Electrical Tape Company ("SETco"), bringing a new product
line, pressure-sensitive electrical tapes, to the Company. In addition, in
1999, the Company also acquired Central Products Company ("CPC"), one of its
competitors for the sale of both pressure-sensitive and water-activated
carton sealing tapes. 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 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 Corp. 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.
During 1999, the Company participated 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 Company, however,
sold its interest in IFCO in March 2000. The capital resources will now be
utilized in other areas of the Company's business expected to provide higher
rates of return.
Until 1998, the majority of the Company's growth came from the sale of
internally developed products. Capacity increases are ongoing throughout the
organization and all product lines. The Company's Utah manufacturing
facility, a 115,000 square foot plant, became operational in June 1998, and
was expanded further in 1999. Consistent with the Company's strategy, this
plant is acting 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.
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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, Inc., a Virginia corporation, formerly known
as Intertape Polymer Corp. ("IPC"), is the principal 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
below.
As of May 17, 2000, the Company had 28,297,392 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
U.S. 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 during the last five years:
<TABLE>
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COMPLETED ACQUISITIONS
- --------------------------------------------------------------------------------------------------------
Annual Cost of
Year Acquisitions Company Location Products
- ---- -------------- ----------------------- ------------------------ ----------------------
($in millions)
<S> <C> <C> <C> <C>
1997 $ 42.9 American Tape Co. Marysville, Michigan Pressure-sensitive
Richmond, Kentucky tapes, masking tapes
1998 $113.2 Anchor Continental, Inc. Columbia, South Carolina Pressure-sensitive
tapes, masking and
duct tapes
Rexford Paper Company Milwaukee, Wisconsin Pressure-sensitive and
water-activated tapes
1999 $111.3 Central Products Company Menasha, Wisconsin Pressure-sensitive and
Brighton, Colorado water-activated carton
sealing tapes
Spinnaker Electrical Tape Carbondale, Illinois Pressure-sensitive
Company electrical tapes
</TABLE>
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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:
- 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
five 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
commenced EXLFILM-TM- and STRETCHFLEX-Registered Trademark-
manufacturing operations at its new facility located in Tremonton, Utah
during the second quarter of 1998 and further expanded this facility
during 1999.
- 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-Registered Trademark-
trademark. Recent product developments during 1999 have
positioned STRETCHFLEX-Registered Trademark- as a leader in new
five-layer high performance stretch wrap. EXLFILM-TM- shrink films,
launched in 1992, have been the focus of numerous product developments,
including the addition of new cross-linking technology that led to the
development of EXLFILMPLUS-TM- which gives the Company access to new
markets that it did not previously participate in.
NOVATHENE-Registered Trademark- woven fabrics have been undergoing
continued product development. The Company has completed the
successful test of a patented woven fabric that competes with PVC in
several major markets. Tape developments continue to focus on
performance products targeted to unique applications and specific
customers.
- DISTRIBUTION CENTERS. The Company has installed in several of its key
manufacturing/distribution facilities a Warehouse Management System
("WMS") which will increase efficiency in the storage, shipping and
inventory management of all its products located in those facilities.
This investment will increase the level of service that
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the Company provides to its customers, as well as reduce its operating
costs in these areas. With recent acquisitions, the Company's
management initiated a fresh look at its Supply Chain strategy. The
premier consultants in the Supply Chain arena have been engaged to
manage the process and guide the Company to reduce its costs, formulate
a strategy, train personnel, eliminate inefficiencies and further
enhance the Company's ability to service its customers.
- 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 Company considers
complementary companies, technologies and products as potential
acquisition targets, and evaluates the merits of each such potential
acquisition. The Company's purchase of American Tape, Anchor, and CPC
are examples of such acquisitions, providing the Company with masking,
duct, 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 acquisitions of American Tape and
Anchor, the Company gained a market presence throughout the world in
high performance masking tapes and duct tapes. The Company believes
that it can build upon 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
INTERTAPE-Registered Trademark- 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 and further believes that it is the only
manufacturer in North America of all three types
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of adhesives; hot melt, acrylic, and natural rubber. Carton sealing tape is
manufactured and sold under the INTERTAPE-Registered Trademark- name to
industrial distributors and manufactured for other customers for sale under
private labels. It is produced at the Company's Danville, Montreal, Richmond
and Columbia 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 markets and continues to increase its
sales force for these markets. The Company expects its centralized warehouse
distribution system in the Tremonton, Utah facility will continue to enhance
these efforts. In addition, the Company exports its product to Europe, Asia,
Central America and South America.
The Company's acquisition in 1993 of the assets of Interpack, 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 enhance and improve its equipment
designs.
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 1999 acquisition of CPC, a producer of carton sealing
tapes, should serve to provide cost reductions to the Company. In addition,
the Brighton, Colorado, facility obtained in the acquisition provides the
Company with the needed capacity in hot melt coating and solvent rubber
products to form a basis for continued growth in these products.
The Company's principal competitor for the sale of carton sealing tape
products is Minnesota Mining & Manufacturing Co. ("3M").
INTERTAPE-Registered Trademark- 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 and expanded its position in this product line with the acquisition
of Anchor in September 1998. Masking tapes are used for a variety of end-use
applications which can be broadly described under two categories: general
purpose and performance.
General purpose applications include packaging and bundling, and
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.
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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,
Shuford Mills, Inc., Industrias Tuk, S.A. de C.V., and Tesa Tape Inc.
("Tesa").
INTERTAPE-Registered Trademark- REINFORCED FILAMENT TAPE: PERFORMANCE
AND GENERAL PURPOSE
In addition to masking tapes, the Company's purchases of American Tape
and Anchor 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, Marysville,
Michigan and Columbia, South Carolina which were acquired in the American
Tape and Anchor acquisitions. These 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 Tesa and RJM Manufacturing, Inc.
ACRYLIC COATING
In 1995, the Company completed a $7.0 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, Virginia
plant. These acrylic coatings, when applied to film tapes, offer extended
shelf life as well as increased performance under the extremes of low and
high temperatures. In addition, certain applications, such as mirror
backing, utilize woven products as the base material to which acrylic coating
is applied.
INTERTAPE-Registered Trademark- DUCT TAPE
The acquisition of Anchor provided the Company a significant capacity in
the duct tape product line. Duct tapes are manufactured at the Columbia,
South Carolina, facility. Approximately 75% of the duct tape volume consists
of polyethylene-coated cloth. Aluminum foil type tape accounts for most of
the non-polyethylene coated product sales of the Company's duct tape
products. The main competitors are Tyko International, Ltd. ("Tyko") and
Shurtape Technologies, Inc.
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
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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 at its Tremonton, Utah facility. The Company
believes that its continued investment in equipment and product development
will help it expand in this market. With the development of cross-linking
technology, the Company has introduced a new line of high performance shrink
film, EXLFILMPLUS-TM-, which can be used to satisfy additional end user
applications.
The Company's shrink wrap products are sold through a select group of
specialty distributors 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.
STRETCHFLEX-Registered Trademark- STRETCH WRAP
STRETCHFLEX-Registered Trademark- 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. The
Company has the capacity to produce a total of 130 million pounds of
STRETCHFLEX-Registered Trademark- annually at its Danville, Virginia plant
and its facility in Tremonton, Utah. During 1999, the Company invested in
upgrading all of its cast lines to new five-layer technology. This
technology, combined with re-engineered film allows the Company to produce
polyolefin stretch wrap that has higher performance while reducing
manufacturing costs.
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.
INDUSTRIAL ELECTRICAL TAPES
As a result of the Company's 1999 acquisition of SETco, which included
its Carbondale, Illinois, facility, the Company is now a manufacturer of
specialty electrical and electronic tape. The new manufacturing capability
and technology at the Carbondale, Illinois, facility, coupled with the
Company's high temperature resistant products manufactured at its Marysville,
Michigan, facility is hoped to provide the Company access to new high margin
markets.
Competing manufacturers of industrial electrical tapes include 3M,
Tessa, and Tyko.
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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 Corp. ("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 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
some of the conversion process to Mexico due to increased foreign
competition. As a consequence, during 1997 the Company 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.
The Company recently announced the development of a patent pending
Pallet-Free-TM- FIBC product. This new product has significant cost and
performance advantages compared to traditional corrugated bulk containers,
which compete in the same bulk product markets.
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, temporary and permanent
shelters, recreational products, protective covers, pond liners, and flame
retardant lattice cloth. During 1999, the Company developed a new patented
woven fabric that meets the fire retardant specifications required for human
occupancy and maintains the UV
11
<PAGE>
specifications for extended outdoor use. This product is used in
applications where PVC was the primary fabric previously used.
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.
SALES AND MARKETING
As of January 1, 2000, the Company maintained a sales force of 165
personnel. The Company participates in industry trade shows and uses trade
advertising as part of its marketing efforts. The Company's overall customer
base is diverse, with no single customer accounting for more than 5% of total
sales. The Company has one long term contract with a customer which accounts
for less than 5% of total sales. Sales for facilities located in the United
States and Canada accounted for approximately 88% and 11% of total sales,
respectively, in 1998, and approximately 86% and 14% in 1999. 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 primarily focused on 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, duct and reinforced tapes,
EXLFILM-TM- and STRETCHFLEX-Registered Trademark-. 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 Interpack, these products were
manufactured by others. The Company's EXLFILM-TM- and STRETCHFLEX-Registered
Trademark- 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 industrial electrical
tapes are sold to the electronics and electrical industries.
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<PAGE>
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. Duct tapes utilize a similar process
with either polyethylene or aluminum foil type coated cloth.
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.
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 1999, five of the Company's plants
were certified under ISO-9002 quality standards program, and one has been
certified under ISO-9001 quality standards program.
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<PAGE>
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. Research and development expenses in 1997, 1998 and 1999 totaled
$1,456,000, $3,059,000 and $3,901,000, respectively.
The Company currently has two active research and development programs;
one primarily focused on tape products and the other supporting the film,
woven fabric, and FIBC development. These programs have been instrumental in
the development of numerous new products including STRETCHFLEX-Registered
Trademark-5L and EXLFILMPLUS LTG, which were rolled out during the later part
of 1999. Additionally, these teams have developed several new products which
will be launched during 2000. 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 tape products under the registered trademark
INTERTAPE-Registered Trademark- 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-Registered Trademark-. FIBC's are sold under the
trademarks LeGRAND
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<PAGE>
SACK-Registered Trademark- and CAJUN-Registered Trademark- BAGS. The Company
has approximately seventy-two registered trademarks, principally in the
United States and Canada, including trademarks acquired from American Tape,
Anchor, Rexford and CPC. 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. However, the Company has pursued patents
in select areas where unique products offer a competitive advantage in
profitable markets, primarily in woven products and shrink wrap. The Company
currently has twenty-five patents and approximately fifteen patents pending.
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.
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
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<PAGE>
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.
MICHIGAN FACILITY
The Company's environmental due diligence review conducted in 1997 in
connection with its acquisition of American Tape revealed certain issues
associated with American Tape's use of chemical solvents, primarily toluene,
at the Marysville, Michigan, facility in the manufacturing process.
Management undertook a comprehensive plan of investigation and remediation at
the facility, with the remediation nearly complete. The Company expects the
full cost of remediation to be funded through amounts available under a $2
million escrow fund established by the sellers at closing.
In addition, the Marysville, Michigan, facility emits toluene and other
pollutants. Approximately 95% of the toluene used is recaptured under
existing solvent recovery systems or controlled by the regenerative thermal
oxidizer pollution control system. The facility's emissions are within the
current permitted limitations, and the Company believes that these emissions
will meet the Maximum Available Control Technology requirements, which are
expected to come into effect in late 2003, although some additional testing
or modifications at the facility may be required.
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 May 1, 2000, the Company employed approximately 2,795 people, 718
of whom held either sales-related, operating or administrative positions and
2,077 of whom were employed in production. These figures reflect the
majority of the staff reductions effectuated by the Company in April, 2000.
Approximately 66 hourly employees at the Montreal plant are unionized and are
subject to a collective bargaining agreement expiring in November 2002.
Approximately 113 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 70 hourly employees at the Green Bay
plant are unionized and are subject to a collective bargaining agreement
which expires on February 28, 2004. Approximately 194 hourly employees at
the Marysville plant are unionized and subject to a collective bargaining
agreement which expires in May 2002. Approximately 167 hourly employees at
the Menasha plant are unionized and subject to a collective bargaining
agreement which expires July 31, 2003. Finally, approximately 50 hourly
employees at the Carbondale plant are unionized and subject to a collective
bargaining agreement which expires March 2, 2001. The Company has never
experienced a work stoppage and considers its employee relations to be
satisfactory.
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<PAGE>
SPINNAKER ELECTRICAL TAPE COMPANY AND CENTRAL PRODUCTS COMPANY ACQUISITIONS
On July 30, 1999, the Company acquired substantially all of the assets
of Spinnaker Electrical Tape Company ("SETco"), a subsidiary of Spinnaker
Industries, Inc. ("Spinnaker"). SETco is an Illinois manufacturer of
pressure-sensitive industrial electrical tapes. The acquisition included a
55-acre facility in Carbondale, Illinois.
On August 9, 1999, the Company acquired 100% of the outstanding shares
of Central Products Company ("CPC"), also a subsidiary of Spinnaker. CPC is
a manufacturer of both pressure-sensitive and water-activated carton sealing
tapes sold primarily to industrial distributors.
The total cash considerations and estimated transaction costs for both
of these acquisitions on a combined basis was approximately $108.1 million.
In addition, Spinnaker received 300,000 five-year warrants to purchase the
Company's Common Shares at a price per share of $29.50.
The acquisition of SETco and CPC has expanded the Company's existing
product lines. As a result of the acquisitions, the Company anticipates cost
reductions for both its water-activated and pressure-sensitive carton sealing
tapes. Also, the CPC facility provides the Company needed capacity in hot
melt coating and solvent rubber products to form a basis for continued growth
in these products. In addition, the Company believes that the new
manufacturing capability and technology obtained as a result of the
acquisition of SETco combined with the Company's high temperature resistant
products manufactured in the Company's Marysville, Michigan, facility will
provide the Company access to new markets.
Finally, the Company's acquisitions have 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.
ITEM 2. DESCRIPTION OF PROPERTY.
The following table sets forth the principal manufacturing and
distribution facilities owned or leased by the Company as at December 31,
1999:
<TABLE>
<CAPTION>
Area
Location Use Products (sq. ft.) Title
- -------------------- ----------------- --------------------------------- --------- -------------------------
<S> <C> <C> <C> <C>
UNITED STATES:
Bradenton, Florida Corporate Offices N/A 20,800 Owned
Brighton, Colorado Manufacturing Pressure-sensitive carton sealing 211,000 Leased to 2014
tapes
Carbondale, Illinois Manufacturing Pressure-sensitive tapes 193,500 Leased for $1 per acre per
electrical/electronic year until 2092 with a 99-
year extension option
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
Area
Location Use Products (sq. ft.) Title
- -------------------- ----------------- --------------------------------- --------- -------------------------
<S> <C> <C> <C> <C>
Columbia, South Manufacturing and Pressure-sensitive masking and 490,000 Owned
Carolina distribution duct tapes
Danville, Virginia Manufacturing and Carton sealing tape, 281,000 Owned
Distribution STRETCHFLEX-Registered Trademark-
acrylic coating
Denver, Colorado Warehouse Storage for finished goods 100,000 Leased on 6-month basis
Green Bay, Wisconsin Manufacturing and Water-activated adhesive tapes 156,000 Owned
Distribution
Marysville, Michigan Manufacturing High performance masking, 250,000 Owned
filament tape, and specialty
pressure-sensitive tape
Menasha, Wisconsin Manufacturing Water-activated adhesive tapes 195,000 Owned
Rayne, Louisiana Manufacturing and FIBCs 78,000 Leased to September 2000
Distribution
Richmond, Kentucky Manufacturing and Carton sealing, masking and 200,000 Owned
Distribution reinforced tape
Tampa, Florida Corporate offices Display and crate operations 4,000 Leased to February 2003
Tremonton, Utah Manufacturing and EXLFILM-TM-, 115,000 Owned
Distribution STRETCHFLEX-Registered Trademark-
CANADA:
Edmundston, New Manufacturing FIBCs 65,000 Owned
Brunswick
Lachine, Quebec Manufacturing Carton sealing equipment 13,000 Leased to July 2000
St. Laurent, Quebec Slitting, Carton sealing tape 60,000 Leased March 2001
Warehouse and
Corporate
Headquarters
St. Laurent, Quebec Manufacturing and Carton sealing tape 25,000 Owned
Distribution
Truro, Nova Scotia Manufacturing Woven products, 260,000 Owned
EXLFILM-TM-
</TABLE>
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.
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<PAGE>
As of May 17, 2000, the directors and officers of the Company as a group
owned beneficially, directly or indirectly, 1,253,973 Common Shares,
representing approximately 4% 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 Plan was to have expired on
September 1, 1998, however, on May 21, 1998, the Shareholders approved an
amendment extending the term of the Rights Plan to 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 New York Stock Exchange
and The Toronto Stock Exchange under the symbol "ITP". The Common Shares were
listed on The Toronto Stock Exchange on January 6, 1993. The Company's Common
Shares were listed on the American Stock Exchange until August 23, 1999, at
which time they were listed on the New York Stock Exchange. 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 16, 2000, 26% of the Company's Common Shares are held in the United
States by 53 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 1998 and on the
New York Stock Exchange in 1999:
Period High Low
------ ----- -----
1st Quarter 1998 24.00 20.62
2nd Quarter 1998 24.00 20.12
3rd Quarter 1998 25.38 18.12
4th Quarter 1998 25.50 16.25
Period High Low
------ ----- -----
1st Quarter 1999 27.25 24.87
2nd Quarter 1999 29.62 25.87
3rd Quarter 1999 33.37 27.12
4th Quarter 1999 29.00 23.56
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<PAGE>
The following table sets forth high and low sales price information for
trading of the Common Shares on The Toronto Stock Exchange in 1998 and 1999:
Period High Low
------ ----- -----
CDN.$ CDN.$
1st Quarter 1998 34.00 30.00
2nd Quarter 1998 35.00 29.00
3rd Quarter 1998 38.28 25.75
4th Quarter 1998 39.00 25.75
Period High Low
------ ----- -----
CDN.$ CDN.$
1st Quarter 1999 41.75 37.25
2nd Quarter 1999 44.25 38.00
3rd Quarter 1999 49.50 39.85
4th Quarter 1999 42.80 34.50
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.
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
20
<PAGE>
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 INCOME TAX CONVENTION (1980) (the "Convention"), is a
resident of the United States for purposes of the Convention 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 or concern 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 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 and 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 credited or deemed to be paid or credited to them by the
Company. In the case of a U.S. Holder
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<PAGE>
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 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 the U.S.
Holder together with such persons, owned, had an interest or option in respect
of, or otherwise had a right to acquire, not less than 25% of the issued
shares of any class or series 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.
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 period
immediately 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, 1995, 1996, 1997, 1998 and 1999, which have been
derived from consolidated financial statements that have been audited by Raymond
Chabot Grant Thornton, General Partnership, independent chartered accountants.
Please note, the financial statements of the Company were presented in
Canadian dollars up to December 31, 1998. As a result of business acquisitions
and increasing activities in the United States, the Company adopted the U.S.
dollar as its reporting currency effective January 1, 1999. In accordance with
generally accepted accounting principles in Canada, for periods up to and
including December 31, 1998, amounts pertaining to the consolidated financial
statements and notes thereto
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<PAGE>
were converted into U.S. dollars using a translation of convenience with the
December 31, 1998 exchange rate of CDN$1.5305 per U.S.$1.00.
For years after December 31, 1998, the accounts of the Company's
operations having a functional currency other than the U.S. dollar have been
translated into the reporting currency using the current rate method as
follows: assets and liabilities have been translated at the exchange rate in
effect at the year end and revenues and expenses have been translated at the
average rate during the year. All translation gains or losses of the
Company's net equity investments in these operations have been included in
the accumulated foreign currency translation adjustments account in
shareholders' equity. Changes in this account for all periods presented
result solely from the application of this translation method.
Transactions denominated in currencies other than the functional currency
have been translated into the functional currency as follows: monetary assets
and liabilities have been translated at the exchange rate in effect at the end
of each year and revenues an expenses have been translated at the average
exchange rate for each year; non-monetary assets and liabilities have been
translated at the rates prevailing at the transaction dates. Exchange gains
and losses arising from such transactions are included in earnings.
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------------------
1995 1996 1997 1998 1999
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Amounts Under Canadian GAAP (1)
Sales $147,258 $177,247 $227,553 $378,030 $569,947
Cost of Sales 104,015 125,938 164,558 271,971 445,322
-------- -------- -------- -------- --------
Gross Profit 43,243 51,309 62,995 106,059 124,625
-------- -------- -------- -------- --------
Selling, general and
administrative expenses 17,034 21,493 27,281 46,747 85,330
Amortization of goodwill 1,150 1,163 1,542 3,330 5,451
Research and development expenses 721 1,152 1,456 3,059 3,901
Financial expenses 2,087 1,107 2,122 12,429 22,149
-------- -------- -------- -------- --------
20,992 24,915 32,401 65,565 116,831
-------- -------- -------- -------- --------
Earnings before restructuring charges
and income taxes 22,250 26,394 30,594 40,494 7,794
Restructuring charges 17,717
-------- -------- -------- -------- --------
Earnings before income taxes 22,250 26,394 12,877 40,494 7,794
Income taxes 8,167 7,710 3,992 11,743 (304)
-------- -------- -------- -------- --------
Net Earnings -- Canadian GAAP 14,083 18,684 8,885 28,751 8,098
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Earnings per share -- Canadian GAAP
Basic 0.67 0.77 0.36 1.14 0.29
---- ---- ---- ---- ----
---- ---- ---- ---- ----
Fully diluted 0.63 0.74 0.35 1.10 0.29
---- ---- ---- ---- ----
---- ---- ---- ---- ----
Net earnings -- US GAAP 14,422 18,919 8,885 28,751 8,098
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Earnings per share -- U.S. GAAP
Basic 0.69 0.78 0.36 1.14 0.29
---- ---- ---- ---- ----
---- ---- ---- ---- ----
Fully diluted 0.65 0.75 0.35 1.10 0.29
---- ---- ---- ---- ----
---- ---- ---- ---- ----
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------------------
1995 1996 1997 1998 1999
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Amounts Under Canadian GAAP(1)
Working capital $ 62,510 $ 52,936 $ 50,435 $(11,313) $ 64,229
Total assets 196,367 227,754 397,179 622,152 815,006
Long-term debt 35,727 41,833 150,321 209,842 336,015
Total liabilities 66,985 75,577 233,961 427,903 533,003
Shareholders' equity 129,382 152,177 163,412 194,249 282,003
</TABLE>
- --------------------------
(1) In certain respects, Canadian GAAP differs 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 1999 Annual Report to Shareholders which is attached as Exhibit 2.1
to, and incorporated by reference in, this Annual Report on Form 20-F.
The Company has no written policy for the payment of dividends. The
following table sets forth a five-year summary of dividends per share:
<TABLE>
<CAPTION>
DECLARATION DIVIDEND TOTAL DATE
DATE PAID
----------- -------- ----- ----
CDN U.S. CDN$
<S> <C> <C> <C> <C>
March 14, 1995 $ .07 $ .05 $1,400,000 March 30, 1995
February 28, 1996 .085 .06 $2,000,000 March 22, 1996
March 4, 1997 .10 .073 $2,500,000 March 27, 1997
March 10, 1998 .013 .092 $3,300,000 March 31, 1998
March 9, 1999 .16 .106 $4,500,000 April 5, 1999
May 15, 2000 .16 .106 $4,500,000 To be paid June 8, 2000
</TABLE>
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 8
through 20 of Registrant's 1999 Annual Report to Shareholders, which is
incorporated herein by reference and which is included as Exhibit 2.1 to this
Annual Report on Form 20-F.
24
<PAGE>
ITEM 9A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
(a) QUANTITATIVE INFORMATION ABOUT MARKET RISK
The following table provides information about the Company's financial
statements that are sensitive to changes in interest rates, which include the
Company's bank indebtedness, credit facilities, and long-term debt. For long-
term debt, the table presents principal cash flows and related interest by
expected maturity dates.
As of December 31, 1999:
<TABLE>
<CAPTION>
Expected Maturity Date
----------------------
1999
2000 2001 2002 2003 2004 Thereafter Total Fair Value
---- ---- ---- ---- ---- ---------- ----- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Long-term Debt $2,079(1) $59,531 $1,242 $463 $422 $274,357 $338,094 $333,193(2)
</TABLE>
- -------------------------------------------------
1. Long-term debt consists of the following:
(a) Series A and B Senior Notes:
Senior unsecured U.S. Dollar notes, bearing interest at an average
rate of 7.78%, payable semi-annually. The Series A $25 million
notes are repayable on May 31, 2005, and the Series B $112 million
notes are repayable in semi-annual amounts between November 30,
2005, and May 31, 2009.
(b) Senior Notes:
Senior unsecured notes, bearing interest at 6.82%, payable
semi-annually, maturing March 31, 2008.
(c) $8,000,000 Series 3 Notes:
Senior unsecured U.S. Dollar notes, bearing interest at an effective
rate of 8.08% (7.78% in 1998), payable semi-annually. These notes
mature on June 1, 2001. The Series 1 and 2 Unsecured Notes were
repaid during the year with a portion of the proceeds from the
Series A and B Senior Unsecured Notes.
(d) Bank loan under a revolving credit facility:
Senior unsecured U.S. dollar bank loan under a $50 million revolving
credit facility maturing July 15, 2001. This loan bears interest at
U.S. prime rate or LIBOR plus a premium varying from 0.4% to 0.625%.
As at December 31, 1999, the effective interest rate pertaining to
the bank loan was 7.0% (6.9% in 1998).
25
<PAGE>
(e) Other Debt:
Consists of government loans, mortgage loans in a joint venture,
obligations related to capitalized leases and other loans at fixed
and variable interest rates ranging from interest-free to 8.25% and
requiring periodic principal repayments through 2008.
2. For all debts with fixed interest rates, the fair value has been
determined based on the discounted value of cash flows under the existing
contracts using rates representing those which the Company could
currently obtain for loans with similar terms, conditions and maturity
dates. For the debts with floating interest rates, the fair value is
closely equivalent to their carrying amounts.
The carrying amounts and fair values of the Company's long-term debt as of
December 31, 1999, and 1998 are:
<TABLE>
<CAPTION>
1999 1998
---------------------------- ----------------------------
Fair Value Carrying Amount Fair Value Carrying Amount
---------- --------------- ---------- ---------------
<S> <C> <C> <C>
$333,193 $338,094 $221,154 $211,844
</TABLE>
The Company's bank indebtedness consists of the utilized portion of
unsecured demand and revolving bank credit facilities and cheques issued which
have not been drawn from the facilities and is reduced by any cash balances.
As of December 31, 1999, the Company had:
. A senior unsecured bank loan under a $60 million term credit facility
which matures April 1, 2000. This loan bears interest at U.S. prime rate
or LIBOR plus a premium varying between 1.25% and 1.50%. As of December
31, 1999, the effective interest rate pertaining to the bank loan was
approximately 8.1% and $50 million was utilized.
. CDN $6 million of revolving credit facilities from Canadian financial
institutions of which CDN $0.4 million was utilized as at December 31,
1999.
. US$30 million of revolving credit facilities from U.S. and Canadian
financial institutions of which US$7.8 million was utilized as at
December 31, 1999.
The effective interest rate on the used portion of the revolving credit
facilities was 8.0% as of December 31, 1999 (8.0% as of December 31, 1998).
FOREIGN EXCHANGE RISK MANAGEMENT
The Company's objective in managing foreign exchange risk is to protect
against cash flow and balance sheet volatility resulting from changes in
foreign exchange rates. Substantially all of the Company's revenues are
denominated in U.S. dollars. Long-term debt denominated in U.S. dollars
exposes the Company to changes in foreign exchange rates. As of December 31,
1999, the Company did not hold any derivative instruments related to foreign
currency risk.
26
<PAGE>
(b) QUALITATIVE INFORMATION ABOUT MARKET RISK
The Company is exposed to various types of market risk in the normal
course of business, including the impact of interest rate changes and foreign
currency exchange rate fluctuations. The Company does not presently use
derivative nor hedging instruments and does not hold derivatives for trading
purposes.
INTEREST RATE RISK MANAGEMENT AND SENSITIVITY
The Company's objective in managing its cash flow exposure to fluctuations
in interest rate is to maintain a mix of fixed and variable-rate debt that will
limit its exposure to within reasonable risk parameters. Generally, the fair
market value of fixed interest rate debt will increase as interest rates fall
and decrease as interest rates rise. Changes in interest rates will affect the
market value but do not impact earnings or cash flows. Conversely for floating
rate debt, interest rate changes generally do not affect the fair market value
but do impact future earnings and cash flows assuming other factors are held
constant.
FOREIGN EXCHANGE RISK MANAGEMENT
The Company's objective in managing foreign exchange risk is to protect
against cash flow and balance sheet volatility resulting from changes in foreign
exchange rates. Substantially all of the company's revenues are denominated in
U.S. dollars. Long-term debt denominated in U.S. dollars exposes the Company to
changes in foreign exchange rates. As of December 31, 1999, the Company did not
hold any derivative instruments related to foreign currency risk.
YEAR 2000
The Company believes that all of its systems are operating and that no
material Year 2000 issues have been encountered. The Company is unaware of any
third party Year 2000 issues that would materially affect its financial
condition or results of operations. The Company obtained Year 2000 compliance
statements from its vendors, suppliers, and other third parties that do business
with the Company. Nevertheless, if any Year 2000 issues presently unknown to
the Company occur with respect to it or with third party products and business
dependencies, the Company might experience a delay or disruption in the delivery
of products which could have a material adverse impact on its financial
condition and results of operations including, but not limited to, loss of
revenue, increased operating costs, loss of customers or suppliers, or other
significant disruptions to the Company's business.
27
<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 59 Chairman of the Board,
Chief Executive Officer and Director
Andrew M. Archibald 54 Chief Financial Officer, Secretary,
Treasurer and Vice President
Administration
Joseph D. Bruno 61 Vice President, Supply Chain Management
Jim Bob Carpenter 44 President, Woven Products
John T. Fain 49 Vice President, Corporate Marketing
Burgess H. Hildreth 58 Vice President, Human Resources
James A. Jackson 51 Vice President, Chief Information Officer
Lloyd W. Jones 62 Vice President, Procurement
H. Dale McSween 50 President, Distribution Products
Salvatore Vitale 36 Vice President, Finance
Duncan R. Yull 35 Vice President Sales, Distribution
Products
Gregory A. Yull 33 President, Film Products
Eric E. Baker 66 Director
Gordon R. Cunningham 55 Director
Ben J. Davenport, Jr. 57 Director
Irvine Mermelstein 73 Director
James A. Motley, Sr. 71 Director
Michael L. Richards 61 Director
L. Robbie Shaw 56 Director
</TABLE>
28
<PAGE>
MELBOURNE F. YULL, founder of the Company, has been the Chief Executive
Officer and a director of the Company since 1989 and was a director of the
predecessor company since 1981. He was President of the predecessor company
from 1981 to 1989 and President of the Company until June, 1994. He has been
Chairman of the Board since January 1995.
ANDREW M. ARCHIBALD has been Chief Financial Officer, Secretary, Treasurer and
Vice President Administration since May 1995. He was Vice President Finance
from May, 1995, to January 15, 1999. Prior thereto he served as
Vice President, Finance and Secretary of the Company since 1989.
JOSEPH BRUNO has been Vice President, Supply Chain Management, since December,
1999. He was Vice President, Distribution Products, since September 1, 1998,
and was Vice President, Sales & Marketing from April 1996.
JIM BOB CARPENTER has been President, Woven Products, since May 1, 1999.
JOHN T. FAIN has been Vice President, Corporate Marketing, since October, 1999.
BURGESS H. HILDRETH has been Vice President, Human Resources, since October,
1998.
JAMES A. JACKSON has been Vice President, Chief Information Officer, since
September 1, 1998.
LLOYD W. JONES has been Vice President Procurement since December, 1999, and
served as Corporate 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.
H. DALE MCSWEEN has been President, Distribution Products, since December,
1999. Prior thereto he served as Executive Vice President and Chief Operating
Officer from May 1995, and 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.
SALVATORE VITALE has been Vice President Finance since September 1, 1998. He
has been Controller of the Company since May 1997.
DUNCAN R. YULL, a son of Melbourne F. Yull, has been Vice President Sales
Distribution Products, since December, 1999.
GREGORY A. YULL, a son of Melbourne F. Yull, has been President, Film
Products, since June, 1999.
29
<PAGE>
ERIC E. BAKER, has served as a director of the Company since December 1989. He
was Chairman of the Board from 1989 to January 1995.
GORDON R. CUNNINGHAM has been a director of the Company since May 1998.
BEN J. DAVENPORT, JR. has been a director of the Company since June 1994.
IRVINE MERMELSTEIN, has been a director of the Company since March 1994.
JAMES A. MOTLEY, SR., has been a director of the Company since February 1992.
MICHAEL L. RICHARDS has served as a Director of the Company and its predecessor,
Systems, since 1981.
L. ROBBIE SHAW has been a director of the Company since June 1994.
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 eight directors, five of whom
are unrelated directors in accordance with the definition of an unrelated
director in the Guidelines.
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 to the independence of the
remaining members of the Board and the role of the Board in determining
30
<PAGE>
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 four outside
directors. The Compensation Committee, as presently constituted, does not
comply with the Guidelines, inasmuch as it has two related directors and two
unrelated directors. 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.
31
<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 CDN $25,000,000
and an annual premium of $157,000 was paid by the Company in the last
completed financial year with respect to the period from December 1999 to
December 2000. Claims payable to the Company are subject to a retention of up
to $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 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.
32
<PAGE>
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, 1999.
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, 1999, to all directors and executive officers as a group, for
services in all capacities, was $2,982,288.
The aggregate amount accrued or set aside by the Company for the year
ended December 31, 1999 to provide pension, retirement or similar benefits, to
all directors and executive officers as a group was $4,266,000.
The following table sets forth all compensation paid in 1999 in respect of
the individuals who were, at December 31, 1999, 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 CDN$668,928 -0- CDN$164,727
D. McSween $288,000 -0- $57,642
A. M. Archibald CDN$340,421 -0- CDN$74,912
K. Rogers $160,000 -0- $37,739
L. W. Jones $238,695 -0- $10,328
</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.
33
<PAGE>
ITEM 12. OPTIONS TO PURCHASE SECURITIES FROM REGISTRANT OR SUBSIDIARIES.
SHARE PURCHASE WARRANTS
As partial consideration for the 1999 acquisitions of SETco and CPC,
Spinnaker received 300,000 warrants to purchase the Company's Common Shares at
a price per share of $29.50. The warrants expire August 9, 2004.
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 market value of the
underlying Common Shares on the day preceding the grant. The Plan provides
that options issued thereunder shall vest 25% per year over four years.
As of December 31, 1999, there were outstanding 2,217,224 options to
purchase the Company's Common Shares, of which a total of 1,552,948 options to
purchase the Company's Common Shares are held by the directors and officers as
a group.
There were no individual grants of options under the Plan during the
fiscal year ended December 31, 1999, to the name executives.
The following table sets forth the exercise price and expiration date for
all of the currently outstanding options:
34
<PAGE>
<TABLE>
<CAPTION>
Number of
Option Shares Exercise Price Year Granted Expiration Date
------------- -------------- ------------ ---------------
CDN.$ U.S.$
<S> <C> <C> <C> <C>
27,600 $ 5.035 $ 4.250 February 1992 February 2002
70,500 $ 6.125 $ 4.813 January 1993 January 2003
150,000 $ 7.915 $ 6.040 July 1993 October 2003
100,000 $ 8.585 $ 6.406 December 1993 December 2003
24,000 $10.465 $ 7.710 March 1994 March 2004
1,600 $11.175 $ 8.260 October 1994 October 2004
76,450 $11.175 $ 8.135 January 1995 January 2005
39,982 $12.095 $ 8.575 March 1995 March 2005
100,000 $14.890 $10.860 June 1995 June 2005
267,475 $22.500 $16.300 February 1996 February 2006
15,000 $24.780 $17.840 August 1996 August 2006
308,588 $26.510 $19.090 May 1997 May 2003
300,000 $29.030 $20.590 December 1997 December 2003
281,088 $32.920 $23.260 March 1998 March 2004
5,000 $33.900 $23.010 May 1998 May 2004
20,000 $30.650 $19.500 September 1998 September 2004
311,000 $25.860 $16.690 October 1998 October 2004
104,941 $29.750 $19.300 November 1998 November 2004
14,000 $40.670 $27.875 May 1999 May 2005
2,217,224
---------
---------
</TABLE>
In addition, in 1996, certain executive officers were credited notional
units, based on salary, related to the market price of the Company's Common
Shares. Each such unit credited to the officers corresponded to one common
share of the Company. These units did not vest for three years and were paid in
full at the end of the three-year period, January 1, 1999. The value of the
units fluctuated with share appreciation (and depreciation) and additional
entitlements (dividend equivalents) may be awarded by the Company to compensate
the holder of these units for any
35
<PAGE>
dividends paid to the shareholders of the Company. If employment was
terminated during the three-year restriction period, the units were canceled.
All notional units have vested under this plan and none remain outstanding.
Payments on these units were treated as free-standing Stock Appreciation
Rights ("SARs").
The following table sets forth each exercise of options during the fiscal
year ended December 31, 1999, by the named executive officers.
AGGREGATED OPTION EXERCISES DURING THE FISCAL YEAR ENDED
DECEMBER 31, 1999, AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Securities Value of
Acquired Unexercised Options
On Aggregate Unexercised Options at FY-End at FY-End
Exercise Value Realized (#) ($)
Name (#) ($) Exercisable/Unexercisable Exercisable/Unexercisable
---- ---------- -------------- ----------------------------- -------------------------
<S> <C> <C> <C> <C>
M. F. Yull Nil n/a 347,500 / 296,500 9,795,156 / 8,357,594
D. McSween Nil n/a 163,946 / 77,362 4,621,228 / 2,180,641
A. M. Archibald Nil n/a 155,536 / 67,150 4,384,171 / 1,892,791
K. Rogers 50,000 1,340,500 80,154 / 41,250 2,259,341 / 1,162,734
L. W. Jones 41,026 1,043,019 n/a / 72,250 n/a / 2,121,109
</TABLE>
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 for the purpose of purchasing Common Shares of the
Company upon the exercise of options. Such loans are repayable not later than
September 30, 2000. As of May 17, 2000, the aggregate indebtedness of all
officers to the Company entered into in connection with the purchase of Common
Shares was $399,531.00. The following table summarizes the largest amount of
the loans outstanding since January 1, 1999, and the amount outstanding on May
17, 2000.
36
<PAGE>
<TABLE>
<CAPTION>
Largest amount
Name and Municipality outstanding during Amount outstanding
of residence fiscal year ended 12/12/99 on May 17, 2000
- --------------------- -------------------------- ------------------
<S> <C> <C>
Melbourne F. Yull $369,218 $369,218
Chairman of the Board and
Chief Executive Officer
Sarasota, Florida
H. Dale McSween $30,313 $30,313
President, Distribution Products
Sarasota, Florida
</TABLE>
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT
On July 1, 1998, the Company entered into a new employment agreement with
Melbourne F. Yull. Pursuant to the terms of the employment agreement, Mr.
Yull agreed to continue to serve as Chairman of the Board and 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 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. Further, it provides for all options for the acquisition
of Common Shares of the Company previously granted to Mr. Yull to become
immediately vested and exercisable in the event of his termination without
cause, or his resignation within six months of a change of control, or his
retirement at any time after his 60th birthday or in the event of his death,
and that they must be exercised within ninety (90) days following the
effective date of such termination, resignation, retirement or death. In
addition to his participation in the pension plan, the employment contract
provides for Mr. Yull to receive, upon his ceasing to be an employee for any
reason, a defined benefit supplementary pension annually for life equal to two
percent of his average annual gross salary for the final five years of his
employment multiplied by his years of service with the Company.
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'
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
37
<PAGE>
terminates his employment with the Company, or (b) the Company terminates an
executive's employment without cause, such executive will be entitled to 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
ITEM 16. CHANGES IN SECURITIES AND CHANGES IN SECURITY FOR REGISTERED
SECURITIES.
None Reportable
38
<PAGE>
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 21 through 46 of
Registrant's 1999 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.
(a) (1) Financial Statements Page(s)
Auditors' Report 21 *
Consolidated Earnings 22 *
Consolidated Retained Earnings 22 *
Consolidated Cash Flows 23 *
Consolidated Balance Sheets 24 *
Notes 1-20 to the Financial
Statements 25-46 *
(b) Exhibits
1.1 Second Amendment to Restated Credit Agreement dated as of
January 22, 1999
1.2 Third Amendment to Restated Credit Agreement with Comerica
Bank dated as of May 17, 1999
1.3 Fourth Amendment to Restated Credit Agreement with
Comerica Bank dated as of July 15, 1999
1.4 Second Restated Revolving Credit Agreement with Comerica
Bank dated as of September 30, 1999
2.1 Registrant's 1999 Annual Report to Shareholders
2.2 Stock Purchase Agreement between Intertape Polymer Group
Inc. and Spinnaker Industries, Inc., dated as of April 9,
1999
39
<PAGE>
2.3 Asset Purchase Agreement between Intertape Polymer Group
Inc., Spinnaker Electrical Tape Company, and Spinnaker
Industries, Inc., dated as of April 9, 1999
2.4 IPG Holdings LP and Intertape Polymer Group Inc. Note
Agreement dated as of July 1, 1999
2.5 Prospectus regarding public offering of 3,000,000 Common
Shares which closed March 16, 1999
3. Auditors' Report
4. Consent of Independent Accountants
- -----------------------------
* The financial statements filed as part of this report are incorporated
herein by reference to the 1999 Annual Report to Shareholders which is
included as Exhibit 2.1 to this Annual Report on Form 20-F. References
to page numbers are references to the applicable page in the 1999 Annual
Report.
40
<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: Chief Financial Officer,
Secretary, Treasurer, and
Vice President Administration
Date: May 19, 2000
41
<PAGE>
Exhibit Index
1.1 Second Amendment to Restated Credit Agreement dated as of
January 22, 1999
1.2 Third Amendment to Restated Credit Agreement with Comerica Bank
dated as of May 17, 1999
1.3 Fourth Amendment to Restated Credit Agreement with Comerica
Bank dated as of July 15, 1999
1.4 Second Restated Revolving Credit Agreement with Comerica Bank
dated as of September 30, 1999
2.1 Registrant's 1999 Annual Report to Shareholders
2.2 Stock Purchase Agreement between Intertape Polymer Group Inc.
and Spinnaker Industries, Inc., dated as of April 9, 1999
2.3 Asset Purchase Agreement between Intertape Polymer Group Inc.,
Spinnaker Electrical Tape Company, and Spinnaker Industries,
Inc., dated as of April 9, 1999
2.4 IPG Holdings LP and Intertape Polymer Group Inc. Note Agreement
dated as of July 1, 1999
2.5 Prospectus regarding public offering of 3,000,000 Common Shares
which closed March 16, 1999
3. Auditors' Report
4. Consent of Independent Accountants
42
<PAGE>
EXHIBIT 1.1
"COMERICA -- 2ND AMENDMENT"
SECOND AMENDMENT
TO RESTATED CREDIT AGREEMENT
This Second Amendment to Restated Credit Agreement and Note dated as of
January 22, 1999 by and among IPG HOLDINGS LP, a Delaware limited partnership
("Borrower"), INTERTAPE POLYMER GROUP INC., a Canadian corporation ("Guarantor")
and COMERICA BANK, a Michigan banking corporation ("Bank").
WHEREAS, Borrower, Guarantor and Bank entered into a Restated Revolving
Credit Agreement dated as of May 8, 1998 (the "Original Agreement" and as
amended by the First Amendment (defined below) the "Agreement"), pursuant to
which Borrower incurred certain indebtedness and obligations to Bank and issued
to Bank a certain Eurodollar Revolving Note in the face amount of Fifty Million
Dollars ($50,000,000) made by Borrower to Bank as of May 8, 1998 ("Note");
WHEREAS, Borrower, Guarantor, and Bank entered into a First Amendment to
Credit Agreement dated as of September 1, 1998 (the "First Amendment"), pursuant
to which (i) a subfacility in favor of American Tape Co. ("ATC") was established
under the Agreement, and (ii) amounts available under the Revolving Facility
were limited, inter alia, by amounts outstanding under the ATC Note.
WHEREAS, Borrower, Guarantor and Bank desire to amend certain provisions of
the Agreement on the terms and conditions hereof;
NOW, THEREFORE, it is agreed:
A. DEFINITIONS
1. Capitalized terms used herein and not defined to the contrary have the
meanings given them in the Agreement.
B. AMENDMENT TO AGREEMENT
1. Section 7.1 of the Agreement is hereby amended by restating the
definition of "ATC Note" to read, in its entirety, as follows:
"`ATC Note' shall mean the Eurodollar Revolving Note made
by American Tape Co., Intertape Polymer Corp., and Anchor
Continental, Inc., jointly and severally, to the order of
Bank as of January 22, 1999 in the face amount of Ten
Million Dollars ($10,000,000) and any extensions, renewals
or replacements thereof or amendments thereto."
C. REPRESENTATIONS
Borrower hereby represents and warrants that:
1. Execution, delivery and performance of this Amendment and any other
documents and instruments required under this Amendment or the Agreement
are within Borrower's powers, have been duly authorized, are not in
contravention of law or the terms of Borrower's Certificate of Limited
Partnership or Agreement of Limited Partnership, and do not require the
consent or approval of any governmental body, agency, or authority.
2. This Amendment, and the Agreement as amended by this Amendment, and any
other documents and instruments required under this Amendment or the
Agreement, when issued and delivered under this Amendment or the
Agreement, will be valid and binding in accordance with their terms.
3. The continuing representations and warranties of Borrower set forth in
Sections 10.01 through 10.4 and 10.6 through 10.20 of the Agreement are
true and correct on and as of the date hereof with the same force and
effect as made on and as of the date hereof.
1
<PAGE>
4. The continuing representations and warranties of Company set forth in
Section 10.5 of the Agreement are true and correct as of the date hereof
with respect to the most recent financial statements furnished to Bank by
Company in accordance with Section 11.13 of the Agreement.
5. No Event of Default, or condition or event which, with the giving of
notice or the running of time, or both, would constitute an Event of
Default under the Agreement, has occurred and is continuing as of the
date hereof.
D. MISCELLANEOUS
1. This Amendment may be executed in counterparts and shall be deemed to
become effective upon such execution and delivery hereof and upon
delivery to Bank of each of the other documents listed on the checklist
attached hereto as Exhibit "A", all in form and content satisfactory to
Bank.
2. Borrower acknowledges and agrees that, except as specifically amended
hereby or in connection herewith, all of the terms and conditions of the
Agreement and the other loan documents, remain in full force and effect
in accordance with their original terms.
3. Except as specifically set forth herein, nothing set forth in this
Amendment shall constitute, or be interpreted or construed to constitute,
a waiver of any right or remedy of Bank, or of any default or event of
default whether now existing or hereafter arising.
4. This Amendment, and the Agreement as amended hereby, shall be
interpreted, construed and governed by the laws of the State of Michigan.
WITNESS the due execution hereof as of the day and year first above written.
<TABLE>
<S> <C>
COMERICA BANK IPG HOLDINGS LP
By: Intertape Polymer Inc.
Its: General Partner
By: /s/Pamela Horne Eidt By: /s/Sal Vitale
Its: Assistant Vice President Its: Assistant Secretary
INTERTAPE POLYMER GROUP INC.
By: /s/Andrew M. Archibald
Its: Chief Financial Officer and Secretary
</TABLE>
2
<PAGE>
EXHIBIT 1.2
"COMERICA -- 3RD AMENDMENT"
THIRD AMENDMENT
TO RESTATED CREDIT AGREEMENT
This Third Amendment to Restated Credit Agreement and Note dated as of
May 17, 1999 by and among IPG HOLDINGS LP, a Delaware limited partnership
("Borrower"), INTERTAPE POLYMER GROUP INC., a Canadian corporation ("Guarantor")
and COMERICA BANK, a Michigan banking corporation ("Bank").
WHEREAS, Borrower, Guarantor and Bank entered into a Restated Revolving
Credit Agreement dated as of May 8, 1998 (the "Original Agreement" and as
amended by the First Amendment (defined below), and the Second Amendment
(defined below), the "Agreement"), pursuant to which Borrower incurred certain
indebtedness and obligations to Bank and issued to Bank a certain Eurodollar
Revolving Note in the face amount of Fifty Million Dollars ($50,000,000) made by
Borrower to Bank as of May 8, 1998 ("Note");
WHEREAS, Borrower, Guarantor, and Bank entered into a First Amendment to
Credit Agreement dated as of September 1, 1998 (the "First Amendment"), pursuant
to which (i) a subfacility in favor of American Tape Co. was established under
the Agreement, and (ii) amounts available under the Revolving Facility were
limited, inter alia, by amounts outstanding under the ATC Note;
WHEREAS, Borrower Guarantor, and Bank entered into a Second Amendment to
Credit Agreement dated as of January 22, 1999 (the "Second Amendment"), pursuant
to which a subfacility in favor of American Tape Co., Intertape Polymer Corp,
and Anchor Continental, Inc. was established under the Agreement;
WHEREAS, Borrower, Guarantor and Bank desire to amend certain provisions of
the Agreement on the terms and conditions hereof;
NOW, THEREFORE, it is agreed:
A. DEFINITIONS
1. Capitalized terms used herein and not defined to the contrary have the
meanings given them in the Agreement.
B. AMENDMENT TO AGREEMENT
1. Section 7.1 of the Agreement is hereby amended by restating the
definition of "ATC Note" to read, in its entirety, as follows:
"'ATC Note' shall mean the Eurodollar Revolving Note made
by American Tape Co., Intertape Polymer Corp.; Anchor
Continental, Inc. and IPG (US) Inc., jointly and
severally, to the order of Bank as of May 17, 1999 in the
face amount of Ten Million Dollars ($10,000,000) and any
extensions, renewals or replacements thereof or amendments
thereto."
C. REPRESENTATIONS
Borrower hereby represents and warrants that:
1. Execution, delivery and performance of this Amendment and any other
documents and instruments required under this Amendment or the Agreement
are within Borrower's powers, have been duly authorized, are not in
contravention of law or the terms of Borrower's Certificate of Limited
Partnership or Agreement of Limited Partnership, and do not require the
consent or approval of any governmental body, agency, or authority.
2. This Amendment, and the Agreement as amended by this Amendment, and any
other documents and instruments required under this Amendment or the
Agreement, when issued and delivered under this Amendment or the
Agreement, will be valid and binding in accordance with their terms.
3
<PAGE>
3. The continuing representations and warranties of Borrower set forth in
Sections 3.1 through 3.3 and 3.5 through 3.10 of the Agreement are true
and correct on and as of the date hereof with the same force and effect
as made on and as of the date hereof.
4. The continuing representations and warranties of Company set forth in
Section 3.4 of the Agreement are true and correct as of the date hereof
with respect to the most recent financial statements furnished to Bank by
Company in accordance with Section 5.16 of the Agreement.
5. No Event of Default, or condition or event which, with the giving of
notice or the running of time, or both, would constitute an Event of
Default under the Agreement, has occurred and is continuing as of the
date hereof.
D. MISCELLANEOUS
1. This Amendment may be executed in counterparts and shall be deemed to
become effective upon such execution and delivery hereof and upon
delivery to Bank of each of the other documents listed on the checklist
attached hereto as Exhibit "A", all in form and content satisfactory to
Bank.
2. Borrower acknowledges and agrees that, except as specifically amended
hereby or in connection herewith, all of the terms and conditions of the
Agreement and the other loan documents, remain in full force and effect
in accordance with their original terms.
3. Except as specifically set forth herein, nothing set forth in this
Amendment shall constitute, or be interpreted or construed to constitute,
a waiver of any right or remedy of Bank, or of any default or event of
default whether now existing or hereafter arising.
4. This Amendment, and the Agreement as amended hereby, shall be
interpreted, construed and governed by the laws of the State of Michigan.
WITNESS the due execution hereof as of the day and year first above written.
<TABLE>
<S> <C>
COMERICA BANK IPG HOLDINGS LP
By: Intertape Polymer Inc.
Its: General Partner
By: /s/Darlene Persons By: /s/Andrew M. Archibald
Its: Vice President Its: Chief Financial Officer
INTERTAPE POLYMER GROUP INC.
By: /s/Andrew M. Archibald
Its: Chief Financial Officer
</TABLE>
4
<PAGE>
EXHIBIT 1.3
"COMERICA -- 4TH AMENDMENT"
FOURTH AMENDMENT
TO RESTATED CREDIT AGREEMENT
This Fourth Amendment to Restated Credit Agreement and Note dated as of
July 15, 1999 by and among IPG HOLDINGS LP, a Delaware limited partnership
("Borrower"), INTERTAPE POLYMER GROUP INC., a Canadian corporation ("Guarantor")
and COMERICA BANK, a Michigan banking corporation ("Bank").
WHEREAS, Borrower, Guarantor and Bank entered into a Restated Revolving
Credit Agreement dated as of May 8, 1998 (the "Original Agreement" and as
amended by the First Amendment (defined below) the "Agreement"), pursuant to
which Borrower incurred certain indebtedness and obligations to Bank and issued
to Bank a certain Eurodollar Revolving Note in the face amount of Fifty Million
Dollars ($50,000,000) made by Borrower to Bank as of May 8, 1998 ("Note");
WHEREAS, Borrower, Guarantor, and Bank entered into a First Amendment to
Credit Agreement dated as of September 1, 1998 (the "First Amendment"), pursuant
to which (i) a subfacility in favor of American Tape Co. ("ATC") was established
under the Agreement, and (ii) amounts available under the Revolving Facility
were limited, inter alia, by amounts outstanding under the ATC Note;
WHEREAS, Borrower, Guarantor and Bank entered into a Second Amendment to
Credit Agreement dated as of January 22, 1999 (the "Second Amendment");
WHEREAS, Borrower, Guarantor and Bank entered into a Third Amendment to
Restated Credit Agreement dated as of May 17, 1999 (the "Third Amendment");
WHEREAS, Borrower, Guarantor and Bank desire to amend certain provisions of
the Agreement on the terms and conditions hereof;
NOW, THEREFORE, it is agreed:
A. DEFINITIONS
1. Capitalized terms used herein and not defined to the contrary have the
meanings given them in the Agreement.
B. AMENDMENT TO AGREEMENT
1. All references to the Note in the Agreement, including, but not limited
to the reference in Section 1.3 of the Agreement, shall mean that certain
Eurodollar Revolving Note in the principal amount of $60,000,000 executed
and delivered by Borrower to Bank of even date herewith as a replacement
to that certain Note executed and delivered in connection with the
Agreement (the "Replacement Note"). Advance under the Replacement Note
are limited by amounts outstanding under the ATC Note (as defined in the
Second Amendment, as amended).
2. The definition of "COMMITMENT AMOUNT" set forth in Section 7.1 of the
Agreement shall be amended to read as follows: "COMMITMENT AMOUNT" means
Sixty Million Dollars ($60,000,000)."
C. REPRESENTATIONS
Borrower hereby represents and warrants that:
1. Execution, delivery and performance of this Amendment and any other
documents and instruments required under this Amendment or the Agreement
are within Borrower's and Company's powers, have been duly authorized,
are not in contravention of law or the terms of their respective
governing instruments, and do not require the consent or approval of any
governmental body, agency, or authority.
5
<PAGE>
2. This Amendment, and the Agreement as amended by this Amendment, and any
other documents and instruments required under this Amendment or the
Agreement, when issued and delivered under this Amendment or the
Agreement, will be valid and binding in accordance with their terms.
3. The covenants of Borrower and Company set forth in Article V of the
Agreement are true and correct as of the date hereof.
4. No Event of Default, or condition or event which, with the giving of
notice or the running of time, or both, would constitute an Event of
Default under the Agreement, has occurred and is continuing as of the
date hereof.
D. MISCELLANEOUS
1. This Amendment may be executed in counterparts and shall be deemed to
become effective upon such execution and delivery hereof and upon
delivery to Bank of each of the other documents listed on the checklist
attached hereto as Exhibit "A", all in form and content satisfactory to
Bank.
2. Borrower and Company acknowledge and agree that, except as specifically
amended hereby or in connection herewith, all of the terms and conditions
of the Agreement and the other loan documents, remain in full force and
effect in accordance with their original terms.
3. Except as specifically set forth herein, nothing set forth in this
Amendment shall constitute, or be interpreted or construed to constitute,
a waiver of any right or remedy of Bank, or of any default or event of
default whether now existing or hereafter arising.
4. This Amendment, and the Agreement as amended hereby, shall be
interpreted, construed and governed by the laws of the State of Michigan.
WITNESS the due execution hereof as of the day and year first above written.
<TABLE>
<S> <C>
COMERICA BANK IPG HOLDINGS LP
By: Intertape Polymer Inc.
Its: General Partner
By: /s/Darlene Persons By: /s/Andrew M. Archibald
Its: Vice President Its: CFO & Secretary
INTERTAPE POLYMER GROUP INC.
By: /s/Andrew M. Archibald
Its: CFO, Secretary-Treasurer & VP
Administration
</TABLE>
6
<PAGE>
EXHIBIT 1.4
COMERICA--2ND RESTATED AGR
SECOND RESTATED REVOLVING CREDIT AGREEMENT
THIS SECOND RESTATED REVOLVING CREDIT AGREEMENT is made as of the 30th day
of September 1999 by and between IPG HOLDINGS LP, a Delaware limited partnership
("Holdings"), IPG (US) INC., a Delaware corporation ("IPG"; collectively with
Holdings, "Borrower"), INTERTAPE POLYMER GROUP INC., a corporation organized
under the laws of Canada ("Company") and COMERICA BANK, a banking corporation
organized under the laws of Michigan, with principal offices at 500 Woodward
Avenue, Detroit, Michigan 48226 ("Bank").
W I T N E S S E T H:
WHEREAS, Holdings and Bank are party to a certain Restated Revolving Credit
Agreement dated as of May 8, 1998, as amended (collectively, the "Prior
Agreement") pursuant to which Bank established a revolving credit facility for
Holdings in the amount of Sixty Million Dollars ($60,000,000) which contained a
subfacility for IPG (and others) in the amount of $10,000,000 and Holdings
delivered to Bank a Eurodollar Revolving Note, as evidence thereof, in the face
amount of Sixty Million Dollars ($60,000,000) and IPG (and others) delivered to
Bank a Eurodollar Revolving Note, as evidence of the subfacility, in the face
amount of Ten Million Dollars ($10,000,000) (collectively, the "Prior Notes").
WHEREAS, Holdings and Company have requested Bank to amend the Prior
Agreement and Prior Notes to among other things, add IPG as a Borrower
hereunder;
WHEREAS, Bank is willing to do so on the terms set forth herein;
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree that the Prior Agreement is hereby
amended and restated in its entirety as follows:
ARTICLE 1
REVOLVING CREDIT FACILITY
1.1 Subject to and upon the terms and conditions herein set forth, the Bank
hereby establishes a Revolving Credit Facility in favor of the Borrower
("Revolving Credit") which may be utilized by Borrower by direct advances under
Section 1.2 below and/or for Letters of Credit issued under Section 1.4 hereof,
provided however that the aggregate principal amount of advances under the
Revolving Credit plus the aggregate face amount of Letters of Credit at any one
time outstanding, plus the aggregate principal amount of the advances
outstanding under the Subfacility Note, shall at no time exceed the Commitment
Amount.
1.2 Subject to the provisions of this Agreement, so long as no Event of
Default exists, and if no condition exists which, but for the giving of notice
or the lapse of time or both, would constitute an Event of Default hereunder,
the Borrower may draw upon such Revolving Credit in whole or in part, from time
to time, and the amount of any borrowing may be repaid and reborrowed, until the
Maturity Date.
1.3 The indebtedness hereunder shall be due and payable in full on the
Maturity Date and interest thereon shall accrue and be paid as provided in the
promissory note executed by Borrower as evidence of the Revolving Credit in the
form attached as Exhibit "A" (the "Note").
1.4 The Borrower may request the Bank from time to time to issue, for the
Borrower's accounts with third parties, letters of credit (called herein,
together with any "Letters of Credit" which were issued by Bank pursuant to the
Prior Agreement which remain issued and unexpired as of the Closing Date, the
"Letters of Credit"), in each case with expiries not later than the earlier of
(x) one year and (y) the Maturity Date. In connection with each such request,
Borrower shall execute and deliver to Bank, prior to the requested date of
issuance, a letter of credit application and agreement in form satisfactory to
Bank.
7
<PAGE>
1.5 The Borrower shall pay to the Lender (a) a closing fee, on even date
herewith, in the amount of , which fee shall be fully earned as of
the date hereof and shall not be refundable in whole or part for any reason,
(b) with respect to Letters of Credit generally, the Bank's standard charges in
connection with processing, issuance, amendments and drawings on letters of
credit, which standard charges are set forth in Exhibit B hereto, (c) with
respect to standby Letters of Credit, letter of credit fees payable quarterly in
arrears on each the first day of each January, April, July and October, in the
amount of one percent (1%) per annum on the face amounts thereof, and (d) with
respect to trade Letters of Credit, letter of credit fees, payable upon issuance
thereof in the amount of three-eighths percent ( 3/8%) per annum of the face
amount thereof.
ARTICLE 2
PURPOSE OF THE LOAN
2.1 The proceeds of the loan to be made hereunder are to be used (i) in an
initial advance to be made on the Closing Date for the purpose of, and in the
amount necessary to, repay, by replacement and renewal evidences, indebtedness
outstanding under the Prior Note, and (ii) thereafter, for general working
capital purposes.
ARTICLE 3
REPRESENTATIONS AND
WARRANTIES OF THE BORROWER
Each Borrower, respectively, represents and warrants to the Bank that:
3.1 AUTHORIZATION. The Borrower has the power and authority necessary and
has taken all necessary steps in order to be authorized to borrow hereunder and
to execute and deliver and perform its obligations under this Agreement and Note
in accordance with the terms and conditions thereof and to complete the
transactions contemplated herein. This Agreement and the Note have been duly
executed and delivered by duly authorized officers of the Borrower and Company
and constitute legal, valid and binding obligations of the Borrower and Company,
enforceable in accordance with their terms.
3.2 NO VIOLATION TO RESULT. The execution and delivery of this Agreement
and the contemplated hereby:
(a) are not in violation or breach of, do not conflict with or constitute a
default under, and will not accelerate or permit the acceleration of the
performance required by, the organizational documents of the Borrower or
any note, debt instrument, security agreement or mortgage, or any other
contract or agreement, written or oral, to which the Borrower is a party
or by which the Borrower or any of its properties or assets are bound;
(b) will not be an event which, after notice or lapse of time or both, will
result in any such violation, breach, conflict, default, or acceleration;
(c) will not result in violation under any law, judgment, decree, order,
rule, regulation or other legal requirement of any governmental
authority, court or arbitration tribunal whether federal, state,
provincial, municipal or local (within the U.S. or otherwise) at law or
in equity, and applicable to the Borrower; and
(d) will not result in the creation or imposition of any lien, possibility
of lien, encumbrance, security agreement, equity, option, claim, charge,
pledge or restriction in favor of any third person upon any of the
properties or assets of the Borrower.
3.3 NO EXISTING DEFAULTS. To the best knowledge and reasonable belief of
the Borrower, there exists no unwaived material default or violation:
(a) under any of the material terms of any note, debt instrument, security
agreement or mortgage or under any other material commitment, contract,
agreement, license, lease or other instrument, whether written or oral,
to which it is a party or by which it or any of its properties or assets
is bound;
8
<PAGE>
(b) under any law, judgment, decree, order, permit, rule, regulation or
other legal requirement or any governmental authority, court or
arbitration tribunal whether federal, state, provincial, municipal or
local (within the U.S. or otherwise), at law or in equity, and applicable
to it or to any of its properties or assets, wherein such default would
result in a material adverse effect upon the Borrower, its properties or
assets; or
(c) in the payment of any of its monetary obligations or debts and there
exists no condition or event which, after notice or lapse of time or
both, would constitute a material default in connection with any of the
foregoing.
3.4 NO ADVERSE CHANGES. From the date of the December 31, 1998 financial
statements delivered by Company to Bank pursuant to the Prior Agreement:
(a) The Borrower has not sustained any damage, destruction or loss, by
reason of fire, explosion, earthquake, casualty, labor trouble,
requisition or taking of property by any government or agency thereof,
windstorm, embargo, riot, act of God or the public enemy, flood, volcanic
eruption, accident, other calamity or other similar or dissimilar event
(whether or not covered by insurance) adversely affecting the business,
properties, financial condition or operations of the Borrower taken as a
whole;
(b) There have been no changes in the condition (financial or otherwise),
business, net worth, assets, properties, liabilities or obligations
(fixed, contingent, known, unknown or otherwise) of the Borrower which in
the aggregate have had or may have a material adverse effect on the
business, properties, financial condition or operations of the Borrower
taken as a whole, and there has been no occurrence, circumstance or
combination thereof which might reasonably be expected to result in any
such adverse effect.
3.5 FULL DISCLOSURE. The information furnished by the Borrower or by any
of its directors, officers, employees, agents, accountants or representatives to
the Bank or its counsel pursuant to this Agreement (whether furnished prior to,
at, or subsequent to the date hereof), the information contained in the Exhibits
and Schedules referred to in this Agreement, and the other information furnished
to the Bank by the Borrower or by any of their respective directors, officers,
employees, agents, accountants or representatives of the Borrower (pursuant to
the request of the Bank or otherwise), does not and will not omit to state any
material fact necessary to make all such information not misleading.
3.6 TAXES. The Borrower has prepared (or caused to be prepared) and
properly filed (or caused to be properly filed) with the appropriate federal,
state, provincial, municipal or local authorities (within the U.S. or otherwise)
all tax returns, information returns and other reports required to be filed and
have paid or accrued (or caused to be so paid or accrued) in full all taxes,
interest, penalties, assessments or deficiencies, if any, due to, or claimed to
be due by, any taxing authority. The Borrower has not executed or filed with any
taxing authority any agreement extending the period for assessment or collection
of any taxes. The Borrower is not a party to any pending action or proceeding,
nor is any such action or proceeding threatened, by any governmental authority
for the assessment or collection of taxes, and no claim for assessment or
collection of taxes has been asserted against the Borrower and during the course
of any audit currently in process or not completed, no issues have been
suggested by any representative of any such governmental authority that, if
asserted, would result in a proposed assessment of taxes, interest or penalties,
against the Borrower.
3.7 TITLE TO ASSETS. The Borrower has good and marketable title to its
property, free and clear of any and all liens, encumbrances, security
agreements, equities, options, claims, charges, pledges, restrictions,
encroachments, defects in title and easements except for the matters previously
disclosed to the Bank in writing.
3.8 LITIGATION. Except as set forth in Exhibit 3.8 hereto, there is no
litigation, suit, proceeding, action, claim or investigation, at law or in
equity, pending or threatened against the Borrower or its property or assets,
before any court, agency, authority or arbitration tribunal, including, without
limitation, any product liability, workers' compensation or wrongful dismissal
claims, or claims, actions, suits or proceedings relating to toxic materials,
hazardous substances, pollution or the environment which are not properly
insured. There are no facts known to the Borrower which, if known to the
Borrower, to customers, governmental authorities or other persons, might result
in any such litigation, suit, proceeding, action, claim or investigation. Except
as set forth in
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such Exhibit 3.8 hereto, the Borrower is not subject to or in default with
respect to any notice, order, writ, injunction or decree of any court, agency,
authority or arbitration tribunal.
3.9 COMPLIANCE WITH LAWS. To the best of its knowledge and belief, the
Borrower has complied with all laws, municipal by-laws, regulations, rules,
orders, judgments, decrees and other requirements and policies imposed by any
governmental authority applicable to it, its properties or the operation of its
business. Without limiting the generality of the foregoing, the Borrower is in
full compliance with:
(a) all laws relating to the protection of human health and safety,
including, without limitation, the Occupational Safety and Health Act of
1970, as amended, and all regulations and standards issued thereunder by
the Secretary of Labor or the Occupational Safety and Health
Administrator or other governmental agency or authority acting at any
time thereunder;
(b) all laws relating to protection of the environment, including, without
limitation, the Resource Conservation and Recovery Act ("RCRA") and the
Comprehensive Environment Response, Compensation and Liability Act
("CERCLA");
(c) all laws administered by the Environmental Protection Agency;
(d) all laws relating to equal opportunity; and
(e) all zoning, building and other laws, ordinances, rules, regulations,
plans and directives of government authorities, Boards of Fire
Underwriters and other entities having jurisdiction, as well as all
private restrictions and covenants (whether or not registered or of
record), in each case without reliance on nonconforming use or similar
rule.
The Borrower has not received any notice or citation for noncompliance with
any of the foregoing, and there exists no condition, situation or circumstance,
nor has there existed such a condition, situation or circumstance, which, after
notice or lapse of time, or both, would constitute noncompliance with or give
rise to future liability with regard to any of the foregoing, except as
otherwise disclosed in Exhibit 3.9 hereto.
3.10 TRUE COPIES. All documents furnished or caused to be furnished to the
Bank or its counsel by the Borrower or by any of its directors, officers,
employees, agents, accountants or representatives are true and correct copies,
and there are no amendments or modifications thereto except as set forth in such
documents.
ARTICLE 4
CONDITIONS OF LENDING
4.1 The obligation of the Bank to make any advance of the loans hereunder or
to issue any Letter of Credit shall be subject to the fulfillment of each of the
foregoing conditions:
(a) PROMISSORY NOTE. The Borrower shall have executed and delivered to
the Bank the Note and the Subborrowers shall have executed and delivered to
the bank the Subfacility Note, dated the date hereof, incorporated by
reference herein and made part hereof.
(b) GUARANTEE. Company, shall have executed and delivered to the Bank
a Guarantee in respect of each of the Borrower's obligations hereunder, such
Guarantee to be in form and substance satisfactory to the Bank's counsel and
the Borrower, shall have executed and delivered to the Bank a Guarantee in
respect of each of the Subborrower's obligations under the Subfacility Note,
such Guarantee to be in form and substance satisfactory to the Bank's
counsel.
(c) OFFICER'S CERTIFICATE. The Bank shall have received: (i) the
certificate of the General Partner of Holdings and the secretary of IPG,
certifying as to the Borrower's authority in respect of the borrowing by the
Borrower hereunder and the issuance of the Note and the offices and specimen
signatures of officers of the Borrower executing any documents delivered to
the Bank in connection with the Loan; and (ii) the certificate of the
secretary of Company certifying as to the Company's authority to execute and
deliver this Agreement and the guarantee and showing the officers and
specimen signatures of officers of Company executing and delivering such
documents.
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(d) OPINIONS. The Bank shall have received opinion letters from the
legal counsel for the Borrower and the Company covering such matters as the
Bank shall require and in form and content satisfactory to the Bank.
ARTICLE 5
COVENANTS
The Borrower and Company covenant and agree that, until any Note together
with interest and all its other indebtedness to the Bank under this Agreement
are paid in full, unless specifically waived by the Bank in writing:
5.1 CORPORATE EXISTENCE, ETC. The Company and Borrower will preserve and
keep in full force and effect, and will cause each Restricted Subsidiary to
preserve and keep in full force and effect, its corporate existence and all
licenses and permits necessary to the proper conduct of its business; provided,
however, that the foregoing shall not prevent any transaction permitted by
Section 5.12.
5.2 INSURANCE. The Company and Borrower will maintain, and will cause each
Restricted Subsidiary to 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 owning and operating similar properties in accordance with
good business practice.
5.3 TAXES, CLAIMS FOR LABOR AND MATERIALS, COMPLIANCE WITH LAWS. Without
limiting any other obligation of the Borrower and Company hereunder including,
without limitation, pursuant to the second sentence of this Section 5.3, the
Company and Borrower will promptly pay and discharge, and will cause each
Subsidiary promptly to pay and discharge, all lawful taxes, assessments and
governmental charges or levies imposed upon the Company, Borrower or such
Subsidiary, respectively, or upon or in respect of all or any part of the
property or business of the Company and Borrower or such Subsidiary, all trade
accounts payable in accordance with usual and customary business terms, and all
claims for work, labor or materials, which if unpaid might become a Lien upon
any property of the Company, Borrower or a Restricted Subsidiary; provided,
however, that the Company, Borrower or such Subsidiary shall not be required to
pay any such tax, assessment, charge, levy, account payable or claim if (i) the
validity, applicability or amount thereof is being contested in good faith by
appropriate actions or proceedings which will prevent the forfeiture or sale of
any property of the Company, Borrower or such Subsidiary or any material
interference with the use thereof by the Company, Borrower or such Subsidiary,
and (ii) the Company, Borrower or such Subsidiary shall set aside on its books,
reserves adequate in accordance with GAAP. The Company and Borrower will
promptly comply and will cause each Subsidiary to comply with all laws,
ordinances or governmental rules and regulations to which it is subject
including, without limitation, the Occupational Safety and Health Act of 1970,
as amended, ERISA and all laws, ordinances, governmental rules and regulations
relating to environmental protection in all applicable jurisdictions, the
violation of which could materially and adversely affect the properties,
business, profits or condition of the Company and Borrower and its Subsidiaries
or would result in any Lien not permitted under Section 5.10.
5.4 MAINTENANCE, ETC. The Company and Borrower will maintain, preserve and
keep, and will cause each Restricted Subsidiary to maintain, preserve and keep,
its properties which are used or useful in the conduct of its business (whether
owned in fee or a leasehold interest) in good repair and working order and from
time to time will make all necessary repairs, replacements, renewals and
additions so that at all times the efficiency thereof shall be maintained.
5.5 NATURE OF BUSINESS. The Company, Borrower and each Restricted
Subsidiary will continue to carry on substantially the same type of business
currently carried on and activities which are ancillary, incidental or necessary
to the ongoing business of the Company, Borrower and the Restricted Subsidiaries
as presently conducted.
5.6 CONSOLIDATED NET WORTH. The Company will at all times keep and
maintain Consolidated Net Worth at an amount not less than $200,000,000.
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5.7 FIXED CHARGES COVERAGE RATIO. The Company will keep and maintain the
ratio (determined as of the end of each fiscal quarter of the Company) 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.
5.8 LEVERAGE RATIO. The Company will not at any time permit Consolidated
Funded Debt to exceed 55% of Consolidated Total Capitalization.
5.9 ADDITIONAL LIMITATIONS ON DEBT.
(a) The Company and the Borrower will not, and will not permit any
Restricted Subsidiary to, create, assume or incur or in any manner become
liable in respect of any Debt, except:
(1) Funded Debt of the Company, Borrower and Restricted Subsidiaries
permitted by Section 5.8;
(2) Current Debt of the Company, Borrower 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 during which Current Debt of the
Company 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
Section 5.9(a)(1) above;
(3) in addition to the limitations with respect to Debt pursuant to the
foregoing paragraphs (1) and (2), in the case of 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 20% of Consolidated Net Worth and (y) all such
Priority Debt shall have been incurred within the other applicable
limitations of this Section 5.9(a); and
(4) Debt of a Restricted Subsidiary owing to the Company or to a
Wholly-owned Restricted Subsidiary.
(b) Any corporation which becomes a Restricted Subsidiary after the date
hereof shall for all purposes of this Section 5.9 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.
5.10 LIMITATION ON LIENS. The Company and Borrower will not, and will not
permit any Restricted Subsidiary to, create or incur, or suffer to be incurred
or to exist, any Lien 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:
(a) Liens for property taxes and assessments or governmental charges or
levies and Liens securing claims or demands of mechanics and materialmen,
provided payment thereof is not at the time required by Section 5.3;
(b) Liens of or resulting from any judgment or award, the time for the
appeal or petition for rehearing of which shall not have expired, or in
respect of which the Company or a Restricted Subsidiary shall at any time
in good faith be prosecuting an appeal or proceeding for a review and in
respect of which a stay of execution pending such appeal or proceeding
for review shall have been secured;
(c) Liens incidental to the conduct of business or the ownership of
properties and assets (including Liens in connection with worker's
compensation, unemployment insurance and other like laws, warehousemen's
and attorneys' liens and statutory landlords' liens) and Liens to secure
the performance of bids, tenders or trade contracts, or to secure
statutory obligations, surety or appeal bonds or other Liens of like
general nature incurred in the ordinary course of business and not in
connection with the borrowing of money; provided in each case, the
obligation secured is not overdue or, if overdue, is being contested in
good faith by appropriate actions or proceedings;
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(d) minor survey exceptions or minor encumbrances, easements or
reservations, or rights of others for rights-of-way, utilities and other
similar purposes, or zoning or other restrictions as to the use of real
properties, which are necessary for the conduct of the activities of the
Company and its Restricted Subsidiaries or which customarily exist on
properties of corporations engaged in similar activities and similarly
situated and which do not in any event materially impair their use in the
operation of the business of the Company and its Restricted Subsidiaries;
(e) Liens securing Indebtedness of a Restricted Subsidiary to the Company or
to another Wholly-owned Restricted Subsidiary;
(f) Liens on shares of stock of Unrestricted Subsidiaries;
(g) Liens existing as of January 1, 1998 and reflected on Exhibit 5.10
hereto.
(h) Liens 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 Company or a
Restricted Subsidiary, including Liens existing on such fixed assets at
the time of acquisition thereof or at the time of acquisition by the
Company or a Restricted Subsidiary of any business entity then owning
such fixed assets, whether or not such existing Liens 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 (i) the Lien shall
attach solely to the fixed assets acquired or purchased, (ii) at the time
of acquisition of such fixed assets, the aggregate amount remaining
unpaid on all Indebtedness secured by Liens on such fixed assets whether
or not assumed by the Company 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 Company), and (iii) all such
Indebtedness shall have been incurred within the other applicable
limitations of Section 5.8 and Section 5.9; and
(i) Liens, in addition to those permitted by Section 5.10(a) through
(h) above, securing Debt of the Company or any Restricted Subsidiary
(including, without limitation, Liens securing obligations of the Company
or any Restricted Subsidiary under any operating lines or short-term or
revolving bank facilities); provided that after giving effect to the
incurrence of all Debt secured by such Liens (i) the aggregate principal
amount of Priority Debt shall not exceed an amount equal to 20% of
Consolidated Net Worth and (ii) all such Debt shall have been incurred
within the other applicable limitations of Section 5.8 and Section 5.9;
5.11 RESTRICTED PAYMENTS. The Company and Borrower will not, and will not
permit any Restricted Subsidiary to, make any Restricted Investment or
Restricted Payment, if, after giving effect thereto, the sum of (i) the
aggregate amount of Restricted Payments made during the period from and after
January 1, 1998 to and including the date of the making of the Restricted
Payment in question, plus (ii) the aggregate amount of all Restricted
Investments made by the Company or any Restricted Subsidiary during said period
would exceed the sum of (x) $115,000,000 (Canadian) plus (y) 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 (z) an amount
equal to the aggregate net cash proceeds received by the Company from the
issuance or sale after the Closing Date (other than to the Company or any
Subsidiary) of shares of common stock of the Company (such sum described in
clauses (x), (y) and (z) being referred to as the "Available Pool").
In addition to the foregoing restrictions, the Company 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 Company 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 5.11, 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
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by the Board of Directors of the Company) 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 5.11, 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 purposes of this Section 5.11, 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.
5.12 MERGERS, CONSOLIDATIONS AND SALES OF ASSETS.
(a) The Company and Borrower will not, and will not permit any Restricted
Subsidiary to, (i) consolidate or amalgamate with or be a party to a
merger with any other corporation or (ii) sell, lease or otherwise
dispose of all or any substantial part (as defined in paragraph (d) of
this Section 5.12) of Consolidated Assets; provided, however, that:
(1) any Restricted Subsidiary may merge or amalgamate or consolidate with
or into the Company or any Wholly-owned Restricted Subsidiary so long
as in any merger or consolidation involving the Company, the Company
shall be the surviving or continuing corporation;
(2) the Company may consolidate or amalgamate or merge with any other
corporation if (i) (x) in the case of any consolidation or merger,
the purchasing, surviving or continuing corporation shall be the
Company or (y) in the case of any amalgamation, the Company's
existence shall continue with the amalgamation and all obligations
hereunder and under the Note shall constitute obligations of the
amalgamated entity and (ii) at the time of such amalgamation,
consolidation or merger and after giving effect thereto, no Default
or Event of Default shall have occurred and be continuing; and
(3) any Restricted Subsidiary may sell, lease or otherwise dispose of all
or any substantial part of its assets to the Company or any
Wholly-owned Restricted Subsidiary.
(b) The Company will not permit any Restricted Subsidiary to issue or sell
any shares of stock of any class (including as "stock" for the purposes
of this Section 5.12, any warrants, rights or options to purchase or
otherwise acquire stock or other Securities exchangeable for or
convertible into stock) of such Restricted Subsidiary to any Person other
than the Company 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 Company and/or a
Restricted Subsidiary whereby the Company and/or such Restricted
Subsidiary maintain their same proportionate interest in such Restricted
Subsidiary.
(c) The Company will not 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 Company or a Wholly-owned Restricted
Subsidiary) any shares of stock of any other Restricted Subsidiary,
unless:
(1) simultaneously with such sale, transfer, or disposition, all shares
of stock of such Restricted Subsidiary at the time owned by the
Company and by every other Restricted Subsidiary shall be sold,
transferred or disposed of as an entirety; and
(2) such sale or other disposition does not involve a substantial part
(as hereinafter defined) of the assets of the Company and its
Restricted Subsidiaries.
(d) As used in this Section 5.12, a sale, lease or other disposition of
assets shall be deemed to be a "substantial part" of the assets of the
Company 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 Company 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.
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For the purpose of making any determination of "substantial part," any sale,
lease or other dispositions of assets of the Company and its Restricted
Subsidiaries shall not be included if and to the extent the net proceeds are
segregated from the general accounts of the Company 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
Senior Funded Debt. Any such prepayment applied to the prepayment of the Notes
shall be prepaid as and to the extent provided in Section 2.2 hereof.
5.13 TRANSACTIONS WITH AFFILIATES. The Company will not, and will not
permit any Restricted Subsidiary to, 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 Company's or such Restricted Subsidiary's
business and upon fair and reasonable terms no less favorable to the Company or
such Restricted Subsidiary than would obtain in a comparable arm's-length
transaction with a Person other than an Affiliate.
5.14 TERMINATION OF PENSION PLANS. The Company will not and will not
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 Lien on any property of
the Company or any Subsidiary pursuant to Section 4068 of ERISA.
5.15 DESIGNATION OF RESTRICTED SUBSIDIARIES. The Company may designate any
Subsidiary a Restricted Subsidiary by giving written notice to Bank that the
Board of Directors of the Company 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.
5.16 REPORTS AND RIGHTS OF INSPECTION. The Company will keep, and will
cause each Restricted Subsidiary to keep, proper books of record and account in
which full and correct entries will be made of all dealings or transactions of,
or in relation to, the business and affairs of the Company or such Restricted
Subsidiary, in accordance with GAAP consistently applied (except for changes
disclosed in the financial statements furnished to you pursuant to this
Section 5.17 and concurred in by the independent public accountants referred to
in Section 5.17(b) hereof), and will furnish to you so long as you are the
holder of any Note and to each other holder of the then outstanding Notes (in
duplicate if so specified below or otherwise requested):
(a) QUARTERLY STATEMENTS. As soon as available and in any event within
75 days after the end of each quarterly fiscal period (except the last) of
each fiscal year, copies of:
(1) consolidated balance sheets of the Company and its consolidated
Subsidiaries (and, if different, of the Restricted Group) as of the
close of such quarterly fiscal period, setting forth in comparative
form the consolidated figures for the corresponding period of the
fiscal year then most recently ended,
(2) consolidated statements of earnings and retained earnings of the
Company and its consolidated Subsidiaries (and, if different, of the
Restricted Group) for such quarterly fiscal period and for the
portion of the fiscal year ending with such quarterly fiscal period,
in each case setting forth in comparative form the consolidated
figures for the corresponding periods of the preceding fiscal year,
and
(3) consolidated statements of changes in cash resources of the Company
and its consolidated Subsidiaries (and, if different, of the
Restricted Group) for the portion of the fiscal year ending with such
quarterly fiscal period, setting forth in comparative form the
consolidated figures for the corresponding period of the preceding
fiscal year,
all in reasonable detail and certified as complete and correct by an
authorized financial officer of the Company;
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(b) ANNUAL STATEMENTS. As soon as available and in any event within
140 days after the close of each fiscal year of the Company, copies of:
(1) consolidated and consolidating balance sheets of the Company and its
consolidated Subsidiaries (and, if different, of the Restricted
Group) as of the close of such fiscal year, and
(2) consolidated and consolidating statements of earnings and retained
earnings and changes in cash resources of the Company and its
consolidated Subsidiaries (and, if different, of the Restricted
Group) for such fiscal year,
in each case setting forth in comparative form the consolidated and
consolidating figures for the preceding fiscal year, all in
reasonable detail and with regard to the consolidated figures,
accompanied by a report thereon of a firm of independent public
accountants of recognized national standing in the United States or
Canada selected by the Company to the effect that the consolidated
financial statements present fairly, in all material respects, the
consolidated financial position of the Company and its consolidated
Subsidiaries (and, if different, of the Restricted Group) as of the
end of the fiscal year being reported on and the consolidated results
of the operations and cash flows for said year in conformity with
GAAP and that the examination of such accountants in connection with
such financial statements has been conducted in accordance with
generally accepted auditing standards and included such tests of the
accounting records and such other auditing procedures as said
accountants deemed necessary in the circumstances;
(c) AUDIT REPORTS. Promptly upon receipt thereof, one copy of each
interim or special audit made by independent accountants of the books of the
Company or any Restricted Subsidiary;
(d) GOVERNMENTAL AND OTHER REPORTS. Promptly upon their becoming
available, one copy of each financial statement, report, notice or proxy
statement sent by the Company to stockholders generally and of each regular
or periodic report, and any registration statement or prospectus filed by
the Company or any Subsidiary with any securities exchange or any
governmental regulatory body including, but without limitation, the
Companies Form 20F and unaudited quarterly reports, and copies of any orders
in any proceedings to which the Company or any of its Subsidiaries is a
party, issued by any governmental agency having jurisdiction over the
Company or any of its Subsidiaries;
(e) ERISA REPORTS. Promptly upon the occurrence thereof, written
notice of (i) a Reportable Event with respect to any Plan; (ii) the
institution of any steps by the Company, any ERISA Affiliate, the PBGC or
any other person to terminate any Plan; (iii) the institution of any steps
by the Company or any ERISA Affiliate to withdraw from any Plan; (iv) a
non-exempt "prohibited transaction" within the meaning of Section 406 of
ERISA in connection with any Plan; (v) any material increase in the
contingent liability of the Company or any Subsidiary with respect to any
post-retirement welfare liability; or (vi) the taking of any action by, or
the threatening of the taking of any action by, the Internal Revenue
Service, the Department of Labor or the PBGC with respect to any of the
foregoing;
(f) OFFICER'S CERTIFICATES. Within the periods provided in
paragraphs (a) and (b) above, a certificate of an authorized financial
officer of the Company stating that such officer has reviewed the provisions
of this Agreement and setting forth: (i) the information and computations
(in sufficient detail) required in order to establish whether the Company
was in compliance with the requirements of Section 5.6 through Section 5.12
at the end of the period covered by the financial statements then being
furnished, and (ii) whether there existed as of the date of such financial
statements and whether, to the best of such officer's knowledge, there
exists on the date of the certificate or existed at any time during the
period covered by such financial statements any Default or Event of Default
(including, without limitation, with respect to Section 5.2) and, if any
such condition or event exists on the date of the certificate, specifying
the nature and period of existence thereof and the action the Company is
taking and proposes to take with respect thereto;
(g) ACCOUNTANT'S CERTIFICATES. Within the period provided in
paragraph (b) above, a certificate of the accountants who render an opinion
with respect to such financial statements, stating that they have reviewed
this Agreement and stating further whether, in making their audit, such
accountants have become aware of any Default or Event of Default under any
of the terms or provisions of this Agreement insofar as
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any such terms or provisions pertain to or involve accounting matters or
determinations, and if any such condition or event then exists, specifying
the nature and period of existence thereof;
(h) UNRESTRICTED SUBSIDIARIES. Within the respective periods provided
in paragraphs (a) and (b) above, financial statements of the character and
for the dates and periods as in said paragraphs (a) and (b) provided
covering each Unrestricted Subsidiary (or groups of Unrestricted
Subsidiaries on a consolidated basis);
(i) FORECASTS AND BUDGET. Within sixty (60) days following the end of
each fiscal year of Company, the Consolidated pre-tax operating forecast and
Consolidated capital expenditures budget of Company; and
(j) REQUESTED INFORMATION. With reasonable promptness, such other data
and information as you or any such holder may reasonably request.
Without limiting the foregoing, the Company will permit Bank, to visit
and inspect, any of the properties of the Company, Borrower and any
Restricted Subsidiary, to examine all of their books of account, records,
reports and other papers, to make copies and extracts therefrom and to
discuss their respective affairs, finances and accounts with their
respective officers, employees, and independent public accountants (and
by this provision the Company authorizes said accountants to discuss with
you the finances and affairs of the Company and its Restricted
Subsidiaries) all at such reasonable times and as often as may be
reasonably requested.
5.17 FURTHER ASSURANCE. The Borrower shall, at its cost and expense, upon
request of the Bank, duly execute and deliver to the Bank such further
instruments and do and cause to be done such further acts as may be necessary or
proper in the reasonable opinion of the Bank to carry out more effectively the
provisions and purposes of this Agreements.
5.18 PERFORMANCE OF OBLIGATIONS. The Borrower shall perform all
obligations in accordance with usual and customary business terms, except to the
extent that the non-fulfillment 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 Company 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 it shall punctually pay all amounts due or to become
due under this Agreement.
ARTICLE 6
DEFAULTS AND REMEDIES
6.1 EVENTS OF DEFAULT. If any of the "Events of Default" (as defined in
the Note) shall occur, then and in any such event, and at any time thereafter,
if such or any other Event of Default shall then be continuing, the Bank may, at
its option, declare the Notes to be due and payable, whereupon the maturity of
the then unpaid balance of the Note shall be accelerated and the same, and all
interest accrued thereon, shall forthwith become due and payable without
presentment, demand, protest, or notice of any kind, all of which are hereby
expressly waived, anything contained herein or in the Note to the contrary
notwithstanding, provided, however, upon the occurrence of an Event of Default
of the type described in clause (d) of the definition of Events of Default in
the Note, the Bank's commitment to lend shall automatically terminate and all of
the principal, interest and other amounts payable hereunder, hereunder and under
the Note and in connection with any outstanding Letter of Credit shall be
automatically due and payable without notice or demand. In addition to the
foregoing, upon any demand therefore made by Bank during the existence of any
Event of Default, Borrower and Company hereby agree to deposit and pledge to
bank, cash collateral in an amount not less than the aggregate face amount of
all Letters of Credit which are outstanding as of the date of such demand.
6.2 SUITS FOR ENFORCEMENT. In case any one or more Events of Default shall
occur and be continuing, the Bank may proceed to protect and enforce its rights
or remedies either by suit in equity or by action at law, or both, whether for
the specific performance of any covenant, agreement, or other provision
contained herein, in the Note or in any document or instrument delivered in
connection with or pursuant to this Agreement, or to
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enforce the payment of the Note and Borrower's and Company's other obligations
hereunder or any other legal or equitable right or remedy. The Borrower and
Company expressly agree:
(i) That the Courts of the State of Michigan and the United States District
Court for the Eastern District of Michigan, shall be the exclusive
forums for the adjudication of any enforcement action or dispute arising
under this Agreement and/or the Notes.
(ii) That it is subject to the personal jurisdiction of the Courts of the
State of Michigan in connection with any enforcement action or dispute
arising under this agreement.
(iii) That service of any summons and complaint made by certified mail to the
then address of the Borrower with copies to the Borrower's counsel,
shall be deemed good and sufficient service.
6.3 RIGHTS AND REMEDIES CUMULATIVE. No right or remedy herein conferred
upon the Bank is intended to be exclusive of any other right or remedy contained
herein, in the Note or in any instrument or document delivered in connection
with or pursuant to this Agreement, and every such right or remedy shall be
cumulative and shall be in addition to every other such right or remedy
contained herein and therein or now or hereafter existing at law or in equity or
by statute, or otherwise.
6.4 RIGHTS AND REMEDIES NOT WAIVED. No course of dealing between the
Borrower and the Bank or any failure or delay on the part of the Bank in
exercising any rights or remedies hereunder shall operate as a waiver of any
rights or remedies of the Bank and no single or partial exercise of any rights
or remedies hereunder shall operate as a waiver or preclude the exercise of any
other rights or remedies hereunder.
ARTICLE 7
DEFINITIONS
7.1 The following words and expressions, when used in this Agreement, unless
the contrary is stipulated, have the following meaning:
"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 Company, (ii) which
beneficially owns or holds 5% or more of any class of the Voting Stock of
the Company 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 Company 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;
"CAPITALIZED LEASE" shall mean 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.
"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.
"CASH EQUIVALENTS" means, as of the date of any determination thereof,
Investments of the type described in clauses (ii), (iii) and (iv) of the
definition of the term "Restricted Investments".
"CLOSING DATE" shall mean the date on which the conditions described in
Section 4.1 hereof are satisfied.
"COMMITMENT AMOUNT" means Sixty Million Dollars ($60,000,000).
"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 5.14 with respect to the
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Company shall include its Restricted Subsidiaries as well as all
Unrestricted Subsidiaries the Debt of which is guaranteed by the Company;
"CONSOLIDATED" when used as a prefix to any item shall mean the aggregate
amount of all such item of the Company and its Restricted Subsidiaries on a
consolidated basis eliminating intercompany items in accordance with GAAP.
"CONSOLIDATED ASSETS" shall mean, as of the date of any determination
thereof, consolidated total assets of the Company and its Restricted
Subsidiaries determined in accordance with GAAP (excluding, in any event,
assets or equity attributable to Unrestricted Subsidiaries).
"CONSOLIDATED CURRENT LIABILITIES" shall mean as of the date of any
determination thereof such liabilities of the Company 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).
"CONSOLIDATED NET INCOME" for any period shall mean the gross revenues of
the Company 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:
(a) 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;
(b) the proceeds of any life insurance policy;
(c) net earnings and losses of any Restricted Subsidiary accrued prior to
the date it became a Restricted Subsidiary;
(d) 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 Company or any Restricted Subsidiary, realized by such
corporation prior to the date of such acquisition;
(e) net earnings and losses of any corporation (other than a Restricted
Subsidiary) with which the Company or a Restricted Subsidiary shall have
consolidated or which shall have merged into or with the Company or a
Restricted Subsidiary prior to the date of such consolidation or merger;
(f) net earnings of any business entity (other than a Restricted Subsidiary)
in which the Company or any Restricted Subsidiary has an ownership
interest unless such net earnings shall have actually been received by
the Company or such Restricted Subsidiary in the form of cash
distributions;
(g) any portion of the net earnings of any Restricted Subsidiary which for
any reason is unavailable for payment of dividends to the Company or any
other Restricted Subsidiary;
(h) earnings resulting from any reappraisal, revaluation or write-up of
assets;
(i) 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;
(j) any gain arising from the acquisition of any Securities of the Company
or any Restricted Subsidiary; and
(k) 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.
"CONSOLIDATED NET WORTH" shall mean, as of the date of any determination
thereof, the consolidated total shareholders equity of the Company and its
Restricted Subsidiaries, determined in accordance with GAAP.
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"CONSOLIDATED TOTAL CAPITALIZATION" shall mean, 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.
"CURRENT DEBT" of any Person shall mean as of the date of any determination
thereof all Debt of such Person other than Funded Debt of such Person.
"DEBT" of any Person shall mean, as of the date of any determination thereof
(without duplication):
(i) all Indebtedness for borrowed money or evidenced by notes, bonds,
debentures or similar evidences of Indebtedness of such Person;
(ii) obligations secured by any Lien 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 Liens 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:
(iii) Capitalized Rentals;
(iv) 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
(v) (without duplication of any of the foregoing) Guaranties of obligations
of others of the character referred to hereinabove in this definition.
"ERISA" shall mean 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.
"ERISA AFFILIATE" shall mean any corporation, trade or business that is,
along with the Company, 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.
"EVENT OF DEFAULT" shall have the meaning given it in the Note.
"FIXED CHARGES" for any period shall mean on a consolidated basis the sum of
(i) all Rentals (other than Rentals on Capitalized Leases) payable during
such period by the Company and its Restricted Subsidiaries, and (ii) all
Interest Charges on all Indebtedness (including the interest component of
Rentals on Capitalized Leases) of the Company and its Restricted
Subsidiaries.
"FUNDED DEBT" of any Person shall mean 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.
"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;
"GUARANTIES" by any Person shall mean 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: (i) to purchase such
Indebtedness or obligation or any property or assets constituting security
therefor, (ii) to advance or supply funds (x) for the purchase or
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payment of such Indebtedness or obligation, or (y) 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, (iii) 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 of the ability of the primary obligor to make
payment of the Indebtedness or obligation, or (iv) 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 Guaranty in respect of any Indebtedness for borrowed money
shall be deemed to be Indebtedness equal to the principal amount of such
Indebtedness for borrowed money which has been guaranteed, and a Guaranty 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.
"INDEBTEDNESS" of any Person shall mean and include 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 (i) obligations of such Person for borrowed money or which has
been incurred in connection with the acquisition of property or assets,
(ii) obligations secured by any Lien upon property or assets owned by such
Person, even though such Person has not assumed or become liable for the
payment of such obligations, (iii) 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,
(iv) Capitalized Rentals and (v) Guaranties of obligations of others of the
character referred to in this definition.
"INTEREST CHARGES" for any period shall mean all interest and all
amortization of debt discount and expense on any particular Indebtedness for
which such calculations are being made. Computations of Interest Charges 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.
"INTERTAPE POLYMER CORP." shall mean Intertape Polymer Corp., a Virginia
corporation, and any Person who succeeds to all, or substantially all, of
the assets and business of Intertape Polymer Corp.
"INVESTMENTS" shall mean 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.
"LIEN" shall mean any interest in property securing an obligation owed to,
or a claim by, a Person other than the owner of the property, whether such
interest is based on the common law, statute or contract, and including but
not limited to the security interest lien arising from a mortgage,
encumbrance, pledge, Capitalized Lease, conditional sale or trust receipt or
a lease in which such Person is lessor, consignment or bailment for security
purposes. The term "Lien" 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 Company 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 Lien.
"LIKE ASSETS" shall mean, as of the date of any determination thereof,
capital assets, used or to be used by the Company or any Restricted
Subsidiary in the lines of business in which the Company or such Restricted
Subsidiary is engaged as of the Closing Date or in businesses reasonably
related thereto.
"LONG-TERM LEASE" shall mean 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.
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"MATERIAL ADVERSE CHANGE" means a material adverse change in the business,
assets, liabilities, financial position, operating results or business
prospects of the Company or any of the Restricted Subsidiaries, or in the
ability of the Borrower or the Company to perform any of its obligations
under this Agreement or under the Guarantee.
"MATURITY DATE" means April 1, 2000.
"MATERIAL DEBT" shall mean any Debt which has or relates to, in the
aggregate, an unpaid principal amount (or aggregate liability) of more than
U.S. $15,000,000 or an equivalent amount of money in any other currency.
"MINORITY INTERESTS" shall mean 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 Company 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.
"MULTIEMPLOYER PLAN" shall have the same meaning as in ERISA.
"NET INCOME AVAILABLE FOR FIXED CHARGES" for any period shall mean the sum
of (i) Consolidated Net Income during such period plus (to the extent
deducted in determining Consolidated Net Income), (ii) all provisions for
any Federal, state or other income taxes made by the Company and its
Restricted Subsidiaries during such period, (iii) Fixed Charges of the
Company and its Restricted Subsidiaries during such period and (iv) all
amortization expenses.
"NEW SUBSIDIARY" means a direct or indirect Subsidiary of IPG (US) Inc. that
is incorporated, created or acquired after the date hereof as well as any
existing Subsidiary of IPG (US) Inc. that is not currently a Subborrower
under the Subfacility Note.
"NOTE AGREEMENT" means the agreement(s) entered into by the Company dated as
of July 1, 1999, with respect to the issuance and sale of two series of
senior notes in an aggregate principal amount of US $137,000,000;
"PBGC" means the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.
"PERSON" shall mean an individual, partnership, corporation, trust or
unincorporated organization, and a government or agency or political
subdivision thereof.
"PLAN" means a "PENSION PLAN," as such term is defined in ERISA, established
or maintained by the Company or any ERISA Affiliate or as to which the
Company or any ERISA Affiliate contributed or is a member or otherwise may
have any liability.
"PRIORITY DEBT" shall have the meaning set forth in the Note Agreement.
"RENTALS" shall mean and include as of the date of any determination thereof
all fixed payments (including as such all payments which the lessee is
obligated to make to the lessor on termination of the lease or surrender of
the property) payable by the Company 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 Company 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.
"REPORTABLE EVENT" shall have the same meaning as in ERISA.
"RESPONSIBLE OFFICER" shall mean any Senior Financial Officer and any other
officer of the Company with responsibility for the administration of the
relevant portion of this Agreement.
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"RESTRICTED GROUP" shall mean, as of the date of determination thereof, the
Company and its Restricted Subsidiaries.
"RESTRICTED INVESTMENTS" shall mean all Investments, other than:
(a) Investments by the Company and its Restricted Subsidiaries in and to
Restricted Subsidiaries, including, without limitation, Investments
(i) directly out of the cash proceeds to the Company of the concurrent
sale of shares of capital stock of the Company or (ii) pursuant to a
direct share exchange offer by the Company, and including any Investment
in a corporation which, after giving effect to such Investment, will
become a Restricted Subsidiary;
(b) Investments in commercial paper maturing in 270 days or less from the
date of issuance which, at the time of acquisition by the Company 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.;
(c) Investments in (i) 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 (ii) 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;
(d) 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 U.S. $100,000,000 (or its equivalent in Canadian
currency) and whose long-term certificates of deposit are, at the time of
acquisition thereof by the Company 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 U.S. $1,000,000,000 (or its equivalent in
such country's local currency); and
(e) loans or advances (including, without limitation, loans or advances to
employees of the Company for the purchase by such employee of shares of
stock of the Company by such employee) 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 Company or any Restricted Subsidiary provided that the
aggregate amount of all such loans or advances shall at no time exceed
U.S. $1,000,000.
"RESTRICTED PAYMENTS" shall mean, for any period,
(i) the declaration or payment, directly or indirectly, of any dividend
either in cash or property, on any shares of capital stock of the
Company or any Restricted Subsidiary;
(ii) 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
Company or any Restricted Subsidiary; and
(iii) any payment or distribution, directly or indirectly, by the Company 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 Company or to a Wholly-owned Restricted
Subsidiary.
"RESTRICTED SUBSIDIARY" shall mean and include Intertape Polymer Corp.,
Polymer International Corp., Intertape Polymer Inc., any other Subsidiary so
described in Exhibit C hereto and any other Subsidiary (i) which is
organized under the laws of the United States, Puerto Rico, Canada or any
Qualifying EU Jurisdiction or any jurisdiction thereof; (ii) 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
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Jurisdiction; (iii) of which more than 80% (by number of votes) of the
Voting Stock is beneficially owned by the Company or any Wholly-owned
Restricted Subsidiary, and (iv) which has been designated by the Board of
Directors of the Company as a Restricted Subsidiary in accordance with
Section 5.16.
"SECURITY" shall have the same meaning as in Section 2(1) of the Securities
Act of 1933, as amended.
"SENIOR FINANCIAL OFFICER" means the chief financial officer, principal
accounting officer, treasurer or comptroller of the Company.
"SENIOR FUNDED DEBT" shall mean Consolidated Funded Debt, other than
Subordinated Funded Debt.
"SUBBORROWERS" shall mean American Tape Co., Intertape Polymer Corp., Anchor
Continental, Inc., Central Products Company and any New Subsidiary that
becomes a borrower under the Subfacility Note in accordance with the terms
of Section 8.9 below.
"SUBFACILITY NOTE" shall mean the Eurodollar Revolving Note made by the
Subborrowers (other than any New Subsidiary) to the order of the Bank as of
the date hereof in the face amount of Fifteen Million Dollars ($15,000,000)
and any extensions, renewals or replacements thereof or amendments thereto.
"SUBSIDIARY" shall mean shall mean any corporation, association or other
business entity (whether now existing or hereafter organized or acquired) in
which more than fifty percent (50%) of the outstanding ownership interests
having ordinary voting power for the election of directors and the exercise
the general direction and supervision of such entity, as of any applicable
date of determination, shall be owned directly, or indirectly through one or
more Subsidiaries, by Borrower.
"UNRESTRICTED SUBSIDIARY" shall mean any Subsidiary which is not a
Restricted Subsidiary.
"VOTING STOCK" shall mean 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).
"WHOLLY-OWNED" when used in connection with any Subsidiary shall mean 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 Company and/or one or more of its Wholly-owned Restricted Subsidiaries.
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ARTICLE 8
MISCELLANEOUS
8.1 NOTICE AND COMMUNICATIONS. All communications and notices provided for
the parties hereunder shall be in writing and mailed by certified mail, return
receipt requested or delivered to:
<TABLE>
<S> <C>
(a) The Borrower and the Company: Intertape Polymer Group Inc.
110E Montee de Liesse
St. Laurent, Quebec H4T 1N4
Canada
(b) The Bank: Comerica Bank
500 Woodward Avenue
Detroit, MI 48226
Attn: Darlene Persons
International Banking
</TABLE>
or to such other address as shall be designated by the parties in a written
notice to the other, complying as to delivery with the terms of this Agreement.
8.2 INCONSISTENCY. Whenever the provisions of the Note are inconsistent
with any of the provisions of the Agreement herein, the provisions of the Note
shall be deemed to control.
8.3 EXPENSES. The Borrower agrees to pay all costs, expenses as well as
any and all stamp and other taxes payable or determined to be payable in
connection with the preparation, execution and delivery of this Agreement, the
Note and related documents (collectively, the "Documents"), including reasonable
attorney's fees and disbursements.
8.4 CONSTRUCTION. All accounting terms not specifically defined herein
shall be construed in accordance with generally accepted principles of good
accounting practice and consistently applied.
8.5 ASSIGNMENT. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns,
except that the Borrower may not assign or transfer its rights hereunder without
the prior written consent of the Bank.
8.6 HEADINGS. Article headings used in this Agreement are for convenience
only and shall not affect the construction or interpretation of this Agreement.
8.7 LAW GOVERNING AGREEMENT. The validity, performance, interpretation and
other incidents of this Agreement shall be governed by the internal laws of the
State of Michigan.
8.8 MODIFICATIONS. This Agreement may not be modified in any way without a
writing duly executed by all parties hereto.
8.9 NEW SUBSIDIARY BORROWINGS. A New Subsidiary shall become a Subborrower
(as if it had executed and delivered the Subfacility Note) upon the delivery of
the following to the Bank, in form and substance satisfactory to the Bank:
(i) certified true and complete copies of the organizational documents (such as
articles of incorporation, articles or organization, certificate of limited
partnership, bylaws, operating agreement, partnership agreement, etc.) of the
New Subsidiary; (ii) opinion letter(s) from the legal counsel for the New
Subsidiary covering such matters as the Bank shall require; (iii) a duly
executed and authorized joinder certificate in the form of Exhibit D attached
hereto; (iv) if the resolutions of any guarantor of the Subfacility Note
delivered in connection with this Agreement authorizing the delivery of such
guaranty do not include the adding of a New Subsidiary as a Subborrower, then an
acknowledgement by such guarantor to the addition of such new Subborrower under
such guaranty; and (v) such other items as are reasonably requested by the Bank
in connection with the foregoing.
[SIGNATURES ON THE FOLLOWING PAGE]
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IN WITNESS WHEREOF, the undersigned has hereunto set his hand and with
respect to the Borrower, its seal the day and year first above written,
intending and declaring this to be a duly sealed instrument.
<TABLE>
<S> <C>
IPG HOLDINGS LP
By: Intertape Polymer Inc.
Its General Partner
By:/s/ANDREW M. ARCHIBALD
Name: Andrew M. Archibald
Title: Chief Financial Officer, Secretary
IPG (US) INC.
By: /s/JOSEPH D. BRUNO
Name: Joseph D. Bruno
Title: VP Sales -- Distribution Products
INTERTAPE POLYMER GROUP INC.
By: /s/ANDREW M. ARCHIBALD
Name: Andrew M. Archibald
Title: Chef Financial Officer, VP
Administration
By: /s/SAL VITALE
Name: Sal Vitale
Title: V.P. Finance
COMERICA BANK
By: /s/DARLENE PERSONS
Name: Darlene Persons
Title: Vice President
</TABLE>
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<PAGE>
EXHIBIT 2.2
STOCK PURCHASE AGREEMENT
BY AND BETWEEN
SPINNAKER INDUSTRIES, INC.
AND
INTERTAPE POLYMER GROUP INC.
DATED AS OF
APRIL 9, 1999
27
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C> <C>
ARTICLE I -- PURCHASE AND SALE OF COMPANY SHARES....................... 30
1.1 Sale of Company Shares by Seller............................ 30
1.2 Time and Place of Closing................................... 30
ARTICLE II -- PURCHASE PRICE........................................... 31
2.1 Purchase Price.............................................. 31
ARTICLE III -- SELLER REPRESENTATIONS AND WARRANTIES................... 31
3.1 Organization; Title to Company Shares....................... 31
3.2 Certificate of Incorporation and Bylaws..................... 31
3.3 Authority................................................... 31
3.4 No Conflict; Required Filings and Consents.................. 32
3.5 Absence of Litigation....................................... 32
3.6 Brokers..................................................... 32
3.7 Disclosure.................................................. 32
ARTICLE IV -- COMPANY REPRESENTATIONS AND WARRANTIES................... 33
4.1 Organization; Approvals..................................... 33
4.2 Capital Stock............................................... 33
4.3 Certificate of Incorporation and Bylaws..................... 33
4.4 No Conflict; Required Filings and Consents.................. 33
4.5 Compliance; Permits......................................... 34
4.6 Inventory................................................... 34
4.7 Accounts Receivable......................................... 34
4.8 Financial Statements........................................ 34
4.9 Absence of Certain Changes or Events........................ 34
4.10 Absence of Litigation....................................... 35
4.11 Employee Benefit Plans...................................... 35
4.12 Labor and Employment Matters................................ 36
4.13 Tangible Personal Property.................................. 37
4.14 Environmental Matters....................................... 37
4.15 Absence of Agreements....................................... 38
4.16 Taxes....................................................... 38
4.17 Insurance................................................... 39
4.18 Material Contracts.......................................... 39
4.19 Substantial Customers and Suppliers......................... 39
4.20 Intellectual Property....................................... 39
4.21 Year 2000 Representation.................................... 41
4.22 Real Property............................................... 41
4.23 Disclosure.................................................. 41
4.24 Subsidiaries................................................ 41
4.25 Material Adverse Effect..................................... 41
ARTICLE V -- BUYER REPRESENTATIONS AND WARRANTIES...................... 42
5.1 Organization; Approvals..................................... 42
5.2 Authority................................................... 42
5.3 No Conflict; Required Filings and Consents.................. 42
5.4 Absence of Litigation....................................... 42
5.5 Brokers..................................................... 43
5.6 Disclosure.................................................. 43
5.7 Holding of Company Shares................................... 43
</TABLE>
28
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<TABLE>
<CAPTION>
PAGE
--------
<S> <C> <C>
ARTICLE VI -- CERTAIN COVENANTS........................................ 43
6.1 Affirmative Covenants....................................... 43
6.2 Negative Covenants.......................................... 44
6.3 Exclusivity................................................. 45
6.4 Access and Information...................................... 45
6.5 Update Disclosure; Breaches................................. 46
6.6 Expenses.................................................... 46
6.7 Retention of Records........................................ 46
ARTICLE VII -- ADDITIONAL AGREEMENTS................................... 46
7.1 Appropriate Action; Consents; Filings....................... 46
7.2 Employee Benefit Matters.................................... 47
7.3 Notification of Certain Matters............................. 48
7.4 Public Announcements........................................ 48
7.5 Customer Retention.......................................... 48
7.6 Non-Competition............................................. 48
7.7 Further Transfer Matters.................................... 49
ARTICLE VIII -- TAXES.................................................. 50
8.1 Tax Indemnification......................................... 50
8.2 Preparation and Filing of Tax Returns....................... 50
8.3 Tax Contests................................................ 51
8.4 Cooperation................................................. 52
8.5 Termination of Tax Sharing Agreements....................... 52
8.6 FIRPTA Certificates......................................... 53
8.7 Conflict.................................................... 53
8.8 Survival.................................................... 53
ARTICLE IX -- CONDITIONS OF CLOSING.................................... 53
9.1 Conditions to Obligations of Each Party..................... 53
9.2 Additional Conditions to Obligations of Buyer............... 53
9.3 Additional Conditions to Obligations of the Seller.......... 54
ARTICLE X -- TERMINATION, AMENDMENT AND WAIVER......................... 55
10.1 Termination................................................. 55
10.2 Effect of Termination; Put Right............................ 55
10.3 Waiver...................................................... 56
ARTICLE XI -- NDEMNIFICATION........................................... 56
11.1 Indemnification............................................. 56
11.2 Procedures for Indemnification.............................. 56
ARTICLE XII -- GENERAL PROVISIONS...................................... 57
Survival of Representations, Warranties, Covenants and
12.1 Agreements.................................................. 57
12.2 Notices..................................................... 57
12.3 Certain Definitions......................................... 58
12.4 Headings.................................................... 59
12.5 Severability................................................ 59
12.6 Entire Agreement............................................ 59
12.7 Assignment.................................................. 60
12.8 Parties In Interest......................................... 60
12.9 Governing Law............................................... 60
12.10 Counterparts................................................ 60
12.11 Time Is of the Essence...................................... 60
12.12 Amendment................................................... 60
12.13 Waiver of Jury Trial........................................ 60
12.14 Consent to Jurisdiction..................................... 60
</TABLE>
29
<PAGE>
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "AGREEMENT"), dated as of April 9, 1999,
by and between Spinnaker Industries, Inc., a Delaware corporation ("SELLER"),
and Intertape Polymer Group Inc., a corporation organized under the Canada
Business Corporations Act ("BUYER").
WITNESSETH:
WHEREAS, Seller is the record and beneficial owner of all of the outstanding
capital stock of Central Products Company, a Delaware corporation (the
"COMPANY") engaged in the business of the design, development, manufacture and
sale of industrial tapes; and
WHEREAS, Buyer desires to acquire from Seller all of the outstanding capital
stock of the Company from Seller, and Seller desires to sell, assign, transfer,
convey and deliver to Buyer such stock, on the terms and subject to the
conditions of this Agreement; and
WHEREAS, concurrently with the execution and delivery of this Agreement,
Buyer is entering into an asset purchase agreement of even date herewith (the
"ASSET PURCHASE AGREEMENT") with Seller and Spinnaker Electrical Tape Company, a
Delaware corporation and an affiliate of the Company engaged in the business of
the design, development, manufacture and sale of industrial tapes.
NOW, THEREFORE, in consideration of the foregoing premises and the
representations, warranties and agreements contained in this Agreement, and
subject to the terms and conditions set forth in this Agreement, the parties
agree as follows:
ARTICLE I
PURCHASE AND SALE OF COMPANY SHARES
1.1 SALE OF COMPANY SHARES BY SELLER. Subject to the satisfaction or
waiver of the conditions set forth in this Agreement, at the Closing (as defined
in SECTION 1.2), Seller shall sell, assign, transfer, convey and deliver to
Buyer, and Buyer shall purchase and accept from Seller, all of the outstanding
capital stock of the Company (the "COMPANY SHARES"), free and clear of all
restrictions on transfer (subject, however, to restrictions on the
transferability thereof under all applicable securities laws and regulations
thereunder), Taxes, liens, options, warrants, purchase rights, contracts,
commitments, equities, claims and demands (other than the rights of Buyer under
this Agreement).
1.2 TIME AND PLACE OF CLOSING.
(a) The closing of the transactions contemplated hereby (the "CLOSING") will
take place on the Closing Date (defined below) or at such other time as
the parties agree. The Closing shall be held at the offices of Morgan,
Lewis & Bockius LLP located at 101 Park Avenue, New York, New York 10178
or such location as may be agreed upon by the parties. The parties shall
use reasonable efforts to cause the Closing to occur on the first
business day following the later to occur of (i) the effective date
(including expiration of any applicable waiting period) of the last
required consent of any regulatory authority having authority over and
approving or exempting the contemplated transaction or (ii) after all the
remaining conditions set forth in ARTICLE IX are satisfied or waived (the
"CLOSING DATE").
(b) At the Closing:
(i) Buyer shall deliver Seller (A) immediately available funds by wire
transfer to an account specified by Seller in an amount equal to the
Purchase Price (as defined in SECTION 2.1), offset as provided in
Section 2.1, (B) a Warrant Agreement, substantially in the form
attached hereto as EXHIBIT A, and (C) the opinion, certificates and
other agreements and documents set forth in ARTICLE IX;
(ii) Seller shall deliver to Buyer (A) the certificate or certificates
representing all of the Company's outstanding capital stock, either
duly endorsed for transfer to Buyer or accompanied by appropriate
duly executed stock powers and with all requisite stock transfer
stamps and taxes attached or provided for, (B) the opinion,
certificates and other documents set forth in ARTICLE IX, and
(C) resignations from each member of the Company's Board of
Directors; and
30
<PAGE>
(iii) (A) All intercompany receivables and all intercompany debt,
together with all interest thereon to the Closing Date, shall be
eliminated and (B) such amounts as are required to obtain a release
of the Company Shares and assets of its business at the Closing
Date under that certain Revolving Loan and Letter of Credit
Facility, dated October 23, 1996, by and among Central Products
Company, Spinnaker Coating, Inc., Spinnaker Coating-Maine, Inc. and
Entoleter, as Borrowers, Spinnaker Industries, Inc., as Guarantor,
and the other parties thereto, as amended from time to time (the
"CREDIT AGREEMENT"), shall be repaid. Current Federal income taxes
receivable and payable shall be considered intercompany balances
for purposes of this Section.
ARTICLE II
PURCHASE PRICE
2.1 PURCHASE PRICE. The aggregate purchase price for the Company Shares
shall be Eighty Million United States Dollars (US $80,000,000) (the "PURCHASE
PRICE"). The payment being made pursuant to SECTION 1.2(b)(iii)(B) above shall
be offset against the Purchase Price, the balance of which shall be delivered by
Buyer to Seller at Closing by wire transfer in immediately available federal
funds to an account designated by Seller by written notice to Buyer given at
least two days prior to the Closing Date. The portion of the Purchase Price
allocable to the non-competition provisions of SECTION 7.9 shall be Seven
Million United States Dollars (US $7,000,000).
ARTICLE III
SELLER REPRESENTATIONS AND WARRANTIES
Except as set forth in the Disclosure Schedule delivered by Seller to Buyer
attached to and incorporated in this Agreement (the "DISCLOSURE SCHEDULE"),
which Disclosure Schedule shall reference disclosure items by section, Seller
represents and warrants to Buyer as follows:
3.1 ORGANIZATION; TITLE TO COMPANY SHARES. Seller is a corporation validly
existing and in good standing under the laws of the State of Delaware. Seller
is, and on the Closing Date will be, the record and beneficial owner of the
Company Shares, and Seller owns, and on the Closing Date will own, the Company
Shares free and clear of all restrictions on transfer, Taxes, liens, options,
warrants, purchase rights, contracts, commitments, equities, claims and demands
(other than restrictions on transferability under applicable securities laws and
regulations thereunder and the rights of Buyer under this Agreement), except as
set forth in SECTION 3.1 of the Disclosure Schedule. The delivery on the Closing
Date of the certificates representing the Company Shares purchased hereunder to
Buyer will transfer to Buyer good, valid and marketable title to the Company
Shares, free and clear of all restrictions on transfer (other than restrictions
on transferability under applicable securities laws and regulations thereunder),
Taxes, liens, options, warrants, purchase rights, contracts, commitments,
equities, claims and demands. From and after the Closing, neither Seller nor any
other person (other than Buyer) will have any rights whatsoever to the Company
Shares, any other securities of the Company or any options or other rights
convertible or exchangeable into such Company Shares or other securities with
respect to the Company.
3.2 CERTIFICATE OF INCORPORATION AND BYLAWS. Seller previously has
furnished to Buyer a true, complete and accurate copy of its Certificate of
Incorporation and Bylaws, as amended or restated (the "SELLER CERTIFICATE AND
BYLAWS"). Such Seller Certificate and Bylaws are in full force and effect.
Seller is not in violation of any of the provisions of the Seller Certificate
and Bylaws.
3.3 AUTHORITY. Seller has the requisite corporate power and authority to
execute and deliver this Agreement, to perform its obligations under this
Agreement and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement by Seller and the consummation by Seller of the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action and no other corporate proceedings on the part of
Seller are necessary to authorize this Agreement or to consummate the
transactions contemplated hereby (other than applicable stockholder approvals).
This Agreement has been duly executed and delivered by, and constitutes a valid
and binding obligation of, Seller and, assuming due authorization, execution and
delivery by Buyer, is enforceable against Seller in accordance with its terms,
except
31
<PAGE>
as enforcement may be limited by general principles of equity whether applied in
a court of law or a court of equity and by bankruptcy, insolvency and similar
laws affecting creditors' rights and remedies generally.
3.4 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Agreement by Seller does not, and the
performance of this Agreement and the transactions contemplated hereby by
Seller shall not, (i) conflict with or violate the Seller Certificate and
Bylaws (ii) conflict with or violate any federal or state law, statute,
ordinance, rule, regulation, order, judgment or decree (collectively,
"LAWS") applicable to Seller or by which it or any of its properties are
bound or affected, or (iii) result in any breach of or constitute a
default (or an event that with notice or lapse of time or both would
become a default) under, or give to others any rights of termination,
amendment, acceleration, cancellation of, or result in the creation of a
Lien (as defined in SECTION 11.3) on Seller, the Company or any of their
respective assets pursuant to any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which Seller is a party or by which it or any
of its properties are bound or affected, except in the case of
clauses (ii) and (iii) for any such conflicts, violations, breaches,
defaults or other occurrences that individually or in the aggregate,
would not, or be reasonably likely to have, have a Material Adverse
Effect with respect to Seller or the Company.
(b) The execution and delivery of this Agreement by Seller does not, and the
performance of this Agreement by Seller shall not, require any consent,
approval, authorization or permit of, or filing with or notification to
any governmental or regulatory authority or any third party except for
applicable requirements, if any, of the Securities Act of 1933, as
amended (the "SECURITIES ACT"), the Securities Exchange Act of 1934, as
amended (the "EXCHANGE ACT"), state securities or blue sky laws ("Blue
Sky Laws"), the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR ACT"), the filing of other documents as required by
applicable law, applicable transfer tax filings and where the failure to
obtain such consents, approvals, authorizations or permits would not
prevent or delay consummation of the transaction contemplated hereby, or
otherwise prevent Seller from performing its obligations under this
Agreement or would be such as to result in, or be reasonably likely to
result in, a Material Adverse Effect with respect to Seller or the
Company.
3.5 ABSENCE OF LITIGATION. Seller is not a party to any, and there are no
pending or, to the knowledge of Seller, threatened, legal, administrative,
arbitral or other proceedings, claims, actions or governmental or regulatory
investigations of any nature against Seller challenging the validity or
propriety of the transactions contemplated by this Agreement which if
unfavorably determined would prevent the consummation of the transactions
contemplated hereby, except where such events would not have, or be reasonably
likely to have, a Material Adverse Effect with respect to Seller or the Company.
There are no claims or judgments pending with respect to which Seller has been
duly served or otherwise received notice as of the date of this Agreement or, to
the knowledge of Seller, threatened against Seller or the Company or outstanding
against Seller or the Company or affecting Seller or the Company, that in the
aggregate would have a Material Adverse Effect on the Company. No injunction,
order, judgment, decree or regulatory restriction has been imposed on Seller or
the assets of Seller which has had or reasonably could be expected to have a
Material Adverse Effect with respect to the Company.
3.6 BROKERS. No broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Seller, except as provided in that certain letter agreement between
Seller and Schroder & Co. Inc. regarding such fees, which fees are the sole
responsibility of, and are to be paid by, Seller.
3.7 DISCLOSURE. No representation or warranty of Seller contained in this
Agreement, and no statement contained in the Disclosure Schedule or in any
certificate, list or other writing furnished to Buyer pursuant to any provision
of this Agreement contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements herein or
therein, in light of the circumstances under which they were made, not
misleading.
32
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ARTICLE IV
COMPANY REPRESENTATIONS AND WARRANTIES
Except as set forth in the Disclosure Schedule delivered by Seller to Buyer
attached to and incorporated in this Agreement (the "DISCLOSURE SCHEDULE"),
which Disclosure Schedule shall reference disclosure items by section, Seller
represents and warrants to Buyer, with respect to the Company and, as to Taxes,
Seller represents and warrants to Buyer with respect to both Seller and the
Company, as follows:
4.1 ORGANIZATION; APPROVALS. The Company is a corporation validly existing
and in good standing under the laws of the State of Delaware. The Company has
the requisite corporate power and authority and is in possession of all
franchises, grants, authorizations, licenses, permits, easements, consents,
certificates, approvals and orders ("COMPANY APPROVALS") necessary to own, lease
and operate its properties and to carry on its business as it is now being
conducted, and the Company has not received any notice of proceedings relating
to the revocation or modification of any Company Approvals, except where the
failure to be so organized, existing and in good standing or to have such power,
authority, Company Approvals and revocations or modifications would not,
individually or in the aggregate, have a Material Adverse Effect (as defined in
SECTION 10.3) with respect to the Company.
4.2 CAPITAL STOCK. As of the date hereof and as of the Closing Date, the
authorized capital stock of the Company consists of 200,000 shares of common
stock, no par value. As of the date hereof and as of the Closing Date, the only
issued and outstanding shares of common stock are the Company Shares, all of
which are, and on the Closing Date will be, duly authorized, validly issued,
fully paid and nonassessable, and the issuance thereof was in compliance with
all applicable Laws. Except for the Company Shares, no shares of capital stock
of the Company have been issued, are held in treasury or are reserved for
issuance. There are no outstanding or authorized options, warrants, purchase
rights, subscription rights, conversion rights, exchange rights, or other
contracts or commitments that could require the Company to issue, sell, or
otherwise cause to become outstanding any of its capital stock (other than the
rights of Buyer under this Agreement). There are no outstanding or authorized
stock appreciation, phantom stock, profit participation or similar rights with
respect to the Company. There are no voting trusts, proxies, or other agreements
or understandings with respect to the voting of the Company Shares. There are no
preemptive rights or agreements, arrangements or understandings to issue
preemptive rights with respect to the issuance or sale of the Company's capital
stock.
4.3 CERTIFICATE OF INCORPORATION AND BYLAWS. The Company previously has
furnished to Buyer a true, complete and accurate copy of its Certificate of
Incorporation and Bylaws, as amended or restated (the "COMPANY CERTIFICATE AND
BYLAWS"). Such Company Certificate and Bylaws are in full force and effect. The
Company is not in violation of any of the provisions of the Company Certificate
and Bylaws.
4.4 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The transactions contemplated hereby by the Company shall not,
(i) conflict with or violate the Company Certificate and Bylaws
(ii) conflict with or violate any Laws applicable to the Company or by
which it or any of its properties are bound or affected, or (iii) result
in any breach of or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration cancellation of, or
result in the creation of a Lien on the Company or any of its assets
pursuant to any note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise or other instrument or obligation to
which the Company is a party or by which it or any of its properties are
bound or affected, except in the case of clauses (ii) and (iii) for any
such conflicts, violations, breaches, defaults or other occurrences that
individually or in the aggregate, would not have a Material Adverse
Effect with respect to the Company.
(b) No consent, approval, authorization or permit of, or filing with or
notification to any governmental or regulatory authority or any third
party except for applicable requirements, if any, of the Securities Act,
the Exchange Act, the HSR Act, or Blue Sky Laws, the filing of other
documents as required by applicable law, applicable transfer tax filings
is required to be obtained by the Company in connection with the
transactions contemplated hereby, except where the failure to obtain such
consents, approvals, authorizations or permits would not prevent or delay
consummation of the transactions contemplated hereby, or otherwise
prevent the Company from performing its obligations under this Agreement
or
33
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would be such as to result in, or be reasonably likely to result in, a
Material Adverse Effect with respect to the Company.
4.5 COMPLIANCE; PERMITS. The Company is not in conflict with, or in
default or violation of, (i) any Law applicable to the Company or by which the
Company is bound or affected, or (ii) any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which the Company is a party or by which the Company is bound or
affected, except for any such conflicts, defaults or violations which would not,
individually or in the aggregate, have a Material Adverse Effect with respect to
the Company.
4.6 INVENTORY. The inventory of the Company consists of raw materials and
supplies, manufactured and processed parts, work-in-progress and finished goods,
all of which is merchantable and fit for the purpose for which it was procured
or manufactured, and none of which is slow-moving, obsolete, damaged or
defective, subject to the reserve for inventory writedown set forth on the
Company's balance sheet at December 31, 1998 (or in any notes thereto), and as
adjusted for operations and transactions through the Closing Date in accordance
with the past custom and practice of the Company.
4.7 ACCOUNTS RECEIVABLE. The accounts receivable of the Company are
reflected properly on its books and records, are valid receivables subject to no
setoffs or counterclaims, are current and collectible, and will be collected in
accordance with their terms at their recorded amounts, subject to the reserve
for bad debts set forth on the Company's balance sheet at December 31, 1998 (or
in any notes thereto), and as adjusted for operations and transactions through
the Closing Date in accordance with the past custom and practice of the Company.
All accounts receivable of the Company are listed on SECTION 4.7 of the
Disclosure Schedule.
4.8 FINANCIAL STATEMENTS.
(a) Prior to the execution of this Agreement, Seller has delivered to Buyer
complete and correct copies of the Company's unaudited balance sheet and
related income statements and statements of cash flow for the eleven
month period ended November 30, 1998 and the years ended December 31,
1998, and December 31, 1997, respectively, and Seller's audited
consolidated balance sheet and related income statements and statements
of cash flow for the year ended December 31, 1998 (the "FINANCIAL
STATEMENTS"). All such Financial Statements are complete and correct in
all material respects and were (i) prepared from the books of account or
other financial records of the Company and Seller, respectively
(ii) prepared in accordance with GAAP applied on a consistent basis
throughout the periods involved, and (iii) fairly present in all material
respects the financial position of the Company and the consolidated
financial position of Seller at the respective dates and the results of
operations and cash flows and the consolidated results of operations and
cash flows (as applicable) for the periods indicated, except that the
interim consolidated financial statements were or are subject to normal
and recurring year-end adjustments which were not or are not expected to
be material in amount and do not have any footnote disclosures.
(b) Except (i) for the liabilities that are fully reflected in the Financial
Statements (including any related notes thereto) or not required to be
reflected in accordance with GAAP and (ii) for the liabilities incurred
in the ordinary course of business consistent with past practice since
December 31, 1998, the Company has not incurred any liability that,
either alone or when combined with all similar liabilities, has had or
would have a Material Adverse Effect with respect to the Company.
4.9 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in the
Financial Statements or reports filed by Seller pursuant to the Securities Act
or the Exchange Act (the "SELLER REPORTS") filed prior to the date of this
Agreement, since December 31, 1998 to the date of this Agreement, the Company
has conducted its business only in the ordinary course and in a manner
consistent with past practice and, since December 31, 1998, there has not been
(i) any change in the financial condition, results of operations or business of
the Company having a Material Adverse Effect with respect to the Company,
(ii) any damage, destruction or loss not covered by insurance with respect to
any assets of the Company having a Material Adverse Effect with respect to the
Company, (iii) any declaration, setting aside or payment of any dividends or
distributions in respect of shares of capital stock of the Company or any
redemption, purchase or other acquisition of any of its securities, (iv) any
entering into of any new, or modification, amendment or termination (partial or
complete) of, any existing
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collective bargaining agreement, contract or other agreement or understanding
with a labor union or similar organization to which the Company has been, or is,
a party or Plan (as defined in SECTION 4.11 below), or other increase in the
salary, bonus, rate of commission or rate of consulting fees payable or to
become payable to any directors, officers, employees or consultants of Seller or
Company, or employment or severance agreement or other employee compensation
arrangement with any of its directors, officers or employees (whether new hires
or existing employees), in each case where such compensation or arrangement
exceeds $75,000, or (v) any union organizing activities relating to employees of
Seller or Company or any entering into of any other material transaction
involving or affecting each of Seller or Company outside the ordinary course of
business of such Seller or Company consistent with past practice.
4.10 ABSENCE OF LITIGATION. The Company is not a party to any, and there
are no pending or, to the knowledge of the Company, threatened, legal,
administrative, arbitral or other proceedings, claims, actions or governmental
or regulatory investigations of any nature against the Company challenging the
validity or propriety of the transactions contemplated by this Agreement which
if unfavorably determined would prevent the consummation of the transactions
contemplated hereby. There are no claims and judgments pending with respect to
which the Company has been duly served or otherwise received notice as of the
date of this Agreement, or, to the knowledge of the Company, threatened against
the Company or outstanding against the Company or affecting the Company, that in
the aggregate would have a Material Adverse Effect on the Company. No
injunction, order, judgment, decree or regulatory restriction has been imposed
on the Company or the assets of the Company which has had or reasonably could be
expected to have a Material Adverse Effect with respect to the Company.
4.11 EMPLOYEE BENEFIT PLANS.
(a) PLANS OF THE COMPANY. Section 4.11(a) of the Disclosure Schedule
lists (i) all employee benefit plans (as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")), and
all bonus, stock option, stock purchase, restricted stock, incentive,
deferred compensation, retiree medical or life insurance, supplemental
retirement, severance or other benefit plans, programs or arrangements and
all employment termination, severance or other employment contracts or
employment agreements, with respect to which the Company has any obligation
and which benefit any of its employees (collectively, the "PLANS"). The
Company has furnished or made available to Buyer a copy of each Plan (or a
description of the Plans, if the Plans are not in writing) and a copy of
each material document prepared in connection with each such Plan,
including, without limitation, and where applicable a copy of (i) each trust
or other funding arrangement, (ii) each summary plan description and summary
of material modifications, (iii) any IRS Forms 5500 and related schedules
filed since August 1998, (iv) any IRS determination letter for each such
Plan issued since August 1998, (v) any actuarial and financial statements in
connection with each such Plan issued since August 1998, and (vi) any other
material information relating to each such Plan as requested by Buyer, to
the extent it is available to the Company.
(b) ABSENCE OF CERTAIN TYPES OF PLANS. No Plan is described in
Section 401(a)(1) of ERISA. SECTION 4.11(b) of the Disclosure Schedule lists
all Plans that obligate the Company to pay separation, severance,
termination or similar-type benefits as a result of any transaction
contemplated by this Agreement or as a result of a "change in control,"
within the meaning of such term under Section 280C of the Code.
(c) COMPLIANCE WITH APPLICABLE LAW. Except as set forth in
SECTION 4.11(c) of the Disclosure Schedule, each Plan has been operated in
all material respects in accordance with the requirements of all applicable
Law and all persons who participate in the operation of such Plans and all
Plan "fiduciaries" (within the meaning of Section 3(21) of ERISA) have acted
in all material respects in accordance with the provisions of all applicable
Law. The Company has performed in all material respects all obligations
required to be performed by it under the Plans, is not in material default
under or in material violation of the Plans and the Company and Seller have
no knowledge of any such default or violation by any party to the Plans.
(d) QUALIFICATION OF CERTAIN PLANS. Each Plan that is intended to be
qualified under Section 401(a) of the Code or Section 401(k) of the Code
(including each trust established in connection with such a Plan that is
intended to be exempt from Federal income taxation under Section 501(a) of
the Code) has received a
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favorable determination letter from the Internal Revenue Service ("IRS")
that it is so qualified, and the Company is not aware of any material fact
or event that has occurred since the date of such determination letter from
the IRS to adversely affect the qualified status of any such Plan. No trust
is maintained or contributed by the Company or the Seller to fund any Plan
that is intended to be qualified as a voluntary employees' beneficiary
association or is intended to be exempt from federal income taxation under
Section 501(c)(9) of the Code.
(e) ABSENCE OF CERTAIN LIABILITIES AND EVENTS. The Company has not
incurred any liability under Title IV of ERISA or for any excise tax arising
under Section 4971 through 4980E of the Internal Revenue Code of 1986, as
amended (the "CODE") and to the knowledge of the Company or the Seller no
fact or event exists that could give rise to any such material liability.
(f) PLAN CONTRIBUTIONS. All contributions, premiums or payments
required to be made with respect to any Plan have been made.
(g) MULTIEMPLOYER PLANS. No Plan is a multiemployer plan (within the
meaning of Section 3(37) of ERISA).
(h) POST-RETIREMENT MEDICAL. Each Plan that provides medical or life
benefits beyond an employee's termination of employment (other than as
required by applicable Law) is disclosed on SECTION 4.11(h) of the
Disclosure Schedule.
4.12 LABOR AND EMPLOYMENT MATTERS.
(a) Except for confidentiality, noncompetition, consulting or other similar
contracts with any employees, consultants, officers or directors of the
Company set forth in SECTION 4.12(a) of the Disclosure Schedule, the
Company is not a party to any such contracts. Each such contract is in
full force and effect and neither the Company nor Seller or, to the
knowledge of the Company or Seller, any other party to such contract has
received notice that the Company is in violation or breach of or default
in any material respect under any such contract (or with notice or lapse
of time or both, would be in violation or breach of or default in any
material respect under any such contract).
(b) Except as set forth in SCHEDULE 4.12(b) of the Disclosure Schedule:
(i) the Company's current employees are not represented by a labor union
or organization, no labor union or organization has been certified or
recognized as a representative of any such current employees, and the
Company is not a party to and/or has any obligation under any collective
bargaining agreement or other labor union contract, white paper or side
agreement with any labor union or organization or any obligation to
recognize or deal with any labor union or organization, and there are no
such contracts, white papers or side agreements pertaining to or which
determine the terms or conditions of employment of any current employee
of either the Company; (ii) there are no pending or threatened
representation campaigns, elections or proceedings or questions
concerning union representation involving any current employees;
(iii) neither the Company nor Seller has knowledge of any activities or
efforts of any labor union or organization (or representatives thereof)
to organize any current employees of the Company, nor of any demands for
recognition or collective bargaining, nor of any strikes, slowdowns, work
stoppages or lock-outs of any kind, or threats thereof, by or with
respect to any current employees or any actual or claimed representatives
thereof, and no such activities, efforts, demands, strikes, slowdowns,
work stoppages or lock-outs have occurred for the past 24 months;
(iv) the Company has not engaged in, admitted committing or been held in
any administrative or judicial proceeding to have committed any unfair
labor practice under the National Labor Relations Act, as amended;
(v) the Company is not involved in any industrial or trade dispute or any
dispute or negotiations regarding a claim of material importance with any
labor union or organization; and (vi) there are no controversies, claims,
demands or grievances of material importance pending or, so far as the
Company or Seller are aware, threatened, between the Company on the one
hand, and any of its employees or any actual or claimed representative
thereof on the other hand.
(c) The Company is in material compliance with all Laws relating to the
employment of labor, including but not limited to such Laws relating to
wages, hours, the Worker Adjustment Retraining and Notification Act of
1988 ("WARN"), collective bargaining, discrimination, civil rights,
safety and health,
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worker's compensation and the collection and payment of withholding
and/or social security taxes and any similar tax.
4.13 TANGIBLE PERSONAL PROPERTY. The Company has, or will as of Closing
have, good and indefeasible title to all of its owned tangible personal property
and assets, free and clear of all Liens, except liens for Taxes not yet due and
payable, pledges to secure deposits and such minor imperfections of title, if
any, as do not materially detract from the value of or interfere with the
present use of such property or which, individually or in the aggregate, would
not have a Material Adverse Effect with respect to the Company. All leases
pursuant to which the Company leases from others tangible or personal property
are in good standing, valid and effective in accordance with their respective
terms. All items of tangible personal property are listed in Disclosure Schedule
SECTION 4.13, indicating which such tangible personal property is owned or
leased. All such tangible personal property is adequate and suitable for the
conduct of the business of the Company and is in good working order and
condition, ordinary wear and tear excepted.
4.14 ENVIRONMENTAL MATTERS. Seller represents and warrants as follows:
(i) the Company, all real property owned by the Company (the "REAL PROPERTY")
and real property subject to leases entered into by the Company (the "REAL
PROPERTY LEASES") are in compliance with all applicable Environmental Laws (as
defined below); (ii) there is no amount of asbestos or ureaformaldehyde material
in or on any property owned, leased or operated by the Company or the Seller in
connection with the Company; (iii) there are no underground storage tanks
located on, in or under any properties currently owned, leased or operated by
the Company or Seller in connection with the Company that violate or result in
liability under any Environmental Law (as defined below); (iv) neither the
Company nor Seller have been notified by any governmental agency or third party
of any pending or threatened Environmental Claim (as defined below) against the
Company or Seller in connection with the Company; (v) neither the Company nor
Seller have been notified by any governmental agency or any third party that
either the Company or Seller in connection with the Company may be a potentially
responsible party for environmental contamination or any Release (as defined
below) of Hazardous Materials (as defined below); (vi) the Company has obtained
and holds all permits, licenses and authorizations required under applicable
Environmental Laws relating to the ownership or operations of the Company
("ENVIRONMENTAL PERMITS"); (vii) the Company is in compliance with all terms,
conditions and provisions of all applicable Environmental Permits; (viii) no
Releases of Hazardous Materials have occurred at, from, in, on, to or under any
property currently or formerly owned, operated or leased by the Company or
Seller in connection with the Company or any predecessors of the Company or
Seller in connection with the Company, and no Hazardous Materials are present
in, on or about or migrating to or from any such property that could give rise
to an Environmental Claim by a third party (including any governmental entity or
private party) against the Company; (ix) neither the Company nor Seller in
connection with the Company nor any predecessors thereof have transported or
arranged for the treatment, storage, handling, disposal or transportation of any
Hazardous Material to any location which could result in an Environmental Claim
against or liability to the Company; and (x) there have been no environmental
investigations, studies, audits or tests conducted by, on behalf of or which are
in the possession of any Seller or Company with respect to any property
currently or formerly owned, leased or operated by either Seller or Company in
connection with the Company thereof which have not been delivered to Buyer prior
to execution of this Agreement, except in each case where such event or
condition would not have a Material Adverse Effect on the Company.
For purposes of this Section, "ENVIRONMENTAL CLAIMS" shall mean any and all
administrative, regulatory, judicial or private actions, suits, demands,
notices, claims, liens, investigations, injunctions or similar proceedings that
may create liability for Seller relating in any way to: (i) any Environmental
Law; (ii) any Hazardous Material, including without limitation, any
investigation, monitoring, abatements, removal, remedial, corrective or other
response action in connection with any Hazardous Material, Environmental Law or
order or notice of liability or violation of a governmental entity or
Environmental Law; or (iii) any actual or alleged damage, injury, threat or harm
to the environment.
"HAZARDOUS MATERIALS" shall mean any and all chemicals, pollutants,
contaminants, wastes, toxic substances, compounds, products, solid, liquid, gas,
petroleum, asbestos, asbestos-containing materials, polychlorinated biphenyls or
other regulated substances or materials which are hazardous, toxic or otherwise
harmful to the environment.
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"ENVIRONMENTAL LAW" shall mean any and all federal and state civil and
criminal laws, statutes, ordinances, orders, codes, rules or regulations of any
governmental or regulatory authority relating to the protection of health, the
environment, natural resources, worker health and safety and/or governing the
handling, use, generation, treatment, storage, transportation, disposal,
manufacture, distribution, formulation, packaging, labeling, or Release of
Hazardous Materials, including but not limited to: the Clean Air Act, 42 U.S.C.
Section7401 ET SEQ.; the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, 42 U.S.C. Section9601 ET SEQ.; the Federal Water
Pollution Control Act, 33 U.S.C. Section1251 ET SEQ.; the Hazardous Material
Transportation Act 49 U.S.C. Section1801 ET SEQ.; the Federal Insecticide,
Fungicide and Rodenticide Act 7 U.S.C. Section136 ET SEQ.; the Resource
Conservation and Recovery Act of 1976 ("RCRA"), 42 U.S.C. Section6901 et seq.;
the Toxic Substances Control Act, 15 U.S.C. Section2601 ET SEQ.; the
Occupational Safety & Health Act of 1970, 29 U.S.C. Section651 ET SEQ.; the Oil
Pollution Act of 1990, 33 U.S.C. Section2701 ET SEQ.; and the state analogies
thereto, all as amended or superseded from time to time, on or before, but not
after, the date of Closing.
"RELEASE" shall mean any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping or disposing of a
Hazardous Material into the environment.
4.15 ABSENCE OF AGREEMENTS. The Company is not a party to any agreement,
order, directive, memorandum of understanding or similar arrangement that
restricts materially the conduct of the Company, except for those the existence
of which has been disclosed in writing to Buyer prior to the date of this
Agreement, nor has the Company been advised, that any person or governmental
authority is contemplating issuing or requesting any such agreement, order,
directive, memorandum of understanding or similar arrangement.
4.16 TAXES.
(a) Seller and the Company have duly and timely filed all tax returns,
reports or statements (including information statements) ("TAX RETURNS")
with respect to the Company or any affiliated, combined, consolidated,
unitary or similar group of which the Company is or was a member (a
"RELEVANT GROUP"), which are required to have been filed with respect to
all federal, state, local or foreign net or gross income, gross receipts,
net proceeds, sales, use, AD VALOREM, transfer, value added, franchise,
withholding, payroll, employment, disability, excise, property,
alternative or add-on minimum, environmental or other taxes, assessments,
duties, fees, levies or other governmental charges of any nature
whatever, except to the extent in dispute and set forth in the Disclosure
Schedule at SECTION 4.16, together with any interest, penalties,
additions to tax or additional amounts with respect thereto ("TAXES");
and each such Tax Return correctly and completely reflects the Tax
liability and other information required to be reported thereon. All
Taxes due and payable by the Company or Seller, and all Taxes shown on
the Tax Returns, have been paid.
(b) The Company has properly and fully accrued unpaid Taxes in its Financial
Statements for the respective periods covered thereby. As of the Closing
Date, the unpaid Taxes of the Company shall not exceed such provisions as
adjusted for the passage of time through the Closing Date by any material
amount.
(c) Neither the Company nor Seller is a party to any agreement extending the
time within which to file any Tax Return. To Seller's knowledge, no claim
has been made by a jurisdiction in which the Company does not file Tax
Returns that the Company is or may be subject to taxation by that
jurisdiction.
(d) The Company has not waived any statute of limitations in respect of
Taxes or agreed to any extension of time with respect to a Tax assessment
or deficiency.
(e) Neither Seller nor the Company have received any written ruling related
to Taxes of the Company or entered into any written and legally binding
agreement with any governmental agency, board, bureau, body, department
or authority of any United States federal, state or local jurisdiction or
any foreign jurisdiction, having or purporting to exercise jurisdiction
with respect to any Tax (a "TAXING AUTHORITY") relating to Taxes of the
Company.
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(f) The Company has withheld and paid all Taxes required to have been
withheld and paid in connection with amounts paid or owing to any
employee, former employee, creditor, independent contractor, shareholder,
customer, affiliate, supplier or other third party.
(g) Seller has not been notified by any Taxing Authority of an intent to
assess additional Taxes against or in respect of the Company for any past
period. To the knowledge of Seller and the Company, there is no dispute
or claim concerning any Taxes of the Company or the Seller (as relating
to the Company) either (i) claimed or raised by any Taxing Authority or
(ii) otherwise known to Seller.
4.17 INSURANCE. SECTION 4.17 of the Disclosure Schedule lists all policies
of insurance of the Company currently in effect. Each policy listed on such
schedule is valid and in full force and effect. The Company has no liability for
unpaid premiums or premium adjustments not properly reflected on the applicable
financial statements.
4.18 MATERIAL CONTRACTS. Except as included as exhibits in Seller Reports,
the Company is not a party to or obligated under any material contract,
agreement or other instrument or understanding that is not terminable by the
Company without additional payment or penalty within 90 days.
4.19 SUBSTANTIAL CUSTOMERS AND SUPPLIERS. SECTION 4.19 of the Disclosure
Schedule lists the 5 largest customers or clients of the Company on the basis of
revenues for goods sold or services provided in the fiscal year ended 1997 and
the 10 largest customers or clients in the fiscal year ended 1998. SECTION 4.19
of the Disclosure Schedule lists the 10 largest suppliers of the Company on the
basis of cost of goods or services purchased in the fiscal years ended 1996,
1997 and 1998. For each such customer or supplier set forth on such Schedule, a
copy of such supplier or customer contract, agreement or understanding with the
Company or Seller has been delivered to Buyer prior to execution of this
Agreement. No such customer, client or supplier has ceased or materially reduced
its purchases from or sales or provision of services to the Company since
December 31, 1998, or to the knowledge of the Company or Seller, has threatened
to cease or materially reduce such purchases or sales or provision of services
after the date of this Agreement. Except for deposits or other non-material
amounts paid in the ordinary course of business consistent with past practice,
the Company has not accepted any prepayment of any sales price or fee or license
fee from any client or customer that relates to products not yet delivered or
services not yet performed by Seller.
4.20 INTELLECTUAL PROPERTY.
(a) The Company owns all right, title and interest in or possesses adequate
licenses or other rights to use (i) all discoveries and inventions
(whether patentable or unpatentable and whether or not reduced to
practice), all improvements thereto, and all patents, patent applications
(either filed or in preparation for filing), and patent disclosures,
together with all reissuances, continuations, continuations-in-part,
revisions, extensions and reexaminations thereof, (ii) all trademarks,
service marks, trade dress, brand names, logos, trade names, Internet
domain names, and corporate names, together with all translations,
adaptations, derivations and combinations thereof and including all
goodwill associated therewith, and all applications (either filed or in
preparation for filing), registrations and renewals in connection
therewith, (iii) all copyrightable works, all copyrights and all
applications (either filed or in preparation for filing), registrations
and renewals in connection therewith, (iv) all trade secrets and
confidential business information (including ideas, research and
development, know-how, formulas, compositions, recipes, manufacturing and
production processes and techniques, technical data, designs, drawings,
specifications, customer and supplier lists, pricing and cost information
and business and marketing plans and proposals), (v) all computer
software (including source code, data and related documentation),
(vi) all other proprietary rights, (vii) all copies and tangible
embodiments of all the foregoing (in whatever form or medium)
("INTELLECTUAL PROPERTY") used in or material to conduct the business of
the Company without conflict with the rights of others. Disclosure
Schedule SECTION 4.20(a) sets forth a description of (i) all Intellectual
Property currently owned by or licensed to the Company and (ii) all
licenses, royalties, assignments and other similar agreements relating to
the foregoing to which the Company is a party and all agreements relating
to technology, know-how or processes that the Company is licensed or
authorized to use by others, or which it licenses or authorizes others to
use, and which the Company uses (the "INTELLECTUAL PROPERTY AGREEMENTS").
No other Intellectual Property is used in or material to the conduct of
the business of the Company.
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(b) The Intellectual Property does not infringe or violate the intellectual
property or contractual rights of any third parties in any country where
the Company does business; to Seller's knowledge, no claim has been
asserted or threatened by any person to the ownership of or right to use
any Intellectual Property or challenging or questioning the validity or
effectiveness of any such license or agreement, and neither the Company
nor Seller has knowledge of a valid basis for any such claim; the Company
and Seller have no knowledge of any claim that any product, activity or
operation of the Company infringes upon or involves, or has resulted in
the infringement of, any intellectual property rights of any other
person, and no proceedings have been instituted, are pending or, to the
best of the knowledge of the Company and Seller, are threatened which
challenge the rights of the Company with respect thereto, and neither the
Company nor Seller has knowledge of a valid basis for any such claim.
(c) To Seller's knowledge, no Intellectual Property is being infringed by
any third party; no action has been asserted or threatened that any
Intellectual Property is being infringed by any third party.
(d) All of the registrations and applications set forth in Disclosure
Schedule SECTION 4.20(d) are in full force and effect and all necessary
registration, maintenance and renewal fees in connection therewith have
been made and all necessary documents and certificates in connection
therewith have been filed with the relevant patent, copyright, trademark
or other authority in the United States or foreign jurisdictions, as the
case may be, for the purpose of maintaining the registrations or
applications for registration of such Intellectual Property or updating
record title thereto, except where such events, either individually or in
the aggregate, would not, or be reasonably likely to, have a Material
Adverse Effect on the Company.
(e) All of the Intellectual Property is, or will be as of Closing, free and
clear of any and all Liens. There are no restrictions on the direct or
indirect transfer of the Intellectual Property, except as disclosed in
any agreements licensing such Intellectual Property to the Company.
(f) The Intellectual Property Agreements are valid and binding and in full
force and effect, and true and correct copies have been provided to the
Buyer; Seller has not granted any license, agreement or other permission
to use such Intellectual Property except as disclosed on Disclosure
Schedule SECTION 4.20(f); the consummation of the transactions
contemplated by this Agreement will not violate nor result in the breach,
modification, cancellation, termination or suspension of the Intellectual
Property Agreements, and Seller is in compliance with, and has not
breached any term of, any Intellectual Property Agreement, and, to the
knowledge of Seller, all of the other parties to such Intellectual
Property Agreements are in compliance with, and have not breached, any of
the terms thereof; there is no dispute between Seller and any other party
to any Intellectual Property Agreement regarding the scope of the license
or performance under any applicable Intellectual Property Agreement,
including with respect to any payments to be made by the Seller
thereunder, except where such events, either individually or in the
aggregate, would not have, or be reasonably likely to have, a Material
Adverse Effect on the Company.
(g) Seller has made available to Buyer prior to the execution of this
Agreement any available documentation with respect to any invention,
process, design, computer software and program or other know-how or trade
secret or proprietary information included in such Intellectual Property,
which documentation, if any, is accurate in all material respects and
reasonably sufficient in detail and content to identify and explain such
invention, process, design, computer software and programs or other
know-how or trade secret or proprietary information. Seller has taken
reasonable security measures to protect the secrecy, confidentiality and
value of their trade secrets and proprietary information (including the
reasonable enforcement by Seller of a policy requiring each employee or
contractor to execute proprietary information and confidentiality
agreements in substantially Seller's standard form, and to Seller's
knowledge all current and former employees and contractors of Seller have
executed such an agreement).
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4.21 YEAR 2000 REPRESENTATION. No technology owned, developed or licensed
by the Company or used in connection with the business (including, but not
limited to, information systems and technology, commercial and noncommercial
hardware and software, firmware, mechanical or electrical products, embedded
systems, or any other electro-mechanical or processor-based system, whether as
part of a desktop system, office system, building system or otherwise)
(collectively, the "TECHNOLOGY") will experience any malfunctions, premature
cancellation or expiration of contractual rights or deletion of data, or any
other problems in connection with (i) the year 2000 (and all subsequent years)
as distinguished from 1900 years, (ii) the date February 29, 2000, and all
subsequent leap years, and (iii) the date September 9, 1999, except where such
problems, either individually or in the aggregate, would not have a Material
Adverse Effect on the Company.
4.22 REAL PROPERTY. SECTION 4.22 of the Disclosure Schedule lists those
parcels of real property used, occupied or operated by the Company (the "REAL
PROPERTY") and all leases, including capitalized leases, for real property used
by the Company (the "REAL PROPERTY LEASES"). The Real Property and Real Property
Leases are the only property of similar type used by the Company. The Company
owns the Real Property in fee subject to no Liens, except for those set forth in
SECTION 4.22 of the Disclosure Schedule. The Company's interest in the Real
Property Leases is subject to no Liens, except for those set forth in
SECTION 4.22 of the Disclosure Schedule. True and correct copies of the Real
Property Leases have been delivered or made available to Buyer by the Company.
Subject to the terms of the respective Real Property Leases, the Company has a
valid and subsisting leasehold estate in and the right to quiet enjoyment to the
property subject thereto for the full term of the respective Real Property
Lease. The Real Property Leases are in full force and effect adequate and
suitable for the conduct of the business of the Company and are enforceable in
accordance with their respective terms, except as such enforceability may be
subject to or limited by bankruptcy, insolvency, reorganization or other similar
Laws, now or hereafter in effect, affecting the enforcement of creditors' rights
generally. The Company has not assigned, pledged, mortgaged, hypothecated or
otherwise transferred any Real Property Lease. The Company has not sublet all or
any portion of any Leased Real Property. The Company has not received any
written notice of default under any Real Property Lease, and to the Company's
knowledge there is no material default by any tenant or landlord under any Real
Property Lease, and no event has occurred or failed to occur which, with the
giving of notice or the passage of time, or both, would constitute a material
default under any Real Property Lease. No portion of any parcel of Real Property
or real property subject to a Real Property Lease is located in an area
designated as a flood zone by any governmental entity, except to the extent such
property is adequately insured by a policy of flood insurance. The buildings,
structures, facilities, fixtures and other improvements located on the Real
Property and the Real Property are adequate and suitable for the conduct of the
business of the Company and are in good working order and condition, ordinary
wear and tear excepted.
4.23 DISCLOSURE. No representation or warranty of the Company contained in
this Agreement, and no statement contained in the Disclosure Schedule or in any
certificate, list or other writing furnished to Buyer pursuant to any provision
of this Agreement contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements herein or
therein, in light of the circumstances under which they were made, not
misleading.
4.24 SUBSIDIARIES. The Company does not have any subsidiaries and the
Company does not control, directly or indirectly, and does not hold any direct
or indirect equity investment or participation in, any corporation, partnership,
trust or other business association.
4.25 MATERIAL ADVERSE EFFECT. Since December 31, 1998 there has been no
Material Adverse Effect with respect to the Company.
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ARTICLE V
BUYER REPRESENTATIONS AND WARRANTIES
Except as set forth in the Disclosure Schedule delivered by Buyer to the
Company and Seller attached to this Agreement (the "BUYER DISCLOSURE SCHEDULE"),
which Buyer Disclosure Schedule shall reference disclosure items by section,
Buyer represents and warrants to the Company and Seller as follows:
5.1 ORGANIZATION; APPROVALS. Buyer is a corporation validly existing and
in good standing under the Canada Company Corporations Act. Buyer has the
requisite corporate power and authority and is in possession of all franchises,
grants, authorizations, licenses, permits, easements, consents, certificates,
approvals and orders ("BUYER APPROVALS") necessary to own, lease and operate its
properties and to carry on its business as it is now being conducted, and Buyer
has not received any notice of proceedings relating to the revocation or
modification of any Buyer Approvals, except where the failure to be so
organized, existing and in good standing or to have such power, authority, Buyer
Approvals and revocations or modifications would not, individually or in the
aggregate, have a Material Adverse Effect with respect to Buyer.
5.2 AUTHORITY. Buyer has the requisite corporate power and authority to
execute and deliver this Agreement, to perform its obligations under this
Agreement and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement by Buyer, the issuance of the warrants and the
consummation by Buyer of the transaction contemplated hereby have been duly and
validly authorized by all necessary corporate action and no other corporate
proceedings on the part of Buyer are necessary to authorize this Agreement or to
consummate the transaction contemplated hereby. This Agreement has been duly
executed and delivered by, and constitutes a valid and binding obligation of,
Buyer and, assuming due authorization, execution and delivery by the Company and
Seller, is enforceable against Buyer in accordance with its terms, except as
enforcement may be limited by general principles of equity whether applied in a
court of law or a court of equity and by bankruptcy, insolvency and similar laws
affecting creditors' rights and remedies generally.
5.3 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Agreement by Buyer does not, and the
performance of this Agreement and the transaction contemplated hereby by
Buyer shall not, (i) conflict with or violate the charter documents of
Buyer, (ii) conflict with or violate any Laws applicable to Buyer or by
which it or any of its properties are bound or affected, or (iii) result
in any breach of or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of, or
result in the creation of a Lien on any of the properties or assets of
Buyer pursuant to any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or
obligation to which Buyer is a party or by which it or any of its
properties is bound or affected, except in the case of clauses (ii) and
(iii) for any such conflicts, violations, breaches, defaults or other
occurrences that individually or in the aggregate, would not have a
Material Adverse Effect with respect to Buyer.
(b) The execution and delivery of this Agreement by Buyer does not, and the
performance of this Agreement by Buyer shall not, require any consent,
approval, authorization or permit of, or filing with or notification to
any governmental or regulatory authority or any third party except for
applicable requirements, if any, of the Securities Act, the Exchange Act,
the Blue Sky Laws, the HSR Act, and filing of other documents as required
by applicable law, applicable transfer tax filings and where the failure
to obtain such consents, approvals, authorizations or permits would not
prevent or delay consummation of the transaction contemplated hereby or
otherwise prevent Buyer from performing its obligations under this
Agreement and would not have, or be reasonably likely to have, a Material
Adverse Effect with respect to Buyer.
5.4 ABSENCE OF LITIGATION. Buyer is not a party to any, and there are no
pending or, to the knowledge of Buyer, threatened, legal, administrative,
arbitral or other proceedings, claims, actions or governmental or regulatory
investigations of any nature against Buyer challenging the validity or propriety
of the transactions contemplated by this Agreement which if unfavorably
determined would prevent the consummation of the transaction contemplated
hereby.
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5.5 BROKERS. No broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Buyer, except as provided in that certain letter agreement between
Buyer and Downer & Company L.L.C. regarding such fees, which fees are the sole
responsibility of, and are to be paid by, Buyer.
5.6 DISCLOSURE. No representation or warranty of Buyer contained in this
Agreement, and no statement contained in Buyer Disclosure Schedule or in any
certificate, list or other writing furnished to the Company or Seller pursuant
to any provision of this Agreement contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make the statements
herein or therein, in light of the circumstances under which they were made, not
misleading.
5.7 HOLDING OF COMPANY SHARES. Buyer is not acquiring the Company Shares
with an intention to distribute or transfer such Company Shares to another
person.
ARTICLE VI
CERTAIN COVENANTS
6.1 AFFIRMATIVE COVENANTS. Seller covenants and agrees with Buyer that
from and after the date of this Agreement and prior to the Closing Date, unless
the prior written consent of Buyer shall have been obtained and except as
otherwise contemplated herein, that Seller shall cause the Company to:
(a) operate its business only in the ordinary course consistent with past
practices;
(b) use reasonable efforts to preserve intact its business organization and
assets, maintain its rights and franchises, retain the services of its
officers and key employees and maintain its relationships with customers;
(c) use reasonable efforts to maintain and keep its properties in good
repair and condition, ordinary wear and tear excepted;
(d) use reasonable efforts to keep in full force and effect insurance and
bonds comparable in amount and scope of coverage to that now maintained
by it;
(e) perform in all material respects all obligations required to be
performed by it under all material contracts, leases and documents
relating to or affecting the Company;
(f) maintain its books and records in the usual, regular or ordinary manner
consistent with past practice and provide Buyer access to such materials
at a reasonable time and place as Buyer and the Company may agree;
(g) use reasonable efforts to obtain all authorizations, consents, orders
and approvals from all governmental or regulatory authorities that may be
or become necessary for its execution and delivery of and the performance
of its obligations under this Agreement;
(h) take such reasonable action as shall be required to fulfill any and all
contractual or statutory obligations the Company may have to any unions
or labor organizations or otherwise as a result of or relating to the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby;
(i) take reasonable actions required pursuant to the terms of any
indentures, credit agreements, contracts or other agreements to address
the consequences of the transactions contemplated by this Agreement, and
to obtain the necessary consents and required releases pursuant to such
indentures, credit agreements, contracts or agreements;
(j) Seller shall deliver to Buyer all documents and information resulting
from or relating to (i) all third party claims relating to, resulting
from or arising out of that incident that occurred on or about
December 4, 1998, involving the explosion and actual or potential Release
of materials from, in, on, under or at the Company's Brighton, Colorado
facility (hereinafter the "INCIDENT") and (ii) all policies
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of insurance and relevant correspondence regarding claims asserted under
such policies or otherwise that may cover or be applicable to such
claims;
(k) use its best efforts to secure from Heller Financial, Inc. releases of
the security interests recorded against Company's trademark registrations
and patents at the U.S. Patent and Trademark Office ("PTO"), record such
releases at the PTO and provide to Buyer copies and proof of such
releases and recordals; and
(l) use its best efforts to secure from Unisource Brands, Inc. an assignment
from Paper Corporation of America to Unisource Worldwide, Inc. of the
trademark registrations for FLASH-TITE, GLASS-PAK, GREY CORE, STRES-FLEX
and STRES-PRUF, record such assignment at the PTO and provide to Buyer
copies and proof of such assignment and recordal.
6.2 NEGATIVE COVENANTS. Except as specifically contemplated by this
Agreement, from the date of this Agreement until the Closing Date, the Seller
shall cause the Company not to, without the prior written consent of Buyer, do
any of the following:
(a) except as required by applicable Law or to maintain qualification
pursuant to the Code, adopt, amend, renew or terminate any Plan or any
agreement, arrangement, plan or policy between the Company and one or
more of the Company's current or former directors, officers or employees,
or except for normal increases in the ordinary course of business
consistent with past practice or except as required by applicable Law,
increase in any manner the base salary, bonus incentive compensation or
fringe benefits of any director, officer or employee or pay any benefit
not required by any Plan or agreement as in effect as of the date of this
Agreement (including without limitation the granting of stock options,
stock appreciation rights, restricted stock, restricted stock units or
performance units or shares);
(b) declare or pay any dividend on, or make any other distribution in
respect of, the Company's outstanding shares of capital stock;
(c) (i) redeem, purchase or otherwise acquire any shares of the Company's
capital stock or any securities or obligations convertible into or
exchangeable for any shares of the Company's capital stock, or any
options, warrants, conversion or other rights to acquire any shares of
the Company's capital stock or any such securities or obligations;
(ii) merge with or into any other corporation, permit any other
corporation to merge into the Company or consolidate with any other
corporation, or effect any reorganization or recapitalization;
(iii) purchase or otherwise acquire any substantial portion of the
assets, or of any class of stock, of any corporation; (iv) liquidate,
sell, dispose of, or encumber any assets or acquire any assets, other
than in the ordinary course of the Company's business consistent with
past practice; or (v) split, combine or reclassify any of its capital
stock or issue or authorize or propose the issuance of any other
securities in respect of, in lieu of or in substitution for shares of the
Company's capital stock;
(d) issue, deliver, award, grant or sell, or authorize or propose the
issuance, delivery, award, grant or sale of, any shares of any class of
capital stock of the Company (including shares held in treasury) or any
rights, warrants or options to acquire, any such shares, other than the
issuance of the Company's common stock issuable upon exercise of employee
or director stock options outstanding as of the date of this Agreement or
pursuant to the Company's Plans, in effect as of the date of this
Agreement;
(e) propose or adopt any amendments to the Company Certificate and Bylaws in
any way adverse to Buyer;
(f) change any of its methods of accounting in effect at December 31, 1998
or change any of its methods of reporting income or deductions for
federal income tax purposes from those employed in the preparation of the
federal income tax returns for the taxable year ended December 31, 1998,
except as may be required by Law or GAAP;
(g) change in any material respect any material policies concerning the
Company, except as required by Law, including without limitation:
(i) sell, assign, transfer, pledge, mortgage or otherwise encumber any of
its assets, except for those sales, assignments, transfers, pledges,
mortgages and encumbrances (A) currently existing or provided for in
existing agreements, (B) incurred in individual amounts of less
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than $75,000 and in an aggregate amount of no more than $750,000 or
(C) incurred in the ordinary course of business consistent with past
practice; (ii) enter into any agreement with respect to any acquisition
of a material amount of assets or any discharge, waiver, satisfaction,
release or relinquishment of any material contract rights, liens,
encumbrances, debt or claims, not in the ordinary course of business and
consistent with past practices; (iii) settle any claim, action, suit,
litigation, proceeding, arbitration, investigation or controversy of any
kind, for any amount in excess of $75,000, net of any insurance proceeds,
that would restrict in any material respect the Company; (iv) make any
capital expenditure in excess of $500,000, except in the ordinary course
and consistent with past practice; (v) make any investment of more than
$100,000; or (vi) take any action or fail to take any action which
individually or in the aggregate could reasonably be expected to have a
Material Adverse Effect with respect to the Company; provided, however,
nothing in this Section shall prevent Seller or Company from eliminating
intercompany assets and liabilities prior to Closing; and
(h) agree in writing or otherwise to do any of the foregoing.
6.3 EXCLUSIVITY. For the period commencing on the date hereof and ending
on the earlier of the termination of this Agreement, the date specified in
SECTION 10.1(e) or the Closing (the "EXCLUSIVITY PERIOD"), except for
discussions with Buyer and its representatives, neither Seller nor the Company
will, directly or indirectly through any director, officer, shareholder,
employee, agent, adviser or otherwise, orally or in writing, initiate, solicit,
encourage, respond to, discuss, negotiate or accept any inquiries, indications
of interest, proposals or offers from, or make any inquiries, indications of
interest, proposals, offers, counter proposals or counteroffers to, or furnish
any information to, any other person with respect to (i) an acquisition of
shares of the Company, (ii) additional equity or convertible debt financing for
the Company, (iii) an acquisition of all or a substantial part of the assets of
the Company, or (iv) a merger, consolidation or any other transaction which
would result in a change in control in the Company or a substantial change in
the business of the Company. Further, during such Exclusivity Period Seller will
promptly forward to Buyer any expressions of interest or other communications or
inquiries received by it in any such regard. During the Exclusivity Period,
Seller will make the books, records and management of the Company and management
of Seller available to Buyer and its representatives for transition purposes.
In addition, during the Exclusivity Period, Buyer agrees that it will not,
except for discussions with Seller and its representatives, directly or
indirectly through any director, officer, shareholder, employee, agent, adviser
or otherwise, orally or in writing, initiate, solicit, encourage, respond to,
discuss, negotiate or make any inquiries, indications of interest, proposals,
offers, counter proposals or counteroffers to, or furnish any information to,
any other person with respect to a material transaction with or in respect of
such person.
6.4 ACCESS AND INFORMATION.
(a) From the date of this Agreement until the Closing Date and upon
reasonable notice, and subject to applicable Law relating to the exchange
of information, Seller shall afford, and shall cause the Company to
afford, to Buyer's officers, employees, accountants, legal counsel and
other representatives, access during normal business hours to all the
properties, books, contracts, commitments and records relating to the
Company, but excluding any books, contracts, commitments and records in
any way related to the sale of the Company.
(b) From the date of this Agreement and until the Closing Date, Seller shall
cause the Company to, or shall itself, furnish promptly to Buyer (i) a
copy of each nonconfidential filing made by Seller with the Securities
and Exchange Commission (the "SEC"), under the HSR Act or under any other
applicable Laws promptly after such documents are available, (ii) a copy
of each Tax Return filed by Seller for the three most recent years
available with respect to or containing information pertaining to the
Company, a copy of any correspondence received from the IRS or any other
governmental entity or taxing authority or agency and any other
correspondence relating to Taxes payable with respect to the Company, and
(iii) all other information concerning the Company as Buyer may
reasonably request, other than in each case reports or documents which
neither the Company nor Seller is permitted to disclose under applicable
Law or binding agreement entered into prior to the date of this
Agreement. The parties will make appropriate substitute disclosure
arrangements under circumstances in which the restrictions of the
preceding sentence apply.
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(c) Unless otherwise required by Law, the parties will hold any such
information which is nonpublic in confidence until such time as such
information becomes publicly available through no wrongful act of either
party, and in the event of termination of this Agreement for any reason
each party shall promptly return all nonpublic documents obtained from
any other party, and any copies made of such documents, to such other
party or destroy such documents and copies. From the date hereof until
the earlier of the Closing Date or the termination of this Agreement, and
subject to the other provisions of this Agreement, the parties agree that
they will take no actions outside of the ordinary course of business to
harm the value of the business conducted by the Company; provided,
however, that this limitation shall not limit the ability of the parties
to engage in normal competition with each other (including, to the extent
applicable, effecting price adjustments to their respective products).
6.5 UPDATE DISCLOSURE; BREACHES.
(a) From and after the date of this Agreement until the Closing Date, the
parties shall update their respective Disclosure Schedules by written
notice to the other party to reflect any matters which have occurred from
and after the date of this Agreement which, if existing on the date of
this Agreement, would have been required to be described therein;
provided that (i) to the extent that any information that would be
required to be included in an update under this Section would have in the
past been contained in internal reports prepared in the ordinary course,
such update may occur by delivery of such internal reports prepared in
accordance with past practice, and (ii) to the extent that updating
required under this Section is unduly burdensome, Seller and Buyer will
use their best efforts to develop alternate updating procedures
utilizing, wherever possible, existing reporting systems.
(b) Each party shall, in the event it becomes aware of the impending or
threatened occurrence of any event or condition which would cause or
constitute a material breach (or would have caused or constituted a
material breach had such event occurred or been known prior to the date
of this Agreement) of any of its representations, warranties or
agreements contained or referred to herein, given prompt written notice
thereof to the other party and use its best efforts to prevent or
promptly remedy the same.
6.6 EXPENSES. All Expenses (as defined below) incurred by Buyer, on the
one hand, and Seller and/or the Company, on the other hand, shall be borne
solely and entirely by Buyer, on the one hand, and Seller, on the other hand.
"EXPENSES" as used in this Agreement shall include all reasonable fees and
out-of-pocket expenses (including without limitation all fees and expenses of
counsel, accountants, investment bankers, experts and consultants to the party
and its affiliates) incurred by a party or on its behalf in connection with or
related to the authorization, preparation and execution of this Agreement, the
solicitation of stockholder approvals and all other matters related to the
closing of the transactions contemplated hereby. Seller shall be liable for and
assume and pay the broker's fees to Schroder & Co. Inc. and Buyer shall be
liable for and shall assume and pay the broker's fees of Downer & Company LLC.
6.7 RETENTION OF RECORDS. Buyer shall retain all books and records of the
Company that Buyer receives from the Company for a period of six years following
the Closing Date. After the Closing, Seller and its representatives shall have
reasonable access to all such books and records during normal business hours. In
addition, Buyer shall upon reasonable request furnish to Seller, at Seller's
expense, copies of any such books or records.
ARTICLE VII
ADDITIONAL AGREEMENTS
7.1 APPROPRIATE ACTION; CONSENTS; FILINGS. The parties shall use
reasonable efforts to (i) do all things appropriate, necessary, proper or
advisable under applicable Law to consummate and make effective the transactions
contemplated by this Agreement, (ii) obtain all consents, licenses, permits,
waivers, approvals, authorizations or orders required under Law in connection
with the authorization, execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby and (iii) make all
necessary filings, and thereafter make any other required submissions, with
respect to this Agreement required under the Securities Act and the Exchange Act
and the rules and regulations thereunder, any other applicable federal or state
securities laws and any other applicable Law; provided that, Buyer and the
Company shall cooperate with
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each other in connection with the making of all such filings that relate
specifically to the transaction contemplated by this Agreement, including
providing copies of all such documents to the non-filing party and its advisors
prior to filing and, if requested, to accept all reasonable additions, deletions
or changes suggested in connection therewith.
7.2 EMPLOYEE BENEFIT MATTERS.
(a) RETENTION OF LIABILITY. Effective as of the Closing, the Company
shall cease to participate in all Plans maintained or sponsored by Seller or
any of its affiliates other than the Company and shall continue to sponsor
all Plans sponsored and maintained exclusively for employees and former
employees of the Company. Seller promptly after receiving written notice
from Buyer (or one of its affiliates) shall reimburse Buyer (or one of its
affiliates) for all costs (including payroll taxes) relating to the
provision of any severance benefits or payments made to Transferred
Employees (as hereinafter defined), up to a maximum reimbursement, when
combined with any reimbursement of severance pursuant to Section 6.2(b) of
the Asset Purchase Agreement, of $700,000.00. In addition, Seller shall be
responsible for all claims for workers compensation benefits for all current
and former employees of the Company with respect to all work-related
injuries which occurred prior to the Closing, provided Buyer notifies Seller
(directed to the attention of Craig Jennings) within three (3) business days
of any report of such injury to Buyer by the employees. Seller shall assume
all responsibility for any and all liabilities for all payments and benefits
under the Key Employee Retention Plan. Seller shall also be responsible for
any long-term or short-term disability benefits payable under the Spinnaker
Industries Short Term and Long Term Disability Plans, to the extent such
benefits are insured, the disability began or is found to have begun prior
to the Closing Date, the disability claim was filed prior to the second
anniversary of the Closing Date, and the disability claim was not filed by a
former employee after such employee was involuntarily terminated from
employment by the Buyer (or one of its affiliates). Seller shall cooperate
with Buyer in effecting an assignment to Buyer of any policies or insurance
for the provision of health or welfare benefits if requested by Buyer.
(b) FLEXIBLE BENEFIT PLAN. On the Closing Date, Buyer (or one of its
affiliates) shall cause to be maintained (for a period at least equal to the
balance of the 1999 calendar year) for the benefit of all employees of the
Company employed as of the Closing Date (the "TRANSFERRED EMPLOYEES") and
all former employees of the Company for whom benefits are being provided
under the Spinnaker Industries Flexible Benefits Plan (the "FLEX PLAN") as
of the Closing Date (together with the Transferred Employees, the "Flex
Employees"), a plan substantially identical to the Flex Plan. As soon as
practicable thereafter, the Seller shall cause to be transferred to the
Buyer the credit or debit balances in the various spending accounts under
the Flex Plan for the Flex Employees. Following such transfer, Buyer (or one
of its affiliates) shall be responsible for all liabilities for all Flex
Employees under Buyer's Plan.
(c) 401(k) PLAN. On or as soon as practicable after the Closing Date,
Buyer (or one of its affiliates) shall cause to be maintained for the
benefit of the Transferred Employees and all former employees of the Company
for whom benefits are owing under the terms of the Spinnaker Industries
Affiliates' 401(k) Plan (the "COMPANY 401(k) PLAN") (together referred to as
the "401(k) EMPLOYEES"), a defined contribution plan intended to be
qualified under Section 401(k) of the Code ("BUYER'S 401(k) PLAN"). As soon
as practicable after the Closing Date, but in any event prior to the
transfer referred to herein, Buyer shall deliver to Seller a copy of the
most recent favorable determination letter for the Buyer's 401(k) Plan, or
evidence that such determination letter is not necessary, or evidence of an
application timely filed with the IRS for such a letter with respect to a
newly adopted plan. In addition, if the Buyer's 401(k) Plan is a newly
adopted plan for which a determination letter is necessary, Buyer shall make
or cause to be made timely any and all amendments requested by the IRS in
order to ensure that the Buyer's 401(k) Plan meets the requirements to
ensure it receives a favorable determination letter. As soon as practicable
thereafter, the Seller shall direct the trustee of the trust funding the
Company 401(k) Plan to transfer to the trustee of the trust funding the
Buyer's 401(k) Plan the aggregate individual account balances of the 401(k)
Employees (whether or not vested). Individual account balance shall be
valued as of the date of transfer, and the transfer shall be in cash or in
kind, as determined by Buyer, except that outstanding loan balances shall be
transferred in the form of notes or other documentation evidencing such
loans. Prior to the date of the transfer, the Seller or its affiliates shall
have contributed all contributions (including salary deferral and
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matching contributions) attributable to service performed by the 401(k)
Employees through the Closing Date. Following such transfer, Buyer (or one
of its affiliates) shall be responsible for liabilities attributable to the
401(k) Employees under the Buyer's 401(k) Plan. In the event that the Buyer
fails to obtain a favorable determination letter from the IRS in respect of
the Buyer's 401(k) Plan, the Buyer shall indemnify Seller, from and after
the Closing Date, against, and agrees to hold Seller harmless from, any and
all damages incurred or suffered by Seller as a result of the Buyer's
failure to satisfy the requirements of this SECTION 7.2(c).
(d) DEFINED BENEFIT PLAN ASSET TRANSFERS. As soon as practicable (but
in no event later than sixty (60) days) following the Closing Date, Seller
shall cause the trustee of the master trust funding the Central Products
Company Affiliated Employees' Pension Plan and the Central Products Company
Retirement Plan (collectively, the "PENSION PLANS") to transfer, in
accordance with the terms of the Pension Plans and the agreement creating
the master trust, the assets of each of the Pension Plans to a trust (or
trusts), qualifying under Section 501(a) of the Code, that is designated by
Buyer to hold the assets of the Pension Plans. Such assets shall be
transferred in cash or other marketable assets reasonably acceptable to
Buyer and shall only be transferred after Buyer provides Seller with a copy
of the agreement creating the Buyer's trust (or trusts) which is intended to
be qualified under Section 501(a) of the Code.
(e) NO RIGHTS. Nothing in this Section shall be construed to give any
employee or former employee of the Company (or any beneficiary thereof) any
rights of any kind, including any right to employment or continued
employment with the Company or the right to any particular terms of
employment, nor shall anything contained in this Section be construed to
prevent the Company or any of its affiliates from terminating or modifying
any benefit plan that they may establish or maintain.
7.3 NOTIFICATION OF CERTAIN MATTERS. Seller and the Company shall give
prompt notice to Buyer, and Buyer shall give prompt notice to Seller and the
Company, of (i) the occurrence or non-occurrence of any event, the occurrence or
nonoccurrence of which would be likely to cause any representation or warranty
contained in this Agreement to be untrue or inaccurate and (ii) any failure of
Seller or the Company or Buyer, as the case may be, to comply with or satisfy
any covenant, condition or agreement to be complied with or satisfied by it
hereunder; PROVIDED, HOWEVER, that the delivery of any notice pursuant to this
Section shall not limit or otherwise affect the remedies available hereunder to
the party receiving such notice.
7.4 PUBLIC ANNOUNCEMENTS. Buyer and Seller shall consult with each other
before issuing any press release or otherwise making any public statements with
respect to the transaction contemplated hereby and shall not issue any such
press release or make any such public statement prior to such consultation,
except as may be required by Law or any listing agreement with or rule of the
National Association of Securities Dealers, Inc.
7.5 CUSTOMER RETENTION. To the extent permitted by law or applicable
regulation, Seller and the Company shall use reasonable efforts to assist Buyer
in its efforts to retain the Company's customers. Such efforts may include
making introductions of Buyer's employees to such customers, assisting in the
mailing of information prepared by Buyer and reasonably acceptable to Seller and
the Company, to such customers and actively participating in any "transitional"
marketing programs as the Buyer may reasonably request.
7.6 NON-COMPETITION.
(a) For a period commencing on the Closing Date and terminating on the third
anniversary thereof (the "PERIOD"), as an inducement to Buyer to execute
this Agreement and complete the transactions contemplated hereby, and in
order to preserve the goodwill associated with the Company, Seller will
not (1) engage in, continue in, participate in or have any interest in
any sole proprietorship, partnership, corporation or business that is
engaged primarily or in any material respect in the business of the
manufacture, sale or distribution of pressure sensitive and water
activated tape and industrial electrical tape serving either the retail
or industrial end markets (the "PROHIBITED BUSINESS") in North America
(the "TERRITORY"), (2) 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 Buyer in
any aspect with respect to the Prohibited Business, including, but not
limited to, with respect to the Prohibited Business, advertising or
otherwise endorsing the products of any such competitor, soliciting
customers or otherwise serving as an intermediary for any such
competition or
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engaging in any form of business transaction on other than an
arms'-length basis with any such competitor; or (3) unless Buyer has
terminated such employee, solicit for employment any employee of the
Company, without the prior consent of Buyer; PROVIDED, HOWEVER, that
nothing herein shall be deemed to prevent (i) Seller from acquiring
through market purchases and owning, solely as an investment, less than
five percent of the equity securities of any class of any issuer whose
shares are registered under Section 12(b) or 12(g) of the Exchange Act,
and are listed or admitted for trading on any United States national
securities exchange or are quoted on the Nasdaq National Market, or any
similar system of automated dissemination of quotations of securities
prices in common use, so long as Seller is not a member of any "control
group" (within the meaning of the rules and regulations of the United
States Securities and Exchange Commission) of any such issuer, (ii) any
offer by Seller to employ a person in the Prohibited Business (except as
set forth in this Section); or (iii) Seller from being acquired by a
person engaged in any business in competition with the Prohibited
Business of the Company.
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 may hereafter own the Company Shares or succeeds to
the business. The parties further 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 the Territory, 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, the
Company and Seller each acknowledge the geographic scope of this covenant
not to compete to be reasonable. The parties intend that the covenant
contained in this Section shall be construed as a series of separate
covenants, one for each city, county or political subdivision of each
country in the Territory, 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, 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) Seller and the Company each agree with Buyer that the provisions and
restrictions contained in this Section are necessary to protect the
legitimate continuing interests of Buyer in acquiring the Company, and
that any violation or breach of these provisions will result in
irreparable injury to Buyer for which a remedy at law would be
inadequate. Seller and the Company each agree with Buyer 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, including without limitation specific
performance, as a court may grant after considering the intent of this
Section, and Buyer shall not be entitled to any other form of relief from
such violation or breach.
7.7 FURTHER TRANSFER MATTERS. Effective on the Closing Date, Seller
constitutes and appoints Buyer the true and lawful attorney-in-fact of the
Seller, with full power of substitution, in the name of the Seller, but on
behalf of and for the sole benefit of Buyer: (i) to demand and receive from time
to time any and all of the assets of the Company and to make endorsements and
give receipts and releases for and in respect of the same and any part thereof,
(ii) to institute, prosecute, compromise and settle any and all actions or
proceedings that Buyer may deem proper in order to collect, assert or enforce
any claim, right or title of any kind in or to the assets of the Company and
(iii) to do all such acts and things in relation to the matters set forth in the
preceding clauses (i) through (iii) as Buyer shall deem desirable. Seller hereby
acknowledges that the foregoing appointment made and the powers granted are
coupled with an interest and are not and shall not be revocable by it in any
manner or for any reason. At the Closing, Seller shall provide Buyer with a
written power of attorney in form and substance appropriate to carry out the
above.
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ARTICLE VIII
TAXES
8.1 TAX INDEMNIFICATION.
(a) From and after the Closing Date, to the extent a Tax (i) is imposed on
the Company for any Taxable period ending on or before the Closing Date
("PRE-CLOSING PERIOD"), or (ii) is imposed on the Company and relating to
(A) the Seller or any affiliate (other than the Company), with respect to
any Tax period, (B) any Tax for the Pre-Closing Period for which the
Company may be liable under Section 1.1502-6 of the Treasury regulations
(or any similar provision of state, local or foreign law), as a
transferee or successor or by contract, Seller agrees to pay to the
appropriate Taxing Authority the amount of such Tax, plus any additional
penalties and interest incurred in the payment of such Tax, and to Buyer
an amount sufficient to make such payments be on a Grossed-Up Basis, each
within the later of 30 days of receipt of notice of such Tax or final
resolution of any dispute relating to such Tax. If such Tax is paid by
Buyer or the Company, Seller agrees to reimburse the party paying such
Tax the amount of such Tax plus any additional penalties and interest
incurred in the payment of such Tax.
(b) From and after the Closing Date, to the extent a Tax (other than a Tax
described in the first sentence of SECTION 8.1(a)) (i) is imposed on the
Company for any Taxable period beginning after the Closing Date
("POST-CLOSING PERIOD") or (ii) is imposed on the Seller or any of its
affiliates and relating to the Company for any Post-Closing Period, the
Buyer and the Company, jointly and severally, agree to pay the amount of
such Tax, plus any additional penalties and interest incurred in the
payment of such Tax, to the appropriate Taxing Authority within the later
of 30 days of receipt of notice of such Tax or final resolution of any
dispute relating to such Tax. If such Tax is paid by Seller, Buyer and
the Company, jointly and severally, agree to reimburse the Seller, on a
Grossed-Up Basis, the amount of such Tax plus any additional penalties
and interest incurred in the payment of such Tax.
(c) If Seller, Buyer or the Company receives notice of a Tax properly
payable under SECTIONS 8.1(a) and (b) by another party to this Agreement
(the "RESPONSIBLE PARTY"), then such recipient shall provide written
notice to the Responsible Party within 30 days of having received such
notice.
(d) Seller shall pay all transfer, real property transfer, stock transfer
and other similar Taxes and fees ("TRANSFER TAXES") arising out of or in
connection with the transactions effected pursuant to this Agreement, and
shall indemnify, defend, and hold harmless Buyer, the Company and their
respective affiliates with respect to such Transfer Taxes. Seller shall
file all necessary documentation and Tax Returns with respect to such
Transfer Taxes.
(e) No amounts of indemnity shall be payable as a result of a claim under
this Section unless and until the party seeking indemnity has suffered,
incurred, sustained or become subject to Taxes, interest or penalties in
excess of $25,000, in which case such party shall be entitled to seek
indemnity for all Taxes, interest or penalties in excess of such $25,000
amount.
(f) All rights and obligations of the parties with respect to
indemnification under this Section shall survive for the applicable
statute of limitations (including any extensions) for the Tax for which
such claim of indemnification is based upon.
8.2 PREPARATION AND FILING OF TAX RETURNS.
(a) Seller shall file or cause to be filed all Tax Returns of, or that
include, the Company for all Pre-Closing Periods. Seller shall pay all
Tax liabilities shown by such Tax Returns to be due. In particular,
Seller will include the income of the Company for all Pre-Closing Periods
on the consolidated federal income Tax Returns of Seller and pay any
federal income Taxes attributable to such income. The Company will
furnish Tax information to Seller for inclusion in the consolidated
federal income Tax Return of Seller for the period that includes the
Closing Date in accordance with the past customs and practice of the
Company. Seller will allow Buyer an opportunity to review and comment
upon such Tax Returns (including any amended Tax Returns) to the extent
that they relate to the Company and shall make such revisions to such Tax
Returns as are reasonably requested by Buyer.
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(b) Buyer shall file or cause to be filed all Tax Returns of, or that
include, the Company for all Taxable periods ending on or after the
Closing Date. With respect to any Tax Return of the Company for a Taxable
period that begins on or before the Closing Date and ends after the
Closing Date, Buyer shall allow Seller an opportunity to review and
comment upon such Tax Returns and shall make such revisions to such Tax
Returns as are reasonably requested by Seller. Seller shall pay to Buyer
within 15 days after the date on which Taxes are paid with respect to
such periods, an amount equal to the portion of such Taxes which relates
to the Pre-Closing Period. For purposes of this SECTION 8.2, in the case
of any Taxes that are imposed on a periodic basis and are payable for a
Taxable period that includes (but does not end on) the Closing Date, the
portion of such Tax which relates to the Pre-Closing Period shall (x) in
the case of any Taxes other than Taxes based upon or related to income or
receipts, be deemed to be the amount of such Tax for the entire Taxable
period multiplied by a fraction the numerator of which is the number of
days in the Taxable period ending on and including the Closing Date and
the denominator of which is the number of days in the entire Taxable
period, and (y) in the case of any Tax based upon or related to income or
receipts be deemed equal to the amount which would be payable if the
relevant Taxable period ended on the Closing Date. Any credits relating
to a Taxable period that begins before and ends after the Closing Date
shall be taken into account as though the relevant Taxable period ended
on the Closing Date. All determinations necessary to give effect to the
foregoing allocations shall be made in a manner consistent with prior
practice of the Company.
Any refund of Taxes (including any interest thereon) that relates to the
Company and that is attributable to a Post-Closing Period, shall be the property
of the Company and shall be retained by the Company (or, if applicable, promptly
paid by Seller to the Company if any such refund is received by Seller or any of
its subsidiaries or affiliates). If after the Closing Date, the Company receives
a refund of any Tax (including any interest thereon) that relates to, and that
was previously paid by or on behalf of the Company and that is attributable to a
Pre-Closing Period and such Tax is not described in the previous sentence, then
the Company shall promptly pay or cause to be paid to the Seller the amount of
such refund together with any interest thereon. Any refund of Taxes (including
any interest thereon) that includes but does not end on the Closing Date shall
be allocated between the Pre-Closing Period and the Post-Closing Period in
accordance with SECTION 8.2(b).
8.3 TAX CONTESTS.
(a) If any Taxing Authority or other person asserts a claim with respect to
Taxes (a "TAX CLAIM"), then the party hereto first receiving notice of
such Tax Claim promptly shall provide written notice thereof to the other
party hereto; PROVIDED, HOWEVER, that the failure of a party to give such
prompt notice to other party shall not relieve such party failing to
provide such notice of any of its obligations under this Article, except
to the extent that the receiving party is irreparably prejudiced thereby.
Such notice shall specify n reasonable detail the basis for such Tax
Claim and shall include a copy of any relevant correspondence received
from the Taxing Authority or other person.
(b) If within 60 days after receiving a Tax Claim or written notice of such
a Tax Claim from the Buyer, Seller notifies the Buyer that Seller desires
to defend Buyer with respect to the Tax Claim, then Seller shall have the
right to defend or prosecute, at its sole cost, expense and risk, such
Tax Claim by all appropriate proceedings, which proceedings shall be
defended or prosecuted diligently by Seller; PROVIDED, HOWEVER, Seller
shall not, without the prior written consent of Buyer, enter into any
compromise or settlement of such Tax Claim that would result in any Tax
detriment to any indemnitee; and PROVIDED, FURTHER, that Buyer may, at
the sole cost and expense of Buyer, at any time prior to Seller's
delivery of the notice referred to in the first sentence of this
SECTION 8.3(b) file any motion, answer or other pleadings or take any
other action that Buyer reasonably believes to be necessary or
appropriate to protect its interests. So long as Seller is defending or
prosecuting a Tax Claim, Buyer shall provide or cause to be provided to
Seller any information reasonably requested by Seller relating to such
Tax Claim, and Buyer shall otherwise cooperate with Seller and its
representatives in good faith in order to contest effectively such Tax
Claim. Seller shall inform Buyer of all developments and events relating
to such Tax Claim (including, without limitation, providing to Buyer
copies of all written materials relating to such Tax Claim), and Buyer or
its authorized representatives shall be entitled, at the expense of
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Buyer, to participate in but not control, all conferences, meetings and
proceedings relating to such Tax Claim.
(c) If Seller fails to notify Buyer within 60 days after receiving a Tax
Claim or a written notice of such Tax Claim from Buyer that Seller
desires to defend the Tax Claim pursuant to this SECTION 8.3 or, if after
delivery of such notice, Seller fails to reasonably defend or prosecute
such Tax Claim, then Buyer shall at any time thereafter have the right
(but not the obligation) to defend or prosecute, at the sole cost,
expense and risk of Buyer, such Tax Claim. Buyer shall have full control
of such defense or prosecution and such proceedings, including any
settlement or compromise thereof. If requested by Buyer, Seller shall
cooperate in good faith with Buyer and its authorized representatives in
order to contest effectively such Tax Claim. Seller may participate in,
but not control, any defense, prosecution, settlement or compromise of
any Tax Claim controlled by Buyer pursuant to this SECTION 8.3(c), and
shall bear its own costs and expenses with respect thereto.
(d) In the case of any Tax Claim that is defended or prosecuted by Seller
pursuant to this SECTION 8.3, Seller shall pay to the Buyer, on a
Grossed-Up Basis, the full amount of any Tax arising or resulting form
such Tax Claim within 30 days after any final determination of any Tax
arising or resulting from such Tax Claim. In the case of any Tax Claim
that is defended or prosecuted by Buyer pursuant to this SECTION 8.3,
Seller shall pay to the Buyer, on a Grossed-Up Basis, the full amount of
any Tax arising or resulting from such Tax Claim, together with any costs
or expenses for investigating, defending or prosecuting a Tax Claim
including, without limitation, reasonable attorneys', accountants' and
experts' fees and disbursements, settlement costs, court costs and any
similar costs or expenses ("ASSOCIATED COSTS") that have not theretofore
been paid by Seller to Buyer, within 30 days after such final
determination. In the case of any Tax Claim not covered by the two
preceding sentences, Seller shall pay to the Buyer, on a Grossed-Up
Basis, the full amount of any Tax arising or resulting from such Tax
Claim, together with any Associated Costs, that have not theretofore been
paid by Seller to Buyer, at least five business days before the date
payment of such Tax is due from the Seller or the Buyer.
8.4 COOPERATION. Each party hereto shall, and shall cause its subsidiaries
and affiliates to, cooperate fully as and to the extent reasonably requested by
the other party in connection with filing any Tax Return, amended Tax Return or
claim for refund, or in conducting any audit, litigation or other proceeding
with respect to Taxes. Such cooperation and information shall include providing
copies of all relevant Tax Returns, together with relevant accompanying
schedules and relevant work papers, relevant documents relating to rulings or
other determinations by Taxing Authorities and relevant records concerning the
ownership and Tax basis of property, which any such party may possess. Each
party will retain all Tax Returns, schedules and work papers, and all material
records and other documents relating to Tax matters, of the Company for the Tax
period first ending after the Closing Date and for all prior Tax periods until
the later of (i) the expiration of the statute of limitations of the Tax periods
to which the Tax Returns and other documents relate or (ii) eight years
following the due date (without extension) for such Tax Returns. Thereafter, the
party holding such Tax Returns or other documents may dispose of them; PROVIDED,
that such party shall give to the other party the reasonable written notice
prior to doing so. Each party shall make its employees reasonably available on a
mutually convenient basis at its cost to provide explanation of any documents or
information so provided. Buyer and Seller further agree, upon request, to use
their best efforts to obtain any certificate or other document from any
governmental authority or any other person as may be necessary to mitigate,
reduce or eliminate any Tax that could be imposed (including but not limited to,
with respect to the transactions contemplated hereby). Buyer and Seller further
agree, upon request, to provide the other party with all information that either
party may be required to report pursuant to Section 6043 of the Code.
8.5 TERMINATION OF TAX SHARING AGREEMENTS. Any and all Tax allocation or
sharing agreements or other agreements or arrangements relating to Tax matters
between the Company on the one hand and any affiliate of Seller on the other
hand shall be terminated with respect to the Company as of the day before the
Closing Date and, from and after the Closing Date, the Company shall not be
obligated to make any payment to any affiliate of Seller, Taxing Authority or
other person pursuant to any such agreement or arrangement for any past or
future period.
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8.6 FIRPTA CERTIFICATES. Seller shall deliver to Buyer on the Closing Date
duly executed FIRPTA certificates in customary form.
8.7 CONFLICT. In the event of a conflict between the provisions of this
Article and any other provision of this Agreement, the provisions of this
Article shall control.
8.8 SURVIVAL. All rights and obligations under this ARTICLE VIII shall
survive the Closing and continue until the expiration of the applicable statute
of limitations (including tollings and extensions thereto).
ARTICLE IX
CONDITIONS OF CLOSING
9.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY. The respective obligations of
each party to effect the transactions contemplated hereby shall be subject to
the satisfaction at or prior to the Closing Date of the following conditions:
(a) NO ORDER. No federal or state governmental or regulatory authority
or other agency or commission, or federal or state court of competent
jurisdiction, shall have enacted, issued, promulgated, enforced or entered
any statute, rule, regulation, executive order, decree, injunction or other
order (whether temporary, preliminary or permanent) which restricts,
prevents or prohibits consummation of the transactions contemplated by this
Agreement.
(b) HART-SCOTT-RODINO ACT. Early termination shall have been granted
or applicable waiting periods shall have expired under the HSR Act.
(c) ASSET PURCHASE AGREEMENT. Subject to the provisions of
SECTION 10.2, the closing of the transactions contemplated by the Asset
Purchase Agreement shall occur simultaneously with the transactions
contemplated hereby.
9.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF BUYER. The obligations of
Buyer to effect the transactions contemplated hereby are also subject to the
following conditions:
(a) REPRESENTATIONS AND WARRANTIES. Each of the representations and
warranties of the Company and Seller contained in this Agreement, including
giving effect to any update to the Disclosure Schedule, shall be true and
correct in all material respects (except that where any statement in a
representation or warranty expressly includes a standard of materiality,
such statement shall be true and correct in all respects) as of the Closing
Date (except to the extent such representations and warranties speak as of
an earlier date) as though made on and as of the Closing Date, and Buyer
shall have received a certificate from each of Seller and the Company signed
on behalf of Seller and the Company, respectively, by the Chief Executive
Officer or President and the Chief Financial Officer of Seller and the
Company, respectively, to the foregoing effect.
(b) AGREEMENTS AND COVENANTS. The Company shall have performed or
complied in all material respects with all agreements and covenants required
by this Agreement to be performed or complied with by it on or prior to the
Closing Date.
(c) CONSENTS OBTAINED. All consents, waivers, approvals,
authorizations or orders required to be obtained and all filings required to
be made by Seller or the Company for the authorization, execution and
delivery of this Agreement and the consummation by it of the transactions
contemplated hereby shall have been obtained and made by Seller and the
Company, except those for which failure to obtain such approvals or make
such filings would not individually or in the aggregate, have a Material
Adverse Effect with respect to the Company.
(d) NO CHALLENGE. There shall not be pending any action, proceeding or
investigation before any court or administrative agency or by a government
agency (i) challenging or seeking material damages in connection with, the
transactions hereby contemplated or (ii) seeking to restrain, prohibit or
limit the exercise of full rights of ownership or operation by Buyer of all
or any portion of the Company, or (iii) seeking to recover against the
proceeds of the transactions contemplated hereby, which in any case is
reasonably likely to have a Material Adverse Effect with respect to the
Company.
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(e) NO MATERIAL ADVERSE CHANGES. Since the date of this Agreement,
there shall not have been any change in the financial condition, results of
operations or business of the Company or the Company, taken as a whole, that
either individually or in the aggregate would have a Material Adverse Effect
with respect to the Company. Buyer shall have received a certificate of the
Chief Executive Officer or President and the Chief Financial Officer of the
Company to that effect.
(f) OPINION OF COUNSEL. Buyer shall have received from Jenkens &
Gilchrist, a Professional Corporation, independent counsel to the Company
("COMPANY'S COUNSEL"), an opinion dated the Closing Date, substantially in
the form attached as EXHIBIT B.
(g) FINANCING AND EMPLOYMENT RELEASES. Buyer shall have received
releases or other documentation in form reasonably satisfactory to Buyer
evidencing the satisfaction of obligations of the Company under or pursuant
to the Credit Agreement.
(h) REAL PROPERTY MATTERS. With respect to each Real Property Lease
containing a provision that grants the lessor thereunder any rights of
termination or consent as a result of the transaction contemplated hereby,
Buyer shall have received an estoppel certificate and consent (dated not
more than 30 days prior to the Closing Date) where such estoppel certificate
and consent are required from each landlord under each such Real Property
Lease reasonably acceptable in form to Buyer.
(i) BRIGHTON MATTERS. With reference to the Seller's obligations under
SECTION 6.1(j), (i) Seller shall have notified Buyer of all third party
claims in accordance with SECTIONS 6.1(j) and 12.2 and (ii) Seller shall
have provided its insurance carrier with a written notification notifying
such carrier of the Incident and shall have provided Buyer with a copy of
such notification.
9.3 ADDITIONAL CONDITIONS TO OBLIGATIONS OF THE SELLER. The obligations of
Seller to effect the transactions contemplated hereby are also subject to the
following conditions:
(a) REPRESENTATIONS AND WARRANTIES. Each of the representations and
warranties of Buyer set forth in this Agreement, including giving effect to
any update to the Buyer Disclosure Schedule, shall be true and correct in
all material respects (except that where any statement in a representation
or warranty expressly includes a standard of materiality, such statement
shall have been true and correct in all respects) as of the Closing Date
(except to the extent such representations and warranties speak as of an
earlier date), as though made on and as of the Closing Date, and Seller
shall have received a certificate signed on behalf of Buyer by the Chief
Executive Officer or President and the Chief Financial Officer of Buyer to
the foregoing effect.
(b) AGREEMENTS AND COVENANTS. Buyer shall have performed or complied
in all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by it on or prior to the Closing
Date.
(c) CONSENTS UNDER AGREEMENTS. All consents, waivers, approvals,
authorizations or orders required to be obtained, and all filings required
to be made by Buyer for the authorization, execution and delivery of this
Agreement and the consummation by it of the transactions contemplated hereby
shall have been obtained and made by Buyer, except where failure to obtain
any consents, waivers, approvals, authorizations or orders required to be
obtained or any filings required to be made would not have a Material
Adverse Effect with respect to Buyer.
(d) NO CHALLENGE. There shall not be pending any action, proceeding or
investigation before any court or administrative agency or by a government
agency (i) challenging or seeking material damages in connection with,
transactions hereby contemplated or (ii) seeking to restrain, prohibit or
limit the exercise of full rights of ownership or operation by Buyer of all
or any portion of the Company, which in either case would have a Material
Adverse Effect with respect to the Company.
(e) NO MATERIAL ADVERSE CHANGES. Since the date of this Agreement,
there has not been any change in the financial condition, results of
operations or business of Buyer, taken as a whole, that either individually
or in the aggregate would have a Material Adverse Effect with respect to
Buyer. Seller shall have received a certificate of the Chief Executive
Officer or President and the Chief Financial Officer of Buyer to that
effect.
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(f) OPINION OF COUNSEL. Seller shall have received from Morgan,
Lewis & Bockius LLP, independent counsel to Buyer ("BUYER COUNSEL"), an
opinion dated the Closing Date, substantially in the form attached hereto as
EXHIBIT C.
(g) REGISTRATION RIGHTS AGREEMENT. Seller shall have received from
Buyer a Registration Rights Agreement, substantially in the form attached
hereto as EXHIBIT D.
ARTICLE X
TERMINATION, AMENDMENT AND WAIVER
10.1 TERMINATION. This Agreement may be terminated at any time prior to
the Closing Date:
(a) by mutual consent of Buyer and Seller;
(b) by either Seller or Buyer if any approval of stockholders required for
the consummation of the transactions contemplated hereby shall not have
been obtained by reason of the failure to obtain the required vote at a
duly held meeting of such stockholders or at any adjournment or
postponement thereof;
(c) by Seller or Buyer if there has been a breach in any material respect
(except that where any statement in a representation or warranty
expressly includes a standard of materiality, such statement shall have
been breached in any respect) of any representation or warranty, or the
material nonfulfillment of any covenant or agreement, set forth in this
Agreement, on the part of any party, which breach has not been cured
within 10 business days following receipt by the nonterminating party of
notice of such breach or other condition, or which breach or
nonfulfillment by its nature, cannot be cured prior to the Closing Date;
PROVIDED, HOWEVER, this Agreement may not be terminated pursuant to this
clause (c) by the breaching party;
(d) by either Buyer or Seller if any permanent injunction preventing the
consummation of the transactions contemplated hereby shall have become
final and nonappealable or if any applicable Law or any rule or
regulation thereunder shall hereafter be enacted or becomes applicable
that makes the transactions contemplated hereby or the consummation of
the Closing illegal;
(e) subject to the provisions of SECTION 10.2 below, by either Buyer or
Seller if the transactions contemplated hereby shall not have been
consummated by July 31, 1999, for a reason other than the failure of the
party seeking termination to comply with its obligations under this
Agreement; PROVIDED, HOWEVER, that in the event early termination shall
not have been granted or applicable waiting periods shall not have
expired under the HSR Act as of such date, the parties may agree to
extend such date for up to two additional 30 day periods, with such
agreement not to be unreasonably withheld;
(f) by either Buyer or Seller if any regulatory authority has denied
approval of the transactions contemplated hereby, and neither Buyer nor
Seller has, within 30 days after the entry of such order denying
approval, filed a petition seeking review of such order as provided by
applicable law; or
(g) by Buyer in the event it shall have notified Seller of its intention to
terminate this Agreement pursuant to SECTION 7.7 within the time period
set forth therein.
10.2 EFFECT OF TERMINATION; PUT RIGHT. In the event of the termination of
this Agreement pursuant to SECTION 10.1, this Agreement shall forthwith become
void and all rights and obligations of any party shall cease except as set forth
in SECTION 6.4(c) of this Agreement; PROVIDED, HOWEVER, nothing herein shall
relieve any party from liability for any willful breach of this Agreement or
shall restrict either party's rights in the case thereof. At any time after
July 31, 1999, provided that approval under the HSR Act has not been obtained,
Seller may elect to pay to Buyer a termination fee of five million U.S. dollars
(US $5,000,000) (the "BREAK UP FEE"). The Break up fee shall be payable by
Seller to Buyer by wire transfer of immediately available funds, to such account
as Buyer shall designate in writing to Seller, not later than five business days
following the date of such election. If Seller makes such election and the Break
up fee is paid as herein provided, the parties shall thereupon proceed to close
the transaction contemplated by, and on the terms and conditions provided for
in, the Asset Purchase Agreement; PROVIDED, HOWEVER, and notwithstanding the
earlier close of the Asset Purchase Agreement, in the
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event regulatory approval has not been denied and Buyer desires to close the
transactions herein contemplated at a mutually agreeable date as provided in
SECTION 10.1(E), Seller shall cooperate with Buyer in such effort and, upon
receipt of any required regulatory approvals, shall close the transactions
herein contemplated on the terms and conditions herein provided.
10.3 WAIVER. At any time prior to the Closing Date, the parties may
(a) extend the time for the performance of any of the obligations or other acts
of the other party, (b) waive any inaccuracies in the representations and
warranties contained herein or in any document delivered pursuant hereto and
(c) waive compliance with any of the agreements or conditions contained herein.
Any such extension or waiver shall be valid only if set forth in a written
instrument signed on behalf of such party, but such extension or waiver or
failure to insist on strict compliance with an obligation, covenant, agreement
or condition shall not operate as a waiver of, or estoppel with respect to, any
subsequent or other failure.
ARTICLE XI
INDEMNIFICATION
11.1 INDEMNIFICATION. Subject to the provisions of this Article, Seller
shall indemnify Buyer, its stockholders, employees, agents and affiliates
(collectively, the "BUYER INDEMNITEES") in respect of, and hold each of them
harmless from and against, and shall pay the full amount of, on a Grossed-Up
Basis (as defined in SECTION 12.3), 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: (i) any causes of action asserted or other legal
proceedings initiated on the part of any of the stockholders of Seller relating
in any way to claims based on the sale of Seller's assets; (ii) any employee
pension benefit plan subject to Title IV of ERISA that is maintained by Seller
or any of its "controlled group," within the meaning of Section 4001(a)(15) of
ERISA, other than any Plans; (iii) severance obligations occurring within six
months of the Closing Date in connection with the agreements described on
EXHIBIT E; (iv) the nonfulfillment of or failure to perform any covenant or
agreement on the part of Seller contained in SECTION 6.6 and SECTION 8.1
(provided that the parties agree that no double recovery shall occur or be
permitted); and (v) any claims by a governmental entity including, but not
limited to, the United States Environmental Protection Agency, the State of
Colorado and the City of Brighton, relating to, resulting from or arising out of
the Incident including, but not limited to, any such claims associated with the
investigation, monitoring or remediation of Hazardous Materials, the replacement
of manholes and the replacement of sewer lines and any related claims for
subrogation and/or indemnification (hereinafter "BRIGHTON GOVERNMENTAL CLAIMS").
11.2 PROCEDURES FOR INDEMNIFICATION. Any claims for indemnification by any
party entitled to indemnification hereunder (an "INDEMNIFIED PARTY") from any
party hereunder (an "INDEMNITOR") under this ARTICLE XI shall be made by an
Indemnified Party by delivery of a written notice to the Indemnitor requesting
indemnification (an "INDEMNIFICATION CLAIM") and specifying the basis on which
indemnification is sought and the amount of asserted Losses. Indemnitor shall
have 30 days after the date on which the Indemnitor receives the notice of an
Indemnification Claim to object to such Indemnification Claim by delivery of a
written notice of such objection to the Indemnified Party specifying in
reasonable detail the basis for such objection. If within 30 days after the date
on which the Indemnitor receives the notice of the Indemnification Claim, the
Indemnitor has not delivered to the Indemnified Party a notice objecting to all
or any portion of the claimed Loss and setting forth the amount of such claimed
indemnification for such Loss objected to and the reasons for such objection,
the Indemnified Party shall be entitled to indemnification for such Loss, and
the Indemnitor shall promptly pay the full amount of such Loss. If, within
30 days after the date on which the Indemnitor receives the notice of an
Indemnification Claim, the Indemnitor delivers to the Indemnified Party an
objection to all or any portion of the claimed Loss, setting forth the amount of
such Loss objected to and the reasons for such objection, the Indemnified Party
shall be entitled to reimbursement for the portion of such Loss not objected to
by the Indemnitor and the Indemnitor shall promptly pay the full amount of so
much of the Loss as to which the Indemnitor did not object.
(a) Upon determination of the amount of an Indemnification Claim, whether by
agreement between the Indemnitor and the Indemnified Party or by any
final adjudication, the Indemnitor shall pay the amount of such
Indemnification Claim within 5 days of the date such amount is
determined.
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(b) The rights accorded to Indemnified Parties hereunder shall be in
addition to any rights that any Indemnified Party may have at law or in
equity.
(c) Any payment under this Article shall be treated for Tax purposes as an
adjustment of the Purchase Price to the extent such characterization is
proper and permissible under the applicable U.S. Tax law, including the
Code, Treasury regulations, court decisions and administrative
promulgations or, alternatively, by Buyer as an offset to a Tax benefit
item, if such characterization is permissible under such Tax law.
(d) In no event shall the aggregate liability of Seller for claims asserted
pursuant to Section 11.1(i) and (iii) of this Agreement and Section 9.1
(i) and (iii) of the Asset Purchase Agreement (excluding indemnification
with respect to the payment of Taxes, penalties, Brighton Governmental
Claims, interest and collection costs thereof) exceed $700,000.
(e) Seller's obligation to indemnify Buyer under SECTION 11.1(v) above shall
terminate on the date which is the earlier of: (i) Buyer's receipt of
evidence that is satisfactory to the Buyer that all actual or potential
Brighton Governmental Claims have been resolved, or (ii) expiration of
the applicable statutes of limitation.
ARTICLE XII
GENERAL PROVISIONS
12.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS.
Except as otherwise set forth herein, the representations and warranties of the
parties shall expire at Closing. The covenants and agreements of the parties
shall expire at Closing; PROVIDED, HOWEVER, that the covenants and agreements
contained in SECTIONS 6.4(c), 6.6, 6.7, 7.2, 7.6, ARTICLE VIII and 10.2 shall
survive the Closing and expire in accordance with their respective terms,
provided that to the extent obligations require repeated performance or
performance from time to time, expiration shall occur only upon the final
performance of the obligations; and provided further that Seller's obligation to
indemnify Buyer under SECTION 11.1(v) above shall survive the Closing and
terminate on the date provided in SECTION 11.2(e).
12.2 NOTICES. All notices and other communications given or made pursuant
to this Agreement shall be in writing and shall be deemed given if delivered
personally, telecopied (with confirmation), mailed by certified
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mail (postage prepaid, return receipt requested) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice) and shall be effective upon receipt:
<TABLE>
<CAPTION>
<C> <S>
(a) If to Seller or the Company:
Spinnaker Industries, Inc.
1700 Pacific Ave., Suite 1600
Dallas, Texas 75201
Telecopier: (214) 855-0093
Attention: President
With copies to:
Jenkens & Gilchrist, a Professional Corporation
1445 Ross Ave., Suite 3200
Dallas, Texas 75202
Telecopier: (214) 855-4300
Attention: Ronald J. Frappier
Crouch & Hallett, L.L.P.
717 North Harwood Street
Suite 1400
Dallas, Texas 75201
Telecopier: (214) 922-4193
Attention: Timothy R. Vaughan
(b) If to Buyer:
Intertape Polymer Group Inc.
110E Montee de Liesse
St. Laurent, Quebec H4T IN4
Canada
Telecopier: (514) 731-5477
Attention: Andrew M. Archibald
With a copy to:
Morgan, Lewis & Bockius LLP
101 Park Avenue
New York, NY 10178
Telecopier: (212) 309-6273
Attention: Nancy H. Corbett
</TABLE>
12.3 CERTAIN DEFINITIONS. For purposes of this Agreement, the term:
(a) "AFFILIATE" means a person that directly or indirectly, through one or
more intermediaries, controls, is controlled by, or is under common
control with, the first mentioned person; including, without limitation,
any partnership or joint venture in which any person (either alone, or
though or together with any other subsidiary) has, directly or
indirectly, an interest of 5% or more.
(b) "BUSINESS DAY" means any day other than a day on which
federally-chartered banks are required or authorized to be closed.
(c) "CONTROL" (including the terms "controlled by" and "under common control
with") means the possession, directly or indirectly or as trustee or
executor, of the power to direct or cause the direction of the management
or policies of a person, whether through the ownership of stock or as
trustee or executor, by contract or credit arrangement or otherwise.
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(d) "GROSSED-UP BASIS" means, when used to describe the basis on which the
payment of a specified sum is to be made, a basis such that the amount of
such payment, after being reduced by the amount of all Taxes imposed on
the recipient of such payment as a result of the receipt or accrual of
such payment and after taking into account the Tax benefit of any
deductions attributable to such Taxes and/or payments that are currently
available to the recipient of such payment, will equal the specified sum.
(e) "LAW" shall have the meaning set forth in SECTION 3.4.
(f) "LIEN" shall mean any conditional sale agreement, default of title,
easement, encroachment, encumbrance, hypothecation, infringement, lien,
mortgage, pledge, reservation, restriction, security interest, title
retention or other security arrangement, or any adverse right or
interest, charge, or claim of any nature whatsoever of, on, or with
respect to any property or property interest, other than (i) liens for
current property Taxes not yet due and payable, and (ii) liens which do
not materially impair the use of, or title to, or value of the assets
subject to such lien.
(g) "LOSS" shall mean any and all demands, claims, actions or causes of
action, assessments, damages, liabilities, costs and expenses, including
interest, penalties, costs of environmental investigation, remediation
and monitoring and defense, and reasonable attorneys' fees, environmental
consultants fees and other professional fees, and expenses relating
thereto (but excluding lost profits or consequential or incidental
damages).
(h) "MATERIAL ADVERSE EFFECT" means, with respect to Buyer, Seller, the
Company or Company, (i) any adverse effect on the business, assets,
properties, liabilities, prospects, results of operations or financial
condition of, and which is material with respect to, such party (or the
Company), or (ii) any effect that materially impairs the ability of such
party to consummate the transactions contemplated hereby; PROVIDED,
HOWEVER, that Material Adverse Effect shall not be deemed to include the
impact of (A) actions contemplated by this Agreement, (B) changes in laws
and regulations or interpretations thereof that are generally applicable
to the manufacturing industry and (C) changes in generally accepted
accounting principles that are generally applicable to the manufacturing
industry.
(i) "PERSON" means an individual, corporation, partnership, association,
trust, unincorporated organization, other entity or group (as defined in
Section 13(d) of the Exchange Act); and
(j) "SUBSIDIARY" or "SUBSIDIARIES" of the Company, Seller, Buyer or any
other person, means any corporation, partnership, joint venture or other
legal entity of which either the Company, Seller, Buyer, or such other
person, as the case may be (either alone or through or together with any
other subsidiary), owns, directly or indirectly, 50% or more of the stock
or other equity interests the holders of which are generally entitled to
vote for the election of the board of directors or other governing body
of such corporation or other legal entity.
12.4 HEADINGS. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
12.5 SEVERABILITY. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner adverse to
any party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner to the end that
transactions contemplated hereby are fulfilled to the extent possible.
12.6 ENTIRE AGREEMENT. This Agreement and the letter agreement dated as of
the date hereof regarding Tax loss carryforwards constitute the entire agreement
of the parties and supersedes all prior agreements and undertakings, both
written and oral, between the parties, or any of them, with respect to the
subject matter hereof and, except as otherwise expressly provided herein, are
not intended to confer upon any other person any rights or remedies hereunder.
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12.7 ASSIGNMENT. This Agreement shall not be assigned by operation of law
or otherwise, except that Buyer may assign all or any of its rights hereunder to
any affiliate provided that no such assignment shall relieve Buyer of its
obligations hereunder.
12.8 PARTIES IN INTEREST. This Agreement shall be binding upon and inure
solely to the benefit of each party and nothing in this Agreement, express or
implied, is intended to or shall confer upon any other person any right, benefit
or remedy of any nature whatsoever under or by reason of this Agreement.
12.9 GOVERNING LAW. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware, regardless of the laws that
might otherwise govern under applicable principles of conflicts of law.
12.10 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, and by the different parties in separate counterparts, each of
which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
12.11 TIME IS OF THE ESSENCE. Time is of the essence with respect to this
Agreement.
12.12 AMENDMENT. This Agreement may be amended by the agreement in writing
of the parties and in accordance with their applicable charter documents and
applicable Law.
12.13 WAIVER OF JURY TRIAL. Each of Seller and Buyer waive their
respective rights to a trail by jury of any claim or cause of action based upon
or arising out of or related to this agreement, any assignment or the
transactions contemplated hereby, in any action, proceeding or other litigation
of any type brought by any party against the other parties, whether with respect
to contract claims, tort claims, or otherwise. Each of Seller and Buyer agree
that any such claim or cause of action shall be tried by a court trial without a
jury. Without limiting the foregoing, the parties further agree that their
respective right to a trial by jury is waived by operation of this Section as to
any action, counterclaim or other proceeding which seeks, in whole or in part,
to challenge the validity or enforceability of this Agreement, any assignment or
any provision hereof or thereof. This waiver shall apply to any subsequent
amendments, renewals, supplements or modifications to this Agreement or any
assignment.
12.14 CONSENT TO JURISDICTION. The parties hereto each hereby irrevocably
submit to the exclusive jurisdiction of the state courts of the State of
Delaware and to the jurisdiction of the United States District Court of Delaware
for the purposes of any suit, action or other proceeding arising out of or based
upon this Agreement or the subject matter hereto brought by any other party
hereto. Each party hereto, to the extent permitted by applicable law, hereby
waives and agrees not to assert, by way of motion, as a defense, or otherwise,
in any such suit, action or proceeding brought in such courts, any claim that it
is not subject personally to the jurisdiction of the above-named courts, that
its property is exempt or immune from attachment or execution, that the venue of
the suit, action or proceeding is improper or that this Agreement or the subject
matter hereof may not be enforced in or by such Court.
IN WITNESS WHEREOF, Seller and Buyer have caused this Agreement to be
executed as of the date first written above by their respective officers
thereunto duly authorized.
SPINNAKER INDUSTRIES, INC. ("Seller")
By: /s/ Ned M. Fleming, III
Name: Ned M. Fleming, III
Title: President
INTERTAPE POLYMER GROUP INC. ("Buyer")
By: /s/ Andrew M. Archibald
Name: Andrew M. Archibald
Title: CFO, Vice President
Administration
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EXHIBIT 2.3
ASSET PURCHASE AGREEMENT
BY AND AMONG
SPINNAKER ELECTRICAL TAPE COMPANY,
SPINNAKER INDUSTRIES, INC.
AND
INTERTAPE POLYMER GROUP INC.
DATED AS OF
APRIL 9, 1999
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<C> <S> <C>
ARTICLE I -- SALE OF ASSETS AND ASSUMPTION OF LIABILITIES.............. 64
1.1 Sale of Assets by Seller.................................... 64
1.2 Excluded Assets............................................. 66
1.3 Assumed Liabilities......................................... 66
1.4 Excluded Liabilities........................................ 66
1.5 Time and Place of Closing................................... 67
ARTICLE II -- PURCHASE PRICE........................................... 67
2.1 Purchase Price.............................................. 67
2.2 Allocation of Purchase Price................................ 67
ARTICLE III -- REPRESENTATIONS AND WARRANTIES OF THE SELLER............ 68
3.1 Organization; Approvals..................................... 68
3.2 Certificate of Incorporation and Bylaws..................... 68
3.3 Authority................................................... 68
3.4 No Conflict; Required Filings and Consents.................. 68
3.5 Compliance; Permits......................................... 69
3.6 Inventory................................................... 69
3.7 Accounts Receivable......................................... 69
3.8 Financial Statements........................................ 69
3.9 Absence of Certain Changes or Events........................ 70
3.10 Absence of Litigation....................................... 70
3.11 Employee Benefit Plans...................................... 70
3.12 Labor and Employment Matters................................ 71
3.13 Tangible Personal Property.................................. 72
3.14 Environmental Matters....................................... 72
3.15 Absence of Agreements....................................... 73
3.16 Taxes....................................................... 73
3.17 Insurance................................................... 74
3.18 Brokers..................................................... 74
3.19 Material Contracts.......................................... 74
3.20 Substantial Customers and Suppliers......................... 74
3.21 Intellectual Property....................................... 74
3.23 Year 2000 Representation.................................... 76
3.24 Real Property............................................... 76
3.25 Disclosure.................................................. 76
3.26 Material Adverse Effect..................................... 76
ARTICLE IV -- REPRESENTATIONS AND WARRANTIES OF BUYER.................. 77
4.1 Organization; Approvals..................................... 77
4.2 Authority................................................... 77
4.3 No Conflict; Required Filings and Consents.................. 77
4.4 Absence of Litigation....................................... 77
4.5 Brokers..................................................... 78
4.6 Disclosure.................................................. 78
ARTICLE V -- CERTAIN COVENANTS......................................... 78
5.1 Affirmative Covenants....................................... 78
5.2 Negative Covenants.......................................... 79
5.3 Exclusivity................................................. 79
5.4 Access and Information...................................... 80
5.5 Update Disclosure; Breaches................................. 80
5.6 Expenses.................................................... 81
</TABLE>
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<TABLE>
<CAPTION>
PAGE
<C> <S> <C>
5.7 Retention of Records........................................ 81
ARTICLE VI -- ADDITIONAL AGREEMENTS.................................... 81
6.1 Appropriate Action; Consents; Filings....................... 81
6.2 Employee Benefit Matters.................................... 81
6.3 Notification of Certain Matters............................. 82
6.4 Public Announcements........................................ 83
6.5 Customer Retention.......................................... 83
6.6 Tax Cooperation and Indemnification......................... 83
6.7 Bulk Transfer Laws.......................................... 84
6.8 Non-Competition............................................. 84
6.9 Further Transfer Matters.................................... 86
6.10 Prorations.................................................. 86
6.11 Release of Liens............................................ 86
ARTICLE VII -- CONDITIONS OF CLOSING................................... 86
7.1 Conditions to Obligation of Each Party...................... 86
7.2 Additional Conditions to Obligations of Buyer............... 86
7.3 Additional Conditions to Obligations of the Seller.......... 88
ARTICLE VIII -- TERMINATION, AMENDMENT AND WAIVER...................... 88
8.1 Termination................................................. 88
8.2 Effect of Termination....................................... 89
8.3 Waiver...................................................... 89
ARTICLE IX -- INDEMNIFICATION.......................................... 89
9.1 Indemnification............................................. 89
9.2 Procedures for Indemnification.............................. 90
ARTICLE X -- GENERAL PROVISIONS........................................ 91
10.1 Survival of Representations, Warranties, Covenants and
Agreements.................................................. 91
10.2 Notices..................................................... 91
10.3 Certain Definitions......................................... 92
10.4 Headings.................................................... 92
10.5 Severability................................................ 92
10.6 Entire Agreement............................................ 93
10.7 Assignment.................................................. 93
10.8 Parties In Interest......................................... 93
10.9 Governing Law; Venue........................................ 93
10.10 Counterparts................................................ 93
10.11 Time Is of the Essence...................................... 93
10.12 Amendment................................................... 93
10.13 Waiver of Jury Trial........................................ 93
10.14 Consent to Jurisdiction..................................... 93
</TABLE>
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ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (this "AGREEMENT"), dated as of April 9, 1999,
by and among Spinnaker Electrical Tape Company, a Delaware corporation
("SELLER"), Spinnaker Industries, Inc., a Delaware corporation ("Parent"), and
Intertape Polymer Group Inc., a corporation organized under the Canada Business
Corporations Act ("BUYER").
WITNESSETH:
WHEREAS, Seller is engaged in the business of the design, development,
manufacture and sale of industrial tapes (the "BUSINESS"); and
WHEREAS, Buyer desires to acquire from Seller the Business through a
purchase of certain of the assets of Seller, and Seller desires to sell, assign,
transfer, convey and deliver to Buyer, on the terms and subject to the
conditions of this Agreement, all of its rights, title and interest in, or to,
all of the assets, rights, properties, claims and contracts owned or used by
Seller in the conduct of the Business and, in connection therewith, Buyer has
agreed to assume certain liabilities of Seller relating to the Business, all on
the terms set forth in this Agreement; and
WHEREAS, concurrently with the execution and delivery of this Agreement,
Buyer is entering into an agreement of even date herewith (the "STOCK PURCHASE
AGREEMENT") with Parent, pursuant to which Parent shall sell to Buyer, and Buyer
shall purchase and acquire from Parent, all of the capital stock of Central
Products Company, a Delaware corporation ("CPC") and an affiliate of Seller
engaged in the business of the design, development, manufacture and sale of
industrial tapes.
NOW, THEREFORE, in consideration of the foregoing premises and the
representations, warranties and agreements contained in this Agreement, and
subject to the terms and conditions set forth in this Agreement, the parties
agree as follows:
ARTICLE I
SALE OF ASSETS AND ASSUMPTION OF LIABILITIES
1.1 SALE OF ASSETS BY SELLER. Subject to the satisfaction or waiver of the
conditions set forth in this Agreement, at the Closing (as defined in
SECTION 1.5), Seller shall sell, assign, transfer, convey and deliver to Buyer,
and Buyer shall purchase and accept from Seller, all of the following assets
associated with the Business (but excluding the Excluded Assets described in
SECTION 1.2) (collectively, the "PURCHASED ASSETS"):
(a) REAL PROPERTY. All of the parcels of real property used, occupied
or operated by Seller in connection with the Business described in
SCHEDULE 1.1(a) (the "REAL PROPERTY"), and all of the rights arising out of
the ownership of the Real Property or appurtenant thereto, together with all
buildings, structures, facilities, fixtures and other improvements to the
Real Property (together with such Real Property, the "FACILITIES");
(b) LEASED PROPERTY. All leases, including capitalized leases, for
real property leased or used by Seller in connection with the Business
described in SCHEDULE 1.1(b) (the "REAL PROPERTY LEASES");
(c) PERSONAL PROPERTY LEASES. All leases, including capitalized
leases, for personal property leased or used by Seller in connection with
the Business, including without limitation those described in
SCHEDULE 1.1(c) (the "PERSONAL PROPERTY LEASES");
(d) MACHINERY AND EQUIPMENT. The machinery, equipment, computer
hardware, tooling, office equipment, telephone, telecopy and communications
equipment, furniture and other items of tangible personal property owned or
licensed (to the extent transferable) by Seller that are used in connection
with the Business and all leasehold improvements (to the extent of Seller's
interest therein) the principal items of which as of December 31, 1998 are
listed in SCHEDULE 1.1(d) (the "EQUIPMENT"), and all warranties and
guarantees, if any, express or implied, existing for the benefit of Seller
in connection with the Equipment (to the extent transferable);
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(e) INVENTORY. The finished products and all work-in-progress, raw
materials, waste materials, scrap, samples, stores and spares, components,
goods in transit from suppliers or manufacturers, goods held on consignment
by any third party for Seller (excluding goods held on consignment for any
third party by Seller), supplies, and packaging and promotional materials
used in connection therewith, owned by Seller on the Closing Date, together
with all rights of Seller against suppliers that relate to the Purchased
Assets (the "INVENTORY");
(f) VEHICLES. All motor vehicles owned or leased by Seller in
connection with the operation of the Business, including without limitation
those described in SCHEDULE 1.1(f);
(g) INTELLECTUAL PROPERTY. All right, title and interest of Seller in
and to any and all Intellectual Property (as defined in SECTION 3.22) used
by Seller in connection with the Business or being developed by Seller in
connection with the Business as of the Closing Date, including without
limitation the Intellectual Property described in SCHEDULE 1.1(g);
(h) BUSINESS INFORMATION AND FILES. Any and all business information,
market research studies, customer lists, customer records and information,
supplier lists, technical manuals, specifications, data, designs, blueprints
and drawings, technical papers, sales and promotional materials, catalogs,
advertising and marketing materials and related books, records and files
currently used by Seller in connection with the Business, but excluding such
information that is related to the sale of the Business;
(i) CONTRACTS. To the extent transferable, all commitments, orders,
quotations, bids, supply agreements, procurement agreements, service
agreements, contracts and agreements, written or oral, to which Seller is a
party or by which Seller is bound (the "CONTRACTS");
(j) ACCOUNTS RECEIVABLE. All accounts receivable of the Business owned
by Seller and reflected on the books and records of Seller as of the Closing
Date;
(k) SECURITY DEPOSITS. All security deposits deposited by or on behalf
of Seller as lessee or sublessee under any lease included in the Business
and other transferable deposits;
(l) LICENSES, CERTIFICATIONS AND PERMITS. To the extent transferable,
the licenses, permits, certificates of authority, authorizations, approvals,
registrations, franchises and similar consents granted or issued by any
governmental or regulatory authority to Seller, including without limitation
those set forth in SCHEDULE 1.1(l) (the "PERMITS");
(m) CORPORATE NAMES, TRADE NAMES, ETC. The use of the name "Spinnaker
Electrical Tape Company," including the goodwill attached to such name, and
the trade names and marks descriptive of and associated with such name for a
period not to exceed nine months;
(n) BANK ACCOUNTS, CASH, ETC. All cash, checks, negotiable
instruments, short-term investments, bank accounts, deposits, securities,
investments (and all interest thereon, to the extent applicable) and all
other cash equivalents of Seller;
(o) BOOKS AND RECORDS. All written or recorded information used by
Seller in connection with the Business, including without limitation
employee payroll and personnel records and customer lists, credit
information, supplier lists and all books and records containing purchasing,
sales, marketing and advertising information of the Business, or relating to
the Purchased Assets or Assumed Liabilities (as defined in SECTION 1.3);
(p) INSURANCE POLICIES. To the extent assignable, any insurance
policy, bonds, or other similar items, or any cash surrender value in regard
thereof, or any security or other deposits, and all insurance proceeds
received by Seller, or rights to receive insurance proceeds, to the extent
any of the foregoing relate to damage to any item of personalty or realty or
property of the Business which has suffered damage or becomes damaged
between the date of this Agreement and the Closing Date, except to the
extent such proceeds were utilized to repair any such damaged item; and
(q) CAUSES OF ACTION. All causes of action and other claims of Seller
of every kind or description which Seller may have against any person or
entity arising out of or relating to the Purchased Assets and the
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Assumed Liabilities (both relating to periods on or after the Closing Date,
except with respect to claims relating to product warranties assumed
hereunder, which relate to all periods);
in each case as of the Closing Date, subject to changes made from the date
of this Agreement to the Closing Date and reflected on appropriate updated
Schedules, as applicable. To the extent assets are used by Parent in
connection with the Business and its other businesses, the parties shall use
good faith efforts to separate such assets in accordance with their
respective uses.
1.2 EXCLUDED ASSETS. Notwithstanding any other provision of this
Agreement, the following assets of Seller are excluded from the sale and shall
not be sold, assigned, transferred, conveyed or delivered by Seller to Buyer,
and Buyer shall not acquire any of Seller's right, title or interest therein
(such assets collectively, the "EXCLUDED ASSETS"):
(a) TAX REFUNDS. Any refunds, credits or other assets or rights
(including interest thereon or claims therefor) with respect to any Taxes
(as defined in SECTION 3.16) of Seller;
(b) CAUSES OF ACTION. All causes of action and other claims of every
kind or description that Seller may have against any person or entity
arising out of or relating to (i) the Excluded Assets or the Excluded
Liabilities (as defined below) and (ii) the Purchased Assets or Assumed
Liabilities (as defined below) (in the case of (ii) relating to periods
prior to the Closing Date);
(c) INTERCOMPANY RECEIVABLES. All intercompany receivables of Seller;
and
(d) OTHER EXCLUDED ASSETS. Such other specific assets used in the
Business as are listed in SECTION 1.2(c) of the Seller Disclosure Schedule.
1.3 ASSUMED LIABILITIES. Buyer shall assume the following liabilities of
the Seller (the "ASSUMED LIABILITIES"):
(a) all obligations under the terms of any outstanding warranty (except
those relating to any Excluded Asset);
(b) liabilities arising on and after the Closing Date (except as otherwise
herein expressly agreed) under the Contracts, the Real Property Leases,
the Personal Property Leases and other assets included in the Purchased
Assets;
(c) all liabilities for accounts payable and accrued and unpaid expenses of
the Business;
(d) all insurance claims, including without limitation automobile liability,
general liability and casualty claims, made on or after the Closing Date
relating to the Purchased Assets or Assumed Liabilities, except as
provided in SECTION 1.4(g);
(e) all liabilities of Seller pursuant to that collective bargaining
agreement between Seller and the Laborers' International Union of North
America, AFL-CIO, Local No. 994, effective from March 7, 1998 through
March 2, 2001;
(f) all liabilities arising from the ownership of the Purchased Assets on
and after the Closing Date;
(g) liabilities relating to the Plans (as defined in SECTION 3.11(a)), but
only to the extent provided in SECTION 6.2; and
(h) liabilities relating to all causes of action and other claims which a
third party may assert in respect of any of the Purchased Assets (but
only to the extent such causes of action or claims relate to liabilities
assumed hereunder).
1.4 EXCLUDED LIABILITIES. Seller shall retain and Buyer shall not assume
any liabilities or obligations (other than the Assumed Liabilities) of Seller
with respect to the Business, whether known or unknown, fixed or contingent,
including without limitation the following obligations or liabilities, as well
as the liabilities in SECTION 1.4 of the Seller Disclosure Schedule (the
"EXCLUDED LIABILITIES"):
(a) all obligations and liabilities arising out of or relating to the
Excluded Assets;
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(b) all financial indebtedness of Seller and any liabilities of Seller
arising under any agreement for borrowed money, including without
limitation, pursuant to any of the following (but exclusive of any
capitalized leases, which shall be Assumed Liabilities):
(i) the Credit Agreement by and among Seller and the other parties
thereto dated as of July 30, 1998 (the "TESA CREDIT FACILITY");
(ii) the Nonnegotiable Subordinated Promissory Note dated as of
July 30, 1998 issued by Seller in the original principal amount of
$500,000 (the "TESA NOTE"); and
(c) all intercompany debt;
(d) all liabilities of Seller, Parent or any affiliate of Parent for Taxes
accruing prior to the Closing Date and Taxes relating to the conduct of
the Business prior to the Closing Date;
(e) all other liabilities of the Business not expressly included in the
Assumed Liabilities, including all liabilities of either Parent or Seller
in connection with the Business arising under or pursuant to
Environmental Laws (as defined in SECTION 3.14) arising from events
occurring prior to the Closing Date;
(f) all overdrafts;
(g) except as expressly provided herein, all liabilities relating to the
employment by Seller of any employee, agent, contractor or consultant, or
the termination of such employment prior to the Closing Date, including
liabilities for compensation and benefits (except, as to the Plans, to
the extent provided in SECTION 6.2); and
(h) all liabilities relating to, resulting from or arising out of employee
exposure to Hazardous Materials in excess of applicable Occupational,
Safety and Health Administration Act and analogous state law standards
and/or requirements at the Carbondale, Illinois facility ("CARBONDALE")
as of or prior to the Closing Date.
1.5 TIME AND PLACE OF CLOSING. The closing of the transactions
contemplated hereby (the "CLOSING") will take place on the Closing Date (defined
below), or at such other time as the parties agree. The Closing shall be held at
the law offices of Morgan, Lewis & Bockius LLP located at 101 Park Avenue,
New York, New York 10178 or such location as may be agreed upon by the parties.
The parties shall use reasonable efforts to cause the Closing to occur on the
first business day following the later to occur of (i) the effective date
(including expiration of any applicable waiting period) of the last required
consent of any regulatory authority having authority over and approving or
exempting the contemplated transaction or (ii) after all the remaining
conditions set forth in ARTICLE VII are satisfied or waived (the "CLOSING
DATE").
ARTICLE II
PURCHASE PRICE
2.1 PURCHASE PRICE. The aggregate purchase price for the Business shall be
(i) Twenty-Three Million United States Dollars (US $23,000,000) (the "CASH
PURCHASE PRICE") and (ii) the assumption by Buyer of the Assumed Liabilities
(collectively, the "PURCHASE PRICE"). The Cash Purchase Price shall be made to
Seller at Closing by wire transfer in immediately available federal funds to an
account designated by Seller by written notice to Buyer at least two days prior
to the Closing Date. The portion of the Purchase Price allocable to the
non-competition provision of SECTION 6.8 shall be US $3,000,000.
2.2 ALLOCATION OF PURCHASE PRICE.
(a) Within sixty (60) days following the Closing Date, Buyer shall prepare
and deliver to Seller and Parent an allocation of the Purchase Price (set
forth as provided in SCHEDULE 2.2) among asset classes as specified by
Section 1060 of the Code and the Treasury regulations thereunder (the
"NOTICE OF ALLOCATION"). This allocation shall be binding upon Seller
unless Seller shall provide a written notice of objection within fifteen
(15) days after receipt of the Notice of Allocation in which event Seller
and Buyer shall negotiate in good faith to resolve such dispute as
expeditiously as possible. Buyer and Seller
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agree that such allocation is in accordance with the rules in
Section 1060 of the Code and the Treasury regulations promulgated
thereunder. Buyer and Seller recognize that the Purchase Price does not
include Buyer's acquisition expenses and that Buyer will allocate such
expenses appropriately.
(b) Seller and Buyer agree to prepare and file on a timely basis any
relevant Tax Returns required to be filed pursuant to Section 1060 of the
Code, the Treasury regulations thereunder or any provisions of local,
state and foreign law (including, without limitation, Asset Acquisition
Statements on IRS Form 8594), setting forth an allocation of the Purchase
Price, pursuant to Section 1060 of the Code and the Treasury regulations
thereunder, in a manner entirely consistent with the allocation set forth
in SCHEDULE 2.2 and agree to act in accordance with such allocation in
the preparation of financial statements and the filing of all Tax Returns
and in the course of any Tax audit, Tax review or Tax litigation relating
thereto. None of Buyer, Parent and Seller will assert that the allocation
reflected in the Notice of Allocation was not separately bargained for at
arm's-length and in good faith.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLER
Except as set forth in the Disclosure Schedule delivered by Seller to Buyer
attached to and incorporated in this Agreement (the "SELLER DISCLOSURE
SCHEDULE"), which Seller Disclosure Schedule shall reference disclosure items by
section, Seller and Parent jointly and severally represent and warrant to Buyer
as follows:
3.1 ORGANIZATION; APPROVALS. Parent is a corporation validly existing and
in good standing under the laws of the State of Delaware. Seller is a
corporation validly existing and in good standing under the laws of the State of
Delaware. Seller has the requisite corporate power and authority and is in
possession of all franchises, grants, authorizations, licenses, permits,
easements, consents, certificates, approvals and orders ("SELLER APPROVALS")
necessary to own, lease and operate its properties and to carry on its business
as it is now being conducted, and Seller has not received any notice of
proceedings relating to the revocation or modification of any Seller Approvals,
except where the failure to be so organized, existing and in good standing or to
have such power, authority, Seller Approvals and revocations or modifications
would not, individually or in the aggregate, have a Material Adverse Effect (as
defined in SECTION 10.3) with respect to the Business.
3.2 CERTIFICATE OF INCORPORATION AND BYLAWS. Seller previously has
furnished to Buyer a true, complete and accurate copy of its current Certificate
of Incorporation and Bylaws, as amended or restated (the "SELLER CERTIFICATE" or
"SELLER BYLAWS"). Such Seller Certificate and Seller Bylaws are in full force
and effect. Seller is not in violation of any of the provisions of the Seller
Certificate or Seller Bylaws.
3.3 AUTHORITY. Each of Parent and Seller has the requisite corporate power
and authority to execute and deliver this Agreement, to perform its obligations
under this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement by Seller and Parent and the
consummation by each of Seller and Parent of the transaction contemplated hereby
have been duly and validly authorized by all necessary corporate action and no
other corporate proceedings on the part of Seller or Parent are necessary to
authorize this Agreement or to consummate the transactions contemplated hereby
(other than applicable stockholder approvals). This Agreement has been duly
executed and delivered by, and constitutes a valid and binding obligation of,
Seller and Parent and, assuming due authorization, execution and delivery by
Buyer, is enforceable against Seller and Parent in accordance with its terms,
except as enforcement may be limited by general principles of equity whether
applied in a court of law or a court of equity and by bankruptcy, insolvency and
similar laws affecting creditors' rights and remedies generally.
3.4 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Agreement by Seller and Parent does
not, and the performance of this Agreement and the transactions
contemplated hereby by Seller and Parent shall not, (i) conflict with or
violate the Seller Certificate or Seller Bylaws or the Certificate of
Incorporation or Bylaws of Parent, (ii) conflict with or violate any
federal or state law, statute, ordinance, rule, regulation, order,
judgment or decree (collectively, "LAWS") applicable to Seller or Parent
or by which it or any of their properties are bound or affected, or
(iii) result in any breach of or constitute a default (or an event that
with notice or lapse of time or both would become a default) under, or
give to others any rights of
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termination, amendment, acceleration or cancellation of, or result in the
creation of a Lien (as defined in SECTION 10.3) on any of the Purchased
Assets pursuant to any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or
obligation to which Seller or Parent are parties or by which they or any
of their properties are bound or affected, except in the case of
clauses (ii) and (iii) for any such conflicts, violations, breaches,
defaults or other occurrences that, individually or in the aggregate,
would not have a Material Adverse Effect with respect to the Business.
Seller is not a "restricted subsidiary" under the terms of that certain
Indenture dated as of October 23, 1996, by and among Parent, CPC and the
other parties thereto.
(b) The execution and delivery of this Agreement by Seller and Parent does
not, and the performance of this Agreement by Seller or Parent shall not,
require any consent, approval, authorization or permit of, or filing with
or notification to any governmental or regulatory authority or any third
party except for applicable requirements, if any, of the Securities Act
of 1933, as amended (the "SECURITIES ACT"), the Securities Exchange Act
of 1934, as amended (the "EXCHANGE ACT"), state securities or blue sky
laws ("BLUE SKY LAWS"), the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended (the "HSR ACT"), the filing of other documents as
required by applicable Law, applicable transfer tax filings and where the
failure to obtain such consents, approvals, authorizations or permits
would not prevent or delay consummation of the transactions contemplated
hereby, or otherwise prevent Seller or Parent from performing its
obligations under this Agreement and would not have a Material Adverse
Effect with respect to the Business.
3.5 COMPLIANCE; PERMITS. Seller is not in conflict with, or in default or
violation of, (i) any Law applicable to Seller or by which the Business is bound
or affected, or (ii) any note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise or other instrument or obligation to which
Seller is a party or by which the Business is bound or affected, except for any
such conflicts, defaults or violations which would not, individually or in the
aggregate, have a Material Adverse Effect with respect to the Business.
3.6 INVENTORY. The inventory of Seller consists of raw materials and
supplies, manufactured and processed parts, work-in-progress and finished goods,
all of which is merchantable and fit for the purpose for which it was procured
or manufactured, and none of which is slow moving, obsolete, damaged or
defective, subject to the reserve for inventory writedown set forth on Seller's
balance sheet at December 31, 1998 (or in any notes thereto), and as adjusted
for operations and transactions through the Closing Date in accordance with the
past custom and practice of Seller.
3.7 ACCOUNTS RECEIVABLE. The accounts receivable of Seller are reflected
properly on its books and records, are valid receivables subject to no setoffs
or counterclaims, are current and collectible, and will be collected in
accordance with their terms at their recorded amounts, subject to the reserve
for bad debts set forth on Seller's balance sheet at December 31, 1998 (or in
any notes thereto), and as adjusted for operations and transactions through the
Closing Date in accordance with the past custom and practice of Seller. All
accounts receivable of Seller are listed in SECTION 3.7 of the Seller Disclosure
Schedule.
3.8 FINANCIAL STATEMENTS.
(a) Prior to the execution of this Agreement, Seller has delivered to Buyer
complete and correct copies of Seller's unaudited balance sheet and
income statement for the period ended December 31, 1998, and Parent's
audited consolidated balance sheet and income statement for the year
ended December 31, 1998 (the "FINANCIAL STATEMENTS"). All such Financial
Statements are complete and correct in all material respects and were
(i) prepared from the books of account or other financial records of
Seller and Parent, (ii) prepared in accordance with GAAP applied on a
consistent basis throughout the periods involved (except as may be
indicated in the notes to such financial statements), and (iii) fairly
present in all material respects the consolidated financial position of
Seller and Parent at the respective dates and the consolidated results of
operations and cash flows for the periods indicated, except that the
interim consolidated financial statements were or are subject to normal
and recurring year-end adjustments which were not or are not expected to
be material in amount or effect and do not have any footnote disclosures.
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(b) Except (i) for the liabilities that are fully reflected or reserved
against in the Financial Statements (including any related notes thereto)
or not required to be reflected or reserved against in accordance with
GAAP and (ii) for the liabilities incurred in the ordinary course of
business consistent with past practice since December 31, 1998, neither
Parent nor Seller has incurred any liability that, either alone or when
combined with all similar liabilities, has had or would have a Material
Adverse Effect with respect to the Business.
3.9 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in the
Financial Statements or reports filed by Parent pursuant to the Securities Act
or Exchange Act (the "PARENT REPORTS") filed prior to the date of this
Agreement, since December 31, 1998 to the date of this Agreement, Seller has
conducted the Business only in the ordinary course and in a manner consistent
with past practice and, since December 31, 1998, there has not been (i) any
change in the financial condition, results of operations or business of Seller
having a Material Adverse Effect with respect to the Business, (ii) any damage,
destruction or loss not covered by insurance with respect to any assets of
Seller having a Material Adverse Effect with respect to the Business, (iii) any
declaration, setting aside or payment of any dividends or distributions in
respect of shares of capital stock of Seller or any redemption, purchase or
other acquisition of any of its securities, (iv) any entering into of any new,
or modification, amendment or termination (partial or complete) of any existing
collective bargaining agreement, contract or other agreement or understanding
with a labor union or similar organization to which Seller has been, or is, a
party or Plan (as defined below), or other increase in the salary, bonus, rate
of commission or rate of consulting fees payable or to become payable to any
directors, officers, employees or consultants of Seller, or employment or
severance agreement or other employee compensation arrangement with any of its
directors, officers or employees (whether new hires or existing employees), in
each case where such compensation or arrangement exceeds $75,000, or (v) any
union organizing activities relating to employees of Seller or any entering into
of any other material transaction involving or affecting each Seller outside the
ordinary course of business of Seller consistent with past practice.
3.10 ABSENCE OF LITIGATION. Neither Seller nor Parent is a party to any,
and there are no pending or, to the knowledge of Seller and Parent, threatened,
legal, administrative, arbitral or other proceedings, claims, actions or
governmental or regulatory investigations of any nature against Seller or Parent
challenging the validity or propriety of the transactions contemplated by this
Agreement which if unfavorably determined would prevent the consummation of the
transactions contemplated hereby. There are no claims and judgments pending with
respect to which Seller has been duly served or otherwise received notice as of
the date of this Agreement, or, to the knowledge of either Seller or Parent,
threatened against Seller or outstanding against Seller or affecting the
Business, that in the aggregate would have a Material Adverse Effect on the
Business. No injunction, order, judgment, decree or regulatory restriction has
been imposed on Parent, Seller or the assets of Seller which has had or
reasonably could be expected to have a Material Adverse Effect with respect to
the Business.
3.11 EMPLOYEE BENEFIT PLANS.
(a) PLANS OF SELLER. SECTION 3.11(a) of the Seller Disclosure Schedule
lists (i) all employee benefit plans (as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")), and
all bonus, stock option, stock purchase, restricted stock, incentive,
deferred compensation, retiree medical or life insurance, supplemental
retirement, severance or other benefit plans, programs or arrangements and
all employment termination, severance or other employment contracts or
employment agreements, with respect to which Seller has any obligation and
which benefit any of its employees (collectively, the "PLANS"). Seller has
furnished or made available to Buyer a copy of each Plan (or a description
of the Plans, if the Plans are not in writing) and a copy of (i) each trust
or other funding arrangement, (ii) each summary plan description and summary
of material modifications, (iii) any IRS Forms 5500 and related schedules
filed since August 1998, (iv) any IRS determination letter for each such
Plan issued since August 1998, (v) any actuarial and financial statements in
connection with each such Plan issued since August 1998, and (vi) any other
material information relating to each such Plan as requested by Buyer, to
the extent it is available to the Company.
(b) ABSENCE OF CERTAIN TYPES OF PLANS. No plan is described in
Section 401(a)(1) of ERISA. SECTION 3.11(b) of the Seller Disclosure
Schedule lists all Plans that obligate Seller to pay separation, severance,
termination or similar-type benefits solely as a result of any transactions
contemplated by this
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Agreement or as a result of a "change in control," within the meaning of
such term under Section 280G of the Code (as defined below).
(c) COMPLIANCE WITH APPLICABLE LAW. Except as set forth in
SECTION 3.11(c) of the Seller Disclosure Schedule, each Plan has been
operated in all material respects in accordance with the requirements of all
applicable Law and all persons who participate in the operation of such
Plans and all Plan "fiduciaries" (within the meaning of Section 3(21) of
ERISA) have acted in all material respects in accordance with the provisions
of all applicable Law. Seller has performed in all material respects all
obligations required to be performed by it under the Plans, is not in
material default under or in material violation of the Plans and Seller has
no knowledge of any such default or violation by any party to the Plans.
(d) QUALIFICATION OF CERTAIN PLANS. Each Plan that is intended to be
qualified under Section 401(a) of the Code or Section 401(k) of the Code
(including each trust established in connection with such a Plan that is
intended to be exempt from Federal income taxation under Section 501(a) of
the Code) has received a favorable determination letter from the Internal
Revenue Service ("IRS") that it is so qualified, and to Seller's knowledge
no material fact or event has occurred since the date of such determination
letter from the IRS to adversely affect the qualified status of any such
Plan. No trust, if any, maintained or contributed by Seller to fund any Plan
is intended to be qualified as a voluntary employees' beneficiary
association or is intended to be exempt from federal income taxation under
Section 501(c)(9) of the Code.
(e) ABSENCE OF CERTAIN LIABILITIES AND EVENTS. Seller has not incurred
any material liability under Title IV of ERISA or for any excise tax arising
under Section 4971 through 4980E of the Internal Revenue Code of 1986, as
amended (the "CODE") with respect to any Plan, and to the knowledge of
Seller no fact or event exists that could give rise to any such liability.
(f) PLAN CONTRIBUTIONS. All contributions, premiums or payments
required to be made with respect to any Plan have been made.
(g) MULTIEMPLOYER PLANS. Each Plan that is a multiemployer plan
(within the meaning of Section 3(37) of ERISA) is disclosed in
SECTION 3.11(g) of the Seller Disclosure Schedule. With respect to each such
plan, (i) no withdrawal liability has been incurred by Seller and Seller has
no reason to believe that any such liability will be incurred prior to the
Closing Date, (ii) to Seller's knowledge no such plan is in "reorganization"
(within the meaning of Section 4241 of ERISA), no proceedings have been
instituted by the Pension Benefit Guaranty Corporation against the plan,
there is no contingent liability for withdrawal liability by reason of a
sale of assets pursuant to Section 4204 of ERISA, and any withdrawal under
Section 4203 of ERISA that will occur by reason of the Closing will not
result in the imposition of withdrawal liability on Seller, and (iii) no
notice has been received that increased contributions may be required to
avoid a reduction in plan benefits or the imposition of an excise tax, or
that the plan is or may become "insolvent" (within the meaning of
Section 4245 of ERISA).
(h) POST-RETIREMENT MEDICAL. No Plan provides medical or life benefits
beyond an employee's termination of employment (other than as required by
applicable Law).
3.12 LABOR AND EMPLOYMENT MATTERS.
(a) Except for confidentiality, noncompetition, consulting or other similar
contracts with any employees, consultants, officers or directors of
Seller set forth in SECTION 3.12(a) of the Seller Disclosure Schedule,
Seller is not a party to any such contracts. Each such contract is in
full force and effect and neither Seller nor Parent or, to the knowledge
of Seller or Parent, any other party to such contract has received notice
that Seller is in violation or breach of or default in any material
respect under any such contract (or with notice or lapse of time or both,
would be in violation or breach of or default in any material respect
under any such contract).
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(b) Except as set forth in SCHEDULE 3.12(b) of the Seller Disclosure
Schedule: (i) Seller's current employees are not represented by a labor
union or organization, no labor union or organization has been certified
or recognized as a representative of any such current employees, and
Seller is not a party to and/or has any obligation under any collective
bargaining agreement or other labor union contract, white paper or side
agreement with any labor union or organization or any obligation to
recognize or deal with any labor union or organization, and there are no
such contracts, white papers or side agreements pertaining to or which
determine the terms or conditions of employment of any current employees
of Seller; (ii) there are no pending or threatened representation
campaigns, elections or proceedings or questions concerning union
representation involving any current employees; (iii) neither Seller nor
Parent has knowledge of any activities or efforts of any labor union or
organization (or representatives thereof) to organize any current
employees of Seller, nor of any demands for recognition or collective
bargaining, nor of any strikes, slowdowns, work stoppages or lock-outs of
any kind, or threats thereof, by or with respect to any current employees
or any actual or claimed representatives thereof, and no such activities,
efforts, demands, strikes, slowdowns, work stoppages or lock-outs
occurred since July 15, 1998 (and, to the knowledge of Seller and Parent,
for the past 24 months); (iv) Seller has not engaged in, admitted
committing or been held in any administrative or judicial proceeding to
have committed any unfair labor practice under the National Labor
Relations Act, as amended; (v) Seller is not involved in any industrial
or trade dispute or any dispute or negotiations regarding a claim of
material importance with any labor union or organization; and (vi) there
are no controversies, claims, demands or grievances of material
importance pending or, so far as Seller or Parent is aware, threatened,
between Seller, on the one hand, and any of its employees or any actual
or claimed representative thereof, on the other hand.
(c) Seller is in material compliance with all Laws relating to the
employment of labor, including but not limited to such Laws relating to
wages, hours, the Worker Adjustment Retraining and Notification Act of
1988 ("WARN"), collective bargaining, discrimination, civil rights,
safety and health, worker's compensation and the collection and payment
of withholding and/or social security taxes and any similar tax.
3.13 TANGIBLE PERSONAL PROPERTY. Seller has good and indefeasible title to
all of its owned tangible personal property and assets, free and clear of all
Liens, except liens for Taxes not yet due and payable, pledges to secure
deposits and such minor imperfections of title, if any, as do not materially
detract from the value of or interfere with the present use of such property or
which, individually or in the aggregate, would not have a Material Adverse
Effect with respect to the Business. All leases pursuant to which Seller leases
from others tangible or personal property are in good standing, valid and
effective in accordance with their respective terms. All items of tangible
personal property are listed in SECTION 3.13 of the Seller Disclosure Schedule,
indicating which such tangible personal property is owned or leased. All such
tangible personal property is adequate and suitable for the conduct of the
Business and is in good working order and condition, ordinary wear and tear
excepted.
3.14 ENVIRONMENTAL MATTERS. Seller and Parent represent and warrant as
follows: (i) Seller and all Real Property and real property subject to Real
Property Leases are in compliance with all applicable Environmental Laws (as
defined below); (ii) there is no amount of asbestos or ureaformaldehyde material
in or on any property owned, leased or operated by Seller or Parent in
connection with the Business; (iii) there are no underground storage tanks
located on, in or under any properties currently owned, leased or operated by
Seller or Parent in connection with the Business that violate or result in
liability under any Environmental Law (as defined below); (iv) neither Seller
nor Parent have been notified by any governmental agency or third party of any
pending or threatened Environmental Claim (as defined below) against Seller or
Parent in connection with the Business; (v) neither Seller nor Parent have been
notified by any governmental agency or any third party that either Seller or
Parent in connection with the Business may be a potentially responsible party
for environmental contamination or any Release (as defined below) of Hazardous
Materials (as defined below) in connection with the Business; (vi) Seller has
obtained and holds all permits, licenses and authorizations required under
applicable Environmental Laws relating to the Business ("ENVIRONMENTAL
PERMITS"); (vii) Seller is in compliance with all terms, conditions and
provisions of all applicable Environmental Permits; (viii) no Releases of
Hazardous Materials have occurred at, from, in, on, or under any property
currently or formerly owned,
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operated or leased by Seller or Parent in connection with the Business or any
predecessors of the Seller or Parent in connection with the Business and no
Hazardous Materials are present in, on or about any such property that could
give rise to an Environmental Claim by a third party (including any governmental
entity or private party) against Seller; and (ix) neither Seller nor Parent in
connection with the Business have transported or arranged for the treatment,
storage, handling, disposal or transportation of any Hazardous Material to any
location which could result in an Environmental Claim against or liability to
Seller; and (x) there have been no environmental investigations, studies, audits
or tests conducted by, on behalf of or which are in the possession of any Seller
or the Parent with respect to any property currently or formerly owned, leased
or operated by either Seller or Parent in connection with the Businesses thereof
which have not been delivered to Buyer prior to execution of this Agreement,
except in each case where such event or condition would not have a Material
Adverse Effect on the Business.
For purposes of this Section, "ENVIRONMENTAL CLAIMS" shall mean any and all
administrative, regulatory, judicial or private actions, suits, demands,
notices, claims, investigations, injunctions or similar proceedings that may
create liability for Seller in any way relating to: (i) any Environmental Law;
(ii) any Hazardous Material, including without limitation any investigation,
monitoring, abatements, removal, remedial, corrective or other response action
in connection with any Hazardous Material, Environmental Law or order or notice
of liability or violation of a governmental entity or Environmental Law; or
(iii) any actual or alleged damage, injury, threat or harm to the environment.
"HAZARDOUS MATERIALS" shall mean any and all chemicals, pollutants,
contaminants, wastes, toxic substances, compounds, products, solid, liquid, gas,
petroleum, asbestos, asbestos-containing materials, polychlorinated biphenyls or
other regulated substances or materials which are hazardous, toxic or otherwise
harmful to the environment.
"ENVIRONMENTAL LAW" shall mean any and all federal and state civil and
criminal laws, statutes, ordinances, orders, codes, rules or regulations of any
governmental or regulatory authority relating to the protection of health, the
environment, natural resources, worker health and safety and/or governing the
handling, use, generation, treatment, storage, transportation, disposal,
manufacture, distribution, formulation, packaging, labeling, or Release of
Hazardous Materials, including but not limited to: the Clean Air Act, 42 U.S.C.
Section7401 ET SEQ.; the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, 42 U.S.C. Section9601 ET SEQ.; the Federal Water
Pollution Control Act, 33 U.S.C. Section1251 ET SEQ.; the Hazardous Material
Transportation Act, 49 U.S.C. Section1801 ET SEQ.; the Federal Insecticide,
Fungicide and Rodenticide Act, 7 U.S.C. Section136 ET SEQ.; the Resource
Conservation and Recovery Act of 1976 ("RCRA"), 42 U.S.C. Section6901 ET SEQ.;
the Toxic Substances Control Act, 15 U.S.C. Section2601 ET SEQ.; the
Occupational Safety & Health Act of 1970, 29 U.S.C. Section651 ET SEQ.; the Oil
Pollution Act of 1990, 33 U.S.C. Section2701 ET SEQ.; and the state analogies
thereto, all as amended or superseded from time to time, on or before, but not
after, the Closing Date.
"RELEASE" shall mean any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping or disposing of a
Hazardous Material into the environment.
3.15 ABSENCE OF AGREEMENTS. Seller is not a party to any agreement, order,
directive, memorandum of understanding or similar arrangement that restricts
materially the conduct of the Business, except for those the existence of which
has been disclosed in writing to Buyer prior to the date of this Agreement, nor
has Seller been advised, that any person or governmental authority is
contemplating issuing or requesting any such agreement, order, directive,
memorandum of understanding or similar arrangement.
3.16 TAXES.
(a) The Seller and Parent jointly and severally represent and warrant as
follows, limited, however, in each case, to Taxes, Tax Returns or other
Tax matters (i) that include, relate to or otherwise affect the Business
or the Purchased Assets, (ii) that could result in the imposition of a
lien on, or the assertion of a claim against, the Buyer with respect to
any Purchased Asset or (iii) that could affect the computation of the
taxable income or the Tax liability of Buyer or any affiliate thereof for
any Post-Closing Period. Parent and Seller have duly and timely filed all
federal, state, local and other returns and reports (the "TAX RETURNS")
with respect to Seller or any affiliated, combined, consolidated, unitary
or similar group of which Seller or any subsidiary is or was a member (a
"RELEVANT GROUP")
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which are required to be filed with respect to all federal, state, local
or foreign net or gross income, gross receipts, net proceeds, sales, use,
ad valorem, transfer, value added, franchise, withholding, payroll,
employment, disability, excise, property, alternative or add-on minimum,
environmental or other taxes, assessments, duties, fees, levies or other
governmental charges of any nature whatever, except to the extent in
dispute and set forth in SECTION 3.16(a) of the Seller Disclosure
Schedule, together with any interest, penalties, additions to tax or
additional amounts with respect thereto (the "TAXES"); all Taxes shown on
the Tax Returns have been fully and timely paid and all such Tax Returns
are complete and correct. There are no pending or, to the knowledge of
Parent and Seller, threatened examinations, claims, liens, assessments or
deficiencies to which Seller or the Purchased Assets may be subject; all
Taxes due and payable by Parent or Seller with respect to the Purchased
Assets have been fully and timely paid.
(b) Seller is not a party to any agreement extending the time within which
to file any Tax Return. To Seller's knowledge, no claim has been made by
a jurisdiction in which Seller does not file Tax Returns that Seller is
or may be subject to taxation by that jurisdiction.
(c) Seller has not waived any statute of limitations in respect of Taxes or
agreed to any extension of time with respect to any Tax assessment or
deficiency.
3.17 INSURANCE. SECTION 3.17 of the Seller Disclosure Schedule lists all
policies of insurance of Seller currently in effect. Each policy listed on such
Schedule is valid and in full force and effect. To Parent's and Seller's
knowledge, Seller has no liability for unpaid premiums or premium adjustments
not properly reflected on the applicable financial statements.
3.18 BROKERS. No broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Parent or Seller, except as provided in that certain letter
agreement between Parent and Schroder & Co. Inc. regarding such fees and such
fees are the sole responsibility of, and are to be paid by, Parent.
3.19 MATERIAL CONTRACTS. Except as included as exhibits in Parent Reports,
Seller is not a party to or obligated under any material contract, agreement or
other instrument or understanding that is not terminable by Seller without
additional payment or penalty within 90 days.
3.20 SUBSTANTIAL CUSTOMERS AND SUPPLIERS. SECTION 3.20 of the Seller
Disclosure Schedule lists the 5 largest customers or clients of Seller on the
basis of revenues for goods sold or services provided in the fiscal year ended
1997 and the 10 largest customers or clients in the fiscal year ended 1998.
SECTION 3.20 of the Seller Disclosure Schedule lists the 10 largest suppliers of
Seller on the basis of cost of goods or services purchased in the fiscal years
ended 1997 and 1998. For each such customer or supplier set forth in such
Schedule, a copy of such supplier or customer contract, agreement or
understanding with Seller or Parent has been delivered to Buyer prior to
execution of this Agreement. No such customer, client or supplier has ceased or
materially reduced its purchases from or sales or provision of services to
Seller since December 31, 1998, or to the knowledge of Seller or Parent, has
threatened to cease or materially reduce such purchases or sales or provision of
services after the date of this Agreement. Except for deposits or other
nonmaterial amounts paid in the ordinary course of business consistent with past
practice, Seller has not accepted any prepayment of any sales price or fee from
any client or customer that relates to products not yet delivered or services
not yet performed by Seller.
3.21 INTELLECTUAL PROPERTY.
(a) Seller owns all right, title and interest in or possesses adequate
licenses or other rights to use (i) all discoveries and inventions
(whether patentable or unpatentable and whether or not reduced to
practice), all improvements thereto, and all patents, patent applications
(either filed or in preparation for filing), and patent disclosures,
together with all reissuance, continuations, continuations-in-part,
revisions, extensions and reexaminations thereof, (ii) all trademarks,
service marks, trade dress, brand names, logos, trade names, Internet
domain names, and corporate names, together with all translations,
adaptations, derivations and combinations thereof and including all
goodwill associated therewith, and all applications (either filed or in
preparation for filing), registrations and renewals in
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connection therewith, (iii) all copyrightable works, all copyrights and
all applications (either filed or in preparation for filing),
registrations and renewals in connection therewith, (iv) all trade
secrets and confidential business information (including ideas, research
and development, know-how, formulas, compositions, recipes, manufacturing
and production processes and techniques, technical data, designs,
drawings, specifications, customer and supplier lists, pricing and cost
information and business and marketing plans and proposals), (v) all
computer software (including source code, data and related
documentation), (vi) all other proprietary rights, (vii) all copies and
tangible embodiments of all the foregoing (in whatever form or medium)
("INTELLECTUAL PROPERTY") used in or material to conduct the Business
without conflict with the rights of others. Seller Disclosure Schedule
SECTION 3.21(a) sets forth a description of (i) all Intellectual Property
currently owned by or licensed to Seller and (ii) all licenses,
royalties, assignments and other similar agreements relating to the
foregoing to which Seller is a party and all agreements relating to
technology, know-how or processes that Seller is licensed or authorized
to use by others, or which it licenses or authorizes others to use, and
which Seller uses (the "INTELLECTUAL PROPERTY AGREEMENTS"). No other
Intellectual Property is used in or material to the conduct of the
Business.
(b) The Intellectual Property does not infringe or violate the intellectual
property or contractual rights of any third parties in any country where
Seller does Business; to Seller's knowledge, no claim has been asserted
or threatened by any person to the ownership of or right to use any
Intellectual Property or challenging or questioning the validity or
effectiveness of any such license or agreement, and neither Parent nor
Seller has knowledge of a valid basis for any such claim; Parent and
Seller have no knowledge of any claim that any product, activity or
operation of Seller infringes upon or involves, or has resulted in the
infringement of, any intellectual property rights of any other person,
and no proceedings have been instituted, are pending or, to the best of
the knowledge of Parent and Seller, are threatened which challenge the
rights of Seller with respect thereto, and neither Parent nor Seller has
knowledge of a valid basis for any such claim.
(c) To Seller's knowledge, no Intellectual Property is being infringed by
any third party; no action has been asserted or threatened that any
Intellectual Property is being infringed by any third party.
(d) All of the registrations and applications set forth in SECTION 3.21(d)
of the Seller Disclosure Schedule are in full force and effect and all
necessary registration, maintenance and renewal fees in connection
therewith have been made and all necessary documents and certificates in
connection therewith have been filed with the relevant patent, copyright,
trademark or other authority in the United States or foreign
jurisdictions, as the case may be, for the purpose of maintaining the
registrations or applications for registration of such Intellectual
Property or updating record title thereto, except where such events,
either individually or in the aggregate, would not, or be reasonably
likely to, have a Material Adverse Effect on the Business.
(e) All of the Intellectual Property is free and clear of any and all Liens.
There are no restrictions on the direct or indirect transfer of the
Intellectual Property, except as disclosed in any agreements licensing
such Intellectual Property to Seller.
(f) The Intellectual Property Agreements are valid and binding and in full
force and effect, and true and correct copies have been provided to the
Buyer; Seller has not granted any license, agreement or other permission
to use such Intellectual Property except as disclosed on SECTION 3.21(f)
of the Seller Disclosure Schedule; the consummation of the transactions
contemplated by this Agreement will not violate nor result in the breach,
modification, cancellation, termination or suspension of the Intellectual
Property Agreements, and Seller is in compliance with, and has not
breached any term of, any Intellectual Property Agreement, and, to the
knowledge of Seller, all of the other parties to such Intellectual
Property Agreements are in compliance with, and have not breached, any of
the terms thereof; there is no dispute between Seller and any other party
to any Intellectual Property Agreement regarding the scope of the license
or performance under any applicable Intellectual Property Agreement,
including with respect to any payments to be made by the Seller
thereunder, except where such events, either individually or in the
aggregate, would not have, or be reasonably likely to have, a Material
Adverse Effect on the Business.
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(g) Seller has made available to Buyer prior to the execution of this
Agreement any available documentation with respect to any invention,
process, design, computer software and program or other know-how or trade
secret or proprietary information included in such Intellectual Property,
which documentation, if any, is accurate in all material respects and
reasonably sufficient in detail and content to identify and explain such
invention, process, design, computer software and programs or other
know-how or trade secret or proprietary information. Seller has taken
reasonable security measures to protect the secrecy, confidentiality and
value of their trade secrets and proprietary information (including the
reasonable enforcement by Seller of a policy requiring each employee or
contractor to execute proprietary information and confidentiality
agreements in substantially Seller's standard form, and to Seller's
knowledge all current and former employees and contractors of Seller have
executed such an agreement).
3.23 YEAR 2000 REPRESENTATION. No technology owned, developed or licensed
by the Company or used in connection with the business (including, but not
limited to, information systems and technology, commercial and noncommercial
hardware and software, firmware, mechanical or electrical products, embedded
systems, or any other electro-mechanical or processor-based system, whether as
part of a desktop system, office system, building system or otherwise)
(collectively, the "TECHNOLOGY") will experience any malfunctions, premature
cancellation or expiration of contractual rights or deletion of data, or any
other problems in connection with (i) the year 2000 (and all subsequent years)
as distinguished from 1900 years, (ii) the date February 29, 2000, and all
subsequent leap years, and (iii) the date September 9, 1999, except where such
problems, either individually or in the aggregate, would not have a Material
Adverse Effect on the Business.
3.24 REAL PROPERTY. The Real Property listed on SECTION 1.1(a) of the
Seller Disclosure Schedule and Real Property Leases listed on SECTION 1.1(b) of
the Seller Disclosure Schedule are the only property of similar type used by
Seller in the Business. Seller owns the Real Property in fee subject to no
Liens, except for those set forth in SECTION 3.24 of the Seller Disclosure
Schedule. Seller's interest in the Real Property Leases is subject to no Liens,
except for those set forth in SECTION 3.24 of the Seller Disclosure Schedule.
True and correct copies of the Real Property Leases have been delivered or made
available to Buyer by Seller. Subject to the terms of the respective Real
Property Leases, Seller has a valid and subsisting leasehold estate in and the
right to quiet enjoyment to the property subject thereto for the full term of
the respective Real Property Lease. The Real Property Leases are in full force
and effect and are enforceable in accordance with their respective terms, except
as such enforceability may be subject to or limited by bankruptcy, insolvency,
reorganization or other similar Laws, now or hereafter in effect, affecting the
enforcement of creditors' rights generally. Seller has not assigned, pledged,
mortgaged, hypothecated or otherwise transferred any Real Property Lease. Seller
has not sublet all or any portion of any Leased Real Property. Seller has not
received any written notice of default under any Real Property Lease, and to
Seller's knowledge there is no material default by any tenant or landlord under
any Real Property Lease, and no event has occurred or failed to occur which,
with the giving of notice or the passage of time, or both, would constitute a
material default under any Real Property Lease. No portion of any parcel of Real
Property or real property subject to a Real Property Lease is located in an area
designated as a flood zone by any governmental entity, except to the extent such
property is adequately insured by a policy of flood insurance. The Facilities
are adequate and suitable for the conduct of the Business and are in good
working order and condition, ordinary wear and tear excepted.
3.25 DISCLOSURE. No representation or warranty of Seller or Parent
contained in this Agreement, and no statement contained in the Seller Disclosure
Schedule or in any certificate, list or other writing furnished to Buyer
pursuant to any provision of this Agreement contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements herein or therein, in light of the circumstances under which they
were made, not misleading.
3.26 MATERIAL ADVERSE EFFECT. Since December 31, 1998, there has been no
Material Adverse Effect with respect to the Business.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Except as set forth in the Disclosure Schedule delivered by Buyer to Seller
and Parent attached to this Agreement (the "BUYER DISCLOSURE SCHEDULE"), which
Buyer Disclosure Schedule shall reference disclosure items by section, Buyer
represents and warrants to Seller and Parent as follows:
4.1 ORGANIZATION; APPROVALS. Buyer is a corporation validly existing and
in good standing under the Canada Business Corporations Act. Buyer has the
requisite corporate power and authority and is in possession of all franchises,
grants, authorizations, licenses, permits, easements, consents, certificates,
approvals and orders ("BUYER APPROVALS") necessary to own, lease and operate its
properties and to carry on its business as it is now being conducted, and Buyer
has not received any notice of proceedings relating to the revocation or
modification of any Buyer Approvals, except where the failure to be so
organized, existing and in good standing or to have such power, authority, Buyer
Approvals and revocations or modifications would not, individually or in the
aggregate, have a Material Adverse Effect with respect to Buyer.
4.2 AUTHORITY. Buyer has the requisite corporate power and authority to
execute and deliver this Agreement, to perform its obligations under this
Agreement and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement by Buyer and the consummation by Buyer of the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action and no other corporate proceedings on the part of
Buyer are necessary to authorize this Agreement or to consummate the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by, and constitutes a valid and binding obligation of, Buyer and,
assuming due authorization, execution and delivery by Seller and Parent, is
enforceable against Buyer in accordance with its terms, except as enforcement
may be limited by general principles of equity whether applied in a court of law
or a court of equity and by bankruptcy, insolvency and similar laws affecting
creditors' rights and remedies generally.
4.3 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Agreement by Buyer does not, and the
performance of this Agreement and the transactions contemplated hereby by
Buyer shall not, (i) conflict with or violate the charter documents of
Buyer, (ii) conflict with or violate any Laws applicable to Buyer or by
which it or any of its properties are bound or affected, or (iii) result
in any breach of or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of, or
result in the creation of a Lien on any of the properties or assets of
Buyer pursuant to any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or
obligation to which Buyer is a party or by which it or any of its
properties is bound or affected, except in the case of clauses (ii) and
(iii) for any such conflicts, violations, breaches, defaults or other
occurrences that, individually or in the aggregate, would not have or be
reasonably likely to have a Material Adverse Effect with respect to
Buyer.
(b) The execution and delivery of this Agreement by Buyer does not, and the
performance of this Agreement by Buyer shall not, require any consent,
approval, authorization or permit of, or filing with or notification to
any governmental or regulatory authority or any third party except for
applicable requirements, if any, of the Securities Act, the Exchange Act,
the Blue Sky Laws, the HSR Act, and filing of other documents as required
by applicable law, applicable transfer tax filings and where the failure
to obtain such consents, approvals, authorizations or permits would not
prevent or delay consummation of the transactions contemplated hereby or
otherwise prevent Buyer from performing its obligations under this
Agreement and would not have a Material Adverse Effect with respect to
Buyer.
4.4 ABSENCE OF LITIGATION. Buyer is not a party to any, and there are no
pending or, to the knowledge of Buyer, threatened, legal, administrative,
arbitral or other proceedings, claims, actions or governmental or regulatory
investigations of any nature against Buyer challenging the validity or propriety
of the transactions contemplated by this Agreement which if unfavorably
determined would prevent the consummation of the transactions contemplated
hereby.
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4.5 BROKERS. No broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Buyer, except as provided in that certain letter agreement between
Buyer and Downer & Company L.L.C. regarding such fees, which fees are the sole
responsibility of, and are to be paid by, Buyer.
4.6 DISCLOSURE. No representation or warranty of Buyer contained in this
Agreement, and no statement contained in the Buyer Disclosure Schedule or in any
certificate, list or other writing furnished to Seller or Parent pursuant to any
provision of this Agreement contains any untrue statement of a material fact or
omits to state a material fact necessary in order to make the statements herein
or therein, in light of the circumstances under which they were made, not
misleading.
ARTICLE V
CERTAIN COVENANTS
5.1 AFFIRMATIVE COVENANTS. Seller and Parent covenant and agree with Buyer
that from and after the date of this Agreement and prior to the Closing Date,
unless the prior written consent of Buyer shall have been obtained and except as
otherwise contemplated herein, Seller will, and Parent shall cause Seller to:
(a) operate its business only in the ordinary course consistent with past
practices;
(b) use reasonable efforts to preserve intact its business organization and
assets, maintain its rights and franchises, retain the services of its
officers and key employees and maintain its relationships with customers;
(c) use reasonable efforts to maintain and keep its properties in good
repair and condition, ordinary wear and tear excepted;
(d) use reasonable efforts to keep in full force and effect insurance and
bonds comparable in amount and scope of coverage to that now maintained
by it;
(e) perform in all material respects all obligations required to be
performed by it under all material contracts, leases and documents
relating to or affecting the Business;
(f) maintain its Books and Records in the usual, regular or ordinary manner
consistent with past practice and provide Buyer access to such materials
at a reasonable time and place as Buyer and Seller may agree;
(g) use reasonable efforts to obtain all authorizations, consents, orders
and approvals from all governmental or regulatory authorities that may be
or become necessary for its execution and delivery of and the performance
of its obligations under this Agreement;
(h) take such reasonable action as shall be required to fulfill any and all
contractual or statutory obligations Seller may have to any unions or
labor organizations or otherwise as a result of or relating to the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby;
(i) take such reasonable actions required pursuant to the terms of any
contracts and agreements to address the consequences of the transactions
contemplated by this Agreement, and to obtain necessary consents and
required releases; and
(j) use best efforts to obtain from the City of Carbondale (the "City") an
amendment to the Lease Agreement listed on SCHEDULE 1.1(b), whereby the
City waives its termination rights pursuant to the provisions of
Article XIV of such Lease Agreement.
In addition, Parent will vote all of its shares of stock of Seller to authorize
the transactions contemplated by this Agreement pursuant to the terms and
conditions set forth in this Agreement.
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5.2 NEGATIVE COVENANTS. Except as specifically contemplated by this
Agreement, from the date of this Agreement until the Closing Date, Seller shall
not, and Parent shall cause Seller not to, without the prior written consent of
Buyer, do any of the following:
(a) except as required by applicable Law or to maintain qualification
pursuant to the Code, adopt, amend, renew or terminate any Plan or any
agreement, arrangement, plan or policy between Seller and one or more of
Seller's current or former directors, officers or employees, or except
for normal increases in the ordinary course of business consistent with
past practice or except as required by applicable Law, increase in any
manner the base salary, bonus incentive compensation or fringe benefits
of any director, officer or employee or pay any benefit not required by
any Plan or agreement as in effect as of the date of this Agreement
(including without limitation the granting of stock options, stock
appreciation rights, restricted stock, restricted stock units or
performance units or shares);
(b) (i) merge with or into any other corporation, permit any other
corporation to merge into it or consolidate with any other corporation,
or effect any reorganization or recapitalization; (ii) purchase or
otherwise acquire any substantial portion of the assets or stock of any
corporation; or (iii) liquidate, sell, dispose of, or encumber any assets
or acquire any assets, other than in the ordinary course of its business
consistent with past practice;
(c) propose or adopt any amendments to the Seller Certificate or Seller
Bylaws in any way adverse to Buyer;
(d) change any of its methods of accounting in effect at December 31, 1998
or change any of its methods of reporting income or deductions for
federal income tax purposes from those employed in the preparation of the
federal income tax returns for the taxable year ended December 31, 1998,
except as may be required by Law or GAAP;
(e) change in any material respect any material policies concerning the
Business, except as required by Law, including without limitation:
(i) sell, assign, transfer, pledge, mortgage or otherwise encumber any of
its assets, except for those sales, assignments, transfers, pledges,
mortgages and encumbrances (A) currently existing or provided for in
existing agreements, (B) incurred in individual amounts of less than
$75,000 and in an aggregate amount of no more than $750,000 or
(C) incurred in the ordinary course of business consistent with past
practice; (ii) enter into any agreement with respect to any acquisition
of a material amount of assets or any discharge, waiver, satisfaction,
release or relinquishment of any material contract rights, liens,
encumbrances, debt or claims, not in the ordinary course of business and
consistent with past practices; (iii) settle any claim, action, suit,
litigation, proceeding, arbitration, investigation or controversy of any
kind, for any amount in excess of $75,000, net of any insurance proceeds,
that would restrict in any material respect the Business; (iv) make any
capital expenditure in excess of $500,000, except in the ordinary course
and consistent with past practice; (v) make any investment of more than
$100,000; or (vi) take any action or fail to take any action which
individually or in the aggregate would have a Material Adverse Effect
with respect to Seller or the Business; PROVIDED, HOWEVER, nothing in
this Section shall prevent Seller from eliminating intercompany assets
and liabilities prior to the Closing; and
(f) agree in writing or otherwise to do any of the foregoing.
5.3 EXCLUSIVITY
For the period commencing on the date hereof and ending on the earlier of
the termination of this Agreement, the date specified in SECTION 8.1(e) or the
Closing (the "EXCLUSIVITY PERIOD"), except for discussions with Buyer and its
representatives, Parent will not, directly or indirectly through any director,
officer, shareholder, employee, agent, adviser or otherwise, orally or in
writing, initiate, solicit, encourage, respond to, discuss, negotiate or accept
any inquiries, indications of interest, proposals or offers from, or make any
inquiries, indications of interest, proposals, offers, counter proposals or
counteroffers to, or furnish any information to, any other person with respect
to (i) an acquisition of shares of Seller, (ii) additional equity or convertible
debt financing for Seller, (iii) an acquisition of all or a substantial part of
the assets of Seller, or (iv) a merger, consolidation or any other transaction
which would result in a change in control in Seller or a substantial change in
the business of Seller. Further, during such Exclusivity Period Parent will
promptly forward to Buyer any
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expressions of interest or other communications or inquiries received by it in
any such regard. During the Exclusivity Period, Parent will make the books,
records of Parent and Seller and management of Parent available during normal
business hours to Buyer and its representatives for due diligence and valuation
purposes.
In addition, during the Exclusivity Period, Buyer agrees that it will not,
except for discussions with Parent and its representatives, directly or
indirectly through any director, officer, shareholder, employee, agent, adviser
or otherwise, orally or in writing, initiate, solicit, encourage, respond to,
discuss, negotiate or make any inquiries, indications of interest, proposals,
offers, counterproposals or counteroffers to, or furnish any information to, any
other person with respect to a material transaction with or in respect of such
person.
5.4 ACCESS AND INFORMATION.
(a) From the date of this Agreement until the Closing Date and upon
reasonable notice, and subject to applicable Law relating to the exchange
of information, Parent and Seller shall afford to Buyer's officers,
employees, accountants, legal counsel and other representatives, access
during normal business hours to all its properties, books, contracts,
commitments and records relating to the Business, but excluding any
books, contracts, commitments and records in any way related to the sale
of the Business.
(b) From the date of this Agreement and until the Closing Date, Seller shall
furnish promptly to Buyer (i) a copy of each nonconfidential filing made
by Parent with the Securities and Exchange Commission (the "SEC"), under
the HSR Act or under any other applicable Laws promptly after such
documents are available, (ii) a copy of each Tax Return filed by Parent
for the three most recent years available with respect to or containing
information pertaining to the Business, a copy of any correspondence
received from the IRS or any other governmental entity or taxing
authority or agency and any other correspondence relating to Taxes
payable with respect to the Business, and (iii) all other information
concerning the Business as Buyer may reasonably request, other than in
each case reports or documents which neither Seller nor Parent is
permitted to disclose under applicable Law or binding agreement entered
into prior to the date of this Agreement. The parties will make
appropriate substitute disclosure arrangements under circumstances in
which the restrictions of the preceding sentence apply.
(c) Unless otherwise required by Law, the parties will hold any such
information which is nonpublic in confidence until such time as such
information becomes publicly available through no wrongful act of either
party, and in the event of termination of this Agreement for any reason
each party shall promptly return all nonpublic documents obtained from
any other party, and any copies made of such documents, to such other
party or destroy such documents and copies. From the date hereof until
the earlier of the Closing Date or the termination of this Agreement, and
subject to the other provisions of this Agreement, the parties agree that
they will take no actions outside of the ordinary course of business to
harm the value of the Business conducted by Seller; provided, however,
that this limitation shall not limit the ability of the parties to engage
in normal competition with each other (including, to the extent
applicable, effecting price adjustments to their respective products).
5.5 UPDATE DISCLOSURE; BREACHES.
(a) From and after the date of this Agreement until the Closing Date, the
parties shall update their respective Disclosure Schedules by written
notice to the other party to reflect any matters which have occurred from
and after the date of this Agreement which, if existing on the date of
this Agreement, would have been required to be described therein;
provided that, (i) to the extent that any information that would be
required to be included in an update under this Section would have in the
past been contained in internal reports prepared in the ordinary course,
such update may occur by delivery of such internal reports prepared in
accordance with past practice, and (ii) to the extent that updating
required under this Section is unduly burdensome, Seller and Buyer will
use their best efforts to develop alternate updating procedures
utilizing, wherever possible, existing reporting systems.
(b) Each party shall, in the event it becomes aware of the impending or
threatened occurrence of any event or condition which would cause or
constitute a material breach (or would have caused or constituted a
material breach had such event occurred or been known prior to the date
of this Agreement) of any of
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its representations or agreements contained or referred to herein, given
prompt written notice thereof to the other party and use its best efforts
to prevent or promptly remedy the same.
5.6 EXPENSES. All Expenses (as defined below) incurred by Buyer, on the
one hand, and Parent and/or Seller, on the other hand, shall be borne solely and
entirely by Buyer, on the one hand, and Parent, on the other hand. "EXPENSES" as
used in this Agreement shall include all reasonable fees and out-of-pocket
expenses (including without limitation all fees and expenses of counsel,
accountants, investment bankers, experts and consultants to the party and its
affiliates) incurred by a party or on its behalf in connection with or related
to the authorization, preparation and execution of this Agreement, the
solicitation of stockholder approvals and all other matters related to the
closing of the transactions contemplated hereby. Parent shall be liable for and
shall assume and pay the broker's fees of Schroder & Co. Inc. and Buyer shall be
liable for and shall assume and pay the broker's fees of Downer & Company.
5.7 RETENTION OF RECORDS. Buyer shall retain all books and records of
Seller that Buyer receives from Seller for a period of six years following the
Closing Date. After the Closing, Seller and Parent and their respective
representatives shall have reasonable access to all such books and records
during normal business hours. In addition, Buyer shall upon reasonable request
furnish to Seller or Parent, without charge, copies of any such books or
records.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 APPROPRIATE ACTION; CONSENTS; FILINGS. The parties shall use
reasonable efforts to (i) do all things appropriate under applicable Law to
consummate and make effective the transactions contemplated by this Agreement,
(ii) obtain all consents, licenses, permits, waivers, approvals, authorizations
or orders required under Law required in connection with the authorization,
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby, and (iii) make all necessary filings, and
thereafter make any other required submissions, with respect to this Agreement
required under the Securities Act and the Exchange Act and the rules and
regulations thereunder, any other applicable federal or state securities laws
and any other applicable Law; provided that, Buyer and Seller shall cooperate
with each other in connection with the making of all such filings that relate
specifically to the transactions contemplated by this Agreement, including
providing copies of all such documents to the nonfiling party and its advisors
prior to filing and, if requested, to accept all reasonable additions, deletions
or changes suggested in connection therewith.
6.2 EMPLOYEE BENEFIT MATTERS.
(a) RETENTION OF LIABILITY. Except as provided in this Section, or as
required pursuant to any collective bargaining agreement, neither Buyer nor
any of its affiliates shall adopt, become a sponsoring employer of, nor have
any obligations under or with respect to any Plan and Seller shall retain
all liabilities thereunder.
(b) WELFARE BENEFITS. Buyer shall be responsible for all (i) claims
for medical, dental and prescription drug benefits incurred by or with
respect to the Transferred Employees and former employees of the Seller (and
their dependents), and (ii) claims relating to COBRA coverage attributable
to "qualifying events" incurred by or with respect to any Transferred
Employee or former employee of Seller (and any dependent thereof), Seller
shall be responsible for any and all claims for workers compensation
benefits for all Transferred Employees and former employees of the Seller
with respect to all work-related injuries which occurred prior to the
Closing, provided Buyer notifies Seller (directed to the attention of Craig
Jennings) within three (3) business days of any report of such injury to
Buyer (or one of its affiliates) by the employee. In addition, on the
Closing Date and for the balance of the 1999 calendar year, Buyer (or one of
its affiliates) shall cause to be maintained for the benefit of all
Transferred Employees and all former employees of the Seller for whom
benefits are being provided under the Spinnaker Industries Flexible Benefits
Plan (the "FLEX PLAN") as of the Closing Date (together with the Transferred
Employees, the "FLEX EMPLOYEES"), a plan substantially identical to the Flex
Plan. As soon as practicable thereafter, the Seller shall cause to be
transferred to the Buyer the credit or debit balances in the various
spending accounts under the Flex Plan along with any net cash amount
attributable to those balances for the Flex Employees.
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Following such transfer, Buyer (or one of its affiliates) shall be
responsible for all liabilities for all Flex Employees under the Buyer's
Plan. Further, Buyer shall be responsible for all severance payments owing
to any Transferred Employee except that Seller, promptly after receiving
written notice from Buyer (or one of its affiliates) shall reimburse Buyer
(or one of its affiliates) for all costs (including payroll taxes) relating
to the provision of any severance benefits and payments made to any
Transferred Employee, up to a maximum reimbursement, when combined with any
reimbursement of severance pursuant to Section 7.2(a) of the Stock Purchase
Agreement, of $700,000.00. Buyer also shall be responsible for all
disability claims filed after Closing with respect to the Transferred
Employees, except that Seller shall remain responsible for any long term or
short term disability benefits payable under the Spinnaker Industries Short
Term and Long Term Disability Plans, to the extent such benefits are
insured, the disability began or is found to have begun prior to the Closing
Date, and the disability claim was not filed by a former employee of the
Buyer (or one of its affiliates) after such Employee was involuntarily
terminated from employment by the Buyer (or one of its affiliates). Seller
shall cooperate with Buyer in effecting an assignment to Buyer of any
policies of insurance for the provision of health or welfare benefits to the
Transferred Employees and former employees of Seller and any other
individual who is not a Transferred Employee or former employee of Seller
and administrative contracts relating thereto, if requested by Buyer.
(c) 401(k) PLAN. On or as soon as practicable after the Closing Date,
Buyer (or one of its affiliates) shall cause to be maintained for the
benefit of Transferred Employees and all former employees of the Seller for
whom benefits are owing under the Spinnaker Industries Affiliates' 401(k)
Plan (the "PARENT'S 401(k) PLAN") (together referred to as the "401(k)
EMPLOYEES") a defined contribution plan intended to be qualified under
Section 401(k) of the Code ("BUYER'S 401(k) PLAN"). As soon as practicable
after the Closing Date, but in any event prior to the transfer referred to
herein, Buyer shall deliver to Seller a copy of the most recent favorable
determination letter for the Buyer's 401(k) Plan, or evidence that such
determination letter is not necessary, or evidence of an application timely
filed with the IRS for such a letter with respect to a newly adopted plan.
In addition, if the Buyer's 401(k) Plan is a newly adopted plan for which a
determination letter is necessary, Buyer shall make or cause to be made
timely any and all amendments requested by the IRS in order to ensure that
the Buyer's 401(k) Plan meets the requirements to ensure it receives a
favorable determination letter. As soon as practicable thereafter, Seller
shall direct the trustee of the trust funding Parent's 401(k) Plan to
transfer to the trustee of the trust funding Buyer's 401(k) Plan the
aggregate individual account balances of the 401(k) Employees (whether or
not vested). Individual account balances shall be valued as of the date of
transfer, and the transfer shall be in cash or in kind, as determined by
Buyer, except that outstanding loan balances shall be transferred in the
form of notes or other appropriate documents evidencing such loans. Prior to
the date of the transfer, Seller or its affiliates shall have contributed
all contributions (including salary deferral and matching contributions)
attributable to service performed by the 401(k) Employees through the
Closing Date. Following such transfer, Buyer or one of its affiliates shall
be responsible for liabilities attributable to 401(k) Employees under the
Buyer's 401(k) Plan. In the event that the Buyer fails to obtain a favorable
determination letter from the IRS in respect of the Buyer's 401(k) Plan, the
Buyer shall indemnify Seller and Parent, from and after the Closing Date,
against, and agrees to hold Seller and Parent harmless from, any and all
damages incurred or suffered by Seller and Parent as a result of the Buyer's
failure to satisfy the requirements of this SECTION 6.2(c).
(d) NO RIGHTS. Nothing in this Section shall be construed to give any
employee or former employee of Seller (or any beneficiary thereof) any
rights of any kind, including any right to continued employment with Buyer
or the right to any particular terms of employment, nor shall anything
contained in this Section be construed to prevent Buyer or any of its
affiliates from terminating or modifying any benefit plan that they may
establish or assume.
(e) EMPLOYEES. Buyer shall offer employment to all of Seller's
employees effective as of the Closing Date on terms and, for the balance of
the 1999 calendar year, with compensation and benefits substantially similar
to those in force immediately prior to the Closing Date (the "TRANSFERRED
EMPLOYEES").
6.3 NOTIFICATION OF CERTAIN MATTERS. Parent and Seller shall give prompt
notice to Buyer, and Buyer shall give prompt notice to Parent and Seller, of
(i) the occurrence or non-occurrence of any event, the occurrence or
nonoccurrence of which would be likely to cause any representation or warranty
contained in this Agreement to be untrue or inaccurate and (ii) any failure of
Parent or Seller or Buyer, as the case may be, to comply with or
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satisfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder; provided, however, that the delivery of any notice pursuant to
this Section shall not limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
6.4 PUBLIC ANNOUNCEMENTS. Buyer and Seller shall consult with each other
before issuing any press release or otherwise making any public statements with
respect to the transactions contemplated hereby and shall not issue any such
press release or make any such public statement prior to such consultation,
except as may be required by Law or any listing agreement with or rule of the
National Association of Securities Dealers, Inc.
6.5 CUSTOMER RETENTION. To the extent permitted by law or applicable
regulation, Parent and Seller shall use reasonable efforts to assist Buyer in
its efforts to retain Seller's customers. Such efforts may include making
introductions of Buyer's employees to such customers, assisting in the mailing
of information prepared by Buyer and reasonably acceptable to Parent and Seller,
to such customers and actively participating in any "transitional marketing
programs as the parties may agree upon.
6.6 TAX COOPERATION AND INDEMNIFICATION.
(a) Seller, Parent and Buyer shall each, and shall cause their respective
affiliates to, provide the other party with such cooperation, assistance
and information as any of them may reasonably request in respect of Taxes
of the Business or the Purchased Assets, the preparation of any Tax
Return, including Tax Returns relating to transfer Taxes, amended Tax
Return or claim for refund in respect of the Purchased Assets, or the
participation in or conduct of any audit or other examination by any
taxing authority or judicial or administrative proceeding relating to
liability for Taxes of the Purchased Assets. Such cooperation and
information shall include (i) providing copies of all relevant portions
of relevant Tax Returns, together with relevant accompanying schedules
and relevant workpapers, relevant documents relating to rulings or other
determinations by taxing authorities and relevant records concerning the
ownership and Tax basis of property, which any such party may possess,
and (ii) making employees available on a mutually convenient basis to
provide explanations of any documents or information provided.
(b) From and after the Closing Date, to the extent a Tax is imposed on Buyer
with respect to the Purchased Assets or Business for any period ending on
or before the Closing Date ("PRE-CLOSING PERIOD"), Parent and Seller
jointly and severally agree to pay the amount of such Tax, on a
Grossed-Up Basis, plus any additional penalties and interest incurred in
the payment of such Tax, to the appropriate Taxing Authority or to Buyer,
as appropriate, within the later of 30 days of receipt of notice of such
Tax or final resolution of any dispute relating to such Tax. If such Tax
is paid by Buyer, Parent and Seller jointly and severally agree to
reimburse Buyer the amount of such Tax, on a Grossed-Up Basis, plus any
additional penalties and interest incurred in the payment of such Tax.
(c) From and after the Closing Date, to the extent a Tax (other than a Tax
described in the first sentence of SECTION 6.6(b)) is imposed on Parent
or Seller with respect to the Purchased Assets or Business for any period
after the Closing Date ("POST-CLOSING PERIOD"), Buyer agrees to pay the
amount of such Tax, on a Grossed-Up Basis, plus any additional penalties
and interest incurred in the payment of such Tax, to the appropriate
Taxing Authority within the later of 30 days of receipt of notice of such
Tax or final resolution of any dispute relating to such Tax. If such Tax
is paid by Parent or Seller, Buyer agrees to reimburse Seller the amount
of such Tax, on a Grossed-Up Basis, plus any additional penalties and
interest incurred in the payment of such Tax.
(d) (i) If any Taxing Authority or other person asserts a claim with respect
to Taxes of the Purchased Assets or Business (a "TAX CLAIM"), then the
party hereto first receiving notice of such Tax Claim properly payable by
another party to this Agreement (the "RESPONSIBLE PARTY") shall provide
written notice thereof to the Responsible Party within 30 days of having
received such notice; PROVIDED, HOWEVER, that the failure of a party to
give such prompt notice to the Responsible Party shall not relieve such
Responsible Party of any of its obligations under this SECTION 6.6. Such
notice shall specify in reasonable detail the basis for such Tax Claim
and shall include a copy of any relevant correspondence received from the
Taxing Authority or other person.
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(ii) If within 60 days after receiving a Tax Claim or written notice of
such a Tax Claim with respect to Pre-Closing Period Taxes from the
Buyer, Parent or Seller notifies the Buyer that Parent or Seller
desires to defend Buyer with respect to the Tax Claim, then Parent
or Seller shall have the right to defend or prosecute, at its sole
cost, expense and risk, such Tax Claim by all appropriate
proceedings, which proceedings shall be defended or prosecuted
diligently by Parent or Seller; PROVIDED, HOWEVER, Parent or Seller
shall not, without the prior written consent of Buyer, enter into
any compromise or settlement of such Tax Claim that would result in
any Tax detriment to Buyer; and PROVIDED FURTHER, that Buyer may,
at the sole cost and expense of Buyer, at any time prior to its
delivery of the notice referred to in the first sentence of
SECTION 6.6(d)(i) file any motion, answer or other pleadings or
take any other action that Buyer reasonably believes to be
necessary or appropriate to protect its interests. So long as
Parent or Seller is defending or prosecuting a Tax Claim, Buyer
shall provide or cause to be provided to Parent or Seller any
information reasonably requested by Parent or Seller relating to
such Tax Claim, and Buyer shall otherwise cooperate with Parent or
Seller and its representatives in good faith in order to contest
effectively such Tax Claim. Parent or Seller shall inform Buyer of
all developments and events relating to such Tax Claim (including
without limitation, providing to Buyer copies of all written
materials relating to such Tax Claim), and Buyer or its authorized
representatives shall be entitled, at the expense of Buyer, to
participate in, all conferences, meetings and proceedings relating
to such Tax Claim.
(iii) If Parent or Seller fails to notify Buyer within 60 days after
receiving a Tax Claim or a written notice of such a Tax Claim with
respect to Pre-Closing Period Taxes from Buyer that Parent or
Seller desires to defend the Tax Claim pursuant to this
SECTION 6.6(d) or, if after delivery of such notice, Parent or
Seller fails to reasonably defend or prosecute such Tax Claim, then
Buyer shall at any time thereafter have the right (but not the
obligation) to defend or prosecute, at the sole cost, expense and
risk of Buyer, such Tax Claim. Buyer shall have full control of
such defense or prosecution and such proceedings, including any
settlement or compromise thereof. If requested by Buyer, Parent or
Seller shall cooperate in good faith with Buyer and its authorized
representatives in order to contest effectively such Tax Claim.
Parent or Seller may participate in, but not control any defense,
prosecution, settlement or compromise of any Tax Claim controlled
by Buyer pursuant to this SECTION 6.6(d)(iii), and shall bear its
own costs and expenses with respect thereto.
(e) Parent and Seller shall pay all transfer, real property transfer, stock
transfer and other similar taxes and fees ("TRANSFER TAXES") arising out
of or in connection with the transactions effected pursuant to this
Agreement, and shall indemnify, defend, and hold harmless Buyer and its
respective affiliates with respect to such Transfer Taxes. Parent or
Seller shall file all necessary documentation and Tax Returns with
respect to such Transfer Taxes.
(f) No amounts of indemnity for Tax payments shall be payable as a result of
a claim under this Section unless and until the party seeking indemnity
has suffered, incurred, sustained or become subject to Taxes, penalties
or interest in excess of $25,000, in which case such party shall be
entitled to seek indemnity for all Taxes, penalties or interest in excess
of such $25,000 amount. All such indemnification payments shall be made
on a Grossed-Up Basis.
(g) All rights and obligations of the parties with respect to
indemnification under this Section shall survive for the applicable
statute of limitations (including any extensions) for the Tax for which
such claim of indemnification is based upon.
6.7 BULK TRANSFER LAWS. Buyer hereby waives compliance by Seller and
Parent with the laws of any jurisdiction relating to bulk transfers which may be
applicable in connection with the transfer of the Purchased Assets to Buyer;
PROVIDED, HOWEVER, that Seller and Parent shall indemnify, defend and hold Buyer
and its affiliates and representatives harmless from and against any and all
Losses (as defined in SECTION 10.3) directly or indirectly arising out of, or
resulting from, or relating to any failure to comply with such laws.
6.8 NON-COMPETITION.
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(a) For a period commencing on the Closing Date and terminating on the third
anniversary thereof (the "PERIOD"), as an inducement to Buyer to execute
this Agreement and complete the transactions contemplated hereby, and in
order to preserve the goodwill associated with the Business, Parent and
Seller will not (1) engage in, continue in, participate in or have any
material interest in any sole proprietorship, partnership, corporation or
business that is engaged primarily or in any material respect in the
business of the manufacture, sale or distribution of pressure sensitive
and water activated tape and industrial electrical tape serving either
the retail or industrial end markets (the "PROHIBITED BUSINESS") in North
America (the "TERRITORY"), (2) 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 Buyer
in any aspect with respect to the Prohibited Business, including, but not
limited to, with respect to the Prohibited Business, advertising or
otherwise endorsing the products of any such competitor, soliciting
customers or otherwise serving as an intermediary for any such
competition or engaging in any form of business transaction on other than
an arms'-length basis with any such competitor; or (3) unless Buyer has
terminated such Transferred Employee, solicit for employment any
Transferred Employee that has been employed by Buyer, without the prior
consent of Buyer; PROVIDED, HOWEVER, that nothing herein shall be deemed
to prevent (i) Parent or Seller from acquiring through market purchases
and owning, solely as an investment, less than five percent of the equity
securities of any class of any issuer whose shares are registered under
Section 12(b) or 12(g) of the Exchange Act, and are listed or admitted
for trading on any United States national securities exchange or are
quoted on the Nasdaq National Market, or any similar system of automated
dissemination of quotations of securities prices in common use, so long
as neither Parent nor Seller is a member of any "control group" (within
the meaning of the rules and regulations of the United States Securities
and Exchange Commission) of any such issuer, (ii) any offer by Parent or
Seller to employ a person in the Prohibited Business (except as set forth
in this Section), or (iii) Parent or Seller from being acquired by a
person engaged in any business in competition with the Prohibited
Business of Seller.
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 succeeds to the Business. The parties further 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 the Territory, each of
which is deemed to be separately named herein. Recognizing the specialized
nature of the Purchased Assets transferred to Buyer and the scope of
competition, Seller and Parent each acknowledge the geographic scope of this
covenant not to compete to be reasonable. The parties intend that the covenant
contained in this Section shall be construed as a series of separate covenants,
one for each city, county or political subdivision of each country in the
Territory, 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, 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) Parent and Seller each agree with Buyer that the provisions and
restrictions contained in this Section are necessary to protect the
legitimate continuing interests of Buyer in acquiring the Purchased
Assets, and that any violation or breach of these provisions will result
in irreparable injury to Buyer for which a remedy at law would be
inadequate. Parent and Seller each agrees with Buyer 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, including specific performance, as a court may grant
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after considering the intent of this Section, and Buyer shall not be
entitled to any other form of relief from such violation or breach.
6.9 FURTHER TRANSFER MATTERS. Effective on the Closing Date, Seller and
Parent hereby constitute and appoint Buyer the true and lawful attorney-in-fact
of Seller or Parent, with full power of substitution, in the name of Seller or
Parent, but on behalf of and for the sole benefit of Buyer: (i) to demand and
receive from time to time any and all of the Purchased Assets and to make
endorsements and give receipts and releases for and in respect of the same and
any part thereof and for the Business, (ii) to institute, prosecute, compromise
and settle any and all actions or proceedings that Buyer may deem proper in
order to collect, assert or enforce any claim, right or title of any kind in or
to the Purchased Assets or Business, (iii) to defend or compromise any or all
actions or proceedings in respect of any of the Purchased Assets or Business,
and (iv) to do all such acts and things in relation to the matters set forth in
the preceding clauses (i) through (iii) as Buyer shall deem desirable. Seller
and Parent hereby acknowledges that the appointment hereby made and the powers
hereby granted are coupled with an interest and are not and shall not be
revocable by it in any manner or for any reason. At Closing, Seller shall
provide Buyer with a written power of attorney in form and substance appropriate
to authorize and carry out the above.
6.10 PRORATIONS. The following prorations relating to the Purchased Assets
and the ownership and operation of the Business will be made as of the Closing
Date, with Seller liable to the extent such items relate to any time period
prior to the Closing Date and Buyer liable to the extent such items relate to
periods beginning with and subsequent to the Closing Date: (a) real estate taxes
on or with respect to the Real Property; (b) rents, additional rents, taxes and
other items payable by or to Seller under the Real Property Leases; (c) the
amount of charges for sewer, water, telephone, electricity and other utilities
relating to the Real Property and the real property subject to the Real Property
Leases; and (d) all other items (excluding personal property taxes and other
Taxes) normally adjusted in connection with similar transactions. Except as
otherwise agreed by the parties, the net amount of all such prorations will be
settled and paid on the Closing Date. If the Closing shall occur before a real
estate tax rate is fixed, the apportionment of taxes shall be based upon the tax
rate for the preceding year applied to the latest assessed valuation.
6.11 RELEASE OF LIENS. Seller, at or before Closing, shall release of
record, the liens listed on SCHEDULE 3.24 of the Seller Disclosure Schedule.
ARTICLE VII
CONDITIONS OF CLOSING
7.1 CONDITIONS TO OBLIGATION OF EACH PARTY. The respective obligations of
each party to effect the transactions contemplated hereby shall be subject to
the satisfaction at or prior to the Closing Date of the following conditions:
(a) NO ORDER. No federal or state governmental or regulatory authority
or other agency or commission, or federal or state court of competent
jurisdiction, shall have enacted, issued, promulgated, enforced or entered
any statute, rule, regulation, executive order, decree, injunction or other
order (whether temporary, preliminary or permanent) which restricts,
prevents or prohibits consummation of the transactions contemplated by this
Agreement.
(b) HART-SCOTT-RODINO ACT. Early termination shall have been granted
or applicable waiting periods shall have expired under the HSR Act.
(c) CONSENT OF MUNICIPALITY. Seller shall have received consent from
any municipality required to provide consent to the transfer of Real
Property pursuant to this Agreement.
7.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF BUYER. The obligations of
Buyer to effect the transactions contemplated hereby are also subject to the
following conditions:
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(a) REPRESENTATIONS AND WARRANTIES. Each of the representations and
warranties of Seller and Parent contained in this Agreement, including
giving effect to any update to the Seller Disclosure Schedule, shall be true
and correct in all material respects (except that where any such statement
in a representation or warranty expressly includes a standard of
materiality, such statement shall be true and correct in all respects) as of
the Closing Date (except to the extent such representations and warranties
speak as of an earlier date) as though made on and as of the Closing Date,
and Buyer shall have received a certificate signed on behalf of Seller by
the Chief Executive Officer or President and the Chief Financial Officer of
Seller to the foregoing effect.
(b) AGREEMENTS AND COVENANTS. Seller shall have performed or complied
in all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by it on or prior to the Closing
Date.
(c) CONSENTS OBTAINED. All consents, waivers, approvals,
authorizations or orders required to be obtained and all filings required to
be made by Seller for the authorization, execution and delivery of this
Agreement and the consummation by it of the transactions contemplated hereby
shall have been obtained and made by Seller, except those for which failure
to obtain such approvals or make such filings would not individually or in
the aggregate have a Material Adverse Effect with respect to the Business.
(d) NO CHALLENGE. There shall not be pending any action, proceeding or
investigation before any court or administrative agency or by a government
agency (i) challenging or seeking material damages in connection with the
transactions hereby contemplated, (ii) seeking to restrain, prohibit or
limit the exercise of full rights of ownership or operation by Buyer of all
or any portion of the Purchased Assets, or (iii) seeking to recover against
the proceeds of the transactions contemplated hereby, which in any case is
reasonably likely to have a Material Adverse Effect with respect to the
Purchased Assets.
(e) NO MATERIAL ADVERSE CHANGES. Since the date of the Agreement,
there has not been any change in the financial condition, results of
operations or business of Seller or the Business, taken as a whole, that
either individually or in the aggregate would have a Material Adverse Effect
with respect to the Purchased Assets, and Buyer shall have received a
certificate of the Chief Executive Officer or President and the Chief
Financial Officer of Seller to such effect.
(f) OPINION OF COUNSEL. Buyer shall have received from Jenkens &
Gilchrist, a Professional Corporation, independent counsel to Seller
("SELLER'S COUNSEL"), an opinion dated the Closing Date, substantially in
the form attached as EXHIBIT A.
(g) REAL PROPERTY MATTERS.
(i) Buyer shall have received an estoppel and consent certificate
(dated not more than 30 days prior to the Closing Date) from
each landlord under a Real Property Lease reasonably acceptable
in form to Buyer;
(ii) Buyer shall have received, at Seller's sole cost and expense, a
policy of title insurance, dated as of the Closing Date and
issued by Buyer's title insurance company, insuring the owner
or tenant of the applicable parcel of Real Property or real
property subject to a Real Property Lease, free of all Liens
including, without limitation, all liens listed on
SECTION 3.24 of the Seller Disclosure Schedule, together with,
at Seller's sole cost and expense, an ALTA/ACSM survey for each
such parcel reasonably acceptable to Buyer. Seller shall
deliver to Buyer's title insurance company a title affidavit
sufficient to allow Buyer's title insurance company to omit the
customary standard exceptions from the policy of title
insurance;
(iii) Buyer shall have received a nondisturbance agreement, in form
reasonably acceptable to Buyer, from each holder of a mortgage
or deed of trust affecting any Real Property Lease;
(iv) Buyer shall have received special warranty deeds in proper
statutory form for recording and otherwise in form and
substance reasonably satisfactory to Buyer conveying title to
the Real Property, if any, in accordance with this Agreement
and an assignment of each Real Property Lease conveying title
to each Real Property Lease in accordance with this Agreement
in a form reasonably acceptable to Buyer;
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(h) FINANCING AND EMPLOYMENT RELEASES. Buyer shall have received
releases or other documentation in form reasonably satisfactory to Buyer
evidencing the satisfaction of obligations of Seller under or pursuant to
the tesa Credit Agreement, any relevant employment agreements and the tesa
Note; and
(i) WARRANTY CLAIM. On or before April 30, 1999, Seller shall have
asserted in writing a warranty claim in respect of the repair of the floor
and foundation at the Carbondale, Illinois facility and shall have assigned
all its rights under such warranty claim to Buyer.
7.3 ADDITIONAL CONDITIONS TO OBLIGATIONS OF THE SELLER. The obligations of
Parent and Seller to effect the transactions contemplated hereby are also
subject to the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. Each of the representations and
warranties of Buyer set forth in this Agreement, including giving effect to
any update to the Buyer Disclosure Schedule, shall be true and correct in
all material respects (except that where any such statement in a
representation or warranty expressly includes a standard of materiality,
such statement shall be true and correct in all respects) as of the Closing
Date (except to the extent such representation and warranties speak as of an
earlier date), as though made on and as of the Closing Date, and Seller
shall have received a certificate signed on behalf of Buyer by the Chief
Executive Officer or President and the Chief Financial Officer of Buyer to
the foregoing effect.
(b) AGREEMENTS AND COVENANTS. Buyer shall have performed or complied
in all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by it on or prior to the Closing
Date.
(c) CONSENTS UNDER AGREEMENTS. All consents, waivers, approvals,
authorizations or orders required to be obtained, and all filings required
to be made by Buyer for the authorization, execution and delivery of this
Agreement and the consummation by it of the transactions contemplated hereby
shall have been obtained and made by Buyer, except where failure to obtain
any consents, waivers, approvals, authorizations or orders required to be
obtained or any filings required to be made would not have a Material
Adverse Effect with respect to Buyer.
(d) NO CHALLENGE. There shall not be pending any action, proceeding or
investigation before any court or administrative agency or by a government
agency (i) challenging or seeking material damages in connection with
transactions hereby contemplated or (ii) seeking to restrain, prohibit or
limit the exercise of full rights of ownership or operation by Buyer of all
or any portion of the Purchased Assets, which in either case would have a
Material Adverse Effect with respect to the Purchased Assets.
(e) NO MATERIAL ADVERSE CHANGES. Since the date of the Agreement,
there has not been any change in the financial condition, results of
operations or business of Buyer that either individually or in the aggregate
would have a Material Adverse Effect with respect to Buyer. Seller shall
have received a certificate of the Chief Executive Officer or President and
the Chief Financial Officer of Buyer to such effect.
(f) OPINION OF COUNSEL. Seller and Parent shall have received from
Morgan, Lewis & Bockius LLP, independent counsel to Buyer ("BUYER'S
COUNSEL"), an opinion dated the Closing Date, substantially in the form
attached as EXHIBIT B.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.1 TERMINATION. This Agreement may be terminated at any time prior to the
Closing Date:
(a) by mutual consent of Buyer, Seller and Parent;
(b) by either Parent, Buyer or Seller if any approval of stockholders
required for the consummation of the transactions contemplated hereby
shall not have been obtained by reason of the failure to obtain the
required vote at a duly held meeting of such stockholders or at any
adjournment or postponement thereof;
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(c) by Seller, Parent or Buyer if there has been a breach in any material
respect (except that where any statement in a representation or warranty
expressly includes a standard of materiality, such statement shall have
been breached in any respect) of any representation, warranty, covenant
or agreement, set forth in this Agreement, on the part of any party,
which breach has not been cured within 10 business days following receipt
by the nonterminating party of notice of such breach or other condition,
or which breach by its nature, cannot be cured prior to the Closing Date;
PROVIDED, HOWEVER, this Agreement may not be terminated pursuant to this
clause (c) by the breaching party;
(d) by either Buyer, Parent or Seller if any permanent injunction preventing
the consummation of the transactions contemplated hereby shall have
become final and nonappealable or if any applicable Law or any rule or
regulation thereunder shall hereafter be enacted or becomes applicable
that makes the transactions contemplated hereby or the consummation of
the Closing illegal;
(e) by either Buyer, Parent or Seller if the transactions contemplated
hereby shall not have been consummated by July 31, 1999, for a reason
other than the failure of the party seeking termination to comply with
its obligations under this Agreement; PROVIDED, HOWEVER, that in the
event early termination shall not have been granted or applicable waiting
periods shall not have expired under the HSR Act as of such date, the
parties may agree to extend such date for up to two additional 30 day
periods, with such agreement not to be unreasonably withheld, and,
further, provided, if the Put Right in SECTION 10.2 of the Stock Purchase
Agreement has been exercised, the parties shall in good faith close the
transaction contemplated hereby as soon as possible after such exercise.
(f) by either Buyer, Parent or Seller if any regulatory authority has denied
approval of the transactions contemplated hereby, and neither Buyer nor
Seller has, within 30 days after the entry of such order denying
approval, filed a petition seeking review of such order as provided by
applicable law; or
(g) by Buyer in the event it shall have notified Parent and Seller of its
intention to terminate this Agreement pursuant to SECTION 6.11 within the
time period set forth therein.
8.2 EFFECT OF TERMINATION. In the event of the termination of this
Agreement pursuant to SECTION 8.1, this Agreement shall forthwith become void
and all rights and obligations of any party shall cease except as set forth in
SECTION 5.4(c) of this Agreement; PROVIDED, HOWEVER, nothing herein shall
relieve any party from liability for any willful breach of this Agreement or
shall restrict either party's rights in the case thereof.
8.3 WAIVER. At any time prior to the Closing Date, the parties may
(a) extend the time for the performance of any of the obligations or other acts
of the other party, (b) waive any inaccuracies in the representations and
warranties contained herein or in any document delivered pursuant hereto and
(c) waive compliance with any of the agreements or conditions contained herein.
Any such extension or waiver shall be valid only if set forth in a written
instrument signed on behalf of such party, but such extension or waiver or
failure to insist on strict compliance with an obligation, covenant, agreement
or condition shall not operate as a waiver of, or estoppel with respect to, any
subsequent or other failure.
ARTICLE IX
INDEMNIFICATION
9.1 INDEMNIFICATION. Subject to the provisions of this Article, Seller
shall indemnify Buyer, its stockholders, officers, directors, employees, agents
and affiliates (collectively, the "BUYER INDEMNITEES") in respect of, and hold
each of them harmless from and against, and shall pay the full amount of, on a
Grossed-Up Basis (as defined in SECTION 10.3), 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: (i) any causes of action asserted
or other legal proceedings initiated on the part of any of the stockholders of
Seller relating in any way to claims based on the failure to obtain shareholder
approval of the sale of Parent's assets; (ii) any employee pension benefit plan
subject to Title IV of ERISA that is maintained by Seller or any of its
"controlled group," within the meaning of Section 4001(a)(15) of ERISA, other
than any Plans; (iii) severance obligations occurring within six months of the
Closing Date in connection with the agreements described on EXHIBIT C; and
(iv) the nonfulfillment of or failure to perform any covenant or agreement on
the part of Seller contained in SECTIONS 5.6 and 6.7.
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9.2 PROCEDURES FOR INDEMNIFICATION. Any claims for indemnification by any
party entitled to indemnification hereunder (an "INDEMNIFIED PARTY") from any
party hereunder (an "INDEMNITOR") under this ARTICLE IX shall be made by an
Indemnified Party by delivery of a written notice to the Indemnitor requesting
indemnification (an "INDEMNIFICATION CLAIM") and specifying the basis on which
indemnification is sought and the amount of asserted Losses. Indemnitor shall
have 30 days after the date on which the Indemnitor receives the notice of an
Indemnification Claim to object to such Indemnification Claim by delivery of a
written notice of such objection to the Indemnified Party specifying in
reasonable detail the basis for such objection. If within 30 days after the date
on which the Indemnitor receives the notice of the Indemnification Claim, the
Indemnitor has not delivered to the Indemnified Party a notice objecting to all
or any portion of the claimed Loss and setting forth the amount of such claimed
indemnification for such Loss objected to and the reasons for such objection,
the Indemnified Party shall be entitled to indemnification for such Loss, and
the Indemnitor shall promptly pay the full amount of such Loss. If, within
30 days after the date on which the Indemnitor receives the notice of an
Indemnification Claim, the Indemnitor delivers to the Indemnified Party an
objection to all or any portion of the claimed Loss, setting forth the amount of
such Loss objected to and the reasons for such objection, the Indemnified Party
shall be entitled to reimbursement for the portion of such Loss not objected to
by the Indemnitor and the Indemnitor shall promptly pay the full amount of so
much of the Loss as to which the Indemnitor did not object.
(a) Upon determination of the amount of an Indemnification Claim, whether by
agreement between the Indemnitor and the Indemnified Party or by any
final adjudication, the Indemnitor shall pay the amount of such
Indemnification Claim within 5 days of the date such amount is
determined.
(b) The rights accorded to Indemnified Parties hereunder shall be in
addition to any rights that any Indemnified Party may have at law or in
equity.
(c) Any payment under this Article shall be treated for Tax purposes as an
adjustment of the Purchase Price to the extent such characterization is
proper and permissible under the applicable U.S. Tax law, including the
Code, Treasury regulations, court decisions and administrative
promulgations or, alternatively, by Buyer as an offset to a Tax benefit
item, if such characterization is permissible under such Tax law.
(d) In no event shall the aggregate liability of Seller and Parent for
claims asserted pursuant to Section 9.1(i) and 9.1(iii) of this Agreement
and Section 11.1(i) and 11.1(iii) of the Stock Purchase Agreement
(excluding indemnification with respect to the payment of Taxes,
penalties, Brighton Governmental Claims, interest and collection costs
thereof) exceed $700,000.
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ARTICLE X
GENERAL PROVISIONS
10.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND
AGREEMENTS. Except as otherwise set forth herein, the representations and
warranties of the parties shall expire at Closing. The covenants and agreements
of the parties shall expire at Closing; PROVIDED, HOWEVER, that the covenants
and agreements contained in SECTIONS 5.4(c), 5.6, 5.7, 6.2, 6.6, 6.8 and 6.9
shall survive Closing and expire in accordance with their respective terms,
provided that to the extent obligations require repeated performance or
performance from time to time, expiration shall occur only upon the final
performance of the obligation.
10.2 NOTICES. All notices and other communications given or made pursuant
to this Agreement shall be in writing and shall be deemed given if delivered
personally, telecopied (with confirmation), mailed by certified mail (postage
prepaid, return receipt requested) to the parties at the following addresses (or
at such other address for a party as shall be specified by like notice) and
shall be effective upon receipt:
<TABLE>
<CAPTION>
<C> <S>
(a) If to Parent or Seller:
Spinnaker Industries, Inc.
1700 Pacific Ave., Suite 1600
Dallas, Texas 75201
Telecopier: (214) 855-0093
Attention: President
With copies to:
Jenkens & Gilchrist, a Professional Corporation
1445 Ross Ave., Suite 3200
Dallas, Texas 75202
Telecopier: (214) 855-4300
Attention: Ronald J. Frappier
Crouch & Hallett, L.L.P.
717 North Harwood Street
Suite 1400
Dallas, Texas 75201
Telecopier: (214) 922-4193
Attention: Timothy R. Vaughan
(b) If to Buyer:
Intertape Polymer Group Inc.
110E Montee de Liesse
St. Laurent, Quebec H4T IN4
Canada
Telecopier: (514) 731-5477
Attention: Andrew M. Archibald
With a copy to:
Morgan, Lewis & Bockius LLP
101 Park Avenue
New York, New York 10178
Telecopier: (212) 309-6273
Attention: Nancy H. Corbett
</TABLE>
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10.3 CERTAIN DEFINITIONS. For purposes of this Agreement, the term:
(a) "AFFILIATE" means a person that directly or indirectly, through one or
more intermediaries, controls, is controlled by, or is under common
control with, the first mentioned person; including, without limitation,
any partnership or joint venture in which any person (either alone, or
though or together with any other subsidiary) has, directly or
indirectly, an interest of 5% or more;
(b) "BUSINESS DAY" means any day other than a day on which
federally-chartered banks are required or authorized to be closed;
(c) "CONTROL" (including the terms "controlled by" and "under common control
with") means the possession, directly or indirectly or as trustee or
executor, of the power to direct or cause the direction of the management
or policies of a person, whether through the ownership of stock or as
trustee or executor, by contract or credit arrangement or otherwise;
(d) "GROSSED-UP BASIS" means, when used to describe the basis on which the
payment of a specified sum is to be made, a basis such that the amount of
such payment, after being reduced by the amount of all Taxes imposed on
the recipient of such payment as a result of the receipt or accrual of
such payment and after taking into account the Tax benefit of any
deductions attributable to such Taxes and/or payments that are currently
available to the recipient of such payment, will equal the specified sum;
(e) "LIEN" shall mean any conditional sale agreement, default of title,
easement, encroachment, encumbrance, hypothecation, infringement, lien,
mortgage, pledge, reservation, restriction, security interest, title
retention or other security arrangement, or any adverse right or
interest, charge, or claim of any nature whatsoever of, on, or with
respect to any property or property interest, other than (i) liens for
current property Taxes not yet due and payable, and (ii) liens which do
not materially impair the use of, or title to, or value of the assets
subject to such lien;
(f) "LOSS" shall mean any and all demands, claims, actions or causes of
action, assessments, damages, liabilities, costs and expenses, including
interest and penalties, and reasonable attorneys' fees and expenses
relating thereto (but excluding lost profits or consequential or
incidental damages);
(g) "MATERIAL ADVERSE EFFECT" means, with respect to Buyer, Parent, Seller
or Business, (i) any adverse effect on the business, assets, properties,
liabilities, prospects, results of operations or financial condition of,
and which is material with respect to, such party (or the Business), or
(ii) any effect that materially impairs the ability of such party to
consummate the transactions contemplated hereby; PROVIDED, HOWEVER, that
Material Adverse Effect shall not be deemed to include the impact of
(A) actions contemplated by this Agreement, (B) changes in laws and
regulations or interpretations thereof that are generally applicable to
the manufacturing industry and (C) changes in generally accepted
accounting principles that are generally applicable to the manufacturing
industry;
(h) "PERSON" means an individual, corporation, partnership, association,
trust, unincorporated organization, other entity or group (as defined in
Section 13(d) of the Exchange Act); and
(i) "SUBSIDIARY" or "SUBSIDIARIES" of Seller, Parent, Buyer or any other
person, means any corporation, partnership, joint venture or other legal
entity of which either Seller, Parent, Buyer, or such other person, as
the case may be (either alone or through or together with any other
subsidiary), owns, directly or indirectly, 50% or more of the stock or
other equity interests the holders of which are generally entitled to
vote for the election of the board of directors or other governing body
of such corporation or other legal entity.
10.4 HEADINGS. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
10.5 SEVERABILITY. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner adverse to
any party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good
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faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner to the end that
transactions contemplated hereby are fulfilled to the extent possible.
10.6 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement of
the parties and supersedes all prior agreements and undertakings, both written
and oral, between the parties, or any of them, with respect to the subject
matter hereof and, except as otherwise expressly provided herein, are not
intended to confer upon any other person any rights or remedies hereunder.
10.7 ASSIGNMENT. This Agreement shall not be assigned by operation of law
or otherwise, except that Buyer may assign all or any of its rights hereunder to
any affiliate provided that no such assignment shall relieve Buyer of its
obligations hereunder.
10.8 PARTIES IN INTEREST. This Agreement shall be binding upon and inure
solely to the benefit of each party and nothing in this Agreement, express or
implied, is intended to or shall confer upon any other person any right, benefit
or remedy of any nature whatsoever under or by reason of this Agreement.
10.9 GOVERNING LAW; VENUE. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
law.
10.10 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, and by the different parties in separate counterparts, each of
which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
10.11 TIME IS OF THE ESSENCE. Time is of the essence with respect to this
Agreement.
10.12 AMENDMENT. This Agreement may be amended by the agreement of the
parties and in accordance with their applicable charter documents and applicable
Law.
10.13 WAIVER OF JURY TRIAL. Each of Seller and Buyer waive their
respective rights to a trail by jury of any claim or cause of action based upon
or arising out of or related to this agreement, any assignment or the
transactions contemplated hereby, in any action, proceeding or other litigation
of any type brought by any party against the other parties, whether with respect
to contract claims, tort claims, or otherwise. Each of Seller and Buyer agree
that any such claim or cause of action shall be tried by a court trial without a
jury. Without limiting the foregoing, the parties further agree that their
respective right to a trial by jury is waived by operation of this Section as to
any action, counterclaim or other proceeding which seeks, in whole or in part,
to challenge the validity or enforceability of this Agreement, any assignment or
any provision hereof or thereof. This waiver shall apply to any subsequent
amendments, renewals, supplements or modifications to this Agreement or any
assignment.
10.14 CONSENT TO JURISDICTION. The parties hereto each hereby irrevocably
submit to the exclusive jurisdiction of the state courts of the State of
Delaware and to the jurisdiction of the United States District Court of Delaware
for the purposes of any suit, action or other proceeding arising out of or based
upon this Agreement or the subject matter hereto brought by any other party
hereto. Each party hereto, to the extent permitted by applicable law, hereby
waives and agrees not to assert, by way of motion, as a defense, or otherwise,
in any such suit, action or proceeding brought in such courts, any claim that it
is not subject personally to the jurisdiction of the above-named courts, that
its property is exempt or immune from attachment or execution, that the venue of
the suit, action or proceeding is improper or that this Agreement or the subject
matter hereof may not be enforced in or by such Court.
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IN WITNESS WHEREOF, Seller, Parent and Buyer have caused this Agreement to
be executed as of the date first written above by their respective officers
thereunto duly authorized.
<TABLE>
<CAPTION>
<S> <C>
SPINNAKER INDUSTRIES, INC. ("Parent")
By: /s/ Ned M. Fleming, III
Name: Ned M. Fleming, III
Title: President
SPINNAKER ELECTRICAL TAPE COMPANY ("Seller")
By: /s/ Mark R. Matteson
Name: Mark R. Matteson
Title: Vice President
INTERTAPE POLYMER GROUP INC. ("Buyer")
By: /s/ Andrew M. Archibald
Name: Andrew M. Archibald
Title: CFO, Vice President Administration
</TABLE>
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- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
IPG HOLDINGS LP
INTERTAPE POLYMER GROUP INC.
NOTE AGREEMENT
DATED AS OF JULY 1, 1999
RE: U.S. $25,000,000 7.66% SENIOR GUARANTEED NOTES, SERIES A, DUE 2005
U.S. $112,000,000 7.81% SENIOR GUARANTEED NOTES, SERIES B, DUE 2009
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
Parties..................................................................... 1
SECTION 1. DESCRIPTION OF NOTES AND COMMITMENT......................... 1
Section 1.1. Description of Notes........................................ 1
Section 1.2. Commitment, Closing Date.................................... 2
Section 1.3. Other Agreements............................................ 2
Section 1.4. Guaranty Agreements......................................... 2
SECTION 2. PREPAYMENT OF NOTES......................................... 3
Section 2.1. Required Prepayments........................................ 3
Section 2.2. Optional Prepayment with Premium............................ 3
Section 2.3. Notice of Certain Prepayments............................... 3
Section 2.4. Application of Prepayments.................................. 4
Section 2.5. Direct Payment.............................................. 4
SECTION 3. REPRESENTATIONS............................................. 4
Representations of the General Partner, the Issuer and the
Section 3.1. Company..................................................... 4
Section 3.2. Representations of the Purchasers........................... 4
SECTION 4. CLOSING CONDITIONS.......................................... 6
Section 4.1. Conditions.................................................. 6
Section 4.2. Waiver of Conditions........................................ 7
SECTION 5. COMPANY, GENERAL PARTNER AND ISSUER COVENANTS............... 8
Section 5.1. Corporate or Partnership Existence, Etc..................... 8
Section 5.2. Insurance................................................... 8
Taxes, Claims for Labor and Materials, Compliance with
Section 5.3. Laws........................................................ 8
Section 5.4. Maintenance, Etc............................................ 9
Section 5.5. Nature of Business.......................................... 9
Section 5.6. Consolidated Net Worth...................................... 9
Section 5.7. Fixed Charges Coverage Ratio................................ 9
Section 5.8. Leverage Ratio.............................................. 9
Section 5.9. Additional Limitations on Debt.............................. 9
Section 5.10. Limitation on Liens......................................... 10
Section 5.11. Restricted Payments......................................... 11
Section 5.12. Mergers, Consolidations and Sales of Assets................. 12
Section 5.13. Repurchase of Notes......................................... 14
Section 5.14. Transactions with Affiliates................................ 14
Section 5.15. Termination of Pension Plans................................ 14
Section 5.16. Designation of Restricted Subsidiaries...................... 15
Section 5.17. Reports and Rights of Inspection............................ 15
Section 5.18. Substitution of Issuer...................................... 19
SECTION 6. EVENTS OF DEFAULT AND REMEDIES THEREFOR..................... 20
Section 6.1. Events of Default........................................... 20
Section 6.2. Notice to Holders........................................... 22
Section 6.3. Acceleration of Maturities.................................. 22
Section 6.4. Rescission of Acceleration.................................. 22
SECTION 7. AMENDMENTS, WAIVERS AND CONSENTS............................ 23
Section 7.1. Consent Required............................................ 23
Section 7.2. Solicitation of Holders..................................... 23
</TABLE>
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<S> <C> <C>
Section 7.3. Effect of Amendment or Waiver............................... 23
SECTION 8. INTERPRETATION OF AGREEMENT; DEFINITIONS.................... 24
Section 8.1. Definitions................................................. 24
Section 8.2. Accounting Principles....................................... 35
Section 8.3. Directly or Indirectly...................................... 35
SECTION 9. MISCELLANEOUS............................................... 35
Section 9.1. Registered Notes............................................ 35
Section 9.2. Exchange of Notes........................................... 36
Section 9.3. Loss, Theft, Etc. of Notes.................................. 36
Section 9.4. Expenses, Stamp Tax Indemnity............................... 36
Section 9.5. Powers and Rights Not Waived; Remedies Cumulative........... 37
Section 9.6. Notices..................................................... 37
Section 9.7. Successors and Assigns...................................... 37
Section 9.8. Survival of Covenants and Representations................... 38
Section 9.9. Severability................................................ 38
Section 9.10. Governing Law............................................... 38
Section 9.11. Jurisdiction and Service in Respect of Issuer and Company... 38
Section 9.12. Payments Free and Clear of Taxes............................ 38
Section 9.13. Currency of Payments; Judgments............................. 39
Section 9.14. Captions.................................................... 40
Section 9.15. Interest Act (Canada)....................................... 40
Section 9.16. Language.................................................... 40
</TABLE>
ATTACHMENTS TO NOTE AGREEMENT:
Schedule I--Names and Addresses of Note Purchasers and Amounts of Commitments
Exhibit A-1--Form of 7.66% Senior Guaranteed Note, Series A, due 2005
Exhibit A-2--Form of 7.81% Senior Guaranteed Note, Series B, due 2009
Exhibit B-1--Representations and Warranties of the Issuer and General Partner
Exhibit B-2--Representations and Warranties of the Company
Exhibit C--Description of Special Counsel's Closing Opinion
Exhibit D--Description of Closing Opinion of Counsel to the Company
Exhibit E--Description of Closing Opinion of Special U.S. Counsel to the
Obligors
Exhibit F--Description of Closing Opinion of Counsel to the Obligors as to
Matters in Delaware
Exhibit G-1--Form of Guaranty Agreement of the Company
Exhibit G-2--Form of Guaranty Agreement of IPG (US)
Exhibit H--Form of Limited Partnership Agreement
ii
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IPG HOLDINGS LP
AND
INTERTAPE POLYMER GROUP INC.
110E Montee de Liesse
St. Laurent, Quebec H4T 1N4
Canada
NOTE AGREEMENT
Re: U.S. $25,000,000 7.66% Senior Guaranteed Notes, Series A
due 2005
U.S. $112,000,000 7.81% Senior Guaranteed Notes, Series B
due 2009
Dated as of July 1, 1999
To the Purchasers named in Schedule I
hereto which are signatories to this
Agreement
Ladies and Gentlemen:
The undersigned, IPG Holdings LP, a limited partnership formed under the
laws of the State of Delaware (the "ISSUER"), Intertape Polymer Inc., a Canadian
corporation and general partner of the Issuer (the "GENERAL PARTNER") and
Intertape Polymer Group Inc., a corporation formed under the laws of Canada (the
"COMPANY" and, together with the Issuer, the "OBLIGORS"), jointly and severally,
agree with you as follows:
SECTION 1
DESCRIPTION OF NOTES AND COMMITMENT
1.1. DESCRIPTION OF NOTES. The Issuer will authorize the issue and sale
of:
(a) U.S. $25,000,000 7.66% Senior Guaranteed Notes, Series A, due May 31,
2005 (the "SERIES A NOTES") to be dated the date of issue, to bear
interest from such date at the rate of 7.66% per annum, to be expressed
to mature on May 31, 2005 and to be substantially in the form of
Exhibit A-1 hereto; and
(b) U.S. $112,000,000 7.81% Senior Guaranteed Notes, Series B, due May 31,
2009 to be dated the date of issue, to bear interest from such date at
the rate of 7.81% per annum, to be expressed to mature on May 31, 2009
and to be substantially in the form of Exhibit A-2 hereto.
The Series A Notes and the Series B Notes are hereinafter collectively
referred to as the "NOTES". The Series A Notes and the Series B Notes are each
herein referred to as Notes of a "SERIES". The interest on the Notes of each
Series shall be payable semiannually on the last day of each May and November in
each year (commencing November 30, 1999) and at maturity and shall bear interest
on overdue principal (including any overdue, required or optional prepayment of
principal) and premium, if any, and on any overdue installment of interest at
the Overdue Rate applicable to such Series. Interest on the Notes shall be
computed on the basis of a 360-day year consisting of twelve 30-day months. The
Notes are not subject to prepayment or redemption at the option of the Issuer
prior to their expressed maturity date except on the terms and conditions and in
the amounts and with the premium, if any, set forth in SECTION2 of this
Agreement. The term "NOTES" as used herein shall include each Note delivered
pursuant to this Agreement and the separate agreements with the other purchasers
named in Schedule I. You and the other Purchasers named in the Schedule I are
hereinafter sometimes referred to as the "PURCHASERS".
1.2. COMMITMENT, CLOSING DATE. Subject to the terms and conditions hereof
and on the basis of the representations and warranties hereinafter set forth,
the Issuer agrees to issue and sell to you, and you agree to
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purchase from the Issuer, Notes in the principal amount set forth opposite your
name on Schedule I hereto at a price of 100% of the principal amount thereof on
the Closing Date (as hereinafter defined).
Delivery of the Notes will be made at the offices of Chapman and Cutler, 111
West Monroe Street, Chicago, Illinois 60603 against payment therefor by wire
transfer in immediately available funds at the principal office of Bank of
America, N.A., New York, New York, ABA #0260-09593, Account #6550-113535 for
further credit to: The Toronto-Dominion Bank, New York, Account #0324-8025371,
Account Name: IPG Holdings LP, in the amount of the purchase price at
10:00 A.M., Chicago time, on July 15, 1999 or such later date (not later than
July 20, 1999) as shall be mutually agreed upon by the Issuer and the Purchasers
(the "CLOSING DATE"). The Notes purchased by you on the Closing Date will be
delivered to you in the form of a single registered Note (or such greater number
of Notes in denominations of at least $500,000 as you may request) in the form
attached hereto as Exhibit A for the full amount of your purchase, registered in
your name or in the name of your nominee, all as you may specify at any time
prior to the Closing Date.
1.3. OTHER AGREEMENTS. Simultaneously with the execution and delivery of
this Agreement, the Obligors are entering into similar agreements with other
Purchasers under which each other Purchaser agrees to purchase from the Issuer
the principal amount of Notes and the Series set opposite such Purchaser's name
on Schedule I, and your obligation and the obligations of the Obligors hereunder
are subject to the execution and delivery of such similar agreements by the
other Purchasers. This Agreement and said similar agreements with the other
Purchasers are herein collectively referred to as the "AGREEMENTS". The
obligations of each Purchaser under the Agreements shall be several and not
joint and no Purchaser shall be liable or responsible for the acts of any other
Purchaser.
1.4. GUARANTY AGREEMENTS. The payment by the Issuer of all amounts due
with respect to the Notes and performance of all obligations of the Issuer under
this Agreement will be unconditionally guaranteed (i) by the Company under a
Guaranty Agreement to be dated as of July 1, 1999 (the "GUARANTY AGREEMENT
(COMPANY)") from the Company, which Guaranty Agreement shall be in substantially
the form attached hereto as Exhibit G-1, and (ii) by IPG (US) under a Guaranty
Agreement to be dated as of July 1, 1999 (the "GUARANTY AGREEMENT (IPG (US))")
from IPG (US), which Guaranty Agreement shall be substantially in the form
attached hereto as Exhibit G-2. The Guaranty Agreement (Company) and the
Guaranty Agreement (IPG (US)) are hereafter referred to collectively as the
"GUARANTY AGREEMENTS" and individually as a "GUARANTY AGREEMENT".
SECTION 2
PREPAYMENT OF NOTES
2.1. REQUIRED PREPAYMENTS. (a) SERIES A NOTES. Except as set forth in
SECTION2.2, the Series A Notes are not subject to prepayment or redemption prior
to their expressed maturity dates.
(b) SERIES B NOTES. The Issuer agrees that on May 31 and November 30
in each year, commencing November 30, 2005 and ending November 30, 2008,
both inclusive, the Issuer will prepay and apply and there shall become due
and payable on the principal indebtedness evidenced by the Series B Notes,
an amount equal to the lesser of (i) $13,440,000 and (ii) the principal
amount of the Series B Notes then outstanding. The entire remaining
principal amount of the Series B Notes shall become due and payable on
May 31, 2009. No premium shall be payable in connection with any required
prepayment made pursuant to this SECTION2.1. Upon any partial prepayment of
the Series B Notes pursuant to SECTION2.2 or repurchase of Series B Notes
pursuant to SECTION5.13, the principal amount of the payment required at
maturity of the Series B Notes and each required prepayment of the Series B
Notes becoming due under this SECTION2.1 on and after the date of such
prepayment or purchase shall be reduced in the same proportion as the
aggregate unpaid principal amount of the Notes is reduced as a result of
such prepayment or purchase.
2.2. OPTIONAL PREPAYMENT WITH PREMIUM. Subject to SECTION2.4, the Issuer
shall have the privilege, at any time and from time to time, of prepaying the
outstanding Notes of both Series, either in whole or in part (but if in part
then in a minimum principal amount of U.S. $1,000,000 in the aggregate) by
payment of the principal amount of the Notes or portion thereof to be prepaid,
and accrued interest thereon to the date of such prepayment, together with a
premium equal to the Make-Whole Amount, determined as of three Business Days
prior to the date of such prepayment pursuant to this SECTION2.2.
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2.3. NOTICE OF CERTAIN PREPAYMENTS. The Issuer will give notice of any
prepayment of the Notes of both Series pursuant to SECTION2.2 to each holder
thereof not less than 30 days nor more than 60 days before the date fixed for
such optional prepayment specifying (i) such date, (ii) the principal amount of
the holder's Notes to be prepaid on such date, (iii) that a Make-Whole Amount
may be payable, (iv) the date when such Make-Whole Amount will be calculated,
(v) the estimated Make-Whole Amount, and (vi) the accrued interest applicable to
the prepayment as of the prepayment date. Notice of prepayment having been so
given, the aggregate principal amount of the Notes specified in such notice,
together with accrued interest thereon and the Make-Whole Amount, if any,
payable with respect thereto shall become due and payable on the prepayment date
specified in said notice. Not later than two Business Days prior to the
prepayment date specified in such notice, the Issuer shall provide each holder
of a Note written notice of the Make-Whole Amount, if any, payable in connection
with such prepayment and, whether or not any Make-Whole Amount is payable, a
reasonably detailed computation of the Make-Whole Amount.
2.4. APPLICATION OF PREPAYMENTS. In the case of each partial prepayment of
the Notes, the principal amount of the Notes to be prepaid shall be allocated
among all of the Notes of both Series then outstanding in proportion, as nearly
as practicable, to the respective unpaid principal amounts thereof.
2.5. DIRECT PAYMENT. Notwithstanding anything to the contrary contained in
this Agreement or the Notes, in the case of any Note owned by you or your
nominee or owned by any subsequent Institutional Holder which has given written
notice to the Issuer requesting that the provisions of this SECTION2.5 shall
apply, the Issuer will punctually pay when due the principal thereof, interest
thereon and Make-Whole Amount, if any, due with respect to said principal,
without any presentment thereof, directly to you, to your nominee or to such
subsequent Institutional Holder at your address or your nominee's address set
forth in Schedule I hereto or such other address as you, your nominee or such
subsequent Institutional Holder may from time to time designate in writing to
the Issuer or, if a bank account with a United States bank is designated for you
or your nominee on Schedule I hereto or in any written notice to the Issuer from
you, from your nominee or from any such subsequent Institutional Holder, the
Issuer will make such payments in immediately available funds to such bank
account, marked for attention as indicated, or in such other manner or to such
other account in any United States bank as you, your nominee or any such
subsequent Institutional Holder may from time to time direct in writing.
SECTION 3
REPRESENTATIONS
3.1. REPRESENTATIONS OF THE GENERAL PARTNER, THE ISSUER AND THE
COMPANY. (a) The General Partner and the Issuer represent and warrant that all
representations and warranties set forth in Exhibit B-1 are true and correct as
of the date hereof and are incorporated herein by reference with the same force
and effect as though herein set forth in full.
(b) The Company represents and warrants that all representations and
warranties set forth in Exhibit B-2 are true and correct as of the date
hereof and are incorporated herein by reference with the same force and
effect as though herein set forth in full.
3.2. REPRESENTATIONS OF THE PURCHASERS. You represent that you are
purchasing the Notes for your own account or for one or more separate accounts
maintained by you or for the account of one or more pension or trust funds and
not with a view to the distribution thereof, PROVIDED that the disposition of
your or their property shall at all times be within your or their control. You
understand that the Notes have not been registered under the Securities Act and
may be resold only if registered pursuant to the provisions of the Securities
Act or if an exemption from registration is available, except under
circumstances where neither such registration nor such an exemption is required
by law, and that the Issuer is not required to register the Notes.
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You represent that at least one of the following statements is an accurate
representation as to each source of funds (a "SOURCE") to be used by you to pay
the purchase price of the Notes to be purchased by you hereunder:
(a) the Source is an "insurance company general account" within the meaning
of Department of Labor Prohibited Transaction Exemption ("PTE") 95-60
(issued July 12, 1995) and there is no employee benefit plan, treating as
a single plan all plans maintained by the same employer or employee
organization, with respect to which the amount of the general account
reserves and liabilities for all contracts held by or on behalf of such
plan, exceeds ten percent (10%) of the total reserves and liabilities of
such general account (exclusive of separate account liabilities) plus
surplus, as set forth in the National Association of Insurance
Commissioners (the "NAIC") Annual Statement filed with your state of
domicile; or
(b) the Source is either (i) an insurance company pooled separate account,
within the meaning of PTE 90-1 (issued January 29, 1990), or (ii) a bank
collective investment fund, within the meaning of the PTE 91-38 (issued
July 12, 1991) and, except as you have disclosed to the Obligors in
writing pursuant to this paragraph (b), no employee benefit plan or group
of plans maintained by the same employer or employee organization
beneficially owns more than 10% of all assets allocated to such pooled
separate account or collective investment fund; or
(c) the Source constitutes assets of an "investment fund" (within the
meaning of Part V of the QPAM Exemption) managed by a "qualified
professional asset manager" or "QPAM" (within the meaning of Part V of
the QPAM Exemption), no employee benefit plan's assets that are included
in such investment fund, when combined with the assets of all other
employee benefit plans established or maintained by the same employer or
by an affiliate (within the meaning of Section V(c)(1) of the QPAM
Exemption) of such employer or by the same employee organization and
managed by such QPAM, exceed 20% of the total client assets managed by
such QPAM, the conditions of Part I(c) and (g) of the QPAM Exemption are
satisfied, neither the QPAM nor a person controlling or controlled by the
QPAM (applying the definition of "control" in Section V(e) of the QPAM
Exemption) owns a 5% or more interest in the Issuer or the Company and
(i) the identity of such QPAM and (ii) the names of all employee benefit
plans whose assets are included in such investment fund have been
disclosed to the Issuer and the Company in writing pursuant to this
paragraph (c); or
(d) the Source is a governmental plan; or
(e) the Source is one or more employee benefit plans, or a separate account
or trust fund comprised of one or more employee benefit plans, each of
which has been identified to the Issuer and the Company in writing
pursuant to this paragraph (e); or
(f) the Source does not include assets of any employee benefit plan, other
than a plan exempt from the coverage of ERISA.
As used in this SECTION3.2, the terms "EMPLOYEE BENEFIT PLAN", "GOVERNMENTAL
PLAN", "PARTY IN INTEREST" and "SEPARATE ACCOUNT" shall have the respective
meanings assigned to such terms in Section 3 of ERISA.
SECTION 4
CLOSING CONDITIONS
4.1. CONDITIONS. Your obligation to purchase Notes in the amounts set
forth opposite your name in Schedule I hereto on the Closing Date shall be
subject to the performance by the Issuer and the Company of their respective
agreements hereunder which by the terms hereof are to be performed at or prior
to the Closing Date and to the following further conditions precedent:
(a) ISSUER AND GENERAL PARTNER CLOSING CERTIFICATE. You shall have
received a certificate dated the Closing Date, signed by the President or a
Vice President of the General Partner on behalf of the Issuer and as an
authorized officer of the General Partner, the truth and accuracy of which
shall be a condition to your obligation to purchase the Notes proposed to be
sold to you and to the effect that (i) the representations and warranties of
the Issuer and the General Partner set forth in Exhibit B-1 hereto are true
and correct on
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and with the same effect as if made on the Closing Date, (ii) the Issuer has
performed all obligations hereunder which are required to be performed by it
on or prior to the Closing Date, and (iii) no Default or Event of Default
has occurred and is continuing.
(b) COMPANY CLOSING CERTIFICATE. You shall have received a certificate
dated the Closing Date, signed by the President or Vice President, Finance
and Administration, of the Company, the truth and accuracy of which shall be
a condition to your obligation to purchase the Notes proposed to be sold to
you and to the effect that (i) the representations and warranties of the
Company set forth in Exhibit B-2 hereto are true and correct on and with the
same effect as if made on the Closing Date, (ii) the Company has performed
all obligations hereunder which are required to be performed by it on or
prior to the Closing Date, and (iii) no Default or Event of Default has
occurred and is continuing.
(c) GUARANTY AGREEMENTS. The Guaranty Agreement (Company) shall have
been duly authorized, executed and delivered by the Company and the Guaranty
Agreement (IPG (US)) shall have been duly authorized, executed and delivered
by IPG (US).
(d) LEGAL OPINIONS. You shall have received from Chapman and Cutler,
who are acting as your special counsel in this transaction, and from
Stikeman, Elliott, Canadian counsel to the Obligors, and from Morgan,
Lewis & Bockius LLP, special U.S. counsel to the Obligors and IPG (US), and
Richards, Layton and Finger, P.A., special counsel to the Obligors and IPG
(US) as to matters of Delaware law, their respective opinions dated the
Closing Date, in form and substance satisfactory to you, and covering the
matters set forth in Exhibits C, D, E and F respectively, hereto.
(e) RELATED TRANSACTIONS. The Issuer shall have consummated the sale
of the entire principal amount of the Notes scheduled to be sold on the
Closing Date pursuant to this Agreement and the other Agreements referred to
in SECTION1.3.
(f) OUTSTANDING DEBT. The Company and its Restricted Subsidiaries
shall not have any Debt outstanding on the Closing Date other than that
specifically described in Annex B to Exhibit B-2 hereto.
(g) CONSENT TO RECEIVE SERVICE OF PROCESS. You shall have received, in
form and substance satisfactory to you, evidence of the consent of CT
Corporation System in New York, New York to the appointment and designation
provided for by SECTION9.11 for the period from the Closing Date through
June 1, 2009 (and the prepayment in full of all fees in respect thereof).
(h) SATISFACTORY PROCEEDINGS. All proceedings taken in connection with
the transactions contemplated by this Agreement, and all documents necessary
to the consummation thereof, shall be satisfactory in form and substance to
you and your special counsel, and you shall have received a copy (executed
or certified as may be appropriate) of all legal documents or proceedings
taken in connection with the consummation of said transactions.
(i) PAYMENT OF SPECIAL COUNSEL FEES. The Company shall have paid all
reasonable fees and expenses of Chapman and Cutler, special counsel to the
Purchasers, to the extent that such fees and expenses are known as at such
Closing Date and are reflected in appropriate bills or invoices delivered by
such special counsel.
(j) CONSENTS OF HOLDERS OF OTHER INDEBTEDNESS. On or prior to the
Closing Date, any notice, consent or approval required to be obtained from
any holder or holders of any outstanding Debt of the Company or any
Restricted Subsidiary, and any amendments or agreements pursuant to which
any Debt may have been issued which shall be necessary to permit the
consummation of the transactions contemplated hereby shall have been
obtained, and all such notices, consents or amendments shall be satisfactory
in form and substance to you and your special counsel.
4.2. WAIVER OF CONDITIONS. If on the Closing Date the Issuer fails to
tender to you the Notes to be issued to you on such date or if the conditions
specified in SECTION4.1 have not been fulfilled, you may thereupon elect to be
relieved of all further obligations under this Agreement. Without limiting the
foregoing, if the conditions specified in SECTION4.1 have not been fulfilled,
you may waive compliance by the Issuer or the Company, as the case may be, with
any such condition to such extent as you may in your sole discretion determine.
Nothing in this SECTION4.2
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shall operate to relieve either Obligor of any of its obligations hereunder or
to waive any of your rights against the Obligors.
SECTION 5
COMPANY, GENERAL PARTNER AND ISSUER COVENANTS
From and after the Closing Date and continuing so long as any amount remains
unpaid on any Note:
5.1. CORPORATE OR PARTNERSHIP EXISTENCE, ETC. The Company will preserve
and keep in full force and effect, and will cause each Restricted Subsidiary to
preserve and keep in full force and effect, its corporate existence and all
licenses and permits necessary to the proper conduct of its business; PROVIDED,
HOWEVER, that the foregoing shall not prevent any transaction permitted by
SECTION5.12. Subject to the provisions of SECTION5.18, (i) the Issuer shall at
all times be and remain a Delaware limited partnership; (ii) Intertape
Polymer Inc., a Canadian corporation, (or any other Wholly-owned Restricted
Subsidiary incorporated under the laws of Canada or any Province thereof or of
the United States or any State thereof) shall at all times be and remain the
General Partner and (iii) the Company shall at all times own directly or
indirectly 100% of the outstanding shares of capital stock of the General
Partner, free and clear of Liens.
5.2. INSURANCE. The Company will maintain, and will cause each Restricted
Subsidiary to 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 owning and operating similar properties in accordance with good business
practice.
5.3. TAXES, CLAIMS FOR LABOR AND MATERIALS, COMPLIANCE WITH LAWS. Without
limiting any other obligation of the Company hereunder including, without
limitation, pursuant to the second sentence of this SECTION5.3, the Company will
promptly pay and discharge, and will cause each Subsidiary promptly to pay and
discharge, all lawful taxes, assessments and governmental charges or levies
imposed upon the Company or such Subsidiary, respectively, or upon or in respect
of all or any part of the property or business of the Company or such
Subsidiary, all trade accounts payable in accordance with usual and customary
business terms, and all claims for work, labor or materials, which if unpaid
might become a Lien upon any property of the Company or a Restricted Subsidiary;
PROVIDED, HOWEVER, that the Company or such Subsidiary shall not be required to
pay any such tax, assessment, charge, levy, account payable or claim if (i) the
validity, applicability or amount thereof is being contested in good faith by
appropriate actions or proceedings which will prevent the forfeiture or sale of
any property of the Company or such Subsidiary or any material interference with
the use thereof by the Company or such Subsidiary, and (ii) the Company or such
Subsidiary shall set aside on its books, reserves adequate in accordance with
GAAP. The Company will promptly comply and will cause each Subsidiary to comply
with all laws, ordinances or governmental rules and regulations to which it is
subject including, without limitation, the Occupational Safety and Health Act of
1970, as amended, ERISA and all laws, ordinances, governmental rules and
regulations relating to environmental protection in all applicable
jurisdictions, the violation of which could materially and adversely affect the
properties, business, profits or financial condition of the Company and its
Restricted Subsidiaries, taken as a whole, or would result in any Lien not
permitted under SECTION5.10.
5.4. MAINTENANCE, ETC. The Company will maintain, preserve and keep, and
will cause each Restricted Subsidiary to maintain, preserve and keep, its
properties which are used or useful in the conduct of its business (whether
owned in fee or a leasehold interest) in good repair and working order and from
time to time will make all necessary repairs, replacements, renewals and
additions so that at all times the efficiency thereof shall be maintained.
5.5. NATURE OF BUSINESS. The Company and its Restricted Subsidiaries will
continue to carry on substantially the same type of business currently carried
on and activities which are ancillary, incidental or necessary to the ongoing
business of the Company and its Restricted Subsidiaries as presently conducted.
5.6. CONSOLIDATED NET WORTH. The Company will at all times keep and
maintain Consolidated Net Worth at an amount not less than U.S. $200,000,000.
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5.7. FIXED CHARGES COVERAGE RATIO. The Company will keep and maintain the
ratio (determined as of the end of each fiscal quarter of the Company) 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.
5.8. LEVERAGE RATIO. The Company will not at any time permit Consolidated
Funded Debt to exceed 55% of Consolidated Total Capitalization.
5.9. ADDITIONAL LIMITATIONS ON DEBT. (a) In addition to and not in
limitation of any other restrictions hereunder, the Company will not, and will
not permit any Restricted Subsidiary to, create, assume or incur or in any
manner become liable (including, without limitation, by merger, consolidation or
amalgamation) in respect of any Priority Debt unless at the time of issuance of
any such Priority Debt and after giving effect thereto and the application of
the proceeds therefrom, the aggregate principal amount of Priority Debt shall
not exceed an amount equal to 20% of Consolidated Net Worth, PROVIDED, HOWEVER,
that if and so long as IPG (US) is a Restricted Subsidiary, "PRIORITY DEBT"
shall not include any unsecured debt ("UNSECURED DEBT") incurred by IPG (US) so
long as (i) such unsecured Debt ranks PARI PASSU with the Notes as guaranteed by
the Guaranty Agreement (IPG (US)); and (ii) the lenders of such other unsecured
Debt shall enter into agreements with respect to the claims of the holders of
the Notes under the Guaranty Agreement (IPG (US)) being on a PARI PASSU basis
with such unsecured Debt, which agreement shall be delivered concurrently with
each issuance of such unsecured Debt and shall contain provisions comparable to
those contained in the Creditor Agreement being supplemented and delivered in
the date of Closing.
(b) Any corporation which becomes a Restricted Subsidiary after the date
hereof shall for all purposes of this SECTION5.9 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.
5.10. LIMITATION ON LIENS. The Company will not, and will not permit any
Restricted Subsidiary to, create or incur, or suffer to be incurred or to exist,
any Lien 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:
(a) Liens for property taxes and assessments or governmental charges or
levies and Liens securing claims or demands of mechanics and materialmen,
PROVIDED payment thereof is not at the time required by SECTION5.3;
(b) Liens of or resulting from any judgment or award, the time for the
appeal or petition for rehearing of which shall not have expired, or in
respect of which the Company or a Restricted Subsidiary shall at any time
in good faith be prosecuting an appeal or proceeding for a review and in
respect of which a stay of execution pending such appeal or proceeding
for review shall have been secured;
(c) Liens incidental to the conduct of business or the ownership of
properties and assets (including Liens in connection with worker's
compensation, unemployment insurance and other like laws, warehousemen's
and attorneys' liens and statutory landlords' liens) and Liens to secure
the performance of bids, tenders or trade contracts, or to secure
statutory obligations, surety or appeal bonds or other Liens of like
general nature incurred in the ordinary course of business and not in
connection with the borrowing of money; PROVIDED in each case, the
obligation secured is not overdue or, if overdue, is being contested in
good faith by appropriate actions or proceedings;
(d) minor survey exceptions or minor encumbrances, easements or
reservations, or rights of others for rights-of-way, utilities and other
similar purposes, or zoning or other restrictions as to the use of real
properties, which are necessary for the conduct of the activities of the
Company and its Restricted Subsidiaries or which customarily exist on
properties of corporations engaged in similar activities and similarly
situated and which do not in any event materially impair their use in the
operation of the business of the Company and its Restricted Subsidiaries;
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(e) Liens securing liabilities of a Restricted Subsidiary to the Company or
to another Wholly-owned Restricted Subsidiary;
(f) Liens on shares of stock of Unrestricted Subsidiaries;
(g) Liens existing as of March 31, 1999 and reflected in Annex B to
Exhibit B-2 to the Note Agreements;
(h) Liens 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 Company or a
Restricted Subsidiary, including Liens existing on such fixed assets at
the time of acquisition thereof or at the time of acquisition by the
Company or a Restricted Subsidiary of any business entity then owning
such fixed assets, whether or not such existing Liens 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 (i) the Lien shall
attach solely to the fixed assets acquired or purchased, (ii) at the time
of acquisition of such fixed assets, the aggregate amount remaining
unpaid on all liabilities secured by Liens on such fixed assets whether
or not assumed by the Company 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 Company), and (iii) all Debt
secured by such Liens shall have been incurred within the other
applicable limitations of SECTION5.8 and, in the case of a Restricted
Subsidiary (other than the Issuer), SECTION5.9;
(i) Liens incurred in connection with any renewals, extensions or refundings
of any Debt secured by Liens described in SECTIONSECTION5.10(g) and (h),
PROVIDED that no additional property is encumbered and there is no
increase in the aggregate principal amount of Debt secured thereby; and
(j) Liens, in addition to those permitted by SECTIONSECTION5.10(a) through
(i) above, securing Debt of the Company or any Restricted Subsidiary;
PROVIDED that after giving effect to the incurrence of all Debt secured
by such Liens the aggregate principal amount of Priority Debt shall not
exceed an amount equal to 20% of Consolidated Net Worth.
5.11. RESTRICTED PAYMENTS. The Company will not, and will not permit any
Restricted Subsidiary to, make any Restricted Investment or Restricted Payment,
if, after giving effect thereto, the sum of (i) the aggregate amount of
Restricted Payments made during the period from and after January 1, 1999 to and
including the date of the making of the Restricted Payment in question, plus
(ii) the aggregate amount of all Restricted Investments made by the Company or
any Restricted Subsidiary during said period would exceed the sum of (x) U.S.
$100,000,000 plus (y) 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 (z) an amount equal to the aggregate net cash proceeds
received by the Company from the issuance or sale after January 1, 1998 (other
than to the Company or any Subsidiary) of shares of common stock of the Company.
In addition to the foregoing restrictions, the Company will not make any
Restricted Payment or any Restricted Investment if, at the time thereof or after
giving effect thereto, any Default or Event of Default shall exist.
The Company 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 SECTION5.11, 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 Company) 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 SECTION5.11, 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.
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For purposes of this SECTION5.11, 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.
5.12. MERGERS, CONSOLIDATIONS AND SALES OF ASSETS. (a) The Company will
not, and will not permit any Restricted Subsidiary to, (i) consolidate or
amalgamate with or be a party to a merger with any other corporation or
(ii) sell, lease or otherwise dispose of all or any substantial part (as defined
in paragraph (d) of this SECTION5.12) of Consolidated Assets; PROVIDED, HOWEVER,
that:
(1) any Restricted Subsidiary may merge or amalgamate or consolidate with
or into the Company or any Wholly-owned Restricted Subsidiary so long
as (i) in any such transaction involving the Issuer and a
Wholly-owned Restricted Subsidiary (and not involving the Company),
the Issuer shall be the surviving or continuing limited partnership
or corporation and (ii) in any such transaction involving the
Company, the Company shall be the surviving or continuing entity, or
(iii) in any other such transaction involving the Issuer and not the
Company, the surviving or continuing corporation or limited
partnership shall be the Issuer or if the surviving or continuing
corporation or limited partnership is not the Issuer, then such
successor entity (x) shall have executed and delivered to each holder
of the Notes its assumption of the due and punctual performance of
each covenant and condition of the Note Agreements and the Notes
(pursuant to such agreements and instruments as shall be reasonably
satisfactory to the holders of the Notes), and shall have caused to
be delivered to each holder of the Notes an opinion of nationally
recognized independent counsel, or other independent counsel
reasonably satisfactory to such holders, to the effect that all
agreements or instruments effecting such assumption are enforceable
in accordance with their terms and comply with the terms hereof, and
(y) shall be a solvent limited partnership or corporation organized
and existing under the laws of the United States of America, any
state thereof or the District of Columbia, Canada or any province
thereof, and, at the time of any such amalgamation, consolidation or
merger described in this SECTION5.12(a), and after giving effect
thereto, no Default or Event of Default shall have occurred and be
continuing;
(2) the Company may consolidate or amalgamate or merge with any other
corporation if, at the time of any such amalgamation, consolidation
or merger described in this SECTION5.12(a) and after giving effect
thereto, no Default or Event of Default shall have occurred and be
continuing, and
(i) the surviving or continuing corporation shall be the Company, or
(ii) the successor entity is not the Company, then such successor
entity (x) shall have executed and delivered to each holder of
the Notes its assumption of the due and punctual performance of
each covenant and condition of the Note Agreements and the
Guaranty Agreement (Company) (pursuant to such agreements and
instruments as shall be reasonably satisfactory to the holders
of the Notes), and the successor entity shall have caused to be
delivered to each holder of the Notes an opinion of nationally
recognized independent counsel, or other independent counsel
reasonably satisfactory to such holders, to the effect that all
agreements or instruments effecting such assumption are
enforceable in accordance with their terms and comply with the
terms hereof, and (y) shall be a solvent corporation organized
and existing under the laws of the United States of America,
any state thereof or the District of Columbia or under the laws
of Canada or any province thereof; and
(3) any Restricted Subsidiary (including the Issuer) may sell, lease or
otherwise dispose of all or any substantial part of its assets to the
Company and any Restricted Subsidiary (except the Issuer) may sell,
lease or otherwise dispose of all or any substantial part of its
assets to any Wholly-owned Restricted Subsidiary (including the
Issuer).
(b) The Company will not permit any Restricted Subsidiary to issue or sell
any shares of stock of any class (including as "stock" for the purposes
of this SECTION5.12, any warrants, rights or options to purchase or
otherwise acquire stock or other Securities exchangeable for or
convertible into stock) of such Restricted Subsidiary to any Person other
than the Company or a Wholly-owned Restricted Subsidiary, except for the
purpose of qualifying directors, or (in the case of a Restricted
Subsidiary other than the
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Issuer) except in satisfaction of the validly pre-existing preemptive
rights of minority shareholders in connection with the simultaneous
issuance of stock to the Company and/or a Restricted Subsidiary whereby
the Company and/or such Restricted Subsidiary maintain their same
proportionate interest in such Restricted Subsidiary.
(c) The Company will not 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 any Restricted Subsidiary may make such sale, transfer
or disposition to the Company and any Restricted Subsidiary (other than
the Issuer) may make such sale, transfer or disposition to a Wholly-owned
Restricted Subsidiary) any shares of stock of any other Restricted
Subsidiary, unless:
(1) simultaneously with such sale, transfer, or disposition, all shares
of stock of such Restricted Subsidiary at the time owned by the
Company and by every other Restricted Subsidiary shall be sold,
transferred or disposed of as an entirety; and
(2) such sale or other disposition does not involve a substantial part
(as hereinafter defined) of the assets of the Company and its
Restricted Subsidiaries.
The provisions of this SECTION5.12(c) shall not prohibit a transaction
otherwise permitted by clause (ii) of the second sentence of SECTION5.1 or by
SECTION5.18.
(d) As used in this SECTION5.12, a sale, lease or other disposition of
assets (a "TRANSFER") shall be deemed to be a "SUBSTANTIAL PART" of the
assets of the Company and its Restricted Subsidiaries if the book value
of such assets, when added to the book value of all other assets
Transferred by the Company and its Restricted Subsidiaries (other than in
the ordinary course of business) during the 12-month period ending with
the date of such Transfer, 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
Transfer shall not be included (i) if and to the extent the net proceeds thereof
are segregated from the general accounts of the Company and any Restricted
Subsidiary, invested in Cash Equivalents until applied in accordance with
clause (x) or (y) below, and within one year after such Transfer are used either
(x) to acquire Like Assets, or (y) to prepay Senior Funded Debt, (ii) if the
assets Transferred are acquired subsequent to the Closing Date, do not
constitute Like Assets and are sold for the fair market value thereof, or
(iii) if the assets Transferred are exchanged for Like Assets having a fair
market value at least equal to that of the assets being Transferred. Any such
prepayment pursuant to clause (i)(y) above applied to the prepayment of the
Notes shall be made pursuant to SECTION2.2 hereof.
5.13. REPURCHASE OF NOTES. None of the Company, the Issuer, any Subsidiary
or any Affiliate, directly or indirectly, may repurchase or make any offer to
repurchase any Notes unless an offer has been made to repurchase Notes, pro
rata, from all holders of the Notes at the same time and upon the same terms.
Notes repurchased by the Company or any Subsidiary or Affiliate shall be
cancelled.
5.14. TRANSACTIONS WITH AFFILIATES. The Company will not, and will not
permit any Restricted Subsidiary to, 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 Company's or such Restricted Subsidiary's
business and upon fair and reasonable terms no less favorable to the Company or
such Restricted Subsidiary than would obtain in a comparable arm's-length
transaction with a Person other than an Affiliate.
5.15. TERMINATION OF PENSION PLANS. (a) The Company will not and will not
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 Lien on any property of
the Company or any Subsidiary pursuant to Section 4068 of ERISA.
(b) The Company will and will cause each Subsidiary to maintain each Foreign
Pension Plan in accordance with the terms and provisions thereof and the
requirements of applicable laws, rules and regulations
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except to the extent the failure to so maintain any such Foreign Pension
Plans could not reasonably be expected to materially adversely affect the
Company, the Issuer or the Company and its Restricted Subsidiaries taken
as a whole or the performance by the Company or the Issuer of this
Agreement, the Notes or the Guaranty Agreement (Company).
5.16. DESIGNATION OF RESTRICTED SUBSIDIARIES. The Company may designate
any Subsidiary a Restricted Subsidiary by giving written notice to each holder
of Notes that the Board of Directors of the Company 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. Such designation may be revoked by the
Board of Directors of the Company; PROVIDED, HOWEVER, that no Unrestricted
Subsidiary may be designated as a Restricted Subsidiary and no Restricted
Subsidiary may be designated as an Unrestricted Subsidiary unless, at the time
of such action and after giving effect thereto, no Default or Event of Default
would exist and at least $1.00 of additional Priority Debt could be incurred
under SECTION5.9, and PROVIDED, FURTHER, no Unrestricted Subsidiary shall at any
time be designated a Restricted Subsidiary if such Unrestricted Subsidiary shall
previously have been designated a Restricted Subsidiary, and no Restricted
Subsidiary shall at any time be designated an Unrestricted Subsidiary if such
Restricted Subsidiary shall previously have been designated as an Unrestricted
Subsidiary pursuant to this SECTION5.16. The foregoing provisions
notwithstanding, the Issuer and IPG (US) shall at all times be and remain a
Wholly-owned Restricted Subsidiary.
5.17. REPORTS AND RIGHTS OF INSPECTION. The Company will keep, and will
cause each Restricted Subsidiary to keep, proper books of record and account in
which full and correct entries will be made of all dealings or transactions of,
or in relation to, the business and affairs of the Company or such Restricted
Subsidiary, in accordance with GAAP consistently applied (except for changes
disclosed in the financial statements furnished to you pursuant to this
SECTION5.17 and concurred in by the independent public accountants referred to
in SECTION5.17(b) hereof), and will furnish to you so long as you are the holder
of any Note and to each other holder of the then outstanding Notes (in duplicate
if so specified below or otherwise requested):
(a) QUARTERLY STATEMENTS. As soon as available and in any event within
75 days after the end of each quarterly fiscal period (except the last) of
each fiscal year, copies of:
(1) consolidated balance sheets of the Company and its consolidated
Subsidiaries (and, if different, of the Restricted Group) as of the
close of such quarterly fiscal period, setting forth in comparative
form the consolidated figures for the corresponding period of the
fiscal year then most recently ended,
(2) consolidated statements of earnings and retained earnings of the
Company and its consolidated Subsidiaries (and, if different, of the
Restricted Group) for such quarterly fiscal period and for the
portion of the fiscal year ending with such quarterly fiscal period,
in each case setting forth in comparative form the consolidated
figures for the corresponding periods of the preceding fiscal year,
and
(3) consolidated statements of changes in cash resources of the Company
and its consolidated Subsidiaries (and, if different, of the
Restricted Group) for the portion of the fiscal year ending with such
quarterly fiscal period, setting forth in comparative form the
consolidated figures for the corresponding period of the preceding
fiscal year, all in reasonable detail and certified as complete and
correct by an authorized financial officer of the Company;
(b) ANNUAL STATEMENTS. As soon as available and in any event within
120 days after the close of each fiscal year of the Company, copies of:
(1) consolidated and consolidating balance sheets of the Company and its
consolidated Subsidiaries (and, if different, of the Restricted
Group) as of the close of such fiscal year, and
(2) consolidated and consolidating statements of earnings and retained
earnings and changes in cash resources of the Company and its
consolidated Subsidiaries (and, if different, of the Restricted
Group) for such fiscal year, in each case setting forth in
comparative form the consolidated and consolidating figures for the
preceding fiscal year, all in reasonable detail and with regard to
the consolidated figures, accompanied by a report thereon of Raymond
Chabot Grant Thorton or any
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other firm of independent public accountants of recognized national
standing in the United States or Canada selected by the Company to
the effect that the consolidated financial statements present fairly,
in all material respects, the consolidated financial position of the
Company and its consolidated Subsidiaries (and, if different, of the
Restricted Group) as of the end of the fiscal year being reported on
and the consolidated results of the operations and changes in cash
resources for said year in conformity with GAAP and that the
examination of such accountants in connection with such financial
statements has been conducted in accordance with generally accepted
auditing standards and included such tests of the accounting records
and such other auditing procedures as said accountants deemed
necessary in the circumstances;
(c) AUDIT REPORTS. Promptly upon receipt thereof, one copy of each
interim or special audit made by independent accountants of the books of the
Company or any Restricted Subsidiary;
(d) GOVERNMENTAL AND OTHER REPORTS. Promptly upon their becoming
available, one copy of each financial statement, report, notice or proxy
statement sent by the Company to stockholders generally and of each regular
or periodic report, and any registration statement or prospectus filed by
the Company or any Subsidiary with any securities exchange or any
governmental regulatory body including, but without limitation, the
Company's Form 20F and unaudited quarterly reports, and copies of any orders
in any proceedings to which the Company or any of its Subsidiaries is a
party, issued by any governmental agency having jurisdiction over the
Company or any of its Subsidiaries;
(e) ERISA REPORTS. Promptly upon the occurrence thereof, written
notice of (i) a Reportable Event with respect to any Plan; (ii) the
institution of any steps by the Company, any ERISA Affiliate, the PBGC or
any other person to terminate any Plan; (iii) the institution of any steps
by the Company or any ERISA Affiliate to withdraw from any Plan; (iv) a
non-exempt "prohibited transaction" within the meaning of Section 406 of
ERISA in connection with any Plan; (v) any material increase in the
contingent liability of the Company or any Subsidiary with respect to any
post-retirement welfare liability; (vi) the taking of any action by, or the
threatening of the taking of any action by, the Internal Revenue Service,
the Department of Labor or the PBGC with respect to any of the foregoing; or
(vii) any event or circumstance with respect to any Foreign Pension Plan
which could reasonably be expected to materially adversely affect the
Company, the Issuer or the Company and its Restricted Subsidiaries on a
consolidated basis or the performance by the Company or the Issuer hereunder
or under the Notes or the Guaranty Agreement (Company);
(f) OFFICER'S CERTIFICATES. Within the periods provided in
paragraphs (a) and (b) above, a certificate of an authorized financial
officer of the Company stating that such officer has reviewed the provisions
of this Agreement and setting forth: (i) the information and computations
(in sufficient detail) required in order to establish whether the Company
was in compliance with the requirements of SECTION5.6 through SECTION5.12 at
the end of the period covered by the financial statements then being
furnished, (ii) whether there existed as of the date of such financial
statements and whether, to the best of such officer's knowledge, there
exists on the date of the certificate or existed at any time during the
period covered by such financial statements any Default or Event of Default
(including, without limitation, with respect to SECTION5.2) and, if any such
condition or event exists on the date of the certificate, specifying the
nature and period of existence thereof and the action the Company is taking
and proposes to take with respect thereto and (iii) any material differences
between United States generally accepted accounting principles and GAAP to
the extent reasonably relevant to determining compliance with the
requirements of SECTION5.6 through SECTION5.12 hereof;
(g) ACCOUNTANT'S CERTIFICATES. Within the period provided in
paragraph (b) above, a certificate of the accountants who render an opinion
with respect to such financial statements, stating that as of the date of
the fiscal year end, and for that year, with respect to which such
accountants have given their report pursuant to SECTION5.17(b), the Company
was in compliance with the provisions of SECTIONSECTION5.6, 5.7 and 5.8 and
that, in the normal course of their audit (without special or additional
investigation), they have not become aware of a Default or Event of Default
under the provisions of SECTIONSECTION5.9, 5.10(j), 5.11 or 5.12 (but only
to the extent relative to the sale of a substantial part of the assets
thereunder);
(h) UNRESTRICTED SUBSIDIARIES. Within the respective periods provided
in paragraphs (a) and (b) above, financial statements of the character and
for the dates and periods as in said paragraphs (a) and
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(b) provided covering each Unrestricted Subsidiary (or groups of
Unrestricted Subsidiaries on a consolidated basis); and
(i) REQUESTED INFORMATION. With reasonable promptness, such other data
and information as you or any such holder may reasonably request.
Without limiting the foregoing, the Company will permit you, so long as you
are the holder of any Note, and each holder of the then outstanding Notes (or
such Persons as either you or such holder may designate), to visit and inspect,
under the Company's guidance, any of the properties of the Company or any
Restricted Subsidiary, to examine all of their books of account, records,
reports and other papers, to make copies and extracts therefrom and to discuss
their respective affairs, finances and accounts with their respective officers,
employees, and independent public accountants (and by this provision the Company
authorizes said accountants to discuss with you the finances and affairs of the
Company and its Restricted Subsidiaries) all at such reasonable times and as
often as may be reasonably requested. The Company shall not be required to pay
or reimburse any Noteholder for reasonable expenses which such Noteholder may
incur in connection with any such visitation or inspection, except that if such
visitation or inspection is made during any period when a Default or an Event of
Default shall have occurred and be continuing, the Company agrees to reimburse
such Noteholder for all such expenses promptly upon demand.
You agree that you will use all reasonable efforts to keep confidential any
information from time to time supplied to you by or on behalf of the Company
(including, without limitation, any such information provided pursuant to this
SECTION5.17) which the Company or any Person acting on its behalf designates in
writing at the time of its delivery to you, or as promptly as practicable
thereafter, is to be treated as confidential, PROVIDED, HOWEVER, that the
foregoing provisions of this paragraph shall not apply:
(i) to any information already known to you at the time of its receipt
thereof (other than any such information which to your knowledge is
already known to you by virtue of any breach by any third party of any
confidentiality obligation owed to the Company);
(ii) to any information which is or becomes public knowledge otherwise than
(to your knowledge) by reason of any breach of this paragraph;
(iii) to the extent that you are required to disclose the information in
question pursuant to any law, statute, rule or regulation or any order
of any court or judicial process or pursuant to any direction, request
or requirement (whether or not having the force of law but, if not
having the force of law, being of a type with which Institutional
Holders in the relevant jurisdiction are accustomed to comply) of any
self-regulating organization or any governmental, fiscal, monetary or
other authority;
(iv) to the disclosure of any such information to any regulators or auditors
including the National Association of Insurance Commissioners or any
successor agency;
(v) to the disclosure of any such information to any other holder of a Note;
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(vi) to the disclosure of any information to your counsel or accountants or
those of any other holder of a Note;
(vii) to the disclosure of any information to any of your employees, other
professional advisors or those of any other holder of a Note;
(viii) to the disclosure of any information to Moody's Investors
Service, Inc., Standard & Poor's Corporation or any other nationally
recognized rating agency;
(ix) to the extent that you need to disclose the information in question for
the protection or enforcement of any of your rights or interests
against the Issuer or the Company, whether under the Note Agreements or
otherwise; or
(x) to the prospective transferee in connection with any contemplated
transfer of any of the Notes (or of any other security of the Company
owned by you or any Person advised by your investment advisor or any of
its subsidiaries) by you PROVIDED, that such prospective transferee
shall agree (in writing) to be bound by the confidentiality provisions
of this SECTION5.17 as if it were a holder of Notes hereunder.
5.18. SUBSTITUTION OF ISSUER. The Issuer shall have the right to require
all (and not less than all) of the holders to deliver the outstanding Notes held
by each holder to the Issuer in exchange for substantially identical senior
guaranteed promissory notes (the "NEW NOTES") of another Restricted Subsidiary
(the "NEW ISSUER") subject to the satisfaction of each of the following
conditions:
(a) the Issuer shall have provided at least 30 days' prior written notice
of the exchange (the date of the exchange being referred to as the
"EXCHANGE DATE") to the holders of the proposed delivery to the
holders of existing Notes describing such exchange and making
reference to this SECTION5.18;
(b) the New Notes shall be in the form of Exhibit A hereto and dated as
of the last date on which accrued interest was paid in full or, if
accrued interest was never paid in full, as of the Closing Date;
(c) the holders, concurrently with the issuance of the New Notes on the
Exchange Date shall have received such corporate showings, legal
opinions and other closing items as may be reasonably requested by
the holders (including, without limitation thereof, such amendments,
modifications and ratifications with respect to the Guaranty
Agreement (Company) and the Guaranty Agreement (IPG (US)) as the
holders might reasonably request), all reasonably satisfactory to the
holders in form, scope and substance;
(d) the New Issuer shall be a corporation, partnership, or limited
liability company organized under the laws of Canada or the United
States or any State or Province thereof and no holder shall have
determined, in its reasonable judgment (by written notice to the
Issuer at least 10 days prior to the Exchange Date), that the
exchange contemplated hereinabove will have a material adverse tax
effect or other material adverse effect on the holder; and
(e) at the time of such exchange and after giving effect thereto, no
Default or Event of Default shall exist hereunder.
The Company shall pay all reasonable costs and expenses incurred by the
holders in connection with any exchange effected pursuant to this SECTION5.18.
In the event each of the foregoing conditions shall have been satisfied in
full, from and after the Exchange Date all references to the Issuer shall be
deemed to refer to the New Issuer referred to hereinabove without the necessity
of additional amendment or modification to this Agreement or the Notes.
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SECTION 6
EVENTS OF DEFAULT AND REMEDIES THEREFOR
6.1. EVENTS OF DEFAULT. Any one or more of the following shall constitute
an "EVENT OF DEFAULT" as such term is used herein:
(a) Default shall occur in the payment of interest on any Note when the same
shall have become due and such default shall continue for more than five
Business Days; or
(b) Default shall occur in the making of any payment of the principal of any
Note or premium, if any, thereon at the expressed or any accelerated
maturity date or at any date fixed for prepayment; or
(c) Default shall be made in the payment when due (whether by lapse of time,
by declaration, by call for redemption or otherwise) of the principal of
or interest on any Material Debt (other than the Notes) of the Company or
any Restricted Subsidiary and such default shall not have been waived and
shall continue beyond the period of grace, if any, allowed under the
terms of such Material Debt; or
(d) Default or the happening of any event shall occur under any indenture,
agreement or other instrument under which any Material Debt of the
Company or any Restricted Subsidiary may be issued and such default or
event shall continue for a period of time sufficient to permit the
acceleration of the maturity of any Material Debt of the Company or any
Restricted Subsidiary outstanding thereunder; or
(e) Default shall occur in the observance or performance of any covenant or
agreement contained in SECTION5.6 through SECTION5.12 hereof or any
covenant or agreement contained in the Guaranty Agreement (Company) or
any covenant or agreement in the Guaranty Agreement (IPG (US)); or
(f) Default shall occur in the observance or performance of any other
provision of this Agreement which is not remedied within 30 days after
the earlier of (i) the day on which a Responsible Officer of either
Obligor, as the case may be, first obtains knowledge of such default, or
(ii) the day on which written notice thereof is given to either Obligor
by the holder of any Note; or
(g) Any representation or warranty made by either Obligor or the General
Partner herein, or made by the Company in the Guaranty Agreement
(Company) or made by IPG (US) in the Guaranty Agreement (IPG (US)) or
made by either Obligor or the General Partner in any statement or
certificate furnished by such Obligor or such General Partner in
connection with the consummation of the issuance and delivery of the
Notes or furnished by either Obligor or the General Partner pursuant
hereto, is untrue in any material respect as of the date of the issuance
or making thereof; or
(h) Final judgment or final judgments for the payment of money aggregating
in excess of U.S. $5,000,000 (or the equivalent thereof in any other
currency) (exclusive of judgment amounts which are covered by insurance
of solvent insurers which have acknowledged such coverage) is or are
outstanding against either Obligor or any Restricted Subsidiary or
against any property or assets of any such entity and any one of such
judgments has remained unpaid, unvacated, unbonded or unstayed by appeal
or for a period of 90 days from the date of its entry; or
(i) A custodian, liquidator, trustee or receiver is appointed for either
Obligor or any Restricted Subsidiary or for the major part of the
property of any one of them and is not discharged within 90 days after
such appointment; or
(j) Either Obligor or any Restricted Subsidiary becomes insolvent or
bankrupt, is generally not paying its debts as they become due or makes
an assignment for the benefit of creditors, or either Obligor or any
Restricted Subsidiary applies for or consents to the appointment of a
custodian, liquidator, trustee or receiver for such Obligor or such
Restricted Subsidiary or for the major part of the property of any such
entity; or
(k) Bankruptcy, reorganization, arrangement or insolvency proceedings, or
other proceedings for relief under any bankruptcy or similar law or laws
for the relief of debtors, are instituted by or against either Obligor or
any Restricted Subsidiary and, if instituted against such Obligor or any
Restricted Subsidiary, are consented to or are not dismissed within
90 days after such institution; or
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(l) (i) The Guaranty Agreement (Company) shall be held by a court of
competent jurisdiction to be invalid or unenforceable in any respect, or
the Company takes any action for the purpose of repudiating or rescinding
the Guaranty Agreement (Company) or its obligations thereunder, or the
Company declares that its obligations thereunder are unenforceable, or
(ii) the Guaranty Agreement (IPG (US)) shall be held by a court of
competent jurisdiction to be invalid or unenforceable in any respect, or
IPG (US) takes any action for the purpose of repudiating or rescinding
the Guaranty Agreement (IPG (US)) or its obligations thereunder, or IPG
(US) declares that its obligations thereunder are unenforceable.
6.2. NOTICE TO HOLDERS. When any Event of Default described in the
foregoing SECTION6.1 has occurred, or if the holder of any Note or of any other
evidence of Debt of either Obligor gives any notice or takes any other action
with respect to a claimed default, such Obligor agrees to give notice within
three Business Days of such event to all holders of the Notes then outstanding.
6.3. ACCELERATION OF MATURITIES. When any Event of Default described in
paragraph (a) or (b) of SECTION6.1 has happened and is continuing, any holder of
any Note may, by notice in writing sent in the manner provided in SECTION9.6 to
the Company declare the entire principal of and all interest accrued on such
Note to be, and such Note shall thereupon become, forthwith due and payable,
without any presentment, demand, protest or other notice of any kind, all of
which are hereby expressly waived. When any Event of Default described in
paragraph (c), (d), (e), (f), (g), (h) or (l) of said SECTION6.1 has happened
and is continuing, the holder or holders of 51% or more of the principal amount
of Notes of all Series, taken as a single class, at the time outstanding may, by
notice to the Company, declare the entire principal and all interest accrued on
all Notes to be, and all Notes shall thereupon become, forthwith due and
payable, without any presentment, demand, protest or other notice of any kind,
all of which are hereby expressly waived. When any Event of Default described in
paragraph (i), (j) or (k) of SECTION6.1 has occurred, then all outstanding Notes
shall immediately become due and payable without presentment, demand or notice
of any kind. Upon the Notes becoming due and payable as a result of any Event of
Default as aforesaid, the Issuer will forthwith pay to the holders of the Notes
the entire principal and interest accrued on the Notes and, to the extent not
prohibited by applicable law, an amount as liquidated damages for the loss of
the bargain evidenced hereby (and not as a penalty) equal to the Make-Whole
Amount. No course of dealing on the part of the holder or holders of any Notes
nor any delay or failure on the part of any holder of Notes to exercise any
right shall operate as a waiver of such right or otherwise prejudice such
holder's rights, powers and remedies. The Issuer further agrees, to the extent
permitted by law, to pay to the holder or holders of the Notes all reasonable
costs and expenses incurred by them in the collection of any amounts payable
under the Notes upon any Event of Default hereunder or thereon, including
reasonable compensation to such holder's or holders' attorneys for all services
rendered in connection therewith. All amounts paid hereunder with respect to
principal, Make-Whole Amount, if any, and interest on the Notes shall be paid
ratably to all Noteholders.
6.4. RESCISSION OF ACCELERATION. The provisions of SECTION6.3 are subject
to the condition that if the principal of and accrued interest on all or any
outstanding Notes have been declared immediately due and payable by reason of
the occurrence of any Event of Default described in paragraph (a), (b), (c),
(d), (e), (f), (g), (h) or (l) of SECTION6.1, the holders of at least 66 2/3% in
aggregate principal amount of the Notes of all Series, taken as a single class,
then outstanding may, by written instrument filed with the Obligors, rescind and
annul such declaration and the consequences thereof, PROVIDED that at the time
such declaration is annulled and rescinded:
(a) no judgment or decree has been entered for the payment of any monies due
pursuant to the Notes or this Agreement;
(b) all arrears of interest upon all the Notes and all other sums payable
under the Notes and under this Agreement (except any principal, interest
or premium on the Notes which has become due and payable solely by reason
of such declaration under SECTION6.3) shall have been duly paid; and
(c) each and every other Default and Event of Default shall have been made
good, cured or waived pursuant to SECTION7.1;
and PROVIDED FURTHER, that no such rescission and annulment shall extend to or
affect any subsequent Default or Event of Default or impair any right consequent
thereto. Such annulment and rescission shall be by written instrument filed with
the Company.
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SECTION 7
AMENDMENTS, WAIVERS AND CONSENTS
7.1. CONSENT REQUIRED. Any term, covenant, agreement or condition of this
Agreement may, with the consent of the Obligors, be amended or compliance
therewith may be waived (either generally or in a particular instance and either
retroactively or prospectively), if the Obligors shall have obtained the consent
in writing of the holders of at least 66 2/3% in aggregate principal amount of
outstanding Notes of all Series, taken as a single class; PROVIDED that without
the written consent of the holders of all of the Notes then outstanding, no such
amendment or waiver shall be effective (i) which will change the time of payment
of the principal of or the interest on any Note or change the principal amount
thereof or change the rate of interest thereon, or (ii) which will change any of
the provisions with respect to optional prepayments including, without
limitation, the definition of Make-Whole Amount, or (iii) which will change the
percentage of holders of the Notes required to consent to any such amendment or
waiver of any of the provisions of this SECTION7 or SECTION6.
7.2. SOLICITATION OF HOLDERS. So long as there are any Notes outstanding,
no Obligor will solicit, request or negotiate for or with respect to any
proposed waiver or amendment of any of the provisions of this Agreement or the
Notes unless each holder of Notes (irrespective of the amount of Notes then
owned by it) shall be informed thereof by such Obligor and shall be afforded the
opportunity of considering the same and shall be supplied by the Obligors with
sufficient information to enable it to make an informed decision with respect
thereto. No Obligor will directly or indirectly, pay or cause to be paid any
remuneration, whether by way of supplemental or additional interest, fee or
otherwise, to any holder of Notes as consideration for or as an inducement to
entering into by any holder of Notes of any waiver or amendment of any of the
terms and provisions of this Agreement or the Notes unless such remuneration is
concurrently offered, on the same terms, ratably to the holders of all Notes
then outstanding.
7.3. EFFECT OF AMENDMENT OR WAIVER. Any such amendment or waiver shall
apply equally to all of the holders of the Notes and shall be binding upon them,
upon each future holder of any Note and upon the Obligors, whether or not such
Note shall have been marked to indicate such amendment or waiver. No such
amendment or waiver shall extend to or affect any obligation not expressly
amended or waived or impair any right consequent thereon.
SECTION 8
INTERPRETATION OF AGREEMENT; DEFINITIONS
8.1. DEFINITIONS. Unless the context otherwise requires, the terms
hereinafter set forth when used herein shall have the following meanings and the
following definitions shall be equally applicable to both the singular and
plural forms of any of the terms herein defined:
"AFFILIATE" shall mean any Person (other than the Company or a Special
Restricted Subsidiary) (i) which directly or indirectly through one or more
intermediaries controls, or is controlled by, or is under common control with,
either Obligor, (ii) which beneficially owns or holds 5% or more of any class of
the Voting Stock of either Obligor 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 either Obligor 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.
"AMERICAN" shall mean American Tape Co., a Delaware corporation, and any
Person who succeeds to all, or substantially all, of the assets and business of
American Tape Co.
"ANCHOR" shall mean Anchor Continental Inc., a Delaware corporation, and any
Person who succeeds to all, or substantially all, of the assets and business of
Anchor Continental Inc.
"BUSINESS DAY" shall mean any day except a Saturday, Sunday or other day on
which banks are generally not open for business in New York, New York or
Montreal, Quebec, Canada.
"CAPITALIZED LEASE" shall mean 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
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(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.
"CAPITALIZED RENTALS" of any Person shall mean 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.
"CASH EQUIVALENTS" shall mean, as of the date of any determination thereof,
Investments of the type described in clauses (b), (c) or (d) of the definition
of the term "Restricted Investments."
"CDN." shall mean Canadian dollars.
"CLOSING DATE" shall have the meaning ascribed to such term in SECTION1.2.
"CODE" shall mean the Internal Revenue Code of 1986, as amended, and the
rules and regulations promulgated thereunder from time to time.
"COMPANY" shall mean Intertape Polymer Group Inc., a corporation
incorporated under the laws of Canada, and any Person who succeeds to all, or
substantially all, of the assets and business of Intertape Polymer Group Inc.
"CONSOLIDATED" when used as a prefix to any item (unless such item is
defined differently herein) shall mean the aggregate amount of such item of the
Company and its Restricted Subsidiaries on a consolidated basis eliminating
intercompany items in accordance with GAAP.
"CONSOLIDATED ASSETS" shall mean, as of the date of any determination
thereof, consolidated total assets of the Company and its Restricted
Subsidiaries determined in accordance with GAAP (excluding, in any event, assets
or equity attributable to Unrestricted Subsidiaries).
"CONSOLIDATED CURRENT LIABILITIES" shall mean as of the date of any
determination thereof such liabilities of the Company 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).
"CONSOLIDATED NET INCOME" for any period shall mean the gross revenues of
the Company 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:
(a) 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;
(b) the proceeds of any life insurance policy;
(c) net earnings and losses of any Restricted Subsidiary accrued prior to
the date it became a Restricted Subsidiary; PROVIDED, HOWEVER, that the
net earnings and losses of American from and after December 16, 1997 and
the net earnings and losses of the Issuer from and after November 19,
1997, shall be included in any determination of Consolidated Net Income
hereunder;
(d) 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 Company or any Restricted Subsidiary, realized by such
corporation prior to the date of such acquisition;
(e) net earnings and losses of any corporation (other than a Restricted
Subsidiary) with which the Company or a Restricted Subsidiary shall have
consolidated or which shall have merged into or with the Company or a
Restricted Subsidiary prior to the date of such consolidation or merger;
(f) net earnings of any business entity (other than a Restricted Subsidiary)
in which the Company or any Restricted Subsidiary has an ownership
interest unless such net earnings shall have actually been received by
the Company or such Restricted Subsidiary in the form of cash
distributions;
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(g) any portion of the net earnings of any Restricted Subsidiary which for
any reason is unavailable for payment of dividends to the Company or any
other Restricted Subsidiary;
(h) earnings resulting from any reappraisal, revaluation or write-up of
assets;
(i) 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;
(j) any gain arising from the acquisition of any Securities of the Company
or any Restricted Subsidiary; and
(k) 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.
"CONSOLIDATED NET WORTH" shall mean, as of the date of any determination
thereof, the consolidated total shareholders' equity of the Company and its
Restricted Subsidiaries, determined in accordance with GAAP.
"CONSOLIDATED TOTAL CAPITALIZATION" shall mean, 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.
"DEBT" of any Person shall mean, as of the date of any determination thereof
(without duplication):
(i) all indebtedness for borrowed money or evidenced by notes, bonds,
debentures or similar evidences of indebtedness of such Person;
(ii) obligations secured by any Lien 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 Liens 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;
(iii) Capitalized Rentals;
(iv) 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
(v) (without duplication of any of the foregoing) Guaranties of obligations
of others of the character referred to hereinabove in this definition.
"DEFAULT" shall mean any event or condition the occurrence of which would,
with the lapse of time or the giving of notice, or both, constitute an Event of
Default.
"ERISA" shall mean 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.
"ERISA AFFILIATE" shall mean any corporation, trade or business that is,
along with the Company, 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.
"EVENT OF DEFAULT" shall have the meaning set forth in SECTION6.1.
"FIXED CHARGES" for any period shall mean on a consolidated basis the sum of
(i) all Rentals (other than Rentals on Capitalized Leases) payable during such
period by the Company and its Restricted Subsidiaries, and (ii) all Interest
Charges on all Debt (including the interest component of Rentals on Capitalized
Leases) of the Company and its Restricted Subsidiaries.
"FOREIGN PENSION PLAN" means any plan, fund (including, without limitation,
any superannuation fund) or other similar program established or maintained
outside the United States by the Company or any one or more
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of the Subsidiaries primarily for the benefit of employees of the Company or
such Subsidiaries residing outside the United States, which plan, fund or other
similar program provides for retirement income for such employees or a deferral
of income for such employees in contemplation of retirement and is not subject
to ERISA or the Code.
"FUNDED DEBT" of any Person shall mean 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; PROVIDED, HOWEVER, that any
obligation permitted to be classified under GAAP as a current liability (other
than the "current portion" of Funded Debt and other than Funded Debt then in
default) shall not constitute Funded Debt.
"GAAP" shall mean generally accepted accounting principles in Canada.
"GENERAL PARTNER" shall mean Intertape Polymer Inc., a Canadian corporation
and the general partner of the Issuer.
"GUARANTIES" by any Person shall mean 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 liabilities, 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: (i) to purchase such liabilities or obligation or any
property or assets constituting security therefor, (ii) to advance or supply
funds (x) for the purchase or payment of such liabilities or obligation, or
(y) to maintain working capital or other balance sheet condition or otherwise to
advance or make available funds for the purchase or payment of such liabilities
or obligation, (iii) to lease property or to purchase Securities or other
property or services primarily for the purpose of assuring the owner of such
liabilities or obligation of the ability of the primary obligor to make payment
of the liabilities or obligation, or (iv) otherwise to assure the owner of the
liabilities or obligation of the primary obligor against loss in respect
thereof. For the purposes of all computations made under this Agreement, a
Guaranty in respect of any indebtedness for borrowed money shall be deemed to be
Debt equal to the principal amount of such indebtedness for borrowed money which
has been guaranteed, and a Guaranty in respect of any other obligation or
liability or any dividend shall be deemed to be Debt equal to the maximum
aggregate amount of such obligation, liability or dividend.
"GUARANTY AGREEMENT (COMPANY)" shall have the meaning set forth in
SECTION1.4.
"GUARANTY AGREEMENT (IPG (US))" shall have the meaning set forth in
SECTION1.4.
"IPG (US)" shall mean IPG (US) Inc., a Delaware corporation, and any Person
who succeeds to all, or substantially all, of the assets of IPG (US) Inc.
"INSTITUTIONAL HOLDER" shall mean any insurance company, bank, savings and
loan association, trust company, investment company, charitable foundation,
employee benefit plan (as defined in ERISA) or other institutional investor or
financial institution.
"INTEREST CHARGES" for any period shall mean all interest and all
amortization of debt discount and expense on any particular liabilities for
which such calculations are being made. Computations of Interest Charges on a
pro forma basis for Debt having a variable interest rate shall be calculated at
the rate in effect on the date of any determination.
"INVESTMENTS" shall mean 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 or accounts receivable
arising in the ordinary course of business.
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"ISSUER" shall mean (i) IPG Holdings LP, a limited partnership formed under
the laws of the State of Delaware, and any Person who succeeds to all, or
substantially all, of the assets and business of IPG Holdings LP or (ii) in the
event of an Exchange of Notes pursuant to SECTION5.18, the New Issuer
thereunder.
"LIEN" shall mean any interest in property securing an obligation owed to,
or a claim by, a Person other than the owner of the property, whether such
interest is based on the common law, statute or contract, and including but not
limited to the security interest lien arising from a mortgage, encumbrance,
pledge, Capitalized Lease, conditional sale or trust receipt or a lease in which
such Person is lessor, consignor or bailor for security purposes. The term
"Lien" 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
Company 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 Lien.
"LIKE ASSETS" shall mean, as of the date of any determination thereof,
operating assets, used or to be used by the Company or any Restricted Subsidiary
in the lines of business in which the Company or such Restricted Subsidiary is
engaged as of the Closing Date or in businesses reasonably related thereto.
"LONG-TERM LEASE" shall mean 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.
"MAKE-WHOLE AMOUNT" means, with respect to any Note, an amount equal to the
excess, if any, of the Discounted Value of the Remaining Scheduled Payments with
respect to the Called Principal of such Note over the amount of such Called
Principal, PROVIDED that the Make-Whole Amount may in no event be less than
zero. For the purposes of determining the Make-Whole Amount, the following terms
have the following meanings:
"CALLED PRINCIPAL" means, with respect to any Note, the principal of
such Note that is to be prepaid pursuant to SECTION2.2 or has become or is
declared to be immediately due and payable pursuant to SECTION6.3, as the
context requires.
"DISCOUNTED VALUE" means, with respect to the Called Principal of any
Note, the amount obtained by discounting all Remaining Scheduled Payments
with respect to such Called Principal from their respective scheduled due
dates to the Settlement Date with respect to such Called Principal, in
accordance with accepted financial practice and at a discount factor
(applied on the same periodic basis as that on which interest on the Notes
is payable) equal to the Reinvestment Yield with respect to such Called
Principal.
"REINVESTMENT YIELD" means, with respect to the Called Principal of any
Note, 0.50% over the yield to maturity implied by (i) the yields reported,
as of 10:00 A.M. (New York City time) on the third Business Day preceding
the Settlement Date with respect to such Called Principal, on the display
designated as "PX1" or other appropriate page of the Bloomberg Financial
Markets Services Screen (or such other display as may replace Page PX1 on
the Bloomberg Financial Markets Services Screen) for actively traded U.S.
Treasury securities having a maturity equal to the Remaining Average Life of
such Called Principal as of such Settlement Date, or (ii) if such yields are
not reported as of such time or the yields reported as of such time are not
ascertainable, the Treasury Constant Maturity Series Yields reported, for
the latest day for which such yields have been so reported as of the third
Business Day preceding the Settlement Date with respect to such Called
Principal, in Federal Reserve Statistical Release H.15 (519) (or any
comparable successor publication) for actively traded U.S. Treasury
securities having a constant maturity equal to the Remaining Average Life of
such Called Principal as of such Settlement Date. Such implied yield will be
determined, if necessary, by (a) converting U.S. Treasury bill quotations to
bond-equivalent yields in accordance with accepted financial practice and
(b) interpolating linearly between (1) the actively traded U.S. Treasury
security with the average life closest to and greater than the Remaining
Average Life and (2) the actively traded U.S. Treasury security with the
average life closest to and less than the Remaining Average Life.
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"REMAINING AVERAGE LIFE" means, with respect to any Called Principal,
the number of years (calculated to the nearest one-twelfth year) obtained by
dividing (i) such Called Principal into (ii) the sum of the products
obtained by multiplying (a) the principal component of each Remaining
Scheduled Payment with respect to such Called Principal by (b) the number of
years (calculated to the nearest one-twelfth year) that will elapse between
the Settlement Date with respect to such Called Principal and the scheduled
due date of such Remaining Scheduled Payment.
"REMAINING SCHEDULED PAYMENTS" means, with respect to the Called
Principal of any Note, all payments of such Called Principal and interest
thereon that would be due after the Settlement Date with respect to such
Called Principal if no payment of such Called Principal were made prior to
its scheduled due date, PROVIDED that if such Settlement Date is not a date
on which interest payments are due to be made under the terms of the Notes,
then the amount of the next succeeding scheduled interest payment will be
reduced by the amount of interest accrued to such Settlement Date and
required to be paid on such Settlement Date pursuant to SECTION2.2 or
SECTION6.3.
"SETTLEMENT DATE" means, with respect to the Called Principal of any
Note, the date on which such Called Principal is to be prepaid pursuant to
SECTION2.2 or has become or is declared to be immediately due and payable
pursuant to SECTION6.3, as the context requires.
"MATERIAL DEBT" shall mean any Debt which has or relates to, in the
aggregate, an unpaid principal amount (or aggregate liability) of more than U.S.
$7,500,000 or an equivalent amount of money in any other currency.
"MINORITY INTERESTS" shall mean 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 Company 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.
"MULTIEMPLOYER PLAN" shall have the same meaning as in ERISA.
"NAIC" means the National Association of Insurance Commissioners or any
successor thereto.
"NET INCOME AVAILABLE FOR FIXED CHARGES" for any period shall mean the sum
of (i) Consolidated Net Income during such period plus (to the extent deducted
in determining Consolidated Net Income), (ii) all provisions for any Federal,
state or other income taxes made by the Company and its Restricted Subsidiaries
during such period, (iii) Fixed Charges of the Company and its Restricted
Subsidiaries during such period and (iv) all amortization expenses of intangible
assets.
"OVERDUE RATE" shall mean with respect to the (a) Series A Notes, 9.66% per
annum and (b) the Series B Notes, 9.81% per annum.
"PBGC" means the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.
"PERSON" shall mean an individual, partnership, corporation, trust or
unincorporated organization, and a government or agency or political subdivision
thereof.
"PLAN" means an "employee benefit plan" (as defined in section 3(3) of
ERISA) that is or, within the preceding five years, has been established or
maintained, or to which contributions are or, within the preceding five years,
have been made or required to be made, by the Company or any ERISA Affiliate or
with respect to which the Company or any ERISA Affiliate may have any liability.
"PRIORITY DEBT" shall mean and include (i) all Debt of the Company and all
Debt of the Issuer, in each case secured by Liens other than those expressly
permitted by SECTIONSECTION5.10(a) through (i), inclusive, and (ii) all Debt of
other Restricted Subsidiaries EXCLUDING, HOWEVER any Debt of such other
Restricted Subsidiaries owing to the Company or a Wholly-owned Restricted
Subsidiary and any unsecured Debt of IPG (US) described in the proviso to
SECTION5.9(a).
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"PURCHASERS" shall have the meaning set forth in SECTION1.1.
"QPAM EXEMPTION" means Prohibited Transaction Class Exemption 84-14 issued
by the United States Department of Labor.
"QUALIFYING EU JURISDICTION" shall mean any country (other than Greece)
which as of the Closing Date is a member of the European Union.
"RENTALS" shall mean and include as of the date of any determination thereof
all fixed payments (including as such all payments which the lessee is obligated
to make to the lessor on termination of the lease or surrender of the property)
in excess of $50,000 annually payable by the Company 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 Company 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.
"REPORTABLE EVENT" shall have the same meaning as in ERISA.
"RESPONSIBLE OFFICER" shall mean any Senior Financial Officer and any other
officer of the Company or the Issuer, as the case may be, with responsibility
for the administration of the relevant portion of this Agreement or the Guaranty
Agreement (Company).
"RESTRICTED GROUP" shall mean, as of the date of determination thereof, the
Company and its Restricted Subsidiaries.
"RESTRICTED INVESTMENTS" shall mean all Investments, other than:
(a) Investments by the Company and its Restricted Subsidiaries in and to
Restricted Subsidiaries, including, without limitation, Investments
(i) directly out of the cash proceeds to the Company of the concurrent
sale of shares of capital stock of the Company or (ii) pursuant to a
direct share exchange offer by the Company, and including any Investment
in a corporation which, after giving effect to such Investment, will
become a Restricted Subsidiary;
(b) Investments in commercial paper maturing in 270 days or less from the
date of issuance which, at the time of acquisition by the Company or any
Restricted Subsidiary, is accorded a rating of at least A-2 by
Standard & Poor's Corporation ("S&P") or at least Prime-2 by Moody's
Investors Service, Inc. ("MOODY'S"), or at least A-1 low by Canadian Bond
Rating Service ("CBRS") or at least R-1 low by Dominion Bond Rating
Service ("DBRS") in Canada;
(c) Investments in (i) 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 (ii) direct obligations of
Canada or any agency or instrumentality of Canada or any province thereof
(which province shall then have outstanding long-term debt bearing a
rating of at least A- by S&P, A3 by Moody's, A low by CBRS or A low by
DBRS), the payment or guarantee of which constitutes a full faith and
credit obligation of Canada or such province, as the case may be, in
either case maturing in twelve months or less from the date of
acquisition thereof;
(d) 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 U.S. $100,000,000 (or its equivalent in Canadian
currency) and whose long-term certificates of deposit are, at the time of
acquisition thereof by the Company or a Restricted Subsidiary, rated A-
or better by S & P, A3 or better by Moody's, A low or better by CBRS or A
low or better by DBRS, 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 U.S. $1,000,000,000 (or its equivalent in
such country's local currency); and
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(e) loans or advances (including, without limitation, loans or advances to
employees of the Company for the purchase by such employee of shares of
stock of the Company by such employee) 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 Company or any Restricted Subsidiary PROVIDED that the
aggregate amount of all such loans or advances shall at no time exceed
U.S. $5,000,000.
"RESTRICTED PAYMENTS" shall mean, for any period,
(i) the declaration or payment, directly or indirectly, of any dividend
either in cash or property, on any shares of capital stock of the
Company or any Restricted Subsidiary;
(ii) 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
Company or any Restricted Subsidiary; and
(iii) any payment or distribution, directly or indirectly, by the Company 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 Company or by a Restricted Subsidiary to a
Wholly-owned Restricted Subsidiary PROVIDED, FURTHER, HOWEVER, that any such
dividends, purchases, redemptions, retirements or other distributions by the
Issuer shall be excluded from "Restricted Payments" made to the extent made to
the Company or to a Wholly-owned Restricted Subsidiary which is either the
general partner or a limited partner of the Issuer.
"RESTRICTED SUBSIDIARY" shall mean and include the Issuer, Intertape Polymer
Corp., Intertape Polymer Inc., American Tape Co., IPG (US), Anchor, any
Subsidiary so described in Annex A to Exhibit B-2 hereto and any other
Subsidiary (i) which is organized under the laws of the United States, Puerto
Rico, Canada or any Qualifying EU Jurisdiction or any jurisdiction thereof;
(ii) 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; (iii) of which at least 50% (by number of votes) of the Voting
Stock or other equity interest is beneficially owned by the Company or any
Wholly-owned Restricted Subsidiary; and (iv) which has been designated by the
Board of Directors of the Company as a Restricted Subsidiary in accordance with
SECTION5.16. In addition to the foregoing, if and so long as (a) the Company and
its Restricted Subsidiaries own and hold at least 20% of the equity interest in
IFCO, a limited liability company ("IFCO"), (b) the Company has the right to
direct and supervise the operations of IFCO and (c) IFCO does not have assets in
excess of 5% of Consolidated Assets, IFCO, at the election of the Company, may
be designated a Restricted Subsidiary as provided in SECTION5.16.
"SECURITIES ACT" shall mean the United States Securities Act of 1933, as
amended from time to time.
"SECURITY" shall have the same meaning as in Section 2(1) of the Securities
Act.
"SENIOR FINANCIAL OFFICER" means the chief financial officer, principal
accounting officer, treasurer or comptroller of the Company or of the Issuer, as
the case may be.
"SENIOR FUNDED DEBT" shall mean Consolidated Funded Debt, other than
Subordinated Funded Debt.
"SENIOR OFFICER" means the chief executive officer or the chief financial
officer of the Company.
"SERIES" is defined in SECTION1.1.
"SERIES A NOTES" is defined in SECTION1.1.
"SERIES B NOTES" is defined in SECTION1.1.
"SPECIAL RESTRICTED SUBSIDIARY" shall mean a Restricted Subsidiary of which
at least 80% (by number of votes) of the Voting Stock or other equity interest
is beneficially owned by the Company or any Wholly-Owned Restricted Subsidiary.
"SUBORDINATED FUNDED DEBT" shall mean all unsecured Funded Debt of the
Company or of the Issuer which, in each case, is subject to subordination
provisions reasonably acceptable to the holders of not less than 66 2/3% in
aggregate principal amount of the Notes, subordinating such Funded Debt to
(i) in the case of Funded Debt of the Issuer, the obligations of the Issuer
under the Notes and (ii) in the case of Funded Debt of the Company, the
obligations of the Company under the Guaranty Agreement (Company), and (iii) in
the case of Funded Debt of IPG (US), the obligations of IPG (US) under the
Guaranty Agreement (IPG (US)).
24
<PAGE>
"SUBSIDIARY" means, as to any Person, (i) any corporation, association or
other business entity in which such Person or one or more of its Subsidiaries or
such Person and one or more of its Subsidiaries owns sufficient equity or voting
interests to enable it or them (as a group) ordinarily, in the absence of
contingencies, to elect a majority of the directors (or Persons performing
similar functions) of such entity, (ii) any partnership or joint venture if at
least a 50% interest in the profits or capital thereof is owned by such Person
or one or more of its Subsidiaries or such Person and one or more of its
Subsidiaries, PROVIDED, that in the case of a 50% ownership interest, such
Person shall have the right to exercise general direction and supervision over
the operations of such partnership, joint venture or other entity. Unless the
context otherwise clearly requires, any reference to a "Subsidiary" is a
reference to a Subsidiary of the Company.
"UNRESTRICTED SUBSIDIARY" shall mean any Subsidiary which is not a
Restricted Subsidiary.
"VOTING STOCK" shall mean Securities of any class or classes, the holders of
which are ordinarily, in the absence of contingencies, entitled whether through
the ownership of stock, partnership interests, by contract or otherwise, to
elect a majority of the board of directors (or Persons performing similar
functions).
"WHOLLY-OWNED" when used in connection with any Subsidiary shall mean any
Subsidiary of which all of the issued and outstanding equity interests (except
directors' qualifying shares) and voting interests of which shall be owned by
the Company and/or one or more of its other Wholly-owned Restricted
Subsidiaries.
8.2. ACCOUNTING PRINCIPLES. Where the character or amount of any asset or
liability or item of income or expense is required to be determined or any
consolidation or other accounting computation is required to be made for the
purposes of this Agreement, the same shall be done in accordance with GAAP, to
the extent applicable, except where such principles are inconsistent with the
requirements of this Agreement.
8.3. DIRECTLY OR INDIRECTLY. 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.
SECTION 9
MISCELLANEOUS
9.1. REGISTERED NOTES. The Issuer shall cause to be kept at its principal
office a register for the registration and transfer of the Notes (hereinafter
called the "NOTE REGISTER") and the Issuer will register or transfer or cause to
be registered or transferred as hereinafter provided any Note issued pursuant to
this Agreement.
At any time and from time to time the registered holder of any Note which
has been duly registered as hereinabove provided may transfer such Note upon
surrender thereof at the principal office of the Issuer duly endorsed or
accompanied by a written instrument of transfer duly executed by the registered
holder of such Note or its attorney duly authorized in writing.
The Person in whose name any registered Note shall be registered shall be
deemed and treated as the owner and holder thereof for all purposes of this
Agreement. Payment of or on account of the principal, premium, if any, and
interest on any registered Note shall be made to or upon the written order of
such registered holder.
9.2. EXCHANGE OF NOTES. At any time and from time to time, upon not less
than ten days' notice to that effect given by the holder of any Note initially
delivered or of any Note substituted therefor pursuant to SECTION9.1, this
SECTION9.2 or SECTION9.3, and, upon surrender of such Note at its office, the
Issuer will deliver in exchange therefor, without expense to such holder, except
as set forth below, a Note of the same Series for the same aggregate principal
amount as the then unpaid principal amount of the Note so surrendered, or Notes
of the same Series aggregating such unpaid principal amount in the denomination
of U.S. $500,000 (or such lesser amount as shall constitute 100% of the Notes of
such holder) or any amount in excess thereof as such holder shall specify, dated
as of the date to which interest has been paid on the Note so surrendered or, if
such surrender is prior to the payment of any interest thereon, then dated as of
the date of issue, registered in the name of such Person or Persons as may be
designated by such holder, and otherwise of the same form, series and tenor as
the Notes so surrendered for exchange. The Issuer may require the payment of a
sum sufficient to cover any stamp tax or governmental charge imposed upon such
exchange or transfer.
25
<PAGE>
9.3. LOSS, THEFT, ETC. OF NOTES. Upon receipt of evidence satisfactory to
the Issuer of the loss, theft, mutilation or destruction of any Note, and in the
case of any such loss, theft or destruction upon delivery of a bond of indemnity
in such form and amount as shall be reasonably satisfactory to the Issuer, or in
the event of such mutilation upon surrender and cancellation of the Note, the
Issuer will make and deliver without expense to the holder thereof, a new Note,
of like tenor and series, in lieu of such lost, stolen, destroyed or mutilated
Note. If the Purchasers, any subsequent Institutional Holder which is an
insurance company or any other Institutional Holder which has a net worth in
excess of U.S. $50,000,000 is the owner of any such lost, stolen or destroyed
Note, then the affidavit of an authorized officer of such owner, setting forth
the fact of loss, theft or destruction and of its ownership of such Note at the
time of such loss, theft or destruction shall be accepted as satisfactory
evidence thereof and no further indemnity shall be required as a condition to
the execution and delivery of a new Note other than the written agreement of
such owner to indemnify the Issuer.
9.4. EXPENSES, STAMP TAX INDEMNITY. Whether or not the transactions herein
contemplated shall be consummated, the Obligors, jointly and severally, agree to
pay directly all of your out-of-pocket expenses in connection with the
preparation, execution and delivery of this Agreement and the transactions
contemplated hereby, including but not limited to the reasonable charges and
disbursements of Chapman and Cutler, your special counsel, duplicating and
printing costs and charges for shipping the Notes, adequately insured to you at
your home office or at such other place as you may designate, and all such
reasonable expenses (including the fees and expenses of any investment banker or
financial consultant) relating to any proposed or actual amendment, waivers or
consents pursuant to the provisions hereof, including, without limitation, any
amendments, waivers, or consents resulting from any work-out, renegotiation or
restructuring relating to the performance by the Issuer of its obligations under
this Agreement and the Notes or of the Company of its obligations under this
Agreement, the Guaranty Agreement (Company) or the Guaranty Agreement (IPG
(US)). The Obligors, jointly and severally, also agree that they will pay and
save you harmless against any and all liability with respect to stamp and other
taxes, if any, which may be payable or which may be determined to be payable in
connection with the execution and delivery of this Agreement, the Notes, the
Guaranty Agreement (Company) and the Guaranty Agreement (IPG (US)), whether or
not any Notes are then outstanding. The Obligors, jointly and severally, agree
to protect and indemnify you against any liability for any and all brokerage
fees and commissions payable or claimed to be payable to any Person in
connection with the transactions contemplated by this Agreement (other than
those expressly retained by you).
9.5. POWERS AND RIGHTS NOT WAIVED; REMEDIES CUMULATIVE. No delay or
failure on the part of the holder of any Note in the exercise of any power or
right shall operate as a waiver thereof; nor shall any single or partial
exercise of the same preclude any other or further exercise thereof, or the
exercise of any other power or right, and the rights and remedies of the holder
of any Note are cumulative to, and are not exclusive of, any rights or remedies
any such holder would otherwise have.
9.6. NOTICES. All communications provided for hereunder shall be in
writing and, if to you, delivered or mailed prepaid by registered or certified
mail or overnight air courier, or by facsimile communication followed (on the
date of transmission) by overnight air courier, in each case addressed to you at
your address appearing on Schedule I to this Agreement or such other address as
you or the subsequent holder of any Note initially issued to you may designate
to the Company in writing, and if to the Company, delivered or mailed by
registered or certified mail or overnight air courier, or by facsimile
communication followed (on the date of transmission) by overnight air courier,
to the Company or to the Issuer at 110E Montee de Liesse, St. Laurent, Quebec,
Canada H4T 1N4, Attention: Vice President, Finance, Fax No. 514-731-5477, with a
copy to Stikeman Elliott, 1155 Rene Levesque West Blvd., Suite 3900, Montreal,
Quebec, Canada H3B 3V2, Attention: Michael L. Richards, Esq., Fax
No. 514-397-3222, and to Morgan, Lewis & Bockius LLP, 101 Park Avenue,
New York, New York 10178, Attn: Nancy Corbett, Esq., Fax No. 212-309-6273 or to
such other address as the Company or the Issuer may in writing designate to you
or to a subsequent holder of the Note initially issued to you, PROVIDED that the
failure to provide copies of any such notices to the parties set forth above or
to provide any other copies shall not invalidate any notice provided to the
Company or the Issuer pursuant to the terms of this SECTION9.6; PROVIDED
FURTHER, HOWEVER, that a notice to you by overnight air courier shall only be
effective if delivered to you at a street address designated for such purpose in
Schedule I, and a notice to you by facsimile communication shall only be
effective if made by confirmed transmission to you at a telephone number
designated for such purpose in
26
<PAGE>
Schedule I and followed (on the day of transmission) by overnight air courier,
or, in either case, as you or a subsequent holder of any Note initially issued
to you may designate to the Obligors in writing.
9.7. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the
Obligors and their respective successors and assigns and shall inure to your
benefit and to the benefit of your successors and assigns, including each
successive holder or holders of any Notes.
9.8. SURVIVAL OF COVENANTS AND REPRESENTATIONS. All covenants,
representations and warranties made by the Obligors or the General Partner
herein and in any certificates delivered pursuant hereto, whether or not in
connection with the Closing Date, shall survive the closing and the delivery of
this Agreement and the Notes.
9.9. SEVERABILITY. Should any part of this Agreement for any reason be
declared invalid or unenforceable, such decision shall not affect the validity
or enforceability of any remaining portion, which remaining portion shall remain
in force and effect as if this Agreement had been executed with the invalid or
unenforceable portion thereof eliminated and it is hereby declared the intention
of the parties hereto that they would have executed the remaining portion of
this Agreement without including therein any such part, parts or portion which
may, for any reason, be hereafter declared invalid or unenforceable.
9.10. GOVERNING LAW. This Agreement and the Notes issued and sold
hereunder shall be governed by and construed in accordance with New York law,
excluding choice of law principles of the law of such State that would require
the application of the laws of a jurisdiction other than such State.
9.11. JURISDICTION AND SERVICE IN RESPECT OF ISSUER AND COMPANY. Any legal
action or proceeding with respect to this Agreement, the Notes, the Guaranty
Agreement (Company) or the Guaranty Agreement (IPG (US)) 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 Company and the Issuer hereby ACCEPTS FOR ITSELF
AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION
OF THE AFORESAID COURTS. EACH OF THE ISSUER AND THE COMPANY 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 ISSUER, THE COMPANY AND
EACH HOLDER OF A NOTE HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY
JURY.
Each of the Issuer and the Company further consents that all service of
process may be made by delivery to it at the address of the Issuer or the
Company, as the case may be, set forth in SECTION9.6 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 Issuer and
the Company 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 SECTION9.11 shall affect the right of any
Noteholder 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
Issuer or the Company, or to enforce a judgment obtained in the courts of any
other jurisdiction.
9.12. PAYMENTS FREE AND CLEAR OF TAXES. The Obligors, for the benefit of
those holders of the Notes which are residents, citizens or domestic
corporations of the United States of America at the time of any payment made by
an Obligor hereunder (the "RELEVANT HOLDERS"), agrees that in the event any such
payments made by an Obligor under the Notes, this Agreement the Guaranty
Agreement (Company) or the Guaranty Agreement (IPG (US)) 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 (or any authority therein or thereunder) from or through
which payments hereunder are actually made (each a "TAXING JURISDICTION"), the
Obligors will pay to the Relevant Holder such additional amounts (the
"ADDITIONAL AMOUNTS") as may be necessary in order that the net amounts paid to
such Relevant Holder pursuant to the terms of this Agreement, such Notes, the
Guaranty Agreement (Company) or the Guaranty Agreement (IPG (US)) after
imposition of any such Relevant Tax (including, without limitation, any Relevant
Tax on such Additional Amounts) shall be not less than the amounts specified
27
<PAGE>
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 (or
any authority therein or thereunder) as described above), except that no such
Additional Amounts shall be payable in respect of this Agreement, any Note, the
Guaranty Agreement (Company) or the Guaranty Agreement (IPG (US)) to a Relevant
Holder which is liable for such Relevant Tax in respect of this Note Agreement,
such Notes, the Guaranty Agreement (Company) or the Guaranty Agreement
(IPG (US)) solely by reason of such recipient being resident or being deemed
resident in such Taxing Jurisdiction or carrying on business or being deemed to
carry on business in such Taxing Jurisdiction or having some other business
connection with such Taxing Jurisdiction other than, in the case of Canada, the
mere holding of this Agreement, such Notes the Guaranty Agreement (Company) or
the Guaranty Agreement (IPG (US)) or the receipt of principal or interest in
respect thereof.
9.13. CURRENCY OF PAYMENTS; JUDGMENTS. Any payment made by any Obligor to
any holder of the Notes or for the account of any such holder in respect of any
amount payable by such Obligor (including any payments under the Guaranty
Agreement (Company)) or the Guaranty Agreement (IPG (US)) shall be made in
U.S. Dollars. Any payment made by such Obligor to any Noteholder or for the
account of any such Noteholder in respect of any amount payable by such Obligor
in lawful currency of the United States of America, which payment is made in
Canadian dollars or other foreign currency, whether pursuant to any judgment or
order of any court or tribunal or otherwise, shall constitute a discharge of the
obligations of such Obligor only to the extent of the amount of lawful currency
of the United States of America which may be purchased with such Canadian
dollars or other foreign currency on the date of payment (or if it is not
practicable to make the purchase on such date, on the first day on which it is
practicable to do so); PROVIDED that any such conversion of a foreign currency
into lawful currency of the United States shall be calculated as of the date
such payment is received by such Noteholder. If the amount of U.S. Dollars so
purchased is less than the amount of U.S. Dollars expressed to be due hereunder
or under the Notes, the Obligors shall indemnify such holder against any loss
sustained by such holder as a result, and hereunder or under the Notes; and in
any event, the Obligors shall indemnify such holder against the reasonable cost
of making any such purchase. These indemnities shall constitute a separate and
independent obligation from the other obligations herein, in the Notes in the
Guaranty Agreement (Company) and in the Guaranty Agreement (IPG (US)), shall
give rise to a separate and independent cause of action, shall apply
irrespective of any indulgence granted by any such holder, shall continue in
full force and effect despite any judgment, order, claim or proof for a
liquidated amount in respect of any such sum due hereunder, under any Note under
the Guaranty Agreement (Company) and under the Guaranty Agreement (IPG (US)) or
any judgment or order and shall survive the payment of the Notes and the
termination of this Agreement.
9.14. CAPTIONS. The descriptive headings of the various Sections or parts
of this Agreement are for convenience only and shall not affect the meaning or
construction of any of the provisions hereof.
9.15. INTEREST ACT (CANADA). Solely for purposes of the INTEREST ACT
(Canada) and in respect of all or any portion of a calendar year, the annual
rate of interest to which any interest rate herein is equal is such rate
multiplied by a fraction, the numerator of which is the total number of days in
such year and the denominator of which is 360.
9.16. LANGUAGE. The parties hereby confirm their express intent that this
Agreement, the other Agreements, the Guaranty Agreement (Company), the Guaranty
Agreement (IPG (US)), the Notes and all documents and agreements directly and
indirectly related thereto be written in English.
Les parties reconnaissent leur volonte expresse que la presente convention,
les billets ainsi que les documents et convention qui s'y rattachent directement
ou indirectement soient rediges en anglais.
28
<PAGE>
The execution hereof by you shall constitute a contract between us for the
uses and purposes hereinabove set forth, and this Agreement may be executed in
any number of counterparts, each executed counterpart constituting an original
but all together only one agreement.
Accepted as of ____________, 1999
<TABLE>
<S> <C> <C>
IPG HOLDINGS LP
By: Intertape Polymer Inc., Its General Partner
By: /s/ ANDREW M. ARCHIBALD
--------------------------------------------
ITS VICE-PRESIDENT AND SECRETARY-TREASURER
INTERTAPE POLYMER INC.
By: /s/ ANDREW M. ARCHIBALD
--------------------------------------------
ITS VICE-PRESIDENT AND SECRETARY-TREASURER
INTERTAPE POLYMER GROUP INC.
By: /s/ ANDREW M. ARCHIBALD
--------------------------------------------
ITS CHIEF FINANCIAL OFFICER & VICE PRESIDENT
AND ADMINISTRATION
</TABLE>
29
<PAGE>
Accepted as of ____________:
<TABLE>
<S> <C> <C>
PRINCIPAL LIFE INSURANCE COMPANY,
on behalf of one or more separate accounts
By: Principal Capital Management, LLC, a Delaware
limited liability company, its authorized
signatory
By: /s/ JON C. HEINY, COUNSEL
--------------------------------------------
Name: Jon C. Heiny
COUNSEL
By: /s/ JOELLEN J. WATTS
--------------------------------------------
Joellen J. Watts
COUNSEL
</TABLE>
30
<PAGE>
Accepted as of ____________:
<TABLE>
<S> <C> <C>
PRINCIPAL LIFE INSURANCE COMPANY
By: Principal Capital Management, LLC, a Delaware
limited liability company, its authorized
signatory
By: /s/ JON C. HEINY
--------------------------------------------
Name: Jon C. Heiny
COUNSEL
By: /s/ JOELLEN J. WATTS
--------------------------------------------
Joellen J. Watts
COUNSEL
</TABLE>
31
<PAGE>
Accepted as of ____________:
<TABLE>
<S> <C> <C>
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
By: CIGNA Investments, Inc.(authorized agent)
By: /s/ JAMES R. KUZEMCHAK
--------------------------------------------
James R. Kuzemchak
MANAGING DIRECTOR
</TABLE>
32
<PAGE>
Accepted as of ____________:
<TABLE>
<S> <C> <C>
JEFFERSON-PILOT LIFE INSURANCE COMPANY
By: /s/ ROBERT E. WHALEN, II
--------------------------------------------
Robert E. Whalen, II
VICE PRESIDENT
</TABLE>
33
<PAGE>
Accepted as of ____________:
<TABLE>
<S> <C> <C>
C.M. LIFE INSURANCE COMPANY
By: /s/ KATHLEEN LYNCH
--------------------------------------------
Kathleen Lynch
Title:
</TABLE>
34
<PAGE>
Accepted as of ____________:
<TABLE>
<S> <C> <C>
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
By: /s/ KATHLEEN LYNCH
--------------------------------------------
Kathleen Lynch
MANAGING DIRECTOR
</TABLE>
35
<PAGE>
Accepted as of ____________:
<TABLE>
<S> <C> <C>
MONY LIFE INSURANCE COMPANY
By: /s/ SUZANNE E. WALTON
--------------------------------------------
Suzanne E. Walton
MANAGING DIRECTOR
</TABLE>
36
<PAGE>
Accepted as of ____________:
<TABLE>
<S> <C> <C>
MONY LIFE INSURANCE COMPANY
OF AMERICA
By: /s/ SUZANNE E. WALTON
--------------------------------------------
Suzanne E. Walton
AUTHORIZED AGENT
</TABLE>
37
<PAGE>
Accepted as of ____________:
<TABLE>
<S> <C> <C>
MONY LIFE INSURANCE COMPANY
(for the account of a Separate Account)
By: /s/ SUZANNE E. WALTON
--------------------------------------------
Suzanne E. Walton
MANAGING DIRECTOR
</TABLE>
38
<PAGE>
Accepted as of ____________:
<TABLE>
<S> <C> <C>
NEW YORK LIFE INSURANCE COMPANY
By: /s/ S. THOMAS KNOFF
--------------------------------------------
S. Thomas Knoff
DIRECTOR
</TABLE>
39
<PAGE>
Accepted as of ____________:
<TABLE>
<S> <C> <C>
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
By: /s/ RICHARD A. STRAIT
--------------------------------------------
Richard A. Strait
AUTHORIZED REPRESENTATIVE
</TABLE>
40
<PAGE>
<TABLE>
<S> <C> <C>
RELIASTAR LIFE INSURANCE COMPANY
OF NEW YORK
By: /s/ JAMES V. WITTICH
--------------------------------------------
James V. Wittich
VICE PRESIDENT, INVESTMENTS
</TABLE>
41
<PAGE>
<TABLE>
<S> <C> <C>
SECURITY CONNECTICUT LIFE INSURANCE COMPANY
By: /s/ JAMES V. WITTICH
--------------------------------------------
James V. Wittich
ASSISTANT TREASURER
</TABLE>
42
<PAGE>
<TABLE>
<S> <C> <C>
RELIASTAR LIFE INSURANCE COMPANY
By: /s/ JAMES V. WITTICH
--------------------------------------------
James V. Wittich
AUTHORIZED REPRESENTATIVE
</TABLE>
43
<PAGE>
<TABLE>
<S> <C> <C>
NORTHERN LIFE INSURANCE COMPANY
By: /s/ JAMES V. WITTICH
--------------------------------------------
James V. Wittich
ASSISTANT TREASURER
</TABLE>
44
<PAGE>
EXHIBIT 2.5
PRELIMINARY PROSPECTUS DATED MARCH 8, 1999
THIS SHORT FORM PROSPECTUS CONSTITUTES A PUBLIC OFFERING OF THESE SECURITIES
ONLY IN THOSE JURISDICTIONS WHERE THEY MAY BE LAWFULLY OFFERED FOR SALE AND
THEREIN ONLY BY PERSONS PERMITTED TO SELL SUCH SECURITIES. NO SECURITIES
COMMISSION OR SIMILAR AUTHORITY IN CANADA HAS IN ANY WAY PASSED UPON THE MERITS
OF THE SECURITIES OFFERED HEREUNDER AND ANY REPRESENTATION TO THE CONTRARY IS AN
OFFENCE. INFORMATION HAS BEEN INCORPORATED BY REFERENCE IN THIS SHORT FORM
PROSPECTUS FROM DOCUMENTS FILED WITH SECURITIES COMMISSIONS OR SIMILAR
AUTHORITIES IN CANADA. FOR THE PURPOSES OF THE PROVINCE OF QUEBEC, THIS
SIMPLIFIED PROSPECTUS CONTAINS INFORMATION TO BE COMPLETED BY CONSULTING THE
PERMANENT INFORMATION RECORD. COPIES OF THE DOCUMENTS INCORPORATED HEREIN BY
REFERENCE AND OF THE PERMANENT INFORMATION RECORD MAY BE OBTAINED ON REQUEST
WITHOUT CHARGE FROM THE SECRETARY OF INTERTAPE POLYMER GROUP INC., AT 110E
MONTEE DE LIESSE, ST-LAURENT, QUEBEC, H4T 1N4, TELEPHONE: (514) 731-7591. THE
SECURITIES OFFERED HEREUNDER HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED. ACCORDINGLY, ABSENT
REGISTRATION OR AN APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
SUCH ACT, THE SECURITIES OFFERED HEREBY MAY NOT BE OFFERED, OR OTHERWISE
TRANSFERRED, DIRECTLY OR INDIRECTLY, IN THE UNITED STATES OF AMERICA OR TO OR
FOR THE ACCOUNT OR BENEFIT OF U.S. PERSONS WITHIN THE UNITED STATES OF AMERICA,
ITS TERRITORIES OR POSSESSIONS AND THIS SHORT FORM PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY WITHIN THE UNITED STATES. SEE "PLAN OF DISTRIBUTION".
NEW ISSUE March 8, 1999
GRAPHIC TO GO HERE
INTERTAPE POLYMER GROUP INC.
$120,750,000
3,000,000 COMMON SHARES
This offering (the "Offering") consists of an offering to the public of
3,000,000 common shares (the "Common Shares") of Intertape Polymer Group Inc.
("Intertape"). The offering price of the Common Shares was determined by
negotiation among Intertape and the Underwriters. The common shares of Intertape
are listed and posted for trading on The Toronto Stock Exchange (the "TSE") and
on the American Stock Exchange (the "AMEX"). On February 23, 1999, the last
trading day before the announcement of the Offering, the closing prices of the
common shares of Intertape on the TSE and on the AMEX were $40.00 and US$26.50,
respectively. The TSE has conditionally agreed to list the Common Shares
distributed hereby, subject to compliance with the requirements of the TSE on or
before May 26, 1999.
PRICE: $40.25 PER COMMON SHARE
---------------------------------
---------------------------------
<TABLE>
<CAPTION>
PRICE TO THE UNDERWRITERS' NET PROCEEDS TO
PUBLIC FEE INTERTAPE(1)
------------ ------------- ---------------
<S> <C> <C> <C>
Per Common Share.......................................... $40.25 $1.61 $38.64
Total..................................................... $120,750,000 $4,830,000 $115,920,000
</TABLE>
(1) Before deducting the expenses of the Offering estimated at $250,000, which
will be paid out of the general corporate funds of Intertape.
The Underwriters, as principals, conditionally offer to the public the Common
Shares, subject to prior sale, if, as and when issued and sold by Intertape and
delivered to and accepted by the Underwriters in accordance with the conditions
contained in the Underwriting Agreement referred to under "Plan of Distribution"
and subject to the approval of certain legal matters on behalf of Intertape by
Stikeman, Elliott and on behalf of the Underwriters by McCarthy Tetrault.
Subscriptions for the Common Shares will be received subject to rejection or
allotment in whole or in part and the right is reserved to close the
subscription books at any time without notice. It is expected that definitive
certificates evidencing the Common Shares will be available for delivery at the
closing of this Offering, which is expected to be on or about March 16, 1999, or
on such other date as may be agreed upon, but not later than April 30, 1999.
TD Securities Inc., one of the Underwriters, is a wholly-owned subsidiary of a
Canadian chartered bank which is a lender to Intertape. See "Plan of
Distribution".
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
DOCUMENTS INCORPORATED BY REFERENCE..... 2
THE CORPORATION......................... 3
RECENT DEVELOPMENTS..................... 3
USE OF PROCEEDS......................... 4
CAPITALISATION.......................... 4
DESCRIPTION OF SHARE CAPITAL............ 5
DETAILS OF THE OFFERING................. 5
PLAN OF DISTRIBUTION.................... 5
</TABLE>
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
LEGAL MATTERS........................... 6
ELIGIBILITY FOR INVESTMENT.............. 6
AUDITORS, TRANSFER AGENT AND
REGISTRAR............................. 6
PURCHASERS' STATUTORY RIGHTS............ 7
CERTIFICATE OF THE CORPORATION.......... C-1
CERTIFICATE OF THE UNDERWRITERS......... C-2
</TABLE>
DOCUMENTS INCORPORATED BY REFERENCE
THE FOLLOWING DOCUMENTS, FILED WITH THE VARIOUS SECURITIES COMMISSIONS OR
SIMILAR REGULATORY AUTHORITIES IN EACH OF THE PROVINCES OF CANADA, ARE
SPECIFICALLY INCORPORATED BY REFERENCE IN AND FORM AN INTEGRAL PART OF THIS
SHORT FORM PROSPECTUS:
(a) THE ANNUAL REPORT OF INTERTAPE ON FORM 20-F FOR THE YEAR ENDED
DECEMBER 31, 1997, FILED IN LIEU OF AN ANNUAL INFORMATION FORM;
(b) THE AUDITED CONSOLIDATED BALANCE SHEETS OF INTERTAPE AS AT DECEMBER 31,
1997 AND 1996 AND THE AUDITED CONSOLIDATED STATEMENTS OF EARNINGS,
RETAINED EARNINGS AND CHANGES IN CASH RESOURCES FOR THE YEARS ENDED
DECEMBER 31, 1997, 1996 AND 1995 TOGETHER WITH THE AUDITORS' REPORT
THEREON INCLUDED IN THE ANNUAL REPORT OF INTERTAPE FOR THE YEAR ENDED
DECEMBER 31, 1997;
(c) THE MANAGEMENT'S DISCUSSION AND ANALYSIS INCLUDED IN THE ANNUAL REPORT
OF INTERTAPE FOR THE YEAR ENDED DECEMBER 31, 1997;
(d) THE MANAGEMENT PROXY CIRCULAR OF INTERTAPE DISTRIBUTED IN CONNECTION
WITH THE ANNUAL AND SPECIAL MEETING OF THE SHAREHOLDERS OF INTERTAPE HELD
ON MAY 21, 1998;
(e) THE COMPARATIVE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS OF INTERTAPE
FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 1998 AND 1997;
(f) THE COMPARATIVE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS OF INTERTAPE
FOR THE SIX-MONTH PERIODS ENDED JUNE 30, 1998 AND 1997; AND
(g) THE COMPARATIVE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS OF INTERTAPE
FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30, 1998 AND 1997.
ANY DOCUMENTS OF THE TYPE REFERRED TO ABOVE AND ANY MATERIAL CHANGE REPORTS
(EXCLUDING CONFIDENTIAL MATERIAL CHANGE REPORTS) FILED BY INTERTAPE WITH A
SECURITIES COMMISSION OR ANY SIMILAR AUTHORITY IN CANADA, AFTER THE DATE OF THIS
SHORT FORM PROSPECTUS AND PRIOR TO THE TERMINATION OF THE OFFERING, SHALL BE
DEEMED TO BE INCORPORATED BY REFERENCE INTO THIS SHORT FORM PROSPECTUS.
ANY STATEMENT CONTAINED IN A DOCUMENT INCORPORATED OR DEEMED TO BE
INCORPORATED BY REFERENCE HEREIN SHALL BE DEEMED TO BE MODIFIED OR SUPERSEDED,
FOR THE PURPOSES OF THIS SHORT FORM PROSPECTUS, TO THE EXTENT THAT A STATEMENT
CONTAINED HEREIN OR IN ANY OTHER SUBSEQUENTLY FILED DOCUMENT THAT ALSO IS OR IS
DEEMED TO BE INCORPORATED BY REFERENCE HEREIN MODIFIES OR REPLACES THAT
STATEMENT. THE MODIFYING OR SUPERSEDING STATEMENT NEED NOT STATE THAT IT HAS
MODIFIED OR SUPERSEDED A PRIOR STATEMENT OR INCLUDE ANY OTHER INFORMATION SET
FORTH IN THE DOCUMENT THAT IT MODIFIES OR SUPERSEDES. THE MAKING OF A MODIFYING
OR SUPERSEDING STATEMENT SHALL NOT BE DEEMED AN ADMISSION FOR ANY PURPOSES THAT
THE MODIFIED OR SUPERSEDED STATEMENT, WHEN MADE, CONSTITUTED A
MISREPRESENTATION, AN UNTRUE STATEMENT OF A MATERIAL FACT OR AN OMISSION TO
STATE A MATERIAL FACT THAT IS REQUIRED TO BE STATED OR THAT IS NECESSARY TO MAKE
A STATEMENT NOT MISLEADING IN LIGHT OF THE CIRCUMSTANCES IN WHICH IT WAS MADE.
ANY STATEMENT SO MODIFIED OR SUPERSEDED SHALL NOT BE DEEMED IN ITS UNMODIFIED OR
SUPERSEDED FORM TO CONSTITUTE PART OF THIS SHORT FORM PROSPECTUS.
2
<PAGE>
THE CORPORATION
Intertape develops, manufactures and sells a variety of specialised
polyolefin plastic packaging products for industrial use. These products include
pressure-sensitive and water-activated carton sealing tapes, masking and
reinforced filament pressure-sensitive tapes, duct tapes, acrylic coating,
shrink wrap, stretched wrap and woven products. Most of Intertape's products are
derived from resins that are converted into films and adhesives. Resins are also
combined with paper and converted into a variety of packaging products. Vertical
integration, whereby Intertape performs each step in the conversion of
polyolefin resins and paper into its various products, and continuous capital
expenditures to increase manufacturing efficiencies allow Intertape 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 Intertape and flexibility and control of the manufacturing process
and in speed of delivery.
Intertape's overall objective is to gain market share in large niche markets
that it believes are growing at rates faster than the economy as a whole.
Intertape's strategies for achieving this objective are as follows:
(i) solidify its position as a low-cost manufacturer; (ii) increase its
manufacturing capacity; (iii) develop new products; (iv) develop central
distribution centres; (v) evaluate future complementary acquisitions; and
(vi) expand its sales into new geographic markets.
Intertape's registered office is located at 1155 Rene-Levesque Boulevard
West, Suite 4000, Montreal, Quebec, H3B 3V2 and its principal executive offices
are located at 110E Montee de Liesse, St-Laurent, Quebec, Canada, H4T 1N4.
RECENT DEVELOPMENTS
In March 1998, Intertape announced its plans to restructure its Flexible
Intermediate Bulk Container ("FIBC") operations. Over the past several years,
the increasing levels of imported products into North America have resulted in a
continuing downward trend in the selling prices of FIBC products. This
penetration into the North American marketplace, coupled with higher domestic
manufacturing costs and worldwide currency devaluation have led to Intertape's
decision to restructure its FIBC operations. Intertape remains strongly
committed to the FIBC business and its customers and believes that the
reorganisation of its FIBC operations will allow it to improve its
competitiveness by restructuring its domestic cost base and gradually transfer
the majority of its FIBC manufacturing facilities outside Canada and the United
States.
In May 1998, Intertape entered into a US$50 million unsecured revolving line
of credit with an American banking corporation to refinance an existing facility
of US$33 million. As of February 23, 1999, approximately US$40.8 million was
outstanding under this facility. In June 1998, Intertape completed a private
placement of US$137 million of senior guaranteed notes maturing in 2008 and
bearing interest at the rate of 6.82% per annum. The proceeds from this private
placement were used to repay debt incurred in December 1997 in connection with
the acquisition of American Tape Co. and to repay short-term credit facilities.
In September 1998, Intertape completed the previously-announced acquisition
from Anchor Continental Holdings Inc., a wholly-owned subsidiary of Coating
Technologies International, Inc., of Anchor Continental, Inc., which
manufactures pressure-sensitive tapes including both masking and duct tapes. The
purchase price for this acquisition was approximately US$102.1 million in cash
and was entirely paid at closing. The purchase price was substantially financed
by Canadian and American banks which advanced US$100 million to Intertape. The
acquisition of Anchor Continental, Inc. is expected to enable Intertape to
expand its existing product lines, to increase its product supply to its
industrial customer base and to broaden the distribution channels for its
products.
In October 1998, Intertape completed the previously-announced acquisition of
substantially all of the assets of the Rexford Paper Company, a division of
Inland Paperboard and Packaging, Inc. The purchase price for this acquisition
was approximately US$9.2 million in cash and was entirely paid at closing. This
acquisition will provide Intertape with complementary product lines of sensitive
tapes and water-activated tape and is expected to expand Intertape's
distribution channels.
3
<PAGE>
USE OF PROCEEDS
Of the estimated net proceeds of $115,670,000 to be received by Intertape
from this Offering, approximately $51.7 million (approximately US$34.5 million)
will be used to reimburse the three series of outstanding senior unsecured US
dollar notes due June 1, 2001 and issued in 1996, approximately $61.2 million
(approximately US$40.8 million) will be used to reimburse the outstanding
balance of a senior unsecured US dollar bank loan under the US$50 million
unsecured revolving line of credit and the balance for general corporate
purposes.
CAPITALISATION
The following table sets forth the consolidated capitalisation of Intertape
as of the dates indicated, before and after giving effect to the sale of the
Common Shares under this Offering, assuming the application of the estimated net
proceeds therefrom as set forth under "Use of Proceeds". This table should be
read in conjunction with the consolidated financial statements and related notes
thereto incorporated by reference herein.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998
AFTER GIVING EFFECT
AUTHORISED DECEMBER 31, 1997(1) SEPTEMBER 30, 1998(1) TO THIS OFFERING(1)
----------- --------------------- ---------------------- --------------------
(unaudited) (unaudited)
(in thousand of dollars, except number of shares)
<S> <C> <C> <C> <C>
Short-term debt
Bank indebtedness............ $ 25,083 $218,344 $153,233
Current portion of long-term
debt....................... 4,310 3,968 3,968
-------- -------- --------
Total short-term debt.......... 29,393 222,312 157,201
Long-term debt
US dollar bank loan under
revolving credit
facilities................. 92,488 -- --
US dollar bank term loan..... 71,475 -- --
US$10,000 Series 1 Notes..... US$10,000 14,295 15,321 --
US$15,000 Series 2 Notes..... US$15,000 21,443 22,981 --
US$8,000 Series 3 Notes...... US$8,000 11,436 12,257 --
US$137,000 6.82% Notes....... US$137,000 -- 209,898 209,898
Interest free government
loan....................... 475 400 400
Other bank term loans........ 3,614 5,865 5,865
Obligations under capital
leases..................... 14,841 8,115 8,115
-------- -------- --------
Total long-term debt (excluding
current portion)............. 230,067 274,837 224,278
Shareholders' equity
Class A Preferred Shares..... unlimited -- -- --
Common Shares................ unlimited 157,430 158,816 276,416(2)
<S> <C> <C> <C> <C>
<CAPTION>
(25,019,921 shares) (25,106,400 shares) (28,106,400 shares)
Retained earnings. 89,632 118,239 (3) 116,814
<S> <C> <C> <C> <C>
Accumulated foreign currency
translation adjustments.... 3,040 3,453 3,453(4)
-------- -------- --------
Total shareholders' equity... 250,152 280,508 396,683
-------- -------- --------
Total consolidated
capitalisation............... $509,562 $777,657 $778,162
======== ======== ========
</TABLE>
- ------------
(1) The December 31, 1997 exchange rate used to convert US dollar denominated
loans and notes is US$1.00 = Cdn, $1.4295. The September 30, 1998 exchange
rate used to convert US loans is US$1.00 = Cdn. $1.5321.
(2) The amount after giving effect to this Offering is net of the after-tax cost
of underwriting commissions and expenses of issue aggregating approximately
$3,150,000.
4
<PAGE>
(3) As at September 30, 1998 after giving effect to the after-tax cost of a
make-whole obligation incurred in connection with the reimbursement of the
three series of outstanding senior unsecured US dollar notes due June 1,
2001.
(4) As at September 30, 1998.
DESCRIPTION OF SHARE CAPITAL
The authorised share capital of Intertape is comprised of an unlimited
number of common shares without nominal or par value and an unlimited number of
Class "A" preferred shares without nominal or par value, issuable in series.
As of the close of business on February 25, 1999, 25,231,833 common shares
and no preferred shares were issued and outstanding.
DETAILS OF THE OFFERING
This Offering consists of 3,000,000 Common Shares at a price of $40.25 per
share.
Each common share entitles the holder thereof to dividends if, as and when
declared by the directors, to one vote at all meetings of holders of common
shares and to participate, PRO RATA, with the holders of common shares, in any
distribution of the assets of Intertape upon liquidation, dissolution or
winding-up, subject to the prior rights of holders of shares ranking in priority
to common shares.
PLAN OF DISTRIBUTION
Pursuant to an agreement (the "Underwriting Agreement") dated February 26,
1999 among CIBC Wood Gundy Securities Inc., RBC Dominion Securities Inc.,
ScotiaMcLeod Inc., TD Securities Inc. and Trilon Securities Corporation
(collectively, the "Underwriters") and Intertape, Intertape has agreed to sell
and the Underwriters have agreed to purchase on March 16, 1999 or on such other
date as may be agreed upon, but in any event not later than April 30, 1999 (the
"Closing Date"), subject to the terms and conditions contained therein, and the
approval of certain legal matters, all but not less than all of the 3,000,000
Common Shares subject to this Offering for a total consideration of $120,750,000
payable to Intertape against delivery of such Common Shares. In consideration of
their services under the Underwriting Agreement, Intertape has agreed to pay to
the Underwriters a fee in the aggregate amount of $4,830,000 ($1.61 per Common
Share).
Pursuant to the Underwriting Agreement, the obligations of the Underwriters
are several and not joint and may be terminated upon the occurrence of certain
stated events. The Underwriters are, however, obligated to take up and pay for
all the Common Shares if any of the Common Shares are purchased under the
Underwriting Agreement.
TD Securities Inc. is controlled by a Canadian chartered bank which is a
lender to Intertape.
Intertape has agreed in favour of the Underwriters that it will not issue,
sell or offer, agree or become bound to issue or announce the issuance or sale,
offering or agreement to issue or sell any securities of Intertape or any
securities convertible into, exercisable for, or carrying the right to purchase
securities of Intertape, other than for purposes of (i) issuing or exercising
options under Intertape's Executive Stock Option Plan, (ii) issuing or
exercising rights under Intertape's Shareholder Protection Rights Plan or
(iii) the payment in full or in part of the purchase price of any business or
assets related to Intertape's activities, for a period of 90 days from the date
of the Closing Date, without the prior written consent of CIBC Wood Gundy
Securities Inc. on behalf of the Underwriters.
Pursuant to policy statements of the COMMISSION DES VALEURS MOBILIERES DU
QUEBEC and the Ontario Securities Commission, the Underwriters may not,
throughout the period of distribution, bid for or purchase common shares. The
foregoing restriction is subject to exceptions, on the condition that the bid or
purchase not be engaged in for the purpose of creating actual or apparent active
trading in, or raising the price of, the common shares. Such exceptions include
a bid or purchase permitted under the by-laws and rules of the TSE relating to
market stabilisation and passive market-making activities and a bid or purchase
made for and on behalf of a customer where the order was not solicited during
the period of distribution. Subject to the foregoing, pursuant to this Offering,
the Underwriters may over-allot common shares or effect transactions
5
<PAGE>
intended to stabilise or maintain the market price of the common shares at a
higher level than that which might otherwise prevail on the open market. Such
transactions may be commenced or discontinued at any time during this Offering.
The Common Shares have not been and will not be registered under the United
States SECURITIES ACT OF 1933, as amended (the "U.S. Securities Act"), and,
accordingly, may not be offered or sold within the United States, except in
certain transactions exempt from the registration requirements of the U.S.
Securities Act. Each Underwriter has agreed that, except in accordance with the
terms of such exemptions, it will not offer, sell or deliver Common Shares
within the U.S. or any territories or possessions thereof.
In addition, until 40 days after the commencement of this Offering, an offer
or sale of the Common Shares within the United States by any dealer (whether or
not participating in this Offering) may violate the registration requirements of
the U.S. Securities Act.
LEGAL MATTERS
Certain legal matters in respect of the Common Shares will be passed upon by
Stikeman, Elliott on behalf of Intertape and by McCarthy Tetrault on behalf of
the Underwriters. On February 25, 1999, the partners and associates of Stikeman,
Elliott and McCarthy Tetrault beneficially owned, directly or indirectly, as a
group less than 1% of the common shares.
ELIGIBILITY FOR INVESTMENT
In the opinion of Stikeman, Elliott, counsel to Intertape, and McCarthy
Tetrault, counsel to the Underwriters, based on legislation in effect at the
date hereof and subject to compliance with the prudent investment standards and
general investment provisions and restrictions of the following statutes (and,
where applicable, the regulations thereunder) and, in certain cases, subject to
the satisfaction of additional requirements relating to investment policies and
goals, without resorting to the so-called "basket" provisions, an investment in
the Common Shares will not, at the date of issue, be precluded under the
following statutes:
INSURANCE COMPANIES ACT (Canada);
PENSION BENEFITS STANDARDS ACT, 1985 (Canada);
TRUST AND LOAN COMPANIES ACT (Canada);
AN ACT RESPECTING INSURANCE (Quebec), for an insurer, as defined
therein, incorporated under the laws of the Province of Quebec, other
than a guarantee fund corporation;
AN ACT RESPECTING TRUST COMPANIES AND SAVINGS COMPANIES (Quebec), for a
trust company, as defined therein, which invests its own funds and
funds received as deposits and a savings company (as defined therein)
investing its funds;
SUPPLEMENTAL PENSION PLANS ACT (Quebec) for an insured plan as defined
therein;
LOAN AND TRUST CORPORATIONS ACT (Ontario);
PENSION BENEFITS ACT (Ontario);
INSURANCE ACT (Alberta);
EMPLOYMENT PENSION PLANS ACT (Alberta);
LOAN AND TRUST CORPORATIONS ACT (Alberta);
THE INSURANCE ACT (Manitoba);
FINANCIAL INSTITUTIONS ACT (British Columbia); and
PENSION BENEFITS STANDARDS ACT (British Columbia).
In addition, in the opinion of such counsel, the Common Shares will on the
Closing Date, be qualified investments under the INCOME TAX ACT (Canada) for
trusts governed by a registered retirement savings plan, registered retirement
income fund or a deferred profit sharing plan.
AUDITORS, TRANSFER AGENT AND REGISTRAR
The auditors of Intertape are Raymond Chabot Grant Thornton, a general
partnership, Chartered Accountants, Montreal, Quebec.
The registrar and transfer agent for the Common Shares are CIBC Mellon Trust
Company at its principal offices in Montreal, Toronto, Winnipeg, Calgary and
Vancouver and ChaseMellon Shareholder Services, L.L.C. at its principal offices
in New York.
6
<PAGE>
PURCHASERS' STATUTORY RIGHTS
Securities legislation in several provinces of Canada provides purchasers
with the right to withdraw from an agreement to purchase the securities within
two business days after receipt of a prospectus and any amendment, as well as
remedies for rescission or, in certain provinces, damages where a prospectus and
any amendment contains a misrepresentation or is not delivered to the purchaser,
provided that such remedies for rescission or damages are exercised by the
purchaser within the time limit prescribed by the securities legislation of his
province. The purchaser should refer to any applicable provisions of the
securities legislation of his province for the particulars of these rights or
consult with a legal adviser.
7
<PAGE>
CERTIFICATE OF THE CORPORATION
Dated: March 8, 1999
The foregoing, together with the documents incorporated herein by reference,
constitutes full, true and plain disclosure of all material facts relating to
the securities offered by this prospectus as required by the securities laws of
each of the provinces of British Columbia, Alberta, Saskatchewan, Manitoba,
Ontario, Nova Scotia, New Brunswick, Prince Edward Island and Newfoundland. For
the purposes of the SECURITIES ACT (Quebec), this simplified prospectus, as
supplemented by the permanent information record, contains no misrepresentation
that is likely to affect the value or market price of the securities to be
distributed hereunder.
<TABLE>
<S> <C>
(Signed) MELBOURNE F. YULL (Signed) ANDREW M. ARCHIBALD, C.A.
Chairman and Chief Executive Officer Vice-President and Chief Financial Officer
On behalf of the Board of Directors
(Signed) ERIC E. BAKER (Signed) L. ROBBIE SHAW
Director Director
</TABLE>
C-8
<PAGE>
CERTIFICATE OF THE UNDERWRITERS
Dated: March 8, 1999
To the best of our knowledge, information and belief, the foregoing,
together with the documents incorporated herein by reference, constitutes full,
true and plain disclosure of all material facts relating to the securities
offered by this prospectus as required by the securities laws of each of the
provinces of British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Nova
Scotia, New Brunswick, Prince Edward Island and Newfoundland. For the purposes
of the SECURITIES ACT (Quebec), to our knowledge, this simplified prospectus, as
supplemented by the permanent information record, contains no misrepresentation
that is likely to affect the value or market price of the securities to be
distributed hereunder.
CIBC WOOD GUNDY SECURITIES INC.
By: (Signed) FRANCOIS GERVAIS
<TABLE>
<S> <C> <C>
RBC DOMINION SECURITIES INC. SCOTIAMCLEOD INC. TD SECURITIES INC.
By: (Signed) MICHEL BOUCHARD By: (Signed) CLAUDE MICHAUD By: (Signed) GARY LITTLEJOHN
</TABLE>
TRILON SECURITIES CORPORATION
By: (Signed) TREVOR D. KERR
The following includes the name of every person or company having an
interest, either directly or indirectly, to the extent of not less than five
percent, in the capital of:
CIBC WOOD GUNDY SECURITIES INC.: a wholly-owned subsidiary of a Canadian
chartered bank;
RBC DOMINION SECURITIES INC.: RBC Dominion Securities Limited, a majority-owned
subsidiary of a Canadian chartered bank;
SCOTIAMCLEOD INC.: an indirect wholly-owned subsidiary of a Canadian chartered
bank;
TD SECURITIES INC.: a wholly-owned subsidiary of a Canadian chartered bank; and
TRILON SECURITIES CORPORATION: a wholly-owned subsidiary of Trilon Financial
Corporation.
C-9
<PAGE>
EXHIBIT 3
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, 1999 and 1998 and the consolidated statements of
earnings, retained earnings and cash flows for each of the years in the
three-year period ended December 31, 1999. 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,
1999 and 1998 and the results of its operations and its cash flows for each of
the years in the three-year period ended December 31, 1999 in accordance with
generally accepted accounting principles in Canada.
(Signed) RAYMOND CHABOT GRANT THORNTON
Montreal, Canada General Partnership
April 7, 2000 Chartered Accountants
10
<PAGE>
EXHIBIT 4
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation of our report dated April 7, 2000, on our
audits of the consolidated financial statements of Intertape Polymer Group Inc.
as at December 31, 1999 and 1998 and for each of the years in the three-year
period ended December 31, 1999, which report is included in this Annual Report
on Form 20-F.
(Signed) RAYMOND CHABOT GRANT THORNTON
Montreal, Canada General Partnership
May 19, 2000 Chartered Accountants
11
